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

Saturday, April 4, 2015

week ending Apr 4

 Yellen Says Fed Will Increase Rates Slowly - — Janet L. Yellen, the Federal Reserve chairwoman, said on Friday that the Fed planned to raise interest rates more slowly than in past recoveries because of the unusually fragile condition of the American economy.  Fed officials, who have held short-term interest rates near zero for more than six years, have indicated that they plan to start raising the Fed’s key gauge later this year. Ms. Yellen’s remarks, delivered at a conference in San Francisco, offered more details about the Fed’s plans than earlier statements, all part of an effort to prepare markets for the end of that prolonged era.And her message was that the return to normal conditions was likely to come slowly. There will be no repeat of the two-year period beginning in June 2004 when the Fed raised rates by 0.25 percentage points at every meeting.“The average pace of tightening observed during previous recoveries could well provide a highly misleading guide to the actual course of monetary policy over the next few years,” Ms. Yellen said. Ms. Yellen’s speech was delivered hours after the Commerce Department reported, in its final revision, that the United States economy grew at a rate of 2.2 percent in the fourth quarter of 2014, down from a robust 5 percent pace during the summer months. Economists said that the economy probably slowed even further in the first quarter of this year, which ends on Tuesday. Despite the latest disappointing economic figures, Ms. Yellen emphasized that she saw the economy as improving, describing the current situation as a temporary slowdown during the winter months. She highlighted particular progress in labor markets, and said that she expected the economy to gain steam as consumer spending increased after a slow start to 2015. By contrast, Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, said earlier this week it was “quite likely” the Fed would raise rates no later than September. John C. Williams, president of the Federal Reserve Bank of San Francisco, and Ms. Yellen’s host on Friday, said “by midyear it will be the time to have a discussion.”

Fed’s Lacker: ‘Strong Case’ to Be Made for June Rate Increase - Federal Reserve Bank of Richmond President Jeffrey Lacker said Tuesday the Fed should be prepared to tighten policy faster than expected once it starts to raise short-term interest rates. In a speech to the Greater Richmond Chamber of Commerce, Mr. Lacker said there is a “strong case” for the Fed to begin raising short-term interest rates at its June policy meeting. “I expect that, unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting,” he said. Mr. Lacker, who is a voting member of the rate-setting Federal Open Market Committee, said he hasn’t yet decided whether he will dissent if the Fed’s policy-setting committee decides not to raise rates in June. “I’ll wait and see what my colleagues have to say,” he told reporters following the speech. Once rates begin to rise, Mr. Lacker told reporters the Fed “needs to be ready for the possibility that we could need to tighten more rapidly than people expect.” In his prepared remarks, Mr. Lacker said improvements in labor market conditions and strong business investment should contribute to economic growth this year, despite the slow housing-market recovery and the challenge to exports from the stronger U.S. dollar.

Thoughts on Yellen's Speech - I came back from vacation to find a detailed speech by Fed Chair Janet Yellen that further lays the groundwork for rate hikes to begin later this year. The speech is a remarkably clear elucidation of her views and provides plenty of insight into what we should be looking for as the Fed edges toward policy normalization. A speech like this once a month from a Federal Reserve Governor would, I think, go a long way toward enhancing the the Fed's communication strategy. One of the most important takeaways from this speech is the importance of labor market data in the Fed's assessment of the appropriate level of accommodation: Although the recovery of the labor market from the deep recession following the financial crisis was frustratingly slow for quite a long time, progress has been more rapid of late...Of course, we still have some way to go to reach our maximum employment goal..But I think we can all agree that the recovery in the labor market has been substantial.I am cautiously optimistic that, in the context of moderate growth in aggregate output and spending, labor market conditions are likely to improve further in coming months. In particular, and despite the somewhat disappointing tone of the recent retail sales data, I think consumer spending is likely to expand at a good clip this year given such robust fundamentals as strong employment gains, boosts to real incomes from lower energy prices, continued increases in household wealth, and a relatively high level of consumer confidence.Yellen intends to look through any first quarter weakness in GDP data, seeing it as largely an aberration (like arguably the first quarter of last year), as long as the employment data continues to hold up. And even there, I doubt any one weak report would do much to undermine her confidence in the recovery; we should be focusing on the story told by the next three employment reports in aggregate.

Was Janet Yellen Test Driving the Policy Rule Bill? - John Taylor - In a speech last week Fed Chair Janet Yellen made use of policy rules, and in particular the Taylor rule, to explain her views on normalizing policy. This comes on the heels of Fed Vice-Chair Stanley Fischer’s reference to the Taylor rule in a speech earlier in the week, two influential Bloomberg View columns by Clive Crook (here and here) making the case for the Fed to use such rules, the Shadow Open Market Committee’s unanimous recommendation to use rules that way, and continued discussion of a bill in Congress which would require the Fed to state its rule and compare it with a reference rule. In fact, Janet Yellen’s discussion of how current and upcoming policy might differ from a reference rule (the Taylor Rule) is not unlike what you  might see if the policy rule legislation under consideration in Congress became law.  So one can think of her discussion as sort of test drive or trial run. If so, it raises a number of questions. Let me first quote from the relevant section of Janet Yellen’s speech starting on page 7 and embedding an important explanatory footnote at the end:

Yellen shoots for ‘equilibrium’ interest rates - The financial markets listened to Janet Yellen’s speech on “normalising” monetary policy last Friday, shrugged, and moved on largely unaffected. It was, indeed, a dovish speech, of the type that had been foreshadowed at her press conference after the FOMC meeting in March (see Tim Duy for a full analysis). But it also spelled out her analytical approach to monetary policy more clearly than at any time since she has assumed the leadership of the Federal Reserve. In the speech, the Fed chairwoman used the term “equilibrium real interest rates” no less than 25 times. This concept is very much in vogue at the Fed. The Yellen speech uses it to explain what she and Stanley Fischer mean by “normalising” interest rates. It was also at the centre of Ben Bernanke’s first forays into economic blog writing this week, which reminds us that it has some pedigree at the central bank. Published documents from the archives of the FOMC demonstrate that staff estimates of the equilibrium rate are made available to the committee on a frequent basis. Ms Yellen indicated that the equilibrium rate is exceptionally low at present, perhaps a little below zero in real terms. But she also said that it will probably return to “normal” in the next few years, as economic headwinds abate. It is this expected rise in the equilibrium rate, to an assumed normal level of about 1.75 per cent, that explains much of the rise in the Fed funds rate shown in the FOMC’s dot plots. A different assumption for the equilibrium rate would produce a very different path for interest rates in the next few years.

Reading the Federal Reserve's Dot Plots - Brad DeLong -- It is always instructive to look at the materials that the Federal Reserve’s Federal Open Market Committee pumps out, especially their semi-anonymized (hi, Charlie Evans, with your 3% longer-run value) estimates of what the appropriate federal funds rate would be.  Thus we can see, comparing January 2012 when the Federal Reserve began publishing its dot-plots to today, the Federal Reserve collectively and slowly come to recognize current reality. Back at the start of 2012 the FOMC participants all thought that in the “longer run”–which at the beginning of 2012 I take to be next year, 2016–the federal funds rate ought to be back at its normal mid-expansion level, which they all took to be in the 3.75%-4.5% per year range. Today, of course, only one participant (Charles Plosser?) still thinks the federal funds rate ought to be in that range next year, and at the very bottom of it. And we can see, comparing November 2013 to today, the Federal Reserve stick to its guns as to the anticipated pace of policy tightening set in motion with Ben Bernanke’s mid-2013 announcement that it was time to stop searching for further extraordinary monetary policy actions to boost the economy. The median FOMC participant in November 2013 thought that by the end of 2015 the federal funds rate should by 0.75%, and by the end of next year 1.75%. The median FOMC participant today thinks that by the end of 2015 the federal funds rate should be 0.5-0.75%, and by the end of next year 1.75%-2.00%.

Fed’s George Says Economy Could Do With Less Fed Stimulus - —Federal Reserve Bank of Kansas City President Esther George said Tuesday that steady economic growth calls for the U.S. central bank to pull back on the level of stimulus it has been providing the economy. “You are required to look ahead” when you make interest-rate policy, Ms. George said. Given the improvements in growth and what appears to be relatively stable prices, it is entirely appropriate to talk about raising rates, which she described less as a process of trying to slow the economy down as ending an emergency policy stance. With a rate rise, “it’s more a process of pulling back on some of the accommodation. The sooner we do it the better,” Ms. George said. She added cutting back on stimulus will also reduce risk taking in the financial system and lower the prospect of bubbles that could damage the broader economy. Based on where the economy is now, metrics for setting rate policy suggest short-term rates “should be higher-than-zero, but I don’t think they pretend interest rates should be back to normal.” Ms. George, who doesn’t currently hold a voting role on the monetary-policy setting Federal Open Market Committee, spoke amid a roiling debate among officials over the timing of interest rate increases.

Former Fed Governor Admits Market Controlling The Fed Is A "Very Dangerous Development" -- The constant changes to Fed policy targets and enslavement to the ticker must change, according to former Fed Governor Kevin Warsh. "The markets think they have Yellen's number," that she will never allow markets to go down, Warsh warns "that is a very dangerous development." What worries Warsh the most, however, is "The Fed's policies changing based on what happens on the ticker... The Fed should be thinking 3 to 4 years ahead." Investors "think good times can last forever," he notes ominously, "we tried negative real rates in the mid 70s and the early 2000s and both ended badly." Someone is not getting invited back on CNBC...

Fed Watch: Air Pocket - The employment data hit an air pocket in March, in line with a variety of softer economic news in the first quarter. That said, it likely will have little near term impact on Fed policy; I anticipate they will tend to dismiss the number as expected volatility in the overall upward path of job growth. Job growth was paltry 126k in March and, in what might be a greater indication that US labor markets are hitting an inflection point, the January and February numbers were revised downward. The three-month moving average dipped sharply, while the 12-month moving average is leveling out: A clear slowdown in the good producing sector is contributing to the weaker numbers as the impact of lower oil prices works through mining. That factor, the stronger dollar, and the West coast port slowdown are also likely taking a toll on manufacturing. Flat construction numbers also contributed. The unemployment rate was unchanged at 5.5% and wage growth remains tepid compared to last year. Payrolls in the context of indicators previously cited by Federal Reserve Chair Janet Yellen: Broad yet still slow general improvement in underemployment indicators. How does this impact the Fed's outlook? First, some recent quotes from policymakers, beginning with Federal Reserve Chair Janet Yellen: ...I anticipate that real gross domestic product is likely to expand somewhat faster than its potential in coming quarters, thereby promoting further gains in employment and declines in the unemployment rate. And: ...a significant pickup in incoming readings on core inflation will not be a precondition for me to judge that an initial increase in the federal funds rate would be warranted... ...That said, I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken, if market-based measures of inflation compensation were to fall appreciably further, or if survey-based measures were to begin to decline noticeably...

Here We Go: Goldman Declares That "The Right Policy Would Be To Put Hikes On Hold For Now" -- It was just two days ago when we observed that during the latest Fed matinee, none other than Goldman's Jan Hatzius presented a slide deck suggestively titled "Hiking Rates in the Name of Financial Stability."  Said slide deck, in addition to hinting that the macroeconomy (not Goldman's bonus pool mind you) may not be able to withstand the shock and horror of a 0.25% rate hike, also contained the following binomial decision tree (in which Goldman, with a straight face said that it was unclear if rate hikes "reduce bust risk") designed to strongly "clue" the academic central planners in the Marriner Eccles building just how and when to act.   What we won't, however, ignore is a note released several hours after today's disastrous jobs print by the Goldman economic team, titled "It Is Hard to Be Reasonably Confident", in which Goldman takes a machete, for the second time in 4 years, to its "above consensus" forecast.  Here is what Goldman had to say: Today’s employment report was a disappointment, as payrolls posted a weaker-than-expected gain in March and employment gains were revised down in prior months.  "It is hard to be “reasonably confident” in the inflation outlook given current economic conditions, unless several inflation drivers rise at the same time. We therefore do not have much confidence in the inflation outlook and believe that the right policy would be to put hikes on hold for now."

For Fed, Question of Whether Jobs Weakness Will Continue or Prove an Aberration - Federal Reserve officials will likely want to see a few more months of data before deciding whether the March slowdown in hiring reflects a serious weakening in the labor market that would justify holding off on raising interest rates.  If hiring rebounds in coming months, that would bolster the case of those officials who want to start lifting borrowing costs sooner rather than later—perhaps as soon as June—while a lasting slowdown would provide reason to hold off.  The Labor Department’s report Friday that employers added just 126,000 jobs last month, the lowest tally in more than a year, comes as Fed officials are discussing when to start raising their benchmark short-term interest rate from near zero. The Fed has said it will raise rates when it sees further improvement in the labor market and is confident inflation is moving back toward its 2% target.   The disappointing job growth in March is likely not a huge surprise to the Fed because other measures of the economy, such as retail sales and industrial production, have also been soft in recent months. Previously, the increase in payroll jobs had been a robust outlier. Now it’s in the muddled middle along with the rest of the major economic indicators. One question Fed economists will quickly set about trying to answer is whether today’s weak report is due to the weather. Last year, during a harsh winter, the economy contracted in the first quarter and the labor market softened. The data snapped back later when the weather improved.  If the weakness is sustained, however, the Fed would be quite unlikely to raise rates in June.

Ben Bernanke: The Fed Is ‘Groping’ to Find the Full Employment Rate - Former Federal Reserve Chairman Ben Bernanke said he doesn’t know where the so-called full-employment level is now, saying the Fed “is in some sense groping” to determine it. Full employment is the point at which joblessness has fallen as low as it can go without fueling inflation pressures. It’s a point that changes over time as the economy evolves and can be hard to identify. “It’s even more complicated than it was before,” Mr. Bernanke said in a question-and-answer session following remarks at the Johns Hopkins School of Advanced International Studies on Monday. “The unemployment rate used to be the only number you had to look at. Now of course there are many dimensions.”  “It’s much harder to make an assessment,” he added. The comments come as the central bank is weighing whether the economy–and the labor market in particular–is healthy enough to withstand interest rate increases. Fed officials indicated at their latest policy meeting they don’t think the U.S. has reached full employment just yet. In December, officials pegged the economy’s long-run unemployment rate, somewhere between 5.2% and 5.5%. But in updated projections released earlier this month, they lowered their estimate to a range between 5 and 5.2%. The U.S. jobless rate was 5.5% in February. Mr. Bernanke said of the full employment rate, “Nobody really knows that number with any precision,” adding, “and the Fed will continue to grope to find out what the right number is.”

The Way Out -- Kunstler -- It’s not what most people think: a return to some hypothetical “normality,” with the ghost of Ronnie Reagan beaming down like a sun-god under his lopsided pompadour, and all the happy self-driving GM cars toodling back and forth from WalMart-to-home loaded to the scuppers with new electric pop-tart warmers and 3-D underwear printers. (Or drone deliveries of same from I mean, surely the thinking folk out there must be asking themselves: what is the way out of this Federal Reserve three-card-monte, one-percenter-stuffing, so-called “economy,” and what is the destination of this society when that mendacious model for living fails? I digress for a moment: there was a chap named Richard Duncan on the pod-waves this weekend (FSN Network) putting out the charming idea that quantitative easing (QE — governments “printing” money to buy their own bonds) had the effect of “cancelling debt” and that it could continue for decades to come. I don’t doubt that there are Federal Reserve officers who believe this. The part they leave out — and Mr. Duncan also left it out until pressed — is that there are consequences. Consult the operating manual of the universe, and you will find that there really is no free lunch or get-out-of-jail card. The truth is, when you rig a money system with price interventions, distortions, and perversions, they will eventually express themselves in ways destructive to the system. In the present case of world-wide QE and central bank monkey business, these rackets are expressing themselves, finally, in wobbling currencies. In many nations, people are deeply unsure of what their money is worth, and how much it might be worth a month from now. This includes the USA, except for the moment our money is said to be magically appreciating in value compared to everyone else’s. Aren’t we special? Get this: nothing is more hazardous than undermining people’s trust in their money.

Finally The "Very Serious People" Get It: QE Will "Permanently Impair Living Standards For Generations To Come" --When "very serious people" (even if it is those who once ran now defunct Bear Stearns) announce it, with a 6 year delay, they make the Financial Times. On the other hand, when Zero Hedge said precisely this 6 years ago, it was cast as a tin-foil clad group of conspirators who see the worst in every situation. What is "it"? This: The long-term consequences of global QE are likely to permanently impair living standards for generations to come while creating a false illusion of reviving prosperity. In this case, it was said this week by Guggenheim's Chairman of Investments and Global Chief Investment Officer, Scott Minerd. We are happy that increasingly more "serious people" come to the same conclusion which we posited first a 6 years ago. Here is the full note: As economic growth returns again to Europe and Japan, the prospect of a synchronous global expansion is taking hold. Or, then again, maybe not. In a recent research piece published by Bank of America Merrill Lynch, global economic growth, as measured in nominal U.S. dollars, is projected to decline in 2015 for the first time since 2009, the height of the financial crisis. In fact, the prospect of improvement in economic growth is largely a monetary illusion. No one needs to explain how policymakers have made painfully little progress on the structural reforms necessary to increase global productive capacity and stimulate employment and demand. Lacking the political will necessary to address the issues, central bankers have been left to paper over the global malaise with reams of fiat currency. With politicians lacking the willingness or ability to implement labor and tax reforms, monetary policy has perversely morphed into a new orthodoxy where even central bankers admittedly view it as their job to use their balance sheets as a tool to implement fiscal policy. One argument is that if central banks were not created to execute fiscal policy, then why require them to maintain any capital at all? Capital is that which is held in reserve to absorb losses. If losses are to be anticipated, then a reasonable inference is that a certain expectation of risk must exist. Therefore, central banks must be expected to take on some risk for policy purposes, which implies a function beyond the creation of a monetary base to maintain price stability.

PCE Price Index: Little Change in the Fed's Preferred Inflation Gauge - The Personal Income and Outlays report for February was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.33%, up fractionally from the from 0.24% the previous month. The Core PCE index (less Food and Energy) at 1.37% is little changed from the previous month's 1.33% YoY. The general disinflationary trend in core PCE (the blue line in the charts below) must be perplexing to the Fed. After years of ZIRP and waves of QE, this closely watched indicator consistently moved in the wrong direction. In April of 2013, the Core PCE dropped below 1.4% and hovered in a narrow YoY range of 1.23% to 1.35% for twelve months. The subsequent months saw a higher plateau approaching 1.5%, but the most recent months are closer to the lower range. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low, a level to which it has returned in the last three months. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. The most recent FOMC statement now refers only to the two percent target.

U.S. Inflation Undershoots the Fed’s 2% Target for the 34th Straight Month -- The Federal Reserve’s preferred measure of inflation in February fell short of the central bank’s 2% target for the 34th straight month. The price index for personal consumption expenditures was up only 0.3% from a year earlier, the Commerce Department said in Monday. The last reading above 1% came in November. The oil price crash, a strong dollar and weak overseas economies have all kept inflation at bay. But some slack in the U.S. economy may also be keeping prices muted. Taking out food and energy, inflation barely firmed to 1.4% from 1.3% in January. The Fed has two mandates: fostering maximum employment and price stability. The two aren’t at odds, at least for the moment, but we’re getting closer. In projections released earlier this month, Fed policy makers lowered their estimate of the longer-run jobless rate to a range between 5% and 5.2%. That threshold represents what some economists call the nonaccelerating inflation rate of unemployment, or Nairu. In English, it’s the lowest unemployment rate that won’t stoke inflation. At 5.5% in February, unemployment is still shy of that mark. But overall, the labor market has been adding jobs at a healthy clip for months and appears to be on solid ground.

Why Ben Bernanke Isn’t Buying the Secular Stagnation Thesis -- Count Ben Bernanke among the skeptics of the idea that the U.S. economy is slipping into a state of malaise called secular stagnation. Proponents of the secular stagnation argument, including former Treasury Secretary Larry Summers, say developed countries face a stretch of subpar growth due to a noxious mix of weak demand, an aging population, slow productivity growth and reduced technological innovation. Low interest rates reflect the dearth of profitable opportunities for savers and investors, and depressed investment explains why the economy grows only when a financial bubble boosts spending. Mr. Bernanke, the former Fed chairman, outlined three reasons why he’s skeptical of the secular stagnation thesis in a blog post on Tuesday at the Brookings Institution. Those reasons “go beyond the fact that the U.S. economy looks to be well on the way to full employment today,” he writes. First, Mr. Bernanke says that if real interest rates fell to an equilibrium level of minus 2%, the level predicated by an economy facing secular stagnation, it would be “hard to imagine that there would be a permanent dearth of profitable investment.” At such a rate, almost any investment would be profitable, he writes, raising questions over whether the economy’s equilibrium interest rate could be negative for very long. Second, he sides with economists who have previously taken issue with the argument that the economy hasn’t reached full employment in recent decades absent a financial bubble. The bubble in tech stocks, for example, developed in the late 1990s, well after the economy was growing strongly. Third, he writes, greater signs of stagnation abroad would be needed for the secular stagnation thesis to prove correct. “The availability of profitable capital investments anywhere in the world should help defeat secular stagnation at home,” Mr. Bernanke writes. “In short, in an open economy, secular stagnation requires that the returns to capital investment be permanently low everywhere, not just in the home economy.”

It's Already Priced Into the Market - Former Fed chair Ben Bernanke blogged about secular stagnation today and he's not buying it: Does the U.S. economy face secular stagnation? I am skeptical, and the sources of my skepticism go beyond the fact that the U.S. economy looks to be well on the way to full employment today. First... at real interest rates persistently as low as minus 2 percent it’s hard to imagine that there would be a permanent dearth of profitable investment projects.  It’s therefore questionable that the economy’s equilibrium real rate can really be negative for an extended period. His successor, Janet Yellen, is also skeptical. She acknowledged in a speech the possibility of secular stagnation, but believes it is an unlikely outcome. Her baseline scenario is for the U.S. economy to continue to recover and, as a consequence, to continue to pull up the real equilibrium interest rate: [T] economy's underlying strength has been gradually improving, and the equilibrium real federal funds rate has been gradually rising. Although the recent appreciation of the dollar is likely to weigh on U.S. exports over time, I nonetheless anticipate further diminution of the headwinds just noted over the next couple of years, and as the equilibrium real funds rate continues to rise, it will accordingly be appropriate to raise the actual level of the real federal funds rate in tandem, all else being equal. If we take the New York Fed's estimate of the 10-year treasury term premium and risk-neutral nominal rate as given, then the market is already pricing in a non-secular stagnation future as seen in the 10-year real risk-free treasury yield below

On Secular Stagnation: A Response to Bernanke, by Larry Summers: Ben Bernanke has inaugurated his blog with a set of thoughtful observations on the determinants of real interest rates (see his post here) and the secular stagnation hypothesis that I have invoked in an effort to understand recent macroeconomic developments. I agree with much of what Ben writes and would highlight in particular his recognition that the Fed is in a sense a follower rather than a leader with respect to real interest rates – since they are determined by broad factors bearing on the supply and demand for capital – and his recognition that equilibrium real rates appear to have been trending downward for quite some time. His challenges to the secular stagnation hypothesis have helped me clarify my thinking and provide an opportunity to address a number of points where I think there has been some confusion in the public debate. ... I would like nothing better than to be wrong as Alvin Hansen was with respect to secular stagnation. It may be that growth will soon take hold in the industrial world and allow interest rates and financial conditions to normalize. If so, those like Ben who judged slow recovery to be a reflection of temporary headwinds and misguided fiscal contractions will be vindicated and fears of secular stagnation will have been misplaced. But throughout the industrial world the vast majority of the revisions in growth forecasts have been downwards for many years now. So, I continue to urge that it is worth taking seriously the possibility that we face a chronic problem of an excess of desired saving relative to investment. If this is the case, monetary policy will not be able to normalize, there will be a continuing need for expanded public and private investment, and there will be a need for global coordination to assure an adequate level of demand and its appropriate distribution. Macroeconomists can contribute by moving beyond their traditional models of business cycles to contemplate the possibility of secular stagnation.

Dueling Blogposts From Larry Summers and Ben Bernanke -  Yogi Berra famously said that it’s hard to make predictions, especially about the future. Yet that is exactly what two of our leading economic heavyweights, former Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Larry Summers, attempted to do in recent blogposts.. Mr. Summers has attracted much attention over his resurrection of the notion, originated by Harvard economist Alvin Hansen in the 1930s, that our economy is headed toward a future of slow growth. Known as “secular stagnation,” this thesis holds that future growth of potential GDP (output assuming full employment of labor) is likely to be slower than the postwar average of about 3% and that knowledge of that prospect makes it difficult to achieve full employment because businesses will reduce their long-term investments in capital goods. The relatively slow growth of about 2% since the end of the 2008-09 recession is consistent with this theory, as is the huge cash hoard of American businesses, which are seemingly reluctant to invest.  Not so fast, argues Mr. Bernanke. For one thing, businesses eventually will invest at very low real interest rates, which should boost growth in the short and long run. Other things being equal, low interest rates hold down the value of the dollar, which encourages exports, which in turn helps lead to full employment. Mr. Bernanke might have added that the U.S. economy is near full employment now even though Mr. Summers might be right that the long-run growth rate of the U.S. economy has slowed. Several additional points are worth noting in this intellectual debate.

Ben Bernanke Unchained Takes on Larry Summers - Earlier this week, Ben Bernanke challenged critics who blame the Fed for forcing senior citizens and savers to live with low returns on fixed income investments. Now he is going after Lawrence Summers, the Harvard University professor and former Obama administration economist who was a rival for the Fed job when Mr. Bernanke was being considered for a second term in 2009.Mr. Summers has been arguing that the U.S. is experiencing low interest rates because the U.S. economy is stuck in a long period of slow economic growth known as “secular stagnation” and marked by very low investment and consumption. Mr. Bernanke doesn’t buy the argument. Exceptionally low interest rates ought to make almost any kind of investment more attractive, he argues. Speaking figuratively, he says it would even pay to knock down the Rocky Mountains to lower the fuel costs of driving across them. (He borrows this argument from Mr. Summers own uncle, the late Nobel Prize winner Paul Samuelson.) Moreover, in a world of secular stagnation, weak growth prospects would put downward pressure on the currency and spur exports, he says. In short, Mr. Bernanke argues rates can’t stay low forever, because they eventually spur the kind of investment and spending that drive growth higher and warrant higher interest. Instead, Mr. Bernanke sides with economists who believe slow U.S. growth since the 2007-2009 financial crisis is the result of “temporary headwinds.”

Why are interest rates so low, part 3: The Global Savings Glut - Ben Bernanke -  My previous post discussed Larry Summers’ secular stagnation hypothesis, the notion that monetary policy will be chronically unable to push interest rates low enough to achieve full employment. The only sure way to get closer to full employment, in this view, is through fiscal action.  A shortcoming of the secular stagnation hypothesis is that it focuses only on factors affecting domestic capital formation and domestic household spending. But US households and firms can also invest abroad, where many of the factors cited by secular stagnationists (such as slowing population growth) may be less relevant. 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. Profitable foreign investments generate capital income (and thus spending) at home; and the associated capital outflows should weaken the dollar, promoting exports. At least in principle, foreign investment and strong export performance can compensate for weak demand at home. Of course, there are barriers to the international flow of capital or goods that may prevent profitable foreign investments from being made. But if that’s so, then we should include the lowering or elimination of those barriers as a potentially useful antidote to secular stagnation in the US.  My conclusion was that a global excess of desired saving over desired investment, emanating in large part from China and other Asian emerging market economies and oil producers like Saudi Arabia, was a major reason for low global interest rates.

Full Employment, Trade Deficits, and the Savings Glut: A Fascinating Debate in the Macro Blogosphere -- Jared Bernstein - The macro blogosphere is on fire, as Bernanke, Summers, and Krugman are having a fascinating discussion that starts with secular stagnation (persistently weak demand, even in expansions), adds a strong dose of international trade with an emphasis on the Bernanke savings glut observations, and thus speaks to a lot of what we think about here at OTE. Read it yourself—PK provides all the relevant links—but let me amplify a few points that struck me as particularly germane. I will also claim some ownership as the Bernanke comments were made at our full employment event and I’ve tried (along with many others) to raise/amplify the international dimension of this in terms of our persistent and large trade deficits—which result in part from Bernanke’s savings glut—as a significant barrier to full employment. Larry agrees with Ben’s amendment to the sec stag analysis, i.e., the importance of including the impact of global imbalances of savings over investment (trade surpluses) on our own trade deficits: With the benefit of hindsight, I wish I had been clearer in seeking to resurrect the secular stagnation hypothesis that one should take a global perspective…Particularly in the 2003-2007 period it is appropriate to regard Ben’s savings glut coming from abroad as an important impediment to demand in the United States.  Ben and I are, I think, in agreement that it is important to think about the saving-investment balance not just for countries individually, but for the global economy. This latter point, about the balance for the global economy, is essential to grasp. I tried to explain it here as follows, adding the role of the dollar as one of globe’s main reserve currencies.

Thrown Under the Bus: Another Look at the Self-Serving Launch of Ben Bernanke's Blog and the Brookings Institute's Pandering Role - Within hours of Ben Bernanke launching his blog at the Brookings Institute I commented Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It. By that time, a few hundred comments to his blog had already been approved. I made two comments of my own. I asked Bernanke about  Fed-sponsored bubbles, inflation as measured by the CPI while ignoring assets especially in housing (see charts in the above link), and whether or not the Fed had any culpability for that had happened.  I was 99% sure in advance my questions and comments would be deleted. They were twice.  Instead of posting serious comments and questions, the Brookings institute fawned all over Bernanke by posting numerous glowing appraisals, thanks, and other trivia. The sole purpose of Bernanke's blog, and the Brookings Institute is shamefully willing to go along with it, is to vindicate Ben Bernanke and the Fed from their role in the housing bubble. Others have chimed in on Bernanke's post and have had their comments and questions deleted as well. Since the Brookings Institute is willing to degrade itself to such a level, I thought I would post a reply to Bernanke's Blog that I found noteworthy. I invite you to read Ben Bernanke’s Apologia for the Fed by Pater Tenebrarum at the Acting Man blog.

How serious is the US slowdown? - Now that the Federal Reserve has announced that its policy stance after June will be entirely “data determined”, the markets are watching the flow of information on US economic activity even more carefully than usual. Since 2010, there has been a recurring pattern in US GDP projections. They start optimistically, but are then progressively downgraded as the economic data come in. In the last few weeks, there has been a sharp downward adjustment to GDP growth estimates for the first quarter, and this has added to the market’s scepticism about whether the Fed will be ready to announce lift off for interest rates this summer. Chair Yellen’s important speech on Friday again expressed concern that the rise in the dollar might be negatively affecting net exports (explicitly mentioning the drag from the dollar no less than three times, which is unusual for a Fed Chair). Nevertheless, the FOMC remained fairly upbeat about immediate prospects for US GDP, reducing the “central tendency” for growth in the year ended 2015 Q4 by only 0.3 per cent to 2.3-2.7 per cent, a little above trend. Ms Yellen explained that this reflected optimism about consumer spending in the context of low energy prices and a strengthening labour market. She summarised her views as follows: I anticipate that real gross domestic product is likely to expand somewhat faster than its potential in coming quarters, thereby promoting further gains in employment and declines in the unemployment rate. Unfortunately, this optimistic view is already being challenged by weak economic data in the first quarter. It would not take much further weakness in the second quarter to wobble the confidence of both the Fed and the markets. The graph below brings together some tracking estimates for GDP growth in Q1, and also some “nowcasts” of underlying activity:

Demographics and GDP: 2% is the new 4% -  Based on some recent comments I've seen, I think this is worth repeating. For amusement, I checked out the WSJ opinion page comments on the Q4 GDP report. As usual, the WSJ opinion is pure politics - but it does bring up an excellent point (that the WSJ conveniently ignores).First, from the WSJ opinion page: The fourth quarter report means that growth for all of 2014 clocked in at 2.4%, which is the best since 2.5% in 2010. It also means another year, an astonishing ninth in a row, in which the economy did not grow by 3%. This period of low growth isn't "astonishing". First, usually following a recession, there is a brief period of above average growth - but not this time due to the financial crisis and need for households to deleverage. So we didn't see a strong bounce back (sluggish growth was predicted on the blog for the first years of the recovery). And overall, we should have been expecting slower growth this decade due to demographics - even without the housing bubble-bust and financial crisis (that the WSJ opinion page missed).

Forecasters Shrug off Winter Economic Blues - Business economists are shrugging off a winter economic slowdown. A poll of 50 professional forecasters by the National Association for Business Economics estimated a 3.1% advance for gross domestic product this year, which would be the best performance in a decade and a marked improvement from the 2.2% to 2.4% range of the prior three years. “Healthier consumer spending, housing investment and government spending growth are expected to make outsized contributions to the projected acceleration in overall economic activity,” said John Silvia, chief economist of Wells Fargo and NABE president. NABE released the survey, conducted Feb. 25-March 12, amid a string of weak real-time economic data. The Commerce Department on Friday said GDP, the broadest measure of goods and services produced across the economy, expanded at a seasonally adjusted annual rate of 2.2% in the fourth quarter, a sharp slowdown from the third quarter’s 5.0% pace. And GDP growth estimates for the first quarter tumbled last week after a disappointing report on business spending. Consumer outlays also appears to be off to a sluggish start this year, hampered in part by bad weather and a disruption at West Coast ports.  The latest survey upgrades nonfarm payroll growth to an average of 251,000 per month this year and expects the unemployment rate to average 5.4% for the year. Oil is expected to just creep up to $61 per barrel at the end of the year, helping keep inflation in check at a paltry 1.2%.

Reality Check: The Next Boom Is Not Upon Us: The big news this week was that there was now more data to sharpen those first-quarter economic forecasts, including a disappointing durable goods report. The recent data in terms of weather and energy-related investments have not been positive, causing a number of major economists to slash their first-quarter GDP forecasts from a high of 3% to a new range of 0.0%-1.5%. Like 2014, we suspect the weather-related issues will cause at least some snapback in spring and summer. However, the slow start may make it difficult for the economy to hit the 3% or higher growth rates for the full year that were prevalent just a month or two ago. For some time we have believed those estimates were too high because of knock-on effects of a slowing energy industry and a slowing manufacturing sector. Terrible February weather further compounded that problem. Besides the disappointing durable goods orders report, inflation picked up again, as did energy prices. Existing-home sales were also soft, raising even more doubts about the housing industry, although a more nuanced analysis of the data showed year-over-year trends continuing to improve. In contrast, new home sales data was surprisingly strong no matter how one looked at it. To top off that report, even the data for January was revised upward. A lot of the interest was in homes still on the drawing board or already completely finished, explaining why some of the other reports did not pick up on the strength. Most of those more negative reports focus on when the shovels literally hit the ground. On the international front it appears that the European manufacturing sector is already picking up while China continues its modest slump. Also weighing on stocks this week was more warlike activity in the Middle East that helped boost energy prices but scared other equity fund managers.

I'm Raising the Caution Flag on the US Economy: Analysts and investors cheered when the US economy grew 5% in 3Q14. Finally, it seemed, the pace of economic growth had hit “escape velocity” – a level at which the macro level of economic growth no longer required fiscal or monetary stimulus. But with a headline number of 2.2% in 2Q14, overall GDP growth quickly returned to its previous slower levels. And since the first of the year several economic numbers have been disappointing. While no one is arguing a recession is on the way, there is just enough negativity in the numbers to raise concerns. Three concerning developments were buried in the fourth quarter GDP report. First, business fixed investment only increased .6% from the previous quarter. Granted, this occurred after two consecutive quarters of growth above 11%, meaning the latest number could simply be a slowdown from the faster pace set earlier in the year. The sharpness of the slowdown, however, raises a potential red flag. Second, exports of goods only increased 2.5% whereas in the previous two quarters they were up 14.3% and 7.5%, respectively. The higher dollar is clearly the reason for this development. Third, total government expenditures decreased 1.9% with a sharp 7.3% drop in federal spending. This pattern of weak fourth quarter federal government spending reports has occurred over the last two years, meaning this could simply be a continuation of that pattern. Weakness in several economic statistics has continued into the first quarter, starting with industrial production:  Overall IP decreased in two of the last three months.  And the increase in January was only .1% -- hardly a number to get excited about.  Sub-categories have broadly declined: consumer products, business equipment, construction and materials are all lower.       Next, consider the weakness in durable goods orders:

It's Official: Fed Sees 0.0% GDP Growth In The First Quarter -- The Atlanta Fed's GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 has been downgraded once again... to 0.0 percent on April 1, down from 2.3 percent on Feb 13th. Following this morning's construction spending release from the U.S. Census Bureau, the nowcast for real residential investment growth increased from -1.1 percent to 1.8 percent. This was more than offset by declines in the nowcasts for real nonresidential structures investment growth (-19.3 percent to -22.5 percent) and real state and local government spending growth (0.3 percent to -0.8 percent).

Why is no one talking about a recession? - — It’s an odd conspiracy of silence. There were signs the economy was slowing in data for the end of the fourth quarter, and it’s looking far, far worse this quarter. Wednesday brought the latest trio of bad data. ADP said it had the first sub-200,000 print for private-sector jobs growth in more than a year. The Institute for Supply Management reported its fifth consecutive drop in manufacturing sentiment. Construction spending wasn't only lower in February, but January’s report was sharply revised downward. OK, there are caveats. The ADP report, perhaps after too much tampering and too many surprises, has lost some of its credibility. The ISM report is still in positive territory, and a separate gauge from Markit is a little bit healthier. There really was unusually bad weather. There really was a big disruption to trade from the port issues on the West Coast. There really was a big run-up in the U.S. dollar. And yet — it does seem odd that not a single Wall Street economist is worried the U.S. is in, or is near, a recession. A check of emailed reports found the word “recession” was absent in every report issued Wednesday, except for a historical reference to the last one. The Atlanta Fed has constructed something called a “nowcast” — basically, an estimate of GDP growth just based on incoming economic data. The latest update to reflect Wednesday’s data on construction spending puts the nowcast at exactly zero. And still, the R-word isn’t escaping anyone’s lips.

Fed’s Lockhart Expects Economy to Pick Up in Second Quarter - Federal Reserve Bank of Atlanta president Dennis Lockhart said Wednesday he believes the U.S. economy will pick up in the second quarter, and the June to September window remains “quite feasible” for the central bank to start raising interest rates. Factors putting downward pressure on the economy in the first quarter “contributes to a situation of some ambiguity at the moment, but I do think this will pass,” Mr. Lockhart, who is a voting member of the Fed committee that sets monetary policy, told reporters in Stone Mountain, Ga. He also said he still sees “not an insubstantial amount of slack in labor markets.” He said he listened closely when, during a evening speech Monday, Fed Vice Chairman Stanley Fischer said he found unemployment data to be more reliable than measures of economic output, such as gross domestic product. “I take the point that our measurement of employment is methodologically probably a bit more precise, such as it is, than our measurement of output,” Mr. Lockhart said. “I think that does…suggest to me that, as we are looking at the data in a data-dependent mode over the coming weeks and months to make possibly a decision on (interest rate) lift-off, that focus on what’s happening in the employment numbers will be very important.” Mr. Lockhart also made some comments on regulatory policy, saying he believes the provision in the 2010 Dodd-Frank law calling for stricter supervision of banks with more than $50 billion in assets should be changed. Some banks above the $50 billion threshold “individually at least do not represent systemic risk, so I think the threshold should be raised,” he said. “I don’t have a number, but certainly higher than $50 billion.”

Pressure in Repo Market Spreads - WSJ: A shortage of high-quality bonds is disrupting the $2.6 trillion U.S. market for short-term loans known as repurchase agreements, or “repos,” creating bottlenecks for a key source of liquidity in the financial system and sending ripples through short-term debt markets. Stresses in the repo market are amplifying price swings in government bonds and related debt markets at a time when many investors are reshuffling their portfolios around new interest-rate expectations, following a period of low volatility, traders and analysts said. Although traders said the impact so far has been manageable, the broad concern is that scarcity in repos will pressure rates and could complicate efforts by the Federal Reserve to lift interest rates when the time comes. Problems in the repo markets have been the subject of discussions at the U.S. Treasury, people familiar with the matter said. Since there is typically a strong relationship between repos and overall bond markets, the shifts can influence trading in everything from U.S. Treasurys to commercial paper, short-term IOUs taken on by companies. “The less repo, the less liquidity in bond and other markets,”

U.S. Government Bonds Rise for Fifth Straight Quarterly Gain - WSJ: U.S. government bonds rose Tuesday to cap the fifth quarterly gain in a row, the longest winning streak in more than a decade. The $12.5 trillion market continues to lure investors left uncertain by uneven global growth and subdued inflation in the developed world. Mixed economic readings in the U.S. during a harsh winter have bolstered investors’ expectations that the Federal Reserve will maintain an accommodative monetary policy, which tends to benefit bond prices. Treasurys also offer higher yields than comparable debt elsewhere in the developed world, another reason investors have kept piling in. “The yield differential between the U.S. and the rest of the world continues to drive foreign buyers into Treasury bonds,” said Thomas Roth, executive director in the U.S. government bond trading group at Mitsubishi UFJ Securities (USA) Inc. in New York. “Domestic investors [have] become convinced by Federal Reserve officials that these low yields are here to stay.” In late afternoon trading, the yield on the benchmark 10-year Treasury note was 1.930%, down from 1.959% on Monday. Yields fall when bond prices rise.

Bridges and budgets: The deep unreality of Republican transportation plans - Every once in a while, you’re hit over the head with just how damaging the dysfunctional, unresponsive politics we live with today really are. Here’s a headline from a Post article from yesterday: “With 61,000 bridges needing repair, states await action on Capitol Hill.” And then there’s this budget analysis by my Center on Budget colleague David Reich: “House, Senate Budgets Have Big Cuts in Transportation Infrastructure.” David points out that both of the budgets passed by the House and Senate “cut highway construction and other transportation infrastructure funding over the next decade by 28 percent and 22 percent, respectively, below the cost of maintaining current funding levels.” That is, they go in exactly the opposite direction that we need them to, given the state of our national transportation infrastructure. In what has to be one of the deepest departures I’ve seen from the reality of our needs in this space, note the path of the yellow line above. That’s from the House budget, which calls for cutting mandatory transportation funding by almost 90 percent in 2016, from $54 billion to $6 billion. What, you may well ask, could they possibly be thinking?

A Choice between Defense, Old People and Tax Hikes - Are those our only choices? And if so, what's it going to be? Cutting defense spending or cutting Social Security? Because with a GOP-dominated Congress, it won't mean increasing revenues by raising taxes on those who are most able to afford a slight increase. Even though the rich live longer than the rest of us, the Washington Post columnist Robert Samuelson (like most Republicans) says we should raise eligibility ages for Social Security beneficiaries to reflect longer life expectancies, perhaps to 69 or 70. In other words, they want most of us "working stiffs" to work until the day we drop dead (most probably, while we're still at work). That's a very painless plan to implement — especially if you're a member of Congress. According to Fact Check: Members of Congress are eligible for a pension at the age of 62 if they have completed at least five years of service. Members are eligible for a pension at age 50 if they have completed 20 years of service, or at any age after completing 25 years of service. The amount of the pension depends on years of service and the average of the highest three years of salary. By law, the starting amount of a Member’s retirement annuity may not exceed 80% of his or her final salary. These people, who want to raise our retirement age and cut our benefits, also get Social Security — but then again, they don't pay this tax on 100% of their earnings — not like the bottom 97.7% of all other wage earners — because with a salary of $174,000 a year and a cap on Social Security taxes at $118,500 — members of Congress only pay this tax on 61.1% of their government taxpayer-paid salaries. Shouldn't they lead by example? But even still, more than half the members of the House and Senate are already millionaires according to analysis of financial disclosure reports (and so therefore, they don't need any government pensions at all).

The GOP has spoken: The wealthy and powerful could use more help - The GOP-dominated House and Senate passed their budget resolutions last week, and in the process proved beyond reasonable doubt that the majority party is less interested in governing than in sending symbolic valentines to the wealthy.  As usual, this will lead to the same ideological war that consumes our politics, but this budget also represents a war against cognitive function, because only in the fantasies of ideologues can one expect to make $5 trillion in cuts over the next 10 years without raising any taxes. Unless, of course, you do it by advancing a budget that promotes the existence of a privileged class and a servile class. Stop us if you've heard this routine before: There are more cuts to food stamps, mostly by "block-granting" the SNAP program, which shifts much of the burden to the states - states like Texas, where one in four children live in poverty, or Mississippi, where the number is one in three. There is a $90 billion cut in Pell Grants over 10 years, which will make college impossible for millions. They want to repeal the Affordable Care Act, again, because anything that improves the lives of 16.4 million working people cannot possibly be a good thing; and they want to make a $400 billion cut in Medicaid, because they found 11 million others who don't deserve health care. They want to gut Dodd-Frank again - this time by removing regulators' liquidation authority over banks, because House Budget chair Tom Price (R-Ga.) considers it an example of the "onerous policies" of the financial reform act. And they're doing all this while increasing defense spending to $612 billion.

The False Hope of a Smaller Government, Built on Tax Breaks - In the early years of the Reagan Revolution, Senator Robert Packwood, then the powerful Republican chairman of the Senate Finance Committee, offered a robust — if unusual — defense of the tax exclusion for employer-provided health insurance: It prevented the government from getting bigger.“The one reason we do not have any significant demand for national health insurance in this country among those who are employed is because their employers are paying for their benefits,” he argued. “I hate to see us nibble at it for fear you are going to have the demand that the federal government take over and provide the benefits that would otherwise be lost.”This reasoning drives American policy making to this day. Whether he realized it or not, Mr. Packwood was effectively explaining why the United States has, alone among advanced nations, built a government on the idea of keeping the government at bay.  Employer-provided health insurance is often portrayed as a result of serendipity.  But though the health insurance tax break has since grown into the nation’s costliest tax expenditure, it is only one of many. Tax deductions for mortgage interest and charitable contributions were born with the income tax code in 1913. The government later added breaks for retirement savings. More recently, the earned-income tax credit for the working poor was created in 1975 and broadly expanded by President Bill Clinton with his first budget. In response to the rising cost of higher education, Washington provided a deduction for college tuition. While the progression might seem like a chain of historical accidents, it adds up to a strategy.

Tax Proposals Would Move U.S. Closer to Global Norm - WSJ: U.S. lawmakers on both sides of the aisle increasingly are finding appeal in an ambitious concept for overhauling the nation’s income-tax system: a tax based on consumption, a tool long used around the world. The tax-writing Senate Finance Committee is giving new consideration to the consumption-tax idea with the hope that its promised boost to economic growth would ease the way to a revamp.As lawmakers have examined a tax overhaul, “it becomes extremely difficult to see a political path to accomplish it” within the confines of the current income-tax system, said Sen. Ben Cardin (D., Md.), co-chairman of a Finance Committee working group negotiating a possible overhaul of business taxes. As a result, the idea of a consumption tax “is getting a great deal more respect, and it is in the discussions,” he said. Mr. Cardin introduced legislation last year to create a type of consumption tax known as a value-added tax and at the same time lower business taxes and scrap income taxes completely for lower-income Americans.Republicans on the working group also are interested in the concept, including a proposal put forward recently by GOP Sens. Marco Rubio of Florida and Mike Lee of Utah. That plan would make several changes to the tax code that would move the nation closer to a consumption-based system.

For Most Households, It’s About the Payroll Tax, Not the Income Tax -- While policymakers obsess about the income tax, they often lose sight of an important detail: For two-thirds of households, the levy that matters most is the payroll tax. According to a new report by the Joint Committee on Taxation, the 80 million tax filers making $40,000 or less will collectively pay no federal income tax and many will even receive cash payments from the IRS in 2015. But they will pay $121 billion in Social Security and Medicare payroll taxes (including the employer share, which most economists believe falls on workers). Even middle-income households—those making between $40,000 and $75,000--will pay three times as much in payroll tax than federal income tax—nearly $190 billion of the former and just $64 billion of the latter. Over all, three-quarters of these middle-income households will pay more in payroll tax than income tax, according to JCT (see Table A-7 of the report). In fact, income tax payments don’t begin to exceed payroll taxes until household incomes reach six figures, and only really dominate for those making $200,000 or more. Still, the design of the income tax very much matters to those low- and middle-income households. Thanks to personal exemptions and the standard deduction, many households making less than $40,000 can zero out their federal income tax liability. Refundable credits, such as the Earned Income Tax Credit and the Child Tax Credit, make it possible for many middle-income families with children to receive income support through the revenue code. If Congress revises the rules, the income tax liability of those households could change significantly.

The Little People and the Estate Tax - The GOP-dominated House Ways and Means Committee just voted to repeal the federal estate tax, which the Republicans, Libertarians and Tea Partiers have been labeling as a "death tax" that unfairly steals the family jewels from ordinary hard-working Americans. Rep. Paul Ryan (R-Wis.), the committee's chairman, claimed: "This tax doesn’t just hit the big guy, it hits the little guy — like the small business and the family farm." But as Congressman Jim McDermott, a Democratic member of the Ways and Means Committee, had pointed out, “You cannot call twenty-three-thousand acres a family farm." It should also be noted that when Republicans refer to "small businesses", they aren't talking about the local "five-and-dime" store or a "mom-and-pop" business — they mean hedge funds and private equity firms. These financial gurus are the people the GOP wants to lower business taxes for, not for the neighborhood deli. And the same applies to the estate tax.  The New Yorker: "The facts? The estate tax now applies only to inheritances valued at more than $5.4 million [$10.8 million for two parents]. According to an analysis by the nonpartisan Tax Policy Center, about 0.2 percent of estates owed the estate tax." In fact, the repeal of the estate tax would amount to a massive unfunded tax break for the very wealthiest people in the country. The Joint Committee on Taxation estimates that the move will raise the budget deficit by about two hundred and seventy billion dollars over the next ten years.

Ilargi: Warren Buffett is Everything That’s Wrong With America - I think I’ve never understood the American – and international – fascination with money, with gathering wealth as the no. 1 priority in one’s life. What looks even stranger to me is the idolization of people who have a lot of money. Like these people are per definition smarter or better than others. It seems obvious that most of them are probably just more ruthless, that they have less scruples, and that their conscience is less likely to get in the way of their money and power goals. America may idolize no-one more than Warren Buffett, the man who has propelled his fund, Berkshire Hathaway, into riches once deemed unimaginable. For most people, Buffett symbolizes what is great about American society and its economic system. For me, he’s the symbol of everything that’s going wrong. Last week, Buffett announced a plan to merge a number of ‘food’ companies in a deal he set up with Brazilian 3G Capital. For some reason, they all have German names (I’m not sure why that is or what it means, if anything): Heinz, Kraft, Oscar Mayer. Reuters last week summed up a few of the ‘foods’ involved: His move on Wednesday to inject Velveeta cheese, Jell-O, Lunchables, Oscar Mayer wieners, and Kool-Aid into his portfolio, stuffs an already amply supplied larder. The additions came from the acquisition of Kraft Foods Group Inc by H.J. Heinz Co, which is controlled by 3G Capital and Buffett’s Berkshire Hathaway. His larder already included everything from Burger King’s Triple Whopper burgers, Coca-Cola soft drinks and Tim Horton donuts to See’s Candies and Dairy Queen icecream Blizzards, as well as such Heinz brands as Tomato Ketchup, Ore-Ida fries, bagel bites and T.G.I. Friday’s mozzarella sticks. Isn’t it curious to see that once people have more than enough to eat, they sort of make up for that by drastically lowering the quality of their food, like there’s some sort of balance that needs to be found? Give them more than plenty, and they’ll start using it to poison themselves.

How Congress’s Inaction on IMF Reform, Trade Hinders the U.S. - Is Congress undermining America’s international economic competitiveness? Not intentionally, of course. But lawmakers’ failure to act on two important fronts—the International Monetary Fund and trade—may well be having precisely that effect. Indeed, this may be one of the areas where it’s easiest to see the real-world effects of Congress’ balkiness and difficulty in finding common ground even on issues with some bipartisan support. First, the IMF. Five years ago, the Obama administration negotiated an agreement with other leading world powers to adjust the way the IMF, the premier international financial institution, does its business. Among other things, the tweaks in the IMF’s long-standing blueprint would have given more voting powers to developing economies, notably including China’s, to give them clout and responsibilities commensurate with their new and rising global economic power. Despite several efforts by the Obama administration to get the necessary congressional approval for these changes, however, lawmakers have done nothing.  The story on trade is simpler but no less consequential. As Will Mauldin reports for the Journal today, Congress’ failure to give President Barack Obama and his trade negotiators so-called fast-track authority—the legal authority to negotiate a trade agreement that must be voted up or down by Congress without amendments—now is the principal obstacle standing in the way of completing a regional free-trade agreement with 11 Pacific Rim countries. On trade, as well as international finance, the danger now is that trains may be leaving the station without the U.S. on board. Republicans probably share more of the responsibility for the failure to enact IMF reforms, and Democrats more of the responsibility on trade. But the consequences are broad regardless of who is responsible.

House Republican Bloc Poses a Threat to Pacific Trade Deal - WSJ: A diverse bloc of House Republicans is threatening to join Democrats in opposition to the White House’s trade push, imperiling an effort long seen as one of the few prospects this year for bipartisan cooperation. Most Democrats in Congress and nearly all unions oppose President Barack Obama’s quest to win a major trade deal with 11 other Pacific countries. That has put pressure on Republican lawmakers and business groups, who widely support the deal. But some 50 to 60 House Republicans are expected to buck GOP leadership on trade policy, say supporters and opponents following the battle. The group may have the clout to block legislation, known as fast track, that is critical to sealing a final pact on the Trans-Pacific Partnership with Japan and 10 other countries. . If 60 House Republicans defect from leadership on trade, the administration would have to win support from at least 32 House Democrats, well over twice the number now thought to support fast track. House Speaker John Boehner (R., Ohio) has asked for 50 Democrats to come out in support of the bill before he moves for a vote.  GOP opponents fall into several groups. Some tea-party disciples and other conservatives oppose fast track because they say it shifts too much trade authority from Congress to the president under their reading of the Constitution. Other conservatives oppose the legislation, also known as trade promotion authority, because it would expedite a Pacific deal they oppose on grounds of U.S. sovereignty or religious freedom abroad. Still others don’t want to support a deal that could jeopardize light manufacturing or other jobs in their district. But the most common sentiment among Republican critics—and one that is gaining momentum—is deep distrust of Mr. Obama as an international negotiator. The Republican suspicion took center stage this month in public challenges to Mr. Obama’s nuclear negotiations with Iran.

Paranoia Reigns in Congress Over an International Financial Cabal -- It’s tough to keep up with the conspiracy theories that run rampant from day to day in the hallowed halls of Congress. But one that is gaining traction is that the U.S. Treasury Department’s Financial Stability Oversight Council (whose acronym is pronounced F-SOC) is the handmaiden of an international finance cabal and is obediently marching to its beat instead of the mandates of Congress.  These suspicions were on display at the Senate Banking Committee hearing last Wednesday and the House Financial Services Committee hearing the week before where U.S. Treasury Secretary Jack Lew, who Chairs F-SOC, was pummeled with thinly veiled, and not so thinly veiled, accusations.  F-SOC was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. It is charged with the early identification of emerging risks to the financial system. Every major regulator of Wall Street banks has a seat. The conspiracy theory that foreign hot shots are really controlling decisions at F-SOC is not without roots. The international equivalent of F-SOC is the Financial Stability Board, which is run by a Plenary of central bankers and finance ministers from around the globe, along with organizations like the International Monetary Fund (IMF), World Bank and Basel Committee on Banking Supervision. The United States has three members on the Plenary: Nathan Sheets, the Undersecretary for International Affairs at the U.S. Treasury; Daniel Tarullo, a member of the Board of Governors of the Federal Reserve; and Mary Jo White, Chair of the SEC. Mark Carney, the Governor of the Bank of England is the current Chair of the Financial Stability Board.

Federal Credit Programs and the Birth of Lemon Socialism - Yves Smith - We regularly criticize government-subsidized lending as a terrible way to achieve policy goals. First, it’s less efficient since you are laundering the subsidies through the financial system, thus unnecessarily enriching middlemen. Second, it’s well nigh impossible to know the effectiveness of the program. It’s not clear how many people would have gone ahead without the cheap credit, meaning the government is rewarding activity that would have taken place anyhow. Moreover, lending subsidy programs often wind up being overly broad and thus are transfers to people who aren’t the purported beneficiary of the gimmie. One classic example is the mortgage tax deduction. It was slotted to be eliminated, along with the tax deductibility of all other consumer borrowing, in the 1986 Tax Reform Act. Instead, it was preserved because brokers and homebuilders howled bloody murder. The mortgage tax deduction is often depicted as a motherhood and apple pie policy, “promoting the American dream” of homeownership. That implies it helps what the Australians call battlers: those who rely on the tax break in order to afford their first home. But as we know, the presence of the tax break merely leads to housing prices being higher than they otherwise would be (as in prices are bid up to reflect the impact of the tax bennies). And the tax writeoff is far more valuable to homeowners in higher tax brackets, meaning the middle and upper middle class, that the aspiring middle class (to the extent it still exists). Here, Professor Sarah Quinn describes how, starting with the Johnson administration, the Federal government played a large role in using lending subsidies to support preferred policies and was responsible for key credit market innovations like mortgage securitization. Quinn also describes how the targets for stealth industrial policy have changed over time.

SEC Regulatory Capture Scandal: Andrew Bowden’s Fawning Over Private Equity Was No Mistake -- Yves Smith -- Two weeks ago, we discussed how the head of the SEC’s examination unit, Andrew Bowden, gushed about the private equity industry at a conference at Stanford Law School, including joking about how he’s told his son to work in the industry.  This appalling example of regulatory capture has been reported widely, including by Bloomberg, the Los Angeles Times, International Business Times, Matt Taibbi, Bill Black, Bill Moyers, and over the weekend, in a nationally syndicated column by David Sirota. And it’s even more glaring since it was Bowden last May who called out widespread private equity misconduct in unusually specific terms, and later told the New York Times’ Gretchen Morgenson that “investors’ pockets are being picked.”  It turns out that Bowden has been making the same type of statements, save the “Gee it would be great for Cole to work in private equity” part since at least last fall. Occupy the SEC member George Bailey sent us this section from an interview with the industry magazine Private Equity International last September:

Presentation Shows Private Equity Investors Knowingly Sign Contracts With Waivers of Fiduciary Duty, Other Terms Stacked Against Them -  Yves Smith - We've pointed out that private equity investors, known in the trade as limited partners, enter into agreements with private equity firms that do a terrible job of protecting the investors' interests. That sad reality is contrary to the urban legend propagated by the general partners, that the agreements are negotiated, that the limited partners are sophisticated and understand full well what they are getting into. The evidence on the ground strongly suggests otherwise. Today, we'll go through a document presented by a top lawyer for limited partners that shows how the general partners continue to skew the agreements even more in their favor, yet the outside legal guns fail to beat back these terms.

At U.S. Companies, Time to Coax the Directors Into Talking - This is the time of year when company directors venture out of the boardroom to encounter the investors they have a duty to serve. After the meetings are over, like so many Punxsutawney Phils, these directors scurry back to their sheltered confines for another year.This is a bit hyperbolic, of course. But institutional investors argue that there’s a troubling lack of interaction these days between many corporate boards in the United States and their most important investors. They point to contrasting practices in Europe as evidence that it’s time for this to change.“It’s a very different culture in the U.S.,” said Deborah Gilshan, corporate governance counsel at RPMI Railpen Investments, the sixth-largest pension fund in Britain, which has 20 billion pounds, or about $30 billion, in assets. “In the U.K., we get lots of access to the companies we invest in. In fact, I’ve often wondered why a director wouldn’t want to know directly what a thoughtful shareholder thinks.”As Ms. Gilshan indicated, directors at European companies routinely make themselves available for investor discussions; in some countries, such meetings are required. Many directors of foreign companies even — gasp — give shareholders their private email addresses and phone numbers.Their counterparts in the United States seem fearful of such contact. Large shareholders say that some directors of American companies refuse to meet at all, preferring to let company officials speak for them.

Companies Go All-In Before Rate Hike, Issue Record Debt In Q1 - It should come as no surprise that Q1 was a banner quarter for corporate debt issuance as struggling oil producers tapped HY markets to stay afloat, companies scrambled to max out the stock-buyback-via-balance-sheet re-leveraging play before a certain “diminutive” superwoman in the Eccles Building decides to do the unthinkable and actually hike rates, and there was M&A. As we discussed last week, rising stock prices have tipped investors’ asset allocation towards equities even as money continues to flow into bonds, meaning that yet more money must be funneled into fixed income for rebalancing purposes, which ironically drives demand for the very same debt that US corporates are using to fund the very same buy backs that are driving equity outperformance in the first place. Put more simply: the bubble machine is in hyperdrive.  Not only did Q1 mark a record quarter for issuance, March supply also hit a record at $143 billion, tying the total put up in May of 2008. Here’s more from BofAML:  1Q set records for both supply and trading volumes in high grade, as new issue supply volumes reached $348bn, up from the previous record of $310bn in 1Q- 2014, whereas trading volumes averaged 15.6bn per day, up from the previous record of $14.3bn during the same quarter last year… Issuance in March totaled $143bn and it tied with May 2008 and September of 2013 for the highest monthly supply on record going back to at least 1998. September of 2013 was the month when the record $49bn VZ deal was priced

Jumping on junk: Investors crazy for high yield bonds: The supply of U.S. companies with junk-rated debt is rising just as investor demand for higher yields is climbing. Moody's reports a two-year high in company debt rated B3 negative or worse—a.k.a. junk—as part of a trend that has seen the list of 184 companies grow by 26 percent over the period. The rise has been led by oil and gas firms, which accounted for 12 of the 28 additions to the junk list in February. What's more, the roster would be even longer but for companies falling off the list due to reasons including filing for bankruptcy. Of the 18 issuers no longer rated, 39 percent filed either for bankruptcy protection or "distressed exchange, and 33 percent withdrew, with just 28 percent getting off the list due to upgrades." "This is a reversal from the previous two quarters, when most companies left the list via ratings upgrades," Moody's said. "If this reversal continues, it could signal tough times ahead for speculative-grade issuers." Not so far, though. Fueled by low default rates and generally favorable credit conditions, investors in 2015 have been pouring money into funds that invest in high-yield debt. In fact, the previous six weeks before the most recent week had the highest level of flows to junk funds since the financial crisis in 2008 and 2009, according to Morningstar.

Why Did Commodity Prices Move Together? - Remember the 2008-11 food price spike? It led to food riots in many parts of the world and increased the number of malnourished people by 80 million worldwide (USDA 2009). What many people don’t know about the price spike is that besides the rise in magnitude, it was distinctive for the breadth of commodities affected. Prices of a wide range of commodities including agricultural (wheat, corn, soybeans, cocoa, coffee), energy (crude oil, gasoline), and metals (copper, aluminum), all rose and fell together during this period. In my recent Political Economy Research Institute (PERI) working paper, Financialization and the Rise in Comovement of Commodity Prices, I examine whether financialization of the commodity futures market can explain the remarkably synchronized rise and fall of commodity prices in 2008. For the empirical analysis, I extract common factors that explain trends in prices of 41 commodities and study the correlation between this common factor and the flow of money into the futures market. Results show that financialization can explain the rise in comovement between commodity prices after accounting for other macroeconomic variables such as demand from emerging markets and depreciation of the U.S. dollar. These results imply that as financialization of the commodities futures market proceeded and more traders entered the futures market, market liquidity increased. Much of the rise in liquidity was due to increasing investment in commodity indices, which meant that futures of unrelated commodities were being bought and sold together as parts of portfolios. This increase in liquidity across different commodity markets led to the synchronized rise (and fall) in commodity prices.

Four TBTF Banks Threaten To Withhold Funds To Democrats Over Elizabeth Warren's Wall Street Rants -  Having already proven that their institutions are above the law in the aftermath of the financial crisis, executives at the “Too Big to Fail and Jail” banks have decided it’s time to teach Senate Democrats a lesson. Not being content with trillions in taxpayer backed bailouts to protect and further consolidate virtually all wealth within their oligarch fiefdoms, these bankers are irate at the notion that a commoner would dare criticize their unassailable crony privilege. What Wall Street wants is one hundred Chucky Schumers in the Senate.

Senator Elizabeth Warren shoots back at Wall Street after banks reportedly withhold contributions to Democrats - -- Senator Elizabeth Warren took aim at Wall Street on Friday after two banks reportedly decided to halt campaign contributions to Senate Democrats unless Warren and Senator Sherrod Brown of Ohio tone down their rhetoric on breaking up large financial institutions. “They can threaten or bully or say whatever they want, but we aren’t going to change our game plan,” Warren wrote to her supporters. “We do, however, need to respond.”   Warren asked her supporters to help raise the $30,000 that JPMorgan Chase and Citigroup are allegedly saying they would withhold from the Democratic Senatorial Campaign Committee. Each bank can contribute $15,000 to the committee through their corporate PACs per year. Warren’s message went to her campaign e-mail list, which can yield $100,000 in contributions from one fundraising plea. Reuters reported on Friday that the two banks decided stop giving to the DSCC, citing unnamed sources. The wire service also said Goldman Sachs and Bank of America have participated in discussions about tying contribution decisions to Warren’s rhetoric. Citigroup is a frequent target of Warren’s attacks. In December she addressed the bank directly in a speech on the Senate floor, saying that she wished the Dodd-Frank Wall Street reform legislation had “broken you into pieces.”

Elizabeth Warren Strikes Back as Citigroup Tries to Blackmail the Democratic Party -- Yves Smith - An unusual move by a thin-skinned too big to fail bank, Citigroup, to slap down the finance-skeptic faction of the Democratic party appears to be backfiring.  Reuters reported on Friday that Citigroup was making clear its displeasure with the way Elizabeth Warren had been calling to its overly-cozy relationship with the Administration by threatening to withhold its customary bribe, um, donation to the Democratic party: Representatives from Citigroup, JPMorgan, Goldman Sachs and Bank of America, have met to discuss ways to urge Democrats, including Warren and Ohio Senator Sherrod Brown, to soften their party’s tone toward Wall Street, sources familiar with the discussions said this week. The story noted that the amount at issue was only $15,000 per bank, so this scheme is more a warning shot that a serious move, particularly since it is aimed at the Senate, and thus pointedly steers clear of the Big Finance stalwarts, the Clintons. But if you widen the frame a bit, there is more at stake here than you might think. Warren has declared war on the Wall Street wing of the Democratic party, including the powerful network of proteges and fundraisers affiliated with former Treasury secretary, former Goldman partner, and more recently, vice chairman of Citigroup Bob Rubin. One politically-savvy financial analyst calls this cadre “the Rubino crime syndicate”.   Warren fingered Citigroup’s extensive connections to the Executive branch when she fought the addition of a rider to a must-pass spending bill that would eliminate a Dodd Frank provisions to force banks to stop trading certain derivatives in taxpayer-backstopped entities (the so-called swaps pushout rule). As you’ll see below, not only did Warren have the bad taste to point out that the current Treasury secretary is a Citigroup alum, and that Sandy Weill, Citigroup chairman, had offered Timothy Geithner the opportunity to run the bank, she also said that Dodd Frank had come up short by not forcing Citigroup’s breakup. If you’ve not seen this speech, you need to watch it. You’ll understand why Citigroup is desperate to find a way to leash and collar Warren.

Fed’s Fischer Floats Ideas for Regulating Shadow Banks - —The Federal Reserve’s No. 2 official floated a series of ideas for regulating nonbank financial companies, the latest indication that top U.S. policy makers are focusing on risks in the so-called shadow banking sector. “While there has been progress on the financial reform front, we should not be complacent about the stability of the financial system,” said Fed Vice Chairman Stanley Fischer in remarks prepared for a conference here hosted by the Federal Reserve Bank of Atlanta. He noted existing rules create an incentive for risky activities to move into less-regulated financial firms and said “we should expect that further reforms will certainly be needed down the road.” Mr. Fischer briefly discussed monetary policy after the speech, reiterating his expectation that it is likely the Fed will raise interest rates some time this year. He said Fed policy makers should start thinking further ahead. “We’ve got to start thinking about what interest rate determination will look like after we lift off” and begin raising rates, he said. Mr. Fischer also defended the Fed’s 2% inflation target, saying it is reasonable and that he adopts former Fed Chairman Alan Greenspan‘s view that stable prices occur “when people don’t have to take inflation into account in the great bulk of their transactions.” He also gave some insight into the way Fed policy makers view economic data. Asked about the reliability of data on U.S. economic productivity, he noted that in the past, gross domestic product measurements have had to be revised. “I think there is a significantly positive probability that the GDP data may not be accurate,” he said. Mr. Fischer, who sits on the Washington, D.C.-based Fed board that supervises most large U.S. financial firms, is just the latest central banker to raise concerns about nonbanks, which are providing a larger share of credit than in the past. Last week, he and Bank of England Governor Mark Carney, gave speeches in Germany in which they raised concerns about whether those firms would become unstable in periods of stress.

Janet Yellen Needs a Lesson in Culture -- The interesting news coming out of Federal Reserve Chairwoman Janet Yellen’s Q&A yesterday was her response to a question about bad bank “culture.” Apparently, it’s not the Fed’s concern. Yellen said, “While changing the culture of organizations is not something that we can achieve through supervision, we will make sure that the banks that we supervise have appropriate compliance regimes in place.” So far, the Fed’s “appropriate compliance regimes” let big banks get away with manipulating Libor, foreign exchange markets, metals markets and energy prices. And that’s just a few of the big cheating regimes banks have lorded over. Today I’ll reveal a few more of those cheats – and I’ll show you how the Fed, if it wanted to, could change bank culture with a single stroke of a pen…

“Hey, At Least We’re Not the Mafia” — Alexis Goldstein - The payday lending industry makes its profits of off individuals who are living paycheck-to-paycheck — and they’re not afraid to admit that. Their interest rates are astronomical: the annual interest on a two-week payday loan ranges from 391 to 521%. And average annual interest rate matters because 4 out of 5 payday loans are rolled over, often trapping customers in a cycle of debt. As a result, payday lenders have faced increasing scrutiny: their rates were capped in the United Kingdom this year, and payday lenders are banned outright in 14 U.S. states and the District of Columbia. Now, the Consumer Financial Protection Bureau (CFPB), with the backing of President Barack Obama, has made a first step towards federally regulating the industry. But despite the Administration’s coordinated effort, it’s unclear if they’ll succeed. And that’s because this is an industry that knows how to lobby, and how to buy off its critics. Last week, the CFPB announced it will consider proposing regulations to “end payday debt traps.” Their proposal would require short-term lenders to ensure that borrowers actually have the ability to repay a loan before the loan is offered. The CFPB’s plan isn’t perfect: The Woodstock Institute warned that the proposal “includes a gaping loophole” because it would still permit up to three back-to-back loans. And the National Consumer Law Center argued that the borrower’s ability to repay shouldn’t just be based on income; it should also factor in the consumer’s debt and other expenses. But given how powerful, monied, and well-connected the payday industry is, it’s going to take a lot just to get this imperfect proposal off the ground, and even more to strengthen it.

Servicers in DOJ s Crosshairs Following JPM Robo-Signing Settlement: Mortgage servicers were supposed to have stopped robo-signing foreclosure documents when state and federal authorities cracked down on the practice years ago, but it seems some have not learned their lesson. While only JPMorgan Chase has been cited for recent robo-signing infractions, Clifford J. White 3rd, the head of a Justice program that oversees consumer bankruptcies, says he is seeing evidence of other servicers not following proper protocols when it comes to dealing with homeowners who have filed for bankruptcy. That could include not just robo-signing documents, but also failing to inform homeowners of mortgage payment increases or charging excessive loan-default fees. Such abuses violate a 2012 settlement between law enforcement officials and the nation's largest servicers and White is putting other servicers on notice that they too will be punished if they flout bankruptcy rules. "Compared to where we were a few years ago, the banks are doing a better job," said White, the director the Justice Department's Office for U.S. Trustees. But, he added, "it is disappointing that, after all the years, [the problems]…are not completely rectified."The $25 billion national mortgage settlement was supposed to put an end to the widespread practice of low-level employees at mortgage servicers rubber-stamping foreclosure documents without reviewing their accuracy. But earlier this month, JPMorgan Chase agreed to a $50.4 million settlement with the U.S. Trustee Program for robo-signing notices of payment changes in 2013 to borrowers in bankruptcy. Almost all of the restitution will be in refunds and credits to borrowers.

Foreclosure Crisis Update -- Is the foreclosure crisis over? Yes and no. Since 2007, about six million homes have been sold at foreclosure sales (Foreclosures Public Data Summary Jan 2015). Today, about one million homes are still somewhere in the foreclosure process. Homeowners behind in their payments have declined from 15% at the 2010 peak of the crisis to less than 8% now (MBAA delinquent plus in foreclosure at 12/31/14).  Most of the still-troubled loans were originated before 2007. The best news is that new foreclosure starts are now down to pre-crisis levels, at less than one-half of one percent of all mortgages, if we take 2006 to be the pre-crisis level. So new home loans, those made since 2008, are doing very well, and what remains is the legacy of those bad loans that triggered the crisis, right? Not exactly.  The first problem is to define what we mean by pre-crisis levels. Subprime mortgages expanded rapidly from 2000 to 2007, accounting for an ever-increasing share of all mortgages, and skewing delinquency rates upwards. So for a real pre-crisis baseline, we need to go back to earlier times, or to look at mortgage default rates for prime and FHA loans only. Today in 2015 there are virtually no subprime mortgages being originated. As the inventory of old subprime loans winds down, we should expect to see default rates well below those for the early 2000s, and we are not there yet. The second problem is negative equity. At the end of 2014, 16.9% of residential mortgages were underwater, i.e. the debt exceeded the current home value. Home price appreciation is not projected to solve this problem any time soon. This situation is historically unprecedented, and leaves millions of homeowners at continuing risk of default should the economy falter. The third problem is the fragile inventory of nontraditional and modified loans that remain from the subprime bubble. There are perhaps 3 to 4 million active mortgages that were modified to avoid foreclosure in the past seven years. Some of these have temporarily low rates, as low as 2%, that will adjust upwards soon. Others have large balloon payments or payment terms than extend for 40 years, making repayment or refinancing difficult.  And of course there are still plenty of homeowners stuck in non-amortizing mortgages or ARMs that are vulnerable to coming interest rate hikes.

Foreclosure to Home Free, as 5-Year Clock Expires - — Susan Rodolfi is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes. Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.The reason, lawyers for homeowners argue, is that the cases have dragged on too long.There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.However, in a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions. “No one gets a free house,” Judge Michael B. Kaplan of the United States Bankruptcy Court in Trenton wrote in an opinion late last year, reflecting what he characterized as a longstanding “admonition” he and others made during the foreclosure crisis. But after effectively ending a New Jersey homeowner’s foreclosure case in November because the state’s six-year statute of limitations had expired, he wrote in his opinion, “With a proper measure of disquiet and chagrin, the court now must retreat from this position.” It is difficult to know for sure how many foreclosure cases are still grinding through the court systems since the financial crisis. It is even harder to say how many of those borrowers are still living in their homes.

Broke? You May Now Be Entitled To a Free Home - It’s been seven years since the epic collapse of the US housing market, and there’s never been a better time to buy your first home. In Denmark for instance, the bank will tax depositors in order to pay you to take out a home loan. But before you move to a European country operating in NIRP-dom, consider Florida and New Jersey first because as Susan Rudolfi recently discovered, you can actually get a house for free by simply not making your mortgage payments. Here’s more via NY Times: She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes. Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime. The reason, lawyers for homeowners argue, is that the cases have dragged on too long. There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.It should come as no surprise that the free house legal loophole comes courtesy of the always dangerous and extraordinarily unpredictable combination of government ineptitude and TBTF inefficiency, and thanks to the fact that the Fed-sponsored, investment bank securitization-fee-fueled real estate bubble was allowed to inflate to the point where it swallowed the entire US economy, tens of thousands of borrowers may ultimately become owners by virtue of remaining resolute when it comes to not making payments:

Fannie Mae: Mortgage Serious Delinquency rate declined in February, Lowest since September 2008 -- Fannie Mae reported today that the Single-Family Serious Delinquency rate declined slightly in February to 1.83% from 1.86% in January. The serious delinquency rate is down from 2.27% in February 2014, and this is the lowest level since September 2008.  The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.Last week, Freddie Mac reported that the Single-Family serious delinquency rate was declined in February to 1.81%. Freddie's rate is down from 2.29% in February 2014, and is at the lowest level since December 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.   Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  The Fannie Mae serious delinquency rate has fallen 0.44 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will be close to 1% in late 2016. The "normal" serious delinquency rate is under 1%, so maybe serious delinquencies will be close to normal at the end of 2016. This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog, especially in judicial foreclosure states like Florida.

Case-Shiller: National House Price Index increased 4.5% year-over-year in January - S&P/Case-Shiller released the monthly Home Price Indices for January ("January" is a 3 month average of November, December and January prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.  From S&P: Rise in Home Prices Paced by Denver, Miami, and Dallas According to the S&P/Case-Shiller Home Price Indices Data released today for January 2015 show that home prices continued their rise across the country over the last 12 months. However, monthly data reveal slowing increases and seasonal weakness. ... Both the 10-City and 20-City Composites saw year-over-year increases in January compared to December. The 10-City Composite gained 4.4% year-over-year, up from 4.3% in December. The 20-City Composite gained 4.6% year-over-year, compared to a 4.4% increase in December. The S&P/Case-Shiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.5% annual gain in January 2015 versus a 4.6% increase in December 2014.The National index declined for the fifth consecutive month in January, reporting a -0.1% change for the month. Both the 10- and 20-City Composites reported virtually flat month-over-month changes. Of the nine cities that reported increases, Charlotte, Miami, and San Diego led all cities in January with increases of 0.7%. San Francisco reported the largest decrease of all 20 cities, with a month over-month decrease of -0.9%. Seattle and Washington D.C. reported decreases of -0.5%.  The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 15.9% from the peak, and up 0.9% in January (SA). The Composite 20 index is off 14.9% from the peak, and up 0.9% (SA) in January. The National index is off 7.9% from the peak, and up 0.5% (SA) in January. The National index is up 24.3% from the post-bubble low set in Dec 2011 (SA). The second graph shows the Year over year change in all three indices.

Case-Shiller Index Resumes Decline Following Small Gain To End 2014 -- Weather-crushed January saw seasonally-adjusted Case-Shiller home prices - and as a reminder Case-Shiller expressly warns not to use seasonal data but opts for raw, unadjusted reporting - rise 0.87% MoM (better than expected), slower than the revised 0.91% gain in December. However, away from the 'make-everything-feel-better' adjustments, home prices slipped in January following December's brief interlude, leaving the index down 4 of the last 5 months. Of course, it goes witghout sayiung that weather was blamed, as they suggest, "unusually cold and wet weather may have weakened activity in some cities." What is more worrisome however, and farcical, is Case-Shiller's ominous warning against rate hikes, "home prices are rising roughly twice as fast as wages, putting pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback."

A Comment on House Prices: Real Prices and Price-to-Rent Ratio in January - The expected slowdown in year-over-year price increases has occurred. In October 2013, the National index was up 10.9% year-over-year (YoY). In January 2015, the index was up 4.5% YoY.  However the YoY change has only declined slightly over the last five months.  Looking forward, I expect the YoY increases for the indexes to move more sideways (as opposed to down).   Two points: 1) I don't expect (as some) for the indexes to turn negative YoY (in 2015) , and 2) I think most of the slowdown on a YoY basis is now behind us. This slowdown in price increases was expected by several key analysts, and I think it was good news for housing and the economy.  In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation (38%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 7.9% below the bubble peak.   However, in real terms, the National index is still about 21% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through January) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to May 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to December 2004 levels, and the CoreLogic index (NSA) is back to February 2005. The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to June 2003 levels, the Composite 20 index is back to March 2003, and the CoreLogic index back to April 2003. In real terms, house prices are back to 2003 levels.

A Look at Case-Shiller by Metro Area - Home prices in the U.S. edged up to start the year, in part due to strong growth in markets such as Denver, Dallas and Miami. Overall U.S. prices were up 4.5% in the year ended in January, according to the the S&P/Case-Shiller Home Price Indices report released Tuesday. That’s a slowdown from the double-digit pace recorded in early 2014, but still well ahead of tepid inflation. Steady price gains are a sign of a healthy housing market and come when other recent reports show a pick up in sales for both new houses and existing properties. “The combination of low interest rates and strong consumer confidence based on solid job growth, cheap oil and low inflation continue to support further increases in home prices” said S&P’s David Blitzer. An improving housing market would be a welcome sign for U.S. economic growth, which appears to have slowed early this year. Still, there are risks. Home prices are rising at more than double the pace of wages, which have only inched ahead despite steady hiring. And the Federal Reserve appears poised to lift benchmark interest rates later this year, a move that could translate into higher rates on mortgage loans. Home prices growing faster than wages puts “pressure on potential homebuyers and heightening the risk that any uptick in interest rates could be a major setback,” Mr. Blitzer said

NAR: Pending Home Sales Index increased 3.1% in February, up 12% year-over-year -  From the NAR: Pending Home Sales Rise in February Behind Solid Gains in Midwest, West The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.1 percent to 106.9 in February from a slight downward revision of 103.7 in January and is now 12.0 percent above February 2014 (95.4). The index is at its highest level since June 2013 (109.4), has increased year-over-year for six consecutive months and is above 100 – considered an average level of activity – for the 10th consecutive month. ...The PHSI in the Northeast fell 2.3 percent to 81.7 in February, but is 4.1 percent above a year ago. In the Midwest the index leaped 11.6 percent to 110.4 in February, and is now 13.8 percent above February 2014. Pending home sales in the South decreased 1.4 percent to an index of 120.2 in February, but is still 10.8 percent above last February. The index in the West climbed 6.6 percent in February to 102.1 (highest since June 2013 at 111.4) and is now 18.3 percent above a year ago.  This was well above the consensus forecast, but as expected by housing economist Tom Lawler. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in March and April.

When a Rising Tide Sinks Most Boats -- In the postwar period, with every subsequent expansion, a smaller and smaller share of the gains in income growth have gone to the bottom 90 percent of families. Worse, in the latest expansion, while the economy has grown and average real income has recovered from its 2008 lows, all of the growth has gone to the wealthiest 10 percent of families, and the income of the bottom 90 percent has fallen. Most Americans have not felt that they have been part of the expansion. We have reached a situation where a rising tide sinks most boats.This policy note provides a broader overview of the increasingly unequal distribution of income growth during expansions, examines some of the changes that occurred from 2012 to 2013, and identifies a disturbing business cycle trend. It also suggests that policy must go beyond the tax system if we are serious about reversing the drastic worsening of income inequality.

Construction Spending decreased 0.1% in February - Earlier today, the Census Bureau reported that overall construction spending decreased in February:  The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2015 was estimated at a seasonally adjusted annual rate of $967.2 billion, 0.1 percent below the revised January estimate of $967.9 billion. The February figure is 2.1 percent above the February 2014 estimate of $947.1 billion.  Private spending increased and public spending decreased: Spending on private construction was at a seasonally adjusted annual rate of $698.2 billion, 0.2 percent above the revised January estimate of $696.9 billion. ... In February, the estimated seasonally adjusted annual rate of public construction spending was $268.9 billion, 0.8 percent below the revised January estimate of $271.0 billion. Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas is generally declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.  As an example, construction spending for lodging is up 10% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 17% year-over-year. . This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending dipped a little last year, but is increasing again. Non-residential spending is 16% below the peak in January 2008. Public construction spending is now 17% below the peak in March 2009 and about 3% above the post-recession low.

Construction Spending Unexpectedly Declines; Good News For Economists! Inquiring minds are investigating construction spending, yet another economic report blamed on bad weather. As has been the case recently, bad weather was unforeseen by economists even though their made their estimates recently, and the report is for February. Construction spending for February came in today at -0.1% while the Bloomberg Construction Spending Consensus Estimate for February was a gain of 0.2%. Construction spending unexpectedly dipped 0.1 percent in February after falling 1.7 percent in January. Market expectations were for a 0.2 percent increase. February's decrease was led by public outlays which dropped 0.8 percent. Private nonresidential construction spending rebounded 0.5 percent. Private residential spending slipped 0.2 percent. On a year-ago basis, total outlays were up 2.1 percent in February compared to 1.4 percent in January. Adverse weather may be still affecting construction data. There is a chance of a normal weather rebound with warmer spring weather. But until later numbers come in, GDP growth estimates are likely being bumped down. Still, rebound data could send estimates up.  By now, I would have thought economists would have figured out that February weather was much worse than they thought given that consensus estimates for nearly every report have been overly optimistic.   For economists seeking good news, I have some to offer: February is finally over!

Reis: Apartment Vacancy Rate decreased in Q1 to 4.1% -- Reis reported that the apartment vacancy rate declined in Q1 2015 to 4.1%, down from 4.2% in Q4 2014, and the same as in Q1 2014. The vacancy rate peaked at 8.0% at the end of 2009. A few comments from Reis Senior Economist and Director of Research Ryan Severino: After appearing to reach an inflection point last year, beyond which the national vacancy rate would continue rising, vacancy actually declined by 10 basis points to 4.1%. This decrease in vacancy was primarily due to relatively weak new completions during the first quarter. Although weak first quarters for completions has become a bit of a norm in recent years as seasonality has returned to the market, it is a bit surprising this year because of the large pipeline of projects slated to come online in 2015, including many new units that were supposed to be completed last year but were delayed until this year. ... The 4.1% vacancy rate matches the cyclical low that was attained during the first half of 2014. The decline was predominantly due to relatively weak supply growth during the quarter – although demand exceeded supply, net absorption was also relatively weak during the quarter as is usually wont to happen during the first quarter of calendar years. Despite this quarter’s decline, over the last twelve months the national vacancy rate was unchanged, indicating that the national vacancy rate has likely bottomed and should rise during the balance of 2015. The massive amounts of new supply that are coming online over the next few years should exceed demand which will gradually push the vacancy rate upward. Asking and effective rents both grew by 0.6% during the first quarter. This also follows the slowing trend of the last few quarters, but seasonality was likely a factor in this lack of acceleration versus the fourth quarter of 2014. The deceleration in rent growth in recent quarters has caused even the year-over-year growth rate to decline. Over the last four quarters, rent growth for asking and effective rents was 3.4% and 3.5%, respectively.

Reis: Office Vacancy Rate declined in Q1 to 16.6% - Reis released their Q1 2015 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined in Q1 to 16.6% from 16.7% in Q4 2014. This is down from 16.9% in Q1 2014, and down from the cycle peak of 17.6%. From Reis:  The national vacancy rate declined by 10 basis points during the quarter to 16.6%, its lowest level since the third quarter of 2009. Although the vacancy decline was just 10 basis points, this is the third consecutive quarter with a vacancy decline, another sign of more consistent improvement from the office market...With net absorption continuing to outpace construction by a wide enough margin, vacancy rate declines are now becoming more consistent, emblematic of a strengthening office market. As office leases that were signed at the bottom of the market expire over the next couple of years, many tenants will find their current space insufficient and will sign larger leases...Asking and effective rents grew by 0.9% and 1.0%, respectively, during the first quarter, marking the eighteenth consecutive quarter of asking and effective rent growth. Superficially, this is a slight decrease from last quarter when both metrics increased by 1.1%. However, this is still strong performance from a market still grappling with a high vacancy rate....[W]e continue to expect that the national vacancy rate will fall by roughly 50 basis points in 2015 while effective rents grow by approximately 3.6%. That would be a solid showing for an office market that is still in recovery mode.This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual). Reis reported the vacancy rate was at 16.6% in Q1. Net absorption is picking up, but there will not be a significant pickup in new construction until the vacancy rate falls much further.

Reis: Mall Vacancy Rate declined in Q1 - Reis reported that the vacancy rate for regional malls was decreased to 7.9% in Q1 2015 from 8.0% in Q4. This is down from a cycle peak of 9.4% in Q3 2011. For Neighborhood and Community malls (strip malls), the vacancy rate decreased to 10.1% in Q1, from 10.2% in Q4. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011. Comments from Reis Senior Economist and Director of Research Ryan Severino: Following the trend of recent quarters, neighborhood and community center vacancy declined by just 10 basis points during the quarter to 10.1%. Although neither net absorption nor construction were particularly robust, demand exceeded supply by a wide enough margin to cause vacancy rates to continue falling. Although rent growth remains weak, that fact that it even continues to grow in the face of such an elevated vacancy rate is a mildly heartening sign for the sector. The vacancy rate for malls also declined by 10 basis points while asking rents grew by 0.5%, the sixteenth consecutive quarter of growth. Taken together, the data for both neighborhood and community centers and malls indicates that the recovery, while not yet accelerating, is becoming more consistent. Quarterly rent growth is now the norm and continues to drift higher while vacancy compression, though slowing for regional malls, is also beginning to occur on a quarterly basis. The quarterly improvement in market fundamentals should persist as we move forward in 2015. ... Construction remained at low levels during the first quarter and is not set to change anytime soon. The combination of little supply growth and increasing demand bodes well for most retail formats in the US.

Fed’s Brainard: ‘Great Recession’ May Have Long-Lasting Financial Consequences for Younger Americans - High student debt, poor job prospects and shifting attitudes are inhibiting homeownership among younger Americans who came of age during the latest recession, potentially hindering the accumulation of wealth for that generation, Federal Reserve governor Lael Brainard said Thursday.  “If the decline in homeownership among young people proves persistent, the implications for asset building for the future could be of concern, since homeownership remains an important avenue for accumulating wealth, particularly for those with limited means,” Ms. Brainard said in remarks prepared for a community development research conference. In her speech, Ms. Brainard made only passing reference to monetary policy, noting it “has remained accommodative over an extended period, which has supported labor market recovery–with significant improvement in overall unemployment, increases in job openings, and recent declines in underemployment–while inflation has remained below its target.” The Fed governor’s comments on younger Americans who graduated from high school and college during the last downturn highlighted major economic obstacles, including massive layoffs and high unemployment that pushed many into jobs for which they were overqualified or out of the workforce all together. “The employment rate of those graduating from college during the Great Recession may recover relatively soon, but their earnings may be reduced for up to a decade or longer as this cohort initially secures lower-quality jobs and then only gradually works its way back up to the normal earnings trajectory,” Ms. Brainard said.

Personal Income increased 0.4% in February, Spending increased 0.1% - The BEA released the Personal Income and Outlays report for February:  Personal income increased $58.6 billion, or 0.4 percent ... in February, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE)increased $11.8 billion, or 0.1 percent...Real PCE -- PCE adjusted to remove price changes -- decreased 0.1 percent in February, in contrast to an increase of 0.2 percent in January. ... The price index for PCE increased 0.2 percent in February, in contrast to a decrease of 0.4 percent in January. The PCE price index, excluding food and energy, increased 0.1 percent in February, the same increase as in January. The February price index for PCE increased 0.3 percent from February a year ago. The February PCE price index, excluding food and energy, increased 1.4 percent from February a year ago. The following graph shows real Personal Consumption Expenditures (PCE) through February 2015 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.The dashed red lines are the quarterly levels for real PCE. The increase in personal income was higher than expected,   The increase in PCE was below the 0.2% increase consensus.  On inflation: The PCE price index increased 0.3 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.4 percent year-over-year in February. Using the two-month method to estimate Q1 PCE growth, PCE was increasing at a 2.0% annual rate in Q1 2015 (using the mid-month method, PCE was increasing 0.8%). This is a slowdown in PCE.

Consumer spending barely rises in Feburary. Shoppers are saving instead. (+video) - Consumer spending rose just 0.1 percent in February, the Commerce Department reported Monday. A harsh winter helped put a damper on consumer spending, but so did higher gas prices and consumers choosing to boost their savings or pay down debt rather than go shopping. US consumers stayed indoors February, and in much of the country, no one would blame them. Still, a disappointing showing for the largest segment of the US economy can’t be all chalked up to weather.  Consumer spending crept up just 0.1 percent in February, slightly more disappointing than the 0.2 percent uptick analysts were expecting, according to data released Monday by the Commerce Department. It was the first positive reading in two months; January and December both recorded a 0.2 percent slide. When adjusted for inflation, it was the first overall decline in consumer spending in nearly a year, setting up a disappointing first quarter of the year after a very strong end to 2014. The results were “indicative of a very slow rate of gain in consumer spending in the quarter as a whole even if there is a rebound in March due to February (presumably) having been affected by extremely harsh weather in many areas,”

Consumer Spending a February Debbie Downer for Economic Growth -- The February personal income and outlays report shows a -0.1% change in real consumer spending, which is not good news for economic growth.   Not adjusted for inflation consumer spending rose a scant 0.1%.  Real personal income isn't any better with no change for the month.  Personal income not adjusted for inflation rose 0.1%.  Real disposable income had better news as it increased 0.2% for the month. Consumer spending is another term for personal consumption expenditures or PCE.   Real personal consumption expenditures were $ 11,158.6 billion for February.  Consumer spending is roughly about 68% ofGDP.   Real means adjusted for inflation and is called in chained 2009 dollars.  Disposable income is what is left over after taxes and increased 0.2% when adjusted for prices. Graphed below are the monthly percentage changes for real personal income (bright red), real disposable income (maroon) and real consumer spending (blue). Below are the real dollar amounts for real personal income (bright red), real disposable income (maroon) and real consumer spending (blue) for the last year. Consumer spending encompasses things like housing, health care, food and gas in addition to cars and smartphones. In other words, most of PCE is most about paying for basic living necessities. Graphed below is the overall real PCE monthly percentage change. The reason for the decline in spending was durable goods just was hammered.   Cars are a durable good sand motor vehicles and parts were identified as the cause for spending on durable good to decline so much.  Nondurable goods are things like gasoline and food.  Services are things like health care.   When people are cutting back on their spending, durable goods are usually the first things to go, especially large ticket items.  Below are the real monthly percentage changes in 2009 chained dollars:

  • Durable goods: -1.1%
  • Nondurable goods: 0.0%
  • Services: +0.1%

The Latest on Real Disposable Income Per Capita: With the release of today's report on February Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013. The February nominal 0.36% month-over-month increase in disposable income drops to 0.18% when we adjust for inflation. The year-over-year metrics are 3.54% nominal and 3.19% real.  The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per capita disposable income since 2000. Nominal disposable income is up 62.5% since then. But the real purchasing power of those dollars is up only 23.1%. Here is a closer look at the real series since 2007. Year-Over-Year DPI Per Capita Let's take one more look at real DPI per capita, this time focusing on the year-over-year percent change since the beginning of this monthly series in 1959. The chart below highlights the value for the months when recessions start to help us evaluate the recession risk for the current level.

US Savings Rate Jumps To Highest Since 2012 As Spending Continues To Miss Expectations -- For the 4th month in a row, personal spending growth missed expectations. With a 0.1% gain in February (against expectations of a 0.2% rise), this growth rate remains below all of 2014's growth. Income rose slightly more than expected at 0.4% (against +0.3% exp) but this is the same growth as January's upwardly reviused +0.4%. That leaves the powers that be very disappointed as the savings rate jumps to the highest since 2012... not exactly the Keynesian pump-primed, low gas prices tax cut spendfest all the smartest people in the room promised...

Americans Are Saving More, But for How Much Longer? - Americans are squirreling away most of the money they’re getting from slowly rising incomes and cheaper gasoline. The personal saving rate rose to 5.8% in February, the highest level in more than two years, the Commerce Department said Monday. The rate measures the percentage of disposable income Americans don’t spend. In absolute dollar terms, the figure was a seasonally adjusted $768.6 billion, also the highest level since December 2012–when new taxes set for 2013 skewed the numbers. As recently as November, the rate was only 4.4%. The latest saving figures suggest households have been cautious, opting to build up their rainy-day funds. Consumer spending during February rose a weak 0.1% while disposable incomes–personal income after taxes–advanced 0.4%. “In short, after years of spending as if there were no tomorrow, consumers are now saving like there is a tomorrow,” Richard Moody, chief economist at Regions Financial Corp., said in a note to clients. “What is unclear, however, is how long this will remain the case.” Indeed, spending may have slowed while parts of the country were socked in by bad winter weather. If that’s the case, there could be a spring rebound. “Households are likely to draw the saving rate lower to support consumption in the coming months,” Michael Gapen, economist at Barclays, said in a note to clients.

Deflation Due to Lower Commodity Prices Is Not a Problem - Dean Baker - For some reason economics reporters and economists seem to have a really hard time understanding deflation. There are two lessons for today.  As I've written a few thousand times, inflation is an aggregate measure that combines price changes of hundreds of thousands of goods and services.  Going from a near zero positive to a near zero negative just means a higher ratio of negative price changes to positive price changes (or the negative ones are larger). How can going from 45 percent negative price changes to 55 percent negative price changes be a disaster? That makes zero sense. The problem of low inflation is that debt burdens become harder for people to deal with since wages tend to rise roughly in step with inflation. If a debt has fixed interest rate, like a standard mortgage, this is a greater burden when wages are rising 1.0 percent than when they are rising 3.0 percent. We also expect the value of homes to rise more or less in step with inflation. This means that in a low inflation environment, most homeowners will be accumulating equity less rapidly than if inflation were higher. And businesses making investment decisions will be more likely to invest if they think the goods they produce will be selling for 15 percent more in five years (@ 3.0 percent average inflation) as compared with 5 percent more (@1.0 percent average inflation). In all three cases, crossing zero and having the inflation rate turn negative makes things worse, but only in the same way that going from 1.5 percent inflation to 0.5 percent inflation makes things worse. There is zero importance to crossing zero. This logic should also help to explain why deflation due to a drop in the price of oil or other commodities is not a problem. Most immediately, lower oil and gas prices will mean more money in the pockets of consumers, which will allow them to buy more. At least initially it will not affect the rate of house price appreciation or the rate of increase in the price of other goods and services. Over time, a drop in commodity prices may end up slowing nominal wage growth and therefore the rate of increase in other prices, but the initial drop in inflation due to the fall in commodity prices is by itself a plus for the economy.

Deconstructing ShadowStats. Why is it so Loved by its Followers but Scorned by Economists? - It is hard to think of a website so loved by its followers and so scorned by economists as John Williams' ShadowStats, a widely cited source of alternative economic data on inflation and other economic indicators. Any econ blogger who has ever written a line about inflation is familiar with ShadowStats. Time and again, readers cite it in comments, not infrequently paranoid in their tone and rude in their language.  Brief replies that cast doubt on some of more extreme claims made by ShadowStats fans don’t seem to have much effect. After a recent round of comments, I promised the editor of one website to undertake a thorough deconstruction of ShadownStats. Here is the result.

Restaurant Performance Index shows Expansion in February --  Here is a minor indicator I follow from the National Restaurant Association: Softer sales offset by stronger optimism in February's RPI Despite dampened sales and customer traffic levels as a result of extreme weather in parts of the country, the National Restaurant Association’s Restaurant Performance Index (RPI) held relatively steady in February. The RPI stood at 102.6 in February, down slightly from a level of 102.7 in January.  In addition, February marked the 24th consecutive month in which the RPI stood above 100, which signifies expansion in the index of key industry indicators. “With same-store sales and customer traffic levels being impacted by challenging weather conditions in parts of the country, the Current Situation component of the RPI declined in February,” said Hudson Riehle, senior vice president of the Research and Knowledge Group for the Association. “However, this was offset by a solid improvement in the Expectations component of the index, as restaurant operators are increasingly optimistic about business conditions in the months ahead. As a result, the overall RPI held relatively steady in February.”

Consumer Confidence Rose in March -- The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through March 19. The headline number of 101.3 was a rise from the revised February final reading of 98.8, an upward revision from 96.4. Today's number was above the forecast of 96.0.  Here is an excerpt from the Conference Board press release: “Consumer confidence improved in March after retreating in February. This month’s increase was driven by an improved short-term outlook for both employment and income prospects; consumers were less upbeat about business conditions. Consumers’ assessment of current conditions declined for the second consecutive month, suggesting that growth may have softened in Q1, and doesn’t appear to be gaining any significant momentum heading into the spring months.”  Consumers’ assessment of present-day conditions turned moderately less favorable for a second straight month. The percentage saying business conditions are “good” was unchanged at 26.7 percent, while those claiming business conditions are “bad” increased from 16.7 percent to 19.4 percent. Consumers were mixed in their assessment of the job market. The proportion stating jobs are “plentiful” edged up from 20.3 percent to 20.6 percent, while those claiming jobs are “hard to get” also edged up from 25.1 percent to 25.4 percent.  Consumers’ optimism about the short-term outlook, which had declined last month, rebounded in March. The percentage of consumers expecting business conditions to improve over the next six months decreased slightly, from 17.6 percent to 16.7 percent; however, those expecting business conditions to worsen also fell, from 8.9 percent to 8.0 percent.  Consumers’ outlook for the labor market saw stronger gains. Those anticipating more jobs in the months ahead increased from 13.8 percent to 15.5 percent, while those anticipating fewer jobs declined from 14.8 percent to 13.5 percent.   The chart below is another attempt to evaluate the historical context for this index as a coincident indicator of the economy. Toward this end I have highlighted recessions and included GDP. The regression through the index data shows the long-term trend and highlights the extreme volatility of this indicator.

Consumer Confidence Surges Higher As 'Hope' Trumps Reality -- Following February's drop from 'recovery' cycle highs (which has now been erased by previous revisions! why are confidence measures seasonally-adjusted anyway?), despite surging gas prices, terrible economic data, and dismal weather, March consumer confidence explodes higher. Printing 101.3, massively beating expectations of 96.4, this is just shy of the cycle highs in January. Of course, it's all hope... the present situation index actually dropped notably from 112.1 to 109.1 as future expectations surged from 90.0 to 96.0, but fewer people plan to buy homes or major applicances in the next 6 months.

Trade Deficit decreased in February to $35.4 Billion - The Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $35.4 billion in February, down $7.2 billion from $42.7 billion in January, revised. February exports were $186.2 billion, $3.0 billion less than January exports. February imports were $221.7 billion, $10.2 billion less than January imports. The trade deficit smaller than the consensus forecast of $41.5 billion. The first graph shows the monthly U.S. exports and imports in dollars through February 2015.  Imports and exports decreased in February (probably due to impact of West Coast port slowdown). Exports are 12% above the pre-recession peak and down 1% compared to February 2014; imports are 4% below the pre-recession peak, and down 4% compared to February 2014. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $49.53 in February, down from $58.96 in January, and down from $91.53 in February 2014. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012. Oil prices will probably increase a little in the March report. Note: There is a lag due to shipping and long term contracts. The trade deficit with China increased to $22.5 billion in February, from $20.8 billion in February 2014. The deficit with China is a large portion of the overall deficit. The decrease in the trade deficit was due to a lower volume and lower price of oil imports, and the West Coast port slowdown. Oil prices will probably be a little higher in March, and trade will be up sharply at the West Coast ports.

Trade Deficit Shrinks; First Quarter GDP Estimate Ticks Up to 0.1% -- Inquiring minds are investigating the Commerce Department report on International Trade in Goods and Services for February 2015, for clues about first quarter GDP.

  • Exports were $186.2 billion, down $3.0 billion from January.
  • Imports were $221.7 billion, down $10.2 billion from January.
  • Year-to-date, the goods and services deficit decreased $ 2.6 billion, or 3.2 percent, from the same period in 2014.
  • Year-to-date exports decreased $5.3 billion or 1.4 percent.
  • Year-to-date imports decreased $7.9 billion or 1.7 percent.

Recall that exports add to GDP and imports subtract from GDP. The net effect of trade report is positive for GDP. Thus my first reaction to the report was that GDP estimates would go up. They did, but very slightly.Yesterday, following an Unexpected Decline in Construction activity, the Atlanta Fed GDPNow forecast dipped to 0.0%. Today following the shrinkage in the trade deficit, the forecast is back in positive territory at 0.1%.  "The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2015 was 0.1 percent on April 2, up from 0.0 percent on April 1. Following this morning's international trade release from the U.S. Census Bureau, the nowcast for the change in real net exports in 2009 dollars increased from -40 billion to -33 billion. The nowcast for real equipment investment growth declined from 7.5 percent to 6.1 percent following the international trade report and the Census Bureau's M3 manufacturing report."

Initial Claims Slide Again; Trade Deficit Lowest Since 2009 Despite Soaring Dollar On Imports Plunge - The volatility in initial claims continues: after last week's drop to 282K pulled the heavily-watched number back under 300K, this week we have seen even less layoffs, with the DOL reporting that only 268K claims for unemployment benefits were filed in the past week, well below the 286K expected. The 4-week moving average was 285,500, a decrease of 14,750 from the previous week's revised average. The previous week's average was revised up by 3,250 from 297,000 to 300,250. And while it is no secret that US labor data leave much to be desired it was today's trade data that will shock many, after the BEA reported that in February, the US trade deficit collapsed to just $35.4 billion, a 17% plunge compared to the $42.7 billion January revision, and far below the $41.2 billion expected. The $7.3 billion drop in the deficit was the largest since the $8.3 billion drop posted in June of 2013. And even more notable: the total February deficit was the lowest since October 2009!

US Imports Collapse Most Since Lehman -- Anyone scratching their head how it is possible that in an environment of a soaring dollar the US trade balance just tumbled, and printed its smallest monthly deficit since 2009, here is the answer: in January, US imports (with the delta entirely in the goods, not services, column) plunged from $232 billion to $222 billion, a whopping $10.2 billion or 4.4% drop, and the biggest monthly decline in US imports since the peak of the financial crisis in the aftermath of the Lehman collapse. The irony: since exports also dropped but did not plunge quite as rapidly, this disturbing number will actually be a boost to US Q1 GDP, which as reported recently, is now tracking at 0.0% with the Atlanta Fed. And now time for a question: with US and Chinese imports both plunging, just who is Europe "exporting" all of those surplus goods and services to?

Divisions in Congress Hamper Pacific Trade Deal - WSJ: Wavering support in Congress has emerged as the biggest obstacle holding up completion of a 12-nation Pacific trade pact under negotiation for nearly a decade. The Obama administration’s push to win fast-track powers from Congress to expedite the deal’s passage has stalled amid disagreements among lawmakers over how much leverage they should have over the pact’s final form. That uncertainty is stirring fear among many of the 11 countries negotiating the Trans-Pacific Partnership with the U.S., who say they need proof Congress is on board before agreeing to final conditions in the deal. Passing the legislation, also known as trade promotion authority, would let negotiators finalize outstanding issues such as auto-industry tariffs, dairy-market access and sensitive rules on intellectual property, areas where negotiators need to get a final signoff from top political leaders. “We can get this deal done, but we’re not going to get there without the U.S. Congress declaring its formal support through an appropriately drafted TPA,” New Zealand Trade Minister Tim Groser said in a recent interview. Australia’s trade minister, Andrew Robb, said the Pacific pact could be wrapped up in a month if there is sufficient political will. But “unless the TPA is completed in the U.S., there won’t be the political will,” he told reporters last week.

Analysis of Leaked Trans-Pacific Partnership Investment Text -- Lori Wallach - pdf - After more than five years of negotiations under conditions of extreme secrecy, on March 25, 2015, a leaked copy of the investment chapter for the Trans-Pacific Partnership (TPP) was posted. Public Citizen has verified that the text is authentic. The leaked text reveals that TPP negotiators already have agreed to many radical terms that would give foreign investors expansive new substantive and procedural rights and privileges not available to domestic firms under domestic law.  The leaked text would empower foreign firms to directly "sue" signatory governments in extrajudicial investor-state dispute settlement (ISDS) tribunals over domestic policies that apply equally to domestic and foreign firms that foreign firms claim violate their new substantive investor rights. There they could demand taxpayer compensation for domestic financial, health, environmental, land use and other policies and government actions they claim undermine TPP foreign investor privileges, such as the "right" to a regulatory framework that conforms to their "expectations."  The leaked text reveals the TPP would expand the parallel ISDS legal system by elevating tens of thousands of foreign-owned firms to the same status as sovereign governments, empowering them to privately enforce a public treaty by skirting domestic courts and laws to directly challenge TPP governments in foreign tribunals.  Existing ISDS-enforced agreements of the United States, and of other developed TPP countries, have been almost exclusively with developing countries whose firms have few investments in the developed nations. However, the enactment of the leaked chapter would dramatically expand each TPP government’s ISDS liability. The TPP would newly empower about 9,000 foreign-owned firms in the United States to launch ISDS cases against the U.S. government, while empowering more than 18,000 additional U.S.-owned firms to launch ISDS cases against other signatory governments.

Trans-Pacific Partnership treaty will help neither workers nor consumers - Our global trade and tax policies have been and still are controlled by corporate and financial interests. They, not workers or consumers, write the rules. In the early post-World War II years, trade treaties were focused on lowering tariffs. In theory at least, workers in both nations might benefit from larger markets and increased trade. But now a significant portion of our trade is intra-corporate trade, an exchange between one branch of a multinational and another. Multinationals have different interests than national companies. They profit even if U.S. workers suffer. Increasingly companies choose to report their profits or ship their jobs to countries with the lowest standards where the legal position of companies is the strongest. Companies like Wal-Mart set up global distribution systems designed to drive down wages here and abroad. The Waltons are the richest family in the world. Their workers are paid so little that they are forced to rely on taxpayer subsidies like Medicaid and food stamps. One product of the corporate-defined trade rules is that the United States has run unprecedented trade deficits, totaling more than $8 trillion since 2000 alone. Trade deficits cost jobs. Worse, companies have used the threat to move jobs abroad to drive down wages here at home.  U.S. negotiators forcefully demand other countries pay a price for greater access to the U.S. market. But that price generally involves one or another corporate lobby, not the interests of the American people. So our drug companies get protections against the introduction of generic drugs, driving up prices abroad. Our agribusiness gets protection for its genetically altered foodstuffs. Wall Street gets rules making the sale of arcane derivatives easier. The TPP is a classic expression of the way the rules are fixed to benefit the few and not the many. It has been negotiated in secret, but 500 corporations and banks sit on advisory committees with access to various chapters.   Although corporations are wired in, the American people are locked out of the TPP negotiations. And, as Sen. Sherrod Brown (D-Ohio) said, “Members of Congress and their staff have an easier time accessing national security documents than proposed trade deals, but if I were negotiating this deal I suppose I wouldn’t want people to see it either.”

U.S.-Korea Trade Deal Resulted in Growing Trade Deficits and More Than 75,000 Lost U.S. Jobs - March 15th was the third anniversary of the U.S.-Korea Free Trade Agreement (KORUS). President Obama said that the agreement would support 70,000 U.S. jobs. This claim was supported by a White House fact sheet that claimed that the KORUS agreement would “increase exports of American goods by $10 to $11 billion…” and that they would “support 70,000 American jobs from increased goods exports alone.” Things are not turning out as predicted. Far from supporting jobs, growing goods trade deficits with Korea have eliminated more than 75,000 jobs between 2011 and 2014. Expanding exports alone is not enough to ensure that trade adds jobs to the economy. Increases in U.S. exports tend to create jobs in the United States, but increases in imports lead to job loss—by destroying existing jobs and preventing new job creation—as imports displace goods that otherwise would have been made in the United States by domestic workers. Thus, it is changes in trade balances—the net of exports and imports—that determine the number of jobs created or displaced by trade and investment deals like KORUS. In the first three years after KORUS took effect, U.S. domestic exports to Korea increased by only $0.8 billion, an increase of 1.8%, as shown in the figure below. Imports from Korea increased $12.6 billion, an increase of 22.5%. As a result, the deficit with Korea increased $11.8 billion between 2011 and 2014, an increase of 80.4%, nearly doubling in just three years.

Eyes on Trade: Study: "Trade" Deal Would Mean a Pay Cut for 90% of U.S. Workers -- The verdict is in: most U.S. workers would see wage losses as a result of the Trans-Pacific Partnership (TPP), a sweeping U.S. "free trade" deal under negotiation with 11 Pacific Rim countries.  That's the conclusion of a report just released by the non-partisan Center for Economic and Policy Research (CEPR).   TPP's corporate proponents have tried to sell the NAFTA-style deal to the U.S. public and policymakers by claiming that it will result in gains for the U.S. economy.  They often cite a study from the Peterson Institute for International Economics that used sweeping assumptions to project a tiny benefit from the TPP. We brought that study down to size back in January, showing that, even if one accepts the pro-TPP authors' litany of optimistic assumptions, the much-touted "benefit" from the TPP would amount to an extra quarter per person per day.  As this week's CEPR report points out, the pro-TPP study projected a meager 0.13 percent increase to U.S. gross domestic product (GDP) by 2025 if the controversial TPP would be signed, passed, and implemented.  By comparison, economists have estimated that Apple's iPhone 5 contributed a 0.25 - 0.5 percent increase to U.S. GDP.   That is, the TPP's total contribution to the U.S. economy is expected, by TPP proponents, to be about one half to one fourth of the contribution of the latest iPhone version.  Well, you might say, a nearly invisible blip in GDP is better than no blip in GDP.  (You might say this if you ignore the host of dubious assumptions used to project said blip, and ignore the TPP's expected threats to medicines affordability, environmental protections, food safety, Internet freedom, and financial stability.) But what would such a paltry GDP rise mean for your pocket?  Answering that requires taking into account the increase in income inequality that typically results from such "free trade" deals

Motor Vehicle Sales April 1, 2015: After 3 months of declines, vehicle sales popped up strongly in March, up 6.2 percent to an annual rate of 17.2 million units. This is the strongest rate since November and points to a badly needed gain for the motor vehicle component of the monthly retail sales report which has declined in 2 of the last 3 reports and was down very sharply in February. The gain is evenly distributed between North American-made vehicles and foreign-made vehicles and between cars and light trucks. Today's data are the first hard sales data for the month of March and suggest that consumers, enjoying a strong jobs market, may finally be spending more. Recent  Sales of total light motor vehicles proved soft in February, down 2.6 percent to a 16.2 million annual rate. This was the lowest rate since April 2015 with a pace of 16.0 million units. Weakness in February was centered in North American made vehicles which fell 3.1 percent to a 13.1 million rate, also the lowest since April. Foreign made vehicles nudged down 0.2 percent to 3.1 million.

U.S. Light Vehicle Sales increase to 17.05 million annual rate in March -- Based on a WardsAuto estimate, light vehicle sales were at a 17.05 million SAAR in March. That is up 3.8% from March 2014, and up 5.5% from the 16.2 million annual sales rate last month.  From John Sousanis at Wards Auto: March 2015 U.S. LV Sales Thread: Spring Sales Lift SAAR Past 17 Million  U.S. automakers sold 1, 537,820 light vehicles in March, as several automakers posted record sales and European luxury brands largely outperformed expectations. The results reflected a 4.4% gain in the daily sales rate compared with same-month year-ago, and pushed the industry's light-vehicle SAAR past the 17-million mark for the first time since November. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for March (red, light vehicle sales of 17.05 million SAAR from WardsAuto). This was above the consensus forecast of 16.8 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967.

The "Mysterious" Source Of Surging Demand For GM Cars, Revealed - With both channel stuffing and subprime out of the window if only for the time being, GM, whose China sales are falling off a cliff, had to come up with some urgent source of end demand. And thanks to recently disclosed data, we now know that "once a Government Motors, always a Government Motors", because just the first quarter of 2015, the average annual increase in sales to Uncle Sam, aka the Government was a whopping 24%, just  about 100% higher than GM's headline rate of sales increase!

Factory Orders Unexpectedly Rise Snapping String of 6 Straight Declines - After six straight months of factory orders unexpectedly declining, economists apparently were finally convinced that bad weather would continue indefinitely.  Factory orders rose, albeit barely, and last month was revised way lower, nonetheless it was amusing to see economists expectations were in the wrong direction for the seventh straight month. This month, factory orders unexpectedly rose.  The Bloomberg Consensus estimate was for no growth, while orders rose a modest 0.2%. After 6 straight declines, factory orders finally moved to the plus column, up 0.2 percent in a February gain, however, that is tied largely to an upward price swing for petroleum and coal products. Another mitigating factor is a sharp downward revision to January orders, to minus 0.7 percent from minus 0.2 percent. Durable goods show broad weakness with orders down 1.4 percent in data initially posted last week. Most readings show significant declines and underscore this morning's export dip in the international trade report and the Fed's concerns over weak export markets and the negative effects of the strong dollar. Core capital goods are down 1.1 percent in the month for a 6th straight decline in a reading that points to a lack of business confidence and business investment.Total shipments bounced back 0.7 percent in February but follow a 2.3 percent plunge in January and which holds down factory contribution to first-quarter GDP. A clear negative is a 3rd straight decline for unfilled orders, down 0.5 percent for what is now the weakest string since way back in the recession days of late 2009. A lack of unfilled orders will not encourage manufacturers to add to their workforces. One positive is inventories which are less heavy, up only 0.1 percent and bringing down the inventory-to-shipments ratio to 1.35 from January's recovery high of 1.36. The main positive in today's report is the non-durables component where a 1.8 percent gain ends 7 straight declines, declines all tied to oil-price effects. But the weakness in durables, tied to foreign demand, is becoming a significant negative for the economic outlook.

Chart Of The Day: Is The US Already In A Recession? - A month ago when looking at the latest Factory Orders numbers, we noticed something very disturbing: the annual rate of increase, or rather decrease, in factory orders dropped to -2.3%. The last two time this happened was in 2008, just after the failure of Lehman, and in 2001, just as the US was again entering a recession. In fact, if there is one reliable, false-negative proof indicator of key recessionary inflection points in the US economy, it is the annual change in Factory Orders. Unfortunately for the econo-bulls, and the Fed's rate-hike prospects, moments ago the latest Factory Orders number came out, and it was not good. Amusingly, on the surface it was actually a beat, rising by 0.2%, relative to the -0.4% expected. However, if one actually looks at the underlying number, February was still a miss, because the January print was revised substantially lower, from $470Bn to $467.5Bn, which means the 0.2% increase was really a 0.4% decline relative to the pre-revised number. What worse, however, is when one looks at the Factory Orders series on an annual basis. It is here that the sequential fudges become irrelevant, and here where it becomes obvious that, all else equal, the US is already in a recession.

Dallas Fed: Texas Manufacturing Activity Weakens -- From the Dallas Fed: Texas Manufacturing Activity Weakens Texas factory activity declined in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell to -5.2, posting its first negative reading in nearly two years.  Other measures of current manufacturing activity also reflected contraction in March. The new orders index pushed further into negative territory, coming in at -16.1, and the growth rate of orders index remained negative for a fifth consecutive month but edged up to -15.3 in March. The shipments and capacity utilization indexes slipped to more negative readings, -8.7 and -6.4, respectively.  Perceptions of broader business conditions were rather pessimistic for a third month in a row. The general business activity index declined 6 points to -17.4 in March, while the company outlook index was largely unchanged at -4. Labor market indicators reflected slight employment declines and shorter workweeks. The March employment index dipped to -1.8, its first negative reading since May 2013.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Economists Fail to Predict Weather Once Again: Chicago PMI Disappoints -- Economists expected a rebound in the Chicago PMI index this month following its collapse last month. Alas, once again the weather was much worse in Chicago than economists thought. The Bloomberg Consensus was for a rebound from last month's dismal print of 45.8 back into positive territory of 50.2.  "Companies sampled in the Chicago PMI report continue to report a lull in activity, at a sub-50 March index of 46.3 following 45.8 in February. On a quarterly basis, the index averaged only 50.5 in the first quarter, down steeply from 61.3 in the fourth quarter for the weakest reading since the third quarter of 2009. Respondents are citing bad weather and fallout from the West Coast port slowdown as temporary negatives, and they see orders picking up during the second quarter." That the Chicago PMI index remained in contraction for the second month at 46.3 while economists expected a rebound into positive territory proves once again how difficult it is for economists to predict the weather in Chicago for February, even though it's now March.  Don't worry, economists tell us this unfortunate string of bad weather is "temporary" and will improve in the second quarter.

Chicago PMI Fails To Bounce Back, Hovers Near 6-Year Lows - Despite the hockey-stick-like expectations of all the clever economists, Chicago PMI failed to bounce back from its total carnage in February. Printing 46.3 against expectations of 51.4, the index remains at near six-year lows. Must be the weather... oh apart from the massive surge in Midwest pending home sales...? This is the biggest 5-month plunge since Lehman. Not what the Keynesian mean-reverters were hoping for... With the biggest 5-month plunge since Lehman... Under the covers, slight improvement...

  • Forecast range 45 - 55 from 42 economists surveyed
  • Prices Paid fell compared to last month
  • New Orders rose compared to last month
  • Employment rose compared to last month
  • Inventory rose compared to last month
  • Supplier Deliveries fell compared to last month
  • Production rose compared to last month
  • Order Backlogs rose compared to last month
  • Business activity has been positive for 10 months over the past year.
  • Number of Components Rising: 5

PMI Manufacturing Index April 1, 2015: Rising production and rising orders gave a lift to Markit's manufacturing PMI, to a 5-month high of 55.7 for final March vs 55.3 at mid-month and 55.1 in final February. The strength in production, underpinned by a rise in backlog orders, is giving a lift to employment. On the negative side are export orders underscoring the FOMC's concerns over weak foreign demand and the negative effects of the strong dollar. Inflation readings are very low, at a nearly 6-year low for inputs and a 10-month low for finished goods. This report has been running hotter than other anecdotal reports and much hotter than hard government data out of the factory sector, data that have been no better than flat.  The Markit PMI manufacturing flash index may have picked up slightly in March, based at least on the PMI flash which is at 55.3, a 5-month high and versus 55.1 in final February and 54.3 in mid-month February. New orders were also at a 5-month high as rising domestic sales offset declining export sales and weak sales out of the oil sector. Purchasing Managers' Manufacturing Index (PMIs) is based on monthly questionnaire surveys of selected companies which provide an advance indication of what is really happening in the private sector economy.

ISM Manufacturing index declined to 51.5 in March -  The ISM manufacturing index suggests slower expansion in March than in February. The PMI was at 51.5% in March, down from 52.9% in February. The employment index was at 50.0%, down from 51.4% in February, and the new orders index was at 51.8%, down from 52.5%. From the Institute for Supply Management: March 2015 Manufacturing ISM® Report On Business® . "The March PMI® registered 51.5 percent, a decrease of 1.4 percentage points from February’s reading of 52.9 percent. The New Orders Index registered 51.8 percent, a decrease of 0.7 percentage point from the reading of 52.5 percent in February. The Production Index registered 53.8 percent, 0.1 percentage point above the February reading of 53.7 percent. The Employment Index registered 50 percent, 1.4 percentage points below the February reading of 51.4 percent, reflecting unchanged employment levels from February. Inventories of raw materials registered 51.5 percent, a decrease of 1 percentage point from the February reading of 52.5 percent. The Prices Index registered 39 percent, 4 percentage points above the February reading of 35 percent, indicating lower raw materials prices for the fifth consecutive month. Comments from the panel refer to continuing challenges from the West Coast port issue, lower oil prices having both positive and negative impacts depending upon the industry, residual effects of the harsh winter, higher costs of healthcare premiums, and challenges associated with the stronger dollar on international business."Here is a long term graph of the ISM manufacturing index.  This was below expectations of 52.5%, but still indicates expansion in March.

ISM Manufacturing Index: Slowest Growth Since May 2013 - Today the Institute for Supply Management published its monthly Manufacturing Report for March. The latest headline PMI was 51.5 percent, a decline from the previous month's 52.9 percent and below the forecast of 52.5. This was the lowest PMI since May 2013. Here is the key analysis from the report: "The March PMI® registered 51.5 percent, a decrease of 1.4 percentage points from February’s reading of 52.9 percent. The New Orders Index registered 51.8 percent, a decrease of 0.7 percentage point from the reading of 52.5 percent in February. The Production Index registered 53.8 percent, 0.1 percentage point above the February reading of 53.7 percent. The Employment Index registered 50 percent, 1.4 percentage points below the February reading of 51.4 percent, reflecting unchanged employment levels from February. Inventories of raw materials registered 51.5 percent, a decrease of 1 percentage point from the February reading of 52.5 percent. The Prices Index registered 39 percent, 4 percentage points above the February reading of 35 percent, indicating lower raw materials prices for the fifth consecutive month. Comments from the panel refer to continuing challenges from the West Coast port issue, lower oil prices having both positive and negative impacts depending upon the industry, residual effects of the harsh winter, higher costs of healthcare premiums, and challenges associated with the stronger dollar on international business."  Here is the table of PMI components.

ISM Survey Shows Barely Breathing Manufacturing Sector - PMI at 51.5%  -- The March ISM Manufacturing Survey shows manufacturing is barely breathing growth as a monthly -1.4 percentage point decline put PMI near the contraction edge.  PMI is now 51.5% and if the index falls below 50%...that's contraction.  The reason for the slide was supplier deliveries, which were more streamlined indicating less to ship and slower manufacturing hiring. New orders declined by none of the indexes which make up PMI are in contraction...yet.  The worse news of the ISM manufacturing report is employment.  Manufacturing jobs have just been hammered and slaughtered so to see any indication of no hiring is just a sad and all too familiar sight. The ISM Manufacturing survey is a direct survey of manufacturers. Generally speaking indexes above 50% indicate growth and below indicate contraction. Every month ISM publishes survey responders' comments, which are part of their survey. In spite of the slowing growth manufacturer's comments are exceedingly positive. Cheap gas was mentioned but only Computer & Electronics said business was slowing down. Textiles and machinery mentioned West cost port delivery congestion being an issue. New orders really are sluggish now as the index dropped -0.7 percentage points to 51.8%.

ISM Manufacturing Tumbles To 22-Month Lows, Longest Losing Streak Since Lehman -- US Manufacturing PMI beat expectations, printing 55.7 up from 55.3 prior to its highest since Oct 2014, once again flying in the face of the collapse in US hard-data-base macro. More in line with the underlying reality, Feb Construction Spending dropped for the 3rd month of the last 4 and March ISM Manufacturing tumbled to 51.5, missing expectations of 52.5, to its lowest since May 2013. Under the covers, it is even uglier with the lowest New Orders since Jan 2014 as US Manufacturing data has missed 5 of the last 7 months and dropped for 5 months in a row - which hasn't happened since 2008.

New Jobless Claims at 268K, Again Better Than Forecast -- Here is the opening statement from the Department of Labor: In the week ending March 28, the advance figure for seasonally adjusted initial claims was 268,000, a decrease of 20,000 from the previous week's revised level. The previous week's level was revised up by 6,000 from 282,000 to 288,000. The 4-week moving average was 285,500, a decrease of 14,750 from the previous week's revised average. The previous week's average was revised up by 3,250 from 297,000 to 300,250.  There were no special factors impacting this week's initial claims. [See full report] Today's seasonally adjusted 268K beat the forecast of 285K. The four-week moving average at 285,500 is now 5,750 above its 14-year interim low set in early November of last year. Here is a close look at the data over the past few years (with a callout for the past year), which gives a clearer sense of the overall trend in relation to the last recession and the volatility in recent months.

Gallup US Payroll to Population April 2, 2015: March U.S. Payroll to Population employment rate was 44.1 percent in March, comparable with February's 43.9 percent. It is also the highest measurement of P2P for any March since Gallup began tracking the metric daily in 2010. P2P typically begins to pick up again in March and April of any year, rising through the summer months from lows in January and February. At the same time, underemployment fell to 15.5 percent from 16.2 percent. Workforce participation among US adults was statistically steady from the 67.0 percent measured in February to 66.8 percent in March. Workforce participation measures the percentage of adults aged 18 and older who are working, or who are not working but are actively looking for work and are available for employment. Since March 2010, the workforce participation rate has ranged narrowly between lows of 65.8 percent and highs of 68.5 percent, but since mid-2013 have most often registered below 67.0 percent. Gallup's U.S. unemployment rate represents the percentage of adults in the workforce who did not have any paid work in the past seven days, for an employer or themselves, and who were actively looking for and available to work. Gallup's unadjusted U.S. unemployment rate fell 0.3 percentage points to 6.4 percent in March, the lowest rate for March by more than a point since Gallup began tracking unemployment daily in 2010.

ADP: Private Employment increased 189,000 in March -- From ADP: Private sector employment increased by 189,000 jobs from February to March according to the March ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis...Goods-producing employment rose by only 5,000 jobs in March, down from 22,000 jobs gained in February. The construction industry added 17,000 jobs, down from 28,000 last month. Meanwhile, manufacturing lost 1,000 jobs in March, after adding 2,000 in February.Service-providing employment rose by 184,000 jobs in March, down from 192,000 in February. ...Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth took a step back in March. The fallout from the collapse in oil prices and surge in value of the dollar is hitting the job market. Despite the slowdown, underlying job growth remains strong enough to reduce labor market slack.” This was below the consensus forecast for 225,000 private sector jobs added in the ADP report.   The BLS report for March will be released on Friday and the consensus is for 247,000 non-farm payroll jobs added in March.

ADP Employment Misses By Most In 4 Years, Lowest In 14 Months --After missing expectations in a dismally weak February print, March turned out even worse. Despite Mark Zandi's reassurances that Feb was a weather-related blip, March ADP employment change was a mere 189k (against expectations of 225k) dropping to its lowest since January 2014. Large business hiring was the worst, adding a mere 19k. Zandi said in Feb that "jobs growth is strong but slowing," but now it appears weak and accelerating lower. And the now recurring punchline: manufacturing jobs -1,000

March Employment Report: 126,000 Jobs, 5.5% Unemployment Rate -- From the BLS: Total nonfarm payroll employment increased by 126,000 in March, and the unemployment rate was unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services, health care, and retail trade, while mining lost jobs.... The change in total nonfarm payroll employment for January was revised from +239,000 to +201,000, and the change for February was revised from +295,000 to +264,000. With these revisions, employment gains in January and February combined were 69,000 less than previously reported. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 126 thousand in March (private payrolls increased 129 thousand). Payrolls for January and February were revised down by a combined 69 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In March, the year-over-year change was 3.1 million jobs. Even with the weakness in March, this is a solid year-over-year gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate decreased in March to 62.7%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio was unchanged at 59.3% (black line).

March Had a Significant Decline in Jobs Growth:  Here are the lead paragraphs from the Employment Situation Summary released this morning by the Bureau of Labor Statistics: Total nonfarm payroll employment increased by 126,000 in March, and the unemployment rate was unchanged at 5.5 percent, the U.S. Bureau of Labor Statistics reported today. Employment continued to trend up in professional and business services, health care, and retail trade, while mining lost jobs.  Today's report of 126K new nonfarm jobs in March was well below the forecast of 245K.  February nonfarm payrolls were revised downward by 31K from 295K to 264K. The unemployment rate remained unchanged at 5.5%. Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and both the nominal and real (inflation-adjusted) price of the S&P Composite since 1948.  The next chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It dropped below 3% in April of last year and is now hovering at its post-recession low of 1.6%. The next chart is an overlay of the unemployment rate and the employment-population ratio. This is the ratio of the number of employed people to the total civilian population age 16 and over. The inverse correlation between the two series is obvious. We can also see the accelerating growth of women in the workforce and two-income households in the early 1980's. Following the end of the last recession, the employment population has been range bound between 58.2% and 59.4% — the lower end of which that harkens back to the 58.1% ratio of March 1953, when Eisenhower was president of a country of one-income households, the Korean War was still underway, and rumors were circulating that soft drinks would soon be sold in cans.

March Jobs Report – The Numbers -- U.S. employers sharply slowed their hiring in March to the weakest pace in more than a year, the latest sign that the economy stumbled in the early months of 2015. Nonfarm payrolls rose by a seasonally adjusted 126,000 jobs in March, the Labor Department said Friday. The unemployment rate, derived from a separate survey of households, was unchanged at 5.5%.  The economy added an average 197,000 jobs in the first three months of 2015, the weakest pace since early 2014. Last year, the U.S. added an average 260,000 jobs a month. The first quarter of 2015 looks a lot like the first quarter of 2014, when job growth averaged 193,000. The big question is whether the latest slowdown represents broader weakness or a temporary lull. Last year’s weak first quarter was followed by a strong rebound.  Updated figures showed job growth was weaker earlier this year than previously estimated, with the economy adding 69,000 fewer jobs in January and February than previously estimated. Payrolls grew 201,000 in January instead of the previously reported 239,000 gain. Payrolls increased 264,000 in February, down from the initially reported addition of 295,000. Workers appear to be getting slightly bigger paychecks. Average hourly earnings of private-sector workers rose 7 cents in March from February, to $24.86. But growth is still modest historically. Over the past year, wages have grown 2.1%.  The labor force shrank last month, a sign of underlying weakness. The labor-force participation rate—or the share of working-age Americans with jobs or searching—fell to 62.7% from February’s 62.8%. The labor force lost 96,000 workers last month. The participation rate is near the lowest level since the late 1970s. Mining and Logging-11,000 The mining and logging industry shed 11,000 jobs in March and has lost a total of 30,000 positions this year. That reflects weakness in the energy industry, suffering under a collapse in oil prices. But many service-providing sectors added jobs last month, including retail, health care and restaurants

Jobs Report: Disappointing payroll gains–a head fake or a new, slower trend?  -- Payrolls rose only 126,000 last month in a surprisingly downbeat reading on the state of the labor market. Unemployment remained unchanged at 5.5%, but the closely watched labor force rate fell a tenth in another sign of weakness. Contributing to the disappointing report, job gains for the prior two months were marked down by a total of 69,000. Thus, the average monthly gain over the first quarter of the year fell slightly below 200,000, as shown below. Average weekly hours ticked down slightly as well in March, the first such decline in over a year. Hourly wage growth, measured on a year-over-year basis, was up 2.1%, providing another month of evidence that despite the long-term improvement in job market conditions, nominal wage growth remains stuck in a narrow band around 2% where it has been for about five years.  In order to smooth out some of the monthly volatility in the data and get a better sense of underlying trends, the figure below shows average monthly payroll gains over the past 3, 6, and 12 months. As noted, the 197,000 monthly average over 2015q1 represents a marked deceleration over the prior 6 and 12 month gains of 261,000.

March Payrolls Huge Miss: Only 126,000 Jobs Added, Worst Since December 2013 - We warned yesterday that the "whisper expectation is for a NFP print that will be well below consensus, somewhere in the mid-100,000s if not worse now that the bartender hiring spree is over", and we were right: moments ago the BLS reported that in March a paltry 126K jobs were added, nearly 50% below the 245K expected, and the lowest monthly increase since March 2013.The unemployment rate was unchangned at 5.5%. The January and February data was also revised significantly lower, and subtracted a grand total of 69K jobs.  More from the report: Total nonfarm payroll employment increased in March (+126,000). Over the prior 12 months, employment growth had averaged 269,000 per month. In March, employment continued to trend up in professional and business services, health care, and retail trade, while employment in mining declined. (See table B-1.) Employment in professional and business services trended up in March (+40,000). Job growth in the first quarter of 2015 averaged 34,000 per month in this industry, below the average monthly gain of 59,000 in 2014. Within professional and business services, employment continued to trend up in architectural and engineering services (+4,000), computer systems design and related services (+4,000), and management and  technical consulting services (+4,000). Health care continued to add jobs in March (+22,000). Over the year, health care has added 363,000 jobs. In March, job gains occurred in ambulatory health care services (+19,000) and hospitals (+8,000), while nursing care facilities lost jobs (-6,000). In March, employment in retail trade continued to trend up (+26,000), in line with its prior 12-month average gain. Within retail trade, general merchandise stores added 11,000 jobs in March.

Huge Miss on Jobs: Establishment +126K Jobs; Household +34K Employment, Labor Force -96K - For a huge change we see the existing pattern of a strong establishment survey but a poor household survey has been replaced by weakness all around. Last month I stated "The household survey varies more widely, and the tendency is for one to catch up to the other, over time. The question, as always, is which way?" It is still difficult to say if this is the start of a new trend, but it could be.  Last month the household survey showed a gain in employment of a meager 96,000 and much of that was teen employment. This month the The household survey came in at 34,000. The labor force declined in each of the last two months. Those "not in the labor force" rose by a whopping 631,000 in the last two months. Let's take a look at all the key numbers. BLS Jobs Statistics at a Glance:

  • Nonfarm Payroll: +126,000 - Establishment Survey
  • Employment: +34,000 - Household Survey
  • Unemployment: -130,000 - Household Survey
  • Involuntary Part-Time Work: +70,000 - Household Survey
  • Voluntary Part-Time Work: -104,000 - Household Survey
  • Baseline Unemployment Rate: +0.0 at 5.5% - Household Survey
  • U-6 unemployment: -0.1 to 10.9% - Household Survey
  • Civilian Non-institutional Population: +181,000
  • Civilian Labor Force: -96,000 - Household Survey
  • Not in Labor Force: +277,000 - Household Survey
  • Participation Rate: -0.1 at 62.7 - Household Survey

The March Jobs Report in 11 Charts --The U.S. economy added 126,000 jobs in March, ending a streak of 12 straight months of job growth exceeding 200,000. But the jobs report is more than the headline figure, and these charts show how Friday’s report from the Labor Department fits into the bigger picture of the economic expansion. The U.S. has added 3.1 million jobs over the 12 months ended in March, which was down slightly from 3.2 million jobs for the period that ended in February. The unemployment rate in March remained unchanged at 5.5%, while a broader gauge of underemployment that includes workers who have part-time jobs but would like full-time work ticked down to 10.9%, the lowest level since August 2008. The unemployment rate fell further for college graduates, dropping to 2.5%. For high school dropouts, unemployment actually worsened last month, climbing to 8.6% from 8.4%. The share of Americans participating in the labor force ticked down to 62.7%, matching the lowest level in 36 years. The share of Americans with jobs was unchanged at 59.3%. A big part of the decline in the overall U.S. labor force owes to the aging of the U.S. population and the growing share of retirees. But even among so-called prime-age workers between 25 and 54 years old, labor-force participation and employment to population have dropped. Average hourly earnings ticked up in March from February, but average weekly earnings posted the smallest annual gain since last June. The number of workers who have been out of their jobs for more than six months has continued to decline but remains above the prerecession level. The share of the unemployed who have been jobless for more than half a year fell below 30% for the first time since June 2009. The rate had been hovering around 31% for the last six months. This was the first big drop in long-term unemployment since August. The median duration of unemployment dropped to 12.2 weeks from 13.1 weeks. This is still much higher than normal but less than half as long as during the worst of the recession. Nearly all of the jobs added since the recession ended in June 2009 have been full-time positions. But there are still around 750,000 fewer full-time jobs than existed in December 2007, when the recession began.

Americans Not In The Labor Force Soar To Record 93.2 Million As Participation Rate Drops To February 1978 Levels -- So much for yet another "above consensus" recovery, and what's worse it is, well, about to get even worse, because while the Fed keeps baning some illusory drum that slack in the economy is almost non-existent, the reality is that in March the number of people who dropped out of the labor force rose by yet another 277K, up 2.1 million in the past year, and has reached a record 93.175 million. Indicatively, this means that the labor force participation rate dropped once more, from 62.8% to 62.7%, a level seen back in February 1978, even as the BLS reported that the entire labor force actually declined for the second consecutive month, down almost 100K in March to 156,906.

Unemployment Report Shows Labor Force Drop Outs At Record High -- The March unemployment rate remained the same, yet once again the BLS survey showed another huge increase in those not considered part of the labor force anymore and as a result the figure hit a record 93.175 million high.  The official unemployment rate is 5.5%.  The labor participation rate is also 62.7% and remains at 37 year record lows.  From a year ago, the number of people considered not in the labor force has increased by over two million.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  The CPS has severe limitations, yet, it is our only real insight into what the overall population are doing for work.  Those employed grew by only 34,000 this month.  This is within the margin of error of the survey.  From a year ago, the employed has increased by 2.535 million.  This is beyond what is needed to keep up with increased population growth.  Those unemployed decreased by -130,000 to stand at 8,575,000.  From a year ago the unemployed has decreased by -1.81 million.  Below is the month change in unemployed and as we can see, this number normally swings wildly on a month to month basis. Those not in the labor force increased by 277,000 persons and to bet 93,175,000. The below graph is the monthly change of the not in the labor force ranks. Those not in the labor force has increased by 2,098,000 in the past year. The labor participation rate is at 62.7%, a -0.1 change from last month. Those aged 16 and over either working or looking for work is still at record lows, as shown in the below graph. The low labor participation rate is not all baby boomers and people entering into retirement. Below is a graph of the labor participation rate for those between the ages of 25 to 54. These are the prime working years, so one cannot blame retirement and college on the declining participation rate. The 25 to 54 age bracket labor participation rates have not been this low since the 1980's recession and the rate stands at 80.9%.

Total Jobs Sputter in March While Wages Continue to Sing the Same Slow Song  -- As I wrote earlier today, while it may be too soon to sound the alarm, this morning’s Employment Situation Report should give us pause. The bottom line is this: only 126,000 jobs added in March and the downward revision of 38,000 jobs in February, together make for disappointing numbers. While it’s important not to put too much stock in a couple months of data—especially since February and March’s job creation numbers were likely dampened by the unusually large amount of snow that blanketed the country those two months—policymakers should be wary of any signs of any slowdown from the solid job growth over the previous year. Other indicators make it clear that there is still ample slack in the labor market, most notably in the continuing trend of inadequate wage growth—private sector hourly wages are up only 2.1 percent over the year. The chart below looks at both private sector wages and the wages of production and nonsupervisory workers over the last several years, and it’s clear that wages according to either measure are far below target. There was, however, one positive wage sign: a mild acceleration in quarter over quarter hourly wages. The annualized increase between 2014 Q4 and 2015 Q1 was 2.8 percent, reasonably faster than trend 2.0 percent. Despite this mild acceleration, we need to see even faster growth, and for a longer time, before we can say the economy is truly working for working people. The slow growth of private sector wages coupled with a few months of disappointing jobs growth mean that the Federal Reserve should not be thinking about tapping the brakes any time soon.

The Waiter And Bartender Recovery Is Over: Fewest Food Workers Added Since June 2012 -- Yesterday we warned that "the whisper expectation is for a NFP print that will be well below consensus, somewhere in the mid-100,000s if not worse now that the bartender hiring spree is over." As already noted, we were spot on with the abysmal jobs print, the worst since 2013. We were also correct about the end of the "bartender hiring spree" because as the following chart shows, the number of "Food Services and Drinking Places" workers, aka waiters and bartenders just saw its worst monthly increase since June of 2012.

No Country For Young Workers: Only Americans 55 And Older Found Jobs In March --We first showed back in October 2012 that in America, courtesy of the Fed's micro-mismanagement of everything, the labor force has been turned upside down, and the only jobs being created are those for aged workers, Americans 55 and over. The reason is two-fold: with savings rates at zero, Americans who were on the verge of retiring found that the fruit of their labor was worth nothing under ZIRP (and may well be punished under the upcoming NIRP) as their savings (and fixed income investments) generate zero interest income, while young Americans would rather stay in college by the millions funded generously by trillions in Uncle Sam student loans. In any event, this is nothing short of a recipe for disaster, as aged workers have no leverage to demand higher wages (hence the lack of any broad wage growth), while Millennials and other young Americans, instead of entering the work force and accumulating job skills as well as wages, get more and more in debt.  All of this was on full display in today's jobs number, which while disappointing wildly based on Establishment survey data, was even worse based on the Household survey where only 34,000 people found jobs in March. But it was the age breakdown that was the stunner, and it can be seen best in the chart below. In short: America continues to be a country where there are only jobs for old men, those 55 and older, who saw a 329,000 increase in jobs in the past month. Every other age group saw job losses!

Don’t Angst Too Much Over One Weak Jobs Report - Is the U.S. economy in trouble? That could be one way to look at Friday’s weak employment report. But there’s little reason to think the lull will last. Payrolls increased just 126,000 new jobs in March, about half what forecasters expected. And January and February payrolls were revised down a total of 69,000. For the first quarter, payrolls grew an average of just 197,000, down sharply from the 324,000 pace of the fourth quarter of 2014. However, that surge in hiring at the end of last year is one reason to not get apoplectic about the latest job report and what it says about the economic outlook. The end of 2014 saw the best quarterly hiring of this expansion. A downshift in early 2015 should not have been a total shock. That’s especially true because falling oil prices, while a net positive for the total economy, continue to hurt certain sectors. No surprise that in March job losses were reported in industries that support mining activities, at heavy- and civil-engineering sites and at petroleum-product makers. Weather may also have been a small factor in the March weakness. Labor Department data show 182,000 employees could not make it to work in March because of bad weather. That’s about 30,000 more than the average of the previous 10 Marches. The high number of people unable to get to work probably explains why the average workweek declined by six minutes.

Oil and Gas Jobs Take a Hit in the March Jobs Report - Lower oil prices are taking a toll on employment in the oil and gas sector.  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. It added 41,000 jobs in 2014. Support services include companies working on a contract or for set fees and may be the easiest to add or cut when times get tough. The Labor Department on Friday said mining sector employment losses in the first quarter of this year have been concentrated in support activities. Oil futures peaked close to $100 a barrel in June but have since fallen below $50.

Employment Report Comments and Graphs - Earlier: March Employment Report: 126,000 Jobs, 5.5% Unemployment Rate This was a disappointing employment report with 126,000 jobs added, and downward revisions to the January and February reports (combined were 69,000 less than previously reported).  However, maybe there was a hint of good news on wage growth, from the BLS: "In March, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $24.86. Over the year, average hourly earnings have risen by 2.1 percent."  However weekly hours declined in March. A few more numbers:  Total employment increased 126,000 from February to March and is now 2.8 million above the previous peak.  Total employment is up 11.5 million from the employment recession low. Private payroll employment increased 129,000 from February to March, and private employment is now 3.3 million above the previous peak. Private employment is up 12.1 million from the recession low. In March, the year-over-year change was 3.1 million jobs. This was the fourth month in a row with the year-over-year gain above 3.1 million.  Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, an important graph is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate decreased in February to 80.9%, and the 25 to 54 employment population ratio decreased to 77.2%. As the recovery continues, I expect the participation rate for this group to increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

Why Are Wages Growing Slowly Despite McDonald’s, Wal-Mart Raises? -  Americans’ paychecks are stuck in a slow-growth pattern despite companies ranging from McDonald's to Wal-Mart to Starbucks touting raises for their workers. Average hourly earnings advanced 2.1% from a year earlier, the Labor Department said in Friday’s jobs report. That’s only a slight pickup from February’s reading. Taking the longer view, wages have basically been growing at a 2% clip for the past four years. How is that possible with all the news of raises and minimum-wage increases in more than a dozen states this year? Pay raises announced by prominent companies don’t kick in till later this year. But even when they do, they won’t address the deeper challenge: The middle of the labor market is largely missing out. Low-wage workers are earning more. Leisure and hospitality employees, mainly restaurant workers, saw a 3.6% hourly pay increase over the past year. Nearly half of minimum-wage earners work in food service. While that’s a decent raise, leisure and hospitality workers only earn an average of $14.23 an hour. Nonmanagers at fast-food restaurants earn less than $10 an hour. That means the raises for restaurant employees and other low-paid workers have limited influence on the overall wage measure.

Jobs Find Workers, Not The Other Way Around, SF Fed Paper Finds -- In America, you don’t hunt for the job, the job hunts for you. A new report from the Federal Reserve Bank of San Francisco said that most people who get a new job weren’t seeking it. Instead, recruitment and referrals form the basis of the bulk of new hiring. “Many people find jobs without ever reporting actively looking for one. This implies that, rather than them finding jobs, the jobs actually find them,”  The report suggest there’s great uncertainty and a lack of knowledge about the underlying state of hiring in the U.S. economy. It offers more evidence of the extremely complicated nature of job market hiring dynamics. The authors do not address changes in total employment, but do suggest some of the measures used to determine how many jobs are available, and how many people want them, may not very helpful. The researcher’s findings are primarily based on a periodic government survey conducted by the Census Bureau called the Contingent Worker Survey, which reports on job search behavior. Problematically, the survey is infrequent. The most recent data are for 2005. It’s unclear whether changes in the job market since the Great Recession would affect the report’s conclusions.

What Seems to Be Holding Back Labor Productivity Growth? - Atlanta Fed's macroblog - The Atlanta Fed recently released its online Annual Report. In his video introduction to the report, President Dennis Lockhart explained that the economic growth we have experienced in recent years has been driven much more by growth in hours worked (primarily due to employment growth) than by growth in the output produced per hour worked (so-called average labor productivity). For example, over the past three years, business sector output growth averaged close to 3 percent a year. Labor productivity growth accounted for only about 0.75 percentage point of these output gains. The rest was due primarily to growth in employment. The recent performance of labor productivity stands in stark contrast to historical experience. Business sector labor productivity growth averaged 1.4 percent over the past 10 years. This is well below the labor productivity gains of 3 percent a year experienced during the information technology productivity boom from the mid-1990s through the mid-2000s. John Fernald and collaborators at the San Francisco Fed have decomposed labor productivity growth into some economically relevant components. The decomposition can be used to provide some insight into why labor productivity growth has been so low recently. The four factors in the decomposition are:

  • Changes in the composition of the workforce (labor quality), weighted by labor's share of income
  • Changes in the amount and type of capital per hour that workers have to use (capital deepening), weighted by capital's share of income
  • Changes in the cyclical intensity of utilization of labor and capital resources (utilization)
  • Everything else—all the drivers of labor productivity growth that are not embodied in the other factors. This component is often called total factor productivity.

Mild Winters and Crank Economics - Paul Krugman - Neil Irwin writes about migration patterns within the United States, and points out that they overwhelmingly reflect just two factors. Most important, people are moving to places with mild winters. On top of this, they’re moving to places with cheap housing, although you need to allow for the fact that some places are cheap precisely because people are leaving. As I pointed out the other day, this long-term movement toward the sun, in turn, probably has a lot to do with the gradual adjustment to air conditioning.  And as I also pointed out, the search for mild winters can lead to a lot of spurious correlations. With the exception of California — which has mild winters but also, now, has very high housing prices — America’s warm states are very conservative. And that’s not an accident: warm states were also slave states and members of the Confederacy, and a glance at any election map will tell you that in US politics the Civil War is far from over. The point, then, is that these hot red states also tend to be low-minimum-wage, low-taxes-on-the-wealthy jurisdictions. And that opens the door to sloppy and/or mendacious claims that low wages and taxes are driving their growth.  This really shouldn’t even be controversial — I think it’s kind of obvious.

McDonald’s to Raise U.S. Workers’ Hourly Wage to $10 By End of 2016——While fast-food workers across the country plan protests over their wages later this month, employees at McDonald’s-owned restaurants can expect pay hikes starting this summer.The fast-food giant will raise the average hourly rate for workers at the U.S. restaurants it owns to $9.90 from $9.01 starting July 1, while those wages will climb to $10 per hour by the end of 2016, The Wall Street Journal reported Wednesday. The company will also allow those employees to earn up to five days of paid vacation every year following one year of employment.One catch is that the new wages will not apply to fast-food workers employed by McDonald’s franchisees, which run almost 90% of the company’s U.S. restaurants, WSJ reported. Franchise owners are able to set their own policies when it comes to wages. As it stands, roughly 90,000 McDonald’s workers will see a pay increase starting this summer.U.S. fast-food workers are planning a one-day strike as part of a two-year campaign that seeks a $15 hourly wage as well as the right to unionize. Those protests are planned for April 15.

Behind McDonald’s Pay Boost: Growing Wage Pressure for Low-Skilled Jobs - McDonald’s pledge to raise the pay of hourly employees by more than 10% will further fuel the unusual trend of wage gains being led by the bottom of the labor market. McDonald’s says it will pay employees at company-operated stores at least $1 per hour more than the local minimum wage. As a result, average pay for those workers will increase to more than $10 an hour by the end of next year, from $9.01 currently. The pay increase would push rank-and-file McDonald’s workers’ average wages above the industry average for fast-food restaurants, according to the Labor Department. While the move applies only to the roughly 1,500 company-owned restaurants in the U.S., it puts pressure on more than 10,000 franchisees and other businesses throughout the food-service industry to at least match that pay level. Already pay gains in the food-service industry is by far outstripping tepid overall wage growth. From a year earlier, average hourly earnings for non-manager employees at fast-food restaurants like McDonald’s rose 3.5% in January to $9.54 an hour, well above 2.2% pace for all private-sector workers.

Power and Paychecks, by Paul Krugman -  On Wednesday, McDonald’s — which has been facing demonstrations denouncing its low wages — announced that it would give workers a raise. The pay increase won’t, in itself, be a very big deal... But it’s at least possible that this latest announcement, like Walmart’s much bigger pay-raise announcement a couple of months ago, is a harbinger of an important change in U.S. labor relations. Maybe it’s not that hard to give American workers a raise, after all. Most people would surely agree that stagnant wages, and more broadly the shrinking number of jobs that can support middle-class status, are big problems for this country. But the general attitude to the decline in good jobs is fatalistic. Isn’t it just supply and demand? Haven’t labor-saving technology and global competition made it impossible to pay decent wages to workers unless they have a lot of education? Strange to say, however, the more you know about labor economics the less likely you are to share this fatalism. For one thing, global competition is overrated as a factor in labor markets... And the evidence that technology is pushing down wages is a lot less clear than all the harrumphing about a “skills gap” might suggest. Even more important is the fact that the market for labor isn’t like the markets for soybeans or pork bellies. Workers are people; relations between employers and employees are more complicated than simple supply and demand. And this complexity means that there’s a lot more wiggle room in wage determination than conventional wisdom would have you believe. We can, in fact, raise wages significantly if we want to....

McDonald's Wage Hike Is Thanks to the Economy, Not the “Fight for $15” -- McDonald’s announced Wednesday that it is raising wages for around 90,000 workers in restaurants across the country and adding additional benefits like paid vacation. It’s yet another clear sign that the job market is strengthening and employers are struggling to attract quality workers.  The move, which was first reported by the Wall Street Journal, will increase wages by $1 per hour more than the local minimum wage. The average hourly wage for McDonald's workers in the U.S. is $9.01. As a result of this wage increase, the average will rise to $9.90 by July 1 and above $10 by the end of 2016. The Journal also reports that after one year of employment, employees can earn up to five days of paid vacation. (McDonald’s move doesn't apply to franchisees, which make up nearly 90 percent of the company's restaurants, though this move might convince some franchisees to follow suit.)  McDonald's is part of a growing trend in big business. Wal-Mart made news earlier this year when it announced it would raise its wages for 500,000 workers to more than $10 per hour next year. TJ Maxx, Ikea, Target and Aetna have all raised their wages in the past few months. All of these companies are not buckling under societal pressure to boost pay. They’re doing so for economic reasons. And surveys of employers bear this out as well:

‘Wealth creators’ are robbing our most productive people -- There is an inverse relationship between utility and reward. The most lucrative, prestigious jobs tend to cause the greatest harm. The most useful workers tend to be paid least and treated worst. I was reminded of this while listening last week to a care worker describing her job. Carole’s company gives her a rota of, er, three half-hour visits an hour. It takes no account of the time required to travel between jobs, and doesn’t pay her for it either, which means she makes less than the minimum wage. During the few minutes she spends with a client, she may have to get them out of bed, help them on the toilet, wash them, dress them, make breakfast and give them their medicines. If she ever gets a break, she told the BBC radio programme You and Yours, she spends it with her clients. For some, she is the only person they see all day.  Is there more difficult or worthwhile employment? Yet she is paid in criticism and insults as well as pennies. She is shouted at by family members for being late and not spending enough time with each client, then upbraided by the company because of the complaints it receives. Her profession is assailed in the media as the problems created by the corporate model are blamed on the workers.  A report by the Resolution Foundation reveals that two-thirds of frontline care workers receive less than the living wage. Ten percent, like Carole, are illegally paid less than the minimum wage. This abuse is not confined to the UK: in the US, 27% of care workers who make home visits are paid less than the legal minimum.

Amazon Requires Badly-Paid Warehouse Temps to Sign 18-Month Non-Competes - Yves Smith - The Verge has broken an important story on how far Amazon has gone in its relentless efforts to crush workers. Despite its glitzy Internet image, Amazon’s operations depend heavily on manual labor to assemble, pack, and ship orders. Its warehouses are sweatshops, with workers monitored constantly and pressed to meet physically daunting productivity goals. Indeed, many of its warehouses were literally sweatshops, reaching as much as 100 degrees in the summer until bad press embarrassed the giant retailer into installing air conditioners. In Germany, a documentary exposed that Amazon hired neo-Nazi security guards to intimidate foreign, often illegal, hires it had recruited and was housing in crowded company-organized housing. Amazon also fought and won a Supreme Court case to escape compensating its poorly-paid warehouse workers for time they spend in line at the end of shift, waiting for security checks.  Amazon’s latest “keep workers down” practice is to make temps sign non-competes. Yes, if you are so desperate and foolish as to take a short-term gig with Amazon, you will be barred from working for virtually anyone else for the next eighteen months. Look at how incredibly broad the language is in the non-compete agreement obtained by The Verge: During employment and for 18 months after the Separation Date, Employee will not, directly or indirectly, whether on Employee’s own behalf or on behalf of any other entity (for example, as an employee, agent, partner, or consultant), engage in or support the development, manufacture, marketing, or sale of any product or service that competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future) that Employee worked on or supported, or about which Employee obtained or received Confidential Information. Pray tell, what possible employers are not included, given how sweeping these terms are? A cleaning service? Nah, Amazon sells Roombas and vacuum cleaners, so you’d be competing indirectly with them. A receptionist in a dentist’s office? Nope, Amazon sells tooth whitening products. A massage therapist? No, Amazon sells electronic massage devices. Working as a gym? No, Amazon sells home exercise equipment.

Even After Walmart Got Busted in Court for Stealing Workers' Wages, It's Trying Not to Pay Up -- Walmart employees have over $187 in damages they can collect from a successful wage theft lawsuit, but the company is arguing that each victim should get their own lawyer. At the end of the 2014, the Pennsylvania Supreme Court affirmed lower court rulings which dictated Walmart was required to pay $151 million in unpaid wages and damages. This sum is supposed to go to an estimated 186,000 employees who worked for the company from 1998-2006. Including attorney fees, the total actually reaches over $187 million. The ruling stems from a 2002 class action lawsuit that was filed against the retail giant in the Philadelphia County Court of Common Pleas. The plaintiffs claimed that Walmart made them work through 33 million allotted rest breaks because management was under pressure to cut down labor costs. According to the lawsuit, managers received lucrative bonuses if certain profits were reached. Forcing workers to skip their breaks would, no doubt, increase their chances of obtaining the bonuses.

The Rise of the Working Poor and the Non-Working Rich - Robert Reich -- Many believe that poor people deserve to be poor because they’re lazy. As Speaker John Boehner has said, the poor have a notion that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.” In reality, a large and growing share of the nation’s poor work full time — sometimes sixty or more hours a week – yet still don’t earn enough to lift themselves and their families out of poverty.  It’s also commonly believed, especially among Republicans, that the rich deserve their wealth because they work harder than others.   In reality, a large and growing portion of the super-rich have never broken a sweat. Their wealth has been handed to them.  The rise of these two groups — the working poor and non-working rich – is relatively new. Both are challenging the core American assumptions that people are paid what they’re worth, and work is justly rewarded. Why are these two groups growing? The ranks of the working poor are growing because wages at the bottom have  dropped, adjusted for inflation. With increasing numbers of Americans taking low-paying jobs in retail sales, restaurants, hotels, hospitals, childcare, elder care, and other personal services, the pay of the bottom fifth is falling closer to the minimum wage. At the same time, the real value of the federal minimum wage is lower today than it was a quarter century ago.  In addition, most recipients of public assistance must now work in order to qualify.  Clinton’s welfare reform of 1996 pushed the poor off welfare and into work. Meanwhile, the Earned Income Tax Credit, a wage subsidy, has emerged as the nation’s largest anti-poverty program. Here, too, having a job is a prerequisite.

When Your Occupation Is Poverty -- A quarter of America’s workers are working full-time, year-round in occupations where they cannot expect to earn enough to keep a family of four above poverty. That’s just one troubling takeaway of the latest Occupational Employment Statistics (OES) report, released yesterday by the Bureau of Labor Statistics (BLS). As far as data about occupations go, OES is, to put it mildly, a big deal. Released just once annually, it provides detailed estimates of employment and wages for over 800 occupations at the national, state, and local levels, based on a survey of 1.2 million business establishments carried out over a three-year period. It’s by far the most comprehensive portrait we have of who does what, where, and for how much. Policymakers, job seekers, and employers use its findings to better understand their options, opportunities, and challenges. One finding should stand above the rest: the less-skilled segment of the job market is not a pretty place. And far more of us are stuck there than we acknowledge or would like to believe. The figure below shows median wages for the 30 lowest-paying occupations with over 250,000 employees, which collectively employ 31 million people nationally. (The median is the wage right in the middle: half of the people in an occupation make less than it, and half make more. It’s a better measure of the typical worker’s experience than average wages, which can be skewed by a handful of high earners.)

Economic Inequality: It’s Far Worse Than You Think - Scientific American - In a candid conversation with Frank Rich last fall, Chris Rock said, "Oh, people don’t even know. If poor people knew how rich rich people are, there would be riots in the streets." The findings of three studies, published over the last several years in Perspectives on Psychological Science, suggest that Rock is right. We have no idea how unequal our society has become.   The average American believes that the richest fifth own 59% of the wealth and that the bottom 40% own 9%. The reality is strikingly different. The top 20% of US households own more than 84% of the wealth, and the bottom 40% combine for a paltry 0.3%. The Walton family, for example, has more wealth than 42% of American families combined. We don’t want to live like this. In our ideal distribution, the top quintile owns 32% and the bottom two quintiles own 25%. As the journalist Chrystia Freeland put it,  “Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz.” This all might ring a bell. An infographic video of the study went viral and has been watched more than 16 million times.   In a study published last year, Norton and Sorapop Kiatpongsan used a similar approach to assess perceptions of income inequality. They asked about 55,000 people from 40 countries to estimate how much corporate CEOs and unskilled workers earned. Then they asked people how much CEOs and workers should earn. The median American estimated that the CEO-to-worker pay-ratio was 30-to-1, and that ideally, it’d be 7-to-1. The reality? 354-to-1. Fifty years ago, it was 20-to-1.   These two studies imply that our apathy about inequality is due to rose-colored misperceptions. To be fair, though, we do know that something is up.  But while Americans acknowledge that the gap between the rich and poor has widened over the last decade, very few see it as a serious issue. Just five percent of Americans think that inequality is a major problem in need of attention. While the occupy movement may have a tangible legacy, Americans aren’t rioting in the streets.

Is inclusiveness good for the economy? - With relatively little fanfare, the economics of discrimination seems to have been flipped on its head. At least, that is one optimistic, heartening way to interpret the national backlash to Indiana’s new “religious freedom” law, which has set off a wave of boycotts by consumers, celebrities, politicians and businesses. Reams of economic research, going back to Nobel laureate Gary Becker’s 1955 dissertation on racial discrimination, have suggested that a key reason firms discriminate is that their customers and employees probably demand it. After all, if employers refused to hire blacks, women, Jews or gays because the employers themselves were prejudiced, their businesses would be at a big disadvantage, since a more open-minded competitor could hire members of the passed-over demographic at an effective discount. But if the customers and employees had a taste for discrimination — and were unwilling to shop or work alongside members of a particular minority — then firms would be better off if they continued to actively discriminate. In that situation, market forces encourage bad behavior; at least in the absence of anti-discrimination and public accommodation laws, doing the right thing becomes expensive, and potentially fatal, to any business whose customers are assumed to be even slightly prejudiced. Hiring gay men and lesbians, or allowing black people to eat at your restaurant, might drive away your other customers. Or so business owners could have reason to fear.

Illegal Discrimination Still Significant and Persistent: If you are black, foreign, female, elderly, disabled, gay, obese or not a member of the dominant caste or religion in your community, you may face ‘significant and persistent discrimination’ when you go to apply for a job, rent a house or buy a product. That is the overall conclusion of a new survey by Judith Rich of 70 field studies of discrimination conducted during the last 15 years. Her report will be presented at the Royal Economic Society’s 2015 annual conference. Field studies of discrimination in markets ensure that group identity is the only difference observed by the decision-maker about an individual. Carefully matched testers, one from the group that may be the victim of discrimination, apply for jobs, rental accommodation or to buy a house or flat, or to purchase goods or services. This can be done in person, over the telephone, (where testers are trained) or, in the majority of studies, in writing, usually by email (where content and style are equivalent).  Among the findings of the 70 experiments in the analysis:

  • An African-American applicant needed to apply to 50% more job vacancies than a white applicant to be offered an interview.
  • Having a higher qualification made virtually no difference for African-Americans but it made a significant improvement in interview offers for whites.
  • White applicants with a criminal record received more interviews than African-Americans with no criminal record.
  • Older workers needed to make between two to three times as many job applications as a young worker to get an offer of interview. 
  • When purchasing products, higher prices were quoted to minority applicants buying used cars in the United State and Israel, drinks in nightclubs and bars in New Orleans, and seeking car repairs in Chicago.

The Homophobic Law and the Indiana Governor Who Dares Not Speak Its Purpose - William K. Black - The paradox is that a law purportedly vital to protect the right of merchants to discriminate against gays is the last thing that merchants want.  Gays make very good customers.  They have income and they buy goods and services.  Merchants want to sell goods. .  The owners and officers of firms often take colleagues and clients to restaurants.  The purpose of doing so is for everyone involved to have a wonderful experience.So here are two variants of the nightmare a business owner has relative to the Indiana law.  Four employees go out for lunch.  The waitress come over and points to the declaratory judgment of an Indiana justice of the peace proudly displayed on the wall.  It declares that the restaurant owner has the right under the Indiana Religious Freedom Restoration Act to deny service to those who are LGBT or support LGBT rights.  The waitress informs one of the employees he must leave the restaurant because he has what she believes to be gay mannerisms. The second variant is that the owner of the firm takes an important client visiting from Illinois out to dinner.  The owner of the restaurant approaches the table and asks the client (who is straight) to leave because they do not serve sodomites. There are, of course, innumerable variants on this theme.  They all offer extreme embarrassment followed by rage by the victims of the discrimination. The Indiana Act does not mention people who are LGBT.  It is far broader than that.  Any person in Indiana can invent a “religious” “belief.”  That “belief” could be that one should not associate with, touch, speak to, see, or serve any characteristic one can imagine – race, color, gender, nationality, age, eye-color, progressives, or the left-handed.  The focus on LGBT is because the purpose of the law is to encourage discrimination against LGBT and because Indiana has no law barring discrimination against LGBT.

American police killed more people in March (111) than the entire UK police have killed since 1900 -- Yeah. Those numbers are real.  A total of 111 people were killed by police in the United States in March of 2015. Since 1900, in the entire United Kingdom, 52 people have been killed by police. Don't bother adjusting for population differences, or poverty, or mental illness, or anything else. The sheer fact that American police kill TWICE as many people per month as police have killed in the modern history of the United Kingdom is sick, preposterous, and alarming.  In March:

Chicagoans Owe City $1.5 Billion In Parking, Driving Tickets: Chicago's unpaid ticket debts reportedly total a whopping $1.5 billion—nearly double what New Yorkers owe their city in ticket debts—and that debt is accruing by $1 million a week. Most of the debt comes from unpaid parking tickets, DNAinfo Chicago found, while unpaid tickets from the city's fledgling red-light and speed camera programs has already grown to more than $230 million, two years since the cameras were installed. Since Rahm Emanuel took office in 2011, total ticket debt has gone up 15 percent. The city's Department of Finance has tried in recent years to help some motorists pay off their tickets with special payment plans but the vast majority of those plans are now in default, DNAinfo says. How will the city get ticket scofflaws to pony up? Some financial analysts believe Chicago should emulate New York City’s carrot-or-stick approach, by keeping late penalties low, but slapping cars with the dreaded boot much sooner in the process than Chicago's law stipulates.

How Chicago has used financial engineering to paper over its massive budget gap -- This article explains that the City of Chicago has concealed how it has dealt with its budget gap over the past decade. The city failed to cut its recurring expenditures to match its recurring revenues after it blew through its reserve funds. Instead, two administrations have:

  • Used long-term debt to finance everyday expenses and maintenance;
  • Used long-term debt to finance judgments and settlements, including police brutality cases, and retroactive wage increases and pension contributions for its unionized employees;
  • Restructured the city’s existing debt to extend the maturities on its bonds far out into the future in order to avoid having to pay the debt as it was coming due;
  • Borrowed more money than it needed in order to make payments on the bonds its was issuing to avoid debt service expenses, essentially using debt to pay debt; and
  • Possibly used the city’s portfolio of interest rate derivatives as an ATM.

State and local governments typically issue bonds to finance the construction of buildings and infrastructure that will benefit residents for generations. This article explains how Chicago residents have billions of dollars of debt and nothing to show for it.

Panel asks state to absorb $350M in Detroit Public Schools debt: — A coalition of business, civic, education and religious leaders wants the state of Michigan to assume at least $350 million in debt Detroit Public Schools has accumulated under state oversight and relieve the cash-strapped district of pension payments for retirees. The Coalition for the Future of Detroit Schoolchildren's recommendation, sent to Gov. Rick Snyder on Monday, is likely to spark a fierce debate in the Legislature over whether the state should be on the hook for deficits piled up by emergency managers appointed by Snyder and former Gov. Jennifer Granholm since 2009. The $350 million in long-term debt costs the 47,238-student school district $53 million in annual debt service payments, diverting $1,120 per student away from the classroom.  The Detroit News first reported Thursday that DPS is about $53 million behind in pension contributions to the Michigan Public School Employees Retirement System, a deficit that has accumulated since October 2010 under four state-appointed emergency managers. The Detroit district is fined $78,000 a month for the delinquency, on top of $7,600 in growing interest penalities. If the district doesn't resume regular payments soon, state officials say DPS could be $81 million behind in pension payments by July 1.

We Send Teachers to Prison for Rigging the Numbers, Why Not Bankers? --  William K. Black -- The New York Times ran the story on April Fools’ Day of a jury convicting educators of gaming the test numbers and lying about their actions to investigators.— In a dramatic conclusion to what has been described as the largest cheating scandal in the nation’s history, a jury here on Wednesday convicted 11 educators for their roles in a standardized test cheating scandal that tarnished a major school district’s reputation and raised broader questions about the role of high-stakes testing in American schools. On their eighth day of deliberations, the jurors convicted 11 of the 12 defendants of racketeering, a felony that carries up to 20 years in prison. Many of the defendants — a mixture of Atlanta public school teachers, testing coordinators and administrators — were also convicted of other charges, such as making false statements, that could add years to their sentences.”  This was complicated trial that took six months to present and required eight days of jury deliberations.  It was a major commitment of investigative and prosecutorial resources.   In addition to the trial success, the prosecutors secured 21 guilty pleas. Atlanta’s public schools, of course, did not engage in “the largest cheating scandal in the nation’s history.”  The big banks’ cheating scandals left the Atlanta educators in the dust.

Welcome to Ohio State, Where Everything Is for Sale -- I’m excited to announce that my university has changed its motto. Out with the old and in with: “Omnia Venduntur!” Our old motto,Disciplina In Civitatem,” or “Education for Citizenship,” just sounded so, you know, land-granty, so civic-minded. It certainly doesn’t capture our new ethos of entrepreneurial dynamism and financial chicanery. So instead: “Everything Is for Sale!” (Actually, the trustees originally wanted to carve “Every Asset a Monetizable Asset” into stone, but it turns out “monetizable” doesn’t have a Latin translation.) Yes, sir, we are open for business! And by “open for business” I mean: Make us an offer for something, and we’ll sell it to you like a pair of pants at a department-store closeout. We’ve been moving in this direction for some time. We were among the first to become a “Coke campus,” which means that in exchange for some cash, we’ve agreed that Coke and Coke products are the only soft drinks permitted on campus. Periodically we all get helpful email reminders of our beverage obligations, which say things like: “If you go to the grocery store to purchase beverages for a university event, you must purchase Coke products regardless of the price of other items.” How else can the university hope to achieve its stated goal of moving from “excellence to eminence”?  The great Coke contract was merely a prelude to the game-changing deal we signed in 2012 to lease campus parking — all 37,000 spaces! — to an Australian investment firm for 50 years. This deal was worth almost $500 million. It’s true that some of the faculty opposed this deal (but only 84 percent, according to a survey), and it’s also true that since the Australian takeover, prices for parking permits have gone through the roof. But it is not true, as has been reported in some places, that faculty have formed hitchhiking co-ops because they can no longer afford to park on campus.

More College Degrees Aren’t Enough to Wipe Out Inequality, Paper Says -  Better education would lift the earnings of men in the bottom half of the income scale but wouldn’t be enough to erase inequality between the rich and poor, according to a new paper. The study, by economists Brad Hershbein, Melissa Kearney and former Treasury Secretary Lawrence Summers, simulates the impact of a bachelor’s degree on the population of men 25 to 64 who don’t have one. “On average, more education does translate into more-valuable skills, and the results of our simulation exercise support that view,” the report for the Brookings Institution’s Hamilton Project said. “At the same time, they make it clear that increasing the share of working-age men that have college degrees will do very little to decrease the overall level of earnings inequality.” Income inequality and wage stagnation have been two key themes running through academic and policy circles. The average incomes of the wealthiest 1% have dramatically outpaced the incomes of everyone else. Meanwhile, steady job creation hasn’t led to higher pay for most workers.. Unsurprisingly, Mr. Summers and his colleagues argue that increasing the skills of those in the lower half of income distribution charts will improve their economic position. Their exercise focuses on low-skilled men, a cohort that has seen a heavy drop in employment and earnings in recent years. The simulation finds that a boost in bachelor’s degrees would lift annual earnings of the lowest 25% to $8,720 from $6,100. At the middle of the pack, earnings would increase to $37,060 from $34,000.

Why More Education Won’t Fix Economic Inequality: Suppose you accept the persuasive data that inequality has been rising in the United States and most advanced nations in recent decades. But suppose you don’t want to fight inequality through politically polarizing steps like higher taxes on the wealthy or a more generous social welfare system.There remains a plausible solution to rising inequality that avoids those polarizing ideas: strengthening education so that more Americans can benefit from the advances of the 21st-century economy. This is a solution that conservatives, centrists and liberals alike can comfortably get behind. After all, who doesn’t favor a stronger educational system? But a new paper shows why the math just doesn’t add up, at least if the goal is addressing the gap between the very rich and everyone else. Brad Hershbein, Melissa Kearney and Lawrence Summers offer a simple little simulation that shows the limits of education as an inequality-fighter. In short, more education would be great news for middle and lower-income Americans, increasing their pay and economic security. It just isn’t up to the task of meaningfully reducing inequality, which is being driven by the sharp upward movement of the very top of the income distribution. It is all the more interesting that the research comes from Mr. Summers, a former Treasury secretary who is hardly known as a soak-the-rich class warrior. It is published by the Hamilton Project, a centrist research group operating with Wall Street funding and seeking to find third-way-style solutions to America’s problems that can unite left and right.

Increasing Education: What it Will and Will Not Do for Earnings and Earnings Inequality  » We have empirically simulated what would happen to the distribution of earnings if one out of every ten men aged 25–64 who did not have a bachelor’s degree were to instantly obtain one—a sizeable increase in college attainment. We focus on men not because women are unimportant—they clearly are important to the workforce—but because low-skilled men have seen the largest drops in employment and earnings over the past few decades, and are now considerably less likely to attend and graduate from college. We focus on college attainment because the data are readily available, but we acknowledge that it is an imperfect measure of skills, perhaps increasingly so. Despite these caveats, this empirical exercise is illuminating and sheds much needed light on an often-muddled public debate. Our analysis leads to three main takeaway points:

  1. Increasing the educational attainment of men without a college degree will increase their average earnings and their likelihood of being employed.
  2. Increasing educational attainment will not significantly change overall earnings inequality. The reason is that a large share of earnings inequality is at the top of the earnings distribution, and changing college shares will not shrink those differences.
  3. Increasing educational attainment will, however, reduce inequality in the bottom half of the earnings distribution, largely by pulling up the earnings of those near the 25th percentile.

Study on MOOCs provides new insights on an evolving space - Today, a joint MIT and Harvard University research team published one of the largest investigations of massive open online courses (MOOCs) to date. Building on these researchers’ prior work — a January 2014 report describing the first year of open online courses launched on edX, a nonprofit learning platform founded by the two institutions — the latest effort incorporates another year of data, bringing the total to nearly 70 courses in subjects from programming to poetry. “We explored 68 certificate-granting courses, 1.7 million participants, 10 million participant-hours, and 1.1 billion participant-logged events,” says Andrew Ho, a professor at the Harvard Graduate School of Education. The research team also used surveys to ­gain additional information about participants’ backgrounds and their intentions. Ho and Isaac Chuang led a group effort that delved into the demographics of MOOC learners, analyzed participant intent, and looked at patterns that “serial MOOCers,” or those taking more than one course, tend to pursue. “What jumped out for me was the survey that revealed that in some cases as many as 39 percent of our learners are teachers,” Chuang says. “This finding forces us to broaden our conceptions of who MOOCs serve and how they might make a difference in improving learning.”

The Fed's Startling Student Debt Numbers That Every Young Person Should See -- What I’m about to tell you is not my own opinion or even analysis. It’s original data that comes from the United States Federal Reserve and national credit bureaus.

  1. 40 million Americans are now in debt because of their university education, and on average borrowers have four loans with a total balance of $29,000.
  2. According to the Fed, “Student loans have the highest delinquency rate of any form of household credit, having surpassed credit cards in 2012.”
  3. Since 2010, student debt has been the second largest category of personal debt, just after a home mortgage.
  4. The delinquency rate for student loans is now hovering near an all-time high since they started collecting data 12 years ago.
  5. Only 37% of total students loan balances are currently in repayment and not delinquent.

The rest—nearly 2 out of 3—are either behind on payments, in all-out default, or have entered some sort of deferral program to delay making payments, with a small percentage still in school. It’s pretty obvious that this is a giant, unsustainable bubble (more on this below). But even more important are the personal implications.University graduates now matriculate with tens of thousands of dollars worth of debt. Debt is another form of servitude. Like medieval serfs, debt keeps people tied to jobs they dislike in places they don’t want to be working for bosses they hate doing things that make them feel unfulfilled. Debt makes it very difficult to walk away and start fresh. In fact, ‘starting fresh’ is almost legally impossible when it comes to student debt. Even in US bankruptcy court, student debt cannot be discharged in almost all cases. It is an albatross that hangs over you for a decade or more if you do make the payments, and it follows you around for the rest of your life if you do not.

Activists Stop Paying Their Student Loans -- Latonya Suggs says she borrowed thousands of dollars in student loans to attend the for-profit Corinthian Colleges but has nothing to show for it. Most employers don't recognize her criminal justice degree."I am completely lost and in debt," Suggs says. And now she's doing something about it: She's refusing to pay back those loans.Suggs and 106 other borrowers now saddled with Corinthian loan debt say their refusal to repay the loans is a form of political protest. And Tuesday, the U.S. government gave them an audience.Representatives of the "Corinthian 100" met with officials from the Department of Education and the Consumer Financial Protection Bureau. Rohit Chopra, the CFPB's student loan ombudsman, said in a letter to the strikers that the CFPB would like to "discuss further" potential "ways to address the burden of their student loans."This saga began last July, when Corinthian Colleges, a for-profit chain with 70,000 students across more than 100 campuses, ceased operations in response to a federal regulatory crackdown.  In September, the CFPB sued Corinthian, accusing it of predatory lending practices. Weeks later, roughly half of its campuses were sold to the Educational Credit Management Corp., a financial company with no prior experience operating colleges.Finally, in February, the CFPB and the Department of Education announced the forgiveness of $480 million in private student loans held by former Corinthian students.

The student debt revolt might just work -  It started out as a few people refusing to repay student loans in protest of alleged predatory lending by for-profit Corinthian Colleges. But the “debt strike” has turned into a movement of over 100 students who may now have a real chance of getting the government to forgive their loans. On Tuesday, the strikers met with senior officials from the Consumer Financial Protection Bureau, Education Department and Treasury Department to discuss having their loans discharged under a federal statute to protect college students from fraud. The strikers are among 400 former Corinthian students to have filed what’s known as defense to repayment claims, an appeal to the Education Department to forgive their federal loans on the grounds that Corinthian broke the law. The department has broad authority to cancel loans when colleges close or commit fraud against students. “What these Corinthian students have experienced is troubling,” said Denise Horn, a spokeswoman for the Education Department. “We will review every claim to borrower’s defense and continue to investigate Corinthian to help students as much as possible.” Horn said she could not provide a timeline for the review.

Student Debt Strikers Grow in Number and in Power -- Just over a month ago, Waging Nonviolence reported that 15 former students of Corinthian Colleges — the beleaguered, notorious for-profit higher education system — were going on strike; not from their jobs, or from class, but from their debt. Today, there are over 100 debt strikers. Their goal is to ramp up pressure on the Department of Education to relieve not just the debt they incurred, but all Corinthian students’ loans and declare that for-profit colleges are not, in fact, too big to fail.  “We had hundreds and hundreds of requests to join the strike,” said Debt Collective organizer Ann Larson. With the initial announcement, the group invited potential strikers to sign up on their website to become part of the Corinthian Collective. A team of dozens of volunteers then sorted through strike requests in a “rigorous process,” informing debtors about the consequences of striking, reading over bills from their lenders and asking them to write up brief biographies and statements about why they were striking.  The Debt Collective, which the 106 strikers belong to, is a product of the Occupy offshoot Strike Debt, which has made headlines over the last several years for buying up private debt on the market for low prices and promptly absolving it. The $13 million in Corinthian students’ debt that the group purchased back in February cost just $1.   The Consumer Financial Protection Bureau, or CFPB, which is suing Corinthian for $570 million in predatory lending damages, has invited the strikers to a meeting in Washington, D.C., set to take place tomorrow. The Department of Education has further granted the collective’s request for a meeting on Tuesday while they are in the nation’s capital.

Student Loan Victims Pay the Price of DOE Inaction - On March 31, the Department of Education met with a group of student loan borrowers at a meeting hosted by the Consumer Financial Protection Bureau. These borrowers, organized by a group known as the Debt Collective, borrowed substantial amounts of federal and private student loans in order to attend schools operated by the now-infamous Corinthian College.  In a deal that purported to disclaim any successor liability for Corinthian's student-directed misdeeds, the Department infused the school with cash to prevent a sudden shut down of operations, allowed for ongoing student enrollment, and brokered the sale of many Corinthian Campuses to ECMC, a collector of student loans. This bailout and controlled unwinding of Corinthian is unusual, but its effect is not unprecedented in one key respect. The Department has evidenced no intention to go back over its books and relieve debt obligations that never should have been issued, had Corinthian played by the rules.

Making full pension payment would have 'incredible' impact on N.J. residents, treasurer says - Gov. Chris Christie's treasurer said Monday that the administration has reached out to lawmakers to comply with a judge's orders to work together to restore $1.6 billion to this year's pension payment, but stressed that actually doing that would mean lots of budget pain for New Jersey residents. A state Superior Court judge ruled last month that the administration and legislators must work together to come up with the cash, which Christie slashed last year to balance the budget. Christie plans to appeal the ruling, and Treasurer Andrew Sidamon-Eristoff said they're "quite confident" in their legal position that the state can't be forced to make the payment. Labor unions, meanwhile, have argued the governor broke a contract requiring him to ramp up payments into the public worker pension system. The treasurer's office contacted lawmakers to "indicate our willingness" to review the state's resources and unspent balances. "Coming up with $1.6 billion in the last few months of the fiscal year would impose incredible and I believe universally unacceptable impacts upon our residents here in New Jersey," he said.

Los Angeles Pension Fund Gives Up to $40 Million Approval Authority to Hopelessly Conflicted Consultant, Hamilton Lane - Yves Smith -- It often seems hard to fathom is how supposedly sophisticated investors like public and private investment funds give private equity firms so much discretion with inadequate oversight and controls. Try as they might, it is impossible for limited partners to find seasoned advisors, such as pension fund consultants and attorneys, who are not beholden to private equity sources of income. We'll look at a case study today, that of a top pension fund consultant and one of its clients, the Los Angeles City Employees' Retirement System, or LACERS. As you will see, the Hamilton Lane reports do not contain sufficient business and financial analysis for a potential investor to make a reasoned decision whether to risk a substantial equity investment. Their role is to provide due diligence theater.

Raising retirement age would widen benefit disparities for disadvantaged -- The age to receive full Social Security benefits should be closer to 70, according to a report published in the journal Daedalus. "We're living longer and healthier than ever before, but the statutory age of retirement for receiving Social Security benefits doesn't reflect that," says lead author S. Jay Olshansky, professor of epidemiology in the University of Illinois at Chicago School of Public Health. When Social Security was enacted in 1935, the age of full retirement was set at 65. Back then, a 25-year-old had a 62.4 percent chance of living to retirement age, and a 65-year-old retiree lived, on average, for another 12.6 years. "If we calculated retirement age using the same ratio of retired to working years present in 1935, the age of eligibility for full benefits today would be close to 70 years old, and the age for early retirement would be 66.5 years old," Olshansky said. "But raising the age of retirement would further exacerbate disparities in Social Security entitlements and place increased financial burdens on populations with lower life expectancies." In other words, people in population groups with lower life expectancies would continue to pay into Social Security the same as anyone else, while becoming even less likely than they already are to live to see retirement -- and those who do reach retirement would draw benefits for even fewer years, as compared to other groups.

America: The "Nursing Home" Economy - The key feature of age is that it happens no matter what you think. What does this mean? It means the “old countries” – their assets and their institutions, at least the ones that depend on population, income and credit growth – are “fastened to a dying animal” and are not likely to survive in their present form. Today, these countries, including the US, are victims of demography.  As people age, the whole society – its institutions, its laws, its customs, its economy and its markets – ages, too. They all become as familiar, comfortable and shabby as a well-worn shoe. An economy is not independent of the people in it. The economy ages with them. And when they reach retirement age, the economy gets arthritis. Older people get more money from the government. And they pay less in taxes. Old people also slow the rate of GDP, for obvious reasons: They are not adding to output; they are living on it.

9 New York Doctors Arrested For Using Homeless People To Defraud Millions From Medicaid -  In America’s fraudulent oligarch economy in which corruption and theft have become the preferred means to earn money, it’s no surprise doctors feel a need to participate. Mr. Rorie was recruiting homeless people, prosecutors said, ...after hours of unnecessary tests and fake diagnoses, the homeless people would be sent off with sneakers - selected from stacks of shoeboxes in the clinics’ basements... "We can use the same patients like guinea pigs for anything we want,” Mr. Vainer was recorded saying in a government wiretap." Do no harm indeed.

Imaginary Health Care Horrors, by Paul Krugman -  There’s a lot of fuzzy math in American politics, but Representative Pete Sessions of Texas, the chairman of the House Rules Committee, recently set a new standard when he declared the cost of Obamacare “unconscionable.” If you do “simple multiplication,” he insisted, you find that the coverage expansion is costing $5 million per recipient. But his calculation was a bit off — namely, by a factor of more than a thousand. The actual cost per newly insured American is about $4,000. Now, everyone makes mistakes. But this wasn’t a forgivable error. Whatever your overall view of the Affordable Care Act, one indisputable fact is that it’s costing taxpayers much less than expected — about 20 percent less, according to the Congressional Budget Office. A senior member of Congress should know that, and he certainly has no business making speeches about an issue if he won’t bother to read budget office reports. But that is, of course, how it’s been all along with Obamacare. Before the law went into effect, opponents predicted disaster on all levels. What has happened instead is that the law is working pretty well. So how have the prophets of disaster responded? By pretending that the bad things they said would happen have, in fact, happened. Remember, Obamacare was also supposed to be a huge job-killer. In 2011, the House even passed a bill called the Repealing the Job-Killing Health Care Law Act. Health reform, opponents declared, would cripple the economy and in particular cause businesses to force their employees into part-time work. Well, Obamacare went into effect fully at the beginning of 2014 — and private-sector job growth actually accelerated, to a pace we haven’t seen since the Clinton years. Meanwhile, involuntary part-time employment — the number of workers who want full-time work but can’t get it — has dropped sharply. But the usual suspects talk as if their dire predictions came true. Obamacare, Jeb Bush declared a few weeks ago, is “the greatest job suppressor in the so-called recovery.”

Income Inequality: It’s Also Bad for Your Health - We know that living in a poor community makes you less likely to live a long life. New evidence suggests that living in a community with high income inequality also seems to be bad for your health.A study from researchers at the University of Wisconsin Population Health Institute examined a series of risk factors that help explain the health (or sickness) of counties in the United States. In addition to the suspects you might expect — a high smoking rate, a lot of violent crime — the researchers found that people in unequal communities were more likely to die before the age of 75 than people in more equal communities, even if the average incomes were the same.“It’s not just the level of income in a community that matters — it’s also how income is distributed,” said Bridget Catlin, the co-director of the project, called the County Health Rankings and Roadmaps.Many factors besides inequality affect health, of course. How much people smoke, whether they are obese, and the safety of air and water, among many other factors, make a difference. But the effect of inequality was statistically significant, equivalent to a difference of about 11 days of life between high- and low-inequality places. The differences were small, but for every increment that a community became more unequal, the proportion of residents dying before the age of 75 went up.

China Can Develop a Drug for Just 3 Percent the Cost in the United States - Dean Baker -- That would be an implication of research by Tufts University professor Joseph DiMasi. He found that it cost an average of $2.6 billion to develop a new drug in the United States. By contrast, the Wall Street Journal reported that a company in China developed a new cancer drug for just $70 million, less than 3 percent of DiMasi's estimate. Given the enormous difference in costs, the United States and the world economy would be much better served if we shifted drug development to efficient countries like China. The United States should instead focus on producing goods and services in which it has a comparative advantage. Unfortunately, our trade deals have been pushing in the opposite direction, trying quite explicitly to protect the U.S. drug industry by increasing the strength of patent and related protection. Of course the best outcome would be to move away from research financed by patent monopolies and moving toward more modern and efficient mechanisms.  (The $70 million estimate may not include any discounting for money spent in the past. The proper methodology would impute interest to money spent ten years ago as opposed to yesterday. It also is only the cost for a successful drug. It doesn't factor in the cost of failures, as does DiMasi's estimate.)

A Penny for Your Sugar: Setting a Price on Sin -  Sugar tastes great, but in excess, it can do a real number on a waistline. I can take some solace in the fact that my kids’ juice has no added sugars. The American Heart Association recommends that we all cut back on added sugar to help curb obesity. Sugar-added beverages are pretty popular, and given the US obesity rate and its associated costs, they pose a problem. Can the problem be solved with a sin tax?  Or in this case, as it’s more palatably known, a “soda tax?” (That is not an all-inclusive term, it just rolls off the tongue more easily than “sugar-added beverage tax.”)  The theory: Tax sugary beverages, and consumers will buy a healthier alternative in order to avoid the tax. Over time, we’d reduce our consumption of sweetened beverages, reduce our chances of putting on extra pounds, and use less medical care. Does this theory hold (sugarless) water? Not much, though early data on Mexico’s year-old soda tax show some promise. US communities have been trying for several years to levy soda taxes in the name of good health. Soda purchases are falling, and there is some evidence that people are buying different drinks without an extra tax. But are we buying healthier, sin-free drinks?

Apple eaters visit the doctor just as often as everyone else, study finds --In what's sure to be a blow to the fruit-industrial complex, a new research study has this week found no evidence to support the old proverb that an apple a day keeps the doctor away. Studying the eating habits of 8,399 Americans, the researchers separated out a group of 753 who ate at least one small apple every day. These apple eaters were generally healthier and better educated than the general populace, but once the effects of such confounding factors were accounted for, there was no statistical difference to be found. Apple eaters were just as likely to visit the doctor or have an overnight hospital stay as everyone else. This analysis, led by University of Michigan assistant professor Matthew Davis, has a number of important limitations. While its subjects are nationally representative for the US, the data is based on their recall of food consumption over a period of 24 hours, which they assert to be representative of their usual diet. That's then compared against their hospital or doctor visits over the previous month, which are again self-reported, and the metric for "keeping the doctor away" is to have no more than one meeting with a medical professional during that period. That leaves the nuance of why people might need treatment unaddressed.

Your salt scare story du jour  -- New CDC study – “Sodium Content in Packaged Foods by Census Division in the United States, 2009“: We combined nutrition and sales data from 2009 to assess the regional variation of sodium in packaged food products sold in 3 of the 9 US census divisions. Although sodium density and concentration differed little by region, fewer than half of selected food products met Food and Drug Administration sodium-per-serving conditions for labeling as “healthy.” I feel like I’m spitting into the wind with salt, but I just can’t help myself. Here’s the second sentence of the paper:More than 90% of US adults consume more sodium than recommended. Remember that CDC data shows that Americans consume, on average, 3500 mg of sodium a day. Remember this study, which showed that consuming 3000 – 6000 mg of sodium a day was associated with lower rates of death that consuming more or less. Remember this Upshot piece which summarized the evidence. Or watch the below Healthcare Triage. Then, try and square that with a bold statement that 90% of us need to consume less salt.

Indiana woman jailed for “feticide.” It’s never happened before. - When Purvi Patel showed up in the St. Joseph Regional Medical Center’s maternity ward, bleeding and showing a protruding umbilical cord, Dr. Kelly McGuire immediately knew something was wrong. “There should have been a baby at the end of the umbilical cord,” he testified in an Indiana court room. McGuire, who is obligated to report cases of suspected child abuse, called the police, he told PRI. Informed that officials were heading to her home, Patel told her doctors that she’d had a miscarriage and had left her stillborn fetus in a dumpster behind a shopping center. Still in his hospital scrubs, McGuire followed police cars to the scene and examined the fetus, which he pronounced dead on arrival. Patel was charged with child neglect, and later with killing her fetus, and on Monday she was sentenced to 20 consecutive years in prison. The verdict makes Patel the first woman in the U.S. to be charged, convicted and sentenced for “feticide” for ending her own pregnancy, according to the group National Advocates for Pregnant Women (“NAPW”). Though Patel said she had had a miscarriage, she was found guilty of taking illegal abortion drugs. The Indiana statute under which Patel was convicted bans “knowingly or intentionally terminat[ing] a human pregnancy” with any intention other than producing a live birth, removing a dead fetus or performing a legal abortion.

John Hopkins lawsuit: US government study infected hundreds of people with syphilis, gonorrhoea and other infections – without their knowledge - Almost 800 people have filed a $1 billion (£676 million) suit against the Johns Hopkins Hospital System Corp after hundreds were unwittingly infected with syphilis, gonorrhoea and other infections as part of study into sexually transmitted diseases (STDs) conducted by the US Government more than 65 years ago.The former research subjects were infected in Guatemala as part of a study looking at ways of preventing STDs spreading. The law suit filed by the participants alleges that the university had "substantial influence" over the studies by controlling some panels that advised the federal government on how to spend research funds. It claims that John Hopkins and the Rockefeller Foundation, which is also named as a defendant, “exercised control over, supervised, supported, encouraged, participated in and directed the course of the experiments”, according to the Associated Press. Both John Hopkins and Rockefeller Foundation have said they denied paying for or conducting the study and accused lawyers for the plaintiff exploiting a “historic tragedy” for financial gain. John Hopkins said it will vigorously defend the suit. Paul Bekman, one of the lawyers representing the participants and their families, said: "The people involved were icons at Johns Hopkins Hospital and the Rockefeller Foundation. "They knew about it, they were architects of it, they planned it, they sought funding for it, they kept it under the radar. Hopkins provided syphilitic rabbits that were used to inject individuals with syphilis."

Brain development in children could be affected by poverty, study shows - Brain scans of children and young adults have revealed that specific brain regions tend to be smaller in those from poorer backgrounds than those born into wealthier families. The effects were most striking among the poorest families who took part in the study, where even modest changes in wages could have a significant impact on the structure of the children’s brains. The brain regions involved are crucial for the development of language, memory and reasoning skills, making them central to a child’s potential to thrive at school and gain a good education. Scientists hope that the findings will help to drive fresh interventions to boost brain growth in children who need it most. They could include targeted activities at school and at home; easier access to further education, which often leads to higher incomes; or simply more generous benefits for the poorest families. “The brain is the product of both genetics and experience, and experience is particularly powerful in molding brain development in childhood,”  “Interventions to improve socioeconomic circumstances, family life, and educational opportunities can make a vast difference.” The parents’ education had an impact on their children’s brain structure too, with scans revealing a larger hippocampus in children from more educated families. The hippocampus plays a pivotal role in short term memory and spatial navigation.

4 States Working to Ban Microbeads --There are currently numerous state bills introduced around the country focused on curbing marine plastic pollution. One notably popular subject this session is that of microbeads, which are teeny tiny bits of plastic put in consumer products such as toothpastes and facial scrubs, which (likely unbeknownst to consumers!) wash down the drain, are frequently not captured by wastewater treatment facilities (because they’re too small, do not biodegrade, and float), simply pass through wastewater treatment facilities, and eventually enter our waterways and pollute our oceans. These microplastics are found in all ocean gyres, bays, gulfs and seas around the world.  This is problematic for a multitude of reasons. First, plastic does not biodegrade into elements or compounds commonly found in nature like other organic materials, but instead, photodegrades into smaller pieces of plastic causing pollution that is virtually impossible to remediate. Second, microplastic debris absorbs toxic, environmentally persistent chemicals such as DDT, PCBs, PAHs, and flame retardants found in our waterways. In 2011, the National Oceanic Atmospheric Association found that plastic debris accumulates pollutants such as PCBs up to 100,000 to 1,000,000 times the levels found in seawater. Thus, aside from the negative effects of plastic consumption by marine life such as intestinal clogging and starvation, fish can become contaminated by the plastic’s absorbed toxins, which bioaccumulate up the food chain. These toxins pose dangerous threats to humans and wildlife who consume them.

The biggest source of plastic trash you’ve never heard of — “Seed trays, drip tape, mulch film, water pipes, hoop house covers, twine, hose, fertilizer bags, totes, tool handles and everything we use to keep ourselves dry.” On a rainy March afternoon, Kara Gilbert, co-owner of Vibrant Valley Farm, rattles off how plastics are used on the farm as she stamps mud off her boots. On a visit to the four-acre farm on lush Sauvie Island at the confluence of the Willamette and Columbia Rivers near Portland, Ore., Gilbert gives me a tour de farm plastics. The fields are just being readied for the season, but black plastic is already laid out under a hoop house. PVC water pipes are being set into place and drip irrigation tape is ready to be deployed, as are plastic sacks of fertilizer. Out in the greening field, little orange-pink plastic plant tags on ankle-high stakes flap in the wet breeze to mark rows of just-sprouted peas. By farming standards, this is a tiny operation. It sells organic produce to 15 or so local restaurants and through community-supported-agriculture shares, and grows flowers it sells wholesale. But even this small farm, Gilbert says, spends between $4,000 and $6,000 on plastic every year. Maybe more. It’s an environmental trade-off, she explains: Using plastic means saving water.  Whether it’s this small organic farm coaxing an impressive yield out of a few acres in Oregon or a large conventional operation somewhere else in the world, plastic is a huge part of modern agriculture — a multi-billion-dollar worldwide industry, according to Penn State Extension. Billions of pounds are used around the world each year, with much of the plastic designed for one season’s use.

Eating food with high pesticide residues linked with poor semen quality: Men who ate fruits and vegetables with higher levels of pesticide residues--such as strawberries, spinach, and peppers--had lower sperm count and a lower percentage of normal sperm than those who ate produce with lower residue levels, according to a new study by researchers at Harvard T.H. Chan School of Public Health. It is the first study to look at the connection between exposure to pesticide residues from fruits and vegetables and semen quality. The study will appear online March 30, 2015 in the journal Human Reproduction. "To our knowledge, this is the first report to link consumption of pesticide residues in fruits and vegetables, a primary exposure route for most people, to an adverse reproductive health outcome in humans," said Jorge Chavarro, assistant professor of nutrition and epidemiology and the study's senior author. Multiple studies have shown that consuming conventionally grown fruits and vegetables results in measurable pesticide levels in urine. Other studies have uncovered associations between occupational and environmental exposure to pesticides and lower semen quality. But only a few studies have linked consumption of pesticide residues in food to health effects, and none had looked at the effects on semen quality.  The men who ate the most fruits and vegetables with low-to-moderate levels of pesticide residue had a higher percentage of normal sperm compared with those who ate less fruits and vegetables with low-to-moderate levels.

EPA To Place Restrictions On The World’s Most Widely Used Herbicide - The EPA will place restrictions on use of the world’s most popular herbicide glyphosate, amid growing concern that the chemical causes weed resistance detrimental to farm production. Glyphosate is the key ingredient in Roundup, a widely used weed-killer produced by Monsanto.  The announcement comes amid recent findings by the World Health Organization that glyphosate is “probably carcinogenic to humans,” a conclusion that Monsanto staunchly rebukes. The EPA’s restrictions, however, are not meant to address public health concerns, and instead focus on the herbicide’s contribution to weed resistance, which has been increasing since the late 1990s.  The EPA does not currently consider glyphosate carcinogenic. The agency’s official position is that “there is inadequate evidence to state whether or not glyphosate has the potential to cause cancer from a lifetime exposure in drinking water.”  Though the agency has yet to release specifics of the plan, an EPA spokeswomen told Reuters that restrictions will likely be similar to those already in place for Enlist Duo, a relatively new herbicide produced by Dow AgroSciences. Those restrictions — put in place in 2014 — require Dow to alert the EPA about any instance of weed resistance, and limit the use of the herbicide to certain states. They also include weed monitoring, education for farmers, and remediation plans for any discovered resistance. Plans for the glyphosate restrictions will be finalized after a conference call between the agency and a committee of the Weed Science Society of America next week. According to the Reuters report, at least 14 species of weed in the United States have developed a resistance to glyphosate, affecting more than 60 million acres of farmland. Worldwide, 32 different weeds are glyphosate-resistant.

EPA Approves GMO Weed Killer Enlist Duo in Nine More States -  Ignoring the World Health Organization’s (WHO) conclusion that the crop chemical glyphosate is “probably carcinogenic to humans,” the U.S. Environmental Protection Agency has approved the glyphosate-containing herbicide Enlist Duo for agricultural use in nine more states. It had previously been approved for use on genetically engineered crops in six states. Enlist Duo’s active ingredients are glyphosate and 2,4-D, both of which have been shown to increase the risk of non-Hodgkin lymphoma.   “This poorly conceived decision by EPA will likely put a significant number of farmers, farm workers and rural residents at greater risk of being diagnosed with cancer,” said Scott Faber, senior vice president for government affairs at Environmental Working Group. “The agency simply ignored a game-changing new finding from the world leading cancer experts, and has instead decided the interests of biotech giants like Dow and Monsanto come first.” Last month, the International Agency for Research on Cancer, a branch of the WHO, elevated its risk assessment of glyphosate to “probably carcinogenic to humans” based on a review of the evidence by a panel of 17 leading oncology experts.

Monsanto donates $4M to effort to save monarch butterflies: — Agribusiness Monsanto Co., whose popular weed killer Roundup has been partly blamed by critics for knocking out monarch butterflies' habitat, said Tuesday it is committing $4 million to efforts to stem the worrisome decline of the black-and-orange insects. The St. Louis-based company said that of $3.6 million it is donating to the National Fish and Wildlife Foundation's Monarch Butterfly Conservation Fund, one-third of that money matches what the U.S. Fish and Wildlife Service is contributing. The remaining funds will be set aside to mirror what other federal agencies plan to offer over the next three years. Monsanto also intends to contribute $400,000 to experts and groups working on behalf of the butterfly, which is being considered for federal protection because its numbers have plunged by more than 90 percent in the past two decades. The decline of the monarchs, which are found throughout the continental U.S., worries environmentalists and scientists. Much of the decline is blamed on destruction of habitat that includes milkweed, on which monarchs lay their eggs and provides the sole source of food for caterpillars that later develop into the distinctive butterflies.

Genetically-modified mosquitoes might save thousands of human lives, but is the risk too high? --  Inside his Winnipeg lab, the University of Manitoba biologist is soaking larvae of one of the insect’s most dangerous strains in a special solution to “silence” two of the bugs’ genes. The result is an army of sterile males with potential to infiltrate and decimate whole populations of mosquitoes. That’s good news for the battle against summer insects. And, more significantly, could finally give humans the upper hand on illnesses like malaria and dengue fever that kill hundreds of thousands annually. But the experiment also launches Canada into a controversial new field – bioengineering mosquitoes – that critics fear might also wreak havoc on humans. A British company’s proposal to release millions of its genetically modified insects into a Florida Keys community in the near future has stirred up vocal opposition, with 150,000 people signing a petition to oppose the project. “They are going to use my kids, my neighbours and my community as a guinea pig,” says Mila de Mier, the Key West realtor who launched the petition. “I’m not a scientist, but I do have common sense. How many times in nature do you get unintended consequences?”

How Gates the Foundation and Western Countries Are Plotting to Take Control of Africa's Agriculture -- A battle is currently being waged over Africa's seed systems. After decades of neglect and weak investment in African agriculture, there is renewed interest in funding African agriculture. These new investments take the form of philanthropic and international development aid as well as private investment funds. They are based on the potentially huge profitability of African agriculture - and seed systems are a key target. Right now ministers are co-ordinating their next steps at the 34th COMESA (Common Market for Eastern and Southern Africa) Intergovernmental Committee meeting that kicked off yesterday, 22nd March, in preparation for the main Summit that will follow on 30th and 31st March 2015. COMESA's key aim is to pave the way for a "Continental Free Trade Area (CFTA) in 2017 under the auspices of the African Union" with uniform regulations, including on agricultural products, seeds and GMOs. A recent meeting on biotechnology and biosafety was held to establish a "COMESA biotechnology and biosafety policy implementation plan" (COMBIP) to roll out from 2015-2019, "leading to increased biotechnology applications and agricultural commodity trade in the region." But read between the lines and its real purpose was to facilitate the planting and commercialization of GMO crops in Africa all at one go, instead of country by country. USAID Regional representatives for East Africa, based in Nairobi, were present to monitor the process and ensure the desired outcome.

Overpopulation, overconsumption – in pictures – Guardian

6,000 Acres of Old Growth Forests Slated for Logging, the Largest Sale in Decades » Two coalitions of conservation groups filed Notices of Appeal before the 9th Circuit Court of Appeals last week from recent district court opinions approving old growth logging in the Tongass National Forest. In one case, four groups challenged the U.S. Forest Service’s Big Thorne old growth timber sale and associated road construction. In a separate lawsuit, a partially overlapping set of groups challenged provisions in the Tongass Land Management Plan that the Forest Service relies on when preparing old growth sales across much of Southeast Alaska. The Big Thorne sale is by far the largest Tongass old growth sale in decades. The conservation groups argue that it undercuts the region’s $2 billion fishing and tourism industries while continuing an unsustainable log export industry. The groups are also concerned about damage to vital habitat for salmon, bears, Sitka black-tailed deer, goshawks and the Alexander Archipelago wolf, and impacts to sport and subsistence hunters as well as recreational use of the forest. The Big Thorne sale would clearcut more than 6,000 acres of old-growth rainforest on Prince of Wales Island. Though the Forest Service estimates the sale would cost taxpayers $13 million, the economics of recent sales indicate taxpayer costs could eventually climb over $100 million. The Forest Service has been widely criticized for offering old-growth sales at an economic loss to American taxpayers and its Tongass timber program is currently under review by the federal General Accounting Office. Timber makes up less than 1 percent of economic activity in Southeast Alaska.

Climate Change Threatens to Kill Off More Aspen Forests by 2050s, Scientists Say - The beloved aspen forests that shimmer across mountainsides of the American West could be doomed if emissions of greenhouse gases continue at a high level, scientists warned on Monday. That finding adds to a growing body of work suggesting forests worldwide may be imperiled by climate change. The new paper analyzed the drought and heat that killed millions of aspens in Colorado and nearby states a decade ago. Such conditions could become routine across much of the West by the 2050s unless global emissions are brought under control, the study found.  “I think of aspens as a good canary-in-the-coal-mine tree,” said William R. L. Anderegg, the Princeton University researcher who led the new study, released online Monday by the journal Nature Geoscience. “They’re a wet-loving tree in a dry landscape. They may be showing us how these forests are going to change pretty massively as that landscape gets drier still.” The study found that large aspen die-offs were a near-certainty only if greenhouse emissions were to continue at the runaway pace that has characterized the last decade. If global emissions are brought under control, the chances will improve that large stands of aspens could be preserved, the paper found.

Russia Lost Forest The Size Of Switzerland Three Years In A Row - Canada and Russia have lost an alarming number of trees in recent years, compromising the ecologically rich and carbon-sequestering boreal forests that are native to the regions, according to a new report. The report, published Thursday by the World Resources Institute (WRI), found that the world’s boreal region has shown the steepest decline in forest cover between 2011 and 2013, with Russia — the country home to the world’s largest area of tree cover — losing an average of 16,600 square miles of tree cover every year. That’s an area, the report points out, that’s larger than Switzerland.  Boreal forests serve as major carbon sinks, so losing the forests is bad news for climate change — though, as the report notes, the light-reflecting land that’s left after forests are removed complicates the climate impact a bit.  Most of the tree loss in Canada and Russia can be attributed to forest fires, which the report notes are expected to occur more frequently and become more intense as the climate warms. Nigel Sizer, global director of WRI’s Forests Program, told ThinkProgress that the report didn’t analyze what percentage of the fires that caused the deforestation could be linked to human activity and what percentage couldn’t, but he did say that an increase in fires, including in the northern latitudes, was in line with climate modelling.

Agribusiness Giant Adopts Historic No-Deforestation Policy -- On Tuesday, one of the world’s largest traders of agricultural commodities vowed to help curb forest loss by instating a “No-Deforestation” policy for soy and palm oil in its supply chain.  Archer Daniels Midland’s no-deforestation policy will be the first of its kind to cover soy production outside of the Brazilian Amazon. It also comes at a crucial time for the Amazon rainforest, which is especially affected by soy production and has seen a recent uptick agriculturally-driven deforestation. As of 2012, soybean production had caused the loss of 80 million hectares of forests in the Amazon basin.  Under the new policy, Archer Daniels Midland — known as ADM — will work with the Forest Trust, a non-profit group dedicated to improving the sustainability of company supply chains. The groups will work to map ADM’s supply chain, making sure that none of its soy or palm oil products come from areas where ecosystems are threatened. The company will formally announce the plan, along with more details, on May 7.

Asia's Other Export Boom — "Second-Hand Smog" To California -- It’s no secret that China has a pollution problem and as we outlined last month, smog may indeed end up near the top of the scapegoat list when it’s time to explain why GDP growth fell woefully short of the official 7% target.  When it comes to estimating the economic impact of President Xi’s “war on pollution” (which we hope is more effective than America’s “war on drugs”), Bloomberg thinks industrial production may take a 20% hit if Beijing hopes to hit even its own clean air targets — the figure is much higher if China wants to match international standards. Fortunately, China is especially adept when it comes to exporting things and new research suggests the Chinese economy may be hard at work shipping pollution overseas. Here’s more from UC Davis: Approximately 10 percent of ozone pollution in California’s San Joaquin Valley is estimated to be coming from outside of the state’s borders, particularly from Asia, according to preliminary research presented today, March 31, by the University of California, Davis. Secondhand smog from Asia and other international sources is finding its way into one of the nation’s most polluted air basins, the San Joaquin Valley. UC Davis atmospheric scientist Ian Faloona shared his research with air quality regulators and scientists today at a transboundary pollution conference near Yosemite National Park. The issue serves as an example of how air quality is a global — not just local — problem.

California drought goes from bad to worse as state grapples with heat wave -- Spring is starting to feel a lot like summer in California, as a record-setting heat wave punishes the parched state now in its fourth year of what is said to be the worst drought in a millennium.  Experts say the scorching spring days are part of a long-term warming pattern – driven largely by human activity – that is increasing the chances that future droughts will be as bad as this one. At fault is a warm and dry weather combination, which exacerbates the already dire drought conditions by drying soil, melting snow and driving up water usage.  “It’s like a one-two punch,” said Jeanine Jones, deputy drought manager for the state Department of Water Resources (DWR). “Not having enough water to fill our reservoirs and having the hot weather evaporate the little that we do have.” According to the most recent US drought report, moderately below-average precipitation, coupled with extremely above-average temperatures, has maintained or worsened drought conditions in California. The consequences have been devastating, from shriveling reservoirs to vanishing groundwater, dying crops, thinning herds and raging wildfires. California relies on a series of massive storms during the winter months to drop snow on the Cascades and Sierra Nevada mountain ranges. During the spring and summer months the snowpack, acting like a natural reservoir, melts as water demand rises. But the recent extremely warm weather has caused precipitation to fall as rain rather than snow. The effect is dramatically less snowpack melt from the state’s mountain ranges, which can provide as much as a third of California’s water supply. This year, the mountain runoff will likely be just a trickle. Snow on the mountains has fallen to 12% of average levels, from 28% last year. In March, data collected from parts of the Cascade and Sierra Nevada mountains indicated that some sites were for the first time snow-free by the first of the month.

California’s Snowpack Reaches All-Time Low During Drought - Low snow levels indicate water supplies will continue to be scarce through much of the year.  The snow that typically tops California’s mountains and is critical to maintaining the state’s water supply dropped to a record low level this year.Because of an abnormally warm winter and little precipitation, the California Department of Water Resources has estimated that the California snowpack level is 8 percent of the historical average, as of late March. A manual survey of snow levels will be conducted in April. The previous record low for the snowpack level, at 25 percent of the average, was set in 1977 and was seen again last winter.The lack of snow could have big implications for California’s battle against an ongoing drought. A department of water resources official told the San Francisco Chronicle that snowpacks typically provides 30 percent of the state’s water supply after the snow melts in spring and summer. With that resource nearly wiped out this winter, Californians will likely have to continue to limit their water use in the coming months.

California Snowpack Hits All-Time Low, 8 Percent Of Average -  The rainy season is over in California before it ever really began.  As the state enters its fourth year of a prolonged and devastating drought, new snowpack estimates give Californians little to aspire to other than more hot and dry conditions. According to the Department of Water Resources, the Sierra Nevada snowpack is lower than any year since 1950, and at the end of March it is just 8 percent of the historical average.  This year’s paltry snowpack is less than one-third of the previous smallest size on record, which was 25 percent of average — an amount that was reached both last year and in 1977.  Winter is normally California’s rainy season, but the state has been parched since several big storms swept through late last year. And that looks like it’s going to continue — state climatologist Michael Anderson told the The Fresno Bee that there is “no significant precipitation in sight.” “I think we’re done,” he said. “I see heat and more heat in the coming months.” The impacts of the ongoing drought — which studies have shown is exacerbated by climate change — are being seen in everything from energy production to the survival of critical species like the Delta smelt.  According to a new report from the Pacific Institute, the ongoing drought is causing California to rely on natural gas to replace unavailable hydroelectricity power sources. The report states that the switch has cost California ratepayers $1.4 billion more for electricity than in average years, and has resulted in an 8 percent increase in carbon dioxide and other pollutants between 2011 and 2014. With the first three months 2015 offering little respite from the drought, California Gov. Jerry Brown recently signed an expansive $1.1 billion emergency drought relief bill, the second such effort in as many years.

California’s Dire Drought Leads to Record Low Snowpack Levels at 6%, Triggers Mandatory Conservation Measures -  California’s dire drought conditions have finally triggered more meaningful action at the state level. Today, Gov. Brown issued an executive order which calls on state and local water agencies “to implement a series of measures to save water, including increased enforcement to prevent wasteful water use, streamline the state’s drought response, and invest in new technologies,” said California Coastkeeper Alliance.  The governor issued the statement today as readings of the April 1 assessment came in, which showed snowpack levels are at their lowest since the state started keeping records (approximately 6 percent of normal levels, compared to 24 percent of normal levels last year).  The lack of snowpack will result in very little or no runoff from the Sierra into California’s reservoirs and rivers, posing a serious problem for the already incredibly water-starved state. Only a few weeks ago, NASA scientist Jay Famiglietti warned “the state has only about one year of water supply left in its reservoirs.” Gov. Brown directed the State Water Resources Control Board to implement mandatory water reductions in cities and towns across California to reduce water usage by 25 percent. After a series of weak measures involving voluntary conservation orders issued by Brown’s administration, organizations such as Waterkeeper Alliance, California Coastkeeper Alliance and Los Angeles Waterkeeper praise the mandatory conservation order.

For First Time In History, California Governor Orders Mandatory Water Cuts Amid "Unprecedented, Dangerous Situation" -- Amid the "cruelest winter ever," with the lowest snowpack on record, and with 98.11% of the state currently in drouight conditions, California Governor Jerry Brown orders mandatory water cuts in California for the first time in history... Lowest snowpack on record... The last four years have been the driest in California’s recorded history. As of March 24, more than 98 percent of California is suffering from abnormally dry conditions, with 41.1 percent in an exceptional drought, according the U.S. Drought Monitor, which estimates that more than 37 million Californians have been affected by the drought. The state’s snowpack, which is largely responsible for feeding the state’s reservoirs, has been reduced to 8 percent of its historical average, and in some areas in the Central Valley the land is sinking a foot a year because of over-pumping of groundwater for agriculture. ... “We are in an unprecedented, very serious situation,” the governor said in his January statement. “At some point, we have to learn to live with nature, we have to get on nature’s side and not abuse the resources

As California's Drought Worsens, Governor Announces New Water Restrictions - Gov. Edmund G. Brown Jr. announced a set of mandatory water conservation measures today, as the state continues to struggle with a prolonged drought that has lasted for more than four years. "Today we are standing on dry grass where there should be five feet of snow," Brown said in a statement after visiting a manual snow survey in the Sierra Nevadas. "This historic drought demands unprecedented action."  For the first time in the state's history, the governor has directed the State Water Resources Control Board to implement mandatory water reductions across California, in an effort to reduce water usage by 25 percent. The measures include replacing 50 million square feet of lawns throughout the state with drought-tolerant landscaping, banning the watering of grass on public street medians, requiring agricultural water users to report their water use to state regulators, and requiring large landscapes such as campuses, golf courses and cemeteries to make significant cuts in water use. The governor’s announcement comes just a few weeks after NASA’s top water scientist, Jay Famiglietti, declared in a Los Angeles Times op-ed that California only had a year's-worth of water supply left in its reservoirs.

Drought-Stricken California Exempts Big Oil and Big Ag from Mandatory Restrictions »  The April 1 snowpack assessment in California, which set an all-time record for lowest snowpack levels in the state’s history, finally spurred Governor Brown’s office to issue an executive order to residents and non-agricultural businesses to cut water use by 25 percent in the first mandatory statewide reduction in the state’s history.   But some groups have been exempted from the water restrictions, specifically big agriculture, which uses about 80 percent of California’s water, and oil companies. Democracy Now! discussed on their show today the new mandates and the implications of exempting some of the biggest water users in the state. Food & Water Watch California is one of the groups critical of Governor Brown for failing to cap water usage by oil companies and corporate farms, which grow water-intensive crops like almonds and pistachios, most of which are exported out of state or overseas, reports Nermeen Shaikh of Democracy Now! “In the midst of a severe drought, the governor continues to allow corporate farms and oil interests to deplete and pollute our precious groundwater resources,” says Adam Scow of Food & Water Watch California. But right now we have billionaire farmers like Stewart Resnick bragging about record profits and record production in water-intensive crops like pistachios, almonds and alfalfa, while poorer communities where farmworkers live “don’t have water coming out of their taps anymore,”

Californians Outraged As Oil Producers & Frackers Excluded From Emergency Water Restrictions -- California's oil and gas industry is estimated (with official data due to be released in coming days) to use more than 2 million gallons of fresh water per day; so it is hardly surprising that, as Reuters reports, Californians are outraged after discovering that these firms are excluded from Governor Jerry Brown's mandatory water restrictions, "forcing ordinary Californians to shoulder the burden of the drought." From Reuters, California should require oil producers to cut their water usage as part of the administration’s efforts to conserve water in the drought-ravaged state, environmentalists said on Wednesday. Governor Jerry Brown ordered the first statewide mandatory water restrictions on Wednesday, directing cities and communities to cut their consumption by 25 percent. But the order does not require oil producers to cut their usage nor does it place a temporary halt on the water intensive practice of hydraulic fracturing.California’s oil and gas industry uses more than 2 million gallons of fresh water a day to produce oil through well stimulation practices including fracking, acidizing and steam injection, according to estimates by environmentalists. The state is expected to release official numbers on the industry’s water consumption in the coming days. “Governor Brown is forcing ordinary Californians to shoulder the burden of the drought by cutting their personal water use while giving the oil industry a continuing license to break the law and poison our water,” said Zack Malitz of environmental group Credo. “Fracking and toxic injection wells may not be the largest uses of water in California, but they are undoubtedly some of the stupidest,” he said.

Invasion of the Hedge Fund Almonds Almond products—snack mixes, butters, milk—are flying off supermarket shelves. The value of the California almond market hit $4.8 billion in 2012—that's triple the level of a decade earlier. Only dairy is worth more to the state than almonds and grapes. In fact, almonds, along with California-grown pistachios and walnuts, are becoming so lucrative that big investment funds, eager to get in on the boom, are snapping up land and dropping in trees. There's just one problem: Almond orchards require about a third more water per acre than grape vineyards. In fact, they're one of California's thirstiest crops. It takes a gallon of water to produce a single almond—more than three times the amount required for a grape and two and a half times as much for a strawberry. There's more water embedded in just four almonds than there is in a full head of lettuce. But unlike row crops, which farmers can choose not to plant during dry spells, almond trees must be watered no matter what. In the midst of the worst drought in California's history, you might expect almonds' extreme thirst to be a deal breaker. But it's not. In fact, the drought has had hardly any impact at all on the almond boom. The state's farmers bought at least 8.33 million young almond trees between July 2013 and July 2014, a 25 percent increase from the previous year....massive financial interests—banks, pension funds, investment arms of insurance companies—are moving rapidly into the nut trade. Take TIAA-CREF, a New York-based retirement and investment fund with nearly a half-trillion dollars in total assets under management. The firm, which owns 37,000 acres of California farmland, claims to be one of the globe's top five almond producers.

Nestlé called out for bottling, selling California water during drought: Nestlé is wading into what may be the purest form of water risk. A unit of the $243 billion Swiss food and drinks giant is facing populist protests for bottling and selling perfectly good water in Canada and drought-stricken California. Nestlé Waters says it does nothing harmful in the watersheds where it operates. Its parent company also signed and strongly supports the United Nations-sponsored CEO Water Mandate, which develops corporate sustainability policies. The company is under fire in British Columbia, though, for paying only $2.25 for every million liters of water it withdraws from local sources. Yet the provincial government sets the price and until this year charged nothing. The rates are also far higher in Quebec, which charges $70, and Nova Scotia, where the price is $140. Nonetheless, 132,000 people have signed an online petition demanding the government stop allowing Nestlé to take water on the cheap. The company’s reputation may be at even greater risk in California, whose severe drought is in its fourth year. The Courage Campaign has organized an online petition, with more than 40,000 signatures so far, that demands Nestlé Waters stop bottling H2O during the drought. There are several local protests, too. The Swiss firm drew 50 million gallons from Sacramento sources last year, less than half a percent of the Sacramento Suburban Water District’s total production. It amounts to about 12 percent of residential water use, though, and is just shy of how much water flows from home faucets in the United States, according to the U.S. Environmental Protection Agency. In other words, Nestlé may be bottling more than locals drink from the tap.

California drought worsens: 'May have to migrate people': It's going from worse to worst each week in California. Suffering in its third year of drought, more than 58 percent of the state is currently in "exceptional drought" stage, according to the latest U.S. Drought Monitor map. That marks a huge jump from just seven days ago, when about 36 percent of the state was categorized that way. Exceptional drought, the most extreme category, indicates widespread crop and pasture losses and shortages of water in reservoirs, streams and wells.  If the state continues on this path, there may have to be thoughts about moving people out, said Lynn Wilson, academic chair at Kaplan University and who serves on the climate change delegation in the United Nations. "Civilizations in the past have had to migrate out of areas of drought," Wilson said. "We may have to migrate people out of California." Wilson added that before that would happen, every option such as importing water to the state would likely occur— but "migration can't be taken off the table."

How Many People Will Have To Migrate Out Of California When All The Water Disappears? -- The drought in California is getting a lot worse.  As you read this, snowpack levels in the Sierra Nevada mountains are the lowest that have ever been recorded.  That means that there won’t be much water for California farmers and California cities once again this year.  To make up the difference in recent years, water has been pumped out of the ground like crazy.  In fact, California has been losing more than 12 million acre-feet of groundwater a year since 2011, and wells all over the state are going dry.  Once the groundwater is all gone, what are people going to do?  100 years ago, the population of the state of California was 3 million, and during the 20th century we built lots of beautiful new cities in an area that was previously a desert. Scientists tell us that the 20th century was the wettest century in 1000 years for that area of the country, but now weather patterns are reverting back to normal.  Today, the state of California is turning back into a desert but it now has a population of 38 million people.  This is not sustainable in the long-term.  So when the water runs out, where are they going to go? I have written quite a few articles about the horrific drought in California, but conditions just continue to get even worse.  According to NPR, snowpack levels in the Sierra Nevada mountains are “just 6 percent of the long-term average”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. California farmers rely on that water.  Last year, farmers had to let hundreds of thousands of acres lie fallow because of the scarcity of water, and it is being projected that this year will be even worse

California should raise the price of water - There has been a lot of discussion of the drought in California and the new regulations that the state is putting in place.  But there has been little mention of the obvious (to an economist) solution: Raise the price of water. This would do more than any set of regulations ever could.  For example, the governor is not going to force people to replace their old toilets with newer, more water-efficient ones.  But a higher price of water would encourage people to do that.  A higher price would also give farmers the right incentive to grow the most water-efficient crops. It would induce entrepreneurs to come up with new water-saving technologies. And so on. Some may worry about the distributional effects of a higher price of a necessity.  But the revenue from a higher price could be rebated to consumers on a lump-sum basis, making the whole system progressive.  We would end up with more efficiency and more equality.

Drought leads to stinky situation in California - -- A smelly stench in Midtown Sacramento has left a lot of residents and business owners curious. "It stinks real bad," said Raj Patel, whose family owns the Peace Market on 18th and O Streets. "I don't know. It just smells like someone took a big poop outside," Patel laughed, adding that the stench has affected his business. "Someone told me yesterday that one guy doesn't come here because he thinks the store smells." City spokesperson Rhea Serran told FOX40 Monday that Downtown and Midtown Sacramento have been historically stinky due to the combined storm and waste water systems. Serran adds that city officials are dealing with a new challenge this year, "One way to remedy it is to flush it out. Due to the drought, we are no longer doing that," Serran said. It takes thousands of gallons of water to flush the sewage system and in an effort to save water, Serran says city officials have chosen to stop flushing the system this year. "It's also hot out lately," he added.   Residents within city limits are urged to call 311 should the stench be too much to handle.

Photographs of the Colorado River reveal thousands of miles of bleached 'bathtub ring' - A drought in the western United States has left water levels in the Colorado River basin far below their normal levels.   Lake Powell, a reservoir at the Arizona-Utah border, is 45 per cent below its capacity, and the lack of water has left a 'bathtub ring' at the bottom of its majestic rock formations.   The lake, from which the Colorado eventually snakes through Grand Canyon National Park, has lost 4.4 trillion gallons of water in a recent drought.   The river's basin has been experiencing the drought for eleven of the last 14 years, shrinking a reservoir that was one-fourth the size of Rhode Island when it was at 'full pool', according to National Geographic. The Colorado provides water for Nevada, Arizona and California, the last of which has seen large areas in 'extreme' and 'exceptional' drought levels and is trying to restrict how much water residents use.Seven states and 40million people get water from different parts of the river's basin, which extends into the southern reaches of Wyoming. Many climate scientists think that the Southwest is also due for a megadrought this century that would far outlast the current phenomenon. Lake Mead, the reservoir next to Hoover Dam, shrunk to 39 per cent of its capacity last year and was at its lowest level since the dam was built in the 1930s.To help the other reserve keep a steady supply, Lake Powell will release 8.23 million acre-feet (2.68 trillion gallons) downstream over the course of this year.

El Niño floods Peru, Chile and Ecuador: In Peru, the Department of Tumbes is being affected by overflowing rivers. As a result of heavy rains on Friday and Sunday, the Government has officially declared a state of emergency in the region, a move that will allow for urgent investments to rehabilitate the affected areas. The Tumbes River has flooded more than 7,500 hectares of crops, homes and roads. The source of the river is in the mountains of the neighbouring country of Ecuador, where flooding in recent days has caused at least 25 deaths. Heavy rains caused the river flow to exceed the all-time record of 1,300 cubic metres per second, and reached 1,887 cubic metres per second. According to the Regional Director of Agriculture, Diego Alemán Ramírez, 2,800 hectares of organic and conventional bananas, as well as 200 of lemons and 200 of cocoa, among others, have been flooded.

14 years' worth of rain in Chile's Atacama desert -- Unwelcome rains fell this week in Earth's driest place -- Chile's Atacama Desert -- causing destructive flooding that has left seven people dead and at nineteen others missing. Antofagasta, which averaged just 3.8 mm of precipitation per year between 1970-2000, and has a long-term average of 1.7 mm of precipitation per year, received a deluge of 24.4 mm (0.96 inches) during the 24-hour period ending at 8 a.m. EDT, March 26. That's over 14 years of rain in one day! The rains were due to an unusually strong and persistent "cut-off" low-pressure system that was trapped over Chile by the exceptionally strong ridge of high pressure that brought the warmest temperatures on record to Antarctica early in the week. A cold front associated with the cut-off low hit the Andes Mountains, dumping rains over soils with very little vegetation (due to the dry climate). Unusually warm ocean temperatures approximately 1 °C (1.8 °F) above average off of the coast meant that high amounts of water vapor were available to fuel the storm and generate exceptionally heavy rains. Heavy precipitation events are common in Chile during El Niño events, like we are experiencing now. El Niño brings warmer than average waters to the Pacific coast of South America where Chile lies.

Critical ocean circulation in Atlantic appears to have slowed -- If ocean circulation has an Achilles’ heel, it’s the North Atlantic. Here, salty surface water from the south cools, becoming dense enough to mix with the deep water below. Once in the deep, it turns to make a return journey southward. This mixing is a delicate balance—dump enough lower-salinity water at the surface, and it can become too buoyant to sink. That slows, and can even halt, the great conveyor belt of circulation that carries warm surface water around. This conveyor belt, called the Atlantic Meridional Overturning Circulation (AMOC for those who don’t want to have to say that all the time), is unlikely to shut down any time soon. (It’s certainly not going to happen The Day After Tomorrow) But while the last IPCC report judged a shutdown to be “very unlikely” this century, climate models consistently predict that the AMOC would slow down in the neighborhood of 12 to 52 percent by 2100, provided “business as usual” greenhouse gas emissions. So what has the AMOC done in recent decades, given the warming we’ve already experienced? It’s hard to say. We don’t have a continuous record of this circulation, in part because it isn’t the easiest thing to measure. Studies that have tried to assess the recent past using one indicator or another have produced conflicting results, with some suggesting a slowdown and others seeing no signs of change. Real monitoring has only been in place since 2004. It shows a small decrease, but the time period is too short to know if that’s just natural variability.

Sea level rise faster than expected: Scientists analysing sophisticated satellite data warn that rises in sea level more rapid than expected are increasing threats to coastal cities and food security − Satellite observations show that sea level rise may have been underestimated, and that annual rises are increasing. A collaborative effort between maritime organisations and space agencies in measuring sea level rise has come to the conclusion that it has been increasing by 3.1 millimetres a year since 1993 – higher than previous estimates. The evidence is growing from a number of recent studies of the ice caps that sea level rise is accelerating, posing a threat to many of the world’s largest and most wealthy cities − most of which are also important ports.  Many of these in the developing world have little or no protection against rising sea levels. Some in Europe – such as London and Rotterdam − already have flood barriers to protect areas below high tide or storm surge level, but  these will need to be replaced and raised in the next 30 years. Delta areas in Egypt, Vietnam, Bangladesh and China – vital to each of the nation’s food supply – are already losing land to the sea.  Since 1991, it has been possible to measure the surface of the oceans across the entire globe by using satellite altimetry, whereby the satellite emits a signal towards the ocean’s surface and receives the reflected echo. The sea level is calculated from the round-trip time between the satellite and the sea surface and the position of the satellite along its trajectory. While the data from tide gauges provides information about local changes relative to the land, the use of altimeter satellites enables the recording of data on a global basis.

Study: Direct Evidence That Global Warming Causes More Global Warming --- Scientists agree that an increase in atmospheric greenhouse gases causes the Earth’s temperature to rise, but they’ve also noticed that relationship seems to swing both ways: warmer temperatures also seem to correspond with an increase in greenhouse gases. But drawing conclusions about the nature of the relationship is tricky, because though scientists have seen a correlation, they haven’t been able to show causation.  Now, scientists believe they’ve untangled the relationship. In a paper published Monday in Nature Climate Change, researchers from the University of Exeter claim to have found direct evidence that as global temperatures rise, so does the atmospheric concentration of greenhouse gases, creating a positive feedback that in turn warms the Earth even more — basically, global warming creates more global warming.  “We discovered that not only does thickening the blanket of heat-trapping gases around our planet cause it to get warmer, but also, crucially, when it gets warmer this increases thickens the blanket of heat-trapping gases,” “so we have a process called a ‘positive feedback’ that amplifies changes in the Earth’s temperature.” This isn’t the first time this relationship has been suggested. Scientists have previously used data from Antarctic ice cores to show that historic temperature rises were accompanied by spikes in global carbon dioxide levels, but other studies cast doubt on that timing, showing a lag of some thousand years. While several models suggest a correlation between warming temperatures and an increase in greenhouse gas, Lenton’s team is the first to prove the relationship using direct evidence, taken from ice cores nearly one million years old.

63.5°F in Antarctica: Possible Continental Record  -- The warmest temperature ever recorded on the continent of Antarctica may have occurred on Tuesday, March 24, 2015, when the mercury shot up to 63.5 °F (17.5 °C) at Argentina's Esperanza Base on the northern tip of the Antarctic Peninsula. According to weather records researcher Maximiliano Herrera, the previous hottest temperature recorded in Antarctica was 63.3 °F (17.4 °C) set just one day previously at Argentina's Marambio Base, on a small islet just off the coast of the Antarctic Peninsula. Prior to this week's remarkable heat wave, the hottest known temperature in Antarctica was the 62.8 °F (17.1 °C) recorded at Esperanza Base on April 24, 1961. (The World Meteorological Organization—WMO—has not yet certified that this week's temperatures are all-time weather records for Antarctica, though the Argentinian weather service has verified that the temperatures measured at Esperanza Base and Marambio Base were the highest ever measured at each site.) A new all-time temperature record for an entire continent is a rare event, and Weather Underground's weather historian, Christopher C. Burt, has full details in his latest post.

Antarctica Records Hottest Day Ever, New Study Finds Rapid Acceleration of Ice Melt » The warmest temperature ever recorded in Antarctica may have occurred last Tuesday with a thermometer reading 63.5 degrees Fahrenheit at Argentina’s Esperanza Base on the northern tip of the Antarctic Peninsula, according to Weather Underground. The previous record was set the day before at 63.3 degrees at Argentina’s Marambio Base on a small islet just off the coast of the Antarctic Peninsula.  Prior to this week’s record heat wave for the icy continent, the hottest known temperature in Antarctica was 62.8 degrees Fahrenheit, recorded at Esperanza Base on April 24, 1961. The World Meteorological Organization (WMO) has not officially declared last week’s temperatures as all-time weather records for Antarctica, but “the Argentinian weather service has verified that the temperatures measured at Esperanza Base and Marambio Base were the highest ever measured at each site,” said Weather Underground. The record heat coincides with the release of a new study from Science that finds “ice shelves in West Antarctica have lost as much as 18 percent of their volume over the last two decades, with rapid acceleration occurring over the last decade. The study found that from 1994 to 2003, the overall loss of ice shelf volume across the continent was negligible, but over the last decade West Antarctic losses increased by 70 percent,” says Think Progress.

Bugs in the ice sheets: Melting glaciers liberate ancient bacteria - The world's ice sheets serve as cold-storage for creatures the Earth hasn't seen in eons. Scientists don't expectanother Contagion or Andromeda Strain, but the release of unknown life forms does pose new concerns about effects of global warming. – Locked in frozen vaults on Antarctica and Greenland, a lost world of ancient creatures awaits another chance at life. Like a time-capsule from the distant past, the polar ice sheets offer a glimpse of tiny organisms that may have been trapped there longer than modern humans have walked the planet, biding their time until conditions change and set them free again.  With that ice melting at an alarming rate, those conditions could soon be at hand. Masses of bacteria and other microbes – some of which the world hasn't seen since the Middle Pleistocene, a previous period of major climate change about 750,000 years ago – will make their way back into the environment.  Once thought to be too harsh and inhospitable to support any living thing, the ice sheets are now known to be a gigantic reservoir of microbial life. Altogether, the biomass of microbial cells in and beneath the ice sheet may amount to more than 1,000 times that of all the humans on Earth.

Oceans might take 1,000 years to recover from climate change - Naturally occurring climate change lowered oxygen levels in the deep ocean, decimating a broad spectrum of seafloor life that took some 1,000 years to recover, according to a study that offers a potential window into the effects of modern warming. Earth's recovery from the last glacial period, in fact, was slower and more brutal than previously thought, according to the study, published online Monday in the journal Proceedings of the National Academy of Sciences. Researchers deciphered that plotline from a 30-foot core of sea sediments drilled from the Santa Barbara Basin containing more than 5,000 fossils spanning nearly 13,000 years.  "The recovery does not happen on a century scale; it's a commitment to a millennial-scale recovery," said Sarah Moffitt, a marine ecologist at UC Davis' Bodega Marine Laboratory and lead author of the study. "If we see dramatic oxygen loss in the deep sea in my lifetime, we will not see a recovery of that for many hundreds of years, if not thousands or more."

Anthropocene raises risks of Earth without democracy and without us -- The term Anthropocene has made many democrats nervous about democracy’s future. Earth scientists tell us we have drifted out of the Holocene into the Anthropocene. In this new epoch, humans are the dominant “geological force” shaping the Earth’s systems. Over the past 11,500 years, the Holocene provided a relatively stable climate conducive to the emergence and development of human civilisation. In contrast, the Anthropocene may be characterised by unpredictable and possibly abrupt and cataclysmic environmental changes. Scientists warn that human-wrought changes may be creating a climate and a biosphere that will become increasingly inhospitable to human civilisation unless human societies drastically change their ways. That is, within the next few decades societies need to confine their activities within the “safe operating space” of our “planetary boundaries”. On the one hand, pundits are warning that if climate negotiations fail to hold warming below two degrees Celsius, democracy will unravel on a hot and lawless planet. Earth will be marked by extreme weather events, ecological collapse, food and resource scarcity, millions of displaced people and increasing conflict and violence. Some have argued that uncontrollable climate change is already locked in and/or that we can expect an age of authoritarianism. However, this very prospect of civilisational collapse has been invoked to justify the suspension or truncation of democracy to ensure the protection of planetary boundaries through authoritarianism or technocratic planetary management via geoengineering techniques such as solar radiation management. Either way, democracy loses.

The Anthropocene Myth - Last year was the hottest year ever recorded. And yet, the latest figures show that in 2013 the source that provided the most new energy to the world economy wasn’t solar, wind power, or even natural gas or oil, but coal. The growth in global emissions — from 1 percent a year in the 1990s to 3 percent so far this millennium — is striking. It’s an increase that’s paralleled our growing knowledge of the terrible consequences of fossil fuel usage. Who’s driving us toward disaster? A radical answer would be the reliance of capitalists on the extraction and use of fossil energy. Some, however, would rather identify other culprits. The earth has now, we are told, entered “the Anthropocene”: the epoch of humanity. Enormously popular — and accepted even by many Marxist scholars — the Anthropocene concept suggests that humankind is the new geological force transforming the planet beyond recognition, chiefly by burning prodigious amounts of coal, oil, and natural gas. According to these scholars, such degradation is the result of humans acting out their innate predispositions, the inescapable fate for a planet subjected to humanity’s “business-as-usual.” Their story centers on a classic element: fire. The human species alone can manipulate fire, and therefore it is the one that destroys the climate; when our ancestors learned how to set things ablaze, they lit the fuse of business-as-usual. The “primary reason” for current combustion of fossil fuels is that “long before the industrial era, a particular primate species learned how to tap the energy reserves stored in detrital carbon.” My learning to walk at the age of one is the reason for me dancing salsa today; when humanity ignited its first dead tree, it could only lead, one million years later, to burning a barrel of oil.

The puzzling flattening of carbon emissions and the problem of global growth - Last week we learned that maybe, just maybe, global carbon emissions were flat in 2014 even though the global economy supposedly grew by 3 percent. As Brad Plumer of Vox (whose work I greatly respect) points out, carbon emissions have moved up almost in lockstep with economic growth for the entire industrial age except during recessions and one year of growth 40 years ago.  This is why I use "supposedly" when referring to the global economic growth number. It's because there is another obvious and plausible explanation for the flat carbon emissions, namely, that the global economy did not grow by the stated percentage, that it may have grown only a fraction of that amount or not at all.   Economic measures are constantly being revised, and I think it is very likely that the global economic growth number for 2014 will be revised downward. Probably not to zero, but downward nonetheless. It's also possible that estimates of carbon emissions are too low. Plumer cites "notoriously unreliable" Chinese emission numbers as one reason to be skeptical. But, even if 2014 turns out to be a year of growth without rising emissions, we shouldn't get particularly exercised. Nor should we be particularly excited if it continues for a time. This is because the only trend that will actually address climate change is a RAPID DECLINE in worldwide emissions (as Plumer rightly points out).

Gallup: Concern About Environment Down – Americans Worry Least About Global Warming  - -- Americans’ concern over environmental issues such as water and air pollution and extinction of species is down from last year, and the data show that of all green issues, Americans worry the least about global warming (or climate change), according to Gallup. As part of its annual Environmental survey, which Gallup has done for more than two decades, the surveyors on March 5-8 asked, “I’m going to read you a list of environmental problems. As I read each one, please tell me if you personally worry about this problem a great deal, a fair amount, only a little, or not at all.” The results showed that when it came to “pollution of drinking water,” 60% worried about it a “great deal” in 2014 but only 55% worried about it a “great deal” in 2015. For “global warming or climate change,” some 34% worried about it a “great deal” in 2014 but that went down to 32% in 2015. The full results from Gallup are presented in the screenshot below:

The dystopian lake filled by the world’s tech lust: Hidden in an unknown corner of Inner Mongolia is a toxic, nightmarish lake created by our thirst for smartphones, consumer gadgets and green tech.  Dozens of pipes line the shore, churning out a torrent of thick, black, chemical waste from the refineries that surround the lake. The smell of sulphur and the roar of the pipes invades my senses. It feels like hell on Earth. Welcome to Baotou, the largest industrial city in Inner Mongolia. I'm here with a group of architects and designers called the Unknown Fields Division, and this is the final stop on a three-week-long journey up the global supply chain, tracing back the route consumer goods take from China to our shops and homes, via container ships and factories. You may not have heard of Baotou, but the mines and factories here help to keep our modern lives ticking. It is one of the world’s biggest suppliers of “rare earth” minerals. These elements can be found in everything from magnets in wind turbines and electric car motors, to the electronic guts of smartphones and flatscreen TVs. In 2009 China produced 95% of the world's supply of these elements, and it's estimated that the Bayan Obo mines just north of Baotou contain 70% of the world's reserves. But, as we would discover, at what cost?

US to submit plans to fight global warming; most others delay: - The United States will submit plans for slowing global warming to the United Nations early this week but most governments will miss an informal March 31 deadline, complicating work on a global climate deal due in December. The U.S. submission, on Monday or Tuesday according to a White House official, adds to national strategies beyond 2020 already presented by the 28-nation European Union, Mexico, Switzerland and Norway. Together, they account for about a third of world greenhouse emissions. But other emitters such as China, India, Russia, Brazil, Canada and Australia say they are waiting until closer to a Paris summit in December, meant to agree a global deal.   In 2013, the United Nations invited INDCs by March 31, 2015, from governments "ready to do so" - the early, informal deadline was meant to give time to compare pledges and toughen weak ones. Late submissions complicate the Paris summit because it will be far harder to judge late INDCs. "The earlier the better," said Jake Schmidt, of the U.S. National Resources Defense Council. "It allows people to look at each others' targets and judge whether or not they pass muster." The White House official noted that both the United States and China already outlined plans last year, saying: "That adds up to a fantastic running start." The United States plans to cut emissions by 26 to 28 percent below 2005 levels by 2025.

Republicans warn world that Obama U.N. plan could be undone (Reuters) - The Obama administration's plan for U.N. climate change talks encountered swift opposition after its release Tuesday, with Republican leaders warning other countries to "proceed with caution" in negotiations with Washington because any deal could be later undone. The White House is seeking to enshrine its pledge in a global climate agreement to be negotiated Nov. 30 to Dec. 11 in Paris. It calls for cutting greenhouse gas emissions by close to 28 percent from 2005 levels within a decade, using a host of existing laws and executive actions targeting power plants, vehicles, oil and gas production and buildings. But Republican critics say the administration lacks the political and legal backing to commit the United States to an international agreement. "Considering that two-thirds of the U.S. federal government hasn't even signed off on the Clean Power Plan and 13 states have already pledged to fight it, our international partners should proceed with caution before entering into a binding, unattainable deal,” Senate Majority Leader Mitch McConnell said.

McConnell Is Telling Other Countries Not To Trust Obama’s Climate Plan --In an effort to undermine international negotiations aimed at combating climate change, Senate Majority Leader Mitch McConnell (R-KY) is telling other countries not to trust President Obama’s promise to significantly reduce the United States’ carbon emissions.  In a statement released Tuesday, McConnell warned other countries to “proceed with caution” before pledging any carbon emissions reductions to the United Nations, saying the U.S. would likely not be able to meet its own climate goals. The statement came shortly after Obama announced the official U.S. plan to slash the United States’ greenhouse gas emissions as much as 28 percent as part of an international agreement brokered by the U.N.  “Even if the job-killing and likely illegal Clean Power Plan were fully implemented, the United States could not meet the targets laid out in this proposed new plan,” McConnell said, adding that “[O]ur international partners should proceed with caution before entering into a binding, unattainable deal.” This is not the first time McConnell has sought to prevent the United States’ efforts to fight climate change, a phenomenon which he refuses to say he accepts scientifically. Earlier this month, McConnell told individual states to openly defy the EPA’s proposed rules limiting greenhouse gas emissions from power plants.

Carbon Tax Economics Revisited - I recently wrote a post laying out how carbon taxes could potentially lead to worse global warming. Like I said in the post, this is just something I think people aren’t worrying enough about rather than a conclusive case against a carbon tax. But I’m not an environmental economist or engineer, and I’m interested to hear feedback from actual experts. So I was glad to see a reply from actual environmental economist John Whitehead. Unfortunately, I think John’s criticisms are off the mark, but he is a talented economist so I take responsibility for the misunderstanding and chalk it up to an unclear explanation on my part. Let me try to lay out a more thorough and I hope clearer version of the economics at hand. 

Discounting Climate Change Under Secular Stagnation  -- The point I want to make is that these low interest rates, and the possibility of secular stagnation, greatly affects the calculus surrounding optimal investments to curb climate change.  The titans of environmental economics--Weitzman, Nordhaus and Pindyck--have been arguing about the discount rate we should use to weigh distant future benefits against near-future costs of abating greenhouse gas emissions.  They're arguing about this because the right price for emissions is all about the discount rate.  Everything else is chump change by comparison.  Nordhaus and Pindyck argue that we should use a higher discount rate and have a low price on greenhouse gas emissions.  Basically, they claim that curbing greenhouse gas emissions involves a huge transfer of wealth from current, relatively poor to future supremely rich.  And a lot of that conclusion comes from assuming 2%+ baseline growth forever. Weitzman counters that there's a small chance that climate change will be truly devastating, causing losses so great that the future may not be as well off as we expect.  Paul Krugman has a great summary of this debate. Anyway, it always bothered me that Nordhaus and Pindyck had so much optimism built into baseline projections.  Today's low interest rates and the secular stagnation hypothesis paint a different picture.  Quite aside from climate change, growth and real rates look lower than the 2% baseline many assume, and a lot more uncertain.  And that means Weitzman-like discount rates (near zero) make sense even without fat-tailed uncertainty about climate change impacts.

AEP’s Get It Right EPA website makes case against Clean Power Plan carbon rules - American Electric Power Company Inc. is using the web to target new federal environmental regulations. The utility  made a website called Get It Right EPA, which describes why AEP is opposed to the Clean Power Plan, a set of rules proposed by the U.S. EPA that would cut carbon emissions from exiting coal-powered plants by 2030. A sleekly produced video sits on the main landing page. In it, a typical American family uses the products for which electricity is needed – a laptop computer, a flatscreen television. Then, briefly, darkness.  “If the grid gets too far out of balance, the lights will go out,” a woman’s voice warns ominously before telling viewers more time is needed to comply with any regulations. The commercial points viewers to the website. AEP and other utilities and government agencies oppose the plans, arguing the rules could lead to shutdowns of power plants and endanger electric reliability. On its website and on the video, AEP says the plan would shut down enough plants to power every home in Ohio, New York and Virginia. Opponents say such fears are overblown.

How Ohio’s Energy Economy Became a Radioactive 19th Century Relic » Back in early 2010 Ohio stood at the cusp of a modern 21st century technological revolution. It had won a new federal-funded rail line to finally re-join Cleveland, Columbus, Dayton and Cincinnati. Tesla electric sales networks were moving into the state, bringing full player status in the spread of the world’s most advanced automobiles.And we had adopted a forward-looking green energy package poised to bring billions of new investments along with thousands of new jobs. Then the 19th century re-took control. Today Ohio’s fossil-fueled, landlocked capital city is the western world’s largest with neither internal commuter light rail nor access by passenger train service from anywhere else. After trying to ban them altogether, Ohio has strictly limited sales of advanced electric Tesla cars. And after being at the cusp of major solar and wind power advances, the state has all but killed the prospects for any large new green energy projects. The state may now miss one of history’s biggest and most profitable technological transformations.  Meanwhile Ohio’s three largest electric power utilities are demanding billions from the PUCO in bail-outs for obsolete fossil and nuke burners that are fast being abandoned elsewhere around the world. If that money goes for these relic generators, investment in advanced energy in the state will disappear, and Ohio’s fossil/nuke dinosaurs will give new meaning to the terms rust belt, global warmers and technological bankruptcy.

Old King Coal Stricken; Prognosis Grave - After bestriding the mountains of Appalachia, among many other places, like the proverbial Colossus for a century and more, the U.S. coal industry has been taken to hospice, a pathetic wasted shadow of its former self, its physical condition terminal, its thought processes derailed by dementia. It’s not a pretty sight (except perhaps to the survivors of the ruin, destruction and death it has brought to thousands upon thousands of helpless people) and there are those who say its fate foreshadows that of the oil fracking industry, which is now in the ICU, and the legacy oil bidness, which has started to have dizzy spells and occasional sudden hemorrhaging. A report out this week from the think tank Carbon Tracker, titled “The U.S. Coal Crash,” itemizes the problems listed on the patient’s chart:

  • 26 coal companies bankrupt in the last three years;
  • Peabody Energy Corp., the world’s largest private coal company, has lost 80% of its share value, and that is representative of the industry as a whole (or as a hole);
  • 264 mines were closed in just two years — 2011-2013.
  • The last best hope for coal, China, which burns more than the rest of the world combined, has rendered much of its territory including its capital virtually uninhabitable because of the resulting air pollution, and is cutting back. A little. Down 3% last year.

Oh, and the dementia part? Peabody Energy issued a “forecast” this year “foreseeing” increased coal demand of 10-30 million tons, and global demand increasing by 500 million tons. Not only that, but the industry professes to believe in “clean” coal, and that its woes are caused entirely by President Obama’s “war on coal.” It’s sad, really, next we’ll find them wandering in the WalMart parking lot, unable to remember where they put their car.

Appalachia Miners Wiped Out by Coal Glut That They Can't Reverse - The only time that Blackburn, now a coal industry consultant, remembers things being this bad was in the 1990s. Back then, he estimates, almost 40 percent of the region’s mines went bankrupt.  Now, like then, the principal problem is sinking coal prices. They’ve dropped 33 percent over the past four years to levels that have made most mining companies across the Appalachia mountain region unprofitable. To make matters worse, there’s little chance of a quick rebound in prices. That’s because idling a mine to cut output and stem losses isn’t an option for many companies. The cost of doing so -- even on a temporary basis -- has become so prohibitive that it can put a miner out of business fast, Blackburn and other industry analysts say.  So companies keep pulling coal out of the ground, opting to take a small, steady loss rather than one big writedown, in the hope that prices will bounce back. That, of course, is only adding to the supply glut in the U.S., the world’s second-biggest producer, and driving prices down further. It’s become, in essence, a trap for miners.“You have this really perverse situation where they keep producing,” . “You’re just shoveling coal into this market that’s oversupplied.”

New Bill Would Block Effort To Protect Streams From Mountaintop Removal Pollution --A plan to protect some of the country’s rivers from mountaintop removal mining may be delayed if a new bill introduced by a West Virginia congressman is signed into law.  The STREAM Act was introduced this week by freshman Rep. Alex Mooney (R-WV) and seeks to postpone final rules on mountaintop removal mining — a process in which the summits of mountains are blown apart, exposing the coal underneath — from the Department of Interior’s Office of Surface Mining (OSM). Those rules, which are expected to be released this April, will eliminate 2008 regulations that allowed mountaintop removal mining in and within 100 feet of streams that only flow during parts of the year.   Mooney’s bill, according to a fact sheet from the representative, would require the OSM to conduct a study on the impact the rule would have on the coal industry, and would delay the implementation of new rules for one year after the study is completed. It would also prevent the OSM from “seizing duplicative regulatory jurisdiction from other agencies” — basically, from regulating things that the Environmental Protection Agency already regulates under the Clean Water Act. It would also force the OSM to “publically[sic] release all scientific data used in the drafting of any new rule.”   “The bill would prevent the administration from implementing a new stream buffer zone rule intentionally designed to shut down all surface mining and a significant section of underground mining in the Appalachian region, ”Mooney said in a statement.  Mountaintop removal is harmful to streams because the rock and soil that’s created through the removal process — which often contains toxic heavy metals — is dumped into streams and valleys, burying them and killing aquatic life. In the last 20 years, mountaintop removal mining has destroyed nearly 2,000 miles of Appalachian streams and damaged more than one million acres of Appalachian forest.

Ohio House bill would ease fracking in state parks -  Gov. John Kasich has used the back door to keep fracking out of Ohio state parks and forests. Now, the legislature is trying a side door to fast-track fracking on public lands. A measure prioritized by House Republicans, who dominate the chamber, got a third hearing yesterday on its way to a likely committee vote next week. The legislature approved fracking in Ohio’s parks in 2011, and Kasich signed the bill. Top officials in his administration prepared a secret marketing plan in the final months of 2012 to sell fracking as a way to keep Ohioans from paying park entrance fees. Under the 2011 law, potential drillers must get permission from a newly created Oil and Gas Commission, complete an environmental study, determine the potential impact on visitors, seek public input and meet other requirements.  But Kasich had a change of heart on allowing drilling on public lands and in effect imposed a unilateral moratorium by not appointing members to the commission — meaning that nobody could get an OK to drill in parks. However, under House Bill 8, GOP legislators would bypass the commission, wiping out the fracking prerequisites in the 4-year-old law — and ending the governor’s unofficial moratorium.

No fracking on public land - Toledo Blade editorial: During his first term, Gov. John Kasich wisely halted a plan that would have authorized hydraulic fracturing in state parks and forests. A reckless bill approved by the Ohio House last week would circumvent Mr. Kasich’s moratorium and open up state forests to the controversial method of oil and natural-gas drilling, with almost no oversight. The Senate should reject the bill; if it reaches the governor’s desk, it merits a veto. House lawmakers removed language from their measure that would have permitted fracking in state parks. But the bill would make it easier to frack on other public lands, including state forests and wildlife areas. It would circumvent the mandatory public input, visitor-impact statement, environmental assessments, and other safeguards that state fracking law and regulation otherwise require. Advocates take advantage of the lack of scientific consensus on fracking to suggest that claims about its dangers are exaggerated. In fact, there is broad agreement about the risks of fracking, even though scientists may not agree on appropriate solutions. Mounting evidence links fracking to a sharp increase in earthquakes in Ohio and across the country. A study by the Seismological Society of America concluded that fracking was responsible for dozens of small earthquakes near Youngstown in recent years.

Oil and gas industry groups voice opposition to Ohio's proposed tax increase - Industry representatives voiced opposition March 3 to Gov. John Kasich's proposed tax increase on oil and gas produced via horizontal hydraulic fracturing. The Ohio Oil and Gas Association, the American Petroleum Institute and others reiterated what they've been saying for several years, since the governor initially proposed the severance tax change -- that is, a tax increase would drive away exploration and investment and any resulting economic boost in eastern Ohio's emerging shale oilfields. Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, told the Ohio House's Ways and Means Committee that dropping oil prices have prompted a retreat in investment in the state. He offered a list of companies who have pulled out of Ohio, waiting for commodity prices to rebound. "In December of 2014, Ohio had a record 59 rigs operating in the Utica," Bennett said in testimony submitted to lawmakers. "Today, a third of those rigs have simply left the state...." He added, "The legislature should not add additional tax burdens on an already-struggling industry. The proposed severance tax before this legislature will dramatically decrease the chance of success in this effort and only serves as a deterrent to future recovery, growth and stability in Ohio's oil and gas industry."

Ohio and other Appalachian states slammed by environmentalists for lack of fracking oversight - In terms of managing its waste, much of the oil and gas industry is exempt from federal oversight, in part because of perceived adequate regulation at the state level. But a new report from environmentalists opposed to fracking for shale gas and oil contends that Ohio and other Appalachian states are dropping the ball by failing to manage oil and gas waste or to regulate it as they would other hazardous waste.   The group claims that states aren’t tracking the drilling waste generated within their borders, or properly monitoring its disposal the way regulators once hoped. In Ohio, the report cited the state’s Department of Natural Resources for failing to put forward regulations for waste storage and disposal, as directed by the state Legislature in 2013. According to the report, “critical regulations have still not been put forward for public review and adoption. As a result, operators and disposal facilities have wide discretion to decide whether waste is contaminated and how to dispose of it.” Neither ODNR nor the Ohio Environmental Protection Agency track volumes, origins or destinations of solid waste, such as drill cuttings, Earthworks reported. The regulations that have been proposed are inadequate, according to Earthworks, which is generally anti-fracking. “Draft regulations do not include standards or limits related to waste storage and treatment methods, volumes, or chemical parameters, nor specify any practices (e.g., reserve pit burial or brine evaporation) that would be prohibited,” the report’s section on Ohio stated. It also stated that there is no public information on the number and location of pits and impoundments used to hold drilling waste, and also no specific requirements for the construction of pits beyond the vague assertion that operators use “sound engineering design and construction, and commonly accepted industry practices.”

Increase in fracking trucks has drawbacks - Columbus Dispatch  — The warning signs and convoys of semi trucks have become part of the landscape in eastern Ohio’s shale country, where a drilling surge has brought more big rigs to rural roads. Oil and gas truck traffic ahead. The orange placards and the trucks they portend might be the clearest sign yet of the dual role locals say the region’s oil and gas industry has assumed as both economic engine and potential danger for drivers sharing winding two-lane roads with 18-wheelers. Those trucks haul stone, heavy equipment used to build well pads, drilling rigs and other materials. And tanker trucks are transporting water needed in the hydraulic fracturing process and the fracking wastewater that flows back up from the wells. “It’s been an economic boon for our county,” said Dale Norris, a Harrison County commissioner. “It’s got its good and its bad.” Among the bad: a recent uptick in the number of crashes involving semi trucks in eastern Ohio counties and faster wear-and-tear onset because of the heavier traffic on roads. State and local officials say the drilling companies have done their part to help. They host safety meetings for trucking companies and meet state requirements for building and maintaining roads that can handle trucks. But the Ohio Department of Transportation is spending more on road repairs in eastern Ohio, and the State Highway Patrol is trying to figure out how to contend with the increase in semi-truck crashes.McCutcheon said that as pipelines are built to transport oil and natural gas from Ohio, even more trucks probably will be transporting heavy machinery and materials on the rural roads. Natural gas is transported from the wells via pipeline, but any oil or condensate is transported by truck. Some routes near processing facilities already have seen as many as 500 additional trucks a day, according to ODOT. For example, an additional 100 to 500 trucks a day were seen on Rt. 43 in Carroll County in 2013, the latest data available, compared with three years earlier.

Bakken oil trains roll across Columbus - Almost 1.4 million Ohioans live within a half-mile of railroad lines where some of the most-volatile crude oil in North America rolls by each week, a Dispatch analysis has found. Those people, about 12 percent of the state’s population, are at risk of being forced from their homes should a train hauling crude oil from the Bakken shale fields of North Dakota run off the tracks. About 15 percent of Franklin County’s residents live within that zone, recommended by the U.S. Department of Transportation as the likely evacuation area during a crude-oil train derailment.. Most trains that transport crude oil stay on their tracks, but derailments can be catastrophic. A Bakken train that derailed in 2013 burst into flames, killing 47 people and destroying most of downtown Lac-Megantic, Quebec. Trains have wrecked in Ontario, as well as in Alabama, Illinois, Minnesota, North Dakota, Pennsylvania and Virginia, sending trains up in flames, prompting mass evacuations and in some cases, obliterating homes. A Bakken train derailed in West Virginia last month, forcing hundreds of people to evacuate their homes and spilling oil into the Kanawha River. That train, run by CSX, almost certainly passed through Columbus. Three CSX tracks that carry crude oil from North Dakota to the East Coast converge in Columbus after passing through Worthington and running between Dublin and Hilliard. Those tracks then head south through Ohio and into West Virginia. Ohio, with its more than 5,300 miles of tracks, is a key junction between the Bakken region and East Coast oil refineries. Rail lines that carry Bakken crude travel through or near Akron, Cleveland and Toledo as well as through Columbus.

Nearly 437,000 barrels of volatile Bakken Shale crude oil per day may pass through Ohio on trains -  Ohioans have known for some time that numerous trains carrying highly volatile Bakken Shale crude oil pass through their neighborhoods each day en route to East Coast refineries. What they didn’t know, until Tuesday, was a number: as many as 437,000 barrels per day. That volume figure surfaced Tuesday when the federal government for the first time released monthly data on crude oil shipments by rail. Such shipments have raised safety concerns following fatal accidents and derailments. In January, the region that includes the Midwest and North Dakota’s Bakken Shale was by far the largest shipper of crude by rail, averaging 732,000 42-gallon barrels per day. The East Coast region was the largest recipient, taking in 437,000 barrels a day by rail from the Midwest in January. That’s enough Bakken crude to fill 612 rail tank cars every day. Much of that volume passed through Ohio on rail lines en route to the East Coast. Activist Teresa Mills of Columbus called the figure “disturbing.” “Ohioans need to know that that much volatile Bakken crude is passing through our state on ‘bomb’ trains that run through some of our major cities,” she said. Citing a recent report in the Columbus Dispatch, she noted that about 1.4 million people live within a half-mile of tracks that carry crude oil trains across the state in northern and central Ohio.

Recent derailments have raised questions of safety, method of transporting oil - President Obama’s veto of the proposed Keystone XL pipeline has major ramifications for North America’s energy future. But it also has intensified the debate about whether it is safer to transport crude oil via pipelines or railroad tank cars. Though statistics show pipelines are safer, more efficient at moving product, and, thus, release fewer climate-altering greenhouse gases than an equivalent amount of crude shipped along a more energy-intensive rail system, pros and cons of each mode of transportation are being amplified by lobbyists — especially in the wake of several recent, catastrophic oil-train derailments.   In 2013, America moved 8.3 billion barrels (348.6 billion gallons) of crude oil via pipeline — nearly 29 times the 291 million barrels (12.2 billion gallons) moved by rail, according to figures from the Association of Oil Pipelines and the Association of American Railroads. A Washington Post analysis showed pipelines average about 22 accidents per billion barrels of oil transported in recent years, while the rate over rail is 10 to 20 times higher. “A pipeline, whether you’re moving a liquid or natural gas, is always going to be more efficient than rail or for that matter, anything else. It’s the safest way,” said Jimmy Stewart, president of the Ohio Gas Association. He said he thinks of America’s 2.6 million miles of pipelines — a buried web people drive and walk across daily — as arteries supporting the nation’s economic heartbeat. “It amazes me the rhetoric that comes out of some peoples’ mouths about pipelines when they walk and drive over them every day,” Mr. Stewart said.

Utica well activity in Ohio  -- Activity in Ohio’s Utica Shale region hasn’t changed much besides a slight increase in the number of wells drilled and in production. However, changes for a major company in the Marcellus and Utica Shale formations has once again cut costs. Chesapeake Energy Corp. has cut its budget once again, this time by $500 million, shrinking it from $4.5 billion to $4 billion. Months after the previously announced budget cuts, the company is also set to decrease its rig count, except for in the Utica.  Chesapeake plans on keeping its rig count in Ohio’s shale formation the same, regardless of its cutbacks.  The other formations that company is operating in, like the Eagle Ford Shale in Texas, will notice a decrease in rigs. The reasoning for the company keeping its rigs the same in the Utica is due to its improved well stimulation.  After running tests, Chesapeake has been able to adjust cluster spacing within the wellbore.  Even though it is complicated, by shrinking the space between the different stages of fracking, the company has increased the flow of gas and natural gas liquids, along with increased well performance. Chesapeake’s Executive Officer Doug Lawler further explained the company’s decision to cut its The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 28th. DRILLED 334 -- DRILLING 246 -- PERMITTED 454 -- PRODUCING 834 -- TOTAL 1,868

Marcellus horizontal well activity in Ohio - Activity in the Marcellus Shale located in Ohio hasn’t changed compared to last week, with a total of 44 wells are still hanging out. However, a specific pipeline project in Pennsylvania that is causing some issues among people that live along its potential route has finally been submitted to federal regulators. Williams’ subsidiary Transco has officially submitted its formal application for its Atlantic Sunrise Pipeline to the Federal Energy Regulatory Commission (FERC). The interstate pipeline will transport Marcellus Shale gas from northeastern Pennsylvania to the markets on the Atlantic, including the Cove Point Terminal in Chesapeake Bay. If approved, the current route of the pipeline will include the following ten counties: Columbia, Lancaster, Lebanon, Luzerne, Northumberland, Schuylkill, Susquehanna, Wyoming, Clinton and Lycoming. Like the PennEast pipeline, several people—mainly landowners—that live on the potential route of the Atlantic Sunrise are opposing the project. They have voiced concerns about safety, environmental degradation and property values. In response to the public’s concerns, Williams made the following comment in its filing: The construction and operation of the proposed facilities will not have a significant impact on human health or the environment … The public benefits of the project are far more substantial than the potential adverse effects.To meet its in-service date of July 2017, Williams has asked the FERC to deliver its response to the filing by August 2016. The following information is provided by the Ohio Department of Natural Resources and is through the week ending on March 28th. PERMITTED: 15 -- DRILLED: 15 -- PRODUCING: 13 -- INACTIVE: 1 -- TOTAL: 44

Pennsylvania shale drillers to release monthly reports on gas production - Pennsylvania’s unconventional natural gas producers pulled 390 billion cubic feet of gas from the Marcellus Shale and other resource-rich rock layers in January, according to the first monthly production reports the companies filed with the Department of Environmental Protection. The numbers released by the state on Wednesday are the first of what will be regular reports of monthly unconventional gas production after Pennsylvania passed a law last year to increase the frequency of reporting from twice-yearly to monthly to better correspond with the details reported on leaseholders’ royalty checks. Shale gas production during the month of January averaged 12.6 billion cubic feet per day, or Bcf/d, an increase over the daily average during the second half of 2014, the last reporting period, when the state’s unconventional producers averaged 11.5 Bcf/d. The state does not guarantee the accuracy of the production data, which are self-reported by operators, but the January numbers appear to be in line with figures released by the U.S. Energy Information Administration, which reported that 14.4 Bcf/d was produced in January from the entire Marcellus Shale region, including West Virginia. A DEP spokeswoman said 80 percent of operators reported their January production by the March 31 deadline and the companies that submitted their reports on time represent 99.5 percent of unconventional natural gas wells in Pennsylvania. Pennsylvania’s top producing counties during the month — Susquehanna, Bradford and Lycoming — were in the northeast, followed by Washington and Greene counties in the southwest. Nearly one-third of the state’s gas production in January came from the nine counties in southwestern Pennsylvania, which also produced 95 percent of the state’s natural gas liquids, which includes ethane, oil and condensate that also are recovered from some shale formations.

Judge denies motion to dismiss racketeering suit against Chesapeake Energy -- A federal judge has denied Chesapeake Energy Corp.’s motion to dismiss a class action lawsuit that alleges the company conspired with subsidiaries it formed to overcharge leaseholders by artificially inflating the cost to gather natural gas extracted from Marcellus Shale drilling. U.S. District Judge Malachy Mannion on Tuesday ruled the Suessenbach Family Limited Partnership had presented sufficient evidence at this state of the litigation to proceed with its lawsuit against Chesapeake and its subsidiary, Access Midstream Partners. The lawsuit, filed in June 2014 by attorney Robert Schaub of Wilkes-Barre, alleges Chesapeake formed Access Midstream in August 2010 to gather and transport natural gas from its drilling operations. The companies then conspired to have Access Midstream charge Chesapeake fees far above industry standards, which were passed on to leaseholders. Access Midstream then rebated a portion of the inflated fees to Chesapeake. The suit sought damages on several counts, including unjust enrichment, conversion and civil violations of the of the Racketeer Influence and Corrupt Organizations Act. The racketeering count was based on allegations the companies’ actions constituted an ongoing fraud perpetrated against leaseholders. Chesapeake and Access Midstream sought to dismiss the racketeering case and other counts, but Judge Mannion denied the motion. The judge did dismiss one count of honest services fraud, finding that count could not stand because officials with the companies had no fiduciary duty to shareholders. The Suessenbach case is among at least three class action lawsuits filed in Pennsylvania that allege racketeering violations. Other similar suits were filed by the A&B Campbell Family LLC Trust in and James L. Brown, both of Wyalusing. Those cases are pending.

Before Fracking Begins, Air and Water Tests Still a Rare Precaution -- Frank Varano's land near Williamsport, Pa., abuts property that has been leased for gas exploration––and he's certain it will be fracked. What is less certain is how that fracking could affect the air he breathes and the water he drinks. That's why he welcomed the opportunity to have two Columbia University scientists test the air inside his house and the water in his well before fracking gets started late this year. "I feel better having someone independent more than just having the industry tell me what's happening," Varano said. "I want to double-check whatever the industry tells me." Last year an air monitor was set up inside his Lycoming County house, and water samples were taken from his well in advance of the drilling and fracking planned for the 10-acre site that sits 500 feet from his place. Varano is one of 15 residents in Lycoming and Sullivan counties to allow geochemists Beizhan Yan and Steven Chillrud of Columbia's Earth Institute to test the air and water on their land before fracking proceeds. The two scientists want to establish a baseline of the quality of air and water and then continue monitoring as the operation progresses from drilling and fracking to functioning wells. It's the best way to understand the risks people face when fracking––hydraulic fracturing––starts to encroach on their homes, the two scientists said. "The data will provide an objective viewpoint to drive a more rational discussion,"

Growing up in a community ravaged by fracking: why I decided to sit in — Growing up in rural Pennsylvania, I spent my childhood wandering through the countryside. The woods and mountains were my playground, the rivers and creeks my pools. My childhood memories were built in a land that seemed to possess a certain enduring purity, a ceaseless beauty. Then I grew up. And I learned that the mountains where I spent my youth had the potential to serve a purpose beyond fueling the imagination of a little girl—they were able to fuel something much more destructive. My home lies on one of the largest deposits of Marcellus Shale in the United States. And as I grew up, the fracking industry moved in. As profit seeking, highly unregulated private companies flooded my home to indiscriminately extract natural gas from the foundation of my childhood, the trails and mountain paths that once welcomed me with open arms were replaced by caution tape and locked gates. Natural gas is a misnomer. Hydraulic fracturing is a process of drilling during which vast quantities of water, sand and over 40,000 gallons of 600 different chemicals are pumped thousands of feet into the earth to fracture ancient beds of shale, releasing gas from the rock. There’s nothing natural about it.

Pipelines: The new battleground over fracking -- Forget the battles over the Keystone XL. Pipeline wars are now raging in Pennsylvania, where production is high and pipeline capacity is low. Marcellus Shale gas has the potential to alter the landscape of the global energy market. But right now a shortage of pipelines to get gas from the gas fields to consumers has energy companies eager to dig new trenches. And activists opposed to more drilling see pipeline proposals as the new battleground over fracking. Pennsylvania’s pipeline building boom could expand the nations’ and perhaps the world’s, supply of natural gas. And this boom includes an estimated 4,600 miles of new interstate pipes, tunneling under Pennsylvania’s farms, wetlands, waterways, and backyards. That’s on top of 6800 miles of existing interstate natural gas pipes, according to the Energy Information Administration. Drillers eager to reach new markets are frustrated right now, because there’s just not enough room in the current pipeline system to transport their gas beyond regional markets. “That gas languishes and it builds up and now that price will drop,” said Rob Boulware, a spokesman for Seneca Resources. Today, Marcellus Shale gas sold at less than $2/MMBtu, which is about a dollar lower than gas sold in other parts of the country.

Pipeline Company Sues 100 West Virginians To Get Access To Their Land -- A pipeline company is suing more than 100 landowners in West Virginia in an attempt to get access to their land, claiming that its proposed pipeline has the right of eminent domain. Mountain Valley Pipeline LLC filed a lawsuit in U.S. District Court last week to force more than 100 property owners and three corporations in 10 West Virginia counties to open their land to surveying for the Mountain Valley Pipeline. The proposed pipeline, if approved, would carry natural gas about 300 miles from northwestern West Virginia to southern Virginia. Since it’s an interstate pipeline, the approval lies with the Federal Energy Regulatory Commission (FERC). In the suit, Mountain Valley Pipeline LLC — which is a joint venture of multiple energy companies including NextEra U.S. Gas Assets and EQT Midstream Partners — states that “it is necessary to enter the respondents’ properties to survey (in order to obtain) necessary rights-of-way, obtain a FERC certificate and construct the pipeline.” The pipeline company says that it contacted the residents being sued to try to get permission to survey their land, but all of them “failed or refused to permit” the company from entering their properties.  Mountain Valley Pipeline hasn’t yet submitted a formal application to FERC to build the pipeline — it’s planning to do so in October. But, according to West Virginia Public Broadcasting, the company can’t ask the courts to use eminent domain until it gets a certificate to proceed with the project from FERC.

Fracking breaches ‘hidden from public’ - Oil and gas companies in 33 US states can avoid heightened public scrutiny because data about violations of safety and pollution rules are effectively hidden from residents, according to an environmental group’s investigation. The Natural Resources Defense Council, which probed a patchwork of state oil and gas regulations, warned that the lack of disclosure left citizens vulnerable as the shale boom brings production closer to residential areas. Over the past six years the shale revolution unleashed by fracking and horizontal drilling has developed so quickly that many state and federal regulators have been left standing. Only now are they beginning to catch up by introducing new safeguards, but not all public officials deem them necessary. Of 36 states with active oil and gas development, the NRDC and a watchdog called the FracTracker Alliance found that only three make data on violations easily accessible to the public — Colorado, Pennsylvania and West Virginia. From 2009 to 2013 in Pennsylvania alone, the NRDC found that 68 large companies were responsible for 3,978 violations of safety and pollution rules. In 33 states there is little or no public information on well site issues monitored by regulators such as oil spills, drinking water contamination, air pollution and the strength of well casings, they found. Amy Mall, senior policy analyst at NRDC, said: “It’s extremely difficult for members of the public to get information on the extent to which any particular company is violating the law.

It's Almost Impossible To Find Data On Oil And Gas Spills In Most States: -- A new report from the environmental group Natural Resources Defense Council has analyzed the data on spills and other violations at oil and gas wells across the country. But perhaps the most interesting aspect of the report is how little data the group was able to turn up. Based on NRDC's evaluation of dozens of state databases, only three states -- West Virginia, Pennsylvania and Colorado -- have easily accessible, publicly available data on spills and other violations. That's three states out of 36 that have active oil and gas development. "We looked at 36 states, and there are only three states where it would be easy for a member of the public to sit down at their computer and get some information about a company's compliance record," said report co-author Amy Mall, a senior policy analyst at NRDC. There are other states where citizens can file requests for data, but these three are the only ones where the information proved relatively easy to access, the group said. Even among these three states, it turned out there was some inconsistency in the types of data available. Colorado's database isn't searchable, nor does it include descriptions of any violations. Pennsylvania and West Virginia both organized their violation data in ways that NRDC called "overly vague." West Virginia's database for spills, for example, lists the names of affected streams, but doesn't describe the extent of any potential damage. Colorado, meanwhile, lists how far each incident occurred from drinking-water sources and notes whether groundwater or surface water was affected, but it doesn't name any of the bodies of water in question. The laws about what constitutes a violation also differ for each state.

Report identifies Top 10 oil, gas companies for spills, violations - Drilling - Ohio: – Only three out the 36 states with active oil and gas operations make information about companies’ spills and legal violations easily available to the public, according to a report by the Natural Resources Defense Council and FracTracker Alliance. “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. “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.” Fracking’s Most Wanted: Lifting the Veil on Oil and Gas Company Spills and Violations is an investigation into whether information about oil and gas company violations is publicly available nationwide, as well as the accessibility and reliability of the information that does exist. The groups discovered that only Colorado, Pennsylvania and West Virginia post accessible public data about companies’ violations. Even that information is often incomplete, misleading, and/or difficult to interpret. The data that is available in each of these three states reveals significant violations—in number and severity. Incidents include a wide range of dangerous infractions like spills, drinking water contamination, illegal air pollution, improper construction or maintenance of waste pits, failure to conduct safety tests, improper well casing, and nonworking blowout preventers. The report shows that too often state regulators don’t inform landowners or their neighbors when violations occur, and allow companies to continue operating even after repeat violations.

Frackers Average 2.5 Frackastrophes a Day in 3 States -- Assuming they get caught 10% of the time, that means about 25 goofs – spills, blow outs, leaks, etc. a day.  Oil and gas drillers ran afoul of regulators on average 2.5 times a day in three energy-intensive states for mistakes such as wastewater spills, well leaks and pipeline ruptures during the boom in hydraulic fracturing. Online records in West Virginia, Pennsylvania and Colorado showed regulators issued 4,600 citations from 2008 to 2013, the Natural Resources Defense Council said Thursday in a report. The report excluded violations in 33 other states with drilling because such records aren’t available on the Internet. “It’s extremely difficult for the public to get this kind of information,” said Amy Mall, an author of the report for the New York-based environmental advocate. “The companies are violating the law too often, and we need policy solutions to increase transparency and to change the consequences for not complying” with the rules, she said. Hydraulic fracturing has sparked a producing boom in long-bypassed energy states such as Pennsylvania, site of the first U.S. oil well. The technique lets producers break apart the underground shale formations and free trapped oil or gas. Each job can entail millions of gallons of water with sand and chemicals. The industry says the practice is safe, and fracking itself hasn’t caused chemical contamination of water supplies.

Frackers near you could be breaking the rules — and you’d probably never know -- One 2013 analysis estimated than at least 15.3 million Americans have a gas well within a mile of their home. So you might think that data on the performance records of oil and gas companies — how often they have spills, or exceed air pollution standards, etc. — would be readily available to locals who have an immediate stake in knowing about what’s going on in their backyard. Not so, according to a new study from the Natural Resources Defense Council and the FracTracker Alliance, a nonprofit that collects data on the gas industry.  Thirty-six U.S. states have active oil and gas operations. But according to the report, just three of these states have readily accessible databases that the public can use to see which drilling companies have been cited for violating environmental rules or other standards. What’s more, the records that do exist paint a disturbing picture. “There are two main issues,” said NRDC senior analyst Amy Mall. “One is that this information is extremely hard for the public to get. The second is that they’re violating the law a lot.” The report points out that in Ohio and Arkansas, for example, violations are not published in an online database. Texas and North Dakota, meanwhile, charge citizens for access to violation data.

Why States Fail to Regulate Frack Waste -- It might seem illogical, but in 1988 the U.S. Environmental Protection Agency (EPA) put a loophole in the Resource Conservation and Recovery Act (RCRA) which regulates hazardous and solid waste, exempting the waste from oil and gas exploration, development and production (E &P) from oversight. While it conceded that such wastes might indeed be hazardous, it said that state regulations were adequate.  That was then, and this is now. The fracking boom has brought oil and gas operations into states and communities that never dealt with them before. Elected officials in those states are often beholden to those oil and gas interests, especially as the amount of money flowing into elections has multiplied exponentially. Basically, the fox is guarding the henhouse. A new study, Wasting Away: Four states’ failure to manage oil and gas waste in the Marcellus and Utica Shale, conducted by Earthworks, explore just how inadequate state oversight of drilling operations is today. It specifically looks at four states that sit on top of the lucrative Marcellus and Utica shale deposits—New York, Ohio, Pennsylvania and West Virginia—to discover exactly how well they are doing in overseeing the identification and handling of the potentially hazardous waste materials left behind after the shale has been fracked. Not very well, it found. “Many of the questions asked about oil and gas field waste decades ago persist, including what it contains and how it is, and should be, treated and disposed of,” the report says. “Also debated is whether states have the ability and resources to adequately protect water, soil, and air quality in the process. Many policymakers and advocates have started to ask: as drilling continues, where is all the waste going and what happens as a result? However, these efforts by states, both current and proposed, are lacking.”

How To Frack a Fish -  Frack a well near a stream. Fish don’t like methane in the water. They prefer oxygen. Just funny that way.  A new stream-based monitoring system recently discovered high levels of methane in a Pennsylvania stream near the site of a reported Marcellus shale gas well leak, according to researchers at Penn State and the U.S. Geological Survey. The system could be a valuable screening tool to assess the environmental impact of extracting natural gas using fracking. Multiple samples from the stream, Sugar Run in Lycoming County, showed a groundwater inflow of thermogenic methane, consistent with what would be found in shale gas, the researchers report in a recent issue of Environmental Science and Technology. Victor Heilweil, research hydrologist, Utah Water Science Center, USGS, was lead author on the paper. “I found it startling that our USGS and Penn State team did a reconnaissance of 15 streams and discovered one instance of natural gas degassing into a stream that may very well be explained by a nearby leaking shale gas well,” said Susan Brantley, distinguished professor of geosciences and director of the Earth and Environmental Systems Institute at Penn State. After testing Sugar Run and finding high methane levels, researchers learned that several nearby domestic water supplies were reportedly contaminated by a Marcellus gas well that had a defective casing or cement, according to the researchers.

DEP schedules public hearing for an ethane cracker plant -- The state Department of Environmental Protection (DEP) has scheduled a public hearing for Royal Dutch Shell’s potential ethane cracker plant.The DEP has scheduled the hearing to address the issue of whether or not to issue an air quality permit for the proposed Beaver County cracker plant.. The plant will convert ethane into ethylene, and then process the ethylene into polyethylene. According to Shell’s permit application, the plant would have the capability of producing 1.6 million metric tons of polyethylene per year. The pollution from the plant would be caused by seven ethane cracking furnaces, flares and three natural gas fired turbines. Being granted the permit is a large piece of the puzzle for Shell as it continues to evaluate the proposed plant. The public hearing will be on May 5th, from 6 p.m. to 8 p.m. at Central Valley High School in Monaca, Pennsylvania. Shell Chemical originally announced plans to build an ethane cracker back in July of 2011. On March 15, 2012, the company shared that the plant would be built in Pennsylvania and that Beaver County could possibly be the location of the plant.

Court Rules: New York Frack Leases Expired Despite Moratorium - The New York moratorium on hydraulic fracturing doesn’t allow energy companies to extend leases with landowners beyond the expiration dates in their contracts, the state’s highest court ruled Tuesday. The Court of Appeals answered that question for a federal appeals court reviewing the case. It follows a federal judge’s 2012 ruling for the landowners, also concluding the leases expired.  The contract clause triggering extensions due to an event beyond the parties’ control would apply if drilling for oil and natural gas had begun, the Court of Appeals said. However, the normal contract expiration periods — five years plus ordinary agreed-upon extensions — apply during the leases’ initial term granting drilling and exploration rights, the seven judges unanimously agreed. “I don’t know how much it matters at the exact present time in New York,” said attorney Peter Bouman, representing 35 landowners who had leases. “It matters across the country because this kind of lease is in an awful lot of jurisdictions.”Case law from New York’s highest court is often influential with other courts, Bouman said. Most of the leases were signed in 2001. Last December, after further reviews, the Cuomo administration decided to prohibit fracking for natural gas because of what regulators called unexplored health risks and dubious economic benefits. Losing Tuesday at the Court of Appeals would have had a major impact on the landowners, leaving them at the mercy of the gas companies for a long time, Bouman said. “There’s a lien on the land. You can’t sell it. You can’t borrow against it a lot of times. And somebody else owns, and in fact has a right to, all of the mineral interests under the land. When the technology improves those mineral rights could be worth far more than the land itself.

NY Ban on Fracking Didn't Extend Gas Leases - (CN) - A 2008 state moratorium on fracking did not constitute an unexpected event that triggered clauses extending oil and gas drillers' land leases, New York's high court found. The decision came in response to two certified questions sent by a federal appeals court to clarify state law on the "relatively undeveloped" legal field around high-volume hydraulic fracturing and horizontal well drilling, commonly known as fracking. Starting in the mid-2000s, energy companies interested in exploring for natural gas in New York began securing land leases with property owners. The leases typically lasted five years. At the same time, though, safety and environmental concerns about fracking arose, leading then-Gov. David Paterson to direct the state Department of Environmental Conservation, which oversees conventional oil and gas drilling, to conduct a formal review of the technique. The order prompted Inflection Energy, a driller with leases in Tioga County near Binghamton and the Pennsylvania border, to notify landowners that a "force majeure" event had occurred which extended the term of its contracts. Oil and gas land leases typically let energy companies conduct geophysical, seismic and other exploratory tests, with landowners receiving a nominal annual fee in return. If a well goes into production, the landowner receives a royalty on the energy company's gross proceeds. Inflection Energy's leases, like most oil and gas contracts, contained term clauses known as habendum clauses that established the set period for granted development rights - in this case a primary term of five years. Inflection's leases also had a force majeure clause, signifying "an event beyond the control of the parties that prevents performance under a contract and may excuse nonperformance."  That clause kicked in when Paterson ordered the fracking review, Inflection contended.

New York court: Drilling leases expired despite state ban  — The New York moratorium on hydraulic fracturing doesn’t allow energy companies to extend leases with landowners beyond the expiration dates in their contracts, the state’s highest court ruled Tuesday. The Court of Appeals answered that question for a federal appeals court reviewing the case. It follows a federal judge’s 2012 ruling for the landowners, also concluding the leases expired. “Basically it’s going to be the end of the case,” said attorney Thomas West, representing Inflection Energy and other companies. “We expect the Second Circuit issues its decision applying the certified answer.” The contract clause triggering extensions due to an event beyond the parties’ control would apply if drilling for oil and natural gas had begun, the Court of Appeals said. However, the normal contract expiration periods — five years plus ordinary agreed-upon extensions — apply during the leases’ initial term granting drilling and exploration rights, the seven judges unanimously agreed.

Texas Lawmakers Want To Stop Towns From Banning Fracking -- Last November, residents of the North Texas town of Denton overwhelmingly voted to ban fracking within their city limits. This did not sit well with Texas lawmakers, and they have made it a top priority of this spring’s legislative session to make sure it doesn’t happen again.  On Monday, the Texas House Natural Resources Committee voted 10-1 to approve House Bill 40, which drastically curtails local governments’ abilities to say no to fracking within their communities. The Senate Natural Resources and Economic Development Committee passed a companion bill last week, SB 1165. Both bills will now head to the full House and Senate for votes.  This effort is the latest take on a style of preemption legislation that has been used across the country to bar cities from regulating everything from landlords to the minimum wage. As the New York Times recently reported, these preemption laws invoke “a paradox for conservatives who have long extolled the virtues of local control in some areas, like education, but now say uniform standards are necessary in others.” In Texas, this hypocrisy is on full display when it comes to banning local control over fracking.  “These bills absolutely conflict with longstanding conservative principles of local control and self-determination,” Luke Metzger, the founder and director of Environment Texas, told ThinkProgress. “Many of these legislators are speaking out of both sides of their mouths, decrying federal preemption of state sovereignty on the one hand, while pushing one-size fits all mandates from Austin overriding local ordinances.” Metzer said that the bills were primarily driven by Denton’s vote to ban drilling, and that while the House Bill was changed to be less severe, it could “still could undermine many city ordinances.”

Bill to prohibit local fracking bans clears Senate panel - A Senate panel has approved a bill that would limit cities and towns from passing local ordinances restricting oil and gas drilling and exploration. The Senate Energy Committee voted 10-1 on Wednesday to advance the bill by Senate President Pro Tem Brian Bingman. The measure now heads to the full Senate. The bill is among several filed this year to limit local regulations in the wake of a ban on hydraulic fracturing that voters in the north Texas city of Denton overwhelmingly approved in November. Bingman says the bill is designed to protect one of the state’s most economically important industries. The bill would allow cities and towns to enact “reasonable” ordinances on things like road use and setbacks for oil and gas well sites. House Bill 2178:

Shale prosperity spreads to Wyoming, Colorado, Oklahoma, Utah, N. Mexico: Combined oil production up 116% in 5 years -- We hear a lot about the well-publicized increases in oil production in America’s top two oil-producing states. No. 1 Texas now produces nearly 3.5 million barrels of oil every day, almost as much as Canada’s total daily production of 3.7 million barrels.  As a separate country the Lone Star State would now be the world’s 7th largest oil-producer. The No. 2 state is North Dakota, home of the prolific Bakken oil fields where daily oil production topped 1 million barrels last June, placing it in an elite group of only ten oil fields worldwide that produced more than 1 million barrels of crude oil per day at peak production. But the recent breakthroughs in advanced drilling and extraction technologies that have boosted oil output in Texas and North Dakota have also brought dramatic increases in shale oil output over the last five years to the five oil-producing states of: Oklahoma (+127% since January 2010), Utah (+90%), Colorado (+198%), Wyoming (+67%) and New Mexico (+114%). The chart above shows the combined daily oil output in those five states (data here), which has increased by 116% over the last five years, from 615,000 barrels per day (bpd) in January 2010 to 1.33 million bpd in December 2014. Recent increases in the combined oil production in those five states since 2010, thanks to advanced drilling technologies, have brought the combined five-state oil production to the highest level in the history of the EIA state data going back to 1981, and has completely reversed a multi-decade decline in oil production that started in those states in the mid-1980s. Combined oil production in Oklahoma, Utah, Colorado, Wyoming and New Mexico topped one million bpd in April 2013 for the first time since early 1989, and then topped the previous 1984 peak of 1.258 million bpd in August 2014 on the way to reaching a new record peak high in December last year of 1.33 million bpd.

Distress in the Oil Field - Bankruptcy Beat - WSJ  Since June 2014, the price of oil has plummeted to less than $50 per barrel from more than $100. Although forecasters seem to think the price will rebound, there is not much consensus on when that will happen. A recent MoneyBeat report showed that analysts predict the price of oil could end 2015 anywhere between $52 and $84 a barrel. In the world of distress, the effects of low prices are already beginning to be felt by some in the industry. Endeavour International Corp., Dune Energy Inc., BPZ Resources Inc. and Quicksilver Resources Inc.—all companies that explore and produce oil and gas—have filed for chapter 11 bankruptcy, as has Cal Dive International, a contractor that services oil and gas exploration companies. American Eagle Energy Corp. and Samson Resources Corp., have said they’re facing trouble, warning of possible bankruptcy filings. And they’re not alone. With so much turmoil in the industry and likely more on the way, the Examiners are set to share their thoughts in two prongs, addressing both the stress in the industry as well as the legal issues these companies present for the bankruptcy court.

Big Oil Pressured Scientists Over Fracking Wastewater's Link to Quakes - In November 2013, Austin Holland, Oklahoma’s state seismologist, got a request that made him nervous. It was from David Boren, president of the University of Oklahoma, which houses the Oklahoma Geological Survey where Holland works. Boren, a former U.S. senator, asked Holland to his office for coffee with Harold Hamm, the billionaire founder of Continental Resources, one of Oklahoma’s largest oil and gas operators. Boren sits on the board of Continental, and Hamm is a big donor to the university, giving $20 million in 2011 for a new diabetes center. Says Holland: “It was just a little bit intimidating.” Holland had been studying possible links between a rise in seismic activity in Oklahoma and the rapid increase in oil and gas production, the state’s largest industry. During the meeting, Hamm requested that Holland be careful when publicly discussing the possible connection between oil and gas operations and a big jump in the number of earthquakes, which geological researchers were increasingly tying to the underground disposal of oil and gas wastewater, a byproduct of the fracking boom that Continental has helped pioneer. “It was an expression of concern,” Holland recalls. Details surrounding that meeting and others have emerged in recent weeks as e-mails from the Oklahoma Geological Survey have been released through public records requests filed by Bloomberg and other media outlets, including EnergyWire, which first reported the Hamm meeting.

Fracking's New Legal Threat: Earthquake Suits -- After an earthquake toppled her chimney, sending rocks crashing through the roof and onto her legs, Sandra Ladra didn't blame an act of God. She sued two energy companies, alleging they triggered the 2011 quake by injecting wastewater from drilling deep into the ground. Ms. Ladra's lawsuit, now before the Oklahoma Supreme Court, highlights an emerging liability question for energy companies: Can they be forced to pay for damages from earthquakes if the tremors can be linked to oil-and-gas activity? Oklahoma, with a history of mild-to-moderate seismic activity, has experienced 585 earthquakes of 3.0 or greater magnitude last year--big enough to be felt indoors--according to the Oklahoma Geological Survey. That's more than the state had in the previous 30 years combined and the most of any state in the contiguous U.S. So far, most of the tremors under investigation in Oklahoma and other oil-producing states, including Arkansas, Kansas, Ohio and Texas, have been too small to cause major damage. But the prospect of facing juries over quake-related claims is reverberating throughout the energy industry, which fears lawsuits and tighter regulations could increase costs and stall drilling. "It's definitely something that has risen to a level of fairly high concern," Steve Everley, a spokesman for industry advocate Energy In Depth, said of earthquake-related risks. "Companies recognize that there's a problem here," he said, adding that they are contributing data to help regulators determine what's causing the quakes. Most of the focus isn't on hydraulic fracturing, which involves shooting a slurry of water, sand and chemicals into wells to let oil and gas flow out--and which helped touch off the recent U.S. energy boom. Instead, researchers say the most serious seismic risk comes from a separate process: disposal of toxic fluids left over from fracking and drilling by putting it in wells deep underground.  Geologists concluded decades ago that injecting fluid into a geologic fault can lubricate giant slabs of rock, causing them to slip.

Fracking’s New Nemesis: Earthquake Lawsuits - Yves Smith - Despite widespread environmental concerns and community opposition, in large swathes of the US, the fracking industrial complex has seemed unstoppable. That may finally be changing.  One major risk, which we’ve discussed at length, is how many shale gas companies are deeply indebted and depend on continued access to cheap credit. With energy prices low, many are having to continue to produce to service debt, keeping the supply glut going longer than it would if more could afford to cut supply and wait for prices to recover.  But even if the more financially fragile and/or higher cost fracking plays go bust, for the most part, that means they’ll be restructured, with the lenders taking losses and the new buyers having a go with a cleaned-up balance sheet. Thus quite a few of the current shale gas operators will go away, but not their operations. However, a more fundamental threat to the industry looms: that of costly earthquake litigation. Oklahoma is ground zero. In the last year, the state has had more earthquakes of magnitude 3.0 or greater than in the previous 30, including a 5.6 magnitude tremblor, the strongest in recorded state history. Two different geology journals attributed the quake to fracking activity in the immediate vicinity. The earthquake risk apparently does not result from the fracking (the fracturing of geological structures) per se but fluid disposal. From the Wall Street Journal: [R]esearchers say the most serious seismic risk comes from a separate process: disposal of toxic fluids left over from fracking and drilling by putting it in wells deep underground. Geologists concluded decades ago that injecting fluid into a geologic fault can lubricate giant slabs of rock, causing them to slip. Scientists say disposal wells are sometimes bored into unmapped faults. The practice isn’t new, but has proliferated with the U.S. drilling boom. Some states are trying to mitigate earthquake risk by limiting the depth and greatly lowering the injection rate of waste water. The Wall Street Journal story does not discuss what economic impact restrictions like that would have.

Staggering Rise in Fracking Earthquakes Triggers Kansas to Take Action » It seems unlikely that Kansas, known as one of the most conservative states in the U.S. and home to fossil fuel barons the Koch Brothers, would take action against the oil and gas industries. But in the face of a new wave of earthquakes attributed to the underground injection of fracking wastewater, its industry regulating body, the Kansas Corporation Commission (KCC), ordered a reduction of wastewater injection in two counties abutting Oklahoma, finding that increased earthquake activity correlated with increasing volumes of injected fracking water.“Because individual earthquakes cannot be linked to individual injection wells, this order reduces injection volumes in areas experiencing increased seismic activity,” said its official report. It added, “The commission finds increased seismic activity constitutes an immediate danger to the public health, safety and welfare. The commission finds damage may result if immediate action is not taken.” The commission’s report pointed to findings by the U.S. Geological Survey (USGS) that the number of earthquakes in Kansas has risen over the past several years. “USGS data shows from 1981 through 2010, Kansas experienced 30 recorded earthquakes,” it said. “In 2013, there were four recorded earthquakes in Kansas. The number of recorded earthquakes reported in Kansas during 2014 increased to 127. From January 1, 2015, to March 16, 2015, Kansas has experienced 51 recorded earthquakes. The majority of the earthquakes have occurred in Harper and Sumner Counties. The increased number of recorded earthquakes in Kansas coincides with an increase in the number of injection wells and the amounts of injected saltwater in Harper and Sumner Counties.”

Labor officials: New Mexico, West Texas oil field workers underpaid  -- Federal labor officials say oil and natural gas workers in New Mexico and West Texas have been underpaid by more than $1.3 million. The U.S. Labor Department’s Wage and Hour Division made the announcement Monday. The findings stem from an enforcement initiative launched by the division last year. Officials say overtime violations led to the underpayment to some 1,300 workers. Among the problems found, employers were failing to include bonus payments when calculating overtime rates, weren’t paying for time spent working off-the-clock and paying flat rates despite the hours worked by employees.  There were also instances of workers being misclassified as independent contractors. A regional labor official, Cynthia Watson, says there’s a misconception that because oil and gas workers typically earn more than minimum wage that they’re being paid legally.

Drought-stricken California not to halt water consuming fracking: California oil producers used nearly 280 million litres (70 million gallons) in the process of fracking for oil and gas in the state last year.This amounts to more than half a million litres of water per day in a nation which is already water-stressed under a four-year-long drought.Just a few days ago California Governor Jerry Brown ordered mandatory water use reductions in supplies to households amounting to 25% for the first time in the state's history, following water scarcity and worsening drought conditions.The drought has worsened with rain deficit and rising temperatures from global warming that led to a winter of record-low snowfalls.The current drought, which began in 2011, is the worst in 120 years of climate record-keeping in the state while some suggest it is the worst in more than a thousand years.It is in such a scenario that Brown has claimed fracking was not a major drain on water supplies and decided not to halt fracking in the state.

Californians Outraged As Oil Producers & Frackers Excluded From Emergency Water Restrictions -- California's oil and gas industry is estimated (with official data due to be released in coming days) to use more than 2 million gallons of fresh water per day; so it is hardly surprising that, as Reuters reports, Californians are outraged after discovering that these firms are excluded from Governor Jerry Brown's mandatory water restrictions, "forcing ordinary Californians to shoulder the burden of the drought." From Reuters, California should require oil producers to cut their water usage as part of the administration’s efforts to conserve water in the drought-ravaged state, environmentalists said on Wednesday. Governor Jerry Brown ordered the first statewide mandatory water restrictions on Wednesday, directing cities and communities to cut their consumption by 25 percent. But the order does not require oil producers to cut their usage nor does it place a temporary halt on the water intensive practice of hydraulic fracturing. California’s oil and gas industry uses more than 2 million gallons of fresh water a day to produce oil through well stimulation practices including fracking, acidizing and steam injection, according to estimates by environmentalists. The state is expected to release official numbers on the industry’s water consumption in the coming days. “Governor Brown is forcing ordinary Californians to shoulder the burden of the drought by cutting their personal water use while giving the oil industry a continuing license to break the law and poison our water,” said Zack Malitz of environmental group Credo. “Fracking and toxic injection wells may not be the largest uses of water in California, but they are undoubtedly some of the stupidest,” he said.

EPA Report Finds Nearly 700 Chemicals Used in Fracking » The U.S. Environmental Protection Agency (EPA) released a report on Friday that found there are nearly 700 chemicals used in the fracking process. The EPA completed the analysis by looking at more than 39,000 FracFocus disclosures in the last two years. The FracFocus Chemical Disclosure Registry was developed by the Groundwater Protection Council and the Interstate Oil and Gas Compact Commission in response to public concern about the contents of fracking fluid, says the EPA report. “FracFocus is a publicly accessible website where oil and gas production well operators can disclose information about the ingredients used in hydraulic fracturing fluids at individual wells,” says the EPA report. However, only 20 states require fracking companies to use FracFocus “to publicly disclose the chemicals they inject into wells,” says The Hill. Additionally, the report found that 10 percent of all chemicals used during the fracking process were not disclosed. Despite all these limitations, the findings were still alarming. The report found that the median number of chemical additives per fracking job was 14. Hydrochloric acid, methanol, and hydrotreated light petroleum distillates were the most common additives, being reported in 65 percent of all disclosures, says The Hill. Even in low doses, these are known to cause skin irritation, chemical burns, headaches and blurred vision, according to the Center for Disease Control and California’s Office of Environmental Health Hazard Assessment. At higher concentrations, exposure to these chemicals can cause shortness of breath, blindness and possibly death.

Oil, gas spill report for March 30 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks. Kerr McGee Oil & Gas Onshore LP, reported on March 24 that a truck driver left a valve open, while transporting a reject tank, outside of Platteville. Approximately five barrels of crude oil spilled onto lined containment. A hydro-vac truck was used to recover the crude oil and it is unknown how much crude oil was recovered. The valve was shut off, isolating the release. The soil that was impacted was collected for disposal at a proper facility. Soil samples will be collected and tested for compliance with COGCC standards.  Whiting Oil & Gas Corporation, reported on March 20 that a loose union resulted in a flowline leaking condensate fluid, outside of Raymer. It is approximated that less than five barrels of condensate spilled. The leak stopped with the tightening of the union. Impacted soil is scheduled for excavation and will be remediated via soil shredding. Noble Energy Inc., reported on March 13 that soil impacts were discovered after a water vault removal, outside of Raymer. It is approximated that less than five barrels of produced water spilled. All production equipment was shut in and an excavation has been scheduled. It is determined that the cause of the leak was equipment failure. The previous oil and gas spill report is available here.

Feds: Niobrara needs railroads to send oil to market - Rail transportation is a crucial factor in the Niobrara oil industry. According to the Denver Business Journal, a new Energy Information Administration (EIA) analysis reports that rail cars transport about 64 percent of oil produced in the formation.  Earlier this week, the EIA announced plans to release a monthly report tracking how much oil is transported through rail and information about transportation via pipeline, tanker and barge.  “The new crude-by-rail provides a clearer picture on a mode of oil transportation that has experienced rapid growth in recent years and is of great interest to policy makers, the public, and industry,” EIA administrator Adam Sieminski said in the article.  Using information from the U.S. Surface Transportation Board, outside sources and its own data, the EIA hopes to curate information from January 2010 up to January 2015. During that five-year period, Niobrara’s production saw a 300,000 barrel-per-day leap.  Transportation via rail and pipeline played an integral role in the production boost. According to Denver-based ARB Midstream LLC CEO Adam Bedard, rail transportation enables companies to ship to a larger range of locations.  But rail transportation may see a slow-down. In the wake of numerous train derailments, BNSF railroad announced new risk-management measures yesterday, including slower speeds in larger metros, improved track inspections and more repairs on faulty wheels.

Nebraska Guy To Regulators: Here, Have A Cold Glass Of Delicious Fracking Juice! --Public hearings don’t generally make for exciting video, short of the occasional outburst by fans of black helicopters or people worried about buttsex enzymes, but they can also be enlivened by an activist with a good visual aid. For example, here’s a Nebraska man inviting members of the state’s Oil and Gas Conservation Commission to drink glasses full of a mystery chemical mix, to make the point that he’s not so crazy about a proposal to pump other states’ fracking wastewater into wells in Nebraska. The state is considering a plan by Terex Energy Corporation to “inject up to 10,000 gallons per day of wastewater from fracking in Colorado and Wyoming into an old oil well on a ranch in Sioux County, in the northwest corner of Nebraska.” One member of the commission tried to assure citizens that concentrations of harmful chemicals in fracking wastewater were so low, the human body could “handle” occasionally ingesting some of the stuff. So Concerned Citizen James Osborn came to the hearing, poured bottled water into three plastic cups, and then added a mixture of mystery goo to the water, explaining that it was perfectly safe but he couldn’t tell the commissioners what was in it, since that was “a trade secret.”

WATCH: Nebraska farmer silences oil and gas committee with invitation to drink water tainted by fracking: Appearing before a Nebraska Oil & Gas Conservation committee hearing, a local farmer received nothing but silence from the pro-fracking members of the board after he invited them to drink glasses of water tainted by fracking. In the video, uploaded to YouTube by BoldNebraska, Nebraskan James Osborne used his 3 minutes before the committee to visually explain what fracking waste can do to the water table, dramatically pouring out water containing his own “private mixture” of fracking additives. The committee is holding public hearings on a proposal by an oil company to ship out-of-state fracking wastewater into Nebraska where it will be dumped into a “disposal well” in Sioux County. According to a report, the Terex Energy Corp wants to truck as much as 10,000 barrels a day of the chemical-laden fracking wastewater to a ranch north of Mitchell, Nebraska for disposal. Explaining that he has ties to the oil industry and that he is still on the fence about fracking, Osbourne explained fluid dynamics to the board while pouring out three cups of the sludgy water that could result from spills or from seeping into the water table. Referring to earlier testimony, Osbourne said, “So you told me this morning that you would drink this water,” as he indicated the cups. “So would you drink it? Yes or no?” he asked, only to be met by silence by the stone-faced group before a member explained they wouldn’t be answering any questions. “Oh, you can’t answer any questions? Well my answer would be ‘no.’ I don’t want this in the water that will travel entirely across this state in three days,” Osborne said. “There is no doubt there will be contamination. There will be spills.”

Enbridge Energy doesn't see oil slowdown affecting Minnesota pipeline projects - Even as the U.S. oil industry slashes investment, pipeline operator Enbridge Energy isn’t paring back its record five-year, $44 billion building program that includes major projects in Minnesota, the company’s CEO Al Monaco said Friday. Monaco said in an interview that the 50 percent drop in crude oil prices since June “is very dire” for the industry, but hasn’t changed the economics of pipelines like Enbridge’s proposed Sandpiper project to deliver North Dakota oil across northern Minnesota to a terminal and other pipelines in Superior, Wis. “The amount of production that is coming on to our system and the amount of production we forecast from the oil sands or the Bakken is actually well in excess of the capacity we have on our system,” said Monaco, whose company operates the world’s longest crude oil pipeline system and has major operations in Minnesota and Wisconsin. Monaco told the Star Tribune that he sees no significant change in the company’s investment plan, which is focused on liquid pipelines. Most projects, he said, are secured with contracts or are already underway. The share in Minnesota is $5 billion, he added.

Fracking Town’s Desperate Laid-off Workers: ‘They Don’t Tell You It’s All a Lie’  —From the looks of it, the nation’s boomtown is still booming. Big rigs, cement mixers and oil tankers still clog streets built for lighter loads. The air still smells like diesel fuel and looks like a dust bowl— all that traffic — and natural gas flares, wasted byproducts of the oil wells, still glare out at the night sky like bonfires. Not to mention that Walmart, still the main game in town, can’t seem to get a handle on its very long lines and half­ empty shelves. But life at the center of the country’s largest hydraulic fracturing, or fracking, boom has definitely changed. The jobs that brought thousands of recession­-weary employment­-seekers to this once peaceful corner of western North Dakota over the last five years have been drying up, even as the unemployed keep coming. .Some migrants have already left, or are planning to, according to the local U­Haul companies. They report fewer people renting vans and trucks to move into town and more laid­-off workers renting vehicles to move out. The rest are becoming Williston’s version of day laborers. They compete for low­-paying jobs such as picking up trash, doing laundry and mopping floors, that make enough for them to eat, but not enough to afford a place to live. (The average one­-bedroom apartment in Williston costs $2,395 a month.) Some live in one room with several other men, pooling resources and splitting costs. Others don’t know where they’ll sleep from one night to the next. The Salvation Army has offered stranded workers a one­-way ticket back home. But many job seekers seem unwilling to leave—at least not until they can make a success out of their sacrificial move to a place with six months of winter, the worst traffic they’ve ever seen, and a disgruntled, if not miserable, populace.

Oil company requesting flaring exceptions for 140 oil wells — An oil company is asking the state regulators to grant an exception to North Dakota’s flaring rate requirements for 140 of its oil wells in Dunn and McKenzie counties. The Bismarck Tribune reports that XTO Energy is arguing it has nowhere to take its gas because gas-processing company OneOK couldn’t secure an easement agreement and build a 20-mile pipeline expansion. OneOK says the pipeline would have moved 40 million cubic feet per day to the company’s Garden Creek gas plant in McKenzie County. XTO’s request was heard this week by the state’s Oil and Gas Division and will be forwarded to the State Industrial Commission for action. Earlier this week, the commission more clearly defined gas-capture rules, imposing penalties for noncompliance and also establishing flexibility to cover extenuating circumstances.

More than 21,000 gallons of saltwater leak in northwest ND — The state Department of Health says a pipeline that leaked about 21,000 gallons of saltwater in northwest North Dakota has impacted a nearby wetland. The pipeline owned by Oasis Petroleum LLC leaked approximately 500 barrels of saltwater, or brine, about 11 miles northwest of Powers Lake. The health department says 475 barrels of the spill have been recovered. It’s unclear how much of the nearby wetland has been impacted. The health department is on site and says it is providing oversight of the cleanup. The North Dakota Oil and Gas Division has also been at the cleanup. Brine is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it.

North Dakota's new oil train safety checks seen missing risks -- New regulations to cap vapor pressure of North Dakota crude fail to account for how it behaves in transit, according to industry experts, raising doubts about whether the state’s much-anticipated rules will make oil train shipments safer. High vapor pressure has been identified as a possible factor in the fireball explosions witnessed after oil train derailments in Illinois and West Virginia in recent weeks. For over a year, federal officials have warned that crude from North Dakota’s Bakken shale oilfields contains a cocktail of explosive gas – known in the industry as ‘light ends.’ The new rules, which take effect on April 1, aim to contain dangers by spot-checking the vapor pressure of crude before loading and capping it at 13.7 pounds per square inch (psi) – about normal atmospheric conditions. The plan relies on a widely-used test for measuring pressure at the wellhead, but safety experts say gas levels can climb inside the nearly-full tankers, so the checks are a poor indicator of explosion risks for rail shipments.

BNSF Engineer Who Manned Exploding North Dakota "Bomb Train" Sues Former Employer - A Burlington Northern Santa Fe (BNSF) employee who worked as a locomotive engineer on the company's oil-by-rail train that exploded in rural Casselton, North Dakota in December 2013 has sued his former employer.  Filed in Cass County, the plaintiff Bryan Thompson alleges he “was caused to suffer and continues to suffer severe and permanent injuries and damages,” including but not limited to ongoing Post-Traumatic Stress Disorder (PTSD) issues. Thompson's attorney, Thomas Flaskamp, told DeSmogBlog he “delayed filing [the lawsuit until now] primarily to get an indication as to the direction of where Mr. Thompson's care and treatment for his PTSD arising out of the incident was heading,” which he says is still being treated by a psychiatrist. The lawsuit is the first of its kind in the oil-by-rail world, the only time to date that someone working on an exploding oil train has taken legal action against his employer using the Federal Employers' Liability Act. Flaskamp told The Forum newspaper in Fargo, North Dakota that Thompson had to “run for his life” to escape the train he was manning once it derailed after colliding with an oncoming grain train. “Behind him, tank cars were starting to derail, catch fire and explode,” Flaskamp told The Forum of Thompson, who is in his 30s and is currently in school to obtain a teaching degree. The plaintiffs allege BNSF, owned by multi-billionaire Warren Buffett, violated the Federal Employers' Liability Act in multiple ways. They include “failing and neglecting to provide [Thompson] with a reasonably safe place to work” and “failing to warn [him] of the dangers of hauling explosive oil tank railcars and the tendencies of these railcars to rupture and explode upon suffering damage.”

Million barrels of oil per day riding U.S. rails - – More than 1 million barrels of crude oil move by train across the United States every day, according to data published for the first time by the government on Tuesday. The volume of crude shipped by rail has increased more than 50-fold in five years, from just 630,000 barrels in January 2010 to 33.7 million barrels in January 2015, the Energy Information Administration (EIA) revealed in its first monthly report on movements of oil by rail. Until now, information on oil shipments has been incomplete, partly confidential and scattered across a number of sources. The Association of American Railroads, individual railroad companies, and the federal government’s Surface Transportation Board, which regulates freight rates, have all published limited data on shipments. The EIA has now brought together the confidential data from the U.S. Surface Transportation Board and Canada’s National Energy Board as well as its own information on production and stocks in each part of the United States, to produce the first comprehensive picture of crude-by-rail movements. The data underscore how rapidly the modern oil-by-rail business has grown. Shipments rose from almost zero in 2008 to hit 1 million barrels per day (bpd) for the first time in the current boom in April 2014.

Where all the oil trains are going - The aging pipeline system in the US wasn’t built for the fracking boom. Shale oil production has soared in some areas that are not well integrated into the pipeline network. Primary among them: North Dakota, now the second largest producing state in the US, after Texas. Hence the use of trains to transport crude oil. To the greatest satisfaction of the railroads, Warren Buffet, tank-car makers, tank-car leasing companies, and the like. At first, say in 2010, it wasn’t a big deal. Only 55,000 barrels per day were shipped from the Bakken in North Dakota to other areas in the US. But as production in the Bakken soared, so did shipments by train, punctuated by derailments in Canada and the US that led to some horrific explosions and loss of life. Now it is a big deal – including for the communities through which these trains rumble: oil train shipments in 2014 exceeded 1 million barrels per day, or about 11% of US oil production. Oil trains had another quirk: the monthly petroleum supply statistics the Energy Department’s EIA collects and publishes included crude oil movements by pipeline, tanker, and barge. But not by oil train. So now, for the first time, the EIA is gathering oil-train data, which as it says, “dramatically reduces the absolute level of unaccounted for volumes” – emphasis by the EIA – in its monthly balances for each region.  So it just released its first “CBR” (crude by rail) data set for January, and time-series maps going back to 2010, when it all started in earnest. Turns out in January, 1,045,000 barrels per day were shipped by oil train to destinations in the US, of which 130,000 barrels per day originated in Canada and 704,000 barrels per day in PADD 2 (Petroleum Administration for Defense District), which includes the Bakken in North Dakota. Of that, 437,000 barrels per day were shipped to PADD 1 (East Coast). Below are the EIA’s time-series maps that show the movements annually from 2010 through 2014. Excluded are movements of less than 1,000 barrels per day and short-distance movements between rail yards within a region.

BNSF railroad adds new safety rules for crude oil trains - — BNSF has started taking additional safety measures for crude oil shipments because of four recent high-profile derailments in the U.S. and Canada, the railroad said Monday. Under the changes, BNSF is slowing down crude oil trains to 35 mph in cities with more than 100,000 people and increasing track inspections near waterways. The Fort Worth, Texas, based railroad also is stepping up efforts to find and repair defective wheels before they can cause derailments. BNSF spokesman Michael Trevino said these additional safety efforts were imposed last week in response to the recent derailments, including one involving a BNSF train earlier this month near Galena, Illinois, and the Mississippi River. “The recent incidents involving crude trains, including our own event in Galena, has led us to believe that we must take further action,” Trevino said. In February, a 100-car Canadian National Railway train hauling crude oil and petroleum distillates derailed in a remote part of Ontario, Canada. And less than two days later, a 109-car CSX oil train derailed and caught fire near Mount Carbon, West Virginia, leaking oil into a Kanawha River tributary and burning a house to its foundation. The worst of these crude oil derailments happened July 6, 2013, and involved a runaway train that killed 47 people in the town of Lac-Megantic, Quebec, just across the U.S.-Canada border from Maine.

North Dakota launches oil rules hoping to curb U.S. rail disasters - North Dakota will from Wednesday require the more-than 1.2 million barrels of crude extracted each day from the state’s Bakken shale formation be run through machines that remove volatile gases linked to recent crude-by-rail disasters. The controversial step is designed to abrogate the damage North Dakota crude oil – 70 percent of which is transported via rail – can cause during derailments. In the absence of concrete regulations from the U.S. Department of Transportation, North Dakota’s new rules become the de facto national standard on the treatment of crude before tankcar loading. “North Dakota’s crude oil conditioning order is based on sound science and represents an important step in the ongoing work to ensure that oil-by-rail transportation is as safe as possible,” said Governor Jack Dalrymple, who has also been pushing federal regulators for stricter rail car designs. The new regulations require every single barrel of North Dakota crude to be filtered for ethane, propane and other natural gas liquids (NGLs), which are found naturally co-mingled with oil. North Dakota crude contains a far-higher percentage of those gases than, for instance, crude extracted in Texas or Alaska, and that added volatility fueled a deadly derailment in Quebec in late 2013, as well as a string of successive disasters.

EIA: The U.S. hit records unseen for a century --The United States hit a milestone last year that hasn’t been accomplished in over a hundred years. According to the U.S. Energy Information Administration (EIA), 2014 was the largest volume increase in oil production (including lease condensate) since record-keeping began in 1900.  U.S. crude oil production increased during 2014 by 1.2 million barrels per day (bbl/d) to 8.7 million bbl/d. On a percentage basis, the EIA stated that output in 2014 increased by 16.2 percent, the highest growth rate since 1940. Major thanks for the increase should go to the hydraulic fracturing and horizontal drilling operations in the tight oil plays in North Dakota, Texas and New Mexico. The EIA states that even though oil production is expected to rise in 2015 and again in 2016, the growth is not expected to be as strong as in 2014. Severe budget cuts and slumping oil prices are a likely reason. Since mid-2014, the price of crude oil has fallen roughly 50 percent, which has slowed production in marginal drilling areas and focused investment in the more developed areas of tight oil plays. According to the EIA’s latest Short-Term Energy Outlook, annual crude oil production is expected to grow 8.1 percent, half of 2014’s rate. Next year, growth will slow down even more severely with an expected rate of 1.5 percent.

U.S. may skirt oil storage crisis as drivers hit the road -- A month ago, it seemed inevitable: a massive global oversupply of crude oil production would overwhelm storage tanks in Oklahoma and fill supertankers off Singapore. Now, there are growing signs that the U.S. oil market can avoid the doomsday scenario in which it runs out of room to stockpile surplus crude, a development that oil traders worried would send crude prices into another tailspin. One reason is that refiners, spurred by high profit margins, are rushing to buy crude and churn out more fuel in response to an unexpectedly swift rise in U.S. road travel and soaring Chinese demand for fuel-hungry sport utility vehicles. Furthermore, shale oil drillers have hit the brakes on new wells faster than many anticipated. This could throw years of unyielding growth into reverse as early as May. Oil prices are starting to reflect these changes. U.S. crude has rebounded from a six-year low of $42 a barrel, although those gains were built partly on growing anxiety over tumult in Yemen last week and a drop in the U.S. dollar. “On a global basis I think sentiment has definitely shifted,” says Amrita Sen from Energy Aspects. “The main reason it’s shifted is that people are realizing demand isn’t actually that bad; in fact, it’s phenomenally strong.”

The "Revolver Raid" Arrives: A Wave Of Shale Bankruptcies Has Just Been Unleashed -- Back in early 2007, just as the first cracks 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, in effect, was the first snowflake in what would ultimately become the lack of liquidity avalanche that swept away 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.

US oil and natural gas rig count drops by 20 to 1,028 - Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 20 this week to 1,028 amid slumping oil prices. Houston-based Baker Hughes said Thursday 802 rigs were seeking oil and 222 exploring for natural gas. Four were listed as miscellaneous. A year ago, 1,818 rigs were active. Among major oil- and gas-producing states, Texas and North Dakota each dropped six rigs, Louisiana was off five and Oklahoma four. Arkansas, Kansas, Ohio and Pennsylvania declined one apiece. California was up by two and Alaska and West Virginia added one rig each. Colorado, New Mexico, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

Drop in US Rig Count Slows after 3-Month Collapse - According to oilfield service company Baker Hughes (BHI), there were 1,048 active oil and gas rigs in the US during the week ended March 27, 2015. That count represents 21 fewer rigs than in the week ended March 20. This was also the smallest rig count decrease in the past 14 weeks. The US rig count generally experienced an uptrend in 2014, but that trend has reversed in the past three months. Fifteen consecutive weeks of falling rig counts show that US drilling activity is on a downturn. Last week also saw the twentieth rig count decrease in the past six months.After last week’s drop, the US rig count dropped to its lowest level since October 2009. The week’s figures were led primarily by a fall in the onshore rig count. Please read Part 6 of this series to learn more about the onshore rig count. According to Baker Hughes, February’s average rig count of 1,348 declined by 335 from January’s average of 1,683. September’s average rig count of 1,931 was the highest since July 2012. Last week’s lower rig count was mainly due to there being 12 fewer active crude oil rigs. There were nine fewer active natural gas rigs. In the last year, the total US rig count has dropped by 761 or 42%. The number of active oil rigs decreased by 674 or 45%. The number of natural gas rigs fell by 85 or ~27%. The total rig count increased by 61 for the corresponding period ended March 28, 2014.

Rig Count Drops For 17th Week With Smallest Decline Of 2015 -- Crude prices are undecided how to react to this week's 20 rig decline in total rig count to 1028. This is the 17th weekly decline in a row (down over 46% from the highs) but the pace of declines is dropping rapidly as it appears the 'efficiency' has been wrung out for now.

U.S. oil rig count cull eases, approaches low point (Reuters) - Two weeks of thin declines in the U.S. rig count have raised expectations that drilling activity is nearing a pivotal level that could dent production, bolster prices and coax idle rigs back to the field after a precipitous cull since October. Energy producers responded quickly to a steep drop in oil prices over the last six months, idling nearly 800 rigs, or 50 percent, since a peak of 1,609 rigs in October. In the last week of January, rigs fell by 94, the biggest drop on record, according to a weekly survey by oil service firm Baker Hughes. [RIG/U] U.S. companies remain nervous about oil prices. Spending has been cut as prices fail to rebound significantly, and further price drops could quickly lead to more shrinkage in the rig count. But the decline has slowed, dropping by just 23 rigs in the last two weeks, the smallest weekly cuts since December, according to the latest survey released on Thursday, a sign that the rig count could be approaching its low point. Some reckon that a 50-60 percent drop is as far as it will fall, once energy firms remove their least efficient rigs. According to Baker Hughes, oil rigs in the Permian Basin of Texas, one of the country's largest oil deposits, fell this week to 280, the lowest level since basin-by-basin records began in early 2011 and down from over 560 in November. In the Williston Basin of North Dakota, oil rigs are at 91, also the lowest since 2011, down from nearly 200 in November

Shell to resume drilling off Alaska coast – Royal Dutch Shell will resume drilling off Alaska after suspending operations for two years in the wake of an accident, the special U.S. envoy to the Arctic said on Monday, but gave no details as to when. Shell has been moving oil rigs to Alaska as it awaits the green light from U.S. authorities. It froze operations in 2013 after the grounding of a rig in Alaska prompted protests from environmental groups. “Clearly Shell and others will resume drilling and exploration up off the North Slope of Alaska,” Admiral Robert Papp said in an interview during a visit to Canada. Papp, noting the accident had happened in December 2012 after that year’s drilling season had ended, said the Anglo-Dutch oil major understood the importance of taking all the necessary precautions. “I think Shell is putting significant resources into this to make sure they have enough people, equipment, resources, redundancy. They should be OK,” he said. Any company operating in the Arctic had to follow U.S. Department of the Interior rules on safety, preparation, extra equipment and additional drill rigs, Papp said, adding they had to be capable of drilling a relief well if necessary.  The Arctic is estimated to contain 20 percent of the world’s undiscovered hydrocarbon resources, although the reserves are extremely remote and costly to develop.

Oil Council foresees the end of fracking, proposes the worst possible alternative - Oil Council foresees the end of fracking, proposes the worst possible alternative - Breaking news, via the National Petroleum Council: the United States’ vast reserves of oil and natural gas are going to run out. Nothing good can last, says the largely industry-based advisory group to the Department of Energy, not even something as good as fracking — which is why the council recommends we start drilling in the Arctic as soon as possible. The NPC’s report, released Friday, would almost be funny if it weren’t so frustrating. Natural gas from fracking, remember, is supposed to be a “bridge fuel”: a less harmful fossil fuel that can tide us over while we transition to a truly clean energy economy. The oil and gas industry, this report makes clear, never intended for that to be the case. Citing the prediction that the U.S. shale boom likely won’t last beyond the next decade, it argues that the next best course of action is to pursue more oil, which also happens to be located in one of the riskiest possible places. “There will come a time when all the resources that are supplying the world’s economies today are going to go in decline,” Rex Tillerson, CEO of Exxon Mobil and chairman of the study’s committee, told the Associated Press. “This is will be what’s needed next. If we start today it’ll take 20, 30, 40 years for those to come on.” To reiterate, he’s envisioning a future, decades down the line, when we’re still dependent on fossil fuels. Never mind that to prevent global warming beyond the already dangerous 2 degrees Celsius, scientists warn that most of the world’s remaining fossil fuels must remain in the ground, including 100 percent of those currently buried in the Arctic, or that the U.N.’s Intergovernmental Panel on Climate Change found we need to be moving toward zero greenhouse gas emissions by the end of this century.

Fracking Bridge to Future Collapses! - The National Petroleum Council has just admitted why shale fracking is just a “bridge” to more fracking – in the Artic. What about all those Shale Blonde TV Ads about a “bridge the future” ?  It was all fracking bullshit. Surprise. The National Petroleum Council recommends we start drilling in the Arctic as soon as possible. Just like shale gas, Arctic oil isn’t going to last forever. U.S. territory holds an estimated 35 billion barrels of oil — ‘about 5 years worth of U.S. consumption and 15 years of U.S. imports.  All told, it’s a lot of money, risk and effort for very little, when we could be investing instead in clean forms of energy that, once they’re in place, will never, ever run out. — From “Oil Council foresees the end of fracking, proposes the worst possible alternative: Shale gas was supposed to be a bridge fuel. Yet next, a DOE advisory group wants us to start drilling in the Arctic,”

Oil sands outlook - On Friday I visited the University of Alberta in Edmonton, where falling oil prices have brought a record provincial budget deficit despite aggressive tax increases and spending cuts. Here I pass along some of what I learned about how the plunge in oil prices is affecting Alberta’s oil sands operations. A couple of factors have cushioned Canadian oil producers slightly from the collapse in oil prices in the U.S. First, while the dollar price of West Texas Intermediate has fallen 45% since June, the Canadian dollar depreciated against the U.S. dollar by 18% over the same period, and now stands at CAD $1.26 per U.S. dollar. Since the costs of the oil sands producers are denominated in Canadian dollars, the currency depreciation is an important offset. There has also been some narrowing of the spread between synthetic and other crudes. As a result of these factors, the University of Alberta’s Andrew Leach calculated that when WTI was selling for US $50 a barrel, Canadian producers were receiving CAD $60 per barrel of synthetic crude. Oil sands and U.S. tight oil production have been the world’s primary marginal oil producers in recent years, by which I mean the key source to which the world could turn in order to get an additional barrel of oil produced. Ultimately in this regime it is the long-run marginal cost of the most costly producing operation that puts a floor under the price of oil. A company with sunk fixed costs will continue to produce even if price is below long-run marginal cost as long as cash flow is greater than current operating expenses. But for anybody considering a new project, the up-front capital costs and required rate of return have to be factored into new decisions. A project won’t be started if price is below the long-run marginal cost.

The Keystone XL Pipeline Company Just Delayed Its Other Huge Tar Sands Pipeline -- Pipeline company TransCanada is canceling its plans to build an oil export terminal in Quebec, a move that the company says will postpone the start of its proposed Energy East pipeline for more than a year. TransCanada  announced Thursday that, due to concerns about the safety of beluga whale populations in the St. Lawrence River, it won’t building marine and tank terminals in Cacouna, Quebec. Cacouna borders the St. Lawrence.  The company said in a statement that it is looking at other options for export sites in Quebec for the Energy East, a pipeline that would carry tar sands oil more than 2,850 miles from Hardisty, Alberta east to Saint John, New Brunswick. TransCanada had planned two export terminals for the project: one in Cacouna and one in Saint John. Because of the change in plans, TransCanada says the pipeline now has a projected start date of early 2020, rather than late 2018.  TransCanada previously halted work on the Cacouna terminal in December, after the Committee on the Status of Endangered Wildlife in Canada (COSEWIC) recommended that the population of beluga whales in the St. Lawrence River be labelled endangered. At the time, TransCanada said it was looking into what impacts Energy East would have on the belugas, and was reviewing “all viable options.” Now, the company says it’s been swayed to scrap plans for the terminal completely. “This decision is the result of the recommended change in status of the Beluga whales to endangered and ongoing discussions we have had with communities and key stakeholders,”

With First Nationwide Fracking Law, Germany Approaches A Ban -- On Wednesday, the German cabinet approved the country’s first nationwide fracking law, which would set the “strictest conditions for fracking” according to Environment Minister Barbara Hendricks. The law, which now heads to parliament for debate, would ban fracking in specified regions “to protect drinking water, health and the environment,” according to the environment and energy ministries. The draft law would ban the use of hydraulic fracturing for drilling processes that are shallower than 3,000 meters, or almost 10,000 feet, and any fracking in nature reserves or national parks.  “This law will enable us to circumscribe fracking so that it no longer represents a danger to people or the environment. As long as the risks cannot be fully evaluated, fracking will be banned,” Hendricks said. The law, which would be in place for around four years, would allow fracking in certain cases for scientific research as well as exceptional commercial operations that pass a drilling test and get special approval from a committee.  Natural gas in Germany is used mainly for heating, making it harder to replace with renewable sources of energy. Right now Germany gets more than a third of its gas supply from Russia. Last year only 12 percent of the country’s demand was covered by its own supply.

Scotland Pulling Out All The Stops To Save North Sea Oil & Gas - Scotland’s oil sector has been severely damaged by the 9-month-old plunge in oil prices. Included in that damage are extensive layoffs. For example, Royal Dutch Shell, one of the largest oil companies operating in Britain, announced March 26 that it will eliminate 250 staff and contract positions, and Abu Dhabi’s Taqa will drop about one-fifth of its 500 member North Sea work force.  George Osborne, Britain’s Chancellor of the Exchequer, had hoped to stimulate the North Sea energy economy and avert layoffs with “bold and immediate measures” in its 2015 budget that included a reduction in tax revenue from the region’s oil from 50 percent to 30 percent. That, however, evidently wasn’t enough. Paul Goodfellow, Shell’s vice president for exploration and drilling for Britain and Ireland, praised Osborne’s effort as “a step in the right direction,” but said it’s up to energy companies themselves to improve profitability through cost-cutting and other measures if they want to attract investors.  There's an incredible energy development we've been keeping track of for you over the past year... It's the reason Saudi Arabia is acting in desperation... depressing oil prices... and even risking internal unrest. Their (and OPEC’s) very survival is being threatened. And we believe we’ve put together an incredible video revealing how it works. Despite the recent slump in the North Sea oil sector, sales by Scottish oil companies were nearly $33 billion in 2013, up 11 percent over 2012. And the leading customer for foreign oil remained North America, whose imports totaled $6 billion in 2013, up by more than one-third over the previous year.

Mexican oil rig burns off coast, 4 dead, 16 injured — A fire at a shallow-water oil platform in the Gulf of Mexico has killed four workers, injured 16 and forced the evacuation of 300, Mexico’s state-owned oil company said Wednesday. Petroleos Mexicanos, or Pemex, said on its Twitter account that the death toll had risen from one to four. In an earlier statement, the company said that two of the injured workers were in serious condition. The fire broke out Wednesday at the Abkatun Permanente platform. Pemex said eight firefighting boats were trying to extinguish the flames. It was unclear whether any significant amount of oil had spilled into the Gulf. In related news, Mexico extinguishes pipeline fire caused by illegal tap. Mexico’s Energy Security Agency said the injured were being treated at a hospital in Campeche, adding that the blaze “is being extinguished.” The Abkatun platform is located in the Campeche Sound, near the coast of the states of Campeche and Tabasco. It is further out to sea than the platform involved in the last severe fire in the area, the 2007 fire at the Kab 121 offshore rig.  That accident killed at least 21 workers and the rig spilled crude and natural gas for almost two months. Mexico’s worst major spill in the Gulf was in June 1979, when an offshore drilling rig in Mexican waters — the Ixtoc I — blew up, releasing 140 million gallons of oil. It took Pemex and a series of U.S. contractors nearly nine months to cap the well, and a great deal of the oil contaminated Mexican and U.S. waters.

Explosion and fire on an oil platform in Gulf of Mexico — 4 dead and dozens hurt - Mexican state-run oil company Pemex said at least four people died after a fire broke out on a production platform in the Gulf of Mexico early on Wednesday, sparking the evacuation of around 300 workers. Local emergency services said as many as 45 people were injured in the blaze, which erupted overnight on the Abkatun Permanente platform in the oil-rich Bay of Campeche. Pemex said it was battling the flames with eight firefighting boats and that a contractor for Mexican oil services company Cotemar was one of the dead. The fire broke out in the dehydration and pumping area of the platform, Pemex said, though it was not clear what caused it. A Pemex spokesman could not immediately say whether local oil production had been affected. A spokesman for emergency services in the nearby city of Ciudad del Carmen said earlier that authorities had registered 45 people with injuries from the fire. Other officials put the total at around 16 injured. The platform forms part of the Abkatun-Pol-Chuc offshore complex. According to data from the U.S. Energy Information Administration, production at the complex has fallen steadily since the 1990s to below 300,000 barrels per day (bpd) in 2013.

Mexico says oil spill avoided after deadly offshore blaze - — A huge blaze twisted and blackened an oil platform in the Gulf of Mexico, but the state-run Pemex oil company said it managed to avert any significant oil spill. At least four workers died and two suffered life-threatening injuries in an explosion that engulfed the platform in flames Wednesday, forcing 300 people to abandon the facility. Officials said environmental damage was avoided because the fire happened on a processing platform where the feeder lines could be turned off, rather than at an active oil well with a virtually unlimited amount of fuel flowing up from the seabed. In a statement Wednesday night, Pemex said the accident “did not cause an oil spill into the sea, given that there was only a seepage, which is being taken care of by specialized vessels.” It suggested the oil remaining in the pipelines was burning off. The company’s official Twitter account announced late Wednesday that fire had been extinguished after hours of being showered with water sprayed from 10 firefighting and emergency boats. Pemex Director General Emilio Lozoya said the accident “would have a minimal impact on production, because this was a processing platform,” not a producing well. Production from nearby wells it normally serves could be rerouted to other processing platforms.

Massive Fire Engulfs Fuel Tanks At Latin America's Largest Port -- Earlier today, there was some good news for Brazil's largest energy major Petrobras when as we reported earlier, none other than China through its CDB, agreed to lend $3.5 billion to the foundering energy giant. That was quickly offset by bad news later in the day when a massive fire broke out at a fuel tank storage facility in Brazil’s port of Santos, Latin America’s largest, forcing some eighty firefighters to battle a raging inferno which consumed facilities located next to Norway’s Stolt-Nielsen Ltd and Transpetro, a subsidiary of state-run oil company Petrobras.

Production Cut Sparks Crude Rally As Inventory Rise Reaches Longest Streak On Record -- Following last night's pump'n'dump after API inventories exceeded expectations (5.2mm vs 4.2mm exp.), WTI crude prices have dropped to almost a $46 handle and recovered as chatter of "no deal" from Switzerland picks up. DOE reports a 4.766mm barrel build, greater than expected, for the 12th week in a row - the longest streak since records began in 1982. Crude prices are however surging as production dropped wekk-over-week for only the 2nd time this year...

What If An Oil Rebound Never Comes? - Oil prices will remain subdued for the next 20 years. That comes from a new policy brief from Stanford economist Frank Wolak, who says that a series of phenomena – surging U.S. shale production, a weakening OPEC, the shale revolution spreading globally, efficiencies in drilling, and more natural gas substitution for oil – will combine to prevent oil prices from rising above $100 per barrel anytime soon. Wolak correctly identifies several trends that are already underway, several of which contributed to the 2014-2015 oil bust. But there are very good reasons as to why the notion that oil prices will not rebound and instead stay in a moderate band of $50 to $60 per barrel over the next 20 years, as Wolak suggests, is a bit optimistic (or pessimistic, depending on your point of view). Wolak does offer some caveats for why his scenario for tepid oil prices may not play out, but they are treated more as outside risks rather than real possibilities. Let’s examine some of his points. First is the argument that shale production has truly upended global supplies. Citing a 5 million barrel-per-day increase from North America – 4 million from U.S. shale and 1 million from Canada’s tar sands – Wolak wisely notes the role that shale has played in causing oil prices to crash over the past year. But the shale boom will likely be temporary. Most estimates project that U.S. shale will begin to fizzle after the next five years or so. The IEA in its 2014 World Energy Outlook said that U.S. shale will peak and then decline in the early 2020’s. Some think it could happen even sooner.

OPEC oil output hits highest since October on Iraq, Saudi – OPEC oil supply has jumped in March to its highest since October as Iraq’s exports rebounded after bad weather and Saudi Arabia pumped at close to record rates, a Reuters survey found, a sign key members are sticking to their effort to regain market share. The increase from the Organization of the Petroleum Exporting Countries adds to excess supply in the market, despite some signs that the halving of crude prices since June 2014 is encouraging higher oil demand. OPEC supply has risen in March to 30.63 million barrels per day (bpd) from a revised 30.07 million bpd in February, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants. “Demand might be a bit stronger than expected at the beginning of the year, but I don’t think it is strong enough to absorb the entire oversupply,” said Carsten Fritsch, an analyst at Commerzbank in Frankfurt. “There’s still oversupply in the market, which is reflected in the inventory builds.” Besides Saudi Arabia, the main reasons for the rise are the resolution of involuntary outages – Iraq lifted exports due to improved weather and Libya managed to nudge production higher despite unrest. If the total remains unrevised at 30.63 million bpd, March’s supply would be OPEC’s highest since 30.64 million bpd in October 2014, based on Reuters surveys. Saudi Arabia was the driving force behind OPEC’s refusal last year to prop up prices by cutting its output target of 30 million bpd, in a bid to discourage more costly rival supplies. The group holds its next meeting in June, and comments from OPEC officials suggest it will not alter the policy.

Ahoy! Oil Tankers Form Four-Mile Line In Persian Gulf As Iran Talks Stoke Supply Glut Fears - Interesting times lay ahead for crude which, in a likely preview of what’s to come, traded in “deal or no deal” mode throughout Thursday’s session. With Tehran sitting on 9% of the world’s proven reserves, the lifting of sanctions and opening of the country’s oil fields to foreign investment could trigger a dramatic decline in crude prices as an extra million bpd gets set to be unleashed on an already saturated market.  Meanwhile, crude exports from from Iraq are hitting three-and-a-half decade highs while production, at 3.7 million bpd, is humming along at a 50-year high despite the ISIS presence in the country. As Bloomberg reports, 5% of the world’s VLCC fleet is currently parked in the Persian Gulf outside the Basra Oil Terminal, where tankers are now waiting an average of 16 days driving shipping rates to multi-year highs in the process. Here’s more:Iraq’s biggest oil exports in more than three decades and winter winds are helping to keep shipping rates at a six-year high as a four-mile line of supertankers waits to load the nation’s crude.There are 22 of the industry’s biggest tankers, or almost 5 percent of the fleet, waiting to collect cargoes from the Basra Oil Terminal in the Persian Gulf, from where most of Iraq’s crude is shipped. The daily rate for supertankers transporting crude from the Middle East to Japan rose to $51,042 on Thursday, bringing the average for this year to $61,306, data from the Baltic Exchange in London show. Iraq’s oil output is rising faster than any other nation in OPEC as supplies from its southern oil province expand even as Islamic State fighters seize parts of the north. 

First Saudi Sovereign Debt Since ’07 Seen This Year as Oil Bites - - Saudi Arabia may issue sovereign debt for the first time since 2007 this year after oil’s decline sent its cash reserves plunging, according to Ashmore Group Plc. Assets of the biggest Arab economy’s central bank tumbled by 76 billion riyals ($20 billion) in February, the largest monthly drop since at least 2000. The country has a debt-to-GDP ratio of about 2.6 percent, according to International Monetary Fund estimates, among the lowest in the world, and may now take advantage of record low interest rates and ample bank liquidity, said John Sfakianakis, a Riyadh-based director at Ashmore and former chief economic adviser to Saudi’s Ministry of Finance. “If oil prices remain at $55 to $60 a barrel, I would expect them to issue some debt in the second half,” Sfakianakis said by phone March 31. “They will tap the local debt market through medium-term paper, which would be a balanced fiscal approach, to partly use reserves and partly the debt markets.” The world’s biggest oil exporter hasn’t issued debt with a maturity of more than 12 months for eight years, choosing instead to run down reserves when necessary to fund expenditure. Saudi Arabia has vowed to maintain spending on its major projects, including railroads, power stations, desalination plants and universities, even after oil prices dropped by half in the past nine months.

Arab Airstrikes Against Yemen Reportedly Could Continue For Months - Yemeni President Abed Rabbo Mansour Hadi described Shiite Houthi rebels who have occupied parts of the country, including the capital, Sanaa, as "puppets of Iran."The remarks by Hadi, who was forced to flee Yemen amid the rebel onslaught, come as a Gulf diplomatic official quoted by news agencies says that Arab nations allied against the Houthis could continue their airstrikes against the Shiite militia for months.At an Arab League summit held in Egypt, Hadi left no doubt that he believed the Houthis were being controlled by Tehran: "I say to the puppets of Iran and its toys: ... You've destroyed Yemen."The Associated Press says that other leaders at the summit, "including the leaders of Egypt, Saudi Arabia and Kuwait, obliquely referenced Iran earlier at the summit held in Egypt's Red Sea resort of Sharm el-Sheikh. They blamed the Persian country for meddling in the affairs of Arab nations, with Egyptian President Abdel-Fattah el-Sissi saying, without mentioning Iran by name, that it was 'spreading its ailment in the body.'""This (Arab) nation, in its darkest hour, had never been faced a challenge to its existence and a threat to its identity like the one it's facing now," Egyptian President Abdel Fattah el-Sissi said. "This threatens our national security and (we) cannot ignore its consequences for the Arab identity."

Saudi oil infrastructure at risk as Mid-East conflagration spreads -- Saudi Arabia’s escalating intervention in Yemen is a high-stakes gamble that risks back-firing in a series of complex ways, ultimately endangering Saudi oil infrastructure and the security of global energy supply.  Military analysts say there is little chance that air strikes by a Saudi-led coalition of Sunni countries will subjugate the Iranian-backed Houthi forces in Yemen. It may require a full-blown invasion by land forces to secure control. Large concentrations of Saudi armour and artillery are already massing near the border, though this may simply be a negotiating ploy.  The longer the conflict goes on, the greater the risks that it will stir up internal hatred in a country that has traditionally been relatively free of sectarian violence. Adam Baron, from the European Council on Foreign Relations, said the inflammatory comments about the Sunni-Shia struggle by politicians across the region are becoming “self-fulfilling prophecies”.  Al-Qaeda in the Arabian Peninsular (AQAP) – thought to be the most lethal of the jihadi franchises, and a redoubt for Saudi jihadis – already controls a swathe of central Yemen and is the chief beneficiary of the power vacuum.  AQAP can plan terrorist strikes against Saudi targets from a deepening strategic hinterland with increasing impunity. All US military advisers have been withdrawn from Yemen, and much of the country’s counter-terror apparatus is disintegrating. It is becoming harder to harry al-Qaeda cells or carry out drone strikes with precision.  The great unknown is whether a protracted Saudi war against Shia forces in Yemen – and possibly a “Vietnam-style” quagmire – might tug at the delicate political fabric within Saudi Arabia itself. The kingdom’s giant Ghawar oil field lies in the Eastern Province, home to an aggrieved Shia minority.  “If the Saudis continue this war – and if they keep killing civilians – this is going to create internal instability in Saudi Arabia itself,” said Ali al-Ahmed, from the Institute for Gulf Affairs in Washington.

U.N. Warns of ‘Total Collapse’ in Yemen as Houthis Continue Offensive -  The United Nations’ human rights chief warned on Tuesday that Yemen was on the brink of collapse, as health officials in the southern port city of Aden described a medical system failing after weeks of urban warfare that had left scores dead and hospitals overflowing with bodies.The warning from the human rights chief, Zeid Ra’ad al-Hussein, came as a Saudi-led military offensive against the Houthis, a militia group from northern Yemen that Saudi officials have accused of serving as a proxy force for Iran, threatened to burst into a broader conflict.The Houthis, acknowledging their alliance with Iran but denying acting on its orders, have been able to extend their offensive despite intensifying airstrikes by Saudi warplanes across Yemen. There have been few signs that the battle, which began last Wednesday, is shifting decisively in favor of any of the combatants, raising fears of a lengthy war that is expanding the destabilizing regional conflict between the Persian Gulf monarchies and Iran. With Yemen under blockade from air and sea by the Saudi-led coalition, aid agencies intensified their warnings on Tuesday about the toll on civilians and hospitals, which are running critically low on medical supplies.

First Europe, Now The Gulf's Leaders Agree To Form United Arab Military Force -- Just a week after Jean-Claude 'I am not a hawkish warmonger' Juncker pressed for the creation of a Unified European Army to combat the 'looming' threat of their massive trade partner Russia; RT reports Arab leaders have agreed to form a joint military force from roughly 40,000 elite troops and backed by warplanes, warships and light armor at a Sharm el-Sheikh summit. Egyptian President Abdel Sisi has announced a high-level panel will work out the structure and mechanism of the future force. The work is expected to take four months. It appears The Endgame of this global game of Risk is fast approaching as one-by-one, geographically proximate nations join forces for whetever comes next.

Will Yemen kick-off the 'War of the two Blocs?' — There is media confusion about what is going on in Yemen and the broader Middle East. Pundits are pointing out that the US is looking schizophrenic with policies that back opposite sides of the fight against al-Qaeda-style extremism in Iraq and in Yemen. But it isn’t that hard to understand the divergent policies once you comprehend the underlying drivers of the fight brewing in the region. No, it isn’t a battle between Shia and Sunni, Iranian and Arab or the much-ballyhooed Iran-Saudi stand-off. Yes, these narratives have played a part in defining ‘sides,’ but often only in the most simplistic fashion, to rally constituencies behind a policy objective. And they do often reflect some truth. But the ‘sides’ demarcated for our consumption do not explain, for instance, why Oman or Algeria refuse to participate, why Turkey is where it is, why Russia, China and the BRICS are participants, why the US is so conflicted in its direction – and why, in a number of regional conflicts, Sunni, Shia, Islamist, secularist, liberal, conservative, Christian, Muslim, Arab and Iranian sometimes find themselves on the same side. This is not just a regional fight – it is a global one with ramifications that go well beyond the Middle East. The region is quite simply the theatre where it is coming to a head. And Yemen, Syria and Iraq are merely the tinderboxes that may or may not set off the conflagration. "The battle, at its very essence, in its lowest common denominator, is a war between a colonial past and a post-colonial future."

The Latest "Conspiracy Theory" In Iraq: Accusations Emerge That US Is Aiding ISIS -- “Everybody knows that the Americans are dropping supplies to Daesh,” said Brig. Gen. Abed al-Maliki, a senior Iraqi army commander based in the city of Samarra, about 80 miles north of Baghdad, using another term for the Islamic State. “It’s just a show,” he said, sitting in the city’s army command headquarters. “If the Americans want to finish something, they will finish it. If they wanted to liberate Iraq, they could

Iran nuclear deal to see $20 oil if Tehran floods crude market - Potentially one of the Middle East’s biggest economies, Iran has been frozen out by the West over its refusal to give up its aspirations to become a nuclear power. But a binding deal that would bring the Islamic state in from the cold appears tantalisingly close as negotiators thrash out terms in talks being held in Lausanne, Switzerland, over the weekend. In terms of commodities, the biggest impact that a resumption of normal economic relations with Iran will open up is in the oil industry. Tehran is a sleeping oil giant, which has been frozen out of international markets and denied access to key technology and investment that could lead to a massive surge in its potential to produce oil and gas. The country holds 9pc of the world’s proven oil reserves and a nuclear deal that could open up its fields to foreign investment is potentially game changing for the industry.  With oil prices continuing to come under pressure from an estimated 2m barrels per day of excess supply sloshing around international markets, any significant increase in Iranian output could easily trigger a further rout in prices. The price of a barrel of crude has fallen 50pc since last June to trade around $50 per barrel but an agreement in Lausanne to restore Iran back into the international community could easily trigger a further sell down towards levels around $20 per barrel. Ahead of the Lausanne talks, Iran’s oil minister Bijan Namdar Zangeneh said that the country could easily increase production by 1m barrels per day (bpd) within months of sanctions being lifted. Under the current terms of the economic sanctions designed to bring Tehran to the table the country’s oil exports are restricted.

$20 Oil Looms As Iran-Nuclear Deal Nears Deadline -- As the deadline for Iran nuclear talks looms, the possibility of a deal which in some way lifts crude export sanctions is starting to be realized. As we warned 2 weeks ago, despite all the rhetoric, a confluence of political factors makes a deal highly likely at this point; and as The Telegraph reports, Iran is a sleeping oil giant holding 9% of the world’s proven oil reserves and with an estimated 2m barrels per day of excess supply already sloshing around international markets, any significant increase in Iranian output could easily trigger a further rout in prices. While OPEC may well clamp down on this in June, as The Telegraph concludes, by then a barrel of oil may already be selling for $20.  As we explained previously, a confluence of political factors makes a deal highly likely at this point however. Firstly, the USA has a stated policy of pivoting from the Middle East and Europe toward Asia. There are a number of reasons for this, but the major one is that the rebalancing of China is likely to be a fraught affair and nobody can forsee the outcome. As such, the USA would prefer a balance of power stabilising the Middle East, of which Iran and Iraq form an important part. Second, a number of traditional Middle Eastern alliances such as have been frayed in recent years due to certain conflicts and clashes on a leadership basis. This is not to say that Iran, who are leading the fight against ISIS, are a prospective ally, but they may no longer be part of a defined Axis of Terror.

Iran nuclear negotiations enter final day as deadlock persists - High-level negotiations on Iran’s nuclear programme enter their last day on Tuesday before a deadline for agreeing the outline for a comprehensive settlement, with top diplomats still struggling to overcome persistent obstacles. The US secretary of state, John Kerry, his Iranian opposite number, Mohammad Javad Zarif, alongside foreign ministers from France, the UK, Germany and China, worked late into the evening on two consecutive nights in an effort to break the deadlock. Russia’s Sergei Lavrov left the talks on Monday afternoon to hold official meetings in Moscow, but said he would return to Lausanne later on Tuesday, telling reporters in the Russian capital that there was a good chance of success.  A US State Department spokeswoman said on Monday night that prospects of a deal on Tuesday were “50-50”. Working teams of experts and diplomats were instructed to work through the night on outstanding issues in the search for a breakthrough. Diplomats said that the principal sticking point was the issue of UN security council sanctions on Iran. Zarif’s team is sticking by the demand by their country’s supreme leader, Ali Khamenei, for all sanctions to be lifted at once in return for Iranian acceptance of restrictions on its nuclear programme over a period of at least 10 years. The six-nation group is offering several relief measures, lifting the EU oil embargo and removing banking restrictions in moves synchronised with the suspension of corresponding US sanctions. But it insists that some UN sanctions must stay in place until Iran has convinced the international community it has no intention of pursuing a weapons programme, a task that could take many years.

Oil prices fall as Iran nuclear talks approach deadline -  Oil prices extended their slide on Tuesday as investors awaited the outcome of the Iranian nuclear talks, which could pave the way for more Iranian crude flooding the already oversupplied global market. Iran and six global powers set Tuesday as the deadline to agree on a framework agreement that would outline the main elements of a deal constraining Iran’s nuclear program in exchange for lifting international sanctions. May-dated Brent crude fell 1.7% to $55.35 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at $47.66 a barrel, down 2.1% from Monday’s settlement. Russia’s foreign minister, who left the nuclear talks in Switzerland on Monday, is planning to return on Tuesday afternoon in a sign that an agreement might be close. Many in the oil market fear that if the sanctions are lifted, Iran, which holds around 10% of the world’s oil reserves and almost a fifth of global gas reserves, would ramp up production and exports and add to the global glut of oil. Oil has shed about half of its value since last summer because of a combination of oversupply and weaker demand. Analysts estimate that there are currently about 1.5 million barrels a day more supplies than there is demand.

More Straws on US Financial Hegemonic Camel’s Back - Over the weekend, Juan Cole laid out how, if nuke negotiations with Iran fail this week, Europe is likely to weaken or end its sanctions anyway. Iran-Europe trade in 2005 was $32 billion. Today it is $9 billion. There isn’t any fat in the latter figure, and it may well be about as low as Europe is willing to go. Tirone also points out that European trade with Iran has probably fallen as low as is possible, and that those who dream of further turning the screws on Tehran to bring it to its knees are full of mere bluster. Arguably, Iran has simply substituted China, India and some other countries, less impressed by the US Department of Treasury than Europe, for the EU trade. Iranian trade with the global south and China has risen by 70%, Tirone says, to $150 billion. Indeed, at those levels Iran did more than make a substitution. It pivoted to Asia with great success before the phrase occurred to President Obama. China is so insouciant about US pressure to sanction Iran’s trade that it recently announced a plan to expand Sino-Iranian trade alone to $200 billion by 2025. (It was about $52 billion in 2014). And Sino-Iranian trade was only $39 bn. in 2013, so the rate of increase is startling. Cole notes — and quotes a British diplomat strongly suggesting — that the US may lack credibility because of the stunts by people like Tom Cotton. Meanwhile, Dan Drezner assigned blame to both a an obstinate Congress and Obama for losing its allies to China’s Asian Infrastructure Investment Bank (the first domino of which I noted here).

World powers, Iran reach framework for nuke deal: After marathon negotiations, the United States, Iran and five other world powers announced a deal Thursday outlining limits on Iran's nuclear program so it cannot lead to atomic weapons, directing negotiators toward a comprehensive agreement within three months. Reading out a joint statement, European Union foreign policy chief Federica Mogherini hailed what she called a "decisive step" after more than a decade of work. Iranian Foreign Minister Mohammad Javad Zarif followed with the same statement in Farsi. U.S. Secretary of State John Kerry and the top diplomats of Britain, France and Germany also briefly took the stage behind them. President Barack Obama heralded the framework nuclear understanding with Iran as an "historic" agreement that could pave the way for a final deal that would leave the U.S., its allies and the world safer. Speaking from the White House Rose Garden Thursday afternoon, Obama said the agreement "is a good deal, a deal that meets our core objectives." He said verification mechanisms built into the framework agreed to in Switzerland hours earlier would ensure that "if Iran cheats, the world with know it."

Iran Agrees to Nuclear Non Proliferation Deal -- Iran and European nations said here tonight they had reached a general understanding about next steps in limiting Tehran’s nuclear program, but officials said that some important issues need to be resolved before a final agreement in June that would allow the Obama administration to assert it has cut off all of Iran’s pathways to a nuclear weapon. Both Germany’s foreign office and President Hassan Rouhani of Iran said that key parameters of a framework for a final accord had been reached, with the details to be negotiated by June 30. But Western diplomats cautioned that on several of the key issues that were debated here for the past eight days between Secretary of State John Kerry and his Iranian counterpart, Mohammad Javad Zarif, there were still significant differences. Mr. Kerry is scheduled to give a news conference soon afterwards, at which he is expected to provide some details of the American understanding of what was negotiated.According to European officials, roughly 5,000 centrifuges will remain spinning enriched uranium at the main nuclear site at Natanz, about half the number currently running. The giant underground enrichment site at Fordo – which Israeli and some American officials fear is impervious to bombing – will be partly converted to advanced nuclear research and the production of medical isotopes. Foreign scientist will be present. There will be no fissile material present that could be used to make a bomb.A major reactor at Arak, which officials feared could produce plutonium, would operate on a limited basis that would not provide enough fuel for a bomb. In return the European Union and the United States would begin to lift sanctions, as Iran complied. All financial sanctions would be lifted immediately.

Iran agrees tentatively to massive cuts in nuclear capabilities; experts surprised -- Iran has agreed to shut down two-thirds of its nuclear enrichment program and accept international inspections that experts say are likely to cripple any attempt to make a nuclear weapon in return for the lifting of economic sanction imposed by the United States and its allies, according to a framework agreement announced Thursday.The agreement, which still must be ratified by the negotiating nations by June 30, would impose its toughest restrictions for 15 years, with the severest lasting 10 then eased during the final five. U.S. Secretary of State John Kerry pointed out that contrary to recent news accounts, the deal has no expiration date.“Robust inspections of Iran’s uranium supply chain will last for 25 years,” according to a summary of the agreement distributed by the State Department.Iran would remain a member of the Nuclear Non-Proliferation Treaty, which prohibits the development of a nuclear weapon. Speaking from the White House, President Barack Obama hailed the agreement, saying it would “shut down Iran’s path to a bomb” made from either uranium or plutonium.“This deal is not based in trust,” he said. “It is based on unprecedented verification.”He also challenged Congress to give the agreement serious consideration and approach it without partisan politics.“These are matters of war and peace,” he said, noting that the agreement was not a bilateral deal between the United States and Iran but a deal between Iran and six world powers and the European Union. “If Congress kills this deal, the international community will blame the United States,” Obama said.

Iran nuclear talks: Rouhani vows to abide by deal - Iran's president has vowed it will abide by the terms of the preliminary nuclear agreement it signed with six world powers, so long as they do too. "The world must know that we do not intend to cheat," Hassan Rouhani said in a televised address to the nation. But Mr Rouhani warned that Iran would have other options if world powers "one day decide to follow a different path". The framework deal signed on Thursday will see Iran curb nuclear activities in return for relief from sanctions. Earlier Israeli Prime Minister Benjamin Netanyahu warned that it posed a grave danger to the region, in particular his own country. He said any compressive accord, due before 30 June, had to include a "clear and unambiguous Iranian recognition of Israel's right to exist". But the White House said the US would not sign an agreement over Iran's nuclear programme that would threaten Israel.

Oil prices — where next, after the Iran deal? -- The provisional agreement to control Iran’s nuclear ambitions led to another fall in oil prices on Friday as the market anticipated the lifting of sanctions and the resumption of full scale Iranian exports. The fall is now overdone and for a series of reasons we are likely to see prices rise — modestly — before the summer. First, the Iranian agreement is provisional and depends on negotiation of crucial details before the next deadline in June. A number of concerned parties — from the Revolutionary Guards in Tehran, who do not want to see the lucrative business interests they have built on the back of sanctions eliminated, to the Israeli government in Jerusalem, which does not believe that any promises from Iran can be trusted —have no interest in seeing the deal completed.  Second, sanctions have not actually been lifted. Republicans in the US Congress will take some persuading to give President Barack Obama a major foreign policy success. Until US sanctions are lifted the country’s companies and banks, and all those who want to do business in the US, will be unable to go back into Iran. Even if Russian and Chinese companies try to fill the gap, the absence of the big players will delay the investment of cash and technology that is necessary to lift Iranian output to its historic level of 4m barrels a day let alone its supposed potential of 5m or more.  Third, and most important of all, the latest price falls will intensify the pressures within Opec for some restraint on production. The cartel no longer has the ability to set prices at will. A cut in production of 2m or 3m barrels a day would be necessary to put prices back above $100. Action on that scale is inconceivable but some more limited response is possible. Saudi Arabia, the United Arab Emirates and Kuwait could between them take 1m barrels a day off the market. As part of a managed process, they could draw Iraq back into the Opec fold, and even engage Iran in discussions on quotas. Neither has an interest in seeing prices fall further.

China Becomes Global Lender Of Last Resort With Bailout Of World's Most Indebted Oil Company -- Over the course of last month we variously described the Asian Infrastructure Investment Bank as an attempt by Beijing to deal a decisive blow to the post-World War II global economic order by undermining US-dominated multinational institutions, as an attempt to usher in a new era characterized by yuan hegemony, and as an effort to cement China’s regional influence via the implicit establishment of a sino-Monroe Doctrine.  With that in mind, we find it somewhat ironic that the China Development Bank (which isn’t the same as the AIIB but which we think might offer some clues as the how the new venture will be run under Beijing’s control), is set to provide $3.5 billion in financing to Brazil’s deeply indebted Petrobras. The new funding comes 6 years after a $10 billion oil export deal between the company and China and just days after Brazil signed up as a founding member of the AIIB.  More, via WSJ:  Brazil’s state-run Petroleo Brasileiro SA said on Wednesday it signed a $3.5 billion financing deal with the China Development Bank, highlighting the oil giant’s deteriorating financial condition in the wake of a vast corruption scandal as well as China’s growing ties to Latin America. Petrobras didn’t provide any details of the deal, which is part of a cooperation agreement to be implemented this year and in 2016. But the transaction deepens the Brazilian government’s relationship with its largest trading partner and fellow BRIC country.Rare Earths Problem Could Have A Nuclear Solution: The 17 rare earth elements have energy supply by the throat. They are used in everything from oil refineries to solar and wind generators. These rare earths are, as John Kutsch, director of the Thorium Energy Alliance, says, “the great multipliers.” They make metals stronger, generators more efficient, cell phones smaller, television sets sharper, and laptops lighter. They are, in their way, as important to modern manufacturing as energy. Back in the days, the United States was a major supplier of rare earths -- with supplemental supplies coming from countries around the world, including Australia and Brazil. Today, 90 percent of the rare earths the world uses come from China.  All U.S. defense manufacturers – including giants Boeing, General Electric and Lockheed Martin -- are dependent on China. Now China is demanding that U.S. companies do more of their manufacturing there: China wants to control the whole chain.... The answer, according to James Kennedy, a science consultant and rare earths expert, is to develop a reactor using thorium instead of uranium. This reactor, called a molten salt reactor, is inherently safe, say its passionate advocates, and would be a better all-around nuclear future. The technology was pioneered by one of the giants of the early nuclear age, Alvin Weinberg, at the Oak Ridge National Laboratory, but abandoned under pressure from enthusiasts for light water reactors, the kind we have today.

Iron ore drops to fresh six-year low: Iron ore hit a six-year low on oversupply and a slowdown in China's property sector. The price of iron ore, for immediate delivery at the port of Qingdao in China, dropped 4 per cent on Friday, the biggest drop since late January, to $US53.14 per tonne, according to Metal Bulletin – the lowest level since the daily pricing index began in 2009. The price has dropped below Fortescue Metals' breakeven price of $US57 per tonne. UBS Research Since its 2014 high of $US135.27 per tonne, the price of the steel making ingredient has dropped more than 60 per cent. Since its record high of $US191.70 per tonne it was fallen more than 70 per cent. "To be honest, there aren't any indicators to suggest we've come getting close to the end of that trend." China new home prices have fallen for six straight months, weighing on China's massive property sector, despite interest rates cuts from the People's Bank of China. In February, new home prices fell in 66 or the 70 cities measures, while sales also declined. Property accounts for 24 per cent of steel use China, so any downturn in property, hurts steel, which rolls on down to iron ore.

Charted: Why the iron ore price keeps falling: Iron ore continues to tumble, falling close to 4 per cent over the last week. Here are four charts explaining why. Over the past 12 months, the Australian dollar has fallen 17.4 per cent against its US counterpart. In that same period, iron ore has more than halved. The Reserve Bank of Australia wants the local currency to push lower to help competitiveness and the difference between the fall against the greenback and a slump on a trade weighted basis, down 10.1 per cent, suggests there is further down to go for the Aussie dollar. Chinese economic growth is losing momentum, which is hardly surprising given the rate of growth it has experienced over the past decade. Last year, China grew at its lowest rate in more than two decades and marginally missed its 7.5 per cent growth target. With a 7 per cent growth target set for this year, many, such as PIMCO, the world's largest mutual bond fund, are predicting a second consecutive miss. "The fall in the iron ore price is overstated compared with the Chinese industrial production growth slowdown from 15 per cent in 2011 to closer to 6¾ per cent by early 2015," TD Securities chief Asia macro strategist Annette Beacher said. China overnight has moved to boost its housing sector by cutting the minimum down payment for a second home to 40 per cent from 60 per cent. Authorities also plan to introduce a policy in which individuals selling an ordinary house would be exempt from business taxes if they had owned it for more than two years, from a previous five years.

China Central Bank Calls for Vigilance on Deflation - China's central bank governor Zhou Xiaochuan warned on Sunday that the country needs to be vigilant for signs of deflation and said policymakers were closely watching slowing global economic growth and declining commodity prices. Zhou's comments are likely to add to concerns that China is in danger of slipping into deflation and underline increasing nervousness among policymakers as the economy continues to lose momentum despite a raft of stimulus measures.  "Inflation in China is also declining. We need to have vigilance if this can go further to reach some sort of deflation or not," Zhou said at a high-level forum in Boao, on the southern Chinese island of Hainan.  Zhou added that the speed with which inflation was slowing was a "little too quick", though this was part of China's ongoing market readjustment and reforms.

Slowdown in China | Charles Schwab: China’s economy is slowing, and the debate is raging over whether the country is headed for an abrupt hard landing or whether the slowdown will stabilize into a soft landing that may already be underway. However it plays out, one thing is clear: A return to the double-digit growth rates of years past seems unlikely. China’s economy appears to be embarking upon an enduring downtrend in economic momentum—not just the drop in annual growth rates from 10% to 7.5% we’ve already witnessed, but what will likely be a further erosion to 7% in the coming years, and then on to 5% and below over the coming decade. It’s worth noting that no economy can maintain double-digit growth rates forever—even an economy as big as China’s will slow as it matures. And the country’s recent growth spurt partly reflects the fact that China’s economy had a lot of ground to make up after years of ruinous economic policies in the mid-20th century. The future outlines of the Chinese economy are still taking shape, and there will likely be challenges as China settles into its slower growth trajectory. However, there will also likely be opportunities, some of which may already be emerging. For example, Chinese stocks have already stumbled over the new slower growth rates and are now available at attractive valuations. But before we get into possible upsides, let’s look at some of the challenges lurking behind China’s slowdown.

Why China May Have the Most Factory Robots in the World by 2017 - Having devoured many of the world’s factory jobs, China is now handing them over to robots. China is already the world’s largest market for industrial robots—sales of the machines last year grew 54% from 2013. The nation is expected to have more factory robots than any other country on earth by 2017, according to the German-based International Federation of Robotics. A perfect storm of economic forces is fueling the trend. Chinese labor costs have soared, undermining the calculus that brought all those jobs to China in the first place, and new robot technology is cheaper and easier to deploy than ever before. Not to mention that many of China’s fastest-growing industries, such as autos, tend to rely on high levels of automation regardless of where the factories are built. “We think of them producing cheap widgets,” but that’s not what they’re focused on, says Adams Nager, an economic research analyst at the Information Technology & Innovation Foundation in Washington. Mr. Nager says China is letting low-cost production shift out of the country and is focusing instead on capital-intensive industries such as steel and electronics where automation is a driving force.

China’s Credit Overdose -- The days of double-digit economic growth in China are over. Indeed, the annual growth rate, which has been lingering at about 7.5% since 2012, is predicted to fall to 7% this year – and is likely to go lower. This is China’s “new normal,” characterized, according to China’s leaders, by “medium-to-high-speed” (instead of high-speed) growth. But perhaps even this is optimistic.  In the last two years, credit grew almost twice as fast as GDP, and total social financing grew even faster. Yet GDP growth slowed considerably – from an annual average of 10.2% in 2002-2011 – suggesting that China may be moving closer to a medium-to-low-speed growth path. One possible explanation for the divergence between credit and GDP growth is that potential growth has already dropped to 7%. But such a sharp decline in potential growth typically implies a powerful brake, in the form of an external shock or major internal adjustments. Under normal circumstances, an economy’s potential growth rate adjusts naturally and gradually, as structural change progresses. In fact, there is no definitive evidence that China’s potential growth rate has plunged. China weathered the 2008 global economic crisis better than other emerging economies. And, though structural factors, including an aging population and shrinking labor force, can certainly undermine potential growth, their effects are not sudden. So what explains the sharp decline in China’s economic output, in an environment of rapid credit expansion? The answer is simple: the way the credit is being used.

China’s New Normal and America’s Old Habits - Stephen Roach – China is generating a lot of confusion nowadays, both at home, where senior officials now tout the economy’s “new normal,” and abroad, exemplified by America’s embrace of Cold War-style tactics to contain China’s rise. On both counts, the disconnects are striking, adding a new dimension of risk to the impact of the “China factor” on a fragile world. The official view in China is that its economy has already arrived in the Promised Land of the “new normal.” Indeed, that was the theme of the just-concluded China Development Forum (CDF) – an important platform for debate among China’s senior officials and a broad cross-section of international participants that occurs immediately after the annual National People’s Congress. Since the CDF’s inception in 2000, the Chinese government has used the event to signal its policy priorities. In 2002, for example, the CDF focused on the impact of China’s accession to the World Trade Organization – a precursor to a spectacular surge of export-led growth. In 2009, the emphasis was on China’s aggressive post-crisis stimulus strategy. And last year’s event addressed implementation of the so-called Third Plenum reforms.  This suggests that China’s “new normal” will be the government’s top priority this year. But there remains considerable ambiguity as to what exactly the new normal entails – or whether it has even been achieved.  In his keynote speech at the CDF, Zhang Gaoli, one of the seven members of the Politburo Standing Committee (the Chinese Communist Party’s highest decision-making body), declared that the senior leadership has rendered the “strategic judgment that China’s economy has entered the stage of the new normal.” Yet, at the CDF’s wrap-up session, Premier Li Keqiang suggested, a bit less decisively, that China is basically following the world economy in its transition to a new normal.

The U.S.: Inept Diplomacy, Indispensable Currency - The announcements by several European governments that they would join the new Asian Infrastructure Investment Bank (AIIB) have been widely seen as indicators of the declining position of the U.S.  The AIIB had been proposed by China for the purpose of funding much-needed infrastructure projects in Asian countries. The U.S. had discouraged other governments from joining, ostensibly on the grounds that the new institution would overlap with the World Bank and the Asian Development Bank. But the real reason seemed to be a concern that the Chinese would have a regional forum to wield power. The New York Times held both the Congress and President Obama responsible for mishandling the issue. The U.S. claimed it sought to ensure better governance in the new institution, but gave no signal of being willing to work with the Chinese and others to make the AIIB an effective agency. The continuing refusal of Congress to approve reforms in the IMF’s governance structure gives the Chinese and other emerging markets ample cause to look elsewhere. The Economist put it starkly: “China has won, gaining the support of American allies not just in Asia but in Europe, and leaving America looking churlish and ineffectual.” And yet: the same issue of The Economist stated that “In the world of economics, one policy maker towers above all others…,”, and named Federal Reserve Chair Janet Yellen as holder of that position due to the sheer size of the U.S. economy. The influence of the U.S. in financial flows extends far outside national borders. A study by the Bank for International Settlements estimated that the amount of dollar-denominated credit received by non-financial borrowers outside the U.S. totaled $9 trillion by mid-2014. Over two-thirds of the credit originated outside the U.S., with about $3.7 trillion coming from banks and $2.7 from bond investors.

1.81% World Payment Share? RMB Going Nowhere  -- So much for the inevitable internationalization of the yuan: The Society for Worldwide Interbank Financial Telecommunication (SWIFT) reports that payments denominated in renminbi fell last month from fifth to seventh place. The Chinese government has been promoting the currency far and wide an an alternative for settling international transactions--especially those with the PRC as a trade counterparty--but China has had a rougher time recently. Its role as a medium of exchange in may be falling victim to doubts over its role as a store of value. That is, folks do not want to hold on to RMB if it is expected to depreciate instead of appreciate in the near future. At any rate, RMB is falling down the currency league tables. It goes unmentioned here though that the Swiss franc (CHF) became stronger and presumably more attractive  as a vehicle currency in the wake of it losing its euro peg in January:  China's yuan has dropped to seventh place among the world's payments currencies, global transactions organisation SWIFT said Monday, even as Beijing tries to push greater international use of the unit. The yuan -- also known as the renminbi -- held a 1.81 percent share in world payments based on value in February, SWIFT said in a statement on Monday, down from 2.06 percent in January, when it stood in fifth place. The Swiss franc and the Canadian dollar overtook the Chinese currency last month, SWIFT data showed.

Russia to join China-backed development bank: official - Russia is to sign up to the Chinese-led development bank AIIB, first deputy prime minister Igor Shuvalov said Saturday at an international forum in China, cited by Russian news agencies. “I'd like to inform you that Russian President Vladimir Putin has taken the decision that Russia will participate in the capital of the Asian Infrastructure Investment Bank (AIIB),” Shuvalov said at China's Boao Forum, quoted by RIA Novosti state news agency. The Beijing-backed AIIB, unveiled in October, is a multinational lender that the United States perceives as a threat to the Washington-led World Bank. It has proved highly successful with countries that are U.S. allies, however, with Britain, Germany, France, Italy and this week South Korea all saying they intend to join the US$50 billion bank. Russia has sought to align itself more closely with China in recent years and these efforts have intensified amid a freeze in relations with the Western powers, which have imposed harsh economic sanctions over Moscow's role in the Ukraine conflict. “We are glad to have the opportunity to build up cooperation in the format of China and the Eurasian Economic Union,” Shuvalov said, referring to a free trade union championed by Putin made up of Russia, Kazakhstan, Armenia and Belarus, which came into force in January.

China may invest $5.2bn in Russia’s first high speed railway — Beijing is interested in funding Russia’s first high-speed rail line between Moscow and Kazan. China would invest a total of $5.2 billion (300 billion rubles) in the project. The bulk of the investment, $4.3 billion at current exchange rates (250 billion rubles) will come in the form of 20-year loans from Chinese banks, and the other $860 million would come as an equity payment from the Chinese company in charge of the project, RIA Novosti reported Sunday, citing sources familiar with the proposal. Train travel from Moscow to Kazan, the capital of the Tatarstan republic, will be shorted to just 3 and a half hours instead of the more than 14 hours it takes now. The train will be able to reach speeds of 400 kilometers per hour. It will also reduce the travel time between Kazan and Nizhny Novgorod, Russia’s third largest city, to just ninety minutes from the more than 10 and a half hours it currently takes.  The plan was developed to better link mid-size Russian cities by improving transport, and therefore the mobility, of people. China has embarked on an ambitious program to expand its rail connections, with plans to lay thousands of miles of new track in the coming years. The world’s fastest passenger train is also in China, the Shanghai Maglev Train can reach speeds of over 430 kilometers per hour.

AIIB: A morality play for India  - The AIIB membership drive has underscored the importance of the European states as Asia’s partner during a period when the region is passing through a major transition. On the one hand, the participation of the European countries ensures that China is obliged to mould the AIIB as an institution of the highest standard in transparency and efficiency. Indeed, the European countries’ participation in the AIIB helps shape its rules but on the other hand, it also offsets US opposition. Put differently, on the bigger plane of the global power dynamic, it also strengthens the Europe-Asia side of the US-Europe-Asia strategic and economic triangle, which dominates the world’s economy and politics today. From an Indian perspective, Saturday triggered depressing thoughts of despondency.To be sure, the soso-called US-India Joint Strategic Vision Statement for the Asia-Pacific and Indian Ocean Region signed during the visit by President Obama to Delhi hardly two months ago has been rendered irrelevant and archaic. Clearly, India, which, notwithstanding its profession of devotion to the ‘Asian Century’, is unable to figure out whether China’s rise is a good thing or not, has been taken for granted by Beijing as a partner in the Belt and Road Initiative. Beijing has left India with no choice but to tag along lest it gets stranded on the Silk Road. China seems one hundred percent sure that Delhi cannot sustain its zero-sum mindset, when Asian countries all around it – big and small – find it attractive to partake of the Chinese initiative, which they see as inclusive, non-prescriptive, based on market rules and in a ‘win-win’ spirit of mutual benefit out of common development. China’s extraordinary ability in the geopolitical sphere makes Indian diplomacy look provincial and out of touch with the Asian and global realities.

S. Korea, Vietnam initial free trade deal : South Korea and Vietnam have initialed their free trade agreement (FTA) that aims to boost bilateral trade by removing tariffs and other barriers, the government said Sunday. Following Saturday's initialing in Seoul, South Korea will seek to formally sign the deal within the first half of this year and obtain parliamentary approval as soon as possible before implementing it by year-end, the Ministry of Trade, Industry and Energy said. In December, South Korean President Park Geun-hye and Vietnamese Prime Minister Nguyen Tan Dung announced the effective conclusion of bilateral FTA negotiations. While an English-language version of the agreement will be open to the public Monday, it will also be translated into the two parties' native languages before it is officially signed. The ministry said the latest FTA will likely help small and medium enterprises to ship more textiles, auto parts, cosmetics and electronics goods to the Vietnamese market. The ministry added that the deal would allow South Korean firms to compete better with their Japanese competitors in the Vietnamese market. A free trade pact between Japan and Vietnam went into effect in 2009. According to the ministry, the free trade deal between South Korean and Vietnam excludes rice, a key staple food for Koreans. Tariffs on tropical fruits, garlic, ginger, and pork will be abolished in 10 years, while those on honey and sweet-potato starch will be lifted in 15 years. Vietnam is South Korea's ninth-largest trading partner, with US$21.09 billion worth of products shipped to the Southeast Asian country in 2013.

S. Korea weighing when and how to join TPP: official : South Korea is weighing when and how to participate in a U.S.-led multilateral free trade agreement, known as the Trans Pacific Partnership (TPP), though its final decision has yet to be made, a senior trade official said Tuesday. The move comes as the ongoing negotiations for the TPP are approaching an apparent end, according to Deputy Trade Minister Woo Tae-hee. "The government plans to hold a fresh round of bilateral talks with other participating countries if necessary as the recent dialogue between the United States and Japan appears to have made progress," he told a press briefing. Woo, however, said the country has yet to make a final decision on its participation in the TPP, adding that such a decision requires a due process that includes a report to the National Assembly. Differences between the two countries, mostly over agriculture and intellectual properties issues, have largely been blamed for a prolonged impasse in the trade negotiations that were first held in 2005. The TPP negotiations currently involve 10 other countries: Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. South Korea has held three rounds of what it has called preliminary bilateral negotiations with the 12 participating countries since it expressed an interest in taking part in the multilateral FTA in late 2013. A fresh round of bilateral talks, if held, will seek to set the date for an announcement of Seoul's participation in TPP, according to Woo. "We plan to hold a fresh round of negotiations to see when and how we can join the TPP," he said.

Peruvian Newspaper Reveals TPP Favors Foreign Companies - The treaty, negotiated in secret between Peru and 11 other countries, allows foreign profit to trump social good.​A new chapter of the Trans Pacific Partnership (TPP) was leaked Thursday by WikiLeaks to Peruvian newspaper La Republica. The treaty has been negotiated in secret since 2010. The organization Public Citizen, which was present at the negotiations in Hawaii between March 9 and 15, verified the authenticity of the leaked document. The 55-page chapter, dated Jan. 20 this year, shows the treaty will reinforce the mechanisms that allow transnational corporation investment in the countries to sue the state where they operate, even before attempting to go through the national mechanisms. The chapter also specifies that companies will be able to sue the state in private courts when they lose profits, or the expectation of profits, due to social conflicts and changes in the public health or environmental codes of a nation. It will also protect companies from direct and indirect expropriations and any changes in financial legislation. The chapter contradicts promises by Peruvian President Ollanta Humala and his U.S. counterpart Barack Obama. According to the notes from the debate during the negotiations, only Australia refused to be ruled by the regulations in this chapter. In contrast to Peru, where there is no transparency about the negotiations, Chile has created an open forum with its citizens to find out where they stand. Chile has also included a clause that protects the right of its Central Bank to limit money transfers from and to the country.

Japan calls on Obama to step up personal involvement in TPP deal - Japan’s economy minister has called on US President Barack Obama to ramp up his lobbying of Democrats to secure congressional authority for the Trans-Pacific Partnership, as the mammoth trade deal approaches a make-or-break deadline in the next few months. The rare direct appeal by Akira Amari, the Japanese minister responsible for the talks, shows how nerves on both sides of the Pacific are fraying as the effective deadline for a deal draws close. “I’ve always thought it was important that President Obama not leave this in the hands of others, and that he should make direct efforts to convince and persuade,” said Mr Amari in an interview with the Financial Times. “We are getting into real time constraints, but there’s still a good possibility of a deal with President Obama, so I’m optimistic,” said Mr Amari. “I’ve heard the president has started making efforts to persuade Democrats and that gives me hope.” Mr Amari’s pressure on the US is a reversal of roles: Japan was widely seen as dragging its feet on agriculture in the TPP talks prior to Mr Abe’s re-election last December. Failure of the TPP would be a huge blow to governments in the US and Japan. For Mr Obama, it is one of the few measures he may be able to get past a Republican Congress; while for Japanese Prime Minister Shinzo Abe, the TPP is both a goal in itself and a tool to force deregulation of domestic sectors such as agriculture. The TPP would liberalise trade among 12 Pacific nations, including Japan and the US, covering about 40 per cent of global output. Negotiations have been under way for almost seven years. But to close the deal, Mr Obama needs to secure a Trade Promotion Authority, a fast-track route through Congress.

Japan-U.S. working-level TPP talks due in April - (Jiji Press) — Japan and the United States will hold another round of working-level talks on automotive trade in April as part of Trans-Pacific Partnership multilateral free trade negotiations, after their talks ended inconclusively last week. The talks in April, expected to be held in Tokyo, will address both auto trade and tariffs on agricultural products. After winding up five days of working-level bilateral talks in Washington, Takeo Mori, ambassador for economic diplomacy, said at a news conference that although the number of issues that need to be resolved has evidently fell, the two countries have not yet reached a stage where they can hold ministerial talks. Japan and the United States hope to narrow down major areas of contention so that their TPP ministers will work out a political settlement before Prime Minister Shinzo Abe and U.S. President Barack Obama hold a summit meeting in Washington on April 28. But Mori said the pending issues are very difficult in terms of quality. Mori also said he is worried whether the United States will be able make a political judgment due to delays in congressional discussions on giving Obama “fast track” authority to negotiate trade deals, known as Trade Promotion Authority. He said he underscored the importance of early congressional approval of TPA at his meeting with Acting Deputy U.S. Trade Representative Wendy Cutler.

Massive Coalition of Japanese Organizations Campaigns Against TPP Copyright Provisions -- "We are deeply concerned about this situation in which important decisions for our nation’s culture and society are being made behind closed doors" reads a joint public statement from Japanese activists who are fighting the copyright provisions in the Trans-Pacific Partnership (TPP). A group of artists, archivists, academics, and activists, have joined forces in Japan to call on their negotiators to oppose requirements in the TPP that would require their country, and five of the other 11 nations negotiating this secretive agreement, to expand their copyright terms to match the United States' already excessive length of copyright. Negotiators have reportedly agreed to set their copyright terms to the length of an author's life plus 70 years. Since the news was leaked, there has been growing opposition among Japanese users, artists, and fans against this copyright expansion—which is nicknamed the "Mickey Mouse Law" there due to Disney's heavy lobbying that led to the copyright extension in the United States nearly two decades ago. The issue gained substantial awareness when prominent Japanese copyright lawyer, Kensaku Fukui, wrote a blog post about the TPP's threats to Japanese Internet users and culture that went viral a month ago.

Japan expected to join Asian Infrastructure Investment Bank -- Japan is likely to join the Asian Infrastructure Investment Bank within a few months, according to the country’s ambassador to Beijing, a move that would see Tokyo break ranks with Washington and leave the US as the only big holdout. Masato Kitera told the Financial Times he agreed with Japanese business leaders’ belief that the country would sign up to the China-led development bank by June. “The business community woke up late, but now they have mounted a big campaign for the AIIB which appears to be very effective,” Mr Kitera said… A Japanese move to join the bank would be a reversal of rhetoric and, for China, the biggest coup yet given the fractious relationship between the two Asian powers. Japan also has strong links to the rival Asian Development Bank, the head of which it traditionally appoints, and has in the past questioned the need for a new bank... No country was seen to be as supportive of the US position as Japan — in part because many officials in both countries saw the AIIB as a direct challenge to the Japanese-controlled Asian Development Bank. But Japanese executives look on China’s ambitious plans to help build infrastructure in the region as a huge business opportunity, as well as a chance to help repair frayed relations.

Japan will not join AIIB by March 31 deadline -- Japan's finance minister, Taro Aso, said Japan will not join the China-proposed Asian Infrastructure Investment Bank (AIIB) by the deadline of March 31, a local report said Tuesday. Speaking at a press briefing after Tuesday's cabinet meeting, Aso said that Japan has to maintain caution toward the AIIB, according to Kyodo News. More than 40 countries have filed applications for the AIIB's founding membership, including other world's major economies. The AIIB, which will support infrastructure projects in Asia, is expected to be officially established by the end of this year. The application deadline is March 31 and the founding members will be confirmed on April 15.

An ageing population as an excuse for a Japanese currency war - There is no more independently determined investment strategy in the world now; everyone in the markets is just trying to follow the next turn in central bank policy. So I thought we might take a look at one of their community debates: whether an ageing population causes deflation or inflation. We all know old people are annoying. They slow down traffic when they drive in what should be the fast lane, and will not listen to sensible advice from their children. But do they also destroy the functioning of our monetary system? Ever since Japan started trying to reflate its economies though Abenomics in 2013, an ageing population has been one of the excuses for what used to be called competitive devaluation, or a currency war. In 2012, Masaaki Shirakawa, governor of the Bank of Japan at the time, published a widely read paper, Demographic changes and macroeconomic performance — Japanese experiences, which was used as a sort of manifesto for Japanese monetary diplomacy. The paper, in part, made the case that a population ageing as fast as Japan’s was creating a deflationary spiral in the domestic economy, which, implicitly, had to be offset with an aggressive monetary policy. Therefore when Prime Minister Abe introduced aggressive monetary expansion as one of the “three arrows” of economic reform, he had the back-up of quite detailed research that showed this was not one of those terrible pre-Depression competitive devaluations of the sort we had all agreed not to do after the second world war. No, Japan had no choice, really. It was all those old people who just gathered deflation around them like pictures of their grandchildren. The other sides of the major currency pairs went along with the monetary arrow, and Japan has managed a 50 per cent devaluation against the dollar over the past couple of years without attracting the sort of thundering attacks on “currency manipulation” that one used to hear in the US Congress. Mr Shirakawa’s erudite PR effort worked so well that it was followed and reinforced by an International Monetary Fund paper, Is Japan’s Population Aging Deflationary?, which was published in August of last year.

Japan government weighing income tax hike on wealthy to meet fiscal goal: sources (Reuters) - Japan's government is considering raising income taxes for the wealthy and increasing the inheritance tax if it looks unlikely to reach its goal of returning to a primary budget surplus in 2020, government sources said. Prime Minister Shinzo Abe's government plans to raise the nationwide sales tax to 10 percent from 8 percent in April 2017 to help pay for rising welfare and healthcare costs. "Abe is determined to not raise the sales tax any further," said one source who declined to be identified. "But we still have to make sure spending matches revenue, so we would have to consider measures to either cut spending or increase revenue." The government will conduct a mid-term assessment of the country's finances heading into the start of fiscal 2018, the source said. If this assessment shows the government is not on track to return to a primary budget surplus in fiscal 2020 then further steps would be needed, the source said. A primary budget is an important indicator of a country's underlying fiscal health because it excludes income from bond sales and debt servicing costs. "This has not made its way into any government documents yet, but raising other taxes could become an option,"

Japan debt/GDP to worsen from FY2023 even with strong growth: sources (Reuters) - Japanese lawmakers' calculations show that the country's mammoth debt burden will start to worsen in less than a decade even under optimistic growth assumptions, as ultra-low interest rates begin to rise, people involved in the process said. Prime Minister Shinzo Abe's government is struggling to meet a promise to balance the budget - excluding debt-service payments and new bond sales - by the fiscal year ending in March 2021. Policymakers have instead emphasized that strong economic growth is at least shrinking the accumulated debt as a proportion of gross domestic product. But a fiscal-reform panel of Abe's Liberal Democratic Party will present estimates on Thursday to a closed-door session that even on this optimistic basis, debt-to-GDP will start to rise after fiscal 2023/24, government and ruling coalition officials told Reuters on Wednesday. Japan's gross public debt is about 240 percent of GDP by the broadest measure, the biggest in the world. Cabinet Office data, which compiles general accounts of the central and local governments, puts debt at 195.1 percent of GDP for the fiscal year that began Wednesday, falling to 182.6 percent in fiscal 2023/24. That low now appears to be the bottom, the officials said. Even assuming growth remains robust, the new calculations assume that interest rates will eventually rise when the Bank of Japan starts to unwind its drastic monetary easing.

Japan on Brink of Another GDP Contraction -- With a booming stock market, falling oil prices and promised pay raises at big companies, Japan’s economy must be doing well, right? Actually, no. Monthly gross domestic product contracted a sharp 2.1% in February from the previous month, the biggest drop since April last year, raising the specter of another quarter of economic contraction in January-March, according to data released Wednesday by the Japan Center for Economic Research, an independent public policy institute. According to JCER’s calculations, the economy now needs to have grown 1.5% in March just to equal the fourth quarter’s output. But that seems a difficult task. The Ministry of Economy, Trade and Industry has forecast that industrial output is expected to have declined in March, before recovering in April. If gross domestic product indeed shrinks in the first quarter, it would be the third contraction in the past four quarters–quite a lackluster performance given Prime Minister Shinzo Abe’s vow to revive strong growth and decisively defeat deflation.What’s to blame? Weak private consumption, said Tetsuaki Takano, an economist with the institute. Household spending fell from the previous month in December, January and February, surprising economists given a relatively benign external environment. Private consumption accounts for 60% of Japan’s economy. The economy may rebound with the start of a new fiscal year in April, Mr. Takano said, but any recovery will lack strength until Japanese consumers regain their health.

China, Japan data add to pressure for stimulus - China and Japan reported gloomy industrial data Wednesday, adding to pressure on leaders of the world's second- and third-largest economies to launch new stimulus. Two surveys showed Chinese manufacturing was weak in February and employers cut more jobs. In Japan, a central bank survey found companies expect conditions to deteriorate and plan to cut investment. The latest data muddy the global outlook at a time when the U.S. is the only major economy to show signs of healthy momentum. Both China and Japan are relying on U.S. demand and a strong dollar to offset internal problems. Either could send shockwaves through the global economy if efforts to overhaul their economic models fail.

Thai household debt rises to record 85.9% of GDP at end-2014: central bank -- Thailand's household debt rose to a record high 85.9 per cent of gross domestic product at the end of 2014 from 84.7 per cent at the end of September, the central bank said on Tuesday. Household debt was 10.43 trillion baht (S$437 billion) at the end of 2014, continuing to crimp consumption as the economy struggles. At the end of September, the total was 10.22 trillion baht. The Thai economy grew only 0.7 per cent in 2014. A senior Bank of Thailand official said the pace of increases in household debt has slowed sharply compared with in the past and "people's debt burdens should be easing following lower interest rates".

Asia’s Manufacturers Feel Squeezed - While falling raw-materials prices have lowered costs for Asia’s manufacturers, firms are feeling pressure to pass savings to customers to keep market share—squeezing profit margins and triggering job cuts, according to factory-floor readings in March. Weak purchasing-managers’ index gauges, which measure manufacturing conditions, show that factories continue to struggle in South Korea, Taiwan and Indonesia amid weak domestic and global demand. China’s readings offer some relief. Two gauges of factory activity show the government’s measures to juice the economy may be paying off. But the gauges also show that the Beijing’s moves are helping big, state-owned firms more than small and medium-size companies. The data underlines “the fragility of the region’s manufacturing recovery,” says Krystal Tan, a Singapore-based economist with research firm Capital Economics. China’s official PMI index rose more than expected to 50.1 in March from 49.9 a month ago, its first time in positive territory since December. A reading above 50 indicates an expansion in manufacturing activity from the previous month, while a reading below indicates contraction. Economists say that the improvement suggests Beijing’s spending on infrastructure projects from roads to airports is starting to help state-owned firms. But a private reading by HSBC and research firm Markit, which focuses on China’s smaller enterprises, fell to 49.6 in March from 50.7 in February. In March, factories shed jobs at the quickest pace since last summer, HSBC said.

Southeast Asian borrowers wince as deflation looms (Reuters) - - Loans to businesses and households in Southeast Asia are growing at their slowest pace in five years, but the region's most indebted economies aren't becoming any less leveraged. Because of deflation, borrowers are at risk of shouldering heavier debt burdens. In Singapore, bank loans grew 3.26 percent in February from a year earlier, official data published on Tuesday shows, the slowest since November 2009. In Thailand, loan growth is also far below the rates seen after the 2008 global crisis when the authorities unleashed liquidity to revive the economy. But outstanding loans remain staggering. The Asian Development Bank says debt in Singapore, Thailand and Malaysia is now equal to at least twice the size of their gross domestic product, fueled by inflows of capital which funded bank loans and bond sales. The ability of borrowers to pay down debts will be tested if deflationary pressures that crept into the region four months ago via Thailand increase. A long spell of falling prices erodes corporate revenues, spurs businesses to lower wages, and slams the brakes on economic growth. Look at Japan. "Deflation will increase the real cost of debt servicing as real rates rise and will keep nominal GDP growth weak," Morgan Stanley wrote in a research note.

Can Asia’s Banks Withstand a Financial Shock? - My colleague Victoria McGrane and and I document in today’s Wall Street Journal the increased scrutiny that financial regulators are imposing on boards of directors at U.S. banks.  A chart accompanying the story raises a governance question not about U.S. banks, but about banks in Asia. Academic research suggests that banks with independent board members are less prone to excessive risk-taking than other banks.  In Asia, bank boards are becoming less independent. Here are the numbers: As part of its Global Financial Stability Report in October, the International Monetary Fund studied governance at 800 banks in 72 countries. It found that U.S. boards have been expanding the representation of independent board members since the financial crisis. The percentage of independent directors on bank boards increased from 62% in 2006 and 2007 to 73% in 2012 to 2013. In Europe, the share was low, but has been growing. It went from 43% to 48%. In Asia, on the other hand, the share of independent directors is low and falling. It went from 44% to 33% during the same period. In the U.S. and Europe, banks also are moving to empower risk officers. One complaint about the pre-crisis financial architecture was that nobody listened to internal risk officers when they tried to say, “Stop.” In the U.S., the share of firms that placed chief risk officers on their board of directors increased from 5% to 10% after the financial crisis. It expanded from 5% to 9% in Europe. In Asia, it has fallen since the crisis from 9% to 3%, according to the IMF. Financial crises find a way into weak banking systems the way a virus preys on weak immune systems. One has to wonder whether the financial body in Asia has gotten stronger of late.

Q2 Central Bank Outlook Points to Cuts in Asia, Uncertainty in U.S. - The big story in central banking this quarter is the Fed’s looming decision about whether to raise short-term interest rates at its June policy meeting. But there are many subplots that could shake financial markets. Central banks in China, Australia, India, Russia, Hungary, Norway and Sweden are expected to cut interest rates to boost their economies during the April to June period. Brazil is expected to raise. Turkey, meanwhile, is in an uncertain place. Its central bank faces government pressure to fuel stronger economic growth with June elections approaching. But a falling Turkish lira and the threat of financial instability makes such a move difficult. Taken together, the cross-currents portend continued foreign exchange volatility in the months ahead, but perhaps shifting away from big developed market currencies that dominated the past few months and toward emerging market currencies. The biggest interest rate reductions are on tap for Asia, where growth in China, the region’s anchor economy, is slowing and there’s more room for rates to drop. The median interest rate across Asian economies is 2.5%, compared to 0.75% in the Europe/Middle East/Africa region. You can get the lowdown on the outlook for 25 central banks around the globe in The Wall Street Journal’s quarterly central bank outlook, produced by our reporters on the ground around the world.

Australia To Start Taxing Bank Deposits - Up until now, the world's descent into the NIRPy twilight of fiat currency was a function of failing monetary policy around the globe as central bank after desperate central bank implemented negative and even more negative (in the case of Denmark some four times rapid succession) rates, hoping to make saving so prohibitive consumers would have no choice but to spend the fruits of their labor, or better yet, take out massive loans which they would never be able to repay. However, nobody said it was only central banks who could be the executioners of the world's saver class: governments are perfectly capable too.  Such as Australia's.  According to Australia's ABC News, the "Federal Government looks set to introduce a tax on bank deposits in the May budget."

Shipowner warns private equity to stop backing new vessels - One of Greece’s highest-profile shipowners has warned private equity firms they risk “destroying” markets if they continue to finance new vessels, after excessive deliveries have driven down cargo rates. Private equity, which until the past few years was only a minor contributor to shipping finance, has invested at least $5bn in shipping every year since 2010 and funded about 10 per cent of deals. High quality global journalism requires investment.  The cash rescued many companies after the collapse in rates and banks’ growing caution towards shipping lending after the financial crisis. However, much of the new capital was used to order new vessels at cut rates from desperate shipyards, rather than buying existing vessels from other shipowners. The tactic flooded first the tanker markets and subsequently the market for ships carrying coal, iron ore and other dry bulk. Average charter rates for a Capesize, the largest dry bulk carrier type, were languishing on Monday at $4,301 a day, well below the roughly $13,000 cost of operating and financing a typical ship. “We welcome private equity in our business,” said Nikolas Tsakos, chief executive of Tsakos Energy Navigation. “But there are 10,000 second-hand ships. For their own good, it would be better if they invested in second-hand ships, rather than destroying the markets they want to invest in.”

Latin American countries propose to remove all US military bases in Latin America: Former Colombian President said: "A good place to the new agenda of relations (which will announce the US and Latin America) would be no US military bases in South America. This belongs to the era of the Cold War. " He also said that Washington should at the table of inter-American debates take a stance that leaves behind its unilateral judgments, let alone make judgments about human rights when there agrees to ratify what other countries in the matter. "It is absurd that a country that has not entered the inter-American human rights system formally the right to make judgments about these reserves," he said. Samper also told EFE that "in a globalized world like the present one can not ask global rules of the game for the economy and keep unilateralism for politics. No country has the right to judge other's behavior or much less to impose sanctions or penalties on their own ". Summit of the Americas These discuciones will take place between 10 and 11 April in Panama, where they have already confirmed attendance 31 regional leaders, including the presidents of Venezuela, Cuba and the United States. To many political observers it is a "historic" not only by the expected greeting between the presidents of the United States and Cuba, or what can happen between Obama and mature, but because US should attempt to destabilize a growing trend that puts a halt its interests in Latin America.

Brazil posts unexpected primary deficit in February  (Reuters) - Brazil posted an unexpected primary budget deficit of 2.3 billion reais ($721 million) in February, central bank data showed on Tuesday, highlighting the challenges the government faces in achieving its closely watched fiscal goal this year. The primary budget, or savings before debt payments, serves as a gauge of the country's capacity to repay its debt. It had been expected to show a surplus of 1.5 billion reais in February, according to the median forecast of 17 analysts surveyed by Reuters. The gauge is of particular importance for Brazil, where President Dilma Rousseff started her second term in office with a concerted effort to stave off a credit rating downgrade after years of lavish spending failed to spur growth. Her new Finance Minister Joaquim Levy has severely limited government spending while raising taxes to help close the fiscal gap. On Tuesday, Levy told Brazil's Senate that he is ready to take measures to ensure enough tax revenues to meet the target. February's data shows how difficult the challenge will be.

Brazil prepared for another round of tax hikes as austerity steps miss (Reuters) - Brazil is prepared to raise taxes, Finance Minister Joaquim Levy said on Tuesday, to shore up investor confidence and preserve its investment grade credit rating as the country's economy moves closer to recession. Brazil hiked import, fuel and financial taxes in January to raise 20.6 billion reais (US$7.7 billion) this year and balance accounts. Despite the increases, some of which took effect on Feb. 1, tax revenues have fallen behind expectations. "We're monitoring tax revenues and will take measures if needed to avoid any risk that tax collections are not sufficient for our target," Levy told a Senate hearing as he sought support for austerity measures. Brazil posted a primary budget deficit of 2.3 billion reais ($721 million) in February, central bank data showed, compared with forecasts by analysts' in a Reuters poll for a 1.5 billion reais surplus. President Dilma Rousseff is faced with pulling government finances out of the red without imposing further hardships on Brazil's middle class and businesses. Rousseff started her second term in January with a concerted effort to stave off a credit rating downgrade after years of lavish spending failed to spur growth.

Bank of Canada head says oil's effect on economy atrocious - The head of the Bank of Canada said a slump in oil prices is having an “atrocious” effect on the Canadian economy but a cheaper currency and incipient U.S. revival should help exports drive a recovery, the Financial Times reported on Monday. Governor Stephen Poloz said in an interview with the newspaper that the central bank still had many options to help the economy if needed. These included pledges to keep interest rates low for a prolonged period of time – a practice known as “forward guidance” – as well as asset purchases.  Poloz defended a surprise rate cut in January, saying that falling oil prices meant it had become impossible to return the economy to capacity within a two-year horizon. “When the oil shock came, it was clear we would no longer be able to close the output gap by 2016, but by 2017,” the governor said in the interview. “Since we had some firepower, we took some insurance and cut rates.” Poloz struck a cautious note on the state of the Canadian economy, the article said.   “The first quarter of 2015 will look atrocious, because the oil shock is a big deal for us,” he said, adding that capital expenditure could fall by as much as 10 per cent as a result of energy companies cutting investment. He added that even though a lower oil price should increase domestic demand by boosting disposable income, the negative effects from the impact on the energy sector were widespread. “In theory lower oil prices mean more money in consumers pockets, but...if an oil company cancels [an investment] project, laying off a worker, that guy will not have the money to buy a new pick-up truck. That spreads pretty quickly,” Poloz said.

Delayed Effects Of Sanctions Could Prolong Russian Recession -- Strong Western sanctions and the steep drop in oil prices have formed a one-two punch that will leave the Russian economy in worse shape than economists had expected, according to a new report by the World Bank. The document, titled “The Dawn of a New Economic Era?” said it expects Russia’s economy to shrink by 3.8 percent this year if the price of oil stays at $53 per barrel on average. The bank’s previous estimate, issued in December, had called for an economic decrease of 0.7 percent in 2015. And, the report said, the recession will continue at least one more year, with Russia’s economy contracting a further 0.3 percent in 2016, when the price of oil is expected to rise to only about $57 a barrel.  “The oil price slump and stricter sanctions came late in 2014, so that their impact only began to affect the economy in the final quarter of 2014; the effects are likely to be more profound this year and in 2016,” the World Bank report said. The average price of oil has plunged since late June 2014 from more than $110 per barrel down to its current price in the low-$50 range, and there’s no evidence that prices will rebound in the near future. That leaves Moscow in a bind to draw up a budget that has, until now, relied heavily and comfortably on generous energy revenues.  The report also showed that World Bank economists expect the sanctions, imposed because of Moscow’s support of Ukrainian rebels and its annexation of Crimea, won’t end anytime soon.

Why Putin Doesn’t Need To Pander To The West - Yves Smith - When sanctions were imposed and tightened against Russia, and oil prices plunged, conventional wisdom in the US press was that the Russian people would not tolerate a decline in living standards and therefore Putin's days were numbered. In fact, Putin's approval ratings rose and even most of his opponents in the Moscow intelligensia fell in behind him. Some analysts pointed out that sanctions seldom succeed and were unlikely to work on Russia. That view has become more prevalent as Russia has proven to be less dependent on oil revenues than widely assumed and Russia's foreign currency reserves have stabilized.

George Soros ready to pour $1 billion into Ukraine --  US financier George Soros said Monday he was ready to invest $1 billion in Ukraine if the West promised to help the embattled country. “Ukraine is defending the EU from Russian aggression” and helping its development will weaken Russian President Vladimir Putin, the Hungarian-born philanthropist said in remarks published in German by the Austrian business daily Der Standard. He said Ukraine needed 50 billion euros to get itself back on its feet, and said he was prepared to pump $1 billion (922 million euros) into agriculture and infrastructural projects. Ukraine is at the edge of bankruptcy hit by the triple whammy of the war in its industrial east, a deep economic recession and the record devaluation of its currency. Its public debt likely to reach 94 percent of its GDP in 2015. Soros said his investments “should make a profit”, which would go to his foundation rather than him personally. “The West can help Ukraine by making it more attractive to investors by giving them insurance against political risk,” he said.

China Buys Europe Cheaply, Pirelli Edition - The weak euro currency has meant that many things in the eurozone are dirt cheap in comparison to what they were just a year ago. It goes without saying that some of Europe's prestige brands can be had for a song, one of them being the Italian tire manufacturer Pirelli. The firm certainly needs no introduction. It has been the sole supplier of tires in Formula One for the last five years, bolstering its famous name in the performance segment of the automotive supplier industry.   And of course, we all know who the prospective buyers are: the cash-laden Chinese. Sure the PRC economy is slowing down, but they've had plenty of rich years before the last two or so. It is thus something of a mystery to me why the Chinese haven't bought more European names with cachet, like dorky-sounding Geely buying Volvo. That is, if you can't conquer world markets because your product names sound borderline, er, laughable, why not buy those with global standing already? Enter state-owned firm ChemChina mooting its purchase of Pirelli for a seemingly measly $7.7B: State-owned China National Chemical Corp (ChemChina) is to buy the world's fifth-largest tire-maker in a 7.1-billion-euro ($7.7 billion) deal that will put the 143-year-old Italian company in Chinese hands. The planned takeover, announced on Sunday, is one of the biggest acquisitions by a Chinese company in Europe and comes after a string of buys by Chinese investors in the euro zone's third largest economy, which is struggling to emerge from its longest recession since World War Two.  Unbeknownst to the rest of the world, Pirelli is but the tip of the iceberg when it comes to the Chinese shopping spree in moribund Italy. What's more, the largest buyers into Italian firms these past few years have been Chinese:

Austerity, Big and Small - Paul Krugman - At this point it’s fairly common to look at the effects of austerity via cross-country scatterplots: one axis shows some measure of fiscal consolidation, while the other shows the change in GDP. Who started this practice? I think I did, here, although I’m happy to cede credit to someone else if I missed it.  There are problems with this approach: causation could run the other way, although given the extent to which austerity, in the eurozone at any rate, was driven by debt panic, those problems shouldn’t be too severe. Another issue, however, is concern that such cross-sectional pictures could be dominated by small outliers. Are we basing too much on Greece?. Here’s what the eurozone scatter looks like, using the IMF’s estimate of the change in the structural balance as a share of potential GDP:There seem to be three insights from this picture. First, the case that austerity really does hurt a lot does not depend on Greece. If anything, Greek economic contraction seems to have been somewhat less than you might have expected given the extreme austerity. Second, and relatedly, the apparent multiplier looks larger if you focus only on the bigger economies; a weighted regression has a coefficient of -1.6, versus -1.3 for the unweighted version. Finally, all the attention given to Latvia looks a bit … odd.

World Inflation Falls To A New 5-Year Low -- It's become a running theme, at least since last September, but the latest release of CPI numbers from around the world has brought our simple average World CPI proxy to its lowest level since the financial crisis. For the period ending in February, our World CPI proxy hit just 1.01% year-over-year. This is the lowest rate of change since November 2009. The year-over-year rate in our World CPI proxy has been falling for six months straight.

Cheap Oil, QE Underpin Eurozone Recovery, S&P Says - Standard & Poor’s Ratings Services has become more positive about the euro area’s economic outlook over the next two years than it was in late 2014, with its more optimistic stance fueled by low oil prices, a weaker euro and the European Central Bank’s quantitative easing program. “We believe there are indeed reasons to feel more positive about the eurozone’s economic prospects for the coming two years, and our macroeconomic forecasts…[are] more positive than they were in the fourth quarter of last year,” S&P said Thursday. Some “powerful tailwinds,” including low oil prices, a much weaker euro exchange rate and the ECB’s introduction of a large, fully-fledged quantitative easing program are providing a “welcome fillip” to consumer demand and growth in the monetary union, S&P said. The ECB launched its public sector purchase program, or QE, on March 9, intending to buy 60 billion euros ($64.57 billion) each month of assets at least until September 2016. S&P economists have revised upward their forecast for eurozone growth by 0.5 to 1 percentage point, on average, compared with their December forecast. For the eurozone as a whole they now expect 1.5% real gross domestic product growth in 2015 and 1.7% in 2016, in their baseline scenario. But not everything is rosy, S&P warned. The uneven growth performance among eurozone states will continue to reflect varying levels of success in restoring their economic competitiveness through structural reforms, while the slowdown in key emerging markets could dent eurozone exports. Additionally, questions about Greece’s future in the eurozone pose further risks to financial markets’ stability, S&P said.

Fitch Radar: Eurozone Deflation Risk Persists Despite QE | Reuters: Fitch's Risk Radar has identified eurozone deflation as the largest potential risk to our credit ratings portfolio, despite the ECB's quantitative easing programme. This is because approximately one-third of Fitch's corporate finance ratings are based in the region and as the world's second-largest economy, largest importer and largest source of cross- border bank lending, deflation and weakness in the eurozone will have knock-on effects on other regions. In a report published today Fitch discusses these and other risks including emerging market slowdown and persistent oil price pressure. Underlying inflation remains subdued and longer-term inflation expectations are still below the ECB's target. QE should help reduce the risk of prolonged deflation in the eurozone through a weaker euro and a boost to confidence. But the ECB's previous easing measures, the introduction of targeted longer-term financing operations and private asset purchases, have so far had a limited impact on credit conditions and dynamics. Downgrades would only occur if the bloc were heading into a protracted 'Japan-style' deflation, which could lead to self-reinforcing negative debt dynamics, making the downward spiral difficult to reverse.

Deflation Rings Wake-Up Call to East Europe Central Banks -  -- Central banks across the European Union’s eastern countries are overcoming their aversion to chasing deflation with monetary easing, and investors are betting that the new rate-cut cycles are just getting under way. Poland, where prices have been falling since July, ended a five-month pause with an interest-rate cut this month. Hungary on March 24 lowered its benchmark after a seven-month interlude, following deflation in nine of the last 11 months. Czech policy makers are weighing whether to weaken the koruna and Romania’s central bank is forecast to cut rates Tuesday. With economies plugged into the euro region, their main export market and source of funding, eastern EU nations are struggling to control downward pressure on prices. The European Central Bank’s 1.1 trillion-euro ($1.2 trillion) bond-buying plan is complicating the task by strengthening the currencies of the euro area’s neighbors, which offer higher rates. “Every month, it’s just another wake-up call for the central banks to cut interest rates,” . “If you have a spread in your central bank rate versus the ECB, you’re going to see inflows, you’re going to import disinflation, deflation and there’s very little you as a central bank can do other than cut rates.” Traders are wagering more interest-rate cuts both in Poland and Hungary. Forward-rate agreements predicting Polish borrowing costs in six months in Poland are trading 13 basis points below the Warsaw Interbank Offered Rate. The spread between Hungarian six-month FRAs and the Budapest Interbank Offered Rate is 31 basis points.

EUROPE: 19 economists call on the ECB to make ‘QE for the people’ in a letter to the Financial Times -- A letter published today in the Financial Times signed by 19 economists, including BIEN co-founder Guy Standing, calls on the European Central Bank to adopt an alternative quantitative easing policy. The letter includes a call to distribute cash directly to citizens of the eurozone. As a response to the European Central Bank’s (ECB) plan to inject 60 bn euros a month for the next 18 months into the financial system, 19 economists have signed a letter to the Financial Times calling on the ECB to adopt a different approach which they consider a more efficient way to boost the eurozone economy.“The evidence suggests that conventional QE is an unreliable tool for boosting GDP or employment. Bank of England research shows that it benefits the well-off, who gain from increasing asset prices, much more than the poorest,” the letter reads. The signatories offer an alternative: Rather than being injected into the financial markets, the new money created by eurozone central banks could be used to finance government spending (such as investing in much needed infrastructure projects); alternatively each eurozone citizen could be given €175 per month, for 19 months, which they could use to pay down existing debts or spend as they please. By directly boosting spending and employment, either approach would be far more effective than the ECB’s plans for conventional QE.

ECB Will Want to See Inflation Hardening Around 2% Mark, Draghi Says -- European Central Bank President Mario Draghi said in remarks published Wednesday that in assessing the path of inflation, the ECB will not only want to see inflation approach the 2% mark, but also hardening around that level. The remarks suggest that the ECB will be patient in determining when the right time is eventually to pull the plug on its bond-buying program, which it started in March and expects to continue until September 2016. Referencing remarks made last week at the European Parliament, Mr. Draghi said, “I stressed that the Governing Council will take a holistic perspective when assessing the path of inflation. We will evaluate the likelihood for inflation not only to converge to levels that are closer to 2%, but also to stabilize around those levels with sufficient confidence thereafter.” “When doing this assessment, the Governing Council will follow its monetary policy strategy and concentrate on inflation trends, looking through any surprise in measured inflation (in either direction) if judged to be transient and with no implications for the medium-term outlook for price stability,” he added. The ECB has said it will buy 60 billion euros ($65 billion) per month in mostly government bonds in an effort to boost inflation in the currency bloc. The most recent data, published Tuesday, showed inflation in the 19-country eurozone was 0.1% below the level of a year earlier in March. The ECB targets inflation over the medium term at just below 2%. In his remarks, which were delivered at an event Tuesday, Mr. Draghi also said the ECB’s first publication of accounts of its meetings, which happened in the second half of February, was successful in capturing that discussions can be “fluid” and that there is a “shared commitment” by the Council to implement the decision.

OECD Economic Review Chair Warns, Central Bankers "Are Doing More Harm Than Good, Policy Must Be Reversed" - "I fear that central bankers may have been inadvertently drawn into what they are currently doing... [QE] won't work and may have many undesired side effects that will build up over time. Many of the central bankers at Davos this year said explicitly that they were only buying time for governments to act but, seven years into the crisis, it already seems we have been waiting forever...  the effectiveness of monetary policy in terms of stimulating aggregate demand goes down with time, because you're constantly bringing spending forward from the future...  Logically, at this point, central bankers should say, "We are doing more harm than good. This policy must be reversed." But I don't see anybody actually doing it."

The Committee To Destroy The World - Negative interest rates on $3 trillion of European debt are an obvious sign of policy failure, yet the policy elite stands mute. Actually that’s not correct – the cognoscenti is cheering on Mario Draghi as he destroys the European bond markets just as they celebrated Janet Yellen’s demolition of the Treasury market. Negative interest rates are not some curiosity; they represent a symptom of policy failure and a violation of the very tenets of capitalist economics. The same is true of persistent near-zero interest rates in the United States and Japan. Zero gravity renders it impossible for fiduciaries to generate positive returns for their clients, insurance companies to issue policies, and savers to entrust their money to banks. They are a byproduct of failed economic policies, not some clever device to defeat deflation and stimulate economic growth. They are mathematically doomed to fail regardless of what economists, who are merely failed monetary philosophers practicing a soft social science, purport to tell us. The fact that European and American central banks are following the path of Japan with virtually no objection represents one of the most profound intellectual failures in the history of economic policy history.  Now we can see the real tragedy of negative interest rates: they not only have the perverse effect of reversing the flow of time, but they demonstrate that borrowers are not acting with the good faith incentives normally associated with someone who needs money. Rather than paying forward, borrowers are paying backwards because they are effectively trying to return something they don’t want. Such an arrangement renders it impossible for an economy to grow. By destroying the temporal and moral structure of money, negative interest rates destroy the economy. When tomorrow cannot be paid, the current regime must fail. The only question to be determined is the form that failure will assume. This may sound like philosophy but it is cold, hard reality.

European Central Bank determined to stick with stimulus plan - (AP) — The official account of the European Central Bank's last policy meeting show top officials expressing determination to stick with the full 1.1 trillion euros ($1.2 trillion) of their planned stimulus — even though the 19-country eurozone economy shows signs of finally picking up.Minutes to the March 5 meeting of the bank's governing council in Nicosia, Cyprus released Thursday showed that "all the members" agreed there was "no room for complacency." Members stressed that the stimulus, which involves the monthly purchase of 60 billion euros worth of government and corporate bonds with newly created money through September 2016, "had to be fully implemented and supported by appropriate communication." The purchases started March 9. The bank's intentions have a significant impact on a wide array of people - from stock and bond investors to European exporters, U.S. corporations and consumers. The stimulus - at a time when the U.S. Federal Reserve is preparing to move in the opposite direction by possibly raising interest rates this year - has sent the euro plunging against the dollar. That helps eurozone exporters but has burdened earnings for U.S. corporations that do business in Europe. The stimulus has also helped shore up European stock markets as well as government bonds.

Marriage Made in Corporatist Heaven Slams into Resistance --  After eight rounds of secret negotiations, Washington and Brussels are still struggling to breathe life into the Transatlantic Trade and Investment Partnership (TTIP). According to current European Union President, Latvia, the chances of the agreement being signed by the year-end target are growing perilously slim. The potentially game-changing trade deal is aimed at radically reconfiguring the legal and regulatory superstructures of the world’s two largest markets, the United States and the European Union – for the almost exclusive benefit of the world’s biggest multinational corporations. However, resistance continues to mount on both sides of the Atlantic. In the U.S. Wikileaks’ perfectly timed exposé of the investment chapter of TTIP’s sister treaty, the Trans Pacific Partnership (TPP), could derail White House efforts to gain fast track approval to bulldoze the treaty through Congress. This time, even the mainstream media seems to be paying an interest, with the New York Times in particular publishing a broadly critical report. On the other side of the Atlantic, things seem to be going from bad to worse — at least for the treaty’s supporters. Even the U.S.’s ever-faithful ally and fellow Five-Eye member, the United Kingdom, is beginning to express reservations about TTIP. Earlier this week an all-party committee of Members of Parliament released a scathing report on the trade agreement. The Business, Innovation and Skills committee said the government needed “stronger evidence” to back up its claim that TTIP would bring a boost of £100bn a year to the UK. The report also warned that the case had yet to be made for the highly controversial investor-state dispute settlement (ISDS), a provision that elevates individual foreign corporations and investors to equal (or arguably superior) status with a sovereign nation’s government. If signed, it would allow companies to skirt domestic courts and directly “sue” signatory governments for compensation in foreign extrajudicial tribunals.

Meet Andorra: Europe's Next Failed State -- Nestling idyllically between France and Spain in the foothills of the Pyrenees, Andorra - which has enjoyed the benefits of European borders without the restrictions of EU membership - has seen its risk "increase beyond our expectations," according to S&P. As a reminder, when Cyprus was "templated" and depositors awoke with a 47% haircut, its total financial assets to GDP was around 8x, Andorra is now at a stunning 17x. As The Telegrpah explains, in the last three weeks, the state has been gripped by a banking crisis that threatens to take it to the brink; and Andorra, which is not a member of the eurozone but uses the single currency on an informal basis, would have no way of bailing them out (with no central bank or lender of last resort). In short, the country faces a catastrophe if its banks fall apart.

Don Quijones: Rajoy Horror Picture Show Nears Grisly Climax in Spain - In Spain, the Eurozone’s fourth largest economy, the stage is set for a grisly finale of the Rajoy Horror Picture Show. In roughly seven or eight months (the exact date is still to be confirmed), Spaniards will vote in general elections that could dramatically reconfigure the country’s political landscape. For the first time in decades, the stranglehold of the two main parties over Spanish politics is under threat. Spain’s establishment parties, Prime Minister Rajoy’s People’s Party (PP) and Pedro Sanchez’s so-called socialist party (PSOE), are facing sustained pressure from both sides of the political spectrum: two new parties – Pablo Iglesias’ anti-austerity movement Podemos and Albert Rivera’s Catalonia-based center-right grouping Ciutadans (or Cuidadanos in Spanish) – enchant the disenchanted masses. As I reported in November last year, if Spain’s new political forces continue to capture the hearts and minds of the disaffected that now represent a very large minority, if not the majority, they could hammer a deep nail into the country’s two-party system. While winning the elections is an almost mathematical impossibility, either party could become kingmaker, or kingbreaker! Recent municipal elections in Andalusia, Spain’s most populous region, could offer an interesting foretaste of what’s to come. The PSOE came out on top despite losing a large number of seats, followed by the PP in second place with its worst ever electoral performance in the region. Podemos rounded out the podium with 15% of the seats, and Ciutadans came in fourth with 9%. No party came even close to achieving an absolute majority. If similar results were to occur at the national level, it would almost certainly spell the end of the Rajoy Horror Picture Show. Just as in Andalusia, the outcome would be a hung parliament or a relatively weak coalition government — either of which would be preferable to the current state of affairs.

European Jobless Rates By Country: Youth Unemployment In Greece, Spain Remains Over 50% -  Earlier today, the supposedly resurgent Eurozone reported a February unemployment number of 11.3%, which not only missed consensus but was worse than the highest estimate. This miss meant the recent steady trend of improvement would have halted if January's unemployment print of 11.3% hadn't been revised higher by 10 bps. Still, 11.3% is better than the 11.8% reported a year ago, and as the chart below shows, the trend is certainly Europe's friend if only for the time being. One does wonder, however, how much of the improvement is due to the borrowing the BLS' favorite tradition of lowering the denominator and artificially reducing the eligible labor force by "eliminating" those who have been out of a job for a long enough period. Statistical gimmick or no, one thing stands out: the biggest threat for Europe's future remains front and center - it is the youth (under 25) unemployment, which at 22.9%, and just barely below the 24% from a year ago. Worse, in the two most troubled European nations, Greece and Spain (with Italy not far behind), it remains well over half.

The Madre of All Bubbles - Why is Spain in the terrible position it is? A quarter of its workforce is unemployed. It is producing much less than it did in 2008. Tens of thousands are protesting in the streets against the status-quo political order.  One explanation might be fiscal recklessness. Yet this explanation simply doesn't work. Spain's government had run large primary budget surpluses for the decade leading up to the crisis. And, if you look at the so-called "structural" budget deficit -- which takes into account the effects of booms and busts on the government's spending and tax revenue -- Madrid was still running a surplus.  But the most important one, I think, is debt. Lots and lots of household debt. It's well known that Spain experienced the madre of all debt-fueled housing bubbles from 1995 to 2008. For comparison, it was vastly larger than the American housing bubble: Real home prices more than tripled in Spain, whereas they doubled in the U.S. (You can see so for yourself on The Economist's neat house-price tool.) When prices came crashing down, Spanish households were left with enormous mortgage debts. And their response was to slash their consumption spending, plunging the Spanish economy into depression. (For more on this explanation, see Atif Mian and Amir Sufi's book, House of Debt.) Add to that the fact that, in Spain, mortgage debts are "full-recourse" -- which means that, even if you default on your mortgage and walk away, the bank can still come after you for the rest of the money.

Opposition tells Tsipras to get control of his party: Opposition parties called on Prime Minister Alexis Tsipras over the weekend to get a firmer control on his party, claiming that some sections of SYRIZA are seeking a confrontation with lenders. With talks between technical teams from Greece and the institutions under way in Brussels, Tsipras was due to hold a cabinet meeting on Sunday night to brief his ministers about the content of the government’s proposals and the course of discussions in the Belgian capital. However, opposition parties had earlier expressed concern about Tsipras’s apparent inability to get his party to support a compromise with creditors. “He does not want to cause a rift because he does not have a mandate from voters for such a move and he knows the consequences would be catastrophic,” PASOK leader Evangelos Venizelos said in an interview with Agora newspaper. “On the other hand, he does not have the parliamentary majority needed to support a clean and honest turn toward responsibility.” To Potami also voiced its concern about the comments from some government members after Energy Minister Panayiotis Lafazanis claimed in an interview with Kefalaio weekly that the only way for Greece to exit the crisis is through “a tough confrontation, if not a clash with German Europe.”

Greek PM Tsipras says he seeks no rift with Europe (Reuters) - Greek Prime Minister Alexis Tsipras said on Saturday that he sought no rift with Europe after his cash-strapped country submitted a list of reforms to its lenders in a bid to secure much-needed funds. Tsipras's leftist government agreed an extension to its 240-million euro bailout funding in February, albeit with aid frozen, and now must agree on a set of reforms which it sent to its EU-IMF creditors on Friday in order to stave off bankruptcy. The austerity-weary nation will run out of money by April 20, a source familiar with the matter said on Tuesday, if it does not unlock much-needed funding. "The liquidity problem is naturally hampering the situation but I believe that will be tackled immediately once we reach an agreement over reforms," Tsipras said in an interview with Sunday's Real News newspaper. After answering a question regarding government attempts to deal with corruption, Tsipras was asked whether he wanted a rift or a solution with Greece's European partners. "My view has always been the same: a break from corruption, a solution with Europe," he replied.

List of Economic Overhauls Greece Must Flesh Out by Monday - -- Greek government officials plan to hold talks in Brussels over the weekend with representatives of the country’s creditors to put the finishing touches on an economic overhaul plan the government hopes to finalize by Monday. The proposed reforms will bring in 3 billion euros ($3.3 billion) of additional revenue this year and allow Greece to achieve a primary budget surplus of 1.5 percent of gross domestic product, according to a Greek government official who asked not to be identified in line with policy. The plan sees GDP growing 1.4 percent this year, he said. Under Greece’s 240 billion euro bailout program with the euro area and the International Monetary Fund, the country was supposed to post a primary surplus of 3 percent of GDP this year. A Feb. 20 agreement to extend the bailout until the end of June says “economic circumstances in 2015 will be taken into account” when assessing this year’s primary surplus. Commitments include streamlining sales-tax rates, with a view to limiting exemptions, implementing a comprehensive review of government spending in every sector, devising a strategy for dealing with tax arrears, overhauling health expenditure, tightening legislation on funding of political parties, social security reform and fighting corruption. A partial list of the reform measures this month focused heavily on this area. That proposal, which included hiring non-professional tax inspectors such as tourists, was deemed inadequate by Greece’s creditors. The government promises to deal with non-performing loans “in a manner that considers fully the banks’ capitalization.” Planned legislation to protect primary residences from foreclosure that the government will submit to parliament next week may draw attention from the European Central Bank, which is the banks’ regulator and is already shoring up their liquidity position with more than 100 billion euros of lending. The government also passed legislation last week for the repayment of tax arrears under an installment scheme, potentially creating a rift with creditors who hadn’t agreed to it.

Eurogroup unlikely to be held soon to discuss Greek reforms: Officials representing Greece and its lenders on Saturday began discussing the reform proposals put forward by Athens in order to secure further bailout funding but the prospect of a Eurogroup meeting being called in the next few days to approve such a disbursal appear slim. Technical teams from the various sides assessed the list of reforms, which include measures aimed at raising 3 billion euros in revenue this year, mainly from improvements in tax collection and efforts to stamp out tax evasion. The government is also aiming to boost state coffers by selling online gambling licenses and launching tenders for broadcasting permits. Other measures being considered are raising the top income tax rate to 45 from 42 percent and only increasing the tax-free threshold from 5,000 euros to 12,000 euros gradually, rather than in one go as SYRIZA had promised before the elections. There is also a plan to increase the luxury tax and the special consumption tax for alcohol but changes to value-added tax will only be considered by Athens if the lenders deem the measures already proposed insufficient. Sources told Kathimerini that even if there is a broad agreement between Greece and its creditors it is unlikely that eurozone finance ministers will meet next week or even the week after to approve the release of even part of the 7.2 billion euros remaining in bailout money. A high-ranking European official said that there is a possibility that the Euro Working Group (EWG) would assess the measures this week but that eurozone finance ministers would not be called upon until all the details have been ironed out. He also pointed out that Western Easter falls this Sunday, meaning that several days would be lost due to holidays, and that Orthodox Easter is the following Sunday.

Germany says Greece must flesh out reforms to unlock aid - (Reuters) - Greece's biggest creditor Germany said on Monday that the euro zone would give Athens no further financial aid until it has a more detailed list of reforms and some are enacted into law, adding to scepticism over plans presented last week. A senior official in Brussels on Sunday had dismissed the list as "ideas" rather than a plan that Greece could submit to EU and IMF lenders to avoid running out of cash next month. Euro zone states are still waiting for Greece to send a more comprehensive list, a German finance ministry spokesman said. Chancellor Angela Merkel said Athens had a certain degree of flexibility on which reforms to implement but that they must "add up" to the satisfaction of European partners. "The question is can and will Greece fulfil the expectations that we all have," she said during a visit to Helsinki. "There can be variation as far as which measures a government opts for but in the end the overall framework must add up." There was no immediate reaction from Athens on whether the list would be amended further. Lenders have said it could take several more days before a proper list was ready. Greek and other euro zone officials from the Euro Working Group are due to discuss the reforms at 1500 GMT on April 1, a Brussels source said. A Greek finance ministry official said the list included a lowered target of 1.5 billion euros (1.1 billion pounds) in proceeds from asset sales this year and a proposal to set up a bad bank with bailout funds returned to the euro zone in February. Among the slated asset sales is a stake in the country's biggest port, Piraeus, in which China has expressed interest.

Greece Submits Inadequately Detailed Reform List; Tsipras Tells Parliament of “Peace with Honor,” Um, “Honorable Compromise” -- Yves Smith - The Greek government continues to climb down substantively on its promises of resistance to the dictates of its creditors as time pressure intensifies. Last Friday, Greece submitted a longer reform list. The problem, from the Troika’s perspective, is that it was longer in the wrong way: more proposals, when what they need is sufficient detail so they can judge the fiscal impact. Recall that Greece is allowed to swap reforms out of the existing structural reform package if it can demonstrate to “the institutions” that there will be no negative impact. Bloomberg’s recap: The 15-page draft, which was discussed Sunday in Brussels, requires more information and details and was a long way from serving as the basis of a deal, said one of the aides, who asked not to be named because the talks were private…. “The implication from early on has been that the Greek side doesn’t have enough flesh on bones of some of the new proposals,” “The surprising thing about even current proposals given leaks is the seeming lack of technocratic input, which would have helped the Greek case.” And the information given wasn’t just too sketchy; it was disorganized. Bess Levin wasn’t exaggerating via her headline Greece Jotted Down Some Notes On The Back Of A Cocktail Napkin And Submitted It To Us: EU.  And as before, there’s a subtext of the Greek side seeming to believe that things are negotiable that just aren’t. One of the thing that is not negotiable has been the process set forth in the Eurogroup memo, which was that the Troika needed to review, negotiate, and finally approve its plans. They would then be sent for Eurogroup approval before the funds will be released. Tsipras said he would achieve an honorable compromise. But that has far too much of a “peace with honor” sound about it. Despite the government’s repeated claims that it is rejecting austerity, it conceded on that issue long ago when Yanis Varoufakis said Greece would achieve a primary surplus of 1.0% to 1.5% of GDP and would continue to run primary surpluses. A government surplus is dampening even in the best of times; during a depression, it guarantees that the economy will get worse.

Greek PM says wants 'honest compromise' but not at any cost (Reuters) - Prime Minister Alexis Tsipras on Monday appealed for an "honest compromise" with lenders but warned Greece would not agree to an "unconditional" one, after its biggest creditor demanded it do more to show commitment to reform. With its cash coffers emptying rapidly, Athens is running out of time to convince euro zone and IMF lenders that it will implement reforms and is worthy of fresh aid. Athens could run out of cash by April 20, a source has previously said. "It is true that we are seeking an honest compromise with our lenders but don't expect an unconditional agreement from us," Tsipras told parliament at a special session on the status of talks with lenders. The radical leftist premier gave away little on progress made in talks, but, in a boost for the government, said a new law making it easier to repay tax arrears had already resulted in 100 million euros (73.1 million pounds) flowing into state coffers in a week. Tsipras appealed to the centre-right opposition to support his efforts. Former Prime Minister Antonis Samaras said his conservatives would support efforts to unlock aid but not at the price of driving Greece into the ground. "Whatever you do, do it fast," said Samaras, who lost the January national election to Tsipras, accusing the 40-year-old leader of facing "deadlocked talks and panic". The comments came after Greece's biggest creditor Germany said the euro zone would give Athens no further aid until it has a more detailed list of reforms and some are enacted into law, adding to scepticism over plans presented last week.

Greek prime minister: Debt needs restructuring for repayment - (AP) — Greece will be unable to repay massive bailout debts without eventually restructuring them, the prime minister said, as pressure from lenders mounted on Athens to produce viable cost-cutting reforms to unlock emergency funds and prevent default. Alexis Tsipras told Greek lawmakers late Monday that his two-month-old government had not abandoned its pledge to seek a debt settlement and push for more generous deficit targets. "There is the recognition (from lenders) of the need to finally begin a debate on the necessary restructuring of the Greek debt," he said. "Because without such an intervention it is impossible to repay it." Greece's reserves are running low on money needed to repay debts and keep the country running after troubled negotiations with lenders and early general elections in January stalled the payout of more than 7 billion euros ($7.6 billion) left in bailout funds for months. In Brussels, EU Commission spokesman Margaritis Schinas said a deal with Greece "requires a lot of technical work" even after hours of meetings to discuss the Tsipras government proposals over the weekend.

Europe Pulls Rug From Under Greece, Says "Nein" To "Vague, Piecemeal" Proposals -- Despite all the talk of a "positive climate" Greek talks with their creditors have ended badly for the desperately cash-strapped nation. As WSJ reports, Greek proposals for a revised bailout program don’t have enough detail - are "piecemeal and vague" - to satisfy the government’s international creditors, eurozone officials said. Furthermore, as Dow Jones reports, EU finance ministers are unlikley to meet again until mid-April (and in the meantime, Greece has to pay salaries, pensions, and most critically IMF debts due on April 9th). It appears clear that the EU is prepared to let Greece entirely run out of money in an effort to squeeze Tspiras as much as possible (though that action will likely further force a pivot to Putin).

Greek Energy Minister Slams "Unscrupulous, Imperialist" Germany, Will Seek "Bold Alternatives" In Russia - The Greek energy minister kicked the hornet's nest point blank earlier today when he said that "Greece is at more than breaking point; urgently needs big, bold alternatives to “German, incumbent Europe"and that "creditors behaving as unscrupulous imperialists towards distant colony, threatening submission or economic suffocation."  More importantly, Lafazanis has some ideas where to find said "big, bold alternatives." In Moscow. Greece's Energy Minister Panagiotis Lafazanis will meet his Russian counterpart and the CEO of energy giant Gazprom in Moscow on Monday, as he hit out at the EU and Germany for tightening a 'noose' around the Greek economy.

Greece sends new reform list to eurozone -- Greece on Wednesday submitted a fresh list of economic reforms to eurozone authorities, estimating the measures could raise as much as €6bn this year. It is the cash-strapped government’s most comprehensive effort so far to unlock €7.2bn in bailout funds before it goes bankrupt. The 26-page document, obtained by the Financial Times, relies on plans to crack down on tax evasion and fraud to raise most of the revenues. These include €875m from audits of offshore bank transfers and €600m from a new lottery scheme aimed at compelling consumers to demand value added tax receipts. The tenor of talks between Athens and its international bailout inspectors — the European Commission, European Central Bank and International Monetary Fund — has improved in recent days, and Greek officials have expressed hope that they could reach an agreement on the measures as soon as next week. “The larger purpose of this document is, in the first instance, to unlock short-term financing that will permit the Greek government to meet its immediate obligations,” the document states in a short introduction. “The Hellenic Republic considers itself to be a proud and indefeasible member of the European Union and an irrevocable member of the eurozone.” The submission comes after a previous effort sent to the inspectors on Friday received a lukewarm reception from eurozone authorities, who said it lacked detail and substance. Talks on the initial submission broke off on Tuesday without agreement and officials said there was little chance of restarting without more co-operation from Athens. Despite the improved atmosphere, several EU officials said they did not expect a deal before the next scheduled meeting of eurozone finance ministers in Riga on April 24. Some officials remain concerned that Athens does not have sufficient funds to make a €450m payment to the IMF on April 9, but Greek officials insist they can scrape enough together to get by.

Updated reform list still not enough to unlock aid: Greek officials and euro-area technical experts on Wednesday discussed an updated list of reform proposals but were unable to reach an agreement that would pave the way for Greece ending its liquidity shortage by receiving at least part of the 7.2 billion euros remaining in bailout funding. Athens insisted that progress had been made during the Euro Working Group (EWG) teleconference, in which Finance Minister Yanis Varoufakis also took part. However, there was a mixed reaction from European officials. One eurozone official told the Wall Street Journal that the Greek proposals were a “very long way” from being the basis for an agreement that would allow the Eurogroup of finance ministers to agree a funding disbursal. Two unnamed euro-area officials recognized “the advances by Greece while insisting that more work needs to be done to reach a conclusion of this part of the rescue,” according to Bloomberg. “It was just to take stock,” a source close to the EWG discussions told AFP. “There won’t be any developments in coming days,” he added. “We will continue with technical work in Athens. There is no Eurogroup meeting in sight.” The updated Greek proposals foresee the adoption of measures that will bring in revenues of 4.7 billion to 6.1 billion euros, which would lead to Greece achieving a primary surplus of 3.1 to 3.9 percent of gross domestic product, which is above even the original 3 percent target in the country’s bailout program.

Greek defiance mounts as Alexis Tsipras turns to Russia and China - Two months of EU bluster and reproof have failed to cow Greece. It is becoming clear that Europe’s creditor powers have misjudged the nature of the Greek crisis and can no longer avoid facing the Morton’s Fork in front of them. Any deal that goes far enough to assuage Greece’s justly-aggrieved people must automatically blow apart the austerity settlement already fraying in the rest of southern Europe. The necessary concessions would embolden populist defiance in Spain, Portugal and Italy, and bring German euroscepticism to the boil. Emotional consent for monetary union is ebbing dangerously in Bavaria and most of eastern Germany, even if formulaic surveys do not fully catch the strength of the undercurrents.  This week's resignation of Bavarian MP Peter Gauweiler over Greece’s bail-out extension can, of course, be over-played. He has long been a foe of EMU. But his protest is unquestionably a warning shot for Angela Merkel's political family. Mr Gauweiler was made vice-chairman of Bavaria's Social Christians (CSU) in 2013 for the express purpose of shoring up the party's eurosceptic wing and heading off threats from the anti-euro Alternative fur Deutschland (AfD). Yet if the EMU powers persist mechanically with their stale demands - even reverting to terms that the previous pro-EMU government in Athens rejected in December - they risk setting off a political chain-reaction that can only eviscerate the EU Project as a motivating ideology in Europe.

No 'bad thing' if Greece leaves euro: Warren Buffett: Billionaire investor Warren Buffett told CNBC that if Greece ended up leaving the euro zone, "that may not be a bad thing for the euro." Asked by CNBC's Becky Quick Tuesday whether it could be a good thing for struggling Greece to leave the 19-country single currency union, Buffett said, "it could be a good idea (in) several ways if everybody learns that the rules mean something." "If it turns out that the Greeks leave, that may not be a bad thing for the euro," he added. The chairman and chief executive of multinational holding company Berkshire Hathaway said that it was not "ordained" that the euro had to have "exactly the same members it has today" but it did need adequate management, he believed. "But it is ordained that over time the countries in the euro zone have to have somewhat compatible labor laws, fiscal deficits, general management of their economy that don't result in outliers that really aren't playing the game the way the rules are supposed to be and we may find out very soon about Greece," he said.

Greece Throws Away One of Its Eurogroup Memo Wins, Submits Reforms Reaching Up to a 3.9% Fiscal Surplus -- Yves Smith -- One of the things we’ve stressed is that the Greek government’s repeated claims that it is submitting an anti-austerity reform package is untrue. The Greek government committed to achieving a fiscal surplus of 1.0% to 1.5% and has separately said it will always run a fiscal surplus. We have stressed that running a fiscal surplus is an economic dampener, and is even more damaging in a severely depressed economy like Greece. One could argue that Greece still got a win in the Eurogroup memo of February, in which the agreement stated that the fiscal surplus target for 2015 would be reassessed in light of current conditions. Most observers took that to mean that the scheduled increase to 3.0% was officially off the table, and that that was an important success for Greece. Mind you, the 3.0% goal was widely recognized as unrealistic, but Greece was relieved of the need to make concessions to have it reassessed. But is also important to recognize that this was a qualified gain, since the 1.0%-1.5% target is still austerian. Greece submitted a new version of its structural reform package yesterday. Peter Spiegel of the Financial Times received a copy and reported on it. His article focused on the state of play, that while the working relations between the two sides is improving, the creditor side still sees the draft as needing a lot of work before anyone can make a decision. The International Business Times reports that its sources say Spiegel’s recap of the latest document is accurate.  From my perspective, Spiegel held a real stunner back till close to the close of his article:  Despite demands from Athens that it should be allowed to reduce its primary budget surplus target — the amount of revenues minus expenditures when payments on debt interest are not counted — the document says the measures could mean a surplus of as much as 3.9 per cent of economic output, which is above the programme’s current 3 per cent target.

Greece Threatens to Miss IMF Payment, Issue Drachma (Updated)  - Yves Smith  Greece has decided to up the ante in its negotiations with the Troika. The open question is whether the latest move, the press leak via Ambrose Evans-Pritchard at the Telegraph that Greece will miss its April 9 payment to the IMF so that it can continue to make pension payments, and has started to make plans to issue the drachma, are game-changers that Greece hopes they will be.  The sources that spoke to Evans-Pritchard said that the government would be out of funds on April 9, the IMF due date. Note this is earlier than the most recently leaked drop-dead date of April 20. The Greek government cannot make that payment and also make pension and government salary payments due April 14.  Keep this in mind:  Investors have recognized that a Grexit was a possible outcome; indeed, the financial press was treating it as a far more likely outcome than the political press. With Greece running out of money, discussion of that possibility increased last week, with Warren Buffett even saying a Grexit could be good for the eurozone versus serious pundits like Martin Wolf warning that a Grexit would pave the way for other countries to leave. But even Wolf held out the option of a managed Grexit so as to reduce the dislocation.   Despite the dramatic sound of invoking the “d” words, so far, this is a bluff.  If you read the article, Greece has yet to take a single concrete step towards issuing drachma, the most important being to impose capital controls. Market reactions will be influenced by Eurocrat actions and messaging. Here Greece has given the officialdom a full four days, since Friday and Monday are holidays in non-Christian Orthodox Europe, to plan a response. No developed economy has defaulted on the IMF, but the flip side is IMF payment dates are loose.

Dijsselbloem says ‘still long way’ to go on Greek proposals: Eurogroup Chairman Jeroen Dijsselbloem said there’s a “long way to go” to strike a deal on Greece’s aid proposals even after the Athens government responded to demands for more detail on its bid to end the deadlock. “It’s continuously improving,” Dijsselbloem told reporters in the Hague on Thursday. “They deliver more and more proposals that are more and more detailed. On some parts, we will definitely reach an agreement.” With cash running out and a renewed recession looming, Greece is in talks with euro-area officials on conditions to unlock emergency loans. The standoff has cost banks more than 15 percent of their deposit base, which has declined for six months. “There must be a good package which can also be realized in the four months we’re talking about,” Dijsselbloem said. “The clock continues to tick. So I hope they soon reach an agreement on the main issues, then we can discuss it in the eurogroup.” Dijsselbloem, also the Dutch finance minister, said he doesn’t expect a Eurogroup meeting next week. “It’s my impression that it still takes time. So I hope they continue to work hard and perhaps in that case, it can go quickly,” he said.

Alternate FinMin: If creditor talks collapse, other solutions can be found: Alternate Finance Minister Dimitris Mardas said on Friday that the government was attempting to reach a deal in negotiations with its creditors but that, if one was not reachable, other solutions could be found. In comments to Skai, Mardas said Athens was intent on meeting its debt obligations on time but also on retaining the required reserves. As for speculation about a possible Greek exit from the eurozone, Mardas described it as "a virtual reality" scenario. He said the government would draft a new mid-term program which would adopt spending and revenue targets to the provisions of a new deal Greece is aiming to reach with creditors. Mardas also ruled out the possibility of the contents of safety deposit boxes at banks being opened to be taxed but said Greeks should declare their assets. Speaking earlier to ANT1, Mardas said, "on the basis of current data, we can pay our obligations." He added that conclusions being reached abroad about the state of the Greek economy "use other hypotheses and research than the ones we use" and that only Greece's General Accounting Office knows the real figures."

Tsipras Heads To Moscow As IMF Withdraws Athens Staff; Greek Default Risk Hits Post-Crisis High - Amid growing pressure from their 'Troika colleagues' with Eurogroup Chair Dijsselbloem noting there is "still a long way to go" on Greek proposals and The IMF withdrawing its staff in Athens; new prime minister Alexis Tsipras heads to Russia to meet with Putin early next week. As Kremlin spokesman, Dmitry Peskov noted - somewhat intriguingly - "Greece has not asked [Russia] for financial aid... yet," as Tsipras is expected to seek agreement for a 'road map' of initiatives on the political and economic levels. Greek default risk has resurged in the last few days to its highest since the last 'restructuring'...

Russia, Greece to discuss EU sanctions, economy in Moscow: Russian President Vladimir Putin and Greek Prime Minister Alexis Tsipras plan to discuss economic ties and the European Union's sanctions against Moscow when they meet for talks next week, a Kremlin spokesman said on Friday. Russia wants the EU to lift the sanctions imposed over Moscow's role in the turmoil in Ukraine and hopes to get support from some EU member states, notably Hungary and Greece. The Kremlin spokesman, Dmitry Peskov, said it was too early to talk about any possibility of Moscow providing financial help to the cash-strapped Greece before the talks. "Relations between Moscow and the European Union will be discussed in the light of Brussels's policy of sanctions and Athens' quite cold attitude to this policy," Peskov said. Greece's new left-wing government has said it will not seek aid from Moscow but has so far failed to reach a deal with its EU/IMF creditors to unlock fresh funds. Putin and Tsipras will meet in Moscow on April 8. It will be Tsipras' first visit to the Russian capital after his leftist Syriza party swept to victory in a snap election in January. Tsipras visited Moscow in May 2014, and attended a conference on ties between Russia and Greece, as well as being received by senior Russian state officials. Five other members of the Greek delegation now also hold senior government roles in Athens.

Generous welfare benefits make people more likely to want to work, not less - Survey responses from 19,000 people in 18 European countries, including the UK, showed that "the notion that big welfare states are associated with widespread cultures of dependency, or other adverse consequences of poor short term incentives to work, receives little support." Sociologists of Oslo and Akershus University examined responses to the statement 'I would enjoy having a paid job even if I did not need the money' put to the interviewees for the European Social Survey in 2010. In a paper published in the journal Work, employment and society they compare this response with the amount the country spent on welfare benefits and employment schemes, while taking into account the population differences between states. The researchers found that the more a country paid to the unemployed or sick, and invested in employment schemes, the more its likely people were likely to agree with the statement, whether employed or not. They found that almost 80% of people in Norway, which pays the highest benefits of the 18 countries, agreed with the statement. By contrast in Estonia, one of least generous, only around 40% did. The UK was average for the generosity of benefits, and for the percentage agreeing with the statement - almost 60%.

Viewing the U.K.’s GDP Numbers in a Less Favorable Light -  The U.K. saw its gross domestic product figures revised upward Tuesday, an apparent boost for the Conservative-led government before upcoming national elections. But viewed through a different lens, the U.K.’s GDP numbers show a less flattering picture. The Office for National Statistics, in its third and final review of Britain’s economic performance, said the U.K. economy grew 2.8% in 2014, which is more than their previous estimate of 2.6% annual growth for the year. But a look at economic output per head, reached by dividing GDP by the number of people living in the country, growth was less robust. On that basis, Britain only grew 2.2% in 2014. Moreover, looking at output per head, the U.K. economy is still 1.2% below its pre-recession level while Britain’s total output is almost 4% above what it was before the downturn. Economists say that gap reflects in part the weak productivity levels Britain has been experiencing since 2008. Analysts consider productivity, which is a gauge of how efficient an economy is, to be important because it helps boost living standards. The economy is a key battleground ahead of the May 7 election, with Prime Minister David Cameron and his fellow Conservative, Treasury chief George Osborne, arguing that their economic approach focusing on the budget deficit is paying dividends. Their main rival, the center-left Labour Party, counter that the recovery is barely being felt by ordinary families who have seen their incomes squeezed by rising prices.

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