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

Saturday, April 11, 2015

week ending Apr 11

Fed watching recent U.S. weakness; rate-hike timing unclear: Dudley (Reuters) - The timing of the Federal Reserve's interest rate hike, which would be its first in nearly a decade, is unclear and for now policymakers must watch that the U.S. economy's surprising recent weakness does not signal a more substantial slowdown, a top Fed official said on Monday. New York Fed President William Dudley's comments were the latest sign that a string of disappointing economic data, including a sharp drop in jobs growth last month, is derailing a Fed plan to tighten monetary policy around mid-year after more than six years of rock-bottom rates. In relatively dovish remarks to a business audience in Newark, New Jersey, Dudley did not repeat his refrain that a rate hike could reasonably be expected to come by mid-2015. He said the weak March jobs report, as well as softer than expected manufacturing and retail sales data in recent months, likely reflected "temporary factors to a significant degree," including the harsh winter in much of the United States. But, he added, the U.S. central bank will need to "determine whether the softness in the March labor market report ... foreshadows a more substantial slowing in the labor market than I currently anticipate." The job market had been a lone bright spot in the world's largest economy. But it has ebbed and then slowed sharply last month, reinforcing the notion the Fed would delay an initial rate hike until later in 2015 or even 2016.

Dudley: Rate-Rise Timing Data-Dependent, Uncertain in Nature - As the Federal Reserve watches economic developments in considering when best to raise rates, how financial markets respond will be just as important in determining the policy path, a top U.S. central bank official said Monday. “How fast the normalization process will proceed depends mainly on two factors: how the economy evolves and how financial market conditions respond to movements in the federal funds rate,” said William Dudley, president of the Federal Reserve Bank of New York, speaking at the New Jersey Performing Arts Center in Newark, N.J. While Mr. Dudley said he expects the Fed’s rate increases to follow a “shallow” path, he added that reaction in the short-term rates market could alter that process. If short-term rates stay low, the Fed may have to lift the policy rate more quickly to “exert some restraint on financial market conditions,” he said. If short-term rates respond by rising quickly, as they did during the “taper tantrum” in 2013, the Fed could slow down the rate-increase process, or even pause. Mr. Dudley acknowledged that it’s unclear exactly how the eventual tightening will affect assets of portfolios and financial-market assets, but noted that investors’ portfolios are usually a mix of stocks and bonds and that a stronger economy can also provide support to equities. For now, the official sees the policy rate’s longer-term resting place at around 3.5%, but admits there is plenty of uncertainty around his estimate.

Fed’s Dudley signals go-slow approach to rate hike -  — New York Federal Reserve President William Dudley on Monday said the economy should speed up soon after a first-quarter slowdown that he blames partly on bad weather. But he also offered caveats that leave plenty of room for doubt and suggested the Fed won’t raise interest rates at least until September. In a speech in New Jersey, Dudley said he expects U.S. growth to slow to 1% in the first quarter from 2.2% in the final three months of 2014. He pointed to a string of soft economic reports, including a mediocre 126,000 increase in U.S. jobs in March that was only half as large as Wall Street expected. The latest batch of weak data reflects a U.S. recovery that has been “disappointing compared to historical patterns,” Dudley said. Dudley attributed the recent slowdown mainly to three factors: harsh weather, a stronger dollar and the negative effects of cheap oil on the vibrant U.S. energy industry. By looking at the amount of snow and the population of the areas affected, New York Fed researchers found that the weather in January and February was 20% to 25% “more severe” than the five-year average, Dudley said. A 15% spike in the value of the dollar since last year, meanwhile, poses “another significant shock” to the economy by making U.S. exports more expensive, he said.

Dudley: Weak Data Sets Higher Hurdle for June Rate Hike - The recent string of disappointing U.S. economic data is setting the bar higher for the Federal Reserve to begin raising rates this June, a top Fed official said Wednesday. “If you look at the broad set of data that we’ve gotten in recent months, data has very much surprised to the downside,” said William Dudley, president of the Federal Reserve Bank of New York, speaking at a Reuters Newsmaker event. “It’d be reasonable to think that the timing of the Fed’s first rate hike might be a little further off in time. I can imagine a situation where a June rate hike could still be in play….but obviously it’s a bigger hurdle because we’ve had a lot of weak data. Now you have to see sufficient data on the other side. Now the bar is a little higher.” Mr. Dudley, a voter on the Fed’s policy-setting board, pointed to still-subdued inflation and disappointing factory data, in addition to the weak March payrolls report, that have painted a downbeat picture of the U.S. economy lately. In a speech on Monday, the official estimated the economy expanded at an annual rate of just 1% in the first quarter.While the official didn’t take the possibility of a June interest-rate increase off the table, he noted that there are reasons the Fed would rather risk tightening policy too late than risk acting too early. “There are reasons to err on the side of being late than being early,” Mr. Dudley said. “If you have to reverse course, you’re back at the zero bound [for interest rates], and you will have lost some credibility in terms of monetary policy.” The central banker added that another reason to be cautious about raising rates is the large number of Americans who have been out of work for a long time. In the aftermath of such a severe financial crisis, he said, it is important to get those people back to work in the next few years before skills atrophy.

Kocherlakota: Fed Should Be ‘Extraordinarily Patient’ About Raising Rates - The Federal Reserve should be “extraordinarily patient” and hold off on raising interest rates until the second half of 2016, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Tuesday. The U.S. central bank “can only achieve its congressionally mandated price and employment goals by being extraordinarily patient in reducing the level of monetary accommodation,” Mr. Kocherlakota said  in remarks prepared for delivery in Bismarck, N.D. “Under my current outlook, I continue to believe that it would be a mistake to raise the target range for the fed funds rate in 2015.” Most Fed officials expect to begin raising interest rates in 2015 as the economy improves, though the precise timing of the first increase remains uncertain. But Mr. Kocherlakota, a vocal advocate for aggressive stimulus who is set to leave office in early 2016, has repeatedly argued against raising interest rates this year.In his remarks on Tuesday, he said it would be “appropriate” for the Fed to “defer the initial interest-rate increase until the second half of 2016,” and then raise the benchmark federal funds rate to roughly 2% by the end of 2017. That is a more gradual rise than most officials expect; in March, the median of policy makers’ projection for the fed-funds rate at the end of 2017 was 3.125%. The Fed’s legal mandate is to pursue maximum employment and price stability. Mr. Kocherlakota said he believes it will take several years for the Fed to achieve either goal. On the bright side, he said, the labor market’s “tremendous improvement” during 2014 defeated the idea that the economy was “trapped in some kind of dismal ‘new normal’ in the wake of the Great Recession.” But to return to the healthy job-market conditions seen in the prerecession year of 2006, Mr. Kocherlakota said it would take “at least three more years like 2014.”

No Fed rate hike needed until second half of 2016: Kocherlakota - The Federal Reserve should not raise interest rates until the second half of 2016 to allow the labor market to continue to strengthen, said Narayana Kocherlakota, the president of Minneapolis district branch of the U.S. central bank, on Tuesday. "In light of the outlook for unduly low employment and unduly low inflation, the [Fed] can be both late and slow in reducing the level of monetary accommodation," Kocherlakota said in a speech to the Chamber of Commerce in Bismarck, N.D. The Minneapolis Fed president said that while labor market conditions improved more in 2014 than they had in almost 20 years, the U.S. would need three more years of similar improvements for the job market to return to its pre-Great Recession levels. Kocherlakota, a leading dove on the central bank who is not a voting member this year and is retiring in 2016, said he did not see inflation rising sustainably above the Fed's 2% target until 2018 and added he did not see any material threat to financial stability that required any Fed rate hikes.

Fed’s Powell: Gradual Rate Increases Could Help Heal Lasting Damage From the Financial Crisis - The Federal Reserve remains on track to raise short-term interest rates this year, though the central bank should increase rates at a gradual pace to help the U.S. economy heal wounds left by the financial crisis, Fed governor Jerome Powell said Wednesday. “The financial crisis did significant damage to the productive capacity of our economy, and the damage was of a character, extent and duration that cannot be fully known today,” “And given this uncertainty, it’s even more difficult than usual to assess how much slack remains in the economy. It seems plausible that at least part of the supply-side damage could be reversed if the economy enjoys a period of sustained growth.” Most Fed policy makers, including Mr. Powell, expect to begin raising interest rates in 2015 as the economy improves, though the precise timing of the first increase remains uncertain. The central bank has signaled it could raise rates as soon as June. “The time is coming, and I do expect it will be this year,” he said following his speech.

A June rate rise can now surely be ruled out - US unemployment data are notoriously noisy. They are maddeningly prone to huge revisions, and many in the market complain that the monthly ritual of waiting for the Bureau of Labor Statistics to speak is an overblown anachronism. All that said, sadly there is ample reason to take seriously the April number on non-farm payrolls, the biggest negative surprise compared with market expectations since December 2009. This in turn has profound implications for the question that has preoccupied markets for months now: when will the Federal Reserve finally start to raise interest rates? A rise in June — still just possible given the rubric set out by Janet Yellen last month — can surely be ruled out. September is the earliest possible date, and now looks unlikely. Even that would require a clear-cut recovery over the spring and summer. The Fed wants to raise rates, but it is telling the truth when it says it is led by the data. As for the data, the unemployment numbers had looked isolated for months, with other figures painting a picture of far more muted US growth. Look, for example, at this month’s ISM supply managers’ survey of manufacturing. Data are available for many countries, and all are handily set with a scale where numbers above 50 indicate growth, and below it suggest recession. This allows direct comparisons. On that basis, the US is slowing sharply. At 58 late last year, it has now dropped to 51.5. That puts it behind Germany and the eurozone, and far behind the UK and Spain, with ISM numbers above 54. All of this suggests that the latest revisions in non-farm payrolls, which revised down previous estimates by 69,000 jobs, have left us with a more accurate picture of the US jobs market. That still leaves an unemployment rate of 5.5 per cent; a respectable number that does not require emergency-level low interest rates. But in combination with negligible inflation, and inflationary pressure from rising wages that still looks very weak, there is little compulsion to raise rates either.

Minutes of the Federal Open Market Committee, March 17-18, 2015 Board of Governors of the Federal Reserve System.

Fed Minutes: Officials Divided On Whether June Rate Increase Warranted - WSJ: Federal Reserve officials were divided at their March policy meeting on whether they might raise interest rates in June, and recent soft economic data could make a midyear move even less likely. Minutes of the Fed’s March 17-18 policy meeting, released by the central bank Wednesday with the regular three-week lag, showed some officials wavering about moving to raise credit costs too quickly. Inflation has been running below the Fed’s 2% objective for nearly three years and some officials saw this trend persisting, citing falling energy prices and a strong U.S. dollar, which lowers the cost of imported goods. While “several” officials thought June would be the right time to raise rates, others thought it would be better to wait longer and some thought the Fed might need to wait until 2016, the minutes said, without identifying the participants by name. The divisions could present a challenge for Fed Chairwoman Janet Yellen in the months ahead. She led officials to a unanimous vote in March to drop language in the Fed’s policy statement assuring the central bank would be “patient” before raising rates. The change effectively opened the door to rate increases by midyear. But tough decisions now loom about whether to move then. Since the March gathering, disappointing data have suggested the economy slowed in early 2015. Just Friday, the U.S. Labor Department reported hiring downshifted sharply in March and was less than previously estimated in January and February. This could push more officials into the camp of those who want to wait.

FOMC Minutes: Different Views on Timing - From the Fed: Minutes of the Federal Open Market Committee, March 17-18, 2015 . Excerpts: Participants expressed a range of views about how they would assess the outlook for inflation and when they might deem it appropriate to begin removing policy accommodation. It was noted that there were no simple criteria for such a judgment, and, in particular, that, in a context of progress toward maximum employment and reasonable confidence that inflation will move back to 2 percent over the medium term, the normalization process could be initiated prior to seeing increases in core price inflation or wage inflation. Further improvement in the labor market, a stabilization of energy prices, and a leveling out of the foreign exchange value of the dollar were all seen as helpful in establishing confidence that inflation would turn up. Several participants judged that the economic data and outlook were likely to warrant beginning normalization at the June meeting. However, others anticipated that the effects of energy price declines and the dollar's appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016. With regard to communications about the timing of the first increase in the target range for the federal funds rate, two participants thought that the Committee should seek to signal its policy intentions at the meeting before liftoff appeared likely, but two others judged that doing so would be inconsistent with a meeting-by-meeting approach.

FOMC Minutes Show Fed Doesn’t Know How to Unscramble the ZIRP Omelet - Wolf Richter - The minutes of the FOMC’s March meeting make clear just how hard it is for the Fed to even think about the possibility of unwinding what they’ve wrought. After six-plus years of interest-rate repression, absurdity has become the established norm. Now they can’t even figure out how to get out of it without bringing down the whole construct. They handed the fruits of their monetary policies to folks who bought assets with them. Assets values have skyrocketed, yields have plunged, and risks have disappeared from the calculus. You can still get run over by a car, but you can’t lose money in stocks or junk bonds. That’s the established norm. This stream of money created asset price inflation and funded the fracking boom, the tech bubble, and a million other things that produced a lot of supply. But demand remained lackluster because they didn’t hand this moolah to the folks who’d spend it on gadgets or food or gasoline, the folks who’d actually create demand. The economy languished, and consumer price inflation, though bad enough for consumers, remained mostly below the money printers’ lofty goals. Now the Fed is trying to figure out how to unscramble the omelet. Meanwhile the ECB and other central banks are adding to it, accomplishing an absurd feat: even the crappiest sovereign bonds – except those of Greece – are soaring, and yields are plunging, many of them into the negative. Then on Wednesday, a new thing happened: Switzerland sold 10-year government debt at a negative yield. They’d been selling debt at negative yields for a while, but with a 10-year maturity. No country had. Germany’s 10-year debt is following closely behind, yielding a still positive but practically invisible 0.15%. About €1.8 trillion in Eurozone sovereign bonds entice “investors” – if you can call them that – with negative yields, which now includes Spanish 6-month T-bills.

WSJ Survey: Economists Think Fed Will Wait Until September to Raise Rates - The Federal Reserve will likely start raising short-term interest rates in September, according to most private economists polled in recent days by The Wall Street Journal–a significant shift away from earlier predictions of liftoff in June. Some 65% of the economists in the latest survey expected a September rate increase, while just 18% saw the first move coming in June. Just a month earlier, economists were more evenly split, with 48% predicting a first rate rise in June while 38% expected it in September.  The latest survey was conducted Friday through Tuesday; 60 analysts offered predictions for the timing of the central bank’s initial rate increase. The Journal’s March survey came on the heels of a strong February jobs report. A few weeks later, the Fed opened the door to raising rates as soon as June by dropping its pledge to remain “patient.” But Fed Chairwoman Janet Yellen signaled caution was still the central bank’s watchword. “Just because we removed the word patient from the statement doesn’t mean we are going to be impatient,” Ms. Yellen told reporters on March 18. Then, in a March 27 speech, Ms. Yellen said the Fed would likely take a “gradualist approach” to raising interest rates.

Richmond Fed’s Lacker Reiterates He Sees Strong Case to Raise Rates in June -  Federal Reserve Bank of Richmond President Jeffrey Lacker reiterated Friday that he sees a strong case for the Fed to begin raising short-term interest rates this summer. “I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting,” Mr. Lacker said in remarks prepared for delivery in Sarasota, Fla. Friday’s speech was largely identical to Mr. Lacker’s March 31 remarks in Richmond, Va.The Fed has held its benchmark federal funds rate near zero since December 2008 to stimulate spending and the broader economy. Most officials at the central bank expect to begin raising rates sometime this year, though the precise timing of the first rate increase remains uncertain. Mr. Lacker, who is a voting member this year of the rate-setting Federal Open Market Committee, has been a longtime skeptic of the Fed’s easy money policies. He has repeatedly signaled that he favors raising rates at the June 16-17 policy meeting. He said Friday that he is “confident” sluggish U.S. inflation will pick up toward the Fed’s 2% annual target over time and said the labor market now is “well within the confidence bands of any reasonable estimate of ‘maximum employment’,” which is one of the Fed’s mandated goals, along with stable prices. “My own view is that, given what we know today, a strong case can be made that the federal funds rate should be higher than it is now,” he said. But the Fed already has said a rate increase is unlikely at the April 28-29 meeting, so June is “the first date at which the FOMC could raise the funds rate target without undermining its past communications,” he said. Some officials, however, favor holding off on rate increases until later in the year, according to minutes released Wednesday from the Fed’s March 17-18 policy meeting.

Minneapolis Fed’s Kocherlakota: Fed Shouldn’t Raise Rates in 2015 - The Federal Reserve should continue to support U.S. economic growth by waiting until the second half of 2016 to begin raising short-term interest rates, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Friday. “I think what people want to hear is prospects of higher wages, higher incomes. That’s what’s going to fuel their desire to spend, and thereby boost the economy and boost employment,” Mr. Kocherlakota said following a speech in Bloomington, Minn. But “raising interest rates is going to deter that spending,” he said. “It’s going to, on the margin, make it less attractive to borrow; on the margin, make it more attractive to save; on the margin, make it less attractive to spend. All these forces are going to drive the wrong way.” Most Fed officials expect to begin raising interest rates in 2015 as the economy improves, though the precise timing of the first increase remains uncertain. Federal Reserve Bank of Richmond President Jeffrey Lacker said earlier Friday that he sees a strong case for the Fed to begin raising rates this summer. “I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting,” Mr. Lacker said.

Big Question for Fed Is Not When, But How To Raise Rates -- Minutes released by the Federal Reserve of its March policy meeting were a reminder that the central bank could face real operational challenges when it decides to start raising short-term interest rates. As part of its bond-buying programs, the Fed has flooded the banking system with $2.7 trillion of funds known as reserves. Bank reserves are like a dollar in your pocket – they pay no interest. This abundance of funds is a giant weight keeping short-term interest rates near zero. When it comes time to raise interest rates the Fed will need to either a) eliminate those reserves or b) pay a higher interest rate than zero to private financial institutions in exchange for them. The Fed has chosen the latter route for the early stages of the rate hike cycle, but the minutes showed Fed officials are still struggling to define the tools they’ll use to pull this off. Paying higher rates to banks is simple since they have accounts with the Fed. But the reserves seep out of the banking system into other financial institutions like money market mutual funds and officials are reluctant to use a new instrument – overnight reverse repo trades – designed to manage rates outside of the banking system. Last September they set a $300 billion cap on these trades. In March they agreed they might need to ignore their own cap, according to the minutes. Fed officials also entertained ways to eliminate reserves more quickly than planned, including by selling some securities before they mature or allowing some to mature without reinvesting the proceeds. It is striking that they discussed new strategies for eliminating reserves at the March meeting. For months it had sounded like Fed officials were settled on their plans on this front – no asset sales and continued reinvestment of proceeds from maturing securities until after the Fed had already started raising rates. Now they don’t sound so sure about that strategy. ““A number of participants suggested that it would be useful to consider specific plans for these and other details of policy normalization under a range of post-liftoff scenarios,” the minutes said.

Fed to Temporarily Lift Cap on Reverse-Repo Program When Liftoff Arrives - Federal Reserve officials in March decided to expand the boundaries of a program they intend to use to control short-term interest rates once they start raising them, likely later this year. The overnight reverse repurchase agreement program is one of several tools the U.S. central bank will use to raise rates that have been pinned near zero since December 2008. Rather than cap the total activity at $300 billion per day, as previously planned, officials decided they might allow a higher limit, at least in early stages of rate increases, according to minutes of the March 17-18 Fed meeting, released Wednesday. In normal times, the Fed increases or reduces small amounts of reserves in the banking system to manage interest rates. Because it has flooded the system with trillions of dollars in reserves, it is using new instruments to manage rates. When it comes time to lift borrowing costs through the economy, Fed officials will raise the target range for their benchmark short-term interest rate, the federal funds rate, which is now set at zero to 0.25%. The Fed will use two other interest rates to set the ceiling and floor of that range. The top will be the interest rate the Fed pays to banks on reserves, the money they park at the central bank. The bottom will be the interest rate paid through the overnight reverse repo program. Through this program, the Fed pays interest to money market funds and other firms on money they temporarily exchange for central bank-owned securities.  Fed officials have been wary about making heavy use of the reverse-repo facility, which has been in testing since September 2013, because it is new and experimental and some worry it could become a source of financial instability.

QE may not have been worth the costs - One of the odd things about unconventional monetary policies is the absence of a vigorous debate about the costs of these experiments, whether in the US, in Japan or now in Europe.  A new report from Swiss Re is changing that. The report calculates that US savers alone have lost $470bn in interest rate income — and that is net of lower debt costs. Central bank policies involve “a whole host of unintended consequences; asset price bubbles, an impaired credit intermediation process and increasing economic inequality are just a few,” the report warns. The Swiss Re report comes at a time of rising concern among both insurers and managers of public pension funds that the benefits they promise to savers and retirees will be cut as a result of these policies. That is because they hold a significant part of their assets in fixed-income securities to match their long-term liabilities. Forgone yield income for insurers on both sides of the Atlantic could total $400bn, Swiss Re adds. Especially problematical are the guarantee products insurers offer, where rates on offer are still way above European government bond yields. Meanwhile the $9tn increase in households’ stock market wealth since 2008 “has predominantly benefited society’s wealthiest”, it adds. “Whether the increase in wealth has led to the so-called ‘wealth effect’ (ie impact on actual consumption) is questionable. There is no clear evidence of equity-related gains having translated into additional consumption and thus no real economic growth.” In other words, with wage gains still far short of expectation, and investment income falling, there is little hope that demand from the average household can recover any time soon. The report also comes when both the inability of these unconventional policies to heal the real economy and the difficulty of exiting without bringing a market swoon has never been more evident. Despite zero interest rates and massive asset purchases (albeit until recently in the case of the Fed), economic growth — expected to come in at 0.6 per cent annualised pace for the US and 1.5 per cent in Japan — remains weak. In the US, there has been “a wave of contractions in the three months through February in manufacturing output, real goods consumption export volumes and construction,” economists at JPMorgan noted.

BB and the Permahawks - Paul Krugman  - Ben Bernanke comes down firmly against the idea that concerns about financial instability should lead central banks to raise interest rates even in a depressed economy. Good — and I was especially pleased to see him citing the Swedish example and the Ignoring of Lars Svensson as a case study. One odd thing, however, is that I’m not at all sure that most people — even economists — would be able to figure out who, exactly, Bernanke is arguing with. And that is, I think, an important omission. We can and should have a pure economics debate about appropriate interest rate policy; but if we’re trying to understand the political economy — and we should, because this is about getting good decisions as well as good analysis — it is definitely relevant to note that the people making the financial stability argument for higher rates are permahawks, who keep coming up with new justifications for an unchanging policy demand. ... Anyway, I think Ben Bernanke did us a bit of a disservice by not linking to whoever it is he’s arguing with. It would help to know that John Taylor and the BIS are on the other side, because this would let readers place their position here in context with their other positions.

Do Not Fear the Shadow Chair - I don't think we need to worry about Ben Bernanke becoming a "shadow chairman." The blog is not as unprecedented as it might seem. Alan Greenspan and Paul Volcker both remain active public figures who not only comment on the economy, but also advocate particular policies. Greenspan has published several books since he was chairman, and Volcker has a think tank, the Volcker Alliance. Neither of them has become a shadow chair. We want our top thinkers going into public service at the Fed and other government agencies. These top thinkers place a high value on having a public voice, and the blogosphere is increasingly the forum for that. If serving precludes them from later participating in the public forum, we will have trouble attracting the best people to these roles in the future.  I think it is good to have a former Fed chair participating in a forum like a blog, which is freely available to the public and fosters debate. It is also a good thing if this blog brings more attention to the Fed and how it pursues its mandate. Since Fed officials are not elected, the Fed needs to be accountable to the public in other ways, and accountability requires that people are aware of the Fed and really thinking about and challenging its actions. In my dissertation I show that this is not currently the case-- people don't understand the Fed enough to be able to hold it accountable. I argue that the Fed needs a strong new media strategy as part of their communication strategy. If former Fed officials make their opinions public, the public will likely put more pressure on current officials to respond and explain their own views and any differences of opinion. This increases accountability. The Fed also claims to place high value on transparency, which is a change from the central banking philosophy several decades ago, so they should be glad that people formerly at the Fed are trying to explain their thinking in a clear way that helps people understand.

The Inbred Bernanke-Summers Debate On Secular Stagnation -- Steve Keen -- Ben Bernanke has recently started blogging (and tweeting), and his opening topics were why interest rates are so low around the world, and a critique of Larry Summers’ “secular stagnation” explanation for this phenomenon, and for persistent low growth since the financial crisis. Summers then replied to Bernanke’s argument, and a debate was on.So who is right: Bernanke who argues that the cause is a “global savings glut”, or Summers who argues that the cause is a slowdown in population growth, combined with a dearth of profitable investment opportunities, not only now but for the foreseeable future? I’d argue both of them, and neither simultaneously—both, because they can both point to empirical data that support their case; neither, because they are only putting forward explanations that are consistent with their largely shared view of how the economy works. And the extent to which they are the product of a single way of thinking about the world simply cannot be exaggerated. It goes well beyond merely belonging to the same school of thought within economics or even the same sect within this school. Far beyond.  They did their graduate training in the same economics department at the Massachusetts Institute of Technology (MIT). They attended the same macroeconomics class: Stanley Fisher’s course in monetary economics at MIT for graduate students (was it the same year—does anybody know?) Some of their fellow Fisher alumni included Ken Rogoff and Olivier Blanchard.  And that’s not all—far from it. Paul Samuelson (MIT) was overwhelmingly the intellectual architect of what most people these days think is Keynesian economics. Paul Samuelson is Larry Summers’ uncle.

Bernanke-Summers Debate II: Savings Glut, Investment Shortfall, Or Monty Python? - Steve Keen -- A Twitter follower accused me of being “a little nasty” with my last blog post (see Figure 1). He was right, and I don’t apologize. I’ve spent 40 years trying to highlight just how limited the dominant ideas in economics are. But even I didn’t fully appreciate how tiny the intellectual gene pool behind these ideas was. Then, as I started to write a post on the economic issues in the Bernanke-Summers debate, I re-read Summers’ original secular stagnation post and realized that, not merely were the ideas coming from a single perspective, most of the major proponents of these ideas came not only from the same University (MIT), and even the same seminar (Class 14462, conducted by Stanley Fisher). Think of the dominant names in economics and there are a few obvious entries: Ben Bernanke; Larry Summers; Paul Krugman; Olivier Blanchard; Ken Rogoff. Summers acknowledged all of them (bar Krugman) as classmates from Stanley Fisher’s seminar, while Krugman did his PhD at MIT (as did the other dominant macro textbook author—and ex-advisor to George W. Bush and Mitt Romney—Gregory Mankiw). This goes well beyond the dominance of economics by a single school of thought, and I felt that “in-breeding” was a nasty but evocatively accurate way to express just how narrow the so-called “economic debate” had become—and therefore how justified were student calls for pluralism in economics. Hell, we don’t simply need pluralism: we need to hear opinions from people who didn’t attend Stanley Fisher’s lectures. Maybe being nasty about this might get people to realize why economics needs to change.

Fed's Dudley says strong dollar, cheap oil are drags on U.S. economy - - New York Federal Reserve President William Dudley on Monday said a stronger dollar has given a "significant shock" to the U.S. economy and that lower oil prices will exert a "meaningful drag" on growth because of lower investment in the vibrant domestic energy industry. Still, he said he expects U.S. growth to pick up after a weak first quarter that largely reflects "temporary factors," with the economy expanding at a similar pace to 2014 and 2013. By the end of the year he predicts the unemployment rate could drop to 5% from 5.5%.

The Real Reason the Dollar Is So Strong Right Now -- When is a stronger U.S. dollar not a good thing? When it causes companies to sell fewer products overseas. That’s one of the big concerns at the moment among American CEOs, many of whom are worried about what the dollar’s strength against currencies like the euro and the yen mean for US exports–and corporate profits.They have legitimate reason to worry. Each of the five major dips in U.S. corporate profitability since 1970 have occurred following reduced sales after periods of relative dollar strength. The Fed has recently expressed concerns about whether the dollar’s strength could hold back the US recovery, which has been lackluster to begin with. Wages are still growing at only around 2 %, not enough to push up consumer spending, which is the major driver of our economy. If US exports also begin to suffer, it could be difficult for the economy to sustain the 3% a year growth figure that is needed to create more jobs.Some economists believe the dollar’s strength reflects the fact that the U.S. is still the prettiest house on the ugly block that is the global economy.  But I think it’s more about central bankers and their actions. The dollar’s strength reflects the Fed’s own recent indications that it will likely raise interest rates by the end of the year.Indeed, the dollar’s strength almost perfectly tracks Fed statements about the coming end of easy money. The tightening of US monetary policy (or even the hint that policy will tighten at some point) has driven the dollar up (and oil down) even as Europe’s beginning of its own “QE” or quantitative easing program has driven the Euro down. None of it reflects the economic reality on the ground, but rather the fact that central bankers are, as investment guru Mohamed El-Erian frequently says, the “only game in town.”

Why The Oil Price Collapse Is The Fed's Fault -- The present oil price collapse is because of over-production of expensive tight oil. The collapse occurred because of the inability of the world market to support the cost of the new expensive oil supply from shale, oil sands and deep water. Demand was progressively destroyed during the longest period of sustained high oil prices in history from 2010 through 2014. Since the early 2000s, the price of oil was largely insensitive to the fundamentals of supply and demand as long as prices were less than about $90 per barrel. The chart below shows world liquids supply minus demand (relative supply surplus or deficit), and WTI oil price.  Tight oil boomed after late 2011 when oil prices moved higher than $90. An endless flow of easy money was available to fund spending that always exceeded cash flow. The table below shows full-year 2014 earnings data for representative tight oil E&P companies. These companies out-spent cash flow by 25%, spending $1.25 for every $1.00 earned from operations. Only 3 companies–OXY, EOG and Marathon–had positive free cash flow. Total debt increased from $83.4 to $90.3 billion from 2013 to 2014. Debt must be continually re-financed on increasingly poorer terms because it can never be repaid from cash flow by many of these companies. The U.S. E&P business has, in effect, become financialized: investment in this class of company has become the sub-prime derivative of the post-Financial Crisis period. There is no performance requirement by investors other than the implicit need to maintain net asset values above debt covenant trigger thresholds. These terrible financial results reflect a year when average WTI oil prices were more than $93 per barrel. First quarter 2015 earnings will make these results look good.

It’s Hard to Lift Wages if the Fed Doesn’t Make It a Priority -  The Federal Reserve is supposed to achieve two goals simultaneously: full employment with stable prices. Yet there is one obvious factor that drives American living standards but risks being lost in this mix: wages. The economic status of most working-age households is determined by whether people are employed and for how many hours. It is also affected by how quickly prices are rising and whether their paychecks are at least keeping up with, if not outpacing, those prices. Over the last few years, employment has been growing and inflation has been low. But annual wage growth has been stuck at about 2 percent going on six years now. This combination has caused some economists and Fed watchers to argue that the Fed should target wages as a third metric. Janet Yellen, the Fed chairwoman, happens to agree with many of these wage-conscious analysts on a wide range of other economic issues, raising the possibility the Fed might indeed move in this direction. Ms. Yellen gave her answer in a recent speech in San Francisco: No.   There are too many other factors driving wages, she argues, making their growth an unreliable benchmark of job market tautness. She cited productivity growth; global competition; technical changes that influence employers’ skill demands and thus wage offers; and the decline in unions.   I count myself among those analysts who have described the potential benefits of wage targeting at the Fed — waiting until wages are growing considerably faster than they are today before tapping the brakes.

GDP and Social Welfare in the Long Run: -- On a semi-regular basis, I find myself trying to be polite while someone explains their breathtaking "new" insight that while economists all worship at the altar of GDP, this wise social critic has noticed that measurements of market output are not identical to social well-being. This supposedly new insight has been obvious to economists since they started trying to measure the size of an economy back in the 1930s and it's been a staple of political rhetoric at least since Robert Kennedy's elegant comments on the subject since 1968. But while no economist believes that GDP is identical to social well-being, many economists do hold a related belief that growth of GDP over time has a positive correlation with human well-being broadly understood. Late last year, the OECD published a report called "How Was Life? Global Well-Being Since 1820," edited by Jan Luiten van Zanden, Joerg Baten, Marco Mira d’Ercole, Auke Rijpma, Conal Smith and Marcel Timmer. In the course of 13 chapters written by different sets of authors, the report looks at evidence on demography, health, personal security, political structures, the environment, and other broad measures of well-being. The volume can be read online or ordered here. Here, let's do a quick review of the evidence on long-term correlations between economic growth and other measures of well-being, and then return to a discussion of correlation and causation between these factors. As a starting point, here's a quick review of the evidence on growth of GDP over time

Jobs data suggests economy is in real trouble -- In the wake of March's tepid jobs creation, it may be time to take a harder look at this soft patch. Even ahead of Friday's employment report, concerns were mounting about a growing pile of weak data. JPMorgan's economic research team cut their first quarter GDP growth forecast to a mere 0.6 percent on Thursday, citing poor consumer spending data. Recent manufacturing data have also looked especially bad, with the ISM manufacturing index's March reading showing the slowest growth since May 2013. Separately, housing market indicators have been mixed, perhaps due to the harsh winter weather. Amid all of the concerns, many economists have held out hope because of the string of strong employment reports, which have indicated that growth remains strong where it matters most. Now, that story changed after the Bureau of Labor Statistics reported that a mere 126,000 jobs were created in March, compared to broad expectations of another 200,00-plus report. However, some economists caution against making too much of the report, arguing that it doesn't imperil the case for a spring snap-back in the second quarter. While granting that "March employment figures were disappointing across the board," Societe Generale economist Aneta Markowska notes that the economy still created an average of 197,000 jobs per month in 2015. She predicts that the dour March report clears the way for a 300,000-plus April number. Chandler writes that "the US economy is not slipping back into a recession," arguing that the weakness can be pinned on "transitory" factors like the weather.

The Fiscal Future I: The Hyperbolic Case for Bigger Government - Krugman  - Brad DeLong has posted a draft statement on fiscal policy for the IMF conference on “rethinking macroeconomics” — and I’m shocked, in a good way. As regular readers may have noticed, Brad and I share many views, so I expected something along lines I have also been thinking. Instead, however, Brad has come up with what I believe are seriously new ideas — enough so that I want to do two posts, following different lines of thought he suggests.What Brad argues are two propositions that run very much counter to the prevailing wisdom, especially among Very Serious People. First, he argues that we should not only expect but want government to be substantially bigger in the future than it was in the past. Second, he suggests that public debt levels have historically been too low, not too high. In this post I consider only the first point.So, how big should the government be? The answer, broadly speaking, is surely that government should do those things it does better than the private sector. But what are these things?The standard, textbook answer is that we should look at public goods — goods that are non rival and non excludable, so that the private sector won’t provide them. National defense, weather satellites, disease control, etc.. And in the 19th century that was arguably what governments mainly did.Nowadays, however, governments are involved in a lot more — education, retirement, health care. You can make the case that there are some aspects of education that are a public good, but that’s not really why we rely on the government to provide most education, and not at all why the government is so involved in retirement and health. Instead, experience shows that these are all areas where the government does a (much) better job than the private sector. And Brad argues that the changing structure of the economy will mean that we want more of these goods, hence bigger government.

The Fiscal Future II: Not Enough Debt? -- Paul Krugman --Continuing my meditation on Brad DeLong’s meditation on the fiscal future. Brad doesn’t just argue that governments should be bigger in the future; he also argues that governments have historically not had enough debt, and should have more. Why? Because, he says, r-g — the difference between the real rate of interest on government debt and the rate of economic growth — has been consistently negative. Why is this significant? Well, we normally imagine that if a government engages in deficit spending now, it will have to engage in compensating austerity of some form later — even if it doesn’t plan to pay of the debt, it will still have to cut spending or raise taxes so as to run a primary, non-interest surplus if it wants to stabilize the ratio of debt to GDP.  But when r is less than g, a higher debt stabilizes itself: erosion of the debt ratio by growth means that no primary surplus is needed. So you can eat your cake and have it too. A bigger debt lets the government do useful things, like invest in infrastructure; it gives investors the safe assets they want; and it need not lead to any future pain as long as you don’t do foolish things like join a currency union with no well-defined lender of last resort.But is r really less than g for all major players? Brad uses the average interest rate on debt, which I haven’t had time to compute. What I’ve done is use the 10-year bond rate — which is somewhat higher than the rate Brad uses, I believe — and examine the G7 over the period 1993-2007. And I think we get some interesting insights.

Biggest Shortage Of US 10-Year Treasurys Since June 2014 - We are glad to see that after beating the drum on the unprecedented bond market liquidity (and underlying) shortage for over two and a half years (and here and here and here), not only famous hedge fund managers but the mainstream media is now sounding the alarm over this most critical of topics to the US market, with the most recent "exposition" coming courtesy of the WSJ's "Broken Bond Market Complicates Fed’s Plan to Raise Rates."  So as a helpful hint for the WSJ and their peers on what to keep an eye for next, one useful place (another one that has been covered here since roughly 2013) is the daily shortage of Treasury collateral as manifested by collapsing rates in the repo market, where just today we saw the repo tighten "immensely" in the words of Stone McCarthy, plunging to super special rates of -224 bps, which implies the liquidity shortage for the On The Run 10Y is now the worst since June of 2014. Granted, there is a 10Y auction tomorrow, settling on April 15, which is usually heavily shorted into, however there have been many 10Y auction in the past 10 months, and none have seen such a collateral squeeze so it is indeed safe to say that the liquidity shortage across the US curve has virtually never been worse.

Treasury 10-Year Note Repo Shortage Sends Rates Below Zero -  Treasury 10-year notes are in short supply in the $1.66 trillion-a-day market for borrowing and lending securities before the government’s sale of $21 billion of the notes Wednesday. Traders are willing to pay to borrow the notes in the repurchase-agreement market in exchange for loaning cash overnight for the most actively traded 10-year maturity, with rates reaching negative 1.99 percent Wednesday, after sliding below negative 2 percent Tuesday, according to data from ICAP Plc tracked by Bloomberg. Traders regularly short, or sell securities they’ve borrowed in the repo market, before a sale to profit if prices of the securities fall after the auction. The negative repo rates for 10-year notes Wednesday is less extreme than levels seen before past auctions -- some of which triggered the Treasury to investigate positions. “There is a large short base in this issue, in part as people are using it as a hedge against some sizable real-money sales of other 10-year notes,” said Kenneth Silliman, head of U.S. short-term rates trading in New York at Toronto-Dominion Bank’s TD Securities unit. “There was also a slightly longer when-issued trading period for this sale than typical, so it forced dealers to build more shorts and overall for people to hold these bets longer. That has all helped richen the debt in repo.” Auction Preview The government sold the 10-year notes Wednesday at a yield of 1.925 percent, the lowest yield on a sale for this maturity debt since 2013. The pre-auction trading period is longer than average based on the timing of the auction versus the settlement date.

Dimon, now Summers: There’s a liquidity problem -- Former Treasury Secretary Larry Summers said regulators should make a priority of addressing the problems of bond market liquidity, brought on by their very efforts to make institutions safer after the financial crisis. Summers, speaking Thursday on "Squawk Box," responded to comments made by JPMorgan CEO Jamie Dimon who said recent volatility in the currency and Treasury markets was a "warning shot across the bow."  The drumbeat about liquidity questions in the corporate bond market but also Treasury market has gotten louder, and Dimon used his annual letter to shareholders as soap box to warn about the issue. Bond market participants blame post-financial crisis regulations aimed at making the activities of financial institutions safer by restricting capital use. In the Treasury market, they point to the fact that the Fed holds a massive amount of Treasury supply on its more-than-$4 trillion balance sheet, keeping it off the market. Another issue often discussed by traders is the reduced head count at Wall Street's primary dealers. "I think what Jamie was actually addressing was not the quantitative easing question. I think it was questions around liquidity in markets, and I do think that does need to be a preoccupation of regulatory authorities, and I think there's a danger that in their enthusiasm for keeping each individual institution safe that regulatory authorities will lose sight of keeping markets open and liquid, and I think that is a legitimate concern that is raised," Summers said.

Bond bubbles - Why can't a government borrow and spend infinite amounts of money? Well, interest payments might get too high, forcing the government to default. But what if interest rates keep getting lower and lower? As nominal interest rates go to 0, interest payments go to 0, so the govt. will always be able to make interest payments no matter how big the debt gets. So all the govt. has to do in order to be able to borrow and spend infinite amounts of money is to get the central bank to keep interest rates at 0 forever, which the central bank can do by - basically - printing money and buying bonds from people and banks. But what if people and companies stop buying the government bonds in the first place? Well, the central bank can just print money and buy the bonds directly from the government. (We call this "the full MMT." It is almost certainly the route Japan will have to take.)  So is this a free lunch? What's the danger? The danger is that all that money-printing will eventually result in a big inflation. A big inflation will also raise nominal interest rates, overwhelming the central bank's ability to keep them down. That will cause a government default. So is this a danger for advanced countries right now? Well, markets have very low expectations for future inflation, and for future interest rates, for most rich countries. If you believe markets are efficient, this means that it's likely that governments can keep borrowing money, and central banks can keep printing money, without causing inflation - at least for now.

Time US leadership woke up to new economic era -- Larry Summers -- This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. ... This failure of strategy and tactics was a long time coming, and it should lead to a comprehensive review of the US approach to global economics. Largely because of resistance from the right, the US stands alone in the world in failing to approve the International Monetary Fund governance reforms that Washington itself pushed for in 2009.  Meanwhile, pressures from the left have led to pervasive restrictions on infrastructure projects financed through existing development banks, which consequently have receded as funders, even as many developing countries now see infrastructure finance as their principle external funding need. With US commitments unhonoured and US-backed policies blocking the kinds of finance other countries want to provide or receive through the existing institutions, the way was clear for China to establish the Asian Infrastructure Investment Bank. There is room for argument about the tactical approach that should have been taken once the initiative was put forward. But the larger question now is one of strategy. ... What is crucial is that the events of the past month will be seen by future historians not as the end of an era, but as a salutary wake up call.

Larry Summers: The Past Month May Go Down as a Turning Point for U.S. Economic Power - In a new column, former Treasury Secretary Larry Summers delivers a scathing message:  "This past month may be remembered as the moment the United States lost its role as the underwriter of the global economic system. True, there have been any number of periods of frustration for the US before, and times when American behaviour was hardly multilateralist, such as the 1971 Nixon shock, ending the convertibility of the dollar into gold. But I can think of no event since Bretton Woods comparable to the combination of China’s effort to establish a major new institution and the failure of the US to persuade dozens of its traditional allies, starting with Britain, to stay out of it."  Summers is referencing the new Asian Infrastructure Investment Bank, China’s 18-month-old plan to start the first new multilateral development lender in decades. More than 40 countries applied to be founding members including China, Australia, Egypt, Ukraine, the U.K., France, Switzerland, India, and South Korea.   Mohamed El-Erian voiced similar concerns in a Bloomberg View column late last month. Through the combination of the proposed AIIB, a new development bank and mushrooming bilateral arrangements, China is slowly building small pathways to bypassing the longstanding institutional arrangement. No wonder the U.S. is again worried about the erosion of the existing Western-dominated multilateral system (in this particular case, the World Bank) where its influence is still considerable, if not determinant.

Secular stagnation and capital flows - Ben Bernanke writes that secular stagnation requires that the returns to capital investment be permanently low everywhere, not just in the home economy. All else equal, the availability of profitable capital investments anywhere in the world should help defeat secular stagnation at home..  Ben Bernanke writes that many of the factors cited by secular stagnationists (such as slowing population growth) may be less relevant for other countries. Currently, many major economies are in cyclically weak positions, so that foreign investment opportunities for US households and firms are limited. But unless the whole world is in the grip of secular stagnation, at some point attractive investment opportunities abroad will reappear. If that’s so, then any tendency to secular stagnation in the US alone should be mitigated or eliminated by foreign investment and trade.  Paul Krugman writes that international capital mobility makes a liquidity trap in just one country less likely, but it by no means rules that possibility out. You might think that you can’t have a liquidity trap in just one country, as long as capital is mobile. As long as there are positive-return investments abroad, capital will flow out. This will drive down the value of the home currency, increasing net exports, and raising the Wicksellian natural rate. Tyler Cowen writes that it’s the wrong comparison of interest rates and the wrong metric of expected currency appreciation. Rather than looking at real interest rate differentials, take the market’s implied prediction for the euro to be the forward-futures exchange rates.  These futures rates match the differences in nominal rates on each currency across the relevant time horizons.  Those equilibrium relationships hold true with or without secular stagnation, whether in one country or in “n” countries, and from those relationships you cannot derive the claim that expected currency movements offset cross-border differences in real rates of return.

White House Uses Bernanke-Summers Debate To Push Trade Deals - President Barack Obama’s top economist used the recent debate between heavyweights Larry Summers and Ben Bernanke over why the economy isn’t growing faster to push the White House’s trade agenda on Wednesday. Last week, Mr. Bernanke challenged the secular stagnation hypothesis put forward by Mr. Summers, which says that the economy faces permanently lower growth because there aren’t enough productive investment opportunities in the economy. Mr. Bernanke says slower growth is instead the result of cyclical and various temporary factors. Jason Furman, the chairman of the White House Council of Economic Advisers, didn’t take sides in his speech at the Brookings Institution on Wednesday. Instead, Mr. Furman said Wednesday that regardless of which camp has it right, trade would offer enough economic benefits to help address either concern. Mr. Obama wants Congress to authorize “fast track” authority, which subjects trade deals to an up-or-down vote  without amendments, in order to finalize a major trade agreement known as the Trans-Pacific Partnership with 11 other countries later this year. To address the concern of secular stagnation raised by Mr. Summers, trade would boost productivity growth by expanding the range of investment opportunities through agreements such as the Trans-Pacific Partnership. And if global imbalances are the problem—Mr. Bernanke suggests that an uneven global allocation of savings and investment have threatened the sustainability of economic growth—then trade deals would “seek a level competitive playing field for global trade to help resolve such imbalances,” he said.

Is there any possible Iran compromise between Obama and Congress? Maybe not. - By all indications, Congress appears to be heading towards passage of the Corker-Menendez bill, which would temporarily suspend President Obama’s authority to lift sanctions as part of a final nuclear agreement with Iran, pending a Congressional vote to approve or disapprove of the deal. With Democratic help, it may pass the Senate with a veto-proof majority.  The administration fears that this could scuttle the process, because a vote before a final deal — one that signals Congress may restrict the president’s ability to carry out our end of the bargain — could cause Iran to question whether we can ultimately deliver on it. A legislative expert I recently interviewed agrees with this. There are other problems with Corker-Menendez: It requires a rushed process for Congress to review the deal and injects Iran’s support for terrorism into the discussion as a potential reason for Congress to kill it, even though the current negotiations are only about Iran’s nuclear program.  The administration says it is open to a compromise with Congress on some kind of a vote on the deal. But what would such a compromise look like?When you strip away all the noise, the basic difference between Congressional Republicans (who are joined by a few Dems) and the Obama administration right now can be boiled down this way: The administration maintains that Obama has the authority, without Congressional approval, to temporarily lift sanctions to comply with a nuclear deal. Republicans don’t, and they are determined to assert a Congressional role in either granting or restricting that authority. The question is whether there is any way to reconcile that difference. There may not be.

Congressional Budget Plans Get Two-Thirds of Cuts From Programs for People With Low or Moderate Incomes -- The budgets adopted on March 19 by the House Budget Committee and the Senate Budget Committee each cut more than $3 trillion over ten years (2016-2025) from programs that serve people of limited means. These deep reductions amount to 69 percent of the cuts to non-defense spending in both the House and Senate plans. Each budget plan derives more than two-thirds of its non-defense budget cuts from programs for people with low or modest incomes even though these programs constitute less than one-quarter of federal program costs. Moreover, spending on these programs is already scheduled to decline as a share of the economy between now and 2025.[1] The bipartisan deficit reduction plan that Alan Simpson and Erskine Bowles (co-chairs of the National Commission on Federal Policy) issued in 2010 adhered to the basic principle that deficit reduction should not increase poverty or widen inequality. The new Congressional plans chart a radically different course, imposing their most severe cuts on people on the lower rungs of the economic ladder. As Table 1 indicates, the House Budget Committee plan proposes $5.3 trillion[2] in non-defense budget cuts through 2025. These cuts are in addition to the cuts dictated by the 2011 Budget Control Act’s (BCA) budget caps and sequestration.

When Will the Congressional Progressive Caucus Ever Learn About Sector Financial Balances? --The CPC budget proposal is interesting because it is definitely not intended to be an austerity budget. Instead, its authors consciously try both to achieve the goals of “fiscally responsible” low deficit budgets while turning away from austerity and towards achieving full employment, renewed economic growth, economic stability, a strengthened social safety net, greater economic equality, an improved infrastructure, and transportation system, improving the health insurance system beyond the Affordable Care Act, a greener economy, improved education and other progressive goals. The CPC proposes to do that in two ways First, by raising Federal revenues from 17.5% of GDP in 2014 and 2015 to 20.2% of GDP in 2016, and then more gradually to 21.5% in 2025, while raising Federal outlays from 20.3% of GDP in 2014 to 22.6% in 2015, and 23.7% in 2016, then stays in the range from 22.3% to 23.1% for the rest of the period. Since they also assume GDP growth rates in the neighborhood of 4.1% of GDP to 4.5% year after year over the period, these assumptions imply freed up funds the caucus believes are necessary to support its programmatic changes. And second, the CPC budget also tries its best to maximize the fiscal multipliers of its various programs, while minimizing the negative fiscal multipliers of its tax programs for raising revenue as a percent of GDP. Since low levels of deficit spending are adhered to in the CPC budget, the fiscal impact of its government outlays is lessened greatly by the negative effect of the rising tax revenues. According to an analysis of the CPC budget by the Economic Policy Institute (EPI), “A fiscal multiplier of 1.4 has been assigned to government spending provisions, and a fiscal multiplier of 0.5 has been assigned to tax provisions.” (p. 24)

A rising insurrection against Obama -  Last month, the Republican-led Arizona House of Representatives passed, on a 36-to-24 party-line vote, a bill sponsored by tea party  Rep. Bob Thorpe (R-Flagstaff) that “prohibits this state or any of its political subdivisions from using any personnel or financial resources to enforce, administer or cooperate with an executive order issued by the President of the U.S. that has not been affirmed by a vote of Congress and signed into law as prescribed by the U.S. Constitution.” If adopted by the Arizona Senate and signed into law, executive orders issued by the president would have no force or effect in that state. What’s more, the Arizona House has passed a number of other bills aimed at nullifying policies, rules and regulations of the Obama administration that have not been approved by Congress. The word “insurrection” does come to mind. Yet the resistance out West to federal authority has been received in virtual silence on Capitol Hill. It’s almost as if the GOP Congress wanted an uprising against the president. This country has drifted far beyond the rough-and-tumble give-and-take that historically occurs between the parties. It’s one thing to oppose the president’s policies. It’s quite another to refuse to acknowledge presidential authority. That’s what we are witnessing in the Arizona House. That’s what we also saw with the 47 Republican senators who wrote to the Iranian government, warning that Obama is seeking a nuclear agreement that won’t last beyond his administration.

The Pentagon's $10-billion bet gone bad - Leaders of the U.S. Missile Defense Agency were effusive about the new technology.It was the most powerful radar of its kind in the world, they told Congress. So powerful it could detect a baseball over San Francisco from the other side of the country. If North Korea launched a sneak attack, the Sea-Based X-Band Radar — SBX for short — would spot the incoming missiles, track them through space and guide U.S. rocket-interceptors to destroy them.Crucially, the system would be able to distinguish between actual missiles and decoys.SBX “represents a capability that is unmatched,” the director of the Missile Defense Agency told a Senate subcommittee in 2007.In reality, the giant floating radar has been a $2.2-billion flop, a Los Angeles Times investigation found.Although it can powerfully magnify distant objects, its field of vision is so narrow that it would be of little use against what experts consider the likeliest attack: a stream of missiles interspersed with decoys.SBX was supposed to be operational by 2005. Instead, it spends most of the year mothballed at Pearl Harbor in Hawaii.The project not only wasted taxpayer money but left a hole in the nation’s defenses. The money spent on it could have gone toward land-based radars with a greater capability to track long-range missiles, according to experts who have studied the issue.

The Iranian Nuclear Framework Finally Exposes The War Party's Big Lie --David Stockman -  The Iranian framework agreement is an astonishingly good deal, and has the potential to become a historic game-changer.  The saliency of that observation lies in the fact that there is virtually nothing in the substance of the deal for the War Party to attack. So what they are doing is desperately hurtling the Iranian axis-of-evil narrative at the agreement, claiming that the regime is so untrustworthy, diabolical and existentially dangerous that no product of mere diplomacy is valid. The Iranians are by axiom hell-bent on evil and no mere “scrap of paper” will stop them. But therein dwells the game-changing opportunity. To defeat the deal, the War Party will have to defend its three-decade long campaign of exaggerations, distortions and bellicose animosity toward the Iranian state. But that is impossible because the axis-of-evil narrative was never remotely true. Indeed, if the truth be told the War Party has never been required to defend its spurious propaganda thanks in large part to a lazy, gullible mainstream press that has been as negligent on the Iranian evil meme as they were on Saddam’s weapons of mass destruction.As will be demonstrated below, the evil Iran narrative rests on repetition and political bombast, not historical fact. Iran was turned into a pariah state not owing to its own deeds and actions, but because it served the domestic political needs of the War Party. So while the whole axis-of-evil narrative is bogus, the War Party is repairing to it in flat-out hysterical tones because it has nowhere else to go. Indeed, it did not take long for a shrill demagogue like GOP Senator Mark Kirk to play the Hitler card: “I would say that Neville Chamberlain got a lot more out of Hitler than Wendy Sherman got out of Iran.”

Are Obama’s Record Arms Sales to Saudi Arabia, Yemen, Egypt and Iraq Fueling Unrest in Middle East? | Democracy Now! (video & transcript) As Saudi Arabia continues U.S.-backed strikes in Yemen and Washington lifts its freeze on military to aid to Egypt, new figures show President Obama has overseen a major increase in weapons sales since taking office. The majority of weapons exports under Obama have gone to the Middle East and Persian Gulf. Saudi Arabia tops the list at $46 billion in new agreements. We are joined by William Hartung, who says that even after adjusting for inflation, "the volume of major deals concluded by the Obama administration in its first five years exceeds the amount approved by the Bush administration in its full eight years in office by nearly $30 billion. That also means that the Obama administration has approved more arms sales than any U.S. administration since World War II." Hartung is the director of the Arms and Security Project at the Center for International Policy, and author of "Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex."

TPP as Important as Another Aircraft Carrier: US Defense Secretary | The Diplomat: On April 6, US Secretary of Defense Ash Carter delivered a speech at the McCain Institute at Arizona State University on ‘the next phase’ of the US rebalance to the Asia-Pacific. The speech began with a customary nod to the Asia-Pacific’s growing importance, a brief assessment of America’s strengths in the region, and an overview of the rebalance. Carter then went on say what ‘the next phase’ of the US rebalance might entail on the defense side, focusing on four components: investments; capabilities; posture; and partnerships and alliances. He touched on investments in a new long-range stealth bomber and a new, long-range anti-ship cruise missile; the fielding of key US capabilities like advanced fighters and missile-defense equipped ships; adapting America’s bases, personnel and platforms to be more distributed, resilient and sustainable; and reinforcing existing alliances, emerging partnerships, and links between them, including trilateral cooperation with Japan and Australia. But after this deep dive into defense issues, Carter also spent some time in his speech to highlight the importance of concluding the Trans-Pacific Partnership (TPP). He stressed its importance in boosting US exports, strengthening key US relationships in the Asia-Pacific, signaling America’s commitment to the region more broadly, and promoting U.S. values. He even likened the TPP to be as important to him as another aircraft carrier.

The Italian Job: The Pentagon has spent the last two decades plowing hundreds of millions of tax dollars into military bases in Italy, turning the country into an increasingly important center for U.S. military power. Especially since the start of the Global War on Terror in 2001, the military has been shifting its European center of gravity south from Germany, where the overwhelming majority of U.S. forces in the region have been stationed since the end of World War II. In the process, the Pentagon has turned the Italian peninsula into a launching pad for future wars in Africa, the Middle East, and beyond. At bases in Naples, Aviano, Sicily, Pisa, and Vicenza, among others, the military has spent more than $2 billion on construction alone since the end of the Cold War — and that figure doesn’t include billions more on classified construction projects and everyday operating and personnel costs. While the number of troops in Germany has fallen from 250,000 when the Soviet Union collapsed to about50,000 today, the roughly 13,000 U.S. troops (plus 16,000 family members)stationed in Italy match the numbers at the height of the Cold War.  That, in turn, means that the percentage of U.S. forces in Europe based in Italy has tripled since 1991 from around 5% to more than 15%.

The Laffer Swerve - Paul Krugman - Jim Tankersley has a good article on Arthur Laffer’s never-stronger influence on the Republican party, with just one seriously misleading statement:  Laffer’s ideas have also grown out of fashion with much of the mainstream economic community. There is an entire branch of economic literature that uses detailed equations to show cutting top tax rates does not spark additional growth. No, Laffer hasn’t “grown out of fashion” with mainstream economics — he was never in fashion. There was never any evidence to support strong supply-side claims about the marvels of tax cuts and the horrors of tax increases; even freshwater macroeconomists, despite their willingness to believe foolish things, never went down that road.And nothing in the experience of the past 35 years has made Lafferism any more credible. Since the 1970s there have been four big changes in the effective tax rate on the top 1 percent: the Reagan cut, the Clinton hike, the Bush cut, and the Obama hike. Republicans are fixated on the boom that followed the 1981 tax cut (which had much more to do with monetary policy, but never mind). But they predicted dire effects from the Clinton hike; instead we had a boom that eclipsed Reagan’s. They predicted wonderful things from the Bush tax cuts; instead we got an unimpressive expansion followed by a devastating crash. And they predicted terrible things from the tax rise after Obama’s reelection; instead we got the best job growth since 1999.And when I say “they predicted”, I especially mean Laffer himself, who has a truly extraordinary record of being wrong at crucial turning points. As Bruce Bartlett pointed out a few years ago, Laffer was even wrong during the Reagan years: he predicted that the Reagan tax hikes of 1982, which partially reversed earlier cuts, would cripple the economy; “morning in America” promptly followed. Oh, and let’s not forget his 2009 warnings about soaring interest rates and inflation.

Businesses Back Tax Overhaul, but Doubt It Will Succeed - Businesses that operate in several countries support an overhaul of the international tax system, but aren’t entirely convinced that it is achievable, according to a survey published Friday. Launched by the Group of 20 largest economies and members of the Organization for Economic Cooperation and Development in 2013, the planned overhaul is intended to close loopholes that allow companies to adopt legal structures and practices designed to shift their profits to the lowest tax jurisdictions, regardless of where those profits are generated. Taxand, a network of tax advisers that operates in almost 50 countries, surveyed chief financial officers or tax directors at 30 multinational companies, most of which generate revenues of more than $1 billion from operations in the Americas, Europe and Asia. It found that while 80% believed a fundamental reform of international taxation was desirable, only 55% thought that goal was achievable. While governments continue to make steady progress toward agreement on the outlines of an overhaul, tax experts warn that it is a first step that must be followed by changes in domestic legislation in each of the participating countries that could take many years to complete and implement. The Taxand survey suggests multinational companies have similar doubts about how quickly and comprehensively commonly agreed standards would actually be implemented. The planned overhaul of tax rules comes as governments around the world are seeking to raise more tax to cut their budget deficits and bring down high levels of debt accumulated in the years since the onset of the financial crisis. It followed controversies in several countries—including the U.S., the U.K., France and Germany—over the behavior of some companies that operate in the digital economy.

What Will Happen To Voluntary Tax Compliance If a Budget-constrained IRS Is Not Fixed? -- Is the IRS such a mess that the nation’s system of voluntary tax compliance is at risk? Will frustrated taxpayers rebel because they can’t get help with a revenue code they can’t understand? Will aggressive taxpayers who recognize that audit rates have plummeted to the lowest levels in years further push the tax-avoidance envelope?  And will a massive increase in new-style tax fraud, perpetrated by hackers and identity thieves rather than traditional tax cheats, crash the filing system? We may be about to find out in what’s becoming an increasingly toxic environment for tax administration. Congress gives the beleaguered tax collection agency more and more to do while cutting its budget over and over again. Commissioner John Koskinen, an old Washington hand and a corporate turn-around artist, is responding aggressively—most recently yesterday at a Tax Policy Center forum on how the IRS is responding to those budget cuts.  Koskinen pulled no punches. The spending reductions mean that, after adjusting for inflation, the agency is working with the same budget it had in 1998. The result, he said: “We’re coming to the point where the significant reductions in the IRS budget will degrade the agency’s ability to continue to deliver on its mission.”  In practical terms those budget cuts are already resulting in fewer audits and collections, and a dramatic reduction in tax-season assistance. At the forum, National Taxpayer Advocate Nina Olson reported that the agency’s system of telephone help has crumbled. “I’ve been practicing for four decades and I’ve never seen anything like this filing season on the phones,” she said. Six of every 10 people who call the agency never get through to a staffer at all. The IRS has hung up on 6.8 million calls (called in the best Orwellian fashion a “courtesy disconnect”) because lines are overwhelmed. Even those who do get through sit on hold an average of 22 minutes when they call with a question about their 1040. And time-constrained staffers have been instructed to not provide specific advice when taxpayers do get them on the phone even if they know the answers to questions.

How much does the tax code reduce inequality? -- There is, for good reason, a lot of focus these days on the widening gap between the top and the bottom in the U.S. economy. Since it’s (almost) Tax Day, that April 15 deadline for filing tax returns, it’s a good time to ponder a very simple question: How much does the U.S. tax system shrink the gap between rich and poor? Now you can tell this story long or you can tell it short.  And you can tell it with tables of numbers, charts and graphs—or you can tell with Legos. To explain how much the U.S. tax code evens out the distribution of income, we’ve made a 3-minute video—with Lego bricks—that illustrates just how unequal the U.S. is before taxes and how much (or how little, depending on your perspective) the tax code changes that.

The Big Chill: How Big Money Is Buying Off Criticism of Big Money - Robert Reich -- Not long ago I was asked to speak to a religious congregation about widening inequality. Shortly before I began, the head of thecongregation asked that I not advocate raising taxes on the wealthy. He said he didn’t want to antagonize certain wealthycongregants on whose generosity the congregation depended. I had a similar exchange last year with the president of a small college who had invited me to give a lecture that his board of trustees would be attending. “I’d appreciate it if you didn’t criticize Wall Street,” he said, explaining that several of the trustees were investment bankers. It seems to be happening all over. A non-profit group devoted to voting rights decides it won’t launch a campaign against big money in politics for fear of alienating wealthy donors. A Washington think-tank releases a study on inequality that fails to mention the role big corporations and Wall Street have played in weakening the nation’s labor and antitrust laws, presumably because the think tank doesn’t want to antagonize its corporate and Wall Street donors. A major university shapes research and courses around economic topics of interest to its biggest donors, notably avoiding any mention of the increasing power of large corporations and Wall Street on the economy. It’s bad enough big money is buying off politicians. It’s also buying off nonprofits that used to be sources of investigation, information, and social change, from criticizing big money.

Junk debt is ballooning even as earnings, liquidity fizzle - — With rates stuck near historic lows, investors are left hunting for richer returns wherever they can find them. It is no surprise then that high-yield corporate bond issuance broke records in March. New high-yield volume in the U.S. was $38 billion, the highest level for a March, outstripping the previous March record of $37.2 billion set three years ago, according to S&P Capital IQ. New U.S. issuance was $91.6 billion in the first quarter, 22% higher than the same period last year and only 8.5% below the all-time high of $105 billion, recorded in the second quarter of 2014, according to S&P Capital IQ. Global high-yield was also high at $110.8 billion in the first quarter, nearly 20% ahead of last year’s pace. March also saw the third largest high-yield deal on record come to market – Valeant Pharmaceuticals’ bond sale of an approximate total size of $10.1 billion, according to S&P Capital IQ.

The Oil Industry's $26 Billion Life Raft - - For U.S. shale drillers, the crash in oil prices came with a $26 billion safety net. That’s how much they stand to get paid on insurance they bought to protect themselves against a bear market -- as long as prices stay low. The flipside is that those who sold the price hedges now have to make good. At the top of the list are the same Wall Street banks that financed the biggest energy boom in U.S. history, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. While it’s standard practice for them to sell some of that risk to third parties, it’s nearly impossible to identify who exactly is on the hook because there are no rules requiring disclosure of all transactions. The buyers come from groups like hedge funds, airlines, refiners and utilities. “The folks who were willing to sell it were left holding the bag when prices moved,” The swift decline in U.S. oil prices -- $107.26 on June 20, $46.39 seven months later -- caught market participants by surprise. Harold Hamm, the billionaire founder of Continental Resources Inc., cashed out his company’s protection in October, betting on a rebound. Instead, crude kept falling.

Wall Street's Biggest Banks May Have To Make Good On $26 Billion In Oil Hedges - Selling billions of dollars worth of insurance on things that turn out to, on occasion, exhibit extraordinary volatility can be a dangerous thing — just ask AIG which was sucked dry by collateral calls from a certain vampire squid when the M2M value of the MBS the company so foolishly insured cratered in 2008 and Goldman came banging on the door for its money. And while the value of the price hedges (i.e. insurance contracts) the US banking sector has sold to the country’s now beleaguered shale drillers may not be large enough to present an imminent systemic risk, as Bloomberg notes, “$26 billion is still $26 billion”For U.S. shale drillers, the crash in oil prices came with a $26 billion safety net. That’s how much they stand to get paid on insurance they bought to protect themselves against a bear market -- as long as prices stay low…The fair value of hedges held by 57 U.S. companies in the Bloomberg Intelligence North America Independent Explorers and Producers index rose to $26 billion as of Dec. 31, a fivefold increase from the end of September, according to data compiled by Bloomberg. Though it’s difficult to determine who will ultimately lose money on the trades and how much, a handful of drillers do reveal the names of their counterparties, offering a glimpse of how the risk of falling oil prices moved through the financial system.  More than a dozen energy companies say they buy hedges from their lenders, including JPMorgan, Wells Fargo, Citigroup and Bank of America… Of course, as Bloomberg goes on to point out, these are the same banks which helped to finance the shale bonanza in the first place and as we recently saw with Standard Chartered, collapsing crude prices can spell trouble if you’re in the commodities loans business.

"I’m The First To Say: I Can’t Do It" - The Energy Junk-Bond Implosion Just Claimed Its First Victim -- The universe of entities who have blown up in the past year trading oil and commodities is getting increasingly more crowded and includes among them such former luminaries as one-time oil trading god (if mostly in the eyes of Citigroup) Andy Hall. However, until now there not been any prominent casualties among the group of indirect investors in the energy space, those investing in the stocks or debt of energy names, and especially those most at risk from the oil price collapse: junk bond investors. That changed today when as WSJ reported earlier, Kamunting Street, which managed about $1 billion at its peak, announced it was returning capital to investors, as a result of plunging oil prices and wrong way junk bond bets tied to hard-hit energy companies which had gone sour over the past nine months.

"Another Crisis Is Coming": Jamie Dimon Warns Of The Next Market Crash -- The Treasury flash crash and similar recent events in currency markets are "shots across the bow," Jamie Dimon says in his latest letter to shareholders. The JPM chief goes on to warn, as we have for years, that declining liquidity in credit markets is likely to exacerbate future crises: "The likely explanation for the lower depth in almost all bond markets is that inventories of market-makers’ positions are dramatically lower than in the past. For instance, the total inventory of Treasuries readily available to market-makers today is $1.7 trillion, down from $2.7 trillion at its peak in 2007. The trend in dealer positions of corporate bonds is similar."

Bitcoin Foundation is “effectively bankrupt,” board member says - One of the newly elected board members of the Bitcoin Foundation—the 2.5-year-old organization that was meant to bring order to the famously open source and freewheeling cryptocurrency—has declared the group "effectively bankrupt."  While the Bitcoin Foundation obviously does not have control over Bitcoin itself, it’s the closest thing to a public face that the community has. Individual memberships start at $25, while corporate memberships start at $1,000 annually. The non-profit’s own tax filings from 2013 show that it ended that year with over $4.7 million in total assets—nearly five times as much as it had at the same time the previous year. It has yet to release financial details for 2014. The organization was founded in 2012 by a number of Bitcoin luminaries who have since fallen, and the group itself has been marred by controversy in recent months. Of its original five founders, one is now in prison (Charlie Shrem), another oversaw the collapse of the largest Bitcoin exchange (Mark Karpeles), and yet another has since left the United States for a Caribbean nation known for offshore banking (Roger Ver). Of the original board members, only Bitcoin lead developer Gavin Andresen has remained.  The Bitcoin Foundation did not immediately respond to Ars’ request for comment, nor did it address the issue on Twitter or its blog.

U.S. announces first antitrust e-commerce prosecution (Reuters) - The U.S. Department of Justice's antitrust division on Monday announced its first prosecution specifically targeting Internet commerce, saying a man has agreed to plead guilty to conspiring to illegally fix the prices of posters he sold online. David Topkins was accused of conspiring with other poster sellers to manipulate prices on Inc's Amazon Marketplace, a website for third-party sellers, from Sept. 2013 to Jan. 2014, according to papers filed in San Francisco federal court. The Justice Department said Topkins also agreed to pay a $20,000 criminal fine and cooperate with its probe. His plea agreement requires court approval. Contact information for Topkins' lawyer was not immediately available. No one answered a phone call to a David Topkins listed in San Francisco. Topkins was accused of conspiring with other poster sellers to use algorithms, for which he wrote computer code, to coordinate price changes, and then share information about poster prices and sales. The Justice Department said this activity violated the Sherman Act, a federal antitrust law, by causing posters to be sold at "collusive, non-competitive" prices.

Pawn to cushion payday lenders from regulatory blow (Reuters) - Payday lenders that have substantial pawn operations are better positioned to absorb the blow from proposed U.S. regulations aimed at cracking down on an industry that has been criticized for saddling borrowers with debt they cannot repay. The Consumer Financial Protection Bureau has proposed a number of guidelines for the industry, including limiting the number of loans per customer to six per year. The move is expected to hurt lending volumes and revenue by as much as 75 percent, as payday lenders make a majority of their money from borrowers who take out 10 or more loans per year. The proposals may result in smaller lenders exiting the market, while companies with both payday and pawn operations will benefit, industry experts said. Payday lenders make small loans that borrowers agree to repay in a short time, such as when they receive a paycheck. Pawnbrokers lend money against valuables such as jewelry. While payday lenders say they help people who are strapped for cash, critics say borrowers often roll over or refinance loans rather than paying them back, racking up debt due to high interest rates and fees. U.S. payday lenders extend more than $38 billion in loans annually, according to the Community Financial Services Association of America, an industry body.

U.S. Justice Department Says It Will Ignore Federal Law and Prosecute People for Medical Marijuana Despite Congressional Spending Ban | Drug Policy Alliance: A spokesperson for the U.S. Department of Justice (DOJ) told the Los Angeles Times that a bi-partisan amendment passed by Congress last year prohibiting DOJ from spending any money to undermine state medical marijuana laws doesn't prevent it from prosecuting people for medical marijuana or seizing their property. The statement comes as the agency continues to target people who are complying with their state medical marijuana law. This insubordination is occurring despite the fact that members of Congress in both parties were clear that their intent with the amendment was to protect medical marijuana patients and providers from federal prosecution and forfeiture. "The Justice Department is ignoring the will of the voters, defying Congress, and breaking the law," said Bill Piper, director of national affairs for the Drug Policy Alliance. "President Obama and Attorney General Eric Holder need to rein in this out-of-control agency." Twenty-three states and the District of Columbia have laws that legalize and regulate marijuana for medicinal purposes. Twelve states have laws on the books regulating cannabidiol (CBD) oils, a non-psychotropic component of medical marijuana which some parents are utilizing to treat their children’s seizures. Four states and the District of Columbia have legalized marijuana for non-medical use.

Fast Foreclosures, Slow Foreclosures - At the onset of the current foreclosure crisis, banks bemoaned their inability to get homeowners in default to respond to their generous offers of loan modifications and other foreclosure alternatives. Today the banking industry complains of spending too much time talking to homeowners, claiming that long foreclosure delays resulting from homeowners massively coming in from the cold are just wasting everyone’s time and money. This policy debate mirrors a long-standing academic debate: do states using a slower judicial foreclosure process impose unnecessary costs compared with states using the more rapid nonjudicial foreclosure sale process?  Clearly taking the “judicial foreclosures are unnecessarily costly” side is a recent paper by Philadelphia Fed economists. The paper’s thesis is that the judicial foreclosure process, by extending foreclosure timelines, imposes significant costs and has few if any benefits. The evidence marshaled, however, falls considerably short of proving this thesis. In brief, the cause of long foreclosure times is misattributed to the judicial/nonjudicial foreclosure variable, while the benefits of foreclosure delays, due to judicial foreclosure or not, are given a cursory and misleading treatment. On the cost side, there is no doubt that delaying an inevitable foreclosure sale will increase the mortgage investor’s loss, by adding more unpaid interest, legal fees and other carrying costs. The first analytical problem is laying the blame for these delays on the use of judicial, as opposed to nonjudicial, foreclosure. There are important state-related variables, apart from the choice of judicial foreclosure, that account for long timelines between foreclosure referral and REO liquidation in some states.

Black Knight February Mortgage Monitor: Foreclosure Rate still "175 percent above pre-crisis norms"  -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for February today. According to BKFS, 5.36% of mortgages were delinquent in February, down from 5.56% in January. BKFS reported that 1.58% of mortgages were in the foreclosure process, down from 2.22% in February 2014.  This gives a total of 6.94% delinquent or in foreclosure. It breaks down as:
• 1,646,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 1,067,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 800,000 loans in foreclosure process.
For a total of ​​3,512,000 loans delinquent or in foreclosure in February. This is down from 4,106,000 in February 2014. From Black Knight: Delinquency and foreclosure inventories continue to trend towards pre-crisis norms February’s delinquency rate, while still 17 percent above the pre-crisis norm of 4.6 percent, was down 49 percent from its January 2010 peak of 10.6 percent   At 1.58 percent, the foreclosure rate remained 175 percent above precrisis norms, but was still down 63 percent from its October 2011 peak.  Also from Black Knight: Black Knight revisited its periodic review of potential refinance candidates, looking at broad-based eligibility criteria, and found that in light of recent mortgage interest rate decreases, the population of potential refinance candidates currently sits at 7.1 million. However, this number has the potential to decline should rates climb, even marginally. “Black Knight looked at the population of borrowers whose current interest rates – as well as credit scores and loan-to-value ratios – mark them as good candidates for refinancing,” said Barnes. “In February 2014, there were approximately 4.1 million borrowers who could both benefit from and potentially qualify for refinancing their mortgages. As of the end of February 2015, there were a total of 7.1 million potential refinance candidates.

Black Knight's February Mortgage Monitor: 7.1 Million Borrowers Could Benefit From a Refinance; Florida Accounted for 26 Percent of Distressed Sales in 2014 --: Today, the Data and Analytics division of Black Knight Financial Services released its latest Mortgage Monitor Report, based on data as of the end of February 2015. Black Knight revisited its periodic review of potential refinance candidates, looking at broad-based eligibility criteria, and found that in light of recent mortgage interest rate decreases, the population of potential refinance candidates currently sits at 7.1 million. However, according to Trey Barnes, Black Knight's senior vice president of Loan Data Products, this number has the potential to decline should rates climb, even marginally. "Black Knight looked at the population of borrowers whose current interest rates -- as well as credit scores and loan-to-value ratios -- mark them as good candidates for refinancing," said Barnes. "In February 2014, there were approximately 4.1 million borrowers who could both benefit from and potentially qualify for refinancing their mortgages. Through a combination of declining interest rates and increased equity among borrowers driven by home price increases, an additional three million borrowers now meet the same broad-based eligibility criteria as compared to one year prior. As of the end of February 2015, there were a total of 7.1 million potential refinance candidates.This month's Mortgage Monitor also leverages data from Black Knight's Home Price Index (HPI) to examine 2014 real estate transactions. The data shows that traditional market sales outpaced 2013 levels, although overall real estate sales were down for the year due to a decrease in distressed transactions (i.e., REO or short sales). Nationally, just 12.7 percent of 2014 residential real estate transactions were distressed sales, the lowest such share since 2007; down from 17 percent the year before and a high of 33 percent in 2011. Florida led the country in 2014 with 25 percent of all transactions in the state coming from distressed sales, and in fact, accounted for 26 percent of all distressed sales in the United States.

CFPB Home Mortgage Disclosure Act Proposal May Enable Redlining -- The Consumer Financial Protection Bureau (CFPB) is in the process of fixing holes in the Home Mortgage Disclosure Act (HMDA), the most important law for identifying and prosecuting some of the most damaging discriminatory practices in the history of our country. Reforming HMDA, which is a key requirement of the Dodd-Frank Act, should improve the abilities of regulators and housing advocacy organizations to spot and stop the types of predatory lending that helped fuel the 2008 financial crisis.  However, nowhere in the CFPB’s 572-page HMDA proposal is there any requirement for financial institutions to include information about mortgage modifications. The CFPB needs to respond to widespread concerns and address this gaping omission. Reports, including one from last year by the U.S. Government Accountability Office (GAO), indicate that large financial institutions could be violating fair lending laws in the ways they handle mortgage modifications for minority homeowners, the very people who suffered the most when the housing bubble burst. Mortgage modifications are a potential lifeline for many of the seven million American homeowners who are seriously underwater—meaning they owe at least 25 percent more on their mortgages than the estimated value of their homes. For many of these homeowners the Great Recession hasn’t ended—as the economists Atif Mian and Amir Sufi have documented in their work, areas with high percentages of underwater homeowners struggle with higher levels of foreclosure and higher levels of unemployment. Underwater homeowners also are particularly vulnerable to predatory mortgage servicing by the financial institutions that collect their mortgage payments and tack on late fees and other charges. “There is an element of ‘suck the loan dry,'” Howard Glaser, a former top official at the U.S. Department of Housing and Urban Development, once told me in an interview, “And then once you have gotten everything out of it that you can, you leave the carcass on the side of the road.’

MBA: Purchase Mortgage Applications Increased, Highest level since July 2013 - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 0.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 3, 2015. ...The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 7 percent from one week earlier, reaching its highest level since July 2013. ... The unadjusted Purchase Index ... was 12 percent higher than the same week one year ago “Purchase mortgage application volume last week increased to its highest level since July 2013, spurred on by still low mortgage rates and strengthening housing markets,” The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.86 percent from 3.89 percent, with points decreasing to 0.27 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. 2014 was the lowest year for refinance activity since year 2000. 2015 will probably see a little more refinance activity than in 2014, but not a large refinance boom. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 12% higher than a year ago.

Freddie Mac: 30 Year Mortgage Rates decrease to 3.66% in Latest Weekly Survey - From Freddie Mac today: Mortgage Rates Lower on Weak Jobs Report Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving lower following a weaker than expected jobs report for March. ...30-year fixed-rate mortgage (FRM) averaged 3.66 percent with an average 0.6 point for the week ending April 9, 2015, down from last week when it averaged 3.70 percent. A year ago at this time, the 30-year FRM averaged 4.34 percent.  15-year FRM this week averaged 2.93 percent with an average 0.6 point, down from last week when it averaged 2.98 percent. A year ago at this time, the 15-year FRM averaged 3.38 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 (31 bps) from the all time low of 3.35% in late 2012, but down from 4.34% a year ago. 

CoreLogic: House Prices up 5.6% Year-over-year in February -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).From CoreLogic: CoreLogic Reports National Homes Prices Rose by 5.6 Percent Year Over Year in February 2015 CoreLogic® ... today released its February 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 5.6 percent in February 2015 compared to February 2014. This change represents three years of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 1.1 percent in February 2015 compared to January 2015. Including distressed sales, 26 states and the District of Columbia were at or within 10 percent of their peak prices. Six states, including Colorado (+9.8 percent), New York (+8.2 percent), North Dakota (+7.7 percent), Texas (+8.5 percent), Wyoming (+8.4 percent) and Oklahoma (+5.2 percent), reached new home price highs since January 1976 when the CoreLogic HPI started. Excluding distressed sales, home prices increased by 5.8 percent in February 2015 compared to February 2014 and increased by 1.5 percent month over month compared to January 2015. ...This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.  The index was up 1.1% in February, and is up 5.6% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase.

FNC: Residential Property Values increased 4.3% year-over-year in February --FNC released their February 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.6% from January to February (Composite 100 index, not seasonally adjusted).    The 10 city MSA, the 20-MSA and 30-MSA RPIs all increased by about 1% in February. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The year-over-year (YoY) change was about the same in February as in January, with the 100-MSA composite up 4.3% compared to February 2014. For FNC, the YoY increase has been slowing since peaking in March at 9.0%. The index is still down 19.4% from the peak in 2006 (not inflation adjusted).

Zillow: February Case-Shiller House Price Index year-over-year change expected to be about the same as in January  -- The Case-Shiller house price indexes for January were released last week. Zillow forecasts Case-Shiller a month early - now including the National Index - and I like to check the Zillow forecasts since they have been pretty close. From Zillow: Expect More of the Same From Case-Shiller in Feb. The January S&P/Case-Shiller (SPCS) data published yesterday showed healthy home price appreciation largely in line with prior months, with 4.5 percent annual growth in the U.S. National Index in January, down slightly from 4.6 percent annual growth in December. Annual appreciation in home values as measured by SPCS has been less than 5 percent for the past five months. We anticipate this trend to continue, with next month’s (February) national index expected to rise 4.4 percent, in line with historically normal levels between 3 percent and 5 percent.The 10- and 20-City Composite Indices both experienced modest bumps in annual growth rates in January; the 10-City index rose 4.4 percent and the 20-City Index rose to 4.6 percent–up from rates of 4.3 percent and 4.5 percent, respectively, in December. The non-seasonally adjusted (NSA) 10- and 20-City indices were flat from December to January, and we expect both to remain flat in February (NSA).

The Current Trend for U.S. Median New Home Sale Prices --Beginning in January 2014, the trajectory of median new home sale prices in the U.S. with respect to median household income began to follow a new trend, with typical new home sale prices increasing at an average pace of nearly $11 for every $1 increase in typical household incomes.  The good news is that rate of increase is less than half that observed during the primary inflation phases of the first and second housing bubbles in the U.S. The bad news is that rate of increase with respect to household incomes is still 2.7-3.3 times greater than those recorded during periods of stable growth in the periods preceding the inflation phases of real estate bubbles.  As we noted in our previous installment, the current pace of growth is consistent with that observed in the latter portion of the inflation of the first housing bubble.   Now, it's important to note that this situation doesn't mean that a new crash in housing prices is imminent, or even likely. Now that real estate investors have established a shortage of affordably-priced homes in the U.S. market, U.S. homebuilders are now better able to exploit the situation by building more affordably-priced homes, which several have begun to do in recent months.

Warren Buffett's mobile home empire preys on the poor - Center for Public Integrity: Denise Pitts walked into the pawn shop not far from where she bought her mobile home in Knoxville, Tennessee, and offered up her wedding rings for $100. Her marriage wasn’t over, but her husband was battling cancer and, Pitts said, her mortgage company told her the only way to keep a roof over his head would be to sell everything else. Across the country in Ephrata, Washington, Kirk and Patricia Ackley sat down to close on a new mobile home, only to learn that the annual interest on their loan would be 12.5 percent rather than the 7 percent they said they had been promised. They went ahead because they had spent $11,000, most of their savings, to dig a foundation. And near Bug Tussle, Alabama, Carol Carroll has been paying down her home for more than a decade but still owes nearly 90 percent of the sale price — and more than twice what the home is worth. The families’ dealers and lenders went by different names — Luv Homes, Clayton Homes, Vanderbilt, 21st Mortgage. Yet the disastrous loans that threaten them with homelessness or the loss of family land stem from a single company: Clayton Homes, the nation’s biggest homebuilder, which is controlled by its second-richest man — Warren Buffett. Buffett’s mobile home empire promises low-income Americans the dream of homeownership. But Clayton relies on predatory sales practices, exorbitant fees, and interest rates that can exceed 15 percent, trapping many buyers in loans they can’t afford and in homes that are almost impossible to sell or refinance, an investigation by The Center for Public Integrity and The Seattle Times has found.

The Mobile-Home Trap: How a Warren Buffett Empire Preys on the Poor -- Kirk and Patricia Ackley, of Ephrata, spent thousands to prepare their land for their Clayton mobile home, then were stuck with a higher loan rate than promised. The lender, also a Clayton company, would not let them refinance and took their home away. The disastrous deal ruined their finances and nearly their marriage. But until informed recently by a reporter, they didn’t realize that the homebuilder (Golden West), the dealer (Oakwood Homes) and the lender (21st Mortgage) were all part of a single company: Clayton Homes, the nation’s biggest homebuilder, which is controlled by its second-richest man — Warren Buffett. Buffett’s mobile-home empire promises low-income Americans the dream of homeownership. But Clayton relies on predatory sales practices, exorbitant fees, and interest rates that can exceed 15 percent, trapping many buyers in loans they can’t afford and in homes that are almost impossible to sell or refinance, an investigation by The Seattle Times and Center for Public Integrity has found.  Berkshire Hathaway, the investment conglomerate Buffett leads, bought Clayton in 2003 and spent billions building it into the mobile-home industry’s biggest manufacturer and lender. Today, Clayton is a many-headed hydra with companies operating under at least 18 names, constructing nearly half of the industry’s new homes and selling them through its own retailers. It finances more mobile-home purchases than any other lender by a factor of six. It also sells property insurance on them and repossesses them when borrowers fail to pay.  Former dealers said the company encouraged them to steer buyers to finance with Clayton’s own high-interest lenders.

Vacation-Home Sales Hit Record, Proving Rich People Still Rich -- "Vacation-home sales account for one-fifth of all home sales and 'that should more or less rise over the next five to 10 year' as the income and number of vacation-home buyers increases," Moody's tells WSJ. That's good news because with America's "supervisory" wages on the rise and with Russian oligarchs dissatisfied with their domestic situation, a healthy market for "secondary" residences may prove critical.

Mortgage Equity Withdrawal Still Negative in Q4 2014  - Note: This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008. The following data is calculated from the Fed's Flow of Funds data (released this morning) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW", but there is still little (but increasing) MEW right now - and normal principal payments and debt cancellation. For Q4 2014, the Net Equity Extraction was minus $35 billion, or a negative 1.1% of Disposable Personal Income (DPI).  This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.  There are smaller seasonal swings right now, perhaps because there is a little actual MEW (this is heavily impacted by debt cancellation right now).The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $5 billion in Q3. This was only the third quarterly increase in mortgage debt since Q1 2008.The Flow of Funds report also showed that Mortgage debt has declined by almost $1.3 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. With residential investment increasing, and a slower rate of debt cancellation, it is possible that MEW will turn positive again soon.

Americans Pull Back on Credit-Card Debt in February - Americans pared down their credit-card balances in February, the latest sign consumers are spending cautiously to start the year. Outstanding consumer credit–reflecting Americans’ total debt outside of mortgages–grew in February, but the gain was entirely driven by car loans and education debt rather than credit cards. Credit-card balances posted the largest percentage decline since April 2011. Total debt balances increased by a seasonally adjusted $15.52 billion to $3.34 trillion in February, the Federal Reserve said Tuesday. That reflected a 5.59% gain at an annual rate. Economists surveyed by The Wall Street Journal had expected household debt to grow $12 billion in February. The latest figures showed household debt grew by $10.8 billion in January, than the initially estimated $11.56  billion gain. The report suggests consumers reined in their credit-card spending in recent months. Revolving credit, reflecting credit-card debt, fell at a 4.97% annualized rate in February. That marked the third decline for the measure in the past four months. Nonrevolving credit, representing mostly auto loans and student debt, grew at a 9.44% annualized rate in February. That was the largest monthly increase in two years. The report is consistent with other data showing that consumers are being careful about extending themselves, especially outside of auto purchases. Household spending advanced a mild 0.1% in February after declining the prior two months, the Commerce Department said in late March. Spending on goods and services, when adjusted for inflation, declined slightly for the first time in 10 months.

Revolving Debt Crashes Most In Four Years, As Student, Car Loans Go Exponential; Bank Lending Freezes - There was only bad news in the just released Fed consumer credit report for the month of February. First, the "good credit", the one that consumer should load up on when they feel comfortable about the future, i.e., credit card, or revolving debt, continued its recent plunge, and in February crashed by $3.7 billion, following January's $1 billion plunge. This was the worst month for revolving credit since December 2010 and explains perfectly why the consumer has literally gone into hibernation - it has nothing to do with the weather, and everything to do with the unwillingness to "charge" purchases, which in turn is a clear glimpse into how the US consumer sees their financial and economic future.

 March Consumer Spending Hits Three-Year Low For Average Americans -- With more than three quarters of US workers trapped in what we will call “wage growth hell,” and whose only chance at seeing a pay hike appears to rest on holding out for a promotion that’s probably not forthcoming, it doesn’t exactly come as a surprise that self-reported consumer spending hit a three-year low for March last month and has trended sharply lower this year when compared to 2014. Of course those with higher incomes hiked their spending by 75% more than those with middle- and lower-incomes. Here’s more via Gallup: Average self-reports of spending in March increased by $7 among upper-income Americans -- those with annual household incomes of $90,000 a year or more -- to reach $144. Among middle- and lower-income Americans, those with incomes that are less than $90,000, spending increased by $4 from February to reach $75 in March. The broad trend shows spending recovering after reaching lows during the Great Recession and its aftermath, but for the first months of 2015, spending has been lower than it was for most months last year.

BofA: "Farewell winter blues" - We recently saw another spate of recession calls (my response was R-E-L-A-X). There are several reasons for the recent economic weakness including seasonal factors, poor weather, the West Cost port slowdown, the stronger dollar and lower oil prices (the negative impacts are more obvious, but overall lower prices will be a positive).  It looks like consumer spending in March was solid. Excerpts from a research note from BofA: "Farewell winter blues" There is finally good news to report on the US consumer. Spending on BAC credit and debit cards was up sharply in March, following a string of weak reports. Our measure of core retail sales - ex-autos and gasoline sales - increased 0.9% mom on a seasonally adjusted basis in March. This is a notable improvement from the past three months of essentially no growth. If we include gasoline station sales, the swing is even more dramatic given the significant adjustment in gasoline prices. ... As always when analyzing economic data, we have to be careful not to overreact to just one report. The gain in March follows several months of weak data, making the comparisons more favorable. Moreover, the early Easter holiday might have sent people shopping in late March. The weather is also an important factor; ... the regions with the harshest winter weather showed the largest declines in February and strongest gains in March.  We are hopeful that the gain in March is the beginning of a healthier trajectory for consumer spending. As we have been arguing, all signs point to a solid consumer backdrop. ... Households have repaired their balance sheets and animal spirits have improved with consumer confidence trending higher. We are therefore holding to our core view that consumer spending will accelerate into 2Q, providing much-need support to GDP tracking.

How Rich and Poor Spend (and Earn) Their Money -- For many Americans, the rise in food and housing prices is a tough squeeze. That’s because—even in an era with low overall inflation—low-income Americans spend a disproportionate share of their money on food and housing. New data from the Labor Department show the extent of the discrepancy. The bottom 10% of Americans, by income, devote 42% of their spending to housing and an additional 17% to food–nearly 60% of their total spending, according to the Consumer Expenditures Survey. By contrast, the wealthiest 10% of Americans dedicate only 31% of their spending to housing and 11% to food–closer to 40% of total spending. This underscores one reason that inflation feels different household to household: People spend their money in such different ways. A parent with children in college or daycare might scoff at the notion that inflation has been low for the last five years. Conversely, someone with no car payment and no mortgage but who does a lot of driving may be feeling flush from the plunge in gas prices. This year, the expenditure survey added new data breaking down Americans into tenths. Approximately 12.5 million consumer units are in each tenth. In the bottom three brackets are individuals earning around $20,000 a year or less, and spending more than they bring in. The survey breaks out their sources of income. The poorest 10% receive more public assistance than any other group. The second 10% receive more than half their income from Social Security and retirement programs. The third and fourth 10% also receive large shares of their income from retirement programs, suggesting that retirees make up a large share of the lower-middle part of the income distribution.

What's the culprit behind recent retail sales and jobs weakness? -- What is behind the recent slowdown in so much economic data?  Candidates include the weak global economy and the related strong dollar, the West Coast ports strike, and unusually poor winter weather, among others. The issue is important because, while winter has given way to spring, and the ports dispute has been settled, the Oil patch weakness is continuing and may even intensify.Breaking the reports down on a state by state basis helps us determine which of the potential issues was the primary driver of the data.  To cut to the chase, it looks like Oil patch weakness is the prime ingredient in the punk March jobs report, although weather may have played a supporting role.  By contrast, weather appears to have been the primary culprit in hiring in February, and poor retail sales in January.  We will get further information on these later this month, with state-by-state breakdowns in the unemployment rate, and state revenue reports for March, which will reflect actual retail sales in February. Ironman at Political Calculations offers supporting data that the March employment report reflected a particularly bad month in the Oil patch.  As I pointed out the other day, there was a big increase to over 300,000  during the weeks ending February 7, 21, and 28.  He shows us this graph of how much of that increase can be traced to the 9 states most impacted by fracking:   Note that the big increase starts in February, increasing to 15,000 per week. This showed up in the March employment report, which of course nets hires and fires.  Meanwhile, on Tuesday we got the JOLTS data for February.  Here is Doug Short's graph of the monthly numbers and 6 month moving averages for openings, hires, and discharges:

U.S. wholesale inventories climb 0.3% in February - U.S. wholesale inventories rose 0.3% in February as wholesale sales fell 0.2%, perhaps a sign that companies experienced less demaind in late winter that could cause them to temporarily scale back production. At February's sales pace, the inventory-to-sales ratio was 1.29, up from 1.2 a year ago. Inventories of durable goods increased 0.3% in February, while inventories of nondurables rose 0.2%.

Wholesale inventories up 0.3% in February, versus 0.2% gain estimates: U.S. wholesale inventories rose in February as sales remained weak, suggesting wholesalers might have little incentive to aggressively restock warehouses in coming months. The Commerce Department said on Thursday wholesale inventories rose 0.3 percent after an upwardly revised 0.4 percent increase in January. Economists polled by Reuters had forecast stocks at wholesalers rising 0.2 percent in February after a previously reported 0.2 percent gain in January.  Sales at wholesalers fell 0.2 percent in February after declining 3.6 percent the prior month. At February's sales pace it would take wholesalers 1.29 months to clear shelves, unchanged from January.

Recession 2.0: Abysmal Wholesale Sales Join Factory Orders In Confirming US Economic Contraction -- Despite another data series revision by the Department of Commerce, there was no way to put lipstick on the pig of America's wholesale trade data, and as reported moments ago, the all important merchant sales for February dropped for 3rd month in a row in February, the longest stretch since the last recession.  What's worse however, is that the annual pace of decline has now stretched over both January and February, confirming that 2015 is now officially a year of contraction for the US economy. As a reminder, every time this series suffers an annual decline, there is a recession.

Factories Be Warned: U.S. Wholesalers Face an Inventory Glut - If wholesalers have anything to say about it, America's manufacturers may be in the doldrums for a while. Sales of durable goods at U.S. distributors in January and February suffered the biggest two-month drop since the recession's last gasp in early 2009, figures from the Commerce Department showed Thursday in Washington. As demand weakened, stockpiles built up, sending the inventory-to-sales ratio for those long-lasting goods up to an almost six-year high. Metals, machinery and professional equipment such as computers are among the products sitting in warehouses waiting for buyers. That's an ominous sign for economists such as Michael Englund. Bloated stocks at wholesalers mean more order books at factories may be a bit leaner, which could leave manufacturing in a funk. Bookings for U.S.-made durable goods declined in three of the four months through February. The Institute for Supply Management's factory index has dropped for five consecutive months, reaching an almost two-year low in March. Too-much inventory "certainly explains why the production-sentiment measures have been weak," said Englund, chief economist at Action Economics LLC in Boulder, Colorado. "They may stay weak for at least three to six months as we work through the displacement from the mining sector."

Update: Framing Lumber Prices down Year-over-year - Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.  The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).  Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand), however prices didn't fall as sharply either.This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through March 2015 (via NAHB), and 2) CME framing futures. Right now Random Lengths prices are down about 9% from a year ago, and CME futures are down 13% year-over-year.

U.S. Import Prices Resume Downward Trend in March - U.S. import prices fell in March as rising petroleum costs were offset by declining prices for other goods, a sign of muted inflation that supports the view the Federal Reserve will probably not raise interest rates in June. The Labor Department said on Friday import prices dropped 0.3 percent last month after a downwardly revised 0.2 percent gain in February. Economists polled by Reuters had forecast import prices slipping 0.3 percent after a previously reported 0.4 percent increase in February, when prices advanced for the first time after declining for seven straight months. In the 12 months through March, prices plunged 10.5 percent, the largest drop since September 2009. Lower crude oil prices and a buoyant dollar have dampened price pressures, leaving inflation running well below the Fed's 2 percent target. Officials at the central bank, some of whom have shown a willingness to consider a rate hike at the June policy-setting meeting, view the low inflation environment as transitory. But the combination of low inflation and weak economic growth in the first quarter has prompted many economists to push back their rate hike expectations to later in the year. And some economists believe monetary policy tightening will only begin in 2016. The Fed has kept its key short-term interest rate near zero since December 2008. Last month, imported petroleum prices rose 0.8 percent after jumping 5.2 percent in February.

Auto Import Prices Tumble Most On Record As Import Prices Plunge Most Since Financial Crisis - Import Prices dropped YoY by 10.5%, the biggest sequential drop since Dec 2008 (following the Lehamn shock). Priod data was revised lower and March's MoM import prices dropped 0.3% after rising 0.2% in Feb (revised lower from a 0.4% rise). US Auto import prices suffered their biggest YoY drop on record as currency wars and implicitly the strong dollar start to bite (even as imported fuels prices rose 0.4%). Other good news for Americans is that food prices are down 1.1%.

Auto-Loan Bubble Endgame - Used-Car Prices Have Stalled -- As auto-loan volumes explode (and terms are extended), many of the post-cash-for-clunkers herd are rapidly coming to the realization that the loan they are carrying (and increasingly not paying) is on a wasting asset. As Goldman Sachs notes, The Manheim Index measured 124.5 in March, essentially used-car prices flat yoy after four consecutive months of solid increases. On a sequential basis, the index posted a 0.5% decline in March, following a 0.2% decline in February, confirming Goldman's expectations for a correction in residual values going forward, driven by rising inventory in the off-lease channel... and this pricing pressure is likely to spill over into new car prices.

Hotels near Record Occupancy Pace --From STR: US hotel results for week ending 4 April - The U.S. hotel industry recorded mixed results in the three key performance measurements during the week of 29 March through 4 April 2015, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy decreased 4.0 percent to 62.9 percent. Average daily rate increased 3.4 percent to finish the week at US$116.01. Revenue per available room for the week was down 0.7 percent to finish at US$72.93. “The industrywide decline in RevPAR was driven by softness related to Passover and Easter,” said Brad Garner, STR’s senior VP for client relationships. “This was the first time in 49 weeks that U.S. RevPAR was negative for a week—the longest stretch of positive weekly RevPAR growth STR has ever tracked. The last time RevPAR went negative for a week (-0.3 percent) was the week heading into Passover and Easter in 2014. We would anticipate a quick RevPAR return to normalcy and another positive streak into the foreseeable future. STR is projecting an annual RevPAR increase of 6.4 percent in 2015.” Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average. Hotels are now in the Spring travel period and business travel will be solid over the next couple of months (the decline was related to the timing of Easter and Passover).

Administration Touts Export-Driven Jobs in Quest for Support on Trade - Some 11.7 million jobs were supported by exports last year, with almost 10% of those jobs coming from Texas, according to a report released by the Obama administration on Thursday. The state-by-state look at the benefits of exports was another blast in the administration’s concerted campaign this week to build support for its trade agenda as Congress begins to debate whether to grant President Barack Obama expanded trade promotion authority in coming weeks. Commerce Secretary Penny Pritzker told reporters Thursday she expected the Senate could unveil a draft of a bill to ease the passage of trade agreements early next week. “We’re anxiously awaiting to see the language,” she said. The state analysis of trade showed California, Washington, New York and Illinois rounded out the top five states with jobs supported by exports last year, behind Texas. Those five accounted for more than 25% of all export-backed jobs, according to the report, which was compiled by the Commerce Department and the Office of the U.S. Trade Representative. The report also provides a breakdown by state of exports to the 11 other countries who are negotiating the Trans-Pacific Partnership, or TPP, a trade deal with Japan, Australia, Canada, Mexico, and other Pacific rim nations. The Obama administration is pursuing legislation known as trade promotion authority that allows for up-or-down votes on trade deals. Obtaining so-called “fast track” authority would give the U.S. the leverage to “speak with one voice…and make sure we can get the best deal” on the TPP, said U.S. Trade Representative Michael Froman on Thursday.

The True Myths on the Trans-Pacific Partnership – Dean Baker - The proponents of the Trans-Pacific Partnership (TPP) are doing everything they can to try to push their case as they prepare for the fast-track vote before Congress this month. Today, Roger Altman, a Wall Street investment banker and former Clinton administration Treasury official weighed with a NYT column, co-authored by Richard Haass, the President of the Council on Foreign Relations. They begin by giving us three myths, all of which happen to be accurate depictions of reality. The first "myth" is that trade agreements have hurt U.S. manufacturing workers and thereby the labor market more generally. Altman and Haas cite work by M.I.T. economist David Autor showing that trade with China has reduced manufacturing employment by 21 percent, but then assert that the problem is trade not trade agreements. They tell us: "the United States does not have a bilateral trade deal with China." Of course if China became a party to the TPP the United States would still not have a bilateral trade agreement with China. (That's right, the TPP is a multilateral trade agreement, not a bilateral trade agreement.) This indicates the level of silliness to which TPP proponents must turn to push their case. As a practical matter, a trade agreement, the WTO, was enormously important in the increase in China's exports to the United States. The second "myth" is: "the TPP would degrade labor and environmental standards and raise drug costs. .... As for the environment, there is nothing new in the TPP that would affect existing dispute-resolution mechanisms. Finally, it is far from certain that new protections for drug companies would lead to higher drug costs." It is simply not true that "there is nothing new in the TPP that would affect existing dispute-resolution mechanisms." Of course we don't have the final text, but based on past agreements like NAFTA, foreign investors would be able to contest a wide range of labor and environmental issues in the investor-state dispute settlement tribunals established by the TPP.  "A third myth is that the TPP is flawed because it won’t prevent countries from competing unfairly by devaluing their currencies to stimulate exports."  Their argument is that we are too dumb to tell the difference between expansionary monetary policy (which will typically lead to a lower value for a currency) and a deliberate effort to lower the value of a currency by selling large amounts in international currency markets and buying up foreign currencies. Their response that this should be taken up at the I.M.F. is another sign of the contempt they have for the general public. The United States has never raised a currency case with the I.M.F. in its almost 70 years of existence.

50 Reasons We Cannot Afford the TPP - How would your state be impacted by the Trans-Pacific Partnership (TPP) – a controversial “free trade” agreement (FTA) being negotiated behind closed doors with 11 Pacific Rim countries?  Click here for a state-by-state guide to the specific outcomes of the status quo “trade” model that the TPP would expand.  Get the latest government data on how many jobs have been lost in your state to unfair trade, how much inequality has risen, how many family farms have disappeared, and how large your state’s trade deficit with FTA countries has grown.  The TPP would extend the North American Free Trade Agreement (NAFTA) model that has contributed to massive U.S. trade deficits and job loss, downward pressure on middle class wages, unprecedented levels of inequality, lagging exports, new floods of agricultural imports, and the loss of family farms. These impacts have been felt across all 50 U.S. states.  Here is a sampling of the outcomes:

  • North Carolina: North Carolina has lost more than 369,000 manufacturing jobs – nearly half – since NAFTA and NAFTA expansion pacts have taken effect.  More than 212,000 specific North Carolina jobs have been certified under just one narrow Department of Labor program as lost to offshoring or imports since NAFTA.
  • Delaware: Delaware’s total goods exports to all U.S. FTA partners have actually fallen 27 percent while its exports to non-FTA nations have grown 34 percent in the last five years.
  • California: In the last five years, California’s $403 million NAFTA agricultural trade surplus became a $187 million trade deficit – a more than $590 million drop. In contrast, California’s agricultural trade surplus with the rest of the world increased by $3 billion, or 79 percent, during the same time period.  California’s agricultural imports from NAFTA partners during this period surged $1.3 billion – more than the increase in agricultural imports from all other countries combined.

Misleading Math on the Korea Free Trade Agreement - Today, the Washington Post fact checker, Glenn Kessler, claimed that Public Citizen’s analysis of the Korean Free Trade Agreement (KORUS) is based on flawed economics and faulty math. Kessler accepts the White House claim that the employment effect of the KORUS should be based only “on a gain in merchandise exports,” and then claims that “the most appropriate way to look at export flows would be on an annual basis, which shows a net gain of about $2.3 billion. That’s theoretically a gain of 15,000—a far cry from the loss of 85,000 [jobs],” as estimated by Public Citizen. By ignoring imports, Kessler completely ignores one of the most important factors in determining the effects of trade on employment.  Imports reduce the demand for domestic goods and services. This is a fundamental assumption in introductory (and applied) macroeconomics. By ignoring it, Kessler denies his readers critical information needed to evaluate Public Citizen’s claim. Public Citizen’s analysis implicitly assumes that the same (export) jobs multiplier is applied to imports and exports. If we divide the increase in general imports ($12.3 billion) and the increase in total exports ($2.3 billion) by the jobs multiplier ($150,000 per job), we get 86,000 fewer jobs because of increased imports and 15,000 more jobs from increased exports. You get exactly the same result (a net loss of 71,000 jobs) if you divide the change in the trade deficit ($10.6 billion) by the jobs multiplier. This just reflects the mathematical law of transitivity. The deeper point is that the import jobs are usually characterized as being lower-skilled and lower paid, so they could have a higher multiplier than that for exports—since each job pays less, more jobs would be lost per dollar of imports. In that regard, Public Citizen’s jobs calculation is conservative—the use of separate import jobs multipliers would likely inflate net job losses.

Update: U.S. Heavy Truck Sales -- This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the March 2015 seasonally adjusted annual sales rate (SAAR).  Heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April 2009 on a seasonally adjusted annual rate basis (SAAR). Since then sales have more than doubled and hit 446 thousand SAAR in August 2014.   Sales have declined a little since August (possibly due to the oil sector), and were at 430 thousand SAAR in March. The level in August 2014 was the highest level since February 2007 (over 7 years ago).  Sales have been above 400 thousand SAAR for nine consecutive months, are now above the average (and median) of the last 20 years.

The Demand for R&D is Increasing - In my TED talk I said that if India and China were as rich as the United States is today then the market for cancer drugs would be eight times larger than it is now. Larger markets, both in size and wealth, increase the incentive to invest in R&D. Larger markets save lives. As India and China become richer, they are investing more in R&D and investing more in educating the scientists and engineers who produce new ideas, new ideas that benefit everyone. The WSJ reports on this trend: Chipscreen’s drug, called chidamide, or Epidaza, was developed from start to finish in China. The medicine is the first of its kind approved for sale in China, and just the fourth in a new class globally. Dr. Lu estimates the research cost of chidamide was about $70 million, or about one-tenth what it would have cost to develop in the U.S. …China’s spending on pharmaceuticals is expected to top $107 billion in 2015, up from $26 billion in 2007, according to Deloitte China. It will become the world’s second-largest drug market, after the U.S., by 2020, according to an analysis published last year in the Journal of Pharmaceutical Policy and Practice. China has on-the-ground infrastructure labs, a critical mass of leading scientists and interested investors, according to Franck Le Deu, head of consultancy McKinsey & Co.’s pharmaceuticals and medical-products practice in China. “There’re all the elements for the recipe for potential in China,” he said.  We have much to gain from increased wealth in the developing world.

Record U.S. Capital Spending Is Last Thing the Market Wants - If you’re an American chief executive officer with a couple million dollars to blow, you may want to think twice before using it to expand plants or add equipment. That’s the message from equity markets, where shares of companies using the biggest portion of their cash on capital expenditures in 2014 trailed those that spent more on dividends and buybacks, according to data compiled by Barclays Plc. While the underperformance didn’t keep corporate investment from hitting a record last year, the rate of growth in repurchases was higher. The research is the latest to depict the U.S. stock market as being addicted to cash inducements provided by companies to investors at the expense of businesses and employees. Barclays’s chief equity strategist, Jonathan Glionna, said that while the data should dispel concern that companies have abandoned projects that boost profits and stoke economic growth, it shows the market prefers other uses for money. “There’s plenty of capex spending and companies that spend more have generally been underperforming,” It’s a problem if investors are more apt to reward spending with the least value to the economy, Over longer periods they’re better off rewarding capital spending, which boosts revenue down the supply chain and gets more people working, he said.

Big Companies Pay Later, Squeezing Their Suppliers -  How would you like to have 120 days to pay your creditors?  Adopting a tactic widely used by 3G Capital, the Brazilian private investment group behind the recent merger of Heinz and Kraft Foods, a growing number of the world’s largest food and packaged goods companies are asking their suppliers to give them as much as four months to pay their bills — even though they typically require payment from their own customers in 30 days.The tactic has gained in popularity ever since an affiliate of 3G Capital put it to use after it bought Anheuser-Busch in 2008.In the past, extended payment terms often were a signal that a company was experiencing worrisome cash flow problems, but these days big, robust companies are imposing new schedules on suppliers as a business strategy, analysts say.  Diageo, the European spirits company, now asks for 90 days to pay its bills. Mondelez, Mars and Kellogg seek 120 days. The list of companies doing the same reads like a grocery store version of Who’s Who — Church & Dwight, Procter & Gamble and Heinz are among those wanting more generous payment terms, suppliers said. Most are trying to maximize use of their capital, bankers who work with supply chain finance say. By pushing out payments to suppliers to three and four months, companies have more cash for any number of projects. Mondelez, for one, is buying back stock. Kellogg is in the middle of a restructuring. Procter & Gamble’s move to extend its payment terms to 75 days in 2013 has probably added $1 billion so far to its cash flow, according to one estimate.

ISM Non-Manufacturing: Continued Growth in March -- Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 56.5 percent, down fractionally from last month's 56.9 percent.  Here is the report summary:"The NMI® registered 56.5 percent in March, 0.4 percentage point lower than the February reading of 56.9 percent. This represents continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 57.5 percent, which is 1.9 percentage points lower than the February reading of 59.4 percent, reflecting growth for the 68th consecutive month at a slower rate. The New Orders Index registered 57.8 percent, 1.1 percentage points higher than the reading of 56.7 percent registered in February. The Employment Index increased 0.2 percentage point to 56.6 percent from the February reading of 56.4 percent and indicates growth for the 13th consecutive month. The Prices Index increased 2.7 percentage points from the February reading of 49.7 percent to 52.4 percent, indicating prices increased in March after three consecutive months of decreasing. According to the NMI®, 14 non-manufacturing industries reported growth in March. The majority of respondents’ comments reflect stability and are mostly positive about business conditions and the overall economy."  Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

ISM Non-Manufacturing Index decreased to 56.5% in March - The March ISM Non-manufacturing index was at 56.5%, down from 56.9% in February. The employment index increased in March to 56.6%, up slightly from 56.4% in February. Note: Above 50 indicates expansion, below 50 contraction. From the Institute for Supply Management: March 2015 Non-Manufacturing ISM Report On Business® "The NMI® registered 56.5 percent in March, 0.4 percentage point lower than the February reading of 56.9 percent. This represents continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 57.5 percent, which is 1.9 percentage points lower than the February reading of 59.4 percent, reflecting growth for the 68th consecutive month at a slower rate. The New Orders Index registered 57.8 percent, 1.1 percentage points higher than the reading of 56.7 percent registered in February. The Employment Index increased 0.2 percentage point to 56.6 percent from the February reading of 56.4 percent and indicates growth for the 13th consecutive month. The Prices Index increased 2.7 percentage points from the February reading of 49.7 percent to 52.4 percent, indicating prices increased in March after three consecutive months of decreasing. According to the NMI®, 14 non-manufacturing industries reported growth in March. The majority of respondents’ comments reflect stability and are mostly positive about business conditions and the overall economy." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

Weekly Initial Unemployment Claims increased to 281,000, 4-Week Average Lowest Since 2000 - The DOL reportedIn the week ending April 4, the advance figure for seasonally adjusted initial claims was 281,000, an increase of 14,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 268,000 to 267,000. The 4-week moving average was 282,250, a decrease of 3,000 from the previous week's revised average. This is the lowest level for this average since June 3, 2000 when it was 281,500. The previous week's average was revised down by 250 from 285,500 to 285,250. There were no special factors impacting this week's initial claims.  The previous week was revised down to 267,000.The following graph shows the 4-week moving average of weekly claims since January 2000.

The punk March jobs report looks primarily like an Oil patch story  -- At first blush, the relatively poor March jobs report looks like an Oil patch story, not a weather story or a West coast port strike story. Changes in initial jobless claims during a month have a pretty good correlation with the same/next month's jobs report (since the reference week is the one including the 13th of each month).  Here's the relevant scattergraph and regression line for this expansion: We had 3 bad weeks in February of new jobless claims over 300,000 a month.  To find out if the weather was a big factor, or if the primary weakness was the Oil patch,  I compared TX and OK with NY and Mass, going back to the first of the year.  This can be done using the Department of Labor's state-by-state breakdown of initial jobless claims, which is reported with a one week delay.   The result was that NY and Mass. had lower claims on average in 2015 in the reference weeks compared with the same week in 2014. TX and OK, by contrast, had about 15% more initial claims in those weeks during 2015 vs. 2014 during the reference weeks for the March report. Oklahoma's jobless claims increased YoY starting at the end of November.  Texas turned negative YoY in late January. Massachusetts had one week wherein 2015 claims equalled 2014 claims. All other weeks were lower. New York had two weeks in 2015 slightly higher than 2014, but the other two weeks were significantly lower than 2014.  While the since-resolved West coast ports strike could have nationwide impacts, one state where it would surely have an impact is California.  California did have one negative YoY week of jobless claims, all the way back in early January. During the 4 reference weeks for the March jobs report, however, it went back to strongly positive YoY readings (i.e., steep declines in jobless claims in 2015 vs. 2014).

Goldman: "The Effect of Slowing Energy Sector Activity on Non-Energy Payrolls" -- An excerpt from a research piece by Goldman Sachs economist Alec Phillips: The Effect of Slowing Energy Sector Activity on Non-Energy Payrolls  Oil & gas-related employment has declined each of the last three months. We find that in previous oil-sector downturns, job growth in non-energy sectors that are closely related to the oil & gas industry--particularly certain segments of manufacturing and construction--has declined by three to four times as much as the decline in oil & gas employment itself. This means that in addition to the 10k or so monthly declines in energy-related jobs we expect over the next several months, we should begin to see more of an effect in these other areas as well... Taking a broader view, we continue to expect that lower energy prices should prove a net benefit for growth and we would expect the negative direct and indirect effects of slowing energy activity on the labor market to be offset by the positive effects on employment in industries that are more closely tied to consumption. Overall, we expect monthly payroll growth over the next several months to be roughly in line with the current 3-month average of 197k. If we are correct that weakness in oil-related employment will spill over into slower job growth in closely-related non-energy sectors, the burden will be on consumer-related sectors to produce a greater share of payroll growth than they have on average over the last several months.

The Numbers That Matter Most from the Jobs Report - - The labor market headlines, as usual, are focused on job growth and the unemployment rate. Employers added just 126,000 jobs in March, which, together with a reduction of 69,000 in the job creation estimates for January and February, suggests that the pace of recovery is slower than previously thought. Nevertheless, with the unemployment rate steady at 5.5 percent — just fractions of a percentage point above its pre-recession norm — many policymakers and commentators remain convinced the economy is heating up.  Wrong. Instead, as I and others have argued, the unemployment rate, considered in isolation, gives us an incomplete and misleading impression of the labor market’s health because it counts only those people who are out of work and say they are actively searching for a job. What it leaves out are the millions of Americans who are categorized as “not in the labor force” — that is, unemployed, but report not looking for work. As it turns out, approximately 2 million of these so-called non-participants find jobs in a given month, or about the same number of new hires as there are among the officially unemployed, and a clear indication that the unemployment rate does not capture the full universe of labor market hardship. It doesn’t have to be this way. There is another indicator, the employment-population (E-P) ratio, that provides a more complete picture of the labor market — and it’s right there in the jobs report, albeit below the fold. Instead of focusing on a subset of who isn’t working, the E-P ratio tells us who is: the share of the adult population that is employed. In other words, it adjusts the unemployment rate for labor force participation.  The corrective it offers is striking. For the past three months, the E-P ratio has been stubbornly stuck at 59.3 percent, not far removed from its post-recession trough of 58.2 percent and a far cry from the 63.0 percent it averaged in 2007. Part of the decline was expected to come with the retirement of the baby boom generation, but the weakness has been deeper than demographics alone can explain.

More Americans Give Up Looking for Work - The March jobs numbers, released on Friday, were disappointing not only for the lower level of job creation, but for the continued decline in the labor force participation rate, the share of Americans who are working or looking for work. The participation rate is now at 62.7 percent, equivalent to February 1978 levels. The creation of 126,000 jobs in March was about half of what was predicted. This number will get revised because it is part of the Labor Department’s survey of establishments, which is not yet complete. The March job creation figure might even get revised back up to 200,000 by the time all the corrections, including annual benchmark revisions, are completed. In contrast, the steady decline in the labor force participation rate will not get revised, although it may eventually reverse itself with changes in economic opportunities and incentives. The data are derived from a one-time survey of households that is only updated when population estimates are revised. Over the past few years, the trend has been only in one direction—down—despite steady but slow economic growth over the past few years. As the graph shows, the labor force participation rate has declined for the past two months and is half a percentage point lower than a year ago. In its April 3 release, the Bureau of Labor Statistics stated, “The civilian labor force participation rate was little changed at 62.7 percent in March.” In its March release, BLS wrote, “The civilian labor force participation rate, at 62.8 percent, changed little in February.” But little changes all in the same direction add up. Last year’s average labor force participation rate was 62.9 percent. If instead the rate were 66.2 percent, equal to the 2006 average, 8.2 million more Americans would have been in the labor force. The unemployment rate today, 5.5 percent, looks healthy because so many people have dropped out. If America had 2006 labor force participation rates with the same number of people employed, last year’s average unemployment rate would have been 11.4 percent instead of 6.2 percent

More Employment Graphs: Duration of Unemployment, Unemployment by Education, Construction Employment and Diffusion Indexes -- This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more. The general trend is down for all categories, and the "less than 5 weeks", "6 to 14 weeks" and "15 to 26 weeks" are all close to normal levels. The long term unemployed is less than 1.7% of the labor force - the lowest since December 2008 - however the number (and percent) of long term unemployed remains elevated. This graph shows the unemployment rate by four levels of education (all groups are 25 years and older). Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and it appears all four groups are generally trending down. Although education matters for the unemployment rate, it doesn't appear to matter as far as finding new employment. Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".  This graph shows total construction employment as reported by the BLS (not just residential). Since construction employment bottomed in January 2011, construction payrolls have increased by 912 thousand. Construction employment is still far below the bubble peak - and below the level in the late '90s.The BLS diffusion index for total private employment was at 61.4 in March, down from 65.8 in February. For manufacturing, the diffusion index was at 47.5, down from 61.3 in February. Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS.  Above 60 is very good

BLS: Jobs Openings at 5.1 million in February, Up 23% Year-over-year - From the BLS: Job Openings and Labor Turnover Summary  There were 5.1 million job openings on the last business day of February, little changed from 5.0 million in January, the U.S. Bureau of Labor Statistics reported today. ....Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.7 million quits in February, about the same as in January. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.   The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for February, the most recent employment report was for March. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in February to 5.133 million from 4.965 million in January. This is the highest level for job openings since January 2001. The number of job openings (yellow) are up 23% year-over-year compared to February 2014. Quits are up 10% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is another very positive report. It is a good sign that job openings are over 5 million, and that quits are increasing solidly year-over-year.

Job Openings Climb to Highest Level in 14 Years, But Hiring Declines - The number of job openings in the U.S. climbed to the highest level in 14 years, surpassing five million for the first time since January 2001. But the number of Americans actually getting hired for jobs fell for the second consecutive month, as did the number of people who voluntarily quit. Job openings climbed to 5.13 million in February, up from 4.97 million in January and from 4.88 million in December. But the number of Americans actually hired to fill jobs declined—falling to 4.9 million in February, down from five million in January and 5.2 million in December, according to the Labor Department’s Job Openings and Labor Turnover Survey, known as Jolts. The primary jobs report shows the net change in jobs—that measure slowed in March to a gain of 126,000, the weakest hiring in 15 months. The Jolts report, which is only available through February, tracks the millions of Americans each month who quit a job, are laid off, or start a new job. The softness in the Jolts report’s measures of hiring and quitting bolsters the case that the labor market has lost some of its momentum in the first quarter of 2015. The report is closely followed by officials at the Federal Reserve, with Chairwoman Janet Yellen citing the rate of voluntary quitting as a key gauge of worker’s confidence in the economy. When the economy is stronger, workers are more likely to quit their job due to the greater ease of finding something different. The number of voluntary quits declined in February to 2.7 million from 2.8 million in January.

Another Month, Same Story: Job Openings Data Little Changed in February -- The employment situation for March showed downward revisions to payroll employment in both January and February and a considerably slower growth in jobs in March. This morning’s Job Openings and Labor Turnover Survey (JOLTS) report generally corroborates that story—the recovery hasn’t stalled, but it isn’t doing much better than simply chugging along. The total number of job openings reached 5.1 million in February; the number of unemployed workers fell to 8.7 million. Taken together, the result was a slight drop in the job-seekers-to-job-openings ratio. In February, there were 1.7 times as many job seekers as job openings. This ratio has been declining steadily from its high of 6.8-to-1 in July 2009, as shown in the figure below.What’s notably missing from the story are the millions of workers who have been sidelined because of weak job opportunities. When the number of unemployed workers fell in February, the numbers of missing workers ticked up. While it’s important not to put too much weight into any one month’s number, it’s unlikely that a continued fall in the job-seekers-to-job-openings ratio is sustainable in the near term as more workers enter or re-enter the labor force when job opportunities grow.

The Quits Rate Exemplifies a Far From Strong Economy -- The hires, quits, and layoffs rates all held fairly steady in the February Job Openings and Labor Turnover Survey (JOLTS) report. As you can see in the figure below, layoffs shot up during the recession but recovered quickly and have been at prerecession levels for more than three years. The fact that this trend continued in February is a good sign. That said, not only do layoffs need to come down before we see a full recovery in the labor market, hiring needs to pick up. The hires rate was unchanged in February. It has been generally improving, but it still remains below its prerecession level.  The voluntary quits rate fell slightly from 2.0 in January to 1.9 in February, the same rate it had been for both November and December. In February, the quits rate was still 9.2 percent lower than it was in 2007, before the recession began. A larger number of people voluntarily quitting their jobs indicates a strong labor market—one where workers are able to leave jobs that are not right for them and find new ones. Before long, we should look for a return to pre-recession levels of voluntary quits, which would mean that fewer workers are locked into jobs they would leave if they could. But we are not there yet.

Job Openings & Labor Turnover and the Business Cycle -- The latest JOLTS report (Job Openings and Labor Turnover Summary), data through February, is now available. The first chart below shows four of the headline components of the overall series, which the BLS began tracking in December 2000. The timeframe is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends. The chart below shows the monthly data points four of the JOLTS series, which are quite noisy, hence the inclusion a six-month moving averages to help identify the trends. The most closely watched series is the one for Total Nonfarm Job Openings, the blue line in the chart above. The moving average peaked in mid-2007 and began rolling over to its trough a couple of months after Great Recession ended. The Hires series is roughly similar in its trend. Likewise Quits, which are generally thought to show an economy that supports the flexibility to leave or change jobs. In contrast, Layoffs and Discharges, the red line, were somewhat inversely correlated to the other three.  The chart above is based on the actual number in the JOLTS report. Another way to think about them is as a percent of Nonfarm Employment, which essentially gives us a population-adjusted version of the data. Here is that adjustment for three of the JOLTS series. Note that the vertical axis for each is optimized for the high-low range.  It would, of course, be excellent if we had historical JOLTS data stretching back through several business cycles. But alas we do not.  At the point, we can see that the Openings percent has surpassed the peak during the previous expansion. Hires continue to trend higher but remain below the 2005 peak. The Layoffs and Discharges series is trending sideways near its historic low.

No Worker Shortages, but Some Sectors Show Improved Opportunities - I’ve written before about how one of the recurring myths following the Great Recession has been that recovery in the labor market has lagged because workers don’t have the right skills. The figure below, which shows the number of unemployed workers and the number of job openings in February by industry, is the best way to rebut this idea. If today’s labor market woes were the result of skills shortages or mismatches, we would expect to see some sectors where there are significantly more unemployed workers than job openings, and others where there are significantly more job openings than unemployed workers. What we find when looking at the data is that there are more unemployed workers than jobs openings in most industries. Last year, the graph showed that the number of unemployed workers exceeded job openings in all industries, but there have been some signs of tightening in February. For several months now, health care and social assistance was the only sector where those workers appeared to be facing a tighter labor market. Now, it appears that they are not alone: finance and insurance and wholesale trade both have job seekers and job openings close to on par with each other. This within-sector tightening is a small sign of good news in February’s JOLTS report. Unfortunately, other sectors have seen little-to-no improvement in their job-seekers-to-job-openings ratios. There are, for example, still five-and-a-half unemployed construction workers for every job opening. In other words, despite claims from some employers, there is no shortage of construction workers. In fact, while the market does appear to be improving for some types of unemployed workers, there are no significant worker shortages anywhere in the economy. Taken as a whole, these numbers demonstrate that the main problem in the labor market is a broad-based lack of demand for workers—not available workers lacking the skills needed for the sectors with job openings.

Restaurants Can't Find Qualified Workers -  Dean Baker - That's what Yahoo Finance effectively told us in the headline of a piece on the Labor Department's release of new data from its Job Opening and Labor Turnover Survey. The headline said, "U.S. jobs opening data points to skills mismatch." The evidence was a modest rise in the overall rate of job openings from 3.4 percent to 3.5 percent. But if this is evidence of a skills mismatch then the biggest problem is in the restaurant sector where the jobs opening rate was 5.1 percent. Apparently there are just not enough people who know how to wait tables and wash dishes.  If we used the standard economist measure, we would be looking for rising wages as evidence of skills mismatch. There is not much evidence of that anywhere, as is pointed out later in the article.

Creating skilled workers and higher-wage jobs - Brookings Institution - The March jobs report released last week showed both limited wage and employment growth among workers. As the job market continues to tighten we should eventually observe more substantial wage growth above inflation, though earnings improvement will likely remain quite modest for most workers. Why is this the case? Some economists argue that labor market forces like technology and globalization shift demand away from middle-wage jobs (or even some higher-paying ones). Worker skills often remain too low for remaining middle- and high-wage jobs in health care, advanced manufacturing or various services, that often require more technical or communication skills and perhaps certain postsecondary credentials. In fact, many employers stress their inability to fill the middle-wage jobs they have, even at higher wages. There are many reasons why American workers have limited skills. Though we send many people to college, too few complete their programs of study. Among those who do, many do not obtain the credentials that the job market values – including specific certificates as well as degrees. Many students, especially among the disadvantaged, enter college with very weak academic skills, and too little information and support to succeed; and most attend community or lower-tier four-year colleges with too few resources and too little incentive to respond to the labor market. (Many others attend for-profit colleges that have other problems.) Also, unlike what occurs in many EU countries, our high school students receive too little high-quality career and technical education or work-based learning that employers might find valuable. Policies to improve completion rates in programs aimed at high-demand sectors and expand strong career education would clearly raise worker earnings. But employer practices and choices around job quality matter as well.

Wage Growth Remains Largely in Check - WSJ: Workers’ wages picked up in March, but signs of the long-awaited acceleration in American paychecks remain elusive. Average hourly earnings of private sector workers rose last month by 7 cents to $24.86, the Labor Department said Friday. The 0.3% increase, which was a bright spot in a broadly weak jobs report, followed a tepid 0.1% rise in February. But monthly readings can be volatile, and the trend remains muted. Hourly earnings in March rose 2.1% from a year earlier, little changed from their 2% annual pace over the past half-decade. “I don’t think we’ve seen enough evidence yet to make the call” that the wage picture is now notably improving, Barclays chief U.S. economist Michael Gapen said. For months, many economists have predicted that wage growth would accelerate because a tighter labor market means employers are facing increased competition to hire and retain workers. There have been nascent signs of a pickup, including recent pay-raise announcements by big employers like Wal-Mart Stores Inc.,Target Corp. and McDonald’s Corp.

Signs of hope for American workers - Wage and salary growth have been pitifully slow in an economic expansion almost at its sixth birthday, and compensation still has not recovered the ground lost during the “Great Recession.” The most recent data available show that the median U.S. household still earns less than its counterpart did at the turn of the century, after adjusting for inflation. But there are signs we may finally be turning a corner. You may have to squint to see them, but they’re there: in the otherwise mediocre March jobs report, in surveys about compensation expectations, and in tangible wage gains at the bottom of the income distribution. Last week’s jobs report was mostly disappointing, as it revealed that the nation’s employers broke their year-long streak of adding at least 200,000 jobs per month. Buried in the report, though, was some encouraging news about earnings. In March, average hourly earnings for private employees rose 7 cents, or about 0.3 percent, to $24.86. Sure, it’s not much, but it’s more than analysts forecast. Other recent Labor Department releases have also shown compensation quietly rising.  These reports may be a harbinger of far bigger raises to come. In surveys, consumers and employers have become increasingly likely to say they expect compensation to rise in the coming months. In the Conference Board’s consumer-confidence survey, for example, consumers are asked whether they expect their income to be higher or lower six months from now. The net share expecting a raise has bounced around a bit from month to month but trended upward for more than a year. As of March, the percentage saying they expected their income to rise was 8.5 points higher than the percentage saying they expected it to fall, more than double the difference a year ago.

Is Your Job ‘Routine’? If So, It’s Probably Disappearing -- The American labor market and middle class was once built on the routine job–workers showed up at factories and offices, took their places on the assembly line or the paper-pushing chain, did the same task over and over, and then went home.  New research shows just how much the world of routine work has collapsed. The economists released a paper today, published by the centrist Democratic think tank Third Way, showing that over the course of the last two recessions and recoveries, a period beginning in 2001, the economy’s job growth has come entirely from nonroutine work. To derive this data, Mr. Siu and Mr. Jaimovich classified jobs by whether their tasks are routine or nonroutine and also whether the work is cognitive or manual. Examples of routine manual jobs in their classification system include rules-based and physical tasks, such as factory workers who operate welding or metal-press machines, forklift operators or home appliance repairers. Routine cognitive jobs include tasks done by secretaries, bookkeepers, filing clerks or bank tellers. Nonroutine manual jobs include occupations like janitors or home-health aides. Finally, nonroutine cognitive jobs include tasks like public relations, financial analysis or computer programming. While many jobs have a mix of routine and nonroutine tasks, the basic classification that Mr. Siu and Mr. Jaimovich use is clear, and the results when jobs are sorted along these lines are striking. In the most recent recession, routine jobs collapsed and simply have not recovered, with employment in both cognitive and manual jobs down by more than 5% if the tasks are mostly routine.

The robots aren’t threatening your job - The Great Robot Freakout of 2015 has begun, and it looks a lot like the robot freakouts that came before it.  In a new survey by CNBC, Americans were asked how concerned they were, if at all, that their jobs could be replaced by technology in the next five years. The level of automation angst was astonishing: About 1 in 8 workers indicated was worried about being displaced. Among those earning less than $30,000, it was a whopping 1 in 4.    No doubt these workers have seen travel agents, bank tellers, typists, mid-skilled manufacturing workers and other occupations of yore dissolve into a pixelation of zeroes and ones, causing them to worry about their own livelihoods. Media fear-mongering about the rise of our robot overlords feeds the anxiety. But there are reasons to be optimistic about the role that technological progress will play in our economy and in helping our workforce, provided policymakers get their acts together.  Droid dread is nothing new. It goes back hundreds, arguably thousands, of years. Sometimes it has manifested itself in science fiction and other narrative lore, such as Kurt Vonnegut’s dystopian 1952 novel “Player Piano” or the 16th-century legend of the Golem of Prague. Often it has been voiced by workers and their intellectual champions. Then, as now, such premonitions embraced the so-called Luddite Fallacy: that technological developments would permanently reduce or even eliminate the need for human labor. But again and again such fears have been proven wrong. Across history, technological developments have caused certain skill sets and jobs to obsolesce, yes, but they have also created demand for new skill sets and types of jobs, typically higher-paying ones that are complementary to technological advances. In 1900, 41 percent of the U.S. workforce labored in farming; those jobs disappeared, but new ones sprang up in their place, mostly in occupations that could not have even been imagined in 1900.

How the Geography of Jobs Affects Unemployment - - Federal Reserve Bank of Richmond: In postwar America, many families moved away from urban centers into the rapidly developing suburbs. Culturally, these new communities were associated with economic opportunity, signifying middle-class values and upward mobility. The path to economic mobility is no longer a highway leading from downtown to the suburbs. For example, the number of suburban residents in poverty may now exceed the number of urban-dwellers in poverty. According to the Brookings Institution, suburban poverty rose from 10 million in 2000 to 16.5 million in 2012, compared to an increase in urban poverty from 10.4 million to 13.5 million over the same period (see chart). This geographic picture of opportunity and wealth adds complexity to questions about whether unfortunate circumstances, such as poverty, might be determined in part by where someone lives. To be sure, where one chooses to live is about more than job opportunities, which are weighed against housing options, commuting costs, lifestyle choice, social networks, and more. In equilibrium, housing prices and wages should make households indifferent among locations. In other words, some people might choose to live far away from jobs, possibly accepting a costlier commute, because they are "compensated" by factors such as lower housing costs.

Irregular Work Scheduling and Its Consequences - Executive Summary: The labor market continues to recover, but a stubbornly high rate of underemployment persists as more than five million Americans are working part-time for economic reasons (U.S. BLS 2015a; 2015b). Not only are many of this type of underemployed worker, by definition, scheduled for fewer hours, days, or weeks than they prefer to be working, the daily timing of their work schedules can often be irregular or unpredictable. This both constrains consumer spending and complicates the daily work lives of such workers, particularly those navigating through nonwork responsibilities such as caregiving. This variability of work hours contributes to income instability and thus, adversely affects not only household consumption but general macroeconomic performance. The plight of employees with unstable work schedules is demonstrated here with new findings, using General Social Survey (GSS) data. These findings (as well as key findings from other research) are highlighted below.

Trying to Explain the Jobless Recovery That Does Not Exist - Dean Baker - That seems to be endless demand for economic policy analysis that finds ways to blame workers for the bad economy rather than the folks in Washington with their hands on the policy wheel. The Wall Street financed group Third Way and the Wall Street Journal gave us more proof for this proposition yesterday with a new explanation for the "jobless recovery." Their basic story is that economy lost routine relatively low-skilled jobs, but it now needs workers with high-skills for the new jobs that are being created.  There are two basic problems with this story. The recovery can better be described as "growthless" than "jobless," and there is no evidence of any significant sector of the labor market experiencing a labor shortage. Taking these in turn, contrary to what we might believe from the WSJ and Third Wayers, we have created a surprisingly large number of jobs given the economy's weak growth. Back at the start of 2010 CBO had projected growth would average 3.2 percent over the next five years, it actually averaged less than 2.2 percent. So we have seen extraordinarily weak economic growth over this period. On the other hand, job growth has been reasonably healthy, especially in the last year. The explanation is extraordinarily weak productivity growth, which has averaged less than 1.0 percent the last two years. This would seem to be pretty much 180 degrees at odds with the story of a rapidly evolving economy that needs more skilled workers. The point about no evidence of a labor shortage is a simple one, where is the wage growth? Even college grads have seen virtually no wage growth in this century. If there are all these potential job openings for skilled workers, then we would expect to see employers bidding up wages to attract the workers they need. We don't.

The Financial Pressures of the Middle Class --  St. Louis Fed -- Many references to the “middle class” are based on a simplistic definition, such as the middle 50 percent of families by income or wealth. While this may be effective for discovering, for example, trends in wealth distribution over time, these definitions uncover little about the characteristics of individual middle-class families and about how these families fare over time. A recent report from the St. Louis Fed's Center for Household Financial Stability sought to provide a demographic definition of the middle class and found that the middle class may be under more financial pressure than has been otherwise reported.  Senior Economic Adviser William Emmons and Lead Policy Analyst Bryan Noeth, both with the center, noted, “Our version of the demographically defined middle class reveals that families that are neither rich nor poor may be under more downward economic and financial pressure than common but simplistic rank-based measures of income or wealth would suggest.”

Middle Class, but Feeling Economically Insecure - It’s not only what you have, but how you feel.When it comes to membership in the middle class, earnings and assets are just part of the definition. Nearly nine out of 10 people consider themselves middle class, as a recent survey by the Pew Research Center found, regardless of whether their incomes languish near the poverty line or skim the top stratum of earners.“Middle income is not necessarily the same thing as middle class,” said Rakesh Kochhar, a senior research associate at Pew. Even as the proportion of households in the middle-income brackets has narrowed, people’s identification with the middle class remains broad.That’s because the middle-class label is as much about aspirations among Americans as it is about economics. But a perspective that was once characterized by comfort and optimism has increasingly been overlaid with stress and anxiety.  Part of the reason has to do with lost jobs and stagnating incomes. At the same time, the psychological frame — how Americans feel about their security and prospects — and the sociological — how they stack up in relation to their parents, friends, neighbors and colleagues — are just as important as purely economic criteria. And on both these counts, middle-class Americans say they are feeling increasingly vulnerable.

Why Is the "Middle Class" Stressed? - Brad DeLong - There have long been a bunch of hypotheses about why the American “middle class” feels “stressed” in spite of constant real incomes and what appears to me increased utility over time as more expenditure shifts toward information goods where consumer surplus is a higher multiple of factor cost:

  1. Americans are used to seeing real incomes improve at 2%/year–doubling every generation–and they have not been getting that. Living little better than your predecessors a generation ago is an unpleasant shock.
  2. The things that have been becoming cheaper are not seen as things key to your “middle class” status, while the things becoming more expensive and difficult to obtain–a detached house in a good neighborhood with a short commute, health insurance, secure pensions, a good education for your children–are things that it used to be taken for granted a middle-class family could get.
  3. The widening gap between the middle class and the upper class.

Now come Emmons and Noeth with a new and very interesting hypothesis: that people who have done better than their parents with respect to education and family structure are no richer, and people who have matched their parents with respect to education and family structure are poorer. In other words, people who thought they were upwardly mobile are finding themselves with no higher real incomes. And people who thought they were sociologically stable are finding themselves poorer:Why the middle class is doing even worse than you think – LA Times:

1 in 3 Older Workers Likely to Be Poor or Near Poor in Retirement - A third of U.S. workers nearing retirement are destined to live in or near poverty after leaving their jobs, new research shows. One underlying cause: a sharp decline in employer-sponsored retirement plans over the past 15 years.Just 53% of workers aged 25-64 had access to an employer-sponsored retirement savings plan in 2011, down from 61% in 1999, according to a report from Teresa Ghilarducci, professor of economics at the New School. More recent data was not available, but the downward trend has likely continued, the report finds.This data includes both traditional pensions and 401(k)-like plans. So the falloff in access to a retirement plan is not simply the result of disappearing defined-benefit plans, though that trend remains firmly entrenched. Just 16% of workers with an employer-sponsored plan have a traditional pension as their primary retirement plan, vs. 63% with a 401(k) plan, Ghilarducci found.Workers with access to an employer-sponsored plan are most likely to be prepared for retirement, other research shows. So the falling rate of those with access is a big deal. In 2011, 68% of the working-age U.S. population did not participate in an employer-sponsored retirement plan. The reasons ranged from not being eligible to not having a job to choosing to opt out, according to Ghilarducci’s research.She reports that the median household net worth of couples aged 55-64 is just $325,300 and that 55% of these households will have to subsist almost entirely on Social Security benefits in retirement. The Center for Retirement Research at Boston College and the National Institute on Retirement Security, among others, have also found persistent gaps in retirement readiness. Now we see where insufficient savings and the erosion of employer-based plans is leading—poverty-level retirements for a good chunk of the population.

It’s Not the Inequality; It’s the Immobility - Tyler Cohen -- Income inequality and economic immobility are often lumped together, but they shouldn’t be.Consider the two concepts positively: Income equality is about bridging the gap between the rich and the poor, while economic mobility is about elevating the poor as rapidly as possible. Finding ways to increase economic mobility should be our greater concern.For instance, while we have talked incessantly about the disproportionate gains of the top 1 percent, the wage slowdown in the United States in recent decades is a bigger problem for most people. Since 1973, for workers as a whole, wages have stagnated largely because of a severe productivity slowdown. The consequences have been startling. Data from the Economic Report of the President suggests that if productivity growth had maintained its pre-1973 pace, the median or typical household would now earn about $30,000 more today. Those higher earnings would constitute a form of upward mobility. For purposes of comparison, if income inequality had maintained its pre-1973 trend, the gain for the median household would be about $9,000 in income this year, a much smaller figure. Those changes in productivity and inequality trends aren’t entirely separate, but accelerating the growth of productivity has the potential to do more for upward economic mobility than redistributing money from the top 1 percent. To be sure, we need to retain the concept of inequality in our thinking, if only to understand public perceptions of the economy or how pay structures are evolving inside corporations. Still, we should be cautious in using “inequality” as an automatically negative term. A lot of inequality is natural and indeed desirable, because individuals have different talents and tastes and opportunities can never be fully equalized.

Tyler Cowen's Three-Card Monte on Inequality - Dean Baker - Tyler Cowen used his Upshot piece this week to tell us that the real issue is not inequality, but rather mobility. We want to make sure that our children have the opportunity to enjoy better lives than we do. And for this we should focus on productivity growth which is the main determinant of wealth in the long-run. This piece ranks high in terms of being misleading. First, even though productivity growth has been relatively slow since 1973, the key point is that most of the population has seen few of the gains of the productivity growth that we have seen over the last forty years. Had they shared equally in the productivity gains over this period, the median wage would be close to 50 percent higher than it is today. The minimum wage would be more than twice as high. If we have more rapid productivity growth over the next four decades, but we see the top 1.0 percent again getting the same share as it has since 1980, then most people will benefit little from this growth. The next point that comes directly from this first point is that it is far from clear that inequality does not itself impede productivity growth. While it can of course be coincidence, it is striking that the period of rapid productivity growth was a period of relative equality. At the very least it is hard to make the case that we have experienced some productivity dividend from the inequality of the post-1980 period. And many of the policies that would most obviously promote equality also promote growth. For example, a Fed policy committed to high employment, even at the risk of somewhat higher rates of inflation, would lead to stronger wage growth at the middle and bottom of the wage ladder, while also likely leading to more investment and growth.

INET Video: Piketty and Stiglitz -- "Thomas Piketty and Joseph E. Stiglitz discuss the causes of, consequences of, and remedies for inequality. With opening remarks from Clive Cowdery, George Soros, OECD Secretary General Angel Gurria, Institute President Rob Johnson and Institute Board Members Anatole Kaletsky and Lord Adair Turner."

How the U.S. spends more helping its citizens than other rich countries, but gets way less - - The public places lots of scrutiny on the services that the government delivers to poor people: Witness the recent outrage over welfare recipients eating steak, visiting swimming pools, and driving a Mercedes while receiving public funds. But a new study argues that the real waste in the American system comes not from welfare programs like food stamps, but from widespread tax breaks that subsidize spending on things like health care and housing. Jacob Funk Kirkegaard, a senior fellow at the non-partisan Peterson Institute for International Economics, argues in a new report that once you take these kinds of tax breaks into account, the U.S. actually devotes far more resources than many other countries to “social spending” -- spending on pensions, health care, family support, unemployment, housing assistance, and similar benefits meant to help people out in hard times. And, compared with most advanced countries, the U.S. gets far less bang for its buck in terms of health outcomes and equality. As the chart below shows, the U.S. government spends only about 19 percent of GDP on this kind of social spending, compared with around 20-31 percent for various European countries. But even when the U.S. government lets the private sector provide certain social benefits, like health insurance, it still “pays” for it in a certain sense through tax breaks, Kirkegaard argues. The U.S. offers huge amounts of what Kirkegaard calls “tax breaks for social purposes,” including the Earned Income Tax Credit, tax-exempt pension contributions, and new tax breaks for Americans to buy health insurance. In contrast, many European governments give services or cash benefits directly to their citizens, but then take some of that money back by taxing those cash benefits, or the person’s spending more generally.

The double-standard of making the poor prove they’re worthy of government benefits - Poverty looks pretty great if you're not living in it. The government gives you free money to spend on steak and lobster, on tattoos and spa days, on — why not? — cruise vacations and psychic visits.  Enough serious-minded people seem to think this is what the poor actually buy with their meager aid that we've now seen a raft of bills and proposed state laws to nudge them away from so much excess. Missouri wants to curtail what the poor eat with their food stamps (evidence of the problem from one state legislator: "I have seen people purchasing filet mignons"). Kansas wants to block welfare recipients from spending government money at strip clubs. Then there are the states that want to drug-test welfare recipients — the implication being that we worry the poor will convert their benefits directly into drugs. But there's virtually no evidence that the poor actually spend their money this way. In fact, the poor are much more savvy about how they spend their money because they have less of it (quick quiz: do you know exactly how much you last spent on a gallon of milk? or a bag of diapers?). By definition, a much higher share of their income — often more than half of it — is eaten up by basic housing costs than is true for the better-off, leaving them less money for luxuries anyway. And contrary to the logic of drug-testing laws, the poor are no more likely to use drugs than the population at large.  We rarely make similar demands of other recipients of government aid. We don't drug-test farmers who receive agriculture subsidies (lest they think about plowing while high!). We don't require Pell Grant recipients to prove that they're pursuing a degree that will get them a real job one day (sorry, no poetry!). We don't require wealthy families who cash in on the home mortgage interest deduction to prove that they don't use their homes as brothels (because surely someone out there does this). The strings that we attach to government aid are attached uniquely for the poor.

Louisiana Bans Cash Transactions on Used Goods The State of Louisiana has just passed new legislation BANNING cash transactions for used goods, mandating that any purchase be made via check, electronic transfers, or money order issued to the seller. The draconian new law also requires all transactions to provide the State documentation of a description of the goods sold, and the client’s personal information including name, address, driver’s license number and the license plate number!  LA House Bill 195 updates the original bill passed in 2011: Anyone, other than a nonprofit entity, who buys,sells, trades in, or otherwise acquires or disposes of junk or used or secondhand property more frequently than once per month from any other person, other than a nonprofit entity, shall be deemed as being engaged in the business of a secondhand dealer. A secondhand dealer shall not enter into any cash transactions in payment for the purchase of junk or used or secondhand property. Payment shall be made in the form of check, electronic transfers, or money order issued to the seller of the junk or used or secondhand property and made payable to the name and address of the seller.  All payments made by check, electronic transfers, or money order shall be reported 16 separately in the daily reports required by R.S. 37:1866.

1,837 La. bridges deemed structurally deficient: Louisiana is one of only 10 states with more structurally deficient bridges in 2014 than the prior year, according to John Olivieri of the United States Public Interest Research Group. The US PIRG is a federation of consumer advocacy groups. It investigated 2014 Federal Highway Administration data on bridges. It found 187 new bridges have since 2011 been downgraded to structurally deficient, a technical rating used to determine bridges' needs. The report comes at time when the state is grappling with how to shrink a $12 billion backlog in deferred road and bridge maintenance. And state and federal gas taxes, which provides money for transportation infrastructure, are flat and failing to keep up with inflation.  Eric Kalivoda, Department of Transportation and Development deputy secretary, told the state's House appropriations committee March 24 the department forecasts Louisiana will have serious problems with the condition of its bridges in 10 years. Kalivoda said the vast majority of those bridges were built in late 50s through the early 1970s. The bridges are reaching their design life and deficiencies will grow substantially. "We are going to do something about it or we're going to be closing a lot of bridges," he said.

How Chicago has used financial engineering to paper over its massive budget gap -- Moody’s has cut Chicago’s rating five notches in less than two years. This downgrade, however, placed the city’s credit below the termination triggers on some of its outstanding interest rate swaps. The city has been working to renegotiate the terms of those contracts with its counterparties. If Chicago’s general obligation rating falls below investment grade, the city’s credit deterioration will become a self-fulfilling prophesy. The city risks nearly $400 million of swap termination payments and the acceleration of its $294 million of outstanding short-term debt. Unsurprisingly, some of Chicago’s bonds are already trading at junk levels.Chicago CUSIPs are listed here. That said, the rating agencies and most other market participants still appear to be light years away from understanding the true scope of Chicago’s financial problems. The city has a very — well, let’s just call it unconventional — approach to borrowing money and probably should not be considered investment grade. In order for you to follow my discussion of Chicago’s borrowing shenanigans, it is necessary to understand the fiscal machinery behind its bond issues. Please be patient with me here. This story will blow your mind shortly.

Mass Tax Foreclosure Threatens Detroit Homeowners --  In Detroit, tens of thousands of people are facing a deadline Tuesday that could cost some of them their homes. That's when homeowners have to make arrangements to either pay delinquent property taxes — or risk losing their home at a county auction.When Detroit emerged from bankruptcy last year, it did so with a razor-thin financial cushion. It desperately needs every bit of tax revenue it can muster.Earlier this year, county officials sent out 72,000 foreclosure notices to homeowners behind on property taxes — 62,000 of them in Detroit alone. They say about 18,000 of these properties are occupied, but fewer than half of those homeowners have paid all of their tax.So officials like City Councilman Gabe Leland are knocking on doors in Detroit neighborhoods, reminding residents that the window to pay taxes is quickly closing.With Detroit's high unemployment and poverty rates, it's not hard for Leland to find residents facing foreclosure — or who know someone that is."It's scary," he says. "Seventy-two thousand in Wayne County, thousands of those here in the city of Detroit. This is a crisis. And you know — city, county — we don't want these properties ... we want people to stay in their homes. And this is gonna put people on the street." Leland supports a moratorium on foreclosures to give homeowners more time to pay taxes or have property values reassessed. But Wayne County Deputy Treasurer Eric Sabree says a moratorium is out of the question because Detroit's property tax revenue is already spoken for. "We pledge all the penalties and fees in our bond pledges to borrow money," he says. "We can't do a moratorium on police protection or fire protection."

More U.S. Women Are Going Childless - The percentage of U.S. women in their 30s and 40s who are childless is rising, new data from the U.S. Census Bureau show. Some 15.3% of U.S. women aged 40 to 44 were childless in June 2014, up from 15.1% in 2012.  Changes in Census’s data processing likely affected its estimates for 2010 to 2012. But even before that, the trend was up: 9.6% of women in this age group were childless in 2010, up from 9.2% in 2008. For women in their late 30s, the rise in childlessness is sharper. Around 18.5% of women 35 to 39 were childless last June, up from 17.2% in 2012. All told, 47.6% of U.S. women aged 15 to 44 were without children last year, up from 46.5% in 2012. The data are the latest to show that childlessness is on the rise in the U.S. as more women (and their partners) delay marriage and childbearing. Because fertility declines significantly for women in their 40s—the Centers for Disease Control and Prevention define a woman’s child-bearing years as 15 to 44—demographers carefully watch these women to get a sense of how many children Americans are having, or not.

Futures Markets for Babies - Having caught your eye, I direct you to an article in the April 9, 2015 edition of the Grey Lady. It discusses attempts by various countries to boost domestic birthrates. The same issue had been considered earlier by Noah Smith. There are two questions lurking here. First, what is the optimal population size for a country? If the goal was to shrink the population then a declining birth rate is not a bad thing. Suppose the goal is keep the population fixed, because, say of pension obligations. Then, one wants a replacement birth rate of roughly 2 per couple. If the birth rate is below the target, what should one do? Interestingly, I cannot recall anyone I have asked or read who does not turn to Government interventions of various kinds. Noah Smith, for example, only discusses Government interventions before concluding one should imitate the French. If the birth rate is below what is optimal for society, why doesn’t the market take care of it?  Do we have a missing market? Is this a public goods problem? (If so, then, Mankiw who is often castigated for being a selfish beast, is, in this case, an unstinting provider of public goods, see here.) Why not a futures market for babies? Those who want warm bodies in the future to support them in their dotage pay for babies now. Swiftian, I know, but interesting to consider. Once one thinks about how to implement the idea, difficulties emerge. One might, for example, be concerned with moral hazard on the part of parents. However, these same difficulties are present even with various Government subsidies.

2 Kansas school districts to close early because of budgets  - Two school districts plan to end the academic year early to save money, citing financial pressures caused by reduced state aid for this academic year. The Concordia school district will release students May 15, rather than May 21. And the Twin Valley School District, which includes Bennington and Tescott, will dismiss May 8, rather than May 20. Concordia Superintendent Bev Mortimer said students have hugged her in thanks for the early release.  Kansas school districts are facing financial pressures after losing $51 million they expected to receive for the current school year after Gov. Sam Brownback signed a school funding overhaul bill in March. The new school funding plan scraps the previous formula for determining state aid and replaces it with block grants, which will give districts a fixed amount of money for the next two years while the Legislature develops a new formula. Brownback said he thought Concordia would have had to make the changes absent the funding overhaul because its reserves were low and it lost funding this year under the previous formula. He said districts like Concordia would benefit from the block grant plan over the next two years because funding will increase and districts will have more flexibility in spending.  The Twin Valley board announced Monday that the school would trim 7 1/2 “discretionary days” from the school calendar, although athletic and other activities would continue. Board members said in a news release that the district was having difficulty withstanding “the present mid-year, unplanned financial cuts recently signed into law.”

Eighth-grader charged with felony for shoulder-surfing teacher’s password - A 14-year-old Florida boy has been charged with felony computer intrusion after shoulder-surfing his school's computer network password and using it to play a prank on a teacher. Domanik Green, an eighth-grader at Paul R. Smith Middle School in Holiday, Florida, was charged with an offense against a computer system and felony unauthorized access, according to a report published Thursday by The Tampa Bay Times. In late March, the youth allegedly used the administrative-level password without permission to log in to the school's network and change the images displayed on a teacher's computer to one of two men kissing. One of the computers accessed allegedly contained encrypted questions to the FCAT, short for the Florida Comprehensive Assessment Test.  While the factual allegations laid out in the article seem to indicate the youth perpetrated some form of trespass, they also alleged a litany of poor practices on the part of school administrators. These practices include weak passwords, entering passwords in front of others, and widespread unauthorized access, possibly that went undetected.From the report: Green, interviewed at home, said students would often log into the administrative account to screen-share with their friends. They'd use the school computers' cameras to see each other, he said.  It was a well-known trick, Green said, because the password was easy to remember: a teacher's last name. He said he discovered it by watching the teacher type it in.

The Dropout Dilemma - Richmond Fed - Orangeburg Consolidated School District 5 serves about 7,000 students in rural South Carolina. More than one-quarter of its high school students fail to graduate within four years. Predominantly African-American, Orangeburg is not a wealthy area; median household income in the county is about $33,000, compared with $53,000 nationally, and the unemployment rate is 10.4 percent, nearly double the national average. Nearly 85 percent of the district’s students qualify for free or reduced-price lunches, and many of their parents did not graduate from high school. "Poverty is our biggest challenge," says Cynthia Wilson, the district superintendent. "We have students growing up in homes where no one is working, and it becomes a cycle we absolutely need to break by graduating more students." High school graduation rates in the United States rose rapidly throughout much of the 20th century.  But around 1970, the averaged freshman graduation rate (AFGR), which measures the share of students who graduate within four years, began to decline, falling from 79 percent during the 1969-1970 school year to 71 percent by the 1995-1996 school year, where it remained until the early 2000s. This stagnation in graduation rates led to widespread concern about a "dropout crisis."

Michigan wrangles with school debts: — A request last week for a massive state rescue of Detroit Public Schools from budget-busting debt is putting the financial troubles of Michigan's most distressed urban school districts in the lap of state lawmakers. But the Coalition for the Future of Detroit Schoolchildren has requested the state assume at least $350 million in DPS debt and relieve Detroit schools of other legacy costs. It is one of several vexing issues involving money-losing public schools that loom large this spring in Lansing. Legislators also are facing requests for $725,000 to cover unpaid debts of the former Buena Vista school district they dissolved two years ago, a $1 million study of education funding adequacy and a doubling of a $50 million emergency loan fund for cash-strapped school districts that is nearly tapped out. "Something definitely has to be done," said state Sen. Ken Horn, R-Frankenmuth. "We have a lot of different problems to solve." Fifty-five other school districts and charter schools across Michigan began this school year in deficit, though 14  school districts and five charters are projecting they will be back in the black by July 1.

Starbucks Expands Free College Plan to 4 Years - Starbucks Corporation is expanding its college tuition assistance program to offer U.S. employees a full reimbursement of tuition for online bachelor’s degrees, company executives revealedon Tuesday.Any Starbucks employee who works more than 20 hours a week will be eligible for a loan to cover tuition at Arizona State University, which the company will reimburse once the student has received a passing grade at the end of each semester, the Wall Street Journal reports. Previously, the program limited tuition reimbursements to juniors and seniors.Starbucks is budgeting upwards of $250 million for the program and expects at least 25,000 employees to take advantage of the offer by 2025.Chief executive Howard Schultz said in an interview with the Wall Street Journal that the program highlighted the company’s commitment to “do everything we can to help our people get access to college.”

Tax Credits Don’t Necessarily Boost College Attendance, Research Finds -- The federal government spent $23 billion last year on tax credits to families paying for college. Despite the generous payout, the funds likely didn’t do much to boost college attendance, according to a new paper published by the National Bureau of Economic Research. Higher-education tax credits, which have been around since 1997 and then were expanded significantly in 2009, don’t affect whether or where students enroll, or what other financial aid they receive. One big reason the money doesn’t make much difference in whether someone decides to go to college, or what school they attend, is the timing of the credit. Tuition bills arrive an average of nine or 10 months before a family would receive any tax credit, so the upfront costs remain an obstacle to many families. The American Opportunity Tax Credit, which kicked in six years ago, increased eligibility to families earning up to $180,000 (from the prior $120,000 cap). The 2009 update also expanded coverage for lower-income families who don’t owe any taxes. But because the credit is calculated as a portion of the money spent on college and many low-income families fund school with grants, rather than savings, they don’t get money back. The authors found that college attendance didn’t increase among the newly eligible families in 2009.  Schools and states are conducting their own experiments to boost attendance by cash-strapped students, though how they define that segment of the population is shifting. Many now offer middle-class scholarships, for students whose families earn well into the six figures..Program critics argue the money could be better spent making up the difference between paltry Pell Grant payments and actual college tuition for the neediest students. They say that middle-class students already get plenty of help, courtesy of tax credits

Colleges Launch Food Pantries to Help Low-Income Students - WSJ: For several months last year, between her classes at the University of California campus here, Sierra Henderson stopped in at a tiny basement room to pick up free canned vegetables, pasta and cereal. “If the pantry wasn’t here I might have had to consider taking time off school to work full-time,” said the 21-year-old food-science major. Food pantries, where students in need can stock up on groceries and basic supplies, started cropping up on campuses in large numbers after the recession began in 2007. More than 200 U.S. colleges, mostly public institutions, now operate pantries, and more are on the way, even as the economy rebounds. Among factors driving the trend: Tuition has soared 25% at four-year public institutions since 2007, according to the College Board, and costs such as housing, books and transportation have also risen significantly in recent years. Meanwhile, more students from low-income families are attending college. For instance, four out of every 10 undergraduates in the UC system, which includes UC Berkeley and UCLA, now hail from households with an annual income of $50,000 or less. The stigma attached to receiving free food has diminished among students as so-called food security—a term used by the U.S. government to describe reliable access to a sufficient quantity of affordable, nutritious food—is regarded on campuses increasingly as a right.

The Sweet Briar Dilemma: Will Predatory Lending Take Down More Colleges? - After 114 years of educating young women in rural Virginia, Sweet Briar College recently announced that the 2015 academic year would be its last. It’s closing its doors, administrators say, because its model is no longer sustainable. There are plenty of people coming out of the woodwork to explain Sweet Briar's problems. These takes are varied and complex, but they are all missing an important point: that predatory banking practices and bad financial deals played an important and nearly invisible role in precipitating the school’s budget crisis. A quick look at Sweet Briar’s audited financial reports (easily available in public records) reveals enough confusing and obfuscating financial-speak to last a lifetime, but a few days of digging did manage to unearth a series of troubling things. A single swap on a bond issued in June 2008 cost Sweet Briar more then a million dollars in payments to Wachovia before the school exited the swap in September 2011. While it is unclear exactly why they chose 2011 to pay off the remainder of the bond early, they paid a $730,119 termination fee. For a school that was sorely strapped for cash, these fines and the fees that accrued around this deal (which are hard to definitively pick out from financial documents) couldn't have come at a worse time.

National student loan debt reaches a bonkers $1.2 trillion -- Craig and Coghill are just two of the 40 million people across the United States who have monumental student debt, as reported by CNN. In fact, student loans have increased by 84% since the recession (from 2008 to 2014) and are the only type of consumer debt not decreasing, according to a study from Experian, which analyzed student loan trends from 2008 through 2014. The analysis also finds that in total, a staggering $1.2 trillion is bleeding students dry. Of all of the open student loan accounts, says Experian, 39% ($417 billion) are in deferment (the period during which payments are not obligatory) and 61% ($727 billion) are in repayment. Of the consumers who are currently in the repayment stage, their average payment is $279 per consumer. But here’s some good news from the Experian study: Among adults 18 to 34 years of age, the average credit score of those who had at least one open student loan account was 640, 20 points higher than others in their age group. Student loans do, in fact, have the potential — if paid in a timely a manner — to help younger people establish a decent credit history before they go on to buy things like homes and cars.

Crippling Student Debt is Now a Punchline for TurboTax - Alexis Goldstein - TurboTax has a new TV commercial out that features a woman at a reception stealing food from a buffet and cramming it into her purse. The brief scene is followed by a TurboTax question superimposed onto the scene: “Did you pay student loans last year?” The user clicks “Yes."  The folks at Intuit (makers of TurboTax), or the marketers they hired, believe that it is so commonly understood that student debt has become so crippling, it’d lead one to steal food at parties. As much as TurboTax may want to make this a punchline, the actual numbers are no laughing matter. Over 38.8 million Americans have student debt (as of the end of 2012), and 7 million of them are in default on their loans. Even the Federal Reserve has warned that outstanding student debt is so high, it’s affecting the ability of Americans to purchase homes.  The fact that TurboTax’s marketers are running ads of borrowers struggling with student debt shows how universally sympathetic the problem is. But solving it is going to take more than sympathy—it will take a radical re-thinking of existing policy. Right now, the most the Administration seems willing to do is put a band-aid on the gaping wound of student debt. A real solution would be to make public higher education tuition free, through proposals like Strike Debt’s “How Far to Free” or the Congressional Progressive Caucus’s Debt-Free College section of their “People’s Budget.” 96 Democrats voted for the People’s Budget—not enough to pass, but a strong showing. Let’s hope other policymakers get on board soon. Student debt should be treated as a crisis, not a punchline.

Nine State Attorneys General Call on Dept of ED to Forgive Corinthian Debt - Alexis Goldstein - The pressure continues to build on the Department of Education to forgive the debts of scammed students of the for-profit Corinthian College, which collapsed last year under the weight of over 200 individual lawsuits. Today, the Attorneys General from nine different states co-signed a letter calling on the Department to forgive Corinthian students’ debt (an act that the Department has the authority to do today, without requiring Congress to do so). The letter begins: “We, the undersigned Attorneys General of Massachusetts, California, Connecticut, Illinois, Kentucky, New Mexico, Oregon and Washington, write to urge the Department of Education to immediately relieve borrowers of the obligation to repay federal student loans that were incurred as a result of violations of state law by Corinthian Colleges, Inc.” Former Corinthian students report being lied to about everything from the kind of financial aid they’d receive, to the job placement assistance they’d get. The school has been charged by multiple federal agencies and state law enforcement with predatory lending, targeting students with “low self esteem,” and publicizing completely false job placement stats. But the Attorneys General don’t just stop at demanding justice for Corinthian students. They also have some tough words for the entire for-profit industry, nothing that the industry spends more money on marketing and recruitment than they do on actually teaching students: "Too often, aggressive recruitment is the only thing these for-profit schools do well.“

Massive Public Pension Liabilities Loom in Jacksonville -The Jacksonville, Florida City Council Finance Committee is debating how to pay for $1.7 billion in unfunded pension liabilities in the city’s Police and Fire Pension Fund. Elected officials remain unable to agree how to reform the city’s public pension programs, after rejecting three separate plans. James Madison Institute Vice President of Policy Sal Nuzzo says city leaders will have to make tough decisions in order to make the pension funds solvent. “Addressing the real problem means making difficult choices,” Nuzzo said. “One policy reform would be to freeze the current system for existing employees and develop a new, more-reasonable retirement program for new hires. Over time, normal attrition would bring the system into greater levels of sanity. “For new employees, everything should be on the table for discussion: adjustments to vesting and retirement ages, examination of the future of health benefits for retirees; [employee] contributions; and other elements of retirement systems that the private market has recognized over the past 25 years,” Nuzzo said.

NYC Pension Earns $40 Million Over 10 Years, Pays Fund Managers $2 Billion -- At great political risk to his own ambitions (given the local campaign-funding base), New York City Comptroller Scott Stringer took a look at how much the city’s been paying to Wall Street (or Greenwich) to manage its money over the last decade and what they’ve gotten in return. It doesn’t look good. via the New York Times: over the past 10 years, the five pension funds have paid more than $2 billion in fees to money managers and have received virtually nothing in return… Until now, Mr. Stringer said, the pension funds have reported the performance of many of their investments before taking the fees paid to money managers into account. After factoring in those fees, his staff found that they had dragged the overall returns $2.5 billion below expectations over the last 10 years.Over the last 10 years, the return on those “public asset classes” has surpassed expectations by more than $2 billion, according to the comptroller’s analysis. But nearly all of that extra gain — about 97 percent — has been eaten up by management fees, leaving just $40 million for the retirees, it found.  It’s bordering on parody. They report investment returns gross of fees and then add the fee information onto their statements as footnotes. Do you know of anyone who can eat their returns gross of fees and taxes? I don’t.

Getting It Wrong -  Susan of Texas -- Megan McArdle has written yet another post meant to undercut Social Security but this latest effort didn't just reach her devoted followers. It also reached the Los Angeles TimesMichael Hiltzik: With even mainstream Democrats coming to embrace the idea of expanding Social Security to help address our looming retirement crisis, it couldn't be long before the pushback emerged from conservatives and Republicans.  Bloomberg's libertarian economics columnist Megan McArdle was quick out of the box, with a column published Tuesday titled, "The Left Gets it Wrong About Social Security." You should read it, because it's rare to find so much sophistry, misunderstanding and misinformation about Social Security packed into one article. You can count McArdle's disdain for retired people, seldom expressed so openly, as a dividend.  Weren't we just talking about entitlement reform so that we could spend less on the program?- Megan McArdle, Bloomberg View, on Social Security McArdle's target is a budget amendment that Sen. Elizabeth Warren (D-Mass.) recently persuaded almost all Senate Democrats to vote for, aimed at increasing Social Security benefits.  Hiltzik goes on to point out her errors and deceptions; read it all so I don't have to pick apart yet another Social-Security-Is-Doomed post. The best part, as always, is when McArdle pretends that top marginal tax rate on the rich can never be raised above 50%. The 1970s called, Megan. They wanted to remind you that the top tax rate was over 70%.

Getting It Wrong Again - So far Megan McArdle has ignored the prominent Los Angeles Times article correcting her deceptive comments about Social Security, choosing instead to respond to Dean Baker's comments at his blog at the Center for Economic and Policy Research without addressing Baker by name.  "Of course we would all like those who disagree with us in major debates to simply disregard their arguments and accept what we are saying as true," their blogger writes. "But most of us just don't possess the power to force our opponents to concede the truth of our position, even when if we use ad hominems to belittle their arguments":  McArdle is a Mean Girl and habitually uses insults to intimidate her targets. One must go with one's strengths however and when knowledge, reason and honesty are one's weakness, venom and propagandist repetition is all that is left.  Baker pointed out that the government is going to pay out Social Security just as the government is going to pay out on other bonds. McArdle quoted Baker saying: McArdle tells us that bonds purchased with prior years' surpluses don't matter, the government still has to cough up the money in the current year. The same logic applies to the bonds held by rich people like Peter Peterson. The government has to cough up the money to pay him the interest this year on whatever bonds he holds. If McArdle wants to declare it "supremely irrelevant" that the payments for Social Security come from bonds held by the trust fund, then with equal validity we can declare it supremely irrelevant that Peterson paid for the bonds he owns. After all, this would just get us into tired old arguments about moral obligations to bondholders. Of course McArdle is trying to convince people that Social Security will go under. Randians do not like Social Security because it is theft from the young to the old in their twisted philosophy.

Guatemalans deliberately infected with STDs sue Johns Hopkins University for $1bn - Nearly 800 plaintiffs have launched a billion-dollar lawsuit against Johns Hopkins University over its alleged role in the deliberate infection of hundreds of vulnerable Guatemalans with sexually transmitted diseases, including syphilis and gonorrhoea, during a medical experiment programme in the 1940s and 1950s.The lawsuit, which also names the philanthropic Rockefeller Foundation, alleges that both institutions helped “design, support, encourage and finance” the experiments by employing scientists and physicians involved in the tests, which were designed to ascertain if penicillin could prevent the diseases. Researchers at Johns Hopkins School of Medicine held “substantial influence” over the commissioning of the research program by dominating panels that approved federal funding for the research, the suit claims. The lawsuit asserts that a researcher paid by the Rockefeller Foundation was assigned to the experiments, which he travelled to inspect on at least six occasions. The suit also claims that predecessor companies of the pharmaceutical giant Bristol-Myers Squibb supplied penicillin for use in the experiments, which they knew to be both secretive and non-consensual. The experiments, which occurred between 1945 and 1956, were kept secret until they were discovered in 2010 by a college professor, Susan Reverby. The programme published no findings and did not inform Guatemalans who were infected of the consequences of their participation, nor did it provide them with follow up medical care or inform them of ways to prevent the infections spreading, the lawsuit states.

Toxic Weed Killer Glyphosate Found in Breast Milk, Infant Formula - The widely-used herbicide glyphosate, now classified as probably carcinogenic to humans by the World Health Organization (WHO), has been found in a number of items, including honey, breast milk and infant formula, according to media reports. “When chemical agriculture blankets millions of acres of genetically engineered corn and soybean fields with hundreds of millions of pounds of glyphosate, it’s not a surprise babies are now consuming Monsanto’s signature chemical with breast milk and infant formula,” said Ken Cook, president and co-founder of Environmental Working Group. “The primary reason millions of Americans, including infants, are now exposed to this probable carcinogen is due to the explosion of genetically engineered crops that now dominate farmland across the U.S.” “Through their purchasing power, the American consumer is fueling this surge in GMO crops and the glyphosate exposure that comes with it,” added Cook. “It’s time the federal FDA require foods made with GMOs be labeled as such so the public can decide for themselves if they want to send their dollars to the biotech industry that cares more about profits than public health.”

Drug-Resistant Food Poisoning Lands In The U.S. -- This time last year, a painful new virus was knocking on our doorstep. Travelers were bringing chikungunya to the U.S. And eventually, the mosquito-borne virus set up shop in Florida. Now the Centers for Disease Control and Prevention says another nasty pathogen is hitching a ride to the U.S. with travelers: multidrug-resistant Shigella.  Shigella is just about as bad as the word sounds. The bacteria infect your intestines and trigger crampy rectal pain, bloody or mucus-laced diarrhea and vomiting. Multidrug-resistant Shigella has caused several outbreaks over the past year in the U.S., the CDC reports Thursday in the journal Morbidity and Mortality Weekly Report. At least 243 people have gotten sick and about 20 percent were hospitalized. Those numbers may not sound like much — especially when you consider a half-million Americans get regular shigellosis each year.So what's the big deal? Well, this strain of Shigella is resistant to the go-to drug for the bacteria: ciprofloxacin.  "If rates of resistance become this high, in more places, we'll have very few options left for treating Shigella with antibiotics by mouth," says epidemiologist Anna Bowen, who led the study. Then doctors will have to resort to IV antibiotics. Shigella is incredibly contagious. It spreads through contaminated food and water. "As few as 10 germs can cause an infection," Bowen says. "That's much less than some other diarrhea-causing germs." From May to February, the Cipro-resistant strain popped up in 32 states, with large clusters in California, Massachusetts and Pennsylvania. Bowen and her team linked several of these outbreaks to international travel, including trips to India, the Dominican Republic and Morocco.

Flint, Mich.: State Water Control Hard to Swallow - Nappier, known to most as Jackie, always had thick hair, which she wore long during her childhood. But suddenly she was losing her hair — and she was far from the only one. Across this shrinking Rust Belt city, residents’ hair and eyelashes began falling out. One woman confessed that she cried every time she cleaned the thick strands out of her shower drain. At Nappier’s home, she and other family members continued to get sick, even though they heeded the series of boil-water advisories the city issued over the summer after E. coli and other bacteria were detected in the water system. Her daughter Glenda Colton returned to Flint from Ohio in the fall and promptly broke out in a rash across her neck and chest. In December and early January, Nappier’s grandchildren started vomiting and having diarrhea, she said, and they complained that their skin was itchy after showering. One day she ran a bath, and the water was the color of tea. The whole family switched to using bottled water for drinking, cooking and sometimes even bathing. In January she and the rest of the city’s nearly 100,000 residents received a letter explaining that water testing revealed high levels of trihalomethanes, a group of chemicals known as THMs. Byproducts of the chlorination process, THMs have been linked to increased rates of cancer, kidney and liver failure and adverse birth outcomes. It later emerged that the city knew since the previous May that the THM levels were high — in some places, twice the maximum allowed by the Environmental Protection Agency. A few weeks later, Nappier returned home from the senior center where she volunteers and ate a bowl of beef vegetable soup her daughter had mistakenly prepared with tap water. A few days later, she was so dehydrated from constant diarrhea that she asked to be taken to the Hurley Medical Center.

Global Week of Actions against GMO Trees in Brazil Ends in Success -- Thursday morning 300 peasants organized by La Via Campesina occupied the meeting of the Brazil National Biosafety Technical Commission (CTNBio) in Brasilia, which was convening to discuss the release of three new varieties of transgenic plants in Brazil including a request by FuturaGene to legalize their genetically engineered eucalyptus trees. The CTNBio meeting was interrupted and eventually cancelled. Earlier this morning, 1,000 women of the Brazil Landless Workers’ Movement (MST) from the states of São Paulo, Rio de Janeiro and Minas Gerais occupied the operations of FuturaGene Technology Brazil Ltda, a subsidiary of Suzano timber corporation, in the municipality of Itapetininga, in São Paulo.  This location is where transgenic eucalyptus, known as H421 is being developed and tested. During the protest, the MST destroyed the seedlings of transgenic eucalyptus trees there and denounced the potential impacts that would be caused by the release of transgenic eucalyptus if approved by CTNBio.  According to Atiliana Brunetto, a member of the National MST, the impending historic decision of CTNBio regarding GE eucalyptus trees must respect the Brazilian legislation and the Biodiversity Convention to which Brazil is a signatory. “The precautionary principle is always ignored by CTNBio. The vast majority of its members are placed in favor of business interests of the large multinationals at the expense of environmental, social and public health consequences,” he says.

GMO Trees Approved in Brazil in Violation of National Law and International Protocols - Today the Brazilian Technical Commission on Biosafety (CTNBio) formally approved an industry request to release genetically engineered (GE) eucalyptus trees. The application was made by FuturaGene, a company owned by Brazilian pulp and paper company Suzano. This is the first approval for commercial release of GE trees in Brazil or Latin America. Organizations in Brazil are exploring legal avenues to stop the commercial release of GE eucalyptus trees, pointing out that this decision violates national law. An  email from CTNBio member Paulo Pase de Andrade to the Campaign to STOP GE Trees dated 8 April, stated that the decision to approve GE eucalyptus was already made, indicating that today’s meeting was merely a technicality where FuturaGene’s request would be rubber stamped.  World Rainforest Movement’s International Coordinator Winnie Overbeek stated, “CTNBio’s approval of GE eucalyptus trees was no surprise. Over the years, CTNBio has made many decisions in favor of releasing GMO crops in Brazil, ignoring – as also happened in this case - protests from a wide range of groups of society. In this case they also ignored protest letters signed by more than 100,000 people.” He continued, “The Commission systematically disregards the precautionary principle, including the urgent need for detailed studies of the various impacts of this dangerous technology, even though this violates the 2008 decision on GE trees made by the UN Convention on Biological Diversity (UN CBD), to which Brazil is a signatory.”

Plowing prairies for grains: Biofuel crops replace grasslands nationwide -- Clearing grasslands to make way for biofuels may seem counterproductive, but University of Wisconsin-Madison researchers show in a study today (April 2, 2015) that crops, including the corn and soy commonly used for biofuels, expanded onto 7 million acres of new land in the U.S. over a recent four-year period, replacing millions of acres of grasslands. The study -- from UW-Madison graduate student Tyler Lark, geography Professor Holly Gibbs, and postdoctoral researcher Meghan Salmon -- is published in the journal Environmental Research Letters and addresses the debate over whether the recent boom in demand for common biofuel crops has led to the carbon-emitting conversion of natural areas. It also reveals loopholes in U.S. policies that may contribute to these unintended consequences. "We realized there was remarkably limited information about how croplands have expanded across the United States in recent years," says Lark, the lead author of the study. "Our results are surprising because they show large-scale conversion of new landscapes, which most people didn't expect." The conversion to corn and soy alone, the researchers say, could have emitted as much carbon dioxide into the atmosphere as 34 coal-fired power plants operating for one year -- the equivalent of 28 million more cars on the road.

Why the Ethanol Mandate Is Terrible Policy -  It used to be that for every gallon of ethanol blended into gasoline, blenders received a “tax credit” ranging around half a dollar. Foreign imports of ethanol were also subject to a 54-cent tariff. Both of these programs were allowed to lapse at the end of 2011. Still on the books, however, is the federal Renewable Fuel Standard, or RFS. Like the ethanol tax credit, the RFS came as a result of the Energy Policy Act of 2005. The RFS mandates a minimum number of gallons of different types of ethanol that must be blended into U.S. gasoline each year. The minimum amount is set to rise over time, and blenders are subject to fines if they do not comply.  The peculiar nature of the RFS has led to some absurd unintended consequences. For example, cellulosic ethanol (which is made chiefly from grass) isn’t commercially available in the necessary quantities to meet its RFS. Blenders have therefore wound up getting fined for not using a product that doesn’t exist. Similarly, because the formula used to set the RFS greatly overestimated the number of miles Americans would drive, blenders were required to use more ethanol than could be safely blended into all the gasoline used in American cars. The problems with the ethanol mandate, however, go beyond poor legislative drafting.  The ethanol mandate has led to the conversion of millions of acres of grassland and wetlands into cornfields. The environmental costs from these conversions swamp any reduced emissions from using ethanol-diluted gasoline. And while oil imports have indeed fallen in recent years, this has been the result of the boom in unconventional oil and gas production, rather than the substitution of biofuels.

New Report Debunks ‘Myth’ That GMOs are Key to Feeding the World - The biotechnology industry "myth" that feeding billions of people necessitates genetically engineered agriculture has been debunked by a new report out Tuesday by the nonprofit health organization Environmental Working Group. The report, Feeding the World Without GMOs (pdf), argues that investment in genetically modified organisms, or GMOs, has failed to expand global food security. It advocates more traditional methods "shown to actually increase food supplies and reduce the environmental impact of production." Over the past 20 years, the report notes, global crop yields have only grown by 20 percent—despite the massive investment in biotechnology.On the other hand, it continues, in recent decades "the dominant source of yield improvements has been traditional crossbreeding, and that is likely to continue for the foreseeable future." As the report states, "seed companies' investment in improving yields in already high-yielding areas does little to improve food security; it mainly helps line the pockets of seed and chemical companies, large-scale growers and producers of corn ethanol." After examining recent research on GMO crop production, the report also found:

  • Genetically modified crops—primarily corn and soybeans—have not substantially contributed to global food security and are primarily used to feed animals and cars, not people.
  • GMO crops in the US are not more productive than non-GMO crops in western Europe.
  • A recent case study in Africa found that crops that were crossbred for drought tolerance using traditional techniques improved yields 30 percent more than genetically engineered varieties.

Monsanto’s “Discredit Bureau” Really Does Exist --- Reuters is reporting that Monsanto is demanding a sit-down with members of the World Health Organization (WHO) and the International Agency for Research on Cancer (IARC). This international scientific body is being called on the carpet for reporting that Monsanto’s most widely sold herbicide, which is inextricably linked to the majority of their genetically engineered products, is probably carcinogenic to humans.  In a DO-YOU-KNOW-WHO-WE-ARE moment, Monsanto’s vice president of global regulatory affairs Philip Miller said the following in interview: "We question the quality of the assessment. The WHO has something to explain." Evidence for the carcinogenicity of Glyphosate comes from a peer-reviewed study published in March of 2015 in the respected journal The Lancet Oncology. Carcinogenicity of tetrachlorvinphos, parathion, malathion, diazinon, and glyphosate   Recently, I attended a talk by Monsanto’s Dr. William “Bill” Moar who presented the latest project in their product pipeline dealing with RNA. Most notably, he also spoke about Monsanto’s efforts to educate citizens about the scientific certainty of the safety of their genetically engineered products. The audience was mostly agricultural students many of whom were perhaps hoping for the only well-paid internships and jobs in their field.  One student asked what Monsanto was doing to counter the “bad science” around their work. Dr. Moar, perhaps forgetting that this was a public event, then revealed that Monsanto indeed had “an entire department” (waving his arm for emphasis) dedicated to “debunking” science which disagreed with theirs. As far as I know this is the first time that a Monsanto functionary has publically admitted that they have such an entity which brings their immense political and financial weight to bear on scientists who dare to publish against them. The Discredit Bureau will not be found on their official website.

Scientism and the Secret “Science” on Roundup - Three Chinese citizens are suing the government trying to force it to disclose the secret information it has on Roundup and the process by which it approved Roundup. We see how the Chinese government is at one with those of the US and EU in wanting to help Monsanto and other corporations keep the actual evidence about the severely toxic and cancer-causing effects of chemicals like Roundup secret from the people. What’s more, these corporations and governments evidently hold to an entirely new concept and paradigm of “science” under which the alleged scientific evidence is to be kept secret from the people, and research materials themselves made available to researchers only under corporate supervision. Instead, government and media elites are to publicly release whatever information the corporations see fit to publicize, this is to be christened as “science”, and the people are supposed to believe it on faith. This is a significant departure from previous scientific practice and in direct contradiction of the self-image and propaganda of today’s capital-S “Science” (i.e. scientism). Yet evidently the mainstream of the STEM and academic establishment supports this new concept and practice of secret alleged science. Therefore, today’s scientific establishment is nothing more or less than an authoritarian cult.

Fields of Toxic Pesticides Surround the Schools of Ventura County - Food and Environment Reporting Network: Oxnard and surrounding Ventura County grow more than 630 million pounds of strawberries a year, enough to feed 78 million Americans. But that bounty exacts a heavy toll: strawberries rank among California’s most pesticide-intensive crops. The pesticides that growers depend on—a revolving roster of caustic and highly volatile chemicals called fumigants—are among the most toxic used in agriculture. They include sixty-six chemicals that have been identified by the state’s Office of Environmental Health Hazard Assessment as the most likely to drift through the air and cause harm. Studies in laboratory animals and humans have linked many of these chemicals—including the organophosphate chlorpyrifos and fumigants 1,3-Dichloropropene (1,3-D), metam sodium, methyl bromide and chloropicrin, all used in strawberry production—to one or several chronic health conditions, including birth defects, asthma, cancer and multiple neurodevelopmental abnormalities.  By 2012, the most recent year for which data is available, more than 29 million pounds of these chemicals—more than half the total used in the state—were applied in just 5 percent of California’s 1,769 census ZIP codes. In two ZIP codes that Zuñiga knows well—areas that include the Oxnard High neighborhood where she trained and south Oxnard, where she lives—applications of these especially toxic pesticides, which were already among the highest in the state, rose between 61 percent and 84 percent from 2007 t0 2012, records at the California Department of Pesticide Regulation show. Both are among the ten ZIP codes with the most intensive use of these pesticides in California. And both have sizable Latino populations—around 70 percent—thanks, in part, to the large number of farm jobs in the area. The great majority of the people who work in the strawberry fields in Oxnard, which hosts the largest population of farmworkers in Ventura County, come from Mexico.

The American West Dries Up -  Getty Images photographer Justin Sullivan traveled to lakes and reservoirs in California, Utah, and Arizona to capture the following scenes of an increasingly waterless West.

NOAA Projects 60 Percent Chance El Niño Lasts All Year As California Fries --The National Oceanic and Atmospheric Administration (NOAA) is predicting a 60 percent chance that the El Niño it declared in March will continue all year. An El Niño is a weather pattern “characterized by unusually warm ocean temperatures in the Equatorial Pacific.” Robust El Niños are associated with extreme weather around the globe. They also generally lead to global temperature records, as the short-term El Niño warming adds to the underlying long-term global warming trend. El Niños are typically California drought-breakers, but as the top graph shows, that hasn’t been the case so far. As I discussed last week, some climatologists believe that we may be witnessing the start of the long-awaited jump in global temperatures — a jump that could be as much as as 0.5°F. It already appears likely that March will be hot enough to set yet another global record for the hottest 12 months on record (April 2014 through March 2015) and a global record for hottest start to a year (January through March) ever.  NOAA released its “consensus probabilistic forecast” of the El Niño Southern Oscillation (ENSO) for the rest of this year, from its Climate Prediction Center (CPC) and Columbia University’s International Research Institute (IRI) for Climate and Society. Note that the ENSO state — El Niño, neutral, or La Niña — is generally based on the sea surface temperature (SST) anomaly in the NINO3.4 region of the Equatorial Pacific.

'Warm blob' in Pacific Ocean linked to weird weather across the US -- An unusually warm patch of surface water, nicknamed 'the blob' when it emerged in early 2014, is part of a Pacific Ocean pattern that may be affecting everything from West Coast fisheries and water supplies to East Coast snowstorms. The blob is just one element of a broader pattern in the Pacific Ocean whose influence reaches much further -- possibly to include two bone-chilling winters in the Eastern U.S.A long-lived patch of warm water off the West Coast, about 1 to 4 degrees Celsius (2 to 7 degrees Fahrenheit) above normal, is part of what's wreaking much of this mayhem, according to two University of Washington papers to appear in Geophysical Research Letters, a journal of the American Geophysical Union. "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, a climate scientist at the UW-based Joint Institute for the Study of the Atmosphere and Ocean, a joint research center of the UW and the U.S. National Oceanic and Atmospheric Administration. Bond coined the term "the blob" last June in his monthly newsletter as Washington's state climatologist. He said the huge patch of water -- 1,000 miles in each direction and 300 feet deep -- had contributed to Washington's mild 2014 winter and might signal a warmer summer. Ten months later, the blob is still off our shores, now squished up against the coast and extending about 1,000 miles offshore from Mexico up through Alaska, with water about 2 degrees Celsius (3.6 degrees Fahrenheit) warmer than normal. Bond says all the models point to it continuing through the end of this year.

Governor Orders Water Cuts Amid Record Low Snowpack -- We are officially in uncharted territory — in more ways than one. The Sierra Nevada snowpack, which typically supplies nearly a third of California’s water, is showing the lowest water content on record: 6 percent of the long-term average for April 1. That doesn’t just set a new record, it shatters the old low-water mark of 25 percent, which happens to have been last year’s reading (tied with 1977). Things are so bad that Governor Jerry Brown decided to slog into the field for the manual snow survey on Wednesday morning. He didn’t need snowshoes but he did bring along a first-ever executive order mandating statewide water reductions. “We’re in a historic drought and that demands unprecedented action,” he told reporters who made it to the Sierra survey site off of Highway 50. The 31-point program is wide-ranging, though direct actions are focused on urban water consumption, aiming for a “mandatory” 25 percent reduction compared to 2013 levels. It will be up to the State Water Resources Control Board and more than 400 local water agencies to work out how to implement and enforce the mandates. The initiative also includes new incentives for replacing lawns with drought-friendly landscaping, consumer rebates for water-saving appliances, and special assistance for residents whose wells have run dry. While the state’s Department of Water Resources does monthly snow surveys during the winter season, the April 1 survey is the benchmark for assessing the season as a whole. That’s when snowfall is reckoned to have peaked and the runoff season gets underway. Six percent on April 1 is essentially saying there’s next-to-nothing to show for an entire winter’s snow accumulation.

California drought: Will the Golden State turn brown? -  California is facing a catastrophic environmental disaster. America's erstwhile Golden State is in the midst of a severe drought which shows no sign of letting up. Even the threat of earthquakes seems to fade in comparison to the water crisis, now in its fourth year. Nasa scientists have projected that reservoirs could run dry within a year and there is growing pressure on ground water supplies, which are dwindling rapidly. The drought is a problem of epic proportions and it could - many say should - result in a seismic shift in attitudes towards water. "Hopefully people will look at a green lawn and find it as annoying as second-hand cigarette smoke," says Nancy Vogel of the California Department of Water Resources.Last week the state's governor, Jerry Brown, announced mandatory water rationing on scale that California has never experienced before. The goal is a 25% reduction in usage. But the governor's plan has been criticised for not requiring similar rationing for farmers, who make up the large majority of the state's water usage. Meanwhile, local authorities and individuals have been put on notice that beautifully manicured green lawns should go. Homeowners will not be forced to remove them, although many cities have introduced limits on the number of days irrigation systems can be used. And cities have been ordered to stop watering ornamental grasses in the median areas of highways. "For the average Californian the easiest and quickest way to save water is to turn sprinklers off," Ms Vogel says. "Just let the lawn go brown or replace it with drought tolerant landscaping."

Scary Times For California Farmers As Snowpack Hits Record Lows -- The water outlook in drought-racked California just got a lot worse: Snowpack levels across the entire Sierra Nevada are now the lowest in recorded history — just 6 percent of the long-term average. That shatters the previous low record on this date of 25 percent, set in 1977 and again last year. And it has huge implications for tens of millions of people who depend on water flowing downstream from melting snow — including the nation's most productive farming region, the California Central Valley. Last year was already a tough year at La Jolla Farming in Delano, Calif. Or as farm manager Jerry Schlitz puts it, "Last year was damn near a disaster." La Jolla is a vineyard, a thousand-or-so acres of neat lines of grapevines in the southern end of the San Joaquin Valley. It depends on water from two sources: the federal Central Valley Project and wells. Until last year, Schlitz says, wells were used to supplement the federal water. "Now, we have nothing but wells. Nothing. There's no water other than what's coming out of the ground," he says. Last year, one of those wells at La Jolla dried up. The farm lost 160 acres — about a million dollars' worth of produce, plus the wasted labor and other resources. This year, the outlook is no better: The Central Valley Project, which decides where and when to release what water is left in California's reservoirs, has already warned that most farmers downstream won't get any water for the second straight year.

California Olive Growers Cutting Down Orchards - “My grandfather planted our first olives in about 1945-1950,” says David DePaoli, an olive grower whose family started farming in California about 100 years ago. When DePaoli took over from his father, he increased their original 20 acres of olives to 40, then 60 acres. In 2010, he started tearing those trees out. “The last 20 acres that I still have, my father planted anywhere from 1957-1972,” DePaoli says. “It’s a family tradition and it’s hard to remove those trees.” At 61 years old, DePaoli has literally grown up with the same orchard that he’s now contemplating tearing down. “But within the next two or three years those trees will probably have to come out, too.”Though California growers recognize that farming is a business, it doesn’t mean there’s no sentiment involved when it’s time to move on. In the case of olives—a tree that can live well over 500 years and still bear fruit—farmers are losing history as well. “Olives have been around since the start of civilization,” DePaoli says. “It literally hurts to pull them out.” Unlike growers who live in areas suited to only one crop, California’s olive growers have many other lucrative options to choose from.  The most popular option is almonds, whose price has climbed from less than a dollar in 1999 to more than $3 a pound today. “Almond trees are really good money,” says Burkett. Not only do new trees start producing within three years (compared to eight for another nut like pistachio), the harvesting process is mechanized, cutting down on annual labor costs. “In the table olive business, harvest can take over 50 percent of the farmer’s gross income,”

California, by the Nuts - In response to the four-year-old California drought, Governor Jerry Brown ordered a 25 percent cut in water use by municipalities across the state last week. The edict has led to a familiar ring of selective fault-finding that displaces a major system failure—such that California public officials bear responsibility for—onto the collective backs of society. Is the drought the fault of the lifestyle at large? No, it’s not. Are we all in this together? Not a chance. The New York Times ran a front-page feature, though, pondering if this was the end of the California dream. “California Drought Tests History of Endless Growth,” the headline proclaimed, before going on to breathlessly wonder how Hollywood and Silicon Valley would survive if, in the future, “people are forbidden to take a shower for more than five minutes.” California’s largest newspaper decided to point the finger at individual members of the one percent. Noting that cities including Beverly Hills, Malibu, and Newport Beach use significantly more water than more plebian places like, well, Los Angeles, the Los Angeles Times gave space to one Stephanie Pincetl, who was identified as having “worked on the UCLA water-use study.” Her take: “The problem lies, in part, in the social isolation of the rich, the moral isolation of the rich.”  The common theme? California sybarites are responsible for their water woes. Barely mentioned was the fact that the clueless wealthy might just as well go ahead and turn on the taps—let ten thousand golf course bougainvillea bloom. They aren’t the problem, or not much of the problem.  Listen up: California’s agricultural sector uses about 80 percent of the state’s water. As Mother Jones reported, it takes one gallon of water to grow a single almond, and nearly five gallons to make a walnut edible.

Farmers Use Water. Get Over It. -  Farming takes lots of water. There’s really no way around that. So I was a little surprised at how appalled many people seemed to be when I mentioned earlier this week that agriculture accounts for about 80 percent of California’s water use and 2 percent of its gross domestic product. To me this feels a little like complaining that California’s motion picture industry uses up 97 percent of California’s actors yet generates only 2.8 percent of GDP. Different industries require different inputs, and there is nothing per se wrong with farmers using a lot more of California’s water than its city dwellers do.  There is also nothing wrong with growing crops in California. The U.S. Department of Agriculture estimates that agriculture accounts for about 80 percent of “consumptive water use” nationwide, so California’s dependence on irrigation isn’t anomalous. Easterners have this weird fixation with California being the artificial and immoral colonization of a desert. There are definitely communities in Southern California that exist only because of water hauled in from hundreds of miles away, and I’ll leave it to you to judge whether that’s immoral. But New York City couldn’t survive without water piped in from mountain reservoirs 100 miles away. Large human settlements are by definition unnatural. So is farming. That said, California’s Central Valley, where most of the state’s farming gets done, has always had tons of water. It doesn’t all come in the form of rain, especially not in the southern half of the valley, but it does flow through as runoff from the snowmelt and rainstorms of the Sierra Nevada and other mountain ranges. When California became a state in 1850, the Central Valley boasted two mighty rivers, each navigable by steamboat for hundreds of miles, and the largest freshwater lake west of the Mississippi.

Beneath California Crops, Groundwater Crisis Grows - Even as the worst drought in decades ravages California, and its cities face mandatory cuts in water use, millions of pounds of thirsty crops like oranges, tomatoes and almonds continue to stream out of the state and onto the nation’s grocery shelves.But the way that California farmers have pulled off that feat is a case study in the unwise use of natural resources, many experts say. Farmers are drilling wells at a feverish pace and pumping billions of gallons of water from the ground, depleting a resource that was critically endangered even before the drought, now in its fourth year, began.  In some places, water tables have dropped 50 feet or more in just a few years. With less underground water to buoy it, the land surface is sinking as much as a foot a year in spots, causing roads to buckle and bridges to crack. Shallow wells have run dry, depriving several poor communities of water.Scientists say some of the underground water-storing formations so critical to California’s future — typically, saturated layers of sand or clay — are being permanently damaged by the excess pumping, and will never again store as much water as farmers are pulling out.“Climate conditions have exposed our house of cards,” said Jay Famiglietti, a NASA scientist in Pasadena who studies water supplies in California and elsewhere. “The withdrawals far outstrip the replenishment. We can’t keep doing this.”

OID, SSJID defy federal fish flows - The Oakdale and South San Joaquin irrigation districts defied the federal government Wednesday by diverting some Stanislaus River water to a local reservoir, where it might help thirsty crops, rather than releasing it down the river to benefit fish. The move follows an announcement Tuesday that the irrigation districts are willing to go to extraordinary lengths, including a court battle, to protect water they believe belongs to farmers. A planned 10-day surge in the river level to help fish, called a pulse flow, began at 1 a.m. Wednesday with an increase of water released from New Melones Dam near Jamestown. Rather than letting it flow downstream through Tulloch and Goodwin dams, which are controlled by the districts, carrying young fish on down the river toward the Delta and ocean, the districts sent the extra water to their Woodward Reservoir north of Oakdale. “We don’t know whose water that is,” OID General Manager Steve Knell said. “We want to make sure it’s not farming water, so we decided to divert it.” Related Federal officials blinked first in the short standoff, reducing New Melones releases to normal by 8:30 a.m. Wednesday, followed by a conference call involving the districts and the U.S. Bureau of Reclamation. Both will meet Thursday with leaders of the State Water Resources Control Board and National Marine Fisheries Service “in hopes of resolving this complicated and challenging issue,” Knell said.

Half of urban California’s water is used to water the grass - Los Angeles has been urging residents to cut back on watering their lawns.  As California searches for ways to dramatically cut its water use, the lawn may have to go, or at least shrink. About half of water usage in the state’s urban areas goes for landscaping, said Jeffrey Mount, a senior fellow at the Public Policy Institute of California and a water expert. “We have a lot of room in the urban sector to adjust,” and the most obvious place is in landscaping. Reducing the amount of water devoted to lawns won’t have a major negative impact on the economy or on lifestyle, he said.  On Wednesday, California Gov. Jerry Brown ordered statewide water reductions of 25% for the first time ever, as California’s drought worsens. Previously he had sought voluntary cuts of 20%. The State Water Resources Control Board is expected to decide on new regulations over the next month. Brown’s announcement said campuses, golf courses, cemeteries and other large landscapes will have to make significant cuts in water use. But it did not mention residential lawns. PPIC says outdoor residential use accounts for one-third of urban water use, twice that of commercial and institutional landscapes, including golf courses and cemeteries.

Carly Fiorina blames environmentalists for California drought -  Carly Fiorina is blaming liberal environmentalists for what she calls a “man-made” drought in California. “It is a man-made disaster,” Fiorina, who is “seriously considering” a run for president in 2016, told the Blaze Radio on Monday.   “California is a classic case of liberals being willing to sacrifice other people’s lives and livelihoods at the altar of their ideology. It’s a tragedy.”  The former Hewlett-Packard CEO, a Republican, ran for a California Senate seat in 2010 against incumbent Democrat Barbara Boxer and lost. Now, the state is facing a devastating drought in its fourth year. On Wednesday, California Gov. Jerry Brown issued an executive order to restrict water usage. The directive orders California’s State Water Resources Control Board — which supplies 90 percent of Californians with water, according to The New York Times — to reduce its supply by 25 percent.  Republicans have blamed California’s protections for endangered species for the drought. In December, the House passed a bill to pump water from the Sacramento-San Joaquin Delta to Southern California, a move that environmentalists said would harm endangered fish species. The Obama administration threatened to veto the bill.

More on pricing water - The use of moral suasion to encourage conservation is not unique to California. Public appeals for reductions in energy and water use are ubiquitous. And it is easy to see why. For political and jurisdictional reasons, it is often easier to mount a conservation campaign than raise energy or water prices in times of scarcity. But what impact do these interventions actually have on energy and water consumption? A new E2e working paper explores this question in the context of electricity. More than a year after the Fukishima earthquake, several of Japan’s nuclear power plants were still out of commission and electricity supply was tight. Policy makers were looking for ways to reduce electricity consumption during critical peak times. Koichiro Ito and his co-authors set out to test the relative effectiveness of an increase in critical peak electricity prices versus “moral suasion”:  a polite request for voluntary reductions in consumption. Customers who volunteered to be part of the study were randomly assigned to one of three groups:

  • A price treatment: Higher electricity prices during critical peak hours. Customers were charged prices ranging from $0.65/kWh – $1/kWh (up from a base rate of approximately $0.25/kWh).
  • A “moral suasion” treatment: Courteous day-ahead and same-day requests for electricity demand reductions during critical peak days.
  • Control group: No notification of/price increases during critical peak events.

It probably will not shock you to learn that the price treatment had a much larger impact on consumption as compared to moral suasion.  ... These qualitative results are compelling – and pertinent to a crisis we are currently facing here in California. An executive order issued last week signals a move in this direction.  The order  imposes mandatory water restrictions designed to achieve a 25 percent reduction in potable water use by urban residents.

If you told me the Governor was going to limit my water use in the future -- I'd start filling up gallon jugs today:  At a time when Californians need to be conserving water the most, many are doing the opposite: Water use in the midst of a severe and worsening drought declined by only 2.8 percent in February. The dismal figure — brought about in part by some Southern Californians actually increasing their water use — set off new waves of concerns among state officials struggling to curtail water consumption. That was the lowest conservation number since the state began gathering these figures in July 2014. The 2.8 percent reduction is in comparison to February 2013, the year the state is using as a baseline. via  OK, I know that this is not a response to expectations of changes in the future but what caused some people to use more water when every Californian knows there is a drought?

Dust Bowl 2.0: California's Historic Drought About To Get Even Worse As "Snowpack Melts Early Across The West" -- It has been a bad year for California whose drought is rapidly approaching historic proportions: according to the LA Times, which cites climatologist Michael Anderson, "you’re looking on numbers that are right on par with what was the Dust Bowl." And it is about to get even worse. According to the USDA, the west-wide snowpack is melting earlier than usual, according to data from the fourth 2015 forecast by the United States Department of Agriculture's Natural Resources Conservation Service (NRCS). "Almost all of the West Coast continues to have record low snowpack," NRCS Hydrologist David Garen said. "March was warm and dry in most of the West; as a result, snow is melting earlier than usual."  Historically, April 1 is the peak snowpack. This year, the peak came earlier. There was little snow accumulation in March, and much of the existing snow has already melted. A consequence of the early snowmelt is that Western states will have reduced streamflow later this spring and summer.  In Western states where snowmelt accounts for the majority of seasonal water supply, information about snowpack serves as an indicator of future water availability. Streamflow in the West consists largely of accumulated mountain snow that melts and flows into streams as temperatures warm in spring and summer. National Water and Climate Center scientists analyze the snowpack, precipitation, air temperature and other measurements taken from remote sites to develop the water supply forecasts.

"California Officials Assure Residents There Still Plenty Of Other Natural Resources To Waste" -- With residents struggling to adjust to newly imposed restrictions on water usage amid the state’s continuing drought, California officials assured citizens Monday there are still plenty of other resources available for them to waste. “Although we as a state must take serious and difficult steps to conserve water, we want to make it clear that residents are still welcome to keep squandering every other resource as usual by leaving TVs on in empty rooms or throwing out perfectly good food,” said Department of Water Resources spokesman Mark Aronow, adding that, while it is crucial that Californians observe constraints on decorative water features and other nonessential uses of water, individual residents and businesses should feel free to continue their regular practices of putting recyclable containers into the trash, paving over soil to expand parking areas, and leaving storefront doors open with the building’s air conditioning turned up. “As long as you’re not using excess water, there are no government regulations stopping you from driving your car a handful of blocks to the convenience store and leaving it idling outside while you head in to buy bottled water or a styrofoam cup of coffee. We just ask that, afterwards, you make sure you hand-wash your vehicle using a single bucket of water instead of spraying it off with a hose.” Aronow added that if residents did their part and focused on wasting other resources for the time being, then the state’s water table could recover, and future generations of Californians would be able to know the joys of poorly setting up a lawn sprinkler that directs the majority of its water onto the roadway and sidewalk.

WSJ Survey: California Water Rules Won’t Dry Out Growth -- The new water restrictions put in place in California will have only a small impact on that state’s economy, said economists surveyed in April by The Wall Street Journal.  On April 1, California Gov. Jerry Brown mandated water restrictions in response to the ongoing drought in the state.  The target is a 25% savings in potable urban water consumption over the next nine months.  Agriculture was exempt from the restrictions. Bloomberg News recently estimated that if the Golden State were its own country, its economy would be the seventh largest in the world. The question is whether mandatory cuts in water use will curb some of the state’s economic activity. A slim majority, 51%, of the forecasters who answered the special questions on California said the drag from the restrictions will be too small to show up in economic data such as income growth, employment and retail activity. Another 44% thought the drag would be small but measurable in the data. Sean Snaith of University of Central Florida echoed a sentiment voiced by a few economists that there would be “a much greater impact if the restrictions are extended to agriculture.”  If so, the California economy would show a greater slowdown and consumers across the U.S. could see higher food prices. “The larger issue is what restrictions today do to growth going forward,” said Diane Swonk of Mesirow Financial, “It is yet another cost of being in California.”

Why the California drought will be worse than everyone thinks  — We’re told by economists that the California drought is no cause for concern to the nation. The agriculture industry isn’t being forced into additional cuts. Food prices will increase only slightly.  Stephen Levy, director and staff economist at the Center for Continuing Study of the California Economy in Palo Alto argues that the market will correct a water imbalance. The state can eventually draw from new sources — desalination plants, diversions from Canada, and Washington and Oregon, to name a couple states. Some state crops including cotton and alfalfa will likely be phased out.  As for prices, “the big price moves have had to do with housing and energy,” Levy said. “Food is a relatively small impact when moving the index [Consumer Price Index, or CPI].”  Likewise, Daniel A. Sumner, an economist at the University of California, Davis, doesn’t think price increases are imminent. He points out that California agriculture is just a part of the national food supply and that food prices are subject to much shifting global demand. He also notes that farmers have invested in wells to offset shortages. It’s working as a stopgap for price increases in a gap that’s growing shorter.  “Even a 10% price increase — larger than I think is likely — the effect on the CPI will be very small,” Sumner said.  It all sounds very reassuring. After all, so what if a quart of strawberries that used to cost $5 now costs $6?  No big deal — unless these economists are wrong. And, frankly, there’s a pretty strong case that should the drought persist, say another two to three years or more, prices will skyrocket. Remember, California is the biggest farm state in the nation, producing more than Iowa, Nebraska and Minnesota combined.

California Urban Water Use Restricted While Regulators Give Oil Industry Two More Years To Operate Injection Wells In Protected Groundwater Aquifers - With snowpack levels at just 6% of their long-term average, the lowest they’ve ever been in recorded history, California Governor Jerry Brown has announced new regulations to cut urban water use 25%, the first ever mandatory water restrictions in the state. California is in the fifth year of its historic, climate-exacerbated drought and, per a recent analysis by a senior water scientist at NASA, has only one year of water left in its reservoirs, while groundwater levels are at an all-time low. Half of the produce grown in America comes from California, yet 2015 is likely to be the second year in a row that California’s farmers get no water allocation from state reservoirs. In some parts of the state, agricultural operations have pumped so much groundwater that the land is starting to sink. Governor Brown’s executive order has been criticized for not including restrictions on groundwater pumping by agricultural operations, but Brown defended the decision, saying that hundreds of thousands of acres of land were already lying fallow because of the state’s water crisis. There’s another industry conspicuously exempt from California’s new water restrictions, though. “Fracking and toxic injection wells may not be the largest uses of water in California, but they are undoubtedly some of the stupidest,” Zack Malitz of the environmental group Credo says, according to Reuters. Water use by the oil and gas industry — primarily for fracking — is on the rise around the country, though in California fracking takes significantly less water than in places like Texas or Pennsylvania. Just how much water fracked wells are using is currently not known, however, because reporting requirements for water used in the oil development process, signed into law late last year by Governor Brown, do not begin until the end of the month.

California Suffers Historic Drought While Oil Industry Wastes 2 Million Gallons of Water Daily: All resources, particularly natural resources, on Earth are finite and when they are gone there is nothing whatsoever that will bring them back. It is why conserving or managing resources is crucial to a civilization’s survival and why a resource like life-giving water is such a precious resource; particularly during a time of drought. . As California suffers the fourth straight year of an historic drought, Governor Jerry Brown took the unprecedented step of mandating a 25% reduction in water use for all Californians; it is virtually water rationing. However, it is unlikely California will reduce its water use by a quarter, partly because some residents do not believe the mandate applies to them, and partly due to corporations’ lust for profit.  There is a very limited and diminishing amount of water underground, but it is prohibitively costly to pump it for agricultural use. What little water is left underground is either being sucked out, blended with carcinogens and toxic chemicals for fracking and oil wells, or stolen by a giant multi-national corporation and sold to residents whose wells have dried up or have been shut down due to oil industry poisoning them. Every single day in California, the oil and gas industry uses way more than 2 million gallons of what precious little water the state has remaining in dangerous extraction techniques such as fracking, acidizing, and cyclic steam injection. This abominable waste of water is in spite of California farmers, cities, and residents struggling to find ways to conserve water and meet the new mandate to reduce water use by 25% to survive an historic drought. While the rest of the state is now forced to do its share to conserve a rapidly diminishing water reserve, the oil and gas industry continues using, contaminating, and disposing of staggering amounts of precious water each day.

California: A Microcosm For Impending Global Water Crisis: The move by California to require mandatory cuts in water use for the first time in its history has highlighted the world’s looming water crisis and increased the focus on the links between sustainable water and sustainable energy. “We need a new paradigm,” says Steven Solomon, author of Water: The Epic Struggle for Wealth, Power and Civilization. “The days when we could just go further into the mountains and find new sources of water are past. We need to make better use of the water we have.” The good news is that this offers opportunities for investors in everything from IBM’s development of smart metering for water use to more mundane technology like devices to detect water leaks. “Mexico City loses 40 to 50% of its water to leaks,” says Solomon. “American cities lose 20 to 30%. Finding those leaks alone could save a lot of water.” The new “toolkit” for dealing with the water crisis already exists, Solomon says, with a number of techniques available for “adaptive systemic management” of water. Wastewater treatment, for instance, can recycle water and save energy at the same time. “The sludge can be used as fuel to provide energy for the treatment,” Solomon says. Individuals can do much of this themselves, recycling their own wastewater as “gray water” for things like watering the lawn that do not require drinking quality water. In the wake of California’s announcement, the Ygrene Energy Fund pointed out that property assessed clean energy (PACE) financing can be used for water upgrades as well.

Who Will Control The World’s Water: Governments Or Corporations? --Water is perhaps the world’s most important resource, and one of the most common resources. For decades water was regarded as a common good, and it was plentiful enough that in most parts of the world there was little money to be made off of it. Now as the world’s population continues to grow, all of that is changing. Late in March, Tetra Tech was awarded a $1B five year contract to help support the US Agency of International Development (USAID) and its water development strategies. Tetra Tech will help USAID by collecting data related to water use, develop water management strategies, and help improve access to water in select areas. This contract is far from the first in the area of water management. Today there are numerous companies focused on earning a profit based on water management, water provision, and water remediation. Water is so critical a resource that any discussion of privatizing water resources predictably draws a frequent public outcry as the fight over a water infrastructure bill in Congress last year showed. The truth is though, that water access is no more or less safe in the hands of corporations than in the hands of governments. There are certainly cases of corporations abusing their customers, but there are equally many cases of governments using their considerable power to oppress their citizens. Corporations are often owned by and responsible to shareholders (i.e. the general public). Further, while government objectives are often murky and depend on the people in office, corporate objectives are more straightforward – earn a profit.

A Megacity Runs Dry -- I am writing by candle light. The power cut has already lasted more than eight hours and I fear that the combination of events and outcome of what we are going through might be a foreshadowing of what’s soon to come around the world.  It started with an irony, that may well be the perfect metaphor: the largest city in a country that holds 20 percent of Earth’s fresh water supply ends up without any. A combination of climate change, years of deforestation, privatization and a badly managed and corrupt political system have come together in a perfect storm to throw my city into one of its darkest crises ever. We now face a reality of four days without water and two with. We might as well call it what it is: a total collapse.  Imagine a megacity like São Paulo as schools are forced to close, hospitals run out of resources, diseases spread, businesses shut down, the economy nose dives. Imagine the riots, the looting … what the police force, infamously known as one of the most violent in the world, will do as this dystopian scenario engulfs us. One of the great modern, rising capital cities of the world suddenly falls apart. We brought this on ourselves. We buried our rivers under concrete, we polluted the reservoirs, chopped down trees, erased the local biome to grow sugar cane, soy and corn to fuel our vehicles, feed our appetites, our extravagant lifestyles.  I read the IPCC reports warning us of catastrophe. I watched the documentaries exposing corporations’ hidden agendas … the YouTube videos showing polluted oceans, overfishing, extracting, fracking and burning. I knew all this. And how markets march “forward” no matter what. How leaders pose for group shots with those golden pledges they never deliver … and how we, the People, march demanding change. This is personal … it’s about everything I love. And you have no idea how terrifying it is. It’s the kind of fear that you have no control over, that makes you grind your teeth at night while you sleep. There’s no language to describe this feeling of dread. No way to fix it. No time to fix it. This is the future that science warned us about. The new normal. And the truth is, I never realized it could happen so fast and that my friends, family and I would be forced to live through it, suffer like this. The battery on my phone is almost dead. The power has been out for 16 hours now. Still no water.

​The World Lost an Oklahoma-Sized Area of Forest in 2013, Satellite Data Show -- Oklahoma spans an area in the American South that stretches across almost 70,000 square miles. That’s almost exactly the same area of global forest cover that was lost in a single year, back in 2013. And it’s perhaps a useful way to visualize the ongoing loss of worldwide forest habitats—recall that in the first decade of the 21st century, the planet lost ​8 percent of its pristine forests.High resolution maps from Global Forest Watch, tapping new data from a partnership between the University of Maryland and Google, show that 18 million hectares (69,500 square miles) of tree cover were lost from wildfires, deforestation, and development the year before last. The maps were created by synthesizing 400,000 satellite images collected by NASA’s Landsat mission.The big surprise is the huge amount of forest loss in Canada and Russia. While Indonesia, long a global leader in deforestation, finally slowed its rate of destruction, northern boreal forests in Russia and Canada were literally burning up. Between 2011 and 2013, Russia and Canada jointly accounted for 34 percent of worldwide forest loss, according to the data.  Here's an interactive map, which you can use to examine the scale of forest loss around the world:

New Study Shows Arctic Permafrost May Be Thawing Faster Than We Thought - 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,”  “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 is chock-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.” . It’s yet another feedback loop manifesting itself in Arctic permafrost regions — as climate change causes it to thaw, the thawing causes more climate change, which causes more thawing, et cetera, et cetera.

Canada glaciers to shrink 70% by 2100 - The glaciers of western Canada, one of the world’s most picturesque mountain regions, are likely to largely melt away over just three generations, scientists have warned. By 2100, the glaciers of Alberta and British Columbia are set to shrink by 75% in area compared to 2005 levels, and by 70% in volume, according to their predictions. But in two out of the three regions that were studied, the decline could be even more dramatic – over 90%. The loss will hit many sectors, from agriculture, forestry and tourism to ecosystems and water quality, the investigators warned. The study, published in the journal Nature Geoscience, was headed by Garry Clarke, a professor at the University of British Columbia in Vancouver. “The disappearance of (the) glaciers... will be a sad loss for those who are touched by the beauty of Canada’s mountain landscapes,” Clarke told AFP. “When the glaciers have gone, we lose the important services they provide: a buffer against hot, dry spells in late summer that keeps headwater streams flowing and cool, and sustains cool-water aquatic species.”

Western Canada May Lose 70 Percent Of Its Glaciers By The End Of This Century -- According to a study published this week in the journal Nature Geosciences, 70 percent of glaciers in Alberta and British Columbia could disappear by the end of the 21st century.  “What [glaciers] are telling us is that the climate is changing. The glaciers don’t respond to weather, so they don’t get confused about whether it was a cold winter or a hot summer,” Gary Clarke, lead author of the study and professor emeritus at University of British Columbia (UBC) told ThinkProgress. “When the glaciers are wasting away, we know that the climate isn’t helpful to them.  Western Canada’s glaciers are vast, covering some 10,000 square miles — an area larger than the state of Vermont. But according to the study, which looked at glacier melt under 24 different climate scenarios, human-caused climate change is threatening to nearly wipe out the glaciers.“According to our simulations, few glaciers will remain in the Interior and Rockies regions, but maritime glaciers, in particular those in northwestern British Columbia, will survive in a diminished state,” the paper reads, noting that the most substantial ice loss will most likely occur between 2020 and 2040. . According to the latest Intergovernmental Panel on Climate Change (IPCC) report, there is “very high confidence that globally, the mass loss from glaciers has increased since the 1960s.” That loss can be seen in the Europe’s Alpine glaciers, which have lost half of their volume since the 1850s. It is also on display in Africa, where glaciers have declined by 60 percent since the 1900s, and Alaska, where glaciers are melting at more than double the rate of ten years ago.

Greenland has massive lakes beneath the ice, repeatedly filling and draining away -- Researchers who are building the highest-resolution map of the Greenland Ice Sheet to date have made a surprising discovery: two lakes of meltwater that pooled beneath the ice and rapidly drained away. One lake once held billions of gallons of water and emptied to form a mile-wide crater in just a few weeks. The other lake has filled and emptied twice in the last two years. Researchers at Ohio State University published findings on each lake separately: the first in the open-access journal The Cryosphere and the second in the journal Nature. Ian Howat, associate professor of earth sciences at Ohio State, leads the team that discovered the cratered lake described in The Cryosphere. To him, the find adds to a growing body of evidence that meltwater has started overflowing the ice sheet's natural plumbing system and is causing "blowouts" that simply drain lakes away. "The fact that our lake appears to have been stable for at least several decades, and then drained in a matter of weeks -- or less -- after a few very hot summers, may signal a fundamental change happening in the ice sheet," Howat said. Each time the lake fills, the meltwater carries stored heat, called latent heat, along with it, reducing the stiffness of the surrounding ice and making it more likely to flow out to sea, he said.  Bevis explained the long-term implications. "If enough water is pouring down into the Greenland Ice Sheet for us to see the same sub-glacial lake empty and re-fill itself over and over, then there must be so much latent heat being released under the ice that we'd have to expect it to change the large-scale behavior of the ice sheet," he said.

Warming Arctic blamed for worsening summer heatwaves -  It seems our weather is getting slower – and hotter. Arctic warming appears to be aggravating summer heatwaves across Europe and North America, by putting the brakes on atmospheric circulation in mid-latitudes.  The team that uncovered this Arctic effect says it caused the Russian heatwave of 2010, which lasted six weeks, killing crops and causing massive forest fires; the west European scorcher of 2003 that killed an estimated 70,000 people; and possibly the record US heatwave of 2012, which decimated corn crops. Dim Coumou and colleagues at the Potsdam Institute for Climate Impact Research in Germany studied atmospheric circulation in the Northern Hemisphere from 1979 to 2013. They found longer and more frequent hot spells in mid-latitudes that, they say, are likely to have been triggered by a reduction in the temperature difference between the Arctic, which is warming quickly, and mid-latitudes, where average warming is slower.  The Arctic has in fact warmed twice as fast as the rest of the globe, because of the melting of the ice replaces a reflective surface with dark ocean that absorbs much more solar energy. Climatologists believe that this temperature difference drives the general west-to-east movement of mid-latitude weather systems, such as the depressions that bring storms and the high-pressure systems that bring hot dry weather in summer and intense cold in winter. A smaller temperature difference slows these systems down, so their associated weather persists for longer.

NSIDC: Arctic sea ice conditions, April 7, 2015 -- Arctic sea ice extent for March 2015 averaged 14.39 million square kilometers (5.56 million square miles). This is the lowest March ice extent in the satellite record. It is 1.13 million square kilometers (436,000 square miles) below the 1981 to 2010 long-term average of 15.52 million square kilometers (6.00 million square miles). It is also 60,000 square kilometers (23,000 square miles) above the previous record low for the month observed in 2006.  The graph above shows Arctic sea ice extent as of April 5, 2015, along with daily ice extent data for four previous years. High-resolution image  The change in total Arctic sea ice extent for March is typically quite small. It tends to increase slightly during the first part of the month, reach the seasonal maximum, and then decline over the remainder of the month. Following the seasonal maximum recorded on February 25, this year instead saw a small decline over the first part of March, and then an increase, due largely to periods of late ice growth in the Bering Sea, Davis Strait and around Labrador. On March 26, extent had climbed to within 83,000 square kilometers (32,000 square miles) of the seasonal maximum recorded on February 25. Despite this late-season ice growth, analysts at the Alaska Ice Program report in their April 3 post that ice in the Bering Sea was very broken up.

Antarctica’s Record High Temp Bodes Ill for Ice -- The Antarctic Peninsula is one of the fastest warming spots on the planet, but in recent days, a stubborn weather pattern sent temperatures skyrocketing there, setting a record high for the continent.  While the event that set the mercury soaring — called a Chinook, or foehn wind — isn’t unusual for the region, it does seem to be increasing with climate change, as winds around Antarctica become stronger. Scientists are worried that if these sudden warming events become more common or more intense, they could put the already threatened ice of the peninsula in an even more precarious situation, with serious implications for global sea level rise. The peninsula of Antarctica is a slender arm of land that reaches out from the continent toward South America. It has warmed by about 5°F in the past 50 years, while the globe as a whole has warmed about 1.3°F. All that warmth has caused major changes to the peninsula, from the precipitous decline of penguin colonies to the spectacular collapse of two of the ice shelves on its fringe. Those floating platforms of ice buttress the land-bound glaciers behind them, controlling how quickly that ice flows into the sea, and its potential contributions to sea level rise.

The Last Time Oceans Got This Acidic This Fast, 96% of Marine Life Went Extinct - The biggest extinction event in planetary history was driven by the rapid acidification of our oceans, a new study concl​udes. So much carbon was released into the atmosphere, and the oceans absorbed so much of it so quickly, that marine life simply died off, from the bottom of the food chain up.   That doesn’t bode well for the present, given the disturbingly similar rate that our seas are acidifying right now. Parts of the Pacific, for instance, are already so acidic that sea snails’ shells begin dissolving as soon as they’re born. The biggest die-off in history, the Permian Extinction event, aka the Great Dying, extinguished over 90 percent of the planet's species—and 96 percent of marine species. A lot of theories have been put forward about why and how, exactly, the vast majority of Earth life went belly up 252 million years ago, but the new study, published in Science, offers some compelling evidence acidification was a key driver.  A team led by University of Edinburgh researchers collected rocks in the United Arab Emirates that were on the seafloor hundreds of millions of years ago, and used the boron isotopes found within to model the changing levels of acidification in our prehistoric oceans. Through this “combined geochemical, geological, and modeling approach,” the scientists say, they were able to accurately model the series of “perturbations” that unfolded in the era.   They now believe that a series of gigantic volcanic eruptions in the Siberian Trap spewed a great fountain of carbon into the atmosphere over a period of tens of thousands of years. This was the first phase of the extinction event, in which terrestrial life began to die out.   “During the second extinction pulse, however, a rapid and large injection of carbon caused an abrupt acidification event that drove the preferential loss of heavily calcified marine biota," the authors write.

Climate Scientist: No, My Study Is Not A “Death Blow To Global Warming Hysteria” - A recent study provided new estimates for the rate at which aerosols -- tiny particles of matter suspended in the atmosphere - deflect the sun's rays, measuring what is known as aerosol "radiative forcing." The study from Germany's Max Planck Institute for Meteorology, which analyzed data from 1850 to 1950, found that the level of radiative forcing from aerosols is "less negative" than commonly believed, suggesting that aerosols do not cool the atmosphere as much as previously thought. According to right-wing media, the study represents a "death blow to global warming hysteria." The reasoning behind the claim, which originated in a Cato Institute blog post, is that climate models rely on aerosols to offset much of the projected greenhouse gas effect from carbon dioxide. So if aerosols offset less warming than commonly believed, Cato claims "the amount of greenhouse gas-induced warming must also be less" and "we should expect less warming from future greenhouse gas emissions than climate models are projecting." The Cato blog post was picked up by the Daily Caller, American Thinker, Alex Jones' Infowars, Investors' Business Daily, and Rush Limbaugh. But the study does nothing to dispute the scientific consensus on global warming, according to the study's author himself.  In response to media outlets using his study to make inference's about the climate's sensitivity to carbon dioxide, climate scientist Bjorn Stevens published a statement on the Max Planck Institute's website, debunking the notion that human-induced climate change is "called into question" by his study. He also wrote that his estimates of aerosol radiative forcing are "within the range" of the IPCC's previous findings (which he actually co-authored), and that "I continue to believe that warming of Earth's surface temperatures from rising concentrations of greenhouse gases carries risks that society must take seriously."

Climate sensitivity is unlikely to be less than 2C, say scientists - Does the fact that surface temperatures are rising slower than in previous decades mean scientists have overestimated how sensitive the Earth's climate is to greenhouse gases? It's a question that's popped up in the media from time to time. And the short answer is probably no, according to a new paper in Nature Climate Change. Using temperature data up to 2011, the authors work out a value of climate sensitivity of 2.5C, comfortably within the range where scientists have suggested the 'real' value lies. Questions about climate sensitivity are complicated, and won't be solved by any single bit of research. But the new paper seems to contribute to a growing confidence among scientists that climate sensitivity is unlikely to be less than 2C.Equilibrium climate sensitivity (ECS) is the warming we can expect per doubling of atmospheric carbon dioxide above pre-industrial levels. In 2013, the Intergovernmental Panel on Climate Change (IPCC) estimated the value is likely to lie between 1.5 and 4.5C. This marked a change from previous reports, which put the lower boundary at 2C. The new paper says lowering of the limit was partly "an effect of considering observations over the warming hiatus". This refers to the last 15 years or so in which surface temperatures have risen slower than in past decades, even though we're emitting greenhouse gases faster.

Norway Oil Fund May Exclude From Investment on Climate Concerns - —Norway’s minority government on Friday said its sovereign-wealth fund should be allowed to exclude from investment companies that damage the global climate, and appointed an expert group to assess whether the fund should be allowed next year to start buying unlisted infrastructure. The $885 billion fund—one of the world’s largest investors, holding on average 1.3% of every listed global company—shouldn’t immediately exit its fossil fuel-exposed holdings such as coal assets, the government said. Instead, it should use the threat of exclusion as a tool to pressure companies to change their climate strategies, it said. “This criteria is broad and good, and behavior-based,” Norway’s Minister of Finance Siv Jensen told The Wall Street Journal in an interview. “I think this is a better ownership tool for the bank than product-based exclusions.” The fund, set up in the 1990s to safeguard Norway’s vast oil and gas revenues, has previously banned certain types of assets deemed unethical, including companies that produce nuclear weapons, cluster bombs, and tobacco, or that contribute to human rights violations such as child labor. Adding contribution to climate change to that list would be a signal to companies and other institutional investors to address climate change concerns. The fund bases its ethically-based exclusions on thorough assessments by an ethics council.

Following Canada’s Bad Example, Now UK Wants To Muzzle Scientists And Their Inconvenient Truths  - Techdirt has been following for a while Canada's moves to stop scientists from speaking out about areas where the facts of the situation don't sit well with the Canadian government's dogma-based policies. Sadly, it looks like the UK is taking the same route. It concerns a new code for the country's civil servants, which will also apply to thousands of publicly-funded scientists. As the Guardian reports:  Under the new code, scientists and engineers employed at government expense must get ministerial approval before they can talk to the media about any of their research, whether it involves GM crops, flu vaccines, the impact of pesticides on bees, or the famously obscure Higgs boson. The fear -- quite naturally -- is that ministers could take days before replying to requests, by which time news outlets will probably have lost interest. As a result of this change, science organizations have sent a letter to the UK government, expressing their "deep concern" about the code. A well-known British neurobiologist, Sir Colin Blakemore, told the Guardian: "The real losers here are the public and the government. The public lose access to what they consider to be an important source of scientific evidence, and the government loses the trust of the public,"

First Florida, Now Wisconsin, Bans the Words 'Climate Change' - The idea that you can make climate change go away by not talking about it is spreading. One month ago, we heard how officials and staff at the Florida Department of Environmental Protection were ordered not to use the terms “climate change” or “global warming” even when they were discussing the all-too-obvious impacts to their vulnerable state.  Now it’s Wisconsin’s turn. The staff of its Board of Commissioners of Public Lands (BCPL) has been told they can’t even discuss climate change, no matter what they call it. Staff members aren’t even permitted to respond to emails on the subject, following a vote this week by the three-member panel overseeing the agency. It includes two Republicans and one Democrat and the vote was 2-1.

Energy and Environment Update for April 10, 2015 - -- The House and Senate are in recess for the Easter and Passover holidays.  Several energy hearings are already scheduled for April, and more are certain to come soon.  More than 100 Senators and Representatives, nearly all Democrats, sent a letter March 31 supporting the Obama Administration’s efforts to demonstrate American leadership in United Nations Framework Convention on Climate Change negotiations toward a global climate accord scheduled to be finalized in Paris this December.  Senators Brian Schatz (D-HI), Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Barbara Boxer (D-CA), Ed Markey (D-MA), and Angus King (I-ME) sent a letter to Interior Secretary Sally Jewell April 1 asking the Interior Department to take the climate change impact of black carbon into account when it proposes updated air permitting regulations for drilling offshore in the Alaskan Arctic.  Senators Jeff Sessions (R-AL), James Inhofe (R-OK), Roger Wicker (R-MS), and John Barrasso (R-WY) sent a letter April 1 to Environmental Protection Agency Administrator Gina McCarthy seeking additional information on the science linking climate change to drought, hurricanes, and increased temperatures, including an analysis of agency climate change modeling results. House Energy and Commerce Subcommittee on Energy and Power Chair Ed Whitfield (R-KY) sent a letter April 1 to Environmental Protection Agency Administrator Gina McCarthy charging that the agency set unrealistic deadlines when it proposed phasing out some hydrofluorocarbons. He contends that manufacturers will not be able to replace the refrigerants with cost effective alternatives beginning next January, when the proposal would begin phasing out their use.

Scientists seek source of giant methane mass over Southwest - Scientists are working to pinpoint the source of a giant mass of methane hanging over the southwestern U.S., which a study found to be the country’s largest concentration of the greenhouse gas. The report that revealed the methane hot spot over the Four Corners region — where Colorado, New Mexico, Utah and Arizona meet — was released last year. Now, scientists from the University of Colorado, the University of Michigan, the National Oceanic and Atmospheric Administration and NASA are conducting a monthlong study to figure out exactly where it came from. The answer could help reduce methane emissions that contribute to global warming. Last year’s study by NASA and the University of Michigan was based on images from a European satellite captured between 2003 and 2009. They showed the methane hot spot as a red blip over the area, which is about half the size of Connecticut. The study found the concentration of methane detected there would trap more heat in the atmosphere than all the carbon dioxide produced each year in Sweden.

Selling the Wind -- Would someone please tell the Guaraní of Guaraqueçaba in Brazil that their land is now a carbon “offset”? That’s ecological jargon for “get the hell out.” The Guaraní aren’t alone, either. Some of the Earth’s lowest carbon footprints are being wiped out in the name of green progress. In the Bajo Aguán region of Honduras, security guards working for the palm oil company Dinant have attacked and murdered farmers to make way for sprawling tree farms that promise to capture methane gas. In spite of its involvement in a hundred or more deaths, Dinant was awarded $15 million in World Bank loans in 2009 for soaking up emissions. Welcome to the world of cap and trade. The system works like this: government sets an overall limit on emissions; and polluters can trade their right to emit within it, or they can pay to exceed it. This devious little notion, the brainchild of George Herbert Walker Bush amid the acid rain scare of 1988, has spawned the U.N.’s Clean Development Mechanism (CDM) and the European Union’s Emissions Trading System (ETS)–huge, booming carbon markets worth billions of dollars. Pollution pays, and, to say the same thing twice, “sustainable development” is everywhere in fashion. The U.N. has just released a new proposed list of Sustainable Development Goals aiming to improve conditions in developing countries, an ambition that relies perversely on incentives to destroy the environment.Take the Indian and Chinese coolant factories that emit HCFC-23, a potent greenhouse gas. A company could earn one carbon credit by eliminating one ton of carbon dioxide, but it could earn more than eleven thousand credits by destroying a ton of HCFC-23 waste (and then trade the credits for big money). That’s why nineteen factories currently receiving the payments have stepped up production of their harmful coolant, deliberately using the most inefficient manufacturing processes available to generate as much waste gas as possible. Many companies earn more from destroying the by-product than from their actual product. Now that’s market efficiency.

Decarbonization --What will a green energy economy look like? Some imply that it will be more just. I think this will require a struggle. excerpt from here: This should prove to be a watershed year for the “de-carbonization” of the US power sector, with record volumes of coal-fired capacity to be shuttered, renewables capacity to be built, and natural gas to be consumed. The result, according to research firm Bloomberg New Energy Finance (BNEF): CO2 emissions from the power sector should drop to their lowest level since 1994. Three factors will combine to make 2015 one for the record books according to new BNEF research and forecasts: • This year, the US will install more renewables than ever before, with 18 new gigawatts (GW) coming online. BNEF forecasts new solar installations to reach an all-time annual high of 9.1GW in 2015 – with half of that built in California. Wind build should total 8.9GW (third-most all-time) with a third of that coming in Texas. • This is expected to be a record year for coal retirements in the US with 23GW forecast to come offline. That represents no less than 7% of all current US coal capacity. A confluence of factors is driving the change, including lower priced natural gas, new standards on mercury emissions, and the old age of many coal-fired units. • The power sector will burn more natural gas in 2015 than ever before – more even than in 2012, “the year of no winter”, when Henry Hub prices fell consistently below $3/MMBtu. Gas burn will rise to back-fill lost generation from retiring coal; but also, remarkably low gas prices have boosted burn totals by allowing efficient gas turbines to undercut the cost of coal-fired electricity. The result of this churn is that CO2 emissions from the power sector should fall to their lowest levels since 1994, BNEF has found. This would put power sector emissions 15.4% below 2005 levels.

Green imperialism - NATO plans to test the latest clean energy technologies in a war game due to be held in Hungary this coming June.  The military alliance’s website says over 1000 soldiers will take part in the exercise, which will use the latest self-contained wind and solar power cells. NATO assistant secretary general for emerging security challenges, ambassador Sorin Ducaru, said the focus was on deploying “smart energy” to battlefields around the world. “Now is the time to start thinking about multinational cooperation: by setting clear priorities; by bringing together groups of interested nations; and by achieving economies of scale,” he said. The potential for renewables to replace fossil fuels in a war zone was highlighted during the recent conflicts in Iraq and Afghanistan, where NATO relied heavily on fuel to be transported by road to outlying bases. These were frequently attacked and ambushed by insurgents, leading to an estimated 3000 dead or wounded US soldiers between 2003 and 2007. Military forces are significant energy users. Together US army, navy and airforce are the country’s largest consumers of oil. The Pentagon has committed to investing in solar, with a 1 gigawatt target for 2025. In 2012 it started trials of biofuels in part of the US fleet, in what was dubbed the ‘Great Green Fleet’

Energy Glut Is More Than Just Crude - First up, let us ride the wave of renewables hitting California. For not only is its renewable generation target of 33% by 2020 aggressive, but also achievable. A rather impressive accolade considering if it were a country, it would rank as the 8th largest economy in the world. It is already meeting 22% of its electricity needs from non-hydro renewables, while solar generation in 2014 was more than three times higher than 2nd placed Arizona, and more than all other states….combined. California is on target to meet 5% of its electricity generation needs this year from utility-scale solar, while 2,300 MW of small scale solar capacity has been installed in homes and businesses, helping to offset the lack of hydro due to worsening drought conditions: Next up, we look at the momentum behind wind power in the US. Not only is it one of the fastest-growing sources of renewable power generation as it reaches 5% of the total generation mix, but with continued investment in technological innovation and grid integration the US could go from having 61 GW of wind generation capacity in 2013 to 224 GW by 2030, to 400 GW by 2050. On this trajectory, wind could account for 10% of the US generation mix by 2020, 20% by 2030, and 35% by 2050: Switching to excess in the world of black gold, Texas tea, according to the EIA’s drilling productivity report new well oil production for the Permian region is set to increase by a whopping 20% month-on-month in April, as a precipitous drop in oil prices spurs producers to be much more nimble in achieving greater efficiencies. A shift to ‘high grading’ – areas of greater productivity and lower costs – makes logical sense, but to see this shift manifesting itself so starkly illustrates the flexibility involved. Permian is still the most active US shale play, accounting for 35% of total active rigs (at 283 rigs). That said, the Permian rig count – like total oil rigs – has fallen 50% from its peak late last year.

Times: “The worst possible result” revealed at Fukushima — Plant Chief: Centuries may pass before humans find a way to deal with molten cores — Top Official: “We have no idea” what to do, “the technology simply doesn’t exist… I can’t say it’s possible” (VIDEOS) ENENews

  • NHK: The people trying to decommission the Fukushima Daiichi nuclear plant have been hit by setback after setback… and faced accusations of misconduct. It’s lost them a lot of public trust… [Naohiro Masuda, president of Tepco's decommissioning company] revealed he’s not sure if he can comply with the government set plan [for] removing the fuel…
  • Naohiro Masuda, president of Tepco’s Fukushima Daiichi Decommissioning Company: We have no idea about the debris. We don’t know its shape or strength. We have to remove it remotely from 30 meters above, but we don’t have that kind of technology, it simply doesn’t exist... We still don’t know whether it’s possible to fill the reactor containers with water. We’ve found some cracks and holes in the three damaged container vessels, but we don’t know if we found them all. If it turns out there are other holes, we might have to look for some other way to remove the debris. It’s a very big challenge. Honestly speaking, I cannot say it’s possible.

Fukushima disaster radiation detected off Canada's coast -- Radiation from Japan’s 2011 Fukushima nuclear disaster has for the first time been detected along a North American shoreline, though at levels too low to pose a significant threat to human or marine life, scientists said. Trace amounts of Cesium-134 and Cesium-137 were detected in samples collected on 19 February off the coast of Ucluelet, a small town on Vancouver Island in Canada’s British Columbia, said Woods Hole Oceanographic Institution scientist Ken Buesseler. “Radioactivity can be dangerous, and we should be carefully monitoring the oceans after what is certainly the largest accidental release of radioactive contaminants to the oceans in history,” Buesseler said in a statement. The levels the group detected are extremely low. For example, swimming in the Vancouver Island water every day for a year would provide a dose of radiation less than a thousand times smaller than a single dental X-ray, Woods Hole said.Tests off the coast of Japan shortly after the 2011 disaster measured radiation at 50 million Becquerels per cubic meter, Buesseler told Reuters. A “Becquerel” is a unit of radioactivity. The Canadian water sample contained 1.4 Becquerels per cubic meter of Cesium-134 and 5.8 Becquerels per cubic meter of Cesium-137.

Toxic alert after second series of blasts at Chinese chemical plant in two years -- At least 14 people were injured, with six in a stable condition in hospital, after a series of explosions at a chemical factory in southern China on Monday evening. It was the second time in two years that there have been blasts at the plant in Zhangzhou in Fujian province. Firefighters had brought the blaze under control on Tuesday morning and fires in two of three burning oil tanks had been extinguished, the fire department in Fujian province said in a statement on social media. The explosions at the paraxylene plant in Zhangzhou were caused by an oil spill near the tanks, according to officials at an emergency command centre at the scene. No chemical leaks or traces have been detected in villages downwind of the plant, the provincial government’s press office said. The injured include four firefighters. About 350 police and more than 600 firefighters were still at the scene on Tuesday morning. More than 400 soldiers have also been deployed to help deal with the incident, the provincial government said. Paraxylene (PX) is a chemical essential to the process of manufacturing plastic bottles and polyester clothing which is dangerous if inhaled or if absorbed through skin, causing different degrees of damage to abdominal organs and the nervous system. China is the world’s largest PX producer and consumer as of 2010. Safety concerns over PX factories have prompted environmental protests in China.  

The hidden reasons behind slow economic growth: Declining EROI, constrained net energy  --It should seem obvious that it takes energy to get energy. And, when it takes more energy to get the energy we want, this usually spells higher prices since the energy inputs used cost more. Under such circumstances there is less energy left over for the rest of society to use, that is, for the non-energy gathering parts--the industrial, commercial and residential consumers of energy--than would otherwise be the case. It shouldn't be surprising then that as fossil fuels, which provide more than 80 percent of the power modern society uses, become more energy intensive to extract and refine, there is a growing drag on economic activity as more and more of the economy's resources are devoted simply to getting the energy we want. A more formal way of talking about this is Energy Return on Investment or EROI. The "energy return" is the energy we get for a particular "investment" of a unit of energy. The higher the EROI of an energy source, the cheaper it will be in both energy and financial terms--and the more energy that will be left over for the rest of society to use. But we've seen a persistent decline in the EROI of U.S. oil and natural gas in the past century, a trend that is likely to be reflected elsewhere in the world as well. We rarely think of the energy it takes to get the energy we need because the processes are hidden from most of us. For example, when we drill for oil, there is energy expended to build the rigs, make the pipes, move and deliver them, drill the well, complete the well and pump the oil. The people involved all require energy in the form of food to live and tools and transportation to do their work. The oil is then transported by pipeline or tanker to refineries which use yet more energy to make the final products such as the diesel and gasoline we use. These products are transported to distributors and finally to retail service stations or large end users. This list is actually cursory, but it illustrates the scope of the activities involved.

What's the limit to the planet's growth? - I came across The Limits to Growth quite by accident in 1972, just when it was published. It was commissioned by the Club of Rome and written by a team of researchers at MIT led by Donella and Dennis Meadows. The book changed the way I thought about nature, people, history, everything. It persuaded me that physics matters, and that the idea of ever-expanding economic growth is a delusion.Although galloping economic growth already seemed normal to most younger people living in the developed world in 1972, the growth that took off after WWII was not normal. It is absolutely unprecedented in all of history. Nothing like it has ever occurred before: large and rapidly growing populations, accelerating industrialisation, expanding production of every kind. All new. The Meadows team found that we could avoid collapse if we slowed down the physical expansion of the economy. This, however, would mean two very difficult changes—slowing human population growth and slowing the entire cycle of physical production from material extraction through to the disposal of waste. The book was persuasive to me and I expected its message to have an impact on human affairs. Yet as the years rolled by, it seemed it was ignored. While scientists from Rachel Carson onwards have sounded the alarm about numerous problems associated with growth, our governments and bureaucracies have not paid attention. Economic growth has gradually been entrenched as the central objective of collective human effort. This really puzzles me.

“If We Dig Out All Our Fossil Fuels, Here’s How Hot We Can Expect It to Get” -- World leaders are once again racing to avert disastrous levels of global warming through limits on greenhouse gas emissions. An agreement may be in reach, but because of the vast supplies of inexpensive fossil fuels, protecting the world from climate change requires the even more difficult task of disrupting today’s energy markets. The White House last month released a blueprint to reduce United States emissions by as much as 28 percent by 2025. The plan lays the groundwork for the formal international climate talks this December in Paris, where the goal is a treaty on emissions that will seek to limit the rise in global temperatures to 3.6 degrees Fahrenheit above preindustrial levels. Beyond 3.6 degrees, scientists say, the most catastrophic climate consequences will occur, possibly including the melting of the Greenland ice sheet. Forging a treaty in Paris would be no small task, yet would be just the beginning of a solution. The greater challenge will be deciding how much of the world’s abundant supply of fossil fuels we simply let lie. (Bill McKibben and more recently The Guardian have taken a maximal position in their Leave It in the Ground campaign.) To understand the scope of this challenge, I’ve tallied the projected warming from fossil fuels extracted so far and the projected warming capacity of various fossil fuels that can be extracted with today’s technology. This accounting was done by taking the embedded carbon dioxide in each energy source and using a standard model for the relationship between cumulative carbon emissions and long-run temperature changes based on a 2009 Nature article. (More detail on the method is available here.) For those who don’t like suspense, here’s the total: an astonishing 16.2 degrees. And here’s how that breaks down. Since the industrial revolution, fossil fuels have warmed the planet by about 1.7 degrees. We are already experiencing the consequences of this warming. In recent weeks, we have learned that the world had its warmest winter on record and that Arctic sea ice hit a new low, even as intense storms continue to inflict harm on communities globally.

OEPA: 2,000 gallons of waste oil spilled into Vienna wetlands - Workers from Kleese Development were back at two ponds and the Little Yankee Run wetlands on Sodom Hutchings Road on Friday for a second day, cleaning up an estimated 2,000 gallons or more of “light waste oil” from Kleese’s oilfield-services company nearby. The company issued a statement late Friday saying the company was halting all operations at the Sodom Hutchings location, including brine injection “for the immediate future out of an abundance of caution.” Kleese and the spill are just north of Warren-Sharon Road. The oil came from a “buried drain pipe” associated with the Kleese site, but EPA officials still are studying the pipe to determine its origin, said Linda Oros, Ohio EPA spokeswoman. So far, there has been no indication the oil came from the holding tanks used in association with the Kleese injection facilities, Oros said. Two wetlands and a private pond were “severely impacted,” Oros said. Oil waste traveled 3,000 feet down a tributary stream of Little Yankee Run, but the leading edge of the oil has been contained, she said. When The Vindicator viewed the site Friday morning, it appeared that the oil had gotten into two ponds on the east side of Sodom Hutchings Road, but a third pond did not appear to have any oil on it. A resident living next to one of the two affected ponds, which are just north of the Kleese site, said he called the EPA on Monday after seeing a dead muskrat by the pond and a sheen on the water.

Vienna oil spill leaves slew of dead animals - – The Ohio EPA and Ohio Department of Natural Resources have contained a waste oil spill in Vienna Township Friday, but are still tracking down the source of the chemicals. The spill happened near 884 Sodom Hutchings Road near old Route 82, also known as Warren Sharon Road, Thursday evening. Township Trustee Phil Pegg said the business responsible for the spill, oil and gas developers KDA Inc., have voluntarily shut down operations for the day. “The facility voluntarily closed down. There is some type of foreign substance that has left the facility. It has gotten into some wetlands and several ponds. It has killed off the fish and the wildlife in that area,” Pegg said. The Ohio Department of Natural Resources said the spill was reported by a neighbor and confirmed by an inspector Thursday night. The neighbor let WKBN’s news cameras on to his property to see the dead fish, turtles and muskrats that fill his pond.Many people in the area have private wells for their water supply. Pegg said that the state is monitoring water quality for the closest resident that does have a well. The spill has been contained and is not spreading further. ODNR said it seems the problem may have been brewing for some time. Sources with the Ohio EPA said at least 2,000 gallons were spilled into a tributary of Little Yankee Run on Thursday. State officials said oil traveled 3,000 feet downstream. The state says the problem might have been going on for some time, but winter ice and snow hid the issues.

Hundreds attend public meeting on Vienna oil spill (WKBN) – Hundreds of Vienna residents received some answers Monday night about a waste oil spill that could have put their drinking and bathing water at risk. The meeting was held at Mathews High School in the township and began at 6 p.m., with some background information from officials about wells and the oil spill, but it was quickly obvious that residents were not there to hear that. In fact, it didn’t take long for them to express their urgency in wanting answers. Both residents and officials raised their voices trying to get their point across. “Everybody does not like the answers that you get and some of the non-answers. You don’t want them to make you feel like you are stupid,” Debbie Moy of Vienna said. As it approached the one-hour mark, residents still were not satisfied. Officials attended the special meeting, delaying the start of the township meeting that was supposed to start at 7 p.m. The biggest concern is the safety of their water. “The exact source of the oil is still under an investigation,” Kurt Kohler from the Ohio EPA said. An estimated 2,000 gallons of waste oil spilled into a private pond on Sodom Hutchings Road, killing some fish and other wildlife. The spill happened on Monday evening, but the Ohio EPA did not come out to investigate until Thursday. Officials said oil and gas company Kleese Development Associates, or KDA, is responsible for the spill. “The state is not doing a very aggressive job of going after them about it.

Fracking waste stirs controversy in Athens — The tractor-trailers arrive at a steady pace, turning off Rt. 50 and climbing a hill to a collection of tall, green metal tanks. The trucks haul long, white tanks that are bare except for a number that identifies their company and one word that has riled a vocal population in Athens County: brine. Brine is another name for the fracking wastewater that bubbles up in oil and gas wells in Ohio, Pennsylvania and West Virginia. The wastewater is laced with toxic chemicals used during hydraulic fracturing, a process in which millions of gallons of water, sand and chemicals are pumped underground to crack shale and free oil and gas trapped within it. Much of the fracking fluids come back up and most often are sent to disposal wells, where they are pumped back underground. Athens County, known for its progressive politics and college-town vibe, took the third-highest amount of fracking wastewater in the state last year. A new injection well, approved last month by the Ohio Department of Natural Resources, could boost Athens to the top in wastewater injections. That’s a dubious distinction, according to Athens County activists and some elected officials. “There’s probably not a county in the state that has as much activism objecting to the injection wells as Athens,” . Almost 25 million barrels of wastewater were pumped into about 200 injection wells in Ohio last year, according to ODNR records.

Ohio Business Owner: Fracking Stifling Local Food Movement - - Sustainably produced foods are becoming more popular among consumers, but some Ohioans say the fracking boom is stifling the growth of the local food movement. According to the EPA, dozens of chemicals are used in hydraulic fracturing, which some growers say puts air, water and soil at risk for contamination. The Village Bakery and Café in Athens specializes in locally grown and organic foods, and owner Christine Hughes says some area farmers were unaware of the risks when they agreed to allow oil and gas companies onto their land. "Landowners were told, 'Oh no, we don't use chemicals, it's all safe,' so I don't blame those people for signing up," says Hughes. "But it has put all these sustainable farms at risk, and the conventional farms as well. The sustainable farmers are more aware of the damage it will do to their reputation." According to Hughes, soil and watershed resilience are likely to worsen as drilling continues to expand. A recent study found nearly 11 percent of the more than 19,000 organic farms in the U.S. share a watershed with oil and gas activity, and 30 percent of organic farms will be in the vicinity of a fracking site or injection well in the next decade.Hughes says many of her restaurant's suppliers are based in Ohio's fracking hotbed. The farm that sourced her flour was directly impacted by fracking after an old injection well was re-activated near the land. "They started bringing in truckloads of radioactive frack waste from West Virginia, Pennsylvania and Ohio," she says. "So they had to shut down their farm and ended up having to sell off their farm and move away and take jobs from their farm."

Fracking disposal well too close to Chesterhill water? - “The disposal well is right on State Route 792,” Village Administrator Gordon Armstrong told the Chesterhill Village Council. “That’s just right up the hollow from our water system.” “They’re putting a disposal well over top of ours?” Councilwoman Smedley asked. The administrator reported to the council that the EPA and the Ohio Department of Natural Resources have put a battery of tanks at an old well on State Route 792. He said that the Depart­ment of Natural Resources is in charge of overseeing it to ensure that there are no issues that could cause problems down the road. Mayor Wetzel asked how they were supposed to tell if something wasn’t right, and Armstrong said that they take samples regularly and it would come back in the test results.The mayor then asked where they were hauling the material to be disposed of from, and Armstrong said that it was coming in from all over the country. “From fracking?” Councilwomen Tabler and Smedley asked in unison, in reference to hydraulic fracturing, a highly controversial method for extracting oil and natural gas. “The EPA’s aware of it,” Armstrong said. “The Department of Natural Re­sources is aware of it. They’re following all the rules, but it is a concern. It’s something we have to keep an eye on.”

Kinder Morgan planning two natural gas liquids pipelines across northern Ohio -- Texas-based Kinder Morgan Energy Partners LP says it intends to add a second 12-inch pipeline to its previously announced plan to ship petroleum-based liquids through northern Ohio. The additional line would transport natural gasoline. The lines, dubbed Utica to Ontario Pipeline Access (UTOPIA) West and UTOPIA East, would run side by side along a 240-mile route from Harrison County through southern Stark and Wayne counties to Fulton County in northwest Ohio. Officials said the pipelines would be built at the same time. From Fulton County, UTOPIA West would carry natural gasoline through existing pipelines to Illinois, then another 1,900 miles to Fort Saskatchewan, Alberta. That line previously carried Canadian propane to the United States. UTOPIA East would connect with existing Kinder Morgan pipelines in Michigan. Its liquids, including ethane and propane from Ohio’s Utica Shale region, would be shipped to the NOVA Chemicals Corp. for eventual use as feedstock for producing plastics at its plant in Corunna, Ontario. That pipeline, a $500 million project, was announced in December 2013. The two pipelines do not require Federal Energy Regulatory Commission approval because the new sections are entirely within Ohio. Only interstate pipelines require approval from FERC.

Energy companies explore lower shales for greater yields of gas, liquids -- Low natural gas prices that have companies balancing spending cuts with promises of ramped-up production are driving some new development in the Utica and Point Pleasant shale, where deeper wells can yield more gas and liquids. Range Resources, Consol Energy, and Rice Energy are among Marcellus shale producers reporting positive results from their Utica and Point Pleasant wells, and are expecting to drill more there despite budget cuts of up to 45 percent. “It's relatively early days in the Utica so I think companies are still trying to figure out the optimal drilling and production and fracturing techniques, but I think you'll continue to see increasing production rates and ultimate recovery rates from these wells,” . The Utica shale formation in Ohio and Pennsylvania runs between 2,000 and 6,000 feet below the more popular Marcellus. It sits just above Point Pleasant, another layer of shale rich in oil and gas liquids. Deeper Utica wells typically have higher pressures than Marcellus wells, and can generate two to three times the gas. They're also more expensive, sometimes several million dollars more than a Marcellus well, depending on the depth and the kind of fracking that's required. “Certainly, even in a low commodity price environment, you can still, in essence, make up the difference by just the sheer volume of gas you're producing,” Yoxtheimer said. Service companies that frack wells and operate equipment on well pads have lowered their prices in response to producers' smaller budgets, making this is a less-expensive time to tap the Utica.

Utica oil wells called Ohio's gold mine - Despite the recent fall in gas and oil prices, the fracking and drilling exploration of the Utica shale in Ohio is nowhere near stopping. That was the takeaway from six speakers at Utica Upstream, hosted by the Canton Regional Chamber of Commerce and the Shale Directories at Walsh University.  Speakers discussed the status of current oil drilling projects in the U.S., focusing on the Utica and Marcellus shale areas in eastern Ohio and western Pennsylvania.  Most echoed the same thoughts that although the number of oil rigs being built in Ohio is lessening compared to the last few years, production will only increase as the U.S. rises to the number one natural gas producer in the world. In 2012 there were 371 permits issued to drill the Utica shale in Ohio. In 2015 the Ohio Department of Natural Resources estimates there will be around 600. That's about 200 less than originally predicted. Rick Simmers, chief of the Ohio Department of Natural Resources Division of Oil and Gas Resources Management, said the price of oil and gas is decreasing, but that is not the only cause for a slowdown in drilling. The efficiency of oil and gas drilling companies has improved so much they have cut their labor time in half."These companies are becoming more efficient. ... A drill that was 35 days per well now takes 15 days per well. You don't need as many rigs because your efficiency has improved so greatly," he said.

Utica and Marcellus well activity in Ohio -- While numbers in the Ohio Utica Shale and Marcellus Shale are about the same as last week’s well activity report, one company is selling all of its operations in the region. EV Energy Partners announced on Monday that it is selling its 21 percent interest in a dominant natural gas and liquids processing operation that is located in eastern Ohio.  Utica Gas Services LLC, a subsidiary of Williams Partners LP, is purchasing the interest in the Utica East Ohio Midstream LLC for $575 million.  Williams Partners conveniently already owns 49 percent of the midstream operation.  According to EV Partners, the closing of the deal will take place in July. EV Energy shared that it has been trying to sell its stake in the midstream and other non-core Utica Shale assets located in eastern Ohio for the last year.  The company also shared that it has invested $249 million into the midstream and its holdings consist of natural gas processing plants located in Columbiana and Carroll Counties and a liquids processing plant in Scio in Harrison County, along with complementary pipelines. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on April 4th. The only change the Utica Shale has seen is regarding the number of drilled, drilling, permitted and producing wells the area has.  According to this week’s report, there were 339 wells drilled (up 5), 242 drilling (down 4), 448 permitted (down 6) and 839 producing (up 5), bringing the total number of wells in the shale formation to 1,868. 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 well permits in Pennsylvania - Marcellus well permits for the week ending on April 4th show activity is still going strong in the shale formation in Pennsylvania even though federal regulators are trying to tighten up drilling regulations. However, the Department of Environmental Protection (DEP) is now looking at the public for input regarding the possible regulations revision. Pennsylvania state environmental regulators are reaching out and making an effort to gather public comments on their proposal to make Marcellus Shale natural gas drilling regulations stricter. On Monday, the DEP announced it is allowing a 45-day public comment period and has scheduled three public hearings for the proposed regulation changes. DEP officials want stiffer reviews on proposed drilling sites that are within 100 feet of streams and wetlands, stricter rules on noise and waste storage and greater analysis of how each new well could impact drinking water, schools and playgrounds. The following information is provided  by the Pennsylvania Department of Natural Resources and is for the week ending on April 4th. New Permits: 22 -- Renewed Permits: 9

Natural gas production, supply centers on rebound - Natural gas prices may be dropping, but the number of area companies involved in the natural gas industry shows no signs of decline. Area companies are involved in a wide range of natural gas services, including engineering and surveying, environmental consulting, excavation and construction and providing fuel. Compressed Natural Gas of New Holland, Lancaster County, operates a CNG refueling station in Earl Township. “Anything from a Honda Civic to a class 8 truck (tractor-trailer) can refuel here,” said Rick Bunn, partner in operations. Business has been good at the station since it opened in September 2013, Bunn said. “We see significant growth month over month,” he said. Compressed natural gas, which is methane stored at high pressure, can be used in place of gasoline, diesel fuel and propane. CNG-powered vehicles have several advantages, according to the company’s website. They are better for the environment than gasoline-powered vehicles. CNG generally is between 30 and 60 percent cheaper than gasoline. CNG-powered vehicles require less maintenance than other hydrocarbon-fuel-powered vehicles, and they’re safer than gasoline-powered vehicles.

Radon may be linked to fracking, researchers suspect - Radon levels in houses near fracking sites in Pennsylvania are higher than in those in areas where there is no oil and gas drilling, according to a new study by Johns Hopkins University researchers. The researchers cautioned that their findings don’t definitively tie hydraulic fracturing to higher levels of radon. But they say they found a “statistically significant association” between a building’s proximity to a fracked well and to the amount of radon detected. “The higher the gas production ... the higher the basement radon levels,” said Brian Schwartz, one of the study’s authors and a professor of environmental-health sciences at Johns Hopkins. Radon, an odorless, invisible gas, is the second-leading cause of lung cancer in the United States after smoking, according to the U.S. Environmental Protection Agency. The EPA estimates that about 21,000 people die each year from lung cancer caused by radon.

Increased Levels of Radon in Pennsylvania Homes Correspond to Onset of Fracking: — Johns Hopkins Bloomberg School of Public Health researchers say that levels of radon in Pennsylvania homes – where 42 percent of readings surpass what the U.S. government considers safe – have been on the rise since 2004, around the time that the fracking industry began drilling natural gas wells in the state. The researchers, publishing online April 9 in Environmental Health Perspectives, also found that buildings located in the counties where natural gas is most actively being extracted out of Marcellus shale have in the past decade seen significantly higher readings of radon compared with buildings in low-activity areas. There were no such county differences prior to 2004. Radon, an odorless radioactive gas, is considered the second-leading cause of lung cancer in the world after smoking. “One plausible explanation for elevated radon levels in people’s homes is the development of thousands of unconventional natural gas wells in Pennsylvania over the past 10 years,” “These findings worry us.” The study, conducted with Pennsylvania’s Geisinger Health System, analyzed more than 860,000 indoor radon measurements included in a Pennsylvania Department of Environment Protection database from 1989 to 2013. Radon levels are often assessed when property is being bought or sold; much of the study data came from such measurements. The researchers evaluated associations of radon concentrations with geology, water source, season, weather, community type and other factors.. In recent years, there has been a huge uptick in the drilling of unconventional natural gas wells in 18 states throughout the country. The disruptive process that brings gas to the surface can also bring heavy metals and organic and radioactive materials such as radium-226, which decays into radon. Most indoor radon exposure has been linked to the diffusion of gas from soil. It is also found in well water, natural gas and ambient air.

Dramatic Increases of Cancer-Causing Radon in PA Homes Linked to Fracking - Researchers in Pennsylvania have discovered that the prevalence of radon, a radioactive and carcinogenic gas, in people’s homes and commercial buildings that are nearer to fracking sites has increased dramatically in the state since the unconventional and controversial gas drilling practice began in the state just over a decade ago. Both odorless and tasteless, radon is a naturally-occurring gas released from bedrock minerals beneath the ground and is found in millions of homes across the country. However, in a study published Thursday in the journal Environmental Health Perspectives, scientists compared the results of state-wide radon testing in Pennsylvania to find a significant correlation between unusually high levels of the deadly gas in some buildings (mostly residential homes) and the proliferation of fracking in certain areas of the state. As State Impact Pennsylvania, the state’s NPR affiliate, reportsResearchers from Johns Hopkins University analyzed radon readings taken in some 860,000 buildings, mostly homes, from 1989 to 2013 and found that those in rural and suburban areas where most shale gas wells are located had a concentration of the cancer-causing radioactive gas that was 39 percent higher overall than those in urban areas. It also found that buildings using well water had a 21 percent higher concentration of radon than those served by municipal water systems. And it showed radon levels in active gas-drilling counties rose significantly starting in 2004 when the state’s fracking boom began.

Rise of deadly radon gas in Pennsylvania buildings linked to fracking industry - The Washington Post: A new study published Thursday reported a disturbing correlation between unusually high levels of radon gas in mostly residences and an oil and gas production technique known as fracking that has become the industry standard over the past decade. Writing in the journal Environmental Health Perspective, researchers analyzed levels of radon — a colorless, odorless gas that is radioactive and has been linked to lung cancer — in 860,000 buildings from 1989 to 2013. They found that those in the same areas of the state as the fracking operations generally showed higher readings of radon. About 42 percent of the readings were higher than what is considered safe by federal standards. Moreover, the researchers discovered that radon levels spiked overall in 2004, at about the same time fracking activity began to pick up. Hydraulic fracturing or "fracking" involves drilling 6,500 to 10,000 feet below the surface, and scientists theorize that radon trapped in rocks there is releasedinto the atmosphere. "By drilling 7,000 holes in the ground, the fracking industry may have changed the geology and created new pathways for radon to rise to the surface," one of the authors, Joan A. Casey from the John Hopkins Bloomberg School of Public Health, warned.  Researchers have also reported concerns about similar radon releases in parts of Colorado where fracking is also booming. In a study published by the U.S. Geological Survey in 2012, government researchers found that the radiation in water in the Appalachian Basin in parts of New York and Pennsylvania near fracking work in the Marcellus Shale was unusually high.

Fracking fluids contain potentially harmful compounds if leaked into groundwater -- The organic chemicals in fracking fluid have been uncovered in two new studies, providing a basis for water contamination testing and future regulation. The research, published in Trends in Environmental Analytical Chemistry and Science of the Total Environment, reveals that fracking fluid contains compounds like biocides, which are potentially harmful if they leak into the groundwater. The authors behind the new study say it's time for the relatively new science to catch up with the extensive public awareness. They say an increasing research focus on contamination from fracking fluid will lead to more attention and regulation in the future. The fracking fluid comes back out at the surface as flowback water, which can contaminate the surface water and ultimately the groundwater if it is not properly disposed. Fracking companies add certain chemicals to prevent bacterial growth, for example, but until now the precise organic content had not been established. The new studies discuss the organic constituents, providing a way to detect contamination in the water system and proposing methods to recycle the water safely.

EPA seeks to ban fracking wastewater from going to public treatment plants  -- The U.S. Environmental Protection Agency is proposing to ban publicly owned wastewater treatment facilities from taking untreated waste fluids from the unconventional oil and gas industry in a move that would guarantee the end of a disposal practice that the industry and states have already abandoned. In a notice Tuesday, federal regulators said they are taking comments on their plan to forbid publicly owned treatment works from accepting and discharging the wastewater, which often contains high concentrations of salt and lesser amounts of chemicals, metals and naturally occurring radioactive materials that are potentially harmful to human health and the environment. Public sewage treatment plants are not designed to remove those pollutants, which can flow through to streams untreated or interfere with the plant’s normal treatment processes. The rule would apply to wastewater that comes from production, field exploration, drilling, well completion or well treatment during unconventional oil and gas extraction, which generally uses the combined technologies of fracking and horizontal drilling to pull hydrocarbons from tight geologic formations, like the Marcellus and Utica shales. It would not apply to conventional oil and gas operations that generally use vertical wells to tap shallower formations and produce smaller amounts of waste fluids. It also would not apply to commercial wastewater plants that treat and discharge fluids to waterways, which are regulated separately.

Who Funds EDF Research? - The Environmental Defense Fund is one of the nation’s most venerable environmental organizations, and many consider it one of the most effective. But its industry-collaborative approach to the study of methane leaks in natural gas drilling has drawn scrutiny from other environmental groups, who worry EDF has strayed into a gray area where science and the fossil fuel industry collide.  Those concerns stem from an ambitious project EDF embarked on in 2011, as an oil and gas boom swept the U.S. While environmentalists have increasingly called for an outright ban on hydraulic fracturing, or fracking, amid concerns that it pollutes the air and water, stifles growth of renewable energy, and might accelerate rather than slow climate change, EDF decided to probe the industry’s climate impacts. And it did so by collaborating with natural gas companies, which agreed to partially fund the research and give EDF access to gas sites for taking crucial measurements. Investigations on this scale are normally organized by the federal government or the National Academy of Sciences. Coordinating what’s become an $18 million series of 16 studies by more than 100 researchers has turned EDF into a heavyweight on the science of methane pollution. The project’s findings will influence government policy concerning the $292 billion-a-year U.S. oil and gas extraction industry and the regulation of fracking. “What EDF is trying to do is put filters on cigarettes,” said Sandra Steingraber, a prominent activist, biologist and scholar-in-residence at New York’s Ithaca College. “There’s no way we can frack our way to climate stability. There’s no scientific evidence for that.”

Berea City Council opposes fracking in areas near city reservoirs - — Berea City Council unanimously approved a resolution Tuesday expressing opposition to hydraulic fracturing, or fracking, in watershed areas near the reservoirs from which the city draws its drinking water.Additionally, Berea College President Kyle Roelofs issued a statement that the college's 10,000 acres of forest land "is not open to oil and gas exploration or development."  In the resolution approved on a 7-0 vote Tuesday, the city council "expresses its opposition to hydraulic fracturing in Berea's watershed areas."The resolution "urges landowners in the area to consider the long-term impact associated with the leasing of their property for the purposes of hydraulic fracturing before taking any action."The resolution also urges Madison County Fiscal Court "to review land policies and zoning regulations with respect to the impact of industrial type activity, such as fracking, on water quality."Finally, the resolution asks the state legislature to study the impact of fracking on water quality.

New plan for old pipe: Carry fracking liquids - – With red dirt piled nearby on grassy green meadow, workers in a hole were welding a weak spot on Kentucky's latest controversial pipeline — putting on a Band-aide, as one of them described it. Just a few hundred yards from his home, physician James Angel approached the crew in his pickup truck, saying the maintenance only punctuated his fears about a Texas company's plans for the natural gas pipeline that crosses his Marion County farm. Under those plans, Kinder Morgan's pipeline will carry a more dangerous product, natural gas liquids, in pipes buried seven decades ago in what Angel, a well-known urologist, described as the patriotic rush of World War II. "If that line ruptures, it would kill me," he said. "It would kill my family, and it would poison our (community's) water supply. It's a threat to everybody I take care of in this county." Kentuckians across the commonwealth are voicing similar concerns this spring as Kinder Morgan's Tennessee Gas Pipeline Co. becomes the second pipeline company in two years to make a play to move valuable natural gas liquids from fracking zones in Ohio and Pennsylvania across Kentucky to the nation's petrochemical hub in Louisiana and Texas. While natural gas used in homes is methane, natural gas liquids are separated at the well site and can include a variety of hazardous hydrocarbons, including ethane, propane and butane. They are used to make plastics, rubber, solvents, antifreeze and refrigerants. They are more dangerous than natural gas because they pose not only an explosion risk but also an asphyxiation risk, said Samya Lutz, outreach coordinator with the Pipeline Safety Trust, a safety advocacy group.

Maryland Passes 2.5 Year Fracking Ban - Today, the Maryland House of Delegates passed legislation, voting 102 – 34, that would prohibit fracking permits in the state until October 2017. The bill will head to Republican Gov. Larry Hogan’s desk in the coming days.  Earlier this week, the Maryland State Senate passed the legislation, voting 45-2, to prohibit fracking permits in the in the state. The governor’s position on the bill is unknown, but the Senate and House passed the bill with a veto-proof majority. “After months of campaigning, a bill that prohibits fracking for two and a half years passed overwhelmingly in the Maryland legislature today,” said Wenonah Hauter, executive director of Food & Water Watch. “This is a testament to the growing movement to protect our communities from the dangers of fracking. Conventional wisdom in the state was that we could never get a moratorium passed in Maryland, just as we were also told we could never get a ban in New York. But naysaying just inspired us all to work harder in bringing the voice of the people to Annapolis in this grassroots initiative. Now it is time for Governor Hogan to heed the call of the people and sign the bill that gives Marylanders more time to examine the impacts of fracking.”

Md. Lawmakers OK Fracking Ban Until Late 2017 « (AP) — The Maryland General Assembly has passed a measure to prohibit fracking permits in the state until October 2017.The House of Delegates voted 102-34 for the bill on Friday to stop the issuing of hydraulic fracturing drilling permits until that time.The process known as fracking has not been allowed in Maryland. There are portions of western Maryland that have been identified as potential drilling sites.The bill now goes to Gov. Larry Hogan, who has not taken a position on the bill. The Republican governor has said he’ll take a hard look at any fracking legislation that passes.The measure passed the House and Senate by veto-proof margins.Supporters of the prohibition say it will give lawmakers more time to evaluate the public health and economic dangers of fracking.

Maryland Fracking Moratorium Headed to Governor Hogan’s Desk - Today, the Maryland House of Delegates passed legislation, voting 102-34, that would prohibit fracking permits in the in the state until October 2017. In response, Wenonah Hauter, executive director of Food & Water Watch, issued the following statement: “After months of campaigning, a bill that prohibits fracking for two and a half years passed overwhelmingly in the Maryland legislature today. This is a testament to the growing movement to protect our communities from the dangers of fracking. Conventional wisdom in the state was that we could never get a moratorium passed in Maryland, just as we were also told we could never get a ban in New York. But naysaying just inspired us all to work harder in bringing the voice of the people to Annapolis in this grassroots initiative. Now it is time for Governor Hogan to heed the call of the people and sign the bill that gives Marylanders more time to examine the impacts of fracking.” More than 425 peer-reviewed scientific studies on the effects of shale gas development now exist, and 75 percent of those have been published since January 2013. Of the 49 studies that investigated the health effects of fracking, 47 – over 96 percent – found risks or adverse health outcomes.

Bill would prohibit compulsory pooling  — A bill filed in the N.C. House of Representatives Thursday would prohibit compulsory or forced pooling, a practice that gives the state the right to compel non-consenting landowners to allow hydraulic fracturing companies to extract oil and gas from beneath their properties. House Bill 586, sponsored by Rep. Bryan Holloway (R-Rockingham, Stokes), would not only prohibit forced pooling, but it would also require drilling companies to obtain surface owners’ consent in cases where the owner of the surface property does not own the oil and gas rights to the property. “I was ecstatic to see it filed,” Rep. Robert Reives II (D-Lee, Chatham) said of the bill. “My hope is that bills like this will start a discussion, and I think they already have at the House level. We can’t do much as far as making the Senate do anything, but I’m just hoping that it starts the discussion.” Rep. Brad Salmon (D-Lee, Harnett) said forced pooling was one of the biggest problems in the state’s fracking rules.  “I fully support this bill to prohibit forced pooling in North Carolina,” Salmon said. “Property owners should not be required to participate in fracking unless they so choose. For North Carolina to allow otherwise would be a disgrace to time-honored property rights.”

Chicago at heart of crude oil shipments, data show -- More highly volatile crude oil passes through the Midwest, specifically the Chicago area, via railroad tank cars than anywhere else in the country, according to newly released data from the federal government. The latest information on crude-oil-by-rail movements, the government's first accounting of such shipments, showed that 437,000 barrels of Bakken shale crude oil were shipped daily in January from North Dakota to East Coast refineries. Since freight moving across the nation is funneled through Chicago, the nation's busiest rail hub, that crude oil is passing through the city and suburbs, experts say. The volume of crude oil is enough to fill as many as 42 mile-long "unit trains," each with a hundred or more tank cars, traveling through the area each week. Indeed, such trains have become a common sight throughout the city and suburbs in recent years. The new data corroborate a Tribune report last Julythat put the number of crude oil trains passing through the region at about 40 a week. Concerns about the increasing number of crude oil trains have grown as a result of several fiery derailments in Illinois and elsewhere. A BNSF Railway train with 103 tank cars containing Bakken crude derailed and exploded in flames in a sparsely populated area south of Galena on March 5. If that incident had occurred in the metropolitan area, thousands of people would have been forced to evacuate and enormous damage could have resulted, officials said.

Fewer Oil Trains Ply America’s Rails - WSJ: The growth in oil-train shipments fueled by the U.S. energy boom has stalled in recent months, dampened by safety problems and low crude prices. The number of train cars carrying crude and other petroleum products peaked last fall, according to data from the Association of American Railroads, and began edging down. In March, oil-train traffic was down 7% on a year-over-year basis. Railroads have been a major beneficiary of the U.S. energy boom, as oil companies turned to trains to move crude to refineries from remote oil fields in North Dakota and other areas not served by pipelines. Rail shipments of oil have expanded from 20 million barrels in 2010 to just under 374 million barrels last year, according to the U.S. Energy Information Administration. About 1.38 million barrels a day of oil and fuels like gasoline rode the rails in March, versus an average of 1.5 million barrels a day in the same period a year ago, according to a Wall Street Journal analysis of the railroad association’s data. Oil-train traffic declined 1% in the fourth quarter of 2014 as crude-oil prices started to tumble toward $50 a barrel. More recently, data from the U.S. Energy Department show oil-train movements out of the prolific Bakken Shale in North Dakota have leveled off as drillers there have begun to pump less, though oil-train shipments from the Rocky Mountain region have risen.

Buffett Bailout? Rail-Based Oil Transit Tumbles To Lowest In Over A Year -- It appears time for the Oracle of Omaha to start pressing his bought-and-paid-for Washington well-be-dones as his immensely profitable rail freight business - built on the back of massive deflation-inducing malinvestment in US Shale businesses thanks to ZIRP and QE - is running out of steam. As WSJ reports, in March, oil-train traffic was down 7% on a year-over-year basis amid safety concerns and with lower crude prices, "the extra cost of rail makes it a tougher choice," notes on analyst, adding that the WTI-Brent spread needs to increase "for the economics of crude by rail" to make sense.

BNSF is running more oil trains through Nebraska: BNSF Railway has raised the number of big oil trains passing through Nebraska, from about a dozen in mid-February to as many as 30 a week now. That's the largest number the railroad has reported since it started doing so last year. BNSF is required to report the number of trains carrying at least a million gallons of Bakken crude oil, which would fill about 35 tank cars, to the Nebraska Emergency Management Agency. Most trains carry far more than 35 cars. BNSF and other railroads typically do not comment on traffic volume, routes and customers' cargo. Trains carrying oil from the Bakken shale formation in North Dakota and Montana to and through Nebraska -- 20 to 30 a week now -- move south from Sioux City, Iowa. Most turn east near Ashland, cross Cass County and the Missouri River into Iowa, according to documents filed with NEMA. BNSF has added safety measures for crude oil shipments because of four recent high-profile derailments in the U.S. and Canada, the railroad said Monday. BNSF is slowing down crude oil trains to 35 mph in cities with more than 100,000 people. The latest NEMA figures show two to seven oil trains passing through Lincoln each week, and few, if any, through Omaha, unchanged from mid-February. The number of rail accidents remains small compared with total rail traffic, but fiery accidents of exploding crude oil have occurred as U.S. and Canadian oil production is booming.

Federal data: Not many oil trains for Keystone XL to displace - New data on crude oil shipments by rail released by the Department of Energy this week show that there are relatively few oil trains taking the path of the controversial proposed Keystone XL pipeline.In its first monthly report on crude by rail, the U.S. Energy Information Administration shows that the bulk of oil shipments by rail are moving from North Dakota’s Bakken region to refineries in the mid-Atlantic and the Pacific Northwest.Far less is moving from either Canada or the Midwest to the Gulf Coast, the location of 45 percent of U.S. refining capacity. Only about 5 percent of the crude oil moved by rail nationwide in January was bound for the Gulf Coast from either Canada or the Midwest.A series of derailments has brought increased scrutiny to oil transportation by rail. Since the beginning of the year, four oil trains have derailed in the U.S. and Canada, leading to spills, fires and evacuations.The White House Office of Management and Budget is reviewing new regulations intended to improve the safety of oil trains. They’re scheduled for publication next month.Some supporters of the 1,700-mile Keystone project have claimed that it would reduce the need for rail shipments. The pipeline would have a projected capacity of 830,000 barrels a day, and would primarily move heavy crude oil from western Canada to the Gulf Coast.The government’s new data confirms, however, that the primary flows of oil by rail are not to the Gulf Coast. Northeast refineries, concentrated in Delaware, Pennsylvania and New Jersey, have come to rely heavily on Bakken crude delivered by rail, and to a lesser extent, Canadian oil.

The Arrival of Man-Made Earthquakes - Outside homes around Prague and nearby Meeker, Keranen and her students, along with Austin Holland, the head seismologist of the Oklahoma Geological Survey, buried their equipment. The researchers wanted to install them quickly, since the ground was still shaking. Shortly before 11 P.M., people in Prague heard what sounded like a jet plane crashing. It was another earthquake, this time a 5.6, followed, two days later, by a 4.7. (The earthquake scale is logarithmic, so a 5.0 earthquake shakes the ground ten times more than a 4.0, and a hundred times more than a 3.0.) No one was killed, but at least sixteen houses were destroyed and a spire on the historic Benedictine Hall at St. Gregory’s University, in nearby Shawnee, collapsed.  Few noticed that Keranen and her team had gathered likely the best data we have on a new phenomenon in Oklahoma: man-made earthquakes.  Until 2008, Oklahoma experienced an average of one to two earthquakes of 3.0 magnitude or greater each year. In 2009, there were twenty. The next year, there were forty-two. In 2014, there were five hundred and eighty-five, nearly triple the rate of California. Including smaller earthquakes in the count, there were more than five thousand. This year, there has been an average of two earthquakes a day of magnitude 3.0 or greater. William Ellsworth, a research geologist at the United States Geological Survey, told me, “We can say with virtual certainty that the increased seismicity in Oklahoma has to do with recent changes in the way that oil and gas are being produced.” Many of the larger earthquakes are caused by disposal wells, where the billions of barrels of brackish water brought up by drilling for oil and gas are pumped back into the ground. Disposal wells trigger earthquakes when they are dug too deep, near or into basement rock, or when the wells impinge on a fault line. Ellsworth said, “Scientifically, it’s really quite clear.”

As Quakes Rattle Oklahoma, Fingers Point to Oil and Gas Industry -- “As long as you keep injecting wastewater along that fault zone, according to my calculations, you’re going to continue to have earthquakes,” said Arthur F. McGarr, the chief of the induced seismicity project at the federal Earthquake Science Center in Menlo Park, Calif., who has researched the Prague quakes. “I’d be a little worried if I lived there. In fact, I’d be very worried.” But in a state where oil and gas are economic pillars, elected leaders have been slow to address the problem. And while regulators have taken some protective measures, they lack the money, work force and legal authority to fully address the threats.More than five years after the quakes began a sharp and steady increase, the strongest action by the Republican governor, Mary Fallin, has been to name a council to exchange information about the tremors. The group meets in secret, and has no mandate to issue recommendations.The State Legislature is not considering any earthquake legislation. But both houses passed bills this year barring local officials from regulating oil and gas wells in their jurisdictions. The state seismologist’s office, short-staffed, has stopped analyzing data on tremors smaller than magnitude 2.5 — even though a recent study says those quakes flag hidden seismic hazards “that might prove invaluable for avoiding a damaging earthquake.”

Earthquake Case Could Doom Fracking In Oklahoma - The rise in earthquakes as a result of fracking poses a massive problem for the oil and gas industry.  It is not hydraulic fracturing per se that is causing the earthquakes. Rather, the injection of wastewater back into the ground that contributes to fault lines “slipping,” which results in heightened seismic activity. Oklahoma has become the earthquake capital of the United States, surpassing even tremor-prone California. Oklahoma has averaged less than two earthquakes of a magnitude 3.0 or greater over the last 30 years. Shockingly, however, that rate has skyrocketed in recent years. In 2013, the state experienced 585 earthquakes with at least a 3.0 magnitude. And if the current rate of earthquakes continues, Oklahoma could have 875 by the end of 2015. The oil and gas industry in Oklahoma has downplayed the induced seismicity from disposal wells, but the frequency of earthquakes – rising to several earthquakes each day – has become too hard to ignore. That is leading to the prospect of a flurry of lawsuits against fracking companies. Continental Resources, one of the most active companies in Oklahoma, even included legal action and state regulation related to seismic activity on its list of risks in its financial statements. Legal action in neighboring states offer an indication that costs will rise for Oklahoma drillers as the backlash ensues. Chesapeake Energy and BHP Billiton paid an undisclosed sum to settle a 2013 case in Arkansas over earthquake activity.

Louisiana oil port, made for import, rents domestic storage - — Louisiana’s offshore oil port, with huge underground storage caverns, was built to handle imported oil but is now leasing space to traders who need to store U.S. crude. The Louisiana Offshore Oil Port recently auctioned 11.3 million barrels of monthly storage space and has scheduled another auction Tuesday, The Advocate reports. “For us, it’s an innovative new product. It’s another service to our customers. We hope to attract new customers with it,” said Terry Coleman, vice president of business development at LOOP. Global production now exceeds consumption by about 1.5 million barrels a day. U.S.-produced crude is piling up at Cushing, Oklahoma, the country’s major oil hub — but that’s getting close to capacity, and some storage fees are going up, said Brian Busch, director of oil markets and business development for data analysis firm Genscape. He said storage at Cushing generally runs 30 cents per barrel per day, but some operators are charging up to $1 — though few contracts have been signed for that proce. That’s about the same amount it costs to store crude aboard tanker ships, which some traders have done while waiting for prices to rebound.

Coast Guard: Ship hits 2 others on Mississippi; oil spills - — About 420 gallons of oil spilled into the Mississippi River and a nine-mile stretch of the waterway was closed after a ship broke free of its mooring in southern Louisiana and hit two other vessels, the U.S. Coast Guard said. The Privocean, a 751-foot bulk carrier, broke free near Convent around 4:00 p.m. Monday, drifted downriver and struck a 98-foot towing vessel, the Texas, according to a statement from the Coast Guard. The Texas began taking on water but was able to ground itself on the river bank before sinking, according to Petty Officer Carlos Vega. The Privocean continued to drift downriver and hit the 816-foot tank ship Bravo, which was discharging crude oil, the Coast Guard said. Initial assessments show about 420 gallons of oil discharged into the river, which is closed from mile marker 163 to 154, according to the statement. Another 126 gallons spilled on the deck of the Bravo but was contained and will be cleaned up. All three ships have been secured. The cause of the incident is under investigation, and Coast Guard response teams and an environmental services company are responding to the spill. The crew of the Texas was taken to a hospital for evaluation but no injuries were reported, the statement said.

Texas-sized Dose of Hypocrisy Served Up To Local Governments Statewide in an Effort to Overturn Denton’s Fracking Ban  -- On March 24, the Texas House of Representatives’ Energy Resources Committee passed a bill that would rescind the fracking ban in Denton and other efforts by local Texas municipalities to protect themselves from the oil and gas industry. Once language in the bill is finalized, which could happen today, the legislation will make its way to the full Texas Senate for a vote.  “The oil and gas industry are getting what they always wanted – to get these pesky cities out of the way. They’re utilizing the lack of diligence and gullibility of state government – who are bought and paid for by industry, by using the Denton fracking ban to get what they want,” Denton Councilman Kevin Roden told DeSmogBlog.  “It is a political cliché to take advantage of a good crisis. And the fracking ban gave them a good crisis.” Roden said. Instead of fighting the ban in the courts, industry made a preemptive move to eliminate local ordinances altogether by pushing representatives to pass laws against ordinances in their way. On March 23, hundreds turned up to speak out against State Rep. Drew Darby‘s (R – San Angelo) proposed House Bill 40 at a hearing in Austin that lasted more than eight hours. A vote was not taken on HB40 then. However, the next day, the Texas Senate Natural Resources & Economic Development Committee voted unanimously to approve SB 1165, a similar bill that would assert the state’s preemptive right to regulate oil and gas development.   Senate Bill 1165 is pretty much the same as HB40, according to Kathy McMullen, head of the Denton Drilling Awareness Group. “It is a common tactic to submit two bills that are nearly identical in hopes one of them goes through, and that is what happened,” McMullen told DeSmogBlog. “The day following the marathon hearing, citizens and local politicians had to go home, but industry stayed and got what it wanted,” McMullen said.

The Lite Guv and the Frack Master - Faulkner is CEO of Breitling Energy Corp., and during the last three years he has become the media’s go-to voice from Texas in favor of hydraulic fracturing, also known as fracking. His 45-minute Powering America show and one-minute “Oil and Gas Today” spots were heard all last year on KRLD, the CBS radio affiliate in Dallas-Fort Worth. As Quest got almost right, Faulkner goes by the moniker “Frack Master.” Outlets that have turned to the Frack Master for news and commentary include CNBC, Bloomberg TV and the BBC. The New York Times cited him eight times in 2014. He’s quoted by reporters for Reuters and in stories by The Associated Press. He’s sharp and snarky with an impressive memory for facts and figures. And he’s unusual in the energy industry; while most executives dodge the press, Faulkner is happy to appear on a chat show to discuss the latest in oil prices or rig counts. Faulkner alternates between Rush Limbaugh-style self-righteousness and sympathetic acceptance of criticism. He says people have a right to worry about noise, earthquakes and mysterious fracking fluids. But he says that fracking can be done well, and that it should be. Faulkner also has become a high-dollar contributor to several statewide officials and members of the Legislature. Texas Ethics Commission records show he has given almost $300,000 to state candidates. That includes a gift of $5,000 to George P. Bush’s race for Texas Land Commissioner. His $100,000 contribution to the campaign of Railroad Commission candidate Ryan Sitton made him Sitton’s biggest individual donor. He also gave $87,500 to Dan Patrick’s campaign for lieutenant governor and a combined $65,000 to two candidates for state attorney general.

Earthquakes have shaken up the Permian - According to data gathered from the U.S. Geological Survey (USGS), over the last two weeks, three earthquakes have rattled the Permian Basin in its oil and natural gas regions. The information collected from the USGS shows that the earthquakes occurred along the Pecos and Reeves county lines. The first earthquake hit the Richter scale with a 2.8 magnitude and was recorded near U.S. Highway 285 and Mendel Road, which is just northwest of Fort Stockton. The reading came at 1 a.m. on March 21st. The second quake was occurred at 10:30 a.m. on March 28th, and was recorded to be a 2.9 magnitude earthquake. This one registered near U.S. Highway 285 and FM 1776. The final and largest earthquake registered a magnitude of 3.3. It shook the area just southeast of Pecos at U.S. Highway 285 and County Road 108 at 7:16 p.m. last Friday. The San Antonio Business Journal reports that since 1976, the USGS has recorded at least 19 earthquakes shaking the southern edge of the Permian Basin. According to reports, no damage has been caused or reported during the most recent three. Earthquakes have been an ongoing issue in the oil and gas industry. Some researchers believe that hydraulic fracturing, or fracking, is the main cause of the recent spike in earthquakes. The USGS has recorded 31 earthquakes since New Year’s Day in the Barnett Shale and five in the Eagle Ford Shale. In the area just north of the Red River in Oklahoma, 650 earthquakes have been recorded by the USGS since New Year’s Day.

Despite Historic Drought, California Used 70 Million Gallons Of Water For Fracking Last Year -- Even in the midst of its historic, ongoing drought, California used millions of gallons of water for hydraulic fracturing last year, according to state officials.The state used nearly 70 million gallons of water to frack for oil and gas in 2014, Reuters reported last week. That amount is actually less than the 100 million gallons officials previously estimated the state uses for fracking operations every year. Steven Bohlen, California’s oil and gas supervisor, noted to Reuters that not all water used for fracking operations is freshwater: some of it is produced water, which rises to the surface during the fracking process and can’t be used for drinking or irrigation. In all, Bohlen said, fracking uses the same amount of water as about 514 households each year. But Patrick Sullivan, spokesperson for the Center for Biological Diversity and Californians Against Fracking, says that while this figure may be correct, using water for fracking isn’t the same as using water for household tasks, like brushing teeth or washing dishes. That water is cycled back into the overall water supply, while water used for fracking is typically too contaminated to be used again for things like irrigation or drinking. “It is water that most likely cannot be put back into the water cycle,” he told ThinkProgress. “It’s water that is by and large gone for good.”Sullivan also said that he didn’t think the figure included all forms of oil and gas development, including things like steam injection — a method commonly used in California oil production. Reuters reported last week that environmentalists estimate that the state’s oil and gas industry uses 2 million gallons of fresh water a day for oil production. At a time when California is enduring a historic, four-year drought, the state shouldn’t be using its precious water resources to frack, Sullivan said.

5 Ridiculous Things Liberals Say About Fracking - The Environmental Protection Agency’s comprehensive study on environmental effects of hydraulic fracturing, or fracking, is set to be released in the near future, and environmentalists are groaning that it’s tainted with oil and gas industry influence. Why the complaining? It’s likely environmental groups know something about the report the general public doesn’t — namely, it probably takes a more favorable view of fracking than activists would like. The potential loss of the EPA in their anti-fracking campaign probably has environmentalists scrambling to rehash their stance on the well-stimulation process. Too bad for them they’ve already made some pretty ridiculous claims about fracking. The Daily Caller News Foundation has taken the liberty of listing the top five most ridiculous anti-fracking claims here:

  • 1. Fracking Causes Earthquakes
  • 2. Your Water Will Be Poisoned.
  • 3. Watch Out, You’ll Get Cancer - Filmmaker Josh Fox of “Gasland” again makes unsubstantiated claims about fracking, this time claiming that an area atop Texas’s Barnett Shale saw “a rise in breast cancer throughout the counties.”
  • 4. Fracking Will Make You A Drug Addict - Probably In 2013, liberal media outlets pushed an article by Vice saying that “with the heavy drilling machinery that is hitting the United States’ one horse towns are workingmen with an insatiable appetite for raw sex and hard drugs.” “The use of meth is also on the rise in fracking boom areas,” Vice reported.
  • 5. Rape? STDs?

Frac sand industry feels the effects of low oil prices, less drilling - Low oil prices and reduced drilling in shale regions like North Dakota are hurting the once fast-growing frac sand industry, slashing demand and forcing price cuts that have led some players to reduce jobs. U.S. sand mines, including 63 in Wisconsin and six in Minnesota, are projected to ship significantly less sand to oil drillers in 2015, compared with last year, when companies like Fairmount Santrol, U.S. Silica and Superior Silica Sands set production records, industry officials say. “This whole ripple effect has taken hold and it is going to continue,” . “There are peak cycles and trough cycles, and we have hit a trough.” The nation’s $4.2 billion industrial sand industry is increasingly tethered to the oil and gas sector, which now buys about 72 percent of the output. Sand production more than doubled in five years, and Wisconsin is the leading producer. Minnesota is fourth, behind Illinois and Texas, according to the U.S. Geological Survey. Sand is used in hydraulic fracturing, or fracking, a process that injects sand, water and chemicals into shale to free oil and gas. As crude oil prices have dropped — by nearly 50 percent since June — drillers have idled rigs, reducing demand for sand and putting pressure on its price, industry officials say. The number of U.S. rigs drilling for oil and gas fell last week for the 17th straight week to 1,028, which is about half the number operating in November 2011, according to oil field service company Baker Hughes. North Dakota’s rig count slipped to 90 from a high of 203 in June 2012.

Five Bakken producers ordered to restrict production - Following North Dakota State’s implementation of new rules to reduce flaring, the North Dakota Oil and Gas Division is taking regulatory action on five oil and gas operators that are flaring more gas than the permitted amount, according to the Forum News Service (FNS). Beginning this month, these companies are required to decrease production to 100 barrels per day on wells where flaring restrictions weren’t met. If the production restrictions aren’t met, companies could be subject to daily penalties. As reported by Lauren Donovan for FNS, spokeswoman for the Oil and Gas Division Alison Ritter said that since the flaring restriction order was put into effect, this is the highest number of companies ordered to restrict production. The flaring regulations, implemented January 1 of this year, require operators to capture 77 percent of produced gas. Ritter explained that the restriction orders will be in effect for a full month. The restrictions will either be continued or lifted after the affected companies submit production reports for the month. The companies currently being restricted include Emerald Oil, Oxy, QEP, Abraxas Petroleum and Enerplus. Emerald Oil was the only company to have production restricted for each month of the New Year. The Associated Press reached out to Emerald Oil Vice President for Finance and Investor Relations Mitch Ayer on the matter. He said the company hasn’t been able to meet the state’s new regulations at some of its well sites due to the rules going into effect before its new midstream systems went online. The systems help capture more natural gas. Ayer told the AP, “It was basically a timing issue between the two.” Ayer added that the new system will transport natural gas from McKenzie County to a plant outside of Watford City that came online late March.

After two pipeline breaks, federal regulations scrutinized - Two pipelines have dumped 70,000 gallons of crude into the nation’s longest free-flowing river in the last four years. What they have in common is that right up until breaking, both were considered safe. That “all clear” by regulators has sparked concern about whether the federal government is setting the bar too low for pipeline safety and ignoring destructive river conditions. There are 39 gas and oil pipelines beneath the Yellowstone River, and many, like the two that have polluted the Yellowstone since 2011, are buried less than 10 feet beneath the riverbed. The federal government requires a minimum of only 48 inches of cover over pipelines in rivers 100 feet or wider. The Yellowstone River is constantly rechanneling, in some places migrating several hundred feet during a few decades. It’s not only moving outward, but also downward, carving deeper trenches in the river bottom in some places. The river’s flows fluctuate widely, from 3,000 cubic feet of water per second in downtown Billings this week to more than 60,000 cubic feet during runoff last spring. At some pipeline crossings, the changing river conditions are not only significant, but also unique. Federal pipeline regulations aren’t addressing those site-specific hazards, “I guess my issue with the pipelines is that there are very general requirements for the pipelines, and it’s really hard to take into account all those things,”

Broken pipeline that spilled into Yellowstone to be removed — The company responsible for a 30,000-gallon oil spill into Montana’s Yellowstone River will try to remove its breached pipeline Wednesday as regulators investigate the cause of the accident that contaminated downstream water supplies. The broken section of pipeline will be sent to a laboratory for a metallurgical analysis as required under a federal order, Bridger Pipeline spokesman Bill Salvin said. The January breach in the Casper, Wyoming company’s pipeline temporarily fouled water supplies for thousands of people downstream in Glendive. Only about 2,500 gallons of crude were recovered from the river. It was the second large spill into the Yellowstone since 2011, renewing calls for pipelines to be buried more deeply at river crossings. Bridger’s Poplar Line carries oil from the Bakken region of Montana and North Dakota. The damaged section was installed in 1967, in an 8-foot-deep trench dug into the river bottom, according to documents submitted to regulators.  Officials are investigating whether high waters or an ice jam on the river near the spill last year played a role in the breach. A large enough ice jam can scour a river bottom and scrape away the cover over a pipeline. Federal law requires pipelines to be buried just 4 feet beneath major water bodies. Despite criticism those rules were inadequate, the U.S. Transportation Department determined in 2014 that 4 feet was sufficient.

Pipeline that leaked into Montana river was split at weld  — A Montana pipeline that spilled 30,000 gallons of oil had been split at the site of an exposed weld where the line crosses beneath the Yellowstone River, officials said, prompting a warning for pipeline companies nationwide to take precautions against flooding. The damaged section of the 12-inch pipeline that crosses the Yellowstone upstream of the city of Glendive was pulled from the river Wednesday. It will be sent to a laboratory in Oklahoma for analysis, said Tim Butters, pipeline safety administrator at the U.S. Department of Transportation. The cause of the split has not been determined. “There are a number of different scenarios,” Butters said in a telephone interview with The Associated Press. “Was it metal-related? Was it external force related? All of that needs to be looked at.” The Yellowstone spill in January contaminated water supplies for about 6,000 residents of Glendive and raised public health concerns in communities downstream in North Dakota.

The State Department ‘Secretly Approved’ Two Pipeline Projects, Lawsuit Alleges - Tribal and environmental groups are suing the State Department for allegedly “secretly” approving two pipeline projects last year, approvals that the groups say violated national environmental regulations. The lawsuit was filed last year by Minnesota’s White Earth Nation tribe along with environmental groups including the Indigenous Environmental Network, the Sierra Club, and Center for Biological Diversity, but the groups filed a motion for summary judgment in Minnesota federal court this week. In it, the groups claim that in 2014, the State Department “short-circuited” the approval process for the expansion of Enbridge’s Line 67 — also known as the Alberta Clipper. They also claim the department approved the construction of a new pipeline that would carry tar sands oil from Alberta, Canada to Superior, Wisconsin, without necessary public input. According to the summary judgment motion, the State Department sought to build the new pipeline by using “an existing permit for another pipeline known as Line 3.” Doug Hayes, staff attorney for the Sierra Club, told ThinkProgress that Enbridge, while waiting on the State Department to conduct an environmental analysis on the Alberta Clipper expansion, found a way to replace parts of Line 3 to allow it transport tar sands at a higher volume while the analysis was taking place.

Swinomish suing BNSF over trains - — The controversy over the growing number of crude oil shipments by rail in Skagit County took a new direction Tuesday when the the Swinomish Indian Tribal Community filed a lawsuit against BNSF Railway in federal court. The tribe is accusing the railroad of violating terms of a 1991 easement agreement that specifies how many trains may cross reservation land daily and that requires the railway to notify the tribe of the cargo being transported. The tribe seeks a permanent injunction to stop BNSF from running more than one train of 25 cars in each direction per day, as per the agreement, and to prevent it from shipping Bakken crude oil across tribal land, Swinomish Chairman Brian Cladoosby said. The tribe also seeks judgments and unspecified damages for trespass and breach of contract, according to the lawsuit. BNSF transports oil to the Tesoro refinery in Anacortes. The Tesoro refinery was the first in the region to start accepting Bakken crude back in September 2012. Six trains, often 100-cars long, come in and out of the facility per week. Shell is seeking to build an unloading facility that will allow it to also process six trains a week carrying Bakken crude. BNSF is reportedly running more than four times as many rail cars daily as permitted by the easement, according to the lawsuit.

Cantwell: Act now on oil trains - Now is the time to act to reduce the continued risk of crude oil moving through the region by rail, U.S. Sen. Maria Cantwell said during a visit to Vancouver on Wednesday. The Washington Democrat and local leaders repeatedly stressed the volatility of the oil itself. Speaking inside Pacific Park Fire Station No. 10 in east Vancouver, the group noted that responders are ill-equipped to handle the kind of fiery derailments and huge explosions that have characterized a string of oil-train incidents across the country recently. In some cases, the fires burned for days after the actual derailment, Cantwell said. “No amount of foam or fire equipment can put them out,” she said. “The best protection we can offer is prevention.” Cantwell last month introduced legislation that would immediately ban the use of rail cars considered unsafe for hauling crude oil, and create new volatility standards for the oil itself. The bill would require federal regulators to develop new rules limiting the volatile gas contained in crude that is transported by rail — an important and somewhat overlooked facet of the larger debate over oil train safety, Cantwell said. Much of the oil that now rolls through Clark County comes from the Bakken shale of North Dakota. Regulators there this month imposed new rules on the volatility of that oil, but critics argue they don’t go far enough. North Dakota, currently in the midst of a historic oil boom, lacks the infrastructure and facilities for more thorough oil stabilization that are commonplace elsewhere.

Industry still failing at transparency -   Last week, the Natural Resources Defense Council (NRDC) released a report identifying the top 10 oil and gas companies based on spills and legal violations from operations. Moreover, in their endeavor the NRDC along with the Frac Tracker Alliance found that only three out the 36 states with active oil and gas operations make information about companies’ spills and legal violations readily available to the public, thus bringing the issue of industry transparency into the spotlight. “People deserve to know what’s happening in their own backyards, but too often homeowners aren’t even informed if there’s a threat to their health,” said Amy Mall, report co-author and senior policy analyst at NRDC in a press release. “Our representatives have a responsibility to protect the people who elect them, not help keep a dangerous industry shrouded in secrecy. States are falling down on their responsibility to be a watchdog for the people who live there.” The groups discovered that only Colorado, Pennsylvania and West Virginia post accessible public data about companies’ violations. According to their report, even the information that is provided often incomplete, misleading, and/or difficult to interpret. Incidents include a wide range of violations such as spills, drinking water contamination, air pollution, improper construction or maintenance of waste pits, failure to conduct safety tests, improper well casing, and nonworking blowout preventers. “The limited information that is actually available is eye-opening, both in terms of frequency and the sometimes shocking nature of the impacts when things go wrong,” said Matt Kelso, FracTracker’s Manager of Data and Technology. “This industry is already immense and rapidly growing. It develops in residential communities, sensitive ecological areas, and everywhere in between.  Our research shows the need for increased transparency about the compliance record of the industry, especially given those vulnerable areas and populations.”

Creditors Pulling The Rug From Under U.S. Shale Sector -- Back in early 2007, just as the first signs of the bursting housing and credit bubble were becoming visible, one of the primary harbingers of impending doom was banks slowly but surely yanking availability (aka "dry powder") under secured revolving credit facilities to companies across America. This also was the first snowflake in what would ultimately become the lack of liquidity avalanche that swept away Lehman and AIG and unleashed the biggest bailout of capitalism in history. Back then, analysts had a pet name for banks calling CFOs and telling them "so sorry, but your secured credit availability has been cut by 50%, 75% or worse" - revolver raids. Well, the infamous revolver raids are back. And unlike 7 years ago when they initially focused on retail companies as a result of the collapse in consumption burdened by trillions in debt, it should come as no surprise this time the sector hit first and foremost is energy, whose "borrowing availability" just went poof as a result of the very much collapse in oil prices. As Bloomberg reports, "lenders are preparing to cut the credit lines to a group of junk-rated shale oil companies by as much as 30 percent in the coming days, dealing another blow as they struggle with a slump in crude prices, according to people familiar with the matter. Sabine Oil & Gas Corp. became one of the first companies to warn investors that it faces a cash shortage from a reduced credit line, saying Tuesday that it raises “substantial doubt” about the company’s ability to continue as a going concern. It's going to get worse: "About 10 firms are having trouble finding backup financing, said the people familiar with the matter, who asked not to be named because the information hasn’t been announced."

EIA report pegs Permian as only oil-producing shale -The latest U.S. Energy Information Administration’s (EIA) monthly drilling report has revealed some very encouraging news for the Permian Basin, but as for other major shale plays—not so much. Among the Bakken, Eagle Ford, Haynesville, Marcellus and Niobrara shale plays, the Permian stood alone as the only shale to sustain continued oil production. According to the EIA’s March report, the Permian’s oil production grew by 21,000 barrels per day in April compared to a month ago. That increase brings the Permian’s overall oil production up to 1.982 million barrels a day. The Eagle Ford shale play, also in Texas, came in second with 1.723 million barrels per day, but saw a decrease in its monthly oil production of 10,000 barrels. Also dropping in oil production for the month is the Bakken Shale in North Dakota and the Niobrara Shale in parts of Colorado, Wyoming and western Nebraska. The Bakken saw an 8,000 barrel per day loss over the past month to bring the Bakken to a total of 1.320 million barrels per day of oil production. The Niobrara, which relies less on oil, saw a 5,000 barrel per day loss, dropping it to 413,000 barrel per day production level. Both the Haynesville and Marcellus shales saw no change in its oil production over the past month. In fact, they both sit at 57,000 barrels per day of oil production.

America's Top 100 Oil Fields -  With everyone's attention in recent months falling squarely on the US oil industry, and specifically how much longer various shale companies will be able to keep operating now that Saudi Arabia is openly on a war path with US marginal producers, we thought it may be an opportune time to remind readers just where America's Top 100 oil fields are located based on the EIA's most recent report. A recap, if you will, of the domestic oil theater of war with America's "closest ally" in the middle east. The top 100 oil fields accounted for 20.6 billion barrels of crude oil and lease condensate proved reserves, which was 56% of the U.S. total (36.5 billion barrels). A map of all the major reserve locations around the continental US. Next, a summary of the changes with America's top 100 fields since the last major ranking was conducted in 2009. In 2009, the United States had 22.3 billion barrels of crude oil and lease condensate proved reserves, and its top 100 oil fields had 62.3% of that total, or 13.9 billion barrels of proved reserves. In 2013, the United States had 36.5 billion barrels of crude oil and lease condensate proved reserves, and its top 100 U.S. oil fields had 56.4% of that total, or 20.6 billion barrels of proved reserves (Table 1). Prominent new additions to the top 10 are two fields from the Eagle Ford Shale Play in Texas, Eagleville and Briscoe Ranch. Eagleville, discovered in 2009, spans 14 counties in South Texas and is the country’s largest oil field as ranked by estimated proved reserves. Prudhoe Bay Field in Alaska (the largest U.S. oil field in 2009) declined in rank to third place, also behind the Spraberry Trend Area of Texas.  Finally, here is the list of the top 100 fields, ranked by their proved reserves, and as estimated by the EIA.

Can't stop, won't stop; will producers be forced to cut production? - Ever since the exponential boom of light tight oil (LTO) production flowing from the major shale plays began, American refineries have worked vigorously to process greater LTO volumes. Now a new report has stated that the load is beginning to become a burden, and the cheapest options for refineries to take on the growing amounts of LTO are over. On Monday, the U.S. Energy Information Administration (EIA) released a report that began the process of solving the issue increased LTO. Most notably, the EIA stated that with low-cost investments exhausted, refiners will have to rely on costlier splitters and new unit installations to refine more shale oil in the future. Essentially, without excessive spending there just isn’t anywhere for the new light crude to go. The additional domestic LTO production that refiners can process by increasing capacity utilization rates is limited and crude oil refinery inputs already reached record levels last year. According to the EIA, refiners have exhausted relatively low-cost investments in equipment modifications to remove restrictions on throughput, also known as crude unit debottlenecking. So far, debottlenecking investments have largely been to replace the gathering trays and condenser units needed to collect the greater volumes of lighter distillation products at the top of an Atmospheric Distillation Unit (ADU) column resulting from processing the surplus LTO. Because the opportunities for such investments are limited, so too is their potential impact on the amount of additional LTO that U.S. refiners will be able to process.

Top 12 Media Myths On Oil Prices - The upstream oil and gas industry is not a black hole. There’s no mystery wrapped in an enigma here. There are a lot of meetings with engineers, chemists and geologists. There’s a constantly evolving learning curve. And then there’s all the regulations and compliance. But all-in-all it’s pretty straight forward, that is, until the media gets a hold of it. That’s when it becomes complicated. It’s as though we are getting reports from the mysteries of the deep ocean or life in the great galaxies beyond. There is so much hyperbole and unsupported guesswork that investors don’t have a chance. So, in a small effort to set the record straight, let’s see if we can’t dispel some of the misinformation.

Who’s To Blame For The Oil Price Crash?: Probably no one would dispute that the price plunge began with the eager and copious production of oil from shale formations in the United States. From the American perspective, that was beneficial because it was bringing energy self-sufficiency to a country with the reputation as the world’s largest importer of oil. Despite unproven concerns about hydraulic fracturing, or fracking, a common way to extract oil and gas from underground shale rock, the practice has proven extremely productive. And that’s the source of the oil glut that began driving down prices in late June 2014.  Even one of fracking’s biggest supporters, legendary oil man T. Boone Pickens, blames the US shale boom for triggering the price slough that’s been hammering the energy industry. He’s doesn’t subscribe to the environmental concerns about fracking, but he says he can also recognize when his industry has latched on to too much of a good thing. “I’ve fracked over a thousand wells,” Pickens, the chairman of BP Capital Management, said March 23 at a panel discussion in Monterey Calif. “I’ve never had a failure on one of them. … Texas, Oklahoma lead in fracking wells and it has been a great success for both those states.” Yet Pickens thinks it’s time for US companies to take a break from their frantic production to allow oil prices to achieve some balance. In an interview with the Financial Times published March 18, he said shale companies have “overproduced,” and that it’s up to them to rein in output to help restore oil prices to a more profitable level.

Why The Oil Price Collapse Is U.S. Shale’s Fault - The present oil price collapse is because of over-production of expensive tight oil. The collapse occurred because of the inability of the world market to support the cost of the new expensive oil supply from shale, oil sands and deep water. Demand was progressively destroyed during the longest period of sustained high oil prices in history from 2010 through 2014. Since the early 2000s, the price of oil was largely insensitive to the fundamentals of supply and demand as long as prices were less than about $90 per barrel. The chart below shows world liquids supply minus demand (relative supply surplus or deficit), and WTI oil price. In mid-2004 and mid-2005, the relative supply surplus was much greater than it has been during the 2014-2015 price collapse yet prices continued to rise. When oil traders perceive supply limits and rising prices, price below some critical threshold is not an issue. They are willing to carry the cost of storage and interest to hold the commodity in the future when it will be more valuable.   Tight oil boomed after late 2011 when oil prices moved higher than $90. An endless flow of easy money was available to fund spending that always exceeded cash flow. The table below shows full-year 2014 earnings data for representative tight oil E&P companies.These companies out-spent cash flow by 25%, spending $1.25 for every $1.00 earned from operations. Only 3 companies–OXY, EOG and Marathon–had positive free cash flow. Total debt increased from $83.4 to $90.3 billion from 2013 to 2014. Debt must be continually re-financed on increasingly poorer terms because it can never be repaid from cash flow by many of these companies. The U.S. E&P business has, in effect, become financialized: investment in this class of company has become the sub-prime derivative of the post-Financial Crisis period. There is no performance requirement by investors other than the implicit need to maintain net asset values above debt covenant trigger thresholds.

As oil price slump drags, companies fight to adapt- In January, Gary Evans, the CEO of the oil and gas firm Magnum Hunter Resources, shut down his entire drilling operation in response to low commodity prices. But for weeks now, he has been listening to executives from rival companies talk about negotiating rate cuts from drilling contractors and field service companies. After hearing about discounts of 25 to 40 percent, Evans said he’s thinking about restarting. “Most firms are already offering some discount. But you typically have to negotiate with them, offer to make a longer-term commitment, if you want them to give you a good deal,” he said. “It’s getting closer, but I don’t think it’s quite there yet.” It’s been nine months since oil prices began their decline, first slowly and then rapidly before leveling off around $50 a barrel, about half what they were last summer. But as the downturn drags on, the initial panic that swept the industry has moderated as companies begin to adapt to drilling in a low-priced crude world. Layoff announcements are still flowing, but not as quickly as they were earlier this year. Likewise, the U.S. rig count, which serves as a barometer for the industry, has lost 164 rigs over the past four weeks. In February 276 rigs were taken out of service, according to the Houston oilfield services company Baker Hughes.  “There will continue to be declines in rigs and employment. But we’re expecting things to stabilize in the second half of 2015,” said Chris Lafakis, a senior economist at Moody’s.

The U.S. Oil Story in Seven Charts - The oil price crash has been rippling through the global economy since last summer. Now it’s hitting more corners of the U.S. economy. Since mid-2014, the price of a barrel of crude has fallen by nearly half. That is offering a boost for American consumers–a net benefit to the overall U.S. economy–but constraining budgets at oil and gas companies. The result so far has been big cuts in capital spending, layoffs and rising production. The effects are showing up in more national economic data. The Labor Department last week said employment in mining, a category that includes oil and gas, fell by 11,000 in March. So far this year, the industry has lost 30,000 jobs, after adding 41,000 in 2014. Employment losses in the first quarter of this year have been concentrated in support activities. The dropoff in employment makes sense in the context of a falling U.S. oil rig count, which is down for 17 straight weeks. At 802 at the end of last month, the number of drilling rigs–a proxy for activity in the industry–is down 36% from the October peak of 1,609. New drilling is in decline because oil prices have fallen sharply since mid-2014. But unlike past crashes, that’s largely been because of rising supplies rather than tumbling demand. The U.S. is a big reason for the oil glut. North American producers have been heavy adopters of hydraulic fracturing, or fracking, technology that has allowed oil to be pumped out of shale formations. U.S. production has climbed despite lower prices. While the U.S. is still far from energy-independent, growing domestic production has led to a big drop in petroleum imports. That’s helped keep the country’s trade deficit from growing even wider.

Crude Tumbles After API Reports Largest Inventory Build In 30 Years -- Who could have seen that coming? For 2 days, oil has surged on every headline (good or bad) as algo-mania created the 2nd best performance in 4 years.. and then API reports an absolutely massive 12.2 million (almost 4 times larger than the 3.4mm estimate). If this corresponds to the DOE inventory data tomorrow - this is the biggest inventory build since 1985... Crude prices are... not up...

Record Gasoline Output to Curb Biggest U.S. Oil Glut in 85 Years - Refiners are poised to make gasoline at a record pace this year, keeping the biggest U.S. crude glut in more than 80 years from overflowing storage. They’re enjoying the best margins in two years as they finish seasonal maintenance of their plants before the summer driving season. They’ll increase output to meet consumer demand and they’ve added more than 100,000 barrels a day of capacity since last summer, when they processed the most oil on record. Booming crude production expanded inventories this year by 86 million barrels to 471 million, the highest level since 1930. Analysts from Bank of America Corp. to Goldman Sachs Group Inc. have said storage space may run out. What looks like an oversupply to banks is turning into an all-you-can-eat buffet for those making gasoline and diesel fuel. “A lot of the excess crude we’ve been sitting on is going to get chewed up quickly,” . “We’re going to move from a stock build to a stock draw.” Goldman Sachs and Bank of America have said storage builds are increasing the risk of breaching storage capacity, sending prices tumbling. West Texas Intermediate oil, the U.S. benchmark, already has lost more than half its value since June as growing U.S. shale production led to a global oversupply. WTI for May delivery added $3 to settle at $52.14 a barrel on the New York Mercantile Exchange on Monday.

U.S. crude oil stocks surge 11 mln bbls, biggest rise since 2001 – U.S. crude stocks surged nearly 11 million barrels last week, the biggest gain in 14 years, as imports jumped, while gasoline inventories unexpectedly increased, government data showed on Wednesday. Crude inventories rose 10.95 million barrels in the week to April 3 to 482.4 million, hitting record highs for the 13th consecutive week, according to data from the Energy Information Administration (EIA). Analysts had forecast an increase of 3.4 million barrels on average. Crude stocks at the Cushing, Oklahoma, delivery hub rose 1.2 million barrels, which was also a bigger-than-expected build. U.S. crude imports rose 869,000 barrels per day (bpd) to 7.7 million bpd. Both U.S. and Brent crude futures extended losses after the EIA report. U.S. May crude was down $2.40, or 4.5 percent, at $51.58 a barrel at 11:20 a.m. EDT, having fallen as low as $51.38. Brent May crude was down $2.01, or about 3.5 percent, at $57.09, having slumped as low as $56.90. “They are the most bearish numbers I’ve seen in quite some time, very surprising, even to a bear like me,” Refinery crude runs rose 201,000 bpd to 15.9 million bpd, EIA data showed, remaining at record highs for this time of year. Refinery utilization rates rose by 0.7 percentage point to 90.1 percent of total capacity.  Gasoline stocks rose 817,000 barrels, compared with analysts’ expectations in a Reuters poll for a 1.0 million barrels drop.  At 229.95 million barrels, gasoline stocks were at their highest level on record for the period, according to EIA data.

Oil dives 6 percent from 2015 high as stocks swell, Saudis pump (Reuters) - Oil prices dived 6 percent on Wednesday after closing at their highest this year, as a mammoth rise in U.S. crude stockpiles and news of record Saudi oil production scuttled talk of a sustained recovery. U.S. crude oil inventories surged 10.95 million barrels - three times more than expected - to a modern-day record 482.39 million last week, U.S. government data showed, the biggest one-week increase since 2001. Stockpiles in Cushing, Oklahoma, rose by 1.2 million barrels, much more than expected. The data added to earlier losses triggered by comments that Saudi oil production rose to 10.3 million barrels per day (bpd) in March, the highest monthly total on record. Brent May crude fell $3.55, or 6 percent, to settle at $55.55 a barrel. U.S. May crude fell $3.56, or 6.6 percent, to settle at $50.42 after closing at nearly $54 a barrel on Tuesday, the highest close since Dec. 30. The U.S. data were "very bearish," . The rise in crude stocks was fueled in part by a 869,000-bpd increase in imports. Gasoline inventories rose 817,000 barrels, compared with analysts' expectations for a 1.0 million-barrel drop, as refiners increased capacity utilization.

Oil settles down 6.6% as US crude inventories continue to surge -- Oil futures settled nearly 7 percent lower on Wednesday after government data showed the largest weekly increase in U.S. crude inventories since 2001 and a day after Saudi Arabia reported record production in March.U.S. May crude closed down $3.56, or 6.6 percent, at $50.42 a barrel. The commodity has erased 2015's gains and is now down 5.4 percent on the year. Meanwhile, Brent May crude was down $3.30 at $56.90 a barrel. U.S. crude oil inventories surged 10.95 million barrels to a record 482.39 million in the week to April 3, the Energy Information Administration (EIA) said in its weekly report. A Reuters survey of analysts had yielded a forecast for a build of 3.4 million barrels. "The report is very bearish with the large crude oil inventory build and the somewhat surprising rise in gasoline inventories,"  U.S. crude oil imports rose by 869,000 barrels per day (bpd) to 7.7 million bpd.  Gasoline inventories rose 817,000 barrels, compared with analysts' expectations for a 1 million barrel drop, as refiners increased capacity utilization.

Cushing Storage Around 90% Full As Inventories Surge Most In 14 Years, Crude Plunges -- Following last night's huge 12.2 mm barrel inventory rise estimate from API, DOE has just confirmed last week saw an almost all-time high 10.95 million barrel inventory build. This is the higest since March 2001. With today's 1.232 million barrel addition at Cushing, Goldman estimates only about 10% of storage capacity is left. And to complete the trifecta, crude oil production ticked back up again after last week's hope-strewn reduction.

US oil and natural gas rig count drops by 40 to 988 - — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 40 this week to 988 amid depressed oil prices. It was the first time the weekly count was below 1,000 since September 2009. Houston-based Baker Hughes said Friday 760 rigs were seeking oil and 225 explored for natural gas. Three were listed as miscellaneous. A year ago, 1,831 rigs were active. Among major oil- and gas-producing states, Texas plummeted by 29 rigs, Oklahoma was down five, New Mexico by four and North Dakota dropped two. Colorado, Ohio and Wyoming declined by one each. Arkansas and Kansas each rose by one. Alaska, California, Louisiana, Pennsylvania, Utah and West Virginia were all unchanged.

Total Rig Count Decline Fastest Since 1986 As Weekly Rig Count Drop Re-Accelerates -- With crude production and inventories hitting record highs this week, it is likely no surprise that rig counts continued to decline - falling 40 to 988 total rigs  (and down 42 to 760 oil rigs). This is the 18th week in a row of total rig count declines - equal to the record series from 2008/9. At 48.5%, this is the biggest 18-week decline since 1986.

U.S. oil rig slide picks up again after false bottom - The fall in U.S. rigs drilling for oil quickened this week, data showed on Friday, suggesting that a recent slowdown was temporary, after slumping oil prices caused half of the country’s rigs to be closed since November. The oil rig count fell by 42 this week to 760, the biggest drop in a month after the loss of 11 and 12 rigs in the prior two weeks respectively, according to data from oil services firm Baker Hughes. U.S. natural gas rigs, meanwhile, rose by three to 225. The slowing decline in March had caused some analysts to wonder whether oil drillers had finished making deep cuts for now, with U.S. crude prices stabilizing at around $50 a barrel or so. But after Friday’s data, prices rose 2 percent on the day and 5 percent on the week, to above $51 a barrel, partly on signs that more cuts may come. “It’s a sign of the tumult the oil industry is still going through,” said John Kilduff, partner at New York energy hedge fund Again Capital. “The price recovery in crude isn’t really to the degree that’s helping, and there are lots of job losses being reported in the oil industry, so I won’t be surprised to see more rig losses hereon.” With this week’s decline, the oil rig count has fallen for a record 18th week in a row, reaching December 2010 lows, according to Baker Hughes data going back to 1987. U.S. energy firms have slashed spending, cut jobs and idled wells over the past several months as crude prices plunged over 50 percent since the summer on oversupply concerns and lackluster world demand. Despite the 53 percent reduction in oil directed rigs from a record high of 1,609 in October, oil output has remained at a 40-year peak, declining only one week in the last couple of months.

U.S. oil production is probably peaking right now --  U.S. crude production will peak this month, according to revised forecasts published by the country’s Energy Information Administration (EIA). Output will average 9.37 million barrels per day (bpd) in April and the same in May before falling to 9.33 million bpd in June and 9.04 million bpd by September, the EIA predicted in the April edition of its Short-Term Energy Outlook (STEO). Production is expected to peak a month earlier and 10,000 bpd lower than the EIA forecast in the January STEO, reflecting continued low wellhead prices and a sharper-than-expected slowdown in new well drilling. Production is forecast not to exceed this month’s level for another 18 months. The EIA has cut its forecast for the end of 2016 by 230,000 bpd compared with three months ago.While the EIA’s Brent price forecast is largely unchanged, prices for West Texas Intermediate crude have been marked down through the rest of 2015 and 2016, reflecting the build-up of crude stocks and persistent weakness of U.S. grades. The number of rigs drilling for oil has fallen further and faster than was anticipated last year. Baker Hughes reported there were 802 rigs drilling for oil last week, down exactly 50 percent since early October. It is unlikely a halving of the rig count can be completely offset by greater target selectivity and other efficiency improvements such as employing only the most powerful rigs, drilling longer laterals and reaching target depth faster.

Greenpeace Activists Are Refusing To Leave Oil Rig Headed For The Arctic, Despite Legal Threats --On Monday, some 750 miles northwest of Hawaii, six Greenpeace activists boarded a Shell oil rig en route from Malaysia to the Port of Seattle in protest of the oil company’s plans for drilling in the Arctic. A mere 24 hours later, Shell filed a lawsuit in federal court, hoping to kick the activists off of the rig. “These acts are far from peaceful demonstration,” Shell said in a press release following the injunction, which it filed in federal court in Alaska. “Boarding a moving vessel on the high seas is extremely dangerous and jeopardizes the safety of all concerned, including both the people working aboard and the protestors themselves.” The protesters, who had been following the rig’s trans-Pacific journey on a Greenpeace ship named the Esperanza, used inflatable boats and climbing gear to approach the vessel carrying the rig — called the Blue Marlin — and scale the rig. The Esperanza, which has several other Greenpeace members on board, is continuing to follow the Blue Marlin, bringing protesters food and supplies as needed.  The 400-foot-tall rig, dubbed the Polar Pioneer, is intended to be staged for Arctic drilling once it reaches Seattle. It is one of two rigs eventually bound for the Arctic Ocean north of Alaska, an area that Shell — pending federal permits — intends to develop for offshore drilling.

British Companies Find Oil Off Falklands; Argentina Threatens Prosecution: The UK and Argentina marked the 33rd anniversary of the start of their 10-week Falklands War with British energy companies announcing the discovery of oil and gas off the islands and the Argentine Foreign Ministry immediately countering with a threat of prosecution. The energy discovery at the Zebedee well about 200 miles north of the Falklands was announced by Premier Oil Plc. and Falkland Oil and Gas Ltd., the first strike in a regional drilling campaign that began last summer. The discovery included an oil reservoir 81 feet deep and a gas basin 55 feet deep.  The Zebedee well is part of a larger drilling enterprise by the British companies called Sea Lion, and uncertainty remains about its development for now, according to analysts at the US brokerage Stifel. “A full appreciation of the significance of today’s result may have to wait until the conclusion of the drilling campaign later this year,” they wrote.  The Falklands, which Argentina calls the Malvinas, have long been part of a tug-of-war between Buenos Aires and London, which both claim the islands in the South Atlantic off the Argentine coast. They have been under British control since 1841. Argentine forces invaded them on April 2, 1982, and claimed them in an effort to establish sovereignty under Buenos Aires. Britain responded by sending a naval task force, and on June 14 Argentina surrendered, returning the islands to British control.

Stop Fracking: Increases Risks of Serious Health Problems - Health experts and activists warning that fracking can promote serious negative health effects are facing government and market hurdles in their effort to protect people. Under the UK’s Climate Change Act, successive British governments are obliged to minimize the greenhouse gas emissions. Yet, the current government, led by Prime Minister David Cameron, has pushed forward an Infrastructure Bill completely at odds with the Climate Change Act 2008. The Infrastructure Bill obliges governments to produce strategies for “maximising the economic recovery of UK petroleum” and includes provisions “to introduce a right to use deep-level land” for “petroleum or deep geothermal energy.”    Rather than taking a precautionary approach to protect people and the environment from the possible severe effects of fracking, David Cameron has – quite irrationally – engaged in a publicity war for the fracking industry, and sought popular support for it by arguing that it “has real potential to drive energy bills down."  But, Cameron won’t listen to prominent health experts who have labelled fracking “inherently risky” for its potential health impact. Nor will he will explain how his attempts at eliciting public support for fracking by outlining economic gains square with those of Former BP chairman Lord Browne, now chairman of fracking company Cuadrilla, who has contradicted Cameron, indicating that there will be no downward trend on household energy bills in the UK as a result of gas and oil derived from fracking in the country. We cannot rely on our governments to provide solutions to the UK’s energy problems, nor to uphold their commitments to reduce greenhouse gas emissions. 

OPEC Revenues Suffer In Oil Price War Of Attrition -- The 9-month-old plunge in the price of oil combined with a decrease in exports cut into OPEC’s net earnings in 2014, according to estimates by the US Energy Information Administration (EIA). With the exclusion of Iran, 11 of OPEC’s 12 member countries earned about $730 billion in net export revenues last year, an 11 percent drop from 2013, when the cartel earned $824 billion, and “the lowest earnings for the group since 2010,” the EIA said. These and all other dollar figures in the EIA report are not adjusted for inflation. The IEA said Iran was excluded from the report because it is difficult to estimate the country’s earnings because of sanctions that forbid payments for oil to Tehran and any price discounts it may offer to some customers. In its four-page “OPEC Revenues Fact Sheet”, issued March 31, the EIA projected that the cartel’s net export revenues in 2015 will be even lower, around $380 billion, even though OPEC’s production and exports aren’t expected to change from their levels in 2014. There are two main reasons for that: First, OPEC decided in November to maintain production levels at 30 million barrels per day rather than cut production in an effort to shore up prices. Second, oil prices were high for nearly half of 2014 before they began their fall in late June. This year has begun with low oil prices, and so far there’s no evidence that oil prices will rebound meaningfully before year’s end.

Middle East state spending throws lifeline to oilfield services – Oil majors may have slashed capital spending but national oil companies (NOCs) in the Middle East and North Africa show no sign of cutting investment, buoying oilfield services that the stock market has beaten down. Investors sold in the second half of 2014 as benchmark fuel prices sank, expecting a dire performance from a sector reliant on investment in oil and gas projects for its revenues. Names such as Saipem and Subsea 7 notched up double-digit share price declines from June to December as oil majors put projects on hold or scaled back expenditure. But while offshore drillers and seismic companies continue to suffer, oil services stocks with chunky exposures to Middle East spending, such as Petrofac, have bounced back. Petrofac’s order backlog was up 26 percent at the end of 2014, and its share price has risen by almost 27 percent since it reported full year earnings on Feb. 25. Recent wins include a contract for the first phase of Kuwait Oil Company’s Lower Fars heavy oil development program and two strategic contract agreements with Algeria’s Sonatrach. “There is a building differentiation in the backlog profiles of those companies exposed to onshore construction in the Middle East and those not,” said Mick Pickup, managing director at Barclays Capital. “While some of this is gas related, it signals a continued robust construction market in the region.” In contrast, a JBC Energy analysis found that ExxonMobil , BP, Shell, Total, Chevron and ConocoPhillips had slashed capital expenditure by 12.7 percent for 2015, or almost $21 billion.

Saudi Stocks Are Plunging Following Rejection Of Russian Embargo Proposal; Death Toll Mounts -- Earlier this morning, RT reports that Saudi Arabia rejected Russia’s amendments to a Security Council draft resolution which would see an all-inclusive arms embargo on all parties in the Yemeni conflict. Saudi stocks did not like the news and began to tumble - now down over 3%, back at January lows as the fighting continues to spiral out of control with civilian death toll climbing. At least 185 people were left dead and more than 1,200 wounded as a result of fighting in Aden, a medical official told AFP Saturday, three-quarters of them civilians. In the meantime, Reuters reports The Houthis are gaining ground in Aden, despite the onslaught of airstrikes; and the Saudi ambassador to the United States, said sending ground troops remained "on the table."

Saudi Arabia crude output at record high in March - Saudi Arabia raised its crude output to 10.3 million barrels a day in March, its oil minister Ali al-Naimi said, signalling an unexpected strong demand from its customers. Mr. Naimi did not give a reason for the increase in output, according to the official Saudi News Agency. The Kingdom's previous record peak was 10.2 million barrels a day in August 2013. It told the Organization of the Petroleum Exporting Countries that it produced 9.64 million barrels a day in February. Mr. Naimi said that the kingdom's production will continue at around 10 million barrels a day, signalling that his country is determined to ride out the price slide without making any output cut. "In terms of petroleum, I expect that prices will improve in the near future, that the Kingdom's production will continue at approximately 10 million barrels per day," Mr. Naimi said in a speech at an energy event in Riyadh. Saudi Arabia is willing to participate in restoring market stability and steering prices back up, but it can only do so with participation from major oil-producing countries inside and outside OPEC, he said. "The burden cannot be borne by Saudi Arabia, the GCC [Gulf Cooperation Countries], or OPEC countries, alone," he said.

"Saudi Arabia Is Going For it" - Why The Saudis Just Boosted Oil Production To A Record High  --Instead of leaving its own production flat in an attempt to stabilize oil prices and hit its "optimistic" outlook sooner rather than never, Saudi Arabia would boost production quite sharply to claw back market share. Specifically al-Naimi, revealed that the kingdom’s oil production in March was 10.3-million barrels a day – a record high. .. Why is Saudi Arabia opening the spigot? There is no doubt that country’s own domestic demand is rising, thanks to heavy investment in new refineries, requiring more production. But it also appears that Saudi Arabia is making renewed push for market share for fear that a gusher of Iranian oil will soon hit the export markets as the Iranian embargo is ratcheted back

Saudi Arabia Maneuvers to Retain Oil Crown - WSJ: Saudi Arabia is struggling to maintain its share of the global oil market in a contest that pits the world’s largest crude exporter against traditional allies in the U.S. and Persian Gulf. The Saudi kingdom’s oil exports declined 5.7% in 2014 compared with 2013. Oil shipments to its fastest-expanding customer, China, reached their lowest levels since 2011 in the first two months of 2015, according to the China General Customs Administration. And its U.S. sales nearly halved in January compared with a year earlier, according to the U.S. Energy Information Administration. China and the U.S. are Saudi Arabia’s biggest importers, with 10% and 8%, respectively, of the kingdom’s production.   Saudi Arabia is suffering from depressed demand and better deals being offered by its rivals in Russia, Kuwait and the United Arab Emirates. In the U.S.,it faces competition from domestic shale producers whose flood of crude has helped shove down world oil prices.  It is an unfamiliar position for Saudi Arabia, long considered the linchpin of the world oil market, and reflects a new order emerging in the global crude market since oil prices plunged more than 50% since last June. The situation also underscores the risks Saudi Arabia took last November when it persuaded fellow members of the Organization of the Petroleum Exporting Countries to forsake their traditional role of boosting prices when the market tanked. Instead, Saudi Arabia said it and OPEC would keep pumping and let oil prices fall. Instead, the kingdom has been forced into a fight with OPEC members, cutting its selling price to Asian customers six times in nine months. But Russia and Saudi Arabia’s Persian Gulf allies have outmaneuvered it, cutting better deals with Chinese, Indian and European refineries, industry analysts said. Kuwait, for instance, boosted its exports by signing a 10-year supply deal last year with China’s largest refiner, China Petroleum & Chemical, known as Sinopec.

Saudi strategy to retain oil dominance - In the face of lower oil prices the world’s biggest energy players have slashed spending, cut jobs and pulled back on the number of rigs drilling for oil and gas. But as the oil price rout has forced companies into a deep retrenchment, Saudi Arabia’s energy behemoth has set its sights on longer term ambitions. After all, the kingdom has a $750bn buffer to allow it to do so. To be sure, Saudi Aramco is also using the downturn to “sharpen” its fiscal discipline, according to its chief executive Khalid Al Falih, negotiating better deals with services companies and other contractors to trim spending. But it is making a bet that running its energy sector hard, investing in oil, gas and refining and pushing for new business in troubled times, will enable Opec’s largest producer to retain its dominance. Ali Al Naimi, Saudi oil minister, last month said the kingdom was producing about 10m barrels of crude a day, up from an average of about 9.7m b/d in the second half of 2014, according to data from JODI, the global oil database. At the same time, the number of rigs drilling for oil and gas has jumped more than 15 per cent since June to 120, according to oilfield services company Baker Hughes, even as the price of crude has halved. In the US rig numbers have dropped by half since October to the lowest in four years. Meanwhile, Mr Al Falih embarked on a trip to Beijing to charm the Chinese into importing more Saudi crude and products as competition for the Asian market increased.

Yemen: Saudi airstrike hit school - Yemeni officials said Saudi airstrikes targeting a military base on Tuesday hit a nearby school, injuring at least a half dozen students. The information came from two officials with the governor's office in Ibb province, where the school is located, as well as Houthi sources from the rebel group that is fighting for control of the country. A third source, with the Education Ministry in Ibb, said three students had been killed at the Al Bastain School in Maitam, in southwestern Yemen, as a result of an airstrike. The officials from Ibb's governor's office said the Al Hamza military base was targeted because Houthis have been sending reinforcements from Ibb to nearby provinces. There were no casualties on the base, the officials said, but it was heavily damaged. The school, which is about 500 meters (one-third of a mile) from the base, was not the main target, the officials said. Schoolchildren were heading to their lunch break when the attacks took place, the officials said. The incident was another example of what has become evident in recent days: The chaos in Yemen, now the scene of some of the most chaotic fighting in the Middle East, has left civilians -- noncombatants, both locals and foreigners -- caught in the crossfire. Those trying to escape the violence, either by leaving their homes or by leaving the country altogether, have been flung into a vortex of fear, fatigue, flight and death.

Despite Constant Saudi Bombing, Yemen Rebels Advance, Seize Key Town; Ayatollah Trolls US, Saudis on Twitter -- It appears that when the US inadvertantly "misplaced" $500 million of weapons in Yemen, the bulk of which fell right in Houthi rebel hands, it created a very credible adversary... for the US and its Saudi-backed coalition allies. Because despite the bombing campaign by the Saudi-headed coalition, AP reports that the rebels seized a key provincial capital in a heavily Sunni tribal area on Thursday as their patron Iran called the two-week air campaign a "crime" and appealed for peace talks. According to media reports the Houthius overran Ataq, capital of the oil-rich southeastern Shabwa province, after days of airstrikes and clashes with local Sunni tribes. The capture marked the rebels' first significant gain since the Saudi-led bombing began.

Saudi to borrow to finance soaring deficit: report (AFP) - Saudi budget deficit will be more than twice its own forecast, a leading research firm has said, forcing the kingdom into the debt market for the first time in more than a decade. Hit by plunging crude prices, the world s biggest oil exporter will post a deficit of $106 billion, compared with a government projection of $39 billion, Saudi firm Jadwa Research said in a report released late Tuesday. The kingdom that exports 7.0 million barrels per day on average will see oil revenues fall by 35 percent to $171.8 billion in 2015, the quarterly report said. Total revenues are forecast down 33.7 percent at $185 billion, while public spending is expected to remain almost unchanged at $290.9 billion. Jadwa said the government is highly expected to return to the debt market for the first time in around 15 years despite its massive reserves. "The government is now expected to issue debt as part of its deficit financing strategy," it said. Saudi Arabia has massive foreign reserves, which stood at $714 billion at end February, but Jadwa said borrowing would eliminate the need for the reserves to be the sole source of deficit financing.

Energy pressure is America’s weapon of choice - oil expert — War always happens for a reason. In the last decades, war has seen violence breaking out over resources, with control over oil being the most contested and cherished goal. Even terrorists join the hunt for black gold. But will that change? How much geopolitical power does oil have? We ask an expert these questions - author of numerous books on energy, Professor Michael Klare is on Sophie&Co today. (interview & transcript.)

Iran Enters Hornets Nest: Parks Two Warships Off Yemen Coast Immediately Next To Two US Aircraft Carriers -- The 34th fleet of the Iranian Navy has left for the Gulf of Aden and Bab al-Mandab Strait in line with the country’s policy of safeguarding naval routes for vessels in the region. The flotilla, which comprises the Bushehr logistic vessel and Alborz destroyer, left Iran’s southern port city of Bandar Abbas on Wednesday, Navy Commander Rear Admiral Habibollah Sayyari said on the sidelines of a ceremony to deploy the fleet.  And now the punchline: the two Iran warships will now be located in the immediate vicinity of not only two US aircraft carriers, CVN-71 Teddy Roosevelt and CVN-70 Vinson, but well as the big-deck amphibious warship Iwo Jima which as reported before is providing marine support should the situation demand it.

Oil prices could be $5-$15 a barrel lower in 2016 if Iran sanctions lifted: EIA  – World oil prices could be $5 to $15 a barrel lower than forecast next year if oil-related sanctions against Iran are lifted, the U.S. government’s energy agency said on Tuesday. In its monthly report, the Energy Information Administration said U.S. oil production growth was slowing even more quickly than it expected a month ago, while demand was higher than earlier forecast. But the agency left its price forecasts unchanged, putting Brent at $59 this year and $75 a barrel next year – with downside risks from Iran’s return. “A lifting of sanctions against Iran should a comprehensive nuclear agreement be concluded could significantly change the forecast for oil supply, demand, and prices,” EIA Administrator Adam Sieminski said in a statement. The agency said that Iran is believed to hold at least 30 million barrels of crude in storage, and that the nation could ramp up crude production by at least 700,000 barrels per day (bpd) by the end of 2016. Analysts have also said production would likely recover next year if sanctions are eased. The comments come on the heels of a framework accord last week to curb Iran’s nuclear program, giving negotiators until June 30 to hammer out a comprehensive agreement. Upon verifying compliance, Iran – once the world’s fifth-largest oil producer – could put supply back into the market. Meanwhile, the EIA cut its U.S. crude oil production growth forecast for 2015 to 550,000 bpd, versus 700,000 bpd in its March forecast, while the 2016 growth forecast was lowered to 80,000 bpd from 140,000 bpd a month ago. “U.S. crude oil production is expected to peak this year in the second quarter and then decline in the third quarter, before picking up again toward the end of this year as projected higher crude prices in the second half of 2015 make drilling more profitable,”

Mapping Iran's Nuclear Program And Oil Facilities - Iran Nuclear "Deal" Post-Mortem, with data courtesy of "The Geopolitics of Iran: Holding the Center of a Mountain Fortress"

On Iran, the Least-Worst Option - The preliminary nuclear deal announced on Thursday in Switzerland means that Obama may very well succeed in keeping his promise to Israel. Iran, it appears, will not gain possession of a nuclear weapon while he is president. If Iran adheres to the terms of the deal, as best as we understand those sketchy terms today, it will not have a nuclear weapon during the terms of the next one or two U.S. presidents. However, this deal, should it actually be ratified in June, formalizes Iran’s status as an eventual nuclear-threshold state by allowing it to maintain a vast nuclear infrastructure. This was not part of the international community’s original plan, and it is a cause for worry. I’ve been reading many of the early analyses of this deal, and I agree with the commentators who argue that the United States and its partners in the "P5+1" group of world powers actually succeeded in extracting significant concessions from the Iranians. Opponents of the Iranian nuclear program should be pleased to see in the preliminary deal limitations on the number of centrifuges Iran is allowed to operate; they should be pleased to learn about the level and intensity of outside inspection of Iran’s nuclear facilities; they should also be provisionally pleased to learn, contra statements from the Iranian foreign minister, that many sanctions will be lifted only in response to specific Iranian actions.  But the truth remains that this provisional agreement can be considered a success mainly within a specific reality created by Obama and his European partners. This reality is one in which the goal was to moderate Iran’s behavior on a single issue, and not to remove the regime responsible for this behavior; this reality was one in which the Western powers preemptively agreed that Iran possessed an inherent “right” to enrich uranium on its soil, and possessed a right to maintain a nuclear infrastructure; this reality was one in which sanctions may not have been given sufficient time to work. I was struck, early in this process, by the first American concession to the Iranians. This came when Wendy Sherman, the chief American negotiator, labeled as “maximalist” U.N. Security Council demands that Iran cease enrichment activities. Once the U.S. signaled to the Iranians that they did not have to take the Security Council seriously, the die was cast.

The Iran nuclear deal, translated into plain English - Iran will be allowed about 6,000 centrifuges: 5,000 at its Natanz facility and 1,000 at Fordow. It can only use first-generation IR-1 centrifuges, and has to give up other models. Centrifuges are pieces of equipment you use to enrich uranium, a natural ore, into nuclear fuel. If you enrich uranium long enough in centrifuges, it can be used to make a nuclear bomb. Iran currently has about 20,000 centrifuges, so it will have to give most of them up. It will also be allowed to use only its very old, first-generation centrifuges.  This means Iran will have a much smaller nuclear program, in terms of its ability to create nuclear fuel or, potentially, nuclear material for a bomb. It will also be restricted to its oldest, slowest, least capable centrifuges.  Iran will be allowed to turn raw uranium into the kind of fuel that can be used for a nuclear power plant. But nothing more. Iran will be required to reduce its stockpile of enriched uranium from 10,000 kilograms to 300 kilograms. Iran has to give up a stunning 97 percent of its nuclear stockpile. The US, Europe, and UN Security Council will remove their sanctions after Iran fulfills its end of the deal. But it is still very unclear how exactly that gets determined, when that happens, or whether it means the sanctions are lifted all at once, or over time. If Iran breaks its end, the sanctions will all come back (in theory).  Sanctions relief was a huge fight: Iran wanted all the sanctions off right away, the US and others wanted to remove them gradually. Some are reading this as Iran getting its demand, but it's just not clear at this point. It is true that once European or United Nations sanctions come off, it will be difficult to re-impose them — even if Iran does cheat.

OPEC's no-cut strategy is not working, Iran says - – OPEC’s strategy of holding output steady is not working and the group’s members should discuss production levels before its next meeting in June, Iran’s oil minister said, a sign of the pain lower prices are causing OPEC’s less wealthy producers. However, Bijan Zanganeh also told Reuters it was up to other members of the Organization of Petroleum Exporting Countries (OPEC) to make way for any extra Iranian crude that reaches world markets if Western sanctions on Tehran are lifted. Oil prices have halved from $115 a barrel in June last year, in a drop that deepened after OPEC refused to cut output and defend market share. Top exporter Saudi Arabia was the driving force behind the policy. “It seems [OPEC’s strategy of not cutting output] does not work well, because prices are coming down,” Zanganeh told Reuters on Thursday during a visit to Beijing. “We haven’t witnessed stable situations on the market.” Iran was among the OPEC members which wanted an output cut at OPEC’s last meeting, in November. But the Gulf OPEC members, who account for more than half of the group’s output, refused to cut without the participation of non-OPEC producers.

OilPrice Intelligence Report: Iranian Media Calls For Saudi Oil Boycott -- Despite the price gains, things are not looking good for the crude-by-rail industry. A series of oil train derailments and explosions struck the rail industry earlier this year. But now fresh data from the Association of American Railroads strikes another blow: the fall in oil prices is starting to cut into the volume of shipments on the railways. As drilling activity falls in places like North Dakota, which accounts for the lion’s share of oil train shipments, fewer and fewer trains are making their trips across the country. Rail shipments fell by 7% in March from a year earlier.   Piling on the pressure, the National Transportation Safety Board published the results of an investigation into train derailments on April 6. The NTSB issued four recommendations to upgrade rail safety including a swift transition towards reinforced railcars. “We can’t wait a decade for safer rail cars,” NTSB Chairman Christopher A. Hart said in a statement. “Crude oil rail traffic is increasing exponentially.” He called on the industry to move quicker. Crucially he also singled out the CPC-1232 design as flawed, which was previously thought to be an upgrade over the flimsier DOT-111. The NTSB called for upgrades to take place over a five-year period, an “aggressive schedule,” as the agency put it.Meanwhile, although the U.S. and Iran are beginning to thaw relations, Iran’s relationship with Saudi Arabia is descending to a point of crisis. Already rivals in the Middle East, the conflict in Yemen is pushing the two sides into outright hostilities. Iran and Saudi Arabia are fighting a proxy war over control of Yemen, but now Iran is stepping up the pressure. The Iranian media is calling for an international boycott of Saudi oil due to the Arab kingdom’s attack on Houthi rebels in Yemen. As the world’s most important oil producer, there is little chance that any country other than Iran pursues such a course of action, but the call highlights how bad things have become between the two OPEC members.

US military aid will further strangle Egypt’s democracy - On April 1, US President Barack Obama restored US military aid to Egypt. It is a stunning volte-face for the United States government, which rightly withdrew military assistance following the overthrow of Egypt's first democratically elected president, Mohamed Morsi, in 2013.  As the tap of military aid flows once more, $1.3bn is now available to the regime of Abdel Fattah el-Sisi. New F-16 fighter jets, Abrams tanks and harpoon missiles will soon be at the disposal of Egypt's armed forces. The country will be the second largest recipient of foreign military financing from the US, after Israel.  Nothing could better symbolise the restoration of the status quo of US-Egyptian relations going back decades - where the real politik of supporting Middle Eastern strongmen that serve the interests of the United States rode roughshod over democracy and human rights. In fact, last week's announcement reflects the gradual erosion of the dreams and ideals of the Arab Spring, not only by the return of dictatorial strongmen and vested interests, but also the willing cooperation of western nations. Now for the West, it seems, imminent security concerns - from ISIL to a failing Yemen - take priority over freedom and democracy.

China’s Already Preparing for a Post-Sanctions Iran - Negotiations over Iran’s nuclear program made a breakthrough last week, with the P5+1 powers (China, France, Germany, Russia, the U.K., and the U.S.) and Iran reaching a framework agreement on an eventual deal. The framework outlines the basic points of a deal – including limits on Iran’s ability to enrich uranium in return for the lifting of nuclear-related sanctions. Now negotiators will go to work on reaching a final, detailed agreement in advance of the June 30 deadline. Iran is eager to rid itself of international economic and financial sanctions that have crippled its economy in recent years. Two tweets from Iranian Foreign Minister Javad Zarif showed how much of an emphasis Tehran will place on getting the maximum number of sanctions removed as quickly as possible. Meanwhile, other negotiating powers, particularly the U.S., are keen to see Iran’s compliance with the deal verified before any sanctions are lifted.Iran, however, is not waiting for verification to seek expanded economic engagements – in fact, it’s not even waiting until the final deal is unveiled in late June. According to Reuters, Iran has already sent a group of Iranian oil officials to China seeking increased investments and oil exports. Iran’s oil minister, Bijan Zanganeh, is also expected to visit China in the near future. Iran hopes to double its oil exports in the first two months after sanctions are lifted; China will be a crucial part of making that dream a reality. Prior to 2012, when sanctions took hold, Iran was the third-largest oil exporter to China. By 2013, Iran had dropped to sixth place, falling behind Oman, Russia, and Iraq. Two Chinese state-owned oil companies, China National Petroleum Company (CNPC) and Sinopec, had already promised billions to Iranian oil projects before sanctions were laid down. Sinopec, for instance, has a $2 billion deal to develop an oil field in Khuzestan, while CNPC has a $2 billion contract for a field in North Azadegan.

PetroChina overtakes ExxonMobil to become world’s biggest energy company — The capitalization of China’s biggest oil producer PetroChina reached $352.8 billion during Thursday trading in Shanghai, surpassing ExxonMobil as the world’s most valuable energy company for the first time since 2010. The market cap of America’s Exxon reached $352.6 billion in Shanghai Thursday trading, Bloomberg reports. PetroChina’s market cap has gone up 13.81 percent in the last 12 months while Exxon’s market value has fallen by 14 percent, following the slump in oil prices. Moreover, the Chinese company’s Class-A shares have gained 61 percent since last April. The last time PetroChina was more valuable than Exxon was at the close of trading on June 25, 2010, according to Bloomberg. “PetroChina has multiple positives at the moment: it’s got a reform story, it’s also listed in Hong Kong, and China has more freedom for mainland fund managers in the works,” said Mark Matthews head of Asia research at Bank Julius Baer & Co. in Singapore. “China is also planning to transfer stakes in state-owned enterprises away from their regulator, which will on the whole be positive for SOEs,” he added.

China to build $2bn Iran-Pakistan pipeline - media — China will reportedly finance the so-called ‘Peace Pipeline’ natural gas pipeline from Iran, home to the world’s second largest reserves, to energy-deprived Pakistan. The project was delayed due to US dissent. The final deal is to be signed during the long-sought visit of Chinese President Xi Jinping to Islamabad in April, the Wall Street Journal reported on Thursday. “We’re building it. The process has started,” Pakistani Petroleum Minister Shahid Khaqan Abbasi told the WSJ. First proposed over 20 years ago, the 1045 mile (1682km) pipeline will transfer gas from Iran’s south to the Pakistani cities of Gwadar and Nawabshah. Karachi, the country’s biggest city of 27.3 million, will also be connected via local energy distribution systems already in place. Iran has said the 560-mile portion that runs to the Pakistan border is already complete, which only leaves $2 billion needed to build the Pakistani stretch. The project could cost up to $2 billion if a Liquefied Natural Gas port is constructed at Gwadar. Otherwise, the project to complete the Pakistani pipeline will cost between $1.5 billion to $1.8 billion, the WSJ said. Pakistan is in negotiations with China Petroleum Pipeline Bureau, a subsidiary of Chinese energy major China National Petroleum Corporation, to finance 85 percent of the project. Pakistan will pay the rest.

Alibaba’s Fake Shoppers Hard to Beat, US Academics Find - WSJ - New research about fake transactions on Alibaba Group’s shopping platforms underscores the challenge the e-commerce giant faces in meeting demands from China’s government to rein in the practice. The research, conducted by four academics in the U.S., deals with a phenomenon in China known as “brushing,” or the faking of orders and customer reviews by vendors to bolster their online visibility. By paying people to pretend to be customers. vendors pad their sales figures and, in theory, boost their standing on online marketplaces, which often give more prominence to high-volume sellers with good track records. The Ministry of Commerce said Tuesday this practice needs to be curbed and says platform operators such as Alibaba face stiff penalties for failing to provide relevant information about it to regulators. The scale of the task is revealed in a paper by the academics slated to be published online by the International World Wide Web Conference Committee in the next month. The research team, led by Haitao Xu of the College of William and Mary and Haining Wang of the University of Delaware, monitored five platforms where merchants recruit people to do brushing, and found about 11,000 sellers from Taobao, Alibaba’s biggest shopping sites, during the two-month study. The researchers were able to identify more than 4,000 sellers’ actual Taobao IDs and monitor how their store ratings improved. Taobao sellers who faked transactions could generally boost their online stores’ rankings at least 10 times faster than others, the academics found. One provider of brushing services was able to boost a seller’s ratings within a day to such a degree that the researchers said it would take a seller playing by the rules at least a year to accomplish.

China Steps Back - Beijing’s plans for a new multilateral Asian Infrastructure Investment Bank have put Washington on edge. More than 40 countries, including major United States allies in Europe, have signed up to join it despite the Obama administration’s objections and warnings.In fact, the United States government has nothing to fear from the A.I.I.B.; its opposition is misguided. The bank’s creation will not enhance China’s global power at the expense of the United States. If anything, Beijing’s attempt to go multilateral is a step backward: It’s a concession that China’s established practice of promoting bilateral initiatives in the developing world has backfired.Once more, anxiety about China supplanting the United States as the world’s leading power is undermining cool-headed analysis. When China set up its own sovereign wealth fund in 2007, many feared it would take control of strategic resources, acquire sensitive technology and disrupt global financial markets. But the China Investment Corporation, which controlled $575 billion in 2014, has been struggling with losses, partly because of mismanagement, according to China’s National Audit Office.In 2008, just as the United States financial system was crashing, China surpassed Japan as the biggest holder of U.S. Treasury securities, setting off predictions that Beijing might one day dump them to force the United States into economic and political submission. Instead, China’s holdings of U.S. Treasuries have more than doubled, from about $493 billion in early 2008 to more than $1.2 trillion at the beginning of this year.Again and again, the alarmists have been disproved.

China inflation misses Beijing target - - Producer prices deflated for a 37th consecutive month in March, falling 4.6 per cent, versus a 4.8 per cent fall in February. That is the longest period of factory gate deflation in China on record. “The current bout of goods deflation in China and South Korea is the longest in postwar East Asia outside of Japan in the 1990s,” said Rodney Jones, Beijing-based principal of Wigram Capital. Producer prices in South Korea have also fallen for 39 consecutive months. The producer price index, often regarded as a leading indicator for consumer prices, has been mired in deflation thanks to sliding domestic demand and chronic overcapacity in many sectors.

Pessimistic Views of China’s Economy are Unconvincing - Jim O’Neill - In 2003, along with some Goldman Sachs colleagues, we first projected what the world might look like by 2050 if the BRIC and other large emerging economies reached their potential, a world that would be dramatically different than the one prevailing at the time.. What is especially noteworthy over the subsequent 13 and ½ years is just how dominant China has become within the BRIC group in terms of economic size, as well of course, it’s increasing importance to the world economy. At the end of 2014, China’s economy surpassed $10 trillion in current US$ and according to the World Bank, in purchasing power parity terms (PPP), actually was larger than the US. At $10 trillion, China is around one and a half times the size of the other three BRIC countries put together. It is also bigger than the combined size of France, Germany and Italy. In terms of size and growth, perhaps it is especially important to point out that not only did China grow at lot more than expected in the last decade, which was also true for the other three BRIC countries, but so far, in this decade, it is the only one that has–so far–surpassed my expectations. All of this means that China is still on track to achieve the 2027 dateline for when it could surpass the US in current US$ terms, and also, due to China’s dominance , the BRIC countries collectively could become as large as the G7 countries collectively. Of course, 12 years is a very long time and a lot of things could develop differently, but if China carries on the way it has been developing, it will occur. Importantly in this regard, I would like to emphasise that I assumed China would slow in terms of its real GDP growth rate, so unless it slows dramatically, this slowdown is consistent with China becoming the world’s largest economy. I will turn to the critical issues facing China below.

World Bank chief expresses strong support for AIIB: World Bank Group President Jim Yong Kim expressed strong support Tuesday for a Chinese-led regional development bank, saying he welcomes any new players in the fight against poverty. China has launched the Asian Infrastructure Investment Bank (AIIB) in a move seen as designed to bolster its economic clout by creating a counterbalance to the Asia Development Bank, led by the United States. The U.S. has been negative about the AIIB, raising questions about whether the envisioned lender will have the necessary transparency and high standards of governance, though it said it agrees with the need to enhance infrastructure investment around the world. Still, Britain, France, South Korea and other nations have recently joined the bank. "My goodness, we have so much need for infrastructure and we welcome any new players. And the Chinese government has been very clear to us that this is not competition for us, but they have been very, very clear they want to cooperate and we've already been cooperating," Kim said during discussions at the Center for Strategic and International Studies. Kim also said there could be many joint projects between the World Bank and the AIIB. "The fundamental issue for us is your enemy cannot be other institutions. Your enemy has to be poverty. And if your enemy is poverty, then the natural thing to do is welcome any new players that are interested in developing the kind of infrastructure that will end poverty," he said. In a separate conference call with reporters, Kim also said he is ready to work with the AIIB.

Turkey joins AIIB as founding member - (Xinhua) -- Turkey has been approved as a prospective founding member of the Asian Infrastructure Investment Bank (AIIB), the Ministry of Finance said on Friday. This brings the number of prospective founders to 38, the ministry said.Membership will be finalized on April 15. Founding members have the right to make rules for the bank. Countries that applied to join after March 31 will be ordinary members with voting rights only, and less say in the rule-making process. The AIIB will provide financing for roads, railways, airports and other infrastructure projects in Asia. It is expected to be established by the end of this year.

Israel Joins Chinese Bank, Defies U.S.  --- Updating the post I wrote a couple of weeks ago on how the U.S. failed to persuade some of its closest allies not to join the new Chinese-backed Asian Infrastructure Investment Bank (AIIB), it’s worth noting that Israel has also abandoned Washington by signing up for membership. The Israeli foreign ministry announced on March 31–the deadline for applying to join the new bank–that Prime Minister Benjamin Netanyahu had signed “a letter of application to join the [AIIB], a result of the initiative of the President of China.” The process of joining the bank was led by the Ministry of Foreign Affairs in recognition of the importance of joining major Asian organizations on the continent. Israel’s membership in the Bank will open opportunities for integration of Israeli companies in various infrastructure projects, which will be financed by the bank. …It should be noted that the establishment of the bank is a Chinese diplomatic achievement. China initially intended that 35 countries should join, and to date 50 countries have joined. The establishment of AIIB is one of the most important initiatives in terms of Chinese foreign policy and in particular for President Xi Jinping, as this is his personal initiative. Needless to say, Israel’s decision, which is perfectly defensible on the grounds of national interest, constitutes another slap at the Obama administration, which in the view of many experts stupidly lobbied U.S. allies against membership. (Of Washington’s closest allies, only Canada and Japan did not apply.) Israel has substantial commercial interests in China, particularly in the hi-tech and defense sectors. In fact, the Pentagon has long complained about Israeli transfers of sensitive U.S. military technology to China.

Greater Tumen Initiative: Korea, China, Russia, Mongolia to Create Economic Cooperation Organization in Northeast Asia - Korea, China, Russia, and Mongolia have agreed to form an international organization for economic cooperation within the region of Northeast Asia. Accordingly, at the next summit to be held in Korea, the international organization establishment agreement will be signed. The Ministry of Strategy and Finance announced on Sept. 18 that participating countries of the Greater Tumen Initiative (GTI) agreed to transform GTI into an international organization to initiate economic cooperation in Northeast Asia by 2016. This summit was held in Yanji, China on Sept. 17. These four countries agreed to develop transportation in land and sea routes, facilitate the trading among Northeast Asian countries, solve the power transmission problems and analyze the business feasibility of coal extracted synthetic natural gas supply through a joint statement. On this day, an inaugural assembly of ‘Northeast Asian Export-Import Banks Council’ in which export-import banks of four countries participated was held to adopt a basic agreement on cooperation among the banks for joint project explorations and supportive loans.

China, South Africa sign currency swap deal - (Xinhua) -- China's central bank signed a currency swap agreement valued at 30 billion yuan (4.9 billion U.S. dollars) with the South African central bank on Friday. The agreement lasts for three years, and can be extended upon agreement by both sides, said a spokesman for the People's Bank of China (PBOC). The deal aims to facilitate bilateral trade and investment as well as maintain regional financial stability. The PBOC also signed swap agreements with Armenia and the Republic of Suriname in March. To promote international use of the yuan, China has signed currency swap agreements with more than 20 countries and regions since the onset of the global financial crisis in late 2008.

Singapore central bank may ease policy further to counter slowing growth (Reuters) - Singapore's central bank could loosen monetary policy for a second time this year on Tuesday, but analysts are divided over the magnitude of any easing as authorities contend with slowing growth, a pick up in core inflation and risks of fund outflows. It's a delicate balancing act for the Monetary Authority of Singapore (MAS) when it meets for its bi-annual review, with the start of the U.S. Federal Reserve's tightening cycle expected later this year adding another layer of uncertainty. On the whole, given slowing growth and benign headline inflation, a further easing in policy is seen as the most likely outcome, according to a majority of 25 economists and currency analysts polled by Reuters. Singapore's central bank targets the exchange rate for policy settings instead of interest rates since trade flows dwarf the tiny city-state's economy. It lets the Singapore dollar rise or fall against the currencies of its main trading partners within a secret trading band based on its nominal effective exchange rate (NEER). Twelve of the 25 economists polled expect the MAS to lower the mid-point of its currency band next week for the first time since a similar move in April 2009. Of the remaining 13, six see a widening of the Singapore dollar's policy band as their base scenario.

Surprise Winter Slowdown Raises New Concerns for Bank of Japan - For months, Bank of Japan officials have downplayed the significance of the sharp drop in the consumer price index. They’ve insisted it’s the temporary result of the plunge in oil prices, and that their scenario remains intact for a sharp CPI rebound later this year. Indeed, they’ve said cheaper oil would even help them hit their 2% inflation target by next spring, by putting more money in company and consumer coffers, and spurring more spending and growth. Yet there’s been disturbingly little evidence so far that the oil windfall is sparking fresh economic activity. In fact, the weak inflation data — falling to 0% in February and possibly returning to deflation territory this spring — may result as much from weaker-than-expected growth, and the re-opening of the deflationary output gap, as from oil. In the run-up to this week’s monetary policy committee meeting, a string of below-forecast indicators has prompted private economists to yet again cut their projections for Japan’s economic growth. One respected think tank has raised the possibility output may have fallen again in the first quarter, following one period of tepid growth at the end of 2014, and two negative quarters mid-year. The BOJ’s own quarterly tankan survey of business sentiment, released April 1, also came in a touch below forecasts, suggesting the sluggishness may be continuing into the spring. The persistent pessimism hanging over the Japanese economy is perplexing, given all the factors that should be giving it a lift about now.

Betting on India’s economy -- With China slowing, Brazil stagnating, and Russia tanking, India has once again emerged as a bright economic spot in the developing world. A business-friendly new Indian government, a windfall from lower global oil prices, and robust new growth figures have all contributed to a sense of optimism about Asia’s third-largest economy. Albeit aided by a change in how it measures GDP, India officially grew faster than China in the final quarter of last year. Finance minister Arun Jaitley predicts that next year the Indian economy will expand by more than 8 percent. Washington has several reasons to seek warmer ties with New Delhi. Though both countries take pains to deny that their partnership is aimed at neutralizing China, it’s hardly a secret that they share concerns about Beijing’s rising clout in the region. Wedged beside Pakistan and Afghanistan, India is also an oasis of relative stability in a region roiled by radical Islam. As a model for Asia’s smaller countries to emulate, India — democratic and pluralistic, with a large English-speaking middle class — is naturally appealing to Americans.

Top 5 Reasons To Stay The $#%@ Away From Pakistan - #5: Pakistan is the World’s most dangerous country.  You are 50 times more likely to be murdered in St. Louis than killed in a terrorist attack in Pakistan.   You are 10 times more likely to be killed in a car accident in the US than killed in a terrorist attack in Pakistan.  #4: Pakistan is small market with little purchasing power ■ 190 Million People ○ World’s 6th most populous country ■ (PPP) of $835 Billion in 2013 ○ World’s 26th largest GDP ○ Higher than Netherlands, Malaysia and UAE ■ 54% of Population is youth ○ Rapidly growing middle class consumers ○ Motorcycle sales increased 4X over last 10 yrs ■ 37M people with GDP per capita > $12,200 ○ Comparable to South Africa and China #3: Pakistani economy is failing ■ Retail Sector is BOOOOMING ○ Clothing, electronics, food, healthcare, FMCG, automotive ○ GDP growth rate does not reflect market ■ Real Estate Prices are doubling ○ 50% to 100% growth quite common in USD terms ○ Still undervalued compared to India ■ KSE World’s 2nd Best Performing stock market in 2013 #2: Pakistan lacks scalable payment mechanisms Rapid emergence of branchless products ○ UBL Omni, EasyPaisa, Mobicash, TimePey ○ Bank Alfalah, JS Bank, Others ■ IBFT Web Banking Huge Success ○ Secure account to account transfer across all banks ○ Online APIs ■ COD Logistics Providers ○ TCS, BlueEx, Leopard ○ Entrepreneurs rushing to fill this space #1: Pakistan is not online 30 Million Internet Users ○ Growing to 65 Million over next 5 years ○ Larger than UK, Australia, South Africa, Saudi Arabia ■ 10 Million 3G Users ○ 15 Million smart phones

Iran Nukes Deal; Pakistan's Yemen Role; MQM vs PTI NA 246 Contest What are the key elements of the framework for Iran nuclear deal with P5+Germany? How's it seen in the United States? What does it do for Iran-Israel rivalry? How will it impact Iran-Arab power equation in the Middle East? What does Saudi Arabia want from Pakistan? What role should Pakistan play in Yemen and the ongoing Iran-Saudi conflict in the region? Should Pakistan send troops to help the Saudis?  Can PTI challenge MQM and win NA-236 by-election for the National Assembly seat vacated by Nabil Gabol in Karachi? ViewPoint from Overseas host Misbah Azam ( discusses these and other questions with Pakistan Television anchor Farrukh K. Pitafi in Islamabad and regular panelists Faraz Darvesh and Riaz Haq( in Silicon Valley.

Indo-Pak Rescue Efforts Amid Yemen Crisis; MQM vs PTI in Karachi NA-246  -- Would humanitarian cooperation in Yemen help improve India-Pakistan bilateral ties?  Is Yemen crisis defusing?  Are hardliners like Iran MP Alireza Zakani adding fuel to the intense fires burning in 4 Middle Eastern countries? What role can Pakistani and Iranian moderates play to reduce growing risks of a broader Shia-Sunni sectarian war in the Muslim world?  Has PTI's NA-246 challenge put MQM on the back-foot in Altaf Husain's stronghold around Azizabad, Liaquatabad, and Karimabad in Karachi? Is it the beginning of the end of MQM dominance in Karachi?  ViewPoint from Overseas host Misbah Azam ( discusses these and other questions with panelists Ali H Cemendtaur, Faraz Darvesh and Riaz Haq ( in Silicon Valley, California, USA.

Do You Have to Choose Growth or Development? -  Lant Pritchett published a piece that asks whether rich countries are in fact good partners for poor countries looking to develop. Pritchett is worried that rich-country development agencies (including the World Bank) have altered their focus from promoting overall economic development, and “defined development down” to be only about alleviating the conditions for the extremely poor – those earning less than $1 per day. ... Pritchett argues that this is to ignore the goals/values/hopes of actual people in those developing countries, who very much would like some material economic growth, please.  I’m very much on Pritchett’s side on this, with a caveat I’ll get to later in the post. Pritchett is arguing, in my mind, for the World Bank to return to thinking about growth economics, or about development in the classic sense. Looking for projects like ports, roads, energy generation, and the like. Scale-intensive activities that need someone to coordinate the investment, and investments that will not take place organically because they are essentially public goods. Acting to alleviate poverty is a noble, useful, moral activity. But you do not get sustained growth as a freebie on top of it. What Pritchett is arguing is that the Bank has presumed that their poverty alleviation efforts will generate growth as a byproduct. They haven’t, and most likely won’t. Now, here is my caveat to supporting Pritchett’s position. Who cares if it is specifically the World Bank that provides that infrastructure investment supporting economic growth? If the aims and goals of the World Bank have changed to poverty alleviation, fine. Let that be their focus, and the business of promoting growth can be left in the hands of other entities.

WSJ Survey: What’s Good for Europe and Japan Is Good for America, Eventually -- Aggressive central-bank stimulus efforts overseas should benefit the U.S. economy in the long run, according to most economists surveyed by The Wall Street Journal. Asked about central-bank easing in Europe and Japan, 69% agreed that “efforts to spur growth in those key economies are vital for long-term U.S. growth,” versus 9% who said that “their competitive devaluation will harm U.S. growth.” The rest, 22%, said the net effects on the U.S. would be minimal. “The U.S. is now more integrated into the global economy than ever before, and that means U.S. business activity cannot be expected to expand indefinitely when other major world economies are chronically depressed,” said Bernard Baumohl, chief global economist at the Economic Outlook Group LLC. The survey was conducted Friday through Tuesday; 55 business and academic economists responded to the question.  While the Federal Reserve debates when to raise short-term U.S. interest rates, many foreign central banks are easing monetary policy to stimulate their sluggish economies and spur inflation higher. The Bank of Japan last fall ramped up its ongoing stimulus efforts. The European Central Bank in March launched a big bond-buying program.

Free Trade Agreements for Indonesia? - One might argue that regional integration can get in the way of international integration. However, no one can debate that if the member countries are geographically proximate and natural trading partners, then a union would be trade creating. Indonesia is one country that has been quite active in concluding free trade agreements (FTAs). By July 2012, Indonesia had eight FTAs in effect, six regional and two bilateral (specifically, the ASEAN free trade area, AFTA; ASEAN-Australia and New Zealand, ASEAN-China, ASEAN-India, ASEAN-Japan and ASEAN-Korea FTAs, Indonesia-Japan EPA and Indonesia-Pakistan FTA). These agreements mean that Indonesia has FTAs with trading partners that account for of 67 percent of its total trade. For context, Chile, Peru, and Mexico have FTA coverage ratios of more than 80 percent, while Canada, Singapore and New Zealand are at more than 50 percent.  Asian economies in recent years have been driven by China’s impressive growth, especially since its ascension to the World Trade Organization in December 2001, and by Japan’s focus on Asia. Still, a number of countries with relatively low trade integration question their positions in the Asian factory and the benefits of FTAs for their economies. And it is true that the use of existing ASEAN FTAs has been limited, and predominately by large firms. An economy with relatively low trade integration like Indonesia may only enjoy a modest gain from free trade agreements.

Medvedev: Vietnam close to trade deal with Russian-led economic union (AP) — Russia’s Prime Minister Dmitry Medvedev says Vietnam is close to agreeing a free trade deal with the Russian-led Eurasian Economic Union. He predicted Monday that Russia’s annual trade with Vietnam could increase by fourfold to $10 billion over the next five years. Medvedev is on a 2-day official visit to Vietnam and held talks with his Vietnamese counterpart Nguyen Tan Dung. Medvedev said Monday that Communist Party-ruled Vietnam is close to a trade deal with the EEU, an economic community which also includes Belarus and Kazakhstan. Two-way trade between Vietnam and Russia was $2.5 billion last year.

Russian PM offers Thailand free trade zone with Eurasian Economic Union —Russian Prime Minister Dmitry Medvedev has suggested Thailand considers creating a free trade zone with the Eurasian Economic Union.  Medvedev said a free trade zone could be created in a similar way to the agreement with Vietnam. “On the one hand, it’s the Eurasian Economic Union, which consists of five countries or 180 million people. Entering the territory of one country, you get to all the five countries at once,” he said Wednesday in an interview to Nation media group during his visit to Thailand.  Medvedev says this will strengthen relations and create deeper cooperation.  "Colleagues should think, as you have advanced relations in ASEAN, but maybe you are also interested in this. We are ready to discuss it [free trade zone.]," he said adding that it depends on Thailand whether the agreement on a free trade zone becomes the next big step in the relations between the two countries.  According to Medvedev it opens the door to the possibility of joint cooperation in the advanced development of Russia’s Far East.  “We have created a legal structure which is called the territory of advanced development. It is, in fact, a preferential zone with special taxation, simplified tax regime, simplified cession of land - perhaps it will also be interesting to our Thai partners," he said.

Waving Cash, Putin Sows E.U. Divisions in an Effort to Break Sanctions - — When Cyprus seized hundreds of millions of dollars from bank depositors, many of them Russians, as part of an internationally brokered deal two years ago to rescue its collapsing financial system, the Russian leader, Vladimir V. Putin, denounced the move as “dangerous” and “unfair,” warning of a sharp chill in relations.But Mr. Putin was all smiles recently when he received Cyprus’s president, Nicos Anastasiades, in Moscow. He hailed relations with the Mediterranean nation as “always being truly friendly and mutually beneficial” and agreed to extend — on greatly improved terms for Cyprus — a $2.5 billion Russian loan. The shift from fury to declarations of eternal friendship displayed Mr. Putin’s well-known flair for tactical back flips. But it also showed his unbending determination to break out of sanctions imposed on Russia by the United States and the European Union for Moscow’s annexation of Crimea and support for armed rebels in eastern Ukraine. Mr. Putin has methodically targeted, through charm, cash, and the fanning of historical and ideological embers, the European Union’s weakest links in a campaign to assert influence in some of Europe’s most troubled corners. One clear goal is to break fragile Western unity over the conflict in Ukraine. On Wednesday, Greece’s new left-wing prime minister, Alexis Tsipras, will be the next to visit Moscow. Ahead of the trip, Mr. Tsipras declared himself opposed to sanctions on Russia, describing them as a “dead-end policy.” On Sunday, Mr. Putin’s efforts to peel away supporters from the European Union opened a new rift, after the United States ambassador in Prague criticized a decision by the president of the Czech Republic, Milos Zeman, to attend a military parade in Moscow on May 9. And in February, Mr. Putin visited Hungary, the European Union’s autocratic backslider, peddling economic deals.

News Coverage of the Global Economy More Positive in March - How the press covers currency impacts on earnings depends in large part on where the reporting is done, according to data released Thursday, which also showed news coverage of the global economy was more positive in March. The dollar has gained ground against the euro ever since the European Central Bank announced plans in January to ease its monetary policy. Ahead of the important quarterly earnings season, Absolute Strategy Research and The Wall Street Journal looked at how changes in foreign exchange are being viewed by the press in Europe and the U.S.A strong currency tends to dampen revenues earned overseas by multinationals. U.S.-based companies such as Tiffany and Oracle have already warned that the rising dollar will result in slower earnings growth.  On the other side of the pond, French cosmetics maker L’Oréal said in January that the weaker euro should have a positive effect on sales and profits.ASR analysts found that after the ECB’s move, an increasing share of earnings stories that mention currency movements in the U.S. and in the eurozone. So far in 2015, euro depreciation was mentioned in 13% of eurozone earnings stories, up from an 8% share in 2014. In the U.S. the dollar’s rise was mentioned in 7% of earnings stories, up from 4% in 2014.

Global growth report card: world slowdown causes concern - Last month, the global report card concluded that world economic activity was expanding at a roughly constant growth rate, with a slowdown in the US and China being offset by faster growth in the eurozone and Japan. In March, these broad trends continued, but the decline in the US growth rate became more pronounced, while Japan also slowed sharply. Chinese activity growth has been stable this month. Overall, the global growth proxy that we use for “flash” monthly estimates (ie the advanced economies plus China) dropped a little in March, causing some concern that the downward momentum in the US may be beginning to dominate the picture.  However, there is much brighter news from the eurozone, where the peripheral economies (notably Spain and, now, Italy, are reporting much firmer growth rates. Furthermore, the UK is still doing very well, and Sweden is accelerating markedly. France is an important exception to this general rule of improving European growth trends. The main points of note from our global “nowcasts” this month are as follows:

  • 1. Growth in the world economy slowed down slightly during March. Our latest estimate for our global proxy shown in the graph on the right (for the major advanced economies plus China) suggests that the growth rate slowed to an annualised rate of 3.6 per cent in early April from 3.8 per cent a month earlier.
  • 2. The main reason for the global slowdown in March is the further significant drop in the rate of expansion in US activity.
  • 3. In sharp contrast to the slowdown elsewhere in the world, underlying growth in activity in the eurozone has continued to strengthen in the past month, reaching 1.7 per cent from 1.3 per cent in February.
  • 4. Growth in other advanced European economies has generally remained fairly healthy in the past month.
  • 5. Activity in Asia, like in North America, slowed markedly last month. Chinese activity growth ended the month roughly where it started, at 6.8 per cent.

US warns of ‘increasingly unbalanced’ global economy -- The US Treasury has stepped up calls for big economies, including the euro area and Japan, to boost demand as it warned the global economy was becoming “increasingly unbalanced”. In a semi-annual report to Congress, the Treasury urged euro area governments and Tokyo not to rely solely on monetary policy to lift growth, while pressing South Korea to reduce interventions in currency markets and let the won rise. The Treasury said the US recovery remained “intact” even after soft growth during the first quarter of 2015, while describing overseas developments as “disappointing”. US multinationals and exporters have in recent months complained about the impact of the higher dollar on overseas sales, as well as soft demand in other important markets. Minutes from the Federal Reserve’s latest policy meeting in March noted that weak activity overseas and the rise in the dollar would “restrain US net exports for some time”. In its report the US Treasury said some countries were putting too much weight on central bank stimulus to boost their economies, and that they should instead use fiscal stimulus and other reforms to lift their performance. It name-checked Germany, which is running a current account surplus of 7.8 per cent of GDP, as it called on the eurozone to take “all necessary steps” to foster domestic demand. In the face of disinflation, the European Central Bank had taken “forceful steps”, the report said, responding to the inception of quantitative easing by president Mario Draghi earlier this year. However it insisted that the euro area should do more to contribute to global demand by pulling other levers. The report also flagged up weak demand in Japan as a persistent concern, warning on an overreliance on monetary policy and arguing the government had failed to sufficiently offset the impact of last year’s increase in consumption tax.

IMF warns of long period of lower growth - Most of the world’s leading economies should prepare for a prolonged period of lower growth rates, which would make it harder for governments and companies to bring down their debt levels, the International Monetary Fund has warned. The warning will reignite fears that the world economy is facing a prolonged period of low growth, which some economists have labelled “secular stagnation”. The findings, included in one of the analytical chapters of the IMF’s twice-yearly World Economic Outlook, mean that living standards — particularly in the developing world — could grow more slowly than they did before 2008. They also show that the global financial crisis was worse than previous episodes of turmoil and could have permanently lowered the rate at which economies can expand, rather than only having a one-off effect. The IMF says that the slowdown in the growth of potential output — or the level of output consistent with stable inflation — has roots going back beyond the 2008 slump. These include an ageing population and a slowdown in the rate of productivity growth in emerging markets. China, in particular, could see a sharp contraction in the growth of potential output, as it tries to rebalance its economy away from investment and towards consumption. Growth in potential output in the rich world will be 1.6 per cent a year between 2015 and 2020, the IMF forecasts. This is marginally higher than the rate of expansion in the past seven years, but significantly lower than growth rates before the slump, when potential output expanded at 2.25 per cent a year.

IMF Warns (Again) of Growing Shadow-Banking Risks - Fearful that turmoil is brewing in opaque areas of the global financial system, the International Monetary Fund is renewing its call for greater oversight of the so-called shadow-banking industry. “The evidence calls for a better supervision of institution-level risks,” the fund said Wednesday in a new assessment of the global financial system. “Currently, the oversight of the industry focuses on investor protection and disclosure, and regulators conduct little monitoring in most countries,” the fund said. In the wake of the financial crisis, regulators around the world tightened oversight of the traditional banking sector. That bolstered the safety of one part of the financial sector. But lending–and risks—have since migrated to the shadow-banking industry. The sector, which includes mutual funds, exchange-traded funds, hedge funds and other institutional investors, has ballooned since the financial crisis. It now has over $75 trillion in assets.

IMF seeks stress tests for asset managers - The International Monetary Fund has called for a regulatory crackdown on asset managers, including the introduction of stress tests that would mirror those in place for the banking system. The call, encompassed in one of the analytical chapters of the IMF’s twice-yearly Global Financial Stability Report, will bring under closer scrutiny an industry that has expanded greatly in size and importance since the financial crisis. Fund managers buy and sell securities worth $76tn, 40 per cent more than 10 years ago and an amount equivalent in size to the world economy. BlackRock, the biggest fund manager, handles $4.7tn. The industry has filled a void left by banks, which have withdrawn from several markets because of capital rules that make it more expensive to keep large trading books. In the US, the Volcker rule has made it more difficult for banks to trade on their own account, a practice known as proprietary trading. “The regulators are trying to make the system safer. But the problem is that a lot of the risk is just being moved towards the asset managers from the banks,” said Vincent Vinatier, portfolio manager at Axa Investment Managers. The IMF believes that the risks for global stability associated with the industry are on the rise. This is the result of structural changes in the financial system, as well as of the prolonged period of low interest rates in the world’s major economies, which has sparked a hunt for yield among investors and led funds to load up on assets that are not so easy to sell in times of financial stress.

Brazil's annual inflation climbs above 8 pct in March (Reuters) - Brazil's annual inflation rate climbed above 8 percent in March though at a slower pace than expected, government data showed on Wednesday, keeping pressure on the central bank to raise interest rates further despite a broad economic slowdown. The benchmark IPCA consumer price index rose 1.32 percent in March, statistics agency IBGE said, slightly less than expectations for an increase of 1.39 percent in a Reuters poll but still climbing at its fastest pace since 2003. In the 12 months through March, consumer prices rose 8.13 percent, the highest rate since December 2003 and well above the government's 4.5 percent inflation target. Brazil's inflation rate has soared in 2015, denting President Dilma Rousseff's popularity as she opted to pass higher costs of electricity, gasoline and other regulated prices on to consumers after years of attempts to keep them low. Housing costs rose 5.29 percent in March from February alone, pushed up by a 22-percent increase in electricity rates as a severe drought affecting hydroelectric production heightened risks of energy rationing. Food prices also accelerated their advance in March to 1.17 percent from 0.81 percent in the previous month. The central bank, intent on keeping inflation expectations under control, has raised interest rates since October and is widely expected to keep lifting the key Selic rate in the coming months from the current 12.75 percent, the highest since 2009.

US Starts to Backtrack, Admits Venezuela Not a Threat -- With much of the region's attention focused on the seventh Summit of the Americas starting later this week in Panama, the White House said Tuesday that the United States does not consider Venezuela a threat to its security. Last month, President Barack Obama signed an executive order declaring a national emergency with respect to the South American country, calling it an “extraordinary threat” to U.S. national security and foreign policy. “The United States does not believe that Venezuela poses some threat to our national security,” said senior White House adviser Benjamin J. Rhodes during a press conference about Obama's trip to the Caribbean and Latin America where he will attend the Summit of the Americas. Despite the inflammatory and threatening language in the decree, Rhodes said the language used was “completely pro forma.” However, the White House spokesman did not announce any intention to repeal the decree, which has further soured relations with Caracas and drawn harsh criticism from virtually every country in the region. In response to the decree, Venezuelan President Nicolas Maduro launched a campaign to collect 10 million signatures demanding the declaration be repealed. On Tuesday, the Venezuelan leader announced that more than 9 million signatures had been collected so far. The socialist leader plans to hand the signatures to his U.S. counterpart at the Panama summit, which begins Friday.

Swiss, Mexican Bond Deals Represent Milestones for Debt -- Until Wednesday, no country had ever sold 10-year debt that gives investors a yield of below 0%. And no country had ever issued a 100-year bond denominated in euros. But in the latest stark sign of how easy the era of easy money has become, Switzerland on Wednesday sold 10-year bonds that investors are actually paying to hold, while Mexico lined up a rare transaction to borrow euros it promised to repay a century from now—at a yield of 4.2%  The two extraordinary milestones reflect Europe’s extraordinary environment. The Swiss National Bank, eager to keep its currency from soaring too far above its eurozone neighbors’, has itself shoved interest rates below zero.  The consequence is a strange collection of monetary phenomena: The ECB has begun charging commercial banks to keep money on deposit. Denmark’s central bank has furiously printed kroner to mitigate a flood of capital into the country. Even Spain, which once looked on the cusp of fiscal collapse, is able to sell short-term Treasury bills that give investors back less principal than they started with.  Given that putting cash on deposit costs money, the very modestly negative yield of the new 10-year bond is marginally attractive. A similar story is playing out in the eurozone, where the ECB has set its deposit rate at minus 0.2% and aggressively bought bonds.  Mexico’s interest in selling the bond at 100 years was partly to extend the maturity of its debt stock, but also to expand its presence in the euro bond market, said Alejandro Díaz de León, head of public credit at the Mexican Finance Ministry. “By placing debt at an exceptionally long maturity, it helps to consolidate Mexico as a widely accepted issuer,” he said.

Once Over $12 Trillion, the World’s Currency Reserves Are Now Shrinking - The decade-long surge in foreign-currency reserves held by the world’s central banks is coming to an end. Global reserves declined to $11.6 trillion in March from a record $12.03 trillion in August 2014, halting a five-fold increase that began in 2004, according to data compiled by Bloomberg. While the drop may be overstated because the strengthening dollar reduced the value of other reserve currencies such as the euro, it still underlines a shift after central banks -- with most of them located in developing nations like China and Russia -- added an average $824 billion to reserves each year over the past decade. Beyond being emblematic of the dollar’s return to its role as the world’s undisputed dominant currency, the drop in reserves has several potential implications for global markets. It could make it harder for emerging-market countries to boost their money supply and shore up faltering economic growth; it could add to declines in the euro; and it could damp demand for U.S. Treasury bonds. “It’s a big challenge for emerging markets,”  They “now need more stimulus. The seed has been sowed for future volatility,” he said.  Stripping out the effect from foreign-exchange fluctuations, Credit Suisse Group AG estimates that developing countries, which hold about two-thirds of global reserves, spent a net $54 billion of this stash in the fourth quarter, the most since the global financial crisis in 2008.

Euro and Overuse of the "Currency War" Term -  Currencies...we must always return to talking about currencies. With the euro approaching parity with the US dollar recently, the "currency war" term coined by former Brazilian FinMin Guido Mantega has been resurrected for the umpteenth time. While catchy at first, it has since become somewhat tiresome for me through repetition. Moreover, there is a whole range of considerations to foreign exchange dynamics that a two-word term can possibly  encompass. Among other things that come to mind are the following:
1. Wasn't "beggar-thy-neighbor" more accurate in describing competitive devaluation (if that's really what's happening)?
2. So the US is now complaining about the effects of its economy being on a money-tightening schedule while others do the opposite. Who's to blame--the initiator or the latecomers?
3. How exactly do we know when a country is engaging in "currency war"?
And so on and so forth. Fortunately, Agence France-Presse has a surprisingly nuanced and wide-ranging discussion of the alleged European offshoot of currency war: "The currency weapon is rarely the official objective," said Patrick Jacq, a bonds specialist at BNP Paribas bank. Led by Brazil, developing countries charged that the US QE programme was a first shot in a currency war because their economies suffered as exports slumped thanks to the weak dollar. Those complaints were brushed aside with commitments by the leading economies to "market determined exchange rates".

The Great Oil Price Easing - In the era of inflation targeting, central bankers tell us they are inclined to “look through” developments that threaten to temporarily raise or lower the rate at which consumer prices are changing. Their logic is that monetary policy works with a lag, and that in any case a national central bank can’t affect the global forces that drive energy and food prices higher or lower. For central bankers, it’s the medium term that matters and they respond to more fundamental forces that determine whether the goods and services demanded by households can be supplied without pushing prices sharply higher or lower. But that’s not how the last six months have looked. Figures released by the Organization for Economic Cooperation and Development last week showed that the annual rate of inflation across its 34 members 34 members picked up in February, to a meager 0.6% from 0.5% in January. It had fallen sharply over the previous seven months, due almost entirely to a collapse in oil prices. Across the Group of 20 largest economies, which account for 85% of world output, inflation had also been in a long decline, until it too picked up in February. The response of central bankers to the sharp fall in oil prices was not a measured passivity that showed only concern for the medium term. Instead, central bankers provided a flood of new stimulus on a scale not seen since the months that followed the collapse of Lehman Brothers. The OECD calculates that since December, central banks from countries that account for 48% of global economic output have eased, and that doesn’t include the Bank of Japan, which acted earlier than most in October. That’s not to say central bankers have been wrong to act as they did. In many parts of the world, inflation was already too low even before oil prices began to fall, and a slide into deflation seemed like a very real threat.

Fears early end to eurozone QE could cause second ‘taper tantrum’ - The European Central Bank’s money-printing programme has only been running for one month, but already investors are expressing concern that it might be wound down too early, causing panic in financial markets. Designed to prop up the ailing euro area economy, the European Central Bank’s (ECB) €60bn (£44bn) a month of bond purchases is expected to be continued until the end of September 2016. Minutes of the central bank’s March policy meeting showed that officials “intended” to continue the scheme until this date. But traders are worried about being caught out a second time by the ECB, which notoriously raised its interest rates in 2008 and 2011, exacerbating the eurozone debt crises at the time. Some are worried that the central bank could again remove the much-needed stimulus before its job is done. Dario Perkins, chief European economist at Lombard Street Research, said that the QE scheme had already begun to work through depreciation of the euro and higher corporate earnings. If purchases were to be wound down early, then this “would unravel the corporate earnings story in Europe,” said Mr Perkins. If the scheme ended sooner than expected, it could have knock-on effects for US Treasuries. “That could make emerging markets vulnerable,” Mr Perkins added. Some experts have cautioned that such a move would risk a “taper tantrum” episode for financial markets, similar to the turmoil prompted by the US Federal Reserve when it indicated that it would scale back its own asset purchases in the summer of 2013. The ECB’s previous policy errors were made under the leadership of Jean-Claude Trichet, then president of the central bank. Analysts were more confident about the ability of his successor, Mario Draghi, to handle the central bank’s exit from QE. Mr Perkins said: “The European Central Bank is less likely to repeat its past errors, but there are no guarantees.

Draghi’s Doom Loop(s) – More Than Just the Euthanasia of the Rentiers -- Rob Parenteau - The recently adopted quantitative easing (QE) approach by the ECB, in concert with the negative deposit policy rate (NDPR) introduced last summer, has set off a number of nested disequilibrium dynamics that may unwittingly introduce a material increase in systemic risk for the eurozone, and perhaps beyond.  Keynes anticipated what he termed a “euthanasia of the rentiers”, as he expected active monetary policy would be successful in reducing long-term interest rates, and the share of the population living off of bond coupons would eventually just wither away. By way of contrast, if the following assessment is correct, Draghi may have signed a mutually assisted suicide pact with finanzkapital in the eurozone.   To cut to the chase, the ECB’s QE and NDRP measures may be setting investors up for a discontinuous price event, much like what was experienced in the equity market meltdown back in October 1987. Even if a disruptive yield spike is avoided, or even contained and reversed by ECB heroics, pursuing QE under NYTM market conditions may lead to a significant dampening down of bank and insurance company profitability. In the extreme, the solvency of key eurozone financial institutions could once again come under question. This could further complicate the ECB’s chances of achieving their 2% inflation goal, as it may dampen the bank lending channel as a key transmission mechanism for unconventional monetary policy.  The entire set up, in other words, begins to take on many of the characteristics of Andrew Haldane’s Doom Loops. In this case, however, the ECB may unintentionally be setting off nested Doom Loops that will feed on each other, and thereby magnify systemic risks quicker than investors and policy makers might otherwise imagine possible. Below is a concise sketch of the main elements of the Doom Loop dynamics the ECB may have set in motion.

ECB Hits March Bond Purchase Target - The European Central Bank reached its target of €60 billion in monthly bond purchases under a new stimulus program launched in March, a sign of resolve that the bank will eventually pump more than €1 trillion in freshly created money to stoke the European economy and boost inflation. According to the ECB’s weekly report on its asset purchase program released Tuesday, the bank settled €11.5 billion in public debt purchases last week. For March as a whole, the ECB settled €47.4 billion in government bonds and debt issued by European Union institutions. When purchases of covered bonds and asset-backed securities–under programs launched last year–are included, “the ECB achieved its monthly target of 60 billion in March,” the ECB said in its report. Because government debt purchases only began March 9, hitting the monthly €60 billion milestone was symbolically important to show the ECB’s determination to eventually pump €1.1 trillion into the eurozone economy by September 2016 under the asset purchase programs.

ECB balance sheet rises by 83 billion euros on quarterly revaluation  (Reuters) - The combined balance sheet of the European Central Bank and the euro zone's national central banks expanded by 83.325 billion euros (60.49 billion pounds) to 2.334 trillion euros in the week to April 3, the ECB said on Thursday. The increase was driven by a quarterly upward revaluation of the ECB's assets by nearly 90 billion euros, including a 40.1 billion euro revision in the value of its gold holdings to 383.965 billion euros. The ECB reduced net assets by 6.510 billion euros during the week, as a fall in the liquidity it provided to banks through its main refinancing operation exceeded the sum of assets that it bought under its new quantitative easing programme. The QE asset purchases are part of a broader plan to pump a trillion euros into the economy in order to lift inflation towards its target of just under 2 percent.

Renewed demand for dollar funding in the Eurozone -- In 2011, as the sovereign debt crisis engulfed the Eurozone, the EUR/USD swap basis was deep in the negative territory (see 2011 post). It was caused to a large extent by US money market funds who refused to roll dollar-denominated commercial paper issued by European banks. Just as the Lehman commercial paper exposure turned toxic for money market funds in 2008, so was the Eurozone bank exposure in 2011.  In late 2011, with limited ability to fund dollar assets on their balance sheets and no access to dollar deposits, many Eurozone banks turned to the foreign exchange markets. Given their access to euros (via deposits or loans from the ECB), banks converted euros to dollars and used the basis swap market to hedge their FX exposure. That demand for EUR/USD swaps pushed the basis into negative territory. The ECB's currency swap with the Fed alleviated some of the stress by allowing the ECB to lend dollars directly to the euro area banks.  Now the EUR/USD basis swap has turned negative again and some have suggested that the funding pressure on Eurozone banks is back. But that's not at all the case. The culprit this time around is the areas demand for yield. Eurozone banks can now access euros at negative rates (chart below) and are willing to pay up on the basis swap to obtain dollar funding - in order to access better yielding dollar assets (USD bonds and loans). Moreover, higher-rated US corporations have been actively issuing euro-denominated bonds this year as the demand for quality bonds spikes in response to ECB's QE. These US firms then convert the proceeds from the bond sales to dollars in order to fund US operations. But since they will need to repay euros in the future, they hedge themselves with EUR/USD basis swaps. That puts further downward pressure on the basis.

Germany's trade surplus is a problem - Ben Bernanke - China, which kept its exchange rate undervalued to promote exports, comes in for particular criticism for its large and persistent trade surpluses. However in recent years China has been working to reduce its dependence on exports and its trade surplus has declined accordingly. The distinction of having the largest trade surplus, both in absolute terms and relative to GDP, is shifting to Germany. ... In a slow-growing world that is short aggregate demand, Germany’s trade surplus is a problem. Several other members of the euro zone are in deep recession,... and ... their fiscal situations don’t allow them to raise spending or cut taxes... Despite signs of recovery in the United States, growth is also generally slow outside the euro zone. The fact that Germany is selling so much more than it is buying redirects demand from its neighbors (as well as from other countries around the world), reducing output and employment outside Germany at a time at which monetary policy in many countries is reaching its limits.Persistent imbalances within the euro zone are also unhealthy, as they lead to financial imbalances as well as to unbalanced growth. Systems of fixed exchange rates, like the euro union or the gold standard, have historically suffered from the fact that countries with balance of payments deficits come under severe pressure to adjust, while countries with surpluses face no corresponding pressure. Germany has little control over the value of the common currency, but it has several policy tools at its disposal to reduce its surplus—tools that, rather than involving sacrifice, would make most Germans better off.

Don Quijones: “Bad Bank” Mania Spreads in Europe - One thing that the world is not in short supply of these days is bad banks. They are everywhere, it seems. But there are bad banks, and there are Bad Banks. This article is about the latter, the officially dubbed “Bad Banks” launched by governments and central banks to conceal the rising tide of triple-F toxic junk (derivatives, securitized debt, non-performing loans…) that threatens to engulf the world’s financial system. As Bad Banks go, few are as bad as Spain’s SAREB, the public-private company responsible for managing assets transferred from the four nationalized financial institutions BFA-Bankia, Catalunya Banc, NGC Banco-Banco Gallego, and Banco de Valencia.  Spanish taxpayers were left holding the tab for the biggest bank bailout in Spanish history. Fast forward to today. Sareb is hemorrhaging. In 2014 the firm’s total losses were €585 million, more than double the amount registered in 2013, its first full year of operations (€260.53 million). It’s a stark contrast from the rosy picture painted by KPMG, the firm hired by the government to draw up Sareb’s original business plan. According to KPMG, investor returns, based on “conservative estimates,” would be in the order of around 15%!Even after over two years of operations the organization still lacks fully established, broadly accepted accounting standards. According to the Spanish daily El Periodico, this is one of the reasons for the sudden deterioration in losses last year. The organization’s regulator, the Bank of Spain, decided to apply different rules halfway through the financial year, forcing the bank to undertake “extraordinary restructuring” measures in order to cover hundreds of millions of euros of unpaid unsecured debt.

More Than Half Of Spanish Debt Is Held By Foreigners As Bills Sell Below 0% For First Time Ever -- Since Mario Draghi's "whatever it takes" threat, it has been a non-stop buying frenzy of Spanish debt by foreigners, and after bottoming in the low-30%'s in 2012 and early 2013, foreign holdings of Spanish debt have once again shot straight up until, moment ago, we learned courtesy of the latest Bank of Spain update that as of February, International investors once again hold a majority of Spanish debt, or 50.5% to be precise, in the form of €333.5 billion of the unstripped Spanish government bonds of the total €660.4 billion.

Stupidity of Negative Interest Rates Expands to Spain; Deflation Shock Thesis -- Reader Bran emailed a link this morning to an El Pais Article that showed interest on a 6-month treasury auction in Spain went negative.  Rather than translate, please consider the Wall Street Journal report Spain Joins Negative Yield Club.  Spain has joined the sub-zero debt club, just. The Spanish Treasury on Tuesday issued short-term debt yielding a shade under 0%. The €725 million ($796 million) in six-month Spanish debt delivers an average yield to investors of -0.002%. Buyers were still keen, placing bids worth five times that amount, according to the Treasury. Another slug of 12-month T-bills, also issued Tuesday, yields just 0.006%.  This is quite a turnaround for Spain. The country was at the heart of the eurozone debt crisis at its darkest hour. In June 2012, it sold similar short-term debt yielding 3.237%. Ben Bernanke made the claim "In the weak (but recovering) economy of the past few years, all indications are that the equilibrium real interest rate has been exceptionally low, probably negative.” Quite frankly, that's idiotic. In the absence of central bank monetary foolishness, negative interest rates cannot happen.

Switzerland becomes first to sell 10-year bond at negative yield - Switzerland on Wednesday became the first country ever to issue 10-year debt that gives investors a yield under 0%. Several European countries inside and outside the eurozone have sold government debt with up to five years of maturity at negative yields, which means investors effectively pay for the privilege of buying it. But no other country has previously stretched this out as long as 10 years. The Alpine country sold a total of 377.9 million Swiss francs (about $391 million) of bonds maturing in 2025 and 2049. On the 10-year slice, the yield was -0.055%, compared with 0.011% on its most recent similar bond two months ago. In January, Switzerland’s central bank scrapped its upper limit on the value of the franc and cut deposit rates to -0.75%. Swiss bonds are likely to remain attractive to investors as long as yields stand above that level.

Denmark highlights naked truth about negative lending -- Eva Christiansen has become something of a star in Denmark. The sex therapist was propelled into the limelight not for her career but because of a loan she took from Realkredit Danmark, the country’s biggest lender.  The reason? Ms Christiansen received a negative interest rate for her three-year loan, meaning the lender — part of Danske Bank — is paying for her to borrow money. The interest rate of minus 0.0172 per cent — which equates to her receiving about DKr7 each month from the bank — is just one sign of the “Through The Looking Glass” effects of extreme central banking measures in Scandinavia.  Plenty of central banks have resorted to unconventional measures such as buying government bonds. But none have gone quite so far as Sweden’s Riksbank or Denmark’s Nationalbank. The Riksbank became the first central bank in the world to take its main policy rate — the so-called repo rate — into negative territory. Nationalbanken in turn cut its deposit rate — the amount it pays or in this case charges banks for placing money with it — four times in three weeks at the start of this year to a world record low of minus 0.75 per cent.  Scandinavian bankers are under no illusions about the test such rates pose to the financial system. “We operate in exceptional times, where economic relationships are turned upside down with negative interest rates. A development that calls for caution; there is no history book to turn to,” Annika Falkengren, chief executive of SEB, told shareholders at the Swedish bank’s annual meeting.

Behold, the new world order of negative government-bond yields – It’s a mad, mad world in government bonds. A trillion-euro bond-buying program being carried out by the European Central Bank to help deliver a shot in the arm to the eurozone’s sluggish economy and the allure of relatively safe U.S. government debt are distorting markets. Around 25% of the eurozone’s government bonds carry a negative yield meaning investors are paying for the privilege of lending money to governments.  On Wednesday Switzerland became the first country to ever issue 10-year debt carrying a yield less than zero. And in the secondary market, Germany, France, the Netherlands, Belgium, Ireland and Austria already have all their short-term debt trading with yields at less than zero. But even as more eurozone members move into negative territory, investors are eager to buy, as the Spanish negative yielding short-term debt issuance showed on Tuesday. Meanwhile, in the U.S. the Federal Reserve’s March meeting minutes that showed on Wednesday that several Fed officials favored a June rate hike, has helped keep Treasury yields in check.  The combination of these competing forces has altered the landscape government bond yields in unprecedented ways, creating anomalies in the market place. For instance, Portugal’s 10-year benchmark bond, which carries a BB rating, would indicate that it is in junk-bond territory — in other words, risky debt. But Portuguese bond yields stand at 1.632%, 32.2 basis points below the much-higher AA+-rated 10-year Treasury

France to challenge 2016-17 EU structural budget targets (Reuters) - France will target a smaller reduction in its structural budget deficit in 2016 and 2017 than called for by the European Commission in order to preserve growth, its budget minister said on Tuesday. Christian Eckert said the amount of effort asked for regarding the structural deficit - which strips out the effects of the economic cycle - was too high, potentially leading to new friction between France and its euro zone peers after Paris won a two-year reprieve on its headline deficit. "The Commission is asking us for a structural effort that is, I believe, oversized: 0.8-0.9 (percent) in 2016 and 2017," Eckert told journalists. The French government will unveil its updated budget plans on Wednesday or Thursday before sending them to the European Commission. They are key to Paris making sure it continues to avoid EU sanctions on its fiscal slippages. "The stability plan we will send will be close to the Commission recommendation without breaking (the return to) growth," Eckert said. The government has so far been targeting reductions of 0.2 percent of GDP in 2016 and 0.3 percent in 2017. As for the 2015 budget, Paris has promised to come up with as much as 4 billion euros ($4.34 billion) in extra savings this week. Eckert reaffirmed that this week's plan would indeed plug the gaps, without giving any details.

French media groups to hold emergency meeting after Isis cyber-attack - France’s culture minister is to call an urgent meeting of French media groups to assess their vulnerability to hacking after the public service television network TV5Monde was taken over by individuals claiming to belong to Islamic State, blacking out broadcasts as well as hacking its websites and Facebook page. All TV5Monde broadcasts were brought down in a blackout between 10pm and 1am local time on Wednesday to Thursday by hackers claiming allegiance to Isis. They were able to seize control of the television network founded by the French government in 1984, simultaneously hacking 11 channels as well as its website and social media accounts. Experts say the cyber-attack represented a new level of sophistication for the Islamist group, which has claimed complex hacking before, but nothing as big as this. The Paris prosecutor’s office has opened a terrorism investigation into the attack.

German Factory Orders Tumble By Most In 9 Months, Spanish Bond Yields Turn Negative -- Bad news is even better news in Europe. "Core" Germany saw its powerhouse economy suffer the biggest drop in Factory Orders since June (-1.3% YoY) missing expectations for the 2nd month in a row - the first consecutive drop since may 2013 (despite German business confidence rising for the 5th month in a row) as apparently devaluing the EU's currency is not encouraging business. The result... DAX futures surging, bond yields tumbling and Spanish bond yields to 6 months are now negative...

Greece Says Ready to Make IMF Payment on April 9 -- Greece will repay a loan tranche to the IMF on time on April 9, its deputy finance minister said on Friday, seeking to quell fears of default after a flurry of contradictory statements on the issue in recent days. Greece is fast running out of cash and its euro zone and International Monetary Fund lenders have frozen bailout aid until the new leftist-led government reaches agreement on a package of reforms. That prompted the interior minister to suggest this week that Athens would prioritize wages and pensions over the roughly 450 million euro ($490 million) payment to the IMF, though the government denied that was its stance. Euro zone officials then quoted Greece as saying it will run out of money on April 9, which the finance ministry denied."We strive to be able to pay our obligations on time," Dimitris Mardas told Greece's Skai TV. "We are ready to pay on April 9." Adding to the confusion, German magazine Der Spiegel quoted a finance ministry general secretary, Nikos Theocharakis, as saying Greece would probably not pay next week's IMF tranche, prompting a further denial from the Greek finance ministry.

Greek finance minister to discuss reforms with IMF chief - — Greek Finance Minister Yanis Varoufakis will meet International Monetary Fund Managing Director Christine Lagarde in Washington on Sunday to discuss a set of planned reforms that Athens hopes will unlock much-needed bailout funds. The unexpected meeting would be “an informal discussion of Greece’s reform plan”, the finance ministry said in a statement. Mr Varoufakis will meet US Treasury officials on Monday, a Greek government official said. Greece is fast running out of cash and its eurozone and IMF lenders have frozen bailout aid until the leftist-led government reaches agreement on a package of reforms. Talks with lenders have been have been tense and slow-moving. Greek officials suggested this week that the government would prioritise spending on wages and pensions over meeting the conditions necessary to unblock a roughly €450m loan tranche to the IMF due on April 9, making markets nervous and reviving fears of a Greek default. Athens denied that was its stance, with government spokesman Gabriel Sakellaridis saying there was “no chance that Greece will not meet its obligations to the IMF” and assuring that the reforms would be further specified. Greece has not received bailout funds since August last year and has resorted to measures such as borrowing from state entities via repo transactions to tide it over.

IMF: We Are Not Recalling Staff From Athens -- The International Monetary Fund (IMF) denied earlier today, a report published in German Spiegel magazine yesterday that it will temporarily withdraw staff from Athens in reaction to foot-dragging by the Greek government to implement reforms. In a statement issued today, the Washington-based Fund declared that the three institutions participating in Greece’s bailout program technical teams had spent more than three weeks in Athens, working together with Greek officials. Moreover, as the statement explained, several staff members were being replaced as part of the normal routine. The IMF said talks were continuing. It is reminded that the German magazine reported that a staff member said that Greek General Secretary of Fiscal Policy Nikos Theocharakis, during the most recent teleconference has called the technical team of the Brussels Group – the representatives of creditors — “completely incompetent.” The slow pace of negotiations and the attitude of the Greek team of technocrats has forced the IMF to recall its staff from Greece for a few days, the report said. Der Spiegel also said that Mr. Theocharakis was on the same wavelength as Greek Interior Minister Nikos Voutsis who stated in the same magazine that if Greece does not receive any money from its European partners and the European Central Bank (ECB) by April 9, “then we will pay salaries and pensions first, and then we will ask the IMF for a special agreement with the understanding that we will delay the payment of 450 million euros to them.” The statement was later denied by Greek government spokesperson Gavrill Sakellaridis and a number of officials.

Greece moves to quell default fears, pledges to meet 'all obligations' (Reuters) - Greek Finance Minister Yanis Varoufakis said on Sunday that Greece "intends to meet all obligations to all its creditors, ad infinitum," seeking to quell default fears ahead of a big loan payment Athens owes the IMF later this week. Following a meeting with the head of the International Monetary Fund, Varoufakis told reporters the government plans to "reform Greece deeply" and would seek to improve the "efficacy of negotiations" with its creditors. Greece has not received bailout funds since August last year and has resorted to measures such as borrowing from state entities to tide it over. It offered a new package of reforms last week in the hope of unlocking funds, but has yet to win agreement on the proposals with its EU and IMF lenders. Most urgently, Athens is on the hook for a roughly 450 million euro ($494 million) loan repayment to the IMF due this Thursday. The interior minister suggested last week the government would prioritize wages and pensions over the IMF payment, although the government later denied that was its stance. IMF Managing Director Christine Lagarde said in a statement after meeting with Varoufakis that she welcomed his confirmation that the loan payment due would be made on schedule.

Frustrated officials want Greek premier to ditch Syriza far left - Eurozone authorities’ frustration with Greece has grown so intense that a change in the current Athens government’s make-up, however far-fetched, has become a frequent topic of conversation on the sidelines of bailout talks. Many officials — up to and including some eurozone finance ministers — have suggested privately that only a decision by Alexis Tsipras, Greek prime minister, to jettison the far left of his governing Syriza party can make a bailout agreement possible.  The idea would be for Mr Tsipras to forge a new coalition with Greece’s traditional centre-left party, the beleaguered Pasok, and To Potami (The River), a new centre-left party that fought its first general election in January. “Tsipras has to decide whether he wants to be prime minister or the leader of Syriza,” said one European official. A senior official in a eurozone finance ministry added: “This government cannot survive.” Members of Syriza’s moderate wing admit there is a problem with the Left Platform, the official internal opposition that represents about a third of the party and controls enough MPs to bring down the government if it were to rebel in a parliamentary vote.

Germany Generously Offers To Freeze The Bank Accounts Of Wealthy Greeks -- Germany has been kind enough to provide an idea where the foundering Greek "radical leftist" government can find some additional funds: by freezing and raiding the bank accounts of wealthy Greeks. Of course, the legal loophole provision is that only those suspected (not convicted) of tax fraud would be eligible for such an asset  freeze, however since in Greece virtually nobody pays the amount of tax they should, this is essentially a carte blanche to freeze and raid the funds of the wealthiest Greeks who have bank accounts in Germany (and soon in all other European nations) no questions asked.

Greece Brings Up Nazi Reparations Once Again - The Greek government is in a delicate position. It needs funds to pay its debt maturities and is running out of options. Athens will likely have to introduce painful measures to secure European funding and bargain with its creditors — led by Germany. In the face of this mounting crisis, Prime Minister Alexis Tsipras and his Syriza party are trying to hold together a parliamentary majority and sustain public popularity. To do so, Tsipras has to show strength in negotiations. This means feeding Greek nationalism with anti-German sentiments. To this end, members of the Syriza government have called for a referendum on a eurozone pullout. Tsipras will also engage in bilateral talks with Russia on April 8-9 to convince the Greek people that the new government is strong. Bringing up Nazi reparations is a rhetorical way for Tsipras to imply that Germany is a debtor itself and has no right to press the Greeks. From the official German perspective Berlin has no legal obligation to pay Athens. It sees the issue as settled by the 1990 treaty. German Chancellor Angela Merkel and Social Democratic Party leader and Minister of Economy Sigmar Gabriel have already rejected the case, while insisting that it should in no way be related to the current negotiations on the Greek debt.

Greece puts figure of €279bn on claim for German reparations - Greece’s deputy finance minister has said that Germany owes it nearly €279bn (£205bn) in reparations for the Nazi occupation of the country. Greek governments and private citizens have pushed for war damages from Germany for decades but the Greek government has never officially quantified its reparation claims. A parliamentary panel set up by Alexis Tsipras’s government started work last week, seeking to claim German debts, including war reparations, the repayment of a so-called occupation loan that Nazi Germany forced the Bank of Greece to make and the return of stolen archaeological treasures.  Speaking at a parliamentary committee on Monday, the deputy finance minister, Dimitris Mardas, said Berlin owed Athens €278.7bn, according to calculations by the country’s general accounting office. The occupation loan amounts to €10.3bn. The campaign for compensation has gained momentum in the past few years as the Greeks have suffered hardship under austerity measures imposed by the European Union and International Monetary Fund in exchange for bailouts totalling €240bn to save Greece from bankruptcy. Tsipras has frequently blamed Germany for the hardship stemming from the imposition of austerity. The Greek prime minister has angered Berlin by threatening to push for reparations in the middle of talks to unlock aid for Greece.

Greece Calculates Germany Owes It A Third Of Its GDP In WWII Reparations - With almost 70% of Europeans already believing that Greece is a drag on the EU economy, this morning's statement by Greek Alternate Finance Minister Dimitris Mardas - coming just a week after the war-raparations committee was set-up, telling lawmakers in Parliament that he has calculated that Germany owes Greece EUR 278.7 billion in World War II reparations, will surely deepen the rift (at almost 40% of Germany's EUR 735 billion GDP) whether right or wrong.

Germany Owes $303 Billion War Debt, Greek Parliament Told —Greece’s government publicly quantified its long-standing claim for World War II-related compensation from Germany, continuing to press claims that Berlin says have long since been settled. Deputy Finance Minister Dimitris Mardas said in parliament Monday that Germany owes Athens €278.7 billion ($303.1 billion), according to calculations by Greece’s General Accounting Office. The Greek government has set up a parliamentary panel, which started work last week, to press for war reparations as well as the repayment of a forced loan that Nazi Germany made the Bank of Greece extend to the wartime German occupiers.

Germany Slams "Stupid" Greek Demands For "Incomprehensible" €278 Billion In Reparations - Yesterday we reported that in what may have been an attempt to stun the world, if not so much Germany, with the law of large numbers, Greece calculated that Germany owes it a whopping €278 billion in World War II reparations, or about a third of what Germany reported was its GDP in the fourth quarter. Unfortunately for Greece, Germany does not appear to be rushing to wire the funds. As Reuters reported earlier today, Germany's economy minister had one word for the Greek demand: "stupid."

Alexis Tsipras’s soft fruit ploy with Moscow set to antagonise EU - When Alexis Tsipras visits Vladimir Putin’s Kremlin on Wednesday there is a chance the Greek premier’s eastern manoeuvre will immediately bear fruit: kiwis, peaches and strawberries to be precise. Athens is hopeful that Moscow will lift a retaliatory ban on Greek soft fruits to demonstrate the abiding strength of Russo-Greek relations, just as both leaders feel a diplomatic chill with Europe over the Ukraine crisis and Athens’ bailout saga respectively. But what worries European diplomats is that the Putin-Tsipras gladhanding amounts to something more significant than fruit trade. The big fear, in the words of one suspicious senior official, is a “Trojan horse” plot, where Russia extends billions in rescue loans in exchange for a Greek veto on sanctions — a move that would kill western unity over Ukraine. No such shock is expected this week. But as Athens nears the brink of insolvency there is growing alarm that Mr Tsipras’s radical left government might turn to Moscow in desperation. It would set off the biggest panic over Greece’s strategic alignment since the 1947 US Marshall Plan, initiated to save the country from communist fighters that Mr Tsipras’ Syriza party lionise to this day. Others argue that Mr Tsipras’ Russia card is but a ploy in bailout talks with Germany and the eurozone. In spite of historic cultural ties and Syriza’s Soviet romanticism, analysts think Greece is too tied to the west – through EU and Nato membership – and too deep in debt for sanctions-damaged Russia to buy it off as a reliable ally. “The Greeks are using Russia as a way to piss off Berlin, to frighten them. Tsipras wants to show he has other options,” said Theocharis Grigoriadis, a Greece-Russia relations expert at the Free University of Berlin. “But he has no intention of making Greece a Russian satellite. The Russians know that. The Germans know that. It is pure theatre, a Greek game, and I’m afraid it looks like a poodle trying to scare a lion.”

Isolated Greece pivots east to Russia, China and Iran. But will it work? -- Greece's bail-out drama is threatening to take a geostrategic turn to the east.  A mere three weeks after his maiden trip to Berlin, Prime Minister Alexis Tsipras is on the road again, this time heading for Greece's eastern hegemon.  On Wednesday, the 40-year-old premier will sit down for his first official meeting with Russian counterpart President Vladimir Putin at the Kremlin.  The timing is not fortuitous.  Originally penciled in for May, Mr Tsipras pushed forward his trip to fall the day before the government faces a crunch €450m repayment to the International Monetary Fund and as the two Orthodox nations prepare to mark Easter. Following repeated EU rebuffs over its reforms-for-cash rescue programme, the Leftist government has intensified its flirtation with a triumvirate of pariah states - Russia, China, and Iran.  But what does Mr Tsipras really hope to achieve?  Greco-Russian relations extend beyond just a shared reproach for European diktats.  Greece's reliance on Russian energy makes Moscow is its largest trading partner, with bilateral trade amounting to nearly $10bn a year.  Syriza's fire-brand energy minister was in Moscow in March, meeting chiefs of state-backed Gazprom and inviting Russian companies to take part in the exploration for oil and gas off the country's eastern coast.

Athens scrapes together cash for April but default looms in May -  Greece has scraped together funds to repay international creditors this month but will exhaust its cash reserves by the end of April, raising the possibility of a sovereign default next month if it fails to agree a new reform package with the eurozone. A senior Greek official gave reassurances that a €458m loan instalment owed to the International Monetary Fund would be paid on April 9 as scheduled, along with another €420bn due to international investors when a six-month treasury bill expires on April 14. “We’ll meet international obligations without any problem but it will be a squeeze to raise cash for domestic payments in the second half [of the month],” the official said. “Next month is a different matter. We are going to run out of money unless reforms are legislated to make some bailout funds available,” he said. Greece has to make two further payments to the IMF in May amounting to €950m on top of €2.4bn of pension and salary payments. But Athens cannot raise financing by selling more treasury bills to Greek banks following a ban by the European Central Bank on increasing their exposure to the government, while foreign investors have been scared off by the country’s increased political risk. The radical anti-austerity government has been unable to reach an agreement with the EU and IMF that would unlock €7.2bn in European funding because of foot-dragging by its economic team over reforms that would contradict Syriza’s election promises not to raise taxes or back further privatisations. Finance ministry experts are scrambling to wrap up technical talks this week with officials from the European Commission, the IMF and the ECB with the aim of reaching a deal with eurozone finance ministers in Riga on April 24.

As Greece Battles a Debt Crisis, Its Banks Issue More Short-Term Debt -  A strange thing is happening as Greece struggles to avert bankruptcy: Its troubled banks are loading up on more debt.These short-term bonds, which have been issued by the country’s largest banks and carry the guarantee of the Greek government, are not being sold to foreign investors. They are being issued to the only entity that would dare buy them: themselves.In the last four months, some of Greece’s largest banks, including Piraeus, Alpha and Eurobank — have self-issued more than 13 billion euros’ worth, or $14.3 billion, of these government-guaranteed bonds.Wounded by vanishing deposits and bad loans, Greek bank bonds are about as toxic an investment as can be found. The banks are on life support via an emergency lending program overseen by the European Central Bank, via which they have access to short-term loans from their own central bank.But to secure this credit line, about €71 billion (more than half the deposits outstanding in Greece), these banks need to provide collateral to the Greek central bank.As was the case in Cyprus during its banking crisis, when a financial system implodes, finding acceptable collateral to swap for desperately needed loans can be difficult.

Greece makes IMF payment, gets bank funds, but doubts remain (Reuters) - Greece made a crucial payment to the International Monetary Fund and won extra emergency lending for its banks on Thursday but it remained unclear whether Athens can satisfy skeptical creditors on economic reforms before it runs out of money. Euro zone partners gave Greece six working days to improve a package of proposed reforms in time for finance ministers of the currency bloc to consider whether to release more funds to keep the country afloat when they meet on April 24. After weeks of contradictory statements, Finance Minister Yanis Varoufakis announced that Athens was resuming the sale of state assets halted when a leftist-led government was elected in January, but would do so on different terms. "We are restarting the privatization process as a program making rational use of existing public assets," Varoufakis told a conference in Paris. "What we are saying is the Greek state does not have the capacity to develop public assets." He did not specify which tenders would go ahead and said the government wanted public-private joint ventures with a minimum investment commitment required from bidders, and the state retaining a stake to generate pension funds.

IMF Payment Sends Greek Yields Lower; Athens Warns "Next Month Is A Different Matter" -- A central bank official, according to The FT, said that Greece has repaid the €450m it owed the International Monetary Fund today. Bond yields have fallen across the Greek curve with 10Y GGBs now at 11.1% (down 70bps from Tuesday's highs). Greek stocks are not as impressed and are giving back their gains. Tsipras, on return from Moscow, explained Greece "was not a beggar...asking other countries to solve its problem," but as a senior Greek official earlier this week said that while it would be able to make Thursday’s IMF repayment, it will still exhaust its cash reserves very soon and "next month is a different matter." HSBC points out that the real crisis point looms on the 12th May and FinMin Varoufakis warns the "asymmetric union" that they "have learned nothing from economic history."

Greece raises 1.1 bln euros, sells all 6-month T-bills on offer | Reuters: (Reuters) - Greece raised 1.138 billion euros ($1.24 billion) at an auction of six-month Treasury bills on Wednesday, moving the full amount on offer in the first of two sales this month as it tries to roll over debt and navigate its way through a cash crunch. Despite Athens' increasingly dire financial position, it was able to find domestic buyers to plug a gap of about 350 million euros stemming from foreign investors' refusal to roll over their own Greek T-bill holdings. The T-bills were sold at a yield of 2.97 percent, however, unchanged from a previous sale in March and the highest rate in 11 months. Athens is now paying to borrow for six months almost twice what Portugal pays to borrow for 10 years. Deputy Finance Minister Dimitris Mardas put a brave face on the situation. "It was a successful issue," he told Reuters. "Domestic investors covered the whole issue, including the share held by foreign investors." The sale's bid-cover ratio was 1.30, unchanged from March, showing no deterioration in demand despite tight liquidity conditions. The amount raised included 263 million euros in non-competitive bids. The settlement date for Wednesday's auction will be April 14. Shut out of debt markets and with aid from official creditors frozen, Greece has scrambled to cope with April redemption payments including 2.4 billion euros of maturing T-bills and a 450 million euro outlay to the International Monetary Fund due on Thursday.

"Odious Debt" Has Finally Arrived: Greece To Write Off "Illegal" Debt - It was back in June 2011 when we first hinted that the time of Odious Debt is rapidly approaching. Today, nearly four years later, Odious Debt is now a reality in Greece, where Zoi Konstantopoulou, the head of the Greek parliament and a SYRIZA member, released two videos which have promptly gone viral, designed to promote the investigative parliamentary committee to look into the circumstances surrounding the signing of the country’s two bailout agreements that led Greece to implement its austerity measures. According to Greek Reporter, Konstantopoulou has said that the newly established “Debt Truth Committee,” will investigate how much of the debt is “illegal” with a view to writing it off.

Overdue Greek Tax Debt Rose to 75.732 bln Euros in February -- The value of overdue tax debt grew further to 75.732 billion euros in February, of which 2.480 billion were new overdue debt by taxpayers in the January-February period, Greek official figures showed on Tuesday. A report by the Secretariat General of Public Revenue, said that the older overdue tax debt was 73.252 billion euros, of which 56.408 billion were overdue debt by individual taxpayers, 10.882 billion were debt by bankrupt companies and 6.039 billion euros were debt by public sector enterprises, municipal companies and utility companies in Greece.

The Greek Counter-Ultimatum To Europe: "We Cannot Keep ISIS Out If You Keep Bullying Us" -- For a second time within a couple of weeks, Greek Defense Minister and leader of coalition government junior partner Independent Greeks, Panos Kammenos warned that if the European Union keeps undermining the coalition government and the country exit or is forced to exit the Euro “waves of migrants: will stream from Turkey to Europe and among them there would be ISIS “radicals.” Speaking to THE TIMES, Kammenos said: “The gross meddling into [Greek] domestic affairs isn’t just unheard for European standards, it’s unethical and it’s dangerous. If Greece goes, then a lot more than financial stability and the euro is at stake.” “If Greece is expelled or forced out of the eurozone, waves of immigrants without papers, including radical elements, will stream from Turkey and head towards the heart of the West."

Greece Releases Graphic Footage From Nazi Occupation, Ups WWII Reparations Pressure -- Having demanded EUR 278.7 billion from Germany for WWII reparations, which was quickly eschewed by Germany, Greece has decided to up the ante. As KeepTalkingGreece reports, Greek Defense Ministry has published a video with rare footage from the occupation of Greece by the Nazis during the World War II. Among others, the footage shows children suffering from malnutrition and emaciated adults, victims of the Great Famine during the Nazi occupation. The video is designed to provide context for the huge claim and the video voice-over states that the Enforced Loan by the Nazis was to blame for the mass starvation of estimated 300,000 people in Athens alone, “Greece lost 13% of its population during the WWII. One part was lost in the battlefield, but the largest part due to Famine and the Nazis’ atrocities.”

Tsipras-Putin Sign New Trade Deal and Renew Greece-Russia Relations -- Greece and Russia signed a trade deal that will bring Greece 4.2 billion euros and talked about the renewal of the deal for natural gas supply to Greece. After the discussions between the two delegations, Greek Prime Minister Alexis Tsipras and Russian President Vladimir Putin talked to the press. Tsipras stated that his visit to Moscow aims at the renewal of Greek-Russian relations. He said that Greece is a sovereign state and has the right to seek economic alliances wherever its interests lie and exploit its geopolitical position. The Greek PM said the two countries will cooperate on a trade and cultural level and Russia will seek investments in tourism and infrastructure in Greece. He also called on investors to build a Greek pipeline bringing Russian natural gas to the country, thereby solving the energy problem. On the issue of European Union sanctions imposed on Russia, Tsipras said he disagrees with the sanctions because they remind him of Cold War practices. On the issue of the Greek debt, he said that he would not go around to other countries asking them to solve a European problem that needs a European solution. On his part, Putin stated that Greece did not ask Russia for financial aid. The trade deal the two countries signed will bring Greece 4.2 billion euros. He said he is interested in infrastructure investments, such as the Thessaloniki Port. He also said the Turkish Stream gas pipeline could make Greece an energy hub that could transport gas to central Europe.

Russia and Greece to ink Turkish Stream gas pipeline deal within days – Greek minister - Russia and Greece are to sign a memorandum of cooperation on the construction of a new pipeline in the Turkish Stream project which will deliver Russian gas to Europe via Greece, according to the Greek energy minister. The memorandum is expected to be signed in the next few days, Greek Energy Minister Panagiotis Lafazanis said in an interview with the Sputnik news agency, adding that the pipeline would be not only a route between Greece and Russia but would as well be very important for Europe.  “The visit of the government delegation, the meeting of Tsipras and Putin open the way for the pipeline which will begin at the border with Turkey and end at the border with Macedonia in the direction of Central Europe. This pipeline is extremely important for energy security and cooperation in Europe," Lafazanis said.  The minister said that Athens expected to "receive significant financial dividends for the pipeline's operations,” and that the pipeline will bring “extremely important profits to Greece, first of all, cheaper gas.” Currently Russian gas covers 66 percent of Greece’s energy needs.  The Turkish Stream gas pipeline could help Greece become one of the main energy distribution centers in Europe, Russian President Vladimir Putin said on Wednesday during his meeting with the Greek delegation. Athens could earn hundreds of millions of euro through gas transit annually if it joins the Turkish Stream pipeline project, he added.  The Russian President also stressed that Greece could use revenues from potential joint projects with Russia to pay off its debt to international creditors.

Europe's manhandling of Greece is a strategic gift to Russia's Vladimir Putin - TelegraphThe European Union has presented Vladimir Putin with an irresistible strategic prize, on a platter. By insisting rigidly that Greece's radical-Left government repudiate its electoral pledges and submit to ritual fealty - even on demands of little economic merit, or that might be unwise in the particular anthropology of a post-Ottoman society - it has pushed the Greek premier into the arms of a revanchist Kremlin. The visit of Alexis Tsipras to Moscow has been a festival of fraternity. On Wednesday he laid a wreath at the Tomb of the Unknown Soldier and spoke of the joint struggle against Fascism, and the unstated foe. The squalid subject of money was of course avoided. "Greece is not a beggar," he said. "The visit could not have come at a better time,” said Mr Putin, purring like the cat who ate the cream. EU sanctions against Russia will expire in June unless all 28 states agree to roll them over, and Mr Tsipras has already signalled his intent. "We need to leave behind this vicious cycle," he said. "Greece is a sovereign country with an unquestionable right to implement a multi-dimensional foreign policy and exploit its geopolitical role," he added, for good measure. A Greek veto on sanctions will embolden Hungary's Viktor Orban to join the revolt, this time in earnest. His country has just secured a €10bn credit line from Russia to expand its Paks nuclear power plant, a deal described as a "purchase of political influence" by a leading critic. Slovakia is quietly slipping away from what was once a united (if fractious) EU front to deter further Kremlin moves into Ukraine. There is safety in numbers for this evolving constellation, what Mr Putin's foes would call the EU's internal "Fifth Column". Brussels can bring one to heel, but not a clutch of rebels. It is becoming powerless.

Beppe Grillo Disarms The 7 Unfounded Fears Of A Euro Exit - Having previously warned that "the eurozone chess game is entering its final stage," and exclaimed that "we are not at war with Russia or ISIS, we are at war with the Troika," Italy's erstwhile populist leader, Italy's Five Star Movement's Beppe Grillo unveils his Plan B by destroying seven unfounded myths with regard an exit from the euro...

  • 1) Mortgages - Mortgages will be converted into the new currency the day we exit the Euro. For anyone with a variable interest rate, this will still remain linked to the Euribor and thus it will remain stable. In relation to mortgages, Italians will benefit.
  • 2) Inflation - Just think that the goods (home, car, telephone) that we want to buy will come down in price. If we don’t spend, the economy stagnates. This is what is happening today with deflation. A low level of inflation is thus necessary to keep the economy going. 
  • 3) Current account Your current account in Euro will be converted into the new currency. But, just even today, you can have a different currency in your bank account. You will still be able to do that after the exit from the Euro.
  • 4) Government bonds - 95% of Italian State bonds will be converted into the new currency (given that 95% are issued in accordance with Italian legislation and so they would inherit the national currency). The State will pay out on them and will issue them in the new currency. 
  • 5) Transition from the Euro to the lira There’ll probably be a 1 to 1 conversion with the new currency and it will then probably devalue a bit. The effect on prices will probably be that they stay the same as today but they will be given in the new currency.
  • 6) Increase in the price of petrol - The price of petrol is a false problem as most of the price (64%) is paid in taxes. International prices of crude oil and the exchange rate only relate to 26% of the price.
  • 7) Imports. Innovation is the only way to develop the country. Staying in the Euro is not going to help.

German ten-year bond yield touches fresh low - Remember when sovereign bonds were bought for their income streams? The yield on the ten-year German government touched a new low of 0.144 per cent on Thursday, underlining the ravenous demand for the country's debt as the European Central Bank become a buyer too. The ECB's long-awaited quantitative easing programme is focused on the sovereign debt of eurozone countries. That's already driven yields on some government bonds into negative territory. On Wednesday, Switzerland became the first government in history to sell benchmark 10-year debt at a negative interest rate. Bonds with negative yields now account for around a quarter of Europe's government debt market. In the last year Germany, Austria, Finland and Spain have all sold shorter-term debt at sub-zero yields.

Bund yields near troughs as QE trumps U.S. data, Greek repayment - (Reuters) - German Bund yields fell towards record lows on Friday, as the European Central Bank's bond-buying programme offset the improved appetite for riskier assets following a Greek debt repayment and the impact of stronger U.S. jobs data. Economists in a Reuters poll this week said the ECB was "about right" in claiming its trillion-euro quantitative easing programme, which has driven euro zone bond yields to record lows, was having a positive impact before it had even begun. The power of the ECB's bond purchases overshadowed data showing 281,000 U.S. workers filed for first-time jobless benefits last week, fewer than analysts had forecast, keeping a 2015 Federal Reserve rate increase on investors' minds. Yields on lower-rated euro zone bonds also headed down after Greece repaid a crucial 450 million-euro loan to the International Monetary Fund on Thursday, easing fears of an imminent default. Greek yields saw their biggest weekly decline in almost two months on Thursday. Markets in Athens were closed on Friday for the Orthodox Easter holiday. Greece also won extra emergency funds for its banks, though it remained unclear whether Athens can satisfy creditors on plans for economic reforms and release more aid before it runs out of money. Euro zone partners have given Greece six working days to improve a package of proposed reforms before the bloc's finance ministers consider whether to release more funds to keep the country afloat when they meet on April 24.

Hungary's central bank will keep on cutting rates - Hungary's central bank will continue to cut its main interest rate until it reaches its inflation target, the bank said in the minutes of its March meeting, when it cut its policy rate to a record low. On March 24 Hungary lowered its main rate to 1.95% and announced the re-launch of its easing cycle after keeping steady on rates since August 2014. Of the nine-strong rate panel, eight members voted in favor of the 0.15 percentage-point rate cut in March, while one board member, Janos Cinkotai, wanted a smaller 0.10 percentage-point clip, the minutes of the meeting published Wednesday showed. The cut was less than the 0.20 percentage-point move the majority of analysts polled by The Wall Street Journal had forecast. The rate cut was "in line with the central bank's cautious stance in the past and with market expectations, thus strengthening its credibility and predictability, and it also provides appropriate elbow room to continue easing," the minutes read. "The cautious rate-cutting may continue until it supports reaching the medium-term inflation target," the rate-setters agreed, according to the minutes. Consumer prices fell 0.6% in March on the year, the country's statistics office said, surprising analysts in poll by The Wall Street Journal, who had expected a 0.8% fall. Prices are expected to pick up in the coming months, the economy ministry said after the data was published. Still, the central bank's 3% medium-term inflation target will remain out of reach for a long while analysts said. Citigroup economist Eszter Gargyan forecast the bank will hit its inflation target in the first half of 2017. As a result, most economists expect the central bank to keep chopping its main rate in small, gradual monthly steps to 1.50% or even less.

UK interest rates kept at record low - BBC News: UK interest rates have been held at 0.5% for another month by the Bank of England. The decision by the Monetary Policy Committee comes more than six years after the record low was introduced. The half-dozen years of ultra-low interest rates have cut returns on savings, while mortgage borrowers have reaped the benefits of lower repayments. Rates have been at a record low for the entire Coalition government period. Expectations of a rise any time this year have been put on hold with Consumer Price Index (CPI) inflation at zero. 'Fragile' David Kern, chief economist at the British Chambers of Commerce, said the decision was the right one, "particularly at a time when inflation is down to zero and likely to fall into negative territory in the next few months". He added: "While official interest rates are very low, the fall in inflation over the past year has effectively raised interest rates in real terms, for both businesses and consumers. "The UK recovery is on course, but remains fragile and should not be unsettled by an unnecessary interest rate rise. Business confidence will be strengthened if the MPC states clearly that official interest rates are likely to stay at their low levels for at least another 12 months."

Iceland looks at ending boom and bust with radical money plan - Iceland's government is considering a revolutionary monetary proposal - removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled "A better monetary system for Iceland". "The findings will be an important contribution to the upcoming discussion, here and elsewhere, on money creation and monetary policy," Prime Minister Sigmundur David Gunnlaugsson said. The report, commissioned by the premier, is aimed at putting an end to a monetary system in place through a slew of financial crises, including the latest one in 2008. According to a study by four central bankers, the country has had "over 20 instances of financial crises of different types" since 1875, with "six serious multiple financial crisis episodes occurring every 15 years on average". Mr Sigurjonsson said the problem each time arose from ballooning credit during a strong economic cycle.

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