week ending Apr 25

 Has The Fed Already Lost? -- As you can see in the below chart, the current forecast by the Atlanta Fed for Q1 2015 US real GDP growth is 0.1%, up slightly from 0% at quarter end. As is also clear from the chart, as of the end of the March, Blue Chip Economists were collectively predicting a 1.7% number, quite a differential relative to the Atlanta Fed's real-time forecast: Why the sudden drop in the Atlanta Fed's real-time forecast for Q1 2015 real GDP? As we look at the underlying numbers in the model, we see recent weakness in personal consumption. Many had predicted an increase in consumption with lower gasoline prices, but that has not played out, at least not yet. Weakness in residential and non-residential construction has also played a part in the downward revision. Also important, slowing in US exports and equipment orders meaningfully influenced the March drop-off in the Atlanta Fed model. At some point, maybe sooner than later, the US economy will re-enter recession. Historically, that's the time when the Fed would lower interest rates in attempt to spur economic growth. But today, interest rates are already at 0%. That's what's so dangerous for the Fed about its current ZIRP policy -- it leaves no gunpowder left in the low-interest-rate bazooka. The Fed will enter its next battle defenseless. This is clearly a situation the Fed wants to avoid, so raising rates - soon - is an urgent priority. But... practically, can the Fed (and other central banks) really raise rates now without killing the already-moribund global economy?

Fed’s Dudley: Hopeful for 2015 Rate Increase, but Action Depends on Economy - Federal Reserve Bank of New York President William Dudley cast a less certain light on outlook for short-term rate increases in remarks Monday, noting that he hopes weakness over the start of the year will prove temporary and allow the Fed to boost borrowing costs. “Hopefully” the economic data will “support a decision to lift off later this year,” Mr. Dudley said, in reference to taking the first move to push interest rates off of their current near-zero levels. But, “because the economic outlook is uncertain, I can’t tell you when normalization will occur,” he said. When it comes to rate rises, “the timing is data dependent. We will have to see what unfolds,” he said. He said that raising rates off of current rock-bottom levels “does not mean that U.S. monetary policy will be tight” after a rate-increase action. Mr. Dudley’s comments came in remarks given at the Bloomberg Americas Monetary Policy Summit. His comments on the economy and monetary policy come as officials are contending with unexpectedly weak economic data over the start of the year, which includes a slowdown in what had been a very strong pace of job gains. The data has called into question central bankers’ expectations that they could begin to entertain the possibility of rate rises starting with the Fed’s mid-June policy meeting. A number of Fed officials signaled last week a more cautious view when it comes to boosting rates. Mr. Dudley said in his speech that he remains upbeat about the outlook. “Growth prospects for the U.S. economy over the remainder of 2015 will improve,” he said. “I expect that the first-quarter weakness will prove to be largely temporary.”

Rosengren Says Fed Could Delay Rate Increases if Weakness Continues - The Federal Reserve may need to delay interest-rate increases if economic data don’t pick up in the months ahead, Eric Rosengren, President of the Federal Reserve Bank of Boston, said in an interview with The Wall Street Journal. Mr. Rosengren said he was expecting such a pickup in growth, but pointed to several worries, including the outlook in Europe and China and the impacts of a strong U.S. dollar. The interview took place Monday, before the Fed, which meets April 28-29, began its regular self-imposed blackout on public comments about the economy or policy ahead of a meeting. A lightly edited transcript of key excerpts of the interview are below:

Fed Should Make Bond Buys a Regular Policy Tool, A Boston Fed Paper Finds -- WSJ: The Federal Reserve should consider keeping bond buys as a regular tool of monetary policy rather than return to a more conventional policy relying just on setting short-term rates, a newly-released paper from the Federal Reserve Bank of Boston says. In particular, the central bank’s new de-facto third mandate, overseeing financial stability, might benefit from a broader array of available policy measures, argues Michelle Barnes, a senior economist adviser at the Boston Fed. “Largely missing from discussions about the Fed’s ‘exit strategy’ is a consideration that perhaps it should retain, not discard, the balance sheet tools,” Ms. Barnes writes. “Since the Dodd-Frank Act has added maintaining financial stability to the Fed’s existing dual mandate to achieve maximum sustainable employment in the context of price stability, it might be beneficial to have several tools to achieve multiple policy objectives.” In response to the financial crisis and its aftermath, the Fed has held short-term interest rates near zero since December 2008. It also has purchased trillions of dollars-worth of Treasury and mortgage-backed securities to hold down long-term rates in hopes of spurring stronger economic growth. It’s portfolio of assets is now about $4.5 trillion, up from less than $1 trillion before the crisis.

Nobel Prize Winner Robert Merton Slams Fed for “Negative Wealth Effect” Policies” -  Yves Smith -- Nobel Prize winner Robert Merton and Arlin Muralidhar have charged ZIRP and QE happy central banks with economic malpractice. One of the main justifications for low interest rates is that they create a “wealth effect” by elevating asset prices. People allegedly feel richer and spend more, stimulating growth.  As we’ve pointed out, the first central bank to try the bright idea of lowering interest rates to spur consumption was Japan in the late 1980s. We know how that movie ended. Japanese banks and companies engaged in what was then called zaitech, or speculation, funded by being able to borrow 100% against urban land.** The result was to massively inflate already-large commercial and residential real estate bubbles, and to funnel Japanese cash into largely misguided and/or overpriced foreign investments. Merton and Muralidhar charge that investors are smarter than central bankers and understand the first rule of finance, that what matters is free cash flow. Super low interest rates lower incomes to asset owners, producing what they describe as a “negative wealth effect”. The Fed seems to think that retirees and others who live mainly off their assets will happily eat their seed corn, um, liquidate some of their capital gains to make up for the loss of income. Instead, people in that position who come up short most often curb spending.

It Takes A Regime Shift to Raise an Economy - Beckworth -- This week we learned that Ben Bernanke does not view NGDP level targeting, price level targeting, or a higher inflation target as the best way to deal with the zero lower bound (ZLB) problem. Now I believe the "what to do at the ZLB" debate is becoming moot as the U.S. economy improves, but it is interesting to consider Bernanke's thoughts on these alternative approaches to monetary policy. Here he is questioning their usefulness at the ZLB relative to his preferred approach:  The second possible direction of change for the monetary policy framework would be to keep the targets-based approach that I favor, but to change the target. Suggestions that have been made include raising the inflation target, targeting the price level, or targeting some function of nominal GDP... a principal motivation that proponents offer for changing the monetary policy target is to deal more effectively with the zero lower bound on interest rates. But economically, it would be preferable to have more proactive fiscal policies and a more balanced monetary-fiscal mix when interest rates are close to zero. Greater reliance on fiscal policy would probably give better results, and would certainly be easier to explain, than changing the target for monetary policy. So Bernanke wants the Fed to keep its inflation target of 2% and complement it with more aggressive use of fiscal policy when up against the ZLB. It sounds reasonable, a more balanced mix of monetary and fiscal policy. What could possibly go wrong? A lot, actually, if you believe this approach would have generated substantially greater aggregate demand growth over the past six years.  Here is why.

Goldman on Inflation: Pass-Through Disinflation: Not Over Yet  - A few excerpts from a note by Goldman Sachs economist David Mericle:  How much should we make of the firmer [inflation] recent prints? In our view, not much. The new car and apparel categories are the largest core goods categories, and are also the most sensitive to import prices. Auto import prices have begun to fall over the last few months, and we expect a decline in consumer prices to follow. Apparel import prices, in contrast, only flattened recently and remain up roughly 1% over the past year. This is not so surprising: the dollar's recent appreciation has not been primarily against the currencies of countries from which the US imports clothing, such as China. But the roughly one-third decline in cotton prices since mid-2014 is likely to result in a larger decline in apparel prices, and we expect that the full impact has yet to be felt. Our equity analysts expect apparel prices to fall for the remainder of 2015, and the 12% drop in raw cotton prices in the March PPI suggests further declines could come soon. ... What about services, which account for three-quarters of the core? Soft health care inflation has been a key contributor to lower core inflation. Slower growth of public payments for health care services and likely spillovers to private insurers suggest that health care inflation is unlikely to exceed core inflation going forward. While health care inflation should normalize from the current sub-1% rate eventually, soft wage growth in the health care industry suggests little immediate upward pressure. Shelter inflation has been among the firmest components of the core, and the low rental vacancy rate suggests this trend is likely to continue in the near term. But we see limited further upside: the National Multi Housing Council's Market Tightness Index is less elevated, and data from REIS indicate that new construction should raise the vacancy rate. More broadly, we do not view the recent data as a sign that pass-through is now behind us. Pass-through is a two-stage process. Dollar appreciation should result first in lower import prices, and then in gradually lower consumer prices. Similarly, while commodity prices are reflected in consumer energy goods and services prices fairly quickly, core prices then respond to energy costs with a lag. ... [W]hile the first stage of oil price pass-through appears largely complete, import prices likely have further to fall. ...

Chicago Fed: "Index shows economic growth slowed in March"  The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth slowed in March Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to –0.42 in March from –0.18 in February. Two of the four broad categories of indicators that make up the index decreased from February, and three of the four categories made negative contributions to the index in March.  The index’s three-month moving average, CFNAI-MA3, decreased to –0.27 in March from –0.12 in February. March’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed: Slowest US Growth In Nearly 3 Years  -- Economic activity in March slumped to the softest pace in 31 months, according to this morning’s update of the Chicago Fed National Activity Index. The three-month moving average of this business cycle benchmark (CFNAI-MA3) decreased to -0.27 last month from February’s -0.12 reading. Last month’s estimate is the lowest since Aug. 2012 for the CFNAI-MA3 data and another sign that the macro trend for the US has suffered in this year’s first quarter. Using this index as a guide, economic activity is well below the historical trend (i.e., below zero).Today’s update marks the fourth consecutive month of deceleration for CFNAI-MA3 after reaching +0.45 last Nov., a four-year high. The big-picture trend has clearly taken a hit so far this year. Keep in mind, however, that only negative values below -0.70 for CFNAI-MA3 indicate that a new recession has started, according to guidelines published by the Chicago Fed. By that standard, the US isn’t in recession. There’s still a moderate gap between the current reading and the tipping point, although the divide between the latest three-month reading and the red line of -0.70 has narrowed to the thinnest degree in several years.

What the Weather Wrought -- Atlanta Fed's macroblog -- At Seeking Alpha, Joseph Calhoun responds to Friday's macroblog post, which noted that, over the course of the recovery, first-quarter gross domestic product (GDP) growth has on average been slower than the quarterly performance over the balance of the year: ... the "between-the-lines" meaning of the Atlanta post is to ignore all of this since this weakness is being portrayed as "just like last year" a statistical problem in the one measure that economists think most represents the economy. Rest assured, we try pretty hard to not place any messages "between the lines," and the penultimate sentence of Friday's piece was meant to strike the appropriately tentative tone: "As for the rest of the year, we'll have to wait and see."We do believe, like others, that weather was at play in the subpar performance of 2015's debut. Severe weather, in February in particular, can explain some of the first-quarter weakness, but "some" is the operative qualifier.   As the following chart illustrates, relative to a baseline forecast without weather effects—proxied with National Oceanic and Atmospheric Administration measures of heating and cooling days through March—we estimate that the severity of the winter subtracted about 0.6 percentage point from GDP growth:

Merrill Lynch forecasting 1.5% GDP in Q1 -- From Merrill Lynch:  We are forecasting GDP growth of 1.5% in 1Q, suggesting the economy hit a soft patch at the start of the year. Business investment looks particularly weak with a likely decline in nonresidential structures investment, as suggested by the monthly Census data, and sluggish growth in equipment investment. We also look for the trade deficit to widen, reflecting the stronger dollar and weaker growth abroad. There is room for surprise with both the investment and trade figures, however. Most importantly, the BEA does not have estimates yet from the Census Bureau on March trade and construction spending, creating room for interpretation from the BEA. Moreover, the port shutdown on the West Coast disrupted activity, adding additional uncertainty for both trade flows and business investment. Elsewhere, we look for consumer spending to increase 2.0% in 1Q. Both auto sales and core control retail sales improved through the quarter after the slow start. We also expect services spending to look stronger, owing in part to greater spending on utilities given the winter weather. Residential investment is likely to be little changed as a decline in housing starts offsets a pickup in existing home sales.The Atlanta Fed is forecasting: The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 0.1 percent on April 16, down from 0.2 percent on April 14. Ouch.

Nomura Forecast: Q1 GDP at 1.0% -- From economists at Nomura: US Q1 GDP: It will likely show that final sales barely grew, but April data should be better.  Adverse weather conditions, West Coast port disruptions, the stronger dollar and the decline in crude oil prices all likely hurt economic activity in Q1 2015. Business investment slowed considerably as oil and gas exploration projects halted abruptly and precipitously on lower crude oil prices while manufacturing activity was additionally hurt by the stronger dollar. Also, we believe that lower gasoline prices failed to spur consumer activity as it appears that households decided to save or pay down debt using the extra money saved from lower gasoline prices. Furthermore, adverse weather conditions likely hurt consumer and construction activity. Taken together, we expect headline Q1 GDP to grow by 1.0% q-o-q on an annualized rate with final sales increasing by only 0.1%. However, there are two key sources of uncertainty worth noting. First, the Bureau of Economic Analysis (BEA) will only have the first two months of trade data on hand and will have to make some assumptions for March. . However, due to West Coast port labor disputes, trade activity slowed considerably in the first two months of the year. BEA’s assumptions on how quickly trade activity rebounded will have a notable impact on topline GDP. Second, our work suggests that there is material residual seasonality in topline GDP in Q1 as it tends to be below trend due to strong seasonal patterns in defense spending. As such, we now expect government expenditures to be more of a drag than we had previously assumed. Nevertheless, this factor remains a key source of uncertainty.

San Francisco Fed Sticks to Rosy Forecast Despite Recent Weakness - Real Time Economics - WSJ: A wobbly start to the year is not deterring economists at the Federal Reserve Bank of San Francisco from a fairly upbeat growth outlook for 2015. “With winter behind us, we expect above-trend growth to resume in the second quarter and continue for the rest of 2015,” writes Mary Daly, senior vice president and associate director of research at the San Francisco Fed, in a recent research note. “Accommodative monetary policy along with ongoing improvements in credit market conditions, asset values, and household incomes related to the strong labor market all are expected to help sustain this solid growth.” Many economists have cut back their first quarter growth forecasts to below 2%, with some attributing much of the unexpected weakness to another unusually harsh winter. Ms. Daly echoed that view. “Much of the weakness can be traced back to severe winter weather in the Midwest and East Coast that snarled transportation networks, idled construction sites, and kept shoppers at home,” she said.  Fed officials have generally become less optimistic about U.S. growth prospects in recent weeks. As recently as March 1, Ms. Daly’s boss, San Francisco Fed President John Williams, was sticking to his estimate that U.S. gross domestic product would finally hit a 3% annual growth rate for first time in this recovery. By March 23, he had revised that forecast down to 2.5%. At their March policy meeting, Fed officials downgraded their 2015 economic growth forecast to 2.3%-2.7%, from their estimate in December of 2.6-3.0%.  They will next update their forecasts at their meeting in June.

Why You Can’t Put Faith in Reports of First-Quarter Economic Slumps - - We have heard this story before: The recovery gathers momentum, but then as the new year gets underway, the reported pace of growth in gross domestic product stalls.It’s happening now. It happened in the first quarter of last year. And it happened in 2010, 2011 and 2012. Indeed, the pattern of weak first-quarter growth has occurred so often that it has led some economists to ask whether there’s a problem in how the government calculates its G.D.P. numbers.The “first-quarter effect” is rather large. In a recent research note to clients, Alec Phillips of Goldman Sachs highlighted the differential, noting that since 2010, “growth in Q1 has averaged 0.6%, while growth in the rest of the year has averaged 2.9%.” CNBC’s Steve Liesman has analyzed the data, finding that since 1985 “first-quarter growth has been by far the weakest of the four, averaging just 1.87 percent while the economy has grown 2.7 percent.”I have checked the math, and they’ve each gotten their sums right. Moreover, these differences are large enough that they are unlikely to simply reflect the effects of chance. And while Mr. Liesman is right that the phenomenon is apparent over the past few decades, there’s no evidence of it in the 1970s and 1980s.It isn’t a surprise that the economy has seasonal ups and downs. After all, summer vacations slow some industries, while others are chilled by winter snow, and the annual parade of holidays shifts spending throughout the year. But the government’s economic statistics are meant to adjust for these predictable seasonal swings, through a process known as seasonal adjustment. But it appears that these adjustments have failed to do the job.

Five graphs to watch in 2015: 1st quarter update - At the end of last year, I highlighted 5 graphs to watch in 2015.  Now that we have all of the reports for the first three manoths, let's take another look.

• #5.  Mortgage refinancing. After a mini-surge at the end of January (light brown in the graph below), refinancing applications fell back to somnolence during February due to a rise in mortgage rates.  Refinancing recovered a little in March as rates retreated, but not so low as in January.  Mortgage News Daily has the graph:
• #4 Gas prices Here is a graph of gas prices (blue) compared with nominal average hourly wages (red) since the bottom in prices in 1999: How long must a worker labor in order to buy a gallon of gas? After skyrocketing in the lead-up to the Great Recession, gas prices collapsed, helping the consumer start to spend again on other things at the bottom of that recession.
• #3 Part time employment for economic reasons. Next is a graph of part time workers for economic reasons expressed as a percentage of the labor force. In the first quarter, this continued to improve: In the longer view, however, this only brought us to the equivalent of levels in 1988, and still 2% (about 3 million) above the boom level of 1999 and about 1.5% (2.25 million) above the level of 2007.
• #2 Not in Labor force but want a job now: This moved generally sideways during the first quarter, going down by only -56,000 from 6.445 million in December. It is now almost 700,000 above its post-recession low of November 2013 (just prior to Congress's cutoff of extended unemployment benefits) and more than 2 million above its 1999 and 2007 lows.
• #1 Nominal wage growth After an anomalous decline in average hourly wages in December, and a big positive reversal in January, wages for nonsupervisory workers were totally flat in February, and then increased again in March.

Crowding In and the Paradox of Thrift - Krugman - As Francesco Saraceno notes, the IMF’s research department, which was always excellent, has become an extraordinary source of information and ideas in this Age of Blanchard. In particular, these days you can pretty much count on the semiannual World Economic Outlook to offer some dramatic new insight into how the world works. And the latest edition is no exception. The big intellectual news here is Chapter 4, on business investment. As the report notes, weak business investment has been a major reason for global economic weakness. But why is business investment weak? Broadly speaking, there are two views out there. One is that we have a special problem of lack of business confidence, driven by fiscal worries, failure to make needed structural reforms, and maybe even careless rhetoric. The U.S. right, in particular, is fond of the “Ma! He’s looking at me funny!” hypothesis – the claim that President Obama, by occasionally suggesting that some businessmen have behaved badly, has hurt their feelings and perpetuated the slump. The other view is that business investment is weak because the economy is weak. Specifically, it is that the effects of household deleveraging and fiscal consolidation have produced slow growth, which has reduced the incentive to add capacity – the “accelerator” effect – leading to low investment that further reduces growth. The IMF comes down strongly for the second view. In fact, if anything it finds that business investment has held up a bit better than one might have expected in the face of economic weakness:

Airbrushing Austerity -- Krugman -  Ken Rogoff weighs in on the secular stagnation debate, arguing basically that it’s Minsky, not Hansen — that we’re suffering from a painful but temporary era of deleveraging, and that normal policy will resume in a few years.  As far as I can tell, however, Rogoff doesn’t address the key point that Larry Summers and others, myself included, have made — that even during the era of rapid credit expansion, the economy wasn’t in an inflationary boom and real interest rates were low and trending downward — suggesting that we’re turning into an economy that “needs” bubbles to achieve anything like full employment. But what I really want to do right now is note something else, which is visible in the Rogoff piece and in many other things one reads lately — a backward-looking view of the austerity fever that swept policymaking circles in 2010 and airbrushes out the reality of intellectual folly. You see this sort of thing when people who predicted soaring interest rates from crowding out right away now claim that they were only talking about long-term solvency; when people who issued dire warnings about runaway inflation say that they were only suggesting a risk, or maybe talking about financial stability; and so on down the line. So, in Rogoff’s version of austerity fever all that was really going on was that policymakers were excessively optimistic, counting on a V-shaped recovery; all would have been well if they had read their Reinhart-Rogoff on slow recoveries following financial crises.

Is Government Debt Too Low? -- Government debt has skyrocketed since the financial crisis, and now tops 100% of GDP on average in rich countries. Is that too high? Oddly, it may not be high enough. That’s the provocative suggestion Brad DeLong, from the University of California at Berkeley made at the International Monetary Fund’s “Rethinking Macro” conference last week. Mr. DeLong bases his argument on a simple observation. The interest rate that rich countries with super-safe debt (in the case of the eurozone, that means Germany but not Spain) pay is astonishingly low: lower than the growth rate of nominal gross domestic product (that is, GDP before subtracting inflation). In the U.S., the Treasury yield has gone from roughly equal to growth in nominal GDP in 2005 to 3 percentage points lower today. By Mr. DeLong’s reckoning, this means those countries are borrowing too little. Bond yields and prices move in opposite directions, so low government bond yields equate to very valuable government bonds. Mr. DeLong asks, “Isn’t the point of the market economy to make things that are valuable?” Since the debt of rich countries is “very cheap to make… shouldn’t we be making more of it?” How does that work? How much the government should borrow depends on whether the taxes required to pay off that borrowing in the future are greater, or less than, the benefits that borrowing yields, today or in the future. By Mr. DeLong’s reckoning, the huge gap between interest rates and nominal growth is a signal that the government could borrow a lot more today and make society better off. What should the government do with the money it borrows? Mr. DeLong’s frequent co-author Larry Summers has repeatedly urged governments to invest more in infrastructure. After all, whatever the return is on the return is on highways, airports, water treatment plants or education, it has to be higher than today’s rock-bottom governments bond yields.

The Republican Recipe for Widening Inequality - This week, House and Senate Republicans will be working on a final budget plan. They are operating from templates that call for cuts of about 40 percent on average by 2025 in programs for low and moderate income households — things like food assistance, college aid and tax credits for the working poor. The damage would be severe. For starters, sixteen million people would be pushed into poverty, or deeper into poverty, after 2017.  At the same time, the Republican plans leave untouched nearly $1 trillion worth of annual tax breaks that overwhelmingly benefit the top 20 percent of households. If that’s not flabbergasting enough, there’s this:  Separate from the budget plans, nearly all House Republicans and seven Democrats passed a bill last week to repeal the federal estate tax on inherited wealth. Repeal would benefit the 5,500 wealthiest families in America each year and would do nothing for everyone else, because the estate tax applies only to those at the very top of the wealth ladder. For estates valued at $50 million and up, for example, repeal would save the heirs about $20 million per estate, on average, in 2016.

Obama’s Jockeying With Congress Shifts to Global Economic Stage - With relatively little notice, the agenda over which the president and lawmakers from both parties are wrestling has shifted to international affairs—and increasingly to international economic affairs. The proposed nuclear deal with Iran and the president’s request for new congressional authorization to prosecute the fight with Islamic State have gotten the most attention in this category. At the same time, three big questions of high importance on the global economic stage are hanging in the congressional balance: continued funding for the Export-Import Bank; so-called fast-track authority to help the Obama administration complete an Asian free-trade deal; and, new rules governing the International Monetary Fund.  The fast-track trade bill may well be the most pressing piece of business on this list. The U.S. is close to completing the Asian free-trade deal known as the Trans-Pacific Partnership, and Japanese Prime Minister Shinzo Abe arrives in Washington next week for a high-profile visit during which both countries would like to close remaining gaps. But getting a deal over the finish line will be difficult unless American negotiators can carry to the table fast-track authority granted by Congress. That authority empowers them to negotiate a deal that Congress could vote up or down but not seek to alter. Foreign negotiators are unlikely to make the difficult and painful concessions needed to close a deal if they aren’t confident the American administration can get that deal past Congress in the end. On fast track, Mr. Obama is fighting mostly members of his own Democratic Party who fear job losses under free-trade deals—and who are under growing pressure from liberal groups to oppose such deals.

America's trade deals: A step closer -  The Economist: IN HIS six years in office Barack Obama has rarely had occasion to thank Republican legislators for their support. Global trade rules may give him a reason to do so. In 2013 the Obama administration began a serious push for to complete bold trade deals: two grand regional deals, with Europe and with Pacific rim economies, as well as a handful of global agreements. Negotiations on the deals have not gone as smoothly as initially hoped. A Pacific deal—the Trans-Pacific Partnership (TPP)—was supposed to be done by now. A global deal agreed under the umbrella of the World Trade Organisation in late 2013 nearly fell apart last year over Indian demands for special treatment. Yet the biggest threat to the most ambitious deals—the TPP and its European cousin, the Trans-Atlantic Trade and Investment Partnership (TTIP)—has been the risk that America's Congress will not grant Mr Obama Trade Promotion Authority (TPA), or "fast track". Fast track guarantees a deal an up-or-down vote in Washington with no amendments. That gives the president the ability to make credible promises in negotiations which cannot be amended away later by a meddling Congress. Fast track expired in 2007 and Congress has not rushed to renew it. That may soon change. Yesterday key legislators worked out a deal for a bill to give Mr Obama TPA. The bill has a hard road ahead; it must be approved by both houses of Congress and will need Democratic votes in the Senate to pass. That is anything but assured; many of the president's loudest critics on trade are within his own party. The deal is nonetheless heartening news, given the stasis into which negotations on the president's proposed trade deals seemed to have fallen.

Fast Track Bill Would Legitimize White House Secrecy and Clear the Way for Anti-User Trade Deals - Following months of protest, Congress has finally put forth bicameral Fast Track legislation today to rush trade agreements like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) through Congress. Sens. Orrin Hatch and Ron Wyden, and Rep. Paul Ryan, respectively, introduced the bill titled the Bipartisan Congressional Trade Priorities and Accountability Act of 2015. With Fast Track, lawmakers will be shirking their constitutional authority over trade policy, letting the White House and the U.S. Trade Representative pass Internet rules in back room meetings with corporate industry groups. If this passes, lawmakers would only have a small window of time to conduct hearings over trade provisions and give a yea-or-nay vote on ratification of the agreement without any ability to amend it before they bind the United States to its terms. The Fast Track bill contains some minor procedural improvements from the version of the bill introduced last year. However, these fixes will do little to nothing to address the threats of restrictive digital regulations on users rights in the TPP or TTIP. The biggest of these changes is language that would create a new position of Chief Transparency Officer that would supposedly have the authority to “consult with Congress on transparency policy, coordinate transparency in trade negotiations, engage and assist the public, and advise the United States Trade Representative on transparency policy.”

ANALYSIS: Hatch Bill Would Revive Controversial 2002 Fast Track Mechanism that Faces Broad Congressional, Public Opposition --The Hatch Fast Track bill introduced today would revive the controversial Fast Track procedures to which nearly all U.S. House of Representatives Democrats and a sizable bloc of House Republicans already have announced opposition.  Most of the text of the Hatch Fast Track bill replicates word-for-word the text of the 2014 Fast Track bill, which itself replicated much of the 2002 Fast Track bill. The bill explicitly grandfathers in Fast Track coverage for the almost-completed Trans-Pacific Partnership (TPP) and would extend Fast Track procedures for three to six years. The bill would delegate away Congress' constitutional trade authority, even after the Obama administration dismissed bipartisan and bicameral demands that the TPP include enforceable currency manipulation disciplines. Today's bill, sponsored by Senate Finance Committee Chair Orrin Hatch (R-Utah), House Ways and Means Chair Paul Ryan (R-Wis.) and Finance Committee Ranking Member Ron Wyden (D-Ore.) failed to attract a single House Democratic sponsor. In the past 21 years, this form of Fast Track authority has only been authorized once by Congress – from 2002 to 2007. In 1998, the House of Representatives voted down Fast Track for President Bill Clinton with 71 GOP members joining 171 House Democrats.

Same Old Fast Track Would Unravel Consumer Protections —Today, Sen. Orrin Hatch (R-UT), Sen. Ron Wyden (D-OR) and Rep. Paul Ryan (R-WI) introduced their Fast Track trade promotion legislation (The Bipartisan Congressional Trade Priorities and Accountability Act of 2015, TPA-2015) that includes provisions that would weaken consumer protections, undermine U.S. food safety standards and prevent commonsense food labeling. The legislation is nearly identical to the measure Senator Hatch introduced last year that failed to garner Congressional approval. It replicates the provisions of Fast Track bills from bygone eras (in 1991 and 2002 in the buildup to NAFTA and CAFTA) and deprives Congress of its constitutionally mandated role in setting U.S. policy in a more complex international commercial landscape.“Congress should reject this retrograde Fast Track trade legislation that is designed to usher in the secret Trans-Pacific Partnership – a trade deal that is a raw deal for consumers,” said Wenonah Hauter, executive director of Food & Water Watch. “The fine print in Fast Track contains an all-out attack on America’s consumer protection and food safety laws.” The legislation dismisses the importance of food safety and consumer protection in trade negotiations, although unsafe imported foods and products have deluged consumers over the past twenty years of corporate-driven globalization. The bill specifically only allows trade negotiators to “take into account” (not “obtain” or “ensure”) the “legitimate health or safety [and] consumer interests,” relegating these safeguards to second class status behind mandatory objectives for business interests and allowing unelected trade negotiators to decide which U.S. consumer protections are “legitimate” (Sec. 2(a)(13)). “Fast Track allows U.S. trade negotiators to trade away vital consumer safeguards to win giveaways and protections for big business in the TPP or other trade deals,” said Hauter. “The safety of American consumers is up for sale under Fast Track.”

The Trans-Pacific Partnership is great for elites. Is it good for anyone else? - Vox: The TPP covers a bewildering range of topics. In addition to conventional trade issues like tariff rates, it includes language on labor rights, environmental laws, copyright and patent protections, e-commerce, state-owned enterprises, corruption, and government procurement. Trade deals like the TPP have grown so complex because the global trade community has figured out how to solve a problem that has bedeviled philosophers and political leaders for centuries: how to craft international agreements with teeth. The WTO's dispute-settlement process, which serves as a model for the TPP, puts pressure on countries to actually keep the promises they make in trade deals. That's why everyone with an agenda — wealthy investors, drug companies, labor unions, environmental groups, and so on — is scrambling to get on the bandwagon. But the complex, secretive, and anti-democratic way the TPP is being crafted rubs a lot of people the wrong way. The agreement will have profound and long-lasting effects on countries that sign on, yet voters in those countries won't even be allowed to see the text until negotiations are over and it's too late to make changes. No wonder so many groups — the AFL-CIO, civil liberties groups like the Electronic Frontier Foundation, and even the free traders at the Cato Institute — have been raising concerns about it.

The Trans-Pacific Partnership Is No Aircraft Carrier - Secretary of Defense Ash Carter has joined the chorus in favor of the Trans-Pacific Partnership. Carter has made explicit the national security “turn” in the TPP debate by analogizing the agreement to the construction of a new aircraft carrier.  The reformulation of the TPP conversation as a national security issue is puzzling, but isn’t necessarily new. David Petraeus made the same case for the TPP last year, arguing that American credibility depended on offering our friends and allies the security and predictability of a multi-lateral trade agreement. Patrick Cronin makes a similar case, although his argument (like that of Petraeus) is a conceptual mess, conjuring terrors of Australia and Japan realigning around Beijing, and implying that changing the way that Vietnam handles American intellectual property regulation will somehow have an effect on Chinese expansion in the South China Sea. Michelle Flournoy and Ely Ratner made roughly the same argument in the Wall Street Journal. Who are these people trying to convince?  The national security “turn” in the TPP conversation is unlikely to carry much weight abroad, and so must be aimed at a domestic audience. The best case for weaponization of the TPP is founded on the argument that the United States faces a systemic challenge in the Asia-Pacific; that is to say, China is challenging the regional liberal economic order that the United States has helped to create and maintain. The TPP, by engaging the critical states of the region and convincing them to support the rule-set preferred by the United States, will help shore up and defend that system. This, rather than quasi-mystical gobbledygook about allies losing faith in American credibility, should be the center of the national security argument for the TPP.

Fast-Track: A Gut-Kick to the Progressive Movement - In a move that elicited a collective groan from virtually all of progressive America, the Obama administration and congressional Republicans reached a deal on April 16 on so-called “fast track” trade authority. This is the legislation needed to ram new trade agreements through the U.S. Congress with limited debate and no amendments. It was a gut-kick for labor unions and environmental, consumer, human rights, and other groups that have long called for a change of course on U.S. trade policy. Instead, the fast track legislation shows we’re still stuck in the same old failed model of the 1990s. The bill lays out trade policy objectives that elevate the narrow interests of large corporations and undercut efforts to support good jobs, the environment, and financial stability.  Nowhere is this corporate bias more explicit than in the “investor-state” dispute settlement mechanism. In fact it would be hard to find in any U.S. policy a stronger example of excessive power granted to large corporations. Under this mechanism, private foreign investors are allowed to sue governments in international tribunals over actions — including public interest regulations — that reduce the value of their investments. The fast track bill makes clear that future trade agreements will continue to grant this extreme corporate privilege.

Hatch and Ryan: Chasing Mice and Ignoring the Elephants - It’s a scary thing when powerful government officials misuse their power, and especially when they misuse it to afflict the needy and comfort the comfortable. This appears to be what’s happening now as the chairmen of the two congressional tax-writing committees seek to change the tax status of various worker centers that have annoyed politically active corporations like Walmart, Darden Restaurants, and McDonalds.  I am not a tax lawyer and can’t say with any certainty whether a worker center formed to provide services such as job training, education, and legal assistance to low wage workers should suddenly be transformed from a 501(c)(3) charity into a labor organization if it challenges wage theft or other labor problems caused by a store or corporation. I don’t think the law should operate that way, but the law has a lot of problems. What I can say is that it’s a shame that Sen. Orrin Hatch and Rep. Paul Ryan are spending their time on a matter of importance only to huge corporations that need no help from Congress in crushing worker organizations, fighting wage increases, and profiting immensely from weak labor standards and high unemployment. As their letter to IRS Commissioner John Koskinen shows, Ryan and Hatch don’t like the fact that worker centers have exercised their constitutionally protected right to “protest and picket against targeted businesses.”

What’s Wrong with Wyden-Hatch-Ryan’s Fast Track Bill – The Specifics - Gaius Publius - When we first reported on the introduction of Fast Track legislation — the bill that makes it possible for Obama and corporate Congress men and women to pass TPP, the next NAFTA-style “trade” agreement, by neutering Congress’ role in the process — we said that the new bill was being analyzed. That analysis is done, and the results are in. This version of Fast Track is worse than the last version, a bill which failed to pass Congress in 2014. Here are the specifics (pdf) via Lori Wallach at Public Citizen, the go-to person for “trade” analysis. I’m going to focus on the main problems so you’re not overwhelmed with detail. Your take-aways:

• What was bad in the prior agreement is worse, despite Wyden’s intervention.
• Every attempt in the bill to make TPP conform to mandated worker, environmental and currency protections is unenforceable.

Note that the bill failed to attract a single Democratic co-sponsor in the House. This is not a bipartisan bill; it’s a Wyden-plus-Republicans bill, at least so far. Wallach starts: The trade authority bill introduced today would revive the controversial Fast Track procedures to which which nearly all U.S. House of Representatives Democrats and a sizable bloc of House Republicans already have announced opposition. Most of the text of this bill replicates word-for-word the text of the 2014 Fast Track bill, which itself replicated much of the 2002 Fast Track bill. Public Citizen calls on Congress to again oppose the outdated, anti-democratic Fast Track authority as a first step to replacing decades of “trade” policy that has led to the loss of millions of middle-class jobs and the rollback of critical public interest safeguards.

Brown, Kaptur On-Board To Oppose ‘Fast Track” and TPP: Ohio Congressman Marcy Kaptur, who flew into Cleveland several weeks ago on Air Force One with the president to attend his remarks at the City Club, said that more than 47 million jobs have been lost since 1976 on international trade accounts alone. Since then, she said, the accumulated lost in trade deficits is now about $9.5 trillion. She pointed to the three-year old trade deal with Korea as an example of another promised good deal gone bad. The bad deal with South Korea has resulted in the loss of 75,000 jobs so far. “Incomes are declining, the middle-class is shrinking and society is unbalanced,” she told reporters today. Trade deficits reduce GOP by 2 percent, she said, adding, “We can’t continue…We’re going to win this fight…for a new trade paradigm.”  Six Senators, including Ohio’s senior senator, Sherrod Brown, Chuck Schumer of New York, Debbie Stabenow of Michigan, Robert Menendez of New Jersey, Ben Cardin of Maryland and Bob Casey of Pennsylvania, signed this statement objecting to the proceedings: “With millions of jobs on the line, American workers and manufacturers deserve more than a hastily scheduled hearing without an underlying bill. Congress should undergo a thorough and deliberative committee process for debating trade agreements that account for 40 percent of our world’s GDP. And we should be debating a bill that has seen the light of day and contains strong provisions to protect American workers against illegal trade practices like currency manipulation.” Senator Rob Portman, who is running for a second term next year, supports TPP. Ted Strickland, a former Ohio governor who is one of two Democrats to take on Portman next year, is also opposed to the trade deal that doesn’t include China.

Key Democrat says he’ll try to kill Obama-backed trade bill - A key House Democrat said Friday he’ll try to kill a bill that would give President Barack Obama “fast track” trade treaty authority, a measure strongly supported by the White House. “I’m out to defeat the Hatch-Wyden bill,” Rep. Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, told reporters. The bill was introduced Thursday by Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, and Sen. Ron Wyden of Oregon, the top Democrat on the finance panel. It was introduced in the House by Rep. Paul Ryan, the Wisconsin Republican who leads the Ways and Means Committee.  The White House has sought fast track, formally known as trade promotion authority, to negotiate a major trade deal with Pacific nations. Fast track would subject trade agreements like the proposed Trans-Pacific Partnership to a simple up-or-down vote in Congress, and deny lawmakers the ability to amend the deals.  Congressional Democrats, as well as labor unions, have criticized trade promotion authority and the proposed Pacific trade deal as being bad for American workers. In a statement on Thursday, Obama said the fast track bill would give U.S. workers a “fair shot.”  Levin made clear the White House can expect more of a fight from Democrats.

No, the TPP Won’t Be Good for the Middle-Class | Economic Policy Institute: President Obama has been vociferously defending the Trans-Pacific Partnership (TPP) recently. He insists that it will be good for the American middle-class and that TPP’s critics arguing otherwise are wrong. But in this case he’s wrong and the TPP critics are right: there is no indication at all that the TPP will be good for the American middle-class. I tried to take this on in very wonky terms in this long-ish report here, and in this post I’ll try to boil it down a bit. The basic argument for why the TPP is likely to be a bad deal for the middle class is pretty simple. For one, even a genuine “free trade agreement” that was passed with no other complementary policies would actually not be good for the American middle-class, even if it did generate gains to total national income. For another, the TPP (like nearly all trade agreements the US signs) is not a “free trade agreement”—instead it’s a treaty that will specify just who will be protected from international competition and who will not. And the strongest and most comprehensive protections offered are by far those for US corporate interests. Finally, there are international economic agreements that the US could be negotiating to help the American middle-class. They would look nothing like the TPP.

​5 things to know about the Trans-Pacific Partnership - The Trans-Pacific Partnership (TPP) may have a bland name, but its potential impact is exploding into a debate that's anything but tame. The Obama administration is pushing the trade agreement, backed by corporate supporters and some Republican allies. But detractors are calling the deal "NAFTA on steroids," referring to the North American Free Trade Agreement, a 1994 pact that is often blamed for encouraging companies to move millions of jobs from the U.S. to low-wage nations. The TPP, which has been in the works for years, covers America and 11 Pacific Rim countries -- but excluding, at least for now, China -- accounting for 40 percent of the global economy. Proponents say it will expand trade and investment between member states; boost U.S. exports to some of the world's fastest-growing economies; provide a forum for promulgating labor standards and resolving disputes; and even help small businesses benefit from trade.  While that sounds positive, critics say it will push more jobs out of the U.S. and squeeze people's wages, effectively putting American workers in direct competition with much lower-paid workers overseas. On top of that, the White House and Congress are pushing to "fast-track" the TTP in ways that limit debate and restrict lawmakers from shaping the agreement in ways that address concerns regarding its impact. "A lot of people think the only people who have to be concerned about the downsides are those who will be directly replaced by imports," Josh Bivens, research and policy director at the left-leaning Economic Policy Institute, told CBS MoneyWatch. "People say, 'Well, it's not that many -- the manufacturing sector bears the brunt,' and that's actually wrong. Landscapers and waitresses might not be displaced by imports, but their wages suffer because they are competing with those who were displaced."

Obama is failing us all by ignoring the need for currency rules in TPP | Dean Baker -- The Obama administration is doing its full court press, pulling out all the stops to get Congress to approve the fast-track authority that is almost certainly necessary to get the Trans-Pacific Partnership (TPP) through Congress. One of the biggest remaining stumbling blocks is that the deal will almost certainly not include provisions on currency. This means that parties to the agreement will still be able to depress the value of their currency against the dollar in order to gain a competitive advantage. This is a really big deal, which everyone thinking about the merits of the TPP should understand. The value of the dollar relative to other currencies is by far the main determinant of our balance of trade. We can talk about better education and training for our workforce, improving our infrastructure and better research, all of which are important for the economy. But anyone who claims that improvements in these areas can offset the impact of a dollar that is overvalued against another currency by 15-20% is out of touch with reality. If the dollar is overvalued by 20% against another country’s currency, it has the same effect as imposing a 20% tariff on US exports and giving a government subsidy of 20% to imports. This is the direct effect when other countries deliberately buy up US assets to prop up the dollar against their currency. This is the main reason the United States is currently running a trade deficit of more than $500bn a year. This trade deficit creates a huge gap in demand. It has the same impact as if households were taking $500bn a year out of their paychecks and stuffing the money under their mattress. There is no obvious way to make up this gap in demand. In principle we could fill the gap with large budget deficits, but this is a political non-starter. Based on a dubious reading of the data from the second half of last year, some analysts had thought the economy was booming again, despite the large trade deficit.

More Craven Arguments Used to Sell TPP and Fast Track to Congress, With Mixed Results - David Dayen -- I don’t know what’s occurring more rapidly, Congressional votes on Trade Promotion Authority (aka fast track) or the parade of half-truths and outright falsehoods being promoted to sell it. Committees in the House and Senate held meetings Wednesday on the bill. The Senate Finance Committee markup got off to a slow start when Bernie Sanders used an obscure Senate maneuver to delay the markup:Early Wednesday, Sanders forced the Senate Finance Committee to abandon a legislative hearing on a bill that would grant Obama so-called fast-track authority on trade agreements. Sanders invoked an arcane procedural maneuver, objecting to a rule that allows committees to meet during legislative sessions. By doing so, Sanders has prevented the Finance Committee from dealing with the trade bill until at least 4:00 p.m. That’s significant because Senate Democrats, including Sherrod Brown (D-Ohio), have prepared dozens of amendments to the fast-track bill, which will take several hours to address in committee. If the panel can’t finish its work Wednesday, or just decides to call it a day early and resume its business tomorrow, Sanders can raise the same objection again, potentially delaying the process for several days. It turned out to be more symbolic than significant. Chairman Orrin Hatch vowed the committee would work deep into the night to get to a final vote, and they eventually came away advancing it by 20-6. Only Richard Burr voted no among the Republicans, while Democrats split: 7 yes (Wyden, Cantwell, Nelson, Carper, Cardin, Bennet, Warner), five no (Schumer, Stabenow, Menendez, Brown, Casey). Sherrod Brown had introduced 88 amendments, but most of them never got a vote. Ron Wyden, the Administration’s stalking horse on the bill, was the only Democrat to vote with all Republicans to cut Trade Adjustment Assistance, basically a cash payoff for workers affected by trade bills. Wyden said specifically that he was acting with the support of the Administration on that.

U.S. Trade Rep Office Helpfully Explains that Only 28 Trade Unionists Were Murdered in Colombia Last Year -  David Dayen -- I said on the last post on the TPP that there was one more thing I wanted to point out. It was ably covered by Michael McAuliff of The Huffington Post, and it reminds me of one of those famed Monty Python “letters to the editor,” written after a sketch portraying British seamen as cannibals.  Here’s the context. Rich Trumka reacted an open hearing on Tuesday to the “labor standards” in prior trade agreements. “we were told by by the [United States Trade Representative] general counsel that murdering a trade unionist doesn’t violate these standards, that perpetuating violence against a trade unionist doesn’t violate these agreements.” To back this up, Trumka cited a report that came out just this month in Colombia, where 105 trade unionists have been murdered since 2011, after the U.S. signed a free trade pact where improving labor standards was intended to be an important end goal.   So McAuliff checked with USTR about it. They said those Guatemala and Honduras cases are under CAFTA, a deal negotiated by George W. Bush with weak labor standards. So then USTR spokesman Andrew Bates was asked about Colombia, a free trade agreement Obama pushed for and signed,  Bates pointed to USTR data that shows killings of union organizers dropped from about 100 a year before the pact to about 28 killings a year now. “There has been a significant decline in violence against union members and labor activists in Colombia over the time that we have been working with Colombia under the Action Plan,” Bates added. “We will continue to work with the Departments of Labor and State to make further progress in this regard.” Emphasis mine, and you read that right, the United States is proud that, four years after they implemented a plan to improve human rights in Colombia, a trade unionist is murdered only every other week.

Obama Says Elizabeth Warren Is ‘Wrong’ on Trade -- After months of simmering, backroom disagreements between the White House and the liberal, populist base of the Democratic Party about the issue of free trade, President Barack Obama went on the offensive Tuesday.In an interview with MSNBC, Obama said Massachusetts Senator Elizabeth Warren and her supporters are “wrong” to think that the White House’s signature free-trade deal, the Trans-Pacific Partnership, would be bad for the American economy.  .“I love Elizabeth,” Obama told host Chris Matthews. “We’re allies on a whole host of issues. But she’s wrong on this.”  .“U.S. Senator Elizabeth Warren is out there saying things like this about the trade agreement: ‘It’s going to help the rich get richer and leave everyone else behind,'” Matthews said to Obama. “She also says it challenges U.S. sovereignty.”“They are throwing the kitchen sink at this trade agreement which will involve 11 nations and ourselves on the Pacific Rim,” he continued. “Why are they saying these things?”“Chris, think about it,” Obama responded. “I’ve spent the last 6½ years yanking this economy out of the worst recession since the Great Depression. Every single thing I’ve done from the Affordable Care Act to pushing to raise the minimum wage to making sure that young people are able to go to college and get good job training to what we’re pushing now in terms of sick pay leave … Everything I do has been focused on how do we make sure the middle class is getting a fair deal. Now I would not be doing this trade deal if I did not think it was good for the middle class.” 

Warren Answers Obama - (video} - “’We cannot afford a trade deal that undermines the government’s ability to protect the American economy,’ Warren said in the letter, also signed by Sens. Tammy Baldwin (D-Wis.) and Edward J. Markey (D-Mass.).” In a later email to her supporters: “‘The government doesn’t want you to read this massive new trade agreement. It’s top secret,’ Warren wrote in the email. ‘Why? Here’s the real answer people have given me: ‘We can’t make this deal public because if the American people saw what was in it, they would be opposed to it.’ ‘For more than two years now, giant corporations have had an enormous amount of access to see the parts of the deal that might affect them and to give their views as negotiations progressed. But the doors stayed locked for the regular people whose jobs are on the line,” Warren wrote. “We’ve all seen the tricks and traps that corporations hide in the fine print of contracts. We’ve all seen the provisions they slip into legislation to rig the game in their favor. Now just imagine what they have done working behind closed doors with TPP.” Besides watering down Dodd-Frank’s ownership restrictions (clip above) on risky derivative ownership (which Obama agreed to changes to requiring TBTF to separate risky investment ownership from TBTF and placing them in separate corporations not eligible for Main-Street-Rescue) during budget negotiation with the Repubs; Warren, Brown and other Senators have pointed out other potential issues with the TPP and fast tracking it besides fighting this one. - “the deal could include provisions that would allow foreign companies to challenge U.S. policies before a judicial panel outside the domestic legal system, increasing exposure of American taxpayers to potential damages.”

No, the TPP Won’t Be Good for the Middle-Class - President Obama has been vociferously defending the Trans-Pacific Partnership (TPP) recently. He insists that it will be good for the American middle-class and that TPP’s critics arguing otherwise are wrong. But in this case he’s wrong and the TPP critics are right: there is no indication at all that the TPP will be good for the American middle-class.  I tried to take this on in very wonky terms in this long-ish report here, and in this post I’ll try to boil it down a bit.  The basic argument for why the TPP is likely to be a bad deal for the middle class is pretty simple. For one, even a genuine “free trade agreement” that was passed with no other complementary policies would actually not be good for the American middle-class, even if it did generate gains to total national income. For another, the TPP (like nearly all trade agreements the US signs) is not a “free trade agreement”—instead it’s a treaty that will specify just who will be protected from international competition and who will not. And the strongest and most comprehensive protections offered are by far those for US corporate interests. Finally, there are international economic agreements that the US could be negotiating to help the American middle-class. They would look nothing like the TPP.

Americans, Led by Democrats, Friendlier With Free Trade - I've pointed out in the past that Americans tend to be less supportive of international trade than other high-income countries of the world, and high-income countries tend to be less supportive of trade than lower-income countries. Of course, foreign trade (as measured by export/GDP ratio, for example) is relatively less important in the US economy, with its enormous internal markets, than in most other countries around the world. Thus, a working hypothesis would be that countries with lower incomes and/or more exposure to foreign trade are more likely to see it in overall positive terms.  However, a recent Gallup poll conducted in February suggest that although Americans became more likely to see trade as a "threat" than as an "opportunity" from about 2001-2008, since the Great Recession of 2007-2009, a rising share of Americans have started to viewing foreign trade as an opportunity.  Here's a graph from Gallup:  Interestingly, the Gallup poll also suggests that the rise in Americans support for foreign trade has been driven mostly by a shift toward in the pro-trade beliefs of (self-described) Democrats and Independents, not a shift in the beliefs of Republicans. Indeed, Gallup finds that Republicans were more likely than Democrats to see trade as an opportunity in the early 2000s, but now Democrats are more likely to hold such beliefs

Top Democrat Larry Summers: Democrats Are Crazy and Hate Trade  -- Like almost every elite Democrat, Larry Summers is so enamored of corporate globalization that he’ll say just about anything in its defense — even unfairly trash his own political party. Summers, who was Treasury Secretary under Bill Clinton, and head of Obama’s National Economic Council, recently declaimed that “one of our major parties [i.e., the Democrats] is opposed to essentially all trade agreements …” That’s maddeningly false in two ways. First, the President of the United States strongly supports the Trans-Pacific Partnership. He’s a Democrat. The Senate Finance Committee just approved its fast track bill, with a majority of Democratic senators voting for it. Second, while the base of the Democratic party does strongly oppose the TPP, and opposed the North American Free Trade Agreement in the early 1990s, it’s completely untrue that it opposes any trade agreements. One of main slogans of the opposition to the version of NAFTA that was enacted in 1994 was “Not This NAFTA.” Regarding the TPP, Dean Baker, co-director of the Center for Economic and Policy Research, says, “if we had a trade deal that focused on improving the living standards of the typical worker it would get plenty of support from Democrats.” Baker specifically suggests “strong rules on currency values, so we could reduce the trade deficit,” the reduction of the “patent and related protection” that currently make pharmaceutical drugs more expensive, and measures to open up highly-paid U.S. professionals to international competition.

Obama facing Dem revolt on trade push, Reid says ‘hell no’ -- President Obama is facing a Democratic revolt over ambitious trade initiatives that are dividing the party, leading to tensions with everyone from Senate party leader Harry Reid to liberal icon Elizabeth Warren. The disagreements erupted on Wednesday as leaders of the Senate Finance Committee tried to proceed with a vote on trade legislation, but liberal opposition quickly delayed the process. Sen. Bernie Sanders, I-Vt., a fierce opponent of the trade push, invoked a Senate scheduling rule to sideline the committee's actions for hours. "This job-killing trade deal has been negotiated in secret," said Sanders, who made a lengthy Senate speech denouncing the legislation. Senate Finance Committee Chairman Orrin Hatch, R-Utah, vowed the committee would finish the bill Wednesday. "I don't care how much time it takes," he said. The flare-up was just one of many in the Democratic ranks. In a blunt challenge to the president, Reid told reporters earlier this week: "I'm not only no, I'm hell no" on Obama's proposal.

Dems deal blow to Obama's trade deal - House Democratic leaders dealt a blow to President Barack Obama's free trade agenda Wednesday by backing an alternative measure that has no chance of becoming law -- but complicates passage of a bill Obama needs in order to secure what would be one of the largest trade deals in history. On Thursday, the House Ways and Means Committee will decide whether to grant Obama's Trans-Pacific Partnership a vote in Congress without amendments, a condition that trade negotiators see as crucial to getting the 12 other countries involved -- particularly Japan -- to finalize the deal. The TPP has broad bipartisan support, and Obama has pushed the agreement as being good for the American middle class. But liberals, including labor unions and environmental groups, bitterly oppose the trade agreement, which they fear will hurt jobs in the U.S. So Democratic Minority Leader Nancy Pelosi and the rest of her leadership team have decided to back a separate version that Rep. Sander Levin of Michigan is set to introduce Thursday. It's a bill loaded with progressive priorities -- including stricter instructions for U.S. negotiators on labor rights and environmental protections -- and requires negotiators to open markets for U.S. automakers and agricultural exporters in ways that other countries involved in the talks have already rejected. And Levin's bill would grant Obama fast-track authority only if a bipartisan set of House and Senate members decide that their instructions were being followed.

Obama’s Republican Collaborators -  Patrick J. Buchanan - The GOP swept to victory in November by declaring that this imperial presidency must be brought to heel, and President Obama’s illicit seizures of Congressional power must end. That was then. Now is now. This week, Congress takes up legislation to cede His Majesty full authority to negotiate the largest trade deal in history, the 12-nation Trans-Pacific Partnership, and to surrender Congress’ right to amend any TPP that Obama might bring home. Why the capitulation? Why would Republicans line up to kiss the royal ring? Is Middle America clamoring for “fast track”? Are blue-collar workers marching in the streets to have Congress grant “Trade Promotion Authority Now!” to Barack Obama? No. Pressure for fast track is coming from two sources. First, the editorial pages of papers like The Wall Street Journal and The Washington Post that truckle to the transnational corporations that provide the advertising revenue stream keeping them alive. Second, Obama is relying on Congressional Republicans who, for all their bravado about defying his usurpations, know on which side their bread is buttered. It’s the Wall Street-K Street side. Fast track is the GOP payoff to its bundlers and big donors. And so, we must hear again all the tired talking points about free trade, soaring exports, jobs created, etc. But what is reality of the last quarter century of “free trade”? We are a dependent nation now. We rely on imports for the necessities of our national life and the vital components of our weapons systems. Hamilton must be turning over in his grave. Where once wages rose inexorably in America and the middle class seemed ever to expand, we read today about income inequality, the growing gap between rich and poor, and wage stagnation. Did $11 trillion in trade deficits since Bush I have anything to do with this? Or do we think that the 55,000 factories and 5-6 million manufacturing jobs that went missing in the first decade of this new century had no connection to those huge trade deficits?

Senate Committee Approves ‘Fast Track’ Trade Bill Needed for Pacific Agreement - WSJ: Major trade legislation favored by President Barack Obama and Republican leaders passed a Senate hurdle on Wednesday, despite opposition from some Democrats. The “fast track” bill, which would pave the way for a sweeping trade agreement among 12 Pacific countries, cleared the Senate Finance Committee by a vote of 20 to 6. It passed along with a measure backed by Sen. Chuck Schumer (D., N.Y.) that would seek to punish foreign companies that benefit from alleged currency manipulation overseas. Another key currency provision was defeated. The fast track bill’s progress in the Senate came on a day when Mr. Obama faced a setback in the House, where his trade push faces the biggest obstacles. The top Democrat in the House, Rep. Nancy Pelosi (D., Calif.) threw her support behind a rival piece of trade legislation. The alternative trade legislation, which Rep. Sander Levin (D., Mich.) said he would introduce Thursday, includes safeguards popular among labor groups and provisions to buttress the Detroit auto industry, as well as strong provisions on currency manipulation. The lack of support among Democratic leaders, made clear on Wednesday, means the administration will have to work harder to clinch necessary Democratic votes for the main, bipartisan fast track bill, also known as trade promotion authority. The legislation, enacted under previous presidents, allows trade agreements to get a simple majority vote in Congress, without procedural delays or amendments. Besides fast track, the Senate committee approved three other bills that would provide a safety net for workers who lose their jobs to trade, renew programs that give preferential tariffs to developing countries, and facilitate customs processes and enforcement.

Trade Bill Clears House Hurdle as GOP Blocks Democratic Alternative - WSJ: A major trade bill favored by President Barack Obama cleared a hurdle in the House of Representatives on Thursday, with a top Republican moving to quash rival legislation favored by leading House Democrats. The approval of so-called fast track trade legislation in the House Ways & Means Committee, a day after it cleared a Senate committee, marked a win for the Obama administration, which is allied with Republican leadership in supporting the measure. The bill, also known as trade promotion authority, would ease passage of the sweeping Pacific trade deal that the administration is negotiating with Japan and 10 other nations. But the bitter dispute Thursday in the House committee highlighted the headwinds the legislation faces on the floor of the House of Representatives, where the administration is seeking to recruit a small but crucial cadre of Democratic votes, over the opposition of Rep. Nancy Pelosi and other top lawmakers in Mr. Obama’s party. Rep. Paul Ryan (R., Wis.) frustrated Democrats by using a little-known House rule to bar a committee vote on an alternative version of fast track that was brought by Rep. Sander Levin, the panel’s top Democrat. “Rules are rules, and I think it’s important to follow the rules,” Mr. Ryan said.“I don’t think the American public will accept this; I hope Congress won’t,” said Mr. Levin, who has moved further away from the administration and Republicans on trade policy. The Michigan Democrat is backing stronger labor safeguards, protections for the auto industry and binding rules to prevent currency manipulation in the Pacific deal, known as the Trans-Pacific Partnership, or TPP.

The trade-off Obama missed on trade - No, President Obama, Elizabeth Warren isn’t wrong.  Obama told MSNBC’s Chris Matthews on Tuesday that the populist Democratic senator from Massachusetts is in error in opposing a free-trade agreement his administration has been negotiating with 11 other Pacific nations.  Warren is right: The Trans-Pacific Partnership (TPP) is an abomination — not because of the deal itself, and not because free trade in general is a bad idea. The TPP is an abomination because Obama had a chance to protect American workers from the harm that would inevitably come from such a pact, and he didn’t take it, or at least he hasn’t. As bad, Obama’s anointed successor, Hillary Clinton, waffled on the trade pact this week, offering only the banality that “any trade deal has to produce jobs and raise wages” — which, of course, they all claim to do. Clinton, and Obama, should champion the trade bill — but only after congressional Republicans do what’s needed to protect low-wage American workers from the dislocation that will occur: approving some serious new spending on worker training and infrastructure to keep the United States in line with the rest of the industrialized world.

Obama Tries to Make His Bones Again with the Trans-Pacific Partnership Ian Welsh -- Apparently Obama is angry at progressives for attacking the Trans-Pacific Partnership.  “What I am averse to is a bunch of ad hominem attacks and misinformation that stirs up the base but ultimately doesn’t serve them well. And I’m going to be pushing back very hard if I keep hearing that stuff,” Obama told a small group of reporters on the call.  Of all the criticisms, “The one that gets on my nerves the most is the notion that this is a secret deal,” he said. “Every single one of the critics saying this is a secret deal, or sent out e-mails to their fundraising base that they’re working to stop a secret deal, could walk over and see the text of the agreement.”   No: Every critic doesn’t have access. Only a partial version of the deal is available to the public, and only because it was leaked.  The very idea that these deals should be done in secret is fundamentally anti-democratic. They do it because they know people would object if they knew what was in them.  The Electronic Frontier Foundation has a good summary of what’s wrong, in terms of copyright enforcement.  In short, countries would have to adopt many of the most controversial aspects of US copyright law in their entirety. At the same time, the US IP chapter does not export the limitations and exceptions in the US copyright regime like fair use, which have enabled freedom of expression and technological innovation to flourish in the US. It includes only a placeholder for exceptions and limitations. This raises serious concerns about other countries’ sovereignty and the ability of national governments to set laws and policies to meet their domestic priorities.  Go read the rest if you want to be sick to your stomach.

Another Danger of the TPP: It Sacrifices Monetary Sovereignity -- Joe Firestone -- Right now the US fulfills the three essential conditions for monetary sovereignty: 1) it issues its own non-convertible currency, 2) which it allows to float on international currency markets; and 3) it owes no debts in any currency other than dollars. Because it is monetarily sovereign, and can always meet its obligations the US can never be forced into insolvency.  Monetary sovereignty is of tremendous value to us. As long as the United States retains it, then for example, we can never become Greece, or for that matter, Weimar Germany, since the latter’s hyperinflation was in large part caused by the fact that it owed its war reparation debts in goldmarks, or in currencies convertible to gold, and could not repay them in its own non-convertible currency, the Mark, which it could freely issue.  It also means, that the US has greater policy space for deficit spending and debt issuance than nations that have given up their currency, have fixed exchange rates, and owe debts in foreign currencies whose price in international markets it cannot control. Given all the current problems of the US, that may require deficit spending to solve, giving up monetary sovereignty is a monumentally risky thing to do, and exhibits the casual and foolish thoughtlessness of the President proposing it and the Congress seriously considering the Trans- Pacific Partnership (TPP) Agreement. Passing the TPP would compromise the monetary sovereignty of the United States and subject us to the influence of currency markets on the prices we may have to pay for foreign currency under a plausible scenario allowed by the Agreement. Specifically, I don’t see anything in the TPP investment chapter requiring that damages be awarded by the Investor State Dispute Settlement (ISDS) tribunals in the sovereign currency of nations incurring damage awards for lost profits, but only that they be awarded in a “freely usable currency” as specified by the IMF. So, complainants in these tribunals could ask for and win damages payable in foreign currencies, rather than US dollars, which the US would then owe in that foreign currency.

Economists Actually Agree on This: The Wisdom of Free Trade - Mankiw -- If Congress were to take an exam in Economics 101, would it pass? We are about to find out. The issue at hand is whether Congress will give President Obama “fast track” authority to negotiate a trade deal with our trading partners in the Pacific. The bill is favored by some congressional leaders of both parties, including Senator Orrin G. Hatch, the Republican chairman of the Finance Committee, Senator Ron Wyden, the committee’s ranking Democrat, and Representative Paul D. Ryan, the Republican chairman of the House Ways and Means Committee.House and Senate committees approved versions of the legislation last week. But with influential lawmakers like Senator Elizabeth Warren, a Democrat, opposed to the measure, final congressional approval is far from certain. Among economists, the issue is a no-brainer. Last month, I signed an open letter to John Boehner, Mitch McConnell, Nancy Pelosi and Harry Reid.  I was joined by 13 other economists who have led the President’s Council of Economic Advisers, a post I held from 2003 to 2005. The group spanned every administration from Gerald Ford’s to Barack Obama’s. We wrote, “International trade is fundamentally good for the U.S. economy, beneficial to American families over time, and consonant with our domestic priorities. That is why we support the renewal of Trade Promotion Authority (TPA) to make it possible for the United States to reach international agreements with our economic partners in Asia through the Trans-Pacific Partnership (TPP) and in Europe through the Trans-Atlantic Trade and Investment Partnership (TTIP).” Economists are famous for disagreeing with one another, and indeed, seminars in economics departments are known for their vociferous debate. But economists reach near unanimity on some topics, including international trade.

Eliminating Currency Manipulation in the TPP Could Create Jobs in Every Congressional District -- Currency manipulation distorts trade flows by artificially lowering the cost of U.S. imports and raising the cost of U.S. exports, and is the leading cause of growing U.S. trade deficits. More than 20 countries, led by China, have been spending about $1 trillion per year buying foreign assets to artificially suppress the value of their currencies. Several members of the proposed Trans-Pacific Partnership (TPP)—including Japan, Malaysia, and Singapore—are well known currency manipulators, and others—including both Korea and China—have expressed interest in joining the agreement. Experts such as Peterson Institute for International Economics director emeritus C. Fred Bergsten and former Treasury Secretary Larry Summers have recommended that new trade agreements address currency manipulation. Currency manipulation can and should be addressed through trade agreements such as the TPP. Eliminating currency manipulation could reduce the U.S. trade deficit by $200 to $500 billion, adding 2.0 to 4.9 percent to U.S. GDP and creating 2.3 to 5.8 million U.S. jobs, with about 40 percent (900,000 to 2.3 million) of those jobs gained in manufacturing. Furthermore, jobs would be gained in most or all congressional districts, as shown in the map below. By eliminating currency manipulation, each of the top 20 districts would gain at least 14,700 and as many as 24,400 jobs in the high impact scenario.

Washington Post Tells Readers the Elite Will Lie, Cheat, and Steal to Pass Their Trade Deals -- Dean Baker - The Washington Post has established itself over many decades as a major mouthpiece of elite opinion. Its editorial pages argue strongly for the interests of the wealthy, with scarcely concealed contempt for people who have to work for a living. (They do support alms for the poor, hence they are okay with programs like food stamps and TANF.)  This attitude has been shown many times over the years, but perhaps never more clearly than in its editorial on the bailout of General Motors and Chrysler, where it fumed about auto workers who earned $56,650 a year. By contrast, it was an ardent supporter of the Wall Street bailout, which was largely about helping people who make this much money in a day. In fact, the Post helped to conceal one of the major scams that was used to pass the bailout, the claim that the commercial paper market was shutting down.  What most of the country, and almost certainly most members of Congress, did not know at the time the bailout was approved was that Ben Bernanke and the Fed single-handedly had the ability to support the commercial paper market. The weekend after Congress approved the TARP, Ben Bernanke announced the creation of the Commercial Paper Funding Facility. Congress would have had a much more informed debate about whether it wanted to save Wall Street if it knew the Fed had this power before it voted, but folks like the Washington Post editorial board didn't want any delays before the Wall Street folks got the money. The Post, like the rest of the elite, has consistently had the same "make them eat it" attitude towards trade deals. When the Democratic presidential candidates criticized NAFTA back in 2007, the Post had a lead editorial singing the praises of NAFTA. After going through the benefits for the United States it told readers that NAFTA had been great for Mexico, causing its GDP to quadruple since 1987. According to the I.M.F., the actual increase was just 83 percent over this period, making Mexico the worst performer of any major country in Latin America.

Are Republicans going to abandon entitlement reform? -- A few quick facts on entitlement spending: (a) CBO projects federal spending on Medicare and Social Security over the next 25 years will rise by roughly 3 percentage points of GDP,  to 11% from 8%; (b) an aging US population will be the prime driver of that projected higher spending; (c) a middle-class, one-earner couple retiring in 2030 will receive $1.3 million in lifetime Medicare and Social Security benefits having paid in just under $500,000. To me, these numbers argue pretty strong in favor of reforming entitlements to spend less than projected and weighting that future spending more toward lower-income Americans. Now I have been worried that Republicans are backing way from reforming Medicare and Social Security in favor of cutting Medicaid and various income support programs. The former would be classified as “earned benefits” or as the WSJ’s Homan Jenkins as put it,  “… middle-class rewards for a life of hard work and tax-paying, against Mr. Obama’s vast expansion of the means-tested welfare state for working-age Americans. ” Now Chris Christie’s proposal to means test Social Security would argue against this theory. But then Mike Huckabee, another potential 2016er, went and said this (via The Weekly Standard): Huckabee said his response to such proposals is “not just no, it’s you-know-what no.”

Tax Cuts Boost Jobs, Just Not When Targeted at Rich -  Tax cuts are an effective way to bolster a weak economy and create jobs—as long as they are targeted at the bottom 90% of income earners. That’s according to a working paper published by the National Bureau of Economic Research that adds new evidence to the age-old debate about the effectiveness of various types of economic policies aimed at spurring growth and fostering employment. “The positive relationship between tax cuts and employment growth is largely driven by tax cuts for lower-income groups and the effect of tax cuts for the top 10% on employment growth is small,” writes Owen Zidar, a professor at the University of Chicago’s Booth School of Business. In particular, the paper tracks the impact of various tax changes over time, and finds that tax cuts aimed at the wealthy–which some economists argue can boost employment because the rich tend to own businesses and are in a better position to hire large numbers of workers–don’t spur growth in output and jobs. Instead, the wealthy show a greater propensity to save, thereby minimizing the short-run impact on the economy’s performance. “I find that the stimulative effects of income tax cuts are largely driven by tax cuts for the bottom 90% and that the empirical link between employment growth and tax changes for upper-income earners is weak to negligible over a business cycle frequency,”

Tax Cuts for Low- and Moderate Income Households May Be Much More Powerful Than Cuts for the Rich -- It turns out that tax cuts for the job creators...don’t create very many jobs. By contrast, tax cuts for low- and moderate-income households can boost economic growth. Those are the results of an interesting new working paper by Owen Zidar for the National Bureau of Economic Research. Zidar, an assistant economics professor at the University of Chicago’s Booth School of Business, concludes that tax changes aimed at low- and moderate-income households have far more powerful macro economic effects than revisions that target the highest-income 10 percent.  “Overall, tax cuts for the bottom 90% tend to result in more output, employment, consumption, and investment growth than equivalently sized tax cuts for the top 10% over a business cycle frequency.”Zidar analyzed the two-year effects of tax changes in the US since 1948 at both state and national levels. He used NBER’s TAXSIM model to calculate the effects of new tax law after 1960, the earliest data available for the model. He looked at the impact of tax changes for the highest income 10 percent, the top half, the bottom 90 percent, and the bottom half. And he corrected for non-tax policies, such as changes in spending. His results were striking at both the national and state levels. For instance, a tax cut of 1 percent of state Gross Domestic Product (a very big reduction) for the bottom 90 percent of households boosts state employment by a cumulative 5.1 percent over two years.  But a similar sized tax cut for the top 10 percent results in no change at all.

It's time to stop reducing taxes on the wealthy | Brookings Institution: House Republicans recently approved the “Death Tax Repeal Act of 2015.” If we care about our debt obligations, social mobility, or equality of opportunity, we should consider doing just the opposite: raising the tax and applying it to more of the super-wealthy. Currently, the estate tax doesn't touch the first $5.43 million of an individual’s assets and the first $10.86 million of couples’ assets. The tax affects anything after that amount, eventually rising to a top marginal rate of 40 percent after $1 million above the initial exemption.  The estate tax is one of the most progressive aspects of our tax system. In a time of increasing inequality, it provides a way to counteract the formation of a “permanent ownership class.” If anything, we should consider raising the rate and lowering the exemption to pay down debt and invest in opportunities for the unlucky children at the bottom of the wealth ladder. We could start by closing the stepped-up basis loophole and raising the estate tax to Clinton-era levels. We could do so in a way that protects real farmers and small business owners. Wealthy heirs, meanwhile, will still do very well, much better than the rest of America. A serious estate tax would allow us to come closer to our national ideal, in which no child is born a prince, and every child can become as rich as a king. 

Wall Street’s stealth tax break - A tax break that could be the biggest in America has never gotten its due. The break on stock market losses flies under the radar, unseen and uncounted, shifting up to 39.6 percent (the top marginal rate) of investment losses onto the U.S. Treasury. And nobody suggests that this tax break should be reined in. For that matter, nobody pays it any attention at all.   Let’s see how the break operates, and how it’s totally overlooked. Then let’s give it the scrutiny it deserves—especially with Congress signaling that it might be getting serious about tax reform. Stock market losses turn into tax breaks when the losses are written off against gains on tax returns. This costs the Treasury revenue, and effectively shifts part of the cost onto other taxpayers. All tax breaks do likewise, but this one has bells and whistles besides. Each year, in addition to unlimited, direct write-offs, losses up to $3,000 can be deducted from ordinary income. Then there’s the cherry on top: any losses that still haven’t been written off can be carried forward indefinitely. They are, and the total is staggering. The Internal Revenue Service recently estimated capital loss carryovers on 2012 returns at $581 billion ($369 billion long term, $212 billion short term). The Treasury will be picking up part of that $581 billion. Year after year, it picks up part of those $3,000 deductions. With every Wall Street loss, in every regular, non-retirement account, it loses more revenue somewhere down the road.

Corporate Tax Reform and Small Business - While there is no chance that Congress will agree to broad-based tax reform before the next president takes office in 2017, lawmakers are making one last effort to enact a more narrow business-based reform. But they face a big challenge:  reforms under consideration could raise taxes paid by many small businesses. To help lawmakers understand the implications of this choice, I testified on April 15 before the House Small Business Committee. There is a developing consensus that our corporate tax system is broken and needs reform. The President and Republican tax-writers both favor reducing the corporate rate, scaling back business preferences, and reforming our international tax rules. The effects of business tax reform, however, cannot be limited to corporations alone.  Most U.S. businesses are not subject to corporate income tax.  Instead, owners of these firms -- sole proprietorships, partnerships, and subchapter S corporations -- pay individual income tax on their business income. These “pass-through” firms account for 95 percent of all U.S businesses and report about 40 percent of all business receipts. A reform that eliminated business tax preferences, such as accelerated depreciation and the special deduction for domestic manufacturing, and reduced the corporate income tax rate but not individual income tax rates would increase taxes on owners of pass-throughs. This raises a legitimate concern that corporate tax reform could hurt small businesses, most of which pay individual instead of corporate tax rates. In my statement, I argued that the best way to address this problem is to expand tax benefits that primarily benefit small businesses rather than granting general relief for all pass-throughs. Congress could extend or increase the higher limits that expired at the end of 2014 for expensing equipment under Section 179 of the Internal Revenue Code.  It could also adopt a suggestion by University of Southern California law professor Ed Kleinbard to expand the 15 percent corporate tax bracket that now applies only to the first  $50,000 of corporate profits.

Could a Carbon Tax Finance Corporate Rate Cuts? - How about using revenue from a carbon tax to help pay for corporate tax rate cuts? That’s the idea proposed yesterday by Rep. John Delaney (D-MD). His political calculation: Democrats would back the bill as a way to reduce carbon emissions and slow climate change. Republicans would support the plan to cut corporate tax rates while retaining at least some popular business tax subsidies.Delaney would use revenues from a $30-per-ton carbon tax to cut the corporate rate from 35 percent to 28 percent. Some of the cash would also provide a tax credit to reduce the burden of the energy tax on low- and moderate-income households. Still other dollars would help coal industry workers who would likely lose jobs as a result of such a tax.While Delaney did not include any revenue estimates for his plan, my colleagues Donald Marron and Eric Toder have analyzed a similar idea.  In a 2013 paper, they found the numbers could work. Like Delaney,   they conclude the combination of a carbon tax and lower corporate rates might be a sensible political and policy trade-off. According to the Congressional Budget Office, a smaller tax than Delaney proposes would raise about $1.2 trillion over a decade (CBO looked at a $20-per-ton tax that would rise by about 5.6 percent-a-year. Delaney’s starts at $30-a-ton and would increase by about 6 percent-a-year).

A financial transaction tax is a Pigouvian tax! - Jared Bernstein --This morning’s NYT tells of prosecutors finally catching up with the alleged perp behind the “flash crash” in 2010, when the Dow fell almost 600 points in a few minutes.  US prosecutors allege that the crash was the work of a guy in a London row house a few miles from Heathrow. That’s right, some schlub in his bathrobe supposedly tanked the markets by “spoofing:” algorithmic trading that executes tens of thousands of buy and sell orders only to cancel them milliseconds later. As the Times notes: The case also played into worries that have swirled around the increasingly automated and complex financial markets, where regulators have struggled to keep up with nimble new participants like high­-frequency trading firms that use sophisticated networks to make money in milliseconds using rapid-fire trades. Regulators have various ideas of how to regulate against spoofing, front-running (where flash traders get information on trades milliseconds before the public), and other such high-frequency fun and games; I’ve written about them before. They generally work by creating speed bumps in the trading process, say by moving from continuous trading to “batch trading,” thereby taking away the millisecond advantages of the flashers.That might work, but it might not. You ask me, an arms race against quants who live to write regulation-beating algorithms is a recipe for more of the same. For example, suppose batch trades across different exchanges are not perfectly synchronized. That’s an opportunity for high-frequency arbitrage. A better, simpler way—and one with numerous positive externalities—is a financial transaction tax, a small excise tax on the security trades, typically a few basis points (hundredths of a percent) on the value of the trade. A three basis points FTT is scored as raising over $300 billion over 10 years, a score that includes its dampening impact on trades.

Lanny Breuer’s Defense of Not Prosecuting HSBC and its Officers - William K. Black -- I have been researching the HSBC frauds for a column I am doing about Loretta Lynch, the U.S. Attorney who refused to prosecute HSBC or any of its officers for the largest and most destructive money laundering and anti-terror finance sanctions-busting in history and continues to fail to do so even though her own appointed monitor at HSBC reports that HSBC is not complying with the sweetheart deal Lynch gifted them and even though she is now aware (of something she should have been well aware of for years) that senior HSBC officials continued to violate the laws to aid the wealthy and criminal evade taxes while HSBC’s lawyers were negotiating the sweetheart deal with Lynch about other mass felonies.  That research caused me to reexamine Lanny Breuer’s statements at the press conference celebrating the great Department of Justice (DOJ) “victory” in failing to hold any HSBC officer or employee accountable and for the anti-regulators acting to ensure that the bank was not held accountable for those crimes in any meaningful fashion. The obvious aspect of Breuer’s statements that right drew scorn was his embrace of the concept that the systemically dangerous institutions (SDIs), particularly the largest banks, were “too big to prosecute.”  Bloomberg describes the two most distressing aspects of Breuer’s explanation for why DOJ, as always, refused to prosecute the bankers who grew wealthy from leading the largest and most destructive fraud schemes in banking history.

Trader Charged With Manipulation That Contributed to 2010 ‘Flash Crash’ - Five years ago, the global financial system was rocked by the “flash crash,” 15 minutes of chaos that shook the world’s biggest markets and prompted investors both big and small to question how such a vital part of the economy could be brought to its knees. On Tuesday, United States prosecutors said that much of the blame for the event could be pinned on a single person: a 36-year-old man who had been boldly manipulating markets from his suburban rowhouse just a few minutes from Heathrow Airport outside London, where he was arrested.  Regulators said that their prosecution of the trader, Navinder Singh Sarao, demonstrated their aggressiveness in rooting out market manipulation. But news of the arrest, if anything, has raised anew concerns about how an individual could manage to exert such influence over the world’s financial markets. The case also played into worries that have swirled around the increasingly automated and complex financial markets, where regulators have struggled to keep up with nimble new participants like high-frequency trading firms that use sophisticated networks to make money in milliseconds via rapid-fire trades. Mr. Sarao is accused of entering and withdrawing thousands of orders worth tens of millions of dollars each on hundreds of trading days, in an attempt to push down the price of futures contracts tied to the value of the Standard & Poor’s 500-stock index, a practice known as spoofing. Once the price fell, Mr. Sarao would buy the contract and reap the profits, according to the criminal complaint. On the day of the flash crash on May 6, 2010, prosecutors contend that Mr. Sarao placed large orders repeatedly over several hours, leaving the market vulnerable to big moves when another big trade came in from an investor in the United States.. Soon, the Dow Jones industrial average, which represents 30 of the largest American companies, was in a virtual free fall, dropping nearly 600 points in a matter of minutes.

A Step By Step Guide How To Crash The Entire Market - "Defendants' use of the Layering Algorithm and the 188/289-Lot Spoofing intensified throughout the day. At 11:17 a.m. CT, Defendants turned the Layering Algorithm on for more than two consecutive hours, until 1 :40 p.m. CT. During this cycle, Defendants utilized the Layering Algorithm to place five orders, totaling 3,000 contracts. A sixth order was added at around 1:13 p.m. CT, increasing the total to 3,600 contracts.... Between 11:17 a.m. CT and 1:40 p.m. CT, Defendants' actions contributed to an extreme order book imbalance in the E-mini S&P market. This order book imbalance contributed to market conditions that caused theE-mini S&P price to fall361 basis points."

Eric Holder’s Coup de Grâce: Arresting a Bedroom Trader for the Flash Crash -- Pam Martens  -- The U.S. Justice Department is relying on Americans’ gullibility with its arrest of a 36-year old in the U.K., charging him as a key culprit in the Flash Crash of the stock market on May 6, 2010. London newspapers report the young man trades from his bedroom in his parents’ middle class row house.  The arrest came on the same day that news broke that Loretta Lynch was speeding toward a confirmation vote in the U.S. Senate as the next U.S. Attorney General, meaning that current U.S. Attorney General Eric Holder is making his last hurrah after failing to prosecute any bigwigs on Wall Street throughout his tenure, notwithstanding their insidious role in the greatest financial collapse since the Great Depression. The first problem with the Justice Department’s complaint against the bedroom spoofer is that the complaint has gone missing. What was released to the public consists of a one-pager stating that there is a complaint, followed by an affidavit from an FBI agent and a one-page Exhibit A which shows trading prices on an S&P 500 futures contract from 11:00 to 11:12 – far removed from when the Flash Crash occurred in the afternoon. The press release issued by the Justice Department tells us that “Navinder Singh Sarao, 36, of Hounslow, United Kingdom, was arrested today in the United Kingdom, and the United States is requesting his extradition.  Sarao was charged in a federal criminal complaint in the Northern District of Illinois on Feb. 11, 2015, with one count of wire fraud, 10 counts of commodities fraud, 10 counts of commodities manipulation, and one count of ‘spoofing,’ a practice of bidding or offering with the intent to cancel the bid or offer before execution.” However, the actual complaint that would provide specifics of these counts is missing from what was released by the U.S. Justice Department.

Navinder Singh Sarao: Our spoofing hero - This is a comment on the story rampant in the press about a British Man causing the US "flash crash". If you are not familiar this is as good a background as needed.It took me a while to get my head around just how ludicrous the assertion that a kid (Navinder Singh Sarao) trading a few thousand e-mini contracts caused the "flash crash" was. He did this every day for a few hundred days - and almost every day there was no flash crash. Then there was a flash crash - so ergo - a kid in his basement caused it.  Spoofing - so what is it? Its placing a bunch of (say) sell orders a little above market and a smaller buy order a little below market. What then happens is that "front running computers" see the multitude of sell orders and assume they are real. They then decide to sell some to get in front of some real selling. The real buy order gets executed. Now our spoofer is long. They will want to sell at some stage - so they reverse the process. They place a lot of buy orders a little below market and a smaller sell order they want executed - and the front running computer crosses the spread. The spoofer thus earns the spread, they do this repeatedly and the loser is front running computers. All these trades are placed for mere milliseconds so spoofing is one computer ripping another computer off. Real people don't get fooled by spoofers because the spoofed trades are around for milliseconds. Making spoofing illegal thus increases the profits of front running computers - meaning more front running computers. Now alas when I buy a real order in market I have to pay my due to the front running computers - which comes at a real cost to me - a real investor - and to my clients. This is a real cost to real investment in the capital market. I would prefer the front running computers go away - and the best way for that to happen is to allow spoofing. Spoofing makes the world unsafe for front-running high frequency traders.

Senator Baldwin is Asking the SEC Questions About “Disgorge the Cash” -- A lot of people were surprised last month when the investment giant BlackRock flagged the rise in stock buybacks and dividend payments as a major economic concern. Its CEO argued that the “effects of the short-termist phenomenon are troubling both to those seeking to save for long-term goals such as retirement and for our broader economy,” and that this was being done at the expense of “innovation, skilled work forces or essential capital expenditures necessary to sustain long-term growth.” They are right to be concerned. The cash handed back to shareholders in the form of buybacks and dividends was 95 percent of corporate profits in 2014, climbing from 88 percent the year before and 72 percent in 2010 and expected to go even higher in the future. These numbers are far above historical norms, but they are the culmination of a long process starting in the 1980s. Private investment remains a weak part of the recovery, and it is necessary to investigate the connection between corporate governance and those decisions. With that in mind, Senator Tammy Baldwin (D-WI) has sent a letter to the SEC looking for answers on these issues. In particular, she flags whether the SEC’s mission to “foster capital formation and prevent fraud" is jeopardized by short-termism in the market. It will be good to see how the SEC responds, and which other senators and organizations join in with their concerns.

U.S. Corporations Spent $1 Trillion in Stock Buybacks -- One hundred million dollars in $100 bills fits nicely on a standard-sized pallet. The image below shows what $1 trillion in cash would look like. This is almost what U.S. corporations have spent on stock buybacks — just in the last year. According to a study by the Roosevelt Institute (Disgorge the Cash), businesses once borrowed to invest and improve their company's long-term performance. But for the past 30 years business investment has been replaced by shareholder payouts. Companies now borrow to enrich their investors in the short-run (including their executives with stock option grants as pay for performance).  Under the older managerial model, more money coming into a firm (either from sales or from borrowing) typically meant more money was spent on fixed investment. But in the new "rentier-dominated" model, more money coming in means more money flowing out to shareholders in the form of dividends and stock buybacks. Since the 1980s, shareholder payouts have nearly doubled; in the second half of 2007, aggregate payouts actually exceeded aggregate investment.  The study shows good evidence that the real economy benefits less from the easier credit provided by macroeconomic policy than it once did. Higher corporate profits in recent business cycles have generally failed to lead to high levels of investment — and cheaper money from lower interest rates failed to stimulate investment, growth and wages — because additional funds are funneled to shareholders through buybacks and dividends.

Investors Chase Returns in Risky Zero-Coupon Bonds - WSJ: Investors are rushing into the riskiest and most volatile corner of the U.S. government bond market in search of bigger returns, as worries about higher interest rates abate. Zero-coupon Treasury bonds, which don’t offer a stready stream of income, that mature in more than 25 years have handed investors a return of 5.79% year to date, according to data from Barclays BCS -1.92 % PLC. That compares with a return of 4.36% for regular Treasurys of similar maturities and 1.94% for the U.S. government bond market as a whole. Because bondholders don’t receive interest payments on zero-coupon bonds until the debt matures, prices of these bonds—also known as just “zeros”—would fall sharply if short-term rates rose, traders say. The effect is even more pronounced for long-duration zeros. But these securities’ strong performance so far this year, coming on top of a 48% return in 2014, shows that many fund managers are shrugging off these risks in the race to grab higher yields. Recent data indicate that the U.S. recovery has hit a soft patch, and Federal Reserve officials have downplayed the chances of a rate increase in June. That has pushed back investors’ expectations on the timing of a rate increase.

It Just Cost Deutsche Bank $25,000 Per Employee To Keep Its Libor Manipulating Bankers Out Of Jail -- Moments ago the NY Department for Financial Services announced that, in what is the largest Libor settlement in history, Deutsche Bank would pay $2.5 billion "in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank ("LIBOR"), the Euro Interbank Offered Rate ("EURIBOR") and Euroyen Tokyo Interbank Offered Rate ("TIBOR") (collectively, "IBOR")."  Most importantly for DB's 98,138 employees is that while DB will "terminate and ban individual employees who engaged in misconduct" nobody will go to jail. Again. In other words it just cost DB's about $25,474 per employee to keep its Libor-manipulating employees (and thus, senior level management because the stench always goes to the very top) out of prison.

Change They Don’t Believe In - Kunstler - The unfortunate consequence of not allowing the process of “creative destruction” to occur in banking and Big Business is that the historic forces behind it will seek expression elsewhere in the realm of politics and governance. The desperate antics of central banks to cover up financial failure can’t help but provoke political upheaval, including war.  It’s a worldwide phenomenon and one result will be the crackup of economic relations — thought by many to be permanent — that we call “globalism.” The USA has suffered mightily from globalism, by which a bonanza of cheap “consumer” products made by Asian factory slaves has masked the degeneration of local economic vitality, family life, behavioral norms, and social cohesion. That crackup is already underway in the currency wars aptly named by Jim Rickards, and you can bet that soon enough it will lead to the death of the 12,000-mile supply lines from China to WalMart — eventually to the death of WalMart itself (and everything like it). Another result will be the interruption of oil export supply lines.  The USA as currently engineered (no local economies, universal suburban sprawl, big box commerce, despotic agribiz) won’t survive these disruptions and one might also wonder whether our political institutions will survive. The prospect of another Clinton – Bush election contest is a perfect setup for the collapse of the two parties sponsoring them, ushering in a period of wild political turmoil. This same moment (in history) the American thinking classes are lost in raptures of techno-wishfulness. They can imagine the glory of watching Fast and Furious 7 on a phone in a self-driving electric car, but they can’t imagine rebuilt local economies where citizens get to play both an economic and social role in their communities. They can trumpet the bionic engineering of artificial hamburger meat, but not careful, small-scale farming in which many hands can find work and meaning.

Regulatory Relief For Banks That Rarely Fail - Rolling back regulations created after the 2008 crisis has been Job 1 for leaders of many of the nation’s large and powerful banking institutions. So it’s no surprise that recent proposals for regulatory reform in the financial industry have overwhelmingly been the work of big banks or their supporters. The bankers want to return to the days when they could roll the dice, pocket their winnings and rely on the taxpayer if something went wrong.That’s what makes a reform proposal put forward last week so unusual. It actually outlines smart ways to give regulatory relief only to low-risk, traditional banks that did not cause the financial crisis. Those institutions that did contribute to the 2008 mess get no relief under the plan. The proposal comes from Thomas M. Hoenig, vice chairman of the Federal Deposit Insurance Corporation. In an interview last week, Mr. Hoenig told me he had been hearing more and more calls to reform the Dodd-Frank Act of 2010 and he wanted a surgical and effective response to those requests. Mr. Hoenig decided to base any possible regulatory relief on the complexity and activities of an institution, not simply on its size.So he and Karl Reitz, deputy to the vice chairman at the F.D.I.C., examined bank failure rates and looked at the characteristics of institutions that were able to withstand downturns.From this exercise, Mr. Hoenig devised a list of three criteria for banks that could be exempted from some regulations without posing risks to the financial system and taxpayers. The winners: banks that hold no trading assets or liabilities, those that have no derivatives positions other than plain-vanilla interest-rate swaps and foreign exchange derivatives and, finally, banks whose notional value of all derivatives exposures totals less than $3 billion.

Fed may allow banks to use muni bonds to meet liquidity rules: WSJ (Reuters) - The U.S. Federal Reserve may allow big banks to use some municipal bonds to meet new liquidity rules that ensure they have enough cash during a credit crunch, the Wall Street Journal reported, citing people familiar with the matter.  The Fed had excluded debt issued by cities and states when it approved liquidity rules for large banks in September, part of a global effort to make banks such as JPMorgan Chase and Citigroup more resilient in a financial crisis. Fed officials had at that time said they did not think the rule would have significant implications for the $3.7 trillion municipal bond market. The Fed had also said it planned to propose allowing certain high-liquid municipal securities to count as a sellable asset at a later date, after further review. U.S. cities and states have been urging the Fed, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) to classify muni bonds as highly liquid if they are investment grade and have demonstrated reliable liquidity during times of economic stress. However, the plan under discussion falls short of including all investment-grade municipal bonds, the Journal said. The exact criteria for the kind of municipal bonds that would count under the rule has not been set, but a key focus will be the ability of a bank to sell the bonds in a fairly short time frame, the newspaper said. The other regulators - the OCC and the FDIC, do not plan to follow the Fed, the newspaper said

Regional Banks Sweat Through Low-Rate ‘Torture’ - WSJ: The schism between banks on Wall Street and Main Street is widening. Commercial banks are still struggling with the low interest rates that have been hammering their profitability for several years. And unlike their Wall Street rivals, many regional and community lenders can’t count on the strong deal and trading activity that has boosted first-quarter earnings at the likes of Goldman Sachs Group Inc.and Morgan Stanley.  The low rates, which have stuck around longer than many expected, hurt bread-and-butter lenders who gather deposits and make loans. The reason: Such banks, although flush with deposits, can’t earn a high enough rate on loans to boost their profit margins. “This whole discussion today about when interest rates move is torture for us,” said Richard Davis, Chief Executive of U.S. Bancorp, USB 0.40 % on a conference call with analysts last week. “I remain very optimistic for the economy…a little less optimistic for the bankers until interest rates start to move up.” There appears to be little relief in sight: In the futures market, bets that the Federal Reserve will keep short-term rates close to zero have been increasing in recent weeks amid choppy economic data and lackluster corporate earnings growth.

April 2015: Unofficial Problem Bank list declines to 342 Institutions - This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for April 2015.  Update on the Unofficial Problem Bank List for April 2015. During the month, the list fell from 349 institutions to 342 after nine removals and two additions. Assets dropped by $1.2 billion to an aggregate $105.1 billion. A year ago, the list held 513 institutions with assets of $167.3 billion. Actions were terminated against Orrstown Bank, Shippensburg, PA ($1.2 billion Ticker: ORRF); Atlantic Coast Bank, Jacksonville, FL ($709 million Ticker: ACFC); The Leaders Bank, Oak Brook, IL ($353 million); PrimeSouth Bank, Blackshear, GA ($326 million); The Exchange Bank, Skiatook, OK ($87 million); and Community Savings, Caldwell, OH ($68 billion). Finding their way off the list through merger were Colonial Bank, FSB, Vineland, NJ ($542 million Ticker: COBK); Baytree National Bank & Trust Company, Lake Forest, IL ($77 million); and Bank Reale, Pasco, WA ($38 million Ticker: BKRL). The two additions this month were Lone Star National Bank, Pharr, TX ($2.2 billion) and Covenant Bank, Leeds, AL ($76 million).

6 Tricks Banks Use to Drive Homeowners Into Foreclosure - Most homeowners are unaware that their mortgage banks make more money from foreclosure than actual payment.  Mortgage banks give as few modifications as possible and comply minimally with statutes put in place to protect borrowers, all while employing tricks to “cash in” on homeowners’ defaults, pushing them to foreclosure.  The banks take the risk of litigation because few people sue, but getting legal assistance as soon as possible can make the difference between homeowners asserting their rights or losing their homes while being bulldozed by the bank. Securitization is the reason banks want homeowners to foreclose.  When a bank assigns the risk of a loan to the investors of a securitized trust, the “bank” is no longer a traditional bank that gets the benefit when mortgage payments are made.  Instead, the bank has become a servicer that actually benefits disproportionately from foreclosure on a homeowner’s property. When foreclosure becomes a possibility, like when a borrower misses a payment or asks for a modification, the banks seize the opportunity for increased profit by foreclosure.  According to Susan M. Murphy, Founding Member and Lead Attorney of Los Angeles based Advocate Legal, that is also when the bank will start to employ the following tricks: 

• Bank Trick #1:  Refusing Payments
• Bank Trick #2:  Switching Services During Modification
• Bank Trick #3:  Breaching a Modification Contract
• Bank Trick #4:  Extra Fees & Escrow Accounts
• Bank Trick #5:  False Notices
• Bank Trick #6:  Multiple Modifications

Laura Coleman Biggs and her experience with Bank of America is absolutely criminal. When her husband George Mitchell passed away, 12 years ago this month, Ms. Biggs continued paying off her mortgage.   George “Kenny” Mitchell had taken out a special lender-pushed insurance policy to pay off most of his loan if he died.  But when he passed away on April 26, 2003, the subsidiary of Charlotte-based Bank of America did not arrange a payoff of the $100,000 policy and continued to charge his widow an insurance premium every month along with her mortgage payment. Pretty bad. But the story is even worse than you already know it is. See, the only reason Ms. Biggs even found out that BOA had royally screwed her was a mixture of desperation, luck and a pro bono lawyer. Biggs was the subject of a story by McClatchy in December 2013 that documented how she was about to lose her home days before Christmas. Bank of America’s bill collector was telling her the home was not her husband’s primary residence. It couldn’t be: He was dead.  The McClatchy report helped stall the foreclosure. In the months that followed, Bank of America’s subsidiary offered Biggs a mortgage modification that added more than $30,000 in miscellaneous fees and legal fees and charges to the loan. That  Her pro bono lawyer demanded a list of specifics on the fees. One stood out to George Bosch, a legal administrator who worked on her case. It was passed off as a fee but didn’t seem normal. Was it an insurance premium, he asked?  “Silence on the other end of the phone. They didn’t want to answer the question,” said Bosch. A few days later, the answer came. Yes, it was an insurance premium, for a policy underwritten by Miami-based American Bankers Life Assurance Co. of Florida.

Black Knight: Mortgage Delinquencies Declined in March, First time below 5% since August 2007 -- According to Black Knight's First Look report for March, the percent of loans delinquent decreased 12% in March compared to February, and declined 15% year-over-year. The percent of loans in the foreclosure process declined 2% in March and were down about 27% over the last year.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.70% in March, down from 5.36% in February.  This is the lowest level of delinquencies since August 2007.The percent of loans in the foreclosure process declined in March to 1.55%.  This was the lowest level of foreclosure inventory since December 2007.  The number of delinquent properties, but not in foreclosure, is down 390,000 properties year-over-year, and the number of properties in the foreclosure process is down 288,000 properties year-over-year. Black Knight will release the complete mortgage monitor for March in early May.

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

Mortgage News Daily: Mortgage Rates Slide Sideways Again -- From Matthew Graham at Mortgage News Daily: Mortgage Rates Slide Sideways Again Mortgage rates figure if they can't be pushing down to new record lows, they might as well pass the time by shooting for different records. This time around, it's the record for FLATNESS! We calculate an average 30yr fixed conventional rate every day based on the sweet-spots on multiple lender rate sheets. This gives us an 'effective rate' to track that typically falls between the two most common rate quotes in the market. For instance, the current computed rate is 3.66% and the two most common quotes are 3.625% and 3.75%. On 9 out of the past 10 days, that effective rate has moved an average of 0.01% per day. In terms of day-to-day rate movement over time, this is about as flat as it gets!  Here is a table from Mortgage News Daily:

MBA: Mortgage Applications Increase, Purchase Apps up 16% YoY -- From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey
Mortgage applications increased 2.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 17, 2015. ... The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index increased 5 percent from one week earlier to its highest level since June 2013. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 16 percent higher than the same week one year ago....The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.83 percent, its lowest level since January 2015, from 3.87 percent, with points decreasing to 0.32 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Freddie Mac: 30 Year Mortgage Rates decrease to 3.65% in Latest Weekly Survey -- From Freddie Mac today: Mortgage Rates Move Down Slightly Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving down slightly this week and remaining near their 2015 lows as the spring homebuying season continues. ...30-year fixed-rate mortgage (FRM) averaged 3.65 percent with an average 0.6 point for the week ending April 23, 2015, down from last week when it averaged 3.67 percent. A year ago at this time, the 30-year FRM averaged 4.33 percent. 15-year FRM this week averaged 2.92 percent with an average 0.6 point, down from last week when it averaged 2.94 percent. A year ago at this time, the 15-year FRM averaged 3.39 percent. This graph shows the 30 year and 15 year fixed rate mortgage interest rates from the Freddie Mac Primary Mortgage Market Survey®.    30 year mortgage rates are up a little (30 bps) from the all time low of 3.35% in late 2012, but down from 4.33% a year ago.   The Freddie Mac survey started in 1971. Mortgage rates were below 5% back in the 1950s.

Forget The Snow, It's The Drought That Is Crushing The Economy - With all eyes and talking heads focused on the 'weather', it seems cold, wet, snowy, and frigid are the most GDP-destructive adjectives. However, as Bloomberg reports, the drought out West is starting to infiltrate U.S. housing data, according to the chief economist of a homebuilders' group, and weakening a major part of the nation's economy. As Bloomeberg reports, Housing starts in the West fell for a third straight month, dropping by 19 percent in March to an annualized rate of 201,000 for the weakest since May. Construction rebounded from harsh winter weather in other parts of the country, such as the Northeast, where they jumped a record 115 percent, and the Midwest. The weakness in the West might reflect the record-setting drought, which may be discouraging companies from building or taking out permits for new construction, said David Crowe, chief economist at the National Association of Home Builders in Washington. Uncertainty surrounding local water policy and the ability to obtain water connections for new homes or apartment buildings could be holding some builders back, he said. "Until it's clear what restrictions mean for new building, it's wise for builders to be hesitant," Crowe said. "This is more serious than just a temporary dry period. This is a new regime that says it's going to be harder to obtain additional water usage."

Existing Home Sales in March: 5.19 million SAAR, Inventory up 2.0% Year-over-year - The NAR reports: Existing-Home Sales Spike in March Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, increased 6.1 percent to a seasonally adjusted annual rate of 5.19 million in March from 4.89 million in February—the highest annual rate since September 2013 (also 5.19 million). Sales have increased year-over-year for six consecutive months and are now 10.4 percent above a year ago, the highest annual increase since August 2013 (10.7 percent). ... Total housing inventory at the end of March climbed 5.3 percent to 2.00 million existing homes available for sale, and is now 2.0 percent above a year ago (1.96 million). Unsold inventory is at a 4.6-month supply at the current sales pace, down from 4.7 months in February. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in March (5.19 million SAAR) were 6.1% higher than last month, and were 10.4% above the March 2014 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 2.00 million in March from 1.90 million in February. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

But The Weather? March Existing Home Sales Surge To Highest Since September 2013 - After failing to comfortably beat expectations for the last 7 months, March Existing Home Sales surged 6.1% to a 5.19mm SAAR - the highest since Sept 2013. Despite collapsing macro data throughout March all blamed on 'the weather' The Midwest saw existing home sales rise the most (by 10.1%). All this 'pent-up demand' has crushed affordability as home prices are up 7.8% YoY - the largest gain since Feb 2014.

A Few Comments on March Existing Home Sales -- Inventory is still very low (but up 2.0% year-over-year in March). More inventory will probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases. This will be important to watch over the next few months during the Spring buying season. Also, the NAR reported total sales were up 10.4% from March 2014, however normal equity sales were up even more, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):  Distressed sales—foreclosures and short sales—were 10 percent of sales in March, down from 11 percent in February and 14 percent a year ago. Seven percent of March sales were foreclosures and 3 percent were short sales. Foreclosures sold for an average discount of 16 percent below market value in March (17 percent in February), while short sales were also discounted 16 percent (15 percent in February). A rough estimate: Sales in March 2014 were reported at 4.70 million SAAR with 14% distressed.  That gives 658 thousand distressed (annual rate), and 4.04 million equity / non-distressed.  In March 2015, sales were 5.19 million SAAR, with 10% distressed.  That gives 519 thousand distressed - a decline of about 21% from March 2014 - and 4.67 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 15%.  The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Existing Homes Sales: The Population-Adjusted Reality -- This morning's release of the March Existing Homes Sales beat expectations, rising to an annual rate of 5.19 million units. The Investing.com consensus was for 5.03 million. The latest number represents a 6.1% increase from the previous month. This is the highest reading since September 2013 and the largest percent increase since December 2010. For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 is available in the St. Louis Fed's FRED repository here. Over this time frame we clearly see the Real Estate Bubble, which peaked in 2005 and then fell dramatically. Sales were volatile for the first year or so following the Great Recession. The latest estimate puts us back to the general level around the turn of the century. Now let's examine the data with a simple population adjustment. The Census Bureau's mid-month population estimates show a 15.4% increase in the US population since the turn of the century. The snapshot below is an overlay of the NAR's annualized estimates with a population-adjusted version. Existing home sales are 0.8% below the NAR's January 2000 estimate. The population-adjusted version is 13% below the turn-of-the-century sales.

Are Entry-Level Homebuyers Really This Gung-Ho Yet? -  The National Association of Realtors’ report on Wednesday of March sales of existing homes found that first-time buyers accounted for an estimated 30% of sales in March, flat with the year-ago percentage. That’s below the traditional share of roughly 40%. Granted, the March figure is a steady 30% for first-timers of an increasingly larger pie, given that total resales increased by 10.4% on a year-over-year basis. But it’s still not a breakneck expansion. Also, the Mortgage Bankers Association found that mortgage applications for purchasing homes of $150,000 or less in this year’s first quarter declined by 12.3% from a year earlier. Those for homes of $150,000 to $300,000 increased by 4.9%. Not bad, but it’s nothing like the 18.8% gain for mortgage applications to buy homes of $300,000 to $417,000. “This is definitely the early stage of some sort of purchase market growth” for the entry level, said Joel Kan, the Mortgage Bankers Association’s associate vice president of industry surveys and forecasting. “We’re not going to see things boom. I think it’s going to be more of a gradual increase throughout the year.”

New-Home Prices Are on Fire - Two different segments of the housing market are yielding two different price trends. When discussing Wednesday’s news that existing home sales climbed in March, National Association of Realtors chief economist Lawrence Yun said the 7.8% yearly rise in March’s median price was unsustainable. “This price gain of near 8% is not healthy, considering people’s incomes are only rising by 2%,” said Mr. Yun. “The only way to relieve housing cost pressure is to have more homes coming onto the market.” Yet research by economists at TD Securities show the uptrend in resale values is nothing compared to the speedy rise in new-home prices. New homes generally command a 10% to 20% premium over existing houses because new construction tends to be of higher quality and have more up-to-date amenities, the TD economists said. But by 2014, the price gap between new and existing houses had widened to 40%. What’s behind the bigger spread? The housing bust and consumer preferences, . After the financial crisis, “many existing homes were in foreclosure or in poor maintenance,” . “Buyers wanted a discount.” That bargain-seeking plus the flood of existing homes into the market caused the median resale price to plummet by about one third during the bust. In fact, even at $212,000 in March, the median resale price is below the $230,000 record set during the boom. Meanwhile, the median price for a new home fell only about 25% during the bust and surpassed its boom peak way back in early 2013. That’s because home builders cut back drastically on single-family housing starts during the recession. Plus, as household finances stabilized, “consumer preferences changed,” “Consumers wanted a new home.” More demand plus tight inventories allowed builders to lift prices.

New Homes Sales Disappoint Forecasts -- This morning's release of the March New Single-Family Homes Sales from the Census Bureau at 481K disappointed expectations, although the sales for the previous month were revised upward. The actual decline was 11.4%. The Investing.com forecast was for 513K sales, which would have been a 5.4% decline from the previous month.  Here is the opening from the report:  Sales of new single-family houses in March 2015 were at a seasonally adjusted annual rate of 481,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent (±18.6%)* below the revised February rate of 543,000, but is 19.4 percent (±21.8%)* above the March 2014 estimate of 403,000.   [Full Report]   For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here. Now let's examine the data with a simple population adjustment. The Census Bureau's mid-month population estimates show a 70.4% increase in the US population since 1963. The snapshot below is an overlay of the New Single-Family Home Sales series along with a population-adjusted version.New single-family home sales are 18.6% below the 1963 start of this data series. The population-adjusted version is 52.3% below the first 1963 sales and at a level similar to the lows we saw during the double-dip recession in the early 1980s, a time when 30-year mortgage rates peaked above 18%. Today's 30-year rate is below 4%.

New Home Sales decline to 481,000 Annual Rate in March -- The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 481 thousand.  The previous months were revised up by a total of 35 thousand (SA). "Sales of new single-family houses in March 2015 were at a seasonally adjusted annual rate of 481,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent below the revised February rate of 543,000, but is 19.4 percent above the March 2014 estimate of 403,000."    The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales over the previous two years, new home sales are still close to the bottoms for previous recessions. The second graph shows New Home Months of Supply. The months of supply increased in March to 5.3 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). "The seasonally adjusted estimate of new houses for sale at the end of March was 213,000. This represents a supply of 5.3 months at the current sales rate."  The third graph shows the three categories of inventory starting in 1973. The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales Down 11.4% Overall, 15.8% in South; Median Price Declines -- The Bloomberg consensus estimate for new homes sales was an overly-optimistic 518,000. Instead, it's bad news again as new home sales fell a very steep 11.4 percent to a 481,000 annual rate.

• New home sales -11.4%
• New homes sales in South -15.8%, West -3.4%, Midwest +5.6%, -33.3% Northeast
• Median price fell 1.5% to $277,400.
• Year-on-year, the median price is down 1.7%.
• Sales are up 19.4% year over year, a discrepancy that points to price discounting by builders
• Today's report echoes last week's housing starts & permits data and points to stubborn weakness in the new homes market.

The Northeast contributes the least. The South contributes the most followed by the West so weather is not a significant factor.  Above New Home Sales table from Census.Gov.   Everyone seems to expect a return to the bubble years even though it's pretty clear where the range really belongs.  Demographically speaking, as boomers age, their houses will add to existing supply as they downsize, then pass away.

Comments on New Home Sales - The new home sales report for March was below expectations at 481 thousand on a seasonally adjusted annual rate basis (SAAR).   However, sales for December, January and February were revised up by a combined 35 thousand (SA).  So, including revisions, sales were about as expected.  Even with a little weakness in March, sales in 2015 are off to a solid start.  Earlier: New Home Sales decline to 481,000 Annual Rate in March. The Census Bureau reported that new home sales this year, through March, were 129,000, Not seasonally adjusted (NSA). That is up 22% from 106,000 during the same period of 2014 (NSA). This is very early - and the next several months are usually the strongest of the year NSA - but this is a solid start. Sales were up 19.4% year-over-year in March, but that was an easy comparison. This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate). The year-over-year gain will probably be strong in Q2 too (the first half was especially weak in 2014), however I expect the year-over-year increases to slow later this year. And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales. Now I'm looking for the gap to close over the next few years. I expect existing home sales to move sideways (distressed sales will continue to decline and be offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

AIA: Architecture Billings Index increases in March, Multi-Family Negative - Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Architecture Billings Index Accelerates in March For the second consecutive month, the Architecture Billings Index (ABI) indicated a modest increase in design activity in March. 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 March ABI score was 51.7, up from a mark of 50.4 in February. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.2, up from a reading of 56.6 the previous month.  “Business conditions at architecture firms generally are quite healthy across the country. However, billings at firms in the Northeast were set back with the severe weather conditions, and this weakness is apparent in the March figures,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The multi-family residential market has seen its first occurrence of back-to-back negative months for the first time since 2011, while the institutional and commercial sectors are both on solid footing.” This graph shows the Architecture Billings Index since 1996. The index was at 51.7 in March, up from 50.4 in February. 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 market was negative in consecutive months for the first time since 2011 - and this might be indicating a slowdown for apartments. (just two months) 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.

The Mall of American Progress  - Malls may not be an American monopoly, but America’s not really thinkable without them. They’re where we come together, octogenarian mall walkers and teen Goths alike, as we aim for that perfect, elusive balance between over- and under-stimulation. They’re our own controlled-climate variation on the outdoor European arcade; only in the multipurposed American mallspace, you don’t simply exchange money for goods: you exercise, see movies, attend concerts, go to school, and worship God. They’re our culture’s vapid response to the depletion of the commons. And their increasingly empty and abandoned carapaces mottle the American landscape like munition-citadels in the war between consumerism and community. If the war metaphor seems too dramatic, consider the name of latest big American mall project to announce itself: The Grand Canyon Escalade Project. An “escalade” is a form of military attack that uses ladders to scale a wall.  And the Grand Canyon is, well, the Grand Canyon. The Grand Canyon Escalade Project is a proposal to build a mall on the eastern rim of the world’s largest canyon. It’s also a handy metaphor for everything debauched, short-sighted, and self-infatuated about our consumer culture: a belligerent outpost of gaudy merchandise, perched on the very cusp of the void. It doesn’t make much economic sense, it doesn’t make much environmental sense, and it’s an exercise in rapaciousness that represents the worst of American attitudes about unbridled growth.

Where Have All the Consumers Gone? - Retail sales rose less than expected in March after declining for three consecutive months. Since the U.S. began collecting data in 1967, only twice has it seen three-month stretches of waning retail sales in non-recessionary times. This is puzzling. Why would consumers spend less as the economy picks up steam? And why haven't consumers gone shopping with the one percent extra income that collapsing oil prices have handed them? Last year, most forecasters assumed consumers would promptly spend their energy savings, resulting in a blowout Christmas season. Because it makes up 70 percent of gross domestic product, consumer spending was the only sector that could push the economy from its tepid 2.3 percent real growth rate to the 3.5 percent to 4 percent rate some economists had been predicting since the recovery started. Forecasters also pinned their hopes on consumer confidence readings, which hit a 10-year peak as shown by the University of Michigan survey. Those prognosticators must not be aware of the low correlation between consumer confidence and spending. Our work shows that changes in consumer sentiment often lag, rather than precede, shifts in outlays.

Families Still Haven’t Fully Recovered from the Recession - Data released Thursday by the Labor Department shows that the number of families with at least one unemployed member fell to 6.5 million last year from 7.7 million in 2013. But at 8%, the percentage of such families remains above pre-recession levels–6.4% in 2006 and 6.3% in 2007. A breakdown by racial group shows how the effects of the downturn still linger. The recession reshaped the way families support themselves and care for their children. The number of stay-at-home dads peaked in 2009 but has been falling steadily since. At 1.3 million in 2014, the figure was just a touch below the level in 2008. While men have steadily returned to work, there are now fewer households with a stay-at-home mother. The number of families with children under 18 where the father is employed but the mother is not was about 7.6 million in 2007, but fell sharply in 2008 and 2009. Last year, the number was a little less than 7.2 million. Overall, moms are working more than the general population—especially moms with older children. The labor force participation rate for women with children ages 6 to 17 peaked in 2008 and 2009 at 77.3% and eased to 74.7% last year. For moms with children under 6, the rate topped out in 2012 at 64.8% and settled to 64.2% last year. For the population as a whole, the participation rate was 62.7% in December 2014.

Median Household Income Declined in March - The Sentier Research monthly median household income data series is now available for March. The nominal median household income was down $307 month-over-month but up $1,104 year-over-year. That's a -0.6% MoM decline and a 2.1% YoY increase. Adjusted for inflation, the latest income was down $436 MoM but up $1,116 YoY. The real numbers equate to a -0.8% monthly decline but a 2.1% yearly increase.  In real dollar terms, the median annual income is 5.3% lower ($3,020) than its interim high in January 2008 but well off its low in August 2011.  The first chart below is an overlay of the nominal values and real monthly values chained in November 2014 dollars. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). I've added callouts to show specific nominal and real monthly values for January 2000 start date and the peak and post-peak troughs.

We Can't Let John Deere Destroy the Very Idea of Ownership - It’s official: John Deere and General Motors want to eviscerate the notion of ownership. Sure, we pay for their vehicles. But we don’t own them. Not according to their corporate lawyers, anyway.  In a particularly spectacular display of corporate delusion, John Deere—the world’s largest agricultural machinery maker —told the Copyright Office that farmers don’t own their tractors. Because computer code snakes through the DNA of modern tractors, farmers receive “an implied license for the life of the vehicle to operate the vehicle.”  It’s John Deere’s tractor, folks. You’re just driving it. Several manufacturers recently submitted similar comments to the Copyright Office under an inquiry into the Digital Millennium Copyright Act. DMCA is a vast 1998 copyright law that (among other things) governs the blurry line between software and hardware. The Copyright Office, after reading the comments and holding a hearing, will decide in July which high-tech devices we can modify, hack, and repair—and decide whether John Deere’s twisted vision of ownership will become a reality.

DOT: Vehicle Miles Driven increased 2.8% year-over-year in February, Rolling 12 Months at All Time High - Note: With lower gasoline prices, vehicle miles driven have reached a new high on a rolling 12 month basis. The Department of Transportation (DOT) reported:Travel on all roads and streets changed by 2.8% (6.1 billion vehicle miles) for February 2015 as compared with February 2014. Travel for the month is estimated to be 221.1 billion vehicle miles.  The seasonally adjusted vehicle miles traveled for February 2015 is 254.1 billion miles, a 2.6% (6.4 billion vehicle miles) increase over February 2014. It also represents a -1.2% change (-3.2 billion vehicle miles) compared with January 2015.  The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors. The rolling 12 month total is moving up, after moving sideways for several years.

Electric Car Sales Plunge To 4 Year Lows -- But low oil prices are supposed to be unequivocally good? On the day when Ford lays off 700 Michigan plant workers in small cars and hybrids manufacturing, The Detroit News reports that, according to Edmunds.com, sales of electric cars and hybrids are at the lowest level since 2011. What is even more worrisome, motorists who leased those first-generation cars, and have decided not to buy them, are turning them in, leaving dealer lots full of low mileage cars at huge discounts to new ones. As Edmunds concludes, while "the government's going to keep pushing it, there is time to pause right now."

Record Numbers Of Drivers Trading In Electric Cars For SUVs -- President Barack Obama promised to put a million more hybrid and electric cars on the road during his tenure, but new research shows drivers are trading them in to buy sports utility vehicles (SUVs). The auto-research group Edmunds.com found that “22 percent of people who have traded in their hybrids and [electric vehicles] in 2015 bought a new SUV.” This number is higher than the 18.8 percent that did the same last year, but it’s double the number that traded in their electric car for an SUV just three years ago. Edmunds.com reports that only “45 percent of this year’s hybrid and EV trade-ins have gone toward the purchase of another alternative fuel vehicle, down from just over 60 percent in 2012.” “Never before have loyalty rates for alt-fuel vehicles fallen below 50 percent,” Edmunds notes.The Obama administration and some states even hand out generous tax credits to encourage people to buy EVs.  Buying an electric car can get you a $7,500 federal tax credit. It’s all part of Obama’s plan to get a million electric cars on the road by 2015. But electric cars were much more attractive when gas prices were high and customers could more easily rationalize paying more for an electric car. So far, Obama is still more than 800,000 electric cars short of meeting his 2015 goal.

LA area Port Traffic Increased Sharply in March following resolution of 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.

Chemical Activity Barometer "Leading Economic Indicator Rises for Fourth Consecutive Month" -- Here is a relatively new indicator that I'm following that appears to be a leading indicator for industrial production.  From the American Chemistry Council: Leading Economic Indicator Rises for Fourth Consecutive Month; Reaches Seven Year High  The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), was up 0.1 percent in April, as measured on a three-month moving average (3MMA). Reaching an index of 98.1, last seen in January 2008, the CAB remains up 2.6 percent over a year ago, and suggests gains in business activity will continue into the fourth quarter. ... “All of the major production-related indicators are up and we might continue to see a strengthening. Construction-related chemistries have been adversely affected by bad weather so far this year, but we expect an improvement as we get further into spring,” said Kevin Swift, chief economist at the American Chemistry Council. “The data on plastic resins and polymers for packaging suggest that retail sales should continue to be strong as well,” Swift added. This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).
And this suggests continued growth.

March Durable Goods: A Mixed Bag - The April Advance Report on March Durable Goods released today by the Census Bureau was a mixed bag. Here is the Bureau's summary on new orders: New orders for manufactured durable goods in March increased $9.3 billion or 4.0 percent to $240.2 billion, the U.S. Census Bureau announced today. This increase, up two of the last three months, followed a 1.4 percent February decrease. Excluding transportation, new orders decreased 0.2 percent. Excluding defense, new orders increased 2.6 percent.  Transportation equipment, also up two of the last three months, drove the increase, $9.5 billion or 13.5 percent to $80.3 billion. Download full PDF The latest new orders headline number at 4.0 percent was well above the Investing.com estimate of 0.6 percent. However, this series is up only 0.7% percent year-over-year (YoY), and if we exclude transportation, "core" durable goods came in at -0.2 percent month-over-month (MoM) and has contracted for six consecutive months. If we exclude both transportation and defense for an even more fundamental "core", the latest number was down -0.5 percent MoM, the seventh month of contraction. The Core Capital Goods New Orders number (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a -0.5% decline and has contracted for seven consecutive months. The downward trend can be attributed to Dollar strength and weakening global demand. The next chart shows the percent change in Core Durable Goods (which excludes transportation) overlaid on the headline number since the turn of the century. This overlay helps us see substantial volatility of the transportation component.

Durable Goods Orders Up but Core Capital Goods Negative Again -  Durable goods orders are somewhat of a mixed bag today, but beneath the headline rise, weakness is easy to find. The Bloomberg Consensus was for a 0.5% rise, and the actual result was a whopping 4% gain due to transportation. Yet, transportation for last month was revised lower, and excluding transportation durable goods orders shrank.More importantly, core capital goods orders declined for at least four consecutive months. Let's dive into the Census Report on Durable Goods for more details. Here is a table of key items I made from the report.  Line items (except the last line which shows shipments) are new orders, in millions of dollars, seasonally adjusted. Core capital goods exclude defense and aircraft. Once again this was another weak economic report excluding aircraft orders that have long lead times and are frequently cancelled.

Durable goods orders jump, but a key detail was not good - The March durable goods orders report is out, and the numbers are mixed. Headline orders jumped 4.0%, beating expectations for a 0.6%. This was all due to robust vehicle and aircraft orders. Civilian aircraft orders surged 31%. Nondefense capital goods orders excluding aircraft — an important measure of business spending — unexpectedly fell by 0.5%. Economists were looking for a 0.3% gain. This latter metric, also known as core capex, appears to be reflective of slumping oil prices and the resulting shut down in energy rigs. "The downward trend here is very strong, thanks to the rollover in capex in the oil sector, and the consensus forecast for a modest increase in March always looked like wishful thinking," Pantheon Macroeconomics Ian Shepherdson said. "We expect core capex orders to fall for another few months at least, until the oil sector hits bottom." This is not encouraging following the weather-driven economic slowdown of Q1. "This signals a weaker handoff into Q2, suggesting that the onus will remain on data over the coming weeks to defy the slowing trend evidenced by the broader data releases in recent weeks," . Shepherdson, however, warns against freaking out. "Outside oil, we think capex is rising at a decent clip, as it was before oil prices collapsed, but this is being swamped, temporarily, by the oil hit," Shephedson continued. "The Fed, remember, has to set policy based on the state of the overall economy, not any particular sectors, and we expect strength in the services sector to offset oil weakness and keep the labor market tightening rapidly over the next few months."

Worst Drop In Core Durable Goods Since December 2012 -- Having missed expectations for 5 of the last 7 months, Durable Goods New Orders jumped 4% MoM in March - the biggest jump since the July Boeing aberration (all driven by a 112% surge in defense Aircraft new orders). Durable Goods New Orders (ex-Transports) fell 0.2% MoM (missing expectations of a 0.3% rise) for the biggest YoY drop since 2012, and under the covers it is ugly - Capital Goods New Orders non-defense, ex-aircraft have now fallen for 7 straight months, missing expectatons dramatically (-0.5% vs +0.3% exp.). These numbers have never fallen for this long a period without a recession.

US Manufacturing PMI Misses By Most On Record As New Orders Tumble - On the heels of weak PMIs from Europe and Asia, Markit's US Manufacturing PMI plunged to 54.2 in April (from 55.7). Against expectations of a rise to 55.6, this is the biggest miss on record. Of course, this is 'post-weather' so talking-heads will need to find another excuse as New Orders declined for the first time since Nov 2014.

Kansas City Fed Manufacturing Report: Nearly a Clean Negative Sweep; US Dollar Effect in Spotlight -- Inquiring minds are digging into the Federal Reserve Manufacturing Report for the 10th District Region. Note the near clean sweep in the negative sense. Actually, inventories of materials rising in the midst of a decline in orders is not a good thing either.New orders, backlog of orders, employment, and length of workweek have all crashed. Prices paid and received are deflationary. Effect of the strength of the US dollar is notable in the comments

1. We are experiencing more volatility on revenue monthly. One month may be much higher than previous month or year and then the next month may be much lower, etc.
2. The durable goods sector just isn't very good, impacted mightily by the price of oil. We are reducing headcount and spending where possible in an effort to withstand this phase of the economy for however long it lasts.
3. Competition for business is fierce especially with the low cost labor and better logistics from Mexico. We are finding more and more customers moving manufacturing operations to Mexico.
4. The manufacturers in the energy producing states are struggling to make adjustments given the speed at with oil prices dropped.
5. Raw material suppliers have announced large increases in price, however, they keep moving the effective dates back. These announced increases are not supported by actual cost increases. Their sales are down so we are not taking the announced increases are seriously. If they do go into effect, our larger inventories will be a cushion.
6. West coast port disputes have us out of stock on key items. No information available on when we will receive products. We will look at reducing our employee count next month if we do not receive goods in April.
7. We import dry bulk cement from Asia and Europe so the strong dollar has given us more buying power. We also export the same type products to Canada where the strong dollar has hurt our margins and made it harder to compete.
8. The strong dollar is good in that it's driving down commodity prices, but bad because it is making us less competitive globally. We're making fewer products but making more money on them. It has been bad for our employees because we have less work (and fewer employees). Overall , it’s a negative for us.
9. The stronger dollar is undoubtedly creating more opportunity for foreign manufacturers. The impact has only begun to be felt in our bookings.

The Consequences of Neglecting Manufacturing: Compared with Other Nations, U.S. Has More Import Competition in Leading Export Industries -- Despite the fact that it is the second largest exporter in the world, the United States is also the only major exporter that has consistently run overall goods trade deficits for more than two decades. More puzzling is the fact that the United States ran a significant trade deficit even in its top 30 exporting industries in 2013. This finding stands in stark contrast to the export performance of industries from other high-exporting nations, all of which generated significant trade surpluses in most or all of the top exporting industries in that year.This issue brief compares trade in goods exports, goods imports, and import penetration (the ratio of imports to exports) for the United States and its top three international competitors: China, Germany, and Japan. Overall, the United States had a trade deficit of $67.4 billion in those top 30 exporting industries. The top 30 exporting industries in those other countries had sizeable trade surpluses that ranged from $223.2 billion in Japan to $285.3 billion in Germany to $647.7 billion in China.

How The Second Tech Bubble Will Burst, In The Words Of Silicon Valley's "Poster Child" And World's Youngest Billionaire - "Fed has created abnormal market conditions by printing money and keeping interest rates low. Investors are looking for growth anywhere they can find it and tech companies are good targets - at these values, however, all tech stocks are expensive - even looking at 5+ years of revenue growth down the road. This means that most value-driven investors have left the market and the remaining 5-10%+ increase in market value will be driven by momentum investors. At some point there won't be any momentum investors left buying at higher prices, and the market begins to tumble. May be 10-20% correction or something more significant, especially in tech stocks."

The Machines Are Coming - THE machine hums along, quietly scanning the slides, generating Pap smear diagnostics, just the way a college-educated, well-compensated lab technician might.A robot with emotion-detection software interviews visitors to the United States at the border. In field tests, this eerily named “embodied avatar kiosk” does much better than humans in catching those with invalid documentation. Emotional-processing software has gotten so good that ad companies are looking into “mood-targeted” advertising, and the government of Dubai wants to use it to scan all its closed-circuit TV feeds.Yes, the machines are getting smarter, and they’re coming for more and more jobs.Not just low-wage jobs, either.Today, machines can process regular spoken language and not only recognize human faces, but also read their expressions. They can classify personality types, and have started being able to carry out conversations with appropriate emotional tenor.Machines are getting better than humans at figuring out who to hire, who’s in a mood to pay a little more for that sweater, and who needs a coupon to nudge them toward a sale. In applications around the world, software is being used to predict whether people are lying, how they feel and whom they’ll vote for.To crack these cognitive and emotional puzzles, computers needed not only sophisticated, efficient algorithms, but also vast amounts of human-generated data, which can now be easily harvested from our digitized world. The results are dazzling. Most of what we think of as expertise, knowledge and intuition is being deconstructed and recreated as an algorithmic competency, fueled by big data.But computers do not just replace humans in the workplace. They shift the balance of power even more in favor of employers. Our normal response to technological innovation that threatens jobs is to encourage workers to acquire more skills, or to trust that the nuances of the human mind or human attention will always be superior in crucial ways. But when machines of this capacity enter the equation, employers have even more leverage, and our standard response is not sufficient for the looming crisis.

Weekly Initial Unemployment Claims increased to 295,000 -- The DOL reported: In the week ending April 18, the advance figure for seasonally adjusted initial claims was 295,000, an increase of 1,000 from the previous week's unrevised level of 294,000. The 4-week moving average was 284,500, an increase of 1,750 from the previous week's unrevised average of 282,750.  There were no special factors impacting this week's initial claims.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since January 2000.

Economists have discovered how bad the economy really is - Unemployment is almost back to normal, but the economy isn't.  That isn't because the unemployment rate is a conspiracy to make things look better than they really are. It's because even though the unemployment rate tells us the most about the labor market, it doesn't tell us the full story. All it does is show us how many people who are actively looking for work can't find it. But that leaves out the "shadow unemployed" who want full-time jobs but have either given up looking for them or can only find part-time ones. That usually doesn't make that big a difference, but it does now, because, even six years after the crisis has ended, there still isn't much that's usual about this economy.  Now if you add it all up, this shadow unemployment means our jobs hole is more than three times as big as it looks. That, at least, is what economists Danny Blanchflower and Andrew Levin found when they looked at how low the unemployment rate is versus how low we think it could go, how high the participation rate is versus how high we think it could go, and how many people can only find part-time jobs. That first part tells us how much further unemployment itself could fall, the second how many discouraged workers could come back, and the last how many people would work more if they could. In other words, it shows us the gap between how many full-time jobs we have and how many full-time jobs we need. The result, as you can see above, is that instead of being a million full-time jobs short, like the unemployment rate says we are, we're about 3.5 million short.

Faster productivity growth would be great. I’m just not at all sure we can count on it to lift middle-class incomes: Recently, a number of economists and commentators have suggested that faster productivity growth would be a big way to boost the income of middle-class households. I’m all for faster productivity growth, though I’d argue no one knows how to reliably make it happen. But given the wedge of inequality between productivity and low and middle incomes, wages, and wealth, I’m skeptical that this would work as well as some think. So I wrote this paper exploring the issue and adding some of my own estimates. Here’s the intro... The stagnation of middle-class incomes is one of the most important and influential trends in American economics. Politicians, from President Obama to Hillary Clinton and Jeb Bush have consistently argued that loosening the middle-class squeeze is a major goal of their policies. Prominent economist Larry Summers recently wrote that in crafting “global as well as domestic” economic policy, “the middle class matters the most,” warning against approaches that offer “little to those in the middle.” In recent weeks, largely motivated by an analysis by President Obama’s economic team, a solution to stagnant middle-income growth has been elevated: faster productivity growth. The President’s Council of Economic Advisors (CEA) tells us the following: “What if productivity growth from 1973 to 2013 had continued at its pace from the previous 25 years? In this scenario, incomes would have been 58 percent higher in 2013. If these gains were distributed proportionately in 2013, then the median household would have had an additional $30,000 in income.”

How the New Flexible Economy is Making Workers’ Lives Hell - Robert Reich - These days it’s not unusual for someone on the way to work to receive a text message from her employer saying she’s not needed right then. Although she’s already found someone to pick up her kid from school and arranged for childcare, the work is no longer available and she won’t be paid for it. Just-in-time scheduling like this is the latest new thing, designed to make retail outlets, restaurants, hotels, and other customer-driven businesses more nimble and keep costs to a minimum. Software can now predict up-to-the-minute staffing needs on the basis of information such as traffic patterns, weather, and sales merely hours or possibly minutes before. This way, employers don’t need to pay anyone to be at work unless they’re really needed. Companies can avoid paying wages to workers who’d otherwise just sit around. Employers assign workers tentative shifts, and then notify them a half-hour or ten minutes before the shift is scheduled to begin whether they’re actually needed. Some even require workers to check in by phone, email, or text shortly before the shift starts. Just-in-time scheduling is another part of America’s new “flexible” economy – along with the move to independent contractors and the growing reliance on “share economy” businesses, like Uber, that purport to do nothing more than connect customers with people willing to serve them. New software is behind all of this – digital platforms enabling businesses to match their costs exactly with their needs. The business media considers such flexibility an unalloyed virtue. Wall Street rewards it with higher share prices. America’s “flexible labor market” is the envy of business leaders and policy makers the world over. There’s only one problem. The new flexibility doesn’t allow working people to live their lives.

Jason Furman Gets the NFP Report the Night Before the Official Release, Does Anyone Else?  -- Last night on Bloomberg TV, they had an interview with Jason Furman, President Obama's Chief Economist. What caught my attention was right at the beginning of the interview, with Bloomberg's Hans Nichols whereby he mentions the following to Furman: "You're the man who brings the President the jobs numbers on Thursday night, the Thursday night before everyone gets to see them." Why this came as a huge surprise to me, was that as far as I and everyone around me knew,  no one except the BLS has access to the data, and that the data wasn't available till 8am on Friday morning. I remember a video in March of last year, where PBS Newshour interviewed Karen Kosanovich of the BLS, where she mentions that her and others are quarantined, and she mentions how tight the security measures are. This just makes me wonder, how is Furman getting the NFP data (email? in person?), and who else is getting it? If the Fed minutes were being leaked to congress and lobbyists, anything is possible is all I'm saying.    Bloomberg's Interview with Furman (important part is right at the beginning)

BLS: Twenty-Three States had Unemployment Rate Decreases in March  - From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in March. Twenty-three states and the District of Columbia had unemployment rate decreases from February, 12 states had increases, and 15 states had no change, the U.S. Bureau of Labor Statistics reported today.  ... The largest over-the-month decrease in employment occurred in Texas (-25,400), followed by Oklahoma (-12,900) and Pennsylvania (-12,700). The largest over-the-month increases in employment occurred in California (+39,800), Florida (+30,600), and Massachusetts and Washington (+10,500 each). ... Nebraska had the lowest jobless rate in March, 2.6 percent. Nevada had the highest rate among the states, 7.1 percent. The District of Columbia had a rate of 7.7 percent. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Nevada, at 7.1%, had the highest state unemployment rate although D.C was higher. 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); Only one state and D.C. are still at or above 7% (dark blue).

March Payrolls Decline in 31 States Plus DC - The March state employment statistics shows the unemployment situation might be forming more dark clouds over workers.  From February a whopping 31 states cut jobs.  The national unemployment rate was 5.5% yet, only 23 states showed any unemployment decrease.  Below is the BLS map of state's unemployment rates for the month. March showed a -0.4 percentage point drop in the Oregon and state of Washington unemployment rate while West Virginia increased half a percentage point.  There is now just Nevada and the District of Columbia with unemployment rates above 7%.  Those states with unemployment rates above 6.0% are Mississippi, Louisiana, South Carolina, West Virginia, New Jersey, Alaska, California, Connecticut, Georgia and Rhode Island.  North Dakota's 3.1% unemployment rate, a 0.2 percentage point increase from last month, is no longer the lowest, Nebraska is with 2.8%.  This is due to the decline in oil prices.  The unemployment change from a year ago nationally has declined by -1.1 percentage points.  Only three states saw unemployment rate annual increases, Louisiana with a 1.1 percentage point increase, North Dakota's unemployment rate has increased 0.4 percentage points from a year ago.  South Carolina a year ago unemployment rate has increased 0.6 percentage points.  The decrease in unemployment rates can be due to declining labor participation rates. State monthly payrolls decreased in 31 states plus the District of Columbia.  Eighteen states saw monthly payroll increases.  By percentages of total payrolls, Oklahoma showed a -0.8% decrease in jobs.  Arkansas, North Dakota and West Virginia all declined by -0.6% in monthly payrolls.  For the year, only one state saw payrolls decrease, West Virginia.  Utah's payrolls gained +3.9%, Florida, +3.7% and Washington increased +3.4%.  The below map shows the past year ago change for payroll growth.

Disappointing State Jobs Growth in March Gives Pause -- The March State and Regional Employment and Unemployment report released today by the Bureau of Labor Statistics gives some cause for concern about the pace of the recovery, but it may be too soon to sound the alarm. Nationally, we added 126,000 jobs in March, a disappointingly low number after the comparatively stronger jobs growth we saw in the latter half of 2014. Growth in March was concentrated in the West and Northeast regions of the United States, while the Midwest and South lost jobs. 18 states saw job growth in March, while 32 states lost jobs. However, it is important not to put too much stock in one month of data, as the trend in state jobs growth over the last three months remains relatively strong. In the first quarter of 2015, 38 states added jobs, with Idaho (2.1 percent), Utah (1.1 percent), South Dakota (1.1 percent) and Washington (1.0 percent) experiencing the largest gains. 12 states and the District of Columbia had declines in their employment numbers, with West Virginia and Alaska experiencing substantial job losses, both down 0.9 percent since December. West Virginia was also the only state to experience a decline in employment over the last year, with jobs down 0.5 percent since March 2014. The other 49 states and the District of Columbia have seen employment growth over the last year, and national jobs have increased 2.3 percent.

Oil States See Slumping Employment as Texas Loses 25,000 Jobs in March - (interactive tables) While the U.S. economy continued to add jobs last month, states that rely heavily on the oil industry experienced significant cuts. Job losses hit particularly hard in Texas (down 25,400 jobs) and Oklahoma (down 12,900), leading the nation in losses. North Dakota lost 3,000 jobs, a significant cut in such a small state. The decline in oil prices has provided a windfall for consumers who are paying less at the pump. But the plunge is now hurting the states that had benefited from the domestic oil-production boom in recent years. All told, 31 states and Washington, D.C., saw a drop in employment in March, and only 18 states saw employment rising. The broad deterioration was a reversal from February, a month in which only 13 states saw decreases and 36 states and D.C. saw an increase. Michael Feroli, the chief U.S. economist for J.P. Morgan Chase, said Monday that the scale of job losses in Texas is so large that the state may be in recession.Among states with job growth, California led the pack by adding 39,800 jobs. Florida added 30,600. Massachusetts and Washington each added just over 10,000 jobs. These states may be benefiting the most from lower oil prices, Despite the setback in March, every state but West Virginia has added jobs over the past year, with Utah, Florida and Washington experiencing the fastest rate of job growth. Unemployment rates have continued falling as well. Over the past year, 46 states and the District of Columbia had their unemployment rates drop. Only Louisiana, South Carolina and North Dakota have higher unemployment than a year ago.

Oil Price Collapse Means Texas Is Still Losing Jobs, J.P. Morgan Economist Says - There’s a saying: Don’t mess with Texas. But that’s not stopping J.P. Morgan Chase’s Michael Feroli. The economist first poked the bear at the end of 2014 in a report that argued Texas’ economy was in for serious trouble owing to the sharp collapse in oil prices. The bear poked back, in the form of a tough rejoinder from the Dallas Fed’s then-President Richard Fisher, who likened the report to “bull droppings.”  In fact, in a March speech, he said The Wall Street Journal account cleaned up “my two-word response to this assertion,” which in its original utterance was much earthier.  Mr. Fisher, who has since retired as Dallas Fed president, argued Texas was no longer tied to the fate of the oil industry. He said the Lone Star State had diversified itself considerably and could withstand the big drop in oil prices and continue to be an engine of growth for the nation.  In a new report, Mr. Feroli was back to say he was right, and Mr. Fisher was wrong. “The only thing dropping in the Texas economy lately is the number of jobs,” he said in a report. The economist said Texas is now seeing the sort of job losses that would normally occur only in a recession. Mr. Feroli pointed to a report from the Texas Workforce Commission showing the state lost 25,400 jobs in March.  The downturn in Texas jobs last month was the first negative reading in 53 straight months. While Texas has diversified, many of its jobs are still tied indirectly to the energy business, Mr. Feroli said. He added that investment declines tied to the oil sector appear to be hitting Texas particularly hard. He explained cuts in energy related capital expenditures alone could cut about 2.7 percentage points off the pace of economic growth in Texas in the first quarter, “a big hole to get out of to achieve positive growth.”

Philly Fed: State Coincident Indexes increased in 41 states in March --From the Philly Fed:  The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2015. In the past month, the indexes increased in 41 states, decreased in four, and remained stable in five, for a one-month diffusion index of 74. Over the past three months, the indexes increased in 46 states, decreased in three, and remained stable in one, for a three-month diffusion index of 86.  Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged). In March, 44 states had increasing activity (including minor increases). It appears we are seeing weakness in several oil producing states including Alaska and Oklahoma. It wouldn't be surprising if North Dakota, Texas and other oil producing states also turned red later this year.

Update on sales, housing, and employment: February was weather, March was the OIl patch - As we all know, there has been a run of weak data for the last several months.  In previous posts, I've suggested that February's poor retail sales were due to weather, while March's poor employment report was due to Oil patch weakness.  Since some new state-level data has been published, I can update these notes.  Let me take the last first.  The state-by-state breakdown of employment and unemployment for March was reported the other day. So, how did the northeast, and in particular Massachusetts fare, vs. the Oil patch states of Texas and Oklahoma?  The following charts cut to the chase.  Note that Massachusetts was one of the big winners for employment growth in March.  And the Oil patch states of Texas and Oklahoma among the big losers. Here is employment changes by region:  Note that the Northeast was the big winner in March, with growth of 44,900. The Midwest, especially the eastern part, where there has been a big growth in fracking,  and the Pacific portion of the West were the big losers, down -50,300 and -13,700, respectively.  Now, here's the unemployment rate: While none of our big states made the list, the new Oil patch states of North Dakota and West Virginia did. Next, let's take a look at housing starts by region. Here's what happened in the Northeast: Let's contrast that with housing starts in the Western region: Housing starts cratered in February in the snow-slammed Northeast, and almost completely recovered. Meanwhile starts in the West fell in February, and cliff-dived in March. Finally, let's update some state sales tax reports.  These are a reasonable proxy for retail spending.  Keep in mind that March collections frequently represent sales that actually took place in February.

New York City Just Outlawed Running Credit Checks on Job Applicants -- Gone are the days when a job applicant could make a good first impression with a smart suit and firm handshake. Now your first impression might get boiled down to three digits on a botched credit rap sheet, leading a boss to reject you, sight unseen. But the city where first impressions count for everything is about to make the job market a little less judgmental. New York’s City Council just voted overwhelmingly to outlaw the common practice of letting employers prejudge people based on their credit history—passing an unprecedented ban against employers use of workers’ credit background data. The legislation, which passed last Thursday following an extensive grassroots campaign by local and national labor and community groups, restricts a boss, prospective employer or agency from “us[ing] an individual’s consumer credit history in making employment decisions.” The final version incorporates some compromises pushed by the business lobby, such as carve-outs for positions that could involve handling “financial agreements valued at $10,000 or more,” police and national-security related jobs, or workers with access to “trade secrets.” While business groups cited these provisions as wins in a bill they otherwise chafed at, economic justice advocates have nonetheless hailed the law as a promising boost for an emerging nationwide movement.

Why American Workers Without Much Education Are Being Hammered --The last couple of decades have been terrible for American workers without much education. New research calculates just how bad, and offers some evidence as to why that is. In short, they face a double whammy. Less-educated Americans, especially men, are shifting away from manufacturing and other jobs that once offered higher pay, and a higher share are now working in lower-paying food service, cleaning and groundskeeping jobs. Simultaneously, pay levels are declining in almost all of the fields that employ less-educated workers, so even those who have held onto jobs as manufacturers, operators and laborers are making less than they would have a generation ago. Perhaps the single most shocking number in a new review of employment and earnings data by researchers at the Hamilton Project, a research group within the Brookings Institution, is this one: The median earnings of working men aged 30 to 45 without a high school diploma fell 20 percent from 1990 to 2013 when adjusted for inflation. A group of people not earning much to begin with, in other words, has seen earnings plummet to $25,500 in 2013 from $31,900 in 1990 (both numbers are in 2013 dollars). Men with a high school diploma did only a little better, with a 13 percent decline in median earnings over the same span. Women did better than men, but it has been no era of riches for less-educated women either; those without a high school diploma saw a 12 percent decline in median earnings, and those with a high school diploma or some college a 3 percent gain.

U.S. Wages Are Historically Great, Or They’re Awful. It Depends on Your Preferred Inflation Measure -- Last week, we posted a series of charts showing inflation-adjusted wages for most workers topped out in 1972. The data, an official Labor Department measure released each month, appeared to underscore soft wage gains during this recovery. But some economists objected, saying the Labor Department is overstating true inflation when it uses the Consumer Price Index to make its calculation on real wages. “When you use a different inflation factor, you get very different results,” Aaron McNay, an economist for the state of Montana, commented here on Real Time Economics. “For example, using the Personal Consumption Expenditure index (PCE), you see that hourly wages for non-supervisory workers have never been higher than they are now.” Rather than peaking more than four decades ago, PCE shows wages bottoming out in 1990 and rising more or less steadily since. The PCE index is persistently lower partly because it tries to account for the way price changes might cause consumers to substitute one item for another. It also includes a broader range of expenditures than CPI and is weighted according to data provided in business surveys, rather than the less reliable consumer surveys.The federal government uses CPI to calculate cost-of-living wage adjustments for Social Security beneficiaries, eligibility for food stamp recipients and payments due to military retirees. The gauge also affects the cost of subsidized school lunches, some collective bargaining agreements and tax brackets.

Big Mac Test Shows Job Market Is Not Working to Distribute Wealth -  Some 15 years ago, searching for a consistent way to compare wages of equivalent workers across the world, Orley Ashenfelter, an economics professor at Princeton University, came upon McDonald’s.The uniform, highly scripted production methods used throughout the McDonald’s fast-food empire allowed Professor Ashenfelter to compare workers in far-flung countries doing virtually the same thing. The company also offered a natural index to measure the purchasing power of its wages around the world: the price of a Big Mac. Some of his findings are depressing.. Real McWages — measured in terms of the number of Big Macs they might buy, declined over the first decade of the millennium widely across the industrialized world.  Even before the financial crisis struck, the McWages of McDonald’s workers in the United States, many Western European countries, Japan and Canada went nowhere between 2000 and 2007, a period of steady, though unspectacular, economic growth in most of the developed world. In the United States, real McWages actually declined.“It’s puzzling that we can get away with paying so little for what are really terrible jobs,” Professor Ashenfelter told me.The battle for public opinion is fought mostly on ethical grounds — pitting the healthy profits of American corporations and the colossal pay of their executives against bottom-end wages that force millions of workers to rely on public assistance to survive.But what is often overlooked in the hypercharged debate about corporate morality is how a similar dynamic is taking hold around the industrialized world.

The Asshole Factory -- My good friend Mara has not one but two graduate degrees. From fine, storied universities. Surprise, surprise: the only “job” she was able to find was at a retail store. Hey—it’s only minimum wage, but at least she’s working, right? And at a major-league, blue-chip company, An American icon; an institution; a name every man, woman, and child in this country knows;  What is Mara’s job like? Her sales figures are monitored…by the microsecond. By hidden cameras and mics. They listen to her every word; they capture her every movement; that track and stalk her as if she were an animal; or a prisoner; or both. She’s jacked into a headset that literally barks algorithmic, programmed “orders” at her, parroting her own “performance” back to her, telling her how she compares with quotas calculated…down to the second…for all the hundreds of items in the store…which recites “influence and manipulation techniques” to her…to use on unsuspecting customers…that sound suspiciously like psychological warfare. It’s as if the NSA was following you around……and it was stuck in your head…telling you what an inadequate failure you were…psychologically waterboarding you…all day long…every day for the rest of your life. Mara’s boss sits in the back. Monitoring all twelve, or fifteen, or twenty people that work in the store. On a set of screens. Half camera displays, half spreadsheets; numbers blinking in real-time. Glued to it like a zombie. Chewing slowly with her mouth open. Jacked into a headset. A drone-pilot… piloting a fleet of human drones…pressure-selling disposable mass-made shit…as if it were luxury yachts…through robo-programmed info-warfare…like zombies…to other zombies…who look stunned…like they just got laser blasted, cluster-bombed, shock-and-awed…

Thousands Of Dreamers Are Losing Their Work Permits - Thousands of undocumented immigrants who gained work permits as part of an Obama administration effort to shield young people from deportation are suddenly losing their ability to work legally as the federal government struggles to renew their authorizations on time. Exactly 11,028 young immigrants have had their Deferred Action for Childhood Arrivals (DACA) status and work permits expire in spite of having applied on time, according to numbers released for the first time to BuzzFeed News by U.S. Citizenship and Immigration Services, the agency that handles the permits. The number of lapsed cases represents roughly 5% of the total number of DACA renewals that USCIS has approved so far.  A USCIS spokesperson told BuzzFeed News that the agency “has heard concerns about delays in adjudicating some of these cases and is looking into measures to address the issue without compromising the integrity of the adjudication process.” The spokesperson also listed a number of reasons why renewals might be delayed, most of which involve the need to double-check information. These lapses reflect the ad-hoc nature of Obama’s program for deferring deportation for so-called Dreamers, young immigrants who entered the country illegally as children. With other forms of immigration status, such as green cards or work-related visas, immigrants do not normally face serious consequences because of processing delays

I am a cook in the US Senate but I still need food stamps to feed my children - -- Every day, I serve food to some of the most powerful people on earth, including many of the senators who are running for president: I’m a cook for the federal contractor that runs the US Senate cafeteria. But today, they’ll have to get their meals from someone else’s hands, because I’m on strike. I am walking off my job because I want the presidential hopefuls to know that I live in poverty. Many senators canvas the country giving speeches about creating “opportunity” for workers and helping our kids achieve the “American dream” – most don’t seem to notice or care that workers in their own building are struggling to survive. I’m a single father and I only make $12 an hour; I had to take a second job at a grocery store to make ends meet. But even though I work seven days a week – putting in 70 hours between my two jobs – I can’t manage to pay the rent, buy school supplies for my kids or even put food on the table. I hate to admit it, but I have to use food stamps so that my kids don’t go to bed hungry. I’ve done everything that politicians say you need to do to get ahead and stay ahead: I work hard and play by the rules; I even graduated from college and worked as a substitute teacher for five years. But I got laid-off and I now I’m stuck trying to make ends meet with dead-end service jobs.

Nine Charts about Wealth Inequality in America: Why hasn’t wealth inequality improved over the past 50 years? And why, in particular, has the racial wealth gap not closed? These nine charts illustrate how income inequality, earnings gaps, homeownership rates, retirement savings, student loan debt, and lopsided asset-building subsidies have contributed to these growing wealth disparities.

1.5 Million Missing Black Men -  For every 100 black women not in jail, there are only 83 black men. The remaining men – 1.5 million of them – are, in a sense, missing. Among cities with sizable black populations, the largest single gap is in Ferguson, Mo. North Charleston, S.C., has a gap larger than 75 percent of cities. This gap – driven mostly by incarceration and early deaths – barely exists among whites.  In New York, almost 120,000 black men between the ages of 25 and 54 are missing from everyday life. In Chicago, 45,000 are, and more than 30,000 are missing in Philadelphia. Across the South — from North Charleston, S.C., through Georgia, Alabama and Mississippi and up into Ferguson, Mo. — hundreds of thousands more are missing. They are missing, largely because of early deaths or because they are behind bars. Remarkably, black women who are 25 to 54 and not in jail outnumber black men in that category by 1.5 million, according to an Upshot analysis. For every 100 black women in this age group living outside of jail, there are only 83 black men. Among whites, the equivalent number is 99, nearly parity. African-American men have long been more likely to be locked up and more likely to die young, but the scale of the combined toll is nonetheless jarring. It is a measure of the deep disparities that continue to afflict black men — disparities being debated after a recent spate of killings by the police — and the gender gap is itself a further cause of social ills, leaving many communities without enough men to be fathers and husbands. Perhaps the starkest description of the situation is this: More than one out of every six black men who today should be between 25 and 54 years old have disappeared from daily life.

American Justice? FBI Lab Overstated 95% Of Forensic Hair Matches (Including 32 Death Sentences) -  The Justice Department and FBI have formally acknowledged that nearly every examiner in an elite FBI forensic unit gave flawed testimony in almost all trials in which they offered evidence against criminal defendants over more than a two-decade period before 2000.  Of 28 examiners with the FBI Laboratory’s microscopic hair comparison unit, 26 overstated forensic matches in ways that favored prosecutors in more than 95 percent of the 268 trials reviewed so far, according to the National Association of Criminal Defense Lawyers (NACDL) and the Innocence Project, which are assisting the government with the country’s largest post-conviction review of questioned forensic evidence.  The cases include those of 32 defendants sentenced to death. Of those, 14 have been executed or died in prison. “These findings are appalling and chilling in their indictment of our criminal justice system, not only for potentially innocent defendants who have been wrongly imprisoned and even executed, but for prosecutors who have relied on fabricated and false evidence despite their intentions to faithfully enforce the law,” Blumenthal said.  – From the Washington Post article: FBI Overstated Forensic Hair Matches in Nearly All Trials Before 2000

The Lifelong Effects of Early Childhood Poverty - infographic

Building better infrastructure with better bonds | Brookings Institution: America’s infrastructure challenges are increasingly front page news, but practical solutions to pay for bridges, roads, airports, schools, water, and other assets are buried on page B7. This brief discusses three new pragmatic proposals to address America’s infrastructure needs—qualified public infrastructure bonds (QPIBs) and two different versions of America Fast Forward (AFF) bonds. While the specific program structures and political prospects vary significantly, the need for new bonding tools is straightforward. QPIBs are designed to let the private sector take a more active role in designing, building, financing, operating, and maintaining public infrastructure assets. AFF bonds are aimed at attracting new types of investors into the infrastructure market, particularly public pension funds, corporate pensions, sovereign wealth funds, insurance companies, and taxpayers in lower income brackets.

U.S. Bridges Falling Down Get No Help From Record ’15 Muni Sales -- The cheapest borrowing costs in five decades aren’t enough of an incentive for states and cities to address their crumbling bridges and roads. While municipalities have issued a record $130 billion of long-term, fixed-rate bonds this year, an unprecedented 70 percent of the deals have gone to refinance higher-cost debt, rather than fund capital expenditures, according to Bloomberg and Bank of America Merrill Lynch data. At about $40 billion, muni sales to finance projects are unchanged from the same period last year -- even though the nation’s aging infrastructure has become a problem so dire and obvious that it was the subject of a feature by comedian John Oliver last month on HBO’s “Last Week Tonight.” “Refunding has taken precedence over infrastructure financing,” said Phil Fischer, head of municipal research at Bank of America in New York. “It’s going to save state and local governments a lot on debt-service costs, and it’s going to help them catch up in terms of their pensions and other fixed obligations.” “That can’t go on forever,” he said. “Infrastructure projects are needed all over the country.”

Cash Shortage Seen in Puerto Rico in 3 Months - Three months.That is how long the Puerto Rico government has before it could run out of money, according to the island’s top finance officials.The warning came in an unusual letter to the commonwealth’s governor and the heads of the House and Senate from the Government Development Bank, which oversees all of Puerto Rico’s debt deals.The letter, which was sent this week, was meant to underscore the need for Puerto Rico lawmakers to act quickly to address the island’s fiscal problems, officials said.Lawmakers have been squabbling over a plan to overhaul the commonwealth’s tax system to generate sorely needed revenue. That debate has held up Puerto Rico’s plan to sell as much as $2.95 billion in bonds — a critical source of liquidity — because potential investors want to see the commonwealth’s long-term fiscal plan before agreeing to lend more money.Without that long-term bond deal, and another shorter-term financing that Puerto Rico needs to complete this summer, the government’s liquidity could be depleted by July, David H. Chafey Jr., the chairman of the development bank, said in an interview.“For us to be able to borrow from traditional investors or hedge fund investors, they will say show me your plan and show your budget,” Mr. Chafey said.Puerto Rico, which is struggling with more than $70 billion in debt and a sluggish economy, has increasingly relied on hedge funds to buy its debt.

Puerto Rico officials warn government shutdown imminent - (Reuters) - Puerto Rico's top finance officials said the government of the U.S. territory will likely shutdown in three months because of a looming liquidity crisis and warned of a devastating impact on the island's economy. In a letter to leading lawmakers, including Governor Alejandro Padilla, the officials said a financing deal that could potentially salvage the government's finances currently looked unlikely to succeed. It warned of laying off government employees and reducing public services "A government shutdown is very probable in the next three months due to the absence of liquidity to operate," the officials said. "The likelihood of completing a market transaction to finance the government's operations and keep the government open is currently remote." The letter, dated April 21, was also sent to the heads of Puerto Rico's Senate and House as well as the governor. It was signed by the government's fiscal team, including the head of the Government Development Bank and the Treasury Secretary. Puerto Rico, which has a total debt of more than $70 billion, is trying to raise $2.95 billion in financing, while pushing through unpopular tax reforms such as a higher value-added tax and increasing a levy on crude oil to help pay for it.

Immigrant Bed Mandate Ensures Guaranteed Profit for For-Profit Prison System by David Dayen --  Congress basically instituted a quota system on the number of detainees that needed to be deported each year. The Obama Administration’s executive order was supposed to change that, to a degree, if it protected enough undocumented workers from deportation. But the quota system from Congress remains, and it basically guarantees profits for the private prison industry. A group called Grassroots Leadership has issued a report pinpointing that quota and the effects on immigration policy.. From the executive summary: In 2009, Senator Robert Byrd (D-WV), then Chairman of the Appropriations Subcommittee on Homeland Security, inserted the following language regarding Immigration and Customs Enforcement’s (ICE) detention budget into the Department of Homeland Security Appropriations Act of 2010: “…funding made available under this heading shall maintain a level of not less than 33,400 detention beds.” This directive established what would become a controversial policy interpreted by ICE as a mandate to contract for and fill 33,400 (increased in 2013 to 34,000) detention beds on a daily basis."  The immigration detention quota is unprecedented; no other law enforcement agency operates under a detention quota mandated by Congress. Two major private prison corporations have emerged as the main corporate beneficiaries of immigrant detention policies: Corrections Corporation of America (CCA) and GEO Group. In fact, CCA and GEO Group now operate 62 percent of all ICE detention centers, even as the system has expanded over the last decade. They control 8 of the 10 largest detention centers. And this bed mandate is incredibly vital to the system’s cash flow; profits have increased 47 percent at CCA since 2007 and an incredible 244 percent at GEO Group. The majority of lobbyist spending from CCA goes toward members of the Homeland Security Appropriations Subcommittee, which controls that language and its interpretation. These detention centers are expanding, particularly in south Texas and Louisiana. It’s even led to acquisitions, as GEO just bought LCS corrections, which operates several immigrant detention facilities.

How Robbers Got Cops to Pay Ransoms - In Lincoln County, Maine, Sheriff Todd Brackett reached a decision that cut against his every instinct as a longtime cop: He agreed to pay a ransom to a robber. The details come from an NBC affiliate's report. Weeks earlier, an email attachment downloaded by someone inside his law enforcement agency released a virus that crippled its computer system. Put simply, all the electronic data in their possession was suddenly encrypted and inaccessible. They were robbed of access to their own information. Then the ransom request arrived: An anonymous hacker wanted $300 in exchange for an encryption key, or passcode, that would instantly unscramble the data. For a while, Sheriff Brackett's computer experts labored to recover access without paying up. The longer they failed the more the top cop had to choose between making a payment that would give hackers an incentive to target other victims or refusing—at the cost of his operation grinding to a halt, crippled by missing files. The payment was made in Bitcoin, per the instructions of the hacker, and traced as far as a Swiss bank account by the FBI, which could follow it no farther.The case was not unique. A similar scheme succeeded against Houlton, Maine, where officials paid a $588 ransom. In Tewksbury, Massachusetts, cops paid $500. And a Boston Globe roundup suggests that many other police agencies have been hit, with at least one refusing to pay a ransom and losing all of their data:

The Continuing Depopulation of Detroit -  Then again, no door in the history of architecture — rotating or otherwise — could have accommodated the latest perversity Detroit officials were inflicting on city residents: the potential eviction of tens of thousands, possibly as many as 100,000 people, all at precisely the same time. Little wonder that it seemed as if everyone was getting stuck in the rotating doors of that Wayne County office building on the last day residents could pay their past-due property taxes or enter a payment plan to do so. Those who didn’t, the city warned, would lose their homes to tax foreclosure, the process by which a local government repossesses a house because of unpaid property taxes. “It’s the last day to pay,” one woman heading toward the rotating glass chamber yelled to a pedestrian who had slowed to watch the commotion. The eighth floor, however, turned out to be little more than another human traffic jam, a holding space for thousands of anxious homeowners who faced hours of waiting before reaching the desk of some overworked city representative down on five. Yet, as a post office delivery worker gaping at the fiasco told me, this was less hectic than it had been a only few days earlier, when the treasurer’s office had rented out the Second Baptist Church across the street. There, people waited for the opportunity to enter the revolving doors to take the elevator to the eighth floor before heading for the fifth floor to… you get the gist. In fact, the whole week had been a god-awful mess. A day earlier, rumors had it, a woman had passed out in the elevator between the eighth and fifth floors en route to “making arrangements,” the euphemism for getting on a payment plan that might save your home.“What happens if you can’t pay?” a slender man asked me as we dodged a new wave of people surging through the glass cylinder. “Then they sell your house at auction,” I replied.

Most of police force quits after tiny Missouri town elects black lady mayor. --  Former city clerk Tyrus Byrd was sworn in as mayor of Parma, Missouri on Tuesday only to find out that police officers, as well as the city attorney and a water treatment supervisor, had resigned before she took office.  Residents of the town, some pointing out that the town was probably over-staffed with police, were unconcerned about their safety after the two full-time and three part-time officers quit. “I think it was pretty dirty the way they all quit without giving her a chance,” resident Martha Miller said. “But I don’t think they hurt the town by quitting, because who needs six police for 740 people?”

Detroit schools deficit payoff proposal could cost every district in the state $50 per student -  If the state of Michigan were to pay Detroit Public Schools' operating deficit, it would cost each school district in the state about $50 per student, according to a report issued Wednesday. Late last month, a coalition of community leaders released a report on the future of Detroit schools with a number of recommendations on improving education in the city. Among the recommendations was the state taking on a portion of the district's debt — its operating deficit. A report issued by Citizens Research Council Wednesday showed that particular recommendation may end up costing the state a total of $72 million. "This increase comes at the expense of fewer state dollars being made available for other students across the state, either through the general foundation allowance or in categorical grants aimed at specific student groups," the report states. There is no question Detroit Public Schools is mired in a financial morass. The district will pay back $2.6 billion in general obligation debt over the next 25 years, a total the coalition is not asking the state to pay. The Coalition for the Future of Detroit Schoolchildren's recommendation is not that all the debt is forgiven, but instead the state takes over the $124 million annual operating deficits and payments to the Michigan Public School Employees Retirement System, or MPSERS.

Credit Swap Event Triggers for Chicago Schools: Out of Cash in 30 Days, Cooking the Books to Oblivion, Rauner Ponders Bankruptcy; Emanuel Out to Destroy Middle Class -- Bad news on Chicago is deep and broad:

• The Chicago Public School System has a $1.1 Billion Budget Hole in $5.9 Billion Budget
• A $228 to $263 million derivative time bomb just triggered on the Chicago Board of Education
• Chicago Public Schools may be out of cash in 30 days
• Corruption investigations plague the school board
• Chicago booted Moody's as a bond rater
• Roadblocks impair pension reforms by the Illinois legislature
• Rauner issued a statement he will not bail out Chicago on the backs of Illinois taxpayers
• Chicago teachers threaten strikes demanding more money that isn't there

Let's investigate those ideas starting with the bond rating cuts that triggered the derivatives time bomb.

Rauner's dangerous talk of Chicago schools bankruptcy - - Bankruptcy, as one lawyer familiar with the legal process puts it, works best as kabuki theater. The actors get all gussied up in outlandish outfits—some as samurai warriors with scary swords and scarier faces. Everyone postures and gestures and engages in exaggerated argument. In the end, they're hopefully all frightened enough that they've worked out a compromise rather than pulling the trigger on Chapter 9. I sure hope Gov. Bruce Rauner knows it's theater. And I hope that his political foes—particularly in organized labor—know that theater sometimes echoes reality as Chicago Public Schools heads down the horrid path to fiscal collapse. CPS has been making lots of news lately, almost all of it bad. Even before CEO Barbara Byrd-Bennett was ensnared in a federal corruption probe, the agency faced a $1.1 billion hole for the budget year that begins July 1, a hugely underfunded pension plan and tough negotiations with the Chicago Teachers Union.   Rauner's seeming solution: bankruptcy. “The state has a crisis. The city has a crisis. I'm concerned that (CPS) is going to have to go bankrupt,” he told attendees at a school conference April 14. “Bankruptcy code exists to help the organization get out of financial trouble. There's a reason for the bankruptcy code.” The governor has his allies in pushing for a state law that would allow local governments to declare bankruptcy and bust those union contracts Rauner so detests. “I'm not saying it's a good thing, but it ought to be an option,” Rockford Mayor Larry Morrissey says. “Sometimes it's better to let a court work it out.” But even Morrissey considers actually doing the deed “a last resort.” Others liken it to opening Pandora's box.

There's a huge crisis brewing in Chicago's public school system -- Chicago Public Schools are having a tough time right now.  The US government is investigating Chicago Public Schools (CPS) for possible financial misconduct.    Meanwhile, the city's school system faces a huge budget gap, and the governor of Illinois even suggested bankruptcy might be the best option for the district. "This investigation is very sad, I hope there's been no wrong-doing, but Chicago Public Schools has been a source of patronage, cronyism, dealings, massive bureaucracy," Illinois Gov. Bruce Rauner said to CBS Chicago on Monday. "It hasn't really served the families and the parents of the children in a very long time," he added. A key figure in the federal investigation is CPS CEO Barbara Byrd-Bennett, who's on a paid leave of absence while investigators look into a $20.5 million no-bid contract awarded to a private company called SUPES Academy, the Chicago Tribune has reported. That award money has come under fire since Byrd-Bennett was once employed by SUPES Academy, a company that trains teachers and administrators, prior to her role at CPS. Byrd-Bennett was hired in 2012 by Chicago Mayor Rahm Emanuel, and in 2013 she signed the request for the board to consider the contract for SUPES Academy, according to records cited by The New York Times.

155,000 New York kids boycott standardized tests: — Tens of thousands of parents expressed disapproval of New York's reliance on standardized tests by having their children refuse to take the tests earlier this week. Several districts in the New York City suburbs reported that at least 25% of students had refused to take the tests. In at least two, that number rose to 50%. Mahopac Central School District's interim superintendent, Brian Monahan, said 55% of his system's middle school students and 45% of the elementary school students had refused the tests. At North Rockland Central School District in Garnerville, N.Y, 63% of middle school students refused the tests with the overall district refusal rate at 49%. Half of Hillburn, N.Y.-based Ramapo Central's middle school students skipped the tests.On Long Island, nearly 65,000 elementary and middle school students have refused to take the tests this week, almost 44% of those eligible, according to a Newsday survey. The state Education Department said official numbers for how many pupils took the statewide assessments won't be released until this summer. But a group called United to Counter the Core, which is critical of the tests, said Thursday that more than 155,000 children boycotted the English tests that were administered Tuesday, Wednesday and Thursday. More than 1.1 million students were supposed to take them.Such a reaction to standardized testing not unprecedented, but the size of the boycott is.

How Working Teens Differ from Other High School Dropouts - Working youth account for around 30% of 16-to-18 year olds who leave high school early, and they tend to be disproportionately male, Hispanic and first-generation immigrants, according to a new analysis by the Urban Institute. On average, these young workers earn around $9,500 a year. While that kind of income puts them below the poverty line as a single worker, it accounts for a hefty share of their family income. One in 10 young workers account for more than half of their family’s income, while the average young worker accounts for 21% of their household income. This is enough to lift 42% of poor households over the poverty line, and it allows 45% of households to spend less than 30% of their income on housing. Half of all out-of-school working youth are working more than 40 hours a week, according to the analysis. And households with adolescent workers tend to rely less on federal assistance programs than those with youths who aren’t in school and aren’t working. Do young people drop out of school to work because they don’t want to be in school, or because they really need the work? The study doesn’t answer the question, but the authors point to a survey of Latinos which found that seven in 10 stopped going to school—either before or after graduating from high school—to help support their families. The reasons for dropping out are important because if more youth are dropping out due to financial necessity—and not because of behavioral or academic problems—then that requires a different policy response.

College for the Masses - When people talk about four-year colleges not being for everyone, the teenage Carlos Escanilla is the sort of student they have in mind. He seemed to be a much better fit for a job, a vocational program or a community college.  Yet on a summer night in 1997, a friend persuaded Mr. Escanilla to try to enroll at nearby Florida International University. The college was growing and might be willing to take a chance on a marginal student. And, Mr. Escanilla began to realize, he didn’t have anything better to do. “I didn’t have a band, I didn’t have a way to tour,” he says. “I didn’t have any prospects.” Two months later, he was sitting in classes at Florida International.The fate of students like Mr. Escanilla is crucial to today’s debate over who should go to college: How much money should taxpayers spend subsidizing higher education? How willing should students be to take on college debt? How hard should Washington and state governments push colleges to lift their graduation rates? All of these questions depend on whether a large number of at-risk students are really capable of completing a four-year degree.As it happens, two separate — and ambitious — recent academic studies have looked at precisely this issue. The economists and education researchers tracked thousands of people over the last two decades in Florida, Georgia and elsewhere who had fallen on either side of hard admissions cutoffs. And the two studies have come to remarkably similar conclusions: Enrolling in a four-year college brings large benefits to marginal students.

20 cash-starved public colleges drafting bankruptcy plans thanks to Bobby Jindal’s budget - Louisiana State University (LSU) said this week that it had been forced to start planning for bankruptcy in response to Gov. Bobby Jindal’s (R) budget. And it’s just one of as many as 20 campuses that were starting the process. LSU President and Chancellor F. King Alexander told The Times-Picayune that his administration had begun the process of declaring financial exigency — which is essentially an academic bankruptcy — after the state Legislature and Jindal’s administration had failed to close a budget gap. “We don’t say that to scare people,” Alexander explained. “Basically, it is how we are going to survive.” According to the paper, Moody’s Investors Service has already downgraded the university’s credit outlook, meaning that it would have to pay more to borrow money. It was also expected to make it more difficult to recruit staff. “You’ll never get any more faculty,” Alexander pointed out. Because Jindal’s budget included $372 million in funding from tax credit rollbacks that the Legislature was never expected to pass — and other sources that were considered shaky at best — the The Times-Picayune reported that overall state funding at LSU would drop from $3,500 per undergraduate student to $660 per undergraduate student. Higher education officials said that 16 to 20 campuses were considering coordinating the filing of their financial exigency plans.

World’s Biggest For-Profit College Chain Plans $1 Billion IPO - Laureate Education Inc., the largest for-profit college network in the world, is interviewing banks for a $1 billion initial public offering in the U.S., people with knowledge of the matter said. The company, whose honorary chancellor is former President Bill Clinton, has been meeting with potential underwriters for an IPO that could value the education juggernaut at about $5 billion, said the people, who asked not to be named discussing private information. The company, based in Baltimore, owns 84 universities, mostly in emerging markets. Laureate was taken private in a management-led $3.8 billion buyout in 2007, backed by an investor group including KKR & Co. and Citigroup Inc. The company pursued an IPO three years ago, people familiar with the situation said then, which never materialized. It would be the the biggest school chain to go public, edging out Nord Anglia Education Inc., the second-biggest, which raised $350 million last year. The market climate surrounding for-profit education could be better. The For-Profit Education Index of 13 companies, including DeVry Education Group Inc. and Apollo Education Group Inc., has plunged 55 percent through Wednesday since its peak five years ago. Enrollment has slowed amid recruiting abuses and student debt concerns, leading to a regulatory crackdown. In the past six months, both Corinthian Colleges Inc. and Education Management Corp. were delisted from the Nasdaq Stock Market.

Student Debt Accounts For Nearly Half Of US Government "Assets" -- On Friday we asked if the student debt bubble was about to witness its 2007 moment. In July of that year, all three ratings agencies turned aggressively negative on subprime-related MBS and their collective actions triggered a pre-crisis crisis in Canada where billions of asset-backed commercial paper stopped rolling in August, offering those who were inclined to take notice a window into what the financial would look like just one year later. Earlier this month, Moody’s put some $3 billion in student loan-backed ABS on review for downgrade citing a risk of default in some tranches.  The collateral backing the paper is FFELP student loans — that is, it’s guaranteed for 97% of principal by the US government. With nearly one in three loans in repayment delinquent by 30 days or more, and with $1.3 trillion in student debt outstanding, we’ve suggested the situation could deteriorate materially going forward and we’ve also noted that it won’t be long before this trillion-dollar mountain of liabilities ends up being socialized because as Bill Ackman says “there’s no way students are going to pay it back.”   Having set the stage, we bring you the following three charts from Bloomberg which show the extent of the problem and the extent to which that problem will become a public, rather than a private issue. More from Bloomberg: Student debt now comprises 45 percent of federally owned financial assets. Of course, that doesn’t include assets owned by the Federal Reserve, and it doesn’t include real assets like land. Still, it’s a startling figure. This trend worries me. Why? Because when the government owns student loans, it has every incentive not to fix the country’s student-debt problem.   Consider the sheer size of the revenue that the government earns from student-loan interest payments. In 2013, it was $51 billion -- almost 2 percent of total federal revenue for that year. That’s more than two-thirds of the lifetime cost of the entire F-22 fighter jet program! With that kind of money on the table, it’s going to be hard to get the government to take strong action for debt relief.

But They Said "Go To College" - The mantra for my entire life has been – go to college and you’ll get a good paying job. It seems something went wrong on the road to riches. The percentage of college graduates with jobs has been falling for the last 30 years and has been plummeting since 2008. It is now at an all-time low of 74.3%. Shouldn’t these people have obtained jobs since the government tells us the unemployment rate has dramatically dropped from 10% to 5.5% since 2009?  Students are left with a debt burden that can’t be written off by declaring bankruptcy, very few jobs in their fields of study, wages that can barely cover the debt payments, and no chance of ever owning a home. They were told by their parents, politicians, and the mainstream media that college was the path to prosperity. They were lied to.

Delinquent Student Loan Borrowers Are Getting Further Behind - St. Louis Fed ---The figures below show student loan delinquencies in the fourth quarters of 2007 (the beginning of the recession), 2010 (after the recession) and 2014 (the most recent data available). We used the fourth quarter of each year to avoid changes that may be related to the time of year. The first figure represents a usually quoted rate of delinquency in student loans: the percent of people with student loans who are behind in their payments. The figure above clearly shows the effect of the Great Recession, as the delinquency rate increased from 13.6 percent to 16.2 percent. Since then, it has increased at a slower, but still significant, rate to 17.9 percent. To further study student loan delinquency, the figure below shows student loan borrowers making payments late who are behind by 90 days or less. Thus, this figure represents the percent of delinquent borrowers who are not seriously delinquent. As the figure shows, that rate remained relatively flat during the crisis, suggesting that households would stop making payments for a couple of months during the recession, then restart. During the past four years, this rate worsened significantly, dropping from 12.4 percent to 8.6 percent. The two figures taken together suggest that although student loan delinquency has slowed over the past four years, its quality has worsened because more borrowers have become seriously delinquent.

From Delinquent To 'Seriously' Delinquent: Another Worrying Trend For Student Debt Revealed - It’s no secret that America has a $1.3 trillion student debt problem and as we’ve outlined on a few occasions recently, the actual delinquency rate for student borrowers is far higher than the (also high) 18% that’s generally reported because as The St. Louis Fed recently pointed out, it’s important to look not at delinquencies over total student loans but at delinquencies over loans in repayment and when you do the math on the latter you discover that once America’s best and brightest come out of deferment and forbearance, one in three quickly fall 30 days or more behind on their payments. In other words, the real delinquency rate (i.e. the rate for those who are actually required to make payments) is closer to 30%. Now we learn that not only are delinquency rates on the rise, so too apparently, is the percentage of delinquent borrowers who have simply stopped making payments, late or not.

2 groups have the most trouble with student debt - Even while Americans were making great strides in "deleveraging" during the Great Recession, one category of debt kept rising: student loans. In particular, student borrowing increased substantially for older students and those from low-income areas, according to a report from the New York Fed. Rising student debt for these two groups isn't really unusual during poor economic times. When growth is floundering and jobs are scarce, people turn to education and the promise it holds of better employment in the future. However, the promise hasn't been fully realized for these two groups, and now they're struggling to pay off their student loans.  Among the New York Fed's findings:

• Although most types of household debt declined after the Great Recession, student loan balances have increased steadily. The largest growth in this category was for borrowers from the lowest-income areas and among older borrowers. For example, the number of borrowers aged 40 and older grew nearly twice as fast as the rate for younger borrowers.
• Students taking out loans in 2009, the focus of the report, have made little or no progress in paying off their loan balances. "The aggregate balance, five years after leaving school, is still at 97 percent of what it was when they left school. This is in sharp contrast with the borrowers from wealthier Zip codes, who have ... paid down nearly 30 percent of their balances."
• Half of the borrowers who took out loans in the 2009 cohort are having problems paying them back, and the problems are concentrated among borrowers from the lower-income areas, with 70 percent of these borrowers having some sort of repayment problem. However, only 37 percent of borrowers from the highest-income areas have had repayment difficulties. The default rate in low-income areas is nearly three times that in higher-income areas.
• Borrowers in their 30s had the highest default rates, and they also had the highest balances. For borrowers who originated loans in 2009, half of those over 30 have either defaulted or become seriously delinquent.

NJ's pension debt up 13 percent, now tops $40 billion: – New Jersey's pension hole got $4.5 billion deeper last year and now exceeds $40 billion. Annual reports by actuaries compiled for the state's pension boards were made public Wednesday and show the retirement funds' debt grew 13 percent between July 2013 and July 2014, a year in which Gov. Chris Christie slashed the payment toward the pensions when tax collections missed forecast. The growth amounts to roughly $1,400 for every household in New Jersey, for a total tab exceeding $12,500. The state's pension funds combined were 51 percent funded as of July 2014. They had been 54 percent funded a year earlier. "Today's actuarial report shows quite clearly that it is well past time for Gov. Christie to begin meeting his responsibilities," said Patrick Colligan, president of the New Jersey State Policemen's Benevolent Association, who noted the Police and Firemen's Retirement System is in better shape than other systems. It is 73 percent funded overall, with the local-government portion 76 percent funded and the state-government portion 47 percent funded.

More Whistleblowers Say Health Plans Are Gouging Medicare - Privately run Medicare plans, fresh off a lobbying victory that reversed proposed budget cuts, face new scrutiny from government investigators and whistleblowers who allege that plans have overcharged the government for years.Federal court records show at least a half dozen whistleblower lawsuits alleging billing abuses in these Medicare Advantage plans have been filed under the False Claims Act since 2010, including two that just recently surfaced. The suits have named insurers from Columbia, S.C., to Salt Lake City to Seattle, and plans that have together enrolled millions of seniors. Lawyers predict more whistleblower cases will surface. The Justice Department also is investigating Medicare risk scores.Though specific allegations vary, the whistleblower suits all take aim at these risk scores. Medicare uses the scores to pay higher rates for sicker patients and less for people in good health. But officials were warned as early as 2009 that some plans claim patients are sicker than they actually are to boost their payments.Privately run Medicare Advantage plans have signed up more than 17 million members, about a third of the people eligible for Medicare, and are poised to get bigger. Earlier this month, the industry overturned proposed cuts sought by the Obama administration for a third straight year, instead winning a modest raise in payment rates for the programs.Medicare Advantage resonates with many seniors for its low out-of-pocket costs. It's also winning favor with some health policy experts who argue these managed care plans can offer higher quality care than standard Medicare, which pays doctors and hospitals on a fee-for-service basis.

Under Obamacare, Competition Is Costly For Consumers - Normally, market competition is good for consumers. More competition generally means competitors are battling each other to lower their prices and/or raise the quality of their goods. But when it comes to Obamacare, the market is working backwards, at least for people receiving health insurance subsidies through the exchanges.  The exchanges are complicated because most people purchasing insurance through the exchanges receive subsidies. If you earn less than 400% of the federal poverty limit, you’ll probably qualify. In other words, the exchanges are subsidized markets. But subsidies inevitably mess up with normal market functioning. After all, insurers usually compete with each other, in part, based on price. And the cost of insurance varies dramatically, depending on who’s applying for insurance. A single man will typically pay less for his insurance than, say, a family of four. The price of insurance also changes depending on where someone lives, an expensive place like New York City or a cheap one like Topeka.  Because of this normal market variation in the price of health insurance, the ACA stipulated that the size of the subsidy would vary, in part, based on the cost of the plans in a person’s local market. Specifically, people purchasing insurance on the exchanges are offered plans ranging from bronze ones – with low monthly premium and high out-of-pocket costs – to platinum ones – with high premiums and low out-of-pocket costs. Subsidies are tied to the cost of the second cheapest silver plan.

Seeking Obamacare alternative, Republicans eye tax credits (Reuters) - If the U.S. Supreme Court blows up the tax subsidies at the heart of Obamacare in June, Republicans hope to deliver on their promise to offer an alternative healthcare plan. But key parts of it may resemble the one President Barack Obama delivered five years ago in the Affordable Care Act, partly reflecting Republican concerns that they could pay a political price if insurance subsidies are yanked from millions of Americans later this year. Two front-running Republican options at an early stage in Congress include a refundable tax credit that experts say is virtually the same thing as the Obamacare tax subsidy being challenged before the Supreme Court. Republicans deny that their ideas are tantamount to "Obamacare Lite" but acknowledge they will need bipartisan support for their plans to stand any chance of avoiding an Obama veto. "It's not going to be like Obamacare, in my opinion," said Senate Finance Committee Chairman Orrin Hatch, whose plan includes a refundable tax credit for low-and middle-income Americans. “It’s not a literal subsidy, it’s a recognition that they should have this credit." Republicans have been vowing for years to repeal and replace Obamacare, the president's signature policy achievement that Democrats passed in 2010 over united Republican opposition. Democrats say the act is insuring more Americans and helping to slow the growth in healthcare spending.

Health-care crunch: Patient costs rise, ability to pay drops: If you've been feeling a bit more financially strapped when faced with medical bills, you're not alone—not by a long shot. Americans last year were hit both with "skyrocketing" costs for some popular medical procedures, and with health insurance deductibles that are rising at a rate well above inflation. At the same time, the amount of revolving credit that people can tap to help pay some leading health-care costs decreased, according to a study released Wednesday by TransUnion Healthcare, a subsidiary of the large credit-report company. And if you have a low credit rating, that problem has gotten even worse.  "Consumers continue to feel the pressure of rising health-care costs," said Gerry McCarthy, president of TransUnion Healthcare. "Despite a slowly improving economy, many consumers are finding they have less money to make these payments."  The TransUnion report, which analyzed data from about 400,000 providers, underscores the fact that even as overall health-care costs have been rising at a much-lower rate in recent years, actual consumers of medical services are directly shouldering a bigger share of the bill.

Dr. Oz ‘Will Not Be Silenced’ - Dr. Mehmet Oz, the host of The Dr. Oz Show who has come under fire by 10 prominent doctors for “promoting quack treatments and cures in the interest of personal financial gain,” told his audience on Tuesday that he “will not be silenced.” “This month, we celebrate my 1000th show,” Oz said. “I know I’ve irritated some potential allies in our quest to make America healthy. No matter our disagreements, freedom of speech is the most fundamental right we have as Americans. And these 10 doctors are trying to silence that right…So I vow to you right here and right now: we will not be silenced, we will not give in.” The 10 doctors have called for Oz to resign from his faculty position at Columbia University.

Resistance to antibiotics found in isolated Amazonian tribe -  When scientists first made contact with an isolated village of Yanomami hunter-gatherers in the remote mountains of the Amazon jungle of Venezuela in 2009, they marveled at the chance to study the health of people who had never been exposed to Western medicine or diets. But much to their surprise, these Yanomami’s gut bacteria have already evolved a diverse array of antibiotic-resistance genes, according to a new study, even though these mountain people had never ingested antibiotics or animals raised with drugs. The find suggests that microbes have long evolved the capability to fight toxins, including antibiotics, and that preventing drug resistance may be harder than scientists thought. The Yanomami health care workers who were the first to contact the remote villagers in a medical expedition in 2009 collected bacteria from the mouths, skin, and feces of 34 of the 54 Yanomami for the researchers. They prescribed medicines to some children with respiratory ailments but have not published the name of the village to protect these people from further contact. After 2 years of getting the proper permits and an 11-month delay when Dominguez-Bello’s lab in New York was closed by damage from Hurricane Sandy, she and her colleagues eventually sequenced the Yanomami gut bacteria RNA in their labs to compare it with samples from industrialized Americans and rural Guahibo Amerindians of Colombia and farmers from Malawi. When they compared the genetic sequences, they found that the Yanomami harbor “significantly higher diversity than other populations,” including high amounts of Prevotella, Helicobacter, Oxalobacter, and Spirochaeta, for example, that are absent or significantly reduced in industrialized humans. The medical workers also documented that although these Yanomami had high levels of parasites, they were healthy and did not suffer from autoimmune disorders, diabetes, high blood pressure, or heart disease, the team reports today in Science Advances.

Workers Seeking Productivity in a Pill Are Abusing A.D.H.D. Drugs - Fading fast at 11 p.m., Elizabeth texted her dealer and waited just 30 minutes for him to reach her third-floor New York apartment. She handed him a wad of twenties and fifties, received a tattered envelope of pills, and returned to her computer.  Several minutes later, she felt her brain snap to attention. The pills were versions of the drug Adderall, an amphetamine-based stimulant prescribed for attention deficit hyperactivity disorder that many college students have long used illicitly while studying. Now, experts say, stimulant abuse is graduating into the work force.Reliable data to quantify how many American workers misuse stimulants does not exist, several experts said. But in interviews, dozens of people in a wide spectrum of professions said they and co-workers misused stimulants like Adderall, Vyvanse and Concerta to improve work performance. Most spoke on the condition of anonymity for fear of losing their jobs or access to the medication. Doctors and medical ethicists expressed concern for misusers’ health, as stimulants can cause anxiety, addiction and hallucinations when taken in high doses. But they also worried about added pressure in the workplace — where the use by some pressures more to join the trend.

Brain Cancer Cases Shot Up in This Florida Town—Is a Defense Contractor to Blame? - When Hannah got sick in 2007, her mother had no idea that, just a few blocks away in the Acreage—their lush South Florida community—other children had also suffered through the same awful symptoms. Had she known about Jessica Newfield, who was close to her daughter’s age and had been ill for many months before being diagnosed; Joey Baratta, who developed two tumors before dying at age 20; or little Jenna McCann, who got sick at age 3, perhaps she’d have gotten Hannah’s tumor diagnosed sooner. But it would take all of the afflicted families years to connect the dots among their tragedies. When Becky heard from a friend that another child in the neighborhood had recently been diagnosed with a brain tumor, “I was like: what is going on?” Just after Hannah underwent surgery to remove her tumor, and less than a year after the boy—a 5-year-old named Garrett Dunsford—had his brain surgery, the parents started talking.  By May 2009, Jennifer Dunsford had developed a database documenting dozens of cancers in children and adults throughout the neighborhood. She had also gotten together with the mothers of other sick children, including Tracy Newfield, Becky Samarripa and Kaye McCann, as well as a few concerned friends and relatives, to see how they might get to the bottom of what was going on in the Acreage.

The air is dark and asthma is deadly along the Mexico border -- Dr. Saima Khan, a pediatrician in California’s Imperial Valley, finds herself dreading the wind. On gusty days, when sand swirls across the interstate and the sun disappears behind a white scrim of dust, she knows her examination rooms will be filled with young children with asthma, many still in diapers and struggling for breath. Asthma is more than just a nuisance for Khan’s kids. It can be deadly.The wind in this desolate region along the U.S.-Mexico border, one of the state’s poorest and most polluted places, is never benign: Some of the country’s most dangerous air – rich with microscopic particles that can burrow deep in the lungs and affect the heart – is carried on its invisible wings. The ingredients of this rank, airborne witches’ brew make the Imperial Valley an especially precarious place to be a child. School-aged children are rushed to emergency rooms for asthma at a rate that’s nearly double the state average. Likewise, Imperial County holds the state record for asthma hospitalizations, with children younger than 5 being the most frequently admitted. The bad air here long has been blamed on agricultural burns and so-called “fugitive dust” from the desert, both of which are factors. However, a study commissioned by Reveal has found that diesel and gas exhaust are the most significant contributors to the region’s polluted air, most likely a combination of traffic and, especially, the snaking lines of idling vehicles waiting at the border.

Chinese scientists genetically modify human embryos - In a world first, Chinese scientists have reported editing the genomes of human embryos. The results are published¹ in the online journal Protein & Cell and confirm widespread rumours that such experiments had been conducted—rumours that sparked a high-profile debate last month about the ethical implications of such work.  In the paper, researchers led by Junjiu Huang, a gene-function researcher at Sun Yat-sen University in Guangzhou, tried to head off such concerns by using ‘non-viable’ embryos, which cannot result in a live birth, that were obtained from local fertility clinics. The team attempted to modify the gene responsible for β-thalassaemia, a potentially fatal blood disorder, using a gene-editing technique known as CRISPR/Cas9. The researchers say that their results reveal serious obstacles to using the method in medical applications. “I believe this is the first report of CRISPR/Cas9 applied to human pre-implantation embryos and as such the study is a landmark, as well as a cautionary tale,” says George Daley, a stem-cell biologist at Harvard Medical School in Boston. “Their study should be a stern warning to any practitioner who thinks the technology is ready for testing to eradicate disease genes.” There were too many off-target mutations, but the Chinese attitude seems to be if at first you don’t succeed……there are reports that other groups in China are also experimenting on human embryos. There is more here.  And Carl Zimmer wrote an explainer on it.

Diabetes drug found in freshwater is a potential cause of intersex fish: A medication commonly taken for Type II diabetes, which is being found in freshwater systems worldwide, has been shown to cause intersex in fish -male fish that produce eggs. A study by Rebecca Klaper at the University of Wisconsin-Milwaukee determined exposure to the diabetes medicine metformin causes physical changes in male fish exposed to doses similar to the amount in wastewater effluent. In addition to intersex conditions, fish exposed to metformin were smaller in size than those not exposed, said Klaper, a professor in UWM's School of Freshwater Sciences. Initially, the results of her study seemed surprising since metformin is not a hormone and it targets blood sugar regulation. But Klaper said it is also prescribed to women with a common hormonal disease called polycystic ovary syndrome. The research in her lab indicates metformin could be a potential endocrine disruptor - a chemical that confuses the body's complicated hormonal messaging system, interrupting a range of normal activities, including reproduction. .

Bird flu confirmed at Iowa farm with 5.3 million chickens - Up to 5.3 million hens at an Iowa farm must be destroyed after the highly infectious and deadly bird flu virus was confirmed, the U.S. Department of Agriculture said Monday. The farm in northwest Iowa's Osceola County has nearly 10 percent of the state's egg-laying hens. Iowa is home to roughly 59 million hens that lay nearly one in every five eggs consumed in the country. Egg industry marketing experts say it's too early to predict the impact on prices, but say it's unlikely to immediately cause a spike or a shortage, because number of chickens that are to be euthanized is a little more than 1 percent of the nation's egg layers. "Don't panic. Let's wait and see," said poultry industry consultant Simon Shane, who also teaches poultry science and veterinary medicine at North Carolina State University. He added that if 20 million to 30 million hens are infected, consumers could start seeing prices rise. Several Midwestern states have been affected by the outbreaks, costing turkey and chicken producers nearly 7.8 million birds since March. The virus was first detected in Minnesota, the country's top turkey-producing state, in early March and the H5N2 virus has since shown up on commercial farms in Arkansas, Iowa, Missouri, North Dakota, South Dakota and Wisconsin. On Monday, the virus was confirmed in another turkey farm in Minnesota and a backyard flock of mixed birds in Wisconsin. The Osceola County farm provides shell eggs and liquid egg products to the market.

Avian flu crisis grows for poultry producers throughout USA: Poultry producers in several states are bracing for more losses as a highly pathogenic strain of avian influenza forced producers to kill millions of chickens and turkeys in the USA in recent weeks. On Tuesday, the U.S. Department of Agriculture confirmed that turkeys at four more commercial facilities--three in Minnesota and one in South Dakota--were confirmed to be infected with the fast moving H5N2 virus. The agency estimated that more than 390,000 turkeys between the plant would be lost to the disease or have to be euthanized as a precaution to prevent spread of the virus. The latest cases come one day after USDA officials announced that H5N2 was found at a chicken laying facility in Osceola County, Iowa. Some 3.8 million layer hens at the farm affiliated with Sonstegard Foods Company will be euthanized to try to prevent the spread of the disease, according to the company. The USDA had initially estimated that 5.3 million hens were affected. But the company has since confirmed that it was operating below capacity at the time avian flu was detected at its Iowa farm, said USDA spokeswoman Joelle Hayden. "We went to great lengths to prevent our birds from contracting AI (avian influenza), but despite best efforts we now confirm many of our birds are testing positive for AI,"

Minnesota declares state of emergency over bird flu in poultry (Reuters) - Minnesota declared a state of emergency on Thursday over a fast-spreading strain of avian flu that has led to the extermination of more than 7.3 million birds in the country. It followed Wisconsin's action on Monday. The highly pathogenic H5N2 strain of bird flu has been identified on 46 Minnesota farms in 16 counties and affected more than 2.6 million birds in the state. State health officials said they were expediting prescriptions for the antiviral drug Tamiflu for farm workers and others who have been in direct contact with infected flocks. No human infections have been reported in this outbreak.Federal and local public health authorities have said the risk of human infection is low. The state's action to provide antiviral drugs follows recommendations from the U.S. Centers for Disease Control and Prevention (CDC). Minnesota's health department approached 140 farm workers and others who had been in direct contact with infected birds and advised 87 of them to take the Roche antiviral medication as a preventative measure, the department's spokesman Michael Schommer said. Seventy of them took the drug, he said.

The Government Killed 8 Eagles, 730 Cats, and a Million Starlings Last Year -- President Obama finally released his kill list, and it's 46 pages long. No, not the list of suspected terrorists targeted for extrajudicial killing—the Department of Agriculture's tally of every animal it killed or euthanized over the last fiscal year.All 2,713,570 of them, from 319 different species. The culling, conducted by the agency's Wildlife Services division, is controversial. That's because—much like the actual kill list—the USDA's operations are shrouded in secrecy, prone to collateral damage, and symptomatic of an approach that often uses force as something other than a last resort. (A 2012 Sacramento Bee series explored the problems with the USDA's methods in detail.) One of the problems with culling wildlife is that once you've gotten into the business of killing some animals to save other animals, it's awfully hard to get out of it.   The contradictions can be glaring. To wit, the USDA killed cats (730) to save rats, but if you're scoring at home, it also killed 1,327 black rats, 353 Norway rats, 74 Hutia rats, 7 Polynesian rats, 4 bushy-tailed woodrats, and 3 kangaroo rats. It slaughtered more than 16,500 double-breasted cormorants to save salmon. It's shooting white-tailed deer (5,321) to save various plant species and the small fauna, like rabbits, that eat them. But the woods aren't safe for Thumper either—the agency bagged 7,113 cottontail rabbits, plus assorted varieties of jackrabbits, swamp rabbits, and feral pet rabbits. The USDA killed 322 wolves and 61,702 coyotes to save livestock, perhaps in an attempt to atone for the 16 unspecified livestock it killed by accident.

Monsanto Furious At World Health Organization For Claiming Weedkiller Causes Cancer -- Following Monsanto lobbyist comments recently that he's "not stupid" enough to drink the weedkiller that he also proclaimed was safe enough that "you can drink a whole quart of it and it won’t hurt you;" Reuters reports that the maker of the world's most widely used herbicide, Roundup, wants an international health organization to retract a report linking the chief ingredient in the weedkiller to cancer. The company said on Tuesday that a report, issued on Friday by the WHO, was biased: "The WHO has something to explain." However, as one scientist noted, "there are a number of independent, published manuscripts that clearly indicate that glyphosate...can promote cancer and tumor growth."

Glyphosate and Its Advocates Are Cancer -- Since the 1980s we’ve been gathering the evidence that glyphosate, AKA Roundup and other commercial formulations, causes cancer. From the start Monsanto and the US EPA were aware, based on toxic and pre-cancerous kidney effects which manifested in studies commissioned by Monsanto itself, that glyphosate was a likely cancer agent. EPA collaborated with Monsanto in keeping the study data secret, thus inaugurating for glyphosate the currently dominant paradigm of “science” as subject to corporate secrecy and information control. Since then laboratory researchers, epidemiologists, and health statisticians have gathered the evidence that glyphosate causes lymphoma and cancers of the brain, breast, prostate, and testicles. Even as the science has developed the links between these cancers and glyphosate, we’ve seen surges in their incidence, just as we’d expect during the period of the great surge of Roundup use as a result of the deployment of Roundup Ready GMOs. We reached a milestone with the official acknowledgement of the UN World Health Organization’s International Agency for Research on Cancer (IARC) that glyphosate is “probably carcinogenic to humans”. Contrary to the Monsanto lies which smeared the IARC as having conducted a cursory review, the IARC has been monitoring the science for many years. In April 2014, nearly a year prior to the 2015 declaration, the IARC published a study reviewing thirty years of scientific evidence linking many agricultural poisons including glyphosate and 2,4-D to non-Hodgkin’s lymphoma. Today we have the latest study confirming that glyphosate causes cancer. This comes out of Argentina where the truth about glyphosate has long been manifest. Nowhere on earth has glyphosate wrought such health devastation among a populace of innocent bystanders as in the “soy republic” of Argentina and neighboring countries. Here entire landscapes have become sacrifice zones to industrial soy being grown for biodiesel and CAFO feed (NOT for food for people; see below on the “feed the world” Big Lie). Just part of the health carnage has been the doubling, quadrupling, and quintupling of cancer rates and cancer mortality in regions dominated by glyphosate-based soy agriculture.

Farmer Suicides Continue Unabated in India in 2015 --Yet another farmer suicide reported in Delhi today. This suicide did not go unnoticed by the Indian media because it happened in front of the cameras covering the Aam Aadmi Party rally. AAP rules the Indian capital New Delhi. It occurred only a stone throw away from Lok Sabha, the Indian parliament. About 60% of India's population is employed in the agricultural and allied sector, which contributes 18% of the country's GDP. Official figures show 11,772 farmers committed suicide in 2013 across India. That is 44 deaths every day. Not much has changed in the last two years since I wrote the following post titled "India's Agrarian Crisis: A Farmer Commits Suicide Every 30 Minutes" on my Haq's Musings blog in 2013: An Indian farmer commits suicide every 30 minutes. About 200,000 Indian farmers have killed themselves over the last decade, according to media reports quoting India Rural Development Report 2012-13 released in September this year. A report by Center for Human Rights and Global Justice blames failures of biotech crops, particularly Bt cotton, for the tragedy. The report also says inadequate policy responses are contributing to the crisis. Others believe it is caused by poor irrigation. They say that cotton requires a lot more water relative to other crops. It takes 25,000 liters of water to produce one kilo of cotton, about 50 times more than to grow a kilo of potatoes, according to a report in Forbes magazine.

USDA Approves Apple Imports From China Despite Potential Impact on American Consumers and Growers » The U.S. Department of Agriculture’s (USDA) approval of imported fresh apples from China could threaten American consumers and apple growers. Thanks to China’s widespread pollution and food safety problems, we could see apples with dangerous chemical residues imported into the U.S. A 2014 survey by the Chinese government found that one-fifth of the country’s farmland was polluted with inorganic chemicals and heavy metals including arsenic, cadmium and nickel.  The Food and Drug Administration is already unable to monitor the growing flood of imported food, and today’s approval of even more imports will make it difficult for border inspectors to stop apples and apple products from China with residues of pesticides and contaminants, such as arsenic. Allowing Chinese apple imports could also pose a risk to American apple orchards because the imports could harbor hidden invasive pests, including the destructive Oriental fruit fly and other insects. USDA approved Chinese apple imports in exchange for China opening its market to U.S. fresh apple exports. But China will be entrusted with the responsibility of ensuring that these commercially destructive invasive insects would not hitch a ride to America. USDA must halt the approval of these irresponsible approvals of more imported fruit products from China and quickly withdraw the pending decision on allowing importing citrus fruits from China.

Conflict Over Soil and Water Quality Puts ‘Iowa Nice’ to a Test -- After years of mounting frustration, the utility, Des Moines Water Works, sued the leaders of three rural Iowa counties last month. Too little has been done, the lawsuit says, to prevent nitrates from flowing out of farm fields into the Raccoon River and, eventually, into the drinking water supply for roughly 500,000 Iowans. The suit seeks to make farmers comply with federal clean-water standards for nitrates that apply to factories and commercial users, and requests unspecified damages.  “It’s very clear to me that traditional, industrial agriculture has no real interest in taking the steps that are necessary to radically change their operations in a way that will protect our drinking water,” said Bill Stowe, the chief executive of Des Moines Water Works. High nitrate runoff, which can result from nitrogen-rich soil and applied fertilizer, places Des Moines’s drinking water in danger of violating federal quality standards, Mr. Stowe said, and increases costs and poses health risks for customers. The lawsuit raises not only the legal question of whether the government should regulate the water that drains off farmers’ land, but also the existential issue of whether rural and urban Iowans can collaborate to solve vexing problems. In a state where agriculture drives the economy, grain silos are featured on license plates and people pride themselves on a certain brand of “Iowa nice,” farmers like Brent Johnson have criticized the litigation as an antagonistic overreach that comes at the expense of cooperation and neighborliness.  “It’s a confrontational approach,” said Mr. Johnson, who farms corn and soybeans here in Calhoun County, one of three counties whose boards of supervisors were named as defendants in the lawsuit. “I think there’s been a lot of progress made. I don’t know any farmer who wants to increase nitrates in the river.”

The USDA Is Taking On Agriculture’s Huge Contribution To Climate Change -- The United States Department of Agriculture plans to announce a set of voluntary initiatives aimed at helping farmers, ranchers, and forest land owners respond to climate change by increasing carbon storage, reducing carbon emissions, and supporting resilience in the face of extreme weather.  Secretary of Agriculture Tom Vilsack is expected to make the announcement Thursday during a visit to Michigan State University, where President Obama signed the 2014 Farm Bill. The initiative is based off of ten “building blocks” that cut across the agricultural sector and seek voluntary action from farmers, ranchers, and forest land owners to reduce their carbon emissions. Through these voluntary programs, the USDA hopes to reduce net emissions related to agriculture by 120 metric tons per year by 2025 — the equivalent of taking more than 25 million passenger vehicles off the road. In 2013, the agricultural sector accounted for 7.7 percent of the United States’ greenhouse gas emissions, with methane and nitrous oxide being the primary greenhouse gases released. Methane is largely released through livestock production, via fermentation in the stomach of ruminants like cattle, sheep, or goats, or through manure management. Nitrous oxide is released when excess fertilizer isn’t absorb by soil. To achieve these reductions, the USDA plans to encourage farmers, ranchers, and foresters to adopt a slew of sustainable practices, from improved nutrient management to enhanced forest conservation. To reduce fertilizer pollution, the USDA hopes to increase the U.S.’s amount of no-till cropland from the current 67 million acres to over 100 million acres by 2025. To tackle methane from livestock production, the USDA intends to support the installation of 500 new digester plants — meant to turn animal waste into renewable energy — over the next 10 years.

Ohio law aims to keep nutrient runoff from reaching Lake Erie - Less than a year after a harmful algal bloom temporarily cut off the city of Toledo’s drinking water supply, Ohio lawmakers have passed groundbreaking legislation to keep pollutants out of Lake Erie. SB 1, signed into law in early April, establishes several new provisions to prevent nutrient runoff.  For farms located in the western Lake Erie watershed, manure and fertilizers containing phosphorus and nitrogen can no longer be spread on frozen, snow-covered or saturated ground. According to The Toledo Blade, that ban also applies to days when heavy rain is forecast. The penalty for noncompliance is as much as $10,000. The new law also bans the open-lake disposal of dredged material, requires additional phosphorus monitoring at wastewater treatment facilities, and creates the state-level position of harmful algae management and response coordinator. A coalition of Great Lakes advocacy groups hailed SB 1 as a “good step,” but also urged policymakers to do more. It wants Lake Erie states and provinces to develop new monitoring plans and a timetable to cut the flow of phosphorus pollution into the lake by 40 percent.

Michigan Sells Treaty-Protected, Pristine Public Land for Limestone Mine - A group of American Indians in Michigan have lost their bid to block a land transfer of nearly 9,000 acres to a company proposing a limestone mine—the “largest single public land deal in Michigan history,” according to the Detroit Free Press.The attempted injunction was the last legal line of defense against the mine, which would cover as many as 13,000 acres, according to the Detroit Free Press. In the deal, which was approved in March, the state will sell 8,810 acres of “surface land or underground mineral rights” to Graymont, a Canadian mining company, for $4.53 million so it can build the limestone mine in the Upper Peninsula, the Detroit Free Press said. The group—comprised of members of several tribes—had filed suit in Grand Rapids trying to stop the Michigan Natural Resources Director Keith Creagh from transferring land to Graymont Mining Co., based on treaty rights. The mine would be built on about 10,360 acres in the northern peninsula, the  Associated Press reported. “It would be unconstitutional for the MDNR Director to transfer those lands as we—American Indians—have Treaty rights to "the usual privileges of occupancy" on those 11,000 acres. We are asking the Court to step in and preserve our Treaty rights and enjoin Mr. Craegh from transferring that land."

Fears Of Contamination Confirmed, North Carolina Residents Warned Not To Drink Their Water - Nineteen households and a church in the community of Dukeville, North Carolina were sent letters by the state Department of Environment and Natural Resources (DENR) warning them not to drink or cook with well water due to elevated levels of toxic heavy metals, the Associated Press reported. Like Gobble’s home, each is located within a quarter mile of a coal ash pond owned by Duke Energy.I feel like I’ve become very suspicious of all water.  The letters sent to Dukeville residents were part of a statewide testing of private drinking water wells near Duke Energy-owned coal ash dumps. That undertaking was sparked by an 82,000-ton coal ash spill from one of Duke’s storage ponds last year, which contaminated water. In all, those tests conducted by DENR showed contamination of 87 private drinking water wells for households located near eight Duke plants across the state, the AP reported. The DENR tests only looked for contaminants found in coal ash — things like mercury, manganese, arsenic, and vanadium — and found of elevated levels of various chemicals depending on the location. Duke Energy, however, is denying that any of the contamination is a result of leaky coal ash ponds.  “Based on the state’s test results we’ve reviewed thus far, we have no indication that Duke Energy plant operations have influenced neighbors’ well water,” she said.

Your White Teeth and Smooth Skin Are Damaging the Environment -  How much are whiter teeth and smoother skin worth to you? Are they worth the water and fish in the Great Lakes? The cormorants that nest along the shore? The coral reefs that provide refuge and habitat for so much ocean life? Are they worth the oceans that give us half the oxygen we breathe, or the myriad other creatures the seas support?  If you use personal-care products such as exfoliators, body scrubs and toothpastes containing microbeads, those are the costs you could be paying. The tiny bits of plastic -- less than five millimetres in diameter, and usually from one-third to one millimetre -- are used as scrubbing agents. Now they're turning up everywhere, especially in oceans, lakes and along shorelines. They aren't biodegradable. Research by the 5 Gyres Institute found an average of 43,000 beads per square kilometre in the Great Lakes, with concentrations averaging 466,000 near cities. Tests on fish from Lake Erie found an average of 20 pieces of plastic in medium-sized fish and eight in small fish. Cormorants, which eat fish, had an average of 44 pieces of plastic each. Microplastics have been found in the oceans and even under Arctic sea ice. Scientists at Australia's James Cook University found corals starving after eating the tiny beads, their digestive systems blocked.  It's not just the plastic that harms animals; the beads absorb toxic chemicals, making them poisonous to any creature that mistakes them for food or that eats another that has ingested the plastic -- all the way up the food chain. Because humans eat fish and other animals, these toxins can end up in our bodies, where they can alter hormones and cause other health problems.

World's mountain of electrical waste reaches new peak of 42m tonnes - A record amount of electrical and electronic waste was discarded around the world in 2014, with the biggest per-capita tallies in countries that pride themselves on environmental consciousness, a report said. Last year, 41.8m tonnes of so-called e-waste – mostly fridges, washing machines and other domestic appliances at the end of their life – was dumped, the UN report said. That’s the equivalent of 1.15m heavy trucks, forming a line 23,000km (14,300 miles) long, according to the report, compiled by the United Nations University, the UN’s educational and research branch. Less than one-sixth of all e-waste was properly recycled, it said. In 2013, the e-waste total was 39.8m tonnes – and on present trends, the 50-million-tonne mark could be reached in 2018. Topping the list for per-capita waste last year was Norway, with 28.4kg (62.5lbs) per inhabitant. It was followed by Switzerland (26.3kg), Iceland (26.1kg), Denmark (24.0kg), Britain (23.5kg), the Netherlands (23.4kg), Sweden (22.3kg), France (22.2kg) and the United States and Austria (22.1kg). The region with the lowest amount of e-waste per inhabitant was Africa, with 1.7kg per person. It generated a total of 1.9m tonnes of waste. In volume terms, the most waste was generated in the United States and China, which together accounted for 32% of the world’s total, followed by Japan, Germany and India. Waste that could have been recovered and recycled was worth $52bn, including 300 tonnes of gold – equal to 11% of the world’s gold production in 2013. But it also included 2.2m tonnes of harmful lead compounds, as well as mercury, cadmium and chromium, and 4,400 tonnes of ozone-harming chlorofluorocarbon (CFC) gases.

Norway approves mine's controversial plan to dump waste into fjord - Environmentalists promised civil disobedience after Norway’s government approved a controversial plan for a mining company to dump millions of tonnes of waste into a fjord. “This is a fjord full of life – to smother it with toxins is insane,” said Arnstein Vestre, president of Young Friends of the Earth Norway, which has been part of protests against the plan. “We have 600 people ready to do civil disobedience actions, and we will not stop until the fjord is safe,” he said.  Announcing its approval of the project on Friday, industry minister Monica Mæland said there would be strict environmental controls and monitoring of waste matter. The mine could generate up to 500 jobs, she said. Nordic Mining, a Norwegian company, plans to mine Engebø mountain in south-west Norway for rutile, a titanium mineral used for pigments in paint, plastics and paper. It acquired the rights to the Engebø deposit in 2006, and the price of rutile has subsequently risen fourfold. The deposit at Engebø is one of the richest in the world. Controversially, over the anticipated 50-year life of the mine, the company plans to dump millions of tonnes of waste from its operations into the adjacent Førde Fjord, one of the country’s most important spawning grounds for cod and salmon and a site where whales and porpoises congregate.  The Norwegian Fishermen’s Association criticised what it called a “political decision” to approve the mine, citing fears that heavy metals such as cadmium could be released into the fjord and damage fish stocks.

Water pricing to spur conservation ruled unconstitutional: (AP) — An Orange County appeals court ruled Monday that San Juan Capistrano's tiered water rates are unconstitutional, potentially dealing a blow to agencies statewide that have used the pricing structure to encourage water conservation.The 3-0 ruling by the 4th District Court of Appeal upholds a Superior Court judge's decision that found that charging bigger water users incrementally higher rates violates a voter-approved law that prohibits government agencies from charging more than the cost of a service. The ruling comes shortly after Gov. Jerry Brown issued drought orders that call for rates, including tiered pricing, that encourage people to save water. About two-thirds of water districts in the state use some form of tiered pricing, and the ruling was being closely watched to see how it might apply beyond the appellate court, which is only binding in Orange County. "The practical effect of the court's decision is to put a straitjacket on local government at a time when maximum flexibility is needed," Brown said in a statement. "My policy is and will continue to be: employ every method possible to ensure water is conserved across California." San Juan Capistrano charged nearly four times as much per unit of water for users in the highest tier to provide an incentive to conserve. Residents complained the higher rates were arbitrary and unfair.

California drought: Court rules tiered water rates violate state constitution - In a ruling with major implications for California's water conservation efforts during the historic drought, a state appeals court on Monday ruled that a tiered water rate structure used by the city of San Juan Capistrano to encourage saving was unconstitutional. The Orange County city used a rate structure that charged customers who used small amounts of water a lower rate than customers who used larger amounts. But the 4th District Court of Appeal struck down San Juan Capistrano's fee plan, saying it violated voter-approved Proposition 218, which prohibits government agencies from charging more for a service than it costs to provide it.   The stakes are high because at least two-thirds of California water providers, including many in the Bay Area, use some form of the tiered rate system. Gov. Jerry Brown immediately lashed out at the decision, saying it puts "a straitjacket on local government at a time when maximum flexibility is needed. My policy is and will continue to be: Employ every method possible to ensure water is conserved across California."

Desalination plants aren't an easy solution for California drought: As surely as the hot, dry Santa Ana winds bring blue skies to the coast and wildfires to the hills, severe California droughts bring calls to build desalination plants up and down the seashore. All that ocean water, begging to be converted to fresh and pumped into our pipelines, would solve our water supply problems instantly and permanently, boosters say. In the coming months, the drumbeat will only get louder. That's not only because the current drought is the longest and most severe in memory, but because a $1-billion desalination project scheduled to start operating in Carlsbad this fall will be attracting lots of attention. The plant, the largest of its kind in the U.S., is designed to provide San Diego County with about 50 million desalinated gallons a day, about 7% of its water needs. "A lot of people are watching what's going to happen in Carlsbad," says Peter MacLaggan, the executive overseeing the project for its developer, privately held Poseidon Water. "They're going to base their future decisions on the success of this project." That could be a mistake. MacLaggan himself doesn't expect desalination to be "a major component in our lifetime" of the state's overall water supply, although Poseidon has proposed to build a second desalination plant, in Huntington Beach. That plant is still awaiting approval from the California Coastal Commission. Enthusiasm for desalination tends to overlook its high costs, which stem in part from its enormous energy demand and weighty environmental footprint. The modern process, known as reverse osmosis, involves forcing seawater at high pressure through a membrane that screens out the salt, leaving behind a heavily brackish residue.

No, Farmers Don’t Use 80 Percent of California’s Water -- “Agriculture consumes a staggering 80 percent of California’s developed water, even as it accounts for only 2 percent of the state’s gross domestic product,” exclaimed Daily Beast writer Mark Hertsgaard in a piece titled “How Growers Gamed California’s Drought.” That 80-percent statistic was repeated in a Sacramento Bee article titled, “California agriculture, largely spared in new water restrictions, wields huge clout,” and in an ABC News article titled “California’s Drought Plan Mostly Lays Off Agriculture, Oil Industries.” Likewise, the New York Times dutifully reported, “The [State Water Resources Control Board] signaled that it was also about to further restrict water supplies to the agriculture industry, which consumes 80 percent of the water used in the state.” This is a textbook example of how the media perpetuates a false narrative based on a phony statistic. Farmers do not use 80 percent of California’s water. In reality, 50 percent of the water that is captured by the state’s dams, reservoirs, aqueducts, and other infrastructure is diverted for environmental causes. Farmers, in fact, use 40 percent of the water supply. Environmentalists have manufactured the 80 percent statistic by deliberately excluding environmental diversions from their calculations. Furthermore, in many years there are additional millions of acre-feet of water that are simply flushed into the ocean due to a lack of storage capacity — a situation partly explained by environmental groups’ opposition to new water-storage projects.

Another Reason To Move Away From California: "Conditions Are Like A Third-World Country" - As if anyone actually needed another reason to move out of the crazy state of California, now it is being reported that conditions in some areas of the state “are like a third-world country” due to the multi-year megadrought that has hit the state.  In one California county alone, more than 1,000 wells have gone dry as the groundwater has disappeared.  The state is turning back into a desert, and an increasing number of homes no longer have any water coming out of their taps or showerheads.  So if you weren’t scared away by the wildfires, mudslides, high taxes, crime, gang violence, traffic, insane political correctness, the nightmarish business environment or the constant threat of “the big one” reducing your home to a pile of rubble, perhaps the fact that much of the state could soon be facing Dust Bowl conditions may finally convince you to pack up and leave.  And if you do decide to go, you won’t be alone.  Millions of Californians have fled the state in recent years, and this water crisis could soon spark the greatest migration out of the state that we have ever seen.

U.S. Greenhouse Gas Emissions Spiked 2 Percent in 2013 -- After two years of decline, total U.S. greenhouse gas emissions released into the atmosphere because of human activity increased 2 percent in 2013 over the previous year. That surge was fueled, in large part, because of a growing economy, falling coal prices and a cold winter, the U.S. Environmental Protection Agency announced Thursday in its annual greenhouse gas emissions inventory. Emissions across nearly all sectors grew in 2013, with increased GHG emissions from electricity generation, more vehicle miles traveled on the nation’s roadways and greater industrial production, according to the EPA.  The news of the increase in U.S. human-caused GHG emissions comes at a critical moment in the global battle against climate change, particularly after the International Energy Agency announced last month that global carbon emissions related to energy consumption have stabilized for the first time in a growing economy. Ahead of international climate negotiations in Paris at the end of this year, the Obama administration announced a plan to slash greenhouse gas emissions each year by 26 percent by 2025, compared to 2005 levels. The EPA’s Clean Power Plan may also bring about CO2 cuts if it is finalized later this year. Last year, electric power plants accounted for 31 percent of total U.S. GHG emissions, followed by transportation at 27 percent and industrial and manufacturing activity at 21 percent.

NOAA: March 2015 Was The Hottest March Ever Recorded - This was easily the hottest March — and hottest January-to-March — on record, according to the National Oceanic and Atmospheric Administration. NOAA’s latest monthly report makes clear Mother Nature is just getting warmed up:

• March 2015 was not only the hottest March in their 135-year of keeping records, it beat “the previous record of 2010 by 0.09°F (0.05°C).”
• January-to-March was not only the hottest start to any year on record, it also beat “the previous record of 2002 by 0.09°F.”
• March was so warm that only two other months ever had a higher “departure from average” (i.e. temperature above the norm), February 1998 and January 2007, and they only beat March by “just 0.01°C (0.02°F).”

2015 Hottest Year to Date, Could Top 2014 Record - By the reckoning of the three main agencies that track global temperature, 2015 has so far been the warmest year in more than a century. Coming immediately after the hottest year on record, the ranking serves as a reminder of how much the globe’s overall temperature has risen thanks to the ever-growing amounts of greenhouse gases in the atmosphere. With the year only a quarter through, it’s difficult to say definitively how 2015 as a whole will turn out. But with an El Niño event currently in place that could help keep temperatures at record or near-record levels for the remainder of the year, 2015 may be poised to eclipse 2014’s newly minted record, though climate scientists are cautious on such pronouncements. The U.S. National Oceanic and Atmospheric Administration released its global temperature records for this March on Friday, ranking it as the warmest March in their 136-year archive. The global average temperature for the month was 1.53°F above the 20th century average and beat the previous record holder (March 2010) by almost a tenth of a degree.  The Japan Meteorological Agency also ranked March as the hottest in its records, while NASA put it in 3rd place, behind 2010 and 2002. Each agency handles temperature data in slightly different ways, which can lead to different rankings for months and years, though there is broad agreement between all three on the overall warming trend.

Changes in water vapor and clouds are amplifying global warming: A very new paper currently in press shines light on climate feedbacks and the balance of energy flows to and from the Earth.First, they used measurements at the top of the Earth atmosphere to count the energy coming into the Earth system and the energy leaving the planet. The measurements were made by satellites as part of the Clouds and Earth’s Radiant Energy System project (CERES for short). By subtracting one energy flow from the other, they found what is called the Earth’s energy imbalance. Most studies show that the energy imbalance is in the range of 0.5 to 1 Watt per square meter of surface area, which is causing ongoing global warming. It turns out, the imbalance changes a lot over time. On a monthly basis the balance might change 1 Watt per square meter of surface area. The changes are caused principally by changes to clouds and water vapor, and other short-term weather patterns. Clouds have the ability to reflect sunlight back to space; however, clouds also have the ability to trap more heat within the Earth’s atmosphere. So, short-term fluctuations in clouds have large impacts on the net rate of heat gain by the Earth. By looking at the relationships among measured variables, such as temperature, radiation heat transfer, water vapor, and others, the authors were able to extract how changes to cloud cover influence global temperature.  What the present paper shows is that future changes to clouds will cause slightly more warming. Scientists describe clouds as a “positive feedback” on global warming.

High mountains warming faster than expected -  High elevation environments around the world may be warming much faster than previously thought, according to members of an international research team including Raymond Bradley, director of the Climate System Research Center at the University of Massachusetts Amherst. They call for more aggressive monitoring of temperature changes in mountain regions and more attention to the potential consequences of warming. High mountains are the major water source for large numbers of people living at lower elevations, so the social and economic consequences of enhanced warming in mountain regions could be large, the researchers add. "This alone requires that close attention be paid to the issue. In addition, mountains provide habitat for many of the world's rare and endangered species, and the presence of many different ecosystems in close proximity enhances the ecological sensitivity of mountains to environmental change." Lead author Nick Pepin of the University of Portsmouth, U.K., says, "There is growing evidence that high mountain regions are warming faster than lower elevations and such warming can accelerate many other environmental changes such as glacial melt and vegetation change, but scientists urgently need more and better data to confirm this. If we are right and mountains are warming more rapidly than other environments, the social and economic consequences could be serious, and we could see more dramatic changes much sooner than previously thought."

The Blob: Warm Pacific water threatens marine life - - Marine life seen swimming in unusual places. Water temperatures warmer than they should be. No snow where there should be feet of it. Some scientists are saying "The Blob" could be playing a factor. As monikers go, the blob doesn't sound very worrisome. But if you're a salmon fisherman in Washington or a California resident hoping to see the end of the drought, the blob could become an enemy of top concern. A University of Washington climate scientist and his associates have been studying the blob -- a huge area of unusually warm water in the Pacific -- for months. "In the fall of 2013 and early 2014 we started to notice a big, almost circular mass of water that just didn't cool off as much as it usually did, so by spring of 2014 it was warmer than we had ever seen it for that time of year," said Nick Bond, who works at the Joint Institute for the Study of the Atmosphere and Ocean. Bond, who gave the blob its name, said it was 1,000 miles long, 1,000 miles wide and 100 yards deep in 2014 -- and it has grown this year. And it's not the only one; there are two others that emerged in 2014. One is in the Bering Sea and the other is off the coast of Southern California. Waters in the blob have been warmer by about 5.5 degrees, a significant rise. According to New Scientist magazine, some marine species are exploring the warmer waters, leading some fish to migrate hundreds of miles from their normal habitats.

Sea levels along the Northeast rose 4-5 inches in just 2 years - Sea levels across the Northeast coast of the United States rose nearly 3.9 inches between 2009 and 2010, according to a new study from researchers at the University of Arizona and the National Oceanic and Atmospheric Administration. The waters near Portland, Maine, saw an even greater rise -- 5 inches -- over the two-year period.  While scientists have been observing higher sea levels across the globe in recent decades, the study found a much more extreme rise than previous averages. Such an event is "unprecedented" in the history of the tide gauge record, according to the researchers, and represents a 1-in-850 year event. "Unlike storm surge, this event caused persistent and widespread coastal flooding even without apparent weather processes," the study's authors wrote. "In terms of beach erosion, the impact of the 2009-2010 [sea level rise] event is almost as significant as some hurricane events." The analysis relied on data from dozens of tide gauges along the eastern seaboard. The nearly 4-inch rise for the Northeast represents the average of 14 tide gauges located between New York and Canada. Tide gauges farther south in the Mid-Atlantic and Southeast indicated a sea level rise far less extreme in 2009 and closer to average in some areas. The jump occurred most quickly between April 2009 and March 2010. The study found that the increase in the Northeast was caused by a 30% slowdown in a major ocean current system known as the Atlantic meridional overturning circulation (AMOC) and a fluctuation in atmospheric pressure at sea level. The Gulf Steam is one component of the AMOC, which moves warm water northward in the upper levels of the Atlantic.

Big Insurance Companies Are Warning The U.S. To Prepare For Climate Change - A coalition of big insurance companies, consumer groups, and environmental advocates are urging the United States to overhaul its disaster policies in the face of increasingly extreme weather due to human-caused climate change. According to a report released Tuesday by the SmarterSafer coalition, the U.S. needs to increase how much it spends on pre-disaster mitigation efforts and infrastructure protection. That way, it asserts, the U.S. can stop wasting so much money on cleaning up after a disaster happens. “Our current natural disaster policy framework focuses heavily on responding to disasters, rather than putting protective measures in place to reduce our vulnerability and limit a disaster’s impact,” the report reads. “This needlessly exposes Americans to greater risks to life and property and results in much higher costs to the federal government.” The SmarterSafer coalition is made up of more than 30 different groups, including some of the biggest insurance companies in the world: Allianz, Liberty Mutual, SwissRe, and USAA, to name a few. Adequately dealing with the risks of climate change is inherently important to the insurance industry, as failure to prepare can lead to increased costs for insurance companies when storms wipe out basements and take out walls.

Darkening ice speeds up Greenland melt, new research suggests - Scientists have noticed a curious thing happening as rising temperatures melt the Greenland ice sheet. The ice that's left is getting darker, making it more susceptible to further melting, according to new research presented at the European Geosciences Union (EGU) conference in Vienna. Scientists have identified three ways in which the gleaming white ice sheet is getting darker, each contributing to the normally-reflective ice sheet absorbing more of the sun's energy. Second only to the Antarctic ice sheet in terms of size, the Greenland ice sheet spans about 1.7 million square kilometres. This bright white sheet of ice reflects much of the sun's energy that hits it. This is called the albedo effect, derived from the Latin word 'albus', meaning 'white'. Albedo is measured as a percentage or fraction of the sun's energy that is reflected.  The albedo effect has a cooling effect on the planet. Ice on land and sea at both poles reflects away energy that would be absorbed had it landed on land and ocean instead. But in recent years, scientists have found that the Greenland ice sheet is becoming darker. Darker ice absorbs more of the sun's energy instead of reflecting it away, causing the ice to warm up and melt further. In an EGU press conference, Prof Marco Tedesco, professor of Earth and Atmospheric Science at the City College of New York presented the graph below, showing that Greenland albedo has decreased significantly since the mid-nineties.

Why This New Study On Arctic Permafrost Is So Scary -- Scientists might have to change their projected timelines for when Greenland’s permafrost will completely melt due to man-made climate change, now that new research from Denmark has shown it could be thawing faster than expected.Published Monday in the journal Nature Climate Change, the research shows that tiny microbes trapped in Greenland’s permafrost are becoming active as the climate warms and the permafrost begins to thaw. As those microbes become active, they are feeding on previously frozen organic matter, producing heat, and threatening to thaw the permafrost even further.In other words, according to the research, permafrost thaw could be accelerating permafrost thaw to a “potentially critical” level.“The accompanying heat production from microbial metabolism of organic material has been recognized as a potential positive-feedback mechanism that would enhance permafrost thawing and the release of carbon,” the study, conducted by researchers at the University of Copenhagen’s Center for Permafrost, said. “This internal heat production is poorly understood, however, and the strength of this effect remains unclear.”The big worry climate scientists have about thawing permafrost is that the frozen soil ischock-full of carbon. That carbon is supposed to be strongly trapped inside the soil, precisely because it’s supposed to be permanently frozen — hence, “permafrost.”

Rapid reduction of West Antarctica’s ice shelves could have serious implications for global sea levels in a warming world  – Scientists in the US report that the volume of Antarctic shelf ice is diminishing, and that there has been an 18% shrinkage in the mass of some ice floating on coastal waters over the last 18 years. And because much of the loss has been off West Antarctica, where shelf ice helps to keep the ice sheet stable, it could mean that global sea levels will rise even faster as a result of increased glacial flow into the ocean. The findings once again raise concern about the link between man-made emissions of greenhouse gases and the dangerous new world of global warming, climate change and sea level rise. They found that the total volume of shelf ice – the thickness multiplied by the shelf area – around Antarctica stayed more or less the same from 1994 to 2003, but then declined very swiftly.The ice shelves of West Antarctica lost ice during the entire period, and although East Antarctica had been gaining shelf ice, these gains ceased after 2003. Some shelves had lost 18% of their volume. “Eighteen per cent over the course of 18 years really is a substantial change,” Paolo says. “Overall, we show not only that the total ice shelf volume is decreasing, but we see an acceleration in the last decade.”

Climate change: Paris 'last chance' for action - Scientists are calling on world leaders to sign up to an eight-point plan of action at landmark talks in Paris. The key element is the goal to limit global warming to below 2C by moving to zero carbon emissions by 2050. The UN meeting in December is "the last chance" to avert dangerous climate change, according to the Earth League.  Scientific evidence shows this can be achieved, but only with bold action now, says an alliance of climate researchers from 17 institutions. The statement involves eight calls for action:

• Limiting global warming to below 2 degrees Celsius
• Keeping future CO2 emissions below 1,000 gigatonnes (billion tonnes)
• Creating a zero-carbon society by 2050
• Equity of approach - with richer countries helping poorer ones
• Technological research and innovation
• A global strategy to address loss and damage from climate change
• Safeguarding ecosystems such as forests and oceans that absorb CO2
• Providing climate finance for developing countries.

Renewables ride wave of success as prices fall and spending jumps - FT.com: The past five months have been full of heartening news for the renewable energy industry, which has grown used to the opposite. Instead of the subsidy cuts, bankruptcies, trade rows and investment dips that dominated the sector three or four years ago, there have been record levels of installations, surprising price falls and a welcome surge in spending. Global investment in renewable energy bounced up for the first time in three years last year to $270bn, a 17 per cent rise from 2013, the UN Environment Programme reported last month. A $75bn boom in solar power installed in China and Japan drove part of the surge, along with a record amount of offshore wind farm investment in Europe. But the more interesting aspect of the $270bn spent last year, that does not include investment in large hydropower plants, is the record amount of so-called modern renewables it helped fund. At least 95 gigawatts of wind and solar generating capacity was installed last year, far more than the 70GW built in 2011, the only year when the dollar amount invested was higher — at $279bn. That also illustrates the rate at which costs are falling, especially for solar panel technology, a shift some green power companies claim will cause a profoundly disruptive shift. “Solar and wind are about to gobble up market share around the world,” says Thierry Lepercq, chairman of Solairedirect, a fast-growing French company that has 57 solar parks built or under construction around the world. “We’re generating power at lower prices than other energy sources in Chile, India and South Africa,” he says.

The Senate’s Top Climate Denier Is Using Climate Change To Argue For More Nuclear Power - James Inhofe (R-OK), the chair of the Senate Environment and Public Works Committee has an Earth Day (!) op-ed arguing we should embrace carbon-free nuclear power because of the threat posed by global warming. You remember Inhofe, the guy who called global warming a hoax, the guy who for over a decade has trashed climate scientists, such as James Hansen, whom he called in 2006 a “NASA scientist and alarmist.”  Apparently, however, Inhofe no longer sees Hansen as radioactive. He writes, without a trace of irony: James Hansen, the former head of NASA’s Goddard Institute for Space Studies, said in 2013 that ‘continued opposition to nuclear power threatens humanity’s ability to avoid dangerous climate change.’  How cool is it that Inhofe is now apparently on board with top climatologist Hansen on the urgent need “to avoid dangerous climate change” by accelerated deployment of zero-carbon technologies? Presumably he’ll soon be on board with Hansen’s call for a high and rising carbon dioxide fee (returned to the public as a dividend), and a World War II scale effort to return CO2 levels back to 350 parts per million from their current level of 400 ppm (and rising 2+ ppm a year).

Record Numbers Of Drivers Trading In Electric Cars For SUVs -- President Barack Obama promised to put a million more hybrid and electric cars on the road during his tenure, but new research shows drivers are trading them in to buy sports utility vehicles (SUVs). The auto-research group Edmunds.com found that “22 percent of people who have traded in their hybrids and [electric vehicles] in 2015 bought a new SUV.” This number is higher than the 18.8 percent that did the same last year, but it’s double the number that traded in their electric car for an SUV just three years ago. Edmunds.com reports that only “45 percent of this year’s hybrid and EV trade-ins have gone toward the purchase of another alternative fuel vehicle, down from just over 60 percent in 2012.” “Never before have loyalty rates for alt-fuel vehicles fallen below 50 percent,” Edmunds notes.The Obama administration and some states even hand out generous tax credits to encourage people to buy EVs.  Buying an electric car can get you a $7,500 federal tax credit. It’s all part of Obama’s plan to get a million electric cars on the road by 2015. But electric cars were much more attractive when gas prices were high and customers could more easily rationalize paying more for an electric car. So far, Obama is still more than 800,000 electric cars short of meeting his 2015 goal.

Carbon reserves held by top fossil fuel companies soar -- The carbon locked up in coal, oil and gas reserves owned by the world’s biggest fossil fuel companies has swollen by 10% in the last five years, despite warnings from the World Bank and others that most existing reserves cannot safely be burned. The top 200 publicly traded coal, oil and gas companies now hold 555 gigatonnes of CO2 in their fuel reserves, boosted by their continuing efforts to find and develop new reserves. That figure alone is close to the total amount the world could ever emit while keeping global warming below the danger limit of 2C.Far more fossil fuels – about 2650GT – are held by state-owned companies, meaning that in total there are four to five times more fossil fuels in existing reserves than can be safely burned. But the exploitation of expensive fossil fuels in the Arctic, tar sands and deep sea waters, which scientists say must be kept in the ground, is dominated by the 200 commercial firms. The 200 companies, which still spend billions a year searching for new reserves, are the focus of a fast-growing divestment campaign, backed by the UN, which is persuading investors to sell off their fossil fuel shares. The rise in carbon reserves is revealed in a list of the top 100 traded coal companies and top 100 oil and gas companies produced by Fossil Free Indexes (FFI), a US company. Coal India tops the coal list with Gazprom heading the oil and gas list. Western fossil fuel giants including ExxonMobil, Shell, BP, BHP Billiton and Anglo American all appear in the top 10.

Earth day: leading scientists say 75% of known fossil fuels must stay underground - Three-quarters of known fossil fuel reserves must be kept in the ground if humanity is to avoid the worst effects of climate change, a group of leading scientists and economists have said in a statement timed to coincide with Earth Day. The Earth League, which includes Nicholas Stern, the author of several influential reports on the economics of climate change; Hans Joachim Schellnhuber, a climate scientist and adviser to Angela Merkel; and the US economist Jeffrey Sachs, urged world leaders to follow up on their commitments to avoid dangerous global warming. Spelling out what a global deal at the UN climate summit in Paris later this year should include, the group demanded governments adopt a goal of reducing economies’ carbon emissions to zero by mid-century, put a price on carbon and that the richest take the lead with the most aggressive cuts. In its “Earth statement”, the group said that three-quarters of known fossil fuel reserves must be left in the ground if warming was not to breach a rise of 2C, the “safety limit” agreed to by governments.

Out of the ashes - Could we reboot a modern civilization without fossil fuels? -- So, would a society starting over on a planet stripped of its fossil fuel deposits have the chance to progress through its own Industrial Revolution? Or to phrase it another way, what might have happened if, for whatever reason, the Earth had never acquired its extensive underground deposits of coal and oil in the first place? Would our progress necessarily have halted in the 18th century, in a pre-industrial state? It’s easy to underestimate our current dependence on fossil fuels. In everyday life, their most visible use is the petrol or diesel pumped into the vehicles that fill our roads, and the coal and natural gas which fire the power stations that electrify our modern lives. But we also rely on a range of different industrial materials, and in most cases, high temperatures are required to transform the stuff we dig out of the ground or harvest from the landscape into something useful. You can’t smelt metal, make glass, roast the ingredients of concrete, or synthesise artificial fertiliser without a lot of heat. It is fossil fuels – coal, gas and oil – that provide most of this thermal energy. In fact, the problem is even worse than that. Many of the chemicals required in bulk to run the modern world, from pesticides to plastics, derive from the diverse organic compounds in crude oil. Given the dwindling reserves of crude oil left in the world, it could be argued that the most wasteful use for this limited resource is to simply burn it. We should be carefully preserving what’s left for the vital repertoire of valuable organic compounds it offers. But my topic here is not what we should do now.  No, I want to answer a question whose interest is (let’s hope) more theoretical.  Is it possible to build an industrialised civilisation without fossil fuels? And the answer to that question is: maybe – but it would be extremely difficult. Let’s see how.

Local group appeals ODNR’s approval of 8th injection well: An Athens-based anti-fracking group has filed an appeal of a new drilling-waste injection well in eastern Athens County recently approved by the Ohio Department of Natural Resources. It will become the third well at that location owned by K&H Partners of West Virginia, and the eighth overall injection well in Athens County. The appeal was filed by the Athens County Fracking Action Network (ACFAN) with the Ohio Oil and Gas Commission, and alleges that the ODNR oil and gas chief's permit for the well was "unreasonable and unlawful." "This approval process subverted the law and ignored democratic principles," a statement from ACFAN released with its appeal document said. "Our safety and security are at risk from this rogue state agency and the governor who is in charge of it, and from the real and present threat this and other wells for injection of massive amounts of toxic and radioactive fracking waste pose to our drinking and agricultural water supply." The group has previously warned that the new well's operation may lead Athens to become the No. 1 county in Ohio for receiving injection-well waste. In 2014, Athens County ranked No. 2, with more than 2.74 million barrels injected. The new well was approved by the ODNR in March and went forward without a public hearing despite 200 letters of protest and a request by the Athens County Commissioners.

Group pushes for county home rule, injection well ban -- A group of anti-fracking activists announced Tuesday they will be circulating petitions to turn Athens County into a charter government and ban the dumping of oil-and-gas hydraulic fracking waste, as well as use of water from sources in the county, for fracking activities, on the November ballot. The measure apparently wouldn't seek to actually ban deep-shale oil and gas drilling, or fracking, however, and no such permit applications have been submitted to the state in the past year. Along with Athens, a group in Medina County is reportedly attempting something similar with regard to drilling wastes. The group claims that the proposed charter would not alter the way Athens County government functions, but would institute home-rule protection against fracking waste injection activities, and use of water for fracking, across the county. The Athens County Bill of Rights Committee is a countywide version of the city of Athens' Bill of Rights Committee that last year proposed a citywide ban on all oil and gas/fracking activities, which passed in November with 79 percent of the vote. Recent Ohio court decisions, including a pivotal Ohio Supreme Court decision earlier this year, have backed up the state of Ohio and drilling industry's contention that the state has primacy over oil and gas regulation, basically stating, "what the state allows, local government can't prohibit." Supporters of local fracking bans and regulations argue that the Supreme Court decision in the case involving oil and gas drilling regulations in Munroe Falls, Ohio, was narrow and limited, and didn't address local communities' attempts to protect their water and resources, based on the bill of rights framework.

Group Wants Charter Government For Athens County To Fight Fracking -The group that got Athens city voters to pass a citizen’s bill of rights to restrict fracking and associated practices within the city limits is now turning its attention to the entire county. The Athens Bill of Rights Committee is attempting to turn Athens County into a charter form of government in order to keep fracking and injection wells out of the county. The issue is slated to go before county voters in the November general election. The group is aiming to gather 2,000 signatures by June 24 in order to get the issue on the fall ballot. “By this charter we, the people, propose to secure the right of all county residents to live in a clean and safe environment, and to participate in county government,” said Dick McGinn, chairman of the Athens Bill of Rights Committee during a news conference on Tuesday. “These rights are presently denied to most citizens under the statutory form of county and township government.” A news release from the group stated: “We declare our right to refuse to live under state law HB 278, which denies our constitutional right to self-government, and instead, renders unto the Ohio Division of Natural Resources sole authority over the siting, permitting and regulation of oil and gas development and wastewater disposal in the state.” “This is the agency that issues my fishing license,” McGinn added. BORC member John Howell said the charter government would do two things: give county residents the right to referendum, initiative and recall; and protect the county’s water supply. “These are rights of local democracy to protect us from government at the state and federal levels gone awry under the influence of corporate interests,”

A Thai energy company says hello to eastern Ohio -- As reported by the Columbus Business First, a Thai energy company has shifted its eyes towards eastern Ohio and is considering building an ethane cracker plant in the region.  Bangkok-based PTT Public Company Ltd, a state-owned company that is worth over $92 billion, has interest in developing the complex located in Belmont County, Ohio.  The county is known as one of the best areas for energy exploration in the state of Ohio, according to industry sources that spoke with the Columbus Business First.  PTT’s plans are anticipated to be released sometime this week by state officials. According to sources, PTT’s plans to build the ethane cracker plant could change depending on oil and natural gas prices.  If the plant were to be built, it could reduce the cost of transportation for manufacturers in the region that use petrochemicals from natural gas greatly.  Typically, ethane cracker facilities are located in the Gulf Coast region, so having one in Ohio seems logical and practical. PTT has stake in several areas of the energy business world, and most of its dealings that are outside of Thailand are located in Asia.  The company’s PTT Global Chemical Public Company Ltd. is currently the largest petrochemical business in Thailand.  PTT has also landed the 84^th spot on Forbes’ Global 500 list of the largest corporations.

Belmont County named site for possible multibillion-dollar 'cracker' plant -- It is not every day that elected officials from Appalachian Ohio get to announce the possibility of a multibillion-dollar development. So Belmont County leaders had reason to enjoy news yesterday that a planned ethane “cracker” plant is envisioned for a site near the Ohio River. And they hope the news will be followed in about a year with a firm commitment by developers to build the project. “This potentially can be, from a fiscal standpoint, one of the biggest developments ever in Ohio,” said Mark Thomas, a Belmont County commissioner. “To have it, potentially, in Belmont County, in southeastern Ohio, in Appalachia, is incredible.” The developers are PTT Global Chemical of Thailand, a giant chemical and fuel-refining company, and Marubeni Corp. of Japan. A cracker plant takes ethane — a component of natural gas — and breaks it down into a substance that can be used to make chemicals and plastic.

Utica and Marcellus well activity in Ohio - Numbers in the Utica Shale have adjusted a little bit since last week’s report, unfortunately not so much in the Marcellus shale in Ohio.  However, Ohio has gotten a lot of attention lately when it comes to ethane cracker projects.  One company in particular is coming across seas in hopes of building a plant. PTT Public Company Ltd., a state-owned company based in Bangkok that is worth $92 billion, has turned its head to a complex in Ohio for a possible ethane cracker plant location.  The complex is located in Belmont County which happens to be the best areas for energy exploration in the state of Ohio. According to industry sources, state officials plan to release PTT’s plans sometime this week. As with much of the anticipated projects in the industry, sources say that PTT’s plans to construct the ethane cracker plant depend on oil and natural gas prices.  However, if the project was to move forward, it could greatly reduce the cost of transportation for manufacturers in the region that use petrochemicals from natural gas. The following information is provided by the Ohio Department of Natural Resources and covers activity through the week of April 18^th. Activity in the Utica Shale formation in Ohio has had a few slight changes when compared to last week’s update.  According to this week’s report, 380 wells were drilled (up 36), 229 drilling (down 24), 421 permitted (down 9) and 847 producing (up 2), bringing the total number of wells in the Utica to 1,877. The Marcellus Shale in Ohio has zero change reported when compared to last week’s well report.  The area is still sitting at 15 wells permitted, 15 drilled, 13 producing and one well inactive.  There are a total of 44 wells in the Ohio Marcellus Shale.

Marcellus permit activity in Pennsylvania -  Well permit activity for the Marcellus Shale formation in Pennsylvania has seen some changes since the last report, and that’s not the only change the Marcellus has seen.  The Pennsylvania Department of Environmental Protection (DEP) has released its final revisions of the Chapter 78 regulations. The Chapter 78 regulations, which manage oil and gas operations, have been under revision since 2011 and are now, hopefully, coming to an end.  The new revisions, titled Advanced Notice of Final Rulemaking (ANFR), will impact both conventional and unconventional operators.  In December 2013, the first revision of the rules was released by the Environmental Quality Board (EQB), which allowed a 90 day public comment period.  During the comment period, the EQB received over 24,000 comments which have been addressed by the DEP in the latest revision of the regulations. To read a detailed version of the PIOGA’s issues regarding the latest revision of the Chapter 78 regulations, click here. The following information is provided by the Pennsylvania Department of Natural Resources and covers through April 11^th to April 17^th.

• New Permits: 56
• Renewed Permits: 16

Pennsylvania well permits hit a low -- According to the state Department of Environmental Protection (DEP) information, the number of unconventional well permits issued for this year’s first quarter has dropped by 30 percent; the lowest it has been over the last five years. Compared to last year, the DEP issued 863 permits just in the first three months.  This year, the number of permits given out fell to 601.  However, these numbers are not surprising considering companies across the U.S. have been cutting back on capital spending, laying off workers and shutting down rigs due to the low energy prices. In certain cases, like Antero Resources, some companies that were issued permits have chosen to defer well completions.  The well will be drilled, but the work required to complete the well will be put on hold until it is needed.  Antero has decided to hold off on 50 well completions located in the Marcellus Shale. As reported by Pittsburgh Business Times, on Monday during a conference call with analysts, executives from Halliburton Co. explained that there are 4,000 oil wells in North America alone that are waiting to be completed.  CEO of Deep Well Services Mark Marmo stated that he believes that if oil and gas prices stay under $60 per barrel and $3 per thousand cubic feet that the number of wells deferred will increase.  He also explained that he does think there will be an activity increase later this year: Companies will drill, but not necessarily complete a well since the completion side costs more than drilling. It all depends on the company hedge programs and the production goals they need to meet … With oil prices going up, and … with the coal-to-gas conversion from the power companies, the (exploration and production companies) will increase activity … I see gas prices going above $3 per thousand cubic feet, especially if it’s a hot summer.

Final oil and gas revisions have been released -- After years of trying to revise its oil and gas regulations, the Pennsylvania Department of Environmental Protection (DEP) has released its second and final version of its proposed Chapter 78 regulations. The revision process started back in 2011 and now four years later the process may be coming to an end.  The new revisions, known as the Advanced Notice of Final Rulemaking (ANFR), will have a great impacts on conventional and unconventional operators. However, the Pennsylvania Independent Oil & Gas Association (PIOGA), which has participated in the revision process since 2012, has raised concerns regarding the DEP’s final version of the Chapter 78 regulations.  A few of the PIOGA’s concerns include the  “significant changes” that have been made from the 2013 version that will impact both unconventional and conventional well operations.  Some of the changes, which haven provided by the PIOGA in its April 2015 edition, include:

• -The requirement to restore impacted drinking water supplies to Safe Drinking Water Act standards or predrill quality (whichever is better).
• -The elimination of the use of pits to store production fluids at well sites.
• -A new proposal to authorize centralized tank storage.
• -The expansion of predrilling assessments to include the identification of nearby active and inactive wells.
• -Revisions to the obligation to identify abandoned and orphan wells.
• -New obligations for site restoration beyond the requirements of Chapter 102.
• -A new requirement to remediate spills or releases at well sites in accordance with Act 2 under a timeframe uniquely created for oil and gas operations.

33 groups urge City Council to snub an energy hub -- Thirty-three environmental groups, neighborhood organizations and other activists on Wednesday called on Philadelphia City Council to snub an energy hub. In an Earth Day letter to Council organized by Food & Water Watch, the activists urged Council to pass resolutions rejecting efforts to build industries linked to the expanding Marcellus Shale natural gas development. “Such a plan would pose public safety risks on several fronts, deteriorate our community’s public health, and elbow out plans to build our community and economy in a safe and sustainable way,” the groups wrote. With the rapid development of Pennsylvania shale gas, business and political leaders are building support for developing southeastern Pennsylvania into a hub through which energy is shipped, stored and consumed. As the East Coast’s biggest refining center, the region already plays a substantial role as an energy trading center.

Fracking waste puts public at risk, study says - Weakness in state regulations governing hazardous oil-and-gas waste have allowed the leftovers to be disposed of with little regard to the dangers they pose to human health and the environment, according to a recent study by the environmental organization Earthworks.The report says states disregard the risks because of a decades-old federal regulation that allows oil-and-gas waste to be handled as non-hazardous material. Those rules, established by the U.S. Environmental Protection Agency in 1988, exempted the waste from the stricter disposal requirements required of hazardous substances and allowed the states to establish their own disposal standards.In its report, "Wasting Away: Four states' failure to manage gas and oil field waste from the Marcellus and Utica Shale," Earthworks studied rules governing disposal of the often toxic waste - and the gaps in those regulations in New York, Pennsylvania, West Virginia and Ohio.The organization, which is often criticized by the industry as being consistently biased, concludes the EPA was wrong when it applied the non-hazardous label to oil-and-gas waste."Drilling waste harms the environment and health, even though states have a mandate to protect both," said Bruce Baizel, co-author of the report and Earthworks' energy program director.

DEC chief: Final fracking report is ‘literally at the printer’  - New York is about to take its next step toward a ban on large-scale hydraulic fracturing. A several-thousand-page document that will lay out the rationale for prohibiting fracking is “being printed as we speak,” state Environmental Conservation Commissioner Joseph Martens said Wednesday.That report, known as the Supplemental Generic Environmental Impact Statement or SGEIS, has been nearly seven years in the making and will pave the way for Martens to issue an order keeping large-scale fracking from moving forward at the current time.“As you know, it’s voluminous,” Martens said Wednesday. “It is literally at the printer.”Martens was asked about the document following a speech he gave at an Earth Day event at Rensselaer Polytechnic Institute in Troy.Large-scale fracking—a much-debated technique to help retrieve natural gas out of underground shale formations—has been on pause in New York since 2008, when the DEC first launched its review.In December, Martens said he would move to prohibit high-volume fracking “at this time” after state Acting Health Commissioner Howard Zucker issued a report recommending against proceeding, citing concerns about health risks and gaps in science. But in order to formalize the effective fracking ban, the state Department of Environmental Conservation had to complete the SGEIS. Now, the next step is for the DEC to release a final SGEIS, which Martens said would happen “very shortly.” From there, state law mandates the document must be available for public review for at least 10 days before Martens issues a”findings statement,” the legal document that would enshrine the state’s fracking decision.

LAW: W.Va. landowners battle pipeline company over property rights -- - West Virginia landowners and litigators are testing a more fundamental level of opposition to the far-reaching expansion of America's pipeline network. Their approach isn't necessarily environmental; they're focused quite literally on what happens in their backyards -- denying access to surveyors and planners who are trying to secure a route for the 300-mile Mountain Valley Pipeline, one of many projects designed to transport the glut of natural gas from the nation's shale drilling boom. EQT Corp. and NextEra Energy Inc., the main backers of the MVP project, say the pipeline is critical for moving natural gas from the Utica and Marcellus shale formations to markets in the Mid-Atlantic and Southeast. Developers need early access to property along the route to do surveys and environmental assessments to ensure the pipeline path is viable. But many West Virginians are leery -- frustrated by developers scoping out their land and doubtful that they'll see much economic benefit. For now, the battle for access hinges on state law. Though the Federal Energy Regulatory Commission has long handled oversight of natural gas pipelines, the rules for property access in the early stages of planning are set at the state level, and dozens of landowners in the path of the $3 billion MVP proposal think they have West Virginia law on their side to thwart pipeline planning. MVP backers disagree with the landowners over the meaning of the state law, and both sides are now pressing judges to clarify the statute once and for all. Six West Virginia landowners filed two lawsuits last month, urging a state court to declare that pipeline planners cannot have access to property unless their project qualifies as an improvement for "public use."

Federal agency will study proposed conversion of natural gas pipeline that crosses Kentucky -- The Federal Energy Regulatory Commission will look into the potential environmental impact of Tennessee Gas Pipeline's proposal to convert an existing pipeline across Kentucky to allow the transport of natural gas liquids.FERC gave notice Friday that it would prepare an environmental assessment of the Tennessee Gas proposal. Federal law also requires the commission to discover and address concerns the public might have about the proposal — a process called "scoping.""Scoping is the process of determining how broad your analysis is going to be," said Tom FitzGrald, a lawyer with the Kentucky Resources Council.Comments from the public, and from local, state and federal agencies, might prompt the FERC to do an even more in-depth study, called an environmental impact statement, University of Cincinnati law professor Jim O'Reilly said."If they (FERC) go the next step and they do an environmental impact statement, that's a big deal because it will take about six months for the complete statement to be drafted," O'Reilly said. "In those circumstances, the pipeline company might walk away from the project — and I'm just speculating — but the longer it takes for them to get the project approved, the less likely they would do it."

Exxon Mobil firms to pay nearly $5M for Arkansas oil spill — The Justice Department says two subsidiaries of Exxon Mobil have agreed to pay almost $5 million in government penalties for a 2013 oil spill in a central Arkansas community. As part of a consent decree set to be filed in a Little Rock federal court Wednesday, the companies would pay about $3.2 million in federal civil penalties in addition to addressing pipeline safety issues and oil-response capacity. They would pay $1 million in state civil penalties, $600,000 for a project to improve water quality at Lake Conway and $280,000 for the state’s legal costs. The Pegasus pipeline ruptured in March 2013, spilling thousands of gallons of oil into a Mayflower housing subdivision. Assistant Attorney General John Cruden notes that Exxon Mobil doesn’t admit liability in agreeing to the measures.

How rules are shaking out: Quakes seem fewer since limits; KCC says 'it's too early' to tell - As of last Friday, it had been 11 days since an earthquake rattled south-central Kansas. A year ago, that might not have seemed remarkable, but the last time it occurred was actually more than nine months ago, at the end of June 2014, according to U.S. Geological Survey figures. Since September, the region has experienced an average of 17 quakes of magnitude 2.0 or higher each month. State scientists and regulators have conceded the injection of waste saltwater deep underground, to dispose of a byproduct of oil and gas production from hydraulic fracturing, is likely triggering the tremors along existing but previously unknown fault lines in the region. The Kansas Corporation Commission (KCC) issued an order March 20 setting new maximum daily wastewater injection amounts in Harper and Sumner counties, and further limiting disposal levels in five specific areas of “seismic concern.” The order, which began March 30, will cut injection in some wells up to 60 percent when fully implemented by late June. With the restrictions in place less than three weeks, officials with the KCC say “it’s too early to reach any conclusions” about whether the restrictions are resulting in a reduction in quakes. Officials noted that there has also been a significant reduction in activity in the region because of depressed oil prices. The type of oil production in the region, called hydraulic fracturing, is very expensive compared to traditional extraction methods.

Oklahoma: From two 3.0 quakes a year-to two a day - In November of 2011, a magnitude 5.7 earthquake ripped through the small Oklahoma town of Prague, damaging more than a dozen homes and toppling a turret on a St. Gregory's University building in nearby Shawnee. It was the worst of three large quakes to strike the area over several days, and it still as ranks as the worst Oklahoma has ever experienced. Since then, hundreds more have rattled the state, racking up millions of dollars in damages and unleashing a political and financial maelstrom. Until 2008, Oklahoma typically had one or two earthquakes of magnitude 3.0 or greater per year, according to the U.S. Geological Survey; since the start of 2015, the state has averaged 2 of this strength or greater per day. Read MoreOPEC slams oil producers with 'go-it-alone' attitudes "We have a good record going all the way back to the 1970s of magnitude 3 or larger earthquakes. They increased throughout the central U.S. in 2009, but primarily in  just a few states like southern Colorado, Arkansas, Texas and Oklahoma," says Bill Leith, senior science adviser for Earthquake and Geologic Hazards at USGS. "Oklahoma is the most striking case, where the number of earthquakes is now at record levels."  And a growing body of scientific research increasingly connects this upsurge in seismic activity with the recent boom in oil and gas production.   In Oklahoma, oil production has more than doubled in the past five years, climbing from roughly 140,000 barrels per day in late 2009 to just over 360,000 barrels per day in January of this year, according to the U.S. Energy Information Administration.  From 2008 through April 8 of this year, there were 1,063 earthquakes of magnitude 3.0 tallied in Oklahoma by the USGS. This year, through April 8, there were 210, compared with 91 over the same period in 2014.  The USGS sees a connection: specifically, a link to underground disposal of wastewater generated by oil and gas production.

Oklahoma scientists say earthquakes linked to oil and gas work (Reuters) – Oklahoma geologists have documented strong links between increased seismic activity in the state and the injection into the ground of wastewater from oil and gas production, a state agency said on Tuesday. Oklahoma is recording 2-1/2 earthquakes daily of a magnitude 3 or greater, a seismicity rate 600 times greater than observed before 2008, the report by the Oklahoma Geological Survey (OGS) said. It is “very likely that the majority of the earthquakes” are triggered by wastewater injection activities tied to the oil and gas industry, the OGS said. It warned residents should be prepared for a “significant earthquake.” Last year the state recorded 585 quakes of magnitude 3 or greater, up sharply from 109 in 2013. Prior to 2008, Oklahoma averaged less than two a year. The spike in earthquake activity has put Oklahoma in the center of a national debate over whether wastewater disposal from oil and gas production triggers earthquakes. In response to the report, Oklahoma state Representative Cory Williams, a Democrat, called for a moratorium on oil and gas wastewater disposal wells.

Confirmed: Oklahoma Earthquakes Caused By Fracking » Despite the enormous increase in earthquakes in Oklahoma that started at the same time as heavy fracking began there—with the number of earthquakes over 3.0 magnitude skyrocketing from an average of less than two a year to 585 last year—the state has been in official denial about the cause. Now the state has not only admitted that the injection into deep underground wells of fluid byproducts from drilling operations is behind the quakes, but it put up a website titled Earthquakes in Oklahoma that is a “one-stop source for information on earthquakes in Oklahoma.” The site includes an interactive map that displays the dramatic change not only in the number of earthquakes but in their distribution. Instead of a scattering around the state, they’re clustered heavily in areas where drilling operations are disposing of fracking wastewater. The new website says, in a post dated April 21, “The Oklahoma Geological Survey announced today the majority of recent earthquakes in central and north-central Oklahoma are likely triggered by the injection of produced water in disposal wells.” “Oklahoma experienced 585 magnitude 3+ earthquakes in 2014 compared to 109 events recorded in 2013,” it says on the front page. “This rise in seismic events has the attention of scientists, citizens, policymakers, media and industry. See what information and research state officials and regulators are relying on as the situation progresses.”

Oklahoma Earthquake Swarm 2015: In Sharp Turnaround, Oklahoma Officials Confirm The Link Between Fracking Wastewater And Earthquakes -- Oklahoma’s government confirmed this week that hundreds of earthquakes rocking the state are largely caused by oil and gas operations. The position marks a sharp turnaround for state officials, who for years expressed skepticism that Oklahoma’s earthquake swarm could be linked to the rampant underground disposal of wastewater from oil and gas wells. The state’s energy and environment office on Tuesday launched a website, called Earthquakes in Oklahoma, which embraces the scientific consensus that injecting billions of gallons of wastewater near fault zones is triggering temblors in areas with little history of seismic activity. Until this week, officials had maintained that the spike in earthquakes was probably a natural phenomenon. Oklahoma experienced 585 earthquakes of magnitude 3.0 or greater last year -- up from just 103 temblors of that size in 2013, according to the Oklahoma Geological Survey. Before 2008, when oil and gas drilling accelerated in Oklahoma, the state experienced only about two magnitude 3.0 earthquakes each year. “While we understand that Oklahoma has historically experienced some level of seismicity, we know that the recent rise in earthquakes cannot be entirely attributed to natural causes,” the new state website says. “The Oklahoma Geological Survey has determined that the majority of recent earthquakes in central and north-central Oklahoma are very likely triggered by the injection of produced water [i.e., wastewater] in disposal wells.”

Oklahoma Lawmakers Vote To Outlaw Fracking Bans As Earthquakes In The State Spike - In an especially fractious split, the day after the state’s energy and environment cabinet acknowledged that the “recent rise in earthquakes cannot be entirely attributed to natural causes,” state lawmakers passed two bills to limit the ability of localities to decide if they want to allow fracking and drilling nearby.   While at least eight bills were filed this session in Oklahoma to prevent cities and counties from banning drilling operations, the two that passed through the House this week are SB 809 and SB 468. SB 809 would allow “reasonable” ordinances related to “road use, traffic, noise and odor,” but would not allow any outright bans — the bill prohibits the direct regulation of oil and gas exploration, drilling, or fracking. SB 468 would make it so that any interference with oil and gas production would be considered a “taking” of property, meaning royalty owners could seek compensation.  The Oklahoma legislature is one of a number of state governing bodies focused on how local jurisdictions could impede the oil and gas industry’s ability to drill first and deal with the consequences later. Earlier this month, the Texas House approved a bill that drastically curtails local governments’ abilities to say no to fracking within their communities. Authorities and industry leaders in both states are worried that more municipalities might follow the lead of Denton, Texas in instituting a ban on fracking within city limits.  According to Oklahoma government, the current rate of earthquakes is approximately 600 times historical averages — a phenomenon that Oklahoma Geological Survey (OGS) now considers very likely to be caused by wastewater wells associated with drilling for oil and gas.

Jon Stewart’s Hilarious Take on Oklahoma’s Fracking Earthquakes - The Daily Show last night was particularly hilarious. Jon Stewart, of course, gives mention to Earth Day, “our favorite of the planetary birthdays,” and offers an apology to Uranus for forgetting her birthday. He then, moves into the news of Oklahoma confirming the link between the increase in earthquakes with the increase in fracking. “Is it, as common sense might suggest, the seemingly obvious connection to fracking, or is the Lord using our great state as a shake weight?” Stewart asks. “Who really knows?”  He then has a field day with a bizarre Earth Day recycling promo video from the National Security Agency.

New Studies Link Earthquakes With Oil, Gas Drilling - WSJ: New scientific findings released Tuesday linked earthquakes to the practice of injecting wastewater from oil and gas operations deep underground, adding to a growing consensus among researchers that energy development is probably causing seismic activity in Oklahoma, Texas and other parts of the U.S. The Oklahoma Geological Survey released a statement Tuesday saying that it now “considers it very likely” that most of the hundreds of earthquakes in the state’s center in recent years were “triggered by the injection of produced water in disposal wells.” Produced water is salty fluid that naturally flows up wells along with oil and gas.  Meanwhile in Texas, a team of college and federal researchers headed by scientists at Southern Methodist University released a new study concluding that a string of earthquakes that began in 2013 northwest of Fort Worth was also likely caused by wastewater injection. Oklahoma Gov. Mary Fallin, a Republican, called the findings by state geologists significant and said the state was working to toughen regulations in response to an increase in quakes. “State agencies are already taking action to address this issue and protect homeowners,” she said in a statement. Oklahoma last year experienced 585 earthquakes of 3.0 or greater magnitude—big enough to be felt indoors—according to the state, more than in the previous 30 years combined.

The Link Between Fracking Activity And Earthquakes Is Getting Stronger -- We’re only mid-week, but it’s already been a big one for human-induced earthquakes.  On Tuesday, scientists from Southern Methodist University added to the growing body of research linking small earthquakes to oil and gas wastewater disposal. That body of research is particularly important to the popular but controversial process of hydraulic fracturing, or fracking, which produces significantly more wastewater than conventional drilling. On the same day, Oklahoma’s government announced that it would officially embrace that large body of scientific research, and start figuring out how to deal with its growing earthquake problem. In the last decade, Oklahoma has experienced a dramatic increase in earthquakes — an increase that has happened in tandem with the spread of wastewater disposal from fracking operations across the state. What makes the Texas study a bit different than other research linking human activity to seismic events is that it suspects wastewater injection alone is not causing the quakes. Instead, it asserts that there’s a specific thing workers do when extracting fuel and performing wastewater injection that may be triggering them.  According to the research, quakes may be made more likely when workers extract gas and groundwater from one side of a fault line, then inject water back into the ground on the other side of the fault. That is slightly different than what other research has suggested — that wastewater injected anywhere near fault lines can change the stress of those faults to the point of failure, causing earthquakes.

Fracking Most Likely to Blame for 2013-14 Earthquakes - - It is no secret that fracking, or hydraulic fracturing, is suspected to play a role in earthquakes across the country, with some scientists saying it should be included in earthquake hazard assessments. And now, a seismology team led by Southern Methodist University (SMU), Dallas is blaming fracking for 2013-14 earthquakes in Azle, Texas. After identifying two intersecting faults, the team developed a sophisticated 3D model to assess the changing fluid pressure within a rock formation in the affected area. They used the model to estimate stress changes in the area, generated by two wastewater injection wells and the more than 70 production wells that remove both natural gas and significant volumes of salty water (brine). They also took into account fluid volumes, flow parameters, and subsurface pressures in the region to provide a more accurate estimate of the fluid pressure along this fault.  "The model shows that a pressure differential develops along one of the faults as a combined result of high fluid injection rates to the west and high water removal rates to the east," Matthew Hornbach, SMU associate professor of geophysics, explained in a statement. "When we ran the model over a 10-year period through a wide range of parameters, it predicted pressure changes significant enough to trigger earthquakes on faults that are already stressed."  In fact, the stress changes on the fault were typically tens to thousands of times larger compared to stress changes associated with water level fluctuations caused by the recent Texas drought, according to their model.

Azle earthquakes likely caused by oil and gas operations, study says --  Oil and gas operations are the most likely cause of dozens of earthquakes that began rattling the North Texas towns of Azle and Reno in November 2013, a group of scientists has concluded. The study, led by researchers at SMU and published Tuesday in the journal Nature Communications, presents some of the most conclusive evidence yet that humans are shifting faults below Dallas-Fort Worth that have not budged in hundreds of millions of years. While experts have not yet determined what’s causing the shaking in Dallas and Irving, the new paper previews aspects of that study and includes suggestions that will help speed research. “It’s certainly one of the best cases in the literature,” said Art McGarr of the U.S. Geological Survey’s Earthquake Hazards Program in Menlo Park, Calif. The new findings contradict statements by the Railroad Commission of Texas that there are no definitive links between oil and gas activity and earthquakes in the state. Shown an embargoed version of the paper, the commission’s staff seismologist Craig Pearson wrote in a statement that “the study raises many questions with regard to its methodology, the information used and conclusions it reaches.” But he declined to answer specific questions before meeting with the paper’s authors. The Railroad Commission regulates the oil and gas industry. The Azle study is the result of a yearlong collaboration involving 11 researchers at SMU, the University of Texas at Austin, and the U.S. Geological Survey and was reviewed by independent experts before publication. The scientists zeroed in on an unusual mechanism behind the quakes: workers pushing liquid into the ground on one side of a fault and sucking gas and groundwater from the other side of the fault.

Railroad Commission moves to shut down wells linked to quakes -- The Texas Railroad Commission said Friday it was considering shutting down two wastewater disposal wells in North Texas’ Barnett Shale after they were linked to seismic activity in the area. A study released by scientists at SMU earlier this week presented evidence a series of earthquakes around the rural town of Azle in late 2013 were caused by two disposal wells operated by XTO Energy, the Forth Worth subsidiary of Exxon Mobil, and Houston-based EnerVest. “In light of SMU’s study linking disposal well activity to earthquakes in 2013, it is important to assess this new information in relation to the continued operational safety of the wells,” Railroad Commission Chairman Christi Craddick said in a statement. A growing body of research has connected earthquakes with injection wells, which oil and gas companies use to store deep underground the billions of gallons wastewater that are a byproduct of drilling. Oklahoma, where oil and gas drilling is prevalent, has seen seismic activity spike to more than 5,000 quakes last year. North Texas has experienced a series of earthquake clusters since 2008, mostly recently around Irving where seismic events reaching more than 3.0 on the Richter scale have been recorded. On Thursday the U.S. Geological Survey said that the risk of damaging earthquakes in the Dallas-Fort Worth area had more than tripled since 2008 due to the increased use of injection wells. The Barnett Shale, which underlies 5,000 square miles in North Texas, is one of the largest natural gas fields in the United States.

Fracking seen turning 'tornado alley' Oklahoma into deemed quake country by USGS - U.S. government geologists now recognize much of Oklahoma as earthquake country, accounting for the bulk of 17 regions newly designated for seismic hazards attributed to underground disposal of wastewater from fossil fuel production. The 17 regions are delineated in the first official map by the U.S. Geological Survey documenting areas of elevated and increasing earthquake frequency found to be induced by human activity, namely deep-well injection of oil and gas wastewater. The areas are spread across the Central and Eastern United States, from Colorado to Ohio. Oklahoma, long synonymous with the storm-prone area of the country known as “tornado alley,” now lies at the heart of a new manmade potential disaster zone, comprising by far the greatest amount of quake activity linked to wastewater injection. The new quake map was part of a USGS study modeling human-caused seismic hazards released on Thursday in conjunction with a meeting of the Seismological Society of America in Pasadena, California. It came a day after Oklahoma geologists issued their own report documenting strong links between rising seismic activity and wastewater injection. The USGS reported similar findings last year for Colorado and New Mexico. Other states with newly designated human-caused seismic zones include Texas, Kansas, Arkansas and Alabama. “Induced seismicity” has been most pronounced since 2009, the USGS said, coinciding with a surge in energy development associated with a drilling method called hydraulic fracturing, which forces water and chemicals into underground shale formations to extract oil and gas.

U.S. Maps Pinpoint Earthquakes Linked to Quest for Oil and Gas - The United States Geological Survey on Thursday released its first comprehensive assessment of the link between thousands of earthquakes and oil and gas operations, identifying and mapping 17 regions where quakes have occurred. The report was the agency’s broadest statement yet on a danger that has grown along with the nation’s energy production. By far the hardest-hit state, the report said, is Oklahoma, where earthquakes are hundreds of times more common than they were until a few years ago because of the disposal of wastewater left over from extracting fuels and from drilling wells by injecting water into the earth. But the report also mapped parts of eight other states, from Lake Erie to the Rocky Mountains, where that practice has caused quakes, and said most of them were at risk for more significant shaking in the future. “Oklahoma used to experience one or two earthquakes per year of magnitude 3 or greater, and now they’re experiencing one or two a day,” Mark Petersen, the chief author of the report, said. “Oklahoma now has more earthquakes of that magnitude than California.” The report came two days after Oklahoma’s state government acknowledged for the first time the scientific consensus that wastewater disposal linked to oil and gas drilling was to blame for the huge surge in earthquakes there. The state introduced an interactive map showing quake locations and places where wastewater is injected into the ground, and the state-run Oklahoma Geological Survey said it “considers it very likely” that the practice is causing most of the shaking.

Quakes in once-stable areas linked to oil, gas drilling - — More than a dozen areas in the U.S. have been shaken in recent years by small earthquakes triggered by oil and gas drilling, a government report released Thursday found.The man-made quakes jolted once stable regions in eight states, including parts of Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma and Texas, according to researchers at the U.S. Geological Survey.Experts said the spike in seismic activity is mainly caused by the oil and gas industry injecting wastewater deep underground, which can activate dormant faults. A few instances stem from hydraulic fracturing, in which water, sand and chemicals are pumped into rock formations to free oil or gas.Many studies have linked the rise in small quakes to the injection of wastewater into disposal wells, but the Geological Survey’s report takes the first comprehensive look at where the man-made quakes are occurring.“The hazard is high in these areas,” said Mark Petersen, who leads the agency’s national mapping project.Oklahoma lately has been rocked by more magnitude 3 quakes than California, the most seismically active of the Lower 48 states, Petersen said.

US government says drilling causes earthquakes – what took them so long? - The drilling – or rather, the process of injecting water deep underground – has been triggering earthquakes in Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma and Texas. The most obvious question is: what took you so long, USGS? Over those seven years, other scientists have speculated about whether this rise in earthquakes has anything to do with the injection wells used by the fracking industry to dispose of the water used in the process. For the most part, the report does not pin the blame on fracking itself – pumping large volumes of water, sand and chemicals into rock formations in order to free oil or gas – but rather on the associated process of injecting wastewater deep underground using injection wells. The rise of fracking after 2005’s Energy Policy Act slightly preceded and coincided with the rise in earthquakes. Oklahoma averaged a handful of earthquakes of magnitude 3 or greater from 1975 to 2008. Then, in 2009, it had 20. In 2011, the number of earthquakes in the state rose to over 60, and Oklahoma was hit by its largest earthquake in recorded history – magnitude 5.7. Immediately after the quake Katie Keranan, an assistant professor of geophysics at the University of Oklahoma, partnered with scientists from the USGS and Columbia University’s Lamont-Doherty Earth Observatory to install two dozen seismometers in Prague. Within a year, Keranan had data that indicated that the pressure from injecting water deep beneath the earth had snapped three fault planes, one after the other.  Not long after, in 2012, an injection well was linked to quakes in Youngstown, Ohio. The state’s governor issued an executive order requiring operators to conduct seismic studies before the state would issue well permits.

Man-made earthquakes increasing in US, wastewater to blame – USGS — The US Geological Survey (USGS) has released a map of earthquakes believed to be the result of human activity. Experts say most of the quakes were caused by the oil and gas industry injecting wastewater underground. Fracking was also blamed in some cases. All of the areas highlighted on the chart “are located near deep fluid injection wells or other industrial activities capable of inducing earthquakes,” the study said.  Such injection-induced earthquakes are occurring at a rate higher than before, according to the USGS. Scientists said the increase in seismic activity throughout the country is mainly due to the oil and gas industry injecting wastewater deep underground, which can activate dormant faults. Many of those awakened faults have not moved in millions of years, according to Geological Survey geophysicist William Ellsworth. "They're ancient faults...we don't always know where they are,” Ellsworth said, as quoted by AP. A few cases were blamed on hydraulic fracturing, or fracking – a process in which large volumes of water, sand, and chemicals are pumped into layers of rock to free oil or gas. The increase in earthquakes has rocked once stable regions in eight states: Alabama, Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma, and Texas.

These 17 Earthquake Hazard Zones Were Likely Created in Part by Fracking Wastewater -- A United States Geological Survey document released Thursday documents an increase in earthquakes likely caused by human activity, mapping 17 seismically active pockets in eight states. The document is not a study of the causes of the quakes, but rather the preliminary result of an initiative to model and predict future seismic activity; it does note that there has been a "substantial increase" in quake rates since 2009 and that the increase is attributed by other studies to the "injection of wastewater or other fluids in deep disposal wells." Wastewater injection is a technique often associated with hydraulic fracturing. Here's the USGS map of affected areas: These earthquakes are occurring at a higher rate than ever before and pose a much greater risk to people living nearby," a USGS official said in a press release. Officials in Oklahoma said on Tuesday that it is "very likely that the majority of recent earthquakes" in their state "are triggered by the injection of produced water in disposal wells." In context, that's a strongly worded statement, and it was described as "significant" by Republican governor Mary Fallin, who also added that "state agencies are already taking action to address this issue and protect homeowners."

Is fracking moratorium the solution for quakes in Texas, Oklahoma? - The release of studies this week linking fracking to recent earthquakes in Texas and Oklahoma came as no surprise to those who have been rocked by the temblors in recent years. The question for people such as Angela Spotts, 53, of Stillwater, Okla., is what’s being done about the problem. The reports, including one by the U.S. Geological Survey on Thursday, tied seismic activity to wastewater disposal following the oil and gas extraction technique known as hydraulic fracturing, or fracking. “I’m trying to understand what’s being done to protect us. There’s no excuse for a moratorium not being put in place immediately” on wastewater injection, Spotts said. “I’m very alarmed that more people are not concerned.” Industry experts say that something is already being done. “We’re all trying to find out what the heck is going on down under the ground. It’s got everyone concerned. Nobody wants to be the cause of earthquakes,” said Alex Mills of the Texas Alliance of Energy Producers, a group of 3,300 oil and gas producers based in Wichita Falls.   Some other states that have been suddenly rocked by quakes in recent years declared partial bans on fracking, including Arkansas and Ohio, noted Casey Holcomb of the Central Oklahoma Clean Water Coalition.  “They moved very swiftly on this when there were earthquake swarms. When we talk to the Oklahoma Corporation Commission here on this, they say they don’t have the authority,” Holcomb said of the state’s oil and gas regulator. He added, “The oil industry is in every level of government, and fracking has just given them obscene levels of wealth and they buy political power with it.”

Oil and Gas Industry Shake-up - America's booming domestic oil and gas industry is made possible through technologies such as horizontal drilling and hydraulic fracturing. Trucking has enjoyed lower fuel prices and a boom for those carriers involved in hauling sand, water, equipment and more to and from drilling sites. However, those lower oil prices have left some wells unfinished, with one fracking executive this week predicting half of all fracking companies will be gobbled up or out of business by the end of the year. And new reports from national and state geologists raise concern about the effect of the oil and gas boom on the planet.For the first time this week, the U.S. Geological Survey unveiled a map of earthquakes believed to be triggered by human activity in the eastern and central United States.Seismic activity has increased in Oklahoma, Texas, Kansas, Colorado, New Mexico and Ohio. All of the areas highlighted on the map “are located near deep fluid injection wells or other industrial activities capable of inducing earthquakes,” the study said.The New York Times has an excellent article delving into the very technical USGS report. Oklahoma, the worst-hit state, last year had more earthquakes magnitude 3 or higher than California.This week, the Oklahoma Geological Survey issued its most strongly worded statement yet linking the oil and gas industry to the state’s earthquakes, saying the spike in seismic activity is “very unlikely to represent a naturally occurring process.”However, it said the primary suspect was not hydraulic fracturing itself, but "the injection/disposal of water associated with oil and gas production," or dewatering.As Yahoo News explains:For the dewatering process, extremely salty water, which coexists with oil and gas below the Earth’s surface, is separated from those substances after extraction. Then barrels of wastewater are deposited into wells far deeper than their point of origin.

Seismologists Link Oil, Gas Drilling To Spike In US Quakes – But Could That Happen In California? - With the evidence coming in from one study after another, scientists are now more certain than ever that oil and gas drilling is causing hundreds upon hundreds of earthquakes across the U.S.So far, the quakes have been mostly small and have done little damage beyond cracking plaster, toppling bricks and rattling nerves. But seismologists warn that the shaking can dramatically increase the chances of bigger, more dangerous quakes.Up to now, the oil and gas industry has generally argued that any such link requires further study. But the rapidly mounting evidence could bring heavier regulation down on drillers and make it more difficult for them to get projects approved.The potential for man-made quakes “is an important and legitimate concern that must be taken very seriously by regulators and industry,” said Jason Bordoff, founding director of the Center on Global Energy Policy at Columbia University.He said companies and states can reduce the risk by taking such steps as monitoring operations more closely, imposing tighter standards and recycling wastewater from drilling instead of injecting it underground.A series of government and academic studies over the past few years — including at least two reports released this week alone — has added to the body of evidence implicating the U.S. drilling boom that has created a bounty of jobs and tax revenue over the past decade or so.On Thursday, the U.S. Geological Survey released the first comprehensive maps pinpointing more than a dozen areas in the central and eastern U.S. that have been jolted by quakes that the researchers said were triggered by drilling. The report said man-made quakes tied to industry operations have been on the rise.

USGS: Colorado 100 times more prone to severe earthquakes - A recent report from U.S. Geological Survey looks to oil and gas wastewater injection as the source of heightened seismic activity throughout 17 states, including Colorado, Oklahoma and New Mexico. According to the Denver Business Journal, the USGS evaluated records of earthquake data from 2000 to 2009, ultimately estimating that earthquakes with a magnitude of three are 100 times more likely to occur within the 17 states. This information concerns Mark Peterson, chief of the USGS National Seismic Hazard Modeling Project: These earthquakes are occurring at a higher rate than ever before andpose a much greater risk to people living nearby. … The USGS is developing methods that overcome the challenges in assessing seaismic hazards in these regions in order to support decisions that help keep communities safe from ground shaking. The areas with most quakes were concentrated in central and eastern states—areas heavy in oil and gas production. The study’s findings suggest, however, that hydraulic fracturing rarely contributes directly to felt earthquakes.

Oil, gas drill bits recovered from drill site in central Weld - Six of seven oil and gas drill bits reported stolen from a drill site last week have been recovered, the Weld County Sheriff’s Office reported late Monday night. The Weld Sheriff’s Office Strike Team, which was formed last year to address theft in rural areas, recovered the missing drill bits along with three others that had yet to be reported stolen, spokesman Sean Standridge said in a press release. The drill bits, which were found dumped at an oil battery site in central Weld, are valued at close to $300,000. The seven drill bits were stolen April 5 from a well site near Milliken. They are used in operation of an oil and gas rig, making them large, heavy — about 300 pounds — and would require two people to move.  The sheriff’s office reported late last week that it is searching for a white man who was seen driving with the drill bits in a late 1980s dark green Ford F150 pickup. The  “We received numerous tips, so the suspect probably dumped them since everyone was looking for a green truck with these in back,” Standridge stated

Greeley Wastewater Injection Well Site Bursts Into Flames - The fire at a wastewater injection well site just northeast of the Greeley-Weld County Airport on Friday could mean a total loss at the facility, Greeley Fire Marshal Dale Lyman said. About 1:15 p.m., a lightning bolt struck a water storage tank at the C4 facility east of the airport, causing a series of explosions and a fire that went on into the evening. After keeping the fire contained much of the day, firefighters began attack operations to extinguish the blaze about 5:30 p.m. Lyman said they had much of it knocked down about half an hour later. By 6:45 p.m. the fire was out.

Oil, gas spill report for April 20 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. Bonanza Creek Energy Operating Company LLC, reported on April 17 that during production, an onsite separator over-pressured, due to gas sales meter shut-in, outside of Kersey. It is approximated that two and a half barrels of oil released. Emergency response personnel were dispatched to begin cleanup of the release. DCP Midstream LP, reported on April 17 that a DCP operator left a bypass valve open, triggering the condensate to spray into the air as the unit de-pressured, outside of Kersey. It is approximated that less than 100 barrels of condensate released. The spray misted Weld County Road 40 and also the property of neighboring landowner. The DCP personnel was able to prevent the condensate from traveling any further with the use of absorption pads. A skid steer scraped the top layer of the road and ditch area, removing some of the impacted soil and floating condensate. DCP is working with the landowner to develop a cleanup of the area. PDC Energy Inc., reported on April 14 that a historic release was discovered during production line replacement, outside of Keenesburg. It is approximated that less than five barrels of condensate spilled and less than five barrels of produced water released. There was no groundwater encountered and excavation activities are ongoing.Noble Energy Inc., reported on April 9 that a hole developed in a production tank outside of Kersey. Less than five barrels of oil spilled. The tanks will be removed and all production was shut in.

Kirtland fuel spill plume seems to bypass Albuquerque wells - — A fuel spill that officials worried might pollute Albuquerque drinking water seems to be bypassing the city’s wells, according to experts. Leaders of the Kirtland Air Force Base jet fuel spill cleanup team say the plume appears to be headed north rather than northeast, the Albuquerque Journal reports. The direction means the fuel will likely bypass two of three nearby wells. It is unclear whether it will pollute the third. “It looked before like it was going directly to Kirtland (well) 3,” Dennis McQuillan, a geologist with the New Mexico Environment Department, said this weekend. “But it appears to be going more north than northeast.” The fuel leak, which is believed to have been seeping into the ground for decades, was first detected in 1999. Estimates of the amount of fuel spilled range from 6 million to 24 million gallons. The greatest concern has been that the spill would contaminate drinking water wells in the Southeast Heights.  McQuillan and other officials involved in the effort to define the extent of the contamination and get rid of it have said all along that there is no imminent danger to the drinking water supply because the plume has been just inching along.

California Gas Pipeline Explosion Injures Up to 15 People - — A construction crew on Friday accidentally ruptured a natural gas transmission line in Fresno, California, sparking an explosion and fire that injured up to 15 people, four of them critically, officials said.The 12-inch (30-cm) pipeline, belonging to Pacific Gas & Electric Corp, was struck by a backhoe near state Highway 99, unleashing a fireball that injured members of the construction team and a jail inmate crew nearby, Fresno Fire Department spokesman Peter Martinez said.The accident forced closure of the highway in both directions, along with an adjacent railroad line, Martinez said. Rail traffic was halted to check for possible damage to a railway bridge over a river, he said.One worker in critical condition was flown to hospital by helicopter, and 13 or 14 others were taken to hospitals for evaluation and treatment of injuries after the pipeline was ruptured at about 2:30 p.m., Martinez added.Four of the injured were taken to Community Regional Medical Center in Fresno, and two more were taken to the burn unit there, said hospital spokeswoman Mary Lisa Russell, adding that four were in critical condition and two serious.The utility had shut off the gas flow by 3:20 p.m., with the residual amount in the pipeline burning off just before 4 p.m..

Why Are Oil & Gas Workers Mysteriously Dying Across America? -- Over the past several years, oil & gas workers in North Dakota, Colorado, Texas, Montana, and Oklahoma have mysteriously died while conducting routine checks of oil levels at tank batteries. In many cases, the fatalities were ruled to have been the result of natural causes. Now, it appears the real culprit has been found. The question is: how much did the industry know and why was the problem not addressed?

Why Did These Oil Workers Die? - WSJ: The deaths of Trent Vigus and at least nine other oil-field workers over the past five years had haunting similarities. Each worker was doing a job that involved climbing on top of a catwalk strung between rows of storage tanks and opening a hatch. There were no known witnesses to any of the men’s deaths. Their bodies were all found lying on top of or near the tanks. Medical examiners generally attributed the workers’ deaths primarily or entirely to natural causes, often heart failure. But in the past few months, there has been a shift. Though still unsure of the exact cause of the deaths, government agencies and some industry-safety executives are now acknowledging a pattern and are focusing on the possible role played in the deaths by hydrocarbon chemicals, which can lead to quick asphyxiation or heart failure when inhaled in large quantities. In the meantime, federal agencies and industry-safety groups are planning to send out a joint alert to the oil industry as early as this week, warning of the potential for imminent danger from inhaling hydrocarbons, according to several people involved in the effort. Much of the industry remains ignorant of the possible risks, they say.

North America’s Oil And Gas Industry Has Taken Over 7 Million Acres Of Land Since 2000 -  Millions of acres of land across the U.S. and Canada has been taken over by oil and gas development in the last 12 years, according to a new study.The study, published Friday in Science, tallied up the amount of land that’s been developed to house drilling well pads, roads, and other oil and gas infrastructure in 11 U.S. states and three Canadian provinces. It found that between 2000 and 2012, about 3 million hectares (7.4 million acres) have been turned over to oil and gas development, a stretch of land that, combined, is equal to three Yellowstone National Parks. This land takeover can have ecological consequences, according to the report.“Although small in comparison with the total land area of the continent, this important land use is not accounted for and creates additional pressures for conserving rangelands and their ecosystem functions,” the report states. “The distribution of this land area has negative impacts: increasing fragmentation that can sever migratory pathways, alter wildlife behavior and mortality, and increase susceptibility to ecologically disruptive invasive species.”Most of the land converted into drilling operations was cropland and rangeland — a term that encompasses prairies, grassland, shrubland, and other ecosystem types — and roughly 10 percent was woodland. Wetlands, according to the report, were mostly spared by oil and gas developers, though a very small amount have been converted into oil and gas sites.

Oil Companies Are Getting a Second Chance in the Bond Market -  Energy companies desperate to head off a potential funding squeeze are getting a second chance in the bond market, allowing them to keep drilling as they seek to weather the oil-price slump. Halcon Resources Corp., run by one of the architects of the U.S. shale boom, sold $700 million of bonds Tuesday that pay junk yields while pledging assets to back the debt. The Houston firm joins explorers Energy XXI Ltd. and Goodrich Petroleum Corp. in leading almost $10 billion of second-lien bond offerings in the U.S. this year, a record pace for issuance of such securities, according to data compiled by Bloomberg. The firms are getting a lifeline as banks shrink credit lines that are tied to the value of oil reserves. They’ve been able to pile on new debt because their existing obligations -- most of which were issued at the height of the shale boom -- exclude borrowing restrictions typically demanded by junk-bond investors. Those debtholders are now being punished because the new creditors are getting a stronger claim on assets. “It’s kind of the last bullet in the chamber for a lot of these companies in the most precarious situation,” “We saw weak covenants across the broader energy space, so the ability to do second liens was certainly there. It is a negative for unsecured holders, as it’s diluting your claim.” Oil companies are facing cuts to their credit lines this month as banks reevaluate the maximum amount they can borrow, a determination based on the value of their oil reserves. The loans are typically reset in April and October, meaning the squeeze happening now may get worse. Crude prices have dropped more than 47 percent to $56.50 since peaking at $107.26 in June.

What Happens To US Shale When The Easy Money Runs Out? -- One must understand that the easy money via QE from the Fed and zero interest rates allowed many shale players to burn free cash flow while showing operationally net of capital expenditures (which were funded by cheap flowing monies via FED) cash generation. To be clear, that model is now broken as the era of free Fed money appears to waning as both QE, and soon, zero rates become a thing of the past. The cost of capital is no longer falling but is now rising through higher bond yields and/or lower stock prices. The madness that is occurring in financial markets on discounting these events despite very weak, almost recessionary economics, boggles the mind.Despite the consensus of both ending, the realities are that FED will eventually reverse course on both in the realization that they can’t talk up economic growth any longer and easy money policies finally get recognized as failures. But that may occur only after another equity bubble bursts and in either case shale producers may find that equity markets are no longer going to fund production. In the end what’s likely, regardless of outcome, is that funding will be more difficult for shale producers who must constantly run in place to replace huge depletion rates.

America’s fracklog could be the next bump after the bust - America has strolled into 2015 claiming the title of the world’s top producer of petroleum and natural gas hydrocarbons. But thanks to low oil prices, holes are drilled but uncompleted, and according to a new analysis, America’s fracklog has skyrocketed. A recent Bloomberg Intelligence analysis found that the number of wells waiting to be hydraulically fractured, known as the fracklog, has tripled in the past year. Researchers claim that 4,731 wells have been drilled but uncompleted in the U.S. in the midst of low oil prices. With storage tanks at their fullest capacity since the 1930’s, companies are keeping roughly 322,000 barrels of oil per day in the ground. To put that into perspective, that’s about the same amount Libya has pumped out this year. Some analysts are worried about what will happen when companies get the first hint of a recovering market. With this many wells uncompleted and waiting for the opportunity to produce, the market could see yet another flood of petroleum commodity. This would mean a slower recovery overall for oil. Bloomberg Intelligence models show that oil production in the lower 48 states would rise 322,000 bpd to an average 7.485 million in the fourth quarter of 2016 if drillers begin to shrink their fracklogs by 125 wells a month in October. They also predicted another scenario where crude could stabilize to $60-65 per barrel. In this case, rigs could go back online, and supply would increase by 500,000 bbd to 7.67 million. According to the analysis, the Permian Basin of West Texas has the largest fracklog to deal with. Bloomberg Intelligence stated that as of February, the Permian had 1,540 wells waiting completion. A bit further south, the Eagle Ford Shale was tallied at 1,250. However the recent estimates from IHS claim that unfinished wells in south Texas number closer to 1,400.

Half of U.S. Fracking Companies Will Be Dead or Sold This Year  -- Half of the 41 fracking companies operating in the U.S. will be dead or sold by year-end because of slashed spending by oil companies, an executive with Weatherford International Plc said. There could be about 20 companies left that provide hydraulic fracturing services, Rob Fulks, pressure pumping marketing director at Weatherford, said in an interview Wednesday at the IHS CERAWeek conference in Houston. Demand for fracking, a production method that along with horizontal drilling spurred a boom in U.S. oil and natural gas output, has declined as customers leave wells uncompleted because of low prices.  There were 61 fracking service providers in the U.S., the world’s largest market, at the start of last year. Consolidation among bigger players began with Halliburton Co. announcing plans to buy Baker Hughes Inc. in November for $34.6 billion and C&J Energy Services Ltd. buying the pressure-pumping business of Nabors Industries Ltd.  Weatherford, which operates the fifth-largest fracking operation in the U.S., has been forced to cut costs “dramatically” in response to customer demand, Fulks said. The company has been able to negotiate price cuts from the mines that supply sand, which is used to prop open cracks in the rocks that allow hydrocarbons to flow. Oil companies are cutting more than $100 billion in spending globally after prices fell. Frack pricing is expected to fall as much as 35 percent this year, according to PacWest, a unit of IHS Inc.  Fulks declined to say whether Weatherford is seeking to acquire other fracking companies or their unused equipment. “We go by and we see yards are locked up and the doors are closed,” he said. “It’s not good for equipment to park anything, whether it’s an airplane, a frack pump or a car.”

Oil markets bullish as US shale boom grinds to temporary halt: The latest news from oil markets seems to indicate that the US shale boom as we know it might be grinding to a temporary halt and transitioning to a new phase, leading to surges in the prices of Brent and WTI crude futures to their highest level in 2015. The US Energy Information Administration (EIA) released its April Drilling Productivity Report last week, forecasting a significant drop in total shale oil volumes in May, the first such forecast after the number of active US rigs began to fall sharply in the fourth quarter of 2014. “We are starting to see the effect of the declining rig count coming into play,” said Carl Larry, director of oil and gas business development at Frost & Sullivan. Output from seven key shale oil formations could drop by 57,000 barrels per day in May, the EIA said. This is the data oil markets have been looking out for, but the crucial point for traders is that it has come earlier than expected. “Although a drop is not unexpected, a decline in May would still be a couple of months earlier than anticipated and could signal less drilled inventory than expected,” said John Corrigan, energy specialist and vice president at Strategy&, a PwC consultancy. Crude oil prices rallied last week as traders mulled the possibility of a sooner-than-expected output cut, despite data from the International Energy Agency (IEA) announcing that in March rival OPEC recorded its highest monthly output increase in four years, and forecasting similar increases for April.

It’s time to lift the ban on crude oil exports -- When Congress approved the ban on crude oil exports 40 years ago in the aftermath of the Arab oil embargo, there was no reason to expect then that the United States would ever have a surplus of domestically produced oil. But a new era of energy abundance has arrived in America in recent years as a result of the shale revolution. Petroleum imports have dropped to less than 27 percent of what we consume, down from more than 60 percent a decade ago – and the United States is more energy secure and self-sufficient than it has been in at least thirty years.  It’s time for Congress to overturn the outdated ban on oil exports. Lifting the ban would not only provide access to an international market for shale oil but would also create a wide range of jobs in the oil drilling supply chain and broader economy, according to a new study by the research firm IHS. The study says that nearly a million new jobs could be created by 2018 if the ban on crude oil exports is lifted. Only 10 percent of the jobs would be created in actual oil production, while 30 percent would come from industries that support drilling, such as construction, oil field trucks and information technology. And 60 percent of the new jobs would come from the broader economy.

Time to Lift the Ban on Crude Oil Exports -- This week Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-AK) said she would push this year for legislation to end the United States’ export ban on crude oil. “We shouldn’t lift sanctions on Iranian oil while keeping sanctions on American oil,” she said. “It makes no sense.” Murkowski is correct—repealing the ban is long overdue. The ban on exports was enacted in the 1970s in response to the OPEC oil embargo, which sent global energy prices soaring. The thinking of legislators at the time was that an export ban was necessary to ensure U.S. oil producers sold their product domestically rather than seeking higher profits in the international market. But even after OPEC lifted the embargo and oil prices crept back from their highs, the ban remained in place. Today crude oil prices are extreme once again, but in the opposite direction. The shale boom in the Midwest has caused production of crude oil to rise 71 percent since 2010. The price of a barrel of crude oil has nearly halved, from $104 this time last year to only $56 today. The low prices are great for American consumers. But they also signal that our economy cannot absorb all the production by itself. Without buyers for their product, the shale boom that brought these states back from recession may come to an end.

Pressure builds on US to ease crude export ban - FT.com: The US may be the world’s largest crude oil importer, but one of its main energy policy tussles is over oil exports. Liberalising the 40-year-old US ban on exporting most domestic crude oil has become the subject of congressional hearings, intense lobbying and a multitude of studies.The debate seems curious, because the US still has gross crude oil imports of 7m barrels a day. But the volume has been dropping thanks to resurgent domestic production. Supplies of “light,” low-sulphur domestic oil from US shale formations have replaced most imports of similar quality. Opponents mobilising against the ban warn these supplies will saturate the market, depress domestic prices and slow down further output gains. The ban was passed in 1975 after the Arab oil embargo crippled US fuel supplies. At the time, economic policy included price controls, and crude export restrictions were needed to effect these controls,  The ban restricts exports to everywhere but Canada, with few exceptions. For decades, US crude oil imports climbed steadily along with domestic fuel consumption to a peak above 10m b/d in 2005, making the question of exports irrelevant. But it has come back into focus as oil supplies climb from states such as North Dakota and Texas. Last year, US production rose by 1.2m b/d, the largest increase in records dating to 1900. Commercial crude inventories this spring were at their highest for 84 years. “For most of the past 40 years, the thought of exporting crude oil was not an issue. Folks had pretty much forgotten that when we lifted oil price controls in the early 1980s, we forgot to lift the ban,”

Oil rout forces LNG companies into radical policy rethink - FT.com: Brent crude at half the level of last June has made the production of expensive oil — from the Arctic to Brazil — unattractive. And the liquefied natural gas (LNG) industry could become another casualty. This is because the LNG market is dominated by long-term contracts whose pricing is linked to oil. Existing projects, many of which came on stream recently to meet Asian demand, have seen lower revenues, while expectations for what can be earned on new projects have been reduced. The oil rout — prices are hovering at $62 a barrel — has also meant developers of big projects have less money to spend. Energy companies have been forced to retrench, re-evaluating investment plans, reassessing cost structures and cutting expenditure. “Most integrated LNG developers are also oil majors and do not report separate capital expenditure for LNG projects.” The companies that are big LNG suppliers, from ExxonMobil to BP and Statoil, have announced cuts totalling $45bn this year — close to a 20 per cent year-on-year reduction. The timing is not ideal. LNG prices had already fallen as the rise in global energy demand slowed on weaker economic growth and milder weather. At the same time supplies were increasing. By mid-March 2015 spot LNG prices delivered into Asia, for example, had fallen by more than 50 per cent year on year. This has wiped out the price advantage of US LNG projects.

Emails: How State Department Secretly Approved Expanding Piece of Enbridge's "Keystone XL Clone"  -- DeSmogBlog has obtained dozens of emails that lend an inside view of how the U.S. State Department secretly handed Enbridge a permit to expand the capacity of its U.S.-Canada border-crossing Alberta Clipper pipeline, which carries tar sands diluted bitumen (“dilbit”) from Alberta to midwest markets. The State Department submitted the emails into the record in the ongoing case filed against the Department by the Sierra Club and other environmental groups in the U.S. District Court for the District of Minnesota. Collectively, the emails show that upper-level State Department officials hastened the review process on behalf of Enbridge for its proposed Alberta Clipper expansion plan, now rebranded Line 67, and did not inform the public about it until it published its final approval decision in the Federal Register in August 2014.According to a March 17, 2014 memo initially marked “confidential,” Enbridge's legal counsel at Steptoe & Johnson, David Coburn, began regular communications with the State Department on what the environmental groups have dubbed an “illegal scheme” beginning in at least January 2014.Environmental groups have coined the approval process an “illegal scheme” because the State Department allowed Enbridge to usurp the conventional presidential permit process for cross-border pipelines, as well as the standard National Environmental Policy Act (NEPA) process, which allows for public comments and public hearings of the sort seen for TransCanada's Keystone XL pipeline.Further, the scheme is a complex one involving Enbridge's choice to add pressure pump stations on both sides of the border to two pipelines, Enbridge Line 3 and Enbridge Line 67, to avoid fitting under the legal umbrella of a “cross-border” pipeline.

BP Spokesman: Tar Balls Left From Gulf Oil Spill Pose No Threat To Humans Or Animals  -- Five years ago, BP’s historic 2010 Deepwater Horizon spill resulted in more than 210 million barrels of oil ending up in the Gulf of Mexico. But while scientists continue to observe ongoing problems, a BP spokesman appeared on ABC’s This Week on Sunday suggesting the remaining oil no longer poses a risk to humans or the aquatic ecosystem.  Alisha Renfro, the Mississippi River Delta Campaign staff scientist for the National Wildlife Federation told a This Week reporter that while you no longer see oil slicked islands today: “You see tar balls that are washing up. And what it points to is the fact that oil is still in the system and, just because we can’t always see it everywhere we go, it’s still out there.”  After Louisiana State University confirmed a sample tar ball as a nearly exact match to the Macondo well oil released during the 2010 spill, BP Senior Vice President of U.S. Communications Geoff Morrell told This Week. “The product that you have in your hand does not pose a threat to human or aquatic life. This, if it’s Macondo oil, is now five years old and likely weathered beyond the point of being harmful.”  Watch the video:

Five Years after the BP Deepwater Horizon Disaster, Oil Spills Are on the Rise --Five years after the BP Deepwater Horizon blowout in the Gulf of Mexico sparked national outrage, oil spills remain a routine occurrence across the United States. Yet many receive little — if any — national attention. The enormity and unprecedented scale of the BP disaster demanded a federal emergency response and captured daily headlines for months. But oil spills and pipeline ruptures occur daily – as they have nearly every day since the Deepwater Horizon exploded on April 20, 2010. While many are relatively small in comparison, they still pose threats to public safety, health, and the environment.Although it seems incredible, there is no comprehensive national list of oil spills — from any government source.The Bureau of Safety and Environmental Enforcement, the federal agency that oversees offshore oil and gas operations, maintains a list of “incidents.” Although this list includes “collisions” as well as oil released from wells, it does not, for example, include last year’s oil tank barge collision in Galveston Bay that spilled nearly 170,000 gallons of oil.E&E’s EnergyWire noted last year that while there was a 17 percent increase in incidents between 2013 and 2014, these records are considered “an undercount” and not all states make this data available. In the top 15 oil and gas producing states, EnergyWire tallied at least 7,662 spills or other releases in 2013, up from 6,546 in 2012. That brings the 2013 total to about 20 such incidents per day that, combined, released some 26 million gallons of oil and related fluids

Five years after the Deepwater Horizon oil spill, we are closer than ever to catastrophe - In the five years since the Deepwater Horizon accident, the oil and gas industry has not retreated to safety. Instead, it has expanded its technological horizon in ways that make it harder to foresee the complex interactions between drilling technologies, inevitable human errors and the ultra-deepwater environment.  Before its sinking, Deepwater Horizon had drilled one of the deepest oil and gas wells. That depth has since been surpassed, and exploration continues to new frontiers. Not far from the Deepwater Horizon accident site, Royal Dutch Shell is now developing the deepest offshore oil field in history. In the Caspian Sea, an international consortium is exploring the Kashagan oil and gas field, a mega-project that the consortium itself describes as an enormously challenging endeavour. And the hunt for Arctic oil takes place in some of the most inhospitable waters in the world. Numerous analyses of the Deepwater Horizon accident have pointed to three contributing causes: the complexity and inherent riskiness of oil drilling systems, human and organisational factors and regulatory challenges. In the past half-decade, we have made little progress in these areas. Indeed, the risk of another catastrophic spill may be greater than ever before. Offshore drilling is a complex system prone to technological failures that are difficult to predict and challenging to comprehend in real-time. Drilling operations have limited slack to absorb errors; the failure of one part of the system can spread quickly to other parts, and operators cannot simply “turn off the well” while they look for a solution. Unfortunately, major accidents are nearly inevitable in these kinds of systems, as decades of research by Yale sociologist Charles Perrow has shown.Human and organisational factors compound these challenges. A well-documented and particularly pernicious tendency of human decision-makers is to interpret evidence in a way that supports their pre-existing conclusions (pdf).

Fracking Campaigner's fury as chemical giant plans to drill 400 METRES from homes and SCHOOL - RESIDENTS blasted chemicals giant Ineos after they revealed plans to start fracking near school playgrounds and 400metres from homes. The news came at the first public meeting over the company’s controversial plans to extract shale gas in Scotland. Angry locals said the move to drill boreholes close to residential homes and a school was a “slap in the face”. The plans were revealed at a packed meeting in Denny High School in Stirlingshire. The company plan to give six per cent, around £2.5billion, of its profits to communities. Community councillor Maria Montenaro, 53, who is also part of the Concerned Communities of Falkirk group, said: “That is far too close for comfort. We wanted a two kilometre buffer zone as they have in parts of Australia.  “They have planning consent for fracking at Skinflats village near Falkirk. This is unacceptable as they will be working only a few hundred metres away from Bothkennar primary school.

Offshore fields use power sent from land - FT.com: Offshore oil and gas fields supply much of the world’s energy, but it is not always appreciated that the very platforms extracting and delivering supplies to shore are themselves considerable consumers of fuel. Larger platforms deployed in the North Sea can typically consume power at a rate of 50 to 100 megawatts across a large range of processes — including oil separation, gas compression, wastewater treatment, gas lifting, and the ultimate export of oil and gas to shore. One study suggests that more than a quarter of Norway’s total carbon dioxide emissions could be attributed to North Sea oil and gas platforms operating in its waters at the beginning of the decade. However, a combination of environmental lobbying, engineering problem-solving and economic calculations have prompted the oil-rich nation to raise its game. Statoil, Norway’s oil industry champion, announced last month the award of a $155m contract to engineering company ABB for initial work on the first stages of a land-based power supply for the development of the Johan Sverdrup field — the biggest North Sea oil discovery of recent years. In total, partners backing the scheme are budgeting more than five times that amount to send power from Norway’s grid system, which is normally fully supplied by the country’s abundant hydro­electricity, via a high-voltage, direct current cable to help fuel oil and gas extraction from 2019 onwards. A 200km long submarine cable should have the capacity also to power adjacent fields scheduled for development from 2022, in line with commitments demanded by a coalition of Norwegian political parties last year to secure public backing for the launch of production from Johan Sverdrup.

Putting The Real Story Of Energy & The Economy Together -- What is the real story of energy and the economy? We hear two predominant energy stories. One is the story economists tell: The economy can grow forever; energy shortages will have no impact on the economy. We can simply substitute other forms of energy, or do without.  Another version of the energy and the economy story is the view of many who believe in the “Peak Oil” theory. According to this view, oil supply can decrease with only a minor impact on the economy. The economy will continue along as before, except with higher prices. These higher prices encourage the production of alternatives, such wind and solar. At this point, it is not just peak oilers who endorse this view, but many others as well.  In my view, the real story of energy and the economy is much less favorable than either of these views. It is a story of oil limits that will make themselves known as financial limits, quite possibly in the near term—perhaps in as little time as a few months or years. Our underlying problem is diminishing returns—it takes more and more effort (hours of workers’ time and quantities of resources), to produce essentially the same goods and services. We don’t measure our investment results with respect to the quantity of end product produced (barrels of oil produced, liters of fresh water produced, kilos of copper produced, or number of workers provided with sufficient education to work in high tech industries), so we don’t realize that we are becoming increasingly inefficient at producing desired end products. See my post “How increased inefficiency explains falling oil prices.” Wages, viewed in terms of the product produced–oil in this case–can be expected to decrease as well. This change isn’t evident in usual efficiency statistics, because some of the workers are providing new kinds of services, such as fracking services, that weren’t required before.

Oil Slips On Saudi Record Production Promise, Specs Pile In But Blackstone Skeptical -- For the 2nd day in a row, WTI crude prices are falling (back below $55) after Saudi Arabian Oil Minister Ali al-Naimi said production in the world's biggest crude exporter would stay near record peaks around 10 million barrels per day in April. The investment community remains divided over the future (perhaps more a reflection of time horizons): BofA notes Large Speculators bought crude contracts for the 3rd consecutive week - the longest streak since June 2014; but Blackstone (among other private equity firms) have stayed on the sidelines (despite plenty of cash to put to work) as public markets have exuberantly filled the void so far this year: Oil producers have been able to “raise a lot of debt and, in some cases, equity publicly at values that we wouldn’t touch."

IHS CERAWeek arrives at an uncertain point in O&G history -- Could the debris from an abysmal year for the oil and gas industry be close to settling? Not likely, CNBC reports. With soaring highs in U.S. oil production partnered with OPEC and Saudi Arabian reluctance to curtail production, IHS Inc. vice chairman Daniel Yergin forecast continued price volatility:“This is a market that’s far from settled down, and it’s a market that’s going to be a lot more volatile. What kind of prices do you need to keep it going? What does it mean when you say the U.S. is the new swing producer? It’s much easier to swing up than down.” The global oil glut and slump nearly halved oil prices since June—rig counts followed suit. Despite operating with half its arsenal of oil and gas rigs, the U.S. still manages to churn out about 9.3 million barrels per day—just one million less from the Saudi average of 10.3 million barrels.  As industrialists stream into Houston this week for the 2015 IHS CERAWeek conference, there’s likely to be a stark contrast in conversation compared to last years’ event, when pricey oil inflated U.S. production. Though low oil prices drove some companies to cut jobs and budgets, Oppenheimer & Co. energy analyst Fadel Gheit said some companies might be able to maintain profit. ExxonMobile, for example, could see an increase in acquisition options with low prices, and Royal Dutch Shell plans to team with BG Group in a $70 billion LNG deal. Gheit expects the prices to recover to about $70 per barrel, but doubts they’ll meet their standards from last June:

Speculators divided over U.S. oil prices – Despite the surge in U.S. oil prices, hedge funds are still divided about what will happen next, according to the latest data from the Commodity Futures Trading Commission (CFTC). Hedge funds and other money managers held long positions in WTI-linked futures and options equivalent to 396 million barrels of oil on April 14. But the hedge fund community also had 150 million barrels of short positions, betting on a fall in prices, CFTC data show. The ratio of hedge fund long to short positions, at just 2.65 to 1, remains unusually low compared with recent years and is still below the level in January and February.In fact, the CFTC data identifies more separate large short positions (92) than long ones (78), implying more hedge funds are bearish rather than bullish, though the bulls on average hold bigger positions. The positioning data confirm that the market remains deeply divided about the outlook for oil prices, especially in the U.S. domestic market. Bulls point to the sharp drop in the number of rigs drilling for oil, down by almost 55 percent since early October, and the expected fall in U.S. oil output over the next six months. Bears focus on the absence of any hard evidence of a fall in production, as well as the build up of almost 100 million barrels of extra oil inventories since the start of the year, and increases in Saudi production.

Big Hit For U.S. Oil Production In January: U.S. crude oil production fell at least 135,000 barrels of oil per day in January 2015 compared to December 2014 according to the EIA (Figure 1). Figure 1. U.S. crude oil production.  Predictions Should Be Taken With More Than A Pinch Of Salt. Bakken Shale production fell the most of any play or jurisdiction losing 37,000 barrels per day in North Dakota and 4,000 barrels per day in Montana for a total of 41,000 barrels of oil per day (Figure 2). Production in California, the offshore Gulf of Mexico, Alaska and Wyoming also declined significantly. Figure 2. January 2015 production changes by jurisdiction. Figure 3 shows Bakken production based on DrillingInfo data. The 42,000 barrels of oil per day drop in January production is completely consistent with EIA data differing by only 1,000 barrels per day. Figure 3. Bakken oil production. Source: DrillingInfo and Labyrinth Consulting Services, Inc. (Click image to enlarge) is important because DrillingInfo data also shows significant decreases in the Eagle Ford and Permian basin plays in January 2015 of 36,000 and 33,000 barrels of oil per day, respectively (Figures 4 and 5). EIA shows that Texas production increased 3,000 barrels per day.

The EIA Is Bizarrely Optimistic About Future US Oil Production - The EIA came out with its final update of Annual Energy Outlook 2015. It seems that the EIA is extremely optimistic concerning future US crude oil production. Here is a comparison with AEO 2014. The EIA still expects US crude production to peak in 2019 but at 10,472,000 bpd or 824,000 barrels per day higher than the expected last year. But the biggest difference is in the EIA’s change in decline expectations. They now expect the US to be producing 9,329,000 bpd in 2040 or 1,812 higher than they had 2040 production last year. This is the EIA’s reference, or most likely case. Production from tight formations leads the growth in U.S. crude oil production across all AEO2015 cases. The path of projected crude oil production varies significantly across the cases, with total U.S. crude oil production reaching high points of 10.6 million barrels per day (bbl/d) in the Reference case (in 2020), 13.0 million bbl/d in the High Oil Price case (in 2026), 16.6 million bbl/d in the High Oil and Gas Resource case (in 2039), and 10.0 million bbl/d in the Low Oil Price case (in 2020). What the EIA is saying in the above paragraph is that price and tight oil production is everything when it comes to US future oil production. On that point I would agree except that even if the price returns to $100 and higher, it will not produce tight oil production to anywhere near the EIA’s high price projections.

Wall Street Bets On Oil Price Rally -- If the whims of speculators are anything to go by, then oil markets are poised for a rebound. Data from the Commodity Futures Trading Commission show that bullish positions on WTI have reached their highest levels in eight months. Speculators make bets on the price of crude – long or short – depending on where they think prices are heading. Not since the end of the summer in 2014 have so many investors put money on the line, betting on a price rise. Obviously, elite investors are not always right. Few saw the bust coming. But the mounting belief that the worst is over for oil provides a bit of evidence that prices could be on the mend. That is also reflected in lending and equity positions in actual oil companies. Sensing a massive opportunity to buy up valuable assets on the cheap, big money is piling into shale companies. Banks, hedge funds, and other big investors are lending, buying equity, and purchasing assets during the down cycle. Around $12 billion in new stock was issued in oil and gas in the first quarter of 2015 according to Bloomberg, the highest amount in eight years. Such an astonishing level of new investment during a period of depressed prices shows that the markets, despite major concerns from corporate executives, have not soured on oil and gas in the least. Oil prices have more than halved from the 2014 peak, which has destroyed profits for many drillers. It is a volatile business to be sure, and more pain can be expected in the coming weeks as companies begin reporting first quarter earnings, but Wall Street’s actions so far this year demonstrate the enormous appetite for oil and gas investment.

A Plot To Hold Down Oil Prices Or Just A Happy Coincidence? - The recent unprecedented surge in oil imports has again prompted a review of things here. In a prior story, we wrote that the lack of capacity to process light sweet crude at refineries produced via shale plays could be playing a role in the stock build. As mentioned previously, refineries over the next 24 months are expected to add 700,000 B/D in capacity to handle this type of crude. In the meantime, we have noticed an unusual amount of crude being imported, possibly as a result of this imbalance in refinery capacity. Or could it be that a more sinister plot is afoot? To quantify the scale of the issue, we turn to Cornerstone Analytics’ work in uncovering the magnitude of the impact of imports on the rise in oil inventory stocks. We haven’t seen this level of import imbalance period since 2013, as the chart below demonstrates via Cornerstone. In the past 6 months, the level of imports relative to the requirement or need by refineries has jumped not once but twice. The 1M B/D “gap” goes a long way in explaining the oil inventory stock build which has been 5MB-10MB per week. If adjusted, the builds over the past 6 months without such imports would not exist at all or at the very least be greatly reduced. So is this occurring as part of the inability of refineries to handle the mix of output domestically or is this part of some plot to build inventories to crash the prices of oil? Quite frankly we can’t say for sure but anomalies such as this must be exposed so that they can be debated given that there has been ample debate on Saudi motivations for holding down oil prices and the ongoing media cheerleading on lower oil prices.

Halliburton says has cut 9,000 jobs in wake of oil's drop — Halliburton has cut 9,000 jobs in about six months and is considering additional cost-cutting moves as falling oil prices reduce demand for its drilling help. That’s more than 10 percent of the Houston company’s workforce. Halliburton Co. executives disclosed the job cuts Monday on a conference call with investors. The company reported a loss of $643 million in the first quarter. Still, the results excluding write-downs and other one-time costs were better than expected.

Baker Hughes Cuts 17% Of Workforce As Oil Slump Ripples Through Economy -  Today, in the latest sign that depressed crude prices are likely to ripple through the economy for some time to come and in the process make the government’s unemployment figures look like even more of a farce than they already do, we learn that Baker Hughes has now increased the number of jobs it plans to cut from 7,000 to 10,500 (or nearly a fifth of its workforce) and the best (or worst) part is, that may not be the end of it. Here’s the statement: During the first quarter we took necessary actions to reduce our cost base and resize our footprint to mitigate current market conditions. These actions include the closure and consolidation of approximately 140 facilities worldwide along with the idling or impairment of excess assets and inventory. Correspondingly, we made the decision to increase our headcount reductions to a total of approximately 10,500 positions, or 17% of our workforce, which is 3,500 positions higher than what we previously announced. Combined, these actions are projected to reduce cost by more than $700 million on an annualized basis. Looking out to the second quarter, we expect unfavorable market conditions to persist. North America and international rig counts are projected to continue declining across most onshore and shallow water markets, which would further intensify the oversupply of oilfield services. We will continue monitoring market conditions closely and will take actions as necessary to optimize efficiency, while retaining the capacity to flex up when market conditions improve.

BP is preparing to stave off a takeover - If there was one thing guaranteed to follow low oil prices (other than the loss of thousands of jobs) it was mergers and acquisitions. This has certainly rung true as companies consolidate their portfolios or use their war chests to snap up competitors while prices are down. The recent deal between Royal Dutch Shell and BG Group has many expecting a renewed wave of major business decisions. The buzz has fueled rumors that BP Plc will be susceptible to a takeover by fellow oil giant Exxon Mobil Corp.  Now even BP is worried that it may be next in line on the merger marketplace, according to Bloomberg. . Sources revealed to Bloomberg that “BP executives are concerned the company is vulnerable to an opportunistic bid.” Executives have recognized ExxonMobil, of course, but also Chevron Corp. as potential buyers. The one thing that is crippling BP’s market fortitude, however, is also making it an uneasy target. U.S. District Judge Carl Barbier has yet to rule just how much the British oil company will pay in fines under the Clean Water Act for the Deepwater Horizon oil spill, which began five years ago as of Monday. Although BP has shelled out billions for recovery and settlements already, it could be hit with as much as $13 billion in fines for the millions of gallons of crude oil that gushed from its Macondo well. Despite recent challenges for BP, though, the company is still worth roughly $131 billion. On the other hand, ExxonMobil, which is the most valuable oil company on the globe, has a value of $368 billion, and according to Bloomberg, it has more than enough capital to spend to scoop up BP.

Oil prices ease as U.S. stockpiles seen rising – Oil prices eased on Tuesday on expectations of another rise in U.S. stockpiles and as Saudi Arabia keeps output near record highs, but prices remained near a 2015-peak reached last week. Crude prices have climbed around 18 percent since the start of April on speculation about falling U.S. output after the domestic oil rig count hit 2010 lows. They have also been supported by tension in the Middle East. Still, U.S. commercial crude oil inventories are likely to have increased by 2.4 million barrels last week, marking a rise for the 15th consecutive week, a preliminary Reuters survey showed. Brent crude for June delivery was down 17 cents at $63.28 by 0141 GMT, after settling flat on Monday. U.S. crude for May delivery, which expires later in the day, was down 15 cents at $56.23 a barrel, after settling 64 cents higher.

Crude Inventories Rise For Record 15th Straight Week, Production Drops - DOE Inventory data confirmed API data overnight with a 5.3mm bbl build (notably better than expectations of 3.2mm and significantly higher than last week's 1.29mm build). Cushing saw a build that was the 2nd lowest since November 2014 (even though at +738k the build was well above expectations of +550k). Crude prices appear to jumping higher on the fact that production was a 2nd consecutive production cut (albeit very modest) even though we have seen such short-term drops before (and it was only Alaska that saw a drop -3.4% - lower 48 was flat 0.0%).

US Oil and Natural Gas Rig Count Drops by 22 to 932 - Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 22 this week to 932 amid depressed oil prices. Houston-based Baker Hughes said Friday 703 rigs were seeking oil and 225 explored for natural gas. Four were listed as miscellaneous. A year ago, 1,861 rigs were active. Among major oil- and gas-producing states, Texas lost 19 rigs; North Dakota lost five; Oklahoma was down three; and Alaska, New Mexico and West Virginia each lost one. Louisiana gained two rigs, while Arkansas, California, Colorado, Kansas and Pennsylvania each gained one. Ohio, Utah and Wyoming were unchanged.

Crude Drops After US Rig Count Decline Extends To Record 20 Weeks -- For a record-breaking 20th week, US rig counts declined. Total rigs dropped 22 to 932 (the 4th smallest drop since Nov 2014) while oil rigs fell 31 to 703 (down over 56% from the highs). With the very modest production drop (all due to Alaska with the Lower 48 flat) it appears any slowdown in drilling rigs has not dampened enthusiasm to pump, baby, pump. WTI initially popped but is fading now...

Baker Hughes expects falling rig count to weigh on 2nd qtr (Reuters) – Baker Hughes Inc, which is being bought by Halliburton Co for $35 billion, said it expects “unfavorable market conditions” to persist in the second quarter as drillers turn off more rigs, intensifying a glut in oilfield services. The comments echoed larger rival Halliburton’s warning on Monday of pricing pressure hurting oilfield services in North America and challenges in international operations. The rig count in North America, a region that accounts for 44 percent of Baker Hughes’ revenue, has halved to 1,000 so far this year. The dramatic fall follows a 45 percent drop in global oil prices since June. Oil producers have responded by quickly scaling back spending, which in turn has weighed on demand for Baker Hughes’ services. In response, the company is cutting 10,500 jobs or 17 percent of its global workforce. Baker Hughes also said it had closed and consolidated about 140 facilities worldwide, besides idling and writing off excess assets and inventory.Halliburton said on Monday that it had laid off about 9,000 workers, or more than 10 percent of its global headcount, in the past two quarters, while industry leader Schlumberger Ltd said last week that it was shedding about 15 percent of its workforce, or 20,000 jobs. Baker Hughes, which publishes a closely watched rig count, said it expected the rig count in North America to drop 30 percent in the second quarter on a sequential basis, and by as much as 15 percent across Europe and Africa.

US Oil Production May Not Drop In Earnest Until 2016 -- Readers are keen to know when US oil production will begin to fall. This is not an easy question to answer but in the comments to last week’s rig count update some interesting links were posted. Among them I came across a link to an Energy Information Agency (EIA) report into US drilling efficiency that sought to link future production to drilling activity and this seemed an interesting avenue to explore. The analysis presented here is jam packed with multiple lines of uncertainty, but a simple analysis based on many assumptions suggests that US production may actually increase further by about 1 Mbpd, due to an estimated 18 month time lag between drilling and first production, improved drilling efficiency and a growing backlog of drilled but idle wells. US oil production may not actually begin to fall in earnest until the middle of 2016.  The starting point for this analysis is to look at recent history. In the wake of the 2008 financial crash, US drilling plunged then as it has done now. What impact did that have on production? There is a small dip in production aligned with the crash but I believe that dip has nothing to do with it and was instead caused by a hurricane closing down US Gulf of Mexico offshore rigs. So when did the decline in drilling show up in production? It is, at this point, important to understand that in 2008 / 09, most shale drilling was for gas and it was in the post-crash rise that there was a massive migration to drilling for oil (Figure 2). However, gas wells produce some liquids (natural gas liquid (NGL) and condensate) and oil wells produce gas. In some cases the lines can be blurred between the two. In this post I look at total rigs (oil + gas) that is compared to crude + condensate + NGL production as reported by the IEA.

Big oil warns world to brace for a different, but equally daunting, price shock to come - As the oil patch grows accustomed to a new world of US$50 to US$60 crude, it’s now looking ahead to a different but equally daunting sort of cliff.Oil companies are warning there will be a price to pay — a much higher price — for all the cost cutting being done today to cope with the collapse in the crude market. Big projects intended to start pumping oil and natural gas 5 to 10 years from now are being canceled or put on hold as the price crash forced US$114 billion in spending cuts on the industry. Energy giants from Exxon Mobil Corp. to Royal Dutch Shell say they’re taking a much more cautious approach to approving projects that cost billions and take years to complete. That’s setting the table for a future oil-price shock when a growing world population drives higher demand, said oil executives and financiers at the IHS CeraWeek Energy Conference in Houston. “What we decide today will have an effect on the future,” Patrick Pouyanne, chief executive officer of Total SA said Tuesday during the event. Postponing spending on mega-projects that usually deliver significant quantities of oil or gas “will have an impact. This could affect supply in three or four years.” Demand has already begun to show signs of strength. The Paris-based International Energy Agency last week raised its forecast for 2015 demand, projecting that the world will consume 94.7 million barrels a day of crude in the fourth quarter, a potential increase of almost 1 million barrels over

Oil falls on strong dollar and as Saudi output remains near record high (Reuters) - Oil prices fell towards $62 a barrel on Monday on a strong dollar and as Saudi Arabian Oil Minister Ali al-Naimi said production would stay around 10 million barrels per day (bpd) in April. Brent crude LCOc1 was trading down $1.20 at $62.25 by 1147 GMT, down from an intraday peak of $64.34. U.S. crude for May delivery CLc1 was down 74 cents at $55 a barrel, down from an early high of $56.65. The dollar was up 0.47 percent against a basket of currencies .DXY, denting the price of crude oil. A strong greenback makes dollar-traded commodities like crude oil less attractive for holders of other currencies. Production in the world's biggest crude exporter would stay near record peaks around 10 million bpd in April, Saudi Arabian Oil Minister Ali al-Naimi told Reuters on Monday in Seoul, where he is due to attend a board meeting of the state oil firm Saudi Aramco.  "I have said many times we will always be happy to supply to our customers with what they want. Now they want 10 million," he said. Naimi earlier this month said Saudi Arabia produced 10.3 million bpd of crude in March, eclipsing a previous record of 10.2 million bpd, in what is seen as a move to defend market share against non-OPEC competition, including the United States.

Strong demand to rebalance oil market by early 2016: Kemp - – Global oil demand is set to rise by 1 million or even 1.5 million barrels per day (bpd) in 2015, according to a range of forecasters. Coupled with a fall in shale output in the second half of the year, as the decline in the U.S. rig count takes effect, that should be enough to bring the oil market near to balance by early 2016. Worldwide consumption will increase by a little over 1 million bpd in 2015, according to forecasts published this month by both the International Energy Agency and the U.S. Energy Information Administration (EIA). Ian Taylor, chief executive of Vitol, the world’s largest oil trader, has also predicted demand will grow by around 1 million bpd, at a conference hosted by the Financial Times. Paul Reed, who heads oil trading for BP, put growth at up to 1.5 million bpd, according to the Financial Times (“BP, Vitol: oil demand will be stronger than forecast” Apr 22). Consumption has increased by more than 1 million bpd in 11 of the last 20 years, according to the EIA, so growth of 1 million to 1.5 million bpd would not be exceptional. Moreover, a 1 million bpd increment in demand would represent a much smaller percentage increase than it did 10 or 20 years ago. Extra consumption of 1 million bpd would represent an increase of just 1.1 percent, a growth rate exceeded in 12 of the last 20 years.

Oil Prices Won't Recover Anytime Soon Says Exxon CEO - Rig counts hit new lows each week. For the week ending on April 17, Baker Hughes says the U.S. lost an additional 34 oil and gas rigs, bringing the total down to 954. Domestic crude oil production appears to have plateaued and the EIA expects a contraction in May. Nearly every driller is dramatically scaling back spending, which should increasingly cut into new output. And oil consumption is finally picking up, as drivers far and wide take advantage of cheap fuel. But what if the bust is not over yet? Despite the signs of a rebound, ExxonMobil’s CEO Rex Tillerson has a much more bearish take on oil prices. Speaking at the IHS CeraWeek conference in Houston, Tillerson predicted that oil prices would remain subdued for the next several years. While the longer-term is harder to predict, there is quite a bit of evidence to suggest that oil prices may not rise much higher than where they are right now in the short-term. For one, crude oil inventories continue to build. Although the stock build has slowed in recent weeks, it is still dramatically higher than the five-year average. Until production slows to the point that consumers are drawing down inventories faster than they can be replaced, oil prices have little room to rise.  Another significant factor that could limit any further increases in oil prices is the enormous backlog of wells awaiting completion. Since most of the value of oil and gas coming out of shale occurs in the first few months of production, drillers are avoiding completing hundreds of wells because selling into the current low-price environment would earn them a lot less cash than if they wait until prices rise again. As a result, there is a vast collection of shale wells that will be completed once oil prices increase (an estimated 900 in North Dakota alone), which could bring a flood of new production online. The effect on prices is debatable, but the CEO of ConocoPhillips thinks it could send oil prices down once again.

Who Is Saudi Arabia Really Targeting In Its Price War? - Saudi Arabia is not trying to crush U.S. shale plays. Its oil-price war is with the investment banks and the stupid money they directed to fund the plays. It is also with the zero-interest rate economic conditions that made this possible. Saudi Arabia intends to keep oil prices low for as long as possible. Its oil production increased to 10.3 million barrels per day in March 2015. That is 700,000 barrels per day more than in December 2014 and the highest level since the Joint Organizations Data Initiative began compiling production data in 2002 (Figure 1 below). And Saudi Arabia’s rig count has never been higher.Market share is an important part of the motive but Saudi Minister of Petroleum and Mineral Resources Ali al-Naimi recently emphasized that “The challenge is to restore the supply-demand balance and reach price stability.” Saudi Arabia’s need for market share and long-term demand is best met with a growing global economy and lower oil prices. That means ending the over-production from tight oil and other expensive plays (oil sands and ultra-deep water) and reviving global demand by keeping oil prices low for some extended period of time. Demand has been weak since the run-up in debt and oil prices that culminated in the Financial Collapse of 2008 (Figure 2 below).  Since 2008, the U.S. Federal Reserve Board and the central banks of other countries have further increased debt, devalued their currencies and kept interest rates at the lowest sustained levels ever (Figure 3 below). These measures have not resulted in economic recovery and have helped produce the highest sustained oil prices in history. They also led to investments that are not particularly productive but promise higher yields that can be found otherwise in a zero-interest rate world. The quest for yield led investment banks to direct capital to U.S. E&P companies to fund tight oil plays. Capital flowed in unprecedented volumes with no performance expectation other than payment of the coupon attached to that investment.This is stupid money. These capital providers are indifferent to the fundamentals of the companies they invest in or in the profitability of the plays. All that matters is yield. The financial performance of most companies involved in tight oil plays has been characterized by chronic negative cash flow and ever-increasing debt. The following table summarizes year-end 2014 financial data for representative tight oil-weighted E&P companies.

Oil Tumbles After Saudis Declare End To Yemen Aerial Bombing Campaign - Saudi Arabia said its campaign of airstrikes in Yemen have succeeded in removing threats to the kingdom and other regional countries, bringing to an end Operation "Decisive Storm." As Bloomberg reports, the Saudi Defense Ministry said a coalition of mostly Sunni Muslim nations has “successfully eliminated the threat to the security of Saudi Arabia and neighboring countries,” by destroying the heavy weaponry and ballistic missiles held by the Shiite Houthi rebels. This comes one day after Gulf envoys told The United Nations that Yemen strikes won't end soon. Saudi Arabia hopes to restart a Yemeni political process and will begin "Operation New Hope," which appears to mean Saudi National Guard ground troops.

Mission Dis-Accomplished? Saudis Resume Bombing Yemen -- Less than 24 hours after Yemen announced an end to Operation Decisive Storm and its airstrikes on Yemen - in hopes of initiating Operation New Hope aimed at resuming a political process - The NY Times reports, warplanes from a Saudi-led military coalition conducted airstrikes in the southwestern Yemeni city of Taiz on Wednesday. Mission Dis-accomplished or Operation 'Empire Strikes Back'?

More than 30% of Arab youth jobless: labour official - More than 30 percent of young Arabs are jobless because of unrest in many Arab nations and not enough investment, a top labour official said on Sunday. "The unemployment rate among Arab youth until the age of 30 years exceeds 30 percent," the director general of the Arab Labour Organisation Ahmad Mohammed Luqman told AFP. "Unrest and a lack of investments have boosted the number of jobless." He said many graduates fail to find employment because their specialisations are not needed by private sector. "Due to unrest in several Arab nations, the number of Arabs without jobs has jumped two million since 2011, making the total number of unemployed Arabs at 20 million," Luqman said on the sidelines of the annual Arab labour conference. He told the opening session of the five-day gathering in Kuwait City that unemployment in the Arab world hit 17 percent last year, "three times higher" than the global average. "It appears that jobless numbers will rise this year and the next," Luqman added, without providing specific figures. Guy Ryder, director general of the International Labour Organisation, warned that the youth unemp loyment problem is a threat to stability. "Arab countries face the urgent and unavoidable task of responding to an acute crisis of unemployment," he told the conference.

FT Commodities Summit: US oil independence to bust dollar-pegs -- The FT’s Martin Wolf led a stellar panel on the global economy and the outlook for commodities featuring China expert Michael Pettis, BP’s group chief economist, Spencer Dale (formerly chief economist at the Bank of England), and Goldman’s chairman of global natural resources Brett Olsher. As one might expect there was a difference of opinion on the panel about China’s future growth path. Goldman’s Olsher said he was confident that China would be able to maintain 6.5 per cent to 7 per cent growth in the near term, whereas Pettis suggested that even 3-4 per cent should be considered a successful adjustment. But the panel was much more aligned when it came to their outlook for the dollar, all of them — including Martin Wolf — predicting an upcoming period of sustained dollar strength (possibly of Reagan-era proportions) as US oil self-sufficiency led to the narrowing of global imbalances. BP’s Dale predicted that part of the “new normal” would be linked to how the fundamental change in the US energy position might affect financial flows. In particular, he added, that a big chunk of the US current account deficit would probably not be there in near future because of the shale revolution. He also questioned the degree to which monetary policy alone was driving dollar strength, implying the energy sector was the cause for much of the dollar shift. Goldman’s Olsher was equally bullish, predicting a near-term target of 85 cents to the euro. In that context both Dale and Pettis questioned the ability of a number of countries to continue to peg their currencies to the dollar. Here’s some of the FT Commodities tweet stream:

Rio Tinto reveals surprise fall in iron ore exports: Rio Tinto has revealed a surprise 12 per cent fall in iron ore exports, according to a set of March quarter results that were weaker than analysts had hoped. Following a period of intense political pressure over its strategy to continue investing in iron ore export growth, the raw export numbers published this morning were much weaker than analysts had expected. The miner exported 72.5 million tonnes from its global operations, including tonnes owned by joint venture partners.  That was well below the 82.7 million tonnes Deutsche had expected to be shipped, and 12 per cent lower than the 82.2 million tonnes shipped in the December quarter. The results come as the World Steel Association announced that steel demand in China would shrink this year and in 2016.  Rio blamed the fall in its exports on wet weather from cyclone Olwyn during the period, and a train derailment that blocked movements of ore into the port.Rio maintained its promise to ship 350 million tonnes in the 2015 calendar year, which if achieved, will be 16 per cent more than it shipped in 2014.

Shanghai Containerized Freight Index Collapses: China-US Rates Hit Hard, China-Europe Rates Plunge to All-Time Low -- Wolf Richter -- First was the Baltic Dry Index, which tracks rates for transporting the major raw materials in bulk by sea. Reflecting the totally battered global commodities market, it crashed to an all-time low in February, though it has since edged up a tiny bit. Now, containerized shipping rates are taking a majestic drubbing, and those from China to Europe have collapsed to all-time lows.The Shanghai Containerized Freight Index (SCFI) that tracks shipping rates from Shanghai to Northern European ports plunged 14% from last week to $399 per twenty-foot container equivalent unit (TEU), down a vertigo-inducing 67% from the glory days just a year ago. It was the 11th week in a row of declines, and it set a new all-time low. The index is now half of the key rate of $800 per TEU that a report by Drewry Maritime Research, released on April 19, considers the break-even rate for these routes even at the currently lower fuel costs. This leaves carriers deeply in the red. The Asia-Mediterranean routes have experienced a similar collapse in shipping rates. The SCFI for these routes plunged 11% from a week ago to $540 per TEU, down 60% year over year, also setting a new all-time low. The link between the global economy, external trade, and the shipping industry is clearly felt in the freight market, explained Peter Sand, chief shipping analyst at the Baltic and International Maritime Council (BIMCO), the world’s largest international shipping association. He blamed an oversupply of ships, including “the continued inflow of new ultra-large container ships on the Far East to Europe trades,” and the deteriorating exports from China so far this year.

China makes big cut in bank reserve requirement to fight slowdown (Reuters) - China's central bank on Sunday cut the amount of cash that banks must hold as reserves, the second industry-wide cut in two months, adding more liquidity to the world's second-biggest economy to help spur bank lending and combat slowing growth. The People's Bank of China (PBOC) lowered the reserve requirement ratio (RRR) for all banks by 100 basis points to 18.5 percent, effective from April 20, the central bank said in a statement on its website www.pbc.gov.cn. "Though the growth in the first quarter met the official target of around 7 percent for 2015, the slowdown in several areas, including industrial output and retail sales, has caused concern," said a report published by the official Xinhua news service covering the announcement. The latest cut, the deepest single reduction since the depth of the global crisis in 2008, shows how the central bank is stepping up efforts to ward off a sharp slowdown in the economy. "The size of the cut is more than expected," . "It's going to release around a trillion yuan (in liquidity) at least."

China's central bank enters stimulus mode - China's central bank is kicking into gear, launching new stimulus designed to counter the country's slowest economic growth in six years. The People's Bank of China announced on Sunday that it will lower the amount of cash that large banks must keep on reserve by 1% to 18.5%, a move that should boost the economy by freeing up money for banks to lend. Economists have expected the central bank to act, especially after a slew of disappointing economic data last week. First quarter GDP growth came in at 7%, the worst since 2009, and a host of other figures were weaker than anticipated. But analysts said the magnitude of this move shows just how worried policymakers are over economic growth. The last time Beijing slashed the reserve requirement ratio by 1% in a single go was during the height of the global financial crisis. "While additional reserve requirement ratio cuts were expected throughout 2015, the size and timing of this cut indicates leaders are more deeply concerned about the state of the economy than official comments previously indicated,"

Economists React: China’s Aggressive Cut in Banks’ Reserve Requirement Ratio --China’s central bank made a surprisingly aggressive cut in the bank reserve requirement Sunday, allowing banks to lend more money, in order to give the flagging economy a boost. The People’s Bank of China slashed the reserve requirement ratio–the portion of deposits that banks need to keep on reserve with the central bank–by a full percentage point. It was the biggest such move since late 2008, according to analysts. However, the central bank wasn’t finished there, offering an array of targeted reserve requirement cuts aimed at helping small businesses and farmers. The central bank has cut the reserve requirement on deposits twice since February and trimmed interest rates twice since November. The latest move, which takes effect Monday, followed the government’s announcement last week that first-quarter economic growth was 7% from a year earlier, the worst performance in six years. It also followed Premier Li Keqiang’s visit last week to the headquarters of some big state banks where he called on the nation’s bankers to try to lower the borrowing costs for companies struggling to adjust to a weaker economy. Economists weigh in on the significance of the central bank’s latest move, with comments edited for style and clarity:

Copper Plunge Continues Despite Chinese Stimulus -- Since China unleashed its latest (and greatest since 2008) RRR cut, stock prices have surged amid the liquidity hype. However, perhaps more indicative of the underlying reality of just what good an RRR cut will do to a debt-saturated economy full of weak credits thanks to tumbling asset prices, copper prices have now plunged over 6% in the last 2 days...

For the People’s Bank of China, Bond Buying Is Both Easy and Hard - China’s central bank has long been critical of the bond-buying programs adopted by its counterparts in developed countries. Now, it’s pondering its own version of such easing and a close look at its balance sheet shows it has room to do just that. Under deliberations at the People’s Bank of China is a proposal that could allow commercial banks to swap local-government bailout funds for cash as a way to bolster liquidity and boost lending, according to people familiar with the talks. Government bonds represented only 4.5% of all of the 33.8 trillion yuan (or $5.5 trillion) in assets held by the Chinese central bank as of the end of last year. By comparison, 55% of the assets owned by the U.S. Federal Reserve consisted of government securities. The vast majority of the PBOC’s balance sheet – 80% as of the end of 2014 – was made up of foreign-exchange reserves that had piled up over the years as the central bank bought dollars off the country’s exporters and simultaneously sold the yuan – its longstanding playbook to keep the Chinese currency from appreciating in value. The small share of its government holdings reflects the rather limited size of China’s bond market, according to analysts and economists. In addition, the PBOC so far has only bought and sold government bonds in the open market on a small scale, with the main goal to adjust liquidity in the interbank market where banks borrow from each other.

China bad debt spikes by more than a third: Chinese banks face a spike in bad loans amid slowing economic growth, PwC warns in a new report. "There are a variety of indications that credit risk exposure is accelerating," said PwC China Banking and Capital Markets leader Jimmy Leung in a press release published on Thursday. Asset quality continues to worsen, while the average overdue loan period is constantly increasing, Leung said, noting there is growing pressure on overdue loans to be downgraded to the non-performing loan category.  Slowing growth in the world's second largest economy prompted the People's Bank of China (PBoC) to stimulate lending, but that has seen the quality of loans deteriorate. China's economy expanded at its slowest full-year pace in 24 years in 2014, undershooting the government's target for the first time since 1998. The economy continued to lose momentum in the first quarter of 2015 with on-year growth marking its slowest pace in six years. The PBoC has undertaken easing measures to prevent the economy from slowing further. Most recently, the central bank cut the reserve requirement ratio (RRR) for banks by 100 basis points on April 19 to stimulate lending – the second RRR cut in as many months.

China Will Keep Growing Because It Has to - Let’s see: there’s a property bubble that’s  beginning to deflate, a construction boom that’s now going in reverse and a financial system that’s riddled with bad debts. Oh, and the air is still really dirty. On the bright side, though, Cirque du Soleil and Segway are coming to China. With the success of the new Asian Infrastructure Investment Bank, the country has established itself as a global economic leader. And the Shanghai Composite Index has more than doubled during the past nine months.  The outside world has a hard time fitting all this evidence together into a coherent picture. Is the stock boom a sign of hope, or a policy-driven bubble? How about that bond default today by state-owned Baoding Tianwei Group -- is it an indication of new financial maturity or the beginning of a great unraveling? Is the slowdown in construction, however scary for the world’s metal producers, a welcome signal that the economy is moving away from its dependence on exports and infrastructure to more sustainable consumer-driven growth?  The common thread here is the Chinese government using every tool it has to keep its long growth run going. As the U.S. and the U.K. grew into industrial powers in the 19th century, they were tripped up every 10 to 20 years by financial crises and economic depressions. Measuring from December 1978, when the Chinese Communist Party “shifted its center of gravity from propagandizing class struggle and organizing political campaigns to economic construction,” China is now in its 37th straight year of economic expansion.

"China Has A Massive Debt Problem", And Why It Is About Get Much Massiver -- "China has a $28 trillion problem. That’s the country’s total government, corporate and household debt load as of mid-2014... equal to 282 percent of the country’s total annual economic output," Bloomberg notes, adding that efforts to deleverage this massive debt burden aren't compatible with the measures Beijing needs to take to boost economic growth. But if you thought the debt problem was bad now, it's going to get worse because as Reuters notes, China is about to activate the ABS machine.

A Veteran of the Financial Crisis Tells China to Be Wary --  About 340 pages into Henry M. Paulson’s new book on China, a sentence comes almost out of nowhere that stops readers in their tracks. “Frankly, it’s not a question of if, but when, China’s financial system,” he writes, “will face a reckoning and have to contend with a wave of credit losses and debt restructurings.”  Mr. Paulson, the former Treasury secretary, knows a thing or two about financial crises, having been the lead firefighter during the 2008 financial collapse, the worst financial crisis since the Great Depression. Mr. Paulson also knows more about China, its politics and the players behind it than most Westerners, having been the former chief executive of Goldman Sachs and one of the first businessmen to seek to establish ties with China more than two decades ago, regularly making trips to the country and befriending top officials. A crisis in China, even a small one, would be contagious, especially in the United States. Already, fears of a slowdown in China in recent months have led to jitters about the trajectory of the American economy.   Mr. Paulson stresses that he’s not saying a crisis is inevitable, and he believes that one can be averted if officials make the right policy decisions. But Mr. Paulson’s anxieties about China have an unnerving similarity to the financial crisis in the United States, and his warnings demand attention.

China Manufacturing Output Slows - WSJ: —China's economy faces further headwinds after two measures of factory output decelerated in August, adding pressure on Beijing to stimulate growth to meet the nation's annual target. The results disclosed Monday follow weaker investment, real estate and retail data in recent weeks. They suggest that the world's second-largest economy is entering a second slowdown this year after peaking in July, economists said. Monday's results come despite August traditionally being a strong manufacturing month, adding to concerns. Monday's data also suggest that Beijing's effort to shore up growth using targeted fiscal and monetary measures has been insufficient to counter a real-estate slump and the negative effects of an anticorruption campaign. "This shows that the pressure on Chinese growth has spread from real estate to manufacturing," said Crédit Agricole CIB economist Dariusz Kowalczyk. "The whole second half will see downward pressure on manufacturing and the whole Chinese economy." The official Purchasing Managers Index fell to 51.1 last month from 51.7 in July, which saw a 27-month high on recovering exports, the China Federation of Logistics and Purchasing said Monday. The August drop in this measure of larger state-owned companies was broad based, with declines seen in new orders, production and new export orders.

US should write laws of global economy, not China - Obama -- The laws of the global economy should be written by the United States and not by the likes of China according to President Obama, as concern over China’s influence is growing. Washington hopes a Pacific free trade pact will curb Beijing’s investment bank. "When 95 percent of our potential customers live abroad, we must be sure that we are writing the rules for the global economy, not a country like China," Obama said in his special message to Congress on Thursday, RIA reports.  The statement comes after an agreement by US lawmakers to fast-track international trade bills earlier on Thursday. The White House is now looking forward to completing the Trans-Pacific Partnership agreement this year to remove trade barriers between the participating nations which account for 40 percent of the global economy and more than a third of global trade. “Our exports support more than eleven million jobs, and we know that exporting companies pay higher wages than others. Today we have the opportunity to open even more new markets to goods and services backed by three proud words: Made in America,” Obama added.

Progress, but no deal, in TPP talks with U.S. - Japan and the United States on Tuesday failed to reach an agreement over thorny issues, such as an import quota for U.S. rice and trade in automobiles, at bilateral ministerial talks for a multilateral Trans-Pacific Partnership trade deal. Determined to iron out the differences on the pending issues, however, Japanese TPP minister Akira Amari and U.S. Trade Representative Michael Froman confirmed that both sides will hold more working-level discussions. If any progress is made there, Amari and Froman will meet again. “Even though we have made substantial progress, there remain unresolved issues over agricultural products and auto trade,” Amari told reporters after the marathon talks in Tokyo that ended in the small hours of Tuesday. “We need to make more efforts to reach an agreement.” Meanwhile, Froman stressed that the gap has significantly narrowed. The progress in the Japan-U.S. talks will give big momentum to the entire TPP negotiations, he said.

Japan stands tough against rice imports as TPP talks with U.S. begin : Economic and fiscal policy minister Akira Amari and U.S. Trade Representative Michael Froman on Sunday kicked off two days of talks to advance negotiations on the Trans-Pacific Partnership agreement before the U.S.-Japan summit on April 28. The trade chiefs will try to bridge their differences over Japan’s agriculture market and trade barriers to the U.S. auto sector but do not expect to settle all outstanding issues before the bilateral negotiations conclude on Monday, Amari said before the talks began. On Sunday, Amari repeated his determination to protect the farm sector, saying Japan would not give in to U.S. demands just because there is a leaders’ summit in nine days. U.S. President Barack Obama will hold a summit with Prime Minister Shinzo Abe in Washington, where sealing the TPP free trade pact will be one of the top items on the agenda. While Japan’s farm market and the U.S. auto sector remain obstacles to a bilateral deal, they are also vital to the success of the long-delayed TPP pact. The two countries account for 80 percent of the economic output generated by the 12-member TPP.

The BoJ's monetary expansion and the yen -- At the end of last October the Bank of Japan announced a massive stimulus increase which was followed by a sharp decline in the yen. In 2015 however the declines have stopped as USD/JPY remains range-bound. Moreover, the trade-weighted yen index has been on the rise this year. This seems inconsistent with the Bank of Japan's monetary expansion, which has been immense. The nation's bank reserves - and therefore the monetary - base rose sharply in 2015.  Has the yen depreciation played out its course for now? The markets do not seem to be expecting significant further declines in the near-term, as the speculative accounts net short yen positions are cut. It's almost as if we've reached what some have termed the "quantitative easing fatigue": further yen depreciation requires ever more aggressive securities purchases announcements by the BoJ. In fact the yen has risen against the dollar for six consecutive sessions as of Friday - the longest winning streak for the currency since September 2012. As of Sunday night, the yen continues to strengthen. Part of the issue has to do with softer than expected economic performance in the United States stalling US dollar rally. For example the US industrial production index declined by 0.64% last month - the largest percentage drop since May 2009. In the long run however, further yen weakness seems inevitable. The reason has to do with the sheer relative size of Japan's quantitative easing. Based on the latest projections, the BoJ's balance sheet will be above 90% of Japan's GDP within a year or so. This dwarfs other major central banks' monetary expansion efforts, including that of the ECB. Furthermore, given the scope and size of this program, it is unclear if the Bank of Japan can ever effectively exit it without a massive disruption to the nation's economy. While we could see the yen strengthen briefly in the near-term, the currency will remain under pressure for some time to come.

Japan Breaks 48-Month Deficit Streak, Manages Marginal Trade Surplus On Collapse In Imports -- After 48 months of trade deficits, March saw a very modest JPY3.3bn surplus (vs JPY409bn deficit expectations), driven by a collapse in imports. Exports rose 8.5% (as expected) but against already dismal expectations of a 12.6% drop, March saw Japanese imports crash by 14.5% - the most since Nov 2009 (driven by the plunge in oil prices - aleviating some of the post-Fukushima fuel demands cost). Of course this is terrible news for stocks as it means less stimulus from the BoJ...asnd JPY is strengthening modestly.

Surging medical, nursing care costs strain Japan's public finances (Reuters) - A panel of Japanese lawmakers has calculated the country's medical and nursing care costs will rise 4 trillion yen ($33.50 billion) over the next five years, people involved in the process said on Tuesday, highlighting the strains placed on public finances by a fast-ageing population. Prime Minister Shinzo Abe's government is facing an uphill battle to achieve its goal to balance the primary budget - excluding new bond sales and debt servicing - by the fiscal year to March 2021. Some policymakers argue that higher economic growth could shrink the accumulated debt as a proportion of gross domestic product and so avoid painful and unpopular spending cuts. But the latest calculations by an administrative reform panel of Abe's Liberal Democratic Party suggested that curbing spending in the medical and nursing could also substantially reduce the primary budget deficit. Tokyo is facing pressure to rein in ballooning public debt that is more than twice the size of its $5 trillion economy, the industrial world's heaviest burden. The government's own calculations show Japan would be left with a primary budget deficit worth 9.4 trillion yen in the fiscal year to March 2021, even assuming that the economy would grow at a nominal 3 percent rate and the national sales tax would rise to 10 percent, from the current 8 percent, in April 2017 as planned.

South Korea’s Next Export Worry: Price Cuts in Japan -- South Korea’s exports are slipping just as Japan’s are picking up, as a weak yen has made Japanese goods more competitive globally.  The situation could get still worse for South Korean exporters if Japanese firms start to cut prices more aggressively in dollar terms to capture market share overseas,. Many Japanese companies have avoided that approach so far, preferring instead to book profits. “Few economies in Asia are as affected by a weaker yen as Korea, given its strong competition with Japan,” he says.  Earlier Thursday, South Korea reported a modest rise in first-quarter growth of 2.4% on-year, compared with 2.7% in the last quarter of 2014. Net exports were the weakest spot in the data, trimming a third of a percentage point from overall growth. South Korean manufacturers compete closely with Japan on exports like cars and electronics. That rivalry has intensified amid Prime Minister Shinzo Abe’s two-year campaign to weaken the yen, which has fallen sharply against the dollar. The relative strength of South Korea’s won—at a seven-year high against the yen—is a big worry for its central bank, which has been criticized by the International Monetary Fund for actively intervening in currency markets. In its semiannual currency report earlier this month, the U.S. Treasury Department chastised South Korea’s currency policy for hurting its trading partners. Still, the won’s relative strength has forced South Korea’s manufacturers to scramble for market share. South Korea’s exporters have been cutting prices, which fell 6.8% on year in March compared with a drop of 8.1% in February. Earlier Thursday, South Korean car maker Hyundai Motor Co. recorded its fifth consecutive fall in quarterly profit, citing the cost of higher sales incentives to keep its U.S. market share.

India’s Central Bank Chief Looks for More Accommodation - Reserve Bank of India Governor Raghuram Rajan is keeping his options open for additional reductions in benchmark interest rates. The central bank has cut rates twice this year and could cut rates further if it sees more signs that inflation is easing, Mr. Rajan said in an interview with The Wall Street Journal on the sidelines of the International Monetary Fund’s spring meetings. “We’re going to look for it,” Mr. Rajan said. “We’re going to look to see the course of disinflation continue.” The interview touched on a range of issues–including puzzles about slow global economic growth and the prospects for interest-rate increases by the U.S. Federal Reserve. A lightly edited transcript of key excerpts follow:

America's Waning Influence: Beijing To Invest $46 Billion In Energy, Infrastructure For US "Ally" -- China is looking to succeed where the United States has failed. Beijing — which, as a reminder, claims it will not use its regional infrastructure development initiatives as a tool of foreign policy — is now set to facilitate the construction of nearly $50 billion in power plants, roads, and railways in neighboring Pakistan. The proposal, which will give China access to the Indian Ocean via the Gwadar port on the Arabian Sea, is part of President Xi Jinping’s ambitious “Silk Road” Economic Belt, and importantly, will likely include financing for the completion of the "Peace Pipeline," which will carry natural gas from Iranian gas fields across Pakistan.

Pakistan, China "Experts": Husain Haqqani, Minxin Pei, Gordon Chang -- The United States is home to many foreign affairs "experts" from various countries around the world. These "experts" are employed by US Think Tanks and invited by the US media to appear on television shows and write Op Ed columns for newspapers whenever there is a significant event anywhere in the world. The analyses and opinions offered by these experts depend on how the United States policymakers view the countries being discussed. If the US sees a nation favorably, the "expert" analyses and opinions are positive and sympathetic toward them. On the other hand, if the US views the nations in question negatively, then these "experts" show hostility toward them. Discussions on India, a current favorite of the United States, often feature Fareed Zakaria who portrays India in a favorable light and its rival Pakistan as the villain in South Asia.  Media coverage of the Middle East features "experts" who are almost always always friendly toward Israel. The recent announcement of major Chinese investment in Pakistan during Chinese President Xi Jinping's visit to the South Asian country has received a lot of attention in the mainstream US media.As expected, the "experts" invited by the US media to talk and write about the China-Pakistan Corridor are hostile to both China and Pakistan.Pakistan's ex-Ambassador Husain Haqqani has been used as the "expert" to do the hatchet job on Pakistan by Rupert Murdoch's Wall Street Journal. Here's an excerpt of it:

This will be Asia's next trillion dollar economy - Indonesia is on track to become Asia's next trillion-dollar economy in two years, according to IHS, joining the ranks of China, Japan, India, Australia and South Korea. "The Indonesian economy has the capacity for robust long-term economic growth of around 5.4 percent per year over the 2016 to 2020 time horizon," said Rajiv Biswas, chief economist, Asia-Pacific at IHS. This will take Southeast Asia's largest economy from its current gross domestic product (GDP) of $870 billion to $1.14 trillion by 2017. Thereafter, GDP is projected to double again by 2023 to an estimated $2.1 trillion – surpassing Australia, which is currently a $1.52 trillion economy. Read MoreIndonesia bets on the taxman "On a global comparison, the Indonesian economy will also be larger than Russia, Spain or the Netherlands in 2023," said Biswas. Indonesia's economy has proved resilient despite commodity price headwinds and monetary policy tightening thanks to steady domestic consumption, supported by the country's rapidly expanding middle class. The economy expanded 5 percent in 2015, with growth projected to accelerate in 2015 and 2016, driven by a recovery in exports helped by the lower exchange rate and pickup in government investment, according to the OECD.

Should Asia’s Governments Spend More? -  Many central banks in Asia have cut interest rates this year to boost growth. Now, governments need to play their part and start spending, some experts say. It’s “time to turn on the tap for fiscal spending,” says HSBC economist Frederic Neumann. “Monetary policy is losing its punch,” he says, adding that low interest rates make it an opportune time to get long-term financing for infrastructure projects. In its capital-spending outlook, consulting firm PwC said that some emerging-market governments have room to spend, as debt burdens have stabilized in recent years. The caveat is they have to do so wisely. Indonesia, Thailand and India are moving in that direction, but more needs to be done, says Mr. Neumann. South Korea, while more advanced, could spend more, too—though on welfare more so than on infrastructure, he says. Last week, finance minister Choi Kyung-hwan said the government would ramp up stimulus in the second half of the year if required. But some governments seem reluctant to do so. Memories are fresh of the Asian financial crisis, when high levels of debt denominated in foreign currencies hobbled economies as regional currencies plunged. In the past two decades, careful financial management and export booms helped repair Asia’s balance sheets. Many policy makers don’t want to undo that good work. In Indonesia, for instance, public debt-to-gross domestic product ratio went from nearly 90% in 2000 to 25% in 2014, according to the International Monetary Fund.

Oil shock morphs into global monetary shock – again -- Ever since the collapse in oil prices started last summer, the behaviour of the global economy and financial markets has been heavily affected by the consequences of lower energy prices. Now, however, there is gathering evidence that the primary effects of the oil shock have been absorbed into the system, and there are signs that other forces are beginning to take control. What are these forces, and how will they affect the global economy in the months ahead?  When the oil shock reached its maximum early in 2015, economists were largely agreed on its likely impact. Since it seemed to stem mainly from the supply side of the oil market, not the demand side (a fact corroborated by IMF research last week), it was thought likely to boost real global GDP growth this year by about 0.5-0.75 per cent, leading to a break-out in global growth to the upside. It also had a dark side, increasing the deflation threat in the eurozone and Japan, but this was likely to be offset by further aggressive monetary easing by their respective central banks. With the US much better insulated against deflation, the Federal Reserve was thought likely to “look through” the disinflationary effects of falling energy prices, therefore pushing ahead with its long-planned lift-off in interest rates in mid-2015. Since the major central banks were shifting policy in diametrically opposed directions, exchange rates adjusted sharply, and the benefits of the oil shock were redistributed accordingly around the world. Many of these expectations were largely fulfilled. But oil prices have rebounded slightly, and global inflation rates are about to hit bottom. A different set of forces is now in charge. Four of them are paramount.

World Braces for Taper Tantrum II Even as Yellen Soothes Nerves - The world economy is about to discover if to be forewarned by the Federal Reserve is to be forearmed. Two years since the Fed triggered a selloff of their assets in the so-called “taper tantrum,” the finance chiefs of emerging markets left Washington meetings of the International Monetary Fund praising Chair Janet Yellen for the way she is signaling plans to raise U.S. interest rates. The test now is whether developing nations have done enough to insulate their economies from the threats of a higher U.S. dollar and capital flight once the Fed boosts borrowing costs for the first time since 2006. How successful they are will help determine the strength of global growth that’s already taking a hit from weaker expansions in China and Brazil. “The Fed is trying its best to be as transparent as possible, to explain its considerations,” Tharman Shanmugaratnam, Singapore’s finance minister, said in an interview. “But it doesn’t mean that ensures us of an orderly exit. One way or another there’s going to be some disturbance.” Yellen is seeking to avoid the May 2013 episode of her predecessor Ben S. Bernanke, when his suggestion that the Fed might soon wind down its bond-buying program prompted investors to flee the risk in emerging markets. India’s rupee and the Turkish lira both tumbled to record lows.

Fink Says Central Bankers ‘Destroying’ Insurers With Low Rates -- Low interest rate policies by central banks around the world are threatening insurance companies and pension funds, said Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest asset manager. “As we live in a world of persistent low rates and, in the case of Europe, negative rates today, when you put a macro-prudential framework on it, we are destroying the value of pension funds,” Fink said at a conference in Singapore on Tuesday. “We are destroying the viability of insurance companies.” BlackRock is the biggest investor in insurers including American International Group Inc. and Prudential Financial Inc. His New York-based company also seeks to manage funds for insurers as they weigh bets in infrastructure and real estate to counter low bond yields. Fink said that policy makers need to think broadly about the impact of their decisions. He joins insurance executives including MetLife Inc. CEO Steve Kandarian and Axa SA’s Henri De Castries in lamenting that low interest rates are punishing savers. Insurers hold trillions of dollars in fixed-income assets to back obligations to policyholders. “Society has given our central bankers worldwide the responsibility for macro-prudential risk, all the risk in the system, not just the risk in the banking system,” Fink said at the Credit Suisse Global Megatrends conference. “I don’t think there is enough talk about what are the costs of the low rate environment to the other components of our global society -- pension funds, retirees, savers, and insurance companies.”

IMF nations point to exchange rate, geopolitical risks (Reuters) - The International Monetary Fund's member nations on Saturday warned of risks to the global economy from exchange rate shifts and geopolitical tensions as they took note of "moderate" global growth and "uneven prospects." While economies in developed countries have strengthened, some emerging nations are being hit by weaker commodity prices and exports, the IMF's steering committee noted in a communique. With the United States poised to hike interest rates, the panel - speaking for the Fund's 188 member nations - said moves toward "policy normalization" needed to be effectively communicated to reduce adverse impacts on other economies. It also said the "possibility of lower growth potential" was becoming an important global challenge, a topic the panel's chairman said was central to talks on Saturday. "I came out of this meeting with a sense of optimism," the chairman, Mexican Finance Minister Agustin Carstens, said. "The fact that a lot of the discussion basically rotated around how to increase growth ... and not only discussing risks - I think that was a very good sign." The spring meetings of the IMF and World Bank, which conclude on Sunday, have taken place amid growing concerns cash-strapped Greece will fail to reach agreement with its European Union and IMF creditors on reforms that would unlock bailout cash and stave off default.

Fed Crisis-Liquidity Function Reviewed for Potential Use by IMF -- IMF member nations are discussing how to expand the lender’s mandate to include keeping markets liquid during a financial crisis, a role played by a group of major central banks led by the Federal Reserve in 2008. The International Monetary Fund’s main committee of central bank governors and finance ministers is working on ways for the fund to provide a better financial “safety net” during a crisis, said Singapore Finance Minister Tharman Shanmugaratnam, who last month finished a four-year term as chairman of the panel. Singapore remains a member of the International Monetary and Financial Committee. “In the last crisis, the Fed and some other central banks had a system of swaps that was applied to only certain financial centers, but you can’t leave it to an individual central bank to make those decisions,” he said in an interview Friday in Washington, as officials from around the world gathered for the IMF’s spring meetings. “It has to be a global player, and the IMF is the only credible institution to perform that role.” The Washington-based IMF needs to evolve into more of a “system-wide policeman” that enforces global financial stability, rather than solely a lender to individual countries that run into trouble, said Shanmugaratnam, 58, who also serves as Singapore’s deputy prime minister.

What If This Is As Good As It Gets? - The International Monetary Fund’s spring meetings are turning into a depressing affair. By April every year in the wake of the financial crisis, it seems the world’s top finance officials and central bankers are busy revising down expectations for annual growth and navigating some brewing financial storm. And so it is in 2015. Washington’s cherry blossoms are in full bloom and so is economic angst and frustration. Greece is replaying its annual role of Eris, the goddess of chaos and discord. European Central Bank officials spent much of the past few days complaining privately to others that Prime Minister Alexis Tsipras and Greece’s left-wing Syriza party are not up to the impossible task they face in the weeks ahead. Default and withdrawal from the eurozone loom. As dramas go, the U.S. seems to be following a script from the 1997 film, “As Good As it Gets,” starring Academy Award winner Jack Nicolson. Mr. Nicholson, portraying a cranky and unlikeable writer named Melvin Udall, cruelly asks a group of depressed psychiatric patients, as they sit in a doctor’s office hoping for healing, “What if this is as good as it gets?” Our Melvin Udall is Harvard University professor Lawrence Summers. He scores points for his “secular stagnation” thesis every time the Federal Reserve and IMF are forced to revise down their growth forecasts or when global interest rates fall further. Mr. Summers has a new edge in his case for the economy’s lack of momentum with a first quarter economic slowdown.

Pettifor Warns of GFC 2.0 Approach -- Yves Smith - Yves here. This is a short but important debate over how much to worry about the upcoming train wreck in emerging markets when the Fed finally gets around to tightening. Pettifor sees it as a potential global crisis event; Macrobusiness sees it as a typical emerging markets bust. The Pettifor viewpoint seems more on target. First, so-called developing economies are far more important contributors to global GDP than in the last big emerging markets crisis of 1997-1998. Second, too many people forget how close we came to a bigger meltdown. Lehman nearly failed then, Goldman was wobbly, and the LTCM crisis, as the Fed and bank counterparties recognized at the time, had the potential to become a systemic crisis. Third, unlike the 1990, where the underlying global growth trend was solid and central banks had room to break glass and lower interest rates to deal with a crisis, fundamentals are much weaker and central banks are already at super-low policy rates.

Mexico’s Finance Minister Says Emerging Markets Concerned About Currency Turbulence -- Finance officials from the world’s largest emerging-market nations are growing increasingly worried that currency turbulence could hurt their economies as the dollar strengthens, Mexican finance minister Luis Videgaray said on Saturday. “The most recurring concern is the U.S. dollar appreciation,” Mr. Videgaray said in an interview, as global finance ministers and central bankers met in Washington to discuss threats to the world economy. Emerging economies are watching the Federal Reserve nervously as the U.S. central bank plans its first rate increase in nearly a decade. “We are not that concerned about the particular level of the dollar,” he said. “For us, the key issue is that changes in the prices of the dollar vis-à-vis the peso—the currency rate—happen in an orderly way.” Investors are plowing their cash into the U.S. currency as the American economy strengthens and the Fed gets set to raise interest rates. Combined with slowing growth in emerging markets and easy-money policies in the eurozone and Japan that depreciate the euro and the yen, demand for the dollar has fueled one of its strongest surges in decades. Amid those shifts in the global economy, emerging markets are worried about three types of threats. First, if the Fed surprises markets by raising rates earlier or faster than expected, investors could move en masse to adjust their portfolios across the broad swaths of assets and markets. Second, many firms and governments have bulked up on dollar-denominated debt amid an era of cheap borrowing costs even though their revenues are often in local currencies. And third, if investor rush to the exits at the same time it could spark major volatility in bond, equity and currency values. For Mexico, the stronger dollar has a mixed impact for the economy, Mr. Videgaray said. For the country’s exporters, it boosts demand for their products.  For retail and food-processing industries that rely heavily on imports for their businesses, it can hit their profit margins.

Russia's Rainy-Day Reserve Fund Could Run Out in a Year and a Half – Finance Minister -  Finance Minister Anton Siluanov warned Friday that Russia risks using up its entire emergency Reserve Fund in just 18 months if it doesn't spend carefully, the TASS news agency reported. "This year we will use up to 3 trillion rubles [$59 billion] of the Reserve Fund's 5 trillion [$98 billion], that is, we could basically use it up in a year and a half if we don't approach our budget policy responsibly," Siluanov was quoted as saying during a lecture to students in St. Petersburg. The Finance Ministry is urging the Kremlin to tighten fiscal policy as the Russian economy veers toward recession and the price of oil, Russia's main export, finds a new norm at around $60 to the barrel — down from highs of $115 a barrel in June. State-owned companies have lined up for handouts from Russia's two oil revenue-funded emergency funds, the Reserve Fund and the National Welfare Fund, as sanctions over Russia's actions in Ukraine cut off firms' access to Western capital markets. Russia's lower house of parliament earlier this month passed in its final reading an amended budget that foresees a budget deficit of about 2.7 trillion rubles ($53 billion) or 3.7 percent of GDP, this year.

The Gazprom Case: Good Timing or Bad Timing? - Just a week after having sent a Statement of Objections (SO) in the frame of the antitrust case against Google, EU Competition Commissioner Margrethe Vestager sent yesterday an SO in the frame of the case against Gazprom. The decision to send a charge sheet against the Russian gas company came after almost three years of investigations, which have also seen EU antitrust officials raiding Gazprom offices in central and eastern European countries. But what is this antitrust case all about? And, considering the current EU gas market environment, has it arrived at a good time or bad time for Gazprom? Furthermore, what might be its potential impact on overall EU-Russia relations? This blog post aims to shed some light on these issues, also by trying to consider the perspective that Gazprom might have on the issue. In the Statement of Objections sent yesterday, the European Commission alleges that in the Baltic countries, Bulgaria and Poland Gazprom is:

• i) Hindering cross-border gas sales, through certain clauses in the contracts with its customers allowing Gazprom to charge higher prices in countries that are more dependent on Russian gas (see map).
• ii) Charging unfair prices through Gazprom’s pricing formulae.
• iii) Making gas supplies conditional on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure. Specifically, the Commission’s preliminary view is that Gazprom made wholesale gas supplies in Bulgaria conditional on the country’s participation in the South Stream pipeline project, and in Poland conditional on the company’s control over investment decisions concerning the Yamal pipeline.

US alarmed by Greek energy alliance with Russia - Telegraph: The US is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous change in the strategic balance of the Eastern Mediterranean as Greece’s radical-Left government drifts into the Kremlin’s orbit. Ernest Moniz, the US Energy Secretary, said his country is pushing for an alternative gas pipeline from Azerbaijan that would help break the stranglehold that Russian state-controlled firm Gazprom has on European markets. “Diversified supplies are important and we strongly support the ‘Southern Corridor’ to bring Caspian gas to Europe,” he told a group of reporters on the margins of CERAWeek oil and gas forum in Houston. He insisted that it was vital to uphold “collective energy security” in Europe. Greece’s foreign minister, Nikos Kotzias, said Gazprom made a “very good offer”, with guaranteed gas supplies for 10 years at good prices. He asked how his Syriza government could justify turning down such an opportunity unless the Western powers could come up with something better. The once-unlikely “Turkish Stream” deal with Russia has suddenly become a stark reality as President Vladimir Putin seizes an opportunity created by the eurozone’s inept handling of the Greek crisis. Under the terms of the offer, Russia would supply 47bn cubic metres (BCM) of gas to Greece, generate much-needed revenue for the Greek authorities, create 2,000 jobs and turn the country into an energy hub. Sources in Athens have confirmed to The Telegraph that it could also bring €3bn (£2.2bn) to €5bn in advance payments, greatly alleviating Syriza’s budget strain as it raids local authority funds in a last, desperate attempt to put off default.

Russia denies German report it is ready to sign gas deal with Greece (Reuters) - Russia denied on Saturday a German media report suggesting that it could sign a gas pipeline deal with Greece as early as Tuesday which could bring up to five billion euros into Athens' depleted state coffers. German magazine Der Spiegel, citing a senior figure in Greece's ruling Syriza party, said the advance funds could "turn the page" for Athens, which is now struggling to reach a deal with its creditors to unlock new loans to avert bankruptcy. "No, there wasn't (any agreement)," said Kremlin spokesman Dmitry Peskov, in comments made to Business FM radio and quoted by RIA news agency. Peskov reiterated that the Greeks had not requested financial assistance during talks in the Kremlin earlier this month between Prime Minister Alexis Tsipras and Russian President Vladimir Putin. "Naturally the question of energy cooperation was raised. Naturally ... it was agreed that at the expert level there would be a working-out of all issues connected with cooperation in the energy sphere, but Russia did not promise financial help because no one asked for it," Peskov was quoted as saying. During his visit to Moscow, Tsipras had expressed interest in participating in a pipeline that would bring Russian gas to Europe via Turkey and Greece.

Thousands in Germany protest against Europe-U.S. trade deal (Reuters) - Thousands of people marched in Berlin, Munich and other German cities on Saturday in protest against a planned free trade deal between Europe and the United States that they fear will erode food, labor and environmental standards. Opposition to the Transatlantic Trade and Investment Partnership (TTIP) is particularly high in Germany, in part due to rising anti-American sentiment linked to revelations of U.S. spying and fears of digital domination by firms like Google. A recent YouGov poll showed that 43 percent of Germans believe TTIP would be bad for the country, compared to 26 percent who see it as positive. The level of resistance has taken Chancellor Angela Merkel's government and German industry by surprise, and they are now scrambling to reverse the tide and save a deal which proponents say could add $100 billion in annual economic output on both sides of the Atlantic. In Berlin, a crowd estimated by police at 1,500 formed a human chain winding from the Potsdamer Platz square, past the U.S. embassy and through the Brandenburg Gate to offices of the European Commission. In Munich, police put the crowd at 3,000, while organizers Attac estimated it at 15,000. Hundreds also marched in Leipzig, Stuttgart, Frankfurt and other European cities on what Attac hailed as a "global day of action" against free trade, though the protests appeared to be largest in Germany.

Denmark is Victorious Defending the Krone: IMF - The IMF has been among the international organizations at the forefront of liberalizing exchange rates. That is, changing the world's remaining fixed exchange rate regimes into floating ones has been part of its longstanding advocacy since flexible rates supposedly work better in adjusting to global economic conditions and in dealing with economic shocks. On a paper concerning exchange rates, IMF orthodox is pretty much summed up when the authors ask how, when and how fast countries should adopt flexible exchange rates without questioning "whether."   It is this with some consternation that the IMF reports Denmark's success in warding off speculation that it would follow Switzerland in abandoning a currency peg that had become too expensive in holding down the value of their respective currencies against the euro. It's almost like Dick Cheney lauding the lifting of sanctions on Iran. Sure, the IMF may suggest that it dislikes currency speculators betting against currencies, but the speculators' desired outcomes--replacement with a floating rate regime--is welcome. Go figure, then, when the IMF now says that the Danes have become one of the fortunate few to have faced down these vile, faceless speculators: Three months after Denmark became the target of a speculative attack against its currency regime, the International Monetary Fund says the country’s central bank has gained credibility after forcefully fighting back the onslaught. Policy makers “did a good job of making it clear that the peg would stand and making it clear that it would be unprofitable to speculate against it,” Thomas Dorsey, the IMF’s mission chief to Denmark, said in an interview. “Having for a generation-plus maintained the peg against pressure in both directions, they gain credibility each time and they did it again this time around.”

Key European interbank rate drops below zero - The negative interest rate trend in Europe has moved from central banks to the bond market - and now to the interbank market. Three month Euribor - the measure of what European banks charge each other for three-month money - has dropped to -0.001 per cent. This is the first time the rate has dropped below zero, Bloomberg data shows, reflecting the incredibly easy credit conditions in Europe after European Central Bank president Mario Draghi launched his €1.1tn, asset buying monetary stimulus in late January. The Euribor rates are also important rates in European money markets, as they underpin the vast amount of interest rate swaps (bets between two parties on what borrowing costs will be at a point in the future) traded across Europe each day. These rates also underpin the cost of consumers' mortgages and what they are paid on savings products.

Banks Paid to Borrow as Three-Month Euribor Drops Below Zero  - Banks in the euro area can now get paid to look after each others’ cash for three months as the European Central Bank’s bond-buying program floods the region’s money markets with excess liquidity. The euro interbank offered rate, or Euribor, for that time period dropped to minus 0.001 percent on Tuesday, according to data from the European Money Markets Institute. That’s the first negative reading since Bloomberg started collecting the data at the end of 1998. The index represents the average rate at which the region’s banks say they see each other lending in euros for three months.  Money-market rates have declined after several moves by the ECB. In June it introduced a negative deposit rate, meaning that commercial lenders were required to pay a fee to park their excess cash overnight with the Frankfurt-based institution. The ECB lowered the rate to minus 0.2 percent in September. Then in March this year the central bank started buying government bonds under a 1.1 trillion euro ($1.2 trillion) quantitative-easing program aimed at boosting growth and staving off deflation.   “Excess liquidity keeps flowing into the system week by week because of the QE program,” . “Banks find themselves inundated with deposits but they don’t want to pay the ECB for parking their money there. Instead they’d rather lend the cash in the interbank market.” “It’s good news for borrowers, not so good news for lenders,” . “Mr. Draghi wants us to spend the cash, not keeping it in Euribor. The purpose of QE is to get us to take on some risk.”

European Banks Are Paid To Borrow For First Time Ever As Euribor Goes Negative -- Mario Draghi said this week that the transmission channels for European Q€ were opening up and crowed how well his cunning plan was working (by well we assume he means stocks are up). Today we get the ultimate test of that 'transmission' as 3-Month EURIBOR fell below 0.00% for the first time ever (likely wreaking havoc on European derivative pricing models). In English that means banks are being paid to borrow from one another in the interbank money-markets (which sounds a lot like a 'glut' of excess cash) seemingly confirming ICMA's de Vidts fears: "We are scared about the [repo] market freezing," as the ECB is "driving without headlights in the dark." Of course this is yet another disturbing distortion on the heels of homeowners being paid to take out mortgages...

Swiss Central Bank Says Negative Rates Won’t Become ‘New Normal’ - —Negative interest rates introduced by the Swiss central bank are a necessary tool to curb demand for the country’s overvalued currency but won’t become a permanent fixture of the economy, Swiss National Bank President Thomas Jordan said Friday. Mr. Jordan said low interest rates around the world had created an extremely difficult environment for the Swiss economy, a situation that is exacerbated by a Swiss franc that is “significantly overvalued.” The situation required the central bank to begin applying negative interest rates in January, a move designed to curb demand for the franc, he said. Mr. Jordan said negative interest rates will play “a very important role” until upward pressure on the franc eases and the global economy recovers further. He made the comments in a prepared text of a speech to be delivered at the SNB’s annual general meeting. “Negative interest will not become the ‘new normal,’” Mr. Jordan said. “The current low interest rate environment is a temporary phenomenon.” The annual general meeting is the central bank’s first since it ditched a three-and-a-half-year policy of capping the franc at 1.20 per euro and introduced negative interest rates, effectively a charge on banks’ deposits with the SNB. The move sent the franc soaring, especially against the euro, and triggered criticism from politicians and business leaders, who worried it would hurt the country’s economy because the 19-nation eurozone buys roughly half of Switzerland’s exports. Despite scrapping the cap, the SNB will still monitor exchange rates and intervene in the market to influence monetary conditions, Mr. Jordan said. He said the high franc would moderate in the future.

Eurozone government debts continue to rise in 2014 - The combined budget deficit of the eurozone's member governments narrowed again in 2014, but their combined debts continued to rise as low rates of inflation and weak economic growth damped tax revenues. The European Union's statistics agency said Tuesday the eurozone's budget deficit fell to 2.4% of economic output from 2.9% in 2013, but that additional borrowing pushed government debt up to 91.9% of gross domestic product from 90.9% in 2013. The continued decline in budget deficits will be viewed by eurozone policy makers as evidence that the austerity policies pursued in response to the currency area's government debt and banking crisis has worked. In an interview with The Wall Street Journal, Luxembourg's finance minister said 2014 had yielded "quite encouraging results" for the eurozone's efforts to halt the post-crisis rise in government debts. "The deficit was lower than last year, so it's all going in the right direction," said Pierre Gramegna. However, the weakness of eurozone economic growth and the low levels of inflation that persisted throughout 2014 made it difficult for governments to boost their tax revenues. As a share of economic output, they were steady at 46.6% of GDP, while spending fell to 49% of GDP from 49.4%.

Europe's debt mountain just got bigger -  It's official. The eurozone is drowning in debt. According to the latest figures from the bloc's official statistical authority, government debt in the eurozone reached nearly 92pc of GDP last year - the highest level since the single currency was introduced in 1999. Unsurprisingly, debt-stricken Greece is the worst offender, with its public debt topping 177pc of national economic output. Italy is not far behind at 132pc of GDP, with bailed-out Cyprus at 107pc. The figures also show that only four of the eurozone's 19 countries are below the Maastricht Treaty's 60pc debt limit. Across Europe as a whole, 16 of out the 26 member states are officially in breach of the debt criteria. Despite attempts by government's across the bloc to rein in spending, stagnant growth and insipid demand has seen debt ratios on the continent soar. Coupled with the ominous threat of deflation, the advanced world's debt burden is now the foremost threat facing the global economy, according to the likes of the IMF. . Total public and private debt levels have reached a record 275pc of GDP in rich countries, and 175pc in emerging markets. Both are up 30 points since the collapse of Lehman Brothers. But as the woes of Greece have shown, the prospect of mass debt write-offs is not on the cards. In the words of Margaret Atwood and beloved of the IMF: "And then the revenge that comes when they are not paid back."

Rising Toll on Migrants Leaves Europe in Crisis; 900 May Be Dead at Sea - European leaders were confronted on Monday with a humanitarian crisis in the Mediterranean, as estimates that as many as 900 migrants may have died off the Libyan coast this weekend prompted calls for a new approach to the surging number of refugees crossing from Africa and the Middle East.Even as efforts continued to collect the bodies from the sinking off Libya late Saturday and early Sunday — only 28 survivors have been found — Italian rescue ships responded to new distress calls from other vessels. A second migrant ship crashed near the Greek island of Rhodes, underscoring the relentless flow of people fleeing poverty, persecution and war. European foreign ministers met in Luxembourg to discuss how to respond. Those governments are trying to balance humanitarian responsibilities against budget constraints and widespread public sentiment against immigration. Italy’s representative pushed for Europe to make “major commitments” to confront the crisis, and European heads of government scheduled an emergency session for Thursday. The disaster also underscored how Libya, reeling from violence and political turmoil, has become a haven for human smuggling rings along the African coastline. In Rome, the prime ministers of Italy and Malta on Monday called for targeted, nonmilitary intervention against Libya’s human traffickers. This year’s death toll in the Mediterranean Sea is thought to have already surpassed 1,500 victims — a drastic spike from the same period last year. With the arrival of warmer weather, the number of migrants on smuggling boats has risen sharply, with more than 11,000 people being rescued during the first 17 days of April. Migrants also now seem to be coming from a larger geographic area — from Bangladesh and Afghanistan in Asia; Syria and Iraq in the Middle East; and African nations such as Gambia, Somalia, Mali and Eritrea.

Why Europe Lets People Drown - Ilargi - That Europe let almost 1000 people die in the Mediterranean in one night shouldn’t be a surprise to anyone, at least not to those who are still occasionally awake. The Club Med migrant crisis has been going on for a long time, and the EU’s only reaction to it has been to slash its budget and operations in the area, not to expand them. So when the New York Times opens with “European leaders were confronted on Monday with a humanitarian crisis in the Mediterranean..”, they’re a mile and a half less than honest. Brussels has known what was going on for years, and decided to do less than nothing.   The onus was put on Italy, Malta, Greece and a handful of private compassionate activists to handle the situation, as if it was some sort of local, or even tourist, issue, while Europe’s finest went back to festive gala openings of their €1 billion+ ‘official’ edifices, and back to forcing more austerity on member nations. Somebody has to pay for those buildings. The EU took over rescue operations from Italy late last year and promptly cut the budget by two-thirds. Saving migrant lives was deemed just too expensive. You don’t survive in European politics if you don’t get your priorities straight. On March 8, I wrote ‘Europe, The Morally Bankrupt Union’, and things have only deteriorated from there. If the international press, and various world leaders, wouldn’t have called them out over the weekend, the Brussels class would still not do a thing about the migrant drama, and would still feel comfortable hiding behind the factoid that most migrants drown outside European waters.  In their meeting on Monday, a bunch of EU interior and foreign ministers once again didn’t reach any meaningful conclusions; it’ll be up to presidents and prime ministers to do this on Thursday. One might almost hope for another huge tragedy before that date, just so the cynical hypocrisy that rules Europe would be exposed once again for all to see.

Notes on Greece - Krugman  -- First, on the fiscal side, Greece has made an incredible adjustment — close to 20 percent of potential GDP, or the U.S. equivalent of about $3 trillion per year (not our usual 10-year calculation) in spending cuts and tax hikes: Second, Greece has accepted roughly a 25 percent cut in nominal private-sector labor costs, or more than 30 percent relative to the euro average, far more than anyone else: You can make a pretty good case that the costs of this adjustment were so large that Greece would have been better off exiting the euro in 2010. You can make an even better case that Greece would have been much better off if it had never joined in the first place. But at this point these are sunk costs. If Greece can negotiate a halfway reasonable compromise, one that more or less pauses further austerity, it’s hard to see that the risks of exit would be worth it.  And the creditors would be equally well served by such a compromise.  So is it going to happen? Well, it’s the right thing to do — which tells you nothing.

Europe ready for Grexit contagion as Athens gets closer to Russian cash - The European Central Bank has warned that a rupture of monetary union and Greek exit from the euro could have dramatic consequences, but insisted that it has enough powerful weapons to avert contagion. Mario Draghi, the ECB's president, said it would be far better for everybody if Greece recovers within EMU but made it clear that the currency bloc is no longer vulnerable to the immediate chain-reaction seen in earlier phases of the debt crisis. This sends an implicit message to the radical-Left Syriza government in Athens that it cannot hope to secure better terms from EMU creditors by threatening to unleash mayhem. "We have enough instruments at this point of time, the OMT (bond-buying plan), QE, and so on, which though designed for other purposes could certainly be used in a crisis if needed," said Mr Draghi, speaking after a series of tense meetings at the International Monetary Fund. "We are better equipped than we were in 2012, 2011."

Talks with Greece have gained momentum but still long way from target - IMF (Reuters) - Global lenders' negotiations with Greece, which have been moving at a crawl recently, have gained some momentum but remained a long way from the finish line, the International Monetary Fund's European head told a German newspaper. Athens has been stuck in negotiations with its euro zone partners and the IMF over economic reforms required by its lenders to unlock remaining bailout funds. "There has been a little bit more impetus in the negotiations between the three institutions and the Greek government for several days," business daily Handelsblatt on Monday quoted Poul Thomsen as saying, referring to the European Commission, the European Central Bank and the IMF. "That's a good development and gives us reason to hope," said Thomsen, the director of the IMF's European department and head of its programme with Greece. But he added that they remained "far from the target" and a lot more impetus was needed in the talks for an agreement to be reached in time. Shut out of bond markets and running out of cash to meet debt repayments and pay civil servants and pensions, Athens may get more aid from both the IMF and euro zone governments if there is agreement on reforms to make its finances sustainable and the economy more competitive. Thomsen said the Greek government's finances would perhaps last until June: "The burden of repayments which are coming up for Greece is very big. We need to reach an agreement beforehand so that further assistance loans can be paid out."

Greece's Varoufakis warns of Grexit contagion (Reuters) - Greece's Finance Minister Yanis Varoufakis said in an interview broadcast on Sunday that if Greece were to leave the euro zone, there would be an inevitable contagion effect. "Anyone who toys with the idea of cutting off bits of the euro zone hoping the rest will survive is playing with fire," he told La Sexta, a Spanish TV channel, in an interview recorded 10 days ago. "Some claim that the rest of Europe has been ring-fenced from Greece and that the ECB has tools at its disposal to amputate Greece, if need be, cauterize the wound and allow the rest of euro zone to carry on." "I very much doubt that that is the case. Not just because of Greece but for any part of the union," he said, speaking in English. "Once the idea enters peoples' minds that monetary union is not forever, speculation begins ... who's next? That question is the solvent of any monetary union. Sooner or later it's going to start raising interest rates, political tensions, capital flight." His comments were recorded before those of Mario Draghi, the European Central Bank's president, who this weekend said the euro zone was better equipped than it had been in the past to deal with a new Greek crisis but warned of uncharted waters if the situation deteriorates.

Grexit worries, ECB buying crush euro zone bond yields, Germany near zero (Reuters) - German 10-year borrowing costs resumed a fall towards zero on Monday, with worries about Greece exiting the euro zone increasing demand for top-rated assets and with the ECB's bond-buying programme quashes yields. Yields were vanishing across the euro zone. Belgium became the sixth euro zone country to sell five-year bonds at a negative yield after Finland, Germany, Austria, the Netherlands and France. Demand was 1.68 times the offer, despite the average yield being minus 0.056 percent. Athens has been stuck in negotiations with its euro zone partners and the International Monetary Fund over economic reforms required to unlock remaining bailout funds. IMF European chief Poul Thomsen told German newspaper Handelsblatt talks have gained momentum but are still a long way from the finish line. Greece's Finance Minister Yanis Varoufakis said on Sunday that if Athens were to leave the euro zone, there would be an inevitable contagion effect. German 10-year Bund yields fell 1 basis point to 0.07 percent, having fallen as low as 0.05 percent on Friday. They have fallen 8 basis points in the past week.

Greece orders raid on government coffers as cash dwindles - Telegraph: The Greek government has ordered a mandatory transfer of cash reserves from state-owned enterprises to its central bank, in a desperate bid to gather enough cash to remain solvent. Citing "extremely urgent and unforeseen needs”, the government issued the emergency decree which will also apply to all local government bodies. The move comes as Athens' cash crisis degenerates with every passing day. Even the most conservative estimates calculate the government's coffers will run dry in a matter of weeks. Despite the risk of violating its fiduciary obligations, the decree could now help the government meet its monthly €1.7bn wage and pension bill, averting a default on its own citizenry. It is thought the confiscation of reserves held in commercial banks to the Bank of Greece could generate as much as €2bn. "Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece," said the presidential decree. The move saw yields on Greek government bonds continue their recent ascent, with the country's three-year bonds spiking to 28pc - the highest level since Greece was forced into a debt restructuring in 2012.

Tsipras to Seize Public-Sector Funds to Keep Greece Afloat - Running out of options to keep his country afloat, Greek Prime Minister Alexis Tsipras ordered local governments to move their funds to the central bank. "Central government entities are obliged to deposit their cash reserves and transfer their term deposit funds to their accounts at the Bank of Greece,” according to the decree issued Monday on a government website. The “regulation is submitted due to extremely urgent and unforeseen needs." Credit-default swaps suggested about an 81 percent chance of Greece being unable to repay its debt in five years, compared with about 67 percent at the start of March, according to CMA data.  The move is a sign of the “dire liquidity situation for the Greek financial system as the government pools all liquidity available,” said Gianluca Ziglio, executive director of fixed-income research at Sunrise Brokers LLP in London. The “next step may be forcing all public-sector entities, including public-sector companies to do the same,” he said. Greek officials, including Deputy Prime Minister Yannis Dragasakis, remained defiant over the weekend, saying the government won’t betray its electoral promises and worsen the pain that came from previous austerity measures.

Stunned Greeks React To Initial Capital Controls And The "Decree To Confiscate Reserves", And They Are Not Happy -- Several hours after the Greek government decreed the confiscation of local government reserves, this order has finally percolated among the population, and the response to what even ordinary Greeks realize is now the endgame, is less than exuberant. Bloomberg reports, that "as Greece struggles to find cash to stay afloat, local authorities say they oppose a government decision to use their reserves for short-term financing." “The government’s decision to seize our reserves not only raises legal and constitutional issues, but also a moral one,” said George Papanikolaou, mayor of Glyfada, the third-largest municipality in the metropolitan region of Attica after Athens and Piraeus. “We have a responsibility to serve our citizens."  Glyfada has about 16 million euros in cash reserves, he said. George is unhappy because as recently as tomorrow, he will find there is precisely zero euros in his public bank account, as all the money has now been forcibly sequestered by the government in order to repay future Troika, pardon, IMF obligations.

Greece on the Brink, by Paul Krugman -- At the end of 2009 Greece faced a crisis driven by two factors: High debt, and inflated costs and prices that left the country uncompetitive.  Europe responded with loans that kept the cash flowing, but only on condition that Greece pursue extremely painful policies. These included spending cuts and tax hikes that, if imposed on the United States, would amount to $3 trillion a year. There were also wage cuts on a scale that’s hard to fathom, with average wages down 25 percent from their peak.  Can Greek exit from the euro be avoided? Yes, it can. The irony of Syriza’s victory is that it came just at the point when a workable compromise should be possible. ... By late 2014 Greece had managed to eke out a small “primary” budget surplus... That’s all that creditors can reasonably demand... Meanwhile, all those wage cuts have made Greece competitive on world markets — or would ... if some stability can be restored. The shape of a deal is therefore clear: basically, a standstill on further austerity, with Greece agreeing to make significant but not ever-growing payments to its creditors. Such a deal would set the stage for economic recovery, perhaps slow at the start, but finally offering some hope.  But right now that deal doesn’t seem to be coming together..., creditors are demanding things — big cuts in pensions and public employment — that a newly elected government of the left simply can’t agree to, as opposed to reforms like an improvement in tax enforcement that it can.

Despite Urges And Threats, Greece Remains Defiant, Won't "Budge On Red Lines" Even As Russia Denies Gas Deal -- Hopes ran high among Europe's unelected bureaucratic oligarchy and the Troika of official creditors that the Greek government, after the ECB openly dropped hints of a Greek IOU currency in the immediate future, would finally relent over the weekend and admit that all of its promises to its voters were a lie and that the Tsipras government would finally pick up where the Samaras government left (and was booted) off. There was even a perfect venue: Washington D.C., where Varoufakis and Obama met for the first time just hours before. The hopes were promptly dashed after Greece, once again, said it would not "renege on election pledges to end austerity measures as creditors pressed for a compromise."

Greece Endgame Nears -  Yves Smith  - Despite the market jitters of last Friday, which were triggered in part by the recognition that the odds of Greece reaching a deal with its creditors are far lower than had been widely assumed, Greek-related coverage has ratcheted down, even as Greece seems certain not to get any funds released in the April 24 Eurogroup meeting and is very likely to miss the end of April deadline for getting its reforms approved by the Troika and Eurogroup. Per a Bloomberg story yesterday: Greece and its creditors remained at loggerheads with time running out to unlock aid and avert a default. The sides haven’t even set 2015 budget targets, let alone on policies to meet them, an official representing creditors said Monday, asking not to be named as talks aren’t public. Euro-area finance ministers said in February that a list of measures must be agreed upon by the end of April. In keeping, Mohamed El-Erian said yesterday in a Bloomberg column yesterday pegged the odds of a “Grexident” at 45% (although El-Erian also conflated a default with a Greek exit, when we have pointed out the first does not necessarily mean the latter; given that the Greek government wants to remain in the Eurozone, it would be the ECB that would be the one to force a de facto Grexit by cutting off its bank system life support, the ELA). Greece’s lenders seem willing to continue pushing Greece into submission negotiating past the old drop-dead date. But the official enforcers have gotten even firmer in their position: Greece must do its homework, as in prepare detailed reforms, and has to hew closely to the existing structural reforms. Christine Lagarde of the IMF last week increased the pressure by saying it would not give Greece a grace period on its payments coming due, as some had hoped.

Slovenia Insists on Greece Honouring Its Commitments and Fair Attitude: Slovenia will insist on Greece repaying its debts and pressing on with reforms, Finance Minister Dušan Mramor said as he arrived for a meeting of the Eurogroup in Brussels on Monday.  He criticised the Greek government for turning only to "some big countries, while simply bypassing Slovenia" in a bid to reach a compromise. Slovenia was among the countries that showed greatest solidarity with Greece in its difficult years, for which it had greatly itself to blame, Marmor said coming for a meeting in which euro finance ministers will try to reach a compromise on aid to Greece after the current package expires at the end of the month. He said that Slovenia's exposure to Greek debt is the third largest after Portugal and Cyprus in terms GDP. "Our exposure to Greece is 2.7% of GDP, which was in a year after we had a 8% fall in GDP and when we had to slash pay and economise in all areas." This is why Slovenia will insist on Greece continuing with the restructuring and continuing to meet its obligations to Slovenia as well as international institutions, Mramor said.

Golden Dawn leaders snub court as criminal trial begins: The leaders of Greece's far-right Golden Dawn party refused to show up at court on Monday at the start of a landmark trial in which the elected politicians are accused of forming a criminal gang. The trial was adjourned soon after starting. It will convene again on May 7 and is expected to drag on for months. If found guilty, the defendants face up to 20 years in prison. Party leader Nikos Mihaloliakos and over a dozen top figures were arrested in 2013, weeks after the stabbing of anti-racism rapper Pavlos Fissas by a party supporter. They have been charged based on evidence linking Golden Dawn with a string of attacks, including the stabbing of Fissas and the killing of an immigrant the following year. The politicians deny the charges. Large numbers of witnesses, lawyers, journalists and dozens of police packed the rowdy courtroom inside the heavily guarded Korydallos prison, near Athens. Dressed in a cream-colored suit, Giorgos Roupakias, who confessed to the stabbing, was led in handcuffed. But Mihaloliakos and the party's senior officials were absent and represented by their lawyers. A total of 69 people will be tried, including all of the 18 lawmakers Golden Dawn had in the previous parliament, which was dissolved for a Jan. 25 snap election.

As Gazprom CEO Arrives In Athens, EU (Coincidentally) Files Anti-Trust Charges Against Russian Giant -- As the head of Russian gas giant Gazprom, Alexei Miller, arrives in Athens tomorrow (for talks with Greek PM Tsipras about "current energy issues of interest," which we suspect will include finalizing the "Turkish Stream" pipeline heralded by many as Greece's potential get-out-of-Troika-jail-card), he will face an increasingly anxious European Union. Fresh from its suit against Google, the WSJ reports, the EU's competition regulator plans to file formal antitrust charges against Russia’s state-owned gas company OAO Gazprom on Wednesday. This re-opens a suit from 2012 saying that it suspected the company of abusing its dominant position in those countries’ natural-gas supply. It appears Europe is getting nervous...

Greek deal could take weeks: Dijsselbloem -- Greece and its international creditors are making progress in negotiations on the country's bailout program, although it could take weeks before a deal is reached, Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, said Tuesday. "I see more progress in the negotiations," Mr Dijsselbloem said in an interview with Dutch broadcaster RTLZ. Mr Dijsselbloem said Greece is "running out of money" and that negotiations cannot drag on for too long. "We have to reach agreement in the coming weeks," he said. Greece needs a deal to secure billions of euros in bailout aid to avoid defaulting on its debt and potentially leaving the euro. But the overhauls that creditors want could destabilise the government of radical-left Prime Minister Alexis Tsipras. Meanwhile, European Commission President Jean-Claude Juncker on Tuesday said Greece needs to step up its efforts in its negotiations to reach a deal with its international creditor. While the intensity of the talks has increased over the last few days, "the efforts haven't reached a point that would allow us to bring the talks to a positive end," said Mr Juncker at a news conference after meeting the Austrian Vice-Chancellor and Economics Minister Reinhold Mitterlehner.

On Greece, Europe Bluffs Itself - Greece’s new leader and his ministers are behaving like fools in their debt showdown with the European union. So claims much of the punditry and you won’t find an argument here. They’ve taunted Germany about war reparations, threatened to open their borders to jihadists trying to enter Europe and cozied up to Vladimir Putin.They also haven’t presented a compelling alternative plan for Greece’s recovery because, as socialists, they must oppose many things that would do the Greek economy long-term good, such as privatization and deregulation. “There will not be the slightest privatization in the country, particularly of strategic sectors of the economy,” says a key member of the government. Greece’s coalition is a collection of individual pols thrown together with little experience of government; there’s no reason to believe they are pursuing a coherent strategy and aren’t just trying to maximize their own career advantages. But they certainly have been acting as if they believe the European Union is bluffing and will ultimately write them a blank check to keep Greece in the eurozone. Europe is not bluffing, the media tell us, because European leaders believe the eurozone would survive quite nicely a Greek departure. There would be no contagion. France and Spain might even welcome a Greek departure as a warning to their own emerging radical parties. A Greek meltdown might be a fillip to Europe’s long-stalled competitive reforms. But what if Europe is wrong? Contagion can take many forms. The European Central Bank can offer itself as a perfect substitute for private investors refusing to buy the bonds of EU governments. But it can’t substitute for the failure of private investors to take risks and build businesses. It can’t substitute for private capital flight. It can’t substitute for Europe’s ambitious young people fleeing to London or New York or Silicon Valley.

The IMF’s Big Greek Mistake -- The Greek government’s mounting financial woes are leading it to contemplate the previously unthinkable: defaulting on a loan from the International Monetary Fund. Instead of demanding repayment and further austerity, the IMF should recognize its responsibility for the country’s predicament and forgive much of the debt. Greece’s onerous obligations to the IMF, the European Central Bank and European governments can be traced back to April 2010, when they made a fateful mistake. Instead of allowing Greece to default on its insurmountable debts to private creditors, they chose to lend it the money to pay in full. At the time, many called for immediately “restructuring” of privately-held debt, thus imposing losses on the banks and investors who had lent money to Greece. Among them were several members of the IMF’s Board and Karl Otto Pohl, a former president of the Bundesbank and a key architect of the euro. The IMF and European authorities responded that restructuring would cause global financial mayhem. As Pohl candidly noted, that was merely a cover for bailing out German and French banks, which had been among the largest enablers of Greek profligacy. Ultimately, the authorities’ approach merely replaced one problem with another: IMF and official European loans were used to repay private creditors. Thus, despite a belated restructuring in 2012, Greece’s obligations remain unbearable — only now they are owed almost entirely to official creditors. Five years after the crisis started, government debt has jumped from 130 percent of gross domestic product to nearly 180 percent. Meanwhile, a deep economic slump and deflation have severely impaired the government’s ability to repay

There Will Be ‘Some Kind of Greek Default,’ Former U.K. Finance Chief Says - Greece should never have joined the euro and will most likely default, according to a former United Kingdom government finance chief. In an interview with The Wall Street Journal, Lord Nigel Lawson, who was chancellor of the exchequer in the government led by Margaret Thatcher, a role roughly equivalent to U.S. Treasury Secretary, said “There is a game of chicken going on” between the Germans and the Greeks.  He thinks the Greeks simply will refuse to reform their economy the way the Germans desire because they believe the German’s will eventually “flinch.” Likewise, he said the German’s expect the Greeks to succumb to their demands. Mr. Lawson, who opposed the early proposals for Britain to join the European single currency, says there will “be some kind of Greek default” although it may be given a polite name. Eventually that default will “probably” lead to Greece leaving the monetary union, he explained. He contends that Greece never qualified to be part of the Eurozone and only got in by getting U.S. investment bank Goldman Sachs to “cook their [national] accounts,” to make it look as though the beleaguered country complied with the fiscal mandates of membership. However, he says the main problem is the way the Greek economy works citing intense corruption, and a failure to collect taxes. He said: “it’s not a model for anyone to emulate.” Mr. Lawson added that he has long been an opponent of the single European currency and said the best solution for the currency area was an “orderly dissolution” of the euro, but that such an event wouldn’t happen quickly.

Gazprom CEO Visits Athens and Guarantees Gas Transit Through Greece -- Colossal Russian energy company Gazprom chief Alexei Miller said his country guarantees annual supplies of up to 47 billion cubic meters of natural gas to Central Europe through transit infrastructure to be constructed in Greece. “The Greek government is supporting the project involving construction of gas transit infrastructure from the border with Turkey, which could be implemented by a Russian-European consortium,” Miller told reporters following a meeting with the Greek Prime Minister Alexis Tsipras earlier today. “The Russian side, Gazprom, guarantees that up to 47 billion cubic meters of natural gas will be transported through the Greek territory. There is no doubt that the Russian-European consortium will be able to attract the two billion euros in financing necessary to build this infrastructure,” the Russian company CEO explained, adding that the pipeline will be implemented in strict accordance with European law. On his behalf, Greek Energy Minister Panagiotis Lafazanis expressed the certainty that Moscow and Athens will soon sign an agreement on gas pipeline cooperation. “No agreements were signed today… Russia and Greece will sign an agreement on the pipeline construction soon,” Lafazanis said. Moreover, as the Energy Minister noted, the talks with the company’s chief were constructive, adding that “Greece is interested in building the pipeline because it will benefit a lot from it.”

ECB Prepares To Sacrifice Greek Banks With 50% Collateral Haircut -- In what seems like a coincidental retaliation for Greece's pivot to Russia (and following Greece's initiation of capital controls), the supposedly independent European Central Bank has decided suddenly that - after dishing out €74 billion of emergency liquidity to the Greek National Bank to fund its banks - as The NY Times reports, the value of the collateral that Greek banks post at their own central bank to secure these loans be reduced by as much as 50%, and the haircut scould increase if negotiations with Europe remain at an impasse. As we detailed earlier, this is about as worst-case-scenario for Greece as is 'diplomatically' possible currently, and highlights an increasingly hard line by The ECB toward The Greeks as the move will leave banks hard-pressed to survive.

Greece buys six weeks’ space with order transferring city funds: Greek officials expect an order that local governments transfer funds to the central bank will keep the country afloat until the end of May as European policy makers turn up the heat on Prime Minister Alexis Tsipras. Municipalities’ reserves are estimated at about 1.5 billion euros ($1.6 billion), according to a person familiar with the matter, who spoke on condition of anonymity. Officials in Athens ruled out also seizing pension funds and the cash reserves of state companies because there wasn’t a need and the move would unnecessarily fuel anxiety, the person said. With bailout talks stalled, access to cash is becoming increasingly critical. Resistance at the European Central Bank to further aiding the country’s stricken lenders is growing and the ECB is studying measures to rein in emergency funding for Greek banks, people with knowledge of the discussions said. “A bigger effort by the Greek side is needed so that we can close the topic in the interest of both sides,” European Commission President Jean-Claude Juncker said in Vienna. “The intensity of the talks has increased in the past 4-5 days but not to the extent that they are ripe enough to come to a quick conclusion.” Tsipras may meet with German Chancellor Angela Merkel on the sidelines of a European Union summit in Brussels on April 23, a Greek government official said Tuesday.

‘Time Is Running Out’ in Greek Bailout Talks, Says Mario Draghi -- The president of the European Central Bank said Friday that time was running short in negotiations on Greece’s bailout and warned that the uncertainty was hurting the country’s banks. “Time is running out,” Mario Draghi said after a meeting with eurozone finance ministers in the Latvian capital, Riga. “Speed is of the essence.”   Asked how much longer the ECB would allow Greek banks to get emergency liquidity from the Greek central bank, Mr. Draghi said that such loans would be supplied as long as the banks were solvent. He also pointed out that the current situation—and high interest rates on Greece’s debts—were making it more difficult for Greek banks to find the assets they need to post in return for these loans. “The higher is the volatility, the more collateral gets destroyed,” Mr. Draghi said. The ECB already stopped accepting Greek debt as collateral in its own liquidity operations in February and Greek banks have been relying on more-expensive lending from the Greek central bank. In recent days, speculation has mounted on whether the ECB would require steeper discounts, or haircuts, on Greek assets. Mr. Draghi also took a swipe at the way the Greek government has been conducting negotiations on overhauls it plans to take in return for continued aid from the eurozone and the International Monetary Fund.

The Greek People Just Destroyed Syriza’s Strategy --Wolf Richter - Greek stocks ventured deeper into purgatory. Then word spread that the ECB had raised the cap on the Emergency Liquidity Assistance for Greek banks by €1.5 billion to €75.5 billion. It’s the oxygen line for Greek banks. Without it, they’re toast.  The ELA provides the liquidity so that the Greeks can continue yanking their beloved euros out of their banks to stash them elsewhere before their desperate government confiscates them. The government, under the cool leadership of Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, is already confiscating €2.5 billion in “idle” cash that state agencies, state-owned enterprises, and local governments kept at commercial banks, the same banks that the ELA is propping up and that the Greeks are fleeing. Now these entities have to transfer the money to the central bank so that the government can “borrow” it for other purposes. When word got out that ELA money could continue to flow to the banks for a little while longer, the dreadfully beaten-down FTSE Athens Banks index jumped over 11%. Greek 2-year yields and 3-year yields, unlike their Eurozone brethren that are blissfully bathing in the negative, jumped to nearly 30%. The 5-year default probability is approaching 90%. In short, the Greek financial markets are kissing the euro goodbye.  But the Greeks themselves love their euro. Enough of them believed the Syriza’s promises to sweep them into power. Now their choice is conflicting with their love for the euro. And by the looks of it, they’d rather hang on to the euro than the Syriza. The sticking point to getting further bailout money from taxpayers of other countries, mostly those in Germany and France but elsewhere as well, is that Greece is playing game theory and is trying to elevate its extortion racket to a fine art, instead of trying to work out a deal that the taxpayers of those donor countries can live with.

Greece Talks With Eurogroup Hit “Complete Breakdown” - - Yves Smith -- Today, an important date came and went. Friday was a Eurogroup meeting. There had been a dim hope that Greece and the Troika would make enough progress and have had agreed or largely agreed on the structural reforms that the Eurogroup could conceivably have approved the release of the so-called bailout funds. But instead, the regularly scheduled meeting took place with a deal on the structural reforms still looking remote. As a fallback, the Eurogroup wanted to hear about what progress Greece had made, presumably with a goal of reaching an agreement by the next Eurogroup meeting on May 11 (note that this will be after Greece has two more IMF payments to make, and it’s already under great stress to find the funds). The conversation got ugly, as if the other ministers wanted to pick up Varoufakis by his lapels and shake him. It reads like a divorce, when partners keep having to deal with each other when they’ve decided emotionally that they are done with each other.  Mind you, the Eurogroup is not necessarily the final arbiter; Tsipras has pinned his hopes on Merkel being committed to not having the Eurozone break up and having enough clout to force the others to heel. But any of the Eurozone members could stymie a deal around the bailout; it takes the approval of all members to release the monies. And the IMF and the ECB are not happy with Greece either.  Here is a sample of media reports. From the Guardian: Eurozone finance ministers have blasted Greece for failing to make more progress towards a bailout deal, at an acrimonious eurogroup meeting in Riga today. Ministers laid into Greek finance minister Yanis Varoufakis for not having reached agreement with creditors, two months after being given a four month extension to Greece’s loan programme…Dijsselbloem also warned that it is very hard to consider a new programme for Greece to cover its funding needs beyond June, given the lack of progress recently. And he ruled out giving Greece a slice of the €7.2bn bailout cash that is being held back until reforms are agreed. ECB president Mario Draghi also showed exasperation over the slow pace, and warned that the ECB could potentially impose tougher conditions in return for keeping Greek banks afloat.

"Greece Can No Longer Withstand The Waves Of Desperate People Arriving From War Zones" -- This is an open letter I received from a group of 57 Greek intellectuals, addressed to the EU and America, concerning the waves of refugees (migrants, immigrants) that ‘wash ashore’ on Greek territory in increasing numbers. We all know by now to what extent Europe has dropped the ball on the issue, and I’ll have much more to say on that soon. I thought it would be a good and respectful idea to let this letter stand on its own, and on its own merit. The number of refugees trying to make it to Greece was estimated at 30,000 in 2014. It’s certain to be a multiple of that this year. The EU may quote numbers like 150,000 for all of southern Europe for 2015, but in real life it will easily be over 500,000. The EU has no idea what it’s doing, what it’s up against, or what to do next. Brussels figured if it would just close its eyes, the problem would go away. And even today, after almost 1000 victims drowned last weekend, passing the buck to its weakest member nations is apparently still too tempting an opportunity to resist.

Sweden scraps plan for new mortgage rules - Unlike in many countries, Swedish homeowners often never repay the full amount of money they borrow from banks or building societies – a process known as amortization – with many only paying off the interest earned. In a move designed to stabilize the country's economy and housing bubble, financial watchdog Finansinspektionen (FI) – which sets the rules and regulations followed by mortgage brokers in Sweden – put forward a new strategy last year to make it obligatory for all house buyers to repay their mortgages in part. Under the original plans, customers would have been asked to pay two percent of the value of their mortgage every year until they had repaid 30 percent of the loan. They would then have been required to pay at least one percent a year until they hit the 50-percent mark. But the watchdog backtracked after an administrative court of appeal in Jönköping in southern Sweden suggested that the proposed changes were not supported by Swedish law.Mortgages account for 95 percent of Swedes' total debt, and borrowers currently hold a mortgage debt 3.7 times higher than their annual income. A study by Sweden's central bank in 2014 suggested that most Swedes with mortgages would die before repaying their debts.  FI said that it still took the view that mandatory mortgage repayment is needed to prevent the Swedish housing bubble from bursting and added that it would be prepared to carry out the changes if directed by the government and parliament.

Spain's Unemployment Rate Increases to 23.7%; 114,300 Jobs Vanish in First Quarter, Public Sector Jobs Rise  -The economic recovery in Spain has gone from jobless to jobloss. Spain shed 114,300 jobs in the first quarter of 2015. Via translation from El Pais, Spain's Unemployment Rate Rose Slightly in the First Quarter. The economic recovery has not been enough to create jobs. In the first three months of the year, the economy shed 114,300 jobs. The result has been a slight increase in the unemployment rate from 23.7% to 23.78% according to the Labour Force Survey (EPA) published by the National Employment Institute. The rise in unemployment could have been higher if not for the significant decline in the labor force. This group has fallen by 127,400 people to 22.9 million. As was the case in the previous quarter, again, the labor kick is a decline in private employment (143,500), since the public has grown to 29,200 jobs.

BOE Sees Little Sign Lowflation Threatens Spending - Bank of England officials have sent a couple of new signals about the prospects for inflation in the U.K., but still seem a long way from raising interest rates. Minutes of officials’ April policy meeting, published Wednesday, were terse and to-the-point, running to only eight pages. The minutes usually run to something closer to 12 and are occasionally much longer. But they offered investors a few interesting nuggets: First, officials have decided they probably don’t need to worry that the recent spell of zero inflation in the U.K. will morph into a sustained fall in prices and hit spending. Central banks fret that falling prices prompt consumers to delay purchases but the BOE said it sees little chance of that in the U.K. Second, officials have honed in on two things in particular when judging the outlook for inflation: The exchange rate and wages. Wage growth is still sluggish despite a sharp fall in unemployment and a buoyant economy. Officials reckon wage growth will have to speed up if they are to hit their 2% inflation target by early 2017 as expected. On the flipside, officials said it’s possible a period of cheap imports from a strong pound is coming to an end. Imported goods prices are beginning to rise, which could cause a faster-than-expected rise in inflation next year once the effects of lower oil prices fade. Third, the BOE sees news from the global economy as mixed. They were cheered by the pickup in the eurozone but disappointed by growth in the U.S. and China. In all, the BOE seems calm as officials wait for clearer signs on where price pressures are coming from. Investors doubt the central bank will raise interest rates until mid-2016.