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

Saturday, March 14, 2015

week ending Mar 14

QE exit [here we go again] - One memory of my final years at the Bank of England is that every two or three months we were commissioned new pieces of work on QE exit strategies, each time prompting ‘here we go again’ thoughts as the staff machine dutifully ground into action, only for events to overtake the writing, making exit an ever more distant event. But it’s conceivable that the issue surfaces again with the heating up of the debate about when the Fed might tighten, itself fuelled by the increasing evidence that the recovery in the US, at least, is secure. That debate has not really questioned when the Fed will exit from quantitative easing and sell its stock of government and agency debt. Rightly so. This is an issue for later, for a number of reasons. The Fed will be anxious about active selling after the ‘taper tantrum’. Sovereign debt markets, although clearing at historically high prices (low yields) may (may) be vulnerable to a sudden correction, volatility perhaps heightened by the ongoing negotiations in Europe between the Eurogroup and Greece. The Fed will want reverse-QE asset sales to be part of an orderly, ongoing plan, to minimise the risk of an unwanted spike in yields, and to ease coordination with the issuance plans of the US Treasury. To maximise the chance that this is possible, it is best to wait until there is no chance that QE would have to be reversed. That means waiting until interest rates have lifted clear enough of the zero bound that this conventional instrument could bear the burden of loosening again, if that became necessary.

Ex-N.Y. Fed Official Sack Says Zero Rates Are Appropriate - The Federal Reserve is justified in keeping rates near zero for now, and should be cautious as it considers raising them later this year given the potential economic costs of prematurely tightening financial conditions, a top former Federal Reserve official said Monday. Brian Sack, former head of the New York Fed’s markets desk and now senior vice president at hedge fund D.E. Shaw, told a conference sponsored by the National Association for Business Economics that despite recent strides in the job market, the economy was still far from fully recovered. “I see plenty of reasons for rates to be at zero today,” Mr. Sack said. “We’ve had employment improvement but GDP [gross domestic product] growth is relatively moderate. “Then you just have this calculus of the benefits and risks. When you’re at the zero bound it’s very costly to make a mistake in liftoff,” he said. The Fed has left official borrowing costs near zero since December 2008 in an effort to jumpstart and support economic recovery from the deepest recession in generations. Many investors expect the Fed to begin raising interest rates at some point this year, though they differ on the exact timing.

Fed’s Fisher Says Raising Rates Soon Will Allow for More Gradual Path —In his final speech as a U.S. central bank official, Dallas Fed President Richard Fisher again pleaded with his colleagues to get to the business of raising interest rates.Citing the robust gains seen in the job market that will soon push the unemployment rate toward levels that could begin generating notable price pressures, Mr. Fisher told a Houston audience Monday “if we are serious about limiting full-employment overshoot, I posit that prompt action to scale back policy accommodation is likely to prove imperative.” “The U.S. economy is improving” and approaching “any sensible measure of full employment,” Mr. Fisher said. The economy has “reasonable price dynamics,” Mr. Fisher said.The veteran policymaker has long argued that the time to push interest rates above the nearly zero levels occupied since the end of 2008 has been very near. For some time, the outgoing official has worried that continuing to keep rates at emergency levels was driving financial markets to excess, while boosting the risk that now-quiet inflation pressures would flare up toward unacceptable levels. Mr. Fisher’s positions have been out of step with many of his colleagues, leading the official to dissent at a number of the interest-rate setting Federal Open Market Committee meetings in which he had a vote. Most Fed officials expect to raise rates this year, with a number of key officials saying the door to increases opens starting with the Fed’s mid-June policy meeting. Mr. Fisher retires from the Dallas Fed on March 19, capping nearly a decade at the helm of that institution. He will not attend the FOMC meeting scheduled for March 17-18.

Mester: Fed Open To Raising Rates In First Half Of Year - –Federal Reserve Bank of Cleveland President Loretta Mester reiterated Monday her belief the U.S. central bank is on track for rate hikes in the near future. “If incoming economic information continues to support my forecast, I would be comfortable with liftoff in the first half of this year,” Ms. Mester said in the text of a speech prepared for delivery before a meeting in Washington held by National Association for Business Economics. The official noted that when it comes to raising rates off of their current near zero levels, the Fed is not on any sort of pre-ordained path. “Both liftoff and the path of policy thereafter will be based on incoming information to the extent that it affects the economic outlook and progress toward our goals of maximum employment and price stability,” Ms. Mester said. The official also noted that even when the Fed does boost its short-term interest rate target off of its current near zero level, where it’s been since the end of 2008, the Fed will still be giving the economy a substantial amount of support. “Policy will remain very accommodative for some time and this will promote attainment of our policy goals,” she said, adding “the economy is now on firmer footing and our monetary policy stance should reflect that.” In her speech, among the last comments of any official before the interest-rate setting Federal Open Market Committee meeting scheduled for March 17-18, Ms. Mester was upbeat about the outlook, while remaining confident that weak inflation readings will over time trend back to 2%. She also used her speech to suggest several ways the Fed could improve its communications strategy, which she said would be very important during the time of rate rises.

N.Y. Fed’s Musalem Says Rate Increases Likely This Year - The New York Fed‘s top international affairs official reiterated Monday that rate increases are likely this year, in comments that flagged ongoing uncertainty around the inflation outlook. The official, Alberto Musalem, also said there’s good reason to believe that emerging market economies, especially those with solid economic fundamentals, will be able to weather U.S. central bank rate increases without too much trouble. Mr. Musalem, who leads the bank’s Integrated Policy Analysis Group, made his comments in the text of a speech before a conference in Cartagena, Colombia. Mr. Musalem’s remarks on the U.S. economy and international landscape were in line with those recently made by his boss, New York Fed President William Dudley. Central bankers are actively considering raising short-term interest rates off their current near-zero levels. Mr. Musalem also spoke ahead of the interest-rate-setting Federal Open Market Committee meeting scheduled for March 17 and 18. Mr. Musalem said the U.S. economy appears on track to continue its progress toward meeting the Fed’s growth and inflation goals, and this “underlies market expectations that the FOMC will begin raising the federal funds rate some time later this year.” The official allowed that while inflation data has been weak on what largely appears to be transitory factors, there are “risks in both directions” for future price pressures. On one hand, a falling unemployment rate should generate wage gains that fuel inflation. But there are some mixed signals about expectations about future price rises that could complicate a hoped-for rise in inflation back to 2%.

Dear Federal Reserve: *Now* is the Time to Raise Interest Rates? Really? Seriously?!? - I am at a complete loss as to why the Federal Reserve might think that now is the moment to begin raising interest rates. I cannot see a scintilla of hard evidence in support, and potent evidence against. The theory is that the Federal Reserve must start to “normalize” interest rates in order to stave off inflationary pressures, particularly inflationary pressures from wages. Here is the last 65 years of consumer inflation YoY:  In that entire time, the only occasions on which there was less inflationary pressure than there is now is immediately after the 1950, 1952, and Great Recessions. The situation is even more compelling when we look at the rolling 3 month average of consumer prices: In the last half a century, there have only been 2 three-month periods, from November 2011 through February 2012, when there was less inflation than there is now. In other words, of the last 600 measurements, only 2 of them have been less than now. That’s 1 in 300. In other words, we are in the bottom 0.05% of all measurements.  99.5% of the measurements have shown more inflationary pressure than now. And it’s not likely, based on your own core measure, that  we will see much inflationary pressure in the next 12 months. Because as you well know, just as core inflation tends to predict the direction of all prices in the next 24 to 36 months, so it takes 12 months or so for current gas prices to feed through into the rest of the economy:  In other words, it is likely that the core inflation reading is going to move lower for the rest of 2015. Now let’s look at wage “growth.” Here is nominal YoY wage growth for the last 50 years: Wages now are putting less pressure on prices than at any time in the last 50 years with the exception of 8 months in 2012.  This is wage pressure??? Again, of the last 600 measurement periods,  only 9 of them have shown less pressure than at present. That puts us in the bottom 1.5% of all time periods in the last 50 years for wage pressure.

WSJ Survey: Most Economists See Fed Raising Rates in June or September -- The Federal Reserve will start raising short-term interest rates in June or September, according to most economists who responded to a Wall Street Journal survey published Thursday. The central bank has held its benchmark short-term interest rate near zero since late 2008. Most central bank officials have indicated they expect to raise it this year, with several saying they would consider a move in June. The Journal poll of 63 economists, conducted March 6-10, found 29 expected the Fed to make its first move in June, 23 in September and four in July. “The main determinant on when the Fed will raise rates is an acceleration in wages, a process that has recently begun,” said Bernard Baumohl, chief global economist at the Economic Outlook Group, who predicted a first rate increase in June. He added, “The June meeting also offers [Fed Chairwoman Janet] Yellen an opportunity to explain the latest change in monetary policy in a press conference too.” David Crowe, chief economist at the National Association of Home Builders, also forecast a June rate rise, noting data showing gross domestic product “and payrolls growing, inflation low but moving up.” Diane Swonk, chief economist at Mesirow Financial, was among those expecting the first increase in September. “Persistently low inflation is expected to delay the liftoff in rates,” she said. The Fed since late 2008 has held its benchmark federal funds rate in a range of zero to 0.25%, and the rate has recently hovered around 0.10%. The economists surveyed on average estimated the rate would be 0.25% in June. That would be lower than the 0.29% they estimated in the Journal’s February poll. The economists’ forecasts for where the rate will be in December were essentially stable. The median estimate among economists for December 2015 was 0.75%. Looking ahead, the median estimate for December 2016 was 2.19%.

Here's what Fed interest rate hikes mean - Rising rates can affect the economy in several ways:

  • Business investment: When interest rates rise, it costs more to borrow money to finance investment projects, causing fewer investment projects to be profitable.
  • Residential investment: The result is the same for investment in housing. When it's more costly to borrow money to purchase a home, the demand for new housing falls, and fewer homes are built.
  • Consumption of durable goods: Purchases of goods generally bought on credit, such as cars, motor homes, boats, etc., also fall when interest rates rise also because the cost of financing these goods goes up.
  • Interest on the government debt: A hike in interest rates will also increase the cost of financing government borrowings. According to one estimate, it "would easily add between $1 trillion to more than $2 trillion to America's debt over the next decade, compared to a scenario in which rates remain low." That would result in pressure to raise taxes or cut government programs, either of which would reduce economic activity (though the impact would depend upon the particular taxes raised and programs cut). And to the extent that it reduces infrastructure spending even further (after the nation failed to take advantage of low rates to boost that spending), higher rates could also be harmful to future economic growth.
  • Savers and lenders: When interest rates rise, those who rely on interest on savings or the revenue from lending money do better. At the same time, however, those who borrow money do worse (leading to the effects noted above). So, higher interest rates help savers and lenders, and hurt those who borrow money (or who borrowed in the past with variable-rate loans).

The Federal Reserve Must Wait - Thomas Palley - February’s employment report showed a gain of 295,00 jobs and a decline in the unemployment rate to 5.5 percent. The report is another in a string of strong employment reports, but it also contains depressingly familiar news about weak wage growth and millions of workers still short of work. The situation remains especially tough for minority workers. The white unemployment rate is 4.7 percent; the Hispanic unemployment rate is 6.6 percent; and the African-American unemployment rate is 10.4 percent.. Tight labor markets increase the cost of discriminatory hiring practices, thereby pushing firms to hire minority workers. That makes tight labor markets essential for minority workers to share in prosperity, and they also raise wages for all. The abundance of labor supply is further confirmed by continuing weak wage numbers. Average hourly wages rose by 3 cents to $24.78 and have risen just 2 percent over the year. Wage increases have slightly exceeded inflation but workers are still barely sharing in productivity growth. That means there is no danger of inflation from a wage – price spiral. In a manner of speaking, the economy has already been subject to a shadow interest rate hike because of the strong dollar. That will put pressure on manufacturing and other export sectors, and it will also create deflationary pressure via lower import prices. Raising interest rates now would add an additional headwind, and it would also aggravate the strong dollar problem by attracting more foreign money to Wall Street.The implication is clear: the Fed must hold off raising interest rates. We are a long way from full employment; there is zero evidence of accelerating inflation; and there is time to raise rates later when needed. It would be foolish to jeopardize our progress in the name of fighting phantom inflation.

Dollar surge poses policy dilemma for Fed - The euro fell closer to parity with the dollar on Wednesday, as the US currency’s strength heightened the policy conundrum facing the US Federal Reserve as it prepares for its first interest-rate increase in nearly a decade. The euro dipped under $1.06 as Mario Draghi, the European Central Bank president, credited the cheap single currency with helping the reversal in the eurozone’s slowdown and said euro area developments were “pointing in the right direction”. The moves come as the Fed prepares for a policy meeting next week at which it is expected to lay the groundwork for a rate rise as soon as June by dropping a pledge to be “patient” before lifting rates. The US currency is rising in part because of the prospect of higher US interest rates and stronger growth. This is squeezing earnings of exporters and US companies with international operations, and could limit inflation as import prices fall.Some policy makers acknowledge that the value of the greenback has triggered concern among big companies. James Bullard, president of the St Louis Fed, told the Financial Times on Monday that he could understand some of the “consternation” he was hearing, but that such companies could hedge their currency exposure. The bulk of the dollar gains may already have happened, he added. “We are trying to run the best monetary policy for the United States that we can,” he said, warning that a Fed interest rate rise was overdue. “We are going to let the exchange rate go where it needs to go to equilibrate international markets,” he said. Gary Cohn, Goldman Sachs president and operating chief, said the foreign exchange moves were putting the Fed in “a very tough position”. He told Bloomberg Business: “The Fed is going to be continuously in this tough dilemma where they are going to want to raise interest rates — and I fundamentally understand why they want to raise interest rates — but they are going to be constrained by circumstances and be concerned by the strength of the dollar, and other countries around the world are going to continue to devalue.”

The Fed's $210 Billion Hangover (That No One Is Talking About) - With more than USD 200bn of Treasury securities held by the Fed due to mature in 2016, the Fed will have to make meaningful monetary policy choices in advance. Fed VP Stanley Fischer commented on SOMA maturities in his speech last Friday, but it appears very few have taken notice as yet and even fewer comprehend the challenge soon confronting The Fed. Many believe that Twist had pushed maturities farther “into the future”. The “future” is Q1 2016. (Note: a shrinking balance sheet is a defacto tightening)

Giving is Easy - Taking is Hard - Despite the occasional satirical joke, I've never had a grave problem with QE. Like many other sober-minded observers, QE, seen in its temporal context, was one of the few available weapons to put a floor under floor asset prices, finance the large counter-cyclical deficits thus preventing the worst of a deleveraging-induced revulsion and associated dislocations of unemployment and output gaps, in an otherwise spartan policy armory. The limited policy options were partly due to rates' proximity to the ZLB, partly because of the difficulty in building consensual responses in an acrimoniously-divided polity and, yes, partly because of the moral furore surround culpability four the crisis.  Though my concerns about tin-foil hat hyper-inflationary fears were near-zero, so too were my expectations that QE would be a panacea. QE, was, never going to be a cure-all, but was decidedly positive whatever critics may say - if only for psychological, confidence-boosting affirmation that the authorities would not stand idly by, holding their willies, passively witnessing a liquidationist resolution, however-much Austrian School proponents were hankering for one.  As a markets person, my concerns with QE (particularly QE3) remain consistent with concerns expressed in the past at one-way CB interventions. That is to say, it likely creates a moral hazard whereby financial institutions and speculators lean on the policy backstop to front-run, lever-up (be it risk-parity; duration, credit), in ways that ultimately create more systemic risk, volatility, sowing the seeds for future dislocation, and likely requirement for public market stabilization [again]. Such hazard is amplified by lack of sterilization. I admit I don't know precisely how it might be implemented, or the optimal boundaries or details, just that fiscal policy deterrents would help diminish some of the negatives to society of one-way unsterilized monetary policy largesse gifted to large asset owners caught in the happenstance of monetary policy.

Michael Hudson: Quantitative Easing for Whom? - Yves Smith - Real News Network released a two-part interview with Michael Hudson on quantitative easing. While the picture is broad-brush, as TV necessitates, the talks provide a good recap of theory, or perhaps more accurately, political justifications for quantitative easing, as opposed to how it works in practice. The second part of the interview focuses on the use and abuse of quantitive easing in the Eurozone crisis. As Hudson emphasizes, QE is designed to keep banks afloat, and any help to the economy at large is incidental.  Below is Part I: (video & transcript)

Janet Who? Most Americans Have Never Heard of Fed Chairwoman Janet Yellen - Most Americans have not heard of Federal Reserve Chairwoman Janet Yellen, according to a new NBC News/Wall Street Journal survey published Monday. Despite the political backlash in some quarters against the Fed since the financial crisis led the central bank to take extraordinary policy actions, most survey respondents hold either a neutral or positive view of the central bank itself. The survey showed 70% of those polled don’t know or aren’t sure who Ms. Yellen is. In contrast, just 1% had never heard of former president George W. Bush. Of those who have heard of Ms. Yellen, 16% of those surveyed had a neutral view of her, while 6% had a somewhat positive view of her and 4% had a very positive view. Just 4% had a somewhat negative or very negative view. When it comes to the Federal Reserve as an institution, 42% said they had a neutral view, while 30% had a somewhat or very positive view and 20% had a somewhat or very negative view. Just 8% didn’t know the name or weren’t sure what it was.

The Fed Impedes GAO Audits by Destroying Source Documents -- Yves Smith - Robert Auerbach, an economist to the Committee on Banking and Financial Services during the Arthur Burns, Paul Volcker, and Alan Greenspan chairmanships at the Fed, as well as being a Fed economist and now a professor at the University of Texas (Austin) has a bombshell revelation in his recent book Deception and Abuse at the Fed. He recounts how the struggle to make the Fed more transparent and accountable has much deeper roots than the mainstream media has let on, and those earlier fights revealed that the central bank hid the existence of original documents, namely FOMC transcripts, then destroyed them, and continues the practice of destroying the original records. This chicanery means that what the GAO is auditing is not what the Fed does, but a simulacrum the Fed has served up, and a prettied-up one to boot.  In a Huffington Post article recapping some of the material in his book, Auerbach describes how the Democrats tried to make the Fed more accountable in the 1970s:...(history)...  The Fed made barmy excuses that it needed to withhold this information to prevent bank runs. Please. This was well after the crisis was past and major banks had all passed the stress tests. The only risk was to the Fed’s reputation and its secrecy. And that, and not the public interest, is why the central bank continues to fight tooth and nail against efforts to subject it to the sort of checks and balances that are essential to prevent abuse of power. The Fed has demonstrated repeatedly that it can’t be taken at its word. The time is long past due for more oversight.

Capital Confusion at the FOMC - Paul Krugman - Ambrose Evans-Pritchard raises a good point about the debt-deflation effects on much of the world caused by a rising dollar; he also, in passing, mentions that some members of the FOMC apparently think that flows of capital into the US strengthen the case for a rate hike. Really? Yes. From the most recent minutesSome participants suggested that shifts of funds from abroad into U.S. Treasury securities may have put downward pressure on term premiums; the shifts, in turn, may have reflected in part a reaction to declines in foreign sovereign yields in response to actual and anticipated monetary policy actions abroad. A couple of participants noted that the reduction in longer-term real interest rates tended to make U.S. financial conditions more accommodative, potentially calling for a somewhat higher path for the federal funds rate going forward. Oh, dear. A first-pass way to think about this is surely to suppose that the Fed sets U.S. interest rates, so that an increased willingness of foreigners to hold our bonds shows up initially as a rise in the dollar rather than a fall in rates. This may then induce a fall in rates because the stronger dollar weakens both growth and inflation, affecting Fed policy – but this means that the rate effect occurs because the capital inflow is contractionary, and is by no means a reason to tighten policy. OK, you can just possibly come up with an argument under which foreigners come in with low risk premiums on longer-term bonds etc. etc., but it’s implausible. Basically, I suspect that the FOMC participants have forgotten their Mundell-Fleming, and are applying fixed-rate logic to a floating-rate problem.

Alan Greenspan Warns Of Explosive Inflation: "Tinderbox Looking For A Spark" = Last month it was revealed that former federal reserve Chairman Alan Greenspan, the architect of U.S. monetary policy under four Presidents, is anticipating a significant market event as a result of the trillions of dollars that have been pumped into the system over the last several years. According to Greenspan, something big is coming.  His comments were shared by well known resource analyst Brien Lundin, who joined Greenspan for private discussions at last year’s New Orleans Investment Conference. In his latest interview Lundin further clarifies Greenspan’s private thoughts on current economic and monetary policy and sheds light on the former Fed Chairman’s suggestion that ‘something big is coming. Greenspan believes that in five years gold will be “measurably higher” than current levels because of the excess liquidity that will eventually be released into the open market. Such an event will undoubtedly lead to riots across America as the general public, woefully unprepared for rapidly rising prices when the pin finally pops the dollar bubble, loses access to affordable critical supplies like food, gas and other resources. The collapse of the dollar, an inevitability suggested by Alan Greenspan, will be a game changer that results in the quadrupling of the cost of living for the average American.

Edwards: “Core Inflation In The US Would Be Just As Low As In The Eurozone If Measured On The Same Basis” - Yves here. In case you have not been following economic releases from Europe closely, one intensifying problem is that the Eurozone has moved into deflation. Deflation was at an annualized rate of 0.6% in January, and reversed somewhat in February to a mere 0.3%. Declining oil prices are a big culprit, but commodities prices have been falling for some time based on weakening demand from China, with oil the last to fall. While most analysts argue that oil prices will start to rebound in the second half of the year, oil production continues to rise. And unlike the bullish shale gas promoters, many of whom have to continue to produce in order to service debt, some oil majors like Exxon and BP have warned that prices could remain low for years. The reason for focusing on the disparity in measurement between the US and Europe is that Europe is using its inflation measures as cause for alarm, and the reason for launching QE, while the Fed is discussing raising rates.  Anyone with a pulse knows that Europe is stuck in a downturn worse than the Great Depression.Most think that the U.S. has fared better … but that is debatable. Mega-bank Société Générale’s strategist Albert Edwards notes: “Core Inflation in the US would be just as low as in the eurozone if measured on the same basis, despite the US having enjoyed much stronger growth!”

Real-Time Q1 GDP Update : 1.2% -  Last week, first Goldman and then JPMorgan cut their GDP forecasts, in the case of the latter by 0.5% to 2.0% from 2.5%. The JPM report cited the Atlanta Fed GDPNow model we first exposed earlier last week. And unfortunately for the Wall Street consensus, which is still hoping for some dramatic surge in US "growth" in the 3 remaining weeks of the first quarter, things are looking bad, because according to the most recent update to the Atlanta Fed model which mimics the methodology used by the BEA to estimate real GDP growth and which will be revealed in less than 2 months when the preliminary Q1 GDP number is revealed, the economy in the first quarter is tracking at just 1.2%, smashing any recent momentum, and the lowest since the Polar Vortex. "Here we go again" indeed. Here is the latest from the Atlanta Fed, whose revised GDP forecast has not budged from a week ago. The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 1.2 percent on March 6, unchanged from its March 2 reading. The nowcast for the contribution of net exports to first-quarter real GDP growth fell from -0.5 percentage point to -0.8 percentage point following this morning's international trade report from the U.S. Census Bureau. This was offset by increases in the nowcasts of equipment investment and inventory investment.

Q1 GDP Expectations Are Crashing - Despite the continuing commentary that all is well in America, economic growth expectations for Q1 just collapsed to a new cycle low. From just 4 months ago, growth expectations have been cut 20% to 2.4%... but that is still four times The Atlanta Fed's dismal 0.6% forecast... The Atlanta Fed forecasts Q1 growth of just 0.6%...The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 0.6 percent on March 12, down from 1.2 percent on March 6. The nowcast for first-quarter real consumption growth fell from 2.9 percent to 2.2 percent following this morning's retail sales release from the U.S. Census Bureau. * * * It appears - just as we detailed here - that non-residential capex is catching down and the spending collapse in the hundreds of billions is looming.

WSJ Survey: No Polar Redux for Winter Growth - With apologies to New England, this winter hasn’t been severe enough to cause a big disruption in the U.S. economy. That’s the view of economists surveyed in March by The Wall Street Journal. The impact was small and temporary, according to the panel of 63 economists (not all of whom answered every question). On average, the forecasters think weather subtracted 0.34 percentage point from inflation-adjusted gross domestic product growth in the first quarter.  That means they think real GDP is growing at a 2.3% annual rate this quarter, instead of about 2.6% if snow and ice had not disrupted transportation systems and closed down schools and businesses and canceled flights. The slap to the economy, however, is nowhere near the beat-down the economy took in the “polar vortex” winter of 2014. At various times during the first three months of 2014, consumers could not get out to shop, factories had to close down production, and home builders could not work outside. Real GDP actually contracted at a 2.1% pace in the first quarter of 2014.

Quarterly Services Survey suggests upward revision to Q4 GDP to 2.5% - From Reuters: U.S. services data suggest upward revision to Q4 growth The Commerce Department's quarterly services survey ... showed consumption ... increased at a faster clip than the government had assumed in its second estimate of [GDP].Economists said the data suggested fourth-quarter consumer spending could be raised by at least six-tenths of a percentage point to a 4.9 percent annual rate ... the QSS suggested fourth-quarter GDP growth could be raised to a 2.5 percent pace from the 2.2 percent rate reported last month ... Here is the Q4 Quarterly Services Press Release

A Little-Watched Report Is Boosting Estimates for U.S. Economic Growth in Late 2014 - Stronger-than-expected consumer spending on services is boosting estimates for U.S. economic growth in the final months of 2014. Revenue at health-care and social-assistance companies climbed 4.2% in the fourth quarter from the prior three months, up sharply from the third quarter’s 0.3% growth, the Commerce Department said Wednesday in its Quarterly Services Survey. The data weren’t adjusted for seasonal variations or price changes. From a year earlier, health-care revenues climbed 5.4% in the fourth quarter, accelerating from 4.8% annual growth in the third quarter. Other service-providing sectors, however, saw more mixed growth in the final months of 2014. Finance and insurance firms saw revenue rise just 0.8% from the third quarter, down from 2.3%, and annual growth slowed to 5.2% in the fourth quarter from 8.2% in the third quarter. Annual revenue growth also decelerated slightly in the information sector and at professional, scientific and technical services firms. The data will be incorporated into the Commerce Department’s next estimate for gross domestic product, the broadest measure of output across the U.S. economy. The agency’s last estimate pegged growth during the fourth quarter at a 2.2% seasonally adjusted annual rate. A new reading will be released March 27. Private forecasters on Wednesday predicted an upward revision for consumer spending on services, offset somewhat by lower investment in software. J.P. Morgan Chase raised its projection for fourth-quarter GDP growth to 2.5% from 2.1%. Barclaysraised its GDP growth estimate to 2.3% from 2.1%. Macroeconomic Advisers raised its estimate to 2.4% from 2.3%.

The Big Slide In US Money Supply Growth Rolls On -- US economic data has been a bit wobbly lately—the unexpected slide in February retail sales, which marks the third straight month of red ink, for instance. The optimists say this is just a soft patch for spending, weighed down by a harsh winter. The encouraging figures in other key indicators imply as much, including the upbeat numbers for payrolls. Perhaps, then, it’s no surprise to find that the real monetary base for the US continued to decline through February, laying the groundwork for the Federal Reserve’s first interest rate hike in nearly a decade. The arrival of policy tightening could come as early as June, according to some forecasters… assuming, of course, that economic growth holds up. The recent deceleration in the growth rate in the real (inflation-adjusted) supply of so-called high-powered money or base money (M0) provides quantitative evidence that the central bank is continuing to wind down its stimulus efforts of recent years. The St. Louis Adjusted Monetary Base (deflated by the consumer price index) was nearly flat on a year-over-year basis through February 2015—a dramatic fall from the 30%-plus increases in late-2013 and early 2014. (Note that the Feb. 2015 CPI report will be published later this month; meantime, I’m using Jan. 2015 data as an estimate for last month’s inflation numbers. Otherwise, historical CPI figures are used to deflate M0.) The sharp deceleration in the annual growth rate of the monetary base alone isn’t a guarantee that that the Fed will start hiking its policy rate in the near-term future, but it’s a telling clue. More context is due next week (Wed., Mar. 18), when the central bank will publish a new FOMC statement, which will be followed by Janet Yellen’s press conference and a fresh set of economic projections.

The blistering pace of dollar’s rally is rattling markets - — It’s probably not the dollar’s unrelenting march higher that is unsettling U.S. stock investors, but it might be the speed of the rally. “I think what people are concerned about is the pace of the dollar strength,” Douglas Borthwick, managing director at Chapdelaine Foreign Exchange, in a phone interview, on Tuesday. “Countries can always adapt to currencies strengthening or weakening, but certainly as the dollar strengthens very, very quickly it leaves very little chance for others to adapt,” he said. On a trade-weighted basis, the dollar remains far from its highs in the mid-1980s and early 2000s, but the pace of the rise over the past half year is the second fastest in the last 40 years, noted David Woo, forex strategist at Bank of America Merrill Lynch, in a note (see chart below). The ICE dollar index, a measure of the U.S. unit against a basket of six major rivals, is up 9% since the end of last year alone to trade at its highest level since late 2003.

Fed Watch: Will the Dollar Impact US Growth? - A quick one while I wait for my flight at National. Scott Sumner argues that the strong dollar will not impact US growth. In response to a Washington Post story, he writes:This is wrong, one should never reason from a price change. There are 4 primary reasons why the dollar might get stronger:

1. Tighter money in the US (falling NGDP growth expectations.)
2. Stronger economic growth in the US.
3. Weaker growth overseas.
4. Easier money overseas.

In my view the major factor at work today is easier money overseas. For instance, the ECB has recently raised its growth forecasts for 2015 and 2016, partly in response to the easier money policy adopted by the ECB (and perhaps partly due to lower oil prices—but again, that’s only bullish if the falling oil prices are due to more supply, not less demand–see below.) That sort of policy shift in Europe is probably expansionary for the US. The initial point is correct - arguing from a price change is a risky proposition. Go to the underlying factors. But I think the next paragraph is a bit questionable. I think that the policy shift in Europe does reduce tail risk for the global economy, and is therefore a positive for the US economy (I suspect the Fed thinks so as well). But it reduces tail risk because ECB policy is supporting not one but two positive economic shocks - both falling oil and a rising Euro. And, all else equal, a rising euro means a stronger dollar, which means a negative for the US economy. Tail risk for Europe is reduced at a cost for the US economy (a cost that the Federal Reserve and US Treasury both seem willing to endure).

How much of a drag on growth is a strong U.S. dollar? How good is a weak euro? -- Scott Sumner says much of what I would, namely don’t reason from a price change.  I would make a related point, but in reverse, about the now-weaker euro.  Yes, it does in the short run help the eurozone exporters and thus the eurozone economies.  But it also makes imports more expensive, all the more in the longer run as the exchange rate pass-through effect on domestic import prices holds more fully.  Even in the short run, it makes the citizenry less wealthy as measured in other currency units of account, at least assuming that people and institutions in the eurozone are holding a disproportionate share of euros, a plausible assumption.  All in all, the weaker euro is likely to prove a net benefit to the eurozone, all the more so if monetary policy can drum up some expansionary domestic benefits above and beyond the exchange rate effect.  Still, if you deliberately engineer a depreciation of your currency out of weakness and desperation, the long-run benefits usually don’t match up to that immediate feeling of short-run juice.

Strength Is Weakness, by Paul Krugman -  We’ve been warned over and over that the Federal Reserve, in its effort to improve the economy, is “debasing” the dollar..., the Fed’s critics keep insisting that easy-money policies will lead to a plunging dollar. Reality, however, keeps declining to oblige. Far from heading downstairs to debasement, the dollar has soared through the roof. ... Hooray for the strong dollar! Or not. Actually, the strong dollar is bad for America. In an immediate sense, it will weaken our long-delayed economic recovery by widening the trade deficit. In a deeper sense, the message from the dollar’s surge is that we’re less insulated than many thought from problems overseas. In particular, you should think of the strong dollar/weak euro combination as the way Europe exports its troubles to the rest of the world, America very much included.  Who wins from this market move? Europe: a weaker euro makes European industry more competitive against rivals, boosting both exports and firms that compete with imports, and the effect is to mitigate the euroslump. Who loses? We do, as our industry loses competitiveness, not just in European markets, but in countries where our exports compete with theirs. ...  In effect, then, Europe is managing to export some of its stagnation to the rest of us. ... And the effects may be quite large. One thing that worries me is that I’m not at all sure that policy makers have fully taken the implications of a rising dollar into account. The Fed, still eager to raise interest rates despite low inflation and stagnant wages, seems to me to be too sanguine about the economic drag. Oh, and one more thing: a lot of businesses around the world have borrowed heavily in dollars, which means that a rising dollar may create a whole new set of debt crises. Just what the global economy needed.

The Global Dollar Funding Shortage Is Back With A Vengeance And "This Time It's Different" -- Something curious has emerged as a result of the divergent "Fed-vs-Everyone-Else" central bank policy: as JPM observed over the weekend while looking at the dollar fx basis, the dollar funding shortage is back with a vengeance, and is accelerating at pace not seen since the Lehman collapse. The last time the world was sliding into a US dollar shortage as rapidly as it is right now, was following the collapse of Lehman Brothers in 2008. The response by the Fed: the issuance of an unprecedented amount of FX liquidity lines in the form of swaps to foreign Central Banks. The "swapped" amount went from practically zero to a peak of $582 billion on December 10, 2008.  The USD shortage back, and the Fed's subsequent response, was the topic of one of our most read articles of mid-2009, "How The Federal Reserve Bailed Out The World."  As we discussed back then, this systemic dollar shortage was primarily the result of imbalanced FX funding at the global commercial banks, arising from first Japanese, and then European banks' abuse of a USD-denominated asset-liability mismatch, in which the dollar being the funding currency of choice, resulted in a massive matched synthetic "Dollar short" on the books of commercial bank desks around the globe: a shortage which in the aftermath of the Lehman failure manifested itself in what was the largest global USD margin call in history.

Debt Ceiling Drama Is Back: Two Days Until US Borrowing Capacity Is Exhausted - And so, a little over a year after the last debt ceiling melodrama, in which the US kicked the can on its maximum borrowing capacity to this Sunday, March 15, in the meantime raking up total US public debt to $18.149 trillion the soap opera with the self-imposed borrowing ceiling on America's "credit card" is back, and the US is once again faced with sad reality of its debt ceiling (now at well over 100% of America's upward revised GDP of $17.7 trillion). Tthe reason: two days from today Congress’s temporary suspension of the debt ceiling, which was approved in February 2014, ends.

The return of the debt limit -- This Sunday the United States' statutory debt limit will once again go into effect, essentially reinstating the debt ceiling at the level of the U.S. debt on Sunday, probably around $18 trillion. The reason the debt limit is returning to haunt our fiscal dreams is because Congress kicked the can down the road when it passed a suspension of the debt limit in February, 2014. But it's hard to know how long the Department of Treasury can use "extraordinary measures" to keep paying its bills before it begins to risk defaulting on its debt. That's because government revenues are lumpy — lots comes in during tax season, for example. The best estimate sets the new deadline at some time in October or November.

Debt Ceiling Will Be Next Budget Battle - The fight over Department of Homeland Security funding has just ended and the next showdown over the country’s finances is already underway. The temporary suspension of the debt ceiling will soon expire, and the countdown to default will begin March 16.  The debt ceiling is a statutory limit on the amount of debt the Treasury can issue to finance the government’s obligations, which include everything from issuing Social Security checks, paying federal employees, and the interest owed on debt. Battles over the debt ceiling in Congress have become more frequent in recent years, and critics have dismissed the limit as an antiquated rule that does more harm than good. Treasury Secretary Jack Lew announced that he will use temporary measures to finance government activities after America hits the debt ceiling in mid-March.  The Congressional Budget Office predicts this will delay a potential default until October or November 2015.  Proponents of eliminating the debt ceiling argue that since Congress already authorizes the budget, the Treasury should not need congressional approval to issue debt. Raising the debt ceiling does not constitute a debt increase, so critics see it as an unnecessary financial risk.  President Obama himself put forward a plan that would have permanently authorized him to unilaterally raise the debt ceiling unless Congress directly voted to stop him. Even then, Congress would have to overcome a veto.

The “Debt Crisis” According to Bruce Bartlett: Household Analogy, Inflation, Savings, and Taxes - In the first two parts of this series of commentaries on Bruce Bartlett’s testimony to the Senate Budget Committee, I’ve reviewed the first 8 paragraphs in his statement. These points debunked various concerns of those who think the United States has a serious “debt crisis” it must handle before it takes on trivial problems such as its unprecedentedly high level of wealth inequality, lack of true full employment at a living wage, roughly 30 million people still lacking health insurance, one of the worst infrastructure systems in the developed world, transitioning from fossil fuels and ending climate change, creating a first class public educational system from pre-K through graduate school, ending the student loan crisis, creating a single standard of law for all, including the various categories of violators categorized as too big to prosecute by recent Administrations, and ending the student loan debt crisis, just to name a few. However, what was noticeably missing from the variety of arguments given in his eight paragraphs was a recognition that the United States is a fiat sovereign nation and that this fact has serious implications for most of the subject matter Bruce Bartlett covers in his statement. In this post I’ll continue my analysis of his statement to explore the extent to which his views correspond to Modern Money Theory (MMT).  Analogies between a family’s debt and the federal government’s are totally invalid. There are two key reasons. Humans die and their books must be balanced at death, with all debts paid, passed along or written off. But the federal government lives forever; there is never a point at which its books must be balanced as a matter of principle. Second, if families get into debt trouble they cannot legislate higher revenues for themselves; the federal government can. The ultimate guarantor of the debt is the federal government’s taxing power and secondarily its power to print money. Absent a problem with the debt limit, which is a technical legal problem, not an economic one, the federal government cannot default; families can and do.

US Budget Deficit Totals $192.3 Billion in February - The federal government ran a slightly smaller deficit in February than a year ago but the imbalance through the first five months of the budget year is still running ahead of last year. The Treasury Department reported Thursday that the deficit in February was $192.3 billion, down from a deficit of $193.5 billion a year ago. For the first five months of this budget year, the deficit totals $386.5 billion, up 2.7 percent from a deficit of $376.4 billion during the first five months of the 2014 budget year. For the entire budget year, which ends Sept. 30, the Congressional Budget Office is forecasting a deficit of $486 billion, up 0.6 percent from the 2014 deficit of $483.4 billion. The 2014 deficit was the smallest annual imbalance in six years. Through the first five months of the budget year, revenues total $1.19 trillion, up 7.1 percent from the same period a year ago, while outlays total $1.57 trillion, also up 7 percent from a year ago. The 2014 deficit was down from $680.2 billion in 2013. Before 2013, the nation recorded four straight years of deficits topping $1 trillion annually, reflecting the impact of a severe financial crisis and the worst economic downturn since the Great Recession of the 1930s. President Barack Obama last month unveiled a new budget proposal which projects the 2015 deficit will rise to $583 billion, sharply higher than CBO's estimate for this year. Obama is asking Congress for authorization to spend $4 trillion next year and projects a deficit in 2016 of $474 billion.

Obama budget would shrink deficits by $1.2 trillion over 10 years: CBO | Reuters: (Reuters) - President Barack Obama's fiscal 2016 budget proposal would shrink U.S. deficits by $1.232 trillion over 10 years compared to those expected under current tax and spending laws, the Congressional Budget Office said on Thursday. The deficit reduction, although smaller than that claimed by the White House, is largely due to Obama's proposals for higher taxes on the wealthy, his plans for lower spending on military operations in Afghanistan and net savings from proposed immigration reforms, the CBO said. For fiscal 2016, the first full year under Obama's fiscal blueprint if Congress were to adopt it, the deficit would fall to $380 billion from $455 billion, the CBO's latest forecast under current laws. But Congress routinely casts aside the president's budget request and passes its own budget and spending bills. Next week, Republican-controlled budget committees in the House and Senate intend to unveil their own proposals for budgets that eliminate deficits within 10 years, with deep spending cuts expected for some federal benefits programs. Under the analysis from the non-partisan CBO, near term deficits under Obama's proposal would be smaller than those forecast by the White House Office of Management and Budget, while deficits in later years are larger. The CBO's fiscal 2016 deficit estimate is $94 billion less than the White House $474 billion estimate, a trend that continues through about 2019, when they grow larger in CBO analysis.

More Good News on the Deficit, This Time Because of Private Insurance Health Premiums -- Estimates for government health care spending keep coming down. A few months, ago, we wrote about how a slowing trend in Medicare spending had led federal budget forecasters to make drastic reductions in their estimates of the program’s costs. On Monday, they made similar cuts in their forecast of what the federal government will spend on private insurance premiums. The revisions reflect growing evidence that health care spending in the country — which has traditionally grown much more quickly than the overall economy — is entering a new, more moderate era. It is still rising, but not very much any more. That could eventually be not only a boon for consumers, but it could also have big implications for the federal budget: If the Congressional Budget Office is right, the amount the federal government pays for health insurance in the coming years will be hundreds of billions of dollars lower than it recently forecast, meaning a much smaller federal deficit.  The precise mix of factors behind the slowdown is still not entirely understood, but reduced spending growth has been observed almost across the board in health care. Medical price inflation has fallen, while the use of certain types of costly care — like hospitalizations — has declined. The changes most likely reflect some mix of consumer behavior (as people try avoid more expensive kinds of care) and a change in how doctors and hospitals practice medicine (as they try to reduce waste and errors).Insurance companies are also probably contributing to those changes. To reduce costs, more have switched to products that either charge customers higher deductibles and co-payments for their care or that limit the number of doctors and hospitals they can see. The health care reform law, known popularly as Obamacare, may also be playing a supporting role by encouraging more efficient care, though most of its cost-saving programs are still small and relatively new.

The US budget deficit goes down, down, down — at least for now - Much good news and (a little) bad news on the US budget, via Dow Jones:  The Congressional Budget Office raised its forecast for the 2015 budget deficit Monday by $18 billion to $486 billion. The increase was due to changes in estimates for costs of federal programs including Medicare, Medicaid and student loans.  … The CBO lowered its 10-year projection for the deficit by $431 billion due to factors including lower costs for the Affordable Care Act, higher tax revenues and lower interest costs on the national debt. Cumulative deficits over the next 10 years are projected to total $7.2 trillion. Long-term estimates are lower, yes, but still historically high relative to gross domestic product, notes the non-partisan CBO. By 2025, it says the federal debt could total 77% of GDP, more than any year prior to 1950.  The massive drop in the US budget deficit is still one of the great, lightly reported economic stories, from 10% of GDP at the start of the Great Recession to less than 3%. But enjoy it while it lasts. The entitlement tidal wave fast approaches.

The Peterson Foundation Sings the Same Old Song - The Peter G. Peterson Foundation (PGPF) always does a press release when the CBO issues one of its budget outlook 10 year projection reports. The PGPF did another in January quoting its President and COO, Michael A. Peterson. Let’s go through that press release and see how many troublesome or false statements we can find. Here’s a breakdown of the press release quotation from Michael Peterson. Today’s CBO report reminds us once again that our nation has significant fiscal challenges that have yet to be solved. It certainly does, but I doubt that Peterson and I would agree on what those challenges are. He thinks they have to do with bringing the national debt under control. I think they have to do with creating full employment with a federal job guarantee program, price stability, a robust economy, a great public and free educational system through graduate school, stopping and reversing climate change, providing everybody in, nobody out, no co-pays and no deductibles health care for all, a first class infrastructure, and a greatly expanded social safety net including a doubling of SS benefits. He thinks the debt is a long-term problem that we have to start to solve now. I think there is, literally, no public finance-related debt problem for a fiat sovereign like the U.S., and that the problem that exists is not a debt problem, but a political problem created by Peterson and his allies across the political spectrum who have propagandized the view that there is a debt crisis since the mid-1970s, with increasing success since the 1990s.

Momentum building in Congress for $174 billion Medicare fix -- "It's kind of a phony bookkeeping thing anyway,” Hatch said of Congress’s ritual of putting off the cuts through what is known as a “doc fix.” Rep. John Fleming (R-La.), co-chairman of the GOP Doctors Caucus, said in an interview Thursday that he strongly believes the bill will clear the House this spring. Still, he acknowledged that it would be a struggle to convince some fiscal conservatives to pass a bill that adds to the deficit. “Many of the party’s fiscal conservatives say we should find a way to pay for all of it, but then again I don’t think they understand, as we do as doctors, that that puts our colleagues into a very difficult situation,” Fleming said. Fleming said he believes the party's best option is to slash entitlement spending — starting with creating work requirements for welfare and by reforming food stamps. House Republican leadership offices have been tight-lipped about the plan. Michael Steel, a spokesman for Speaker John Boehner (R-Ohio), declined to comment Thursday on any of the proposals under consideration. While multiple healthcare lobbyists on Thursday said the House is close to a deal, conservative groups such as Club for Growth and Heritage Action are vowing to oppose any measure that is not fully paid for. “Americans didn’t hand Republicans a historic House majority to engage in more deficit spending and budget gimmickry,” said Heritage Action spokesman Dan Holler. “Any deal that only offsets a fraction of the cost, like the one currently being discussed behind closed doors and leaked to the press, is a non-starter for conservatives.”

The Truth About Entitlements - Paul Krugman - I was looking at CBO historical budget data, and realized that you can summarize a lot about all those much-denounced “entitlements” with this figure: Here, income security is mainly EITC, food stamps, and unemployment benefits, plus a few other means-tested aid programs. Health is all major programs — Medicare, Medicaid/CHIP, and at the very end the exchange subsidies. What this chart tells you right away:

  • 1. The “nation of takers” stuff is deeply misleading. Until the economic crisis, income security had no trend at all. The only way to make it seem as if means-tested programs were exploding is to include Medicaid, which has gone up in part because of rising costs, in part because of a major expansion to cover children (all those 11-year-old bums on welfare, you know).
  • 2. When people claimed that spending was exploding under Obama, the only thing actually happening was a surge in income-support programs at a time of genuine distress. People smirked knowingly and declared that everyone knew that the bump in spending would become permanent; it didn’t.
  • 3. If there is a long-run spending problem, it’s overwhelmingly about health care. And we have lately been making remarkable progress on that front.

The biggest threat to the U.S. budget: A Fed rate hike? - Dean Baker - Raising borrowing costs would mean a larger interest burden for the U.S. government. Since the release last week of the latest monthly U.S. jobs report, the positive numbers have many wondering if theFederal Reserve will start raising short-term interest rates as early as June. The central bank may offer more clues when officials meet next week. If the Fed chooses to raise rates soon, it would easily add between $1 trillion to more than $2 trillion to America’s debt over the next decade, compared to a scenario in which rates remain low. How? This can happen in three ways: The first and most obvious channel is that higher borrowing costs will mean a larger interest burden for the federal government. I calculated that the path of interest rate hikes projected by the Congressional Budget Office (CBO) could add almost $2.9 trillion to U.S. debt over the next 10 years, compared with a scenario where interest rates stayed where they are today. . Secondly, the CBO assumes that as part of its tightening, the Fed will sell off the assets it purchased through its various large-scale bond purchasing programs, called quantitative easing. Under QE, the Fed purchased more than $3 trillion of mortgage-backed securities and long-term debt as part of an effort to keep rates low and stimulate the economy. The interest from these assets increased Fed earnings, and consequently, the Fed’s refunds to Treasury (after paying its operating fees and member banks, the Fed refunds the rest of its earnings to the U.S. government via the Department of the Treasury). The CBO assumes that the Fed will want to quickly sell off the bonds purchased through QE to put upward pressure on interest rates and avoid over-stimulating the economy. But if the Fed sees no need to put the brakes on the economy and continue to hold the same amount of bonds over the next decade as it does today, it would gain an additional $600 billion in interest compared to the CBO baseline. Even an intermediate path would generate more than $300 billion more in income from interest.  We would not want the Fed to make bad choices on monetary policy for the purpose of reducing the budget deficit, but in a context where the case for interest rate hikes is ambiguous, it is reasonable to take the budgetary impact into account. Lower interest rates from the Fed is a much easier way to reducing the deficit than tax increases or budget cuts.

Chaos in Congress is about to get a lot crazier - The quote of the week, one that will likely reverberate through the halls of Congress for many months to come, is this one from GOP Rep. Charlie Dent, lamenting the inability of the House GOP caucus to unite behind, well, anything at all: “We really don’t have 218 votes to determine a bathroom break over here on our side. So how are we going to get 218 votes on transportation, or trade, or whatever the issue?” While the need to expel human waste should not be trivialized, it turns out that in very short order, Congress will have to determine the outcome of a number of pressing matters that are perhaps far more important than the timing of bathroom breaks. The Hill reports this morning that another “tense standoff,” one similar to the chaos that erupted around Department of Homeland Security funding, is likely to unfold around the need to replenish the Highway Trust Fund, which is set to run low on funding this spring. Business groups — and the Obama administration — are warning of disaster if funding for ongoing infrastructure projects evaporates, while conservative groups are insisting Republicans agree to devolve infrastructure back to the states. Yet John Boehner is already on record saying he wants to replenish infrastructure funding. He just hasn’t said how it should be paid for. Sound familiar?

The 3 Biggest Myths Blinding Us to the Economic Truth - Robert Reich

  • 1. The “job creators” are CEOs, corporations, and the rich, whose taxes must be low in order to induce them to create more jobs. Rubbish. The real job creators are the vast middle class and the poor, whose spending induces businesses to create jobs. Which is why raising the minimum wage, extending overtime protection, enlarging the Earned Income Tax Credit, and reducing middle-class taxes are all necessary.
  • 2. The critical choice is between the “free market” or “government.” Baloney. The free market doesn’t exist in nature. It’s created and enforced by government. And all the ongoing decisions about how it’s organized – what gets patent protection and for how long (the human genome?), who can declare bankruptcy (corporations? homeowners? student debtors?), what contracts are fraudulent (insider trading?) or coercive (predatory loans? mandatory arbitration?), and how much market power is excessive (Comcast and Time Warner?) – depend on government.
  • 3. We should worry most about the size of government. Wrong. We should worry about who government is for. When big money from giant corporations and Wall Street inundate our politics, all decisions relating to #1 and #2 above become rigged against average working Americans.
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Spending on Our Crumbling Infrastructure: Larry Summers recently said something startling: “At this moment . . . the share of public investment in GDP, adjusting for depreciation, so that’s net share, is zero. Zero. We’re not net investing at all, nor is Western Europe”... In other words, total federal, state, and local government investment is enough to cover only the amount of wear and tear on bridges, roads, airports, rails, and pipes. “Can that possibly make sense?” asked the former Treasury secretary, who has been campaigning for more government spending on infrastructure. I wondered whether Mr. Summers was hyping the data to make his point. So I checked. Net federal public investment spending, both defense and non-defense, in 2013 (the latest year for which data are available) works out to zero as a percentage of gross domestic product, according to the Bureau of Economic Analysis’s National Income and Product Accounts tables. Non-defense investment spending, which was nearly 1% of GDP in the mid-1960s–and hasn’t come close to that since–was about $9.8 billion in 2013, or a paltry 0.06% of GDP. Mr. Summers wasn’t exaggerating.  As shown in the chart above, the bulk of government investment in the U.S. is done at the state and local levels, not by Washington. That spending soared in the housing boom years before the financial crisis, when state and local governments were flush. It collapsed in 2010. Net federal defense investment rises and falls with the Pentagon budget, not surprisingly. In 2013, the U.S. wasn’t spending enough on defense to offset wear and tear on its equipment.

G.O.P. Is Divided as Budget Bills Start Piling Up - — In their first major test of governing this year, Republicans stumbled, faltered — and nearly shut down the Department of Homeland Security.And that vote may have been the easy one.In April, physicians who treat Medicare patients face a drastic cut in pay. In May, the Highway Trust Fund runs dry. In June, the charter for the federal Export-Import Bank ceases to exist. Then in October, across-the-board spending cuts return, the government runs out of money — and the Treasury bumps up against its borrowing limit.All will require congressional action, and while many of these measures used to be pushed through in an almost unthinking bipartisan ritual, there is no such thing as simple in Congress anymore.“We really don’t have 218 votes to determine a bathroom break over here on our side,” said Representative Charlie Dent, a Pennsylvania Republican. “So how are we going to get 218 votes on transportation, or trade, or whatever the issue? We might as well face the political reality of our circumstances and then act accordingly.”

Dynamic Scoring Forum: The Dangers of Dynamic Scoring -- Simon Johnson -- One of the strengths of the US budgeting system is that proposals are held accountable through a relatively open process of scoring the costs and benefits.  This process, as run by the Congressional Budget Office and others, looks carefully at the impact on very specific federal government revenues and expenditures.  It is hard to engage in too much wishful thinking in this framework. Wishful thinking does of course occupy a prominent position in Washington – there is some element present in every political campaign.  And there is nothing wrong with competing vague visions for what could happen to the macroeconomy under alternative policies; at least, this has been a cornerstone of our democracy for more than 200 years. We also have – or should have at this point in our history – a better grip on the limits of what exactly we know.  Take, for example, the case of potential tax cuts – one topic that comes up a lot in current discussions about dynamic scoring. Under President Ronald Reagan, there were some broad and optimistic claims made about the positive impact on tax revenue that would arise from tax cuts.  This optimism proved excessive – and effective tax rates subsequently had to be adjusted upwards, including through closing loopholes, in order to boost revenue. One example:  the Omnibus Budget Reconciliation Act of 1990 that also created the pay-as-you-go (PAYGO) rule requiring that spending increases or tax cuts be offset with lower spending  or higher taxes.  This was not a perfect arrangement, to be sure, but it helped create a framework that  limited fiscal deficits during the 1990s.

Watch What You Wish For: Dynamic Scoring Creates More Issues for the GOP - As TaxVox readers know by now, House Republicans now require the Joint Committee on Taxation and the Congressional Budget Office to include macroeconomic effects when they produce budget scores of major bills. The GOP hoped this would show that tax cuts would generate so much new economic activity that they’d lose much less revenue than traditional budget scoring suggests. But two recent episodes suggest that dynamic scoring may disappoint even its strongest admirers. In the first, the Tax Foundation, which advocates for tax cuts, dynamically scored the latest proposal by senators Marco Rubio (R-FL) and Mike Lee (R-UT). The Rubio-Lee plan includes, among other things, major cuts in corporate and individual tax rates, repeal of taxes on capital gains and other investment income, and big new incentives for business investment. In other words, the plan was specifically intended to boost economic growth. But the Tax Foundation found that it would still lose $1.7 trillion over the next 10 years—the all-important budget window upon which tax bills must be scored. Add in interest costs, and it would increase the debt by $2.3 trillion. Over time, the fiscal consequences would be different, according to the Tax Foundation. Using its own model, the group concluded that the Rubio-Lee bill would raise revenue by about $94 billion in Year 10 and then increase receipts by a steady 0.5 percent of Gross Domestic Product thereafter. Even the 10-year score looks much better than a traditional static estimate, which shows an increase of more than $4 trillion in the debt, according to the Tax Foundation model. But it still blows a huge hole in federal finances.

JCT Finds Obama Budget Would Hike Taxes by $1.2 Trillion - The Joint Committee on Taxation (JCT) has estimated that the President’s budget would increase taxes by $1.2 trillion over 10 years. This is slightly more of a tax hike than we estimated under our static analysis, which we released last week. JCT, like us, found no sign of a corporate tax rate reduction. The President has for more many years proposed cutting the corporate tax rate, acknowledging that it is the highest in the developed world, but this year he left it out of his budget. JCT, like us, found the brunt of the tax increases are on multinational corporations and investors, with smaller tax increases aimed at various out of favor industries, such as oil and gas, banking and insurance. Such a tax increase squarely aimed at business investment can only do severe damage to the economy.  That is in fact what we found in our dynamic analysis: the President’s plan would shrink the economy by 3 percent, reduce wages by 2.4 percent and result in the loss of over 800,000 jobs. By shrinking the economy, the President’s budget would also shrink tax revenue for the federal government by $12 billion annually.

U.S. Tax System Encourages Foreign Takeovers, Business Roundtable Study Says - Big businesses are gearing up to make the case for overhauling the U.S. tax system, armed with a new study arguing that it is encouraging foreign takeovers of American firms. The trend could lead to job losses and other harms, according to the study prepared for the Business Roundtable, a group of big-firm CEOs. The findings–to be released as soon as Wednesday–are likely to fuel business demands that Congress rewrite U.S. tax rules. Businesses want Congress to lower the U.S. corporate tax rate, now the highest among developed countries at 35%. They also want to loosen the U.S. system’s unusual global reach. Those features of the U.S. tax system are putting American firms at a disadvantage compared with their foreign rivals, particularly when it comes to cross-border mergers and acquisitions, businesses have long contended. The study seeks to quantify the problem, while underscoring the potential broader impacts on jobs and workers. “If the disadvantages in our system persist, they could have long-lasting effects on productivity, wages and living standards,” says the report, prepared for the Business Roundtable by accounting firm EY. Still, the extent of the U.S. tax system’s negative impacts on American firms and their competitiveness remains a subject of debate, and the new study leaves some big questions unanswered. The report analyzed more than 25,000 cross-border merger and acquisition deals around the world over the last decade, looking for evidence of the U.S. system’s disadvantages. It found that American firms were the target in 23% of transactions, and the acquirer in 20%.

New Republican tax plan is just the Bush tax cuts on steroids - A specter is haunting the Republican Party—the specter of Ronald Reagan. Ever since his two landslide victories, conservatives have treated it as received wisdom that cutting taxes as much as possible is the onefold path to economic and political nirvana. Well, make that cutting the top tax rate as much as possible. The idea, known as supply-side economics, is that the lower the top rate, the more top earners will work and invest, and the more growth there will be to—keep waiting for it—trickle down to everyone else. Never mind that this hasn't really worked in the past and couldn't even work in the present, at least not that much, now that the top rate is already pretty low. This is still an orthodoxy that Republicans are barely allowed to deviate from, and only then if they say three Hail Reagans as penance. Just look at what happened to Senator Marco Rubio and Mike Lee's tax plan. It started out as what was supposed to be a warm and cuddly kind of supply-side economics that was like the Bush tax cuts only a little less regressive.  But then the CNBC class decided that this crossed the line into heresy, and demanded more tax cuts for themselves to appease the pro-growth gods. They got them. The result is what would in all likelihood be an even bigger budget-busting giveaway to the top 1 percent than anything George W. Bush ever dreamed up. That's the price "reform conservatives," or reformocons, apparently have to pay to get the rest of the Party to go along with anything that helps the middle class. And it's even higher than it used to be.

Bernie Sanders Blasts “Robin Hood in Reverse” Subsidies to the Rich, Calls for Full EmploymentYves Smith - (video) Bernie Sanders gave a forceful, if sobering, assessment of the state of the economy from the perspective of working men and women, as well as retirees, and focused on the hypocrisy of corporations and the wealthy that poor-mouth as a way to extract even more subsidies and tax breaks. Sanders called for an end to socialism for the rich, or what he calls “Robin Hood in reverse” and demanded the government do more to promote job creation and better wages.  The fact that a speech like this is noteworthy is a testament to how the Democratic party has become a pro-corporate venture which generously allows women, gays, Hispanics, and people of color to join in the looting.

Fake IRS agents target more than 366,000 in huge tax scam - (AP) -- Fake IRS agents have targeted more than 366,000 people with harassing phone calls demanding payments and threatening jail in the largest scam of its kind in the history of the agency, a federal investigator said Thursday. More than 3,000 people have fallen for the ruse since 2013, said Timothy Camus, a Treasury deputy inspector general for tax administration. They were conned out of a total of $15.5 million. The scam has claimed victims in almost every state, Camus said. One unidentified victim lost more than $500,000. "The criminals do not discriminate. They are calling people everywhere, of all income levels and backgrounds," Camus told the Senate Finance Committee at a hearing. "The callers often warned the victims that if they hung up, local police would come to their homes to arrest them." The scam is so widespread that investigators believe there is more than one group of perpetrators, including some overseas. Camus said even he received a call from one of the scammers at his home on a Saturday. He said he had a stern message for the caller: "Your day will come." Sen. Johnny Isakson, R-Ga., said he got a similar call, but realized it wasn't a real IRS agent. "It was a very convincing, convincing phone call," Isakson said.

A CEO's Real Fiduciary Duty - To pay themselves first. In the past several years, profits have been increasingly paid back to shareholders, rather than invested in hiring more people and/or paying their employees better. Instead, companies have been borrowing in order to buy back their own company stock, which not only boosts their company's stock price for investors — but also for company executives, who are paid with stock-option grants as "performance pay". So whenever you hear a CEO say, "I have a fiduciary duty to our investors", they aren't just talking about huge institutional investors, but about themselves as well — because their executive compensation packages often include (if not mostly include*) company shares as "incentives" to do whatever they can to raise their company's share prices. They are setting their own salaries, year after year after year — even when they bomb at their jobs. And companies have been borrowing money to buy billions of dollars worth of stocks to make those shareholder payouts, because with interest rates so low, it’s a relatively cheap way to push stock prices higher. And that may be why some had pushed so hard for "quantitative easing" (QE) — and why they are so worried about the Fed raising interest rates:

Wall Street Firm Develops New High-Speed Algorithm Capable Of Performing Over 10,000 Ethical Violations Per Second - Calling it a major breakthrough that will significantly expedite and streamline its daily operations, Wall Street financial firm Goldman Sachs revealed Thursday it has developed a new high-speed algorithm that is capable of performing more than 10,000 ethical violations per second. “With this new automated program, we’ll be able to systematically deceive investors, engage in conflicts of interest, and execute thousands of other blatantly unethical dealings in the time it takes to press a button,” said John Waldron, co-head of Goldman Sachs’ investment banking division, who added that the high-frequency impropriety system will be able to break more rules in a minute than an entire floor of morally suspect securities traders, financial analysts, and portfolio managers could over the course of a week. “In the past, if one of our brokers wanted to exploit a questionably legal regulatory loophole or breach the covenant of good faith with an investment client, that would require hours of manually contravening the basic principles of professional integrity. But this innovative system will allow millions of such transgressions to go through every single day. Going forward, I expect this revolutionary program to be the cornerstone of our business.” Upon learning of the advanced new unethical algorithm, investors initiated a buying frenzy on Goldman Sachs stock, sending share prices surging more than 30 percent to $245.46.

What If Holder and Obama Listened to DOJ’s Cartel Prosecutors? -- William K. Black - This is how Belinda A Barnett, Senior Counsel to the Deputy Assistant Attorney General for Criminal Enforcement, Antitrust Division, U.S. Department of Justice began her speechIt is well known that the Antitrust Division has long ranked anti-cartel enforcement as its top priority. It is also well known that the Division has long advocated that the most effective deterrent for hard core cartel activity, such as price fixing, bid rigging, and allocation agreements, is stiff prison sentences. It is obvious why prison sentences are important in anti-cartel enforcement. Companies only commit cartel offenses through individual employees, and prison is a penalty that cannot be reimbursed by the corporate employer. As a corporate executive once told a former Assistant Attorney General of ours: “[A]s long as you are only talking about money, the company can at the end of the day take care of me . . . but once you begin talking about taking away my liberty, there is nothing that the company can do for me.”1 Executives often offer to pay higher fines to get a break on their jail time, but they never offer to spend more time in prison in order to get a discount on their fine. We know that prison sentences are a deterrent to executives who would otherwise extend their cartel activity to the United States. In many cases, the Division has discovered cartelists who were colluding on products sold in other parts of the world and who sold product in the United States, but who did not extend their cartel activity to U.S. sales. In some of these cases, although the U.S. market was the cartelists’ largest market and potentially the most profitable, the collusion stopped at the border because of the risk of going to prison in the United States.”

Under The Hood Of A Subprime Lender Accused Of Illegally Repoing Soldiers' Cars Santander Consumer — a unit of one of only two banks to receive the dubious honor of failing the Fed’s stress tests yesterday and the market leader in subprime auto lending — allegedly ignored a law that requires lenders to obtain a court order before repossessing cars from members of the military and will now pay $9.35 million to settle the issue with the government. Apparently, Santander illegally repoed nearly 800 vehicles from active service members over the course of 5 years and then attempted to extract fees from some 350 additional soldiers in connection with repossessions the bank didn’t even execute.  From the NY Times:Santander Consumer, prosecutors said, failed to get those court orders, leaving service members, including some who were deployed thousands of miles away, to fight at home and abroad. Prosecutors said that the lender’s repossessions stretched over roughly five years, from January 2008 until February 2013. Santander, prosecutors said, completed 760 repossessions against service members protected under the relief act.  The case, filed in Federal District Court in Dallas, also accused Santander of going after an additional 352 service members for fees that stemmed from illegal repossessions started by other lenders.This is the same Santander Consumer that was subpoenaed last year by the Justice Department in connection with its packaging of subprime auto loans into ABS and whose lending practices also got the attention of the New York Dept. of Consumer Affairs.  Don’t think for a second that any of this is slowing down the Santander Consumer subprime auto securitization machine though. The company, which leads all other lenders when it comes to the total amount of subprime auto loan debt outstanding, has already done a deal this year worth $1.2 billion which accounts for nearly 25% of all subprime auto ABS issuance YTD. The details of that deal are below — note the average FICO score of 595, the average term of 70 months, the average APR of nearly 17%, and the breakdown which shows that more than two thirds of the loans were for used cars.

Give Credit Where It’s Due to U.S. Stress Tests - We spend a lot of time these days reading and writing about U.S. government failures and the nasty political divisions that impede problem-solving in Washington. With that in mind it’s worth pausing for a moment to recognize a bipartisan success. Six years ago this month, with the economy in freefall and markets unstable, the Federal Reserve was deep into executing stress tests of the nation’s largest financial institutions. The plan was to formally assess the resilience of big banks to a deepening shock and use funds from the Troubled Asset Relief Program to get capital into those in need of more financial buffering. The TARP law was passed by Democrats in Congress and signed by a Republican in the White House, George W. Bush. Then the stress tests were executed by a Democrat in the White House, Barack Obama, and a Republican nominee at the Federal Reserve, Ben Bernanke. Today, the government is out of the capital infusion business, but the Fed continues stress tests, counting on the market to provide capital where needed. Banks complain about the opaque nature and cost of the Fed’s annual stress testing ritual. Some supervisors wonder whether the Fed has gotten too consumed in stress test number-crunching, at the expense of old--fashioned, face-to-face supervision.  Still, it is hard to argue with the results. Since 2009, the eight biggest U.S. financial institutions have added $500 billion of capital, which works out to $10 trillion of lending capacity with a 5% minimum capital ratio.

Fed's Annual Stress Test Results: 28/31 Pass - Deutsche & Santander Fail, BofA To Re-Submit - After all 31 banks passed Dodd-Frank's "stress"-test with flying colors and awaited The Fed's CCAR blessing to spread the wealth to shareholders, we thought ironic that The Fed's Tarullo had previously commented that "we don't want banks to know the stress-test scenarios and tailor their portfolios to meet our goals," because that would never happen. The CCAR results are now out and 28 of 31 passed. Deutsche Bank, Santander failed for "qualitative" reasons (with significant and widespreasd deficiencies in risk management) and Bank of America will need to resubmit their proposal.

Fed Fails Deutsche Bank and Santander Capital Plans, BofA required to Submit New Plan by Q3 - From the Federal Reserve: Comprehensive Capital Analysis and Review (CCAR) The Federal Reserve on Wednesday announced it has not objected to the capital plans of 28 bank holding companies participating in the Comprehensive Capital Analysis and Review (CCAR). One institution received a conditional non-objection based on qualitative grounds, and the Federal Reserve objected to two firms' plans on qualitative grounds....The Federal Reserve did not object to the capital plan of Bank of America Corporation, but is requiring the institution to submit a new capital plan by the end of the third quarter to address certain weaknesses in its capital planning processes. The Federal Reserve objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA on qualitative concerns.

Federal Reserve Rejects 2 Banks’ Capital Plans in Annual ‘Stress Tests’- Twenty-eight of 31 large banks received Federal Reserve approval to return capital to investors on Wednesday but only after some of the biggest Wall Street firms came perilously close to failing the regulator’s annual “stress test.”  A 29th firm, Bank of America Corp. , received conditional approval of its capital plan and can move forward with boosting dividends or stock buybacks, but must resubmit its proposal to address “certain weaknesses” including its ability to measure losses and revenue, the Fed said. ... The Fed rejected the capital plans of two large banks, the U.S. units of Deutsche Bank AG and Banco Santander SA, for “qualitative” deficiencies including ability to model losses and identify risks. ... Deutsche Bank, which took the stress test for the first time this year, was rejected for “numerous and significant deficiencies” across several areas of the capital planning process including the bank’s ability to identify risks, the Fed said.

Wall St. banks launch massive buybacks, boost dividends: The heart of the U.S. financial system got a seal of approval from the Federal Reserve Wednesday, prompting major U.S. banks to unleash a flood of dividend increases and more than $23 billion in stock buybacks on their shareholders. In the second phase of the Fed's so-called stress tests, 29 out of 31 top lenders got the thumbs up to spend their cash on shareholders. Within minutes of the release of the results of the tests, at least nine major banks either increased their quarterly dividends, announced new stock repurchase plans — or both.

Black Knight Mortgage Monitor: Foreclosure Starts increase in January - Black Knight Financial Services (BKFS) released their Mortgage Monitor report for January today. According to BKFS, 5.56% of mortgages were delinquent in January, down from 5.64% in December. BKFS reported that 1.61% of mortgages were in the foreclosure process, down from 2.35% in January 2014. This gives a total of 7.17% delinquent or in foreclosure. It breaks down as:
• 1,701,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,112,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 815,000 loans in foreclosure process.
For a total of ​​3,628,000 loans delinquent or in foreclosure in January. This is down from 4,315,000 in January 2014.From Black Knight:   The month’s data showed that both first-time and repeat foreclosure starts reached 12-month highs, although there was clear separation in the levels of increase between the two. According to Trey Barnes, Black Knight’s senior vice president of Loan Data Products, separation also continues to be seen between judicial and non-judicial foreclosure states across multiple performance indicators.  “Overall foreclosure starts hit a 12-month high in January, and that held true when looking at both first-time and repeat foreclosure starts individually,” said Barnes. “Repeat foreclosure starts made up 51 percent of all foreclosure starts and increased 11 percent from December. In contrast, first-time foreclosure starts were up just a fraction of a percent from the month prior. Similarly, Black Knight found that January foreclosure starts jumped about 10 percent from December in judicial states as compared to just a 1.7 percent increase in non-judicial states. Judicial states are also seeing higher levels of both new problem loans and serious delinquencies (loans 90 or more days delinquent, but not yet in foreclosure) than non-judicial states, although volumes are down overall in both categories.  This is still mostly clearing out the backlog.

Repeat Foreclosures Triple Since Crisis - As delinquencies rise to worrisome levels in the now $1 trillion market for auto loans and as the two biggest players in the consumer loan space prepare to merge into a multi-billion dollar ABS machine, January data on foreclosures suggests there may be trouble in the real estate world as well.   According to Black Knight Financial, both new and repeat foreclosures hit a 12-month high during the first month of the year with repeats (i.e. the borrower was rescued but has since entered the foreclosure process again) jumping 11% M/M. More troubling is the trend in repeat foreclosures which accounted for only 15% of total foreclosures during the crisis but now make up a startling 51%.  Trouble in HAMP-land anyone?

MBA: Mortgage Applications Decrease in Latest Weekly Survey  - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 6, 2015. ...The Refinance Index decreased 3 percent from the previous week to the lowest level since January 2015. The seasonally adjusted Purchase Index increased 2 percent from one week earlier....The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.01 percent, the highest level since the week ending January 2, 2015, from 3.96 percent, with points increasing to 0.39 from 0.30 (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 2% higher than a year ago.

Mortgage Rates Steady Near March Lows -- Mortgage rates were mixed today depending on the lender, but moved just slightly lower on average. This wasn't the case this morning as essentially all lenders came out with noticeably lower rates following the weaker-than-expected Retail Sales report. As the day progressed, early gains in bond markets faded, especially after the afternoon's 30yr Bond auction. While that refers to 30yr Treasuries, the goings-on in the Treasury market always have some effect on the mortgage-backed-securities that dictate mortgage rates. Today was no exception, and as prices fell into the afternoon, most lenders 'repriced' to higher rates. ...  That puts us very close to the lowest levels in March, seen on the first two days of the month. Most lenders are quoting conventional 30yr fixed rates of 3.875% to top tier borrowers. A few of the stronger lenders are at 3.75% and fewer still remain at 4.0%.

FNC: Residential Property Values increased 4.3% year-over-year in January --  FNC released their January 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values decreased 0.3% from December to January (Composite 100 index, not seasonally adjusted).    The 10 city MSA, the 20-MSA and 30-MSA RPIs all decreased . These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).   Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The year-over-year (YoY) change was lower in January than in December, with the 100-MSA composite up 4.3% compared to January 2014  (this index was up 5.0% year-over-year in December).   In general, for FNC, the YoY increase has been slowing since peaking in March at 9.0%. The index is still down 19.8% from the peak in 2006.

American "Nightmare" Shocker: The Real US Homeownership Rate Has Never Been Lower -  The transformation of the American Dream, most broadly manifested in popular folklore as the aspiration of the US middle-class to own a home (even if it means agreeing to a 30-year loan with one's friendly neighborhood TBTF bank), into the American Nightmare, in which an entire generation (the Millennials) is locked out of purchashing a home due to over $1 trillion in student loans hanging over every financial decision, an abysmal jobs market (for everyone but college educated "waiters and bartenders" whose hiring is on a tear), and banks' unwillingness to lend money to anyone that can fog a mirror, and forcing millions of Americans to rent instead of buy, has been duly documented here before.  As we showed most recently in October, the officlally reported US homeownership rate, after peaking during the first housing/credit bubble, has been plunging in a straight line and is now the lowest since 1994.. When stripping away the now traditional assumption fudges which have flooded every single data set and made virtually all the New Paranormal data meangingless due to its reliance on pre-Lehman crash demographic and labor participation assumptions, the reality is that not only is the American Dream now completely over, but that the American Nightmare has never been worse, because as BofA just calculated, the real US homeownership rate has never been lower!

Hotels: Solid Start for 2015 - From STR: US hotel results for week ending 7 March - The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 1-7 March 2015, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy rose 0.5 percent to 64.5 percent. Average daily rate increased 2.0 percent to finish the week at US$116.74. Revenue per available room for the week was up 2.5 percent to finish at US$75.27. 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 increase over the next couple of months.

CoStar: Commercial Real Estate prices increased in January --From CoStar: CRE Price Indices Start 2015 on a Strong Note with Solid Gains in January Following a strong 2014, prices for commercial real estate (CRE) continued to climb in January 2015, supported by an expanding economy, strengthening market fundamentals and continued low interest rates. The two broadest measures of aggregate pricing for commercial properties within the CCRSI—the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index—each increased by 1.2% in January 2015, contributing to annual gains of more than 12% in each index.Thanks to steady gains in recent months, the value-weighted U.S. Composite Index reached a record high in January 2015, and now stands 7.5% above its prerecession peak in 2007, reflecting strong competition among investors for large, high-quality commercial properties. After beginning its recovery later in the current cycle, the equal-weighted U.S. Composite Index has continued to grow steadily in the 12 months since January 2014, although it remains 13.4% below its 2007 prerecession peak. The increase in the equal-weighted U.S. Composite Index, which is influenced by smaller deals, reflects the general movement of capital into secondary markets and property types, as investors search for higher yields after property pricing has escalated in core U.S. coastal markets.  This graph from CoStar shows the the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index indexes. The value weighted index is at a record high, but the equal weighted is still 13.4% below the pre-recession peak. There are indexes by sector and region too. The second graph shows the percent of distressed "pairs". The distressed share is down from over 35% at the peak, but still a little elevated.

 A New Life for Dead Malls — According to Ellen Dunham-Jones, an architect and professor at Georgia Tech, there are about 1,200 enclosed malls in the United States, and about one-third of them are dead or dying. That's because developers rapidly overbuilt malls in the 20th century, she said: The U.S. has twice as much square footage in shopping centers per capita than the rest of the world, and six times as much as countries in Europe. “The malls died for a reason,” she told me. “We were way over-retailed.” As anchor brands such as JC Penney, Sears, and Macy's close stores and Americans show a preference for shopping online or in walkable urban centers, more malls are expected to close But there is good news: In many areas of the country developers are finding new uses for dead malls. Dunham-Jones keeps a database of projects that retrofit dying malls for other purposes, and says that there are 211 spaces across the country being retrofitted in one way or another. “Malls are being turned into medical centers, colleges, elementary schools, churches,” she said.

Non-Financial Business Debt rises in 4th quarter, 2014 - The Flow of Funds report from the Federal Reserve came out today for the 4th quarter of 2014. Non-financial business debt grew quite fast. “Non-financial business debt rose at an annual rate of 7.2 percent in the fourth quarter, a somewhat larger increase than in the previous quarter. As in recent years, corporate bonds accounted for most of the increase.” (page i of report) The non-financial business debt had grown at an average a little over 5% for the previous 4 quarters.We may be seeing an increase in lending ahead of the somewhat anticipated Fed rate rise. Will these funds be invested in domestic productive capacity, purchases of existing assets or held for a rainy day? Still, a benefit from the Fed signaling a future rate rise is that businesses tend to increase borrowing ahead of time. Normalizing monetary policy gives increasing incentives for investment now rather than later. Normalizing monetary policy can be stimulative when there is confidence that the business cycle will continue for a couple of years. How confident are businesses that the business cycle will last another 2 years? Do businesses believe that the Fed rate is far behind the curve of the business cycle? The answer will be found in how they use the funds.

Fed's Q4 Flow of Funds: Household Net Worth at Record High -- The Federal Reserve released the Q4 2014 Flow of Funds report today: Flow of Funds. According to the Fed, household net worth increased in Q4 compared to Q3: The net worth of households and nonprofits rose to $82.9 trillion during the fourth quarter of 2014. The value of directly and indirectly held corporate equities increased $742 billion and the value of real estate rose $356 billion.Prior to the recession, net worth peaked at $67.9 trillion in Q2 2007, and then net worth fell to $54.9 trillion in Q1 2009 (a loss of $13.0 trillion). Household net worth was at $82.9 trillion in Q4 2014 (up $28.0 trillion from the trough in Q1 2009). The Fed estimated that the value of household real estate increased to $20.6 trillion in Q4 2014. The value of household real estate is still $1.9 trillion below the peak in early 2006.  The first graph shows Households and Nonprofit net worth as a percent of GDP. Household net worth, as a percent of GDP, is close to the peak in 2006 (housing bubble), and above the stock bubble peak. This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations. This ratio was increasing gradually since the mid-70s, and then we saw the stock market and housing bubbles. The ratio has been trending up but has moved sideways over the last year. This graph shows homeowner percent equity since 1952. Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008. In Q4 2014, household percent equity (of household real estate) was at 54.5% - up from Q3, and the highest since Q1 2007. This was because of an increase in house prices in Q4 (the Fed uses CoreLogic).

The Richest Have Never Been Richer: US Household Assets Rise To Record $97 Trillion (As The Poor Get Poorer) -- In the quarter ended September 30, 2014, household net worth did something it hasn't done since 2011: it declined, as a result of the dip in the stock market which pushed financial assets lower by $200 billion. Well, since then ECB announced and then launched Q€, not to mention the expanded BOJ QE in November, and predictably financial assets rose.  Which means that in the fourth quarter, US household net worth jumped by $1.5 trillion to $82.9 trillion, driven by a rise in total assets to $97.1 trillion, even as the long awaited increase in "good debt", that of mortgage debt, remains elusive and Mortgage debt hasn't budged from $9.4 trillion in 8 quarters! This, even as the total US housing market is said to have kept rising, which can only mean one thing (a thing we have explained many times in the past): the bulk of home purchases in the US take place "all cash" with zero incremental leverage (whether because the potential buyers don't want to incur the debt, or don't quality).Ironically, even as household liabilities remained flat for the second year in a row, real estate assets rose from $23.2 trillion to $23.5 trillion as America's ultra-luxury segment continues to drive housing higher while every other segment is contracting.But the biggest jump in Q4 assets was once again in financial assets, driven by a $492 billion increase in Corporate Equities as well as $323 billion added from Pension Funds. And as usual, financial assets remained at precisely 70% of total assets (a curious ceiling which we will discuss shortly).In short: almost $100 trillion in household assets, with the vast bulk of these belonging to America's "1%".

One American's Rage Spills Over: Shut Your Mouth & Start Fighting These Political Parasites - "I was shocked today by the absolute gaul of the Fed releasing a statement about Net Worth in America reaching record levels.  Now I get that they are under extreme pressure to sell the story that everything is rainbows and butterflies. The ugly reality is that the bottom 80% of Americans experienced none of that gain. And so when the Fed via its ass pamper boy, Steve Liesman, start banging on about the fact that some sliver of society is being handed extraordinary wealth while the working class has lost 40% of their net worth since 2007, well a big F### you right back at ya bub!...And for those of you that think I’m an ass for being so harsh on us, well stuff it.  Get up off your stool you lazy drunk, shut your damn mouth and start fighting these political parasites like a damn man, like a damn American."

Household Net Worth: The "Real" Story: Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth that is 50.9% above the 2009 trough and 22.2% above the 2007 peak and at an all-time high. The nominal Q4 net worth is up 1.9% from the previous quarter and up 5.2% year over year. Click for a larger image But there are problems with this analysis. Over the six decades of this data series, total net worth has grown about 7766%. A linear vertical scale on the chart above is misleading because it fails to provide an accurate visual illustration of growth over time. It also gives an exaggerated dimension to the bubble that began in 2002. But there is another more serious problem, one that has to do with the data itself rather than the method of display. Over the same time frame that net worth grew over seven-thousand-plus percent, the value of the 1950 dollar shrank to about nine cents. The Federal Reserve gives us the nominal value of total net worth, which is significantly skewed  by money illusion. Here is a log scale chart adjusted for inflation using the Consumer Price Index. The next chart gives us a more intuitive sense of real net worth. Here I've divided the inflation-adjusted series above by the Bureau of Commerce's mid-month population estimates, which have been recorded since January 1959. I say "more intuitive" because the per-capita adjustment brings the latest data point from the Multi-Trillion stratosphere to $$259,020 -- an amount we can relate to on a somewhat more personal level. The latest data point is about even with the real peak in Q1 2007.

U.S. Retail Sales Fall as Consumers Remain Cautious - WSJ: —U.S. retail sales fell for the third consecutive month in February, reflecting bad weather in parts of the country and a sign of continuing caution among U.S. households despite an improving labor market and cheap gasoline prices. Sales at retailers and restaurants decreased 0.6% last month to a seasonally adjusted $437 billion, the Commerce Department said Thursday. Retail sales fell 0.8% in January and 0.9% in December. ENLARGE Economists surveyed by The Wall Street Journal had expected total sales would rise 0.2% in February. “The broad-base weak tone of this report suggests that the bad winter weather may have been a key factor in tempering economic activity this quarter,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities, said in a note to clients. Falling gasoline prices had dragged retail-sales figures down in recent months. But a small bump—the national average for a gallon was $2.216 last month versus $2.116 in January—lifted overall sales 1.5% in February. That was the first monthly increase since May 2014, though sales are still down 23% from a year earlier.

Retail Sales decreased 0.6% in February -- On a monthly basis, retail sales decreased 0.6% from January to February (seasonally adjusted), and sales were up 1.7% from February 2014. Sales in December were unrevised at a 0.8% decrease. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $437.0 billion, a decrease of 0.6 percent from the previous month, but up 1.7 percent above February 2014. ... The December 2014 to January 2015 percent change was unrevised from -0.8 percent.  This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline decreased 0.8%. Retail sales ex-autos decreased 0.1%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 5.1% on a YoY basis (1.7% for all retail sales). The decrease in February was below consensus expectations of a 0.3% increase. This was a weak report.

Spending at Gas Stations Rises for the First Time Since May - Americans spent more at gas stations in February, the first time since May 2014. Purchases at gas stations—by and large dollars spent on fuel—rose a seasonally adjusted 1.5% last month, the Commerce Department said Thursday. It was the first increase for the category in nine months, and the largest monthly gain since December 2013. The gain shows gasoline prices started to tick up in February after a steady decline since last summer. The national average for a gallon of regular gasoline was $2.22 last month versus $2.12 in January, according to the U.S. Energy Information Administration. Still, gas station sales fell 23% from a year earlier, reflecting that prices remain well down from early last year. Gasoline stations had been a drag on overall retail sales for several months, but their February turnaround didn’t overcome reduced spending elsewhere. Overall sales were down 0.6%, largely due to weaker spending at auto dealerships.

Retail Sales Crumble, Suffer Worst Run Since Lehman - Earlier today we warned readers that based on actual credit card spending data, today's retail sales data would continue the worst trend since Lehman, and sure enough that's what happened: moments ago the Commerce department reported that in February, retail sales missed once again and missed big and across the board, the third big miss in a row, with the headline print coming at -0.6%, far below the 0.3% expected, and in line with the -0.8% drop last month. Putting the headline numbers in context: December -0.9%, January -0.8%, February -0.6%. Excluding the volatile autos and gas, sales dropped once again, sliding -0.2%, below the 0.3% expected - in fact below the lowest estimate - and worse even than last month's downward revised -0.1% decline. And with that the worst run in retail sales since Lehman is now in the record books.

Bloomberg: “Consumers Aren’t Spending Even In a Booming Job Market” --  Yves Smith  -- I am sure Naked Capitalism readers can clear up what a Bloomberg headline screams is an “American Mystery Story,” that the economy is creating more jobs, yet retail sales have fallen three months in a row, with the latest being a 0.6% decline in February versus an expected increase of 0.2%. The analysts quoted on Bloomberg blamed the terrible February weather and were confident consumer spending would pick up soon.  Of course this article could simply be Dr. Pangloss meets the job market. It somehow appears to elude most commentators that the economy is creating more jawbs than jobs, and that the labor participation rate actually fell from 62.9% to 62.8%. But analysts somehow manage to look past that. From the Bloomberg story: “The expenditures that add up to gross domestic product are coming in a lot softer than employment,” Why would retailers be hiring if sales are falling? Why would they be boosting hours if sales are falling and why would they be paying more?” The other factor leading to lower spending is that the saving rate is up. Well, why shouldn’t the savings rate rise on a secular basis as the public realizes (if they haven’t already) that social safety nets, and most important of all, Medicare and Social Security, are being hollowed out? I’m thus mystified by the uniform tone of boosterism in the media about the state of the economy. In New York, where many finance reporters live, things aren’t all that rosy, so it’s hard to attribute it to being biased by local readings. I’ve never seen more vacant stores than now, for instance.

US retail sales: a slowdown, yes, but wait for the inflation adjustment: Yesterday's retail sales report looked mighty poor, down -0.8% m/m. It was the third straight decline in this metric. Three important points need to be made: First, a slowdown in consumer purchases is not surprising, given the slowdown in housing in late 2013 and early 2014. The slowdown troughed 1 year ago. Since usually trends in housing spread through the economy in about a year or so, we have been on track for this. Here's a graph showing housing permits, motor vehicle sales, and real retail sales normed to 100 as of June 2013: Housing declined first, cars and light trucks have declined in the last 4 months, and real retail sales through January have turned down slightly since November. Second, it is important to keep inflation in mind. Yesterday was a nominal number. In January, for example, the big -0.7% decline translated into only a -0.1% decline after adjusted for inflation. Here is a graph comparing nominal and real retail sales: Consumer prices for February won't be reported until March 24, but this morning February producer prices were reported down -0.5%. Similarly, while personal spending for January was reported down -0.2%, after adjusting for inflation, it was actually up +0.3%. Additionally, yesterday showed that the US is importing deflation in a big way: Finally, as I have previously pointed out, in the past where there have been substantial declines in oil prices, consumers have initially pocketed the savings. For example, as shown in this next graph, in 1986 consumers waited a year before they started to spend their gas savings:

Retail Sales -- The Census Bureau had a press release this morning announcing that nominal retail sales fell -0.6% in February, the third consecutive fall. Wall Street economists,analysts, strategists and managers have been watching these weak retail sales reports and speculating on why the drop in oil prices has not lead to the boost in consumer spending that virtually everyone expected. The problem is that the nominal data can be misleading. Few know that the Bureau of Economic Analysis (BEA) as part of its GDP calculation also creates an unpublished series on retail sales that will be available later this month.  The BEA also estimates deflators for the various components of retail sales and an estimate of monthly real retail sales by category. The BEA data is much better than the series of nominal sales deflated by the CPI available in FRED ( the St. Louis Fed. public data base).  Over the previous three months –November, December and January –both Census and BEA estimated that nominal retail sales fell 1.3%. But the BEA data also showed that over these three months the retail deflator fell -3.34%. Consequently, the -1.3% drop in nominal salesis actually a 2.15%increase  in real retail sales, or almost 9% at an annual rate. I expect when the BEA deflator becomes available the – 0.6% drop in February nominal sales will actually be a real increase.The  sharp decline in the retail deflator is not just oil.  Almost every segment of retail sales except food stores and restaurants is showing a sharp drop in prices.  In 2013 and  2014 the change in the retail deflator  bounced around zero.  But as of January the year over year change in retail sales prices fell to -3.3%.  While the Fed is worrying about inflation and the Cassandras who have seen inflation right around the corner for years continue to forecast a massive inflationary surge, the data implies that deflation may be much more likely.

Consumer Spending Tumbles: BofA Blames Snow, Oil; Claims Its Models Are Right, Reality Is Wrong  -- Stick a fork in the now proven wrong theory that plunging gas prices would boost consumer spending. Why? Because 4 months after the full impact of tumbling gas price was said to become apparent, consumer spending is not only not picking up, it is in fact slowing down more, especially in those places where there was snow in the winter, and gasp, where oil price actually fell the most! Ridiculous? No. This is what the latest Bank of America card data survey reveals. To wit: "Consumer spending remained sluggish in February, according to the Bank of America card data. After netting out volatile gasoline and autos, spending on Bank of America credit and debit cards was unchanged MoM seasonally adjusted. On a YoY basis, sales are still up a solid 5.4%, but that reflects favorable comps from last year." How is it possible that everyone could have been so wrong? Simple: for the second year in a row, nobody could possibly anticipate that the "gas savings" boost to consumer spending in the early winter would be fully (and then some) offset by an utterly inconceivable heavy snowfall in January and February. Because seasonal adjustments are there only for show, and to smooth out goalseeked lines presumably, not to - you know - adjust for the seasons. The BofA scapegoating is just humor in its most purest: We can explain the weak MoM rate, in part, from the harsh winter weather in February. Excessive snowfall in parts of the country left many households stuck at home, reducing spend on their credit and debit cards. Of course, we attempt to control for seasonality, but it is difficult to capture abnormal weather patterns.

Energy expenditures as a percentage of consumer spending - Here is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through January 2015.This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices. Data source: BEA Table 2.3.5U.  The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.  With some further declines - WTI oil futures fell 4% today to $45.09 per barrel - we might see energy expenditures as a percent of PCE at new lows and resume the long term down trend.

Why Is Per Capita Energy Consumption At Recession Levels After Six Years Of "Recovery"? -- One way to verify rosy official data--GDP growth, low unemployment, etc.--is to compare it with data that is less easily gamed: for example, energy consumption.Those seeking a realistic snapshot of the Chinese economy routinely turn to energy consumption and rail traffic data for this reason: at least until recently, these data sets were more reflective of real economic activity than the glowing official numbers. So let's try the same analysis on the U.S. economy. Courtesy of Market Daily Briefing, here are four charts of per capita (per person) energy consumption.By using per capita data, we eliminate population growth as a variable. If total energy consumption remains steady as population rises, the per capita energy consumption will drop. As vehicles, appliances, etc. become more energy-efficient, we would expect per capita energy consumption to decline. For example, as mileage/unit of fuel of vehicles rise, the fuel needed to drive the same number of miles per year declines. offsetting this gradual decline due to increasing efficiency is an overall rise in the standard of living, which in a consumerist society means owning and operating more vehicles, appliances, etc., taking more vacations, etc.--all of which tend to push per capita energy consumption higher. Increasing efficiency is a long-term trend. The sharp drops in the charts below characterize the effects of recession on consumption: as economic activity plummets, per capita energy consumption plummets, too. We can see this in the first chart of total per capita energy consumption: energy use plummeted sharply in the 1980-82 recession, and then recovered along with economic activity. The sharp drop in consumption in the 2008-09 recession was not followed by robust recovery.

Michigan Consumer Sentiment Drops 4.4 Points: The University of Michigan preliminary Consumer Sentiment for March came in at 91.2, down 4.4 points from the final reading of 95.4 in February. had forecast 95.5 for the Michigan preliminary number. 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 7 percent above the average reading (arithmetic mean) and 8 percent above the geometric mean. The current index level is at the 60th percentile of the 448 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 21.9 points above the average recession mindset and 3.7 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 4.4 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 Tumbles, Misses By Most Since 2006; Weather & Poor People Blamed -- Despite record high net worth and record high stock markets, the US Consumer is not amused. UMich survey of Consumer Sentiment for March tumbled from 95.4 to 91.2 (against expectations of a rise to 95.5) for the biggest miss since Feb 2006. This was the biggest one-month drop since Oct 2013. Quite unbelievably, the survey director says the drop was driven by a slide in lower-income group sentiment caused by weather! And finally, it appears the data was 'leaked' 3-4 minutes early as Nanex noted, liquidity disappeared from e-minis at 0956ET.

N.Y. Fed: Consumers’ View of Inflation Weakened in February - Consumers’ expectation of future inflation is growing weaker, according to new data from the Federal Reserve Bank of New York. In its monthly survey of household’s attitudes about the economy, the bank found the median expectation for inflation over the one-year horizon edged down to 2.8% in February, the lowest reading since the series began in June 2013. The one-year-ahead expected inflation reading stood at 2.9% in January and 3% in December. The New York Fed noted that inflation expectations declined the most in younger people and in those with college degrees. The bank didn’t say why respondents to their survey pared back their outlook for future price rises, but the report arrives at a time when a rapid and extreme drop in oil prices has caused already low headline inflation readings to soften even further. The decline in inflation expectations is almost certainly something the Fed doesn’t want to see as it contemplates raising rates later this year. Most officials are on board for increasing rates off of their current near zero levels this year, with a number of key officials saying active consideration of a rate rise starts at their mid-June policy meeting. The case for rate increases rests on the rapid improvement seen in the job market. But arguing against a move higher is the growing gap between the Fed’s 2% target and the actual level of inflation. Most Fed officials continue to believe that further improvements in the job market will drive inflation to desired levels over time. But a key component of the forecast for higher inflation is stability in inflation expectations. Many Fed officials, as well as private-sector economists, believe that over time actual inflation tends to converge with where the public expects it to be.

The Billion Prices Project Thinks Inflation May Have Turned a Sharp Corner - One of the biggest economic questions facing the U.S. economy in 2015 is this: Will measures of inflation veer into deflationary territory, or will prices firm? The Billion Prices Project, which scrapes the Internet daily to capture changing prices online and has often foreshadowed subsequent changes in official price indexes, shows a sharp turn upward in measures of inflation, albeit from a low starting point. The official measures of inflation from the Labor Department and Commerce Department are only available through January, with no turn evident in that data. But the Billion Prices Project measure, which is now produced as the State Street PriceStats inflation index, has turned upward sharply in recent weeks. If the turn holds, then inflation could be firming faster than economists realize. Is the recovery all about the slight uptick in gasoline prices, visible at gas stations nationwide? The PriceStats index suggests that prices are getting stronger in other sectors as well. To tease out the effect of gasoline, PriceStats has produced an “ex-gas” index that removes the prices of gasoline and closely related items. This is similar in concept to measures of core inflation that exclude food and energy prices.

Producer Price Index: Another Negative Surprise - Today's release of the February Producer Price Index (PPI) for Final Demand came in at -0.5% month-over-month seasonally adjusted. That follows the previous month's -0.8% decline. Core Final Demand (less food and energy) also came in at -0.5% month-over-month following a -0.1% change the month before. The forecasts were for 0.3% headline and 0.1% core. The year-over-year change in Final Demand is -0.7%, the lowest in the brief history of this data series. Here is the summary of the news release on Finished Goods: The Producer Price Index for final demand fell 0.5 percent in February, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved down 0.8 percent in January and 0.2 percent in December. On an unadjusted basis, the index for final demand decreased 0.6 percent for the 12 months ended in February.... In February, about 70 percent of the decline in final demand prices can be attributed to a 0.5-percent decrease in the index for final demand services. Prices for final demand goods moved down 0.4 percent. More… The Headline Finished Goods for February came in at -0.10% MoM and is down -3.51% YoY. Core Finished Goods were up 0.11% MoM and 1.49% YoY. Now let's visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge over the past several months in headline PPI is, of course, energy related -- now at its lowest level since 2009. Core PPI has remained quite stable over the past year.

US Producer Prices Tumble Most Since 2009 (And Don't Blame Oil) - US Producer Price Index (ex food and energy) fell 0.5% MoM in February (against expectations of a 0.1% rise) - the biggest drop on record (since 2009).The great news for Americans is that the drop in overall producer prices was led by a 1.6% fall in food prices. Year-over-Year PPI Final Demand has fallen (-0.6%) for the first time on record. Biggest MoM drop on record.. As YoY PPI Final Demand dropped for the first time on record... From the report: Prices for final demand services fell 0.5 percent in February, the largest decline since the inception of the index in December 2009. Leading the decrease, margins for final demand trade services dropped 1.5 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) The index for final demand transportation and warehousing services also moved down 1.5 percent. In contrast, prices for final demand services less trade, transportation, and warehousing rose 0.3 percent. Product detail: In February, nearly 30 percent of the decline in the index for final demand services can be traced to margins for fuels and lubricants retailing, which fell 13.4 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; food and alcohol retailing; apparel, jewelry, footwear, and accessories retailing; truck transportation of freight; and wireless telecommunication services also moved lower. Conversely, prices for inpatient care advanced 0.6 percent. The indexes for outpatient care (partial) and for TV, video, and photographic equipment and supplies wholesaling also increased

Commodities Fall to 12-Year Low as Dollar Rises Amid Surplus -- Slumping energy prices led commodities to a 12-year low as the dollar’s best rally since 2008 reduced the investment appeal of raw materials amid surpluses of everything from oil to sugar. The Bloomberg Commodity Index fell 1.4 percent to 97.5777, the lowest level since August 2002, dragged down by crude oil and raw sugar. The Bloomberg Dollar Spot Index, tracking the greenback against 10 currencies, is set to climb the most since 2008 this quarter and reached the highest level in data going back to the end of 2004. A stronger dollar tends to deter investment in raw materials. Commodities are tumbling as economies expand in the U.S. and cool in other nations, driving the dollar higher. The Federal Reserve will hold a policy meeting next week as strength in the U.S. labor market fuels speculation that the central bank will lay the groundwork for higher borrowing costs. The European Central Bank started a bond-buying plan this week, adopting so-called quantitative easing to spur growth. Goldman Sachs Group Inc. said commodities may drop 20 percent over the next six months amid rising supplies. “The combination of prospective Fed rate hikes versus QE in Europe and Japan suggests that dollar strength can continue,” Nic Brown, the London-based head of commodities research at Natixis, said by e-mail on March 10. “This stronger dollar inevitably implies downward pressure on the dollar-denominated price of commodities. Those used as a safe-haven store of value are most at risk.” West Texas Intermediate crude slid 4.7 percent to end at $44.84 a barrel in New York, the lowest settlement since January. A glut of oil in storage in the U.S. expanded for a ninth straight week, the Energy Information Administration said March 11. Natural gas dropped for a second day, losing 0.3 percent to $2.727 per million British thermal units.

Natural gas prices aren’t hitting consumers like oil prices -- According to an analysis by the U.S. Energy Information Administration (EIA), the price slump in natural gas isn’t benefiting consumers like the oil price slump has. Over the past several months, natural gas producers have battled with a warmer than usual winter and massive production numbers. Due to the weather being warmer and the U.S. having an abundance of natural gas, prices have plummeted greatly. The EIA found that retail natural gas prices are protected from swings in spot-market rates because of regulation, hedging by distributing companies and the seasonal demand. The benchmark price of natural gas at Henry Hub dropped over $4 at the end of last year and is now sitting under $3. As reported by FuelFix, “Prices at local hubs fit into a much wider range due to the area’s balance of supply and demand for gas.” The companies that bring natural gas to homes and businesses typically lock prices in advance using hedges. More common than not, the hedges mean that the retail prices are related to the prices of natural gas bought several months before. The EIA also explained that along with hedges, regulation and fixed rates only add to the delay between retail and natural gas market rates. Demand for natural gas goes up during the winter months, due to it being a primary source for heat for most of the U.S. With a demand increase also comes higher bills, regardless of what the market prices are. Consumers also pay a fixed cost that covers the operating expenses for local distribution companies, which is included in consumer’s bills but is not related to natural gas prices.

Road builders want 15-cent gas tax hike - A group representing road builders said Thursday that the federal gas tax should be increased by 15 cents per gallon to help pay for infrastructure improvements. The American Road & Transportation Builders Association (ARTBA) said increasing the gas tax this year would raise $401 billion for new transportation spending. The gas tax hike could be offset with a “federal tax rebate for middle and lower income Americans for six years,” the group suggested.  ARTBA President Pete Ruane said the tax increase was a more viable than other ideas that have been floated as a solution to a transportation shortfall that has bedeviled lawmakers for years, such as taxing oversees corporate profits. “If our national leaders think they need to use budget gimmicks or ‘one-offs’ again to pass the surface transportation investment program the states need and the business community has been pleading for, then use those devices to provide a $90 tax rebate to middle and lower income tax filers to offset the cost to them of a 15 cent per gallon increase in the federal gas tax,” Ruane said in a statement.

Goldman Confirms Subprime Responsible For Collapse In Auto Sales -- We’ve written extensively of late about the parallels between today’s subprime auto lending market and the conditions that prevailed in the subprime housing market on the eve of the collapse. Essentially the dynamic is the same. Lending to underqualified borrowers proliferates, leading to a large pool of securitizable loans. Issuance of ABS based on those loans rises as IBs see an opportunity to take advantage of investors’ hunt for yield. Rising demand for subprime ABS fuels demand for more subprime loans to securitize, prompting lenders to relax their standards in an effort to make eligible borrowers out of ineligible borrowers. New loans begin to carry longer terms (in order to lure buyers who need low monthly payments), lower FICO scores, and are often made for more than the total cost of the asset. Delinquencies rise. Cue collapse.  As we’ve shown, delinquencies are indeed rising as is the total amount of outstanding auto debt, the latter having touched a massive $1 trillion, putting auto loans in position to join student debt in full-on bubble mode. Our fears were confirmed last week when, in the surest sign yet that the subprime auto bubble has reached its peak, CNBC unveiled what we have dubbed the “car-stock arbitrage,” wherein viewers are advised to take out an 84 month car loan and dump the money into the stock market at all time highs.  Meanwhile, GMAC disclosed an SEC probe into subprime ABS origination and the higher ups at Wells Fargo (perhaps after someone in the research department suggested that a 60% Y/Y increase in banks’ tendency to originate loans for the purpose of selling them might be a red flag) suddenly got cold feet last month after financing $30 billion in car loans in 2014 and decided to put a cap on subprime auto lending.

U.S. Economic Confidence Still Negative, at -3: Gallup's U.S. Economic Confidence Index registered -3 for the week ending March 8, the third consecutive week in negative territory after an eight-week run of positive weekly scores. The index is still significantly higher than it has been at most times since 2008. Gallup's Economic Confidence Index is the average of two components: Americans' ratings of current economic conditions and their views on whether the economy is getting better or getting worse. The index has a theoretical maximum of +100, if all Americans believe the economy is excellent or good and getting better; and a theoretical minimum of -100, if all Americans say the economy is poor and getting worse. Confidence recently reverted to negative territory, after two months of positive weekly scores. Prior to that, index scores had consistently been negative since Gallup began tracking economic confidence daily in 2008. Although the index had improved after bottoming out at -65 in October 2008, it did not register a positive score until late December 2014, after months of falling gas prices. The recent slip back into negative territory is likely related to a reversal of the trend in gas prices, after spending on fuel reached a long-term low at the end of January. The government's generally positive unemployment report for February does not seem to have moved Americans' economic confidence in a positive direction. For the week ending March 8, 26% of Americans said the economy was "excellent" or "good," while 27% said it was "poor." This resulted in a current conditions score of -1, basically unchanged from the -2 registered during the two weeks prior. Meanwhile, the economic outlook score was -4, the result of 46% of Americans saying the economy is "getting better" while 50% said it is "getting worse." The economic outlook score is down slightly from the -2 of the previous two weeks, and is the lowest in nearly three months.

Recession Alarm: Wholesale Sales Plunge Alongside Factory Orders, Worst Since Lehman -- For the first time since Lehman, Wholesale Trade Sales dropped for a 3rd month in a row in January. Plunging 3.1% MoM (against -0.5% expectations), this is the biggest drop since March 2009. Excluding auto sales, wholesale sales fell 3.5%. Wholesale inventories rose 0.3% (beating expectations) with only a very modest -0.1% drag from oil. This has sent the inventory-to-sales ratio soaring as the "Field Of Dreams" economy is back - but as one wise trader noted, we are now 10bps higher in inventory/sales than when we entered the recession in Dec 2007. But the punchline is the following chart showing the annual change of Wholesale Trade Sales. It does not need much explanation: It certainly puts the chart of the Factory Orders in much better context:

Wholesale Trade: Sales Down, Inventories Up; GDP Estimate Revised Lower Again; Sticking With Recession Call - The US Commerce Department Monthly Wholesales Report for January 2015 shows sales are down while inventories continue to rise.

  • Sales down 3.1% from the revised December level
  • Sales for December revised lower by 0.5%
  • Sales down 1.0% from January 2014
  • Sales of electrical and electronic goods were down 4.4% from December
  • Sales of metals and minerals, except petroleum were down 4.1% from December
  • Sales of nondurable goods were down 4.6% from December
  • Sales of nondurable goods were down 6.7% from last January.
  • Sales of petroleum and petroleum products were down 13.5% from December
  • Sales of drugs and druggists' sundries were down 3.6% from December
  • Inventories up 0.3% from the revised December level
  • Inventories up 6.2% from January 2014 level
  • Inventories for December revised downward by 0.1%
  • January inventories of durable goods were up 0.6%
  • January inventories of durable goods were up 7.7% from a year ago
  • Inventories of electrical and electronic goods were up 2.4% from December
  • Inventories of motor vehicle and motor vehicle parts and supplies were up 1.6% from December
  • Inventories of nondurable goods were down 0.1% from December
  • Inventories of nondurable goods were up 3.7% from last January
  • Inventories of farm product raw materials were down 4.6% from December
  • Inventories of paper and paper products were up 3.0% from December

US wholesale inventories up, sales post largest drop since 2009: U.S. wholesale inventories unexpectedly rose in January as sales recorded their biggest decline since 2009, pushing the number of months it would take to clear warehouses to its highest level in more than 5-1/2 years. The Commerce Department said on Tuesday wholesale inventories increased 0.3 percent. Stocks at wholesalers were revised to show them unchanged in December. Economists polled by Reuters had forecast wholesale inventories unchanged in January after December's previously reported 0.1 percent gain.  Sales at wholesalers fell 3.1 percent in January, the largest drop since March 2009, after slipping 0.9 percent in December. At January's sales pace it would take 1.27 months to clear shelves, the most since July 2009, up from 1.22 months in December.

US business inventories flat, inventory-to-sales ratio highest since 2009: U.S. business inventories were unchanged in January and further declines in sales pushed the number of months it would take to clear shelves to the highest since July 2009, which suggests a stock drawdown in the months ahead. The Commerce Department said on Thursday business inventories were also unchanged in December after previously being reported to have increased 0.1 percent. Economists polled by Reuters had forecast inventories gaining 0.1 percent in January. Inventories are a key component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, edged up 0.1 percent after being flat in December.  That could see economists lower their first-quarter GDP growth estimates. Growth forecasts for the January-March quarter currently range between an annualized pace of 1.7 percent and 2.5 percent. Economic activity early in the year was hurt by a harsh winter and the now-settled labor dispute at the country's West Coast ports, which disrupted the supply chain. The economy grew at a 2.2 percent pace in the fourth quarter. In January, business sales fell 2.0 percent, the biggest decline since March 2009, after falling 1.0 percent in December.

Business Inventory-To-Sales Ratio Surges To Worst Since Lehman And to complete this morning's trifecta of disappointment, Business Inventories miss (for the 8th of the last 9 months) and show no change MoM - the weakest since May 2013. Building Materials, Furniture, and Autos saw inventories fall as Department Store inventories rose. Coupled with sales weakness (retail sales -0.9%), this is the highest inventory-to-sales ratio since Lehman... just as with Wholesale inventories... Worst monthly change since May 2013... and highest inventrory to sales ratio since Lehman... But apart from that... Charts: Bloomberg

The U.S. Trade Deficit Excluding Oil Hit a Record High. Here’s Why It Matters - The U.S. trade deficit excluding oil hit a record high in January, according to the latest Commerce Department data. It’s likely to continue widening since two major trends aren’t expected to disappear soon: A strong dollar and weak growth overseas.Does it really matter? Yes, because of what it says about the health of the U.S. and its major trading partners. Oil’s share of the trade deficit has fallen as domestic production expanded and prices plummeted. If prices rise, cheap oil fuels more consumption or domestic output is priced out of the market, crude oil’s contribution to the deficit could rebound. Meanwhile, the trade gap in other goods and services has swelled. A robust dollar and a strengthening economy are giving Americans more buying power, especially for products made overseas, boosting the tab for imports. At the same time, growth in Europe and Japan is lackluster and output in several major emerging markets is cooling, undercutting demand for U.S. products abroad. Combined, those dynamics are broadening the non-oil U.S. trade deficit. Exports of industrial supplies are picking up, largely driven by petroleum exports. International sales of capital goods—the products companies invest in to expand their businesses–have shown some improvement, but that trend isn’t nearly as strong. Other export categories show much tamer expansions. Why does this matter? Because the share of total exports as a share of gross domestic product has steadily grown. Export stagnation would undermine growth, one reason the Federal Reserve is looking at growth trends abroad as it mulls when to raise interest rates. Export expansion has also been a key plank of President Barack Obama‘s economic strategy.

U.S. import prices climb 0.4% in February - The prices the U.S. paid for imported goods rose in February for the first time in nine months, largely because oil is no longer in a freefall. The import price index increased a seasonally adjusted 0.4% last month, larger than the 0.1% gain predicted by economists polled by MarketWatch. Yet excluding fuel, import prices fell by 0.3% last month, the Labor Department said Thursday. The price of U.S.-made goods exported to other nations, meanwhile, dipped 0.1% in February. For the past 12 months U.S. import prices have dropped 9.4%, mainly because of sharply lower oil costs. Import prices are down a much smaller 1.2% excluding fuel during the same span.

US Import Prices Plunge 9.4%, Most Since Lehman -- February Import Prices to the US droped 9.4% YoY - the biggest drop since the month after Lehman's bankruptcy i 2008. January's drop was also revised lower. The YoY drop is dominated by a 43.2% drop in petroleum prices (but MoM in Feb petroleum prices jumped 8.1%). Ex-fuel, import prices fell 1.2% YoY as the price of imported capital goods fell the most since March 2009.

The Strong Dollar Is Weighing On Major U.S. Exporters - The stronger U.S. dollar has hurt exporters and could dampen their investment plans for next year, top business executives said in a new survey.  The quarterly Duke University/CFO Magazine Global Business Outlook Survey, released Wednesday, polled about 1,000 business executives–mostly CFOs–around the world.Two out of three big U.S. exporters–those with at least one-fourth of their total sales overseas–said the appreciation of the dollar has had a negative impact on their businesses. And nearly one-fourth of big exporters said they have reduced their capital spending plans as a result. Executives across many sectors–from construction to manufacturing to healthcare–pointed to the strengthening U.S. dollar against most major currencies as an emerging risk that has developed over the past six months. “We are in a midst of an ugly contest to see whether the eurozone, Japan or Canada can depreciate the most against the U.S. dollar, and China is probably next,”  “U.S. exporters are being punished by these competitive depreciations and this will lead to lower profits and less employment.”Nearly one-third of business executives expect the value of the dollar to increase 10% relative to the euro, according to the survey. Among executives who expect at least 10% dollar appreciation, 13.8% said currency values will have a negative effect on capital spending plans, and 8.6% expect a negative effect on hiring plans. (The survey was conducted through March 6; the dollar has strengthened further since then.)

A trade deal must work for America’s middle class - Larry Summers - Over the next few months the question of US participation in the Trans-Pacific Partnership trade deal is likely to be resolved one way or the other. It is, to put it mildly, a highly controversial issue. ... I believe that the right TPP is very much in the American national interest. First, in considering what is most fundamental — the interests of American workers... The view now is that trade and globalisation have increased inequality... But increases in the extent of US trade are driven largely by technology and by the increased sophistication of developing country economies — not by trade agreements. ... Arrangements such as TPP have the potential to tilt the gains from trade towards the American middle class. This is due to the fact that the US has been a very open market for a long time. It means that properly negotiated trade agreements bring down foreign barriers and promote exports to a much greater extent than they ... benefit imports. Crucially, TPP is necessary to let American producers compete on a level playing field... Only through TPP do we have the chance to manage international competition in the interests of American workers through binding arrangements in areas such as labour and environmental standards.

Larry Summers Gets It Largely Right on Trade - Dean Baker - In a Washington Post column on the Trans-Pacific Partnership (TPP) Summers raises the right cautions. He argues that a trade deal should have rules that prevent countries from gaining a competitive advantage by deliberately lowering the value of their currency. He also argues that a deal should not be about special privileges for corporations. And, he says that a trade deal should not jeopardize public health by raising drug prices. Nonetheless it looks like Summers is likely still going to come down for the TPP. His rationale is that a deal has large potential gains for the United States by making East Asian markets more open to the United States. This is hard to see. Most of these markets are already largely open, so there will not be much gain from removing whatever barriers still exist to exporting to countries like Australia. Some of the other countries, most notably Vietnam, still have substantial barriers, but it's difficult to see large gains given their limited size. In the case of Vietnam, our current exports are around $35 billion a year. Suppose this increases by 30 percent as a result of the TPP.  This would translate into a bit more than $10 billion a year in additional exports to Vietnam. If we assume that we get 20 percent more from selling these exports to Vietnam than they would otherwise fetch (a quite large premium) that would translate into $2 billion a year. That is equal to 0.01 percent of GDP. Of course there will be gains from openings with other countries but the total is not likely to be very impressive. A study published by the Peterson Institute for International Economics put the gains from the TPP at $77 billion a year. This is equal to about 0.4 percent of GDP. That's not trivial, but not exactly a sea change in terms of American prosperity. And remember, the projection is that we don't see this full gain for a decade or more. Also, this says nothing about the distribution of the gains, which may go disproportionately to those at the top. (The model assumes full employment.)  Furthermore, this estimate took no account of measures that will almost surely slow growth, most notably higher drug prices due to stronger patent protections and higher prices for other goods due to stronger copyright protection. These increased protections have the same impact as imposing large excise taxes on the items covered. (The impact of patents on drug prices is comparable to taxes in the range of 1,000-10,000 percent.)

TPP at the NABE - Krugman - I was in DC yesterday, giving a talk to the National Association of Business Economists. The subject was the Trans-Pacific Partnership; slides for my talk are here.Not to keep you in suspense, I’m thumbs down. I don’t think the proposal is likely to be the terrible, worker-destroying pact some progressives assert, but it doesn’t look like a good thing either for the world or for the United States, and you have to wonder why the Obama administration, in particular, would consider devoting any political capital to getting this through. Actually, I was glad to see Larry Summers weigh in on the same subject in yesterday’s FT. Reading that piece, you may wonder what just happened – did Larry come out for the deal or against it? The answer, I think (slide 1), is that he basically supported an idealized TPP that could have been, but came out against the TPP that actually seems to be on the table. And that means that he and I are in a similar place.So, about the deal. The first thing you need to know is that almost everyone exaggerates the importance of trade policy. In part, I believe, this reflects globaloney: talking about international trade sounds glamorous and forward-thinking, so everyone wants to make that the centerpiece of their remarks. (The same thing happens to an even greater extent when international money issues like the dollar’s role as a reserve currency crop up.)Also, there’s an odd dynamic involving the role of international trade in the history of economics. Comparative advantage was an early, classic example of how economic reasoning can lead to results that are true but not obvious; naturally, economists have always wanted this intellectual victory to be important in the real world too. This leads to the odd dynamic: comparative advantage says “yay free trade”, but also suggests that once trade is already fairly open, the gains from opening it further are small. But because economists want to keep shouting yay free trade, they look for reasons why those gains might be larger – even though the stories they then end up telling are inconsistent with the competitive model that was the basis for free-trade advocacy in the first place.

Astroturf “Progressive” Support for the TPP – Meet “270 Solutions” - naked capitalism by Yves Smith - It's become routine to expose some of the supposedly organic proposals that come out of the Tea Party as actually sponsored by the Koch Brothers and other big corporate interests. We didn't want to leave Democrats out in the cold in the astroturfing game. Gaius Publius discusses one ecosystem: a consulting firm, "270 Strategies" and one of its phony creations, the Progressive Coalition for American Jobs.  By Gaius Publius: I recently did a piece looking at the Democratic consulting shop “270 Strategies” — a group that’s been characterized as involved in “astroturfing” by the Daily Kos diarist Liberty Equality Fraternity and Trees. Her (or his) headline was: Obama Campaign Alumni Form New Astroturf Group to Promote TPP That’s accurate, but a little confusing. There are actually two groups involved. Obama campaign alumnae (or alumni) — Lynda Tran, Mitch Stewart and Jeremy Bird — are founding partners of the PR and digital consulting shop “270 Strategies.” And the “astroturf” group is their client (or brainchild), the “Progressive Coalition for American Jobs.” Let’s continue our look at 270 Strategies, since their efforts on behalf of TPP have already borne fruit. From a news piece around the time 270 Strategies was created:

Dean Baker on the TPP - Brad DeLong -- Fun With Brad DeLong on TPP: "Okay, let's take the DeLong challenge.... ...TPP... will almost certainly have nothing on currency... It will not make it any easier, and could well make it more difficult, for the United States to address the trade deficit that results from having an over-valued dollar.... The United States has faced a serious problem of secular stagnation.... No one in a position of power is prepared to talk about big increases in the government deficit.... If we could reduce the value of the dollar enough to lower the trade deficit by just 0.2 percent of GDP, but are blocked from this path by TPP provisions, then the resulting loss of 0.3 percent of GDP (assumes a multiplier of 1.5 on net exports) would exceed the gains that have Brad so excited.... Brad has not set a very high bar.... The countries of the region spend close to $700 billion a year on pharmaceuticals.... Let's say the TPP raises drug prices by 20 percent. That gets $140 billion a year, a sum that's more than 80 percent larger than Brad's $75 billion. Will TPP raise drug prices by this much? Certainly the drug companies who are at the table would like to see [it].... TPP will mean higher prices on fertilizers, pesticides and a wide range of other chemicals as well books, movies, recorded music, video games and all sorts of other good things.  Finally, we should consider the issue of the mix between winners and losers.... Okay, all of this is incredibly crude, but it is possible to think of plausible scenarios in which most of the people in this country end up as losers from the TPP. So, why should we buy this industry-crafted deal?

Unfair Trade Deals Lower the Wages of U.S. Workers -- Unfair trade deals have lowered the wages of U.S. workers by displacing jobs and weakening the bargaining position of low- and middle-wage workers. President Obama and his predecessors have frequently claimed that free trade agreements (FTAs) and other trade deals would lead to growing exports and domestic job creation. But data on trade following the North American Free Trade Agreement in 1994, China’s entry into the World Trade Organization in 2001, and the U.S.-Korea Free Trade Agreement (KORUS) in 2007 show that these deals have done much more to stimulate imports than exports, leading to growing trade deficits. The issue is simple: Although increased exports support U.S. jobs, increased imports cost U.S. jobs. Thus, it is trade balances—the net of exports and imports—that determine the number of jobs created or displaced by trade agreements. Rather than reducing our too-high trade deficit, past trade agreements have actually been followed by larger U.S. trade deficits. Trade deals and globalization affect U.S. wages in two main ways:

  • Increased U.S. trade deficits push jobs out of better-paid tradeable sectors. Jobs displaced by growing trade deficits result in lost wages as workers who leave high-paying import-competing industries such as computer and electronic parts manufacturing take jobs in lower-paying nontradeable industries. Even when jobs in importing industries are replaced in part by jobs in exporting industries such as agriculture or food products, the result is wage losses from rising trade deficits.
  • Even if trade deficits did not rise, increased trade changes the composition of jobs, and the new patterns of employment lead to reduced demand for labor and downward pressure on wages. As the United States increases production (and increases exports) of capital-intensive goods and reduces production (and increases imports) of labor-intensive goods, this leads directly to a reduced demand for labor, even if exports and imports measured in dollars balance.

Why Obama’s key trade deal with Asia would actually be good for American workers - Opponents of giving President Obama fast-track authority to negotiate the Trans-Pacific Partnership (TPP) — the pending trade pact between the United States and 11 countries in Asia and the Americas — cite the job-killing impacts of globalization as a prime reason for their objection. The free-trade agreement would lower tariffs and remove other barriers to imports from member countries, which opponents fear would create steep competition for U.S. industries domestically. There is indeed substantial evidence that import competition from low-wage countries has contributed to the momentous decline in U.S. manufacturing employment in the last two decades. We even researched and published some of that empirical evidence. Still, we believe blocking the TPP on fears of globalization would be a mistake. There are several reasons to support the TPP despite globalization concerns. First, the TPP — which seeks to govern exchange of not only traditional goods and services, but also intellectual property and foreign investment — would promote trade in knowledge-intensive services in which U.S. companies exert a strong comparative advantage. Second, killing the TPP would do little to bring factory work back to America. Third, and perhaps most important, although China is not part of the TPP, enacting the agreement would raise regulatory rules and standards for several of China’s key trading partners. That would pressure China to meet some of those standards and cease its attempts to game global trade to impede foreign multinational companies.

The TPP debate is alive and well -- Here is Ezra on TPP:

    • 5. Here’s how the White House sees it: there will either be a trade deal with America at the core of it that forces countries like Vietnam and Malaysia to live up to labor and environmental standards the Obama administration finds acceptable, or there will be a trade deal with China at the core of it that forces countries like Vietnam and Malaysia to live up to labor and environmental standards China finds acceptable. Which would you prefer?
    • 6. There’s also a bigger foreign policy objective here. TPP is central to the Obama administration’s long-heralded “pivot to Asia.”…

Do read the whole thing, to not pursue some version of TPP is basically to turn our backs on much of Asia.  Or think of TPP as an attempt to cartelize ASEAN nations and others in the region against Chinese one-by-one bilateral bargaining, most of all on geopolitical issues, not just labor and environmental standards. Matt Yglesias comments, he says beware of economists (i.e., me) bearing foreign policy arguments.  And here are Autor, Dorn, and Hanson on TPP, as Dani Rodrik pointed on on Twitter they offer a relatively mercantilist argument in favor of the agreement.

Will Currency Manipulation Vigilance Kick Off a New Wave of Trade Protection? --  Yves here. Even though Treasury is required to make semi-annual reports of whether any major trade counterparites countries are engaging in currency manipulation under the U.S. Trade and Competitiveness Act of 1988, the law appears to be overly forgiving, since economists and financial analysts recognize that the so-called Asian tigers, and most of all China, kept their currencies low in order to build up foreign exchange reserves. That of course meant they also ran trade surpluses, which hurt American companies and workers. And indeed, Treasury did designate China to be a currency manipulator prior to 2012, but that designation does not appear to have played much of a role in China’s decision to liberalize the pricing of its currency.  Note that the bill that would toughen the US stance on currency manipulation comes up when we’ve had even more currency jockeying than normal thanks to faltering economic conditions in the wake of the crisis. Japan saw the yen go into nosebleed territory as a result of China manipulating the yen as a stealtier way to cheapen the remnimbi versus the dollar than buying dollars directly. Similarly, many analysts believe the only clear economic benefit of Eurozone QE will be to drive the Euro lower. When the Eurozone crisis first broke, Wolfgang Munchau argued it would take a Euro value at between 60 and 80 cents for the Eurozone to have a high enough growth rate so as to fend off the need for structural reforms. Will QE drive it that low, and even if so, is the US prepared to tolerate that? And while this bill has the potential to throw sand in the gears of pending (misnamed) trade deals, I’m told the bill’s sponsors believe in it on its own merits. And it’s intriguing to observe that Larry Summers, who appears to be seeking to displace Krugman as the anchor of respectable leftie thinking, has a “damning with faint praise” comment in the Financial Times on the pending trade deals, A trade deal must work for America’s middle class. Without going as far as questioning the logic of “more trade is better” he does a lot more of the two-handed economist routine than is typical for him.

U.S. Refiners, Striking Workers Digging In for Protracted Battle - WSJ: U.S. refiners and striking union workers are digging in for a protracted battle that could last through the spring. Even as the two sides returned to the bargaining table Wednesday for a new round of talks on salaries and safety, some refinery operators say they are training replacement employees to take over for union workers at their plants. A spokeswoman for Shell said discussions ended Wednesday with an agreement to resume talks next week. In a letter addressed to employees Tuesday, LyondellBasell Industries said it had filed a complaint with the National Labor Relations Board alleging the United Steelworkers has threatened and harassed people trying to cross picket lines. “We have been told of threats against returning employees, abusive language being used in texts and social media, and we have witnessed threatening behavior at the gates to the Houston Refinery as employees arrive for work,” the company said in the letter. Royal Dutch Shell PLC said late Monday that by midsummer its Texas fuel-making plant southeast of Houston will be operating at normal staff levels with newly trained employees who aren't affiliated with the USW. Roughly 20% of striking workers at the plant have defied the union and returned to work at that plant, Shell said. USW Vice President Tom Conway said Wednesday that employees haven't gone back to the plants en masse. He called the companies’ attempts to lure employees back and recruit new ones a “misguided effort” that shows companies want to break the strike, not resolve safety and wage disputes with the union.

Union says tentative deal reached to end U.S. refinery strike - – The United Steelworkers union and oil companies have reached a tentative deal to end the largest U.S. refinery strike in 35 years, the labor group and people familiar with the negotiations said on Thursday. The new agreement would be for four years, a year longer than previous agreements, several people told Reuters. The deal, which still needs to be ratified, may not end strikes right away at all refineries that have suffered walkouts as local union chapters could still need to work out pending issues. “We salute the solidarity exhibited by our membership,” said USW International President Leo Gerard. “There was no way we would have won vast improvements in safety and staffing without it.” The tentative deal contains language that addresses worker fatigue, which is tied to accidents, and the use of contractors versus unionized labor. It also safeguards gains made in previous contracts, the union and sources said. They added that annual wage increases would likely be between 2 percent and 3 percent. Lead industry negotiator Royal Dutch Shell Plc, when asked about the pact, said it had nothing to add. Twelve refineries with a fifth of U.S. refining capacity have been hit by strikes during the last 40 days. Companies have responded by calling in temporary workers. The contract would also cover refineries owned by Exxon Mobil Corp, BP Plc, Tesoro Corp, Valero Energy Corp, Chevron Corp and other companies.

U.S. Manufacturers Trim Optimism Amid Strong Dollar and Rising Health-Care Costs - U.S. manufacturers expect sales to continue to grow this year, but fear the effects of rising health-care costs, a strong dollar and the West Coast port strike, according to a new industry survey.The National Association of Manufacturers said Monday it still expects 3% or more growth in the economy and industrial production in the next 12 months. But several headwinds are eroding optimism within its member firms. Tentative demand growth, sluggish growth overseas and falling energy prices are tempering optimism within the association’s member companies, according to a new survey by NAM and Industry Week. The first-quarter survey found 88.5% of manufacturers said they were either somewhat or very optimistic about the company’s outlook, down from 91.2% in the previous quarter. Increasing health-care costs topped the list of worries. On average, manufacturers expect benefit costs will rise by an average of 5.3% over the year and health-insurance premiums by 7.2%. Smaller firms said their health-insurance costs could jump by nearly 13%. Sales forecasts were also softer. Manufacturers expect purchases to expand by 4.3% over the next 12 months, down from 4.5% three months ago. They also slimmed their outlook for hiring. Employment in the industry is only expected to grow by 1.9% this year, slower than the 2.3% rate expected in the last survey. Still, as the American economy show signs of gathering pace, manufacturers see inventories building and production continuing to grow.

NFIB: Small Business Optimism Index Increased slightly in February - From the National Federation of Independent Business (NFIB): Small Business Optimism Rises Despite Falling Sales Trends - The NFIB Small Business Optimism Survey for February rose 0.1 points to 98.0 a solid result despite some unfavorable conditions. “In spite of slow economic activity and awful weather in a lot of the country, small business owners are finding reasons to hire and spend which is great news. Of the ten components, owners reporting hard-to-fill job openings was the largest gain increasing three points to a 29 percent which is a nine year high. “Large firms have been powering the economic recovery since the Great Recession, but that may be shifting to the small business sector. February’s data suggests there are fundamental domestic economic currents leading business owners to add workers and these should bubble up in the official statistics and support stronger growth in domestic output.” .....Fourteen percent cited the availability of qualified labor as their top business problem, the highest since September 2007. The job openings figure is one of the highest in 40 years and this suggests that labor markets are tightening and that there will be more pressure on compensation in the coming months.

Skills Shortage Is the Worst Since 2006, Small-Business Survey Says -Although small-business owners remain upbeat, a growing percentage reports difficulty in finding workers with the right labor qualifications. By one measure, the skills shortage is the worst since 2006, but most business owners remain reluctant to raise compensation to attract and retain qualified employees. The National Federation of Independent Business‘s small-business optimism index edged up to 98.0 in February, from 97.9 in January. Both readings are down from 100.4 in December, which was the highest reading since October 2006, before the last recession. Economists surveyed by The Wall Street Journal expected the index to edge up to 98.0. The subindexes showed little movement last month. The subindex covering plans to create new jobs fell 2 percentage points to 12%. The capital outlays subindex was unchanged at 26%. The earnings trend subindex was also unchanged at 19%. Business conditions expectations fell one point to minus 1% and real sales expectations slipped one point to 15%. The small-business sector as a whole is hiring more than firing. The NFIB found businesses that increased employment added an average of 3.4 workers, while those reducing their workforce cut an average of only 2.9 positions. As a result, the average increase in workers per firm was 0.16 worker, unchanged from January’s solid reading. Finding good workers remains a problem, the NFIB said. The subindex covering jobs that are hard to fill increased three points to 29%. The report said it is the highest reading since April 2006. Of those looking for workers, 89% said they were seeing few or no applicants who were qualified for the open positions.

Weekly Initial Unemployment Claims decreased to 289,000 - Catching up: The DOL reported: In the week ending March 7, the advance figure for seasonally adjusted initial claims was 289,000, a decrease of 36,000 from the previous week's revised level. The previous week's level was revised up by 5,000 from 320,000 to 325,000. The 4-week moving average was 302,250, a decrease of 3,750 from the previous week's revised average. The previous week's average was revised up by 1,250 from 304,750 to 306,000.  There were no special factors impacting this week's initial claims.  The previous week was revised up to 325,000. The following graph shows the 4-week moving average of weekly claims since January 2000.

America's jobs report: The winning streak continues | The Economist - FOR how much longer can the American economy keep creating jobs so fast? 2014 was a bumper year—by December there were 3m more people in work than a year earlier (see first chart). Unemployment was 1.1 percentage points lower. The ratio of jobseekers to vacancies fell from a peak of seven to one in 2009 to two to one in December 2014. If the figures released this morning are anything to go by, the good times will continue. America's economy created 295,000 jobs in February, a pace of growth faster than for 2014 as a whole. Unemployment fell to 5.5%, a level that, back in 2013, the International Monetary Fund thought would be well out reach until 2018. People who typically struggle in the labour market have done especially well. Let's look at those Americans who failed to complete high school, or who did complete high school but no more. Both have done reasonably well, unemployment-wise, compared to their better-qualified peers (see second chart). One possible explanation for this, which we have discussed at length elsewhere, is that unemployment benefits got stingier at the beginning of 2014. That reform disproportionately hit people with fewer qualifications, since they are most likely to be unemployed. This argument suggested that by removing benefits, the wage demands of people previously on handouts fell. Employers created more jobs to take advantage of the lower wages, and that encouraged people to give employment a shot. Indeed, over the last year the labour-force participation rate of people with very poor qualifications has jumped (see third chart).

Job Surge Spooks Markets as Unemployment Approaches Natural Rate -- The BLS announced Friday that the US economy added 295,000 jobs in February, bringing the unemployment rate to 5.5 percent, a new low for the recovery. The leading stock indexes immediately plunged. The Dow lost 1.5 percent, the S&P 500 1.4 percent, and the NASDAQ 1.1 percent. Why  the negative reaction to such good news? The answer may lie in an obscure economic indicator known as the non-accelerating inflation rate of unemployment, or NAIRU. The NAIRU gets its name from the fact that when unemployment hits that level, the rate of inflation begins to accelerate. Market participants know that the Fed has a dual mandate to maintain full employment and price stability, and some of them interpret that to mean that it will begin to raise interest rates as soon as the unemployment rate hits the NAIRU. As the following chart shows, that could happen any time now. The Congressional Budget Office estimates that the NAIRU is currently 5.39 percent, within easy reach of February’s current unemployment rate of 5.5 percent.  There is just one problem with this scenario. NAIRU or no, the rate of inflation shows absolutely no sign of accelerating, or even of slowing its rate of decrease. The Fed’s favored measure of inflation is the personal consumption expenditure index (PCE), an indicator derived from the GDP accounts. In Q4 2014, the inflation reading for the PCE was just 1 percent, compared with the same quarter a year earlier. That was not all due to falling gasoline prices, either. Year-on-year inflation for the core PCE, which excludes food and energy, was just 30 basis points higher (1.04 percent vs. 1.01 percent).  We don’t know the PCE deflator for Q1 2015 yet, but judging from the consumer price index, which went  negative last month, it is highly likely that PCE inflation will turn out to be still lower when the data become available at the end of April. Supposedly, the Fed is targeting 5.5 percent unemployment and 2 percent inflation. With inflation still headed down as unemployment approaches the NAIRU, it looks like we are headed for a bad miss on the low side, as the next chart shows.

Job Growth Was Fantastic Last Month. So Why Aren’t Wages Rising More? - First the good news. The American job market has truly, really, finally, unquestionably shifted into a higher gear.The 295,000 jobs the nation added in February was comfortably above expectations, drove the unemployment rate down two-tenths of a percentage point to 5.5 percent, and completed the best stretch for job creation in nearly 15 years. Over the last six months, the nation has added just shy of 300,000 jobs a month, the strongest number since the six months ended in March 2000.This time a year ago, the economy was locked in a yearslong tepid recovery that involved adding 2 to 2.5 million jobs a year. That has now hit 3.3 million, and will soon hit 3.5 million if this pace of job growth keeps up. This is pretty terrific news by any standard. But what is a little more curious is that while the evidence of a truly robust jobs recovery is obvious in this and other recent readings on the labor market, the evidence of the two other trends that economy-watchers are hoping to see is somewhere between murky and nonexistent.The absence of meaningful gains in American workers’ pay has been one of the lingering problems in the economy. With high rates of job growth and an unemployment rate that is down near normal, healthy levels, you would expect workers to have more leverage to demand raises. We’ve seen anecdotal evidence that is happening, including the major employers Walmart and Aetna voluntarily increasing their wages for lower-level workers. But the latest jobs numbers offer no real evidence this is an economywide trend. Average hourly earnings rose only 0.1 percent in the month, below forecasts. Over the last year, that number has risen only 1.98 percent, actually down a bit from a few months ago.

More Employment Graphs: Duration of Unemployment, Unemployment by Education, Construction Employment and Diffusion Indexes - By request, a few more employment graphs ... This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more. The general trend is down for all categories, and both the "less than 5 weeks" and 6 to 14 weeks" are close to normal levels. The long term unemployed is close to 1.7% of the labor force - the lowest since December 2008 - however the number (and percent) of long term unemployed remains a serious problem. This graph shows the unemployment rate by four levels of education (all groups are 25 years and older). Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down. Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment. Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed". This graph shows total construction employment as reported by the BLS (not just residential). Since construction employment bottomed in January 2011, construction payrolls have increased by 921 thousand. The BLS diffusion index for total private employment was at 65.4 in February, up from 62.0 in January. For manufacturing, the diffusion index was at 64.4, up from 61.3 in January. Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. Above 60 is very good.

Here Come the Employment Truthers - Krugman - Ben Casselman reads an op-ed in the Wall Street Journal and declares, It is, without exaggeration, one of the dumbest things I’ve ever read. And I read Zero Hedge.  I’d say that he doesn’t get out enough — you can get much, much dumber. Still, the piece in question is a diatribe against seasonal adjustment, and is so amazingly ignorant that you might wonder how it got published in the Journal. You might wonder, that is, if you didn’t understand what’s happening: we’re witnessing the coming of the employment truthers.When Obama and the Fed began their efforts to rescue the economy from the worst financial crisis since the 1930s, the right knew, just knew, what was going to happen. Inflation was going to soar thanks to money-printing and deficits; private employment would stagnate because of Obamacare, and also because Obama was hurting the feelings of job creators.When inflation failed to take off, in came the inflation truthers, insisting that the official numbers were wrong and probably a deliberate fake.  Now, how’s that employment prediction doing? Witness the terrible effect of a socialist who trash-talks capitalism:

Truthinesslessness  Kunstler - Nothing is stable, nothing is straightforward, everything is fixed, and nothing is fixed. O nation of busboys and WalMart greeters, awake and sing!  Can an empire founder on sheer credulousness? After last Friday’s jobs report, I think so. For a culture that luxuriates in statistical analysis (and the false idea that if you measure enough things, you can control them), it is rather amazing that we absolutely don’t care whether the measurements are truthful or not. Hence, an economist (sic) such as Paul Krugman of The New York Times might ask himself how it is that Zero Interest Rate Policy only trickles down to places where hamburgers are sold. PK was at it again in his Monday column, yammering about “rapid job growth,” “partying like it was 1995.” Wise men like him are pounding this country down a rat hole faster than you can say Romulus Augustulus. Apparently the US Bureau of Labor Statistics missed the job bloodbath in the oil industry, especially over in Frackville where the latest western phenomenon is the ghost man-camp (along with ghost pole dancing parlors). It’s a veritable hemorrhagic fever of job layoff announcements: 9,000 here, 7,000, there, thousands of thousands everywhere — Halliburton, Schlumberger, Baker Hughes — like an Ebola ward in the oil services sector. Not to mention the cliff-drop of capital expenditure, meaning even steeper job losses ahead, Casey Jones. But nobody notices, I guess because they’re out at Ruby Tuesdays eating things bigger than their heads. Are the portions getting smaller, or are their heads shrinking?

Why the Prime Labor Force Participation Rate has Declined -- Complaining about the decline in the overall labor force participation rate is the last refuge of scoundrels. A significant decline in the participation rate was expected based on demographics (there is an ongoing debate about how much is due to demographics, and how much of the decline is cyclical - however, as I've pointed out many time, a careful analysis suggests most of the decline is due to demographics). But what about the decline in the prime working age labor force participation rate? Each month I post the following graph of the participation rate and employment-population rate for prime working age (25 to 54 years old) workers. In the earlier period the participation rate for this group was trending up as women joined the labor force. Starting in the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.  The 25 to 54 participation rate decreased in February to 81.0%, and the 25 to 54 employment population ratio increased to 77.3%.  As the recovery continues, I expect the participation rate for this group to increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s. A couple of key points:
1) Analyzing and forecasting the labor force participation requires looking at a number of factors. Everyone is aware that there is a large cohort has moved into the 50 to 70 age group, and that that has pushing down the overall participation rate. Another large cohort has been moving into the 16 to 24 year old age group - and many in this cohort are staying in school.
2) But there are other long term trends. One of these trends is for a decline in the participation rate for prime working age men (25 to 54 years old).   For some reasons, see: Possible Reasons for the Decline in Prime-Working Age Men Labor Force Participation and on demographics from researchers at the Atlanta Fed: "Reasons for the Decline in Prime-Age Labor Force Participation" First, here is a graph of the participation rate by 5 year age groups for the years 2000, 2005, 2010, and 2015

A Better Gauge of Labor Slack May Be the Gap Between Two Jobless Rates - The unemployment rate has fallen to a level that has some economists suggesting the U.S. is nearing “full employment,“ but the spread between that number and a broader measure of joblessness remains stubbornly large. The most commonly reported unemployment rate, known in economics circles as the U-3, fell to 5.5% last month. Another measure that includes the unemployed plus people those who want a job but have given up looking and those working part-time would prefer full-time employment, known to wonks as the U-6, stood at 11.0% in February, according to the Labor Department. Both measures have fallen over the past year, but the U-3 has slid more quickly. It’s down 18% against 13% for the U-6. As a result the spread between the two measures has narrowed only modestly, to 5.5 percentage points last month from 5.9 points a year earlier. In the 10 years before the recession began in late 2007, the average spread was 3.6 percentage points. The current gap suggests an unusually large number of Americans are underemployed or on the fringe of the labor market. That situation exerts stronger downward pressure on wages than a 5.5% unemployment rate would suggest. At the National Association for Business Economics conference in Washington this week, a handful of economists suggested the Federal Reserve should be keeping an eye on the gap between the two measures as it nears a decision for when to raise short-term interest rates.

BLS: Jobs Openings at 5.0 million in January, Up 28% Year-over-year  -- From the BLS: Job Openings and Labor Turnover Summary There were 5.0 million job openings on the last business day of January, little changed from 4.9 million in December, the U.S. Bureau of Labor Statistics reported today. ... ... Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.8 million quits in January, little changed from December. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. This series started in December 2000. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for January, the most recent employment report was for February. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in January to 4.998 million from 4.877 million in December. The number of job openings (yellow) are up 28% year-over-year compared to January 2014. Quits are up 17% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is another very positive report. It is a good sign that job openings are at 5 million, and that quits are increasing significantly year-over-year.

Job Openings Back to Pre-Recession Levels - The BLS JOLTS report, or Job Openings and Labor Turnover Survey shows there are 1.8 official unemployed per job opening for January 2015.  Job openings were around five million.   Job openings returned to pre-recession levels while overall hires has also increased to pre-recession levels.  In just the private sector job openings have also recovered to pre-recession levels while private hires are finally just 3.4% from their pre-recession levels.  The U.S. is finally back to where we started from, all the way back to 2007. There were 1.8 official unemployed persons per job opening at the start of the recession, December 2007.  Below is the graph of the official unemployed per job opening, currently at 1.8 people per opening.  Finally the U.S. returns to having enough job openings after years of terrible figures.  If one takes the U-6 broader measure of unemployment that includes people who are forced into part-time work and the marginally attached, the ratio is 3.6 people needing a job to each actual job opening. In December 2007 this ratio was 3.2. So here too we're finally seeing some good ratios regarding job openings. By either measure it is clear job openings have finally returned to pre-recession levels. Bear in mind there are more people needing a jobs when looking at the below raw job openings figures. Currently job openings stand at 4,998,000. Since the June 2009 trough, actual hires per month have only increased 17.4%, but that's only because recession hiring really didn't crash and burn like firings and openings did, Total hires are finally at pre-recession levels, although by last month hires dropped -4.6%. In the private sector hires are about 3.4% below their pre-recession levels. Keep in mind the levels of working population have increased significantly since 2007. Additionally, Businesses can say there are job openings, but if they do not hire an American and fill it, that doesn't help the labor situation. Below is the graph of actual hires, currently 4,996,000.

Job Openings Rise to the Highest Level in 14 Years - Employers across the U.S. had 5 million job openings at the end of January, the most since January 2001, providing further hope that the labor market is on the mend. Openings have been rising across a range of industries, according to the Labor Department’s Job Openings and Labor Turnover Survey, known as Jolts. Professional and business services, health care and accommodation and food services have seen openings rise; mining and logging, which includes the beleaguered U.S. oil industry, has seen openings decline. The level of hiring declined slightly in January, falling to 5 million from 5.2 million in December. The total number of people leaving their job declined slightly, too–separations fell to 4.8 million from 4.9 million. The Labor Department’s main jobs report shows the net change in jobs—a gain of 295,000 in February—but the Jolts report digs one level deeper, cataloging the millions of workers each month who quit a job or are laid off, retire, start a new job or switch jobs. The Jolts report is closely followed by the Federal Reserve. Fed Chairwoman Janet Yellen has identified the report’s tally of the number of people who voluntarily quit their jobs each month as an important barometer of the economy’s health. In a good labor market, workers are more willing to quit—owing to greater confidence in their prospects or greater opportunities to find different work. The number of workers voluntarily quitting their job climbed to 2.8 million. Despite improvement in recent months, the level of quits has yet to recover to its prerecession levels.

Hires and Quits Rates Remain Depressed  -- The hires, quits, and layoffs rates all held fairly steady in the January Job Openings and Labor Turnover Survey (JOLTS). As you can see in the figure below, layoffs shot up during the recession but recovered quickly and have been at prerecession levels for more than three years. The fact that this trend continued in December is a good sign. That said, not only do layoffs need to come down before we see a full recovery in the labor market, but hiring needs to pick up. While the hires rate has been generally improving, it’s still below its prerecession level.  The voluntary quits rate rose slightly from 1.9 in December to 2.0 in January, the same rate it had been for both September and October. In January, the quits rate was still 8.0 percent lower than it was in 2007, before the recession began. A larger number of people voluntarily quitting their jobs indicates a strong labor market—one where workers are able to leave jobs that are not right for them and find new ones. Before long, we should look for a return to pre-recession levels of voluntary quits, which would mean that fewer workers are locked into jobs they would leave if they could. But, we are not there yet.

There Are Nearly Six Unemployed Construction Workers for Every Construction Job Opening -- One of the recurring myths following the Great Recession has been that recovery in the labor market has lagged because workers don’t have the right skills. The figure below, which shows the number of unemployed workers and the number of job openings in January by industry, is a useful way to examine this idea. If today’s labor market woes were the result of skills shortages or mismatches, we would expect to see some sectors where there are more unemployed workers than job openings, and others where there are more job openings than unemployed workers. What we find, however, is that there are more unemployed workers than jobs openings in almost every industry. The notable exception is health care and social assistance, which has been consistently adding jobs throughout the business cycle, and there are signs that workers in that industry are facing a tighter labor market. However, we have yet to see any sign of decent wage gains yet, which would be the final indicator that the labor market, at least for those workers, was approaching reasonable health. Other sectors have seen little-to-no improvement in their job-seekers-to-job-openings ratios. There are, for example, still nearly six unemployed construction workers for every job opening. In other words, despite claims from some employers, there is no shortage of construction workers. Taken as a whole, these numbers demonstrate that the main problem in the labor market is a broad-based lack of demand for workers—not available workers lacking the skills needed for the sectors with job openings.

Obama Administration Makes Unverifiable Claim of 545,000 IT Job Openings; H-1B Visa Boosting Likely Culprit  -- Yves Smith - The oldsters would explain how yes, none of the large and hardly any mid-sized companies were willing to train people. They’d send the yeoman work that used to be how young professionals learned their trade offshore. Of course, that meant that the US was choosing to give up its leadership position in computer science by refusing to develop the next generation of professionals, but no one seemed to care much about that. With this background, we have in the same day, two stories on Slashdot that say a great deal about the reality of the labor market versus the official hype. Here’s the first post Do Tech Companies Ask For Way Too Much From Job Candidates?: The short answer: Yes. Many employers’ “required” skill sets seem to include everything but the ability to teleport and build a Shaker barn; the lengthy requisites of skills and experience seem achievable only by candidates who’ve spent the past four decades using a hundred different programming languages and platforms to excel at fifty different, complicated jobs. Why do a lot of tech companies do that? Dice asked around and discovered a bunch of different reasons. Companies want to make investments in talent, but the inherent costs of that talent also make them wary of hiring anyone but the absolute best. Slashdot’s community also pointed out that Dice failed to mention the elephant in the room, namely, the role of the H-1B visa process in these unrealistic job specs. That came even more strongly in focus in the second piece, Obama Administration Claims There Are 545,000 IT Job Openings. The post proper: The White House has established a $100 million program that endorses fast-track, boot camp IT training efforts and other four-year degree alternatives. But this plan is drawing criticism because of the underlying message it sends in the H-1B battle. The federal program, called TechHire, will get its money from H-1B visa fees, and the major users of this visa are IT services firms that outsource jobs. Another source of controversy will be the White House’s assertion that there are 545,000 unfilled IT jobs. It has not explained how it arrived at this number, but the estimate will likely be used as a talking point by lawmakers seeking to raise the H-1B cap.

Being 'laid off' leads to a decade of distrust --  People who lose their jobs are less willing to trust others for up to a decade after being laid-off, according to new research from The University of Manchester. Being made redundant or forced into unemployment can scar trust to such an extent that even after finding new work this distrust persists, according to the new findings of social scientist Dr James Laurence. This means that the large-scale job losses of the recent recession could lead to a worrying level of long-term distrust among the British public and risks having a detrimental effect on the fabric of society. Dr Laurence ... finds that being made redundant from your job not only makes people less willing to trust others but that this increased distrust and cynicism lasts at least nine years after being forced out of work. It also finds that far from dissipating over time, an individual can remain distrustful of others even after they find a new job. ...

The Future of Work | Lawrence H. Summers: We need to recognize that a sector that has rapid technological progress but of which the world can absorb only so much, becomes ultimately unimportant in the economy. Is that kind of thing relevant in thinking about the world? Here’s a fact that continues to astonish me. I concede there are a million measurement problems. But it is a fact. The way they compute the consumer price indices all prices were set to be an index of 100 in 1983. Consider two goods today: a television set, and a year at a University or I could use a day in a hospital. The consumer price index for the latter two categories is in the neighborhood of 600. The consumer price index for the former category is 6. There has been a 100-fold change in the relative price of TV sets and the provision of basic education and health care services. Something very serious has happened with respect to the general availability of quality jobs in our society. We can debate whether it is due to technology or whether it is not due to technology. We can debate whether it is the cause of dependence or whether it is caused by policies that promote dependence. But it is very hard to believe that a society in which the fraction of people–choose whatever your most prime demographic group is–who should be working in that group, in which the fraction of them who are not working, is doubling in a generation. Is that going to be a society that is going to function well, or function well without major social innovations?

A Warning Sign from the Latest Wage Data  - Over the weekend, my virtual friend and occasional correspondent New Deal Democrat requested some assistance on visualizing Average Hourly Earnings of Production and Nonsupervisory Employees: Total Private, a series produced by the Bureau of Labor Statistics and conveniently published in the FRED repository. Here is his request and initial observations: "Would you please prepare a graph of the 3 month moving average of series AHETPI, wages for nonsupervisory personnel, going all the way back to the beginning of the series, and mark a line at its current reading, which if my math is correct is +.049%. If I've done my math correctly, the only other times the reading was lower since the series began in the 1960s, was Nov 2011-Jan 2012, and Dec 2011-Feb 2012."  Here is the Excel chart created in response to NDD's request. As NDD correctly pointed out, the latest data point is the lowest in this series with the exception of two monthly averages about three years ago. For NDD's analysis, along with several other graphs, see his article:  Dear Federal Reserve: *Now* is the time to raise interest rates? RLY?? SRSLY?!?

We Shouldn’t Accept the Unacceptable on Wage Growth - Hidden amid all the discussion of when falling unemployment will lead to rising wages are the expectations shared in the media and among economic analysts that we can only expect wages to rise when unemployment is low. There is confusion here. Yes, we certainly expect wages to rise more quickly as unemployment falls. But why is there a widespread acceptance that real wages will not rise (i.e., that wages will not rise faster than inflation) at all when there is 5.5 or 6.5 percent unemployment? Why not expect real wages to rise every year as they used to in the United States and in other advanced nations? After all, output per hour has been steadily rising, profits have been historically high, and the stock market has soared. There are certainly no economic fundamentals that only allow real wages (on average or at the median) to rise during the few short years of each business cycle when unemployment is relatively low. These lowered expectations reflect how poorly wages have performed over the last four decades. These low expectations constitute an unstated acceptance of an unacceptable normal that real wages will rarely rise. Reflecting this, analysts claim to be “puzzled” that wages have yet to accelerate as the recovery gains momentum, but seemingly are not puzzled at all when real wages fail to grow on a regular basis. So, I am calling on analysts and the journalists who cover them to examine, or at least explain, their unstated assumptions about wage growth. My view is that the failure of white-collar and blue-collar real wages to rise for well over a decade (through the last recovery and not only the recent recession but also this recovery) reflects a policy regime that makes employers dominant in the labor market, enabling them to suppress wage growth.

WSJ Survey: Full Employment First, Faster Wage Growth Next -  The U.S. economy will finally reach full employment in 2015, economists said in this month’s Wall Street Journal survey of forecasters. That means wage growth will finally break out of its lackluster 2% annual pace seen throughout this expansion, they said.  Picking the exact jobless rate to indicate the economy is using all available labor can be like shooting at a moving target. Demographics, technology and productivity can change the equation. (Plus, there is always some unemployment caused by people who quit one job and take time to find a new one and by some job-seekers who have not acquired the skills needed by employers.) But the Federal Reserve in January said policymakers’ estimates of of the longer-run normal rate of unemployment had a “central tendency” of 5.2% to 5.5%. The U.S. hit the Fed’s upper range in February when the official rate fell to 5.5%. That probably won’t change Fed officials’ thinking on policy. But economists think the decline in joblessness will continue. The average forecast thinks the rate will drop to 5.4% by June and 5.1% in December. If the projection is correct, the economy will be below the Fed’s key range sometime in the fourth quarter. Faced with tighter labor markets, employers will finally start to increase wages to attract and retain staff. Nationwide economist David Berson projects average hourly pay will be growing 2.5% by year’s end. “That may not seem like much, but it would be the strongest 12-month gain since 2009,” he says, adding because inflation will remain low, the increase in real spending power will be even greater.

How Low Can We Go? State Unemployment Insurance Programs Exclude Record Numbers of Jobless Workers - In this briefing paper, we show that state UI programs are failing their critical goals of income replacement and supporting economic growth. The proportion of jobless workers receiving benefits from state programs, referred to as the UI recipiency rate, fell to 23.1 percent in December 2014—below the previous record-low level of 25.0 percent in September 1984. Due to the expiration of federal emergency unemployment benefits at the end of 2013, jobless individuals were solely dependent upon state UI programs for support in 2014. This brief focuses special attention on those states that have cut their potential available weeks of UI benefits to below the long-accepted norm of 26 weeks. Because state UI programs are mainly designed to address short-term unemployment, we focus our analysis on the short-term recipiency rate, which excludes people who have been unemployed for 27 weeks or more from the proportion of jobless workers receiving benefits from state programs.The key findings of this brief include the following:

  • Since 2011, nine states have cut maximum durations of unemployment benefit recipiency: Arkansas, Florida, Georgia, Illinois, Kansas, Michigan, Missouri, North Carolina, and South Carolina.
  • Eight of these states have experienced faster-than-average declines in their short-term recipiency rates. The exception is Illinois, which cut available benefits by only one week for a single year (to 25 weeks for 2012). In four of the states (Florida, Georgia, North Carolina, and South Carolina), short-term recipiency rates declined by between 1.7 and 8.6 times as much as the U.S. average decline.
  • By cutting available weeks of benefits, these eight states’ already-low short-term recipiency rates fell even further below the recipiency rates of all other states. In 2014, Florida, Georgia, North Carolina, and South Carolina ranked in the bottom eight states in short-term (less than 26 weeks) recipiency rates.
  • In North Carolina, one of the states with the most severe cuts (cutting the duration of benefits from 26 weeks in 2013 to 14 weeks in 2014 as well as cutting the level of weekly benefit amounts), the decline in the short-term recipiency rate was 14.4 percentage points (or 8.6 times) greater than the nation’s average decline since the cuts went into effect in July 2013.

Did economic incentives destroy lower-income families? - That tale doesn’t seem to fit the data.  DarwinCatholic reports: There follows more hand-waving about how things are tough for those at the lower end of the economy. And they are. But here’s the problem. They always have been. The effect that we’re looking to explain is a massive decrease in marriage rates and increase in out-of-wedlock childbearing. If we’re going to explain that as driven by a bad economy, we’d expect to see the incomes of those people getting worse, right? But they haven’t. There has been a near stagnation for the lowest quintile, but not general income declines.  And if I understand the author correctly those figures do not include government benefits, and it is widely admitted that the “war on poverty” has brought some successful results

The US government didn’t lose the War on Poverty: it changed sides - Both the number and the percentage of families in poverty dropped sharply during the 1960s when the “War on Poverty” was being waged actively, and remained near their all-time lows through the Nixon and Carter years until 1979, when the Volcker recession hit, followed by the election of Ronald Reagan. These events can reasonably be said to mark the point at which the government unequivocally changed sides. The number of households in poverty has risen steadily since then and is now higher than in 1959, the year for which the poverty level was first defined by Mollie Orshansky. The poverty rate has remained consistently higher than in the 1970s, except for a brief deep at the peak of the late-1990s boom.A quick note on the data: Unlike most other countries, the US uses an absolute poverty line, rather than a measure set relative to median income. Orshansky estimated a food budget that was adequate but austere by the standards of 1960, then multiplied the cost by 3 on the basis that the food share of a poor families budget should be 1/3. It’s been adjusted for inflation since then, but not increased in real terms. It might be argued that the CPI overstates inflation somewhat. But much the same point applies to measures of GDP per person which has increased dramatically over the 35 years since the US government stopped fighting poverty and started fighting the poor.

Naming Wrongs -- Late last year, Lincoln Center—a nonprofit organization that is meant to use its money to bring cultural programming to New York City—paid the heirs of Avery Fisher an eye-popping $15 million. Fisher was a philanthropist who believed in supporting the arts in New York and who even donated $10 million to Lincoln Center in 1973. So what was going on here? It makes sense for philanthropists to give millions of dollars to nonprofits, but why would nonprofits turn around and give millions of dollars to their former donors?  The answer is that Lincoln Center had put Fisher’s name on what used to be called Philharmonic Hall, and Fisher’s family had threatened to sue if his name was ever removed. Lincoln Center, however, really, really wanted to be able to change the name of Avery Fisher Hall. So the nonprofit paid up: For $15 million, it got the ability to change the name to anything it liked.And why would Lincoln Center want to do that? Well, it hoped to spend $500 million on a massive revamp of the facility, and, as Alexander Podkul puts it, “raising a half-billion dollars without the leverage of negotiating naming rights is implausible and impractical.”   With its $15 million payment to the Fisher family, Lincoln Center was saying something very depressing about its donor base and about the state of cultural philanthropy writ large—that raising millions of dollars is now routinely transactionalized in return for donors seeing their names stamped on buildings. Worse, by choosing to pay the Fisher family that sum, Lincoln Center was suggesting that if it couldn’t dangle the naming carrot in front of a well-heeled individual donor, then the amount of money that person would be willing to give would fall by more than $15 million.  So, what kind of person is vain and shallow enough to raise his donation to Lincoln Center by more than $15 million, if only that results in him getting his name on the building? I mean, you’d need to be some kind of self-aggrandizing Hollywood billionaire or someth ... O, hai, David Geffen. I shoulda guessed.

Hungry in Cleveland: if the economy's improving, where's all the food? --  For the past five years, I’ve been a reliably imperfect member of a plucky church that serves a lot of poor people on Cleveland’s West Side.  In 2014, things were supposed to be looking up for the Ohio economy, but they weren’t looking up at my church. The already full-to-bursting meal crowd was growing. People were starting to get physical when they thought they’d been shortchanged. Adults were discouraged from bringing their children. The city pushed the church to hire an off-duty police officer for security, because too many people were arriving early to get a prime spot in line and blocking the streets with their cars. While these hungry people waited in line, the economic outlook in Ohio was “brightening” and economists were reporting job growth. Governor John Kasich – who believes that faith-based charity, not government, should relieve the ills of poverty – was apparently pleased with these proclamations. At the end of 2013 and 2014, for the first time since the recession started, he turned down the government offer to make it easier for Ohio residents to receive millions of dollars of federal money for emergency food stamps. The decision to reject the statewide waiver involving what are known as Snap benefits (Supplemental Nutrition Assistance Program) took away food from a swath of the able-bodied population unless they worked 20 hours a week, or were accepted and enrolled in a state-approved job training programme.

Investing in Our Kids Using One Simple Tool: Cash - One in five children in the United States lives in poverty. That is the highest rate for children in the rich world, with only one or two small countries as exceptions. Breaking down U.S. child poverty by age, the rate is highest for children age five and under. Moreover, the child poverty rate has not fallen in the economic recovery since 2009. In sum, 14.7 million U.S. children live in families below the poverty line. Many domestic social programs address poverty levels. They include food stamps, the earned income tax credit, the child tax credit, and Medicaid. But they are clearly not adequate. One policy idea that is disregarded or even disdained in the United States is regular cash allowances to parents. Of thirty-five economically advanced countries evaluated by a 2012 UNICEF report on child poverty, which included most of Europe, Japan, Canada, and Australia, the United States is the only one without some sort of cash allowance policy.  America’s lack of interest in cash allowances for children flies in the face of solid evidence that they are highly effective. The Century Foundation held a conference on the issues in January called Child Poverty Solutions That Can Work. Below we present briefly the encouraging findings.  As currently practiced in many nations, a cash allowance is provided monthly or weekly to parents for each child. Usually, all that’s needed to collect is a birth certificate. The justification for the policy is that additional cash income allows parents to invest more in their children, but in a way that is adaptable to specific circumstances. In the United States for example, a single working mother who doesn’t have enough cash income to buy the cheaper monthly Metrocard in New York City would have very different needs than an unemployed family of four living in rural Utah needing gas for the car. Transferring cash allows each family to use the money as it sees fit, while respecting each family’s autonomy.

New York Hedge Funds Pour Millions of Dollars into Cuomo-Led Bid to Expand Charter Schools | Democracy Now! (video & transcript) In his latest column for the New York Daily News, Democracy Now! co-host Juan González reports on the tens of millions of dollars in hedge fund donations behind the push for charter schools in New York state. Gov. Andrew Cuomo is the single biggest recipient, hauling in $4.8 million. After winning approval for up to $2,600 more per pupil for charter school facilities, Cuomo is calling on the state Legislature to increase the state limit on charter schools.

What It's Like To Have A Robot For A Teacher  - Thomas Hatch noticed something unusual in a reflection on his laptop screen as he worked on a lesson one day in his pod at high school. The teenager turned around. He was face to face with a teacher of an online course. Well, sort of. The teacher’s face was encased in a small video screen. His body was a 4-foot-tall plastic tower on wheels. He maneuvered the telepresence robot around the classroom and spoke to students using controls on his computer from a remote location.The public high school in central Ohio blends online and in-person instruction in an open, office-style building located in a small industrial park. The school has some in-the-flesh teachers, but many teachers never set foot in the building, because they teach only online courses—some from locations quite far away. Most of the time, the remote teachers interact with their students through a computer screen or phone call. The new telepresence robot provides another means of communication with students and staff in the building. Lights flash on the robot body when a teacher signs in to control the robot. A screen the size of a small tablet computer shows a live video of the teacher’s face. A webcam flips open above the screen, revealing the Cyclops eye that helps the long-distance teacher “drive” the robot. They zip around the school just like any other teacher—except for when the robot crashes into walls and doorways. The depth perception and peripheral vision aren’t great, Fetch said. But the technological hiccups don’t bother him.

Gender Gap in Education Cuts Both Ways - Concern about this deficit exploded into public consciousness 35 years ago, when researchers in the department of psychology at Johns Hopkins University published an article suggesting the gap might be caused by a “superior male mathematical ability.” The debate that ensued was furious. It was so hot that a quarter of a century later, a similar controversy contributed to the ouster of Lawrence Summers from his post as the president of Harvard. Was there anything “natural” about the performance gap? Or was it the product of gender bias working its way through schools? As the debate raged, ending the underrepresentation of women in science, technology, engineering and math became a critical policy priority.  Last week the Organization for Economic Cooperation and Development — a collective think tank of the world’s industrialized nations — published a report about gender inequality in education, based on the latest edition of its PISA standardized tests taken by 15-year-olds around the world. The gender gap in math persists, it found. Top-performing boys score higher in math than the best-performing girls in all but two of the 63 countries in which the tests were given, including the United States. But these are hardly the most troubling imbalances. The most perilous statistic in the O.E.C.D.’s report is about the dismal performance of less educated boys, who are falling far behind girls.Six out of 10 underachievers in the O.E.C.D. — who fail to meet the baseline standard of proficiency across the tests in math, reading and science — are boys. That includes 15 percent of American boys, compared with only 9 percent of girls. More boys than girls underperform in every country tested except Luxembourg and Liechtenstein.

Is the Cost of a University Education Today Worth It?  -  Albert Einstein once described education in this manner: "It is not so very important for a person to learn facts. For that he does not really need a college. He can learn them from books. The value of an education in a liberal arts college is not the learning of many facts, but the training of the mind to think something that cannot be learned from textbooks” Unfortunately, industrialists and bankers who reshaped schooling to serve their needs during the Industrial Revolution have transformed institutional academia into the rote memorization of many facts and have rotated it away from real learning that trains the mind to think. In fact, just as the penal system “institutionalizes” young men that spend the majority of their youth incarcerated, the institutional academic system “institutionalizes” children that spend the majority of their youth being reprogrammed by the behavioral modification, Pavlovian conditioning, and Skinnerian operant conditioning objectives that industrialists and bankers have imbedded into the global academic system. In SmartKnowledgeU Podcast #3, we discuss the downfall and degradation of schooling from institutions of learning into institutions of behavioral modification that turn young children into people that “yield themselves with perfect docility to [the General Education Board’s] molding hands.” As the head of John D. Rockefeller’s General Education Board stated, bankers and industrialists desired to transform the purpose of schooling into one that revolved around “teach[ing] [children] to do in a perfect way the things their fathers and mothers are doing in an imperfect way” and to prevent children from evolving into learned men and women that may grow up to challenge their authority and that possess the desire to right the wrongs they see in society.

When a Summer Job Could Pay the Tuition - When I was graduating from high school in 1978, a number of my friends went to the hometown University of Minnesota. At the time, it was possible to pay tuition and a substantial share of living expenses with the earnings from a full-time job in the summer and a part-time job during the school year. Given the trends in costs of higher education and the path of the minimum wage since then, this is no longer true.Here's an illustration of the point with the University of Minnesota, with its current enrollment of about 41,000 undergraduates,as an example. (The figure is taken from a presentation by David Ernst, who among his other responsibilities is Executive Director of the Open Textbook Network, which provides links to about 170 free and open-license textbooks in a variety of subjects.) Just to put this in perspective, say that a full-time student works 40 hours per week for 12 weeks of summer vacation, and then 10 hours per week for 30 weeks during the school year--while taking a break during vacations and finals. That schedule would total 780 hours per year. Back in the late 1970s, even being paid the minimum wage, this work schedule easily covered tuition. By the early 1990s, it no longer covered tuition. According to the OECD, the average annual hours worked by a US worker was 1,788 in 2013. At the minimum wage, that's now just enough to cover tuition--although it doesn't leave much space for being a full-time student.

The Average Student Debt Load in D.C. is a Whopping $40,885 - The nation’s student-debt tab has more than doubled since the recession to roughly $1.3 trillion, but the burden varies greatly by state. The nation’s capital of Washington, D.C.—one of the most educated cities in the U.S. and home to high-priced private schools–is the most indebted compared with states when it comes to average federal student-loan debt. Some 140,000 borrowers in D.C. owe a whopping average of $40,885, according to new data released by the White House. Georgia is second on the list with 1.45 million residents owing an average $30,443. North Dakota sits at the bottom, with 114,000 borrowers owing an average $22,379. The White House released the statistics Tuesday as it unveiled a “Student Aid Bill of Rights,” a series of steps it said would empower borrowers in their dealings with the companies that collect student-debt payments on behalf of the federal government. As part of the plan, the White House said it would also study whether to push to make it easier for Americans to discharge student loans in the bankruptcy process.

Which States Have The Most Student Debt --  Just under two years ago, we presented a full breakdown of the student loan bubble, broken down by state, in which among other things, we found that Washington D.C. stuck out like a sore thumb as the "students" residing in it had on average just under $40,000 in student loans.  Yesterday, as part of Obama's most reent push to change the bankruptcy law and promote legislation that facilitates the reduction or outright forgiveness of student debt, the White House provided a full state-by-state breakdown of where the 43.2 million borrowers on the hook for some $1.135 trillion in student loans.  But before we present the results, it will likely come as no surprise to anyone that once again, it is the students in the nation's capital, the District of Columbia, where the debt burden is once again heaviest: As Bloomberg recaps, "at an average of $40,855 per borrower, the student loans of debtors in the nation's capital are 140 percent higher than the national average of $28,400, and they exceed by more than $10,000 what borrowers owe in Georgia, the state with the second-highest student debt level." Here is state breakdown, ranked by highest to lowest average per student debt. One wonders how much clearer the unprecedented student debt fraud taking place in D.C. has to be before someone actually investigates.

Obama to propose student loan bill of rights - President Barack Obama will announce a student aid bill of rights today during an appearance at the Georgia Institute of Technology, an effort to make the borrowing process fairer and more transparent for millions of college students. The plan, as outlined during a telephone briefing Monday afternoon, will direct the federal Department of Education to take a series of actions, including developing a single website for students to see who exactly holds their loans. In addition, the plan will:
■Raise standards for private collections firms used by the federal government to track down delinquent accounts. The new standards would make sure fees being charged to borrowers are fair.
■Work to increase transparency when loans are transferred between servicers.
■Look at whether laws should be changed to allow student loans to be dischargeable in bankruptcy.
■Mandate that any extra payments made on loans be put on the highest interest loans first.
■Continue a push to enroll more borrowers into a repayment plan based on income.

Obama announces changes for student loan repayment | Reuters: (Reuters) - President Barack Obama told students at Georgia Tech on Tuesday he wants to make the process of repaying student loans easier to understand and manage. Obama signed a “student aid bill of rights” and spelled out an assortment of policy tweaks and projects to try to make it easier for people with student loans to pay back their debt. “We're going to require that the businesses that service your loans provide clear information about how much you owe, what your options are for repaying it, and if you're falling behind, help you get back in good standing with reasonable fees on a reasonable timeline,” Obama told a raucous crowd of more than 9,500 students. “We're going to take a hard look at whether we need new laws to strengthen protections for all borrowers, wherever you get your loans from,” Obama said. Obama has asked the Treasury and Education departments and the Consumer Financial Protection Bureau to report by Oct. 1 on whether bankruptcy laws or other laws or regulations should be changed for student loans. The lending industry has resisted loosening bankruptcy standards for student loans, but advocates have argued students burdened by heavy debt should be able to more easily use that as a way to discharge their obligations.

Senators Introduce Legislation To Make Private Student Loans Dischargeable In Bankruptcy – Since 2005, student borrowers have been unable to discharge their private student loans through the process of bankruptcy. But that could soon change after a group of 12 senators introduced a bill aimed at addressing the current student debt crisis by restoring the bankruptcy code to hold private student loans in the same regard as other private unsecured debts. The Fairness for Struggling Students Act of 2015 [PDF] would amend the current bankruptcy code, restoring the availability of bankruptcy relief for private student loans. The act, which was introduced by Illinois Senator Dick Durbin aims to address the current student debt crisis, which has propelled student loan debt to more than $1.2 trillion. Currently, student loan debt averages $29,000 for borrowers leaving school with a Bachelor’s degree. “Too many Americans are carrying around mortgage-sized student loan debt that forces them to put off major life decisions like buying a home or starting a family,” Durbin says in a statement. “It’s not only young people facing this crisis, it is parents, siblings and even grandparents who co-signed private loans long ago and are still making payments decades later. It’s time for action. We can no longer sit by while this student debt bomb keeps ticking.” While allowing private student loans to be dischargeable in bankruptcy might seem like a dramatic measure, the impact would be rather small when looking at total student loan debt in the United States. Private lenders only hold about 10% to 15% of all student loan debt; the rest is held by the U.S. Education Department.

New Jersey worst state for public pension funding: report (Reuters) - New Jersey underfunded its public pension system more than any other U.S. state for more than a decade, according to a study to be released later on Wednesday. From fiscal year 2001 through 2013, the Garden State paid on average just 38 percent of what it was supposed to have contributed annually into its system, according to the report by the National Association of State Retirement Administrators. Pennsylvania is not far behind at 41.2 percent, followed by the states of Washington, North Dakota and Kansas. The study covered 112 statewide and state-sponsored public pension plans, which together account for more than 80 percent of all U.S. public pension assets and participants, the group said. Overall, the amount of money those U.S. public employers were supposed to have paid into their retirement plans more than tripled, to $93.7 billion from $27.7 billion over the 13-year span studied, said the report, which was sponsored by the AARP. Meanwhile, the combined annual funding shortfall skyrocketed to $19 billion in 2012 from just $300 million in 2001. In 2013, that gap fell back slightly to $17.8 billion.

Don’t Be Duped by Misleading Economic Terms - David Cay Johnston -- Americans are being duped about many crucial economic concepts because of misleading terms that pollute popular understanding. This problem caught my attention last week when a state treasurer spoke just before me at a national conference on pension plans and, along with the event host, referred to “contributions” to pension plans. They are not alone. News reports routinely refer to contributions to pension plans by industry and government. Journalists perpetuate this misunderstanding by accepting the language politicians and others use without checking the facts, as when Gov. Scott Walker of Wisconsin said four years ago that he wanted state workers to “contribute more” to their pensions so taxpayers could contribute less. Using the term “contribution” creates the false impression that pensions are a gift and therefore optional. There are no taxpayer contributions to public worker pension plans. All the money in these plans — except for investment earnings — is compensation that workers have earned. Some readers may be thinking, “Hey, wait a minute. The money comes from the taxpayers.” It does, but the taxpayers traded their money for the work done by state troopers, teachers and other public sector workers. Once that work is done, the money belongs to the workers, and it is their earnings that flow into the pension plan

Government Admits It Can't Fully Guarantee 51% Of Insolvent Pension Plans --  A new report suggests that the government agency in charge of backstopping private-sector pension plans (the Pension Benefit Guaranty Corporation) isn’t entirely optimistic about its own ability to provide an effective safety net for multiemployer plans. In fact, more than half of participants will see their benefits cut if their plans become insolvent and are forced to turn to government guarantees.

Wall Street Journal Soon to Run Piece on Improper Denials of Disability Claims - Dean Baker - That's inevitable, since any fair-minded newspaper that ran a column on improper approvals would surely want to balance it out. For those who missed it, the Wall Street Journal had a column by George Mason economist Mark Warshawsky and his grad student Ross Marchand complaining about a limited number of administrative-law judges who approve disability appeals at a very high rate.  The piece referred back to data from 2008, which showed that 9 percent of Social Security administrative law judges had approval rates of more than 90 percent in a year when the overall approval rate was 70 percent. They conclude that these judges cost the disability program more than $23 billion due to wrongly approved claims.Clearly there are judges who are too lenient and accept claims that probably should be denied, however there are also judges who are too harsh and reject claims that should probably be approved. In these cases, workers are being denied the insurance benefits for which they have paid. The Social Security Administration (SSA) analyzed the approval patterns of 12 low-allowance judges over the period from 2010-2013. It found their approval rate increased from 21 to 24 percent over this four year period. During this period the overall approval rate had fallen from 67 to 56 percent, implying gaps of between 32 percentage points and 56 percentage points. Note that the gaps between the overall approval rate and the approval rate of the low-allowance judges is considerably larger than the gap between overall approval rate and the approval rate of the high-allowance judges highlighted in the Wall Street Journal column.

Committee delays bill to ban TN health exchange: State Sen. Brian Kelsey's bill to prohibit Tennessee from setting up a state-run health insurance exchange has been delayed in a Senate committee. Kelsey drafted the bill to pre-empt the state from setting up a health insurance exchange in case the U.S. Supreme Court rules that tax subsidies for health insurance are only available on state exchanges under the Affordable Care Act. The bill, SB0072, was unexpectedly rolled for two weeks to March 24 in the Senate Commerce and Labor committee Tuesday. The bill was not debated or presented. Kelsey did not immediately respond to email or phone inquiries about the reasons for the deferral. Representatives from the Tennessee Department of Commerce and Insurance were present at the committee to answer questions from the nine-person committee about impacts to the state's budget and health insurance market if the bill passed and the Supreme Court ruling favored the plaintiffs in King vs. Burwell. The department estimates the state could lose $6.3 million in tax revenue from insurance premiums in 2015, based on the mid-February enrollment numbers for 2015 from the U.S. Department of Health and Human Services.

Feds Knew About Medicare Advantage Overcharges Years Ago - Federal health officials were advised in 2009 that a formula used to pay private Medicare plans triggered widespread billing errors and overcharges that have since wasted billions of tax dollars, newly released government records show.Privately run Medicare Advantage plans offer an alternative to standard Medicare, which pays doctors for each service they render. Under Medicare Advantage, the federal government pays the private health plans a set monthly fee for each patient based on a formula known as a risk score, which is supposed to measure the state of their health. Sicker patients merit higher rates than those in good health. The program is a good fit for many seniors. Some 16 million people have signed up — about a third of people eligible for Medicare — and more are expected to follow. Supporters argue that Medicare Advantage improves care while costing members less out of pocket than standard Medicare. The Medicare Advantage industry is lobbying hard to block budget cuts sought by the Obama administration.

Once Again, Obamacare Is Cheaper Than Expected - Here's some good news: the latest report from the CBO has reduced its estimate of the cost of Obamacare. This is due partly to a slight decrease in the number of people CBO expects to be covered, but mostly due a lower estimate of the cost of insurance premiums. Thanks to this, federal subsidies are estimated at $209 billion less over a ten-year period, and the cost of CHIP and Medicaid is estimated at $73 billion less. However, there are also reductions in expected revenues from Obamacare's excise tax, so the net reduction amounts to $142 billion over ten years. The table below tells the story. Sarah Kliff has more details here. As she notes, this isn't the first time CBO has reduced its estimate of how much Obamacare will cost: "The CBO is projecting the federal government will spend $600 billion less on health care than the agency expected in 2010, when it wasn't counting even a dollar of the spending in Obamacare. That's simply an amazing fact." Yep.

Future Obamacare Costs Keep Falling - Nearly five years after President Barack Obama signed the Affordable Care Act into law, federal budget scorekeepers have sharply revised down the projected costs of the signature bill. In the latest projection, published by the nonpartisan Congressional Budget Office on Monday, the major provisions of the law will cost the government 11% less than they forecast six weeks ago, or $142 billion over the coming decade. Overall, the health-care law will now cost 29% less for the 2015-19 period than was first forecast by the CBO when the law was signed in March 2010. Back then, the CBO and the congressional Joint Committee on Taxation estimated that for the last five years of their 10-year projection, Obamacare would cost $710 billion. Now, they expect it will cost $506 billion for the same period. In 2019, for example, the agencies project Obamacare will cost $116 billion, which is down 33% from the initial forecast for the same year made in 2010. Monday’s report illustrates two dynamics at play. First, health-care costs are rising more slowly than previous forecasts assumed. And slightly fewer people than anticipated are signing up for health insurance through federal exchanges. The CBO estimates the government will spend 20% less on subsidies provided to individuals who purchase health insurance through the federal health exchange, or around $209 billion in lower-than-projected costs over the coming 10 years.

If Obamacare critics win high court case, effects will be wildly disparate - If the Supreme Court rules in favor of the plaintiffs in King v. Burwell, nowhere will the effect be more stark than along the 400-mile border between two states my family has called home, Tennessee and Kentucky. In the state where I grew up, Tennessee, thousands of people would in all likelihood be forced back into the ranks of the uninsured. That’s because the cost of coverage would quickly skyrocket for the 230,000 Tennesseans enrolled in a health plan this year through the insurance exchange that’s operating there. In Kentucky, where we lived when I worked for Humana Inc., it doesn’t matter what the Supreme Court does. No one there is facing the threat of suddenly finding their coverage unaffordable. Kentucky is one of the 16 states (and the District of Columbia) that decided to establish and operate its own exchange. Tennessee, on the other hand, is one of the 34 states that defaulted to the federal government to operate its exchange. The plaintiffs in King v. Burwell argued before the high court last Wednesday that because of the way the Affordable Care Act is worded, the Obama Administration is breaking the law by providing subsidies to people in those 34 states to help them buy health insurance. Their argument is that the law allows subsidies only for enrollees in an exchange “established by the state.” If the Court agrees, the subsidies for folks in exchanges operated by the federal government could come to an abrupt end as early as mid-summer

Health law hasn’t cut insurers’ rate of overhead spending: study | Physicians for a National Health Program: Despite claims by the Obama administration that the Affordable Care Act will reduce health insurance companies’ spending on overhead, thereby channeling a greater share of consumers’ premium dollars into actual patient care, insurers’ financial filings show the law had no impact on the percentage of insurer expenditures on such things as administration, marketing and profits.That’s the chief finding of a team of researchers, including two prominent physicians on the faculties of the City University of New York’s School of Public Health and Harvard Medical School, in an article published Wednesday in the peer-reviewed International Journal of Health Services.Examining U.S. Securities and Exchange Commission filings of nine large insurers, and using a constant definition of what constitutes an insurer’s “medical loss ratio” or MLR – i.e. actual spending on payments to doctors, hospitals, pharmacies, etc. – the researchers found that the weighted average MLR in the three years after the new ACA regulations took effect (2011-2013) was 83.05 percent, compared to 83.04 percent in the three years prior to the reform.The ACA sets limits on insurers’ overhead, mandating an MLR of at least 80 percent in small-group markets and 85 percent in the large group market. However, the Obama administration changed the traditional yardstick by which the MLR is measured.The new way of calculating the MLR allows insurers to classify most expenditures on “quality improvement” initiatives and the updating of coding systems as medical expenditures, and allows them to subtract most taxes, regulatory fees and “community benefit” spending.

Americans have insurance but can’t afford to use it -  Although more Americans have health insurance coverage, 25 percent of non-elderly Americans don’t have enough liquid assets to cover the deductible on their health insurance plan, plan, according to a new report from the Kaiser Family Foundation. The report finds that many consumers don’t have the cash on hand to cover the cost of a mid-range deductible or $1,200 for an individual or $2,400 per family. High deductible health plans require that consumers cover their health care costs out of pocket until they’ve met their deductible.  The goal of such plans is to keep costs down by encouraging consumers to consider the costs and benefits of health care before purchasing it. “It’s really up to the consumer with these plans to comparison shop and look for cost savings when making medical decisions,’ says Kevin Coleman of For consumers, that means negotiating for any non-emergency services and evaluating medical bills for potential errors. “The big challenge is when it’s about you or someone you love, you lack objectivity, which means you lack leverage,” . High-deductible plans, especially those paired with a funded health savings account may be a good alternative for those that are healthy or have the financial means to cover the costs of a medical emergency. However, the KFF report finds that as deductibles creep beyond the scope of savings, consumers are likely to either put off care or rack up medical debt.

Why Your Workplace Might Be Killing You -  Stanford - Workplace stress — such as long hours, job insecurity and lack of work-life balance — contributes to at least 120,000 deaths each year and accounts for up to $190 billion in health care costs, according to new research by two Stanford professors and a former Stanford doctoral student now at Harvard Business School.“If employers are serious about managing the health of their workforce and controlling their health care costs, they ought to be worried about the environments their workers are in,” says Jeffrey Pfeffer, a Stanford professor of organizational behavior. Pfeffer, with colleagues Stefanos A. Zenios of Stanford GSB and Joel Goh of Harvard Business School, conducted a meta-analysis of 228 studies, examining how 10 common workplace stressors affect a person’s health. They found that overall, these stressors increase the nation’s health care costs by 5% to 8%. Job insecurity increased the odds of reporting poor health by 50%, while long work hours increased mortality by almost 20%. Additionally, highly demanding jobs raised the odds of a physician-diagnosed illness by 35%.“The deaths are comparable to the fourth- and fifth-largest causes of death in the country — heart disease and accidents,” says Zenios, a professor of operations, information, and technology. “It’s more than deaths from diabetes, Alzheimer’s, or influenza.”

Suicide rates increasing among adolescents, especially for females - Not too long ago, I wrote a piece at the Upshot on how they’ve been focusing on things that really kill kids – like suicide – which has had an impressive impact on their outcomes. Recently, the CDC released a report that shows that things haven’t been going as well for similarly aged adolescents and young adults in the US: CDC analyzed National Vital Statistics System mortality data for the period 1994–2012. Trends in suicide rates were examined by sex, age group, race/ethnicity, region of residence, and mechanism of suicide. Results of the analysis indicated that, during 1994–2012, suicide rates by suffocation increased, on average, by 6.7% and 2.2% annually for females and males, respectively. Increases in suffocation suicide rates occurred across demographic and geographic subgroups during this period. Clinicians, hotline staff and others who work with young persons need to be aware of current trends in suffocation suicides in this group so that they can accurately assess risk and educate families.  Their charts are even more compelling. This is suicides per 100,000 pop for females age 10-24 years in the US:  Not that you’d have trouble seeing it, but I’ve highlighted the increase in overall suicide rate in the last 6 years or so. It’s not subtle, and it’s concerning. We shouldn’t ignore it. Suicide is the second leading cause of death in this age group, and accounted for more than 5000 deaths in 2012 alone.

Documents Detail Sugar Industry Efforts To Direct Medical Research -- Back in 2007, Christin Kearns attended a conference for dentists like herself to learn about links between diabetes and gum disease.She was handed a government pamphlet titled, "How to Talk to Patients about Diabetes," and was surprised to find that the diet advice didn't mention reducing sugar intake. She said it made her wonder if the sugar industry "somehow impacted what the government can or cannot say about diet advice for diabetics?"Kearns, now a fellow at the University of California, San Francisco wanted to answer that question. She went on a hunt for industry documents that might yield clues. After months of online searches, she started uncovering some documents which ultimately led to an archive at the University of Illinois, 1,551 pages of documents that show how closely the sugar industry worked with the federal government during the 1960s and early 1970s, when dentists were trying to find a way to prevent cavities in children. In an analysis of the documents published Wednesday in the journal PLOS Medicine, Kearns and her collaborators concluded that industry influence starting in the late 1960s helped steer the National Institute of Dental Research, part of the National Institutes of Health, away from addressing the question of determining a safe level of sugar.

Water Fluoridation Linked to Higher ADHD Rates - New research shows there is a strong correlation between water fluoridation and the prevalence of Attention Deficit Hyperactivity Disorder, or ADHD, in the United States.   It’s the first time that scientists have systematically studied the relationship between the behavioral disorder and fluoridation, the process wherein fluoride is added to water to prevent cavities.   The study, published in the journal Environmental Health, found that states with a higher portion of artificially fluoridated water had a higher prevalence of ADHD. This relationship held up across six different years examined. The authors, psychologists Christine Till and Ashley Malin at Toronto’s York University, looked at the prevalence of fluoridation by state in 1992 and rates of ADHD diagnoses in subsequent years. “States in which a greater proportion of people received artificially-fluoridated water in 1992 tended to have a greater proportion of children and adolescents who received ADHD diagnoses [in later years], after controlling for socioeconomic status,” Malin says. Wealth is important to take into account because the poor are more likely to be diagnosed with ADHD, she says. After income was adjusted for, though, the link held up.   Both  Delaware and Iowa, for instance, have relatively low poverty rates but are heavily fluoridated; they also have high levels of ADHD, with more than one in eight kids (or 14 percent) between the ages of four and 17 diagnosed.

Common Food Additives Cause Obesity, Metabolic Syndrome -- Common food additives, it turns out, may cause obesity and metabolic syndrome, among other conditions, according to a new study. The additives in question are called emulsifiers, and are added to most processed foods to aid texture and extend shelf life. However, while they may make your food taste better, they can also alter the composition and localization of your gut microbiota, leading to inflammatory bowel disease (IBD). IBD includes Crohn's disease and ulcerative colitis, severely debilitating conditions that affect millions of people. Emulsifiers are also reportedly linked to metabolic syndrome - a group of very common obesity-related disorders that can lead to type-2 diabetes, cardiovascular and liver diseases.With both IBD and metabolic syndrome, gut microbial - that is, the 100 trillion bacteria that naturally live in the intestinal tract - are disturbed. "A key feature of these modern plagues is alteration of the gut microbiota in a manner that promotes inflammation," co-lead author Dr. Andrew T. Gewirtz said in a statement. "The dramatic increase in these diseases has occurred despite consistent human genetics, suggesting a pivotal role for an environmental factor," researcher Dr. Benoit Chassaing. "Food interacts intimately with the microbiota so we considered what modern additions to the food supply might possibly make gut bacteria more pro-inflammatory."

The effect of GOP malice and MBA stupidity on Research shows no sign of slowing down - riverdaughter - The commenters at In the Pipeline are beginning to think that nothing short of a bacterial apocalypse is going to get the public’s attention. I don’t even want to think of how that could come about. Derek continues to document the atrocities. Amgen acquired Onyx and laid off 300 of their researchers this week. Add that to the antibiotic researchers who got laid off last week, the 100 or so Sanofi oncology investigators who got laid off last month and the Shire investigators who got the ax last week as well. By the way, we are now referring to ourselves as investigators, not researchers. Add it to your glossary. And now, the NSF is complaining that the Republican Congress is sticking its mitt into research, playing politics and generally making an already miserable situation even worse. I got this article in my email blast from Nature yesterday:  Some of these politicians make a big deal out of the fact that they don’t believe in evolution or the effect that human activity can have on climate. I am assuming that some are lying to get elected. But I’m hearing from former investigators that they have stopped doing research on dementia because only traumatic brain injury was being funded. Department of Defense grants seem to be in somewhat better supply in se fields of study. Anyway, just read it. It’s just one more straw breaking the camel’s back. Between the constant layoffs, restructuring, relocations, impoverished startups, vulture capitalists, stingy academic salaries and hard to get grants, and more Congressional oversight from a bunch of anti-science wing nuts, investigators can’t catch a break. We’re on our last nerve. We’re exhausted in every sense of the word.

Industry Body Calls for Gene-Editing Moratorium -  Officials of a biotechnology industry group have called for a voluntary moratorium on using new DNA-editing techniques to change the genetic characteristics of human embryos in laboratory research. In an editorial published today by the journal Nature, Edward Lanphier, CEO of the biotechnology company Sangamo Biosciences, and four colleagues write that “scientists should agree not to modify the DNA of human reproductive cells” because it raises safety and ethical risks including the danger of “unpredictable effects on future generations."  New gene-editing techniques, in particular one called CRISPR, have given scientists powerful and useful new ways to swap and change DNA letters inside of living cells for the first time (see “Genome Surgery”).  Recently, some scientific teams have started to study whether CRISPR would be able to correct disease genes in future generations of people—for instance, by repairing genes during in vitro fertilization, or in eggs or sperm. The idea of such “germ line” modification would be to install healthy versions of genes, which children would be born with. (see “Engineering the Perfect Baby”). But the idea of using editing technology to improve children is as controversial as it is medically powerful. In their editorial, Lanphier, whose coauthors include Fyodor Urnov, co-developer of a different gene-editing system, raise the concern that such techniques might be “exploited for non-therapeutic modifications.” That could mean, for instance, changing the physical traits of children.

Alarming Report Links Hormone-Disrupting Chemicals to Autism, ADHD, lower IQ and Obesity -- Chemicals found in everyday household items such as furniture, rugs and plastic are causing lower IQ, autism, ADHD and obesity, and costing billions of dollars in healthcare expenses, according to a report published last week. The study, which was accepted for publication in the Journal of Clinical Endocrinology & Metabolism and posted on the journal’s website, found a highly probable association between endocrine-disrupting chemicals (EDCs) and a spate of health burdens and diseases, including lower IQ, autism, attention deficient disorder, infertility and death, among people in Europe. The researchers used statistical analysis to assess the healthcare burden of these conditions among the European population, and concluded that EDCs are likely responsible for some 150 million Euros, or 200 billion dollars, in healthcare expenses. “The shocking thing is that the major component of that cost is related to the loss of brain function in the next generation,” Dr. Philippe Grandjean, one of the study authors, told the UK Guardian.“Our brains need particular hormones to develop normally—the thyroid hormone and sex hormones like testosterone and oestrogen. They’re very important in pregnancy and a child can very well be mentally retarded because of a lack of iodine and the thyroid hormone caused by chemical exposure.”

Your McNuggets: Soon Without a Side of Antibiotics -- Fast-food giant McDonald’s announced today that it will cease buying chicken raised with the routine use of most antibiotics, a move that seems certain to reframe the contentious debate about agriculture’s use of the increasingly precious drugs. The company set a deadline of two years to make chicken in its 14,000 US locations substantially antibiotic-free. The announcement instantly makes McDonald’s the largest company by far to use its buying power to change how livestock are raised. Its 25 million US customers a day dwarf those at Chipotle Mexican Grill, which pioneered fast food using antibiotic-free meat, and also at Chick-fil-A, which announced a year ago that it would move to antibiotic-free chicken in five years. McDonald’s new policy doesn’t solve the farm-antibiotics problem. The company is making the move only for chicken, not for beef or pork (though chicken is already the meat Americans eat the most). And the policy has important caveats. But since McDonald’s is the largest food-service buyer of chicken in America, this can’t help but affect other restaurants, and production of other meats.

Jane Goodall and Steven Druker Expose US Government Fraud Over GMOs - In an acclaimed new book being launched Wednesday in London, American public interest attorney Steven Druker reveals how the US government and leading scientific institutions have systematically misrepresented the facts about GMOs and the scientific research that casts doubt on their safety. The book, Altered Genes, Twisted Truth, features a foreword by the renowned primatologist Dame Jane Goodall, hailing it as “without doubt one of the most important books of the last 50 years”. The book’s revelations come at a crucial time when some European countries are considering the commercial planting of GM crops following the European Parliament’s decision to allow member states to opt out of the blockade that has barred them from the EU until now. Based on the evidence presented in the book, Druker and Goodall will assert that it would be foolhardy to push forward with a technology that is unacceptably risky and should never have been allowed on the market in the first place. The book is the result of more than 15 years of intensive research and investigation by Druker, who came to prominence for initiating a lawsuit against the US Food and Drug Administration (FDA) that forced it to divulge its files on GM foods. Those files revealed that GM foods first achieved commercialisation in 1992 only because the FDA:

Covered up the extensive warnings of its own scientists about their dangers.
• Lied about the facts.
• And then violated federal food safety law by permitting these foods to be marketed without having been proven safe through standard testing.

Anti-GMO Protests Rock Poland As Farmers Demand Food Sovereignty Rights - Farmers in Poland have risen up against Big Ag and GMOs in one of the biggest demonstrations of its kind the country has ever seen. They are demanding: the right to sell their produce directly to the people, a total ban on GMO sales and production, the regulation of land-grabs by biotech corporations like Monsanto, the implementation of a compensation scheme for farmers whose livelihoods have been damaged, and a change to inheritance laws which currently prohibit farmers from leaving land to their heirs.  A convoys of tractors blocked roads in late February as demonstrations occurred in hundreds of towns across the country. Later, more than 6000 farmers marched on the capital of Warsaw to demand the restoration of their basic rights. Many Polish farmers use traditional methods of farming, meaning that their crops are organic (although uncertified) and pesticide-free. At the moment, these small family farms simply cannot compete with corporations in the marketplace, and many have been made bankrupt as a result.  Protests took place throughout February and into March. They are co-ordinated by the farmers’ branch of the Solidarity Union and the International Coalition to Protect the Polish Countryside (ICPPC) and have been supported by striking bee-keepers, nurses and coalminers. A basket of ‘illegal‘ farm foods was taken to the Prime Minister’s office, while a table was set up outside to display these items and highlight the absurdity of Polish agriculture laws.

BRAZIL: CTNBio Meeting Cancelled! Futuragene Occupied! Watch the Videos - Global Justice Ecology Project -- New videos have been posted of the CTNBio meeting disruption as well as the occupation of Futuragene by 1,000 women.  You can view those videos here. 300 peasants took over the building where CTNBio was meeting to decide about whether to approve GE eucalyptus trees. The meeting was cancelled. On the same morning, 1,000 women took over operations of Futuragene across Brazil. The action included the destruction of GE eucalyptus seedlings. This morning about 300 peasants organized by La Via Campesina occupied the meeting of the Brazil National Biosafety Technical Commission (CTNBio), which was convening to discuss the release of three new varieties of transgenic plants in Brazil including genetically engineered eucalyptus trees. The meeting was interrupted and decisions were postponed.Earlier in the morning on Thursday, another 1,000 women of the Brazil Landless Workers’ Movement (MST) in the states of São Paulo, Rio de Janeiro and Minas Gerais occupied the operations of FuturaGene Technology Brazil Ltda, a subsidiary of Suzano timber corporation, in the municipality of Itapetininga, in São Paulo.The site being occupied in Itapetininga is where transgenic eucalyptus, known as H421 is being developed and tested. At the time, the MST destroyed the seedlings of transgenic eucalyptus trees there.The action intends to denounce the evils that a possible release of transgenic eucalyptus, to be voted on CTNBio, can cause to the environment.According to Atiliana Brunetto, a member of the National MST, the historic decisions of the Commission must respect the Brazilian legislation and the Biodiversity Convention to which Brazil is a signatory.”The precautionary principle is always ignored by CTNBio. The vast majority of its members are placed in favor of business interests of the large multinationals at the expense of environmental, social and public health consequences “he says.For Brunetto all approved GMO means more pesticides in agriculture, since the packets always approved for marketing include a type of agricultural poison.

Buying Conservation--For the Right Price -- Erica Goode has an inspiring article about the benefits of conservation tillage, which has been gaining favor among farmers.  No-till farming can improve yields, lower costs, and improve the environment.  Just the kind of thing we all want to hear--everybody wins! One important thing Goode doesn't mention: USDA has been subsidizing conservation tillage, and these subsidies have probably played an important role in spreading adoption.Subsidizing conservation practices like no-till can be a little tricky.  After all, while this kind of thing has positive externalities, farmers presumably reap rewards too.  There are costs involved with undertaking something new. But once the practice is adopted and proven, there would seem to be little need for further subsidies.  The problem is that it can be difficult to take subsidies away once they've been established. In practice, the costs and benefits of no till and other conservation practices vary.  Some of this has to do with the type of land.  No-till can be excellent for land in the Midwest with thick topsoil.  In the South, where topsoil is thin, maybe no so much.  So, for some farmers conservation practices are worthwhile; for others, the hassle may not be worth the illusive future benefits.  Ideally, policy would provide subsidies to the later, not the former.  But how do policy makers differentiate?  In practice, they don't; everybody gets the subsidies. Can we do better? Together with some old colleagues at USDA, I've been thinking about this question for a long time, and we recently released a report (PDF) summarizing some of the most essential ideas (here's the Amber Waves short take).

World food prices continue to fall in February - U.N. FAO: (Reuters) - Global food prices fell 1 percent in February to their lowest in more than four-and-a-half years, with cereals, meat and sugar declining, oils steady and only dairy prices rebounding sharply, the United Nations food agency said on Thursday. The U.N. Food and Agriculture Organization's (FAO) price index, which measures monthly changes for a basket of cereals, oilseeds, dairy, meat and sugar, averaged 179.4 points last month, 1.8 points below its reading in January. High global production, low crude oil prices and limited demand from major importers including China have helped cap food prices for the past year and the index has now been declining since April 2014 to reach its lowest since July 2010. Cereal stocks at the end of the 2014-15 season are now forecast to reach 630.5 million tonnes, up almost 8 million tonnes from a previous reading to reach their highest levels in 15 years. FAO's forecast for world cereal production in 2015 reached 2.542 billion tonnes, 8 million tonnes above the forecast made in January. Cereals prices were down 3.2 percent from January, with wheat prices sharply lower on better production prospects and large inventories. Meat prices fell 1.4 percent, pulled down by cheaper beef, mutton and lamb that outweighed stable poultry prices and higher pork prices.

Impressive Plant Facts | Big Picture Agriculture - infographic

Killers sought in deaths of 300,000 chickens in South Carolina - (Reuters) - Revenge may be the motive for the killings in South Carolina of more than 300,000 commercial chickens worth about $1.7 million over the past two weeks, authorities said on Monday. Birds have been found dead of unnatural causes in 16 chicken houses at six farms that grow chickens for Pilgrims Pride Corp, the largest poultry producer in the United States, which laid off some 60 people right before the killings began, Clarendon County Sheriff Randy Garrett said. The company has a processing plant in Sumter, South Carolina. About 325,000 chickens have been found dead at the farms since mid-February, Garrett said. One farmer, W.L. Coker, lost the birds in eight chicken houses, or about 160,000 birds, he said. Authorities are searching for killers with a deep working knowledge of raising chickens, Garrett said, adding that he believed the deaths of the chickens are related to the layoffs. Vandals bypassed alarms systems and raised or lowered temperature in the chicken houses, killing them, Garrett said. "Depending on the age of the birds, they knew whether to jack the heat up or jack the heat off," Garrett said. Young birds need more heat, and older ones need less, he said. "They had all that knowledge of the farms and how many weeks growth the chickens were," Garrett said.

Starving Sea Lions Washing Ashore by the Hundreds in California - By the time Wendy Leeds reached him, the sea lion pup had little hope of surviving.Like more than 1,450 other sea lions that have washed up on California beaches this year, in what animal experts call a growing crisis for the animal, this 8-month-old pup was starving, stranded and hundreds of miles from a mother who still needed to nurse him and teach him to hunt and feed. Ribs jutted from his velveteen coat.The pup had lain on the beach for hours, becoming the target of an aggressive dog before managing to wriggle onto the deck of a million-dollar oceanfront home, where the owner shielded him with an umbrella and called animal control. In came Ms. Leeds, an animal-care expert at the Pacific Marine Mammal Center, which like other California rescue centers is being inundated with calls about lost, emaciated sea lions.“It’s getting crazy,” she said.  Experts suspect that unusually warm waters are driving fish and other food away from the coastal islands where sea lions breed and wean their young. As the mothers spend time away from the islands hunting for food, hundreds of starving pups are swimming away from home and flopping ashore from San Diego to San Francisco. Many of the pups are leaving the Channel Islands, an eight-island chain off the Southern California coast, in a desperate search for food. But they are too young to travel far, dive deep or truly hunt on their own, scientists said.

Why are California sea lion pups starving? ‘Any fishing on sardines right now is overfishing, as the population is not even replacing itself, much less providing a surplus’ – Recent national news stories have shown emaciated California sea lion pups being rescued and admitted to marine mammal rehabilitation centers. The sight of hundreds of withered sea lions is reminiscent of the all-too-recent California sea lion "unusual mortality event" in 2013 followed by a significant number of stranded and dead sea lions last year. Dying sea lions and strandings are becoming less unusual and a more frequent occurrence. In fact, the 2015 sea lion deaths are already on pace to exceed the 2013 numbers. About 70 percent of sea lion pups are expected to die this year before weaning age.  So, why are these pups stranding and dying?  It is simple. The sea lions are starving.  Nursing female sea lions don’t have enough food to eat; primarily fatty forage fish like sardine and anchovies and they are spending more time foraging, which means less time feeding their pups. In turn, the pups are not getting the nutrition they need, and people are finding them stranding on beaches, weak, emaciated and dying.  As the National Oceanic and Atmospheric Administration (NOAA) stated following the 2013 mortality event, these sea lion pups are starving and malnourished due to a “change in the availability of sea lion prey, especially sardines” (NOAA Fisheries 2014).   In 2010 two NOAA scientists (Zwolinski and Demer 2012) published a paper predicting the collapse of the Pacific sardine population. The authors concluded in the abstract: "alarming is the repetition of the fishery’s response to a declining sardine stock - progressively higher exploitation rates targeting the oldest, largest, and most fecund fish." Though the paper was subject to a great to deal of controversy and debate within the agency, the scientists’ predictions came true. The Pacific sardine population has collapsed.

In South Africa, Ranchers Are Breeding Mutant Animals to Be Hunted -  It’s easy to spot Columbus. He’s not only the biggest and strongest gnu among the dozens grazing on a South African plain, he also sports a golden-hued coat, a stunning contrast to the gray and black gnus around him.Finding Columbus in the wild would be a stroke of amazing luck. More than 99.9 percent of all wild gnus, also called wildebeest, from the Afrikaans for “wild beast,” have dark coats. But this three-year-old golden bull and his many offspring are not an accident. They have been bred specially for their unusual coloring, which is coveted by big game hunters. These flaxen creatures are the latest craze in South Africa’s $1 billion ultra-high-end big-game hunting industry. Well-heeled marksmen pay nearly $50,000 to take a shot at a golden gnu — more than 100 times what they pay to shoot a common gnu. Breeders are also engineering white lions with pale blue eyes, black impalas, white kudus, and coffee-colored springboks, all of which are exceedingly rare in the wild.“We breed them because they’re different,” says Barry York, who owns a 2,500-acre ranch about 135 miles east of Johannesburg. There, he expertly mates big game for optimal — read: unusual — results. “There’ll always be a premium paid for highly-adapted, unique, rare animals.”

Tanzania breaks promise - thousands of Maasai evicted to make way for lion hunt -  The Tanzanian government is illegally carrying out gunpoint evictions of Maasai pastoralists in an area surrounded by the Serengeti, Maasai Mara and Ngorongoro national parks, burning hundreds of homes. It's all part of a plan to make way for luxury game hunting in the area. Ortello Business Corporation (OBC) - a luxury hunting company based in the United Arab Emirates with close connections to the Dubai Royal Family - occupied a 1,500 square km area of Maasai community land in 1992. Since then OBC has built a private airport and exclusive hunting retreats - and deployed a range of tactics to prevent indigenous Maasai people from accessing their land: cutting them off from vital grazing land and water points; pushing the community ever closer to collapse. In 2009, a mass eviction of Maasai villages within the 1,500 square kilometres took place. Over 200 homes were burned, leaving over 3,000 people homeless. According to witnesses, the operation was undertaken by the Tanzanian Field Force Unit with assistance from private security guards representing OBC (see Olosho video, below). The plan for further evictions was apparently cancelled last year due to international pressure, including an Avaaz petition signed by over 2 million people. On 23rd November 2014 the President of Tanzania, Jakaya Kikwete, tweeted: "There has never been, nor will there ever be any plan by the Government of Tanzania to evict the Maasai people from their ancestral land."  But evictions are once again under way, this time in the areas of Arash and Loosoito / Maaloni. Maasai campaigners report that SENAPA (Serengeti National Parks) rangers burnt 114 homes burnt between the 10th and 14th February alone, leaving 2,000 to 3,000 Maasai, including many children, homeless and without food, medical supplies or shelter.

Some states fight to keep their wood fires burning - Smoke wafting from wood fires has long provided a familiar winter smell in many parts of the country – and, in some cases, a foggy haze that has filled people’s lungs with fine particles that can cause coughing and wheezing. Citing health concerns, the Environmental Protection Agency now is pressing ahead with regulations to significantly limit the pollution from newly manufactured residential wood heaters. But some of the states with the most wood smoke are refusing to go along, claiming that the EPA’s new rules could leave low-income residents in the cold. Missouri and Michigan already have barred their environmental agencies from enforcing the EPA standards. Similar measures recently passed Virginia’s legislature and are pending in at least three other states, even though residents in some places say the rules don’t do enough to clear the air. It’s been a harsh winter for many people, particularly those in regions repeatedly battered by snow. And the EPA’s new rules are stoking fears that some residents won’t be able to afford new stoves when their older models give out. “People have been burning wood since the beginning of recorded time,” said Phillip Todd, 59, who uses a wood-fired furnace to heat his home in Holts Summit. “They’re trying to regulate it out of existence, I believe, and they really have no concern about the economic consequences or the hardship it’s going to cause.”

Warming temperatures implicated in recent California droughts - California has experienced more frequent drought years in the last two decades than it has in the past several centuries. That observed uptick is primarily the result of rising temperatures in the region, which have climbed to record highs as a result of climate change, Stanford scientists say. In a new study led by Stanford professor Noah Diffenbaugh, examined the role that temperature has played in California droughts over the past 120 years. They also examined the effect that human emissions of carbon dioxide and other greenhouse gases are having on temperature and precipitation, focusing on the influence of global warming upon California's past, present, and future drought risk. The team found that the worst droughts in California have historically occurred when conditions were both dry and warm, and that global warming is increasing the probability that dry and warm years will coincide. The findings suggest that California could be entering an era when nearly every year that has low precipitation also has temperatures similar to or higher than 2013-2014, when the statewide average annual temperature was the warmest on record. "Of course low precipitation is a prerequisite for drought, but less rain and snowfall alone don't ensure a drought will happen. It really matters if the lack of precipitation happens during a warm or cool year," Diffenbaugh said. "We've seen the effects of record heat on snow and soil moisture this year in California, and we know from this new research that climate change is increasing the probability of those warm and dry conditions occurring together."

California farmers won't get federal water -- A federal agency said Friday it will not release any water for Central Valley farms this year, forcing farmers to continue to scramble for other sources or leave fields unplanted. It will be the second year of no federal water for farmers in the region that grows much of the nation's produce. Many farmers had been bracing for the news as California's drought enters its fourth year. David Murillo, mid-Pacific regional director of the U.S. Bureau of Reclamation, said federal officials are doing everything possible to increase water deliveries during the dire dry conditions. "Our economy and our environment depend on it," he said. The Central Valley Project conveys water through a system of dams and reservoirs and 500 miles of canals. The agency says it can irrigate up to a third of California's agricultural land when water is flowing. Even before supplies were cut off, federal water has become a less dependable source for farmers. Farmers in the San Joaquin Valley only received 10 percent of demand in 2009 and 20 percent in 2013. Farmers are instead turning to storage supplies and pumping from largely unregulated groundwater wells that are quickly being depleted

East Bay MUD sounding alarm on California drought -- East Bay MUD is sounding the alarm on the California drought, the worst outlook in 40 years. The water supply hasn't been this bad since the late 1970s and conservation efforts are dismal, just 4 percent. Voluntary conservation could become mandatory. The California drought is as bad as it looks, according to East Bay MUD, which supplies water to 1.3 million people in the Bay Area. "The predictions are grim. We are looking at water storage levels that are probably going to rival what we saw in the 1977 drought," EBMUD spokesperson Abby Figueroa said. That was the worst year in the district's history. Bay Area water conservation resources Here are links to water conservation tips and rebate information from some of the Bay Area's major water suppliers. EBMUD's key reservoir, Pardee, is 90 percent full but only because the district is holding water there rather than releasing it downstream to other storage facilities, such as Camanche, which is just 30 percent full. At the Caples Lake above Pardee, EBMUD's current snow measurement is just 1 foot, when normally it's more like 6 or 7.

Drought Forcing Water Price Hikes As Much As 33 Percent For Bay Area Residents - — San Francisco Bay Area residents face price hikes for water as the drought continues.Three of the area’s largest water agencies have rate hikes of up to a third on their agendas.The San Jose Mercury News reports that water agencies are spending millions of dollars more to buy water from a Southern California water bank.Programs to encourage residents to save water are costing the agencies millions of dollars more.Beau Goldie of the Santa Clara Valley Water District says water agencies also are losing revenue because water customers are using less water.The East Bay Municipal Utility District and the San Francisco Public Utilities District also face rate hikes

Epic Drought Spurs California to Build Largest Desalination Plant in Western Hemisphere - Desalination has been proposed for years in the U.S., but has always been shot down for being too expensive and requiring too much energy. Now, “the first desalination plant in Carlsbad is coming online in 2016 or maybe even sooner,” says Jassby. The cost of desalinized water has come down significantly in recent years, making it “pretty comparable” to conventional water sources, according to Jassby. He expects that places that have “ready access to the ocean” and are water-stressed will employ desalination in the coming years. It’s already widely used in other parts of the world such as the Middle East, Australia and parts of Southern Europe. When the Carlsbad Desalination Project is completed this fall, it will be the largest desalination plant in the Western Hemisphere. Kerl of the San Diego County Water Authority, which is partnering with Poseidon Water on the project, explains why she believes the desalination plant is environmentally sound and also necessary for the state of California. The state’s recent snowpack survey reveals that the snowpack, a major source of drinking water for residents, is currently five percent of average, according to Kerl. Listen to the full episode below:

NASA Scientist Warns "California Has One Year Of Water Left" - Given the historic low temperatures and snowfalls that pummeled the eastern U.S. this winter, it might be easy to overlook how devastating California's winter was as well. As our “wet” season draws to a close, it is clear that the paltry rain and snowfall have done almost nothing to alleviate epic drought conditions. January was the driest in California since record-keeping began in 1895. Groundwater and snowpack levels are at all-time lows. We're not just up a creek without a paddle in California, we're losing the creek too. Data from NASA satellites show that the total amount of water stored in the Sacramento and San Joaquin river basins — that is, all of the snow, river and reservoir water, water in soils and groundwater combined — was 34 million acre-feet below normal in 2014. That loss is nearly 1.5 times the capacity of Lake Mead, America's largest reservoir. Statewide, we've been dropping more than 12 million acre-feet of total water yearly since 2011. Roughly two-thirds of these losses are attributable to groundwater pumping for agricultural irrigation in the Central Valley. Farmers have little choice but to pump more groundwater during droughts, especially when their surface water allocations have been slashed 80% to 100%. But these pumping rates are excessive and unsustainable. Wells are running dry. In some areas of the Central Valley, the land is sinking by one foot or more per year.As difficult as it may be to face, the simple fact is that California is running out of water — and the problem started before our current drought. NASA data reveal that total water storage in California has been in steady decline since at least 2002, when satellite-based monitoring began, although groundwater depletion has been going on since the early 20th century. Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one. In short, we have no paddle to navigate this crisis.

California only has one year’s worth of its water supply left, NASA scientist warns - Plagued by prolonged drought, California now has only enough water to get it through the next year, according to NASA. In an op-ed published Thursday by the Los Angeles Times, Jay Famiglietti, a senior water scientist at the NASA Jet Propulsion Laboratory in California, painted a dire picture of the state's water crisis. California, he writes, has lost around 12 million acre-feet of stored water every year since 2011. In the Sacramento and San Joaquin river basins, the combined water sources of snow, rivers, reservoirs, soil water and groundwater amounted to a volume that was 34 million acre-feet below normal levels in 2014. And there is no relief in sight. "As our 'wet' season draws to a close, it is clear that the paltry rain and snowfall have done almost nothing to alleviate epic drought conditions. January was the driest in California since record-keeping began in 1895. Groundwater and snowpack levels are at all-time lows" Famiglietti writes. "We're not just up a creek without a paddle in California, we're losing the creek too." On Wednesday, the U.S. Department of Agriculture announced that one-third of the monitoring stations in California’s Cascades and Sierra Nevada mountains have recorded the lowest snowpack ever measured.  "Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing,” Famiglietti writes. He criticized Californian officials for their lack of long-term planning for how to cope with this drought, and future droughts, beyond "staying in emergency mode and praying for rain."

Can Climate Action Plans Combat Megadrought and Save the Colorado River?  0 If a city’s water supply is threatened by climate change, should that city enact a strong climate action plan? I believe the answer is yes, but few cities throughout the Colorado River basin are moving forward aggressively to address climate change even though the threat is increasing every year.  Two of the largest reservoirs in the U.S.—Lakes Mead and Powell along the Colorado River—continue to lose water and are now less than half full with no prediction that the trend will change direction. The U.S. Bureau of Reclamation, which manages the reservoirs, and many scientific studies by independent researchers have reached the same conclusion: human overuse of the river and the likely impacts of climate change could have a profound negative impact on the amount of water flowing down the Colorado River and its ability to supply water for 40 million people. A recent newspaper article discussing this issue was titled, “Climate change or just bad luck?” In the last 15 years, about 20 percent less water has flowed in the river compared to the 40 years prior. This river flow, which comes from snow falling in the Rocky Mountains in Colorado, Utah and Wyoming, is at historic lows already. Climate change is predicted to lower the snow and river flows by 8.5 percent or more. A recent study by the National Oceanographic and Atmospheric Administration used the term “megadrought” to describe what could be coming for the Colorado River basin if climate change is not abated.

Sao Paulo’s Reservoirs Feel Pinch of Failed Wet Season --Sao Paulo, in the wake of another dry summer in southeast Brazil, continues to struggle with a multi-year drought. The city has implemented water rationing, but reservoir levels still hover at perilously low levels and will likely remain there or drop even further as the usual rainy season ends. What is traditionally the rainy season runs from September through April and brings the most rain from December through February. Yet for the second year in a row, rains have failed to fully materialize. The 2013-14 wet season saw rainfall deficits of nearly 16 inches and this year, though not quite as bad as last, is running up to 8 inches below normal according to data available from the International Research Institute for Climate and Society.A wet burst at the end of February provided some relief, but Sao Paulo’s Cantareira Reservoir System, which provides nearly half the drinking water for Sao Paulo’s 20 million residents, is still in rough shape. Its five reservoirs are only about 13 percent full and as of Tuesday, the Jaguari Reservoir, which sits at the top, was just 8.72 percent full. That led officials to require water restrictions, cutting off water for days at a time, and pushed Sao Paulo residents to start drilling illegal wells in the city in search of water. According to NPR, economists estimate that the drought could cost Sao Paulo 2 percent of its GDP.

Brazil, World's Shower Champ, Grapples With Drought - ABC News: Surveys say Brazilians are the world's most frequent bathers, taking on average 12 showers a week, putting rub-a-dub-dub up there with soccer and Carnival as essentials of the culture. But a historic drought that is making taps run dry across southeastern Brazil, particularly in South America's largest city of Sao Paulo, has people worried they might be asked to cut down on their beloved showers. While it may not be the most serious problem created by the drought, observers warn that restricting showers could spell trouble for political leaders. "Showers are part of our roots as Brazilians. Not being able to shower in a country as hot as this, where hygiene is as culturally important as is it, well, it's enough to cause a revolt," said Renata Ashcar, co-author of the book "The Bath: Histories and Rituals," published in Brazil in 2006. Brazil's populous southeastern region is in the throes of the worst drought in eight decades and reservoirs are at critical lows. Residents of Sao Paulo have faced water cuts for months, and that scenario now looms for Rio de Janeiro. Heavy rains in February and early March have helped reservoirs in the region recover somewhat,— but they still are dangerously below normal levels. The Cantareira reservoir system that provides water for some 9 million people in metropolitan Sao Paulo, for instance, was at less than 13 percent capacity this week.

Why fresh water shortages will cause the next great global crisis - Water is the driving force of all nature, Leonardo da Vinci claimed. Unfortunately for our planet, supplies are now running dry – at an alarming rate. The world’s population continues to soar but that rise in numbers has not been matched by an accompanying increase in supplies of fresh water. The consequences are proving to be profound. Across the globe, reports reveal huge areas in crisis today as reservoirs and aquifers dry up. More than a billion individuals – one in seven people on the planet – now lack access to safe drinking water. Last week in the Brazilian city of São Paulo, home to 20 million people, and once known as the City of Drizzle,drought got so bad that residents began drilling through basement floors and car parks to try to reach groundwater. City officials warned last week that rationing of supplies was likely soon. Citizens might have access to water for only two days a week, they added. In California, officials have revealed that the state has entered its fourth year of drought with January this year becoming the driest since meteorological records began. At the same time, per capita water use has continued to rise. In the Middle East, swaths of countryside have been reduced to desert because of overuse of water. Iran is one of the most severely affected. Heavy overconsumption, coupled with poor rainfall, have ravaged its water resources and devastated its agricultural output. Similarly, the United Arab Emirates is now investing in desalination plants and waste water treatment units because it lacks fresh water. As crown prince General Sheikh Mohammed bin Zayed al-Nahyan admitted: “For us, water is [now] more important than oil.”

After Much Ado, El Niño Officially Declared - Just when everyone had pretty much written it off, the El Niño event that has been nearly a year in the offing finally emerged in February and could last through the spring and summer, the National Oceanic and Atmospheric Administration announced Thursday. This isn’t the blockbuster, 1998 repeat El Niño many anticipated when the first hints of an impending event emerged about a year ago. This El Niño has just crept across the official threshold, so it won’t be a strong event.  “We’re basically declaring El Niño,” NOAA forecaster Michelle L’Heureux said. “It’s unfortunate we can’t declare a weak El Niño.” In part because of its weakness, as well as its unusual timing, the El Niño isn’t expected to have much impact on U.S. weather patterns, nor bring much relief for drought-stricken California. But forecasters say it could nudge weather patterns in other areas of the globe, especially if it persists or intensifies, and could boost global temperatures — following a 2014 that was already the hottest year on record.. “It does tilt the odds toward warmth,” L’Heureux said.

Florida Officials Ban The Term ‘Climate Change’ -- Florida’s Department of Environmental Protection is tasked with protecting the state’s “air, water and land.” But there’s one environmental threat you won’t hear DEP officials talking about.Officials at Florida’s DEP have banned the words “climate change” and “global warming” from all official communications, including reports and emails, according to an investigation published Sunday by the Florida Center for Investigative Reporting (FCIR). Four former DEP employees told FCIR that they had been instructed not to use the terms during their time at the state’s DEP.  “We were told not to use the terms ‘climate change,’ ‘global warming’ or ‘sustainability,’” Christopher Byrd, who served as an attorney with the DEP’s Office of General Counsel from 2008 to 2013, told FCIR. “That message was communicated to me and my colleagues by our superiors in the Office of General Counsel.” The ban on using “climate change” and “global warming at the DEP manifested in a variety of ways, FCIR writes. One writer wanted to include climate change in a series of fact sheets he was writing on coral reefs for the state’s Coral Reef Conservation Program, but he said he was instructed not to by DEP employees. In addition, when volunteers attended a 2014 meeting the Coral Reef Conservation Program held to train volunteers to conduct presentations on coral reef health in Florida, two volunteers said they were told not to address climate change when talking about threats facing coral reefs.

CO2 Levels for February Eclipsed Prehistoric Highs - Scientific American -- February is one of the first months since before months had names to boast carbon dioxide concentrations at 400 parts per million.* Such CO2 concentrations in the atmosphere have likely not been seen since at least the end of the Oligocene 23 million years ago, an 11-million-year-long epoch of gradual climate cooling that most likely saw CO2 concentrations drop from more than 1,000 ppm. Those of us alive today breathe air never tasted by any of our ancestors in the entire Homo genus. Homo sapiens sapiens—that’s us—has subsisted for at least 200,000 years on a planet that has oscillated between 170 and 280 ppm, according to records preserved in air bubbles trapped in ice. Now our species has burned enough fossil fuels and cut down enough trees to push CO2 to 400 ppm—and soon beyond. Concentrations rise by more than two ppm per year now. Raising atmospheric concentrations of CO2 to 0.04 percent may not seem like much but it has been enough to raise the world's annual average temperature by a total of 0.8 degree Celsius so far. More warming is in store, thanks to the lag between CO2 emissions and the extra heat each molecule will trap over time, an ever-thickening blanket wrapped around the planet in effect. Partially as a result of this atmospheric change, scientists have proposed that the world has entered a new geologic epoch, dubbed the Anthropocene and marked by this climate shift, among other indicators.

Earth entering new era of rapid temperature change, study warns - The rate of climate change we're experiencing now is faster than at any time in the last millennium, a new study shows. Researchers compared how temperature varied over 40-year periods in the past, present and future, and concluded that the Earth is entering a new "regime" of rapid temperature change. We're already locked into fast-paced changes in the near future because of past emissions, the researchers say. That means we'll need to adapt to minimise the impacts of climate change, even if greenhouse gas emissions are cut substantially. Peaks and troughs A look back at how global temperatures have changed over the past century shows how temperature rise of the Earth's surface has been anything but smooth. These peaks and troughs are in part caused by natural phenomena, such as volcanic eruptions and El Niño, which influence the Earth's climate from year to year. The graph below shows average global surface temperatures for every year back to the 1850s. You can see that temperature changes from decade to decade do not always happen at the same pace. This is the impact of natural cycles in climate, which can either work to enhance or dampen the long-term warming trend over short timescales. A new study, published in Nature Climate Change,, shows how much faster temperature has increased in recent decades compared to any time over the last 1,000 years.

The oceans may be lulling us into a false sense of climate security -- A paper published last week in Science casts more light on oceans and how they may have contributed to a false sense of security about what we face in the future. The paper approached the problem in a new way that connected real-world observations with state-of-the-art climate models. What the authors find casts severe doubt on other work which had oversold the role of natural climate’s ability to halt global warming for the next 15 years. Instead, by correcting others’ errors, the new paper shows that things may be worse than we thought.  The two oscillations focused on in this paper are the Atlantic Multidecadal Oscillation (AMO) and the Pacific Decadal Oscillation (PDO).  The AMO is a cyclical variation in North Atlantic temperatures that lasts for 50–70 years. On the other hand, the PDO can actually be thought of as a short (16–20 year process) and a longer (50–70 year) process. Currently, the oceans are characterized by a slightly positive AMO and a more negative PDO. A recent publication discusses the role of the PDO and the continued warming of the planet, readers can go there for a basic description.  The authors focus attention on the longer of the two PDO processes which is multidecadal and they ask whether the current status of the oceans can explain what we are observing at the Earth’s surface. What they find is interesting. These oscillations are “found to explain a large proportion of internal variability in Northern Hemisphere mean temperature.” The authors also show that other researchers who have incorrectly defined natural variability using simple linear detrending have been mistaken.

Arctic Sea Ice Is Getting Thinner, Faster -- While the steady disappearance of sea ice in the Arctic has been one of the hallmark effects of global warming, research shows it is not only covering less of the planet, but it’s also getting significantly thinner. That makes it more susceptible to melting, potentially altering local ecosystems, shipping routes and ocean and atmospheric patterns. New data compiled from a range of sources — from Navy submarines to satellites — suggests that thinning is happening much faster than models have estimated, according to a study aiming to link those disparate data sources for the first time. University of Washington researchers Ron Lindsay and Axel Schweiger calculated that in the central part of the Arctic Ocean basin, sea ice has thinned by 65 percent since 1975. During September, when the ice reaches its annual minimum, ice thickness is down by a stunning 85 percent. The information is key in determining when parts of the Arctic may become ice-free for at least part of the year in the coming century.

Arctic sea ice: possible record-low maximum extent occurring  - We have a situation here. In the past, I looked little at the Arctic sea ice extent numbers because I considered the sea ice volume to be a far more important measure of what was going on in the Arctic.  However, consider this -- say 5-10 years ago, the ice in general was much thicker.  There were even land-fast ice shelves attached to the Canadian archipelago that were more than 100 feet thick (those are all gone), and multi-year ice could easily be well over 5-6 meters thick, and there was a lot more of it. These days, in general, all of the ice is fairly thin, thus making the extent graph much more significant.During the summer melt seasons, it was often (but not always) the case that when the Arctic Oscillation Index was strongly positive, the rate of melt was much higher, primarily due to warm air masses entering the Arctic via the North Atlantic. Have a look at the current AO Index -- 2 is a fairly normal number, but above 5 is quite extraordinary:Then have a look at the satellite photos of water vapor moving into the Arctic via the North Atlantic and the Bering Strait:  Animation of the satellite images here:

Arctic Sea Ice Dwindling Toward Record Winter Low - While balmy hints of spring melt piles of snow in the eastern U.S., the impending end of winter marks peak season for Arctic sea ice. But this year, that winter maximum area is currently on track to hit a record low since satellite records began in 1979. The area of the Arctic covered by sea ice during the winter of 2014-2015. In March, that area has hit such low levels that they could set a seasonal record if they persist. “The fact that we're starting the melt season with low — maybe record low — winter extents cannot be good,” Jennifer Francis, a Rutgers University Arctic researcher, said in an email. Sea ice extent is crucial to the Arctic's ecology and economy, affecting wildlife habitats, weather patterns, and shipping lanes. Sea ice is a key part of the habitats of animals like polar bears and walruses, as well as fish and other creatures that live below it. When it is missing it can make it dififcult for some of the animals to find food. For humans, ice-free areas of water are prime real estate for oil drilling and shipping and an Arctic low on ice would open the region to more of both, a controversial proposition. There has also been research that indicates the disappearance of sea ice, along with the broader warming of the Arctic, is affecting weather patterns over North America, Europe and Asia, though there is still much work to be done to fully explain such a connection. The cap of sea ice that covers the Arctic Ocean waxes and wanes with the seasons, with ocean water forming ice as the sun descends below the horizon in the autumn and plunges the region into the perpetual darkness of winter. As the sun re-emerges in spring, the ice can grow no more and melting begins. The ice typically reaches its maximum area in March and its minimum in September.

Greenland Reels: Climate Disrupting Feedbacks Have Begun: Greenland is warmer than it has been in more than 100,000 years and climate disrupting feedback loops have begun. Since 2000, ice loss has increased over 600 percent, and liquid water now exists inside the ice sheet year-round, no longer refreezing during winter. Melt and ice loss dynamics from Greenland are far more complicated than we understood just a few years ago. New discoveries have been made that add large uncertainties as to exactly how fast ice melt and iceberg discharge will increase in the future. Over the last decade, continued research into the rate of ice loss in Greenland has downplayed any rapid acceleration of current melt rates. New discoveries could be changing our understanding of this last decade's work. The last 18 years have seen more melt than average across the ice sheet every year with an increasing trend that peaked in 2012 when the entire ice sheet surface temperature went above freezing for four days. (1) The melt line, or the elevation on the 11,000-foot-high ice sheet where the temperature does not rise above freezing in any given year, has steadily been increasing since the 1970s. (2) All of this melt is exposing areas beneath the ice sheet that have not been exposed in a very long time. Across Baffin Bay to the west of Greenland is Baffin Island. This is the largest of the islands in the Canadian Arctic Archipelago, and ranked the fifth largest in the world; it is almost as big as Texas (Greenland is the largest). Baffin Island has its own ice cap as well as satellite ice caps to the main body of ice. It is these satellite ice caps that attracted the attention of researchers.

Scientists link Arctic warming to intense summer heatwaves in the northern hemisphere: The Arctic is warming up, and the impacts are being felt right across the world. A new study suggests rising temperatures there could even be contributing to longer-lasting heatwaves in the northern hemisphere, like the one Russia experienced in 2010. Published today in the journal Science, the paper is the latest in a line of research suggesting how rising temperatures in the high north could be affecting our weather patterns much further south. But there's a lot still to understand before the links can be well and truly pinned down, scientists say. The Arctic is warming at least twice as fast as the globe as a whole. Scientists begun noticing the pattern emerge in temperature records since about the year 2000. It's known as Arctic Amplification. Part of the reason for it is that, as sea ice is diminishing, heat from the sun that would have been reflected back to space by snow and ice is being absorbed by the oceans instead, warming them up. As the Arctic warms faster than the rest of the world, the temperature difference between the pole and the equator is getting smaller. Since this temperature contrast drives much of the atmospheric circulation in the northern hemisphere, the smaller it gets, the weaker the circulation becomes. These atmospheric circulation patterns are responsible for delivering the weather systems that create warm, cold or wet conditions in the northern hemisphere. So, it follows that disrupting the circulation will, in turn, have consequences for the weather we see.

Melting will hit the US hardest -  Hurricane Sandy was not an aberration. It was New York City's first taste of a trend that could continue for centuries — the storm surge that flooded the city's coastal areas could become a much more frequent — and destructive — occurrence. Land ice at both of the planet's poles is melting, causing our oceans to rise. But Antarctica, known as the sleeping giant of sea level rise, is melting faster than scientists previously thought. In a bit of cruel irony, as Antarctica's ice falls into the ocean, the distribution of sea level changes could actually hit the world's largest cumulative contributor to climate change — the United States — harder than elsewhere. The New York City Panel on Climate Change recently said that sea level rise in the five boroughs won't be the two to four feet that it had previously estimated, but possibly as much as six feet. Cities like Washington DC, Norfolk, Miami, and Seattle could also be hard hit by sea level rise, inundating coastal infrastructure and even potentially forcing the relocation inland of tens of millions of inhabitants. "Sea level rise gives climate change an address, because it is the climate impact we can talk about at the address level," Benjamin Strauss, Vice President for Sea Level and Climate Impacts at the independent science and journalism organization Climate Central, told VICE News. "You can literally walk down a street and give different sea level risk assessments for different properties."

Climate fight won't wait for Paris: vive la résistance - The math is so basic and easy that it’s quickly carried the day. What in 2013 was the rallying cry of a few student campaigners has by 2015 become the conventional wisdom: there’s a “carbon bubble,” composed of the trillions of dollars of coal and oil and gas that simply must be left underground. Here’s the president of World Bank speaking in Davos: “Use smart due diligence. Rethink what fiduciary responsibility means in this changing world. It’s simple self-interest. Every company, investor and bank that screens new and existing investments for climate risk is simply being pragmatic.” Those radicals at HSBC, in between sheltering taxes for the super-rich, ran the numbers: if the world actually tried to keep its 2C commitment, valuations of the fossil fuel industry would drop by half. Mark Carney, governor of the Bank of England, did his best to explain the unwelcome news to the industry at a conference last October: the “vast majority” of the planet’s carbon reserves “are unburnable,” he said. When Shell’s chief executive hit back last month, calling a rapid transition off fossil fuel “simply naïve,” it was Tory veteran and chair of parliament’s energy committee Tim Yeo who told him off: “I do believe the problem of stranded assets is a real one now. Investors are starting to think by 2030 the world will be in such a panic about climate change that either by law or by price it will be very hard to burn fossil fuels on anything like the scale we are doing at the moment.”  Forget sea level rise for a moment – this is a sea change, happening in real time before our eyes, as the confidence in an old order starts to collapse. Last September the members of the Rockefeller family – the first family of fossil fuels – announced that they were divesting their philanthropies from coal, oil, and gas for reasons “both moral and economic”. As the head of the Rockefeller Brothers Fund put it, “We are quite convinced that if John D Rockefeller were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy.”

Keep fossil fuels in the ground to stop climate change -- If you visit the website of the UN body that oversees the world’s climate negotiations, you will find dozens of pictures, taken across 20 years, of people clapping. These photos should be of interest to anthropologists and psychologists. For they show hundreds of intelligent, educated, well-paid and elegantly-dressed people wasting their lives. The celebratory nature of the images testifies to the world of make-believe these people inhabit. They are surrounded by objectives, principles, commitments, instruments and protocols, which create a reassuring phantasm of progress while the ship on which they travel slowly founders. Leafing through these photos, I imagine I can almost hear what the delegates are saying through their expensive dentistry. “Darling you’ve re-arranged the deckchairs beautifully. It’s a breakthrough! We’ll have to invent a mechanism for holding them in place, as the deck has developed a bit of a tilt, but we’ll do that at the next conference.” This process is futile because they have addressed the problem only from one end, and it happens to be the wrong end. They have sought to prevent climate breakdown by limiting the amount of greenhouse gases that are released; in other words, by constraining the consumption of fossil fuels. But, throughout the 23 years since the world’s governments decided to begin this process, the delegates have uttered not one coherent word about constraining production.

If enough of us decide that climate change is a crisis worthy of Marshall Plan levels of response, then it will become one - Naomi Klein --  I denied climate change for longer than I care to admit. I knew it was happening, sure. Not like Donald Trump and the Tea Partiers going on about how the continued existence of winter proves it’s all a hoax. But I stayed pretty hazy on the details and only skimmed most of the news stories, especially the really scary ones. I told myself the science was too complicated and that the environmentalists were dealing with it. And I continued to behave as if there was nothing wrong with the shiny card in my wallet attesting to my “elite” frequent flyer status. A great many of us engage in this kind of climate change denial. We look for a split second and then we look away. Or we look but then turn it into a joke (“more signs of the Apocalypse!”). Which is another way of looking away. Or we look but tell ourselves comforting stories about how humans are clever and will come up with a technological miracle that will safely suck the carbon out of the skies or magically turn down the heat of the sun. Which, I was to discover while researching this book, is yet another way of looking away. Or we look but try to be hyper-rational about it (“dollar for dollar it’s more efficient to focus on economic development than climate change, since wealth is the best protection from weather extremes”) – as if having a few more dollars will make much difference when your city is underwater. Or we look but tell ourselves we are too busy to care about something so distant and abstract – even though we saw the water in the subways in New York City during Superstorm Sandy, and the people on their rooftops in New Orleans after Hurricane Katrina, and know that no one is safe, the most vulnerable least of all. And though perfectly understandable, this too is a way of looking away.

Mark Carney defends Bank of England over climate change study - Climate change is one of the biggest risks facing the insurance industry, the governor of the Bank of England has said after a former Conservative chancellor dismissed a study on global warming as “green claptrap”. Speaking at the House of Lords, Mark Carney mounted a robust defence of the Bank’s work on the impact of climate change on the insurance industry in the face of claims by Nigel Lawson that it had its priorities wrong. Lawson, who has claimed “there is no global warming to speak of going on at the moment”, a view that puts him outside the overwhelming scientific consensus, attacked the bank for “focusing on green claptrap” rather than the remaining problems in the UK’s financial sector. Lawson was referring to a recent speech by Paul Fisher, a senior policymaker at the Bank, who warned insurers they could take a “huge hit” by investing in fossil fuels, which could collapse in value if action is taken to curb greenhouse gas emissions in line with scientific advice. Fisher is deputy head of the Bank’s Prudential Regulation Authority, which supervises insurers and banks with the aim of ensuring financial stability. The Bank has recently surveyed the insurance industry on its fossil fuel investments, as it investigates the risk of an economic crash if action on climate change renders oil and gas assets worthless.. The contribution from Threadneedle Street is expected to be published after the election by the Department for Environment, Food and Rural Affairs (Defra) as part of a bigger report on the impact of climate change.

Europe submits UN climate pledge, urges US, China to follow: (Reuters) - The European Union on Friday submitted its formal promise on how much it will cut greenhouse gas emissions to the United Nations ahead of climate change talks starting in November and called on the United States and China to follow its lead. The European Union is the first major economy to agree its position before the talks in Paris aimed at seeking a new worldwide deal on global warming. "We expect China, the United States and the other G20 countries in particular to follow the European Union and submit their contributions by the end of March," Miguel Arias Canete, climate and energy Commissioner, told reporters after a meeting of EU environment ministers in Brussels. French Energy Minister Segolene Royal said Europe was taking up its responsibilities as host of the 2015 Paris climate conference, which begins on Nov. 30. "A very important step was taken today," she said. "This is a decisive, historic stage." She had said on Thursday agreement had to be reached by March 20 at the latest. The EU's official contribution will be a target of an at least 40 percent cut in emissions by 2030, compared to levels emitted in 1990.

China pledges to boost clean energy, industrial restructuring: (Reuters) - China's top state planning agency pledged on Thursday to accelerate policies to promote cleaner and renewable sources of energy and tackle overcapacity in polluting industrial sectors. China is trying to strike a balance between improving its environment, suffering from more than three decades of breakneck growth, and keeping its economy running at the pace required to maintain employment and stability. The National Development and Reform Commision (NDRC) in its annual report published at the opening of the full session of parliament said it would implement policies aimed at reducing coal consumption and controlling the number of energy-guzzling projects in polluted regions. "We will strive for zero-growth in the consumption of coal in key areas of the country," Premier Li Keqiang said in his government work report delivered to parliament on Thursday. "Environmental pollution is a blight on people's quality of life and a trouble that weighs on their hearts," Li said. The NDRC also said it would take action to boost the proportion of cleaner fuels, encourage the development and utilisation of natural gas, and aggressively develop renewable wind, solar and biofuel energy sources. "For areas affected by severe smog, regions where conserving energy is difficult, and industries with overcapacity, we will strictly control the number of energy-intensive projects and implement policies for reducing coal use, and for replacing coal with alternative energy sources," the report said.

China Builds Nuclear Reactors in Earthquake-Prone Pakistan -- China has decided to defy international norms and build new nuclear reactors in Pakistan. While the U.S. and Europe see stagnant growth for commercial nuclear power, the same is not true in Asia. China is not only building nuclear reactors at home, but it is exporting its technology abroad. Of particular concern is its construction of nuclear reactors in Pakistan. China helped build two reactors at Chashma, which came online in 2000 and 2011 respectively. More recently, it has decided to double the size of the Chashma power plant, with two additional reactors under construction. And it is also constructing a new nuclear power plant near Karachi, using China’s next generation ACP-1000 design. But China’s plans in Pakistan are facing global criticism. The problem is that Pakistan is not a signatory of the nuclear non-proliferation treaty (NPT), which should disqualify it for any international help in building nuclear power plants. The Nuclear Suppliers Group (NSG) is a coalition of nuclear technology exporting countries who have banded together to create guidelines and norms around the sale of nuclear technology in order to ensure its safe use while guarding against the spread of nuclear weapons capabilities. One of the core tenets of the NSG is to not trade nuclear technology to countries that have not signed up to the NPT. Pakistan is one of the world’s four remaining holdouts to the NPT (the other three are India, Israel, and South Sudan). That is why China’s decision to build nuclear reactors in Pakistan has received criticism. As a member of the NSG, China is defying the guidelines on nuclear trade. China says that its promise to Pakistan predates its 2004 accession to the suppliers group.

McConnell to states: Don't comply with EPA climate rule - Senate Majority Leader Mitch McConnell (R-Ky.) is urging state officials not to comply with the Obama administration's signature climate rule.McConnell, a stringent opponent of the regulation, said states should not submit a design plan for limiting carbon pollution from existing power plants."The regulation is unfair. It's probably illegal. And state officials can do something about it; in fact, many are already fighting back," McConnell said in an op-ed published in the Lexington Herald-Leader. The rule, which the EPA is working to finalize this summer, requires states cut carbon dioxide emissions from existing power plants 30 percent from 2005 levels by 2030. "Think twice before submitting a state plan — which could lock you in to federal enforcement and expose you to lawsuits — when the administration is standing on shaky legal ground and when, without your support, it won't be able to demonstrate the capacity to carry out such political extremism," McConnell said.

At Least Four States Are Pushing Koch-Backed Legislation To Ban Funding EPA’s Climate Rule - Lawmakers from at least four states have introduced model legislation from the right-wing group Americans for Prosperity (AFP) seeking to prohibit state funding for the Environmental Protection Agency’s efforts to fight climate change. On Thursday, Missouri state lawmaker Tim Remole introduced a resolution mimicking the text of AFP’s Reliable, Affordable and Safe Power (RASP) Act. Remole’s resolution “seeks to prohibit state agencies from using state money to implement EPA rules and guidelines,” specifically the EPA’s efforts to limit carbon dioxide emissions from power plants.  Nearly identical resolutions have also been introduced in Florida, Virginia, and South Carolina in 2015. Each one says the proposed limits on carbon emissions from power plants “will not measurably alter any impacts of climate change,” “conflicts with a literal reading of the law,” and would “effectively amount to a federal takeover of the electricity system of the United States.”  The sentiment in these resolutions would have to be included in actual bills to become a real law. But if they do pass, it would signify that the states have the momentum to move similarly-written bills through their Legislatures. The RASP Act is a piece of model legislation written by AFP, a free-market group famously backed by the billionaire brothers Charles and David Koch. AFP announced in December that it would “lead a large coalition of organizations” to push the RASP Act in states — organizations which include the libertarian Competitive Enterprise Institute, right-wing think tank Heritage Action for America, and the Koch-backed American Energy Alliance. The model legislation is also being pushed by the American Legislative Exchange Council (ALEC), a free-market lobbying group.

IEA: CO2 Emissions Decouple From Economic Growth For First Time In 40 Years - Energy-related carbon dioxide emissions flatlined globally in 2014, while the world economy grew. The International Energy Agency reports that this marks “the first time in 40 years in which there was a halt or reduction in emissions of the greenhouse gas that was not tied to an economic downturn.” The IEA attributes this remarkable occurrence to “changing patterns of energy consumption in China and OECD countries.” As we reported last month, China cut its coal consumption 2.9 percent in 2014, the first drop this century. China is aggressively embracing energy efficiency, expanding clean energy, and shuttering the dirtiest power plants to meet its planned 2020 (or sooner) peak in coal use. As a result, Chinese CO2 emissions dropped 1 percent in 2014 even as their economy grew by 7.4 percent. At the same time, the Financial Times points out “In the past five years, OECD countries’ economies grew nearly 7 percent while their emissions fell 4 percent, the IEA has found.” A big part of that is the United States, where fuel economy standards have reversed oil consumption trends — and renewable energy, efficiency, and natural gas have cut U.S. coal consumption. All this “provides much-needed momentum to negotiators preparing to forge a global climate deal in Paris in December,” explained IEA Chief Economist Fatih Birol, who was just named the next IEA Executive Director. “For the first time, greenhouse gas emissions are decoupling from economic growth.”

Utilities wage campaign against rooftop solar - Three years ago, the nation’s top utility executives gathered at a Colorado resort to hear warnings about a grave new threat to operators of America’s electric grid: not superstorms or cyberattacks, but rooftop solar panels.If demand for residential solar continued to soar, traditional utilities could soon face serious problems, from “declining retail sales” and a “loss of customers” to “potential obsolescence,” according to a presentation prepared for the group. . “Industry must prepare an action plan to address the challenges,” it said. The warning, delivered to a private meeting of the utility industry’s main trade association, became a call to arms for electricity providers in nearly every corner of the nation. Three years later, the industry and its fossil-fuel supporters are waging a determined campaign to stop a home-solar insurgency that is rattling the boardrooms of the country’s government-regulated electric monopolies. The campaign’s first phase—an industry push for state laws raising prices for solar customers—failed spectacularly in legislatures around the country, due in part to surprisingly strong support for solar energy from conservatives and evangelicals in traditionally “red states.” But more recently, the battle has shifted to public utility commissions, where industry backers have mounted a more successful push for fee hikes that could put solar panels out of reach for many potential customers.

The ‘Insane’ Plan To Burn 80,000 Pounds Of Chemical Explosives, Out In The Open, Every Day For A Year - - Just a few miles away from the population center of Minden, Louisiana, 15 million pounds of military explosives are sitting in cardboard boxes, waiting to detonate. The massive stockpile of explosive M6 propellant has been stored at a Louisiana National Guard military training site called Camp Minden since 2010, when the U.S. Army sold it to a company to be destroyed. But the company, Explo Systems, never actually disposed of it — they just left it in the boxes. Now the M6 is rapidly deteriorating, and by August, its risk of spontaneous combustion will greatly increase.   The Environmental Protection Agency, the U.S. Army, and two Louisiana state agencies have put forth a solution: Burn it. Burn the M6 in the open over the course of one year. Put it in trays, light it on fire, and let the smoke and fumes drift into the air. A year-long schedule would amount to 80,000 pounds of chemicals burned each day.  “We believe this would be the largest chemical burn of its kind in U.S. history,” said Frances Kelly, director of organizing for Louisiana Progress Action, and one of the loudest opponents of the plan. “It’s very scary.” As Kelly and others in Minden fight for an alternative disposal, it’s sparked a bigger conversation about open munitions burning far beyond Louisiana. Across the country, the military regularly disposes of its huge stockpile of excess and obsolete explosives, propellants, and munitions by burning them. The regulations surrounding these burns are confusing, sometimes bypassing environmental review until after a burn has been agreed to. What’s more, these open burns have largely flown under environmentalists’ radar, despite well-documented evidence showing long-term public health and environmental risks.

Is it time to scrap the American Renewable Fuel Standard? --  On Wednesday, representatives of the American Petroleum Institute, the Environmental Working Group (EWG) and anti-hunger group ActionAid USA held a joint press conference to call on Congress for a repeal or a drastic reform of corn ethanol mandates under the Renewable Fuel Standard (RFS). “A chorus of concerned groups — from consumer groups to environmental groups to anti-hunger groups and industry groups – are calling for repeal or reform of the nation’s ethanol mandates under the Renewable Fuel Standard,” said Bob Greco, API downstream group director. “API remains seriously concerned that increasing ethanol mandates under the RFS stands to harm consumers and our economy.” The RFS is a federal program that originated with the Energy Policy Act of 2005. The idea behind the legislation was to require fuel sold for transportation purposes to contain a minimum amount of renewable fuels, usually bio-fuel. The RFS program requires renewable fuel to be blended into transportation fuel in increasing amounts each year. In addition, each renewable fuel category in the program is mandated to emit lower greenhouse gas emissions relative to the petroleum-based product it is replacing. However, Scott Faber, vice president of government affairs at EWG noted that the corn-based push of the RFS is actually worse in terms of emissions and water pollution. Faber noted that the U.S. Environmental Protection Agency (EPA) found that the RFS program has increased emissions when compared to estimated gasoline consumption. “We feel it’s time to develop actual green responsible biofuels rather than corn ethanol,” Faber said. “The Renewable Fuel Standard has not only failed consumers and the environment, it has also failed the advanced biofuel industry it was supposed to help.”

U.S. exports 836 million gallons of ethanol worth $2.1 billion: - U.S. ethanol exports reached near-record levels in 2014, sending 836 million gallons of ethanol worth $2.1 billion to international markets, the Renewable Fuels Association (RFA) explained in its new publication "2014 U.S. Ethanol Exports and Imports: Statistical Summary." The publication offers an overview of the U.S. ethanol export and import markets in 2014 showing the upward trend in exports and the downward trend in imports - reaching the second-lowest levels - since 2005. The report finds that U.S. ethanol has made its way to all inhabited continents of the world, reaching more than 50 countries. The top five countries importing U.S. ethanol last year included Canada, Brazil, the United Arab Emirates, the Philippines and India. Meanwhile, exports to the European Union remain down because of a punitive trade tariff it chooses to impose on U.S. produced ethanol.

Trans-Pacific Partnership: A Fast Track to Disaster - The U.S. is at the tail end of negotiating the Trans-Pacific Partnership (TPP)—a massive trade deal with Mexico, Canada, Japan, Vietnam and seven other countries. The negotiations have been conducted in secret. Now Congress will soon decide whether to grant the Obama administration “fast track” authority to have the “final” pact approved as is—meaning strict limits on Congressional debate and no amendments. That’s a terrible idea for lots of reasons—not least of which is that the TPP could sabotage the ability of the U.S. (and other nations) to respond to the climate crisis. Senator Elizabeth Warren put her finger on the problem in an op-ed for the Washington Post “Who will benefit from the TPP? American workers? Consumers? Small businesses? Taxpayers? Or the biggest multinational corporations in the world?” Here’s a hint: The answer is definitely not “all of the above.” Multinational corporations—including some of the planet’s biggest polluters—could use the TPP to sue governments, in private trade tribunals, over laws and policies that they claimed would reduce their profits. The implications of this are profound: Corporate profits are more important than protections for clean air, clean water, climate stability, workers’ rights and more. This isn’t a hypothetical threat. Similar rules in other free trade deals have allowed corporations including ExxonMobil, Chevron and Occidental Petroleum to bring approximately 600 cases against nearly 100 governments. Increasingly, corporations are using these perverse rules to challenge energy and climate policies, including a moratorium on fracking in Quebec; a nuclear energy phaseout and coal-fired power plant standards in Germany; and a pollution cleanup in Peru. TransCanada has even intimated that it would use similar rules in the North American Free Trade Agreement to challenge a U.S. decision to reject the Keystone XL pipeline.

Here’s why gas really costs Americans $6.25 a gallon - The study, published in the journal Climatic Change, is the first to pull together a proper accounting of the hidden costs of greenhouse gas emissions. It shows the true (and much higher) cost that we pay in dollars at the pump and light switch—or in human lives at the emergency room.Drew Shindell, a professor at Duke University, has attempted to play CPA to our industrialized emitting world. He has tabulated what he calls “climate damages” for a whole range of greenhouse gases like CO2, aerosols, and methane—and more persistent ones like nitrous oxides. If these damages are added in like the gas tax, a gallon of regular in the United States would really cost $6.25. The price of diesel would be a whopping $7.72 a gallon. Shindell also estimated the yearly damages from power plants in the U.S. Using coal costs us the most, with climate damages adding an almost 30 cents per kilowatt hour to the current price of 10 cents we now pay. The gas-fired power price rises to 17 cents from 7 cents per kilowatt hour.For the average homeowner who uses natural gas, your real bill after climate damages is double. And for those of us who get their electricity from coal-fired power plants, our energy bills are really four times what we see in our monthly statements. Shindell calculates the total yearly emissions price tag—between transportation, electricity, and industrial combustion—at between $330-970 billion. That wide spread depends on the choice of a discount rate, which reflects the relative value of money over the years and decades of climate change to come.

Florida Utility Is Buying A Coal Plant Just To Shut It Down -- State utility Florida Power and Light (FPL) wants to buy an old coal plant in Florida just to shut it down, a move that it says would prevent nearly 1 million tons of carbon dioxide from entering the atmosphere each year.  FPL filed a petition with the state’s Public Service Commission last week to acquire the Cedar Bay Generating Plant in Jacksonville, which went into service in 1994. Upon buying the coal plant, FPL plans to immediately reduce the plant’s operations by 90 percent, and then phase it out of service completely over the next two to three years.  The reason it’s doing this, FPL has said, is simple: the plant is outdated, and shutting it down will save customers money — $70 million a year to be exact, according to the utility.  “Although years ago it made sense to buy this plant’s power to serve our customers, times have changed. We have invested billions of dollars to improve the efficiency of our system, reduce our fuel consumption, prevent emissions and cut costs for our customers,” Eric Silagy, president and CEO of FPL said in a statement. “Now we’re in a position to take ownership of the facility and effectively buy out an outmoded contract with the goal of ultimately phasing the plant out of service.”

Duke Pollution Could Continue Under Proposed Permits - Duke Energy could legally leak pollutants from some of its coal ash dumps under new wastewater permits proposed Friday by North Carolina regulators. Just days after federal prosecutors filed criminal charges against Duke over the leaks, the North Carolina Department of Environment and Natural Resources released new draft permits for three of Duke's coal ash sites. New permits for Duke's remaining coal ash dumps across the state are to follow. Among those issued Friday is a draft permit for Riverbend Steam Station near Charlotte, one of five plants cited Feb. 20 with Clean Water Act violations. Duke says it will plead guilty to nine misdemeanor counts and pay $102 million to settle the case. The proposed permit would add "12 potentially contaminated groundwater seeps" in the dump's earthen dam to Riverbend's allowed discharges — the same leaks cited as violations last month. Riverbend's wastewater discharges into Mountain Island Lake, 3 miles upstream from the main intake for Charlotte's drinking water supply. The new permits will require Duke to monitor the leaks to make sure the pollution coming from them don't exceed state water-quality standards. Duke will continue to collect its own samples and test them at its company lab, self-reporting the results to the state.

State Fines Duke Energy $25 Million For Coal Waste, Still Doesn’t Require Cleanup - North Carolina’s environmental agency handed Duke Energy a record fine Tuesday after finding the company let coal ash contaminants from one plant leach into groundwater over a period of several years.  The $25.1 million penalty is nearly five times the amount of the previous largest fine from the North Carolina Department of Environment and Natural Resources (DENR) and applies to pollution from the Sutton coal power plant near Wilmington, which was decommissioned in 2013. “Today’s enforcement action continues the aggressive approach this administration has taken on coal ash,” DENR Secretary Donald R. van der Vaart said in a statement. “In addition to holding the utility accountable for past contamination we have found across the state, we are also moving expeditiously to remove the threat to our waterways and groundwater from coal ash ponds statewide.” “This proposed fine does not clean up one ounce of coal ash pollution,” Frank Holland, an attorney with the Southern Environmental Law Center said in an email to ThinkProgress. “It is the easiest thing in the world for Duke Energy to write a check. What the Wilmington community and its clean water need is elimination and cleanup of the coal ash pollution.” Duke Energy has an annual revenue of more than $24 billion and sold more than 58 thousand gigawatt-hours of electricity last year.  North Carolina Gov. Pat McCrory’s administration has in the past received criticism for lenient fines on Duke Energy, including for a $99,111 fine over similar groundwater contamination that was rescinded and increased after the company spilled 35 million gallons of coal ash into the Dan River in 2014. McCrory worked for Duke Energy for almost 30 years.

750 tons of Fukushima plant water leaked – TEPCO -- In yet another major leak at the crippled Fukushima nuclear power plant, operator Tokyo Electric Power Co. (TEPCO) reported that 750 tons of contaminated rainwater have escaped the plant. The water overflowed from mounds where storage tanks for radioactive water are located, The Japan Times quoted TEPCO as saying.  Rainwater within that perimeter had up to 8,300 becquerels per liter of beta particle-emitting radioactive substances, such as strontium-90.  The leak has likely made its way to the ground, according to the officials, but they do not anticipate the contaminated water spreading further into the sea. The spilled rainwater was discovered in two separate places between the artificial mounds and the ground.   Initially, the leak was believed to be 400 tons. It was later revised upwards.

A New Season Brings Big Changes In Energy -- A change in the seasons doesn’t just manifest itself in nature but in the energy markets as well and can often have dramatic impacts on the international markets. So here are some such seasonal shuffles, across continents and commodities.

  • 1) Surely the most fervent flag-waving signal of spring in energyland™ is that of the reversal by natural gas storage from winter withdrawals to springtime injections. While the wave of whopper withdrawals currently have flipped us back into a deficit versus the five-year average (see below), the prospect of exiting the withdrawal season in four weeks or so just shy of 1,500 Bcf and at a ~20% deficit – as opposed to the -55% seen last year – is pressuring prompt month prices to maintain their residence in two-dollardom, while record production continues apace:
  • 2) Switching both commodities and continents, we shift our focus to China. For it is the largest consumer of coal on the planet…but is changing its tune. China is aggressively trying to increase the share of renewable energy in its generation mix to 15% by 2020 to counter pollution and reduce emissions, through a focus on wind and solar generation. Solar and wind currently account for ~5% of the generation mix (while hydro accounts for over 20%).Coal accounts for ~65% of the Chinese generation mix (and a nutty ~50% of global consumption), and through a growing focus on renewables and natural gas it has lowered both coal consumption and production for the first time in 14 years. Correspondingly, global production of solar panels rose by 30% in 2014 to meet this rising need, while global wind generation capacity rose by 50 GW, up 40% from 2013, driven in large part by China.

Pa. Gov. Wolf's budget to boost green energy on back of fossil fuels - Gov. Tom Wolf is looking to borrow money to inject millions of dollars in subsidies and grants into Pennsylvania’s renewable energy industry. In his proposed $30 billion budget for the 2015-16 fiscal year, Wolf would fund several energy initiatives by issuing $675 million in bonds. He would pay the interest on the bond money with $55 million from a proposed severance tax on oil and gas drillers. The plan would direct $225 million to energy investments. It would provide $150 million for grants and other aid to renewables, including $50 million to resurrect a rebate program for solar projects. A $100 million program enacted in 2008 to fund solar installations ended in 2013, and a 30 percent federal tax credit for solar projects is due to expire in 2016. Another $20 million in bond money would fund a wind energy generation program, and $20 million would expand a green program to generate electricity by using agricultural waste. The Pennsylvania Energy Development Authority also would receive $30 million to expand the market for clean energy technology and fuels, and $30 million would fund initiatives in using recycled heat to produce power, or what is known as co-generation. “We must expand and develop new markets for Pennsylvania’s energy technologies, services and fuels, and this budget makes historic investments to bolster and transform our energy economy,” said John Quigley, acting secretary of the state Department of Environmental Protection.

Battle Continues in Fight to Save States’ Renewable Energy Policies  - There was a series of attempts in 2013 and 2014 to repeal or weaken state laws that set targets for increasing the use of renewable energy. States across the country—including Wisconsin, Kansas, Texas and North Carolina, among others—faced campaigns against their renewable energy standards. All of those attempts were unsuccessful except in the case of Ohio. Passed in 2008 with nearly unanimous support from both Republican and Democratic legislators, Ohio’s energy standards required utilities to meet 12.5 percent of electricity demand with renewable energy and to decrease energy use by more than 22 percent by 2025, with interim targets each year beforehand. The standards also required half of the renewable energy to come from in-state facilities. Despite clear evidence that the standards had economic benefits, including increased in-state investment, employment and savings for ratepayers, S.B. 310 proposed to freeze the standards for two years and eliminate the in-state requirement for renewable energy. After the bill passed the state legislature in May 2014 and Gov. John Kasich (R) signed the bill into law the following month, Ohio became the first state to take regressive measures against its renewable energy standards. The future of the standards after the two-year period is uncertain. Reports are now coming in from leaders in Ohio’s solar, wind and energy efficiency industries that employment and investment are draining from the state, as described in the Center for American Progress issue brief, The Economic Fallout of the Freeze on Ohio’s Clean Energy Sector. There have already been several new attempts in 2015 to repeal or weaken state-level energy standards, and further attempts—backed by aggressive lobbying campaigns—are certainly forthcoming. For those states, Ohio serves as a cautionary tale of the in-state economic damage that could follow a rollback.

The Natural Gas Gamble: A Risky Bet on America’s Clean Energy Future - Union of Concerned Scientists - Dramatically expanding the use of natural gas to generate electricity creates numerous and complex risks for our economy, our health, and our climate.  Full report Executive summary Technical appendix The U.S. electricity sector is in the midst of a major change. As power producers retire aging coal plants, they are turning to natural gas to generate electricity at an unprecedented rate. While this rapid shift is providing important near-term environmental and economic benefits, strong evidence suggests that becoming too reliant on natural gas poses numerous and complex risks, including persistent price volatility and rising global warming emissions.  Analysis shows, however, that the dangers of an overreliance on natural gas can be overcome by greatly expanding the use of renewable energy and energy efficiency in our power supply. These technologies are already ramping up quickly across the country and demonstrating that they can deliver affordable, reliable, and low-carbon power. With sensible policies in place, these technologies can flourish and natural gas would play a useful—though more limited—role in a clean energy system.

Frackers show their true colors - Columbus Dispatch editorial -- A bill that would allow fracking in Ohio state parks and forests shows again that many Statehouse legislators are in the pocket of the oil and gas industry, and that the industry’s cries of poverty and hardship are phony. Members of the Republican-dominated Ohio House are fast-tracking legislation that would permit fracking for oil and gas on public lands. House Bill 8 would go against the wishes of fellow Republican Gov. John Kasich. Kasich had a change of heart after first supporting drilling on such lands several years ago, and he has enacted a de facto moratorium on issuing drilling permits. This is another example of Kasich acting in a nonpartisan fashion in the best interests of Ohioans. Kasich has correctly recognized that the state’s parks have been set aside as a public trust for current and future generations to enjoy. While they continue to counter Kasich’s efforts to enact reasonable severance taxes in Ohio, these legislators are bending over backward to accommodate deep-pocketed out-of-state oil and gas companies who have plied them with hundreds of thousands of dollars in campaign contributions. These are the same companies that have claimed that lower oil prices and the mere threat of higher taxes will cause them to pull up stakes and leave Ohio.  So which is it? Are these companies now so interested in expanding in Ohio that they’re seeking a change to state law, or have they lost interest because they might have to pay a little more in taxes to compensate Ohioans for extracting irreplaceable natural resources?

Panel accepts some fracking safeguards for state parks, rejects others - By mostly party-line votes, a legislative panel turned back a pair of amendments today that would have offered additional protections to state parks and forests from fracking. However, a possible final vote on House Bill 8 was delayed for yet another week. The measure would set up a new process in Ohio for combining parcels of land from different owners into a large unit that oil and gas drillers need. An amendment was approved today from Rep. Christina Hagan, an Alliance Republican who is vice chair of the House Energy and Natural Resources Committee, to stipulate that fracking not disturb the surface of any state area included in a fracking unit. She said that, with the change, frackers would need a completely separate agreement for operations that would affect any public land at the surface. However, the panel shot down amendments from Columbus Democrat David Leland and Warren-area Rep. Sean O’Brien. Leland took issue with the fact that the bill would bypass current requirements that mandate a public impact statement and environmental and geological studies before fracking can occur on public lands. “These lands will be gone forever” if fracking damages them, he said, citing the possibility of “endangering our legacy to our children and our grandchildren.” Hagan said she understands the sensitivity about harming public lands, but with her amendment, doesn’t think Leland’s additional safeguards are necessary. She noted the presence of oil and gas drillers in the room, and said lawmakers could check with them if they had questions. Leland’s amendment was defeated 7-4, with every Republican committee member voting against it, and every Democrat in favor. O’Brien’s amendment, which paralleled Hagan’s, was beaten 6-5 after virtually no discussion. One Republican voted in favor of his proposal.

Kasich predicts drilling tax hike could hit ballot — Gov. John Kasich (KAY’-sik) says he foresees a ballot measure emerging if his latest effort to raise taxes on oil-and-gas drillers fails to get through the Legislature. Kasich predicted at a news conference Friday that a citizen group or aspiring politician would spearhead the effort and seek rates even higher than he has proposed. Kasich’s current budget proposal calls for a fixed rate on crude oil and natural gas of 6.5 percent at the wellhead, and a lower 4.5 percent for natural gas and natural gas liquids sold downstream. Kasich said a ballot campaign would probably push a 10-percent rate with earmark proceeds for something popular with voters. Proceeds of his tax would go to income-tax reductions. The industry says tax increases would kill momentum and cost jobs.

Fracking will happen despite taxation -  I respond to the Wednesday letter “ Don’t raise tax on shale-energy industry” from Jonathan McRae, who is surprised that The Dispatch would endorse Gov. John Kasich’s plan to lower income taxes and raise the severance tax on oil drillers.He said, “Taxes are a primary consideration when companies decide where to invest their money, and driving oil and gas investments to another state would be catastrophic for Ohio.” McRae is misses two important factors, one for the drillers and the other for the state. Extraction industries go where the resource is, and there is shale oil in Ohio.The drillers and their jobs will come, regardless of taxation. The proposal in Ohio is 6.5 percent on oil and gas. Natural-gas liquids, for which Utica shale is known, would be taxed at 4.5 percent. Part of the proposed severance-tax increase is designated for the Ohio Department of Natural Resources and 20 percent is earmarked for local governments. There also should be a driller’s surcharge placed into an untouchable fund for future cleanup operations, because ultimately, the state is going to be responsible for cleaning up the mess created by fracking’s toxic brew of chemicals. The Dispatch is showing good sense in endorsing the proposed increase in severance taxes.

Some fighting state proposal on disclosure of fracking chemicals - The Columbus Dispatch: Environmental groups, people who live in Ohio’s oil-and-gas country, and some emergency responders say that a proposal by Gov. John Kasich to filter information about chemicals used in fracking activities through the Ohio Department of Natural Resources could leave firefighters without what they need during an emergency. The department, some groups and residents argued this week before state legislators, already has proved it can’t get that information to the people who need it when a fracking site catches fire. And that worries people who live near oil and gas sites. Firefighters, not the Department of Natural Resources, should have that chemical information, residents testified this week. Amanda Kiger, a Columbiana County resident who testified before an Ohio House of Representatives subcommittee this week, said she lives near a hazardous-waste incinerator that is scheduled to start taking fracking waste soon. “If any volunteer fireman or EMT would have to respond to an accident regarding the frack waste, they would not know the chemicals they are walking into,” Kiger said. “I would like to know that our first responders have knowledge of the chemicals they are dealing with.” But the Department of Natural Resources and representatives of the oil and gas industry say passing that information through the department would actually make it more accessible.

Schiavoni wants tougher penalties for wastewater dumping (AP) — A state senator wants increased penalties and stiffer permit rules for improperly disposing of gas-drilling waste and toxic brine in Ohio. Senate Minority Leader Joe Schiavoni’s legislation would raise the state’s penalties for knowingly disposing of oil and gas waste illegally to levels found in the federal Clean Water Act. Schiavoni of Boardman, D-33rd, says violators could face a felony. They could be fined between $10,000 and $50,000, be imprisoned for three years, or face both penalties for their first offense. Potential fines and prison sentences increase for subsequent offenses. The proposal comes after a former owner of a Youngstown-based wastewater company pleaded guilty last year to violating the federal Clean Water Act in the dumping of thousands of gallons of fracking wastewater into a northeast Ohio storm sewer.

AEP produces the best and is selling, what? - American Energy Partners LP’s (AEP) natural gas game may not be the best, but in Ohio its oil wells are top notch. Three of AEP’s wells in Ohio are performing undoubtedly well. The wells are located on the Shugert Daddy pad in Guernsey County and each produced over 51,000 barrels during the last three months of 2014. One of the wells also claimed the title of top producer with almost 56,500 barrels produced. According to state data, the second best oil well, which is owned by Chesapeake Energy Corp., produced just above 28,000 barrels. There are a few possible explanations for why AEP’s wells did so well in Ohio—the first being location The Shugert Daddy pad is located in the western part of the Utica Shale, which is known for its oil supplies. The second explanation involves what went on after drilling took place. For instance, the number of frack stages to take place. The more stages used, the better the early production numbers will be. It’s obvious that AEP believes the land in Guernsey County to be valuable; it would be crazy not to. However, AEP is selling 29,000 undeveloped acres of its Utica Shale assets. The land is located in Noble, Tuscarawas, Jefferson, Columbia, Carroll and Guernsey counties. The land in Guernsey that is for sale is located west of the Shugert Daddy area. AEP is considering trading or selling parts or all of the land. Due to the geology of the Utica Shale play, the western part of it works for oil. As you travel west in Ohio, the play becomes shallower. Bob Chase, a petroleum engineering professor at Marietta College, explained how over time the organic matter in the shallower shale rocks is “cooked” less compared to the gassier parts of the shale play. Chase also mentioned that more of these areas will be found in Guernsey County, but will be limited in size. The offer for the sale was released in February.

Chesapeake Energy testing waterless fracking in Ohio’s Utica shale with GasFrac -  Chesapeake Energy Corp. is partnering with GasFrac Energy Services Inc. to test waterless fracking at one of its Ohio oil wells. The most-active driller in the Utica shale play is in the early stages of the test on a Tuscarawas County well, the company confirmed. "One of our partners (EV Energy Partners) attempted to use the technology," said Chris Doyle, executive vice president of operations for Chesapeake's northern division. "We're using that technology and we want to test that out and see if it could drive additional value." GasFrac, based in Calgary, Alberta, made waves late last year when it started testing its first waterless fracking well, also in Tuscarawas County. It partnered on that well with EV Energy, whose CEO Mike Mercer said this month the test well was fracked with liquid butane and mineral oil. Waterless fracking is appealing because of concerns about the large amounts of water used in the hydraulic fracturing process, which involves injecting fluid, including water, into cracks in shale formations to release gas or oil. A cost- and operational-effective alternative could help remedy one of the industry's major environmental concerns.Doyle cautioned that the test is in the very early stages, so it's unclear yet if it's something the company would use going forward. Nonetheless, it's a potential plus for the future of waterless fracking and the company whose technology is seen as the best chance yet to crack the issue.

Company asks panel for permission to resume fracking operations at Trumbull County site -  American Water Management Services Inc. asked a state panel Wednesday to allow it to resume operations at a Trumbull County injection well, following seismic activity near the site last year. The state ordered the company to cease operations at the Weathersfield Township site after two minor quakes in July and August. The company appealed that order and wants the Ohio Oil and Gas Commission to allow it to restart oil field waste injections, though at a lower rate. "On occasions, even government officials with good intentions exceed their authority or act unreasonable," said John Keller, legal counsel for AWMS. "We believe that this commission's primary function is to establish a check and balance over the actions of the government, and we ask you to revise the orders to allow for a phased start-up (and) further monitoring." The state has countered that it is developing criteria for dealing with injection wells and seismic activity. Legal counsel for the Ohio Department of Natural Resources also voiced concern over increasing seismic events in Weathersfield Township. "We had these two seismic events, and they occurred very close to the injection activities," said Brett Kravitz, legal counsel for the state, noting schools, homes and commercial development near the wells. "... The consequences here are serious consequences. The concern is an escalation of greater magnitude. ... If something happens, if there's greater seismic events in the future, they're the ones that are going to feel the effect." The Oil and Gas Commission listened to testimony from a company representative, seismologist, petroleum engineer and the head of the ODNR's Division of Oil and Gas Resources Management during a hearing that lasted more than eight hours Wednesday.

Injection wells inducing tremors in fracking policy debate - There’s one message that has been heard loud and clear at the Statehouse: The good people of the Mahoning Valley are tired of earthquakes and expect their public officials to do everything in their power to prevent future fracking-induced tremors. Companies that pump massive amounts of salty oilfield waste into the ground now are required to install seismic monitors to track earth movement. When those devices record quakes — even small ones — the state can step in and shut down operations until it can assess the situation and devise plans to prevent additional seismic events. Which brings us to the nearly nine-hour hearing that took place in Columbus a few days ago, before a state panel that is considering an appeal to restart operations at a Trumbull County injection well where a couple of minor quakes happened last summer. Both sides have legitimate-sounding arguments. American Water Management Services Inc. says the two seismic events — a magnitude 1.7 tremor in July and a 2.1 about a month later — were minor and were not felt by the general populace or big enough to cause damage. Company officials want to restart injections at the site, only at a reduced volume, to see whether the reduction would help control any ground movement. The state allowed similar activities at a Washington County well, with the results showing a correlation between reduced injections and reduced seismicity. The company also points out that it has invested millions of dollars in the operation, and officials aren’t happy that the state’s been stringing them along with promises of restarted activities that never come to fruition. Add to that the ongoing development of guidelines by the state for dealing with wells that are tied to ground movement. There’s no timeline for adopting any new guidelines, leaving AWMS in limbo.

Marcellus horizontal well activity in Ohio - While production and permitting in the Marcellus Shale play located in Ohio has managed to the stay the same, the Pennsylvania region of the shale has received some exciting news. National Fuel Gas has finally received the go-ahead from federal regulators to go forward with its plans to construct a pipeline that will run from the Marcellus shale region in Pennsylvania to Niagara Falls. The Northern Access 2015 Pipeline project is being built in conjunction with Tennessee Gas Pipeline Co.’s Niagara Expansion Project pipeline, and the two pipelines will run from the Pennsylvania Marcellus Shale and connect to the TransCanada pipeline located near Niagara Falls. National Fuel plans to spend $66 million on the Northern Access pipeline, which will be able to transport 140,000 dekatherms of natural gas per day. With the expansion, the company will be able to transport natural gas produced in the Marcellus Shale to markets throughout the Northeast and Canada. Construction on the pipeline expansion will begin this month and the pipeline is scheduled to be up and running in November. The following information is provided by the Ohio Department of Natural Resources and is through March 7th. DRILLED: 15 -  DRILLING: 1 - PERMITTED: 15 - PRODUCING: 13 - TOTAL: 44

Utica well activity in Ohio - Activity in the Utica Shale play has increased a slight bit and is still going strong. However, even with drilling still occurring companies are still selling assets in the region. One company that is selling its undeveloped land in the Utica is American Energy Partners LP (AEP), which is odd considering the company’s oil wells are considered top notch.  AEP’s top three oil wells are located on the Shugert Daddy pad in Guernsey County, Ohio.  The three wells each produced over 51,000 barrels of oil during the last three months of 2014.  One of the wells produced over 56,500 barrels by itself.  Nonetheless, the three wells aren’t enough to convince AEP to keep all of its land in the Utica. The company plans to sell 29,000 acres of undeveloped land located in Noble, Tuscarawas, Jefferson, Columbia, Carrol and Guernsey counties.  The land located in Guernsey is located just west of AEP’s Shugert Daddy pad, which is where the company believes it will have more success.  AEP is considering trading or selling parts or all of the land.  The offer for the sale was released in February of this year. The following information is provided by the Ohio Department of Natural Resources and is for the week ending on March 7th. DRILLED: 305 - DRILLING: 260 - PERMITTED: 466 - PRODUCING: 821 - TOTAL: 1,852

Large Utica Shale reserve could house the next gas boom - Once pipelines in the Utica Shale region are built, the area could see another natural gas drilling boom, according to Seneca Resources anyways. The company recently announced its successful completion of a well on state forest land located in Tioga County. The well tests report that the well will produce 22.7 million cubic feet of natural gas per day. Seneca is a subsidiary of National Fuel Gas Company. National Fuel’s CEO and President Ronald J. Tanski commented on the success of the well and how it could lead to more Utica Shale gas drilling on state forest land in Tioga and across the state: This well, along with wells drilled by other operators in the area, have de-risked the Utica potential of our 10,000 acres on DCNR Tract 007. We estimate resource potential on this tract alone of approximately 1 trillion cubic feet. With these strong results in hand our team is evaluating options to develop this acreage in the next few years, depending on local gas prices and pipeline take-away capacity. We have additional Utica potential not only in Tioga County, but across much of our large Pennsylvania acreage position. Our next Utica exploration well is planned for fiscal 2016.The thought of producing 1 trillion cubic feet of natural gas is mind blowing, but none of that gas will be going anywhere until pipeline infrastructure is developed.  Tioga County is considered one of the most remote areas in Pennsylvania.  The forest, which consists of 10,493 acres, is where Seneca’s test well is located and was leased to the company back in 2010 for $48,530,125.  As of now, the DCNR lease hasn’t witnessed much development.

Wolf administration advances tougher gas drilling rules — A forthcoming proposal to toughen regulations for the Marcellus Shale natural gas drilling industry will target how it stores waste, dampens noise and affects public water resources, schools and playgrounds, state environmental regulators said Monday. The proposal is the first signal from Gov. Tom Wolf’s administration of how it will approach the natural gas industry after the Democrat campaigned last year on a promise to toughen state regulation of the industry. He also is seeking lawmakers’ approval of higher taxes on booming natural gas production to boost aid to public schools. The administration’s approach to waste storage was motivated, in part, by leaking wastewater impoundments in southwestern Pennsylvania that prompted the Department of Environmental Protection last year to pursue multimillion-dollar fines.In the proposal, agency officials say they want inspectors to undertake more stringent reviews of proposed drilling sites that are within 100 feet of streams or wetlands and require drillers to create site-specific noise control plans. They also want tougher regulations over waste storage and to require drilling permit applications to analyze how the proposed new well could affect drinking water sources, schools and playgrounds. On waste storage, the administration wants to eliminate the use of pits to store drill cuttings and wastewater at drilling sites — even though it knows of none in use by the shale drilling industry — and toughen regulations for the centralized impoundments that store wastewater from multiple drilling sites.

Pennsylvania DEP moves to discourage or ban open waste pits in shale operations -- The Pennsylvania Department of Environmental Protection is moving to discourage and, in some cases, ban the use of open waste pits in shale gas operations in favor of closed tanks, in a revised draft of drilling rules that the agency released Monday. The draft rules would ban waste pits at Marcellus and Utica shale gas well sites, and require companies to close or substantially upgrade large centralized wastewater storage ponds that have leaked and been implicated in soil and water contamination cases in the state in recent years. The changes are among dozens the agency is proposing to make in its final draft of wide-ranging revisions that will direct how the oil and gas industry operates above ground. They reflect the agency’s consideration of thousands of suggestions submitted by citizens, industry representatives and environmental groups during a public comment period last year, as well as the policy priorities of the new administration, which inherited the years-long revision process that began in 2011.  Among other significant changes, the agency is moving to institute noise reduction requirements at shale well sites for the first time, as well as add schools and playgrounds to the list of public resources, like parks and historical sites, that will trigger stricter well permit reviews when drilling is planned nearby.

Large reserve of Utica Shale gas could lie beneath state forest land - Tapping the Utica Shale in north central Pennsylvania could become the state’s next natural gas drilling boom, at least once the pipelines get built. Seneca Resources has announced the successful completion of a well on state forest land in Tioga County. Seneca, a subsidiary of National Fuel Gas Company, says its test well generated 22.7 million cubic feet of natural gas daily. National Fuel Gas Company CEO and President Ronald J. Tanski praised the results in a release, saying the development could lead to more Utica Shale gas drilling on state forest lands in Tioga County and other parts of the state. “This well, along with wells drilled by other operators in the area, have de-risked the Utica potential of our 10,000 acres on DCNR Tract 007. We estimate resource potential on this tract alone of approximately 1 trillion cubic feet. With these strong results in hand our team is evaluating options to develop this acreage in the next few years, depending on local gas prices and pipeline take-away capacity. We have additional Utica potential not only in Tioga County, but across much of our large Pennsylvania acreage position. Our next Utica exploration well is planned for fiscal 2016.” One trillion cubic feet is a lot of untapped natural gas. But right now, that test well is shut in because there’s no pipeline infrastructure in that part of the state to take it to market. Tioga County is one of the most remote parts of Pennsylvania, and includes the prized “Grand Canyon of Pennsylvania,” popular with hikers and campers. The 10,493 acres of forest land where the Seneca test well lies was leased to the gas producer by the Rendell Administration back in 2010 for $48,530,125. So far, that DCNR lease has not seen much development.

Wolf supports drilling moratorium in Delaware River Basin - Gov. Tom Wolf supports a moratorium on gas drilling in the Delaware River Basin, his spokesman confirmed a day after the issue came up in a legislative committee hearing. “This is a regional decision between Pennsylvania, New Jersey, New York and Delaware and (Mr.) Wolf supports it,” spokesman Jeff Sheridan said in an email Thursday. On Wednesday, state Department of Environmental Protection Secretary-designate John Quigley told the House Appropriations Committee Mr. Wolf supports the de facto moratorium, which has been in effect since 2011. Mr. Wolf’s proposed budget also increases funding to the Delaware River Basin Commission to $750,000, up almost 73 percent from last fiscal year. “It was certainly very encouraging news for us,” commission spokesman Clarke Rupert said. “We’re definitely heading in the right direction.” Exploration and production of natural gas is on indefinite hold in regions east of the Wyoming Valley, where the commission, a compact of four states and the federal government that oversees the Delaware River and its watershed. Meanwhile, the counties west of the Wyoming Valley have developed into some of the most heavily drilled gas fields in the state. There, the Susquehanna River Basin Commission,Department of Environmental Protection another compact among multiple states — New York, Pennsylvania and Maryland — has not significantly regulated the gas industry beyond permits for withdrawing water from rivers, streams and below ground.

PennEast natural gas pipeline may run past Bethlehem's water supply - The idyllic Carbon County acreage where Bethlehem gets its drinking water — called one of the last great places on Earth by one conservancy group — might get a natural gas pipeline. On a 114-mile route from the Wilkes-Barre area to a distribution terminal outside Trenton, N.J., the proposed PennEast pipeline would pass close to a pair of spring-fed reservoirs holding 10 billion gallons of water. The pipeline would run past the historic Three O’Clock Spring in Towamensing Township, the source of Wild Creek, which fills the city’s reservoirs, and farther south over a water main carrying 12 million gallons of water a day toward the spigots of 115,000 customers in the Lehigh Valley. To install the pipeline, contractors would have to remove valuable hardwood trees that the Bethlehem Authority has sold as carbon credits to corporations looking to offset their carbon footprints. The possibility of a pipeline has prompted Bethlehem officials to alert the Federal Energy Regulatory Commission about their concerns, and has led to an outcry from Carbon County residents and environmentalists about the potential impact on water quality and biodiversity.

Sunoco backs down in pipeline zoning fight - Philadelphia-based Sunoco Logistics has withdrawn a request with the state Public Utility Commission to circumvent local zoning in order to build pump and valve structures along its 300- mile Mariner East 1 natural gas liquids pipeline.  Late last year Mariner 1 partially came online, and it’s already shipping propane across the state. Approximately 15 pump and valve control structures are needed along the route to keep the liquids flowing. These facilities faced a backlash from environmental groups and communities that were upset Sunoco attempted to bypass local zoning. In October the PUC affirmed the company has “public utility” status and the pipeline is not subject to zoning– however the structures housing its pump stations could be subject to zoning.   Although it’s backing out of the case, Sunoco is still moving forward with the overall project. The company now says it will work with municipalities– either by modifying the structures around the pumps and valves or not building any at all.  But some opponents remain wary, like Tom Casey who heads the Chester County Community Coalition– a group that has fought the pipeline. “It’s an odd request for them, to fight for almost a year and then pull out. It doesn’t make sense,” he says. “Until we get more information, it’s really hard to say where they’re heading.”

Study: 1.5 million at risk in Pennsylvania for crude oil derailment --  In Pennsylvania, nearly 1.5 million people are in potential danger if a train carrying crude oil derails and catches fire, according to a PublicSource analysis. That is about one in every nine Pennsylvanians, or 11.5 percent of the state’s population. The analysis also found 327 K-12 schools, 37 hospitals and 61 nursing homes in the state are at risk. These numbers take on new meaning in the wake of the recent derailment near Mount Carbon, W. Va. And, a federal report predicts 15 trains carrying crude oil and ethanol in the United States could derail in 2015 alone. On Feb. 16, the nation watched as blazing orange clouds of fire shot out of crushed tank cars in West Virginia from a derailed CSX train carrying Bakken crude oil. Fires burned for days, drinking water was affected, a house was leveled and hundreds were evacuated from their homes. And there were derailments in the last week in Illinois and in Canada. The West Virginia scene had some Pennsylvanians wondering: Could it happen here? Fractracker, a group that vets data about fracking, and PennEnvironment, an environmental advocacy group, also published a map looking at crude-oil trains and population. Their numbers vary from PublicSource because of different methodologies and sources.

Project studying illnesses near Minisink gas compressor - Public health toxicologist David Brown does not call his work with people living around gas compressor stations “research.” “When people are sick, you don’t do a study. You find out what they’re sick from,” he said. Brown is a founder of the Southwest Pennsylvania Environmental Health Project, a nonprofit group begun in 2011, initially devoted to providing public health information and services related to natural gas extraction in Washington County. Now the Environmental Health Project is studying 30 people living near the Millennium Pipeline gas compressor that was built in Minisink 18 months ago. The Environmental Health Project’s work with residents near gas drilling sites led to investigation of areas surrounding gas compressors. Brown said he found those people were often sicker than the population near gas wells. “Around compressors, emissions are bigger and more frequent, “ he said. Brown previously worked for the national Centers for Disease Control in Atlanta, but left to investigate what he calls “orphaned” public health issues — neglected trouble spots. Last year, Brown and his colleagues published a peer-reviewed article about the health impact of natural gas facilities. Pramilla Malick, a weekend resident of Minisink and founder of the group Protect Orange County, saw it and called Brown.

Massive Explosion & Fire After Yet Another Crude Tanker Crashes In Detroit - Live Feed - It is becoming just a little too much of a daily occurrence but instead of a rail freight car crashing, today we see a massive explosion and fire erupt from an oil tanker crash in Detroit... As gas prices remain low, the shift from rail to road will likely increase the frequency of these scenes....As WXYZ reports,A massive tanker fire on eastbound I-94 in Dearborn has shut down both directions of the freeway between Addison and Michigan Avenue. The fire is raging on the Detroit - Dearborn border.   At least two vehicles, in addition to the tanker, are on fire. There is no word on injuries at this time. A number of people can be seen on the side of the road. Flames can also be seen coming from sewer system manholes. One witness says they heard what sounded like an explosion. The heavy black smoke can be seen for miles. Rob Morosi from the Michigan Department of Transportation says crews are re-routing traffic. Once the fire is out, Morosi says crews will assess any damage to the freeway, and expects that the freeway will be closed for an indefinite amount of time.

Drilling down on fracking in Indiana -- Fracking is nothing new in Indiana. Frequent earthquakes would be. Geologists and environmental activists have been raising concerns for years about increased hydraulic fracturing — called “fracking” for short — and other unconventional oil production methods in the United States. Hydraulic fracturing is the drilling and injection of fluid into the ground to create cracks in rock formations and release natural gas, oil and other energy-producing resources. Fracking proponents say the practice lessens the U.S. reliance on foreign oil, creates jobs and leads to energy savings in American households. Those who oppose U.S. drilling and using fossil fuels point to accidents at oil wells with detrimental environmental effects, such as a January pipeline leak in North Dakota that spilled 3 million gallons of brine and contaminated two creeks. And a recently documented natural phenomenon near wastewater injection sites — a byproduct of fracking — has provided environmentalists with another argument against unconventional drilling. “It turns out that many things that we do that affect the subsurface of the Earth are also capable of triggering earthquakes,” said Michael Hamburger, a professor of geological sciences at Indiana University. “This is one of the unexpected side effects of oil and gas exploration. There are places in Kansas or Texas that have never experienced an earthquake that have now experienced an earthquake and have no idea what to do about them.”

Proposed W.Va.-Va. pipeline finding some resistance -  — Companies proposing a natural gas pipeline from West Virginia to Virginia are threatening legal action against property owners who refuse to allow surveyors on their land. Mountain Valley Pipeline is a joint venture between EQT Corp. and NextEra Energy Inc. It would run from Wetzel County, West Virginia, to another pipeline in Pittsylvania County in Southside Virginia. It would deliver natural gas from the Marcellus and Utica shale deposits. Elise Keaton of the Greenbrier River Watershed Association told West Virginia Public Broadcasting the organization had received calls from landowners in four counties who had been mailed letters from the pipeline company. EQT spokeswoman Natalie Cox said the company is trying to work with landowners to resolve their concerns, but legal action may be necessary to move the surveying forward.

EQT amps up pipeline project -- EQT Corp. announced that its master limited partnership, EQT Midstream Partners, will be expanding a natural gas gathering system in northern West Virginia on a rather large piece of undeveloped land owned by EQT. According to EQT the partnership is planning on doubling the system in size and is spending $370 million to do so. Currently, the natural gas gathering system consists of 70 miles of gathering lines and a 30-mile long, high-pressure pipeline that runs into a MarkWest Energy Partners processing facility. The system also has 25,000 horsepower (hp) of compression capacity. The expansion includes adding 100 more miles of gathering pipe and an additional 23,700 hp of compression capacity. The construction for the project will continue past 2018. EQT shared that is has an estimated 76,000 net acres around the gathering system. Of that, about 59,000 of it is undeveloped. The company has plans to transport gas through the systems under the terms of a 10 year contract. EQT will be the only shipper using the system. On Tuesday, EQT announced it will be selling the gathering system to the partnership for just about $1 billion. Since EQT formed the partnership in 2012, the company has been letting go of its midstream assets. The West Virginia gathering system is one of the last two assets EQT owns. EQT spokesperson Natalie Cox said the other asset consist of a transmission system and some gathering lines that are mainly located in Pennsylvania. According to Cox, EQT will more than likely keep the remaining asset for the rest of 2015.

Dominion Proposes Alternate Routes for Natural Gas Pipeline - Owners of hundreds of properties in three counties will receive letters from Dominion Resources, asking permission to survey their land for a proposed natural gas pipeline. Landowners in Augusta, Nelson and Buckingham Counties are now in the path of new alternative routes for the Atlantic Coast Pipeline project. These new alternatives affect 281 properties in those counties. One of the new route options shifts the pipeline eight miles south, to cross the mountain through the George Washington National Forest and run near Nellysford instead of Afton. Two other routes change the path around Lovingston to avoid areas damaged by Hurricane Camille. A fourth option re-directs the pipeline around Wingina’s historic district. Dominion says these alternatives are due to Nelson Co. landowners blocking its surveying crews. “Until we get permission to survey property in Nelson County and other counties, we're going to find the best route by doing so. That's why we're looking at alternative routes at this point,” said Dominion spokesperson Frank Mack.

Residents fear North Carolina pipeline will destroy property values -  Economic development and plummeting property values were passionately discussed Monday night during a public meeting with representatives from the Federal Energy Regulatory Commission, which could oversee the proposed 550-mile Atlantic Coast Pipeline that would cut through portions of North Carolina. Supporters — including county commissioners and local government officials — said the pipeline could bring job opportunities to the state’s counties most in need. But opponents argued it would destroy their property values and likely wouldn’t bring the jobs people have touted. “My husband and I worked hard for this property and now it’s being taken away from us,” said Darlene Bain, whose property would include a portion of the pipeline. Bain was one of 14 speakers in the audience of about 100 to participate in the commission’s first Public Scoping Meeting. The commission has scheduled two more meetings in North Carolina this week before moving on to West Virginia and Virginia. The $5 billion natural gas pipeline is a joint venture of Dominion, Piedmont, Duke Energy and AGL Resources.

Long-term impacts of unconventional drilling operations on human and animal health - Abstract: Public health concerns related to the expansion of unconventional oil and gas drilling have sparked intense debate. In 2012, we published case reports of animals and humans affected by nearby drilling operations. Because of the potential for long-term effects of even low doses of environmental toxicants and the cumulative impact of exposures of multiple chemicals by multiple routes of exposure, a longitudinal study of these cases is necessary. Twenty-one cases from five states were followed longitudinally; the follow-up period averaged 25 months. In addition to humans, cases involved food animals, companion animals and wildlife. More than half of all exposures were related to drilling and hydraulic fracturing operations; these decreased slightly over time. More than a third of all exposures were associated with wastewater, processing and production operations; these exposures increased slightly over time. Health impacts decreased for families and animals moving from intensively drilled areas or remaining in areas where drilling activity decreased. In cases of families remaining in the same area and for which drilling activity either remained the same or increased, no change in health impacts was observed. Over the course of the study, the distribution of symptoms was unchanged for humans and companion animals, but in food animals, reproductive problems decreased and both respiratory and growth problems increased. This longitudinal case study illustrates the importance of obtaining detailed epidemiological data on the long-term health effects of multiple chemical exposures and multiple routes of exposure that are characteristic of the environmental impacts of unconventional drilling operations.

Measures banning local drilling rules pass both chambers - (AP) - Legislation that prohibits cities and other local governments from regulating oil and natural gas drilling operations has been approved by Oklahoma lawmakers in both chambers. House members voted 69-26 for a measure by House Speaker Jeff Hickman of Fairview. The Senate approved a similar bill by President Pro Tem Brian Bingman of Sapulpa by a vote of 36-7. Oil and gas drilling is regulated by the Oklahoma Corporation Commission. The measures ban local governments from regulating oil and gas exploration, drilling, fracturing and production but permits local ordinances involving road use, traffic, noise and fencing for health and safety purposes. Opponents say the measures don't go far enough to give local governments the authority to regulate drilling operations near rural homes. The chambers will now exchange the versions of the legislation.

Fracking Industry Conspiring To Cover Up Oklahoma Earthquake Evidence? - Are seismologists in Oklahoma being pressured to play down the connection between fracking and the state’s recent uptick in earthquakes? All of a sudden Oklahoma is one of the most earthquake-prone areas in the country. Last year, with a grand total of 585 earthquakes, Oklahoma far surpassed the notoriously seismic State of California. Seismologists postulate that disposal wells are to blame. Water and brine injected underground at enormous pressure can cause faults to slip, triggering an earthquake. EnergyWire reported on March 3 that Oklahoma regulators made that connection years ago, but have maintained silence in public due to industry pressure. According to secret emails obtained by EnergyWire, one seismologist with the Oklahoma Geological Survey came out in 2013 and said that there was in fact a link between seismic activity in Oklahoma and drilling operations, quickly earning him a meeting with superiors and industry leaders who were “concerned” about his comments. Intriguingly, in one specific instance, Holland was called in to meet with his boss, University of Oklahoma’s President David Boren, and the CEO of Continental Resources, Harold Hamm. Continental is a major oil and gas producer in the state and Hamm and Boren have close ties. Boren serves on Continental Resources’ board and Hamm is a major donor to the university. The Harold Hamm Oklahoma Diabetes Center bears his name after a $20 million donation. Since then Holland has played down the link between earthquakes and disposal wells, instead pointing to natural causes. Those conclusions run counter to what federal seismologists have found.“This rise in seismic activity, especially in the central United States, is not the result of natural processes,” USGS stated recently. “Deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes and the corresponding increase in seismic hazard in the central U.S.”

Oklahoma could be in danger of strong earthquakes - For residents in Oklahoma, thousands of tiny earthquakes in the past five years have mostly been annoying. But a new study in Geophysical Research Letters suggests the future could be more dire, with the state possibly seeing larger temblors. It found that the same fault lines that have triggered earthquakes of between 3 and 4 magnitude are capable of producing events as high as 6 on the Richter scale. The study, led by Dan McNamara, a research geophysicist at the U.S. Geological Survey, found that there were 3,639 earthquakes in Oklahoma between late 2009 and 2014, which was 300 times more than in previous decades. Several of these earthquakes caused damage and many were felt, with over 153,000 individual reports for 474 separate earthquakes entered at the USGS. Many of those quakes occurred on average 3 miles underground along the Nemaha and Wilzetta fault zones. Until recently, the faults in Oklahoma had largely been quiet so the huge increase initially puzzled scientists. Several studies have traced the increase of earthquakes in Oklahoma as well as Ohio to the oil and gas industry's increased use of injection wells to bury huge amounts of wastewater underground. Resulting from enhanced hydrocarbon extraction operations, scientists believe the wastewater may increase the pressure on the rocks enough to cause seismic events. A paper in Science last year concluded that four of the highest-volume disposal wells in Oklahoma are likely behind 20 percent of hundreds of quakes since 2008 east of the Rocky Mountains. And a 2013 study in the journal Geology concluded that a 2011 earthquake in the tiny remote town of Prague - a 5.6 magnitude temblor that was the largest in Oklahoma's history - was due to the injection of wastewater underground.

Texas earthquakes linked to oil, gas development - For more than 100 years, people have questioned whether taking oil and gas from the depths of the earth can cause tremors. When an earthquake shook Austin in 1902, some thought an explosion in the oilfields of Spindletop, in southern Beaumont, might be to blame. The 1902 earthquake was naturally occurring. But the link between human activity and earthquakes is very real and well established, said Cliff Frohlich, associate director and senior research scientist with UT’s Institute for Geophysics. “When people make the statement that it hasn’t been established that humans can cause earthquakes, they’re either woefully uninformed about the research by myself and hundreds of others over the last 70 years or they’re trying to mislead you,” he said. “That’s like people saying the world is flat; that evolution hasn’t been proven or that humans can’t cause climate change.” Research by Frohlich and others have linked disposal wells and oil and gas extraction to earthquakes in Texas. Most of these earthquakes have been small enough or far enough away from communities that they haven’t caused injuries or damage to infrastructure. But some researchers argue an increase in small tremors ups the odds of a big quake. And while new state regulations make earthquakes a consideration for permitting disposal wells, further research and management could help energy companies develop oil and gas safely.

3 killed in oil field accident in Upton County | Three people were killed in a pulling unit accident in Upton County, according to the Upton County Sheriff’s Department. Investigator Dusty Kilgore of the Upton County Sheriff’s Office said deputies were assisted by the Rankin Volunteer Fire Department when they arrived at the scene of an explosion that killed three people around 9:30 a.m. Tuesday. “One person survived,” Kilgore said when asked if other workers were at the scene. That person was not taken to a hospital, he said. The families have been notified, but Kilgore said the sheriff’s department will not release their names until arrangements have been made for the victims. The explosion happened off FM 2401, about four miles inside Texas 49, according to Kilgore. The explosion happened when a pulling unit crew was working on an existing well owned by Parsley Energy of Midland. Kilgore declined to name the company that employed the pulling unit crew, directing that question to Parsley Energy. Kilgore said he did not have exact statistics for oil field fatalities in Upton County.

Since the City of Denton Banned Fracking, Texas GOP Moves to Pre-empt Local Control State lawmakers and the oil and gas industry isn't just responding to the blow delivered to fracking interests in Texas, but also hoping to beat back frack bans nationally. Bans on hydraulic fracturing passed in local municipalities across the nation during midterms elections. Those bans, and in particular, Denton's ban - have created a backlash from the oil and gas industry and conservative statehouses in the United States. Last month, the Ohio Supreme Court ruled that only the state - not cities or counties - has the authority to regulate oil and gas drilling, effectively killing a municipality's ability to ban the drilling practice. But in other states, judges have ruled exactly the opposite, such as in New York's Supreme Court, which in July decided that local governments did have the authority to ban fracking. In another case in Pennsylvania, a court ruled that cities have the authority to regulate fracking, but not to outlaw it. "The reason all these [pre-emption] bills are being filed is [state legislators are] in a state of shock, because the people of Denton conducted an electoral revolution and passed this [fracking ban], and now they are reeling from it," Burnam said. Dentonites and other North Texans living on top of the Barnett Shale formation are fighting a state and industry attack on their right to determine what's best for their communities. They point out the hypocrisy of conservative lawmakers in Austin who rail against so-called "Big Government" at the federal level while simultaneously attempting to strip small municipal governments of their power. The grassroots activists have also been quick to point out conservative lawmakers' duplicity when it comes to property rights. They have largely framed their arguments at the state Capitol in those terms because state representatives often ignore other valuable environmental and health concerns.

Measure shields oil, gas interests - The chairman of the Texas House Energy Resources Committee filed legislation in Austin on Tuesday that would prevent cities from not only regulating oil and gas production with new rules but also from enforcing any such rules they have on the books now. House Bill 40, filed by state Rep. Drew Darby, R-San Angelo, would pre-empt cities from making any rules concerning the oil and gas industry by expressly protecting activity deemed “commercially reasonable.” The measure defines commercially reasonable as “a condition that permits a reasonably prudent operator to fully, effectively, and economically exploit, develop, produce, process, and transport oil and gas.” Darby’s office did not return a call for comment Tuesday. Denton Mayor Chris Watts said the city staff and others were still studying the legislation, but on its face, he expected the bill would not only prevent Denton from pursuing its co-location program but also from enforcing its ban on hydraulic fracturing. “That’s my gut reaction,” Watts said. “This would take us back to long before anything we passed.” Denton voters overwhelmingly passed a citizen-driven initiative to ban fracking in November. The ban has been in effect since December. Both the Texas General Land Office and Texas Oil and Gas Association have challenged the ban’s constitutionality in state court. Watts said he expected a companion bill to HB 40 that would give the Texas Railroad Commission the authority to determine whether a city ordinance would be pre-empted by state law. The proposed legislation is similar to pre-emption legislation the oil and gas industry has pursued in other states, an effort to limit the growing number of cities and counties that have banned fracking around the country.

“Frack Anywhere” Law Proposed in Texas -- There are no state setbacks for oil and gas wells in Texas. Setbacks come under local zoning ordinances. If your city does not address oil and gas drilling it its zoning code, a fracker can frack anywhere – next to a day care center, a restaurant, hospital or school.The frackers have floated a bill in Austin to gut local zoning ordinances of any right to determine setbacks or land use on oil and gas rigs. Meaning a fracker could frack anywhere in a city and there’s nothing the city could do about it. It is time to head to Austin to speak before the Texas House Energy Resources Committee in opposition to HB 40, described below: HB40 hearing is scheduled for Monday 3/23 at 2PM, per clerk Jamie Burchfield.The meeting may not start promptly at 2PM if the morning house session does not adjourn on time.  It may not start until 4PM. Meeting location is Room E2010.We can setup of our personal profiles online ahead of time, but we can only sign in to testify at the capital using kiosh stations located around the capital and extension, including near the meeting room.

Digging in for the downturn - Around the flickering flames of an outdoor fireplace, cold beer is flowing and salty epithets are flying as a group of nomadic American oil workers rue the fickle price of a barrel of crude. They have had their hours slashed, been told not to come to work or lost contracts as the oil price slump has forced producers to cut spending in Texas’s Eagle Ford shale formation. For Carrizo Springs and countless communities across Eagle Ford , the question is what will happen when he and the oil industry leave. In recent years, residents have watched as the oil juggernaut — with its jobs, dirt, steel and noise — has overrun sleepy towns and ranchland. Government officials accustomed to counting heads of cattle had barely got used to the thrum of multimillion dollar investments. Now, as each week brings more retrenchment, they have been reminded that booms come to an end. Their opportunity to plant the seeds of long-term prosperity is limited and the risks of ending up with scorched earth are growing. Rick Perry, the former Texas governor and a potential Republican presidential candidate, said earlier this year that the plummeting oil price would make things “very uncomfortable” for parts of the state. “This is going to be a painful period of time.” Texas’s wide open spaces are already dotted by more than 250 ghost towns — once-vibrant settlements that fell into decline when the lone driver of their economy disappeared, says Thomas Tunstall of the University of Texas at San Antonio. In some cases the end came with the exhaustion of an oil reservoir or a coal mine; in others a town lost its status as a county seat or was bypassed by a new highway. Each one is a reminder of the impermanence of economic success. “The state does not need any more ghost towns,” he says.

NextDecade pushing pair of billion dollar LNG projects in Texas - A pair of multi-billion dollar LNG projects are set to take off in the coming months in Brownsville and Galveston. According to the Houston Business Journal, Woodlands-based NextDecade LLC is planning to file applications later this month for an $8 billion Rio Grande LNG project and a $6 billion Pelican Island LNG project near Galveston. NextDecade CEO Kathleen Eisbrenner says both projects aim to export LNG to non-Free Trade Agreement nations like Japan and India. The Rio Grande Project includes a new option-to-lease agreement with the Port of Brownsville and would expand the company’s site from 500 acres to 1,000 acres for its proposed export terminal near the southern-most tip of Texas. The company would also construct a 130-mile pipeline from Brownsville to the Agua Ducle market hub near Corpus Christi. Eisbrenner says the goal is to begin construction in Brownsville as early as 2017 and to begin operations in 2020.  As far as the Pelican Island Project near Galveston, Eisbrenner says the company is currently in the midst of negotiating acreage for the project and that the Pelican Island Project is running about three months behind the Rio Grande LNG venture. So far, the Galveston Wharves Board of Trustees has signed off on a short-term, six month deal for $100,000 to set aside 185 acres on the northeast corner of Pelican Island. . “Pelican Island continues to progress as hoped.”

Houston Ship Channel remains closed after ships collide — A portion of the Houston Ship Channel remained shut down early Tuesday after two 600-foot ships collided during foggy conditions a day earlier, causing some leakage of a flammable liquid. The Coast Guard said a gasoline additive aboard a chemical tanker was no longer leaking methyl tert-butyl ether — or MTBE. It was not immediately known how much spilled. Petty Officer Andy Kendrick said that the Liberian bulk carrier Conti Peridot had been moved from the collision site but that the Danish-flagged Carla Maersk would remain in the channel until decisions are made about what to do with its chemical cargo. He said that won’t happen until after daybreak. No injuries were reported from the collision, and the immediate area remains closed, including the Barbours Cut Terminal, where cargo vessels are loaded and unloaded. Three cargo tanks on the tanker were ruptured, releasing an unknown quantity of the water-soluble, flammable gasoline additive, said Coast Guard Capt. Brian Penoyer, commander of the Houston-Galveston Coast Guard District. “This is not a cargo chemical that is easy to clean up,” he said.

Water usage decreases with oil price - The drop in oil prices should mean less water used by the industry in drought-stricken West Texas, but with that comes a blow to long-term efforts of water recycling even as the amount of produced water injected into the ground continues to grow, industry experts and outside analysts have said. Water requirements for fracking Permian Basin wells should drop from 551 million barrels last year to 422 million barrels in 2015, according to PacWest, a company recently bought by the Houston firm IHS that tracks industry water usage. PacWest revised water usage as oil prices drop from their June peak of about $104 a barrel. Before, the firm expected demand for fracking, and thus water, to grow by 20 percent. “The drilling and completion activity has just fallen off a cliff,” said Piers Wells, the CEO and co-founder of Digital H20, another firm that analyzes water usage in the area. “Demand for water to complete wells has really dried up.” That is welcome news for some in the drought-scorched region. Less demand for fresh water means less competition between oil companies and other heavy users such as municipalities. But the reality too is that low oil prices will push back implementing new recycling technology or expanding experimental programs, analysts have said. The dirty water that emerges from an oil well falls into two categories: flow-back water, which emerges from the well during through the first month or so after it is fracked, and produced water, which seeps up to the surface through the life of the well. Flow-back water accounts for about 30 percent of the contaminated water a well will produce, according to Digital H20. Produced water accounts for about 70 percent.

Explosion kills oil field worker in southeastern New Mexico -- An explosion at an oil field site in southeastern New Mexico has killed one worker and injured another. Authorities say preliminary information indicated the explosion occurred Wednesday in southern Lea County while the workers were loading material into a pipe being installed into a drilling pipe. The county Sheriff’s Department said the victims were struck by metal debris from the blast. The office said cause of the explosion is under investigation. There was no fire following the blast.

Groups sue feds over drilling in northwest New Mexico — A coalition of environmental groups is suing the federal government over the approval of oil and gas drilling permits in northwestern New Mexico. The groups filed their lawsuit Wednesday as they prepared to rally at the State Capitol. They contend that more development and hydraulic fracturing could harm the environment and sites such as the Chaco Culture National Historical Park. The suit names the Bureau of Land Management and the U.S. Interior Department. The BLM did not immediately respond to a request for comment. The agency is in the process of updating its management plan for the San Juan Basin in the face of an expected shale oil boom, and the groups have been pushing the agency to stop approving new drilling permits until the plan is in place.

Analysis of California’s Fracking Wastewater Reveals a Slew of Toxic Chemicals Linked to Cancer and Other Illnesses  - California is currently the only state that requires chemical testing of fracking wastewater and public disclosure of the findings. That’s good. What’s not so good is what the testing and disclosure reveal. The Environmental Working Group (EWG) has completed an analysis of data released by the state during the first year of new reporting requirements. It found that the high levels of the carcinogen benzene in California’s fracking wastewater isn’t the only thing Californians have to worry about from the state’s extensive oil and gas fracking operations and the injection of chemical-laced wastewater back into the ground once drilling is completed.  The study, Toxic Stew: What’s in Fracking Wasterwater, revealed the presence of hundreds of chemicals, including many linked to cancer, nervous system damage and reproductive disorders. Among the chemicals found in up to 50 percent of the samples were chromium-6, lead and arsenic, all linked to cancer and/or reproductive damage. The samples also contained thousands of times more radioactive radium than the goals set by the state, along with high levels of nitrate and chloride ions. And an another analysis last month by the Center for Biological Diversity found that 98 percent of the fracking wastewater samples tested exceeded federal and state water safety levels for benzene.

Toxic Stew: What’s in Fracking Wastewater - Wastewater from hydraulic fracturing of oil and gas wells in California is heavily contaminated with a toxic stew of chemicals known to cause cancer or reproductive harm, an analysis by Environmental Working Group shows. Because California is the only state to require comprehensive chemical testing of drilling wastes and public disclosure of the results, the findings also provide a unique window into what chemicals likely contaminate fracking wastewater nationwide. In 2014, the first year of California’s groundbreaking fracking disclosure program, more than a dozen hazardous chemicals and metals as well as radiation were detected in the wastewater, some at average levels that are hundreds or thousands of times higher than the state’s drinking water standards or public health goals (Table 1). These findings underscore the gravity of recent revelations that the state tolerated illegal injection of billions of gallons of drilling wastewater into thousands of disposal wells that pour into aquifers that potentially could be tapped for drinking water or irrigation. What’s more, the mandated disclosure data on the state’s website is still incomplete and confusing, so Californians cannot be confident that it provides a clear picture of the threat these hazardous substances pose to water supplies. According to state officials, there is no evidence to date that California aquifers currently used for drinking water have been contaminated by fracking chemicals. But there is clear cause for alarm.

'We Are Next': California Looks to Follow New York's Fracking Ban -   Juan Flores stands in the community garden at Sequoia Elementary School in Shafter, California, and points to one, two, three oil wells within view of the school. The closest well stands the length of a couple of football fields from the edge of the garden, and all day its pump slides up and down sucking crude oil from the earth. “There are probably a hundred wells within a mile radius of this school,” says Flores, an environmental organizer and the son of local farmworkers. “And many of them have been fracked.” The tall well at the edge of school property is the nearest example. Before Flores can say more, a man in a white truck comes by and tells us that the farmer next door is about to spray pesticides on his almond grove. The wind is blowing in the direction of the garden and the school. It’s time to leave. This is life in Kern County, one of the most productive and poisoned places in California. Located at the southern end of California’s Central Valley, Kern County boasts a $6.7-billion farm economy that churns out huge quantities of almonds, grapes and other foodstuffs each year. It’s a place where farmworkers fill the fields and crop dusters zip across the sky. About 75 percent of in-state oil production also takes place here, according to the local Chamber of Commerce. Wells, pumps, storage tanks and oil workers in big white trucks seem to be around every bend. Air pollution, meanwhile, is out of control. The county seat, Bakersfield, consistently ranks near the top of the American Lung Association’s list of cities with terrible air quality. One in 10 adults in the county suffer from active cases of asthma, according to state data. Water resources are also damaged. Kern River, for instance, which runs through much of the county, is as dry as parchment paper and filled with weeds.

Oil-loading facility sanctioned in Washington rail car spill - The Federal Railroad Administration has issued a violation against a North Dakota loading facility over a leaking oil car in northwest Washington state that initially wasn’t reported to state officials for a month. The leak was discovered at the BP Cherry Point refinery near Ferndale, Wash., in early November by federal inspectors. About 1,600 gallons of oil was missing from the car, which had originated in Dore, N.D., at a facility operated by Musket Corp. and apparently escaped through a valve that was not properly shut. No local emergency officials were notified, and the state Utilities and Transportation Commission first learned about the spill in early December when BNSF Railway sent the agency a copy of a federal report it had 30 days to file. The FRA violation was issued on Jan. 28, two days after McClatchy first reported on the leaking car. The agency has yet to determine the amount of the penalty, and the company will have a chance to negotiate what it will ultimately pay. Though the spill was detected in Washington state, neither the railroad, nor the third-party company that unloaded the oil at Cherry Point could determine where the missing oil had spilled. BNSF said that no one reported a leaking car or an oil spill along the train’s path. The Washington State Department of Ecology also investigated the incident, but ultimately determined that it could issue no penalties.

Mesa County says it may sue over Gunnison grouse listing - (AP) — The Mesa County commissioners say they might join other governments in suing the U.S. Fish and Wildlife Service for listing the Gunnison sage grouse as threatened. The Grand Junction Daily Sentinel reports commissioners approved a notice of intent to sue Monday. They say the listing wasn’t necessary. Officials say the notice doesn’t obligate them to sue but puts the county on record as opposing the listing. The listing, announced in November, could restrict oil and gas, agriculture and other activities. About 5,000 Gunnison grouse remain, only in Colorado and Utah. The states of Colorado and Utah and three other counties in the two states have also said they might sue, arguing the listing was unnecessary. Environmental groups filed their own lawsuit notice, saying the listing wasn’t strong enough.

Weld oil production soars for 2014 - Crude production in Colorado’s top county has gone off the charts since 2011, and three years later it’s still not disappointing. While production numbers are always a few months behind, solid counts through much of last year show Weld County’s 2014 oil production up 33 percent from the previous year, and expanding to 85 percent of the state’s oil output, according to the Colorado Oil and Gas Conservation Commission’s tracking system. Weld’s production also is 8 percent higher than the entire state’s production last year. Some analysts predict the state’s largest producer, and largest oil field employer, will continue to put up the big numbers through much of 2015 — even amid a slowdown precipitated by plummeting global prices. Weld County production numbers as of March 6, show a total output of 70.5 million barrels of oil for 2014. Last year, total output had hit a record 52.9 million, a 33 percent increase with final numbers not in. Production numbers, however, change daily, as they are continually updated. The numbers are encouraging as the world faces its first massive oil slowdown since 2009, one that has seen crude price bottoms well beyond six-year lows. Prices hover around $50 per barrel, about half what they were last summer, prompting companies to lay down rigs, slow down its drilling and concentrate mostly on its moneymakers. While drilling will slow due to the ultimately supply-demand problem the world now faces, production in Weld County likely will keep churning out the big numbers.

Oil and gas spill report for March 9 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. PDC Energy Inc, reported on March 4 that a hose was accidentally disconnected, after completing cementing operations outside of Milliken. It is approximated that less than 100 barrels of drilling fluid released. The spill was cleaned up immediately, and a majority of the spilled mud was recovered. Whiting Oil & Gas Corp., reported on March 3 that a hydro-vac operator left a valve open on a truck, outside of New Raymer. About 17 barrels of drilling water mixed with fresh water to the pad. Roughly 2-3 inches of soil was removed and stockpiled. Soils not in compliance with COGCC standards will be removed. Noble Energy Inc., reported on March 3 that impacted soil was discovered, outside of Greeley during the removal of a water vault. It is approximated that less than five barrels of produced water spilled. All production equipment was shut in. An excavation has been scheduled. Noble Energy Inc., reported on March 3 that produced water surfaced after a corrosive hole formed in a water line, outside of Gill. It is approximated that less than 100 barrels of produced water spilled. All production equipment was shut in and an excavation of soil has been initiated. A third party environmental consultant will collect a soil sample. Synergy Resources Corp., reported on March 3 that oil misted over a location outside of Johnstown, due to rupture disc that had popped off a separator. It is approximated that less than one barrel of oil was spilled. To stop the flow of oil into the atmosphere, the well was shut in. Contaminated snow and soil was stock piled for disposal.  PDC Energy Inc., reported on March 2 that a load line valve on one of the production tanks froze and cracked, releasing approximately 5.5 barrels of produced water inside tank containment, outside of Ault.  Kerr McGee Oil and Gas Onshore LP, reported on March 2 that a sewage on the back of the tank was sheared off, resulting in an approximate spill of 82 barrels of condensate and 20 barrels of produced water, outside of Platteville. When discovered the well was shut in and a vacuum truck recovered about 35 barrels of condensate material. It is approximated that less than 15 barrels of condensate and five barrels of produced water released outside of containment. Excavation activities are ongoing at this time.

Colorado’s Frack Anywhere Committee -  Composed almost entirely of frackers in favor of fracking. Anywhere they fracking want to frack.  This is what comes when a state does not have Home Rule – a sham regulatory scheme proposed by the frackers for the frackers. Colorado’s Fracking Wars Reignite  You’ve got to have a mind of winter to fully appreciate the pall Colorado Governor Hickenlooper’s Task Force on Oil and Gas cast over the concept of good government in this state.   Termed Blue Ribbon by the governor, it easily was not.  It included not one person from the many local citizen groups that have organized to protect themselves against a rampaging oil industry given free license to drill at will by a benighted legislature and a puppet governor.  The Colorado Oil and Gas Conservation Act is one of those stupid laws.  It established a small bureaucracy, called the Colorado Oil and Gas Conservation Commission, which was invited to walk hand in hand with the oil and gas industry in developing a poison garden of oil and gas wells in the state. Beyond the obvious, there are several problems with this prescription to economic development and efficiency.  First, the legislation defies Colorado’s constitution, which declares explicitly that, in matters of dominant local interest, those rules and regulations propounded by local government in such matters are superior to those of the state.  In Colorado this is called home rule or local control and is selfishly guarded.   Can there be anything more local than objecting to the creation of an industrial landscape of 8 or 12 oil wells over a mile deep and up to two miles long, with concomitant storage vessels on the surface, all spitting out poison, noise, and fire and explosion risk just out your kitchen window? These concerns are at the heart of the lawsuit brought against the people of Longmont by the industry with the support of the governor, who, as some have reminded him, is effectively suing his own people on behalf of the oil industry.  Their crime? They told the industry they weren’t welcome in their backyards, they weren’t interested in an industrial landscape outside their kitchen windows.

Shale Reserves Parallel Rise In Costs - Shale operators have claimed that as they have became better and better at drilling for shale gas and tight oil in the US, the costs of producing such shale reserves fell. This is simply not the case. Ernst and Young, a preeminent accounting firm, carries out an annual survey of reserves and cost analysis for oil and gas. Production costs have risen steadily since 2009 right in line with increased shale reserves. So although shale reserves have increased, they have not increased without additional expense. This problem has been obfuscated by the large investment banks which were earning lucrative fees off shale transactions. In Spring 2014, Ed Morse, Global Head of Commodity Research at Citi and one of the chief cheerleaders for shales, stated in Foreign Affairs: “…the cost of finding and producing oil and gas in shale and tight rock formations are steadily going down and will drop even more in the years to come”.

Iowa lawmakers urge independent environmental study for Bakken Pipeline -— Several Iowa lawmakers are calling for an independent environmental study of a proposed crude oil pipeline through Iowa financed by the Texas company requesting a permit to build the Bakken Pipeline.The Iowa Utilities Board should commission the study, and use the finding to inform whether to grant or refuse Dakota Access, LLC.’s permit request, according to the March 5 letter signed by 15 lawmakers, including 12 Democrats and three Republicans in the Iowa House. The board should also place conditions or restrictions on the permit, if approved, or reject the application altogether, the letter stated, “Preserving our natural resources and protecting the health and safety of Iowans are public necessities,” the letter stated. The group said they have concerns after pipeline accidents in Montana, Louisiana, Arkansas, Michigan, California, Missouri, Texas and Ohio.  “We do not prejudge the issues that would be explored in an environmental assessment,” the letter stated. Dakota, which is owned by Dallas-based Energy Transfer Partners, is proposing the 1,100-mile-long pipeline from the Bakken supply area in North Dakota to Pakota, Ill., including 343 miles cutting diagonally across 17 Iowa counties.

Drugs, Prostitution, Violence Plague Oil Boom Towns Gone Bust -- With crude prices reeling from the effects of geopolitical wrangling and surging production, it’s a tough time to be a resident of an oil boom town. Although drilling in areas like North Dakota’s Bakken oil patch has generated hefty revenues for once quiet communities, it’s also led to an increase in crime. As the Washington Post noted last year, the arrival of highly paid oil workers living in sprawling ‘man camps’ with limited spending opportunities has led to a crime wave -- including murders, aggravated assaults, rapes, human trafficking and robberies -- fueled by a huge market for illegal drugs, primarily heroin and methamphetamine.” While this would be a rather undesirable situation under any circumstances, collapsing crude prices are beginning to leave some towns cash-strapped, which means less resources to dedicate to things like deterring crime. Meanwhile, production isn’t slowing down, which means boom town populations aren’t declining alongside revenues. According to NPR, this dynamic is leaving some communities with a combination of decaying infrastructure, less money for public schools, and inadequate manpower to combat sharply higher crime rates. This comes as monthly expenses like rent skyrocket in the face of surging demand.  Via NPR: What happens when the price of oil tanks and suddenly you're faced with a whole lot less money to deal with your town's explosive growth? If you're 52-year-old Rick Norby, you lose a lot of sleep. "I haven't slept since I became mayor," he says. "I really ain't kidding you."  When Norby became mayor of Sidney, Mont., oil prices were about $100 a barrel. A year later, they've fallen to roughly half that. Yet oil production has continued to churn right along.

Explosion razes waste disposal facility near Alexander - A fire so massive that it could not be approached by firefighters erupted after an explosion at an oil waste disposal site north of Alexander, North Dakota. According to KXNews, McKenzie County Emergency Manager Karlin Rockvoy said the only thing to do at first was watch the fire burn itself out. The explosion occurred at approximately 3:30 a.m. Emergency responders from both Williston and Alexander established a perimeter around the site to ensure the safety of anyone in the area. Five employees at the facility escaped unharmed, one of whom reported jumping out of the way just in time. Firefighters were able to get the flames under control by midmorning, though the cause of the explosion is still unknown. The complex, which undertook the treatment and disposal of oilfield waste, was completely destroyed during the incident. According to the Bismarck Tribune, Rockvoy reported that any damage caused by the explosion was contained by a surrounding embankment.

Oil tanks explode in the Bakken - At around 9 a.m. Saturday morning, three oil storage tanks exploded outside Killdeer, North Dakota. Although the blast occurred five miles outside the city, residents reported feeling the blast, according to The Bismarck Tribune. Dunn County Emergency Manager Denise Brew says that the cause of the blast and resulting fire has yet to be determined. An official from the North Dakota Department of Health reported a similar incident occurring at a different tank on Friday night. The events are speculated to be related to the recent rise in temperature. Marathon Oil, the operator of the well site, reported that nobody was on location when the tanks exploded. As reported by The Tribune, Brew said, “[The blast] did blow the tops off of the three tanks. It was pretty powerful.” KX News reports that a man that lives near the site was walking out to feed his cattle at the time of the incident and was knocked to the ground by the blast. The West Dunn County Fire Department, Sheriff’s Department and Killdeer police responded to the incident. Crews were called back to the scene at around 5 p.m. the same day after an oil heater-treater reignited. The resulting fire has since been extinguished.

No injuries in separate blasts in North Dakota oil patch — No injuries were reported in two large fires in the western North Dakota oil patch over the weekend. McKenzie County Emergency Manager Karolin Rockvoy says emergency crews from Alexander and Williston were called to an oil and gas waste disposal site north of Alexander about 3:30 a.m. Saturday. Firefighters had the blaze contained about 5 ½ hours later. Three oil tanks exploded about 9 a.m. Saturday at a site about 5 miles north of Killdeer. Dunn County Emergency Manager Denise Brew says the boom was felt by people in Killdeer. Authorities are investigating the causes of both fires.

Water quality examined after North Dakota spill - -- Health officials in North Dakota said they're investigating potential water quality issues related to a small spill of liquids associated with oil production. About 40 barrels, or 1,680 gallons, of brine, a liquid associated with production in the state, spilled into a creek about seven miles west of Williston.  The Environmental Protection Agency said brine may contain toxic metals and radioactive substances that can be "very damaging" to the environment and public health if released on the surface. "The spill impacted a nearby creek and water quality impacts are being investigated," the North Dakota Department of Health said in a Tuesday statement. The department said it was working with Golden Eagle Trucking, the responsible party, on a remediation plan. The trucking company, which transports water and brine in Montana and North Dakota, had no public statement on the release. At least two brine releases were reported in January.

Lawmakers Move to Regulate Pipelines, After a Record Spill in a Drilling Boom - Two months after the biggest fracking-related spill in recent North Dakota history, state lawmakers are pushing legislation that could help prevent similar disasters in the future. More than 2 million gallons of toxic wastewater gushed from a hole in the type of pipeline known as a "gathering line" near the town of Williston between the last week of December and first week of January. The spill contaminated at least two local waterways. The rupture went unnoticed for about 12 days before a pipeline worker discovered it. Gathering lines carry oil, gas and wastewater laced with heavy metals, high salt levels and possibly radioactive material from wells to other sites, for processing or disposal. The number of such lines continues to soar in the midst of the nation’s fracking boom.North Dakota has 20,000 miles of gathering lines, mostly in rural areas, and that number is expected to increase by around 60 percent over the next five years. State regulators know the location of only about one-third of the existing gathering lines—all the lines installed after August 2011. .Of the more than 240,000 gas-and-crude gathering lines nationwide, the federal Pipeline and Hazardous Materials Safety Administration regulates only a fraction of them—mainly the lines that cut through cities. Few states have any regulations on the books for such pipelines. Wastewater, or produced water, lines are another animal: No one knows how many exist, they don't fall under federal jurisdiction, and most states aren't tracking them. Now, two competing bills in the North Dakota legislature would take the first steps to regulate wastewater-and-crude gathering lines, because those lines have proved to be most at risk of spills. The bills are currently written to target future pipelines, not the thousands of miles of active pipelines for either produced water or crude oil.

North Dakota rigs take a big hit from oil's steep fall - The number of oil-drilling rigs in North Dakota has fallen to the lowest level in six years, triggering an estimated 3,000-4,000 oil field job losses that could get worse, a top state official said Thursday. “It is becoming painful out there in the oil patch,” Lynn Helms, director of the North Dakota Department of Mineral Resources, said on a monthly conference call with reporters. The department, which tracks and regulates the oil industry, also reported that North Dakota oil production declined to just under 1.2 million barrels per day in January, the most recent period for which data are available. Helms forecasts lagging oil output for a few months because the 111 operating drilling rigs — down from 193 rigs a year ago — aren’t enough to sustain production growth. He said the rig count is the lowest since February 2009 and could drop to 100 rigs this year, resulting in more layoffs. Hundreds of North Dakota wells also have been drilled but not completed, he said. Oil companies are saving money, and awaiting a potential major tax savings, by delaying hydraulic fracturing on 825 wells — a number that likely will increase, Helms said.

Bakken production, flaring drop in January - Oil production in North Dakota declined by approximately 37,000 barrels per day in January and the number of wells awaiting completion continues to grow, reports the Bismarck Tribune. Regulators are attributing these figures to low oil prices. The North Dakota Department of Natural Resources released the preliminary production figures for January earlier this week. January production was reported to be 1.19 million barrels per day, down from December’s production level of 1.23 million barrels per day. As reported by the Tribune, Director of the Department of Mineral Resources Lynn Helms said, “We’re going to see some months of declining production.” Companies are continuing to cut budgets and consolidate their operations to the core of the Bakken formation. As of Thursday, North Dakota’s rig count dropped to 111, down by more than 50 from last summer. While the rig count drops, the amount of wells waiting to be hydraulically fracked continues to grow. In December, there were 750 wells awaiting completion. For the month of January, the number of wells waiting to be fracked sits at around 825. Helms told the Tribune, “That inventory of wells continues to grow and grow and grow … until they can see a little better oil prices.” Despite the decreased production levels, the percentage of natural gas being flared off dropped from 24 percent in December to 22 percent in January. Last year, the Industrial Commission set goals to reduce the amount of gas flared to 26 percent by October 1. The next largest target was to reduce flaring to 23 percent in January. Helms said that part of this was due to improved infrastructure as well as voluntary restrictions on production.

Rockin’ the Bakken 21st Century Style » In Western Montana and Wyoming, we hear a steady drumbeat of stories about what the boom has brought—truck fatalities, worker deaths, pipeline spills, exploding trains, illegal dumping of radioactive waste, murders, gangs and human trafficking … to name a few. We also hear about the wealth. Shiny pick up trucks line our downtown streets with bumper stickers announcing hard working men and women are “Rockin’ the Bakken.” We’re also told that desperately needed jobs are being created to provide energy independence for Americans. The boom/bust cycle is not a new phenomenon; our region has seen our share. What’s hard to understand about this particular boom is that oil industry executives and our government officials didn’t have the foresight to prepare for it. Ensuring basic public health safeguards, social services and workplace safety should be automatic in the 21st century. Communities who bear the brunt of producing this nonrenewable resource should have the same protection as the people who consume it. But in the Bakken, public officials are watching North Dakota crumble into unmonitored ruin—ignoring environmental chaos and a public health crisis that promises to boom after the after the oil has gone bust. Meanwhile, the Bakken’s local health and social service professionals, educators, and faith-based leaders have been overwhelmed by a stream of social issues including: a housing crisis, worker deaths, migration of national and international workers, childhood homelessness, crime, violence, a burgeoning drug and sex industry, and nearly insurmountable obstacles to the distribution of basic human services.

Bakken Shale: Too Many Wells, Too Much Expense - The number of Bakken shale wells needed to produce a million barrels a day is staggering when you compare it to a typical OPEC well. If you’ve ever wondered why shales are struggling to compete with OPEC, this may give you a clue. According to the IEA, International Energy Administration, it takes approximately 2500 Bakken shale wells per year to produce 1 million barrels of crude per day whereas only 60 Iraqi wells are needed to produce an equal amount. Bakken shale wells are land consumptive and expensive. They also decline rapidly. In short, drilling for tight oil faces a number of headwinds not least of which is low crude prices.

Introducing Fracklog, the New-Fangled Oil Storage System (Bloomberg) -- Oil drillers expecting prices to rebound after the biggest drop in six years have come up with an alternative to storing their crude in tanks: They’re keeping it in the ground. It’s a new twist on an old oil-trading technique, known as a contango storage play, in which a trader buys cheap crude in an oversupplied market and saves it to lock in profits at higher future prices. Drillers who have spent millions boring holes through petroleum-rich shale rock are just waiting for prices to go up before turning on the spigot. From North Dakota to Texas, there are more than 3,000 wells that have been drilled but not tapped, based on estimates from Wood Mackenzie Ltd. and RBC Capital Markets LLC. Waiting gives producers such as Apache Corp. and EOG Resources Inc. a better chance of receiving a higher price. It could also delay a recovery by attracting more supply every time prices rise. “Effectively, the rock is the storage,” Troy Cook, an analyst with the Energy Information Administration in Washington D.C., said by phone. “If you can afford to hang on to it, you could certainly choose to wait until the price goes up.” Shale drilling is a two-part process. Once a rig bores a horizontal tunnel through the underground shale layers, another crew blasts it with a mixture of water, sand and chemicals to crack the rock and release the oil. It’s only after the second process, known as hydraulic fracturing or fracking, that the well is complete and able to produce oil. The backlog of unfracked wells -- call it a fracklog -- is one reason that U.S. crude output is poised to climb even as companies have idled more than a third of the rigs that were drilling for oil in October. About 85 percent of U.S. wells aren’t being completed right now, Continental Resources Inc. Chief Executive Officer Harold Hamm said in a March 2 interview.

How Debt Has Caught Up With U.S. Shale -- Whiting Petroleum is the latest victim of the flawed U.S. shale play business model. The shale and tight oil play model is based on large-scale acreage acquisition at any price and massive over-production to satisfy growth targets. In Whiting’s case, it also involved debt-based acquisition of Kodiak Oil and Gas, another large Bakken player. The $3.8 billion deal closed in December 2014 when WTI oil prices averaged $66 per barrel, down from $106 per barrel in June. Whiting’s demise shows that location isn’t everything. The company is looking for a buyer despite having a premium position in the Bakken Shale play in North Dakota.  Whiting discovered the Sanish Field in 2006 that began the Bakken-Three Forks play and that has been the centerpiece of activity for the past several years. The map below shows Bakken commercial areas at $45 WTI oil price based on an average well EUR (estimated ultimate recovery) of 650,000 barrels of oil equivalent. The table below summarizes Whiting’s financial performance. The company ended 2014 with free cash flow of almost negative $3 billion and 100% debt-to-equity ratio. The increase in debt from 3rd quarter 2014 was because of the Kodiak acquisition.

OPEC chief says cartel hurting U.S. shale producers - OPEC’s top official said Sunday that the cartel’s decision to keep pumping crude in the face of collapsing prices is hurting the U.S. shale-oil industry and a global pullback on investment could lead to a shortage that will push the market upward again. “Projects are being canceled. Investments are being revised. Costs are being squeezed,” said Abdalla Salem el-Badri, the secretary general of the Organization of the Petroleum Exporting Countries, at the Middle East Oil and Gas conference in Bahrain. “If we don’t have more supply, there will be a shortage and the price will rise again.” Other top officials at the conference said they would maintain their response of continuing to pump in the face of collapsed prices caused in part by a glut of U.S. shale oil--a relatively new product obtained through hydraulic fracturing, or fracking, of shale rock formations underground. Brent crude, the global benchmark, was trading at about $60 a barrel on Friday, an amount that is almost half its price last July but that officials in places like Kuwait say they can live with. “We are very lucky oil prices did not drop to $20,” said Kuwait Oil Minister Ali al-Omair.

OilPrice Intelligence Report: OPEC Boasts About Pain In U.S. Shale -- On March 6, Baker Hughes reported another round of declining rig counts. Only this week the pace of cutbacks accelerated. An estimated 75 rigs were removed from the oil patch for the week ending on March 6, a big jump from a week earlier. It is important to remember that week-to-week numbers are largely statistical noise; the long-term trend line is more important. Still, after several weeks in which the rig count collapse appeared to be slowing, last week’s figures are a reminder that the rout is not over yet. After all, production has not dropped off – U.S. production surpassed 9.3 million barrels of oil per day in February, the highest level in decades. Still, the falling rig count is evidence that OPEC’s strategy is working, something emphasized by its top official over the weekend. OPEC’s Secretary-General Abdallah Salem el-Badri spoke at the Middle East Oil and Gas Conference in Bahrain on March 7, in which he highlighted the growing cracks in the U.S. shale industry. His comments echoed confidence in OPEC’s strategy of undermining its main competitor. Without explicitly saying so, he emphasized that OPEC will successfully force some shale production out of the market as private companies pullback on investment. “When OPEC didn’t reduce its production, everything collapsed for the U.S. shale-oil-rig market,” el –Badri said. At the same time, he cautioned that the industry may be cutting too much, which could lead to a price spike in the future. “Projects are being canceled. Investments are being revised. Costs are being squeezed,” he warned. “If we don’t have more supply, there will be a shortage and the price will rise again.” Not that that would necessarily be a bad thing for OPEC. But as el-Badri noted, low prices are indeed putting a strain on the industry. Significantly lower revenues for oil and gas exploration companies have sparked a wave of credit downgrades, which along with new bond offerings, are contributing to an unsettling level of “junk” bonds. The energy sector accounts for a large and growing share of the high-yield credit market. Junk bonds in the energy sector have reached $247 billion, or 17.5%, the highest share for any industry. The growing level of debt with poor credit ratings is beginning to concern big banks, which warn that defaults are most likely just around the corner.

OPEC is winning its battle with U.S. shale:-- U.S. shale producers are falling behind in the Red Queen’s Race as the downturn in drilling means that new oil production is failing offset falling output from existing wells. The famous race is named after the scene from Lewis Carroll’s novel “Through the Looking-Glass,” in which the Red Queen warns Alice: “It takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run twice as fast.” The race is a metaphor for the relationship between increased oil production from newly drilled wells on the one hand and declining output from old wells on the other. The net result is that the downturn in drilling is threatening to cut output for the first time since the start of the shale revolution. Other forms of oil production, notably from offshore fields in the Gulf of Mexico, will continue to increase in the next few months. But in the shale sector, the Organization of the Petroleum Exporting Countries (OPEC) has won its battle with U.S. shale producers and forced output growth to a standstill. By refusing to cut its own output in November and allowing prices to fall sharply, OPEC has attempted to force shale producers to curb their rapidly swelling output.

This chart shows the true collapse of fracking in the US  - “People need to kinda settle in for a while.”That’s what Exxon Mobil CEO Rex Tillerson said about the low price of oil at the company’s investor conference. “I see a lot of supply out there.”So Exxon is going to do its darnedest to add to this supply: 16 new production projects will start pumping oil and gas through 2017.Production will rise from 4 million barrels per day to 4.3 million. But it will spend less money to get there, largely because suppliers have had to cut their prices.That’s the global oil story. In the US, a similar scenario is playing out. Drillers are laying some people off, not massive numbers yet. Like Exxon, they’re shoving big price cuts down the throats of their suppliers. They’re cutting back on drilling by idling the least efficient rigs in the least productive plays – and they’re not kidding about that.In the latest week, they idled a 64 rigs drilling for oil, according to Baker Hughes, which publishes the data every Friday. Only 922 rigs were still active, down 42.7% from October, when they’d peaked. Within 21 weeks, they’ve taken out 687 rigs, the most terrific, vertigo-inducing oil-rig nose dive in the data series, and possibly in history: As Exxon and other drillers are overeager to explain: just because we’re cutting capex, and just because the rig count plunges, doesn’t mean our production is going down. And it may not for a long time. Drillers, loaded up with debt, must have the cash flow from production to survive. But with demand languishing, US crude oil inventories are building up further. Excluding the Strategic Petroleum Reserve, crude oil stocks rose by another 10.3 million barrels to 444.4 million barrels as of March 4, the highest level in the data series going back to 1982, according to the Energy Information Administration. Crude oil stocks were 22% (80.6 million barrels) higher than at the same time last year. “When you have that much storage out there, it takes a long time to work that off,” said BP CEO Bob Dudley, possibly with one eye on this chart:

‘How Did This Happen': Shell Using Seattle Ports For Arctic Drilling Rigs -- The specter of Shell using the Port of Seattle to dock its Arctic drilling rigs is causing major upheaval in the Emerald City.   For the last two months, outrage over the Port of Seattle’s clandestine leasing of a terminal to Royal Dutch Shell’s Arctic oil drilling fleet has been slowly gaining steam. What began as a quiet deal between the port and Foss Maritime Co., which would work for Shell under the two-year lease, has burgeoned into an expansive debate over the image of one of the country’s greenest cities, the extraction of some of the most remote fossil fuels, and the global effort to confront climate change.  “How did this happen without anyone paying attention to it?” Seattle City Councilmember Sally Bagshaw told ThinkProgress. “Shell is one of the few oil companies that’s still contemplating Arctic drilling; it’s just inconsistent with what we believe is this city’s direction.” On Monday, Seattle Mayor Ed Murry and Seattle City Council announced that the city would “review, investigate and determine” whether the Port of Seattle’s plans for Terminal 5 are permitted under current regulations.

About 1,000 laid off by Husky oil sands contractor, union says | About 1,000 construction workers employed by a contractor at Husky Energy Inc’s Sunrise oil sands project were laid off unexpectedly on Wednesday, a union official confirmed. Izzy Huygen, a Fort McMurray, Alberta, representative of the Christian Labor Association of Canada, said many of the workers had expected their jobs to last until summer but were informed of the layoffs on Wednesday morning. “Guys were just notified this morning as they woke up in camp,” Huygen said. “They were supposed to be there until June, July and August. It was supposed to be a gradual decline through the summer, so this was unexpected.”  The workers were employed by Saipem SpA’s Canadian unit, which could not immediately be reached for comment. However, Husky spokesman Mel Duvall confirmed that Saipem’s work has wrapped up at the site 60 km (37 miles) northeast of Fort McMurray and any remaining work at the site will be handled by the company and other contractors. The layoff is among the largest yet seen from companies operating in Alberta’s oil sands, as oil prices that have dropped more than half since June squeeze profits and force operators to slash capital spending and new projects.

EPA: Illinois oil train derailment threatens Mississippi River -- An oil train derailment and spill in northwest Illinois poses an “imminent and substantial danger” of contaminating the Mississippi River, the U.S. Environmental Protection Agency said Saturday. The spill from the derailment, which occurred Thursday, also threatens the Galena River, a tributary of the Mississippi, and the Upper Mississippi National Wildlife and Fish Refuge, one of the most complex ecosystems in North America. The EPA said it couldn’t estimate how much oil was spilled, but that the 21 cars of the 105-car BNSF Railway train that derailed contained 630,000 gallons of Bakken crude from North Dakota. Small fires from the wreckage continued to burn Saturday. Earlier Saturday, another oil train derailed and caught fire near Gogama, Ontario, bringing to five the total number of fiery derailments in the U.S. and Canada in as many weeks.The safety of trains carrying flammable materials has become an issue as the introduction of new drilling technology has allowed the development of crude oil deposits far from traditional pipelines, particularly in the so-called Bakken formation in North Dakota. Rail has become the preferred way to transport that crude to refineries, with railroads moving about 500,000 carloads of oil last year, according to industry estimates, up from 9,500 in 2008. One tank car holds 30,000 gallons.But recent derailments have cast doubt on the effectiveness of safety efforts and suggest that no tank car currently in service on the North American rail system is tough enough to resist damage in relatively low-speed derailments. According to the Federal Railroad Administration, which is investigating the Illinois derailment, the train was traveling at just 23 miles per hour when it left the tracks, well below the maximum speed allowed. The damaged tank cars were newer CPC-1232 tank cars, which are supposed to be safer than previous ones, but have failed in at least four derailments this year and at least two in 2014.

We Keep Spilling Oil Into America’s Greatest Rivers -- The U.S. Environmental Protection Agency issued a grave warning about the Mississippi River on Saturday. Because of an oil spill, it said, the cultural landmark is in “imminent and substantial danger” of being contaminated.  The oil spill came from a train carrying 103 cars of Bakken crude oil from North Dakota. On Thursday afternoon, 17 cars of that train derailed in northern Illinois, each carrying approximately 30,000 gallons of crude. EPA officials aren’t sure how much oil has spilled, but noted that a seasonal wetland has already been affected. The river, one of its tributaries, and the Upper Mississippi National Wildlife and Fish Refuge are all in danger of contamination, the agency said.  This isn’t the first time in recent months that one of North America’s most powerful and historic rivers have been threatened by oil. In the last year, the Mississippi, the Yellowstone, the Missouri, and the Ohio Rivers have been contaminated because of oil train derailments, barge crashes, and pipeline spills. Here are some of the more significant incidents.

Train carrying crude oil derails near Gogama, Ont. - Several tanker cars caught fire after a Canadian National Railway train carrying crude oil derailed in Northern Ontario, prompting officials to advise nearby residents to stay indoors and avoid consuming water from local sources. CN said its crew reported the derailment to emergency services at about 2:45 a.m. ET Saturday. Police said the train was 30 to 40 cars in length and 10 cars went off the track four kilometres northwest of Gogama, Ont. There were no reports of injuries. Some of the rail cars that caught fire entered the Mattagami River System, CN and police said. The cause of the derailment is still under investigation and the Ministry of Environment has been notified. Residents of Mattagami First Nation were being advised not to consume water from their community source for the time being. Residents of Gogama and Mattagami First Nation were also being asked to stay inside until further notice due to possible smoke inhalation. CN Rail said in a statement that there is no evidence so far, however, that either the water or air quality near the site have been affected. The CN statement said emergency crews are conducting a full site assessment and activating the emergency response plan with local officials. Booms have been deployed into the river to try to contain any spilled oil, the company said.

Fire Burns After Another Oil Freight Train Derails, This Time In Canada - In the early hours of this morning, yet another oil-carrying freight train derailed. Canadian National Railways says a fire continues to burn after a train carrying crude oil derailed in Northern Ontario (near Gogama). As yet no injuries have been rported and a team of specialists are on the scene. This is the fourth derailment for CN Rail in Northern Ontario this year. As CP24 reports,, CN Rail says crews reported the derailment near Gogama, Ontario, about two-and-a half hours north of Sudbury, around 2:45 a.m. No one was injured in the derailment, CN said. The company said a number of teams, including senior operations, engineering, dangerous goods and environment officers were responding to the scene. Ontario Provincial Police said Highway 144 between Highway 560 (Watershed) and Mattagami Reserve Road near the site of the derailment will be shut down for between 24 and 36 hours due to safety concerns.As CN states: Train U70451-02 derailed along the Ruel subdivision of the CN main line, near Gogama, ON. The incident, which occurred at 0246hrs EST on Saturday, March 07, is currently impacting rail traffic running between Toronto, ON, and Winnipeg, MB.CN crews are responding to the site in order to undertake the necessary repairs. Both westbound and eastbound traffic scheduled to cross the affected area is currently obstructed, and may be delayed by 24 hours or more. Every measure is being taken in order to reduce the impact to customer shipments.

Yet Another Oil Bomb Train Explosion Marks Fourth Derailment in Four Weeks -- Once again this weekend, we saw scenes of tanker cars strewn across the landscape on their sides emitting huge billows of smoke and fire. On Saturday a 94-car train carrying Alberta tar sands oil derailed two miles outside Gogama, Ontario, with at least 35 cars going off the rails and at least seven igniting. Five cars landed in the Makami River, prompting a warning to residents not to drink the water as well as to stay inside to avoid possible toxic effects from the fire.  It follows fiery derailments of the so-called oil bomb trains carrying volatile crude oil that have occurred in Illinois, West Virginia and Ontario since the beginning of the year. In each of those cases, only about half a dozen cars derailed, making the Gogama derailment the biggest so far this year. Gogama is about 60 miles north of the remote, unpopulated area outside Timmins, Ontario where a derailment occurred Feb. 14. And while Gogama itself is remote, it’s not unpopulated: the town has almost 400 residents and the nearby Mattagami First Nation community, and it’s a major center of outdoor tourism. The tracks the train was traveling go through the town, raising the specter of another tragedy like the one that killed 47 people and leveled much of the town of Lac-Mégantic, Quebec in July 2013.   Mattagami chief Walter Naveau told northern Ontario news outlet Village Media that he had met with representatives from CN, the company whose train derailed and wasn’t comfortable with their reassurances.

Bomb Train Roulette? Latest Derailment in Ontario Is Fourth in Four Weeks --A train carrying crude oil that derailed in northern Ontario on Saturday—which resulted in numerous overturned cars catching fire and oil spilling into a local waterway— is the fourth such accident in North America in as many weeks.The train, owned by the Canadian National Railway Co., was passing over a bridge above the Makami River near the town of Gogama, Ontario when the derailment occurred, sending thirty-five cars off the tracks, at least five of which ended up in the water. A large fire and huge black clouds of smoke followed. The CBC reports the train was 94 cars long and all were tanker cars carrying crude oil from Alberta. Officials with rail company have said their disaster response team was on the scene and tried to assure residents that drinking water supplies have not been harmed. Local residents who spoke to media did not seem convinced there was nothing to worry about.  "It’s frightening and nerve-wracking, especially after what happened in Quebec," Roxanne Veronneau, owner of the Gogama Village Inn, told the Toronto Star, referring to the train derailment in Lac-Mégantic in 2013 that killed 47 people."People here are on pins and needles," Veronneau continued. "The tracks run right through town … I’m sure that there’s going to be a lot of talk afterward that this shouldn’t be in the middle of our town."

CN back on track but still worries in Gogama - One week after a CN train derailment occurred near the village of Gogama, people in that community south of Timmins are calming down but there are still some concerns about the long term safety for rail traffic in general and oil trains in particular. The big CN locomotive had just crossed the Makami River bridge west of town when suddenly, seven or eight cars back, tank cars began leaving the tracks. The entire 94-car train consisted of tank cars carrying synthetic crude oil from Alberta. Within seconds, 38 of the cars had derailed. Several caught fire. At least five of the cars plunged into the Makami River. It was a violent thing. The old iron bridge which had spanned the river for decades was suddenly ripped off its foundation. Creaking and twisting, it too fell into the river. Despite the scope of the wreck, no injuries occurred. The train crew at the front of the train was able to break off from the wreck with the locomotive and pull several of the tank cars away from the fire. It was the third CN rail train wreck in as many weeks. On Feb. 14, another crude oil tank car train jumped the tracks at a point about 30 kilometres north of Gogama. And then just last week, a third CN train derailed in Hornepayne. For people who have been in a tiny railroad town like Gogama all their lives, it suddenly hammered home the message that something wasn't right.

Derailments put oil train expansion in the crosshairs — After a BNSF Railway oil train derailed and burst into flames Thursday near Galena, Ill., at least one community group has asked the U.S. Army Corps of Engineers to suspend permits for rail expansions along the upper Mississippi River. Of the 70 oil trains a week that leave North Dakota’s Bakken region for coastal refineries, more than half of them funnel through a roughly 400-mile stretch from Minnesota’s Twin Cities to the Quad Cities on the Illinois-Iowa border. BNSF and Canadian Pacific haul both crude oil and ethanol on both sides of the Mississippi River, and the region has become a bottleneck. BNSF alone plans to spend more than $780 million in Minnesota, Wisconsin and Illinois this year to add new track and improve signal systems. Because the projects affect wetlands along the river, the railroads must seek permits under the federal Clean Water Act. And as elsewhere in the country, the permitting process has become a primary tool of community and environmental groups to slow or stop the growth of such rail shipments. After Thursday’s derailment, Citizens Acting for Rail Safety, a group based in LaCrescent, Minn., sent a letter requesting that the corps’ St. Paul District hold off on approving any rail project permits until investigators determined the cause of the derailment and two others since early February.

As crude oil trains rumble through Wisconsin, DNR challenged over rail expansion -  Following a fiery train derailment last week in Galena, Illinois, near the Wisconsin border, the Department of Natural Resources is facing a legal challenge over a wetland filling and bridge permit to facilitate more crude oil shipments through the state.  The suit says the DNR did not conduct a full environmental impact statement when it granted the permit to Burlington Northern Santa Fe Railway (BNSF) for a second set of tracks through the La Crosse River Marsh. More than 40 oil trains now rumble through the state each week from North Dakota, many with more than 100 tank cars. Some pass through Sauk, Columbia and Jefferson counties. Petitioners are asking the La Crosse County Circuit Court to reverse a permit granted last month and force the DNR to do a more thorough analysis under the Wisconsin Environmental Policy Act (WEPA), a 1972 law that required sound decision-making by state agencies.   “As we have seen with recent derailments like the one that happened in Galena, last Thursday, today’s rail traffic is much riskier than a few years ago,” said Ralph Knudson of Citizens Acting for Rail Safety in a statement. “The marsh project being considered is one of a series of projects intended to facilitate even more traffic flow.”

Hennepin County seeks to halt rail traffic by buying key property in Crystal -- Hennepin County jumped in Tuesday to try to thwart two railroad giants from rerouting freight and oil trains through Crystal into the heart of Minneapolis. The County Board directed its staff to buy the central chunk of property where the railroads want to build a connector for trains hauling oil from North Dakota’s Bakken fields. North Suburban Towing Inc. and Thomas Auto Body & Collision currently rent and operate businesses on the site at 5170 W. Broadway in Crystal and had been told to prepare to move. Now they might not have to. County Board Member Mike Opat, who represents the area, said staffers are in exclusive negotiations with the property owner. “I’m confident that we will be able to” buy it, Opat said. BNSF and Canadian Pacific tracks now cross each other in Crystal, but do not connect. With a connector, the trains would slow to 25 miles per hour to turn, a maneuver that could paralyze five intersections in Crystal and Robbins­dale at once. The mile-long trains would continue along Theodore Wirth Park and across Nicollet Island on the Mississippi River, at the edge of downtown Minneapolis. Golden Valley, New Hope and Plymouth also would see more traffic and heavier trains if the connector is built. The county’s goal in acquiring the land would be to prevent the railroads from using their substantial federal powers to take property. Opat said he believes the county’s purpose in acquiring the property — public safety — would supersede the railroads’ authority.

Pipelines or Rail for Fossil Fuels are False Choices - The so called “train bombs” are gaining public attention, mainly due to the media reporting. We have to keep in mind the first rule of reporting news – If it bleeds, it leads. A train derailment with a spectacular fireball is more “entertaining” than a pipeline leak. Transport of fossil fuels by rail is more expensive than transport via pipeline. Due to the cost considerations of rail or pipelines it is obvious the industry would prefer to use a pipeline. The frequency of news reporting around rail accidents involving fossil fuels has put the public in “scare mode” with every train being looked at as a potential disaster. This works to the industry’s benefit in proposing more and more pipelines.The nation has more than 185,000 miles of liquid petroleum pipelines, nearly 320,000 miles of gas transmission pipelines, and more than 2 million miles of gas distribution pipelines. OPS regional offices inspect interstate pipeline systems and intrastate facilities under direct Federal jurisdiction to determine operator compliance with pipeline safety regulations. These facilities include certain municipal and master meter gas systems that by State law are not subject to State regulation or intrastate pipelines in States where the state agency is not participating in the program.However, pipeline operators are responsible for reporting leaks, spills or other accidents to OPS. The data used to compile reports comes largely come from accident/safety-related condition reports submitted by gas and hazardous liquid pipeline operators and annual reports submitted by gas pipeline operators which include information on miles and types of pipelines. In other words – the industry self-reports.OPS only know of accidents/leaks/spills if an inspector happens to be at the right place at the right time, an operator reports it or the “event” is too big to miss. This calls into question the accuracy of statistics and reports.   There is a high probability that there are more pipeline “events” than are being reported. Additionally because majority of pipelines are located underground, leaks could go undetected for years.

Time to call them Obama trains --  There was another oil train derailment this week – this time near Galena, Illinois –  producing another explosion and smoke cloud that’s being plastered all over the media. It was the third such derailment in three weeks. Left-wing activists have taken to using the term “bomb trains” and are now blaming public officials for not seeking regulatory retribution for the derailments from the oil industry. Which is certainly convenient, for them, I suppose.They think the answer to oil train derailments is to stop producing oil. But really, it’s President Barack Obama who has created this situation for them to exploit. Not so much because the administration has balked at tougher regulations for oil-by-rail shipments, as Reuters reported recently, but because Obama’s intransigence on energy infrastructure has created a shipping bottleneck that has left our rails overrun. The reason for this is that pipeline infrastructure wasn’t in place to take oil from plays like North Dakota’s Bakken oil fields and bring it to market. So, while we’ve been waiting for the pipelines to catch up, oil producers have relied on rail. We badly need alternatives, but that’s where the environmental zealots come in. Led by our zealot-in-chief Barack Obama they’re intent on ensuring that pipeline infrastructure can’t catch up. It’s not just Obama’s intransigence on the Keystone XL pipeline. While the 100,000 barrels per day of capacity that pipeline would be important infrastructure for the North Dakota oil fields, it’s not a silver bullet that would solve this problem. But the blockade on Keystone is symbolic of the larger fight over pipelines.  The Sandpiper line, which would run from Tioga, North Dakota, through Minnesota down to Wisconsin is currently being blocked by activists in Minnesota. A pipeline taking oil from the Bakken north into Canada will likely face the same obstacles from the federal government that the Keystone pipeline has. The activists don’t want pipelines, but they also gleefully report every new oil train derailment, leveraging them into calls for action on further restrictions to oil production.

America is literally on fire: How out-of-control oil spills are destroying our population centers - It’s a good bet that someplace in North America is on fire right now, raging so out of control that officials have to let it burn itself out. And it happened because highly flammable oil was placed on a train for shipping, and something went drastically wrong. Because so much oil is transported by rail these days, the probabilities of catastrophe have elevated significantly. We haven’t ruined a major population center yet only through dumb luck; and we haven’t cracked down on this treacherous practice only because of the enormous power of the industry.  Last Thursday, 21 oil tanker cars derailed near Galena, Illinois, and five of them burned for three days. Firefighters gave up combating it because of the intensity of the heat. Tanks tumbled into a bank along the Mississippi River, threatening the Upper Mississippi National Wildlife and Fish Refuge. The EPA said the fire posed an “imminent and substantial danger” to the river. On Saturday, another train caught fire near Gogama, Ontario, damaging a bridge and sending five tank cars into the water. A similar train fire occurred on Feb. 14 near the Ontario town of Timmis, and on Feb. 16 in the almost perfectly named town of Mount Carbon, West Virginia. In all, over the past five weeks there have been five crude oil train derailments, threatening ecosystems and human health. You can follow all the “action” at the DOT-111 Reader. The industry estimates that 9,500 carloads of oil moved along rail lines in 2008. In 2014 that number jumped to 500,000 carloads, transporting 15 billion gallons of crude. By some estimates that could double this year. Moreover, harder-to-reach oil, from the Bakken shale of North Dakota to the tar sands of Alberta, Canada, is more flammable and explosive, igniting at much lower temperatures, according to U.S. regulators.

Chesapeake Energy Sees History Repeating Itself -- Despite its best intentions, Chesapeake Energy can’t seem to catch a break. The company was on the wrong side of natural gas when its price plunged in 2012, and the situation appears to be repeating itself after the price of oil plummeted. Now Chesapeake Energy expects, once again, to announce a big asset writedown in the first quarter.  In its annual report, Chesapeake Energy laid out a number of risk factors to the business, as it does each year. Most of the risks are probably both familiar and obvious to investors. For example, the company said oil and gas prices could go down or it might drill dry holes, both of which would impact earnings results. Other risks are only familiar to investors based on the company’s history. One of those ghosts from Chesapeake’s past is apparently about to haunt the company again. The company stated in this year’s annual report that “We expect to write down the carrying value of our oil and natural gas properties in 2015 if commodity prices remain low.” It noted that it is required under accounting rules to write down the carrying value of its oil and gas assets if capital costs exceed the quarterly ceiling limit, which is based on average commodity prices as of the first day of the month over the trailing-12-month period. Given where prices are now, a writedown is coming, and not for the first time. Per the annual report: Such writedowns can be material. For example, in 2012, we reported a non-cash impairment charge on our oil and natural gas properties of $3.315 billion, primarily resulting from a 10% decrease in trailing-12-month average first-day-of-the-month natural gas prices as of September 30, 2012, as compared to June 30, 2012, and the impairment of certain undeveloped leasehold interests. That writedown came at a bad time for the company as its cash flow was dropping and its debt was far too high. Chesapeake Energy was forced to take a number of steps to fix its balance sheet, including selling assets at fire-sale prices. However, it survived, and the balance sheet is now the strongest it has been in the company’s history.

U.S. oil production still surging - Econbrowser: The EIA is now reporting that U.S. field production of crude oil averaged almost 8.7 million barrels a day in 2014. That’s up 1.2 mb/d from 2013, and is only 0.9 mb/d below the all-time U.S. peak in 1970.  Production of oil by means of fracturing shale and other tight formations is the main reason. The EIA drilling productivity report estimates that production from the Permian, Eagle Ford, Bakken, and Niobrara– the main tight oil producing areas– was 1 mb/d higher in 2014 compared to the previous year. I used that estimate to update my graph of U.S. production by source. The tight oil story is pretty dramatic.  And it seems to be continuing. The February drilling report estimates production from those 4 regions will be almost 0.3 mb/d higher this month than it was in December. That’s leading to record levels of U.S. inventories. How much longer will production keep going up? Much of the new production can’t be profitable at current prices, and the number of drilling rigs operating in the tight oil areas has fallen 12% since September. That presumably means less than a 12% reduction in production from new wells, for two reasons. First, it is the least promising new prospects that will be cut first. Second, there has been a learning curve improving productivity of new wells. Average oil production per rig (in barrels per day) across Permian, Eagle Ford, Bakken, and Niobrara, January 2007 to January 2015. Data source: EIA. Working against these is the fact that production from existing wells continues to decline. But at the moment, it seems further adjustments on the part of drillers will be necessary in order to bring the supply of oil in balance with the demand.

Oil Price Faces Another 20% Drop Due To Contango Math -- Want to know where oil prices are headed? You need to understand the economics of the floating storage play, Soc Gen says.  As we noted on Friday, retail investors looking to be the next Jed Clampett have piled into the U.S. Oil fund over the past several months, presumably unaware of the extreme contango in the market. That said, it’s not just retail investors who are itching to dive in. Here’s Soc Gen:  The motivation to buy it [is] widespread and not always based on traditional market analysis – consumers [are] keen to lock in lower prices with their newly expanded credit lines, due to the decline in the notional value of their existing hedges. Endowments and Sovereign Wealth Funds (SWFs) [are] under pressure to use the “opportunity” to claw back recent losses.. At its core, the trade is simple:   A trader buys physical oil now at a low price, and simultaneously sells paper forward at a high price, thus locking in a profit margin. If this profit margin is higher than the cost of fixing a vessel to store it on, the trade works, and it should happen. Although, as Reuters notes, “the capacity of U.S. commercial oil storage tanks has expanded by a third since 2010,” the global stock increase is set to be nearly 3 times bigger than during the last oversupply period (in the aftermath of the crisis). Given that floating storage was used in 2008-2009, it’s likely that cheaper on-land storage capacity will dwindle necessitating the use of crude carriers this time around as well.

US May Run Out Of Oil Storage Space As Soon As June -- On Sunday, we noted that the economics of the floating storage play could spell further declines for crude prices. With a global stock increase that’s some 3 times larger than that which occurred during the last period of oversupply, expect cheap, on-land storage to prove inadequate necessitating the use of VLCCs. According to Soc Gen, determining how far the front end of the curve would have to fall in order for traders to arbitrage the difference between buying and storing physical oil and selling paper forward is a good indicator for where prices may find a floor: ...the bank is looking for the front end of the curve to fall until the contango is wide enough to make the floating storage play enticing. The example Soc Gen uses shows that Brent needs to see ~$49 before the trade is sufficiently profitable. The takeaway, we noted, is that storage availability and contango should be taken into account when considering the future direction of oil prices. With production still climbing despite the decline in rig count, it seems supply may, in short order, outstrip storage capacity for as the following two charts show, crude storage capacity in the US is now at 60% and is set to be completely exhausted by June:

Goldman Blames Weather For Stronger Oil Prices, Sees WTI Sliding Back To $40 -- As we noted over the weekend when we showed a simple contango math calculation by SocGen according to which storage costs imply another 20% drop in Brent prices, now none other than Goldman - which has been oddly bearish on oil over the past few weeks - says that its Brent forecast remains at $40/bbl for two simple reasons: i) the global inventory glut is set to resume and ii) it's the weather's fault there has been a slowdown in the crude build-up.

The oil price: Dead cat rally | The Economist -- STRONG demand and tight supply have stoked a rise in the oil price. Last week, it reached more than $60 for Brent (the benchmark price for North Sea oil) and $50 for West Texas Intermediate, the main American price. Last year’s downward slide seems over. Goldman Sachs, a bank which was forecasting oil at $40 for the next two quarters, now says the risk is “skewed to the upside”, meaning that the likely price is higher. Some of the factors behind this bounce are temporary. Unrest in Libya and sandstorms in Iraq have hit production. America had an unusually cold winter, and Brazil has a drought, boosting demand. But these disruptions will pass—or in Libya’s case cannot get much worse. OPEC production is likely to recover. The cartel of oil-exporting countries shows no sign of flinching from its decision last year to keep market share by maintaining production. A short period of pain now, the body’s Gulf masterminds reckon, is better than a drawn-out one. But if the aim is to dent non-OPEC production, it is proving an elusive goal. Production is up in Russia and Brazil, and continuing even in Nigeria. Most importantly, lower prices are not crippling American production of “light tight” oil from the shale beds of North Dakota, Ohio and other places. The least profitable drillers are going bust—but others are ploughing ahead. The price of labour and equipment is plummeting, and finance is still abundant. More productivity gains lie ahead, with better fracking and horizontal-drilling techniques.

Crude Pops & Drops As API Reports Unexpected Inventory Draw - Against expectations of a 4.75 million barrel build, API reported an estimated inventory draw of 404,000 barrels - potentially ending the 8 week build streak if DOE confirms (following last week's huge DOE-reported 10,303 million barrel build). The initial reaction of the machines was a jerk higher, perfectly tagging $49.00, before tumbling back into the red.

Oil slides as supply balloon grows: A government report showing an increase in already-record crude supplies fanned speculation the market is setting up for a selloff that could take oil prices to a new cycle low. West Texas Intermediate futures fell below $48 per barrel after the morning report, but bounced back to close just slightly lower at $48.17, down 12 cents. Futures for Brent, the international benchmark, traded higher, just below $58 a barrel. Crude oil supplies rose 4.5 million barrels in the last week to 448.8 million—a ninth week of gains and an 80-year high, according to the Energy Information Administration. Oil stored at Cushing, Oklahoma, the physical delivery point for WTI futures, rose by 2.3 million barrels to 51.5 million."It says a lot of the world's oversupply is finding its way to storage in North America," Compared to this time last year, crude oil inventories are over 20 percent higher." Many oil analysts expect another violent selloff in crude this spring. Some project that to take WTI closer to the $40 level or lower, carving a new bottom for prices. WTI's recent closing low was $44.53 per barrel on Jan. 29, before moving higher during February. Production of U.S. oil last week rose to a multidecade record of 9.37 million barrels a day, from 9.32 million the week earlier. Weekly data show oil production has consistently surpassed 9 million barrels a day since November in the longest stretch since the 1970s. "It says prices are going to remain under pressure," said Lipow, who expects oil to retest its recent low and head to $40 before the next selloff is over.

Crude Price Battered After Another Huge Inventory Increase - The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 4.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 448.9 million barrels, the ninth consecutive week of a higher total than at any time in at least 80 years. In a Tuesday update to its Short-Term Energy Outlook, the EIA lowered its forecast 2015 average price per barrel of West Texas Intermediate (WTI) crude oil from $55.02 to $52.15 and raised its forecast for the yearly average price for a barrel of Brent crude from $57.56 a barrel to $59.50. The continuing builds in crude oil storage are identified as the reason for the wider differential between the two benchmark crudes. Total gasoline inventories decreased by 200,000 barrels last week, but they remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the EIA’s measure of consumption) averaged over 8.7 million barrels a day for the past four weeks, up by 2.8% compared with the same period a year ago. Distillate inventories increased by 2.5 million barrels last week but remain in the lower half of the average range. Distillate product supplied averaged 4.1 million barrels a day over the past four weeks, up by 12.8% when compared with the same period last year. Distillate production averaged 4.8 million barrels a day last week, up about 200,000 barrels a day compared with the prior week’s production.

Bigger Than Expected Inventory Build & Record Production Sparks WTI Slump To 6-Week Low -- An initial kneejerk higher after last night's surprise API inventory draw is long forgotten as USD strength (and no signs of global growth returning) has dragged WTI Crude back to $48.01 - its lowest in almost 5 weeks... As traders awaited today's DOE inventory/production report, it appears expectations were that there will be a 4.75 million barrel build, notably divergent from API's print... and sure enough DOE printed 4.512 million barrels - the ninth weekly build in a row. That immediately sent WTI tumbling beloiw $47.50 on heavy volume. Storage concerns grow as Cushing rose a greater-than-expected 2.32mm barrels and production hit a new record high at 9.366 mm b/d.

The U.S. Has Too Much Oil and Nowhere to Put It  - Seven months ago the giant tanks in Cushing, Okla., the largest crude oil storage hub in North America, were three-quarters empty. After spending the last few years brimming with light, sweet crude unlocked by the shale drilling revolution, the tanks held just less than 18 million barrels by late July, down from a high of 52 million in early 2013. New pipelines to refineries along the Gulf Coast had drained Cushing of more than 30 million barrels in less than a year.  As quickly as it emptied out, Cushing has filled back up again. Since October, the amount of oil stored there has almost tripled, to more than 51 million barrels. As oil prices have crashed, from more than $100 a barrel last summer to below $50 now, big trading companies are storing their crude in hopes of selling it for higher prices down the road. With U.S. production continuing to expand, that’s led to the fastest increase in U.S. oil inventories on record. For most of this year, the U.S. has added almost 1 million barrels a day to its stash of crude supplies. As of March 11, nationwide stocks were at 449 million barrels, by far the most ever.  Not only are the tanks at Cushing filling up, so are those across much of the U.S. Facilities in the Midwest are about 70 percent full, while the East Coast is at about 85 percent capacity. This has some analysts beginning to wonder if the U.S. has enough room to store all its oil. Ed Morse, the global head of commodities research at Citigroup, raised that concern on Feb. 23 at an oil symposium hosted by the Council on Foreign Relations in New York. “The fact of the matter is, we’re running out of storage capacity in the U.S.,” he said.

Cushing Crude Build Concerns Send WTI To $47 Handle -- Traders are citing Genscape data on Cushing crude storage builds and the re-opening of the Houston Ship Channel (enabling more crude imports into PADD 3) for taking away the overnight hope/hype in WTI and dragging it back to a $47 handle. It appears the June deadline continues to loom large.

Record U.S. Oil Glut May Fill Storage, Cut Prices -- A record surplus in U.S. crude inventories may soon strain the nation’s storage capacity, renewing a slump in prices and curbing its output, according to the International Energy Agency. The IEA boosted estimates for U.S. oil production this year as cutbacks in drilling rigs have so far failed slow its output. Crude inventories threaten to fill tanks, with the nation’s largest oil-storage hub in Cushing, Oklahoma 70 percent full, the agency said. The IEA raised its 2015 estimate of global oil demand by the most since it was introduced in July. “Stocks may soon test storage capacity limits,” said the Paris-based adviser to 29 nations in its monthly market report. “That would inevitably lead to renewed price weakness, which in turn could trigger the supply cuts that have so far remained elusive.” Oil has rallied about 20 percent in London over the past two months as U.S. drillers idled an unprecedented number of rigs in response to the biggest price collapse since 2008. Crude slumped 61 percent from June to January after OPEC signaled it would leave shale producers and other suppliers to deal with a global glut. West Texas Intermediate crude, the U.S. benchmark, fell $1.69, or 3.6 percent, to $45.36 a barrel at 11:17 a.m. on the New York Mercantile Exchange. Brent, the international benchmark, dropped $1.02 to $56.06 a barrel. Both grades are heading for weekly declines.

The Truth About U.S. Crude Storage: Despite the popular narrative that we keep hearing, the U.S is not running out of crude oil storage. Yet there are those who are predicting that oil prices are going to fall to $20 or $30 a barrel, pointing to the crude oil storage numbers and suggesting that we are near maximum capacity and therefore a price collapse is imminent. (Although Goldman Sachs did some backpedaling on their forecast this week). The argument goes something like this: : US running out of room to store oil; price collapse next?  At first glance, the argument seems to be pretty straightforward. But let’s dig into the data a bit. Admittedly, if you look at the storage numbers in the nation’s most important oil storage hub (and the price settlement point for West Texas Intermediate on the New York Mercantile Exchange) in Cushing, Oklahoma, it’s easy to form the impression that storage is filling up and an oil price crash is inevitable:  Any time someone claims that we are nearly full on crude oil storage, I ask them to quantify that. “Highest levels in 80 years” isn’t quantified. You could be at the highest levels in 80 years and only 10% full. And in the graphic above, one thing that is missing is how much storage volume is actually available at Cushing. The answer is 71 million barrels (with more storage under construction). So even if inventories there continued to build at the recent pace, it would be nearly four months before Cushing would actually be full. But, there are several mitigating factors that minimize this possibility.

Rig count keeps falling: Producers laid down more rigs this week as the fallout from lower oil prices continued to slow drilling across the U.S. Data from oil field services company Baker Hughes showed the number of rigs chasing crude oil fell by 56 to 866 this week, its lowest level since March of 2011. The count has now declined for 14 consecutive weeks, according to Baker Hughes data. Combined, both oil and gas rigs fell by a total of 67 to 1,125. Rigs chasing natural gas fell by 11 to 257 and miscellaneous rigs were unchanged at two. The rig count has fallen sharply as producers have cut back on drilling and other expenses due to lower crude oil prices. Last week, the oil rig count fell by 64 to 922. Analysts have watched the figures closely hoping that a slowdown in drilling activity would lead to less production and stem the tide of crude oil that has pushed supply past demand. But despite a significantly lower rig count, production has yet to show signs of much decline. In its most recent weekly report released Wednesday, the U.S. Energy Information Administration estimated that U.S. production hit its highest level in decades, about 9.4 million barrels per day, in the week ending March 6.

Rig Count Drops For 14th Week In A Row, Fastest Rate In 29 Years -- For the 14th week in a row, the US rig count fell 67 rigs to 1125, (a 5.6% drop to 41.4%, bigger than March 09's previous record 14-week decline of 41%). The decline in rigs continues to track the lagged oil price perfectly but has shown absolutely no impact on production levels as firms push for cashflows in a race to the bottom. As one analyst rightly noted, while rig counts continue to drop, companies are high-grading (shifting to more efficient wells), "the real thing that needs to change is U.S. production and that is not happening at the moment." April WTI Crude tested $45.01 before the data and bounced very modestly on the data.

US oil and natural gas rig count drops by 67 to 1,125  — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. fell by 67 this week to 1,125 amid depressed oil prices. Houston-based Baker Hughes said Friday that 866 rigs were seeking oil and 257 exploring for natural gas. Two were listed as miscellaneous. The count is down from 1,809 rigs active a year ago. Among major oil- and gas-producing states, Texas lost 37 rigs, Louisiana declined by seven, Oklahoma was down five, North Dakota and Ohio four each, New Mexico and Wyoming three apiece, Colorado two, and Alaska, Kansas and Utah by one each. West Virginia gained one rig. Arkansas, California and Pennsylvania were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

US crude settles at $44.84 per barrel; down 4.7% - U.S. crude settled at $44.84 per barrel on Friday's session, dropping $2.21 or 4.7 percent. The settle marks the lowest close since Jan. 28. Oil futures were little changed after the pace of rig reductions in U.S. oilfields slowed moderately in the last week, according to data from Baker Hughes. The number of rigs exploring for oil in the United States fell by 56, compared with a 64-rig reduction in the prior week. Total U.S. oil rigs stood at 922, compared with 1,461 at the same time last year. Canadian drillers took 65 rigs offline in the last week, Baker Hughes reported.  U.S. crude earlier fell more than 4 percent after the International Energy Agency said that a global oil glut is building and U.S. oil production shows no signs of slowing. The IEA, which advises industrialized countries, said in its monthly report that the United States may soon run out of empty tanks to store crude, which would put additional downward pressure on prices.U.S. crude finished Friday's session down $2.21 at $44.84. Brent crude fell $2.16 to $55.13.

The US Oil Bust Just Got Worse -  Wolf Richter - The price of oil did today what it has been doing for a while: it waits for a trigger and plunges. As I’m writing this, West Texas Intermediate is down 4.4%, trading at $44.99 a barrel, less than a measly buck away from this oil bust’s January low. It’s down over 20% from the peak of the most recent sucker rally.  US oil drillers have been responding by slashing capital expenditures, including drilling, in a deceptively brutal manner. In the latest week, drillers idled 56 rigs that were classified as drilling for oil, according to Baker Hughes. Only 866 rigs were still active, down 46.2% from October, when they’d peaked at 1,609. In the 22 weeks since, drillers have taken out 743 rigs, the most dizzying cliff dive in the data series, and probably in history:  You’d think this sort of plunge in drilling activity would curtail production. Eventually it might. But for now, the industry has focused on efficiencies, improved drilling technologies, and the most productive plays. Drillers are trying to raise production but with less money so that they can meet their debt payments. Thousands of wells have been drilled recently but haven’t been completed and aren’t yet producing. This is the “fracklog,” a phenomenon that has been dogging natural gas for years. So US oil production hit another record of 9.366 million barrels per day for the week ended March 6, according to the Energy Information Administration’s latest estimate. This chart shows how the rig count (red) has plunged while production (black) continues to soar: But demand is not living up to the level of production and imports. As an inevitable result, US crude oil inventories are piling up. Excluding the Strategic Petroleum Reserve, crude oil stocks, according to the EIA, rose by 4.5 million barrels in the latest reporting week, to a record 448.9 million barrels. A more modest rise than in prior weeks, but the ninth week in a row of increases. Crude oil stocks are now 78.9 million barrels, or 21.3%, higher than at this time last year. Note the beautiful spike: So when is US storage capacity going to be full? That event would cause all sorts of havoc in the oil markets, including a terrible plunge in price. With no place to put their oil, some production companies would have to turn off the tap and leave the oil in the ground. That would bring production down in a hurry, but it would add to the pent-up supply, the “fracklog,” thus dragging out the bust even further.

Everyone Is Guessing When It Comes To Oil Prices -- Predicting and diagnosing the trajectory of oil prices has become something of a cottage industry in the past year. But along with all of the excess crude flowing from the oil patch, there is also an abundance of market indicators that while important, tend to produce a lot of noise that makes any accurate estimate nearly impossible. First there is the oil price itself. The crash began last summer, and accelerated in November. Since then, predictions for oil prices for 2015 have been all over the map – from Citigroup’s $20 per barrel, to T. Boone Pickens’ prediction of a return to $100 per barrel. OPEC’s Secretary-General even said prices could shoot up to $200 in the coming years as a result of overly drastic cutbacks and a failure to invest in new production. With those estimates at the extremes, most analysts think prices will continue to seesaw within a rough band of $40 to $70 for the rest of the year.  Aside from oil prices, the weekly measurement of the number of rigs still in operation has become one of the most watched indicators out there. Weekly rig counts from Baker Hughes have sparked the Twitter hashtag #Rigcountguesses, to which energy analysts post their predictions. For the week ending March 6, another 75 oil and gas rigs were pulled from operation, taking the total down to 1,192. That is the lowest level in years, and 43 percent lower than its 2014 peak. A new metric that has popped up in recent weeks is the level of available storage. Excess oil has been stashed in storage tanks around the world, but government data suggests that storage space is starting to run low. The EIA says that about 60 percent of total U.S. storage is filled, a jump from 48 percent a year ago. Regional figures are higher, for say, the East Coast (85 percent).  Cushing, Oklahoma could begin to run out of space this spring. Another key number to keep in mind is the number of drilled but uncompleted wells out there. There are an estimated 3,000 wells that have not been completed as producers wait for prices to rebound. Instead of storing oil in tanks, simply holding off on finishing a well can allow drillers to “store” oil in the ground. Once completed, however, the backlog of wells will push down prices.The most important indicator for trying to figure out where prices are going is actual levels of oil production. In the face of spending cut backs, drops in rig counts, and ongoing price pressure, oil production continues to defy gravity. Output continues to climb. At the end of February, the U.S. was producing 9.3 million barrels per day, up 10 percent since prices began crashing in June 2014, and even up 2 percent since the beginning of 2015. Low prices have yet to cut into the trend line, but will have to at some point soon.

The Oil Glut And Low Prices Reflect An Affordability Problem -- For a long time, there has been a belief that the decline in oil supply will come by way of high oil prices. Demand will exceed supply. It seems to me that this view is backward–the decline in supply will come through low oil prices. The oil glut we are experiencing now reflects a worldwide affordability crisis. Because of a lack of affordability, demand is depressed. This lack of demand keeps prices low–below the cost of production for many producers. If the affordability issue cannot be fixed, it threatens to bring down the system by discouraging investment in oil production. This lack of affordability is affecting far more than oil products. A recent article in The Economist talks about LNG prices being depressed. LNG capacity ramped up quickly in response to high prices a few years ago. Now there is a glut of LNG capacity, and prices are far below the cost of extraction and shipping for many LNG suppliers. At least temporary contraction seems likely in this sector. If we look at World Bank Commodity Price data, we find that between 2011 and 2014, the inflation-adjusted price of Australian coal decreased by 41%. In the same period, the inflation-adjusted price of rubber is down 58%, and of iron ore is down 59%. With those types of price drops, we can expect huge cutbacks on production of many types of goods.

The Real (and Troubling) Reason Behind Lower Oil Prices -- I am obsessed with how the top tier of finance has undermined, rather than fueled, the real economy.  Ruchir Sharma, head of emerging markets for Morgan Stanley Asset Management and chief of macroeconomics for the bank, posited a fascinating idea: the major fall in oil prices since this summer may be about a shift in trading, rather than a change in the fundamental supply and demand equation. Oil, he says, is now a financial asset as much as a commodity.  The conventional wisdom about the fall in oil prices has been that it’s a result of both slower demand in China, which is in the midst of a slowdown and debt crisis, but also the increase in US shale production and the unwillingness of the Saudis to stop pumping so much oil.  Sharma rightly points out, though, that supply and demand haven’t changed enough to create a 50% plunge in prices. Meanwhile, the price decline began not on the news of slower Chinese growth or Saudi announcements about supply, but last summer when the Fed announced that it planned to stop its quantitative easing program. Sharma and many others believe this program fueled a run up in asset buying in both emerging markets and commodities markets. “Easy money had kept oil prices artificially high for much longer than fundamentals warranted, as Chinese demand and oil supply had started to turn back in 2011, and oil prices have now merely returned to their long-term average,” says Sharma. “The end of the Fed’s quantitative easing has finally pricked the oil bubble.”  If this is the case, the fact that hot money could have such an effect on such a crucial everyday resource is worrisome. And the fact that the Fed’s QE, which was designed to buoy the real economy, has instead had the unintended and perverse effect of inflating asset prices is particularly disturbing. I think that regulatory attention on the financialization of the commodities markets will undoubtedly grow; for more on how it all works, check out this New York Times story on Goldman’s control of the aluminum markets. Amazing stuff.

Low oil prices: Who are the losers? - As we are repeatedly told, every consumer is a winner because lower oil prices mean that it is cheaper to drive and fly, to ship goods, and to buy fuels and feedstocks for industrial production. Aggregate savings would be enormous: selling some 4.5 billion tons of annual global crude oil output at half price saves about $1.7 trillion, more than 2 percent of the world’s economic product. But for the governments of oil-producing countries, now led by the United States and with Canada the fifth-largest producer, that is also $1.7 trillion less to be taxed in order to cover the ever-higher burden of non-discretionary spending on social support and health care. Of course, having more disposable income, the consumers, including those in oil-producing countries, could save some of those sudden gains and stimulate parts of the economy with the rest.  And on a state, provincial, or local level those savings are not so appealing to the residents of Oklahoma or Alberta, or to the inhabitants of some of Norway’s or Mexico’s coastal towns, where oil companies are already pulling back, cancelling rig contracts, postponing new developments, and letting some workers go, and where a longer spell of low prices would bring higher unemployment and lower house prices, to say nothing of rising budget deficits. And here is a quote from a recent message I received from Oklahoma: My oldest friend signed a lease in Osage county in August. It had 50 working wells. He was going to rebuild them and then do some horizontal drilling. But now, he can’t afford to do anything but band-aid the existing pumps and hope prices go up enough to service his debt. None of the oil folk are in a position to stop the pumping, therefore it’s exacerbating the supply. They’re going to pump or go broke. It’s a weird oil field cash-flow psychosis. It’s happened before.

Imbalance in Crude Oil Price Will Even Out Soon: OPEC Chief - -- The global crude-oil market will return to balance in the second half of this year as demand growth picks up and high-cost producers trim output amid lower prices, OPEC Secretary-General Abdalla El-Badri said. Consumption in 2015 will increase by 1.2 million barrels a day after rising more slowly than expected last year by less than 1 million barrels a day, El-Badri said Sunday at a conference in Manama, Bahrain.   Crude has lost half its value since June, raising risks for suppliers with comparatively high costs of production. The U.S. is idling rigs and delaying wells even as it pumps oil from shale and other deposits at the fastest pace since 1983. Cheaper crude is a boon to countries such as China and India that rely on energy imports, and OPEC’s decision on Nov. 27 to maintain production rather than sacrifice market share has added to the glut. “If we made a cut in the November meeting, then we would have needed to make another cut in January, and then we would need another cut in June as supply will keep increasing from non-OPEC,” El-Badri said. Non-OPEC supply has grown by 6 million barrels a day since 2008 while production by members of the Organization of Petroleum Exporting Countries has remained at about 30 million barrels, he said. Brent oil futures, a benchmark for more than half of the world’s crude, dropped 0.2 percent today to $59.62 a barrel in London.

$1trn oil, gas projects could be cancelled over oil price slump - The steep fall in energy prices will hit investment in oil and gas projects worldwide and the industry may cancel about $1 trillion of planned projects globally in the next couple of years, a senior Saudi Aramco executive said on Monday. "Challenges during down cycles are more complicated today than before...At this moment the global industry is poised to potentially cancel about $1 trillion in capital funding," Amin Nasser, senior vice president for upstream operations at the Saudi oil giant, told a conference in Bahrain. Speaking to reporters later, Nasser said the $1 trillion figure included projects that might merely be delayed, not just those that could be cancelled outright. "What we've heard from the industry is that there is $1 trillion of planned projects that will be dropped or deferred over the next couple of years because of what's happening," he said, without elaborating on the source of that estimate.

Oil Producers Could See "Regime Change": Bloomberg -- As we’ve noted previously, the US-Saudi joint effort to force the Kremlin into cutting Assad loose (the end goal of course being to install a government that will acquiesce to mainlining Qatari natural gas through Syria straight into Europe thus breaking Gazprom’s stranglehold), has resulted in a bit of collateral damage for the world’s less geopolitically important oil producing countries (take Venezuela for instance, where collapsing crude prices have exacerbated an already abysmal scenario, leading to, among other tragic outcomes, a shortage of soap and condoms).   Bloomberg suggests that the destabilization of already fragile political and economic situations could lead, in short order, to “regime change” across oil producers: The large petrostates are varying degrees away from the Weberian ideal of the rule of law. That could spell trouble. Low oil prices threaten the ability of these inefficient, sometimes corrupt states to service their debts and may curtail the government spending that keeps the masses content. This may in turn ignite demands for a fairer distribution of these dwindling oil proceeds and, possibly, regime change.

The big drop: Riyadh’s oil gamble - It was October 7, and the price of oil had been falling precipitously since June. Everybody wanted to know when Saudi Arabia would take charge and stem the plunge. “Of course you’re going to cut production,” declared one guest. “What makes you think we’re going to cut?” the Saudi official replied. The throwaway remark, recounted by one of the attendees, reverberated across markets. It was the first sign that Saudi Arabia would not come to the oil market’s rescue, shattering long-held assumptions about the kingdom’s oil policy and shaking up a world energy order in place for decades. During periods of instability, the Saudis have adjusted their production to restore balance. But last year, as concerns about oversupply escalated, the kingdom changed tack and refused to act as the oil market’s safety net. Cutting output, Saudi Arabia believed, would only help its rivals — and it was time to take a stand. A month later, with crude still falling, Saudi Arabia strong-armed its Opec peers into supporting its decision not to intervene in the market. Mr Naimi would later describe this moment as “historic”. Armed with $750bn in foreign exchange reserves, Saudi Arabia led a battle against high-cost producers — from the US to Brazil and Russia — betting that a period of lower prices would force them to cut their output. The tactic might hurt revenues in the short term, the reasoning went, but it was necessary to protect market share for the long term. The move had a huge and immediate impact. The budgets of big oil exporting countries were thrown into disarray. Energy companies had to tear up their investment plans. Financial markets were rocked. The shift in Saudi oil policy that was crystallised between June and October has been the subject of intense speculation. Some suspected it was rooted in geopolitics: one theory held that the Saudis, acting under US influence, deliberately sought to undermine rivals Russia and Iran. But a close examination of Saudi actions suggests an unexpected series of global political events and — crucially — a misreading of the market were the driving forces behind Riyadh’s gamble.

Is Social Unrest Coming To Saudi Arabia? New King Vows To Limit Oil Price Impact, Boost Security -- In what some note could be a pre-emptive strike against rising social tensions in The Kingdom, new (and potentially crazy) King Salman bin Abdulaziz vowed to limit the impact of lower oil prices on economic growth, demanding that his regional governors "listen to their citizens." King Salman then specifically noted, he would work to "achieve justice for all citizens with no difference between one citizen and another, one region or another," adding that he will "confront the reasons behind schisms in society." Concluding with a warning that "we will never allow for tampering with our security," the King vowed to "boost security forces’ capabilities to defend the nation."

Republicans warn Iran nuclear deal with Obama may not last  (Reuters) - Forty-seven Republican U.S. senators warned Iran's leaders on Monday that any nuclear deal with President Barack Obama could last only as long as he remains in office, an unusual partisan intervention in foreign policy that could undermine delicate international talks with Tehran. The open letter was signed by all but seven of the Republicans in the Senate and none of Obama's fellow Democrats, who called it a "stunt." Iranian Foreign Minister Javad Zarif dismissed it as a "propaganda ploy" from pressure groups he called afraid of diplomatic agreement. In the letter, the senators said Congress plays a role in ratifying international agreements. Noting Obama will leave office in January 2017, they said any deal not approved by Congress would be merely "an executive agreement" that could be revoked by Congress.

The Iran Letter: Explaining the Joke - By now everyone’s familiar with the infamous and outrageously embarrassing open letter signed by forty-seven Republican senators that condescendingly warns Iran that any nuclear agreement it reaches with the West will die once Obama is out of office. It not only seeks to undermine substantive negotiations with Iran; it may also be illegal. The letter didn’t go over too well. Politico has reported that Republican Senators who refused to sign the letter are worried about it backfiring. There’s a petition calling for the prosecution of the people who did sign it. In an inevitable walk-back, some Republicans are even saying the whole thing was just “a ‘cheeky’ reminder of the congressional branch’s prerogatives,” complaining that “the administration has no sense of humor.” And they’re right that it’s a joke, in the colloquial sense of the word. But the letter isn’t just damaging because it propagates an idiotic and dangerous policy; it’s also damaging, specifically, for Senate Republicans. The letter undermines their group’s credibility in at least three significant ways: it’s technically flawed, it subverts Rand Paul’s non-interventionist bona fides, and it gives the appearance of Republicans being fair-weather friends to our allies. The tone of the letter is snide. Its organizing principal is that the Iranians “may not fully understand our constitutional system,” and then goes on to pedantically explain that the Senate has the power to craft “binding international agreements” which they must “ratify with a two-thirds vote.” The only thing is, that’s not true. The Senate does not ratify treaties. It takes up a resolution of ratification, in which it gives advice and consent to the President.

Iran Offers to Mediate Talks Between Republicans and Obama - —Stating that “their continuing hostilities are a threat to world peace,” Iran has offered to mediate talks between congressional Republicans and President Obama. Iran’s Supreme Leader, Ali Khamenei, made the offer one day after Iran received what he called a “worrisome letter” from Republican leaders, which suggested to him that “the relationship between Republicans and Obama has deteriorated dangerously.” “Tensions between these two historic enemies have been high in recent years, but we believe they are now at a boiling point,” Khamenei said. “As a result, Iran feels it must offer itself as a peacemaker.” He said that his nation was the “logical choice” to jumpstart negotiations between Obama and the Republicans because “it has become clear that both sides currently talk more to Iran than to each other.” He invited Obama and the Republicans to meet in Tehran to hash out their differences and called on world powers to force the two bitter foes to the bargaining table, adding, “It is time to stop the madness.” Hours after Iran made its offer, President Obama said that he was willing to meet with his congressional adversaries under the auspices of Tehran, but questioned whether “any deal reached with Republicans is worth the paper it’s written on.” For their part, the Republicans said they would only agree to talks if there were no preconditions, such as recognizing President Obama’s existence.

New Iran laws reduce women to "baby-making machines" - - Iranian women will be reduced to "baby-making machines" by draft legislation intended to boost the country's declining birth rate, rights group Amnesty International said in a report published on Wednesday. "The proposed laws will entrench discriminatory practices and set the rights of women and girls in Iran back by decades," Hassiba Hadj Sahraoui, Amnesty's Middle East and North Africa deputy director, said in a statement accompanying the report. One draft law, outlawing voluntary sterilization and restricting access to information about contraception, was passed by parliament in August 2014 and is now being considered by the Guardian Council, which must approve all laws, Amnesty said. This would result in more unwanted pregnancies, forcing more women to seek illegal and unsafe abortions, Amnesty said. Until 2012, the Iranian government provided millions of women with access to affordable modern contraception. But since then, the authorities have been trying to arrest the declining birth rate in their country of some 90 million people.

Global commodities under pressure - (graphs) With the dollar's renewed strength and slower global demand, commodities are under pressure again. The situation in Brazil is not helping as the weak Brazilian real encourages producers to dump commodities at lower prices (in dollar terms). And Brazil is one of the largest commodity exporters in the world. Here is the Continuous Commodity Index (broad commodity index). While the dollar rally and the weakness across the energy patch are pressuring commodities, other drivers exists as well. One specific commodity to watch closely is lumber. Here's May-2015 lumber futures contract. Is it an indication of slower US housing demand on higher rates ahead? Is the Canadian housing market in trouble?  And then we have the raw materials prices in China: steel rebar (used in construction) and iron ore (May-2015 contract). The rebar weakness tells us not to expect a housing recovery recovery in China this spring.  And China's recent growth downgrade is sending iron ore futures to multi-year lows (see story).  While the focus has been on crude oil, a number of non-energy commodities are in trouble as well. With the Fed's expected rate hike in 2015 and further dollar strength widely expected, the global deflationary environment is pressuring commodities across the board.

Aussie Boom Towns Go Bust As Iron Ore Prices Crash To Record Lows -- Dalian Iron Ore prices have been cut in half in the last year (which must mean over-supply and not under-demand, right?). Amid China's growth target cut, Iron Ore prices there have crashed to below $60 - a record low - and that is having dramatic impacts across many regions. As we recently noted, Aussie gold miners are producing desperately to generate cashflow, but despite the booming housing market in some areas, as Reuters reports, the drop in iron ore and coal prices (the nation's 2 biggest exports) have led former boom towns to bust as "reality comes into the marketplace." As bad as it's ever been... one-third of 2011 peak credit-enthused levels...Which has led, as Reuters reports, to layoffs and empty streets in Australia's boom towns...  In 2013, the 45-year-old boilermaker left his hometown of Cebu in the Philippines, where he was getting paid about $10 a day, to work in Karratha in Western Australia for $30 an hour. Enough to support his relatives and build a new life Down Under. What Junio didn't expect was that Australia's booming resources industry would go bust less than two years later, taking his job, and leaving him just 60 days to find work or go home.

China Inc's Destruction of Nigeria's Textile Industry -- It is no big secret that China's textiles have found a ready market the world over due to their relatively low price and high quality. This trade phenomenon, however, can be a mixed blessing for those that buy them: In Nigeria, the "resource curse" is in full swing as the demand for energy exports has sapped the competitiveness of import-competing sectors--including textiles. Widespread smuggling of textiles into Nigeria has certainly not helped matters as an entire country beside Nigeria, Benin, specializes as a gateway for contraband goods to the rest of the African continent: The Nigerian stretch is the final leg of a 10,000km journey. It begins in Chinese factories, churning out imitations of the textiles that Nigerians previously produced for themselves, with their signature prime colours and waxiness to the touch. By the boatload they arrive in west Africa’s ports, chiefly Cotonou in Benin, a tiny country beside Nigeria whose major economic activity is the transshipment of contraband. At the ports the counterfeit consignments are loaded on to trucks and either driven straight over the land border between Benin and western Nigeria or up through Niger and round to the border post with its taciturn chief. The trade is estimated to be worth about $2bn a year, equivalent to about a fifth of all annual recorded imports of textiles, clothing, fabric and yarn into the whole of sub-Saharan Africa. The Chinese being in the business of customer satisfaction, they have successfully copied garments in the local style, to the chagrin of Nigerian producers who simply cannot compete. For all its energy exports, the truth is that the electricity infrastructure of Nigeria is woefully inadequate, severely handicapping what's left of the local textile industry as high operating costs put them out of business:

China Inc flocks to euro debt for funding - Chinese companies are ditching the renminbi and flocking to the euro to raise new offshore debt, as the imminent launch of quantitative easing in the single currency bloc sends ripples through global markets. So far this year, mainland-based companies have sold $2.9bn worth of euro-denominated debt, according to Dealogic, compared with nothing in the first quarter of last year and within striking distance of the $3.3bn raised during the whole of 2014. Meanwhile, Chinese borrowers have shunned offshore renminbi debt, known better as “dim sum” bonds. The total raised in the market this year is only $250m, a dramatic drop from the $6.6bn issued during the first three months of last year. US dollar borrowing has been steadily high, with $16.3bn of bonds sold this year. Funding costs for euro debt have been tumbling since the European Central Bank announced plans to start its own programme of quantitative easing, which is due to begin on Monday. More than €1.5tn of sovereign eurozone bonds now offer investors negative yields, according to JPMorgan estimates. The new focus on euro debt also marks a change in Chinese corporate funding habits, in part a reflection of increasing eurozone assets held by some of Asia’s most acquisitive companies. Euro bonds can be used for deal financing or for currency management. In the past six months, the euro has dropped 13 per cent against the renminbi, which has a managed peg to the US dollar.

China Reports Worst Industrial Production Data Ever Outside Of The Global Financial Crisis -- Activity data for the combined January-February period (the NBS releases these two months together given the difficulty of adjusting for Chinese New Year effects) was significantly weaker than expected across IP, FAI, and retail sales. For overall industrial production, this was the weakest year-over-year reading ever (China’s IP data starts from 1995) outside the global financial crisis.

Economists React: Bring Out the Caveats, China’s Export Data Not Quite So Rosy -- Far from busting out the Great Wall champagne and launching fireworks over some miraculous trade-led Chinese economic recovery, economists were quick to reach for their caveats after February’s surprising 48% year-on-year jump in exports. First there’s the effect of the Lunar New Year, a holiday that floats around the calendar, making comparisons difficult. In addition, global demand remains weak. And the yuan is appreciating on a trade-weighted basis against the dollar, a clear headwind for Chinese exporters. Headlines aside, the general picture has been relatively consistent of late: reasonably strong exports and dismal imports–down 20.5% year-on-year in February–leading to another record trade surplus amounting to $60.6 billion last month. And given the prospect of continued weakness in the domestic economy, economists expect more sizeable Chinese trade surpluses ahead. Economists’ reactions to the latest trade figures released Sunday, edited for length:

Global manufacturing: Made in China? -  BY MAKING things and selling them to foreigners, China has transformed itself—and the world economy with it. In 1990 it produced less than 3% of global manufacturing output by value; its share now is nearly a quarter. China produces about 80% of the world’s air-conditioners, 70% of its mobile phones and 60% of its shoes. The white heat of China’s ascent has forged supply chains that reach deep into South-East Asia. This “Factory Asia” now makes almost half the world’s goods. China has been following in the footsteps of Asian tigers such as South Korea and Taiwan. Many assumed that, in due course, the baton would pass to other parts of the world, enabling them in their turn to manufacture their way to prosperity. But far from being loosened by rising wages, China’s grip is tightening. Low-cost work that does leave China goes mainly to South-East Asia, only reinforcing Factory Asia’s dominance (see article). That raises questions for emerging markets outside China’s orbit. From India to Africa and South America, the tricky task of getting rich has become harder.  China’s economy is not as robust as it was. The property market is plagued by excess supply. Rising debt is a burden. Earlier this month the government said that it was aiming for growth of 7% this year, which would be its lowest for more than two decades—data this week suggest even this might be a struggle (see article). Despite this, China will continue to have three formidable advantages in manufacturing that will benefit the economy as a whole.

China's Biggest Shipyard Is Now a Ghost Ship -: (Beijing) – Piles of rusty steel bars and old ship parts are virtually all that's left of a sprawling shipyard in the eastern city of Rugao, where Jiangsu Rongsheng Heavy Industries Group Co. used to employ more than 30,000 people. Once China's largest shipbuilder, Rongsheng is on the verge of bankruptcy. Orders have dried up and banks are refusing credit. Questions have been raised about the shipyard's business practices, including allegations of padded order books. And Rongsheng is apparently behind on repaying some of the 20.4 billion yuan in combined debt owed to 14 banks, three trusts and three leasing firms, sources told Caixin. The few hundred shipyard workers left – survivors of what's now a three-year downsizing – are wondering whether they'll ever see their overdue paychecks. Those with an uncertain future include a worker who cuts steel from abandoned ships into pieces that can be sold for scrap. "We haven't been paid since November," the worker said. Rongsheng is on the ropes now that it has completed a multi-year order for so-called Valemax ships for the Brazilian iron ore mining giant Companhia Vale do Rio Doce. The last of these 16 bulk carriers, the Ore Ningbo, was delivered in January.

China's Latest Spinning Plate: 10 Trillion In Local Government Debt - China is in the midst of attempting to help local governments refinance a mountain of debt, some of which was accumulated off balance sheet via shadow banking conduits at relatively high rates. According to UBS, "Chinese domestic media are saying that the authorities are considering a Chinese "QE" with the central bank funding the purchase of RMB 10 trillion in local government debt."

China shifts stimulus focus from monetary to fiscal policy - China has tripled the quota for bond sales by local governments to Rmb1.5tn ($240bn) in a bid to shunt some of their hefty debts back on balance sheets at lower rates of interest. Ultimately this is set to reach Rmb3.5tn, according to local media. Local governments have racked up huge debts, largely off-balance sheet, as they went on spending binges designed to promote growth and gild the reputations of officials. Borrowing through 10,000 local government finance vehicles was nearly $3tn, according to a government survey published in December 2013. Economists broadly welcomed the move, saying it creates more transparency and enables local governments to roll over short-term maturing loans into government bonds which cost less to service. It also shows Beijing is shifting from monetary to fiscal policy levers as it seeks to cushion a slowdown in the economy without exacerbating debt problems. The quota was raised two days after Lou Jiwei, finance minister, said the fiscal deficit for 2015 would be higher than previously indicated. Economists say fiscal spending on infrastructure is crucial to maintaining China’s overall growth this year amid slowdowns in real estate and manufacturing, key sectors that have driven China’s economic expansion in recent years. “As the space for monetary policy expansion is constrained by the rapid increase in leverage of the past seven years, we have long argued it makes sense to rely more on proper (bond-financed) fiscal policy to support growth,”

China Completes SWIFT Alternative, May Launch "De-Dollarization Axis" As Soon As September -- Following a year of threats that the west would kick Russia out of SWIFT, Moscow finally took the plunge and created its own international payment system alternative. And now, seeing how easy and fast it can be done, here comes China next with its own "China International Payment System" or CIPS, as one after another major global powers wave goodbye to a dollar-based, Washington-controlled (and NSA-supervised) international funds-transfer protocol. One that no longer relies on the US Dollar.

China's International Payments System Could Launch by End of 2015: It's being reported the China International Payment System to process cross-border yuan transactions may be launched this year. A total of 20 banks have reportedly been selected to take part in the pilot scheme. 13 of the banks are Chinese. The rest are subsidiaries of foreign banks. The official launch may take place in September or October, depending on the results of testing. Currently, cross-border yuan clearing has to be done either through one of the offshore yuan clearing banks in Hong Kong, Singapore and London, or else with the help of a correspondent bank on the mainland. The launch of the CIPS is expected to help increase global use of the Chinese currency by cutting transaction costs and processing time. CIPS is expected to use the format as other international payment systems, which should make it easier to deal with other banks around the world.

Will China Break the Currency Truce? - In the past five years, first the dollar, then the yen, and now the euro have tumbled as their respective central banks have undertaken large-scale bond-buying, or “quantitative easing” (QE). This is not a zero-sum currency war: QE sends money cascading across borders, bolstering asset markets and often triggering reciprocal monetary easing. Everyone wins. But it’s a different matter if China devalues; that would kick off a currency war. Why the difference? Usually, monetary policy and currency policy are joined at the hip. When a country lowers interest rates (or buys bonds), the currency falls as money seeks better returns elsewhere. Markets, not central banks, get to decide the relative response of currency, bond and stock prices. They may try to affect exchange rates by buying or selling currencies on the open market, but such intervention seldom works unless it is aligned with overall monetary policy. That’s why Japan’s massive intervention did not drive down the yen in 2011, but its QE in 2013 did. Korea has used intervention to slow the rise of the won, but yesterday it resorted to an interest rate cut. China is different because, even after significantly liberalizing its financial system, it still maintains controls over how much money can move in and out. When interest rates rise or fall, foreigners and residents can’t respond by moving money at will in and out of China, except surreptitiously. A repressed financial system means China has multiple tools for multiple targets: interest rates and credit guidance to target investment; reserve requirements to target bank liquidity; and the yuan to target trade. This means that when China’s currency falls, its trading partners don’t get the usual benefits of easy monetary policy; there is no outrush of capital from China to other countries, and no boost to domestic spending to bolster imports.

The Trans-Pacific Partnership and China’s Reality »  The Trans-Pacific Partnership (TPP) is a proposed trade and investment treaty that would promote free trade among countries on both side of the Pacific Ocean—including Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. This proposal has been under closed-door negotiation since 2002, with the United States joining the negotiations in March 2008. Attempts have been made in recent months by President Obama and Republican leaders to fast-track the deal into law. China is notably missing from the agreement, although state officials have publicly commented that the nation is open to joining. This is no small free trade agreement—it covers over 40% of the world’s GDP. The TPP would potentially eliminate tariff and nontariff barriers in trade and investment, providing expanded market access to participating countries. Rules will be more rigorous than those in the World Trade Organization; intellectual property laws would be strengthened. For example, the pharmaceutical industry would receive much stronger patent protections. Well-known figures such as Robert Reich have publicly criticized the TPP for its orientation toward big business and financial interests, and its omission of sufficient protections for workers and the environment. The secret negotiations have also been a target of criticism, as they have excluded public participation.

Prices May be Falling, but Taiwan’s Shoppers Are Spending - Cheaper gas is finally starting to filter through to consumers in Taiwan, where falling prices overall have overshadowed a welcome pickup in domestic demand. Like other net oil importers, Taiwan’s fuel prices have fallen more than a quarter from a year earlier. That’s put headline inflation in negative territory for the second consecutive month in February, falling to 0.19% compared with a 0.94% decline in January. But, core inflation, which excludes food and energy prices, climbed 1.8% last month, up from 0.6% in January. The good news is that February’s drop in consumer prices isn’t because demand is weak, but rather that oil prices are falling, says Joshua Gau, a budget official. Both the government and economists say that despite the headline number, there’s no deflationary concern for now. If anything, the oil swoon, on the whole, could be good for Taiwan. “It’s like a subsidy from net oil exporters. Taiwanese consumers will also be able to spend more on other goods because of cheaper oils,”

Japanese investors binging on foreign debt as JGB yields dwindle : Japanese investors were net buyers of major sovereign debt from overseas in January, except for U.K. debt, underscoring their appetite for higher returns as the Bank of Japan’s unprecedented easing suppresses bond yields. Net purchases of Canada’s sovereign bonds maturing in more than a year rose to ¥99.5 billion ($822 million), the most since May 2010, data from the Finance Ministry showed Monday. They also bought a net ¥469.7 billion of French government bonds, the biggest amount in seven months. Investors in Japan are increasingly diversifying their assets as they seek those with higher yields. The Government Pension Investment Fund disclosed its portfolio details last month, showing a drop in its holdings of Japanese government bonds and a rise in its holdings of foreign stocks and bonds.

The unseen casualties of Japan’s lost decades suffer in silence - A foreign visitor to the tourist districts of any big city will often go home with the impression that everything is dandy. Only locals know what goes on one alley behind the show windows full of light and colour. But in the Japan of the so-called lost decades, the lights and colours have kept growing brighter — even for some of the locals. Japan is often held up as some kind of spectre: this, the warning goes, is what could happen to Europe if it too heads down the dead-end road of deflation, stagnation and resistance to change. Yet for many in Japan itself, or at least for certain groups, “Japanisation” has not proved quite so lethal. If you belong to the 60 per cent in full-time employment, the 45 per cent who are aged over 50, or the 65 per cent living in big cities, the pain of the lost decades that began in the 1990s may well have passed you by — especially if you are male. You have a good, steady income, a job until retirement and a state pension that pays two-thirds of the average wage for men. Since prices are stagnant or falling — at least until recently — it does not matter so much if wages rise by only a meagre amount. In any event, in the jobs for life prevalent in Japan, your salary rises along with your age. But what of the side effects of Japanisation? Interest rates are in effect zero, which puts a new perspective on prices. Annual interest on a Y1m ($8,000) deposit in a savings account buys nothing more than the shortest train ride. One-hundred yen shops, Japan’s answer to dime or pound stores, have become part of the landscape. But when it comes to buying anything more expensive, the interest rate does not enter most people’s calculations. Except if they have to borrow money, that is, since deflation inflates the real value of debt over time.

Japan's Lower House of Parliament passes record $1.1 trillion Budget - (AFP) - Japan's powerful Lower House of Parliament on Friday passed a record 96.34 trillion yen (S$1.1 trillion) Budget, including fresh economy-boosting stimulus and more defence spending as Tokyo eyes an increasingly assertive China. The government plans to spend 96.34 trillion yen for the fiscal year to March 2016 under the Budget, which will now be sent to the Upper House for final approval. Passage is expected within several weeks despite possible opposition moves to stall the Bill. Tokyo's spending package is aimed at reversing an expected 0.5 per cent contraction in the world's number three economy for the current fiscal year that ends this month. But the eye-popping Budget will also inflate a huge national debt that is already twice the size of the economy - one of the biggest burdens among wealthy nations.

Thai Central Bank's Surprise Action Is 23rd Rate Cut Of The Year - Whether the world's central banks are 'co-operating' or competing is up for question but the tsunami of policy easings so far this year is making the 'surprise' rate cut, unsurprising. As Bloomberg reports, Thailand today became the latest to execute an unexpected interest-rate cut, bringing the total to 23 in 2015. While only 6 of 22 economists expected it, the Southeast Asian country -- a onetime export powerhouse that’s seen its manufacturing mojo dim somewhat in recent years amid historic flooding and political infighting -- lowered its main rate to 1.75%. "The surprise move suggests the economy is much weaker than expected," noted one analyst, adding that "it is negative for the baht and there’s concern that lower rates may lead to more outflows as the U.S. is expected to raise rates."

Bank Of Korea Unexpectedly Cuts Interest Rate To Record Low 1.75%, 24th Central Bank To Ease In 2015 -- The currency war salvos just keep on coming.  Moments ago the BOK unexpectedly (the move was predicted by just 2 of 17 economists polled by Bloomberg) cut its policy rate from 2.00% to a record low 1.75%, in what is clearly a full-blown retaliation against the collapse currency of its biggest export competitor, Japan, whose currency has cratered to a level that many in South Korea believe has become a direct subsidy for its competing exports. As such the only question is why the BOK didn't cut earlier. And following the surprise rate cut by Thailand earlier today, the "surprise" South Korean rate cut means there are now 24 easing policy actions by central banks in 2015 alone.

Are Currency Wars Looming in Asia? - WSJ: Does the rising wave of surprise interest-rate cuts in Asia portend a currency war? Central bankers won’t let the term leave their lips. Bank of Korea Gov. Lee Ju-yeol on Thursday, in announcing an interest-rate cut to a record low 1.75%, was studious in denying such a thing existed. Yet both South Korea and Thailand, which cut rates on Wednesday, have reason to worry about the strengthening of their currencies. The won has lost value against a resurgent U.S. dollar, but has strengthened 10% against the euro since the start of 2015. It is also up 10% against the Japanese yen over the past year. South Korea long has complained about the yen’s weakness, which is making it harder for its exporters to compete. Now, a steep fall in the euro is adding to the complications. South Korea’s exporters of automobiles and ships compete directly with European producers. “Korea exports a significant volume to the eurozone,” Mr. Lee acknowledged. “The fluctuating euro can affect Korea’s exports as much as the fluctuating yen.”

TPP Conclusion: KITA Expects TPP to be Concluded in First Half of Year | BusinessKorea: The Korea International Trade Association (KITA) has announced on March 10 that the Trans-Pacific Partnership (TPP) is highly likely to be concluded in the first half of this year, and counterstrategies are needed. The KITA said that there is a high possibility that the TPP will be agreed in the first half of this year, even though the talks have currently been delaying. It explained, “In particular, major participant companies of the TPP have important political agendas next year, including the U.S. presidential election and Japan’s upper house election. Therefore, the first half of this year is practically a deadline for the TPP agreement.” When the TPP is concluded, Korea, will be heavily affected. Korea is an export-driven country, and 69 percent of said exports are intermediary goods to TPP regions. Also, the country has focused 44.4 percent of overseas investment on the TPP regions, too. Accordingly, domestic companies should decide whether or not to participate in the TPP as soon as possible in order to establish the production network of the TPP and come up with concrete strategies. The U.S. and Japan are also finding a middle ground in opening products. Until now, both countries have failed to bridge their differences, as the U.S. demanded the opening of the agricultural market and Japan demanded the opening of the automobile market. Japan is currently raising the level of openness to beef and pork, and the U.S. is showing flexibility in opening the auto parts market, narrowing their differences. The Obama administration and the Republican party both have positive attitudes about the TPP, while the Democrats, whose major support base includes auto labor unions, have stuck to a cautious tone.

India Strives to Attract Foreign Investment in New Budget -- The Indian government announced several changes to their tax code on February 28th as part of the 2015-2016 budget. Along with a corporate income tax rate reduction, the budget attempts to remove many impediments to foreign investment. These measures are part of Prime Minister Narendra Modi’s “Make in India” campaign, which aims to increase manufacturing in India. To achieve the goal, the new budget calls for:

  • A two-year delayed of the General Anti-Avoidance Rules (GAAR), which were slated to start on April 1st of this year. The delay is one year less than the three-year delay recommended.
  • Procedural changes in the courts, which includes updated bankruptcy rules and faster dispute resolution of public contracts.
  • A restriction in the scope of the retrospective tax, an indirect transfer tax on the sale of Indian assets.
  • Extending pass-through status to specific investment funds and modifies the permanent establishment rules for fund managers. 
  • An increase in the application amount of Advance Pricing Agreements (APA) from 50 million rupees (~US$810,000) to 200 million rupees (~US$3.25 million).
  • A reduction of custom duties on raw materials and intermediate goods.
  • Abolishing the patchwork of federal and state indirect taxes in favor of a unified goods and service tax (GST).
  • Replacing the 1% wealth tax with a 7% surtax on income for companies with incomes between 10 million rupees (~US$163,000) and 100 million rupees (~US$1.63 million).
  • A phased reduction of the corporate income tax rate from 30% to 25%. For companies within the surtax range, the effective tax rate is 32%.

Indian media: Is banning Delhi rape film right?: The BBC's film about the 2012 Delhi gang rape and murder case continues to dominate media debate in India. Film maker Leslee Udwin's interview with the convict appears in India's Daughter, a BBC Storyville documentary which was broadcast in the UK on Wednesday. It was also due to be shown in India on NDTV. But police secured a court injunction late on Tuesday, blocking the broadcast in India. A section of the media have taken "strong objection" with the content of the film. Rapist Mukesh Singh, who along with the three others is facing the death penalty, expressed no remorse in the interview with Ms Udwin, and blamed the victim for fighting back. "This is journalism turned upside down. This is unethical," said prominent TV journalist Arnab Goswami on his show on Tuesday night, and continued to raise questions over the film on Wednesday as well. Home Minister Rajnath Singh also criticised the film in parliament, saying it should not be shown in India. The Zee News TV seems to agree with Mr Singh, the channel's headline on Wednesday reads: "India won't take Nirbhaya's (The Fearless One) insult". Nirbhaya is one of the nicknames given to the victim, who cannot be named for legal reasons, by the media in India.

Outcry and fear as Pakistan builds new nuclear reactors in dangerous Karachi - — World leaders have fretted for years that terrorists may try to steal one of Pakistan’s nuclear bombs and detonate it in a foreign country. But some Karachi residents say the real nuclear nightmare is unfolding here in Pakistan’s largest and most volatile city. On the edge of Karachi, on an earthquake-prone seafrront vulnerable to tsunamis and not far from where al-Qaeda militants nearly hijacked a Pakistan navy vessel last fall, China is constructing two large nuclear reactors for energy-starved Pakistan. The new reactors, utilizing a cutting-edge design not yet in use anywhere in the world, will each provide 1,100 megawatts to Pakistan’s national energy grid. They are being built next to a much smaller 1970s-era reactor on a popular beach where fishermen still build wooden boats by hand. But the new ACP-1000 reactors will also stand less than 20 miles from downtown Karachi, a dense and rapidly growing metropolis of about 20 million residents. Now, in a rare public challenge to the Islamabad government’s nuclear ambitions, some Pakistanis are pushing back. Of all places to locate a reactor, they argue, who could possibly make a case for this one?

Pakistan Civil Society; Rangers at MQM HQ "90"; India's Ban on "Daughter" and Beef  -What is the role of civil society in Pakistan today? How's civil society activist Jibran Nasir's movement doing?  Why did Pakistan Rangers raid MQM headquarter at "90" which is also self-exiled MQM leader Altaf Husain's home in Karachi? Was this action justified? Why are Ranger not acting against many banned sectarian outfits engaged in murder and mayhem of Shias?   Why has Indian government banned BBC documentary "Daughter" about the culture of rape? Why is beef now banned in Maharashtra in Indian "secular democracy"?  What is the significance of Pakistan's Shaheen 3 missile's successful test?   ViewPoint from Overseas host Faraz Darvesh discusses these questions with Pakistan's leading civil society activist Mohammad Jibran Nasir - Official and regular panelists Ali H Cemendtaur and Riaz Haq(

Publicly funded inequality, Brookings: One of the factors driving the massive rise in global inequality and the concentration of wealth at the very top of the income distribution is the interplay between innovation and global markets. In the hands of a capable entrepreneur, a technological breakthrough can be worth billions of dollars, owing to regulatory protections and the winner-take-all nature of global markets. What is often overlooked, however, is the role that public money plays in creating this modern concentration of private wealth. As the development economist Dani Rodrik recently pointed out, much of the basic investment in new technologies in the United States has been financed with public funds. The funding can be direct, through institutions like the Defense Department or the National Institutes of Health (NIH), or indirect, via tax breaks, procurement practices, and subsidies to academic labs or research centers. When a research avenue hits a dead end – as many inevitably do – the public sector bears the cost. For those that yield fruit, however, the situation is often very different. Once a new technology is established, private entrepreneurs, with the help of venture capital, adapt it to global market demand, build temporary or long-term monopoly positions, and thereby capture large profits. The government, which bore the burden of a large part of its development, sees little or no return. ...A combination of measures and international agreements must be found that would allow taxpayers to obtain decent returns on their investments, without removing the incentives for savvy entrepreneurs to commercialize innovative products.

Venezuela To Start Fingerprinting Supermarket Shoppers - Back in August, when we wrote about the latest instance of trouble in Maduro's socialist paradise, we cautioned that as a result of the economic collapse in the Latin American nation, Venezuelans soon may need to have their fingerprints scanned before they can buy bread and other staples.  Privacy concerns aside (clearly Venezuelans have bigger, well, smaller fish to fry) there was hope that this plunge into insanity would be delayed indefinitely, as the last thing Venezuela's strained economy would be able to handle is smuggling of the most basic of necessities: something such a dramatic rationing step would surely lead to. Unfortunately for the struggling Venezuelan population, the time has arrived and as AP reported over the weekend, Venezuela "will begin installing 20,000 fingerprint scanners at supermarkets nationwide in a bid to stamp out hoarding and panic buying" as of this moment.

U.S. declares Venezuela a national security threat, sanctions top officials (Reuters) - The United States declared Venezuela a national security threat on Monday and ordered sanctions against seven officials from the oil-rich country in the worst bilateral diplomatic dispute since socialist President Nicolas Maduro took office in 2013. U.S. President Barack Obama signed and issued the executive order, which senior administration officials said did not target Venezuela's energy sector or broader economy. But the move stokes tensions between Washington and Caracas just as U.S. relations with Cuba, a longtime U.S. foe in Latin America and key ally to Venezuela, are set to be normalized. Venezuelan President Nicolas Maduro denounced the sanctions as an attempt to topple his government. At the end of a thundering two-hour speech, Maduro said he would seek decree powers to counter the "imperialist" threat, and appointed one of the sanctioned officials as the new interior minister. Declaring any country a threat to national security is the first step in starting a U.S. sanctions program. The same process has been followed with countries such as Iran and Syria, U.S. officials said. The White House said the order targeted people whose actions undermined democratic processes or institutions, had committed acts of violence or abuse of human rights, were involved in prohibiting or penalizing freedom of expression, or were government officials involved in public corruption.

Brazil's Rousseff says austerity drive to last as long as needed (Reuters) - President Dilma Rousseff appealed to Brazilians on Sunday to back fiscal austerity policies, while saying that the belt-tightening will last as long as needed and positive results will only start showing at the end of this year. With the economy stalled and relations with her coalition allies in disarray due to a massive corruption investigation at state-run oil company Petrobras, Rousseff needs support for unpopular steps to reduce a gaping deficit and save Brazil's investment grade rating on its debt from a downgrade by ratings agencies. "This is a process that will last as long as necessary to rebalance our economy," Rousseff said in a nationally televised speech marking International Women's Day. She said she expected the economy to start recovering at the end of this year. true The leftist leader said the belt-tightening started with cutbacks in government spending and has moved on to reducing tax breaks and subsidies for credit. Rousseff's plans to cut unemployment and social security benefits, however, have met with resistance from within her own Workers' Party. And a decree to raise payroll taxes paid by businesses was thrown out by her main ally in the Senate last week.

Citi blocked on Argentine bond payment - The legal feud between Argentina and a group of New York-based hedge funds that has prevented the government from servicing its debt took a new turn on Thursday when the judge overseeing the case refused Citibank’s request to process a bond payment. Judge Thomas Griesa in Manhattan said in a ruling that Citibank “must observe the orders of United States courts”, putting the US bank in the position of facing possible sanctions in Argentina or violating his ruling. Judge Griesa said he understood Citi’s predicament, saying “Neither option is appealing”, but concluded that the bank must obey US law. The payment, due on March 31, relates to bonds issued under Argentine law. The question of whether Argentina is legally blocked from servicing all of its debt, or just bonds issued under US law, remains in dispute. That debate was fuelled by a recent legal decision in London, where a judge said an interest payment in euros deposited by Argentina fell under UK law. Judge Griesa’s decision on Thursday represents a shift from his rulings on three previous occasions, when he allowed Citi to process “one-time” bond payments. A lawyer for Citi said at a hearing this month that, if the bank did not process the payment, it would be violating Argentine law and would see its business operations jeopardised. Judge Griesa ruled in 2012 that Argentina could not service debt it restructured after its $95bn default in 2001 if it did not also pay the hedge funds — known as holdout creditors — which refused the debt swaps and took Argentina to court demanding full payment. The government has been unable to service its debt since last summer.

Global growth report card: world activity steady as US slows - In last month’s global growth report card, this blog reported that the growth in economic activity in the major economies was fairly steady at an above trend pace, though the US and China were slowing, while other major economies were accelerating. A similar pattern has emerged from the latest data. According to the February estimates of global economic activity derived from Fulcrum’s factor models or “nowcasts”, the growth rate in the major advanced economies was 2.3 per cent last month, slightly down from 2.5 per cent in January. The growth rate was about 0.5 per cent above the trend growth rate estimated by the models, so the output gaps are still closing in all of the major advanced economies. Fears of “bad” global deflation are diminishing.  If we add China to the advanced economies, a broader “nowcast” proxy for global growth in February was 3.9 per cent, compared to 4.0 per cent in January. This global growth estimate has been steady as a rock for the last several few months [1]. Overall, therefore, the benefits to global economic activity from the oil shock have been almost exactly offset by a weakening in the emerging economies, and the US.

Nowcasting Global GDP Growth - - The International Monetary Fund (IMF) provides in its bi-annual World Economic Outlook (WEO) report estimates of world GDP growth that are considered by experts in the field as benchmark figures when aiming at monitoring the global economy. In fact two wide exercises are carried out by the IMF each year in April and October, while two updates, which are light exercises, are released in January and July. All the WEO reports contain the annual world GDP growth for the current year (referred to as nowcast) and for the next year (referred to as forecast). The latest update of the IMF WEO report has been released on the 20th of January 2015 and can be downloaded from the IMF web site. The salient fact of this report is that global GDP growth in 2015-16 has been revised downwards by -0.3pp both years, from 3.8% to 3.5% in 2015 and from 4.0% to 3.7% in 2016. Those revisions are mainly due to weaker than expected prospects in China, Russia, the euro area and Japan. It is noteworthy that the US is the only major economy to be revised upwards. Facing a huge oil price drop (more than 50% since June 2014) oil exporting countries have also been largely revised downwards.  Because of the downward revision for the two upcoming years, many comments have underlined the pessimistic view of the IMF as regards the global economy. However, a global economic growth of 3.5% this year is not especially low. For example, the World Bank is less positive than the IMF and anticipates a global economic growth at 3.0% in 2015 (see the forecast table). In fact, over the recent years, it turns out that the IMF was rather over-optimistic as regards their forecasts of global economic growth. Some of the reasons lying behind this bias are well described in the Chapter 1 of October 2014 WEO (see Box 1.2 p. 39).

"Ignore This Measure Of Global Liquidity At Your Own Peril", Albert Edwards Warns -- With all eyes squarely on the ECB as Mario Draghi prepares to flood the EMU fixed income market with €1.1 trillion in new liquidity starting Monday, Soc Gen’s Albert Edwards reminds us that “another type of QE” is drying up thanks largely to the relative strength of the US dollar. "The bottom line is that in a world of over-inflated asset values, the strength of the dollar is resulting is a rapid tightening of global liquidity as emerging economies (and indeed the Swiss) stop printing money to buy the US dollar. This should be seen for what it is — a clear tightening of global liquidity. Investors ignore this at their peril."

"We Have Front-Row Seats To An Imminent Market Shock", Hedge Fund Billionaire Warns -- Having previously noted that "this is the best shorting opportunity since 2007-9," Billionaire hedge fund manager Cripsin Odey warns that (just as Goldman has noted) the global economy is h"eaded for recession and central banks will not be able to able to come to the rescue because they have exhausted the arsenal of policy weapons." No matter what happens, he chides, the market shrugs it off as they are "kind of relying on central banks pulling a rabbit out of a hat." They will not, "Central banks are not all singing and all dancing," and cannot avoid the consequences of what they are doing, concluding, "you and I have got grandstand seats here [to an imminent market shock]," and investors are about to "find out just how illiquid it really is out there." One of the world's leading hedge fund managers has warned that global economies are headed for recession and central banks will not be able to able to come to the rescue because they have exhausted the arsenal of policy weapons. As The Sydney Morning Herald reports, Mr Odey is best known for his big macroeconomic calls, including foreseeing the 2008 global credit crisis; piling into insurers in the wake of September 2001 attacks; and picking the recent oil price rout. He famously paid himself £28 million in 2008 after shorting credit crisis casualties, including British lender Bradford & Bingley. Mr Odey's fund returned 54.8 per cent that year. "The market's reaction to all of this is leave it to the professionals, leave it to those great guys, the central bankers, because they saved the day in 2009," he said. "These guys are kind of relying on central banks pulling a rabbit out of a hat." The risk is that this time, monetary policy may be ineffective: "We need the crisis to reformulate policy. Central banks are not all singing and all dancing, they cannot basically avoid the natural consequences of what we are doing."

Global finance faces $9 trillion stress test as dollar soars - Sitting on the desks of central bank governors and regulators across the world is a scholarly report that spells out the vertiginous scale of global debt in US dollars, and gently hints at the horrors in store as the US Federal Reserve turns off the liquidity spigot. This dry paper is the talk of the hedge fund village in Mayfair, and the stuff of nightmares for those in Singapore or Hong Kong already caught on the wrong side of the biggest currency margin call in financial history. "Everybody is reading it," said one ex-veteran from the New York Fed. The report - "Global dollar credit: links to US monetary policy and leverage" - was first published by the Bank for International Settlements in January, but its biting relevance is growing by the day. It shows how the Fed's zero rates and quantitative easing flooded the emerging world with dollar liquidity in the boom years, overwhelming all defences. This abundance enticed Asian and Latin American companies to borrow like never before in dollars - at real rates near 1pc - storing up a reckoning for the day when the US monetary cycle should turn, as it is now doing with a vengeance. Contrary to popular belief, the world is today more dollarized than ever before. Foreigners have borrowed $9 trillion in US currency outside American jurisdiction, and therefore without the protection of a lender-of-last-resort able to issue unlimited dollars in extremis. This is up from $2 trillion in 2000. The emerging market share - mostly Asian - has doubled to $4.5 trillion since the Lehman crisis, including camouflaged lending through banks registered in London, Zurich or the Cayman Islands. The result is that the world credit system is acutely sensitive to any shift by the Fed. "Changes in the short-term policy rate are promptly reflected in the cost of $5 trillion in US dollar bank loans," said the BIS.

Currency Movements Take On a Bigger Share of Economic News -- News coverage of the global economy turned slightly positive in February, according to data released Tuesday, and foreign-exchange movements are taking on more importance this year. The Absolute Strategy Research/Wall Street Journal global composite newsflow index edged up to 50.5 in February from 48.7 in January. An index above 50 denotes positive news coverage on economic topics. The U.S. newsflow composite index increased to 53.8 from 50.1. While up in February, both the global and U.S. indexes remain well below their averages of fourth-quarter 2014. Elsewhere, the direction of news coverage was mixed. Japan’s index returned to a positive level of 51.5 in February from 47.4 in January. The eurozone composite index edged up to a still weak 48.9 in February from 46.5 in January. China went in the opposite direction. Its composite index fell to 41.9, the lowest reading in two and a half years. Currency swings have become a more important economic topic among major economies. ASR found that 23% of eurozone economic stories reported in January and February mentioned currency movements. That’s up sharply from the 14.6% share averaged in 2014. The increase corresponds with more accommodative policy announced in January by the European Central Bank. The ECB’s bond buying began Monday. The ECB’s intention to buy bonds sharply weakened the euro versus the U.S. dollar. The euro hit an 11-year low against the dollar on March 6. A cheaper currency is seen as a positive for exports and tourism and thus overall economic growth. In the U.S., on the other hand, recent mentions of the dollar have been negative for the economic outlook since the dollar’s strength is limiting export growth. ASR found the share of currency mentions picked up in the U.S. to 14.7% in February. While that’s well above the 7% averaged in 2014, it is low compared with the shares in Europe and Japan.

Putin Eyes Single Currency for Eurasian Union Trade Bloc - Moscow Times: Russia will explore the creation of a single currency across the Moscow-led Eurasian Union trade bloc of ex-Soviet states, according to an order published on the Kremlin's website. The move comes as relations between union members Russia, Belarus, Armenia and Kazakhstan are strained by tit-for-tat sanctions between Moscow and the West over Ukraine and a Russian recession that is spilling over into neighboring economies. According to the order, President Vladimir Putin requested Russia's government and Central Bank work with financial regulators in the bloc's member nations to present by Sept. 1 a report "defining the vector of financial and currency integration within the Eurasian Union and examining the desirability and possible creation of a currency union in the future." The Eurasian Union was formed on Jan. 1 this year on the basis of an earlier customs union between several former Soviet republics. Russia lobbied hard to create the bloc, which unites around 170 million people and will be joined by Kyrgyzstan later this year. But customs posts briefly reappeared between bloc members late last year as Russia tried to enforce a ban on a range of food imports from Western countries and the European Union that was adopted in retaliation for sanctions.

TASS: Economy - Russia may use China’s payment infrastructure instead of SWIFT — VTB Bank head: Russia may eventually use China’s payment infrastructure instead of international bank message system SWIFT, VTB Bank Chief Andrey Kostin said in an interview with Bloomberg news agency on Wednesday. "With time but not now," Kostin said in reply to a question about whether Russia would be able to switch to the Chinese International Payment System (CIPS) if it experienced problems with SWIFT. The VTB head said the international financial system was becoming not very convenient for Russia as it posed a threat to Russia’s security. ‘We’ll definitely work closer with Chinese colleagues to develop alternative systems," the head of Russia’s second largest bank said. The VTB chief said he doubted that the situation would develop to extremes. "I don’t believe there will be a decision on disconnection because this is a very unfriendly and even alien step towards Russia," he said.The news agency Reuters reported on Tuesday China might launch an international payment system for external settlements in yuans in September-October 2015. The CIPS will allow banks in various countries to exchange instructions in yuans instead of US dollars thanks to lower transaction costs. Last year, Western countries considered disconnecting Russia from SWIFT as a possible sanction over Russia’s stance on developments in neighboring Ukraine. The proposal was made by UK Prime Minister David Cameron and was also mentioned in a resolution of the European parliament.

The West's Plan To Drop Russia From SWIFT Hilariously Backfires -- If Vladimir Putin is alive and remotely capable of laughter (the jury is out on that one...) then he’s probably doing so right now. For the last several months, despite numerous warnings of the consequences, the US and UK governments have been pushing to block Russia from the SWIFT payments system. And so what is utterly hilarious - On Monday afternoon, not only did SWIFT not kick Russia out... but they announced that they were actually giving a Board Seat to Russia.

EU Decides Not to Target Investments to Help Nations It Forced into Great Depressions - William K. Black -- Sometimes there’s a news story that captures the madness perfectly.  The latest is by Rebecca Christie and Rainer Buergin in Bloomberg entitled “EU Backs Investment Plan With Pushback on Help for Hardest Hit.” “European Union finance ministers agreed to press ahead with a proposed 315 billion-euro ($338 billion) investment plan, while reminding crisis-hit nations that it won’t offer them special assistance.” The numbers in the EU’s supposed “investment plan” are a grossly inflated public relations effort.  At first blush, the plan is simply a way of subsidizing huge, private firms to increase their profits.  When we look more closely we can see it is actually malignant.  The public funding, relative to the EU’s overall need for investment is deliberately trivial.  Relative to the private firms that the EU will subsidize with those funds, however, the EU public funds represents a 6.67% subsidy.  That is a material addition to corporate profits. “[EU Commission President Jean-Claude] Juncker’s plan envisages using 21 billion euros of EU seed money to mobilize 15 times as much investment in cooperation with private investors. To gain financing help, projects must show private-sector backing and evidence that they will offer a return on investment.” Juncker is notorious for his long-standing role in turning Luxembourg into the “magical fairyland” by implicitly creating enormous subsidies for large foreign corporations through secret deals to dramatically reduce their taxes.  He is ultra-conservative, one of the most virulent of the troika’s austerity supporters, and a fierce proponent of the troika’s war on EU workers.  His selection as head of the EU Commission demonstrates the ultra-conservative domination of that body.

Ukraine’s High-Wire Act: One Misstep Could Plunge It Into the Abyss - Ukraine’s bailout is a high-wire balancing act: One misstep and the economy could fall into the abyss. Just hours after the International Monetary Fund approved an expanded, $17.5 billion emergency-financing package for the country, outside economists were once again questioning the reality of the fund’s assumptions. There are a myriad of what the IMF calls “exceptionally high risks” to the program. But three sets of assumptions stand out: about the conflict with Russian-backed separatists, economic growth and a planned debt restructuring. “The odds of this program surviving intact for four years, or even through the end of 2015, are not much higher than for the original 2014 program,” said Robert Kahn, a senior fellow at the Council on Foreign Relations and former IMF economist in a blog post Thursday. Since the start, the Ukraine bailout has drawn comparisons to the Greek program. Five years later–after countless revisions, expanded financing and the largest debt restructuring in history–Greece is still fighting with creditors and struggling to return to health. As in the Greek program, the IMF was at first adamant that no debt relief would be needed. Then, after repeated downward revisions of the growth outlook, the IMF acknowledged what analysts, economists and reporters had predicted all along: A debt restructuring was vital. In Ukraine’s case, one of the biggest risks is that the bailout is based on a fragile cease-fire holding between Kiev and the militants. A re-escalation would scupper the ability of the government to meet its obligations to the fund.  Underscoring the frailty of the program, U.S. officials said just hours before the fund approved the bailout that separatists had already violated the accord.

Michael Hudson on the IMF’s Tender Ministrations in Ukraine and GreeceYves Smith - This RT interview with Michael Hudson focuses on the appalling state of the Ukraine economy and the role of the IMF, both in its policy-violating rescue package there and on a more general basis. Hudson points out that the IMF was always a vehicle of policy, and is operating as an adjunct to the Pentagon. What is left unsaid is that the IMF loan is being used as an alternative to a Congressional appropriation to fund the government in Kiev against the aspiring breakaway region in the east.  The section with Hudson starts at 13:45.

Jean-Claude Juncker calls for EU army -- The European Union needs its own army to help address the problem that it is not “taken entirely seriously” as an international force, the president of the European commission has said. Jean-Claude Juncker said such a move would help the EU to persuade Russia that it was serious about defending its values in the face of the threat posed by Moscow. However, his proposal was immediately rejected by the British government, which said that there was “no prospect” of the UK agreeing to the creation of an EU army. “You would not create a European army to use it immediately,” Juncker told the Welt am Sonntag newspaper in Germany in an interview published on Sunday. “But a common army among the Europeans would convey to Russia that we are serious about defending the values of the European Union.” Juncker, who has been a longstanding advocate of an EU army, said getting member states to combine militarily would make spending more efficient and would encourage further European integration. “Such an army would help us design a common foreign and security policy,” the former prime minister of Luxembourg said. “Europe’s image has suffered dramatically and also in terms of foreign policy, we don’t seem to be taken entirely seriously.”

Thomas Piketty on the Euro Zone: 'We Have Created a Monster' - A small part of a much longer interview: Thomas Piketty on the Euro Zone: 'We Have Created a Monster', Interview by Julia Amalia Heyer and Christoph Pauly: ... SPIEGEL: ... What do mean when you refer to impenetrable political instruments?

  • Piketty: We may have a common currency for 19 countries, but each of these countries has a different tax system, and fiscal policy was never harmonized in Europe. It can't work. In creating the euro zone, we have created a monster. Before there was a common currency, the countries could simply devalue their currencies to become more competitive. As a member of the euro zone, Greece was barred from using this established and effective concept.
  • SPIEGEL: You're sounding a little like Alexis Tsipras, who argues that because others are at fault, Greece doesn't have to pay back its own debts.
  • Piketty: I am neither a member of Syriza nor do I support the party. I am merely trying to analyze the situation in which we find ourselves. And it has become clear that countries cannot reduce their deficits unless the economy grows. It simply doesn't work. We mustn't forget that neither Germany nor France, which were both deeply in debt in 1945, ever fully repaid those debts. Yet precisely these two countries are now telling the Southern Europeans that they have to repay their debts down to the euro. It's historic amnesia! But with dire consequences.

Europe, The Morally Bankrupt Union - The European Union is busy accomplishing something truly extraordinary: it is fast becoming such a spectacular failure that people don’t even recognize it as one. People have no idea, they just think: this can’t possibly be true, and they continue with their day. They should think again. Because the Grand European Failure is bound to lead to real life consequences soon, and they’ll be devastating. The union that was supposed to put an end to all fighting across the continent, is about to be the fuse that sets off a range of battles. To its east, the EU is involved in a braindead attempt at further expansion – it has only one idea when it comes to size: bigger is always better -, an attempt that is proving to be such a disaster that heads will roll in the Brussels corridors no matter what. Europe has joined the US and NATO very enthusiastically in creating not just a failed state, but a veritable imitation of Hiroshima, in Ukraine, right on its own borders. The consequences of this will haunt the EU (or if it doesn’t last, which is highly plausible, its former members) not just for weeks or months or years, but for many decades.  The carefully re-crafted relationship with Russia, which took 25 years to build, was destroyed again in hardly over a year, something for which Angela Merkel deserves so much blame it may well end up being her main political legacy. Vladimir Putin, and Russia as a nation, will not easily forget the humiliation the west has thrown at them, the accusations, the innuendo, the attempts to draw them into a war they never wanted and in which they see no advantage for any party involved.  That US warmongers would try and set this up, is something Moscow has long known and expected; that Merkel would stand side by side with the likes of John McCain and Victoria Nuland is seen as a deep if not ultimate betrayal between neighbors and friends. Russia will present Germany with the bill when it feels the time is right. Obviously, all other EU countries that have behaved in the insane ways they have over the past year will receive that same bill, or worse.

European bond yields drop as ECB launches QE - Borrowing costs for most European countries fell on Monday as the European Central Bank kicked off its most aggressive easing program ever. The yield on 10-year German bunds shaved off 8 basis points to 0.311%, while yields for the country’s shorter-dated bonds remained in negative territory, according to electronic trading platform Tradeweb. Meanwhile in southern Europe, the yield on 10-year Spanish government bonds fell 2 basis points to 1.211%, a far cry from the more than 7% logged during the height of the European debt crisis. Yields on 10-year Italian government paper dropped 4 basis points to 1.276%, while borrowing costs for Portugal slipped a basis point to 1.745%. The declines in borrowing costs came as the ECB started its 60-billion-euro ($65 billion) a-month bond-buying program, aimed at lifting inflation and boosting growth in the struggling region. According to Bloomberg, the central bank bought German and Italian debt on its first QE day, as well as Belgian and French securities. A representative from the ECB said the central bank doesn’t comment on the purchase details, but that a report will be publish each month with specifications on the amount and what kind of bonds that have been bought so far. The scheme was announced at the central bank’s Jan. 22 meeting and bond yields have moved steadily lower since then. Economists expect borrowing costs for European countries to gradually pick up when the QE effect spreads to the wider economy.

European Markets Watchdog Warns Government Bonds Not a Risk-Free Investment -  A financial markets watchdog group headed by European Central Bank President Mario Draghi said Tuesday that the risk-free treatment of government bonds in some regulations may lead to excessive investment in these types of securities. A report from the European Systemic Risk Board, which Mr. Draghi chairs, noted that “for decades, the regulatory treatment of sovereign debt has significantly discounted and, in many cases, ignored the possibility of default on exposures that are denominated and funded in the country’s own currency.” “The evidence presented in the report illustrates, however, that sovereign risk is not a novel concept” and that defaults “have occurred regularly throughout history, including for sovereign debt denominated and funded in domestic currency,” the report said. The ESRB was set up in the aftermath of the global financial crisis and includes representatives from the ECB and other central banks in Europe as well as banking supervisors. The ESRB report noted that, after falling in the early part of the 2000s, government bond holdings by banks in fragile euro countries have risen over the past six years. “In almost all euro area countries, the euro area sovereign debt exposure of banks is overwhelmingly towards their domestic issuer, and this home bias is particularly strong in the countries where banks’ total euro area sovereign exposure is largest,” the ESRB report said.

This Was Not Supposed To Happen - As Mario Draghi unleashes his trillion euro bond buying program - aimed from what we are told, at lowering risk premia in credit markets to stimulate the eurozone's economy from utter stagnation - things are not going according to plan. Away from Greece, peripheral bond spreads are all up 8bps on the day and stock indices are mixed on this first day of DOMO (Draghi Open Market Operations) Of course, the other reason for Q€ is to implicitly (because one would never explicitly admit to joining the currency wars) devalue the currency - thus improving competitiveness and exports for the EU; but that's not working out so well as Germany's exports dropped and missed by the most since August... this was not supposed to happen.

ECB ‘Chasing Own Tail’ as Bond Rates Turn Negative: SocGen -- The amount of bonds eligible for the European Central Bank to buy under its quantitative-easing program is poised to shrink as the purchases risk pushing more yields below zero, according to Societe Generale SA. The ECB, led by President Mario Draghi, began buying euro-area sovereign debt on Monday under the 19-month plan to inject 1.1 trillion euros ($1.2 trillion) into the region’s economy to spur growth. While the ECB was said to have purchased debt with negative yields this week, including that of Germany and the Netherlands, its rules preclude buying of securities yielding less than its deposit rate of minus 0.20 percent. The move and anticipation of further bond purchases helped to push Germany’s seven-year rate below zero on Tuesday, while yields from Italy to Ireland dropped to record lows. German notes maturing in April 2018 were no longer eligible for ECB buying on Tuesday as their yields dropped to minus 0.23 percent. “It’s like the ECB is chasing its own tail,” Ciaran O’Hagan, head of European rates strategy at SocGen in Paris, said on Tuesday. “Yesterday, the Bundesbank could have bought 2018 notes. Today it needs to go out to 2019. The universe of buyable bonds is melting like snow in the spring sun.” A nominal amount of 1.17 trillion euros in bonds, or around 25 percent of total eligible government securities, is yielding less than zero, according to SocGen data.

How Far Below Zero Can Interest Rates Go? -- Several central banks in Europe have ventured past the frontier of conventional monetary policy by pushing some of their policy rates below zero. This raises two interesting questions. First, how is this  possible? And second, will it work?  It has long been said that interest rates cannot go below zero because people will simply hold physical currency rather than incur a charge for leaving money in the bank. But the “zero bound” was never really zero for the simple fact that money is a pain to store and to use. As David Beckworth, who blogs at Macro and Other Market Musings, notes, what we are really interested in is the effective lower bound: the true level below which interest rates cannot go. That number is probably negative, but how negative?  Evan Soltas, who blogs at economics & thought, says people seem willing to tolerate credit card and related fees of around 2%, and reckons people would tolerate negative interest rates of 3% before switching to cash. The European Central Bank puts the total economic cost of cash at 2.3%  of the face value of transactions.   The time Danish households spent using cash was worth an estimated 1.3 billion krone (about $200 million) in 2009,  about 0.3% of GDP. The relative inconvenience of cash has grown as electronic alternatives have become ever more ubiquitous and frictionless.  But Paul Krugman at the New York Times points out that convenience is only one of the factors that people consider in weighing whether to hold cash or bonds (or bank deposits, or anything that pays interest). The other is that it’s a store of value. Cash is pretty inferior as a store of value when bank deposits pay positive interest, but clearly superior when they pay negative interest; a zero rate of return is clearly better than negative. Thus, he says, convenience is irrelevant for people who hold as money as wealth rather than for spending.

The Below-Zero Lower Bound - What’s at stake: The negative yields observed on some government and corporate bonds, as well as the recent move into further negative territory of monetary policy rates, are shaking our understanding of the ZLB constraint. This blogs review summarizes the recent debates on the binding nature of the zero lower bound. Next week, we’ll look at the implications of negative interest rates for financial stability. Matthew Yglesias writes that something really weird is happening in Europe. Interest rates on a range of debt — mostly government bonds from countries like Denmark, Switzerland, and Germany but also corporate bonds from Nestlé and, briefly, Shell — have gone negative. And not just negative in fancy inflation-adjusted terms like US government debt. It’s just negative. As in you give the German government some euros, and over time the German government gives you back less money than you gave it.   Evan Soltas writes that economists had believed that it was effectively impossible for nominal interest rates to fall below zero. Hence the idea of the “zero lower bound.” Well, so much for that theory. Interest rates are going negative all around the world. And not by small amounts, either. $1.9 trillion dollars of European debt now carries negative nominal yields, and the overnight interest rate in Swiss franc is around -1 percent annually. Gavyn Davies writes that an unprecedented experiment in monetary policy is underway in two small countries in Europe. By pushing policy interest rates more deeply into negative territory than ever seen before, the Swiss and Danish central banks are testing where the effective lower bound on interest rates really lies. Denmark and Switzerland are clearly both special cases, because they have been subject to enormous upward pressure on their exchange rates. However, if they prove that central banks can force short term interest rates deep into negative territory, this would challenge the almost universal belief among economists that interest rates are subject to a ZLB.

More on Negative Rates - Evan Soltas -- Paul Krugman and I, I think, are largely on the same page with respect to negative nominal interest rates. Greg Ip has a nice introduction to the conversation as well.Here's what I think we can agree on:
1. The zero lower bound is a bound at zero only if there is no cost to storing currency. Since this is not true, as there is some cost to storing currency, the bound is not at zero.
2. Furthermore, it may not particularly useful to think of it as a bound. Rather, different agents in the economy face different costs of switching from deposits to currency. This distribution of costs shapes a supply curve for deposits. As the interest rate is increasingly negative, the supply of deposits dwindles, as more and more find it worthwhile to convert deposits into currency.
3. Krugman is right that the marginal depositor must use deposits only as a means of storage, not as a transaction medium. That is, the first dollars to get converted into currency must be ones that nobody plans on spending anytime soon -- the dollars that would otherwise pass in and out of credit-card accounts remain in deposit form unless rates continue to go negative.
4. That argument, however, also suggests that the value of the convenience that I stressed in my previous piece is not irrelevant for the entire deposit-supply curve, but rather just for the initial segment. The marginal benefit of deposits includes convenience in transactions for a later section of the deposit supply curve.
5. It is not quite clear how large the share of passive deposits are -- i.e. the ones that exist just for storage -- relative to the share of deposits that are, in some sense, money in movement. Excess reserves suggest it could be substantial.
6. Furthermore, as Miles Kimball stressed to me, whether the movement into negative nominal interest rates is expected to be enduring or short-lived matters, because setting up systems to store currency likely involve fixed costs. So it's likely the short-term supply of deposits in negative-rate territory would be greater than the long-term supply.
7. There are many, many ways to maneuver around a negative nominal interest rate. As I suggested at the end of the earlier piece, inventories and working capital may be more important than our currency-focused discussion would suggest.

Ultra-low interest rates could run and run --This week, all eyes have been fixed on the relationship between the euro and the dollar. No wonder. A year ago, the eurozone was running a tighter monetary policy than the US. This week, however, the European Central Bank embarked on a massive new round of quantitative easing, even as American monetary policy officials such as James Bullard, head of the Reserve Bank of St Louis, signalled that they want to raise American interest rates soon. So it is no surprise that the spread between dollar and eurozone interest rates has widened as the dollar has strengthened. “It is all about the dollar and euro [now],” Bill Blain, an analyst at Mint Partners in London argued, noting that “surveys suggest that more than 50 per cent of market participants think the euro will reach parity against the dollar before Easter”. Investors who are obsessively watching that euro-dollar rate risk missing another, equally interesting shift under way in the markets — this time between yen interest rates and euro rates. Over the past decade, eurozone interest rates have traded well above those in Japan. Back in March 2004, for example, the 15-year forward swap rate for euros and yen (which indicates the relative difference in yields) was about 300 basis points, and four years ago the gap was still around 150 basis points. That (obviously) reflected the fact that Japan has been mired in deflation, economic stagnation and ultra-low interest rates for more than a decade. But the picture has suddenly — and dramatically — reversed as the yield on eurozone bonds has fallen below that of yen bonds. Right now, for example, 15-year euro-yen swaps imply that eurozone rates are 77 basis points lower those of Japan. Meanwhile, the current 10-year Bund yield is a mere 22 basis points, compared with 41 basis points in Japan, and for 30-year bonds the yields are 71 basis points and 149 basis points respectively. To put it another way, as a demonstration of Alice-in-Wonderland economics, Japan is no longer the only (or best) example. The pattern in the eurozone looks even more extreme in terms of ultra-low rates.

Open market operations for negative nominal yield bonds - There are lots of those such securities these days, so what happens when a central bank buys up some with monetary reserves?  An email from Scott Sumner prompted me to address this question more directly than my mere mention from yesterday.  I see a few scenarios, none of which satisfy me:

  • 1. Buying the securities lowers long rates further and depresses the value of the currency, which is broadly stimulatory.  Arguably this would follow from a Keynesian model.
  • 2. Currency determines the price level, not bonds, as in Fama (1980).  Alternatively, old-style monetarists might believe that something like M2 determines the price level.  Either way, we can expect the OMO to raise the price level and perhaps depress the exchange rate as well.
  • 3. Portfolio theory means that the lower rate (indeed negative rate) instruments must have higher liquidity premia.  Buying up higher liquidity instruments with lower liquidity instruments (i.e., currency) ought to be contractionary.  Don’t be fooled by Fama and the monetarists, in a world of credit it is all about liquidity in the broad sense and that in this scenario is going down.
  • My intuitions are closest to number three, but I am not trying to claim that is being verified empirically.  And oh, there is also #4:
  • 4. If nominal rates are negative, all the action is in the risk premium.  And the effect of this asset swap on the risk premium is????

That euroglut outflow and the real Japanisation of Europe -- All hail the Euroglut, that oh so corpulent result of Europe’s (read: Germany’s) huge excess savings — which hit a record €234bn at the end of last year as oil prices collapsed and are projected to hit €300bn over the course of 2015 if oil prices stay that way. You can, in part, blame said Euroglut (along with ECB QE and negative rates) for this type of thing… As to the eventual size of these outflows? Well, Deutsche’s George Saravelos and Robin Winkler, they of the original Euroglut conception back in September, have attempted to go beyond just “massive”. They’re guessing the adjustment being talked about here will eventually demand net capital outflows in the region of 4tn – that would mean a continuation of the current pace of outflows for the next eight years. Nice to know roughly what “massive” means, at least. First though, from Deutsche, on those yield-hungry ouflows so far: The large current account surplus combined with ECB easing and negative rates has initiated a process of large-scale capital outflows from Europe. In the second half of 2014, the euro area saw record net investment in foreign portfolio assets, reaching €135bn in Q4 (Figure 3), or around half a trillion in annualized terms. There are no indications that this trend has reversed or slowed down since. More than 90% of these flows are attributable to fixed income, though equity outflows accelerated markedly in December. At the same time, ‘other investment’ outflows- –mostly bank lending in the European periphery—have diminished relative to the financial account. The expansion of the Eurozone’s financial account has thus been driven by portfolio outflows. This stands in stark contrast to the pre-crisis decade, during which the Eurozone recycled its intermittent and meager surpluses through EUR-denominated loans to the European periphery. Portfolio outflows from the euro area have been searching for yield overseas. Relative to the allocation of the EMU’s total stock of foreign portfolio assets, recent flows have disproportionately favoured assets in the US, the UK, and Canada (Figure 4).

Exporting Europe's Stagnation - Paul Krugman - Watch that plunging euro! Actually, it’s good news for Europe. European growth numbers have been better lately, and the weak euro — which makes EZ manufacturing and other tradables more competitive — is surely a large part of the explanation. Not so good for Japan or the US. But how should we think about this? It’s more or less standard international macro that with high capital mobility and floating exchange rates, demand shocks in any one country or region will be “shared” with other countries. If you have exceptionally strong demand, your currency will rise, crimping your own growth while boosting growth abroad; if you have exceptionally weak demand, you will get partial compensation via a weaker currency that helps net exports. Such effects can be offset with interest rate changes if you’re not at the zero almost lower bound, but we are. But how much of a demand shock is shared? I argued about a month ago that it depends on the extent to which the shock is perceived as temporary versus permanent. In an idealized world permanent shocks should be fully shared — that is, permanently weak demand in Europe should hurt the United States just as much as it does Europe.

Austrian state faces ′bad bank′ crisis - The state of Carinthia in southern Austria faces a bill it can't pay - and may be forced to declare bankruptcy. It may be asked to find as much as 10 billion euros to cover toxic bank debts from a collapsed lender. An Austrian state is threatened with bankruptcy after the country's national government said it would cut support for one of the "bad banks" created in the wake of the world financial crisis. Supervisors took control of Heta Asset Resolution on Sunday (01.03.2014) after an audit revealed a balance-sheet shortfall of up to 7.6 billion euros. They issued a 15-month moratorium on payment of its debts to allow time for agreement on a debt haircut with creditors. Finance Minister Hans Jörg Schelling told public radio the country would cover a 1 billion euro bond, issued in 2012. But it would not cover the debt guarantees of Austria's states - and he called on the southern state of Carinthia to pay its full share.But state premier Peter Kaiser said the debt guarantee amounted to 10.2 billion euros - some five times Carinthia's annual budget. "Carinthia cannot pay that," he said.

EU gives France third extension to cut its budget deficit (Reuters) - European Union finance ministers gave France two more years on Tuesday to cut its budget deficit to within EU limits, extending the deadline for the third time since 2009 as Paris struggles to enact reforms. The euro zone's second biggest economy has repeatedly missed deadlines and budget consolidation targets and, under EU budget rules sharpened during the sovereign debt crisis, was facing fines of up to 4 billion euros ($4.3 billion) by late last year. But the European Commission, which prepares the ministers' decision, recommended an extension of the deadline to 2017 from 2015 to give Paris more time to implement reforms and cut spending at a time of weak economic growth and low inflation. "The two-year extension in the excessive deficit procedure for France is approved," an EU official said. The Commission recommendation sparked controversy among some smaller euro zone countries and within the Commission itself, because many policy-makers see it as undermining the credibility of the rules set out in the EU's Stability and Growth Pact.

Greece must reform and forget Syriza's 'false promises:' ECB's Coene (Reuters) - Greece must realize there is no other way than to reform, European Central Bank governing council member Luc Coene said in an interview published on Saturday, telling Greeks they had been sold "false promises" by radical leftists now in power. The Belgian central bank chief said that life outside the euro zone would be far worse for Greek people and warned that if Athens wanted to be financed by the euro zone, the ECB and the International Monetary Fund, it had to follow the rules. "I do not believe there is a radically different way," he told Belgian daily De Tijd. "Syriza has made promises it can not keep," he said, adding that the Greek people "will understand quickly that they were deceived by false promises." true Like his euro zone colleagues, Coene had a clear message for Greece, saying: "Reform is the only way ... Tell me where the money should come if the Greeks do not want reform and do not want to repay other European countries?" Greeks voted for Alexis Tsipras, leader of Greece's far-left Syriza party, in January because of his promises to renegotiate the country's EU/IMF bailout that many feel punished the country and drove it into an economic depression. But EU leaders say Greece's prospects have improved greatly since it nearly crashed out of the euro in 2010 and, as economic growth returns, urge it to continue the reform process.

Is the IMF About to Make Greece an Offer It Can’t Refuse? -These words belong to a Brazilian economist called Paulo Nogueira Batista Jr. who represents 11 Central and South American countries on the IMF board. During a recent interview with private Greek television broadcaster Alfa TV, he made the following rather startling — but much ignored — assertions (none of which will be to the German government’s liking):

  • The first Troika-sponsored program, in 2010, was presented as a bailout of Greece but was in reality a bailout of Greece’s private creditors. Greece received enormous amounts of money but almost all of it was used to allow the exit of French, German and other Northern European banks from their positions,
  • Any solution to Greece’s debt crisis should include a significant restructuring of debt with its official European creditors. Without a restructuring, it’s very hard to envisage Greece extricating itself from its economic and social crisis.
  • The Greek government should respect the IMF’s preferred creditor status. Any debt restructuring should affect other creditors that do not have this preferred creditor status. In other words, whatever Greece tries to do, it should forget about attempting “to restructure its debt with the IMF.”

It doesn’t take much reading between the lines to realize that what Batista is essentially advocating is for European taxpayers to be left holding a bag of worthless, cancelled Greek debt while the IMF continues to get paid – to borrow Batista’s own words – “at par.” This is an offer that would completely obliterate the strict conditions recently set for Greece by Germany, the Eurozone’s biggest creditor nation, and supported by all other Eurozone nations. They include fellow Club-Med nations like Portugal and Spain whose governments Greek PM Alexis Tspiras recently accused – with some justification – of seeking to sabotage talks on extending the Greek bailout program.

Eurogroup head responds positively to new Greek letter: government (Reuters) - The head of the euro zone finance ministers responded positively to Greece's request for an immediate start to technical talks with international creditors to conclude the country's current bailout program, a Greek government official said on Saturday. Greek Finance Minister Yanis Varoufakis sent a letter to Jeroen Djisselbloem on Friday, outlining the first batch of reforms that Greece would implement as a condition for further aid by its EU/IMF lenders. "Eurogroup's head Djisselbloem sent a letter late last night responding to Finance Minister Varoufakis," the official said. true "He responded positively to the Greek minister, underlining the need for the negotiations to continue at the Euroworking Group and between the technical teams in order to implement the Feb. 20 decision." Under a deal with its lenders last month, the new Greek government has until the end of April to specify the measures it will implement in turn for further aid. Euro zone finance ministers are meeting on Monday in Brussels to discuss Athens' letter of pledged reforms. On Thursday, European Central Bank President Mario Draghi added to pressure on Greece's government to implement promised reforms, saying the ECB would resume normal lending to Greek banks only when it sees Athens is complying with its bailout program and is on track to receive a favorable review.

Greece threatens new elections if eurozone rejects planned reforms - Greece’s anti-austerity government has raised the spectre of further political strife in the crisis-plagued country by saying it will consider calling a referendum, or fresh elections, if its eurozone partners reject proposed reforms from Athens. Racheting up the pressure ahead of a crucial meeting of his eurozone counterparts on Monday, the Greek finance minister, Yanis Varoufakis, said the leftist-led government would hold a plebiscite on fiscal policy if faced with deadlock. “We are not attached to our posts. If needed, if we encounter implacability, we will resort to the Greek people either through elections or a referendum,” he told Italy’s Il Corriere della Sera in an interview on Sunday. Varoufakis was the second high-ranking official in as many days to suggest the possibility of a referendum being held. On Saturday, Panos Kammenos, who heads the government’s junior partner in office, the small, rightwing Independent Greeks party, said such a ballot could be a “possible response” to protracted disagreement with creditor bodies propping up Greece’s debt-stricken economy. “If [lenders] question the will of the Greek people and of the government, one possible response would be to carry out a referendum,” Kammenos, who is also defence minister, told the financial weekly Agora. Reforms have been set as a condition for unlocking a €7.2bn (£5.2bn) tranche of aid that Athens has yet to draw down from its €240bn bailout programme agreed with the EU, the European Central Bank (ECB) and the International Monetary Fund (IMF). With Greece shut out of capital markets, the disbursement is vital to meeting debt obligations.

Greek Tensions Revived as Creditors Reject Reform List - -- Greece’s provisional agreement with creditors to avert a default started to crack as European officials said the country’s latest proposals fell far short of what was tabled two weeks ago and Greek ministers floated the prospect of a referendum if their reforms are rejected. The list of measures Greece’s government sent to euro region finance ministers last Friday, including the idea of hiring non-professional tax collectors such as tourists, is “far” from complete and the country probably won’t receive an aid disbursement this month, Eurogroup chairman Jeroen Dijsselbloem said on Sunday. Greece’s anti-austerity government, elected in January on a promise to renegotiate the terms of a 240-billion euro ($260 billion) bailout, has to present detailed proposals to European creditors or risk running out of cash as soon as this month. The renewed tensions threaten to temper a rally in Greek bonds sparked by optimism over the provisional accord. “It seems their money box is almost empty,” Dijsselbloem told reporters. Greece is seeking the disbursement of an outstanding aid tranche totaling about 7 billion euros. Without access to capital markets, its only sources of financing are emergency loans from the euro area’s crisis fund and the International Monetary Fund. Its banks are being kept afloat by an Emergency Liquidity Assistance lifeline, subject to approval by the European Central Bank. “I can only say that we have money to pay salaries and pensions of public employees,” Greek Finance Minister Yanis Varoufakis said in an interview Sunday. “For the rest we will see.”

Rob Parenteau: Why Understanding Money Matters in Greece -  -- As Greece staggers under the weight of a depression exceeding that of the 1930s in the US, it appears difficult to see a way forward from what is becoming increasingly a Ponzi financed, extend and pretend, “bailout” scheme. In fact, there are much more creative and effective ways to solve some of the macrofinancial dilemmas that Greece is facing, and without Greece having to exit the euro. But these solutions challenge many existing economic paradigms, including the concept of “money” itself. At the Levy Economics Institute conference held in Athens in November 2013, I proposed tax anticipation notes, or “TANs”, as a way for Greece to exit austerity without having to exit the euro (see “Get a TAN, Yanis!” published here last month, for an updated version of that policy proposal). This proposal is based on a deeper understanding of what money actually is, and the many roles that it plays in the economies we inhabit.  The government itself ultimately is the source of money required to pay for government expenditures. Taxes simply give value to money, as households and nonbank firms cannot create money – that is counterfeiting. Instead, they have to sell an asset or a product or a service to the government to get money, or they need to be beneficiaries of government corporate subsidy or household transfer programs to get money.

EU, Greece to start technical loan talks on Wednesday | Reuters: (Reuters) - Warning Greece it had "no time to lose", euro zone ministers agreed technical talks between finance experts from Athens and its international creditors would start on Wednesday with the aim of unlocking further funding. "We've talked about this long enough now," an impatient-sounding Dutch Finance Minister Jeroen Dijsselbloem said after chairing Monday's meeting of euro zone colleagues, their first since Feb. 20, when they extended Greece's bailout deal to June. "We only have four months," he said. "Let's get it done." The new left-wing Greek government, keen to show voters it is keeping election promises to break with EU-imposed austerity, has tried patience among its EU peers by arguing over the form and venue for detailed talks required to establish its needs and whether it has met conditions the creditors have set on reforms. In a compromise, Dijsselbloem said the negotiations among financial experts from Greece and the creditor institutions --the European Commission, European Central Bank and International Monetary Fund -- would start in Brussels on Wednesday, not in Athens as has been normal for EU bailout programmes so far. Those talks, however, would be "supported" by international teams working in Athens to obtain and check information.

The moment of truth is approaching: The government is facing on Monday its second litmus test since it took power in late January. It passed the first test on February 20 by agreeing to a four-month extension of the economic policy program but it is highly doubtful whether its proposed reforms will convince the Eurogroup to disburse a portion of the eurozone tranche. This will put public finances under more strain and bring the moment of truth closer. If Goldman Sachs is right, Greece will have to repay about 270.3 million euros to the International Monetary Fund on Friday, 450.5 million euros on March 16 and 270.3 million euros on March 20. Moreover, it will have to roll over 1.6 billion euros worth of treasury bills on Friday and another 1.6 billion euros on March 20. It may also have to make some interest payments as well during this period, increasing the amount it will have to pay to its creditors. In addition, it will have to pay wages to civil servants and pensions in excess of 2 billion euros at the end of March. This is not an easy task because budget revenues are lagging and the government wants to fulfill its obligations to creditors, civil servants and pensioners. By all accounts, the state has to borrow all the money it can find, i.e. the bank deposits of social security funds and state entities, and postpone other payments to suppliers and other third parties as well as tax rebates. Even so, it may not be able to meet all of its obligations this month if revenues do not pick up and some kind of external help does not arrive. Informed people say the state has even contacted the Greek subsidiaries of multinational companies for short-term loans, indicating the seriousness of the situation.

No good Plan Bs: Greece has no good Plan Bs. Its only rational course of action is to work with its euro zone creditors to reform its economy. Alexis Tsipras, the prime minister, is in a bind. He agreed a short-term deal with other euro zone governments two weeks ago. But he has found it difficult to sell this to hardliners in his radical left Syriza party back home, who accuse him of a U-turn. Some of the subsequent rhetoric from Tsipras’ ministerial colleagues, such as promises to cancel privatisations, has been troubling. So have decisions such as raising the salaries of electricity workers. Meanwhile, Yanis Varoufakis, the finance minister, has sent a rather thin list of proposed reforms to his euro zone counterparts in advance of a meeting on March 9. He has also raised the possibility of holding a second election or a referendum if Greece met with intransigence from its creditors, although it is unclear whether such a possible appeal to the voters would be the precursor to further U-turns by the government or an exit from the euro or might have some other purpose. Varoufakis will have much explaining to do. If Greece is to secure a long-term pact with its creditors by end-June, Tsipras will have to abandon most of his election promises. Given the difficulties he is having delivering on even the short-term pact, there is a temptation to cast around for alternatives. Some members of Syriza want Greece to regain its financial independence by defaulting on its debts and cutting loose from the euro. Meanwhile, pundits such as Wolfgang Munchau of the Financial Times want Greece to threaten to default while staying within the single currency – and to use that as a tactic to secure a better deal from its creditors. Tsipras should resist these siren voices. Their advice will lead to disaster, as Odysseus, the ancient Greek mythological hero, knew well when he had himself tied to his ship’s mast so he could listen to the sirens but not do their bidding.

ECB to reject all Greek requests: The European Central Bank is sticking to its tough stance as – without any concrete progress in negotiations with Athens – it has not expressed any intention of easing its financing terms for Greece. Still, Wednesday’s treasury bill issue by the country’s Public Debt Management Agency (PDMA) is expected to be covered even without additional support from Frankfurt. Sources say that Monday’s Eurogroup has not changed anything in the ECB’s decisions. As Greek officials note, unless the inspection is completed or there is clear progress in negotiations between the government and its creditors, then the ECB will not have the scope to ease its regulations. In this context Greece cannot expect any earnings returns from the Eurosystem’s Greek bond holdings (SMPs) or any increase in the limit of the T-bills Greek banks purchase from the current 15 billion euros. Furthermore the ECB will not alter its directive to the Greek lenders that provides that they should not increase their T-bills exposure and can only recycle the short-term debt they already possess. Even so, the Greek side will likely submit a fresh request for an increase in the T-bill purchase limit at Wednesday’s ECB board meeting. The government expects Wednesday’s 1.6-billion-euro T-bill issue to be fully covered, as banks will refinance the debt they acquired on February 18 while the Bank of Greece will refinance the amount it holds through the state account, which also includes the reserves of other state entities and social security funds. There is optimism that if a problem arises in covering the full amount, the gap will be covered in other ways. It also remains to be seen what the attitude of foreign investors will be, as there was talk of Chinese funds participating in last week’s T-bill issue.

Germany insists on troika in Greece bailout talks: German Finance Minister Wolfgang Schaeuble insisted Tuesday that urgent technical talks on extending Greeces bailout would involve the "troika" of creditors, despite claims by Athens that the much-loathed group would play no part. The influential Schaeuble was speaking in response to a claim by Greek Finance Minister Yanis Varoufakis that Athens would deal "individually" with its EU, IMF and ECB creditors when bailout talks begin on Wednesday. "Well, then his ideas have to be corrected," Schaeuble told journalists in Brussels, a day after eurozone ministers agreed to begin talks that could lead to more cash for Athens and an extension of its current bailout beyond June. "The institutions will do that together," he said. Greece agreed with eurozone partners on Monday that talks in Brussels on Wednesday would be accompanied by visits to Athens from officials from the European Commission, International Monetary Fund and European Central Bank. While seemingly minor, the format of the technical talks that begin on Wednesday between Greece and its creditors is a sorely sensitive issue in Athens. After five years of painful austerity, Greeces leftist government swept to power in January on a hugely popular pledge to refuse all dealings with the troika team of creditors that saw through the tough reforms during two bailouts since 2010. Prime Minister Alexis Tsipras has backed down on several of his anti-austerity promises, but seeing a return of the troika to Athens would be one of the most painful climbdowns.

Greece awarded financial breathing space with €550m lifeline - Greece's cash-strapped government will be able to tap more than half a billion euros in bank rescue funds, easing the pressure on the country as it scrambles to meet loan repayments due later this month. Following a revision of the eurozone's financial backstops, Athens will be eligible to receive more than €550m (£390.7m) from the Hellenic Financial Stability Fund (HFSF) - a bank rescue vehicle used to recapitalise the country's stricken lenders in 2012. Klaus Regling, head of Europe's financial rescue fund, said the money was originally paid in by Greek banks before the country's bail-out in 2010, and creditors "had no legal claims" on it. The cash injection could now help alleviate the squeeze on Greece's Leftist government, which faces loan redemptions of €1.2bn to the International Monetary Fund over the next 20 days. Greece's economy minister told The Telegraph last month that his government had a number of options to stay solvent until April.

Euro slides to 12-year low against dollar on fears of renewed Greek debt crisis -- The prospect of cheaper holidays in continental Europe this summer for British and American tourists has become closer after the euro tumbled on the foreign exchanges. Amid fears of a rekindling of Greece’s debt crisis, the pound climbed above €1.40 against the euro for the first time since the onset of the global financial crisis in 2007. Against the dollar, the single currency was at its lowest level for 12 years. The euro’s renewed weakness came on a day of financial turbulence in which concerns about Greece, growth in China and the possibility of higher US interest rates affected sentiment across financial markets. London’s FTSE-100 index fell by 174 points to close at 6,703, while in New York the Dow Jones industrial average fell 332.78 points to 17,662.94 erasing all the gains made so far this year. The cost of crude oil and industrial metals slid on signs that China’s economy is slowing. But the main action was in the currency markets, where the strength of the US dollar added to pressure on a number of emerging market economies, including Mexico, where the peso fell to its lowest level on record, the Turkish lira was trading close to record lows, and the Brazilian real extended its recent decline.

German Finance Minister Says Greece Isn’t A Hopeless Case -  —Greece isn’t a hopeless case, Germany’s finance minister said Thursday evening. Until the end of last year, Greece was developing better than expected under the bailout programs, Wolfgang Schäuble said, but problems have arisen since then. “The situation in Greece is very specific,” Mr. Schäuble said at an event here. Over the long term, weaker eurozone member countries can’t expect stronger countries to finance their over spending, he said. His Austrian counterpart, Hans Jörg Schelling, said that the risk of Greece exiting the euro remains, but that the consequences of such a move would be unforeseeable. Greece isn’t Europe’s only problem—it faces a number of problems such as high youth unemployment. Mr. Schäuble said pumping more money into the system won’t be enough to solve all of Europe’s problems and that reforms must be implemented. He said Europe also needs to have a discussion about what sustainable growth means. The eurozone’s more mature countries might have to settle for economic growth less than 2% rather than more than 2%, he said. Late Thursday, in an interview with the Austrian news show “ZiB 2,” Mr. Schäuble said Greece must fulfill the conditions of its existing bailout program in order to receive more money. “Greece must implement what it pledged to do. Otherwise, there can’t be any payments from the current [bailout] program,” he said in the interview.

EU executive warns of Grexit 'catastrophe', urges euro solidarity (Reuters) - The European Commission warned of "catastrophe" if Greece has to abandon the euro and its chief executive, Jean-Claude Juncker, urged EU governments to show solidarity as Athens struggles to secure more credit. A day after German Finance Minister Wolfgang Schaeuble said Greece might stumble out of the euro zone because new, left-wing leaders failed to negotiate new borrowings, Juncker's economics commissioner said EU hardliners underestimated the risk that this would start a fatal domino collapse of the common currency. "All of us in Europe probably agree that a Grexit would be a catastrophe -- for the Greek economy, but also for the euro zone as a whole," Pierre Moscovici told Der Spiegel -- a view not in fact shared by some conservative allies of Chancellor Angela Merkel who favor amputating the bloc's troubled Greek limb. Moscovici, a French Socialist, countered the argument that protective mechanisms put in place in the three years since the last major debt crisis meant Grexit -- or an inadvertent "Grexident" -- could be contained, or even strengthen the euro. "If one country leaves this union, the markets will immediately ask which country is next," Moscovici told the German magazine. "And that could be the beginning of the end."

Tsipras Slams “Crimes Of Third Reich And Hitler’s Hordes", Threatens Seizure Of German Assets -- Earlier today, Greek Prime Minister Tsipras was busy not making German friends, following the latest Greek overture to confiscate German assets in response for allegedly unpaid German WWII reparations. “After the reunification of Germany in 1990, the legal and political conditions were created for this issue to be solved. 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?” Tsipras said and added that "despite the crimes of the Third Reich and Hitler’s hordes, the German debt was written off." As a result Greece is now seeking to recoup German WWII reparations which may amount to as much as 80% of Greek GDP!

Greece misses budget revenue targets for Jan-Feb - Greece's budget revenues missed targets in the first two months of the year, further complicating talks with international creditors over securing more rescue funding for the country. Political uncertainty has weighed on revenues, but less than previously expected, as income reached €7.79 billion ($8.24 billion), some €963 million, or 11 per cent short of target, according to data from the finance ministry. In the past three years Greece has managed to meet fiscal targets set by international creditors in exchange for rescue funding worth €240 billion by slashing spending and boosting taxes. The latest bout of political instability that has shaken Greece has weighed on its economic recovery and hurt tax collections efforts though the revenue shortfall is in line with that recorded in the previous month. Despite budget outlays being less than expected, the deficit also came in a bit higher than expected. The finance ministry said in a statement the shortfall reached €189 million, compared with the target of €70 million. Figures showed that the primary budget surplus-before taking into account debt payments-came in at €1.24 billion, below the targeted €1.41 billion.

Germans Furious After Varoufakis/Tsipras Admit "Greece Will Never Repay Its Debts" -- The Greco-Germanic war of words continues... Having pissed off The Greeks with his "Troika" remarks, Germany's Schaeuble went on today to more ad hominum attacks by reportedly calling the Greek FinMin "foolishly naive." The Greek ambassador has 'officially' complained to "friend and ally" Germany about the personal insult. But The Greeks had the last laugh, as first Varoufakis and then Tsipras explained respectively that "Greece would never pay back its debts," and "Greece cannot pretend its debt burden is sustainable." The German response, via tabloid Bild, "there must be an end to this madness. Europe must not be made to look stupid." 

Europe Has A Modest Proposal For Greece: "Don't Pay Wages For One Or Two Months" -- The Greek media is ablaze with just what Europe's proposed solution to this issue may be. As Protothema and Capital report, the Troika proposed that Athens halt the payment of salaries and pensions for one to two months. This, according to Europe, would promptly tackle the problem of liquidity and find a solution to Greek problem of how to pay back bailout loan tranches to creditors when suffering from liquidity problems.

State-owned RBS pays millions in bonuses to its banker fatcats despite disastrous year with £3billion losses - BAILED-out Royal Bank of Scotland paid the same number of bankers £1million in 2014 as the year before despite losses of more than £3billion. The lender, 80 per cent owned by the taxpayer, gave 72 employees £1million or more in 2014 - while claiming it was  at the “leading edge of reform” on bringing down banker pay. RBS last week reported a £3.5billion annual loss for last year, though it was an improvement on the £8.2billion loss a year before. The figures also cover a year in which the bank paid £399million in fines to US and UK regulators over the foreign exchange rate rigging scandal. Their remuneration report disclosed the number of bankers paid one million euros (£806,000) or more fell from 131 to 110. But the number paid 1.5million euros (£1.21million) or more rose from 43 to 51. The number of millionaires created by the bank is understood to be 72. Last year three staff were paid between five million and six million euros (£4-4.8million) according to the report. It also revealed 1200 employees earned total remuneration of more than £250,000 while 6700 made do with between £100,000 and £250,000, and 15,500 were paid between £50,000 and £100,000.

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