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

Saturday, March 21, 2015

week ending Mar 21

 The Federal Reserve is ready for 'lift off' on interest rates - The Federal Open Market Committee, the branch of the US Federal Reserve which determines monetary policy, meets this week. After some confusion, the Fed’s intentions on the date of ‘lift off’, or the long-expected first increase in interest rates, now seem to indicate it is more than 50 per cent likely to come in June. The behaviour of the dollar, and of core inflation, are likely to determine whether June or September is eventually chosen for lift off. Once that is out of the way, the markets will turn their attention to a much harder question: how rapidly will rates rise after this lift-off? There is huge uncertainty about this question among the members of the committee at present. The interest rate forecasts for individual members of the FOMC, which will be updated on Wednesday, have a very wide range.  In the end, the speed of rate rises after lift off will be determined by two supply side variables which are likely to be hotly debated. These will determine whether inflation remains subdued or begins to cause headaches for the Fed. The first is the level of the Non Accelerating Inflation Rate of Unemployment, the “equilibrium” US unemployment rate. Fed vice-chairman Stanley Fischer says that it is around 5.0-5.5 per cent, in which case the labour market is already there. More dovish FOMC members like Charles Evans think it has fallen to 5 per cent or less. This is equivalent to saying that there is a lot of slack in the labour market lying outside the official unemployment rate.  Wherever the Nairu rate may lie, a second supply side question is how rapidly the economy is likely to approach it? At present, the official unemployment rate is dropping very rapidly because the recorded growth rate of productivity has slumped in recent years. This means that employment is rising unexpectedly fast, given the relatively subdued recovery in real GDP.

Fed Watch: The End of "Patient" and Questions for Yellen - FOMC meeting with week, with a subsequent press conference with Fed Chair Janet Yellen.. It is widely expected that the Fed will drop the word “patient” from its statement. Too many FOMC participants want the opportunity to debate a rate hike in June, and thus “patient” needs to go. The Fed will not want this to imply that a rate hike is guaranteed at the June meeting, so look for language emphasizing the data-dependent nature of future policy. This will also be stressed in the press conference. Of interest too will be the Fed’s assessment of economic conditions since the last FOMC meeting. On net, the data has been lackluster – expect for the employment data, of course. The latter, however, is of the highest importance to the Fed. I anticipate that they will view the rest of the data as largely noise against the steadily improving pace of underlying activity as indicated by employment data. That said, I would expect some mention of recent softness in the opening paragraph of the statement. I don’t think the Fed will alter its general conviction that low readings on inflation are largely temporary. They may even cite improvement in market-based measures of inflation compensation to suggest they were right not to panic at the last FOMC meeting. I am also watching for how they describe the international environment. I would not expect explicit mention of the dollar, but maybe we will see a coded reference. Note that in her recent testimony, Yellen said: But core PCE inflation has also slowed since last summer, in part reflecting declines in the prices of many imported items and perhaps also some pass-through of lower energy costs into core consumer prices. Stronger dollar means lower prices of imported items.

American Amoeba -  Kunstler - The money-moving world waits on tenterhooks for the Wednesday appearance of America’s oracle, Janet Yellen, to step out of her grotto and state whether or not she feels twinges of patience.  Patience for what? Well, whether to raise the Federal Reserve’s benchmark short-term interest rate from near-zero to something microscopically above zero. This is what the world foolishly turns on. And, of course, also some oracular hint as to whether this momentous move might occur in April, June, September, or not at all. Some canny observers of the vaudeville that US money policy has become — namely, Jim Rickards, David Stockman, Peter Schiff — maintain that Yellen and her Fed are boxed in and can really do nothing. Their policies and interventions regarding the flows of capital have done nothing so far but disable the normal operations of markets and distort the valuation of everything, especially the cost of renting money itself — for that is what happens when you take out a loan. The net result of all that is a financial picture that no longer reflects anything truthful about the actual economy, being a trade in goods and services.  The transparent truthlessness of the Fed’s basic premises go far to explain the chasm between official policy and reality — though it does not explain the appetite for plain lying of the supposedly informed minority cohort of the public, the deciders among us in business, politics, and media. For instance, the employment numbers that came out of the federal government ten days ago saying that the jobless rate is just over 5 percent. Everybody not in a special ed class in America knows that this is a barefaced lie. But nobody except a few mavericks on the web (see above) object to it. Lesser official oracles such as The New York Times and the Wall Street Journal report the lie without reservation and it gets absorbed into the body politic like any other morsel of protoplasm into the mindless amoeba that America has become.  So far, the Fed has tried to merely chatter about the possibility of raising rates as a substitute for actually doing anything. That’s because anything more than a gesture of raising rates will blow up the lucrative carry trade arbitrage enjoyed by the banks that hold the Fed (and everybody else) hostage, as well as the artificially inflated stock markets, and the US government’s ability to service its debt. That’s a lot to blow up. The wondrous levitating S & P index is the Fed’s substitute for reality. While the public’s attention is diverted to that ongoing marvel, they fail to see the appalling instability in currencies around the world, or the booby-traps laid in bond markets everywhere, or the devastation thundering through the oil industry, and the collapse of global trade relations that Tom Friedman said would last forever.

Fed Will Bark Before It Bites -- A small rise in interest rates by the Federal Reserve should have little effect on the economy. But that is only if markets don’t get in the way. Investors on Wednesday will be carefully parsing the statement the Fed releases following its two-day meeting and Chairwoman Janet Yellen’s postmeeting news conference for any hints on when the central bank might start raising rates. This is something economists are sharply divided over, with nearly half the respondents to The Wall Street Journal’s latest forecasting poll looking for a “liftoff” in the second quarter (read: at the June meeting), and the remainder expecting it to come in the third quarter or later. Whenever the Fed starts tightening, the trajectory of rates likely won’t be steep. Rather, with inflation still below its 2% target, rate increases will be incremental, with the central bank pausing if the economy seems to soften. That is because the aim isn’t to cool an overheating economy, but to put into motion a yearslong process of getting overnight rates from near zero to the 3.75% that the Fed sees as normal. Yet investors have been unusually sensitive to changing views of when liftoff will likely occur. The strong February employment report, which strengthened the case for a June rate increase, sent stocks down sharply. Last week’s weak retail sales report, which pushed the needle toward the Fed’s September meeting, saw stocks rise.

Fed opens door wider for rate hike but downgrades economic outlook (Reuters) - The Federal Reserve on Wednesday moved a step closer to hiking rates for the first time since 2006, but downgraded its economic growth and inflation projections, signaling it is in no rush to push borrowing costs to more normal levels. The U.S. central bank removed a reference to being "patient" on rates from its policy statement, opening the door wider for a hike in the next couple of months while sounding a cautious note on the health of the economic recovery. Fed officials also slashed their median estimate for the federal funds rate - the key overnight lending rate - to 0.625 percent for the end of 2015 from the 1.125 percent estimate in December. true The cut to the so-called "dot plot," together with other economic concerns cited by the Fed, sent a more dovish message than investors were expecting, and pushed market bets on the central bank's rate "lift-off" from mid-year to the fall. "Just because we removed the word 'patient' from the statement doesn't mean we're going to be impatient," Fed Chair Janet Yellen said in a press conference after Wednesday's statement. Stocks on Wall Street surged and oil prices jumped as much as 5 percent after the Fed statement. The dollar tumbled against other major currencies and the U.S. 10-year Treasury yield dipped below 2 percent for the first time since March 2. In its quarterly summary of economic projections, the Fed cut its inflation outlook for 2015 and reduced expected U.S. economic growth. The policy statement repeated its concern that inflation measures were running below expectations, weighed down in part by falling energy prices.

FOMC Press Release - The Fed has lost its patience (i.e. it dropped the word patience from its forward guidance even as it increases its estimate of the amount of slack in the economy by lowering its estimate of the natural rate of unemployment -- that gives it more reason to remain patient -- though the statement does say "This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range"): Press Release, Release Date: March 18, 2015, For immediate release, FOMC:  (copy text)

FOMC Statement: No "Patient", "Growth has moderated" -- Dropped "patient", "economic growth has moderated", unlikely to hike rates in April. FOMC Statement: Information received since the Federal Open Market Committee met in January suggests that economic growth has moderated somewhat. Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; declines in energy prices have boosted household purchasing power. Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened. Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.  . Consistent with its previous statement, the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. This change in the forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range.

Read the Full Text of the Fed’s March Statement - Here is the full statement text from the Federal Reserve’s policy-making committee.

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

Fed Watch: Yellen Strikes a Dovish Tone -- The FOMC concluded its two-day meeting today, and the results were largely as I had anticipated. The Fed took note of the recent data, downgrading the pace of activity from "solid" to "moderated." They continue to expect inflation weakness to be transitory. The risks to the outlook are balanced. And "patient" was dropped; April is still off the table for a rate hike, but data dependence rules from that point on. Growth, inflation and unemployment forecasts all came down. Especially important was the decrease in longer-run unemployment projections. The Fed's estimates of NAIRU are falling, something almost impossible to avoid given the stickiness of wage growth in the face of falling unemployment. The forecast changes yielded a downward revision to the Fed's interest rate projections. In addition, the strong dollar was clearly on the Fed's mind. Federal Reserve Chair Janet Yellen often referred to the dollar and its impact on growth in the press conference, much more than I expected. I think they are probably happy the dollar took a hit today. On net, I think this from last week stood up well: ...assuming the Federal Reserve takes sufficient note of the rising dollar, and its impact on inflation, by lowering the expected path of short term interest rates. And perhaps this is exactly what is revealed in next week's Summary of Economic Projections. Look for the possibility next week that the Fed is both hawkish - by opening the door for a June hike - and dovish - by lowering the median rate projections in the dot plot. Note that the Fed is capitulating here. The distance between the bond market and the Fed rate expectations has been something of a conundrum for policymakers. But it is now clear the bond market is not moving toward the Fed; the Fed is moving toward the bond market. Going forward, they still believe that their rate forecast is accommodative.

Janet Yellen Says June Meeting Might Bring First Rate Rise - Federal Reserve Chairwoman Janet Yellen said Wednesday the door to increasing rates opens in June, but cautioned that any move toward higher borrowing costs will depend on how the economy performs. Ms. Yellen, speaking at a press conference held after the conclusion of the central bank’s two-day gathering of the rate-setting Federal Open Market Committee, was addressing changes in the central bank’s official policy statement that ended a commitment to be “patient” on the timing of rate increases. That shift had been widely expected amid increasing speculation over the timing of lifting rates off of the current near-zero levels occupied since late 2008. “While it’s still the case that we consider it unlikely that economic conditions will warrant an increase in the target range at the April meeting, such an increase could be warranted at any later meeting, depending on how the economy evolves,” Ms. Yellen told reporters. The change in the language in the FOMC statement “does not mean that an increase will necessarily occur in June,” Ms. Yellen said, although she added that a rate hike then can’t be ruled out. The FOMC statement suggested in strong language that rate increases wouldn’t happen at the April meeting. Ahead of this week’s meeting, a number of Fed officials said the conversation over rate increases starts with the mid-June meeting. Some Fed officials have even called for rate increases at that gathering.

Janet Yellen Isn’t Going to Raise Interest Rates Until She’s Good and Ready - The key words in Janet L. Yellen’s news conference Wednesday were rather pithy, at least by central bank standards. “Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” Ms. Yellen, the Federal Reserve chairwoman, said.With this framing, Ms. Yellen was putting her firm stamp on the policy of an institution she has led for just over a year — and making clear that she will not be boxed in. Her words and accompanying announcements conveyed the message that the Yellen Fed has no intention of taking the support struts of low interest rates away until she is absolutely confident that economic growth will hold up without them.  Earlier Wednesday afternoon, the Fed’s policy committee had removed a promise to be “patient” about raising interest rates from its written statement, something financial markets have anticipated for months as a sign that interest rate increases are coming soon. But Ms. Yellen managed a delicate task of changing that language to obtain flexibility without setting the Fed on a preordained course to tighter money.  Ms. Yellen’s comments about patience versus impatience were part of that dance. But the dual message was even more powerful when combined with other elements of the central bank’s newly released information, which sent the signal that members of the committee intend to move cautiously on rate increases. By eliminating the reference to “patience,” Paul Edelstein, an economist at IHS Global Insight, said in a research note, “The Fed did what it was expected to do.” “But beyond that,” he added, “the committee appeared much more dovish and in not much of a hurry to actually pull the trigger.”

Luckily, the Fed Still Seems Patient, if Not “Patient” - It was widely reported yesterday that the word “patient” was dropped from the Federal Reserve statement on monetary policy. But too much focus on this one word might lead one to miss the forest through the trees. Yes, the Fed no longer is committed to official “patience”. In practice that’s their way of saying we could raise rates at any time in coming meetings without giving you (and by you I mean “markets”) any more warning. This has been widely (and reasonably) interpreted to mean that such a rate increase is coming soon. Such a rate increase would be a mistake. The employment situation in the U.S. labor is clearly improving, with unemployment falling and job-growth accelerating in 2014. But the point of raising interest rates shouldn’t, of course, be simply to sabotage the labor market anytime it starts generating lots of jobs and reducing unemployment. The point of rate hikes in the face of economic strength is supposed to be preventing incipient inflationary pressures. But there’s an important link in the chain between falling unemployment and accelerating inflation: wages have to start accelerating. Importantly, they need to start accelerating faster than the sum of the Fed’s inflation target plus productivity growth. What’s the logic of this wage target? For one, note that nominal (ie, not inflation-adjusted) wage growth that simply equals productivity growth puts no upward pressure on prices at all. Say that wages rise by 2 percent but productivity rises by 2 percent too. What has happened to the cost per unit of output? Nothing. Hourly wages are up 2 percent, but the amount produced in each hour of work has risen by 2 percent as well, so costs per unit of output haven’t budged. Assume trend productivity growth of around 1.5-2 percent and this means that only nominal wage-growth over 1.5-2 percent puts any upward pressure on prices at all.

The Fed Turns Gloomier on the Supply Side - The Fed has revised down its growth outlook so often that it seems hardly noteworthy it did so again Wednesday. Yet the downgrade is telling in a little-noticed way: the Fed is getting gloomier about the supply side of the economy, and that’s one reason why interest rates may be low for longer. All the monetary stimulus the Fed has thrown at the economy since 2009 has been aimed at reviving demand so that unemployed people and unused capital can be put back to work, restoring U.S. output to its much higher, theoretical “potential” level. Yet in recent years, the Fed has had to acknowledge the economy’s potential level is less than previously thought. On Wednesday, it did so again. There are several bits of evidence for this. The first is the downgrades to the near term growth outlook. GDP is expected to grow 2.5% this year (that’s the midpoint of officials’ fourth quarter to fourth quarter projection), down from 2.8% in December, and 3.2% the prior December. While that reflects the weak character of first quarter data, it’s telling that the Fed does not expect the weakness to be recouped later in the year, as would happen if weather were the culprit. They also downgraded next year’s forecast to 2.5% from 2.75% in December and 2.9% the prior December. Growth in 2017 is now seen as just 2.2%, compared with 2.4% last December.

Fed Should Wait Longer to Raise Rates When They’re Near Zero, Chicago Fed Research Says -- The Federal Reserve should delay raising interest rates from near zero for quite a bit longer given high economic uncertainty and the risk that moving too soon could threaten the recovery and force the central bank to slash borrowing costs again. That’s the view expressed in a paper authored by Chicago Fed President Charles Evans and three of his staffers, and released Thursday at a conference at the Brookings Institution.“The zero lower bound on interest rates implies that the central bank should adopt a looser policy when there is uncertainty,” Mr. Evans and his co-authors write. The say there is significant uncertainty around Fed officials’ expectation that low inflation will start rebounding toward the Fed’s 2% target. “In the current context this result implies that a delayed liftoff is optimal,” argues Mr. Evans, who has said he thinks the Fed should wait until next year to start raising rates. The Fed has held its benchmark short-term interest rate, the federal funds rate, near zero since late 2008 to bolster the economy. Fed officials Wednesday opened the door to consider raising the rate in June or later this year, but indicated they are likely to proceed cautiously. For Mr. Evans and his co-authors, that’s a start. At issue is what the authors see as the much bigger risk of raising rates too soon, since it could crimp the recovery and require the central bank to reverse course with new rate cuts. The opposite risk is that if the Fed waits too long to raise rates, it could cause inflation to go too high. But that could easily be addressed through higher interest rates, Mr. Evans and his staffers say.

Ben Bernanke Was Right: "No Rate Normalization During My Lifetime" - With the Fed's credibility terminally smeared across the windshield of the Marriner Eccles-mobile, courtesy of the latest "dots" projection which proved yet again - and beyond any doubt - that the FOMC members are just a pack of chimps throwing darts, and perhaps feces, at a fed funds dart board, we can now honestly say that the one Fed (ex) member who was 100% accurate (if only in this case), and who saw the writing on the wall early on and got the hell out of Marriner Eccles while he could, is Ben Bernanke.  As a reminder, this is what he said (via Reuters): "At least one guest left a New York restaurant with the impression Bernanke, 60, does not expect the federal funds rate, the Fed's main benchmark interest rate, to rise back to its long-term average of around 4 percent in Bernanke's lifetime. "Shocking when he said this," the guest scribbled in his notes. "Is that really true?" he scribbled at another point, according to the notes reviewed by Reuters."   Yes, it really is.

Here Is Why The Fed Can't Hike Rates By Even 0.25% - There was a time when Zoltan Poszar was the most important person at the Fed (and Treasury), because he was likely the only person in the government's employ who grasped the enormity and complexity of the then-$30 or so trillion US shadow banking system. While Zoltan is currently working in the private sector at Credit Suisse, he is perhaps best known for laying out, back in 2009, the full topographical map of the US shadow banking system in all its flow of assets (or is that contra-assets when it is a repo) beauty.  Which is also why we bring him up, because in a much welcome follow up to his previous work title "A Macro View of Shadow Banking" which we will discuss further in the coming days because it is not only Zoltan's shadow banking magnum opus and must read for anyone who wants to get up to speed with all the latest development in the unregulated shadow banking space, but because Poszar also provides perhaps what is the most important chart which explains why the Fed is so very terrified of even the smallest possible incremental rate hike of 0.25%.  Specifically, we look at Poszar's findings about the implied leverage within the fixed income asset space in America's just a little levered buyside community. This is what he says: Although no precise measures are available, the presence of leverage among hedge funds with credit and fixed income strategies has been recognized since the LTCM crisis (see Figure 21), as is leverage in separate accounts in the asset management complex. While hedge funds and separate accounts are allowed to use leverage liberally – in fact, leverage is the sine qua non of these investment vehicles – it is widely underappreciated that bond mutual funds that are typically thought of as unlevered and long-only also have considerable room to use leverage.  The extent to which this room to use leverage is utilized is up to bond portfolio managers to decide, and it is not uncommon for the largest bond funds to maximize the leverage they may bear in their portfolio within the limits allowed by the Investment Company Act of 1940, and the SEC’s interpretation of the portfolio leverage and concentration incurred through the use of derivatives.

New York Fed Propaganda: "The Story Of The Federal Reserve System" In Cartoons -- To truly understand what The Fed does, we go to the source... "The Fed is best known for its influence in money and credit conditions in the economy in order to help the US economy experience strong growth in output and income, high employment, and stable prices." So factory output growth is now negative, income stagnant, the percentage of employed people in the population is catastrophic, and prices (oil collapse? stock explosion? record beef and beer prices?) are anything but stable.

The Fed Doesn’t Think the U.S. Economy Is at Full Employment, After All - Full employment in the U.S. isn’t here quite yet, according to the latest Federal Reserve economic projections. Back in December, Fed policy makers pegged the economy’s normal longer-run unemployment rate somewhere between 5.2% and 5.5%. But in updated projections released on Wednesday, they lowered their estimate of the longer-run jobless rate to a range between 5% and 5.2%. It’s a significant threshold because it represents what some economists call the nonaccelerating inflation rate of unemployment, or Nairu. The Fed could try to push the unemployment rate lower, but in theory that would stoke inflation. The central bank’s so-called dual mandate is to pursue stable prices and maximum employment. In February, the U.S. unemployment rate fell to 5.5%. That was the top of the Fed’s target range for full employment — at least, at the time . But under the new projections, full employment is still a while down the road.  Still, officials expect to get there soon. The projections released Wednesday see the U.S. unemployment rate hitting 5% to 5.2% in the fourth quarter of 2015, and falling a bit lower in 2016 and 2017. Boston Fed President Eric Rosengren, in January, said he was one of the officials thinking about lowering his estimate for the longer-run unemployment rate . “Clearly, we haven’t seen the wage and price pressure that at least some people might have expected as we start getting to 5.6% and below,” Mr. Rosengren said. “People particularly at the high end of the Nairu estimates are going to be in a position where they have to think through why they’re not seeing more wage and price pressure.

Fed Officials See Slower Inflation Pickup Than Private Economists Do -  On Wednesday, the Federal Reserve released released its latest set of forecasts compiled from various central bank officials. According to the range of all forecasts, real gross domestic product could grow between 2.1% and 3.1% this year and 2.2% and 3.0% in 2016. The unemployment rate could be anywhere between 4.8% and 5.3% by the end of 2015 and 4.5% to 5.2% by the end of next year. The Fed’s span of  growth and unemployment forecasts fits squarely into the middle of the forecasts of private economists compiled earlier this month by The Wall Street Journal. Within the WSJ survey, the GDP forecasts range from 1.9% to 3.7% in 2015 and 0.8% and 4.3% in 2016. The private forecasters think unemployment will run between 4.5% and 5.6% by year’s end and 3.9% and 5.9% by the end of 2016. On inflation (as measured by the price index personal consumption expenditures), both groups think the end of falling energy prices means inflation should edge higher during this year and the next. Yearly PCE inflation stood at 0.2% in January. The Fed’s outlook, however, expects a slower pickup in inflation than the private group. For 2015, the highest Fed forecast calls for inflation to hit a tepid 1.5%; the highest private forecast expects a steamy 3.4%. No Fed forecaster expects inflation to reach the bank’s target of 2% until 2016, while about 15% of private economists think the rate will be 2% or higher by the end of this year.

WSJ Economists' Forecasts for 10-Year Yields and the Fed Funds Rate: The big economic news today will start the statement from the Federal Open Market Committee at 2 PM ET and followed by Janet Yellen's press conference 30 minutes later. The economic press has been a veritable cacophony pundit views on whether the word "patient" remains or is discarded in the new statement. Here is the key sentence in the previous statement (emphasis added). Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy.  With the focus now on the FED, let's take a quick look at a couple of items in the March Wall Street Journal survey of economists, starting with where the Federal Reserve is headed with the Fed Funds Rate, which is currently hovering around 0.12 percent. The March survey was sent to 73 economists, with responses received from 63. Here is a table showing the major response statistics -- Low, Median (middle), Average (aka Mean) and High -- at six-month intervals from June 2015 to December 2017. Here is the equivalent table showing the forecasts for the 10-year Treasury Note yield, which closed yesterday at 2.06 percent. Since a picture is worth a thousand words, here's a short visual essay illustrating the forecast averages for the two series, rounded to one decimal.

Fed Officials Trim Back Estimates Of Interest Rate Rises Amid Big Forecast Changes - Federal Reserve officials expect the path of future interest rate increases to be less aggressive compared to their projections from the end of last year, according to updated forecasts released Wednesday. The policymakers also weighed in on their expectations for the economy over the next few years. They cut their outlook for growth. On the jobs front, central bankers see bigger declines in the jobless rate, and project inflation to be weaker. They also believe the jobless rate can fall to a lower level without sparking price pressures. In the projections, a strong majority of Fed officials–15 out of 17–continue to predict the central bank will raise what are now near-zero short-term rates this year, while two predict the Fed will act next year. Officials see a reduced amount of rate increases this year. Their median estimate for the Fed’s short-term interest rate target at the end of the year now stands at 0.625%, versus the 1.125% level forecast at the end of December. The median projection for the fed funds target at the end of 2016 is 1.875%, while the longer run estimate of the fed funds target rate held steady to 3.750%. The Fed’s forecasts were released in conjunction with the announcement of the outcome of the two-day rate-setting Federal Open Market Committee meeting. In that gathering, officials continued to prepare the way for interest rates increases. While the Fed left short-term interest rates unchanged at the rock-bottom levels they’ve rested at since the end of 2008, officials ended a commitment to be “patient” about the timing of future interest rate increases. Ahead of the Fed meeting, a number of officials noted that the door to rate rises opens with the Fed’s mid-June meeting.

Goldman: "The Path to Exit" - A few excerpts from a research piece by Goldman Sachs economist Kris Dawsey: The Path to the Exit The March FOMC statement and “dot plot” were more dovish than the market expected. The probability of a September hike looks much higher than a June hike, with a risk that the first hike could be pushed even later. Despite this week’s events, the Fed is busily planning how it will lift off from the zero lower bound when the time comes  ... We think that the most likely outcome for the first hike is an increase in the target range to 25 to 50 basis points (from 0 to 25 basis points currently). Although not likely, there is an outside chance that the Fed could decide to start with a “mini” hike. Once the first hike occurs, the Fed probably has sufficient tools to ensure that the effective fed funds rate trades within—but likely in the bottom half of—the target range most of the time.  Despite the Fed’s guidance that interest paid on excess reserves (IOER) will be the primary tool for firming rates, we think that the Committee will significantly increase the cap on the overnight RRP (O/N RRP) facility around the time of the first hike as an insurance policy. ... In our view, flexibility with regard to tactics and a process of “learning by doing” will probably be key features of the early part of the exit. Sometime after the first hike the Fed will allow its balance sheet to begin shrinking, resulting in a gradual increase in the term premium. ... Our forecast for the start of portfolio runoff is 2016 Q1, with risk skewed toward a later date, and we think that the initial step will probably be a switch to a policy of partial reinvestment. Although the Fed has stated that asset sales are not part of its normalization plan at this time, it is possible to imagine scenarios which could push the Fed in this direction.

Dot-dot-dot, dash-dash-dash, dot-dot-dot ~  Well, that was....intense. The Fed dropped the word "patient" and explicitly left the door ajar for a move in June should circumstances warrant. However, the real sting in the tail was in the SEP, where the infamous dot-plot ratcheted lower in response to downgrades to the growth and inflation forecasts. The end-2015 median is now at its lowest level since before the Taper Tantrum. Market reaction was swift, and Yellen's press conference did little to dissuade the participants from buying securities and selling the dollar. For today at least, score this one in favour of the monetary heroin addicts. Probably unsurprisingly, the most vicious price action took place in the most-positioned market, EUR/USD. Pre-Fed short covering evolved into post-Fed stop-lossing, which itself became a full-blown rout in the gray zone after 4 pm NY time. Not since Bernanke pulled a volte-face in July 2013 have dollar longs been punished so swiftly, with so little liquidity.From Macro Man's perch, price action in eurodollars was disappointing but not altogether surprising given the magnitude of the dot-plot downgrades.   They key question here is whether the market chooses to maintain a 10-20 bp "easing risk premium" in the ED market versus the dot-plot, or whether it's now happy to let the market price converge now that the Fed has apparently capitulated. Macro Man has to confess that the dot-plot forecasts moved a bit lower than he had envisaged; such is life when ruled by a central bank that forecasts with a rearview mirror.  It's just as well that he had a last-minute bout of jitters and sold a few dollars and cut a little bit of rates risk before the announcement.

Here Is The Reason Why Stocks Are Soaring, Or Farewell "Recovery"... Again - Why are stock soaring in response to the Fed statement and latest set of projections? Because, as Bloomberg promptly calculated, the FOMC revised down all forecasts for 2015 since the previous SEP was released on Dec. 17.  The median dot for year end 2015 falls to 0.625% from 1.125% in Dec: a whopping 0.50% cut.  And there goes not only the "recovery" but any imminent rate hike.   The details:

  • The central tendency for GDP this year is 2.3%-2.7% vs 2.6%-3%. But the real hammer was 2016 and 2017: these were just slashed from 2.5%-3.0% and 2.3%-2.5% as of December, to 2.3-2.7% and 2.0-2.4%.
  • Unemployment rate 5.0-5.2% vs 5.2%-5.3%
  • The Fed now sees PCE inflation at 0.6%-0.8%. This was supposed to be 1%-1.6% just three months ago.
  • Core PCE 1.3%-1.4% vs 1.5%-1.8%
  • And the one that matters most, the "dot plot", saw the median dot for 2016 fall to 1.875% vs 2.5%, and decline to 3.125% from 3.625% for 2017.

A Strong Dollar Forces the Fed To Rethink Its Next Move - In her press conference, Yellen reiterated her prediction that the economy would enjoy “above trend growth” this year. At the meeting itself, the F.O.M.C. dropped its commitment to being “patient” about starting to raise the federal funds rate, which it has kept at close to zero per cent since the financial crisis of 2008. On the face of it, this implies that the Fed remains confident the economy is finally shaking off the aftereffects of the Great Recession, which would allow it to go ahead and begin to normalize monetary policy. But the internal economic projections published alongside the committee’s statement and Yellen’s news conference were less reassuring. Far from suggesting that better times are here to stay, they indicate that policymakers are becoming more pessimistic about the economy’s prospects. At the end of last year, when jobs and output both appeared to be growing strongly, members of the F.O.M.C. were predicting that G.D.P. growth in 2015 would be somewhere between 2.6 and 3.0 per cent. Now they have cut their prediction for growth this year to somewhere between 2.3 and 2.7 per cent. That’s not a drastic revision, but it reflects a number of recent economic statistics, such as retail sales and exports, having come in weaker than expected. While Yellen was at pains to point out that other recent indicators, notably jobs numbers, have remained strong, the big rise in the dollar over the past year clearly has Yellen’s attention. Indeed, I suspect that the rally in the currency has prompted a serious rethink inside the Fed—and for good reason. The rise in the dollar means, effectively, that monetary policy has already been tightened. From an economy-wide perspective, an appreciation of the currency acts just like an actual rise in rates: it reduces the over-all level of demand and causes a slowdown in G.D.P. growth. Now that this has happened, it’s no surprise that the Fed would reconsider its next move.

Janet Yellen Says Strong Dollar Holding Down Exports and Inflation, But Reflects U.S. Economy’s Strength - A stronger U.S. dollar reflects the strength of the U.S. economy, but also is weighing down on the nation’s exports and inflation, Federal Reserve Chairwoman Janet Yellen said on Wednesday. “Export growth has weakened. Probably the strong dollar is one reason for that,” Ms. Yellen said at a news conference in Washington. “On the other hand, the strength of the dollar also in part reflects the strength of the U.S. economy.” A strong dollar also “is holding down import prices and, at least on a transitory basis, at this point pushing inflation down,” she said. Fed officials, in updated economic projections released on Wednesday, downgraded their estimates for U.S. economic growth and inflation this year. Ms. Yellen said gross domestic product, the broadest measure of output across the economy, has seen growth slow somewhat in the first quarter, “below where it was the last several quarters of last year.” But, she said, “We do see considerable underlying strength in the U.S. economy and in spite of what looks like a weaker first quarter, we are projecting good performance for the economy.”

When The World's Reserve Currency Flash Crashed: "I Haven’t Seen Anything Like It Since The Financial Crisis’ On Wednesday afternoon, just after the close of the market, the US Dollar, the world's reserve currency flash crashed. This is how the WSJ described the move: In the latest episode Wednesday, a message from the U.S. Federal Reserve that it is in no hurry to raise interest rates caused a big slump in the dollar, which has run up a huge rally so far this year. The euro surged more than 4% against the buck, its biggest jump in a single day in 15 years, according to Deutsche Bank. Early on Thursday, the European currency resumed its slide. The sheer speed of the round trip in the euro-dollar exchange rate—the world’s most heavily traded currency pair—left traders and investors reeling.We profiled the staggering move in real-time as it was happening:  Again, this is the world's reserve currency, not some two-bit backwater currency pair. It was, also, a stunning, unheard of event.  This is how the rest of America's traders saw it, from the WSJ: “I haven’t seen anything like it since the financial crisis,” Traders said Wednesday’s move brought back memories of January’s surge in the Swiss franc, when the currency climbed more than 40% after the Swiss central bank abandoned its policy of capping the franc’s strength against the euro. For a few minutes on Wednesday, the lack of dollar buyers caused a short-term freeze in electronic trading platforms, according to a New York-based trader at a major currency-dealing bank. “There was a lot of shouting on the desk, a lot of nervousness,” the trader said.

How Europe’s Easy Monetary Policy Crossed the Atlantic - The people most shocked by the outcome of the Federal Reserve’s monetary policy meeting Wednesday were those betting the euro was headed below the dollar. As the dovish implications of the Fed’s downgraded forecasts for growth, inflation and interest rates sank in, the euro rocketed higher, ending the day at $1.09, up sharply from $1.06 on Tuesday. Yet the reversal also says something more important about the global economic consequences of the European Central Bank’s move towards bond buying or “quantitative easing” (QE), which triggered the steep fall in the euro and the rally in the dollar. The ECB’s QE has often been portrayed as currency war, an ill disguised attempt to steal demand from its neighbors by boosting eurozone exports and squeezing out imports. Yet as I’ve argued before, the term currency war is misleading. When one country’s currency falls because of easy monetary policy, its trading partners often ease as well to limit the damage of an appreciating currency. The net result is a tit-for-tat monetary expansion that boosts demand in everyone’s economy. The ECB’s actions had already done this in smaller countries. Denmark and Switzerland both introduced negative interest rates to offset the upward pressure on their currencies. So did Sweden, and Wednesday it made them more negative, and it also expanded its own QE program. Thailand and Korea have cut their interest rates. The big question was always how the Fed would respond. Up until Wednesday, it seemed prepared to tough it out and not change its plans to raise rates. Wednesday’s meeting cast doubt on that. Ms Yellen acknowledged the dollar has weakened both the growth and inflation picture. While she didn’t go so far as to say that would delay the onset of monetary tightening, that is the clear implication both of her words and the accompanying projections of her colleagues. .

Fed's policy statement is nod to global currency war - - Federal Reserve chairman Janet Yellen just acknowledged the negative consequences of the US dollar's gains on Wednesday, saying the currency is weighing on exports and inflation as policy makers pared back their outlook for interest-rate increases. That sent the greenback down by the most in six years and prompted some analysts to suggest the rally will pause following a 14 per cent rise in the last six months. "They clearly do care about the dollar, and the Fed's important for the dollar trend," said Jens Nordvig, managing director of currency research at Nomura Holdings in New York. "We're going to have a couple of months of consolidation." The dollar's ascent has been fueled by the Fed's plans to raise borrowing costs this year at a time when central banks are easing across from the euro area to Canada and Australia. Sweden's Riksbank became this week at least the 23rd central bank to drive down its currency this year, lowering its key interest rate outside of its schedule for policy decisions.

Is the US getting addicted to extremely low interest rates ?  - Uber wonk Matt O’Brien writes about The “weird way people talk about zero interest rates” He discusses Gillian Tett discussing her conversations with those who O’Brien calls the “the masters of the universe.” They don’t like the Fed’s extremly low interest rate policy. They can’t claim that loose monetary policy has causes excessive inflation, so they have to be creative. I don’t think they did a very good job. “they think the real risk, as Tett puts it, is that ‘low rates become ingrained into the consumer and corporate psyche” and “become increasingly hard for policymakers to remove.’”  I guess the word “psyche” is usefully abstract. I can’t prove that this hasn’t happened without reading consumers’ and corporations’ minds (especially hard in the case of the corporations which don’t, technically, have a psyche. However, it is possible to see if housholds or corporations (as 2 wholes) are becoming addicted to extremely low rates. An entity is dependent on low rates when it builds up debt which it can’t service at higher rates.  So has the period of extremely low interest rates lead to a dangerous buildup of debt ? The answer is obviously no (especially to masters of the universe).  Here is the ratio of the debt of households and non-profits to GDP. This is a household (and non-profit) sector kicking the debt habit, or, more exactly, being kicked by the debt built up before the extremely low interest rate policy started. The effect of extremely low rates engrained in consumers’ psyches is that they borrow short term or at flexible rates. This was a problem back when safe interest rates were well above zero. It isn’t now.

Some Implications of the Dollar’s Rise - Currency appreciation will be a drag; this implies a policy of slower monetary tightening is in order. The dollar has risen by over 20% (log terms) against major currencies since July, as of 3/13. Against the euro, the dollar has appreciated by over 25%.  The angst concerning the dollar, in particular the drag induced by expenditure switching (reduced exports, increased imports), is reflected in many accounts, including U.S. economy’s surprise risk: The dollar’s surge could weaken growth: The surging value of the U.S. dollar promises new bargains for American consumers and travelers but also presents big threats to the U.S. economy — in a trend that is shaping up to be one of the most unexpected and significant factors driving the global economy this year.…The unexpected surge has led economists to reduce their expectations for U.S. economic growth this spring; this week, it pushed markets into negative territory for the year. It’s happening largely because the U.S. economy has been unusually strong amid a global slowdown, giving the dollar an advantage over other currencies.  I would take issue with the assertion that the induced drag was a surprise. Analysts had worried about the appreciating dollar back last year, when the surge was already apparent.  The article makes clear that it’s the real value of the dollar that’s relevant. Figure 2 presents a longer view on the dollar’s real value.

A Note on Dollar Strength - Paul Krugman -- Tim Duy is having a debate with Scott Sumner, who insists that the strong dollar won’t hurt US growth. I think we need to think about this both conceptually and quantitatively, and I’m not nearly so sanguine. Sumner says that you can’t reason from a price change; the dollar doesn’t just move for no reason, so you have to go back to the underlying cause and ask what effect it has. Actually, asset price moves often have no clear cause — they’re bubbles, or driven by changes in long-term expectations, so you really do want to ask about the effects of price changes you can’t explain very well.  More specifically, Sumner is right that if the euro’s fall is being driven by expansionary monetary policy, this affects the U.S. through the demand channel as well as competitiveness, so it may be a wash. But I’ve already argued that the fall in the euro is much bigger than you can explain with monetary policy; it seems to reflect the perception that Europe is going to be depressed for the long term. And if that’s what drives the weak euro/strong dollar, it will hurt US growth.

Dollar Regains Most Of Yesterday's "Flash Crash" Losses. Oil Resumes Slide; 10Y Under 2% -- If it was the Fed's intention to slow down the relentless surge in the dollar with yesterday's "impatient" removal which blamed the dollar strength on the "strength" in the US economy, it promptly failed after algos and a few carbon-based traders looked at the Atlanta Fed and realized that a 0.3% Q1 GDP print is anything but "strong." As a result the EURUSD, after soaring by nearly 400 pips yesterday in a market reminiscent of a third-world FX pair's liquidity especially following the previously noted USD flash crash, the dollar has recoupped nearly all losses, and the DXY is once again on the way up and eyeing the resistance area of 100.  Of course, the only Fed intention was to push stocks higher, where it certainly succeeded compliments as usual of Citadel, and the S&P futures are flat since yesterday's epic surge, which saw the market move from red to the year to just shy of all time highs. So as Larry Kudlow said "Just enjoy it: stocks are going up." One place where the resumption in dollar strength, however, has promptly manifested itself, is the price of crude, which soared yesterday as EURUSD rate differentials sent it soaring, At last check, WTI had fallen back to $43/bbl as focus returns to U.S. supply glut that saw prices fall to 6-yr low yday before FOMC policy statement gave prices a boost in U.S. afternoon. Yesterday’s gain ended a six-day losing streak. Today, Brent futures down less, allowing premium to WTI to widen toward $10. U.S.

Japan Ties China As America's Largest Creditor As Foreigners Dump A Record Amount Of Treasurys -- Moments ago the January TIC data update was released, and while China continued selling US paper, liquidating another $5.2 billion in January and bringing its new total to the lowest since January 2013, Japan - yes that Japan whose central bank is now moentizing 100% of its own debt issuance because the country is now effectively insolvent and absent constant monetization of its debt it is finished - bought $8 billion in US debt, in the process trying China as America's largest foreign creditor for the first time in history, with both nations holdings $1.239 trillion in US TSYs.

Sources of Slow Recovery - Paul Krugman -  The other R&R — Christina and David Romer — have an interesting new paper questioning the other Reinhart-Rogoff result, the claim that financial crises consistently lead to deep, sustained slumps. I’m not ready to referee this one, at least not yet. Romer and Romer clearly have done an impressively systematic job of identifying financial distress in an objective way; but I wonder, very tentatively, if they’re looking at the wrong variable. My sense is that the aftermath of credit and housing bubbles is consistently remarkably bad – Alan Taylor and colleagues have been documenting this proposition — and that may not be well captured by reports of credit-market distress. Still, Romer-Romer have some interesting thoughts about why recovery from the 2008 crisis was so slow. They suggest that hitting the zero lower bound may have been crucial. That’s actually why I was predicting a sluggish recovery well in advance, and in fact well before the Reinhart-Rogoff aftermath paper came out. And then there is the unprecedented fiscal austerity. However this dispute eventually pans out, one thing should be clear: whether or not sluggish recovery from financial crisis is the norm, this particular episode didn’t have to happen. Better policy could have produced a much faster, stronger return to full employment.

Pimco downgrades US growth to 2.5 to 3 pct on sluggish exports, capex  (Reuters) - Bond fund company Pacific Investment Management Co cut its forecast for U.S economic growth in 2015, saying it expected a stronger dollar to hold back exports and that capital expenditures would slow in the energy sector. Pimco said on Thursday in its quarterly Cyclical Forum outlook report that it expected growth of 2.5 percent to 3 percent, down from a prior outlook of 2.75 percent to 3.25 percent. The company also said the Federal Reserve, which on Wednesday opened the door wider for a rate hike later this year, would "proceed at a fairly slow pace." That view was backed by former Federal Reserve Chairman Ben Bernanke, who participated in Pimco's Cyclical Forum earlier this month at its headquarters in Newport Beach, California. "The scale of the Fed's challenge should not be underestimated," Pimco, a unit of German insurer Allianz SE , said in its report. "Dr. Bernanke, in his contributions to the forum debate, stressed that there is no peacetime precedent of a central bank successfully tightening policy and sustainably exiting the zero bound (interest rate level). The Fed and therefore market participants are entering unchartered waters."

Q1 GDP Now Just 0.3% According To Fed Model -- When we first exposed the world to The Atlanta Fed's GDPNow forecasting model (just 2 weeks ago), expectations were for 1.2% growth in GDP in Q1. A week later it was cut in half to 0.6% as dismal data just poured on. And today, The Fed model now predicts another 50% cut in growth to just 0.3% in Q1, led by a near 20% collapse in non-residential investment. As The Atlanta Fed explains...The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 0.3 percent on March 17, down from 0.6 percent on March 12. Following yesterday morning's industrial production release from the Federal Reserve Board that reported a 17 percent decline in oil and gas well drilling in February, the nowcast for first-quarter real nonresidential structures investment growth fell from -13.3 percent to -19.6 percent.

Are lower oil prices a net negative for the US after all? - From Capital Economics: Our initial view that lower oil prices would be a net positive for the real economy is not borne out in the first quarter data. The negative impact on mining investment almost outweighed the positive impact from rising purchasing power on real consumption. The adjustment in the mining sector is almost complete, however, while there is still scope for a surge in real consumption. Accordingly, we still think that lower oil prices will eventually turn out to be a big net positive. The slump in crude oil prices has triggered an equally severe collapse in the number of active drilling rigs, from a peak of 1,930 to a six-year low of only 1,125 last week.  Actual oil production hasn’t fallen yet, but it will do soon. The good news, if there is any, is that the historical relationship with prices suggests that the number of active drilling rigs will soon stabilise. As far as GDP is concerned, the slump in active drilling rigs points to a 60% annualised decline in first quarter mining structures investment. Furthermore, even if the number of active rigs stabilised at its current level, that would still equate to a further 60% annualised decline in the second quarter. (See Chart 2.) Nevertheless, since mining structures investment accounts for only 1% of GDP, those declines would subtract only 0.2% points from annualised GDP growth.

Conference Board Leading Economic Index Remains in Growth Territory: The Latest Conference Board Leading Economic Index (LEI) for February is now available. The index rose 0.2 percent, which follows a 0.2 percent January increase and a 0.4% December increase. The latest number matched the forecast by Here is an overview from the LEI technical notes: The Conference Board LEI for the U.S. improved again in February, driven mostly by positive contributions from the financial components and building permits. In the six-month period ending February 2015, the leading economic index increased 2.4 percent (about a 5.0 percent annual rate), slower than the growth of 3.7 percent (about a 7.5 percent annual rate) during the previous six months. In addition, the strengths among the leading indicators have remained widespread. [Full notes in PDF]  Here is a chart of the LEI series with documented recessions as identified by the NBER.

US blows through $18trn debt limit —On Monday, the US reached its legal debt limit of $18 trillion -more than the country’s entire GDP. Lawmakers will either have to again lift it, or attempt to cap spending. As of March 12, the US Treasury reported federal debt at $18,114,324,000,000.00 in its daily treasury statement. This figure is above the statutory debt limit, which was extended by Congress through March 15 this year.  Treasury Secretary Jack Lew told Congress that the limit would be reached on March 16, and he also requested lawmakers raise the debt ceiling “as soon as possible,” in a letter written in early March.  Under current arrangements, the US government can keep running until October using so-called extraordinary measures, or accounting tricks to keep money flowing into government programs, according to the Congressional Budget Office.  Now that a new zenith has been passed, a fresh showdown between lawmakers and the President about America’s spending habits can be expected.

Maya MacGuineas of Fix the Debt’s Profound Fiscal Irresponsibility - Just as every Spring we can count on the Peter G. Peterson Foundation (PGPF) to do a supportive press release when the CBO issues one of its budget outlook 10 year projection reports, we can also count on being treated to public statements by Maya MacGuineas joining in the Peterson Army choir, warning about the coming debt crisis, and singing about the glories of deficit and debt reduction. And this while completely ignoring the real and sad consequences of deficit and debt reduction policies throughout the world since the crash of 2008, as well as previous applications to Latin American, Asian, and the nations of the disintegrated soviet empire, most notably Russia itself. Let’s look at Maya MacGuineas latest effort; her testimony to the Senate Budget Committee. She begins by identifying herself as president of the Committee for a Responsible Federal Budget (CRFB) and head of the Campaign to Fix the Debt, which she describes as “non-partisan” organizations “. . . dedicated to educating the public about and working with policy makers on fiscal policy issues.” She then emphasizes that the Boards of her two organizations include past directors and chairs of various agencies within the Executive Branch and Congress, and leaders from business, government, policy and academia. I know these types of introductions are standard for people testifying in front of Congress, and that there is nothing out of the ordinary in presenting them. But, perhaps, we should occasionally ask what they mean from the viewpoint of what they’re intended to convey which is the authority and credibility of the person testifying on the subject she/he has been called upon to testify.

Budget Referee Sees Less Deficit Reduction in Obama’s Proposal -- The nonpartisan Congressional Budget Office sees President Barack Obama’s budget proposal for the year beginning Oct. 1 reducing deficits over the next 10 years by $1.2 trillion.  That is less than the $2.2 trillion in cuts forecast by the White House in its budget. (In public, the administration has said its proposal would reduce deficits by $1.8 trillion because the larger figure includes reductions in war spending.) The disparity between the CBO and White House forecasts reflects a higher baseline estimate in the White House budget, which sees deficits rising higher over the next decade under current law than the CBO does. The White House also sees its budget adding a little less to the debt, $5.6 trillion over 10 years, than the CBO does, around $5.9 trillion over 10 years. By 2025, the CBO forecasts the annual budget deficit will rise to $801 billion, from $486 billion this year, under Mr. Obama’s proposal. The White House says the deficit would rise to $687 billion in 2025. For the first five years of the budget window, the forecasts are closer together. The CBO forecasts the Obama budget would cut deficits by $400 billion cumulatively through 2020, while the White House says its proposal would cut deficits by $556 billion. In the immediate future, the CBO actually sees the White House’s budget proposal providing greater deficit reduction than the White House expects. The budget score-keeping agency says tax receipts from several deductions that the administration would eliminate or cap would be responsible for the largest component of deficit reduction, aside from the drop in war funding.

At White House, Commerce Department, Growing Concern About Cuts to Statistics - Officials at the White House and Commerce Department are publicly expressing worries that economic statistics surveys—in particular a critical survey at the Census Bureau known as the American Community Survey—face a growing risk of cuts. “The risk is much higher than it has been,” Mark Doms, the undersecretary of Commerce for economic affairs, said at a conference in Washington this week. Betsey Stevenson, one of three economists on the White House Council of Economic Advisers, said the data is critical because “public policy should be evidence-based.” Maintaining the quality of U.S. statistics is “the next great infrastructure challenge in the data age,” she said at the same gathering. Agencies across Washington are under pressure to reduce their budgets. At the Commerce Department, the Census Bureau’s American Community Survey has emerged as a flash point. It reaches 3.5 million households annually to produce detailed demographic and economic statistics down to areas as small as census tracts and block groups. Prior to the ACS’s full launch in 2005, much of the nation’s demographic information was available only once every 10 years, with the decennial census. But the ACS is expensive, representing more than 20% of the Census Bureau’s budget and more than a third of its staff in 2015. The Commerce Department requested $257 million dollars for the survey for fiscal year 2016. And—unlike almost every other survey—it’s mandatory. The Commerce Department is authorized by statute to fine people who do not respond. In practice, they don’t actually issue these fines, but the potential has rattled some survey respondents and some congressmen.

F-35 Will Not Reach Full Close-Air-Support Potential Until 2022 | DoD Buzz -- F-35 Joint Strike Fighter pilots will have to wait until 2022 to fire the U.S. military’s top close-air-support bomb after the Small Diameter Bomb II enters service in 2017, JSF officials explained.  The Small Diameter Bomb II (SDB II) is an upgrade from previous precision-guided air-dropped weapons because of its ability to track and hit moving targets from up to 40 miles. However, the F-35 will not have the software package required to operate the bomb loaded onto the fifth generation fighter until 2022, officials said. The delay in getting the SDBII onto the F-35 will reduce the aircraft’s ability to provide close-air support to ground troops. It plays a role in the debate over the aircraft’s ability to adequately fulfill the mission of the A-10 Warthog if Air Force officials are allowed by Congress to retire the close-air-support aircraft. Air Force leaders renewed their intent to retire the A-10 by 2019 in February with its budget proposal. Officials said the Air Force needs to transfer resources being used to support the A-10 over to the development of the Joint Strike Fighter. Air Force leaders have said the F-35 will be one of many aircraft that will backfill the A-10. The JSF office has already discovered that the SDB II does not fit onto the F-35B — the Marine Corps variant — without modifications to the aircraft’s weapons bay. The Pentagon is not in a rush to make those changes before the F-35B reaches initial operating capability this year because the weapon won’t work until the right software package is installed.

Pentagon loses track of $500 million in weapons, equipment given to Yemen - The Pentagon is unable to account for more than $500 million in U.S. military aid given to Yemen, amid fears that the weaponry, aircraft and equipment is at risk of being seized by Iranian-backed rebels or al-Qaeda, according to U.S. officials. With Yemen in turmoil and its government splintering, the Defense Department has lost its ability to monitor the whereabouts of small arms, ammunition, night-vision goggles, patrol boats, vehicles and other supplies donated by the United States. The situation has grown worse since the United States closed its embassy in Sanaa, the capital, last month and withdrew many of its military advisers. In recent weeks, members of Congress have held closed-door meetings with U.S. military officials to press for an accounting of the arms and equipment. Pentagon officials have said that they have little information to go on and that there is little they can do at this point to prevent the weapons and gear from falling into the wrong hands. “We have to assume it’s completely compromised and gone,”

Robert Reich: Why Americans are screwed and Europeans are not -  The U.S. economy is picking up steam but most Americans aren’t feeling it. By contrast, most European economies are still in bad shape, but most Europeans are doing relatively well. What’s behind this? Two big facts. First, American corporations exert far more political influence in the United States than their counterparts exert in their own countries. In fact, most Americans have no influence at all. That’s the conclusion of Professors Martin Gilens of Princeton and Benjamin Page of Northwestern University, who analyzed 1,799 policy issues — and found that “the preferences of the average American appear to have only a miniscule, near-zero, statistically non-significant impact upon public policy.” Instead, American lawmakers respond to the demands of wealthy individuals (typically corporate executives and Wall Street moguls) and of big corporations – those with the most lobbying prowess and deepest pockets to bankroll campaigns. The second fact is most big American corporations have no particular allegiance to America. They don’t want Americans to have better wages. Their only allegiance and responsibility to their shareholders — which often requires lower wages to fuel larger profits and higher share prices.

House Republican Budget Overhauls Medicare and Repeals the Health Law - House Republicans on Tuesday will unveil a proposed budget for 2016 that partly privatizes Medicare, turns Medicaid into block grants to the states, repeals the Affordable Care Act and reaches balance in 10 years, challenging Republicans in Congress to make good on their promises to deeply cut federal spending.The House proposal leans heavily on the policy prescriptions that Representative Paul D. Ryan of Wisconsin outlined when he was budget chairman, according to senior House Republican aides and members of Congress who were not authorized to speak in advance of the official release.With the Senate now also in Republican hands, this year’s proposal is more politically salient than in years past, especially for Republican senators facing re-election in Democratic or swing states like Pennsylvania, Wisconsin, Illinois and New Hampshire, and for potential Republican presidential candidates.Mr. Ryan’s successor, Representative Tom Price, Republican of Georgia, promised on Monday “a plan to get Washington’s fiscal house in order, promote a healthy economy, protect our nation and save and strengthen vital programs like Medicare.” Democrats — and those Republicans who support robust military spending — will not see Mr. Price’s “Balanced Budget for a Stronger America” in those terms. Opponents plan to hammer Republican priorities this week, as the House and Senate budget committees officially begin drafting their plans on Wednesday, and then try to pass them through their chambers this month.

U.S. Republican budget cuts social spending, boosts military (Reuters) - U.S. House Republicans on Tuesday proposed higher defense spending and deep cuts to social services including healthcare for the poor in an aggressive new budget plan that seeks to eliminate deficits by 2024. The blueprint from House Budget Committee Chairman Tom Price, which has almost no chance of becoming law, prescribes $5.468 trillion in spending cuts and interest savings over 10 years compared to current policies. Like the budgets of Price's predecessor, Representative Paul Ryan, the document assumes $2 trillion in 10-year savings from full repeal of the Affordable Care Act, the signature healthcare reform law that President Barack Obama has vowed to defend. Price's plan also recycles Ryan's prescription for controversial changes to the Medicare health program for seniors, turning it into a system of subsidies for private insurance, affecting those born in 1959 or later. The non-binding resolution reasserts the Republican Party's long-standing vision of a smaller federal government, less national debt, lower taxes and a stronger economy, all likely themes in the 2016 presidential campaign.

House GOP budget cuts $5.5T in spending, balances in nine years - House Republicans are offering a budget Tuesday that would balance in nine years and cut $5.5 trillion in projected spending over the next decade. The budget would keep spending ceilings under a 2011 budget deal in place, but would provide as much as $90 billion in additional war funding — much more than the $51 billion proposed by President Obama. House Budget Committee Chairman Tom Price’s (R-Ga.) blueprint repeals ObamaCare and proposes a premium support system for Medicare similar to the one proposed in previous House budgets by Rep. Paul Ryan (R-Wis.), Price’s predecessor. It does not touch Social Security but proposes that a bipartisan commission study the entitlement program’s problems and then submit proposals to Congress. On the tax side, Price would repeal the alternative minimum tax but otherwise does not propose major tax reform, unlike last year’s budget from Ryan. Republicans have been debating what to include under reconciliation, a budget tool that would prevent Democrats in the Senate from filibustering covered legislation. It could make it easier for Senate Republicans to pass legislation repealing ObamaCare or other policies opposed by Democrats. The budget resolution includes instructions for House committees to figure out how to repeal as much of ObamaCare as possible under budget reconciliation, a process that would prevent Democrats in the Senate from filibustering a budget reconciliation bill.

Short Term Implications of the House Budget - The CBO took at face value the revenue and spending levels in the House Budget, FY2016, and assessed the impact on GNP per capita (remember, this is not a score, as there are few details on specific provisions to hit the targets). The impact is shown in Figure 2 from the CBOFigure 2 from CBO (2015). Notes: “These results account for the following macroeconomic effects (“feedback”): the ways in which changes in federal debt affect investment in capital goods (such as factories and computers), the ways in which changes in after-tax wages (resulting from changes in capital investment) affect the supply of labor, and the ways in which those economic effects in turn affect the federal budget. The analysis incorporates the assumption that the budget scenarios do not alter the contributions that government investment makes to future productivity and output; those contributions are assumed to reflect their past long-term trends. I thought it was of use to investigate what happens in the short term — so zooming in on 2007-2020. Unfortunately, 2014 GNP per capita was not reported in the document, so I had to do some estimating. But in the end, this is what I obtained. What I have for 2014 real per capita GNP might not match what CBO has, but as best as I can make out, it sure looks like the short term impact is to set growth to zero for 2015 (my actual calculation is -0.5%, y/y — but like I say, I had to estimate 2014 per capita GNP). More on the (re-)appearance of the magic asterisk, from CBPP.

The House GOP Budget As Can Opener: An Impossible Task and A New Lesson in Dynamic Budget Scoring -- Two takeaways from the House Budget Committee’s 2016 fiscal plan: A) It is impossible and B) It is the latest example of the challenges of trying to include macroeconomic effects of tax and spending choices in budget scoring.  Let’s start with A.  Like most budget resolutions, this one builds only a broad fiscal framework to be completed later by other committees. It sets several extraordinarily ambitious goals: It would cut spending by nearly $5.5 trillion over the next decade, or by about 13 percent, and balance the budget by 2025. It would rewrite the tax code, repeal the Affordable Care Act and replace it with a new unspecified health law, completely restructure Medicare, redesign Medicaid, and remake federal transportation, education, and income support programs.  Because this is a budget bill, Congress would have to do all these things in about six months, before next Sept. 30. This would be the same Congress that took five months after the beginning of the fiscal year to  agree to fund one piece of one federal agency—the Department of Homeland Security. Of course, in reality Congress won’t have to do all these things because this budget will not be adopted, not even by a Congress where the GOP holds majorities in both the House and Senate. It is not clear whether Congress will be able to approve any budget at all this year. But if it does, it assuredly won’t be this one.

Senate leaders fire opening shots in 2016 budget battle - Senate Majority Leader Mitch McConnell (R-Ky.) and Minority Leader Harry Reid (D-Nev.) previewed the upcoming fight over the budget Wednesday ahead of a committee markup.  The Senate Budget Committee is expected to mark up a budget resolution Wednesday, with votes in the Senate expected next week. McConnell said the budget will reign in spending while bolstering economic growth. "It's a budget that controls spending, reduces the deficit, and improves programs like Medicaid. It's a budget that will support economic growth and more opportunity for hardworking families while protecting our most vulnerable," he said. "And it is a budget that would allow us to repeal and replace a program that hurts the middle class — ObamaCare." The Obama administration released its fiscal 2016 request last month. McConnell, however, dismissed the president's budget, saying "hardly anyone took that budget seriously."

Senate GOP budget cuts less than House, balances in decade - Senate Republicans released a budget Wednesday that would balance in 10 years and cut spending by $5.1 trillion over the next decade. The blueprint from Senate Budget Committee Chairman Mike Enzi (R-Wyo.) differs greatly from a House GOP blueprint introduced a day earlier that balances in nine years and cuts $5.5 trillion in spending. Most notably, the Senate GOP budget only provides $58 billion for a war spending account known as the overseas contingency operations (OCO) fund, much less than the $90 billion included in the House GOP budget. The Senate blueprint also imposes a 60-vote point of order against any legislation requesting more than $58 billion for the war fund. That would set a high hurdle for legislation requesting a total above that threshold and could provide the Senate with leverage in negotiations with the House.

The Senate GOP Budget Looks Good Relative to the House GOP Budget, But Not Relative to Much Else - Yesterday I wrote a quick overview of the House GOP budget proposal, which I argued would clearly be bad for our economic—and quite possibly physical—health. The Senate GOP budget proposal is a bit better, but while less it’s less austere than the House GOP budget, it is still harmful to the general welfare and the economy. The Senate Budget Committee’s fiscal year 2016 budget resolution, proposed by Senator Mike Enzi (R-WY), would continue damaging austerity for yet another year. This budget, which like the House Budget resolution passed with only GOP support, proposes to eliminate the budget deficit by 2025 without raising taxes. However, to achieve this goal, the budget punishes low- and middle-income people, with cuts to public investments (education, infrastructure, research and development), Medicaid, unemployment benefits, and nutrition programs for needy children. Furthermore, because these cuts start early, when the economy is still likely to be operating below potential due to deficient aggregate demand, the budget plan has adverse effects on economic growth and jobs in the near-term. Based on standard multipliers and relationships between GDP and employment growth, I estimate that the Senate GOP budget cuts would reduce GDP by 0.7 percent in FY2016 and decrease payrolls by almost 800,000 jobs, relative to CBO’s baseline economic and budget projections. It gets even worse in FY2017—GDP would be reduced by almost 1.9 percent, with payrolls decreasing by 2.3 million jobs. All in all, the Senate GOP budget does slightly less damage than the House GOP budget, but that’s a low bar to clear.

Trillion Dollar Fraudsters, by Paul Krugman --  By now it’s a Republican Party tradition: Every year the party produces a budget that allegedly slashes deficits, but which turns out to contain a trillion-dollar “magic asterisk” — a line that promises huge spending cuts and/or revenue increases, but without explaining where the money is supposed to come from.  But the just-released budgets from the House and Senate majorities break new ground. Each contains not one but two trillion-dollar magic asterisks: one on spending, one on revenue. And that’s actually an understatement. If either budget were to become law, it would leave the federal government several trillion dollars deeper in debt than claimed, and that’s just in the first decade. ... The modern G.O.P.’s raw fiscal dishonesty is something new in American politics... And the question we should ask is why. One answer you sometimes hear is that what Republicans really believe is that tax cuts for the rich would generate a huge boom and a surge in revenue, but they’re afraid that the public won’t find such claims credible. So magic asterisks are really stand-ins for their belief in the magic of supply-side economics, a belief that remains intact even though proponents in that doctrine have been wrong about everything for decades.  But I’m partial to a more cynical explanation. Think about what these budgets would do if you ignore the mysterious trillions in unspecified spending cuts and revenue enhancements. What you’re left with is huge transfers of income from the poor and the working class, who would see severe benefit cuts, to the rich, who would see big tax cuts. And the simplest way to understand these budgets is surely to suppose that they are intended to do what they would, in fact, actually do: make the rich richer and ordinary families poorer.

Trying to Square the House’s Tax Cuts and Its No-Tax-Cut Budget - DOA budgets are hardly new. But House tax writers seem to be ignoring their own party’s fiscal plan. The House Budget Committee’s fiscal framework would not change expected revenues over the next 10 years.  While it recommends enormous (though unspecified) spending cuts in an attempt to eliminate the deficit over the next decade, tax revenues hew to the current law baseline: $41.67 trillion over the next decade under current law. $41.67 trillion under the GOP budget. The Senate Budget Committee’s fiscal plan does the same thing. That means that any tax cuts would have to be offset dollar-for-dollar with tax hikes.  For instance, the plan endorses the concept of a broad-based tax reform that would move around major pieces of the revenue code but, in the end, produce the same amount of money as current law. It leaves no room to restore and make permanent the 50-plus tax subsidies that expired at the end of last year, which the GOP budget assumes are no longer in law. And it does not allow any new free-standing tax cuts. But somebody didn’t get the memo.

Tax Cuts Still Don’t Pay for Themselves - Last week, I wrote about the new tax plan from Senator Marco Rubio and Senator Mike Lee as the “Puppies and Rainbows Tax Plan,” because it’s a plan that includes something for everyone — and as a result would cost trillions of dollars in revenue over a decade. Or would it? The Tax Foundation released a report last week arguing the Rubio-Lee plan would generate so much business investment that, within a decade, federal tax receipts would be higher than if taxes hadn’t been cut at all. According to William McBride, the chief economist at the right-of-center think tank, the senators’ plan would add 15 percent to gross domestic product and 13 percent to wages.  If that sounds aggressive to you, you’re not alone: I discussed the Tax Foundation report with 10 public finance economists ranging across the ideological spectrum, all of whom said its estimates of the economic effects of tax cuts were too aggressive. “This would not pass muster as an undergraduate’s model at a top university,” said Laurence Kotlikoff, a Boston University professor whom the Tax Foundation specifically encouraged me to call. Of course, a lot of flawed think tank reports are released every year. This one matters because the House adopted a rule in January that requires “dynamic scoring” of tax bills: analyses (such as the Tax Foundation’s) that give legislation credit for its likely macroeconomic effects, including any rise in tax receipts due to economic growth.In principle, dynamic scoring is fine. Tax policy really does affect the economy, and the right tax policies can produce economic growth that increases the amount of taxable income. But as the Tax Foundation report shows, dynamic scoring can be misused: You can get essentially any answer you want out of a dynamic tax model by changing the assumptions about economic behavior that you plug into it. If you turn the dials far enough, you’ll get a report that shows a tax cut will pay for itself, even if it won’t.

Tax inversion curb turns tables on US - A crackdown by the Obama administration on “tax inversion” deals, which allowed US companies to slash their tax bills, has had the perverse effect of prompting a sharp increase in foreign takeovers of American groups. In September the US Treasury all but stamped out tax inversions, which enabled a US company to pay less tax by acquiring a rival from a jurisdiction with a lower corporate tax rate, such as Ireland or the UK, and moving the combined group’s domicile to that country. The move was designed to staunch an exodus of US companies and an erosion in tax revenues, but it has left many US groups vulnerable to foreign takeovers. Once a cross-border deal is complete, the combined company can generate big savings by adopting the overseas acquirer’s lower tax rate. Since the crackdown, there have been $156bn of inbound cross-border US deals announced, compared with $106bn in the same period last year and $81bn a year earlier, according to data from Thomson Reuters. By far the biggest acquirers have come from countries with lower tax rates such as Canada and Ireland, which have announced $26bn and $22bn of deals respectively, highlighting the competitive advantage that their companies have when it comes to mergers and acquisitions. Before the crackdown, groups from Germany and Japan were the biggest buyers of US companies. So far this year, foreign buyers have announced $61bn worth of US acquisitions, an increase of 31 per cent on last year and the strongest start to a year for inbound cross-border deals since 2007, according to the data. When the Obama administration changed the rules governing tax inversions, many bankers and politicians warned it would not stop the exodus of companies from the US unless it was accompanied by a reduction in the headline rate of US corporation tax, which stands at 35 per cent. However, gridlock in Washington has made it very difficult to achieve a comprehensive overhaul of the tax code.

Spanish Company Tops Corporate Welfare List -  How much welfare Uncle Sam provides companies has long been one of the great mysteries of taxpayer spending. Like a secret underground river, boodles have flowed out of the Treasury and into corporate bank accounts without notice. Now we finally have a first look at the size of that river and where the cash goes. The federal government has quietly doled out $68 billion through 137 government giveaway programs since 2000, according to a new database built by a nonprofit research organization,  Good Jobs First. It identified more than 164,000 gifts of taxpayer money to companies. You can look up company names, subsidy programs and other freebies at the Subsidy Tracker 3.0 website. A report the organization released today, “Uncle Sam’s Favorite Corporations,” shows that big businesses raked in two-thirds of the welfare. The most surprising and tantalizing finding is the identity of the biggest known recipient of federal welfare. That dubious honor belongs to Iberdrola, a Spanish energy company with a reputation for awful service and admissions of incompetence. It collected $2.1 billion of welfare on a $5.4 billion investment in U.S. wind farms from coast to coast. In fact, 10 of the 50 biggest recipients of federal welfare are foreign-owned firms. Try to imagine Congress debating a bill giving welfare payments to poor Canadians, Mexicans and Europeans and you’ll see the absurdity of U.S. taxpayers providing welfare to the owners of foreign corporations.

The Rent Hypothesis - Rent, as an economic idea, refers to some gain that, loosely, you can think of as unearned. It is, more rigorously, a payment for a resource in excess of its opportunity cost, one that instead reflects market power.  For instance, profits that a monopolist earns in excess of the profit that would exist in a competitive market are rents. So are excess profits from the production of a patented invention, or the extra compensation that an executive might get because he's buddy-buddy with the board of directors. Rents are not always bad. Protections for intellectual property make sense not in spite of the rents they generate, but rather because of them.Usually, however, there is something less than endearing about rents. That's because, without some countervailing market failure, as in the case of innovation, giving away unearned gains is bad for incentives and bad for the allocation of resources. An economy where the cost of Internet access (to choose a not-accidental example) is determined by how much can be squeezed out of you and me, rather than how much it actually costs to provide it to us, is inefficient.There has been, for the last few years, a "big idea" floating around the economics conversation that these rents are growing -- that unearned gains are eating up an larger share of income. Let's call it "the rent hypothesis." It's an appealing idea from a certain perspective. It seems to explain a lot. Why are corporate profits so high? Shouldn't they be competed away? Why does finance make so much money? Can it really cost that much to do what financial intermediaries do? Why is executive compensation so huge?  And why, if profits are so high, is new-business formation and business investment so low? Shouldn't those profits attract new entrants and encourage existing businesses to expand? That last point comes from Paul Krugman, who has done some of the brainstorming about rents here and here:

ICE Futures Broke Law "Thousands" Of Times In 20 Months, CFTC Fines Exchange 0.75% Of 2015 Revenues - From October 2012 to May 2014, the CFTC found that ICE Futures exchange submitted reports and data containing errors and omissions on every reporting day, with cumulative inaccuracies totaling in the thousands. The CFTC stated unequivocally that, those "who fail to meet their reporting obligations will be held accountable," and required ICE to pay a $3 million civil monetary penalty. With expectations of over $4 billion in revenues for FY 2015, the $3 million fine represents just 0.75% of the exchange's income... that will teach them!!!

S.E.C. Wants the Sinners to Own Up - For decades, the Securities and Exchange Commission has allowed companies and individuals to make settlements without admitting any wrongdoing. Even a company committing an egregious sin that cost investors millions of dollars could walk away from the proceedings without ever acknowledging its role.But in mid-2013 the agency declared that it was doing an about-face.“Heightened accountability or acceptance of responsibility through the defendant’s admission of misconduct may be appropriate, even if it does not allow us to achieve a prompt resolution,” Andrew Ceresney, the S.E.C.’s head of enforcement, said in a June 2013 email to his lieutenants. The program represented a seismic shift in approach, but in practice it is still in its early stages. After two years, the S.E.C. has generated admissions of culpability in 18 different cases involving 19 companies and 10 individuals. Given the hundreds of settlements struck by the S.E.C. over this time, it is clear that most of the time defendants are still being allowed to settle without admitting to or denying the agency’s allegations.S.E.C. officials say this age-old practice saves it from having to bring — and possibly lose — a case in court, allows the agency to return money to victims more quickly and conserves resources for other investigations.Nevertheless, S.E.C. enforcement officials say they believe the policy change has sent a crucial message. “Requiring admissions adds a powerful tool in appropriate cases, and it has been extremely successful and positive,” Mr. Ceresney said in a recent interview. “In cases where we have obtained admissions, it adds accountability, and that has been very important.”

The SEC’s Andrew Bowden: A Regulator for Sale? --  Yves Smith   -- The head of the SEC’s examination unit, Andrew Bowden, created a furor last May when he described the widespread lawbreaking that the SEC was uncovering in its first examinations of private equity firms, now that virtually all were required by Dodd Frank to register as investment advisors. For one type of abuse alone, allocation of fees and expenses, Bowden stated that the SEC had found “violations of law or material compliance failures” in more than half the firms examined. Let’s not put too fine a point on this: the SEC said that most firms were stealing from investors, either by accident or design. Bowden confirmed that view, later telling the New York Times’ Gretchen Morgenson that “investors’ pockets are being picked.” But after this unusually tough and detailed talk, the SEC went into retreat. Reports from speeches and statements by Bowden at private equity conferences and in interviews showed him making conciliatory remarks that were disturbingly inconsistent with the level and range of wrongdoing his unit had unearthed. The disparity was so striking that it went well beyond a walkback; we called it a coverup last September and an example of enforcement cowardice in October.  One possible explanation of this striking reversal could be that private equity kingpins, who are often substantial political donors, told Congresscritters to call the SEC dogs off. Remember that the SEC is the lone financial regulator whose budget comes from Congressional appropriations, as opposed to fees and fines. Congressmen have not hesitated to threaten the SEC with budget cuts when they’ve deemed it to be stepping on important donors’ toes.

What Does it Take to Get Fired at the SEC? --“Yves Smith” has a distressingly wonderful column in her blog, NakedCapitalism, on the SEC’s Andrew Bowden.  The SEC Chair, Mary Jo White, needs to read it and walk to Bowden’s office and tell him she needs his resignation letter on her desk by noon or she will terminate his employment.  When the SEC appointed Bowden as its lead examiner it put out a press release that purported that his unit was hiring folks from the industry like Bowden, which was going to make it a competent, kick-ass regulator. “The SEC’s National Exam Program conducts inspections and examinations of SEC-registered investment advisers, investment companies, broker-dealers, self-regulatory organizations, clearing agencies, and transfer agents. OCIE has adopted a risk-focused examination program, hired industry experts, leveraged technology to increase efficiency, and launched a training program focused on quality and consistency. These initiatives have enabled OCIE to more effectively fulfill its mission to promote compliance with U.S. securities laws, prevent fraud, monitor risk, and inform SEC policy.” The reality was that under the Clinton, Bush, and Obama administrations huge areas of finance had been left with minimal regulation.  As “Yves Smith’s” article explained, as soon as the SEC actually looked at these areas it found wholesale non-compliance “with U.S. securities laws,” endemic fraud, and unmonitored risk at private equity firms.  In sum, the private equity firms were ripping off their investors.

Stanford Law School Covers Up SEC’s Andrew Bowden’s Embarrassing Remarks by Deep-Sixing Conference Video - It looks like private equity and its allies in academia are very keen to try to maintain the industry’s vaunted secrecy, even after the cat has clearly gotten out of the bag  Two days ago, we wrote about a remarkable example of regulatory capture and potential corruption. SEC enforcement chief Andrew Bowden, before an industry audience at Stanford Law School, on a panel moderated by KKR board member, Stanford Law professor and former SEC commissioner Joseph Grundfest, made fawning remarks about the private equity industry. Bowden repeatedly called PE “the greatest,” and made clear that he was so awestruck by its profits and seemingly attractive investor returns that he was urging his teenaged son to seek his fortunes there. This was troubling not simply because Bowden, as the SEC’s exam chief, looked to be soliciting, on a plausibly deniable basis, employment for his child from the firms he supervises. Bowden had described widespread lawbreaking in private equity in an unusually blunt and detailed speech last May. But almost immediately, he began walking his remarks back at conferences with the industry and in interviews with private equity publications. We’d charitably assumed the change in posture was due to outside pressure, but it may actually be due in large measure to Bowden’s unduly high regard for the industry, which appears to have  tarnished his judgment, badly. Stanford Law had posed the conference video on line, and for viewer convenience, we put up a key section as a separate clip:

How foreigners became America’s financial regulators -- At a hearing before the House Financial Services Committee on Tuesday, Treasury Secretary Jack Lew denied that the decisions of the Financial Stability Board—an international body of financial regulators—were binding on its member nations, which include the United States. Chairman Jeb Hensarling asked him why, then, did the FSB need to give three Chinese banks “exemptions” from its “nonbinding” rules. Mr. Lew was unable to explain.  This exchange may not seem to have much practical significance. But it does. The authority of this board should be of pressing concern to Congress and the American public, both for its effect on the U.S. financial system and more so on the power of Congress under the U.S. Constitution.  In 2009 President Obama and the leaders of the G-20 countries deputized the Financial Stability Board to reform the international financial system. The Treasury Department, Federal Reserve and Securities and Exchange Commission are the board’s U.S. members.

The Case Against New York as Home to Wall Street Regulation: There is now a movement in Congress to strip the Federal Reserve Bank of New York of its regulatory oversight of the biggest Wall Street banks. The movement has roots among both Democrats and Republicans who are fed up with the continuing unbridled abuses of the public trust by the unruly hooligans on Wall Street and their timid regulator, the New York Fed. The push for change is critically important for a number of reasons. Major among them is the perception that New York and its politicians are more concerned about what’s in the best interests of New York residents and less about what’s best for the country as a whole. Two trillion dollar too-big-to-fail banks may pose a systemic risk for the nation but they’re a handy source of quick, mega loans for the hedge funds and real estate interests in New York, whose employees’ free-spending ways are a boon to the pricey restaurants and upscale stores that dot the Manhattan landscape. No two individuals have exemplified the hubris of the New York politician’s way of thinking better than Senator Chuck Schumer and former Mayor Michael Bloomberg, a billionaire whose fortune derives from Wall Street. Just one year before Wall Street’s deregulated landscape would usher in the greatest financial collapse since 1929, Schumer and Bloomberg were pushing for greater deregulation of Wall Street. The two hired McKinsey & Company to study any threats that might be lurking to New York City’s global dominance in financial services.

Top Wall Street Lawyer Slams Regulatory Environment - WSJ: One of Wall Street’s top lawyers says strains between banks and regulators have never been greater. After the record mortgage-related fines paid by banks over the last two years, “the regulatory environment today is the most tension-filled, confrontational and skeptical of any time in my professional career,” Sullivan & Cromwell Senior Chairman H. Rodgin Cohen said Wednesday at a banking legal conference in Phoenix. Instead of blaming regulators themselves, Mr. Cohen said the acrimony stems from the fight over a phenomenon called regulatory capture, in which watchdogs essentially get too close to the subjects they regulate. Many policymakers have expressed concerns about such capture, but Mr. Cohen says the fears are overblown. Almost on cue a few hours later, a top regulator criticized banks. Federal Reserve Chairwoman Janet Yellen, asked about banks’ culture and recent regulatory fines at a news conference in Washington said: “It’s certainly been very disappointing to see what have been some really brazen violations of the law.” She added that the Fed was keeping a close eye on bankers’ bonuses to make sure they didn’t encourage bad behavior.

Rodgin Cohen: Pay No Attention to That Man Behind the Curtain -- The Wall Street Journal ran a story today about H. Rodgin Cohen, the Senior Chairman of Sullivan & Cromwell and "one of Wall Street's top lawyers" decrying "the myth of regulatory capture." All I can say is wow. That's some chutzpah.  For Rodgin Cohen to downplay regulatory capture is a like the scene in the Wizard of Oz when the Wizard says, "Pay no attention to that man behind the curtain." It's hard to think of an individual more at the center of the regulatory capture phenomenon than Rodgin Cohen.  Cohen plays a particular and unique role in the regulatory capture problem. Cohen is not just "one of Wall Street's top laywers". He is the top bank lawyer. He's a node through which all sorts of connections happen. Cohen is the eminece grise of financial services law and is an institution unto himself. Think of him as a sort of super-consiglieri or Mr. Wolf. There's no one who quite plays the role of Cohen in the world of financial regulation, and he's rightly greatly respected.

Bank Super Lawyer, Rodgin Cohen of Sullivan & Cromwell, Says Regulatory Capture is a Myth - Yves Smith - Yesterday, the Wall Street Journal ran a credulity-straining account of how Rodgin Cohen, the dominant bank regulatory lawyer in the US, was trying with a straight face to convey a line that legitimates his role: move along, there is no such thing as regulatory capture. Funny, that, since none other than former central banker Willem Buiter called it out in 2008 at the Fed’s Jackson Hole conference. And a key bit of evidence, not cited by Buiter, came at the 2005 Jackson Hole conference. He delivered his paper, “Has Financial Development Made the World Riskier?” and ran into a firestorm of criticism when he answered his own question,”Yes.” Rajan’s paper described widespread bad incentives in the financial services industry, which led to excessive risk taking and periodic busts, and fingered credit default swaps as a possible driver of a systemic crisis. The current Fed appears to have learned a bit and clearly disagrees with Cohen’s sunny view that cozy, collegial relationships between regulators and their charges are desirable and normal. I gather Cohen was somehow missing in action when the fruit of all that chumminess and credulous acceptance of what Wall Street was selling was the crisis just past. The Fed has belatedly taken some initial steps to create some sunlight between it and major financial firms, by removing key elements of regulatory oversight from the New York Fed, which has always been close to Wall Street. The central bank also the practice of embedding supervisory staff at bank offices, recognizing that the information gain by being onsite is more than offset by coming to see the world through the institution’s eyes and not wanting to have friction in dealing with the people they work with every day at those banks.

Currency swings cost U.S. corporates $18.66 billion in fourth quarter: study - (Reuters) - Foreign exchange swings cost North American corporates $18.66 billion in revenue in the fourth quarter, according to a report by currency risk management consulting firm FiREapps. Total negative currency impact rose more than four-fold in the fourth quarter from the previous quarter, and was the biggest since the height of the euro crisis, according to the report. FiREapps analyzes currency effects on quarterly earnings of 846 North American companies, a subset of the Fortune 2000 companies that generate at least 15 percent of international revenue in two or more currencies. ( Earnings per share of North American corporates were hurt by $0.06 on an average, nearly double the 2013-2014 average and the highest since FiREapps began measuring the impact of currency swings. A slew of U.S. multinational companies, from DuPont to Procter & Gamble , have showed that a strong U.S. dollar hurt their earnings, and several blue-chip exporters said the situation will get worse if the greenback holds its strength. The number of companies reporting a negative impact was 6.4 percent higher in the fourth quarter than in the third quarter, according to FiREapps. A strong U.S. dollar is hurting multiple sectors, including industrial companies such as 3M Co , technology companies like Microsoft Corp and Apple Inc , airlines such as American Airlines Group Inc , healthcare companies, including Bristol-Myers Squibb Co and Pfizer Inc , and consumer firms like Procter & Gamble - which all garner a large portion of their sales from outside the United States.

Paul Tudor Jones Warns This "Disastrous Market Mania" Will End "By Revolution, Taxes, Or War" -- "This gap between the 1% and the rest of America, and between the US and the rest of the world, cannot and will not persist," warns renowned trader Paul Tudor Jones during his recent TED Talks speech, as he addressed the question - can capital be just? Hoping to expand the "narrow definitions of capitalism," that threaten the underpinnings of society, Tudor Jones exclaims, "we're in the middle of a disastrous market mania," adding "one of worst of my life." Perhaps most ominously, he concludes, historically this ends "by revolution, higher taxes or wars. None are on my bucket list."

Banks Struggle to Unload Oil Loans - WSJ: Citigroup Inc.,Goldman Sachs Group Inc.,UBS AG and other large banks face tens of millions of dollars in losses on loans they made to energy companies last year, a sign of investor jitters in a sector battered by the oil slump. The banks intended to sell the loans to investors but have struggled to unload them even after cutting prices, thanks to a nine-month-long plunge that has taken Nymex crude futures to their lowest level since 2009.  The losses mark a setback for Wall Street, after global banks earned $31 billion in fees over the past five years by financing energy-company stock sales, borrowing and mergers-and-acquisition transactions, according to Dealogic. Wall Street’s losses on the loans could have a chilling effect on some oil companies’ ability to fund their operations as investors take a more cautious view of the sector. “We’ve been pretty shy about dipping back into the energy names,”  “We’re taking a wait-and-see attitude.” Energy-sector deals have been a bright spot at a time when once-lucrative businesses, such as fixed-income trading and consumer lending, are flagging thanks to tighter rules, low interest rates and uneven economic growth, analysts said.

Community Banks and the CFPB - I'm testifying before the House Financial Services Committee on Wednesday at a hearing entitled "Preserving Consumer Choice and Financial Independence." I'm the only non-industry witness (no surprise there). For those interested, my testimony is linked here.  Here's the highlight:   Community banks face a serious structural impediment to being able to compete in the consumer finance marketplace because they lack the size necessary to leverage economies of scale. The CFPB has repeatedly acted to ease regulatory burdens on community banks in an attempt to offset this structural disadvantage. While community banks continue to face serious problems with their business model, their profits were up nearly 28% in the last quarter of 2014 over the preceding year, which strongly indicates that they are not being subjected to stifling regulatory burdens. Ultimately, if Congress wants to help community banks, the answer is not to tinker with the details of CFPB regulations... Instead, if Congress cares about community banks it needs to take action to break up the too-big-to-fail banks that receive an implicit government guarantee and pose a serious threat to global financial stability. Until and unless Congress acts to break up the too-big-to-fail banks, community banks will never be able to compete on a level playing field.

Citigroup Owes 23,000 Americans a Total of $20MM - Alexis Goldstein - If you owed 23,000 people about $20 million, and you didn’t pay them, what do you think would happen to you? Justice would probably come pretty swift for you through the court system, right?  Citigroup owed this $20 million to homeowners who faced illegal or error-ridden foreclosures. These foreclosures were unveiled through something called the Independent Foreclosure Review: "In the wake of the foreclosure crisis and the myriad abuses perpetuated by mortgage servicers, the Office of the Comptroller for the Currency (OCC) and the Federal Reserve created the Independent Foreclosure Review. Fourteen servicers owned by banks like Bank of America, Wells Fargo and JPMorgan Chase were ordered to investigate foreclosures between 2009 and 2010 and figure out if these foreclosures were fraudulent." In April 2013, the results of the Independent Foreclosure Review settlement were unveiled. And the settlement was a complete joke. Wronged homeowners who never missed a payment were paid $5,000 (but didn’t get their home back). Those who had a loan modification approved, but the bank foreclosed anyway, got a paltry $300.  But the story just keeps getting worse. Now, government officials leaked to Bloomberg news that Citigroup never even bothered to pay 23,000 harmed borrowers, owing a total of $20,000 million.   Jesse Hamilton reports for Bloomberg: "The bank is now preparing to pay them about $20 million — in amounts ranging from a few hundred dollars to as much as $125,000 — after government officials called attention to the error."

Real estate needs further regulation: New York City is one of the wealthiest cities in the world, and as a result has one of the fiercest luxury real estate markets. A New York Times investigative report released Feb. 7 delved into this high-end market and found that a huge number of residences are owned by secretive, anonymous shell companies that allow foreign buyers — some of them criminals — to purchase condos. The regulatory loophole that has brought this infusion of foreign assets provides a safe haven for both dirty and clean money, and makes the real estate market not only less transparent, but also more competitive. New York City’s elite real estate is being bought up at a staggering rate by anonymous shell companies. Due to the lack of legal imperative to investigate the identities of buyers, large numbers of unscrupulous ultra-rich have come to own a large percentage of New York’s most valuable real estate. In 2010, a $15.65 million condominium in the Time Warner Center was bought by Vitaly Malkin, a Russian banker and politician who has been linked to organized crime and subsequently banned from entering Canada. Similarly, Dimitrios Contominas, a Greek businessman arrested for corruption charges last year, purchased a $21.4 million unit on the 74th floor, the same floor as Malkin. The shell companies that owners use are often registered in the names of family, friends and consultants instead of the owners themselves, and their ownership can be changed without documentation. Even Tom Brady has been linked to buying real estate using these dubious methods.

CoreLogic: "1.2 Million US Borrowers Regained Equity in 2014, 5.4 Million Properties Remain in Negative Equity" - From CoreLogic: CoreLogic Reports 1.2 Million US Borrowers Regained Equity in 2014 CoreLogic ... today released new analysis showing 1.2 million borrowers regained equity in 2014, bringing the total number of mortgaged residential properties with equity at the end of Q4 2014 to approximately 44.5 million or 89 percent of all mortgaged properties. Nationwide, borrower equity increased year over year by $656 billion in Q4 2014. The CoreLogic analysis also indicates approximately 172,000 U.S. homes slipped into negative equity in the fourth quarter of 2014 from the third quarter 2014, increasing the total number of mortgaged residential properties with negative equity to 5.4 million, or 10.8 percent of all mortgaged properties. This compares to 5.2 million homes, or 10.4 percent, that were reported with negative equity in Q3 2014, a quarter-over-quarter increase of 3.3 percent. Compared to 6.6 million homes, or 13.4 percent, reported for Q4 2013, the number of underwater homes has decreased year over year by 1.2 million or 18.9 percent.  The share of homeowners that had negative equity increased slightly in the fourth quarter of 2014, reflecting the typical weakness in home values during the final quarter of the year,” This graph shows the break down of negative equity by state. Note: Data not available for some states. From CoreLogic: "Nevada had the highest percentage of mortgaged properties in negative equity at 24.2 percent; followed by Florida (23.2 percent); Arizona (18.7 percent); Illinois (16.2 percent) and Rhode Island (15.8 percent). These top five states combined account for 31.7 percent of negative equity in the United States." . The second graph shows the distribution of home equity in Q4 compared to Q3 2014. Close to 4% of residential properties have 25% or more negative equity.

Zillow: Negative Equity Rate unchanged in Q4 2014 - From Zillow: Even as Home Values Rise, Negative Equity Rate Flattens In the fourth quarter of 2014, the U.S. negative equity rate – the percentage of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9 percent, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year.  While this may not seem very notable (after all, overall negative equity didn’t go up, merely flattened out), this represents a major turning point in the housing market. The days in which rapid and fairly uniform home value appreciation contributed to steep drops in negative equity are behind us, and a new normal has arrived. Negative equity, while it may still fall in fits and spurts, is decidedly here to stay, and will impact the market for years to come.  The following graph from Zillow shows negative equity by Loan-to-Value (LTV) in Q4 2014. Note: CoreLogic released their Q4 2014 negative equity earlier this week. For Q4, CoreLogic reported there were 5.4 million properties with negative equity, up slightly from Q3.

Underwater Homeowners "Here To Stay" Zillow Says - A few weeks back we commented on the rather disturbing news that repeat foreclosures jumped in January:  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%.  Here’s what the trend looks like:  Now, a new report from Zillow seems to offer further evidence that the US housing market may not be the picture of health after all (as if we needed more proof after housing starts cratered 17% in February). The percentage of homeowners underwater in the US was flat from Q3 to Q4 which doesn’t sound all that terrible until you consider that this figure had fallen for 10 consecutive quarters. Things look particularly bad in Florida and the Midwest where Zillow notes more than 25% of borrowers are sitting in a negative equity position. Here’s more:  In the fourth quarter of 2014, the U.S. negative equity rate – the percentage of all homeowners with a mortgage that are underwater, owing more on their home than it is worth – stood at 16.9 percent, unchanged from the third quarter. Negative equity had fallen quarter-over-quarter for ten straight quarters, or two-and-a-half years, prior to flattening out between Q3 and Q4 of last year… More than a quarter of mortgaged homes are underwater in some markets in Florida and the Midwest

MBA: Mortgage Applications Decrease in Latest Weekly Survey - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 13, 2015. ...The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 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) decreased to 3.99 percent from 4.01 percent, with points increasing to 0.40 from 0.39 (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 1% higher than a year ago.

Freddie Mac: 30 Year Mortgage Rates decrease to 3.78% in Latest Weekly Survey - From Freddie Mac today: Mortgage Rates Move Down as We Head Into Spring Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving down across the board. The average 30-year fixed mortgage rate continues its run below 4 percent -- a good sign for the spring homebuying season. ... 30-year fixed-rate mortgage (FRM) averaged 3.78 percent with an average 0.6 point for the week ending March 19, 2015, down from last week when it averaged 3.86 percent. A year ago at this time, the 30-year FRM averaged 4.32 percent. 15-year FRM this week averaged 3.06 percent with an average 0.6 point, down from last week when it averaged 3.10 percent. A year ago at this time, the 15-year FRM averaged 3.32 percent

30 Year Mortgage Rates decline to March Lows -  From Mortgage News Daily: Mortgage Rates End Week at March Lows Mortgage rates moved modestly lower on average today after doing an admirable job of holding their ground amid weaker market conditions yesterday. That weakness was largely the result of a technical correction to the immense strength seen after Wednesday's Fed Announcement and Press Conference. The following two days have essentially legitimized that strength as something other than a temporary knee jerk reaction...Most lenders are now quoting a conventional 30yr fixed rate of 3.75% for top tier scenarios. There's more consensus on that one rate than normal. Many lenders that had been at 3.875% are just barely into the 3.75% territory after this week's gains, but underlying market levels are quite strong enough and haven't been maintained long enough for too many lenders to make the foray down to 3.625%. Note: rates are still above the level required for a significant increase in refinance activity. Historically refinance activity picks up significantly when mortgage rates fall about 50 bps from a recent level.   Based on the relationship between the 30 year mortgage rate and 10-year Treasury yields, the 10-year Treasury yield would probably have to decline to 1.5% or lower for a significant refinance boom (in the near future). With the 10-year yield currently at 1.93%, I don't expect a significant increase in refinance activity. Here is a table from Mortgage News Daily:

Housing Market Index March 16, 2015: The lack of first-time buyers is an increasing negative for the new home market, evident in the housing market index for March where growth slowed 2 points to an 8-month low of 53. The traffic component of the index again shows particular weakness, down 2 points to 37 which is a 9-month low and directly reflects the lack of first-time buyers. The other 2 components of the report remain well over 50, at 58 for current sales, which however is down 3 points from February for a 5-month low, and at 59 for future sales which is unchanged. Regional composite data show the Midwest out in front at 61 for a striking 13 point surge in the month followed by the largest region, the South which is down 2 points to 54. The West, which is also a very important region for new homes, shows an 11-point decline to 53 with the Northeast, which is by far the least important market for new homes, down 7 points to 39. Why are first-time buyers not showing interest in buying a home? Perhaps it's tied to the bubble collapse in 2008, one that may have lowered the appeal of housing as a lifelong investment. This report always precedes the housing starts report by 1 day. Tomorrow's report on housing starts & permits is expected to be no better than mixed.

Housing Starts decreased sharply to 897 thousand Annual Rate in February -- From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in February were at a seasonally adjusted annual rate of 897,000. This is 17.0 percent below the revised January estimate of 1,081,000 and is 3.3 percent (±12.5%)* below the February 2014 rate of 928,000. Single-family housing starts in February were at a rate of 593,000; this is 14.9 percent (±10.0%) below the revised January figure of 697,000. The February rate for units in buildings with five units or more was 297,000.  Privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,092,000. This is 3.0 percent above the revised January rate of 1,060,000 and is 7.7 percent above the February 2014 estimate of 1,014,000. Single-family authorizations in February were at a rate of 620,000; this is 6.2 percent (±0.9%) below the revised January figure of 661,000. Authorizations of units in buildings with five units or more were at a rate of 445,000 in February. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) decreased sharply in February. Multi-family starts are down 10% year-over-year. Single-family starts (blue) decreased in February and are up slightly year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), This was well below expectations of 1.040 million starts in February, although starts in January were revised up. Overall this was a weak report, although permits were decent (an indicator for March), and a large portion of the weakness was in the volatile multi-family sector.

Housing Starts Fall More Than Expected In February -- New construction of US residential housing in February was considerably weaker than expected, raising more doubts about the resilience of the economy’s strength. Analysts were looking for a mild pullback to a seasonally adjusted annual rate of 1.048 million units for last month. As it turns out, that was far too optimistic. The Census Bureau reports that housing starts slumped 17% last month to an annual pace of 897,000, the lowest in more than a year. Is the weakness a danger sign for the macro trend? Or is it just a blip due to a rough winter that’s temporarily weighing on economic activity? No one really knows at this stage, although that doesn’t stop anyone from choosing a narrative that fits their economic worldview. As for the data in hand, today’s bad news was tempered somewhat by the strength in newly issued housing permits, which perked up to a seasonally adjusted annual rate of 1.092 million—close to a post-recession high. As a result, we have an odd combination of rising permits and falling starts. The two indicators tend to track one another through time, but short-term divergences pop up at times… like now. Which measure should we focus on?  Some economists favor the idea that permits are effectively a leading indicator for starts, which implies that residential construction activity will improve in the months ahead. Given the recent strength in payrolls lately, that’s a reasonable forecast. But one reason for keeping a lid on this prediction arises from the fact that today’s soft data on housing starts follows disappointing February updates on industrial production and retail sales. It seems that there are more cockroaches than expected as we continue pulling up the rug.

Housing Starts Collapse Most In 8 Years To 18 Month Lows -- Housing Recovery? Yellen, we have a problem. Housing Starts for February collapsed 17% - this is the biggest MoM drop since February 2011. At 897k SAAR, this is the first sub-900k print since September 2013 and biggest miss since Feb 2007. Multi-family starts are the lowest since June 2014. The collapse was dominated by the Northeast (-56.5%) and Midwest (-37%) so it must be the weather, right? Not so fast, The West region saw starts collapse 18.2%. Permits for multi-family units rose notably as single-family permits dropped to one-year lows...

Ignore housing starts, housing permits were encouraging -- You don't need decent weather to get a housing permit. You need decent (or at least not horrendous) weather to actually start building a house. That makes winter housing starts particularly volatile. In general, housing starts (red in the graph below) are twice as volatile as housing permits (blue). I've squared the results so that they are all positive, making it easier to see the volatility: That's why I focus on permits rather than starts. Plus permits tend to lead starts by a month. So what is going on with permits? Here they are in absolue terms: And here is the YoY trend: Housing permits in February were only exceed by last October. And the YoY trend has turned up mildly. So consider me unperturbed by the morning's housing starts miss, and encouraged by the good permits number.

Let Building Permits Tell the Tale of February Home Construction - Housing starts declined by 17% in February from January. So, we should all panic, right? No.The Commerce Department’s data for February home starts, released Tuesday, is an anomaly born of harsh weather in many parts of the U.S. last month. Residential building permits provide a better view of the market’s trajectory.The question isn’t so much whether this spring home-selling season is off to a disastrous start. Rather, it’s more about whether the spring is starting slowly or if it’s shaping up for big gains. The former would deliver modestly disappointing gains from last year’s lackluster result, and the latter is what most builders and economists are hoping for. Consider that, even though overall construction starts were down 3.3% in February from a year earlier, residential building permits were up 2% in the same span. Permits are a solid gauge of building activity in the near future, and they aren’t whipsawed as much each month by weather as are construction starts. From another perspective, the number of permits issued in January and February of this year for single-family houses shows a 0.9% increase from the same period a year ago. That’s not a strong gain. But neither is it the disastrous decline that today’s headline number implies. “We think harsh weather in the Northeast may have been partially responsible as that region fell the hardest sequentially and year-over-year in February (in permits for single-family homes),”  “In contrast, the more important South and West regions were up 4.8% and 13.6% year over year, respectively, pointing to a stronger start to the 2015 spring selling season.”

Pushing On A String: The Fed's Spectacular Failure To Stimulate Housing -- David Stockman - The “incoming data” was disappointing again yesterday - this time the culprit was housing starts which were off by 17% from January. But please don’t blame the “weather” again. The data below is for single family starts which are less volatile than apartment construction. At an annual rate of 593k units in February they were almost exactly flat with last February at 589k. If memory serves, the second month of 2014 was the epicenter of last year’s famous Polar Vortex—–meaning that winters happen but this year’s tepid results cannot be blamed on a winter that was not as bad as the real bad one. Besides that, the seasonal adjustments are supposed to factor in weather—especially the possibility of snow and cold in the Northeast. On the considerable chance that the seasonals are screwed up, however, just consider the raw unadjusted, unannualized numbers for the month of February. During the coldest winter in recent times last year, the actual number of single family starts during the month was 40,600. This year it was 40,700. You need a microscope to tell the difference! Fortunately, it is not the hairline gain from last year that’s the real story in today’s downbeat housing numbers. What we have here is another powerful case of the Great Immoderation. That is, the havoc that the Fed’s bubble finance policies have visited upon the main street economy.. In short, in the name of improving upon the alleged instability of the private economy - absent the Fed’s expert ministrations - the geniuses in the Eccles building have actually caused the rate of housing starts to gyrate wildly. To wit, by a factor of 5X from top to bottom - so far this century.

Housing Waits–and Waits–on Millennials - : The 17% plunge in February housing starts would suggest the roof is collapsing on housing. In reality, harsh weather probably caused most of the free fall: housing starts in the Northeast alone fell 56.5% in February. Still, home building–especially construction of single-family stand-alone residences–has not rebounded as might be expected given ultralow mortgage rates and good affordability. Even before February’s crash, single-family housing starts were running less than half the levels seen during the housing boom and are 37% below their average of the 1990s. One reason is the absence of younger home buyers. People ages 25 to 34 are typically the source of new household formations that drive home construction. In this expansion, young people are less likely to set up their own households. Roiana Reid, an associate in Nomura‘s economic department, found the share of households headed up by someone 25 to 34 years old has fallen far more than other age groups since 2006. Moreover, not only are millennials not going out on their own, those that do are not buying homes. “The growth in households since the financial crisis has been almost entirely from renters,” wrote Mike Cudzil, co-head of agency mortgage portfolio management at bond firm Pimco in a blog post. The inclination to rent explains why construction of apartment buildings is back to prerecession levels, even as single-family housing struggles. The problem for the economy is that multiunit construction doesn’t have as much bang for the buck as single homes do. “Each multifamily housing start creates one job for every three jobs created by a single-family housing start,” Mr. Cudzil wrote

Comments on February Housing Starts - As always, we we shouldn't let one month of data influence us too much. For February it appears housing starts were impacted by the weather, especially in the Northeast. Here is a table showing starts in the four Census Bureau regions.  Starts in the Northeast were down 46% year-over-year: However, even if starts had increased year-over-year in February at the rate in the South and the West, housing starts would still have been below expectations.  So overall this was a disappointing report. Note: It is also possible that the West Coast port slowdown impacted starts a little.  The labor situation was resolved in February, so any impact should disappear quickly. This graph shows the month to month comparison between 2014 (blue) and 2015 (red). Even with the weak February, starts are running 8.4% ahead of 2014 through February. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months). think most of the growth in multi-family starts is probably behind us - although I expect solid multi-family starts for a few more years (based on demographics). The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

NAHB: Builder Confidence decreased to 53 in March -- The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 53 in March, down from 55 in February. Any number above 50 indicates that more builders view sales conditions as good than poor. From Reuters: Builder Confidence Drops Two Points in March Builder confidence in the market for newly built, single-family homes in March fell two points to a level of 53 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. “Even with this slight slip, the HMI remains in positive territory and we expect the market to improve as we enter the spring buying season,” said NAHB Chairman Tom Woods, a home builder from Blue Springs, Mo. “The drop in builder confidence is largely attributable to supply chain issues, such as lot and labor shortages as well as tight underwriting standards,” said NAHB Chief Economist David Crowe. “These obstacles notwithstanding, we are expecting solid gains in the housing market this year, buoyed by sustained job growth, low mortgage interest rates and pent-up demand.” Two of the three HMI components posted losses in March. The component gauging current sales conditions fell three points to 58 while the component measuring buyer traffic dropped two points to 37. The gauge charting sales expectations in the next six months held steady at 59.This graph show the NAHB index since Jan 1985. This was below the consensus forecast of 56.

Homebuilder Sentiment Tumbles To October Lows (and No, It's Not The Weather) - Homebuilder Sentiment tumbled for the 2nd month to October lows, missing expectations for the 3rd month in a row, as buyer traffic and sales expectations both fell. The weather-crushed Midwest saw sentiment surge from 48 to 61 and the sun-soaked home-sales-destroyingly warm West region saw sentiment collapse from 64 to 53.

AIA: Architecture Billings Index increases slightly in February -  This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Architecture Billings Index Improves in February After its first negative score in ten months, the Architecture Billings Index (ABI) showed a nominal increase in design activity in February, and has been positive ten out of the past twelve months. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 50.4, up slightly from a mark of 49.9 in January. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 56.6, down from a reading of 58.7 the previous month. “The health of the institutional market has been the key factor for positive business conditions for the design and construction industry in recent months, and it is encouraging to see that sector remain on solid footing,”  “However, we’re seeing some slowing in the other major construction sectors. Design billings for residential projects had its first negative month in over three years, and commercial design billings have seen only modest growth in recent years.” This graph shows the Architecture Billings Index since 1996. The index was at 50.4 in February, up from 49.9 in January. Anything above 50 indicates expansion in demand for architects' services. Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions. The multi-family residential was negative for the first time in over three years - and might be indicating a slowdown for apartments. (just one month) According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. This index was mostly positive over the last year, suggesting an increase in CRE investment in 2015.

Failed by Law and Courts, Troops Come Home to Repossessions - Charles Beard, a sergeant in the Army National Guard, says he was on duty in the Iraqi city of Tikrit when men came to his California home to repossess the family car. Unless his wife handed over the keys, she would go to jail, they said.  The men took the car, even though federal law requires lenders to obtain court orders before seizing the vehicles of active duty service members.Sergeant Beard had no redress in court: His lawsuit against the auto lender was thrown out because of a clause in his contract that forced any dispute into mandatory arbitration, a private system for resolving complaints where the courtroom rules of evidence do not apply. In the cloistered legal universe of mandatory arbitration, the companies sometimes pick the arbiters, and the results, which cannot be appealed, are almost never made public.That is the experience for many Americans who are contractually obligated to resolve their disputes with investment advisers or lenders in this way. But it is supposed to be different for the troops who are deployed abroad, say military lawyers, state authorities and Pentagon officials.

February consumer prices may have declined by as much as -1.2%!: Last week I cautioned that we really needed to see what happened with in-(de-)flation for February before we panic about the -0.8% decline in retail sales. Over the weekend the Wall Street Journal showed dramatically why that is the case. A private service called the "Billion Prices Project" scours the internet for price information. It has a short track record, but has been excellent in forecasting the CPI number in real time. According to the WSJ commentary, here is the recent month over month change in prices: Prices declined as much as -1.2% at some point in February. Here is the same information YoY: The CPI in January was -0.2% YoY. Last February prices increased +0.4%. The Billion Prices Project data suggests that there will be a -1.2% CPI print for February. If so, that would mean that *real* retail sales actually *increased* +0.4% in February. It also has implications for real Q1 GDP. Here is the Atlanta Fed's "GDPNow" graph, which has gotten a lot of play, including by me: This looks dreadful. But although it indicates that it is estimating real GDP, at this point it does not have the February inflation information. This graph will look very different if February prices decrease by as much as -1.2%!

LA area Port Traffic Declined Sharply in February due to Labor Issues - Note: LA area ports were impacted by labor negotiations that were settled on February 21st.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report for February since LA area ports handle about 40% of the nation's container port traffic.  The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.   On a rolling 12 month basis, inbound traffic was down 1.3% compared to the rolling 12 months ending in January. Outbound traffic was down 1.4% compared to 12 months ending in January. Inbound traffic had been increasing, and outbound traffic had been mostly moving sideways or slightly down. The recent downturn was due to labor issues. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). Imports were down 18% year-over-year in February, exports were down 17% year-over-year. The labor issues are now resolved - the ships are rapidly disappearing from the outer harbor - and I expect port traffic will be at record levels for March (catching up).

'Boeing's Bank' earns its name in closed-door rulemaking with aircraft titan - AEI: Government subsidies create winners and losers. When Congress and a federal judge ordered the Export-Import Bank to study who loses as a result of subsidized Boeing exports, Ex-Im turned to Boeing to craft the economic study, newly released emails reveal. Ex-Im officials ran the early drafts of their economic model past Boeing officials before publishing it for public comment. Then after the public comment period ended, Ex-Im tweaked the model, at Boeing’s request, to exempt almost all Boeing subsidies from a detailed economic analysis, because such an analysis would sink the deals. To create an appearance of distance between Boeing and the model, Ex-Im also suggested Boeing handpick a third-party to conduct some economic analysis. These emails, first reported on by the Wall Street Journal’s Brody Mullins, show a federal agency extraordinarily cozy with the company it serves.

Tech’s Four Horsemen of the Apocalypse: Amazon, Facebook, Google, Apple - Yves Smith  - This is a great talk (hat tip Wolf Richter) on the outlook for the four dominant tech companies by Scott Galloway of L2, ” a think tank for digital innovation,” and Firebrand Partners, an activist fund. He’s also a professor of marketing at NYU, specializing in brand strategy and luxury marketing. There’s only one small bit of his presentation with which I take issue. He remarks in passing that the economy, based on the proliferation of Uber-based services, will be great for employment and terrible for wages. Those two can’t readily co-exist.

Fed: Industrial Production increased 0.1% in February - From the Fed: Industrial production and Capacity Utilization Industrial production increased 0.1 percent in February after decreasing 0.3 percent in January. In February, manufacturing output moved down 0.2 percent, its third consecutive monthly decline. The rates of change for the total index in January and for manufacturing in both December and January are lower than previously reported. The index for mining fell 2.5 percent in February; drops in the indexes for coal mining and for oil and gas well drilling and servicing primarily accounted for the decrease. The output of utilities jumped 7.3 percent, as especially cold temperatures drove up demand for heating. At 105.8 percent of its 2007 average, total industrial production in February was 3.5 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased to 78.9 percent in February, a rate that is 1.2 percentage points below its long-run (1972–2014) average.

February 2015 Industrial Production Shows Manufacturing's Downtrodden Decline - The Federal Reserve Industrial Production & Capacity Utilization report shows industrial production increased 0.1% while January was revised downward to a -0.3% decline.  December was also revised down to -0.2%.  Manufacturing alone declined by -0.2% and January's manufacturing production was also revised downward from +0.2% to -0.3%.   This is the 3rd month in a row for a decline in manufacturing output as December's contraction was -0.1%. Utilities jumped up 7.3% on snow apocalypses. Mining, which includes oil, took another hit and decreased by -2.5%. The G.17 industrial production statistical release is also known as output for factories and mines. Total industrial production has now increased 3.5% from a year ago and this yearly gain is much lower than last month. Currently industrial production is 5.8 percentage points above the 2007 average. Below is graph of overall industrial production's percent change from a year ago. Here are the major industry groups industrial production percentage changes from a year ago.

  • Manufacturing: +3.4%
  • Mining:             +5.3%
  • Utilities:           +1.3%

Manufacturing output is 1.3 percentage points above it's 2007 Levels. Within manufacturing, durable goods was hammered, decreasing - 0.6% for the month.  Motor vehicles & parts declined by a whopping -3.0% for the month but there were also other monthly declines.  Aerospace increased 1.2%.  Nondurable goods manufacturing showed a 0.2% gain for the month as petroleum and coal products gained 1.9%.  Mining showed a -2.5% monthly decrease.  Mining includes gas and electricity production and the Fed have a special aggregate index for oil and gas well drilling.  Oil and gas well drilling dropped a whopping -17.3% and for the year is down -21.4%.  That's gotta hurt and assuredly is making an impact in the previous North Dakota boom town miracle. Utilities are volatile due to weather and why the below graph shows the wild swings.  One can track the polar vortexes and heat waves in the below graph.

US Manufacturing Output Falls For 3rd Month - Worst Since Lehman -- Along with a massive revision for January (from +0.2% to -0.3%), February's Factory Output fell 0.2% (missing expectations for the 3rd month in a row). This is the 3rd drop in a row for factory output - the worst run since 2009. Overall industrial production missed for the 3rd month in a row but managed a meager 0.1% rise on the back of the biggest rise in utility output ever. Auto vehicles and parts production tumbled 3.0% MoM.

The most important new information about the US economy: February was cold. – Quartz: It was cold in February. It was really, really cold. You might think that wouldn’t matter much to the world’s largest economy. But it does. As we’ve pointed out, retail sales during the month of February were well below estimates. (Though online sales surged.)  So it was with industrial production, as the just-reported February data shows. Does this mean anything about the fundamental health of the US business cycle? No. Last year’s polar vortex put a similar chill on the US economy in the first quarter, but the nation’s economic machinery defrosted in subsequent months. Share Tap image to zoom That means most February economic data should be taken with a few scoops of de-icing salt. If it’s useful for anything, the February data can at least remind us that it was really cold. Which is why production at US utilities surged 7.3% in February, compared to the prior month. That’s the largest month-on-month jump on record going back to at least the early 1970s.

The Declining Demand for Driving Vehicles - For several years now I have published a weekly update on gasoline prices and a monthly update on vehicle miles traveled and gasoline volume sales, complete with a variety of charts. Paul Hodges, who writes a blog for on Chemicals and the Economy, recently sent me link to his fascinating study on the correlation between gasoline prices and the Department of Transportation's monthly statistics on vehicle miles driven. Paul offers a new perspective with a scatter chart showing the correlation between gasoline prices (vertical axis) and per-capita vehicle miles traveled on the horizontal axis.  Paul leads with the following observations:"Americans are driving less each year. For the first time since records began in 1970, average vehicle miles per person has been declining for over a decade. The trend is now so well established, it is highly unlikely that the current collapse of oil prices back to normal levels will change the overall picture.  This has enormous implications for companies and investors. It means we have reached 'peak car' moment in the US market, and should expect auto sales to slowly decline in future years, even if the overall population continues to increase."   I highly recommend a reading of Paul's complete commentary:  Americans Drive Less As Demand Patterns See Major Change

Empire State Manufacturing: Modest Expansion, Below Expectations: This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at 6.90 shows a slippage from last month's 7.78, which signals expansion at a modest pace.  The forecast was for a reading of 8.00. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report. The March 2015 Empire State Manufacturing Survey indicates that business activity continued to expand at a modest pace for New York manufacturers. The headline general business conditions index, at 6.9, remained close to last month's level. The new orders index fell four points to -2.4, pointing to a small decline in orders, and the shipments index declined six points to 7.9. Labor market indicators pointed to a solid increase in employment levels and a lengthening in the average workweek. Pricing pressures remained subdued, with the prices paid index inching down two points to 12.4, and the prices received index at 8.3. As in February, indexes for the six-month outlook conveyed less optimism than in many of the preceding months, and the capital spending and technology spending indexes declined. Here is a chart illustrating both the General Business Conditions and Future General Business Conditions (the outlook six months ahead):

Empire State Manufacturing Misses: New Orders Slide To 16 Month Lows, Capex Plunges -- At 6.90, Empire State Manufacturing missed expectations of 8.00 (and dropped from the previous 6.9 print) for the 2nd weakest print in 11 months. While New Orders tumbled back into the red (and 16-month lows), average workweek and number of employees rose markedly (making this survey once again seem a total farce). "Hope" for the future improved (though remains lower than most of the last year's prints) but new order expectations, tech spend, and capex all plunged.

Philly Fed Business Outlook: Modest Growth, A Bit Below Expectations- The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware.  The latest gauge of General Activity came in at 5.0, essentially unchanged from last month's 5.2 and the lowest reading since the -2.0 contraction in February of last year. The 3-month moving average came in at 5.5, down from 11.9 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was little unchanged at 32.0 versus the previous month's 29.7.  Today's 5.0 came in below the 7.1 forecast at Here is the introduction from the Business Outlook Survey released today:  Manufacturing activity in the region increased at a modest pace in March, according to firms responding to this month's Manufacturing Business Outlook Survey. The survey's current indicators for general activity and new orders were positive and remained near their low readings in February. Firms reported overall declines in shipments and in work hours, while overall employment increased only slightly. Firms reported more widespread price reductions in March, although most firms continued to report steady prices. The survey's indicators of future activity showed mixed results but continued to suggest that the manufacturing sector is expected to continue growing over the next six months. (Full PDF Report)  The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012 and a shallower contraction in 2013. The indicator is now above its post-contraction peak in September of last year.

Philly Fed Manufacturing Survey declines to 5.0 in March  -- From the Philly Fed: March Manufacturing Survey Manufacturing activity in the region increased at a modest pace in March, according to firms responding to this month’s Manufacturing Business Outlook Survey. The survey’s current indicators for general activity and new orders were positive and remained near their low readings in February. The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, at 5.0, was virtually unchanged from its reading of 5.2 in February ... Although the current employment index, at just 3.5, was virtually unchanged from last month, the index remains well below its average reading of about 14 over the second half of last year. ...This was below the consensus forecast of a reading of 7.0 for March.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The light blue line is an average of the NY Fed (Empire State) and Philly Fed surveys through March. The ISM and total Fed surveys are through February.  Note: Areas with oil production (Texas and some in Kansas City region), have been especially weak. The average of the Empire State and Philly Fed surveys declined in March, and this suggests a slightly weaker ISM report for March.

Philly Fed Growth Trends Lower 4th Month: Prices, Shipments, Workweek Negative -- As has been the case with nearly every economic report for months on end, the Philly Fed Consensus Estimate disappointed to the downside.  Slow growth with weakness in orders is the common thread for both the Empire State report, released earlier this week, and now the Philly Fed where the general conditions index held little changed at 5.0 in March vs 5.2 in February. New orders, at 3.9, are not much above zero while unfilled orders are suddenly well below zero, at minus 13.8 in a sharp decline from February's plus 7.3. Weakness in orders points to softness in shipments, which are already below zero at minus 7.8, as well as softness in employment which is struggling to stay above zero at 3.5. Price data show contraction for both inputs, at minus 3.0, and finished goods, at minus 6.4. The early indications on March are not that positive in what would extend a series of weak months for the manufacturing sector, a sector that the FOMC noted yesterday is being hurt by weak exports tied to weak foreign demand and complicated by the strong dollar. Let's dive into the Philly Fed Report for some charts and tables.

Philly Fed Suffers Worst Run In 3 Years, All Sub-Indices Collapse -- Philly Fed hasn't missed for 4 months in a row since Feb 2012. Printing at 5 (against expectations of 7) the March Philly Fed data is the weakest since Feb 2014. Under the covers it was even uglier... Employees, Average Workweek, New Orders, Prices Received, and Shipments all plunged. Great news for the stock market bulls... yet another dismally bad data item to keep The Fed from hiking.

Philly Fed Signals Worst Margin Compression Since Lehman - With markets pricing in nothing but a "permanent plateau of margins," it appears the Philly Fed is about to ruin that meme too... Thanks to the collapse of the Prices Received (and Prices Paid) indices, margins are now implicitly the lowest since Lehman. The last 2 times "margins" were this low, the US entered recession.

U.S. refinery deal hits roadblocks at 8 striking plants -  A tentative national agreement to end a six-week strike at twelve U.S. refineries has struggled to win ratification at eight plants as workers and companies struggle to settle local issues, according to union officials. The deal reached on Thursday by the United Steelworkers (USW) and lead industry negotiator Royal Dutch Shell Plc to end the biggest walkout of its kind in 35 years is showing signs of quick passage at just four plants. The four sites where the deal is finding support and progress is being made on local issues are at facilities owned or co-owned by Shell. Workers at these plants, which include three Motiva Enterprises refineries, have scheduled or are expected to hold votes this week to ratify the agreement. They could be back at work next week. But local labor talks were stalled at other plants as union chapters try to address issues not covered by the national deal that defines rules for pay, healthcare and safety. The delays mean companies will have to continue relying on temporary workers to keep their plants running. The stoppages affected plants with a fifth of U.S. crude processing capacity.

Despite Oil Fears, Spending by Major Businesses Set Records in December - Surprise: Big U.S. energy companies didn’t slash capital expenditures in the fourth quarter — and in fact, business investment by major companies overall hit new records in December. Companies in the S&P 500 reported capital spending of $192 billion in the fourth quarter, up 10.3% from third quarter and up 17% from fourth-quarter 2013, according to S&P Dow Jones Indices. For the year, capex rose 16.3% from 2013 to $681 billion — which even beats 2001′s inflation-adjusted $637 billion, Senior Index Analyst Howard Silverblatt notes. The data reflect reported results from 95% of the index’s companies. The energy sector stayed hot, clocking its own record and spending 19.5% more than it did in third quarter, while remaining the biggest chunk of the index’s overall figure at about a third. The Wall Street Journal an increase in capital spending among big companies earlier this month using data for a smaller group of companies in the index. The S&P data reflects global spending, which means it’s of limited use in forecasting the U.S. economy. Many large U.S. companies generate a third or more of their business outside the country. And there’s little doubt pullback is coming from energy companies, of course: Plenty of oil and gas companies have announced plans to slash spending, including Chesapeake Energy, which said it would reduce investment by more than a third in 2015, and Pioneer Natural Resources, which said it would cut capital spending by half.

Getting It Wrong on Trade: TPP Is Not Good for Workers - Dean Baker -  The big money is sweating big time since it seems large segments of the American public have caught wind of the Obama administration's plans for the Trans-Pacific Partnership. After several decades in which trade has been a major factor depressing the wages and living standards of the country's workers, the Obama administration is going back to the well to push for more. The immediate goal is the Trans-Pacific Partnership (TPP), which includes a number of countries in Asia and Latin America. While it excludes major countries like China and India, the explicit intention is to expand the pact so that these countries will eventually be included. This fact is important in assessing this deal. For example, the Washington Post (which has a religious devotion to these sorts of trade deals) ran a column by three prominent economists, David Autor, David Dorn, and George Hanson (ADH), which tells readers the TPP is good for the country's workers. ADH is an interesting team to make this argument since they have written several papers showing that our patterns of trade have been an important force depressing the wages of a large segment of the U.S. workforce. ADH start out by saying that manufacturing workers have to little to lose in this deal because tariffs with the countries in the pact are already near zero, therefore we will not be opening ourselves to new competition if the few remaining barriers are eliminated. Here is where the possibility of expansion is important. Many prominent economists, including many strongly pro-trade economists like Fred Bergsten, the former president of the Peterson Institute for International Economics, have argued the TPP should include rules on currency manipulation. According to calculations by Bergsten and others, actions of foreign central banks to raise the value of the dollar have added several hundred billions of dollars to our trade deficit and cost us millions of manufacturing jobs.  We have no easy mechanism for replacing the $500 billion in lost annual demand (@ 3.0 percent of GDP) due to the trade deficit.

What’s Wrong with the TPP? This deal will lead to more job loss and downward pressures on the wages of most working Americans --  In a recent op-ed in the Washington Post, three prominent economists, David Autor, David Dorn, and Gordon Hanson make a number of controversial arguments in favor of the proposed Trans-Pacific Partnership (TPP). Autor, et al, acknowledge that the United States has lost 5 million manufacturing jobs since 2000 due to globalization and automation, but they then make the argument that these jobs are not coming back. There’s no sense closing the barn door after the horse has escaped, as it were. But this line of thought ignores the crucial role played by currency manipulation, which costs jobs by subsidizing foreign exports to the United States while acting like a tax on U.S. exports. Many prominent economists, including Fred Bergsten and Larry Summers, have said that trade deals like the TPP should include restrictions on currency manipulation. As Dean Baker notes, this is particularly important to keep in mind because the TPP is designed to be expandable, and countries such as China (the world’s largest currency manipulator), Korea, and India are candidates for early inclusion in an expanded TPP, if the agreement is completed. Eliminating currency manipulation could reduce the U.S. trade deficit by up to $500 billion, adding up to 4.9 percent to U.S. GDP and creating up to 5.8 million U.S. jobs, with about 40 percent (2.3 million) of those jobs gained in manufacturing. So, many of those lost manufacturing jobs could in fact be recovered, in part through the inclusion of a currency clause that Autor, et al, fail to consider in their analysis of the TPP. A TPP without a currency clause will make it affirmatively harder to end currency manipulation in the future, and the effect of this on net exports swamps the effect of even large tariff cuts.

Obama Seeks Fast Track for TPP, Trade Deal that Could Thwart "Almost Any Progressive Policy or Goal" - video

Why Are Unions So Focused on Fighting Trade Deals? - A shrinking slice of American union workers are in industries exposed to imports and other pressures from international trade. Yet, among all the threats to organized labor and the wages of American workers, the AFL-CIO has made a priority of fighting the Obama administration on the Trans-Pacific Partnership trade deal, which probably won’t much have much economic impact anyhow. Why? Consider this chart: Half of all U.S. workers represented by unions work for governments, and another 12% are in education or health care. Trade has very little direct impact on them. Another 20% of workers represented by unions are in construction, wholesaling, retailing or transportation doing jobs that are largely immune from import competition. Less than 10% of all the workers that U.S. unions represent today are in manufacturing or agriculture, the industries most exposed to harm from globalization. Trade creates winners and losers; a small fraction of union workers are among the obvious losers. So with states passing right-to-work laws, Congress pressuring the National Labor Relations Board, the tax code rewarding big corporations that move overseas, funding for education, training and infrastructure under pressure middle-income wages stagnating across the whole economy, why so much union energy devoted to fighting TPP?  Igot part of the answer from AFL-CIO President Rich Trumka when he talked about trade the other day before a not-very-sympathetic audience at the Peterson Institute for International Economics. He assigns a very large share–an improbably large share, in my view–of the blame for stagnant wages and inequality to recent trade agreements. (He insists organized labor is not against trade or trade agreements, but against “bad trade agreements,” though he didn’t recall any good ones.)“For more than 20 years, we have looked at trade through the very narrow lens of corporate interests,” he said. “In truth, our trade deals were not really trade deals—they were investment deals. Their goal was not to promote America’s exports—it was to make it easier for global corporations to move capital offshore and ship goods back to America. The logical outcome was trade deficits and falling wages—and that’s exactly what we got.”

Weekly Initial Unemployment Claims increased to 291,000 - The DOL reported: In the week ending March 14, the advance figure for seasonally adjusted initial claims was 291,000, an increase of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 289,000 to 290,000. The 4-week moving average was 304,750, an increase of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 302,250 to 302,500.  There were no special factors impacting this week's initial claims.  The previous week was revised up to 290,000. The following graph shows the 4-week moving average of weekly claims since January 2000.

Initial Claims Hold Worst Levels In 6 Months As Shale State Joblessness Re-Surges - After some 'stability' in the last few weeks, initial jobless claims in the major shale states has started to rise again with Texas the most impacted for now. Overall initial jobless claims rose very modestly to 291k, but leaves the 4-week average above 300k for the 2nd week in a row - the first time in over 6 months. Contonuing claims rose modestly also, confirming the change in trend from improving to stable-to-deteriorating again.

Something Strange Is Going On With Nonfarm Payrolls - As reported earlier in the month, following the report of March's expectations smashing 295,000 jobs added, there have now been a 13 consecutive months of 200K+ payroll months... ... something which together with the 5.5% unemployment rate, is for the Fed is a clear indication that the slack in the labor is about to disappear and wages are set to surge. Seasonally adjusted housing starts for February plunged by one of the largest amounts in the post-crisis period. The chart below shows a subset of the February non-farm payroll report, residential construction jobs. Seasonally adjusted these jobs increased by 17,200 in February, the most in two years (Feb 2013 was greater) and the second most in four years.  So while economists are blaming the weather for the plunge in housing starts, residential construction jobs were fairly robust in February. This makes no sense."

Most States Start the Year with Strong Job Gains - This morning’s release of January employment and unemployment data from the Bureau of Labor Statistics shows most states began the New Year with relatively strong job growth and continued declines in unemployment. There are now a handful of states with unemployment rates below their pre-recession levels, and the average rate of state job growth over the past three months was more than double its rate from the same period a year ago. From October 2014 to January 2015, 44 states and the District of Columbia added jobs, with Utah (+1.7 percent), Idaho (+1.5 percent), Oregon (+1.1 percent), and Washington (+1.1 percent) experiencing the largest percentage gains. Five states—Kansas, Louisiana, Minnesota, New Hampshire, and South Dakota—had small declines in overall job numbers. One state, Maine, had a more substantial loss of jobs—total employment in Maine fell by 0.8 percent from October to January. In fact, Maine is the only state with a net decline in jobs over the past year (January 2014 to January 2015).Over the same period, unemployment fell in 37 states, rose slightly in 4 states, and was unchanged in 9 states and the District of Columbia. The largest declines in unemployment were in Idaho (-0.5 percentage points), Oregon (-0.5 percentage points), and Rhode Island (-0.5 percentage points). For the most part, these declines in unemployment appear unambiguously positive—with states seeing both increasing numbers of jobs and a growing labor force. However, the drop in unemployment over this period in a few states was accompanied by significant labor force declines, notably in Maine (-0.5 percent), Rhode Island (-0.4 percent), and West Virginia (-0.8 percent). All three of these states have seen their labor force shrink by more than one percent over the past year, suggesting that at least some of the improvement in the unemployment rate may be due to discouraged job seekers giving up the search, rather than finding jobs.

BLS: Twenty-four States had Unemployment Rate Decreases in January  - From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in January. Twenty-four states had unemployment rate decreases from December, 8 states had increases, and 18 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today. .. North Dakota had the lowest jobless rate in January, 2.8 percent. Mississippi and Nevada had the highest unemployment rates among the states, 7.1 percent each.  This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The states are ranked by the highest current unemployment rate. Mississippi and Nevada, at 7.1%, had the highest state unemployment rate although D.C was higher. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 8% (light blue); Three states and D.C. are still at or above 7% (dark blue).

North Dakota Unemployment Still Lowest in Nation Despite Oil-Price Crash - North Dakota’s unemployment rate, 2.8%, remained the lowest in the nation in January, according figures from the Labor Department published Tuesday. Oil prices have plunged over 60% in seven months, raising fears that the U.S. energy sector might soon start slashing jobs. Federal Reserve officials say the drop in energy costs is a net positive for the U.S. economy since it puts more money in consumers’ pockets. Forty-five U.S. states had unemployment rate decreases from a year earlier, the state and regional data showed, in line with a national jobless rate that has fallen to 5.5% in February from 6.7% in the same month a year earlier. North Dakota also experienced the largest year-over-year percentage increase in employment, with a 4.3% increase. It was followed by Utah at 4.0% and Florida and Nevada at 3.6%. Washington, D.C., has the nation’s highest jobless rate at 7.7%, followed by Mississippi and Nevada at 7.1%.

Where the US added jobs - We want to share a few highlights of the new state-level data on employment and unemployment from the US Bureau of Labor Statistics. Our first chart compares the growth rate in the number of workers by state against the US as a whole:  The fastest growth was in North Dakota, which has yet to feel the impact of the downturn in oil prices. Maine, with its aged and shrinking population, was the one state to experience an outright decline in the number of people working, while West Virginia had almost no employment growth. Among the ten states with the fastest job growth, all but Florida and Georgia are west of the Mississippi River, and three are on the Pacific Coast. By contrast, the slowest-growing states tend to concentrated in the northeast and the eastern part of the Midwest. Of course, growth in employment by itself doesn’t tell you much. Nevada had the third-fastest job growth of any US state, but it endured a depression roughly as bad as Spain’s. Its jobless rate was the second-highest in the country at the start of 2014 and, even now, employment is still about 5 per cent below its peak. Florida didn’t do quite as badly but was another major victim of the housing bust, and its total employment is still below peak. California and Georgia also entered 2014 with some of the highest unemployment rates in the country. To correct for this, we compared the rank order of the fifty states (plus DC) on employment growth against the rank order of the states on their unemployment rates in January, 2014. Here’s the chart, where larger positive numbers represent more job growth relative to the starting level of unemployment, and negative numbers are states that did worse at adding jobs despite their starting unemployment rate:

The changing geography of US employment -   In a previous post we looked at which US states were the best for job growth in 2014. (North Dakota was best overall, followed closely by Utah, which has the advantage of not being reliant on energy extraction, as well as one of the highest median incomes in the US.) In this post we’re going to take a longer view of how the distribution of employment has shifted across the most populous US metro areas since 1990, when the data begin. The first thing to note is that the share of Americans employed in one of the major metro areas in our sample* has stayed relatively constant since 1990, although there have been some interesting trends over the period: Another way to visualise these changes is to separate the annual change in US employment into the changes that occurred in the major metros and the changes that occurred outside of those major metros: The first half of the 1990s was brutal for the big cities but a boom time for less-populated areas. By contrast, the years since the trough of the financial crisis have been relatively good to the larger cities while the rest of the country has lagged: We want to focus on which of the big cities contributed most to these changes over time. First, the long view: about 31.6 million more Americans work now than worked in January, 1990. Of that increase, about 55 per cent can be attributed to the smaller metros and rural areas, while around 45 per cent can be attributed to the major metros in our sample. The chart below shows how that 45 per cent share splits across our 26 metro areas:  Anyone familiar with American geography will notice that the distribution of post-1990 job gains has almost no connection the distribution of employment, either at the start of 1990 or even today. To make this clearer, we took the chart above and subtracted out each metro’s share of total employment in January, 1990. The result shows how much job growth occurred above and beyond what you would have expected if each metro area had maintained its relative size:

Jobs, Jobs, Jobs—and Nothing to Show for Them? -  If Federal Reserve policymakers were to look solely at headline labor market indicators, they might be tempted to conclude that the U.S. economy had finally reached cruising altitude. The unemployment rate has fallen from a peak of 10 percent in 2009 to 5.5 percent, within the range considered to be full employment. Nonfarm payroll growth has averaged 275,000 a month over the last year, a pace last seen in the roaring '90s.  Yet nothing else has that '90s feel: not the pace of economic growth, not capital investment, not productivity growth, not even Nasdaq 5000. The juxtaposition of solid job growth and tepid economic growth describes what the current expansion lacks: dynamism and innovation. These are the forces that drive productivity growth, allowing companies to produce more with less and provide a higher real wage to workers.   Almost all of the increase in real GDP since the start of 2010 has come from growth in labor inputs, according to Douglas Holtz-Eakin, president of American Action Forum, a center-right think tank, and a former director of the Congressional Budget Office. Labor inputs include the number of jobs and the number of hours worked. The contribution of productivity has been miniscule.

If Economists Were Right, You Would Have a Raise by Now - Six years into the U.S. expansion, the link between falling unemployment and rising wages -- once almost as basic to economic theory as supply and demand -- seems to be coming unhinged.The former could account for much of latter during the 1980s, [but] the two variables have fallen increasingly out of sync…. Mainstream analysts such as Mark Zandi, chief economist of Moody’s Analytics Inc. in New York, say the recession that began in December 2007 was so deep and damaging it left a large pool of untapped labor that’s not fully reflected in the unemployment rate. Companies can draw on this pool without having to raise pay. Despite its size, Zandi said, the economy now is adding jobs at such a clip that this labor pool will be drained quickly and wages finally will start rising again. ‘There are already early signs of the wage revival and by this time next year it will be undeniable,’ he said. Analysts such as Mary Daly, the associate research director at the Federal Reserve Bank of San Francisco, trace recent slow wage growth to another aspect of the 2007-2009 recession: Employers didn’t cut the wages of workers they retained. Now that employers have resumed hiring, they’re doing so at the same or lower pay, which is holding back wage growth, Daly and colleague Bart Hobijn wrote in a Jan. 5 San Francisco Fed paper. The implication is that as the expansion continues, wages eventually will start growing again…

The bigger, the less fair | The Economist - In America the best-paid 1% of workers earned 191% more in real (ie, inflation-adjusted) terms in 2011 than they did in 1980, whereas the wages of the middle fifth fell by 5%. Similar trends can be observed all over the world, despite widely varying policies on tax, the minimum wage and corporate pay. The standard explanation says that technology plays a big role: modern economies require more skilled workers, raising the pay premium they can demand. A new paper* adds a new and intriguing wrinkle to this: the rising size of the average firm. Economists have long recognised that economies of scale allow workers at bigger firms to be more productive than those at smaller ones. That, in turn, allows the bigger firms to pay higher wages. This should not, in theory, cause a rise in inequality. If the chief executive and cleaner at a larger firm are both paid 10% more than their counterparts at a small firm, the ratio between their wages—and thus the overall level of inequality—should remain the same. But the paper shows that the benefits of scale are not shared equally among all workers. Using data on wages at British firms, they divide workers into nine groups according to how skilled they are. Over time, they find that the proportional difference in wages between the groups grows as firms get bigger. This trend is driven entirely by a rising gap between wages at the top compared with the middle and bottom of the distribution. As the authors note, this is very similar to the trend in income inequality in America and Britain as a whole since the 1990s, when pay for low and median earners began to stagnate (see chart).

Senate Committee Debates Whether to Allow H-1B Guestworkers to Replace U.S. IT Workers - The Senate Judiciary Committee explored important economic questions this week. Should businesses be able to lay off qualified U.S. tech workers and replace them with lower paid foreign workers? Is there a shortage of skilled Science, Technology, Engineering and Math (STEM) workers—or an oversupply? And even if there is such a shortage, should we import temporary non-immigrant labor from abroad, or would it be better to let the free market work long enough for wages to rise and more students to be attracted to these fields? The committee’s Republican and Democratic members disagreed with each other without regard to party labels. No senator, in fact, seemed more concerned about the rights of U.S. workers and their economic outcomes—and more skeptical of claims made by the business community—than Sen. Jeff Sessions of Alabama, a conservative, anti-union Republican. Most Americans probably think it is illegal to lay off an U.S. worker and replace him with a temporary foreign worker. Yet Prof. Ron Hira and several other witnesses testified that this is not just a common practice, it is the primary use of the H-1B visa program. (Hira points out that most of the top 10 users of the H-1B visa are firms that outsource and offshore U.S. IT jobs.) When Ben Johnson of the American Immigration Council said replacing U.S. workers should not be prohibited, Sens. Hatch, Klobuchar, and Flake all agreed; in fact, they voted in 2013 to remove language from the immigration bill that would have made it illegal to use the H-1B visa to replace U.S. workers. And all three are sponsors of the “I-Squared” bill, which would triple the number of temporary non-immigrant foreign workers replacing Americans.

The “iEverything” and the Redistributional... - Robert Reich -- It’s now possible to sell a new product to hundreds of millions of people without needing many, if any, workers to produce or distribute it. At its prime in 1988, Kodak, the iconic American photography company, had 145,000 employees. In 2012, Kodak filed for bankruptcy. The same year Kodak went under, Instagram, the world’s newest photo company, had 13 employees serving 30 million customers.  The ratio of producers to customers continues to plummet. When Facebook purchased “WhatsApp” (the messaging app) for $19 billion last year, WhatsApp had 55 employees serving 450 million customers. A friend, operating from his home in Tucson, recently invented a machine that can find particles of certain elements in the air.  He’s already sold hundreds of these machines over the Internet to customers all over the world. He’s manufacturing them in his garage with a 3D printer. So far, his entire business depends on just one person — himself. New technologies aren’t just labor-replacing. They’re also knowledge-replacing. The combination of advanced sensors, voice recognition, artificial intelligence, big data, text-mining, and pattern-recognition algorithms, is generating smart robots capable of quickly learning human actions, and even learning from one another.  If you think being a “professional” makes your job safe, think again.

Robert Reich's "iEverything" — the Job-Killing iRobot - From his blog: "It’s now possible to sell a new product to hundreds of millions of people without needing many, if any, workers to produce or distribute it ... The ratio of producers to customers continues to plummet ... New technologies aren’t just labor-replacing, they’re also knowledge-replacing ... When more and more can be done by fewer and fewer people, the profits go to an ever-smaller circle of executives and owner-investors ... That means most of us will have less and less money to buy the dazzling array of products and services spawned by blockbuster technologies — because those same technologies will be supplanting our jobs and driving down our pay ... A future of almost unlimited production by a handful, for consumption by whoever can afford it, is a recipe for economic and social collapse." Mister Reich goes on to make this analogy: "Imagine a small box – let’s call it an iEverything – capable of producing everything you could possibly desire, a modern day Aladdin’s lamp. You simply tell it what you want, and – presto! – the object of your desire arrives at your feet. The iEverything also does whatever you want. It gives you a massage, fetches you your slippers, does your laundry and folds and irons it. The iEverything will be the best machine ever invented. The only problem is, no one will be able to buy it. That’s because no one will have any means of earning money, since the iEverything will do it all."

Unemployment Insurance Benefits Reaching a Smaller Share of Unemployed Workers -  Unemployment insurance (UI) is a federal-state program that provides income support for jobless workers in economic downturns. Following the Great Recession, the safety net provided by the UI system was a crucial tool in counteracting the effects of the downturn on families. Since the recovery began in 2010 however, we’ve seen a rapid decline in the recipiency rate, or the share of unemployed workers who receive UI benefits. While this is partially expected as an economy improves, we know that slack remains in today’s labor market with lackluster wage growth and a historically high long-term unemployment rate. The figure below shows how severe the drop in the recipiency rate was following the Great Recession and how we now sit at a historically low recipiency rate. The recipiency rate was 23.1 percent in December 2014, below the pre-Great Recession record low of 25.0 percent in September 1984. Economic Snapshot

Can One Union Save the Beleaguered U.S. Postal Service? - The U.S. Post Office, the oldest, most respected and ubiquitous of all public institutions is fast disappearing. In recent years management has shuttered half the nation’s mail processing plants and put 10 percent of all local post offices up for sale. A third of all post offices, most of them in rural areas, have had their hours slashed. Hundreds of full time, highly experienced postmasters knowledgeable about the people and the communities they serve have been dumped unceremoniously, often replaced by part timers. Ever larger portions of traditional post office operations— trucking, mail processing and mail handling– have been privatized. Close to 200,000 middle class jobs have disappeared. Since 2012 the U.S. Postal Service (USPS) has lowered service standards three times, most recently in January when in preparation for closing an additional 82 mail processing plants it announced the end of one day delivery of local first class mail and an additional 1-2 days for all mail.  The Postal Service, we are told, has fallen so deeply into debt (more on this in a moment) that it has exhausted its borrowing capacity. There’s no cash left. It’s been challenging to invest in capital projects. Post offices are in disrepair. Trucks are out of date. Now for the good news. On November 12, 2013 a slate of insurgents won seven of nine national offices at the American Postal Workers Union (APWU). What? Can the election of new officers in a single union, even one with over 200,000 members possibly save the post office? Certainly not if they try to do it singlehandedly but there’s a chance, just a chance they could turn the tide if they build an effective national movement. And that’s what they’re trying to do.

What Anti-Union Workers Should Know - For decades the top 0.01% (and their political allies) have been winning the war on working-class Americans (meaning, about 92.2% of the labor force). One particular political party always wants to cut government agencies and programs that protect workers' health, safety and welfare — such as workers' wages, workers' pensions, workers' voting rights and workers' labor unions (like they do with their so-called "Right to Work" laws).They would like to defund or eliminate government agencies such as the Occupational Safety and Health Administration (OSHA), the National Labor Relations Board, the Equal Employment Opportunity Commission, and even the Department of Labor — so that the "job creators" can misclassify workers as "independent contractors", engage in wage theft, dodge payroll taxes, skirt environmental and safety laws, and cut worker compensation benefits when workers are injured on the job.So whenever you hear one of these politicians expressing concern about the middle-class and poor, one has to be very misinformed to actually believe them (and if you have a very good sense of humor, you may feel compelled to laugh out loud). Forward Progressives says it best: "What I don’t get are poor and middle-class Americans who call themselves Republicans ... but I guess if you holster a gun, hold a Bible and wave a flag, that’s all it takes to fool millions of Americans into thinking you’re on their side — even if almost nothing you support as a political party actually benefits them in any way." Watch Bill Maher slam these politicos for their sudden faux concern for the middle-class.

How to Raise Wages: Policies That Work and Policies That Don’t -- There is now widespread agreement across the political spectrum that wage stagnation is the country’s key economic challenge. As EPI has documented for nearly three decades, wages for the vast majority of American workers have stagnated or declined since 1979 (Bivens et al. 2014). This is despite real GDP growth of 149 percent and net productivity growth of 64 percent over this period. In short, the potential has existed for adequate, widespread wage growth over the last three-and-a-half decades, but these economic gains have not trickled down to the vast majority. The Agenda to Raise America’s Pay:  Because wage suppression stems from intentional policy choices, it can be reversed by making different policy choices. To boost Americans’ wages, policymakers must intentionally tilt bargaining power back toward low- and moderate-wage workers. As this paper explains, wage stagnation is not inevitable. It is the direct result of public policy choices on behalf of those with the most power and wealth that have suppressed wage growth for the vast majority in recent decades. Thus, because wage stagnation was caused by policy, it can be alleviated by policy. In particular, policymakers must address two distinct sets of policies:  One set of policies that have stifled wage growth are aggregate factors that have led to excessive unemployment over much of the last four decades, and others that have driven the financialization of the economy and excessive executive pay growth. Another set of policies concerns the business practices, eroded labor standards, and weakened labor market institutions that have reduced workers’ individual and collective power to bargain for higher wages.

Sleepless Over Seattle - Seattle's minimum wage will rise to $11 an hour on April 1, then to $15, and economists are watching. How will Seattle fare? Will businesses close and low-skill workers lose their jobs, or will business carry on and those workers get big raises? These are questions that, in the tradition of the best research on the minimum wage, should be answered with lots of data and careful analysis. It's too bad, then, that some economics bloggers seem to have already made up their minds -- without, as best as I can tell, any data at all.  We need some better ideas than re-litigating anecdotal accounts in magazines and credulously quoting a think-tank report. Past research on the minimum wage has showed us that the effects are mostly felt in the food-service industry. As I suggested in Sunday's links, we should be watching food-service employment in the Seattle metro area. It's not a perfect measure, as the metro area goes beyond Seattle city limits, but it gets close. Another issue is the data only go up to December 2014. For whatever it's worth, then, there's been no sign of a minimum-wage hit to employment:

Target Will Raise Minimum Wage to $9 Per Hour- The second largest retailer in the U.S. is following Walmart's leadTarget, the second-largest retailer in the U.S., will lift its minimum wage to $9 an hour in April.The move comes just one month after Wal-Mart said it would raise its starting wage to $9 per hour this spring and $10 next year, giving around 500,000 workers a raise.Though Target said it would not comment on employee wages, Dow Jones reported and Reuters confirmed the bump Wednesday.The move will be cheered by labor groups who have been pushing the company to offer higher pay. Women’s advocacy group UltraViolet recently ran a web campaign that pointed potential customers towards competitors. One banner ad read, “Did you know there’s a Walmart near you that pays higher minimum wage than Target?”Federal minimum wage has been $7.25 per hour since 2009. Democrats have proposed raising it to $10.10, but many Republicans believe it would be detrimental to businesses.

How effective is the minimum wage at supporting the poor? -- Thomas MaCurdy has a new piece in the JPE (jstor) on exactly that question.  The news does not surprise me: This study investigated the antipoverty efficacy of minimum wage policies.  Proponents of these policies contend that employment impacts are negligible and suggest that consumers pay for higher labor costs through imperceptible increases in goods prices.  Adopting this empirical scenario, the analysis demonstrates that an increase in the national minimum wage produces a value-added tax effect on consumer prices that is more regressive than a typical state sales tax and allocates benefits as higher earnings nearly evenly across the income distribution.  These income-transfer outcomes sharply contradict portraying an increase in the minimum wage as an antipoverty initiative. MaCurdy also writes: About 35 percent of the total increase in after-tax benefits goes to families with income less than two times the poverty threshold, a common definition of the working poor or near-poor; nearly 13 percent goes to families principally supported by low-wage workers defined as earning wages at or below 117 percent…of the new 1996 minimum wage; and only about 14 percent goes to families with children on welfare.   Over 25 percent of the increased earnings are collected back as income and payroll taxes…Even after taxes, 27.6 percent of increased earnings go to families in the top 40 percent of the income distribution.

Inequality in Black and White: For the past few years, Americans have been engaged in two big public conversations about inequality. One is about economic insecurity (stagnant wages, wealth concentration, Occupy Wall Street). The other is about racial inequality (incarceration rates, police brutality, disenfranchisement). Often, these two discussions are kept separate, but they are closely intertwined. The economic trends that have battered Americans have been exceptionally hard on African Americans, making them perhaps the truest face of economic inequality. Much of the progress in the workplace and in schools that African Americans have made since the 1964 Civil Rights Act has now ground to a halt, or worse. Blacks are nearly three times as likely to be poor as whites and more than twice as likely to be unemployed. Compared to whites with the same qualifications, blacks remain less likely to be hired and more likely to earn lower wages, to be charged higher prices for consumer goods, to be excluded from housing in white neighborhoods, and to be denied mortgages or steered into the subprime mortgage market. Racial disparities in household wealth haven’t just persisted; they’ve increased. What’s more, the reasons for these divergences aren’t always outwardly apparent or easy to understand.

All You Need to Know About Income Inequality, in One Comparison - The Wall Street bonus pool for last year is roughly double the total earnings of all Americans who work full time at the federal minimum wage. That claim, which comes from a new report from Sarah Anderson of the Institute for Policy Studies, is one of the more striking sound bites I have heard in quite some time. And so I thought it worth digging in to the data to see if it checks out. Short answer: It does, although given the uncertainty in these sorts of calculations, the precise ratio could easily be a bit higher or lower. Let’s start with the Wall Street bonuses. The New York State Comptroller reported on Wednesday that the size of the bonus pool paid to securities industries employees in New York City was $28.5 billion. Dividing this total among 167,800 workers yields an average bonus of $172,860, which seems plausible enough. For sure, some received much, much bigger bonuses, and many received nothing. What about the total earnings of full-time workers at the federal minimum wage? The Bureau of Labor Statistics reports that there are 1.03 million full-time workers paid an hourly wage of $7.25 or less. These people tend to work around 40 hours a week on average. If they all earn $7.25 per hour and work 50 weeks per year, the total earnings of this group come to nearly $15 billion. Ms. Anderson, whose report usefully shows all her work, prefers an estimate of 37 hours per week — which looks too low to me based on other data — and 52 weeks per year, so after rounding, she gets to a total of $14 billion.

Working Minority Families Are Twice As Likely To Be Low-Income As Whites - Among America’s working poor, a significant divide is growing between white families and most minority groups. Working minority families are twice as likely to be low-income—meaning their total income fell below 200% of the poverty level—as white working families, according to a new report from the Working Poor Families Project analyzing U.S. Census data. And the gap has only increased since the start of the last recession, the study’s authors said. Minority working families were also disproportionately low-income. Racial and ethnic minorities made up 40% of all working families, but accounted for 58% of working families that are low-income, according to the report. Young families headed by racial and ethnic minorities are especially vulnerable, the report said. In 2013, 76% of minority families headed by adults ages 18 to 24 were considered low-income, compared with 47% of minority families headed by workers ages 25 to 54. Of the 24 million children in working poor families, 14 million children–three out of every five–are racial or ethnic minorities. “This is a moral as well as economic issue that’s defining the fairness of our society,” said Brandon Roberts, one of the study’s authors. “The inequality between hard-working families in America is very real and must be addressed and our state leaders have the power to do so.” A family is defined as working if all family members 15 years and older worked a combined 39 weeks or more in the prior 12 months, or if the family met those conditions and had one unemployed parent looking for work in the prior four weeks. The report also found that more than a third of African-American and Latino working families are in the lowest income bracket–which tops out at around $32,000–compared with just 13% of whites and Asian Americans. The disparity is likely due to the fact that racial and ethnic minorities are more likely to be working in low-paying jobs, such as retail sales, food preparation, health care and housekeeping services, the report said.

Cutting Unemployment Insurance Hurts Jobless Workers and Our Economy - In our recent EPI briefing paper, How Low Can We Go?, we noted that a lower proportion of jobless workers are protected by state unemployment insurance (UI) programs than at any time in history. The UI benefit recipiency rate for state programs fell to 23.1 percent in December 2014—below the previous record-low level of 25.0 percent in September 1984.  Eight states that cut the length of time benefits were available below the traditional 26 weeks have seen recipiency declines that exceeded all other states that did not abandon the 26 week norm.  The figure below shows declines in short-term benefit recipiency in each of the eight states starting with the month cuts took effect, and compares those declines to the average decline in the states not taking this approach over the same time periods. We calculated a short-term recipiency rate in order to isolate the target population for state UI programs—those out of work for less 26 weeks or less. Even using this narrower definition of benefit recipiency, nationally only 35 out of 100 jobless workers received UI benefits at the end of 2014. In South Carolina, which cut available weeks to 20 in 2011 and adopted other restrictions, fewer than 15 out of 100 short-term unemployed workers got UI in 2014.

Poor Getting Poorer: 2008-2012, All Income Growth Went to Top - Alexis Goldstein - Some would have you believe that America continues to be a place where anyone who works hard can get ahead. But the data paints a different picture altogether: the bottom 90% of Americans are getting screwed.  According to data from Emmanuel Saez of the University of California Berkely, from 1935-1980 the bottom 90% of America’s families captured 70% of all the income growth. In other words, as the country got richer, average families got richer. Now, it’s worth noting that wasn’t a prosperity that shared by all Americans, as this time period also coincided with the Jim Crow South, redlining, and other forms of racial discrimination.  But in the last several decades, the rich, and only the rich, have been able to share in income gains.  The idea of “trickle-down economics” was popularized under President Ronald Reagan, in the 1980s. Yet, the data shows that beginning in the year Reagan took office, all income gains were concentrated at the very top. According to another data set from Saez and from Thomas Piketty, from 1980-2012 the bottom 90% of Americans captured ZERO income growth. All income growth in America went to the top 10% richest Americans.

Safety Net Lifted 39 Million Americans out of Poverty - CBPP - As the House Ways and Means Committee holds a hearing today on empirical evidence for poverty programs, it’s worth recalling that safety net programs cut poverty nearly in half in 2013, lifting 39 million people out of poverty.  The figures rebut claims that government programs do little to reduce poverty. Our analysis of Census data shows that, in 2013:

  • Government policies cut the number of poor Americans by 39 million — from 88 million to 49 million.   Of the 39 million people, “universal” assistance programs such as Social Security and unemployment insurance, which are widely available irrespective of income, cut poverty by 19 million. “Means-tested” benefits such as rent subsidies, SNAP (formerly food stamps), and the Earned Income Tax Credit (EITC), which target households of limited means, cut poverty by another 20 million.
  • For millions more people, government assistance makes poverty less severe: 34 million poor people were less deeply poor because of safety net benefits.

These figures use the federal government’s new Supplemental Poverty Measure (SPM), which — unlike the official poverty measure — accounts for taxes and non-cash benefits as well as cash income.  (The SPM also makes other adjustments, such as taking into account out-of-pocket medical and work expenses and differences in living costs across the country.) Because the SPM includes taxes and non-cash benefits, it gives a more accurate picture of the impact of anti-poverty programs than the official poverty measure. Other analysts have recently used SPM data to show the strong impact of poverty programs.  For example,

Workplace Suicide Rates Rise Sharply --  Suicide rates in the U.S. have gone up considerably in recent years, claiming an average of 36,000 lives annually.Most people take their lives in or near home. But suicide on the job is also increasing and, according to federal researchers, suicide risk changes depending on the type of work people do.Researchers from the National Institute for Occupational Safety and Health analyzed census data and compared suicide rates among different occupations.They found that, between 2003 and 2010, a total of 1,719 people died by suicide in the workplace. Rates of suicide on the job declined from 1.5 per million workers in 2003 to 1.2 per million in 2007. Then the rate climbed to 1.8 per million in 2010.Overall, men were more likely to take their lives than women. And older workers, those between the ages of 65 and 74, were more likely to commit suicide than their younger counterparts.The study findings are being published by the American Journal of Preventive Medicine.

Without Lethal Injection, States Plan a Return to Old Execution Methods —Lethal injection is dying a slow death. Thanks to a European Union embargo on the export of key drugs, and the refusal of major pharmaceutical companies to sell them, the nation’s predominant method of execution is increasingly hard to perform. Texas, the most prolific of death-penalty states, has only one dose of its preferred drug pentobarbital remaining. Other state death rows have seen their stocks dwindle too. Even if the justices uphold Oklahoma’s controversial lethal-injection protocol when they rule on the case later this term, the drug shortages show no sign of abating. With lethal injection’s future uncertain, some states are turning to previously discarded methods. The Utah legislature approved a bill on Tuesday that would reintroduce firing squads for executions. On Wednesday, Alabama’s House of Representatives voted to authorize the electric chair if new drugs couldn’t be found. Electrocution is also being considered in Virginia and Tennessee. In Oklahoma, where the use of midazolam is currently before the U.S. Supreme Court, state legislators are mulling the gas chamber. There’s a grim irony to this trend: Lethal injection became so widely adopted in the first place because the methods preceding it were considered untenable. Virtually all executions in the United States since 1776 used one of five methods: hanging, firing squad, electrocution, the gas chamber, or lethal injection. This graph by Quartz shows the change in methods over time. (The Supreme Court effectively halted executions between 1972 and 1976.)

Illinois finances continued downward slide in FY 2014: auditor -  (Reuters) - Illinois' overall financial condition deteriorated last fiscal year, the state auditor reported on Wednesday, underscoring the deep budget gap the state has yet to fill. Liabilities outweighed assets by $49.2 billion in the year ended June 30, compared with negative net assets of $47.9 billion at the end of fiscal 2013. This left Illinois in the worst shape of the 43 U.S. states that had filed fiscal 2014 audits. The only other state with negative assets was Massachusetts at $29 billion. Texas reported the biggest positive net assets at $119.4 billion. Illinois had $45.1 billion of net assets, including revenue, land, buildings, investments and cash on hand, versus $94.3 billion in liabilities such as expenses, debt and pensions. The state marked its thirteenth consecutive year with a general fund deficit, which decreased for a second straight year to $6.7 billion in fiscal 2014 from $7.3 billion in fiscal 2013, the audit showed. At the end of fiscal 2014, Illinois only had $275.7 million in its budget stabilization fund, an insufficient amount to address cash management needs, state Comptroller Leslie Geissler Munger reported in the audit.

S&P drops Chicago Board of Education rating to A-minus (Reuters) - Standard & Poor's Ratings Services on Wednesday cut the Chicago Board of Education's credit rating two notches to A-minus, citing continued budget deficits at the nation's third-biggest public school system. "We lowered the rating and changed the outlook to negative due to our view of the board's fiscal imbalance that have so far resulted in an operating shortfall for fiscal 2014 and a projected shortfall for fiscal 2015," S&P credit analyst John Kenward said in a statement. He added that if budget pressures continue and there is no substantial growth in state aid or tax revenue, the rating could fall below the single-A level. Moody's Investors Service on March 6 dropped its rating for the school district to Baa3, just one notch above the junk level, due to pension pressures.  The two-notch downgrade, affecting $6.3 billion of the school district's general obligation bonds, came a week after Moody's downgraded the rating on $8.3 billion of Chicago's general obligation bonds to Baa2.

Walmart heirs' foundation advises hedge funds on how to profit from charter schools -- Charming. The "charitable" foundation of the Walmart heirs got together with the Bill & Melinda Gates Foundation last week to help hedge funds figure out how to profit off of charter schools. Seriously. The event was called "Bonds and Blackboards: Investing in Charter Schools. With the explicit intent of helping investors "Learn and understand the value of investing in charter schools and best practices for assessing their credit," the event featured experts on charter school investing from Standard & Poor's, Piper Jaffray, Bank of America, and Wells Capital Management, among others. [...]  "It's a very stable business, very recession resistant, it's a high demand product. There are 400,000 kids on waiting lists for charter schools ... the industry is growing about 12-14% a year," David Brain, former President and CEO at EPR Properties, told CNBC in 2012. "It's a public payer, the state is the payer on this category," he added in support of the highly safe investing opportunities in charter schools. (FYI, charter school waitlist numbers are usually to be taken with several grains of salt.)  This is philanthropy, Walton- and Gates-style: figuring out how millionaires and billionaires can profit off of drawing money out of traditional public schools and into charters and then into hedge fund coffers? And the lessons in how to profit are coupled with a massive campaign to buy the policies that make the profit possible to begin with.  They say it's about "civil rights" but this is the real story of the big-money push for charter schools.

Texting Off in Class - From New York to California -- and with a frequency of up to 11 or more times per class period, researchers find -- today’s college student is texting off with wild -- and sometimes wildly erotic -- abandon. And thus they are missing out on -- and blatantly reducing the quality of -- their own classroom education and opportunity to learn and contribute. These are not the students of Howard Becker’s Outsiders, just a few eccentric misfits dressed in black and stretching the boundaries of social deviance. No. Texter-offers are all the way in, vanilla as can be, and that’s the problem. Texting off in class means just as it sounds. It begins when a texter-offer has the urge to text off or when he feels in his pants the vibration of incoming text or data, which might, in fact, have been delivered by a classmate seated close by to him. Even in courses strictly prohibiting texting during class, today’s texter-offer can hardly resist, and many give in to the temptation. Texting off begins when he or she surreptitiously leans back a little in his or her seat, and removes from her or his pants the urgent object of desire. Next thing you know the head drops down low, the chin heads for the chest and hands are held close, facing inward on the lap. Breathing is sometimes halted or hesitant at this stage, as the new text is read and replied to. There then emerge two at first very wide and then increasingly narrow and squinting eyeballs staring fixedly at the little glowing object (or the big one, so to speak: iPhone 6 Plus). The student with long experience texting off is frequently touching and stroking with their fingers so quickly -- and with such determined concentration -- it looks from the outside as if they can’t tell that their classmates, and especially their irritated professor, are staring back at them, interrupting class for everyone.

STEM Grads Can’t Find Jobs - All credible research finds the same evidence about the STEM workforce: ample supply, stagnant wages and, by industry accounts, thousands of applicants for any advertised job. The real concern should be about the dim employment prospects for our best STEM graduates: The National Institutes of Health, for example, has developed a program to help new biomedical Ph.D.s find alternative careers in the face of “unattractive” job prospects in the field. Opportunities for engineers vary by the field and economic cycle – as oil exploration has increased, so has demand (and salaries) for petroleum engineers, resulting in a near tripling of petroleum engineering graduates. In contrast, average wages in the IT industry are the same as those that prevailed when Bill Clinton was president despite industry cries of a “shortage.” Overall, U.S. colleges produce twice the number of STEM graduates annually as find jobs in those fields. In the face of these stark facts, we now see several studies that seem to be desperate Hail Mary passes, using rather unconventional means to find “shortages.” Some analysts do this by expanding the definition of STEM jobs – traditionally those involved in innovation, discovery and development – to include air conditioning technicians and even some retail jobs to make the case that this workforce is large and growing. Without any coherent meaning, such analyses now serve only rhetorical purposes to advance particular legislation.

Elizabeth Warren Re-Introduces Bank on Students Emergency Loan Refinancing Act - Today, Senator Elizabeth Warren and Rep. Joe Courtney (CT-2) re-introduced the Bank on Students Emergency Loan Refinancing Act. Americans can typically refinancing their home loans, but most programs do not allow for the refinancing of student loans. Warren and Courtney’s bill aims to change that.  The bill would allow those with outstanding student loan debt to refinance at the interest rates that were approved last year for new borrowers.  A prior version of the bill was voted on last Congress, and every Senate Democrat and three Senate Republicans voted to move the bill forward, falling just short of breaking a Republican filibuster. n From Senator Warren’s press release: “Many borrowers with outstanding student loans have interest rates of nearly 7 percent or higher for undergraduate loans, while students who took out loans in the 2013-2014 school year pay a rate of 3.86 percent under the Bipartisan Student Loan Certainty Act passed by Congress in 2013. The release also notes that almost one million more borrowers are falling behind on their student loans now than in 2014. And as noted by the Young Invincibles, one in seven students default on their debt within a few years of graduating.

We’re Frighteningly in the Dark About Student Debt ...The United States government has a portfolio of roughly $1 trillion in student loans, many of which appear to be troubled. The Education Department, which oversees the portfolio, is playing the part of the loan division — neither analyzing the portfolio adequately nor allowing other agencies to do so.  These loans are no trivial matter... Student loans are now the second-largest source of consumer debt in the United States, surpassed only by home mortgages. In a major reversal, they now constitute a larger portion of household debt than credit cards or car loans. ... These loans are no trivial matter — not for the borrowers responsible for them or for the country as a whole. Student loans are now the second-largest source of consumer debt in the United States, surpassed only by home mortgages. In a major reversal, they now constitute a larger portion of household debt than credit cards or car loans.  Student debt has grabbed the attention of the Federal Reserve, the Treasury and the Consumer Financial Protection Bureau. Officials in these organizations worry that student debt threatens the well-being of households and the federal budget, since taxpayers are liable if student loans go unpaid.  Over at the Federal Reserve and consumer bureau, as well as outside the government, highly trained analysts are eager for data. A sensible solution would be for the Education Department to put it in their hands and let them get to work. An additional longer-term solution is to move the loan program out of the Education Department entirely — either into an existing agency that has the statistical expertise or a new student-loan authority.

Pelosi: Let’s lift 'anvil' of student debt -- House Democrats are launching a new push to ease the financial burden on college students. Behind House Minority Leader Nancy Pelosi (D-Calif.), the lawmakers introduced legislation that would allow students with high-interest loans to refinance at lower rates. Democrats are calling on GOP leaders to consider the proposal for the benefit of the middle class while simultaneously accusing them of protecting wealthy special interests at the expense of the nation's students. "Our Republican colleagues are always talking about [how] we can't heap mountains of debt onto future generations," Pelosi said. "We all agree … but we don't want to heap mountains of debt onto individual American students and their families. And that's where we have this division." Sponsored by Rep. Joe Courtney (D-Conn.), the Democrats' bill would empower students with high-interest loans — either public or private — to ease their debt obligations by refinancing through the Department of Education. For undergraduates, the new rate would be 3.8 percent; for graduate students, it would drop to 5.4 percent; and for PLUS loans, the figure would be 6.4 percent.

Pension funding up, but still way short: The rising price of stocks and bonds last year helped push pensions closer to full funding. But corporate and public plans remain well short of having enough money to pay out what they've promised to retirees. The ratio of pension assets to liabilities, or funding ratio, for 131 state-sponsored defined benefit retirement systems was an estimated 80 percent as of June 30, up from 74 percent for the 2013 fiscal year, according to new data from Wilshire Consulting, the investment advisory business of Wilshire Associates. Put another way, 87 percent of the 92 state retirement systems that reported data for the 2014 fiscal year are underfunded. "Global stock markets rallied strongly over the twelve months ended June 30, 2014, augmenting the positive performance of global fixed income and allowing pension asset growth to outdistance the growth in pension liabilities over fiscal 2014," Wilshire researcher Russ Walker said in a statement. But the new figures showing higher funding levels aren't cause for celebration, as public plan funding is still well short of highs before the financial crisis. They were 95 percent funded as of fiscal year-end 2007, according to Wilshire data, but fell as low as 64 percent by fiscal year-end 2009. The year-end 2014 data is based on reporting from 92 plans (not all 131 have released data, hence the large drop in the dollar values from 2013 to 2014).

Priest pension crisis: $74M gap in retirement fund -  The Archdiocese of Boston is facing another mounting financial crisis, with a staggering $74 million in unfunded pensions for priests — and a growing number of aging clergy heading into retirement, the Herald has learned. The archdiocese currently has enough funds on hand to cover only about 37 percent of its more than $117 million in retirement obligations for priests, according to its fiscal 2014 financial filings for priest retirement benefits in the Clergy Health and Retirement Trust. “It’s not a looming crisis. It’s happening right now,” said Charles Zech, director of the Center for Church Management and Business Ethics at Villanova University. “The numbers jump out at you in Boston because they’re so large, but most dioceses are struggling with this,” Zech said. “Priests are living longer than anticipated, and they haven’t been as smart in investing as they should have been. The church investments haven’t been keeping up.” In the past decade, the percentage of so-called “senior” priests receiving retirement payments from the archdiocese has jumped from 28 to 38 percent of the total clergy in the archdiocese, according to the trust. In fiscal 2014, the average age of active priests in Boston was 58, and church officials estimated that 134 of the 392 active priests would reach retirement age within the next decade.

Big Data shocker: Over 6 million Americans have reached the age of 112 - In an illustration of what can happen when you use Big Data uncritically, it has emerged that no less than 6.5 million living Americans have reached the ripe old age of 112. Even more amazingly, it appears that just 13 of the super-silver legions are claiming benefits - and tens of thousands of them appear to be holding down jobs at least part-time. Were they being taken seriously, the Social Security Administration's records would be shattering assumptions regarding the numbers of supercentenarians alive in the world today. The fact that US social security records nominally contain more than six million Americans aged 112+ emerged in a recent report from the social security Inspector-General's office. The same records appear to indicate that the oldest American still alive would have been born in 1869, a mere four years after the culmination of the American Civil War. Only 13 of the 6.5 million are actually claiming Social Security benefits, it seems, but the other numbers have not been formally deleted and thus create an opportunity for fraudsters to give false details when providing their financial information.

How Medicaid expansion affects demand for care VA care - Last year, Adrianna illuminated the interplay between demand for Veterans Health Administration (VA) care and Medicaid expansion. Medicaid expansion could relieve some pressures on the VA system. For some veterans, geographic access could be a serious barrier to care, since VA benefits are typically provided at VA facilities. Medicaid coverage has its own shortcomings, but dual eligibility would permit veterans to seek care wherever it was most readily available. Of course, almost half of states are still refusing to expand the public program, affecting an estimated 258,600 uninsured veterans. At the time of her writing, and until last week, nobody had quantified for all states the extent to which Medicaid expansion (or non-expansion) affects VA enrollment or utilization. A new paper in the journal Healthcare by me, Amresh Hanchate, and Steve Pizer does just this. If the ACA’s Medicaid expansion had been implemented in all states, enrollment for VA health coverage, acute inpatient care (days), and outpatient visits would have been 9%, 6%, and 12% lower, respectively. In states that did not expand Medicaid in 2014, VA enrollment, inpatient days, and outpatient visits were, respectively, 10, 6, and 13 percentage points higher than they would have been otherwise. VA medical centers in states that did not expand Medicaid in 2014 are likely to have experienced a higher demand, and commensurately longer wait times.

Blue Shield of California loses state tax-exempt status; health insurer has big cash stockpile: Blue Shield of California is protesting a state decision to strip the nonprofit health insurer of its tax-exempt status, which the company has held since its founding in 1939. The California Franchise Tax Board quietly revoked the tax break in August, the Los Angeles Times reported Wednesday ( ). The decision could put San Francisco-based Blue Shield on the hook for tens of millions of dollars in state taxes each year. The insurer has paid federal taxes for years. A spokeswoman for the tax agency declined to comment on why the insurer lost its status. The highly unusual action came after a lengthy state audit reviewed the justification for Blue Shield's taxpayer subsidy, according to the newspaper. Blue Shield said it is protesting the decision, but state officials have ordered it to file tax returns back to 2013 in the meantime. California's third-largest health insurer has faced criticism over its rate increases, executive pay and financial reserves. Insurance Commissioner Dave Jones, a longtime critic of Blue Shield, said Wednesday that the company has also shifted its health insurance products from the Department of Insurance to the Department of Managed Health Care to avoid $100 million in premium taxes each year. "Blue Shield is dodging taxes that other legitimate businesses and families and individuals pay, so it's fundamentally unfair and corrosive to our system of tax collection," Jones said.

Panel Faults Medicare Payment Fix as Too Weak - WSJ: A planned overhaul of Medicare payments to long-term hospitals doesn’t go far enough, a congressional advisory panel said, and it called for further changes to discourage timing patients’ discharges to financial incentives. Long-term-care hospitals get smaller payments for short visits, but after patients stay for a certain number of days the payments jump to much larger lump sums. That gives the hospitals “a strong financial incentive to keep patients” until they qualify for higher payments, “and they appear to respond to that incentive,” the Medicare Payment Advisory Commission, called MedPAC, said in a report Friday. Medicare’s planned overhaul aims to limit the number of patients qualifying for high long-term-hospital payments. But a Wall Street Journal analysis of Medicare data suggests the new rules wouldn’t have much effect on the incentive to discharge eligible patients at particular times.

Health-Care Deductibles Climbing Out of Reach - Deductibles are an element of any insurance product, but as deductibles have grown in recent years, a surprising percentage of people with private insurance, and especially those with lower and moderate incomes, simply do not have the resources to pay their deductibles and will either have to put off care or incur medical debt. The chart above, based on a Kaiser Family Foundation study published Wednesday, shows that about a quarter of all non-elderly Americans with private insurance coverage do not have sufficient liquid assets to pay even a mid-range deductible, which at today’s rates would be $1,200 for single coverage and $2,400 for family coverage. We found that more than a third don’t have the resources to pay higher deductibles. Among low- and moderate-income households, even fewer are able to meet deductibles. It’s no wonder that collections for medical debt represent half of all bill collections. The estimates are conservative because they assume that people have all of their liquid assets available to pay their health-care bills. But most people must tap into their liquid assets to meet other obligations, such as their rent or mortgage, car repairs, or educational costs.

Health care paperwork costs firms thousands - Complying with the health care law is costing small businesses thousands of dollars that they didn't have to spend before the new regulations went into effect. Brad Mete estimates his staffing company, Affinity Resources, will spend $100,000 this year on record-keeping and filing documents with the government. He's hired two extra staffers and is spending more on services from its human resources provider. The Affordable Care Act, which as of next Jan. 1 applies to all companies with 50 or more workers, requires owners to track staffers' hours, absences and how much they spend on health insurance. Many small businesses don't have the human resources departments or computer systems that large companies have, making it harder to handle the paperwork. On average, complying with the law costs small businesses more than $15,000 a year, according to a survey released a year ago by the National Small Business Association.

Universal drug plan would save billions, UBC researchers say - A universal prescription drug plan could reduce total spending on medications in Canada by billions and cover everyone at an affordable price for taxpayers, health policy researchers say. Canada is the only developed country with universal health insurance coverage that does not also offer universal prescription drug benefits. About one in 10 Canadians say they can’t afford to take their medications as prescribed, previous studies suggest. In Monday’s issue of the Canadian Medical Association Journal, researchers say the extra total cost to government of providing universal pharmacare could range as high as $5.4 billion a year, but would likely be about $1 billion, depending on exactly how much can be saved through bulk purchases of medications and other measures. At the same time, it would save the private sector the $8.2 billion annually it spends on prescription drugs, mainly through employee health plans. "When we did the analysis, we were, at first, a little bit surprised," said study author Steven Morgan, a professor of health policy at the University of British Columbia in Vancouver. "Wow. Canada can really save billions of dollars by covering everybody for virtually every drug? And then we started to look deeper at the math, and it made perfect sense. "You save about 10 per cent by getting better generic prices, you save about 10 per cent [on] brand name prices and you save an additional 10 per cent by encouraging more cost-effective prescribing," Morgan said, using conservative estimates. "Mine those three things together, you save 30 per cent of a very large budget. Therefore you're saving billions of dollars."

What The Heck Is The Trans-Pacific Partnership And Why Should You Care? -  The report, ““Negotiating Healthy Trade in Australia: A Health Impact Assessment of the Proposed Trans-Pacific Partnership Agreement,” found that the TPP has the potential to increase the cost of medicines in the member countries outside the U.S., prevent the U.S. from implementing reforms to make medications more affordable, and could negatively impact participating nations’ domestic policies.According to Hirono, the U.S. has some of the strongest policies related to intellectual property in the world, and imposing U.S. standards in countries with different intellectual property rules “could significantly change the affordability of medications in those countries, as well as locking in current arrangements that keep prices high in the U.S.”“What this means for medicine is that it takes longer for cheaper generic medications to enter the market, keeping costs higher for patients for longer,” Hirono said in an email. Additionally, there are provisions that would allow foreign investors to sue governments of another country when they believe there has been a violation of their property rights, meaning “public policies that are good for health,” such as improved nutrition labeling on food, restrictions on alcohol and health warnings on tobacco products could be challenged by companies under the TPP.“This not only damages health when good public policies are taken away, but it often deters governments from enacting new policies for fear of litigation,” says Hirono.

The longer babies breastfeed, the more they achieve in life – major study - Breastfed babies are more likely to turn into well-educated and higher-earning adults, according to a major long-term study. Researchers in Brazil have followed nearly 6,000 babies from birth for the past three decades, enabling them for the first time to get an idea of the long-term effects of breastfeeding. Nearly 3,500 of them, now 30-year-old adults, accepted an invitation to be interviewed and sit IQ tests for the purpose of the study. Those who had been breastfed proved to be more intelligent, had spent longer at school and earned more than those who had not been. And the longer they were breastfed as a baby, the better they tended to be doing. “Our study provides the first evidence that prolonged breastfeeding not only increases intelligence until at least the age of 30 years but also has an impact both at an individual and societal level by improving educational attainment and earning ability,” he said.

Altering brain chemistry makes us more sensitive to inequality - What if there were a pill that made you more compassionate and more likely to give spare change to someone less fortunate? UC Berkeley scientists have taken a big step in that direction. A new study by UC Berkeley and UC San Francisco researchers finds that giving a drug that changes the neurochemical balance in the prefrontal cortex of the brain causes a greater willingness to engage in prosocial behaviors, such as ensuring that resources are divided more equally. The researchers also say that future research may lead to a better understanding of the interaction between altered dopamine-brain mechanisms and mental illnesses, such as schizophrenia or addiction, and potentially light the way to possible diagnostic tools or treatments for these disorders. "Our study shows how studying basic scientific questions about human nature can, in fact, provide important insights into diagnosis and treatment of social dysfunctions," said Ming Hsu, a co-principal investigator and assistant professor at UC Berkeley's Haas School of Business. "Our hope is that medications targeting social function may someday be used to treat these disabling conditions," said Andrew Kayser, a co-principal investigator on the study, an assistant professor of neurology at UC San Francisco and a researcher in the Helen Wills Neuroscience Institute at UC Berkeley.

The myopia boom -- East Asia has been gripped by an unprecedented rise in myopia, also known as short-sightedness. Sixty years ago, 10–20% of the Chinese population was short-sighted. Today, up to 90% of teenagers and young adults are. In Seoul, a whopping 96.5% of 19-year-old men are short-sighted. Other parts of the world have also seen a dramatic increase in the condition, which now affects around half of young adults in the United States and Europe — double the prevalence of half a century ago. By some estimates, one-third of the world's population — 2.5 billion people — could be affected by short-sightedness by the end of this decade. “We are going down the path of having a myopia epidemic,” Glasses, contact lenses and surgery can help to correct it, but they do not address the underlying defect: a slightly elongated eyeball, which means that the lens focuses light from far objects slightly in front of the retina, rather than directly on it. In severe cases, the deformation stretches and thins the inner parts of the eye, which increases the risk of retinal detachment, cataracts, glaucoma and even blindness. Because the eye grows throughout childhood, myopia generally develops in school-age children and adolescents. About one-fifth of university-aged people in East Asia now have this extreme form of myopia, and half of them are expected to develop irreversible vision loss.

Would You Rather Die Sooner Than Take a Daily Pill? — In a recent study, one-third of the participants said they'd shave time off their lives to avoid taking medication each day. There are diagnoses for some people who can’t or won’t take pills. There’s dysphagia, or difficulty swallowing. There’s emetophobia, the fear of gagging or vomiting. There’s pharmacophobia, the fear of taking any medicine at all.  And then there are people who have none of these conditions, but really, really hate to do it anyway. Hate it so much, in fact, that when a recent survey asked people if they’d prefer to risk immediate death or swallow a daily pill for the rest of their lives, more than a third chose the former. In a study published earlier this week in Circulation: Cardiovascular Quality and Outcomes, a journal of the American Heart Association, researchers from the University of North Carolina and the University of California, San Francisco, surveyed 1,000 people on what they would be willing to give up to avoid taking a daily pill—one without any cost or side effects—to protect heart health. Here’s what people were willing to trade:

  • More than 20 percent said they would pay $1,000 or more; around 3 percent said they’d pay up to $25,000.
  • Around 38 percent of respondents said they’d be willing to gamble some risk of immediate death; around 29 percent of the people surveyed said they’d accept a small (lower than 1 percent) risk, while 9 percent of them said they’d accept a one-in-10 chance of immediate death.
  • When the question changed from risk of death to certain death, around 30 percent said they would trade at least a week off their lives, and 8 percent were willing to give up a full two years.

After Ebola, measles may follow - The Ebola crisis in West Africa is one of the most striking public health emergencies in recent years. According to the Centers for Disease Control, this fast-spreading virus has killed over 9,951 people since the start of the outbreak in December of 2013. Currently, there are no FDA-approved vaccines or antiviral treatments for Ebola, and patients’ survival depends on their own immune response and the supportive care they receive. The mortality rate for this disease is currently estimated to be approximately 70 percent by the World Health Organization. Now a new study published in the journal Science suggests that the Ebola crisis could leave countries vulnerable to epidemics of a more common virus, measles, due to its disruption of routine health care services in affected areas. The authors of this study are affiliated with some of the most prominent public health institutions in the world, including Princeton University, Johns Hopkins’ Bloomberg School of Public Health, and the National Institutes of Health. They project that due to the loss of healthcare workers caused by the Ebola crisis, a cluster of children unvaccinated for measles will accumulate in Guinea, Liberia, and Sierra Leone. Because of the susceptibility of this population, the investigators expect a regional measles outbreak of 127,000 to 227,000 cases after 18 months, which will result in 2,000 to 16,000 measles-related deaths in the region.

‘Hypoallergenic’ is meaningless — It is ‘whatever a company wants it mean,’ scientists explain - A new video by the American Chemical Society explains that “‘hypoallergenic’ isn’t really a thing,” largely because the term can mean whatever manufacturers want it to. “There’s one label that’s gone unregulated for decades — ‘hypoallergenic,’” Speaking of Chemistry‘s host Sophia Cai said. “A hypoallergenic product should mean that it’s less likely to give you an allergic reaction,” but that’s simply not the case, according to the Food and Drug Administration. “There’s actually no scientific evidence,” Cai said, “to back up these claims.” In fact, according to the official FDA website, “[t]he term means whatever a particular company wants it to mean,” and these manufacturers “are not required to submit substantiation of their hypoallergenicity claims to the FDA.” “Back in the 70s, the FDA suggested that the ‘hypoallergenic’ label should only be applied to products proven to reduce allergic reactions,” she explained. “But big name manufacturers fought back, saying those tests would cost too much.” Cai said that in 2014, researchers analyzed 187 children’s personal care products bearing labels like “hypoallergenic” and “dermatologist tested,” searching for 80 molecules that commonly cause allergic reactions. “Eighty-nine percent contained a chemical known to cause a skin rash,” Cai said. “Eleven percent contained five or more allergens — and a different 11 percent contained methylisothiazolinone, a preservative that was dubbed ‘The Contact Allergen of the Year’ in 2013 by a dermatology society.” Watch the entire American Chemical Society video below via YouTube.

America's Latest Craze: Flushing Money Down The Toilet On "Luxury" Toilet Paper (And Going Commando) -- US sales of what the industry calls "luxury" rolls — anything quilted, lotioned, perfumed or ultra-soft, from two- to four-ply — climbed to $1.4 billion last year, outpacing all other kinds of toilet paper for the first time in nearly a decade, data from market research firm Euromonitor International show. The luxury market is one-fourth the size of the standard TP market, but its prominence in Big Wipe is growing faster than many industry watchers expected. Luxury toilet paper sales have grown more than 70 percent since 2000, and they're expected to keep growing faster than all other categories every year through at least 2018.

A new Toilette Etiquette: Let's stop flushing forests and wasting water -- Sylvia Kronstadt - When you slip into the restroom for a little tinkle, you probably don't realize that you are participating in massive environmental genocide -- but you are. Millions of gallons of water swoosh down the tubes every day, even as water becomes an ever-more precious and limited resource, and the specter of global drought and conflict looms. On top of that, more than the equivalent of 9.8 million trees are flushed down the toilet every year, according to Claude Martin of Worldwide Fund for Nature. The expanding global demand for toilet paper has resulted in an assault on forests in both the  Northern and Southern hemispheres by paper companies competing to fill a seemingly inexhaustible, rapidly growing consumer demand for ever cushier toilet paper. The U.S. alone uses 30 billion rolls a year. To make matters worse, the Sanitary Industrial Complex is succeeding brilliantly in its marketing of "flushable" wet wipes for adults, which are gumming the gears of plumbing networks around the nation. According to yesterday's  New York Times, the city has spent more than $18 million in the past five years on wet wipe-related equipment problems (  Humankind got along pretty well for a long time without toilet paper. Surely we can figure out how to return to those glorious days in which trees weren't slaughtered to cleanse our behinds.  My solution mitigates my impact on this wood and water misuse by close to 80 percent.

U.S. bird experts mystified by Midwest avian flu spread: (Reuters) - A virulent strain of avian flu that has killed turkeys in the heart of the nation's poultry region has been found through molecular testing to be nearly identical to viruses isolated in migratory ducks. But some wildlife experts are skeptical of suggestions that wild birds are responsible for spreading the H5N2 flu strain that has infected poultry in Minnesota, Missouri and Arkansas. A top investigator from the U.S. Department of Agriculture (USDA) says that testing performed by the government supports a conclusion that the virus is being carried by waterfowl along an established migratory route that stretches south from Minnesota to the Gulf of Mexico. The virus can be transmitted to poultry from ducks through droppings that land on farms or when birds interact, among other ways. "That's the way we're sort of pointing right now: to ducks as the problem," said Brian McCluskey, lead epidemiologist for the U.S. Department of Agriculture's Animal and Plant Health Inspection Service. The agency has not, however, identified how the disease made its way from the ducks to domestic fowl. Experts who doubt that wild birds are spreading the virus note that the disease has moved from Minnesota in the north, south to Arkansas and Missouri, the opposite direction birds migrate through the area in the spring.

U.S. may impose tougher curbs to contain bird flu in Arkansas  (Reuters) - U.S. authorities are considering imposing tougher restrictions in Arkansas to contain a virulent strain of avian flu in the heart of America's poultry region in a bid to minimize international trade disruptions and contain the virus. The H5N2 flu discovered in Arkansas last week is the state's first case of a strain that causes massive internal hemorrhaging in poultry, can kill nearly every bird in an infected flock within 48 hours, and is prone to mutate. Such strains are sometimes called "chicken Ebola." In response, Arkansas is working with the U.S. Department of Agriculture (USDA) to create new rules for commercial poultry producers and owners of backyard flocks alike, Reuters has learned. The rules will spell out how often poultry within a quarantine zone must test negative for bird flu before the quarantine can be lifted, Brandon Doss, Arkansas’ assistant state veterinarian, said. Until the quarantine is lifted, no poultry within 10 km (6 miles) around the farm that was infected with bird flu can move in or out of the area.

New study points to link between weedkiller glyphosate and cancer - The World Health Organisation’s cancer agency has declared the world’s most widely used weedkiller a “probable carcinogen” in a move that will alarm the agrochemical industry and amateur gardeners. The assessment by the International Agency for Research on Cancer of glyphosate, which is used in herbicides with estimated annual sales of $6bn, will be of particular concern to Monsanto, the company that brought glyphosate to market under the trade name Roundup in the 1970s. Monsanto’s current generation of herbicide-resistant genetically modified crops depends on farmers spraying their fields with glyphosate to kill weeds. The IARC assembled 17 experts to assess five organophosphate pesticides. After meeting for a week this month at IARC headquarters in Lyon, France, the panel decided that two of the chemicals were “possible” (class 2B) carcinogens and three were “probable” (class 2A) carcinogens. A summary of the assessment was published online on Friday in the journal Lancet Oncology. Although malathion, another widely used insecticide, and tetrachlor vinphos were also given a 2A classification, the glyphosate ruling will make the most impact. The IARC has no regulatory role and its decisions do not lead immediately to bans or marketing restrictions, but campaigners are expected to use them to put pressure on regulators to act against products containing glyphosate. Worldwide sales of glyphosate herbicides are about $6bn a year.

NY Assembly votes to help farmers fight GMO seed lawsuits - (AP) - Farmers in New York state would be better protected against lawsuits from biotech companies if genetically modified crops inadvertently grow on their fields under a bill passed by the state’s Assembly. Seed producers have sued farmers around the country for allegedly growing their bioengineered crops without buying the seed. Farmers often argue the seeds arrived by wind or other natural means. Assemblyman Tom Abinanti said Wednesday that his legislation will make it easier for New York farmers to defend themselves against frivolous lawsuits. He says that in the case of organic farmers, genetically modified seeds are seen as a contaminant. The bill passed the Assembly on Monday. Similar legislation is pending in the state Senate. Separate legislation would require the labeling of food products that contain genetically modified ingredients.

Jon Stewart Hammers Big Food for 'Death Menu of Artificial Chemicals, Antibiotics and Cool Ranch Carcinogens' » “Making food slightly less bad for you craze is spreading,” according to Jon Stewart in his “the Snacks of Life” segment on The Daily Show. From sharing the announcement by McDonalds that it will only buy chicken raised without antibiotics within the next two years to Dunkin’ Donuts eliminating the chemical that gives its powered donuts that bright, white look, Stewart hammers Big Food for turning our “food supply into an addictive, fattening, death menu of  artificial chemicals, antibiotics and cool ranch carcinogens.” He also exposes the new “KIDS eat right” label that Kraft is helping to financially support via the not so academy of Academy of Nutrition and Dietetics. Watch here:

Scientists Seek Ban on Method of Editing the Human Genome - A group of leading biologists on Thursday called for a worldwide moratorium on use of a new genome-editing technique that would alter human DNA in a way that can be inherited.The biologists fear that the new technique is so effective and easy to use that some physicians may push ahead before its safety can be assessed. They also want the public to understand the ethical issues surrounding the technique, which could be used to cure genetic diseases, but also to enhance qualities like beauty or intelligence. The latter is a path that many ethicists believe should never be taken.“You could exert control over human heredity with this technique, and that is why we are raising the issue,” said David Baltimore, a former president of the California Institute of Technology and a member of the group whose paper on the topic was published in the journal Science. Ethicists, for decades, have been concerned about the dangers of altering the human germline — meaning to make changes to human sperm, eggs or embryos that will last through the life of the individual and be passed on to future generations. Until now, these worries have been theoretical. But a technique invented in 2012 makes it possible to edit the genome precisely and with much greater ease. The technique has already been used to edit the genomes of mice, rats and monkeys, and few doubt that it would work the same way in people.

Bee Death Study Clears Bayer’s Insecticide as Sole Cause - A widely used insecticide developed by Bayer AG and tied to deaths of honeybees isn’t the main cause of the fatalities, University of Maryland researchers said in a study that may weaken arguments used by environmentalists seeking to ban the chemical.  The insect-killer, imidacloprid, when applied at “realistic” levels doesn’t harm honeybee colonies, according to the three-year study published Wednesday in the peer-reviewed journal PLOS ONE. “It’s not the sole cause,” said Galen Dively, a entomology professor at Maryland’s College Park campus and lead writer of the study. “It contributes, but there is a bigger picture.” The chemical may add to stresses such as malnutrition and parasites in causing higher death rates in commercial colonies in the past decade, according to the study. The pesticide, made by companies including Syngenta AG, Valent USA Corp. and Arysta Lifescience Ltd., is among chemicals known as neonicotinoids, which are similar to nicotine. Environmental groups want the government to ban them because of a possible link to bee deaths, known as Colony Collapse Disorder. The European Union suspended imidacloprid’s use in 2013, citing effects on pollinators.

Crop Subsidies Soar under 2014 Farm Bill “Reforms” -- The 2014 farm bill will prove to be the most expensive ever thanks to new subsidies Congress added on top of the already costly crop insurance program, researchers at the University of Missouri said in an analysis released this week. The finding came in the U.S. Baseline Briefing Book issued annually by the university’s Food and Agriculture Policy Research Institute. The new analysis confirms that the promised cost savings of 2014’s subsidy “reforms,” which were much touted during the farm bill debate, are turning out to be pie in the sky. Two new crop subsidy programs – Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) – are at the heart of the dramatic increase in payouts, the Briefing Book reports. The Institute’s researchers estimate that the two new types of coverage will generate more than $24 billion in payments over the 2014-2018 life of the farm bill. That’s $2.4 billion more than the “direct payment” subsidies the new crop subsidy plans replaced, which cost taxpayers $21.6 billion from 2009 through 2013. The generous new subsidy payouts for 2014 crops will go out to growers this fall. Under the Risk Coverage program, most counties in most counties in Ohio, Iowa, Minnesota and Kansas are projected to receive payouts of between $60 and $200 an acre for corn alone. This is a huge increase from the average $24 per acre formerly paid for corn under the direct payment program. Corn growers in other states are also predicted to receive ARC payments, but in lesser amount.

Mexican farmworkers strike over low wages, blocking harvest: Veronica Zaragoza grew up in these coastal fields, picking berries and tomatoes and watching an industry being transformed. She saw new greenhouses erected, irrigation lines spread through the fields, packing plants expanded and produce piled onto ever-larger trucks. Everything in this fertile agricultural region 200 miles south of San Diego has changed, it seemed, except her wages. Zaragoza said she still earns 110 pesos per day, about $8 — a little more than when she started picking as a 13-year-old. Zaragoza, now 26, joined thousands of pickers this week as they spilled onto the streets to protest low wages in a bold demonstration — the first strike by farmworkers here in decades.Pickers not only stayed out of the fields, they stood shoulder to shoulder blocking the main highway, stalling traffic for hours and all but stopping the harvest at the height of the season. The clash was shaping up as an early test of a newly formed alliance of produce industry groups dedicated to improving conditions for farmworkers in Mexico. The group, the International Produce Alliance to Promote a Socially Responsible Industry, was established in February, after The Times documented widespread labor abuses at Mexican export farms in a series called "Product of Mexico."

As Farmers Fade, Who Will Care For the American Landscape? — The landscapes of our country are now virtually deserted. In the vast, relatively flat acreage of the Midwest now given over exclusively to the production of corn and soybeans, the number of farmers is lower than it has ever been. I don’t know what the average number of acres per farmer now is, but I do know that you often can drive for hours through those corn-and-bean deserts without seeing a human being beyond the road ditches, or any green plant other than corn and soybeans. Any people you may see at work, if you see any at work anywhere, almost certainly will be inside the temperature-controlled cabs of large tractors, the connection between the human organism and the soil organism perfectly interrupted by the machine. Thus we have transposed our culture, our cultural goal, of sedentary, indoor work to the fields. Some of the “field work,” unsurprisingly, is now done by airplanes.This contact, such as it is, between land and people is now brief and infrequent, occurring mainly at the times of planting and harvest. The speed and scale of this work have increased until it is impossible to give close attention to anything beyond the performance of the equipment. The condition of the crop of course is of concern and is observed, but not the condition of the land. And so the technological focus of industrial agriculture by which species diversity has been reduced to one or two crops is reducing human participation ever nearer to zero. Under the preponderant rule of “labor-saving,” the worker’s attention to the work place has been effectively nullified even when the worker is present.

Sierra Club Condemns Border Security Bill That Seeks To Gut Protected Lands -A regional chapter of the Sierra Club, one of the largest environmental organizations in the country, is denouncing a Republican-sponsored border security bill that could have deleterious effects on the environment if enacted into law. Arizona’s Grand Canyon Sierra Club Chapter sent out a petition strongly opposing legislation that would exempt border security activities from 16 environmental laws within 100 miles of the southern and northern U.S. borders.  The latest petition criticized the “Secure the Border First Act,” which would carry out a wide range of border security activities, including the construction or repair of 120 miles of fencing, 1,800 miles of roads, and 12 security bases along the southern U.S. border. The petition stated that the bill would “militarize natural areas and communities already glutted with border walls, roads and towers,” “undermine fundamental environmental and conservation laws,” and “allow further damage to the fragile border environment and the people and communities dependent upon it.”  The petition added, “Walls also fragment wildlife habitat and block wildlife migration corridors, threatening the survival of a wide range of imperiled species. A total of 652 miles of border barriers have already been constructed along the U.S.-Mexico border at great cost to taxpayers and with little to no effectiveness in stopping human migration.”

GOP Budget Expected To Fund Proposal To Sell Off America’s National Forests - A proposal to seize and sell off America’s national forests and other public lands could make its way into the House GOP’s budget resolution when it is announced this week. In a recent memo to the House Budget Committee, Rep. Rob Bishop (R-UT), chair of the House Natural Resources Committee, proposed that America’s public lands be transferred to state control. He then requested $50 million of taxpayer money to be spent to enable transfers to “start immediately.” The memo states that public lands “create a burden for the surrounding states and communities,” and “the solution is to convey land without strings to state, local, and tribal governments.” Bishop’s plan and similar proposals to give away America’s public lands are controversial. A majority of voters in those regions believe the proposals would likely result in states having to raise taxes, open prized recreation areas to drilling and mining, or sell lands to private interests to cover the substantial costs of management. Despite these concerns — and despite the fact that these proposals are extremely expensive, unpopular, and most importantly, unconstitutional — there is a strong likelihood that Rep. Bishop’s request will be included in the House GOP’s budget, thanks to intensive lobbying efforts by a handful of right wing politicians and special interest groups. As reported by E&E Daily, the American Lands Council (ALC), an organization founded by Utah state Rep. Ken Ivory (R), hired a lobbyist at the end of last year to “educate congressional lawmakers on the benefits of relinquishing federal lands to the states.” Federal lobbying disclosure forms show that the ALC paid the lobbyist, Michael Swenson, $150,000 for just three months of lobbying work.

The world’s forests are fragmenting into tiny patches — risking mass extinctions: Much of the Earth was once cloaked in vast forests, from the subarctic snowforests to the Amazon and Congo basins. As humankind colonised the far corners of our planet, we cleared large areas to harvest wood, make way for farmland, and build towns and cities. The loss of forest has wrought dramatic consequences for biodiversity and is the primary driver of the global extinction crisis. I work in Borneo where huge expanses of tropical forest are cleared to make way for palm oil plantations. The biological cost is the replacement of some 150 forest bird species with a few tens of farmland species. But forest is also frequently retained inside or at the edges of oil palm plantations, and this is a pattern that is replicated globally. The problem, according to new research published in Science Advances, is that the vast majority of remaining forests are fragmented. In other words, remaining forests are increasingly isolated from other forests by a sea of transformed lands, and they are found in ever-smaller sized patches. The shockwaves of loss thus extend far beyond the footprint of deforestation.   The team, led by Nick Haddad from North Carolina State University, used the world’s first high-resolution satellite map of tree cover to measure how isolated remaining forests are from a non-forest edge. Edges are created by a plethora of deforesting activities, from roads to cattle pastures and oil wells, as well as by rivers. They found that more than 70% of remaining forest is within just 1km (about 0.6 miles) of an edge, while a 100 metre stroll from an edge would enable you to reach 20% of global forests.

Tourists Dine On Tiger Bone Wine And Bear Cub In ‘Lawless Playground’  - Exotic – and illegal – items from sautéed tiger meat to bear cubs are on offer at a resort in Laos, according to the Environmental Investigation Agency.  The London-based Agency said in a report that the sprawling resort on a special economic zone that bridges Laos, Myanmar, and Thailand operates as a “lawless playground,” in large part, for and by Chinese nationals who have a taste for “wild flavor.” In addition to menu items that included everything from python to pangolin, but also offered tiger bone wine. Drinkers of the traditional brew believe that it can do everything from enhance circulation to cure arthritis. One black market seller told the Daily Beast that consuming the stuff on a regular gave him the strength of a tiger and the senses of a predator.  Investigators found that the resort didn’t just sell tiger bone wine, but that the drink that was made in-house. The Agency found four tigers on site when it visited in mid-2014, but investigators found that it held 26 of them last month – and plans to keep as many as 500. Investigators who toured the animal enclosure said the head keeper, who claimed to have worked on several Chinese tiger wine facilities, “gave the impression that there were no restrictions on the keeping, breeding or trading of captive tigers in Laos.”In fact, Laos is a signatory of the Convention on International Trade in Endangered Species, or CITES, which outlaws the breeding of endangered animals for trade purposes.

California Is Turning Back Into A Desert And There Are No Contingency Plans - Once upon a time, much of the state of California was a barren desert. And now, thanks to the worst drought in modern American history, much of the state is turning back into one. Scientists tell us that the 20th century was the wettest century that the state of California had seen in 1000 years. But now weather patterns are reverting back to historical norms, and California is rapidly running out of water. It is being reported that the state only has approximately a one year supply of water left in the reservoirs, and when the water is all gone there are no contingency plans. Back in early 2014, California Governor Jerry Brown declared a drought emergency for the entire state, but since that time water usage has only dropped by 9 percent. That is not nearly enough. The state of California has been losing more than 12 million acre-feet of total water a year since 2011, and we are quickly heading toward an extremely painful water crisis unlike anything that any of us have ever seen before.

Intensifying Calif. drought sets off alarms: As California's epic drought continues with no end in sight, it is setting off new alarms about unprecedented water shortages, increased wildfire threats, fewer crops and farmers, higher electric bills and huge economic losses for years — or even decades — to come. "Even if normal precipitation begins to fall, it will take a few years to overcome the massive deficits we've been running," said scientist Peter Gleick, president of the Pacific Institute, a research organization in Oakland. California and much of the West must cope with the consequences of a drought predicted to intensify in coming months. The negative impact is sure to deepen. Scientists predict megadroughts will set in by mid-century. "It often seems impossible to imagine, but tap water shortages are a distinct possibility if mitigation efforts aren't embraced and droughts become more frequent and intense in the coming years," said meteorologist Steve Bowen of Aon Benfield, a global reinsurance firm. California has about one year of water left in its reservoirs, and mandatory rationing should begin now, NASA scientist Jay Famiglietti said last week, the Associated Press reported. The possible shortage of tap water is leading to myriad propositions, from the treatment and reuse of wastewater and stormwater to the desalination of the Pacific Ocean, an extremely expensive solution already underway in San Diego while proposals are considered in cities throughout the state. "For agriculture, desalination is so far out of the range of cost that no one really even thinks about it. But over time, we will see more and more desalination in those places with no other options, as we see in many Middle East and Gulf state countries,"

Overpumping of Central Valley groundwater creating a crisis -- Parts of the San Joaquin Valley are deflating like a tire with a slow leak as growers pull more and more water from the ground. The land subsidence is cracking irrigation canals, buckling roads and permanently depleting storage space in the vast aquifer that underlies California’s heartland.  The overpumping has escalated during the past drought-plagued decade, driving groundwater levels to historic lows in some places. But in a large swath of the valley, growers have been sucking more water from its sands and clays than nature or man puts back for going on a century. They are eroding their buffer against future droughts and hastening the day, experts warn, when they will be forced to let more than a million acres of cropland turn to dust because they have exhausted their supplies of readily available groundwater.   Until last year, California didn’t have a statewide groundwater law, making it an outlier in the West. The legislation, intended to end unsustainable groundwater use, won’t do that any time soon. Agricultural interests opposed the regulations, which call for the creation of local groundwater agencies that have more than two decades to fully comply. “In the meantime, it’s easier for growers to keep pumping than rein in their use. ‘Telling people they have to stop irrigating is a huge economic thing,’ said Charles Burt, chairman of the Irrigation Training and Research Center at Cal Poly San Luis Obispo. ‘Guys are going to get their guns out. If you were farming, you wouldn’t take that very lightly.’

California restricts yard watering as drought persists - California regulators on Tuesday ordered every water agency in the state to restrict how often customers can water their landscaping, an unprecedented move that marks another milestone in the severe and ongoing drought. The decision was adopted unanimously by the State Water Resources Control Board and will take effect in about 45 days. Officials at the water board said it is the first time any state in the nation has imposed an emergency water conservation requirement on every local water agency within its borders. “This is a serious drought,” board member Steven Moore said. “We need to face it down together and look at these issues very seriously.” A range of speakers supported the move at the board’s Tuesday meeting in Sacramento, from environmental groups to golf course associations.At the same meeting, state and federal water officials reported that the Sierra Nevada snowpack – source of about 60 percent of the state’s fresh water – was 12 percent of average as of Tuesday. In the approximately 100 years the state has been recording snowpack across the range, that marks a historic low for this time of year. This came after California saw its driest-ever January, normally the wettest month of the year, and as the driest-ever March is unfolding.

California drought: State OKs sweeping restrictions on water use - California officials approved a package of far-reaching water restrictions Tuesday, limiting homes and businesses in much of the Bay Area and elsewhere to just two days of outdoor watering per week while cracking down on the way restaurants and hotels use water. The rules mark unprecedented territory for the state, which has historically let local water agencies, with their unique supplies and demands, manage how customers use water. But with California poised for a fourth year of drought and conservation lagging, officials opted for statewide action.The regulations, carrying fines up to $500, add to restrictions put in place last year that rein in outdoor water use — for example, barring people from hosing down driveways. The new terms tread deeper into homes, businesses and the lives of most Californians, and are indicative of the state’s worsening water woes. “We are not seeing the stepping up and the ringing of alarm bells that the situation warrants,” said Felicia Marcus, chair of the State Water Resources Control Board, which voted unanimously for Tuesday’s conservation mandates.

New California Drought Restrictions Coming To Restaurants, Hotels, As Home Rules Get Stricter — State water officials are going into emergency mode as it plans to impose tighter conservation restrictions after another dry winter. Reservoir levels statewide are the lowest they’ve ever been, and the way scientists are seeing it, things are only going to get worse. A scientist with the NASA Jet Propulsion Laboratory wrote an op-ed in the Los Angeles Times last week saying California has only about a year of water supply left in its reservoirs. State officials like Max Gomberg say it’s a scary reality that’s not far from the truth as the state enters its fourth drought year. The first priority is managing what water is left. Stricter regulations will be up for vote on Tuesday that will affect both the hotel and restaurant industry. Unless you ask for it, restaurants won’t be serving customers water, and hotels won’t change your sheets and towels daily. Outdoor watering rules are expected to drop to two days a week or less depending on where people live. Some of the rules are already in place, but enforcement has been lenient. The state is serious this time, saying it will slap water waters with fines up to $500 a day. Conversation inspectors will face a $10,000 fine if they hand residents and businesses warnings instead of handing out citations, which come with fines. “This is an all hands on deck moment for the state and one of those areas where all actions add up. They do matter,” Gomberg said. If approved on Tuesday, the new rules will go into effect by the end of the month.

Study: California Drought Decreases Hydropower, Increases Greenhouse Gas Emissions - The Pacific Institute says there is less hydroelectricity and more expensive electricity, due to the diminished river flows as a result of the California drought. In its study, the Oakland think tank, which focuses on water issues, said with reduced hydropower, the state has increased the use of natural gas to produce electricity. Along with higher utility bills, it also means more emissions of climate-changing greenhouse gases are released. “This severe drought has many negative consequences," said Peter Gleick, Pacific Institute President and the report's author. "One of them that receives little attention is how the drought has fundamentally changed the way our electricity is produced. We hope this report prompts a lively debate on how to factor in a changing climate when we plan for electricity generation." Gleick said during the 2011- 2014 drought period, burning more natural gas to compensate for limited hydropower led to an 8 percent increase in emissions of carbon dioxide and other pollutants from California power plants. "Between October 2011 and October 2014, California’s ratepayers spent $1.4 billion more for electricity than in average years because of the drought-induced shift from hydropower to natural gas," Gleick said. "In an average year, hydropower provides 18 percent of the electricity needed for agriculture, industry, and our homes. Comparatively, in this three-year drought period, hydropower comprised less than 12 percent of total California electricity generation."

No, California won't run out of water in a year -- Lawmakers are proposing emergency legislation, state officials are clamping down on watering lawns and, as California enters a fourth year of drought, some are worried that the state could run out of water. The headline of a recent Times op-ed article offered a blunt assessment of the situation: "California has about one year of water left. Will you ration now?" Jay Famiglietti, senior water scientist at NASA's Jet Propulsion Laboratory and a professor at UC Irvine, wrote about the state's dwindling water resources in a March 12 column, citing satellite data that have shown sharp declines since 2011 in the total amount of water in snow, rivers, reservoirs, soil and groundwater in California.  In an interview Thursday, Famiglietti said he never claimed that California has only a year of total water supply left. He explained that the state's reservoirs have only about a one-year supply of water remaining. Reservoirs provide only a portion of the water used in California and are designed to store only a few years' supply. But the online headline generated great interest. Famiglietti said it gave some the false impression that California is at risk of exhausting its water supplies. The satellite data he cited, which measure a wide variety of water resources, show "we are way worse off this year than last year," he said. "But we're not going to run out of water in 2016," because decades worth of groundwater remain. Still, the state's abysmal snowpack and below-average reservoir levels could exacerbate the overpumping of already depleted groundwater reserves — a problem detailed in an in-depth Los Angeles Times article Wednesday.

San Francisco Catholic Church Installs Watering System To Ward Off Homeless: A Catholic cathedral in San Francisco installed a watering system in an attempt to soak homeless people who try to loiter and sleep near its doorways, radio station KCBS reported on Wednesday. Saint Mary's Cathedral, which, the radio station reported, is the main church within the Archdiocese of San Francisco and the home of the archbishop, has four tall side doors which are used as sheltered nooks by homeless people in the city. While the church has "No Trespassing" signs, the watering system doesn't come with a warning and the showers rain down throughout the night, KCBS reported. The spigot is 30 feet up on the ceiling of the doorway alcove and when it spews water, the alcove and unsuspecting homeless people reportedly get soaked. According to KCBS, the water runs for about 75 seconds every 30-60 minutes. "We're going to be wet there all night, so hypothermia, cold, all that other stuff could set in," a homeless man named Robert told KCBS. "Keeping the church clean, but it could make people sick."

California Drought May Be Causing Increase In Fleas - Fleas can live year-round in California, but pet owners in our area say they’re seeing infestations like never before. “If it gets in your house it’s a nightmare. ’cause you have to take absolutely everything and go to the laundromat. All bedding, anything they’ve touched,” she said. “Their dog scratching, having fleas and complaining that the products they’re using have not been working. And this is about the only year I’ve heard that in my six years here,” said UC Davis vet Dr. Julie Meadows. She doesn’t think it’s the flea products that are ineffective this year, but rather there area simply a lot more fleas around. UC Davis entomology professor Lynn Kimsey thinks the drought is to blame. “During the winter, normally, the ones that are on wild animals get kind of hammered by the cold, wet weather,” she said. The lack of rain and warm temperatures have allowed the fleas to not just survive, but thrive this winter. On top of that, Kimsey says she’s never seen populations of urban wildlife so high—raccoons, opossums and rats that all carry fleas.

A Tiny California Fish Is On Brink Of Extinction And The Ramifications Are Huge - Life for the Delta smelt has gone from bad to worse. This three-inch fish, which has played a central role in California’s efforts to manage its precious water resources, is on the verge of extinction according to the latest trawl survey in areas of the Sacramento-San Joaquin Delta where the fish normally congregate. University of California-Davis fish biologist Peter Moyle recently told a group of scientists with the Delta Stewardship Council to “prepare for the extinction of the Delta Smelt in the wild.”“That trawl survey came up with just six smelt, four females and two males,” he said. “Normally because they can target smelt, they would have gotten several hundred. It tells you that the smelt populations are very close to extinction. These six smelt were caught in an area where they should have been catching them in large numbers. It’s the spawning time.”According to Moyle, the Delta smelt is functionally extinct, but the U.S. Fish and Wildlife Service (FWS) says it’s too soon to make that call just yet.  The Delta smelt has always been considered an indicator species and that “in the time when it was in abundance and very healthy, so was the rest of the Delta.” Jeff Miller, a California-based conservationist with the Center for Biological Diversity, agrees. He said the record-low numbers of Delta smelt in recent years indicate the Delta ecosystem is unraveling.  “Delta smelt, longfin smelt, several populations of salmon, steelhead trout, green sturgeon, and Sacramento splittail are facing extinction in the Delta,” he told ThinkProgress. “If state and federal regulators carry on with business as usual, allowing wealthy agribusiness interests to dictate water policy, we will lose all of these fish.”

The Economics of the California Water Shortage --The NYTimes has an article on California’s extreme water drought with the usual apocalyptic imagery (see the video especially): California is facing a punishing fourth year of drought. Temperatures in Southern California soared to record-high levels over the weekend, approaching 100 degrees in some places. Reservoirs are low. Landscapes are parched and blighted with fields of dead or dormant orange trees.  The apocalyptic scenario needs to be leavened with some basic facts. California has plenty of water…just not enough to satisfy every possible use of water that people can imagine when the price is close to zero. As David Zetland points out in an excellent interview with Russ Roberts, people in San Diego county use around 150 gallons of water a day. Meanwhile in Sydney Australia, with a roughly comparable climate and standard of living, people use about half that amount. Trust me, no one in Sydney is going thirsty. So how much are people in San Diego paying for their daily use of 150 gallons of water? About 78 cents. Water is such a small share of most people’s budgets that it could double in price and the effect on income would still be low. Moreover, we don’t even have to increase the price of water for residential or industrial uses. As The Economist points out: Agriculture accounts for 80% of water consumption in California, for example, but only 2% of economic activity.

Epic Drought Drives California Businesses to ‘Connect the Drops’  --California’s record-breaking drought is heading into its fourth year, making headlines about water shortages, drying rivers and reservoirs, threatened fisheries, shrinking mountain snow cover, and battles between cities, consumers, agricultural interests and businesses for essential water resources. The effect of the drought has been felt across the country since the state’s agricultural output is the largest of any state, and last year California farmers had to leave half a million acres unplanted because of the water shortage.  This crisis has led the nonprofit advocacy group Ceres, which works with businesses and investors to promote sustainable practices, to launch Connect the Drops, a coalition of businesses with significant California operations or suppliers. These businesses have signed a declaration to work on maximizing California’s water resources through conservation and efficiency, reuse and recycling, and stormwater capture and recharge. Boston-based Ceres has opened an office in San Francisco to expand its work in the state. “Water is the lifeblood of California,” says the declaration. “It is central to our communities, our economy and our natural resources. We cannot risk our state’s economic future by relying on outdated water management practices, policies and infrastructure.

Governor, California Lawmakers Unveil $1B Emergency Drought-Relief Plan -- Drought-relief legislation providing about $1 billion in spending was proposed Thursday by Gov. Jerry Brown and Democratic legislative leaders as California enters its fourth consecutive dry year near the end of what has been a dismal wet season. Dramatic Photos of California's Drought The plan calls for $1 billion in drought relief and is a response to what the governor and lawmakers called a water crisis that has intensified after months without much signficant precipitation. The vast majority of the package accelerates spending that voters have already approved for water and flood projects, including last year's $7.5 billion bond measure. "There is no greater crisis facing our state today than our lack of water," said Senate President Pro Tem Kevin de Leon during Thursday's news conference. The two proposed bills would provide some funding for immediate aid to communities facing dire water shortages and unemployment. There is also money for emergency drinking water, food aid for the hardest-hit counties, fish and wildlife protections and groundwater management. The legislation will need majority approval from the state Legislature which is controlled by Democrats. Republican leaders have not been briefed on the plan, according to their spokespeople.  Such spending is normally approved as part of budget negotiations that last through June. Although the plan being announced is labeled as emergency legislation, much of the funding has been available to the state for years. Some of the projects that will benefit could take more than a year before there is a noticeable increase in water supplies.

To Solve California’s Water Crisis, We Must Change the Nation’s Food System - The bold headline of a recent Los Angeles Times editorial by the hydrologist Jay Famiglietti starkly warned: “California has about one year of water left. Will you ration now?” The write-up quickly made the social media rounds, prompting both panic and the usual blame game: It’s because of the meat eaters or the vegan almond-milk drinkers or the bottled-water guzzlers or the Southern California lawn soakers. California’s water loss has been terrifying. But people everywhere should be scared, not just Californians, because this story goes far beyond state lines. It is a story of global climate change and industrial agriculture. It is also a saga that began many decades ago—with the early water wars of the 1930s immortalized in the 1974 Roman Polanski film “Chinatown.”  Even though Gov. Jerry Brown just imposed a series of mandatory water-conservation measures in response to the emergency, most of those measures are aimed at individual users and restaurants. While it is crucial for residents to stop wasting water on the utterly useless tasks of car washing and lawn watering, “residential use in California is about 4 percent,” Redman told me. “Eighty percent is for agriculture.”  The truth is that California’s Central Valley, which is where the vast majority of the state’s farming businesses are located, is a desert. That desert is irrigated with enough precious water to artificially sustain the growing of one-third of the nation’s fruits and vegetables, a $40 billion industry.  Think about it. A third of all produce in the United States is grown in a desert in a state that has almost no water left. That produce is trucked from the West Coast all over the country in fossil-fuel-consuming vehicles, thereby contributing to the very mechanism of climate change that is likely to be driving California’s historic drought.  “It is not a place that agriculture, at the scale and at the scope that exists now, should exist,” Redman explained.

São Paulo, South America’s Largest City, Will Run Out of Water by June - The water situation in São Paulo is so bad, that South America’s largest city will likely run out of water in June. As in about 2-and-a-half months from now. That is the estimate set forth by Brazil’s own government. According to Climate.Gov, the region is experiencing its worst drought in 80 years. “The reservoirs that service the metro area of São Paulo and its 20 million residents were only at 8.9 percent of capacity during the middle of February, a shockingly low level.” The Associated Press reported in January that the biggest problem may be the Cantareira water system. That system is the largest of six reservoirs that provide water to nearly one-third of the people living in the metropolitan area of São Paulo city. “The water supply situation is critical and could become even more critical if the lack of rain and hot weather continue and effective demand management techniques are not created,”  Good news? Some rain at the end of February bumped them up to 11 percent. As notes, low water levels are effecting more than just the drinkable stuff. “The low water levels have also impacted electricity outputs, as hydroelectric dams simply cannot produce as much energy with reduced water flows.” The government has announced a potential water rationing program to help stem the issue as well as announced planned blackouts to conserve electricity.

Boston gets most winter snow in its recorded history - 108.6 inches (Reuters) - After hosting parades through snowy streets and weathering storms that snarled traffic and commerce over the last few months, Boston residents have seen the snowiest winter in the city's recorded history, the National Weather Service said. Boston got 108.6 inches (275.8 cm) of snow over the winter, surpassing the city's previous 1995-1996 record of 107.6 inches. The new record was officially set at about 7 p.m. on Sunday, after a storm dropped 2.9 inches on the capital and largest city in Massachusetts. "Boston, you survived the snowiest winter on record!!!," the National Weather Service in Taunton wrote in a message on Facebook. The record-setting inches, the most snowfall of any season since 1872, the first year on record, came after a day of rain began melting snow piles around the city and hinted at the onset of spring.

Two Months In and 2015 Is Record Warm - We may only be two months into 2015, but already the year is burning up the charts, setting up the possibility that it could topple 2014’s newly minted record for hottest year.  Together, January and February were the warmest such period on record, according to global data released Wednesday by the National Oceanic and Atmospheric Administration. With an El Niño (albeit a weak one) in place, there’s potential for that warmth to stick around and elevate temperatures for more of the year.  Of course, two months is only a small portion of the year, and it’s impossible to say for sure how the remainder will turn out. But regardless of its final ranking, 2015 will almost certainly be much warmer than most years in the records (which stretch back to 1880), thanks to the steady rise in global temperatures fueled by the unabated release of greenhouse gases into the atmosphere. January 2015 was the second warmest in NOAA records, as was February as the month checked in at about 1.5°F warmer than the 20th century average for the month. Combined, the first two months of the year were 1.42°F above average and nearly half a degree above the same point last year. February 2014 ranked only as the 21st warmest for the month.

Northeast U.S. left out in the cold in Earth’s warmest winter on record - This winter was the warmest on record, and last month was the second warmest February on record, February on record, says NOAA. But you wouldn’t guess it if you live in the eastern U.S., where temperatures ran well-below average in February. Across the globe’s land and oceans, February was 1.48 degrees above the 20th century average. But in pretty much the entire eastern half of North America, it was a much colder picture — and strikingly similar to what the region saw in February 2014. “In February 2015, cooler to much-cooler-than average conditions overtook the entire eastern half of the United States and the eastern third of Canada, with some record cold pockets seen around the Great Lakes region and part of northeastern Canada near Hudson Bay,” writes NOAA. “In stark contrast to the eastern United States, the western United States was encompassed by record warmth. The warm-cold pattern over the country has been observed over much of the past two years.”In addition to being the second-warmest February on record, NOAA says the past three months also comprise the warmest winter — December to February — 0n record. In case that’s not warm enough, the past 12 months have been the warmest 12-month period on record, as well.The bifurcated temperature assessment will come as no surprise to New England, which as been buried in snow and blasted by cold this winter, or California, which remains in an epic, multi-year drought.With an average temperature of just 14.2 degrees, February was the coldest month — out of any month — on record for Worcester, Mass. Records for coldest month overall were also set in Bangor, Maine, where the average temperature was 6.1 degrees; Marquette, Mich.; and Syracuse, Buffalo and Rochester, N.Y. Perhaps what’s most impressive about these records is how much they surpassed the old — 3 degrees in Syracuse and 2.3 in Bangor, which is a landslide in terms of monthly records, which typically are broken by fractions of degrees.

NOAA: Hottest Winter On Record Globally, 19th-Warmest Winter In U.S. - If you live on the East Coast of the United States, the National Oceanic and Atmospheric Administration has just released some statistics that may surprise you:

  • Globally, this has been the hottest winter on record, topping the previous record (2007) by 0.05°F.
  • This was “the 19th warmest winter for the contiguous US.”
  • Globally it’s easily been the hottest start to any year (January-February), beating the previous records (2002, 2007) by 0.07°F.
  • This was the second warmest February globally, and “slightly below” the 20th-century average in the contiguous U.S.
Note: For NOAA, winter is the “meteorological winter” (December 2014 to February 2015).  As the NOAA map above shows, other than the “cooler than average” northeast, this winter has been “warmer than average” and “much warmer than average” and “record warmest” over every other land area in the world.  In particular, many Western states saw their hottest winter on record — which is not a surprise if you live in drought-stricken California or its neighbors:

    The power of the anecdote, climate change edition -- We have had a long-running discussion about the power of the anecdote here on TIE. It’s how medical myths get started. It’s why it’s hard to change physician behavior. It’s why it’s hard to get policy to be research-based. Because what people see and experience themselves seems to matter much, much more than what the data and evidence show. Today, a tweet from Chris Cillizza made this point unbelievably well with respect to climate change. He references this map: 2014 was pretty much the warmest year on record except for a few places, the East Coast and Midwest of the United States excluded. The map above shows the world’s temperatures in February of this year compared to 1981-2010. For pretty much the entire world, that month was startlingly hotter than the last 30 years. That’s except for the East Coast and the Midwest of the Unites States. There, it was much colder than usual. It’s also, ironically, where the most influential climate skeptics in the entire world live. But good luck convincing them otherwise. It doesn’t matter that the vast majority of evidence and data tell a different story than what they are experiencing. The anecdote is powerful. As Matthew Herper replied to me on Twitter: @TheFix @aaronecarroll It’s like there is a God, and he has a sick sense of humor.

    Climate change in the Arctic is messing with our weather -- We know that the Arctic is heating faster than the planet as a whole. Consequently, there is more energy in the Arctic which can be transmitted to the atmosphere. Much of the excess heat is transferred to the atmosphere in the late fall or early winter. This extra energy is connected to what’s called Arctic geopotential height, which has increased during the same times of the year. As a consequence, the Jetstream might weaken in the cold seasons. But what about summer? Have these changes been detected then too? Well just recently, a paper was published in that answered this question. The authors, from the Potsdam Institute for Climate Impact Research and from the University of Potsdam reported on three measures of atmospheric dynamics (1) zonal winds, (2) eddy kinetic energy, and (3) amplitude of the fast-moving Rossby waves. Rossby waves are very large waves in the upper atmospheric winds. They are important because of their large influence on weather. The authors found that the summer zonal winds have weakened. The reason for the weakening is that since the Arctic is warming faster than the rest of the planet, the temperature difference between the Arctic and the lower latitudes is getting smaller. It is this temperature difference which maintains the wind speeds. The authors also found that eddy kinetic energy is decreasing. So what does all this mean? Well two things. First, it means that there are either fewer or less intense summer storms or a combination of both. But secondly, it means that weather patterns can get “stuck”. Storms are excellent at breaking up persistent weather patterns, and bringing cool and moist air from ocean regions to land zones. With fewer storms, “warm weather conditions endure, resulting in buildup of heat and drought.”

    Arctic Sea Ice Hits Record Low Winter Peak: It’s official: When the sea ice that blankets the Arctic Ocean hit its yearly peak on Feb. 25, the maximum area was a record low. Warm temperatures in parts of the polar regions kept sea ice levels depressed, and also contributed to the winter peak occurring much earlier than usual, the National Snow & Ice Data Center announced Thursday. The maximum normally isn’t reached until early March, but was recorded about a week early this year, the NSIDC said. That low occurred on the backdrop of overall dwindling sea ice levels, fueled by global warming. The extent of Arctic sea ice is monitored by satellites throughout the year. Scientists keep a close eye on sea ice area because it is so crucial to the polar habitat and has considerable economic potential. Animals like polar bears and walruses depend on it to reach their food, and diminished ice makes the search for sustenance more difficult. Humans are interested in the opportunities afforded by ice melt in terms of new shipping lanes and oil drilling, much more controversial topics.  On average, Arctic sea ice extent has declined by 4.52 percent per decade, according to the NSIDC. The summer minimum has seen an even steeper drop of 13.7 percent per decade. The 2015 winter maximum was measured at 5.61 million square miles, which is 425,000 square miles lower than the 1981-2010 average and the lowest winter maximum in the satellite record, which extends back to the late 1970s. It was 50,200 square miles below the previous record low maximum, set in 2011.

    Arctic sea ice shrinks to lowest level on record - Arctic sea ice appears to have shrunk to its lowest level on record for this time of year, scientists said this week. The amount of ice covering the sea around the Arctic regularly grows through the dark freezing winter before melting as the summer months near. This winter, the maximum level of ice seems to have been reached earlier than usual, on February 25, according to the US-based National Snow and Ice Data Center.  The amount of ice coverage was also the lowest in a satellite record dating back to 1979. A late season surge in winter sea ice growth is still possible, the NSIDC said, adding it would publish a more detailed set of figures in early April. “However, it now appears unlikely that there could be sufficient growth to surpass the extent reached on February 25,” the centre said in a statement. The new data are a fresh sign of the impact of climate change, said some researchers. “This is further evidence that global warming and its impacts have not stopped despite the inaccurate and misleading claims of climate change ‘sceptics’,” said Bob Ward, policy and communications director at London’s Grantham Research Institute on Climate Change and the Environment.

    WaPo: The melting of Antarctica was already really bad. It just got worse -  A hundred years from now, humans may remember 2014 as the year that we first learned that we may have irreversibly destabilized the great ice sheet of West Antarctica, and thus set in motion more than 10 feet of sea level rise. Meanwhile, 2015 could be the year of the double whammy — when we learned the same about one gigantic glacier of East Antarctica, which could set in motion roughly the same amount all over again. Northern Hemisphere residents and Americans in particular should take note — when the bottom of the world loses vast amounts of ice, those of us living closer to its top get more sea level rise than the rest of the planet, thanks to the law of gravity.  The findings about East Antarctica emerge from a new paper just out in Nature Geoscience by an international team of scientists representing the United States, Britain, France and Australia. They flew a number of research flights over the Totten Glacier of East Antarctica — the fastest-thinning sector of the world’s largest ice sheet — and took a variety of measurements to try to figure out the reasons behind its retreat. And the news wasn’t good: It appears that Totten, too, is losing ice because warm ocean water is getting underneath it. The floating ice shelf of the Totten Glacier covers an area of 90 miles by 22 miles. It it is losing an amount of ice “equivalent to 100 times the volume of Sydney Harbour every year,” notes the Australian Antarctic Division. That’s alarming, because the glacier holds back a much more vast catchment of ice that, were its vulnerable parts to flow into the ocean, could produce a sea level rise of more than 11 feet — which is comparable to the impact from a loss of the West Antarctica ice sheet.

    Rate of Climate Change to Soar by 2020s, with Arctic Warming 1 °F per Decade - New research from a major national lab projects that the rate of climate change, which has risen sharply in recent decades, will soar by the 2020s. This worrisome projection — which has implications for extreme weather, sea level rise, and permafrost melt — is consistent with several recent studies. The Pacific Northwest National Laboratory (PNNL) study, “Near-term acceleration in the rate of temperature change,” finds that by 2020, human-caused warming will move the Earth’s climate system “into a regime in terms of multi-decadal rates of change that are unprecedented for at least the past 1,000 years.” In the best-case scenario PNNL modeled, with atmospheric carbon dioxide concentrations stabilizing at about 525 parts per million (the RCP4.5 scenario), the 4-decade warming trend hits 0.45 °F (0.25 °C) per decade. That means over a 4-decade period, the Earth would warm 1.8 °F (4 x 0.45) or 1 °C (4 x 0.25). This is a faster multi-decadal rate than the Earth has seen in at least a millennium. Because of Arctic amplification, the most northern latitudes warm two times faster (or more) than the globe as a whole does. As this figure from the study shows, the rate of warming for the Arctic is projected to quickly exceed 1.0 °F (0.55 °C) per decade.

    Florida employee 'punished for using phrase climate change' - An employee of Florida’s environmental protection department was forced to take a leave of absence and seek a mental health evaluation for violating governor Rick Scott’s unwritten ban on using the phrases “climate change” or “global warming” under any circumstance, according to a complaint filed against the state. Longtime employee Barton Bibler reportedly included an explicit mention of climate change in his official notes from a Florida Coastal Managers Forum meeting in late February, during which climate change, rising sea levels and the possible environmental impact of the Keystone XL Pipeline were discussed. On 9 March, Bibler received a formal reprimand for “misrepresenting that ‘the official meeting agenda included climate change’”, according to a statement from Public Employees for Environmental Responsibility (Peer), a nationwide non-profit that champions public employees’ rights and providers resources and guidance to whistleblowers using its network of members across the country. Bibler was instructed to stay away from the office for two days and told he could return to work only after a mental health evaluation from his doctor verified his “fitness for duty”, the complaint said. In the letter to Florida’s inspector general, Candie Fuller, the state’s Peer director calls for a full investigation to the matter.

    FEMA to States: No Climate Planning, No Money - Beginning next year, governors that want the many millions in disaster preparedness funding from FEMA will have to sign off on plans acknowledging the climate change risks to their communities.  The Federal Emergency Management Agency is making it tougher for governors to deny man-made climate change. Starting next year, the agency will approve disaster preparedness funds only for states whose governors approve hazard mitigation plans that address climate change. This may put several Republican governors who maintain the earth isn’t warming due to human activities, or prefer to do nothing about it, into a political bind. Their position may block their states’ access to hundreds of millions of dollars in FEMA funds. Over the past five years, the agency has awarded an average $1 billion a year in grants to states and territories for taking steps to mitigate the effects of disasters. “If a state has a climate denier governor that doesn’t want to accept a plan, that would risk mitigation work not getting done because of politics,” said Becky Hammer, an attorney with the Natural Resources Defense Council’s water program. “The governor would be increasing the risk to citizens in that state” because of his climate beliefs.

    The film that reveals how American ‘experts’ discredit climate scientists - For Naomi Oreskes, professor of scientific history at Harvard, there’s no more vivid illustration of the bitter war between science and politics than Florida’s ban on state employees using terms such as “climate change” and “global warming”. No matter that the low-lying state is critically vulnerable to rises in sea level, or that 97% of peer-reviewed climate studies confirm that climate change is occurring and human activity is responsible, the state’s Republican governor, Rick Scott, instructed state employees not to discuss it as it is not “a true fact”. In one sense, news of the Florida directive could not have come at a better time – a hard-hitting documentary adaptation of Oreskes’s 2010 book Merchants of Doubt is just hitting US cinemas. In another sense, she says, it is profoundly depressing: the tactics now being used to prevent action over global warming are the same as those used in the past – often to great effect – to obfuscate and stall debates over evolutionary biology, ozone depletion, the dangers of asbestos or tobacco, even dangerous misconceptions about childhood vaccinations and autism. Scott’s de facto ban is, she tells the Observer, “a grim state of affairs straight out of a George Orwell novel. So breathtaking that you don’t really know how to respond to it.”

    Our Rising Oceans: VICE on HBO Season 3 (Episode 1) - YouTube -  Our oceans are rising. With human use of hydrocarbons skyrocketing, waters around the globe are getting hotter and, now, this warm sub-surface water is washing into Antarctica’s massive western glaciers causing the glaciers to retreat and break off. Antarctica holds 90% of the world’s ice and 70% of its freshwater, so if even a small fraction of the ice sheet in Antarctica melts, the resulting sea level rise will completely remap the world as we know it – and it is already happening. In the last decade, some of the most significant glaciers here have tripled their melt rate. VICE founder Shane Smith travels to the bottom of the world to investigate the instability of the West Antarctic ice sheet and to see first hand how the continent is melting -- and VICE follows the rising oceans to Bangladesh for a glimpse into the world's underwater future. From the UN Climate conference to the People's Climate March to the forces that deny the science of global climate change, this special extended episode covers all sides of the issue and all corners of the globe, ending with a special interview with Vice President Joe Biden.

    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.

    And That Ends The Discussion -- I will quote the opening of Brad Plumer's The big climate question: Can we sever the link between CO2 and economic growth? (Vox, March 16, 2015).  Historically, there's been a tight relationship between economic growth and the carbon dioxide emissions driving climate change. As the world's economy expands, we've built more power plants and factories and driven more cars and trucks. That's long meant burning more coal, gas, and oil.  If we ever hope to stop global warming, we'll have to sever that relationship — and figure out how to have economic growth while reducing emissions. (Alternatively, we could halt economic growth, but no one wants that.) And that ends the discussion of economic growth in Plumer's post. He then goes into a long analysis of stuff which, superficially, looks very sophisticated to the average human but doesn't matter at all in so far as he skipped the only thing that matters in his 2nd paragraph. Think about it this way—there are two variables in the phrase "decoupling growth (X) and emissions (Y)". Humans are able to talk about Y, and do so endlessly to no effect. Humans are "unwilling" to talk about X. I put the word 'unwilling' in quotes because there is certainly something fishy about X being a taboo subject.  And if X is taboo, then Plumer's assertion that "alternatively, we could halt X, but no one wants that" becomes incoherent.

    This Changes Some Things -  Jodi Dean - How do we imagine the climate changing? Some scenarios involve techno-fixes like cloud-seeding or new kinds of carbon sinks. Cool tech, usually backed by even cooler entrepreneurs, saves the day -- Iron Man plus Al Gore plus Steve Jobs. In green. Other scenarios are apocalyptic: blizzards, floods, tsunamis, and droughts; crashing planes; millions of migrants moving from south to north only to be shot at armed borders. The poor fight and starve; the rich enclave themselves in shining domed cities as they document the extinction of charismatic species and convince themselves they aren't next. And there is climate change as unconscious: the stuff of stress, inconvenience, anxiety, and repression; the relief at not having to manage anymore; the enjoyment of change, destruction, and punishment. There will be a last judgment after all. Here those of us who follow the reports of emissions, temperature increases, and political failure get to enjoy being in the know, being those with access to the truth. We can't do anything about it, but we can judge everyone else for their blind, consumerist pleasures. We can name our new era, marking our impact as the Anthropocene (hey, we have changed the world after all.) Anticipatory Cassandras, we can watch from within our melancholic "pre-loss," to use Naomi Klein's term, comforted at least by the fantasy of our future capacity to say we knew it all along. We told you so. The hardest thing is doing something about it. Coming together. Fighting against the multiple centrifugal forces that have produced us as individuals preoccupied with our particular freedoms, preferences, conveniences, and choices. It's no wonder in this setting that market approaches to climate change have appeared as popular options. They affirm the selves we've become and promise to solve the problems all in one new light-bulb or electronic car.

    Emissions by Makers of Energy Level Off -- Carbon dioxide emissions from the world’s energy producers stalled in 2014, the first time in 40 years of measurement that the level did not increase during a period of economic expansion, according to preliminary estimates from the International Energy Agency. The research suggests that efforts to counteract climate change by reducing carbon emissions and promoting energy efficiency could be working, said Fatih Birol, the agency’s chief economist and incoming executive director. “This is definitely good news,” he said. Dr. Birol noted that many nations have promoted energy efficiency and low-carbon energy sources like hydroelectric, solar, wind and nuclear power. China, he noted, has worked to reduce carbon emissions as part of an intensive effort to limit environmental damage from economic development. That China appears to be successfully moving down that path, he said, portends well for the deal struck with the United States in November. China committed in that agreement to turning around its growth in carbon emissions by 2030, or earlier if possible, while increasing the share of non-fossil fuels in energy production to 20 percent of its menu. The agency has been collecting data on carbon dioxide emissions for 40 years, and in that time emissions have stalled or dropped only three times; each of those coincided with weakness in the global economy. The last instance was in 2009, during a global economic slump. In 2014, however, the economy expanded by about 3 percent. The agency reported that global emissions of carbon dioxide in 2013 and in 2014 were 32.3 billion metric tons. The figures were first published by The Financial Times in an interview with Dr. Birol. The organization said that these preliminary figures will be contained in a report scheduled to appear in June. That report, Dr. Birol said, could provide guidance for negotiators seeking a global climate deal in Paris in December.

    Carbon emissions stop growing globally -- The growth in global carbon dioxide emissions stalled in 2014 for the first time in the 40 years, and the International Energy Agency (IEA), which has been tracking it, said the slowdown wasn't connected to an economic downturn. The IEA said the news shows promise that economic progress does not necessarily have to be tied to increasing greenhouse gas emissions, as it has been for decades.“This gives me even more hope that humankind will be able to work together to combat climate change, the most important threat facing us today,” Fatih Birol, IEA’s chief economist, said in a statement from the organization. Global emissions were 32.3 billion metric tons, or the annual emissions of about 6.8 billion American cars, the same volume as 2013. Meanwhile, the world’s economy grew by about 3 percent. The IEA attributed the carbon stall to shifts that China and major developed economies in the Organization for Economic Cooperation and Development (OECD) undertook last year.

    Amazon rainforest is taking up a third less carbon than a decade ago - The amount of carbon that the Amazon rainforest is absorbing from the atmosphere and storing each year has fallen by around a third in the last decade, says a new 30-year study by almost 100 researchers. This decline in the Amazon carbon sink amounts to one billion tonnes of carbon dioxide - equivalent to over twice the UK's annual emissions, the researchers say. If this pattern exists in other forests around the world, deeper cuts in human-caused carbon dioxide emissions are needed to meet climate targets, the researchers say. The Amazon rainforest is the largest rainforest in the world. Spanning nine countries in South America, it's 25 times the size of the UK. Using a process known as photosynthesis, the Amazon's three billion trees convert carbon dioxide, water and sunlight into the fuel they need to grow, locking up carbon in their trunks and branches. As they grow, Amazon trees account for a quarter of the carbon dioxide absorbed by the land each year.  Studies suggest that as human-caused carbon dioxide emissions increase, forests will absorb and store more carbon, assuming they have enough water and nutrients to grow. But a new study, published today in Nature, suggests the Amazon has passed saturation point for how much extra carbon it can take up. A team of almost 500 people monitored trees in more than 300 sites across eight countries. Between 1983 and 2011, the researchers measured the trees in each plot, recording the number, size and density to calculate how much carbon each one stored. The trees took up more carbon and grew more quickly during the 1990s, before levelling off since the year 2000. You can see this in the middle chart below.

    Global emissions trading scheme 'should be based on UN carbon budget - The Intergovernmental Panel on Climate Change's (IPCC) carbon budget could provide the scientific basis for a global cap on emissions, suggested Tim Yeo, the outgoing chair of the UK's energy and climate change committee. In its most recent  report, the UN-backed panel of climate scientists  calculated that total carbon dioxide emissions must be limited to 3,670 gigatonnes in order to prevent warming of more than two degrees Celsius. Around 1,890 gigatonnes of this "budget" had already been emitted by 2011. Yeo told a  conference in London today that the remaining gigatonnes could guide governments in capping carbon globally through an emissions trading scheme. He said:"The IPCC fifth assessment report suggested there's now a cap for global emissions over all time which can safely be emitted. That seems to be a natural opportunity to say, well, let's make that the cap for a global system. Of course, there are lots of hurdles to try and implement that, but the concept seems one that is good." This would mean translating the IPCC's scientific budget into a political target. While scientists have worked out the how many gigatonnes remain in the budget for two degrees, it remains for governments to decide whether they want to convert these findings into policy.

    Fossil fuels are way more expensive than you think - A new paper published in Climatic Change estimates that when we account for the pollution costs associated with our energy sources, gasoline costs an extra $3.80 per gallon, diesel an additional $4.80 per gallon, coal a further 24 cents per kilowatt-hour, and natural gas another 11 cents per kilowatt-hour that we don’t see in our fuel or energy bills. The study was done by Drew Shindell, formerly of Nasa, now professor of climate sciences at Duke University, and Chair of the Scientific Advisory Panel to the Climate and Clean Air Coalition. Shindell recently published research noting that aerosols and ozone have a bigger effect on the climate in the northern hemisphere, where humans produce more of those pollutants. That research led Shindell to question current estimates of the true costs of our energy sources. Much research has gone into estimating the social cost of carbon, which attempts to account for the additional costs from burning fossil fuels via the climate damages their carbon pollution causes. However, this research doesn’t account for the costs associated with other air pollutants released during fossil fuel combustion. Shindell estimates carbon pollution costs us $32 per ton of carbon dioxide emitted in climate damages, and another $45 in additional climate-health impacts like malnutrition that aren’t normally accounted for. But Shindell also estimates that carbon emissions are relatively cheap compared to other fossil fuel air pollutants. For example, sulfur dioxide costs $42,000 per ton, and nitrous oxides $67,000 per ton! However, less of these other pollutants are released into the atmosphere during modern

    Coal: Burning Up Australia’s Future -- With less than a year to go before the United Nation’s annual climate change meeting scheduled to take place in Paris in November 2015, citizens and civil society groups are pushing their elected leaders to take stock of national commitments to lower carbon emissions in a bid to cap runaway global warming. Industrialised countries’ trade, investment and environment policies are under the microscope, with per capita emissions from the U.S., Canada and Australia each topping 20 tonnes of carbon annually, double the per capital carbon emissions from China. But despite fears that a rise in global temperatures of over two degrees Celsius could lead to catastrophic climate change, governments around the world continue to follow a ‘business as usual’ approach, pouring millions into dirty industries and unsustainable ventures that are heating the planet.  In Australia, coal mining and combustion for electricity, for instance, has become a highly divisive issue, with politicians hailing the industry as the answer to poverty and unemployment, while scientists and concerned citizens fight fiercely for less environmentally damaging energy alternatives. Others decry the negative health impacts of mining and coal-fired power, as well as the cost of dirty energy to local and state economies.Globally, coal production and coal power accounts for 44 percent of CO2 emissions annually, according to the Centre for Climate and Energy Solutions.

    US and Chinese companies dominate list of most-polluting coal plants. - The 100 global power companies most at risk from growing pressure to shut highly polluting coal plants have been revealed in a new report from Oxford University. Chinese companies dominate the top of the ranking but US companies, including Warren Buffett’s Berkshire Hathaway, occupy 10 of the top 25 places. The analysis, produced to help investors assess the risk of major financial losses, also found French energy giant GDF Suez was third in the list of most polluting coal station fleets in the world.   Coal currently provides 40% of the world’s electricity and three-quarters of this is produced by the most-polluting, least-efficient and oldest “sub-critical” coal-fired power stations. The International Energy Agency calculates that one in four of these sub-critical plants must close within five years, if the world’s governments are to keep their pledge to limit global warming to 2C.  The new analysis ranked the companies by how much electricity they produced from sub-critical plants. The major German utilities RWE and E.ON both appeared in the top 25, along with South Africa’s Eskom and Australia’s AGL Energy.  “Sub-critical coal-fired power stations are the first thing we need to kill off if we want to tackle climate change,”  As well as carbon emissions, the air pollution and pressure on water resources caused by these coal plants were also analysed. Caldecott said some Chinese coal plants were already being closed due to public anger over air pollution, while others in India have been unable to operate for months at a time due to a lack of water. However, subcritical coal-fired power stations continue to be built, despite producing 75% more carbon pollution and using 67% more water as the most efficient - but more costly - plants.

    The Greening of China's Black Electric Power System? Insights from 2014 Data - While China’s energy system is still largely a “black” system depending on fossil fuel inputs, the electric power system is greening at the margins. We demonstrate, using 2014 data on additions to China’s electric power system, that the system is greening– with powerful implications for the future of the country’s energy profile. We utilize three lines of argument: first, utilizing data for electric energy generated, where we show that China actually generated less energy from thermal sources in 2014 than in 2013, while increasing generation from water, wind and solar; second, examining capacity additions, we show that new capacity in water, wind and solar (WWS) exceeded new capacity for thermal; and third, in terms of investment. We argue that such data rebut claims made that China is getting blacker while its greening efforts remain small and insubstantial, or that China will become dependent on nuclear power rather than hydro, wind and solar as it cleans its energy system.

    Nearly all fuel in Fukushima reactor has melted, says TEPCO --New tests show almost all of the fuel inside one of the Fukushima plant's reactors has melted, its operator said Thursday, the latest step in the clean up after Japan's worst ever nuclear crisis. Tokyo Electric Power Co. said the technology, which uses elementary particles called "muon" to create x-ray style images, gave the most concrete evidence yet the fuel had dropped to the bottom of the first reactor. The data, though largely expected, should help TEPCO as it continues its effort to decommission the plant four years after an earthquake and tsunami caused one of the worst nuclear meltdowns in living memory. Engineers have not been able to develop a machine to directly see the exact location of the molten fuel, hampered by extremely high levels of radiation in and around the reactors. "While our previous analysis have already strongly suggested that fuel rods had melted down, the latest study provided further data that we like to regard as a progress in our effort to determine the exact locations of the debris," said a TEPCO spokesman.

    Legendary Coal Miner Says We Must Stop the Insane Practice of Mountaintop Removal  -- With mountaintop removal mining on the ropes, as the last bank financiers ditch lending support amid new scientific research that demonstrates “solid evidence that dust collected from residential areas near mountaintop removal sites causes cancerous changes to human lung cells,” residents from across central Appalachia’s coal country are converging today on the West Virginia Department of Environmental Protection headquarters in Charleston to demand an end to new permits. In the aftermath of last year’s world attention on the state’s handling of the coal chemical disaster on Elk River, and with the once invincible “dark lord” of mountaintop removal Don Blankenship facing criminal conspiracy charges, a renewed coalition of citizens groups called the People’s Foot movement is confronting state and federal agencies directly for their complicity in ignoring the growing and indisputable evidence on health damages from mountaintop removal mining. The writing is on the wall—and in two dozen peer-reviewed scientific studies: Newspapers will one day feature stories about “wrongful death settlements with the coal companies—such as last summer’s $26 billion verdict against the tobacco companies for lung cancer—and criminal charges of negligent homicide by policymakers and politicians who have openly allowed such a health crisis to take place,” as I’ve noted before. No one knows this better than Stanley Sturgill, the legendary retired coal miner and mine inspector from Harlan County, Kentucky, who served 41 years in the mines. “This practice of coal mining is not only killing the folks down stream of these mines, but also the very miners that blast our mountains away. ”Sturgill said.

    The Biggest Source Of U.S. Carbon Emissions Is Coal Extracted From Public Lands - Taxpayer-owned coal is the single biggest source of greenhouse gas emissions in the United States, according to a new report from the Center for American Progress and The Wilderness Society.  The report, released Thursday, finds that emissions from coal, oil and gas that is mined or drilled on federal lands and waters could account for 24 percent of all energy-related greenhouse gas emissions in 2012. The report also concludes that more than 10 percent of all U.S. greenhouse gas emissions result from the combustion of coal extracted on public lands in Wyoming and Montana, primarily in the Powder River Basin (PRB), where 40 percent of all U.S. coal is produced. The report was released as coal companies operating on federal lands in the PRB are coming under increasing scrutiny for allegedly evading royalties by selling coal to their own subsidiary companies at depressed prices. With Thursday’s report, it appears Americans are not only missing out royalty payments that are owed for publicly owned coal, but are also footing the bill for high pollution costs that result from fossil-fuel extraction on public lands.  In addition to presenting new estimates of emissions from America’s shared energy resources, the report calls for the Obama Administration to develop a comprehensive strategy to account for and reduce carbon emissions. The U.S. Department of Interior (DOI) does not currently measure the total greenhouse gas emissions from public lands that it manages, despite being one of the most significant sources in the country.

    McConnell Urges States to Help Thwart Obama’s ‘War on Coal’ - — Senator Mitch McConnell of Kentucky has begun an aggressive campaign to block President Obama’s climate change agenda in statehouses and courtrooms across the country, arenas far beyond Mr. McConnell’s official reach and authority.The campaign of Mr. McConnell, the Senate majority leader, is aimed at stopping a set of Environmental Protection Agency regulations requiring states to reduce carbon pollution from coal-fired power plants, the nation’s largest source of greenhouse gas emissions.Once enacted, the rules could shutter hundreds of coal-fired plants in what Mr. Obama has promoted as a transformation of the nation’s energy economy away from fossil fuels and toward sources like wind and solar power. Mr. McConnell, whose home state is one of the nation’s largest coal producers, has vowed to fight the rules.Since Mr. McConnell is limited in how he can use his role in the Senate to block regulations, he has taken the unusual step of reaching out to governors with a legal blueprint for them to follow to stop the rules in their states. Mr. McConnell’s Senate staff, led by his longtime senior energy adviser, Neil Chatterjee, is coordinating with lawyers and lobbying firms to try to ensure that the state plans are tangled up in legal delays.On Thursday, Mr. McConnell sent a detailed letter to every governor in the United States laying out a carefully researched legal argument as to why states should not comply with Mr. Obama’s regulations. In the letter, Mr. McConnell wrote that the president was “allowing the E.P.A. to wrest control of a state’s energy policy.”

    Laurence Tribe Says Obama’s Clean Power Plan Is Like ‘Burning The Constitution’ - President Obama’s law school mentor, Laurence Tribe, testified before Congress this week that “burning the Constitution of the United States, about which I care deeply, cannot be a part of our national energy policy.”  “EPA is attempting an unconstitutional trifecta: usurping the prerogatives of the States, Congress and the Federal Courts — all at once.” The House Energy and Commerce committee’s Energy and Power subcommittee held a hearing Tuesday about the “legal and cost issues” surrounding the EPA’s proposed 111(d) Rule for Existing Power Plants. Usually the lineup for hearings like this is easily divided into a larger group of conservative witnesses selected by the Republican majority, and a smaller group of more liberal or moderate witnesses selected by the Democratic minority.  The GOP clearly saw Tribe as their big get, a liberal icon who had trained his sights on a centerpiece of President Obama’s climate agenda. Several Republican committee members heaped praise on Tribe, with one saying that while he may disagree with the Harvard law professor on many other issues, he was “honored” to be in the same room as him. His “burning the Constitution” statement referred to the President’s plan to clean up power plant carbon pollution using a section of the Clean Air Act, something that has passed legal scrutiny before. It will get another hearing in the U.S. District Court of Appeals on April 14 following challenges from the coal industry.

    West Virginia Passes Bill Rolling Back Regulations On Chemical Storage Tanks - The West Virginia legislature has passed a bill that scales back regulations meant to protect state waterways from storage tank spills, a piece of legislation that some worry could leave the state’s water more vulnerable to the kind of spill that contaminated the water of 300,000 state residents last year.  The bill, which was passed by the state Senate early Saturday morning, rolls back portions of a law passed last year in response to January’s spill, which occurred due to a leak in a chemical storage tank along the banks of the Elk River. Under the law, known as the Aboveground Storage Tank Act, nearly 50,000 aboveground storage tanks in the state were subject to registration and regulation. Now, under the new bill, the number of regulated tanks will fall to about 12,000. Those 12,000 are tanks that are located in “zones of critical concern,” which means they’re situated along a waterway and about 10 hours away from a drinking water intake. That number could drop even further, said Evan Hansen, president of West Virginia think tank Downstream Strategies. Under the new bill, which is expected to be signed by Gov. Earl Ray Tomblin (D), owners of those 12,000 tanks have the ability to opt out of the regulations if they’re already being regulated by a different permit. And, if the tank owners do opt out, that means they may not be subject to regulations as stringent as those in the Aboveground Storage Tank Act.

    Judge shoots down Broadview Heights ban on future oil and gas wells | - - Two oil and natural gas firms can drill new wells in Broadview Heights, a judge has ruled, effectively overturning the city's voter-approved ban on future wells.  In a March 11 ruling, Cuyahoga County Common Pleas Judge Michael K. Astrab said that Bass Energy Co. Inc. of Fairlawn and Ohio Valley Energy of Austintown - and other oil and gas companies - can drill new wells in Broadview Heights. Bass and Ohio Valley sued Broadview Heights in July, challenging the city's Community Bill of Rights, a charter amendment that includes a ban on future oil and gas wells. Voters approved the bill of rights in November 2012. Bass and Ohio Valley, in their lawsuit, said the state of Ohio, not Broadview Heights, has sole authority to permit or deny drilling and to regulate wells. Astrab, in his nine-page ruling last week, agreed. He said state law gives the Ohio Department of Natural Resources "sole and exclusive authority'" to permit, locate, space and regulate oil and gas wells. Further, Astrab said state code prohibits local governments from exercising authority that "discriminates against, unfairly impedes or obstructs oil and gas activities and operations." In December, Mothers Against Drilling filed its own lawsuit against the state of Ohio and Gov. John Kasich in an attempt to stop drilling in Broadview Heights. That case is ongoing in county common pleas court.

    OH Antis Handed Crushing Defeat in Broadview Hghts Home Rule Case - We’ve commented before on the lawless tendencies of anti-drillers, particularly in Ohio where, when they lose a court case, they declare the government is illegitimate (see OH Anti-Drillers on Rampage after Supreme Court Home Rule Decision). It hasn’t been a full month since the Ohio Supreme Court ruling and now a second, crushing defeat for anti-fossil fuelers. Last week a Cuyahoga County Common Pleas Court judge struck down the Cleveland suburb of Broadview Heights’ so-called community bill of rights that bans all, including shale drilling. Once again, as with the Supreme Court “Munroe Falls” case, we see what sore losers anti-drillers are. If a court case like Broadview Heights doesn’t go their way, they immediately start talking about anarchy–that the government has “ceased to be legitimate.” These are not only stupid people, they’re dangerous too… We now have two Ohio court cases–one from the Supreme Court, the other from a county court–that uphold Ohio law which says local municipalities’ home rule stops where the state’s interest begins when it comes to oil and gas drilling. That is, state law specifically empowers the state to control this activity–not local towns and cities. Here’s more on the Broadview Heights decision: A Cuyahoga County judge has struck down Broadview Heights’ community bill of rights that banned additional drilling. The action came from Judge Michael Astrab in what was a major victory for Ohio’s drilling industry. Astrab said the city’s community bill of rights conflicts with state law that gives the Ohio Department of Natural Resources sole authority to regulate drillers since 2004.  Many had questioned whether such community bills of rights are legal in Ohio, and the Broadview Heights case is the first Ohio case to get a legal review.

    Yet Another Town Botches a Frack Ban -- As you may recall, there is a right way to “ban fracking” and a wrong way. Yet another town in Ohio gets it wrong. See below.  No town ban was overturned in New York and the reason why is that they did not simply single out and ban fracking (surprised ?) They defined fracking as one of many industrial uses, and prohibited all industrial activities (not just fracking) under their comprehensive land use plans and zoning ordinances.  The state regulates how oil and gas wells are drilled. Local zoning laws regulate where they are drilled and where they may not be drilled.  Any questions ? Who promotes the legal fiction that a municipality can simply amend their charter to say King’s X on fracking ? Some fractavist snake oil salesmen . . .– Two oil and natural gas firms can drill new wells in Broadview Heights, a judge has ruled, effectively overturning the city’s voter-approved ban on future wells.  In a March 11 ruling, Cuyahoga County Common Pleas Judge Michael K. Astrab said that Bass Energy Co. Inc. of Fairlawn and Ohio Valley Energy of Austintown – and other oil and gas companies – can drill new wells in Broadview Heights.  Bass and Ohio Valley sued Broadview Heights in July, challenging the city’s so called “Community Bill of Rights,” a charter amendment, not a zoning law, that includes a ban on future oil and gas wells. Voters approved the bill of rights in November 2012. Bass and Ohio Valley, in their lawsuit, said the state of Ohio, not Broadview Heights, has sole authority to permit or deny drilling and to regulate wells.

    Fracking-tax ballot issue? - Columbus Dispatch -- Maybe Ohio’s Republican lawmakers and the oil-and-gas interests who command their loyalty don’t believe Gov. John Kasich when he hints at a possible statewide ballot issue to hike the state’s puny severance tax. They should, because a ballot issue is possible and would appeal to voters. Those oil-and-gas titans who call Kasich’s proposed 6.5 percent tax on oil profits too burdensome should consider how they would like a 10 percent tax or 15 percent or 20 percent, because voters likely would be more than happy to approve it. Most Ohioans — the ones who don’t receive cash donations from the oil-and-gas industry — favor raising the severance tax, levied on companies that profit by extracting irreplaceable resources. Ohio’s current tax is far lower than that of other shale-drilling states. That means Ohioans are being cheated out of reasonable compensation for the loss of those resources. Everyone welcomes the jobs and investment that can come from shale drilling, but the boom doesn’t come without problems. Roads in drilling areas take a beating and neighbors have to worry about air and water pollution from the drilling itself and from disposing of the toxic-water byproduct. Where disposal wells are drilled, experience has shown there’s even the possibility of earthquakes. Letting out-of-state companies pay a fraction of what they pay in taxes elsewhere leaves local communities with less money to manage the impact and makes it harder for the state to pay for regulation and monitoring to ensure safety. Still, lawmakers, who count drilling-industry giants among their biggest contributors, refuse to consider a reasonable increase in the tax. It’s a disservice to the people of Ohio, and taking the issue directly to the people via the ballot would be a perfect remedy.

    Republicans change their minds about pushing fracking in state parks - A push to allow fracking under state parks, opposed by Gov. John Kasich, died in a legislative committee today. Republicans who control the House Energy and Natural Resources Committee changed their minds on whether include the public lands in a bill designed to speed up the permitting process for fracking. After a 15–minute private GOP caucus, the panel agreed to an amendment from Rep. Sean O’Brien, D-Warren, to take the parks out of the bill, and to forbid surface disruptions in state forests. The amended bill passed without objection and was sent to the full House. Rep. David Leland, D-Columbus, tried to remove state lands through an amendment a week ago, but his provision was tabled – usually a sure death in the legislature. The General Assembly approved fracking in Ohio’s parks in 2011, and Kasich signed the bill. Under the 2011 law, potential drillers must get permission from a newly created Oil and Gas Commission was given the responsibility of approving potential drillers after completion of environmental and geological studies, determining the potential impact on visitors, seeking public input and meeting other requirements. But Kasich had a change of heart on allowing drilling on public lands and in effect imposed a unilateral moratorium by not appointing members to the commission — meaning that nobody could get an OK to drill in parks.

    No Fracking in State Parks, Ohio House Democrats and Republicans Surprisingly Agree -- In a surprising move for a polarized Ohio legislature controlled by far-right Republicans cozy with fossil fuel interests, its House Energy and Natural Resources committee voted 12-0 Tuesday to ban fracking in state parks. The full bill, which aims to speed up the drilling permitting process, was then passed unanimously on the House floor Wednesday. It now heads to the Senate.  It comes following a series of maneuvers in the last several years that have left both fracking operators and anti-fracking activists unsure where they stood. Just last week, House Republicans had opposed such a ban. But when an amendment was proposed by House Democrat Sean O’Brien just before the committee convened Tuesday, it took a 15-minute recess so Republicans could confer privately. When they returned, they had agreed to support the amendment, which also protects the surface of state forests from being disrupted by fracking although it could still take place underground. “Despite its best efforts, industry was stonewalled from snorkeling through state parks,” said Trent Dougherty of the Ohio Environmental Council. “OEC testified against the bill in late February, citing, among other concerns, the bill’s overreaching impact to state protected forests and parks. Tuesday’s amendment addressed some of our major concerns. We would have desired no bill approving unitization on public lands, and on the other side, industry wanted to force ODNR to allow drilling units to include all public owned lands in the state—no questions asked. In the end, the bill was a compromise where industry can force ODNR to move at the speed of business, just not over the back of Mother Nature.”

    Drilling Permit Issued For Injection Well In Troy Township - K&H Partners has been issued a state permit to drill its third injection well in Troy Twp. "The injection well permit was issued to K&H today and the Ohio Department of Natural Resources will monitor each step of the drilling and injection process," according to a statement released Wednesday by the agency. The permit was issued without holding a hearing. ODNR spokesman Eric Heis told The Messenger last month that 243 comments were received about the permit application, with only one in favor of the well. Many of the comments requested a public hearing. "No public hearing will be held, as no public comment objections were new or unaddressed in the initial permit review process," Wednesday's ODNR statement said. Roxanne Groff, a member of the Athens County Fracking Action Network, said that Rick Simmers, chief of the Division of Oil and Gas Resources Management, is required to hold a public hearing if relevant and substantive objections are raised. Groff said she believes those who objected to the application met that requirement. "ODNR has not addressed the substantive and relevant concerns raised by people here in Athens County," she said. Groff said that when she got word the permit was issued she was in the process of writing her third letter (regarding this application) to the governor's office asking him to intervene and require a public hearing. She asserted that Simmers has failed to address seismic concerns regarding the K&H application. She noted that there has been seismic activity in both Athens County and Washington County.

    What would you do? - While no drilling companies have proposed drilling oil or gas wells in the city of Athens, city voters last November overwhelmingly approved a ban on oil and gas drilling, fracking and related activities within the city limits. However, since that vote, courts in Ohio, including the state Supreme Court, have ruled against local efforts to restrict or ban fracking (the intensive process used in deep-shale oil and gas wells throughout the region). In the most recent case, Cuyahoga County Common Pleas Judge Michael Astrag ruled that a community bill of rights for Broadview Heights, Ohio, conflicts with a state law that reserves oil and gas regulation to the Ohio Department of Natural Resources. The Broadview Heights law is similar to the one approved by 79 percent of Athens city voters in November. In light of the recent decisions striking down local oil-and-gas regulation, The Athens NEWS queried elected and appointed city officials last week to see how they would proceed in case an oil and gas outfit applied for a state permit to drill within the city limits. The officials also were asked about their position if a fracking waste injection well were proposed in the city. Five of seven Athens City Council members said last week that they fully expect the city of Athens to enforce its Community Bill of Rights, with its fracking ban, if the Ohio Department of Natural Resources were to approve an oil or gas drilling or injection well permit for within the city limits.

    Court rulings suggest Athens fracking ban is indefensible: Athens city officials should admit that the Community Bill of Rights/fracking ban approved by city voters in November doesn't have a snowball's chance in hell of surviving a legal challenge. That being the case, they should quit pretending the amendment is defensible. A more honest and effective approach would be to help kick-start a statewide campaign to pass a state constitutional amendment that grants local communities the authority to regulate oil and gas drilling and related activities. Granted, that approach would require city officials to familiarize themselves with the clear defeats that other local oil-and-gas regulations and prohibitions have suffered in recent court cases in Ohio. Our interviews last week about this issue with elected and appointed city officials revealed a surprising lack of knowledge on the issue in general, and the recent Ohio court cases specifically. Some city officials seemed indifferent. We asked Athens officials how the city should respond if the state were to grant a permit for an oil or gas well, or for a fracking waste injection well, within the city limits. By law, the city of Athens prohibits any oil and gas drilling or related activities. Seventy-eight percent of Athenians who voted in November approved a Community Bill of Rights prohibiting drilling activities in the city limits. Since that vote, two courts – including the biggest one in Ohio, the state Supreme Court – have ruled against Ohio municipalities that had laws regulating or banning oil and gas activities. In each case, the courts cited Ohio Revised Code Chapter 1509.

    Where exactly are Athens County's injection wells? (interactive map) - Athens County doesn't actually have wells specifically used for fracturing underground rock to extract oil and gas, but it is home to seven wells where fuel companies inject byproduct waste from that extraction. All seven wells are classified as class II injection wells, which house brines and wastewater, among other substances, according to a fact sheet from the Ohio Department of Natural Resources. ODNR just recently approved a permit for a 4,200-feet-deep well to operated by K&H Partners in Troy Township, near Coolville. As of last fall, there were 199 active injection wells in Ohio, a state where the byproduct fluids aren't required to be tested prior to their injection. In all of Pennsylvania there were only 10 permits for such wells, as of last fall. In 2014, well operators injected 2,757,508 barrels of brine into six of Athens County's active injection wells, according to ODNR.  Click on each point on the map to find out more information about each of these wells that cause so much controversy in Southeast Ohio and throughout the United States.

    Number of drilling rigs in Ohio continues to drop - The number of drilling rigs in Ohio’s Utica Shale region continues to drop. There are 27 rigs drilling in Ohio, as of March 14, the Ohio Department of Natural Resources said. That’s down from 37 rigs Feb. 28 and from 49 rigs Jan. 3, according to state records. The drop in the rig count comes as commodity prices for oil and natural gas continue to drop. Many drillers have scaled back 2015 operations in eastern Ohio and elsewhere. Ohio has 1,393 drilled Utica Shale wells, of which 828 are producing. The U.S. Energy Information Administration on Tuesday said drops in rig counts in three key oil areas foreshadow a growing drop in oil production. That analysis looked at the Eagle Ford Shale in Texas, the Bakken Shale in North Dakota and the Niobrara Shale in Colorado and neighboring states. Those three oil areas are projected to produce 24,023 fewer barrels per day in March, the federal agency said. It is the first decline since the agency published its Drilling Productivity Report in October 2013.

    Despite falling prices, Ohio oil production increases --  Oil and natural-gas prices might be low, but production in Ohio’s Utica shale region next month is expected to continue rising. The forecast, issued by the Energy Information Administration, shows the Utica is one of two shale regions in which oil production is on track to grow, while the country’s other five regions are projected to have reductions or flat growth. “The biggest thing that differentiates Utica from the other regions is Utica is relatively young,” said Jozef Lieskovsky, an analyst for the energy agency. Because the region’s development is more recent, most of its existing wells are still producing at a high rate, he said. This, along with output from new wells, is enough to maintain a net increase. But this does not mean the region has been immune from the effects of low commodity prices. Production would almost certainly be growing much faster if prices were higher, Lieskovsky said. Energy companies in the Utica are projected to produce 62,000 barrels of oil per day in April, up from 59,000 in March.

    Utica Shale: Weak vs. Strong is coming -- Chris Doyle, the executive vice president of operations for Chesapeake Energy Corp., believes that over the next few years it will be clear who the weak and strong are in the Utica shale. Doyle’s experience in the Utica Shale started back in 2011 while managing the Appalachian division of Anadarko Petroleum Corp. At the time, the company had acquired about 400,000 acres in the Utica Shale located in Ohio and drilled its first well. Doyle left Anadarko in mid-2013 for a similar job with Chesapeake. Doyle soon learned that the Utica wasn’t as oil rich as many had hoped, but the region’s natural gas and natural gas liquids were ample. As reported by Columbus Business First, “It’s been a bit of a roller-coaster ride for people like Doyle. The first few years of Utica exploration focused on acquiring large swaths of land using the best geological information companies had at that time. Then the relative performance of the area started to be known and the “core” of the play was defined along a corridor of southeastern Ohio around Belmont and Monroe counties.”Having been in the Utica Shale for years now, Doyle believes the time has come for companies to prove themselves after dedicating so much time and money in the region.  He also feels that over the next few years there will be a divide between companies operating in the Utica and it will be clear who the weak are: This is where you will be able to separate the weak from the strong.

    Utica well activity in Ohio -- The rig count in the Utica Shale has begun to drop, but some still see hope in the region, if you are strong enough of course. Chesapeake Energy Corp.’s Executive Vice President of Operations Chris Doyle believes that now is the time when people will begin to see a separation of companies, the weak and the strong. Doyle explained how it is time for companies that have put in the hours and spent the money on operations in the Utica to really prove themselves. Of course, Chesapeake Energy has always been a top company in the region, continues to remain at the top. According to Doyle, Chesapeake has zero plans to leave the Utica and plans on sticking around for decades. Chesapeake Energy Corp. is the second largest natural gas producer in the U.S. The company has an industry leading portfolio of excellent unconventional wells and focuses on discovering and developing its extensive and geographically diverse oil and natural gas resources. Chesapeake Energy produces over 700,000 barrels of oil per day, a 48 percent increase since 2010. The following information is provided by the Ohio Department of Natural Resources and is for the week ending on March 14th. DRILLED: 301 - DRILLING: 264 - PERMITTED: 462 - PRODUCING: 828 - TOTAL: 1,855

    Marcellus horizontal well activity in Ohio - While Marcellus activity in Ohio remains the same, the Department of Conservation and Natural Resources (DCNR) is boosting gas drilling monitoring in Pennsylvania. Pennsylvania Governor Tom Wolf has proposed a $342 million budget for the DCNR in the fiscal year 2015-2016, an $8 million increase compared to last year. About a third of the budget would come from the Oil and Gas Fund based on payments for public land drilling. Wolf also plans to use an additional $22 million from the taxpayer-supported General Fund, which will be a change for the DCNR since it was mainly supported by the Oil and Gas Fund. The budget will be used to study the long-term impacts that oil and gas drilling operations have on air and water quality, wildlife and people who visit the forests. Cindy Dunn, secretary-designate of the Department of Conservation and Natural Resources, explained the agency has already hired botanists and biologists to study the impacts that oil and gas drilling is having on plants. The funding comes after Gov. Wolf’s executive order back in January that reinstated a moratorium on leasing new state forest or state park land for drilling. In his order, Wolf refers to the need for additional research and monitoring in order to completely understand the impacts of oil and gas drilling in state forests and parks. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 14th. DRILLED: 15 - PERMITTED: 15 - PRODUCING: 13 - INACTIVE: 1 - TOTAL: 44

    Where do Pennsylvania oil and gas drillers get their pipe? -- State Sen. Jim Brewster was angry when he heard in June that U.S. Steel was about to close a plant in McKeesport that made pipe to transport natural gas. “When I have a plant shut down with 175 to 200 jobs, I have a problem with that,” said Mr. Brewster, a Democrat who is a former mayor of McKeesport and whose late father worked at a pipe plant in the city. When he heard from U.S. Steel officials that a big part of the reason for shutting down the plant was that the oil and gas industry here was buying a lot of pipe made in other countries, he got angrier. Before that, Mr. Brewster said, “I hadn’t given much thought to where the pipe was coming from.” There is no requirement that drillers use domestic steel, but Mr. Brewster believed the industry should work to provide American jobs.Mr. Brewster wanted more detailed information about pipe in both oil and gas wells, so he asked his staff to look into where the pipe used in Pennsylvania wells was coming from. They used well record data from the state, which since October 2012 has required drillers to indicate the country of origin for every section of pipe that goes into a well. Because of errors by drillers filling out the forms, and delays by Pennsylvania Department of Environmental Protection staff in filing the forms, Mr. Brewster’s staff was able to find properly prepared records on only 709 of the 4,473 wells that were drilled between Oct. 5, 2012, and Oct. 30, 2014. About half of the 709 wells used all American-made pipe; about one-third used some combination of domestic and foreign pipe; and nearly 20 percent of the wells used just foreign pipe.

    Special issue delves into the long term consequences of fracking on people, environment: Marcellus shale extraction and its potential negative effects on the environment is the subject of a recently published special issue in the Journal of Environmental Science and Health, Part A. This issue, comprised of eight different papers, delves into the long term consequences fracking has on people, animals, and the environment. Paper topics range from the positive correlation between the amount of fracking and mercury found in the surrounding wildlife, to the long term impacts of unconventional drilling on human and animal health. The research was presented at the 2013 conference Facing the Challenges: Research on Shale Gas Extraction, held at Duquesne University. "This publication presents some of the biggest topics scientists are grappling with as they study unconventional energy extraction," said Dr. John Stolz, director of Duquesne's Center for Environmental Research and Education and the conference organizer. "Given the importance of fracking and its possible impacts on health and the environment, we welcome this special issue. It provides academics, industry experts and residents with the opportunity to see a number of different aspects gathered in one volume." Some articles cover topics such as human exposure to unconventional natural gas development, well water communication in rural communities, and animal health conditions near natural gas wells.

    P.A. needs a train derailment task force, according to Casey -- Pennsylvania Senator Bob Casey is pushing for a federal legislation that would put in place a task force to acknowledge the increasing number of crude oil train derailments occurring in Pennsylvania. The legislation, titled The Response Act, would develop a Federal Emergency Management Agency National Advisory Council subcommittee that would assist first responders in dealing with crude oil train derailments. According to data from Sen. Casey’s office, there has been a drastic increase in oil train derailments from 2008 to now. The committee would suggest recommendations to increase training and responses within a year. Sen. Casey commented on the increased number of derailments and the need for legislation: The increase in train derailments in Pennsylvania and throughout the nation is troubling and requires action … This legislation is a commonsense approach that could give our first responders more training and the additional resources they need.The most recent crude oil train derailment to take place in Pennsylvania was on February 12th.  A Norfolk Southern train was hauling heavy Canadian crude oil when it derailed and spilled in western Pennsylvania.  The train crashed into an industrial building and 19 of the 120 were carrying crude oil.  Four of the cars spilled between 3,000 and 4,000 gallons of oil.  No injuries were reported and the leaks were plugged.  Cleanup began that day and the Federal Railroad Administration said it was dispatching an investigator to the derailment location.

    Public needs answers about destination of gas in PennEast pipeline - When asked recently if the PennEast pipeline would be used for liquefied natural gas export, Tony Cox, PennEast project manager, said there is "no evidence whatsoever of that." PennEast maintains its line is designed for Pennsylvania and New Jersey. Consider these facts. First, Peter Terranova, vice president of UGI Energy Services, lead company in PennEast, gave a presentation July 21, 2014, at a Department of Energy event in Pittsburgh with this phrase in slide 9: "To SE PA, Philly, LNG Exports?" Slide 9, titled "A Direct Pipe from Supply to Market," has one arrow from Marcellus Shale joining five arrows with captions, including, "To MD, DC Markets, Mid-Atlantic Power Gen." Second, UGI's Oct. 17, 2012 "Analyst Day" presentation for investors mentions the now suspended "Commonwealth" pipeline, apparent predecessor to PennEast's proposal. Slide 102, "Pipelines: Commonwealth," notes, "The proposed route preserves the option to extend from Eagle to Cove Point, MD." Dominion Resources submitted its Federal Energy Regulatory Commission application for an LNG export facility at Cove Point, MD, on April 1, 2013, five months later. Third, on Oct. 9, 2014, in Falmouth, Maine, FERC Office of Energy Projects Director Jeff C. Wright described numerous "pre-filed," "pending," and "potential" gas transmission lines from Marcellus Shale (slides 7-9). Slides 10-12 discuss future LNG exports in terms of 4 "approved," 13 "proposed," and 13 "potential" LNG sites. Could future LNG export terminals draw from PennEast's pipeline and its interconnects? Which other markets would PennEast's pipeline supply? The public deserves answers.

    PennEast Spams FERC -  The PennEast Pipeline is in the pre-file stage of the Federal Energy Regulatory Commission rubber-stamping process. (Docket#15-1)Since its announcement in late 2014, the PennEast Pipeline has been met with unprecedented opposition.Townships and county governments have passed and filed resolutions against it, and opposition to the PennEast Pipeline ruled the FERC scoping hearings held earlier in 2015.Between September 2014 and now, over 1,500 comments have been submitted to FERC. The vast majority are thoughtful and original writings of residents along the pipeline route, who express, in their own words, why they oppose PennEast. It is obvious PennEast is under fire with the growing numbers of people and communities who are against this project. How does PennEast fight back? One way would be to encourage their supporters to also file comments, but that would mean supporters would have to take time, compose a comment, and then register with FERC to submit it, or pay postage to send it in via the US Post Office. Perhaps PennEast did try this, but judging from comments submitted to FERC, the supporters appear to be reluctant to make that effort.  Next best thing, is to SPAM the FERC with Preprinted Postage Paid PennEast PostCards. Supporters would only need to fill in their name, address, phone number and check the one and only box available. There is a space for comments, however it has usually been left blank.

    Segmentation – A Pipeline Loophole  -- In 2014 the Delaware Riverkeeper Network (DRN) successfully won a lawsuit against the Federal Energy Regulatory Commission (FERC). The lawsuit involved the Tennessee Gas Pipeline Company’s (TGP) Northeast Upgrade Project (NEUP). The NEUP project involved the interdependence of its 300 Line upgrade project components. TGP tried to hide this interdependence to avoid critical environmental regulation and oversight. Avoiding interdependence and thus finding a loophole by segmenting projects eliminates the need to look at cumulative impacts of the project will have. Segmenting projects eliminates the need to take existing pipelines and known future projects. It puts the specific pipeline in a vacuum. In a decision issued June 6, 2014, the United States Court of Appeals for the District of Columbia, ruled that the Delaware Riverkeeper Network, the NJ Sierra Club and New Jersey Highlands Coalition were correct in their legal challenge to the Tennessee Gas Pipeline Company’s Northeast Upgrade Project and ordered additional analysis and review. The Court stated: “On the record before us, we hold that in conducting its environmental review of the Northeast Project without considering the other connected, closely related, and interdependent projects on the Eastern Leg, FERC impermissibly segmented the environmental review in violation of NEPA. We also find that FERC’s EA is deficient in its failure to include any meaningful analysis of the cumulative impacts of the upgrade projects. We therefore grant the petition for review and remand the case to the Commission for further consideration of segmentation and cumulative impacts.” “On the record before us, we find that FERC acted arbitrarily in deciding to evaluate the environment effects of the Northeast Project independent of the other connected action on the Eastern Leg.” Logic would dictate if one pipeline has an impact that the impact would increase with the addition of more pipelines. In other words there would be a cumulative impact.

    Constitution Pipeline can access properties, judge orders - Constitution Pipeline Co. can access properties in Susquehanna County the company seeks to condemn to build its new natural gas pipeline to New York, a federal judge ordered Tuesday. Constitution argued it needs to access seven properties in New Milford, Jackson, Oakland and Harmony townships that it has not been able to obtain through negotiation. A joint partnership among midstream company Williams, Cabot Oil & Gas Corp., Piedmont Natural Gas and WGL Holdings, Constitution is ready to begin work on its 124-mile line from Brooklyn Twp. to Schoharie County, New York. The 30-inch thick line is designed to carry 650 million cubic feet of gas per day. The company is in a hurry to gain necessary permits, complete surveys and start work as soon as possible to comply with time-sensitive conditions imposed by the Federal Energy Regulatory Commission, which approved the project in December. It must complete the project by Dec. 2, 2016.

    Judge rules shale gas pipeline can cross holdout properties — The companies backing a 124-mile pipeline designed to ferry cheap Marcellus Shale natural gas to New York and New England can build across seven northeastern Pennsylvania properties whose owners had not agreed to it, a judge ruled. U.S. District Judge Malachy Mannion ruled that the Constitution Pipeline has the necessary permits from the Federal Energy Regulatory Commission and that it serves the public interest by providing additional natural gas pipeline capacity. Mannion also wrote in the Tuesday ruling that the Susquehanna County landowners stand to gain adequate compensation from the pipeline’s owners. Some of the defendants did not respond to the lawsuits seeking access to their land. The lead partners in the Constitution Pipeline are Tulsa, Oklahoma-based Williams Partners LP and Houston-based Cabot Oil & Gas Corp. Construction on the seven properties can begin after the partner companies posts a $1.6 million bond to ensure there is money to pay the landowners once a judge approves the final compensation. A Williams spokesman, Chris Stockton, said Thursday the group hopes to begin construction June 1 and still needs permits from the U.S. Army Corps of Engineers and New York’s Department of Environmental Conservation.

    Oil Rot Spreads as Loan Default Claim Puts Connacher on Brink --- A New York lawsuit is threatening to make Connacher Oil and Gas Ltd. a casualty of crude’s collapse in Canada’s oil sands as creditors squeeze small producers in one of the priciest places to extract the fuel. As oil prices resumed their slide to a new six-year low this week, creditors filed suit on Monday demanding Connacher immediately repay a $128.4 million loan. If successful, the suit would make it difficult for the company to stay in business unless it finds some other source of capital, according to Moody’s Investors Service Inc. Connacher is among smaller oil-sands companies that drew interest from debt investors willing to finance upstart developments when U.S. crude prices averaged more than $90 a barrel. With prices now about half that, those so-called junior developers are fighting to stay afloat. “In this new pricing environment, my view is it’s going to be a struggle for junior oil-sands players to continue to grow or even survive,” said Jeff Lyons, a national oil and gas leader in Calgary at Deloitte LLP, an audit, tax, consulting and financial advisory firm. “This latest downturn signals to me the end of unprofitable oil growth in Canada.” Chris Bloomer, Connacher’s chief executive officer, didn’t return phone messages and e-mails requesting comment on the lawsuit by lenders. Connacher hasn’t yet responded in court to the allegations.

    When the Roots Aren’t Made of Grass, the Solutions Save the System, and the Only Thing Hotter than the Planet is the Bacon -- About two thirds of the way into Josh Fox’ Solutions Grassroots Tour performance at Lycoming College, Pennsylvania, I got up and walked out. I wasn’t noisy–but I was definitive. I could say that Fox’ gig just wasn’t very well put together (it wasn’t), or that it seemed pretty cheesy on the side of a pitch for his new installment in the Gasland documentary series (it was). I could say that the “theater” promised in the trailer was wholly MIA, and that it wasn’t much of a concert–but the surprise musical guests were really really great. Nope, I got up and walked out because the Progressive Democrat brand of politics being sold to an audience mostly made up of all the usual anti-fracking movement suspects–and no one really new–is a recipe for reinforcing the very system of commodification and exchange that generates endemic social and economic injustice and–through both willful blindness and the demand that the solutions be easy–contributes to climate change.I walked out because it’s just not true that we Westerners can keep consuming practically everything at the massive level we do, and that–just by the easy-peasy switch from centralized fossil fuel production to centralized solar and wind–we’re actually making a substantial difference.

    Wolf Richter: Investors Crushed as US Natural Gas Drillers Blow Up - The Fed speaks, the dollar crashes. West Texas Intermediate had been experiencing its biggest weekly plunge since January, trading at just above $42 a barrel, a new low in the current oil bust. When the Fed released its magic words, WTI soared to $45.34 a barrel before re-sagging some. Even natural gas rose 1.8%. Energy related bonds had been drowning in red ink; they too rose when oil roared higher. It was one heck of a party. But it was too late for some players mired in the oil and gas bust where the series of Chapter 11 bankruptcy filings continues. Next in line was Quicksilver Resources. It had focused on producing natural gas. Natural gas was where the fracking boom got started. Fracking has a special characteristic. After a well is fracked, it produces a terrific surge of hydrocarbons during first few months, and particularly on the first day. Many drillers used the first-day production numbers, which some of them enhanced in various ways, in their investor materials. Investors drooled and threw more money at these companies that then drilled this money into the ground. But the impressive initial production soon declines sharply. Two years later, only a fraction is coming out of the ground. So these companies had to drill more just to cover up the decline rates, and in order to drill more, they needed to borrow more money, and it triggered a junk-rated energy boom on Wall Street. At the time, the price of natural gas was soaring. It hit $13 per million Btu at the Henry Hub in June 2008. About 1,600 rigs were drilling for gas. It was the game in town.  Throughout, gas drillers had to go back to Wall Street to borrow more money to feed the fracking orgy. They were cash-flow negative. They lost money on wells that produced mostly dry gas. Yet they kept up the charade. They aced investor presentations with fancy charts. They raved about new technologies that were performing miracles and bringing down costs. The theme was that they would make their investors rich at these gas prices. Quicksilver’s bankruptcy is a consequence of this fracking environment. It listed $2.35 billion in debts. That’s what is left from its borrowing binge that covered its negative cash flows. It listed only $1.21 billion in assets. The rest has gone up in smoke. Its shares are worthless. Stockholders got wiped out. Creditors get to fight over the scraps.

    After Frack “Ban” New York Awash in Frack Filth : Imported fresh daily from Fracksylvania. Where they appear to have an infinite supply of the stuff. other ways that hydrofracking puts New York’s water resources at risk. Steve Penningroth, director of the Community Science Institute recently spoke about how shale gas waste disposal and infrastructure development threaten the state’s water resources despite the federal Clean Water Act and the state-wide frack ban. State regulations that address wastewater treatment plants, factories, landfills, and even concentrated animal feeding operations (CAFOs) allow a certain amount of pollution. That’s because the SPDES permits (State Pollution Discharge Elimination System) specify the source and quantities of pollutants that operations can “legally discharge” into streams, rivers, and lakes. But some chemicals, such as endocrine disruptors and pharmaceuticals, are allowed to enter the public waste streams unregulated. And even though some wastes may be hazardous, the Clean Water Act exempts them – including radioactive drill cuttings from fracked gas wells.It’s not just landfills that have to deal with radioactive waste in drill cuttings from Pennsylvania and other states, says Penningroth. Wastewater treatment plants that take landfill leachate have to deal with whatever pollutants end up in the water percolating through the landfills. Add to that the risks associated with train and truck transport of oil and liquefied petroleum gas (LPG) for spills, fires, and explosions and the potential for storage fields – including salt caverns – to leak or explode.

    Compulsory Integration Shot Down in W. Virginia -  Tea Party Republicans in W. Va. prove they are not stooges to the oil and gas lobby and deny frackers privatized eminent domain, aka compulsory integration or pooling. Somewhere Barry Goldwater is smiling. In a 49-49 tie vote, Democrats and tea party Republicans helped kill a forced pooling bill that drew outcry about infringement of people’s property rights. It would have allowed horizontal drilling from missing or unwilling mineral rights owners when 80 percent of the surrounding mineral owners had drilling agreements.

    Pollution mandate changes for NC fracking nears final OK -(AP) - The General Assembly is one vote away from finalizing a bill giving a state panel more leeway directing how air pollution from future fracking operations in North Carolina is restricted. The Senate gave tentative approval Thursday to a House bill that in part would no longer require the Environmental Management Commission to create air-toxic rules for the natural gas drilling if it determines federal or state regulations are adequate. Regulators still would have authority to create more severe restrictions. Environmentalists worry the change will ultimately result in weaker standards. The bill is moving quickly because other drilling rules will take effect next Tuesday. A final Senate vote is expected early next week after Thursday's 37-11 tentative approval. Gov. Pat McCrory would be asked to sign the bill into law.

    Revealed: Fracking Used to Inject Nuclear Waste Underground for Decades -- Recently unearthed articles from the 1960s detail how nuclear waste was buried beneath the Earth’s surface by Halliburton & Co. for decades, as a means of disposing the by-products of post-World War II atomic energy production. Fracking is already a controversial practice on its face, so allowing industries to inject slurries of toxic, potentially carcinogenic compounds deep beneath the planet’s surface — as a means of “see no evil” waste disposal — already sounds ridiculous and dangerous without even going into further detail. Alleged links between fracking and the contamination of the public water supply and critical aquifers, as well as ties to earthquake upticks near drilling locations that are otherwise not prone to seismic activity, have created uproar in the years since the “Cheney loophole” was implemented in 2005, which allowed the industry to circumvent the Safe Drinking Water Act by exempting fracking fluids, thus fast tracking shale fracking as a source of cheap natural gas.Now, it is apparent that the fracking industry is also privy to many secrets of the nuclear energy industry, and specifically, where its dangerous nuclear waste is buried — waste that atomic researchers have otherwise found so difficult to eliminate. Truthstream Media recently uncovered several published newspaper accounts from the Spring of 1964 concerning a then-newly disclosed plan to dump nuclear waste produced by the U.S. atomic energy industry into hydraulic fracturing (fracking) wells using a cement slurry technique developed by Halliburton & Co. The top two fracking companies in the nation at the time were Halliburton and Dowell, a subsidiary of Dow Chemical.

    Utility doesn't have to tell customers about untreated natural gas - Atmos Energy will not be required to tell rural customers if untreated natural gas is being pumped into their homes despite evidence that it may damage appliances, shut down service and possibly release elevated levels of carbon monoxide in their homes, state hearing examiners ruled. Texas Railroad Commission examiners Cecile Hanna and Rose Ruiz, granting a request by Atmos to abandon the service to a small neighborhood near Lake Palo Pinto, did not impose tougher notification standards even when the company is selling what has been described as a “raw gas cocktail.” “The examiners find those requests for relief to be outside the scope of this proceeding and not required by applicable statutes and rules,” Hanna and Ruiz wrote in their March 6 ruling. The Texas Railroad Commission may consider their recommendation to allow Atmos to stop providing service to nine customers in April. Atmos said the use of what is known as “wet gas” made the project not economically viable.

    Fracking Induces Earthquake Surge in Formerly Stable Regions: Ancient fault lines stretching across areas once considered geologically stable have been roused by the forces of industry and are now triggering chains of earthquakes in states where structures are not built to withstand the shaking of an earthquake. "There is now a substantial level of seismic hazard in areas where there used to be almost none," U.S. Geological Survey Geophysicist Art McGarr said. "These areas now have to deal with it, and there are costs in dealing with seismic hazard." This exponential increase in earthquakes, primarily in the Central U.S., is not a natural occurrence but is directly related to fluid-injection activities associated with the energy industry's modern methods of natural gas or oil production. These industrial methods result in large amounts of wastewater, which is disposed of by injecting the fluid down wells. The wastewater flows into deep aquifers chosen for their ability to accept large volumes of water. In this Nov. 6, 2011, file photo, Chad Devereaux examines bricks that fell from three sides of his in-laws' home in Sparks, Okla., following two earthquakes that hit the area in less than 24 hours. (AP Photo/Sue Ogrocki, File)"Very few of these [wastewater wells] cause earthquakes, but the ones that do can cause a real problem," McGarr said. "Occasionally, however, the increase in pore pressure caused by fluid injection makes its way from the target aquifer into a nearby fault zone that is nearly at the point of earthquake rupture."

    Fracking: is a Rule 23 earthquake about to happen? - Lexology -- Class action claims stemming from underground fracking may be poised to explode on a nationwide basis as lower federal courts continue to ignore and erode the Supreme Court’s holding in Comcast and “no injury” and single issue class actions continue to be sanctioned.   Of late, there have been growing claims that fracking may cause minor and perhaps major earthquakes capable of damaging homes and businesses.  The frequency of earthquakes in areas where there is significant fracking activity is striking. Last year, for example, there were some 567 quakes of at least 3.0 magnitude in Oklahoma, a state that is a hotbed of fracking. In fact, since 2009, over 3600 earthquakes have struck Oklahoma, some 300 times that of previous decades. The same is true in other states.  And recently, more and more scientists have come to believe that the deep water wastewater disposal injection used in fracking can be linked to the frequency of these earthquakes. Both U.S. Geological Survey (USGS) and Oklahoma Geological Survey have recently confirmed that they believe that there is just such a link between oil and gas fracking and the uptick in seismic activity in Texas, Colorado, Arkansas and Ohio as well as numerous other states.   Thus far, only a smattering of class action lawsuits have been filed related to these earthquakes and many of these have been dismissed or settled. (The dismissal of one such claim is on appeal to the Oklahoma Supreme Court). These cases have generally included claims for property damage, diminution in property value and even personal injury.  

    Fracking will ruin sacred, preserved sites in the ‘American cradle of civilization’ - lawsuit — video - A Navajo advocacy group has asked a federal judge to halt hydraulic fracking permits in the San Juan Basin of New Mexico, claiming that drilling threatens a historic UNESCO heritage site considered sacred by Navajo, Hopi and Pueblo peoples.  Diné Citizens Against Ruining Our Environment and three other groups have sued the US Bureau of Land Management (BLM) and US Department of Interior, calling on a federal judge to vacate the 130 fracking permits issued by the BLM and enjoin fracking activity in the Mancos Shale of the San Juan Basin until the BLM adheres to the National Environmental Policy Act and the National Historic Preservation Act, according to Courthouse News.   The 4,600-square-mile San Juan Basin of New Mexico's Four Corners region is home to Chaco Culture National Historical Park, which includes the Anasazi ruins and other archeological remains of structures that were among North America's largest around 1,000 years ago. Chaco and the surrounding areas, known as the “American cradle of civilization,” are considered a UNESCO World Heritage site. The United Nations Educational, Scientific and Cultural Organization calls the area “remarkable for its monumental public and ceremonial buildings and its distinctive architecture – it has an ancient urban ceremonial centre that is unlike anything constructed before or since.”

    California senators focus on oil industry, drinking water: (AP) — Lax oversight by the state has allowed the oil and gas industry to contaminate protected water aquifers and endanger the public, California regulators acknowledged Tuesday while pledging to intensify supervision. When it comes to a balance between supporting the oil and gas industry in California — the country’s No. 3 oil-producing state — and protecting public resources and public safety, “I would suggest that ... there has not been the proper balance between these two mandates” for state oil and gas regulators, John Laird, the state secretary of natural resources, told state senators in a scathing senate hearing. “And this is our chance to get it right.” The U.S. Environmental Protection Agency, meanwhile, set strict new deadlines for California to start dealing with more than 2,000 oil-and-gas industry injection wells that state regulators had allowed to inject into underground water reserves that are federally protected as current or potential sources of water for drinking and irrigation. In an EPA letter made public Tuesday, federal regulators also joined some state lawmakers in challenging state plans to continue issuing new permits for oilfield injection in certain protected water aquifers. Members of state Senate committees on environmental quality and natural resources convened after critical state and federal reviews, and after news reports by The Associated Press and others, addressing what state records show as decades of loose enforcement and record-keeping gaffes that allowed some oilfield operations to threaten underground drinking-water reserves. An Associated Press review of state records found more than one-third of the state permits granted in apparent violation of the U.S. Safe Drinking Water Act were awarded since 2011.

    Oil, gas spill report for March 16 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.Noble Energy Inc., reported on March 12 that a leak in a flowline was discovered during maintenance activities outside of LaSalle. Impacted soil was discovered to be above COGCC standards. It is approximated that less than five barrels of condensate and less than five barrels of produced water were spilled. All production equipment was shut in and an excavation will be scheduled.  Noble Energy Inc., reported on March 12 that a hole developed in a flow line outside of LaSalle. It is approximated that less than five barrels of condensate and less than five barrels of produced water spilled. An excavation has been scheduled and production equipment was shut in.  Noble Energy Inc., reported on March 11 that during plugging and abandonment procedures outside of Eaton, soil impacts were noted. It  The production equipment has been removed an excavation of impacted soil has been scheduled.Noble Energy Inc., reported on March 11 that a hole developed in a flowline outside of LaSalle, releasing crude oil and produced water. . All production equipment was shut in. An excavation has been scheduled. DCP Midstream LP, reported on March 11 that soil staining was noticed outside of Keenesburg. An excavation of the contaminated area was conducted to find the suspected leaking pressure line. Extraction Oil & Gas LLC, reported on March 9 that a valve was left open at the back of a production tank releasing approximately 18 barrels of produced oil outside of Greeley. The spill remained within containment. Noble Energy Inc., reported on March 6 that during water vault removal activities impacted soil was discovered outside of Greeley. It is approximated that less than five barrels of produced water spilled. All production equipment was shut in. DCP Midstream LP, reported on March 5 that a third party environmental consultant collected soil samples of an area that was suspected to be impacted by a gas leak, outside of LaSalle. Lab analysis indicated that the soil had been impacted. Remediation activities have been scheduled.

    Fracking Next to a Cemetery? 10 Unlikely Sites Targeted for Drilling: Last November, when 6,700 acres of public land in Colorado were auctioned for oil and gas drilling, one lot came with an unusual caveat: It held an active graveyard. Kanza Cemetery sits on a 320-acre expanse east of Colorado Springs offered by the U.S. Bureau of Land Management. The rural graveyard, where more than a hundred people are buried, has been there for at least a century. Its land was leased for $26 an acre. The cemetery is one of several eyebrow-raising sites caught up in the U.S. rush to drill for oil and gas. Companies eager to capitalize on the boom have nominated tracts beneath or adjacent to farms, historic sites, art installations, and even whole towns.  A report released today by the Western Values Project, a conservation group, offers a rundown of questionable nominations. Most prospects on the list ultimately got nixed, WVP says, largely because of reforms the BLM finalized in 2010. The federal process, however, remains inefficient and puts sensitive areas at risk, according to the group. "In the eyes of certain companies, almost no place should be off-limits to development," says the report. The oil and gas industry nominated more than 12 million acres of public land for leasing in 2013,, more than twice as much as the year before. The BLM weeds out illegal or unfeasible plots, then conducts an environmental assessment on the remainder, allowing public comment during the process. A 30-day protest period precedes the sale of any lease. No one filed a protest of the lease for Kanza, which sits a few miles outside Rush, a town of about 600 people marked by a cafe and post office.

    Interior Secretary Says Climate Change Must Factor Into Decisions To Drill On Public Lands - Secretary Sally Jewell yesterday called for reform to the way that the Department of the Interior manages America’s energy resources in order to address the causes of climate change.  In a bold speech at the Center for Strategic and International Studies, Secretary Jewell outlined the Department of the Interior’s energy priorities and laid out three goals of “safe and responsible energy development, good government, and encouraging innovation” in the final two years of the Obama Administration.   Jewell said that Interior needs to do more to cut carbon pollution, which “should inform our decisions about where we develop, how we develop, and what we develop.” The Department of the Interior manages the nation’s energy resources, including the coal, oil and gas, located on more than 500 million acres of public land across the country, and more than 1.7 billion acres offshore.  Jewell emphasized the need for balance in the management of the nation’s resources as a key part of the Department’s role in addressing the causes of climate change.   “My responsibility to my grandchildren’s generation is at the top of my mind with every decision we make,” she said, stressing that any new energy development on public lands should be also matched with new protections for lands and waters. “[T]hat is why we must — we must — do more to cut greenhouse gas pollution that is warming our planet.”

    New Federal Rules Are Set for Fracking - — The Obama administration on Friday unveiled the nation’s first major federal regulations on hydraulic fracturing, a technique for oil and gas drilling that has led to a significant increase in American energy production but has also raised concerns about health and safety risks.The Interior Department began drafting the rules, focused on drilling safety, in Mr. Obama’s first term after breakthroughs in the technology, also known as fracking, led to a surge in the production of oil and gas.The fracking boom has put the United States on track to soon become the world’s largest oil and gas producer. But environmentalists fear that the technique, which involves injecting a cocktail of chemicals deep underground to break up the rocks around oil and gas deposits, could contaminate surrounding water supplies and wildlife.  The states have jurisdiction over drilling on private and state-owned land, where the vast majority of fracking is done in the United States. The new federal rules, by contrast, will cover about 100,000 oil and gas wells drilled on public lands, according to the Interior Department.Obama administration officials hope that the federal rules will serve as a de facto standard for state legislatures grappling with their own regulations. “Current federal well-drilling regulations are more than 30 years old, and they simply have not kept pace with the technical complexities of today’s hydraulic fracturing operations,” said the interior secretary, Sally Jewell.Ms. Jewell, who oversaw the creation of the rules, noted that while they would create standards only for wells drilled on public lands, “there are a number of states where these may be the only regulations they have.”

    The Obama administration will require energy companies to disclose fracking chemicals used on public lands (AP) — The Obama administration is requiring companies that drill for oil and natural gas on federal lands to disclose chemicals used in hydraulic fracturing operations. A final rule released Friday also updates requirements for well construction and disposal of water and other fluids used in fracking, a drilling method that has prompted an ongoing boom in natural gas production. The rule has been under consideration for more than three years, drawing criticism from the oil and gas industry and environmental groups. The industry fears the regulation could hinder the drilling boom. The groups worry that it will allow unsafe drilling techniques to pollute groundwater. The rule relies on an online database used by at least 16 states to track the chemicals used in fracking operations. The rule takes effect in June.

    Obama administration tightens federal rules on oil and gas fracking - The Obama administration imposed tougher restrictions Friday on oil and gas “fracking” operations on public lands, seeking to lower the risk of water contamination from a controversial practice that is chiefly behind the recent boom in U.S. energy production. The regulations represent the administration’s most significant effort to tighten standards for hydraulic fracturing, a technique that helped make the United States the world’s No. 1 producer of natural gas while igniting a fierce debate over environmental consequences. The Interior Department rules apply only to oil and gas drilling on federal lands, or about a quarter of the country’s current fossil-fuel output. But the prospect of new regulations has drawn sharp opposition from industry groups who say the new requirements will drive up production costs everywhere.The rules announced on Friday are intended chiefly to minimize the threat of water contamination from fracking. Companies that drill on public lands would be subject to stricter design standards for wells and also for holding tanks and ponds where liquid wastes are stored. Interior officials also introduced new transparency measures that require firms to publicly disclose the types of the chemical additives they use. The liquid injected into fracking wells consists mainly of water and sand, with small amounts of other substances that can range from coffee grinds to acids and salts.

    Fracking: US Tightens Rules for Chemical Disclosure -  The Obama administration said Friday it is requiring companies that drill for oil and natural gas on federal lands to disclose chemicals used in hydraulic fracturing, the first major federal regulation of the controversial drilling technique that has sparked an ongoing boom in natural gas production but raised widespread concerns about possible groundwater contamination. A rule to take effect in June also updates requirements for well construction and disposal of water and other fluids used in fracking, as the drilling method is more commonly known. The rule has been under consideration for more than three years, drawing criticism from the oil and gas industry and environmental groups alike. The industry fears federal regulation could duplicate efforts by states and hinder the drilling boom, while some environmental groups worry that lenient rules could allow unsafe drilling techniques to pollute groundwater. Reaction to the rule was immediate. An industry group announced it was filing a lawsuit to block the regulaion and the Republican chairman of the Senate Environment and Public Works Committee announced legislation to keep fracking regulations under state management. The final rule hews closely to a draft that has lingered since the Obama administration proposed it in May 2013. The rule relies on an online database used by at least 16 states to track the chemicals used in fracking operations. The website,, was formed by industry and intergovernmental groups in 2011 and allows users to gather well-specific data on tens of thousands of drilling sites across the country. Companies will have to disclose the chemicals they use within 30 days of the fracking operation.

    GOP moves to block Obama’s fracking regs | TheHill: Republicans on Friday roundly rejected the Obama administration’s rules for hydraulic fracturing on federal land and pledged to fight them. The GOP warned that the regulations will hamper the nation’s economic recovery that has been bolstered by the boom in natural gas and oil production, much of which depends on fracking. “America’s energy boom is one of the best things going for our economy, and keeping it going should be one of the federal government’s top priorities,” Speaker John Boehner (R-Ohio) said in a statement. “Instead, the Obama administration is so eager to appease radical environmentalists that it is regulating a process that is already properly regulated.” Boehner promised to “do all we can” to stop attempts to impede the energy boom, including the fracking rules.

    The U.S. Just Got New Environmental Rules For Fracking, And Republicans Are Freaking Out - On Friday afternoon, the U.S. Bureau of Land Management (BLM) released its final version of rules governing the controversial practice of hydraulic fracturing, or fracking, on America’s public lands. Under the rules, companies that want to frack on lands like national parks and forests would have to comply with stronger standards to protect the environment.Republicans and the oil industry are not happy about this. So unhappy, in fact, they’ve already taken up drastic measures to stop the rule. According to Politico, 27 Senate Republicans have introduced a bill to block them, and two oil industry groups have filed a lawsuit to nullify them. Filed by oil industry groups Independent Petroleum Association for America and the Western Energy Alliance, the lawsuit claims BLM lacks the authority to issue stricter regulations on fracking. “The rulemaking has been procedurally deficient and the final rule as issued is contrary to law,” it reads, adding that “[T]he court should find the rule invalid.”The bill, which includes a co-sponsorship from Senate Majority Leader Mitch McConnell (R-KY), was reportedly filed before the rule was announced.Under the final rules, oil and gas companies will be required to disclose all the chemicals used while fracking on protected lands. In addition, companies will be prohibited from storing fracking wastewater in open pits on national public lands, and will be required to periodically test the integrity of every well to help prevent pollution.

    New Fracking Rules on Public Lands 'A Giveaway to Oil and Gas Industry,' Advocates Say » Earlier this week, Secretary of the Interior Sally Jewell said that the new regulations for fracking on federal lands from the Department of the Interior’s Bureau of Land Management (BLM) would be released “within the next few days,” following a four-year process that included receiving more than 1.5 million public comments. Today she unveiled those new rules, which take effect in 90 days. The BLM claimed they would “support safe and responsible hydraulic fracturing on public and American Indian lands.” Drilling has been occurring on federal lands for years with more than 100,000 wells in existence. However, following the fracking boom of the last two decades, more than 90 percent of new drilling operations involve that process, evading the regulations of 30 years ago. Rather than the ban on new drilling that many environmental and citizen groups sought, the rules focus on safety issues like well construction, and chemical management and disclosure. Specifically, they include:

    • Ensuring the protection of groundwater supplies by requiring a validation of well integrity and strong cement barriers between the wellbore and water zones through which the wellbore passes;
    • Requiring companies to publicly disclose chemicals used in fracking to the Bureau of Land Management through the website FracFocus within 30 days of completing operations;
    • Higher standards for interim storage of recovered waste fluids from fracking to mitigate risks to air, water and wildlife; and
    • Measures to lower the risk of cross-well contamination with chemicals and fluids used in the fracturing operation, by requiring companies to submit more detailed information on the geology, depth and location of preexisting wells to give the BLM the chance to better evaluate and manage site characteristics.

    Oil and gas industry groups sue over U.S. fracking rules (Reuters) - The oil and gas industry moved quickly on Friday to challenge new U.S. regulations for hydraulic fracturing on public lands, minutes after the Obama administration issued the rules. In what could be the start of a broad industry assault on the rules, the Independent Petroleum Association of America (IPAA) and Western Energy Alliance sued the U.S. Interior Department. Other industry groups and companies are expected to follow suit. The new regulations would require companies to provide data on the chemicals used in hydraulic fracturing, or fracking, and to take steps to prevent leakage from oil and gas wells on federally owned land. They do not cover wells on private land. Fracking, involves injection of large amounts of water, sand and chemicals underground at high pressure to extract fuel. The groups described the rules, under development for nearly four years, as "arbitrary and unnecessary burdens" for industry and asked the U.S. District Court for the District of Wyoming to throw out the rules. Courts typically give the government great deference when it comes to determining the need for regulations of this nature, setting a high bar for the groups involved in this case to overcome, said Thomas Lorenzen, of law firm Dorsey and Whitney. "Industry really has to establish ... that there was no reasonable basis for the government to conclude that there is a threat here unaddressed by state regulations,"

    Obama’s New Fracking Rules Won't Apply to Majority of U.S. Operations - The Obama administration on Friday unveiled new hydraulic fracturing regulations three years in the making. The rules apply to so-called fracking only on federal and tribal lands, leaving in place a patchwork of state regulations that apply to the vast majority of fracking operations that take place on private and state lands.  The rules will cover about 100,000 wells, said the Interior Department. As of last year, there were approximately 1.1 million active oil and gas wells in the U.S., according to data compiled by the research group FracTracker. While it is difficult to know how many of those are fracking wells, due to a mixed bag of state reporting requirements, a 2013 report on hydraulic fracturing regulation compiled by the Congressional Research Service estimated 1 million wells have had hydraulic fraturing applied to them nationwide and 90 percent of new oil and gas wells use the process. Oil and gas producers, meanwhile, filed suit against the the federal government directly following the announcement of the rules. The Independent Petroleum Association of America (IPAA) and the Western Energy Alliance sued the interior secretary, Sally Jewell, and the Bureau of Land Management (BLM), alleging that the rules are an unnecessary overreach. “States have been successfully regulating fracking for decades, including on federal lands, with no incident that necessitates redundant federal regulation,” Tim Wigley, president of the Western Energy Alliance, said in a statement. “This is a classic case of federal overreach, with the government taking on even more control that will stifle economic growth and job creation while limiting the return to American taxpayers on the energy they all own.”

    More bids sought for plugging Wyoming coal-bed methane wells - (AP) - The Wyoming Oil and Gas Conservation Commission is about to solicit another round of bids to plug and clean up abandoned coal-bed methane wells. Gas developers have abandoned thousands of wells amid a bust in northeast Wyoming's coal-bed methane industry. Most companies have taken responsibility for plugging their wells while others have walked away without doing anything. Wyoming Oil and Gas Supervisor Mark Watson says the commission since last year has overseen plugging and cleanup of 381 wells at a cost of $1.7 million. Another 3,508 wells still must be addressed. Watson says the commission will seek bids for the next round of work in the days ahead. Crews plugged 14 wells in January and 25 in February. Watson says the pace will quicken with the arrival of warmer weather.

    Dayton proposes spending $330 million to upgrade rail safety -- Gov. Mark Dayton, joined by officials from cities across the state, proposed Friday a $330 million 10-year spending plan to make railroads and grade crossings safer from passing oil trains. The proposal, which includes $33 million in new annual assessments on major railroads in Minnesota, is a response to more rail shipments, especially of crude oil from North Dakota. Up to 60 oil trains, often with 100 or more tank cars, roll though the state weekly. “Our local communities have a much lower margin of error now because it takes just one 30,000-gallon oil tanker to derail and explode and you have a catastrophe,” said Rep. Paul Marquart, DFL-Dilworth, one of more than a dozen officials to appear with Dayton at a St. Paul news conference. The governor proposed major projects to separate trains from roadways with bridges or underpasses in Coon Rapids, Moorhead, Willmar and Prairie Island. Those projects, Dayton said, will be included in an upcoming bonding bill, and do not rely on the proposed new assessment on railroads. The railroad assessments would pay for upgrading 71 other rail crossings, better emergency preparation, the state’s first hazmat training facility at Camp Ripley near Little Falls, Minn., and a new rail office director position to oversee freight rail issues.

    MnDOT: 326K live within oil train evacuation zones - Some 326,170 Minnesotans, about 6 percent of residents, live within a half mile of rail routes carrying crude oil from North Dakota, state officials said Thursday as they emphasized the need for greater rail safety. Crude oil trains travel on 700 miles of railroad from North Dakota's Bakken oil fields through the Twin Cities and other parts of the state on the way to the East Coast and Gulf Coast, while Canadian railroads carry shipments of Alberta heavy crude oil through International Falls and Duluth, the Minnesota Department of Transportation said. SponsorFive to seven trains of crude oil pass through the state daily, each carrying about 3.3 million gallons of oil, MnDOT said. Fears of a potential disaster have grown in recent years as the numbers of train cars shipping Bakken crude has jumped in the past few years. Casselton, N.D., not far from the Minnesota border, narrowly escaped tragedy after a train derailment set off an explosion of crude oil cars in December 2013. Derailments and explosions in other parts of the United States and Canada since then have increased those fears.

    Hennepin County Board acts to block rail junction in Crystal - Hennepin County formally voted Tuesday to spend $1.8 million to buy up land in Crystal so freight haulers can’t use it as a pivot point for trains moving oil from North Dakota’s fields. The board claimed the property under the aegis of public safety, which “would be negatively impacted by a proposed rerouting of freight trains through Crystal, Robbinsdale, Golden Valley and Minneapolis,” according to a county statement. BNSF and Canadian Pacific tracks now cross each other in Crystal, but do not connect. The proposed connector would allow the trains to slow to 25 miles per hour and make a turn. That move alone could simultaneously block five intersections in Crystal and Robbinsdale. The mile-long trains would then continue to 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 were built.

    Rail inspection finds missing bolts --  An inspection of the rail line that stretches from Fort Edward to southern Saratoga County last week found three “critical” problems, although all were in central and southern Saratoga County and none in Washington County. The track review by the state Department of Transportation and Federal Railroad Administration found missing bolts in rail joints in stretches of track in Saratoga Springs and Ballston. Those issues were considered “critical” and were repaired immediately by track owner CP Rail, said Beau Duffy, a spokesman for the DOT. Eleven less serious “non-critical” issues were found in Saratoga Springs and Clifton Park, Duffy said. Those problems included missing and loose “switch” bolts and a fouled track ballast, where mud had come through the ballast, Duffy explained. CP Rail had 30 days to repair those, he said. If “critical” problems aren’t fixed quickly, railroads risk the imposition of speed restrictions, Duffy said. CP Rail spokesman Jeremy Berry said CP inspectors accompanied state and federal staff members during the inspections, and the problems were corrected as soon as they were identified. He said the issues that were found were not considered “safety critical” by CP.

    Utilities regulator orders disposal well reduction - Kansas has ordered drilling operations in two counties to cut back on a practice that may be causing earthquakes. The Kansas Corporation Commission issued the order Thursday. It requires drillers in five areas in Harper and Sumner counties in south-central Kansas to reduce the amount of water they inject into underground wells as a part of their businesses. The process is commonly part of the hydraulic fracking technique used to reach previously inaccessible oil and gas deposits. More than 200 earthquakes have been recorded in Kansas since 2013 in an unprecedented spike in seismic activity. Many have been in the two counties. Interim Director Rex Buchanan of the Kansas Geological Survey has said there is a strong correlation between the injection-well process and the dramatic increase in earthquakes.

    Seismic activity lacking in ND compared to other oil states -  Swarms of earthquakes have been rattling Oklahoma, Texas and other central states with a history of little or no seismic activity. The recent quakes, according to scientists, may be the fault of deep underground injections of wastewater left over from fracking. But in North Dakota, where wastewater injection wells are abundant, the ground has remained largely unshaken. So why are other oil-producing regions significantly more wobbly? “It’s actually a really good question,” said Michael Stickney, director of earthquake studies for the Montana Bureau of Mines and Geology. “And I don’t know that I have a good answer to it.” As it happens, a study published last month by researchers at the University of Texas at Austin explored the question, comparing drilling activity in Oklahoma and the Williston Basin, which holds the oil-rich Bakken Formation. The study found no definitive explanation as to why earthquakes are rare in the Bakken, but one reason may be that higher volumes of wastewater are injected into some Oklahoma wells. But more research is needed, said Clifford Frohlich, a seismologist who led the study, as well as an earlier one that examined increased seismicity in the Barnett Shale region in northeast Texas.

    How Many Shale Oil Plays Make Money At $37 Per Barrel? (Spoiler Alert: None) -- I know Americans are math challenged and need a calculator to subtract 10 from 20, but I think even a CNBC bimbo or Princeton economic professor could get this one right. Last year there was much banter from the Wall Street shysters and Bakkan shale oil experts about the true breakeven price for shale oil not being $80 (which is the truth) but actually being as low as $58 a barrel. They were spreading this lie in order to keep idiot investors buying the stocks and bonds of these fly by night shale oil companies. Well, we are now six months further down the line and Bakkan shale oil this morning is selling for $37 per barrel. Where are the babbling baboons of bullshit with storylines of shale oil breakeven prices of $30? I guess even corrupt lying scum can’t work up the gumption to try and convince the ignorant masses of that doozy. Think about this for a minute. What business in their right mind would start a project that is guaranteed to lose $43 per barrel produced? How long will these small shale oil companies with gobs of junk bond debt last at these prices? The answer is easy. Not long. The bankruptcies have begun. The rig counts are collapsing at the fastest pace in history. And the number of layoffs is increasing exponentially. It’s like watching a devastating car crash in slow motion. And it has only just begun.

    Radioactive waste landfills becoming contentious issue — A special waste landfill in far western North Dakota will seek to dispose of radioactive waste, if it becomes legal. Charles Slaughter, of Canada-based Gibson Energy, said his company plans to step up at its WISCO landfill west of Williston about 1 mile from the Montana line, The Bismarck Tribune reported. “We will modify our permit to participate in that market,” said Slaughter, adding that his company has experience with radioactive material landfills in Canada, where 20 times higher than North Dakota’s proposed 50 picocuries is allowed. Currently, the state bans anything above 5 picocuries. “The bottom line is it’s the right thing to do. You only have to go back to the mid ’70s and Love Canal to see what happens because there weren’t proper disposal techniques,” said Slaughter, whose operation is one of 10 licensed special waste landfills in the oil patch, where storage tank bottoms, dirty dirt from spills and leaks and drill cuttings are buried in lined pits. Another seven are in development. The State Health Department is moving on new rules that will allow operators, such as WISCO, to dispose of radioactive waste, possibly later this year. Scott Radig, the state department’s waste management director, predicts half the special waste landfill operators in the state will go into the radioactive materials business.

    Nearly 19,000 gallons of saltwater spills north of Tioga - The state Department of Health says a pipeline has leaked nearly 19,000 gallons of saltwater in northwest North Dakota. The pipeline owned by Continental Resources ruptured after it was struck by equipment excavating at the site about 16 miles north of Tioga. The 450-barrel saltwater, or brine, spill was contained to the excavated area near the pipeline. The department says it has not impacted any waterways and is not a threat to public health at this time. Brine is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it. The Department of Health and the North Dakota Oil and Gas Division have responded and say cleanup is underway.

    Nearly 12K gallons of saltwater spill in northern ND  — North Dakota oil regulators say nearly 12,000 gallons of saltwater have spilled at a disposal well in the northern part of the state. Alison Ritter with the Oil and Gas Division says Petro Harvester Operating Company, LLC, reported the incident Wednesday. The operator says 11,970 gallons of saltwater were released at the Peterson 2 saltwater disposal well in Bottineau County, about six miles north of Maxbass. Saltwater is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it. Ritter says the operator reported that a piping connection leak caused the spill. The water was contained and recovered on site.

    Geologist sees a path to easing fracking concerns: The natural gas boom that transformed the energy picture in the United States in the last decade is still in its infancy, says John Shaw, chair of Harvard's Earth and Planetary Sciences Department. Shaw expects natural gas to continue to displace coal in electricity generation. It is projected to become the nation's largest electricity-generating fuel by 2040. In addition, he said, opportunities for expanding the market lie in export to energy-hungry nations such as Japan, which has curtailed nuclear power in the wake of the Fukushima disaster, and, closer to home, in the U.S. transport sector, where trucking fleets provide another opportunity, perhaps first through the installation of natural gas filling stations along highways. Further, the low cost of natural gas has set a new standard for the energy sector. "Nothing has had a more profound impact on the U.S. and global energy economy in the past decade than the emergence of shale gas resources," Shaw said. "It has already essentially transformed the United States from a net gas importer to one that will be exporting natural gas. It has provided a low-cost fuel that has spurred the development of industry and, in many respects, it has become the preferred way that we generate electricity." Shaw said that some of the problems that have generated opposition to the process—contamination of water supplies, induced earthquakes, and methane release into the atmosphere—come not from the fracking, but from associated activities that could be improved upon.

    Figuring Out Fracking Wastewater - Chemical & Engineering News: Almost 3 million gallons of concentrated salt water leaked in early January from a ruptured pipeline at a natural gas drilling site near Williston, N.D. The brine, a by-product of the oil and gas extraction method known as hydraulic fracturing, spilled into two creeks that empty into the Missouri River, according to news reports. Although a state health official said the salty water was quickly diluted once it reached the Missouri, the spill—large by North Dakota standards—raised questions about the contents of the brine. Accidental spills like this one occur with some frequency, so scientists would like to understand the contaminants they release into waterways and elsewhere in the environment. Their findings could help officials guide the cleanup of sites or mitigate damage. For every well they drill, fracking operators pump 3 million to 5 million gal of water thousands of feet underground.  The water gets mixed with additives such as sand and surfactants to form fracking fluid, which is used to optimize the amount of fuel extracted. But what goes down comes up. Shortly after the water gets injected, it flows back out of the well. The well releases water over its lifetime, larger volumes in the early stages and smaller quantities later on. The early-stage water—the so-called flowback—still contains many of the additives from the fracking fluid. As oil and gas production continues, water from the geologic formation mixes with the fracking fluid, bringing with it brine and other substances from underground. This “produced water” can be many times saltier than seawater—the salinity varies with the mineral content of the geologic formation. The flowback and produced water together make up fracking wastewater.

    Wait— How many jobs cut? - At this point in the oil slump, dreaded jobs cuts hardly come as a surprise anymore; this week, Talisman Energy let go of 200 employees while Neven energy cut 400. But how many total American jobs have low oil prices cost?  A recent Forbes article estimates at least 75,000—about 12 percent of the nation’s oil and gas workforce—so far. According to the article, America’s shrinking rig count dwindled by more than 700 rigs in just one year, with an estimated 40 jobs lost per rig closure. The greatest losses, however, have been suffered by oilfield services companies, whose job cuts totaled 59,000; Halliburton cut 6,600, Baker Hughes cut 7,000, Weatherford cut 8,000, and Schlumberger topped the list with 9,000 job cuts. The sector within the O&G industry suffering the second largest losses was exploration and production, which slashed 10,000 jobs, followed by pipe manufacturing, which cut 7,100 jobs. Some have cited over-production of oil for abysmal fuel prices, but the article suggests that’s it’s not necessarily how much oil is produced as it is what kind. While America produces an abundance of light, sweet crude, we still import about 5 million barrels per day of heavy, sour crude. The article’s author, Christopher Helman, suspects that if America could export light crude, producers could leverage higher prices than what Americans are willing to pay for domestic crude. “And if all else fails?” Helman writes, “Some of these laid off workers could find a new future in Saudi Arabia, where Aramco is reportedly wooing shale workers to ‘join our team.’”

    The (not so secret) Plan to Export America’s Propane Reserves Overseas -  By the one company that controls the propane pipeline system. And their Washington lobbyist. What does this mean to you ? Higher propane prices and seasonal shortages.  A propane market reform bill steered clear of the political minefield of propane exports, which are increasingly distorting the domestic market. Weekly U.S. propane production is up 35% since 2010, but exports are growing even faster, according to the EIA. In 2013, production rose by 1.5 billion gallons, but propane exports grew by 2.0 billion gallons. That gap is expected to widen. “Announced plans to construct additional propane export capacity would triple propane export capacity in the next three years,” Roldan testified last March. Enterprise owns the second largest of five existing propane export facilities, and it owns the largest of seven planned propane export facilities, according to ICF International. While propane exports cut into domestic supplies and tend to drive U.S. prices higher, they are a geopolitical bargaining chip, and they affect many powerful players within the United States and abroad. Even Rose of PGANE, the New England retailers group, supports propane exporting. “We need to export to stimulate propane production,” Rose said. “If we don’t export it, there’s no place to store it.”  The 2014 reform bill was never very ambitious because it never addressed the politically sensitive issue of exports. Regardless, it was effectively neutered. The GAO investigation of propane pipeline affiliates was stripped away, as was the mandate to consider regional propane storage sites. President Obama finally signed a version that includes relatively minor training and research items.

    Could another LNG facility be headed for Louisiana's coast? -- Senator David Vitter (R-Louisiana) is proving a boon to the energy industry in his home state. This week, Vitter advised the Federal Energy Regulatory Commission (FERC) to pay particular attention to the proposal for a liquefied natural gas (LNG) export terminal in St. Charles, Louisiana, by Magnolia LNG LLC. Magnolia’s facility is just one in a wave of LNG export terminals being proposed for the Gulf Coast. According to Natural Gas Intelligence, Vitter asserted that the sooner Magnolia receives authorization, the sooner it can come online, which could be as early as 2018. “The Magnolia LNG Project is now nearly 24 months into the FERC process,” Vitter said to FERC commissioners. “The window of opportunity for the United States to become a significant contributor to the global LNG market is closing quickly.” Louisiana’s position in the U.S. LNG market is as strong as ever, despite uncertain global outlooks for the resource’s demand. With the Haynesville shale offering a close supply of natural gas and extensive energy sector infrastructure already in place, it is a prime location for growth in the LNG industry. Vitter hopes that Magnolia will receive approval by the end of the year, which would strengthen the state’s role in the future of LNG. In order to do so, FERC would need to request more data and schedule an environmental review before the end of March, reports Law360. Magnolia LNG, the wholly-owned subsidiary of Australia-based Liquefied Natural Gas Limited (LNGL), is a newly formed player in the market. The company will be the owner and operator of the Lakes Charles facility, should it be approved. The pre-filing process with FERC began on March 12, 2013. Magnolia LNG hopes to receive approval from FERC early in 2015, according to their website, and will ideally finalize investment decisions in the middle of the year.

    Cruz, Bridenstine author proposed energy bill - U.S. Sen. Ted Cruz, R-Texas, and Rep. Jim Bridenstine, R-Okla, introduced on Wednesday the “American Energy Renaissance Act” that would rollback or end several federal regulations on the nation’s oil and gas industry. The proposed legislation, introduced into the U.S. Senate and House of Representatives, would leave the regulation of hydraulic fracturing, or fracking, to the states rather than the federal government. Additionally, the proposed legislation would speed up the permitting process for new refineries, phase out and repeal the Renewable Fuel Standards over five years, end federal regulation of greenhouse gases that have been linked to global climate change, open up national reserves in Alaska and Native American reservations for oil and coal production, and immediately approve the Keystone pipeline, among others. Bridenstine said the legislation is needed to empower the private sector to create good-paying American jobs, spur economic growth and expand opportunity. “Oil and gas production on private lands created the entire energy boom over the past few years,” Bridenstine said. “Our proposed changes in law and policy will open federal lands and reverse policies that cripple the free market and inhibit innovation and private investment. Opening federal lands to oil and gas development, allowing exports and infrastructure improvements, and stopping regulatory overreach will greatly expand U.S. energy production.”'

    Feds: Oil leasing in Gulf slows due to oil price drop - — Regulators say only 195 bids were placed on the 41 million acres of the Gulf of Mexico up for new oil and gas leasing off of Louisiana, Mississippi and Alabama. That’s the lowest number since 1986 when 129 bids were offered, according to the Bureau of Ocean Energy Management. It says the low price of oil accounts for the lackluster interest. Still, the agency is upbeat about the future of offshore drilling, a prime source of income for the federal government. The lease sale is taking place Wednesday at the Louisiana Superdome. Interior Secretary Sally Jewell is attending. The sale encompasses productive and sought-after leases in an area of the Gulf roughly the size of Washington state. In a first, the Interior Department is offering leases along the Mexican-U.S. border.

    Feds eye oil, gas drilling off East Coast, Alaska, Gulf — Environmentalists say allowing offshore drilling along the U.S. East Coast from northern Virginia to the Georgia-Florida border could lead to a catastrophic oil spill devastating to the crucial tourism industry. But business and petroleum groups say they want to be able to explore whether significant oil and gas reserves exist that could stabilize energy prices and help the economy overall. The federal Bureau of Ocean Energy Management proposes opening up a stretch of the East Coast in its latest five-year plan, scheduled to take effect in 2017. The agency also is proposing drilling off the northern Alaska coast and in the western and central Gulf of Mexico between Texas and Alabama. A final decision on the proposals should be made by the end of 2016. At a public hearing Wednesday in Atlantic City, New Jersey, environmentalists said an oil spill could devastate the environment and economies in states where tens of millions of people live. “If something happens to an offshore windmill, a pelican gets hurt; an oil spill is a genuine catastrophe,” said Jeff Tittel, director of the New Jersey Sierra Club. “People don’t realize where this is is less than 100 miles from the Jersey shore. The president says he wants to do something about climate change, and he proposes this?”

    While We’ve Been Debating Keystone, The U.S. Has Grown Its Pipeline Network By Almost A Quarter -- Americans have been waiting for the federal government to come to a decision over the Keystone XL pipeline for more than six years, enduring countless protests, Congressional hearings and even a Presidential veto over the controversial project. But during that time, pipeline construction in the U.S. hasn’t slowed — in fact, it’s surged.  The U.S. has added 11,600 miles of oil pipeline in the last decade, increasing its network of pipelines shipping oil through the country by almost a quarter, according to a report published Monday by the Associated Press. Since 2012, according to the AP, more than 50 pipelines have been constructed, approved, or are in the process of being built. Also since 2012, 3.3 million barrels of oil per day of pipeline capacity has been built in the U.S. — a figure that dwarfs Keystone XL’s capacity to ship about 800,000 barrels per day.  Some of those pipelines have been approved even after facing harsh opposition in the states where they were proposed. The Flanagan South pipeline, which has the capacity to ship 600,000 barrels of diluted tar sands and Bakken crude each day, was completed in December of last year. The pipeline, which runs from Pontiac, Illinois to Cushing, Oklahoma, endured multiple lawsuits and opposition from local anti-tar sands groups, who said that the way the pipeline was being permitted allowed it to skip key environmental reviews.  More pipeline projects are going through the approval process, and are dealing with local landowners and environmental groups that don’t want an oil pipeline running through their state. In Iowa, citizens groups, environmental organizations, and a local tribe are fighting to stop a pipeline proposed by Dakota Access LLC. That project would ship up to 570,000 barrels of oil each day from North Dakota’s Bakken region to Patoka, Illinois.

    CSIS helped government prepare for expected Northern Gateway protests - Canada's spy agency helped senior federal officials figure out how to deal with protests expected last summer in response to resource and energy development issues — including a pivotal decision on the Northern Gateway pipeline. The Canadian Security Intelligence Service prepared advice and briefing material for two June meetings of the deputy ministers' committee on resources and energy, documents obtained under the Access to Information Act show. The issue was driven by violence during demonstrations against natural-gas fracking in New Brunswick the previous summer and the government's interest in "assuming a proactive approach" in 2014, says a newly declassified memo from Tom Venner, CSIS assistant director for policy and strategic partnerships. Release of the material comes amid widening concern among environmentalists and civil libertarians about the spy agency's role in gathering information on opponents of natural resource projects.  Those worries have been heightened by proposed anti-terrorism legislation that would allow CSIS to go a step further and actively disrupt suspected extremist plots. Traditional aboriginal and treaty rights issues, including land use, persist across Canada, Venner said in the memo to CSIS director Michel Coulombe in advance of a June 9 meeting of deputy ministers.  "In British Columbia, this is primarily related to pipeline projects (such as Northern Gateway)."

    CN Rail says some oil product spills in Manitoba derailment (Reuters) - Thirteen cars on a Canadian National Railway Co train went off the tracks in rural Manitoba on Wednesday night and spilled some petroleum product on the ground in the company's third derailment in a week. There were no injuries and no threat to the public from the latest derailment, CN spokesman Brent Kossey said on Thursday. The train was carrying refinery cracking stock, which spilled from one car. Canadian Transport Minister Lisa Raitt used the accident to reiterate her calls from earlier in the week that the company should be called to answer questions before a parliamentary committee. "What's going on operationally?" Raitt told reporters following a speech. "I can hear from CN, but I think CN should talk to Parliament and should talk to Canadians." On Saturday, a CN oil train derailed and burned in northern Ontario. Also in Ontario, a train hauling empty tank cars that had recently held hazardous liquids went off the tracks on March 5.

    Federal report: 200 crude oil train derailments predicted over the next 20 years: Millions of gallons of crude oil travel through Ogle County every month on trains. Monday night, first responders prepare for the worst when it comes to these loads on the heels of a major train derailment last week in Jo Daviess County. These are accidents some government officials say could keep happening. 13 News obtained an Illinois Emergency Management Agency document through a Freedom of Information Act request showing how many crude oil trains run through the area. That 2014 report says dozens of trains do each week, which is why one county wants to be ready if one of their trains goes off the tracks. Four days ago, one area of rural Jo Daviess County was up in smoke. Things are now just getting back to normal after a train carrying crude oil derailed. This type of accident could happen on any track at any time. "But, the odds of a derailment or odds of any hazardous material being released are very, very slim," says Illinois Fire Service Institute Instructor and Rockford Fire Department Division Chief Matt Knott. The U.S. Department of Transportation released a report predicting derailments like the one in Jo Daviess County will happen an average of 10 times a year. But, the Association of American Railroads says that federal document is filled with speculation. "It's our position that this report is based on assumptions," says AAR spokesman Ed Greenberg. There is one issue both sides agree on. Rail cars aren't safe enough. "It is important that tank cars are strengthened; increases in shell thickness, the use of jacket protection, thermal protections," Greenberg says.

    Leaders join broad coalition on oil trains -  Several Clark County leaders have joined a growing coalition of elected officials across the Northwest who say they want to raise awareness about the risks of transporting coal and oil by rail. The Safe Energy Leadership Alliance includes more than 150 members from Washington, Oregon, Idaho, Montana and British Columbia in Canada. Among them are representatives from the cities of Vancouver, Camas and Washougal. "I'm not sure I've ever seen a coalition like this," said Vancouver City Councilor Jack Burkman, one of the group's members. "I can't think of one that spans that large of an area." The new coalition gathered last week in Portland for its third meeting. The group is led by King County Executive Dow Constantine but represents a broad range of interests that span the political spectrum, Constantine said. Its focus includes both coal and oil, but a string of recent train derailments and explosions involving crude oil have shifted much of the public's attention to oil trains. "Everyone, I think, is concerned about the possibility of a catastrophic event," Constantine said. The group aims to be a unified voice for local communities that are among the most impacted by the recent rise of oil by rail, Constantine said. Those jurisdictions often lack direct authority over the forces that have dramatically changed the energy landscape during the last few years. But joining together can help them influence the state and federal authorities that do, he said.

    Rail industry pushes White House to ease oil train safety rules — — The U.S. rail industry is pushing the White House to drop a requirement that oil trains adopt an advanced braking system, a cornerstone of a national safety plan that will soon govern shipments of crude across the country. Representatives of large rail operators met with White House officials last week to argue against the need for electronically controlled pneumatic brakes, or ECP brakes, saying they “would not have significant safety benefits” and “would be extremely costly,” according to a handout from the meeting. ECP brakes trigger all axles simultaneously rather than one at a time in current design.  Reuters reported last month that the national oil train safety plan now under review at the White House Office of Management and Budget would require the advanced braking system. The Transportation Department has concluded that ECP braking would deliver meaningful safety improvements but the industry officials argued that the department estimates “grossly overstate benefits and understate costs.” The industry claims fitting rail stock with ECP brakes would not prevent accidents, but merely limit the number of cars that derail in an accident.

    Oil industry must join U.S. railroads to boost train safety – Rail operators are going to great lengths to prevent oil train derailments but the energy sector must do more to prevent accidents from becoming fiery disasters, the leading U.S. rail regulator said on Friday. Oil train tankers have jumped the tracks in a string of mishaps in recent months that resulted in explosions and fires. Several of those shipments originated from North Dakota’s Bakken energy fields. Officials have warned that fuel from the region is particularly light and volatile. Sarah Feinberg, acting head of the Federal Railroad Administration, said the energy industry must do more to control the volatility of its cargo. “(We) are running out of things that we can put on the railroads to do,” she said. “There have to be other industries that have skin in the game.” A national safety plan for oil trains, due to be finalized in May, would require trains to have toughened tankers, advanced braking and other safety improvements. The plan, however, would do nothing to mute the dangers of the fuel itself.

    Are the good times over for growth in U.S. shale gas? -  U.S. natural gas production could decline in 2016 for the first time in 10 years, driven by low oil prices after a decade of gangbusters growth from shale plays. While most analysts forecast gas production will continue growing year-over-year, albeit at a slower pace, a couple of outlier analysts believe low oil and gas prices will prompt drillers to cut spending enough to reduce gas production next year. Any talk of cutbacks is an early sign that low oil prices have slowed the U.S. shale gas boom that has revolutionized global markets and is expected to transform the nation into a net exporter of gas by the end of the decade. U.S. gas production has increased every year from 51.9 billion cubic feet per day in 2005 to a record 74.4 bcfd in 2014, a 43 percent increase. The U.S. Energy Information Administration expects gas output to reach 78.4 bcfd in 2015 and 80.0 in 2016. The lack of consensus among analysts shows how much still depends on what oil prices do in the coming months.

    US shale industry shows remarkable resilience - At its latest meeting in November, Opec, the oil producers’ cartel, decided against a cut in output to support the crude price, sending it into freefall. Saudi Arabia, the cartel’s most powerful member, has insisted that this was not intended to be a “war on shale”, but Ali al-Naimi, the country’s oil minister, used a speech in Berlin this month to stress that it was not the role of Middle East nations to “subsidise higher-cost producers”. North American shale companies are among those higher-cost producers, and evidence of the impact on them of the near 60 per cent fall in US crude since last summer is now mounting: in declining profits, cuts in jobs and investment and idled equipment. A handful of shale producers have gone bankrupt, while some others are struggling with large debts. The number of rigs drilling for oil in the US has dropped 46 per cent from its peak last October, and this is starting to affect output. The US government’s Energy Information Administration said last week that in two of the three principal shale regions — the Bakken of North Dakota and the Eagle Ford of south Texas — oil production was expected to fall marginally next month. Only in the Permian basin of west Texas is it still rising. But, so far, overall US output seems to be only levelling off, rather than collapsing. If US crude stays at its present level of about $45 per barrel, then it seems likely that production will start falling later this year. But Wood Mackenzie, a consultancy, is forecasting that US oil production will grow this year and next, if there is a rebound in prices to about $60 per barrel. The industry’s ability to keep growing at lower prices than in recent years will depend on how far it can reduce its costs. Adam Sieminski, head of the EIA, says: “We have seen that shale oil works very well at $100 per barrel. Now we are going to find out if it works at $50 to $75.” The round of earnings and outlook statements in recent weeks from the US exploration and production companies — the small to midsized independents that led the shale revolution — showed that while they are all cutting activity sharply, none is expecting a corresponding fall in output.

    U.S. oil supply update -- The EIA released a new drilling productivity report last week, allowing us to update our graph of the drilling rig count in the four major tight oil regions. Active rigs in those areas are now 32% below their peak last October, the lowest level in 3 years. The DPR’s forecasting model nevertheless predicts that production from these four regions will be half a million barrels/day higher this month than it was in October, and will only begin to decline starting next month. But folks over at the Peak Oil Barrel note that while the DPR is estimating for example that Bakken production rose 27,000 b/d between December and January, the North Dakota Department of Mineral Services reported last week that Bakken monthly production was down over a million barrels in January, or about a 35,000 b/d drop from December. In any case, U.S. crude oil inventories continued to increase last week, signaling that so far supply continues to outstrip demand. And the Wall Street Journal reports a strategy followed by some companies that could enable them to bring production back up quickly if prices recover: Now many are adopting a new strategy that will allow them to pump even more crude as soon as oil prices begin to rise. They are drilling wells but holding off on hydraulic fracturing, or forcing in water and chemicals to free oil from shale formations. The delay in the start of fracking lets companies store oil in the ground in a way that enables them to tap it unusually quickly if they wish– and flood the market again. The backlog of wells waiting to be fracked– some are calling it fracklog– adds to the record above-ground inventories to restrain any significant price resurgence. Eventually, however, the economic fundamentals have to prevail, and we will settle down to a price around the true long-run marginal cost.

    North America Crude Oil Production Remains Strong -- There are signs that crude oil production in the US remains strong, despite the strong correction in prices recently. The American Association of Railroads (“AAR”) publishes rail traffic data for a variety of commodities in the US and Canada. The subset for petroleum and petroleum products can provide a sense of crude oil volumes being railed across North America (although it also includes refined products like gasoline, distillates, jet fuel and so on). Here’s the latest monthly data for the US. Monthly volumes up until last January remained strong, far higher than January of the prior year, although slightly below the high recorded last September. Volumes in Canada were even stronger.

    Alberta faces structural deficit even if oil rebounds, TD says - The government of Alberta could be facing a long-term deficit situation for reasons beyond the temporary plunge in oil prices, TD Bank said in a report Thursday. Economists Jonathan Bendiner and Derek Burleton say the province's current estimate of a $7-billion budget shortfall might not be realistic and the government could be facing much more serious fiscal challenges — namely, a structural deficit. By the numbers: Alberta's $6 billion budget shortfall Ontario poised to grow as Alberta slows down, TD says Unlike what's known as a cyclical deficit, which is when governments temporarily dip into the red because of a temporary slowdown in the business cycle, a structural deficit is a situation where a government spends more than it earns even after the real economy rebounds, because of the compounding impact of debt payments. Alberta is set to unveil its latest provincial budget next Thursday. Policymakers have already signalled to expect spending cutbacks, but the bank's report says it doubts those alone will be enough to fix Alberta's long-term financial problems. "While the government has discussed a number of policy tools to address its fiscal challenge, a slash and burn approach to achieving fiscal balance in quick time can be costly to the economy and does not address current inefficiencies in program spending and an over-reliance on non-renewable-resource revenues," the TD report says.

    OPEC says low oil prices may hit U.S. output by late 2015 - – U.S. oil output could start to take a hit by late 2015, OPEC said on Monday, suggesting the oil price collapse will take time to impact on the shale oil boom. In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) left its forecast for non-OPEC supply this year unchanged, but said output of U.S. tight oil, also known as shale, could be curbed. “Tight crude producers are aware that typical oil wells in shale plays decline 60 percent annually, and that losses can only be recouped by drilling new wells,” OPEC said in the report. “As drilling subsides due to high costs and a potentially sustained low oil price, a drop in production can be expected to follow, possibly by late 2015.” In the report, OPEC left its forecast for 2015 world oil demand growth unchanged and made virtually no change to its estimate of the demand for its crude this year.

    What is the Baker Hughes Rig Count Trying to Tell Us? - Oilpro: One of the questions dominating oil service company C-Suites and boardrooms this quarter has been debate about US drilling activity and where it will head next. Will LNG exports drive a recovery in the gas-drilling market? Will $50 oil be sustained? Will we see $20 before we see $200? How deep do we cut and for how long? While our crystal ball is as foggy as anyone’s in the industry, we do believe a glance back in the rearview mirror can help explain how we got here and provide some insight as to where we might go next. When Baker Hughes started publishing an oil and gas rig count in 1987 we had 559 oil rigs, 337 gas rigs and 26 rigs that were either geothermal or tight holes. Within two years, the gas-directed rig count matched the oil-directed count. By the end of the 90s, some began to refer to the US “gas and oil” industry, rather than the “oil and gas” industry. Production from the unconventional gas plays more than satisfied the US markets and in September 2008 market sentiment collapsed. The gas-directed rig count, shown in Chart 2, peaked at 1,606. Lower gas prices would not support dry gas development, and attention shifted to wetter plays where oil and natural gas liquids (NGLs) production could drive acceptable economic returns. Oil and gas companies pivoted, if they could, away from dry gas and towards oil and NGL plays. The gas-directed rig count fell precipitously. Despite a significantly lower gas-directed rig count, shale-gas production rose and has continued to rise since, despite a declining rig count. More efficient drilling techniques, an increase in the number of wells drilled per rig, attractive economic returns on wet gas (NGLs) wells, and more production per well have more than offset the production decline from the existing conventional well population.

    Oil Investors, Beware The “Fracklog” -- “Fracklog” is the latest term running around the oil world, a new game that oil producers are playing to try and outlast temporarily depressed oil prices. The Catch-22 is that the more doggedly shale players hold on to production, the longer prices stay depressed and the more difficult it will be to carry on.  Recently, one of the techniques that US oil producers have been using to keep production in reserve without relinquishing acreage is to delay well completions. The economics of shale drilling can be difficult for the oil producer; most leases require oil companies to develop at least some of the acreage in order to maintain control of the mineral rights, and several standard clauses allow landowners to renegotiate leases should production fall under a certain level. So, many smaller oil companies choose to partially develop lease acreage but stop short of ‘completion’ – the point in drilling when oil finally comes out of the ground. The completion stage is by far the most expensive.  It’s a trick of necessity, allowing tremendous Capex reductions while still controlling the prime acreage at the same lease rates that were initially negotiated. But it has created what is being called a ‘fracklog’ – a backlog of ready production that companies plan to turn on as soon as market conditions allow. In other words, there’s a lot of oil out there waiting for oil prices to rally.  And there’s the problem – oil waiting for a rally puts continuing pressure on oil prices, and the more oil you’ve accumulated under a ‘fracklog’, the more pressure you’ll get. Already, the EIA has estimated 9.35m barrels a day of US production for 2015, up 50,000 barrels a day from its last estimate and 200,000 barrels a day from last year. Add our ever increasing ‘fracklog’ of wells awaiting completion, and it’s going to make a significant oil rally practically impossible for many months ahead. I’ve watched so many investors (even private equity firms) recently chase an oil sector they know to be too cheap to last. They are right: economics do not ultimately support oil prices below $75 a barrel. But the instinct to jump on here is wrong – there is still far too much pressure on oil prices for them to even think about turning around substantially.

    Majors Could Be The Big Winners Of The Oil Price Crash - The dominos are starting to fall, and it hasn’t been a good March so far for three Texas oil and gas operators. As prices take another nosedive, here come the Chapter 11 filings as struggling producers decide the mounting pressure of debt payments and other obligations won’t wait for prices to turn. Tuesday, Quicksilver Resources Inc., a Ft. Worth, Texas shale operator, announced voluntary Chapter 11 filing in the United States Bankruptcy Court in Delaware. BZP Resources Inc. of Houston similarly filed on March 9, saying the current oil price environment made debt refinancing difficult. And as things seem to come in waves of three, Houston’s Cal Dive International, Inc. initially tripped the dominos on March 3rd. This kind of thing was not unexpected, and has been heavily discussed in the media, corporate boardrooms and over many business lunches, as prices started to sink below the magical $70 per barrel number that makes lenders quiver. Debt that worked all day long at $100 oil, but cannot be sustained at prices barely flirting above or below break-even. Which begs the question, what will happen to those assets? Some smaller shale operators have been quietly paying as they go, building cash, and could easily be positioned to snatch-up distressed assets. Perhaps best poised to strengthen themselves amidst this draught would be the most major of the majors, ExxonMobil. Even though profits were down by almost $2 billion in the fourth quarter, they still banked $6.5 billion.

    How long will oil stay cheap: I'm in Alberta, the province that produces most of Canada's oil, and there's only one question on everybody's lips. How long will the oil price stay down? It has fallen by more than half in the past nine months - West Texas Intermediate is $48 per barrel today - and further falls are predicted for the coming weeks. This hits jobs and government revenues hard in big oil-producing centers like Alberta, Texas and the British North Sea, but its effects reach further than that. "Clean" energy producers are seeing demand for their solar panels and windmills drop as oil gets more competitive. Electric cars, which were expected to make a major market breakthrough this year, are losing out to traditional gas-guzzlers that are now cheap to run again. Countries that have become too dependent on oil revenues are in deep trouble, like Russia (where the ruble has lost half its value in six months) and Venezuela. Countries like India, which imports most of its oil, are getting a big economic boost from the lower oil price. So how long this goes on matters to a great many people. The answer may lie in two key numbers. Saudi Arabia has $900 billion in cash reserves, so it can afford to keep the oil price low for at least a couple of years. The "frackers" who have added 4 million barrels/day to U.S. oil production in the past five years (and effectively flooded the market) already owe an estimated $160 billion to the banks. They will have to borrow a lot more to stay in business while the oil price is low, because almost none of them can make a profit at the current price. Production costs in the oil world are deep, dark secrets, but nobody believes that oil produced by hydraulic fracturing ("fracking") comes in at less than $60-$70 per barrel.

    Removing U.S. oil ban would create jobs beyond drilling: report - – Lifting a 40-year-old U.S. ban on crude exports would create a wide range of jobs in the oil drilling supply chain and broader economy even in states that produce little or no oil, according to a report released on Tuesday. Some 394,000 to 859,000 U.S. jobs could be created annually from 2016 to 2030 by lifting the ban, according to the IHS report, titled: “Unleashing the Supply Chain: Assessing the Economic Impact of a U.S. crude oil free trade policy.” Only 10 percent of the jobs would be created in actual oil production, while 30 percent would come from the supply chain, and 60 percent would come from the broader economy, the report said. The supply chain jobs would be created in industries that support drilling, such as oil field trucks, construction, information technology and rail. Many of the jobs would be created in Florida, Washington, New York, Massachusetts, and other states that are not known as oil producers. “The jobs story extends across the supply chain, right across the United States,” said Daniel Yergin, a vice chairman at IHS and an oil historian. “It’s not just an oil patch story, it’s a U.S. story.”

    Debunking America’s Energy Fantasy: Shale Gas and Tight Oil Peak in Next Decade -- Yves Smith - We’ve written from time to time on how reports of America’s coming energy independence and continuing access to lots of affordable domestic shale gas and oil are based on studies that more careful geological work have demonstrated to be optimistic, and by a large margin. We’ve repeatedly pointed out, for instance, that shale gas production will peak in 2020 and decline gradually for a few years after that, then tail off more rapidly. Oil and gas expert Arthur Berman gave a detailed talk last month about hype versus reality as far as the outlook for US shale gas and oil production is concerned (hat tip Pwelder). The presentation is followed by Q&A with geologists, so the level of discourse is higher than what you typically see.  Since the presentation is long, I’ve also embedded the slides. A quick and dirty way to get much of the content is to read the slides, and then zero in on the sections that interest you, or just listen to the Q&A, which starts is at 1:08. Some key points from Berman’s remarks:

      • The US is a much smaller player, in global terms, than the cheerleading would have you believe
      • The EIA (which if anything has a bullish bias) projects that US oil production will peak in 2016
      • Shale gas production is falling for all US plays except Marcellus, and that is estimated to peak in 2020
      • LNG export is a bad idea; the US can’t compete with Russian prices

    He also has a long and intriguing discussion of how ZIRP and financialization have played into what he calls “the beautiful story”. And he’s not terribly optimistic about the prospects for US shale gas operators: “a lot of these companies are toast….There’s not a nice, easy solution to this.”

    Lipstick on a pig: America as the world's swing producer of oil - Most people have heard the old saying: "You can put lipstick on a pig. But it's still a pig." That's sort of what is happening in the American oil patch as producers try to put a positive gloss on the devastation that low oil prices are visiting on the industry. Perhaps the most inventive redefinition is as follows: The part of the U.S. oil industry devoted to extracting tight oil from deep shale reservoirs in places such as North Dakota and Texas has made the United States the world's "swing producer." A swing producer is a country or territory that has large production in relation to the total market, substantial excess capacity and the ability to turn its capacity on and off quickly in response to market conditions.  The term makes the U.S. oil industry sound powerful and important. And, while the U.S. industry remains an important player in the world--third in production behind Russia and Saudi Arabia--it is most definitely not powerful in the sense that the moniker "swing producer" would imply. To understand why this is so, we need only examine the history of the world's other two swing producers. Prior to 1970, Texas was the world's swing producer. Starting in the 1930s the state of Texas began regulating the amount of oil that an oil company could produce from its wells. It did this when overproduction drove the price of oil down to a mere 13 cents a barrel. No one was making any money.  By 1970 the world needed all the oil that Texas could pump and so the commission announced 100 percent "proration."* The commission essentially stopped regulating oil well output based on market demand. The inability of Texas to maintain significant excess capacity while supplying the market with adequate amounts of petroleum meant that the days of Texas as the swing producer were over. Saudi Arabia had oil that was cheap and easy to produce just as Texas had had when it first became the world's swing producer. And, the Saudis had the will to exercise discipline in raising and lowering production to moderate price declines and spikes.

    Big Oil’s business model is broken -- Many reasons have been provided for the dramatic plunge in the price of oil to about $60 per barrel (nearly half of what it was a year ago): slowing demand due to global economic stagnation; overproduction at shale fields in the United States; the decision of the Saudis and other Middle Eastern OPEC producers to maintain output at current levels (presumably to punish higher-cost producers in the U.S. and elsewhere); and the increased value of the dollar relative to other currencies. There is, however, one reason that’s not being discussed, and yet it could be the most important of all: the complete collapse of Big Oil’s production-maximizing business model. Until last fall, when the price decline gathered momentum, the oil giants were operating at full throttle, pumping out more petroleum every day. But Big Oil was also operating according to a business model that assumed an ever-increasing demand for its products, however costly they might be to produce and refine. This meant that no fossil fuel reserves, no potential source of supply — no matter how remote or hard to reach, how far offshore or deeply buried, how encased in rock — was deemed untouchable in the mad scramble to increase output and profits.  How things have changed in a matter of mere months. With demand stagnant and excess production the story of the moment, the very strategy that had generated record-breaking profits has suddenly become hopelessly dysfunctional.

    Energy Credit Risk Soars Most In 2015 As Bankruptcies, Liquidations Loom -- While investors have grown to used to knife-catching heroics in equity markets, the Energy credit markets have been a poster child of yield-reaching, bottom-guessing, dip-buying exuberance in the past six months. As every leg lower in oil was met with more Oil ETF buyers and bond buyers (or loan financers) as "the bottom is in," so each low has failed and new lows are made. The last few days have seen credit risk soar the most in 2015 in the energy sector as numerous firms enter bankruptcy or approach it with huge looming coupon and principal due. What is even more telling is the news of a huge liquidation sale of energy heavy equipment which will be the 'tell' for the entire industry if it is weak... On March 25, Ritchie Bros., the world's largest industrial auctioneer, will conduct a massive multi-million dollar crane and transportation auction for Energy Transportation in Casper, Wyoming. Energy Transportation is the largest supplier of fully operated and maintained crane services, specialized rigging, and heavy haul transportation in the state of Wyoming. More than 750 items will be sold in the one-owner unreserved public auction, including 14 rough terrain cranes (ranging from 20 – 150 tons), seven all terrain cranes (225 – 600 tons), seven hydraulic truck cranes (75 – 110 tons), six crawler cranes (230 – 660 tons), related rigging equipment, as well as heavy-spec trucks, trailers and other equipment.

    Oil Firms’ Debt Is Helping Drive Prices Lower, BIS Says - High levels of borrowing at many energy-sector firms may be magnifying a historic slump in the oil markets, according to a new report from the Bank for International Settlements. This has created a vicious cycle in which companies are forced to keep up production to meet short-term debt obligations even as prices fall, exacerbating the downturn, the BIS says in its latest quarterly review of world financial conditions. The BIS, based in Basel, Switzerland, is an international organization of central banks. Debt in the oil and gas sector surged to $2.5 trillion last year from $1 trillion in 2006, according to BIS economist Dietrich Domanski and his three co-authors. “Greater leverage may have amplified the dynamics of the oil price decline,” the authors write. The authors say the trend reveals risks to the financial system that go well beyond traditional banking. “Rapidly rising leverage creates risk exposures to the nonfinancial corporate sector that may be transferred across the global financial system,” the paper says. “A selloff of oil company debt could spill over to corporate bond markets more broadly if investors try to reduce the riskiness of their portfolios.” For that reason, it is harder to view the rapid plunge in crude oil prices as an unequivocal good, even for crude importers, the authors say. “Oil sector leverage complicates the assessment of the macroeconomic implications of lower oil prices.”

    Junk-Rated Oil & Gas Companies in a “Liquidity Death Spiral” -- Wolf Richter -   West Texas Intermediate plunged over 4% to $45 a barrel on Friday.. The boom in US oil production will continue “to defy expectations” and wreak havoc on the price of oil until the power behind the boom dries up: money borrowed from yield-chasing investors driven to near insanity by the Fed’s interest rate repression. But that money isn’t drying up yet – except at the margins. Companies have raked in 14% more money from high-grade bond sales so far this year than over the same period in 2014, according to LCD. And in 2014 at this time, they were 27% ahead of the same period in 2013. You get the idea. Even energy companies got to top off their money reservoirs. Among high-grade issuers over just the last few days were BP Capital, Valero Energy, Sempra Energy, Noble, and Helmerich & Payne. They’re all furiously bringing in liquidity before it gets more expensive. In the junk-bond market, bond-fund managers are chasing yield with gusto. Last week alone, pro-forma junk bond issuance “ballooned to $16.48 billion, the largest weekly tally in two years,” the LCD HY Weekly reported. Year-to-date, $79.2 billion in junk bonds have been sold, 36% more than in the same period last year. But despite this drunken investor enthusiasm, the bottom of the energy sector – junk-rated smaller companies – is falling out.

    Oil Bonds Lose Investors $7 Billion in 10 Days - Investors lured back into junk-rated energy bonds by their juicy yields are getting burned. Oil prices have fallen more than 15 percent since March 4 to a six-year low of $42.3, wiping out $7 billion of market value of high-yield debt issued by energy companies. Prices on $1.45 billion of notes sold less than two weeks ago by Energy XXI Ltd., an oil producer that was being squeezed by its lenders, have fallen by as much as 10 percent. Comstock Resources Inc.’s $700 million of securities have declined by more than 7 percent since March 6. The latest slump in crude is rekindling concern that oil companies will struggle to service the $120 billion of high-yield, high-risk debt they took on in the past three years amid the U.S. shale boom. That’s a sharp reversal from February when yield-starved bond investors were loading up on the debt again, pushing down borrowing costs to a two-month low. “We had a whole month where prices were at a level that it seemed to have bottomed and provided a false sense of security for investors,” “They are constantly hunting for yield and the short-term opportunity in this low-rate environment.” Junk-rated energy borrowers have sold about $9.4 billion in bonds this year, doubling the amount issued during the last three months of 2014, according to data compiled by Bloomberg. The companies raised more than $17 billion during the third quarter of last year. Oil prices are plunging as U.S. output climbs to the highest in three decades even as explorers idle drilling rigs. The drop to less than $43 a barrel follows a month of relative stability, when prices hovered around $50 after sliding from as high as $107 in June.

    Oil Prices Drop as Production Hums Along Despite a Brimming Supply - — Just as the oil market appeared to be stabilizing, the price of crude resumed its descent on Friday.The drop, of about 4 percent, came after a report from the International Energy Agency warning that oil pouring into tank farms in the United States might “soon test storage capacity limits.”The agency, whose reports are closely monitored by oil traders, said that overflowing storage “would inevitably lead to renewed price weakness.” American production of oil continues to increase despite recently announced cutbacks in new drilling by producers.The price of West Texas Intermediate, the American benchmark, fell to around $45 a barrel on Friday, while Brent, the international benchmark, fell below $55 a barrel. The Department of Energy has proposed adding five million barrels of oil to the Strategic Petroleum Reserve. The purchase, which requires congressional approval, would be added in June and July. But 9.4 million barrels of oil a day are being produced in the United States. Kevin Book, an analyst with ClearView Energy Partners, said that the proposed purchase was not an attempt to support falling prices but instead “appears to derive from a statutory obligation.”with winter coming to an end in much of the world, the oil market was most likely due for a spell of softness. Refineries in Europe and Asia will now be undergoing routine maintenance, leading to a period of weaker demand for crude. “We are expecting another period of weakness,” Mr. Mallinson said in an interview. Additionally, striking refinery workers in the United States reached a tentative deal this week to end their walkout. Although the walkout affected 12 refineries, it had minimal impact on production as managers and other workers kept the plants running

    Oil prices drop on strong dollar, U.S. crude hits six-year low  (Reuters) – Oil prices fell sharply in early Asian trade on Monday, with U.S. crude dropping more than 2 percent to a six-year low after the dollar hit fresh highs and concerns grew that the United States might run out of oil storage. Both U.S. crude and Brent have dropped steeply this month on a stronger dollar and worries over an oil supply glut. U.S. crude fell to $43.57, the lowest since March 2009, while Brent slipped to $53.34 in early trading on Monday after the dollar index closed above 100 on Friday for the first time since April 2003 to hit fresh 12-year highs. By 2330 GMT, U.S. crude was down 93 cents, or 2.1 per cent, at $43.91 a barrel, and Brent was down 97 cents at $53.70 a barrel.

    WTI Crude Oil Falls Close to $43 per Barrel -- From the WSJ: Oil Prices Fall to Six-Year Intraday Low Crude prices extended losses in early New York trading on a report, issued by a private data provider, that showed rising oil stockpiles at a key U.S. storage hub. Earlier, oil dropped as traders weighed the prospect of more Iranian crude hitting the global market, as negotiators came closer to a tentative political agreement on Tehran’s nuclear program...Recently, light, sweet crude for April delivery recently fell $1.65, or 3.7%, at $43.19 a barrel on the Nymex. It dipped as low as $42.85 a barrel, the lowest intraday price since March 12, 2009. Oil is now on pace for a five-session losing streak and is down nearly 14% in that span.This graph shows WTI and Brent spot oil prices from the EIA. (Prices today added).  According to Bloomberg, WTI has fallen 2.8% today to $43.52 per barrel, and Brent to $53.23.WTI oil prices are off  almost 60% from the peak last year, and there should be further declines in gasoline prices over the next couple of weeks.  Nationally gasoline prices are around $2,42 per gallon, and gasoline futures are down about 4 cents per gallon today.

    U.S. Oil Prices Fall to Six-Year Low - Oil prices fell to six-year lows on Monday in the face of concerns that a glut in the United States was outpacing already-brimming storage facilities.Additionally, the Organization of the Petroleum Exporting Countries published a report suggesting that the cartel remained reluctant to intervene to prop up prices.The direction of oil prices, which had risen sharply from January lows, has fallen back in recent days. Traders are now focused on the second quarter of the year, when demand for oil is traditionally weak because of the end of winter and scheduled refinery shutdowns for maintenance.On Monday, the price of West Texas Intermediate crude, the main United States benchmark, fell about 2 percent to about $44 a barrel, a six-year low, while Brent crude, the international benchmark, fell by about 2 percent to about $53 a barrel.Oil markets continue to focus on OPEC because its members could quickly alter the markets’ balance by cutting production. But while some members, including Nigeria and Venezuela, would like to see cuts, Saudi Arabia and its Gulf allies show little inclination to change the policy they agreed to in the fall: Protect market share regardless of what happens to prices.

    Oil Plunges To Lowest Since March 2009 ($43 WTI) As EURUSD 1.05 Battle Continues -- Despite 'trouble' in Saudi Arabia, and chatter of SPR buying, it appears the re-opening of all Houston shipping channels, comments from Greenspan, yet another refinery shut (Exxon's Joliet lost power), and the rapidly filling storage capacity has awakened the realization that the month-long dead-cat-bounce is over in crude. Brent broke below $53.50 and WTI back to a $43 handle (close to the lowest levels in 6 years) at the open. One can only imagine the pressure on USO (Oil ETF) holders as the contango continues to gap wider. EURUSD is teasing the crucial 1.05 level again...

    WTI Plunges To $42 Handle On Massive API Inventory Build -- For what appears to be the 10th week in a row, API reports a massive 10.5 million barrels (far bigger than the 3.1 million barrel expectation) and a 3 million barrel build at Cushing. If this holds for DOE data tomorrow (and worryingly API has tended to underestimate the build in recent weeks) it will be the biggest weekly build since 2001. WTI has plunged on this news hitting $42.60 on the April contract.

    U.S. shale oil firms brace for more pain as crude resumes slide  – With the prospect of another plunge in crude prices looming after two months of stability, U.S. shale oil producers may face another round of spending cuts to conserve cash and survive the downturn. A deeper retrenchment would have far-reaching effects. Additional cutbacks would further gut the already-hemorrhaging oilfield services industry and may heighten expectations for a steeper drop in U.S. crude output later this year. They would also reinforce the United States’ emerging role as the world’s “swing producer,” with dozens of independent companies that can quickly ramp up production in good times and dial it back in a downturn. “If I were an oil company today, I would talk about one thing: how far can you cut costs,” said Fadel Gheit, an oil analyst at Oppenheimer in New York. “They cannot control anything else.” Gheit said he expected a new wave of capital budget cuts starting in May, when much of the energy industry reports quarterly results.  U.S. oil companies have slashed spending 20 to 60 percent since the price of oil fell by half from June to January, and oilfield services firms shed more than 30,000 jobs, according to Reuters compilations of public disclosures. Debt rating agency Moody’s estimates that about a fifth of the North American exploration and production companies it follows will slash budgets by more than 60 percent this year while more than half will cut spending by at least 40 percent. After a pause brought a sense of relief, the price slide has resumed. U.S. benchmark West Texas Intermediate (WTI) has fallen 12 percent in a week to $42 on concerns about lingering global oversupply. Citibank and Goldman Sachs have said oil could tumble to $30 or even $20.

    Oil Prices Will Recover: Market Fundamentals Are Working: On St. Patrick’s Day the U.S. Energy Information Administration (EIA) reported that oil production from three of America’s largest shale plays is in decline. The EIA is forecasting that total U.S. oil production will be in decline in the 3rd quarter. The South Texas Eagle Ford, North Dakota’s Bakken/Three Forks and the Niobrara in Colorado & Wyoming are in decline. Since horizontal shale wells have very steep production decline rates (more than 50% in the first year), the oil supply “glut” will be corrected by market forces. Shale plays require continuous drilling or they quickly go on decline.  Baker Hughes reported March 13, 2015 that the land rig count was down to 1,069. I am forecasting the active onshore rig count in the U.S. to fall below 800 by the end of April. The price of West Texas Intermediate (WTI) crude oil is testing the 5-year low as I write this article. Oil traders are dealing with some facts and a lot of fiction these days. The physical market is obviously oversupplied today, but the word “glut” is being way overused. There is no doubt in my mind that some of the “narrative” coming from Wall Street analysts is purposely meant to drive down the price of oil. More than 90% of the NYMEX futures contracts are now held by non-commercial “speculators”. Many of them are now “short” oil, hoping the price of WTI will fall. Once Wall Street gets oil prices as low as they can, they will suddenly change their tone and point out that demand for oil is going up and supplies are falling. I have seen this happen several times in my 35+ years in the industry. What’s happening now is not new.

    WTI Slumps As Cushing Inventory & Production Hit New Record High -- Following last night's massive 10.5mm barrel build (according to API), this morning's DOE inventories data was highly anticipated (with an expectation of just over 5 million barrels). It did not disappoint... printing at 9.622 million barrel inventory build, this is now the fastest inventory build on record... with record total inventory and record Supplies at Cushing. Storage concerns are growing. But, despite the collapse in rig counts, high-grading and cash-flow deparation remains as crude production also hit a new record high.

    Brent oil falls below $53 as industry data shows record U.S. inventories – Brent oil prices fell below $53 a barrel on Wednesday on oversupply concerns as industry data indicated U.S. crude stocks had hit a new record high. U.S. crude inventories rose by 10.5 million barrels to 450 million barrels in the week to March 13, American Petroleum Institute (API) figures showed on Tuesday.  A Reuters poll showed that analysts had expected a 3.8-million-barrel build. Brent for May delivery was down 70 cents at $52.82 per barrel by 1305 GMT after ending the previous session up 7 cents. U.S. crude for April delivery fell $1.25 to $42.21 per barrel, after hitting a six-year low of $42.05 earlier in the session. Crude stocks at the Cushing, Oklahoma delivery hub rose by 3 million barrels, the API said. “That’s a big build, especially given the rate of inventory increases we’ve seen recently,”

    Kuwait "Over-Supply" Concerns Send WTI Tumbling Back To $42 Handle - Reversing all of yesterday's FOMC-inspired idiocy, WTI has plunged back to reality this morning. Following comments by Kuwait's comments that OPEC had no choice but to keep production steady, refocusing the market on global oversupply, April WTI is back down to a $42 handle. All of yesterday's idiocy unwound... As Reuters reports, Kuwait's oil minister said on Thursday he was concerned by the 50 percent drop in oil prices since June because of its impact on the Gulf Arab state's budget, but said OPEC had no choice but to keep output steady. "We don’t want to lose our share in the market," Ali al-Omair told reporters.

    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.

    US oil and natural gas rig count drops by 56 to 1,069 - Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. tumbled by 56 this week to 1,069 amid slumping oil prices. Houston-based Baker Hughes said Friday 825 rigs were seeking oil and 242 exploring for natural gas. Two were listed as miscellaneous. A year ago, 1,803 rigs were active. Among major oil- and gas-producing states, Texas lost 36 rigs and Louisiana 18. New Mexico declined by five, North Dakota and Ohio each dropped three and Arkansas and Kansas lost two apiece. In related news, EIA: Eagle Ford production set to slow down in April. Alaska gained four rigs, Pennsylvania and West Virginia were up three, Colorado and Oklahoma two and California one. Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

    US oil rig count falls to lowest since March 2011 - The number of US rig counts fell by 41 last week to 825, according to the latest data from oil driller Baker Hughes. This is the lowest oil rigs in use since March 2011. Combined oil and gas rigs fell by 56 to 1,069, the lowest since October 2009. Since hitting a peak of 1,609 in late October, the number of oil rigs is use is down about 49%. In previous downturns in the price of oil, the number of oil rigs in use has declined by around 40%-60%, according to comments made by Baker Hughes on its first quarter earnings conference call. And while the market has been looking at the decline in rig count, the bigger story in the oil market may be quickly dwindling amount of storage for the oil that US producers continue to pump out. Here's the latest chart of the decline in rig count.

    Rig Count Plunge Continues: Total Rigs Lowest Since March 2011, Fastest Drop Since 1986 -- The rig collapse continues, with "only" 1,069 rigs currently operating, down 5.0% from last week's 1,125, and the lowest since March 2011. The hope (because lately that's all there is) is that since oil rigs are plunging at an annual pace last seen 1986, that sooner or later production will be mothballed. However, as the blue line in the chart below shows, quite the contrary is happening as plummeting oil rigs simply means even more record production.

    U.S. Oil Rig Count Keeps Falling - WSJ: The U.S. oil rig count fell by 41 to 825 in the latest week, according to Baker Hughes Inc., making the 15th straight week of declines. The number of U.S. oil drilling rigs--a proxy for activity in the oil industry--has fallen sharply since prices headed south last year. There are now about 49% fewer rigs working from a peak of 1,609 in October. That hasn’t yet translated into a drop in actual output, which is currently running at a multiyear high of 9.4 million barrels a day in the U.S., even though it has squelched production capacity. U.S. crude prices held gains following the data and were recently up 3.1% to $46.95 a barrel. According to Baker Hughes, gas rigs were down 15 to 242 this week. The U.S. offshore rig count is at 37, down 11 from last week and down 18 from the previous year. For all rigs, including natural gas, the week’s drop was 56 to 1,069, down 734 from 1,803 at this stage a year ago.

    Oil heading to $20: Expert: A strengthening dollar and economic weakness in Europe and China could drive crude prices as low as $20 per barrel, according to Raoul Pal of The Global Macro Investor newsletter. The dollar has been climbing recently against the euro and the yen, pushing oil prices lower and sending fear across the markets. He said crude could still fall another 60 percent before the downturn is done. Pal said the strengthening dollar is a big part of why oil could continue to drop. "If we look back historically at how these big dollar bull markets go, I think it's going to go, using the (dollar index), at least to 125, maybe even further," he said in an interview Tuesday on CNBC's "Fast Money." Historically the price of oil moves inversely to the strength of the dollar. According to Pal, that relationship, along with weak demand in Europe and China, has led oil companies to put crude into storage in hopes of waiting out the downturn in prices. Crude stores in America are filling "at an incredible rate" and could be full by summer, he said, which could lead to even more dire consequences. "Any oil that is then brought out of the ground will either have to be sold into the normal market, which will be at much cheaper prices, or they're going to have to shut down production," he said. "I think that shutdown of production is something that people haven't really thought through yet."

    Data Suggests An Oil Price Recovery Could Be Sooner Rather Than Later: World oil demand increased by 1.1 million barrels per day in February. This is a potentially important data point that suggests a crude oil price recovery sooner than later. It is also important because it further supports the view that a production surplus and not weak demand is the main cause for the recent oil-price fall. The latest data from EIA shows that February world liquids production was flat with January but consumption increased 1.1 million barrels per day. This reduces the relative production surplus (production minus consumption) from 1.68 million barrels per day in January to 0.56 million barrels in February. The chart below shows production (supply) in blue and consumption (demand) in red.  The gap between production and consumption shrunk to its lowest level since April 2014, before the drop in world oil prices as shown in the chart below. The EIA forecasts that consumption will be lower in the next 3 months before returning to and exceeding the February demand level in June and thereafter for the rest of 2015 as shown in the chart below. IEA data released today is somewhat less optimistic indicating lower demand through the second quarter of 2015 with higher demand in the second half of the year.

    Pickens: Expect $70 per barrel this year | Could an oil and gas bounce-back loom in America’s near future? During his appearance on CNBC’s “Squawk Box,” energy magnate Boone Pickens seems to think so, forecasting prices to rise to $70 per barrel by the end of the year. Pickens noted producers’ efforts to balance the rocky market with rig cuts, but blamed overzealous production habits for slashing oil prices by half since June. Today, U.S. crude prices reached as low as $43. Baker Hughes reported a rig count of 866; a far cry from the U.S. high of 4,530 in 1981, but still well above the low of 488. Pickens also offered forecast for natural gas prices, which he predicted would rise from the current price of $2.84 to $6 in the next five years. “We were so efficient, the industry did such a good job, the industry showed up with too much gas,” he said in the interview. “So, at one time—around 5 years ago—we had 1,400 rigs running on natural gas. Today we have 300. We oversupplied the market, and boy, we did it big time.”

    Growing U.S. oil export debate has now spread to geopolitics – Lifting the longstanding ban on U.S. crude oil exports would boost the country’s economy and enhance its global leadership, a former senior Obama administration official will tell senators on Thursday, introducing a strategic dimension to the growing debate over selling American oil abroad. In testimony submitted ahead of a Senate energy committee hearing on U.S. crude export policy, the Pentagon’s former undersecretary of defense for policy, Michele Flournoy, argues “policymakers in the United States should embrace these various benefits to our allies and ourselves and liberalize our crude export rules. “Market conditions merit such a step and security dividends will not be fully realized without it,” said Flournoy, co-founder of the Center for a New American Security. A host of economic and geopolitical factors, from plummeting oil prices, near-capacity storage facilities and sanctions against Iran and Russia, are forcing both sides of the debate to address strategic questions. “Members of Congress are starting to focus on this issue in a big way,” said George Baker, executive director of Producers for American Crude Exports – a group representing independent companies demanding an end to the export ban.

    U.S. Oil Export Ban No Solution to Oil Prices | Art Berman: Tight oil producers are hoping for an end to the U.S. oil export ban. They hired IHS to write the second report on this topic in less than a year. In Unleashing The Supply Chain,, IHS argues that U.S. jobs are the casualty from the export ban. The problem, they say, is that the U.S. lacks the capacity to refine all of the light tight oil being produced and that lowers the price. But there were plenty of jobs over the last several years when oil prices were high even though the export ban was in place. That is because over-supply has lowered oil prices and over-production, not the export ban, is the problem. The chart below shows that tight oil production from the U.S. and Canada is the anomaly responsible for global over-supply.  And it’s a world problem of over-supply, not just an American problem. Oil companies everywhere are cutting staff and budgets. All companies are being hurt by low oil prices because they need $100 oil to break even. The IHS report claims that the oil export ban causes lower oil prices in the U.S. compared to international prices. Actually, U.S. oil pricing has nothing to do with international prices. It is a simple matter of supply and demand. When U.S. companies supply more oil than is needed, the price goes down. If there were less supply, the price would be higher. In fact, there was no difference between U.S. WTI and International Brent prices until late 2010 when tight oil started to become a big factor in U.S. production (see chart below). If the U.S. export ban were removed, U.S. companies would make more money per barrel for a short time until the extra U.S. supply pushed down the price of world oil even further.

    The Senate Had A Hearing On Oil Exports And Didn’t Mention The Environment Once -- On Thursday, the Senate Energy Committee convened a hearing to discuss the U.S. ban on crude oil exports, which has been in place since 1973. With the United States in the midst of an oil boom — and with Americans using less gas than ever before — lifting the ban would have profound implications both at home and abroad, issues that dominated the panelists’ testimony and committee’s questions. “The national security side will be an extremely important part of this going forward,” Chairwoman Sen. Lisa Murkowski (R-AK), said during the hearing. “We all recognize that the world is a very, very volatile place right now.” Lifting the export ban, several panelists argued, would allow the United States to leverage more power over potential oil sanctions by assuring that the international market would remain stable. It would also, panelists said, move the center of the international oil market away from unstable countries — both Russia and Iran merited a mention — stabilizing the overall supply.  Domestically, Carlos Pascual, fellow at the Center on Global Energy Policy at Columbia University, argued that lifting the export ban would lower gas prices and boost the U.S. economy. “The critical focus on the part of Americans is price,” Pascual said. “Every single study that has been done by a major institution has come to the same conclusion: lifting the export ban will reduce the price of gasoline in the United States,” while adding $38.1 billion to the U.S. GDP by 2020.  In all these calculations, however, there was one glaring omission: no panelist — or senator — talked about how lifting the export ban would impact the environment.

    Saudi looking beyond oil price slump as rig count spikes - – As the global energy industry stares transfixed at a spectacular drop in U.S. rigs, Saudi Arabia is ramping up the number of machines drilling for oil and gas despite a sharp fall in the price of crude. Industry sources and analysts say the OPEC kingpin is looking beyond the halving of global oil prices since June 2014 to a time when crude could again be in short supply. Riyadh is therefore keen to preserve what is known as its spare capacity – the kingdom’s unique ability to raise oil output quickly at any given moment. But to achieve that, Saudi Arabia has to drill much more than in the past, after boosting output to record levels to compensate for global supply outages in the past four years. “The Saudis are probably worried about everyone else reducing capex as a result of low oil prices and about non-OPEC output falling off a cliff at some point. We all know that supply disruptions are unpredictable but they are certain,”  “The increase in Saudi rig numbers is like a signal to the industry – let’s be rational. We will need supply growth in the future.” State oil giant Saudi Aramco used a record-high 210 oil and gas rigs in 2014, up from around 150 in 2013, 140 in 2012 and some 100 in 2011, according to previous industry estimates. Amin Nasser, Aramco’s senior vice-president for upstream operations, said this month his firm had yet to decide whether to increase the rig number in 2015 from the 212 currently in use.

    After Ending US Shale Jobs, Saudis Look to Hire 'Em - You've got to hand it to the Saudis: this tactic of driving down global oil prices to eliminate marginal shale producers in the United States seems to be working. There's been a non-stop drop in the number of oil rigs operating Stateside as the OPEC bigwig's decision to keep pumping despite falling oil prices has worked as intended. Being endowed with massive foreign exchange reserves, the Saudis could play a game of chicken for much longer than debt-dependent shale producers. We now know who's blinked first. But wait a minute: the plot thickens. Since there are now legions of unemployed workers with shale production expertise, the Saudis are now looking to hire them. Saudi Aramco is not exactly known for homegrown expertise in cutting-edge extractive technologies, preferring to hire foreigners to get the job done. So it is now decreed that, having seen the potential of shale drililng, the Saudis are looking to get into the game. What better way, then, other than to hire Americans laid off by its price wars? This is quite rich, but there are apparently takers for Aramco's "help wanted" ads. They've even hired headhunters to pick off Americans who've presumably lost their jobs in the downturn in oil prices induced by the Saudis: In February, Saudi Aramco posted several new ads on websites including Rigzone and LinkedIn that focused on shale expertise. One recent LinkedIn listing for a petroleum engineer with shale experience drew 160 applicants in a month, according to data from the professional networking website. “Consider the opportunity to join our team and help shape the future of key global unconventional resource development,” the ads say, referring to shale-rock exploration that’s led to a renaissance in U.S. oil and natural gas production. Additionally, since the start of the year, Saudi Aramco has added an “unconventionals” category to its recruiting website, where 35 job listings require specific experience in shale. A recruiting company, Whitney Human Resources, has also written directly to prospective employees on Saudi Aramco’s behalf.

    OPEC, non-OPEC oil talks on ice, Iran return unlikely to change that – OPEC efforts to bring non-member countries such as Russia on aboard in cutting output have made little progress, officials say, and even the chance of more Iranian exports hitting prices if sanctions end is unlikely to boost cooperation. Since the oil price collapse, top OPEC exporter Saudi Arabia has said it wanted non-OPEC producers to cooperate with the group. But a plan for a meeting between the two sides this month appears to have been shelved. “At first we have been planning to meet in March, but so far no-one has come forward with such an initiative. The situation has calmed down a bit,” Russian Energy Minister Alexander Novak told Reuters. Novak was part of a Russian delegation that held talks with OPEC ministers before OPEC’s November meeting. But no supply cut deal was reached then, OPEC refused to act alone and Brent crude prices fell, reaching a near six-year low close to $45 in January. The Organization of the Petroleum Exporting Countries’ position, according to a delegate from a Gulf producer, remains that it might consider cutting output if outside producers were willing to contribute. “If big non-OPEC producers are willing to cooperate effectively, not only by saying but effectively, to make plans to decrease production, here OPEC may take a decision,” the delegate said.

    Saudi oil: Peak conspiracy- The oil world’s been full of speculation about the shift of strategy last year by Saudi Arabia which saw it keep the pumps running even as the price fell, turning an initial drop into a plunge. There may be a simpler explanation for Saudi’s willingness to see prices slide than an attack on US shale or a “political plot” against regional rival Iran, though: a change in the Saudi view on peak oil. The Saudis have two choices with their oil: sell it now, or sell it later.  If they think oil is running out, it is reasonable to think prices will keep rising in future – perhaps rising much faster than the returns they could earn by deploying the money elsewhere, particularly since they invest a lot of their excess foreign exchange in US Treasury bonds paying almost nothing. The logical thing to do is to keep as much oil in the ground as possible, pumping only enough to keep the global economy ticking over. On the other hand, if peak oil is so much bunkum, at least for the foreseeable future, then it makes sense to pump a lot more oil. Worse, if peak oil is the opposite of the truth – that demand for oil might go into a long-term decline – then it makes sense to pump as much as possible as soon as possible, whatever the price, because it will only be worth less in future. Not being a senior member of the Saudi royal family I don’t know the truth. Perhaps the Saudis did a secret deal with the US to hurt Russia. Perhaps they are trying to pressure the Russians to cut off Bashar al-Assad in Syria.. But new technologies are making it easier to access oil from shale, Brazilian pre-salt formations and Canadian oil sands, while global warming, ironically, is making the Arctic look like a potential new source of wells.

    Saudi Arabia Needs More Oil to Feed Local Refinery Expansion - -- Saudi Arabia’s plans to expand local refineries while maintaining its share of the global crude market point to one thing: higher production. The world’s largest oil exporter will probably increase output this year to feed new refineries, deepening a global supply glut, according to analysts at Societe Generale SA and DNB ASA. The kingdom may go as high as 10 million barrels a day by April, according to Torbjoern Kjus, an analyst at DNB in Oslo. That would be the most in more than two years, according to data compiled by Bloomberg. “Saudi Arabia will do the same thing as other OPEC members have always been doing: They’ll produce as much as they can,” Kjus said by phone March 11. Fellow OPEC members, the United Arab Emirates and Kuwait, will probably do the same because “they don’t want to be holding back on any potential exports.” Crude’s rebound from the lowest in almost six years has faltered amid speculation that a global supply surplus may worsen. U.S. production and stockpiles continue to rise from the highest level in three decades, even after last year’s price slump of almost 50 percent. The Organization of Petroleum Exporting Countries has pumped more than its daily production target of 30 million barrels for nine months. A February rally in the price of oil has been followed by two weeks of declines. West Texas Intermediate, the U.S. benchmark, traded at $43.68 a barrel in electronic trading on the New York Mercantile Exchange at 12:42 p.m. Singapore time. The contract fell to $42.85 Monday, the lowest since March 2009.

    Fears of Violence Against Western Oil Workers In Saudi Arabia: US international security officials said Washington’s embassy in Riyadh has suspended all consular services in three major Saudi cities because of concerns that an unnamed “terrorist organization” may be intent on violence against Western oil workers in the country. The State Department’s Overseas Security Advisory Council (OSAC) issued a statement on its website on March 14 that consular offices would be closed on Feb. 15 and 16 in Riyadh, Jeddah and Dhahran due to “heightened security concerns.” It said that even the consular section’s telephone lines won’t be open during the suspension. Further, all US citizens in Saudi Arabia were urged to “be aware of their surroundings, and take extra precautions when traveling throughout the country. The Department of State urges US citizens to carefully consider the risks of traveling to Saudi Arabia and limit non-essential travel within the country.” In Washington, the State Department said it could not elaborate on the message. The warning was issued a day after the OSAC warned that Western oil workers in Saudi Arabia’s Eastern Province, including US citizens, could be the targets of attacks or kidnappings by “individuals associated with a terrorist organization.” Neither message identified the suspected terrorists.

    With 45 Beheadings In 2015 – "US Ally" Saudi Arabia Set To Top 2014's Record Decapitation Level -- In the past month, a group of radical Islamic extremists based in the Middle East beheaded at least 23 people and enforced a ban on Christianity by arresting a group of people for practicing the faith in a private home. No, we're not talking about ISIS. The real culprit is the Kingdom of Saudi Arabia, one of the America’s closest global allies. It would appear, some human rights are more equal than others.

    State Department Shuts US Embassy In 'Ally' Saudi Arabia Amid "Heightened Security Concerns" -- Having recently noted The Kingdom's new king's decrees promising to support the poor and needy with more and more handouts (and to halt the rise of inequality), it is interestingly coincidental that, as The BBC reports, the US embassy in the Saudi capital Riyadh has cancelled all consular services for Sunday and Monday due to "heightened security concerns," and consular services in Riyadh, Jeddah and Dhahran would not be available. This follows Friday's warning that Western oil workers could be the target of militant attacks. Something is going in Saudi Arabia...

    Libya Burning: ISIS Lays Claim To Another Country, Right At Europe’s Door - With global attention focused on Iraq and Syria, Libya was left to convulse under the weight of its own brand of political instability and insecurity, yet another failed Arab Spring state. Of course, mainstream media watched and reported as Col. Moammar Gadhafi’s regime crumbled under an unprecedented, violent popular armed insurgency in 2011. That attention, however, was short-lived and fleeting. Libya came back into focus on Feb. 14, when Islamic State of Iraq and Syria (ISIS) militants published a gruesome video, “A Message Signed in Blood to the Nation of the Cross.” The five-minute video shows ISIS militants simultaneously beheading a group of 21 Egyptian Coptic Christians, who had been abducted in Libya earlier this year. With ISIS now inserted into the mix of Libya’s unravelling, the country is back on the forefront of the war on terror. Two days after the video surfaced, Egypt’s Ambassador to the U.K. Nasser Kamel told the BBC that ISIS would attempt to break into Europe by exploiting conventional migration routes, camouflaging its fighters within the waves of illegal migrants pouring toward Western capitals.

    WATCH: Obama, 'ISIL is a direct outgrowth of Al-Qaida in Iraq which grew out of our invasion' - Video - In an interview with Vice News, President Obama attributed the rise of ISIS in Iraq and Syria to the U.S. invasion of Iraq in 2003. Obama also discussed the recent letter Senate Republicans sent to Iran.

    • Shane Smith: One of the biggest questions that I had was how did they become so popular so fast? How did they get so many foreign fighters from America, from the U.K., from Scandinavia, from all over the world, go there, outstrip al Qaeda, almost overnight. So, a, how did they become so popular out of nowhere? And then, b, how do we stop them?
    • President Obama: ISIL is direct outgrowth of Al-Qaida in Iraq which grew out of our invasion which is an example of unintended consequences which is why we should generally aim before we shoot.

    Iran deal could start nuclear fuel race - Saudi Arabia: A senior member of the Saudi royal family has warned that a deal on Iran's nuclear programme could prompt other regional states to develop atomic fuel. Prince Turki al-Faisal told the BBC that Saudi Arabia would then seek the same right, as would other nations. Six world powers are negotiating an agreement aimed at limiting Iran's nuclear activity but not ending it. Critics have argued this would trigger a nuclear arms race in the region spurred on by Saudi-Iran rivalry. "I've always said whatever comes out of these talks, we will want the same," said the prince, Saudi Arabia's former intelligence chief. "So if Iran has the ability to enrich uranium to whatever level, it's not just Saudi Arabia that's going to ask for that. "The whole world will be an open door to go that route without any inhibition, and that's my main objection to this P5+1 [the six world powers] process."

    Iran Talks Stall Over Ending of Sanctions - WSJ: —When international sanctions on Iran would be lifted has emerged as one of the largest remaining stumbling blocks to an agreement to constrain Tehran’s nuclear program by a March 31 deadline, according to U.S., European and Iranian officials. Tehran’s negotiators in Switzerland, according to these diplomats, have hardened their position that United Nations sanctions on their country be repealed at the front end of any deal reached this month with the U.S. and other global powers. The U.S. and its European allies are demanding the U.N.’s sanctions be suspended or terminated in a phased time-frame over years. They believe sanctions relief should only come after Iran addresses concerns about its past nuclear work and is given a clean bill of health by the U.N.’s nuclear watchdog, the International Atomic Energy Agency.

    Amid "US Coup", Venezuela Takes Another $5 Billion Loan From China - The people of Venezuela can rejoice... not so fast. Amid paranoid-sounding (though not unlikely) rantings about US-created coups (and blaming 'economic' war for his nation's Socialist utopia hyperinflation), it appears President Maduro just got another life-line (or more rope to hang himself). After begging China's leader Xi early in January for moar money (and getting it), China - which is already Venezuela's biggest creditor with over $50 billion loaned since 2007 - as Reuters reports, is said to plan on signing another $5bn loan to Venezuela for "wide-ranging" projects like "mature oil fields." So, it appears China is enabling Maduro to hollow out his economy even more.

    Home Prices Decline at Record Pace in China - The average price of a new home in China fell at the fastest pace on record in February from a year earlier, hurt by slower sales during the Lunar New Year holidays. But developers and analysts expected prices to slowly recover — particularly in top-tier cities.The average prices for new homes in China’s 70 major cities dropped 5.7 percent last month from a year ago, the sixth consecutive monthly fall, following January’s 5.1 percent decline. It was the biggest annual decline in the nationwide survey since it began in 2011.The monthly fall in February from January was 0.4 percent, the same as in the previous month, and pointed to sustained risks to the government’s 7 percent economic growth target for the year. The property sector accounts for about 15 percent of China’s gross domestic product.The decline coincided with news that Chinese banks have extended Evergrande Real Estate Group 100 billion renminbi, or $16 billion, in credit, as the real estate slump extends to one of the country’s biggest and most indebted property developers.Chinese real estate stocks jumped in response to the price news, with the Bank of Communications expecting the government will announce more measures to bolster the market, including lowering taxes and loosening requirements for mortgage lending.“Over the weekend, Premier Li Keqiang vowed to support the economy if it continues to slide, so the worse the economic data, the sooner stimulus policies will be rolled out,”

    Crash Landing: China Home Prices Plunge At Fastest Pace On Record, Surpass Post-Lehman Collapse -- Less than three weeks ago, when the PBOC proceeded with its latest "surprise" rate cut, we showed a chart that should scare everyone who is hoping that China will avoid a hard-landing would prefer would never have been revealed: the annual collapse in Chinese home prices is now so sharp and so widespread, that it has surpassed the housing collapse in the aftermath of the Lehman collapse." Overnight things went from bad to worse, when China's National Bureau of Statistics reported that contrary to hopes for a modest rebound, China's average new home prices fell at the fastest pace on record in February from a year earlier.

    Is China's slowdown worse than economists' projections? - Further evidence is emerging that China's economic growth is likely to slow further. Even without thinking about growth fundamentals, when you have a 10 trillion dollar economy, a 7% growth is larger than the whole GDP of Sweden or Poland. The sheer size of China's economy relative to the rest of the world will limit its growth rate. China's authorities openly admit the growth challenges the nation faces. FT: - Premier Li Keqiang gave his assurance in Beijing’s Great Hall of the People while warning that China would struggle to meet its annual growth target of “around 7 per cent” this year. “It is true we have adjusted down somewhat our GDP target, but it will by no means be easy for us to reach this target.” Mr. Li told reporters at the end of the annual parliamentary session. “China’s economy has already exceeded $10tn so a 7 per cent increase is equivalent to the entire economy of a medium-sized country.” The question however remains: could we see growth that is substantially below even this reduced estimate? The latest fundamental economic reports seem to be pointing to a sharper slowdown than economists have been forecasting. Here are three examples: fixed asset investment growth, industrial production, and retail sales - all below consensus. Furthermore there is a slew of indirect indicators that seem to support the view that China's slowdown is sharper than originally thought.

    • 1. China's rail freight growth:
    • 2. Hong Kong jewelry sales and Macau gaming revenue:
    • 3. Hong Kong industrial production growth:
    • 4. Price declines in China's industrial commodities markets. Here is the Shanghai Futures Exchange hot-rolled coil May futures contract:

    The Coming China Crisis | naked capitalism -- But what cannot be changed is this: China, fueled by runaway lending, has produced far more housing, steel, iron, and a host of other goods than it knows what to do with, amassing unprecedented levels of overcapacity and, by my estimate, making a staggering $2-$3 trillion in problem loans in the process. And since GDP growth is more a measure of capacity being created than capacity actually needed, even China’s high rate of GDP growth, fueled almost entirely by continued ultra-high levels of lending growth, compounds rather than solves China’s fundamental overcapacity problem. Which means that the global economic boost from China, the world’s only major growth engine since the crash of 2008 in the West, is rapidly diminishing and will soon largely end. The only question is how. China’s bad-debt problem is unprecedented in scale, but not in nature. In the United States in 2007 and 2008, we saw our own economy crumble under the weight of bad debt. And the system didn’t know what hit it: On the eve of our own collapse, even though more than $1 trillion of bad mortgages had already been made and major financial fallout was inevitable, banks’ loan-loss provisions—the amount they set aside to cover bad loans—were near an all-time low, while consumer net worth and the stock market were at all-time highs.

    Europeans defy US to join China-led development bank - France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution. The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank.  The European decisions represent a significant setback for the Obama administration, which has argued that western countries could have more influence over the workings of the new bank if they stayed together on the outside and pushed for higher lending standards. The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades. When Britain announced its decision to join the AIIB last week, the Obama administration told the Financial Times that it was part of a broader trend of “constant accommodation” by London of China. British officials were relatively restrained in their criticism of China over its handling of pro-democracy protests in Hong Kong last year. Britain tried to gain “first mover advantage” last week by signing up to the fledgling Chinese-led bank before other G7 members. The UK government claimed it had to move quickly because of the impending May 7 general election. The move by George Osborne, the UK chancellor of the exchequer, won plaudits in Beijing.

    Defying U.S., European allies say they'll join China-led bank (Reuters) - Germany, France and Italy said on Tuesday they had agreed to join a new China-led Asian investment bank after close ally Britain defied U.S. pressure to become a founder member of a venture seen in Washington as a rival to the World Bank. The concerted move to participate in Beijing's flagship economic outreach project was a diplomatic blow for the United States, reflecting European eagerness to partner with China's fast-growing economy, the second largest in the world. It comes amid prickly trade negotiations between Brussels and Washington, and at a time when EU and Asian governments are frustrated that the U.S. Congress has held up a reform of voting rights in the International Monetary Fund due to give China and other emerging economies more say in global economic governance. German Finance Minister Wolfgang Schaeuble said Europe's biggest economy, a major trade partner with Beijing, would be a founding member of the Asian Infrastructure Investment Bank. A French Finance Ministry official told Reuters that Paris "confirms France's participation and highlights agreement between Germany, France and Italy" on the matter, first reported by the Financial Times. The Italian Treasury said the Europeans had agreed to work to ensure the new institution "follows the best standards and practices in terms of governance, safeguards, debt and procurement policies".

    France & Germany to join China-led $50bn infrastructure bank, along with Italy — The finance ministries of France and Germany have confirmed they’ll join China’s new Asian Infrastructure Investment Bank (AIIB), and Italy is expected to soon. Joining the rival to the US-led World Bank is seen as a setback for the Obama administration. "The Ministry of Finance confirmed that France would join the AIIB bank," French daily Le Figaro reported Tuesday. Germany’s finance ministry said it was joining the bank, the BBC says, although Italy has yet to confirm the earlier report by the Financial Times (FT). Europe showing teeth to the "Master". #Europe defy #US to join China-led development bank - via @FT #AIIB #euroriot — Asia Tumasian (@Next__Frontiers) March 17, 2015 The decision comes after Britain last week became the first Western country to agree to become a founding member of the AIIB, FT reports. The UK government said the decision was in the country’s national interest, but it got a negative reaction from the United States. The new China-led bank is expected to challenge the Washington-based World Bank, so the US is increasing pressure on its allies not to join the institution. The US’ concern is that the new investment bank might not have high standards of governance and environmental and social safeguards.

    Major American Allies Ignore U.S. Pleas and Join China’s Development Bank - Yves here. The lead story at the Financial Times, Europeans defy US to join China-led bank, updates this post. Key sections: France, Germany and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading western countries out of the new institution… The decision by the three European governments comes after Britain announced last week that it would join the $50bn Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank…The AIIB, which was formally launched by Chinese President Xi Jinping last year, is one element of a broader Chinese push to create new financial and economic institutions that will increase its international influence. It has become a central issue in the growing contest between China and the US over who will define the economic and trade rules in Asia over the coming decades… Britain hopes to establish itself as the number one destination for Chinese investment and UK officials were unrepentant. One suggested that the White House criticism of Britain was a case of sour grapes: “They couldn’t have got congressional approval to join the AIIB, even if they wanted to.”

    America's European "Allies" Desert Obama, Join China-led Infrastructure Bank -- It appears the sea of de-dollarization has reached the shores of Europe. With Australia and UK having already moved in the direction of joining the China-led AIIB, The FT reports that France, Germany, and Italy have now all agreed to join the development bank as 'pivot to Asia' appears to be Plan B for Europe. As Greg Sheridan previously noted, "the saga of the China Bank is almost a textbook case of the failure of Obama’s foreign policy," but as The FT concludes, the European decisions represent a significant setback for the Obama administration, which has argued that western countries could have more influence over the workings of the new bank if they stayed together on the outside. As Forbes notes, this leaves Obama with 3 uncomfortable options...

    "Colossal Defeat" For Obama As Australia Joins China's Regional Bank -- Having attacked its "closest ally" UK for "constant accomodation" with China, we suspect President Obama will be greatly displeased at yet another close-ally's decision to partner up with the Chinese-led Asian Infrastructure Investment Bank (AIIB). As The Australian reports, "make no mistake," the decision by Australia's Abbott government to sign on for negotiations to join China’s regional bank, foreshadowed by Tony Abbott at the weekend,  "represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia." As The Australian's Greg Sheridan writes Op-Ed, The decision by the Abbott government to sign on for negotiations to join China’s regional bank, foreshadowed by Tony Abbott at the weekend, represents another defeat for Barack Obama’s diplomacy in Asia. The Abbott government is right to make this decision. It had well-founded concerns about the vague and unsatisfactory governance arrangements of the institution when Beijing first invited Canberra to join. Those arrangements have ­improved since then and Australia is only signing on to negotiate terms of accession. If the terms are no good, Australia will ultimately walk away. Canberra’s move follows similar decisions by Britain, Singapore, India and New Zealand. Make no mistake — all this represents a colossal defeat for the Obama administration’s incompetent, distracted, ham-fisted dip­lomacy in Asia.

    Australian households awash with debt: Barclays: Australian households are the most indebted in the world, according to research by Barclays, which warns that the country would be vulnerable in the event of another global financial shock. Barclays chief economist for Australia Kieran Davies says private sector debt-to-income gearing is currently at an all-time high of 206 per cent, up from a pre-global financial crisis (GFC) level of 191 per cent. This put Australia just within the top 25 per cent of the world when it comes to leverage. However, when it comes to household debt - which includes mortgages, credit cards, overdrafts and personal loans - Australia leads the global field, according to Mr Davies, with credit continuing to pile up while the rest of the developed world is paying it down. Advertisement Using nominal gross domestic product, the bank estimates household debt at 130 per cent of GDP, which is the highest level on record.

    Taiwan interested in joining AIIB: finance chief - (Xinhua) -- Taiwan is willing to join the Asian Infrastructure Investment Bank (AIIB) if invited, Taiwan's finance chief Chang Sheng-ford said Thursday.When asked by lawmakers on Thursday, Chang said the participation would open up a good channel for Taiwan's investment. His remarks came after three large eurozone economies -- France, Germany and Italy -- announced their intention to become prospective founding members of the AIIB.  Britain last week announced its own decision to join the AIIB.  With an expected initial subscribed capital of 50 billion U.S. dollars, the AIIB will fund infrastructure projects in Asia and is expected to be formally established by the end of this year. The bank was initially proposed by Chinese President Xi Jinping with a mission of helping to fund infrastructure projects in poor Asian countries. Chinese mainland has pledged a large part of the initial 50-billion-U.S.-dollar capital. Twenty-one countries including China, India and Singapore signed a memorandum of understanding in Beijing in October last year to found the bank.

    An Influential Voice Slams U.S. Handling of New China-Led Infrastructure Bank -  In the past week, the United Kingdom, France, Germany and Italy have all announced plans to join the new China-led Asian Infrastructure Investment Bank (AIIB). European participation in the new financial institution has materialized despite strong objections from the Obama administration, which sees the AIIB as China’s vehicle for creating a rival to the U.S.-led World Bank. Is the AIIB merely a thinly veiled Chinese attack on the international financial architecture created by the United States and its allies after World War II? What does European enthusiasm for the AIIB signify for the global strategic competition shaping up between the U.S. and China?  Robert Zoellick, former president of the World Bank and former U.S. Trade Representative and Deputy Secretary of State under George W. Bush, says there is certainly a risk that the new bank could end up being a vehicle for Chinese influence but also calls the Obama administration’s approach “mistaken both on policy and on execution.” Zoellick notes that China aims to use the AIIB to support infrastructure financing — an important goal for emerging market economies around the world. To that end, the AIIB could serve a worthy purpose if it is developed properly in a multilateral context. The U.S. could have engaged with China on the former’s concerns over anti-corruption, transparency and governance issues but failed to take advantage of the opportunity.

    Japan Says It Could Join China-Led Development Bank - WSJ: Japan indicated it could join a China-backed development bank, despite territorial and economic rivalry between the two neighbors, and another U.S. ally, Australia, signaled it is ready to join the bank Washington has expressed concerns about. Australia was to decide Monday, and the U.K., France, Germany and Italy have decided to participate in China’s proposed Asian Infrastucture Investment Bank, despite U.S. concerns. The U.S. sees the bank as a potential rival to the World Bank and Asian Development Bank, where the U.S. holds greater sway. Australia had been expected to become a founding member after lengthy negotiations last year. But Australia stepped back, citing transparency and governance concerns. Those concerns, which echo the U.S. position, are shared by Japan, Finance Minister Taro Aso said Friday. Mr. Aso said Friday that he doesn’t rule out considering participation in the new China-led lender, provided it adopts a governance code and transparency standards that are on a par with existing multilateral institutions, such as the World Bank. But he indicated there were no signs so far that Beijing was addressing Japan’s concerns, making Tokyo’s immediate participation unlikely.

    US "Isolated" As Key Ally Japan Considers Joining China-Led Bank - Just a week ago it appeared Washington had managed (for the time being at least) to convince the US’ closest allies to refrain from joining the Asian Infrastructure Investment Bank, a sinocentric institution aimed at promoting development across Asia that is meant to rival the US/Japanese-led ADB and begin a seismic shift away from the world’s traditionally US-dominated institutions such as the World Bank and the IMF. Then, much to the chagrin of Washington, the UK joined as a founding member calling it an “unrivaled opportunity.”  As we and many other observers correctly noted at the time, the move by Britain could well embolden other countries who had expressed an interest initially but been deterred by pressure from Washington to reconsider their bids for membership. In (very) short order, everyone from Germany to Australia to Luxembourg was suddenly ready to cast their lot with the Chinese despite US warnings that the bank won’t adopt the proper operational standards. As we said yesterday, the world is now wise to the fact that US criticism of the new venture is very likely nothing more than an attempt by The White House to undermine Chinese regional ambition:  Now, it appears the last valuable friend the US has in the bid to keep China from undercutting the ADB is beginning to consider a bid to join up. Here’s more from ReutersJapan's foreign minister signaled cautious approval of the institution that the United States has warned against…

    Japan debt: It’s not what it looks like - Adair Turner - Over the next few years, it will become obvious that the Bank of Japan (BOJ) has monetized several trillion dollars of government debt. The orthodox fear is that printing money to fund current and past fiscal deficits inevitably leads to dangerous inflation. The result in Japan probably will be a small uptick in inflation and growth. And the financial markets’ most likely reaction will be a simple yawn. Japanese government debt stands at more than 230 percent of gross domestic product and at about 140 percent even after deducting holdings by various government-related entities such as the social security fund. This debt mountain is the inevitable result of the large fiscal deficits that Japan has run since 1990. And it is debt that will never be “repaid” in the normal sense of the word. Figures provided by the International Monetary Fund illustrate why. For Japan to pay down its net debt even to 80 percent of GDP by 2030, it would have to turn a 6 percent-of-GDP primary budget deficit (before interest payments on existing debt) in 2014 into a 5.6 percent-of-GDP surplus by 2020, and maintain that surplus throughout the 2020s. If this was attempted, Japan would be condemned to sustained deflation and recession. Instead of being repaid, the government’s debt is being bought by the BOJ, whose purchases of 80 trillion yen (US$658.7 billion) per year now exceed the government’s new debt issues of about 50 trillion yen. Total debt, net of BOJ holdings, is therefore falling slowly. Indeed, if current trends persist, the debt held neither by the BOJ nor other government-related entities could be down to 65 percent of GDP by 2017. And because the government owns the BOJ, which returns the interest it receives on government bonds to the government, it is only the declining net figure that represents a real liability for future Japanese taxpayers.

    Is Momentum Building in Japan Towards Signing the TransPacific Partnership? - Yves Smith - US sources claim that Japan is finally warming to the TransPacific Partnership. True or not?  Now as Naked Capitalism readers know, the Japanese government has made pronouncements of the “Yes, we are making real progress” or ” A deal is just around the corner” sort, and yet a consummation of the TransPacific Partnership appeared to be as remote as ever. However, just because Japan and the US have regularly resorted to the well-honed negotiating technique of trying to create the impression of momentum, it does not necessarily follow that the Japanese government isn’t managing to move closer to cinching a deal. So we decided to check in with our Japan-based reader of tea leaves Clive. His reaction to the question of whether the TransPacific Partnership seemed to be moving forward: In a word, no. There’s been nothing whatsoever from official sources (in the Japanese government) that I can find. And in the Japanese press, all I’ve seen is the now familiar reiteration of the well-known inabilities of congresscritters to do anything much in a bipartisan fashion. That, plus the usual boilerplate from Prime Minister Abe about being in sight of turning the final corner on the TPP home straight (or one of his other equally wobbly metaphors). Where the fast track is covered in the Japanese press, it continues to tell the same story of how Japan is unwilling to make its “best and final offers” without that authority being in place. This original article and its conclusions, especially this section, got recited and quoted quite widely: The apparent TPA delay could have implications for the TPP timeline, some observers and officials say, given that some of the US’ TPP partners may not be willing to make their most difficult trade concessions until having clear assurances that a final deal will be approved, without changes, in the US Congress. “The Japanese also made it clear they do not want to make final offers until Congress passes Trade Promotion Authority (TPA), adding to the need for us to act quickly on this effort,” said Representative Adrian Smith, a Republican from the US state of Nebraska who participated in a recent congressional delegation to Asia.

    Japan says difficult to reach Japan-U.S. trade deal without TPA - (Reuters) - Japanese Economy Minister Akira Amari said on Friday it would be difficult to reach an agreement in two-way trade talks between Japan and the United States unless U.S. lawmakers fast-tracked trade promotion legislation. The two countries have been working toward an agreement over access to agriculture and auto markets and a bilateral deal between them is considered key to a 12-nation Trans-Pacific Partnership (TPP) deal. A delay in agreeing on the legislation in the United States to streamline the passage of trade deals, known as trade promotion authority (TPA), through Congress is blamed for pushing back the timetable on the TPP. "Not only Japan but also other member nations share a view that TPA is an essential condition for the TPP agreement. I would like President Obama to make the utmost effort," Amari told a news conference. "It is very high hurdle to reach an agreement to Japan-the U.S. trade talks unless we see clarity on the prospect for TPA bill." Amari said this week that he wanted to reach a broad agreement on the two-way trade talks before Japanese Prime Minister Shinzo Abe's expected visit to the United States from late April to early May. A source familiar with Japan's stance on TPP told Reuters he did not know if the two allies could clinch an agreement before Abe's visit, primarily because of a lack of clarity on the outlook for TPA. "I know there are issues pending and I know the solutions are not easy," he said. "It's certainly doable but I don't know if the U.S. is prepared." Another source said talks on the TPP were unlikely to gather momentum if prospects for the passage of TPA remained unclear. "It will certainly be good if we can reach an agreement when leaders from the two nations are to meet," he said.

    Stagnant Growth: Korea’s Economic Growth Rate Expected to be 0% for Six Consecutive Quarters -  With poor real economic indicators in the beginning of this year, the South Korean economic growth rate is expected to show zero percent growth for six quarters in a row, as the rate is likely to stay at the zero percent level in the first quarter. One official from a private economic research institute said on March 15, “The growth rate of the first quarter compared to the previous quarter is expected to stay at a zero percent level, as the indices such as the industrial product and export indexes were poor in the beginning of the year along with deteriorating consumer sentiment.” The official added, “If the growth rate stays at the zero percent level even with the base effect from the fourth quarter of last year, which showed a low growth rate, it means that the national economy is going through a considerable hardship.” The situation is similar to that shown in 2011 to 2013, recording a zero percent level growth for nine quarters during the period. Although the Bank of Korea (BOK) predicted in the beginning of the year that the economy will turn around in the first quarter, overcoming the poor performances in last year’s fourth quarter, it is, however, continually showing a poor real economic index in the beginning of the year. The industrial output in January dropped by 1.7 percent and, in particular, the reduction in mining and manufacturing industries was the greatest since the financial crisis in 2008 with 3.7 percent. Exports decreased 0.7 percent and 3.4 percent in January and February, respectively, and consumption also reduced 3.1 percent in January.

    Seizing India’s MomentiMFdirect (video) As many countries around the world are grappling with low growth, India has been marching in the opposite direction.  The IMF’s Managing Director Christine Lagarde gave a speech at Lady Sri Ram College, in New Delhi to talk about the global economy,  India’s economy and how the quality of growth and can benefit the poor, the women, and the youth of India.

    Dr. Christine Fair Compares India's BJP With America's KKK - Fair spoke at the World Affairs Council in San Francisco on "Pakistan, the Taliban and Regional Security" March 4, 2015. Here are some interesting excerpts from her generally anti-Pakistan narrative at the event:
    1. India's Hindu Nationalists (RSS, BJP) are like the Ku Klux Klan (KKK), the violent post-civil war white supremacist organization made up mainly of former southern confederate supporters, in the United States. The difference is that while KKK has very little popular support in America, the RSS's political wing BJP recently won general elections by a landslide, making Narendra Modi ("KKK wizard") the prime minister of India.
    2. India's human rights record in Kashmir is appalling.
    3. It's "flat out wrong" to say that "Indian Muslims do not participate in terrorism".
    4. Pakistan can use Indian Mujahideen (IM) which includes India's deeply alienated Muslims to conduct covert actions in India with plausible deniability.
    5. China has been talking with the Taliban since 1990s. Chinese can play a huge role to stabilize Afghanistan with investments and control Pakistan's behavior. (Later, she says US should encourage India to go big in Afghanistan).
    6. India has been able to establish significant presence in Afghanistan under US security umbrella. India's intentions in Afghanistan are not benign. But she also says that US should encourage India to "go big" in Afghanistan to check Pakistan.
    7. India has built the Iranian port of Chabahar to compete with Gwadar port in Pakistan.  She says Chahbahar offers a better land route for trade with from Arabian Sea to Central Asia.
    8. No one wants to pay Afghanistan's bills when US leaves. China can fill the gap. US and China can be partners for peace in Afghanistan.
    11. Fair says she wants the US to work to "reduce Pakistan Army's influence"in governance but, in the next breath, she says "civilians are no better than the military".

    Major Tipping Point: Pakistan's Middle Class Grows to 55% of Population -- Majority of the households Pakistan now belong to the middle class, a first in Pakistan's history, according to research by Dr. Jawaid Abdul Ghani of Karachi School of Business and Leadership (KSBL).  It's an important tipping point that puts Pakistan among the top 5 countries with fastest growing middle class population in Asia-Pacific region, according to an Asian Development Bank report titled Asia's Emerging Middle Class: Past, Present, And Future. The ADB report put Pakistan's middle class growth from 1990 to 2008 at 36.5%, much faster than India's 12.5% growth in the same period.  From 2002 to 2011, the country's middle class, defined as households with daily per capita expenditures of $2-$10 in 2005 purchasing power parity dollars, grew from 32% to 55% of the population, according to a paper presented by Dr. Abdul Ghani at Karachi's Institute Business Administration's International Conference on Marketing. Dr. Ghani has cited Pakistan Standards of Living Measurement (PSLM) Surveys as source of his data.  Growing middle class is a major driver of economic growth, as the income elasticity for durable goods and services for middle class consumers is greater than one, according to a Brookings Institution study titled The Emerging Middle Class in Developing Countries.

    Pakistan's Most Amazing Money Manager Gets No Respect -- In Pakistan, it’s difficult to find a more successful money manager than Maheen Rahman. The 39-year-old turned a loss—making asset management company into a profitable acquisition target, led her flagship equity fund to the country’s top performance and positioned her new firm for what she estimates will be a 40 percent jump in client assets this year. For all that, Rahman still struggles to prove she belongs in an industry where all 21 of her rival chief executive officers are men. “My biggest challenge has been building a reputation and trust in a market that values grey hair and being male,” said Rahman, who oversees the equivalent of $180 million in stocks and bonds as the CEO of Alfalah GHP Investment Management Ltd. in Karachi. “After all these years, I still routinely get asked why I don’t just design clothes.” While Rahman’s rise to the top of a financial firm would have been almost unheard of in Pakistan two decades ago, her struggle to gain the acceptance of male peers illustrates the challenge professional women still face in a country with the smallest proportion of female workers among Asia’s 15 largest economies. Investors who bet on Rahman have been rewarded with a 443 percent return from her IGI Stock Fund since its inception seven years ago, 117 percentage points more than the benchmark index and the biggest gain among 34 peers tracked by Bloomberg.

    Pakistan church bombings: Twin blasts kill 15, wound 78 in Lahore - In the latest attack on religious minorities in Pakistan, twin Taliban suicide bombers blew themselves up at two Christian churches during Sunday mass in the country's eastern city of Lahore, leaving at least 15 persons dead and more than 70 injured. The blasts sparked mob violence in the area in which two other suspected militants were killed and later their bodies were set on fire.  The bombings occurred at Catholic and Christ churches, located around half a kilometre apart, in quick succession in the city's Youhanabad area, one of Pakistan's biggest Christian neighbourhoods, a home to about a million Christians. The first suicide bomber detonated his strapped-explosives outside the main gate of St John's Catholic Church after the security guard prevented him from entering the church where Christian families had gathered for Sunday service, a senior police officer. The second blast occurred minutes later in the compound of Christ Church.

    Asia Steps Up Efforts to Reach the ‘Unbanked’ - Governments from China to India are experimenting with novel ways to widen access to financial services, from using mobile technology for transfers to allowing retail stores to take deposits in remote areas. The WSJ’s Tom Wright reports: Back in early 1800s Europe, only aristocrats and rich merchants typically had access to banks. Artisans, farmers and domestic servants stashed money away under the pillow, if they saved at all. Then, over the following few decades, a savings revolution took place. Fearful of poverty and social insurrection, governments used state finances to back savings banks, offering ordinary people a safe way to sock money away and earn interest. Around 200 years later, the transformation that began in Europe remains incomplete. Some 2.5 billion adults didn’t have a bank account in 2011, from a global population of around 7 billion, according to the World Bank’s most recent estimates. Some 60% of adults in developing countries didn’t have accounts, compared with only 11% in high-income economies, according to the bank. Despite Asia’s economic rise, many of the globe’s “unbanked” citizens, residing in countries including India, China and Myanmar, make do without access to savings, insurance and pensions. The reasons for financial exclusion aren’t dissimilar to Europe’s situation in the early 19th century.

    BIS Sees Financial Inclusion Increasing Central Bank Powers - Wider access to financial services around the world will make the interest rates set by central banks a more powerful tool for guiding economies, but can increase the risk of harmful financial crises, the Bank for International Settlements said Wednesday. The BIS noted that in some developed economies, a fifth of adults still have no bank account or other access to financial services. In many developing economies, that share can be as high as 90%. Increasing access to financial services is a goal of the Group of 20 leading economies, whose governments believe that financial inclusion will help boost growth, reduce poverty and foster greater income equality.  But it also has consequences for central banks. In its quarterly report, the BIS said greater financial inclusion should make the interest rates set by central banks “a more effective policy tool,” since they will affect the behavior of a larger proportion of households and smaller businesses. “Given that the rewards for saving (and the cost of borrowing) are affected by interest rates, greater financial access implies that a bigger share of economic activity comes under the sway of interest rates, making them a more potent tool for policymakers,” the BIS said. Greater inclusion may make financial systems more stable by increasing the number of depositors at banks. But it also poses a threat to financial stability. “Greater financial access may increase financial risks if it results from rapid credit growth or the expansion of relatively unregulated parts of the financial system,”

    Exchange Rates and Balance Sheet Effects - Paul Krugman -- Neil Irwin writes about concerns that a rising dollar will damage developing countries where corporations have borrowed in dollars; as he says, this raises echoes of the Asian crisis of the late 1990s and the Argentine crisis of 2002.He does seem to go slightly astray at one point, however: The biggest difference this time around is that private companies, not governments, have incurred debt in a currency not their own.  Actually, this time is not different: the Asian and Argentine crises were also about private-sector debt, with Asian public debt, in particular, quite low before the crisis hit. And a number of economists, myself included, independently developed models of leverage, currency mismatch, and balance sheet effects to make sense of the Asian crisis. This point matters, I think, for a couple of reasons. On one side, if you paid attention to Asia in 1997-98 you were pre-inoculated against the temptation to fiscalize crisis narratives – the urge to see everything that goes wrong as the result of budget deficits. (This is one reason I reacted to Irwin’s piece; there’s already been a huge effort to retroactively fiscalize the euro crisis, and we need to push back against attempts to do the same to Asia.) On the other side, I sometimes hear people declaring that until the 2008 crisis struck, economists paid no attention to private debt as a source of economic problems. But everyone who worked on Asia 1998 was very well aware of the problems debt and leverage could create. If we didn’t realize how vulnerable the rise in household debt made America, that was a failure of observation, not a deep conceptual problem.

    Weakening Against U.S. Dollar, Renminbi Lead Euro’s Decline - Roughly half of the euro’s decline between May 2014 and February were driven by the weakening of its exchange rate against the U.S. dollar and Chinese renminbi, the European Central Bank said in its economic bulletin Thursday. In a study included in the bank’s economic bulletin (pages 42-44) the ECB notes that, between the euro’s May 2014 peak and Jan. 23 of this year, the euro weakened about 10% against a broad basket of currencies. The euro, it said, “has stabilized in recent weeks with the return of capital inflows following the ECB’s announcement of its expanded asset purchase program after the 22 January 2015 Governing Council meeting.” Of that drop, “half the fall in the (nominal effective exchange rate) was accounted for jointly by the US dollar and the Chinese renminbi,” the ECB said. Each rose about 20% versus the euro during that time frame, with the dollar “supported by expectations of further diverging monetary policies in the euro area and the United States, market uncertainty in an environment of declining commodity prices and heightened geopolitical tensions,” the ECB said. The Swiss franc’s sharp rise against the euro, after the Swiss central bank abandoned its currency ceiling for the franc’s value against the euro in January, accounted for about 10% of the broad decline in the euro, according to the ECB’s estimates. The euro also weakened against the yen, sterling and many emerging market currencies. These declines were offset somewhat by the sharp rise in the euro against the Russian ruble, and the eurozone currency also strengthened against the Swedish krona.

    Michael Hudson: Europe Tilts East Towards China -- naked capitalism - The sudden rush of countries joining China's infrastructure bank, including supposed US allies like the UK, Germany, and France, demonstrates the desire of not just emerging but also advanced economies to have access to international institutions that are not dominated by the US. Whether the infrastructure bank actually winds up being better, as opposed to simply different than existing institutions remains to be seen. But as Hudson describes, the World Bank sets a low bar.

    The currency wars have begun --- Central banks around the globe are rushing to ease monetary policy as looming deflation and still-weak commodity prices weigh on growth expectations.   On Wednesday, Sweden’s Riksbank cut its benchmark interest rate and expanded its bond-buying program. The European Central Bank began its massive 60 billion-euro-a-month bond-buying program on March 9, making it more difficult for central banks to keep their currencies fairly valued against a rapidly weakening euro.  Mohamed El-Erian has described it as “accidental,” but however you characterize it, it’s hard to deny that a global currency war has already begun. Here’s a map showing which central banks have fired their opening salvo in 2015.

    Global Trade Grinds To A Crawl Today, we got still more evidence from the world of seaborne freight that in fact, global trade may be grinding to a halt. As Reuters notes, freight rates declined for a seventh straight week plunging double-digits to the lowest levels in nearly 2 years: Shipping freight rates for transporting containers from ports in Asia to Northern Europe fell 12.4 percent to $620 per 20-foot container (TEU) in the week ended on Friday, a source with access to data from the Shanghai Containerized Freight Index told Reuters. It was the seventh consecutive week with falling freight rates on the world's busiest trade route and the current level is the lowest seen since June 2013. In the week to Friday, container freight rates dropped 15.5 percent from Asia to ports in the Mediterranean, and fell 4.7 percent to ports on the U.S. West Coast and were down 4.7 percent to ports on the U.S. East Coast. And while there are still plenty of commentators who will suggest that oversupply is the controlling factor here, the evidence just seems to be mounting that it could be the other way around or as we put it: “...yes supply isn't helping, but it is the lack of global demand that is pushing equilibrium levels lower, aka global deflation.”

    Where The Top 0.002% Of The World Live - We’ve talked quite a bit in the past about the foreign oligarch demand-driven boom in Manhattan real estate prices and the dollar strength-induced bust in the market for luxury Miami condos. As the dollar continues to surge and signs emerge that the hot money laundering trade may be waning, here are some clues as to where the 0.002 percenters of the world can be found going forward.   Mapping the number of people with $30 million or more in assets by city…

    Fifty Lashes and Hobson’s Choice, Argentina Edition - Big day in sovereign debt. After months of kicking the can down the road and a couple of anticlimactic decisions from English courts that made no practical difference in the pari passu injunction, a giant big shoe has just dropped in the Southern District of New York. Judge Griesa ruled that Argentina's dollar-denominated local law bonds were covered by his injunction just the same as New York and English law bonds. In the process, he defined (or redefined?) the injunction super-broadly, effectively blocked Argentina from issuing new foreign currency debt under its own law, potentially expanded the reach of the pari passu clause for other sovereigns, told Argentina that it was all out of comity, and told Citi to choose between New York and Cristina Fernandez de Kirchner.

    Argentina will not let Citigroup quit custody business -govt source -- - Argentina will not allow Citigroup Inc. to exit its local custody business, a senior source in the government said on Wednesday, setting up a possible showdown between the leftist government and the banking giant over sovereign debt payments. The government is demanding Citigroup process a March 31 coupon payment on its sovereign debt to avoid its latest default on foreign law bonds spilling into local debt. However, the bank said on Tuesday it planned to quit the custody business, in which it acts as custodian of some Argentine bonds and processes payment for the ultimate security holder, after a U.S. court barred it from passing on the funds. true President Cristina Fernandez' has threatened to cancel Citibank Argentina's operating license if it refuses to process a March 31 interest payment, putting at risk the group's retail banking business in Latin America's No. 3 economy. "There is no way we will let them exit their (custody) business," said the source, who is familiar with President Cristina Fernandez' view on the matter. Citigroup has found itself at the center of a bitter court battle between Argentina and a group of New York-based hedge funds that were awarded full payment on their defaulted sovereign bonds by U.S. District Judge Thomas Griesa. Griesa ruled Argentina must settle with the funds before it continue paying interest to the large majority of investors who accepted significant writedowns on the debt holdings after the country's record default on $100 billion in 2002.

    Venezuela puts debt service before food imports as cash dries up: sources (Reuters) - Venezuela's government has told the country's food industry that it is limiting dollar disbursements for food imports so that it can pay down foreign debt amid low oil prices, according to two sources with direct knowledge of the situation. The government of socialist President Nicolas Maduro administers most of the country's dollars through a currency ggcontrol system and must pay $8.4 billion in debt service on foreign bonds by the end of the year. Restrictions on dollars for imports have already caused shortages of basic goods including meat and olive oil, and the scarcity is weighing on the government ahead of parliamentary elections. true At the same time, concerns Venezuela could default on foreign debt have pushed its yields to the second highest of any emerging market nation, despite government assurances it is committed to servicing the bonds.

    Brazil’s Economy Contracted 0.11% in January, Central Bank Says: Brazil’s economy contracted 0.11 percent in January, compared to the prior month, and 1.34 percent relative to the same month in 2014, the Central Bank said Monday. The figures come from the Central Bank’s Index of Economic Activity, or IBC-Br, which is used as a preview of the gross domestic product (GDP) number, which is released quarterly, but this indicator is not as broad and tends to overestimate economic growth on the upside. The IBC-Br finished last year with a contraction of 0.15 percent, compared to 2013. The January figures indicate that the downward trend is continuing and bolstered the forecasts of private sector analysts. Private sector analysts surveyed by the Central Bank expect South America’s largest economy to contract by 0.78 percent this year. The GDP forecast comes from analysts polled for the Boletin Focus, a weekly Central Bank survey of experts from about 100 private financial institutions on the state of the national economy. Most analysts estimate that the economy contracted about 0.15 percent last year, marking the first contraction in Brazil since 2009. The Brazilian Institute of Geography and Statistics, or IBGE, will release the official 2014 GDP number on March 27. Analysts now expect inflation to tick up in Brazil, with prices seen rising 7.93 percent in 2015.

    Russian economy shrank in Q1, says central bank - Russia's economy shrank 0.7% on the year in the first quarter, Russian news agencies reported Monday, citing the central bank's first deputy chairwoman, Ksenia Yudaeva. However, the Bank of Russia said on its website that its models paint a more optimistic economic outlook than the majority of official forecasts. According to its latest economic outlook, growth could reach 0.6% on the year in the second quarter. The central bank's second-quarter forecast contrasts with its own forecast for the whole of 2015, for a gross domestic product contraction of up to 4%. Market economists and credit-rating firms expect the economy to contract by more than 5% this year, due to a sharp drop in oil prices and Western sanctions against Moscow. The central bank noted that its outlook for the second quarter could be revised lower as more official economic data is published.

    EU moves towards extending Russia sanctions - EU leaders took the first step towards extending their sweeping economic sanctions against Russia on Thursday night, agreeing that the measures would be maintained unless last month’s ceasefire agreement reached in Minsk was implemented in full by Moscow. The communiqué, agreed on the first day of a two-day summit in Brussels, fell short of hopes from some hardline countries — and the summit’s host, European Council president Donald Tusk — for an immediate renewal of the sanctions, which are due to expire in July. But by tying the measures to the Minsk agreement, which among other things requires Russia to secure its border with Ukraine and hand over its control to Ukrainian authorities, officials believe extension is now assured since the Kremlin is not expected to live up to the agreement’s terms. “Our common intention is also very, very clear,” said Mr Tusk at a post-summit press conference. “We have to maintain our sanctions until the Minsk agreement is fully implemented.” The communiqué notes the Minsk agreement is not expected to be completed until December, sending a signal that the extension, once it is agreed, would be for six months rather than the full year of the original sanctions regime.

    Vladimir Putin Proposes "Eurasian" Currency Union - While the distraction that is the stock market continues to enthrall most Americans, the big shots in the global monetary which for now are taking place behind the scenes, are getting ever louder. One person who is paying attention to the failure of the US to grasp that the unipolar world of the 1980s is long gone, is Russia's Vladimir Putin, who earlier today proposed creating a "Eurasian" currency union which would have Belarus and Kazakhstan as its first members, which already are Russia's partners in a political and economic union made up of former Soviet republics.

    Russia, Ukraine to Aim for Gas-Supply Deal Until Bill Dispute Settled - WSJ: —Ukraine and Russia said Friday that they would seek to negotiate a deal that would ensure natural-gas deliveries to Ukraine and the European Union until a dispute over unpaid bills has been settled. After a first, EU-mediated round of talks between Russian Energy Minister Alexander Novak and his Ukrainian counterpart, Volodymyr Demchyshyn, Russia said it would consider again granting a discount to the price set out in its gas-supply contract with Ukraine. Such a discount was central to a gas deal between the two sides that expires at the end of the month. Ukraine, meanwhile, said it would consider buying sufficient gas to fill up its huge storage facilities ahead of next winter—a step that is crucial to ensure both domestic supplies and effective transit to the EU. The statement, however, didn’t say how much gas Ukraine was willing to purchase, indicating that a disagreement between Kiev and Brussels over how much gas was needed to be in the storage by October remains. The European Commission, the EU’s executive, said it would consider helping Ukraine find the financing necessary to pay for the gas purchases. The initial talks left most key questions unanswered, but showed that Kiev and Moscow are willing to work together despite the bloody conflict in eastern Ukraine and friction over gas supplies to areas held by pro-Russian rebels. Their joint statement didn’t mention whether Moscow would be willing to suspend a controversial take-or-pay clause in its contract with Kiev, which forces Ukraine to pay for agreed volumes even if it doesn’t need them.

    IMF Makes Ukraine War-Fighting Loan, Allows US to Fund Military Operations Against Russia, May Repay Gazprom Bill -  John Helmer - The International Monetary Fund (IMF) has agreed on a scheme of war financing for Ukraine. For the first time, according to Fund sources, the IMF is not only violating its loan repayment conditions, but also the purposes and safeguards of the IMF’s original charter. IMF lending is barred for a member state in civil war or at war with another member state, or for military purposes, according to Article I of the Fund’s 1944-45 Articles of Agreement. This provides “confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity.” To deter Russian and other country directors from voting last week against the IMF’s loan, and releasing their reasons in public, the IMF board has offered Russia the possibility of, though not the commitment to repayment for Gazprom’s gas deliveries, and the $3 billion Russian state bond which falls due in December. On March 11 the IMF board agreed to approve an Extended Loan Facility (EFF) for Ukraine for a total of 13.4 billion Special Drawing Rights (SDR), currently equivalent to $17.5 billion. Here are the IMF papers spelling out the details. The first tranche agreed for payment amounts to $4.6 billion, and was paid on Friday. According to the IMF, another $4.6 billion may be released in three instalments later in the year – in June, September, and December. At the same time, the Ukrainian government is obliged to repay the IMF $840.1 million in past-due loan amounts and charges.

    IMF Loan to Ukraine Props Up Failing Banks, Enriches Oligarchs -- John Helmer - The International Monetary Fund (IMF) has decided to give the Ukrainian banks R&R&R – that’s rest from regulation and refinancing. Inspection of the foreign exchange book, unwinding related-party credits, recovery of non-performing loans, and obligatory recapitalization, which were all conditions of the Fund’s 2014 Ukraine loan, have been relaxed. The new loan terms announced by the IMF last week, postpone reform by the commercial banks until well into 2016. In the meantime, the IMF says it will allow about $4 billion of its loan cash to be diverted to the treasuries of the oligarch-owned banks. That is almost one dollar in four of the IMF loan to Ukraine. The biggest beneficiary of last year’s IMF financing is likely to repeat its good fortune, according to sources close to the National Bank of Ukraine (NBU). This is PrivatBank, controlled by Igor Kolomoisky (lead image), governor of Dniepropetrovsk region and financier of several units fighting on Kiev’s side in the civil war.

    Serbia Asks People To Please Stop Throwing Their Grenades In The Garbage: (Reuters) - The Serbian government asked people on Tuesday not to dispose of hand grenades and other munitions in the garbage, hoping to minimize accidents as it imposes tighter controls over privately held weapons. Hundreds of thousands of unregistered arms, many stashed away after the wars in the former-Yugoslavia in the 1990s, are estimated to be at large in the country with a population of 7.3 million. That is in addition to over 1 million registered weapons.

    Evolution of Taxes: Italy Taxes "Shadows", Tax on Breathing Next? - Zero Hedge had an interesting article today called In Italy, They're Now Taxing Shadows. This is one of those stories where you expect the headline to be a bit of an exaggeration. It wasn't. As Italian newspaper Leggo reports, store owners in Conegliano are now faced with the unfortunate (albeit comically absurd) proposition of paying taxes on shadows. The rationale appears to go something like this: an awning casts a shadow on public property and therefore you must pay to use that property.  Tax on Breathing Next?  I pinged that article off Pater Tenebrarum at Acting Man. He lives in Austria. Pater responded ...They actually got that idea from Austria, where we have the so-called (put down the coffee) "air tax". No, it's not a tax on breathing just yet. But if you have a shop sign that "occupies airspace", you must pay a tax for it!  In Vienna this is garnished additionally with the "subway levy", which has to be paid regardless of whether one uses the subway or not. In fact, I think there is no government on the planet more inventive with regard to taxes, levies and imposts of all sorts.

    ECB Reports Only €9.8 Billion In Bond Purchases In First Full Week Of Q€ -- Unlike the Fed, the ECB's Q€ program is far more opaque, far more ad-hoc, and far more improvised (and at the rate it is soaking up already negligible collateral as JPM explained yesterday, soon to be far more abbreviated). In fact, without a daily POMO preview (such as what the Fed used to provide) nobody has any idea what is going or what the ECB will be buying until a week after the fact. Today, for the first time, the ECB provided the bare minimum data on its "Public sector purchase program" i.e., how much debt it had purchased in the first week of the ECB's QE. The answer: only €9.8 billion.

    ECB's balance sheet expands as it begins stimulus programme (Reuters) - The balance sheet of the European Central Bank and the euro zone's national central banks expanded by 7.298 billion euros ($7.76 billion) to 2.142 trillion euros in the week to March 13, the ECB said on Tuesday. The increase came as the ECB began buying sovereign bonds under an asset purchase plan that aims to pump 1 trillion euros into the euro zone economy with a view to lifting inflation from below zero back up towards its target of just under 2 percent. The ECB's gold reserves fell by 27 million euros to 343.8 billion euros.

    Yellen battles Draghi in euro-dollar drama - The dollar’s steep rise against the euro, which overshadowed this week’s US Federal Reserve policy meeting, had been the big financial market upset of 2015. Euro weakness was the implicit object of the European Central Bank’s quantitative easing programme, which had been well flagged before its start this month. However, the speed and extent of the euro’s decline against the greenback took aback even seasoned currency market watchers. Janet Yellen, Fed chairwoman, on Wednesday voiced the pain the stronger dollar was causing on the other side of the Atlantic, noting how it was hitting US exports. Her comments, together with lower growth and inflation forecasts as well as projections of a much slower pace of Fed monetary policy tightening than previously, may have succeeded in braking the dollar’s advance. Nevertheless, bafflement over why the euro had fallen so fast against the dollar highlights the disruptive potential of central bank actions; the volatility and uncertainty created by transatlantic divergences is in itself damaging — to economies as well as investors. The ECB started buying bonds on March 9. Even though its intentions were well known in advance — and could have been priced in — the euro still dropped 4 per cent against the dollar over the next five days, increasing to almost 25 per cent the single currency’s decline since May last year. Falls on such a scale cannot reasonably be considered normal for advanced world economies — but they have become a feature of 2015. The Swiss franc rose as much as 40 per cent against the euro when the prospect of eurozone QE forced Switzerland’s central bank to abandon its cap on the currency in January.

    The Volatility/Quantitative Easing Dance of Doom - Nomi Prins - The battle between the ‘haves’ and ‘have-nots’ of global financial policy is escalating to the point where the ‘haves’ might start to sweat – a tiny little. This phase of heightened volatility in the markets is a harbinger of the inevitable meltdown that will follow the grand plastering-over of a systemically fraudulent global financial system. It’s like a sputtering gas tank signaling an approach to ‘empty’. Obscene amounts of central bank liquidity applauded by government leaders that have protected the political-financial establishment with failed oversight and lack of foresight, have coalesced to form one of the most unequal, unstable economic environments in modern history. The ongoing availability of cheap capital for big bank solvency, growth and leverage purposes, as well as stock and bond market propulsion has fostered a false sense of economic security that bares little resemblance to most personal realities. Quantitative easing, or central bank bond buying from banks and the governments that sustain them, has enjoyed its longest period of existence ever. If these policies were about fortifying economic conditions from the ground up, fostering equality as a force for future stability, they would have worked by now. We would have moved on from them sooner. But they aren’t. Never were. Never will be. They were designed to aid big banks and capital markets, to provide cover to feeble leadership. They are policies of capital creation, dispersion and global reallocation. The markets have acted accordingly. What began with the US Federal Reserve became a global phenomenon of subsidizing the financial system and its largest players. Most real people – that don’t run hedge funds or big banks or leverage other peoples’ money in esoteric derivatives trades – have their own meager fortunes at risk. They don’t have the power of ECB head, Mario Draghi to issue the ‘buy’ order from atop the ECB mountain. Nor do they reap the benefits.

    Bank of International Settlements Questions Deflation Threat - New research from the Bank for International Settlements suggests that there is little to fear from even a persistent fall in the prices of goods and services, although a sharp decline in asset prices is a different matter. Examining a new data series that spans more than 140 years—from 1870 to 2013—and covers 38 economies, economists at the international organization for central banks have concluded that there is only “a weak association between goods and services price deflations and growth; the Great Depression is the main exception.” Two episodes help explain why the threat of persistent deflation tops the list of things that keep modern central bankers awake at night: the Great Depression, and more recently, Japan’s “lost decades.” Both periods seem to confirm that when prices are falling for a long time, output suffers, and the link between the two becomes self-reinforcing and chronic. So great is the fear of deflation that it took just one month of falling prices to prompt the European Central Bank to abandon its long-held reservations about printing money to buy government debt, and announce in January the launch of a program of quantitative easing. In Japan, a huge program of QE has also been deployed to end the period of deflation that dates back to 1998. The U.S. Federal Reserve and the Bank of England adopted similar policies to fend off the threat of deflation in the immediate aftermath of the global financial crisis, although they were also attempting to stabilize a collapsing financial system. However, the BIS study found that falling prices don’t always or even often lead to declines in output. Indeed, they have often had the opposite effect, and helped raise output. By contrast, the BIS economists find that asset price deflations—or falls in prices of equities or houses—do hurt economic growth. Indeed, this may be why falls in the prices of goods and services during the Great Depression appear to have done so much harm—they were happening at the same time as asset price falls, which were responsible for the damage.

    Sweden’s central bank cuts rates deeper into negative -  Sweden’s central bank delivered an unscheduled interest rate cut and expanded its government-bond purchase plan as it struggles to revive price growth. The benchmark repo rate was lowered to minus 0.25 per cent from minus 0.1 per cent, the Stockholm-based bank said in a statement. The bond-buying program will be expanded by 30 billion kronor ($3.4-billion U.S.), adding to the 10 billion kronor in purchases that started last month.“These measures and the readiness to do more at short notice underline that the Riksbank is safeguarding the role of the inflation target as a nominal anchor for price setting and wage formation,” the bank said. Policy makers are living up to a pledge of doing whatever it takes to jolt the largest Nordic economy out of disinflation. Inflation has trailed the Riksbank’s 2-per-cent target for more than three years. The central bank is now in full crisis mode after coming under criticism for missing its inflation target and for focusing on household debt at the expense of the labour market. Policy makers have said they have wide array of measures if needed, including direct currency interventions. Unemployment has remained stuck at around 8 per cent for the past three years, prompting criticism from economists including Nobel Laureate Paul Krugman, who called the Riksbank “sadomonetarists.” The krona has increasingly become a concern as central banks around the globe lower rates to weaken exchange rates. The European Central Bank is in the midst of an unprecedented stimulus program that is pushing the euro down. 

    On the limits of negative rates - Izabella Kaminska - Regarding how low negative interest rates can go, Paul Krugman wrote a couple of weeks ago that:  So the liquidity advantages of bank deposits over cash in a vault are pretty much irrelevant. It’s all about the cost of storage. And before that, he noted:What this means is that the marginal dollar of money holdings is being held solely as a store of value — the medium of exchange utility is irrelevant.  All in all, another example of how sometimes currencies can behave more like commodities than commodities, and commodities can behave more like currencies than currencies. A fundamental point behind all this is that you never engage in a contango (storage) trade until the rate of return compensates you for your cost of storage/insurance over the period in question. Once it does, however, there is no logical reason for you to be compensated over and above your storage costs. If you are, somewhere the market is behaving inefficiently. The very same point applies to cash storage. If the costs associated with negative rates are larger than the costs of storage, cash investors receive the equivalent of a free lunch — something that is unlikely to be tolerated by the market for long. On that basis, storage costs (or to be precise: storage costs plus insurance costs, plus inconvenience costs) should always form a natural limit to negative rates. And that applies to the rates on government bonds as well as cash.

    France will not hinder growth to rein in deficit - PM (Reuters) - France will stick to its commitments to bring down its budget deficit, but will be very careful not to do anything that would destroy growth, Prime Minister Manuel Valls said on Wednesday. "Europe needs a strong France, economically competitive, and of course France and the other member states also need a strong Europe," Valls said in a joint news conference with European Commission President Jean-Claude Juncker. The Commission has agreed to extend by two years until 2017 the deadline for France to bring its budget deficit below 3 percent of gross domestic product. The target for 2015 is 4 percent, which would require a further 4 billion euros of savings. Valls repeated that France would meet the target. true "France will abide by its budgetary commitments," Valls said, but adding that savings should not jeopardise growth. "I also highlighted before the Commission that we will be extremely vigilant not to destroy the growth that is returning today... 2015 will be the year of the return of growth and so of confidence in France," Valls said. Valls said any budgetary effort that weakened growth would not be taken seriously.

    Italian Debt Level Hits 132% of GDP --Italy’s debt load is now €2.1659 trillion, the Bank of Italy said Friday. The country’s public debt increased by €31 billion in January, bringing the total close to the record-high of €2.1677 billion euro recorded in July 2014. Italy’s public debt is only second to Greece in the eurozone. The main reason debt spiked in January is because the Treasury increased its available liquidity, or money supply, by €36.3 billion euro, bringing the total to €82.6 billions, Italy’s ANSA news agency reported Friday. Gross domestic product to debt in Italy is near 132 percent, compared to 127.9 percent in 2013, or 102 percent two years ago. Italy, the third largest economy in Europe, has had its economic woes overshadowed by the looming crisis in Greece. Rome hasn’t seen quarterly growth since mid-2011, and the economy is in need of economic resuscitation. Though the European Commission isn’t monitoring Italy as strictly as Greece, Rome’s budget is still under “special surveillance.”The European Commission mandated debt-to-GDP target is 60 percent. Italy’s growth forecast for 2015 is 0.5 percent, a much rosier picture after the economy’s less than stellar performance in 2014, when growth stagnated in the fourth quarter. In 2016, Italy’s central bank expects 1.5 percent expansion.

    Italian Bad Debt Hits Record $197 Billion As Bank Lending Contracts For Unprecedented 33 Consecutive Months -- For the third largest issuer of sovereign bonds in the world, Italy - the country all eyes will focus on once Greece and/or Spain exit the Eurozone - when it comes to NPLs things are going from bad to worse because as Reuters reported earlier, citing ABI, gross bad loans at Italian lenders continued to rise, totalling 185.5 billion euros ($196.5 billion) in January from 183.7 billion euros a month earlier.As the chart below shows, Italy now has over 10% of its  GDP in the form of bad debt.  And just as bad, even as NPLs rose, total debt issuance contracted once more, lending to families and businesses decreased 1.4 percent year-on-year in February, the 33rd consecutive monthly fall.

    Schulz: Greek ruling coalition ′a mistake′ - The German-born president of the EU Parliament, Martin Schulz, says he thinks the coalition of left and right-wing parties in the Greek government is not working. The EU is locked in drawn-out talks over Greek reform. Schulz's comments come days after he met with Greek Prime Minister Alexis Tsipras in Brussels. In other talks that same day, European Commission chief Jean-Claude Juncker told Tsipras the dispute over Greece's bailout was taking too long. But Schulz's statements threaten to prolong the disagreement, after the EU Parliament president told a German newspaper on Sunday he thought the Greek government in its present coalition was not working out."I think the current coalition of the left party with these right-wing populists is a mistake," Schulz told the Frankfurter Allgemeine. The radical leftist Syriza, the party which swept to victory in January and which Tsipras leads, governs Greece with the right-wing Independent Greeks.The Independent Greeks leader, Panos Kammenos - Greece's defence minister - on Saturday accused Germany of "intefering" in its domestic affairs. His criticism was aimed at German Finance Minister Schäuble, who earlier warned of a "Grexident," which could push Athens out of the euro.

    Eurozone wage growth slows, raising deflation fear - Pay growth in the eurozone slowed in the final three months of 2014, a development that if sustained would raise fresh concerns about the threat of a slide into deflation. The European Union's statistics agency said wages in the final three months of the year were 1.0% higher than in the fourth quarter of 2013, a slowdown from the 1.4% rate of growth recorded in the three months through September. Consumer prices began to fall in the final month of last year, prompting the European Central Bank to launch a program of quantitative easing, under which it will buy more than one trillion euros of most government bonds by September 2016. Policy makers are worried that workers and businesses will grow to expect further declines in prices, and agree lower pay rises that will in turn weaken inflation further. Labor costs also increased at a slower pace of 1.1% in the final quarter of last year largely as a result of slower wage growth. For many businesses, wages and taxes on workers account for the bulk of their costs. Slowing labor costs mean they are under less pressure to raise their own prices. There are some signs that in Germany at least, wage growth is set to pick up this year. In February, Germany's most powerful union IG Metall agreed a with employers on a 3.4% pay increase for 800,000 metal and electrical workers in the state of Baden-Württemberg, in a deal to serve as a precedent for other regions.

    Germany riot targets new ECB headquarters in Frankfurt: Dozens of people have been hurt and some 350 people arrested as anti-austerity demonstrators clashed with police in the German city of Frankfurt. Police cars were set alight and stones were thrown in a protest against the opening of a new base for the European Central Bank (ECB). Violence broke out close to the city's Alte Oper concert hall hours before the ECB building's official opening. "Blockupy" activists are expected to attend a rally later on Wednesday. In earlier disturbances, police in riot gear used water cannon to clear hundreds of anti-capitalist protesters from the streets around the new ECB headquarters.Organisers were bringing a left-wing alliance of protesters from across Germany and the rest of Europe to voice their anger at the ECB's role in austerity measures in EU member states, most recently Greece. The bank, in charge of managing the euro, is also responsible for framing eurozone policy and, along with the IMF and European Commission is part of a troika which has set conditions for bailouts in Ireland, Greece, Portugal and Cyprus. A spokesman for the Blockupy movement said the troika was responsible for austerity measures which have pushed many into poverty. Police set up a cordon of barbed wire outside the bank's new 185m (600ft) double-tower skyscraper, next to the River Main. But hopes of a peaceful rally were dashed as clashes began early on Wednesday. Tyres and rubbish bins were set alight and police responded with water cannon as firefighters complained they were unable to get to the fires to put them out. One fire engine appeared to have had its windscreen broken.

    Greek finance minister says some election vows can be put off (AFP) - Greece's combative finance minister has indicated that Athens' new radical left government is prepared to put some of its campaign promises on hold while it seeks to build confidence among its creditors. "Our programme is a programme for four years," Yanis Varoufakis told reporters after a meeting of economic and finance leaders in northern Italy on Friday. "We continue to hope...and will continue to work towards ensuring that these very basic promises we've made will be fulfilled within (this) timeframe," he said, according to an online video of a news conference following the closed-door meeting in Cernobbio, near Lake Como. "If this means that for the next few months while there are negotiations we suspend or we delay the implementation of our promises, we shall do precisely that in the context of building trust with our partners." Varoufakis did not specify the election pledges he had in mind.

    Technical talks to resume with lenders: Greece embarks on a second week of technical discussions with its lenders from Monday with the aim of agreeing on a first batch of reforms but also securing a concession, possibly from the European Central Bank, that would help it overcome its pressing liquidity problems. There was contact between Greek officials and representatives of the country’s lenders in Athens and Brussels this week. The Greek side was informed by its creditors that they need the latest data on Greece’s public finances in order for discussions to progress. The Greek delegation returned from Brussels to prepare the information, while technocrats sent to Athens by the institutions began receiving paperwork on Friday. Sources in Brussels told Kathimerini that there was little progress in the discussions that took place in the Belgian capital due to the lack of technical data and because of an apparent insistence on the Greek side on discussing the seven reform proposals that Finance Minister Yanis Varoufakis had submitted before the last Eurogroup. Athens will be hoping that discussions can advance next week because the government is running short of money. It is hoping for either an early disbursement of some of the 7.2 billion euros in remaining bailout loans or an increase in the 15-billion-euro limit on T-bills that the state can issue. The latter would need the approval of the ECB as Greek banks would likely be the only buyers of the T-bills. At the moment, though, the Frankfurt-based lender does not seem willing to budge on the issue. An ECB official told Kathimerini that Greece’s funding difficulties will only last until August, which means the pressure on the government to carry out reforms must be exercised now.

    Yanis Varoufakis: Presenting an Agenda for Europe at Ambrosetti - Yves here. If you followed Yanis Varoufakis before he became a household word (at least in Europe and in finance circles), you’ll recognize that he is making a layperson-friendly case for the Eurozone reforms that he, Stuart Holland, and Jamie Galbraith call A Modest Proposal. A new wrinkle is that he argues that the scarcity of bonds eligible for QE argues for one of its ideas, infrastructure spending funded by the EIB (those bonds would presumably be eligible for QE purchases). By Yanis Varoufakis, Finance Minister of Greece. Originally published at his blog Dear All, Ministerial duties have impeded my blogging of late. I am now breaking the silence since I have just given a talk that combines my previous work with my current endeavours. Here is the text of the talk I gave this morning at the Ambrosetti Conference on the theme of ‘An Agenda for Europe’. Long time readers will recognise the main theme – evidence of a certain continuity…

    Nazi Archives Will Support Greece's Escalating Claims For German War Reparations -- As Greeks solemnly remembered the horrific acts of 72 years ago (when the first of 19 trains transported nearly 50,000 local jews to Nazi death camps), the Greek President Pavlopoulos made statements today that he "remains adamant" that "Greece's demands for German war reparations and the occupation loan are active and can be claimed legally." German Finance Minister Wolfgang Schaeuble has once again ruled out the possibility of a retreat from what Berlin has already officially said on the matter - that the issue has been settled decades ago. But, today the Greek Defense Minister issued a statement confirming that archives that they possess from Nazi armed forces support the country's claims for reparations.

    Greek state not facing a cash shortage, says PM: The Greek state is not facing a cash shortage, Prime Minister Alexis Tsipras insisted Sunday as his government braced for another week of pressing debt repayments. "There is absolutely no problem with liquidity," Tsipras told reporters after a meeting Finance Minister Yanis Varoufakis. The finance minister had earlier told Alpha TV: "There is no problem in securing funds for salaries and pensions." The denials came as Greece prepared to issue 1 billion euros ($1.1 billion) in three-month Treasury bills on Wednesday to meet debt repayments. The government this week must repay over 900 million euros to the International Monetary Fund and redeem 1.6 billion euros in three-month Treasury bills, To Vima weekly reported Sunday. Greece has drawn no loans from its 240-billion-euro EU-IMF rescue package because the new government is still locked in talks with its international creditors on a revised reform plan. With a 6-billion-euro debt bill in March overall on Athens's books, Germany's Frankfurter Allgemeine Zeitung on Sunday warned that Greek civil servants should brace themselves for downsized salaries and pensions this month.

    Greece: update on public finances - At the end of last week the Greek Finance Ministry published the preliminary budget execution bulletin for February. The State primary budget balance has returned almost in line with the target, but mostly due to expenditure cuts. Revenues continue to underperform.  These bulletins give monthly data on a cash basis, which makes them well suited to assessing the situation of public finances from a short term financing perspective. Moreover, it shows the cumulative execution of the budget and it allows us to compare actual outcomes with expected ones.  As previously shown, the budget execution for December 2014 and January 2015 was significantly below expectations. For the 12-months period of January-December 2014 the outcome for the primary balance had been 1.9bn against an expected 4.9 billion, mainly due to the underperformance of State budget net revenues, which undershot the target by about 3.9 bn. Underperformance continued in January 2015, when the primary balance was 443 million against 1.4bn expected, with revenues still 935 million short of the target. According to the Ministry of Finance, the underperformance in January 2015 was mainly due to the extension of a VAT payment deadline until the end of February 2015 and to the underperformance of the expected revenues from the settlement of arrears. Therefore, data for February released last week are key. At first sight, the situation has improved. The State primary balance budget for the period January-February 2015 was 1.2bn compared to the 1.4bn expected, only 168 million short of the target. Compared to the 900 million shortfall recorded in January, this is a significant improvement. However, a closer look at the revenues and expenditure show that the improvement in the primary balance has been achieved almost entirely by reducing expenditures. Revenues for the period January-February 2015 came in at 7.8bn compared to 8.8bn expected, 963 million still short of the target. However expenditures, which in January 2015 were almost perfectly on target, were significantly reduced in February. For the period of January-February 2015, state budget expenditures came in at 7.98bn against 8.8bn expected, 844 million below target, thus explaining the improvement in the primary balance(see Figure 2).

    Why smoke and mirrors are safer than cold turkey - When German economic illiteracy meets with Greek diplomatic illiteracy, nothing good will come of it. Last week, a Greek minister threatened to swamp Germany with Islamic refugees. The Germans are again debating an accidental Greek exit from the eurozone: Grexident. Alexis Tsipras, the Greek prime minister, linked a claim about second world war reparation payments against Germany to present discussions on the extension of a loan agreement. The reparations claim itself is not frivolous. There are even German lawyers who believe Athens has a case. But it is politically mad to link the two. What we are hearing is not the usual noise: there is a loss of trust.  The conclusion I draw from this is that the odds of a Greek exit from the eurozone have shortened dramatically in the past two weeks. The two sides may tone down their rhetoric in the coming days but I cannot see the creditor countries relenting on the conditions of last month’s debt rollover agreement. Nor can I see the Greek government fulfilling them. Since nobody knows how many days or weeks Athens is from insolvency, the risk of a sudden exit is clear and present. Grexit may never happen — but it is time to get ready. Grexit is not an outcome any rational person would wish for. It will undermine the EU’s geostrategic influence. Economically, it will unmask a hidden truth: that the monetary union is just a beefed-up fixed-exchange system. A large number of financial contracts would instantly default. It is unclear how the global financial system would cope. The eurozone’s fledgling economic recovery would be at risk. For Greece an exit may well work in the long run if it is well managed; but it will bring economic misery in the short term.   A preparation for Grexit is not about a Plan B in the top drawer. It means a pre-agreed sequence of actions ready to be implemented. A changeover of a currency regime within a short period of time constitutes an organisational and logistical challenge that goes beyond anything normal states ever do. I would advise against a cold turkey switch into a new currency regime — one that would replace the euro with a new drachma. I doubt this is logically feasible or economically desirable. I would opt for a transitory regime, a smoke-and-mirrors version where nobody knows precisely whether Greece is in or out.

    Varoufakis' Latest Fiasco: FinMin Claims "Middle Finger To Germany" Clip Fake; Germany Disagrees -- It was a tough weekend (again) for Greece's embattled FinMin Yanis Varoufakis. After walking out on a CNBC interview when asked if he was a liability (after his photo shoot caused a storm in Greece), a video surfaced showing the outspoken minister giving the middle finger to Germany saying "solve the problem yourself." He has come out swinging this morning, as The Telegraph reports, Varoufakis exclaims, "That video was doctored. I've never given the finger, I've never given the middle finger ever." However, the user who uploaded it to YouTube denied it was a fake and, based on The Telegraph's poll, 67% believe Varoufakis did it. Furthemore, the German talk-show that aired the clip has confirmed "no evidence of manipulation or falsification," and, for the first time, a majority of Germans now want Greece out of the union.

    Greeks find support for German reparations claims — in Germany - When Greek governments have periodically sought reparations from Germany for crimes committed during the Nazi occupation, Berlin has tended to respond with an abrupt: geschlossen. As in, case closed. But the latest Greek demand — aired in the context of an increasingly bitter fight with Germany over access to the country’s bailout loans — is finding an opening with unlikely allies in Berlin. On Tuesday, two leading Social Democrats — Chancellor Angela Merkel’s coalition partners — urged the government to start talks with Athens over second world war reparations questions. Gesine Schwan, a former Social Democrat presidential candidate, and Ralf Stegner, an SPD vice-chairman, were echoed by Anton Hofreiter, parliamentary chief of the opposition Greens. All three were quoted in the online version of Der Spiegel, the news magazine. “The government’s legal argument isn’t convincing,” Ms Schwan told the Financial Times. “It leaves a bad impression that Germany doesn’t want to face up to its responsibilities. It was possible to find a solution in German-Polish relations. Something similar can be done with Greece.” Ms Schwan suggested that any negotiations about wartime claims be kept separate from the hard bargaining over Greece’s bailout. But she said she could see why the Greek government — “with its back to the wall” — had raised the issue.

    Greece’s default probability rises as Euro exit seems inevitable.: Greece’s money troubles resemble a game of pass the parcel, where each successive participant rips another sheet of wrapping paper off the box — which turns out to be empty when the final recipient reaches the core. With time and money running out, a successful endgame seems even less likely than it did a week or a month ago. It’s increasingly obvious that the government’s election promises are incompatible with the economic demands of its euro partners. Something’s got to give. The current money-go-round is unsustainable. Euro-region taxpayers fund their governments, which in turn bankroll the European Central Bank. Cash from the ECB’s Emergency Liquidity Scheme flows to the Greek banks; they buy treasury bills from their government, which uses the proceeds to … repay its International Monetary Fund debts! No wonder a recent poll by German broadcaster ZDF shows 52 percent ofGermans say they want Greece out of the euro, up from 41 percent last month. There’s blame on both sides for the current impasse. Euro-area leaders should be giving Greece breathing space to get its economic act together. But the Greek leadership has been cavalier in its treatment of its creditors. It’s been amateurish in expecting that a vague promise to collect more taxes would win over Germany and its allies. And it’s been unrealistic in expecting the ECB to plug a funding gap in the absence of a political agreement for getting back to solvency.

    Negotiations with Greece Close to Breakdown as Budget Strains WorsenYves Smith  Things are not looking good for Greece. When Greece and the Eurogroup signed a four-month deal delineating how Greece could get access to desperate needed, so-called “bailout” funds, our reading of the agreement was that it reaffirmed the so-called Memorandum of Understanding, meaning the structural reforms that were part of the IMF loan program. That was very much a minority view at the time.  It has proven to be correct. But Greece, which has a very different interpretation of the same text, is refusing to move forward with the discussion of the reform program, at least as envisaged by the Troika and the Eurogroup. That in turn is pushing already-strained relations to the breaking point. And notice that this is consistent with another early reading, that the two sides had no overlap in their bargaining positions. That meant unless one side or the other decided to capitulate on a key point, the negotiations would fail. That is the current trajectory.  That means the inertial path is that Greece does not in fact get much or any of the bailout funds it had hoped to obtain by the end of April at the latest. While the government is scrambling to find cash to make payments to the IMF and perversely, on a Goldman swap this month, it is borrowing from the pension kitty to do so. That means if tax collections do not improve, it may come up short on pension payments in upcoming months. It is not clear whether Syriza will be able to maintain public support if it fails to meet its pension obligations in full. And there is other evidence of the stress the government is under. Fresh releases of government data show that the government’s primary surplus was revised from an estimate by the previous government for 2014 of 1.5% to 0.3%. Worse, the primary surplus of the last two months was achieved only by virtue of cutting spending even further. Less government spending will only intensify the depression in Greece.

    IMF Labels Greece “Most Unhelpful Client in its History” - Yves Smith - This report does not bode well for Greece Prime Minister Alex Tsipras’ efforts to resolve what he regards as an impasse over negotiating process, but the IMF and possibly the ECB regards as a more fundamental outtrade. The IMF clearly regards the structural reforms that the previous government agreed to as very much in place, while Greece appears to believe that it had won the right to renegotiate them. Various media reports over the last few week suggest that Greece’s creditor are largely aligned with the IMF view, but that could unduly reflect German and financial services industry bias in reporting.  Regardless, the IMF was clearly set forth in the memo as having to approve the reforms package with Greece before any funds could be released. Tsipras’ efforts to reach a “political” solution by going to top European officials ex Lagarde, meaning Merkel, Hollande, ECB chief Draghi, EC head Juncker look unlikely to succeed. Greece has never been an equal party in these talks. As we reported earlier, Greece was not a party to the drafting of the February memo; it was presented to Tsipras as a fait accompli, and the most favorable report says he asked only to have one word changed. Unless Merkel decides Grexit is too big a risk and decides to puts her foot down, Greece is unlikely to get any breaks. Indeed, the meeting could wind up having the European leaders tell Tsipras that he is at the end of his rope and needs to make some tough choices.

    Grexit Contagion Resumes After IMF Slams "Most Unhelpful Client Ever" - Draghi, we have a problem. Despite the omnipotent buying power of the all-knowing ECB, peripheral European bond spreads are blowing out again (and stocks dropping) as Grexit fears start to spread contagiously across the continent. As Greece's cash crunch looms ever closer (with capital controls looming) and bulls "throw in the towel" on the "nuts" Greeks, the IMF has come out and rubbed Mediterranean salt into that wound by telling the Eurogroup that Greece is the most unhelpful country the organization has dealt with in its 70-year history. As Bloomberg reports, in a short and bad-tempered conference call on Tuesday, officials from the 'Troika' complained that Greek officials aren’t adhering to a bailout extension deal leaving Dijsselbloem hinting at Cypriot templates for Greece.

    Grexit, from Threat to Promise - Here are the overriding facts that are unlikely to change without a change in policy:
    1. Greece is in the grips of an economic and humanitarian crisis.  In fact, unless there is a substantial change in course, it runs the risk of becoming a failed state altogether.
    2. Greek sovereign debt is not payable.  Its society will collapse first.
    3. There does not exist the political will in Europe for a transfer union that mutualizes the obligations and needs of Greece on a permanent basis.  This is in contrast, for instance, to the United States, in which most sovereign debt is mutualized and interstate transfers occur on a routine basis.  A transfer union might be a first-best solution in Europe, but it is politically infeasible.
    4. Under current circumstances, Grexit would be experienced in Greece, and possibly through much of Europe, as a catastrophe.  A hurriedly introduced drachma would be unanchored, and the redenomination of contracts would be chaotic and disruptive of ordinary business.  Greek savings would either flee or be largely wiped out, with dangerous political consequences.
    5. Nevertheless, Greece was a poor candidate to enter the eurozone when it did and is a poor candidate to remain in the zone today.  Above all, it lacks a sufficiently large, diversified and productive export sector to permit growth under a fixed exchange rate without the accumulation of unsustainable current account imbalances.

    ECB Prepares For Grexit, Anticipates 95% Loss On Greek Debt -- Dear Greek readers: the writing is now on the wall, and it is in very clear 48-point, double bold, and underlined font: when the ECB "leaks" that it is modelling a Grexit, something Draghi lied about over and over in 2012 and directly in our face too, take it seriously, because it is time to start planning about what happens on "the day after." And incidentally to all those curious what the fair value of peripheral European bonds is excluding ECB backstops, the ECB has a handy back of the envelope calculation: a 95% loss.

    Parliament adopts new anti-poverty law: The Greek parliament adopted a "humanitarian crisis" bill on Wednesday, the first package of social measures put forward by Prime Minister Alexis Tsipras' radical left-wing government. In going ahead with presenting the bill of housing allowances and emergency food aid for the poorest, which also received support from conservative New Democracy lawmakers, the government ignored apparent attempts from the European Commission to halt it. Athens reacted angrily to a request from Declan Costello, a representative on the European Commission team monitoring Greece, telling the government not to make a "unilateral" move. In the latest skirmish between heavily indebted Greece and its creditors, government spokesman Gabriel Sakellaridis said the Commission's move amounted to a "veto" of the bill and added to the "pressure" on Greece. However, the EUs economic affairs commissioner Pierre Moscovici denied it had been a veto of the bill.

    It’s What Jesus Would Do, Right? -- Ilargi -- On the day that Mario Draghi opened the ECB’s overly opulent new €1.3 billion palatial building(s) in Frankfurt, which led to fierce and fiery protests with hundreds arrested, amongst others from the Blockupy movement, and the IMF for some reason found it necessary to tell the eurozone that Greece is its most unhelpful client ever (really? let’s see the others) and to leak that finding to the press to boot, the Greek parliament voted in an anti-poverty law with a huge majority.   Oh, and it was also the day that a San Francisco church decided to dismantle an elaborate system of outdoor showerheads it had installed to get rid of those pesky homeless on its property. The showerheads would get the ‘rough sleepers’ soaking wet every hour or so. As one tweet said: “It’s what Jesus would do, right?” Anyway, enough protest was enough to get them backtracking. I don’t know what the shower system cost, and who really cares, but I do know the price tag for the Greek law to help its poorest: €200 million. Or about 14% of what that one building cost (the EU has much more construction going on). Which, by the way, was announced as, I paraphrase and kid you not, “an example of what Europe is capable of”. No comment there, I couldn’t have out it any better myself. One thing’s for sure: the building is not meant for the poor. There were thousands of cops at the opening alone to prevent them from entering. Cops paid for with taxpayer money, including that from the poor. Greek Prime Minister Alexis Tsipras labeled the new Greek law a “humanitarian crisis law”, and responded, when warned by the European Commission that Greece ‘should not act unilaterally’: “If they’re doing it to frighten us, the answer is – we will not be frightened.”

    Greece and creditors bicker ahead of summit - A Greek “humanitarian bill” to aid victims of the economic crisis has become the latest flashpoint in the country’s frayed relationship with its creditors and has set the stage for a high-level confrontation at Thursday’s EU summit. Alexis Tsipras, the Greek prime minister, introduced the bill in parliament on Wednesday, angering creditors who believed they should have first been consulted. Mr Tsipras defended the move in an emotive speech, saying: “We’re not going to allow [foreign] technocrats to draft our legislation any longer.” The bill, which passed on Wednesday by an overwhelming majority, is part of the governing Syriza party’s campaign pledge to fight poverty in Greece caused by a prolonged recession and comes with a price tag of an estimated €200m. But creditors said Athens’s decision to push through the legislation violated a deal reached with eurozone finance ministers to consult them and not change economic policy unilaterally. They also complained that other measures had been inserted into the legislation that did not directly address social spending. “We completely support the objective of helping those who are most vulnerable in Greek society, those who have been struck by the crisis,” said Pierre Moscovici, economic chief at the European Commission, one of Greece’s bailout monitors. “But there must be consultations on new measures. We have to be able to evaluate the budgetary impact of the measures being proposed.” The German tabloid Bild put it more bluntly, calling the law — which offers food stamps and free electricity to the poor — a “declaration of war”.

    After Pillaging Pensions, Greece Raids Utilities To Repay Troika; Bonds Plunge As Bank Run Accelerates -- The new Greek government, instead of seriously contemplating a Plan B outside of the Eurozone, was busy thinking of new ways to raid its own population just to repay the "loathed" Troika. In the latest sad indication of just how truly insolvent Greece is, Reuters also reported that days after raiding its own Pension funds to repay the IMF (which in turn lent the cash to Ukraine so it could repay Ukraine's obligations to Gazprom and thus Putin), the Syriza government is now raiding the major state utility firms to lend the government cash through short-term repo transactions as it scrambles to avoid running out of cash.

    Greek bailout summit ends in disarray - Greece’s prime minister and fellow eurozone leaders emerged from a meeting early on Friday morning touting a breakthrough agreement to unlock much-needed bailout funds for Athens — only to fall into disagreement hours later about what it all meant. Two days of intensive and occasionally heated negotiations at an EU summit in Brussels amounted to little more than a repeat of talks a month ago between eurozone finance ministers that officials then also hailed as the definitive agreement to get the final bailout review under way. So similar were the two deals that, much like the one finalised last month, leaders involved in the talks could not agree on what was agreed within 12 hours after a late-night meeting aimed at resolving all differences. Athens is facing a severe cash crunch. It needs fresh sources of financing to pay wages and pensions at the end of this month following a €1bn revenue shortfall in the first two months of the year, according to Athens bankers. At the centre of the dispute is what reforms Athens must undertake to access €7.2bn in rescue aid, and how eurozone lenders can verify that Greece’s radical anti-austerity government is actually implementing them. Angela Merkel, the German chancellor, made clear at a post-summit news conference that the starting point for Alexis Tsipras, Greek prime minister, was a December 10 inventory of incomplete reforms promised by the previous Greek government. “The Greek government has the opportunity to pick individual reforms that are still outstanding as of 10 December and replace them with other reforms if they . . . have the same effect,” Ms Merkel said. It is a potentially incendiary demand since the document Ms Merkel referred to — a letter written by Greece’s then centre-right prime minister Antonis Samaras and his finance minister Gikas Hardouvelis — was the focus of particular scorn for Mr Tsipras’s far-left Syriza party on the campaign trail.

    Latest Greece Talks End in Confusion, Dissent - Yves Smith - It’s hard to fathom Greece’s approach to its dealings with its oppressors, um, creditors. As we’ve indicated from the outset, Greece was in a weak negotiating position and traded away its best card, that of the threat of a Grexit. Its only real hope was if outside forces applied pressure on its behalf. The US acted as if it might, but then backed off. Municipal and regional elections in Spain, if anti-austerity party Podemos performs well, could help the Greek cause, but Greece also needs to have enough of a financial runway to have the negotiating space to use any such gain to its advantage. The reality is that the government’s situation is only becoming more dire. Its fiscal surplus has dwindled and is close to zero. That means it has had to rob Peter to pay Paul, or in this case, the IMF to make payments due in March, by using pension reserves to meet those obligations.  The negotiations over Greek’s reform package were at loggerheads, with Greece not putting forward the sort of granular proposals that the IMF wanted, leading the IMF to make derogatory leaks to the press. That was astonishingly tacky nevertheless one of many indicators of how terrible the dynamics are between the two sides. And another spat erupted when Greece passed a €200 million humanitarian relief bill, leading a European Commission official to object that Greece had agreed to no unilateral measures and that they needed to put forward an entire reform package, and not implement measures piecemeal. Eurogroup chief Jeroen Dijsselbloem also said that Greece should consider implementing capital controls (which as Rob Parenteau points out by e-mail, Greece should have imposed long ago, now is too late in the game to do all that much good). Athens sought and won a meeting with the main players ex the most recalcitrant party, the IMF: Merkel, Draghi, Dijsselbloem, EC head Jean-Claude Juncker, French President Francois Hollande and EC council head Donald Tusk. Unfortunately, the talks appeared to resolve nothing. Each side declared victory and presented irreconcilable versions of what was agreed to.

    U.K. Adds Craft Beer, e-Cigarettes and Music Streaming to Inflation Basket - Fancy beer, protein shakes and the fees charged for streaming music online have been added to the basket of goods and services used to calculate inflation in the U.K. The U.K.’s Office for National Statistics routinely overhauls its list of more than 700 items that underpin Britain’s consumer-price index to ensure it accurately reflects households’ changing shopping habits. The ONS said Tuesday new items added to the national shopping basket include craft beer, gym-goers’ protein powder and refills for electronic cigarettes. Out have gone sat navs, since many drivers now use their smartphones to navigate, and yoghurt drinks, which have faded in popularity. Other changes indicate Britons are developing a taste for sweet potato and melon as well as rediscovering a love of offal, which hasn’t been included in the basket since 1999. The CPI is the main measure of inflation in the U.K. The Bank of England is tasked with keeping annual inflation as measured by the CPI at 2%. Inflation has cooled dramatically in recent months due to plunging oil prices but officials expect it to begin accelerating back to target over the next year or two.

    Labor Costs Yet to Fuel Global Inflation - Falling unemployment rates generated some upward pressure on consumer prices in the U.S. and the U.K. in the final months of last year, but had little impact in Japan or the eurozone. With lower oil prices having pushed annual rates of inflation to worryingly low levels across the developed economies, central bankers hope tightening labor markets will result in a pickup in wages that will translate into higher consumer prices, as businesses act to protect their profit margins and as consumer demand strengthens. But an internationally comparable measure of labor costs released Thursday by the Organization for Economic Cooperation and Development showed mixed signs. The Paris-based research body recorded a 0.5% increase in unit labor costs across its 34 members during the final quarter of last year, a pickup from 0.3% in the three months through September. However, that rise was modest compared with the start of 2014, when costs increased by 0.9%. Labor costs rose by 0.8% in the U.S., having fallen in the two previous quarters, and by a faster 0.6% in the U.K.. But in the eurozone, the growth of labor costs slowed to 0.3% from 0.5%, while in Japan, labor costs actually fell, although only slightly. “A further sustained increase in labour cost growth would probably be necessary for inflation to rise to the 2% target in the medium term, after the temporary impacts on inflation of movements in energy and food prices had faded,” the Bank of England’s Monetary Policy Committee said in minutes of its March meeting released Wednesday.

    Bank of England Sounds Alarm on Pound - —Bank of England officials are worried that a strengthening pound risks prolonging a spell of ultra-low inflation in the U.K., a development that could put a brake on interest-rate increases expected to begin early next year. Minutes of officials’ March policy meeting record the nine-member Monetary Policy Committee were concerned that sterling’s recent ascent may continue, due in part to the European Central Bank’s decision to embark on large-scale asset purchases to revive growth and stoke inflation in the neighboring 19-nation currency union. Sterling rose 2.5% against the currencies of the U.K.’s main trading partners in March and 4% against the euro, and the BOE’s market contacts suggested the gains would have been greater still were it not for uncertainty over the outcome of May’s U.K. general election, according to the minutes, published Wednesday. “Although monetary policy at home and abroad was only one of the many factors that influenced the exchange rate, especially in the near term, there was a risk that divergent monetary policy trends, as well as stronger prospects for growth in the United Kingdom than in the euro area, might continue to put upward pressure on the sterling exchange rate,” the minutes record. A stronger pound risks bearing down on the price of goods and services imported into the U.K., potentially prolonging the period at which annual inflation remains below its 2% target, the panel concluded. Annual inflation was just 0.3% in January and is expected to dip below zero in the coming months before rising back to target over the next two years.

    Why British Prime Minister Cameron Is Stiffing Obama To Woo Beijing - The Financial Times this morning carries an important exclusive on British Prime Minister David Cameron’s defiance of a White House effort to counter Chinese financial power. The White House had been trying to organize a G7 boycott of the new Asian Infrastructure Investment Bank, which is seen in Washington as a Chinese-inspired rival to the American-led World Bank. In an astonishing departure from normal British diplomacy, Cameron has broken ranks to back the Chinese initiative. The Obama White House has retaliated by publicly criticizing the Cameron government for its “constant accommodation” of China. The Obama slap-down is well timed because Cameron is facing an exceptionally tough general election in less than two months.

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