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

Saturday, May 9, 2015

week ending May 9

Why The Fed Will Do QE4 (In 4 Ugly Charts) While The Fed and its apologists (except for Jim Bullard) remain firmly attached to the idea that it is the 'stock' (or absolute level) of Fed Assets that represents the amount of policy-easement and not the 'flow' (rate of change), we have explained numerous times that this is complete rubbish. With the Federal Reserve balance sheet hitting 6-month lows this week, we thought the following 4 pictures would paint more than a thousand words on why The Fed will need to restart the flow soon... or the game is up.  The quiet, subtle decline in the Federal Reserve's balance sheet continued in April. As of May 1st, Gavekal notes the Fed's balance was at $4.47 trillion. While undoubtedly still incredibly large, the Fed's balance sheet is about $45 billion less than its peak level on January 16, 2015.  Total assets at the Fed are back to levels last seen on October 17th. Total assets at the Fed have declined by nearly $29 billion over the past three months. On a rolling three-month basis, the Fed's balance sheet has been declining for the last two months. And the three-month difference in total Fed assets has produced some interesting relationships since QE started. Below are some economic indicators that caught our eye... All suggesting it is indeed the flow.. and not stock that has pumped everything... and now that it is officially in decline, Yellen is going to need to find an excuse to crank the flow once again...

Fed’s Evans Continues to Advocate for Early-2016 Rate Increase - Federal Reserve Bank of Chicago leader Charles Evans repeated on Monday his belief that raising rates this year would be a bad idea, especially in the wake of data showing a weak start to the year amid persistently weak levels of inflation. “Economic activity appears to be on a solid, sustainable growth path, which, on its own, would support a rate hike soon,” Mr. Evans said in a speech in Columbus, Indiana. “However, the weak first-quarter data do give me pause, and I would like to see confirmation that they are indeed a transitory aberration,” the official said. Speaking to reporters after his speech, Mr. Evans said he suspects the negligible levels of growth seen during the first quarter reflect weather issues, a slow global economy and lower exports tied to the strength of the dollar. “I tend to believe that most of what we saw in the first quarter was transitory, but we will have to see,” he said. In his speech, he said the uncertain outlook, coupled with very low levels of inflation and the expectation it will only slowly rise over time, means “it likely will not be appropriate to begin raising the federal funds rate until sometime in early 2016.” “There is no prescribed timeline that must be adhered to, and no preset script to follow, other than that we should let economic conditions and risks to the outlook be our guides,” Mr. Evans said. “I see significant risks, but few benefits, to increasing interest rates prematurely,” he said. When it comes to moving too early, “It’s inflation that I worry most about. I think if we top out in this cycle with inflation not getting to 2%, that’s going to be a problem for us longer term,” Mr. Evans told reporters.

Fed’s Lockhart Still Sees Rate Rise in Coming Months, Data Permitting - Federal Reserve Bank of Atlanta President Dennis Lockhart said Wednesday he remains hopeful the U.S. central bank can raise rates at some point in the next few months, but he needs to be sure that weakness at the start of the year proves temporary. When it comes to lifting rates off of near zero levels, “all meetings are in play…including June,” Mr. Lockhart told reporters after a speech in Baton Rouge, La. “I’m still of the view that the conditions will be appropriate in the middle of the year, which we are getting closer to,” he said, in his first public comments since last week’s monetary-policy setting Federal Open Market Committee meeting.  Mr. Lockhart noted that markets are also shifting toward what he thinks the likely path of rates will be after a period of disconnection between investor and official outlooks. “I’ve noticed recently that probabilities as reflected in forward markets, or futures markets for fed funds, seem to have moved from December toward September. I think that’s a reasonable alignment with what I think to be the likely policy outlook” for short-term rates, he said. But to get to higher rates, Mr. Lockhart said he needs to be sure that the unexpectedly weak levels of growth that started the year don’t persist. To that end, he said Friday’s release of the April jobs data will be very important to gauge economic momentum in the second quarter. More weakness, coming on the back of March’s soft hiring gains, wouldn’t be definitive to the outlook, but it would be a worrisome signal, Mr. Lockhart told reporters.

Kocherlakota Reiterates Fed Shouldn’t Raise Rates in 2015  — Soft economic data in the first three months of 2015 should give Federal Reserve officials pause when it comes to raising interest rates, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said Tuesday. “It’s only one quarter, and you don’t make policy based on three months of data, but it is a matter for concern,” Mr. Kocherlakota said at a public forum here. The Commerce Department earlier on Tuesday reported that the U.S. trade deficit widened in March. “Once those [numbers] are folded into estimates for real gross domestic product, we’re probably going to be in a negative situation in the first quarter, meaning that real gross domestic product actually contracted in the first quarter,” Mr. Kocherlakota said. The Commerce Department in April said GDP, the broadest measure of goods and services produced across the economy, expanded in the first quarter at a weak 0.2% annual rate. The agency will release a revised GDP estimate in late May. Most Fed officials expect to begin raising their benchmark short-term interest rate, which has been pinned near zero since December 2008, sometime this year. The central bank in April cited “transitory factors” in explaining the economy’s winter slowdown. Mr. Kocherlakota, however, has repeatedly argued that the Fed shouldn’t raise rates in 2015, often pointing to subdued U.S. inflation that has undershot the Fed’s 2% annual target for nearly three years. The latest “softening” in economic activity, he said Tuesday, “should give us additional pause.”

Job Numbers Restore Confidence, But Don’t Give Fed Reason to Hurry - The April jobs numbers are an important step toward restoring the Federal Reserve’s confidence that the economic expansion is on track after a first quarter slump. This keeps the Fed on a path toward raising short-term interest rates later this year. Fed officials will want further confirmation the economy is growing at the 2.3% to 2.7% pace they project and inflation heading back toward their target of 2%. Because they want that confirmation, a June rate increase looks unlikely and September the most probable liftoff date. “There is nothing in this report that would force the Fed to hike before September,” Payroll growth bounced back after slowing sharply in March, with employers adding 223,000 jobs in April, which is in line with their average since September 2012, when the Fed launched its third bond-buying program. An index of aggregate hours worked by labor was up a healthy 2.5% from a year earlier, also in line with its average of the past few years.Those data suggest a moderate expansion of output and income continues after the first quarter slowdown. The jobless rate continued to fall, which suggests that slack in the labor market is diminishing, a development which many Fed officials believe will eventually lead to upward wage and inflation pressures. However, evidence of such pressure is mixed. Average hourly earnings of private workers were up 2.2% in April from a year earlier, within the 1.8% to 2.2% range they’ve been in since 2013. While there is no evidence of a wage breakout there, other measures of wages, including in the Labor Department’s Employment Cost Index, are starting to show signs of improvement.  “Even with wages still soft, payroll gains above 200,000 and ongoing declines in unemployment firm up the case to hike in the fall rather than risk falling too far behind the curve,”

WSJ Slams Bernanke's Rambling Blog Post: "Stop Blaming Everyone" For Your Mistakes - Bernanke threw the first punch... and it landed. Now The Wall Street Journal counters with a colossal combination... Thursday’s editorial on “The Slow-Growth Fed” sure got a rise out of Ben Bernanke. The former Federal Reserve Chairman turned blogger turned Pimco adviser wrote to defend the central bank and by implication his policies as innocent of responsibility for subpar economic growth. This is fun, so let’s parse the Revered One’s arguments. First, Mr. Bernanke accuses us of “forecasting a breakout in inflation” at least since 2006. The central banker is getting into the polemical swing, but he’s wild with that one. We’re not always right. But we’ve been careful not to join some of our friends in predicting inflation from the Fed’s post-crisis policies. We’ve written that we are in uncharted monetary territory with risks and outcomes we lack the foresight to predict. Our view has been that the Fed’s first round of quantitative easing was necessary to stem the financial panic—and that it worked. We were skeptical of the later bouts of QE, and in our view these have been notably less successful in helping the economy return to robust health. Asset prices are up and the wealthy are better off, but the working stiff is still waiting for the economic payoff. “The relatively rapid decline in unemployment in recent years shows that the critical objective of putting people back to work is being met,” Mr. Bernanke writes.  One reason the jobless rate has fallen to 5.5% is because so many people have left the workforce. The labor participation rate has plunged to 1978 levels during this supposedly splendid expansion. Most economists acknowledge that if the participation rate had stayed constant, the jobless rate would still be close to 8%. The failure to attract the long-term unemployed into the job market is one reason the Fed continues to hold interest rates so low.

Taylor on Bernanke: Monetary Rules Work Better Than ‘Constrained Discretion’ - In a recent blog post Ben Bernanke criticized the use of rules-based monetary policy in which the central bank endeavors to set the instruments of policy in a predictable rule-like manner.  The post attracted a lot of attention, but this is not the first time Ben has criticized rules-based monetary policy.  His recent criticism of rules-based policy focuses on the Taylor rule. It is similar to his criticism in 2010 in a major speech before the American Economic Association, which I responded to here in The Wall Street Journal, and it is an elaboration of his talk at a recent IMF conference where I also gave a talk and we had a little debate. In his 2003 speech Ben advocated “constrained discretion” as an alternative to rules-based policy, and judging from his talk at the IMF conference, “constrained discretion” is still his view of how policy has been conducted in recent years and how it should be conducted in the future. Ben’s blog post starts off with a nice summary of the Taylor rule from my 1993 paper. The summary is accurate except for the suggestion that I put the rule forth simply as a description of past policy when in fact the rule emerged from years of research on optimal monetary policy. In his IMF talk he also quotes at length from that 1993 paper to demonstrate, perhaps in a gotcha sense, that I did not think policy could be conducted mechanically.   I never thought that policy should be mechanical and still don’t. Some people say that I want to chain the Fed to an algebraic formula, but that is not what I have written or said. Having a rules-based policy for your instruments does not mean you mechanically follow a formula. It means you have an explicit strategy for setting the instruments. The same is true for my recommendation regarding legislation. In his blog post Ben then goes on to critique “Taylor’s critique of Fed Policy.” But he defensively focuses entirely on the period when he was on the Fed Board. In fact, as I described in my recent IMF talk, my critique of the Fed goes back to the terrible economy of the 1970s when, much as in recent years, the Fed was “highly discretionary and interventionist” with “lofty goals but no consistent strategy.”

The Fed Does Not Control the Money Supply - Paul Krugman -- Brad DeLong points us to David Glasner on John Taylor; I don’t think I need to add to the pile-on. But I do think Glasner misses a point when he says that the quantity of money, unlike the Fed Funds rate, is not an instrument under the direct control of the Fed.   Actually, under current conditions — in a liquidity trap — it’s not even under the indirect control of the Fed. The same impotence of conventional monetary policy that makes open-market purchases of Treasuries useless at boosting GDP also mean that broad monetary aggregates that include deposits are largely immune to Fed influence. The Fed can stuff the banks full of reserves, but at zero rates those reserves have no incentive to go anywhere, and even if they do they can sit in safes and mattresses. This is not a new point. Back in 1998 I covered it pretty well: it is quite misleading to look at monetary aggregates under these circumstances: in a liquidity trap, the central bank may well find that it cannot increase broader monetary aggregates, that increments to the monetary base are simply added to reserves and currency holdings, and thus both that such aggregates are no longer valid indicators of the stance of monetary policy and that their failure to rise does not indicate that the essential problem lies in the banking sector.  The effects of quantitative easing in Japan a few years later, which failed to raise M2, confirmed this conclusion. And sure enough, here’s what happened to US M2 as the Fed increased the size of its balance sheet:

Home (and Solvency Bias) at the Fed - naked capitalism - Yves here. I’m behind in giving my impressions of the INET conference on Finance and Society in DC, which has gotten more attention for its all-women roster than its content. In some ways, that is not surprising, given that the overwhelming majority of the speakers were either currently in or had a history of being in policy positions, and hence have the well-ingrained habit of speaking in code, and to the extent they admit to problems being serious, of steering clear of suggesting remedies commensurate with the seriousness of the issues.  Perry Mehrling, who teaches at Bard and has expertise in payment systems and complex financial products (among other things) does the important service of providing the highlights of the presentations by and conversation between Janet Yellen and Christine Lagarde. Lagarde, who is a remarkably theatrical speaker, took advantage of the fact that the IMF does not regulate banks to make a few pointed remarks on widespread cultural failings, admittedly in hackneyed terms such as “tone at the top” and “fish rot from the head. Nevertheless, more and more officials are admitting this is a major issue. For instance, Mark Carney of the Bank of England fingered as a potential systemic risk).

By insisting on a rate hike the Fed has "imported" the global slowdown  - Economic data out of the United States remains lackluster. We now see more evidence that a strong dollar can be quite damaging to US growth, as manufacturing employment in the US unexpectedly shifts into contraction mode. With this miss in the Friday's ISM PMI report (which was generally worse than consensus), the Bloomberg Economic Surprise index hit the lowest level since early 2009. Some argue that this economic weakness is driven mostly by seasonal effects, as Americans increasingly tend to "hibernate" over the winter.  If so, will we see an improvement in Q2?  We also have the Atlanta Fed US GDP tracker, which correctly predicted poor GDP performance in Q1, pointing to growth that is substantially below the "blue chip" consensus.  Furthermore, this model has been shown to be quite reliable in predicting the initial GDP releases in recent quarters.  The Fed officials seem to have gotten the message loud and clear that it's not the slightly higher interest rates in and of themselves that would impede growth. While the US economy on its own can easily withstand higher short-term rates, it is the dollar's strength, driven by higher rate expectations, that is most damaging. The US monetary policy can no longer be steered in isolation and the Fed is starting to pay attention.The US central bank can't begin tightening policy while the rest of the world is easing without negative consequences. And global monetary policy is in a rapid easing mode. Except for Brazil, Ukraine, and a couple of other nations that have been desperately trying to defend their currencies, there have been over 30 individual rate cuts by central banks globally this year alone. There is another way to think about this effect. The chart below shows the global nominal GDP growth - which is projected to decline in 2015 for the first time since 2009. By swimming against the world's monetary policy tide, the US risks "importing" some of that global slowdown. But that is indeed what the the Fed has done by telegraphing a hike this summer.

Worst Ever US Trade Deficit Excluding Crude Hints At Upcoming QE4 -  Remember that in a beggar thy neighbor world, where currency warfare has once again broken out between the US, Europe and Japan, for every winner there is a loser. In this case, the loser is the one country that has decided that a strong currency is a great thing for its economy (if only for the time being): that would be the US. Why is this relevant? Because as the chart below shows, US trade excluding Petroleum, just crashed to $43.7 billion, the worst print in the history of the series, suggesting that portrayals of the US as a resurgent export powerhouse are completely erroneous, and that instead the US is as big a net importer of goods and services (and soon to be oil) as ever. The crucial point here is that with Shale production now expected to decline (if only modestly: after all those junk bond investors are desperate to keep the MotherFracking dream alive), the US will soon have to import more oil which will require more debt issuance to fund the soaring trade deficit which will require more QE to monetize the deficit. And thus the stage is set for QE4.

There Is No Solution To The Crisis - Tell people every day that things are OK, fudge economic numbers and plaster over the cracks in the hope that eventually it will all rectify itself, then people will actually start believing ,spending and therefore improving the economy and that the debt can be repaid via tax receipts. This coinciding with a technology boom where there is a serious lack of talent and available staff and it would be tempting to think that this may have possibly worked. That the central banks have saved us from a perilous depression....however, as it has been said...with great power comes great responsibility. The end result of Fed policy appears to be to keep us in perpetual economic malaise, to keep us all confused. They keep interest rates low masking the huge structural issues of huge federal budget deficits and whenever the economy appears to be picking up a bit, they threaten to take away the government props of QE and low interest rates faster thereby slapping down the economy. All this happening while the ticking time bomb of huge Federal Debt accumulates more potency. There is no solution to the crisis, merely a choice of which roads to choose, a deflationary debt collapse, or a hyperinflationary dollar collapse or World War III. Pick your poison...

Yellen: Fed Providing Lawmakers With Names of Staffers in Leak Probe - The Federal Reserve is providing a congressional panel with the names of its staffers who had contact with a consulting firm that published details of market-sensitive policy deliberations in October 2012, “with the understanding that the names will be kept confidential,” Fed Chairwoman Janet Yellen said. “As you are aware, the [Fed] Board’s Inspector General and the Department of Justice are in the midst of an investigation into this matter,” Ms. Yellen wrote in a letter dated Monday to Rep. Jeb Hensarling (R., Texas), chairman of the House Financial Services Committee, and Rep. Sean Duffy (R., Wis.), who chairs the panel’s oversight subcommittee. “We are cooperating fully with them and look forward to the results of their investigation. To avoid compromising that investigation, these names are being provided with the expectation that they will be kept confidential.” Mr. Hensarling did not respond immediately Monday to a request for comment. In October 2012, the day before the Fed released its minutes of its September 2012 policy meeting, Medley Global Advisors sent a report to its clients with several sensitive details that subsequently appeared in the minutes. A central bank probe into the matter found no major breaches of its communications policies. The Fed’s investigation found a “few” Fed staffers had contact with Medley before the report, but did not identify them. Mr. Hensarling in mid-April sent Ms. Yellen a letter requesting, by April 22, the names of Fed employees who reported some contact with Medley from June to October 2012. A committee spokesman said the Fed didn’t respond by that date.

Yellen Meetings With Financial Firm Come Under Scrutiny - WSJ: Congressional efforts to press the Federal Reserve for more details about a possible leak have suddenly focused attention on Chairwoman Janet Yellen’s contacts with financial firms. Ms. Yellen met in 2011 and 2012 with a representative of Medley Global Advisors, the financial consultancy involved in several investigations into its publication of sensitive details of internal Fed policy deliberations. In a letter Monday to lawmakers, Ms. Yellen said that she couldn’t have provided the sensitive information in the Medley report because it related to a Fed a meeting in September 2012, long after her meeting in June 2012 with a Medley analyst. Fed officials want to talk with market participants and others to get information on markets and perceptions of central-bank policy. But the access they offer could result in real or perceived advantages to a privileged few. In June 2011, the Fed adopted a communications policy, which Ms. Yellen helped to write, stating that members of its top policy-making committee “will strive to ensure” they don’t provide any profit-making entity “with a prestige advantage over its competitors.”

The Worst Ex-Chairman Ever -- Paul Krugman -When Alan Greenspan left the Fed, he had nearly divine status in the eyes of the financial press and, I’m sorry to say, quite a few economists. In retrospect, of course, his reputation has faltered badly; whether or not you blame Fed policy for the housing bubble (you shouldn’t), Greenspan denied the bubble’s existence and even its possibility as it was inflating, while actively blocking efforts to tighten financial regulation. But it’s his track record since leaving office that is truly remarkable. He has been an inflation and debt fear monger, helping to make his successor’s already hard job a bit harder — and famously complained about ungrateful markets that keep failing to deliver the crises he predicts. After a brief moment of doubt about the wisdom of financial markets, he went right back to denouncing regulation while proclaiming that markets get it right “with notably rare exceptions”. Now I have in my inbox a notice that as the Fed holds its annual meeting in Jackson Hole, Greenspan will address a counter-conference organized by a group called the American Principles Project. The group combines social conservatism — it’s anti-gay-marriage, anti-abortion rights, and pro-“religious liberty” — with goldbug economic doctrine. The second half of this agenda may be appealing to Greenspan, a former Ayn Rand intimate — as Paul Samuelson remarked, “You can take the boy out of the cult but you can’t take the cult out of the boy.” But the anti-gay stuff? And helping these people attack his former colleagues?  Awesom.

Central Bankers Reconsider Inflation Targets They Can’t Hit -  Central bankers are proving to be the gang that can’t shoot straight. A quarter of a century since New Zealand opened the era of inflation targeting, policy makers from the U.S., euro area, U.K. and Japan are all undershooting their consumer-price goals. Of the Group of Seven, only Canada is currently meeting its mandate. Rather than lowering their sights to make things easier, the misses are fanning calls for targets to be increased from the 2 percent most aim for to perhaps as high as 4 percent. While a similar idea was pitched five years ago by International Monetary Fund economists led by Olivier Blanchard, and endorsed by Nobel laureate Paul Krugman, this time around it may be the central-banking community itself proposing a rethink. Former Federal Reserve Chair Ben S. Bernanke last month suggested he would be open to an increase in the U.S. Federal Reserve’s 2 percent goal, saying there is nothing “magical” about that number. Fed Bank of Boston President Eric Rosengren said the same month it could be the case “inflation targets have been set too low.” His colleague from San Francisco, John Williams, told the New York Times that if the future is one of weaker growth because of demographics and productivity then it’s worth asking “is the 2 percent inflation goal sufficiently high in that kind of world?” But if they can’t hit 2 percent, why lift the targets?

Sentiment shift on US inflation expectations --We seem to be undergoing a sentiment change on US inflation expectations as fresh signs appear that inflation has bottomed. Commodity markets are firmer, particularly industrial metals. We've seen nickel prices moving up sharply a couple of days back (see chart). Here is aluminum and copper.  Commodity indices are still near multi-year lows but seem to have found a bottom - for now. Here is the CRB BLS Spot Index.  Moreover, the components of the US Employment Cost Index seem to indicate improved wage growth as well stronger increases in starting salaries.  As a result we continue to see breakeven inflation expectations moving higher. The Eurozone has also seen an improvement in breakeven rates. Perhaps the most telling sign that inflation sentiment has shifted is the record jump in inflation funds inflows (ETFs and mutual funds).  The dollar of course continues to pose risks to this change in investor views. Should we for example see a 300K new payrolls print from the labor department this Friday, all bets are off. The Fed will be back in play, the dollar rally will resume, and inflation expectations will dive again. Such an outcome with the jobs report seems unlikely but a resumption of the dollar rally remains a risk.

Interest-Bearing Securities When Interest Rates are Below Zero – NY Fed - Negative interest rates have evolved, over the past few years, from a topic of modest academic interest to a practical reality. Short- and intermediate-term sovereign debt of several European countries, including Germany, Denmark, the Netherlands, Sweden, Austria, and Switzerland, now trades at negative yields.  This post discusses some of the challenges that may be encountered as money and capital markets adjust to negative rates. We suggest that issuing interest-bearing securities at negative yields might raise some difficult design problems. (A related post published earlier on Liberty Street Economics examined institutional innovations and behavioral changes that could blunt the policy impact of negative rates.)

Bill Gates: Low rates pose leverage, bubble risks -- Bill Gates said Monday he's concerned about the negative ramifications of continuing low interest rates not only in the U.S. but around the world.   "The environment with low interest rates-it's globally so unusual. It really shouldn't persist," he said. "It creates problems in terms of leverage and bubbles. But how we get out of it creating some economic setback? It would be very difficult." The Federal Reserve is in a tough spot because central banks in Europe are still lowering rates at a time the Fed is considering hiking rates, Gates said. "People do expect the U.S. to sort of take the lead in pushing our way out of this situation."  Gates joined Berkshire Hathaway Chairman and CEO Warren Buffett and Berkshire Vice Chairman Charlie Munger on CNBC's " Squawk Box " following the Berkshire annual shareholder meeting on Saturday.  Low interest rates are affecting real estate in a big way, Buffett said. "And you can understand why-you can borrow your money cheaper if you want to finance the thing."

We Just Broke 2008′s Record for the Fastest Economic Unraveling -- The final Q1 GDP revision was just released and we saw that GDP has again missed expectations by such a large margin that 2015 is another write off for a 3% growth year.  Almost comically we heard the same excuses we got last year.  “Weather was wintery and next year is going to be the turnaround year”.  So in order to explain to these supposed economic and market ‘experts’ who seem wholly incapable of understanding economic and market forces with any sense of accuracy, let’s run through a few fundamentals. I want to hone in on the category of consumer spending that is first to go away so that we may capture the first signals of a consumer spending pull back.  A good proxy for this is the Johnson Redbook Chain Store yoy sales.  This captures the consumer spending taking place at large department stores (Macy’s, Kohls, Walmart, Kmart, etc).  This is going to be where the real discretionary retail spending takes place, as in do I have enough space on my credit card for that sassy blue dress and groceries or just groceries?  And don’t think that is just a theatrical example.  I remember the days of asking myself those very same questions (ok maybe not the blue dress but you get the idea).  That is just real life here in the US (and Canada for that matter).  So this category does well to target the true discretionary spending.  Now if the chart trend appears strong or even flat then we can be confident consumers have not yet pulled back on even the most discretionary of items and so any variations in the overall spending patterns are likely not worrisome.  However, if we see a sharp pull back here it is indicative that a downturn in the overall spending trend is likely substantive rather than nuance.  Let’s have a look.

Sucking Spoilt Milk From A Bloated Dead Sow – Ilargi - With US GDP growth ‘officially’ back where it belongs, in the Arctic zone close to freezing on the surface but much worse in real life, for reasons both Albert Edwards and Ambrose Evans-Pritchard (not exactly a pair of Siamese twins) remarked this week; that is, excluding the “biggest inventory build in history, the economy contracted sharply”, it’s time for everyone to at long last change the angle from which they view the world, if not the color of their glasses. But ‘everyone’ will resist, refuse and refute that change, leaving precious few people with an accurate picture of the – economic – world. Still, for you it’s beneficial to acknowledge that very little of what you read holds much, if any, truth or value. This is true when it comes to politics, geopolitics and economics. That is, the US is not a democracy, it is not the supreme leader of the world, and the American economy is not in recovery. Declining business investment, a record inventory build and extreme borrowing to hold share prices above water through buybacks, it all together paints a picture of a very unhealthy if not outright dying economy, and certainly not one in which anything at all is recovering. But how are you supposed to know? The entire financial media should change its angle of view, away from the recovery meme (or myth), but the media won’t because the absurd one-dimensional focus on that perpetuated myth is the only thing that makes the present mess somewhat bearable, palatable and, more importantly, marketable, to the general public. This has the added simultaneous benefit of keeping that same general public from understanding how sinister the myth really is; it can only be upheld by greatly increasing the debt levels which burden their shoulders, in hidden ways. If the media can no longer keep the consequences of the debt increases hidden, the game is up.

Final Update: Recovery Measures  --I posted these graphs regularly during the recession and recovery.  Here is a final update (until the next recession) to four key indicators used by the NBER for business cycle dating: GDP, Employment, Industrial production and real personal income less transfer payments.  The following graphs are all constructed as a percent of the peak in each indicator. This shows when the indicator has bottomed - and when the indicator has returned to the level of the previous peak. If the indicator is at a new peak, the value is 100%. All four of the indicators are above pre-recession levels (GDP and Personal Income less Transfer Payments, Industrial Production, and employment). The first graph is for real GDP through Q1 2015. Real GDP returned to the pre-recession peak in Q3 2011, and is at a new post-recession high (although Q1 2015 GDP might be revised down). At the worst point - in Q2 2009 - real GDP was off 4.2% from the 2007 peak. The second graph shows real personal income less transfer payments as a percent of the previous peak through the March 2015 report. This indicator was off 8.3% at the worst point. Real personal income less transfer payments reached the pre-recession peak in January 2012. Then real personal income less transfer payments increased sharply in December 2012 due to a one time surge in income as some high income earners accelerated earnings to avoid higher taxes in 2013. This is why there is a second dip in this indicator in 2013. Real personal income less transfer payments are now above the pre-recession peak - and above the December 2012 surge. The third graph is for industrial production through March 2015. Industrial production was off 16.9% at the trough in June 2009. There has been a little weakness recently (mostly related to oil and gas), and now industrial production is 4.4% above the pre-recession peak. The final graph is for employment through March 2015.

US first quarter GDP likely to be negative after jump in trade deficit: Tracking estimates lowered after trade deficit hits 6-year high. The ISM surveys paint a better picture of the second quarter but it's likely that the economy contracted in Q1. The initial estimate on GDP was just +0.2% in Q1 but that may be revised a half-point lower after the trade data. Credit Suisse says its "Q1 GDP tracking estimate currently runs at -0.3% annualized from the initially reported +0.2%. BNP Paribas cuts its estimate to -0.4% from +0.2%. TD said the deficit will shave 0.2-0.3 pp from GDP. At this point the market is more focused on Q2 but the downward momentum in the US dollar continues to accelerate despite the ISM data. I believe the bond market is in charge here and that rising yields are prompting a squeeze on long-dollar positions.

First Quarter GDP Likely Negative as Trade Deficit Soars  -- On April 29 in Real Q1 GDP 0.2% vs. Consensus 1.0%; Disaster in the Details I commented "The second estimate of Q1 GDP comes out on May 29. Any number of changes could send Q1 negative."  Here we are already. Imports subtract from GDP and March trade numbers were much worse than expected. The Bloomberg Consensus trade estimate was -42.0 billion. The actual trade deficit was -51.4 billion. The deficit was outside the entire range of estimates of -45.0 billion to -37.8 billion.  First-quarter GDP, barely above zero at plus 0.2 percent, may move into the negative column on revision following a much higher-than-expected March trade deficit of $51.4 billion, the largest since October 2008. The unwinding of the port strike on the West Coast, which was resolved mid-month March, played a major role in the data especially evident in imports which surged $17.1 billion in the month as backlogs at the ports were cleared. Imports of consumer goods, especially cell phones, were especially heavy. Exports, led by aircraft, also rose but only $1.6 billion. The total goods gap in the month was $70.6 billion which is the highest since August 2008.  The gap in petroleum trade, at $7.7 billion vs February's $8.2 billion, wasn't a major factor in the March data as the drop in prices was offset by a rise in volumes. By country, the gap with China widened to $31.2 vs $22.5 billion in February and to $7.1 billion vs $4.2 billion for Japan. The OPEC gap widened slightly to $1.2 billion vs $0.7 billion.

It Now Looks as if the Economy Shrank in the First Quarter - Last fall when the dollar was soaring on global currency markets, it seemed only a matter of time before it started to increase the United States trade deficit and dampen growth.The time has come. In March, the trade deficit widened by $15.5 billion to $51.4 billion. That was influenced by the end of a West Coast ports disruption that fueled a surge in imports (which subtracts from economic growth), but even for the full first three months of the year, the nation’s trade deficit is more than 5 percent higher than a year before.The new trade data had analysts scurrying to downgrade their estimates of how fast the overall economy grew in the first three months of the year. Now an outright contraction looks likely. Just last week, the Commerce Department reported an 0.2 percent annual growth rate in the first quarter, which already reflected a steep drag from trade.Incorporating the new March trade data, the damage now looks even worse. Barclays now estimates that gross domestic product fell at an 0.3 percent annual rate last quarter; Macroeconomic Advisers estimates a negative 0.4 percent; and Goldman Sachs has marked its estimate down to a retraction of 0.5 percent.

Trade (Head)Winds -- Today’s March trade release brought unwelcome news, making the advance release (discussed by Jim here) appear optimistic by comparison. From Reuters: A surge in imports lifted the U.S. trade deficit in March to its highest level in nearly 6-1/2 years, suggesting the economy contracted in the first quarter. Growth, however, is regaining momentum as other data on Tuesday showed activity in the services sector, which accounts for more than two-thirds of the economy, accelerated to a five-month high in April.“It looks like we are going to have negative GDP for the first quarter, just based on trade, but we expect a robust rebound in the second quarter. A lot of the headwinds we saw in the first quarter have unwound,”  Macroeconomic Advisers has provided some estimates of the impact on GDP and the trade balance. Figure 1 depicts real GDP.   Q/q SAAR growth is estimated down to -0.4%, from the BEA’s advance of 0.2%.  Both imports and exports were revised, but imports were more noticeably affected, as shown in Figure 2.The correlation of the surging dollar and the drop in exports is suggestive, but in order to identify the relative importance of this factor, one would want to use a regression model to estimate what share of the decline is coming from slowing overseas growth. In this post, I recount that a 20% appreciation would eventually knock off about 14% of exports relative to baseline (in this case of non-agricultural goods exports — the exact figure for total exports would be different). For me, this outcome merely confirms that in my view it is too early to tighten monetary policy. As I’ve suggested, the dollar is strongly correlated with the shadow policy rates in the US and abroad; to the extent that the Fed can influence the shadow rate by forward guidance, it makes sense to err on the side of caution, and maintain an expansionary monetary policy.

Did the Economy Shrink in the First Quarter? - U.S. economic growth for the first quarter was already looking weak. Now it’s looking even worse. Trade figures released by the Commerce Department on Wednesday suggest gross domestic product, the broadest measure of economic output, contracted in the first three months of the year.  Last week, Commerce said GDP grew at a paltry 0.2% seasonally adjusted annual rate  from January to March. Those preliminary figures were based on some incomplete data, including estimated March trade numbers. The government agency had assumed a deficit of roughly $45 billion. Instead, the U.S. trade deficit expanded to $51.37 billion, a more than 43% jump from the prior month and the biggest such increase nearly two decades. The cause appears to be the unwinding of backlogs at West Coast ports after a labor dispute was resolved. But the effect will likely be a big downward revision for GDP when updated figures are released May 29. Exports add to the top-line number while imports subtract. So how bad was it?

  • “We see first-quarter GDP growth being revised down to minus 0.4% from +0.2%, with the net exports contribution being revised down to minus 1.8pp from minus 1.25pp, exports to minus 7.9% from minus 7.2%, and imports to +5.0% from +1.8%” —Ted Wieseman, economist at Morgan Stanley
  • “We calculate that today’s report, if taken at face value without considering any offset from inventories, implies a 0.6 percentage point downward revision to first quarter growth, leaving our tracking estimate at [a] minus 0.4%” seasonally adjusted annual rate of growth from the prior quarter. —Laura Rosner, economist at BNP Paribas
  • “The second estimate will show a decline rather than a 0.2% annualised increase, but it will be a pretty modest contraction of roughly 0.3%.” —Paul Ashworth, chief U.S. economist at Capital Economics
  • “The March trade deficit figures were $25.9 billion above what the Bureau of Economic Analysis had assumed in last week’s advance first-quarter GDP report. This means at present that first-quarter real GDP is on track to be revised down 70 basis points to minus 0.5%.” —Joseph LaVorgna, chief U.S. economist at Deutsche Bank

Yes, the U.S. Economy Probably Contracted in the First Quarter. But How Much? - The U.S. economy’s performance in the first quarter of the year is looking worse and worse. Last month, the Commerce Department reported gross domestic product, the broadest measure of economic output, economic output, grew at a 0.2% seasonally adjusted annual rate in the opening months of the year. That estimate was based on incomplete data. Since, figures on trade and inventories have come in lower than expected, suggesting the economy actually contracted. (Higher-than-expected imports and lower-than-expected inventories are the big drags.)  On Friday, after Commerce released wholesale inventory data for March, J.P. Morgan Chase cut its tracking estimate of first-quarter GDP growth to minus 0.8% from minus 0.5%. Barclays lowered its estimate by three-tenths of a percentage point to minus 0.6%. Forecasting firm Macroeconomic Advisers knocked two-tenths of a percentage point off of its first-quarter estimate, taking it to minus 0.6%. And while the April jobs report offered some reassurance that the economy is thawing after a winter freeze, it doesn’t appear poised for a breakout. “We still think there is some downside risk to our forecast for real GDP to increase 2.5%” in the second quarter, J.P. Morgan economist Daniel Silver said in a note to clients. In 2014, GDP contracted at an annualized 2.1% in the first quarter of the year but then bounced back with readings of 4.6% in the second quarter and 5% in the third.

The strong US dollar and recessions: In the past, has a sudden move towards a strong dollar been associated with recessions? With some qualifications, the answer is "yes." Let's start with a few graphs from XE's currency section. First, here is the Japanese Yen vs. the dollar: The Yen fell by over 10% before stabilizing late in the 4th quarter of 2014. Next, here is the Euro vs. the dollar: The Euro fell by over 20% compared with the $US, and continued to fall into the 1st quarter of 2015. As I have been reporting weekly since February, steel production and rail shipments have turned negative YoY. Steel production has averaged a decline of about 10% YoY recently, and rail carloads have also turned negative YoY, with coal shipments leading the way, also down about 10% YoY. First quarter GDP was just reported as barely positive, and the unexpectedly large trade deficit in March has some revising that number into negative territory. So I thought I would turn to the historical data. In the past, have recessions been associated with big positive moves in the $US? Below is a graph of the trade-weighted $US (blue) YoY, compared with the YoY% change in real GDP (inverted. amplified scale for easier comparison, red). First, here is 1974 to 1995:  Sudden strengthening of the $US has been associated with the 1982 and 2001 recessions. On the other hand, before the 1991 recession, the $US weakened substantially.  In 1980 it moved quickly from weakening to stable, it also weakened substantially during the first part of the Great Recession, reversing course and strengthening in the second, deeper half of that recession. Further, there were strong positive moves in the $US in 1984, 1997, and 2005, none of which were accompanied by recessions. So, while a strong dollar has sometimes been associated with a recession, this is no better a relationship than I would expect to find by chance.

U.S. Potential Economic Growth: Is It Improving with Age? - NY Fed -  The contribution of labor input to the potential GDP growth rate for the United States has changed over time. We decompose this contribution into two components: the size of the adult population and the average demographically adjusted employment rate. We find that these two components in the late 1960s and early 1970s contributed at least 2.5 percentage points to potential growth. Since the mid-1990s, the aging of the population has reduced the contribution of labor to growth. We estimate that the current contribution to potential economic growth from labor input has declined to around 0.6 percentage points. One implication going forward is that more labor productivity growth will be required to sustain U.S. growth.

The U.S. Energy Boom Will Give a Modest Boost to the Economy, an IMF Paper Says -- The U.S. energy boom may offer a modest boost to the U.S. economy but probably won’t noticeably alter the country’s overall balance of trade, income flows and financial transfers, according to a new working paper published by the International Monetary Fund. Authors Benjamin Hunt, Dirk Muir and Martin Sommer examine the sharp rise in oil and natural gas production–from unconventional sources such as shale formations–and assume the U.S. can become energy self-sufficient in 12 years. “This assumption may be optimistic, but it provides a useful benchmark to gauge the magnitude of possible macroeconomic effects,” they said. They also side-step short-term changes in the market, like the last year’s oil price crash and a recent rebound, and offer other caveats related to their projections. Over the long term, their economic models suggest U.S. gross domestic product, the broadest measure of economic output, would expand if the country becomes self-sufficient. “Real GDP in the United States is estimated to increase by between 1% and 1½% over the longer term, with the impact on real GDP outside the United States to be less than ¼%,” they said. Of course, there could be a “very large” adverse impact on oil exporting nations. And while the energy boom has reshaped U.S. trade patterns, the authors don’t expect a long-term impact on the country’s current account. The current account measures the net change in trade of goods and services, income flows and transfers such as foreign aid and worker remittances. “Although the U.S. energy balance will improve modestly, the impact on the overall U.S. current account is ambiguous in the short run and will depend critically on people’s expectations of future U.S. energy production prospects,” the authors said.

Demographics are Now Improving - The Financial Times blogs has a blog post about the demographic impact on the U.S. economy: The US economy’s demographic dividend is fast turning into a deficit. A few excerpts.  Demographic change is creating major headwinds for the US economy ... One key factor is that there are more older people than ever before, due to a combination of the ageing of the US baby boomer generation (those born between 1946 and 1964) and increasing life expectancy. Older people tend to spend less, as they already own most of what they need and their incomes decline as they enter retirement.Equally important is the collapse that has occurred in US fertility rates since the peak of the baby boom. These have nearly halved from the 3.33 babies/woman level of the mid-1950s to just 1.97 babies/woman today, below the level required to replace the population. If this post had been written a decade ago, it would make more sense. Last year, I posted some demographic data for the U.S., see: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group, Decline in the Labor Force Participation Rate: Mostly Demographics and Long Term Trends, and The Future's so Bright ... I pointed out that "even without the financial crisis we would have expected some slowdown in growth this decade (just based on demographics). The good news is that will change soon." Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the "baby boomer" generation, the movement of younger cohorts into the prime working age is another key story in coming years. Here is a graph of the prime working age population (this is population, not the labor force) from 1948 through March 2015.

'US External Debt: A Curious Case' -- Should we be worried about the U.S. net international investment position (the difference between US assets abroad and foreign claims on the US)? Paul Krugman says it's "actually a symptom of US relative strength":  As Tim Taylor notes, the U.S. net international investment position ... has moved substantially deeper into the red in recent years...  But why? You might be tempted to say that it’s obvious: we’ve been running big budget deficits, borrowing the money from foreigners, so of course our debt to those foreigners is surging. But that story implicitly requires a surge in the trade deficit (or more precisely the current account deficit, which includes investment income), which hasn’t happened. ... So it’s not about borrowing vast sums abroad... But what is it? ... The big move is a sharp rise in the value of foreign holdings of US equity, not matched by any comparable rise in US holdings of foreign equity. What’s that about?  The answer, I believe, is that we’re looking at the differential performance of stock markets. ... So the value of foreign holdings of US equities ... has surged along with the Obama stock market, while US holdings abroad have seen no comparable boost.  And this means that the plunge in the U.S. international investment position, far from showing weakness, is actually a symptom of US relative strength, reflected in strong stock prices. I think I’m right about this, although happy to hear alternative stories.

Budget plan calls for $194 billion in unidentified cuts to federal workforce - The Washington Post: Federal employees should be wary, but not surprised. The House and Senate Republican budget plan announced this week would continue hits on government workers, as expected, with cuts that could lighten their wallets by up to $194 billion.The joint budget agreement calls for cutting that amount over 10 years from programs under the House Oversight and Government Reform Committee. It oversees federal employee issues in its broad portfolio. But the agreement gives no instructions on reaching the budget savings. Just where the ax might fall remains to be seen. Given the committee’s oversight, however, federal pension benefits and the Federal Employees Health Benefits program are likely targets. “This stands in notable contrast to the House budget resolution, which specifically directed the committee with jurisdiction over the federal workforce and its retirees to achieve substantial savings and provided specific policy recommendations toward that end,” the National Active and Retired Federal Employees Association told its members. In March, a House budget resolution proposed increasing the employee share of pension contributions by 6 percentage points of salary, with an offsetting reduction in what agencies pay. That and ending a “special retirement supplement” would save $127 billion over 10 years. Another proposal would require federal employees to pay a greater share of premiums for their employer-sponsored health insurance.

Republicans: End sequestration -- Following the House’s lead, the Senate yesterday passed a budget resolution which will guide Congress on next year’s spending bills. For the Republican leadership it will be quite a triumph since both houses have not passed a resolution since in 2009.But it might not matter. The White House has said that President Obama will veto any appropriations bill that increases the defense budget but doesn’t offer similar relief for domestic discretionary spending. Yet this is precisely what the budget resolution does.  If the president keeps his word, the Congress and the administration are headed for an impasse that, in order to keep the government up and running, could ultimately result in a continuing resolution locking in expenditures at this year’s levels. Such a result would undercut ongoing operations in the Middle East and Afghanistan and might well put a final nail in the coffin of the military’s ability to carry out the country’s national security strategy.

Congress Has Not Passed A 2016 Budget. It Has Only Begun The Process. -- Headline in this morning’s Washington Post: “In a Slog Forward, Congress Passes Budget.” I’ll leave it to others to parse what a slog forward is, but rest assured Congress has not passed a budget. Congressional Republicans, with no support from Democrats, have approved a budget resolution. But that document is merely a non-binding fiscal framework, and is far from a detailed description of how the government will raise and spend money next year. How much will the Department of Health and Human Services spend on Meals on Wheels in 2016? Don’t bother looking for the answer in the budget resolution. It is not there. In fact, the resolution doesn’t even say how much the entire Department of HHS will have in 2016. It only instructs Congress to spend $430.9 billion next year for programs that come under the category of Health. The gritty work of filling in the all-important details now goes to congressional committees. While the budget resolution lays out a decade-long fiscal plan, only the first year matters to these panels. They have only one real job: To make sure their 2016 spending bills obey the budget instructions.

The Pentagon Could Soon Share Americans’ Data With Foreign Militaries - As Ashton Carter unveiled the Pentagon's new Cyber Strategy last week, he underscored its importance by revealing that networks had been infiltrated by actors within Russia. The Defense secretary did not emphasize a provision of the strategy that could send private data about U.S. citizens and companies to foreign militaries.  Here's what it says: "To improve shared situational awareness DOD will partner with DHS [Department of Homeland Security] and other agencies to develop continuous, automated, standardized mechanisms for sharing information with each of its critical partners in the U.S. government, key allied and partner militaries, state and local governments, and the private sector. In addition, DOD will work with other U.S. government agencies and Congress to support legislation that enables information sharing between the U.S. government and the private sector."  The new strategy indirectly, but unequivocally, ties into information-sharing legislation that's slowly making its way to the president's desk. Among the various bills moving around Capitol Hill, the most important is the Cyber Information Sharing Act. Among other things, CISA would protect companies from being sued for sending data about their users to DHS, which would be permitted to send it in real time to DOD and other U.S. agencies and outfits. In turn, DOD's new strategy claims the right to share cyberthreat data beyond the United States. Presumably, that would include information obtained via CISA. In particular, the new strategy pledges DOD cyber assistance, including information sharing, to allies in the Middle East: "As a part of its cyber dialogue and partnerships, DOD will work with key Middle Eastern allies and partners to improve their ability to secure their military networks as well as the critical infrastructure and key resources upon which U.S. interests depend. Key initiatives include improved information sharing to establish a unified understanding of the cyber threat, an assessment of our mutual cyber defense posture, and collaborative approaches to building cyber expertise."

Republicans push Barack Obama to rally Democrats for TPP vote - The top Republican lawmaker on trade has called for US President Barack Obama to work even harder to build support among Democrats for a crucial trade bill on the eve of what are expected to be divisive votes in Congress. “We’ve still got a lot of raindrops to run through here without getting splashed,” Senator Orrin Hatch, chairman of the powerful Senate Finance Committee, told the Financial Times in an interview. The Utah Republican is one of the sponsors of a bill unveiled last month that would grant Mr Obama the “fast-track” authority he needs to wrap up the Trans-Pacific Partnership with Japan and 10 other Pacific Rim economies. If successfully concluded, the TPP, which covers about 40 per cent of the global economy, would be the biggest trade deal sealed in the world in two decades. The bill to grant the president what is formally known as “Trade Promotion Authority” is expected to come to a Senate vote as soon as this week and to be presented in the lower House of Representatives before the end of May. It faces stiff opposition from many Democrats who are coming under intense pressure from labour unions to resist Mr Obama’s trade agenda. But Republicans, who control both houses of Congress, insist they need Democratic support to offset defections by some Tea Party Republicans opposed to giving the president anything at all. Mr Hatch said he and fellow Republican Paul Ryan, chairman of the House Ways and Means Committee, were having a degree of success convincing some Tea Party Republicans. He also praised Mr Obama for taking on his critics in the Democratic party more forcefully in recent weeks.

Critical Alert': Jeff Sessions Warns America Against Potentially Disastrous Obama Trade Deal - Sen. Jeff Sessions (R-AL)is sounding the alarm to his colleagues Senate-wide, warning them and the American public with a “critical alert” published Sunday evening that voting for the Trade Promotion Authority (TPA) deal that would set up the Trans-Pacific Partnership (TPP) trade deal with Asian countries is fraught with problems and concerns. “Congress has the responsibility to ensure that any international trade agreement entered into by the United States must serve the national interest, not merely the interests of those crafting the proposal in secret,” Sessions’ team writes in a document that lays out the top five concerns with the Obama trade deal. “It must improve the quality of life, the earnings, and the per-capita wealth of everyday working Americans. The sustained long-term loss of middle class jobs and incomes should compel all lawmakers to apply added scrutiny to a ‘fast-track’ procedure wherein Congress would yield its legislative powers and allow the White House to implement one of largest global financial agreements in our history—comprising at least 12 nations and nearly 40 percent of the world’s GDP. “The request for fast-track also comes at a time when the Administration has established a recurring pattern of sidestepping the law, the Congress, and the Constitution in order to repeal sovereign protections for U.S. workers in deference to favored financial and political allies.” The Sessions document then goes point-by-point for five full pages through the TPA trade deal, laying out why it wouldn’t help Americans—rather, it would likely hurt American workers—and why the deal doesn’t in fact provide Congress with more power over trade despite talking points from the Obama trade deal’s proponents like House Ways and Means Committee chairman Rep. Paul Ryan (R-WI)60%, Senate Majority Leader Sen. Mitch McConnell (R-KY)58%, and House Speaker Rep. John Boehner (R-OH)40%.

Obama’s TPP doesn’t deserve free trade agreement treatment - The U.S. Congress is being asked to give President Barack Obama full “fast track” negotiating authority for the Trans-Pacific Partnership (TPP), supposedly a free trade agreement with 11 other mostly wealthy Pacific nations. Yet when you examine the Wiki-leaked version of TPP which is all we have, it is far more notable for the draconian intellectual property provisions than for any truly significant easing of trade barriers. I would argue that such tight intellectual property rights are an historic aberration, incompatible with a truly free market, so that TPP would overall raise barriers against free market exchange rather than lowering them. If it is to be economically beneficial, TPP needs a truly free-market negotiator at the U.S. end – which means it should wait until 2017. Like all regional trade treaties, TPP is in principle an unsatisfactory substitute for the real thing, which is a truly global free trade agreement along the lines of the moribund Doha round, hanging fire since 2001. Regional treaties allow countries to raise non-tariff barriers against non-members and erect innumerable incompatible international product standards which form barriers to truly free world trade. In TPP’s case there are some genuine advances, such as opening up Japanese agriculture (if that indeed happens). However trade among the TPP partners is mostly free with low tariff barriers already, since several of the TPP members already have free trade agreements with the United States.

President Obama Is Badly Confused About the Trans-Pacific Partnership - Dean Baker -- That was the main takeaway from a NYT article on his trip to Nike. According to the article, he made many claims about the Trans-Pacific Partnership (TPP) and opponents of the deal which are clearly wrong.  For example, the article tells readers: "he [President Obama] scorned critics who say it would undermine American laws and regulations on food safety, worker rights and even financial regulations, an implicit pushback against Ms. Warren. 'They’re making this stuff up,' he said. 'This is just not true. No trade agreement’s going to force us to change our laws.'" President Obama apparently doesn't realize that the TPP will create an investor-state dispute settlement mechanism which will allow tribunals to impose huge penalties on the federal government, as well as state and local governments, whose laws are found to be in violation of the TPP. These fines could effectively bankrupt a government unless they change the law. It is also worth noting that rulings by these tribunals are not subject to appeal, nor are they bound by precedent. Given the structure of the tribunal (the investor appoints one member of the panel, the government appoints a second, and the third is appointed jointly), a future Bush or Walker administration could appoint panelists who would side with foreign investors to overturn environmental, safety, and labor regulations at all levels of government. (Think of Antonin Scalia.) President Obama apparently also doesn't realize that the higher drug prices that would result from the stronger patent and related protections will be a drag on growth. In addition to creating distortions in the economy, the higher licensing fees paid to Pfizer, Merck, and other U.S. drug companies will crowd out U.S. exports of other goods and services. Obama is also mistaken in apparently believing that the only alternative to the TPP is the status quo. In fact, many critics of the TPP have argued that a deal that included rules on currency would have their support.

A Trade Pact in the Corporate Interest - Spurred on by powerful multinational corporations and aided by their corporate lobbyists, the administration wants Congress to sign a blank check for yet another "free trade" deal, with the same inadequate safeguards as previous failed deals. The administration is pressuring Congress to pass special legislation, known as "fast track," intended to prevent a full and open discussion of an expansive new trade deal, the Trans-Pacific Partnership. Because tariff barriers are very low, this is not really a trade deal; it is about the protection of corporations. This deal contains major new provisions that would directly affect the lives of every American by moving important national decisions on regulating corporations, from product labeling to pollution out of the hands of the legislature and into those of special corporate dominated international tribunals.  Neither the history of past trade agreements nor the way "fast track" has been handled to date should give the American people confidence that we can dispense with full Congressional discussion and a thorough examination of the proposed new agreement.

A Multinational Trojan Horse: The Trans-Pacific Partnership -- You don't have to know much about the "trade" deal called the Trans-Pacific Partnership (TPP) to be more than a little suspicious.  First, there are the very peculiar bedfellows. Supporting the TPP are President Obama and most Congressional Republicans, the same Republicans who've vehemently opposed his every initiative for the past six and one-half years. Against the TPP are most (but not all) Congressional Democrats, Ford Motor Company, virtually all trade unions and environmental groups, watchdog groups such as Public Citizen, and usual Obama allies such as Massachusetts Senator Elizabeth Warren and Ohio Senator Sherrod Brown, who, in a testy open letter to the President on April 25, called for greater transparency on the TPP.  Furthermore, when asked to lend his support for so-called "Fast Track" authority for the TPP, Obama water-carrier and former Senate Majority Leader Harry Reid chafed, "So the answer is not only no, but hell no."Also opposed: liberal icon Noam Chomsky, Democratic presidential hopeful Bernie Sanders, Republican hopeful Mike Huckabee, many Tea-Party groups, and conservative Republican editorialist and former presidential candidate Patrick Buchanan. Conspicuous by silence: Hillary Rodham Clinton.  What's going on here? Why the strange alliances? Peel back the layers of the TPP and you'll find what some believe to be a "corporate Trojan horse." Disguised as "free trade," the TPP's provisions and tactics undermine Constitutional safeguards and national sovereignty. But there's also a silver lining. The TPP exposes who, in the marbled halls of political power, is working for whom. It forces politicians to put their cards on the table, and by their hands you will know them.

TPP: The Fascism Issue -- If the Trans-Pacific Partnership (TPP) Agreement will, if implemented, and as I’ve argued elsewhere, result in the death of national and state sovereignty, constitutional separation of powers, and democracy, then what system and what principles will replace these things? Eric Zuesse answers that it will be Fascism. And implicitly, that we are going through an evolution from representative democracy to fascism and that trade deals like the TPP, the Trans-Atlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TiSA) mediate the transfer “. . . of democratic national sovereignty to international fascist bodies that represent global corporate management. . . . ” The motivation behind U.S. President Barack Obama’s trans-Pacific trade-deal TPP, and his trans-Atlantic trade-deal TTIP — the motivation behind both of these enormous international trade-deals — is the same, and Democratic U.S. Senators Elizabeth Warren and Sherrod Brown are correct: it is not at all progressive. It is instead to transfer political power away from the public in a democracy, and for that power to go instead to the international plutocracy (i.e., to go as far away from any national democracy as is even possible to go). This is to be done by switching the most fundamental thing of all: the global power-base itself. Instead of that power-base being democratic votes of the national publics, who elect their political representatives who determine the laws and regulations, that national democratic political system becomes instead the exact opposite: the global aristocratic stockholder votes of the international plutocracy who elect the corporate directors of international companies, who will, in their turn, then be selecting the members to the international-trade-panels which, in TPP and TTIP, will, in their turn, be determining the rules and enforcements regarding especially workers’ rights, product-safety, and the environment.

U.S. Currency Hawks: IMF’s Brighter Yuan Outlook Strengthens Case for Currency Sanctions in Trade Deal -  : U.S. currency hawks, undismayed by the International Monetary Fund‘s brighter outlook on China’s exchange rate policy, say the fund’s new assessment on the yuan bolsters, not weakens, the case for currency sanctions in trade legislation. Federal lawmakers have long cited China as the chief target of legislation meant to punish trade partners seen to be using their exchange rates to gain a competitive advantage. For more than a decade, the IMF’s assessment of the yuan as undervalued lent legitimacy to lawmakers and their constituents who complained that China’s currency policy came at the expense of American jobs, exports and growth. But now the IMF—the world’s pre-eminent authority on currencies—is on the verge of declaring the yuan fairly valued after a decade of Beijing allowing the currency to appreciate. The IMF’s new assessment comes as many of the most ardent supporters of punitive currency legislation seek to include measures targeting alleged currency-manipulating countries in major trade legislation pending in Congress. U.S. administration officials worry that such measures could kill the Trans-Pacific Partnership deal, a 12-nation trade pact comprising 40% of the global economy. Although the administration says the yuan is still undervalued, Treasury officials argue that China’s appreciation of the exchange rate bolsters the case to let diplomacy, not sanctions, resolve disputes over currency policies. And as Beijing allowed the yuan’s value to rise and as China’s billion-plus population gains middle-class buying power, the administration has become more concerned about other trade irritants, such as market access for U.S. firms and investors and intellectual property-right protections.

A Fake Debate Over Trade Talks - Government secrecy is a far more captivating topic than the failings of intellectual property protections in southeast Asia. So it's hardly a surprise that Senator Elizabeth Warren of Massachusetts has made secrecy the focus of her latest critique of the most ambitious trade agreement in U.S. history.  Unfortunately, her charge that the Trans-Pacific Partnership is being negotiated in secret suffers from two fatal defects. The first is that the deal isn't so secret. The second is that some secrecy is justified.   Warren is right that talks over the Trans-Pacific Partnership, which are at a delicate stage, are taking place out of public view. But members of Congress can read the draft agreement at any time -- which, to her credit, she has. Meanwhile, environmental, labor and consumer advocates are invited to join advisory committees that guide the U.S.'s position in the talks. Along with corporate executives and other industry representatives, advocates have full access to the latest documents.  Yes, they must abide by confidentiality rules -- as must members of Congress, who cannot discuss the specifics of the text in public. That's entirely appropriate. Whether negotiating international trade agreements or congressional budget deals, sometimes secrecy is necessary.  By their very nature, treaty negotiations are usually classified until they're finished. If they weren't, countries wouldn't hand over proprietary data and take political risks.    Moreover, the Office of the U.S. Trade Representative says it has held about 1,700 meetings on TPP with lawmakers and their staffs. It provides classified chapter-by-chapter summaries. It has published online its negotiating objectives and an outline of what's been agreed to so far. 

Extreme secrecy eroding support for Obama's trade pact - If you want to hear the details of the Trans-Pacific Partnership trade deal the Obama administration is hoping to pass, you’ve got to be a member of Congress, and you’ve got to go to classified briefings and leave your staff and cellphone at the door.If you’re a member who wants to read the text, you’ve got to go to a room in the basement of the Capitol Visitor Center and be handed it one section at a time, watched over as you read, and forced to hand over any notes you make before leaving. And no matter what, you can’t discuss the details of what you’ve read.“It’s like being in kindergarten,” said Rep. Rosa DeLauro (D-Conn.), who’s become the leader of the opposition to President Barack Obama’s trade agenda. “You give back the toys at the end.”For those out to sink Obama’s free trade push, highlighting the lack of public information is becoming central to their opposition strategy: The White House isn’t even telling Congress what it’s asking for, they say, or what it’s already promised foreign governments.

Who Is Really Trying to Rewrite the Rules for Trade? - President Barack Obama regularly warns that if Congress doesn’t approve fast-track legislation to grease the way for his ambitious Asian trade agenda, then China would wind up writing trade rules in the region to the disadvantage of U.S. workers and businesses. Republicans have picked up on the trope, including such notable conservatives as Texas Sen. Ted Cruz, as did Washington Post columnist Robert Samuelson. Trouble is, there’s little evidence that China has any interest—or ability—to write such rules and have any other countries adopt them. For the most part, China follows the U.S. lead on trade policy. When the Asia-Pacific Economic Cooperation forum met in Beijing last fall, for instance, Beijing’s big trade idea was to push a vague Free Trade Area of the Asia Pacific—an idea that the U.S. had championed earlier. (The U.S. managed to get the FTAAP sidelined this time because it worried FTAAP could interfere with concluding the 12-nation Trans-Pacific Partnership.) But there is actually a major power center looking to write very different rules of trade:  liberals in Mr. Obama’s Democratic party and their allies in consumer and environmental groups. In April, House Rep. Sander Levin (D., Mich.) introduced a bill that would present a very different direction for U.S. trade policy. The “Right Track for the Trans-Pacific Partnership Act of 2015,” called for a deal that would crack down on currency manipulation, toughen enforcement of labor and environmental standards and ease intellectual-property protection to make sure new medicines are more widely available.The Democratic alternative would also vastly weaken arbitration panels that investors in TPP nations can use to challenge domestic laws. Liberal Democrats and others argue that such panels give companies a way to bypass courts and attack domestic regulation.

Trade with Asia Isn't About Jobs -  -  U.S. Defense Secretary Ash Carter is a very smart man who’s at home in the military-industrial complex, but he’s not very sharp on trade issues. Case in point: Carter’s recent claim in a speech at the start of his Asia trip: “We already see countries in the region trying to carve up these markets.” That was Carter’s attempt to show his support of the Obama administration’s big push to obtain fast-track authority to win eventual passage of the Trans-Pacific Partnership — the implication being that without TPP, America will lose ground in Asia. But all Carter did was show that when it comes to economics, he’s stuck in an earlier century. And with such scare talk, he and the administration are vastly overstating the benefits of TPP, which risks exacerbating America’s already tense relationship with China. Carter’s imagery of carving up markets unwittingly calls to mind one of the most famous political cartoons of all time: the iconic image by British caricaturist James Gillray that captured 18th century British Prime Minister William Pitt the Younger and Napoleon “carving up” the world into spheres of influence. But it doesn’t work that way with trade. There are no spheres of influence, there’s no winner-take-all game. In contrast to colonial-era territorial acquisition and mercantilism, the possibilities of who can trade with whom are, for all practical purposes, nearly endless. TPP will not provide American ownership of markets in the countries involved, nor will it cede that ownership to any other country.

WH takes on Reid over trade - The White House is criticizing Senate Democratic Leader Harry Reid for his promise to block a vote on fast-track trade authority for President Obama. White House spokesman Josh Earnest said the Senate should be able to move on fast-track quickly, taking issue with the Nevada senator's call for the chamber to take up other issues first. “We are setting the bar awfully low if the Senate cannot handle multiple issues at once,” Earnest said.We should be able to expect the United States Senate to do more than one thing over the next month.” Reid has long opposed fast-track, which would prevent Congress from amending trade deals negotiated by the Obama administration and make those agreements much easier to complete. He said Tuesday that he would work with other Democrats to prevent a vote on the measure and called on the Senate to first take up legislation on highway funding and the National Security Agency (NSA). Senate Majority Leader Mitch McConnell (R-Ky.) said Tuesday that his plan is to address fast-track after the Senate completes work on the GOP budget and an Iran bill. Reid’s office questioned whether McConnell can complete work on the highway and NSA bills if he also insists on taking up the trade legislation. Reid staffers noted that fast-track is expected to move with several other pieces of trade legislation, including bills to lower tariffs on imports from countries in sub-Saharan Africa and a bill to give assistance to workers who lose their jobs because of trade.

McConnell Puts Trade Bill on Senate Agenda - WSJ - Senate Majority Leader Mitch McConnell (R., Ky.) formally put trade legislation on the Senate schedule, plunging the chamber into a debate that pits the Obama administration against liberal groups opposed to renewing the president’s power to speed trade pacts through Congress. The Senate leader said Tuesday that he planned to bring the trade measure up for a vote after the chamber finishes work on a bill to give Congress final review power over a deal with Iran. Republicans and the White House are in rare agreement over the trade bill, which would expedite approval of a trade pact between the U.S. and 11 other nations around the Pacific. President Barack Obama has been openly feuding with the liberal wing of the Democratic base over the trade bill, which is the cornerstone of his economic agenda in the final years of his presidency.  “At the risk of having some of you literally faint, I want to compliment the president for the way he’s handling the trade issue,” Mr. McConnell told reporters after laying out his plans to take up the trade bill. “Speaking the truth to his base was welcome and shows that he is intent on working with us to get both the trade promotion authority in place and to subsequently approve hopefully the Trans-Pacific Partnership deal.”  The fight centers on the complex trade pact and the companion legislation, known as Trade Promotion Authority or fast track, that would give Mr. Obama and his immediate successor the right to put the accord to an up-or-down vote in Congress without amendments. While the fast-track bill is expected to pass the Senate, some initial hurdles came into view Tuesday as Senate Minority Leader Harry Reid (D., Nev.) said he wanted to combine the trade legislation with other measures, including one to expand to service workers a program that provides aid to workers displaced by trade agreements.

The IRS seized $107,000 from this business owner for making too many small cash deposits -- If you deposit more than $10,000 in cash, your bank is required to file a form with the authorities reporting the transaction. But the law also makes it illegal to "structure" deposits — depositing cash in amounts under $10,000 to avoid triggering the reporting requirement. But aggressive enforcement of these laws can ensnare small business owners whose only crime is dealing in cash. This video tells the story of Lyndon McLellan, a convenience store owner in rural North Carolina who had $107,702 seized by the IRS. The agency hasn't charged McLellan with any crime, but under controversial civil asset forfeiture rules the burden of proof is on him to prove he didn't violate the "structuring" laws. The video was made by the Institute for Justice, a libertarian public interest law firm that is representing McLellan. The New York Times points out that business owners can have legitimate reasons for keeping their cash deposits under $10,000. For example, some store owners have insurance policies that only cover cash losses up to $10,000.  It won't be easy for McLellan to get his money back. Many forfeiture targets don't bother to contest seizures under civil forfeiture laws because legal fees would exceed the value of what was taken. But with IJ's help, he might be able to recover the money the IRS took from him.

Why Do Taxpayers Leave Money on the Table? - The IRS was sitting on roughly $1 billion in unclaimed tax refunds from 2011 and the window was about to close on those who wanted to collect what was, after all, their money. About 1 million people who worked in 2011 were due these refunds, about half of which were for more than $698. They had taxes withheld from their paychecks, but didn’t file a return. “Some people may not have filed because they didn’t make much money, but they may still be entitled to a refund,” Mr. Koskinen explained, channeling my dad. And there may be many more than those 1 million non-filers. Researchers Jacob Mortensen, James Cilke, Michael Udell, and Jonathon Zytnick estimate that in 2003, there were 8.3 million non-filers whose tax withholdings totaled $15.9 billion. Why didn’t they file? The IRS suggests that some don’t want to be found. Maybe they owed other debts to the IRS or a state tax agency. Maybe they were behind on child support, or were delinquent on federal debts like student loans. Some may have been  undocumented immigrants. But what about the others: Did they understand that their taxes had already been withheld, even though they didn’t make much money? Did they find filing too difficult? Or was dealing with the IRS too intimidating? These questions are difficult to answer, because we don't know a great deal about non-filers who are owed refunds, except that they likely have lower incomes than those who turn in their 1040s.

Raise the Gas Tax? Proposals for Highway Spending Go Outside the Lines - With lawmakers once again staring down a deadline to extend the Highway Trust Fund, experts across Washington are rolling out proposals to help break the logjam. Some might even be creative enough to shake loose money without requiring lawmakers to raise the deficit. Congress last summer passed legislation to fund highway and mass-transit projects through May 31, a 10-month patch that did little to resolve a longer-term spending and revenue mismatch. Once again, the Highway Trust Fund, which pays for highway and mass-transit projects, could exhaust its reserves. And already this year, Democrats and Republicans have clashed over infrastructure spending. A new report from the Brookings Institution’s Hamilton Project highlights falling spending on the country’s infrastructure and recommends a series of measures to improve roads, bridges, ports and other transportation nodes. “The federal government’s investment in infrastructure is declining, budgetary resources for discretionary programs are becoming even scarcer, and political gridlock is increasing,” said authors Roger Altman, who served at the Treasury Department in the Clinton administration, and Aaron Klein and Alan Krueger, both former Obama administration Treasury officials. Indeed, Congressional Budget Office data show that by one measure, such spending by all governments across the U.S. peaked in 2003.

Why The Powers That Be Are Pushing A Cashless Society -- The central banks are … planning drastic restrictions on cash itself. They see moving to electronic money will first eliminate the underground economy, but secondly, they believe it will even prevent a banking crisis. This idea of eliminating cash was first floated as the normal trial balloon to see how the people take it. It was first launched by Kenneth Rogoff of Harvard University and Willem Buiter, the chief economist at Citigroup. Their claims have been widely hailed and their papers are now the foundation for the new age of Economic Totalitarianism that confronts us. Rogoff and Buiter have laid the ground work for the end of much of our freedom and will one day will be considered the new Marx with hindsight. They sit in their lofty offices but do not have real world practical experience beyond theory. Considerations of their arguments have shown how governments can seize all economic power are destroy cash in the process eliminating all rights. Physical paper money provides the check against negative interest rates for if they become too great, people will simply withdraw their funds and hoard cash. Furthermore, paper currency allows for bank runs. Eliminate paper currency and what you end up with is the elimination of the ability to demand to withdraw funds from a bank.

The New Corrupt Elite Running Our Economy -- Lynn Parramore -- Social anthropologist Janine Wedel, author, most recently, of Unaccountable: How Elite Power Brokers Corrupt Our Finances, Freedom, and Security, has spent decades getting to the bottom of how powerful people wield influence. In her view, old ways of talking about formal systems of power and corruption don't begin to capture new realities. Truth and transparency, she warns, have devolved into performance art. The buck stops nowhere. Could women be particularly suited to disrupt the unaccountability structured into the DNA of many of today's financial, corporate and governmental organizations? Wedel weighs in. (Accountability is a key topic in a May 5-6 conference sponsored by the Institute for New Economic Thinking, " Finance and Society," which features Brooksley Born, Elizabeth Warren, and other influential women who have challenged corrupt systems of power.)

Taking on the Banks: A Conversation with Anat Admati - What do Senator Elizabeth Warren, Federal Reserve chair Janet Yellen, and Christine Lagarde, the managing director of the International Monetary Fund, have in common? For one, all three will appear in Washington this week, at a conference about finance and its relationship to the rest of society. In the aftermath of the 2008 financial crisis, the need to tame the banking sector and prevent a repeat of the crisis became a huge political issue, giving rise to the Dodd–Frank legislation of 2010 and the Occupy Wall Street movement. Other concerns have come to the fore of American politics, but many questions about the financial industry, including what exactly it contributes to the rest of the economy and how it should be regulated, still haven’t been resolved. Meanwhile, concerns about excesses in the financial sector have merged with broader worries about rising inequality and economic stagnation. Warren has certainly helped keep pressure on bankers: from her perch on Capitol Hill, the Massachusetts senator has launched a series of fusillades at Wall Street and its enablers in Washington. Another significant figure, and a tireless critic of the big banks, is Anat Admati, a professor of finance and economics at Stanford University’s Graduate School of Business. Admati is the principal force behind the Washington conference, which is being held under the auspices of the Institute for New Economic Thinking. (It will take place at the headquarters of the I.M.F.) In 2013, Admati published a book with the German economist Martin Hellwig called “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It.” She has been tireless in writing articles, testifying to Congress, and offering advice to the regulators. Time magazine named her one of the hundred most influential people of 2014.

Brooksley Born: Still Telling the Uncomfortable Truths About Wall Street -- As the Wall Street Journal reports this week that two of the serially charged Wall Street banks, Citigroup and JPMorgan, along with two foreign banks, Barclays and RBS, are expected to plead guilty as early as next week to criminal charges of massive fraud in the foreign exchange markets, some of the most powerful women in the field of finance and economics were speaking at a conference in Washington D.C. and taking on the system that allows this corruption to continue unchecked – six years after it collapsed the U.S. economy and blew up Wall Street.  The conference was titled “Finance & Society” and featured luminaries like Fed Chair Janet Yellen, Senator Elizabeth Warren, Christine Lagarde, Managing Director of the International Monetary Fund (IMF), and Esther George, President of the Federal Reserve Bank of Kansas City, along with other important voices.  But the segment of the conference that has galvanized Wall Street reformers were the speeches by Brooksley Born, the former Chair of the Commodity Futures Trading Commission, and Anat Admati, a professor of finance and economics at Stanford University, a chief architect of the conference. Brooksley Born is best known as the sole regulator in the Clinton administration who attempted to regulate derivatives and became the target of bullying by then Treasury Secretary Robert Rubin, his enforcer, Larry Summers, and Fed Chair Alan Greenspan. Frontline aired an expose on the guts Born summoned to stand up to the Wall Street enablers’ cartel. In the end, of course, Wall Street had its way and derivatives remained unregulated. Born resigned her post. In her talk at the conference, Born takes on the preposterous proposition that markets can self-regulate. During her time at the CFTC, Born said Wall Street had poured billions of dollars into deregulation lobbying which was “supported by the fallacious beliefs championed notably by Alan Greenspan that financial markets are self regulating and that financial firms are capable of policing themselves.”

Elizabeth Warren Steps Into the F.I.R.E. of Wall Street Corruption: Increasingly it feels to Americans that the bulk of the news about scams to separate them from their life savings is coming from one Senator from Massachusetts — Elizabeth Warren. Ripoffs in financial services, insurance, and real estate – known as F.I.R.E. on Wall Street – are being exposed by Warren, typically in bold pronouncements in Senate Banking hearings where Warren has a chair and a respected voice, and are rapidly amplified in the media. In 2013, it was only because of Senator Warren that we learned that the so-called Independent Foreclosure Reviews to settle the claims of 4 million homeowners who had been illegally foreclosed on by the bailed out Wall Street banks were a sham. The “independent” consultants were hired by the banks, paid by the banks, and the banks themselves were allowed to determine the number of victims. It was Senator Warren who put the high frequency trading scam described in the Michael Lewis book, “Flash Boys,” into layman’s language the American people could understand. Speaking at a Senate hearing on June 18 of last year, Warren said: “High frequency trading reminds me a little of the scam in Office Space. You know, you take just a little bit of money from every trade in the hope that no one will complain. But taking a little bit of money from zillions of trades adds up to billions of dollars in profits for these high frequency traders and billions of dollars in losses for our retirement funds and our mutual funds and everybody else in the market place. It also means a tilt in the playing field for those who don’t have the information or have the access to the speed or big enough to play in this game.

At INET Conference, Warren Adds Two Pieces to Her Financial Reform Framework -- Yves is in Washington for the INET Finance and Society conference, which is unique because it features a dozen and a half speakers, every one of them a woman, from Fed Chair Janet Yellen to IMF Chair Christine Lagarde to the SEC’s Kara Stein to CFTC’s Sharon Bowen to Treasury’s Sarah Bloom Raskin to many more, from the U.S. and around the world. Anat Admati of Stanford University organized the event, and you can watch the webcast tomorrow at this link. Maybe you’ll spy Yves stalking the halls. As INET’s Rob Johnson said by way of introduction at tonight’s opening dinner, “the old boy’s club was not a committee that saved the world.” He quipped that the best think you could do for financial reform is to only have women regulate it. While gender does not define a willingness to go hard at the banks for their practices, it certainly appears that a group of them represent outsiders, unwilling to accept elite spin and able to fight the prevailing wisdom. So I’m pretty excited about this conference and bummed that I couldn’t make it out to D.C.  One of those women is Senator Elizabeth Warren, who gave the keynote address tonight. I’m going to embed it here; Rob Johnson is as always quite good, but so you know, Warren’s remarks begin at about 12:00:

Could ‘Fast Track’ Unravel Wall Street Rules, as Elizabeth Warren Warns? -  Sen. Elizabeth Warren is raising an unusual alarm over President Barack Obama’s trade push: “Fast track” trade legislation, she says, could help a Republican president eviscerate the financial rules Congress enacted after the financial crisis. Hers a complicated, roundabout argument, but Ms. Warren insists it’s not a hypothetical. Still, a very specific series of events would have to occur for her warning to prove prophetic.“Big banks on both sides of the Atlantic are gearing up to use that agreement to water down financial regulations,” she said. But for that to happen, several shifts would have to occur. A new Republican president would have to embrace Mr. Obama’s early-stage negotiations with the EU and put financial regulation on the table. Despite pleas from Brussels, the Obama administration has firmly objected inclusion of financial regulation in the EU negotiations, which could someday lead to a pact called the Transatlantic Trade and Investment Partnership, or TTIP. The Treasury prefers to negotiate international financial rules through other international forums. Then, the Republican administration would have to make the conscious decision to negotiate with foreign officials on domestic Dodd-Frank rules, not just international rules for banks. Such a step is unlikely, at least at first, because the new president would likely just choose to roll back Dodd-Frank directly through changes to U.S. law, with ordinary legislation through the Republican-controlled Congress, assuming the GOP maintains control of both the House and Senate after 2016. No trade deal or fast track would be needed to take that route. But if that didn’t work, then a TTIP deal—which would also comprise everything from agricultural tariffs to auto-safety rules—could in theory be brought to Congress for fast-track approval, with softer rules for Wall Street wrapped inside.

Dodd-Frank Rules Could Shave $895 Billion Off Economic Growth Over a Decade, Think Tank Says - Holtz-Eakin -- The 2010 Dodd-Frank law could reduce U.S. economic output by nearly a trillion dollars over the next decade, according to a new analysis by American Action Forum. In a paper to be released today, the conservative Washington think tank looked at the banking sector’s response to new regulations and the cost of complying with them to see how the financial reform law has affected economic growth. They found the law could reduce gross domestic product by $895 billion between 2016 and 2025, or $3,346 for each working-age person. “Clearly, such a computation is subject to large uncertainties,” said AAF president Douglas Holtz-Eakin, the former director of the Congressional Budget Office and the paper’s author. “But the order of magnitude is instructive.” The Dodd-Frank law imposed a set of sweeping changes on the banking industry in the wake of the financial crisis, including higher capital requirements, stricter lending rules and heightened supervision. Defenders of the law say the changes have made the financial system safer and better protected against another potential catastrophe. But critics—including banks and many Republican lawmakers—argue the regulatory overhaul has made loans more expensive, limited access to credit for certain borrowers and pushed more activities out of the regulated banking sector and into the shadows. “If so, then this is a costly misstep,” Mr. Holtz-Eakin said. “I think it’s worth sorting that out.”

Dodd-Frank Supporters Argue Safer Financial System Justifies Cost of Regulation -- Few policy debates make the average American’s eyes glaze over faster than the debate over the costs and benefits of the 2010 Dodd-Frank law. But few debates rile up lawmakers and wonks more. Nearly five years after Congress passed the mammoth regulatory overhaul, the law’s critics and supporters are still arguing over whether lawmakers took justifiable steps to prevent another financial crisis, or whether they overreached with rules that could limit Americans’ access to credit and hurt the overall economy. Citing some studies that show the last crisis cost up to $14 trillion, supporters argue there is no question: The financial overhaul law was worth it. “Rules are not the enemy of the markets,” Sen. Elizabeth Warren (D., Mass.) said Tuesday at a conference hosted by the Institute for New Economic Thinking, a liberal think tank. “Rules are a necessary ingredient for healthy markets.” So it’s no surprise the law’s supporters pounced on a new research paper by a conservative think tank that argues Dodd-Frank rules could reduce economic output by $895 billion over the next decade. The paper, from American Action Forum president Douglas Holtz-Eakin, analyzed the link between saving and investment in the economy, and the extent to which new compliance costs or regulatory requirements crimp economic growth. The paper doesn’t argue that those costs outweigh the benefits. But it doesn’t attempt to quantify any of those benefits, either. That’s a significant flaw, according to Americans for Financial Reform, a liberal advocacy group that posted its own takedown of Mr. Holtz-Eakin’s paper on its website Thursday. “Extensive economic research shows that the benefits of greater financial sector stability alone will exceed the costs claimed by the AAF,” the group argued.

Latest Award of Frederic Mishkin Iceland Prize for Intellectual Integrity: Former CBO Director Holtz-Eakin’s Garbage-In, Garbage Out Attack on Dodd Frank - Yves Smith -  As readers know all too well, there is so much obviously half-baked economic research that this site could turn itself over to shredding examples and only scratch the surface. But we have established the Frederick Mishkin Iceland Prize for Intellectual Integrity to highlight outstanding examples of economic shillery in which the attempt at analysis is obviously cooked so as to produce a pre-determined outcome.   Specifically, the paper, The Growth Consequences of Dodd-Frank by former CBO director Douglas Holtz-Eakin, attempts to quantify the costs of Dodd Frank. The very language of the paper broadcasts how strained it is. As Dave Dayen noted yesteerday: Regardless of what you think of Dodd-Frank, this is one of the most hackish things I’ve seen in quite a while. Doug Holtz-Eakin, who used to consider himself a moderate, pulls a number out of his posterior that even he knows is fake. “Clearly, such a computation is subject to large uncertainties,” he says. “It doesn’t change the growth rate dramatically—it’s not even a percentage point,” he adds. “Everyone should take this all with a grain of salt… I have no belief that I’ve nailed it.” And then WSJ runs it anyway with a big headline including the number that Holtz-Eakin spends the entire article disavowing. Shorter version: “This is a meaningless number, but it is big, and therefore important.” Holtz-Eakin manages to come up with a 10 year cost of $895 billion “or $3.346 per working age person.” Notice the effort at precision when Holtz-Eakin repeatedly has to concede that his analysis is reliable at best to an order of magnitude. So we already have dishonest rhetoric in giving a false impression of exactitude in an at best crude estimate.  Gee, but isn’t insurance supposed to cost money? Isn’t Dodd Frank supposed to protect against financial crises? How does this cost guesstimated compare to the benefits? Let’s turn to a paper by Andrew Haldane of the Bank of England, whose early estimates of the cost of the crisi, in terms of lost output, has proven to be pretty accurate….these losses are multiples of the static costs, lying anywhere between one and fivetimes annual GDP. Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy and between £1.8 trillion and £7.4 trillion for the UK. As Nobel-prize winning physicist Richard Feynman observed, to call these numbers “astronomical” would be to do astronomy a disservice: there are only hundreds of billions of stars in the galaxy. “Economical” might be a better description.

EU, U.S. derivatives talks inconclusive, hope for deal by summer (Reuters) - Regulators from the European Union and United States failed on Thursday to end a long-standing deadlock over recognising each other's derivatives market rules, but said they hoped for a deal by the summer. Most of the world's $630 trillion financial derivatives are traded in London and New York. Without deferral to each other's rules for the clearing houses that stand between two sides of a derivatives transaction, clearers and their users face the costly burden of complying with two sets of regulation. The European Commission and U.S. regulators have been trying to iron out differences over their approaches to regulating the same market since at least 2013. "Discussions are constructive and progressing," EU financial services chief Jonathan Hill and Timothy Massad, chairman of the U.S. Commodity Futures Trading Commission (CFTC), said in a joint statement at the end of a meeting in Brussels. The talks have been "mutually satisfactory" on the ability for both sides to potentially defer to each other's rules, the statement said. Hill and Massad agreed to continue their discussions "with the aim of finalising an approach by the summer".

Bernie Sanders To Introduce Bill To Break Up The Big Banks: (Reuters) - Bernie Sanders, a self-described socialist U.S. senator who has launched a bid for the 2016 Democratic presidential nomination, said on Tuesday he will introduce a bill to break up the biggest banks, a position far to the left of the party's front runner, Hillary Clinton. Calls for Wall Street's largest firms to be cut down were numerous after taxpayers spent billions of dollars to prevent the financial system from collapse during the 2007-09 financial crisis, but they have since gradually died down. Sanders faces long odds against Clinton's fund-raising might, and his views might help position the former secretary of state and first lady more as a moderate and buttress her efforts to attract money from banks' deep pockets. Under the Sanders proposal, regulators on the existing Financial Stability Oversight Council would compile a list of institutions that are 'too big to fail' and implicitly rely on government support during a crisis. "If an institution is too big to fail, it is too big to exist," Sanders said in a statement. Within a year of enactment of the bill, the Treasury secretary would be required to break up these firms. They would also be prohibited from using any customer funds for risky or speculative activities on financial markets.

Former Citi Trader Posts Nude Photos of Hungry Woman He Just Fed; Financial Times Thinks It’s a Calling - Last week we were reading an article by Matt Klein in the typically staid, button-down Financial Times. When we arrived at the 10th paragraph, Klein tells us that he’s been chatting with Chris Arnade, a man who spent 20 years as a trader at Salomon Brothers and Citigroup, who has now retired to “document the lives of those less fortunate.” The words “document the lives of those less fortunate” are hyperlinked to a blog by Chris Arnade with a story titled “Another Day.” The story and the photographs take us into a genre of poverty porn meets Schadenfreude – finding pleasure in another’s pain.  Arnade has been wowing an ever increasing number of media outlets, like NPR and The Guardian, with his essays on the lives of the homeless, drug addicted and prostitutes on the streets of  New York. On his Facebook page, Arnade explains his mission: “What I am hoping to do, by allowing my subjects to share their dreams and burdens with the viewer and by photographing them with respect, is to show that everyone, regardless of their station in life, is as valid as anyone else.” But in Arnade’s photo essay, “Another Day,” which the Financial Times has linked to, Arnade first spots a new prostitute on a street corner; he takes her to McDonald’s and buys her food. Next, he says: “I gave her twenty dollars for her time, for allowing me to photograph her.” She then asks to be driven to her drug dealer and Arnade accommodates her. According to Arnade, after she has two joints, she strips off her clothes from the waist down and engages in two suggestive poses showing her crotch area and bending over the bed with her bare ass in the air. Arnade, who has avowed his mission as photographing those less fortunate “with respect” takes the unconscionable step of posting these photos of a homeless, hungry woman under the influence of drugs – clearly unable to give informed consent — on his web page. For a mere McDonald’s meal, which he says came from the dollar menu, and $20, Arnade has acquired nude photos to promote his blog. I fired off an email to Matt Klein’s editor at the Financial Times, Paul Murphy, certain that he must not have scrolled down to see these photographs. Murphy responds that he’s sorry if I was offended, but they’re not going to remove the link.

The US Equity Bubble Depends On Corporate Buybacks; Here's The Proof -- For those who require still more proof that the rally in US equities has become inextricably linked with corporations leveraging their balance sheets to repurchase their own shares, JP Morgan is out with an in-depth look at buyback trends which strongly suggests that buyback activity is in fact responsible for driving US stocks to record highs.

Bull market 'supercycle' for stocks, bonds ending: Bill Gross - (Reuters) - The bull market "supercycle" for stocks and bonds is approaching an end, as the unconventional monetary policies that have bolstered asset prices since the financial crisis are running out, widely followed investor Bill Gross said on Monday. The attempt by global central banks to cure a debt crisis with more debt doesn't have much further to run, which will end a rally that's lasted three and a half decades, Gross said in an investment outlook for Janus Capital Group Inc.. "Credit based oxygen is running out," Gross wrote in the outlook titled, "A Sense of an Ending," in which he compared the final stages of the financial market cycle with his own mortality. Gross, who turned 71 in April, wrote: "A 70-year-old reads the obituaries with a self-awareness, as opposed to an item of interest. Some point out that this heightened intensity should make the moment all the more precious and therein lies the challenge: Make it so; make it precious; savor what you have done – family, career, giving back – the 'accumulation' that (British author) Julian Barnes speaks to." Gross, manager of the $1.5 billion Janus Global Unconstrained Bond Fund, has made similar warnings on stocks and bonds before and acknowledged they've come too early.

“Smart Money” Prepares to Profit from Bond Market Rout  - Wolf Richter: -- “If I had an easy way and a non-risk way of shorting a whole lot of 20- or 30-year bonds, I’d do it,” said our favorite uncle Warren Buffett on CNBC. These kinds of bonds have been on a terrific bull run ever since Paul Volker, as Chairman of the Fed, cracked down on inflation. But now, even the avuncular face of capitalism would bet against them. He was behind the curve. On April 22, Bill Gross, at Janus Capital, tweeted that 10-year German government debt was “The short of a lifetime.” The “only question” was “Timing.” Other bond gurus have jumped into the fray. Selling bonds outright, or selling them short if you didn’t already own them, particularly European government bonds, has become the thing to do in certain circles. Now valuations are falling, and yields are soaring off their ludicrously low levels. So within the last 30 days, the 10-year US Treasury yield jumped from 1.83% to 2.23% as I’m writing this; the German 10-year Bund yield, instead of dropping below zero, skyrocketed from 0.05% to 0.60%; the Italian 10-year yield soared from 1.18% to 1.93%. And so on. Sharply rising long-term yields are percolating through the system. In the era when several trillion dollars of even crappy government debt is so overpriced that it sports negative yields, thanks to central-bank machinations, this bout of selling is somewhat inconvenient. Bonds with long maturities are particularly vulnerable. That’s what Buffett, the ultimate “smart money,” would focus on. And selling them is exactly what companies are doing at a record pace while there are still eager buyers for them out there. So far this year, according to Bloomberg, companies have sold $39 billion in bonds that mature in over 30 years. That’s over five times more than during the same period in 2014.

Private Equity Standard-Setter Confirms That Investors Have No Idea What Firms Charge Them  -- Yves Smith - Institutional and well-informed retail investors have for the last several decades recognized the importance of limiting the fees and expenses they incur, since those will eat away at investment returns and potentially at principal. That’s a big reason for the rise in popularity of index investing. In stock and bond investing, where fees and costs are transparent, academic studies have repeatedly confirmed that active investment managers don’t generate enough (if any) outperformance to justify their higher fees and costs.   As we’ve discussed in previous posts, investors in private equity only have the right to see the books and records of the investment fund, that is, the limited partnership entity in which they invest. They have no right to see the financial records of the companies in which they invest. That has led to tons of mischief, including, as former SEC examination chief Andrew Bowden said in a speech last May, that taking of impermissible charges, which in most circles would be called stealing or embezzlement. (Notice how private equity misconduct is whitewashed through the use of tepid terminology).

SEC Commissioner Furious At Deutsche Bank's "Decade Of Lying, Cheating, And Stealing" -- "Deutsche Bank’s illegal conduct involved nearly a decade of lying, cheating, and stealing. This criminal conduct was pervasive and widespread, involving dozens of employees from Deutsche Bank offices including New York, Frankfurt, Tokyo, and London. Deutsche Bank’s traders engaged in a brazen scheme to defraud Deutsche Bank’s counterparties and the worldwide financial marketplace by secretly manipulating LIBOR. The conduct is appalling. It was a complete criminal fraud upon the worldwide marketplace." - SEC Commissioner Kara Stein..

Los Angeles sues Wells Fargo over opening extra accounts to hike sales quotas: Wells Fargo Bank employees opened unauthorized accounts and credit cards for customers in Los Angeles in a bid to up their sales quotas, according to a civil lawsuit filed by City Attorney Mike Feuer’s office. Filed Monday in Los Angeles County Superior Court, the lawsuit claims Wells Fargo engaged in “unlawful activity including opening fee-generating customer accounts and adding unwanted secondary accounts to primary accounts without permission,” according to Feuer’s office. Customers faced fees for each account opened, Feuer’s office alleged. In some cases, customers also received “derogatory notes” on their credit reports after failing to pay fees on unauthorized accounts. The bank also failed to tell customers of misuse of their personal information, the suit alleges. Speaking at a Tuesday news conference, Feuer said the bank “elevated its profits over the legal rights” of its customers. He also announced the formation of a hotline to report issues related to Wells Fargo: 213-978-3393. “We urge every Wells Fargo customer to review their records,” Feuer said.

Bank of America’s Relief for Mortgage Borrowers Is Questioned -  There was plenty of fanfare last August when Bank of America agreed to a record $16.7 billion settlement with the Justice Department over dubious mortgage practices. Prosecutors crowed about the deal, which required the bank to provide $7 billion of consumer relief — including such things as loan modifications — over the ensuing four years.  But now that the settlement has faded from the public eye, questions are arising about whether the promised assistance is actually getting to the right people and whether the bank will be allowed to claim credit for consumer relief that far exceeds its actual value   The details are complex but worth delving into, given the importance of the issue. In the settlement, Bank of America is required to make a wide array of loans more affordable for borrowers. The bank was expected to forgive or reduce the amounts owed on the first and second mortgages it held. In exchange, the bank would receive credit for these reductions in dollar amounts outlined in the settlement. Bank of America, in pursuing its goals, has told a number of borrowers that it intends to “forgive” some loans that have been discharged in borrowers’ bankruptcies. But that debt has already been forgiven. Patti Coleman, a Florida borrower, received a letter from Bank of America this year. In it, the bank told Ms. Coleman it was pleased to approve her “for a full principal forgiveness” of $54,732 in a home equity line of credit.  But Ms. Coleman has not owed this money since she filed for personal bankruptcy in 2010. “In my Chapter 7 filing, the debt was extinguished,” she said in an interview on Tuesday. “They can’t come back to me and try to collect.”

Fed Survey: Banks ease Standards for Residential Mortgages, CRE Loans - From the Federal Reserve: The April 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices the April survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the first quarter of 2015. On net, banks reported having eased some price terms. With respect to commercial real estate (CRE) lending, on balance, survey respondents reported having eased standards on loans secured by nonfarm nonresidential properties.  A few large banks also indicated that they had eased standards on construction and land development loans, and some large banks reported that they had eased standards on loans secured by multifamily properties. In addition, survey respondents reported having eased some CRE loan terms, on net, over the past year. On the demand side, banks indicated having experienced little change in demand for C&I loans in the first quarter; in contrast, respondents reported stronger demand for all three categories of CRE loans covered in the survey. Regarding loans to households, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months on net. Most banks reported no change in standards and terms on consumer loans. On the demand side, moderate net fractions of banks reported stronger demand across most categories of home-purchase loans. Similarly, respondents experienced stronger demand for auto and credit card loans on balance.

It’s becoming increasingly hard to get a loan in the Deep South - It’s been well-documented that America’s banks and financial institutions are no longer the loose-and-easy lenders they were several years ago. But newly released data from the Federal Reserve Bank of New York reveals a less explored implication of that credit tightening: A new geographic divide in how easily Americans can borrow money. Those who live in the upper Midwest, particularly Minnesota and the Dakotas, still have the healthy borrowing profiles they did before the Great Recession. Those in many other states have seen only modest declines in the ability to borrow. But those in the Deep South — especially in states hugging the Gulf Coast — have seen their access to credit drop off significantly, even though it was already weak to begin with. The consequences of a credit freeze in the Deep South are daunting. The region is already economically distressed, with disproportionately high poverty levels, and restrictions on credit access limit the ability of those living there to start businesses, make investments, or manage unforeseen expenses. If enough people in an area cannot borrow, the community itself becomes less resilient, said Kausar Hamdani, a senior vice president at the New York Fed. “It’s the ability to access resources,” Hamdani said. “Not just for emergencies, but to grow a dream, to start a business.” The map below provides a snapshot of America’s credit picture in 2007 — the tale end of the credit bubble. At that time, 74.0 percent of Americans with a credit file borrowed on standard, revolving terms, using either a credit card or (for more significant needs) home equity line of credit.

The Foreclosure Crisis Caused a Great Migration in Miniature -- Several commentators picked up on the relationship between the events in Baltimore and the dearth of economic opportunity that leads to a sense of hopelessness. But precious few added the component of the foreclosure crisis, a dislocating event that has few parallels in American history. A new paper in the American Sociological Review by Matthew Hall (Cornell), Kyle Crowder (University of Washington) and Amy Spring (Georgia State) puts numbers to this, and shows that we really had a small-scale version of the Great Migration, the shift of African-Americans from the rural south to the big cities of the north. This migration hollowed out and segregated African-American and Latino communities to an even greater degree than where they already were. Those of us who have observed the foreclosure crisis since the end of 2006 already had a recognition of this. We knew that poor neighborhoods in Cleveland or Jacksonville would suddenly have loan brokers going door to door, usually to houses where the resident had equity, on a quest to steal it. They saddled them with high-cost mortgages or home equity lines of credit, and when everything crashed the lenders provided little to no relief, to say nothing of the government. I remember stories around the 2010 election of candidates sending out volunteers to walk precincts, and they would only find one or two occupied homes on a street. There are parts of this country that looked like ghost towns. And the burden wore heavily on people of color. Unfortunately, only the abstract of the paper, “Neighborhood Foreclosures, Racial/Ethnic Transitions, and Residential Segregation,” is available without a subscription. But it gives a decent sense of their work:

Black Knight March Mortgage Monitor: "Negative Equity Population Shrinks to Just Over 4 Million" - Black Knight Financial Services (BKFS) released their Mortgage Monitor report for March today. According to BKFS, 4.70% of mortgages were delinquent in March, down from 5.36% in February. BKFS reported that 1.55% of mortgages were in the foreclosure process, down from 2.13% in March 2014.This gives a total of 6.25% delinquent or in foreclosure. It breaks down as:
• 1,409,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 971,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 782,000 loans in foreclosure process.
For a total of ​​3,162,000 loans delinquent or in foreclosure in March. This is down from 3,840,000 in March 2014. Typically there is a large decline in the March delinquency rate, but the decline this year was especially large. Also from Black Knight on negative equity: Black Knight analyzed the latest available data on the nation’s negative equity situation...the trend remains one of overall improvement – though negative equity distribution varies considerably depending upon geographical location and home values within a given market. ... “Our most recent data shows that just over 8 percent of borrowers are currently underwater on their mortgages, representing a nearly 30 percent reduction in the negative equity rate since last year. We also observed that 29 percent of underwater borrowers are seriously delinquent on their mortgages and that borrowers in negative equity positions make up 77 percent of all active foreclosures. In fact, one of every three borrowers in active foreclosure has a current loan-to-value ratio of 150 or more, meaning they owe 50 percent more than their homes are worth."

Fannie and Freddie: REO inventory declined in Q1, Down 30% Year-over-year - Fannie and Freddie reported results this week. Here is some information on Real Estate Owned (REOs). From Fannie MaeWe continue to experience disproportionately higher credit losses and serious delinquency rates from single-family loans originated in 2005 through 2008 than from loans originated in other years. Single-family loans originated in 2005 through 2008 constituted 12% of our single-family book of business as of March 31, 2015 but constituted 59% of our seriously delinquent loans as of March 31, 2015 and drove 67% of our credit losses in the first quarter of 2015. From Freddie Mac: Our single-family REO acquisitions in the first quarter of 2015 were highest in Florida, Illinois, Ohio, and Michigan, which collectively represented 38% of total single-family REO acquisitions during that period, based on the number of properties, and comprised 38% of our total single-family REO property inventory at March 31, 2015. Our REO acquisition activity is disproportionately high for certain types of loans, including loans with certain higher-risk characteristics. In addition, loans from our 2005-2008 Legacy single-family book comprised approximately 71% of our REO acquisition activity during the first quarter of 2015.Fannie and Freddie are still working through the backlog of loans made during the housing bubble, mostly in judicial foreclosure states. Here is a graph of Fannie and Freddie Real Estate Owned (REO).

Study finds foreclosures fueled racial segregation in US: Some 9 million American families lost their homes to foreclosure during the late 2000s housing bust, driving many to economic ruin and in search of new residences. Hardest hit were black, Latino, and racially integrated neighborhoods, according to a new Cornell University analysis of the crisis. Led by demographer Matthew Hall, researchers estimate racial segregation grew between Latinos and whites by nearly 50 percent and between blacks and whites by about 20 percent as whites abandoned and minorities moved into areas most heavily distressed by foreclosures. Forthcoming in the June print issue of the American Sociological Review and recently published online, the paper, "Neighborhood Foreclosures, Racial/Ethnic Transitions, and Residential Segregation," noted that the crisis spurred one of the largest migrations in U.S. history, changes that could alter the complexion of American cities for a generation or more. ... Examining virtually all urban residential foreclosures from 2005 to 2009, Hall and co-authors find that mostly black and mostly Latino neighborhoods lost homes at rates approximately three times higher than white areas, with ethnically mixed communities also deeply affected. They estimate that the typical neighborhood experienced 4.5 foreclosures per 100 homes during the crisis, but the figure rises to 8.1 and 6.2 homes in predominately black and Latino areas, respectively, while white neighborhoods lost only 2.3 homes on average. ... "Not only were white households less likely to be foreclosed on, but they also were among the first to leave neighborhoods where foreclosures were high, particularly those with racially diverse residents," said Hall.

Wells Fargo Co-Opts Lesbian Moms -- Alexis Goldstein - Wells Fargo has long been plagued by charges of racist, predatory lending. And the uprising in Baltimore has re-ignited the scrutiny on their past practices.  Bryce Covert wrote for Think Progress about the ongoing economic devastation that provides context for the Baltimore Uprising. Covert notes that the Department of Justice found that 4,500 homeowners in Baltimore and Washington, DC had been affected by predatory lending practices that targeted black borrowers: In 2012, a former loan officer with Wells Fargo testified that she and the other officers targeted majority black communities in Baltimore and nearby areas, forging relationships with churches and community groups. They pushed homeowners with perfect credit into loans that had higher interest rates than they should have been paying and also gave mortgages to people with low incomes who couldn’t afford them without any income paperwork or down payments. Bank employees called their clients “mud people” and called the subprime mortgages “ghetto loans.” And the Department of Justice also found that from 2004-2009, Wells Fargo had charging approximately 30,000 black and Latino borrowers higher fees and rates than whites, leading the bank to settle the charges fro $175 million. So, what’s an embattled bank to do? They’ve ruined their reputation in the black and Latino communities, and have no leg to stand on there. So, it appears they’ve made a pathetic attempt to up their diversity bonefides by running an ad with (presumably) white lesbian mothers who adopt a deaf child. Nice try, but this white lesbian isn’t buying it.

Government Using Subprime Mortgages To Pump Housing Recovery - Taxpayers Will Pay Again - It seems hard to believe, but your government is purposely recreating the mortgage debacle of 2007 and putting you on the hook for the billions in losses coming down the road. In their frantic effort to generate the appearance of economic recovery they are willing to gamble with taxpayer’s money while luring unsuspecting blue collar folks into buying houses they can’t afford. During the previous housing bubble, greedy Wall Street bankers, deceitful mortgage brokers, and corrupt rating agencies colluded to commit the greatest control fraud in the history of mankind. This time it is your government, aided and abetted by the Federal Reserve, that is actively promoting the lending of money to people incapable of paying it back. And again, you the taxpayer will be on the hook when it predictably blows up.

Are Rising Home Prices Leading to Greater Inequality? The National Association of Realtors on Thursday said rising home prices were likely leading to greater inequality in many metro areas, because homeownership rates have fallen across the country over the past few years. The Realtor group’s analysis found that 93 out of the 100 largest metros had declining homeownership rates even as home prices rose between 2010 and 2013. Since gains in home equity can only benefit someone if they own their home, NAR says that’s possibly led to a widening disparity in the total wealth of residents in those cities. The cities that would have the most intense effect include high-cost areas with rapid price growth, such as northern California, said NAR economist Lawrence Yun in a release. Homeownership as an explanation for widening wealth inequality has caught some attention over the past couple months. Some economists believe that income from capital, such as business profits or interest, has risen faster than income from labor, such as wages, leading to greater inequality. However, MIT graduate student Matthew Rognlie presented a paper  in March that said  the rapid growth of capital’s share of income is really attributable to growing home prices. Mr. Yun said the analysis showed the need for increased mortgage access and more construction of less-expensive homes for first-time home buyers. The NAR represents real-estate agents who have a direct financial stake in encouraging homeownership.  Here is part of NAR’s table of cities with the lowest homeownership rates, along with their “Gini Index,” a measure of wealth inequality.

MBA: Mortgage Purchase Applications increase, Refinance Applications in Latest Weekly Survey -- From the MBA: Mortgage Applications Decrease 4.6 % in Latest MBA Weekly Survey Mortgage applications decreased 4.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 1, 2015. ...The Refinance Index decreased 8 percent from the previous week to the lowest level since January 2015. The seasonally adjusted Purchase Index increased 1 percent from one week earlier to its highest level since June 2013. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 12 percent higher than the same week one year ago. The first graph shows the refinance index. 2014 was the lowest year for refinance activity since year 2000. It would take much lower rates - below 3.5% - to see a significant refinance boom this year. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 12% higher than a year ago

Mortgage News Daily: Mortgage Rates Near 2015 Highs, Several major Lenders at 4% - From Matthew Graham at Mortgage News Daily: Mortgage Rates Dangerously Close to 2015 Highs  In terms of conventional 30yr fixed rate quotes, several major lenders are now up to 4.0%, even for top tier scenarios, though many remain at 3.875%. Just one short week ago, 3.625% was widely available.In the broader context, there has only been one day in 2015 where rates were any higher. Before that, you'd need to go back to November to see higher rates. Here is a table from Mortgage News Daily:

CoreLogic: House Prices up 5.9% Year-over-year in March -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA). From CoreLogic: CoreLogic Reports National Homes Prices Rose by 5.6 Percent Year Over Year in February 2015  CoreLogic® ... today released its March 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 5.9 percent in March 2015 compared with March 2014. This change represents 37 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 2 percent in March 2015 compared with February 2015. Including distressed sales in March, 27 states plus the District of Columbia were at or within 10 percent of their peak prices. Seven states, including Colorado, Nebraska, New York, Oklahoma, Tennessee, Texas and Wyoming, reached new home price highs since January 1976 when the CoreLogic HPI started. Excluding distressed sales, home prices increased by 6.1 percent in March 2015 compared with March 2014 and increased by 2 percent month over month compared with February 2015. ...This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 2.0% in March, and is up 5.9% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase. The second graph is from CoreLogic. The year-over-year comparison has been positive for thirty seven consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

Home Flipping Profits Hit Record As Wall Street Drives Speculation (Again) - Back in March, we were thrilled to discover that becoming a real estate speculator is easier than we thought. Although bank financing may have dried up post-crisis, it turns out BlackStone and a whole host of other PE firms will gladly loan credit-worthy borrowers money to accumulate distressed single-family properties. These newly-minted “investor-landlords” will likely have no trouble locating renters thanks to the fact that many former homeowners lost their residences in foreclosure during the crisis, and have found little economic respite in the anemic US ‘recovery.’ The PE firms who make this all possible are themselves driven by a desire to securitize the loans they make, meaning that in relatively short order, we should begin to see landlord loan-backed paper in the ABS market. Today, we get what is essentially the same story, involving the exact same PE firms (BlackStone, Colony, and Cerberus) but with the wrinkle that instead of lending money to prospective landlords, the borrowers are house flippers. Here’s Bloomberg: Real estate buyers seeking money to renovate and flip U.S. houses are getting help from some of the world’s biggest investment firms. Colony Capital Inc., Blackstone Group LP and Cerberus Capital Management are among the companies that have started making bridge loans to investors who buy homes to sell them quickly for a profit. Borrowing costs -- traditionally the highest in residential lending -- are tumbling as the firms compete for customers.

Lawler on Housing Vacancy Survey: More “Stunning” Results, But Tough to Interpret --A technical note from housing economist Tom Lawler: Earlier this week the Census Bureau released its “Residential Vacancies and Homeownership” Report (commonly referred to as the Housing Vacancy Survey, or HVS) for the first quarter of 2015, and while the results were not as “eye-popping” as those in the previous quarter, they were nevertheless – if reflective of actual housing trends – stunning. The HVS estimate of the US homeownership rate continued its recent rapid descent last quarter, and the 1.2 percentage point decline over the last four quarters is the largest four-quarter decline since the HVS began. The YOY declines in the HVS HOR’s were especially steep for householders 44 years old or younger. On the housing inventory front, the HVS estimate of the number of occupied homes (or households) declined by 407,000 in the first quarter following the all-time record 1.337 million jump in the fourth quarter of last year. After adjusting for normal seasonal patterns, the HVS household estimate fell by about 60,000 last quarter after jumping by a record 1.17 million in the previous quarter.  Here are some summary stats from the latest report.

America's trailer parks: the residents may be poor but the owners are getting rich  - It’s an unusual but potentially lucrative investment: billionaire Warren Buffett is heavily invested, and his and others’ success is prompting ordinary people to attend Mobile Home University, a ‘boot camp’ in trailer park ownership. The number one rule is stated twice, once in the classroom and once on the bus: “Don’t make fun of the residents.” Welcome to Mobile Home University, a three-day, $2,000 “boot camp” that teaches people from across the US how to make a fortune by buying up trailer parks. Trailer parks are big and profitable business – particularly after hundreds of thousands of Americans who lost their homes in the financial crisis created a huge demand for affordable housing. According to US Census figures, more than 20 million people, or 6% of the population, live in trailer parks. It is a market that has not been lost on some of the country’s richest and most high-profile investors. Sam Zell’s Equity LifeStyle Properties (ELS) is the largest mobile home park owner in America, with controlling interests in nearly 140,000 parks. In 2014, ELS made $777m in revenue, helping boost Zell’s near-$5bn fortune.Warren Buffett, the nation’s second-richest man with a $72bn fortune, owns the biggest mobile home manufacturer in the US, Clayton Homes, and the two biggest mobile home lenders, 21st Mortgage Corporation and Vanderbilt Mortgage and Finance Company. Buffett’s trailer park investments will feature heavily at his annual meeting this weekend, which will be attended by more than 40,000 shareholders in Omaha. Such success is prompting ordinary people with little or no experience to try to follow in their footsteps.

NAHB: Builder Confidence improves Year-over-year for the 55+ Housing Market in Q1 -- This is a quarterly index that was released last week by the the National Association of Home Builders (NAHB). This index is similar to the overall housing market index (HMI). The NAHB started this index in Q4 2008 (during the housing bust), so the readings were initially very low.  From the NAHB: Builder Confidence in the 55+ Housing Market Remains Positive in the First Quarter Builder confidence in the single-family 55+ housing market remains in positive territory for the first quarter of 2015, according to the National Association of Home Builders’ (NAHB) 55+ Housing Market Index (HMI) released today. Compared to the previous quarter, the single-family index edged down slightly by one point to 58, which is the fourth consecutive quarter above 50. Two of the three components of the 55+ single-family HMI posted increases from the previous quarter: present sales increased one point to 64 and expected sales for the next six months rose three points to 67, while traffic of prospective buyers dropped eight points to 40.

G.O.P. Expands Labor Battle to Laws Setting State Construction Wages - A bill that would end prescribed wages on public construction projects in Indiana awaits the signature of Gov. Mike Pence. And Henry Burks, a union electrician who lives near Indianapolis, is bracing.  “This is going to inhibit me from taking care of my family,” Mr. Burks, who makes about $60,000 a year, said. “Our wages will go down. The contractors we work for won’t get as many jobs. Maybe I’ll have to find work outside of Indiana.”  Indiana’s Republican-held legislature narrowly voted in April to repeal the state’s so-called common construction wage, a provision that had been around in various forms for 80 years and that sets pay standards for workers on publicly financed projects.Efforts to end prevailing-wage laws are emerging in statehouses around the nation. Opponents say these efforts would lower wages and see them as a new front in a battle by increasingly Republican legislatures to weaken labor unions. Advocates, like Mr. Bosma, say the bills are aimed at sparing the budgets of struggling cities and states through free-market principles, and ending an inconsistent, inflated and sometimes politicized system for calculating what wage should be the standard. In West Virginia, where Republicans took control of the Legislature this year for the first time since the 1930s, lawmakers ended the prevailing wage for projects worth $500,000 or less. In Nevada, where Republicans also newly dominate, lawmakers in March exempted school construction projects from that state’s requirement. Proposals to repeal such laws entirely have been offered in more than a dozen states, including Michigan and Missouri, as well as Wisconsin, where one conservative lawmaker has called for a vote this week but Republicans appear divided on the matter.

Update: Framing Lumber Prices down Year-over-year  -- Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs. The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).  Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand), however prices didn't fall as sharply either.This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through April 2015 (via NAHB), and 2) CME framing futures.   Right now Random Lengths prices are down about 11% from a year ago, and CME futures are down around 25% year-over-year.

Weekly Gasoline Price Update: Up Another Nine Cents -- It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny, the price of Regular and primium both rose nine cents. This is the third week of price increases after six weeks of little change. According to, California has the highest average price for Regular at $3.71. South Carolina has the cheapest at $2.33.

For Shoppers, It’s Not What Gas Costs Now, It’s What It Will Cost Tomorrow - Ever since gasoline prices began falling in earnest last summer, economists expected consumers to go out and splurge on other items. Instead, shoppers played hard to get with retailers (except for auto dealers).  From November through February, while pump prices were generally falling, store sales excluding autos and gasoline went nowhere. It was not until March that sales popped up. A survey of consumers done by credit card issuer Visa offers one explanation for the lackluster shopping performance. “What drives consumer spending are expectations of future gas prices, not prices today,” said Wayne Best, Visa’s chief economist. Because consumers thought last year’s pump plunge was temporary, Mr. Best said they chose to save the windfall or use it to pay down debt. According to Visa, only 30% of households spent the savings elsewhere. Mr. Best said younger adults were most likely to spend the savings. The notion that future expectations drive current spending isn’t confined to gas prices. Consumers also make current buying decisions depending on what they think their incomes will do in the future, not just what their present earnings look like. Gasoline prices bottomed out in January and are up about 60 cents since then. No surprise, then, that 70% of consumers in the Visa survey think gas prices will continue to increase and consequently consumers modified their spending habits, Mr. Best said. To gauge consumer spending, Visa created a Retail Spending Monitor that uses data from the company’s payment network. Ahead of the Commerce Department’s April retail report on May 13, Visa estimates nonauto, nongas retail sales were up 4.5% in April compared with year-ago spending, down from the 5.3% gain posted in March.

Hotels at Record Occupancy Pace in 2015 -- From STR: US hotel results for week ending 25 April The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 19-25 April 2015, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy increased 4.3 percent to 69.8 percent. Average daily rate increased 6.5 percent to finish the week at US$120.07. Revenue per available room for the week was up 11.0 percent to finish at US$83.86.  Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.  The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  Hotels are now in the Spring travel period and business travel is solid.The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and solidly above last year.  Right now 2015 is even above 2000 (best year for hotels) - and 2015 will probably be the best year on record for hotels.  Note the strong gains in RevPAR too.

U.S. Consumers Boost Borrowing in March at Fastest Pace Since July - Americans stepped up borrowing in March, a sign consumer spending is rebounding after a slow start to the year. Outstanding consumer credit–reflecting Americans’ total debt outside of mortgages–grew at a 7.37% annual rate March, the Federal Reserve said Thursday. That is the largest increase since July. Total debt balances increased by a seasonally adjusted $20.52 billion to $3.36 trillion in March. Economists surveyed by The Wall Street Journal had expected household debt to grow by $16 billion during the month. The expansion was broad-based, showing both increased credit-card balances and additional borrowing for cars and education. Revolving credit, mainly reflecting credit-card debt, rose at a 5.92% annualized rate in March. That was the first increase for the category since December. The upturn in balances matches with increased consumer spending in recent months. After declining in January and December, household spending rose a seasonally adjusted 0.4% in March from the prior month, the Commerce Department said last week. Spending ticked up 0.2% in February. The latest data follows a pattern similar to last year’s, when consumers started “spending again after taking a break following the holiday season and harsh winter weather,”  Nonrevolving credit, representing mostly auto loans and student debt, grew at a 7.89% annualized rate in March, the Fed report said. That was slightly slower than the prior month’s expansion, but continues a pattern of steady growth. Nonrevoling credit has consistently grown since August 2011.

98% Of Q1 Consumer Credit Was Used For Student And Car Loans - By now everyone realizes that Q1 will be the second consecutive first quarter to see a negative GDP print. Wall Street's weathermen formerly known as "economists" have been quick to scapegoat harsh weather once again for this unprecedented "non-recessionary" contraction in the US economy, however what the actual reason for the drop is irrelevant for this specific post; what is relevant is that even in a quarter in which US GDP is set to decline consumer credit, according to the latest update from the Federal Reserve, increased by just over $45 billion. But how is it possible that with such a massive expansion in household credit there was no actual benefit to the underlying economy? Simple: 98% of the credit lent out in the first quarter, or $44.3 billion, went to student and car loans! The amount of credit that actually made it into the broader, consumer economy, i.e., credit card or revolving credit: a negative $600 million, despite a jump in revolving credit in March, when it rose by $4.4 billion to $889.4 billion. So $889.4 billion in credit card debt: as a reminder this is the key credit amount that has to keep growing for consumers to telegraph optimism about their wages, jobs, and generally, the economy. The problem is that as of Q1, this amount was lower than both car debt, at $972.4 billion, and certainly student debt, which in Q1 rose by another $30 billion to a record $1.355 trillion!

Major U.S. Retailers Are Closing More Than 6,000 Stores -- If the U.S. economy really is improving, then why are big U.S. retailers permanently shutting down thousands of stores? The “retail apocalypse” that I have written about so frequently appears to be accelerating. As you will see below, major U.S. retailers have announced that they are closing more than 6,000 locations, but economic conditions in this country are still fairly stable. So if this is happening already, what are things going to look like once the next recession strikes? For a long time, I have been pointing to 2015 as a major “turning point” for the U.S. economy, and I still feel that way. And since I started The Economic Collapse Blog at the end of 2009, I have never seen as many indications that we are headed into another major economic downturn as I do right now. If retailers are closing this many stores already, what are our malls and shopping centers going to look like a few years from now? The list below comes from information compiled by, but I have only included major retailers that have announced plans to close at least 10 stores. Most of these closures will take place this year, but in some instances the closures are scheduled to be phased in over a number of years. As you can see, the number of stores that are being permanently shut down is absolutely staggering…

US Economic Confidence Crashes Most Since July To Lowest Since December -- Despite record-er stock prices, weather excuses for current economic weakness, and The Fed promising that growth is here and everything will be awesome, it appears the message has not reached the US Consumer. Gallup's U.S. Economic Confidence Index plunged 9 points last week (the largest week-to-week drop since last July) to its lowest weekly score since December. The main driver was a collapse of hope as 'outlook' fell to November lows. For the week ending May 3, 24% of Americans said the economy is excellent or good while 29% said it is poor, resulting in a current conditions score of -5 -- down four points from the previous week and the lowest current conditions score since December. The economic outlook score saw a sharper drop of eight points, to -12 -- its lowest reading since November. The latest outlook score is the result of 42% of Americans saying the economy is getting better, and 54% saying it is getting worse.

U.S. trade deficit leaps 43% in March - The nation's trade deficit soared 43% to $51.5 billion in March, largely reflecting the settlement of a major West Coast port dispute that allowed piles of imported goods sitting on docks to be processed and shipped to U.S. buyers. Exports edged up 0.9% to $187.8 billion, but imports leaped a record 7.7% to $239.2 billion, the Commerce Department said Tuesday. The size of the trade gap was much larger than expected, suggesting first-quarter U.S. GDP will go from a meager 0.2% gain to a negative reading when the preliminary numbers are revised later this month. Economists surveyed by MarketWatch had forecast the deficit to rise to $43.5 billion in March from a revised $35.9 billion in February. After falling to the six-year low in February, the deficit climbed to a seven-year high in March as ports began to operate again near full capacity. Meanwhile, the three-month average in the trade gap that smooths out big short-term swings only showed a modest change. The trade deficit in the first quarter averaged $43.3 billion, up 5.2% compared to $41.17 billion in same three months in 2014. That's the highest three-month average since last June.

Trade Deficit increased in March to $51.4 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 $51.4 billion in March, up $15.5 billion from $35.9 billion in February, revised. March exports were $187.8 billion, $1.6 billion more than February exports. March imports were $239.2 billion, $17.1 billion more than February imports. The trade deficit much larger than the consensus forecast of $42.0 billion. The first graph shows the monthly U.S. exports and imports in dollars through March 2015. Imports and exports increased in March ( due a bounce back following the resolution of the West Coast port slowdown). Exports are 13% above the pre-recession peak and down 3% compared to March 2014; imports are 3% above the pre-recession peak, and up 1% compared to March 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 $46.47 in March, down from $49.53 in February, and down from $93.91 in March 2014. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012. The trade deficit with China increased to $31.2 billion in March, from $20.4 billion in March 2014. Much of this increase was due to unloading all the ships backed up at West Coast ports. The deficit with China is a large portion of the overall deficit.

U.S. Trade Gap Widens on Surging Imports - WSJ: A stronger dollar and an influx of pent-up imports into West Coast ports are pointing the U.S. economy toward its third quarterly contraction in its six-year-long expansion, reflecting choppy conditions that appear set to restrain growth throughout the year. The nation’s trade deficit expanded by 43.1% in March from February, the largest monthly widening since 1996, the Commerce Department said Tuesday. A record level of non-petroleum imports flowed into the U.S. after a labor dispute at West Coast ports ended, causing the seasonally adjusted trade gap to widen to $51.37 billion. That was significantly larger than economists had forecast, even with pressure from a strong dollar and weak global growth. As a result, revisions could push the official reading for first-quarter gross domestic product into negative territory from the paltry 0.2% annualized gain initially reported last week. “The underlying story remains the same: Growth faltered at the start of the year with very few signs of momentum,” said Sterne Agee economist Lindsey Piegza. After the trade report, economists at J.P. Morgan Chase and Deutsche Bankcut their first-quarter GDP growth estimates to show a 0.5% contraction. Forecasting firm Macroeconomic Advisers lowered its reading by six-tenths of a percent to a 0.4% contraction. All three had previously estimated a tiny expansion for the quarter. The figures represent a setback for the U.S. economy, but it overcame a similar one that surfaced last year.

US international trade gap at $51.37 billion in Mar vs. $41.30 billion expected: The U.S. trade deficit surged to its highest level in nearly 6-1/2 years in March as imports rebounded strongly after being held down by a labor dispute at key West Coast ports, suggesting the economy contracted in the first quarter. The Commerce Department said on Tuesday the deficit on the trade balance jumped 43.1 percent to $51.4 billion, the largest since October 2008. The percent rise also was the biggest since December 1996. February's shortfall was revised to $35.9 billion from a previously reported $35.4 billion. Economists polled by Reuters had forecast the trade deficit rising to $41.2 billion. When adjusted for inflation, the deficit widened to $67.2 billion in March, the largest in eight years, from $51.2 billion the prior month.Prices for U.S. Treasuries turned positive after the data, while U.S. stock index futures added to losses. The dollar was slightly weaker against a basket of currencies. March's trade gap was far larger than the $45.2 billion deficit the government assumed in its snapshot of first-quarter gross domestic product last week. In that report, the government estimated trade sliced off 1.25 percentage points from GDP, helping to pull down growth to a 0.2 percent annual pace. The economy expanded at a 2.2 percent rate in the fourth quarter. With March's trade deficit coming in bigger than assumed, growth is likely to be revised down to show a contraction when the government publishes its second GDP estimate later this month.

US Trade Deficit Soars To Worst Since Financial Crisis; Will Push Q1 GDP Negative -- After shrinking notably in Feb, March's US Trade deficit exploded. Against expectations of a $41.7bn deficit, the US generated a $51.4bn deficit - the worst since Oct 2008 and the biggest miss on record. Exports rose just $1.6bn while imports soared $17.1bn with the goods deficit with China soaring from $27.3bn to $37.8bn in March. Ironically, just as the "harsh winter" was found to lead to a GDP boost due to a surge in utility spending, so the West Coast port strike which was blamed for the GDP drop, was actually benefiting the US economy as it lead to a plunge in imports. In March, however, the pipeline was cleared, and US imports from China soared by over $10 billion to $38 billion.  End result: prepare for upcoming Q1 GDP downgrades into negative territory. The increase in imports of goods mainly reflected increases in consumer goods ($9.0 billion), in capital goods ($4.0 billion), and in automotive vehicles, parts, and engines ($2.7 billion). A decrease occurred in petroleum and products ($1.1 billion). The goods deficit with China increased from $27.3 billion in February to $37.8 billion in March.

What ails rail? - Weekly statistics from the AAR ( ) show an abrupt fall in rail traffic in late February.  Here's the breakout for the week ending February 14: All looks well.  But here is the breakdown just one week later: Everything has gone to hell. Finally, here is the breakdown from the most recent week:A settlement was reached in the West Coast Ports strike in late February. According to one observer, "by the end of March, ... substantial progress should have been made in processing through the backlog of ships waiting to unload at West Coast ports." Bill McBride a/k/a Calculated Risk believes this has in fact happened.  But while intermodal rail traffic (used for global shipping) has turned consistently positive since the beginning of March, carloads have remained almost entirely negative. Consistent with the analysis of the port strike settlement above, carloads have generally been "less worse" in April, but in particular coal, and to a lesser extent, industrial metal shipments have languished. Here is how the information breaks out by carloads, by carloads ex-coal, and by indsutrial metals this year compared with the equivalent period in 2014:

Date: 1/1-2/14   1/1-4/26  2/15 - 4/26
Carloads: +5.7%  -1.2%  -5.0%
Coal: +3.9% -4.8%  -9.4%
ex-coal: +6.9%  +1.0%  -2.3%
Metals: +5.5% -2.6%  -7.2%

Since mid-February, coal carloads are down by over -100,000.  Ex-coal, carloads are down by -40,300.  Of that shortfall, -16,500 is industrial metals. In short, primarily it is coal exports that are killing rail, because the strong dollar is killing coal exports.  Since the strong dollar itself was a reflection of the relative strength of the US economy, it is reasonable to believe that the relative weakening of the US economy will lead to a weaker dollar, and the pendulum will swing back in the coming months, reviving rail.

Wholesale Trade May 8, 2015: The wholesale inventory build slowed in March against what are extending declines in sales. Inventories in the sector rose 0.1 percent while sales fell for the 8th month in a row, down 0.2 percent. The inventory-to-sales ratio is at 1.30, up from 1.24 as recently as December and from 1.20 going back to September. Wholesale inventories of metals, where sales have been in contraction, look very heavy relative to demand as do machinery inventories. Those on the thin side include chemicals where sales have picked up. Auto inventories held steady in March but are still heavy relative to trend. Wholesale payrolls fell 5,000 in this morning's employment report, one of the few contractions for this reading of the whole recovery and one reflecting that long 8-month dismal streak for wholesale sales. Inventories remain heavy in the wholesale sector reflecting, ultimately, softness in the retail sector.

US wholesale stockpiles rose slightly in March - US News: (AP) — U.S. wholesalers expanded stockpiles modestly in March even though their sales fell for an eighth straight month. Wholesale stockpiles edged up 0.1 percent following a 0.2 percent rise in February, the Commerce Department reported Friday. Sales at the wholesale level fell 0.2 percent after an even bigger 0.6 percent drop in February. Sales have fallen every month since August. Economists are expecting sales to rebound in the coming months as the warmer weather lures shoppers back to shopping malls and auto dealerships. The pickup should fuel consumer spending, which accounts for 70 percent of economic activity. Higher demand at the retail level would then spur increased restocking at all levels of business including wholesalers. In March, auto stockpiles at the wholesale level were up 0.2 percent while furniture stockpiles increased 2.2 percent while inventories of computer equipment increased 1.7 percent. But stockpiles of lumber were down 0.8 percent and farm products were down 2.8 percent. Total wholesale inventories increased to a seasonally adjust $574.5 billion in March, up 5.1 percent from a year ago. Overall economic growth, as measured by the gross domestic product, barely grew in the January-March quarter. Many economists believe GDP will turn negative when the government issues a revision next month, reflecting a major widening in the trade deficit in March. First quarter activity was hurt by an unusually severe winter, falling oil prices that triggered a big cutback in investments by energy companies and a rising dollar that has hurt U.S. export sales. But economists remain hopeful that growth will rebound with warmer weather and continued strong gains in employment. They forecast overall GDP growth of between 2 percent and 2.5 percent in the current April-June period and then climb above 3 percent in the second half of this year.

Wholesale Sales YoY Worst Since Lehman As Inventories Grow At Slowest Pace In 2 Years | Zero Hedge: For the first time since July 2008, Wholesale Sales fell for the 4th month in a row in March (-0.2% vs +0.5% expectation). On a YoY basis, this is the worst sales drop since November 2008. Perhaps even more problematic is the weakness in inventories - which will drag Q1 GDP even lower - as the last time we saw a weaker inventory growth (+0.1% in March) was May 2013. Wholesale Sales are a disaster... and Inventories miss suggests Q1 GDP downgrades further into negative territory... Wholesale Inventories to Sales remain at Lehman (and 2000) highs... Charts: Bloomberg

US factory orders post largest gain in 8 months: New orders for U.S. factory goods recorded their biggest increase in eight months in March, boosted by demand for transportation equipment, but the underlying trend remained weak against the backdrop of a strong dollar. The Commerce Department said on Monday new orders for manufactured goods increased 2.1 percent, the largest gain since July last year, after a revised 0.1 percent dip in February. Economists polled by Reuters had forecast orders rising 2.0 percent in March after a previously reported 0.2 percent gain in February. Orders excluding transportation were flat in March after edging up 0.1 percent in February.  Manufacturing has been hit by the strong dollar and lower crude oil prices, which are putting a squeeze on the profits of multinational corporations and oil firms. The department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans- edged up 0.1 percent instead of the 0.5 percent drop reported last month. Shipments of non-defense capital goods orders excluding aircraft, used to calculate business equipment spending in the gross domestic product report, declined 0.4 percent as previously reported.

Factory Orders Positive First Time in 8 Months, Remain Weak  - Last month I noted Factory Orders Unexpectedly Rise Snapping String of 6 Straight Declines. They didn't. Last month's orders were revised to the negative column in today's report. Today, the Bloomberg Economic Consensus on factor orders was correct, but soft.  Boosted by aircraft and also by motor vehicles, factory orders rose an as-expected 2.1 percent in March. March's gain ends what were 7 straight declines as February, which was initially at plus 0.2 percent, is revised now to minus 0.1 percent. The 7 straight declines are the most striking evidence of how hard the manufacturing sector has been hit, by the strong dollar that weakens exports and also specific trouble in the energy sector due to the downturn in oil. But in March, the sector got a big boost from civilian aircraft, an industry where big monthly swings are normal, but also from motor vehicle & parts where orders rose 6.0 percent in what is one of the very strongest gains of the recovery. Excluding transportation, however, orders were unchanged compared to only a 0.1 percent gain in February, with the latter revised down sharply from an initial reading of plus 0.8 percent.But in March, the sector got a big boost from civilian aircraft, an industry where big monthly swings are normal, but also from motor vehicle & parts where orders rose 6.0 percent in what is one of the very strongest gains of the recovery. Excluding transportation, however, orders were unchanged compared to only a 0.1 percent gain in February, with the latter revised down sharply from an initial reading of plus 0.8 percent. Energy equipment rebounded 4.8 percent in the month but following a long streak of declines including an 18.5 percent drop in February. Industrial machinery was also down on the month. Other industries on the plus side include computers and defense capital goods.Orders for capital goods in general were mixed, up only 0.1 percent on the core, which excludes aircraft, and extending their downward slope. Other readings include a sizable 0.5 percent rise in shipments. Another plus is a small rise in unfilled orders which have been especially weak. Inventories held steady relative to sales, with the inventory-to-sales rate unchanged at 1.35.

US Factory Orders Drop YoY For 5th Consecutive Month -- After 6 months of MoM drops (something not seen outside of a recession),  February saw a modest 0.2% rise in Factory orders which has spurred economists to extrapolate a 2.0% expectation for March. However, while Factory Orders rose 2.1% in March, Feb was revised lower (to a -0.1% drop) leaving US Manufacturing Orders down 4.0% YoY. The series of YoY drops continues (now at 5 consecutive months) to indicate a recessionary environment. The ratio of inventories-to-shipments remains stuck at extremely elevated levels.

US Non-Manufacturing Rises (ISM) & Falls (PMI) In April As Export Orders Collapse -- The hope-strewn bounce in Services PMI over the last 3 months (despite collapsing macro data) has ended. Markit Services PMI dropped in April to 57.4, weakening notably from preliminary expectations of 57.8. Markit remains convinced that their survey implies 3% GDP growth and all is well in the world. ISM Services however smashed expectations, printing 57.8 vs 56.2, its highest since November - despite a plunge in new export orders into contraction.

ISM Non-Manufacturing Index increased to 57.8% in April -- The April ISM Non-manufacturing index was at 57.8%, up from 56.5% in March. The employment index increased in April to 56.7%, up slightly from 56.6% in March. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management: April 2015 Non-Manufacturing ISM Report On Business®   "The NMI® registered 57.8 percent in April, 1.3 percentage points higher than the March reading of 56.5 percent. This represents continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased substantially to 61.6 percent, which is 4.1 percentage points higher than the March reading of 57.5 percent, reflecting growth for the 69th consecutive month at a faster rate. The New Orders Index registered 59.2 percent, 1.4 percentage points higher than the reading of 57.8 percent registered in March. The Employment Index increased 0.1 percentage point to 56.7 percent from the March reading of 56.6 percent and indicates growth for the 14th consecutive month. The Prices Index decreased 2.3 percentage points from the March reading of 52.4 percent to 50.1 percent, indicating prices increased in April for the second consecutive month, but at a slower rate. According to the NMI®, 14 non-manufacturing industries reported growth in April. The majority of respondents indicate that there has been an uptick in business activity due to the improved economic climate and prevailing stability in business conditions." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

Here’s How Managers Can Be Replaced by Software -- For the last several years, we have been studying the forces now shaping the future of work, and wondering whether high-level management could be automated. This inspired us to create prototype software we informally dubbed “iCEO.” As the name suggests, iCEO is a virtual management system that automates complex work by dividing it into small individual tasks. iCEO then assigns these micro-tasks to workers using multiple software platforms, such as oDesk, Uber, and email/text messaging. Basically, the system allows a user to drag-and-drop “virtual assembly lines” into place, and run them from a dashboard. But could iCEO manage actual work projects for our organization? After a few practice runs, we were ready to find out.  iCEO routed tasks across 23 people from around the world, including the creation of 60 images and graphs, followed by formatting and preparation. We stood back and watched iCEO execute this project. We rarely needed to intervene, even to check the quality of individual components of the report as they were submitted to iCEO, or spend time hiring staff, because QA and HR were also automated by iCEO. (The hiring of oDesk contractors for this project, for example, was itself an oDesk assignment.) We were amazed by the quality of the end result — and the speed with which it was produced. The research alone for such a paper would typically take several weeks to complete; with iCEO, the research only took three days. And while creating the full report through a traditional management-employee structure would probably require months to complete, iCEO did it in just weeks.

Weekly Initial Unemployment Claims increased to 265,000, Lowest 4-Week average in 15 years -- The DOL reported: In the week ending May 2, the advance figure for seasonally adjusted initial claims was 265,000, an increase of 3,000 from the previous week's unrevised level of 262,000. The 4-week moving average was 279,500, a decrease of 4,250 from the previous week's unrevised average of 283,750. This is the lowest level for this average since May 6, 2000 when it was 279,250.  There were no special factors impacting this week's initial claims.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since January 2000.The previous week was unrevised. The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 279,500. This was well below the consensus forecast of 285,000, and the low level of the 4-week average suggests few layoffs. This is the lowest 4-week average in 15 years (since May 2000).

Do Initial Claims tell if Unemployment is really at 5.5%?  -- The unemployment rate is officially at 5.5% in the US. But is that rate true? Maybe the rate should actually be higher when one considers the low labor participation rate and the long-term unemployed.  The civilian labor force has not risen much since the crisis. (link) Do we conclude therefore that there are many unemployed out there beyond the 5.5% unemployment rate?  Initial claims of workers seeking state jobless benefits has declined to a level near the ends of past business cycles. (link)  A higher level of initial claims shows a weaker economy. Can we expect initial claims to fall more if we expect the economy to get even stronger from here into the future?  How can we get a sense if the labor market is reaching a saturation point that would show that unemployment is near its natural potential?  The 4-week moving average of initial claims can be divided by the civilian labor force. (link) In this graph, since the crisis, initial claims have declined in relation to the civilian labor force employed. The economy has been recovering. Since last October, though, the initial claims have been rising slowly in relation to the civilian labor force.  The graph would imply that maybe unemployment has reached a saturation point consistent with past business cycles. Or can the line continue downward? Could we expect the civilian labor force to continue rising with initial claims to continue falling?  If you see the saturation point taking effect now, then you might conclude that a 5.5% unemployment rate is fairly reliable and that unemployment is getting close to its natural potential..

Layoffs hit 3-year high in April as energy cuts surge: Challenger: Layoffs surged in April to the highest level in three years as energy sector employers announced a fresh wave of job cuts. U.S.-based companies said they would let go 61,582 workers last month, the most since May 2012, according to a report by global outsourcing firm Challenger, Gray & Christmas. The oil price rout continued to account for the bulk of workforce reductions. Challenger, Gray & Christmas attributed 20,675 to the effect of crude prices, with most of the layoffs occurring within the energy sector. In April, oilfield services firm Schlumberger announced it would lay off 11,000 additional employees, having already slashed 9,000 positions. Employers have cut 201,796 positions this year, a 25 percent increase from the same period last year, when companies handed out 161,639 pink slips.

The Texas Job Recession Is Now Literally "Off The Chart" -  The paradoxical, utterly nonsensical "data" releases continue. On one hand, the government's Department of Labor reported earlier today that in the past week just 265K people were laid off: the lowest number since early 2000. On the other, private data aggregator Challenger reported that in April, there were a whopping 61,582 job cuts, a 68% surge from March, and up 53% from a year ago. This was the highest monthly total since May 2012 and the highest April total since 2009! Smoothing out the noise reveals that in the first 4 months of 2015, employers announced 201,796 planned job cuts, which marks a 25 percent increase from the 161,639 layoffs tracked in the first four months of 2014. This is the largest four-month total since 2010. To say that something does not add up here between the public and private data releases is quite evident. But while there may be massive confusion when it comes to the data propaganda and the clear agenda behind the seasonally-adjusted, policy-specific government data, there is no confusion when it comes to one thing: the job recession in Texas has not been this bad since the last of the second Great Depression.

ADP: Private Employment increased 169,000 in April - From ADP: Private sector employment increased by 169,000 jobs from March to April 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 declined by 1,000 jobs in April, down from 3,000 jobs gained in March. The construction industry added 23,000 jobs, up from 21,000 last month. Meanwhile, manufacturing lost 10,000 jobs in April, after losing 3,000 in March. Service-providing employment rose by 170,000 jobs in April, down slightly from 172,000 in March. The ADP National Employment Report indicates that professional/business services contributed 34,000 jobs in April, up from March’s 28,000. Expansion in trade/transportation/utilities grew by 44,000, up from March’s 41,000. The 7,000 new jobs added in financial activities is a drop from last month’s 12,000. ..Mark Zandi, chief economist of Moody’s Analytics, said, “Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation. Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer." This was below the consensus forecast for 205,000 private sector jobs added in the ADP report.

ADP Employment Tumbles To 15 Month Lows As Manufacturing Jobs Plunge  -- Following March's dismal drop in the ADP Employment report (the biggest miss in 4 years) and missing for 3 straight months, April printed a very weak 169k (against notably lowere expectations of a 200k rise). Even worse, February and March was revised even lower. This is lower than the lowest economist estimate. Large companies were particularly weak with smaller businesses adding the bulk of the meager jobs print. The esteemed Mark Zandi blames this on "the fallout from the collapse of oil prices and the surging value of the dollar."

ADP Employment Report for April Disappoints Expectations -- Today we have the April estimate of 169K new nonfarm private employment jobs from ADP. That is the lowest number since the 157K in January of last year, 15 months ago. In addition, the previous month's estimate was revised downward from 189K to 175K.  The 169K estimate came in well below the forecast of 200K for the ADP number. The forecast for the forthcoming BLS report is 224K nonfarm new jobs (the actual PAYEMS number). Here is an excerpt from today's ADP report: Goods-producing employment declined by 1,000 jobs in April, down from 3,000 jobs gained in March. The construction industry added 23,000 jobs, up from 21,000 last month. Meanwhile, manufacturing lost 10,000 jobs in April, after losing 3,000 in March.  Service-providing employment rose by 170,000 jobs in April, down slightly from 172,000 in March. The ADP National Employment Report indicates that professional/business services contributed 34,000 jobs in April, up from March's 28,000. Expansion in trade/transportation/utilities grew by 44,000, up from March's 41,000. The 7,000 new jobs added in financial activities is a drop from last month's 12,000. "April job gains came in under 200,000 for the second straight month," said Carlos Rodriguez, president and chief executive officer of ADP. "Companies with 500 or more employees had the slowest growth." Mark Zandi, chief economist of Moody's Analytics, said, "Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation. Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer."  Here is a visualization of the two series over the previous twelve months.

ADP Employment Report Shows Bad News for Manufacturing -- ADP's proprietary private payrolls jobs report gives us another stunted employment preview by reporting a monthly gain of 169,000 private sector jobs for April 2015.  Manufacturing jobs are truly a bad omen with 10,000 reported lost.  Construction on the other hand is still in recovery with 23,000 April jobs gained.  By the numbers the overall job growth appears to be decelerating, and ADP blames the collapse in oil prices.  This report does not include government, or public jobs.  The official BLS employment report will be released on Friday. ADP's reports in the service sector alone job gains were 170,000 private sector jobs.  The goods sector lost jobs and declined by 1,000.  Unfortunately ADP does not give a lot of breakdown in their job categories but clearly other areas of the goods producing sector lost jobs.  Professional/business services jobs grew by 34,000.  Trade/transportation/utilities showed the strong growth with 44,000 jobs.  Financial activities payrolls added 7,000 jobs.  As previously noted, Manufacturing lost 10,000 jobs.  Graphed below are the monthly job gains or losses for the five areas ADP covers, manufacturing (maroon), construction (blue), professional & business (red), trade, transportation & utilities (green) and financial services (orange).  As we can see manufacturing's figures are a rarity. ADP reports payrolls by business size and this month companies with 500 up to 1,000 employees really hit the slow down tank as their payrolls gains were a big fat zero.  Small business, 1 to 49 employees, added 94,000 jobs with establishments having less than 20 employees adding 54,000 of those jobs.  ADP does count businesses with one employee in there figures.  Medium sized business payrolls are defined as 50-499 employees, added 70,000 jobs.  Large business added 5,000 to their payrolls, all with 1,000 or more workers.  Below is the graph of ADP private sector job creation breakdown of large businesses (bright red), median business (blue) and small business (maroon), by the above three levels.  For large business jobs, the scale is on the right of the graph.  Medium and Small businesses' scale is on the left.

Gallup U.S. Job Creation Index May 6, 2015: More American workers have reported that their employers were hiring over the past year than in the six years prior, with the latest data from April representing a new high mark. Gallup's U.S. Job Creation Index reached plus 31 in April, inching past its previous high of plus 30 from September of last year. The latest reading is up two points from March, and is a break from six months of fairly static measurements. Since hitting a low point of minus 5 on two separate occasions in 2009, the U.S. Job Creation Index has climbed fairly steadily over the past six years. The first five months of 2014 saw steady increases in monthly readings of the index, rising from plus 19 in January to plus 27 in May. Since then, the index has mostly stayed between plus 27 and plus 29, apart from the higher readings last September and this April. For the first time since Gallup began tracking the index in 2008, index scores are plus 30 or higher in all four regions of the country. Each region has a new high index score, with the Midwest leading the other regions at plus 33 in April. The index score in the East had never reached the plus 30 mark before the latest poll. Both government and nongovernment workers reported slightly greater hiring activity, with a two-point increase in each of their index scores for the month of April. For nongovernment workers, last month's plus 33 is a new high in their net hiring perceptions, edging past the plus 32 in September. The plus 22 score among government workers is one point below the high from last August. Perceptions of hiring among nongovernment workers have consistently been stronger than those of their government counterparts in nearly all of Gallup's readings over the years.

U.S. Payroll to Population Rate 43.9% in April: The U.S. Payroll to Population employment rate (P2P), as measured by Gallup, was 43.9% in April. This is up 0.5 percentage points from April 2014, though lower than what was found in April 2013. The metric has been fairly steady so far in 2015, and has not yet shown the typical seasonal rise in the spring months from lows in January and February. Gallup's P2P metric tracks the percentage of the U.S. adult population aged 18 and older who are employed by an employer for at least 30 hours per week. P2P is not seasonally adjusted. The latest results are based on Gallup Daily tracking interviews with 29,412 Americans, conducted April 1-30 by landline telephone and cellphone. Gallup does not count adults who are self-employed, work fewer than 30 hours per week, who are unemployed or are out of the workforce as payroll-employed in the P2P metric.The percentage of U.S. adults participating in the workforce in April was 66.4%, on par with the 66.8% measured in March. The workforce participation rate has declined 0.6 points since February. 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 April 2010, the workforce participation rate has remained in a narrow range, from a low of 65.8% to a high of 68.5%. But since mid-2013, it has generally remained below 67.0%. Gallup began recording this metric in January 2010, but Bureau of Labor Statistics (BLS) figures prior to that show that labor force participation before the 2007-2009 recession was three percentage points higher than it is today, and it has yet to recover from that decline.

April Employment Report: 223,000 Jobs, 5.4% Unemployment Rate -- From the BLSTotal nonfarm payroll employment increased by 223,000 in April, and the unemployment rate was essentially unchanged at 5.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, and construction. Mining employment continued to decline....  The change in total nonfarm payroll employment for February was revised from +264,000 to +266,000, and the change for March was revised from +126,000 to +85,000. With these revisions, employment gains in February and March combined were 39,000 lower 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 223 thousand in April (private payrolls increased 213 thousand). Payrolls for February and March were revised down by a combined 39 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In April, the year-over-year change was just under 3.0 million jobs. This is a solid year-over-year gain.

April Jobs Report – The Numbers -- The economy added an average 191,000 jobs from February through April. Last year, the U.S. added an average 260,000 jobs a month, which was the highest since 1999. The economy cooled in the first quarter, as severe weather, West Coast port strikes and a strong dollar weighed on economic growth and hiring. A return of strong job creation in April suggests the slowdown may have been a temporary lull, and that the economy is poised for a spring rebound. The Federal Reserve wants to see strong hiring again as it considers raising short-term interest rates as early as this summer.  Updated figures showed job growth was weaker earlier this year than previously estimated, with the economy adding 39,000 fewer jobs in February and March than previously estimated. Payrolls grew by 266,000 in February, up slightly from the previously reported 264,000 gain. But payrolls increased only 85,000 in March, down from the initially reported addition of 126,000. Workers appear to be getting slightly bigger paychecks. Average hourly earnings of private-sector workers rose 3 cents in April from March, to $24.87. But growth is still modest historically. Over the past year, wages have risen 2.2%. Stagnant wages have been a mystery, given the sharp decline in unemployment. A pickup in wages suggests employees may finally have more leverage and the U.S. economy is approaching “full” employment nearly six years after the recession.  The labor force grew last month, another sign of the strengthening job market. The labor-force participation rate—or the share of working-age Americans with jobs or searching—rose to 62.8% from March’s 62.7%. The labor force added 166,000 workers last month. The participation rate is near the lowest level since the late 1970s. The mining and logging industry shed 15,000 jobs in April and has lost a total of 49,000 positions this year. That reflects weakness in the energy industry, following last year’s collapse in oil prices. But other sectors added jobs last month, including professional and business services, health care and construction.

Establishment +233K Jobs; Household +192K Employment, Part-Tme Employment +198K, Labor Force +166K -- Today we see a snap back from last month's report on both establishment jobs and household survey employment. Last month the household survey last month came in at an anemic 34,000. This month it is 192,000. Part-time employment went up by 198,000 meaning the entire increase in employment was part-time. Finally, March nonfarm payrolls were revised lower from 126,000 to 85,000. This snap back is nowhere near as big as it appears at first glance. It will take at least another month to see if weakness in March was the start of something or an outlier.  Let's take a look at all the key numbers. BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +233,000 - Establishment Survey
  • Employment: +192,000 - Household Survey
  • Unemployment: -26,000 - Household Survey
  • Involuntary Part-Time Work: -125,000 - Household Survey
  • Voluntary Part-Time Work: +323,000 - Household Survey
  • Baseline Unemployment Rate: -0.1 at 5.4% - Household Survey
  • U-6 unemployment: -0.1 to 10.8% - Household Survey
  • Civilian Non-institutional Population: +186,000
  • Civilian Labor Force: +166,000 - Household Survey
  • Not in Labor Force: +19,000 - Household Survey
  • Participation Rate: +0.1 at 62.8 - Household Survey

April Jobs Growth Rebounds and the Unemployment Rates Ticks Down to 5.4%: 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 223,000 in April, and the unemployment rate was essentially unchanged at 5.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, and construction. Mining employment continued to decline.   Today's report of 223K new nonfarm jobs in April was close to the forecast of 224K. Moreover, March nonfarm payrolls were revised downward by 41K from 126K to 85K. The unemployment rate ticked down from 5.5% to 5.4%.  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 the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to be repeating itself with the most recent and previous bear markets. 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 is now hovering at its post-recession low of 1.6%. Click 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.

Jobs Report: Solid April Follows Weak March; Some Signs of Slower Job Growth; Negative Impact of Strong Dollar Clear in Manufacturing -- Payrolls rose 223,000 last month, in line with expectations, and the jobless rate ticked down to 5.4%, a seven-year low. March’s already low payroll gain was revised down to only 85,000; combining that with February’s revision takes payrolls down 39,000 over those months. As shown below, the March outlier takes the three-month average down to about 190,000 jobs per month over the past three months, a slower trend of payroll gains then prevailed last year. The jobless rate ticked down slightly, and for the “right” reasons: more jobs vs. fewer people in the labor force. The closely watched (i.e., by labor market nerds and Fed watchers) labor force participation rate ticked up a tenth to 62.8%. At this point, it’s fair to conclude that the lfpr has stabilized at around 63%, where it’s sat for well over a year now.  That’s better than a declining rate—at least some of the decline was driven by labor-force leavers discouraged by their job prospects. But most analysts, myself included, believe there’s considerably room for the lfpr to tick up as labor demand returns. The reason this matters—why it’s actually a big deal—is that this dynamic means there’s more slack in the job market than the relatively low unemployment rate suggests. By smoothing out the jumpiness in the monthly data, JB’s Jobs Day Smoother shows 3, 6, and 12-month averages of monthly payroll gains. This month’s smoother is suggestive of another important development in the job market: the slowing of monthly job gains, from an average of around 250,000 to around 200,000.

April jobs report: much better, but an alarm on leading indicators - HEADLINES:

  • 223,000 jobs added to the economy
  • U3 unemployment rate down -0.1% to 5.4%

With the expansion firmly established, the focus has shifted to wages and the chronic heightened unemployment.  Here's the headlines on those:

  • Not in Labor Force, but Want a Job Now: down -111,000 from 6.369 million to 6.258 million
  • Part time for economic reasons: down -125,000 from an upwardly revised 6.705 million to 6.580 million
  • Employment/population ratio ages 25-54: unchanged at 77.2% 
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up +0.1% from an upwardly revised $20.88 to $20.90,  up +1.9%YoY, a slight increase. (Note: you may be reading different information about wages elsewhere. They are citing average wages for all private workers. I use wages for nonsupervisory personnel, to come closer to the situation for ordinary workers.)

February was revised higher by +2,000, but March was revised even lower, down -39,000 to +85,000, for a net of -37,000.The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed but with a negative bias for the third month in a row. the average manufacturing workweek fell -0.1 hours from 40.9 hours to 40.8 hours.  This is one of the 10 components of the LEI and so will affect it negatively.

April Payrolls Miss At 223K, March Revised Much Lower, Wage Growth Disappoints Again - While the April payrolls came almost precisely as expected, at 223K, a tiny 5K below the 228K expected, the reason stock are soaring is that the already abysmal March payroll prints was revised even lower to just 85,000, the weakest print since June 2012, and pushing the 3 month average job gain to under 200K, or a level which the Fed has indicated previously it will hardly do much if anything material. The household survey did not provide an offsetting boost, with the number of employed Americans rising only 192,000 in April according to the "other" survey. And, as a result and as we noted in our market wrap today, with a June hike now looking unlikely, the S&P has exploded higher. In other relevant news, the unemployment rate is down from 5.5% to 5.4% as expected, but even more important, hopes that wages would finally rise are once again dashed with the average hourly earnings rising a paltry 0.1%, below the 0.2% expected and down from the pre-revision 0.3% gain in March, now revised to just 0.2%. In other words, because ZIRP, QE has failed to trickle down for 7 years, the Fed has a greenlight to do more of it.

Part-Time Jobs Soar By 437,000; Full-Time Jobs Tumble, Stay Firmly Under Pre-Recession Highs - For all the talk about a jobs recovery and about a US economy that has put the great financial crisis and recession of 2007/8 in the rear view mirror, don't tell it to those workers who desire a full-time job and instead are forced to settle with measly part-time offerings (mostly courtesy of Obamacare). Because as the chart below shows, as of April 2015, the number of full-time jobs remained well below the pre-recession peak, which incidentally was hit on December 2007, the month the last recession officially started.

Summing Up the Data on Jobs and Wages  - Recent weeks have seen a raft of pretty bad economic news. Last month’s jobs report showed a marked slowdown in employment growth—with 126,000 new jobs reported in March, down from the 269,000 average pace of growth that had characterized the previous 12 months. And gross domestic product (GDP) in the first quarter was essentially stagnant—rising at just a 0.2 percent annualized rate. March trade data showed an enormous rise in the trade deficit, which will likely drive the revised numbers on GDP into negative territory.  Given this backdrop, there was a bit more at stake than usual in today’s monthly jobs report. So, what’s the verdict? Mixed. Job growth in April was 223,000—much closer to the 2014 year-round average than March’s numbers. And the unemployment rate ticked down (insignificantly) to 5.4 percent. Both of these numbers are good news. But the weak March job growth was revised down even further, to 85,000. The prime-age employment-to-population ratio remains slightly off its February peak (77.2 percent down from 77.3). Worse, some very nascent signs of pickup in wage growth seem to have melted away. The three-month change in average hourly earnings picked up to 2.7 percent in the March jobs report, but receded down to 2.3 percent in this month’s data. For the year, average hourly earnings rose 2.2 percent—the same desultory pace that has characterized essentially the entire recovery. For production workers (80 percent of the private sector workforce) wage growth was even weaker, increasing just 1.9 percent over the past year.

The April Jobs Report in 13 Charts - - The U.S. economy added 223,000 jobs in April, and a separate survey showed that the unemployment rate fell to 5.4%, near a seven-year low. Of course, the jobs report contains far more than these headline figures, and these charts show how Friday’s report from the Labor Department illustrates the broader state of the economic expansion. Unemployment is falling steadily across a range of measures. The plunge in oil prices has taken a toll on hiring in the mining and logging sector, which includes oil-and-gas extraction. Over the trailing three months, job growth in March and April has slowed a bit from its hot pace at the end of last year. The economy added just 85,000 jobs in March, down from an earlier estimate of 126,000. Wage growth has been running slightly below 2.2% over the past year. The economy has added nearly 3 million jobs over the past year, but that pace is down from around 3.2 million at the beginning of this year. The share of Americans in the labor force remains historically low, but ticked up in April. The share of prime-age workers (those between 25 and 54 years old) who are working has been rising steadily even though it remains well below its pre-recession level. Unemployment rates remain much lower for workers with higher education. The share of unemployed workers who have been out of work for at least six months remains high, but it continues to decline. And the median duration of jobless spells, while elevated, is also declining. The number of long-term unemployed workers is still higher than before the recession, but it has been steadily edging down. There are still around 750,000 fewer full-time workers than before the recession began in December 2007. But most of the jobs added since the recession ended in June 2009–nearly 7.9 million positions–are full-time.

Rising Trade Deficit Slows Job Growth in Manufacturing - Dean Baker - The Labor Department reported the economy created 223,000 jobs in April. This is disappointing since the already weak March number was revised down by 41,000 to 85,000. Since the March number was held down by unusually bad weather, it was reasonable to expect more of a bounceback in April. With the downward revision, the two-month average is just 154,000, a considerable falloff from last year’s pace. There were few sectors showing much strength in the month. Professional and business services added 62,000 jobs, 20,700 of which were in the relatively high-paying professional and technical services sector. Construction added 45,000 after a reported loss of 9,000 in March. Health care added 45,200 jobs, up considerably from its average of 33,000 over the last year. Restaurants added 26,000 jobs after losing 7,400 jobs in March. Over the last year, job growth averaged more than 32,000 a month. The government sector added 10,000 jobs in April, reversing a loss of 9,000 jobs in March. Manufacturing employment has essentially gone flat, adding just 1,000 jobs. Employment in the sector is up by just 4,000 since January, and because the average workweek has declined, the index of aggregate weekly hours in manufacturing is down by 0.5 percent from its January level. Overtime hours are also down sharply over the last year. This is consistent with the data showing a rise in the trade deficit due to the stronger dollar. A downward revision to last month’s wages eliminated the little evidence we had seen of accelerating wage growth. The annual rate of growth over the last three months compared with the prior three months is 2.3 percent, compared to 2.2 percent over the last year. The news is a bit better in the household survey. The unemployment rate edged down slightly to 5.4 percent. The number of involuntary part-time workers fell by 125,000 from the March level and is now down by 880,000 from its year-ago level. Meanwhile, the number of people who choose to work part-time rose by 320,000 from March and is up by 1,140,000 (6.0 percent) from its year-ago level. This is likely due to the increased flexibility offered by the Affordable Care Act. Interestingly, college educated workers are not doing especially well in the recovery. The employment-to-population ratio (EPOP) for college grads is down by 0.2 percentage points over the last year and is down by 4.0 percentage points from its pre-recession level. By contrast, the EPOP for workers without high school degrees has risen by 1.4 percentage points over the last year and is down by less than 2.0 percentage points from its pre-recession level.

The High Share of Part-Time Workers Helps Explain Weak Wage Growth - The economy created 223,000 new jobs last month, and the unemployment rate, at 5.4%, is heading toward a level normally viewed as signaling a tight labor market. Yet yearly growth in average hourly wages remains stuck at about 2%. If the economy were facing a shortage of labor, then businesses should be boosting pay at a faster clip to keep their employees and attract new ones. One possible explanation is that more companies have restructured their staffing to focus on part-time workers. Because of that, there is slightly more slack in the labor markets than the jobless rate indicates. And these part-timers have less bargaining power to negotiate higher wages. To be sure, most of the jobs created in this expansion (as reported in the household survey) are full-time positions. But part-time spots, less than 35 hours a week, now account for a larger share of total employment than they did before the recession. That’s true for total part-time workers and for part-time workers who would prefer a full-time position. The Labor Department breaks down involuntary part-timers into two classifications: those who are working part-time because work is slack and those working part-time because that’s the only job offered. Stephen Stanley, chief economist at Amherst Pierpont Securities, notes a distinction between the two. “Slack” part-time work is the result of cyclical forces, while “could only find part-time work” is typically the result of structural changes in the labor markets. With economic output expanding, the number of part-timers because of slack work has fallen sharply from a high of 6.9 million during the recession to 3.9 million in April. That’s only about 37% higher than the average from 2003-07, Mr. Stanley writes in a research note. On the other hand, the number of workers who could only find part-time slots has barely fallen since the recession. At 2.4 million in April, the number is 84% higher than the 2003-07 average. That large number means the economy has more labor available to meet businesses’ demands.

Old Workers Hit New All Time High As All April Jobs Go To The "55 And Older" -- Earlier we reported that all the jobs added in April were part-time, or over 400,000, while full-time jobs decreased by over 200,000 pushing them further under the pre-recession peak. Here is another stunning data point: of the 255K workers added in the household survey when broken down by age group, more than all, or 266K went to workers aged 55 and older also known as the age cohort which is realizing it is never going to retire under the Fed's centrally-planned regime.

In April There Were 26 Waiters And Bartenders For Every Manufacturing Job Added -- Several years ago (and then subsequently renewed almost every year) Barack Obama unviled a manufacturing initative during one of his countless teleprompted appearances before the nation, in which he promised to do everything in his power to boost the US manufacturing sector. It should therefore come as no surprise that in the month of April America's attempts to rekindle a manufacturing renaissance have fizzled once again, with a tiny 1,000 manufacturing jobs added, following zero manufacturing jobs added the month before.  Putting this in perspective, for every manufacturing job added in April there were 26 new waiters and bartenders confirming the "robustness" of America's jobs recovery. The chart below shows the progression of how America is slowly but surely transforming from a manufacturing society to one of waiters and bartenders.

Oil Jobs Fall To the Lowest Level in More Than a Year - The number of Americans working on oil and gas wells has dried up to its lowest level in more than a year. Employment in in oil-and-gas extraction fell by 3,300 in April to a seasonally adjusted 194,400, the Labor Department said Friday. That’s the fewest since March 2014 and represents a year-over-year decline for an industry that until recently had been a growth engine for the labor market. The decrease comes while the broader economy added 223,000 jobs to payrolls last month .. Employment in the energy-extraction sector reached 201,500 in October. The recent peak, driven by the expansion of hydraulic fracturing, was the industry’s highest employment level since 1986. Jobs in the field have declined in four of the past six months. The drop off coincides with plummeting oil prices. After exceeding $100 a barrel in June, benchmark oil prices slipped to about half that level by the end of 2014. Prices have mostly stabilized since, creeping above $60 a barrel this month. Oil and gas jobs represent a fairly small share of the overall labor market. But firms in that industry were steadily hiring in 2011 and 2012, a time when broader payroll gains were sluggish. And in certain regions of the country, such as North Dakota and Texas, energy jobs were significant drivers of the economy. They helped spur hiring in other fields such as construction, manufacturing and retail jobs. The unemployment rate in North Dakota was 3.1% in March. While that’s still the second lowest in the country, the measure is up from a seasonally adjusted 2.7% in September.

Black Unemployment Rate Falls to Single Digits in April as Black Men Catch Up to Black Women - In January of this year, I projected that the black unemployment rate would reach single digits by mid-2015. That happened this month as job growth of 223,000 in April was more in line with the monthly average in 2014. At 9.6 percent, the black unemployment rate is the lowest it’s been since June 2008 and nearly two (1.8) percentage points below where it was this time last year. Though this is an important milestone, the rate remains above the annual average of 8.3 percent in 2007, meaning there’s still much further to go before we declare a full recovery for black workers. Though the unemployment rate for black men fell to nearly the same rate for black women in April, black men and black women have made very unequal progress, as can be seen in Figure A. This is an amplification of the fact that although men lost more jobs than women during the recession, they have also rebounded faster in the recovery. Between April 2014 and April 2015, job gains for black men far outpaced those of black women (an increase of 7.6 percent and 3.9 percent, respectively). As a result, black men’s unemployment rate declined 2.3 percentage points over the last year, compared to a decline of 1.4 percentage points for black women. Since the end of 2014, employment growth for black women has slowed even further, leaving black women’s unemployment rate 0.5 percentage points higher in April 2015 than it was in December 2014. Meanwhile, black men’s unemployment rate was 2.3 percentage points lower in April 2015 than December 2014.

Jobless Rate for Black Americans Finally Dips Into Single Digits - For the first time in nearly seven years, the unemployment rate for African-Americans is in single digits–though it remains more than twice as high as the jobless rate for whites. The seasonally adjusted unemployment rate for black workers was 9.6% in April, the Labor Department said Friday. That was down from 10.1% in March and the lowest reading since June 2008, when it was 9.4%. For whites, the unemployment rate was steady in April at 4.7%. The Hispanic jobless rate was 6.9%, ticking up from 6.8% in March. The Asian unemployment rate was 4.4% last month, up from 3.2% in March. Overall, the U.S. unemployment rate fell to 5.4% in April from 5.5% in March.  Black unemployment peaked at 16.8% in March 2010, while white unemployment crested at 9.2% in late 2009. Despite recent declines in joblessness, the racial unemployment gap has remained stubbornly large.

The April jobs report: Is that all there is to this economic recovery? -- So a decent snapback in the US labor market. Net new jobs increased by 223,000 in April — matching the consensus forecast –while the unemployment rate fell by 0.1 percentage point to 5.4%, according to the Bureau of Labor Statistics. Labor force participation ticked up, making that jobless rate improvement look a bit stronger. The U-6 underemployment rate edged lower. Also some more progress in the long-term jobless numbers.  Not so decent: The employment rate went nowhere. The March jobs number was revised lower from 126,000 to 85,000. Over the past three months, job gains have averaged 191,000 per month vs. 260,000 monthly in 2014. And once again weak wages: The broadest measure of average hourly earnings was up 0.1%, leaving average hourly earnings up 2.2% over the past year. Average hourly earnings for production and nonsupervisory workers were up 0.1% and 1.9% year over year. (Double that rate would be nice.) What’s more, the US may still have a 3-6 million “jobs gap.”  Yet as JPMorgan economist Michael Feroli says in a new note, “While it’s obviously hard to draw firm conclusions from one month’s report, it does feel like the period of extreme labor market outperformance may be waning, and the trend in job growth is going from great to good. As for the economic outlook, the news on labor income is pretty soft and may serve as a headwind to the consumer spending outlook.”

Employment Report Comments and Graphs - Earlier: April Employment Report: 223,000 Jobs, 5.4% Unemployment Rate. This was a decent employment report with 223,000 jobs added, but February and March were revised down by a combined 39,000 jobs. However there is still limited wage growth, from the BLS: "In April, average hourly earnings for all employees on private nonfarm payrolls rose by 3 cents to $24.87. Over the past 12 months, average hourly earnings have increased by 2.2 percent." Weekly hours were unchanged. A few more numbers:  Total employment increased 223,000 from March to April and is now 3.0 million above the previous peak.  Total employment is up 11.7 million from the employment recession low.  Private payroll employment increased 213,000 from March to April, and private employment is now 3.5 million above the previous peak. Private employment is up 12.3 million from the recession low. In April, the year-over-year change was just under 3.0 million jobs.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 increased in April to 81.0%, and the 25 to 54 employment population ratio was unchanged at 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. The number of persons working part time for economic reasons decreased in April to 6.58 million from 6.70 million in March.  This suggests slack still in the labor market.  These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 10.8% in April from 10.9% in March. This is the lowest level for U-6 since August 2008.

So Far, the Black Unemployment Rate Has Only Recovered in States Where It Was Highest Before the Great Recession - In March 2015, the national unemployment rate was 5.5 percent, showing little progress since the previous low of 5.6 percent at the end of 2014. Yet, even as the recovery moves ahead slowly, conditions vary greatly across states and across racial and ethnic groups. In March, state unemployment rates ranged from a high of 7.7 percent in the District of Columbia to a low of 2.6 percent in Nebraska, replacing North Dakota as the state with the lowest unemployment rate. Nationally, African Americans had the highest unemployment rate, at 10.1 percent, followed by Latinos (6.8 percent), whites (4.7 percent), and Asians (3.2 percent). Following is an overview of racial unemployment rates and racial unemployment rate gaps by state for the first quarter of 2015. We provide this analysis on a quarterly basis in order to generate a sample size large enough to create reliable estimates of unemployment rates by race at the state level. We only report estimates for states where the sample size of these subgroups is large enough to create an accurate estimate.

Unit labor costs increase by 1%+ in Q1: The price commanded by labor for a unit of output increased in the first quarter, making a new post-recession high: This is another sign that wages are finally participating in the expansion: The only problem with labor costs is if they outstrip the ability of the employer to absorb them and maintain a given profit level. Since other commodity prices have plummeted (brown in the graph below), and producer prices for final goods have declined but not so much (red), employers should be OK while employees/consumers benefit from increased wages and flat consumer prices.

Productivity Dives, Wages Rise; Inflation Theory vs. Practice; Technical Recession? -- Today's BLS release on Productivity and Costs shows a back-to-back decline in productivity accompanied with rising wages. Productivity is up year-over year, but barely, at 0.6%. Nonfarm business sector labor productivity decreased at a 1.9 percent annual rate during the first quarter of 2015, the U.S. Bureau of Labor Statistics reported today, as output declined 0.2 percent and hours worked increased 1.7 percent . The decline in productivity follows a decline of 2.1 percent in the fourth quarter of 2014. From the first quarter of 2014 to the first quarter of 2015, productivity increased 0.6 percent, reflecting increases in output and hours worked of 3.5 percent and 2.9 percent, respectively. Unit labor costs in the nonfarm business sector increased 5.0 percent in the first quarter of 2015, reflecting a 3.1 percent increase in hourly compensation and a 1.9 percent decline in productivity. Unit labor costs increased 1.1 percent over the last four quarters.  Manufacturing sector productivity decreased 1.1 percent in the first quarter of 2015, as output decreased 1.2 percent and hours worked edged down 0.1 percent. Productivity decreased 2.3 percent in the durable manufacturing sector and was unchanged in the nondurable manufacturing sector. Employee wages are up but output is down two consecutive quarters. This is a bottom line hit to corporate earnings. In theory, the Fed will cheer this development because it adds inflation pressures. Companies will have to raise prices to maintain earnings, and that is just what the Fed foolishly wants. But will businesses, especially fast food and retail stores be able to pass on those costs? And if they do, what about sales? In practice, the Fed will be sorely disappointed with this development. Minimum wage hikes coupled with declining productivity will greatly dampen corporate hiring plans.

US Productivity Suffers First Consecutive Quarterly Plunge Since 1993 Well this cannot be good. US output per hour (for the non-farm businesses) - or non-Farm productivity - plunged 1.9% in Q1. This follows a 2.1% slump in Q4 2014 and is the first consecutive quarterly plunge since 1993. This was driven by a 0.2% decline in output as hours worked increased 1.7% with manufacturing productivity suffering a 1.1% drop in Q1 (driven by a 1.2% decline in output).  Must be geat news... working more... making less.

Labor Productivity, Household Incomes and Corporate Profits: And the Winner Is?  -- Yesterday the Bureau of Labor Statistics released the preliminary data for Q1 Productivity and Costs. We learned that the headline metric, nonfarm business sector labor productivity, decreased at a 1.9 percent annual rate during the first quarter of 2015. Let's take a look at the BLS's complete data series for this index, which dates from 1947. As the above chart illustrates, compounded annual rate of change is quite volatile, hence our inclusion of a 10-year moving average.We get a more useful view of the long-term trend by simply looking at the Labor Productivity Index itself, which is currently chained so that the year 2009 = 100.Now let's overlay real median household incomes, for which we have annual Census Bureau data from 1967 to 2013.  The growth in labor productivity clearly hasn't translated into higher incomes for median (aka middle class) households. Note that the household income data ends at 2013. The Census Bureau will publish the 2014 data in mid-September. That relatively flat blue line, showing a cumulative growth of 19.2% since 1967, is actually 8.7% off its peak, which occurred in 1999 as the market was entering the final phase of the Tech Bubble. So who actually benefited from the upward trend in labor productivity? Let's look at an overlay of the Labor Productivity Index and a log-scale chart of Corporate Profits.  Growth in Labor Productivity has been a boon to corporate profits, but not to household incomes. So much for the theory of trickle-down economics.

"Companies can't find workers who can hold a conversation or show up on time" -- I'd like to see data from 10, 20, and 30 years ago, but this sounds pretty bad: According to the latest supplemental survey from the New York Fed's manufacturing and business leaders surveys, employers in the New York area are facing two main problems: finding workers who can show up on time and workers who can hold a conversation. The survey showed that in April, 65% of manufacturing employers had difficulty finding punctual workers and 60% had trouble finding workers with interpersonal skills. Among business leaders, a broader survey group, 42% had trouble finding punctual workers while about 48% had trouble finding workers with interpersonal skills.

The Demolition of Workers’ Compensation - It was getting late that September afternoon in 2012. Whedbee, a 50-year-old derrickhand, was helping another worker remove a pipe fitting on top of the well when it suddenly blew.   Oil and sludge pressurized at more than 700 pounds per square inch tore into Whedbee’s body, ripping his left arm off just below the elbow. Coworkers jerry-rigged a tourniquet from a sweatshirt and a ratchet strap to stanch his bleeding and got his wife on the phone. “Babe,’’ he said, “tell everyone I love them.” It was exactly the sort of accident that workers’ compensation was designed for. Until recently, America’s workers could rely on a compact struck at the dawn of the Industrial Age: They would give up their right to sue. In exchange, if they were injured on the job, their employers would pay their medical bills and enough of their wages to help them get by while they recovered. No longer. Over the past decade, state after state has been dismantling America’s workers’ comp system with disastrous consequences for many of the hundreds of thousands of people who suffer serious injuries at work each year, a ProPublica and NPR investigation has found. The cutbacks have been so drastic in some places that they virtually guarantee injured workers will plummet into poverty. Workers often battle insurance companies for years to get the surgeries, prescriptions and basic help their doctors recommend. Two-and-a-half years after he lost his arm, Whedbee is still fighting with North Dakota’s insurance agency for the prosthesis that his doctor says would give him a semblance of his former life.

Minimum Wage Increase Hits the Bulls’ Eye - Social or labor market policies are measured by their reach, their adequacy, and their costs. By these metrics, a minimum wage increase is a slam dunk. A generation of research now demonstrates pretty decisively that markets can accommodate a reasonably higher minimum at no significant threat to job creation—especially when ancillary gains (productivity gains, less turnover, increase in aggregate demand) are taken into account. Raising the minimum wage makes almost no demands on the public purse, and could in fact recoup much of the current public subsidy (through working families’ reliance on means-tested tax credits, cash assistance, health care, and food security programs) of low-wage employment. Even a small increase promises to make a big difference: in 2013, Arin Dube estimated that an increase to $10.10 would raise the incomes of poor families (those at the 10th percentile) by 12 percent and lift five to seven million out of poverty. An increase to $12 would likely have even larger poverty-fighting effects.While much of our social and tax policy is either poorly targeted (it reaches the poor unevenly) or aimed in in the wrong direction (it benefits those who don’t need it), a minimum wage increase hits the bull’s-eye. As EPI’s new estimates of the impact of the “Raise the Wage Act” (bringing the minimum to $12.00/hour by 2020) underscore, the benefits of an increase would flow overwhelmingly to those—young workers, single parents, workers of color—who need it the most. The interactive graphic below summarizes this important new work: the first menu sorts workers by race, the second by income, age, family status, labor force participation, and educational attainment.

Raising the Minimum Wage to $12 by 2020 Would Shrink the Wage Gap between Low-Wage Workers and Typical Workers  --Over the past four decades, much of the growth in inequality has come from the declining value of the federal minimum wage. Infrequent or inadequate increases in the federal wage floor created a significant gap between the hourly wages paid to low-wage workers and the wages paid to typical or middle-wage workers. The Raise the Wage Act of 2015, recently introduced by Sen. Patty Murray (D-WA) and Rep. Robert “Bobby” Scott (D-VA), would help undo this growth in wage inequality by gradually raising the minimum wage to $12 by 2020. As explained in We Can Afford a $12 Federal Minimum Wage in 2020, this would restore the relationship between the minimum wage and the wages of typical workers that existed in the late 1960s. As the figure below shows, at its high point in 1968, the federal minimum wage was equal to 52.1 percent of the median wage of full-time workers in the United States. As of 2014, the minimum wage had fallen to 37 percent of the median wage. If the federal minimum wage is raised to $12 by 2020, it would equal 54.1 percent of the median wage, under the conservative assumption that the median wage will not grow any faster than inflation between now and 2020. If, instead, the median wage grows just 0.5 percent per year faster than inflation between 2014 and 2020, a $12 federal minimum wage in 2020 would equal 49.9 percent of the 2020 median wage.

A $12 Minimum Wage Would Bring the United States in Line with International Peers  - In We Can Afford a $12 Federal Minimum Wage in 2020, Larry Mishel, John Schmitt, and I explain that raising the federal minimum wage to $12 by 2020 is an eminently achievable and worthwhile goal. As the paper explains, $12 in 2020 would equal a modest 11 percent increase in purchasing power over the 1968 minimum wage, yet would essentially be the same as the 1968 minimum’s value as a percentage of the typical worker’s wage. In other words, raising the minimum wage to $12 by 2020 would simply restore the 1968 relationship between what minimum-wage workers were paid relative to what typical workers were paid—and in doing so, would raise the wages of more than a quarter of all working Americans. Raising the federal minimum wage to $12 by 2020 would also bring the U.S. minimum wage more in line with the rest of the developed world. This relationship between the minimum wage and the median wage—also known as the “Kaitz index”—is tracked by the Organisation for Economic Co-operation and Development (OECD). As shown in the figure below, according to the OECD, in 2013, the United States had the third-lowest minimum-to-median wage ratio among developed countries—only Mexico and the Czech Republic had lower Kaitz indices. However, if the United States raised its minimum wage to $12, and other countries’ minimum-to-median ratios were to remain unchanged, the United States would move to the eleventh spot. 1

U.S. Minimum-Wage Employees Must Work 50 Hours a Week to Escape Poverty, OECD Says - Minimum-wage employees in the U.S. need to work three times as many hours a week to lift their families out of poverty compared with counterparts in the U.K., says a study released Wednesday by the Organization for Economic Cooperation and Development. A single parent of two children would need to work 50 hours a week at a minimum-wage job in the U.S. to earn 50% of the nation’s net median household income, the organization’s international equivalent for the poverty line. A similar worker in the U.K. would only need to work 16 hours to rise above the poverty threshold, the OECD said. The federal minimum wage in the U.S. is $7.25 an hour. The U.K. minimum wage rate is 6.50 pound, or about $9.92 an hour. The OECD measure takes into account not only the minimum rate, but also taxes that a worker would need to pay and social assistance for which the family would qualify. Of the 25 OECD countries for which data was available, U.S. minimum-wage workers tied for the seventh-longest week needed to escape poverty. It was hardest for minimum-wage workers in the Czech Republic to earn their way out of poverty. They would need to work 79 hours a week. Estonia, at 60 hours, and South Korea, at 59, followed. In those countries, “the working hours required to escape poverty on a minimum wage are unrealistic for lone parents in particular,” the study said. “They would need better income support, or wages significantly above the minimum wage to work their way out of poverty.”

Fast-Food Workers Deserve a Raise -  Andrew M. Cuomo  — INCOME inequality is a national problem that leaders at all levels of government are grappling with. While American capitalism never guaranteed success, it did once guarantee opportunity. But today, too many Americans don’t believe their children will have a better life than their own. The ideal of mobility has been replaced by the reality of stagnation.Some argue that we can close the income gap by pulling down the top. I believe we should do it by lifting up the bottom. We can begin by raising labor standards, starting with the minimum wage. In 2013, I raised New York State’s minimum wage; it is now $8.75, up from $7.25 (and will rise to $9 at the end of the year). In my latest budget, I proposed raising it again, to $11.50 in New York City and $10.50 elsewhere in the state. But the Legislature rejected that proposal. So I am continuing the fight. While lawmakers delay, I am taking action.State law empowers the labor commissioner to investigate whether wages paid in a specific industry or job classification are sufficient to provide for the life and health of those workers — and, if not, to impanel a Wage Board to recommend what adequate wages should be.On Thursday, I am directing the commissioner to impanel such a board, to examine the minimum wage in the fast-food industry. The board will return in about three months with its recommendations, which do not require legislative approval.

California's 4.8 million low-wage workers now earn less than in 1979 -- Over the past 35 years, California's high-wage workers have seen steady increases in their paychecks. But low-wage workers, 4.8 million strong and about one-third of the state's workforce, earned less in inflation-adjusted dollars in 2014 than they did in 1979, according to an analysis from the University of California, Berkeley.  UC Berkeley researchers analyzing U.S. Census Bureau data at the campus's Center for Labor Research and Education found that low-wage workers, defined as those earning hourly wages of $13.63 or less, have seen steady declines in their inflation-adjusted buying power. This low-wage workforce, nearly three-quarters nonwhite and concentrated in two industries -- retail trade, and restaurants and other food services -- has also become older and more highly educated.  Teens made up 5 percent of low-wage workers in 2014, down from 16 percent in 1979, and 48 percent of low-wage earners in 2014 had attended some college, compared to 39 percent in 1979. The analysis also showed that 40 percent of the state's low-wage workers in 2014 were foreign-born. "We found that low-wage workers in California are older and more educated than they were 30 years ago, and yet they've seen stagnant and even declining wages," said Annette Bernhardt, a visiting UC Berkeley professor of sociology and a senior researcher at the center. "The story of growing inequality is not just about the top 1 percent, it is also about the millions of low-wage workers and their families who struggle with economic insecurity every day."

The Price of Nice Nails - The women begin to arrive just before 8 a.m., every day and without fail, until there are thickets of young Asian and Hispanic women on nearly every street corner along the main roads of Flushing, Queens.  It is the start of another workday for legions of New York City’s manicurists, who are hurtled to nail salons across three states. They will not return until late at night, after working 10- to 12-hour shifts, hunched over fingers and toes. On a morning last May, Jing Ren, a 20-year-old who had recently arrived from China, stood among them for the first time, headed to a job at a salon in a Long Island strip mall.  Tucked in her pocket was $100 in carefully folded bills for another expense: the fee the salon owner charges each new employee for her job. The deal was the same as it is for beginning manicurists in almost any salon in the New York area. She would work for no wages, subsisting on meager tips, until her boss decided she was skillful enough to merit a wage.  It would take nearly three months before her boss paid her. Thirty dollars a day. Once an indulgence reserved for special occasions, manicures have become a grooming staple for women across the economic spectrum. There are now more than 17,000 nail salons in the United States, according to census data. The number of salons in New York City alone has more than tripled over a decade and a half to nearly 2,000 in 2012. But largely overlooked is the rampant exploitation of those who toil in the industry. The New York Times interviewed more than 150 nail salon workers and owners, in four languages, and found that a vast majority of workers are paid below minimum wage; sometimes they are not even paid. Workers endure all manner of humiliation, including having their tips docked as punishment for minor transgressions, constant video monitoring by owners, even physical abuse. Employers are rarely punished for labor and other violations.

Mapping Income Mobility: The Best (And Worst) Places To Grow Up -- A new study from Harvard economists Raj Chetty and Nathaniel Hendren seeks to quantify the financial impact of where America's children are brought up. More specifically, Chetty and Hendren measure "the percentage earnings gain from growing up in each county [in America] relative to an average place for children in low-income families." The goal of the study (and its predecessors) is to determine the most effective way to imporove economic outcomes for low-income children. Here, the researchers "focus on families who moved across areas to study how neighborhoods affect upward mobility." Unsurprisingly, Chetty and Hendren "find that every year of exposure to a better environment improves a child’s chances of success." Interestingly, the economists have actually quantified the improvement in order to "estimates of the causal effect of each county in America on upward mobility." The map below, from NY Times, shows "how much extra money a county causes children in poor families to make" compared to national averages for low-income households: Click here for interactive map

Orange County Family Paid $72K to Keep Son in Upgraded Jail Cell After he Killed Girl While Drunk Driving - Contrary to the concept of “equal justice for all,” multiple Southern California cities offer upgraded jail cells with phones, DVD players, and full-sized refrigerators to offenders who can afford the daily rate, reports KNBC. The family of one Seal Beach man paid over $72,000 for an upgraded cell, away from the general population, while he served 2-years for killing a classmate after crashing his car while driving drunk. Called “pay-to-stay,” the cells can be found in Seal Beach, Anaheim, Arcadia, Burbank, Glendale, Huntington Beach, Pasadena, Santa Ana and Torrance, at nightly rates of $127 to $143. In some cities, the non-violent offender’s cell doors are not locked, and the prisoners are free to come and go to their jobs on a daily basis.

Poverty Policy Truths - Krugman - Last year was the 50th anniversary of the War on Poverty, and the date provoked a flurry of studies correcting some widespread myths; perhaps most notable was an enlightening report from the Council of Economic Advisers.  What needed correcting? Basically, the “nation of takers” narrative, according to which we have been pouring ever-growing sums into helping the poor while making no dent in the poverty rate.  The reality is that spending on “income security” — which includes virtually everything except Medicaid that you could construe as aid to people with low incomes — has basically been flat for decades, with a temporary (and appropriate) spurt due to unemployment benefits and food stamps during the Great Recession If you don’t believe this, think about it: where are these big anti-poverty programs? We have EITC and food stamps; TANF, the successor to old-fashioned welfare, is a shadow of the former program. So where are these huge sums outside health care? Meanwhile, it’s not true that poverty has been unchanged; the standard measure is known to be flawed, and a better measure shows progress, although not as much as we’d like:  So it is somewhat disheartening to see the thoroughly debunked narrative still emerging in some of the Baltimore-inspired discussion.

What the Debate on Inequality Is Missing - The United States economy is one of the most effective on earth in terms of generating new wealth. But for all the wealth it generates, it does an exceptionally dismal job at sharing it broadly among Americans. Is this the best we can do? Over the last four decades the debate in Washington about poverty and inequality has been bogged down in a somewhat pointless, often surreal debate about the size of government and the amount spent on behalf of the poor. Over that same period, the earnings of workers in the bottom half of the income pile have progressed little. American society has buckled under the strain. The actual size of government? Measured by the taxes we pay, it was about 25 percent of our gross national product in 1970. It is still about 25 percent of our G.D.P. today. And the share of our wealth spent on the poor, apart from money devoted to the rising cost of health care, has not changed very much, either. And yet there are other tools. In the furious partisan bickering, the debate has bypassed all the other ways the government affects the distribution of the nation’s prosperity, selectively placing its thumb on the scales.The trick to achieving a more equitable society might simply be to turn the government from an active participant in widening inequality, to one that at least seeks — through norms, laws, regulations — to narrow the gap.

Economic Mobility Trumps the Income Gap as Bigger Worry — WSJ/NBC Poll - Americans are far more concerned about moving up the economic ladder than about the rich becoming richer.  The debate over rising income inequality jumped into high gear last year when French economist Thomas Piketty‘s book, Capital in the Twenty-First Century, became a surprise bestseller. By a greater than 2-to-1 margin, however, Americans said they’re less worried about the income gap, per se, and more worried about how middle- or working-class Americans can get ahead financially, according to the latest Wall Street Journal/NBC News poll.  The issue of economic mobility has already jumped to the fore in the nascent 2016 presidential campaign. On the Republican side, former Florida Gov. Jeb Bush has promised to make income inequality and poverty a major theme of his still-unannounced campaign. Florida Sen. Marco Rubio has written a new book with the subtitle: “Restoring Economic Opportunity for Everyone.” Leading the Democratic field, former Secretary of State Hillary Clinton has been hammering on stagnant wages for the middle class. There are differences in how people see the issue, depending on their political leanings. Republicans are more likely than Democrats to play up mobility concerns over the income gap. Some 38% of likely Democratic primary voters said the income gap was their greater concern, compared to 11% of likely Republican voters.

Explaining US Inequality Exceptionalism - Paul Krugman - Disposable income in the United States is more unequally distributed than in most other advanced countries. But why? The answer to that question has important implications for our understanding of inequality more generally, and also for policies intended to reduce inequality. And new work by my colleagues Janet Gornick and Branko Milanovic at the CUNY Graduate Center’s Luxembourg Income Study Center shed light on the question, partly overturning what all of us believed until recently. They explain their findings in the first Research Brief in a new series launched on the LIS Center website.   The standard story up until now has been that the source of US inequality exceptionalism lies in the unusually low amount of redistribution we do through our tax and transfer system. Figure 1, based on LIS data, shows Gini coefficients before and after taxes and transfers for a number of advanced economies. The US after-tax-after-transfer Gini is the highest of the group, but its pre-tax-pre-transfer Gini – the inequality of market income – isn’t all that special. What this figure suggests, then, is that it’s all about redistribution rather than about market inequality. But can this be right? We know that the US has unusually weak unions, a low minimum wage, an exceptionally wide skills premium and, of course, an exceptionally imperial one percent. Shouldn’t all this leave some mark on market income? What Gornick and Milanovic realized (helped by suggestions from a number of colleagues, notably Larry Mishel at EPI) was that true US market inequality might be being masked by another exceptional piece of the US system – delayed retirement, causing many older households to have positive market income where comparable households in other countries have no or very little market income. Thus, putting all households together and looking at their pre-tax-pre-transfer income inequality makes other countries’ distributions appear comparatively more unequal because people in other countries are more likely to retire earlier than in the US (and hence have zero or low market income).

‘Inequality Is a Choice’ - THE eruptions in Baltimore have been tied, in complex ways, to frustrations at American inequality, and a new measure of the economic gaps arrived earlier this year: It turns out that the Wall Street bonus pool in 2014 was roughly twice the total annual earnings of all Americans working full time at the federal minimum wage. You read that right: Just the annual bonuses for just the sliver of Americans who work just in finance just in New York City dwarfed the combined year-round earnings of all Americans earning the federal minimum wage. We’ve been walloped with staggering statistics like this long enough that although this used to be a Democratic issue, Republicans are now speaking up. “The United States is beset by a crisis in inequality,” warned Senator Mike Lee of Utah, a Republican with Tea Party support (although he added that his concern is gaps in opportunity, not wealth). Likewise, Lloyd Blankfein, the chief executive of Goldman Sachs, declared recently that “we have to do a better job” of curbing inequality. Yet while we broadly lament inequality, we treat it as some natural disaster imposed upon us. That’s absurd. The roots of inequality are complex and, to some extent, reflect global forces, but they also reflect our policy choices. In his new book, “The Great Divide,” Joseph Stiglitz, the Nobel Prize-winning economist, includes two chapters whose titles sum it up: “Inequality Is Not Inevitable” and “Inequality Is a Choice.” “I overheard one billionaire — who had gotten his start in life by inheriting a fortune — discuss with another the problem of lazy Americans who were trying to free ride on the rest,” Stiglitz writes. “Soon thereafter, they seamlessly transitioned into a discussion of tax shelters.”

Are the Suburbs Where the American Dream Goes to Die? - Rumors of the American Dream's demise have been greatly exaggerated -- at least in parts of America.  That's the message of a new study that looks at the connection between geography and social mobility in the United States. It turns out modern-day Horatio Algers have just as much a chance in much of the country as they do anywhere else in the world today. But if you want to move up, don't move to the South. As you can see in the chart below from David Leonhardt's write-up in the New York Times, the American Dream is on life support below the Mason Dixon line. So why does a kid from the bottom fifth in the South or the Rust Belt have such a hard time making it to the top fifth? It's not how progressive local taxes are. Or the cost of college. Or how unequal a place is. At least not much. The research team of Raj Chetty and Nathanial Hendren of Harvard and Patrick Kline and Emmanuel Saez of the University of California-Berkeley found that these factors only correlated slightly with a region's social mobility. What seems to matter more is the amount of sprawl, the number of two-parent households, the quality of elementary and high schools, and how involved people are in things like religious and community groups.. The suburbs didn't quite kill the American Dream, but a particular type did. That's the low-density and racially-polarized suburbs that have defined places like Atlanta. Indeed, as you can see in the chart below from Paul Krugman, there's a noticeable relationship between a metro area's density and its social mobility.As usual, the elephant in the room here is race. So let's address it: the researchers found that the larger the black population, the lower upward mobility. But on closer inspection, this has something to do with population density too.

In a land of dollars: Deep poverty and its consequences | Brookings Institution -- In 2011, over 1.5 million families were living in “extreme” poverty, with $2 or less in cash income per person per day, according to a recent study by Luke Shaefer and Kathryn Edin. Many more—over six percent of the US population, including 7.1 million children— live in “deep” poverty, defined as having a household cash income under half the federal poverty threshold. In 2015, the threshold for being in deep poverty is an annual cash income of less than $5,885 for an individual, $7,965 for a single-parent with one child, or $12,125 for a married couple with two kids. For context, the median household income in the US in 2013 was nearly $52,000. Recently, both extreme and deep poverty in the US have become more prevalent. As shown below, this holds true for most definitions of income, even those including non-cash benefits. Although there is some disagreement about these figures and their causes, many scholars suggest that the rise is a consequence of the 1996 welfare reforms. Strengthened work requirements and newly implemented time limits meant that many low-income families entered work, received higher tax credits and improved their situation. But those unable or unwilling to move from welfare to work as intended received less cash assistance from the government and became reliant on a hodgepodge of government support, such as SNAP, housing subsidies, Medicaid/CHIP.

Why So Many Americans Are Trapped in ‘Deep Poverty’ - While politicians in both parties continue to voice concern about the economic plight of the middle class, a more urgent crisis may be the growth in the number of American families trapped in “deep” or “extreme” poverty.  The problems of the poorest of poor in the U.S. received scant discussion during the recent round of budget talks that produced a fiscal 2016 Republican blueprint for gradually eliminating the deficit. The plan would require more than $5 trillion in cuts to domestic spending over the coming decade – many in social safety-net programs for low-income Americans.  President Obama and Democratic lawmakers are demanding far more money for key domestic programs, including some vital to the country’s poorest families, before they sign off on specific spending bills for the coming year. According to recent research, the number of households living on $2 or less in cash income per person per day in a given month increased from about 636,000 in 1996 to about 1.65 million in mid-2011, a growth of nearly 160 percent. What’s more, over six percent of the population – including 7.1 million children – live in “deep poverty,” which experts define as having a household cash income of less than half the federal poverty threshold. To give that some added context, the threshold for being in deep poverty today is having an annual cash income of less than $5,886 for an individual, $7,965 for a single parent with one child or $12,125 for a married couple with two children. By comparison, the median household income last year was $53,891.

The Complex Story of Race and Upward Mobility - As my colleagues and I were working on our recent article and graphics about a new study on upward mobility, we found ourselves wondering how big a role race played. When you look at our interactive map showing upward-mobility rates by metropolitan area, you can see why. Many of the areas where climbing the economic ladder is most difficult are also the areas with the largest concentration of African-Americans. In this map, which ran in Monday’s Times, regions shaded red have low rates of upward mobility; regions shaded yellow have rates in the middle, and blue regions have the highest: In this map, from the Census Bureau, the shaded regions have larger populations of African-Americans: The metropolitan areas with the highest percentage of African-Americans are clustered in the southeast and the industrial Midwest. So are the metropolitan areas where low-income children have the longest odds of making it into the middle class.Mecklenburg County in North Carolina – the heart of the Charlotte region, which ranks dead last in upward mobility among the 50th largest metropolitan regions, according to the study – is 32 percent black. Georgia’s Fulton County – home to Atlanta, which ranks 49th in mobility among the 50th biggest metropolitan regions – is 45 percent black. Indiana’s Marion County – site of Indianapolis, which ranks 48th – is 27 percent black.In areas like these, fewer than one in 20 children born into a family into the bottom fifth of the income distribution in the early 1980s has made it to the top fifth as adults, the study found. By contrast, in the regions with the highest mobility, the chances can exceed one in 10. Those regions include some of the whitest parts of the country, like Utah, Idaho, Minnesota, the Dakotas and upper New England.

Race, Class and Neglect, by Paul Krugman -- I do worry that the centrality of race and racism to this particular story may convey the false impression that debilitating poverty and alienation from society are uniquely black experiences. In fact, much though by no means all of the horror one sees in Baltimore and many other places is really about class, about the devastating effects of extreme and rising inequality. Take, for example, issues of health and mortality. Many people have pointed out that there are black neighborhoods in Baltimore where life expectancy compares unfavorably with impoverished Third World nations. But what’s really striking on a national basis is the way class disparities in death rates have been soaring even among whites. Most notably,... life expectancy among less educated whites has been falling at rates reminiscent of the collapse of life expectancy in post-Communist Russia. And yes, these excess deaths are the result of inequality and lack of opportunity... It has been disheartening to see some commentators still writing as if poverty were simply a matter of values, as if the poor just mysteriously make bad choices and all would be well if they adopted middle-class values. ... Wilson argued long ago that widely-decried social changes among blacks, like the decline of traditional families, were actually caused by the disappearance of well-paying jobs in inner cities. His argument contained an implicit prediction: if other racial groups were to face a similar loss of job opportunity, their behavior would change in similar ways.And so it has proved. Lagging wages — actually declining in real terms for half of working men — and work instability have been followed by sharp declines in marriage, rising births out of wedlock, and more.

English Spoken Here - Kunstler - The Freddie Gray riots in Baltimore last week prompted the usual cries for “an honest conversation about race,” and countless appeals to fix the “broken” public school system. So, in the spirit of those pleas, I will advance a very plain and straightforward idea: above all, teach young black kids how to speak English correctly.  Nothing is more important than acculturating ghetto kids out of their pidgin patois and into real English with all of its tenses, verb forms, and cases. It’s more important initially than learning arithmetic, history, and science. I would argue that it is hardly possible to learn these other things without first being grounded in real grammatical English.  When these kids grow up, their manner of speech will identify them and their prospects for success at least as much as the color of their skin and probably more, in my opinion. Their ability to speak English correctly will be the salient feature in how others assess the content of their character I’m sure by now that the racial justice hand-wringers are squirming over this proposal. All dialects are equally okay in this rainbow society, they might argue. No they’re not. Have you noticed that TV news, business, show biz, education, and politics increasingly employ people whose parents came from India and other parts of Asia. Do they speak in a patois lacking in complex verb forms? Apparently not. Are they succeeding in American life, such as it is? Apparently so.  Notice that the speech issue — how people talk — is never part of the “honest conversation about race” that we are supposed to have. Has anybody noticed that in his public speeches Martin Luther King spoke regular English correctly, if with a Southern inflection? Has anybody noticed how important that was in his role as “a communicator?” Why is this crucial question of language absent from the public conversation about “the intractable problems of race in America?” Is it because both blacks and whites are too fearful, too cowardly, to face this particular problem of how English is spoken?

Deaths in police custody, research results The limited data available do not suggest a recent overall increase in the number of homicides by police or the racial composition of those killed, despite the high-profile cases and controversies of 2014-2015, according to a New York Times analysis. But a January 2015 report published in the Harvard Public Health Review, “Trends in U.S. Deaths due to Legal Intervention among Black and White men, Age 15-34 Years, by County Income Level: 1960-2010,” suggests persistent differences in risks for violent encounters with police: “The rate ratio for black vs. white men for death due to legal intervention always exceeded 2.5 (median: 4.5) and ranged from 2.6 in 2001 to 10.1 in 1969, with the relative and absolute excess evident in all county income quintiles.”And this:For the most recent period where statistics are available (2003-2009), the BJS found that 4,813 persons “died during or shortly after law enforcement personnel attempted to arrest or restrain them… About 60% of arrest-related deaths (2,931) were classified as homicides by law enforcement personnel.” However, among these 2,931 homicides by law enforcement personnel, 75.3% were reported to have taken place in response to a violent offense — constituting a force-on-force situation, such as an intervention with an ongoing assault, robbery or murder: “Arrests for alleged violent crimes were involved in three of every four reported homicides by law enforcement personnel.” Still, 7.9% took place in the context of a public-order offense, 2.7% involved a drug offense, and among 9.2% of all homicides by police no specific context was reported.  There is much more of interest at the Harvard Kennedy School link.

Paranoia Strikes Derp - Paul Krugman - You may think that the big news story lately has been riots in Baltimore — or, if you have different priorities, either that boxing match or Kate’s baby. But in certain circles, the big thing has been the right-wing belief that operation Jade Helm 15, a military training exercise in Texas, is a cover for Obama to seize control of the state and force its citizens to accept universal health care at gunpoint. No, really — and this is being taken seriously both by Ted Cruz and by the governor, who has ordered the National Guard to keep a watch on the feds and their possibly nefarious activities. Before you pooh-pooh this, think about what would happen to a Democratic politician who gave similar credence to a left-wing conspiracy theory this far out. I can’t even think of what that conspiracy theory might be. And this isn’t an isolated incident. You should think of the panic over the attack of the Obamacare black helicopters as being part of a continuum that runs through inflation truthers like Niall Ferguson and Amity Shlaes, who insist that the government is cooking the economic books, to QE conspiracy theorists like (sadly) John Taylor and Paul Ryan declaring that Bernanke only did it to bail out Obama, to the more general prevalence of inflation derp, the insistence that Weimar is just around the corner despite six or more years of failed predictions. There’s something happening here. What it is ain’t exactly clear (although I have some ideas I’ll flesh out soon.) But it’s quite remarkable, and pretty scary.

Chicago to Pay Millions in Reparations for Police Torture -- Chicago made history today as the first municipality in the United States to pass legislation providing reparations for victims of police torture. The landmark policy will allot financial compensation to the mostly African-American men tortured from 1972 to 1991 under Area 2 Commander John Burge and his infamous “midnight crew.” The legislation gives victims access to psychological counseling, education and job training, and mandates that public schools teach about the torture; a permanent memorial will also be erected in the city. More than 100 victims are estimated to have been subjected to heinous abuse under Burge and his cohorts, and still suffer from the psychological aftermath. “People were electrically shocked on their genitals, people were suffocated with plastic bags, people were beaten with telephone books and flat jacks, others were subjected to mock execution,” including via stimulated Russian roulette, Joey Mogul, an attorney who has worked with victims of Chicago police torture for 18 years, tells Rolling Stone. “In some cases [the torture] led to false confessions,” Mogul says.

Proposed cuts for Alabama courts ‘crazy, devastating’ -  The spending cuts facing Alabama's court system – already marked by years of yo-yo budgets -- will leave it unable to meet its constitutional requirements, Gov. Robert Bentley and court officials warn.  Alabama's Administrative Office of Courts estimates the current cuts, mandates and one-time expenses will mean a $27 million cut from its budget and the elimination of 618 employees across the state. Officials warn the cuts will mean no money to pay jurors, dockets will get backlogged for family court and civil disputes, and already-crowded county jails will get worse while inmates wait for their day in court. The $700 million budget shortfall Bentley announced after last year's election would mean deep cuts across state agencies for state troopers, crime labs, aid to needy children, veterans, state parks and more. Bentley has proposed a series of tax and fee hikes to make up the deficit, but the Alabama Legislature is still working on next year's budget. The court system, a co-equal branch of government, doesn't submit its budget directly to the Alabama Legislature. It must go through the governor's office. Bentley has proposed a $17.8 million cut, leaving $163 million to fund the state's court system.

Egyptian Co. Takes $500M Tax Incentive from Iowa, Lays Off 1500 Union Workers -- Iowa legislators and union members are seeking answers after Egypt-based Orascom laid off 1,500 union workers on a $1.8 billion fertilizer plant construction projecty that received nearly $500 million in tax incentives.  The layoffs took place on April 18th.   Union leaders and representatives have since tried to meet with the company.  Jerry Hobart, Business Manager of Plumbers & Pipefitters Local Union 125 spoke to Radio Iowa, saying: “Orascom is like a ghost. They’re tough to meet with.  We’ve had our national reps, trying to get with them and it’s just been tough to talk to them directly.” State Senator Tom Courtney is now worried it is too late, as the company is openly searching for out-of-state workers to complete the work.   Richie Schmidt of the Laborers International Union of North America (LIUNA!) said he also expects non-union workers to be hired as replacements.  He added that he doesn’t know where his members would find work next: “The 1480 members that were just laid off overnight in Wever, Iowa, last week — they are now sitting without jobs right now.  They don’t know where the next job’s going to come from. They are going to be replaced with other workers from out of state. That’s what we’re hearing down there.” Safety is another major concern given the dangers associated with fertilizer plants.  “The state should have provided more control over who Orascom could hire,” he said. “Fertilizer is highly explosive. Having cheap labor to build the plant is not a good thing.”

Illinois governor says no bailout for Chicago - (Reuters) - Illinois Governor Bruce Rauner told the Chicago City Council on Wednesday that the state's "terrible financial crisis" means there is no money to bail out the city from its own fiscal mess. The governor, in an unprecedented address to the Democratic council, said the city and state need to work together to address problems that include big unfunded pension liabilities facing both governments. Rauner has been touring the state to sell his "turnaround" agenda that includes cuts to public pensions and controversial proposals like creating local right-to-work zones where union membership would be voluntary instead of mandatory. Ahead of his speech, Chicago aldermen adopted a resolution against that proposal. Though Rauner is a Republican and Chicago Mayor Rahm Emanuel a Democrat, the two have been close friends and even political allies in the past, and they share an agenda of strengthening government finances. Emanuel, re-elected in April, faces growing deficits in the city and school budgets. Rauner and Emanuel both said on Wednesday that the city and the state must make sacrifices to reach a joint solution, but neither provided much detail of where compromise may be found. Illinois has the lowest credit rating of any U.S. state, which makes it expensive to borrow money.

Power Problems: Puerto Rico's Electric Utility Faces Crippling Debt : NPR: As a U.S. territory with tropical weather and beautiful beaches, Puerto Rico has a lot going for it. But there are downsides to living on an island. A big one is the cost of energy.All the electricity on the island is distributed by the government-owned Puerto Rico Electric Power Authority, also known as PREPA. Power on the island costs more than in any U.S. state, except Hawaii.And that's not the biggest problem."PREPA is very damaged, very distressed," says Lisa Donahue, an expert on fixing utility companies that are in trouble. "PREPA needs a lot of work."Puerto Rico is caught in a financial crisis, and fixing the energy company is crucial to the island's economic future.After years of borrowing to cover budget deficits, the U.S. territory is more than $70 billion in debt. The biggest chunk of the debt, more than $9 billion, is owed by PREPA.Donahue is PREPA's chief restructuring officer. She was hired by the company's board to overhaul and modernize the power company.She recently told skeptical members of the island's Senate, "We have one chance to do this right, and to set PREPA on the right path and to fix it for the future of Puerto Rico."

Can States Boost Growth By Cutting Top Individual Tax Rates? - States can generate powerful economic growth by cutting income tax rates. That, at least, is the theory behind a recent wave of tax cuts, or proposed tax cuts, around the country. Kansas has cut taxes repeatedly in recent years. So has Wisconsin. In Maine, Governor Paul LePage vows to repeal his state’s income tax entirely.  But does economic research support the claim? Can a state boost growth by cutting income tax rates, especially top tax rates. Or conversely, would it retard growth by raising them?A new paper by my Tax Policy Center colleagues Bill Gale, Aaron Krupkin, and Kim Rueben concludes the answer is “no” to both questions.  In the cautious language of academic research: “Our results are inconsistent with the view that cuts in top state income tax rates will automatically or necessarily generate growth.” But Bill, Aaron, and Kim also have a warning for those who assert that cutting state taxes is good for growth or raising them is bad: All taxes are not alike. It turns out that while individual income taxes don’t matter much at all, and corporate taxes may actually boost growth a bit, higher property taxes do seem linked to slower growth though even that relationship seems to change over time.

Tax Breaks, Cuts, and Consequences - Louisiana’s Governor Bobby Jindal doesn’t want to raise taxes on the entertainment industry. Bloomberg reports that the state’s $1.6 billion budget gap won’t be filled by dropping a $415,000 per episode tax break for “Duck Dynasty.” Louisiana gives moviemakers a tax credit of up to 30 percent of their in-state spending. Louisiana Budget Project director Jan Moller explains: “You’re talking about between $200 million and $250 million a year that goes out the door to TV and film producers.” Instead, GOP Presidential hopeful Jindal would cut $200 million from Louisiana State University. Deep state income tax cuts from 2012 and 2013 mean some Kansas public schools will close early in the spring of 2015. Revenue losses blindsided the state, which now faces an $800 million budget gap starting July 1. At least eight school district budgets have been cut due to the budget crisis and will shut down before the scheduled end of classroom instruction. Dozens of other districts have eliminated or cut programs. About those state income tax cuts… TPC’s Howard Gleckman dives into the latest research from colleagues Bill Gale, Aaron Krupkin, and Kim Rueben. Spoiler alert: “As policy analysis, this paper tells an important story: The effects of state taxes on economic growth are ambiguous at best. Those who firmly believe that tax cuts solve all woes will be disappointed. If this paper were a novel, it would be terrible. No drama.”

Tax Relief for the Few, Tax Increases for All… or None -- Everything is bigger in Texas, except tax relief for its low-income residents. Tax cuts are a sure bet in the Lone Star state this year, but it’s hard to provide tax relief to everybody without a state income tax. TPC’s Richard Auxier explains that Texas’ reliance on sales and property taxes makes its taxation especially regressive. He shows how the two competing tax cut bills in the Texas legislature would direct more of state's limited funds to the rich than to the poor.  Meanwhile, Alabama continues to debate tax increases. GOP Governor Robert Bentley wants $541 million in tax increases, but House Republicans have proposed raising taxes by just $150 million. Democratic lawmakers sponsor the two biggest tax increases endorsed in the Republicans' plan: hikes in taxes on cigarettes and businesses. The Senate has a plan to raise money too, but without new taxes. It’s betting on a lottery and casinos. Michigan’s tax increase plan traveled a rocky road to a dead end. It’s back to the drawing board for GOP Governor Rick Snyder and the legislature. Their compromise plan to raise funds for road repairs—consisting of 10 bills that first required passage of complicated ballot measure Proposal 1—failed on Tuesday. The proposal would have boosted the 6 percent state sales tax to 7 percent, eliminated the tax from motor fuel sales, and raised other fuel taxes. It would have raised $1.3 billion in additional road funding.

The Cost of Child Poverty -- Among the many forces contributing to the recent epidemic of tension between police and mostly black urban communities, from Ferguson to Cleveland to Baltimore, one in particular has been all too little acknowledged: America’s child poverty crisis.   There are between 10 and 17 million children under eighteen living in poverty in America today, depending on how you measure it. If we take the measure most often used in international comparisons, up to 20 percent of the young population—one in five children—is poor. This is a far higher proportion than in any other developed country except Romania, according to a 2012 study of thirty-five developed nations by UNICEF. Worse, nearly one in two blacks is born into poverty in the US. And many black men have disappeared into the nation’s penal system, often because of harsh prison sentences for minor drug abuses, leaving children to be raised on one income, the mother’s.   Meanwhile, years of research have made clear the direct connection between childhood poverty and social dysfunction, ranging from poor health outcomes to higher incarceration rates. Dozens of studies have reported that poor kids are more likely to have learning disabilities, language delays, behavioral problems, and to contract diseases such as asthma and diabetes. They tend not to do as well at school and are more likely to drop out of high school, or even grade school. Women more often have babies in their teenage years. The Children’s Defense Fund says the path to prison is often paved in these years. And, most important, neurologists have found virtually incontrovertible evidence that high levels of stress experienced from birth to the age of three can actually damage brain architecture, reducing, for example, the size of the hippocampus.

6-year-old pork served for lunch at schools in East Tennessee - An East Tennessee school district served years-old pork to students for lunch and is now implementing new food-handling procedures. Local media outlets report that the frozen meat had dates of 2009 to 2011 and was served to students in the Hawkins County district on April 22. No sicknesses have been reported. Director of Schools Steve Starnes says a new inventory system went into effect last Friday. All current frozen items were inventoried, and outdated items were discarded.Hawkins County Commissioner Michael Herrell says he received a call from a concerned cafeteria worker about the old pork, and he raised questions about the food's safety. "They go to school and that might be the only meal they get all day long, and it just upsets me that these kids are going to school to get that meal,"

Jon Stewart Wrong on Education in Baltimore -- The Fact Checker column at the Washington Post rightly awards Jon Stewart four Pinocchios for this howler. It’s not close to being true and even as hyperbole it lends support to the common misperception that foreign aid is a large percentage of the Federal budget. Let’s forget the off-the-cuff comparison to Afghanistan, however, and focus on a more relevant comparison. Is it true, as Stewart suggests, that Baltimore schools are underfunded relative to other American schools? The National Center for Education Statistics reports the following data on Baltimore City Public Schools and Fairfax County Public Schools, the latter considered among the best school districts in the entire country: Baltimore schools spend 27% more than Fairfax County schools per student and a majority of the money comes not from the city but from the state and federal government. Thus, when it comes to education spending, Baltimore has not been ignored but is a recipient of significant federal and state aid.

Why Manhattan children earn less when they grow up - I am late to covering this excellent piece by David Leonhardt, but it is worth your attention.  The core result is this: Low-income children who grow up in Manhattan make less money as adults than similar low-income children who grow up elsewhere…It’s just that affluent Manhattan children don’t grow up to be quite as affluent as affluent children elsewhere. To make the case of the affluent child concrete, if the Manhattan parents earn 400k a year, the child at age 26 averages 50k a year, compared to an average of 55k for comparable non-Manhattan kids at that same age.  David considers a few hypotheses:

  • 1. That effect is possibly diminishing as Manhattan improves, but the changes doesn’t yet show up in the data.
  • 2. Perhaps Manhattan parents, or Manhattan itself, teach that money is not so important.  For one thing, you get interested in culture there.
  • 3. People who grew up in Manhattan are less likely to be married at a particular age.
  • 4. Manhattan schools are less than perfect.

Chicago teachers 'highly insulted' over request for 7 percent pay cut | Chicago: The Chicago Board of Education wants teachers, social workers and other union members to take a 7 percent pay cut by paying their own pension contributions, according to the Chicago Teachers Union. The proposal — likely signaling an austerity contract and rough bargaining to come — was denounced by a “highly insulted” union. CTU President Karen Lewis, who led her members to strike in 2012 for the first time in 25 years, accused CPS of being “broke on purpose” and of retaliating against the union for opposing the mayor in his recent re-election campaign. “Once again, the board has created a fiscal crisis in order to justify its continued attack on our classrooms and communities. By citing its so-called $1.5 billion deficit, the mayor is proposing a reduction in teaching staff which will result in larger class sizes and the loss of teaching positions,” Lewis said in a press release. “The CTU is highly insulted,” said union spokeswoman Stephanie Gadlin, who planned a press conference on Wednesday. The union said CPS agreed in 1981 to pay for 7 percent of the 9 percent of each CTU member’s pension contribution in lieu of a raise the board said it couldn’t afford at that time. A member earning about $70,000 a year would have to pay about $5,000 into pensions, according to the union, if CPS ceases the 7 percent “pension pickup.”

Higher Ed Lobby Quietly Joins For-Profit Schools to Roll Back Tighter Rules - The Obama administration is set to achieve one of its top domestic policy goals after years of wrangling. For-profit colleges, which absorb tens of billions of dollars in U.S. grants and loans yet often leave their students with little beyond crushing debt, will need to meet new standards or risk losing taxpayer dollars. But as the July 1 deadline approaches, the troubled industry has been mounting a last-ditch effort to avert or roll back the new rules. And suddenly it’s getting a lift from a set of unlikely allies: traditional colleges and universities. For years, the higher education establishment has viewed the for-profit education business as both a rival and an unsavory relation — the cousin with the rap sheet who seeks a cut of the family inheritance. Yet in a striking but little-noticed shift, nearly all of the college establishment’s representatives in Washington are siding with for-profit colleges in opposing the government’s crackdown. Most of the traditional higher education lobbying groups signed onto a recent letter to Congress stating their support for Republican legislation that would block the new restrictions on for-profit colleges, as well as undo or weaken other accountability rules for colleges. And a new report on higher education regulation commissioned by the Senate and overseen by the American Council on Education, the leading lobby group for traditional schools, slammed the rules on for-profit colleges as part of a broader critique of the administration’s approach. The emerging alliance points to a new calculation by the higher education lobby. By throwing in with the for-profits, traditional schools might be able to capitalize on Republican control of Congress to limit the government’s reach into their own campuses. Among other things, colleges and universities would like to block the proposed new federal ratings system designed to help families choose institutions based on how of their many students graduate and where they get jobs.

Corinthian Colleges Secretly Funded D.C. Think Tanks, Dark Money Election Efforts - The spectacular crash of Corinthian Colleges after years of systematically deceiving thousands of students into enrolling into low-quality, high-cost education programs has once again raised questions about how the for-profit college industry staved off stronger rules governing the $1.4 billion per year in federal loans that helped keep Corinthian afloat. Some hints emerged today in the giant chain’s filing for Chapter 11 bankruptcy protection in Delaware. It shows that Corinthian made secret payments to an array of political consultants, think tanks and political dark money groups. The filing doesn’t list amounts, but shows that Corinthian made payments to Crossroads G.P.S., a group co-founded by Karl Rove that has raised over $300 million to elect Republican members of Congress through campaign advertising. Crossroads G.P.S., a 501(c)(4) nonprofit, does not disclose any of its donors.Crossroads G.P.S. spent over $700,000 to help elect Sen. Marco Rubio, R-Fla., during his 2010 election. As Bloomberg News revealed, Rubio later filed a letter with the Department of Education, requesting that the agency “demonstrate leniency” with Corinthian. Corinthian registered only two lobbying firms last year — Akin Gump Strauss Hauer & Feld LLP and Akerman LLP. But the filing shows that Corinthian also paid a myriad of other consulting firms that work to influence the political process. Corinthian’s creditor list includes: TheGroup DC LLC, a public affairs firm founded by Art Collins, an advisor to Barack Obama’s 2008 election; Stanton Communications Inc., a firm that specializes in “crisis management”; and Strategic Partnerships LLC, a Virginia-based public affairs company founded by Kenneth Smith, a former Reagan administration advisor who now serves as the president of Jobs for America’s Graduates, Inc.

Congratulations, Class of 2015. You’re the Most Indebted Ever (For Now) -  The class of 2015 is reaching new heights, though perhaps not the way it had hoped. College graduates this year are leaving school as the most indebted class ever, a title they’ll hold exclusively for all of about 12 months if current trends hold. The average class of 2015 graduate with student-loan debt will have to pay back a little more than $35,000, according to an analysis of government data by Mark Kantrowitz, publisher at Edvisors, a group of websites about planning and paying for college. Even adjusted for inflation, that’s still more than twice the amount borrowers had to pay back two decades earlier.Not only is average debt rising, but more students are taking out loans to finance secondary education. Almost 71% of bachelor’s degree recipients will graduate with a student loan, compared with less than half two decades ago and about 64% 10 years ago. “It’s unfortunate that college costs are going up and the student aid, the grants, are not going up at the same rate on a per student basis,” Mr. Kantrowitz said. “College is becoming less and less affordable, though it’s still just as necessary.” Indeed, separate government data show much brighter job and earnings prospects for people with college degrees. Labor Department figures show median weekly earnings at $668 last year for full-time wage and salary workers with only a high-school degree. For those with at least a bachelor’s degree, the figure was $1,193. The unemployment rate also is significantly lower for college grads.

Class Of 2015 Sets Student Debt Record -- Having been one of the very first sources for in-depth analysis about what has become a $1.3 trillion problem, we’ve happily watched as the mainstream financial news media has gone on what seems like a student loan debt story binge over the past several months. Indeed not a day goes by without a someone else commenting on either the inexorable rise in student debt, soaring tuition rates, or the rather dismal job prospects for recent graduates. Here’s a remarkably concise recap of everything that’s happened in the past three months. With student debt soaring out of control (and government projections suggesting the burden may grow to $3.3 trillion by 2025), the White House is assessing ways to tackle the problem even as it closes down for-profit schools costing taxpayers hundreds of millions. Low oil prices are forcing Louisiana to consider deep cuts to education funding, which, if realized would send LSU to the edge of bankruptcy. We’ve been pounding the table on delinquency rates, arguing  that if deferments, forbearance, and IBR are taken into account, actual delinquencies are probably above 40%, a sentiment echoed by Moody’s who warned that $3 billion in student loan-backed paper is at risk for default. Finally, a Georgetown study shows that if you want to survive in the post-crisis world, you’ll major in petroleum engineering and if you want to go broke once the student loan checks stop coming in, you’ll major in childhood education. With that, we bring you the latest bit of news from the world of trillion-dollar education bubbles and it comes from WSJ who notes that the class of 2015 has something to be proud of: it’s the most indebted class of all time.

Debt hangover ruins the American dream - A decade ago, American consumers seemed the most debt-addicted people on the planet. Since 2008, however, something rather remarkable has occurred: the level of consumer card and mortgage debt in the US has shrunk. But there is one glaring exception to this trend: student debt. Over the past decade, the level of outstanding student debt has almost tripled to $1.3tn.  And although the law makes it relatively hard to walk away from student debt, defaults are also strikingly high. There are many ways to measure this figure but the Department of Education reports that Americans who were due to start repaying their student debts in 2011 had a 13.7 per cent default rate last year. This is a touch lower than the previous year (14.7 per cent) but dramatically higher than it had been since the mid-1990s; and it is higher than the credit card default rate.This figure may understate the problem, however. The Treasury Borrowing Advisory Committee released a report late last year which suggests that actual defaults (using its data) were just 9 per cent but the “shadow” default rate — the debt “delinquencies” that are not fully reported — could be 23 per cent. Other economists have similar estimates. Does this matter? Yes, according to Sarah Bloom Raskin, deputy treasury secretary. This week she told a finance conference in Washington that she now sees “eerie parallels” between the student loan tale and subprime mortgages. This is not because she thinks that student debt is about to detonate a systemic financial crisis. Unlike subprime mortgages, student loans have (thankfully) not been repackaged into vast quantities of funky derivatives, or injected into a gigantic network of off-balance sheet entities. And since Federal guarantees backstop many student loans, it will be the government, not just private sector investors, taking much of the future hit.

More Highly Educated Women Are Having Children - A growing share of highly educated U.S. women are having children, and more are having bigger families. Just 22% of U.S. women ages 40 to 44 with a master’s degree or more had no children last year, down from 30% in 1994, according to a new analysis of Census data by the Pew Research Center. If only women with a medical degree or a Ph.D. are considered, this figure falls to 20% from 35% in 1994. Meanwhile, the percentage of U.S. mothers 40 to 44 with a postgraduate degree who have one child (as opposed to more) has declined to 23% in 2014 from 28% in 1994. The share having three or more children has risen from 22% to 27%. “Postgraduate education and motherhood are increasingly going hand-in-hand,” says Pew’s Gretchen Livingston. The fact that highly educated women are becoming more likely to have children could mean women are having an easier time juggling work and family. Generally speaking, mothers with more education tend to have fewer children than those with less education. Pew’s findings are affected by the rising share of women with postgraduate degrees: About 14% of U.S. women ages 40 to 44 have a master’s degree or more, compared with 10% in 1994. If having an advanced degree is more common among women, it’s natural to some extent for recent numbers to reflect more child-having among highly educated women. Interestingly, Pew’s analysis shows that among mothers with a high-school diploma, the share having two children at the end of their childbearing years (40 to 44) declined by 5 percentage points, down from 43% in 1994. There’s also been an increase in this group in having just one child. Basically, the long-time “gap” between the fertility of educated versus less-educated mothers—more educated mothers have fewer kids—is closing.

Ohio hides its $11 billion pension debt - Ohio owes $11 billion in unfunded retirement benefits, but because of the state’s outdated accounting methods reports a debt of just $156 million, according to tax experts who analyze government accounting. “Under the accounting rules that corporations and the rest of us use, future pension obligations are required to be reported, but state and local governments don’t have to report these liabilities,” said Sheila Weinberg, founder and CEO of Truth in Accounting. TIA looked at Ohio’s June 2014 audited financial statement and then examined actuarial reports of pension plans the state manages for its public employees. Comparing the documents, TIA found state employees have been promised $8 billion in pensions and nearly $3 billion in health-care benefits. These costs, however, have not been identified as a bill that needs to be paid. It’s like a credit card, Weinberg said. “Ohio has run up the debt on the credit card, and while it pays the minimum due, it’s ignoring the balance,” she said. Ohio has $110 billion in assets, but not all the assets are available to pay the bills. For instance, there’s $40 billion in capital assets, Weinberg said, but “you shouldn’t be selling roads or buildings to pay your bills.” According to the report, Ohio has only $50 billion in assets to cover its $64 billion in bills, leaving the state with a $15 billion deficit. That’s about $3,900 per taxpayer.

Pension Funds Can Only Guess at Private Equity’s Cost - Partnership agreements outlining private equity firms’ practices are as closely guarded as the recipe for Coca-Cola.Indeed, when it comes to secrecy, few industries do it better than private equity. To outsiders, the lucrative business of borrowing money, buying companies and hoping to sell them later at a profit is as impenetrable as a lockbox. Rates of return and hidden costs are difficult to identify, even for investors in these deals.While top-line fees associated with these funds are well known — management typically charges investors 1 to 2 percent of assets and about 20 percent of portfolio gains — many charges are hidden from view. These include transaction fees, legal costs, taxes, monitoring or oversight fees, and other expenses charged to the portfolio companies held in a fund. Those undisclosed charges are a meaningful drag on returns. How meaningful? Very, according to a recent report by CEM Benchmarking, a Toronto-based consulting firm specializing in pension fund performance analysis.It estimated that more than half of private equity costs charged to United States pension funds were not being disclosed.CEM concluded that the difference between what funds reported as expenses and what they actually charged investors averaged at least two percentage points a year. For a $3 billion private equity portfolio, that would add up to $61 million. And this estimate, CEM acknowledges, is probably low. It comes from Dutch pension fund data, and Europeans pay far less to private equity firms than pension funds in the United States typically do, investment experts say.

Illinois Supreme Court rules landmark pension law unconstitutional: The Illinois Supreme Court on Friday unanimously ruled unconstitutional a landmark state pension law that aimed to scale back government worker benefits to erase a massive $105 billion pension debt, sending lawmakers and the new governor back to the negotiating table to solve the pressing financial issue. Republican Justice Lloyd Karmeier, writing for the entire court, said the law violated provisions of the 1970 Illinois Constitution known as the pension protection clause. The clause says public employee pensions are a contractual relationship with government and benefits cannot be diminished or impaired. The December 2013 law called for curbing automatic and compounded annual cost-of-living increases for retirees, extending retirement ages for current state workers and limiting the amount of salary used to figure pension benefits. Karmeier rejected arguments by the state that economic necessity forced curbing retirement benefits despite the constitution's pension protections. "Our economy is and has always been subject to fluctuations, sometimes very extreme fluctuations," Karmeier said. But, he noted, "The law was clear that the promised benefits would therefore have to be paid and that the responsibility for providing the state's share of the necessary funding fell squarely on the legislature's shoulders. "The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to avoid and ... it is a crisis for which the General Assembly itself is largely responsible," Karmeier wrote.

1 out of 3 of Workers Expect Their Living Standard to Fall in Retirement -- One third of workers expect their standard of living to decline in retirement—and the closer you are to retiring, the more likely you are to feel that way, new research shows. That’s not too surprising, given the relatively modest amounts savers have stashed away. The median household savings for workers of all ages is just $63,000, according to the 16th Annual Transamerica Retirement Survey of Workers. The savings breakdown by age looks like this: for workers in their 20s, a median $16,000; 30s, $45,000; 40s, $63,000; 50s, $117,000; and 60s, $172,000. Those on the cusp of retirement, workers ages 50 and older, have the most reason to feel dour—after all, they took the biggest hits to their account balances and have less time to make up for it. If you managed to hang on, you probably at least recovered your losses. But many had to sell, or were scared into doing so, while asset prices were depressed. And even you did not sell, you gave up half a decade of growth at a critical moment.Despite holding student loans and having the least amount of faith in Social Security, workers under 40 are most optimistic, according to the survey. That’s probably because they began saving early. Among those in their 20s, 67% have begun saving—at a median age of 22. Among those in their 30s, 76% have begun saving at a median age of 25. Nearly a third are saving more than 10% of their income.Workers in their 50s and 60s are also saving aggressively, the survey found. But they started later—at age 35. And with such a short period before retiring they are also more likely to say they will rely on Social Security and expect to work past age 65 or never stop working.

Two-Thirds Of Workers Plan To Fund Retirement With Inheritance, HSBC Finds --66% of working age people surveyed by HSBC indicated they plan to depend at least partially on an inheritance they may or may not receive to fund their retirement. Ironically, a quarter of respondents in the same survey said they planned to spend all of their money before they die, leaving the next generation to fend for itself.

Medicaid Work Requirements: Why Republicans' Reasons Are Wrong --Last week, Politico reported that in "nearly a dozen Republican-dominated states, either the governor or conservative legislators are seeking to add work requirements to Obamacare Medicaid expansion." Arkansas Governor Asa Hutchinson told reporter Sarah Wheaton that Medicaid "is supposed to be an incentive and encouragement for people to work versus an incentive for people to just receive the government benefit and not be part of a working culture of Arkansas," while Governor Gary Herbert of Utah described his position this way:  I wanted to be able to say, ‘If you want the taxpayers to fund your health care, then you need to go out and be involved in a work program, no ifs, ands or buts.’ I’ve been accused by the Obama administration: ‘Well, you’re trying to turn this health care program into a work program.’ And I’ve said, ‘You’re right.’ Demanding a work requirement is a more radical view than simply opposing the Affordable Care Act. Restricting health insurance to those who are working or seeking work is inconsistent with not just the ACA but also with any other universal health insurance scheme, because universal plans cover everyone. This includes plans from Republican health care analysts who propose alternatives to Obamacare that also provide universal coverage. There are five main problems with work requirements.

One in five rural hospitals in state are financially vulnerable, could close doors - One in five rural hospitals in Oklahoma are financially vulnerable and could be forced to shut their doors, according to data and analysis from The Associated Press. Jeff Hackler, chairman of the department of rural health at Oklahoma State University Center for Health Sciences, said rural hospitals have fewer patients but still have many of the same fixed costs as larger hospitals. They must maintain emergency departments and keep up buildings and equipment, regardless of how many beds are filled, he said. “They’re often not making enough to break even,” he said.Rural hospitals would benefit from more federal compensation for Medicaid and Medicare patients. Recent funding cuts to hospitals assumed there would be more Medicaid patients under the Affordable Care Act, but Oklahoma and 36 other states refused to expand Medicaid, he said. The AP investigation found that most of the rural hospital closures so far have occurred in the South and Midwest. Of those at risk, nearly 70 percent are in states that have chosen not to expand Medicaid coverage under the federal Affordable Care Act, although some experts are hesitant to draw a cause-and-effect correlation.Hackler said rural hospitals can also struggle because they have difficulty recruiting health-care professionals to work in those areas, he said.If a rural hospital closes, residents often would have to travel an hour or more for emergency care. The first hour of crisis care is the most important, he said.

Activists Target Hedge Fund Managers Cashing In On Predatory Drug Pricing Schemes from Gilead Sciences – On the eve of Gilead Science’s annual shareholder meeting, activists criticized the pharmaceutical giant’s decision to price its Hepatitis C Virus (HCV) cure out of reach for millions of sick people by targeting three major hedge fund investors in the company. The groups released a new report charging Julian Robertson of Tiger Management, Steve Cohen of Point72 Asset Management, and other hedge fund managers of profiting from extortionate drug prices on the backs of 3.5 million Americans and 175 million people worldwide who are living with the virus. Gilead charges as much as $1,125 per pill and $94,500 for a course of its lifesaving treatments, forcing health care systems to limit access, robbing patients of a decent quality of life, and forcing many into serious health problems and complications. Hedge fund managers are laughing all the way to the bank. A pack of hedge fund managers bet big on Gilead price-gouging schemes in 2014, increasing the number of shares they held by a factor of 12. The bet turned out well for the hedge fund managers – Gilead’s stock rose 84%. But things haven’t worked so well for HCV patients who still can’t get access to Gilead’s overpriced drugs.“The hedge fund industry directly supports Gilead’s decision to put astronomical profits over people’s lives,” said Fred Wright of the grassroots political group VOCAL New York. “Hedge fund managers, including those we’re protesting today, have unapologetically attacked any effort to control drug costs for the good of the public. They’re parasites feeding off of people’s desperation.”

The Difference in Life Expectancy Between the Rich and Poor is Getting Worse - You’d expect life expectancy to keep rising in the future: As we cure more illnesses and work to improve our general living situation, it’s no surprise that our prospective age of death continues to steadily climb. But a new UK study suggests that life expectancy in 2030 will exceed official forecasts—if you live in the right postcode.     The paper, published in medical journal The Lancet, suggests that by 2030 men will be living to an average of around 85.7 years and women to 87.6 years on the national level. Compare this to estimates from the Office for National Statistics (ONS), which forecast that men born in 2030 will live to 83.1 and women to 86.4. Why women live longer than men is a combination of biological factors and social differences—in the past at least, men would smoke and drink more, for instance. That gap has been steadily narrowing and is set to continue to diminish. “The fact that it’s higher than official forecasts means we need to be planning more for future services,” . “We should be investing more in the NHS [National Health Service] because people are going to be expected to live longer; we’re going to have to invest more in social services for the elderly; we’re going to have to expect more and invest more in pensions.” His team’s figures suggest that everyone has one or two extra years that are “unplanned for and unpaid for.” Additionally, while everyone’s going to be living longer, society will become more unequal. Death is no longer the great equaliser. The new study goes beyond the national-level projections made by the ONS to break down the life expectancy of geographical areas. The difference between 2012 figures in some places is striking; live in Chelsea, one of the wealthier parts of London, and your life expectancy is five to six years higher than the less rich area of Tower Hamlets, just ten miles or so away in the same city.

15 Baltimore neighborhoods have lower life expectancies than North Korea - Inequality in Baltimore has been thrust into the national spotlight this week, with riots and civil unrest in that city following the funeral of Freddie Gray. This inequality has roots that stretch deep into the past. It's been exasperated by bad policy decisions in the present-day. And it makes itself felt in every aspect of life in the city, from the racial composition of neighborhoods to the number of empty houses standing in them. For another illustration, let's look at a hypothetical case of two babies born on the same day this year in Baltimore. One is born in Roland Park, a wealthy neighborhood in the north of the city. The other is born just three miles away in Downtown/Seton Hill, one of the city's poorest neighborhoods. The Roland Park baby will most likely live to the age of 84, well above the U.S. average of 79. The Seton Hill baby, on the other hand, can expect to die 19 years earlier at the age of 65.  That's 14 years below the U.S. average. The average child born this year in Seton Hill will be dead before she can even begin to collect Social Security. The only thing more astonishing than this 19-year gap in life expectancy is the short distance you have to travel in Baltimore to get from one extreme to another. Below, I've mapped the life expectancies for the city's neighborhoods.

Europe faces massive obesity problem: study -- Nearly all Irish adults are likely to be overweight in 15 years' time, said a study Wednesday that warned of a European "obesity crisis of enormous proportions". On current trends, some 89 per cent of Irish men will be overweight by 2030, and nearly half obese, said a World Health Organization study to be presented at a European Congress on Obesity in Prague. This was up from 74 per cent overweight, and 26 per cent obese in 2010 in one of Europe's fattest nations. Of Irish women, 85 per cent are likely to be overweight and 57 per cent obese by 2030, said the study, also well up on the 2010 figures. The growing numbers of overweight and obese people are a growing cause of disease and disability around the world. "Even in countries with a traditionally lower prevalence of obesity such as Sweden, obesity rates are predicted to rise sharply," the congress report said. Over a quarter of Swedish men will be obese by 2030, and 22 per cent of women.

Most Countries Have No Plans For When Antibiotics Stop Working -  Smithsonian -  As more and more strains of bacteria become drug-resistant, scientists are scrambling for ways to adapt and preserve the drugs that save so many lives. But most governments aren't sure quite what to do about the waning efficacy of antibiotics. The World Health Organization recently warned that only a quarter of countries surveyed have plans to preserve antimicrobial medicines, including antibiotics. The WHO sounded the alarm in conjunction with a new report on how countries worldwide are responding to antimicrobial resistance, James Gallagher reports for the BBC. When they surveyed 133 countries, they found that only 34 have comprehensive plans to preserve the efficacy of antimicrobial drugs like antibiotics. And though monitoring drug-resistant infections and the use of antibiotics is key to controlling future resistance, many countries are hampered by inadequate infrastructure that prevents them from identifying new outbreaks. The report, which is the first to look at current international efforts to fight antimicrobial resistance, also highlighted the danger of over-the-counter antibiotics. “Weak enforcement of regulations on the sale of antibiotics and other antimicrobial medicines,” presents a particular threat, says the WHO in a release. When antibiotics are too widely available to uninformed consumers, they have the potential to be overused. That, in turn, deepens the danger of drug resistance, an issue the WHO’s Assistant-Director-General for Health Security calls “the single greatest challenge in infectious diseases today.”

After Nearly Claiming His Life, Ebola Lurked in a Doctor’s Eye — When Dr. Ian Crozier was released from Emory University Hospital in October after a long, brutal fight with Ebola that nearly ended his life, his medical team thought he was cured. But less than two months later, he was back at the hospital with fading sight, intense pain and soaring pressure in his left eye.  Test results were chilling: The inside of Dr. Crozier’s eye was teeming with Ebola. His doctors were amazed. They had considered the possibility that the virus had invaded his eye, but they had not really expected to find it. Months had passed since Dr. Crozier became ill while working in an Ebola treatment ward in Sierra Leone as a volunteer for the World Health Organization. By the time he left Emory, his blood was Ebola-free. Although the virus may persist in semen for months, other body fluids were thought to be clear of it once a patient recovered. Almost nothing was known about the ability of Ebola to lurk inside the eye. Despite the infection within his eye, Dr. Crozier’s tears and the surface of his eye were virus-free, so he posed no risk to anyone who had casual contact with him. More than a year after the epidemic in West Africa was recognized, doctors are still learning about the course of the disease and its lingering effects on survivors. Information about the aftermath of Ebola has been limited because past outbreaks were small: no more than a few hundred cases, often with death rates of 50 percent to 80 percent. But now, with at least 10,000 survivors in Guinea, Liberia and Sierra Leone, patterns are emerging.

Living Far From These Eyesores Keeps The Brain Healthy - PsyBlog: Living further away from major roadways has been linked to better brain health by new research. Long-term exposure to even moderate levels of air pollution, the study found, is bad for the brain. Air pollution may cause poor cognitive function and ‘silent strokes’, which have been linked to dementia. The study also found that people exposed to more air pollution had smaller brains. Dr Elissa Wilker, an epidemiologist at Beth Israel Deaconess Medical Center who led the study, said: “This is one of the first studies to look at the relationship between ambient air pollution and brain structure. Our findings suggest that air pollution is associated with insidious effects on structural brain aging, even in dementia- and stroke-free individuals.”  The study looked at how far people lived from the nearest roadway.

Perfect Nails, Poisoned Workers - Each time a customer pulled open the glass door at the nail shop where Nancy Otavalo worked, a cheerful chorus would ring out from where she sat with her fellow manicurists against the wall: “Pick a color!”  Ms. Otavalo, a 39-year-old Ecuadorean immigrant, was usually stationed at the first table. She trimmed and buffed and chatted about her quick-witted toddler, or her strapping 9-year-old boy. But she never spoke of another dreamed-for child, the one lost last year in a miscarriage that began while she was giving a customer a shoulder massage.At the second table was Monica A. Rocano, 30, who sometimes brought a daughter to visit. But clients had never met her 3-year-old son, Matthew Ramon. People thought Matthew was shy, but in fact he has barely learned how to speak and can walk only with great difficulty. A chair down from Ms. Rocano was another, quieter manicurist. In her idle moments, she surfed the Internet on her phone, seeking something that might explain the miscarriage she had last year. Or the four others that came before.Similar stories of illness and tragedy abound at nail salons across the country, of children born slow or “special,” of miscarriages and cancers, of coughs that will not go away and painful skin afflictions. The stories have become so common that older manicurists warn women of child-bearing age away from the business, with its potent brew of polishes, solvents, hardeners and glues that nail workers handle daily. A growing body of medical research shows a link between the chemicals that make nail and beauty products useful — the ingredients that make them chip-resistant and pliable, quick to dry and brightly colored, for example — and serious health problems.

Common Hormone Used To Fatten Up Cows Is Contaminating The Environment --Trenbolone acetate, or TBA, is a synthetic growth promoter used extensively in the cattle industry to help cows add muscle mass quickly. Implanted in the ears of over 20 million cows annually, cattle metabolize TBA to create 17-alpha-trenbolone, an endocrine disruptor that can end up in streams or rivers due to feedlot runoff or cattle manure applied to cropland.  For years, regulators weren’t concerned about the environmental risks associated with the compound because 17-alpha-trenbolone breaks down rapidly in sunlight. But a study published Friday in Nature Communications shows that TBA and its metabolite compounds persist in the environment in much higher concentrations — and for much longer — than previously thought, casting doubt on the current regulatory framework’s ability to properly manage risk associated with contaminants in the environment.  When 17-alpha-trenbolone and other TBA metabolites enter into the environment, they’re broken down rapidly by sunlight — but convert back to TBA metabolites in darkness. Ward and his colleagues discovered that this unique reactivity does have an impact on the environment, finding that concentrations of TBA metabolites like 17-alpha-trenbolon may exist in concentrations around 35 percent higher than previously thought. They also found that the TBA metabolites persisted longer in the environment, resulting in 50 percent more biological exposure. The study also found that the areas with the highest concentration of TBA metabolites aren’t necessarily right next to the release point — sometimes, the worst exposure happens 20 to 25 miles from the site of pollution. “That really challenges how we think about pollution,” Ward said. “It may be that it takes a while for this combination of transport and reaction to produce the worst-case scenario.” In runoff from feedlots, TBA metabolites have been measured in concentrations as high as 55 nanograms per liter, but even small amounts of endocrine disruptors like 17-alpha-trenbolon have been shown to adversely affect aquatic life. In concentrations as low as 10 nanograms per liter, studies have seen undesirable impacts on fish, including reduced rates of reproduction, skewed sex rations, and disruptions in hormones.

Hong Kong 'Loophole' May Have Flooded China With Radioactive Japanese Foods  - And the 'incidents' just keep coming for Japan. Lax safety checks at Kwai Chung container terminal - the only sea entry point for food from overseas - have allowed banned imports from Japan to enter Hong Kong, according to Democratic Party lawmaker Helena Wong Pik-wan. As The South China Morning Post reports, radioactive contaminated food may have been entering the city unnoticed for years because of deficiencies in safety controls on fresh produce since the ban following the Fukushima nuclear power plant incident in 2011.

Brazil’s Federal Public Prosecutor Demands Ban on All Glyphosate Poisons: A full suspension of the toxic main ingredient in Monsanto’s RoundUp, glyphosate, is being demanded by the Brazilian Federal Public Prosecutor in the Federal District. It is currently the most commonly used herbicide in Brazil, and negatively affects numerous crops, as well as human and ecosystem health. Just one study conducted in Brazil on ‘glyphosate-resistant’ soybeans has shown some reprehensible results from utilizing Monsanto’s favorite venom. Brazil is currently the second largest producer of soybeans in the world, and sadly, they are almost entirely now GMO. More than 70% of soybeans cultivated in the country are from GE glyphosate-tolerant seed. A mere five states are responsible for 80% of Brazil’s soybean production; Rio Grande do Sul and Parana in the south, and Mato Grosso, Goîas, and Mato Grosso do Sul in the center-west region.  The Federal Prosecutor has asked for all glyphosate herbicide use to be suspended due to questions about its chemical makeup. The Prosecutor is calling into question 2,4-D as well as the active ingredients methyl parathion, lactofem, phorate, carbofuran, abamectin, tiram, and paraquat. Why? The inactive ingredients can be just as, if not more toxic. Due to these concerns, two actions have been filed by the Brazilian Prosecutor. He explains on his website:“The first measure seeks to compel the National Health Surveillance Agency (ANVISA) to reevaluate the toxicity of eight active ingredients suspected of causing damage to human health and the environment. On another front, the agency questions the registration of pesticides containing 2,4-D herbicide, applied to combat broadleaf weed.”

New Corn Ethanol Is Even Worse For The Climate Than We Thought. But Is It Illegal?  - Corn ethanol may be breaking the law, according to a study from last month, “Cropland Expansion Outpaces Agricultural and Biofuel Policies in the United States.” It appears that corn was caught yellow-handed by University of Wisconsin-Madison researchers in a plot with other crops like soy to replace “millions of acres of grasslands.” But scientists named corn the ring-leader: “Corn was the most common crop planted directly on new land.”  I know you’re wondering, “since when is it illegal to replace carbon-storing grassland with the Walter White of Biofuels?” Answer: Since the federal Renewable Fuel Standard (RFS), “which requires blending of gasoline with biofuels that are supposed to be grown only on pre-existing cropland, in order to minimize land-use change and its associated greenhouse gas emissions,” as the UWM news release explains. Now if only anybody were actually enforcing the law, the anti-hero of biofuels would be perp-walked to prison for destroying the very environment it was supposed to help protect. This new UMW study is the “first comprehensive analysis of land-use change across the U.S. between 2008 and 2012.” University of Wisconsin-Madison researchers “tracked crop-specific expansion pathways across the conterminous US and identified the types, amount, and locations of all land converted to and from cropland” during that time. Scientists learned that crops “expanded onto 7 million acres of new land,” during those four years and replaced “millions of acres of grasslands.” Half of that was new soy and corn, which was increasingly used to make biofuels between 2008 and 2012 to meet U.S. government mandates, which included a minimum target of over 12 billion gallons of biofuels for in 2010.

Avian Flu Infections Are Found at Five More Iowa Poultry Farms - The highly pathogenic H5 avian flu turned up in initial tests at five more farms in Iowa, including a commercial egg operation housing up to 5.5 million birds.  If the virus is confirmed at the farms in additional tests underway at a federal Agriculture Department laboratory, the number of American cases could surpass 20 million birds and result in the biggest death toll in a bird flu outbreak in United States history.The latest case, at an egg farm in Buena Vista County, could be the largest single operation to be hit in the current outbreak.The egg farm’s owner, Rembrandt Foods, one of the top egg producers in the United States, confirmed the outbreak but disputed the number of birds affected. The state did not identify the affected farm by name.Avian flu was probable at four other commercial farms in Buena Vista, Sioux and Clay Counties, the Iowa Department of Agriculture and Land Stewardship said. If the virus is confirmed at all five farms in the coming days, the number of sites where H5 has been found in Iowa would rise to 17.  Hours earlier, state officials confirmed that an Iowa-based chicken broiler breeding farm had initially tested positive for the virus.The farm, in Kossuth County, was comparatively small, with an estimated 19,000 birds. But it was thought to be the first time in this outbreak that the virus had affected a broiler breeding farm; such farms are said to have better biosecurity systems. And it underscores the potential for the outbreak to have a wide-ranging effect on the country’s poultry supply chain.

Plastic Pollution = Cancer of Our Oceans: What Is the Cure? -- As someone who lives in a highly urbanized coastal city in California, this estimate didn’t shock me. I grew up watching loads of plastic trash spew from river outlets into our ocean. Our beaches are covered with things like plastic bottles, bags, wrappers and straws—all mostly single-use “disposable” items. For years, I’ve watched polluted water flow beneath the bridge at the end of the San Gabriel River, a channel that drains a 713 square mile watershed in Southern California. This bridge is special … it’s where my fascination with plastic waste began—it’s where our plastic trash becomes plastic marine debris.  As Algalita’s education director, it’s my job to help people wrap their heads around the complexities of this issue. Many times, it’s the simple questions that require the most in-depth responses. For example: “Why can’t we clean up the trash in the ocean?”  I won’t say extracting plastic debris from our ocean is impossible; however, I will say most plastic pollution researchers agree that its output is not worth its input. They believe our cleanup efforts are best focused on land and in our rivers. Here’s why:

Oxygen-starved 'dead zones' with no marine life up to 100-miles long discovered in the Atlantic Ocean - Swathes of oxygen-deprived water up to 100 miles long, unable to sustain any form of animal life, have been found in the Atlantic, scientists have said. Researchers of the GEOMAR Helmholtz Centre for Ocean Research Kiel in Germany discovered the unexpectedly low oxygen environments several hundred kilometres off the coast of West Africa. A paper, published in Biogeosciences, describes 100-mile-long eddies of swirling water spinning their way across the Atlantic for months at a time.  The group of researchers led by Dr Johannes Karstensen have suggested that: ‘the eddies propagate westward, at about four to five kilometres per day, from their generation region off the west African coast into the open ocean.’ Dead zones are usually found in shallow bodies of water, such as lakes and shallow coastlines. However, the swirling movement of the eddies found in the Atlantic ensures that no water can escape, so the oxygen supply is quickly used up. “The fast rotation of the eddies makes it very difficult to exchange oxygen across the boundary between the rotating current and the surrounding ocean.

Human security at risk as depletion of soil accelerates, scientists warn --Steadily and alarmingly, humans have been depleting Earth's soil resources faster than the nutrients can be replenished. If this trajectory does not change, soil erosion, combined with the effects of climate change, will present a huge risk to global food security over the next century, warns a review paper authored by some of the top soil scientists in the country.  The paper singles out farming, which accelerates erosion and nutrient removal, as the primary game changer in soil health.  "Ever since humans developed agriculture, we've been transforming the planet and throwing the soil's nutrient cycle out of balance," . "Because the changes happen slowly, often taking two to three generations to be noticed, people are not cognizant of the geological transformation taking place."In the paper, to be published Thursday, May 7, in the journal Science, the authors say that soil erosion has accelerated since the industrial revolution, and we're now entering a period when the ability of soil, "the living epidermis of the planet," to support the growth of our food supply is plateauing.  The authors identify the supply of fertilizer as one of the key threats to future soil security. Because the process of synthesizing nitrogen is energy- intensive, its supply is dependent on fossil fuels. Unlike nitrogen, potassium and phosphorous come from rocks and minerals, and the authors point out that those resources are not equitably distributed throughout the world. The United States has only 1 to 2 percent of the world's potassium reserves, and its reserves of phosphorous are expected to run out in about three decades.

Emergency 25% cut in California cities' water use approved --  State data released Tuesday painted a stark portrait of the uphill struggle Californians face in achieving a mandated 25% reduction in urban water use, with one official joking grimly that dealing with severe drought was similar to grappling with the five stages of grief. Cumulative water savings since last summer totaled only 8.6%, according to the State Water Resources Control Board, far short of the historic reduction outlined in an April 1 executive order by Gov. Jerry Brown. At the same time, the board said, most of the state's water suppliers issued 20 or fewer notices of water waste in March even though they have received thousands of complaints. “It's a collective issue we all need to rise to.” The disclosures came as board members Tuesday night unanimously approved new conservation regulations set to take effect in time for summer, when outdoor water use traditionally accounts for 50% to 80% of residential consumption. Water board staff scientist Max Gomberg said California residents and businesses used only 3.6% less water in March than they did during the same month in 2013, the baseline year for savings calculations.

California Adopts "Unprecedented" Restrictions On Water Use As Drought Worsens -- Early last month we warned that California’s drought was approaching historic proportions and that if climatologists were to be believed, the country may see a repeat of The Dirty Thirties as experts cite “Dust Bowl” conditions. Governor Jerry Brown has called for statewide water restrictions aimed at reducing consumption by 25%. Now, the conservation calls are getting much louder as the state’s water regulators have approved “unprecedented” measures aimed at curtailing the crisis. Via AP: California water regulators adopted sweeping, unprecedented restrictions Tuesday on how people, governments and businesses can use water amid the state's ongoing drought, hoping to push reluctant residents to deeper conservation.The State Water Resources Control Board approved rules that force cities to limit watering on public property, encourage homeowners to let their lawns die and impose mandatory water-savings targets for the hundreds of local agencies and cities that supply water to California customers.Gov. Jerry Brown sought the more stringent regulations, arguing that voluntary conservation efforts have so far not yielded the water savings needed amid a four-year drought. He ordered water agencies to cut urban water use by 25 percent from levels in 2013, the year before he declared a drought emergency…Despite the dire warnings, it's also still not clear that Californians have grasped the seriousness of the drought or the need for conservation. Data released by the board Tuesday showed that Californians conserved little water in March, and local officials were not aggressive in cracking down on waste.

California's "Unprecedented" Drought In Pictures -- California's drought has reached epic proportions, prompting Governor Jerry Brown and state water regulators to adopt "unprecedented" (and some say draconian) measures to counter what is perhaps the only example of a liquidity crisis more acute than that which investors face in secondary bond markets. Cities will be forced to cut consumption by as much as 36%, a mandate that is expected to cost utilities upwards of $1 billion, lost revenue which, as we noted earlier this week, will promptly be recouped in the form of higher prices for any consumer who isn’t a MotherFracker. So with the state preparing to crack down on “wasters” in the form of $10,000 fines, and with more than 12 million dead trees greatly increasing the chances that wildfires could spread out of control, we bring you the drought in pictures: We'll leave you with the following rather somber assessment from a professor of public policy at USC (via Politico): “Politicians are paying attention, because some people — mainly the media and interest groups — are paying attention,” said Sherry Bebitch Jeffe, a professor of public policy at the University of Southern California.But I’m not at all sure it’s really hitting home yet with the average voter. When they start to see rate increases, and fines for overuse, and brown lawns, then they will be paying a lot of attention. I think the politicians are smart to be trying to get ahead of it, because this is the new normal. We are a desert, and we should have remained a desert.”

Teens Say California Drought Makes Tap Water Taste Funky - Normally our tap water comes from the bottom of our reservoir. Clean, fresh, cold water — which is a key element for salmon to spawn. With water so limited, the water district decided it needed to preserve that cold water for the salmon.So last month, it started taking water from a higher part of the reservoir instead — where the water is warmer. And that made a big difference."There was a change in the taste and odor and we heard from our customers loud and clear," said Abby Figueroa, spokeswoman for the East Bay Municipal Water District where our water comes from. Figueroa told us that the warm water we were left with was more susceptible to algae blooms."Even though the algae is filtered out at our treatment plants," said Figueroa, "it does leave behind a different taste and odor profile."Not exactly what we're used to here in the San Francisco East Bay. Figueroa says that so many customers complained, the water district recently reverted to using water from the bottom of the reservoir. But it's a temporary solution."This is a really bad drought," said Figueroa. "It's never been this bad. We've gone back to the drawing board and looked at are there any other options. There aren't many, though. We're no longer in a normal situation for our water supply."

California Grows Almost All Of Our Produce. Will The Drought Change That?  -- Agriculture requires water, and large-scale agriculture, like that in California, requires large amounts of water. So when Governor Brown came under fire for exempting farmers from the mandatory cuts — farmers use 80 percent of the state’s available water — he was unmoved.  “They’re not watering their lawn or taking long showers,” he told ABC’s “The Week” the Sunday after he announced the restrictions. “They’re providing most of the fruits and vegetables of America to a significant part of the world.” Almonds get a lot of the attention when it comes to California’s agriculture and water, but the state is responsible for a dizzying diversity of produce. Eaten a salad recently? Odds are the lettuce, carrots, and celery came from California. Have a soft spot for stone fruit? California produces 84 percent of the country’s fresh peaches and 94 percent of the country’s fresh plums. It produces 99 percent of the artichokes grown in the United States, and 94 percent of the broccoli. As spring begins to creep in, almost half of asparagus will come from California. “California is running through its water supply because, for complicated historical and climatological reasons, it has taken on the burden of feeding the rest of the country,” Steven Johnson wrote in Medium, pointing out that California’s water problems are actually a national problem — for better or for worse, the trillions of gallons of water California agriculture uses annually is the price we all pay for supermarket produce aisles stocked with fruits and vegetables. Up to this point, feats of engineering and underground aquifers have made the drought somewhat bearable for California’s farmers. But if dry conditions become the new normal, how much longer can — and should — California’s fields feed the country? And if they can no longer do so, what should the rest of the country do?

Your Winter Vegetables: Brought to You by California’s Very Last Drops of Water -- California's drought-plagued Central Valley hogs the headlines, but two-thirds of your winter vegetables come from a different part of the state. Occupying a land mass a mere eighth the size of metro Los Angeles, the Imperial Valley churns out about two-thirds of the vegetables eaten by Americans during the winter. Major crops include broccoli, cabbage, carrots, cauliflower, and, most famously, lettuce and salad mix. And those aren't even the region's biggest moneymakers. Nestled in the state's southeastern corner, the Imperial Valley also produces massive amounts of alfalfa, a cattle feed, and its teeming feedlots finish some 350,000 beef cows per year.  In terms of native aquatic resources, the Imperial makes the Central Valley look like Waterworld. At least the Central Valley is bound by mountain ranges to the east that, in good years (not the last several), deliver abundant snowmelt for irrigation. The Imperial sits in the middle of the blazing-hot Sonoran Dessert, with no water-trapping mountains anywhere nearby. It receives a whopping 3 inches of precipitation per year on average; even the more arid half of the Central Valley gets 15 inches. The sole source of water in the Imperial Valley is the Colorado River, which originates hundreds of miles northeast, in the snowy peaks of the Rocky Mountains. As it winds down from its source in the snow-capped peaks of northern Colorado down to Mexico, it delivers a total of 16.5 million acre-feet of water to the farmers and 40 million consumers in seven US states and northern Mexico who rely on it. (An acre-foot is the amount it takes to flood an acre of land with 12 inches of water—about 326,000 gallons.) Of that total, the Imperial Valley's farms gets 3.1 million acre-feet annually—more than half of California's total allotment and more than any other state draws from the river besides Colorado. It's an amount of water equivalent to more than four times what Los Angeles uses in a year, according to figures from the Pacific Institute.

The Drought: Which Crops Will Survive --Everyone has an opinion on which crops are using the most water in drought-stricken California. But water usage, it turns out, has little to do with whether those crops will survive the drought. The USDA helps us out with that data. There’s been an awful lot of blame going around to point out which industries, exactly, are draining California’s water supply. Almonds in particular are getting the brunt of the country’s rage about supposedly non-prudent water use, though some of this blame may be misplaced. The USDA released a helpful fact sheet about the crisis, and embedded within it is a very interesting graphic that shows what type of irrigation broad categories of crops use, along with their total water use. Check it out:  Basically, the further up and to the right a crop is, the more at risk it is during the drought. The X axis, “Potential for onfield water losses,” is a measurement of how much the crop relies on either rainfall or some other source of water that’s actually on the farmer’s land. Crops like vegetables and fruits are not, comparatively speaking, all that reliant on water from outside the farmer’s property. The Y axis, “Potential for water supply shortfalls,” is a measurement of how much the crop relies on water from outside the farmer’s property—basically, how much a crop taps into the state’s water infrastructure, which is heavily reliant on groundwater and slow to refill, and surface water like lakes and rivers, which are draining quickly.

Farmers Growing Crops With Oil Wastewater Out of Desperation -- Amidst a crippling drought, Californians should be applauded for devising new ways to conserve and recycle the state’s limited water supply. However, environmentalists are hardly excited about one of the newer “solutions,” namely Chevron selling its leftover wastewater to nearby farmers. How do you feel about having the food you eat being grown with the untreated water from oil excavation?  Given that drilling and fracking rely on a lot of chemicals, sending this tainted water — a total of 21 million gallons per day — to Kern County for farming raises the potential that these dangerous toxins will wind up in the food we eat. While most scientists aren’t prepared to say that recycling oil wastewater for agriculture is definitely unsafe until tests are done, it is disconcerting that the state is allowing this transferal to occur without conducting much research.  As the LA Times points out, testing the contents of oil wastewater has been a “low priority” for the government in recent years despite evidence that it seeps into local water supplies. Unsurprisingly, oil companies have successfully lobbied to have fewer tests conducted on this wastewater.. However, now that the wastewater is used directly on crops for human consumption, it seems especially pertinent to verify the safety of this water.  The newspaper spoke to scientist Scott Smith, who had decided to run some tests of his own. Collecting samples of the drilling wastewater en route to farms, Smith found traces of oil as well as high concentrations of methylene choloride (considered a carcinogen) and acetone in the water. While Chevron denies that it uses either of those compounds, they will not reveal what kind of chemicals can be found in wastewater since the government has helped them classify this mess as a “trade secret.”

California Drought Killed 12 Million Forest Trees Since Last Year - An estimated 12 million trees across California’s forestlands have died over the past year because of extreme drought conditions, according to an aerial survey conducted April 8-17 by the U.S. Forest Service. In San Diego County, 82,528 trees, mostly Jeffrey pines across Mt. Laguna, have succumbed to a lack of rainfall, with many more struggling to survive, said Jeffrey Moore, interim aerial survey program manager for the U.S. Forest Service.There is “very heavy mortality, a lot of discoloration in the pine trees that probably will expire sometime during this growing season, as well as oak trees that are suffering,” Moore said. Moore was part of a team that surveyed the trees visually, using a digital mapping system while flying in a fixed-wing aircraft 1,000 feet above ground. A tree’s survival often depends on its proximity to other trees, he said. “A lot of trees are competing for whatever available moisture there is in a drought situation,” Moore said. “When you have too many trees in an area, it makes it hard on all of the trees.” In Southern California, the researchers tracked more than 4.2 million acres in Cleveland, San Bernardino, Angeles and Los Padres National Forests, where they found an estimated 2 million perished trees. They combed another 4.1 million acres in the Southern Sierra Nevada, where they documented approximately 10 million dead trees. Their findings were compared to similar surveys taken in July 2014, Moore said. In San Diego County, Moore said they found substantial pine mortality near Descanso Road in the Cleveland National Forest, and throughout Mt. Laguna.

Wild animals in drought-stricken U.S. West are dying for a drink – ‘It’s looking to be a very, very difficult year for wildlife’  – For the giant kangaroo rat, death by nature is normally swift and dramatic: a hopeless dash for safety followed by a blood-curdling squeak as their bellies are torn open by eagles, foxes, bobcats and owls. They’re not supposed to die the way they are today — emaciated and starved, their once abundant population dwindling to near nothing on California’s sprawling Carrizo Plain, about 100 miles northwest of Los Angeles, where the drought is turning hundreds of thousands of acres of grassland into desert. Without grass, long-legged kangaroo rats cannot eat. And as they go, so go a variety of threatened animals that depend on the keystone species to live. “That whole ecosystem changes without the giant kangaroo rat,” said Justin Bra­shares, an associate professor of wildlife ecology and conservation at the University of California at Berkeley. Endangered kangaroo rats are just one falling tile in the drought’s domino effect on wildlife in the lower Western states. Large fish kills are happening in several states as waters heated by higher temperatures drain and lose oxygen. In Northern California, salmon eggs have virtually disappeared as water levels fall. Thousands of migrating birds are crowding into wetlands shrunk by drought, risking the spread of disease that can cause huge die-offs. As the baking Western landscape becomes hotter and drier, land animals are being forced to seek water and food far outside their normal range. Herbivores such as deer and rabbits searching for a meal in urban gardens in Reno are sometimes pursued by hawks, bobcats and mountain lions. In Arizona, rattlesnakes have come to Flagstaff, joining bears and other animals in search of food that no longer exists in their habitat.

Latest Victim of California’s Drought: Water Bonds - WSJ: California’s drought is starting to spread to the market for bonds issued by water utilities, long considered one of the safest types of debt sold by state and local governments. Some investors are steering clear of the bonds from hard-hit areas of the U.S. west, amid concerns that restrictions on water use will drive down water-authority revenue. Some authorities may have a tough time raising rates to offset that lost income. If shortages persist, credit ratings may weaken and prices for outstanding bonds fall, according to analysts and rating firms. California water and sewer bonds lost value in April for the second month in three, falling 0.61% after Gov. Jerry Brown imposed mandatory water restrictions. All California municipal bonds posted a 0.55% decline for the month, counting price moves and interest payments, according to Barclays. California is in its fourth year of drought, one of the worst on record for the nation’s most populous state. It is costing billions of dollars in losses in its agricultural sector and prompting the first-ever mandatory statewide cutbacks in water use. Water-utility bonds seldom default because they’re typically backed by residents’ payments on an essential service. And so far the drought hasn’t kept water authorities from tapping the debt market.

The Big Idea: California Is So Over - The Daily Beast#: California has met the future, and it really doesn’t work. As the mounting panic surrounding the drought suggests, the Golden State, once renowned for meeting human and geographic challenges, is losing its ability to cope with crises. As a result, the great American land of opportunity is devolving into something that resembles feudalism, a society dominated by rich and poor, with little opportunity for upward mobility for the state’s middle- and working classes. The water situation reflects this breakdown in the starkest way. Everyone who follows California knew it was inevitable we would suffer a long-term drought. Most of the state—including the Bay Area as well as greater Los Angeles—is semi-arid, and could barely support more than a tiny fraction of its current population. California’s response to aridity has always been primarily an engineering one that followed the old Roman model of siphoning water from the high country to service cities and farms. But since the 1970s, California’s water system has become the prisoner of politics and posturing. The great aqueducts connecting the population centers with the great Sierra snowpack are all products of an earlier era—the Los Angeles aqueduct (1913), Hetch-Hetchy (1923), the Central Valley Project (1937), and the California Aqueduct (1974). The primary opposition to expansion has been the green left, which rejects water storage projects as irrelevant.  Yet at the same time greens and their allies in academia and the mainstream press are those most likely to see the current drought as part of a climate change-induced reduction in snowpack. That many scientists disagree with this assessment is almost beside the point. Whether climate change will make things better or worse is certainly an important concern, but California was going to have problems meeting its water needs under any circumstances. 

Lake Mead water level falls to a landmark low, and is likely to get worse - For Western states enduring a debilitating drought, the news is bone-dry bad: Anemic Lake Mead has hit a historic low level. The surface of the sprawling reservoir outside Las Vegas late Tuesday afternoon fell to 1,079.76 feet above sea level — nearly 140 feet below capacity — as the prolonged drought continues to evaporate the beleaguered Colorado River system. Mead's chalky white shoreline is advancing as the waters quickly recede. For California, Arizona and Nevada, which draw water from Mead, a grim situation is about to get worse: Officials estimate that Mead will drop to the unprecedented low elevation of 1,073 feet as the hottest summer months bear down, with less snowpack in the Rocky Mountains to recharge the Colorado River. The Colorado River provides water for 40 million people across the Southwest and parts of Mexico — the majority of them in U.S. cities such as Los Angeles, San Diego, Phoenix and Las Vegas. But as populations continue to climb — Las Vegas' population of 2 million is expected to double by 2060 — water experts say consumers need to take drastic measures or the water will one day run out. Las Vegas has long been at a disadvantage when it comes to Lake Mead water. A 1922 Colorado River water-sharing agreement among seven Western states — one still in effect nearly a century later — gives southern Nevada the smallest amount of all; 300,000 acre-feet a year, compared with California’s 4.4 million annual acre-feet. An acre-foot can supply two average homes for one year.

Leaking Las Vegas: Forced Rationing Looms As Lake Mead Faces Federal "Water Emergency" -- Leak Mead – on your left, when you drive from Las Vegas across the Hoover Dam – is the largest reservoir in the country when at capacity. It’s fed by the Colorado River which provides water for agriculture, industry, and 40 million people in Nevada, Arizona, California, and Mexico, including Los Angeles, San Diego, Phoenix, and Las Vegas. Now after 15 years of drought, the “lake” – a mud puddle surrounded by a huge chalky bathtub ring – is threatening to run dry. It’s considered “operationally full” when the water level is at 1,229 feet elevation above sea level. On May 2, the water level was down to 1,078.9 feet above sea level, the lowest since it was being filled in May 1937. It’s down 15 feet from the same day a year ago. Over the last 36 months, the water level has dropped 44.8 feet. It’s down 150 feet from capacity. If the water level is below 1,075 feet elevation – 4 feet below today’s level – by January 1, 2016, it will trigger a federal water emergency. And water rationing. Las Vegas Review Journal reported that forecasters expect the level to drop to 1073 feet by June, before Lake Powell would begin to release more water. Assuming “average or better snow accumulations in the mountains that feed the Colorado River – something that’s happened only three times in the past 15 years,” the water level on January 1 is expected to be barely above the federal shortage level. Even with these somewhat rosy assumptions of “a verage or better than average snow accumulations,” the water level would begin set new lows next April. But if the next winter is anything like the last few, all bets are off.If the level drops below 1050 feet, one of the two intake pipes for the Las Vegas Valley, which gets 90% of its water that way, will run dry. A new $817-million tunnel is being built by the Southern Nevada Water Authority to create a new drain.

Bill Would Roll Back Public Lands Protections In The Name Of National Security -- As part of what critics say is one of the most aggressive anti-environmental agendas ever pursued by a new Congress, a legislative committee in the U.S. Senate this week is taking up a bill that critics worry would roll back protections for national parks, wilderness, and wildlife in Arizona under the pretext of national security.  Senator John McCain (R-AZ)’s bill, the “Arizona Borderland Protection and Preservation Act” (S.750), would give the Department of Homeland Security’s Customs and Border Protection (CBP) “access to federal lands for security activities” on 10 million acres in Arizona. It would make it easier for border patrol to enter and operate on federal lands, including parks, build infrastructure such as radio towers. The area in Arizona includes some of the state’s most treasured public lands, including Saguaro National Park, Coronado National Forest, Sonoran Desert National Monument, and multiple wildlife refuges.  Introducing the bill in March, McCain and cosponsor Congressman Matt Salmon (R-AZ) said that “laws put in place to protect these lands also prevent Border Patrol agents from doing their jobs,” and the legislation would “cut unnecessary red tape and enable Border Patrol agents to have access to all federally managed land in Southwest Arizona so they can perform their jobs effectively, keep our communities safe, and secure the border once and for all.” However, Randy Serraglio, a Southwest conservation advocate at the Center for Biological Diversity, told E&E Publishing that “the notion that laws protecting public lands are somehow impeding border security is a fantasy cooked up by politicians who’ve been trying for many years to weaken those protections.”

World headed for an El Nino and it could be a big one, scientists say - The world is headed into a major drought-bringing El Nino event, which will lift global temperatures and lead to bushfires and water shortages in eastern Australia, climate scientists have confirmed. Fairfax Media understands that Australia's Bureau of Meteorology will announce next Tuesday that the El Nino event is all but certain. Sea-surface temperatures in the central and eastern Pacific are recording anomalies of more than 1 degree, a combination that has not previously been seen in weekly data going back to 1991, according to a bureau climate forecaster.   Australia's measure of El Nino thresholds is sustained warmth of sea-surface temperatures of 0.8 degrees above average in the key regions surveyed, a higher bar to clear than set by the US and some other agencies. "You can see a warming in the eastern Pacific, which looks to be a classic [El Nino] event," said Agus Santoso, an El Nino modeller at the University of NSW's Climate Change Research centre.  Scientists, though, are surprised that the build-up of unusual warmth in the eastern Pacific compared with the west is happening so early in the year. "It's quite rare – this is an interesting one," Dr Santoso said. In typical El Nino years, the usual easterly trade winds stall or even reverse in winter or later, dragging rainfall eastwards away from Australia and also south-east Asia. Droughts tend to deepen and spread and bushfire seasons are more active than normal.

More foreign companies buying B.C. farmland to earn carbon credits - The B.C. government has acknowledged the amount of farmland being replanted with trees so companies can claim carbon credits is far greater than thought. A few weeks ago, Agriculture Minister Norm Letnick dismissed concerns about the issue, which had been raised by farmers in the Cariboo, saying only about 1,500 hectares of agricultural land had been reforested for carbon sequestration. But in a new fact sheet released this week, the government states that “an additional 7,000 hectares of land” have now been identified on which trees may have been planted for carbon credits. Mr. Letnick wasn’t immediately available for comment, but the document states that the new information has been given to the Agricultural Land Commission, which is responsible for protecting B.C. farmland. Farmers and ranchers in the Cariboo said last month they were seeing thousands of hectares of productive farmland being purchased by foreign companies, which then planted trees to qualify for carbon credits. Lana Popham, the NDP agriculture critic, says it’s alarming the government’s figures could change so dramatically in just a few weeks. “It shows that they actually don’t know what’s going on, on the ground,” she said. And Ms. Popham said the amount of farmland replanted with trees could be even larger than the government is now saying.

Lester Brown: 'Vast dust bowls threaten tens of millions with hunger' -  Vast tracts of Africa and of China are turning into dust bowls on a scale that dwarfs the one that devastated the US in the 1930s, one of the world’s pre-eminent environmental thinkers has warned. Over 50 years, the writer Lester Brown has gained a reputation for anticipating global trends. Now as Brown, 80, enters retirement, he fears the world may be on the verge of a greater hunger than he has ever seen in his professional lifetime. For the first time, he said tens of millions of poor people in countries like Nigeria, India, Pakistan and Peru could afford to eat only five days a week. Most of the world was exhausting its ground water because of overpumping. Yields were flatlining in Japan. And in northern and western China, and the Sahel region of Africa – an area already wracked by insurgency and conflict – people were running out of land to grow food. Millions of acres of were turning into wasteland because of over-farming and over-grazing. “We are pushing against the limits of land that can be ploughed and the land available for grazing and there are two areas of the world in which we are in serious trouble now,” Brown said.“One is the Sahel region of Africa, from Senegal to Somalia. There is a huge dust bowl forming now that is actually stretching right across the continent and that dust bowl is removing a lot of top soil, so eventually they will be in serious trouble,” he said. In areas of China, villagers were abandoning the countryside because the land was too depleted to raise flocks or grow food. “At some point there will be a reckoning,” he said. “They will be abandoning so much land, both for farming and for grazing, that it will restrict their efforts to expand food production.” The result would be far worse than anything America saw in the 1930s. “Our dust bowl was serious, but it was confined and within a matter of years we had it under control ... these two areas don’t have that capacity.”

Pope Francis: ‘If We Destroy Creation, Creation Will Destroy Us’ - A declaration at the end of a meeting in Rome hosted by the Vatican made a plea to the world’s religions to engage and mobilize on the issue of climate change. “Human-induced climate change is a scientific reality, and its decisive mitigation is a moral and religious imperative for humanity,” the declaration said. “In this core moral space, the world’s religions play a very vital role.” Vatican watchers and climate experts say the meeting, “The Moral Dimensions of Climate Change and Sustainable Development,” shows that Pope Francis is—in marked contrast to his predecessors—keen for the Catholic church to be more involved in the climate change issue, and is also urging other religions to become more actively engaged. The meeting was organized by various religious and non-religious organizations, including the Vatican’s Pontifical Academy of Sciences and the UN-affiliated body, the Sustainable Development Solutions Network. Ban Ki-moon, the UN Secretary-General, also spoke at the one-day conference. In a few weeks’ time, the Pope is due to release an encyclical on climate change—within the Catholic church, a statement of fundamental principles. He has also made several impassioned speeches on the issue. “If we destroy Creation, Creation will destroy us,” the Pope told a gathering of thousands in St Peter’s Square, Rome, last month. “Never forget this.”

NASA’s Time Lapse Video Shows Humanity’s Impact on the Earth  - How much of an impact can billions and billions of people make on the environment? Well, if you watch the video below from Vox, you’ll see that in a mere 40 years, human activity can leave quite the mark.  These images are courtesy of NASA and the U.S. Geological Survey’s Landsat satellite program that the space agency launched in 1972 with the sole intention of studying our planet’s surface and how its been changing over time. According to Vox, the satellite takes pictures of the entire surface of the planet every 18 days and orbits the Earth 14 times a day.  In the video, photos taken over the last four decades have been strung together to show humanity’s footprint on five different locations. From the shocking deforestation of Rondônia, Brazil (where the area’s global beef exports have mowed down enough trees to fill the state of West Virginia), to the rampant water use in the Aral Sea causing a loss of 60,000 fishery jobs due to rising salt levels.  You’ll also see how the the dirty energy industry has literally stripped away Wyoming’s natural resources, and how much the Larsen B Ice Shelf has collapsed due to climate change. And in the GIF above from Vox, notice how the increasing number of golf courses and artificial lakes in rapidly growing Las Vegas are an ironic harbinger of the area’s relentless drought.  It’s clear that we must all change our ways and act now before it gets any worse. Check out the haunting footage here:

Global Carbon Dioxide Levels Just Hit A Disturbing New Threshold -- Four hundred: it’s a number that will go down in climate history while also continuing to rise.   According to the National Oceanic and Atmospheric Administration (NOAA), 400.83 parts per million (ppm) was the average concentration of atmospheric carbon dioxide in March. This news from NOAA marks the first time that the entire planet has surpassed the 400 ppm benchmark for an entire month.  With the rate of growth of atmospheric carbon dioxide concentrations steadily increasing — rising from about 0.75 ppm per year in 1959 to about 2.25 ppm per year in 2015 — this milestone will soon be surpassed. Still, the 400 ppm average has been a long time coming.  “It was only a matter of time that we would average 400 parts per million globally,” Pieter Tans, lead scientist of NOAA’s Global Greenhouse Gas Reference Network, said in a statement. “Reaching 400 parts per million as a global average is a significant milestone.” As the climate change activist group — named after what they deem to be a safe level of atmospheric carbon dioxide — states, at the beginning of human civilization the atmosphere contained about 275 ppm of carbon dioxide. This concentration began to rise during the Industrial Revolution in the 18th century, and the large-scale emissions of greenhouse gases into the atmosphere remains a critical part of human societies across the world.

The World Reached a Scary Emissions Milestone in March — and It’s Only Going to Get Worse -- The concentration of carbon dioxide in the atmosphere surpassed 400 parts per million (ppm) this March — a barrier that, when it was first crossed in May 2013, marked a terrifying milestone.  Those records just keep coming: in 2014, CO2 concentrations surpassed that barrier a full two months earlier than they had the year before — which is significant because the long-term rise in CO2 is subject to seasonal variability, and doesn’t typically peak until May. This year, according to data released Wednesday by NOAA, not only did CO2 peak early (an occurrence that was no longer even newsworthy) — the average for the entire month of March was above 400pm, for the first time in recorded history.  “This marks the fact that humans burning fossil fuels have caused global carbon dioxide concentrations to rise more than 120 parts per million since pre-industrial times,” Pieter Tans, the lead scientist of NOAA’s Global Greenhouse Gas Reference Network, said in a statement. “Half of that rise has occurred since 1980.”  CO2 emissions, of course, along with other greenhouse gases, are a key contributor to climate change, and they’ve been on the rise ever since humanity began burning massive amounts of fossil fuels. For most of human history, atmospheric CO2 levels were around 275 ppm. The last time they were this high predated modern humans, and things did not go well for the planet: the seas were 100 feet higher than their current levels, and the average temperature was 11 degrees Fahrenheit warmer.

It's Official: Global Carbon Levels Surpassed 400 ppm for Entire Month - Marking yet another grim milestone for an ever-warming planet, the National Oceanic and Atmospheric Administration revealed on Wednesday that, for the first time in recorded history, global levels of carbon dioxide in the atmosphere averaged over 400 parts per million (ppm) for an entire month—in March 2015. "This marks the fact that humans burning fossil fuels have caused global carbon dioxide concentrations to rise more than 120 parts per million since pre-industrial times," said Pieter Tans, lead scientist of NOAA’s Global Greenhouse Gas Reference Network, in a press statement. "Half of that rise has occurred since 1980."This is not the first time the benchmark of 400 ppm has been reached."We first reported 400 ppm when all of our Arctic sites reached that value in the spring of 2012," explained Tans. "In 2013 the record at NOAA’s Mauna Loa Observatory first crossed the 400 ppm threshold." However, Tans said that reaching 400 ppm across the planet for an entire month is a "significant milestone."During pre-industrial times, CO2 levels were at 280 ppm. Scientists have warned that, in order to achieve safe levels, CO2 must be brought down to a maximum of 350ppm—the number from which the environmental organization derives its name.

Two degrees warming a 'prescription for disaster' says top climate scientist James Hansen -- The aim to limit global warming to two degrees of pre-industrial levels is "crazy" and "a prescription for disaster", according to a long-time NASA climate scientist. The paleo-climate record shows sea-levels were six to eight metres (19 to 26 feet) higher than current levels when global temperatures were less than two degrees warmer than they are now, Professor James Hansen, formerly head of NASA's Goddard Institute for Space Studies and now at Columbia University in New York, said. "It's crazy to think that 2 degrees celsius is a safe limit," Professor Hansen told RN Breakfast on ABC Radio on Tuesday, adding that this would lock in several metres of sea-level rise by the middle of the century, New satellite data over the past decade indicate that the ice sheets are disintegrating faster than had been modelled by climate scientists. "The ice sheets are losing mass faster and faster, with a doubling time of about 10 years," Professor Hansen said. "If that continues, we would get sea-level rises of several metres by 40-50 years." "The consequences are almost unthinkable. It would mean that all coastal cities would become dysfunctional," he told ABC Radio. Even the goal of limiting warming by two degrees is looking like it is unlikely to be met. A study out this week by Lord Nicholas Stern and colleagues found that the commitment and likely pledges by nations to cut greenhouse gas emissions by 2030 fall about half short of the reductions needed to restrict the two-degree increase on pre-industrial levels.

Arctic ice melting faster and earlier as scientists demand action - There was less ice in the Arctic this winter than in any other winter during the satellite era, National Oceanic and Atmospheric Administration scientists said on Tuesday. The announcement was consistent with previous predictions that the Arctic would have entirely ice-free summers by 2040, they said in a briefing to the media on the state of climate trends in the north pole.  The consequences of such a small quantity of Arctic ice are major and far-reaching.  After undergoing a period of colder temperatures and slower ice retreat between 2007 and 2012, the Arctic is returning to a warm period with the overall trend over the decades continuing to show temperatures getting hotter and ice melting faster. This year, full ice coverage – the point at which the ice reaches its peak and then starts melting – was reached on 25 February, more than two weeks before the expected date of mid-March. This means ice started to melt earlier and faster than in previous years. Ed Farley, a scientist with NOAA’s Alaska fisheries science center, said that studies over the last 15 years showed that ice melting faster year-on-year led to a drastic loss in the fat contained in zooplankton – a fish food crucial for the entire area’s ecosystem. Zooplankton feeds the area’s fish, which in turn feed the area’s seals, which in turn feed the area’s polar bears. Eating high-fat foods is crucial forthose species to allow them to fatten up and survive harsh winter months. Changing temperatures in the sea may also severely affect access to high-fat foods in the Arctic’s ecosystem, Farley said.

Antarctica is melting faster than ever before — and the result will be devastating -- Study after study shows that Antarctica isn't in great shape. Its ice shelves are disappearing and its ice sheets are collapsing, hastening swiftly rising sea levels. Sounds terrible.  But just in case you wanted a second opinion, a new study out of Princeton University takes a look at a decade's worth of satellite data. Their results, published in Earth and Planetary Science Letters, show that not only is Antarctica melting, it's melting faster than ever before.   Unlike other studies that looked at the volume of ice lost, this study used data relating to the mass of the ice — the difference the researchers say between measuring weight loss by looking in a mirror versus using a scale.  While looking in a mirror (or the volume of ice) can give you some idea of what's going on, it's sometimes deceptive. Snow compacting into ice leads to a reduction in volume, but only ice melting into water or breaking off the continent registers as a change in mass.  They used data collected between 2003 and 2014 by NASA's Gravity Recovery and Climate Experiment (GRACE) twin satellites that can measure differences in the amount of water around the world. Since its launch in 2002, GRACE has analyzed the health of underground aquifers, analyzed flooding, and helped show that ice loss in Antarctica was messing with the continent's gravity.  In flybys over Antarctica, the satellites were able to weigh the mass of Antarctica's ice cover. GRACE measures gravity by orbiting in formation around the earth. One satellite follows the other at a set distance, but when they pass over an area of greater gravity (an area with more mass), the lead satellite gets pulled away from its companion. By comparing gravity anomalies over time, GRACE can see where water is moving around the world. The data showed that between 2003 and 2014, Antarctica lost 92 billion tons of ice per year. That's the net amount of ice loss--some ice grew back in East Antarctica, but the gains were a drop in the bucket compared to the 121 billion tons of ice that the West Antarctic ice shelf lost during that time.

What is the Scariest Climate Change Scenario of All?: Ken Caldeira, a respected climate scientist has issued a warning. He explains that it would only require a few people with a few billion dollars to geoengineer planetary cooling. This could be done by using planes pumping the sky full of small particles, mimicking the cooling effect that a volcanic eruption has on the planet. Perhaps a heat stress induced famine in China, India, or the tropics could motivate a government or wealthy funded organization to take this type of independent action with the intention of restoring food security, a desperate response to a desperate situation. Caldeira tells us that through geoengineering, humans have the capability to force down temperatures ten degrees Fahrenheit. The resulting cooling would happen in a dangerously uneven and unpredictable way. Caldeira says that he has become convinced that if there will be a climate catastrophe, it will be the result of the interaction between the climate systems and social institutions.

House Science Committee guts NASA Earth sciences budget - Yesterday, by a party-line vote, Republicans in the House Committee on Science, Space, and Technology approved a budget authorization for NASA that would see continued spending on Orion and the Space Launch System but slash the agency's budget for Earth sciences. This vote follows the committee's decision to cut the NSF's geoscience budget and comes after a prominent attack on NASA's Earth sciences work during a Senate hearing, all of which suggests a concerted campaign against the researchers who, among other things, are telling us that climate change is a reality. The recently approved budget would cover 2016 and 2017, and it contains two scenarios based on the degree to which the overall budget is constrained. An analysis of the bill shows that it would keep spending in line with the Obama administration's request but shift money from basic sciences to human exploration. The Orion crewed capsule and Space Launch System rocket would both see an addition of hundreds of millions of dollars. Planetary science would also see a boost of nearly $150 million.The added spending is offset by a huge drop in spending on Earth science, from $1.947 billion under Obama's proposal to $1.45 billion under the optimistic budget. If budget constraints kick in, it would drop to $1.2 billion—a cut of nearly 40 percent.

The G.O.P.’s War on Science Gets Worse: During last fall’s midterm election campaign, “I’m not a scientist” became a standard Republican answer to questions about climate change. ... Now, it seems, they are trying to go one better. They are trying to prevent even scientists from being scientists. Last week, the House Science, Space, and Technology Committee, headed by Texas Republican Lamar Smith, approved a bill that would slash at least three hundred million dollars from NASA’s earth-science budget. “Earth science, of course, includes climate science,” Representative Eddie Bernice Johnson, a Texas Democrat who is also on the committee, noted. ... Defunding NASA’s earth-science program takes willed ignorance one giant leap further. It means that not only will climate studies be ignored; some potentially useful data won’t even be collected. ... The vote on the NASA bill came just a week after the same House committee approved major funding cuts to the National Science Foundation’s geosciences program, as well as cuts to Department of Energy programs that support research into new energy sources. ... “It’s hard to believe that in order to serve an ideological agenda, the majority is willing to slash the science that helps us have a better understanding of our home planet,” Representative Johnson wrote. Hard to believe, but, unfortunately, true.

Why Scientific American's Predictions from 10 Years Ago Were So Wrong -- Recently, we did an experiment: We took an outdated issue of a respected popular science magazine, Scientific American, and researched exactly what happened to the highly-touted breakthroughs of the era that would supposedly change everything. What we discovered is just how terrible we are at predicting the long arc of scientific discovery.  The daily churn of science news tends toward optimism. You know what I’m talking about: New cure! New breakthrough smashing Moore’s law! New revolutionary technology! I write about science, and I am always uncomfortable trying to predict how a new piece of research will change the future.  That’s because science can be wrong. It can go down dead ends. And even when it doesn’t, almost everything is more complicated and takes longer than we initially think. But just how wrong and how long?   We can’t very well time travel to the future for those answers, but we can look backward. I recently dig up the 2005 December issue of Scientific American and went entry by entry through the Scientific American 50, a list of the most important trends in science that year. I chose 2005 because 10 years seemed recent enough for continuity between scientific questions then and now but also long enough ago for actual progress. More importantly, I chose Scientific American because the magazine publishes sober assessments of science, often by scientists themselves.

How Much Would Zero Emissions Cost? -- In 2014 global carbon emissions totaled 32 gigatonnes (Gt). If you’re counting, that’s roughly 32 Gt too many. Yes, zero, near-zero, or net-zero is what we want, and soon is when we need it. Failure to achieve such goals by the end of the century will irreparably damage our planet and leave us dangerously susceptible to new and harsher climate conditions, at least according to the Intergovernmental Panel on Climate Change (IPCC). The United Nations agrees, though several countries openly reject the target. In an effort to better understand the zero goal, let’s try to put a price on it. More specifically – and for simplicity – how much would it cost for the world’s highest per capita emitter, the United States to achieve zero or near-zero emissions? To be clear, the following focuses on energy-related gas emissions, which are mostly CO2 and account for about 84 percent of the country’s total greenhouse gas emissions: electric power is responsible for roughly 38 percent of total emissions; transportation is second at 34 percent; and residential, commercial, and industry emissions account for 28 percent.  Of course, there is no simple solution to the problem at hand, but there is a simple idea: remove fossil fuels from the picture, and across all sectors.  It also means saying goodbye to petroleum-powered transportation as we know it.  According to Stanford University scientist and professor Mark Jacobson, 100 percent renewable generation is possible now and attainable by 2050. In fact, he’s developed a plan for all 50 states – and he’s put a price on it. The proposed 7,131-gigawatt Wind, Water, and Sunlight (WWS) system carries an upfront cost of $14 trillion and will create nearly 7 million long-term jobs (net 3 million), while addressing emissions from the three most polluting sectors. Considering market differences – and relative to GDP – the cost is comparable to a recent French study on the same topic.

Is climate policy compatible with Tesla’s battery-fueled dreams? --On Thursday, Tesla announced a new division to invest in battery technology to be installed in dwellings and businesses and even grouped in power facilities. The batteries would store any excess energy from solar panels and use it to power a home at night or charge up an electric car. This could also help existing electricity grids manage peak-load issues by allowing consumers to draw in power when it is cheap and draw it out of the battery when it is expensive. More critically, it is a complement to solar. One of the big issues in solar energy is that it is dependent on the daily cycle. So if most of your power needs are during the evening, you have a problem. The battery is intended to solve that issue.   In the process, it makes solar power more valuable to consumers. Couple this with the forecasts of Ramez Naam that solar panel costs are falling at their own Moore’s Law-type rates, and the outlook is quite favorable. Tesla founder Elon Musk believes it is technically possible to convert all of our current power production (and by “our” I mean for the entire Earth) to solar within decades.  To do this, Tesla will be building lots of factories, but the company has also opened up its patents so that others can invest more in batteries as well.  The bulk of the capital needed to roll out the battery and solar solutions Musk is promoting, however, has yet to be spent – by Tesla or any other company. Herein lies the risk. If we act too quickly to raise the costs of carbon, pushing up the price of energy, it may be that we harm private-sector efforts to promote solar power, which in turn will make innovations in battery technology less rewarding.   I raise this point not to diminish the efforts to put a price on carbon. There are many reasons why this is a sensible direction. But I believe that we need to acknowledge the real risks to private-sector innovation if we substitute fuel sources that themselves promote energy use. Solar power is such a fuel and its return is contingent on a healthy demand for energy that may be at risk if people pre-emptively economize on that energy.

Hawaii Passes Bill To Get 100 Percent Of Its Electricity From Renewables  -- Hawaii is on its way to having the greenest grid in the nation.  The state legislature sent a bill to the governor’s desk this week that moves the renewable portfolio standard (RPS) up to 100 percent by 2045 — which means that all electricity provided by the electric companies will have to come from renewable sources like solar and wind. Nationwide, electricity generation makes up about a third of all carbon emissions.  “We’ll now be the most populated set of islands in the world with an independent grid to establish a 100 percent renewable electricity goal,” State Senator Mike Gabbard (D) told ThinkProgress in an email. “Through this process of transformation we can be the model that other states and even nations follow. And we’ll achieve the biggest energy turnaround in the country, going from 90 percent dependence on fossil fuels to 100 percent clean energy.” Gov. David Ige (D) has until May 15 to veto or sign the bill. If he fails to act by then, the bill will automatically become law. Hawaii would be the first state in the nation to have an RPS at 100 percent. Its previous RPS called for 40 percent renewables by the end of 2030.  Hawaii already has the greatest solar penetration in the nation. One out of every eight homes in Hawaii has solar, and roughly 10 percent of the state’s electricity comes from solar, according to the Solar Energy Industries Association (SEIA). Another quarter of Hawaii’s electricity comes from geothermal sources, according to the federal Energy Information Agency (The EIA does not track residential solar electricity generation).

Assessing the Energy-Efficiency Gap - Robert Stavins - Global energy consumption is on a path to grow 30-50 percent over the next 25 years, bringing with it, in many countries, increased local air pollution, greenhouse gas (GHG) emissions, and oil consumption, as well as higher energy prices.  Energy-efficient technologies offer considerable promise for reducing the costs and environmental damages associated with energy use, but these technologies appear not to be used by consumers and businesses to the degree that would apparently be justified, even on the basis of their own (private) financial net benefits. For some thirty years, there have been discussions and debates about this phenomenon among researchers and others in academia, government, non-profits, and private industry, typically couched in terms of potential explanations of the so-called “energy efficiency gap” or “energy paradox.” I wrote about this some two years ago at this blog (Thinking About the Energy-Efficiency Gap).  I  noted then that Professor Richard Newell of Duke University and I had just launched an initiative – sponsored by the Alfred P. Sloan Foundation — to synthesize past work on potential explanations of the energy paradox and identify key gaps in knowledge. We subsequently conducted a comprehensive review and assessment of social-science research on the adoption of energy-efficient technologies.I’m pleased to inform readers of this blog that we have now released a major monograph, Assessing the Energy Efficiency Gap, co-authored with Todd Gerarden, a Harvard Ph.D. student in Public Policy and a Pre-Doctoral Fellow of the Harvard Environmental Economics Program (HEEP).  The monograph draws in part from the research workshop held at Harvard (in October 2013), in which most of the U.S.-based scholars (primarily, but not exclusively, economists) then conducting research on the energy-efficiency gap participated.

The EPA’s Power Plant Rule Would Prevent Thousands Of Deaths And Hospitalizations -- The Environmental Protection Agency’s proposed power plant rule is aimed at reducing carbon emissions that cause climate change. But it would also come with major health benefits, a new study confirmed Monday. The study, published in the journal Nature Climate Change, found that the EPA’s carbon rule could prevent 3,500 premature deaths each year, in addition to 1,000 hospitalizations and about 220 heart attacks. That’s because the rule, which aims to cut carbon dioxide emissions from power plants by 25 percent from 2005 levels by 2020 and 30 percent from 2005 levels by 2030, will also result in reductions of pollutants like particulates, sulfur dioxide, and nitrogen oxides — emissions that contribute to smog and which can harm human health when breathed in regularly. The study also mapped out what states would see the most health benefits from the Clean Power Plan. According to the study, Pennsylvania, Texas, and Ohio, would benefit most from the rule, with 230 to 330 premature deaths avoided each year. Some of these states are also among the most opposed to the Clean Power Plan: Ohio is one of 12 states — all of which are either large producers or consumers of coal — suing the EPA over the proposed rule. Charles Driscoll, lead author of the study and professor of environmental systems engineering at Syracuse University, told ThinkProgress that this dichotomy makes sense. Many of the states that stand to gain the most benefits from the Clean Power Plan rely fairly heavily on coal for their energy, so tackling emissions from power plants within those states would more likely result in a noticeable difference in air quality than in states that don’t rely heavily on coal.

UN climate chief says the science is clear: there is no space for new coal -- The UN climate chief, Christiana Figueres, has said there was “no space” for new coal developments and stressed the benefits of ambitious renewable energy targets after a meeting with representatives from seven Australian governments. At the meeting in Adelaide, organised by the South Australian government, federal, state and territory administrations agreed to work more closely to drive an uptake in renewable energy, coordinate energy-efficiency schemes and help communities adapt to climate change. Figueres, the executive secretary of the United Nations framework convention on climate change, urged the states and territories to work with the federal government to help deliver a “strong” global agreement at key climate talks in Paris in December. The meeting was attended by the environment ministers of the Labor-run states and territories – Victoria, South Australia, Queensland and the ACT. The federal government, Tasmanian and New South Wales governments were represented at “senior official level”, and Western Australia and the Northern Territory were absent. According to the meeting’s official communique, Figueres warned of the dangers of the world exceeding 2C of warming compared with pre-industrial times and “emphasised that the science is clear that there is no space for new coal or unmitigated coal”.

North Carolina Finds Water Contamination In 93 Percent Of Tested Homes Near Coal Ash Ponds - The state of North Carolina is sending more letters to residents living near coal ash ponds warning them not to drink their water, after tests showed elevated levels of toxic heavy metals.  According to the Associated Press, 152 out of 163 water wells tested within 1,000 feet of Duke Energy coal ash ponds failed to meet state standards for groundwater — a 93 percent rate of contamination. A large number of the tests reportedly showed high levels of lead, vanadium, and hexavalent chromium, the latter of which is carcinogenic to humans. Duke Energy is denying its coal ash ponds are causing the pollution, saying it is occurring naturally. Duke is, however, providing bottled water to a small fraction of the affected residents. “We do not believe our ash basins are responsible for the water quality concerns, but we want them to have peace of mind while more study is done,” Paige Sheehan, a Duke spokeswoman, told the AP. For the last few months, the North Carolina Department of Environment and Natural Resources (DENR) has been testing private drinking water wells near Duke Energy-owned coal ash dumps, to see if they are contaminated. They’re doing that because of an 82,000-ton coal ash spill from one of Duke’s storage ponds last year which contaminated water, thereby sparking concerns from other residents living near coal ash ponds that they might be at similar risk. The tests are only conducted at water wells within 1,000 feet of a storage pit for coal ash, and analyzed only for constituents that might be associated with the waste. Coal ash is the toxic byproduct of burning coal and often contains chemicals like arsenic, chromium, mercury, and lead. It is the second-largest form of waste generated in the United States.

Mountain Pact: Coal mining effects our environment, economy - Western mountain communities in Colorado and neighboring states want financial reparations from energy companies to help offset the environmental and economic damages they believe is caused by fuel mining, particularly coal mining. This week, mountain community advocacy group Mountain Pact will write to federal and state officials demanding changes in their method of coal royalty collection, The Denver Post reports. Members of the Mountain Pact cite coal producers for exacerbating issues including increased wildfires, spread of the mountain pine beetle epidemic, reduced snowpack and inconsistent river flows. Leadville Mayor Jaime Stuever believes these changes could hurt the area’s economy, which relies in part on tourism: We’re seeing the impact from global warming. I’m not blaming it solely on coal. It’s fossil fuels in general. But we need to create a diversification of jobs. If there’s no consistent snow, due to global warming, then we need to look at other forms of tourism.Telluride Mayor Stu Fraser said any funds the city receives from coal royalties will go directly towards wind and solar power developments: If they’re going to continue to burn coal, it has to be cleaner. This needs to happen sooner rather than later. It’s very important that we have less pollution going into the environment.

Radioactive and Short on Cash to Pay for Closures - At the edge of Humboldt Bay in northern California lies a relic from the heyday of U.S. nuclear power. The reactor was shut down in 1976. The remaining cost to decommission the plant once and for all -– cleaning up lingering radiological dangers, dismantling the remains -- will be about $441 million, according to its owner, PG&E Corp. The question is who will pay -- for Humboldt Bay, and for dozens of other reactors that are in the process of closing or might soon. Nuclear operators like PG&E are supposed to lay up enough money to cover the costs, similar to how corporations fund pensions. Turns out, most haven’t. PG&E’s Humboldt Bay trust fund, for instance, is currently $308 million short, according to a company filing to the U.S. Nuclear Regulatory Commission. PG&E customers will shoulder the cost in the form of higher electricity bills. The U.S. nuclear industry is feeling its age. Once touted as a source of electricity that would be “too cheap to meter,” plants need expensive upgrades to protect them from terrorism and natural disasters. At the same time, they face growing competition from renewables and natural gas. While five new reactors are under construction, current economics give little incentive to build more. Looming is an unprecedented wave of closures.

TEPCO Admits Fukushima Is Leaking Again - Over 600x 'Safe' Radiation Levels - Having killed a robot by underestimating the level of radiation present in the Fukushima power plant, and after delaying its previous admission of a leak, Tokyo Electric Power Co. (TEPCO) has quickly admitted that the nuclear plant has sprung another leak. As EFE reports, a small quantity of radioactive water has leaked from a storage tank with 70 microsieverts per hour of beta-ray-emitting radioactivity detected on the surface where the water had leaked, far exceeding the recommended maximum exposure of 0.11 microsieverts per hour. But apart from that it's "contained."

Fracking, wastewater-injection wells raise Ohio’s quake risk, feds say - Columbus Dispatch: “When I used to show (seismicity) maps in my intro class, I’d say, ‘Ohio is about as earthquake-free as you get,’ ” Klemetti said. “Now, it has a bull’s-eye on it, at least to some degree.” That bull’s-eye, according to a recent U.S. Geological Survey report, is directly linked to hydraulic fracturing for oil and gas and to injection wells for fracking wastewater. The report was the survey’s first large-scale examination of the connection between earthquakes and oil and gas extraction. Geologists identified 17 regions across the country, including the area around Youngstown in northeastern Ohio, that are at higher risk of earthquakes because of oil and gas activities. . This increased seismic activity, the report’s authors say, is directly linked to injection wells, where fracking wastewater is pumped underground at high pressure. Oil and gas activities have created hundreds of earthquakes in Oklahoma, Texas, Arkansas and Ohio, the report found. Connecting fracking and earthquakes is not new. A team of Miami University researchers published a study this year that linked nearly 80 quakes in Mahoning County to nearby oil and gas operations, and the Ohio Department of Natural Resources — the state agency that oversees oil and gas in Ohio — also has said that oil and gas operations can cause earthquakes. Another team of researchers published a report last year arguing that fracking triggered hundreds of small earthquakes on a previously unmapped fault in Harrison County in 2013. And although fracking-related earthquakes strong enough to be felt by people are more common in Oklahoma than Ohio, the survey warned that parts of Ohio are at risk of more-frequent temblors. Last year, nearly 25 million barrels — more than 1 billion gallons — of fracking wastewater were pumped into about 200 injection wells in Ohio, according to Department of Natural Resources records.

Deference to fracking demands shake-up - Joe Blundo: If you didn’t read the story about fracking and earthquakes by my colleague Laura Arenschield in the Monday edition of The Dispatch, I’ll take you right to the most amazing quote from a quake researcher: “Before they do the wastewater injection, they should study the geology a lot more. . . . But that’s tough because a lot of these (injection wells) are mom-and-pop operations.” Pardon me for shouting, but MOM-AND-POP OPERATIONS! We’re allowing Fred’s Bar, Grill & Wastewater Injection Well to do something that causes earthquakes? Can you imagine another industry being treated with the deference that the oil-and-gas industry is shown in Ohio? I mean, if we had evidence that, say, beauty salons were triggering mini-tornadoes with their hair dryers or that craft brewers were causing minor floods (beer sends people to the bathroom, you know), might not state officials be a bit quicker to intervene? But Leroy’s Deli & Fracking Disposal makes the ground shift beneath our feet, and we’re told not to become overly alarmed. Sheesh. So here’s the background: Oil and gas activity, according to a recent U.S. Geological Survey report, is directly linked to hundreds of earthquakes in Ohio (mostly around Youngstown) as well as Arkansas, Oklahoma and Texas. The quakes linked to fracking have been small and with no damage, the report said. The bigger quakes are thought to have been triggered by the injection of fracking wastewater deep into the ground, it said. How big? Here is what the USGS said:  “It does appear that wastewater disposal induced the Raton Basin, Colo., earthquake in 2011 as well as the quake that struck Prague, Okla., in 2011, leading to a few injuries and damage to more than a dozen homes.”

Tensions rise over proposed pipeline in northeast Ohio - — Tensions surrounding a proposed underground pipeline are rising after property owners were told that surveyors for the project may enter their property without permission, homeowners said. A letter signed by project manager Walton Johnson said work on the Nexus gas transmission pipeline in northeast Ohio must be conducted without delay, The Medina Gazette reported. The letter indicated that if property owners hadn’t granted permission for property access by May 1 in order for surveyors to provide advanced notice, Nexus may enter properties without consent to perform necessary survey activities. The proposed pipeline would run through nine Ohio counties. The 200-mile corridor of 42-inch-diameter pipe would be capable of transporting as much as 2 billion cubic feet of natural gas per day, an amount that would meet the needs of around 20,000 homes per year. Gas from the pipeline would be made available to industry and to gas-fired power plants. While some have been fighting the pipeline since its introduction, some property owners say the letter has increased tensions. Paul Gierosky with the Coalition to Re-route Nexus, said people are questioning the demands of the letter and feeling threatened. Jon Strong, also with the Coalition to Re-route Nexus and a recipient of the letter, called the pipeline fight an “ugly process.” “My fear is that it’s going to escalate,” he said. “People just have a feeling no one’s listening to them.”

Belmont County residents worried about fracking near reservoir - From a press release today:  Citizens Send Mayday Message to State Officials Regarding Fracking Threat to Water Supply – More than 2,300 citizens served by Slope Creek Reservoir in Belmont County and supporters signed their names to a petition to protect the water supply from risks associated with shale gas development (AKA fracking), and stop Gulfport Energy Corporation’s plans to place multiple well pads as close as 500 feet from the reservoir. Activists with the citizens’ group “Concerned Barnesville Area Residents” (CBAR) compiled the petition, which was delivered to the offices of Governor John Kasich, Ohio Department of Natural Resources (ODNR) Director James Zehringer, ODNR Division of Oil and Gas Chief Rick Simmers, and Ohio Environmental Protection Agency Director Craig Butler on May 1.  The Slope Creek Reservoir, located outside the village of Barnesville, provides 82% of the drinking water for nearly 10,000 people in the Barnesville area, including nearby communities of Quaker City, Somerton, Malaga, Jerusalem, and Beallsville. To date, two-dozen horizontal fracking wells are producing in the township where the reservoir lies, and 69 wells are producing across the county, according to the ODNR website.  On average, over 10.7 million gallons of fresh water were used while drilling each of the wells in the deep-seated Utica shale in Belmont County, as calculated from data provided by fracfocus.

Dominion's SCO natural gas price drops to 34-year historic low - The price of natural gas has tumbled to a 34-year historic low for residential customers who buy their gas through a Dominion East Ohio supplier. Effective with bills on May 13, the monthly natural gas price for residential customers who have chosen Dominion’s Standard Choice Offer (SCO), or those who don’t choose their own supplier, will be $2.54 per thousand cubic feet (MCF). The identical SCO and Standard Service Offer (SSO) price will be 7 cents/MCF or 2.7 percent lower than April’s rate of $2.61/mcf. They are also $2.68/mcf or 51.3 percent lower than last May’s price of $5.22/mcf. But the new price is the lowest since May of 1981 when the Dominion price was $2.53/MCF for the price then called the Gas Cost Recovery (GCR) rate, said spokesman Neil Durbin. The highest price was $14.55/mcf in July of 2008. In. “You can see the market price impact of increasing domestic production from shale area in Ohio and neighboring states,” said Durbin. In addition, the formula to determine the monthly SCO price came in at a historic low of 2 cents/mcf above the closing price on the third to last day of the previous month on the New York Mercantile Exchange (NYMEX). That new formula began with April bills.

Chesapeake Energy to scale back Utica Shale drilling in eastern Ohio -  Low prices for natural gas and related liquids are forcing Chesapeake Energy Corp. to cut into Ohio operations. The Oklahoma-based energy giant said Wednesday that its intends to scale back its drilling in the Utica Shale in the coming months, as profits drop and production continues to climb. Chesapeake will lower the number of drilling rigs in Ohio from five to two by the middle of the third quarter and will reduce the number of Ohio crews that hydraulically fracture, or frack, the rock from four to 2.5 for the rest of 2015, the company said in an earnings call with analysts and the media. Similar cuts are being made elsewhere, with some of the biggest reductions coming in the Eagle Ford Shale in Texas. The company needs to maintain two drilling rigs in order to hold onto its leased acreage in eastern Ohio. Chesapeake, the No. 1 player in the Utica Shale and No. 2 producer of natural gas in the United States, said it is has been very pleased with recent natural gas results in Columbiana County. Three wells recently completed there show significantly more potential than nine earlier-drilled wells, spokesman Chris Doyle said. The company is seeing a 50 percent improvement in production with the new wells, he said, and the company could expand its core area beyond neighboring Carroll County into Columbiana County. Chesapeake is continuing to expand its laterals in Ohio to produce better results, officials said. The company in 2012 averaged 4,900 feet per lateral. That grew to 5,150 feet in 2013 and to 6,200 feet in 2014. Laterals likely will average about 7,900 feet with 41 frack stages in 2015, about 27 percent longer than the previous year, officials said. Longer laterals with additional fracking pay out far more than shorter laterals, the company said. Extending Ohio laterals will cost Chesapeake more, however. It anticipates spending $8.2 million per well in 2015, up from $6.7 million in 2013 and $7.2 million in 2014. Chesapeake began production on 38 Utica wells in the first quarter. The average peak production of those wells was 1,272 barrels of oil equivalents per day.

Ohio infrastructure sees no slow down -- While oil and natural gas prices have affected the industry greatly, oil and gas companies in Ohio are still investing billions into new infrastructure. According to a report published by Bricker & Eckler LLP, a Columbus, Ohio-based law firm, investments in oil and gas infrastructure has increased by $6 billion since last fall. The increase is driven by the development going on in the Utica and Marcellus Shale Formations, which both happen to be extremely rich in natural gas. Bricker began keeping track of projects in October of 2013. Since then, over $28 billion in infrastructure projects have been announced. Even though exploration and production in Ohio is down when compared to last year, some areas of the industry are moving forward, such as pipelines. Although the projects won’t be online for a few more years, companies in the industry are hoping that by then oil and gas prices will have recovered. Matt Warnock, a Bricker attorney and co-chairman of its oil and gas group, commented on Ohio’s infrastructure: Even though there’s been kind of a pause button hit on the E&P side, the infrastructure is still going full-steam ahead.Warnock explained that the spending cutbacks and job layoffs that are occurring now have the potential to be beneficial in the future. He believes that the cutbacks will allow infrastructure projects to catch up with drilling operations.

Truck Driver Gets Fracked by Range Resources & Sues -- A West Virginia truck driver is suing Range Resources over claims that company employees ordered him to keep working in wet clothes for hours after he was splashed with flowback water at a Buffalo Township well site. Russell Evans of Triadelphia claimed he suffered chemical burns, blisters and rashes from the alleged incident May 21, 2013, at which time he was working for Equipment Transport LLC.  During his second trip to the well site that morning, he backed his truck up to a “sloppy pond” used to store reused frack water and noticed that water was leaking from the back hatch of his tanker truck. He claimed he was doused with water when he attempted to stop the leak and was told by a Range employee the water would not harm him. He claimed he was ordered to stay on site until he was cleared to leave, which was about two hours later.  He claimed an employee told him to “wash the water off at a nearby McDonald’s.” “Due to the fact that Mr. Evans was told the reused water was harmless, he remained in his wet clothes for several hours while he drove back to Equipment Transport LLC’s terminal in Dallas Pike, West Virginia,” the complaint alleged. “In total, Mr. Evans remained in these clothes for over four hours.” Evans said he went to MedExpress when he developed a rash and blisters and claimed that physicians told him he could not be treated without knowledge of the chemicals he may have been exposed to. The complaint alleges Range “kept the chemical makeup of the fracking fluid a secret.” He also was refused medical care at an emergency room in Wheeling a week after the alleged incident because of his inability to name the constituents of the water. In addition to skin ailments, he claimed he suffered nausea, shortness of breath, indigestion, vertigo and headaches, as well as potentially permanent skin discoloration and permanent sensitivity to sunlight.

Chevron sells more Marcellus land - While continuing the process of reorganizing its operations, Chevron Corp.’s Appalachia business group is putting 11,700 Marcellus Shale acres on the market. As reported by the Pittsburgh Business Times, “According to a listing on EnergyNet, Chevron is accepting sealed bids on the acreage in Clearfield and northern Cambria counties until May 21. The acreage, about 52 percent of which is held by production, includes six producing Marcellus wells.” Earlier this year, Chevron put 15,600 gross acres located in Cambria, Blair and Bedford counties on the market. Chevron’s spokesperson Brenda Cosola said that the company has decided to put the land up for sale because it is not part of the company’s main development area. Cosola added that even though the company is selling a large amount of its land in the Marcellus, it is still dedicated to the region: Chevron considers developing the Marcellus and Utica an important long-term opportunity and is committed to investing in its core development areas in the tri-state region.  Chevron’s Marcellus and Utica Shale leases are mainly in southwestern Pennsylvania, eastern Ohio and the West Virginia panhandle, according to the company’s most recent 10-K filing. “Those areas, along with another shale play in Michigan, yielded an average net daily production of 269 million cubic feet in 2014.”

The 'monster' beneath the Marcellus --  Range Resources Corp. tested the shale well with the best ever initial flow rate in the Appalachian Basin and possibly the country in December in Washington County. But the “monster well,” as financial analysts called it, wasn’t hiding in the Marcellus. Production rates for wells, like Range’s, that have been drilled into Pennsylvania’s Utica Shale — the lesser known cousin of the Marcellus that can run a mile deeper than its kin — have been raising eyebrows in recent months. Activity in the Utica is generally focused in Ohio, where the shale produces oil and wet gas that contains valuable hydrocarbons like ethane and propane along with methane, the primary component of natural gas. Still, some companies have also been prospecting for wet Utica gas in Lawrence, Mercer and other Western Pennsylvania counties. But recently operators have reported remarkable production results for dry gas — mostly methane — from wells hundreds of miles east of the heart of Utica development in Ohio. In September, Royal Dutch Shell announced two Utica discovery wells in Tioga County in northeastern Pennsylvania, far from where the Utica was thought to be most productive, that were comparable to the best Utica wells in southeastern Ohio. One of the wells had a peak flow rate of 26.5 million cubic feet per day of natural gas (MMcf/d) . For context, the median initial flow rate for Pennsylvania Marcellus wells was 5 MMcf/d in mid-2013, according to a Morningstar report released last year. Though it’s not unusual for rates to exceed that median.

API study says a Marcellus severance tax would hinder shale development -- An advocacy group for the oil and gas industry released a study Thursday that found a shale gas tax proposed by Pennsylvania Gov. Tom Wolf would mean fewer new wells, less gas and lost jobs in the commonwealth over the next decade. The study for the Associated Petroleum Industries of Pennsylvania, the state division of the American Petroleum Institute, found that the severance tax proposed by Mr. Wolf would lead to 1,364 fewer wells, nearly 18,000 fewer jobs in fields supported by the industry and 2.86 trillion cubic feet less natural gas produced in the state by 2025 compared to projected levels without the tax. A spokesman for the governor said the study is misleading and its conclusions have no merit. Mr. Wolf has proposed a 5 percent tax on the value of gas and natural gas liquids produced from shale wells, plus 4.7 cents per thousand cubic feet (Mcf) on the volume of the natural gas. His proposal sets a $2.97 per Mcf minimum value for shale gas, regardless of the actual sale price.. Mr. Wolf wants to use the money from the tax to fund education and environmental protection programs, while maintaining funding for communities that host wells at roughly the same level they are expected to receive this year from the current impact fee that companies pay based on the number of wells they drill.

Three drillers post losses despite higher production -- While three major players — Chesapeake Energy, Gulfport Energy and Rex Energy — reported increases in production during the first quarter of 2015, they also all posted losses in revenue. All three cited lower commodity prices.The companies outlined their quarters, and discussed plans for the rest of 2015, in investor conference calls Wednesday. Chesapeake Energy saw a 14 percent increase in production in the first quarter of 2015, with an average production of approximately 686,000 barrells of oil equivalents per day. However, Chesapeake posted a net loss available to common stockholders of about $3.8 billion, compared to a net income of $374 million in the first quarter of last year. In the Utica Shale, Chesapeake production averaged approximately 110 million barrels of oil equivalent per day in the first quarter, up 10 percent. The company plans to scale down its operations in the region, going from five drilling rigs and four fracking crews currently to two rigs and two and a half crews by the end of the year. Gulfport Energy more than doubled production in the first quarter of 2015, compared to the same period last year to 424.4 million cubic feet equivalent per day. That’s a 161 percent increase from the first quarter of 2014 and an 11 percent increase from the final quarter of last year.  Gulfport reported an adjusted net loss of $7.2 million in the first quarter, despite a profit of $25.5 million. In the Utica Shale, Gulfport began drilling operations at 16 wells and began producing at eight wells during the first quarter.  Rex Energy, based in State College, Pa., produced an average of 196.2 million cubic feet equivalent per day during the first quarter ending March 31, up 61 percent from the same quarter last year. But Rex posted first quarter net losses attributable to shareholders of $20.2 million. Rex had losses of $71.7 million in the fourth quarter of 2014 and $49 million for the year. 

Is This The Top For Oil Prices For Now? -- E&P earnings are coming in and the impression we’re left with is that natural gas investment in Marcellus is being reduced, while oil overall appears to be incrementally ramping up versus prior guidance. Also, production overall for 1Q15 has exceeded sell side expectations as well, as reported by many public companies. Noble (NBL) reported that it’s cutting investment in the Marcellus by some $200M in response to the Nat Gas price crash. This is on top of prior production reductions at Chesapeake (CHK) & Range Resources (RRC). However, the Ponzi game in shale oil, having to continuously drill to replace 80% 12 month decline rates in existing production and having to burn yet more cash in doing so, is continuing to push production higher. Devon Energy (DVN) raised production some 5% while Pioneer Resources (PXD) hinted that, if prices recover, they may add 2 rigs starting in July 2015 and, in their words, production in 2016 could return to double digits. If you are expecting oil to cover above $70, we caution you on such expectations at least in the shorter term. Firstly, although the weaker dollar is a reflection of a much weaker underlying economy than reported in headline economic and talking head media, it will still help some. However, weaker economic growth in the US as well as, in all likelihood, the failure of QE in Europe as well as China, will ultimately weigh on demand.  Secondly, the private equity monies sloshing around (some $50B) will also allow these broken shale models to continue versus allowing the market to efficiently bankrupt the weaker producers while rewarding the strong ones while overall reducing output.  In addition, lease operating expenses appear poised to fall 10% which, on top of reduced capital expenditure costs, will also reduce financial pressure on weaker players even more.

Study: Trace amount of drilling fluid found in water wells -- A new study says toxic fluids used in drilling and hydraulic fracturing likely escaped an unlined borehole and migrated thousands of feet into residential drinking-water wells in Pennsylvania. At least three wells were contaminated with dangerous levels of methane and other substances in 2010. The incident was one of several involving Chesapeake Energy that prompted state regulators to levy a record $1 million fine against the driller. Penn State University researchers say they detected minute amounts of a chemical compound often found in drilling and fracking fluids. Their study was published Monday in the Proceedings of the National Academy of Sciences. The study does not implicate the fracking technique itself. Researchers say the toxic fluid probably escaped the gas well while it was being drilled.

Fracking Chemicals Found in Drinking Water, New Study Says  - Yesterday a new study was published in the Proceedings of the National Academy of Sciences, which analyzed drinking water taken from three homes in the heart of the shale fields in Pennsylvania. And they found what the industry’s critics will argue is damning evidence: traces of a compound commonly found in Marcellus Shale drilling fluids. The scientists believe they have answered one of the outstanding issues surrounding fracking and water pollution, by outlining a series of events by which the fracking chemicals could have contaminated the water.  In 2012, the scientists collected drinking water samples from the households and subsequent analysis in one of the samples found 2-Butoxyethanol or 2BE, a common drilling chemical which is also a potential carcinogen.  And they believe they know how this chemical has ended up in the drinking water. “This is the first case published with a complete story showing organic compounds attributed to shale gas development found in a homeowner’s well,” Susan Brantley, one of the study’s authors and a geoscientist from Pennsylvania State University told the New York Times. Brantley added that: “These findings are important because we show that chemicals traveled from shale gas wells more than 2 kilometers (1.25 miles) in the subsurface to drinking water wells.” The scientists believe that the pollution may come from a lack of integrity in the well which passes through the drinking aquifer and not the actual fracking process below.

Fracking Chemicals Detected in Pennsylvania Drinking Water  --An analysis of drinking water sampled from three homes in Bradford County, Pa., revealed traces of a compound commonly found in Marcellus Shale drilling fluids, according to a study published on Monday. The paper, published in the Proceedings of the National Academy of Sciences, addresses a longstanding question about potential risks to underground drinking water from the drilling technique known as hydraulic fracturing, or fracking. The authors suggested a chain of events by which the drilling chemical ended up in a homeowner’s water supply. “This is the first case published with a complete story showing organic compounds attributed to shale gas development found in a homeowner’s well,” said Susan Brantley, one of the study’s authors and a geoscientist from Pennsylvania State University.  The industry criticized the new study, saying that it provided no proof that the chemical came from a nearby well. In 2012, a team of environmental scientists collected drinking water samples from the households’ outdoor spigots. An analysis showed that the water in one household contained 2-Butoxyethanol or 2BE, a common drilling chemical. The chemical, which is also commonly used in paint and cosmetics, is known to have caused tumors in rodents, though scientists have not determined if those carcinogenic properties translate to humans. The authors said the amount found, which was measured in parts per trillion, was within safety regulations and did not pose a health risk.Dr. Brantley said her team believed that the well contaminants came from either a documented surface tank leak in 2009 or, more likely, as a result of poor drilling well integrity.

Study links foam in water wells to shale well sites: White foam in northeastern Pennsylvania water wells likely was caused by Marcellus Shale gas well sites that have already been blamed for causing natural gas to infiltrate residential water supplies, a paper published by the journal Proceedings of the National Academy of Sciences reported on Monday. Environmental consultant Garth Llewellyn and biochemistry and geosciences researchers with Penn State University used a novel method to identify low levels of organic compounds that they said likely explain foaming from three water wells in Bradford County between 2010 and 2012. Test results from commercial laboratories during investigations at the sites had not picked up on what was causing the foaming — they reported no unsafe levels of compounds other than natural gas in the water, while other compounds, like glycols and surfactants, had appeared inconsistently or at barely detectable levels. The same or similar organic compounds that the researchers traced in the water, including 2-n-Butoxyethanol, or 2-BE, are known to be used in drilling and hydraulic fracturing additives or to appear in waste fluids from oil and gas operations. The researchers said it is impossible to “prove unambiguously” that the contaminants in the water came from shale gas-related activities because they were unable to secure samples of fluids that were used at or near the well site. But they said that multiple strands of evidence, including timing, well construction problems and the presence of matching compounds in both shale fluids and the water wells, make shale activity “the most probable source.”

In Pennsylvania, Fracking Is Most Likely To Occur In Poor Communities  --  As campaign director for the Sierra Club’s natural gas reform campaign, Deb Nardone goes to the places where fracking is prolific, speaking to affected families. When she’s in Pennsylvania, she’s most often in poor, rural townships — like Dimock, in Susquehanna county. “There’s one family we met with where she turns her tap water on and it’s brown, spewing, smelling — she never had any water issues before they began fracking a well so close to her home,” Nardone told ThinkProgress. “The industry is saying they’re not responsible.”  Whether the industry is responsible or not, new research makes it clear: If you see a fracking site in Pennsylvania, chances are it’s in a poor, rural community. In a study published in the June issue of Applied Geography, Clark University scientists showed that when it comes to potential pollution exposure from fracking, “the poor are the most affected population group.”“Our analysis shows that environmental injustice was observed only in Pennsylvania, particularly with respect to poverty,” the study reads. “In seven out of nine analyses, potentially exposed tracts had significantly higher percent of people below poverty level than non-exposed tracts.” The petroleum industry says this is a good thing — not the potential pollution exposure (which it disputes), but the fact that fracking operations are located in poorer, more rural communities.According to Massaro, fracking is able to provide income for these communities — not just with jobs, but with tax incentives and fees set by the state of Pennsylvania. Specifically, Massaro mentioned “impact fees,” a sort of tax imposed on the natural gas industry, where the money goes directly back to affected communities.

Fracking the Poor --Poor in Pennsylvania? You’re fracked.  Fracking wells in Pennsylvania’s Marcellus Shale region are disproportionately located in poor rural communities, which bear the brunt of associated pollution, according to a new study. Penn State/flickr Nancy Adams from Penn State’s University Libraries touches residue leftover from drilling at the Marcellus Shale drilling site The study bolsters concerns that poor people are more likely to deal with hydraulic fracturing in their community and raises concerns that such vulnerable populations will suffer the potential health impacts of air and water pollution associated with pulling gas from the ground.“This trend is not one we’re surprised by, we see this in a lot of industries,” said Mike Ewall, founder and director of Energy Justice Network, a nonprofit organization that works with U.S. communities dealing with pollution from energy.However industry groups say hydraulic fracturing is in rural farming regions of Pennsylvania out of necessity and is providing some much needed economic stimulus. Researchers from Clark University mapped areas in Pennsylvania, West Virginia and Ohio to identify areas with a lot of Marcellus Shale hydraulic fracturing wells and then examined some local demographics: age, poverty and education levels, and race.The Marcellus Shale is a large rock formation — almost 95,000 square miles — that stretches across parts of New York, Pennsylvania, Ohio and West Virginia and holds trillions of cubic feet of natural gas. It’s experienced a surge of drilling as techniques have advanced. The most common method, hydraulic fracturing or “fracking”, works by drilling and injecting fluid at high pressure, which fractures rocks and releases the natural gas.One thing was clear from the Clark University study: poverty levels are strongly associated with active fracking wells in Pennsylvania.

Proposed rule on noise limits for oil, gas sites in Pa. pleases none - Gas industry leaders and fracking critics in Pennsylvania have found common ground in their views on one aspect of proposed environmental regulations for drilling: A rule aimed at limiting noise from sites is too vague to be effective. The state Department of Environmental Protection is proposing noise regulations for oil and gas sites as part of its rewrite of surface rules around wells. They would require companies to record noise levels and formulate a plan to keep them down for neighbors. But the proposal introduced last month does not specify a decibel limit or how to monitor levels. “Right now the regulation is unenforceable because there’s no objective standard,” said George Jugovic, general counsel for Penn Future, an environmental group that has lobbied for tougher regulations for the oil and gas industry in the state. “How do you determine that someone has minimized the noise?” The DEP did not include specific decibel limits or standards for how far noisy equipment must be from neighbors because they are too difficult to enforce, said Scott Perry, deputy secretary for the department’s Office of Oil and Gas Management. “All of the various situations that this issue could arise in make it a little too difficult to simply throw down a solid number, an objective standard,” he said. The regulation would require companies to follow  standards that the department is writing for noise around well pads and compressor stations, and will make them available to companies when the rules become final next spring. Violating the standards can result in the state’s revoking a permit. Enforcement will be largely complaint-driven, Perry said.

Anti-frack activist is officially barred from gas sites - While causing trouble for Cabot Oil & Gas for years, the time has come where anti-frack activist Vera Scroggins’ time in the limelight may be over. After appearing in court for standing too close to one of Cabot’s sites, receiving a $1,000 fine and the possibility of jail if the fine is not paid, Scroggins has received a new court order barring her from the company for good. The court order makes her previous temporary injunction from 2013 permanent. The order required her to stay off of Cabot’s sites and follow the 25 to 100 foot buffer zone. In response to the new court order, Scroggins says she plans to bring it back into court and fight it. Last fall, Scroggins first agreed to the restrictions but then changed her mind and never signed the final document. However, Cabot argued the matter in court and stated that her signature was not required considering the judge sided with the company. The judge also found that Scroggins gave her attorneys permission to agree to the deal on her behalf, which did not help support her case. As reported by State Impact Pennsylvania, “The Houston, Texas-based company is the largest driller in Susquehanna County. It has aggressively pursued legal action against Scroggins, a 64-year-old retiree and self-described ‘gas tour guide.’ Cabot says she has routinely trespassed on its property and poses a safety risk. Scroggins often brings journalists, politicians, and onlookers to drilling sites. She videotapes her encounters and documents the company’s environmental violations.” Despite having so much evidence against Scroggins, the company has not once been able to prove that Scroggins has caused any harm to its oil and gas operations.

Fuzzy Fazzary won't stick to deal: Charges Won’t Be Dropped For 84 Crestwood Protesters The Schuyler County district attorney has decided not to dismiss trespass charges against 84 protestors arrested at the gates of Crestwood Midstream Partners, We Are Seneca Lake said Thursday.Those protesters were part of a civil disobedience campaign organized by We Are Seneca Lake in opposition to plans by Crestwood to expand natural gas storage and add liquefied petroleum gas storage on the lake’s western shore.District Attorney Joseph Fazzary rescinded his support for dismissing charges against the 84 protesters that was to take place Thursday, We Are Seneca Lake said. Earlier, Fazzary, along with local judges, dropped charges against 60 protesters “in the interests of justice,” the group said. A month ago, he agreed to dismiss charges against the 84 additional Seneca Lake protesters, the group said.“We understand that the district attorney says that he has withdrawn the promised offer because 19 new community members blocked the gates of Crestwood in a peaceful act of civil disobedience on Earth Day (April 22),” the group said in a news release. Those 19 protesters, ages 49 to 76, had not been arrested before and were not part of the dismissal agreement, the group said.

Energy Pipeline: In New York state, fracking ban fuels secession talk - From this village of dairy farms and friendly diners, Carolyn Price can see across the border into Pennsylvania, and it is a bittersweet view: towns brimming with money extracted from the gas-rich Marcellus Shale, where the high-pressure drilling method known as hydraulic fracturing, or fracking, has spurred an economic boom. It is a different story here on the New York side, where Gov. Andrew Cuomo in December declared a statewide ban on fracking — one of only two in the country — saying he was not convinced it is safe.  The national debate over fracking, which critics say can pollute groundwater and endanger public health, heated up last week when the Obama administration announced the first-ever federal regulations on the practice. But nowhere is fracking as heated an issue as in the stretch of New York known as the southern tier, where Cuomo’s ban has spurred talk of secession.  Political leaders like Price, Windsor’s town supervisor, say secession is not such a farfetched idea, and they are gathering feedback from constituents to see whether there is support for a breakaway movement.  “The natural gas is the only thing that’s truly going to save this area,” Price said.  Windsor is one of about 15 towns in New York’s southern tier where secession is being eyed, if not as an attainable goal than as a radical proposal aimed at grabbing state lawmakers’ attention and forcing them to take notice of the region’s desperation. 

Judge Halts Work On Maryland Pipeline Due To Environmental Concerns - Construction on a natural gas pipeline set to run through Maryland has been halted after a judge found that the state hadn’t done enough to protect the environment and hadn’t given residents enough of a chance to weigh in on the project.  Baltimore County Circuit Court Judge Judge Justin J. King ruled last week that the Maryland Department of the Environment (MDE) must go back and revise the permit it issued for the 21-mile pipeline, which is being constructed by Columbia Pipeline Group and is slated to run through Baltimore and Harford counties. According to the judge’s ruling, the permit’s water safety requirements were too general, “rendering it impossible for this court to determine whether the permit complies with state and federal water quality regulations.”   In addition, King wrote, the permit didn’t allow enough time for public input, and there wasn’t enough evidence that Maryland took a close enough look at how the project would affect historic sites. Construction on the pipeline, which is about halfway complete, has been temporarily halted. It will only resume after the state revisits the permit or, in the case of an appeal, if the ruling is overturned.  Environmentalists in Maryland, who have been warning of the danger the pipeline poses to the state’s waterways, applauded the judge’s move. The pipeline, as it’s permitted, would cross over 70 streams. Thirty-nine of those streams feed into the Loch Raven Reservoir, which provides water to most of Baltimore County, including the city of Baltimore.

Carolinas clear first proposals for offshore oil surveys — State regulators in both Carolinas have signed off on proposals by companies to conduct seismic testing for oil and natural gas off the Atlantic coast, subject to some conditions. The South Carolina Department of Health and Environmental Control last Friday certified a proposal by Spectrum GEO. Earlier the North Carolina Department of Environment and Natural Resources certified proposals for surveying by both Spectrum and GX Technology. The companies have applied to the federal Bureau of Ocean Energy Management for permits to use seismic air guns to survey for oil and natural gas off the Atlantic coast. While state waters extend only 3 miles from the shoreline and the testing will be done in federal waters much farther offshore, each state was allowed to certify whether the testing is consistent with state coastal zone programs. Conservation groups have said air guns that send sound waves through the water could harm right whales and sea turtles and is inconsistent with the state programs.

Injection well permitted but not built near Michigan earthquake epicenter, DEQ says -- A Denver-based company recently filed two permit applications to build wastewater injection wells at an oilfield near the epicenter of the May 2 earthquake in Kalamazoo County, but a well has yet not been built, according to state officials. Wastewater injection wells used in hydraulic fracturing, also known as fracking, have been associated with small earthquakes in other states, including Ohio, Oklahoma and Colorado. However, yet another scientist said Thursday that close examination of the earthquake data provides further evidence it was not induced by oil or gas drilling.  "Quakes are so rare in Michigan, I was initially concerned" there might be such a link, said Michael Brudzinski, a geophysics professor at Miami University in Ohio who has extensively studied seismic activity related to fracking.  But in examining the quake data, he said, it is clear "this looks like very normal plate tectonics. ... People in Michigan should not be worried." The 4.2-magnitude quake originated about 12 miles southeast of Kalamazoo in the rural community of Scotts. The epicenter is about three miles from Pease Farms, where Axia Energy of Denver recently installed three oil wells.

Michigan earthquake not caused by fracking, scientists say - -- The state official who oversees regulation of oil and gas wells says he is certain that Saturday's earthquake in Kalamazoo County is unrelated to fracking or other drilling in the area. "I am extremely confident there is no connection," said Hal Fitch, a geologist who is director of the Michigan Department of Environmental Quality's Office of Oil, Gas, and Minerals.That opinion is echoed by David Barnes, professor of geosciences at Western Michigan University."I'm as certain as a scientist can be" that there is no connection, Barnes said.Hydraulic fracturing -- also known as fracking -- is a process that involves pumping water at high pressure to create fractures in  Class II wells are those associated with oil and gas development. Scientists, including those at that the U.S. Geological Survey, recently have connected an increase in seismic activity to high-pressure injection wells used to dispose of wastewater that is the byproduct of fracking. The link has been seen in Colorado, Texas, Arkansas, Oklahoma and Ohio.  However, Fitch and Barnes said the earthquake here appears to be a natural phenomena versus one induced by human activity. "The nearest hydraulic fracturing activity is more than 50 miles away and took place several years ago," Fitch said.

California Farmers Are Watering Their Crops With Oil Wastewater, And No One Knows What’s In It -- As California farmers face a fourth year of the state’s historic drought, they’re finding water in unexpected places — like Chevron’s Kern River oil field, which has been selling recycled wastewater from oil production to farmers in California’s Kern County. Each day, Chevron recycles and sells 21 million gallons of wastewater to farmers, which is then applied on about 10 percent of Kern County’s farmland. And while some praise the program as a model for dealing with water shortages, environmental groups are raising concerns about the water’s safety, according to a recent story in the Los Angeles Times. Tests conducted by Water Defense, an environmental group founded by actor Mark Ruffalo in 2010, have found high levels of acetone and methylene chloride — compounds that can be toxic to humans — in wastewater from Chevron used for irrigation purposes. The tests also found the presence of oil, which is supposed to be removed from the wastewater during recycling.  “All these chemicals of concern are flowing in the irrigation canal,” Scott Smith, chief scientist for Water Defense, told ThinkProgress. “If you were a gas station and were spilling these kinds of chemicals into the water, you would be shut down and fined.” Chevron, which produces around 70,000 barrels of oil and 760,000 barrels of water each day at the Kern River oil field, has been selling water to farmers in the surrounding area for two decades. But government authorities have never required that water to be tested for chemicals used in oil production — only naturally occurring toxins like salts and arsenic. And even those standards are “decades-old,” according to the Los Angeles Times.

Oil Companies Are Injecting Industrial Waste Into California’s Water Supply. Now It’s Being Sued. -- Against the backdrop of California’s historic drought, two environmental groups filed a lawsuit Thursday demanding that the state stop allowing oil industry wastewater to be injected into protected, clean aquifers.   In response to an investigation showing the California Department of Conservation has been allowing oil companies to inject waste into clean water sources for years, the department, named in the suit, only issued a “emergency rulemaking action” that allows the wastewater injections to continue until 2017.  The lawsuit by the Sierra Club and the Center for Biological Diversity asks that the action be invalidated and that the Division of Oil, Gas, and Geothermal Resources be forced to immediately stop the continued wastewater injections. “Everyone agrees they are illegally operating injection wells,” Center for Biological Diversity attorney Hollin Kretzmann told ThinkProgress. “The Safe Drinking Water Act is clear and prohibits this type of activity.” Wastewater from oil and gas drilling can contain heavy metals, radioactive material, and chemicals like arsenic and benzene. Injection wells, where toxic substances are pumped deep underground, have been used for hazardous material disposal for decades, but an investigation by ProPublica in 2012 found that “structural failures inside injection wells are routine” and pose a tremendous health risk.  The state division responsible for regulating injection wells denies that the approximately 2,500 improperly-permitted wells pose a risk.

EOG Resources to resume fracking if oil hits $65/barrel – Oil and natural gas producer EOG Resources Inc plans to begin fracking hundreds of wells in North Dakota and Texas later this year if oil prices stabilize around $65 per barrel, executives said on Monday after reporting a better-than-expected adjusted profit. EOG was the latest major U.S. shale oil producer to peg increased operations to a specific dollar amount, a positive sign for an industry worried that last year’s price drop would permanently cripple growth. Whiting Petroleum Corp said last week it would add drilling rigs to its portfolio if crude prices rise to $70 per barrel, and Pioneer Natural Resources Co told Reuters last month it was considering adding new rigs this year as West Texas Intermediate (WTI) prices rebound. EOG, considered a leader in the U.S. shale oil industry, has for months drilled new wells only to keep them idle by delaying fracking, part of a strategy to hold back pumping some crude after a roughly 40 percent drop in prices since last summer. Crude prices have inched up in the past month. EOG executives said Wall Street should expect the company’s 2015 production to resemble the letter “U” – falling in the first half of the year, then rebounding in the second half and hitting double-digits by next year.

How America's biggest swamp could become fracking wasteland - — In the heart of Louisiana’s Cajun country,  plans for a new facility have sparked fears among Belle River residents that they too will have to deal with increased traffic, pollution and a discovery that there might be little anyone can do to stop it. It is a situation that has set off a fierce dispute, as well as highlighted a national issue of how big business can sidestep rejections of their plans.  One hundred miles west of New Orleans, Belle River is considered the gateway to the Atchafalaya Basin, the largest wetland in the U.S. The area is famous for its plentiful seafood and cypress-tupelo swamps. "This is no place to dispose of toxic chemicals," said Dean Wilson, the head of the Atchafalaya Basinkeeper grassroots environmental group. But that is precisely what FAS Environmental Services has done since the mid-1980s. The company receives industrial waste from processes ranging from conventional oil drilling to hydraulic fracturing, also known as fracking. The waste can often contain high concentrations of methanol, chloride, sulfates and other substances. “Produced water,” the industry’s name for waste from fracking sites, can also contain toxins like benzene and xylene. The waste comes on truck and barge to an existing FAS transfer station close to the Hines residence, inside the flood protection side of the levee. It is then transferred onto a shuttle barge for a 2-mile trip on the Intracoastal Waterway to the company's injection well, where it is pumped at high pressure deep below the surface into rock formations where it is meant to permanently remain. Now FAS wants to build a new facility directly across the waterway from the injection well. Its plan requires a pipeline to be built under the Intracoastal Waterway, connecting the new facility to the injection well, allowing waste to be moved under the waterway and eliminating the need for the current shuttle barge system.

North Texas derailment leaves 4 BNSF Railway workers hurt - (AP) — A freight train has derailed in North Texas during stormy weather leaving 17 cars off the tracks and four crewmembers slightly hurt. BNSF Railway spokesman Joe Faust says the derailment happened early Friday near Valley View, 50 miles northwest of Dallas. Four engines and 13 cars derailed. Faust says the southbound train was hauling a variety of freight to the Fort Worth area, but no hazardous materials. Nothing spilled. He says four crewmembers were transported to a Denton hospital for observation with injuries not believed to be life-threatening. Faust says strong winds were reported in the area. He says authorities are trying to determine whether the gusts and high water contributed to the derailment. Standing water was seen near the tracks.

Denton Gas Well Burns After Lightning Strike -- A gas well exploded and burned late Thursday night after an apparent lightning strike during severe weather which moved through North Texas. It happened at about 10:00 p.m. at a Vantage Energy site in Denton.   The site had been used for gas drilling, but was shut down due to low production. Vantage Energy spokeswoman Nancy Farrar said that it was “not a producing well,” and confirmed that lightning was believed to be the cause of the fire.  A second gas well at an adjacent site was producing, but Vantage Energy workers and Denton Fire Department officials were able to close it off so that the fire did not spread. Emergency crews decided to let the fire burn itself out, a process that lasted until about 2:30 a.m. on Friday morning.  The site is located north of Highway 380 in Denton, and flames from the fire could be seen from Interstate-35. Officials shut down the interstate’s service road in an effort to ensure the safety of drivers.  There were no injuries reported throughout this incident. Vantage Energy workers on Friday, with help from state and local agencies, will begin cleaning up the mess that was left from the lightning strike and fire.

No injuries in natural gas well fire in Denton, blaze out — A natural gas well fire in North Texas has been put out as authorities try to determine whether lightning sparked the blaze. Denton city spokeswoman Lindsey Baker says firefighters extinguished the blaze early Friday. Nobody was hurt. Baker says authorities received word of the well fire shortly before 10 p.m. CDT Thursday. Storms were in the area at the time. She says eyewitness reports indicate a lightning strike may have started the fire, which burned more than four hours before being put out. Fire department officials monitored air quality at the site.

Denton fracking bill sails through Texas Senate - With little discussion, the Texas Senate approved a bill Monday limiting municipal control over oil and gas drilling and prohibiting any city from banning fracking. The Senate voted 24-7 for House Bill 40 — also known as the Denton fracking bill. It reasserts state control over drilling while spelling out some limited powers that cities have in regulating surface operations. The bill will now go to Gov. Greg Abbott’s desk for his signature. The push for the bill came after Denton residents approved a ban on hydraulic fracturing in November. Sen. Troy Fraser, chairman of the Senate Natural Resources and Economic Development Committee, avoided attempts to amend the bill in committee and on the Senate floor. The bill underwent a careful and sometimes contentious rewrite in the House before being adopted 122-18. Lawmakers have said that the bill is necessary to clarify state and local regulations and prevent a statewide patchwork of unreasonable ordinances that would threaten oil and gas production. The fight over who controls urban drilling began after Denton residents approved a ban, not on all drilling but simply on hydraulic fracturing. A grassroots group felt that the city and the Texas Railroad Commission, which regulates the industry, were not doing enough to protect them.

Texas Passes Ban on Fracking Bans (Yes, You Read that Right) -- The Texas state legislature voted yesterday to ban fracking bans. Ever since the people of Denton, Texas voted to ban fracking last November, state lawmakers in cahoots with the oil and gas industry and the American Legislative Exchange Council, or ALEC, have attempted to strip municipalities like Denton of home rule authority to override the city’s ban.  In response, citizens banded together to form Frack Free Denton to fight for home rule. The group has put together a powerful film, which premieres on Friday, documenting their fight to ban fracking within city limits in the heart of oil and gas country. The vote comes despite recent findings by a team of researchers from Southern Methodist University that linked the earthquakes in one area of Texas, which did not have earthquakes prior to the fracking boom.. Marketplace′s Kai Ryssdal and Scott Trang discuss Texas’s ban and other states considering similar bills. “The bill would provide what’s called state preemption and that is state law here would trump anything that local jurisdictions, cities and towns pass,” says Trang. A similar bill, in Oklahoma, passed one chamber. “The sponsor of that bill said he wants to ‘get ahead of what we’re seeing in other states,'” reports Trang. Ryssdal asks if there is a group connecting all these state lawmakers. Trang’s response? You guessed it: ALEC. Listen to the full story here:

Energy rich states move to quash local limits on drilling - Lawmakers in Texas and energy producing states across the nation are rushing to stop local communities from imposing limits on oil and gas drilling despite growing public concern about the health and environmental toll of such activities in urban areas. The slump in oil prices that has led to job losses in the oil patch has only added to the urgency of squelching local drilling bans and other restrictions the industry views as onerous. The number of jobs nationwide in the sector that includes energy production has fallen 3.5 percent since December, and Texas alone lost about 25,000 jobs in March, according to federal data. A half dozen states — Texas, Oklahoma, Ohio, Pennsylvania, Colorado and New Mexico — have imposed or grappled with the issue of putting limits on local municipalities' ability to regulate drilling or hydraulic fracturing, a practice of blasting huge volumes of water and chemicals underground to release tight deposits of oil and gas. And two of the biggest energy producers in the nation, Texas and Oklahoma, are poised to ban cities and towns enacting any ordinances considered unreasonable to energy exploration, including limits on fracking, water disposal, well maintenance and other activities. The backlash against local bans represents the third phase of the U.S. shale boom. In the last decade, fracking spawned a massive expansion in drilling that pushed the United States to the number one oil and gas producer in the world. Cities responded to environmental and health concerns by passing restrictions. Now, state lawmakers are stepping in to shut down the groundswell of local activism in order to keep the energy expansion rolling.

Details of the debate in US states on oil drilling, fracking - Following is a summary of state debates.  In Texas, which leads the nation in oil and natural gas production, a measure to limit local regulations to those deemed "commercially reasonable" has passed the Legislature and is expected to be signed into law by Republican Gov. Greg Abbott. The Oklahoma House approved a wide-reaching bill last month that prohibits cities and towns from banning oil and natural gas drilling, or implementing restrictions that are not "reasonable." On the other side of the issue, New York state banned fracking statewide in December.  In Pennsylvania, after fracking in the Marcellus Shale deposit began booming in 2008, the Legislature imposed a 2012 law restricting the ability of municipalities to dictate the location of drilling activity. The law was struck down by the state Supreme Court last year. After some Ohio cities passed municipal bans, that state's Supreme Court recently ruled the opposite, finding that the state had exclusive authority over all aspects of oil and natural gas drilling, including fracking. Colorado state law prohibits local ordinances that ban energy exploration such as fracking, but some towns have imposed them anyway, sparking lawsuits. Fracking opponents last year attempted to put a measure on the election ballot stating that cities and counties could impose limits. The state's Democratic governor got the opponents to drop the measures with the promise of a task force to look at the question. When New Mexico's Mora County imposed a ban on oil and gas development that was eventually struck down in federal court, state lawmakers responded with four bills designed to prevent future bans — though none passed.

Magnitude-4.0 quake between Mansfield, Venus is biggest yet -- A magnitude-4.0 earthquake shook Johnson and southern Tarrant counties Thursday evening, the biggest quake ever recorded in North Texas, the federal earthquake monitoring agency reported. There were no reports of serious damage or injury by 9 p.m. The earthquake’s epicenter was 3 miles north-northwest of Venus and 6 miles south of Mansfield, the U.S. Geological Survey reported. The time was 5:58 p.m. More than 50 earthquakes have rattled North Texas region since November 2013, most of them in western parts of Dallas but also in the Azle area. In 2009, Johnson County had five small quakes, and in 2012 there were 10 within 30 days in June and July. On Thursday, people in Arlington, Alvarado, Burleson, Cleburne, Mansfield and Dallas reported feeling the ground move. In Johnson County, the first report of damage — cracked blocks under an Alvarado mobile home — was received at 6:30 p.m.. As a precaution, Moore said, the Texas Railroad Commission started sending inspectors to check all the oil and gas infrastructure within a 10-mile radius of the earthquake’s epicenter for cracks or leaks.

The tremors from the US tight-oil boom - At least once an hour, a sudden burst of spikes signals a tremor that someone will have felt — each one representing an unexpected new threat to the US’s oil and gas revolution.  (video) The energy market has been transformed by surging production of “tight” oil and gas, which horizontal drilling and hydraulic fracturing (or fracking) are freeing from shale and other rock formations. With US oil output close to 10m barrels a day — the all-time high it hit in 1970 — America has cut its dependence on Middle Eastern imports, created thousands of jobs and produced an oil glut that has helped to lower the global crude price. But Mr Crismon — and scientists who have studied the issue — say it is not all good news. They blame the shale boom for triggering a spate of earthquakes that are shredding nerves and damaging homes. “It just tears everything. I got cracks everywhere,” says Mr Crismon, who compares the state to a war zone. “Instead of having bombs you got earthquakes.” Quakes were rare in Oklahoma until 2009. But last year the state had a record 584 with a magnitude of 3.0 or over — more than in the previous 30 years combined, according to the Oklahoma Geological Survey. This has pushed the state past California to become the most rattled part of the continental US. No-one has been killed, but the largest recent quake, a magnitude 5.6 jolt in the tiny town of Prague in 2011, injured two people and destroyed 14 homes. The shale boom has been helped by a drill-first-ask-questions-later approach permitted by some US states. But the quakes could mark a turning point. Bob Jackman, a petroleum geologist and former oil and gas operator, says they are a “warning flag” that carelessness will catch up with oil companies. “It’s a caution to the fossil fuel industry that you must weigh other considerations.”

Eminent domain legislation advances in Iowa Senate — Legislation that would make it harder for two energy projects to win eminent domain rights passed another legislative hurdle in the Iowa Senate on Tuesday. The Senate Government Oversight Committee approved the bill. Under the proposal, a project seeking eminent domain to build through private properties could get permission only after negotiating voluntary deals for at least 75 percent of the affected land. Sen. Rob Hogg, D-Cedar Rapids, said the bill was an effort to address eminent domain for non-public entities. He said he did not expect a vote by the full Senate before next week. A similar bill is moving through the state House, said Rep. Bobby Kaufmann, R-Wilton. The proposed change could affect two current proposals that are before the Iowa Utilities Board. One would build an oil pipeline that would ship 450,000 barrels daily from production sites in North Dakota to an oil hub in Illinois. The other would build an electrical line across 16 Iowa counties that would transmit wind-generated energy from Iowa to customers in the Midwest and East Coast. Both projects are trying to negotiate settlements with landowners, though eminent domain might be sought. The Iowa Utilities Board is reviewing both proposals and no hearing dates have been set.

Outcry over Nebraska wastewater well prods lawmakers to act - Opposition to a planned wastewater well in northwest Nebraska has prompted lawmakers to introduce legislation. Lawmakers took the rare step Thursday of suspending their rules so they could consider new regulations for wastewater wells. A bill by Sen. Ernie Chambers of Omaha would require companies to disclose the chemicals in wastewater generated from oil and natural gas well production. The Nebraska Oil and Gas Conservation Commission approved a well last month that would allow a Colorado company to discard such wastewater underground on a ranch in northwest Nebraska. The project drew opposition from landowners, environmental groups and others. Ken Winston of the Nebraska Sierra Club says he understands the bill won’t pass this year, but it sends a message that lawmakers take the issue seriously.

Workers hurt in oil facility explosion in stable condition - — Two workers are in stable condition after sustaining injuries in an explosion and fire at an oil facility in Converse County. The Casper Star-Tribune reports that the two Susquehanna Services employees were in stable condition Monday after sustaining burns on 29 percent and 20 percent of their bodies, respectively. The names of the two men were not disclosed. The blast happened just before noon Friday at the Chesapeake Energy facility about 4 miles north of Douglas. Rob Black with the state Department of Workforce Services says the two contractors were pumping an unknown fluid out of containers when the blast occurred. The site remains closed while the explosion is under investigation.

Can LNG save the Western Slope? -  Low oil prices dealt a heavy blow to Colorado’s energy economy over the past year, but the Western Slope’s struggle with cheap natural gas began nearly six years ago. According to a report from the Denver Post, the Slope’s considerable production of “dry gas” and deficient output of oil and petroleum products lands the region in a particularly difficult financial quandary. But Andrew Ware, director of strategic projects for Cheniere Energy, believes liquefying and exporting the gas may help to pry the region out of its economic slump: Exports can help stabilize the market. If you’ve been in a dry gas play, like western Colorado, you’ve been through some tough times.  Oregon’s Canadian-owned Jordan Cove LNG plant may be the link to exports the state needs. Its developer, Veresen Inc. of Calgary, dropped $1.4 billion on half of the capacity of the Ruby Express Pipeline, which streamlines gas from Wyoming and Colorado to Oregon. “This is a rare opportunity to acquire a large interest in a core U.S. pipeline asset,” said Veresen CEO Don Althoff. The U.S. Department of Energy reported 54 current LNG plant applications, but only Jordan Cove and 12 others are set for development. Between 2012 and 2014, natural gas production in western Colorado dropped about 14 percent, driving spot prices down to about $2.80 per cubic feet compared to $8.90 in 2008. “I don’t know what price we need to reanimate Western Slope operations, but it is a lot more than what we are seeing,”

Editorial: Fractivists threaten the poor - Anti-fracking crusaders claim they fight for minorities and the poor.  If these protesters cared about “low income communities of color,” they would defend a fracking revolution that has done more than any government program to help them. There is nothing like a $500-a-day job — entry-level fracking work — to dramatically improve the status of a low-income household. All over Colorado and other energy states, fracking has put low-skilled workers into wage brackets traditionally reserved for college graduates. In North Dakota, where the fracking frenzy began, per-capita incomes jumped by 31 percent to $57,367 between 2008 and 2012. The energy boom has directly added a half million high-wage jobs to the country’s economy since 2003. It is indirectly responsible for an additional 2 million careers in transportation, construction, information services and other sectors that benefit from the success of oil and gas companies. Fracking generates windfalls for school districts and other governing entities. Cities that were low income a decade ago — such as Greeley — enjoy unprecedented wealth. If energy independence prevents wars, the economic and social value will be incalculable.

Colorado earthquakes: we've seen this before - A recent study from U.S. the Geological Survey deemed Colorado and 16 other states to be 100 times more prone to earthquakes than other states. That same study affirmed years’ worth of speculation that the quakes resulted from oil and gas wastewater injection after a 3.2 magnitude earthquake shook the area surrounding Greeley last year. But Colorado’s man-made quakes didn’t start with the fracking boom, nor oilfield with wastewater injection, Colorado Public Radio reports.  Commerce City, just outside of Denver, was home to the Army’s Rocky Mountain Arsenal in the 60s. More than 1,300 earthquakes were recorded in the area between 1962 and 1967, which scientists later linked to the arsenal’s injection of wastewater into the ground. The site of the arsenal has concerned the U.S. Geological Survey since its 1992 closure. To curb an area’s quake potential, the Colorado Oil and Gas Conservation Commission established a “traffic light” system for determining whether or not to operations are able to continue: quakes with a magnitude of 4.5 prompt a “red light,” which halts production. In nearby Paradox Valley, a series of quakes prompted an event worthy of a“red light.” COGCC engineering manager Stuart Ellsworth said the Bureau of Reclamation may have triggered the events by injecting their swill into the ground. Universities in the state, including University of Colorado Boulder, Colorado State University and Colorado School of Mines continue to research seismicity with COGCC.

Fracking and Earthquakes - Food and Water Watch  -Although fracking itself can cause earthquakes, they are smaller and less frequently felt than earthquakes produced from underground injection control wells. A study in Seismological Research Letters found that fracking was the likely culprit of hundreds of small tremors in Ohio during 2013; another Ohio-based study that came out in 2015 pinpointed fracking as the cause of a 3.0 magnitude earthquake near Poland Township. In 2011, fracking was associated with a 3.8 magnitude earthquake in British Columbia, Canada; and that same year, in Blackpool, England, two earthquakes were directly linked to fracking operations. Fracking has also been linked to an earthquake that was felt in Garvin County, Oklahoma in 2011.More typically when talking about fracking-related earthquakes, the conversation is referring the seismic events triggered by injection wells, a common method of disposal for fracking waste. In the eastern and central United States, earthquake activity has increased about fivefold, from an annual average of 21 earthquakes above a 3.0 magnitude between 1967 and 2000, to more than 300 earthquakes over three years from 2010 to 2012. According to scientists with the U.S. Geological Survey (USGS), this increased seismic activity is associated with wastewater disposal wells in states such as Oklahoma, Colorado, Arkansas, Ohio and Texas. It’s important to note that induced seismic events may not always strike soon after the injection activity begins; it may take a long time for an earthquake to trigger, and sometimes not until after the injection activity has ended. Fluid pressure from high-rate disposal wells can migrate, so even if an injection well is not very close to a fault line or to one that is susceptible to earthquakes, the fluid pressure can migrate long distances to reach a fault that is more susceptible. Read our full, annotated Fracking and Earthquakes issue brief to learn more about this subject.

Greens pounce on research linking drilling to quakes - The Hill  Green groups and lawmakers are seizing on new government research linking earthquakes to oil and gas drilling as evidence of the need for tougher federal regulations.  States are currently responsible for oversight of most drilling and hydraulic fracturing in the United States, though environmentalists have long pushed Congress and federal agencies to impose stronger restrictions.  Their concerns about fracking have generally focused on the chemicals used in the process.  But a government report released in April raised a new issue: wells meant for disposing wastewater in oil and gas production are causing small earthquakes in drilling fields across the country.   “We feel there is pretty much a preponderance of evident now that these earthquakes in Kansas and Oklahoma and Texas, Colorado, are being triggered by this wastewater injection,” said Bill Leith, the senior science adviser for earthquake hazards at the United States Geological Survey.   The new research is tied to traditional oil and gas drilling, but it raised a red flag for those opposed to fracking, a process by which liquids are injected at high-pressure into the ground to release oil and gas.   Food and Water Watch is releasing a report of its own on fracking-induced earthquakes next week and Emily Wurth, the group’s water program director, said the new research “has kind of really become conclusive and it does call for some kind of larger action at the federal level.”

Oil Train Derails, Catches Fire, And Causes Evacuation Of North Dakota Town - A town in North Dakota was evacuated Wednesday after an oil train derailed and caught fire. The BNSF Railway train went off the tracks Wednesday morning about two miles from the town of Heimdal, North Dakota. The derailment forced approximately 35 people to leave the town, but officials say there’s been no injuries. Ten out of the 109 cars on the train caught fire, but officials did not yet know as of Wednesday afternoon if the cars had exploded or were simply burning. Fire crews had been called in to try to contain the blaze.  It’s was also unclear on Wednesday whether oil had been spilled as a result the derailment. Tammy Roehrich, emergency manager for Wells County, where Heimdal is located, said the scene looked similar to a 2013 derailment in Casselton, North Dakota.

Heimdal, North Dakota, Evacuated After Fiery Oil Train Crash -- A tiny North Dakota town was evacuated Wednesday after a train carrying crude oil derailed and 10 cars burst into flames, local authorities said. It is the latest in a string of explosive oil train derailments that have raised concerns about the large volume of crude moving across America's tracks. No injuries have been reported from the derailment of a BNSF train near Heimdal, North Dakota. The town, which in 2010 had a population of 27, has been evacuated, as have farms near the crash site. "I was in the house at 7:15 a.m. when we thought we heard thunder," witness Jennifer Willis told NBC News. She went out to the scene, about an eighth of a mile away, and found the area covered in black smoke. "It was kinda awesome. It's kinda scary to hear it. It was like fireworks going off. You could hear little explosions going off. I sat there for 15 minutes and you could hear it going off," she said. Fire crews from three nearby towns were called in, and BNSF said it was aware of the incident and cooperating with first responders. The National Transportation Safety Board was sending a five-person team to the site, and the Federal Railroad Administration dispatched 10 investigators.

North Dakota town evacuated after oil train derails: A tiny central North Dakota town has been evacuated after the derailment of an oil train. The incident displaced residents of Heimdal, sheriff's officials told local media. The accident involved a BNSF Railway train with 109 cars, five of which were burning. Six to seven cars derailed and the cause of the event is unknown, according to officials. Read More Crude oil's growing rail transport problem No injuries were reported. Five local fire crews were called to the scene. An acting administrator at the Federal Railroad Administration tweeted this around 10 a.m. EDT on Wednesday:We are aware of crude derailment and resulting fire near Heimdal, ND. We have investigators on their way. Will update when we know more.   Berkshire Hathaway-owned BNSF said in a statement: "At approximately 7:30 am CDT today, a train operating approximately 50 miles east of Minot, ND derailed carrying crude oil. Initial reports from the crew indicate there are no injuries but a fire has been reported at the scene. The tank cars involved in the incident are the unjacketed CPC-1232 models. BNSF will work with the nearest first responders."

Massive Fire Rages After Another Buffett-Owned Oiltrain Derails In North Dakota, Town Evacuated -- Exactly two months after the latest Warren Buffett-owned BNSF train derailed near the spot where the Galena river meets the Mississippi, resulting in a huge fire and the evacuation of all homes in a one mile radius, moments ago another of Buffett's BNSF oil trains derailed, this time near the town of Heimdal, North Dakota, resulting in the same outcome.  According to the Bismark Tribune, the town in Wells County was evacuated Tuesday morning after a train full of oil tanker cars derailed and burned about a mile and half east of here.  Wells County Emergency Manager Tammy Roehrich said the BNSF Railway oil tanker train derailed around 7:30 a.m., setting six oil tanker cars on fire.  Roehrich said she couldn’t get close enough to the train to see whether it was exploding or just burning. No injuries were reported, she said.  “It looks a lot like Casselton,” she said, referring to the fiery train wreck of oil tankers near Casselton in late 2013.  As a reminder, in 2013 another oil train, also owned by Buffett's Burlington Northern, derailed and led to the evacuation of the town of Casselton, and people living in a 5 mile radius.  The 30 or so residents of Heimdal were evacuated in response to the derailment. All were staying with family or friends, Roehrich said.Firefighters remained on the scene battling the blaze as of 9 a.m.  KFYR TV adds fire crews from Harvey, Fessenden and Maddock have all been called in to fight the fire. An official with Harvey Fire says at least 5 oil tanker cars are burning.  A viewer who called reported seeing black smoke in the area.

Yet Another Oil Bomb Train Explosion Proves New Regulations Fail to Protect Us -- The town of Heimdal, North Dakota was evacuated this morning after yet another train carrying crude oil derailed and exploded. A BNSF Railway oil train derailed around 7:30 a.m., setting at least 10 oil tanker cars on fire. No injuries or fatalities have been reported. “The tank cars involved in the incident are the unjacketed CPC-1232 models,” BNSF spokesperson Amy McBeth told Valley News Live. These newer tank cars are suppose to be safer than older models, but the four oil train accidents in the first three months of 2015 all involved the newer cars, according to Common Dreams.“Again another derailment and explosion of a train carrying crude. Again another community evacuated and its people counting their blessings this didn’t happen half a mile down the track in the middle of town,” said Earthjustice attorney Kristen Boyles. “Under the U.S. Department of Transportation’s (DOT) new rules, the type of oil tank cars that are burning in Heimdal will stay on the rails for five to eight years. DOT’s new industry-pleasing rule is too weak and too slow. We need to get these exploding death trains off the tracks now.” Last week, the DOT released new oil-by-train safety standards, but many environmental groups believe the standards are not strong enough and “leave communities at risk of catastrophe.” The Center for Biological Diversity is one of the groups calling for a moratorium on these so-called “bomb trains.”

Evacuated residents allowed home after oil train derailment — An oil train that burst into flames after derailing in North Dakota was extinguished early Thursday, and nearby residents who were evacuated from their homes were allowed to return. Crews were removing the remaining oil from the tank cars that burned. The 20 people who live in Heimdal went home Wednesday night after the fire died down, Wells County Commission Chairman Mark Schmitz said. “It had pretty much quieted down by 8, 9 o’clock,” he said of the fire scene. “Firemen said it was just a matter of watching it, making sure it didn’t flare up again.” Residents were ordered from their homes shortly after the BNSF Railway train derailed about 7:30 a.m. Wednesday outside the town, about 115 miles northeast of Bismarck. No injuries were reported. The National Transportation Safety Board is investigating the cause of the wreck. The six cars that caught fire on the 109-car train were carrying approximately 180,000 gallons of oil, according to BNSF vice president Mike Trevino. He did not immediately know early Thursday how much burned and how much was left in the cars once the fire was extinguished but he expected the operation to transfer the oil to trucks to wrap up by midday. Once the NTSB has cleared the site, the derailed cars can be removed, and this should happen by Thursday evening.

Hess-owned oil railcars involved in North Dakota derailment – A BNSF train that derailed in central North Dakota on Wednesday was carrying railcars owned by Hess Corp, 10 of which caught fire and forced the evacuation of a nearby town, the oil producer told Reuters late Wednesday. Emergency crews worked into the night to extinguish the fire. No one was injured. Hess, the third-largest North Dakota oil producer, said BNSF is leading cleanup efforts but added it stands ready to assist. The New York-based company said it is “fully compliant” with new North Dakota crude-treatment standards that went into effect last month. The standards, designed to mitigate the incendiary effect of crude-by-rail disasters, require combustible elements be filtered out of crude oil. It remains unclear whether the new standards helped reduce the fire caused by the derailment, but politicians, first responders and other witnesses described a subdued scene. “The scene is very anticlimactic and rather nondramatic, which is all very good,”

Oil on fiery North Dakota train less volatile than limit – Crude oil aboard a BNSF train that derailed in North Dakota on Wednesday caught fire even though it was less flammable than required by a state law that took effect last month. Test results sent to federal investigators and seen by Reuters show the state’s new rule may not be stringent enough to significantly reduce the risks of fireballs after derailments of trains carrying crude. In this crash, the crude on board contained about 20 percent fewer volatile gases than regulations mandate. The oil, transported in tank cars owned by Hess Corp , had a vapor pressure of 10.83 psi, according to test results. This pressure is less than the new threshold of 13.7 psi. State regulators have used vapor pressure as a proxy for measuring the amount of flammable gases known as light-ends that are present in crude. Samples of the crude oil involved in this latest derailment were taken on May 5 at the Tioga rail complex owned by Hess. They were tested on May 6, the day of the accident, by Intertek, a diagnostics firm, according to the document, which was supplied to the Federal Railroad Administration. No one was injured on Wednesday morning when six of the 109 cars derailed, four of which burned. Forty residents were evacuated from the nearby town of Heimdal and allowed to return home by late evening. Critics of the new safety rules have said they do little to stop so-called “Bakken Bombs,” a pejorative for crude-by-rail transport in the state’s Bakken oil patch, and should be far tougher. State officials said they said they were pleased that the aftermath of the Heimdal derailment was far less devastating than previous crashes.

Baldwin, other senators urge stronger disclosure on Bakken trains - Wisconsin’s Tammy Baldwin joined a cadre of other Democratic senators Thursday in calling on the federal Department of Transportation to enact stronger disclosure requirements on railroads shipping volatile Bakken crude oil. “The unsafe movement of crude-by-rail is a threat to communities across the country,” the senators wrote in a letter DOT Secretary Anthony Foxx. The letter was released as members of the small North Dakota community of Heimdal were permitted to return to their homes. They were evacuated Wednesday when a 109-car BNSF Railway train derailed around 7:30 a.m. Six cars containing 180,000 gallons of Bakken crude oil caught on fire. It was the fifth major oil train derailment in the United States and Canada so far this year and occurred just days after the DOT issued long-awaited regulations to improve oil train safety. The regulations require beefier tankers, upgraded braking systems and speed limits. Baldwin has criticized the rules, saying they do go far enough. The Journal Sentinel has reported that seven to 11 oil trains pass through the heart of Milwaukee each week. Aldermen have introduced a resolution that seeks a thorough inspections of all railroad tracks and bridges. The senators’ letter to Foxx urges the DOT to strengthen its disclosure rules. “We call on upon you to issue an Emergency Order that improves the process for providing detailed information on crude-by-rail movements and volumes to first-responders, shifts the onus for information sharing onto the railroads and not communities, and allows for the continued public availability of broader crude-by-rail data on movements and routes,” it says.

With bomb trains on the horizon, pipeline legislation hopes to save America -- Three members of congress from energy producing or oil refining states have come together in a bipartisan effort to promote the Oil and Gas Production and Distribution Reform Act. The pending legislation is hailed as a great importance to energy infrastructure by its supporters and key to America becoming the new energy super power. Senators Shelley Moore Capito (R-W.Va.), Heidi Heitkamp (D-N.D.) and Bill Cassidy, M.D. (R-La.) run the leadership on the issue. Senator Capito, a member of the Senate Energy and Natural Resources Committee, introduced the legislation Wednesday. The legislation is intended to be a step towards modernizing and improving the timeframe for the approval of new pipelines. “West Virginia’s Marcellus Region has the largest shale gas reserves in the United States. This rapid rise in production in the Marcellus Region has been great for our economy but has outpaced our pipeline’s capacity,” said Sen. Capito in a press release. “This bill increases pipeline capacity, allowing the U.S. to fully take advantage of its vast natural gas reserves and limit any overload on existing pipelines.” Sen. Heitkamp stated that to implement a multifaceted energy strategy for America’s future, energy policy needs to include building energy infrastructure and energy transportation.

Official: 'Significant' 63K-gallon brine spill reaches lake — A state Department of Health official says about 63,000 gallons of saltwater have leaked from a pipeline in northwest North Dakota and that some has reached a lake via a tributary. Water Quality Director Karl Rockeman said Wednesday that it’s unclear how much of the saltwater has entered Smishek Lake near the town of Powers Lake, which is about 75 miles northeast of Williston. He says the lake does not supply area drinking water. Saltwater, or 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. Rockeman says he considers the 1,500-barrel leak “significant.” Oasis Petroleum owns and operates the pipeline. The state learned of the spill on Monday.

Another Day – Another Pipeline Spill -- A 63,000-gallon saltwater spill that leaked from an underground pipeline entered a lake via a tributary in northwest North Dakota, a state Department of Health official said Wednesday. He said the spill will not affect any drinking water in the area. Water Quality Director Karl Rockeman said it’s unclear how much of the saltwater has entered Smishek Lake near the town of Powers Lake, which is about 75 miles northeast of the oil boomtown Williston. Saltwater, or brine, is an unwanted byproduct of oil production and is considered an environmental hazard by North Dakota. It is many times saltier than sea water and can easily kill vegetation. The most recent spill is “significant,” Rockeman said, but it still pales next to a massive pipeline spill in January that leaked nearly 3 million gallons of brine, some of which reached two creeks and the Missouri River. Officials have said cleanup of that spill from Summit Midstream Partners could take from several months to years..Oasis Petroleum, which owns and operates the pipeline, is responsible for cleaning up the spill and has been at the site along with crews from the state Department of Health and the North Dakota Oil and Gas Division. The company estimates that about 1,500 barrels of saltwater were released from the underground pipeline, which is almost 2 miles from Smishek Lake. It said preliminary field test do not indicate any adverse effects to the lake itself or its aquatic life. About 4,000 barrels of liquid have been recovered from the area, but that amount includes fresh water and salt water, Rockeman said. It’s unclear how much saltwater has been recovered.

Oil And Gas Wells Are Leaking Huge Amounts Of Methane, And It’s Costing Taxpayers Millions - In March, Secretary of the Interior Sally Jewell cited a methane gas plume the size of Delaware hovering over the Four Corners area in Northwest New Mexico as evidence that the Interior Department needs to cut “wasted gas that results from venting and flaring during oil and gas operations.”  This methane hot spot, which is located above an area that contains more than 40,000 wells, arises primarily from leaks in natural gas production and processing equipment spanning a large area of federal lands. While it may be the most visible instance of this issue, it is far from the only instance of methane — a powerful greenhouse gas that traps up to 34 times as much heat as carbon dioxide over the course of a century — being emitted into the atmosphere above public lands. A new report from the Government Accountability Office notes another unfortunate side effect of this inefficiency: the loss of tens of millions of taxpayer dollars each year. The GAO has been urging the Bureau of Land Management (BLM), an Interior Department agency, to cut methane emissions via flared or vented gas since at least 2010, when the government office found that 40 percent of this methane could be economically captured and sold. According to the 2010 report, “such reductions could increase federal royalty payments by about $23 million annually and reduce greenhouse gas emissions by an amount equivalent to about 16.5 million metric tons of CO2 — the annual emissions equivalent of 3.1 million cars.”  In the intervening half decade, the situation has only been exacerbated by the proliferation of new extraction techniques such as hydraulic fracturing. Last May, an Associated Press review of government records found that the BLM, which manages oil and gas development on federal and Native Americans lands, had been “overwhelmed” by the boom in fracking.

SCT&E hopes for powerful LNG deals with China -  Executives from Southern California Telephone & Electric LNG (SCT&E LNG) returned home this week after 45 days abroad in Latin America and Asia. The businessmen and women spent the month-and-a-half campaign working to recruit investors and seek out off-takers for its pending Monkey Island natural gas liquefaction and export terminal set for Cameron Parish, Louisiana. And from the sounds of it, the trip was a great success. SCT&E is already in the process of negotiating deals with investors and future buyers for its liquefied natural gas (LNG) in both Latin America and Asia, according to a press release. However, the travelling executives focused much of their energy on potential business partners in Asia. “Countries like Japan and South Korea have been attractive to U.S. LNG developers. However, global demand for LNG continues to grow, particularly in Southeast Asia and Latin America,” said SCT&E LNG Chairman and CEO Greg Michaels in the press release. “Countries like China and others globally have a tremendous increasing demand for LNG.” Given China’s latest efforts to cut down on coal usage, LNG will likely become a source of alternative energy for the gargantuan energy consumer. China’s energy development plan would make it the second largest importer of LNG in the world within the next decade, which would put its suppliers in a stable position in a market flooded by future project proposals.

Why Cheap Oil is Bad News for US Gas Export Hopes - For the past year, many in the United States have been rubbing their hands at the prospect of a huge natural-gas export boom, raising hopes of a flood of cheap and clean fuel being shipped to friends in Europe and Asia. But the long-awaited gas boom has yet to materialize — and with oil prices well below last year’s highs, it might never. At the peak of enthusiasm over U.S. gas exports, more than 30 proposed projects jumped on the bandwagon, with grandiose visions of dispatching tankers full of liquefied natural gas (LNG) from the East Coast, the Gulf Coast, and the Pacific Coast to thirsty markets all around the world. Leading U.S. politicians, from President Barack Obama to House Speaker John Boehner, R-Ohio, all have touted the prospects of Washington turning its energy wealth into geopolitical coin, especially now that Europe is redoubling efforts to reduce its energy dependence on Russia. Energy Secretary Ernest Moniz still speaks of the United States surpassing Qatar as the No. 1 LNG exporter this decade.  Today, though, only five U.S. LNG export projects have gotten government approval and are under construction. Only one, Cheniere Energy’s first-out-of-the-gate facility at Sabine Pass, Louisiana, is on track to export any gas this year. In a sign of how cloudy the horizon has suddenly gotten, Cheniere has yet to make a final investment decision on an expansion of Sabine Pass — a tricky, multibillion dollar decision against oil prices that are still almost 50 percent lower than they were last summer. Moody’s Investors Service, a ratings agency, warned last month that cheap oil could well kneecap U.S. and Canadian LNG export projects still in the queue.

Fracking – let’s not  --  We’ve known for years that fracking is a terrible idea – a dirty, water-thirsty, inappropriate, climate-changing mistake that will only make an elite few rich and have the rest of us left with a mess for decades to come. Having guzzled down the fossil fuel industry’s Kool-Aid with gusto, however, the South African government remains enamoured with the controversial natural gas extraction technique, believing it to be a ‘game changer’. Alas, fracking hasn’t magically transformed into a good idea as even a cursory glance at recent research shows: Exactly what chemicals are present in the cocktail of fracking liquids that are injected into the ground in large quantities to extract natural gas remains somewhat of a mystery. Partly because of industry secrecy, partly because of lack of sufficient monitoring and partly because scientists don’t really know what they are looking for.  In two papers published last month, researchers found that fracking fluid, some of which remains underground and some of which returns to the surface as so-called ‘produced water’, contains an array of organic compounds, including solvents, surfactants, gels, friction reducers, acetic acid and biocides added to prevent bacterial growth. While many of these substances are present at small concentrations, they are still potentially dangerous if they leak into groundwater sources, a process that has been shown to happen.  You might think that the question of what to do with all of this contaminated wastewater was a major headache for the industry. Not so. In the US they’ve simply been pumping large quantities of the stuff into underground wells drilled specifically for the purpose. Out of sight out of mind? Not quite. New research indicates that a massive increase in the occurrence of earthquakes in the country’s interior (not naturally a seismically active region) is most likely the result of brine extraction from natural gas wells and the practice of disposing fracking wastewater by injecting it back into wells.These conclusions have recently been confirmed by a report from the US Geological Survey.

The Shale Boom Has Already Gone Bust - At Least for Now -- The meteoric rise in U.S. oil production has ended, easing a global glut and driving a rebound in crude prices from below $50 a barrel, according to crude trader and hedge fund manager Andrew J. Hall. “We have now reached a turning point,” Hall said in a letter Friday to investors in Astenbeck Capital Management LLC, his commodities hedge fund. Growing demand and supply pullbacks “rendered all the doomsday forecasts self-defeating.” Oil production from Texas to North Dakota peaked at almost 10 million barrels a day in February and has been falling since then, Hall wrote. A drastic reduction in drilling rigs is starting to shrink U.S. oil output, according to government data cited by Hall. That’s helped drive a 36 percent rally in the past six weeks, and prices will continue to rise because it will be harder for producers to ramp up than it was to cut back, Hall said in his letter. Lower crude prices have also boosted demand, while the risk of supply disruptions across the Middle East is growing amid sectarian tensions. West Texas Intermediate, the U.S. benchmark crude, settled at $59.15 a barrel Friday, marking a 3.5 percent rise for the week. It fell 22 cents on Monday to $58.93 a barrel.

Trader Andy Hall says oil prices reached turning point -- Famed oil trader Andy Hall said the meteoric rise in U.S. oil production has ended, easing a global glut and driving a rebound in crude prices, Bloomberg reported. Oil production from Texas to North Dakota peaked at about 10 million barrels a day in February and has been falling since then, Bloomberg reported, citing Hall’s letter to investors of his commodities hedge fund, Astenbeck Capital Management LLC. “We have now reached a turning point,” Bloomberg quoted Hall as saying in the letter on Friday. A drastic reduction in drilling rigs is starting to shrink U.S. oil output, the Bloomberg report said, citing U.S. government data quoted by Hall.

Einhorn targets US ‘frack addicts’ - -- David Einhorn, the short seller who bet against Lehman Brothers, has turned his attention to US oil exploration companies, labelling them “frack addicts” who are wasting money on uneconomic wells. Mr Einhorn picked out five oil companies he said were making capital investments that would never pay off, making the biggest splash on a day of presentations from hedge fund managers at the Ira Sohn investment conference in New York. Shares in several of the oil companies — led by Pioneer Natural Resources, which Mr Einhorn labelled “the motherfracker” — tumbled in the minutes after the presentation. When someone doesn’t want you to look at traditional metrics, it is a good time to look at traditional metrics - David Einhorn Tweet this quoteEquity investors had been sold on a dream of expansion under the US shale oil revolution, Mr Einhorn said, but companies are looking at a negative return on their capital expenditure in the current environment. For many, that was true even when oil was at $100 per barrel. “Depletion gets ignored because it is not a cash item, and capex gets ignored because it is funding future growth,” he argued. “When someone doesn’t want you to look at traditional metrics, it is a good time to look at traditional metrics.” As well as Pioneer, the companies singled out in the presentation on Monday were EOG Resources, Whiting Petroleum, Continental Resources and Concho Resources.

Diamond Offshore scraps rigs as demand weakens - Diamond Offshore Drilling Inc, one of the world’s top five offshore rig contractors, said it was scrapping three rigs in the face of weak demand due to a steep fall in global crude prices. The company said on Monday it recorded an impairment charge of $319 million for eight rigs, including the rigs being retired, in its first-quarter results. The charge caused the company to report a quarterly loss for the first time since June 2004. Diamond Offshore, which has 33 rigs, said last year it would idle or sell eight rigs. Excluding the write-down and a $4 million charge for restructuring and severance costs, the company posted an adjusted profit of 50 cents per share, according to Thomson Reuters I/B/E/S. Analysts on average had expected 43 cents. A number of oilfield companies are cutting jobs and retiring rigs in response to weakened demand from oil producers, who are scaling back spending to cope with a 43 percent decline in global crude prices since June. Utilization rates for Diamond Offshore’s ultra-deepwater rigs, its biggest business, fell to 51 percent in the quarter ended March 31, from 66 percent, a year earlier. Net loss was $255.7 million, or $1.86 per share, in the first quarter, compared with a profit of $145.8 million, or $1.05 per share, a year earlier.

Oil at $60, get ready for 'frack counterattack': U.S. oil prices are heading into a sweet spot that could spur the fracking industry to crank up some of the drilling it shut down when crude prices collapsed. West Texas Intermediate oil futures for June rose above $60 per barrel Tuesday for the first time since December. That sparked expectations the price could go even higher, if U.S. oil inventory data Wednesday show an expected draw down in oil stored at the Nymex physical hub in Cushing, Oklahoma. "If oil prices stabilize above $60, I believe we are going to resume production growth in the second half of the year. More companies will drill more wells," said Fadel Gheit, senior energy analyst at Oppenheimer.  WTI and Brent crude, the international benchmark, rose as protests stopped oil flows to Libya's eastern port and Saudi Arabia raised the official selling price for Arab Light grade crude to the U.S. and Northwest Europe. Brent was above $68 a barrel for the first time since December. But price gains should be capped by any increase in output so oil prices may not go much higher for now. "Any increases in oil prices will bring more oil production, and it will dampen any price increases. Every time more production comes on, it is self-fulfilling. ... It will douse it and cool it off," said Gheit.

Here’s How The U.S. Plans To Prevent Oil Train Explosions - A resurgence in domestic crude oil production due to technological advances in drilling has led to a transportation bottleneck between landlocked oil fields and coastal refineries and ports, and that bottleneck has opened up the door for more oil shipment via rail.  But increased shipment by rail has also led to an increase in accidents, and on Friday, the U.S. Department of Transportation released long-awaited safety standards for train cars carrying oil and other flammable materials following a series of dangerous derailments. The standards, which were criticized by the oil industry over costs and time frames as well as by environmental groups and lawmakers, who demanded even stricter reforms, aim to improve overall safety and prevent catastrophic accidents and explosions. They do so through a number of measures, including updated braking systems for trains, a new maximum speed of 50 miles per hour, new operational protocols such as routing procedures and information sharing, and better classification of materials. The 50 mph speed limit comes in addition to a recently introduced 40 mph limit for trains travelling through certain urban areas. The final rule comes as pressure mounted to address the issue due to a series of deadly crashes over the last few years, including a July 2013 derailment and explosion that killed 47 people in Lac-Mégantic, Quebec. So far in 2015 there have been five oil train explosions and spills in North America — four in the U.S. and one in Canada. While this represents only a minuscule fraction of the nearly 500,000 rail-car loads of flammable material last year — a figure up from 9,500 seven years ago — it just takes one incident to incite a disaster.

Canadian oil trains shift to carry less-volatile crude – A growing share of Canadian oil-by-rail traffic is made up of tough-to-ignite undiluted heavy crude and raw bitumen, say industry executives, as companies scramble to cut expenditures with the price of crude down more than 40 percent since June. By eliminating the cost of diluting with ultra-light condensate, heavy oil offers rail shippers an opportunity to claw back a few dollars per barrel in transportation costs. Official data does not break down the different Canadian crudes shipped by rail but interviews with industry executives suggest undiluted heavy and raw bitumen shipments now make up roughly a quarter of the estimated 200,000 barrel per day (bpd) oil-by-rail market. An added bonus is that heavy crude and bitumen are far less combustible than the Bakken and Canadian synthetic crudes involved in fiery crashes that spurred the Canadian and U.S. governments on Friday to tighten safety rules for trains carrying oil. With very high boiling and flashpoints they fall outside Packing Groups 1 and 2, used to classify the more volatile types of crude oil for transport, and are already shipped in double-hulled cars, meaning they should be unaffected by last week’s tank car phase-out rules.

Canada’s Land Of Tar Sands Just Elected A Left-Wing Government -- Something pretty crazy happened in Alberta, Canada, last night.  The province, known for its prolific oil reserves and strong conservative leanings, elected a left-wing government. Not only that, it elected a left-wing government by a landslide.  If you don’t know much about Canadian politics and want to understand how unprecedented this is, it’s useful to think of it as a comparison to Texas. As Bloomberg’s Dave Weigel put it on Twitter, abbreviations extended: “Imagine if Democrats took not only Texas Governor, but supermajority control of [the] Legislature and all state offices. That’s what [Alberta’s election] is like in Canada.”  As it happens, Alberta is “often thought as being the Texas of Canada” — that’s at least according to Ed Whittingham, the executive director of the Pembina Institute, a leading environmental and energy think tank in Canada. And just like oil-rich Texas, oil-rich Alberta is has grown accustomed to having strong conservative governance (the Progressive Conservative party has been in the leadership there for more than four decades).  Now with the votes in and counted for, Whittingham told ThinkProgress that Tuesday’s elections results would likely mean changes for Alberta’s oil country. He put an emphasis on “likely” — based on the left-wing New Democratic Party’s (NDP) policy platform, he said it’s “too early to tell” what they’ll do exactly — but there is hope for change particularly when it comes to mitigating human-caused global warming.

What Alberta’s shocking election results could mean for the oil sands - Alberta is the conservative heart of Canada, with an economy dominated by the oil industry.  Canada is the world's fifth-largest oil producer, with about 78 percent of that produced in Alberta. Four-fifths that comes from the province's vast oil sands — the root of the endless controversy over the Keystone XL pipeline in the United States. The recent increase in Alberta's oil-sands production has also been a big factor pushing down global oil prices. It's an important place. And now comes an election that could, potentially, roil this entire set-up. . So what will this election mean for those famous oil sands?  It's too soon to say precisely — in part because the NDP's proposals on energy policy are actually quite light on details.   First, the new provincial premier, Rachel Notley, has vowed to work with Canada's federal government on some sort of national climate change policy. That, in itself, is notable: Canada has become a climate pariah in recent years, bowing out of the Kyoto Protocol and missing its targets for cutting greenhouse-gas emissions. And oil-rich Alberta, the power base for Conservative Prime Minister Stephen Harper, has long been seen as a key obstacle to more ambitious climate-change policies.Perhaps more significant for the future of the oil sands is the fact that the NDP has pledged to review the royalties that oil companies pay to Alberta's government. These royalties have long been kept fairly low to encourage growth and development: Alberta's royalties run about 25 to 40 percent of oil company profits; in Norway, by contrast, royalties run to 80 percent of profits.

TransCanada Keystone 1 Pipeline Suffered Major Corrosion Only Two Years in OperationDocuments obtained by DeSmogBlog reveal an alarming rate of corrosion to parts of TransCanada's Keystone 1 pipeline. A mandatory inspection test revealed a section of the pipeline's wall had corroded 95%, leaving it paper-thin in one area (one-third the thickness of a dime) and dangerously thin in three other places, leading TransCanada to immediately shut it down. The cause of the corrosion is being kept from the public by federal regulators and TransCanada. “It is highly unusual for a pipeline not yet two years old to experience such deep corrosion issues,” Evan Vokes, a former TransCanada pipeline engineer-turned-whistleblower, told DeSmogBlog. “Something very severe happened that the public needs to know about.” When TransCanada shut the line down, the company and the Pipeline and Hazardous Materials Safety Administration (PHMSA) told the press that the shutdown was due to “possible safety Issues.” And although an engineer from PHMSA was sent to the site where TransCanada was digging up the pipeline in Missouri, no further information has been made available publicly.Only after DeSmogBlog made a Freedom of Information Act (FOIA) request to PHMSA in August 2013 — which the agency partially responded to this April — was the information revealing the pipeline had deeply corroded in multiple spots exposed. The documents also disclosed a plan to check for a possible spill where the corrosion was detected.  However, documents explaining what caused the corrosion and findings concerning a possible spill were not included in response to DeSmogBlog's request. According to PHMSA spokesman Damon Hill, documents that might impact an ongoing compliance review the agency is conducting of TransCanada were withheld.

5th Circuit: 3 Mexican states cannot sue over 2010 spill — A federal appeals court has upheld a lower court’s ruling that three Mexican states cannot sue BP and other companies over damages from the 2010 Gulf of Mexico oil spill. The ruling by the 5th U.S. Circuit Court of Appeal upholds a 2013 district court ruling. The court held that the Mexican federal government is the owner of the damaged property and that the three states — Veracruz, Tamaulipas and Quintana Roo — don’t have standing to file the suit. The 5th Circuit opinion, dated May 1, notes that that the Mexican federal government filed a similar lawsuit, which is progressing through the court system.

U.S. Banks Expect Rise in Energy-Sector Loan Defaults - WSJ: Banks in the U.S. are cutting credit lines to energy companies and forcing firms to cough up more collateral to guard against fallout from the past year’s plunge in oil prices, a Federal Reserve survey found. Banks expect more delinquencies and charge-offs from the sector over the course of this year, “but they indicated that their exposures were small, and that they were undertaking a number of actions to mitigate the risk of loan losses,” senior loan officers at commercial banks told the Fed in a survey tracking changes in loan terms and standards in the first quarter of the year. U.S. oil and gas companies went deep into debt during the energy boom as they looked to cash in on new technologies that allowed sizable increases in domestic energy production. Those loans looked like a good bet while U.S. oil prices were around $100 a barrel. But after peaking in June, oil prices tumbled, dropping below $50 earlier this year. Prices have rebounded in recent weeks, but remain below $60. The sharp reversal on prices has rattled the energy sector, forcing firms to cut spending, shed workers and conserve cash. Of banks making loans to such firms, most said they accounted for less than 10% of outstanding commercial and industrial loans.

Oil Rises After API Reports First Inventory Draw In 16 Weeks -- For the first time since the first week of January, API reports a 1.5 million barrel inventory draw (against last week's 4.2mm build). This also comes with a 336k draw from Cushing following on from last week's 162k draw. Oil prices have responded by pushing higher, though it appears most of this was priced in.

Oil eases after hitting 2015 highs on US crude stock draw - Oil hit new highs for 2015 on Wednesday, bolstered by the first U.S. crude stockpile drop since January, before paring gains as investors and traders moved to take profits on a multi-week rally. The dollar's recent tumble also fed the run-up in oil and other commodities, as those raw materials became more affordable for holders of the euro and other currencies. U.S. crude futures settled up 53 cents, or 0.88 percent, at $60.93 a barrel. It rallied more than $2 to the year's high of $62.58 a barrel earlier. Wednesday's rise came after the U.S. Energy Information Administration said crude stockpiles fell by 3.88 million barrels last week, the first drop in four months. The draw was more than double that projected by industry group American Petroleum Institute. A Reuters poll of analysts had estimated U.S. crude stocks to rise last week for a record 17th week in a row.  The EIA data lent conviction to oil bulls' bets that the global oversupply in crude could finally be easing. But skeptics said more work was needed to balance supply-demand in the market, which they said was overpriced after Brent's 21 percent rally in April and U.S. crude's 25 percent gain. Crude prices had tumbled earlier, by more than 50 percent since June on worries of an oil glut.

Crude Pumps (And Dumps) After DOE Show Biggest Inventory Draw In 8 Months -- Confirming last night's API inventory data, DOE just reported a 3.882 million barrel drawdown in total crude inventories (considerably more than the 1.5mm bbbl draw expected). This is the biggest draw since early September. The initial spike took WTI Crude prices above $62.50 but that is fading now...

US refineries run hard to absorb crude glut – U.S. refineries are running at near-record levels to turn the glut of crude into gasoline and other refined fuels ahead of the summer driving season. U.S. refineries processed an average of 16.347 million barrels per day (bpd) last week, an increase of almost 250,000 bpd compared with the previous week. Crude processing was almost 1.2 million bpd higher than the ten-year average for this point in the year and is just 280,000 bpd beneath its all-time record. Refineries would not normally process so much crude this early in the year before the summer driving season gets underway after Memorial Day at the end of May. But cheap crude oil from North Dakota and other U.S. locations, coupled with strong prices and demand for refined fuels, has incentivised them to maximize production. Crude oil stockpiles are more than 121 million barrels above the average level for this time of year, but they fell by almost 3.9 million barrels last week, the first drawdown after 16 consecutive weeks of inventory rises. Stockpiles of refined products are more modest though both gasoline and especially propane stocks are high for the time of year.

The U.S. Production Decline Has Begun -- It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled. The implications are profound. Production will decline by several hundred thousand of barrels per day before the effect of reduced rig count is fully seen. Unless oil prices rebound above $75 or $85 per barrel, the rig count won’t matter because there will not be enough money to complete more wells than are being completed today. Tight oil production in the Eagle Ford, Bakken and Permian basin plays declined approximately 111,000 barrels of oil per day in January. These declines are part of a systematic decrease in the number of new producing wells added since oil prices fell below $90 per barrel in October 2014 (Figure 1).   Deferred completions (drilled uncompleted wells) are not discretionary for most companies. Producers entered into long-term rig contracts assuming at least $90 oil prices. Lower prices result in substantially reduced cash flows. Capital is only available to fulfill contractual drilling commitments, basic costs of doing business, and to complete the best wells that come closest to breaking even at present oil prices. Much of the new capital from junk bonds and share offerings is being used to pay overhead and interest expense, and to pay down debt to avoid triggering loan covenant thresholds.Hedges help soften the blow of low oil prices for some companies but not enough to carry on business as usual when it comes to well completions.  The decrease in well completions provides additional evidence that the true break-even price for tight oil plays is between $75 and $85 per barrel. The Eagle Ford Shale is the most attractive play with a break-even price of about $75 per barrel. Well completions averaged 312 per month from January through September 2014 when WTI averaged $100 per barrel (Figure 2). When oil prices dropped below $90 per barrel in October, November well completions fell to 214. As prices fell further, 169 new producing wells were added in December and only 118 in January.

Oil prices: "It's up to Allah" - As the world sits by stacked and idled rigs in anticipation of how long Saudi Arabia will wait to react to the persistent oil price slump, Oil Minister Ali Al-Naimi told CNBC that “no one can set the price of oil – it’s up to Allah.” Following last year’s rapid oil price decline, the global market has been hoping that the Organization of Petroleum Exporting Countries (OPEC) would cut production, providing a buoy to the sinking market. However, the 12-country organization, following Saudi Arabia’s lead, has persistently maintained production levels of 30 million barrels per day in an attempt to preserve its share of the market. Despite numerous pleas for OPEC nations to decrease production, the cartel has maintained its no-cut policy. Last month OPEC oil output climbed to the highest levels since 2012. Even though the influence and support a production cut could have on the global market and demand, Al-Naimi maintains that there is no specific price that would prompt Saudi Arabia to cut production. In March, at an energy conference in Riyadh, Naimi told reporters, “The production of OPEC is 30 percent of the market, 70 percent from non-OPEC … everybody is supposed to participate if we want to improve prices.” As reported by Reuters, he also commented, “Today the situation is hard. We tried, we held meetings and we did not succeed because countries [outside OPEC] were insisting that OPEC carry the burden and we refuse that OPEC bears the responsibility.” Last June the price per barrel of benchmark Brent crude fell from a peak of $114 to lows unseen in over six years. Coupled with the global supply glut and decreased demand, prices hovered around the $50 per barrel mark worldwide, placing strain on domestic producers and pushing them into the core regions where production is sustainable at lower prices.

WTI Crude Tops $60 (5 Month Highs) After Saudi's "Leave It To Allah" Comments -- WTI Crude is now up 43% from its mid-March lows (at $42), topping $60 for the first time since early December. This is a 25% retracement of the June to March drop. Despite near-record US production (rose last week WoW), record Saudi production, slowing global economies, and expectations that higher prices will bring a flood of new supply as cash-starved frackers start pumping again; it appears the squeeze combined with Middle East tensions is driving the resurgence (for now). Perhaps everyone should listen to Influential Saudi Oil Minister, Ali Al-Naimi, who said Tuesday that "no one can set the price of oil - it's up to Allah." It seems Allah wants higher gas prices.

Oil Price Recovery May Be Too Much Too Soon -- Oil prices have hit their highest levels in 2015, with WTI surging above $60 per barrel. Crude oil inventories in the U.S. declined for the first time since December 2014, perhaps indicating that the glut could be easing. The EIA reported that oil stockpiles fell by 3.9 million barrels for the week ending on May 1, a larger drop than expected. With rig counts falling by more than half since last year, this could be the beginning of a longer contraction. Both weekly production figures and the stock build appeared to have peaked, suggesting that supplies are adjusting lower and demand is rising. That has oil prices surging from their March lows, with WTI jumping over $15 per barrel, and Brent about $20 per barrel.   But have the markets overreacted? The rise in oil prices over the last few weeks has been so rapid that few predicted it. Speculators have raised their bullish bets to the highest level in years. The optimism may not be justified. In the past, bets to such a degree have often been followed by a fallback in prices, the head of commodity strategy at Saxo Bank told Reuters in an interview. Similarly, the top commodities official at Commerzbank told CNBC that the price rise was “premature,” and oil prices could dip back below $50 per barrel once the markets come to their senses. In other words, the markets may have overshot, rising beyond levels warranted by the underlying fundamentals. Oil inventories are still at 80 year highs. The 487 million barrels of oil sitting in storage will take quite a while to drawdown. Crucially, oil production is still exceeding demand, leaving oil markets well-supplied.

Oil dives 3 percent on surging dollar, renewed supply worries (Reuters) - Oil prices tumbled 3 percent on Thursday as a resurgent dollar erased gains from the past two sessions, setting the market up for its first weekly loss in five. Traders and investors also returned their focus to the oversupply in crude and gasoline after Wednesday's euphoria over the first U.S. crude drawdown in months. The dollar, on a downtrend since the start of May, jumped on optimism that Friday's U.S. employment report for April would show strength after upbeat weekly jobless claims.  A stronger greenback makes dollar-denominated commodities less affordable for holders of the euro and other currencies. "The dollar is definitely the driver in today's tumble, though people are also taking stock of the market's fundamentals and taking some profit after the incredible month of gains we've had," said Phil Flynn, analyst at the Price Futures Group in Chicago. North Sea Brent crude settled down $2.23, or 3.3 percent, at $65.54 a barrel. For the week, Brent was headed 1.6 percent lower, its weekly loss since April 30. U.S. crude settled down $1.99, or 3.3 percent, at $58.94 a barrel. Gasoline fell 2.3 percent, its biggest loss in a month, to settle at just over $1.99 a gallon. Stronger-than-expected demand growth and a slowdown in U.S. crude supply have boosted oil prices by 50 percent from a six-year low hit in January.

US oil and natural gas rig count drops by 11 to 894 -  Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 11 this week to 894. Houston-based Baker Hughes said Friday that 668 rigs were seeking oil and 221 explored for natural gas. Five were listed as miscellaneous. A year ago, with oil prices nearly double the current price, 1,855 rigs were active. Among major oil- and gas-producing states, Oklahoma lost six rigs, Louisiana was down three, New Mexico declined by two and Arkansas, California, Kansas, Ohio, Texas, Utah and West Virginia were off one each. Colorado gained two rigs and North Dakota increased by one. Alaska, Pennsylvania and Wyoming were unchanged.

Oil rig count falls to lowest since late 2010 - Producers eased back on the number of rigs laid down this week, idling 11 oil-chasers at a time when crude prices have started to rise again. The number of oil rigs fell to a total of 668, according to weekly data from oil services firm Baker Hughes. That’s the lowest level since September 2010. The rig count has been plummeting for five months as drillers pulled back from shale plays after an oil slump began in late 2014. About 941 oil-drilling rigs have been idled since the peak in October, according to Baker Hughes. The total rig count, including oil, gas and other drilling units, fell by 11 to 894 this week. The U.S. lost one gas-chasing rig but gained a miscellaneous rig. Texas lost a single rig this week, cutting the state’s count to 379, down from 906 in November. The rig count, historically used to gauge the strength of U.S. production, has at times caused wild shifts in oil prices as traders use the information to place bets on future oil output. Oil prices collapsed in recent months as a flood of oil hit the market amid flat demand. Prices have started to tick up again, and oil this week surged above $60 barrel, amid signs that the U.S. has slowed production while global demand has begun to increase again.

Russian Missile Sale to Iran Involves Unseen Deals With Israel -- Last month, when President Vladimir Putin of Russia announced plans to sell a powerful anti-missile system to Iran before the lifting of international sanctions, Israel was quick to join the U.S. in expressing shock and anger. But behind the public announcements is a little-known web of arms negotiations and secret diplomacy. In recent years, Israel and Russia have engaged in a complex dance, with Israel selling drones to Russia while remaining conspicuously neutral toward Ukraine and hoping to stave off Iranian military development. The dance may not be over. Critics of the Russian move say it undermines efforts to apply pressure to Iran by removing one building block of a sanctions regime that will be hard to put back together. It would also enhance Iran’s defenses against a potential U.S. or Israeli attack, as both countries have said they’d consider using force if diplomacy fails. Israeli officials, including Prime Minister Benjamin Netanyahu, warned that the missiles, known as S-300s, would provide the Islamic Republic with a military shield that would encourage further adventurism, and expressed concern they could end up in the hands of Iranian allies like Lebanon’s Hezbollah. Others argued that the Russian move shouldn’t be taken at face value. “The public announcement of the possible sale of S-300 to Iran is no more than a political gesture aimed at the U.S. to motivate it in restraining its arms transfers to Ukraine,” says Konstantin Makienko, deputy head of Moscow’s Centre for Analysis of Strategies and Technologies.“In any case deliveries of S-300s to Iran will remain a bargaining chip between Moscow, the United States and Israel in talks on a wide range of issues.”

India to sign port deal with Iran, ignoring U.S. warning against haste - (Reuters) - India will push ahead this week with plans to build a port in southeast Iran, two sources said, with Prime Minister Narendra Modi keen to develop trade ties with Central Asia and prepared to fend off U.S. pressure not to rush into any deals with Iran. India and Iran agreed in 2003 to develop a port at Chabahar on the Gulf of Oman, near Iran's border with Pakistan, but the venture has made little progress due to Western sanctions on Iran. Now, spurred on by Chinese President Xi Jinping's signing of $46 billion of energy and infrastructure deals with Pakistan, Modi wants to swiftly sign trade agreements with Iran and other Gulf countries. "Shipping Minister Nitin Gadkari will travel on a day-long tour to Iran to sign a memorandum of understanding for development of Chabahar port," a Shipping Ministry source with direct knowledge of the matter told Reuters. The deal will be signed on Wednesday, he said. Encouraged by the prospect of a deal between world powers and Tehran by June 30 on Iran's nuclear programme, after which sanctions could be eased, India recently sent a delegation to Iran to scout for trade, energy and infrastructure deals. The United States cautioned India and others last week against strengthening ties with Iran ahead of a final agreement. But Indian officials said New Delhi could not ignore its national interest and noted a report that a U.S. energy delegation was visiting Iran.

China Manufacturing PMI in Contraction: New Orders and Operating Conditions Decline at Strongest Rate in a Year - More signs of a global slowdown surface in the latest China Manufacturing PMI where operating conditions and new orders decline at fastest pace in a year.  Chinese manufacturers saw a further deterioration in operating conditions in April, with total new orders declining at the strongest pace for a year while production levels stagnated. Data suggested that relatively weak domestic demand was the main driver of reduced new business, as new export work picked up in April (albeit marginally). Consequently, employment in the sector continued to decline, while purchasing activity fell at the quickest rate in 13 months. Meanwhile, deflationary pressures intensified in April, with both input and output costs falling at accelerated rates. Adjusted for seasonal factors, the HSBC Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single - figure snapshot of operating conditions in the manufacturing economy – remained below the neutral 50.0 value at 48.9 in April, down from 49.6 in March. This signalled a deterioration in the health of the sector for the second successive month. Moreover, the pace of deterioration was the strongest seen in a year. Total new business placed at Chinese manufacturers declined for the second month in a row in April. Furthermore, the rate of contraction quickened since March to the strongest in a yearWeaker demand conditions led companies to become more cautious with regard to their production schedules, with firms leaving their output unchanged in April. This contrasted with increased output in the opening three months of the year. Purchasing activity meanwhile declined for the first time since January. Though moderate, the rate of reduction was the quickest since March 2014, with a number of respondents attributing the fall to fewer new orders. On the price front, average cost burdens faced by Chinese goods producers fell for the ninth successive month. Moreover, the rate of deflation accelerated to a sharp pace. In line with the trend for input costs, companies cut their selling prices again in April and at a solid rate.

China factory index shows fastest deterioration in a year  — A report says Chinese manufacturing suffered its sharpest contraction in a year in April in a further sign of the weakness in the world’s No. 2 economy. HSBC’s manufacturing index based on a survey of factory purchasing managers fell to 48.9 in April from 49.6 in March. The index is based on a 100-point scale on which numbers below 50 show contraction. The index level is worse than a preliminary reading of 49.2 released in late April. The report said total new orders declined at the fastest rate in a year while production levels stagnated. HSBC’s index comes after an official survey by the China Federation of Logistics and Purchasing found that manufacturing activity barely budged in April.

Futures Levitate Following Worst Chinese Mfg PMI In One Year, Brent At 2015 Highs; Bund Slide Continues -- The best news for stocks is twofold: volumes continue to be lethargic with both the UK (May Day bank holiday) and Japan closed until Thursday (Golden Week), while the bulk of the S&P500 has now exited the stock buyback quiet period. As such, ignore record equity outflows - all the matters is that corporate CFOs, flush with brand news bond issuance cash, will tell their favorite Wall Street trading desk to buy stocks at just the right inflection point sending the market surging just as shorts once again test the downtrend and the 50 DMA.

Trends and Cycles in China's Macroeconomy: A presentation at the 30th Annual Conference on Macroeconomics: (video) Also, a brief interview with Tao Zha: (video)

China’s ‘migrant miracle’ nears an end as cheap labour dwindles - China’s labour force is shrinking and the “migrant miracle” that powered its industrial rise is mostly exhausted, removing the factors that propelled the country’s meteoric development, according to leading economists. The transformation will lead to slower growth, reduced investment and a loss of export competitiveness, they warn, increasing the urgency of implementing ambitious economic reforms aimed at finding new sources of expansion. Today the Financial Times begins a series of articles on the end of the migrant miracle — the three decades of breakneck economic growth fuelled by the unprecedented migration of labour from the unproductive farm sector to work in factories and on construction sites. Broad consensus has emerged that China has reached its “Lewis Turning Point” — the point at which the once-inexhaustible pool of surplus rural labour dries up and wages rise rapidly. Nobel-prize winning economist Arthur Lewis argued in the 1950s that a developing country with surplus agricultural labour could develop its industrial sector for years without wage inflation as it absorbed that surplus. “Now we are at the so-called Lewis inflection point. I made this forecast in 2006, and today there is no need to change it,” said Ha Jiming, chief investment strategist for private wealth management at Goldman Sachs in Hong Kong and formerly chief economist at China International Capital Corp, the country's first Sino-foreign joint venture investment bank. “The working-age share of China’s population peaks this year at 72 per cent, then it will start to fall rapidly, even more rapidly than what we saw in Japan in the 1990s,” he added. Cai Fang, vice-president of the Chinese Academy of Social Sciences, a think-tank that advises the government, estimates that China’s potential gross domestic product growth decreased from 9.8 per cent in 1995-2009 to 7.2 per cent in 2011-15 and 6.1 per cent from 2016-20. A shrinking labour force is one of the main drivers. Since Deng Xiaoping launched market reforms in 1978, 278m migrant workers from rural villages have moved to work in the cities.

China and a friendly reminder to keep watching those capital outflows - If you want something done right, do it yourself.  The People’s Bank of China, recently… (probably). With that in mind, here’s Michael Pettis’s on the PBoC’s renewed distrust in the banking system’s ability to allocate credit — which spawned the flawed comparisons to ECB LTROs made as China tried to help out local governments yearning for a debt swap:  Because it cannot ease credit conditions without encouraging a continuation of the worst kind of lending, the PBoC is trying to direct lending by targeting the types of lending it will support. To the extent that this lending flows into small and medium enterprises, agriculture, services, or other parts of the Chinese economy that are using capital efficiently, this is a good thing, but if capital continues to flow into large infrastructure projects, especially into the poorer provinces, it seems to me that this only leaves the country with a worse debt burden.

How Chinese Oligarchs Used Fake Trade Invoices To Launder Almost $1 Trillion Globally -- "China’s capital account might be closed—but it’s not that closed. Between 2003 and 2012, $1.3 trillion slipped out of mainland China—more than any other developing country... GFI says the most common way money leaks out in the developing world is through fake trade invoices. The other big culprit is “hot money,” likely due to corruption—which GFI gleans from inconsistencies in balance of payments data. In China, both activities have picked up since 2009." Just like in the U.S., the so-called government “stimulus” in China achieved nothing more than to stimulate an oligarch crime spree. Hence the global boom in $100 million real estate, art and everything extremely high-end. As intended, the bailouts and stimulus on a global basis went directly to the 0.0001%.

China announces it is scoring its citizens using big data - mathbabe - Please go read the article in the Dutch newspaper de Volkskrant entitled China rates its own citizens – including online behavior (hat tip Ernie Davis).  In the article, it describes China’s plan to use big data techniques to score all of its citizens – with the help of China internet giants Alibaba, Baidu, and Tencent – in a kind of expanded credit score that includes behavior and reputation. So what you buy, who you’re friends with, and whether you seem sufficiently “socialist” are factors that affect your overall score. Here’s a quote from a person working on the model, from Chinese Academy of Social Science, that is incredibly creepy:  When people’s behavior isn’t bound by their morality, a system must be used to restrict their actions And here’s another quote from Rogier Creemers, an academic at Oxford who specializes in China: Government and big internet companies in China can exploit ‘Big Data’ together in a way that is unimaginable in the West I guess I’m wondering whether that’s really true. Given my research over the past couple of years, I see this kind of “social credit scoring” being widely implemented here in the United States.

Gates Says Bet On Yuan As IMF Calls Currency Fairly Valued - For the first time in more than ten years, the IMF believes the yuan is close to fairly valued. This comes as the fund considers the yuan for SDR inclusion later this year and as China attempts to promote the currency to a more prominent role in the global economy. Meanwhile, Bill Gates says that although he "loves the dollar" he'd "put his bet on yuan."

IMF on verge of declaring yuan fairly valued: Report (CNBC analysis video) The International Monetary Fund (IMF) is reportedly on the verge of declaring China's currency fairly valued for the first time in more than a decade, the Wall Street Journal reported on Sunday. The fund's reassessment is expected to be made official in IMF reports on China in the coming months, the report said. This is a milestone event as the IMF for years have expressed disapproval over Beijing's management of its currency. The shift could also undermine Washington's dissatisfaction with the yuan, which it claims remains artificially weak and giving Chinese exports an unfair advantage.

ADB "Boosts Firepower" As China-Led Bank Grabs Center Stage  China-led Asian Infrastructure Investment Bank represents not only a major shift away from the multilateral institutions that have dominated the post-war global economic order, but also a move by Beijing to establish what we have described as a Sino-Monroe Doctrine. Speaking to the latter point, President Xi Jinping’s recent pledge to invest $46 billion in Pakistan (53% more than the US has invested in 13 years) as part of Beijing’s Silk Road initiative, gives us a window into what the future may hold in terms of China’s growing regional influence.  But as Washington learned in March, belittling China’s power grabs is a fool’s errand, especially when they are disguised as infrastructure development initiatives. In the end, resistance is futile, but old habits die hard, which is why it’s not surprising that the ADB is now beefing up its lending capacity while simultaneously paying lip service to the AIIB.   Via Bloomberg: The Japan-led Asian Development Bank unleashed measures that could help it hold its ground as a resource for regional economies, even as China’s Asian Infrastructure Investment Bank gains prominence. The ADB overhauled a four-decade-old development fund to boost its annual lending and grant approvals by 50 percent, to as much as $20 billion, the bank said at its annual meeting in Baku, Azerbaijan that started May 2. It will also set aside money to support public-private partnership projects and work with the AIIB “for Asia,” the ADB said. “Now that the China-led AIIB is becoming a reality, the Japan-led ADB wants to ensure that it will still remain a key funder for infrastructure programmes in less developed Asia,”

China Containerized Freight Index Plunges to Multi-Year Low, Shanghai-EU Rates Totally Collapse, US Rates Morose - Wolf Richter: Two weeks ago, when I wrote about the Shanghai Containerized Freight Index (SCFI), the index had fallen so far so fast that it seemed to be a statistical fluke, something that would instantly bounce back. The SCFI tracks the spot rates from Shanghai to various destinations around the world. At the time, the SCFI component for Northern Europe had plunged 14% from the prior week to $399 per twenty-foot container equivalent unit (TEU), down 67% from a year ago. An all-time low. The question was how much lower could rates drop? A lot lower. Over the two weeks since, the SCFI for Northern Europe plunged another 14% to $343, setting a new all-time low. A terrific 68% collapse from the same week a year ago. Something big is going on in the China-Europe trade.  Carriers have tried to impose big rate increases, with UASC pushing for an increase of $1,300 per TEU, and a gaggle of others going for an increase of $1,000 per TEU, according to the Journal of Commerce. None of them were able to make them stick. The swooning rates came as bunker fuel costs have been rising off their January lows. Higher input costs are hitting container carriers just as revenues are collapsing. A toxic mix. On some other routes, carriers have succeed in raising rates, and so not all routes from China suffered the same relentlessly brutal fate. Rates ticked up recently to the Mediterranean, South America, and the US West Coast. But that doesn’t say much. On the routes from Shanghai to the US West Coast, carriers tried to impose rate increases effective April 1. But after rising by nearly $300 to $1,932 per forty-foot container equivalent unit (FEU) in the first week, the spot rate plunged to $1,623 in the second week, and to $1,596 in the third week. In the week just ended, the index jumped to $1,783. It’s still down 8% from early April, and about back where it was a year ago.

China Exports Unexpectedly Fall in April - WSJ: —Chinese exports unexpectedly fell in April in the face of weak global demand and a stronger currency, the latest sign of slower growth in the world’s second-largest economy. China’s exports fell 6.4% from a year earlier in dollar terms, after a drop of 15% in March, data from the General Administration of Customs showed Friday. The result was well below the median forecast of a 2.5% increase by 13 economists in a survey by The Wall Street Journal. Some economists said the data pressures leaders in Beijing to continue their efforts to rekindle slowing growth. “This is obviously worse than expected,” said Macquarie Group MQG 3.50 % economist Larry Hu. “This is another pretty weak data point so far this year, so policy stimulus will continue for sure.” Mr. Hu said he expects at least one broad interest rate cut and a cut in bank reserves in coming months. Imports in April slipped 16.2% from a year earlier, compared with a 12.7% drop in March, Customs said. That also was worse than expected, pushing up China’s trade surplus to $34.1 billion from its $3.1 billion level in March. The trade figures are the latest sign of weakness in China’s economy. In the first quarter, China’s gross domestic product expanded by 7% year from a year earlier, its slowest pace in six years. And despite recent monetary easing, industrial profits are down, monthly factory prices have been falling for more than three years and the real-estate market continues to swoon.

Additional monetary easing for China?  - Alicia García-Herrero - As many other central banks in the Asian region, the People Bank of China (PBoC) has been on an easing mode for a few months now and more seems to be in the store. The once relatively polarized debate on what the PBoC monetary policy stance should be has increasingly leaned towards additional easing. Some analysts are even proposing full-fledged quantitative easing (QE), in the form of US Treasury sales to raise funds for assets locally, such as local government bonds and other hardly–performing assets. There is no doubt that the PBoC could, thereby, bring another big stimulus into the already heavily massaged Chinese economy as it would help debt-saddled local governments to clean their balance sheets and, at the same time, allow banks’ to lend further. As if this were not enough, any additional easing – capital controls permitting- would also push the RMB to a more depreciated level, bringing thereby an additional push to external demand. Given China’s increasingly weak economic situation and growing deflationary pressures, the above could sound like music to Chinese ears. An obvious proof of how much euphoria this music can bring is the recent dramatic revival of Chinese and Hong Kong stocks. Some optimistic commentators have even related it to a strong economic recovery in the near future, notwithstanding the poor incoming data. Whether they are proven right or not, at least temporarily, very much depends on the PBoC and how much it ends up easing, especially if it goes all the way to some sort of QE.

CFR Says China Must Be Defeated And TPP Is Essential To That -- Wall Street's Council on Foreign Relations has issued a major report, alleging that China must be defeated because it threatens to become a bigger power in the world than the U.S. This report urges: "The United States should invest in defense capabilities and capacity specifically to defeat China’s emerging anti-access capabilities and permit successful U.S. power projection even against concerted opposition from Beijing. … Congress should remove sequestration caps and substantially increase the U.S. defense budget.” In other words: the Government should spiral upward the U.S. debt even more vertically (which is good for Wall Street), and, in order to enable the increased ‘defense’ expenditures, only ‘defense’ expenditures should be freed from spending-caps.

Russia, China sign raft of economic deals, including loans — Russian and Chinese leaders on Friday signed a plethora of deals in Moscow, including billions in infrastructure loans for Russia. Russian President Vladimir Putin is hosting Chinese President Xi Jinping in Moscow this week for talks as well as for the May 9 commemoration of the 70th anniversary of the Nazi defeat in World War II, an event that most Western leaders stayed away from amid tensions over Ukraine. Putin and Xi on Friday oversaw the signing of 32 contracts including a 300 billion ruble ($6 billion) loan to build a high-speed railway link. Russian gas giant Gazprom also signed a memorandum of understanding with China's CNPC to build a gas pipeline to China and sell up to 30 billion cubic meters of gas, but the details have yet to be hammered out. Putin said after the talks that Russia would welcome the involvement of Chinese companies in tapping the giant Vankor oil and gas fields in eastern Siberia, adding that specifics are being worked out. Putin and Xi also talked about the Silk Road Economic Belt, an ambitious Beijing project intended to encourage the infrastructure development in formerly Soviet Central Asia. Moscow in the past had been jealous about China's efforts to increase its sway in the region, but the two leaders seemed to reach common ground on the sensitive issue during Friday's talks in the Kremlin. They issued a statement saying that while conducting the project, China will coordinate closely the Eurasian Economic Union, an economic alliance that includes Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan. "It means reaching a new level of partnership that envisages common economic space on the entire Eurasian continent," Putin said after the talks.

Stalling Free-Trade Pact With China Could Pinch Taiwan’s Exports - Like its Asian neighbors, Taiwan has been struggling with moribund exports as China’s economic growth slows and a pickup in the U.S. loses some steam.  Taiwan’s exporters could soon face another challenge: local opposition to further free trade with China. Taiwan already is heavily dependent on China, which sucks in 40% of its exports. Many Taiwanese work on the mainland. Currently, the territory has a limited free-trade agreement with its neighbor that the ruling Kuomintang party wants to extend to cover up to 5,000 items and services. But protests against the deal last year, led by students, shut down Taiwan’s parliament and put such trade liberalization on the backburner. Many in Taiwan feel further dependence on China will erode its independence and give ballast to China’s claims on Taiwan’s sovereignty. The problem for Taiwan is that rivals like South Korea are pushing ahead with their own deals with Beijing. Southeast Asia and China already have a trade pact. Taiwan has expressed interest in joining the U.S.-led Trans-Pacific Partnership, a Pacific Rim trade deal that excludes China. But Taiwan’s giant neighbor is key for its IT businesses, which largely produce on the mainland. The territory now risks getting left behind. And that’s bad news at a time when Taiwan’s electronics-focused exports already are facing headwinds.  Taiwan’s exports to China have been droopy this year, down 8.1% in March compared with a drop of 16.3% in February, though data from that month is colored by the Lunar New Year holiday.

Abe administration backpedals on granting lawmakers access to TPP draft text – A senior government official has backtracked on his proposal to give lawmakers access to the draft text of a 12-nation Pacific trade pact ahead of a potential deal. Yasutoshi Nishimura, senior vice minister of the Cabinet office in charge of the negotiations, said his intent was misunderstood when he told a press conference on Monday that Japan will “make preparations to allow lawmakers access to the text next week” at the earliest. Nishimura apparently withdrew the disclosure plan due to strong opposition from some government officials, who are concerned about differences in confidentiality obligations between Japan and the United States, according to informed sources. In line with a rule agreed with the 11 other countries, only a handful of Japanese officials can currently read the text, such as Prime Minister Shinzo Abe, TPP minister Akira Amari and chief TPP negotiator Koji Tsuruoka. However, the U.S. Trade Representative’s Office has already made the draft Trans-Pacific Partnership text available to U.S. legislators on condition they do not make any part of it public. Nishimura said Thursday that Tokyo cannot take the same measure as Washington “there is a big difference between the duty of confidentiality” of lawmakers in the two countries.

Japan's monetary base rose 35.6% to another record in April - The Japan Times: Japan’s monetary base stood at a record ¥305.88 trillion ($2.56 trillion) at the end of April, up 35.6 percent from a year earlier, as the Bank of Japan continued to provide more liquidity to raise the inflation rate to its targeted 2 percent, BOJ data showed Thursday. The monetary base reached an all-time high for the ninth straight month and topped the ¥300 trillion line for the first time. The central bank took additional monetary easing steps last October to raise the pace of supplying funds. The balance of financial institutions’ current account deposits at the BOJ, the biggest part of the monetary base, came to ¥210.22 trillion, up 57.1 percent. Under the stimulus measures, the BOJ aims to boost the monetary base at an annual pace of about ¥80 trillion, up from ¥60 trillion to ¥70 trillion under its previous policy. The BOJ has been trying to get rid of lingering deflationary pressure on the economy with its drastic quantitative easing. But lower crude oil prices and a slow economic recovery following the 3-percentage-point consumption tax hike to 8 percent in April 2014 have prompted the BOJ to delay the timing of reaching the inflation goal.

Japanese government's debt swells to ¥1.053 quadrillion - Japan’s debt stood at a record-high ¥1.053 quadrillion ($8.78 trillion) at the end of March, the Finance Ministry said Friday, increasing pressure on the government to take further austerity measures. The ministry also projected the debt would reach ¥1.167 quadrillion by the end of fiscal 2015 next March, reflecting the need to finance ballooning social security costs with state debt as the population rapidly grays. The latest figure tops the previous record of ¥1.039 quadrillion set in June last year and was more than double Japan’s nominal gross domestic product in 2014, which was ¥488 trillion. Japan’s fiscal health is the worst among the major developed economies. The result consisted of ¥881.5 trillion in Japanese government bonds, ¥55.0 trillion in borrowing, mainly from financial institutions, and ¥116.9 trillion in financing bills, or short-term government notes up to six months. As of March 31, per capita debt — or the amount owed per person — was about ¥8.30 million. Japan’s population stood at around 126.9 million as of April 1.

Japan joining global bond rout as BOJ shifts on inflation target -- The Bank of Japan’s equivocation on its inflation target is adding to the shifting global monetary policy picture that has sparked a sovereign debt rout. The nation’s 10-year yield has climbed almost 10 basis points since BOJ Gov. Haruhiko Kuroda said April 30 that he sees the price goal being reached around the first half of the 2016 fiscal year. When Kuroda introduced his record bond-buying plan in April 2013, he said he expected the goal would be reached in about two years. The change in tone is an admission of failure that suggests the need for further easing, which is technically difficult and requires a new policy regime, according to Tokai Tokyo Securities Co. “It’s difficult for the BOJ to meet its inflation target and a failure of the current policy framework will spur talk of a technical exit,” said Kazuhiko Sano, the chief bond strategist at Tokai Tokyo who correctly predicted Japan’s 10-year yield would fall to 0.25 percent by March. “The BOJ will need to overhaul the fundamental framework of its quantitative and qualitative easing.” The whispers of unquiet in Japan’s markets coincided with a slump in bonds across the world on prospects that U.S. interest rate increases will kill off the bull-run in sovereign debt that took yields to unprecedented lows. Benchmark Japanese securities headed for their biggest decline in three months on Thursday after Federal Reserve Chair Janet Yellen said on May 6 that yields on Treasury bonds are too low.

It's 2015, But Japan is USA's Largest Creditor (Again) -- This news was buried somewhere with all else that's happening in the world economy, and I'm not sure if it's even that significant, but Japan has resumed the mantle of being the United States' largest lender going by the amount of Treasuries it holds. For the month of February 2015, it's Japan at $1.2244T to China at 1.2237T [cue We are the Champions]. It's certainly not a distinction to be proud of, but for what it's worth, earlier predictions that it would come true have proven good. In mid-2014, the purchases of the Japanese pension fund in foreign sovereign bonds to boost negligible returns on Japanese government bonds (JGBs) was offered as a reason Japan was set to overtake China: Japan is poised to pass China as America’s biggest foreign creditor this year with help from the world’s largest pension fund, according to Nomura Holdings Inc. The 126.6 trillion yen ($1.25 trillion) Government Pension Investment Fund will increase overseas bond holdings in coming months to earn higher yields, according to money managers, strategists and economists surveyed by Bloomberg. Separate funds in Japan that use GPIF’s allocations as a benchmark may follow, according to a professor who advises the government. China’s accumulation of reserves that it has used to buy Treasuries will diminish, a Beijing-based official said last month.

In India, a Debate Over Central Bank Independence - A debate over how to set interest rates in India is pitting the central bank against finance ministry officials, and it’s showing no signs of abating. Unlike the U.S., where the Federal Open Market Committee’s 12 members vote on monetary policy, India’s central bank governor is advised by a technical committee but takes sole responsibility for setting rates. In the past, though, the central bank has come under intense political pressure on its rate decisions. The bank’s independence is not enshrined in its 1930’s founding charter and India has scored badly on global studies of central bank independence. Since assuming his post in 2013, Governor Raghuram Rajan has battled to restore a focus on curbing inflation, despite criticism from growth-focused politicians. Authorities now are seeking to set up a monetary policy committee to formalize India’s decision-making process on interest rates and bring it in line with many other nations. New legislation to do so is currently in the drafting phase, and Finance Minister Arun Jaitley has pledged to introduce it to Parliament within a year. The problem is the central bank and finance ministry both want to control the majority of appointments to the committee – a reflection of the battle for control over the bank that’s raged for years.

India’s Debt Pileup Complicates Growth Plans - WSJ: A large pile of debt on the books of India’s big infrastructure companies is complicating Prime Minister Narendra Modi’s plans to boost the country’s economy and improve its woeful roads, electric grids and other public works. The companies that build big projects owe more than 3 trillion rupees ($48 billion), the result of a failed effort by the previous government to get businesses to help improve India’s infrastructure. The total amount of debt for Indian infrastructure companies is at its highest in more than a decade, affecting the overall economy because banks, fearing the loans won't be repaid, are reluctant to lend to other companies. Debt levels have risen across Asia in the past five years and are now higher than they were before the Asian financial crisis in 1997. The borrowing has taken different forms in different countries. In China, giant state-owned companies borrowed the most, in Thailand and Malaysia, consumers took on debt, while in Japan, the government boosted its world-leading borrowing.High debt levels could limit India’s ability to help drive global growth at a time when China is slowing and many of the world’s economies are weak. Foreign portfolio investors have poured $42 billion into Indian stocks and bonds over the past year, leaving them vulnerable to cracks in the country’s economy. In India, overall debt levels are relatively low. But the sector struggling the most with its borrowing is also one that Mr. Modi is counting on to juice the economy and boost the country’s productivity. Instead, the companies are now focused on reducing their debt.

India and China Top Mexico as Sources of Illegal Immigration to USA  -- India left Mexico behind as the top country sending illegal immigrants into the United States as of 2012, according to several media reports.  A more recent review of 2013 immigration data shows that China replaced India and Mexico as the top country of origin for immigrants to the United States. The 2013 American Community Survey, conducted by the U.S. Census Bureau, recorded 1,201,000 immigrants. Of those, 125,000 came from Mexico, 129,000 came from India, and 147,000 came from China. The previous year, Mexican immigration (125,000) just topped Chinese immigration (124,000). Pew Research has found that Indians constitute four per cent of the total illegal immigrants living in the US, a country where the overall unauthorized immigrant population has remained unchanged since 2009.  Mexicans still make up about half of all unauthorized immigrants (52%), though their numbers have been declining in recent years. There were 5.9 million Mexican unauthorized immigrants living in the U.S. in 2012, down from 6.4 million in 2009, according to Pew Research Center estimates. Ranking second to Mexico is El Salvador (675,000 in 2012), followed by Guatemala (525,000), India (450,000), Honduras (350,000), China (300,000) and the Philippines (200,000). But largely because of a marked decline in Mexican unauthorized immigrants since 2009, the shares of unauthorized immigrants from other nations and regions have grown. The sudden reversal of a long trend of growth in the number of Mexican unauthorized immigrants probably results from both a marked decline in new arrivals and an increase in departures to Mexico.

Australia’s central bank cuts key rate to record low of 2% -- Australia’s central bank today (May 5) cut interest rates for the second time this year, seeking to buttress the economy against sliding mining investment while heading off a harmful increase in the local currency. The Aussie dollar did initially drop after the Reserve Bank of Australia (RBA) trimmed its cash rate by a quarter percentage point to a fresh all-time low of 2 per cent. Yet it soon rallied as investors wondered whether the easing cycle might now be over. Indeed, the statement announcing the move noted some improvement in the economy while omitting a mention that further action could prove necessary. “The board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand,” said RBA Governor Glenn Stevens. He also offered a nod to recent better data. “The available information suggests improved trends in household demand over the past six months and stronger growth in employment.” As a result, interbank futures dipped from July onwards and short term yields climbed as the market pared back the prospects of rates going under 2 per cent. The Aussie dollar initially slid half a US cent but later more than reversed the drop to US$0.7910. Against the Singapore dollar, it stood at S$1.0435.

Australian Rate Cut Falls Flat -  A rate cut by the Reserve Bank of Australia earlier this week hasn’t panned out as expected, as bond yields have risen and the Australian dollar gotten stronger, stymying efforts to give a boost to the economy. The RBA on Tuesday cut its cash rate target a quarter of a percentage point to a record low of 2%, citing subdued inflation risks and weak growth. It was the second cut this year and the tenth since late 2011. Normally, this would weaken the currency and push yields down, as bond investors seek better returns elsewhere. As Australia’s mining boom fades, authorities are looking for a renaissance in manufacturing, and hope a weaker dollar will spur exports. But the yield on 10-year Australian government bonds rose to 3.00% Thursday, its highest level this year, up from 2.68% at the end of last week. The Australian dollar also strengthened, moving back above 0.8 to the U.S. dollar Thursday extending a run of gains that began last month.

Global growth report card – is the world slowdown temporary? - The latest activity “nowcasts” shown in detail below indicate that the global economy has continued to slow down more than consensus forecasts projected, though forecasters continue to believe that this slowdown will prove temporary. Data in the US have so far failed to improve, after a very disappointing first quarter of 2015. US activity growth is now estimated at 1.8 per cent, down from 2.0 per cent last month. Japanese activity in both the industrial and retail sectors has also been weak, with the model’s estimate of activity growth now close to zero, while the UK seems to have slowed to about 1.8 per cent in the run up to next week’s General Election. Chinese activity dipped sharply last month, and the estimated rate of growth is now 5.3 per cent, well below the government’s 7 per cent target for the 2015 calendar year. Other Asian economies have also slowed, partly due to the effect of the US West Coast ports strike on their exports. The sole bright spot is the eurozone, where activity growth has improved slightly further to 1.8 per cent, following an encouraging pick-up earlier in the year. The gap between US and eurozone growth has, for now, disappeared completely.Overall, the growth rate of the global economy has therefore slowed further, according to our models. Our estimate of activity growth in the major advanced economies plus China, which we use as a proxy for global activity, has dropped to 3.0 per cent at the end of April, from 3.7 per cent a month ago. This measure of global activity has now broken below the roughly 4 per cent rate that had been established since mid 2014.

Liquidity drought could spark market bloodbath, warns IIF -  Investors face a “painful” adjustment in a world of evaporating liquidity and higher US interest rates that will trigger huge market swings with potentially catastrophic consequences, the Institute of International Finance has warned. Timothy Adams, the chief executive of the IIF, which represents the world’s biggest banks, described liquidity as the “top issue” at high level meetings of central bankers, chief executives and other financial institutions. He warned that the raft of regulation introduced in the wake of the 2008 crisis could potentially cause market gyrations larger than last October’s “flash crash” in US Treasuries. While Mr Adams supports tougher rules that have made the banks more resilient, he said a complex web of regulatory reform may have left banks less able to respond to the next crisis. “There’s just less capacity for making markets,” he said. “Officials will say: we expect some volatility and this was part of this broader scheme of regulatory reform. But for the private sector there is this issue of: is the total effect of all of these various regulatory changes likely to produce outcomes larger than each individual regulatory reform and its consequences? "The cumulative unintended could end up being much larger than the one-off intended - we just don’t know.”

Venezuela to Nationalize All Food Distribution -- Venezuelan President Nicolas Maduro has promised to nationalise food distribution in the South American nation beset with record shortages of basic goods, runaway inflation and an escalating economic crisis. During a rally on Friday, on International Workers' Day, the socialist leader allowed a union activist to ask for the nationalisation of food and essential-item distribution. Various estimates suggest the government already controls about half of the country's food distribution, but that hasn't stopped record shortages in shops and markets. Venezuela is struggling with a recession, 68.5% annual inflation and severe shortages of the basic goods that it relies on oil money to import. On any given day, people in Venezuela can wait hours to get some subsidised milk, cooking oil, milk or flour, if they can be found at all. Maduro's government is strapped for cash in the face of a global supply glut that caused oil prices to collapse by more than 50 percent between June and January. Nonetheless, Maduro also announced a 30% increase in public wages on Friday.

Presenting The Most Overvalued Housing Market In The World In One Chart - On one side of the ring, we have The Economist, that came out last week saying Canada has the most overvalued housing market in the world. After crunching the data in housing markets in 26 nations, The Economist has determined that Canada’s property market is the most overvalued in terms of rent prices (+89%), and the third most overvalued in terms of incomes (+35%). They have mentioned in the past that the market has looked bubbly for some time, but finally Canada is officially at the top of their list. Of course, The Economist is not the only fighter on this side of the ring. Just over a month ago, the IMF sounded a fresh alarm on Canada’s housing market by saying that household debt is well above that of other countries. Meanwhile, seven in ten mortgage lenders in Canada have expressed “concerns” that the real estate sector is in a bubble that could burst at any time. Deutsch Bank estimates the market is 67% overvalued and readily offers seven reasons why Canada is in trouble. Even hedge funds are starting to find ways to short the market in anticipation of an upcoming collapse. Canada’s housing situation could give rise to the world’s next Steve Eisman, Eugene Xu, or Greg Lippmann. On the opposing side of the ring, who will contend that the Canadian housing market is just different this time? Hint: look to the banks and government.

Russian Economy May Be Stumbling Back To Its Feet: The Bank of Russia has cut interest rates for the third time so far this year, reinforcing forecasts by some government ministers that the country’s economic woes are beginning to stabilize. The central bank cut its key rate on April 30 to 12.5 percent, a reduction of 1.5 points, and said it would reduce it further – perhaps at its next board meeting on June 15 – as inflation cools down. The reason in part is to keep the ruble from rising too quickly in value, which would make Russian exports – notably oil and gas – more expensive on the world market.  The ruble has been on a rollercoaster ride in the past several months because of the plunging price of oil and Western sanctions imposed on Moscow for its involvement in the crisis in neighboring Ukraine. The currency hit a record low against the US dollar in December, but was up by 13 percent compared with the dollar just before the Bank of Russia acted. This year began with an emergency rise in the key interest rate in January to help shore up the ruble. That evidently worked, and the central bank quickly lowered the rates in January and March to help cool off the quickly rebounding ruble. Many analysts though, believe the Bank of Russia will be careful in adjusting interest rates to control the value of the ruble because outside forces could do the job themselves.

Pirate Party surges in polls to become biggest political party in Iceland -- Iceland is in the grips of piracy, albeit the Pirate Party who have managed to become the biggest political party in the country, after local polling showed public support in overwhelming numbers. The Party, which has sprung up in over 60 countries, campaigns for internet and data freedom. It now has a 23.9 per cent share of the vote, up from 12.8 per cent in February.  By comparison the poll, conducted Icelandic market research company MMR, showed that the country’s ruling Independence Party had slipped from 25.5 per cent to 23.4 per cent. Over the past month the party has seen its membership soar, according to recent polling, and would win 16 seats in Iceland’s Parliament in the event of an election.In 2013, the Pirates won three parliamentary seats in Iceland’s election and have also been using their seats in the European Parliament to bring pressure on the European Union to overhaul copyright laws. The party’s leader, Birgitta Jonsdottir, was previously a member of Iceland’s Parliament for the Citizen’s Movement, a party that formed in the wake of the Iceland’s financial crisis.

The War of Trade Models - Dani Rodrik --There is an interesting debate going on in Europe about the likely consequences of the TTIP (Transatlantic Trade and Investment Partnership). Much of the real debate is (or should be) about the proposed Investor-State dispute resolution (ISDS) and the desirability of regulatory harmonization when nations have different preferences about how these regulations should be designed. But there is also a fascinating numbers game going on, with alternative quantitative estimates deployed by pro- and anti-TTIP groups. The studies used by the pro group tend to show positive, if small, GDP effects. Probably the best known among these is a study by Joseph Francois and his colleagues, according to which EU and US GDPs will rise by 0.5% and 0.4%, respectively, by 2027 (relative to the baseline scenario without TTIP). Francois et al use a standard computable general equilibrium model that assumes full employment and perfect competition (save for a few sectors where there are scale economies and monopolistic competition). Wisely, they stay away from some of the bells and whistles (e.g., induced learning and TFP gains) that have been used in the past to produce exaggerated benefits from trade agreements.  These results, however, have been challenged in a recent paper by Jeronim Capaldo. Capaldo uses a Keynesian model where output is demand-determined and finds that EU GDP would fall as a result of a decline in net exports. (But U.S. output would rise, since U.S. net exports increase.)  

Romania's central bank surprises with new record low rates (Reuters) - Romania's central bank surprised markets by shaving another quarter point off its benchmark interest rate to a new record low on Wednesday, as a cut in value added tax next month should keep inflation near zero. It cut its benchmark rate to 1.75 percent, still higher than rates in most other European countries, where some are negative. Most analysts had expected Romania's central bank to end its rate cutting cycle at 2 percent, and that monetary policy would continue to ease through cuts in minimum reserve requirements as signalled by policymakers. On Wednesday, the bank also cut the reserve requirements for commercial banks' leu currency liabilities to 8 percent from 10 percent, which will pour some 3 billion lei ($765 million) into the market. It kept requirements for hard currency liabilities at 14 percent, or 4 billion euros ($4.53 billion). In the region, Poland has already said it has finished easing policy, while Hungary left room for more rate cuts. Central European economies are improving but they face risks from an expected U.S. interest rate hike later this year, which would reduce the yield gap with emerging European assets, potentially reducing capital inflows.

French Unemployment At New Record Highs: Whom Do They Blame? - While ECB president Mario Draghi brags his economic policy of negative interest rates is working, I ask for whom? On April 23, 2015 I noted Spain's Unemployment Rate Increases to 23.7%; 114,300 Jobs Vanish in First Quarter, Public Sector Jobs Rise. Let's now turn our attention to France.

Flashback January 27, 2014 Mish: France Unemployment Hits New Record High; Hollande's November Pledge Reviewed In November, French president Francois Hollande announced he had met his electoral pledge to halt the rise in joblessness by the end of 2013.No one with any economic sense believed it. Today in the face of a new record high unemployment rate, Hollande says unemployment has "stabilised".Whom Do The French Blame? I have a question for Mario Draghi: Is this what it means to have your negative interest rate policies "work"? One cannot blame the ECB for French nonsense. Yet, one can blame the ECB for stupidity in attempting to solve via economic policy, something that cannot possibly be solved that way.

Robots About to Take Away 18 Million German Jobs, 59 Percent of Germany's Work Force? -- I have seen many grim predictions regarding robots taking away human jobs, but one of the most dire predictions comes from a study commissioned by ING-Diba.  The study claims that 59 percent of Germany's work force could be replaced by machines and software in the coming decades. The Local asks Robots About to Take Away 18 Million Jobs? The results of the [ING-Diba] study paint an almost doomsday-esque scenario for Germany. Almost two thirds of its workforce will be unemployed. Of the 30.9 million people currently in full or part-time employment in Germany, 18 million will be made redundant by improved technology, the report claims. Although the study looked into the effect that advancing technology will have on the work place in several European countries including Finland and the Netherlands, it was Germany that came out the worst. This, argues the report, is the price Germany will pay for its strong industrial sector. Factory workers and the administrative army behind global giants such as Volkswagen and BMW will soon become superfluous as advanced algorithms and sophisticated machinery are developed which can do their jobs faster and more efficiently.

Will the Politics or Economics of Deflation Prove More Harmful? --Although growth has returned to the periphery of Europe, with Spain, Ireland, Portugal and even Greece posting positive numbers, the rate of growth in their debts still outpaces their rate of GDP growth. That means, for example, that Portugal would have to run a current account surplus at Chinese levels for over a decade to get unemployment down to single figures, and that is simply not going to happen. Indeed, the most recent ECB unemployment projections predict double-digit unemployment out to 2017, regardless of the incipient recovery. Standard macro theory imagines that fiscal contractions are recessionary in the short run, but in the long run the supply side determines the trend rate of growth. What the eurozone has recently shown us is that you can contract so severely on the demand side that the supply side of the economy can be permanently damaged, which may have lowered inflationary expectations to a deflationary equilibrium point. This is extremely dangerous - more so for political than economic reasons. The politics of periods of inflation and deflation are radically different. Inflation is a class-specific tax, insofar as it hits creditors and the owners of paper assets harder and faster than anyone else, especially at sustained moderate levels. Yes, people on fixed incomes also suffer in such conditions, but given that they are usually pensioners who vote in disproportionate numbers, we can be sure that relief will be forthcoming. An investor's profits know no such relief. Given this, the politics of collective action under inflation are clear. Investors know what they want and mobilize to get it: an end to inflation and the taming of inflationary forces. Labor, on the other hand, quite likes this debt-friendly world and the tight labor markets that it produces. As profits get squeezed, labor's share of national income grows. Think of this as the world in the 1970s, because those were the prevailing economic conditions at the time.

ECB's balance sheet rises to 2.372 trln euros in week to May 1 (Reuters) - The combined balance sheet of the European Central Bank and the euro zone's 19 national central banks billion euros rose 11.8 billion euros ($13.2 billion) to 2.372 trillion euros in the week to May 1, the ECB said on Tuesday. The ECB is rolling out a scheme to buy government bonds and other assets known as "quantitative easing" to pump 1 trillion euros into the economy in order to lift inflation towards its target of just below 2 percent. ($1 = 0.8963 euros)

Has The ECB Run Out Of Willing Bonds Sellers On The Long End? -- While the ECB is representing that it has no limitations on total monthly volume purchases, it is suddenly finding itself forced to buy increasingly more bonds on the short end. Which brings up the question: is this due to the specific shift in the purchasing strategy of the ECB, or has the ECB simply run out of bond sellers on the long end and as a result is forced to buy ever shorter-maturity paper?  Which is why many carefully poured over today's monthly update of the ECB's public sector purchase programme (PSPP) aka QE for the month of April, to see if there was a decline in purchases, or if there was anything else worth noting.  On the surface, things were great: after purchasing €47.4 billion in March, the ECB purchased a total of €95.1 billion through April 30, or €47.7 billion in April: a €300 million increase from the previous month.  The breakdown by nation also revealed nothing substantial, with that biggest wildcard of all, Germany, seeing a moderate increase in purchases with Draghi buying €11.1 billion in German bonds, after purchasing a virtually identical amount the month before. However, a very different picture emerges when looking at the breakdown by weighted average remaining maturity of ECB bond purchases.

European Bond Yields Are Surging - Draghi, We're Gonna Need A Bigger Bazooka -- Despite a good start, since early March when The ECB began its bond-buying bonanza, things have not been going the way Mario Draghi had hoped. While inflation data inflected modestly higher (cough oil cough), European bond yields (and peripheral bond spreads) have widened notably. Whether this is "sell the news" trading, Gross-Gundlach-driven unwinds, or Greek "serious disappointment" contagion (Greek 10Y bond yields are up over 200bps from the announcement in January of ECB QE) is unclear... but what is clear is that if ECB bond-buying is not pressuring yields lower then how can they hope to contain real Grexit contagion?

Global Bond Rout Halts as Rising Debt Yields Attract Investors -  A rally in Italian and Spanish government bonds led a rebound in debt markets around the world after a selloff that wiped out more than $410 billion in value in the past week. Treasuries erased intraday losses along with government bonds across Europe as the slump pushed yields to levels that attracted buyers to the market, backed up by purchases of debt by the European Central Bank under its quantitative-easing plan. “The strength of this turnaround suggests there is still also plenty of opposite interest out there. It’s probably also the shock that yields can move this much in a matter of days after so much conviction that the ECB had anchored yields for good.” Italy’s 10-year yield fell five basis points, or 0.05 percentage point, to 1.76 percent at 10:48 a.m. London time after it jumped 27 basis points on Tuesday and touched the highest this year earlier on Wednesday. The 1.5 percent security due in June 2025 rose 0.46, or 4.60 euros per 1,000-euro ($1,121) face amount, to 97.715. Similar-maturity Spanish bond yields dropped five basis points to 1.73 percent, U.K. gilts halted a six-day run of losses and U.S. Treasuries were little changed after the 10-year yield increased as much as four basis points. Germany’s 10-year yield climbed two basis points to 0.53 percent after rising to 0.59 percent earlier on Wednesday, the highest since Dec. 29. “The market has come a long way and the recent selloff brought bond yields back to levels that some see as attractive,”

Did The World's Central Banks Hit The Panic Button This Morning? -  If there is one thing more worrisome for the world's central planners than a stock sell-off, it is a bond rout 'proving' that they have lost control. The overnight carnage across global bond markets appears to have triggered someone (or someones) to step in - in dramatic size - to rescue bonds and save the world once again. Rescue Me!! (Futures prices) And what that looked like for German Bund yields... What is becoming increasingly clear to the central bankers, as we noted earlier, is that since the bond market is now massively illiquid and everyone is on the same side there is no way to orchestrated a controlled decline. Be careful what you wish for, stock 'investors'. Charts: @NanexLLC

Investors stung by eurozone bond volatility - European bonds gyrated on Thursday in the worst bout of volatility since the eurozone debt crisis, as markets were thrown into confusion over the impact of quantitative easing on Europe’s financial assets and economies. In the space of a few hours the yield on Germany’s 10-year Bund, which moves inversely to prices, jumped by 21 basis points to 0.80 per cent before easing back to 0.59 per cent. With sovereign bond yields rarely moving by more than a few hundredths of a percentage point in a day, the volatility caught investors off guard. “We’ve been hurt,” said James Athey, investment manager at Aberdeen Asset Management. “The movements of recent days have been extremely unusual and the magnitude doesn’t reflect the economic data we’re seeing.” Some experts believe the sell-off is simply a correction to the strong rally in bond markets this year. When the European Central Bank launched its QE programme in March, investors piled into eurozone debt, pushing up bond and equity prices and driving the euro sharply lower. This crowded position left the market vulnerable to small shifts in sentiment. Oil prices have jumped in recent weeks, alleviating fears about deflation and the downward pressure on bond yields. Nevertheless, many market experts were still puzzled by Thursday’s swings, saying the timing of recent market volatility lacked a clear trigger. “It is difficult to understand exactly what is driving this,” said Michael Riddell, bond fund manager at M&G Investments. “But that’s in part because central bank action has blunted the relationship between feedback from the economy and prices in markets.”

What Has Caused Europe’s Bond Rout? -- The past week or two has seen an unprecedented rout in bond markets with German ten year bunds being the prime example. German ten year bund yields hit a record low of 0.05% on 13 April. But yields then rebounded to 0.74% earlier today putting it on course for the biggest weekly rise since the country joined the euro in 1999 (see chart below from WSJ MarketWatch).This huge shift is all the more surprising since nearly everyone had assumed that it was only a matter of time before German bund yields went to zero and even into negative territory. But what has prompted such a huge sell off and what does it mean for the ECB and longer term investments around Europe? First it is worth noting that the rout has been in bond markets across the Eurozone and even spread to US Treasuries rather than simply confined to the German bund market. That said, as explained above, the move in bunds has been particularly sharp and exemplifies what has been happening more widely. The most likely reasons behind such a move are: Bonds overbought, a correction was due – one obvious explanation is that the long trade in favour of bonds had become incredibly crowed and too one sided. This had pushed prices too high, particularly with the huge amount of bonds moving into negative yields. As such, a correction is not entirely unexpected or surprising. Collecting profits after launch of QE – as is often the case, there was a long expectation of QE with investors buying the rumour and (eventually) selling the fact. While the timeline here does not entirely line up, there is undoubtedly part of the move which was motivated or exacerbated by investors booking significant profits on bonds by selling off some of their holdings as prices looked to be declining. Temporary shift in supply of bonds – As the chart below highlights (courtesy of Zerohedge and BNP Paribas) while the supply of bunds was very scarce in April, it has become much more abundant in May. This has, at least temporarily, relieved the significant pressure from high demand and allowed for a sharp price move in combination with the other factors mentioned.

Europe to End FDIC Insurance System for Banks? - So what is the purpose of paying taxes? It was supposed to be about protecting society, but politicians are bribed to allow the banks to do as they like with other people’s money. The whole system of insuring the people to create confidence goes out the window when those protections cost too much.  It was reported that Austria is now planning a wide-ranging reform of deposit insurance, abandoning government insurance for deposits. The new view states the people should pay attention to the banks, since politicians are bribed way too much, and regulators cannot do their job anyway. This is where it starts. We already have bail-in legislation from the USA to Switzerland. We can count on this type of insurance vanishing when the system crashes and burns.  Look to the private assets as the hedge. Government guarantees will mean nothing.

Greece Says it Won't Request New Bailout: Greece has said that it would not ask for a new rescue package from its international creditors if they would simply restructure its debt. Greek Finance Minister Yanis Varoufakis said in an interview with a Greek newspaper Saturday that Greece can do without a new bailout, but "one of the conditions for this to happen ... is an important restructuring of the [current] debt." However, its creditors, the European Union, European Central Bank and the International Monetary Fund have considered that impossible. Although Varoufakis called the Eurozone “a shaky common monetary system" that “if not changed, will die,” he dismissed the possibility of leaving the euro group. It was "one thing to say we shouldn't have joined the euro and it is another to say that we have to leave," said Varoufakis, because backtracking now would lead to "an unforeseen negative situation". Athens resumed talks with its creditors last week, in an attempted to unlock the $8 billion last payment of its EU-IMF current bailout package. Greece is struggling to pay salaries and pensions without that payment. A May 12 deadline is fast approaching, when the county has to pay over a billion dollars in debt and interest for repayment to the IMF. Without an agreement to release the remaining EU-IMF bailout money, Greece faces default and a possible exit from the Eurozone.

Greece and creditors 'miles apart' on deal to avert debt default - Greece and its international creditors remain apart on key elements of the country's bailout agenda even as they worked to bridge differences in a bid to avert a default as early as this month. As the two sides were still locked in discussions on Saturday, it wasn't clear that there would be enough progress to clinch a deal in time for the planned May 11 meeting of euro- area finance ministers, some officials warned. "They're working hard now and that's what we've gained," Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem told reporters in the Hague on Friday. "But in the end we only look at the results and we're not that far yet." Greek Prime Minister Alexis Tsipras told his cabinet on Thursday he's confident of closing a deal, even as his government sent conflicting signals on its willingness to agree on reforms required under the €240 billion bailout. While the government is working hard to get a deal as soon as possible, it retains red lines in matters such as labor market reforms and cuts to wages and pensions, government spokesman Gabriel Sakellaridis said on Saturday. Faced with debt payments totaling about €1 billion to the International Monetary Fund on May 6 and May 12, Greece hopes there will be enough progress in the talks by next week to allow the European Central Bank to restore liquidity access for the country's cash-strapped banks.

‘No default if Greece misses payments to ECB and IMF’ - Most top credit rating agencies said yesterday they would not cut Greece’s rating to default if it misses a payment to the International Monetary Fund or European Central Bank, a stance that could keep vital ECB funding flowing into the financial system. Greece owes nearly €1 billion to the IMF this month and almost €7 billion to the ECB over July and August and there are concerns that the govern-ment, stuck in funding talks with official lenders, will miss the payments. This would be an unprecedented move that could put Athens’ future in the euro in doubt and has raised questions about whether it could set off a chain reaction, possibly accelerating repayments due to other official and private sector creditors and compounding Greece’s problems. But for most rating firms, whose views determine whether the ECB can still accept sovereign Greek securities as collateral for lending to its banks, a missed IMF payment would not lead them label the country in default. This is critical to keeping the life-support mechanism, the ELA emergency cash provided by the Greek central bank with the blessing of the ECB, flowing to banks because the ECB would not accept any securities issued by a government in default.  Standard and Poor’s, Fitch and DBRS, three of the top four, all say that as the IMF and ECB are not standard creditors, a missed payment to either, although likely to push Greece’s rating even deeper into junk, would not be classed as a default.

Greek PM to Meet With Creditors after Obstacles in Brussels Greek Prime Minister Alexis Tsipras is planning to meet with the heads of Greece’s creditors over the next few days, in an attempt to arrange a Eurogroup meeting and to make progress in the negotiations, so that Athens can receive the next installment. On Saturday, May 2, the technical level cycle of negotiations was completed and according to media reports several obstacles were met. The IMF has requested that Greece makes mass lay-offs, while the European officials are asking for measures in order to cover the 2.5 billion-euro financial gap. On Sunday, May 3, the creditors’ representatives will inform their political leaders about the negotiations, the points where both parties are in agreement and the points where there are discrepancies in order to determine their future course of action. The talks will resume on Monday, with Athens aiming at the arrangement of an emergency Eurogroup meeting by the end of the week. Alexis Tsipras met with the Greek government ministers and his close associates on Saturday, while today, Sunday, May 3 he will meet with members of the economic team, even though Yanis Varoufakis is currently on vacation in Aegina.

Greece, creditors still far apart despite intense negotiations - Greece and its international creditors are still far apart on key elements of the country’s bailout agenda after four days of intensive negotiations. Differences remain on issues ranging from fiscal assumptions to asset sales and labour and pension reforms, according to three people familiar with the negotiations. Still, progress has been made in a much-improved atmosphere, they said. Another official said that Greece should have enough cash to get through the week and make a €200-million ($272-million) payment to the International Monetary Fund on May 6. The people spoke on condition of anonymity as the talks are confidential. Negotiations resume Monday.The fiscal noose is tightening on Greece after weeks of brinkmanship and Prime Minister Alexis Tsipras may need to show the European Central Bank in the coming days that he’s willing to work towards a compromise. Failure to do so could prompt the ECB to tighten conditions on emergency lending at a meeting on May 6, a decision that would risk pushing Greece further toward default. Euro zone officials are skeptical that a technical agreement will be reached by May 6, said two people familiar with the talks. Mr. Tsipras held talks on Sunday evening with Finance Minister Yanis Varoufakis and the head of his government’s negotiating team, Euclid Tsakalotos, to discuss progress in the negotiations. Mr. Tsipras has said he aims for enough progress this week to allow the ECB to relax liquidity conditions and avert a default that could come as soon as this month, Greek newspaper Kathimerini reported on Sunday.

"Completely Absurd" To Think Greece Won't Default In May: Official - Facing a pensioner rebellion and a looming €780 million payment due to the IMF on May 12, Greece’s back is now truly against the wall. Last Tuesday, Athens appears to have run out of cash, triggering an 8 hour delay in pension payments which left some pensioners walking away from ATMs empty-handed. This didn’t sit well with the country’s retirees who reportedly disrupted a state pension fund board meeting and demanded that cash reserves not be transferred to the central government as mandated by a decree that came down last month.   Now, with a reshuffled negotiating team (characterized by less Varoufakis and more negotiating), PM Tsipras is racing to strike a deal on reforms that would allow the country’s creditors to disburse the bailout money Athens needs to pay… well, to pay its creditors (we’ll ignore the circular reasoning there for now).  More from Bloomberg:While talks have picked up pace in recent days, the two sides are still trying to bridge differences on stalled reforms. It isn’t yet clear that there will be enough progress to clinch a deal in time for the planned May 11 meeting of euro-area finance ministers, some officials warnedFaced with debt payments totaling about 1 billion euros to the International Monetary Fund on May 6 and May 12, Greece hopes there will be enough progress in the talks by next week to allow the European Central Bank to restore liquidity access for the country’s cash-strapped banks…

Charlie Munger Compares Greece To a "Frivolous, Drunken Brother-In-Law" - Having previously effused over gold and holocaust jews, bailouts, and handouts, Buffett & Munger took aim at Europe, well more implicitly Greece, during today's annual octagenerian-fest.  Munger on Euro strains: You shouldn't create a partnership with your drunken, shiftless brother in law.  And Buffett's (implicit Grexit) retort: the euro can and probably should survive but it will take some changes... As he previously said, Germany must stop Greek dog peeing on its rug.

The Greek Dra(ch)ma is back? - One more round of negotiations between Greece and the rest of is European partners to seek a last-minute solution before the Greek government runs out of money. Negotiations could end up going in any direction. Greece is unlikely to score a massive win but it could buy itself some time if there is agreement around a reasonable set of reforms that are to be implemented over the coming months. What Greece really wants out of these negotiations is straightforward: a restructuring/reduction of its current debt that allows them to survive over the coming years with a primary balance in (small) surplus. This would mean that their pressure is gone and and that they can implement any policies they want without worrying about new loans as long as they can keep a primary surplus, which might be feasible given the current state of the budget. In return it will be easy to promise reforms that can have enough support at home (removing bureaucratic barriers, broadening the tax base, improve government efficiency).  What the European partners want is much less clear. They would love to get paid back on all the current Greek government debt that they hold but that's unlikely to happen. Some would love to see Greece outside of the Euro area so that they do not have to deal with this again. There is a sense that whatever agreement is found now will not be the last one. The lack of trust has reached levels that has made it clear to some that Grexit is the best long-term outcome. But they are afraid of the consequences, both in the short run and in the long run in terms of credibility of the membership that would be left after Greece was gone.  But credible commitment on reforms is not feasible. Reforms take time to be designed and implemented and there is enough uncertainty about growth and interest rates to ensure that a future crisis can be ruled out.

Athens mayor guards city’s cash from government - The fund-grabbing decree came like a bolt from the blue, according to the mayor of Athens. Yiorgos Kaminis was in Vienna late last month at a gathering of mayors of EU capital cities when he heard the news: Greece’s local authorities had to hand over their entire cash reserves to help avert a possible sovereign default. “I thought for a moment I should take the next flight back to Athens. Then I decided it was better to discuss it with my (European) colleagues,” Mr Kaminis told the FT, adding that several European mayors were as shocked as he was. The move by the leftwing Syriza-led government of prime minister Alexis Tsipras to raid municipal reserves was one of the most dramatic signs of Greece’s desperate need for cash as its coffers run dry. Athens has been seeking a fresh bailout deal with international lenders that would give it access to a €7.2bn aid package frozen since last year. Mr Tsipras’s latest prediction that an agreement would be struck this weekend has proved over-optimistic. An official in Athens said on Sunday the negotiations had run into problems over the creditors’ insistence on further pension cuts and measures to permit mass dismissals of private sector workers. Both demands are “red lines” that Syriza cannot accept, according to Mr Tsipras. The parties are to resume talks on Monday. They are hoping to clinch a deal before a meeting of eurozone finance ministers on May 11 — a day before a cash-strapped Athens must make a €750m payment to the International Monetary Fund. The mayors of Greece’s 330 municipalities say they want to help the government but are not prepared to hand over unconditionally their entire €1.2bn stash of funds. So far, only a handful of Syriza-run local authorities have complied with the decree.

Syriza Emulates Nixon Going to China in a Bad Way  - Yves Smith - It’s painful to watch the Greek ruling coalition unwittingly do the creditors’ work by wringing Greece dry of cash more aggressively than Pasok or New Democracy would have dared to.  In a desperate bid to buy more time to reach an agreement, the central government has borrowed pension cash and ordered local governments and universities to turn over their deposits to the central bank, ostensibly to serve as short-term borrowings to make IMF payments. But as anyone with an operating brain cell must recognize, if the Greek negotiators fail to come to terms with their creditors to unlock €7.2 billion in bailout funds, this begged and borrowed money will never be coming back. Greece will default in even more desperate straits than it would have otherwise. As we’ve pointed out, the best strategy for the creditors was to keep Greece in the sweatbox. Syriza fails to realize that they are playing right into their counterparties hands.  Even the ruling coalition’s extreme measures appear to be buying only a few days of breathing room. The latest report is that Greece will be able to make a May 6 IMF payment, but the government’s body language is that it really, really, really needs the Eurogroup to approve the release of funds at its May 11 meeting, prior to the next IMF payment date of May 12.  But Eurogroup chief Jeoren Djisselbloem ruled that possibility out at the last Eurogroup meeting. And even if the Eurogroup ministers were to have a miraculous change of heart, the need for many of the member countries, particularly Germany, to obtain parliamentary approvals, separately would seem to make it impossible for Greece to get funds in time to make May 12 IMF payment.

IMF Splinters From Rest Of Troika, Threatens To Cut Off Greek Funding -   At this point it’s become fairly obvious to even the most casual observer that Greece is headed for some manner of default. The only real question is who gets shorted and when, as well as a relatively new question: which debt will Greece will default on first (just because it has so many choices). After a decree to sweep excess cash from local government coffers to the central bank didn’t go entirely as planned, Athens was forced to delay pension payments by 8 hours last Tuesday, prompting retirees to storm a pension fund board meeting, and at least one official recently claimed that even if a deal had been struck yesterday, there simply was no way — logistically speaking — that Greece could possibly make its May 12 payment of €780 million to the IMF. Now, FT is reporting that the IMF may refuse to disburse its part of the remaining €7.2 billion Athens would theoretically receive if negotiations produced a breakthrough unless the country’s European creditors agree to write-off a portion of their Greek debt. Here’s more: Greece is so far off course on its $172bn bailout programme that it faces losing vital International Monetary Fund support unless European lenders write off significant amounts of its sovereign debt, the fund has warned Athens’ eurozone creditors. The warning, delivered to eurozone finance ministers by Poul Thomsen, head of the IMF’s European department, raises the prospect that it may hold back its portion of a €7.2bn tranche of bailout aid that Greece is desperately attempting to secure to avoid bankruptcy. Eurozone creditors, who hold the vast bulk of Greek debt, are adamantly opposed to debt relief. But IMF support is crucial both for its funds and to sustain political backing for the Greece bailout, particularly in Germany.

The Persecution and Assassination of the People of Greece as Performed by the Inmates of the Troika, Under the Direction of the Eurogroup --  Yves Smith - In our coverage of the Greek government’s efforts to end austerity and negotiate a debt restructuring and a shift to pro-growth policies, we’ve stressed how unlikely the ruling coalition was to succeed. That meant it has been frustrating for readers to see the new government make unforced errors and reduce its already low odds of success. But even worse is the specter of Syriza now taking steps to wring money out of a long-sufffering population in order to make payments to creditorsAs we discussed yesterday, would the old mainstream coalition have dared to pilfer pension funds, local government deposits, and university surplus cash, particularly when the odds are high that the government will soon be forced to capitulate or default? Nevertheless, some readers have been unhappy that we have not been harsher critics of the creditors. It is a mystery to us why the Troika is willing to risk turning Greece into a failed state to a make a point about the cost of defying its authority. And we’ve chronicled over the years how austerity policies have failed.  However, the Greek government has exposed how deeply wedded not only the Eurocrats, but also the governments that have been forced to wear the austerity hairshirt are to economic faith healing. The Latvian government actually believes its program is a success, when that “success” was achieved through a 14% decline in the population as the youngest and most energetic departed, leaving Latvia with an aging populatoin. And as we and other commentators observed years ago, the contractionary policies inflicted on the periphery countries would eventually infect the core, and that is starting to occur as deflation takes hold in Europe.

IMF takes hard line on aid as Greek surplus turns to deficit - Greece is so far off course on its €172bn bailout programme that it faces losing vital International Monetary Fund support unless European lenders write off significant amounts of its sovereign debt, the fund has warned Athens’ eurozone creditors. The warning, delivered to eurozone finance ministers by Poul Thomsen, head of the IMF’s European department, raises the prospect that it may hold back its portion of a €7.2bn tranche of bailout aid that Greece is desperately attempting to secure to avoid bankruptcy. Half of the €7.2bn, which is the subject of intense negotiations between Athens and its creditors in Brussels-based talks that resumed on Monday, is due to come from the IMF. Without the funds, Greece is expected to run out of cash this month.  Eurozone creditors, who hold the vast bulk of Greek debt, are adamantly opposed to debt relief. But IMF support is crucial both for its funds and to sustain political backing for the Greece bailout, particularly in Germany. According to two officials present at a contentious meeting of eurozone finance ministers in Riga last month, Mr Thomsen said initial data the IMF had received from Greek authorities showed Athens was on track to run a primary budget deficit of as much as 1.5 per cent of gross domestic product this year. Under existing bailout targets, Athens was supposed to run a primary surplus — government receipts net of spending, excluding interest payments on sovereign debt — of 3 per cent of GDP in 2015. With the large surplus now turning into a sizeable deficit, Greece’s debt levels would begin to spike again. This would force either Athens to take drastic austerity measures or eurozone bailout lenders to agree to debt write-offs to get Athens’ debt back on a sustainable path, the IMF believes. Officials said Mr Thomsen specifically mentioned the need for debt relief during the three-hour meeting. “The IMF thinks the gap between the two realities is very large right now,”

Greece’s Firebrand Finance Minister Deserves to Be Heard -  Mohamed A. El-Erian - I have never met or spoken to Yanis Varoufakis, Greece's finance minister. Yet I feel I have gotten to know him through his writing and interviews, and by reading about his interactions with both the official and private sectors in Europe. That's why -- though I understand the rationale for the decision -- I was saddened last week when Prime Minister Alexis Tsipras sidelined Varoufakis from Greece’s complicated and consequential negotiations with its European creditors and the International Monetary Fund. Varoufakis was a breath of fresh air in this protracted and exhausting Greek economic drama, which involves alarming human costs in terms of unemployment, poverty and lost opportunities. Backed by considerable economic logic and a desire to do better, he pressed for more realism in the policy conditions demanded by Greece’s creditors. And he never tired of reminding people that Greece's recovery wasn't that country's responsibility alone. Greece's Fiscal OdysseyHis approach to substance came with an unusual negotiating style – one that attracted quite a bit of attention but understandably proved unpalatable to his European partners. Having spent the bulk of his career in academia, Varoufakis erred toward open public discussion and discourse. Diplomatic niceties were set aside in favor of candid debates. Flowery introductions gave way to laser-like focus on areas of disagreements. Having also been part of a government that was elected on the promise to restoring Greece's dignity, he had no hesitation about speaking to other European finance ministers as an equal. And because his meetings were closely covered by the media -- in particular those with his German counterparts -- the world was often treated to a level of drama that hardly ever emerges from European negotiations: accusations and counter-accusations, rebukes and unusual physical postures. Varoufakis is impatient, and understandably so. Having observed the suffering of his people for so many years because of what he believes were unguided policies, he was ready to shake things up. Yet in his keenness to deliver a big bang solution, he neglected the small confidence-building steps that were required.

Handelsblatt poll says the majority of Germany’s business executives now want Grexit -- A majority of German executives now want Greece out of the eurozone, according to polling out Wednesday.  According to Germany's premier business newspaper, Handelsblatt, 44% of the 673 executive-level German managers surveyed think that Greece should leave the eurozone of its own accord.  A further 13% think Greece should be actively ejected from the monetary union.  79% believe if Greece left the euro it wouldn't have contagion effects with other countries, and less than a fifth are concerned about that financial knock-on impact.   During the euro crisis (from about 2010 to 2012), businesses and politicians even in the core of Europe were concerned about a domino-like effect if Greece exited the euro. From then on, nobody would be safe, and there would be constant speculation about other peripheral economies. The logic was that Greece might have been manageable, but that an exit from Portugal might have triggered Spain (and so on). 

Outmigration: Escaping Greece's Economic Killing Fields - Of all the woes besetting modern Greece, here's one that not many talk about but probably will have the greatest impact going forward: the mass exodus of educated young people continues apace. When they install some vainglorious, bald-headed action star wannabe as finance minister, you know that things have only one way to go in the near future: down. With EU membership (for now) guaranteeing freedom of movement, there really is no need for college graduates and other holders of advanced "human capital" to stick around:A devastating brain drain is luring away the best and brightest of Greece’s workforce, several reports showed, with estimates varying between 180,000 and 200,000 well-educated citizens leaving the cash-strapped nation. At that rate, the exodus translates to about 10% of the country’s total university-educated workforce, said Lois Lambrinidis, a professor of economic geography at the University of Macedonia. On a macro level, this movement is a clear brain drain, said Nicholas Alexiou, a sociology professor at CUNY’s Queens College who studies Greek immigration patterns. What differentiates a brain drain from other types of migrant waves is the high percentage of skilled and educated people who leave the country, Alexiou said..

Greece Says It Will Make IMF Payment Next Week As Stalemate Continues – Yves Smith -  A brief update on the negotiations between Greece and its creditors. A number of Greek officials seemed to regard it getting at least some funds approved by the Eurogroup at its May 11 meeting as critical to being able to make a €750 million payment to the IMF on May 12. But on Thursday, Finance Minister Yanis Varuofakis said Greece will be able to meet that obligation, se we’ll assume that yet again the government has managed somehow to stump up the needed funds. But while that move in theory buys the government more time, in practice, it’s not clear what the point is, given the following:  The two sides remain hopelessly at odds. The only progress has been on “shape of the table” issues. As the Financial Times notes: Some officials on both sides of the talks had hoped that Monday’s meeting would at least produce a statement endorsing their progress but even that low bar appears out of reach.With such an endorsement, Athens hoped the European Central Bank would be persuaded to increase its cap on the amount of short-term debt the government could issue — a key relief valve that would have eased, at least temporarily, the government’s cash crunch. But no such relief is now expected.

Defiant Greece rehires public staff despite bailout talks - BBC News: Greece is rehiring thousands of public sector workers, including cleaning ladies, despite sustained pressure from its international creditors. Greek MPs passed a law to give back jobs to some 4,000 workers who were laid off under severe austerity cuts. It comes as Athens seeks a deal on more financial aid ahead of a meeting of eurozone finance ministers on Monday. Greece is running out of money as it has to pay €750m ($845m; £555m) to the International Monetary Fund on 12 May. International creditors have demanded cuts in spending, including plans to trim the civil service and privatisation of state assets, in order for Greece to continue receiving loans. On Thursday, the Greek parliament adopted a bill to rehire school guards, cleaning ladies and civil servants who lost their jobs or were earmarked for dismissal under the austerity programme.

Greek bailout talks near ‘drop dead’ moment - There have been so many “make-or-break” moments for Athens since Greece’s debt crisis first shook markets five years ago,that it is difficult to know when things might really break. But this much is clear: unless Greece and its international creditors agree a deal soon to close out the country’s €172bn bailout, and then quickly agree another rescue, Athens is likely to run out of money and default on its debts. That would push it perilously close to crashing out of the eurozone. With just seven weeks remaining before Greece’s current rescue runs out, it is unclear who might blink first. Will Athens bow to pressure and accept tough new economic reforms to release the remaining €7.2bn in the programme and refill its dwindling coffers? Or will Greece’s increasingly divided creditors succumb to fears over “Grexit” and give Athens a pass? The next week . . . Officials had been eying next week as a potential capitulation date. All 19 eurozone finance ministers are due to gather in Brussels on Monday for their monthly eurogroup meeting, where bailout deals are normally brokered. The next day, Greece is due to make a €750m loan repayment to the International Monetary Fund. Several factors have conspired against a deal next week. For one thing, Greece appears to have once again scraped together enough cash to stave off the day of reckoning. Asked on Thursday if the fund payment would be made, Yanis Varoufakis, the Greek finance minister, said: “Of course we want to pay the IMF. We intend to pay every creditor.” Meanwhile, progress in bailout talks remains sluggish. Officials involved in the negotiations say the atmosphere has improved: negotiators are now engaged on substantive differences, rather than battling over logistics such as who will attend. But there has been no real narrowing of differences. Some officials on both sides of the talks had hoped that Monday’s meeting would at least produce a statement endorsing their progress but even that low bar appears out of reach.

Documents Distributed by Greece’s Yanis Varoufakis Baffle Eurozone Officials - WSJ: —Economic plans and growth estimates distributed by Greek Finance Minister Yanis Varoufakis to some of his eurozone counterparts have baffled officials involved in the talks over its international bailout. Officials say that the files differ greatly from what has been discussed at the technical level in Brussels in recent days and underline how Mr. Varoufakis continues to complicate progress toward a financing deal. The 36-page document, entitled “Greece’s recovery: A blueprint” and seen by The Wall Street Journal, was presented by Mr. Varoufakis to his counterparts in Paris and Rome, as well as senior officials in Brussels, while he was touring European capitals over the past week, according to four European officials.Mr. Varoufakis declined to comment on the document Friday in Madrid after meeting with Spanish Finance Minister Luis de Guindos. The Greek Finance Ministry said the document was a first draft of a new plan “for the recovery and growth of the country in the [post-bailout] era,” which it said Mr. Varoufakis had discussed informally with some of his counterparts. “This is a long-term project that goes well beyond the limits of the negotiation that is currently underway in the Brussels Group,” as the group of experts representing Greece and its creditors is known, the ministry said.

Eurogroup chair says more time needed for Greece deal - Eurogroup chair Jeroen Dijsselbloem played down hopes of an imminent deal on Greece's debt, saying a meeting of finance ministers of the single currency on Monday was unlikely to be conclusive. “We need more time,” the Dutch finance minister said after talks with his Italian counterpart Pier Carlo Padoan in Rome on Friday. Greece is hoping the meeting will make a “positive statement” on negotiations with its creditors that will allow for 7.2 billion euros (US$8.1 billion) in remaining bailout loans to be released, officials have said. Dijsselbloem said an easing of Greece's debt burden as proposed by the EU in November 2012 remained on the table, as long as Athens complied with the conditions attached to it in terms of structural reforms. “That agreement, that promise of November 2012 is still valid, but it does have its conditions, first, that the program must be successful,” the Dutch minister said. Padoan said: “It is difficult to predict the outcome of Monday's meeting but I am confident we will reach an accord within a reasonable timeframe.” Greece has been squeezing funds from the central and local governments to be able to meet its international loan payments, with concerns that within a matter of weeks it could default and face a messy exit from the euro.

Stop-Go Austerity and Self-Defeating Recoveries - Paul Krugman - Sometimes good things happen to bad ideas. Actually, it happens all the time. Britain’s election results came as a surprise, but they were consistent with the general proposition that elections hinge not on an incumbent’s overall record but on whether things are improving in the six months or so before the vote. Cameron and company imposed austerity for a couple of years, then paused, and the economy picked up enough during the lull to give them a chance to make the same mistakes all over again. They’ll probably seize that chance. And given the continuing weakness of British fundamentals – high household debt, a soaring trade deficit, etc. – there’s a good chance that the resumption of austerity will usher in another era of stagnation. In other words, the recovery of 2013-5, which is falsely viewed as a vindication of austerity, is likely to prove self-defeating. There’s a somewhat similar problem in the euro area, as Barry Eichengreen noted recently. There, too, growth has picked up, thanks to a pause in austerity, quantitative easing and a weaker euro. The policies that pulled Europe back from the brink were made politically possible by fear, first of collapse, then of deflation. But as the fear abates, so does pressure to change Europe’s ways; austerians are already claiming the pickup as vindication, not of Draghi’s activism, but of the policies that made that activism necessary.

No comments: