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

Saturday, June 27, 2015

week ending Jun 27

U.S. Monetary Policy: Avoiding Dark Corners – IMF direct -- A few weeks ago, the Fund suggested that the Federal Reserve could defer its first increase in the policy rate until it sees greater signs of wage or price inflation, with a gradual increase in the federal funds rate thereafter. Such a monetary policy strategy could help avoid the “dark corners” in which, as Olivier Blanchard has argued, small shocks can have potentially large effects. In this blog and accompanying working paper, we expand upon this idea. We also outline the potential benefits of an expanded communications toolkit. The United States and the world economy have been preparing for a gradual increase in the U.S. policy interest rates for some time now. The Fed has argued it is likely to start in the second half of this year, but that this will be dependent on the state of the U.S. economy. Indeed, Fed Chair Janet Yellen used the word “gradual” several times in her latest press conference and this message was further underlined by the unhurried pace of policy rate increases forecast by Federal Open Market Committee members.  Preliminary findings of the ongoing IMF health check of the U.S. economy suggest that, despite a weak first quarter, growth in the coming months is likely to pick up, accompanied by steady gains in job creation. In this context, a data-dependent approach clearly calls for a gradual pace of monetary policy normalization. The IMF mission also argued that taking the first step along that gradual path should happen once there are more tangible signs of wage or price inflation than are currently evident.

Fed’s Williams: Fed Should Raise Rates Twice This Year -  The first Federal Reserve official to speak in the wake of this week’s central bank monetary policy meeting said Friday the Fed should raise interest rates twice this year. “We are getting closer and closer to the time to raise rates,” Federal Reserve Bank of San Francisco President John Williams told reporters following a hometown speech. “My own forecast would be to raise rates two times this year, if the economy performs as I expect.” He added he would like to see those initial increases at 25 basis points each. As he has on many occasions, Mr. Williams cautioned that whatever happens with a policy that now has short-term rates pegged at near-zero levels will be driven by how the economy performs. And while he is upbeat about the outlook for growth and hiring, he said there are still reasons to be cautious about raising the cost of borrowing in the U.S. economy right now. “My own view is there are still significant headwinds to this economy,” he told reporters. In the text of remarks delivered Friday, Mr. Williams also said he was wary of acting before gathering more evidence that “inflation’s trajectory is on the desired path.” “Until I have more confidence that inflation will be moving back to 2%, I’ll continue to be in wait-and-see mode regarding raising interest rates,” he said. But Mr. Williams also cautioned that “every [Federal Open Market Committee] meeting is on the table” when it comes to deciding on changing interest rates.

Fed’s Powell eyes two 2015 hikes as he dismisses bubble fears - — A key official at the Federal Reserve said Tuesday there could be two interest-rate hikes this year as he said the stock market isn’t showing signs of being in a bubble. If the economy unfolds as expected, condition for two rate hikes this year could be in place as soon as September, said Federal Reserve Governor Jerome Powell. The U.S. central bank has set two conditions for a rate hike — continued improvement in the labor market and confidence that inflation is moving toward the central bank’s 2% annual target. “I would see that test potentially being satisfied as soon as September,” Powell said in a conversation at a breakfast sponsored by The Wall Street Journal. Powell said he wasn’t saying that a rate hike in September was a done deal, describing it instead as a “coin flip.” “What I would say is that, if my forecast for the economy were to be realized, and that forecast includes significantly strong growth than we’ve realized in the first half of the year, continued progress in the labor market and a greater basis for confidence of inflation returning to 2% goal over the medium term. If those things are realized, I feel that it will be time, potentially, as soon as September,” Powell said. “I don’t think the odds are 100% on that. I think the odds are probably 50-50 range that we will realize those conditions,” Powell added. His own forecast now calls for an additional increase in December, the Fed governor said.

Fed Watch: Dovish Fed --Coming on the heels of a dovish FOMC meeting and press conference, it might be surprising that San Francisco Federal Reserve President John Williams is still looking for two rate hikes this year. Via Bloomberg: “We are getting closer and closer,” to raising rates, he told reporters on Friday after delivering a speech in San Francisco. Williams, a voter this year on the policy-setting Federal Open Market Committee, was head of research at the regional bank when it was led by now-Chair Janet Yellen. “My own forecast would be having us raise rates two times this year,” he said. “But that would depend on the data.” Why raise rates this year despite anemic inflation and moderate economic growth? He still expects the Fed will be moving closer to its stated goals in the second half of the year and moving sooner means moving slower: Williams also said that raising rates earlier rather than later would allow the Fed to tighten gradually, which he favors because the U.S. economy still faces significant headwinds.“If we raise rates sooner rather than later, then we can do it more gradually,” he said. It is worth reiterating just how gradual the Fed is planning to raise rates. This I think remains more important than the timing of the first hike. Note that the midpoint forecasts from the Summary of Economic Projections imply a 0 percent equilibrium interest rate at the end of 2016, and just slightly higher than that in 2017:

US productivity – the dog that isn’t barking at the Fed - Before last week’s FOMC meeting, there was much debate about whether the Fed would officially draw attention to the awful US productivity data that have been published lately. Both William Dudley and Janet Yellen have highlighted the problem in recent speeches, and there was speculation that some members of the FOMC might revise down their estimates for potential GDP growth at the June meeting.  In fact, however, they did not do so, preferring to sweep the problem under the carpet for at least another meeting. Instead, they focused attention on the “gradual” nature of the likely upward path for interest rates after lift-off, which now seems marginally more likely to start in December than in September 2015.  The FOMC’s range for long run GDP growth fell sharply from 2011 to 2013, but has not been changed now for about a year. Potential GDP growth depends on underlying productivity growth, and on the projected growth in the labour force, which is about 0.4 per cent per annum at present. So the Fed’s central projection of 2.15 per cent for potential GDP growth implies a productivity projection of about 1.75 per cent. The problem, however, is that this range is not consistent with the actual productivity numbers that have been published at any stage during the present economic recovery. Since 2009, productivity has risen at an average of 1.5 per cent per annum while over the past two years it has risen at only 0.5 per cent. Normally, as a recovery matures, productivity growth should be speeding up, but that is not happening this time. At some point soon, the FOMC will need to acknowledge this.

Monetary policy and financial inclusion — Central bankers usually steer clear of discussions about inequality. They view monetary policy as a tool for stabilizing the economy. For many central banks, like the ECB or the Bank of England, this means price stability. For others, like the Federal Reserve, it means a combination of high employment and low inflation. Regardless of the goals, issues involving the distribution of income are generally left to the fiscal authorities. For the most part, this division of labor is sensible. However, their mandates require central banks to make policy tradeoffs that are influenced by the prevailing income distribution. Specifically, the way in which monetary policy is conducted should depend on the access individuals have to the financial system, including both savings and credit. And we believe that it does.  To understand why monetary policy depends on the degree of “financial inclusion,” we need to explain two aspects of policy. First, policymakers face a tradeoff, not between the level of growth (or employment) and inflation, but between their variability. Second, faced with temporary fluctuations in their income, people with access to credit and savings through the financial system have the ability to smooth their consumption in a way that others do not.

U.S. Inflation Undershoots Fed’s 2% Target for 37th Consecutive Month -- U.S. inflation remained well below the Federal Reserve’s 2% annual target in May. The personal consumption expenditures price index, which is the Fed’s preferred inflation gauge, rose 0.2% last month from a year earlier, the Commerce Department said Thursday. That was unchanged from April’s revised annual reading and down from 0.3% annual growth in March. Price gains have undershot the Fed’s goal for 37 straight months, the longest stretch of sub-2% inflation since the first half of the 1960s. Excluding the volatile categories of food and energy, prices rose 1.2% in May from a year earlier, slipping from revised annual gains of 1.3% in April and 1.4% in March. Core inflation in May posted its smallest annual growth since February 2014. Overall prices rose 0.3% in May from the prior month, and so-called core prices ticked up 0.1% from April. Two other broad gauges of U.S. prices jumped in May. The Labor Department’s closely watched consumer-price index posted its largest one-month gain in more than two years and the agency’s producer-price index saw its sharpest increase in nearly three years. Still, annual inflation remained subdued in both reports. The consumer-price index was unchanged in May from a year earlier, and producer prices fell 1.1% on the year.

The PCE Price Index Remains Disappointingly Below Target - The Personal Income and Outlays report for May was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.22%, little changed from 0.16% the previous month. The latest Core PCE index (less Food and Energy) at 1.24% is a slight decline from the previous month's 1.29% YoY. The general disinflationary trend in core PCE (the blue line in the charts below) must be perplexing to the Fed. After years of ZIRP and waves of QE, this closely watched indicator consistently moved in the wrong direction. Since Early 2013, Core PCE Price Index has hovered in a narrow YoY range of 1.23% to 1.52%. For eight months beginning in April 2014 it rose to a plateau at the higher end of the range and then dropped back into the low end. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low, a level to which it has returned in the last six months. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. The most recent FOMC statement now refers only to the two percent target.

Mixed Inflation Readings Complicate Fed’s Confidence Hurdle - The Federal Reserve has said it will begin raising short-term interest rates when officials are reasonably confident that inflation is on a path to move toward 2%. Can they get reasonably confident at a time when one of their key measures of inflation is decelerating? The Commerce Department reported Thursday that its personal consumption expenditure price index, excluding volatile food and energy prices, was up 1.2% in May from a year earlier, the smallest increase since May 2014. It has slowed from increases of 1.5% between May and October of last year. The PCE price index is the Fed’s preferred inflation measure. It is the measure officials forecast in the Fed’s quarterly Summary of Economic Projections, which helps guide their interest rate decisions. The PCE index excluding food and energy – which they also project in the SEP — is especially important now because officials are trying to look through the volatility in energy prices that has moved the headline index substantially in the past seven months. There is a lot at play in the core PCE slowdown. It is likely due in part to pass-through from the energy price drop into other sectors. Oil price declines coincided with the slowdown in prices outside of the energy sector. The strengthening dollar also has weighed on imported goods prices, a factor restraining non-food and non-energy prices. Fed officials see both of these developments as transient and something they’re prepared to look past in making rate decisions. Still, it is striking that services prices – which should be less exposed to oil price drops and import price declines than goods prices – have slowed in the PCE index as well. Meantime, a divergence is building between prices measured in the PCE index and those measured in the consumer price index produced by the Labor Department. While core PCE prices have slowed, core CPI prices were up 1.7% in May from a year earlier and they have been rising at around that pace since last August. This divergence is due in part to the different weightings the two indexes place on various sectors. The CPI index places heavy weight on home rental and ownership costs, which are firming. The PCE index places heavy weight on health care costs which have been restrained.

Just Released: U.S. Economy in a Snapshot –NY Fed - The Research Function at the New York Fed would like to announce the publication of U.S. Economy in a Snapshot. This new monthly packet combines charts and summary points and is fashioned to be a tight, yet comprehensive, overview of current economic and financial developments. The packet features section headers that present discussions on a broad range of topics, including labor and financial markets, the behavior of consumers and firms, as well as survey responses and the global economy. The charts and commentary will change often, reflecting a diversity of contributors with wide-ranging areas of expertise. In addition, U.S. Economy in a Snapshot will typically include a “Special Topics” section, which will cover issues such as the behavior of commodity prices, developments in the Second District, and findings from the New York Fed Survey of Consumer Expectations. U.S. Economy in a Snapshot draws from a wide landscape of economic and financial indicators. Depending on the meeting schedule of the Federal Open Market Committee, the packet will be posted on either the second or third Monday following the release of the monthly labor market report. We will also post accompanying data for the charts, if permitted, with the intent to expand the publication of the series to the fullest extent possible.  We are very pleased to launch U.S. Economy in a Snapshot. If you have questions about U.S. Economy in a Snapshot, submit them by email to the research publications mailbox.

Fed Shocked That Warm Weather Did Not Lead To A Consumption Surge -- Blaming the weather has become such a popular strategy for explaining away poor economic data that calling attention to the PhDs and Wall Street analysts who employ it in a desperate attempt to perpetuate the US economic recovery myth has almost lost its comedic value… almost. But not quite. Which is why we found it particularly amusing that the NY Fed — and this is the same NY Fed that recently called the San Francisco Fed’s Steve Liesman-assisted residual seasonality coup a “myth” — admits that “real consumption expenditures have yet to show signs of a significant pickup from a slowdown in winter.” “Growth has been tepid,” the NY Fed research team notes, “despite better weather.” So our only question is this: with winter and all the cold weather, snow, and ice that economists are always shocked to see accompanying it just five months away, we wonder how it’s possible that the Fed will be able to start raising rates in December. Or, summarized...

Chicago Fed: US Economic Growth Picks Up A Bit In May -  The Chicago Fed National Activity Index’s three-month average (CFNAI-MA3) posted a fractional increase in May. Although growth remains below trend, the business cycle benchmark’s three-month average ticked higher for the second month in a row and is currently at its highest level since January. As such, recession risk remains low, based on the three-month average of the index, which rose to -0.16 last month—well above the -0.70 mark that signals the start of new recessions, according to Chicago Fed guidelines. “Two of the four broad categories of indicators that make up the index increased from April, but only the employment, unemployment, and hours category made a positive contribution to the index in May,” the Chicago Fed noted in yesterday’spress release.   Analzying the updated CFNAI-MA3 data with a probit model continues to show that the probability is low (roughly 7%) that a recession started in May (a view that jibes with last week’s update on business cycle risk via The Capital Spectator’s proprietary indexes). The current risk estimate in the chart below is based on a probit regression that analyzes the historical record of NBER’s business cycle dates with CFNAI-MA3.

Chicago Fed: "Index shows economic growth slightly below average in May" -- The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth slightly below average in May The Chicago Fed National Activity Index (CFNAI) moved up to –0.17 in May from –0.19 in April. Two of the four broad categories of indicators that make up the index increased from April, but only the employment, unemployment, and hours category made a positive contribution to the index in May.The index’s three-month moving average, CFNAI-MA3, increased slightly to –0.16 in May from –0.20 in April. May’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed: Economic Growth Slightly Below Average in May -- "Index shows economic growth slightly below average in May": This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: The Chicago Fed National Activity Index (CFNAI) moved up to –0.17 in May from –0.19 in April. Two of the four broad categories of indicators that make up the index increased from April, but only the employment, unemployment, and hours category made a positive contribution to the index in May. The index’s three-month moving average, CFNAI-MA3, increased slightly to –0.16 in May from –0.20 in April. May’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. The CFNAI Diffusion Index, which is also a three-month moving average, was unchanged at –0.13 in May. Thirty-five of the 85 individual indicators made positive contributions to the CFNAI in May, while 50 made negative contributions. Forty-three indicators improved from April to May, while 41 indicators deteriorated and one was unchanged. Of the indicators that improved, 21 made negative contributions. [Download PDF News Release] The previous month's CFNAI was revised downward from -0.17 to-0.19. The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.

Q1 GDP Revised Up to -0.2% Annual Rate -- From the BEA: Gross Domestic Product: First Quarter 2015 (Third Estimate)  Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- decreased at an annual rate of 0.2 percent in the first quarter of 2015, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.  The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the decrease in real GDP was 0.7 percent. With the third estimate for the first quarter, exports decreased less than previously estimated, and personal consumption expenditures (PCE) and imports increased more ... Here is a Comparison of Third and Second Estimates. PCE growth was revised up from 1.8% to 2.1%. Residential investment was revised up from 5.0% to 6.5%. Q1 will probably be revised up again when the annual revision is released on July 30th.

Q1 GDP Third Estimate Goes Less Negative - The Third Estimate for Q1 GDP, to one decimal, came in at -0.2 percent, an increase of 0.5 from the -0.7 percent of the Advance Estimate. Today's number was not entirely a surprise, as both and had a forecast of -0.2.  Today's weak number, however, was not a complete shock. Note that the Atlanta Fed's GDPNow indicator, last updated on April 26th, was forecasting Q1 GDP at 0.1 percent.  Here is an excerpt from the Bureau of Economic Analysis news release: Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- decreased at an annual rate of 0.2 percent in the first quarter of 2015, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the decrease in real GDP was 0.7 percent. With the third estimate for the first quarter, exports decreased less than previously estimated, and personal consumption expenditures (PCE) and imports increased more (see "Revisions" on page 3). The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from PCE, private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. [Full Release]  Here is a look at Quarterly GDP since Q2 1947. Prior to 1947, GDP was calculated annually. To be more precise, the chart shows is the annualized percent change from the preceding quarter in Real (inflation-adjusted) Gross Domestic Product. We've also included recessions, which are determined by the National Bureau of Economic Research (NBER). Also illustrated are the 3.26% average (arithmetic mean) and the 10-year moving average, currently at 1.49 percent.

Third Estimate 1Q2015 GDP "Improves" to 0.2% Contraction -- The third estimate of first quarter 2015 Real Gross Domestic Product (GDP) improved to a negative 0.2%. This "improvement" was due to upward revisions to exports, to personal consumption expenditures, to private inventory investment, to nonresidential fixed investment, and to state and local government spending that were partly offset by an upward revision to imports. Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 1Q2015, the year-over-year growth is 2.9% - up from 4Q2014's 2.4% year-over-year growth. So one might say that GDP growth accelerated 0.5%. The year-over-year acceleration adds fuel to the fire that there is a methodology problem with determining first quarter GDP. This third estimate released today is based on more complete source data than were available for the "second" estimate issued last month. (See caveats below.) Real GDP is inflation adjusted and annualized - the economy declined on a per capita basis. The table below compares the 4Q2014 third estimate of GDP (Table 1.1.2) with the advance / second / third estimate of 1Q2015 GDP which shows:

  • consumption for goods and services declined.
  • trade balance worsened
  • there was an inventory growth adding 0.45% to GDP;
  • fixed investment growth was declined;
  • government lack of spending improved but remains a headwind to GDP.

The arrows in the table below highlight significant differences between 1Q2015 second estimate and this 1Q2015 third estimate (green is good influence, and red is a negative influence).What the BLS says about the revision from the second to the third estimate: The "third" estimate of the first-quarter percent change in GDP is 0.5 percentage point, or $23.6 billion, more than the second estimate issued last month, primarily reflecting upward revisions to exports, to personal consumption expenditures, to private inventory investment, to nonresidential fixed investment, and to state and local government spending that were partly offset by an upward revision to imports.

Final Q2 GDP Revision Confirms 3rd Negative GDP Quarter Of The "Recovery", Inventory Build Up Flashing Red -- Just as consensus had expected, after printing at -0.7% in the first revision to Q1 GDP, the final revised GDP print for the March 31-ended quarter came in at -0.2%, confirming the third negative GDP quarter in one recovery cycle since 2011 (all of which have come in the first quarter of the year as global winter cooling fans will have you know)- the first time this has happened since the 1950s.The breakdown by components: According to the BEA, which has yet to implement double seasonally adjusted data so that every report is favorable no matter how bad it is, 'the decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from PCE, private inventory investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased." More details: Real GDP decreased 0.2 percent in the first quarter of 2015, in contrast to an increase of 2.2 percent in the fourth quarter of 2014. The downturn in the percent change in real GDP reflected a deceleration in PCE and downturns in exports, in nonresidential fixed investment, and in state and local government spending that were partly offset by upturns in private inventory investment and in federal government spending and a deceleration in imports. The comparison with the last month's revision shows a modest increase in PCE from 1.23% to 1.43% on a SAAR basis, a smaller deduction from CapEx, which was revised from -0.21% to -0.05%, and a small pick up in inventory even as net trade remained unchanged.

The 2015 Economic Growth Story Is Looking A Lot Like the 2014 Story, So Far - The latest data on U.S. economic output paints a less bleak picture of the economy coming out of the first quarter. But the U.S. appears poised to match last year’s less-than-impressive first half. Strong hiring, robust home sales, better wage growth and a pickup in consumer spending are driving a rebound for the second quarter. Forecasting firm Macroeconomics Advisers is predicting U.S. gross domestic product will increase at a seasonally adjusted annual rate of 2.7% in the second quarter. Averaged with the latest first-quarter figures, that would amount to just 1.3% growth in the first half of the year. “Potential growth is much slower than generally thought over the bulk of this expansion,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. GDP contracted at a 0.2% pace in the first three months of the year, the Commerce Department said Wednesday. That’s an upward revision from a preliminary estimate of a 0.7% contraction in the first quarter. Commerce in April had initially reported first-quarter GDP grew at a 0.2% rate. The revision, which was in line with economists’ expectations, resulted from a smaller drop in exports and a bigger increase in consumer spending. Those factors were partly offset by an upward revision to imports, which is actually a drag on GDP. The first quarter is reminiscent of the first quarter of 2014, when severe winter weather led to a sharp contraction in the first quarter, followed by a strong rebound in the second and third quarters.

Excluding Obamacare And The "Harsh Winter", Q1 GDP Tumbled -1.4% -- It is somewhat ironic that even as reporters posing as economists, reporters posting as reporters, and even the US department of truth and failed weathermen posing as the Bureau of Economic Analysis decided to blame the "harsh winter" for the collapse in GDP, according to the BEA's own GDP report, real Q1 GDP which printed at -0.2% actually benefited from the cold weather as a result of Utilities adding 0.59% to the bottom line GDP in the quarter. But wait, because if it wasn't for that now traditional "contributor" to the US economy, the mandatory tax better known as Obamacare, and which was the primary contributor to the 0.62% in healthcare contribution to GDP, Q1 GDP would have tumbled by a consolidated -1.4%. Finally, if one also excludes the 0.45% contribution from the now ridiculous addition in inventories which even Joe Lavorgna has noticed and is warning will result in weaker growth in the future... The near $100 billion increase in Q1 inventories means we could see a substantial slowing in the current quarter.... Q1 GDP would have been -1.9%. So if one excludes just three items: Obamacare, the "harsh winter", and near record inventory re-stocking in anticipation of a spending deluge that never comes, Q1 GDP would have tumbled nearly 2.0%.

Q1 GDP Per Capita at -1.1 for Third Estimate -- Earlier today we learned that the Third Estimate for Q1 real GDP came in at -0.2 percent (rounded from -0.17 percent), up from the -0.7 percent Second Estimate. Here is a chart of real GDP per capita growth since 1960. For this analysis we've chained in today's dollar for the inflation adjustment. The per-capita calculation is based on quarterly aggregates of mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence our 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data is available in the FRED series POPTHM. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale. The chart includes an exponential regression through the data using the Excel GROWTH function to give us a sense of the historical trend. The regression illustrates the fact that the trend since the Great Recession has a visibly lower slope than long-term trend. In fact, the current GDP per-capita is 9.8% below the pre-recession trend and similarly in Q1 of last year.

May 2015 Inflation Adjusted Personal Expenditures Strong. Good for 2Q2015 GDP. -- The data this month showed relatively strong spending growth, but weaker income growth. With backward revisions to the April data, this is a positive influence to 2Q2015 GDP.

  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, income trend is down and expenditures are up.
  • Real Disposable Personal Income is up 3.5% year-over-year (unchanged from last month), and real personal expenditures is up 3.4% year-over-year (accelerated 0.5% from last month)
  • this data is very noisy and as usual includes moderate backward revision (detailed below) - this month the changes were moderate.
  • The third estimate of 1Q2014 GDP indicated the economy was contracting at 0.2% (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - income and expenditure must grow at the same rate.
  • The savings rate continues to be low historically, and declined this month.

The inflation adjusted income and consumption are "chained", and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics. Per capita inflation adjusted expenditure has exceeded the pre-recession peak - but growth has been weak in 2015. Estimates have been revised for January through April. Changes in personal income, in current-dollar and chained (2009) dollar DPI, and in current-dollar and chained (2009) dollar PCE for March and April -- revised and as published in last month's release -- are shown below.

Treasury Snapshot: 30-year Yield at its 2015 high -- US Equity indexes have had a relatively dull week with little volatility. Treasury yields have provided market watcher a bit more drama. The yield on the benchmark 10 year note closed last week at 2.26%. This week's close was 23 bps higher at 2.49%, which is a single bp below the 2015 closing high on June 10th. The 30-year bond yield closed the week at its 2015 high of 3.25%. The first chart shows the daily performance of several Treasuries and the Fed Funds Rate (FFR) since 2007. The source for the yields is the Daily Treasury Yield Curve Rates from the US Department of the Treasury and the St. Louis Fed's FRED repository for the Fed Funds Rate. Here is a closer look at the 10- and 30-year yields along with the FFR. A log-scale snapshot of the 10-year yield offers a more accurate view of the relative change over time. Here is a long look since 1965, starting well before the 1973 Oil Embargo that triggered the era of "stagflation" (economic stagnation with inflation). The trendline (the red one) connects the interim highs following those stagflationary years. The red line starts with the 1987 closing high on the Friday before the notorious Black Monday market crash. The S&P 500 fell 5.16% that Friday and 20.47% on Black Monday.

Correcting CBO and touting some fiscal oxygen - I wanted to weigh in briefly on this little dust up re some recent CBO analysis. My colleague Richard Kogan pointed out that while the CBO’s recent long-term budget analysis was as sound as ever, the opening sentence was very wrong: “The Congressional Budget Office’s (CBO) new report on the budget picture opens by saying, “The long-term outlook for the federal budget has worsened dramatically over the past several years,” blaming the Great Recession and the steps taken to address it. But CBO’s own data, in that very report, show that’s not the case. The CBO data that allow an apples-to-apples comparison of its new projections with its earlier ones from before the recession show that the long-term budget picture has improved significantly, not worsened.” Paul Krugman amplified this message last week. Probably the easiest way to see Richard’s point is to look the evolution of CBPP’s long term projects as in the first figure here (shown below). There we show the 2040 debt projected to be around 100% of GDP by 2040 vs. over 200% from our projection a few years back.  One reason for that improvement—not the only one, but a big one—is the decline in government spending on health care, due in large part to the fact that the growth of health care costs has slowed significantly in recent years, which is in turn partially due to health care delivery efficiencies enforced by the ACA. The figure below, from another new CBO release, shows the persistent decline in their estimates of budget impact of the ACAs premium subsidies, driven both by the decline in costs and reductions in their guesstimates of how many people will purchase coverage through the exchanges (assuming the federal gov’t led exchanges in 34 states survive the SCOTUS).Since our strongest fiscal pressures are coming from the combination of aging demographics and rising health costs, this development is creating some much needed fiscal oxygen.

Senate Trade Promotion Authority Vote a Matter of Trust: The Senate vote on Trade Promotion Authority will amount to a test of faith. In what has become an increasingly complex process, Majority Leader Mitch McConnell, R-Ky., last week outlined his plan to send three pieces of the four-piece trade package to President Barack Obama’s desk by the Independence Day recess.But for everything to go according to plan, a dozen or so pro-trade Democrats will have to trust that a vote for TPA will be followed by the approval of Trade Adjustment Assistance for workers displaced by trade, an African trade-preferences bill and a customs-enforcement bill. “TAA will come second after TPA, but the votes will be there to pass it,” McConnell asserted. “Reluctantly, not happily, but they will be there if it means getting something far more important accomplished for the American people.” The fate of the package depends, in part, on Democrats believing those words. “Here’s what it’s going to take,” McConnell said in a floor speech late on June 18. “One, working together toward the shared goal of a win for the American people. Two, trusting each other to get there.” While many pro-trade Democrats last week were hesitant, Sen. Ron Wyden, D-Ore., who last time — along with Finance Chairman Orrin G. Hatch of Utah — shepherded the bills through the Senate, said he thought Republicans had acted in good faith. “I think everybody’s being straight with each other,” Wyden told reporters. Wyden acknowledged the complexity of the process and the differences between the Senate and the House, where both have faced their own “procedural snafus” in the words of White House Press Secretary Josh Earnest. Wyden said pro-trade Democrats had “almost nonstop” meetings and the consensus was clear — all four bills need to be approved. The highest ranking Senate Democrat of the bunch, Sen. Patty Murray, D-Wash., echoed that “all the alphabet soup” — TPA/TAA/AGOA (the African Growth and Opportunity Act) and the non-acronymed customs bill — needed to happen.

Why the TPP Is Worse Than Mystery Meat --The same day last week that Congress initially blocked fast track authority for approval of the TPP trade agreement, the House voted to overturn rules requiring country-of-origin labeling for meat. Those supporting the latter said they were just responding to a World Trade Organization ruling, judging U.S. country-of-origin labeling unfair competition with meat coming from foreign countries like Canada and Mexico, and therefore a violation. They said they had no choice for fear of triggering sanctions or lawsuits from countries exporting meat across our borders.  I don't know about you, but I like knowing whether my meat comes from Iowa or Uzbekistan, Montana or Mexico, Kentucky or Kenya. So do 93 percent of Americans, according to a Consumer's Union survey. People like supporting U.S. farmers, cutting down distance travelled, knowing there will be at least minimal inspection standards, even if the delights of e-coli occasionally slip through. It seems commonsensical that we'd want at least the chance to become informed consumers, whether with the origins of our meat, GMO-derived crops, or the amount of sugar and calories in our baked goods. Maybe the House members are wrong in insisting that the international tribunals that adjudicate trade disputes would deem this a violation. But if this particular House bill passes the Senate and gets signed by Obama, even the mere possibility of a lawsuit will have struck down a wholly reasonable law that protects our health and supports our local economies. And if TPP passes the Senate, other attempts to regulate commerce for the common good will be potentially gutted as well, from attempts at financial regulation to limits on the prices charged for drugs, to environmental rules and seemingly innocuous actions like requiring accurate labeling. Some of this could occur through legal action, and some through the mere fear that such action could occur.

Support for Free Trade Drops, Amid Raging Congressional Debate – WSJ/NBC Poll -- Voters’ support for expanding U.S. trade abroad has dropped in the last two months, as President Barack Obama has battled with Congress to pass legislation to expedite consideration of free-trade agreements, the new Wall Street Journal/NBC News poll has found. Asked if free trade between the U.S. and foreign countries has helped or hurt the U.S., the poll found that  29% said it helped — down from 37% in April. Meanwhile the share who said trade has hurt the U.S. rose to 34% from 31% in April. Those results are a sign of why it has been so hard for Mr. Obama to get his trade agenda through Congress. He suffered a major setback two weeks ago, when the House blocked approval of “fast track” trade legislation that the president says he needs to complete an Asian trade deal called the Trans-Pacific Partnership. The Senate is set this week to take another stab at passing the trade package. The poll found that among Democratic primary voters, more people said trade helped than hurt the U.S., by a 35%-29% split. But the impact of union opposition to trade was also clear. Among union households, 45% said trade had hurt the U.S., compared with 23% who said it helped.  By another measure, the poll found that support for the Asian trade agreement may be a political wash for 2016 candidates. Asked if a presidential candidate’s support for the pact would make them feel more or less favorable towards the candidate, registered voters split evenly, 31% said more favorable and 31% said less favorable. Support for the Asian trade pact  was more of a plus for Democratic primary voters,  who said it would make them feel more favorable toward a candidate by a 34%-25% margin. Among Republican primary voters, trade pact support made 37% feel less favorable, and 32% more favorable.

TPP: Will Voters Re-elect Laughing Stocks to the Senate? -- Let’s review the devious process for passing the Trade Promotion Authority (TPA) bill devised by the Republicans I outlined in my last post. It has the following steps:

  • – Step one: the House passes a TPA bill without passing Trade Adjustments Assistance (TAA); then
  • – Step two: the Republicans in the Senate give assurances to Senate Democrats that TAA will be passed by the Senate and later the House;
  • – Step three: the Senate then passes the House’s TPA bill, and then sends it to the President; then
  • – Step four: the Senate passes an amendment to another piece of legislation (not clear yet whether the plan will use the Trade Preferences bill, or the African Growth and Opportunity Act (AGOA), and incorporate TAA in one of those); then
  • – Step five: the House passes TAA with the help of Democrats, because once TPA is passed Democrats will have no incentive to vote against TAA.

Step one’s done now. A TPA bill without Trade Adjustment Assistance passed the House 218 – 208 on Thursday, sending the bill on to the Senate. In order to complete steps two – three, Mitch McConnell is promising the 14 Democratic Senators who voted for cloture on the TPA bill in May, that he will pass a bill re-authorizing the Ex – Im Bank, a measure empowering the Commerce Department to take retaliatory action against nations that violate trade rules, and also will immediately pass a TAA amendment to a trade preferences bill, so the Democratic Senators can say that they passed protections for workers who lose their votes as an eventual consequence of the TPA whose passage they are supporting. Of course, even if McConnell follows through with the promise of passage of the TAA (step four) that he probably has the means to fulfill, his and the President’s assurances that the Republicans in the House will fulfill their part of bargain, enabling Democrats to complete step five, passing TAA in the House, depend both on Speaker John Boehner’s cooperation and his ability to deliver 30 – 40 Republican votes for TAA, a program Republicans view as “welfare.”

What Hillary Clinton REALLY said about TPP and Fast Track - The media has been reporting that it's the Democrats who have been split on the issues of trade (TPP, TPA and TAA). But it appears the Republicans have also been just as split on these issues. According to the website Liberty News, the following is a list 2016 GOP presidential candidates and their views on what they have affectionately nicknamed ObamaTrade:  The Breitbart website, who also calls this ObamaTrade, reports that Senators Marco Rubio (R-FL) and Lindsey Graham (R-SC) both voted for TPA but have continued to refuse to answer whether they read the TPP text before voting for it. The website also noted the often unmentioned Export-Import Bank, which many believe is just more crony capitalism. As for all the 2016 Democratic presidential contenders: Senator Bernie Sanders (op-ed and video), Jim Webb (former senator and Assistant Secretary of Defense) and Martin O'Malley (former Governor of Maryland), all oppose TPP and fast track — all except for Hillary Clinton. But for some reason, some media outlets seem to be subtly implying that Hillary Clinton may be disagreeing with Obama on the TPP trade deal — and that she is against fast-tracking TPP. But really, she just opposes the current bill if it excludes the funding for re-training displaced workers (known as TAA). At the very least, when she was recently asked about her positions on TPP, Hillary Clinton just waffled and danced around the question on TPP and fast-track again. Every other presidential candidate has made it perfectly clear where they stand on fast-track and TPP — all except for Hillary Clinton, who is either unsure and/or uninformed, or is deliberately hiding her true opinions for fear that voters won't elect her if she told the complete and ungarbled truth.

Senate Narrowly Approves Fast-Tracking TPP  -- Today, the Senate narrowly approved a procedural motion to pass a degraded version of the Fast Track Trade Promotion Authority that passed last month. A smaller handful of Democrats joined with Senate Republicans to pass Fast Track over the will of the American people who have been clamoring to halt the rush to rubber stamp trade deals like the Trans-Pacific Partnership. Last month, the Senate passed a different version of Fast Track, but House Republicans eviscerated the delicate Senate policy balances, making the version the Senate passed today considerably worse. Today’s legislation does not include the worker-retraining program that many said was essential to securing their vote, but House Republicans are unlikely to ensure this program survives to the President’s desk. Today’s bill also weakened the Senate’s earlier provisions addressing human trafficking and currency manipulation and includes new House language that prohibits trade deals from ever addressing climate change or immigration issues.

Fast-Track Trade Bill Clears Key Hurdle in Senate - WSJ: —The Senate on Tuesday gave President Barack Obama’s trade agenda a big push forward, in a pivotal vote that clears the highest remaining procedural hurdle to granting the president expanded trade-negotiating power. The 60-37 vote effectively precludes any filibuster opponents might mount and sets up the fast-track bill to pass the Senate by Wednesday. The House has already passed the measure, a priority for Mr. Obama that would stand as one of the most significant legislative acts of his presidency and a monument to the power of divided government to cut through partisan gridlock. More Republicans support fast-track than Democrats, but GOP backers had to rely on the votes of 13 business-friendly Democrats to advance the legislation, which would give Mr. Obama the power to submit trade deals to Congress for an up-or-down vote without amendments. Five Republicans and the chamber’s two independents joined 30 Democrats in voting no. The success in getting over the Senate’s last procedural hurdle—with no votes to spare, since 60 were needed—was a victory for the White House, businesses and Republican leaders. It was a crushing blow to labor unions and environmentalists, who helped elect Mr. Obama and view his trade agenda—and the intensity with which he has fought for it—as a betrayal.

Obama poised for huge win on trade: President Obama is poised for one of the biggest victories of his second term after the Senate voted Tuesday to advance legislation enhancing his trade powers. The Senate’s 60-37 vote sets the stage for passage on Wednesday of the trade-promotion authority (TPA) bill, or fast-track, which House GOP leaders ushered through the lower chamber last week. If the Senate approves the measure, as expected, it heads to the White House for Obama’s signature. After the vote, liberal trade opponents on and off Capitol Hill acknowledged fast-track is all but certain to become law, throwing in the towel after a months-long legislative brawl that saw Obama siding with GOP leaders against his own Democratic base. The opponents are instead moving the battle lines back in preparation to fight an emerging Pacific trade deal the fast-track power is designed to foster. As part of the strategic switch, Democrats in both chambers are lining up to vote in favor of a worker aid bill — known as Trade Adjustment Assistance (TAA) — which House liberals killed earlier this month as a means to block fast-track. Public Citizen, among the most vocal opponents of Obama’s trade agenda, also indicated Tuesday that it will reserve its firepower for the coming fight over the Trans-Pacific Partnership (TPP), an accord with Japan and 10 other nations that could affect as much as 40 percent of the global economy. Obama had said he would not sign a fast-track bill without assurances that there is a strategy for getting TAA to his desk as well.

TPP: 13 Democratic Senators Invite Republicans to Make Them Laughing Stocks and More Serious Matters -- The cloture vote in the Senate is now done, making the TPA vote itself a mere formality. The vote was 60 – 37 in favor of cloture with 13 of the 14 original Democratic defectors (Ben Cardin was the exception) sticking with the multinational corporations, the President, and all but five of the Republicans in supporting cloture. Supporters of cloture celebrated the bipartisan nature of the vote, as if Americans who lose their jobs and their sovereignty as a consequence of it, and the things it enables, will look more favorably on what they did because both major parties did it. Meanwhile, three of the five steps in the process for passing the Trade Promotion Authority (TPA) bill devised by the Republicans are virtually complete. The remaining steps now defined by McConnell are: After the Senate votes Wednesday on final passage for fast-track, it will take a procedural vote on a package that includes TAA and trade preferences for African countries known as the African Growth and Opportunity Act (AGOA).McConnell has promised both bills, as well as a customs and enforcement bill favored by Democrats, will reach Obama’s desk by the end of the week.  This remaining process includes the final step of the House passing TAA with the overwhelming support of Democrats, added to about 30 – 40 Republicans, because, it is assumed, probably correctly, that once TPA is passed, then Democrats will have every incentive to vote for TAA, while Boehner will be able to supply the remainder of the votes needed to pass it and keep the McConnell/Boehner commitments to the House and Senate Democratic defectors. This last step, however, isn’t guaranteed to happen in the House. A TAA package received 86 Republican votes in the House in the failed roll call vote that was tied to the first TPA package. But that total for TAA was delivered under pressure from the leadership to pass the TPA package.  Sadly for the 13 defecting Democrats, even if McConnell delivers on his promise of Senate performance this week, then John Boehner may not be able to deliver the 30-40 Republican House votes for the new trade preferences package from the Senate including TAA after the TPA bill becomes law.

Dear Senator Feinstein (re “Fast Track”, TPP, etc.) -- Steve Randy Waldman - Dear Senator Feinstein,  As a constituent, I felt betrayed by your vote in favor of 3-6 year, no-supermajority “fast track” for TPP and other trade-related deals negotiated by the executive branch. On procedural grounds, “fast-tracks” should always be supermajoritarian. The usual checks and balances that block or at least shave the edges off of bad law are not present under a straight up-or-down vote on an externally prepared text. To counterbalance that, any fast track should require a much stronger consensus than 50% plus 1 vote. 50-50 fast tracks are just bad political engineering.On substantive grounds, given what that has been released about TPP, TTIP, and TISA, you should frankly be ashamed to have once endorsed a procedure that realistically makes their passage extremely likely. “Free trade” in the abstract is a good thing, and there are many trade deals I would support. Maximalist intellectual property law and “elimination of nontrade barriers” that in practice means submitting democratic choices about governance to review of unelected corporate arbitration panels are not free trade at all. They are harbingers of the sort of post-democracy that we see operating already in the European Union. They are instruments of plutocracy. The most cynical argument in favor of these trade deals is the geopolitical argument. “If we don’t write the rules, then China will!” If we don’t write good rules, then maybe China should. The United States should wield global authority not merely because it is our team. The United States should wield global authority because it exercises that authority for the good. Not for the good of well-connected interest groups within the United States, not even just for the good of US and its citizens, but, if we are to exercise global authority, for the world. From the bits that ordinary citizens have been able to learn about the contents of the various deals under negotiation by USTR, we have fallen down badly on the job. Good for well connected interest groups, foreign and domestic? Check. Good for US citizens or the world broadly, no.

Sessions: They Won the Vote, But Lost the ‘Trust of the American People’ -- Senator Jeff Sessions statement in response to Senate's vote to advance the fast-track trade bill: “Americans increasingly believe that their country isn’t serving its own citizens. They need look no further than a bipartisan vote of Congress that will transfer congressional power to the Executive Branch and, in turn, to a transnational Pacific Union and the global interests who will help write its rules. "The same routine plays out over and again. We are told a massive bill must be passed, all the business lobbyists and leaders tell how grand it will be, but that it must be rushed through before the voters spoil the plan. As with Obamacare and the Gang of Eight, the politicians meet with the consultants to craft the talking points—not based on what the bill actually does, but what they hope people will believe it does. And when ordinary Americans who never asked for the plan, who don’t want the plan, who want no part of the plan, resist, they are scorned, mocked, and heaped with condescension. "Washington broke arms and heads to get that 60th vote—not one to spare—to impose on the American people a plan which imperils their jobs, wages, and control over their own affairs. It is remarkable that so much energy has been expended on advancing the things Americans oppose, and preventing the things Americans want. "For instance: thousands of loyal Americans have been laid off and forced to train the foreign workers brought in to fill their jobs—at Disney, at Southern California Edison, across the country. Does Washington rush to their defense? No, the politicians and the lobbyists rush to move legislation that would double or triple the very program responsible for replacing them. "This ‘econometarian’ ideology holds that if a company can increase its bottom line —whether by insourcing foreign workers or outsourcing production—then it’s always a win, never a downside.

We Don’t Know How Bad Secret Obama Trade Deal Really Is: Ellen Brown -- Attorney and public banking expert Ellen Brown says the recent Obama trade deal is bad news.  Brown contends, We don’t even know how bad it is.  All we know we got out of WikiLeaks.  It’s all secret.  They are negotiating what would be called a treaty which should require a two-thirds vote under the Constitution.  They are negotiating it for “fast-track” and it is completely secret. . . .    These documents are supposed to be kept classified for four years after this thing passes.  How is that even possible?  There are two other agreements that are coming down the pipe that are also covered by “fast-track,” which means they go directly to an up or down vote.  Only get a brief time to look at it.  They don’t get to use filibusters.  They don’t get to debate.  Besides the TPP (Trans Pacific Partnership) which is bad enough because what we know of it is horrible, there is the Trans-Atlantic Agreement which is similar to the TPP with Pacific Rim countries.  There’s another one that we only just heard about which is the TiSA, which is the Trade in Services Agreement.  This covers 80% of the American economy and all sorts of services, including financial services, which means banking.  So, we can’t regulate banking anymore, and that is basically what it means.” So, instead of getting a government “Of the people, by the people and for the people,” we are getting a government of the corporations, by the corporations and for the corporations.  Brown contends, “That is totally correct.  It is alarming what is happening.  Corporations totally run our government.  We think this is for the benefit of the American people, but it is for the benefit of the large American corporations, and they’re not even American corporations.  They are large international corporations.  These corporations can sue us, our local governments for trying to protect the people against whatever they want to destroy—our economy, our environment, our jobs.”

Trade Authority Bill Wins Final Approval in Senate - — The Senate on Wednesday gave final approval to legislation granting President Obama enhanced power to negotiate major trade agreements with Asia and Europe, sending the president’s biggest end-of-term legislative priority to the White House for his signature.Senators then approved a bill that provides assistance to workers displaced by international trade accords, attaching it to a popular African trade measure that will go to the House for a final vote Thursday morning. House Democrats signaled they would support the measure, which they had voted down two weeks before.The burst of legislative action secured a hard-fought victory for Mr. Obama and the Republican congressional leadership. It kept on track an ambitious agenda to complete a broad trade agreement joining 12 countries — from Canada and Chile to Australia and Japan — into a web of rules governing trans-Pacific commerce. Negotiators will also move forward on an accord with Europe, knowing that any agreement over the next six years will be subject to a straight up-or-down vote, but cannot be amended or filibustered in Congress.The Senate cleared the so-called trade promotion bill 60 to 38, with 13 Democrats joining all but five Republicans. After the Senate voted 76 to 22 to cut off debate on the worker aid and African trade bill, senators agreed to pass it by voice vote.

Senate approves fast-track, sending trade bill to White House -  The Senate voted Wednesday to approve fast-track authority, securing a big second-term legislative win for President Obama after a months-long struggle. The 60-38 Senate vote capped weeks of fighting over the trade bill, which pitted Obama against most of his party — including Senate Democratic Leader Harry Reid (Nev.) and House Minority Leader Nancy Pelosi (D-Calif.).  Passage of the bill is also a big victory for GOP leaders in Congress, including Senate Majority Leader Mitch McConnell (R-Ky.) and Speaker John Boehner (R-Ohio). The Republican leaders worked closely with an administration they have more frequently opposed to nudge the trade bill over the goal line. Labor unions and liberal Democrats had fought hard against the authority and are likely to now turn their attention toward stopping the Trans-Pacific Partnership (TPP), a trade deal Obama is negotiating with 11 other Pacific Rim nations. Fast-track, or trade promotion authority, will allow the White House to send trade deals to Congress for up-or-down votes. The Senate will not be able to filibuster them, and lawmakers will not have the power to amend them. The expedited process, which lasts until 2018 and can be extended until 2021, greatly increases Obama’s chances of concluding negotiations on the TPP, which is a top goal of the president’s.

Pelosi Stands Down On TAA, Clearing Way For Obama's Trade Agenda -- House Minority Leader Nancy Pelosi (D-Calif.) waved the white flag on Wednesday, telling her caucus she would support passage of a key measure tethered to President Barack Obama's broader trade agenda. Her support all but guarantees that the measure will succeed, thereby handing Obama a major victory on trade. Pelosi and House Democrats were the last obstacle against Republican and pro-trade Democrats' efforts to grant Obama so-called "fast-track" authority to clear major trade deals, such as the Trans-Pacific Partnership, through Congress with ease. House Democrats succeeded in blocking fast-track nearly two weeks ago when they defeated Trade Adjustment Assistance, which was tied to the fast-track legislation. TAA provides aid to workers who have lost their jobs as a result of trade deals.  In response to the defeat of TAA, Obama and Republican leaders crafted a new plan to pass fast-track, also known as Trade Promotion Authority, as a standalone bill without TAA. The clean fast-track bill, already passed by the House, is expected to sail through the Senate later Wednesday and then on to Obama's desk.  Next, the Senate will immediately move to pass TAA for workers, which is now attached to an African trade preferences bill, after which it will be sent back to the House. And with Pelosi's support, TAA should have the votes for passage.  "I’m disappointed that the TAA bill isn’t nearly as robust as it should be in light of a trade agreement that encompasses 40 percent of the global economy," Pelosi wrote in a Dear Colleague letter to House Democrats. "While we may not all vote in the same manner on TAA, I will support its passage because it can open the door to a full debate on TPP."

Obamatrade Passes, The Corporations Win Again... And Now They Gloat  - Moments ago, the passage of "Obamatrade" was assured when in 60-38 vote, the Senate cleared the "fast track" passage of the TPP also known as the Trans Promotion Authority with no votes to spare, ending the president's long struggle to lift the measure out of the political quicksand that repeatedly came close to trapping it in both chambers. There was much drama, even more theater, but in the end the lobbying corporations which we laid out previously in the chart below, won. We are still shocked at how cheap it costs them to buy both the senate and the house.The details are well known to most but for anyone unfamiliar here is the WSJ with a simple recap: the legislation will give Obama “fast track” authority that allows him to submit trade deals to Congress for an up-or-down vote without amendments. Negotiators have said that process is crucial to completing the 12-nation trade deal with countries around the Pacific Ocean, known as the Trans-Pacific Partnership. Already approved by the House, the bill now heads to the White House for Mr. Obama’s signature. Its passage delivers a rare legislative victory for the second-term president whose agenda has largely stalled in a Congress now fully controlled by Republicans.Wednesday’s vote capped a fitful campaign that joined the White House, top GOP leaders and centrist Democrats to push through Congress legislation that both ends of the political spectrum opposed. Liberals viewed expanded trade as detrimental to U.S. jobs, while conservative members didn’t want to expand Mr. Obama’s authority.

Money Talks: Corporate America Buys Fast Track Authority --  We have come full circle on trade at the end of Barack Obama's second term as the American president. Campaign Mode Obama circa 2008 adopted some pretty nasty anti-trade rhetoric. As I noted so many years ago, this tactic is standard fare for Democratic candidates for president to gain the support of or at least silence staunchly isolationist elements in their party like labor unionists. Once they enter office, however, they ditch these patsies and reveal...their true pro-trade agenda.And so it's happened with the passage of fast-track authority. With no further votes to win--he is in his second and last term as US president, Obama has pushed for this authority enabling him to conclude trade deals abroad--the Trans-Pacific Partnership (TPP) in Asia and the Transatlantic Trade and Investment Partnership (TTIP) in Europe--and have them voted on an up-or-down basis in the US congress without modification.  What accounts for the relatively easy passage of  fast-track authority--after a few temporary hiccups? Simple: pro-trade contributions to politicians far outstrip anti-trade ones. The political maneuvering and opinions on the trade partnership remain complex. But the money flowing to senators from interested groups has been much more one-sided. Industries, such as banks, insurance companies, utilities and many more, that back the bill in its current form have donated $218.4 million to current senators since October 2008, according to money in politics researcher MapLight. That's about nine times more than the $23.2 million contributed by groups that oppose it.

The Political One Percent of the One Percent: Megadonors fuel rising cost of elections in 2014 - In the 2014 elections, 31,976 donors — equal to roughly one percent of one percent of the total population of the United States — accounted for an astounding $1.18 billion in disclosed political contributions at the federal level. Those big givers — what we have termed the "Political One Percent of the One Percent" — have a massively outsized impact on federal campaigns.  They’re mostly male, tend to be city-dwellers and often work in finance. Slightly more of them skew Republican than Democratic. A small subset — barely five dozen — earned the (even more) rarefied distinction of giving more than $1 million each. And a minute cluster of three individuals contributed more than $10 million apiece. The last election cycle set records as the most expensive midterms in U.S. history, and the country’s most prolific donors accounted for a larger portion of the total amount raised than in either of the past two elections.The $1.18 billion they contributed represents 29 percent of all fundraising that political committees disclosed to the Federal Election Commission in 2014. That’s a greater share of the total than in 2012 (25 percent) or in 2010 (21 percent).  It's just one of the main takeaways in the latest edition of the Political One Percent of the One Percent, a joint analysis of elite donors in America by the Center for Responsive Politics and the Sunlight Foundation.

Is the Trans-Pacific Partnership Unconstitutional? - It is January 2017. The mayor of San Francisco signs a bill that will raise the minimum wage of all workers from $8 to $16 an hour effective July 1st. His lawyers assure him that neither federal nor California minimum wage laws forbid that and that it is fine under the U.S. Constitution. Then, a month later, a Vietnamese company that owns 15 restaurants in San Francisco files a lawsuit saying that the pay increase violates the “investor protection” provisions of the Trans-Pacific Partnership (TPP) agreement recently approved by Congress. The lawsuit is not in a federal or state court, but instead will be heard by three private arbitrators; the United States government is the sole defendant; and the city can participate only if the U.S. allows it. It is not a far-fetched scenario. The TPP reportedly includes such provisions, as a means of solving a thorny problem. In the United States, the courts are, by and large, independent and willing to fairly decide challenges to arbitrary government laws and rulings, no matter who the plaintiff is. The same is not consistently true in less developed countries.The solution proposed in the TPP is to allow foreign investors to bring claims for money damages over violations of the TPP’s investor protection provisions before a private arbitration tribunal that operates outside the challenged government’s court system. One arbitrator would be chosen by the investor, one by the country being challenged, and a third by agreement of the other two arbitrators.  The arbitrators are often lawyers who specialize in international trade and investment, for whom serving as arbitrators is only one source of their income. Unlike U.S. judges, they are not salaried but paid by the hour, and they can rotate between arbitrating cases and representing investors suing governments.

Caymans Exposed: Tax Havens Lucrative for Big Finance, Leave Only Crumbs for Locals - - Yves Smith - Not long after a newspaper editor critical of local financial sector corruption fled the Cayman Islands, followed by apparent “tombstones” death threats, another brave journalist with the Cayman Reporter has published a fiery editorial, which rings true to many of the things we have said in the past: The financial industry including the regulators in the Cayman Islands has a parallel universe of their own standards and beliefs. One where it does not matter what the facts are, they say and believe is the surreal reality. This always tends to be the case in the goldfish-bowl politics of small tax havens. Local media gets captured, dissenting voices retreat, and the voice of the offshore financial sector becomes all-encompassing (read The Life Offshore chapter here for more details.) Locals begin to believe the relentless spin, and dismiss criticism by outsiders as ill-informed and outdated. It’s a far more comfortable position to be in, than a position where one realises that so much of what’s around you is crooked, and so many of your friends are up to their necks in it. What is more, finance requires the suppression of bolshy democracy, for fear that easily-relocated “business” flees to other shores. But as these recent news articles in Cayman show, refreshing exceptions do appear. Generally, however, a Theatre of Probity is acted out, and the same message is repeated ad nauseam: ‘we are a clean, co-operative, transparent international financial centre, and the people who attack us are motivated by the politics of envy.’The Cayman Reporter denounces the Theatre: The Cayman Islands Monetary Authority and the Cayman Islands Financial Services needs to take another look at their strongly worded statements in the local media about their seriousness related to anti-laundering regime etc. etc.  And the article provides a whole smorgasbord of stories about rotten practices run out of Cayman. We have not seen this level of frankness from Cayman media for a long time. And there’s more to this blistering article, which is worth quoting at length:

The Bankruptcy of America’s Elites - Yves Smith - If someone had used the word “elites” in 2006, they would have been seen as a hair-on-fire hysteric, long on conspiracy theories and short on sober understanding of How Things Work. But as the 1% and 0.1% amass more and more of total income and wealth, so too have they come to believe their interest diverge from those of the rest of us (and in a literal sense, they often do, since in too many cases, their wealth rests at least in part on predatory conduct). And now that that gap has become obvious, it has reshaped the role of the ruling class, as in the people who are in charge of the administrative apparatus of society. While some members of these top income groups play a direct role in running powerful organizations (CEOs of large an/or strategically important businesses, for instance), it also includes much less affluent individuals, like government officials and those who influence values and collective perceptions, like major publishers and public intellectuals.  Increasingly, these administrators, influencers, and top professionals seek to use their roles as an entry ticket to the top cohort. The prototype is the revolving door regulator, but there are plenty of other embodiments.

House Aims to Prevent SEC from Requiring Corporate Political Disclosures Again - The U.S. House of Representatives is trying again to prevent U.S. securities regulators from requiring companies to disclose corporate political spending, despite continuous pressure for the government’s investor protection agency to act. The Securities and Exchange Commission has received over one million public comments – the most ever – on a 2011 rulemaking petition from a group of influential legal professors that asked the SEC to develop rules for public companies to disclose the use of corporate resources for political activities to shareholders. In the past few weeks, a bipartisan group of former top SEC officials including former Chairmen Arthur Levitt and William Donaldson asked the agency to require mandatory disclosure of corporate political activities. But when the U.S. House Appropriations Committee approved the Fiscal Year 2016 Financial Services Bill this week, it included a prohibition to the Securities and Exchange Commission from implementing a rule to require disclosure of corporate political spending. Section 625 of the financial services bill would prevent the SEC from using authorized funds to create a rule on disclosure of political contributions, or contributions to trade associations and other tax-exempt organizations.

SEC Takes Proactive Measures In The Hunt For Hackers -- In a first, the SEC has proactively approached several businesses to investigate failures in cybersecurity that may have created a new method of insider trading. The Commission’s investigation, along with a probe by the Secret Service, is focused on a group they’re calling FIN4 which they suspect to have broken into corporate email accounts to steal confidential information about mergers and acquisitions. Naturally, the SEC declined to comment exactly how broad their investigation is, or really anything else on the matter. The investigation was spurred by a December investigation on FIN4 by security company FireEye that stated the hacking group’s primary intent is on, “compromising the accounts of individuals who possess non-public information about merger and acquisition (M&A) deals and major market-moving announcements, particularly in the healthcare and pharmaceutical industries.” FireEye also noted that the hacking group focuses on those industries due to the volatile nature of their stocks.  FIN4’s attacks on these companies are brilliant in their simplicity.

  • 1) Identify insecure email accounts.
  • 2) Create fake MS Outlook login pages.
  • 3) Get somewhat computer illiterate executives, attorneys, and consultants to enter login info.
  • 4) Profit.

So far, the SEC has asked at least eight companies to provide information on their data breaches making this the first time it’s ever approached companies about breaches in connection with an insider trading probe. Although companies are not required to disclose breaches unless they’re deemed ‘material’ under federal securities law, it appears the SEC has taken an active stance on cybersecurity despite only bringing a handful of civil cases against hackers in the past. What will that lead to after they’ve concluded their investigation? More regulations imposed on already regulation-laden industries? Or, a wakeup call to those within those industries that ‘password1234’ is not going to cut it when others are actively trying to steal their information?

These hackers warned the Internet would become a security disaster. Nobody listened. | The Washington Post: Breaking into networked computers became so easy that the Internet, long the realm of idealistic scientists and hobbyists, gradually grew infested with the most pragmatic of professionals: crooks, scam artists, spies and cyberwarriors. They exploited computer bugs for profit or other gain while continually looking for new vulnerabilities. Tech companies sometimes scrambled to fix problems — often after hackers or academic researchers revealed them publicly — but few companies were willing to undertake the costly overhauls necessary to make their systems significantly more secure against future attacks. Their profits depended on other factors, such as providing consumers new features, not warding off hackers. “In the real world, people only invest money to solve real problems, as opposed to hypothetical ones,” said Dan S. Wallach, a Rice University computer science professor who has been studying online threats since the 1990s. “The thing that you’re selling is not security. The thing that you’re selling is something else.” The result was a culture within the tech industry often derided as “patch and pray.” In other words, keep building, keep selling and send out fixes as necessary. If a system failed — causing lost data, stolen credit card numbers or time-consuming computer crashes — the burden fell not on giant, rich tech companies but on their customers.

Top CEOs Make 300 Times More than Typical Workers: Pay Growth Surpasses Stock Gains and Wage Growth of Top 0.1 Percent - The chief executive officers of America’s largest firms earn three times more than they did 20 years ago and at least 10 times more than 30 years ago, big gains even relative to other very-high-wage earners. These extraordinary pay increases have had spillover effects in pulling up the pay of other executives and managers, who constitute a larger group of workers than is commonly recognized.1 Consequently, the growth of CEO and executive compensation overall was a major factor driving the doubling of the income shares of the top 1 percent and top 0.1 percent of U.S. households from 1979 to 2007. Since then, income growth has remained unbalanced: as profits have reached record highs and the stock market has boomed, the wages of most workers, stagnant over the last dozen years, including during the prior recovery, have declined during this one. In examining trends in CEO compensation to determine how well the top 1 and 0.1 percent are faring through 2014, this paper finds:

  • Average CEO compensation for the largest firms was $16.3 million in 2014.
  • From 1978 to 2014, inflation-adjusted CEO compensation increased 997 percent, a rise almost double stock market growth and substantially greater than the painfully slow 10.9 percent growth in a typical worker’s annual compensation over the same period.
  • The CEO-to-worker compensation ratio, 20-to-1 in 1965, peaked at 376-to-1 in 2000 and was 303-to-1 in 2014, far higher than in the 1960s, 1970s, 1980s, or 1990s.
  • Over the last three decades, compensation for CEOs grew far faster than that of other highly paid workers, i.e., those earning more than 99.9 percent of wage earners. CEO compensation in 2013 (the latest year for data on top wage earners) was 5.84 times greater than wages of the top 0.1 percent of wage earners, a ratio 2.66 points higher than the 3.18 ratio that prevailed over the 1947–1979 period.
  • Also over the last three decades, CEO compensation increased more relative to the pay of other very-high-wage earners than the wages of college graduates rose relative to the wages of high school graduates.

Top-CEO Pay Isn’t Driven By Talent, New Study Says - The rapid rise in pay for corporate executive officers, which stands in contrast to the stagnant wages of many Americans, is a key driver of inequality that’s not clearly tied to talent or performance, a new report from a liberal think tank finds. The Economic Policy Institute report says this means CEO pay could be reduced without hurting economic growth or productivity. EPI says top U.S. CEOs make 300 times more than typical American workers, down from a peak of 376 times in 2000 but well above levels seen in the preceding four decades. “The growth of CEO and executive compensation overall was a major factor driving the doubling of the income shares of the top 1% and top 0.1% of U.S. households from 1979 to 2007,” write EPI researchers Lawrence Mishel and Alyssa Davis. The findings are the latest to address the issue of inequality and its impact on broader economic activity. The International Monetary Fund has argued high inequality was actively damaging to growth. The EPI report also counters recent research arguing inequality has been driven by a gap between firms than within them. EPI authors say such work tends to focus on too broad a range of entities as opposed to simply large firms, which skews the pay levels downward and understates the pay gap. “This is a clever but misguided critique. The reason to focus on the CEO pay of the largest firms is that they employ a large number of workers, are the leaders of the business community, and set the standards for pay in the executive pay market and probably do so in the nonprofit sector as well,” the authors say.

New Study Debunks Myth That Exorbitant CEO Pay Results from “Talent” -- Yves Smith - In the last month or so, I’ve seen some remarkably dubious studies flogged around what Lambert calls the Innertubes, all ringing changes on the same themes: outsized pay for those at the top is a reflection of a state of nature. Power laws in pay are to be expected and therefore the winners are deserving. Cathy O’Neil shredded one example of this type of propaganda research. A more recent one, that I could not even bring myself to shred because I thought calling attention to it would serve to dignify it, tried claiming that the rising pay disparity between CEOs and average worker wages was due to the pay levels of CEOs at….hold your breath…”super companies.”   Lawrence Mishel and Alyssa Davis of the Economic Policy Institute have not only gone after that junk paper, but with it, the general issue of whether ever-excalating CEO pay is justified. A new report focuses on the fact that rising executive pay has been a significant cause of the doubling of the income share of both the top 1% as well as the top 0.1%. Let us not forget that CEO pay drives a host of other pay levels: other C level execs, board members, and advisors to CEOs like top consultants and top law firm partners (it’s unseemly for them to be seen to make more than their clients, so rising executive pay gives them an umbrella for charging more).  The study is clear and forcefully argued. Key points from its summary: CEO compensation in 2013 (the latest year for data on top wage earners) was 5.84 times greater than wages of the top 0.1 percent of wage earners, a ratio 2.66 points higher than the 3.18 ratio that prevailed over the 1947–1979 period. This wage gain alone is equivalent to the wages of 2.66 very-high-wage earners….That CEO pay grew far faster than pay of the top 0.1 percent of wage earners indicates that CEO compensation growth does not simply reflect the increased value of highly paid professionals in a competitive race for skills (the “market for talent”), but rather reflects the presence of substantial “rents” embedded in executive pay (meaning CEO pay does not reflect greater productivity of executives but rather the power of CEOs to extract concessions). Consequently, if CEOs earned less or were taxed more, there would be no adverse impact on output or employment. The entire paper is very much worth reading. It has a lot of solid lower-level arguments and evidence.

Tech Companies Fly High on Fantasy Accounting - The New York Times: Technology shares have been powering the stock market recently, outperforming the broader stock indexes by wide margins. The tech-heavy Nasdaq 100, for example, is up 19 percent over the last 12 months, almost twice as much as the Standard & Poor’s 500-stock index, which has risen 10 percent.Investor enthusiasm for all things tech is understandable, given the disruptions the industry is bringing to so many businesses and the potential profits associated with that upheaval.But there’s a more troubling aspect of the current exuberance for technology stocks: the degree to which so many of the popular companies with premium-priced shares promote financial results and measures that exclude their actual costs of doing business.These companies, in effect, highlight performance that is based more on fantasy than on reality.Corporations still must report their financial results under generally accepted accounting principles, or GAAP. But they often play down those figures, advising investors to focus instead on the numbers favored by those in the executive suite — who, it just so happens, stand to gain personally from the finagling. Among the biggest costs these companies ask investors to ignore are those associated with stock-based compensation, acquisitions and restructuring. But these are genuine expenses, so excluding them from financial reporting makes these companies’ performance look better than it actually is. This, in turn, makes it harder for investors to understand how their businesses are really doing and whether their shares are overvalued or fairly priced.

How hedge-fund geniuses got beaten by monkeys — again - The average hedge fund has produced a worse investment performance in the first half of this year than a portfolio consisting of a savings account at your local bank and a random collection of stocks picked by a blindfolded monkey. Stop me if you’ve heard this one before. According to the benchmark HFRX Global Hedge Fund Index, tracked by Hedge Fund Research Inc., the average hedge fund has earned its investors just 2.4% so far this year net of fees. By contrast, the average stock in the MSCI World index of the developed countries’ equity markets is up 7.7%.  Someone who put 20% of their money in a federally insured bank savings account, and the other 80% in a random collection of stocks from around the world, picked by monkeys, would be up about 6.2% so far this year. (And that’s assuming for the sake of simplicity that you earned 0% interest on the savings. In reality, you could have done slightly better)

Fed’s Powell: Financial Regulation May Contribute to Decline in Bond-Market Liquidity - Federal Reserve governor Jerome Powell acknowledged that tough new rules on big financial firms may be contributing to the decline in bond-market liquidity but suggested he doesn’t think the postcrisis situation is a worse one for the global economy. For one, he said that forces other than regulation are contributing to the decline in liquidity in some fixed-income markets since the 2008 financial crisis, particularly big firms’ own diminished risk appetites. If you sit down with some of these big firms, Mr. Powell said Tuesday during a Wall Street Journal event, they will tell you, “This isn’t you, this is us.” Firms are looking at risk in a completely different way than they were before the crisis, when the cost of supplying liquidity and holding big inventories of these assets was sharply underestimated, Mr. Powell said.“It’s not obvious that it’s all because of regulation,” he said. In addition to firms’ reduced risk appetite, he said advancing technology is another factor. Market participants have grown increasingly concerned that new capital and liquidity regulations–many written by the Fed–have constrained liquidity, or the ability of market participants to buy or sell securities at a given price, potentially leaving the financial system vulnerable to crisis during times of stress. In particular, much attention has focused on whether these rules have made big banks less willing to facilitating trading because the rules have raised the cost of such market-making activities. Regulators have broadly rejected the notion that postcrisis regulations are unduly harming the system, a sentiment Mr. Powell appeared to echo, even while he acknowledged that regulation could be contributing to the new liquidity picture.

Fed’s Tarullo: Something’s Changed in The Bond Market; Unclear Why - Federal Reserve governor Daniel Tarullo said Thursday changing bond-market liquidity conditions remain unaccounted for, with uncertain implications for overall financial stability. Mr. Tarullo was addressing rising anxiety that changes in financial firms’ regulation, among other factors, is causing some companies to pull back from the bond market, in turn boosting the risk stress-driven volatility could cause harm to the economy as a whole. The official also took stock of the implementation of new rules aimed at strengthening the regulation of the financial sector, and he warned that leaders of financial firms need to be held accountable when their employees violate the law. Mr. Tarullo made his comments in an appearance at the Council on Foreign Relations in New York. He didn’t comment on monetary policy or the economy. “There does seem to be something different” in bond markets right now, the official said. “Something does seem to have changed” in terms of things like the ability of a market participant to easily execute a large trade, he said. As it now stands, “I don’t think there is at this point a very precise and convincing explanation for exactly what has happened,” Mr. Tarullo said. He noted signs of fragility could be tied to regulatory changes, the rise of high frequency trading and firms’ willingness to engage in the market as potential drivers of current market conditions.

Fed’s Powell: More Can Be Done to Improve Payment Security - More can and should be done to improve the security of the U.S. payment system, including the adoption of new technologies in a “prudent fashion,” Federal Reserve governor Jerome Powell said Thursday. “The market should be the primary driver of change, and government should avoid stifling healthy innovation,” Mr. Powell said in remarks at a conference hosted by the Federal Reserve Bank of Kansas City in Kansas City, Mo. “But policymakers can play a role by actively listening to concerns from the public regarding barriers or gaps in regulatory regimes that may create disincentives for developing new, safe products. Policymakers can also bring industry participants together.” The Fed in January called for a coordinated effort to speed up and secure the U.S. payment system.   Mr. Powell in his Thursday speech discussed that ongoing effort, including the creation of two task forces. A task force on speeding up payments plans to “have laid out its detailed thinking on the most effective approaches for implementing faster payments in the United States” by the end of next year, Mr. Powell said. The steering committee of a task force on payment security will meet for the first time in mid-July, he added.

Fed’s Esther George: U.S. Payments System Needs Improvement - In a speech that highlighted the need for further improving the U.S. payments system, Federal Reserve Bank of Kansas City President Esther George also said there’s a renewed focus on bolstering security. Among industry participants and central bankers, “I sense a greater degree of consensus around the security challenges we face,” Ms. George said in the text of a speech to be delivered at her bank Friday. In her remarks, the official touted what she hoped would be a collaborative process to further modernize the way money is shifted around in the U.S. economy. “Time will tell whether this collaborative approach can be successful or whether the Fed needs to take a different approach to foster a modern payments system that serves the needs of a dynamic economy,” Ms. George said. The Fed plays a significant role in providing the infrastructure to move money around in the U.S. economy. Ms. George noted that “the Federal Reserve is prepared to leverage its central bank roles to bring about critical improvements for payments security.”

USPS Banking? Elizabeth Warren Thinks It’s A Great Idea -- Massachusetts Senator Elizabeth Warren wants us to bank at our local post office. The politician and consumer advocate has announced a plan that would bring budget-priced banking services to U.S. citizens. In May 2015, the USPS said it had lost $1.5 billion in the most recent fiscal quarter. If losses continue USPS losses could surpass last year’s $5.5 billion loss and perhaps surpass $6 billion. The USPS Office of Inspector General floated the banking idea last month as a means to close the gap. Under the Inspector General’s plan, USPS would continue to deliver mail, but it would also begin expanding the kinds of financial services it offers. The goal will be to capture accounts for “unbanked” and “underbanked” customers. Those new banking plans would include small loans, check cashing, bill pay, and savings accounts.According to the Inspector General, entering this market could help USPS reap as much as $10 billion in annual revenue — and close its budget gap with a resounding snap. If successful the Inspector General believes the USPS could reap as much as $10 billion in annual revenue.

Supreme Court Upholds Protections to Housing Discrimination - Today, in a huge blow to bigots everywhere, the Supreme Court decide to PRESERVE key protections against racial and other discrimination in housing. What was at stake is the ability for the government to prosecute violations of the Fair Housing Act by using “disparate impact” theory, which you should just think of as, well, statistics and math.  Disparate impact theory holds that you can prosecute someone for discrimination if two things happen:

  1. Minorities, or other protected classes, who were similarly situated to whites, were disproportionately affected by a policy. 
  2. There was an alternative method that could have used that wouldn’t have been as discriminatory, that wasn’t used.

If both of those standards are met, the government can prosecute for, say, violations of the Fair Housing Act (aka, discrimination in housing).

Here’s what this looks like in practice: The Justice Department used disparate impact when they sued Wells Fargo for housing discrimination. They looked at borrowers with the same income levels and credit scores, and found that Black and Hispanic borrowers got more expensive mortgages than whites. The basic idea is outcomes vs intention. As it stands now, it’s enough to show discrimination because their were racist outcomes–AND alternatives existed that wouldn’t have created racist outcomes, but were ignored. Banks want outcomes to be ignored when it comes to proving housing discrimination. They think they should only be prosecuted for discrimination if there is a smoking gun email proving that they intended to discriminate.  Conservatives, and their big-bank allies, have been obsessed for years with preventing disparate impact from being used. As I’ve written about previously, Rep. Scott Garrett has made it his personal mission to try and ensure racial discrimination in housing goes un-prosecuted. This January, it seems they finally had their best chance, with the case Texas Department of Housing and Community Affairs v. The Inclusive Communities Project.  Here is the full opinion:

Black Knight: Mortgage Delinquencies increased in May --According to Black Knight's First Look report for May, the percent of loans delinquent increased 4% in May compared to April, and declined 12% year-over-year.  The percent of loans in the foreclosure process declined 2% in May and were down 22% over the last year.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.96% in May, up from 4.77% in April. he percent of loans in the foreclosure process declined in May to 1.49%.  This was the lowest level of foreclosure inventory since January 2008.The number of delinquent properties, but not in foreclosure, is down 326,000 properties year-over-year, and the number of properties in the foreclosure process is down 212,000 properties year-over-year. lack Knight will release the complete mortgage monitor for May in early July.

Freddie Mac: Mortgage Serious Delinquency rate declined in May -- Freddie Mac reported that the Single-Family serious delinquency rate declined in May to 1.58%, down from 1.66% in April. Freddie's rate is down from 2.10% in May 2014, and the rate in May was the lowest level since November 2008.   Freddie's serious delinquency rate peaked in February 2010 at 4.20%. These are mortgage loans that are "three monthly payments or more past due or in foreclosure. Although the rate is declining, the "normal" serious delinquency rate is under 1%. The serious delinquency rate has fallen 0.52 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until late 2016. So even though delinquencies and distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in May - Economist Tom Lawler sent me an undated table below of short sales, foreclosures and cash buyers for a few selected cities in May.  On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales (Mid-Atlantic is up year-over-year because of an increase in foreclosures in Baltimore). Short sales are down in all of these areas. The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.  As Lawler noted last month: The Baltimore Metro area is included in the overall Mid-Atlantic region (covered by MRIS). Baltimore is shown separately because a large portion of the YOY increase in the foreclosure share of home sales in the Mid-Atlantic region was attributable to the significant increase in foreclosure sales in the Baltimore Metro area.

MBA: Mortgage Applications Increase in Latest Weekly Survey, Purchase Index up 18% YoY  - From the MBA: Refi, Purchase Applications Both Up in Latest MBA Weekly Survey Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 19, 2015.... The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index was unchanged compared with the previous week and was 18 percent higher than the same week one year ago. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.19 percent from 4.22 percent, with points decreasing to 0.38 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. With higher rates, refinance activity has mostly declined recently. 2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 18% higher than a year ago.

FHFA: House Prices increased 0.3% in April, Up 5.3% Year-over-year --This house price index is only for houses with Fannie or Freddie mortgages. From the FHFA: FHFA House Price Index Up 0.3 Percent in April 2015 U.S. house prices rose in April, up 0.3 percent on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). The previously reported 0.3 percent change in March remains unchanged.  The FHFA HPI is calculated using home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. From April 2014 to April 2015, house prices were up 5.3 percent. The U.S. index is 2.3 percent below its March 2007 peak and is roughly the same as the February 2006 index level. For the nine census divisions, seasonally adjusted monthly price changes from March 2015 to April 2015 ranged from -0.8 percent in the East North Central division to +1.4 percent in the West North Central division. The 12-month changes were all positive, ranging from +2.3 percent in the Middle Atlantic division to +7.5 percent in the Pacific division.

Existing Home Sales June 22, 2015: The housing sector is lifting off, as existing home sales jumped 5.1 percent in May to a 5.35 million annual rate that hits the top end of the Econoday consensus. The year-on-year rate tells the story, at plus 9.2 percent which, outside of March' s 11.9 percent, is the strongest rate in nearly two years. And prices are rising, up 7.9 percent year-on-year at a median $228,700. In a special sign of strength, sales are strongest for single-family homes, up 5.6 percent in the month to 4.73 million. Year-on-year, single-family sales are up 9.7 percent. Condo sales have been flat in recent reports, up 1.6 percent in May to a 620,000 rate for a year-on-year gain of 5.1 percent. And in yet another special strength, first-time buyers are back in the market, making up 32 percent of all sales vs 27 percent this time last year. Gains sweep the regional data with the Midwest up 4.1 percent and the West and South up 4.3 percent each. The Northeast rose an outsized 11.3 percent in the month which is also the region's year-on-year rate. Year-on-year, the Midwest is the strongest at 12.4 percent with the West at 9.0 percent and the South up 6.9 percent. Holding down sales has been a lack of supply which, relative to sales, is at 5.1 month vs 5.2 in April. In another sign of tightness, the median sales time held steady at 40 days. But the rising sales rate together with the rise in prices are certain to bring new homes to the market. And homes are coming onto the market, to 2.29 million vs 2.20 and 2.01 in the prior two readings. The existing-home side of the housing sector is now joining the new-home side where the next update will be tomorrow morning with new home sales. Housing is emerging as a leader for the economy, helping to offset what has been disappointment from the export hit manufacturing sector.

Existing Home Sales in May: 5.35 million SAAR, Inventory up 1.8% Year-over-year -- The NAR reports: Existing-Home Sales Bounce Back Strongly in May as First-time Buyers Return Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 5.1 percent to a seasonally adjusted annual rate of 5.35 million in May from an upwardly revised 5.09 million in April. Sales have now increased year-over-year for eight consecutive months and are 9.2 percent above a year ago (4.90 million).... Total housing inventory at the end of May increased 3.2 percent to 2.29 million existing homes available for sale, and is 1.8 percent higher than a year ago (2.25 million). Unsold inventory is at a 5.1-month supply at the current sales pace, down from 5.2 months in April.  This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in May (5.35 million SAAR) were 5.1% higher than last month, and were 9.2% above the May 2014 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 2.29 million in May from 2.22 million in April. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory. Inventory increased 1.8% year-over-year in May compared to May 2014. Months of supply was at 5.1 months in May. This was above expectations of sales of 5.25 million. For existing home sales, a key number is inventory - and inventory is still low, but increasing.

Existing-Home Sales Bounce Back in May - This morning's release of the May Existing-Home Sales surprised expectations, bouncing back to a seasonally adjusted annual rate of 5.35 million units from an upwardly revised 5.09 million in April (previously 5.04 million). The consensus was for 5.26 million. The latest number represents a 5.1% increase from the previous month and a 9.2% increase year-over-year. Here is an excerpt from today's report from the National Association of Realtors."Lawrence Yun, NAR chief economist, says May home sales rebounded strongly following April's decline and are now at their highest pace since November 2009 (5.44 million). "Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers," he said. "However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 is available in the St. Louis Fed's FRED repository here.

Existing Home Sales Spike To Highest Since Nov 2009 As Prices Soar For Expensive Homes -- Following last month's disappointing drop in Existing Home Sales (ignored by most since other housing data provided just enough smoke and mirrors to confirm any inherent biases), May saw Home Sales surged 5.1% (handily beating expectations for a 4.4% rise after the 3.3% drop in April). At 5.35m SAAR, this is the highest rate of sales since Nov 2009 at the end of the government's last housing bailout plan spiked sales. For the 39th consecutive month, home prices rose (by 7.9% YoY) driven by prices rises at the high-end (and a 13.9% drop in prices at the low-end) but NAR's chief economist proclaimed this as sustainable (despite stagnant incomes and home prices about to take out the previous peak) but with 67% of investors paying cash for homes in May, the demand is clearly foreign as Chinese buyers surpass Canadian snowbirds as QE floods out into every asset.Lawrence Yun, NAR chief economist, says May home sales rebounded strongly following April's decline and are now at their highest pace since November 2009 (5.44 million). "Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers," he said. "However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent."

A Few Random Comments on May Existing Home Sales -- First, last month housing economist Tom Lawler pointed out the data in the South looked funny, see: The “Curious Case” of Existing Home Sales in the South in April. Sure enough, sales for April were revised up, with all of the upward revision coming in the South. Second, as always, new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale. Third, in general I'd ignore the median sales price because it is impacted by the mix of homes sold (more useful are the repeat sales indexes like Case-Shiller or CoreLogic). The NAR reported the median sales price was $228,700 in May, just below the median peak of $230,400 in July 2006. That is 9 years ago, so in real terms, median prices are close to 20% below the previous peak.  Not close. Inventory is still very low (up 1.8% year-over-year in May). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases. This will be important to watch over the next few months during the Spring / Summer buying season.  The following graph shows existing home sales Not Seasonally Adjusted (NSA).Sales NSA in May (red column) were above May 2014, and were below May 2013 (NSA).

The NAR Sees "No Housing Bubble", So Here Is A Look At NAR's History Of Absolutely Disastrous Forecasts - When it comes to industry associations such as the homebuilders' National Association of Realtors, one thing is certain: their chief economists, in this case the always wrong Lawrence "Larry" Yun, never see anything but blue skies ahead... even when the second great depression is starting them in the face. Which is logical: after all forecasting anything but a chart from the lower left to the upper right for a person tasked with selling houses (which is what the NAR ultimately does) is the same as Goldman issuing "sell" recommendations on all its stocks, starting a market crash, and alienating all of its corporate clients. It is also why all NAR recommendations are utter garbage and why in 2011 the NAR admitted it had artificially inflated its housing metrics by 14% for the 2007-2010 period.  Unfortunately, these individuals also never learn from their mistake, and today was a perfect example: as part of its improving housing market propaganda, which incidentally is now carried almost entirely on the back of Chinese investors parking the PBOC's hot money in US real estate, and who just surpassed Canadians as the largest foreign buyers of homes in the US...... the inimitable Larry Yun made a repeat CNBC appearance (we wonder where his August 2008 CNBC interview with Diana Olick disappeared to which he patiently explained that there is no better time to buy houses just weeks before housing suffered its biggest collapse since the Great Depression) in which he pronounced "that 2015's annual price could exceed the 2006 peak. Then he made another bold claim: "This is clearly not a bubble."

The Revival of Cities and the Urban Land Premium - naked capitalism - Yves here. This post makes for interesting reading in connection with Wolf Richter’s latest missive on the insanity of San Francisco real estate prices. Admittedly, with San Francisco, as with other “world cities,” you have a large influx of foreign capital, a lot of it less than clean, also goosing the market. This article, by contrast, offers a theory as to what it takes for formerly depopulated urban centers to make a comeback. I’m curious if readers can offer counterexamples. For instance, is this confusing the causal chain? It used to be that manufacturing offered well paid jobs and more secondary cities were prosperous by virtue of being the headquarters for these companies (for instance, Dayton, Ohio has the main offices for NCR, Mead, and Stouffers). Manufacturing is now in retreat in the US and many mid-sized companies have been gobbled up by bigger ones. “Knowledge workers” are now attractive residents, but is this shift in the basic structure of the economy as lasting as many experts believe? I’m old enough to have lived in the days when city centers were seen as doomed: too unsafe, too grubby to be saved. 35 years has led to a complete change in conventional wisdom. But even smaller cities with supposedly limited intrinsic appeal may become more attractive if they have dense enough central areas to make auto free/limited auto living viable in our possible future of higher fuel costs. In other words, high energy costs work against suburbanization, but what does it evolve into?

Number of US homeowners reaches 20-year low -- The American dream is increasingly just that - a dream. Since the 2008 recession, owning a home has been a realistic goal for a shrinking number of people. In 2014, the national homeownership rate slid for 10th consecutive year to 64.5%, reaching lowest homeownership in 20 years, according to a report released by Joint Center for Housing Studies at Harvard University. Even as US is on the path to recovery and unemployment has dropped to 5.5%, homeownership rate still continues to fall. In the first quarter of this year, it has dropped to 63.7% – lowest quarterly rate since early 1993. This drop in homeownership “erases nearly all of the increase from the previous two decades”, according to Chris Herbert, managing director of the center. He added that “the trend does not appear to be abating”. Home ownership is not just slipping through the fingers of the younger millennial generation. The homeownership rate for those 35 to 44 years old has fallen the most and is down 5.4% since 1993. Their homeownership level is down to the levels not seen since the 1960s.

Most Millennials Want to Own Homes -- For generations, homeownership was not only  considered practical, it was also thought to be one of the safest and smartest investment you could make. But the housing crisis of 2008 changed that mindset. Since then, it’s been unclear if the allure of homeownership will return, and whether or not Millennials—who came of age during the downturn—would ever have the means, or desire, to buy homes of their own.  According to a recent report from the National Association of Realtors, first-time homebuyers make up about 33 percent of purchases nationwide; the historical average between 1981 to the period before the boom and bust, was about 40 percent. It’s still largely unclear if the dearth of first-time homebuyers is because of persistent economic instability or because young adults, who typically make up the first-time-home-buying group, were put off of the idea of homeownership by the housing bust. The most recent Allstate/National Journal Heartland Monitor poll tried to assess not only motivation and desire to buy a home, but also whether or not views of homeownership as an important step in American life have changed for older or younger Americans.   Overall, the poll found that older and younger Americans generally regard homeownership as a smart and achievable goal in equal numbers: 72 percent of older respondents said that they felt this way, and 69 percent of younger Americans responded similarly. But the poll found bigger differences when it came to the two groups’ assessments of whether they’d ever be in a position to buy: Nearly one-in-five younger respondents felt that while homeownership is a smart decision, it’s not financially viable for them. Young white respondents were more likely than their minority counterparts to say that their finances probably would not support the purchase. Young women were also more likely than young men to say that homeownership was likely not an economically viable path. And only about 12 percent of respondents, young or old, felt that homeownership was actually a risky or poor choice.

New Home Sales increased to 546,000 Annual Rate in May -- The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 546 thousand.  The previous three months were revised up by a total of 34 thousand (SA). "Sales of new single-family houses in May 2015 were at a seasonally adjusted annual rate of 546,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.2 percent above the revised April rate of 534,000 and is 19.5 percent above the May 2014 estimate of 457,000."The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales since the bottom, new home sales are still close to the bottoms for previous recessions. The second graph shows New Home Months of Supply. The months of supply decreased in May to 4.5 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal).  "The seasonally adjusted estimate of new houses for sale at the end of May was 206,000. This represents a supply of 4.5 months at the current sales rate."Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973.
The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

May 2015 New Home Sales Remain Relatively Strong and Above Expectations.: The headlines say new home sales improved from last month. The rolling averages smooth out much of the uneven data produced in this series - and this month there was a decline in the rolling averages. And there was also a small decline in new home sales prices. As the data is noisy, the 3 month rolling average is the way to look at this data. This data series is suffering from methodology issues. Econintersect analysis:

  • unadjusted sales growth decelerated 12.2% month-over-month (after last month's revised acceleration of 12.8%).
  • unadjusted year-over-year sales up 18.6% (Last month was up 30.7%). Growth this month is on the high end of the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth decelerated 3.6% month-over-month - is up 22.3% year-over-year.
US Census Headlines:
  • seasonally adjusted sales up 2.2% month-over-month
  • seasonally adjusted year-over-year sales up 19.5%
  • market expected seasonally adjusted annualized sales of 505K to 540K (consensus 525K) versus the actual at 546K.
The quantity of new single family homes for sale remains well below historical levels.

New Homes Sales Highest Since February 2008 - This morning's release of the May New Homes Sales from the Census Bureau at 546K was 21K above forecast, with the previous month an upward revision. The forecast was for 525K sales, which would have been a 3.8% increase from the revised previous month. The actual increase was 2.2%.  Here is the opening from the report: Sales of new single-family houses in May 2015 were at a seasonally adjusted annual rate of 546,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.2 percent (±16.7%)* above the revised April rate of 534,000 and is 19.5 percent (±19.7%)* above the May 2014 estimate of 457,000. [Full Report] For a longer-term perspective, here is a snapshot of the data series, which is produced in conjunction with the Department of Housing and Urban Development. The data since January 1963 is available in the St. Louis Fed's FRED repository here.

Comments on New Home Sales and Prices --The new home sales report for May was solid, with sales above expectations at 546 thousand on a seasonally adjusted annual rate basis (SAAR), and upward revisions to prior months. The Census Bureau reported that new home sales this year, through May, were 233,000, not seasonally adjusted (NSA). That is up 24.0% from 188,000 during the same period of 2014 (NSA). That is a strong year-over-year gain for the first five months! Sales were up 19.5% year-over-year in May. This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate). The year-over-year gain will probably be strong through July (the first seven months were especially weak in 2014), however I expect the year-over-year increases to slow later this year - but the overall year-over-year gain should be solid in 2015. Also, as part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices. From the Census Bureau: "The median sales price of new houses sold in May 2015 was $282,800; the average sales price was $337,000." The following graph shows the median and average new home prices.The average price in May 2015 was $337,000 and the median price was $282,800.  Both are above the bubble high (this is due to both a change in mix and rising prices), but are below the recent peak. The recent decline in the median and average is probably because some builders have introduced new homes at lower price points. The third graph shows the percent of new homes sold by price.

Why New Home Sales Remain At Recession Levels, In One Chart -- While the number of new home sales reported earlier beat consensus expectations, coming in at 546K above the estimated 523K, driven mostly by another curious surge in Northeast sales (up 88% from April) where something is clearly afoot following the recent historic outlier in housing permits as shown a week ago..... the reality is that, as a long-term of New Home Sales shows, this series is still at recession levels, and even at the better than expected print of 546K, this the same as a level last seen in 1992. What is the reason for the non-existent rebound? Simple: the following chart comparing total new home sales and the median new home sales price explains it.

Economists Assign Blame For Housing Shortage - The national supply of homes for sale is getting squeezed by the small amount of equity millions of would-be sellers have in their properties and relatively weak output from home builders, according to economists speaking Friday at a real-estate conference in Miami. Tight inventory has been a cause of slow sales volume in the housing market this year, experts say. Homes listed for resale in May amounted to a 5.1-month supply. That means it would take that long at the current sales pace to exhaust the available inventory. A balanced market typically has a supply of six to seven months. The pace of home construction gained momentum this year. But it still amounted in May to just 75% of the annual average from 2000 to 2014. Asked to rank the most influential factors restricting housing supply, most of the five economists on a panel at the National Association of Real Estate Editors’ annual conference pointed to factors that have hamstrung potential home sellers in recent years. Frank Nothaft of CoreLogic and Stan Humphries of Zillow named as a primary factor a persistent lack of equity four years into the housing recovery for a large section of U.S. home owners. “One in three homeowners either has negative equity or very little equity in their homes,” Mr. Humphries said.  According to Zillow, 33% of U.S. homes were equity-impaired in the first quarter, meaning they had 20% equity or less. Many of those homes are worth less than their mortgage amounts. Those with small equity cushions still can sell their homes, but it is likely to be challenging for most of them to cover costs such as Realtor fees, closing costs and a down payment for their next home with so little wiggle room.By CoreLogic’s calculations, roughly 5 million U.S. homes, or 10% of the total, are worth less than the debt owed on them, and another 1 million have insufficient equity to allow a move, Mr. Nothaft said. He added that other homeowners are reluctant to sell these days partly because they refinanced in recent years at interest rates of less than 4%, and they don’t want to forfeit those low rates.

Do Home Builders Understand What Buyers Want? - Two real-estate economists said Thursday that many home builders aren’t doing a good job of determining what home buyers want. Nela Richardson, chief economist for brokerage Redfin Corp., and Selma Hepp, chief economist for Zillow Group’s Trulia real-estate website, both said builders aren’t constructing enough entry-level housing to meet demand. They’re focusing more of their resources instead, the economists said, on building pricey homes for buyers with ample credit. “If there is any speculation in building, it’s going to be toward the higher end,” Ms. Richardson said, speaking during a panel discussion at the National Association of Real Estate Editors’ annual conference in Miami. By speculation, she meant building homes without buyers already signed up. Building entry-level homes on a “spec” basis was a common practice before and during last decade’s real estate boom, when there was ample demand for those homes. But that entry-level demand fell off dramatically in the downturn and since, with many entry-level buyers hampered by strict mortgage-qualification standards and mounting student debt. Meanwhile, demand for pricier homes remains strong, so builders can safely construct spec homes in that segment. But determining if entry-level demand is recovering well enough to warrant wide-scale spec building of less expensive homes requires builders to make an educated guess about future demand. The economists say entry-level housing demand is adequate and increasing. But many builders aren’t so sure.

AIA: Architecture Billings Index increased in May --Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From the AIA: Architecture Billings Index Returns to Positive Territory Led by growing demand for new schools, hospitals, cultural facilities and municipal buildings, the Architecture Billings Index (ABI) increased in May following its second monthly drop this year. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 51.9, up from a mark of 48.8 in April. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.5, up from a reading of 60.1 the previous month. “As has been the case for the past several years, while the design and construction industry has been in a recovery phase, we continue to receive mixed signals on business conditions in the marketplace,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Generally, the business climate is favorable, but there are still construction sectors and regions of the country that are struggling, producing the occasional backslide in the midst of what seems to be growing momentum for the entire industry.”ATA Trucking Index increased 1.1% in May --Here is an indicator that I follow on trucking, from the ATA: ATA Truck Tonnage Index Rose 1.1% in May American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.1% in May, following a revised loss of 1.4% during April. In May, the index equaled 132.1 (2000=100). The all-time high is 135.8, reached in January 2015. Compared with May 2014, the SA index increased just 1.8%, which was well below the 2.7% gain in April and the smallest year-over-year gain since February 2013 (-4.3%). ... “The good news is that truck tonnage increased in May,”. “But tonnage is certainly not strong at the moment as factory output is soft and there is an inventory reduction occurring throughout the supply chain.” Costello noted that truck tonnage is off 2.7% from the high in January. Here is a long term graph that shows ATA's For-Hire Truck Tonnage index. The index is now up only 1.8% year-over-year.

Are Multi-Family Housing Starts near a peak? -- I'm wondering if multi-family housing starts are near a peak. The architecture billings index for multi-family residential market was negative for the fourth consecutive month, and that suggests a slowdown for new apartment construction later this year.  That doesn't mean apartment construction will slow sharply, especially since demographics are still favorable for apartments (as discussed below).   But multi-family construction might move sideways. However the NMHC Market Tightness Index was still favorable for apartments in Q1, but not as favorable as a few years ago. The first graph shows single (blue) and multi-family (red) housing starts for the last several years. Multi-family is volatile month-to-month, but it does appear that growth is slowing.  Of course multi-family permits were very high last month, so we might see another pickup in starts. This has been quite a boom for apartments.  It was five years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive. The drivers were 1) very low new supply, and 2) strong demand (favorable demographics, and people moving from owning to renting).  Demographics are still favorable, but my sense is the move "from owning to renting" has slowed. And more supply has been coming online. On demographics, a large cohort has been moving into the 20 to 34 year old age group (a key age group for renters). Also, in 2015, based on Census Bureau projections, the two largest 5 year cohorts are 20 to 24 years old, and 25 to 29 years old (the largest cohorts are no longer be the "boomers").  This graph shows the population in the 20 to 34 year age group has been increasing.  This is actual data from the Census Bureau for 1985 through 2010, and current projections from the Census Bureau from 2015 through 2035. The circled area shows the recent and projected increase for this group. And on supply, here is the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

The socialisation of US household debt -- Zoltan Pozsar has a fascinating new slide deck illustrating the changing landscape of US household debt, which, thankfully, is easier to read than his incredibly detailed map of the shadow banking system. While the total stock of household obligations is only slightly lower than it was at the peak in 2008, the composition of the lenders has changed dramatically. The government, which for our purposes includes Fannie and Freddie as well as the Federal Reserve, has become far more important, while so-called “shadow banks”, private-label securitisation, and foreigners have all become less important. On the whole, this is probably good for financial stability. Start with a breakdown of household debt as it looks today. Most debt is mortgages and home equity lines of credit. Autos and student loans are about equal in size at $1 trillion each, with the rest taking the form of credit cards and other consumer borrowing:A slight majority of the debt takes the form of bonds rather than loans retained on a balance sheet. The vast majority of those bonds — about $6 trillion — are mortgage-backed securities issued and guaranteed by Fannie and Freddie. The remaining $1 trillion mostly consists of private-label MBS issued before the crisis, with a smattering of private student loans, auto loans, and credit card debts to round it out: In terms of ownership, about a quarter ($3 trillion) of the total stock of debt owed by American households is held either directly by the government or central bank: What’s changed since the crisis? For starters, the government has become much more important because it is the only sector meaningfully boosting credit provision to American households:The Fed bought about $1.7 trillion worth of agency MBS, while the Department of Education started making (and retaining) student loans in size. By contrast, “shadow” lending has contracted by about a third (from $3 trillion to $2 trillion) while domestic “real money” holdings of household debt have collapsed by about half (from roughly $4 trillion to $2 trillion). Traditional bank loans retained on the balance sheet are up since the crisis, but not by much.

Economists, Wall Street Upset About Stingy Millennials -- Turns out, to the greatest consternation of some folks on Wall Street, millennials are smart.  “They don’t trust the stock market,” Goldman Sachs determined in a survey. Only 18% thought that the stock market was “the best way to save for the future.”  The older ones in the cohort have seen the market soar, collapse, re-soar, re-collapse, re-soar…. They’ve seen what amount of monetary gyrations the Fed undertook to re-inflate stocks this time around. They’ve read about the stock market scandals and manipulations, high-frequency trading, dark pools, and spoofing.  They’ve seen hard-working people get wiped out. But they do have a problem, smart as they are: they’re carrying on their shoulders a good part of the $1.2 trillion of student debt outstanding. In 2004, Americans under the age of 30 had $146 billion in student loans, according to Equifax. By 2014, in just ten years, the student-debt burden of the under-30 cohort had skyrocket by 152% to $369 billion. Delinquencies are rising. Some of the millennials have gotten caught up in the for-profit-college scandals that have left them with lots of debt and little education. Now they’re waiting for a taxpayer bailout. It has been the school of hard knocks for them. But there are consequences. Equifax determined in its analysis that millennials aren’t borrowing money to buy homes like their predecessors a decade ago did – “a trend that may have as much to do with high levels of student debt and poor job prospects as it has to do with trauma from the housing bust….” The analysis also confirmed our suspicions that those earning less than $30,000 per year – so for example, lawyers working as bar tenders – face the highest risk of delinquency. Then with each $10,000 increase in income, the delinquency rate drops by 20%. A “phenomenon that demonstrates the strain student debt puts on young consumers starting their careers,” as Equifax put it.

Americans households have the highest credit card debt since recession - American consumers are accumulating credit card debt at the same rate as before the recession, despite paying down a huge chunk of that borrowing during the first quarter of this year, according to CardHub’s 2015 Credit Card Debt Study released this week. During the first three months of 2015, consumers paid down $34.7 billion in debt owed to credit card companies. That’s about 7 percent above the average of the past two years. But American consumers still ended 2014 with $57 billion in debt, a historic high. “Simply put, it seems that we have a societal addiction to debt. The only cure will be to redefine what we consider luxuries and necessities as well as to improve our overall financial literacy,” an earlier CardHub report declared. The Federal Reserve’s April consumer credit report confirmed CardHub’s findings, showing an escalation of the country’s overall borrowing levels. Revolving credit, which includes all types of credit, including credit card balances, increased $8.6 billion in April, nearly double March’s increase. The average household has $7,177 in debt, according to the CardHub report. That amount is the largest it has been in six years, and is indicative of a national spending problem, according to expert observers.

70 million Americans teetering on edge of financial ruin - According to a survey of 1,000 adults released by on Tuesday, nearly one in three (29%) American adults (that’s roughly 70 million) have no emergency savings at all — the highest percentage since Bankrate began doing this survey five years ago. What’s more, only 22% of Americans have at least six months of emergency savings (that’s what advisers recommend) — the lowest level since Bankrate began doing the survey. These findings mirror others — all of which paint an abysmal picture of Americans’ ability to withstand an emergency. For example, a survey released in March by national nonprofit NeighborWorks America also found that roughly one third (34%) of Americans don’t have emergency savings.  The problem with this lack of savings is that emergencies can and do happen, and when they do, you may be forced into an expensive solution like credit cards or personal loans — and in extreme cases having to declare bankruptcy. Indeed, half of Americans had experienced an unforeseen expense in the past year, according to a 2014 survey by American Express; of those, 44% had a health care-related unforeseen expense and 46% had one related to their car — both of which tend to be things you can’t avoid paying.

Personal Income increased 0.5% in May, Spending increased 0.9%  --The BEA released the Personal Income and Outlays report for May:  Personal income increased $79.0 billion, or 0.5 percent ... in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $105.9 billion, or 0.9 percent...Real PCE -- PCE adjusted to remove price changes -- increased 0.6 percent in May, compared with an increase of less than 0.1 percent in April. ... The price index for PCE increased 0.3 percent in May, compared with an increase of less than 0.1 percent in April. The PCE price index, excluding food and energy, increased 0.1 percent in May, the same increase as in April. The May price index for PCE increased 0.2 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.2 percent from May a year ago. The following graph shows real Personal Consumption Expenditures (PCE) through May 2015 (2009 dollars).  The dashed red lines are the quarterly levels for real PCE. The increase in personal income was higher than expected. And the increase in PCE was above the 0.7% increase consensus. A strong report. On inflation: The PCE price index increased 0.2 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.2 percent year-over-year in May. Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 3.1% annual rate in Q2 2015 (using the mid-month method, PCE was increasing 4.2%). This suggests a rebound in PCE in Q2, and decent Q2 GDP growth.

Consumers Come to Life in May -- Consumers came to life in May, as expected by the Bloomberg Econoday Consensus Estimate. Reports on personal income, consumer spending, PCE, and core PCE come out today. Economists got all of them correct, actually being a bit pessimistic on spending. Once again though, autos lead the way. The consumer came to life in May, boosted by a 0.5 percent rise in personal income and helping to support a 0.9 percent surge in personal outlays that reflects heavy spending on autos and retail goods. And gains are not inflationary, at least yet, based on the very closely watched core PCE price index which edged only 0.1 tenth higher in May and is at a very benign 1.2 percent year-on-year rate which is actually down a tenth from an upward revised April. Components on the income side are very solid with wages & salaries up 0.5 percent in the month. Both proprietors' income and rental income show especially strong gains. Spending components show special strength for durables, again tied especially to autos, and also strong gains for non-durables, here tied to higher pump prices. Spending on services once again shows an incremental gain. Turning back to PCE prices, the overall price index looks a little hot in May at plus 0.3 percent but the year-on-year rate is unchanged at only 0.1 percent. That's right, that's the year-on-year rate at only the most incremental level of inflation. And the 1.2 percent year-on-year core appears to be moving in reverse, down 1 tenth in each of the last two reports and further away from the Fed's 2 percent target. Consumers, in an expression of their confidence, dipped into their savings to spend, with the savings rate down 3 tenths to 5.1 percent. This is a good report for the bulls, showing a strong non-inflationary bounce for the second quarter. This report won't be keeping the doves up at night and does not move forward the Fed's coming rate hike.

Personal income, spending, and saving: a trifecta of good news for the US economy: This morning's report on personal income, savings, and spending completes the picture of the consumer coming back after a brief hibernation. And consumers aren't spending all of their gas savings, they have simply returned to normal. To the graphs! First, here is a comparison of real retail sales through May (blue) vs. real personal consumption expenditures (red): While real retail sales did have a winter dip, they are back on trend at a new high. But retail sales only cover about half of all purposes. Personal consumption expenditures are more comprehensive, and they have stayed on trend with only a slight pause during last winter. Since consumer spending is a bout 70% of all spending, the improvement here is more than enough to offset the slight downturn in industrial production since last November. Next, here is the personal savings rate: This has returned to its top end of typical range for the last 2+!years, even with the increase in spending. So consumers are still keeping a share of their gas savings. I'd be remiss if I didn't mention the Atlanta Fed's GDPNow calculator, which, as the name implies, is a day by day "now-cast" of the present quarter's GDP, baed on information available to date. This did a great job anticipating the roughly 0 1st quarter GDP, and was cited by a few Doomers as proof that we were about to enter, if not in, a recession. Well, here's how it stands now:  At 2.1%, this isn't great, but it is far from recession -- and of course will change again over the next month.

The changing nature of Americans’ income - It’s amazing what you can find when you spend some time in table 2.1 of America’s National Income and Product Accounts. As anyone following the debates about inequality has surely heard, income from owning capital has fluctuated dramatically as a share of total personal income: (Note that realised capital gains are not counted as personal income in the national accounts even though they clearly affect consumption and saving behaviour.) From a stable average of around 7 per cent of total personal income, the rentier’s share fell below 4 per cent by the mid-1970s and stayed there until the early 1990s. In the past 25 years, however, dividends and rents have exploded as a share of total personal income and now account for a little more than a tenth of the total. The massive growth in the share of income earned by renting out property to others since the housing bust is particularly striking, although unsurprising given what’s happened to the homeownership rate. While nothing in that narrative is wrong, the broader conclusion that rentiers are back is a bit misleading. The next chart adds in interest income and nonfarm proprietors’ income. That latter category includes small businesses but also law firm partners, hedge funders, private equity, etc. As you can see, capital’s share of US personal income has actually been pretty stable since the data begin in the late 1940s: So if capital’s share has been basically constant for 70 years, why have wages and salaries steadily ground lower since the mid-1970s? Part of the reason is that “supplements” — a category that includes the taxes employers pay into Social Security and Medicare, as well as contributions to employer-sponsored pensions — have grown:

May Real Disposable Income Per Capita Rose a Fractional 0.12% - With the release of today's report on May Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013. The May nominal 0.43% month-over-month increase in disposable income drops to 0.12% when we adjust for inflation. The year-over-year metrics are 3.00% nominal and 2.77% real.  The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per capita disposable income since 2000.  Nominal disposable income is up 63.6% since then. But the real purchasing power of those dollars is up only 23.3%.

Personal Spending Surges Most Since August 2015 As Savings Rate Tumbles - After 6 straight months of decline in annual spending growth, May saw YoY spending pop 3.6% (the most since Dec 2014). After an unchanged April, May expectations for spending were a 0.7% jump but the data blew that away, printing a 0.9% MoM jump - the biggest since August 2009 and biggest beat since Jan 2013. Personal Income only grew at 0.5% (still the highest MoM jump since March 2014) driving the savings rate down to 5.1% - the lowest since December. Spending Spike... Savings Down... As spending outpaces income once again... Charts: Bloomberg

Michigan Consumer Sentiment: Growth in Consumer Spending 3% in 2015 -- The University of Michigan final Consumer Sentiment for June came in at 96.1, a small increase from the 94.6 June preliminary reading but still below the interim high of 98.1 in January. had forecast 94.6 for the June final. The latest survey findings were a welcome improvement following last month's interim low. Surveys of Consumers chief economist, Richard Curtin makes the following comments: Consumers voiced in the first half of 2015 the largest and most sustained increase in economic optimism since 2004. Just as important, that same record was set by households in the top third of the income distribution as well as by the middle third and those in the bottom third of the income distribution. Moreover, the recent surveys recorded those same records when consumers were asked to evaluate prospects for the national economy, their personal finances, and buying conditions. Consumer spending will remain the driving force of economic growth in 2015. Overall, the data indicate growth in consumer spending of 3.0% in 2015. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.  To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is now 13 percent above the average reading (arithmetic mean) and 14 percent above the geometric mean. The current index level is at the 83th percentile of the 450 monthly data points in this series. The Michigan average since its inception is 85.2. During non-recessionary years the average is 87.5. The average during the five recessions is 69.3. So the latest sentiment number puts us 26.8 points above the average recession mindset and 8.6 points above the non-recession average.Note that this indicator is somewhat volatile, with a 3.1 point absolute average monthly change. The latest data point was a 5.4 point change from the previous month. For a visual sense of the volatility, here is a chart with the monthly data and a three-month moving average.

Consumer Confidence Surges To January Cycle Highs (Near 11 Year Highs) -- UMich consumer sentiment spiked from 90.7 to 96.1 (well above the 94.6 preliminary print)just shy of 2015 highs (which are also the highest since 2004). The spike is driven by asurge in "Current Conditions" as hope for the future rose only modestly as inflation expectations dropped. However, notably fewer people see now as a good time to buy a house. We assume UMich survey respondents are "invested" in stocks since higher gas prices and lower affordability in housing seemed to weigh Gallup's economic confidence down to its lowest since 2014.

DOT: Vehicle Miles Driven increased 3.9% year-over-year in April, Rolling 12 Months at All Time High - The Department of Transportation (DOT) reported: Travel on all roads and streets changed by 3.9% (10.2 billion vehicle miles) for April 2015 as compared with April 2014. Travel for the month is estimated to be 267.9 billion vehicle miles. The seasonally adjusted vehicle miles traveled for April 2015 is 262.4 billion miles, a 3.7% (9.5 billion vehicle miles) increase over April 2014. The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors. The rolling 12 month total is moving up, after moving sideways for several years.In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months. Miles driven (rolling 12) had been below the previous peak for 85 months - an all time record - before reaching a new high for miles driven in January. The second graph shows the year-over-year change from the same month in the previous year.

Vehicle Sales Forecasts for June: Over 17 Million Annual Rate Again, Best June in a Decade - The automakers will report June vehicle sales on Wednesday, July 1st. Sales in May were at 17.7 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales will in June will be over 17 million SAAR again. There were 26 selling days in June, one less than in June 2014.  Here are a few forecasts: From Auto Industry Poised for Best June Sales in a Decade, Forecasts ... forecasts that 1,484,487 new cars and trucks will be sold in the U.S. in June for an estimated Seasonally Adjusted Annual Rate (SAAR) of 17.3 million. The projected sales will be a 9.0 percent decrease from May 2015, but a 4.7 percent increase from June 2014. If the sales volume holds, it will mark the best-selling month of June since 2006, and the biggest June SAAR since 2005. From J.D. Power: June New-Vehicle Retail Sales Strongest For the Month in a Decade The forecast for new-vehicle retail sales in June 2015 is 1,169,600 units, a 1 percent increase on a selling-day adjusted basis compared with June 2014 and the highest retail sales volume for the month since June 2005, when sales hit 1,350,004. Retail transactions are the most accurate measure of consumer demand for new vehicles. [Total forecast 17.2 million SAAR] From Kelley Blue Book: New-Car Sales To Rise Nearly 6 Percent In June 2015, According To Kelley Blue Book New-vehicle sales are expected to increase 5.8 percent year-over-year to a total of 1.5 million units in June 2015, resulting in an estimated 17.4 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book ...

ATA Trucking Index increased 1.1% in May --Here is an indicator that I follow on trucking, from the ATA: ATA Truck Tonnage Index Rose 1.1% in May American TruckingAssociations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.1% in May, following a revised loss of 1.4% during April. In May, the index equaled 132.1 (2000=100). The all-time high is 135.8, reached in January 2015. Compared with May 2014, the SA index increased just 1.8%, which was well below the 2.7% gain in April and the smallest year-over-year gain since February 2013 (-4.3%). ... “The good news is that truck tonnage increased in May,”. “But tonnage is certainly not strong at the moment as factory output is soft and there is an inventory reduction occurring throughout the supply chain.” Costello noted that truck tonnage is off 2.7% from the high in January. Here is a long term graph that shows ATA's For-Hire Truck Tonnage index. The index is now up only 1.8% year-over-year.

Trucking Tonnage Index Recovers Partially in May 2015-- The American Trucking Associations' (ATA) trucking index rose 1.1% following an upwardly revised decline of 1.4% in April. From ATA Chief Economist Bob Costello: The good news is that truck tonnage increased in May. But tonnage is certainly not strong at the moment as factory output is soft and there is an inventory reduction occurring throughout the supply chain. I believe the inventory correction should end this summer and truck freight, helped by better personal consumption, will accelerate, which is good because I think it is unlikely factory output will boost truck tonnage much until later this year or next year. Compared with one year ago, seasonally adjusted tonnage increased 1.8%. Econintersect tries to validate data across data sources. It appears this month that jobs growth says the trucking industry increased 0.6% month-over-month (red line). Please note using BLS employment data in real time is risky, as their data is normally backward adjusted significantly.

Rail Week Ending 20 June 2015: Just Another Bad Week for Rail -- Week 24 of 2015 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. Intermodal traffic expanded year-over-year, which accounts for half of movements - but weekly railcar counts continues in contraction. It should be noted that the level of contraction worsened from the previous week. This analysis is looking for clues in the rail data to show the direction of economic activity - and is not necessarily looking for clues of profitability of the railroads. The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages which generally are in a weak growth cycle.. For the week ending June 20, 2015, total U.S. weekly rail traffic was 550,839 carloads and intermodal units, down 2.4 percent compared with the same week last year. Total carloads for the week ending June 20, 2015 were 273,932 carloads, down 6.1 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 276,907 containers and trailers, up 1.6 percent compared to 2014. Four of the 10 carload commodity groups posted an increase compared with the same week in 2014. They included: miscellaneous carloads, up 15.7 percent to 8,946 carloads; grain, up 3.4 percent to 18,271; and motor vehicles and parts, up 1.9 percent to 18,682 carloads. Commodity groups that posted decreases compared with the same week in 2014 included: coal, down 13.7 percent to 95,095 carloads; metallic ores and metals, down 8.1 percent to 25,181 carloads; and forest products, down 7.3 percent to 11,119 carloads. For the first 24 weeks of 2015, U.S. railroads reported cumulative volume of 6,658,163, down 3.6 percent from the same point last year; and 6,329,465 intermodal units, up 2.2 percent from last year. Total combined U.S. traffic for the first 24 weeks of 2015 was 12,987,628 carloads and intermodal units, a decrease of 0.8 percent compared to last year.

Major internet providers slowing traffic speeds for thousands across US - Major internet providers, including AT&T, Time Warner and Verizon, are slowing data from popular websites to thousands of US businesses and residential customers in dozens of cities across the country, according to a study released on Monday. The study, conducted by internet activists BattlefortheNet, looked at the results from 300,000 internet users and found significant degradations on the networks of the five largest internet service providers (ISPs), representing 75% of all wireline households across the US. The findings come weeks after the Federal Communications Commission introduced new rules meant to protect “net neutrality” – the principle that all data is equal online – and keep ISPs from holding traffic speeds for ransom. Tim Karr of Free Press, one of the groups that makes up BattlefortheNet, said the finding show ISPs are not providing content to users at the speeds they’re paying for. “For too long, internet access providers and their lobbyists have characterized net neutrality protections as a solution in search of a problem,” said Karr. “Data compiled using the Internet Health Test show us otherwise – that there is widespread and systemic abuse across the network. The irony is that this trove of evidence is becoming public just as many in Congress are trying to strip away the open internet protections that would prevent such bad behavior.”

Durable Goods Orders June 23, 2015 - Big downward revisions to April data almost sink the latest durable goods report where, however, important details show some life. Total orders sank 1.8 percent in May but this is badly skewed by a 49 percent drop in aircraft orders where outsized month-to-month swings are the norm. The April revision is the big surprise here, now at minus 1.5 from an initial minus 0.5 percent in an unwelcome reminder of how volatile this series is. Stripping out transportation, which is where aircraft orders are tracked, shows strength in the month at plus 0.5 percent which hits the Econoday consensus. But here again, the April revision swings in and takes an initial 0.5 percent gain to minus 0.3 percent. The key area, however, that remains on the positive side is capital goods where new orders excluding aircraft rose 0.4 percent in May vs a 0.3 percent slip in April which was initially posted at plus 1.0 percent. Shipments for this reading, in what is a plus for second-quarter GDP, show back-to-back gains of 0.3 percent. The industry breakdown looks almost positive in this report. Many of the capital-goods industries show solid acceleration in new orders the last couple of months including machinery, fabricated metals and primary metals. Otherwise, there's only a few industries showing weakness including electrical equipment which is a negative signal for construction where signals have otherwise been strong. Motor vehicles are surprisingly flat despite the recent surge in sales. Among other readings, unfilled orders are down for a second month at a heavy 0.5 percent while inventories are down 0.2 percent in a reading that's a negative for second-quarter GDP. Another negative for GDP is a second straight decline in shipments at minus 0.1 percent.

May Durable Goods: Another Mixed Bag -  The May Advance Report on April Durable Goods released today by the Census Bureau was another disappointment. Here is the Bureau's summary on new orders:  New orders for manufactured durable goods in May decreased $4.1 billion or 1.8 percent to $228.9 billion, the U.S. Census Bureau announced today. This decrease, down three of the last four months, followed a 1.5 percent April decrease. Excluding transportation, new orders increased 0.5 percent. Excluding defense, new orders decreased 2.1 percent. Download full PDF The latest new orders headline number at -1.8 percent was well below the estimate of -0.6 percent. This series is down -2.5 percent year-over-year (YoY). If we exclude transportation, "core" durable goods came in at 0.5 percent month-over-month (MoM), a tick below the estimate of 0.6 percent. The core measure is down -1.6 percent YoY. If we exclude both transportation and defense for an even more fundamental "core", the latest number was a fractional up 0.2 percent MoM, but down -1.1 percent YoY. Core Capital Goods New Orders (nondefense capital goods used in the production of goods or services, excluding aircraft) is an important gauge of business spending, often referred to as Core Capex. It posted a 0.4 percent monthly gain, However, it is down 0.9 percent YoY. For a look at the big picture and an understanding of the relative size of the major components, here is an area chart of Durable Goods New Orders minus Transportation and Defense with those two components stacked on top. We've also included a dotted line to show the relative size of Core Capex.

Durable Goods Orders Plunge in May, Huge Downward Revisions in April --  In the durable goods May forecast, the Bloomberg Consensus Economist's Estimate was well off the mark.  The consensus estimate was -0.6% with the actual number a dismal -1.8%, but heavily skewed by a drop in aircraft orders.The economists had the negative sign correct, but given the huge downward revision from -0.5% to -1.5% for April, they really missed the mark by a mile.   Big downward revisions to April data almost sink the latest durable goods report where, however, important details show some life. Total orders sank 1.8 percent in May but this is badly skewed by a 49 percent drop in aircraft orders where outsized month-to-month swings are the norm. The April revision is the big surprise here, now at minus 1.5 from an initial minus 0.5 percent in an unwelcome reminder of how volatile this series is. Stripping out transportation, which is where aircraft is tracked, shows strength in the month at plus 0.5 percent which hits the Econoday consensus. But here again, the April revision swings in and takes an initial 0.5 percent gain to minus 0.3 percent.  The key area, however, that remains on the positive side is capital goods where new orders excluding aircraft rose 0.4 percent in May vs a 0.3 percent slip in April which was initially posted at plus 1.0 percent. Shipments for this reading, in what is a plus for second-quarter GDP, show back-to-back gains of 0.3 percent.

Durable Goods Order Bounce Dead; Biggest YoY Drop Since 2009 -- March's exulted bounce in Durable Goods faded rapidly into April's disappointing drop and today we see May disappoint further with a 1.8% drop (against expectations of a 0.1% drop) having missed 5 of the last 7 months. Revisions are big and negative... so that's not helping and has pushed Durable Goods Orders NSA down 5.0% YoY - the largest consecutive slump since Dec09... the last time we dropped this much, The Fed unleashed QE3. Durable Goods Ex Transports and Core Capex are also both down YoY for 4 months in a row, flashing recessionary red.  MoM - the bounce is dead... Leaving YoY Durables Goods Orders weak With Core Durable Goods down YoY 4 months in a row... Worse still Core Capex is down 4 months in a row also... And the bottom line: durable Goods Inventories declined by the most since May 2013. Which means very bad news for Q2 GDP if indeed this flows through into the GDP calculation.

Richmond Fed Manufacturing Index June 23, 2015: The early read on June conditions in the manufacturing sector is mixed, which is actually positive compared to prior months. The Richmond Fed manufacturing index is up 5 points in June to 6 which is pretty solid for this reading. And, importantly, new orders lead the report, up 9 points to 11. Backlog accumulation is right behind, at plus 6 for a rare positive reading. Hiring is up with wages showing some pressure. Other price readings show no significant pressure. Weakness in today's report is in shipments which are flat this month, but this is far offset by the jump in new orders. Where does the manufacturing stand right now? Readings on this month are so far mixed with this report and last week's Philly Fed report on the strong side but last week's Empire State report and this morning's PMI manufacturing index on the soft side. A look back at May in this morning's durable goods is likewise mixed with most readings soft except for capital goods which is a key group. Being mixed in sum points to no better than flat conditions in sharp contrast to housing data which are now uniformly strong.

Richmond Fed: Manufacturing Grew Modestly in June - Today the Richmond Fed Manufacturing Composite Index increased slightly with a 5 point increase to 6 from last month's 1. had forecast a rise to 3. Because of the highly volatile nature of this index, we include a 3-month moving average to facilitate the identification of trends, now at 1.3, in modest expansion.  The complete data series behind today's Richmond Fed manufacturing report (available here), which dates from November 1993. Here is a snapshot of the complete Richmond Fed Manufacturing Composite series: Here is the latest Richmond Fed manufacturing overview. Manufacturing executives anticipated positive business conditions during the next six months. Manufacturers expected faster growth in shipments and in the volume of new orders. Additionally, producers expected order backlogs to grow more quickly and looked for increased capacity utilization. Survey participants anticipated unchanged vendor lead times. Manufacturers expected faster growth in the number of employees and looked for average wages to accelerate in the six months ahead. They expected a modest rise in the length of the average workweek. In addition, producers expected faster growth in prices paid and in prices received during the next six months. Here is a somewhat closer look at the index since the turn of the century.

Kansas City Fed: Regional Manufacturing Activity Declined in June -  From the Kansas City Fed: Tenth District Manufacturing Activity Declined at a Slower Pace The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined at a slightly slower pace, and producers’ expectations improved modestly. “Regional factory conditions continued to decline in June, especially in energy-producing areas,” said Wilkerson. “However, firms continue to expect some stabilization in the months ahead and for orders to rise by the end of the year.” ... Tenth District manufacturing activity declined at a slightly slower pace than the previous month, and producers’ expectations improved modestly. Most price indexes continued to rise, particularly for raw materials.  The month-over-month composite index was -9 in June, up from -13 in May but down from -7 in April ... On the other hand, although still negative, the new orders, order backlog, employment, and new orders for export indexes edged higher.

Kansas City Fed: Manufacturing Contraction "Better" in June 2015 -- Of the four regional manufacturing surveys released to date for June, two show weak manufacturing growth and two are in contraction. There were no market expectations published from Bloomberg.  "Regional factory conditions continued to decline in June, especially in energy-producing areas,"  Tenth District manufacturing activity declined at a slightly slower pace than the previous month, and producers' expectations improved modestly. Most price indexes continued to rise, particularly for raw materials. The month-over-month composite index was -9 in June, up from -13 in May but down from -7 in April (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Durable goods manufacturing improved slightly, although still negative, particularly for aircraft products and parts. However, nondurable goods production fell further broadly across all types of plants. Production fell in all District states except for Colorado, but continued to be most negative in energy-concentrated Oklahoma. The majority of other month-over-month indexes also remained negative. The production index contracted further from -13 to -21, its lowest level since February 2009, and the shipments index also decreased. On the other hand, although still negative, the new orders, order backlog, employment, and new orders for export indexes edged higher. The finished goods inventory index fell from 0 to -6, while the raw materials inventory index was basically unchanged.

Kansas City Fed Survey: Manufacturing at Levels Last Seen in Mid-2009 --We have added the Kansas City Fed Manufacturing Survey to our series of regional Fed updates using the composite index. This business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico. Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001.Here is an excerpt from the latest report: The Federal Reserve Bank of Kansas City released the June Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined at a slightly slower pace, and producers’ expectations improved modestly. “Regional factory conditions continued to decline in June, especially in energy-producing areas,” said Wilkerson. “However, firms continue to expect some stabilization in the months ahead and for orders to rise by the end of the year.” Here is a snapshot of the complete Kansas City Fed Manufacturing Survey. The three-month moving average, which helps us visualize trends, is at its lowest level since mid-2009.

US Manufacturing PMI Slumps To Weakest Since Oct 2013 -- Having hovered at its lowest level since January 2014, Markit's US Manufacturing PMI slipped even further to 53.4 (against expectations of 54.1). This is the weakest since October 2013 and the biggest miss since August 2013. Stunned, Markit notes, "while the survey data points to the economy rebounding in the second quarter, the weak PMI number for June raises the possibility that we are seeing a loss of momentum heading into the third quarter;"which is odd because every talking head has been proclaiming everything is awesome, "while a September rise still looks likely, given the ongoing strength of the service sector, any further deterioration in the data are likely to push the first hike into next year." Well this is not what The Fed promised...

Chemical Activity Barometer "Leading Economic Indicator Heats Up" -- Here is a relatively new indicator that I'm following that appears to be a leading indicator for industrial production. From the American Chemistry Council: Leading Economic Indicator Heats Up The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), increased by 0.7 percent in June, followed by a similar gain in May, and an upwardly revised 0.5 percent gain in April. The pattern represents an acceleration of productivity not seen since the first quarter of 2011. Data is measured on a measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 3.7 percent over this time last year, also an acceleration of annual growth as compared to the first half of 2015. ... Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research.

TPP won't help Pennsylvania manufacturers - President Obama has spent the past six years negotiating a Trans-Pacific Partnership (TPP) trade deal behind closed doors. The agreement, repeatedly touted as a boost for America’s manufacturers and workers, would open the U.S. market to a slew of imports from 11 nations, including Vietnam, Japan, Singapore, and Malaysia. In order to craft the TPP package, which now runs to thousands of pages, the president has relied on the advice of 600 non-governmental organizations, including many multinational corporations. Unfortunately, he has refused input from the one voice that should matter — the U.S. Congress. And that’s a real problem. Since 2000, the U.S. has lost more than five million manufacturing jobs and 57,000 manufacturing establishments. In Pennsylvania alone, this has meant a $203 billion cumulative trade deficit over the past five years, with 295,000 good-paying factory jobs shed since 2000. This lost manufacturing has come at a real cost for Pennsylvania’s middle class, and what should be paramount on the minds of our elected officials is how to rebuild this lost industrial capacity. The TPP is emphatically not the answer. Instead, it’s simply the latest in a long line of trade deals (like NAFTA, WTO, China, CAFTA, South Korea, etc.) that have opened the door to predatory trade with countries that have only their own interests at heart.

US Services PMI Misses By The Most On Record, Tumbles To Lowest Since January -- Missing by the most on record (as serial extrapolators expected a rise to 56.5), Markit US Services PMI (following weakness in the Manufacturing PMI) printed 54.8 - the lowest since the middle of weather carnage in January. As Markit notes, with the exceptions of the weather-related slowdown at the turn of the year and the 2013 government shutdown, June saw the weakest pace of economic growth since May 2013 as the Composite PMI slipped to 54.6 - its lowest since January 2015 (as employment tumbled and cost burdens surged the most since Oct 2013). As Markit conludes, hopes for a 3.00% growth are receding as "there has clearly been a loss of momentum in recent months."

The Humans Who Dream Of Companies That Won't Need Us - What Ethereum proposes, in effect, is a global computer that could not only handle those transactions but also eventually emulate many of the functions of companies like Uber, Airbnb, Dropbox, Amazon, and Kickstarter—but without the "inefficient" bureaucracies and the other intermediaries who take a slice of the pie. That is to say, companies that, once started, can run themselves. If the blockchain is a giant ledger, Buterin's goal—first articulated in a January 2014 article in Bitcoin Magazine, which he cofounded—is to build the army of robot accountants working on top—what are sometimes known as "smart contracts." Nick Szabo, the cryptographer who is credited with coining that term and is speculated to have been involved in bitcoin's creation, described blockchain-based autonomous organizations last December on his blog as armies of accountant robots: Instead of the cashier and ticket-ripper of the movie theater, the block chain consists of thousands of computers that can process digital tickets, money, and many other fiduciary objects in digital form. Think of thousands of robots wearing green eye shades, all checking each other's accounting. Individually the robots (or their owners) are not very trustworthy, but collectively, coordinated by mathematics, they produce results of high reliability and security.

Americans Haven’t Been Working This Much Since 2008 -- Americans put in more hours at work last year. They also managed to find more time to sleep and watch television. Work and work-related activities averaged three hours, 35 minutes per day last year, an increase of seven minutes from 2013, the Labor Department said Wednesday in its latest American Time Use Survey report. That was the most time spent on work since the recession year of 2008, when Americans worked an average of three hours, 44 minutes. The portrait of the average American day is based on the civilian population 15 years and older, including the employed and those without jobs, across weekdays and weekends. For employed Americans, work took up an average of seven hours, 45 minutes in 2014, up 10 minutes from 2013. Women saw a larger jump in time worked than did men. Work hours fell during the recession and have rebounded with the broader economy. Not only did Americans work more last year, but more Americans in the survey were working. The U.S. unemployment rate dropped to 5.6% at the end of 2014 from 6.7% a year earlier, according to separate Labor Department data. Even with more work, Americans still found plenty of time to kick back and relax. Leisure and sports took up five hours, 18 minutes of the average day last year, up two minutes from the prior year. The average day in 2014 included two hours, 49 minutes of TV time, three minutes more than in 2013. That stands in contrast to the idea that people are living busier and more frantic lives, said University of Maryland sociologist John P. Robinson. “If you’ve got time to watch television, I think you’ve got time,” he said. Sleep remained the single largest daily activity in 2014, accounting for eight hours, 48 minutes of the average day. That’s up from eight hours, 44 minutes in 2013. Time devoted to education dipped last year. An average of 25 minutes was spent in the classroom and on homework in 2014, down from 29 minutes in 2013.

Weekly Initial Unemployment Claims increased to 271,000 - The DOL reported: In the week ending June 20, the advance figure for seasonally adjusted initial claims was 271,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 267,000 to 268,000. The 4-week moving average was 273,750, a decrease of 3,250 from the previous week's revised average. The previous week's average was revised up by 250 from 276,750 to 277,000.  There were no special factors impacting this week's initial claims.  The previous week was revised up by 1,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Chart of the day: Jobless claims adjusted for the labor force -  It’s been a few years since I last featured the pair of charts above showing: a) the number of jobless claims vs. the size of the US labor force (top chart), and b) jobless claims as a share of the US labor force (bottom chart), both updated through May 2015 with the most recent data for May (BLS data here and here).  The top chart shows why unadjusted jobless claims are very misleading: the size of the US labor force has more than doubled over the last 42 years, from 76.6 million in 1967 to the current level of almost 157.5 million Americans. The bottom chart shows jobless claims adjusted for the size of the US labor force, which have been steadily declining since 2009. Jobless claims averaged 272,950 in May, which is 0.173% of the May labor force of 157,469,000, and the lowest level since the Department of Labor started reporting monthly jobless claims in 1967. Compared to the most recent peak of 0.424% in March of 2009 during the Great Recession, adjusted jobless claims have fallen consistently to the current historic low-level of 0.173%.Jobless claims, when adjusted to account for the size of the US labor force, have now fallen to the lowest level in history. Conditions in today’s labor market are actually slightly better than the unadjusted claims would suggest, especially when compared to previous economic recoveries. It’s amazing that so much attention is paid every Thursday to an important economic variable (initial jobless claims) that really has no meaning unless it’s adjusted to account for the size of the US labor force.

Getting Hired Now Takes Longer - I came across an interesting research by Glassdoor.  According to this new research paper,  the time required for hiring processes has grown dramatically in recent years, both in the U.S. and internationally.  That means it is taking longer for job seekers to get through the interview process and actually land a job. The chart below shows the average time for hiring processes by country in 2014, which ranged from 22.1 days in Canada to 31.9 days in France. The research found one major contributing factor to the longer wait time to get hired has to do with  job interview “screening” methods used by employers.  Each additional “screen”—such as group panel interviews, background check, skills tests—adds significantly to hiring times. The longer hiring process could also be a reflection of a more fundamental shift toward more non-routine, more judgement-oriented jobs (high-skilled) making job-match more difficult.Of course bureaucracy is certainly a factor contributing to the current lengthy hiring process.  The chart from Bloomberg (based on the same Glassdoor research data set) shows the number of days in the interview process by major U.S. cities.  So not surprisingly Washington DC bureaucrats lead the U.S. city group with the longest waiting days of 34.4 days.

How Some Companies Are Scamming Job Applicants -- After posting our latest piece about getting hiring now takes longer, we learned a disturbing trend in the current company interview practice (we are talking about Fortune 500 companies) from some of our reader friends.  What we are about to describe is probably more often seen in the sector or city experiencing large layoffs such as the energy sector or City of Houston.  As we previously reported, the new 'lower for longer' oil price environment has brought the State of Texas the worst job recession in 80 years.  Indeed, the graph below from Reuters (updated through May 12, 2015) shows a clear inverted relationship between oil price and U.S. energy sector layoffs. This has lead to a lot of good talents (typically higher-paid and high-skilled workers) now available in the job market within the energy sector and Houston, the Energy Capital of the World. What we've found is that companies, unwilling to pay for an external consult, are increasingly using actual work project(s) (that they don't know how to deliver) packaged as 'scenario' or 'Case Study' in job interviews phishing for 'free' advise and insight from qualified industry veteran applicants.  The hiring manager typically would ask for very specific info and/or 'work samples'. The applicants are usually only too eager to share thinking it'd mean certain advantage of landing the job.

Can an Algorithm Hire Better Than a Human? - Hiring and recruiting might seem like some of the least likely jobs to be automated. The whole process seems to need human skills that computers lack, like making conversation and reading social cues. But people have biases and predilections. They make hiring decisions, often unconsciously, based on similarities that have nothing to do with the job requirements — like whether an applicant has a friend in common, went to the same school or likes the same sports. That is one reason researchers say traditional job searches are broken. The question is how to make them better. A new wave of start-ups — including Gild, Entelo, Textio, Doxa and GapJumpers — is trying various ways to automate hiring. They say that software can do the job more effectively and efficiently than people can. Many people are beginning to buy into the idea. Established headhunting firms like Korn Ferry are incorporating algorithms into their work, too.  If they succeed, they say, hiring could become faster and less expensive, and their data could lead recruiters to more highly skilled people who are better matches for their companies. Another potential result: a more diverse workplace. The software relies on data to surface candidates from a wide variety of places and match their skills to the job requirements, free of human biases.

Cringley on How the Bogus Shareholder Value Theory is Wrecking the Computer Industry (and America Generally) -- Yves Smith -- Lambert and Mike B pinged me about a new Bob Cringley piece, The U.S. computer industry is dying and I’ll tell you exactly who is killing it and why, which makes such a powerful and compact statement of how American management has become virtually incapable of building successful, durable enterprises that I wanted to make sure I did what I could to help make sure it gets the attention it warrants.  Cringley correctly focuses on the single worst management idea evah to gain legitimacy: the idea that the job of executives is to maximize shareholder value. That catchphrase is widely presented as if it were a legal obligation. It isn’t. It’s an idea made up by economists that got traction because it was useful to the capital owning classes. Cringley points out that as CEO pay has skyrocketed by virtue of granting them more equity linked-pay, which in turn puts them in the business of goosing the stock price rather than running the business, underlying economic performance has deteriorated: The average rate of return on invested capital for public companies in the USA is a quarter of what it was in 1965. Sure productivity has gone up, but that can be done through automation or by beating more work out of employees.And he really gets rolling on how greedy and destructive the executive classes have become:  Now let’s look at what this has meant for the U.S. computer industry. First is the lemming effect where several businesses in an industry all follow the same bad management plan and collectively kill themselves…The IT services lemming effect has companies promising things that can not be done and still make a profit. It is more important to book business at any price than it is to deliver what they promise. In their rush to sign more business the industry is collectively jumping off a cliff. This mad rush to send more work offshore (to get costs better aligned) is an act of desperation. Everyone knows it isn’t working well. Everyone knows doing it is just going to make the service quality a lot worse. If you annoy your customer enough they will decide to leave. The second issue is you can’t fix a problem by throwing more bodies at it. USA IT workers make about 10 times the pay and benefits that their counterparts make in India. I won’t suggest USA workers are 10 times better than anyone, they aren’t. However they are generally much more experienced and can often do important work much better and faster (and in the same time zone). The most effective organizations have a diverse workforce with a mix of people, skills, experience, etc. By working side by side these people learn from each other. They develop team building skills. In time the less experienced workers become highly effective experienced workers. The more layoffs, the more jobs sent off shore, the more these companies erode the effectiveness of their service. An IT services business is worthless if it does not have the skills and experience to do the job.

The U.S. Stands Out on Labor Force Participation Rates - The U.S. has become an outlier among its peers in a key employment gauge. Among eight major advanced economies, all but one — the United States — show gains in labor force participation over the past 15 years, according to a new study by Maximiliano Dvorkin and Hannah Shell of the Federal Reserve Bank of St. Louis. Participation fell by 4.6 percentage points in the U.S. between 1997 and 2013, says the study based on data from the Organization for Economic Cooperation and Development. By contrast, it rose over that period in Canada, France, Germany, Japan, Spain, Sweden and the United Kingdom. If you pull back to 1975, most of the countries show a steady increase in labor force participation. In some, such as Spain, that increase is pronounced whereas in others, such as France, it is more gradual. Sweden had the highest participation rate in the sample. Among Swedes, the rate dropped sharply in the early 1990s before starting to climb again. At first, the United States followed the general upward trend. But in 1997, the rate started dropping and has fallen ever since. In 2013, the U.S. rate for those ages 15-64 stood at 72.8%, down from its peak of 77.4% in 1997. Of the countries in Dvorkin and Shell’s sample, only France had a lower labor force participation rate than the U.S. in 2013.

A World Without Work - The end of work is still just a futuristic concept for most of the United States, but it is something like a moment in history for Youngstown, Ohio, one its residents can cite with precision: September 19, 1977. For much of the 20th century, Youngstown’s steel mills delivered such great prosperity that the city was a model of the American dream, boasting a median income and a homeownership rate that were among the nation’s highest. But as manufacturing shifted abroad after World War II, Youngstown steel suffered, and on that gray September afternoon in 1977, Youngstown Sheet and Tube announced the shuttering of its Campbell Works mill. Within five years, the city lost 50,000 jobs and $1.3 billion in manufacturing wages. The effect was so severe that a term was coined to describe the fallout: regional depression. Youngstown was transformed not only by an economic disruption but also by a psychological and cultural breakdown. Depression, spousal abuse, and suicide all became much more prevalent; the caseload of the area’s mental-health center tripled within a decade. The city built four prisons in the mid-1990s—a rare growth industry. One of the few downtown construction projects of that period was a museum dedicated to the defunct steel industry.This winter, I traveled to Ohio to consider what would happen if technology permanently replaced a great deal of human work. I wasn’t seeking a tour of our automated future. I went because Youngstown has become a national metaphor for the decline of labor, a place where the middle class of the 20th century has become a museum exhibit.

Farm-Sector Earnings Plunge - Earnings for workers in the U.S. farm sector plunged in the early months of 2015, with all but nine states posting declines, the Commerce Department said Monday. Farm earnings fell 22.4% in the first quarter, which Commerce attributed primarily to lower livestock output. In Iowa, Kansas, Nebraska and South Dakota—where farmers have grappled with severe drought and the spread of avian influenza—first-quarter earnings growth in other sectors was entirely offset by the drop in farm earnings. That led to an overall decline in personal income in those four states, the only states where personal income fell in the first quarter compared with the previous quarter. Iowa posted the biggest drop, at 1.2%. Personal income includes all wages and salaries, property income and government benefits, such as Social Security and Medicaid. Earnings in the mining sector also fell, reflecting the sharp drop in oil prices that has pummeled the energy industry. Mining earnings fell 3.5% in the first quarter, the first decline since the third quarter of 2009. The biggest declines occurred in Wyoming, Louisiana, North Dakota, Oklahoma and Texas. Overall, state personal income grew 0.9% on average in the first quarter, a slower pace than the fourth quarter’s 1.1% growth rate. Income grew the fastest in Florida, which posted a 1.3% gain. Personal income grew in 46 states and growth accelerated in 15 of those states. Meanwhile, overall earnings increased 0.8%, compared with 1.4% in the fourth quarter. Commerce attributed much of the increase to a jump in government earnings, which rose 0.5% compared with 0.3% in the fourth quarter.

The strike is over: Galveston Bay USW members head back to work - After nearly five months of the largest U.S. refinery and chemical worker strike in the past 35 years, United Steelworkers union members will return to work at Marathon Petroleum Corp.’s Galveston Bay Refinery. According to the Houston Chronicle, union members reached an agreement with the company and ratified a contract. The 1,200 workers on strike in Galveston Bay, who were initially among 15 other worker groups throughout the country when the strike began in February, were the last group to head back to work. The employees are scheduled to clock back into work under the new contract July 6. Picketers called for improved workplace fatigue policies, reduced out-of-pocket healthcare payments and an annual pay increase of 6 percent. Workers rejected Marathon’s “last, best and final” contract offer, which USW said would have eliminated 150 jobs and minimized safety standards, in April. The two parties, however, finally agreed upon a labor contract as well as a return-to-work agreement, but did not elaborate on the conditions or vote total.

People Aren’t Better Off Than Income Trends Show - Matt O'Brien at Wonkblog recently picked up a month old poll that shows the majority of economists saying that people are better off now than income trends suggest. The argument here is that price indexes have failed to fully account for the change in the quality of goods and therefore understate how much true inflation-adjusted income has risen over time.  Insofar as we cannot tap directly into people's brains and measure their hedonic activity, this debate is inevitably driven by people's feelings and intuitions about how much things are better now than before. One way to try to prime these intuitions is to ask, as O'Brien does, this kind of hypothetical: Adjusted for inflation, would you rather make $50,000 in today's world or $100,000 in 1980's? In other words, is an extra $50,000 enough to get you to give up the internet and TV and computer that you have now? The answer isn't obvious.  It's not easy to generalize.. Since you are attached to the technologies and media of your time, you inevitably say that it would require a huge premium to go back in time. But this is a very strange approach to this question. The reason it is strange is that we actually have people who are alive right now who were in their adulthoods in 1980. These people know what the technology was like then and now. And, at present, they have some degree of control over which set of technologies they use. Using smartphone adoption as a proxy for these people's technological preferences, it's clear that the people who actually lived as adults through both technological periods overwhelmingly prefer older technologies: The super-majority of people over the age of 55 do not have a smartphone. Additionally, a good chunk of those over that age that do have a smartphone don't really use it like a smartphone (instead they treat it more like an older phone):

This Big Retailer Just Raised its Minimum Wage for U.S. Workers — Again - Last June, Ikea announced it would raise its hourly minimum wage in U.S. stores from $9.17 to $10.76, a 17.3% hike. Now, almost exactly one year later to the day, Ikea is doing it again.  The Swedish furniture giant says the pay will go up to $11.87, a 10% increase for Ikea and a whole $4.62 above the current U.S. federal minimum wage of $7.25. (There is a movement underway to bring that up to $12 by 2020.) The hike will take effect on the first day of 2016 and will have an impact on 30% of Ikea’s U.S. employees.   This is a smart business move by Ikea, which has been expanding globally at a rapid pace, and it is one that will inevitably reap good P.R. The last time around went well for the company: Rob Olson, Ikea’s U.S. CFO, told the Huffington Post that in the six months since the last hike, Ikea has had 5 percent less worker turnover and is already attracting better talent.

Philly Fed: State Coincident Indexes increased in 35 states in May --  From the Philly Fed: The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for May 2015. In the past month, the indexes increased in 35 states, decreased in 10, and remained stable in five, for a one-month diffusion index of 50. Over the past three months, the indexes increased in 41 states, decreased in eight, and remained stable in one, for a three-month diffusion index of 66.  Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed: The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

These 22 States Are Facing Worker Losses Over The Next 15 Years - -The labor force in 22 of the 50 United States is going to shrink over the next 15 years according to state-by-state projections of the working-age population from the Conference Board. In terms of loss, Vermont is expected to lose 11.5% of its population by 2030, the largest drop off in available workforce members. Vermont is expected to lose workers during that time even as the population of working-age citizens jumped by 5.2% over the same time period. Vermont was the biggest loser in the bunch, where the working-age population between this year and 2030 The map below from our friends at Bloomberg shows how each state will stack up. The Northeast and Midwest regions are expected to experience a 3% decline, despite currently hosting 39 percent of working-age Americans. News could get worst for West Virginia, the only state to lose jobs in the current year through May. According to Labor Department data, West Virginia will see a 9.5 percent decline in its working-age population over the next decade and a half, the second-biggest drop. Maine is expected to lose the same percentage of workers as West Virginia. It isn’t all doom and gloom for US states: Nevada, Utah, and Arizona are expected to experience population growth, which will help bring new workers into the region. Nevada will experience 25.5 percent increase, while Utah and Arizona will each climb towards a 24 percent boost.

Who’s Speaking Up for the American Worker? - Unfettered free trade has not only put the Henry County region near the top of Virginia’s unemployment rankings for more than a decade, but it has also ushered in an era of soaring food insecurity and Social Security disability claims.And crime, too. A sheriff’s deputy told me at another book signing that many of his calls are now related to methamphetamine and heroin. An unemployed man accidentally set an abandoned factory on fire while trying to rip out copper electrical wires to sell on the black market; he was riding a bicycle, an unusual sight in this hilly, rural, car-reliant area.After weeks of Congressional chess over the Asia-Pacific trade accord, with lawmakers finagling new methods to pass or block trade-negotiating authority — depending on the day — the so-called “fast track” is now on President Obama’s desk, a crucial step toward completion of the accord, known as the Trans-Pacific Partnership.AdvertisementContinue reading the main story Economists aren’t sure how many factory jobs will be lost as a result, but even T.P.P. proponents have acknowledged probable losses, especially in lower-skilled, labor-intensive manufacturing.People living in rural America just want someone in Washington to level with them:Will T.P.P. protect American jobs or hasten their demise? In talks and readings I’m giving across Appalachia’s former furniture belt, that’s always the first question I’m asked.I am not in possession of an economic crystal ball. But unlike most of the lawmakers deciding the fate of America’s role in international trade, I have spent much of the past three years talking to dislocated workers still living in former factory towns. Most believe that T.P.P. is simply the North American Free Trade Agreement “on steroids,” a done deal driven by corporate greed-heads and the lobbyists they employ.

Why It’s Time for Interns to Unionize --Last week, 30,000 summer interns descended on Washington, D.C., to toil for tiny wages in policy shops, think tanks, the White House and, yes, labor unions. Despite the sweat, for many it’s a rewarding experience, helping them develop the skills and street smarts needed for success in life and career. Countless union and civic leaders, and even members of Congress, were once interns themselves. But there’s a dark side too. Interns are at the crest of a wave of unpaid and underpaid contingent labor that increasingly does the work that full-time employees used to do. Interns employed in D.C.’s web of progressive organizations often spend their days fighting for a living wage, but some don’t make even a dime, much less the current minimum wage. Some organizations offer “opportunities” for college credit or a small stipend, which is not sufficient for them to live and eat in one of America’s most expensive cities. Now, thanks to the organizing work of one savvy group of union interns, the tide may be about to turn. Recently, a group of interns at the American Federation of Teachers, in a groundbreaking vote, voted to be represented by the Office and Professional Employees International Union, Local 2, forming the first nonmedical intern bargaining unit in the country. While the numbers were small, the victory is significant in much the same way as the Gawker Media editorial staff’s vote to unionize, a few days later. Even conservative millennials are giving unions a second look because unions give workers in unstable positions a real voice on the job. And nowhere is that more important than for contingent workers like adjunct faculty or interns. When interns have a say in their conditions at work, everyone, including their employers and their co-workers who are ongoing employees, reap the benefits.

Middle-Class Black Families, in Low-Income Neighborhoods - Many of the nation’s racial disparities stem from the simple economic fact that white families make more money than black families on average, a gap that has remained stubbornly large in recent decades.Yet neither this income gap nor blatant discrimination is the only reason for the disparities. A new study, by three Stanford researchers, highlights another big cause: the neighborhood gap.Even among white and black families with similar incomes, white families are much more likely to live in good neighborhoods — with high-quality schools, day-care options, parks, playgrounds and transportation options. The study comes to this conclusion by mining census data and uncovering a striking pattern: White (and Asian-American) middle-income families tend to live in middle-income neighborhoods. Black middle-income families tend to live in distinctly lower-income ones.Most strikingly, the typical middle-income black family lives in a neighborhood with lower incomes than the typical low-income white family.“I thought comparing people at exactly the same income level would get rid of more of the neighborhood differences than it did.” The findings are especially notable because they come shortly after a separate research project, by two Harvard economists, that we’ve covered in detail at The Upshot. That project has tracked several million children since the 1980s to analyze how the area where they grew up affected their lives. Children who grew up in better neighborhoods — which tended to have less poverty, less crime, more two-parent families and schools with higher test scores — fared much better as adults than otherwise similar children from worse neighborhoods.

Homeless or countless? -- In the most recent paper in AEI’s Economic Perspectives series, “Street homelessness: A disappearing act?,” my colleague Kevin Corinth casts doubts on the reported decrease in the number of homeless people living on America’s streets. According to the Department of Housing and Urban Development, national counts of the street homeless have gone down by about a third since 2007. Kevin shows that most of that reported decrease can be attributed to changing counting methodologies and drastic underreporting in certain cities: Detroit, for example, reported a 98% reduction in the number of street homeless people, or over 13,000 people, between 2007 and 2009. State and local homeless criminalization measures may also have played a (smaller) part. Federal policy, and actual attempts to help the street homeless stop being homeless do not appear to play a major role in the decrease: [S]heltered homeless counts, which are much more reliable than street counts, have been remaining steady. This is true not just among families—who rarely sleep on the streets—but also among individuals—who are more likely to transition between the streets and shelters. Meanwhile, substantial expansion of permanent supportive housing appears to play only a minor role in the national street count reduction, although the possibility that altered homeless migration patterns are partially masking its effect cannot be ruled out. Ultimately, the evidence suggests that it is too soon to declare that we know what works in ending homelessness.

Most of America's poor have jobs, study finds - The majority of the United States' poor aren't sitting on street corners. They're employed at low-paying jobs, struggling to support themselves and a family. In the past, differing definitions of employment and poverty prevented researchers from agreeing on who and how many constitute the "working poor." But a new study by sociologists at BYU, Cornell and LSU provides a rigorous new estimate. Their work suggests about 10 percent of working households are poor. Additionally, households led by women, minorities or individuals with low education are more likely to be poor, but employed. Science magazine says the data from this study is relevant to the upcoming presidential election, as candidates discuss ways to help the working poor move out of poverty. Understanding the size and characteristics of the group makes this goal more realistic. BYU professor Scott Sanders says the findings dispel the notion that most impoverished Americans don't work so they can rely on government handouts. "The toxic idea is if we clump all those people together and treat them as the same people, then we don't solve the real problem that the majority of people in poverty are working, trying to improve their lives, and we treat them all as deadbeats,"

Jailed for Being Broke - A little over a week ago, a 23-year-old construction worker in the Bronx named Jeff Rivera got in an argument with his wife, from whom he is separated. During the argument, he struck her door, pushing in the screen. Rivera was arrested and brought to court, where he was charged with criminal mischief, a misdemeanor, for pushing in the screen door. Though the sentence for being convicted of a misdemeanor offense like criminal mischief is hard to predict, the more immediate question for Rivera was whether or not he'd be jailed before trial. Rivera had no reason to expect that he'd have to post bail to stay out of jail. Not only was the offense relatively minor, but he has no criminal history, is employed, and has a child and every reason in the world to show up for his trial. But Rivera was unlucky. He went to court and stood before a judge who decided to set bail of $500 in his case.  Rivera didn't have the money, which means he'd essentially committed two crimes, the second more serious than the first: he'd pushed in a screen door, and he didn't have $500. He was shocked to find that he was about to be carted off to the Manhattan Detention Complex, an infamous place also known as the Tombs. "I was shocked. There are real criminals in there, murderers and rapists," he says. "You've got to be real careful about what you say in there. One word can set somebody off." Rivera spent the weekend before last in the Tombs, wondering how long he'd be in. As the hours ticked by, he started to worry about all kinds of things. "Things happen in there," he says. "I was worried, if I get in a fight, I might be charged with another crime. And I'd be in there longer." He survived the weekend. Then, last Monday night, some inmates got into an argument, one that spilled over into the next morning, when a real fight started. Rivera managed to stay out of the melee, but still got hurt later that day when his fingers got caught in a cell door.

The Quotidian Racism of Dylann Roof: Mariame Kaba Interview -- Humorless Queers - This episode, we are thrilled to interview Mariame Kaba (@PrisonCulture), an educator and organizer based in Chicago. We discuss the “absolutely quotidian and mundane way” that white supremacy manifests in our society, how we arbitrate terror in the wake of Charleston, how Afro-pessimism describes our current predicament, and how the homes of black Americans have always been fair game for the state—from Batterrams in L.A., to warrantless raids in NYC, to raids that persist in Chicago today.   We also discuss why, even though Chuck Todd should TOTALLY quit his job, unless we shift the media’s allegiances, someone else will just pop in to take his place and replicate the same conversation. In addition, Alexis discusses one example of how racial prejudice makes its way into policy. We’ll dig into the GOP’s hatred of “disparate impact” theory, and how conservatives have long been fighting, both in the Supreme Court and in Congress, to make racial discrimination in housing even harder to prove than it already is. Here is a good summary of Rep. Scott Garrett’s two amendments, to two different appropriations bills, to try and block disparate impact theory from being used to enforce Fair Housing cases. The vote breakdown of Rep. Garrett’s amendments can be found here and here.

Black People Are 12 Times More Likely To Die In America Than In Other Developed Countries - The tragic events that unfolded Wednesday evening at the historic Emanuel AME church in Charleston, South Carolina served as yet another reminder that race relations in America are rapidly deteriorating. Although it might be fair to say that this week's church massacre is a separate and distinct event that can be better understood as an act of domestic terrorism or as a hate crime than as another example of the marginalization of African Americans, we would be remiss if we didn't mention it in the context of Baltimore, Ferguson, and the death of Eric Garner and Walter Scott.  Indeed, Wednesday's shooting and the subsequent arrest of a white male suspect who appears to have sympathized with White Supremacist ideologies will likely lead to still more scrutiny on what certainly appears to be a widening racial divide in America.  In this context, we bring you the following graphic which shows that, among countries with relatively high Human Development Index scores (which measure social welfare and standard of living), the number of African Americans killed per 100,000 people in the US each year is around 12 times the average for all people in developed countries.

Why Don’t the Poor Rise Up? - Why are today’s working poor so quiescent? I’m not the only one posing this question. “Why aren’t the poor storming the barricades?” asks The Economist. “Why don’t voters demand more redistribution?” wonders David Samuels, a political scientist at the University of Minnesota. The headline on an April 7 National Catholic Reporter article reads: “Why aren’t Americans doing more to protest inequality?” There are legitimate grounds for grievance. For those in the bottom quintile, household income in inflation-adjusted dollars has dropped sharply, from $13,787 in 2000 to $11,651 in 2013. According to the Census Bureau, 64 million Americans currently live in the bottom quintile. Still, it’s possible that poverty is less grueling than in the past, for several reasons. First, although incomes have declined, the cost of many goods – televisions, computers, air-conditioners, household appliances, cellphones – has fallen, leaving the bottom quintile less deprived than simple income figures might reflect. Second, people nowadays marry and have children later in life than in the past, postponing some financial demands to better earning years. Third, some economists contend that commonly used inflation measures result in excessively high estimates of the real-world cost of goods for consumers, thus making living conditions less dire than they might otherwise be. But there is another reason that there has not been broad public insurrection. Society has drastically changed since the high-water mark of the 1930s and 1960s when collective movements captured the public imagination. Now, there is an inexorable pressure on individuals to, in effect, fly solo. There is very little social support for class-based protest – what used to be called solidarity.

U.S. Population Diversity Census Report - Minority births in the U.S. are far outpacing deaths as the white population remains all but stagnant, the U.S. Census Bureau reported Thursday, driving the country closer to the point at which minorities outnumber whites. The country’s minority population increased from 32.9% of U.S. residents in 2004 to 37.9% in 2014, according to the Census, and four states — Hawaii, California, New Mexico and Texas — along with Washington, D.C., are now majority-minority. Nevada, which has 48.5% minority population, is likely next. Non-Hispanic deaths outpaced births in 2014 for a third year in a row, something University of New Hampshire demographer Ken Johnson says has never happened before in the U.S. “We expected to see non-Hispanic white natural decrease in the future, but it wasn’t expected to start for another decade or so,” Johnson says, adding that the recession and low fertility rates have contributed to the dip. “The white population is considerably older than any other part of the population. This means it has higher mortality. Fewer women are in their prime child-bearing years.” The slowdown in white population increases is coupled with minority births that are outpacing deaths by three to one. An estimated 95% of the country’s population gain – a 2,360,000 increase – came from minorities last year, while whites made up almost 80% of deaths. However, the non-Hispanic white population did see a bump thanks to 155,000 immigrants, mostly from Europe. The population for whites grew by just 94,000. “Ironically, non-Hispanic whites are now more dependent on immigration for population increase than any other group,” Johnson says.

Cowboys, Aliens, and Stimulus - Paul Krugman - Some years ago I facetiously suggested that we should invent a fake threat from space aliens as a way to break the destructive obsession with deficits and get the fiscal stimulus the economy needed. (It was actually an episode of The Outer Limits, not The Twilight Zone.) My suggestion was not followed up. But something along the same lines is now going on in Texas. Texas is, of course, a Medicaid-rejection state, unwilling to accept billions of federal dollars to help its less fortunate. But money for a largely pointless border-protection project? Now you’re talking: In Rio Grande City, named for the river that splits the U.S. from Mexico, footpaths cut from the brush by drug-smugglers and illegal immigrants have a new look, rehabbed into family-friendly hike-and-bike trails. Now that the state has authorized $800 million to ratchet up security on the Mexico line, more troopers are on their way to deliver another shot to what might be the biggest stimulus program this needy part of Texas has ever seen.  It really is Keynes and burying bottles in coal mines: spending that actually helps people is unacceptable, but pure waste is OK.

The Last Rebels: 25 Things We Did As Kids That Would Get Someone Arrested Today -- With all of the ridiculous new regulations, coddling, and societal mores that seem to be the norm these days, it’s a miracle those of us over 30 survived our childhoods.  Here’s the problem with all of this babying: it creates a society of weenies. There won’t be more more rebels because this generation has been frightened into submission and apathy through a deliberately orchestrated culture of fear. No one will have faced adventure and lived to greatly embroider the story. Kids are brainwashed – yes, brainwashed – into believing that the mere thought of a gun means you’re a psychotic killer waiting for a place to rampage. They are terrified to do anything when they aren’t wrapped up with helmets, knee pads, wrist guards, and other protective gear. Parents can’t let them go out and be independent or they’re charged with neglect and the children are taken away. Woe betide any teen who uses a tool like a pocket knife, or heck, even a table knife to cut meat. Lighting their own fire? Good grief, those parents must either not care of their child is disfigured by 3rd-degree burns over 90% of his body or they’re purposely nurturing a little arsonist. “Free range parenting” is all but illegal and childhood is a completely different experience these days. All of this babying creates incompetent, fearful adults. Our children have been enveloped in this softly padded culture of fear, and it’s creating a society of people who are fearful, out of shape, overly cautious, and painfully politically correct.  They are incredibly incompetent when they go out on their own because they’ve never actually done anything on their own.

Twice as many Americans now forced to delay marriage, college, kids - More people are delaying major life events like getting married because they’re worried about their finances. Thanks to crushing financial concerns, more Americans are now being forced to put off major life events like going to college, getting married and having kids. According to a survey released Thursday of 1,010 adults by the American Institute of CPAs, more than half of American adults (51%) say they delayed at least one important life decision — like having kids or retiring — because of financial reasons. This is up from just one in three (31%) who did that in 2007. Despite an improving economy and job market, “the specific life events Americans are delaying for financial reasons have more than doubled from the 2007 survey,” the institute reveals. This may be thanks to the fact that we’ve learned some hard lessons since the recession, says Ernie Almonte, the chair of the AICPA’s National CPA Financial Literacy Commission, an organization devoted to helping Americans with financial literacy. “When you peel the onion back, you start to see that what they have experienced — their parents, friends losing their homes or jobs or people in so much debt they file for bankruptcy — stuck with them,” he says. “They have learned from those lessons…people are looking at things now and saying ‘I don’t have enough savings for that’ or ‘I will put it off for a year or two until I’m financially stable.’”

Time to End the Vicious Cycle of Inequality Begetting Unequal Education - A new EPI study of the academic preparation of kindergartners by social class and race ended up being less about absolute preparation of children at the beginning of school and more about how prepared they are relative to one another. In short, children do not start school as equals. According to Inequalities at the Starting Gate: Cognitive and Noncognitive Skills Gaps between 2010–2011 Kindergarten Classmates, children’s school preparation is highly unequal, and what determines being better or worse off is a student’s social class. While inequalities in the cognitive abilities of our young people have been documented by previous research (see EPI’s Inequality at the Starting Gate study from 2002 and Robert Putnam’s new book, Our Kids: The American Dream in Crisis), our study uses a dataset that allowed for examining how prepared children are in both cognitive (reading and math) and noncognitive domains (social skills, persistence, and creativity, among others). The data set (the National Center for Education’s Early Childhood Longitudinal Study of the Kindergarten Class of 2010-2011) also offers information on individual and family demographic characteristics and various enrichment activities that parents undertake with their children, enabling assessment of the importance of these variables for children’s preparation. All in all, the data allowed us to understand the broad school readiness of a recent generation of students. These students were born after—and thus presumably benefited from—the spread of prekindergarten education and other advances in school preparedness research and policymaking. But these children were also raised in a context of economic stagnation.

Tests vs. Fests: Students in 'learning celebrations' rather than exams scored higher and enjoyed themselves -- ScienceDaily: "Assessment is too important for students to dread," said Kevin Dougherty, Ph.D., associate professor of sociology in Baylor's College of Arts & Sciences, in the essay "Reframing Test Day," published in Teaching/Learning Matters. "My goal is to create an ambience for assessment that enhances learning and joy." Students are initially skeptical, he said, and "often slip into the familiar language of quizzes and tests." But "members of our teaching team, myself and two graduate teaching assistants gently remind them that no such activities occur in our course." The celebrations are used in Dougherty's "Introduction to Sociology" class, which usually has more than 200 students. In previous research, Dougherty found that students who used a Facebook group as part of a large sociology class did better on course assignments and felt a stronger sense of belonging. Both studies have implications for the challenge of teaching large classes, a matter of growing concern for higher education. With Learning Celebrations, Dougherty noted that the mean percentage on exams in three previous semesters, with standard tests, was 84.65; the mean percentage on three semesters of the celebrations was 86.48. Students consistently did better on Learning Celebrations, with statistically significant differences, Dougherty said.

I Am an Adjunct Professor Who Teaches Five Classes -- and I Earn Less Than a Pet-Sitter -- Like most university teachers today, I am a low-paid contract worker. Now and then, a friend will ask: “Have you tried dog-walking on the side?” I have. Pet care, I can reveal, takes massive attention, energy and driving time. I’m friends with a full-time, professionally employed pet-sitter who’s done it for years, never topping $26,000 annually and never receiving health or other benefits. The reason I field such questions is that, as an adjunct professor, whether teaching undergraduate or law-school courses, I make much less than a pet-sitter earns. This year I’m teaching five classes (15 credit hours, roughly comparable to the teaching loads of some tenure-track law or business school instructors). At $3,000 per course, I’ll pull in $15,000 for the year. I work year-round, 20 to 30 hours weekly – teaching, developing courses and drafting syllabi, offering academic advice, recommendation letters and course extensions for students who need them. . I receive no benefits, no office, no phone or stipend for the basic communication demands of teaching. I keep constant tabs on the media I use in my classes; if I exhaust my own 10GB monthly data plan early, I lose vital time for online discussions with my students. This, although the university requires my students to engage in discussions about legal issues and ethics six days a week, and I must guide as well as grade these discussions.

Higher Education Reform at For-Profit Schools - by Alexis Goldstein & Luke Herrine - As the presidential campaign season heats up, Hillary Clinton and Bernie Sanders are talking about debt-free or tuition-free college. Using student debt as an issue to damage Republicans and to energize young voters is a smart strategy. But to make the case for why higher education should be free in the United States, 2016 candidates need look no further than the current crisis in the for-profit college industry. The government’s deep conflicts of interest as both the regulator meant to protect students and the banker profiting off student debt has led to an unmitigated disaster — one that, so far, has stuck students with the bill. For decades, for-profit colleges have run an outrageously profitable scam: They have devoured more than a quarter of all federal student loan money and used it to lure first-generation college students into career training programs that lead to few, if any, real prospects. These schools often spend more money on marketing than on instruction. As a result, employers laugh at for-profit college degrees.  Over the past decade, the truth about for-profit college scams has been revealed to the public over and over. These schools have been the subject of investigations on ABC’s “20/20” and PBS’ “Frontline” and of Senate committee reports, whistleblower lawsuits and federal and state law enforcement investigations, not to mention student complaints. And yet the Department of Education (DOE) has largely ignored these alarms and continued to give the schools an implicit seal of approval by allowing federal money to continue to flow in via loans. What’s worse, it has also used its punitive collection tactics — garnishing wages, taxes and disability payments — against students conned by schools the department failed to properly oversee

Courts Rule That Disabled Woman Living Below the Poverty Line Must Repay Student Loans - Monica Stitt, a 45-year-old woman, is unemployed, disabled, and living far below the poverty line. Still, a federal district judge decided in June that she could not cancel more than $37,000 in student debt in bankruptcy, because she hadn’t made a good-faith attempt at repaying the loans. Her entire income—about $10,000 per year, according to the judge—consisted of Social Security disability benefits and public assistance. She has been unemployed since 2008. Stitt had borrowed $13,250, which had increased with interest to $37,400 by the time she filed for bankruptcy. After the bankruptcy judge ruled she couldn't shake the debt, the woman appealed to the U.S. District Court in Maryland without a lawyer, where a District judge upheld the bankruptcy court's ruling on June 9. The debtor didn’t meet the “undue hardship” test required by the bankruptcy code, U.S. District Judge Peter J. Messitte said in his opinion. Unlike credit card debt, student loans can almost never be discharged in bankruptcy. The only way people who have filed for bankruptcy can get rid of the debt is by proving that repaying them would impose "undue hardship" on their lives. U.S. courts use a three-pronged test to decide whether paying back a student loan would be too difficult. First, a borrower must prove that she can't maintain a "minimal standard of living" while also repaying the debt. Then she must prove that her current destitute circumstances will last for quite a long time. Last, the debtor has to show she has made "good-faith efforts" to repay the loan in the past.

Is There a Student Loan Debt Crisis? -- I've been a skeptic for some time about claims that we have a student loan "crisis" in the United States. For individuals mired with student loan debt, it is very much a crisis, of course.  But my reluctance to term growing levels of student loan debt a crisis reflects the fact that student loan debt is highly concentrated within the population and is generally structured in a way that does not create sharp liquidity crises:  long (and often deferrable) maturities, no sharp repayment shocks, and often offers established repayment and forgiveness programs. (This is more true of government loans than private loans.) And, while student loan debt is growing rapidly, it is still only about a 9th of the size of the mortgage market. All of this has kept the student loan kettle from boiling over.   Yet at the same time it is precisely because of the concentration of student loans in the younger population that it is concerning.  Large debt loads at the beginning of one's adult life are likely to have very different effects on than debt spread out over a life time.  Moreover, student loans are not incurred based on current income, but on assumptions of future income (if that), so student loan debt burdens are more likely to be poorly calibrated to borrower's actual earning capacity. Additionally, because student loan debt is not dischargeable in bankruptcy (except in extreme circumstances), unlike other types of debt, it likely to stick around.  And, unlike various types of secured debt, there is no "put" option. A homeowner who runs into trouble with a mortgage or a cash-strapped auto loan borrower can always sell the house or car (or let them be repossessed) to pay off part or all of the debt. That's not possible with unsecured debt.   The real concern with student loans is not an acute liquidity crisis, like a mortgage payment resets or a massive surge in defaults, as with underwater homeowners.  Instead, the systemic danger from student loans is a debt overhang problem in which consumers' consumption habits are altered by the constant drag of debt service. That's not a "crisis" yet, but it's a problem that needs to be addressed before it becomes one.

The U.S. government’s predatory-lending program: Most parents will do just about anything for their children, especially when it comes to education. Predictably, at a time when college costs are exploding and students are staggering under more than $1 trillion in debt, one opportunistic lender is making huge profits on loans to their doting moms and dads. Less predictably, that lender is the United States government. The fast-growing federal program known as Parent PLUS now serves 3.2 million borrowers, who have racked up $65 billion in debt helping their kids go to school. Thirteen percent of undergraduates now rely on Parent PLUS, and many of their parents are falling into debt traps. “You feel so guilty that you haven’t done enough for your kid, and they make it so easy to get the loans,” said Elizabeth Hill, a 57-year-old property appraiser from the Boston suburbs with more than $30,000 in PLUS debt. “Then they’ve got you by the cojones. It’s like ‘The Sopranos,’ except it’s the government.”  For all the controversy swirling around student loans, lending money directly to students at least has a “human capital” rationale, since recipients pursue degrees that can boost their earning power and help them fulfill their obligations. But when parents borrow, they’re often taking on new debts just as their earning power is starting to dwindle. They’re not building human capital. They’re just getting closer to retirement, mortgaging their futures on behalf of their children. And if they default, the government can garnish their wages and even their Social Security checks — less brutal than “The Sopranos,” but just as effective. According to the White House budget office, the expected recovery rate for defaulted Parent PLUS loans is a remarkable 106 percent, a testament to Uncle Sam’s unique power as a collection agency. Overall, the program is expected to return $1.23 on every dollar it lends this year, thanks to its relatively high interest rates and minimal opportunities for debt relief, as well as the government’s relentlessness in tracking down overdue education loans.

Liberals now think it’s ‘predatory’ to expect borrowers to repay taxpayers - Earlier this month, in reference to the Department of Education’s $3.5 billion bailout for Corinthian College students, I observed at NRO, “What’s especially worrisome here is the frontal attack the administration is mounting on notions of students’ responsibility.” The fear was that sensible attention to student debt would change into an excuse for borrowers to default and stick taxpayers with the tab. That moment has already arrived. Just last week, the Consumer Financial Protection Bureau issued a report that found that co-signers have a rough time getting released from their promises to repay private student loans. While CFPB did flag some problematic practices (such as “auto-default” mechanisms, which kick in when a borrower dies), its larger message was the inhumanity of insisting that loans be repaid. CFPB director Richard Cordray, an Obama appointee, told the Chronicle of Higher Education, “Parents and grandparents put their financial futures on the line by co-signing private student loans to help family members achieve their dream of higher education.” It’s not entirely clear what Cordray thinks is so troubling, as paying up when the borrower doesn’t is exactly what co-signers are for. When parents and grandparents co-sign student loans, they are promising to repay those loans.  Late last week, Politico reported on federal PLUS loans in a story titled “The U.S. government’s predatory lending program.” In a news account that read more like an editorial, Michael Grunwald noted that the PLUS program is the most profitable of 100+ federal lending programs, returning to taxpayers $1.23 for every dollar loaned out. Grunwald wrote, “That sounds like a good thing, until you remember the government’s profit comes from its own citizens, often citizens of modest means. . . . [Since its creation in 1980] it has grown to look a lot like publicly funded predatory lending, providing almost any borrowers with almost unlimited cash to attend any school with almost no regard to their ability to repay. Thirteen percent of undergraduates now rely on Parent PLUS, and many of their parents are falling into debt traps.”

College Is Wildly Exploitative: Why Aren’t Students Raising Hell? - Higher education wears the cloak of liberalism, but in policy and practice, it can be a corrupt and cutthroat system of power and exploitation. It benefits immensely from right-wing McCarthy wannabes, who in an effort to restrict academic freedom and silence political dissent, depict universities as left-wing indoctrination centers. But the reality is that while college administrators might affix “down with the man” stickers on their office doors, many prop up a system that is severely unfair to American students and professors, a shocking number of whom struggle to make ends meet. Even the most elementary level of political science instructs that politics is about power. Power, in America, is about money: who has it? Who does not have it? Who is accumulating it? Who is losing it? Where is it going? Four hundred faculty members at New York University, one of the nation’s most expensive schools, recently released a report on how their own place of employment, legally a nonprofit institution, has become a predatory business, hardly any different in ethical practice or economic procedure than a sleazy storefront payday loan operator. Its title succinctly summarizes the new intellectual discipline deans and regents have learned to master: “The Art of The Gouge.” The result of their investigation reads as if Charles Dickens and Franz Kafka collaborated on notes for a novel. Administrators not only continue to raise tuition at staggering rates, but they burden their students with inexplicable fees, high cost burdens and expensive requirements like mandatory study abroad programs. When students question the basis of their charges, much of them hidden during the enrollment and registration phases, they find themselves lost in a tornadic swirl of forms, automated answering services and other bureaucratic debris. Often the additional fees add up to thousands of dollars, and that comes on top of the already hefty tuition, currently $46,000 per academic year, which is more than double its rate of 2001. Tuition at NYU is higher than most colleges, but a bachelor’s degree, nearly anywhere else, still comes with a punitive price tag. According to the College Board, the average cost of tuition and fees for the 2014–2015 school year was $31,231 at private colleges, $9,139 for state residents at public colleges, and $22,958 for out-of-state residents attending public universities.

Bill to delay Chicago school pension payment fails in House - A bill that would give the Chicago Public Schools until Aug. 10 to make a $634 million payment to its pension fund failed on Tuesday to attract enough votes in the Illinois House to pass. The 53-46 vote fell short of the 71 affirmative votes needed to give the measure, which passed a House committee earlier on Tuesday, immediate effect. The nation's third-largest public school system is struggling to come up with money to make the state-mandated payment by June 30.

After House rejects Emanuel-Rauner CPS pension plan, finger-pointing begins: The Illinois House on Tuesday defeated Mayor Rahm Emanuel’s plan to delay a massive Chicago Public Schools pension payment due at months’ end, a result of years of deeply rooted partisan mistrust surfacing in a new era of divided state government. Finger-pointing commenced shortly after the measure negotiated between the mayor and Republican Gov. Bruce Rauner fell 18 votes shy. Democrats under House Speaker Michael Madigan blamed Rauner for failing to provide enough Republican votes to secure passage. Rauner accused Madigan of double-dealing, contending it was a show of pique because the veteran speaker was not part of the original negotiations. “Gov. Rauner and Republican leaders supported this legislation, but the speaker had Chicago Democrats vote against it. The only reason the speaker's Chicago caucus would vote against the mayor's bill is because Madigan wanted to kill it,” Rauner spokesman Lance Trover said in a statement. Madigan denied trying to influence the measure’s defeat, saying: “We don’t instruct anybody to do anything.” And Madigan suggested that the Rauner administration blaming him was an “extreme” response. Madigan said he plans to call the bill for another vote next Tuesday — the same day CPS’ $634 million pension payment is due.

Kentucky Lawmakers Still Considering $3.3 Billion Bond For Teacher Pensions:  Kentucky teacher pension officials are still asking for a $3.3 billion bailout of the system, saying it would increase the plan’s funded ratio from 53 percent to 66 percent and reduce the amount the state has to contribute. A bill that sought to authorize the bonding measure passed the Democrat-led state House, but it failed in a conference committee during the last days of this year’s legislative session. Critics of the plan said that the bonding measure would hurt the state’s credit rating. Kentucky Teacher Retirement Systems director Gary Harbin said rating agencies already know about the state’s debt level and the new bonds would reduce the unfunded liability.

Pension tidal wave is about to crash down on taxpayers : The New Jersey legislature, looking to solve a budget crisis back in 1992, passed a bill that changed some of the accounting principles of the state's government employee pension system. The technical changes, little understood at the time, made the system seem in better financial shape than it actually was, allowing the legislature to reduce contributions for pensions by $1.5 billion over the next two years. Legislators seized those extra dollars and redirected them into other spending. Jersey officials could manipulate their pension system because local governments have latitude in how they run their own retirement plans. So what they did was not unique. Around the country, state and local officials have increasingly discovered over the years that they can exploit the complex and sometimes ill-defined accounting of government pension systems, as well as loopholes in their own laws governing those pensions. Over time, elected officials came to promise workers politically popular new benefits without setting aside the money to pay for them, declared "holidays" from contributions into pension systems and changed their own accounting systems midstream to make the systems seem better funded — all just ways of passing obligations on to future taxpayers. In the process, government pension systems became one of the chief vehicles that state and local politicians used to massage their budgets. Now we face the consequences. Our elected representatives played a deceptive game of chicken with pension funds. And now the chickens have come home to roost.

“A Bad Man’s Guide to Private Equity and Pensions” -- Yves Smith -Critics of private equity often inveigh against the fact that the general partners (firms like KKR and Blackstone) have strong incentives to borrow heavily against the companies that they buy, since they collect so many fees that they profit whether or not the businesses they buy can survive with the debt load. It has reached the point where the European Union imposed restrictions on how much borrowed money private equity firms could use, out of concern about how many bankruptcies private equity firms were leaving in their wake. In the US, the objections to private equity financial engineering and asset stripping generally focus on the risk of company failure and job loss. But an important part of the equation often gets second shrift: that of how private equity kingpins use bankruptcy to get rid of pensions. Eileen Appelbaum and Rosemary Batt did address it in their landmark book Private Equity at Work, but the practice still needs broader exposure.  A new paper by Elizabeth Lewis for Harvard’s Safra Center for Ethics, A Bad Man’s Guide to Private Equity and Pensions, helps fill this gap. I’ve embedded it below. From its abstract:  More recently, some private equity firms have honed Chapter 11 as an efficient financial engineering tool for insider sales—and for dumping pensions. Based on partial data from the Pension Benefit Guaranty Corp., at least 51 companies have abandoned pension plans in bankruptcy at the behest of private equity firms since 2001. They’ve dumped $1.592 billion in pension bills onto a government-backed agency that insures private defined benefit plans. Because pension insurance doesn’t cover all benefits, their actions have left some of the nearly 102,000 workers or retirees with lost benefits amounting to at least $128 million. And they’ve contributed to the chronic deficits at the Pension Benefit Guaranty Corporation.

We’re Living Longer, and Other Reasons to Worry About Americans’ Retirement Outlook -  Americans are increasingly unprepared for retirement, says a new paper out today. The paper, from the Hamilton Project at the Brookings Institution, examines 10 facts about contemporary retirement finances. We won’t outline all 10 here, but the key is this: Americans are living longer. The average American woman who reaches age 65 this year has a better than one-in-three chance of seeing her 90th birthday, up from a one-in-four chance 50 years ago. That’s unquestionably a good thing, but it will require her and millions of others to make sure they can support themselves for a long retirement, says the report. With roughly half of of all Americans who turned 65 in 2014 projected to need expensive long-term care and with new strains on pension systems and Social Security, it remains to be seen how tomorrow’s seniors will make ends meet. Below are a few highlights of the report. Anxious Outlook Only about half of adults who aren’t yet retired expect to have enough money to live comfortably once they stop working, While that’s an improvement over the outlook that prevailed in the aftermath of the recession, it’s still lower than early in the last decade.

Sacramento region hit hard by CalPERS health plan rate hikes - Eyes popped last week when the California Public Employees’ Retirement System approved a average HMO premium hike of 7.21 percent in 2016 — but the news is worse for public agency workers in the Sacramento area. People who work for cities, counties, school districts and other public agencies in the four-county Sacramento region face an average HMO premium increase next year of 12.2 percent. Amounts vary by health plan from a low of 5.17 percent for Kaiser Permanente to 18.76 percent for the Blue Shield NetValue plan. Anthem Blue Cross charges more here than in any other region, including the Bay Area. CalPERS negotiates one statewide rate for state workers, but public agency rates are negotiated by region. The rating system was launched a decade ago to accommodate public agencies in Southern California that complained about sharing the burden of higher health-care costs in Northern California.  This set up a dynamic where next year, single public agency workers in Los Angeles will pay a monthly premium of $611 for traditional Anthem HMO coverage, while their counterparts in Sacramento will pay $1,113. Family coverage for the same plan is $1,588 in Los Angeles, $2,893 in Sacramento. Employers pay part of the tab, but workers pick up the rest. The breakdown varies by employer.

Obamacare and Labor Supply - Krugman - I was critical of CBO yesterday — probably excessively — for giving what seemed like undue cover for deficit scolds in its long-run budget projection. So credit where credit is due: the new report on the consequences of repealing the ACA is definitely not what the Congressional majority wants to hear. Despite including “dynamic scoring”, the report finds, unambiguously, that Obamacare reduces the deficit and repealing it would enlarge the deficit. Is there anything in the report that provides fodder for the opponents? I see that the Times report says that there are “mixed effects”, because CBO says that GDP would be higher if the ACA were repealed. And maybe the usual suspects will try to spin it that way. But the truth is that this report is much, much closer to what supporters of reform have said than it is to the scare stories of the critics — no death spirals, no job-killing, major gains in coverage at relatively low cost.And there’s another important point: while the ACA may lead to somewhat lower GDP because it reduces labor supply, this does not imply a one-for-one loss in welfare. Suppose that a family’s second earner, now assured of being able to get health insurance, chooses as a result to work shorter hours and spend more time taking care of the children. GDP goes down — but there is a compensating non-monetary gain.In fact, in a perfectly competitive economy the gain would fully offset the fall in GDP: if workers are paid their marginal product, the fall in GDP from the ACA is equal to the lost wages, but workers choosing to work less clearly prefer to have the extra time to the extra wages. Or to put it a bit differently, other things equal it’s a good thing if workers, freed from the fear that they won’t be able to get health insurance, respond by voluntarily working less.

Is Obamacare Working? Uninsured Rate Drops Dramatically In Just 12 Months - The uninsured rate in the US has decreased by nearly one-fifth and it has reached record lows just one full year after the Affordable Care Act was fully implemented according to data released Tuesday by the Centers for Disease Control and Prevention. The CDC’s National Health Interview Survey, considered the most reliable government estimate of the country’s uninsured population, reports an uninsured rate of just 16.3% among people under 65-years-old in 2015, a decrease from 20.4% in October 2013. The one-year drop is the lowest uninsured drop rate since the CDC began conducting the National Health Interview Survey in 1997. The survey matches findings from a recent Gallup poll which also shows a plummeting uninsured rate for the first quarter of 2015. With the uninsured rate dropping dramatically in the United States, it will be interesting to see which decision the Supreme Court hands down in King v. Burwell. If the court decides to strike down a key provision of the law that allows the federal government to provide subsidies for about 6.4 million low-income people to buy insurance, a large majority of people who are now insured would not be able to afford health insurance under Obamacare.

Fewer Poor Uninsured, Study Finds in Health Law - The share of poor Americans who were uninsured declined substantially in 2014, according to the first full year of federal data since the Affordable Care Act extended coverage to millions of Americans last year.The drop was largely in line with earlier findings by private polling companies such as Gallup, but was significant because of its source — the National Health Interview Survey, a long-running federal survey considered to be a gold standard by researchers. The findings are being released on Tuesday.The survey also registered a sharp decline in the share of black Americans who were uninsured, which fell by nearly a third to 13.5 percent from 18.9 percent in 2013. That was the largest annual change for any racial or ethnic group since the survey began in 1997.The survey shows the impact the law has had as a far-reaching ruling on it by the Supreme Court nears. If the court rules against the government, it would have the effect of eliminating a large share of the subsidies that have enabled many lower-income people to afford health insurance.The gains were particularly significant for poor Americans in part because a larger share of them lacked health insurance to begin with. But the poor also benefited from the subsidies, and from a vast expansion of Medicaid, the government insurance program for the poor. More than 20 states refused to expand the program, and many experts said the gains would have been even larger had they done so.While black Americans under the age of 65 made the biggest gains, Hispanics in the same age group also benefited substantially, with the share of uninsured dropping by nearly 17 percent from 2013 to 25.2 percent. The share of whites who were uninsured fell to 9.8 percent, down from 12.1 percent in 2013.

Expanding Health Insurance in 2014: How Much Progress? - One of the most prominent claims made by supporters of the Patient Protection and Affordable Care Act of 2010--now commonly called "Obamacare" both by many supporters and opponents--is that it would substantially reduce the number of Americans without health insurance.  How is that working out? Probably the best source of information is the National Health Interview Survey that is conducted by the National Center for Health Statistics. The survey asks about a full range of health and insurance issues, and it is carried out continually through the year, so that results can be reported on a quarterly basis. In 2014, the sample size includes about 110,000 people.  The most recent NHIS reports came out earlier this week, "Health Insurance Coverage: Early Release ofEstimates From the National Health Interview Survey, 2014,", with a focus on annual data for 2014. The 2014 estimates after implementation are based on a full year of data collected from January through December2014 and, therefore, are centered around the midpoint of this period. So in looking for patterns in the extent of health insurance coverage that are emerging through 2014, it is also useful to look at the more detailed NHIS data broken down by quarter--with the fourth quarter of 2014 being the most recent data available. Here's the overall pattern for those lacking health insurance on an annual basis. The proportion of uninsured had peaked back around 2009 and 2010 in the immediate aftermath of the Great Recession, and had been declining since then. The decline does look more rapid in 2014, although of course the figure doesn't reveal how much is due to the improving economy and employment situation and how much is due to the provisions of the 2010 legislation that started to be enacted in January 2014.

Meet the Health-Law Holdouts: Americans Who Prefer to Go Uninsured - WSJ: The Affordable Care Act has a perplexing problem: Many uninsured Americans prefer their old ways of getting health care. For millions, arranging treatment through cash, barter and charity is still better than paying for insurance. They include Lisa Khechoom of Glendale, Calif., who refuses to buy coverage. She says she pays a flat $35 for a doctor visit and often substitutes prescriptions with cheaper natural remedies for herself, her husband and their children. “I’m spending money either way, but it’s going to be less,” says the 41-year-old, who runs a telecom-service business with her husband that brings them an annual income of around $77,000. “For the amount of office visits I do make, why pay $3,500 for insurance when I’m not even taking advantage of it? We go to the doctor and we pay for it. Usually I can get a better deal than if I had insurance.” The law’s penalty for not carrying insurance grows to its maximum next year and will start at $695 for an individual, up from $325 this year. That isn’t enough to sway Ms. Khechoom, who says paying the penalty is still preferable to buying coverage.

The Persistence of ACA Denialism - Paul Krugman -- I guess people with strong political preferences have always had a hard time accepting facts that are at odds with those prejudices; but I do also think that it has gotten worse in modern America thanks to the closed information loop of movement conservatism and the incestuous amplification it brings. You see it in things like the rise of inflation trutherism; you also see it in the inability of many on the right to accept the reality that Obamacare really has covered a lot of previously uninsured Americans.  Anyway, the latest line I’ve been hearing is that the decline in uninsurance isn’t really about the ACA, it’s just the improving economy. Now, the same people who say such things tend to deny that the economy is really improving, too — Obamacare was supposed to be a job killer, so it must be killing jobs. But never mind. What about claims that the improving economy is the real story?  The answer is in two parts. First, the decline in the number of uninsured is too steep, too perfectly timed with the coming of the ACA to make sense in such terms. Uninsurance was rising until late 2013, despite a recovering economy, then suddenly fell off a cliff just as the ACA went into full effect. Not a coincidence. Second, we are now at a point where a much smaller fraction of Americans are uninsured than we’ve seen in a long time, maybe ever. Even in 2000, with unemployment very low and health costs relatively moderate, Census data show that around 16 percent of Americans aged 18 to 64 were uninsured; meanwhile, the HRMS data, which are consistent with multiple other sources, show uninsurance among that group at about 10 percent, and just 7.5 percent in Medicaid expansion states. I know this program was supposed to be a dismal failure. But, you know, it isn’t.

States Take Few Steps to Fill Gap if Supreme Court Blocks Health Subsidies - — As the Supreme Court prepares to rule on whether to block health insurance subsidies in 34 states that use the federal insurance exchange, Pennsylvania and Delaware are the best prepared. They have submitted detailed plans for creating their own exchanges by next year, a move intended to keep subsidies flowing to their residents, though possibly with an interruption.Mississippi’s insurance commissioner, Mike Chaney, says he has a tentative plan for establishing a state exchange, but federal officials would have to loosen the rules. In Illinois, the state hospital association laid out options for quickly establishing an exchange in a blunt memo to Gov. Bruce Rauner and state legislators this month.  But in the vast majority of states that rely on the federal exchange,, there is little or no evidence that anyone has a plan to preserve the subsidies that help more than six million residents of those states afford their insurance premiums. Most of the affected states have Republican governors, and many, including Scott Walker of Wisconsin, Rick Scott of Florida and Dennis Daugaard of South Dakota, insist it is Congress’s job to come up with a remedy if the subsidies disappear.“They’re not scrambling as of yet over this,” Mr. Leavitt said. “But when the force of millions of people who are going to have their insurance affected begins to influence this debate, it’s going to look different to those who are feeling the pressure. And I think it will be the governors.” The case before the Supreme Court, King v. Burwell, focuses on a section of the Affordable Care Act that says subsidies should flow to insurance customers “through an exchange established by the state.” The plaintiffs argue that this language means only people who use state-run exchanges, not the federally run, can receive subsidies. At this point, only 13 states and the District of Columbia fully run their own exchanges. Three other states have a “federally supported state exchange” and may also not be affected by the decision.

King v. Burwell: Supreme Court Upholds Subsidies to Federal Exchanges -- This morning, the Supreme Court issued a 6-3 opinion affirming the IRS decision to offer subsidies to those who purchase plans from the federal healthcare exchange through the Affordable Care Act (ACA.) Writing for the majority, Chief Justice Roberts held that the context of the ACA required the court to deviate from “the most natural reading” of the clause at issue (restricting subsidies to those “enrolled in through an Exchange established by the State under 1311”). In a strident dissent, Justice Scalia argued that the Court is performing “somersaults of statutory interpretation” that prove the “discouraging truth that the Supreme Court of the United States favors some laws over others”. This is an important case concerning a significant feature of the tax code. While the premium subsidies are to be administered by the IRS, they are somewhat unusual compared to traditional IRS responsibilities; they are a refundable tax credit for individuals, kind of like the Earned Income Tax Credit, but instead of being paid to individuals, they are paid to insurance companies on an individuals’ behalf.Another unusual feature of them is that they are determined and paid during the year, and then the final amount is settled on tax day through Form 8962. If a taxpayer’s subsidy was determined to be too large, they will owe additional taxes. If the subsidy was too small, the taxpayer receives a credit. As our previous coverage of this case has noted, the subsidies so far are (relatively) small. However, they are projected to increase as more people begin using the exchanges. In fact, they are projected to become about as big as all other refundable tax credits combined.

Supreme Court Gives Obama Huge Victory With 6-3 Vote In Favor Of Obamacare --The Supreme Court has ruled that people who bought healthcare coverage through federal exchanges as part of Obamacare can keep subsidies that effectively limit the amount low- and middle-income Americans pay for health insurance to 9.5% of their income or less.  has just overcome its last legitimate legal challenge. In some ways this was not unexpected, but that the final vote was 6-3 is somewhat surprising with most pundits expecting a 5-4 Robert-led tiebreaker. As The Hill summarizes, the SCOTUS upheld a key provision of ObamaCare, affirming that 6.4 million people can continue to receive subsidies that allow them to purchase healthcare plans. The 6-3 decision authored by Chief Justice John Roberts is a huge victory for President Obama. The case, King v. Burwell, represented the biggest legal threat to ObamaCare since the Supreme Court ruled the law was constitutional three years ago. The decision puts an abrupt end to the years-long challenge from conservatives, led by the Competitive Enterprise Institute, that have also levied a half-dozen other lawsuits against the 5-year-old law.

The Supreme Court and Obamacare: Somehow, common sense prevailed -- At one level, today’s Supreme Court decision to preserve the tax subsidies that allow low- and middle-income people to afford health insurance is a marvelous, miraculous win. I’m sure that the millions who depend on those subsidies (in states where the federal government runs the exchange) are hugely relieved that they can continue to receive affordable coverage. I can tell you for a fact, listening to the hallways here at CBPP (and interviewing myself), that those who helped craft and have advocated for the Affordable Care Act are hugely elated. But at another level, and this comes out surprisingly clearly from Chief Justice Roberts’ majority (6-3!) decision, the suit made little sense in the first place. His opinion—highly readable, btw—shows that a common sense reading of the issues points clearly in the direction of Congressional intent: the subsidies are an integral part of the law’s structure, and Congress intended them to do what they’re doing, regardless of whether the state or the feds set up a particular state’s exchange. The majority recognizes that the drafting was ambiguous around the issue of exchanges set up by the feds, but argues that when such ambiguity exists, you look at the over-arching intention of the law—the provision of affordable coverage—and the linkages between the ambiguity in question, the structure of the law, and its goal. When you do so, according to these justices, there’s no question that Congress intended that regardless of who sets up a given exchange, it must provide tax credits to fulfill that link in the chain nicely articulated above.

Health Mergers Could Cut Consumer Options - WSJ: The nation’s biggest health insurers, which are pursuing a series of potential megamergers, have market overlaps that could damp competition in sectors such as private Medicare plans, an analysis of state and federal data by The Wall Street Journal has found. The board of Cigna Corp. CI 1.32 % on Sunday rejected a $47.5 billion bid from Anthem Inc. ANTM -0.61 % that was disclosed on Saturday. Aetna Inc. AET 0.12 % has made an offer for Humana Inc. HUM -0.04 % in recent days. Those deals, if completed, would shrink the current top five insurers to a powerful big three, each with revenue on paper of more than $100 billion. Meantime, the largest player by revenue, UnitedHealth Group Inc., UNH 2.07 % has recently made a takeover approach to Aetna. Some of the combinations could pose challenges to competition around the country, according to the Journal’s analysis. For instance, an Aetna-Humana tie-up would increase by about 180 the number of U.S. counties where at least 75% of customers for Medicare Advantage plans are in the hands of a single insurer. In addition, in eight states, an Aetna-Humana merger would remove a competitor from the exchanges where individuals can buy coverage under the Affordable Care Act. A UnitedHealth-Aetna tie-up, meanwhile, would remove a competitor in exchanges involving 11 states. Insurers may not offer plans in every region of a state, however.

The Fattening Of America: Obesity Rates Hit Record High, Doctors Blame Cars & Poverty -- 74% of American men are either overweight or Obese (up from 63% in 1994)according to a new report using data from the National Health and Nutrition Examination Survey.  As MSN reports, the researchers exclaim "obesity is not getting better. It's getting worse, and it's really scary. It's not looking pretty," warning that America's "car dependence" and poverty ("processed and fast foods are less expensive") are to blame and America's weight problem is an issue that will not be resolved through a purely medical solution. As MSN reports, fewer than one-third of Americans are currently at a healthy weight, with the rest of the population either overweight or obese, a new report finds. About 35 percent of men and 37 percent of women are obese. Another 40 percent of men and 30 percent of women are overweight, researchers said in the June 22 issue of JAMA Internal Medicine.

More people are obese than overweight in the US. -- From JAMA Internal Medicine, “Prevalence of Overweight and Obesity in the United States, 2007-2012“: Overweight and obesity are associated with various chronic conditions. These conditions are considerable health care and societal burdens, yet could potentially be averted by preventing weight gain and obesity. In a prior analysis, now almost 20 years old, Must et al used a nationally representative data set from 1988 through 1994 and reported the US chronic disease burden associated with body mass index (BMI), thus informing clinical practice and the priorities for cost-effective prevention strategies. Using the most recent data in the National Health and Nutrition Examination Survey (NHANES, 2007-2012), we updated the prevalence of overweight and obesity by sex, age, and race/ethnicity and compared the values with those of the earlier study. Researchers looked at NHANES data for people 25 years or older, who weren’t pregnant, from 2007-2012. Specifically, they looked at people’s BMI to see if they were underweight (<18.5), normal weight (18.5-24.9), overweight (25.0-29.9), of obese ( >= 30.0). They further classified obesity into classes: class 1 (30.0-34.9), class 2 (35.0-39.9), and class 3 (≥40). Very few people were underweight. Unfortunately, not a ton were normal weight either. But here’s the news: About 40% of men were overweight, as were 30% of women. Worse, 35% of men and 37% of women were obese. If you extrapolate these numbers to the US population, that means that 65,219,927 people in the US are overweight, and 67,639,931 are obese. More people 25 years old and older are now obese than overweight.

On being old, lonely, demented, and hospitalized  - Last Tuesday I had my hip replaced. The procedure went amazingly well and the care was superb. But I had the opportunity to witness one of the challenges of geriatric care.* After the procedure and some time in a post-operative unit, I was taken to a room on an orthopedic ward. I shared the room with an elderly woman who had broken her femur in a fall. She woke up shortly after I arrived, looked at me and said: Günter?!? Wo bist du gewesen?? (Günter, where have you been?) She was frightened and unaware that she was hospitalized. She had some English, which was fortunate because I was the only one around with a touch of German. The nurse and I were able to persuade her that I was not her husband, but this led to agitated demands that we find her husband. He was in fact at the nursing home where they both lived. We convinced her of this and she fell back to sleep. This scene repeated many times over the next 24 hours, until I was discharged. Sometimes she would wake up and demand to be released so that she could find Günter and care for him. She retained nothing from our prior encounters. Each time she woke, I had to explain to her that I was not her husband and that this was not her home. The staff was wonderfully patient with her, repeatedly spending the time required to soothe and reorient her. The alternative was restraining her, physically or chemically. There is an important health policy choice here (read Atul Gawande’s Being Mortal). Adequately staffing hospitals to deal with demented patients is expensive. There is no medical cure for dementia. What good care does, for these patients, is that it respects their dignity. There will be nothing tangible to show for this, nothing will restore this woman to a productive or even coherent life. We just have to decide what the dignity of others is worth to us.

What they say about you when you are not listening: An operation was inadvertently recorded, and here are some of the results: The recording captured Ingham mocking the amount of anesthetic needed to sedate the man, the lawsuit states, and Shah then commented that another doctor they both knew “would eat him for lunch.” The discussion soon turned to the rash on the man’s penis, followed by the comments implying that the man had syphilis or tuberculosis. The doctors then discussed “misleading and avoiding” the man after he awoke, and Shah reportedly told an assistant to convince the man that he had spoken with Shah and “you just don’t remember it.” Ingham suggested Shah receive an urgent “fake page” and said, “I’ve done the fake page before,” the complaint states. “Round and round we go. Wheel of annoying patients we go. Where it’ll land, nobody knows,” Ingham reportedly said. Ingham then mocked the man for attending Mary Washington College, once an all-women’s school, and wondered aloud whether her patient was gay, the suit states. Then the anesthesiologist said, “I’m going to mark ‘hemorrhoids’ even though we don’t see them and probably won’t,” and did write a diagnosis of hemorrhoids on the man’s chart, which the lawsuit said was a falsification of medical records. After declaring the patient a “big wimp,” Ingham reportedly said: “People are into their medical problems. They need to have medical problems.”

Bottled Water Recall, 11 States Affected - - If you’re a bottled water drinker, you may want to check the label. Over 14 brands of bottled water distributed to 11 states have been recalled due to a potential E. coli contamination. Among these are food store brands Shoprite, Stop & Shop, Giant, Acme and Wegman’s. The voluntary recall was issued at two of its Pennsylvania facilities after a spring found traces of E. coli in its water. “This is a voluntary recall. Even if the spring has an issue, none of the water showed any issues in our tests,” says Stan Bratskeir, a spokesperson for Niagara Bottling, a family-owned bottled water company in the United States. The following brands bottled between June 10th and June 18th were affected: Acadia, Acme, Big Y, Best Yet, 7-11, Niagara, Nature's Place, Pricerite, Superchill, Morning Fresh, Shaws, Shoprite, Western Beef Blue and Wegman's. “This affects a regional level. Over the eight days, this bottled water was shipped to over 11 states," says Bratskeir in a interview. The states affected include Connecticut, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Ohio, Vermont, Virginia, North Carolina and Pennsylvania.

South Korea hospitals to monitor emergency room visitors in battle on MERS | Reuters: South Korea has ordered hospitals to track all emergency ward visitors, after a large outbreak of Middle East Respiratory Syndrome (MERS) was blamed on difficulties locating every person exposed to the disease, the health ministry said on Thursday. Many of the 180 MERS cases in South Korea, which make up the largest outbreak of the disease outside Saudi Arabia, were caught from sufferers encountered in emergency wards before they were diagnosed, during a wait for hospital places. The difficulty of tracing those who thronged the wards made it harder to find people who needed to be isolated for suspected exposure to the disease, ministry official Kwon Deok-cheol said. "This issue has been raised as one of the biggest problems, as we looked at the trend of the MERS outbreak," Kwon, the ministry's head of health care policy, told a news briefing. Hospitals are now required to keep a record of all patients and family members as well as ambulance workers and the time of their visits, the ministry said. On Thursday, the ministry reported two more deaths from the disease, taking the toll to 29, besides reporting one new case. Most of the deaths have been among elderly patients or those already suffering illnesses. There are 77 people still being treated in hospital, the ministry said. The emergency ward at a prestigious Seoul hospital run by the Samsung Group had become an epicentre of the outbreak after a 35-year-old patient waited nearly three days for a bed while nearly 900 patients, their families, and other visitors, as well as hospital staff, went through the ward. The health ministry has promised to change the practice of patients and their families waiting in emergency rooms for beds to become available.

China Caught Smugglers Trying to Sell Meat from the 1970s -- BBC reports that Chinese authorities seized over 100,000 tons of meat from smugglers in the Hunan province, some dating back to the Carter Administration, as part of a nationwide crackdown on poor food standards. The estimated $438 million worth of flesh—which had been frozen, thawed, and refrozen again during its trek from places like Brazil and India through neighboring countries and into the bellies of unsuspecting consumers—included beef, chick feet, and duck necks.  While Chinese anti-smuggling authorities are investigating 21 gangs, having already arrested 20 people in the Hunan province alone, this seizure coincides with news of a Chinese food safety watchdog urging the Shaanxi province to order a recall on three milk producers in the area, after finding a curiously high amount of nitrate levels in infant formula powders.  Food standard issues are nothing new to the country that engineers genius babies and uses the black market to coax white English speakers to come teach. Back in 2008, Chinese milk producers released a product contaminated by melamine, killing six kids and leaving some 300,000 others ill—and there's also that whole dog meat festival thing.

Poor Sanitation in India May Afflict Well-Fed Children With Malnutrition - His parents seemed to be doing all the right things. His mother still breast-fed him. His family had six goats, access to fresh buffalo milk and a hut filled with hundreds of pounds of wheat and potatoes. The economy of the state where he lives has for years grown faster than almost any other. His mother said she fed him as much as he would eat and took him four times to doctors, who diagnosed malnutrition. Just before Vivek was born in this green landscape of small plots and grazing water buffalo near the Nepali border, the family even got electricity.   So why was Vivek malnourished?  It is a question being asked about children across India, where a long economic boom has done little to reduce the vast number of children who are malnourished and stunted, leaving them with mental and physical deficits that will haunt them their entire lives. Now, an emerging body of scientific studies suggest that Vivek and many of the 162 million other children under the age of 5 in the world who are malnourished are suffering less a lack of food than poor sanitation.Like almost everyone else in their village, Vivek and his family have no toilet, and the district where they live has the highest concentration of people who defecate outdoors. As a result, children are exposed to a bacterial brew that often sickens them, leaving them unable to attain a healthy body weight no matter how much food they eat.“These children’s bodies divert energy and nutrients away from growth and brain development to prioritize infection-fighting survival,” said Jean Humphrey, a professor of human nutrition at Johns Hopkins Bloomberg School of Public Health. “When this happens during the first two years of life, children become stunted. What’s particularly disturbing is that the lost height and intelligence are permanent.”

Children of Smog in Delhi: Real News video & transcript - Last year the World Health Organization reported that Delhi, the capital city of India, has the worst air pollution of any major city in the world. The issue has begun to get attention in the national and international press. The New York Times, for example, recently reported that nearly half of the city's 4.4 million schoolchildren have irreversible lung damage from the poisonous air they breathe. Here to talk about all of this with us today, who has recently returned from Delhi after spending his spring there, is James K. Boyce. James is the director of the Environment Program at the Political Economy Research Institute in Amherst, Massachusetts. He has joined us again after a long time. Jim, thank you for coming on The Real News.

Remember That Weird In-Flight Mass Fainting Episode? Boeing Faces Lawsuit - Four flight attendants sued the Boeing Company on Tuesday, alleging that crew and passengers are sometimes exposed to toxic fumes in airplane cabins that can lead to devastating health problems. All Boeing commercial jets—with the exception of the company's newest model (the 787 Dreamliner)—use a venting system in which air is pulled through the compressor of the engine to provide pressurization in the cabin. Airbus, Boeing's rival, uses the same system. When something goes wrong in that process—like a leaking engine seal or an overfilling oil reservoir—air can be contaminated by the chemicals in the oil of the engine, mishaps known as "fume events." "Since stepping on that plane my life has been turned upside down," says one of the plaintiffs.The four flight attendants allege that such an event occurred during a 2013 Alaska Airlines flight from Boston to San Diego. Three of the four women lost consciousness, leading the plane to land early in Chicago, where they were hospitalized. According to the complaint, all four flight attendants still suffer from medical problems, including tremors, blurred vision, memory loss, and chronic fatigue. Two of the four flight attendants can no longer work. "Since stepping on that plane my life has been turned upside down," says Vanessa Woods, one of the plaintiffs.

Johnson & Johnson Has a Dirty Secret About Microbeads --Instead of moving to safe, natural alternatives, Johnson & Johnson wants to replace plastic microbeads with more plastic. They recently came out in the New York Times against the California microbead ban, even after pledging in 2013 to ban microbeads in their products. Across the country in states like Colorado, Illinois, New Jersey and Oregon, Johnson & Johnson is working to sabotage microbead bans with a sneaky loophole. By subtly tweaking the definition of a microbead, the loophole would allow companies to replace traditional plastic microbeads with other types of dangerous plastics, like the type used in cigarette filters. Plastic microbeads are found in beauty products like toothpaste and facial scrubs in staggering quantities. One tube of exfoliating scrub can contain more than 350,000 plastic microbeads. It’s estimated that 471 million microbeads are released into the San Francisco Bay every day. No microbead alterative that still uses plastic will stop the toxic effect microbeads has on our oceans and our health.

Climate Change Health Risk Is a 'Medical Emergency,’ Experts Warn - The threat to human health from climate change is so great that it could undermine the last 50 years of gains in development and global health, experts warned on Tuesday. Extreme weather events such as floods and heat waves bring rising risks of infectious diseases, poor nutrition and stress, the specialists said, while polluted cities where people work long hours and have no time or space to walk, cycle or relax are bad for the heart as well as respiratory and mental health. Almost 200 countries have set a 2 degrees C global average temperature rise above pre-industrial times as a ceiling to limit climate change, but scientists say the current trajectory could lead to around a 4 degrees C rise in average temperatures, risking droughts, floods, storms and rising sea levels. "That has very serious and potentially catastrophic effects for human health and human survival,” said Anthony Costello, director of University College London’s (UCL) Institute for Global Health, who co-led the report.The report, commissioned and published by The Lancet medical journal, was compiled by a panel of specialists including European and Chinese climate scientists and geographers, social, environmental and energy scientists, biodiversity experts and health professionals. It said that because responses to mitigate climate change have direct and indirect health benefits - from reducing air pollution to improving diet - a concerted effort would also provide a great opportunity to improve global health. The report said direct health impacts of climate change come from more frequent and intense extreme weather events, while indirect impacts come from changes in infectious disease patterns, air pollution, food insecurity and malnutrition, displacement and conflicts.

Why Researchers Are Sounding The Alarm About Climate Change’s Health Impacts - Climate change and air pollution make a dangerous pair. That’s one of the findings of a report published Monday from the Lancet Commission on Health and Climate Change, a group that represents a collaboration between European and Chinese climate scientists and geographers, social and environmental scientists, biodiversity experts, energy policy and health experts, and other professionals. The report, which laid out the health risks of climate change and makes policy recommendations, called air pollution among the most serious of the indirect health effects of global warming.  Here’s why that is: gases that result from the burning of fossil fuels pollute the air, and cause global warming. At the same time, rising temperatures worsen air pollution by increasing ground level ozone, a chemical reaction between sunlight and emissions and the main component of smog. We are seeing the impacts of climate on lung health, and that is a huge concern.  The resulting dirty air — a combination of ozone and fine particles — is very bad for humans, especially children whose lungs are still developing, as well as for the elderly and people with asthma, heart disease or chronic obstructive pulmonary disorder (COPD). Experts even believe it hurts healthy people as well. “Exposure to air pollution has been directly linked to worsening respiratory disease, and not just in asthmatics,’’ “Pollution has a direct impact, there is no question. We’re seeing a rise in childhood asthma and adult onset asthma too, and increases in COPD, which is becoming a tremendous problem in this country. People are developing it who never smoked, or never had family members who smoked.’’ “We are seeing the impacts of climate on lung health, and that is a huge concern,’’ said Janice E. Nolen, assistant vice president for national policy at the American Lung Association. “We are very worried about the threat it poses today, and will pose in the future.’’

Why climate change is increasingly seen as an urgent health issue -  When people think about health, they generally think about things individuals can do to ward off disease — seeing a doctor, taking medicine, or dieting. But increasingly, many health experts think this mindset needs to change. When we think about health, they say, we need to start thinking about how environmental factors can matter as much as — maybe even more than — any personal behaviors. And that includes big things like climate change: In a big new report released Monday, The Lancet brought together the world’s leading experts on environmental health. They argue that "[t]he implications of climate change for a global population of 9 billion people threatens to undermine the last half century of gains in development and global health": The direct effects of climate change include increased heat stress, floods, drought, and increased frequency of intense storms, with the indirect threatening population health through adverse changes in air pollution, the spread of disease vectors, food insecurity and under-nutrition, displacement, and mental ill health. Over the next five years, the authors urge governments to pay more attention to the health implications of climate change. That includes steps like:

  • Investing in climate change research and surveillance to better understand how the environment is affecting population health
  • Phasing out coal as a source of energy in order to protect people's cardiovascular and respiratory health
  • Redesigning cities to promote healthier lifestyles

Drought, Bird Flu: Farm Sector Earnings Plunge in Early 2015 - Earnings for workers in the U.S. farm sector plunged in the early months of 2015, with all but nine states posting declines, the Commerce Department said Monday. Farm earnings fell 22.4% in the first quarter, which Commerce attributed primarily to lower livestock output. In Iowa, Kansas, Nebraska and South Dakota—where farmers have grappled with severe drought and the spread of avian influenza—first-quarter earnings growth in other sectors was entirely offset by the drop in farm earnings. That led to an overall decline in personal income in those four states, the only states where personal income fell in the first quarter compared with the previous quarter. Iowa posted the biggest drop, at 1.2%. Personal income includes all wages and salaries, property income and government benefits, such as Social Security and Medicaid. Earnings in the mining sector also fell, reflecting the sharp drop in oil prices that has pummeled the energy industry. . Mining earnings fell 3.5% in the first quarter, the first decline since the third quarter of 2009. The biggest declines occurred in Wyoming, Louisiana, North Dakota, Oklahoma and Texas. Overall, state personal income grew 0.9% on average in the first quarter, a slower pace than the fourth quarter’s 1.1% growth rate.

Leading Cancer Experts: 2,4-D Weed-Killer Is ‘Possibly Carcinogenic to Humans’ - The decision by an organization of the world’s leading cancer experts to classify the herbicide 2,4-D as a possible carcinogen underscores the risk posed by the U.S. government’s recent approval of 2,4-D for use on genetically engineered, or GMO, crops.  The International Agency for Research on Cancer (IARC), a branch of the World Health Organization, said 2,4-D is “possibly carcinogenic to humans” because there is “strong evidence that 2,4-D induces oxidative stress that can operate in humans and moderate evidence that 2,4-D causes immunosuppression, based on in-vivo and in-vitro studies.” “We have known for decades that 2,4-D is harmful to the environment and human health, especially for the farmers and farm workers applying these chemicals to crops,” said Mary Ellen Kustin, senior policy analyst for the Environmental Working Group. “Now that farmers are planting 2,4-D-tolerant GMO crops, this herbicide is slated to explode in use much the way glyphosate did with the first generation of GMO crops. And we know from experience—and basic biology—that weeds will soon grow resistant to these herbicides, making GMO crop growers only more dependent on the next chemical fix.” 2,4-D is one of the two active ingredients in Enlist Duo, a toxic weed-killing cocktail marketed by Dow AgroSciences, which the U.S. Environmental Protection Agency recently approved for use in 15 states. The other herbicide in Enlist Duo is glyphosate, which the international cancer agency had previously classified as “probably carcinogenic.” Exposure to both chemicals has separately been linked to non-Hodgkin lymphoma.When the EPA approved Enlist Duo for use on GMO crops, the agency did not consider the effects the two harmful defoliants may have on human health when mixed together.

Pope Francis Slams GMOs and Pesticides for Destroying the Earth’s ‘Complex Web of Ecosystems’ -- Pope Francis’s encyclical didn’t just cover climate change, he also denounced pesticides and genetically engineered (GE) crops, declaring “the spread of these crops destroys the complex web of ecosystems, decreases diversity in production and affects the present and the future of regional economies.”  Biotech companies claim their products are key to solving hunger, but the Pope knows this isn’t true. No commercial GE crops are engineered for increased yield.  The Pope’s message couldn’t come at a better time. Pesticide use is at an all-time high. The U.S. Department of Agriculture says glyphosate use on corn and soy increased from 10 million pounds in 1996, the year Roundup Ready crops were introduced, to 204 million in 2013. The U.S. Geological Survey routinely finds glyphosate in our water. The Word Health Organization just declared glyphosate a probable carcinogen. The Pope observed that pesticide use “creates a vicious circle in which the intervention of the human being to solve a problem often worsens the situation further.” He said, “many birds and insects die out as a result of toxic pesticides created by technology … [and this] actually causes the Earth we live in to become less rich and beautiful, more and more limited and gray …” Pesticides have already made our Earth less rich and more gray by nearly wiping out monarch butterflies, which have declined by 90 percent, largely because increased glyphosate use has wiped out the monarch’s sole host plant, milkweed. Pesticides are a leading cause of our current pollinator collapse. With one-third of the bites we eat requiring bee-pollination, many world leaders, including President Obama, are waking up to the need for action. With this encyclical, the Pope reminds us that our fates are intertwined with all species, and calls us to action.

Raisins: When Insiders Set the Rules: Earlier this week, the US Supreme Court in Horne et al. vs. Department of Agriculture overturned an arrangement that had stood since 1937 for the sale of raisins. The case turned on what is apparently a non-obvious question, given that this program had been around for eight decades and lower courts had ruled differently: Does taking 47% of someone's crop count as a a "taking" in the legal sense prohibited by the 5th Amendment to the US  Constitution, which ends with the words " ... nor shall private property be taken for public use, without just compensation." Chief Justice John Roberts wrote the decision for an 8-1 majority. He begins with a compact overview of past practice: The Agricultural Marketing Agreement Act of 1937 authorizes the Secretary of Agriculture to promulgate “marketing orders” to help maintain stable markets for particular agricultural products. The marketing order for raisins requires growers in certain years to give a percentage of their crop to the Government, free of charge. The required allocation is determined by the Raisin Administrative Committee, a Government entity composed largely of growers and others in the raisin business appointed by the Secretary of Agriculture. In 2002–2003, this Committee ordered raisin growers to turn over 47 percent of their crop. In 2003–2004, 30 percent. Growers generally ship their raisins to a raisin “handler,” who physically separates the raisins due the Government (called “reserve raisins”), pays the growers only for the remainder (“free-tonnage raisins”), and packs and sells the free-tonnage raisins. The Raisin Committee acquires title to the reserve raisins that have been set aside, and decides how to dispose of them in its discretion. It sells them in noncompetitive markets, for example to exporters, federal agencies, or foreign governments; donates them to charitable causes; releases them to growers who agree to reduce their raisin production; or disposes of them by “any other means” consistent with the purposes of the raisin program.

CRP Acreage Down 34 Percent Since 2007 - Kay McDonald - The Agricultural Act of 2014 gradually reduces the cap on land enrolled in the Conservation Reserve Program (CRP) from 32 million acres to 24 million acres by 2017. CRP acreage declined 34 percent since 2007, falling from 36.8 million acres to 24.2 million by April 2015. While initially enrolling mainly whole fields or farms (through periodically announced general signups), CRP increasingly uses “continuous signup” (which has stricter eligibility requirements than general signup) to enroll high-priority parcels that often provide greater per-acre environmental benefits. Conservation practices on these acres include riparian buffers, filter strips, grassed waterways, and wetland restoration. Riparian buffers, for example, are vegetated areas that help shade and partially protect a stream from the impact of adjacent land uses by intercepting nutrients and other materials, and provide habitat and wildlife corridors. Enrollment under continuous signup increased by about 50 percent, from 3.8 million acres in 2007 to 5.7 million acres in 2014. (see graphics)

The Surprising Environmental Reason Weed Should Be Legal - Marijuana has a strange legal status. In California, it’s been medically legal for almost two decades, but growing it and selling it for recreational purposes is in a gray area of law enforcement, with federal law prohibiting it altogether and state and local laws cobbled together in a patchwork of regulation. But according to a new study, this pseudo-legalization is bad news for the environment.  The $31 billion marijuana growing business is draining local streams and allowing pesticide runoff to poison fish and wildlife, and it’s “high time” to include environmental regulations in the legalization conversation, states the report, published this week by a team of scientists from the Nature Conservancy, the California Department of Fish and Wildlife, and University of California Berkeley.  “Illegal marijuana production in California is centered in sensitive watersheds with high biodiversity,” the authors write in the report, which appeared in the journal BioScience.Environmental enforcement bodies don’t have the resources to regulate rogue, unregulated pot growers under a patchwork of state and local legislation, and the federal prohibition “encourages secrecy and invisibility among producers,” the report states, further complicating enforcement. Growers are often squatting on public land, unlicensed and unregistered. The study’s authors take care to note that they are not weighing in on whether marijuana should be legalized — they are simply saying that the environmental implications need to be included in the debate.

Only 60 Years of Farming Left If Soil Degradation Continues - Scientific American  - Generating three centimeters of top soil takes 1,000 years, and if current rates of degradation continue all of the world's top soil could be gone within 60 years, a senior UN official said on Friday. About a third of the world's soil has already been degraded, Maria-Helena Semedo of the Food and Agriculture Organization (FAO) told a forum marking World Soil Day. The causes of soil destruction include chemical-heavy farming techniques, deforestation which increases erosion, and global warming. The earth under our feet is too often ignored by policymakers, experts said. "Soils are the basis of life," said Semedo, FAO's deputy director general of natural resources. "Ninety five percent of our food comes from the soil." Unless new approaches are adopted, the global amount of arable and productive land per person in 2050 will be only a quarter of the level in 1960, the FAO reported, due to growing populations and soil degradation. Soils play a key role in absorbing carbon and filtering water, the FAO reported. Soil destruction creates a vicious cycle, in which less carbon is stored, the world gets hotter, and the land is further degraded.  "We are losing 30 soccer fields of soil every minute, mostly due to intensive farming,"

New Research Warns Of Catastrophic Food Shortages Due To Unchecked Climate Change - New research supported by the United Kingdom’s Foreign Office and insurer Lloyd’s of London finds that, absent major changes, humanity risks a catastrophic collapse in its ability to feed itself by mid-century, due in significant part to human-caused climate change. Last year, the United Nations’ “highly conservative” IPCC climate panel warned that humanity is risking a “breakdown of food systems linked to warming, drought, flooding, and precipitation variability and extremes” on its current path of unrestricted carbon pollution. Many studies in the last 12 months have strengthened the scientific case (see this, for instance). The new research is from the Global Resource Observatory, a project of Anglia Ruskin University’s Global Sustainability Institute (GSI) partnering with the UK government’s Foreign Office; Lloyds of London; a “coalition of leaders from business, politics and civil society”; the Institute and Faculty of Actuaries; and both the Africa and Asian Development Banks.  The GSI group does business-as-usual forecasting using system dynamics modeling — arguably the only type of modeling that treats feedbacks and time delays well enough to even approximate what is coming. GSI Director Aled Jones explains that the group “ran the model forward to the year 2040.” The results were stunning:“The results show that based on plausible climate trends, and a total failure to change course, the global food supply system would face catastrophic losses, and an unprecedented epidemic of food riots. In this scenario, global society essentially collapses as food production falls permanently short of consumption.” The “good” news: That only happens if humanity doesn’t actually do any serious planning for this outcome — and doesn’t do any serious reacting as it plays out. But homo sapiens isn’t a “brainless frog,” are we?

Water Wars Crush California Wineries: "Whoever Has The Longest Straw Wins" --Eerily reminiscent of the determinedly evil oil baron from the movie 'There Will Be Blood', Reuters reports the growing tensions amid California's drought-stricken wineries are boiling over: "There is way too much demand. I blame a lot of vineyards like other people do... It's a matter of who has the longest straw at the bottom of the bucket." No one should worry though, because the government is here to help - with a new water management agency...  Between 1990 and 2014, harvested wine grape acreage in the growing region around Paso Robles nearly quintupled to 37,408 acres, as vintners discovered that the area's rolling hills, rocky soil and mild climate were perfect for coaxing rich, sultry flavors from red wine grapes. But, as Reuters reports, in the last few years, California's ongoing drought has hit the region hard, reducing grape yields and depleting the vast aquifer that most of the area’s vineyards and rural residents rely on as their sole source of water other than rain. Across the region, residential and vineyard wells have gone dry. Those who can afford to – including a number of large wineries and growers – have drilled ever-deeper wells, igniting tensions and leading some to question whether Paso Robles' burgeoning wine industry is sustainable. "All of our water is being turned purple and shipped out of here in green glass," said Cam Berlogar, who delivers water, cuts custom lumber and sells classic truck parts in the Paso Robles-area community of Creston. "There are a lot of farmers who are going to have to farm with a hell of a lot less water." But, spurred by the drought, California Governor Jerry Brown last year signed a package of bills requiring groundwater-dependent areas to establish local water sustainability agencies by 2017. The agencies will then have between three and five years to adopt water management plans, and then another two decades to implement those plans. Some residents worry that Paso Robles can't wait that long.

Troubled Delta System Is California’s Water Battleground - — Fighting over water is a tradition in California, but nowhere are the lines of dispute more sharply drawn than here in the Sacramento-San Joaquin Delta, a 720,000-acre network of islands and canals that is the hub of the state’s water system.Giant pumps pull in water flowing to the delta from the mountainous north of the state, where the majority of precipitation falls, and send it to farms, towns and cities in the Central Valley and Southern California, where the demand for water is greatest.For decades, the shortcomings of this water transportation system, among the most ambitious and complex ever constructed, have been a source of conflict and complaint.But in the fourth year of a profound drought, the delta has become a central battle zone, pitting north against south, farmers against environmental groups, farmers against one another and many local residents against California’s governor, Jerry Brown, whose plan to fix the delta’s problems upsets them almost as much as the drought itself.   Water pumped from the delta, the largest estuary on the West Coast, accounts for only about 15 percent of the total water from aboveground sources that is used in California.But the delta pumps help feed more than three million acres of farmland, much of it in the San Joaquin Valley, the agricultural heartland of the state. The estuary’s water is also home to hundreds of wildlife species, including fish — like the winter-run Chinook salmon and the delta smelt — that are listed as endangered and federally protected.

Drought May Prompt Californians to Let Personal Hygiene Slide - Forget the brown lawns. California’s historic drought may make the state’s residents less keen on washing their bodies and their homes. The water woes in the Western U.S. may cut sales of traditional cleaning products sold by the likes of Procter & Gamble Co., Bloomberg Intelligence analysts Deborah Aitken and Gregory Elders wrote in a report Friday. But it could boost sales of dry shampoos, which customers spray on and comb through their hair in lieu of washing in the shower, they said. Consumers changing their cleaning patterns in response to a drought isn’t unheard of. Unilever Chief Executive Officer Paul Polman recently told analysts and investors that Brazilians are showering 15 percent less because of water shortages. Meanwhile, the company’s products that are geared toward helping consumers use fewer resources are growing twice as fast as its other brands, and they’re more profitable, Polman said at a conference this month. Why Everyone in the U.S. Will Feel California's Drought Dry shampoos already had started to gain traction because more consumers want to keep their hair’s natural oils intact and avoid harsh substances. Sales of the products are growing five times as fast as the 2 percent gain predicted for the total shampoo category through 2019, Aitken said, citing Euromonitor International data. “It is now a case of skip a wash, or even two, among some of the users I know,”

California Drought: Support grows in Bay Area for toilet to tap water - Bay Area residents consider California's historic drought so dire that a majority say they would be willing to drink purified toilet water.That's not the only finding in a Bay Area Council poll released Wednesday that used to be considered hard to swallow. Many Bay Area residents appear to be putting aside some long-held notions about the environment, health and public costs to support bolder options to increase the water supply. While 58 percent of those polled say they favor adding appropriately treated recycled water to the drinking water supply, 63 percent say they support building more dams and reservoirs, with 23 percent strongly in favor. "That's a high number in an environmentally-conscious place like the Bay Area," said Rufus Jeffris, a spokesman for the Bay Area Council, a pro-business advocacy group. "This all suggests that people want to look more seriously at these types of solutions that, in the past, haven't had this great acceptance either because of environmental, health or cost reasons."

Drought So Bad, California Received 1 Year Worth Of Rain Over Last 4 Years « — Brown grass, low reservoirs and worsening wildfires are undeniable signs of California’s worsening drought. New rainfall comparisons highlight just how thirsty the Golden State is, but rising ocean temperatures are giving climate experts hope for a wet winter.The National Weather Service showcased those unsettling rainfall totals in an illustration to document the change in climate since July 2011, when California’s drought began.The below graph shows San Francisco received a four year deficit of 31.51 inches of accumulated participation , or 133 percent of annual normal. Meanwhile, Livermore saw a deficit of 21.87 inches of rainfall and Santa Cruz a staggering 50.54 inches — 161 percent of the yearly average.  While California has received some rainfall from passing winter storms, particularly during the Bay Area’s “hella storm” last December, the overall number of sub-tropic “atmospheric rivers” responsible for those torrential downpours are well below average. Instead, a stronger than usual high pressure ridge over the western U.S. continues to push storms to the north, creating long-term dry conditions. But lately, climate experts are leaning into new El Nino data that shows rising Pacific Ocean surface temperatures. An anomaly in the range of 1.5 to 3.5 degrees Celsius would be considered characteristic of an El Nino. The warmer and more widespread the water in the Pacific Ocean, the stronger the El Nino. The temperature anomaly is presently 1.8 degrees Celsius, according to the National Weather Service. In July, scientists will compare the latest computer models for a better idea of what California’s winter may look like.

Republicans Introduce Bill Based On The Idea That Environmentalists Caused California’s Drought --The bill, introduced this week by Rep. David Valadao (R-CA), would direct officials to release more water through the state’s Central Valley Project, which provides irrigation and city water sources to a large portion of the state’s Central Valley. Under the bill, water flows couldn’t be limited by concerns about fish species like salmon and the Delta smelt unless there was concern over extinction of the species. By ensuring that more water moves through the project’s canals, supporters hope to make water more available to residents. The bill has the backing of California’s entire Republican House delegation, the Hill reports.  Valadao’s bill is based of an idea that’s been cited by Republicans before: that environmentalists have prevented California from building key water infrastructure, in part because of their concerns about the Delta smelt, a threatened fish species that could be nearing extinction. In 2008, in an attempt to protect the fish, the Fish and Wildlife Service moved to restrict the amount of water that’s pumped from the Sacramento-San Joaquin Delta south to water districts and farms.Valadao’s office said in a statement that water policy aimed at protecting “certain species of fish listed under the Endangered Species Act (ESA) is a significant obstacle hindering water delivery in Central and Southern California.” The bill, the statement said, “will cut red tape holding back major water storage projects that have been authorized for over a decade, which will aid the entire Western United States during dry years.” Several California Republicans agree with Valadao’s premise.  “Droughts are nature’s fault; water shortages are our fault,” California Rep. Tom McClintock, a supporter of Valadao’s bill, said in a statement. “For a generation, we have failed to build the facilities needed to store water from wet years to have it in dry ones and radical environmental laws have squandered the water we did store. Our water shortage is caused by a shortage of sensible water policy. This bill begins fixing that.”

Lake Mead sinks to record low, risking water shortage --Lake Mead sunk to a record low Tuesday night, falling below the point that would trigger a water-supply shortage if the reservoir doesn't recover soon. Water managers expect the lake's level to rebound enough to ward off a 2016 shortage thanks to a wetter-than-expected spring. But in the long run, as a U.S. Bureau of Reclamation spokeswoman said, "We still need a lot more water."  The reservoir stores water for parts of Arizona, Southern California, southern Nevada and northern Mexico — all of which have endured a 15-year drought that continues. The U.S. Bureau of Reclamation will announce a 2016 shortage in August if it projects Lake Mead won't rise above 1,075 feet by January. Assessments are updated in the middle of every month. This month's report forecasts an improved outlook.  But Tuesday's record low — registering 1,074.99 feet — signals that Colorado River water users consume more than the river provides, said water-policy manager Drew Beckwith of the Western Resource Advocates, a nonprofit environmental law and policy organization."This is the check-engine light," Beckwith said. "It really does (make critical) the fact that we have to start changing." For Las Vegas, the record reinforces the need for a nearly $1.5 billion project to tap deeper into Lake Mead. The Southern Nevada Water Authority soon will complete a 3-mile tunnel that will suck water from an 860-foot elevation level. The plan also includes a pumping station.

Lake Mead Hits Historic Low -- Lake Mead hit a record low last night by falling below 1,075 feet in elevation at 1,074.98 feet, which would trigger a water-supply shortage if the reservoir doesn’t recover by January. The threshold for mandatory cuts was set in a 2007 agreement as part of the U.S. Department of Interior’s Colorado River Interim Guidelines. These cuts would be the first set of mandatory water delivery curtailments to Lake Mead. Should the water levels continue to drop, as they are expected to, more cuts would be required. “Water managers expect the lake’s elevation level to rebound enough to ward off a 2016 shortage thanks to a wetter-than-expected spring,” says The Arizona Republic. However, Rose Davis, a Bureau of Reclamation spokeswoman, told The Arizona Republic, “We still need a lot more water.”  The U.S. had the wettest month ever recorded in May—”the wettest places were parts of Arizona, Southern California, Northern Utah, a tiny spot in Nevada and a small spot on the border of Texas and Oklahoma, where precipitation was at least 500 percent of average,” said the National Oceanic and Atmospheric Administration. Still, the recent rains were not enough to end the Southwest’s 15-year drought. The U.S. Bureau of Reclamation will announce a 2016 shortage this August if its projections show that Lake Mead will still be below 1,075 feet in January. The elevation, which is recorded hourly, climbed to 1,075.05 feet this morning. Davis says the agency is expecting several more drops below 1,075 feet in the coming weeks, but they estimate the lake level will rise by the end of the year to about 1,081 feet, according to CBS News. Still, many water policy experts are pushing for long-term solutions.

Leaking Las Vegas: Lake Mead At Record Lows, "We Have To Change" - This is it, warns one water advocate, "it really does (make critical) the fact that we have to start changing." Lake Mead water levels have sunk to their lowest levels on record (below the levels when the dam was built) at 1075 feet. This is a major problem, as USA Today reports,since Las Vegas water authority's current "straws" glean water from 1,050 feet and 1,000 feet - leaving the first straw just 25 feet away from pulling in air. With the drought only set to get worse as the summer begins, the water wars are just beginning as Lower-basin states are still taking more than the river system can sustain.As USA Today reports, Lake Mead sunk to a record low Tuesday night, falling below the point that would trigger a water-supply shortage if the reservoir doesn't recover soon. the long run, as a U.S. Bureau of Reclamation spokeswoman said, "We still need a lot more water." The reservoir stores water for parts of Arizona, Southern California, southern Nevada and northern Mexico — all of which have endured a 15-year drought that continues.

Leaking Las Vegas: Lake Mead At Record Lows, "We Have To Change" - This is it, warns one water advocate, "it really does (make critical) the fact that we have to start changing." Lake Mead water levels have sunk to their lowest levels on record (below the levels when the dam was built) at 1075 feet. This is a major problem, as USA Today reports,since Las Vegas water authority's current "straws" glean water from 1,050 feet and 1,000 feet - leaving the first straw just 25 feet away from pulling in air. With the drought only set to get worse as the summer begins, the water wars are just beginning as Lower-basin states are still taking more than the river system can sustain.As USA Today reports, Lake Mead sunk to a record low Tuesday night, falling below the point that would trigger a water-supply shortage if the reservoir doesn't recover soon. the long run, as a U.S. Bureau of Reclamation spokeswoman said, "We still need a lot more water." The reservoir stores water for parts of Arizona, Southern California, southern Nevada and northern Mexico — all of which have endured a 15-year drought that continues.

Caribbean swelters under worst drought in five years - The worst drought in five years is creeping across the Caribbean. From Puerto Rico to Cuba to St Lucia, crops are withering, reservoirs are drying up and cattle are dying while forecasters worry that the situation could only grow worse in the coming months. Thanks to El Niño, a warming of the tropical Pacific that affects global weather, forecasters expect the hurricane season that began in June to be quieter than normal, with a shorter period of rains. That means less water to help refill Puerto Rico’s thirsty Carraizo and La Plata reservoirs as well as the La Plata river in the central island community of Naranjito. A tropical disturbance that hit the US territory on Monday did not fill up those reservoirs as officials had anticipated. Puerto Rico is among the Caribbean islands worst hit by the water shortage, with more than 1.5 million people affected by the drought so far, according to the US National Drought Mitigation Center. Tens of thousands of people receive water only every third day under strict rationing recently imposed by the island government. Puerto Rico last week also activated national guard troops to help distribute water and approved a resolution to impose fines on people and businesses for improper water use. The Caribbean’s last severe drought was in 2010. The current one could grow worse if the hurricane season ending in November produces scant rainfall and the region enters the dry season with parched reservoirs, said Cedric Van Meerbeeck, a climatologist with the Caribbean Institute for Meteorology and Hydrology. “We might have serious water shortages … for irrigation of crops, firefighting, domestic consumption or consumption by the hotel sector,” he said.

Satellites Find Less Groundwater Left - Groundwater supplies around the world are scanter than previously thought and are depleting fast in many places, according to a set of two studies published yesterday online in Water Resources Research. Groundwater is the primary water source for about 2 billion people worldwide. But estimates of supplies are based on rough estimates of withdrawals and deposits, and as such, are all over the map. “It is absolutely insane that we do not know how much water we have in the world’s major aquifers, and that the range of estimates is so great that the numbers are effectively meaningless,” said study co-author Jay Famiglietti, a senior water scientist at NASA’s Jet Propulsion Laboratory and a professor at the University of California, Irvine. Famiglietti and his fellow researchers used NASA’s Gravity Recovery and Climate Experiment satellites, which orbit the Earth at a distance of 400 kilometers, to measure the gravitational pull of masses of water. The data spans from January 2003 to December 2013. By looking at total storage in groundwater basins, rather than just estimating the amount that leaves and re-enters them each year, satellite measurements can add a significant dimension to current understanding of water storage. Yesterday’s studies found that of the world’s 37 largest aquifers, 13 are being depleted, with little to no water re-entering them. The most-stressed aquifer is the Arabian Aquifer System, followed by the Indus Basin in northwestern India and Pakistan and the Murzuk-Djado Basin in northern Africa. Fourth is California’s Central Valley, where drought has been increasingly driving farmers to tap groundwater to supplant meager river flows (ClimateWire, Dec. 17, 2014).

The world is quickly running out of water, new NASA study says - The world is losing groundwater, fast. That is the conclusion of a new study published by researchers at NASA, which drew on satellite data to quantify the stresses on aquifers. The researchers found that over the decade-long study of the 37 major aquifers worldwide, 21 experienced a depletion of their water supply. Especially alarming was the study’s finding that the Indus Basin aquifer, which supplies much of India’s water supply, has depleted rapidly. “The potential consequences are pretty scary,” NASA scientist Matthew Roddell, a lead author of the study, tells Quartz. “At some point those aquifers might run dry.” To measure the water level changes, the researchers studied the gravitational orbit of NASA’s Gravity Recovery and Climate Experiment (GRACE) satellite caused by the shifting of earth’s mass. Because water is one of the larger and constantly shifting masses on earth, this allowed them to measure changes to groundwater supplies.  The researchers found that California’s Central Valley aquifer was the most depleted of all aquifers in the US, because Californians have relied more heavily on drawing groundwater as rain water has dissipated during California’s long drought. Preserving water in aquifers is especially problematic in agricultural areas like India, which relies heavily on water-intensive rice farming. According to Rodell, over 68% of our water supply is used for agriculture. But unlike, say, water used to cool a power plant, water used in agriculture is not recyclable, Rodell explains. “The people who are using the water don’t necessarily recognize that it will ever run out. It is used as a resource that will last forever,” Rodell says. If we continue with our current consumption practices, hesays,”these people and those farmers that rely on that water won’t have it anymore.”

The water story - The crisis - Water: Many women and children in rural areas of the developing world spend hours each day walking miles to collect water from dirty or unsafe pools and rivers. In urban areas they collect it from polluted waterways or pay high prices to buy it from vendors. Carrying heavy water containers is an exhausting task, which takes up valuable time and energy. It often prevents women from doing vital domestic or income-generating work and stops children from going to school. The tragedy is that the water they have worked so hard to collect is often unsafe and contaminated with deadly diarrheal diseases such as cholera, typhoid and dysentery. Every day 1,400 children in the developing world die from preventable water-related diseases, that's one child every minute. People suffering from these diseases or caring for children who are ill from them are often unable to work to earn money, yet face large medical bills. They remain trapped in poverty. Lack of water, sanitation and hygiene costs Sub-Saharan African countries more in lost GDP than the entire continent gets in development aid.Unsafe water and poor sanitation cause diarrheal diseases, which kill over 500,000 people every year and lead to malnutrition; parasitic infections such as bilharzia and hookworm; and water-washed diseases including the eye infection trachoma and skin infections such as scabies. Many children are frequently absent from school because they are collecting water or are sick with water-related diseases. Parasitic infections transmitted through unsafe water can hamper children’s learning potential. It is also difficult to recruit good teachers to work in schools where there is no clean water.

Alaska’s climate hell: Record heat, wildfires and melting glaciers signal a scary new normal -  Here’s the immediate problem: Alaska is on fire. Wildfires have been raging all week in the northernmost state: two major ones are currently being fought near the communities of Sterling (#CardStreetFire) and Willow (#Sockeyefire), while more than fifty smaller blazes are demanding firefighting crews’ attention across the state. The Card Street fire exploded in size Thursday evening: at 12,000 acres, it’s officially the nation’s top wildfire priority. .@MatSuBorough says of about 50-100 structures destroyed in #SockeyeFire, 26 were homes  The sheer number of fires, said Pete Buist, a spokesman for the state Division of Forestry, “in Alaska terms is not the end of the world” — 2004, which saw a record 6.7 million acres burn, demonstrated just how catastrophe the state’s wildfire season has the potential to get. But crews have been preparing for a season marked by unusually hot, dry weather — and following a winter marked by below-average snowfall — that can exacerbate the blazes. Any associations you might have with Alaska being a generally chilly place, actually, were belied by last month’s heat wave: with average temperatures 7.1 degrees above normal, the state had its hottest May in 91 years of record-keeping. Here, via NASA’s Earth Observatory, is what that deviation looked like:

We Cooked the Planet – Now the Planet Strikes Back! --In the wake of major hurricanes, floods and heat waves, scientists are quick to say that no single weather event can be attributed to climate change until careful analysis draws that conclusion. Now, a new study argues that thinking is backwards, that all extreme weather has a link to climate change.The default position has been holding science back in connecting weather and climate, concludes the authors of a peer-reviewed paper published Monday in Nature Climate Change.  This “could be a game changer in how these studies are done in [the] future,” lead author Kevin Trenberth said in an email.Trenberth is a senior scientist at the National Center for Atmospheric Research (NCAR), and one of three researchers behind the study.The paper presents a new research technique that grew out of an idea Trenberth first proposed at a conference in 2010. It also provides scientists examples of how to apply the method, and challenges the conclusions of a 2014 paper that found no climate influence in the massive floods that swept Boulder, Colo., in 2013.Trenberth said his approach is new, and conventional research methods still dominate the field.Traditionally, researchers begin with a default assumption that the extreme weather event they’re examining is not influenced by human-caused climate change. They then run computer models or other tests to see if global warming has increased the intensity or likelihood of that event.  But Trenberth’s team says this method can lead to “false negatives” that underestimates the role of climate change. It’s particularly problematic when scientists are studying extreme weather driven by atmospheric circulation—factors such as weather patterns and storm patterns—when it’s difficult to separate the influence of climate change from natural variability.

Pakistan heatwave: Emergency measures as toll nears 700 - BBC News: Pakistan's PM Nawaz Sharif has called for emergency measures as the death toll from a heatwave in southern Sindh province reached nearly 700. The army is now being deployed to help set up heat stroke centres, with temperatures reaching 45C (113F). Officials have been criticised for not doing enough to tackle the crisis. There is anger among local residents at the authorities because power cuts have restricted the use of air-conditioning units and fans, correspondents say. Matters have been made worse by the widespread abstention from water during daylight hours during the fasting month of Ramadan. On Tuesday, the National Disaster Management Authority (NDMA) said it had received orders from Mr Sharif to take immediate action to tackle the crisis. This came as Sindh province Health Secretary Saeed Mangnejo said 612 people had died in the main government-run hospitals in the city of Karachi during the past four days. Another 80 are reported to have died in private hospitals. Thousands of people are being treated in the Sindh province, and some of them are in serious condition Many of the victims are elderly people from low-income families. Thousands more people are being treated, and some of them are in serious condition. Hot weather is not unusual during summer months in Pakistan, but prolonged power cuts seem to have made matters worse.

Extreme Heat, Fueled By Climate Change, Leaves More Than 800 Dead In Pakistan -- More than 800 have died from heat stroke and thousands more have been hospitalized as a heat wave scorches much of Pakistan with temperatures as high as 113 degrees. While officials have rolled out emergency response efforts, poor infrastructure and the unpredictable patterns of extreme weather have made the crisis particularly devastating. India is fraught with such infrastructure issues as well, and it too saw similar patterns of extreme weather — and extreme loss of life — in recent months. Nearly 1,700 died in a heat wave that swept the India in May. The majority of those who have lost their lives due to heatstroke in Pakistan have been elderly or low-income residents of Karachi, Pakistan’s most populous city. The impact of the heat wave may be compounded by the fact that many in the Muslim-majority country are abstaining from food and water for Ramadan.  In recent years, Pakistan’s longstanding energy crisis has meant that people across the country face rolling power outages that can last 10 hours in urban areas, and up to 20 in rural ones.The power outages mean that people are unable to run air-conditioners or even electric fans — and that they have little access to water, which is largely moved through pipes by electric pumps. In Karachi, electricity shortages kept the water supply system from pumping millions of gallons of water, according to the state-run water utility service.“[T]he blame is squarely on the shoulders of the government for its lackluster performance in providing water and electricity,” according to an editorial in the Pakistani daily, The Nation.

Death Toll Soars in Climate Change-Related Pakistan Heat Wave --A deadly heat wave spreading through southern Pakistan has killed nearly 800 people in just a few days—a number that threatens to rise as temperatures remain unusually high this week.  At least 740 people have died of dehydration, heat stroke and other heat-related illnesses in Karachi, the country’s largest city, since Saturday, with various sources estimating the death toll to have hit anywhere from 744 to 775. Local media reports that an additional 38 people have died in other provinces. As temperatures hit 45°C (113°F) yesterday, Pakistan’s Prime Minister Nawaz Sharif declared a state of emergency for hospitals, many of which have hit full capacity, with thousands needing care for heat stroke and dehydration. Al Jazeera writes: “The mortuary is overflowing, they are piling bodies one on top of the other,” said Dr Seemin Jamali, a senior official at the Jinnah Postgraduate Medical Centre (JPMC), the city’s largest government hospital. “We are doing everything that is humanly possible here,” she said, adding that since Saturday, the JPMC had seen more than 5,000 patients with heat-related symptoms. Of those, 384 patients had died, she said.“Until [Tuesday] night, it was unbelievable. We were getting patients coming into the emergency ward every minute,” she said.  Among those who have died, most have been either elderly or poor, officials say. A former director of the Pakistan Environmental Protection Agency, Asif Shuja, said earlier this week that the soaring temperatures are an impact of climate change, fueled by rapid urbanization, deforestation and car use. But as the Daily Pakistan points out, only 15 percent of Pakistani citizens believe climate change is a major threat, while 40 percent are unaware or deny its existence. That makes Pakistan the “least aware” country in the South Asian region of the threats of climate change.

6 Devastating Heat Waves Hitting the Planet  - Need proof that we’re having the hottest year on record? Scorching heat is searing parts of the world, sparking wildfires and claiming lives due to heat stroke and dehydration.

  • 1. India. The relentless heat since mid-April has claimed about 2,330 lives, overwhelming hospitals and devastating the country. As we previously reported, officials have blamed the heat on global warming.
  • 2. Pakistan. India’s neighboring country is also suffering from the horrible heat, with the city of Karachi experiencing temperatures of 113 degrees Fahrenheit (45 degrees Celsius). According to BBC News, the weather has led to the deaths of nearly 700 people, mostly poor and elderly.
  • 3. The U.S. Southeast. Over on our shores, temperatures in the American South are about 5-15 degrees higher than usual with temperatures ranging between 100 and 115 degrees Fahrenheit, AccuWeather noted. Southerners, especially in southern Georgia and Florida, are also sweltering in the extreme humidity (in the upper 60s and 70s), making it feel even hotter, reported.
  • 4. Alaska. Not only are glaciers rapidly melting, the northernmost U.S. state experienced record heat at the end of May where parts of Alaska recorded temperatures higher than in Arizona. Unseasonably high temperatures, unpredictable winds and low humidity have been the perfect storm for wildfires to break out in the state, and as of last Sunday, more than 100 new fires have ignited across the state.
  • 5. Israel. Temperatures recently reached 113 degrees Fahrenheit (45 degrees Celsius) in some parts of the country, causing fires to break out. In the photo below, animals kept in Israeli zoos are being fed frozen treats to help cool off.
  • 6. Japan. The East Asian country has been shattering their temperature records. According to the Weather Channel, in the city of Otsu in Hokkaido, its April high of 89.4 degrees Fahrenheit (31.9 degrees Celsius) smashed the usual high of 50.9 degrees Fahrenheit (10.5 degrees Celsius). And just this month, roughly 780 people across the country were admitted into hospitals due to a heat wave, Sputnik reported.

2015 is likely to beat 2014 as the warmest year on record - The Earth just had its warmest May on record, hottest spring and mildest year-to-date, according to new data released Thursday. The climate statistics indicate the year is on course to set another milestone for the warmest year on record, surpassing the previous warmest year, set in 2014. The data, released by the National Oceanic and Atmospheric Administration (NOAA), also bolsters the clarion call for climate action released by Pope Francis, since they are a sign of longterm warming caused by human activities, scientists said.  According to NOAA, May was not only the warmest such month on record, globally, coming at 1.57 degrees Fahrenheit above the 20th century average, but it also blew away the old record by 0.14 degrees Fahrenheit. The old record was set just last year, indicating that 2015 is running hotter than 2014. (Typically, these records are exceeded by smaller margins of 0.1 or 0.2 degrees Fahrenheit.) In fact, May had the fourth-largest temperature departure from average of any month on record, NOAA said.  The spring months of March through May also set a record for the warmest such period on record since 1880, surpassing the previous warmest spring, set in 2010.  The year so far is running a temperature departure from average of 1.53 degrees Fahrenheit above the 20th century average, which is the highest for the January through May period on record, beating 2010 by 0.16 degrees Fahrenheit.

El Nino Gains Strength as Pacific Warms Just Like It's 1997 - The El Nino developing across the Pacific strengthened further, according to Australia’s Bureau of Meteorology, which again highlighted patterns shown by the data that are similar to the record 1997-1998 event. Sea-surface temperature indexes for the central and eastern tropical Pacific are more than 1 degree Celsius above average for a sixth week, the bureau said. Models showed the central Pacific will warm further over the coming months, it said. El Ninos have the potential to affect weather and harvests around the globe by baking parts of Asia, dumping rain across South America and bringing cooler summers to North America. The event poses a risk for the global economy in the second half as it can hurt crops and boost inflation, according to Citigroup Inc. The 1997-98 El Nino was the strongest on record, according to the National Oceanic and Atmospheric Administration. “It is unusual to have such a broad extent of warmth across the tropical Pacific,” the Melbourne-based bureau said in its fortnightly update on Tuesday. “The last time this occurred was during the 1997–98 El Nino.” The Australian bureau’s update contained twin warnings that it isn’t possible at this stage to determine how intense this event will be, and also that an El Nino’s strength doesn’t always correspond to its impact. In May, forecasters at the center said they expected the current event to be substantial. The majority of models suggest the Pacific will continue to warm in the coming months, possibly reaching strong El Nino levels, the United Nations’ World Meteorological Organization said on June 15. Outlooks at this time aren’t as accurate as ones in the second half, and more-confident estimates of the event’s strength will be available after mid-year, it said.

El Nino Threatens Modi Inflation Hopes as Monsoon Stymied -  The El Nino strengthening across the Pacific Ocean is threatening to curb India’s monsoon rainfall and hamper Prime Minister Narendra Modi’s chances of capping food costs. The Indian Institute of Tropical Meteorology predicts a “large-scale reduction” during the first half of July after a wetter-than-normal June that caused Mumbai’s worst floods in 10 years. The El Nino that forecasters are likening to a record event almost two decades ago may disrupt sowing and stunt growth of rice, cotton and soybeans. Modi is banking on a normal monsoon to help curb inflation and buoy sales of everything from smart phones to gold among the 833 million people who depend on farming in India. While the early downpours prompted the longest advance in Indian shares since January this week, the prospect of insufficient rain renews concern that damaged crops will boost food prices. “If the prediction of weak rains prove correct, there’s going to be an adverse impact on the economy as a whole, more so on agriculture,” Shashanka Bhide, director of the Madras Institute of Development Studies, said by phone from Chennai on Thursday. “The government’s worry last year was to keep inflation down. This year also the main worry would be the impact on prices.” The Reserve Bank of India said it’s closely watching the rains after identifying a monsoon shortfall as the biggest risk to the economy that depends on agriculture for about 15 percent of gross domestic product. Consumer prices in India, where food costs represent almost half of the retail inflation index, jumped more than 5 percent in May, official data showed June 12.

World Cities, Home to Most People, to Add 2.5 Billion More by 2050 -  (Reuters) - More than half of the world's seven billion people live in urban areas, with the top "mega cities" - with more than 10 million inhabitants - being Tokyo, Delhi, Shanghai, Mexico City and Sao Paulo, according to a United Nations report on Thursday. That proportion is expected to jump, so that more than six billion people will be city dwellers by 2045, the U.N.'s World Urbanization Prospects report said. The jump will be driven by a "preference of people to move from rural to urban areas, and the overall positive growth rate of the world's population, which is projected to continue over the next 35 years," John Wilmoth, director of the Population Division in the UN's Department of Economic and Social Affairs said at a news conference Thursday at the UN. Indeed, urbanization, combined with overall population growth, will boost the number of people in cities by 2.5 billion over the next three decades, with much of that growth in developing countries, especially in Asia and Africa. India, China and Nigeria will make up 37 percent of the projected growth in the next three decades, with India adding 404 million city residents, China 292 million, and Nigeria 212 million, by 2050. The key challenge for these countries will be to provide basic services like education, health care, housing, infrastructure, transportation, energy and employment for their growing urban populations.

Humans creating sixth great extinction of animal species, say scientists -- The modern world is experiencing a “sixth great extinction” of animal species even when the lowest estimates of extinction rates are considered, scientists have warned.  The rate of extinction for species in the 20th century was up to 100 times higher than it would have been without man’s impact, they said.  Many conservationists have been warning for years that a mass extinction event akin to the one that wiped out the dinosaurs is occurring as humans degrade and destroy habitats.   But the authors of a study published on Friday said that even when they analysed the most conservative extinction rates, the rate at which vertebrates were being lost forever was far higher than in the last five mass extinctions. “We were very surprised to see how bad it is,”. “This is very depressing because we used the most conservative rates, and even then they are much higher than the normal extinction rate, really indicating we are having a massive loss of the species.”  Previous studies have warned that the impact of humans taking land for buildings, farming and timber has been to make species extinct at speeds unprecedented in Earth’s 4.5bn-year history. Ceballos said that his study, co-authored by Paul R Ehrlich who famously warned of the impact of humanity’s “population bomb”, employed better knowledge of natural or so-called background extinction rates. He said it was conservative because it looked only at species that had been declared extinct, which due to stringent rules can sometimes take many years after a species has actually gone extinct. Under a “natural” rate of extinction, the study said that two species go extinct per 10,000 species per 100 years, rather than the one species that previous work has assumed. Modern rates of extinction were eight to 100 times higher , the authors found. For example, 477 vertebrates have gone extinct since 1900, rather than the nine that would be expected at natural rates.

Sixth mass extinction is here: US study - (AFP) - The world is embarking on its sixth mass extinction with animals disappearing about 100 times faster than they used to, scientists warned Friday, and humans could be among the first victims. Not since the age of the dinosaurs ended 66 million years ago has the planet been losing species at this rapid a rate, said a study led by experts at Stanford University, Princeton University and the University of California, Berkeley. The study "shows without any significant doubt that we are now entering the sixth great mass extinction event," said co-author Paul Ehrlich, a Stanford University professor of biology. And humans are likely to be among the species lost, said the study -- which its authors described as "conservative" -- published in the journal Science Advances. "If it is allowed to continue, life would take many millions of years to recover and our species itself would likely disappear early on," said lead author Gerardo Ceballos of the Universidad Autonoma de Mexico. The analysis is based on documented extinctions of vertebrates, or animals with internal skeletons such as frogs, reptiles and tigers, from fossil records and other historical data.  If the past rate was two mammal extinctions per 10,000 species per 100 years, then the "average rate of vertebrate species loss over the last century is up to 114 times higher than it would be without human activity, even when relying on the most conservative estimates of species extinction," said the study.

Study: The World Is In The Midst Of A Mass Extinction, And Humans Are To Blame --There have been five documented mass extinctions in the Earth’s history, including when the dinosaurs were suddenly wiped out 65 million years ago. Those extinctions are thought to have been caused by natural disasters, such as massive, earth-darkening volcanic eruptions or cataclysmic asteroid strikes. But a study published Friday concluded that a sixth, human-caused mass extinction is happening now.  We are the problem, according to Gerardo Ceballos, one of the study’s authors and a professor at the Institute of Ecology at the National Autonomous University of Mexico.  “We know that we have been destroying habitat; deforestation is huge,” Ceballos told ThinkProgress. “Thousands of animals are being killed every year for trade, and also by pollution. All these factors, these human factors, are major, and now we have climate change.” The results were incredibly, incredibly shocking  Climate change puts animals at risk in two ways, Ceballos said. One is increased extreme weather, such as a hurricane that hits Puerto Rico and damages the endangered Puerto Rican parrot population. The other is rising temperatures that delicate amphibians can’t adapt to. Both are contributing to the continued loss of biodiversity.  Based on the researchers’ data, published Friday in Advanced Sciences, over the course of the Earth’s existence, it would have taken up to 10,000 years for some of the species that have gone extinct in the last century to disappear. The analysis is based on a “very conservative” estimate that looks only at vertebrate species and uses a high threshold of documentation for extinction, the study said. “The results were incredibly, incredibly shocking,” Ceballos said. “To be honest… because we were using such conservative measures, I thought that we wouldn’t be able to find that we were going into a mass extinction.”

A Nasty Surprise in the Greenhouse -- Peter Sinclair The disaster movie “The Day After Tomorrow” was based on long-term scientific concerns about global warming’s impact on the North Atlantic Current – what most people think of as “The Gulf Stream” – although that is a simplification. The movie was obviously over the top in terms of the projected impacts, but after a decade in which science has downplayed the possibility of such an event, a new paper shows that the circulation is indeed slowing down. This could signal potential impacts on weather, the food chain, and circulation of oxygen and nutrients throughout the ocean. I’ve been interviewing key authors of the paper: lead author Stefan Rahmstorf, as well as paleoclimate expert Mike Mann, and glaciologist Jason Box. This is a paper that could have substantial impact, and might very well be distorted or sensationalized,  – so bookmark this post as a damper for overhyped speculation, as well as a warning about real impacts. Lead Author Stefan Rahmstorf in RealClimate: The North Atlantic between Newfoundland and Ireland is practically the only region of the world that has defied global warming and even cooled. Last winter there even was the coldest on record – while globally it was the hottest on record. Our recent study (Rahmstorf et al., 2015) attributes this to a weakening of the Gulf Stream System, which is apparently unique in the last thousand years. So what’s so special about this region between Newfoundland and Ireland? It happens to be just that area for which climate models predict a cooling when the Gulf Stream System weakens (experts speak of the Atlantic meridional overturning circulation or AMOC, as part of the global thermohaline circulation). That this might happen as a result of global warming is discussed in the scientific community since the 1980s – since Wally Broecker’s classical Nature article “Unpleasant surprises in the greenhouse?” Meanwhile evidence is mounting that the long-feared circulation decline is already well underway.

Pope’s Encyclical Makes Grade in Climate Science -- When it comes to the science of climate change, Pope Francis’ environmentally focused encyclical makes the grade, experts said Thursday. Francis makes clear in the document that humanity bears most of the blame for the warming of the planet and he lays out the main findings of climate science -- that greenhouse gases are causing global temperatures to rise, that sea levels are also rising, that extreme weather events are becoming worse, and that polar ice is melting, further imperiling the planet.  Though discussing the science is not the main purpose of the Pope’s message, which centers more on the moral reasoning for taking care of the environment, “he gets the science right,” climate scientist Michael Mann, of Penn State, said in an email. The Pope’s message is coming at a time when records for the warmest years are being set as global average temperatures have risen 1.6°F since beginning of 20th century. That temperature rise is fueled by the ever-increasing amounts of greenhouse gases in the atmosphere put there by human activities. Carbon dioxide has hit levels not seen in modern human history, and seas have risen by 8 inches over the past century. Heat waves like the deadly one that struck India recently are expected to occur more often in a warmer world, as are torrential downpours that can cause flash floods.

The most radical part of Pope Francis’s message isn’t about climate change -- With such a hot-button issue in the mix, it’s no wonder that climate change has been the main focus of the discussion around the encyclical. But it’s by no means the only environmental issue the final document is expected to address — nor is it necessarily the most important. “If you look at a lot of the extractive industries that are fueling climate change, we’ve kind of been hit twice by our errors,” says Kelly Mitchell, energy campaign director for Greenpeace. The same industries that contribute so substantially to climate-altering greenhouse gas output, such as mining and coal-burning, often have the added effect of contributing to the degradation of natural habitats, the endangerment of wild species and the quality of our air and water, she says.  In a second double whammy, these same environmental concerns are likely to be exacerbated in a major way by climate change itself. Scientists generally agree that global warming poses broad threats to the environment, having been linked to an increase in severe weather events, droughts, fires, disease, extinctions and crop failures, to name a few. In these ways, all of the environmental issues likely to be discussed in the papal encyclical are inextricably tied to one another. Dan Misleh, founding director of the Catholic Climate Covenant, argues that the encyclical’s historic nature has less to do with its climate stance — although certainly that’s making enough waves on its own — and more to do with the fact that “it’s the first time that an encyclical has ever been written just on the environment.” “The Vatican has already announced that this encyclical is intended for the entire world, not just the Catholic community,” and its far-reaching impact could be owed to another aspect of the document, which ties together all of the environmental concerns it will address: its focus on environmental justice. It also includes major sections dedicated to diminishing quality of human life, social degradation and planetary inequalities.

Eight things we learned from the pope's climate change encyclical - Pope Francis has released an unprecedented encyclical on climate change and the environment. The 180-page document calls on rich nations to pay their “grave social debt” to poorer countries and lambasts the UN climate talks for a lack of progress. Here are eight things we learned:

  1. He thinks we should phase out coal
  2. He thinks the UN climate talks have failed to achieve much
  3. He doesn’t like carbon trading
  4. But he does like community energy
  5. He is neither pro nor anti genetically modified food
  6. He thinks consumption is a bigger problem than population
  7. He says iPhones and all our other gadgets are getting in the way of our relationship with nature
  8. Our gift to the next generation may be desolation:

Pope Francis’ Call to Action Goes Beyond the Environment -- IN Pope Francis’ sprawling new encyclical, “Laudato Si’,” there are many mansions.  What everyone wants to know, of course, is whether the pope takes sides in our most polarizing debate. And he clearly does. After this document, there’s no doubting where Francis stands in the great argument of our time. But I don’t mean the argument between liberalism and conservatism. I mean the argument between dynamists and catastrophists. Dynamists are people who see 21st-century modernity as a basically successful civilization advancing toward a future that’s better than the past. They do not deny that problems exist, but they believe we can innovate our way through them while staying on an ever-richer, ever-more-liberated course. Dynamists of the left tend to put their faith in technocratic government; dynamists of the right, in the genius of free markets. But both assume that modernity is a success story whose best days are ahead. Catastrophists, on the other hand, see a global civilization that for all its achievements is becoming more atomized and balkanized, more morally bankrupt, more environmentally despoiled. What’s more, they believe that things cannot go on as they are: That the trajectory we’re on will end in crisis, disaster, dégringolade.  Like dynamists, catastrophists can be on the left or right, stressing different agents of our imminent demise. But they’re united in believing that current arrangements are foredoomed, and that only a true revolution can save us. This is Pope Francis’ position, and the controlling theme of his encyclical. It includes, as many liberals hoped and certain conservatives feared, a call to action against climate change, which will no doubt cause Republicans to squirm during political campaigns to come.

Few Echo Pope’s Environment Plea in Sunday Sermons -- On the first Sunday after Pope Francis issued a landmark document on the environment, Roman Catholics attending Mass in Kenya, France, Mexico, Peru and the United States said they were thankful that he was using his pulpit to address climate change, pollution and global inequality. But few priests or bishops — other than in parts of Latin America — used their own pulpits on Sunday to pass on the pope’s message, according to parish visits, interviews with Catholic leaders and reports from Catholics after Mass. Despite the urgent call to action in Francis’ document and the international attention it received, it will take some time to know whether Catholic clergy are familiar or comfortable enough with its themes to preach them to the faithful.  It traditionally takes months for papal teaching documents, known as encyclicals, to be read, understood and disseminated. And this one, “Laudato Si’,” or “Praise Be to You: On Care for Our Common Home,” is long, nearly 200 pages, and intricately weaves spiritual and moral teachings with economic, scientific and political analysis. It includes a forceful denunciation of a global economic system that the pope says plunders the resources of the poor for the benefit of the rich, leaving the poor to disproportionately suffer the consequences, including the effects of climate change.

Why Pope Francis’s climate message is so hard for some Americans to swallow -  With the official release of Pope Francis’s encyclical on the environment, it’s clear that several strains of thought prominent in the U.S. will be particularly challenged by the document. That includes U.S. individualists who tend to support limited government and fewer environmental restrictions — Rush Limbaugh has already accused Francis of Marxism — and also those who perceive a strong conflict between science and religion. The Pope’s entire case for caring for “our common home,” as he puts it, is moral. And the precise moral worldview being articulated — what might be called communitarianism, the idea that we’re all in it together, that “it takes a village” — deeply challenges an individualistic value system that research suggests is quite prevalent in the U.S. In several places in the text, indeed, the pope explicitly critiques “individualism” by name. “In the particular case of the United States of America, which does have a strong individualistic trend, we will be challenged by the Pope,” says Bill Patenaude, a Rhode Island based Catholic commentator who writes the blog Catholic Ecology. At the same time, the document also represents a mega-merger of religious faith and a vastness of carefully researched scientific information — challenging the conflict-focused way that so many Americans have been conditioned to think about the relationship between science and religion. In essence, then, the Pope rolls science and faith into a comprehensive statement about our global, common responsibility to address the planet’s vulnerability. Let’s take them in turn:

A Harvard Don is Enraged that Pope Francis is “Opposed to the World Economic Order”-  William K. Black --A New York Times article entitled “Championing Environment, Francis Takes Aim at Global Capitalism” quotes a conventional Harvard economist, Robert N. Stavins. Stavins is enraged by Pope Francis’ position on the environment because the Pope is “opposed to the world economic order.” The rage, unintentionally, reveals why conventional economics is the most dangerous ideology pretending to be a “science.” Stavins’ attacks on the Pope quickly became personal and dismissive. This is odd, for Pope Francis’ positions on the environment are the same as Stavins’ most important positions. Stavins’ natural response to the Pope’s views on the environment – had Stavin not been an economist – would have been along the lines of “Pope Francis is right, and we urgently need to make his vision a reality.” Stavins’ fundamental position is that there is an urgent need for a “radical restructuring” of the markets to prevent them from causing a global catastrophe. That is Pope Francis’ fundamental position. But Stavins ends up mocking and trying to discredit the Pope. I was struck by the similarity of Stavins response to Pope Francis to the rich man’s response to Jesus. Pope Francis’ positions on the environment and climate are the greatest boon that Stavin has received in decades. The Pope, like Stavins, tells us that climate change is a disaster that requires urgent governmental action to fix. Stavins could receive no more joyous news. Instead of being joyous, however, Stavins is sorrowful. Indeed, unlike the wealthy man who simply leaves after hearing the Rabbi’s views, Stavins rages at and heaps scorn on the prelate, Pope Francis. Pope Francis says, as did Jesus, that this means that we must not worship “free markets,” that we must think first of the poor, and that justice and fairness should be our guides to proper conduct. Stavins, like the wealthy young man, is forced to make a choice. He chooses “great possessions.” Unlike the wealthy young man, however, Stavins is enraged rather than “sorrowful” and Stavins lashes out at the religious leader. He is appalled that an Argentine was made Pope, for Pope Francis holds views “that are opposed to the world economic order [and] fearful of free markets.”

God Admits He Too Close To Creation To Judge Whether It Any Good Or Not - Saying that His opinion of the heavens and the earth seems to change every time He looks at them, The Lord Our God, Supreme Ruler of the Universe, admitted Monday that He is simply too close to His divine creation to judge whether it’s any good or not. “I worked on this thing for over 13 billion years, so sometimes I wonder whether I really have enough critical distance,” said God Almighty, adding that, having poured His heart and soul into the universe for so many eons, His attachment to it may be blinding Him to some of its flaws. “I’m still on the fence about certain creative choices I made, but there are also times when I feel like I’m probably being too critical about small corners I cut when making the cosmos—things that only I would ever notice. What I could really use is an outsider’s perspective.” At press time, the Lord had decided to step away from His work for a few millennia and hopefully come back to it with a fresh set of eyes.

E.P.A. Warns of High Cost of Climate Change -   the absence of global action to curb greenhouse gas emissions, the United States by the end of the century may face up to $180 billion in economic losses because of drought and water shortages, according to a report released Monday by the White House and Environmental Protection Agency. White House officials said the report, which analyzes the economic costs of a changing climate across 20 sectors of the American economy, is the most comprehensive effort to date to quantify the impacts of global warming. The report comes as President Obama is trying to build political support both at home and abroad for an ambitious climate change agenda. During the president’s six and a half years in office, the E.P.A. has released a series of regulations and legal decisions aimed at reining in planet-warming greenhouse gases from cars, trucks, power plants and airplanes. Mr. Obama hopes to use those regulations as leverage to broker a United Nations accord in Paris this December that would commit all nations to enacting similar emissions cuts.“That’s what we’re going to use to push other countries to join in global climate action,” The report used existing scientific and economic studies on the projected impacts of unchecked global climate change emissions. It compared those with a future in which global emissions are reduced enough to prevent a rise in average atmospheric temperatures of 2 degrees Celsius, or 3.6 degrees Fahrenheit, the point at which, scientists say, the planet will be locked into an irreversible future of rising sea levels, stronger storms, extreme drought, food shortages and other damages. The results were peer reviewed in scientific literature, and the summary report was independently reviewed by seven external experts.The report found that global policy to curb climate change could prevent 12,000 deaths from extreme heat and cold, or what it estimated as $200 billion in savings to the American economy by 2100. It also said climate policy could prevent 720 to 2,200 bridges from becoming structurally vulnerable for an estimated savings by the end of the century of $1.1 billion to $1.6 billion.

EPA report touts big benefit to US from global climate policies - The Obama administration unveiled a new weapon Monday in its fight against climate change, with a report showing billions of dollars in domestic benefits from aggressive international climate policies. The report from the Environmental Protection Agency (EPA) cuts across many areas of concern and sectors of the economy, including public health, electricity, water resources and agriculture. It’s meant to show Americans and world leaders alike what could happen by the end of the century if climate change goes unabated and what it would look like to cut greenhouse gas emissions significantly. It comes at an important time for President Obama’s climate agenda, as House Republicans vote this week on a pair of bills to significantly weaken or outright repeal the administration’s limits on power plants’ carbon dioxide emissions, the main and most controversial pillar of Obama’s second-term climate push....The analysis specifically looks at the benefits in the United States by the year 2100 if world leaders successfully limit global warming to 2 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels.  It finds billions of dollars in avoided problems and costs in each of six areas: health, infrastructure, electricity, water resources, agriculture and forestry and ecosystems. It does not account for the costs of the carbon controls, since it does not analyze specific policies. But officials said the costs would pale in comparison to the benefits.

House Votes To Weaken And Delay The EPA’s Climate Rule  -- The House of Representatives passed a bill Wednesday that would delay and weaken the federal government’s proposed regulations on power plant emissions. The bill, called the Ratepayer Protection Act and sponsored by Rep. Ed Whitfield (R-KY), would allow governors to refuse to comply with the Environmental Protection Agency’s Clean Power Plan, which aims to curb greenhouse gas emissions from existing power plants. Governors who claim that the regulations would have a “significant adverse effect” on electric bills or grid reliability in their states could opt out of making plans to cut power plant emissions.  “This is a worldwide problem and there’s no reason for the president of the United States to unilaterally punish America for what we’ve already accomplished,” Whitfield said of the carbon rule. “It’s such a power grab, unprecedented, that we are going to take it up on the floor today to delay this radical regulation.”  The bill, which passed 247-180, would also delay the implementation of the Clean Power Plan until all the court challenges surrounding the proposed regulation are resolved. Two of those lawsuits — one from a group of energy companies led by coal company Murray Energy Corp., and the other from a group of 15 states led by coal-heavy West Virginia — were dismissed earlier this year, when a judge ruled that because the rule isn’t yet finalized, it’s too early to be considering legal challenges. But once the rule is finalized, more lawsuits will likely be filed.

Indiana will defy Obama on climate change plan: — Indiana will not comply with President Barack Obama's plan to battle climate change by requiring reductions in emissions from coal-fired power plants, Republican Gov. Mike Pence said Wednesday. The proposal as currently written, known as the Clean Power Plan, will make Indiana electricity more expensive and less reliable and hurt economic growth in Indiana and across the nation, Pence wrote in a letter to Obama. The plan targets pollution from the coal-fired power plants that Indiana relies on. Pence said the Indiana coal industry employs more than 26,000 people. "If your administration proceeds to finalize the Clean Power Plan, and the final rule has not demonstrably and significantly improved from the proposed rule, Indiana will not comply. Our state will also reserve the right to use any legal means available to block the rule from being implemented," Pence wrote. Indiana is not the only state to defy the president on the issue. Oklahoma's Republican Gov. Mary Fallin issued an executive order in April prohibiting her state from developing a plan to reduce its carbon dioxide emission from power plants.

Combating Climate Change With Science, Rather Than Hope -  Is the American approach to combating climate change going off the rails?  Last year, President Obama set a goal of reducing carbon emissions by as much as 28 percent from 2005 levels by 2025, only 10 years from now. Now, environmental experts are suggesting that some parts of the strategy are, at best, a waste of money and time. At worst, they are setting the United States in the wrong direction entirely.  That is the view of some of the world’s top environmental organizations, including Greenpeace, Friends of the Earth and the Sierra Club. On Tuesday, they argued in a letter to the White House that allowing the burning of biomass to help reduce consumption of fossil fuels in the nation’s power plants, as proposed by the Environmental Protection Agency, would violate the Clean Air Act.  It’s also the view of economists from the University of Chicago and the University of California, Berkeley, who on Tuesday released the disappointing results of a field test of the federal Weatherization Assistance Program, the government’s largest effort to improve residential energy efficiency.  It turns out that burning biomass — wood, mainly — for power produces 50 percent more CO2 than burning coal. And even if new forest growth were to eventually suck all of it out of the atmosphere, it would take decades — perhaps more than a century — to make up the difference and break even with coal.   The energy efficiency push has a different problem: It is much too expensive. The weatherization improvements cost more than twice as much as households’ energy savings. Even after including the broad social benefits from less pollution, it was still a bad deal. Indeed, the program spent $329 per ton of CO2 it kept out of the air, some eight times as much as the administration’s estimate of the social cost of damages caused by carbon.

Warning: Climate Change Is Hazardous to Your Health - As 100-degree temperatures broke Washington, DC records on Tuesday, I was pleased to be at the White House Public Health and Climate Summit listening to Surgeon General Murthy tell the American people that climate disruption poses an extremely dangerous risk to Americans’ health. If this sounds familiar, it should. Fifty years ago Americans received a similar warning from then Surgeon General Terry, on the terrible health risks of smoking tobacco. With Surgeon General Terry’s warning, our country was made bluntly aware of the dangers of cigarettes and Tuesday, Surgeon General Murthy was just as direct about the severe health consequences of climate disruption. Climate disruption is fueled primarily by carbon pollution coming from fossil fuels and fossil fuel power plants contribute 40 percent of all U.S. carbon emissions. Therefore, it’s logical to think dirty fossil fuel burning power plants now deserve a bold-print warning label that lets Americans know of the dire consequences similar to a pack of cigarettes. As climate policy director at Sierra Club, people often ask me if I still use my public health degree and today the Surgeon General answered that question for me by making it abundantly clear that good climate policy is good health policy. The reverse is also true: if we keep burning fossil fuels like we are today, we will destroy our health and the health of our children. This message connecting two important facets of good government is what attracted pillars of the American medical community to the summit including the American Lung Association, the American Public Health Association and the American Academy of Pediatrics. It goes without saying that I was honored to be there with them and join them in celebrating the historical significance of Surgeon General Murthy’s words.

Dems propose carbon tax - Two Senate Democrats sponsored a bill Wednesday to institute an economy-wide tax on carbon dioxide emissions, revenue that would be returned through rebates and tax cuts. Sens. Sheldon Whitehouse (D-R.I.) and Brian Schatz (D-Hawaii) pitched their proposal at an event hosted by the conservative American Enterprise Institute, saying that their bill aligns with conservative economic principles and Republicans should support it.  The tax would be charged at $45 per ton of carbon dioxide or equivalent greenhouse gases for coal, oil, natural gas and other hydrocarbons, collected at the place where it is produced or refined. “The basic idea is simple: you levy a price on a thing you don’t want — carbon pollution — and you use the revenue to help with things you do want,” Whitehouse said. “Whether you call them neighborhood effects or negative externalities, the effects of carbon pollution harm all of us.” Whitehouse said that effects of climate change from carbon emissions amounts to a subsidy for fossil fuels, and a carbon tax would significantly cut that subsidy. “Right now, for fossil fuel producers, that subsidy is immense, giving them artificial advantage over cleaner energy sources,” Whitehouse said. “A carbon fee can repair that failure by incorporating unpriced damage into the cost of fossil fuels. Then, the free market — not industry, not government — can drive the best energy mix for the country, with everyone competing on level ground.” Schatz said the proposal in the bill is for “a highly efficient tax to make sure that those who emit carbon pollution pay the full cost. By pricing carbon more accurately, our bill would drive down emissions and correct a market defect that has stunted the development of renewable energy.”

Everything You Should Know about Taxing Carbon -- From the pope’s encyclical to the upcoming United Nations conference in Paris, leaders are debating how to slow and eventually stop the warming of our planet.  We economists think we have an answer: put a price on carbon dioxide and the other gases driving climate change. When emissions are free, businesses, consumers, and governments pollute without thinking. But put a price on that pollution and watch how clean they become. That’s the theory.  But a carbon price that works well in principle may stumble in practice. A real carbon price will inevitably fall short of the theoretical ideal. Practical design challenges thus deserve close attention.To help policymakers, analysts, and the public address those challenges, we have published a new report, “Taxing Carbon: What, Why, and How,” on putting a price on carbon.Some highlights:

  • Lawmakers could put a price on carbon either by levying a tax or by setting a limit on emissions and allowing trading of emission rights.
  • Carbon prices already exist. At least 15 governments tax carbon outright, and more than 25 have emissions trading systems. Those efforts have demonstrated that the economists’ logic holds. If you put a price on carbon, people emit less.
  • Figuring out the appropriate tax rate is hard. The Obama administration estimates that the “social cost of carbon” is currently about $42 per metric ton. But the right figure could easily be double that, or half.
  • Taxing carbon could reduce the need for regulations, tax breaks, and other subsidies that currently encourage cleaner energy.
  • By itself, a carbon tax would be regressive: low-income families would bear a greater burden, relative to their incomes, than would high-income families. We can reduce that burden, or even reverse it, by recycling some carbon revenue into refundable tax credits or other tax cuts focused on low-income families.
  • By itself, a carbon tax would weaken the overall economy, at least for several decades. That too can be reduced, and perhaps even reversed, by recycling some carbon revenue into offsetting tax cuts, such as to corporate income taxes.
  • Unfortunately, there’s a tradeoff. The most progressive recycling options do the least to help economic growth. And the recycling options that do the most for growth would leave the tax system less progressive.

Trucking industry is O.K. with new fuel standards -- The Environmental Protection Agency (EPA) is proposing new fuel standards for heavy-duty trucks, such as semis, and the industry gives their full approval. The EPA is proposing higher standards for fuel efficiency of heavy-duty trucks, which the trucking industry is welcoming with open arms, considering it spent $150 billion on diesel fuel just last year, said the American Trucking Association (ATA). Bill Graves, President and CEO of the ATA, commented on the fuel standards changes Fuel is an enormous expense for our industry – and carbon emissions carry an enormous cost for our planet … That’s why our industry supported the Obama administration’s historic first round of greenhouse gas and fuel efficiency standards for medium and large trucks, and why we support the aims of this second round of standards.As reported by the Columbus Business First, “The new rules aim to reduce fuel consumption and carbon dioxide emissions by 24 percent for semi-trucks, large pickup trucks and vans, buses and work trucks. The new standards cover model years 2021-2027. The first round of fuel efficiency standards covered 2014-2018 models.” According to the EPA, the previous fuel standards cut carbon dioxide emissions by 270 million metric tons. The new standards will reduce CO2 emissions by another 1 million metric tons.

Why the Senate Must ‘Vote No’ on Fast-Tracking the TPP - Fast Track would railroad the Trans-Pacific Partnership (TPP) through Congress. Thanks to leaks, we know that the TPP includes provisions that would harm the environment and accelerate climate change. A provision was even added to the Fast Track legislation forbidding climate issues from being included in U.S. trade pacts for the next six years.  After six years, TPP negotiations are almost completed but the text remains secret from the public and press and Congress only has limited access. But 500 official U.S. trade advisors mainly representing corporate interests have had special access to the negotiations and text and now want to use Fast Track to impose through the TPP an anti-environmental agenda that could not withstand open public debate. Thanks to leaks, we know that the TPP would empower foreign corporations to challenge our sovereign laws that protect the environment and our citizens by dragging the U.S. government to tribunals where corporate lawyers serve as “judges.” These tribunals would be empowered to order the U.S. government to pay corporation that claim our laws violate their new TPP rights unlimited taxpayer compensation for their lost future profits. In my own state of New York, where hundreds of thousands of people worked together to get a ban on fracking, we could be sued for billions of dollars for protecting our communities. This is not a hypothetical threat: already under a narrower version of these rules, the Lone Pine Corporation sued Canada demanding hundreds of millions in compensation for a moratorium on fracking under the St. Lawrence Seaway. If the TPP is Fast Tracked into place, overnight 9,000 additional foreign firms would have the rights to attack U.S. environmental policies. The European pact now being negotiated would quadruple our liability to these attacks—almost 40,000 new firms could newly use the tribunals to attack U.S. laws passed by Congress and state legislatures that our domestic courts have said were just fine.

G7: Make ‘climate fragility’ a foreign policy priority: No-one could have predicted in 2008 that seven years later Islamic State militants would be terrorising eastern Syria and destroying ancient shrines. Nor could they have foreseen how many Syrians would drown in the Mediterranean as they made a desperate bid for Europe. But as the country entered its third year of drought – a symptom of climate change – the warning signs for conflict were mounting up. Cases like this are why “climate fragility” should be made a foreign policy priority, according to an in-depth report commissioned by the G7. UK foreign minister Baroness Anelay picks on Syria as an example of the importance of global warming to her brief. Speaking at the report’s London launch, she says: “Climate change is not only a threat to the environment but also to our global security, to poverty eradication and economic prosperity. “That therefore makes it a top priority not only for environment ministers but foreign ministers too.” Report: Climate change a likely factor in Syria civil war Drawing on scientific research, consultations in 10 countries and surveys of policymakers, the report aims to link climate change with humanitarian aid and peacebuilding. Where the climate community talks about “adaptation” to the effects of a warming world, the buzzwords here are “fragility” and its opposite, “resilience”. “The G7 has the capacity to be a leading force in setting the global resilience agenda,” says lead author Dan Smith.

Power grids brace for second big solar storm this week – Power grids across North America and Europe have been on high alert all week as two massive solar storms have battered Earth, threatening to disrupt electricity supplies to millions of homes and businesses. On Monday, PJM Interconnection, which coordinates power to 61 million people across 13 U.S. states and the District of Columbia, alerted generators and transmission companies as the first storm was upgraded from “strong” to “severe” by the U.S. government’s Space Weather Prediction Center (SWPC) in Boulder, Colorado. Controllers across the United States and Canada have been issuing similar warnings and preparing to stabilize their grids as unusually strong electromagnetic radiation emitted from the sun interacts with the Earth’s own magnetic field and induces freak currents across the electricity transmission network. A second storm is set to peak around 23:00 GMT on Wednesday, when highly charged particles which erupted from the surface of the Sun on Monday are forecast to reach Earth, according to the SWPC. Grid controllers aim to prevent a repeat of the events of the night of March 13-14, 1989, when a geomagnetic storm induced severe currents on high voltage power lines near the U.S.-Canadian border and created a cascading failure which knocked out the entire Hydro-Quebec power grid in just 92 seconds.

Why the Saudis Are Going Solar - Near Riyadh, the government is preparing to build a commercial-scale solar-panel factory. On the Persian Gulf coast, another factory is about to begin producing large quantities of polysilicon, a material used to make solar cells. And next year, the two state-owned companies that control the energy sector—Saudi Aramco, the world’s biggest oil company, and the Saudi Electricity Company, the kingdom’s main power producer—plan to jointly break ground on about 10 solar projects around the country. The Saudis burn about a quarter of the oil they produce—and their domestic consumption has been rising at an alarming 7 percent a year. Turki heads two Saudi entities that are pushing solar hard: the King Abdulaziz City for Science and Technology, a national research-and-development agency based in Riyadh, and Taqnia, a state-owned company that has made several investments in renewable energy and is looking to make more. “We have a clear interest in solar energy,” Turki told me. “And it will soon be expanding exponentially in the kingdom.” Such talk sounds revolutionary in Saudi Arabia, for decades a poster child for fossil-fuel waste. The government sells gasoline to consumers for about 50 cents a gallon and electricity for as little as 1 cent a kilowatt-hour, a fraction of the lowest prices in the United States. As a result, the highways buzz with Cadillacs, Lincolns, and monster SUVs; few buildings have insulation; and people keep their home air conditioners running—often at temperatures that require sweaters—even when they go on vacation.

The People v. the Coal Baron - Mr. Blankenship’s quasi-dictatorial management style as chief executive produced spectacular results for Massey, transforming it from a relatively modest business dominated by a single family into a corporation that operated more than 150 mines and brought in more than $2.6 billion in revenue. And Massey’s success lifted Mr. Blankenship out of an impoverished speck of Appalachia to a perch as one of West Virginia’s most feared and powerful figures. When he encountered politicians and judges who stood against his free-market, anti-regulatory views, he spent millions of dollars to end their careers or thwart their initiatives.  But on April 5, 2010, Mr. Blankenship’s singular role in West Virginia changed. That day, an explosion at the Massey-run Upper Big Branch coal mine in Montcoal, W.Va., killed 29 men; it was the deadliest disaster in the industry in 40 years. A government task force would ultimately determine that corners had been cut on important safety measures and that managers had hoodwinked regulators by tipping off miners about imminent inspections. Federal prosecutors came to the conclusion that Donald L. Blankenship, 65, was behind what they described as misconduct, and last November they indicted him on four criminal counts, including conspiracy to violate mine safety standards and conspiracy to impede federal mine safety officials. He could face up to 31 years in prison. The trial, originally scheduled to start in January, has been pushed to Oct. 1. Mr. Blankenship has pleaded not guilty. The indictment was hailed in The Charleston Gazette as a breakthrough, and denounced by Mr. Blankenship’s allies as politically motivated and grossly unfair. On one point, there was agreement: Federal authorities had taken a step without precedent in West Virginia.

Mich. lawmakers irate over Canada ‘s proposed burial site near Lake Huron - A first-of-its-kind underground nuclear waste dump proposed for excavation less than a mile from Lake Huron in Canada has prompted a heavy dose of fallout from U.S. politicians who want to see the waste stored elsewhere. At issue is Ontario Power Generation’s solution for coping with low- and medium-level waste from 20 reactors operating in the province. The publicly owned utility has been pursuing underground storage for almost 15 years and won an endorsement last month from an advisory panel that recommended construction of a “deep geological repository” by Canadian Minister of Environment Leona Aglukkaq. The review panel under the Canadian Nuclear Safety Commission found no reason to not move forward with what would be the first such operating project in North America and the first anywhere to dig a nuclear repository out of limestone rock formations. Crucially, the site would not house spent fuel rods, though there is a separate process afoot in Canada much like the ongoing battle over Yucca Mountain , Nev. , in the United States to find a suitable long-term federal site for high-level radioactive waste.

Aging Nuclear Power Plant Must Close Before It Closes Us - We must face facts regarding the Indian Point nuclear plant. It’s infrastructure is aging, its safety is dubious and most everyone knows it. What many people don’t know is that it can be replaced at little cost to ratepayers—and energy technologies taking its place would create new economic opportunities for New York.  Indian Point—just 38 miles north of New York City—is vulnerable to terrorism, has 2,000 tons of radioactive waste packed into leaking pools and relies on an unworkable evacuation plan. While some argue that transformer accidents—such as the one that occurred last month—can happen at any power facility, they happen with astonishing frequency at Indian Point. Its age is problematic: You wouldn’t rely on a 40-year-old appliance, why extend this trust to a nuclear plant? Moreover, the Nuclear Regulatory Commission (NRC) says Indian Point 3 has the highest risk of earthquake damage of all the nation’s reactors. About 20 million people live within 50 miles of Indian Point. If a catastrophic accident occurred, the consequences would be unimaginable.

What's Really Going On At Fukushima? --  Fukushima’s still radiating, self-perpetuating, immeasurable, and limitless, like a horrible incorrigible Doctor Who monster encounter in deep space.  Fukushima will likely go down in history as the biggest cover-up of the 21st Century.Governments and corporations are not leveling with citizens about the risks and dangers; similarly, truth itself, as an ethical standard, is at risk of going to shambles as the glue that holds together the trust and belief in society’s institutions. Ultimately, this is an example of how societies fail.  Tens of thousands of Fukushima residents remain in temporary housing more than four years after the horrific disaster of March 2011. Some areas on the outskirts of Fukushima have officially reopened to former residents, but many of those former residents are reluctant to return home because of widespread distrust of government claims that it is okay and safe. Part of this reluctance has to do with radiation’s symptoms. It is insidious because it cannot be detected by human senses. People are not biologically equipped to feel its power, or see, or hear, touch or smell it (Caldicott). Not only that, it slowly accumulates over time in a dastardly fashion that serves to hide its effects until it is too late.  Dr. Caldicott gave a speech about Fukushima at Seattle Town Hall (9/28/14). Pirate Television recorded her speech; here’s the link:  Dr. Helen Caldicott is co-founder of Physicians for Social Responsibility, and she is author/editor of Crisis Without End: The Medical and Ecological Consequences of the Fukushima Nuclear Catastrophe. For over four decades Dr. Caldicott has been the embodiment of the anti-nuclear banner, and as such, many people around the world classify her as a “national treasure”. She’s truthful and honest and knowledgeable.  Fukushima is literally a time bomb in quiescence. Another powerful quake and all hell could break loose. Also, it is not even close to being under control. Rather, it is totally out of control. According to Dr. Caldicott, “It’s still possible that Tokyo may have to be evacuated, depending upon how things go.” Imagine that!

The EPA's report on fracking has been given a positive spin by much of the media - Crain's Cleveland Business - Recently, The Plain Dealer published an article regarding the release of EPA’s draft assessment report on the impact of hydraulic fracturing on the water supply. The article originally appeared under the headline, “EPA finds fracking no threat to water.” Unfortunately, that headline left faithful PD readers with the misimpression that the EPA found hydraulic fracturing safe for our water supply. (Note: The PD later updated its headline to say “EPA study finds fracking causes no extensive pollution to groundwater; environmental groups disagree.” This is better, but still not great.) The PD was not alone. News sources of all kinds used similarly misleading headlines. “Draft EPA Study Finds Fracking Has Not Led to Widespread Drinking Water Contamination,” proclaimed The National Review, “EPA Finds No Widespread Drinking Water Pollution From Fracking” said National Public Radio, while NBC news reported: “EPA says fracking has no widespread impact on drinking water.” The problem with these headlines is that the EPA’s draft report is far more nuanced.  The EPA considered five major issues pertaining to the integrity of the water supply.  First, it looked at water acquisition — where the oil and gas industry gets the enormous quantities of water it uses to fracture oil and gas wells. Second, it looked at the content of that water — that is, it looked at the chemical content of the water-based fluid producers inject into oil and gas wells to cause them to fracture and release the oil and gas within. That fluid is not just water. It’s water, mixed with chemicals and proppants — like sand.  Third, the agency considered the impact of the injection of these fluids into the oil/gas wells to fracture the rock from which oil and/or gas will emerge.  Fourth, it studied flowback and produced water. Flowback is the liquid that comes back up through the well after it has been fractured.  Produced water is brackish, meaning salty, and it’s commonly contaminated with naturally occurring radioactive materials. Accordingly, its safe disposal is complicated and costly. Finally, the report assessed what industry does with this produced and flowback water after the hydraulic fracturing is completed and the well is producing.

House Bill 8 represents best interests of 'Big Oil' -- Emboldened by recent victories in the courts, supporters of Big Oil in the state legislature are now trying to pass House Bill 8. This bill will make it easier to neutralize local opposition to fracking.  Ironically, it is easier to get an ODNR permit for a new gas well than it is to get a color change for window shutters through local zoning in many historic districts. This has been a setback for residents against both drilling and an ODNR permitting process that rejects local participation. Since 2004, a number of towns have leased their own parks and playgrounds to oil companies. Some municipalities, like Highland Heights, have had second thoughts. They terminated their gas well leases but not without paying a settlement reported to be in excess of $600,000. Current state laws on "mandatory pooling" and "unitization" work like this: you need approximately 540 acres for three horizontal wells. A group of farmers could lease their properties to create a drilling unit of 360 acres. Another group of farmers have 180 acres, but are not interested in leasing. The majority owners of the 360 acres could apply to ODNR to "unitize" the minority owners of the 180 acres, to complete the 540 acre "drilling unit" necessary to drill. ODNR usually grants these unitizing requests. HB 8 will add a new dynamic to thwart those local governments or local residents resisting unitization. It requires that "political subdivisions of the state," add their acreage to the acreage of any adjacent majority owner who is seeking approval from the ODNR Chief to unitize a minority of others. This includes the land owned by political subdivisions such as counties, cities, towns, and villages. HB 8 has only one exception, the State Parks, at the request of Governor Kasich. In State Forests, horizontal drilling below the surface would be allowed, however surface disturbance would not. The entire Cleveland Metroparks system, which is not a state park, is at risk.

They're really serious about severance tax hike, maybe - Stop me if you've heard this before: A hard issue surfaces in the legislature, with many differing opinions on what should be done.The administration and senators and representatives are on different pages on the right course of action.Instead of working out a compromise, the sides bicker and offer varying plans that won't have enough support for final passage.In the end, a study commission or task force or working group or some other like-named panel is formed to study the problem and offer recommendations.Those recommendations are issued in a report that ends up on a shelf gathering dust until the next go-round, and the cycle repeats.A cynic would say that's the latest status of a push to increase the tax rate on oil and gas produced via horizontal hydraulic fracturing, or fracking.Gov. John Kasich initially proposed a severance tax increase more than three years ago, saying out-of-state producers shouldn't be allowed to take Ohio's precious natural resources without paying a little more for the privilege.Lawmakers have been balking at the suggestion ever since, pulling it from Kasich's mid-biennium budget reviews and biennial budget bills, with little indication that the different sides were working toward a meaningful compromise.And, so, the debate has continued along the same lines.

GOP axes John Kasich's oil, gas tax from budget - – Republican lawmakers say they won’t add a tax on oil and gas obtained through fracking into the state budget as Gov. John Kasich asked. In February, Kasich asked for a 6.5 percent tax on oil and gas at the fracking well head and 4.5 percent tax on natural gas and liquids obtained downstream. That was higher than the 2.75 percent tax the governor suggested last year. Twenty percent of the tax revenue would have gone to counties with wells and the rest would have helped pay for an income tax cut. House Republicans stripped the fracking tax from their version of the state’s two-year budget. Kasich, who is fundraising for a potential presidential bid, complained through a spokesman about the alternate tax plans offered by fellow Republicans, saying they could dismantle Ohio’s recovery. On Tuesday, Ohio Senate President Keith Faber, R-Celina, and House Speaker Cliff Rosenberger, R-Clarksville, said they will not add a tax to the two-year state budget, which the Senate plans to vote on this week. Both said there wasn’t enough time to agree on a fracking tax before the June 30 deadline for passing the budget.Instead, they created a task force with lawmakers and members of the Kasich administration to discuss options, which likely would include a fracking tax hike. A report from the task force would be due Oct. 1. Ohio currently taxes the industry at 20 cents per barrel of oil — one of the lowest taxes in the country.

Athens County likely to become No. 1 chemical frackwaste acceptor in Ohio - A brine injection well recently permitted to Troy Township will likely make Athens County the largest acceptor of chemical-laden fracking waste in Ohio. The well, owned by K&H Partners, was permitted by the Ohio Department of Natural Resources on March 18 to accept as many as 12,000 barrels of brine per day from a steady flow of tractor-trailers travelling down U.S. Route 50. The Athens County Fracking Action Network took legal action against ODNR Tuesday, citing sizeable human health concerns for air and water quality and demanding a retraction of the permit. “There is something really wrong with a system that forces an economically disadvantaged area for the economic gain of a handful of people while threatening what is a growing local food tourism and renewables industry,” said Crissa Cummings, a local activist who chained herself to the K&H gate last June to protest the safety of the wells. “The fact that our local community has no say in the decision making is a serious problem.” Brine is a byproduct of the fracking process, where two to five million gallons of chemicals and sand are combined with water and shot underground to crack shale layers and access the oil and gas below. Much of that combined fluid rebounds after the oil is extracted and must be disposed of before it becomes the brine that is injected into underground wells. ODNR is not required by law to monitor the long-term structural safety of these wells or the surrounding air quality. K&H owns two other injection wells in Troy, which accepted about 2.5 of the 2.9 million barrels of brine relocated into Athens County’s seven injection wells last year. The third well would increase that yearly total to 4.4 million barrels.

EPA fracking report draws local criticism -   Local critics of a recent Environmental Protection Agency study on fracking are far from convinced of the study’s findings denouncing fracking’s effects on water. The EPA announced June 4 in the much-anticipated study that hydraulic fracturing, or fracking, does not cause “widespread, systemic” drinking water pollution. Heather Cantino, a member of the steering committee of Athens County Fracking Action Network, pointed out that while the study has led many to believe that there are no impacts on water from fracking, the EPA did not gather enough data to form such conclusions.She also pointed out that the agency did find mechanisms in fracking, both above and below ground, for impacts and instances in which the mechanisms did cause contamination.

Utica gets upgrades while drillers prepare for increased activity - After its fourth plant came online last month, Blue Racer Midstream LLC has plans for one more cryogenic processing plant in the Utica shale while drillers prepare themselves for increased drilling activity. According to Jack Lafield, chairman of Blue Racer, the company’s fifth plant was put on hold for about six months due to commodity prices being so low. Lafield explained how a lot of Blue Racer’s customers were forced to slow down. Therefore, the company was forced to pause its plans for the cryogenic processing plant. Latfield did say that by spring the plant will be necessary due to increasing well production. As reported by the Dallas Business Journal, “The cryogenic plant freezes natural gas, separating the methane from the ethane and other products. Blue Racer will have capacity to handle 1 billion cubic feet per day of natural gas once the fifth plant comes online in the first half of 2016. No location has been chosen yet.” While natural gas prices remain low, Lafield said drillers have become resourceful and have discovered ways to drive down the costs of drilling in the Utica. He expressed how he continues to be amazed by the innovations companies have come up with to reduce costs per well by 30 to 40 percent. The main goal now for pipeline companies is to stay ahead of producers that rely on them to deliver their oil and natural gas to markets.

Markwest Energy takes control in the Utica Shale - While several oil and gas operators have cut back on drilling, MarkWest Energy Partners LP hasn’t slowed down and continues to grow in the Utica Shale formation. Currently, MarkWest Energy has 18 projects underway in the Appalachian region that is home to the Marcellus and Utica Shale formations. The company focuses on operating pipelines, fractionation plants and other equipment associated with delivering and processing gas. MarkWest Energy is able to continue its expansion in the region thanks to its pipelines and related facilities having long-term agreements with oil and gas producers that have produced more oil and natural gas than existing infrastructure can handle.So far, MarkWest Energy has spent billions on projects in Ohio and neighboring states and has plans to spend even more. As reported by the Columbus Business First, “It’s finalizing three major Ohio plant expansions: a 60,000 barrel-a-day expansion of its Hopedale fractionation plant; adding a third plant with 200 million cubic feet a day of capacity to its cryogenic facility in Cadiz; and a fourth plant with 200 million cubic feet of extra capacity will be added to its Seneca processing complex in Noble County.” MarkWest Energy’s VP of Utica and Appalachia Operations David Ledonne explained that with current market conditions, the expansions would allow the company plenty of capacity to fulfill current needs.

Utica and Marcellus well activity in Ohio -- Activity in the Utica and Marcellus Shale formations in Ohio have seen some changes compared to the last the well activity update, and maybe it’s because one CEO believes natural gas prices may be on the rise. During his speech at the Hart Energy DUG East Conference in Pittsburgh, Pennsylvania, Eclipse Resources Corp. CEO Benjamin Hulburt said he expects natural gas prices to start increasing to the $3.50 to $4 range, but he doesn’t think prices will get much higher than that.  Hulburt explained since there is still a large amount of gas, prices will not stay around $2.80, and that price is not an economical price for anyone to continue production. Hulburt also went on to say that his company, Eclipse Resources, was searching for potential financial partners but has not moved forward with any due to the company’s drilling advantage.  He believes the company has the ability to drill faster and at a lower cost “in the deepest and highest pressure parts” of the Utica Shale in Ohio than any other operator, except Chesapeake Energy Corp. The following information is provided by the Ohio Department of Natural Resources (ODNR) and is through the week of June 20th. Activity in the Utica Shale formation in Ohio has caused a few slight changes in comparison to last week’s update.  The ODNR reported 424 wells were permitted, 405 drilled, 906 producing, 25 inactive, 24 in final restoration and 3 abandoned.  This brings the total number of wells in the Utica to 1,936.  The Marcellus Shale in Ohio remains unchanged from last week’s well report.  The area is still sitting at 15 wells permitted, 11 drilled and 16 wells producing.  There are a total of 44 wells in the Ohio Marcellus Shale.

WVU project aims to monitor fracking process from start to finish -— A new West Virginia University research project to study the hydraulic fracturing process kicked off in Morgantown Friday, officials announced. The project — dubbed the Marcellus Shale Energy Environmental Laboratory (MSEEL) — will involve on-site monitoring of an active, producing natural gas well-pad. The five-year, $11 million project is a collaboration among WVU, the National Energy Technology Laboratory, The Ohio State University and Charleston-based Northeast Natural Energy — the company that will be drilling and operating the gas wells to be monitored. Brian Anderson, a professor of chemical engineering and the director of WVU’s Energy Institute, said the collaboration, by allowing direct monitoring of the natural gas extraction process from start to finish, is “absolutely, fundamentally different” from past research projects on the impact of the industry. “It will be an actual production site. Northeast Energy will be producing the gas,” Anderson said. “You have to do that if you want to understand what’s done during the drilling process.”  The project site will have three wells drilled into the Marcellus Shale, Anderson said. Two of the wells will be natural gas wells. A third “science well” will be drilled in between the two producing wells, Anderson said. The science well will be dedicated to monitoring the subsurface during the drilling and fracturing process, he said. “What we actually will be doing is called microseismic monitoring that allows us to actually paint a picture of the fractures that happen during stimulation and where they go,” Anderson said. “We’ll get a really good picture of what’s going on in the subsurface.”

Without forced-pooling law, WV gas industry sues landowners to gain access  - Krafft’s refusal to sign prompted Antero to file a lawsuit in Harrison County Circuit Court seeking to end her ownership in the tract of minerals. Without Krafft’s signature on a lease, the entire Marcellus Shale well that would be drilled through nearly 14 properties could be put on hold, delaying profits for Antero and the other property owners, who already had signed over their mineral rights. Krafft’s case is just one example of how the oil and gas industry has turned to West Virginia’s court system in the absence of a pooling law to force mineral owners to either sign leases or sell their property. In county courthouses throughout the north-central part of the state, gas companies have filed what are known as partition lawsuits, seeking court-ordered buyouts of partial mineral owners who have yet to sign a lease. In Doddridge and Harrison counties alone, Antero, one of the region’s largest gas producers, has filed nearly two-dozen lawsuits over the past two years. Lawyers who have worked on similar cases in the state say the lawsuits also have been used by other companies, like EQT Corp., in the state’s other Marcellus gas-producing counties. For the companies, the lawsuits are a necessary part of their effort to clean up the state’s fragmented mineral acreage, which often is split between dozens of shared owners, the result of property being passed down through generations, sometimes unknowingly. For the people who are sued, though, the litigation often is seen as an unfair process in which they are either compelled to sign a lease or watch as their property is sold to a gas company for whatever price the court determines is fair — often less than what can be made from the minerals once they are drilled.

What’s in your frac fluid? U.S. doctors want to know - Fuel Fix: — U.S. doctors want more information about the ingredients of the chemical compounds pumped underground during hydraulic fracturing operations at oil and gas wells nationwide. The chemical disclosure request came in the form of a policy plank adopted by the American Medical Association’s House of Delegates during the group’s annual meeting Tuesday. The  AMA said in a statement that the group is concerned about the inability to effectively monitor and track the possible long-term public health and environmental changes associated with hydraulic fracturing. “Most states do not require drilling companies to publicly disclose what chemicals are injected into the ground during hydraulic fracturing,” said David Barbe, an AMA board member, in a statement. “The new AMA policy supports disclosure requirements to monitor any environmental exposure to tracking chemicals and advise or treat patients based on reliable information.” Under the newly adopted policy, the AMA also supports better government tracking of the chemicals used in oil and gas extraction. Hydraulic fracturing involves pumping sand, water and chemicals underground to open the pores of oil- and gas-bearing rock so those hydrocarbons can flow out. When combined with horizontal drilling, the well stimulation process has driven a surge in domestic oil and gas production.

DEP tests for radiation and contamination of Ten Mile Creek - The Pennsylvania Department of Environmental Protection (DEP) announced it will be conducting an investigation to see if there are radioactive materials in part of the Monongahela River Tributary. The DEP will be testing the Ten Mile Creek which runs through Greene and Washington counties in Pennsylvania. The creek is located in the center of the state’s shale gas fields and is a major tributary of the Monongahela River, an important source of drinking water for that part of the state. According to John Poister, the DEP’s spokesperson, the public should not be worried: At this point, we don’t think there is an immediate threat to the health and safety of the people in that vicinity.  Poister explained the DEP is planning to start testing the creek towards the end of June and how the testing stems from previous testing done a year ago which found levels of radioactivity higher than what is expected in Pennsylvania. As reported by the Herald Standard, “Those initial tests occurred in April 2014, after years of prodding by local environmental groups, whose members shared the results with PublicSource after obtaining the documents through open records requests and DEP file reviews.” However, the DEP has not disclosed the test results.

Fracking Linked to Increased Infant Mortality in Alarming New Study - A new study has linked fracking to a higher incidence in infant mortality, perinatal mortality, low-weight births, premature births and cancer in infants and children. Funded by the Pittsburgh Foundation and written by Joe Mangano, co-founder and president of the Radiation and Public Health Project, a nonprofit educational and scientific organization that studies the relationship between low-level, nuclear radiation and public health, the study used data from state agencies to examine eight heavily fracked counties in Pennsylvania — four in the northeast and four in the southwest region of the state, counties that account for the majority of the state's natural gas drill wells and gas production. In all categories but child cancer, increases were greater in the northeast counties than they were in the four southwest counties. "The information presented in this report supports the hypothesis of a link between exposure to toxic chemicals released in fracking and increased risk of disease and death," writes Mangano, who also manages the citizen-based radiation monitoring programs near the nuclear plants at Indian Point, New York, and Oyster Creek, New Jersey. "While it is virtually impossible to estimate a 'dose' to a community from chemicals generated by fracking, it is clear that residents of the eight most-fracked counties received far greater exposures than those in the rest of Pennsylvania." Analyzing publicly available data from the Pennsylvania Department of Health and the U.S. Centers for Disease Control and Prevention, Mangano found that, since the early 2000s and compared to the rest of the state, the heavily-fracked counties have seen a rise in infant mortality (13.9 percent), perinatal mortality (23.6 percent), low-weight births (3.4 percent), premature births/gestation less than 32 weeks (12.4 percent) and cancer incidence in age 0-4 (35.1 percent).

Documents Released Show Pa. Fracking Health Complaints, Negligence of State Agencies’ Response – The advocacy group Food & Water Watch released today an analysis of reams of documents it obtained from the state of Pennsylvania that clearly demonstrate an ongoing pattern of alarming inadequacy and negligence by the state Dept. of Health (DOH) in its response to fracking-related health complaints from state residents. After a 2014 StateImpact Pennsylvania report revealing that DOH health workers were instructed to identify key fracking “buzzwords,” and told not to respond to fracking-related health complaints, Food & Water Watch requested and eventually received the DOH natural gas drilling log of health complaints. The logs demonstrate that state residents are regularly reporting alarming health concerns, and that state agencies have failed to adequately respond and address these health problems from drilling and fracking.Common symptoms reported in the logs include breathing difficulty, asthma, throat and nose irritation, noxious odors, skin problems, and abdominal issues. Residents also reported headaches nosebleeds, eye irritation, hair loss and cancer. DOH responses to these complaints did not adequately address the seriousness of the reported symptoms. Many residents, after calling DOH, were simply referred to other state agencies and/or told to have their air or water tested.The DOH log records received by Food & Water Watch can be accessed here: The full analysis of the complaint logs can be accessed here:   “This detailed look inside the Department of Health brings into stark relief what we’ve known for years – that Pennsylvanians are getting sick from drilling and fracking, and the state has been grossly negligent in protecting residents.

Study Confirms Fracking is Polluting Water in Pennsylvania , So Why the Frack is it Still Happening? -- A new study has found that shale drilling and fracking contaminated drinking water wells in Pennsylvania . The study represents the first peer-reviewed paper confirming that fracking can and does contaminate drinking water supplies. The study discovered that the whitish foam seeping from the faucets and hoses in Bradford county homes was the drilling chemical 2-BE a “foaming agent” known to cause tumors in rodents. The fracking industry contaminant was present in drinking water wells closest to Chesapeake Energy shale operations. Residents of Bradford have been complaining about contaminated water since Chesapeake Energy began drilling in 2009. Bradford is now the “most fracked” county in Pennsylvania , and Chesapeake is the largest lease holder. While Chesapeake has never admitted responsibility for water contamination, the company has paid millions in settlements to Bradford residents since 2011.

The Causes, Costs and Consequences of Bad Government Data - Data is the lifeblood of state government. It's the crucial commodity that's necessary to manage projects, avoid fraud, assess program performance, keep the books in balance and deliver services efficiently. But even as the trend toward greater reliance on data has accelerated over the past decades, the information itself has fallen dangerously short of the mark. Sometimes it doesn't exist at all. But worse than that, all too often it's just wrong.  In 2012, the secretary of environmental protection in Pennsylvania told Congress that there was no evidence the state's water quality had been affected by fracking. "Tens of thousands of wells have been hydraulically fractured in Pennsylvania," he said, "without any indication that groundwater quality has been impacted." But by August 2014, the same department published a list of 248 incidents of damage to well water due to gas development. Why didn't the department pick up on the water problems sooner? A key reason was that the data collected by its six regional offices had not been forwarded to the central office. At the same time, the regions differed greatly in how they collected, stored, transmitted and dealt with the information. An audit concluded that Pennsylvania's complaint tracking system for water quality was ineffective and failed to provide "reliable information to effectively manage the program."

Coal mine water could become fracking water --On Monday, the Senate Environmental Resources and Energy Committee approved a bill that will push the use of coal mine water to be used in fracking operations. As reported by State Impact Pennsylvania, “Senate Bill 875 limits potential liabilities for producers who would use the polluted mine water, instead of cleaner fresh water, in the drilling process.” The Corbett Administration and the Marcellus Shale Advisory Commission both support the usage of coal mine water being used in fracking. The bill would ultimately decrease the amount of fresh water natural gas operators use to drill wells in the Marcellus Shale. However, there are those, specifically lawyers, who have said that due to Pennsylvania’s Clean Streams Law, drillers could be held accountable for cleaning up mine water they may not have polluted. The state’s Clean Streams Law was put in place to prevent the coal industry from seriously impacting water quality. The law allows the Department of Environmental Protection (DEP) to monitor wastewater discharge and penalize any industry that violate the law by polluting. The main concern drillers have with the Senate Bill 875 is that the DEP “could penalize them for the dirty mine drainage water if they use it to frack a well.” Those who support the bill and usage of coal mine water being used for fracking consider it a “win-win” situation. They believe that it would not only help remove acidic mine water, it will also help reduce the amount of freshwater taken by operators for drilling operations. On average, a natural gas well uses an estimated 4.4 million gallons of water, which is a lot all by itself but one has to remember how many wells are fracked daily using that same amount. It adds up quickly.

Marcellus permit activity in Pennsylvania | The Marcellus Shale formation in Pennsylvania saw quite a bit of action over the last week. Yet, despite the on going activity, the number of jobs the gas industry supplies the state with has dropped drastically. It was like magic how quickly the state of Pennsylvania lost 160,000 jobs in the natural gas industry, but the credit for the trick all goes to Governor Tom Wolf and the state Department of Labor and Industry. Last week, the Department of Labor and Industry changed the way it records employment in the Marcellus Shale natural gas industry. Before the department switched its accounting ways, the natural gas industry accounted for 250,000 jobs. However, with the new calculations completed, the industry actually supports 89,314 jobs. While having a factual number is beneficial, there are those that oppose the way Wolf and the department went about changing methods. .To read the full story regarding the disappearance of 160,000 jobs in Pennsylvania’s natural gas  industry, click here. The following information is provided by the Pennsylvania Department of Environmental Protection and covers June 15th through June 21st. New: 26 - Renewed: 2

Marcellus region to see wave of large pipeline projects -- Over the next three years, the Marcellus Shale region can expect to see about 17 pipeline projects meant to ship about 17.3 billion cubic feet per day of natural gas out of Pennsylvania, West Virginia and Ohio to end-users, according to IHS Energy. Those destinations “are varied, and in addition to New England, some are targeting the Midwest, eastern Canada and the South,” said Matthew Piatek, associate director of North American natural gas for IHS, which tracks energy markets. “Given the amount of production in the tri-state area currently, it will be able to satisfy the lion’s share of Mid-Atlantic and New England demand and still export a net amount of natural gas,” Mr. Paitek said. The new infrastructure is in high demand. As natural gas production ramped up in the Marcellus and Utica regions, the existing pipeline network to take that fuel from well sites to market has been maxed out. That has led to a supply glut and to depressed natural gas prices in Pennsylvania, even as neighboring New England and New York weathered dramatic natural gas price spikes during high-demand winter months. “There will be significant relief with the buildout happening this year,” said Lindsay Schneider, principal analyst with Wood Mackenzie’s natural gas team.

U.S. industrial natural gas usage falls unexpectedly - (Reuters) – U.S. manufacturers have not soaked up as much excess shale gas in the first half of 2015 as expected, but the shortfall may be an anomaly as a Gulf Coast manufacturing boom is poised to insulate the sector from seasonal demand fluctuations. Average industrial demand for gas in 2015 was expected to increase nearly 4 percent over 2014, according to federal energy forecasts. But almost halfway through the year, it has eased about 1 percent to 21.7 billion cubic feet per day from 22 bcfd a year earlier, according to Thomson Reuters Analytics. The primary reason for the decline was a milder winter this year than last year’s brutal cold in the heavily industrialized U.S. Midwest and Gulf Coast. “The industrial sector has become more temperature-sensitive over the years, so it’s not surprising industrial demand was a little disappointing this winter,” . Experts, however, expect the industrial sector to become less weather-sensitive as more manufacturing facilities enter service along the Gulf Coast, where heating is in less demand than in the Midwest. Power generators and manufacturing companies will consume most of the gas in the United States over the next 25 years, according to the U.S. Energy Information Administration. So far this year, however, only the power sector had gobbled up its share of near-record output from shale fields. Power generators accounted for 33 percent of U.S. gas consumption, burning on average 23.9 bcfd so far in 2015. That compared with 20.1 bcfd a year earlier and a 10-year average of 19.0 bcfd.

Europe needs Pennsylvania’s natural gas -- Thanks to Russia forcing Europe to pay high natural gas prices, Central and Eastern European counties are in need of Pennsylvania’s natural gas. On Monday, speakers at Williamsport-Lycoming Chamber of Commerce member connection event advocated the idea of exporting Pennsylvania’s Marcellus shale gas. During the discussion, commerce members requested the self-imposed exporting limits on natural gas be put to an end. As reported by PennLive, “The 1938 Natural Gas Act permits exports if the Energy Department finds they are in the public interest. This is 2015, not 1938, said Fred H. Hutchinson, executive director of LNG Allies, an organization that support exports. LNG stands for liquefied natural gas.” According to Hutchinson, “it is time to close ranks and open international markets for U.S. natural gas.” During the commerce member connection event, representatives from 15 European embassies sat in the audience and listened to the discussion. Following the event, the representatives toured a Halliburton natural gas powered generating plant that is under construction, along with a Marcellus Shale gas well. Among the representatives was Ivo Konstantinov from the Bulgarian embassy who explained his country sees unreliable and expensive natural gas supplies controlled by Russian President Vladimir Putin. Konstantinov said his people love Russian people, but the cost of the “friendship” is too much, and the “monopolistic extortion” is holding Bulgaria back from developing.

LPG would be moved by rail daily through Watkins Glen -- A gas storage proposal along Seneca Lake calls for trains — each loaded with pressurized and explosive cargoes of butane and propane — to cross daily over a bridge spanning Watkins Glen State Park. After crossing the bridge, most of the liquefied propane gas (LPG) trains will head east, traveling along Norfolk Southern tracks through Corning, Elmira, Owego, Johnson City and Binghamton. While trains with hazardous cargoes are under scrutiny across North America, the chief concern among some public officials with the proposal is the 80-year-old open-decked bridge spanning the gorge 75 feet in the air. For investors in Crestwood Midstream Partners' LPG project, Watkins Glen State Park is a chasm that must be crossed. For an estimated 530,000 Finger Lakes tourists each year, the park is a major attraction that must be explored. Some see these distinct pursuits adding up to an epic hazard.As precarious as the bridge may appear from far above and far below, the chance of cars — each loaded with 33,000 gallons of gas — derailing and spilling into the gorge reportedly is slim. According to a risk assessment commissioned by Crestwood, the annual probability of a fatal accident involving an LPG rail car in the Finger Lakes is one in 5 million. The trestle and the tracks were rebuilt in 1935 after being washed out by a flood. They are inspected routinely, although requests to see the report must be granted through a records access officer with the Federal Railroad Administration. A request made during the reporting of this story is pending.

Fracking divides red, blue states -- Fracking is creating a new dividing line between the nation’s red and blue states. While liberal-leaning states such as New York and Maryland have opted to ban hydraulic fracturing, despite the potential revenue from natural gas, conservative strongholds such as Texas and Oklahoma have gone the opposite route, moving to ensure that local towns and cities cannot outlaw the practice in their communities. Observers say a state’s approach to fracking is increasingly falling along partisan lines, with the affiliation of a state’s legislature and governor often reflected in whether the practice is welcome or shunned. “Where we have legislative or executive preemption efforts, we have tended to see would be expected, which is that the more liberal states tend to be more concerned about the environmental and social effects of fracking, whereas the more conservative states tend to welcome the money,” said Hannah Wiseman, a Florida State University Professor who researches environmental regulation, The Democratic leaders of New York and Maryland have banned fracking, responding to the concerns of environmentalists, who say fracking can pollute groundwater and the air.

Foes of fracking losing legal and political momentum - — After scoring a statewide ban last year on hydraulic fracturing in New York, anti-fracking activists talked excitedly about following up in a major fossil fuel-producing state — Colorado, maybe, or California. Instead, the next state to prohibit the use of fracking in oil and gas extraction — on a temporary basis — was Maryland, which, like New York, is a deep-blue state with no hydraulic fracturing activity. Critics quickly dismissed the two-year moratorium as purely symbolic. In fact, in a development that has caught both sides by surprise, the legal and political momentum these days appears to be running against the anti-fracking cause. In states where the revolutionary oil- and gas-drilling technique actually is being employed in a significant way, the movement is losing ground. Activists in leading oil and gas producers like California, Colorado, Oklahoma and Texas have suffered defeats in the last year at the hands of state legislatures, courts and even voters. Foes of fracking were hit with another setback Tuesday as a federal judge delayed this week’s scheduled implementation of the Obama administration’s tight new fracking rules for federal lands, prompted by a lawsuit challenging the regulations filed by four states.

Eagle Ford could feed Japan's newfound hunger for natural gas - Eagle Ford producers could find new friends from the Far East as Japan searches for new sources of natural gas to fuel power plants. In Houston, a delegation from the Consulate General of Japan toured the Freeport LNG construction site south of the city. In addition, the enthusiastic tourists also made note to visit a Tidal Petroleum’s oil and natural gas drilling site near Moulton in Lavaca County on Thursday, according to a San Antonio Journal report. Overall, Texas has really dived into developing and implementing natural gas. If Texas were its own nation, it would be the third largest producer of natural gas in the world with 18.84 billion cubic feet per day. Former Japanese Ambassador Yasuo Saito told the San Antonio Business Journal that all of Japan’s nuclear reactors remain shut down years after the 2011 Fukushima earthquake. The U.S. Energy Information Administration (EIA) stated that roughly one-third of Japan’s electricity was nuclear powered. However, Saito told the journal that Japan is working diligently to diversify its energy sources. Currently, the nation receives natural gas from Qatar, Australia, Indonesia and Russia. Saito noted that branching out is vital, and that he feels the Eagle Ford Shale in Texas could be a potential source of energy. The U.S. and Japan don’t have a free trade agreement, so Texas producers would be required to obtain an extra permit from the U.S. Department of Energy before exporting natural gas. Saito stated that if the Trans-Pacific Partnership passes, it would make the process of shipping natural gas to Japan easier for companies in Texas.

A New Pro-Fracking Propaganda Web Site is a new oil and gas industry-supported website whose mission is to challenge the negative public perception of fracking. That’s a tall order since public awareness and opposition to fracking is growing following the passage of a fracking ban in Denton, Texas, as well as a de-facto ban in New York and other high-profile efforts to protect public safety and water supplies by limiting or outright stopping the risky shale extraction technique in communities worldwide.   The group behind the website, North Texans for Natural Gas (NTNG), claims it is “a grassroots organization” that “aims to give a voice to those who support natural gas.” But as readers of DeSmog know, the oil and gas industry has long used expensive astroturf tactics to gin up the appearance of grassroots support to mask what are actually corporate public relations campaigns. “When the fossil fuel industry tries to pretend it’s a grassroots movement, it always manages to fail the Turing test,” Bill McKibben, founder of the environmental activist group, told DeSmog. “I mean, there’s something just inextricably bogus about it.” North Texans for Natural Gas is a “loose coalition of people who support natural gas development,” wrote Fuel Fix. Fuel Fix and other media sites that mention Frackfeed do not identify any of the people who make up the grassroots component of the site.  “As is disclosed on the front page of NTNG’s website, there are four energy companies who support the effort, though it is worth emphasizing that the group does not ‘speak for’ the industry,” the site’s spokesman, Steve Everley, wrote DeSmog in an email.

Nat. gas prices may reach $4 but nothing more -- According to one CEO, with natural gas exporting to Mexico and LNG shipments going overseas in the near future, natural gas prices may see an increase. While speaking at the Hart Energy DUG East Conference in Pittsburgh, Pennsylvania, Eclipse Resources Corp. CEO Benjamin Hulburt said he expects natural gas prices to start increasing to the $3.50 to $4 range. However, he also mentioned that he doesn’t believe prices will exceed $4 by much. Since there is still a large amount of gas, Hulburt explained prices will not stay around $2.80. He explained that at the current prices it is not economical for anyone to continue producing.

Texas has suffered billions from oil price slump - We’ve seen the decimation of oil prices, most notably the loss of jobs and the reduction of new wells or new exponential increases in production. In the pursuit of quantifying the damage, a recent report found that Texas petro-wealth is down $33 billion from 2014’s observations. Blackbeard Data just released its 2015 Petro-Wealth report. In its summary, Blackbeard states that in proved producing reserves, Texas contains $107 billion worth of petro-wealth, down $33 billion or 24 percent from $140 billion in our 2014 report. Out of the $107 billion in worth, corporations own $86 billion, individuals own $15.7 billion and trusts own $3.5 billion. The remaining $1.8 billion is spread between non-profits, educational institutions, religious organizations and the government. The report also includes the top 20 cities holding Texas petro-wealth. Houston, Texas came in as the number one city worth of $37 billion and Midland, Texas came in second with over $11 billion.  Blackbeard Data compiles lease ownership data for all oil producing counties in Texas. From this information, the company pulls out the different classes of ownership, classifies the type of owner, breaks out city sums and then adjusts all sums of all ownership values using the price of oil at the current time of analysis.

HB40's final defeat on Denton fracking ban -The controversy surrounding Denton, Texas’ on-again-off-again fracking ban has been a unique ordeal, to say the least. The conflict over whether or not to allow the city to back hydraulic fracturing inspired a cabaret music troupe, prompted in the arrest of a blind 92-year-old woman and, unsurprisingly drew scorn from the rest of oil-rich state until House Bill 40 put the kibosh on any county or city-sanctioned frack bans. Though Denton’s voter-approved bar of fracking within city limits seemed to have a fighting chance in May, when Denton City Council imposed a moratorium on oil and gas activities until a solution was reached, the council moved to repeal the ban altogether last week. In a Denton Record Chronicle report, city leaders called their decision a “strategic repeal” in hopes of redressing lawsuits filed against the city by the Texas Land Office and TXOGA. Denton Mayor Chris Watts, who voted in favor of the repeal, told the Associated Press he did so with a heavy heard.“It was probably one of the most difficult decisions I’ve had to make, to see the hard work and heart and soul that was poured into the effort and to prevail at the ballot box, to then have a different level of government under it,” Watts said.

Blogger: Texas should recycle oilfield water— their water supply needs it - Extracting materials we use for fuel can take a mighty toll on Texan water supplies, but Gabriel Collins, blogger for North American Shale Blog, sees a solution in recycling oilfield water. Large projects in Eagle Ford, he writes, can use up to 11.5 million gallons of water—about 10 barrels of water per barrel of oil produced. “Treatment technologies have advanced dramatically in recent years, and treating produced water now costs a fraction of what trucking and disposal does,” Collins writes. “[Fracking] is only one potential end use for treated water. Some companies may even be able to purify the water to drinking-level quality at a cost still comparable to that at which major Texas cities such as San Antonio have recently acquired freshwater supplies.” Data from the Argonne National Laboratory suggests that in 2007, oil and gas fields churned out a volume of produced water that equates to nearly 22 percent of all water used by Texas municipalities that year. Despite technological advancements and economic incentives to recycle frack water, factors including cost and lack of public support had previously deterred companies from treating water. In 2014, Apache employees estimated that water disposal in the Barnhart area cost the company about $2 to $2.50 per barrel while recycling—but not desalinating—the water only cost about 29 cents per barrel. In related news, What does Texas do with 945 million gallons of wastewater a day? Desalination, though a slightly spendier process, has been made more accessible through technological breakthroughs, driving the traditional costs of $4 to $8 per barrel down to as little as $1.50 to $2.00 per barrel.

Cancer-Causing Chemicals Found in Drinking Water Near Texas Fracking Sites -- On June 4, the U.S. Environmental Protection Agency (EPA) released a report on how fracking for oil and gas can impact access to safe drinking water. Although the report claims not to have found any “widespread, systemic impacts on drinking water resources in the United States,” a new study in Texas provides more evidence that contamination of drinking water from fracking might be occurring. A research team at the University of Texas at Arlington has published a peer-reviewed study, A Comprehensive Analysis of Groundwater Quality in the Barnett Shale Region, in Environmental Science & Technology, a journal of the American Chemical Society. The heavily fracked Barnett shale region, with more than 20,000 wells, covers a swath of counties in north Texas surrounding the populous Dallas-Fort Worth area. It also sits beneath two major aquifers. . “Most accounts of groundwater contamination have focused primarily on the compositional analysis of dissolved gases to address whether UOG activities have had deleterious effects on overlying aquifers. Here, we present an analysis of 550 groundwater samples collected from private and public supply water wells drawing from aquifers overlying the Barnett shale formation of Texas.” The team, led by UT Arlington chemistry professor Kevin Schug, found elevated levels of 10 metals and 19 chemicals as well as high levels of ethanol and methanol. The chemical compounds found included benzene, toluene, ethyl benzene and xylenes, which have been associated with a range of negative health impacts including cancer. Schug said that his team’s work was “the most comprehensive groundwater study in connection to this whole process.”

Coast guard swiftly responds to 100 gallon oil leak --Over the weekend, Coast guard along with state and local officials responded to oil seepage reported on the Bolivar Peninsula approximately 4 miles west of Rollover Pass. While conducting a beach patrol Friday at approximately 11:30 a.m., the Coast Guard identified a 100-yard area along the beach with oil seepage, 1st class Petty Officer Andrew Kendrick stated in a report. Since the oil contamination was identified, the Coast Guard, Texas General Land Office, Texas Parks and Wildlife, and Galveston County Office of Emergency Management have been working to contain and clean up the affected area. In addition, the Texas Railroad Commission has lent assistance on the scene. About 50-100 gallons of oil have been collected since Saturday, officials said. According to the report, the Coast Guard has hired an oil spill response team, thanks to the Oil Spill Liability Trust Fund. The oil spill response organization is currently working to protect the shoreline from further contamination. Roughly 200 yards of beach have been closed around the affected area. “We will continue working with our state and local partners to protect the public and Texas Gulf coast’s sensitive environment from this pollution threat,”

Officials looking for source of Texas beach oil seepage - — Federal and state authorities are still looking for the source of an oil seepage that has forced officials to close about 200 yards of beach on the Bolivar Peninsula. A Coast Guard beach patrol discovered the seepage Friday morning, prompting federal, state and local officials to mobilize cleanup crews. Lt. Samuel Danus of the Coast Guard Marine Safety Unit Texas City said a trench dug to contain the oil had collected 50 to 100 gallons by Sunday. Danus said officials don’t know the source. They will test the oil and compare it to samples from nearby oil and gas facilities in the area. Danus says there are many such facilities in the area, some of which date to the 1970s.

Earthquakes Tied to Fracking Boom, Two New Studies Confirm  -- Studies keep showing that the earthquakes start happening when wastewater from fracking is injected underground. Scientists say it’s because those large quantities of water, forced underground by heavy pressure, activate dormant fault lines. Now two more such studies have been added to the pile of evidenceOne of the studies, published in the journal Science, comes from a team of scientists from the University of Colorado at Boulder and the U.S. Geological Survey (USGS). The largest study to date, they analyzed information on earthquakes and 180,000 injection wells from Colorado to the east coast. They tied 18,000 of the wells, primarily in Colorado and Oklahoma, to earthquakes. “This is the first study to look at correlations between injection wells and earthquakes on a broad, nearly national scale,” said University of Colorado doctoral student Matthew Weingarten, the study’s lead author. “We saw an enormous increase in earthquakes associated with these high-rate injection wells, especially since 2009, and we think the evidence is convincing that the earthquakes we are seeing near injection sites are induced by oil and gas activity.” They found that “high-rate” injection wells, which pumped more than 300,000 gallons of water a month underground, were more likely to cause tremors than low-rate wells and that wastewater injection wells were more likely to cause earthquakes than so-called “oil recovery” wells which inject fluid to push remaining oil out of depleted wells. They also found that injection wells were tied to earthquakes ranging from 4.7 to 5.6 magnitude in Arkansas, Colorado, Oklahoma and Texas in 2011 and 2012. The second study, published last week in the journal Science Advances, was done by a pair of geologists at Stanford University. They looked specifically at the increased seismicity in certain areas of Oklahoma that rarely saw earthquakes before 2009—”no state has experienced a more significant increase in seismicity in recent years than Oklahoma,” they said. They  found that it followed big increases in wastewater water from drilling operations that was injected into underground wells nearby.

Oklahoma drilling regulator calls spike in quakes a "game changer" (Reuters) – A spike in earthquakes across Oklahoma is forcing the state’s energy regulator to urgently consider tougher restrictions on drilling activity, a spokesman said on Wednesday, calling it a “game changer.” From June 17 to 24, there have been 35 earthquakes of magnitude 3.0 or greater in the state, according to the Oklahoma Geological Survey. Particularly worrying for regulators, some of the recent quakes occurred in the Oklahoma City metropolitan area, where there are no high-volume wastewater injection wells. The spike in quakes comes roughly two months after new rules governing the disposal of briny wastewater from drilling took full effect. Drillers were directed by the Oklahoma Corporation Commission (OCC), which regulates the oil and gas industry, to stop disposing wastewater below the state’s deepest rock formation, believed to be one of the main causes of the quakes, and to reduce the depth of wells that already go that deep. “We have to approach it anew,” said Matt Skinner, a spokesman for the OCC. “There’s been a huge increase. That’s a game-changer,” he said, referring to the recent jump in tremors. Oklahoma has been grappling with a rise in seismic activity since 2009, amid an expansion of drilling activity that has doubled the state’s oil output in the last seven years. The energy boom has created jobs and contributed to state coffers, but many residents are deeply uneasy about the tremors. Oklahoma has become ground zero in the oil industry’s struggle to break the connection between production and earthquakes. It was not immediately clear why there was a spike in quakes in the last eight days. Prior to this period, quakes of magnitude 3.0 or greater typically hit Oklahoma once or twice a day, according to data from the U.S. Geological Survey (USGS). Prior to 2009, there were only one or two such quakes in the state in a year.

Very Recent Huge Increase In Quakes A "Game-Changer" For Oklahoma Oil & Gas --The recent spike in earthquakes in Oklahoma could present a “game changer” for regulators. That is how regulators themselves described the spate of earthquakes that struck the state between June 17 and June 24, according to Reuters. Oklahoma has become the most seismically active state in the country in recent years, with a lot of scientific data pointing to the practice of disposal wells as the culprit. Earthquakes with a magnitude of 3.0 or greater have jumped from 20 in 2009, to 585 in 2014. But 2015 could be even worse – if current trends continue, the state could log more than 800 for the year. The rapid increase in seismic activity prompted new regulations, after a long period of hesitation on behalf of the state, which took effect two months ago. The rules barred drillers from injecting wastewater past a certain depth underground, a threshold that seismologists believe contributes to earthquakes. But even with those rules in place, earthquakes have not stopped. Over the past week, an estimated 35 earthquakes of a magnitude of 3.0 or greater struck the state. That has the Oklahoma Corporation Commission, which regulates oil and gas drilling, looking again at regulations. “We have to approach it anew,” an OCC spokesman, Matt Skinner, said after the latest round of quakes, according to Reuters. “There's been a huge increase. That's a game-changer.” The surge in earthquakes over the past week comes as a June 23 report from E&E that showed that the University of Oklahoma sought a $25 million donation from famed oil executive Harold Hamm, head of Continental Resources. The university pursued his donation as it was also establishing its position on the connection between earthquakes and disposal wells. When completed, their position reflected Hamm’s pretty closely, although he ultimately declined to donate (he is still one of the university’s largest donors). E&E notes that there is nothing specifically linking the donation to the university’s position, but they took place at the same time.

Report ranks New Mexico No. 1 for methane emissions, lost gas revenues -  A national environmental advocacy group says natural gas and the revenue associated with its production at oil and gas wells are wasted at high levels on federal and tribal lands throughout the Western United States, with New Mexico accounting for more waste than any other state. A report commissioned by the Environmental Defense Fund and compiled by the consulting firm ICF International drew on Environmental Protection Agency and industry data to measure the amount of methane leaked, vented or burned during 2011. In New Mexico, the report said, that number totaled about 33.7 billion cubic feet, at an estimated cost of about $101 million. Methane, the main component of natural gas, is a potent greenhouse gas. Said Jon Goldstein, senior energy policy manager at the Environmental Defense Fund: “Pound for pound, it’s more than 80 times more potent than carbon dioxide. For folks concerned about climate change, that’s a big deal.” He added that researchers at NASA and the National Oceanic and Atmospheric Administration are studying the largest bloom of methane ever detected in the United States, located over the Four Corners region between San Juan County and Colorado. Scientists who observed the hot spot in observations from space said “the source is likely from established gas, coal and coalbed methane mining and processing.” Methane emissions are also a problem for taxpayers and tribal members who don’t want to see royalty revenue from natural gas production lost, Goldstein said.

Here’s Which States Are Leaking The Most Natural Gas At The Expense Of Their Taxpayers -- Oil and gas operations located on federal and tribal lands leaked $360 million worth of fuel in 2013, money which would have gone in part to taxpayers and tribes in the form of royalties, according to a new report.  Tuesday’s report was commissioned by the Environmental Defense Fund (EDF) to track fugitive methane emissions, a term referring to methane released when natural gas is leaked, vented, or flared. Methane is a powerful greenhouse gas that contributes to climate change, and is 86 times more effective at trapping heat than carbon dioxide over a 20-year time frame.  The report looked specifically at fugitive methane emissions on federal and tribal lands. It found that, on those lands, more than 65 billion cubic feet (Bcf) of natural gas was wasted via leaks and venting in 2013, representing more than 1 million metric tons of methane. That means that in 2013, emissions from wasted natural gas on federal lands was about the same as the emissions from 5.2 million cars. That’s obviously bad news when it comes to climate change. ThinkProgress has reported extensively on the climate impacts of fugitive methane leaks, and Tuesday’s study was no different. It found that, even though natural gas emits less greenhouse gases than coal or crude oil, enough gas is leaking to negate the bulk of its climate benefits. But it’s also bad for taxpayers and tribes, which are supposed to get royalty payments via the gas derived from their land. “Every molecule of methane that’s being leaked or flared is a molecule that’s not having royalty assessed on it,” Jon Goldstein, a senior energy policy manager at EDF, told ThinkProgress. “Those royalties are what you use to return to states and tribes to invest in schools, to invest in roads — things that really help impacted communities.”

Fracking Babies (To Death) --What’s Killing the Babies of Vernal, Utah? A fracking boomtown, a spike in stillborn deaths and a gusher of unanswered questions…A midwife comes under attack after she starts asking questions about dead babies in a Utah fracking town.  Every night, Donna Young goes to bed with her pistol, a .45 Taurus Judge with laser attachment. Last fall, she says, someone stole onto her ranch to poison her livestock, or tried to; happily, her son found the d-CON wrapper and dumped all the feed from the troughs. Strangers phoned the house to wish her dead or run out of town on a rail. “Before they started spreading their cheer about me, I usually had 18 to 25 clients a year, and a spotless reputation in the state,” says Young, the primary midwife to service Vernal, Utah, a boom-and-bust town of 10,000 people in the heart of the fracked-gas gold rush of the Uintah Basin.  Two years ago, she stumbled onto the truth that an alarming number of babies were dying in Vernal — at least 10 in 2013 alone, what seemed to her a shockingly high infant mortality rate for such a small town. That summer, she raised her hand and put the obvious question to Joe Shaffer, director of the TriCounty Health Department: Why are so many of our babies dying?  In most places, detecting a grave risk to children would inspire people to name a street for you. But in Vernal, a town literally built by oil, raising questions about the safety of fracking will brand you a traitor and a target. Which raises a question you might ask in a state whose legislature is so rabid for oil and gas money that it set aside millions to sue the federal government for the right to drill near Moab and Desolation Canyon, some of the state’s most sacrosanct places: How many dead infants does it take before you’ll accept that there’s a problem? 

Oil, gas spill reports for June 22 -  The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.  Noble Energy Inc. reported on June 17 that the union where a flowline was repaired failed, releasing fluid below the ground surface, outside of Keenesburg. It is approximated that less than five barrels of condensate and less than five barrels of produced water were released. The facility and well head was shut in and an excavation will be initiated. Synergy Resources Corporation reported on June 15 that a production tank drain line was leaking, outside of Greeley. The leak spread underneath the production tank, less than five barrels of produced water and less than five barrels of oil were released. The contaminated soil was placed on a liner and hauled to waste management. The production tank was removed and the drain line on the back of the production tank has been replaced.

Judge to consider request to suspend federal oil, gas rules - — New rules for hydraulic fracturing and other petroleum industry practices on federal land are headed before a judge in Wyoming. Four states and two petroleum industry groups are suing the U.S. Interior Department, saying the rules announced in March are unnecessarily burdensome for oil and gas developers. The rules are set to take effect Wednesday. Colorado, North Dakota, Utah, Wyoming, the Western Energy Alliance and the Independent Petroleum Association of America seek to suspend the rules pending the outcome of their lawsuit. U.S. District Judge Scott Skavdahl has scheduled arguments for and against that request at a hearing Tuesday in Casper. States including Wyoming claim they already have effective regulations for oil and gas drilling. The federal government and environmental groups say the rules are necessary to protect federal land.

Southern Ute tribe challenges new federal fracking law - -— The Southern Ute Indian Tribe has filed a lawsuit against the U.S. Department of the Interior, challenging the Bureau of Land Management’s new hydraulic fracturing rule because tribe members say they have the right to decide their own land-use policies. The rule, which is set to go into effect Wednesday, also is the subject of lawsuits filed earlier this month, including a joint suit by the states of Colorado, Wyoming and North Dakota, as well as another filed by the Western Energy Alliance and Independent Petroleum Producers on behalf of 46 trade associations and royalty-owners groups. Hydraulic fracturing is a technique used by the energy industry to extract oil and gas from rock by injecting high-pressure mixtures of water, sand or gravel and chemicals. Fracking has been a contentious subject. Concerns include groundwater contamination, leakage from wells and an increase in earthquakes in areas where the technique is used extensively. The rule requires a federal permit on public and tribal lands, in addition to the state permits already required. It applies to about 750 million acres of public and tribal lands, as well as private lands where the minerals are federally managed. The Southern Ute lawsuit, filed in federal court in Denver, says the rule conflicts with the Indian Mineral Leasing Act, the Durango Herald reported.

Judge Rules To Temporarily Block Federal Fracking Regulations - Rules for fracking on federal land won’t go into effect Wednesday as planned, after a federal judge in Wyoming issued a temporary block of the rules late Tuesday. U.S. District Court Judge Scott Skavdahl’s decision to issue a temporary stay on the rule wasn’t the full injunction that oil companies had called for in court. But the decision does mean that, while the stay is in place — which will be at least a month, the Casper Star Tribune reports — oil and gas permitting on public lands will go on under existing regulations, instead of under the new regulations. Skavdahl’s decision was based partially on the fact that the government hasn’t yet filed records on how the rule was created, so the judge wanted to give the government more time to do so. Afterward, he’d be able to adequately examine the oil industry’s legal argument.  The Western Energy Alliance, an oil and gas trade group, praised the judge’s decision, as did Wyoming Gov. Matt Mead (R), who’s opposed to the federal rules. Oil industry groups, including the American Petroleum Institute, have claimed that the regulations will increase costs and delays on fracking projects.  Environmental groups weren’t as happy, however. The Sierra Club called the judge’s ruling a “setback for our public lands.”  “While these regulations didn’t go far enough to protect public health, they were a first and necessary step in reining in the dirty and dangerous oil and gas industry, and would begin to hold them accountable for the pollution they cause,” the group said in a statement. “Fracking needs more regulation, not less.”

Bakken oil pipeline under Lake Sakakawea approved -- On Monday the North Dakota Public Service Commission voted in unanimous support of a crude oil pipeline which will run beneath Lake Sakakawea, reports the Forum News Service (FNS). The $105 million pipeline project, owned by Hess Corp., will convert an existing 8-inch pipeline to transfer crude oil produced in the Bakken. The section of pipeline runs for 2.4 miles and was buried six feet beneath the lake bottom in 1992. The segment will connect with a 10-mile portion of new pipeline on the south side of the lake and with a 12.8-mile portion on the north side, which will transfer oil to the Ramberg Truck Facility near Tioga, North Dakota. PSC Chairwoman Julie Fedorchak said the new 12-inch pipeline sections will be buried at least five feet underground. The span of the completed system will have the capacity to transfer up to 76,000 barrels of oil per day. As reported by the FNS, Hess will monitor the pipeline 24/7 from a control room in Tioga which will track the system’s pressure, flow and temperature. Operators of the control room will have the ability to activate emergency shutdown valves in various sections of the pipeline, as well as on both sides of the lake. According to a risk assessment performed by Hess, the pipeline under the lake has a likelihood of leaking once every 190 years. Additionally, in the event of a leak, the impact on water quality, plants and animals would be minimal.

Oil leaks in Divide County; brine spilled in Burke County -- North Dakota health officials say around 42 gallons of oil has spilled in Divide County after a pipeline leaked. Condor Petroleum, Inc., also reported that around 1,638 gallons of produced water, or brine, have been released. The North Dakota Department of Health said it’s evaluating a nearby wetland for impacts to water quality. Officials say a brine spill also occurred in Burke County, around 4 miles northwest of Bowbells. Petro Harvester Operating Company, LLC, said around 2,100 gallons of brine spilled offsite and affected a nearby wetland. State department officials are responding and will work with the company on a remediation plan.

Bakken rig count at five year low -- As of Monday the number of active drilling rigs in the Williston Basin hit its lowest level since December of 2009, reports KTVQ News. Monday’s number of active drilling rigs was tallied at a paltry 75. On this day one year ago, there were 190 drilling rigs active in the Bakken. The record number of rigs in North Dakota’s Bakken was reached on May 29, 2012, with a count of 218. According to industry experts, each active drilling rig can be associated with approximately 120 jobs. The drop in active drilling rigs can be partially attributed to more operators experimenting with using fewer rigs to explore enhanced oil recovery techniques and improved drill times. “This has resulted in a current active drilling rig count that is five to eight rigs below what operators indicated would be their 2015 average if oil prices remained below $65 per barrel.” Like the current rig count, North Dakota’s oil production is also down from the previous month. In March, North Dakota produced 1,190,502 barrels per day, compared to April’s production levels of 1,168,636 barrels per day despite there being more wells producing in April versus March. Helms said that in order to maintain production levels of 1.2 million barrels per day, about 110 to 120 well completions are necessary. At the end of April, there were approximately 925 wells waiting to be completed, an increase of 45 compared to March figures. Although production levels have decreased along with the rig count, North Dakota sweet crude is fetching a higher price on the market compared the recent months. In April the price was around $38 per barrel and about $44 per barrel in May. As of Monday, Bakken crude was priced at $52.25 per barrel.

Oil and natural gas production job declines tend to lag oil price declines - EIA - Employment in oil and natural gas extraction and support activities in the United States reached nearly 538,000 in October 2014, but then it declined by about 35,000 jobs, or 6.5%, over the following six months, through April 2015, according to data from the U.S. Bureau of Labor Statistics (BLS).  Declines in oil and natural gas extraction and support employment tend to lag declines in crude oil prices. As prices of North Sea Brent crude oil fell from their June 2014 level of $112 per barrel, firms reduced the number of new wells drilled and the associated workforce. The count of drilling rigs in the United States, as measured by Baker Hughes, totaled 857 for the week ending June 19, 54% below the same point a year ago and the lowest level in nearly six years.  Declines in production jobs lag oil price declines. In July 2008, Brent crude oil reached a record-high monthly spot price of $133 per barrel, before falling to $43 per barrel by February 2009. Oil and gas production jobs reached a high of 391,000 in September 2008, two months after the oil prices had started declining. Employment in drilling, extraction, and support activities then continued to decline for 13 months, when the number of production jobs dropped by more than 51,000. Most (82%) of the decline in these jobs occurred after oil prices reached the lowest monthly level and were on the rise. BLS data showing declines in national oil and natural gas production jobs between October 2014 and May 2015 represent a contraction of about 6.5% of the industry workforce. Although unemployment rates for states that are heavily dependent on resources production remain well below the national average, the effects of reductions in oil and natural gas jobs are different in key states.

Indebted Shale Oil Companies See Rough Ride Ahead - There has been a lot of speculation about how deeply and how quickly U.S. shale production would contract in the low price environment. The industry has proven resilient, with rig counts having fallen by more than half since October 2014 but actual production not exhibiting a corresponding precipitous decline. That could soon change. Shale companies drastically cut spending and drilling programs following the collapse in oil prices. For example, Continental Resources, a prominent producer in the Bakken, slashed capital expenditures for 2015 from $5.2 billion to $2.7 billion. Whiting Petroleum, another Bakken producer, gutted its capex by half. The list goes on. To be sure, exploration companies are achieving a lot of efficiency gains in their drilling operations. After years of pursuing a drill-anywhere strategy, many are now approaching the shale patch with more forethought and cost-saving technologies. Oil field service companies are also dropping their rates, allowing for drilling costs to decline. That will allow U.S. companies to squeeze more oil out of shale while spending less. However, the improved productivity could be temporary. Much of the cost reductions have come in the form of layoffs rather than fundamental gains in the cost of operations. If drilling activity picks up in earnest, costs could rise again as workers will need to be rehired. The tumbling “breakeven” costs for producing a barrel of oil could be a bit of a mirage. If oil prices remain relatively weak, or even drop further in the second half of the year, the problems could start to mount. Shale wells suffer from steep decline rates after an initial rush of output. That means that unless enough new wells are drilled to offset natural decline, overall output could drop precipitously. Add to that the fact that the companies are bringing in 40 percent less per barrel than they were last year because of lower oil prices, and falling revenues start to become a problem for weaker companies.

Fracking and the Franciscans --Pope Francis is one of the world’s most inspiring figures. There are passages in his new encyclical on the environment that beautifully place human beings within the seamless garment of life. And yet over all the encyclical is surprisingly disappointing. Legitimate warnings about the perils of global warming morph into 1970s-style doom-mongering about technological civilization. The pope has a section on work in the encyclical. The section’s heroes are St. Francis of Assisi and monks — emblems of selfless love who seek to return, the pope says, to a state of “original innocence.”  He is relentlessly negative, on the other hand, when describing institutions in which people compete for political power or economic gain. At one point he links self-interest with violence. He comes out against technological advances that will improve productivity by replacing human work. He specifically condemns market-based mechanisms to solve environmental problems, even though these cap-and-trade programs are up and running in places like California.  You would never suspect, from this encyclical, that over the last decade, one of the most castigated industries has, ironically, produced some of the most important economic and environmental gains. I’m talking of course about fracking. There was recently a vogue for polemical antifracking documentaries like “Gasland” that purport to show that fracking is causing flammable tap water and other horrors. But a recent Environmental Protection Agency study found that there was no evidence that fracking was causing widespread harm to the nation’s water supply. On the contrary, there’s some evidence that fracking is a net environmental plus.

Pipeline firm documents reveal chaos after Santa Barbara County spill - Chaos and delay marked the initial hours after a pipeline burst last month along the Santa Barbara County coast, sending thousands of gallons of oil into the Pacific Ocean. A timeline that Plains All American Pipeline provided to lawmakers was released Wednesday and details the company’s struggle to report the spill to federal regulators in the hours after the leak was identified. Lawmakers wanted to know why the company did not alert federal regulators to the leak until nearly 3 p.m. May 19 despite the fact that operators in Midland had shut down the line at 11:30 a.m. According to the company timeline, workers on the ground near Refugio State Beach didn’t know about the leak until they received reports of oil in the water from state parks staff around noon. Initially, company employees struggled to spot oil leaking from the underground pipeline. Around 1:30 p.m., they realized oil was reaching the ocean via a storm culvert near where a corroded pipe had broken. Meanwhile, company officials in Bakersfield who were responsible for alerting federal regulators were unable to contact employees on the ground near where Line 901 ruptured. In the letter to lawmakers, the company said workers in the field were “busy dealing with the immediate demands and distractions.” Finally, at 2:56 p.m., federal regulators were notified. Even after alerting federal regulators to the spill, though, company employees in Bakersfield provided an inaccurate estimate of the volume of oil that had spilled.

ExxonMobil temporarily halts oil production off Santa Barbara after oil spill - ExxonMobil has shut down oil production at its three platforms off the Santa Barbara County coast a month after a corroded pipeline owned by Texas company Plains All American Pipeline burst, effectively cutting off the flow of Exxon’s crude. The oil giant halted operations at the Heritage, Harmony and Hondo offshore platforms late last week after it exhausted storage space at an onshore facility near El Capitan State Beach, company spokesman Richard Keil said Tuesday. The company had hoped to avoid a shutdown by using a fleet of 6,720-gallon trucks to make as many as 192 daily trips on U.S. 101 to ship the oil to nearby refineries. A Santa Barbara County official rejected that “emergency” proposal for an expedited trucking permit this month. Prior to the shutdown, Exxon had slowed daily production by nearly two-thirds and began storing oil in large tanks after the May 19 rupture spilled up to 101,000 gallons of crude oil along the Gaviota coast.. The company is still considering its next steps during the temporary shutdown, Keil said.

Amid fracking boom, cities fear explosive safety risk it can carry -- While the global fracking boom has stabilized North America’s energy prices, Chicago —  America ’s third largest city and the busiest crossroads of the nation’s railroad network — has become ground zero for the debate over heavy crude moved by oil trains. With the Windy City experiencing a 4,000 percent increase in oil-train traffic since 2008, Chicago and its many densely populated suburbs have become a focal point as Congress considers a number of safety reforms this year. Many oil trains are 100 or more cars long, carrying hydraulically fracked crude and its highly explosive, associated vapors from the Bakken region of Montana , North Dakota , Saskatchewan , and Manitoba . A majority of those trains also cross northwest Ohio on their way to refineries and barge terminals along the East Coast. Derailments can lead to massive explosions, such as the one on July 6, 2013, when a runaway train derailed in Lac-Megantic, Que., just across the U.S.-Canada border from Maine . The resulting explosions and fire killed 47 people and leveled the town’s business district. “For me to assure my community there’s no risk, I would be lying,” Aurora , Ill. , Mayor Tom Weisner told reporters on the Halsted Station’s elevated platform near downtown Chicago last week. The discussion was arranged by the Institutes for Journalism & Natural Resources, a group that promotes better environmental reporting.

Forums will focus on upcoming decisions affecting oil train traffic - Laura Ackerman works at the Saranac Building in Spokane, a short walk from BNSF Railway’s train tracks. Oil trains pass her office on a daily basis, and more will roll through downtown if a new crude oil terminal is built 350 miles away in Vancouver, Washington. Upcoming decisions on Western Washington energy facilities will affect local residents, said Ackerman, oil policy director for The Lands Council. The council is among several environmental groups hosting coal and oil train forums in Spokane and Sandpoint this week. “Ports in Vancouver and Longview will be making decisions that affect us, because we’ll get the train traffic,” Ackerman said. One of the forum’s speakers is Eric de Place of Seattle’s Sightline Institute, who has charted proposed oil refinery expansions, new oil shipping terminals and coal export terminals in Washington and Oregon. There are 10 existing or proposed facilities that accept or would accept crude oil from North Dakota’s Bakken region, and three proposed coal export terminals. “We’re really seeing something that’s unprecedented — the sheer scale of the fuel flowing through these projects,” said de Place, policy director for the think tank, which promotes sustainable development. The Northwest lies between the nation’s coal and oil reserves and the energy-hungry markets of Asia. That’s giving the region a role in shaping national energy policy through the decisions it will make on coal and oil facilities, de Place said.

Railroads use new oil shipment rule to fight transparency – Railroads may have found a new weapon in their fight to keep information about oil train shipments from the public: a federal rule that was supposed to increase transparency. The U.S. Department of Transportation insists that its May 1 final rule on oil trains, which mostly addresses an outdated tank car design, does not support the railroads’ position, nor was it intended to leave anyone in the dark. But in recent court filings in Maryland, two major oil haulers have cited the department’s new rule to justify their argument that no one except emergency responders should know what routes the trains use or how many travel through each state during a given week. Those details have been publicly available in most states for a year, though some sided with the railroads and refused to release them. The periodic reports have helped state and local officials with risk assessments, emergency planning and firefighter training. The department’s rule was expected to expand the existing disclosure requirements. In its 395-page rule, the department acknowledged an overwhelming volume of public comments supporting more transparency. But ultimately, it offered the opposite. The final rule ends the existing disclosure requirements next March. Railroads no longer would be required to provide information to the states, leaving emergency responders to request details about oil train shipments on their own, and the public would be shut out entirely.

Will Re-Fracking be the Shale Drilling Industry’s Next Big Move? -- With oil prices continuing to languish, companies like Halliburton and Schlumberger have started talking up a way to get more shale oil and gas for less money: re-fracking wells drilled over the past 10 years, kick-starting flagging production and pumping out more shale oil and gas while spending less than the cost of a new well. Excitement has spread among oil companies and investment analysts alike. “You want to talk about the next step to increasing production without increasing costs?” Carl Larry, director of oil and natural gas at Frost & Sullivan, a consulting firm, told Bloomberg. “Re-fracking looks great.” “In terms of the market potential, I think you’re talking billions in terms of revenue opportunities over an extended period of time,” Schlumberger CEO Paal Kibsgaard told investors during a quarterly conference call this year. “[I]n terms of how many wells, I would say there are thousands of wells in North America land that are candidates for refracturing, and this is both shale liquids and shale gas.” “If you look at the top operators across North America that we work with, there’s not a single one of them that’s not talking about re-fracks today,” David Adams, a Halliburton vice president, told Bloomberg. “E&Ps are no longer on a treadmill,” IHS Energy Senior Consultant James Coan, announced on May 20, according to E&P Magazine, (E&P refers to Exploration and Production oil and gas companies). Despite the headlines touting re-fracking as a ticket to solvency for drillers despite low oil prices, many are skeptical that the technology is nearly as ready as the oil industry would like it to be. Early efforts to re-fracture wells have repeatedly run into stumbling blocks, earning it the nickname “pump and pray” within the industry.

Chemicals from fracking could cause significant pollution and damage to wildlife - A new analysis for chemicals charity CHEM Trust finds that chemicals from fracking sites have the potential to cause significant pollution [1]. This pollution with hazardous chemicals could cause damage to sensitive ecosystems, including killing wildlife, as has happened in the US. Important UK wildlife sites are threatened, which could harm a wide range of species such as butterflies, dragonflies and bats.  CHEM Trust makes 18 recommendations for vital improvements that are needed in the regulation of fracking in order to reduce risks to the environment and human health. In addition, it warns that cuts in regulators such as the Environment Agency in the UK could jeopardize the effectiveness of any regulations [2].  This publication comes days before Councillors in Lancashire, in North West England, vote on whether to permit Cuadrilla to frack two sites [3], which could potentially affect wildlife in and around Morecambe Bay, a wetland of international importance under the Ramsar convention [4]. CHEM Trust is sending our report to the key Councillors in Lancashire prior to this vote. The European Commission is also currently considering the effectiveness of the current regulations on fracking [5], and CHEM Trust will be sending our report to the EU’s Environment Commissioner and key Members of the European Parliament, in order to push for stronger regulation. We have already met officials in the EU’s environment department to call for tighter controls on chemical use in fracking operations. High volume hydraulic fracturing – or fracking – requires large volumes of water and considerable quantities of a range of chemicals; in the USA this has included chemicals with hormone disrupting properties [6]. The liquid that flows back from the well can also contain additional pollutants. Experience in the USA has found that fracking wells, pipes and other equipment can leak, causing pollution and damage to wildlife. Given that full scale fracking requires a very large number of wells, even a small rate of well failure will lead to pollution.

EPA’s new fracking study: A close look at the numbers buried in the fine print – At least 12.2 million Americans live or drink water from within a mile of a fracked well When EPA’s long-awaited draft assessment on fracking and drinking water supplies was released, the oil and gas industry triumphantly focused on a headline-making sentence: “We did not find evidence of widespread, systemic impacts on drinking water resources in the United States.”  But for fracking’s backers, a sense of victory may prove to be fleeting.  EPA’s draft assessment made one thing clear: fracking has repeatedly contaminated drinking water supplies (a fact that the industry has long aggressively denied).  Indeed, the federal government’s recognition that fracking can contaminate drinking water supplies may prove to have opened the floodgates, especially since EPA called attention to major gaps in the official record, due in part to gag orders for landowners who settle contamination claims and in part because there simply hasn’t been enough testing to know how widespread problems have become.  And although it’s been less than a month since EPA’s draft assessment was released, the evidence on fracking’s impacts has continued to roll in.  A study in Texas’ Barnett shale found high levels of pollutants – volatile organic compounds, heavy metals, and known carcinogens – in many people’s drinking water, based on testing from over 500 water wells. The contaminants found were associated with the shale drilling industry, but the researchers cautioned it was too soon to say whether the industry actually caused the contamination. But the association was strong, the researchers said. “In the counties where there is more unconventional oil and gas development, the chemicals are worse,” lead researcher Zachariah Hildenbrand told Inside Climate News. “They're in water in higher concentrations and more prevalent among the wells. As you get away from the drilling, water quality gets better. There's no doubt about it.”

Is the EPA Fracking Report Science Fiction? -- “Hydraulic fracturing activities have not led to widespread, systemic impacts to drinking water resources.” Or so says the U.S. Environmental Protection Agency’s (EPA) press statement announcing the release of the agency’s draft report on the risks to drinking water from fracking, and a legion of stories in the popular press that followed.  But is that what the scientific study itself found? (Spoiler alert: no)  A thorough review of the study suggests that the EPA misrepresented the findings of its own study in both the press release and the high-level summary. EPA’s statement that it did not find evidence of widespread, systematic impacts fails to accurately reflect the uncertainty in the underlying data. The fact is that EPA cannot say with any certainty how widespread or systematic impacts to drinking water from fracking are, due to a lack of available data. In an attempt to summarize this high-level finding from the study’s Executive Summary, “We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States,” EPA’s press statement changed the meaning.  As I explained in my blog on the report, not finding evidence of impacts is not the same thing as not finding impacts. EPA’s press statement fails to accurately communicate this finding.

America’s Dangerous Pipelines: A new analysis of oil and gas pipeline safety in the United States reveals a troubling history of spills, contamination, injuries and deaths.This time-lapse video shows pipeline incidents from 1986 to 2013, relying on publicly available data from the federal Pipeline and Hazardous Materials Safety Administration. Only incidents classified as “significant” by the agency are shown in the video. “Significant” incidents include those in which someone was hospitalized or killed, damages amounted to more than $50,000, more than 5 barrels of highly volatile substances or 50 barrels of other liquid were released, or where the liquid exploded or burned.  Popular viral website Upworthy calls this video "One Time-lapse Big Oil Doesn't Want You to See." According to the data, since 1986 there have been nearly 8,000 incidents (nearly 300 per year on average), resulting in more than 500 deaths (red dots on the video), more than 2,300 injuries (yellow dots on the video), and nearly $7 billion in damage.   Since 1986 pipeline accidents have spilled an average of 76,000 barrels per year or more than 3 million gallons. This is equivalent to 200 barrels every day.    Oil is by far the most commonly spilled substance, followed by natural gas and gasoline. The data does not separate oil by whether it is light crude or heavy crude typical of tar sands oil, which has proven exceedingly difficult to clean up and is the variety that would flow in the Keystone XL pipeline. 

Oil Leaks and Spills, Exploding Oil Bomb Trains & Pipelines – But Americans Are “Safe” America is “awash” in oil and gas – but not in the way the Petroleum Industry wants you to believe.  Since the start of the era of Big Oil over a century ago, the amount of oil (and other hydrocarbons, including natural gas) spilled or dumped into America’s soil, waterways, and air have caused an increasingly larger area of land to become contaminated, and caused growing public health problems across the US.  Today, as we hear Industry talk of making the US “the Saudi Arabia of the West”, more and more pipelines and processing facilities, and trains carrying volatile Bakken shale oil have begun to appear in communities across America’s, regardless if there is active drilling happening there.  These developments are endangering increasing numbers Americans by exposing them to ever greater risk and health problems as the pace continues to quicken. Now, while the Petroleum Industry claims that transporting explosive shipments of oil and natural gas via rail or pipeline through hundreds of communities is “safe”, the data involving accidents tells another story.  And while the claim that “pipelines are safer than trains” may have some statistical validity when sheer numbers are compared, the reality is that pipelines leak, corrode and they explode – especially when old or not properly maintained and monitored – and the frequency of these “accidents” is increasing along with the number of infrastructure projects designed to bring OUR oil and gas to ports for refining and processing in order to be shipped overseas where higher profits can be realized. The safety, health and well-being of Americans are being sacrificed for corporate greed under the bogus claim that we will become “energy independent” if we allow the Petroleum Industry to get their way.  Unfortunately, given the growing problems associated with explosions, fires and deaths from transporting oil & natural gas, and given that we can only burn about of one third of CURRENTLY KNOWN reserves before cooking the planet  and causing catastrophic climate change, allowing the Petroleum Industry to get their way is tantamount to committing suicide.

Cheap Energy Poised to Shake Up Pipeline Industry - WSJ: Low oil-and-gas prices are poised to shake up yet another part of the nation’s energy economy, spurring a merger battle among companies that own the key pipelines that move fuels around the country. Williams WMB -3.15 % Cos., a large natural-gas pipeline operator, said it hired bankers and lawyers to help it review strategic alternatives, including a sale, after rejecting a roughly $48 billion unsolicited takeover that would have been the largest energy deal in the U.S. this year.  Cheap energy has stronger companies across the industry—including exploration and drilling companies—eyeing weaker rivals. But deals have been few as buyout candidates hold out for richer offers. Dallas-based pipeline company Energy Transfer Equity ETE -1.52 % LP. said it has been pursuing Williams for six months. And it isn’t giving up, saying the proposed all-stock deal would be “the right merger at the right time.” Other pipeline giants also may enter the Williams bidding, said analysts.Analysts also say other companies that run major pipelines may be merger candidates, including Oneok Inc., OKE -0.37 % another Tulsa company that owns a skein of natural-gas lines and is building a big new one to Mexico. Regional specialists may also be acquisition targets, according to Credit Suisse, which named Targa Resources Corp. TRGP 1.30 % , a large pipeline operator in West Texas. Oneok declined to comment. Targa didn’t respond to requests for comment.

Mexico announces underwater gas pipeline to Texas (AP) — The Mexican government has announced plans for nearly $10 billion worth of electricity and natural gas infrastructure projects, including a gas pipeline under the Gulf of Mexico from Texas to the port of Veracruz. The Federal Electricity Commission said Monday that the costliest project would be the 500-mile underwater pipeline for carrying natural gas from South Texas. The pipeline is intended to go into operation in June 2018. Officials hope that facilitating the importation of cheap natural gas will help lower Mexico’s electricity rates. Other projects include power plants, electricity distribution, transmission lines and electrical substations. Mexico passed a broad overhaul of its energy sector last year aimed in part at attracting more investment to electricity and petroleum.

Pipelines winning as crude slump hits oil by rail - The flow of North American crude oil by rail will stall this year at about 700,000 carloads – instead of rising by 40 per cent – amid low prices and new pipeline capacity, says Taylor Robinson, president of Chicago-based PLG Consulting. Shippers in Western Canada have been favouring pipelines over crude by rail as the price difference between Western Canadian oil and West Texas intermediate has narrowed amid crude’s plunge. Currently, the spread between the two grades is less than $8 (U.S.), far less than the $24 it costs to move one barrel from Alberta to the Gulf Coast. It costs about $12 to ship a barrel by pipeline.“It’s hard to make crude by rail out of Western Canada work in a low-price environment. Pipelines are going to win in the end,” Mr. Robinson said by phone. Also dampening oil volume is added capacity on Enbridge Inc.’s Western Canadian pipeline network and reduced oil supply as a result of maintenance-related shutdowns and fires in Alberta’s oil patch. This means there will be room in the pipelines for the expected rise in oil production later this year, Mr. Robinson said. The slump has called into question the viability of several crude-by-rail terminals in Western Canada, including the $360-million Canexus facility in Bruderheim, Alta., which was sold last week to Cenovus Energy Inc. for $75-million. “No one is close to capacity and I’m wondering if some of those facilities are even in service,” Mr. Robinson said.

Bombing of Colombian pipeline causes ‘environmental tragedy,’ Ecopetrol says - Several thousand barrels of crude oil have spilled into a river in southwest Colombia after insurgents bombed a pipeline, state-run oil company Ecopetrol said on Wednesday, describing the damage as an “environmental tragedy.” The bomb attack occurred Monday but was not previously disclosed. It was one of spate targeting oil installations this month and will affect several thousand families, Ecopetrol’s Chief Executive Officer Juan Carlos Echeverry told reporters. As many as 4,000 barrels of spilled oil have contaminated rivers used for fishing and fresh water supplies.  “It’s a social and environmental tragedy,” Echeverry said, describing the spill as “senseless.” The financial cost to Ecopetrol will be minimal compared with the harm done to the environment and affected communities, he said. The slick is drifting down the Rosario River , from Pambil in Narino province, and is expected to reach the Pacific Coast by Wednesday evening. The company has deployed booms to recover some of the crude but that will be made harder by rebel presence at along the river’s path. Although Ecopetrol – 88 percent owned by the government – did not name the rebel group, the Revolutionary Armed Forces of Colombia, a Marxist group known as the FARC, operate in the area. The 300-km Transandino pipeline, attacked six times this year, was not operating at the time of Monday’s bombing but it leaked several thousand barrels of residual crude.

Hackers’ Favorite Target: Big Oil and All That Deadly Equipment -- Hackers have made the energy industry a favorite target. A study conducted in April by Symantec Corp., the world’s biggest cybersecurity firm, found that computer-system invaders attacked 43 percent of global mining, oil and gas companies at least once last year. Like all big enterprises, energy companies want to protect sensitive data. But they have another dimension to worry about – – the potential for hackers to cause physical damage to equipment such as drilling rigs or power stations. While the industry has long prioritized physical security, with electric fences and cameras typically standing guard at refineries and power plants, cyberdefenses are only recently getting similar attention. 

Growing Mobilization Against Introduction of Fracking in Spain -- Thousands of people in Spain have organised to protest the introduction of “fracking” – a controversial technique that involves pumping water, chemicals and sand at high pressure into shale rock to release gas and oil. “We are all different kinds of people, local inhabitants, who love our land and want to protect its biodiversity,” activist Hipólito Delgado with the Asamblea Antifracking de Las Merindades, a county in the northern province of Burgos , told Tierramérica. The company BNK España, a subsidiary of Canada ’s BNK Petroleum, has applied for permits to drill 12 exploratory wells and is awaiting the environmental impact assessment required by law. On May 3 some 4,000 people demonstrated in the town of Medina de Pomar in the province of Burgos, demanding that the government refuse permits for exploratory wells because of the numerous threats they claimed that hydraulic fracturing or fracking posed to the environment and health. While no permit for fracking has been issued yet in Spain , 70 permits for exploration for shale gas have been granted and a further 62 are awaiting authorisation, according to the Ministry of Industry and Energy.  

Crude Oil Inventory Drops Last Week, Lower than Expectations - In its Weekly Petroleum Status Report released on Wednesday, June 24, the EIA (U.S. Energy Information Administration) announced a decrease of 4.9 million barrels (or MMbbls) in crude oil inventories for the week ended June 19. Analysts were expecting a much smaller decrease of 2 MMbbls.  Crude oil inventories peaked at 490.9 million barrels in the April 24 week. It was the highest in 80 years. Crude oil prices and energy companies have been battered by surging supplies. In the week ending May 1, inventories began turning downward for the first time in four months, as you can see in the above graph. This signaled an easing of the supply glut. Inventories continued to drop in May. Now they’re down ~28 MMbbls. Last week, inventories stood at ~463 million barrels.It remains to be seen if the downturn in inventories will go deep enough to sustain confidence in the energy industry. Production is a key thing to watch.

Crude Oil Price Slips as Inventory Declines Continue - The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 4.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 463 million barrels. The commercial crude inventory remains near levels not seen at this time of year in at least the past 80 years. Tuesday evening, the American Petroleum Institute (API) reported that crude inventories fell by 3.2 million barrels and gasoline inventories also declined by 2.9 million barrels in the week ending June 19. For the same period, analysts estimated a decrease of 2.1 million barrels in crude inventories. Total gasoline inventories increased by 700,000 barrels last week, according to the EIA, and remain in the upper half of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged about 9.4 million barrels a day for the past four weeks, up by 4.5% compared with the same period a year ago. The increase in gasoline inventories is working to lower the prices that consumers pay at the pump. Crude oil exports have doubled from 273,000 barrels a day a year ago to 571,000 barrels a day last week, and net exports of petroleum products totaled 3.74 million barrels a day, compared with 3.12 million a year ago. Total products supplied reached 20.68 million barrels a day, up nearly 2 million barrels a day year-over-year. U.S. producers are still working through high crude inventories and refineries continue to benefit.

Stocks Jump, Oil Dumps After DOE Reports Bigger Than Expected Inventory Draw, Production Rises (Again) - Against expectations of a 2.0 mm bbl inventory draw, DOE reports a substantial 4.93mm bbl draw (double last week's draw) extending the streak of inventory drawdowns to 8 weeks. Crude production overall raose 0.16% to near a new cycle record high. The reaction - oil algos ran stops at highs then dumped... stocks just ripped - which allmakes perfect sense. Inventories have fallen for 8 straight weeks... (graphs) But production near a new record high...

U.S. weekly oil rig count decline slows – Baker Hughes -- Energy firms pulled three rigs from U.S. oil fields this week, the smallest drop in five weeks, data showed on Friday, a sign the collapse in drilling is coming to an end as crude prices recovered after falling 60 percent from last June to March. It was the 29th straight weekly decline, bringing the total down to 628, the lowest since August 2010, oil services company Baker Hughes Inc said in its closely followed report. In the latest week, drillers removed two rigs in the Permian, the biggest U.S. shale oil play in West Texas and eastern New Mexico, and three in the Bakken centered in North Dakota. Experts expect the rig count to bottom out soon. “We expect the rig count decline to remain lumpy in the coming weeks and expect to see a few weeks with some rig additions, offset by larger declines in subsequent weeks, before we reach an absolute bottom,” analysts at Evercore ISI, a banking advisory firm, said in a report this week. The Evercore ISI analysts said that bottom will most likely come early in the third quarter.With U.S. crude futures averaging around $60 a barrel since the start of May – up 40 percent from a six-year low in March – several drillers, including most recently WPX Energy Inc in the Bakken, said they plan to return to the well pad due in part to lower drilling costs.U.S. drillers eliminated thousands of jobs and idled more than half of their oil rigs since the total peaked at a record 1,609 in October in response to a 60 percent fall in crude prices from last June to March.

US oil rig count falls for 29th straight week, total count climbs -- The total count of US oil and gas rigs climbed this week, although oil rigs declined for a 29th straight week. The oil rig count fell by three to 628, the lowest since August 6, 2010. The number of oil and gas rigs in operation rose by two to 859. Last week, the number of oil rigs in operation fell for a 28th consecutive week, by four, and the combined count of oil and gas rigs fell by two. Following the data, West Texas Intermediate crude oil was lower but little changed, at around $59.53 per barrel. In the last week's 'oil rig monitor,' Goldman Sachs researchers wrote: "Should WTI prices remain near $60/bbl, US producers will ramp up activity given improved returns with costs down nearly 30% and producers increasingly comfortable at the current costs/revenue/funding mix." Here's the latest chart of the oil rig count:

U.S. rig count rises as oil-directed rigs drop for 29th week: Baker Hughes: The U.S. rig count has ended a 28-week slide with Baker Hughes reporting the first addition of rigs since Dec. 5. And while the overall count may have increased, the number of oil-directed rigs continued to drop. According to Baker Hughes, 859 rigs were turning to the right on Friday, two more than the previous week. However, the number of oil-directed rigs slipped three to 628, with the Permian and Williston basins losing 2 and 3 rigs, respectively. The Eagle Ford stayed flat with 83 oil-directed rigs. Gas-directed rigs rose five to 228, while miscellaneous rigs held steady at three.

US Rig Count Increases For First Time In 29 Weeks -- After 28 consecutive weeks rig counts declines in America - despite crude production levels hitting new cycle record highs - Baker Hughes reports Total Rig Count increased 2 to 859 this week. The oil rig count dropped 3 to 628. Crude's price reaction is negligible. Total Rig Count rose for first time since Dec 5th...But production just keeps rising...Charts:Bloomberg

Oil prices around $60 as demand balances glut - Crude oil prices steadied on Thursday as strong demand for oil products helped to balance a global overhang of crude oil for immediate delivery. North Sea Brent crude oil traded within a fairly narrow range as investors eyed a weak physical crude market in the Atlantic basin amid reports of stronger demand for gasoline and diesel in the United States and Europe. Official prices for Nigerian crude have hit their lowest in at least a decade with as much as 10 million barrels of unsold light, sweet crude oil capping Atlantic basin prices. But demand for oil products is fairly strong. U.S. gasoline demand in the week to June 19 hit the highest seasonal level since 1991, according to the U.S. Energy Information Administration (EIA). Brent for August was flat at $63.49 a barrel by 1250 GMT, after ending the previous day down 96 cents, or 1.5 percent. U.S. crude for August was down 25 cents at $60.02 a barrel, after finishing Wednesday down 74 cents.  “Reports of unsold physical cargoes in the North Sea combined with a Brent crude oil contango that shows no signs of tightening are a warning that the market is currently not tightening up into the high demand season as one should expect,” . An EIA report on Wednesday said U.S. gasoline stocks climbed 680,000 barrels to 218.49 million in the week to June 19. A Reuters poll had indicated a 304,000-barrel drop.

Falling Oil Prices and Global Saving - NY Fed - The rise in oil prices from near $30 per barrel in 2000 to around $110 per barrel in mid-2014 was a dramatic reallocation of global income to oil producers. So what did oil producers do with this bounty? Trade data show that they spent about half of the increase in total export revenues on imports and the other half to buy foreign assets. The drop in oil prices will unwind this process. Oil-importing countries will gain from lower oil bills, but they will also see a decline in their exports to oil-producing countries and in purchases of their assets by investors in these countries. Indeed, one can make the case that the drop in oil prices, by itself, is putting upward pressure on interest rates as income shifts away from countries that have had a relatively high propensity to save.  One measure of petrodollars is the total export earnings of oil-exporting countries, as defined by the International Monetary Fund (IMF), found in the IMF’s Direction of Trade database. As of mid- 2014, when oil prices were near their peak, exports from these countries totaled $2.2 trillion. This was quite a change from 2000 when exports were only $0.4 trillion. The chart below shows a tight connection between these two factors, with the simple regression line finding that a $10 increase in oil prices has been correlated with a $200 billion increase in export revenue. Oil-exporting countries used much of the increase in export revenues to buy more imported goods, with these purchases rising from $0.2 trillion in 2000 to $1.4 trillion in mid-2014. The increase came in roughly equal measure from advanced and other emerging market economies, with a $200 billion jump in purchases from China and the euro area and a $100 billion increase in purchases from the United States. Japan is notable in that its export sales increased by only $30 billion, even though its imports from the oil-exporting countries increased $125 billion. A simple regression like the one above has a $10 increase in the price of oil correlated with $70 billion increase in imports of goods by oil-exporting countries.

BP Data Suggests We Are Reaching Peak Energy Demand -- Some people talk about peak energy (or oil) supply. They expect high prices and more demand than supply. Other people talk about energy demand hitting a peak many years from now, perhaps when most of us have electric cars.  Neither of these views is correct. The real situation is that we right now seem to be reaching peak energy demand through low commodity prices. I see evidence of this in the historical energy data recently updated by BP (BP Statistical Review of World Energy 2015). Growth in world energy consumption is clearly slowing. In fact, growth in energy consumption was only 0.9% in 2014. This is far below the 2.3% growth we would expect, based on recent past patterns. In fact, energy consumption in 2012 and 2013 also grew at lower than the expected 2.3% growth rate (2012 – 1.4%; 2013 – 1.8%).  Recently, I wrote that economic growth eventually runs into limits. The symptoms we should expect are similar to the patterns we have been seeing recently (Why We Have an Oversupply of Almost Everything (Oil, labor, capital, etc.)). It seems to me that the patterns in BP’s new data are also of the kind that we would expect to be seeing, if we are hitting limits that are causing low commodity prices. One of our underlying problems is that energy costs have risen faster than most workers’ wages since 2000. Another underlying problem has to do with globalization. Globalization provides a temporary benefit. In the last 20 years, we greatly ramped up globalization, but we are now losing the temporary benefit globalization brings. We find we again need to deal with the limits of a finite world and the constraints such a world places on growth.

The New Big Oil Is State-Owned - From 2005 to 2015, global oil usage has only increased from 83 million to 93 million bpd (1.13% CAGR). However, the overall rate at which the Top 10 has increased production has been at a 1.29% CAGR pace, and their production now makes up about 58% of all global production. The biggest oil and gas companies with the most impressive increases in production are all state-owned. Saudi Aramco, the world's largest producer, increased production from 10.8 million bpd (2004) to 12 million bpd (2014). NK Rosneft' OAO, National Iranian Oil, Petrochina, and Kuwait Petrol Corp all saw sizeable increases. The only company to see a big decrease, however, was also state-owned (Gazprom). Could this be the reason for Saudi Arabia's stance on oil supplies? There's an incredible energy development we've been keeping track of for you over the past year... It's the reason Saudi Arabia is acting in desperation... depressing oil prices... and even risking internal unrest. Their (and OPEC’s) very survival is being threatened. And we believe we’ve put together an incredible video revealing how it works. View the video here... Oil and gas continues to make up the majority of the global energy mix with 33% and natural gas at 24%. That said, based on the CAGRs above, it does seem that we are making progress in tapering the growth of production. Human population and the economy are growing at rates higher than 1.13%, so that means oil is giving up ground to other energy sources.

To Many Iraqis, U.S. Isn’t Really Seeking to Defeat Islamic State - WSJ: —In a tent city under a highway overpass in Baghdad, refugees from Iraq’s Sunni province of Anbar were unanimous about whom to blame for their misery. “I hold Americans responsible for destroying Anbar,” said former policeman Wassem Khaled, whose home was taken over by Islamic State, or ISIS, after the Iraqi army fled from Anbar’s provincial capital of Ramadi last month. “We all know that America is providing ISIS with weapons and food, and that it is because of American backing that they have become so strong,” added Abbas Hashem, a 50-year-old who also escaped from Ramadi and now lives in the makeshift Baghdad camp that is only occasionally supplied with water. “It is a pervasive view throughout Iraq and throughout the region that we are simply disengaged, that we are not prepared to exercise the kind of weight that might actually make a difference,” said Mr. Crocker, now dean of the Bush School of Government at Texas A&M University. “And in the case of Iraq and Anbar, we are dealing with individuals, groups and tribes that remember a very different U.S. engagement. They know it, they lived it, and now the level of bitterness and mistrust is profound,” he said. This spreading perception that the U.S. isn’t really interested in defeating Islamic State has undermined local resistance to the militant group in Anbar in recent months. It represents a major obstacle to recruiting local Sunni tribes—one of the U.S. strategies in the war—provincial leaders say.

Hello world. I’m the PetroEuro! -- Back in November we meandered through the possible implications of there being no more petrodollars in the system (on account of US shale oil energy liberation). Since then, we’ve also been thinking about the possible implications of there being no more sweatdollars in the system (on account of US re-shoring and digital manufacturing trends). So what happens if key dollar recycling pathways were to be significantly closed off or contracted? Privately, we’ve speculated the situation could over time lead to the rise of a new international funding currency front runner. (Though, certainly not because the US is losing influence. More because, shale oil and a labour surplus means it may not be in America’s interest to defend reserve-currency status at all.) Some say if a new reserve currency were to arise it would undoubtedly be the Chinese renminbi. But we’re more partial to the view that it might actually be the euro.. And there is a lot of theory out there to suggest that reserve currencies emerge from shifts in global trading trends and the core needs of value-adding powers. Loosely speaking, the world is prepared to hold the IOUs of countries it can’t afford to annoy, but which it is confident will use their advances of base resources, commodities and labour for value-added purposes they too can benefit from in the long run. While China fits that bill as much as the eurosystem, another core part of the equation, however, is trusting that the power you’re extending your materials or labour to won’t forget that it owes you something in return. It’s also pretty useful if the IOUs extended can buy you access to their territory, including sizeable property rights or the rights to investments.It’s on those last two points that China is disadvantaged versus Europe.

What Would A Saudi-Russian Partnership Mean For World Energy? -- As we recently noted, Russia and Saudi Arabia appear oddly allied in recent weeks. What happens when two nations, that together account for more than fourth quarter of global oil production, begin collaborating on future energy projects?'s Gaurav Agnihotri explains... Russian President Vladimir Putin met Saudi Prince Mohammad in St. Petersburg on June 18 at a meeting in which Saudi Arabia and Russia, the world’s leading two oil giants, decided to form a working group for joint energy projects. “At the end of the year, in October, we will summon a meeting of the intergovernmental commission, which hasn’t operated for five years,” Russia’s Energy Minister Aleksandr Novak said recently at the St Petersburg economic forum. He further clarified that his country was not looking to replace its existing oil and gas partners but wanted to create newer ones. “There are no specific projects in the energy field yet, we only have an agreement to create a working group between our ministry and the Saudi Arabian oil ministry, which, together our companies will work on specific projects,” the Energy Minister told reporters.What are these ‘specific’ projects that Russia is talking about? Why are the two biggest producers of oil in the world now cooperating? Is this a natural response to the U.S. and EU sanctions that have targeted Russia’s oil and gas industry, specifically its arctic exploration and unconventional drilling sector?

In Historic Shift, Russia Overtakes Saudi Arabia As China's Number One Oil Supplier - Over the course of the last seven months, we’ve painstakingly documented the quiet deathof petrodollar mercantilism, the USD recycling system and fixture of the post-war global economic order that has served to underwrite decades of dollar dominance.  As a reminder, the petrodollar system works like this: oil export countries recycle the dollars they receive in exchange for their oil exports by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one holds US-denominated assets and printed US currency) loop.  The flow of petrodollar reserves into financial markets peaked in 2006 and turned negative for the first time last year when Saudi Arabia famously Plaxico’d itself (and the US) by glutting the world with crude, in an attempt to crush Putin, and subsequently, to take out the US crude cost-curve. And while the recent drawdown in oil exporters’ petrodollar reserves suggests Saudi Arabia’s actions were sufficient in and of themselves to catalyze the system’s demise, the US has accelerated the process by backing economic sanctions on Russia which, starting this year, began to settle oil and natural gas exports to China in yuan, marking what we have hailed as the  the intersection of two critically important themes that have far-reaching geopolitical and economic consequences: 1) the death of petrodollar mercantilism, and 2) the idea of yuan hegemony. 

The Growing China-Latin American Energy Relationship -- With Li Keqiang’s recent business and investment blitz through Latin America, many in the region are hopeful these increased commitments will result in expanding business and trade links between the two. The energy sector represents one of the largest opportunities for expanding trade between China and Latin America. China has made a concerted effort to expand energy links in the region and to assiduously build up dependencies, especially in form of oil-backed loans. This has resulted in oil exports from the region realizing near double-digit growth to China over the past decade, a relationship that will continue to expand for several reasons. First, the U.S. shale oil and gas revolution is forcing major changes on Latin American producers. Not only do these exporters have to adjust to lower sustained prices, but they must also adapt to continual reductions in energy exports to the United States due to the shale boom. With the U.S. rapidly slashing its dependence on imported oil, the market for Latin American oil producers has shrunk considerably. According to EIA data for the five years leading up to 2014, Argentina, Brazil, Venezuela, and Mexico have all seen their exports to the U.S. fall. The reduction in oil exports to the United States will force Latin American suppliers to look elsewhere with vigor, in a bid to diversify away from the U.S. market, and China seems the logical destination. Second, due to reduced exports to the U.S. market and the small Latin American share of Chinese oil imports, there’s room to grow on both sides of the ocean. This trend has been underway for several years already, but shale growth has accelerated the growing energy relationship between China and Latin America, as China picks up the extra barrels that the U.S. is no longer interested in.

China’s Plan for Local Debt Amounts to a Bailout - WSJ: —China is bailing out the nation’s heavily indebted local governments, relying on trusted methods to keep its financial system stable despite promises to allow market forces to play a greater role. Beijing is permitting provinces to issue at least 2.6 trillion yuan ($419 billion) in bonds in 2015, the first local-government issuances in more than 20 years, to stave off a debt crunch. Local administrations have accumulated some 18 trillion yuan in bank loans and bonds to fund risky land and property deals—equivalent to a third of China’s economy. As the real-estate market slows, state-owned banks that did much of the lending are on the hook. The municipal bonds are aimed at allowing local governments to refinance short-term bank loans, which carry high interest rates of 7%. The move won plaudits from economists and investors as a market-based solution to the debt problem. What is transpiring, however, is more akin to the public bailout of China’s state-owned banks in the 1990s. Back then, the government pumped billions of dollars in fresh capital into the banks and carved out bad loans from the lenders. Only around a fifth of the soured debt was ever recovered.

People’s Bank of China Cuts Interest Rates - WSJ:  —After more than a week of a brutal selloff in Chinese stocks, the country’s central bank on Saturday took a rare easing step, cutting both its benchmark interest rates and the amount of reserves certain banks are required to hold. In a statement, the People’s Bank of China said both steps were aimed at lowering borrowing costs and “stabilizing growth” in the world’s second-largest economy. The PBOC cut its one-year benchmark lending rate by a quarter of a percentage point to 4.85% and its one-year deposit rate by the same scale to 2%. At the same time, it also lowered the reserve requirement by half a percentage point for banks with sizable lending to farmers and small businesses. The central bank has rarely cut both interest rates and the reserve-requirement ratio on the same day. The last time it did so was in October 2008, the height of the global financial crisis. The actions came a day after Chinese stocks saw their biggest one-day decline in several years. On Friday, the Shanghai Composite Index fell 7.4% and was off 19% since hitting a 52-week high on June 12, a decline that has wiped away $1.25 trillion in market capitalization, an amount roughly equal to the size of Mexico’s economy.

Beijing beats Washington in the South China Sea's war of willpower -- At the opening of the seventh annual United States-China Strategic and Economic Dialogue earlier this week, US Vice-President Joe Biden launched yet another diplomatic broadside against Chinese expansionism in the disputed South China Sea. In a thinly veiled rebuke of Chinese tactics, Biden pointedly remarked: ‘Nations that discard diplomacy and use coercion and intimidation to settle disputes … only invite instability.’ The United States deserves credit for pushing for a fair and legal resolution of the South China Sea dispute. But the combination of China’s unyielding commitment to claiming the bulk of the South China Sea and the comparatively small US stake in these waters should prompt serious doubts about Washington’s ability to block Chinese territorial ambitions. Defending what Beijing argues is China’s sovereign right to the South China Sea is a crucial element of the Chinese national project.With Beijing consistently emphasising that its territorial claims are indisputable, it would be politically untenable and a great national embarrassment to ever back down in the South China Sea. Popular opinion also sees China’s South China Sea claims as a core national interest and a matter of national pride. An illuminating recent analysis of the Chinese public’s attitudes found that they tend to view the South China Sea dispute ‘in terms of national and personal humiliation, independently of official media cues.’ Beijing’s South China Sea policy is therefore not just aimed at gaining control of China’s strategically valuable southern maritime approaches; it is also designed to rehabilitate the dignity and stature of the ‘great Chinese nation.’ Not surprisingly, the United States has much less riding on the South China Sea dispute.

With $27 trillion in savings, Chinese are set to change the world: Few events will be as significant for the world in the next 15 years as China opening its capital borders, a shift that economists and regulators across the world are now starting to grapple with. With China's leadership aiming to scale back the role of investment in the domestic economy, the nation's surfeit of savings - deposits currently stand at $US21 trillion ($27.2 trillion) - will increasingly need to be deployed overseas. That's also becoming easier, as Premier Li Keqiang relaxes capital-flow regulations. The consequences ultimately could rival the transformation wrought by the Communist nation's fusion with the global trading system, capped by its 2001 World Trade Organisation entry. That stage saw goods made cheaper across the world, boosting the purchasing power of low-income families at the cost of hollowed-out industries.Some changes are easy to envision: watch out for Mao Zedong's visage on banknotes as the yuan makes its way into more corners of the globe. China's giant banks will increasingly dot New York, London and Tokyo skylines, joining US, European and Japanese names. Property prices from California to Sydney to Southeast Asia already have seen the influence of Chinese buying. Other shifts are tougher to gauge. International investors including pension funds, which have had limited entry to China to date, will pour in, clouding how big a net money exporter China will be. Deutsche Bank is among those foreseeing mass net outflows, which could go to fund large-scale infrastructure, or stoke asset prices by depressing long-term borrowing costs.

Pointing to Greece, Japan Chooses Growth to Cut Deficit - Japan isn’t Greece and it won’t suffer the same mistakes. That was the message late Monday after the Japanese government released its latest blueprint for growth and fiscal reform. Economy Minister Akira Amari said austerity measures–severe spending cuts and tax increases–only made Greece’s debt problems worse. Critics often liken Japan’s mountain of debt to Greece’s. Japan’s debt-to-GDP ratio in 2014 was 230%, versus 189% for Greece, according to data from the Organization for Economic Cooperation and Development. Under the new plan Japan will focus on economic growth as a means of reducing its deficit, though it didn’t include any major overhauls. The plan is based on an assumption of 3% growth, an annual rate that hasn’t been seen in the past decade and a half. Even if that rate is achieved, the government would still need to eliminate another Y9.4 trillion ($76 billion) in annual spending to achieve a balanced primary budget–excluding interest payments–within five years, the government estimated in February. The markets largely shrugged off the plan, though some analysts said it will provide a test for Prime Minister Shinzo Abe. Success would likely mean growing calls for him to serve another term as leader of the Liberal Democratic Party after his tenure expires in 2018, perhaps scrapping a party rule limiting leadership to two consecutive six-year terms, said Kenji Yumoto, senior chief economist at Japan Research Institute. By law, Mr. Abe would be required to call a general election by late 2018.

BOJ says factory output likely hit soft patch in April-June - The Bank of Japan said it expects factory output to fall for the first time in three quarters in April-June on weak Asian demand, underscoring the fragile nature of the economic recovery. Industrial production rose 1.5 percent in January-March from the previous quarter, helping the world's third largest economy expand much faster than expected. But the central bank offered a cautious view on the outlook for output, saying it may have briefly hit a soft patch as automakers see domestic inventories build up and steelmakers feel the pinch from sluggish Asian demand. "Industrial production will increase moderately reflecting domestic and overseas demand, albeit with some fluctuations," the BOJ said in a monthly economic report released on Monday. The central bank also warned there was "high uncertainty" on its forecast that output will rebound in the third quarter.

Abe government to continue efforts to curb rise in social security spending -- Efforts to curb rising social security spending and rehabilitate tattered government finances should continue at the same level as the last three years until fiscal 2018, according to a draft of the Abe administration’s fiscal and economic policy blueprint. But the draft fails to set a specific numerical target for spending under the general budget, as the administration is counting on a revenue increase derived from economic growth to achieve its key fiscal reform goal of turning the primary balance into a surplus by fiscal 2020. The draft, released Monday, calls on the government to limit increases in social security spending at ¥1.5 trillion in the next three years through fiscal 2018, the same level posted in the past three years. It also urges the government to hold the line and keep increases in general policy spending, including social security costs, at around ¥1.6 trillion, as seen in the past three years. However, it says this figure should be used only as a “rough indication.”

Japan tests West’s boycott of Russia - The Russian diplomacy got a big boost on Wednesday when Japanese Prime Minister Shinzo Abe made a phone call to President Vladimir Putin. Abe took the initiative a day after Tokyo had sent out a cryptic signal that Russia’s participation in next year’s G7 summit (May 26-27), which Japan is hosting, “is undecided yet.” The Kremlin readout said the two leaders “expressed their mutual desire to develop political, economic, humanitarian, and security cooperation”. They resolved to “prepare thoroughly” for a visit by Putin to Japan. Abe has strong reasons to pick up the threads of Japan’s bilateral ties with Russia, which suffered through the past year after Tokyo closed ranks with the West and imposed sanctions against Russia. The fact of the matter is that as the Asia-Pacific is celebrating the 70th anniversary of the end of World War II, Japan is the odd man out, still without a peace treaty with Russia. Tokyo had pinned hopes on Putin’s leadership to resolve the dispute over the Kurile Islands, which are under Russian occupation and is a hugely emotive issue for the Japanese public. Japan has held out the promise that the resolution of the island dispute could unlock Japanese investments for Russia’s Far East and Siberia, which Moscow has been eagerly seeking. Meanwhile, what makes Tokyo particularly uneasy is the acceleration of the Sino-Russian entente in the Asia-Pacific. Beijing is closer than ever in securing Moscow’s support for its “core interests” in the Asia-Pacific. The two countries have pledged to be supportive of each other’s core interests and to coordinate their foreign policies.

Free trade agreements 'preferential' and dangerous, says Productivity Commission: The Productivity Commission has launched a scathing attack on Australia's latest series of free trade agreements, saying they grant legal rights to foreign investors not available to Australians, expose the government to potentially large unfunded liabilities and add extra costs on businesses attempting to comply with them. The assessment comes after trade minister Andrew Robb successfully concluded agreements with Japan, Korea and China, and on the cusp of final negotiations to seal a so-called Trans Pacific Partnership with eleven Pacific-facing nations including the United States, Japan, New Zealand and Singapore. On Wednesday, the US Senate voted to give President Barack Obama special negotiating powers that will remove one of the last impediments to the partnership.  The Productivity Commission has devoted a special chapter of its Trade and Assistance Review released on Wednesday to the agreements, which it described as "preferential" rather than "free" trade agreements. Advertisement It claims that by favouring some countries over others and excluding firms sourcing substantial inputs from other countries from special treatment, they "add to the complexity of international trade and investment, are costly and time-consuming to negotiate and add to the compliance costs of firms and administrative costs of governments." According to the Commission, the Japan and Korean agreements were concluded without a rigorous and independent assessment of whether costs would exceed benefits. There was also no mechanism in place to monitor the outcomes of the agreements after they come into force, it said.

Trade Agreement-Signing Competition: US vs. China --  Aside from being the two largest economies in the world, the US and China are also its two largest traders in goods and services. Paying no heed to the notion of "trade diversion," both are racing to sign preferential trade agreements with any and all comers--except each other, that is. As it so happens, Laura He has an interesting description of this contest to ink PTAs at MarketWatch. Let's start off with China. Its strategy involves linking together a series of bilateral arrangements for an eventual wider, regional deal known as the Regional Comprehensive Economic Partnership [RCEP]. After the RCEP, there will be an even broader deal in China's plans for APEC member nations known as the Free Trade Area of the Asia-Pacific [FTAAP]:  Last week, China signed a landmark free-trade agreement with Australia, the latest entry in Beijing’s recent parade of high-profile trade deals. [T]hese deals can also be seen in the context of a “free-trade race” with the U.S., in which each side racks up competing — and often overlapping — free-trade agreements, or FTAs. Specifically, the Australia deal follows closely a similar agreement with South Korea, inked June 1, and falls into China’s plan for a Regional Comprehensive Economic Partnership, which Beijing hopes will in turn serve a grander, more globe-straddling strategy for a Free Trade Area of the Asia-Pacific. RCEP and FTAAP, as the latter schemes are known, are more than just another pair of Chinese government acronyms. Back in the 1990s, China was struggling to conform to the rules of the World Trade Organization, which it finally joined in 2001. But today, as an editorial by the state-run Xinhua News Agency put it last week, China wants to transition to “actively helping write international economics and trade rules” rather than following a system set up by other nations.

Container Shipping Rates from China to US, Europe Collapse - “Sluggish westbound volumes have brought about the worst spot market rate collapse that this trade has experienced.” That’s how Drewry Maritime Research summarized it in a report a couple of weeks ago. Since then, the collapse of the rates for shipping containers from China to the West has gotten worse with clockwork relentlessness. In mid-April, there had already been a lot of handwringing. The Shanghai Containerized Freight Index (SCFI) tracks spot rates of shipping containers from Shanghai to 15 major destinations around the world. At the time, rates from Shanghai to Rotterdam had plunged to $399 per twenty-foot container equivalent unit (TEU), down 67% from a year earlier, the lowest rate ever, and half of what was considered the break-even rate for these routes. It seemed that there would have to be some kind of uptick – that efforts by carriers to impose higher rates would stick. But nothing worked. So a week ago, there was a lot of handwringing because rates to Rotterdam had dropped to $243 per TEU, which wouldn’t even cover the cost of fuel of about $300 per TEU. But now, in the week ended June 19, the spot rates from Shanghai to Rotterdam plunged another 15.6% to $205, a previously unimaginable low. And it’s not just to Northern Europe. On the routes from Shanghai to the US West Coast, carriers also tried to implement rate increases effective April 1. But after an ephemeral uptick of $300 to $1,932 per forty-foot container equivalent unit (FEU), spot rates re-swooned. By the beginning of May, the index had dropped to $1,783, about back where they had been a year earlier. But look what has happened since. Last week the index plunged 5.4% to $1,268 per FEU, down 29% from the battered rates at the beginning of May.

India’s State-Owned Banks Strained by Bad Debt, RBI Warns - The gulf between India’s healthy private banks and its fragile state-owned lenders is widening, sparking concerns that the swelling pile of bad debt is straining government-controlled banks and preventing them from growing, a report by the country’s central bank warned Thursday. Privately-owned banks, which account for about a third of the Indian banking sector’s assets, are showing faster credit and deposit growth, steady profitability and a lower share of bad loans on their balance sheets, said the report, authored by regulators at the Reserve Bank of India. “The continued stress on asset quality of public-sector banks and consequent pressure on capital adequacy is a matter of increasing concern,” the central bank’s governor,Raghuram Rajan, wrote in a forward to the document. State-controlled banks, which have cozy ties with the country’s largest corporations and powerful politicians, are seen as tools for the government to achieve its economic policy goals. Private banks, on the other hand, operate as regular businesses. As economic growth has slowed in recent years and large infrastructure projects stalled, state banks have taken a hit. Bad loans have climbed.

Dear governments and aid agencies: Please stop hurting poor people with your skills training programs: Here is an incredible number: From 2002 to 2012 the World Bank and its client governments invested $9 billion dollars across 93 skills training programs for the poor and unemployed. In lay terms, that is a hundred freaking million dollars per program. Unfortunately, these skills probably did very little to create jobs or reduce poverty. Virtually every program evaluation tells us the same thing: training only sometimes has a positive impact. Almost never for men. And the programs are so expensive—often $1000 or $2000 per person—that it’s hard to find one that passes a simple cost-benefit test. You might think to yourself: That’s not so bad. Nobody hurt the poor. Plus the trainers and the firms probably benefited. So it’s not a total loss. If you think this, I urge you to transfer to an organization where you can no longer affect the world. I can think of a couple UN agencies with excellent benefits.  Because when you take billions of dollars a year (because the World Bank is hardly the only spender on skills programs) and you spend them on vocational bridges to nowhere, you have denied those dollars to programs that actually work: an anti-retroviral treatment, a deworming pill, a cow, a well, or a cash transfer. You have destroyed value in the world. ... If you’re thinking to yourself “hey, I would like to read 20,000 more words on this, preferably in dry prose,” well do I have the paper for you. A new review paper with Laura Ralston: Generating employment in poor and fragile states: Evidence from labor market and entrepreneurship programs. ... Fortunately the paper includes a 4-page executive summary. And, even better, an abstract!

Russian fury at Belgium asset seizure in Yukos oil case - Russia has protested to the Belgian ambassador over the seizure of Russian state assets in Belgium - a move triggered by a court ruling over the now-defunct Yukos oil firm. The ambassador was told that the asset seizure was "an openly hostile act" that "crudely violates the recognised norms of international law". Last year a court told Russia to pay Yukos shareholders $50bn (£32bn) in compensation, after Yukos's break-up. A Russian state firm took over Yukos. In July 2014, an international arbitration court in The Hague said Russian officials had manipulated the legal system to bankrupt Yukos, and jail its boss, the oligarch Mikhail Khodorkovsky. On Friday, President Vladimir Putin said Russia did not recognise the court's authority. Responding to the asset seizure, he said Russia would "defend our interests by the route of justice".  France has also seized Russian state accounts in about 40 banks, along with eight or nine buildings, AFP news agency reports. And a legal application has also been filed to seize Russian state assets in the UK and US, a lawyer acting for Yukos shareholders told the BBC.

 Austere brand of Islam on rise in Europe, stirring concerns (AP) — Its imams preach austere piety, its tenets demand strict separation of sexes — and some of its most radical adherents are heeding the call of jihad. Salafism, an Islamic movement based on a literal reading of the Quran, is on the rise in France, Germany and Britain, security officials say, with Salafis sharply increasing their influence in mosques and on the streets. The trend worries European authorities, who see Salafism as one of the inspirational forces for young Europeans heading to Syria or Iraq to do battle for the Islamic State group. Experts, however, point out that the vast majority of Salafis are peace-loving. In Germany, there are currently about 7,000 Salafis in the country — nearly double the 3,800 estimated four years ago, the Interior Ministry said last month. About 100 French mosques are now controlled by Salafis, a small number compared to the more than 2,000 Muslim houses of worship, but more than double the number four years ago, a senior security official told The Associated Press. He spoke on condition of anonymity because he is not authorized to discuss the matter publicly. France does not do head-counts by religious practices or origins. In Britain the numbers are on the rise, too. Seven percent of Britain's 1,740 mosques are run by Salafis, according to Mehmood Naqshbandi, an expert on Britain's Muslims and counter-extremism adviser to the British government who keeps a database of the various currents of Islam in Britain. He says those numbers are steadily growing, especially among young people — and that a quarter to half of British Muslims under 30 "accept some parts or all of the Salafi theology." Today, the Internet is largely seen as the main route for youth to quickly radicalize. But radicalization can be cultivated in places where Muslims socialize, like mosques. And there, said the French security official, it is Salafis who are considered the principle purveyors of radical ideology.

ECB's balance sheet rises to 2.452 trillion euros, gold steady (Reuters) - The combined balance sheet of the European Central Bank and the euro zone's 19 national central banks rose by 9.850 billion euros to 2.452 trillion euros ($2.74 trillion) in the week to June 19, the ECB said on Tuesday. The ECB's balance sheet is steadily increasing as it rolls out a roughly 1 trillion euro scheme to buy government bonds and other assets known as "quantitative easing". The bank added that Eurosystem gold holdings remained unchanged at just under 384 billion euros.

French Unemployment Hits Record High: 80th Consecutive Month Of Rising Joblessness -- While French president Hollande is busy "grilling" (in the words of The Local) president Obama over the latest US "spying on its allies" snafu, the French economy continues to deteriorate and according to the latest French labor ministry data, in May the number of French jobseekers rose by another 0.5%, or 16,200, to 3.552 million, 10k more than expected, and a new all time high.The number was 5%, or 168,500 greater, compared to a year ago as the so-called European recovery has yet to have a positive impact on what is supposed to be Europe's second strongest economy. Most troubling: this is the 80th consecutive month of increasing Y/Y unemployment, yet stocks are delighted of course. Labour Minister Francois Rebsamen said Wednesday that  that "by the end of the year we will see, I hope, a phase of  stabilization followed by a decline in the number of jobseekers."

What if the Euro Area Falls into Serious Deflation? -- The economies of the euro area monetary union are close to deflation. In May 2015, the annual rate of inflation averaged 0.3% across the euro area, after six months during which the rate of inflation had been zero or below. The question then arises as to whether the deflation has been internally or externally generated, whether it becomes self-perpetuating, and what the consequences would be. The dramatic drop in global oil prices have had a significant effect in the reduction of the rate of inflation, though with some recent rises, this dampening effect on inflation may have come to an end. The threat of zero or negative inflation means that households and firms, which are heavily indebted, find it difficult to service their debt, partly because its real value increases with falling prices and also because current household income is falling and firms are reluctant to invest in view of expected falling demand. Deflation could well compound the lack of aggregate demand which stalks the euro area. The strategy of the euro area to reduce unemployment is based on a twin track approach of reducing budget deficits based on a belief in “expansionary fiscal consolidation,” and reinforcement of so-called structural reforms to make labour and product markets more “flexible.” But structural reforms and improving competitiveness entail flexible labour markets, a lower minimum wage, less labour job protection, and a strategy of wage cuts as a way forward.

Debt, War and Empire By Other Means -- This video below may help one to understand some of the seemingly obtuse demands from the Troika with regard to Greece. The video is a bit dated, but the debt scheme it describes remains largely unchanged. The primary development has been the creation of an experiment called the European Union and the character of the targets.   One might also look to the wars of 'preventative intervention' and 'colour revolutions' that raise up puppet regimes for examples of more contemporary economic spoliation. From largely small and Third World countries, the candidates for debt peonage have become the smaller amongst the developed Western countries, the most vulnerable on the periphery.    And then there is the mass looting enabled by the most recent financial crisis and Bank bailouts.  If the people will not take on the chains of debt willingly, you impose them indirectly, while giving the funds to your cronies who use them against the very people who are bearing the burdens, while lecturing them on moral values and thrift.  It is an exceptionally diabolical con game. The TPP and TTIP are integral initiatives in this effort of extending financial obligations, debt, and control. You might ask yourself why the House Republicans, who have fought the current President at every turn, blocking nominees and repeatedly staging mock votes to denounce a healthcare plan that originated in their own think tank and was first implemented by their own presidential candidate, are suddenly championing that President's highest profile legislation, and against the opposition of his own party? Where did that come from?

Inciting Bank Runs As A Negotiating Tactic --The troika of Greek creditors has gone into full-frontal morals-be-damned attack mode, handpicking arms from a weapons arsenal we haven’t seen used before, and that we never should have seen in an environment that insists – and prides – on presenting itself as a union, both in name and in spirit. Now that they are being used, there no longer is such a union other than in name, in empty words.  This has turned into the kind of economic warfare one would expect to see between sworn and lethal enemies, that the US would gladly use against Russia for instance, but not between partners in a union founded on principles based entirely and exclusively on being mutually beneficial to everyone involved.   When spokespeople at the troika side of the table stated on Thursday that they don’t know if Greek banks will be open on Monday, they crossed a line that should never even have been contemplated. This is so far beyond the pale, it should by all accounts, if everyone involved manages to keep a somewhat clear head, blow up the union once and for all. If a party to a negotiation that can’t get its way stoops to these kinds of tactics, there is very little room left for talk. And all EU nations should understand by now that this is not about Greece anymore, it’s about all of them. Any member nations that does not fall into -goose- step with Brussels must from here on in be prepared to deal with attempts to crush it economically and politically. The Greek crisis has destroyed that lift-all-boats notion once and for all. All that’s left of the union is power politics, of those (s)elected to represent all member nations, working to crush one of them with all weapons at their disposal. One of those weapons is utilizing the media to incite a bank-run in Greece, aimed at paralyzing the Greek government into full submission. The run-up to the bank-run has been building up steam ever since Syriza took over 5 months ago, but apparently not fast enough for the troika.

What Happens If Greek Banks Can’t Open? - The scariest quote for the world economy this week came from a member of the European Central Bank’s executive board. Asked by Eurogroup President Jeroen Dijsselbloem whether Greek banks would open Friday, his answer was stark:  "Tomorrow, yes. Monday, I don't know," replied Benoit Coeure. So far, Coeure is right: Greek banks were open on Friday, though that wasn’t what people were worried about. The important issue is whether Greece can come to an agreement with its creditors to release bailout funding that will keep banks running. At the moment, Greece is due to owe creditors €1.6 billion at the end of June, money the government says it doesn’t have. If it can’t either repay or reach an extension deal, Greece might leave the eurozone—the doomsday scenario with the somewhat silly name “Grexit”—though default wouldn’t necessarily mean departure.  On Friday, the ECB apparently gave Greece a short-term cash infusion to last through the weekend, and the eurozone ministers will reconvene on Monday to try to hammer out a longer-term deal. If you feel like you’ve been hearing about this for years, you’re not entirely wrong—there have been dire warnings about Greece departing the eurozone since the spring of 2012. This time really does seem to be different. Greece’s left-wing government has refused to make as many concessions as its creditors want—which isn’t to say that Grexit is inevitable. Although the mood has darkened a bit over the last few days, there’s a widespread expectation among many analysts that an agreement will be reached. As some Greeks demonstrated outside of parliament in favor of remaining in the eurozone, others headed to banks to prepare in case that doesn’t happen. “A steady stream of people—though never enough to call a queue—were withdrawing money from the National Bank branch on Athens’s central Syntagma Square,” reported The Guardian’s Jon Henley. Greek depositors withdrew a billion euros on Thursday alone, and €3 billion since Monday.

Meanwhile, Greece Is Quietly Printing Billions In Euros - Earlier today we showed why Greece is now literally living on borrowed time. The combined €2.9 billion in ELA cap increases ‘generously’ bestowed upon the flailing Greek banking sector by the ECB last week looks to have been barely enough to keep things from “ending very differently” (to quote Kathimerini) at the ATMs on Friday.  But perhaps more importantly from a big picture perspective, Greece may have already breached the upper limit of its borrowing base. JPM calculates Greek banks’ eligible collateral at €121 billion (€38 billion in EFSF bonds €8 billion in government securities, and €75 billion in “credit claims”). With Friday’s ELA increase, the country’s total borrowings (that’s OMO plus ELA) amount to some €125 bilion. Why would the ECB allow this? Because it knows the breach will be promptly limited or reversed on Monday, or there will be a deal.  So, it is literally “deal or no deal” time, because if JPM is correct and eligible collateral was either exhausted two weeks ago or, in the best case scenario, is right at the limit, capital controls will need to be put in place as early as Tuesday at which point the ATMs will officially stop dispensing freshly-minted euros which, incidentally, brings up an important point. As Barclays notes, during the same period over which Greek banks lost nearly €30 billion in deposits, banknotes in circulation jumped by some €13 billion. In short, because Greeks are increasingly prone to stuffing their euros in mattresses, a large proportion of the deposit flight has come in the form of hard currency withdrawals, meaning the Bank of Greece is forced to (literally) print billions in physical banknotes: A large part of the deposit outflows is in the form of banknotes, whose usage has increased significantly since the end of last year (+44%).Indeed, out of a deposit outflow of €29bn (from the end of November 2014 to the end of April 2015), banknotes in circulation in Greece have increased by €13bn.

Greek Government Preparing Plans to Cross Red Lines to Avert Default - Yves Smith --Some fans of the Greek ruling coalition argued that it had become increasingly intransigent over recent months to pave the way for a default and/or Grexit, that it was not simply playing a game of chicken with its creditors but was working to create a set of conditions that would force a radical rupture in a way that it could tell voters that it had clean hands.   This 11th dimensional chess theory of Greek negotiations appears to be invalid. Both the Guardian and the Wall Street Journal are separately reporting that members of the Tsipras government are working on plans that amounts to capitulation on the most contested creditor demands: that of pension and labor market “reforms,” as in large pension cuts and changes to market regulations that reduce worker bargaining power.   Now it may turn out the Syriza offer is deemed to be too small, too deferred, and/or too cosmetic to satisfy the Troika and the European governments that must approve any bailout extension (we are now so close to the expiration of the second bailout on June 30 that it is now too late to get a deal approved by then. But since IMF chief Christine Lagarde has 30 days before she has to report a Greek non-payment of €1.5 billion on June 30 to her board, the real drop dead date appears to be July 20, when a €3.5 billion payment is due to the ECB). And since the Syriza cabinet is apparently hashing out details now, any media reports are on discussions in progress, and not a final plan.  Note that Tsipras has yet to sign off on a proposal key members of the government are devising. However, note that they would not be working on a proposal to, as the IMF demanded, “make the numbers work” without a go-ahead from him to try to close the gap. And also remember that last week, in a proposal the Troika rejected, Greece agree to meet their primary surplus demands of 1.0% of GDP this year, rising to the insane level of 3.5% by 2018 and thereafter. Last week’s plan from Greece was kicked back because the Greek negotiators freely admitted their reform proposals failed to meet those levels.

Avoiding Apocalypse - Paul Krugman  -- Larry Summers has written a scary column warning that Greece may be on the verge of becoming a “failed state”. It’s a useful corrective to the extraordinary complacency I’m hearing from too many European officials. But I do think it’s worth pointing out that this need not happen, even if there is no deal. What Summers seems to portray is a scenario in which Greek banks collapse and take down the economy with them. But what if Greece abandons the euro and issues its own currency to keep cash flowing?  For sure there would be a sharp devaluation, which would lead to a spike in inflation. But would hyperinflation follow? Remember that Greece is running a large cyclically adjusted primary surplus — that is, given even a modest economic recovery it would not need to roll the printing presses to pay its bills. And a a devaluation would, other things equal, promote recovery.   I know that many people are telling stories about immediate collapse due to inability to buy raw materials, complete failure of exports to respond, and so on. They could be right. But I actually can’t think of any historical examples that fit this story — in particular, all the hyperinflations I know about involved governments too weak to collect taxes, and believe it or not, that’s not true of Greece despite all you’ve heard.  So even if Greece goes over the edge in the next few days, there may be another off-ramp from the road to hell. And at that point the European problem would turn on its axis, as Wolfgang Munchau says, and become one of coping with the euro’s evident reversibility.

Renegotiating Greek’s debt -- What are the numbers for Greece’s primary surplus? It turns out it’s harder to find a straight answer to that question than it should be. The graph below plots the figures from the IMF World Economic Outlook database. These claim that after years of big deficits, Greece finally ran a primary surplus of 1.2% of GDP in 2013. But the ECB claims instead that Greece ran a primary deficit of 8.3% of GDP rather than a surplus in 2013. What’s the controversy? Based on this report from the Wall Street Journal, it appears that the IMF must be excluding one-time expenditures in support of the Greek banking system, which amounted to 10.8% of GDP. In terms of the calculus of whether external creditors on net were getting repaid anything in 2013, the ECB concept appears to be the correct one– Greece was still running a big primary deficit in 2013 in the sense that any interest payments they made that year, along with much of their spending, were paid for with newly borrowed money.For 2015 the IMF is anticipating a primary surplus of 3% of GDP. But Daniel Gros attributes the surplus so far in 2015 to factors such as the government not having made cash payments yet for goods and services already ordered or provided– otherwise known as new government borrowing not recorded in the official measures of government debt. This is why creditors are asking for more progress from Greece on the primary surplus before extending additional funds. But here’s the response of Greek finance minister Yanis Varoufakis:

Why There Cannot Be Greek Debt Relief -  It’s been a standard point for months now about the Greek crisis that there should be, in economic terms, some debt relief. Hack a haircut off the total amount that Greece owes. We all know that it won’t pay that total amount, there’s just about no way possible that it could. So, all the economically rational people have been saying that we should impose the haircut and cut that total amount of debt. Yet it hasn’t happened and it’s most unlikely that it will. For while this is the correct economic answer it’s also one that is politically almost impossible. The reason for this is that the capitalists and the banks don’t actually own any of this debt (OK, some banks do, but it’s almost entirely Greek banks and if their holdings are haircut then they go bust and the Greek government then needs to prop them up again, achieving nothing). So, we can’t stick the bill with the capitalists or the banksters neither of whom would get a great deal of sympathy over their losses at the best of times. The money is owed to the taxpayers of other European Union and eurozone countries. And what’s more, those taxpayers know this. How much is owed to whom is listed on this nice little chart from Barclay’s:  So, here’s what the problem is. In order to solve the Greek debt problem something like 50% of that debt has to be written off. So, in the range of 1.5% to 2% of GDP for each of those countries listed. Now, that can be done of course. It’s not that they’ve then got to go out and collect another 2% of GDP in taxes from their own citizens to pay for it. Not in one year at least. The pain will be spread over the years: most of it would probably come from the European Central Bank returning smaller profits to the shareholders, those nations, over the years. However, the citizenry can read that chart as well as you or I can. And they know that writing down the debt means that they lose some of their money.

'The People Will Not Be Blackmailed': Thousands March in Athens Against Austerity -  Throngs flocked to Athens on Sunday to call on the ruling Syriza party to stand up to international creditors and reject further austerity measures. In the second mass demonstration this week alone, thousands of protesters chanted "No to the euro" and "The people will not be blackmailed."  "We’re here to show there are a lot of us," protester Katherina Sergidou, a member of Syriza, told The Irish Times. "A big window has opened—a window of change."  Prime Minister Alexis Tsipras of the ruling Syriza party is slated to meet with heads of the European Commission, the European Central Bank, and the International Monetary Fund on Monday. The emergency meeting falls ahead of the Tuesday deadline for a massive payment to the IMF. Greece's lenders have sought to impose stringent austerity measures in exchange for relief funds. But protesters Thursday urged Syriza officials, elected on an anti-austerity pledge, to reject more cuts. Meanwhile, some within the Syriza Party are openly questioning whether a Greek Exit from the Eurozone, or Grexit, is preferable to the terms of the country's creditors.

Greece – five pictures of a troubled country | Paul Mason: In a special long-read, Paul Mason offers five pictures of Greece.

Creditors offer Greece six-month bailout reprieve as Tsipras weighs response - Greece’s international creditors are aiming to strike a deal to stop Athens defaulting on its debt and possibly tumbling out of the euro by extending its bailout by six months and supplying up to €18bn (£12.9bn) in rescue funds. The negotiators representing Greece’s lenders are also proposing to pledge debt relief for the austerity-battered country – but officials stressed that a breakthrough hinged on a positive response from the Greek prime minister, Alexis Tsipras. Negotiations were continuing on Sunday night, hours ahead of crucial gatherings of eurozone finance minsters and leaders in Brussels, which Angela Merkel, the German chancellor, François Hollande, the French president, and Tsipras are expected to attend. All three leaders spoke over the weekend, with contributions from European commission head Jean-Claude Juncker.   The crisis meeting was convened in an attempt to ease Greece’s debt crisis before a critical €1.6bn payment to the International Monetary Fund falls due next Tuesday. Greece’s creditors were still waiting for Tsipras and his Syriza party to formally submit revised fiscal targets, pensions cuts and tax increases in an attempt to secure the six-month lifeline, concessions that the country’s leader has resisted since he came to power five months ago.

As Greece Deadline Looms, European Central Bank Plays Key Role - — As Greece’s standoff with its creditors enters the final stretch, the European Central Bank finds itself in the awkward position of being both the country’s savior and its scold.Europe’s central bank has been the lender of last resort for Greece, keeping its banking system — if not the country itself — from collapse. But the E.C.B. has also been among the most recalcitrant of its creditors, pushing Greece to the verge of default by refusing to offer relief on its heavy debts.This tension in many ways mirrors Europe’s broader dilemma of how to handle Greece.Should lending lines to the country be renewed, in the interest of keeping the eurozone intact? Or should Greece, having demanded too much from Europe, not be bailed out again?Frantic depositors pulled over a billion euros a day from the country’s banks late last week, leading the E.C.B. on Friday to bolster the banking system for the second time in three days. Greek bankers say that the banks will soon have to close if this uncertainty continues. Greece is just about broke and must pay $1.8 billion to the International Monetary Fund by June 30. So far, it has refused European demands that it cut spending and amend its labor laws in return for a release of frozen funds. The central bank’s exposure to Greece now stands at 150 billion euros, or $170 billion, according to Deutsche Bank. Of that, €122 billion is propping up the banking sector through an emergency lifeline and other funding, and €27 billion is longer-term Greek bonds. At 83 percent of the gross domestic product of Greece, the bet is substantial. It is larger than the lifelines doled out to other bailed-out countries like Cyprus and Ireland, relative to the size of their economies, and it underscores the lengths to which Europe has gone to keep Greece afloat.

Greece will hurt Europe no matter what - Athens and its lenders still have a chance to negotiate a deal that could prevent a Greek default. For a disorderly default and an exit from the eurozone to occur, Greece would have to fail on several fronts: First, it would have to fail both to reach an agreement with its lenders and to repay its debt to the International Monetary Fund by the June 30 deadline. Then, it would also have to fail to reach a deal with creditors in early July and default on its debt payments to the European Central Bank due in the coming months. At that point, Greek banks would stop receiving liquidity from the European Central Bank, savers would panic, and Athens would be forced to start printing some kind of currency. Greece would then either be suspended from membership in the eurozone or expelled completely. But regardless of the specific legal mechanism and language used in the process, the result would be the same: a Greek exit from the currency union before the end of the year. This would be the most traumatic outcome for the European Union. Upon Greece's exit from the eurozone, depositors might withdraw their savings from other potentially vulnerable eurozone members such as Portugal, Spain and Italy to avoid taking a hit should these countries also default on their payments. Investors might divert their money into the sovereign bonds of more solvent states such as Germany, the Netherlands and Austria, making it more difficult for countries in Europe's periphery to find financing. For the past three years, the European Central Bank's promise to protect the eurozone calmed financial markets. However, a disorderly Grexit could resurrect anxieties about the volatile financial situation in much of Mediterranean Europe.

Eurozone doomed whether Greece leaves or stays, study shows - Telegraph: The Eurozone is doomed and cannot survive in its current form, regardless of what happens to Greece, a major new study shows. New research demonstrates that members of the single European currency are becoming more economically divergent, making a single rate of interest increasingly unsuitable for the bloc.   Political, social and cultural differences will also make it increasingly hard for the euro members to share a currency. Eventually, the Eurozone will have to either “integrate or disintegrate”, the analysis says. The research, by economic consultants from the ECU Group, is part of Change, or Go, a wide-ranging study of Britain’s European Union membership and future prospects.The study is being serialised in The Telegraph at the start of a potentially decisive week for the EU and its currency, with Greece once again facing a potential exit from the Eurozone. However, the report concludes that whether or not Greece is forced out of the single currency, the Eurozone will still face deep-seated problems that must be resolved by either breaking up or full-blown political integration. When the single currency was created in 1999, its advocates argued that common economic rules would help its members converge economically, making a single rate of interest more and more suitable to all. However, analysis by the ECU Group for the Change or Go report shows that the opposite has happened: the countries using the euro have diverged economically, experiencing shifts in supply and demand at different times and under different circumstances.

Tsipras Said to Risk Miscalculating Merkel on Greek Aid - Greek Prime Minister Alexis Tsipras is testing Angela Merkel’s patience, risking the best hope for keeping his country in the euro area. While the German chancellor says she wants to keep the euro intact, Tsipras is probably overestimating her willingness to compromise at an emergency summit called to break the deadlock on Greek aid, according to a person familiar with the government’s thinking. Her stance is backed by a chancellery estimate that the financial impact on Germany of a Greek default would be limited to 1 billion euros ($1.1 billion) a year, said the person, who asked not to be identified discussing government deliberations. As Merkel hardens her tone, she’ll take those calculations into the special summit with Tsipras and 17 other euro-area leaders in Brussels on Monday. “Merkel has still got an outstretched hand to the Greeks, but it’s pretty clear right now that she’s not going to move beyond the middle of the table to seal a deal at any price,” Carsten Brzeski, chief economist of ING-Diba AG in Frankfurt, said by phone. “The Greeks must wake up fast to the reality that Germany has done its homework and gauged that a Greek euro exit is manageable.” Merkel’s warnings have become more explicit as the June 30 expiration of Greece’s second bailout draws closer and Greek leaders, notably Finance Minister Yanis Varoufakis, pressure her to unlock aid needed to avoid a possible default. In a speech to parliament last week, she portrayed Greece as an enduring burden on a European Union that faces “a multitude” of challenges from the Ukraine conflict to climate change.

Goldman's "Conspiracy Theory" Stunner: A Greek Default Is Precisely What The ECB Wants - Last week, we showed a curious thesis by Goldman, which asked if there is a new and "ominous" development in European currency swings, namely the emergence of what may be a "under the table" fight between the ECB and the Bundesbank on which bonds to monetize. Today, in a follow up report by Goldman's Robin Brooks and company, and one which seeks to validate Goldman's "top trade" thesis of a weak Euro currency,  Goldman explains why despite relentless Greek drama, the EUR hasn't moved and its conclusion is that this is due to "growing question marks over ECB QE" as a result of the surprising bond-buying on the short end (at the expense of reducing longer-term maturity holdings) out of the Bundesbank which has "reduced the maturity of its QE buying." Here is Goldman's full take: From an economic perspective, Greece shows that “internal devaluation” – whereby structural reforms are meant to restore competitiveness and growth –is difficult politically and a poor substitute for outright devaluation. Emerging markets that devalue during crises quickly return to growth, powered by exports, while Greek GDP continues to languish. We emphasize this because – even if a compromise involving a debt haircut is found – this will not do much to return Greece to growth. Only a managed devaluation, with the help of the creditors, can do that. With respect to EUR/$, we think the Bund sell-off increases EUR/$ downside if tensions over Greece escalate further. This is because the ECB, including via the Bundesbank, would almost surely step up QE to prevent contagion. We estimate that the immediate aftermath of a default could see EUR/$ fall three big figures. The ensuing acceleration in QE would then take EUR/$ down another seven big figures in subsequent weeks. We thus see Greece as a catalyst for EUR/$ to go near parity, via stepped up QE that moves rate differentials against the single currency.

Wealthy Greeks Slam "Incompetent Communists Ruining The Country", Demand EU "Save" Greece -- Despite the market's exuberant hope that everything will be contained and business-as-usual will resume shortly in Europe, the message from the wealthiest Greeks is very different... As The FT reports, not since the nation's civil war has Greek society been riven by deep divisions between left and right as Greece's financial plight reopens old wounds. "The government are incompetent and are ruining the country because they are communists and do not understand reality," said Maria, a banker. "But there has to be a deal. The EU has to save us," she said, fingering her golden necklace. "Right?" As The FT reports, for the affluent, life without the euro is almost unimaginable... The single currency made it easier for them to send children to study abroad and purchase property and luxury goods elsewhere in Europe.  More than that, it distinguished Greece from its impoverished Balkan neighbours, confirming its place at the centre of a prosperous Europe. But as the crisis has dragged on, other Greeks — particularly supporters of the left-wing premier Alex Tsipras — increasingly equate membership of the currency with crippling public spending cuts and social inequality. Until now, much of the country’s elite had assumed Mr Tsipras’s defiance to the country’s creditors was a calculated bluff to extract more aid from EU leaders fearful of the ramifications of a Greek exit from the eurozone.

Greece Capitulates: Tsipras Crosses "Red Line", Will Accept Bailout Extension - We’ve long said that negotiations between Greece and its creditors are more a matter of politics than they are a matter of economics or finance. From the troika’s perspective, breaking Greece and forcing PM Alexis Tsipras to concede to pension cuts and a VAT hike is paramount, and not necessarily because anyone believes these measures will put the perpetually indebted periphery country on a sustainable fiscal path, but because of the message such concessions would send to Syriza sympathizers in Spain and Portugal. In short, the troika cannot set a precedent of allowing debtor nations to obtain austerity concessions by threatening to expose the euro as dissoluble. On the Greek side of the table, Tsipras must convince Syriza party hardliners that concessions are preferable to Grexit and the economic malaise that would come with redenomination. For some on the Left Platform, compromising the party’s electoral mandate is simply not an option and it’s these lawmakers (who just two weeks ago voted to leave the euro and default) that Tsipras will need to sway or else attempt to push an unpopular agreement through parliament a gambit which implicitly assumes that the ensuing political upheaval and voter backlash is preferable to economic collapse. The problem with the latter approach is that it effectively means the troika will have succeeded in using financial leverage to subvert the democratic process, an eventuality that die hard Syriza hardliners are in no mood to suffer. After one final attempt to table a proposal that retains some semblance of Tsipras' defiant posturing, it appears he may have finally broken after a meeting with ECB chief Mario Draghi where is sounds as though the central bank warned the PM that without concessions, ELA to Greek banks would be cut off and that, of course, would mean game over as Greeks would take to the streets en masse. From Bloomberg:

No deal, but some hope, on Greece – An emergency summit of eurozone leaders broke up Monday night without an agreement on a Greek rescue, but there was optimism that a deal to avoid a default and exit from the euro was possible ahead of next week’s deadline. The mood improved thanks to a new proposal from Greece calling for tax increases and steps to limit early retirement that Donald Tusk, the European Council president, called “a positive step forward” that demonstrated the “seriousness” of Alexis Tsipras, the Greek prime minister. Jean-Claude Juncker, the Commission president, added: “I am convinced that we will find an agreement this week.” Even Angela Merkel, the German chancellor who had gone into the summit voicing skepticism about the chances of a breakthrough, told reporters: “What Greece proposed today is a step forward … The three institutions have said the the Greek proposals are good.” True to her cautious style, Merkel added that much work was needed to reach a deal. Much of that work should be done at Wednesday’s Eurogroup meeting of finance ministers from the eurozone. If they can thrash out a deal, a routine EU summit starting Thursday could break the five-month deadlock between Greece and its creditors.

Greek offer to creditors runs into angry backlash at home: Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament's deputy speaker warned the proposals would struggle to win approval, puncturing optimism that a deal to lift Greece out of crisis might be quickly sealed. European leaders on Monday welcomed the new budget proposals from Athens as a basis for a possible agreement to unlock frozen aid and avert a default that could trigger a Greek exit from the eurozone. Stock markets also welcomed the plan, with European shares extending the previous session's sharp rally and climbing to a three-week high on Tuesday, with growing expectations that Greece was getting closer to striking a deal. But Prime Minister Alexis Tsipras, who was voted into office in January on a pledge to roll back years of austerity in a country battered by recession, must keep his leftist SYRIZA party as well as his creditors onside for a deal to stick. "I believe that this programme as we see it ... is difficult to pass by us," Deputy parliament speaker and SYRIZA lawmaker Alexis Mitropoulos told Greek Mega TV on a morning news show. If parliament does fail to back the latest offer, which included higher taxes and welfare changes and steps to curtail early retirement, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty.

Any Greece deal must match party manifesto, minister says - Any deal Greece signs with its creditors to avoid default must be in line with the pledges the ruling party was elected on in January, the deputy labour minister said ahead of an emergency summit of European ministers on Monday. After months of wrangling that have left Greece on the verge of bankruptcy, its leftist government submitted last-ditch proposals for a cash-for-reforms deal over the weekend that were welcomed by EU officials as a good starting point for talks. The exact contents of the proposal were not divulged. But the comments by Deputy Labour Minister Dimitris Stratoulis underscore the tightrope Prime Minister Alexis Tsipras must walk to reach an agreement that will win over both the creditors and his own Syriza party. Syriza stormed to power in January pledging to roll back years of austerity. A new street protest against the cuts is planned for Tuesday night. Greece must repay a 1.6 billion euro loan to the International Monetary Fund next week and any failure to pay could threaten its future in the euro zone currency bloc. The country could also be forced to impose capital controls within days to stem the outflow of billions of euros from Greek banks. "I repeat: The deal will either be compatible with the basic lines of Syriza's election manifesto, or there will be no deal," Stratoulis told Antenna television on a morning news show. "The prime minister is negotiating with this in mind."

Germans’ impatience with Merkel on Greece bailout talks grows - Hours after Germany’s Angela Merkel gave a cautious welcome to Greece’s latest reform proposal, she received a sharp reminder of the depth of frustration back home when one of her own backbenchers poured scorn on the bailout talks. Wolfgang Bosbach, a legislator from the chancellor’s CDU party — who voted against previous Greek bailouts — dismissed the eurozone’s policy towards Greece as a “financial carousel . . . which I personally don’t believe will ever come to a stop”. Mr Bosbach told the state broadcaster Deutschlandfunk: “Anyone who now believes that this is the last chapter of the endless story of Greece, will soon be disabused.”  Other German voices appeared inclined to give the chancellor the benefit of the doubt and more time to negotiate, with Spiegel, the influential news magazine, opining: “Now it’s once again Greece’s creditors’ move.” Nonetheless, the reaction in Germany on Tuesday morning was a further indication of how sentiment has hardened against Greece in recent months, and Mr Merkel’s limited room for manoeuvre in the crucial days ahead. Frankfurter Allgemeine Zeitung, Germany’s leading conservative broadsheet, urged Ms Merkel’s government not to rush to judgment — but to properly analyse the latest Greek plan, which calls for sharp tax increases and changes to Greece’s notoriously early retirement scheme. “The detailed examination is no superficial matter and in this dispute it is central,” the paper stated. Giving voice to a broader German frustration, it added: “No government of a crisis country has damaged the public view of Europe like this radical coalition in Athens. No one has smashed as much porcelain. A basis of the EU has come under attack — its acceptance by citizens.”

The Ultimate Moral Hazard: 70% of Greek Mortgages Are In Default  -- Just as we warned earlier in the year, total uncertainty about the future of Greece has enabled a growing sense of moral hazard as "if the nation doesn't pay its debt, why should we"sweeps across the troubled nation. As Greeks' tax remittances to the government, which were almost non-existent to begin with, have ground to a halt, so The FT reports, so-called 'strategic defaults' have become a way of life among Greece's formerly affluent middle-class..."I still owe money on the car and motorboat I can’t afford to use. Even a holiday loan I’d forgotten about...I’m living with my mother looking for work and waiting for the bank to come up with another restructuring offer."As we detailed earlier this year, it appears taxpayers everywhere are learning from the best: their insolvent governments. In this case, Greek (non) taxpayers have decided to slow down their mandatory remittances to the government even more because the government may just not exist in two short weeks: Most taxpayers have chosen to delay their payments, given that the positions of the two main parties leading the election polls are diametrically opposite: Poll leader SYRIZA promises to cancel the ENFIA and even write off bad loans, while ruling New Democracy acknowledges the difficulties but is avoiding raising issues that would generate problems and fiscal consequences. The dwindling state revenues will not only hamper the next government’s fiscal moves, but, given that the fiscal gap will expand, also negotiations with the country’s creditors. The Finance Ministry will have to make plans for new measures and make sure that salaries, pensions and operating expenses are covered, especially in case the creditors do not pay the bailout installments which are already overdue.

ECB raises emergency funding for Greek banks - Reuters: The European Central Bank increased its funding lifeline to Greece's banks again on Tuesday, sources with direct knowledge of the decision said, allowing the country's banks to stay open as Athens inches toward a deal with creditors. The latest increase amounted to "a bit less than one billion euros," one of the people told Reuters. It raises the value of the ECB's Emergency Liquidity Assistance (ELA) to around 89 billion euros ($100 billion), a growing liability that is worrying many around the euro zone, particularly in Germany. One of the people who spoke to Reuters said the decision had been prompted by "the positive signal from the leaders' summit meeting" and hopes that a deal was at hand. But Ralph Brinkhaus, deputy parliamentary floor leader for German Chancellor Angela Merkel's conservatives, criticized the decision and called on Athens to introduce controls on the movement of money instead. "Through the continuous increase of the limit for emergency credit by the ECB, Greek banks and, ultimately, the Greek state are artificially managing to keep their heads above water," Brinkhaus said. "You have to ask yourself, what needs to happen before the Greek state finally introduces capital controls?"

Hopes for Greece bailout deal rise sharply as Athens gives ground- Hopes of a deal that would spare Greece from a looming debt default and possible exit from the single currency rose sharply on Monday after the country’s European partners welcomed proposals from Athens to cut its pension bill and raise extra money from VAT. In what was seen in Brussels as the most positive development since negotiations began five months ago, the leftwing government of prime minister Alexis Tsipras showed a willingness to give ground on the two issues that have left it at odds with its creditors.  An emergency summit of eurozone leaders ended on Monday night with high hopes of reaching a deal within 48 hours. Chancellor Angela Merkel of Germany said eurozone finance ministers would meet on Wednesday evening, the third time in a week, to finalise a deal to be put to a summit in Brussels on Thursday. Jean-Claude Juncker, the president of the European commission, described the Greek offer of tax increases and spending cuts as “a major step forward”. He added: “We we will finalise the process this week.”

IMF Spoils The Party Again: "Disagrees" With Latest Greek Proposal -- But it was all looking so great based on the market's all-knowing discounting mechanism of idiot algos. Despite Merkel's comments on "no discussion of restructuring" and Schaeuble's dysphoria over the proposals, a Greek Minister's overconfident "Greece is rescued" comment is about to be crushed by Lagarde's heavy hand:  Yeah - but as they say - apart from that The IMF loved the Greek Proposal!?  However, even if this were to be agreed by The IMF, there is stil Zee Germans who just threw another "ball is in your court" wrench in the plans:

Why the IMF’s so hard on Greece -- The impact of the International Monetary Fund’s involvement in the Greece bailouts may have had different consequences for the institution’s’ last two managing directors. But the main consequence of its controversial action since 2010 seems clear: For the Fund’s involvement in eurozone affairs, it looks like “never again.” Strauss-Kahn, during the trial on pimping charges for which he was recently cleared in France, explained to the judges that he couldn’t have possibly attended as many sex parties as alleged by the prosecution because he was “busy saving the world.”  DSK’s successor Christine Lagarde, for her part, must deal with the consequences of what was a controversial involvement from the start. She has to soothe a restless IMF board where representatives of emerging countries resent the Fund’s involvement in the never-ending Greek crisis, for which it bent, if not broke, most of its long-standing rules of engagement. That may be the reason why Lagarde is appearing to be tougher with Greece than its eurozone creditors — save possibly Germany, whose finance minister Wolfgang Schäuble remains highly skeptical of Greece’s ability to ever solve its own problems. Lagarde comes up for re-election as IMF head next year. She can’t afford a split board. The European stranglehold on the IMF’s top job since its creation is being contested, and she has to show she can be tough on Europe. That involves both being tough on Greece — making sure Athens adheres to a credible program — and being tough on Greece’s creditors, by pointing out that they will have to consent to debt relief in future. And she has until March 2016, when the current IMF program for Greece expires, to extract the institution from the Greek mess it regrets having ever stepped into.

Greece debt crisis: the offer from Athens in detail -- Eurozone finance ministers gather in Brussels on Wednesday evening to discuss proposals from Athens to secure a life-saving €7.2bn (£5.1bn) in financial aid. If these reforms receive ministerial approval and are passed by the national parliament in Athens, Greece will be able to pay a bill of €1.6bn that is owed to the International Monetary Fund by next Tuesday. Taken from the 11-page document submitted by the government of Prime Minister Alexis Tsipras on Monday, these are the proposals:

  • • Increasing national healthcare contributions – a levy paid by pensioners – to an average of 5% of pension income, up from 4%
  • • Introducing healthcare contributions for supplementary pensions, at a rate of 5%
  • • Raising social security contributions for supplementary pensions from 3% to 3.5%
  • • Increasing pension contributions for those working towards retirement by 3.9%.
  • •The standard VAT rate of 23% will be widened
  • •However, “to protect the disposable income of low- and middle-income households” there will be a reduced rate of 13% on energy, basic foods, catering and hotels
  • • A reduced rate of 6% will be charged on medical supplies and books
  • • In order to “promote fairness”, VAT discounts for various Greek islands will end.
  • • An increase in the corporation tax rate from 26% to 29% combined with a special tax of 12% on corporate profits above €500,000. The total tax raised should be €815m in 2015.

Knives out for Tsipras as Syriza hardliners threaten mutiny - Even before Alexis Tsipras arrived back in Athens after Monday night’s emergency eurozone summit in Brussels, the knives were out in his fractious leftwing Syriza party. Speaking to European colleagues, the Greek prime minister talked up his latest, more conciliatory proposals for a bailout deal in a last-ditch attempt to unlock €7.2bn of bailout aid and avert a default on June 30. But members of Syriza’s restive hard left faction fear Mr Tsipras is about to agree to tax increases and pension cuts resembling the austerity measures he condemned while in opposition as “barbarous” and “unacceptable”. The mood in the party turned mutinous on Tuesday, even as a leaked Greek version of the proposals claimed Athens had rejected tough demands by the creditors in favour of socially responsible options. “My personal view is that these measures cannot be approved in a vote. They are extreme and against social justice,” said Alexandros Mitropoulos, a hardline Syriza MP and deputy speaker of parliament. Yannis Micheloyannakis, another hard-left legislator, agreed: “A deal on the basis of the government’s new proposals would amount to a gravestone for Greece.” Some Syriza officials worry that Yanis Varoufakis, the polarising finance minister, may be preparing to break ranks with the government. Mr Varoufakis threatened this year to defect and take a group of Syriza colleagues with him after Mr Tsipras suggested — at the instigation of several senior European politicians — that he should resign. Mr Tsipras is under threat, in part, because as he rushed to hammer out a list of credible reform proposals in recent weeks, he and his aides neglected 20 to 30 potential rebels in his parliamentary group. He is also facing a public backlash. On Tuesday evening, thousands of pensioners took to the streets of Athens to decry cuts promised to the country’s creditors.

Greek business community attacks new proposals - It’s not only politicians who are up in arms over the purported measures. Greece’s biggest chamber of commerce has also waded in saying the proposed measures will stymie growth and worsen recession and joblessness, the latter already at record levels. While moving in the right direction and keeping bankruptcy at bay, the proposal might well make Greece’s plight a great deal worse, businessmen said. “The proposed measures throw all the weight on the privately-run economy with new taxes and increases in contributions that more than certain will lead to recession and an increase in unemployment,” the Hellenic-American Chamber of Commerce’s president Simos Anastasopoulos announced. “A proposal with a different mix of measures and growth plan would satisfy the demands of a viable solution.” But echoing a widely held view this morning, Anastasopoulos noted that an agreement was better than no agreement, given Greece’s urgent need for funds. And the former leader of the socialist PASOK party, Evangelos Venizelos, has criticised prime minister Alexis Tsipras’s handling of the situation, saying: “Relief that the country has averted catastrophe, that the government itself threatened it with - five years after 2010 - can’t hide the fact that we got here in the worse possible way.”

Deal With Greece Still Looks Wobbly  -- Yves Smith - While Greece and its creditors are being more circumspect than usual as they try to hammer out the terms of an agreement by Wednesday evening prior to a previously-scheduled EU summit later this week, what little messaging that is leaking out is not as positive as it should be. In general, in negotiations, both sides tend to overhype any smidgeon of what could conceivably be called progress in order to create a sense of momentum. Here, with Greece having made large enough concessions that even hardliners are willing to contemplate the latest Greek proposal, there’s more unhappiness from both sides that one likes to see at this juncture. After a breakthrough, you expect to see more positive sentiment, mixed with doubts about maybe having given too much.  Given how high the stakes are, let’s hope that these troubling undercurrents are just noise and I’m being too much of a worrywart. But what has me concerned is that the Greek side has already crossed its red lines, which puts the Tsirpas government at some risk of delivering (or at least delivering on the unduly tight timetable, between the ongoing bank run and the drop dead date of a €3.5 billion payment due the ECB on July 20). And there are more signs than I like that the Germans and perhaps the IMF want to push Greece even further.  Since this is all in play, I don’t want to belabor the matter overmuch. Nevertheless, here are some not so good signs: Lack of an official announcement showing preliminary support for the Greek offer. Consider this from an interview yesterday by BBC with Greece’s Economy Minister Giorgos Stathakis: He said he expects eurozone government heads to issue a communique later today that will say there is now a basis for a formal agreement with Athens to complete the current bailout programme and release €7.2bn of vital funds. Readers are encouraged to correct me, but I see no sign this happen. EC officials like Donald Tusk and Pierre Moscovici have made positive noises, but there aren’t as many preliminary approvals as one would like to see at this juncture. In fairness, Merkel did make acknowledge that progress had been made, but her tone was cautious, and it is widely believed that she will not back any deal unless the IMF signs off.

Greece given 4 days to enact reforms - Greece’s parliament will have only a few days to pass all the economic reforms pledged by Athens to unlock desperately needed bailout aid, putting intense pressure on Prime Minister Alexis Tsipras to build domestic political support for the concessions. Berlin has insisted on full and immediate legislative approval of measures that may be agreed at a meeting of eurozone finance ministers on Wednesday evening, even though officials now concede a deal may come too late for Athens to meet a €1.5bn debt repayment to the International Monetary Fund due on June 30. Mr Tsipras is due in Brussels on Wednesday for meetings with Christine Lagarde, IMF managing director, Mario Draghi, the European Central Bank president, and Jean-Claude Juncker, European Commission president, to continue negotiations on his proposed reforms ahead of the ministerial meeting. People briefed on Berlin’s thinking said months of negotiations since the anti-austerity government came to power in Athens had undermined trust in Greece’s ability to fulfil its promises. German officials want Greek parliamentary approval before an extension of its bailout programme is presented to the Bundestag before the current deadline expires on Tuesday. Greek authorities have begun preparations for a hasty and potentially rancorous parliamentary debate over the weekend amid growing signs that Mr Tsipras’s new reform plan — which would be presented to eurozone leaders on Thursday — faces fierce resistance in Greece.

Germany Says Greece Breakthrough Far Off as Deal Terms Rejected -- Germany downplayed the chances of an imminent deal with Greece as Prime Minister Alexis Tsipras’s government rejected the latest terms set by creditors to unlock bailout aid.  The downbeat tone from Berlin reinforced the brinkmanship at play as Tsipras met in Brussels Wednesday with the heads of the three creditor institutions: International Monetary Fund Managing Director Christine Lagarde, European Commission President Jean-Claude Juncker and European Central Bank President Mario Draghi.  “Our impression is that there’s still a long way to go,” German Finance Ministry spokesman Martin Jaeger told reporters at a regular government press briefing in Berlin. Creditor institutions have made “exceptionally generous” concessions to the Greek government, and “it’s now up to the Greek side to show some movement,” he said.

Greek Stocks Tumble As Newest Debt Deal Is Rejected - Greek Prime Minister Alexis Tsipras announced on Wednesday that his country’s newest bailout proposal has been denied by the regions creditors. Some of Tsipras’ supporters in the Syriza government party that propelled him to power have been critical of the proposal, stating that it gave too much away during a moment of desperation. The prime minister is in Brussels at the sidelines of the Eurogroup meeting to see the heads of the Troika: the European Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF). Tsipras’ Twitter account claims that the International Monetary Fund (IMF) is standing in the way of a deal, suggesting that it either did not want an agreement or was serving “special interests.” Greek Finance Minister Yanis Varoufakis spokesman Dimitris Yannopoulos called the IMF’s change of heart “shock doctrine.” Officials in Athens are attempting to unlock $8.2 billion in bailout tranche in order to make debt repayments to the IMF on June 30 and then to the ECB on July 20. In a note to the Financial Times, Peter Spiegel explained the importance of reaching a swift deal. “Without a deal by tonight, which would then be endorsed at an EU summit on Thursday, eurozone officials worry there will not be enough time for national parliaments to approve an extension of Greece’s current programme before it expires on Tuesday. Without an extension, the remaining €3.6bn in the EU’s portion of the bailout would disappear and Athens would likely default on a €1.5bn loan repayment due to the IMF on Tuesday.

Greek PM tells government that creditors rejected reform proposal: reports - Greek Prime Minister Alexis Tsipras on Wednesday told his government that the country's international creditors have rejected Athens's latest reform proposal, according to media reports, citing a Greek government officials. Greece submitted the proposals on Monday morning in the latest bid to unlock much needed financial aid. Tsipras's comments on Wednesday came before he headed to Brussels for an emergency meeting to discuss the reform measures with the heads of lender institutions, Bloomberg reported. In a post on Tsipras's official Twitter account, the prime minister criticized certain creditors, saying their stubbornness in not accepting equivalent reform measures hadn't been seen in negotiations with Ireland and Portugal. "Either they don't want a deal or they are serving specific interests in Greece," he said in the Tweet. The Greek premier is scheduled to meet European Central Bank President Mario Draghi, the International Monetary Fund chief Christine Lagarde and European Commission President Jean-Claude Juncker around midday in Brussels, or early morning Eastern Time. An EU official said the meeting would go ahead as planned, noting that talks hadn't broken down, according to the Guardian. The high-level meeting comes ahead of a Eurogroup gathering at 7 p.m. Brussels time (1 p.m. Eastern), aimed at locking in a reform deal before an EU summit on Thursday.

"No Deal": Tsipras Says Creditors Did Not Accept Greek Proposal -- Who could have possibly foreseen that the IMF would throw up all over the Greek "proposal"... aside from this post here "Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers" yesterday afternoon of course. In any event, moments ago Bloomberg reported that just as we wrote here yesterday afternoon, there is no deal and that Greek PM Alexis Tsipras told his associates that creditors not accepting equivalent fiscal measures has never happened before, according to a Greek govt official, who asked not to be named in line with policy. Creditors “not accepting parametric measures has never happened before. Neither in Ireland, nor in Portugal, nor anywhere. This strange stance can hide two scenarios; they either don’t want an agreement or serve specific interests in Greece,” the official cited Tsipras as saying." As a reminder, Tsipras is meeting Wednesday with European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Commission President Jean-Claude Juncker in an effort to reach a deal before Greece’s bailout expires and about 1.5 billion euros ($1.7 billion) in payments come due to the IMF on June 30.

Greece Rejects "Totally Unacceptable" IMF Counterproposal Demanding Pension Cuts, VAT Hike -- As reported earlier and as tipped here on Monday, markets will have to call off the party for now because the focus of the Greek debt deal negotiations has now shifted back to Brussels after all eyes had turned briefly to Athens on Tuesday following reports which indicated a deal in principle had been struck. Here’s what we said less than 24 hours ago: The IMF demands no tax hikes and pension cuts. Instead it will get almost exclusively tax hikes, amounting to 92% of the proposed measures, and just a few cuts, few of which actually impact Greek pensions. In short: the proposal is not only unsustainable, it is also unenforceable, something which the Germans - already facing a third Greek bailout - will be quick to point out. Which is why tomorrow, after Tsipras is finished with the meeting with the Troika, he will have a new homework assignment: revise the "final final" proposal and come up with much less in tax hikes, much more in spending cuts: something which the already furious hard-line elements within Syriza will have a field day with. And that is precisely what happened. As WSJ reports, creditors have decided to stick to their “red lines” after all:  Significant divisions remain between Greece and its international creditors over measures Athens must implement before receiving desperately needed bailout aid, according to a document seen by The Wall Street Journal on Wednesday ahead of a crucial meeting of eurozone finance ministers. Key points of disagreement are corporate taxation, the overhaul of Greece’s pension system and value-added taxes, according to the document. For instance, Greece had planned to increase corporate taxes to 29%, but in the document creditors limited increase to 28%. That may cause new budget shortfalls that need to be plugged with other measures. The Greek government has proposed increasing pension system revenues largely by raising social-security contributions from employers and limiting early retirement.

Greece Bailout Deal Looks Even More Remote --Yves Smith - As we said two days ago, despite talk of a breakthrough as Greece submitted a proposal to creditors that amounted to crossing one of its famed red lines, pension “reform” as in cuts, the tenor of comments of key people to the media were nowhere near as positive as they should have been if a deal were on track. But even with the understandable concern that it might prove difficult to work out fine points in time and close remaining gaps, the creditors led by the IMF, stunned most commentators, and most of all Greek officials, by making their own proposal which pretty much rubbished what the Greeks had submitted.  Tsipras went to Brussels yesterday to try to rescue an agreement. In a very bad sign, there were few leaks despite the meeting with Lagarde, Juncker, and Draghi going until past midnight, seven hours in total. Press reports today all indicate little progress was made.  I’ve embedded the document at the end of the post; it’s already been widely circulated and discussed. Even if you don’t want to read it in detail, the amount of red inked revisions speaks volumes. The big changes are:

    • 1. Changing the mix of cuts versus tax increases. The Greek proposal relied overwhelmingly on tax increases; the creditors doubt they’ll raise enough funds, given how tax payments have dropped since Syriza has taken office. The creditors, in a minor sop to Greece, did relent on taxing electricity at the highest VAT rate of 23% as they had once demanded. However, they also got rid of a one-time wealth tax of 12% of all corporate profits in excess of €500,000 this year, and reduced a proposed increase in corporate taxes from a rate of 29% to 28%. They are also proposing spending cuts, like ending diesel subsidies for farmers, and want defense spending reduced by €400 million versus the €200 million proposed by Greece
    • 2. Although this is technically just a subset of 1, it’s such a heated issue for Greece that it merits separate discussion: serious pension cuts, and a much faster elimination of the so-called “solidarity grant” for poor pensioners.

The creditors have so little trust in the Greek government that they are demanding that the pension fund changes become effective as of July 1, 2015. As mentioned earlier, they also want key legislation passed by the Greek parliament by Sunday so that the German parliament has that in place before it ratifies the bailout. Given that the earlier timetable assumed that officials would be working on drafting legislatoin today, when the two sides remain at an impasse, it’s hard to see how all the moving parts could be marshaled into place, even if someone figured out how to resolve the yawning differences.

Greece’s businesses buckle after months on brink of bankruptcy - When a country teeters for months on the brink of bankruptcy — becoming a spectacle for television cameras chronicling social breakdown and prompting doomsayers to predict imminent chaos — its businesses must resort to special measures to survive. For Nikos Vasiliou, that means flying his overseas customers to Greece so they can see with their own eyes that his respected lightbulb company still exists. “The last five months has killed business in Greece. Everyone is afraid to make an order with a Greek company, because nobody knows what will happen,” says Mr Vasiliou, owner of Bright Special Lighting. Since the start of this year, 59 Greek companies have closed down each day, costing 613 jobs and €22m in gross domestic product every 24 hours, according to industry groups, as business confidence sank, financing dried up and anxiety mounted about the government’s ability to strike a deal with Greece’s creditors. Greek businesses are now at the mercy of a leftwing government holding last-ditch bailout talks with creditors in Brussels this week. If those talks fail, then the country could default on a debt payment on June 30, leading to a possible exit from the eurozone. “There is insecurity. We have lost our faith in each other, Greek companies have stopped trusting each other,” said Vassilis Korkidis, chairman of the National Confederation of Hellenic Commerce, a small business lobby. “Business is driven by trust. And there is no trust in the Greek state at the moment.” At the heart of the Greek business collapse is almost six years of austerity measures and six months of capital flight since the election of the Syriza government that has left Greece’s banks — and their corporate customers — gasping for finance.

Breaking Greece - Krugman - I’ve been staying fairly quiet on Greece, but given reports from the negotiations in Brussels, something must be said...This ought to be a negotiation about targets for the primary surplus, and then about debt relief that heads off endless future crises. And the Greek government has agreed to what are actually fairly high surplus targets, especially given the fact that the budget would be in huge primary surplus if the economy weren’t so depressed. But the creditors keep rejecting Greek proposals on the grounds that they rely too much on taxes and not enough on spending cuts. So we’re still in the business of dictating domestic policy.The supposed reason for the rejection of a tax-based response is that it will hurt growth. The obvious response is, are you kidding us? The people who utterly failed to see the damage austerity would do — see the chart, which compares the projections in the 2010 standby agreement with reality — are now lecturing others on growth? Furthermore, the growth concerns are all supply-side, in an economy surely operating at least 20 percent below capacity. ... At this point it’s time to stop talking about “Graccident”; if Grexit happens it will be because the creditors, or at least the IMF, wanted it to happen.

New round of talks in Brussels after brief inconclusive Eurogroup: Prime Minister Alexis Tsipras was due to be locked in talks on Wednesday night with key European officials after Greece’s lenders submitted new proposals for measures to unlock 7.2 billion euros in bailout funds that Athens dismissed as being unacceptable. Tsipras, accompanied by State Minister Nikos Pappas and Alternate Minister for International Economic Relations Euclid Tsakalotos, held talks for several hours with European Commission President Jean-Claude Juncker, European Central Bank President Mario Draghi and International Monetary Fund Managing Director Christine Lagarde after lenders demanded the Greek government adopt more spending cuts than it had proposed. This meeting was followed by a brief Eurogroup meeting, where finance ministers were not able to take any decisions as the previous talks had not arrived at a conclusion. A decision was reached for the ministers to reconvene at 1 p.m. in Brussels on Thursday, by which time they hope to have a document that they can assess. “We will work through the night if we have to,” said Eurogroup chief Jeroen Dijsselbloem, who was also due to take part in Wednesday night’s talks along with European Economic Affairs Commissioner Pierre Moscovici and European Stability Mechanism chief Klaus Regling. A government official said Greece’s delegation had expected talks in Brussels on Wednesday to focus on Greek proposals that “the institutions had accepted as a basis for discussion on Monday.” However, the creditors submitted their own proposal, “which transfers the burden to salaried workers and pensioners in a way that is socially unfair while also proposing measures to avoid increasing the burden on the privileged,” the official said.

Eurogroup breaks with no Greek deal, but talks continue – Europe’s latest attempt to broker a deal with Greece failed late Wednesday amid growing acrimony between Athens and its creditors ahead of a deadline next Tuesday that could see a Greek default and a possible ejection from the eurozone. Finance ministers from the 19-member Eurogroup gathered in Brussels for the second time this week to hash out the details of an accord, but adjourned after less than two hours, dashing hopes that a deal was within grasp. “We have not reached agreement yet,” Eurogroup chief Jeroen Dijsselbloem said on his way out. “But we are determined to continue our work towards doing what is necessary.” German Finance Minister Wolfgang Schäuble was more blunt, saying that he was “not optimistic.” European Commission President Jean-Claude Juncker responded by calling the heads of the International Monetary Fund, the Eurogroup, European Central Bank and Greek Prime Minister Alexis Tsipras to his Brussels office just before midnight Wednesday. But that meeting broke up after just 90 minutes. European Union leaders hoped to sign off on a deal at their summit on Thursday but that goal was now in doubt. The finance ministers agreed to meet again on Thursday at 1 p.m. and there were reports in the early morning hours that Tsipras might resume talks with creditors as early as 9 a.m.  Time is running out for an agreement that would disburse €7.2 billion in bailout funds. Without that cash injection, Athens is unlikely to be able to repay the IMF €1.6 billion due at the end of June.

Belgian Central Bank: ECB Governing Council Supports Emergency Lending to Greece - The European Central Bank’s governing council’s continued approval of emergency loans to Greek banks is justified because the banks are solvent with adequate collateral, Belgium’s Central Bank Governor Jan Smets said Thursday. The ECB kept its lending to Greek banks unchanged Thursday under the emergency lending program known as ELA, according to a person familiar with the matter. Lending under the program had been rising steadily in recent days, and now stands at nearly 89 billion euros ($99.58 billion), as uncertainty over Greece’s future in the eurozone had sparked an outflow of deposits from its banks. The program is run by Athens’ central bank–the Bank of Greece–but the ECB must approve increases in the ELA program’s size. “Granting ELA [to Greece is] under no objection of [from] the governing council of the ECB because two conditions are fulfilled, one being, it’s liquidity support for solvent banks and secondly, it’s liquidity support with sufficient collateral–and that’s the case,” said Belgian Central Bank Governor Jan Smets, who sits on the European Central Bank governing council. “If for any reason market conditions or political events would have to lead to reassessment of this, the governing council will do so,” Mr. Smets added. His colleague on the ECB’s governing council, Bundesbank President Jens Weidmann, took a tougher stance on emergency funding for Greek banks. “When banks without access to the markets buy debt of a sovereign which is likewise locked out of the market, taking recourse to ELA raises serious monetary financing concerns,” Mr. Weidmann said in a speech in Frankfurt Thursday.

Greece No Closer to a Deal as Debt Deadline Nears - With Greece’s bailout set to expire at the end of the month, it is becoming clear that negotiators mean to go down to the wire. The brinkmanship brings with it the risks of reaching no agreement at all, or a last-minute deal that might do little to solve Greece’s underlying economic problems.“It looks like both sides are going to walk this to the precipice,” said Mujtaba Rahman, who heads the Europe practice for the Eurasia Group, a political-risk consultant firm. “But any deal that comes out of that is of course going to be more political and even more economically suboptimal.”On Thursday, for the fourth time in a week, a meeting of the Eurogroup of eurozone finance ministers ended without resolution on a Greek debt package. The group agreed only to meet yet again, on Saturday. That will push the impasse closer to the deadline.Without the bailout, and a remaining 7.2 billion euros, or about $8.1 billion, loan tranche that Athens is still hoping to receive under it, Greece could soon default on its debt and possibly have to leave the euro currency union.Because few people in the negotiations want that to happen, there are still widespread expectations that some sort of deal will be struck.The possible outcomes of Saturday’s discussion include a messy compromise that would extend the current bailout for a few more months, but with no more aid until the country fulfills certain conditions. If that were the case, Greece might be unable to make a €1.6 billion payment to the International Monetary Fund that is also due on Tuesday.

Crisis talks on Greece to stretch into the weekend: After yet another inconclusive Eurogroup in Brussels Thursday, finance ministers agreed that more talks were required to bridge enduring gaps between Greece and its creditors with another Eurogroup to be held over the weekend, most likely on Saturday. Prime Minister Alexis Tsipras and the leaders of the country’s international creditors – European Commission President Jean-Claude Juncker, European Central Bank chief Mario Draghi and International Monetary Fund head Christine Lagarde – held long talks late on Wednesday night and Thursday morning before eurozone finance ministers reconvened for the fourth time in a week. Technical teams also met to discuss the details of two different proposals – one from Greece and one from the creditors – for the so-called prior actions that could lead to the conclusion of a previous program and the release of 7.2 billion euros in loans that Greece desperately needs. Greek government sources said Athens’s proposal was largely unchanged from the document it submitted to creditors on Monday, setting out some 8 billion euros’ worth of measures. Sources attributed the negative atmosphere in the meeting to a bloc of ministers from five countries “influenced by German Finance Minister Wolfgang Schaeuble,” who was downbeat in his comments to reporters about the prospects for a deal. But Greece’s Finance Minister Yanis Varoufakis indicated that “several” of his peers had expressed criticism of the creditors’ proposal. Indicative of the fluid nature of the situation was the fact that close aides to Tsipras were unable to determine whether the premier would return to Athens after the end of a two-day summit of European Union leaders Friday or stay in Brussels for more talks with representatives of Greece’s creditors.

Germany's Merkel says it's currently not possible to find fresh funds for Greece beyond what's left in the bailout program -  German Chancellor Angela Merkel said a euro zone finance ministers' meeting on Saturday would be decisive for finding a solution to Greece's debt crisis. Merkel told a news conference after the first day of a European Union summit that heads of state and government could not get involved in the detailed negotiation of a cash-for-reform deal but only encourage the sides to reach a rapid conclusion. "We are saying, not without careful thought, that this Eurogroup is of decisive importance, taking into account that time is very short and that a result must be worked on," she said early on Friday. Asked whether she was ready to offer Athens debt relief as Prime Minister Alexis Tsipras had demanded, Merkel said it was not possible to find new money for Greece beyond what was left in its second bailout program at this stage. She deflected a question about whether finance ministers would discuss a Plan B to cope with the fallout of a Greek default and limit the damage to other euro zone countries if there was no deal on Saturday, saying she would not engage in speculation and wanted a successful agreement.

Merkel, Hollande Dangle Financing Before Greece's Tsipras - The leaders of Germany and France offered to release billions in frozen aid on Friday in a last-minute push to talk Greek Prime Minister Alexis Tsipras into contentious pension reforms in exchange for filling Athens' empty coffers until November. The leftist premier's response, according to a Greek official, was that he could not understand why his country's creditors were seeking to impose such harsh conditions in return for money to avert imminent default and damage to the euro zone. The creditors laid out terms in a document that went to Greece on Thursday and was seen by Reuters on Friday. It said Greece could have 15.5 billion euros in EU and IMF funding in four installments to see it through to the end of November, including 1.8 billion euros by Tuesday as soon as the Athens parliament approved the plan. The total is slightly more than Greece needs to service its debts over the next six months but contains no new money.  If Greece refuses, the ministers will move on to discussing a "Plan B" on preparing to limit the damage from a Greek default to Greek banks and other euro zone countries and markets, the official said. However, Merkel and Hollande have refused to talk publicly about a "Plan B", saying their efforts are focused on getting an agreement to keep Greece in the euro zone.

Greece Refuses to Abandon Tax and Pension Plans- Greece is refusing to abandon its tax and pension plans despite the strong objections of its creditors to the proposals, in a sign of the gulf remaining between the two sides on the terms of a bailout deal. According to its latest counterproposals to its creditors, Athens is sticking to its demand for a one-off 12 per cent tax on all corporate profits above €500,000 and a rise in employee pension contributions. Bailout monitors believe the plans would crimp economic growth and in their own final offer earlier insisted on alternative savings measures. The stark differences in the two proposals come amid mounting evidence that several European leaders are preparing for the prospect that no deal will be reached at a make-or-break meeting of eurozone finance ministers on Saturday. According to EU officials, Mark Rutte, the Dutch prime minister, told his fellow leaders at an EU summit on Thursday night that they may need to reconvene to discuss Greece — not to negotiate, he said, but to deal with the fallout from a Greek default.

Greece talks to go down to the wire amid fears of imminent banking collapse - Last-ditch debt talks between Greece and its international creditors collapsed for the second time in less than 24 hours raising the prospect of imminent bank closures as the country spirals towards default in five days. Greece's creaking banking system is now facing the prospect of a devastating run on its assets after Athens failed to give ground on an ultimatum presented by its paymasters. In in a three-hour aborted session of finance ministers, both sides failed to agree on a final version of a deal to report back to European leaders convening for a two-day summit. At the summit, which was billed as David Cameron's bid to kick-start his EU renegotiation ploy, leaders such as Germany's Angela Merkel and Holland's Mark Rutte, reportedly told Alexis Tsipras to "shut up" over his pleas for a reprieve over the dinner table.  Negotiations will now spill over into the weekend, raising fears that capital controls will need to be imposed as early as Monday in the absence of a deal to stave off a debt default on June 30. Amid the acrimony, Ms Merkel accused Greece of taking "regressive" steps, warning that Berlin would not be "blackmailed" by the debtor's demands, she told her MEP's. “We have not made the necessary progress. In some areas one even gets the impression that we have moved backwards,"

Debt and morality in the Greek crisis - I know I keep saying that economics is not a morality play. But when it comes to Germany and Greece, I can find no other satisfactory explanation for what is happening.  The harsh treatment meted out to Greece over the last five years makes no economic sense whatsover. It has driven Greece into a deep depression that not only makes its government budget unsustainable but renders its debt unpayable: it has not only caused poverty and distress among Greece's population, but it has driven businesses into bankruptcy and done serious damage to the supply side of Greece's economy. And yet creditors want more. I might agree that reforms to pensions are a good idea. I might also agree with widening the tax base. But not, emphatically not, in an economy as depressed as this. What is needed is debt relief, FIRST. Then real reforms, and help to restore the wanton destruction caused to the economy through ill-considered and frankly vindictive austerity measures. But debt relief is not on the agenda. The IMF has previously expressed concern about the sustainability of Greece's debt: but now, returning to the fray after a brief absence, it has compromised its own objectives in order to present a united front with the EU. The Greek side is still asking for debt relief, though not for debt reduction. But its pleas are falling on deaf ears. The reunited Troika continues to insist on austerity measures as a condition of releasing the bailout funds previously agreed.  I've reminded everyone before about Irving Fisher's famous observation: "The more the debtors pay, the more they owe". In 2012, Michael Hudson developed this idea further. "Debts that can't be paid, won't be", he said.

Forget Greece, Portugal is the eurozone’s next crisis -  Back in 2011 and 2012, when the euro crisis first flared up, three countries went bust. Of those, Greece is still in intensive care, and looks likely to remain so for the foreseeable future — the Greeks look willing to do just enough to stay in the eurozone, while the rest of Europe is willing to offer it just enough money to stay afloat while making it impossible to grow (it is a reverse Goldilocks — probably the worst of all possible solutions).   Ireland, which was always the strongest of the three bankrupt nations, is now growing again at a reasonable rate, helped along by the robust recovery in the U.K., which is still its main export market. And then there is Portugal — which is not in Greek-style permanent crisis, and yet does not seem capable of a sustainable recovery. On the surface, Portugal looks in much better shape than it did three years ago. It has exited the bailout scheme, leaving the program in May last year, after hitting European Central Bank and International Monetary Fund targets. The economy is starting to expand again. Gross domestic product rose by 0.4% in the latest quarter, extending the run to a whole year of expansion, taking the annual growth rate up to 1.5%. It is forecast to expand by another 1.6% this year. If Portugal can indeed recover, that would be a big win for the EU and IMF. Their catastrophic mix of internal devaluation and austerity looks to have been a complete failure in Greece, but if they can make it work in both Ireland and Portugal, the reputation of both institutions could be salvaged.

Greek problems mask the rising risks in Italy and France - Obsessed with the problems of Greece and the European periphery, financial markets are ignoring the rising risks of the core, especially Italy and France. Italy and France face mounting problems of high debt, slow growth, unemployment, poor public finances, lack of competitiveness and an inability to undertake necessary adjustments. Reductions in energy prices combined with low borrowing costs and a weaker euro, engineered by the European Central Bank, cannot hide deep-seated and unresolved problems forever. Italian total real economy debt (government, household and business) is about 259 per cent of gross domestic product, up 55 per cent since 2007. France’s equivalent debt is about 280 per cent of GDP, up 66 per cent since 2007. This ignores unfunded pension and healthcare obligations as well as contingent commitments to eurozone bailouts. Italy is running a budget deficit of 2.9 per cent. Government debt is around €2.1tn, or 132 per cent of GDP. French public debt is just above €2tn, or 95 per cent of GDP. The current budget deficit is 4.2 per cent of GDP. France’s budget has not been balanced in any single year since 1974. Italy’s economy has shrunk about 10 per cent since 2007, as the country endured a triple-dip recession. Italy’s unemployment is more than 12 per cent, with youth unemployment about 44 per cent. French GDP growth is anaemic, with unemployment above 10 per cent and youth unemployment of more than 25 per cent. Trade performance is lacklustre. Italy’s current account surplus of 1.9 per cent reflects deterioration of the domestic economy rather than export prowess. France’s current account deficit is about 0.9 per cent of GDP, reflecting a declining share of the global export market.

Tsipras Rejects Ultimatums, Says "Won't Be Blackmailed" --On Friday, the German press reported (and Bloomberg later confirmed) that Greece’s creditors had presented PM Alexis Tsipras with a document (essentially an outlining the following available funds that could theoretically be part of either an extension of the country’s second bailout or a third program (with the latter having been previously ruled out by the IMF and German lawmakers). The details are as follows:

  • EU creditor proposal foresees EU8.7b in EFSF funds: official
  • Creditor proposal foresees EU3.3b in SMP profits: EU official
  • Creditor proposal foresees EU3.5b in IMF funds: EU official

As noted, if Greece receives €3.3 billion from SMP profits it will mean that the ECB has forfeited the money it made on the Greek bonds it purchased in the past, effectively allowing Athens to repay the central bank with its own money. Here's DB with some color: There may be a more rapid disbursement option. EUR1.9bn of the EUR7.2bn stalled tranche is SMP profits. Releasing these funds might only involve a decision by finance ministers without necessarily consulting parliaments. Disbursing EFSF funds, on the other hand, requires the national approval process (e.g., the joint decision by the German Finance Minister and the Budget Committee, if not a full plenary vote). In other words, SMP profits could be disbursed at short notice. These would be sufficient to pay the EUR1.6bn owed to the IMF on Tuesday. As for the EFSF funds, it's long been suggested that bank recap funds could be chanelled to Athens under the 'right' circumstances and apparently imminent default is as good an excuse as any. 

Greece’s Tsipras Calls July 5 Referendum on Creditors’ Demands -- Greek Prime Minister Alexis Tsipras called a referendum on whether he should accept the latest demands of the country’s creditors, the most dramatic move yet in a debt crisis that started five years ago. Greek ministers, including the defense chief, joined the fray, urging the country of 11 million people to vote “no.”   In a nationally televised address after midnight in Athens, Tsipras said the vote will take place on July 5 and excoriated a take it-or-leave it offer as a violation of European Union rules and “common decency.” A Greek official, speaking on condition of anonymity, said the government has no plans to impose capital controls and banks will stay open on Monday. “After five months of tough negotiations, our partners unfortunately resorted to a proposal-ultimatum to the Greek people,” Tsipras said. “I call on the Greek people to rule on the blackmailing ultimatum asking us to accept a strict and humiliating austerity without end and without prospect.”  The surprise development throws into turmoil planned talks Saturday among euro-area finance ministers on their latest proposal, which would unlock 15.5 billion euros ($17.3 billion) and extend Greece’s program through November, in return for a commitment to pension cuts and higher taxes that Tsipras opposes.

Greeks cautious as Tsipras vote puts fate of euro in their hands -- Few walked the rain-slick streets of Athens in the early hours of Saturday when Prime Minister Alexis Tsipras announced his shock decision to let Greeks determine their own financial fate - and perhaps Europe’s, as well. Among the first to react were the cab drivers. They shouted the news from their taxi windows to fellow cabbies and passersby. There would be a referendum. On July 5, Greece would choose whether to accept the latest demands from their creditors – more pension cuts and tax hikes – or face a possible exit from the euro and the economic unknown. Some headed straight for the ATM to withdraw precious euros, even as Deputy Foreign Minister Euclid Tsakalotos assured them that the banks would open on Monday. Others cheered the chance for Greece to regain control of its finances after more than five years of economic decline and fiscal cliffhangers directed by foreign bankers and politicians. “They’re trying to kill us, they’re trying to kill us, they’re trying to kill us,” said Ianos Kalivas, eating at a kebab shop near Parliament Square. “It’s like we live in a constant state of fear.” How Greeks will vote is unclear. More than 56 percent favored retaining the euro, compared with 35.4 percent who preferred default and an exit over a bad debt deal, according to a Mega TV poll released June 16. That was before Greek leaders denounced euro area negotiators as blackmailers out to humiliate their country and urged people to vote “no” in the referendum. While a negative result could prompt the European Central Bank to cut its financial lifeline to the country’s banks and raise the risk of a Greek default, a “yes” vote could force Tsipras into early elections. The political atmosphere may only grow more tense over the next eight days, especially if ATM queues become bank runs.

Tsipras’ Bailout Referendum Sham -- Yves Smith - At 1:00 AM in Athens on Saturday morning, Greek prime minister Alex Tsipras announced that Greece would hold a referendum on July 5 on whether to accept the terms provided by the creditors in order for Greece to obtain €7.2 billion in “bailout” funds as the final part of a loan package provided to Greece in 2012.The bailout in fact expires on June 30. It would require the approval of each and every one of the 18 other countries in the Eurozone to extend the bailout beyond June 30. In some countries, most importantly Germany, extending the bailout requires parliamentary approval. The New York Times reported that German chancellor Angela Merkel told Tsipras that the latest offer was “extaordinarily generous.” It has also been widely reported that her stance towards Greece is more generous than that of the German Finance Minister, Wolfgang Schauble, and Schauble’s views on this issue carry more weight in the Bundestag that Merkel’s do.  Now of course, since Schauble taunted Tsirpas in early May that Greece should consider calling a “helpful” referendum, on can argue he can hardly reverse himself now. But his suggestion came in early May, which is an eternity ago, and when a referendum did not conflict with the bailout end. Thus to have this referendum at all requires a approval of Eurozone countries who for the most part are already unhappy with serial Greek brinksmanship, and may well see this as a stunt too far.* Germany had already demanded that Greece pass legislation consistent with the bailout terms by the end of this weekend as a condition for approval by the Bundestag. It is thus hard to see that a bailout extension would be approved. And a morning tweet from the Financial Times’ Peter Spiegel echoes the skepticism:Two senior #eurozone officials tell me it's highly unlikely #eurogroup will extend #Greece bailout beyond Tues. Confirming our suspicions, the initial reactions from German MPs do not seem too positive: The Bundestag’s high odds of rejecting a bailout extension alone makes the referendum seem more a desperate ploy than a real exercise of democracy. And let us not forget that some other Eurozone countries, such as Finland, Latvia, and Spain, are if anything more bloody minded on the subject of Greece than Germany.

Merkel tells Tsipras no alternative to creditors’ offer - Chancellor Angela Merkel on Friday pleaded with Greek premier Alexis Tsipras to accept an “extraordinarily generous offer” from international creditors, making clear there was no alternative and that she would not intervene directly to broker a compromise. Speaking at the end of an EU summit in Brussels, Ms Merkel said that she and French president François Hollande had “asked and urged” the Greek leader face-to-face to “take the remaining step” to reach agreement with the bailout monitors. But Mr Tsipras rejected the creditors’ offer, saying Greece would not be threatened with “blackmail and ultimatums”. He flew back to Athens on Friday evening to consult his cabinet and ruling Syriza party. The mood of intransigence boded ill for a meeting of eurozone finance ministers on Saturday intended as a last-ditch attempt to reach a deal that would extend Greece’s bailout and unlock €15.3bn in urgently needed aid. That includes €7.2bn that has been withheld since the end of last year. Greek officials said they refused an offer of a five-month extension of the bailout that would have funded the government until the end of November. According to a memo obtained by the Financial Times, the extension would be funded by “repurposing” €6.9bn in rescue funds set aside for bank recapitalisations and using it for general government expenses. Unless creditors and Athens break the stalemate, Greece will be heading for a possible run on its bank as soon as Monday, the imposition of capital controls and default. On 30 June, Greece is due to make a €1.5bn debt repayment to the International Monetary Fund and the eurozone portion of its bailout will end.

Greece is a sideshow. The eurozone has failed, and Germans are its victims too - Nearly every discussion of the Greek fiasco is based on a morality play. Call it Naughty Greece versus Noble Europe. Those troublesome Greeks never belonged in the euro, runs this story. Once inside, they got themselves into a big fat mess – and now it’s up to Europe to sort it all out.  Those are the basics all Wise Folk agree on. Then those on the right go on to say feckless Greece must either accept Europe’s deal or get out of the single currency. Or if more liberal, they hem and haw, cough and splutter, before calling for Europe to show a little more charity to its southern basketcase. Whatever their solution, the Wise Folk agree on the problem: it’s not Brussels that’s at fault, it’s Athens. Oh, those turbulent Greeks! That’s the attitude you smell when the IMF’s Christine Lagarde decries the Syriza government for not being “adult” enough. That’s what licenses the German press to portray Greece’s finance minister, Yanis Varoufakis, as needing “psychiatric help”. There’s just one problem with this story: like most morality tales, it shatters upon contact with hard reality. Athens is merely the worst outbreak of a much bigger disease within the euro project. Because the single currency isn’t working for ordinary Europeans, from the Ruhr valley to Rome. On saying this, I don’t close my eyes to the endemic corruption and tax-dodging in Greece (nor indeed, does the outsiders’ movement Syriza, which came to power campaigning against just these vices). Nor am I about to don Farage-ist chalkstripes. My charge is much simpler: the euro project is not only failing to deliver on the promises of its originators, it’s doing the exact opposite – by eroding the living standards of ordinary Europeans. And as we’ll see, that’s true even for those living in the continent’s number one economy, Germany.

Painful reality — creditors will support Greece in any case - Whatever emerges from high-wire negotiations aimed at averting a Greek default and possible exit from the eurozone, the country’s creditors have begun to acknowledge an expensive truth: that Greece is likely to be reliant on the support of the EU and International Monetary Fund for years to come because of the depth of its economic problems. The Greek government is determined to wrap up what it sees as an onerous relationship with the IMF and its other bailout monitors by March next year, when its current IMF programme expires. But at the IMF senior officials regard that as an overly optimistic scenario. Even in the best case — and with a deal done this week to avoid default — they doubt Athens would be able to return to markets to meet its financing needs within nine months. In the words of one senior official close to the negotiations, many people at the IMF “would rather cut off their little finger” than extend what has been a fractious and controversial relationship with Greece. But it is “unrealistic” to believe that Greece’s economic woes will be solved less than a year from now. The inescapable reality is that for Greece to get back on its feet it is likely to need the IMF’s help far beyond the current four-year, $30bn bailout. And the same truth, they contend, applies to its European creditors. Even in the event of a Greek default, the country’s creditors would not be off the hook. If Athens misses a €1.5bn payment due to the IMF on June 30 — making it the first developed nation to miss such a payment — it would immediately lose access to the Fund’s financial resources. It would likely then turn to fellow EU members for support, an eventuality that European institutions have already begun preparing for amid warnings about the social upheaval and human suffering that might ensue.

The real challenge this week is to save the eurozone - Europe’s leaders will have the unique opportunity to commit two mistakes in a single week. On Monday, Europe’s leaders will decide on the future of Greece. On Thursday and Friday, they will meet again to discuss, among other things, the future governance of the eurozone. The latter is more important in the long run: a healthy eurozone may even withstand a Greek exit from the single currency and prosper. But a crippled eurozone would be no less crippled if Greece were to remain a member. A dual failure would be a disaster. When I heard Christine Lagarde complain about the lack of “adults in the room” on Thursday night, I knew that things were getting out of hand. Whatever the purpose of the remark by the managing director of the International Monetary Fund, it was not helpful to dish out personal insults. It makes the search for a compromise even harder. If the leaders fail on Monday, we are looking at a sequence of events that may include default, capital controls, the introduction of a parallel currency and possibly a Greek exit from the eurozone. What then? The impact of Grexit would probably not be a sudden financial crunch. The more insidious danger is a slow realisation by investors, and more importantly by citizens, that the eurozone ceases to be a genuine union if it forces out a member state. The pretence of irreversibility is what distinguishes a monetary union from a fixed exchange rate system with a shared currency. Grexit would mark the moment when the EU moves from integration, via stagnation, to disintegration. The economic and geopolitical impact would be colossal. Not all of that would be visible immediately to everybody, which may be why so many EU leaders appear so fearless. The counter-argument is that Grexit would forge a much closer union among the remaining members. This rather optimistic hypothesis will be tested at this week’s second EU summit. By Friday, we will have a clearer picture because this is when the leaders will discuss the future of the eurozone. I fear that they will fail abysmally.

The Foreign Office warned Brits travelling to Greece to be prepared - With Greece on the brink of leaving the euro, the holiday destination is at risk of a run on banks and anti-austerity riots on the streets. The Foreign Office last night said its official advice for travellers is "under review" as holidaymakers face the prospect of limits on cash withdrawals and violent protests. The European Central Bank (ECB) agreed to pump more funds into Greek banks yesterday to prevent a full-blown emergency in the eurozone's crisis state following the acrimonious breakdown of talks between finance ministers on Thursday night. The ECB has scheduled another meeting for Monday, suggesting that the latest cash injection will only see Greece through the weekend. Although UK officials will wait to draft the advice until the situation in southern Europe becomes clearer, they are considering "all sorts of issues". This includes the possibility of cash machines shutting down if a resolution to the crisis is not found and violent protests should the Left-wing Syriza government bow to its creditors' demands, a spokesman said. British holidaymakers heading to Greece over the next few days are being advised to take plenty of cash with them as Greek people continue to empty the country's banks.

Germany: Beware Putin's Push For Brexit: The Russian President might try to drive a wedge between Britain and the EU, Germany has warned, as David Cameron looks to renegotiate the country's deal with Brussels.A key ally of German Chancellor Angela Merkel said Vladimir Putin would be "happy" if Britain voted to leave the union and could even fund anti-EU efforts on British soil.Norbert Rottgen, the chairman of the German Parliamentary Foreign Affairs Committee and a former minister in Ms Merkel’s cabinet, told Sky News Mr Putin was already funding anti-EU efforts in other countries and could do in the UK. The warning comes at a delicate time for UK-Russia relations.  When asked if the Russian President would be happy if Britain left the EU he said: "No doubt about that: yes he would be happy about that, no doubt about this, because everything which weakens the West and the Europeans is very much appreciated by Russia and Putin"