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

Saturday, June 13, 2015

week ending Jun 13

World Bank And IMF Want Fed To Hold Off On Rate Hikes Until 2016 - -- The World Bank is asking the Federal Reserve to wait until 2016 before it raises rates. According to Bloomberg, the bank’s chief economist Kaushik Basu said on Wednesday that the economy is sending mixed signals. The World Bank also cut its forecast for US growth to 2.7% in 2015 from an original estimate of 3.2%. That prediction arrives as part of the agencies semiannual update on its forecasts for the global economy. Last Thursday, the international monetary fund also asked the Fed to hold off on rate hikes until 2016. The IMF said there is not enough proof of wage or price inflation. Both agencies urged the Federal Reserve to stop increases after Fed chair Janet Yellen said it would be appropriate to raise rates from 0% for the first time since December 2008. She did note that an increase was only likely if the economy continues to grow at its current pace. Various analysts now believe that the Fed will raise rates before the end of 2015.

Bill Dudley Says Fed "Still Likely To Start Raising Rates This Year" -- Some of his other comments via Bloomberg:

  • “The appropriate stance of monetary policy will be influenced by how financial market conditions respond to the Federal Reserve’s actions,” Dudley said in text of speech in Minneapolis
  • If conditions tighten sharply, Fed is likely to proceed more slowly; officials would move more quickly under opposite scenario
  • “We will adjust the policy stance to support the financial market conditions that we deem are most consistent with our employment and inflation objectives”
  • Level of real short-term rates consistent with neutral policy seems “considerably lower” than in past, likely to remain lower than normal in future
  • Large balance sheet shouldn’t hurt Fed’s ability to lift fed funds rate, yet liftoff “may not go so smoothly in terms of the impact on financial asset prices”
  • Timing of any FOMC decision will still be based on incoming data
  • Growth should pick up “somewhat” for rest of yr; uncertainty remains on whether it will lead to further labor mkt improvement
  • Some forces restraining growth are likely to fade
  • There’s “plenty of room” for more gains in residential investment
  • Consumer spending should grow if households become more confident about their finances
  • 2Q rebound appears to be “relatively muted”

WSJ Survey: Economists Think Fed Won’t Raise Rates Before September -- Private economists increasingly expect the Federal Reserve to wait until September or later to begin raising interest rates, remaining on hold at the upcoming June policy meeting. Some 72% of the economists surveyed over the last week by The Wall Street Journal said the Fed’s first rate increase will come in September, versus just 3% who saw liftoff coming in June and another 3% who predicted officials will raise rates in July.  After Wednesday’s strong retail-sales report and other solid readings in recent days, “I think they should go in June and I believe that at next week’s meeting, they will seriously consider it,” . “But it may very well be that they’ll still conclude that September is the better month, so they can await even more data.” More economists are even looking past September: 5% predicted an October rate increase, 9% saw the Fed raising rates in December and 8% thought the Fed would wait until sometime in 2016. The survey of 66 business and academic economists was conducted Friday through Tuesday; not every economist answered every question. The Fed has kept short-term interest rates pinned near zero since December 2008 to support the U.S. economy through a financial crisis, recession and slow recovery. Officials have signaled they expect to begin raising rates sometime this year. The central bankers say want to see continued improvement in the job market, and they want to be “reasonably confident” that too-low inflation will soon move back toward their 2% annual target.

Reassuring Consumer Data Keep Fed On Track for Rate Increases - The last batches of economic data to arrive before the Federal Reserve’s policy meeting next week have surely put policy makers at ease about the pace of the U.S. expansion. A puzzling slowdown in consumer spending earlier this year turns out to have been less pronounced than feared. The Commerce Department reported a jump in retail sales in May and revised up earlier estimates of sales. Moreover, new data on services spending in the first quarter – captured in the Census Bureau’s Quarterly Services Survey – suggests upward revisions to first quarter spending data. to first quarter spending data. Macroeconomic Advisers, a research firm, now estimates that rather than contracting in the first quarter U.S. economic output was flat, and that it is growing at a 2.5% annual rate in the second. Fed officials had been signaling before they entered their self-imposed blackout period this week – in which they don’t speak publicly — that they were in a wait-and-see mode. They believed the first quarter contraction was transitory but wanted to see evidence this was the case before deciding to raise short-term interest rates. The latest reassuring data keep the Fed on track to raise short-term interest rates in the months ahead, and could make Fed Chairwoman Janet Yellen more comfortable signaling as much after next week’s policy meeting. Nearly three out of four economists surveyed by The Wall Street Journal see September as the likely liftoff date. Because many officials want to avoid unsettling markets about such a momentous event – and because many want more evidence of a true rebound — there’s reason to believe the Fed will follow the market’s lead and avoid moving sooner than expected unless more robust data pile up.

The Fed fears lifting interest rates, ex-insider says - — An expert who’s been involved in internal debates at both the Federal Reserve and the European Central Bank says the U.S. central bank is already behind the curve in lifting interest rates. Athanasios Orphanides, now a professor of global economics and management at MIT, was head of the Central Bank of Cyprus for five years, ending in 2012. He started his career as an economist in the Fed’s monetary policy division and later became senior adviser to board of governors. St. Louis Fed President James Bullard noted that Orphanides is probably the only person on the planet who has attended Fed monetary policy meetings as well as European Central Bank governing council meetings. In a speech at the St. Louis Fed earlier this month, Orphanides discussed the Fed’s fear of liftoff and what the causes might be. MarketWatch talked to him about why the Fed seems reluctant to raise interest rates. This conversation has been edited for length and clarity.

Fed Policy May Have Widened America’s Wealth Inequality, Philadelphia Fed Paper Says - Federal Reserve policies launched in a historic economic slump may have exacerbated wealth disparities in the U.S., according to new research from the Philadelphia Fed. “Monetary policy currently implemented by the Federal Reserve and other major central banks is not intended to benefit one segment of the population at the expense of another by redistributing income and wealth,” writes economist Makoto Nakajima in the second quarter edition of the regional central bank’s Business Review. “However, it is probably impossible to avoid the redistributive consequences of monetary policy,” the paper says. Such effects are especially pronounced when the central bank undertakes a concerted monetary stimulus as it did during the financial crisis of 2008 and the weak economic recovery that followed, the report says. Official borrowing costs have been effectively zero for six and a half years, and the Fed purchased more than $3 trillion in mortgage and Treasury bonds in order to further encourage borrowing and investment by keeping long-term rates down. “When a central bank conducts such aggressive monetary policy, redistributive consequences might be more important,” Mr. Nakajima writes. His findings are part of an unsettled debate about the effects, intended and otherwise, of the Fed’s unconventional policies, which came after official rates had already hit zero but the economy and financial markets still needed additional support.

Krugman, Inequality, and Growth - Dean Baker - Paul Krugman questions whether there is an existence of positive relationship between equality and growth. He rightly cautions those on the left against being too quick to accept the existence of such a relationship. He uses a simple graph showing the relationship between inequality and growth per working age person in the years 1985 to 2007. His takeaway is that there is not much of a positive relationship, but there clearly is no negative relationship between equality and growth. In other words, the people who argue that we need to have more inequality to support stronger growth have a hard case to make using this simple comparison. I would suggest taking the analysis one step further. One big difference between countries over this period is the extent to which they opted to take the benefits from growth in more leisure time. There are large differences in the decline in the length of the average work year across countries. Using the OECD data (which is not perfect for international comparisons) we find that relatively equal France saw a decline in average work hours of 10.2 percent over this period. Denmark had a decline of 5.3 percent, and West Germany had a drop of 15.9 percent. These would translate into annual increases in GDP per potential work hour of 0.5, 0.2, and 0.8 percentage points, respectively. By contrast, in the relatively unequal U.K. the drop in average hours was 4.7 percent, in Canada 3.1 percent, and in the U.S. 2.2 percent. These translates in gains in annual GDP per potential hour worked of 0.2, 0.1, and 0.1 percentage points, respectively.

The Myth of First-Quarter Residual Seasonality - NY Fed - The current policy debate is influenced by the possibility that the first-quarter GDP data were affected by “residual seasonality.” That is, the statistical procedures used by the Bureau of Economic Analysis (BEA) did not fully smooth out seasonal variation in economic activity. If this is indeed the case, then the weak readings of the economy in the first quarter give an inaccurate picture of the state of the economy. In this post, we argue that unusually adverse winter weather, rather than imperfect seasonal adjustment by the BEA, was an important factor behind the weak first-quarter GDP data.  Recent studies by economists at the Federal Reserve Bank of San Francisco as well as a number of private sector research firms (as summarized by the Wall Street Journal) suggest that there are problems with the seasonal adjustment of GDP data for the first quarter of the year. A study by economists at the Board of Governors of the Federal Reserve, however, did not find significant statistical evidence for such distortions on the aggregate GDP level, although they found weak evidence for some of its components.  We revisit the issue of residual seasonality using regression analysis. As a start, seasonally adjusted annualized GDP growth is regressed on a constant, seasonal dummies for each of the first, second, and fourth quarters, and lagged GDP growth rates, using data from 1975 through the first quarter of 2015. The hypothesis is that an accurate seasonal adjustment would make the seasonal dummies statistically insignificant, whereas a significant seasonal dummy suggests an unexplained influence on growth rates in certain quarters even after seasonal adjustment. Regressions are estimated using moving ten-year data windows. The chart below shows the evolving estimates of the first-quarter seasonal dummy parameter over our sample.

 Demographics are going to cause the US economy to see decades of slower growth - As shown in Chart 1, 23 quarters after the 2009:Q2 business-cycle trough, real GDP growth has been the weakest of any 23-quarter post-cycle trough starting with that of 1961:Q2. Although I believe that the nature of the cause of the last recession, a financial crisis, is the principal factor accounting for the relative weakness of the current economic expansion, I also believe that the trend rate of growth of U.S. real GDP in the decades to come will be less than that in the preceding decades. The primary reason for this is related to demographics. A secondary reason is that the credit excesses that preceded the last recession will not be allowed to occur again for some time..Now, let’s look at the demographic factor that will retard U.S. growth in real GDP for decades to come. The trend growth rate of output for any economy is a function of the trend growth rate in the economy’s working-age population and the trend growth rate in the economy’s productivity and technological advance. Forecasting productivity growth and technological advance is difficult. Projecting population cohorts is much less difficult. Chart 6 contains Department of Census actual and projected 10-year compound annual growth rates (CAGR) of the U.S. 16- to 64-year old population from 1970 through 2060. In 1980, the 10-year CAGR of the U.S. working-age population was 1.8%, in 2000, it was 1.3% and in 2020, it is projected to be 0.4%. You get the picture – growth in the U.S. working-age population is projected to slow significantly in the decades ahead. Barring some offsetting surge in productivity growth and/or technological advance, this projected slowdown in the growth of the U.S. potential labor force implies slower growth in U.S. real GDP than what we have experienced in previous decades.

Experts Say Best Option Now Is Keeping Nation As Comfortable As Possible Till End —Saying there were no other options remaining and that continued intervention would only prolong the nation’s suffering, experts concluded Tuesday that the best course of action is to keep the United States as comfortable as possible until the end.  According to those familiar with its condition, the country’s long, painful decline over the past several decades has made it clear that the most compassionate choice at this juncture is to do whatever is possible to ensure America is at ease during its last moments.  “We need to accept the fact that the U.S. doesn’t have long—simply helping it pass that time in comfort is the humane thing to do,” said economist Danielle Martin, speaking on behalf of a large group of experts ranging from sociologists and historians to lawmakers and environmentalists, all of whom confirmed they had “done everything [they] could.” “Attempting to stabilize the country in its current enfeebled state would not only be extremely expensive, but it would also cause unnecessary agony as it enters this final stage. With how hard the nation is struggling to perform even basic functions, letting it meet its end naturally is the merciful decision here.”  Added Martin: “At the end of the day, it’s nearly 240 years old—what can you reasonably expect?”  Others agreed with Martin, saying that, with America having gradually become a weak, almost unrecognizable shadow of its former self, the priority now should be ensuring that it is given whatever palliative support it needs and using the remaining time to put the nation’s affairs in order.  Sources also emphasized that citizens who have not already begun to emotionally prepare themselves for the country’s demise should begin to do so.  “At a time like this, it’s completely understandable to wish for some kind of 11th-hour miracle, but expecting the U.S. to somehow magically return to the way it was in its prime isn’t healthy or realistic,” said Georgetown University researcher Andrew Fischer, who later stressed that just because the nation still has “the occasional good day,” this should not cause anyone to get their hopes up for a sudden recovery. “It’s important to manage expectations and realize that sometime very soon, we’re all going to have to say goodbye.”

WSJ Survey: Fed Forecasts for the Economy and Interest Rates Could Edge Down - The Federal Reserve’s forecast for economic growth this year and for interest rates in the coming three years could be edging down, according to economists surveyed by The Wall Street Journal. The central bank will be updating its projections for the economy and interest rates at its policy meeting next week. To get a read on how the Fed’s own forecasts might change, The Wall Street Journal examined how the outlook among private forecasters had changed since March, when the Fed last updated its Summary of Economic Projections. The biggest change was in 2015 growth forecasts. Private analysts have revised down their estimates of growth in gross domestic product–a measure of the economy’s output of goods and services–to 2.1% this year from 2.9% in March. That is due largely to a contraction in output in the first quarter associated with bad weather and other factors. The new 2.1% estimate is below the Fed’s 2.5% projection for March and suggests Fed officials might be taking down their own numbers when they release their new Summary of Economic Projections at the June 16-17 meeting. Fed revisions got close attention from investors because they have implications for where the central bank might direct interest rates. After Fed officials move down their projections for interest rates and economic growth in March, investors responded by pushing down actual rates and the value of the dollar. Though some Fed officials have said of late that they were concerned the economy has lost some momentum, many have argued that the first-quarter contraction was a temporary blip, a view supported by strong car sales, retail sales and hiring reports released in recent days.

Merrill and Goldman Expect GDP to Rebound in Q2 -Some excerpts from two research reports ... From Merrill Lynch: To everything, there is a season  After a dismal start to the new year, we think that the worst is behind us. At its low, our tracking model for 1Q GDP pegged growth at -1.2%; now it is tracking -0.2%. The low for 2Q was 2.3%; now it is tracking 2.9%. On a similar note, key monthly data releases have shifted from negative to neutral. On a negative note, both core retail sales and manufacturing output were flat in April; on a positive note, the latest housing starts and auto sales data were strong and the labor market continues to motor along, with 200,000-plus job gains and a modest pick-up in wage growth. From Goldman Sachs: After the Pothole  We view the recent turnaround in the US economic data as further confirmation that weak Q1 GDP growth was largely a result of temporary factors and statistical distortions with little bearing on the outlook for the rest of the year. Once again, the US economy seems to be climbing out of a Q1 pothole....We continue to expect strong growth for the remainder of 2015. We are currently tracking Q2 GDP growth at 2.7% and expect a slight acceleration to 3% in 2015H2. We expect a pick-up in consumer spending to provide the largest contribution to stronger growth over the remainder of this year. Consumption grew a puzzlingly soft 1.8% in 2015Q1 despite strong disposable income growth and high consumer confidence. While many have expressed concern about softer spending in recent months, it is worth recalling that consumption has risen a respectable 2.7% over the last year ...  Based on recent data, Q1 GDP will probably be revised up with the next release. And it looks like there will be a bounce back in Q2 (although the Atlanta Fed GDPNow model is only tracking 1.1% for Q2.

Atlanta Fed: U.S. economy now growing at 1.9% -  --  The U.S. economy is projected to expand by 1.9 percent in the second quarter following government data that showed a 1.2 percent increase in retail sales in May, Atlanta Federal Reserve's GDPNow forecast model showed on Thursday.The regional Fed's prior estimate on June 3 showed a 1.1 percent growth in gross domestic product in the second quarter. The GDPNow model has added 1 full percentage point to its second-quarter GDP estimate since May on improved figures on trade, jobs, retail sales and service sector activity.The upwardly revised GDP estimate is still below some of the forecasts of top Wall Street firms. On Thursday, Goldman Sachs economists raised their second-quarter GDP tracking estimate by 0.2 percentage points to 3.0 percent due to the May rise in retail sales. J.P. Morgan economists left their second-quarter GDP call unchanged at 2.0 percent. Atlanta Fed's GDP forecast model caught traders' attention earlier this year when it nearly nailed the government's first reading on first-quarter GDP, which showed a 0.2 percent rise.The GDPNow program called for a 0.1 percent increase, compared with a 1.0 percent gain among economists polled by Reuters.

U.S. services data suggest upward revision to Q1 GDP - The U.S. economy was probably not as weak as has been reported in the first quarter, with data on Wednesday showing slightly stronger consumer spending than previously estimated. The Commerce Department's quarterly services survey, or QSS, showed consumption, including healthcare spending, increased at a faster clip than the government had assumed in its second estimate of gross domestic product published last month. JPMorgan said the data suggested first-quarter consumer spending could be bumped up by at least three-tenths of a percentage point to a 2.1 percent annual rate when the government publishes its third GDP estimate later this month. That, together with revisions for construction spending, trade and wholesale inventory data, suggests first-quarter GDP could be revised to show it contracting at a 0.2 percent rate instead of the 0.7 percent pace of decline the government reported last month

Visits to the Doctor Could Help Brighten the U.S. Economy’s Grim Winter --The U.S. economy’s first-quarter contraction could look less grim thanks to new data showing stronger-than-expected revenues at doctors’ offices. Eight of 12 broad categories of service-providing businesses saw annual revenue growth decelerate or drop outright in the first quarter compared with the final three months of 2014, the Commerce Department said Wednesday in its Quarterly Services Survey. However, year-over-year revenue growth accelerated in one of the largest sectors, health care and social assistance. The evidence of stronger-than-expected spending on health-care services led several private economists to upgrade their estimates for gross domestic product, the broadest measure of goods and services produced across the U.S. economy. The Commerce Department last month estimated GDP shrank at a 0.7% seasonally adjusted annual rate in the first quarter. But J.P. Morgan Chase on Wednesday estimated GDP shrank at just a 0.2% pace. Barclays projected a 0.3% decline, and forecasting firm Macroeconomic Advisers projected GDP shrank at a mere 0.1% pace in the first three months of 2015. The QSS, as it’s known, doesn’t get much attention in the world of economic indicators. Still, it’s one of the U.S. government’s only sources of timely and reliable data on how much Americans spend on services such as surgery, day care, freight trucking and legal advice. It forms the basis for roughly a fifth of the GDP calculation.

Reports of the U.S. Economy’s Contraction Have Been Greatly Exaggerated -- The U.S. economy contracted 0.7% in the first quarter. Or did it?  The Commerce Department reported last month that the gross domestic product fell at a seasonally adjusted 0.7% annual rate from January through March. Now, the agency might have to essentially say, “Nevermind.” That’s largely because reports in recent days show consumers spent more during the winter—at retailers and on health care—than previously thought. Because consumer spending is such a big part of the U.S. economy—representing more than two-thirds of output–many private-sector economists are revising their own estimates of first-quarter GDP. Forecasting firm Macroeconomic Advisers now thinks the economy didn’t contract at all, and instead registered a flat 0.0% “growth” reading for the quarter. Others such as JP Morgan Chase still think GDP fell, but at a milder 0.2% rate. The Commerce Department’s Bureau of Economic Analysis will give its own update on first-quarter GDP on June 24. As it does for all economic reports, the government releases early estimates of measures like GDP, retail sales and employment that are based on incomplete data. Once fresher data comes in, the government puts out revised figures.In the case of GDP, the government releases an initial estimate, and then two revisions, for each quarter in the immediate months after it ends. (It then revises them further the following year.) The initial reading of first-quarter GDP, released in late April, showed 0.2% growth. The second reading, released last month, showed a 0.7% contraction that was based largely on new data showing a surging trade deficit at the end of the quarter. A Commerce report Wednesday showed stronger-than-expected revenues at doctors’ offices. And an agency report Thursday showed that, in addition to a jump in retail sales in May, spending was stronger in prior months, including March, than previously thought. To be sure, even with the revisions, the first quarter was a forgettable one, if not an outright nightmare, for the economy. If it stands, the contraction is the third time since the recession ended in mid-2009 that GDP turned negative during a quarter. Even a reading of flat or meager growth would suggest a big slowdown in the winter.

The Return Of The Bond Vigilantes -- US Treasury yields continued to rise yesterday, with the rate on the benchmark 10-year Note reaching 2.50%–the highest level since last September, based on data from Meanwhile, the 2-year yield—considered the most sensitive spot on the yield curve for rate expectations—ticked up to a four-year high of 0.75% on Wednesday (June 10). The Treasury market has been dropping signals lately that rates are headed higher (as I’ve been discussing in recent weeks), and yesterday’s trading reaffirms the upward bias that’s been bubbling anew. The deflation trade, as Ambrose Evans-Pritchard notes, has gone “horribly wrong,” in the US and around the world.  Deciding if US rates will continue to rise from here is largely dependent on the economic numbers in the days and weeks ahead, starting with today’s monthly update on retail sales. Based on’s consensus forecast, the outlook is positive, with spending set to post a solid rebound in May after several months of disappointing numbers.  Meantime, recent data for the labor market paints an encouraging profile. The net result is that the Treasury market is focused on the rising possibility that the Federal Reserve will start raising interest rates in the near future, perhaps as early as September. But as the chart below shows, Mr. Market is inclined to do the heavy lifting ahead of a formal announcement from the central bank

US budget deficit drops to $82.4 billion in May — The U.S. budget deficit for May dropped sharply from the level a year ago but much of the improvement reflected a calendar quirk. In its monthly budget report, the Treasury Department said Wednesday that the May deficit dropped to $82.4 billion, down from a deficit of $130 billion in May 2014. But last year's deficit was inflated because June 1 fell on a Saturday, requiring the government to mail out $35 billion in June benefit payments in May of last year. For the first eight months of this budget year, which began Oct. 1, the deficit totals $365.2 billion, down 16.3 percent from the same period last year. This year's deficit improvement has been helped by a stronger economy, which has pushed up tax receipts by 8.6 percent. The revenue increase pushed receipts to $2.1 trillion for the period October through May. Outlays were up at a slower pace, rising 4 percent to $2.47 trillion. The government has run a deficit in May for 60 of the past 61 years. The May deficit followed a $156.7 billion surplus in April, when a flood of tax payments pushed government receipts to an all-time monthly high. The Congressional Budget Office is forecasting that the deficit for the full year will total $486 billion, little changed from last year's deficit of $483.4 billion. The 2014 deficit was down from $680.2 billion in 2013. Before then, the U.S. had recorded four straight years of annual deficits topping $1 trillion. That reflected the impact of a severe financial crisis and the worst recession since the Great Depression of the 1930s.

US Budget Deficit Reaches 7-Year Low As Revenue Rises And Government Spending Increases - The U.S. budget deficit improved further in May on news that revenue continued to rise faster than expenses have over the past year, the Treasury Department reported on Wednesday. The budget has improved thanks in large part to higher tax revenue and stronger-than-expected economic growth. The decrease in the US budget deficit continues even as government spending increased. Revenue for the fiscal year, which began in October, is running 9% ahead of the prior years levels while government spending has increased by 6%. According to the report, over the last 12 months the deficit has plummeted to $412 billion from $460 billion in April and $491 billion one year prior. The numbers suggest the lowest deficit since August 2008. According to Fox Business, “The U.S. ran an $82 billion deficit in May, a month in which the government has almost always run a deficit in recent decades. The government collected $212 billion in receipts, up 6% from a year earlier, and spent $295 billion, essentially unchanged after adjusting for calendar differences.” The Congressional Budget Office forecast in March that the federal deficit would rise to $486 billion this year, from $485 billion last year. Those numbers may now be revised because of current economic strengths.

U.S. Annual Budget Deficit Smallest in Nearly Seven Years - WSJ: —The U.S. budget deficit narrowed further in May as revenue continued to rise faster than expenses have in the past year, the Treasury Department said Wednesday. The budget picture has improved this year amid higher tax revenue and stronger economic growth, even though government spending has also increased. Revenue for the fiscal year, which began in October, is running 9% ahead of the year-earlier levels, while government spending is up 6%. In the past 12 months, the budget deficit has fallen to $412 billion, down from $460 billion in April and $491 billion a year earlier. That marks the lowest 12-month deficit since August 2008. The brighter budget outlook means the deficit could come in below projections made by analysts just a few months ago. The Congressional Budget Office forecast in March that the federal deficit would rise to $486 billion this year, from $485 billion last year. The U.S. ran an $82 billion deficit in May, a month in which the government has almost always run a deficit in recent decades. The government collected $212 billion in receipts, up 6% from a year earlier, and spent $295 billion, essentially unchanged after adjusting for calendar differences.

The Shrinking Deficit -  From the WSJ: U.S. Annual Budget Deficit Falls Near Seven-Year Low - Over the past 12 months, the budget deficit has narrowed to $412 billion, down from $460 billion in April and $491 billion a year earlier. That marks the lowest 12-month deficit since August 2008.
...The brighter budget outlook means the deficit could fall below projections made by analysts just a few months ago. The Congressional Budget Office forecast in March that the federal deficit would rise to $486 billion this year, from $485 billion last year.Meanwhile, Congress has yet to raise the federal debt limit. The Treasury has been using emergency measures since mid-March to avoid breaching the ceiling. The Treasury hasn’t yet said how long it might be able to do that, but the CBO estimated in March that those measures should last until October or November.
The most recent CBO projection was for the fiscal 2015 budget deficit to be 2.7% of GDP. Right now it looks like fiscal 2015 will be closer to 2.4% (a significant change).

US Budget Deficit Reaches 7-Year Low As Revenue Rises And Government Spending Increases - The U.S. budget deficit improved further in May on news that revenue continued to rise faster than expenses have over the past year, the Treasury Department reported on Wednesday. The budget has improved thanks in large part to higher tax revenue and stronger-than-expected economic growth. The decrease in the US budget deficit continues even as government spending increased. Revenue for the fiscal year, which began in October, is running 9% ahead of the prior years levels while government spending has increased by 6%. According to the report, over the last 12 months the deficit has plummeted to $412 billion from $460 billion in April and $491 billion one year prior. The numbers suggest the lowest deficit since August 2008. According to Fox Business, “The U.S. ran an $82 billion deficit in May, a month in which the government has almost always run a deficit in recent decades. The government collected $212 billion in receipts, up 6% from a year earlier, and spent $295 billion, essentially unchanged after adjusting for calendar differences.” The Congressional Budget Office forecast in March that the federal deficit would rise to $486 billion this year, from $485 billion last year. Those numbers may now be revised because of current economic strengths.

Republican budget would prohibit FCC from enforcing net neutrality rules - The Republican-controlled House Appropriations Committee today released a budget proposal that would prohibit the Federal Communications Commission from implementing its new net neutrality rules. The Financial Services and General Government Appropriations bill for fiscal 2016, to be considered in a subcommittee meeting tomorrow, "contains $315 million for the FCC—a cut of $25 million below the fiscal year 2015 enacted level and $73 million below the request," the committee said in its announcement. "The legislation prohibits the FCC from implementing net neutrality until certain court cases are resolved, requires newly proposed regulations to be made publicly available for 21 days before the Commission votes on them, and prohibits the FCC from regulating rates for either wireline or wireless Internet service."

Rand Paul demands White House release trade deal text immediately -Sen. Rand Paul (R-Ky.) said Saturday it “boggles the mind” that the White House has not yet released the text of trade deal it’s pushing, known as the Trans-Pacific Partnership (TPP). “It kind of boggles the mind,” Paul said in an interview with Breitbart News. “Who’s in charge of the administration that decides to keep a trade treaty secret? To keep it classified makes no sense at all.” Paul said the administration should immediately release the text of the trade deal so members of the Senate can decide how to vote later on.  The Senate recently voted to fast-track the trade deal, which would allow an up-or-down vote on it. House GOP leaders could hold the fast-track vote as early as next week despite opposition from groups in both parties. “To me, it’s kind of you put the cart before the horse to give the permission to do something you haven’t seen,” Paul said. “They claim you’ll get to see it, again but you’ll only get an up-or-down vote with no amendments. Also, they get rid of some of the rules on — I guess it’s not, you can’t filibuster it either. It passes with a simple majority.” Paul explained he has proposed legislation that would require the Senate to wait one day before a vote is held for every 20 pages of legislation. “So 800-page legislation [like Obamatrade] would wait 40 days. You’d wait 40 days so we’d have adequate time to read it. Yeah, I’m a believer that we should read legislation before we vote on it.”

Fast-track vote still up in the air - Supporters of a controversial trade bill are increasingly confident they can secure the votes needed to pass so-called fast-track legislation when it hits the House floor, which could come as early as this week. Still, House Majority Leader Kevin McCarthy of California and other GOP leaders have not yet committed to bringing up Trade Promotion Authority by week’s end, a sign that while pro-trade leaders in the House are closing in on the 217 ayes they need to pass the bill, the contentious vote remains very close. Only about a dozen members remain undecided, most of them Democrats, and President Barack Obama is expected to make another lobbying push this week to try and win over wavering members of his party. Story Continued Below Republican aides predicted a decision by Wednesday on whether the measure would come up for consideration in the House this week, signaling it does not have the votes to pass quite yet. Support for fast-track — which allows Congress up-or-down votes to approve trade packages while barring amendments — is a rare point of agreement between Obama and Hill Republicans. And enacting fast-track would be a major victory for the president, who needs the expedited authority to finalize a huge Pacific trade accord, the centerpiece of Obama’s economic agenda. In fact, with bitter fights looming over government spending this summer, it may be the last time for months that Obama and GOP leaders work together in relative harmony.

Fast Track Will Also Apply to TISA -- Gaius Publius - Fast Track is not just a path to TPP … it’s evil all on its own. There’s now another leaked “trade” deal, called TISA, and Fast Track will “fast-track” that one too. Want your municipal water service privatized? How about your government postal service? Read on. Most of the coverage of the Fast Track bill (formally called “Trade Promotion Authority” or TPA) moving through Congress is about how it will “grease the skids” for passage of TPP, the “next NAFTA” trade deal with 11 other Pacific rim countries. But as we pointed out here, TPA will grease the skids for anything the President sends to Congress as a “trade” bill — anything. One of the “trade” deals being negotiated now, which only the wonks have heard about, is called TISA, or Trade In Services Agreement. Fast Track legislation, if approved, will grease the TISA skids as well. Why do you care? Because (a) TISA is also being negotiated in secret, like TPP; (b) TISA chapters have been recently leaked by Wikileaks; and (c) what’s revealed in those chapters should have Congress shutting the door on Fast Track faster and tighter than you’d shut the door on an invading army of rats headed for your apartment. Congress won’t shut that door on its own — the rats in this metaphor have bought most of its members — but it should. So it falls to us to force them. Stop Fast Track and you stop all these “trade” deals. (Joseph Stiglitz will explain below why I keep putting “trade” in quotes.)  What’s TISA? It’s worse than TPP. As you read the following, keep the word “services” in mind. TISA protects the right of big money players to make a profit from “services,” any and all of them.

What’s Wrong With The Administration’s Trade-Deal Arguments -- Here is from the June 3rd article at the pro-trade-deals Americas Society & Council of the Americas, "Summary: The Trans-Pacific Partnership - What's at Stake for the Western Hemisphere?” in which the Democratic congressman, Gregory Meeks, a Co-Chair of the Friends of the Trans-Pacific Partnership Caucus, states the core of the Administration’s case on its proposed trade-deals. The article reports: According to Congressman Meeks, 'TPP is a force for positive change across the board for all countries, whether or not they belong to TPP,' although this transformation will require rigorous action. Countries in Central and South America understand that economic reforms and harmonized trade rules are only one side of the coin. On the reverse side, they are committed to addressing socio-political demands, inequality issues, violence, and the informal sector in the economy.  He’s referring there to the uniform standardization that these deals would impose upon all participating countries regarding regulations of food-safety, product-safety, drug-safety, environmental standards, workers’ rights, protections against the defrauding of investors, etc. He is saying that this international uniformity will bring "positive change across the board for all countries.” What it will actually do is to raise the standards in some countries and lower the standards in others, in order to achieve uniformity across international borders.This is what he is implying (even though it’s false). But there is a deeper problem than whether environmental and other standards within various nations are set higher; and it is that they are, in effect, to be set in stone by these agreements.

Fast Track to the Corporate Wish List -- Some time in the next several days, the House will likely vote on trade promotion authority, enabling the Obama administration to proceed with its cherished Trans-Pacific Partnership (TPP). Most House Democrats want no part of the deal, which was crafted by and for corporations. And many Tea Party Republicans don’t want to hand the administration any additional powers, even in service of a victory dearly sought by the GOP’s corporate allies. The vote, which has been repeatedly delayed as both the White House and House GOP leaders try to round up support, is expected to be extremely close. The Obama administration entered office promising to renegotiate unbalanced trade agreements, which critics believe have cost millions of manufacturing jobs in the past 20 years. But they’ve spent more than a year pushing the TPP, a deal with 11 Pacific Rim nations that mostly adheres to the template of corporate favors masquerading as free trade deals. Of the 29 TPP chapters, only five include traditional trade measures like reducing tariffs and opening markets. Based on leaks and media reports—the full text remains a well-guarded secret—the rest appears to be mainly special-interest legislation. Pharmaceutical companies, software makers, and Hollywood conglomerates get expanded intellectual property enforcement, protecting their patents and their profits. Some of this, such as restrictions on generic drugs, is at the expense of competition and consumers. Firms get improved access to poor countries with nonexistent labor protections, like Vietnam or Brunei, to manufacture their goods. TPP provides assurances that regulations, from food safety to financial services, will be “harmonized” across borders. In practice, that means a regulatory ceiling. In one of the most contested provisions, corporations can use the investor-state dispute settlement (ISDS) process, and appeal to extra-judicial tribunals that bypass courts and usual forms of due process to seek monetary damages equaling “expected future profits.”

Last-second objections threaten Obama-GOP vote on trade -- House Republicans are moving full-steam ahead toward a Friday vote to grant President Obama fast-track trade authority despite objections from Democrats to a last-second deal between Speaker John Boehner and Minority Leader Nancy Pelosi. The late Tuesday night Pelosi-Boehner deal scrapping cuts to Medicare that were to be used to pay for a program offering help to workers displaced by trade appeared to lift the final obstacle to a Friday vote. After repeatedly hedging their bets on whether the big vote would take place this week, Republican leaders announced the Friday vote at a closed-door caucus meeting on Wednesday. But Democrats at their own closed-door meeting complained to Pelosi that the Medicare deal wasn’t good enough because GOP leaders plan to attach the fix to a separate trade “preferences” bill. Since the bill granting trade preferences to African countries is not considered must-pass legislation, that means there is “no guarantee of enactment,” said a source in the meeting. Boehner and Republicans don’t want the fix attached to either fast-track or Trade Adjustment Assistance (TAA), the bill granting aid to displaced workers. Doing so would alter the Senate-passed package, requiring another vote by the upper chamber. It’s not clear whether the stumble will be enough to derail the fast-track vote, though some GOP aides expressed deep frustration at the last-minute maneuvering.

It’s crunch time. Just a little reminder from Ross -- Just a little reminder for everyone.  It’s not just his “giant sucking sound” comment.  It’s the time frame he noted, and the advantages to a business going to a foreign nation.  Well, tomorrow is the Fast Track vote and there are some dem’s who are not taking the threat of loosing their job seriously enough.

Trans-Pacific Partnership: Democrats threaten to sink trade deal - POLITICO: President Barack Obama’s push for a large-scale trade deal with the Pacific Rim cleared an important hurdle Thursday — barely — but faces a much stiffer test on Friday amid growing opposition from House Democrats to his trade agenda. Speaker John Boehner’s (R-Ohio) plan to bring a package of trade bills to the House floor is proving to be a big gamble, as both senior Republicans and Democrats are privately wondering whether they will be able to pass Trade Adjustment Assistance, a program to help workers who lose their jobs due to free trade, in a do-or-die Friday vote. Story Continued Below The internal struggle for Democrats was evident Thursday in the Capitol complex, when White House officials and AFL-CIO President Richard Trumka both addressed lawmakers in a closed meeting. White House Chief of Staff Denis McDonough, Treasury Secretary Jack Lew and Labor Secretary Tom Perez spoke first, urging Democrats to clear TAA, despite their deep reservations. If the House passes TAA, the chamber would be able to consider legislation that would give Obama fast-track authority to negotiate the Trans-Pacific Partnership, one of his top legislative priorities. But TAA is unpopular with Republicans, and aides in both parties estimate that only 50 to 100 GOP lawmakers will vote for it. That means Democrats hold the key to its passage — and ultimately to the overall trade package. Rep. Peter DeFazio (D-Ore.) said he told McDonough that the White House’s position was “bullshit.”

Will TPP Kill The Post Office? - I was on Nicole Sandler's show, Radio or Not on Wednesday and she referenced a chart showing "all donations that corporate members of the U.S. Business Coalition for TPP made to U.S. Senate campaigns between January and March 2015, when fast-tracking the TPP was being debated in the Senate." Along with Goldman Sachs and Citigroup, there were FedEx and UPS at the top of the list. The same FedEx and UPS that have been lobbying to strangle the Post Office so they can get the business for themselves. TPP is reported to have provisions regulating "state-owned enterprises." (We don't know for sure what it says because it's secret.) UPS and FedEx are top donors to a campaign to pass the TPP. Uh Oh. Does this mean TPP contains provisions designed to kill our Post Office?  Why were FedEx and UPS giving money to senators just before a vote on fast track pre approval of TPP? Could it be because they have been able to sneak a privatization mandate into TPP? We don't know because TPP is still secret. If fast track passes the House, we won't be able to fix it when TPP comes up for a vote because the fast track law would prohibit Congress from making any amendments to the agreement. Note that the AFL-CIO position on SOEs says the AFL-CIO "does not oppose SOEs and does not seek to privatize them." But because the U.S. does not have "a comprehensive manufacturing strategy or adequate governmental support for manufacturing, without strict disciplines on anti-competitive behavior by SOEs, U.S. workers and producers remain at risk from those entities."  In other words, when companies owned outside of the U.S. get government assistance helping them to force closure of U.S. production, this affects working people in a negative way.

Why Currency Manipulation Matters - Currency manipulation (CM) by foreign countries has become a major part of the debate over Trade Promotion Authority (TPA) in Congress. Lawmakers opposed to TPA have charged that China’s efforts to keep the value of its currency down in order to expand exports contributed to US job losses since the turn of the century. Previously, Fred Bergsten and I raised the possibility of including currency chapters in trade agreements as one of several possible strategies for countering CM. This post, however, focuses exclusively on the costs of CM to the US economy.  Some observers describe the cost of CM entirely in terms of jobs lost for US workers; others dispute the notion that CM has any effect on US employment. But the truth is more complicated than these simple nostrums. Economic circumstances determine whether CM has any effect on total employment. In the recent past, CM held down US employment to a major extent. In the near future, CM probably will have a negligible effect on employment. However, CM imposes costs on the US economy even when we are at full employment. These costs are roughly comparable in magnitude to all of the gains that are projected from trade agreements with Asia-Pacific countries.

Why TPP sucks - On June 10th the Washington Post’s editorial page chastised Congress for “making free trade difficult”. Champions of Trade Promotion Authority and the Trans-Pacific Partnership (TPP) continue to label all skeptics as “opponents of free trade.” Many skeptics actually favor free trade, but the Trans-Pacific Partnership appears to be less about “free trade” and more about domestic regulatory harmonization. The post-WWII trade regime has been very successful in its aims of reducing tariffs and barriers to trade, expanding global market access, and integrating new players into the global trade regime. The spectacular economic rise of countries such as China, India, and Brazil is testament to the value of the trade route to lift millions out of poverty. The House may vote on Trade Promotion (“Fast Track”) Authority (TPA) as early as Friday, June 12th. The Senate has already voted in favor of TPA and Obama has been working hard to get skeptical House Democrats on board to support it. If the House grants Obama TPA, it ties its hands to an “up or down” vote on TPP with no possibility for amendment. There is much at stake and citizens and representatives need to know who is drafting it, what it means for US democracy and sovereignty, and the effects it will have on public health. Lobbyists representing corporate, not consumer, interests, drafted much of the TPP. William New, editor of IP-Watch and visiting fellow at Yale Law School, sued the Office of the United States Trade Representative (USTR) under the Freedom of Information Act and obtained hundred of pages of e-mails sent between the 600 or so “cleared advisors” and USTR. Though heavily redacted, the e-mail demonstrated an extraordinarily chummy relationship between corporate lobbyists, CEOs, and USTR. As New points out, many of the industry representatives are former USTR officials. For instance, Stan McCoy – former USTR negotiator of TPP – left USTR in April 2014 for a position as Senior Vice President and Policy Director for the Motion Picture Association. Former USTR Mickey Kantor became a lobbyist for the Pharmaceutical Research and Manufacturing Association (PhRMA). The revolving door between USTR and K Street creates incentives skewed against the public interest. Corporate interests have unparalleled access to USTR while consumers and citizens have been shut out.

Fast-Track Would Give Obama Green Light To Form EU-Inspired ‘Pacific Union,’ Surrender Congress’ Treaty Powers - U.S. Sen. Jeff Sessions (R-AL), Chairman of the Subcommittee on Immigration and the National Interest, sent the following letter to President Obama demanding information about the new global governance structure whose creation would be authorized through six-year fast-track executive authority. Text of the letter follows: (excerpt) I asked that you make public the section of the TPP that creates a new transnational governance structure known as the Trans-Pacific Partnership Commission. The details of this new governance commission are extremely broad and have the hallmarks of a nascent European Union, with many similarities. Reviewing the secret text, plus the secret guidance document that accompanies it, reveals that this new transnational commission—chartered with a “Living Agreement” clause—would have the authority to amend the agreement after its adoption, to add new members, and to issue regulations impacting labor, immigration, environmental, and commercial policy. Under this new commission, the Sultan of Brunei would have an equal vote to that of the United States. The implications of this new Pacific Union are extraordinary and ought to be discussed in full, in public, before Congress even contemplates fast-tracking its creation and pre-surrendering its power to apply the constitutional two-thirds treaty vote. In effect, to adopt fast-track is to agree to remove the constitutional protections against the creation of global governance structures before those structures are even made public. I would therefore ask that you provide to me the legal and constitutional basis for keeping this information from the public and explain why I cannot share the details of what I have read with the American people.

House Kills TPP Fast-Track, Huge Blow to Corporate-Friendly Trade Agenda -- The U.S. House of Representatives on Friday dealt a serious blow to President Obama’s corporate-backed trade agenda, while erecting a major stumbling block for proponents of Fast Track, or trade promotion authority.  “Today’s votes to stall Fast Track and TPP are a major win for anyone who cares about climate change,” said Executive Director May Boeve. “This disastrous deal would extend the world’s dependence on fracked gas, forbid our negotiators from ever using trade agreements in the fight against global warming, and make it easier for big polluters to burn carbon while suing anyone who gets in the way.” She continued: “That message clearly broke through today, as House Democratic Leader Nancy Pelosi got up, bucked enormous pressure, and rallied against the deal, specifically citing concerns about its impact on climate change. Today was a big win, but the thousands of climate activists across the country who stood up and linked arms with fellow progressives to get us here won’t rest until Fast Track and TPP are dead for good.” A bill on Trade Adjustment Assistance (TAA), which would provide aid to workers displaced because of so-called “free trade” agreements, had been packaged with Fast Track authority, and a vote against either doomed the total package. Legislators opposed to Fast Track had hoped to derail the entire package by voting against TAA.  And derail it they did, voting 126-302 against TAA.

House Kills Fast-Track Of Obamatrade After Pelosi-Led Democrat Rebellion -- And just like that, President Obama's "great job creation" bill is defeated.  Following Pelosi's comments that "its defeat is the only way we will be able to slow down fast track," the defeat of a worker aid measure vote means the TPA is done (for now)... Of course this can all go back for another markup and another amendment but for now... TPP needs TPA for full passage which means we are back to square one.  As The NY Times reports, House Democrats rebuffed a dramatic personal appeal from President Obama on Friday, torpedoing his ambitious push to expand his trade negotiating power — and, quite likely, his chance to secure a legacy-defining trade accord spanning the Pacific Ocean. In a remarkable rejection of a president they have resolutely backed, House Democrats voted to kill assistance to workers displaced by global trade, a program their party created and has stood by for four decades. By doing so, they brought down legislation granting the president trade promotion authority — the power to negotiate trade deals that cannot be amended or filibustered by Congress — before it could even come to a final vote. “We want a better deal for America’s workers,” said Representative Nancy Pelosi of California, the House minority leader who has guided the president’s agenda for two terms and was personally lobbied by Mr. Obama until the last minute.

Congress Rebukes Obama On Trade, And Thus The Lame Duck Era Begins -- After an unusual last minute visit to Capitol Hill to personally lobby Democratic members of the House, President Obama suffered a big loss today in a vote on trade promotion authority:House Democrats rebuffed a dramatic personal appeal from President Obama on Friday, torpedoing his ambitious push to expand his trade negotiating power — and, quite likely, his chance to secure a legacy-defining trade accord spanning the Pacific Ocean.  In a remarkable rejection of a president they have resolutely backed, House Democrats voted to kill assistance to workers displaced by global trade, a program their party created and has stood by for four decades. By doing so, they brought down legislation granting the president trade promotion authority — the power to negotiate trade deals that cannot be amended or filibustered by Congress — before it could even come to a final vote.  “We want a better deal for America’s workers,” said Representative Nancy Pelosi of California, the House minority leader who has guided the president’s agenda for two terms and was personally lobbied by Mr. Obama until the last minute.Republican leaders tried to muster support from their own party for trade adjustment assistance, a program they have long derided as an ineffective waste of money and sop to organized labor. But not enough Republicans were willing to save the program. Republican leaders then passed a stand-alone trade promotion bill, 219 to 211. That measure cannot go to the president for his signature because the Senate bill combined both trade adjustment and trade promotion.

The Democrats’ TPP rebellion just drew blood: Everything you need to know about today’s shocking vote Today’s rebuke for the Obama Administration and his friends on the Republican side of the aisle on their trade agenda restores democratic accountability to the process of governing. What Obama was proposing was a trick, one used repeatedly to advance distasteful policies, by getting each side to vote only on the parts they like. And House progressives responded by saying they wouldn’t play that game anymore. If they can withstand the pressure, not only will trade be derailed, but the era of the split-vote gambit, where opponents help the victors, will be over.  Progressive Democrats took their stand on trade adjustment assistance (TAA), a separate bill to “fast track” trade authority for the President, which the Senate linked together, so that they had to pass concurrently. TAA offers modest job training, income support and health insurance assistance to workers who lose their jobs from trade deals. It’s not very effective, but it sounds good; Democrats who oppose trade deals can say that they at least got some help for workers.  TAA and fast track have passed together ever since the Trade Act of 1974. This is a Washington game where Democrats get to vote for TAA so Republicans don’t have to. Republicans don’t favor TAA because they see it as welfare.  That set up liberal Democrats as the deciding factor on whether Obama would get his fast-track trade authority. The President went to Capitol Hill to tell Democrats to “play it straight” on the vote. But voting for TAA as a sweetener for a policy most Democrats don’t support is the opposite of playing it straight. It’s a stupid game, and progressives finally decided not to play… {more}

Liberals Deal Obama a Stunning Blow on Trade—but One More Showdown Awaits - Here’s what happened: The House considered three bills Friday. One was a generally noncontroversial customs enforcement bill. Another was the actual fast-track trade-authority legislation. (You can read the case against that bill here.) And the third was a bill providing trade-adjustment assistance to workers who get screwed over by trade deals. Republicans have long detested trade-adjustment assistance as a wasteful big-government program, and Democrats were not happy with the way it was being paid for. The way House Speaker John Boehner structured the process along with the Senate, all three bills had to pass or else the entire package would not advance. (If you’re a gambler, think of it like a three-item parlay bet.) Progressive Democrats who oppose fast track feared it would pass with mainly Republican votes alongside a small number of Democrats, but they sensed an opportunity on the must-pass trade-assistance bill—since relatively few Republicans would back the legislation, it would be much easier to kill by withholding Democratic votes. And if trade assistance goes down, so too would fast track. And that’s exactly what happened. Minority leader Nancy Pelosi took the floor early Friday afternoon and said that explicitly defeating trade assistance “is the only way we will be able to slow down fast track.” When the votes rolled in shortly thereafter, the trade-assistance bill failed with 302 votes against it and only 126 in favor. It’s worth stressing here how much progressive organizing had to do with this defeat. President Obama personally appeared in Congress at the last minute Friday morning to appeal to Democrats one more time, on the heels of crashing the congressional baseball game the night before. But Pelosi and Democrats remained unswayed, and in her speech, Pelosi instead credited the work of activists holding members to a “hot stove” back home.  But fast track isn’t quite dead yet. Boehner moved on to the fast-track and customs bills anyway, both of which “passed,” though fast track only got two votes more than it needed. The package still won’t advance without trade-adjustment assistance—but Boehner scheduled a revote for Tuesday.

Business Leaders React With Dismay to Defeat of Trade Bill - As big a setback as Friday’s vote on Capitol Hill was for President Obama’s efforts to advance his trade agenda, it was an even bigger rebuff for the leaders of American business.While there are deep divisions over trade policy among Democrats, and to some extent among Republicans as well, corporate America has been nearly unified in its support of a deal that would lower various barriers to trade and investment between the United States and 11 other Pacific Rim nations.Though many sought to put the best face on the vote, business groups and chief executives were quick to voice their displeasure with the House’s rejection of aid to workers harmed by imports, which could doom prospects for eventual approval of a wider trade pact.“This is disappointing and discouraging,” said Todd J. Teske, chief executive of Briggs & Stratton, a 107-year-old manufacturer based in Wauwatosa, Wis. “We do business around the world, and free and fair trade allows the U.S. and our company to be competitive globally.” In a classic strange-bedfellows-in-Washington moment, big-business lobbies swung into action Friday afternoon in a concerted effort to save a signature initiative of President Obama, a leader with whom they have rarely seen eye to eye. “Manufacturers will not back down in this fight for expanded trade, for the future of our industry and our country,” the National Association of Manufacturers said in a statement.

A Big Win for Big Labor - House Democrats may have cast the fatal votes that killed President Obama’s trade agenda on Friday morning, but the party responsible for its demise was a coalition whose numbers have diminished for decades and whose political clout has been questioned: the American labor movement. The Obama administration believed it had the votes necessary to pass the most-contentious piece of its trade legislation—Trade Promotion Authority—that would allow the president to finalize agreements with Pacific Rim nations and the European Union. But the labor movement was not prepared to give up. Instead, it caught the administration off guard by launching a surprise attack on legislation known as Trade Adjustment Assistance, a program designed to help workers displaced by trade and one which Democrats—and organized labor—have overwhelmingly supported in the past. Just 40 House Democrats—less than one-quarter of the caucus—voted for the bill, which fell in a landslide, 302-126. By defeating the aid measure, the labor movement rendered the administration’s careful work rounding up votes for Trade Promotion Authority largely irrelevant. As the margin of the defeat became clear, some Democrats scrambled to change their votes to 'No,' a measure of just how unpopular the measure had become. Republicans moved quickly to hold a vote on Trade Promotion Authority, but even though the bill received a majority of votes, it will not go to the president's desk because it does not match the Senate-passed package. GOP leaders could try to bring the assistance bill back for another vote next week, and the White House tried to downplay Friday’s loss as a momentary stumble. Press Secretary Josh Earnest referred to it as a “procedural snafu”—the same phrase he used to describe the trade package’s initial failure in the Senate earlier this spring. “It’s deja vu all over again,”

Decline and Fall of the Davos Democrats - Krugman - OK, I didn’t see that coming: even though I have come out as a lukewarm opponent of TPP, I assumed that it would happen anyway... But no, or not so far. ...Or to put it another way, one way to see this is as the last stand of the Davos Democrats. If you talk to administration officials — or at least if I talk to them (they may be telling me what they think I want to hear) — they offer a fairly sophisticated defense of this deal. ...I’m not fully convinced, but this is a reasonable discussion. But the overall selling of TPP, to some extent by the administration and much more so by its business allies, has been nothing like this. Instead, it has been all lectures from Those Who Know How the Global Economy Works — the kind of people who go to Davos and participate in earnest panels on the skills gap and the case for putting Alan Simpson in charge of everything — to the ignorant hippies who don’t. You know, ignorant hippies like Joseph Stiglitz and Elizabeth Warren.  This kind of thing worked in the 1990s, when Davos Man actually did seem to know how the world works. But now Davos Democrats are known as the people who told us to trust unregulated finance and fear invisible bond vigilantes. They just don’t have the credibility to pull off arguments from authority any more. And it doesn’t say much for their perspicacity that they apparently had no idea that the world has changed. TPP’s Democratic supporters thought they could dictate to their party like it’s 1999. They can’t.

How Pelosi broke with Obama - Nancy Pelosi needed John Boehner to help save her party and her president from an ugly public meltdown. By Friday morning, it was clear that a crucial piece of Barack Obama’s trade initiative was barreling toward defeat. Democrats were disjointed, dispirited, even angry in some cases. At the same time, they knew that they – not Republicans – would shoulder much of the blame for killing the president’s top legislative priority and for the ensuing spectacle of a party at war. Pelosi was a minor player for much of Obama’s push to secure authority to clinch the Trans-Pacific Partnership, a 12-nation pact that would be the largest free-trade deal in history. But as the vote neared, and major Democratic opposition bubbled to the surface, she was in a wrenching position: naturally inclined to deliver for a president she’s worked hand-in-glove with for years, but all-too-aware of the strong progressive winds within her caucus against a deal Democrats believe would jilt American workers. Up until moments before Friday’s vote, Pelosi hadn’t told a soul how she was going to vote on TAA or Trade Promotion Authority, the fast-track trade law Obama was seeking. No one could get a good read on her: Some Democrats thought Pelosi was wary of the trade package, others believed she’d ultimately back Obama. Still others figured she’d split the difference, backing TAA, but bucking Obama’s request for fast-track authority. On Friday morning, before she spoke to Boehner, Pelosi told Obama — sitting in her office during a last-ditch visit to the Capitol — that she probably wouldn’t back TAA, a necessary precursor to the fast-track vote he worked hard to pass. But when Pelosi’s decision was final that she would split with the president, one of her aides – not the California Democrat herself – delivered the news to the White House.

Obama quest for fast-track trade bill on ice in House - (Reuters) - A raging battle over President Barack Obama's request for "fast-track" authority central to improving U.S. ties with Asia resumes in the House of Representatives next week when lawmakers are expected to try to reverse Friday's defeat of linchpin trade legislation. House Democrats disregarded Obama's personal pleas and teamed up with Republicans, for different reasons, to overwhelmingly defeat a program that helps American workers who lose their jobs as a result of trade deals. Supporters were heartened, however, when the House narrowly approved a separate measure to give Obama "fast-track" authority to negotiate the Trans-Pacific Partnership (TPP) trade deal. But the legislation is stuck in the House because of the defeat Obama and House Speaker John Boehner suffered on the first vote. Both measures are included in one bill and both need to be approved before the legislation can clear the House. A House Republican aide told reporters Republican leaders hope to stage a vote again Tuesday to pass the worker aid portion of the bill. That would allow the entire bill to be signed into law by Obama, but its chances were unclear. Obama, who made a last-ditch personal appeal to congressional Democrats to support the worker aid program, urged lawmakers to get behind the twin initiatives. "New trade agreements should go hand in hand with support to American workers who’ve been harmed by trade in the past," he said in a statement, noting the program helps about 100,000 workers per year.

Survey: Obama's Trade Proposal a Tough Sell for Most Americans - NBC News: Despite a heavy push by President Barack Obama for a sweeping multinational trade deal, a majority of Americans echo the concerns of labor unions and a number of Democratic members of Congress that the trade accord will negatively impact U.S. workers and companies. Two-thirds of Americans say protecting American industries and jobs by limiting imports is more important than allowing free trade so they can buy products at lower prices from any country, according to the most recent NBC News online survey conducted by SurveyMonkey from June 3-5. And that sentiment is held across party lines, with majorities of Republicans, Democrats, and independents agreeing that limiting imported inexpensive goods from other countries to protect jobs from other countries is more important than being able to buy cheap goods.  After a dramatic showdown in the Senate over giving the president "fast-track" aauthority to negotiate a sweeping multinational trade pact, the fight now moves to the House where the majority of Democrats oppose the legislation amid worries that the Trans-Pacific Partnership, a massive 12-nation trade accord, will cost American jobs and result in lowered middle class wages.

Trade Deal’s Setback Left Wall Street Unmoved. Why? - The rejection earlier today by the House of a bill that was seen as essential for President Obama to make progress on his ambitious agenda of tighter economic integration with the Asia Pacific region came as a major surprise to most commentators.But the real surprise is how the news appears to have been met with a yawn on Wall Street. A crucial part of the proposed Trans-Pacific Partnership involved stronger protections for the intellectual property held by American corporations.Yet when the surprise vote failed, not only did the stock market as a whole barely react, but the stock prices of large American pharmaceutical companies — the most obvious beneficiaries of these proposals — also remained largely unchanged. Wall Street’s apparent indifference to this latest development tells us something, although it’s not quite clear what. One possibility is that perhaps this trade deal just isn’t such a big deal for the bottom lines of these firms — it adds only millions to the bottom lines of companies that are worth billions.  If that’s right, then perhaps the stakes here aren’t as high as the agreement’s most fervent boosters have suggested. The economist Tyler Cowen suggested as much on Twitter, arguing that his “default hypothesis” is that “it is not actually a huge transfer of wealth to them.” An alternative interpretation is that Wall Street didn’t react because financial markets already expected it. But given the extent of surprise among the trade policy analysts that I talk with, this seems unlikely. Even as it was widely understood that the vote would be close, few expected it to be defeated.

U.S. Shifts Stance on Drug Pricing in Pacific Trade Pact Talks, Document Reveals — Facing resistance from Pacific trading partners, the Obama administration is no longer demanding protection for pharmaceutical prices under the 12-nation Trans-Pacific Partnership, according to a newly leaked section of the proposed trade accord. But American negotiators are still pressing participating governments to open the process that sets reimbursement rates for drugs and medical devices. Public health professionals, generic-drug makers and activists opposed to the trade deal, which is still being negotiated, contend that it will empower big pharmaceutical firms to command higher reimbursement rates in the United States and abroad, at the expense of consumers. “It was very clear to everyone except the U.S. that the initial proposal wasn’t about transparency. It was about getting market access for the pharmaceutical industry by giving them greater access to and influence over decision-making processes around pricing and reimbursement,”  “I think it’s a shame that the annex is still being considered at all for the T.P.P.” The annex, which covers pharmaceutical and medical devices, is the latest document obtained by The New York Times in collaboration with the watchdog group WikiLeaks, and it was released before the House vote on whether to give President Obama expanded powers to complete the Trans-Pacific Partnership. The Senate has already approved legislation giving the president trade promotion authority, or fast-track power that would allow him to complete trade deals without the threat of amendments or a filibuster in Congress. A House vote on final passage of the bill, now expected on Friday, appears extremely close.

Forget the TPP: Wikileaks Releases Documents From The Equally Shady “Trade in Services Agreement" - If you haven’t heard about about the Trade in Services Agreement, aka TISA, don’t worry, you’re not alone. While I had heard of it before, I never read anything substantial about it until today. What sparked my reading interest on the subject were a series of very troubling articles published via several media outlets following a document dump by Wikileaks. Here’s how the whistleblower organization describes the TISA leak on it document release page: WikiLeaks releases today 17 secret documents from the ongoing TISA (Trade In Services Agreement) negotiations which cover the United States, the European Union and 23 other countries including Turkey, Mexico, Canada, Australia, Pakistan, Taiwan & Israel — which together comprise two-thirds of global GDP. “Services” now account for nearly 80 per cent of the US and EU economies and even in developing countries like Pakistan account for 53 per cent of the economy. While the proposed Trans-Pacific Partnership (TPP) has become well known in recent months in the United States, the TISA is the larger component of the strategic TPP-TISA-TTIP ‘T-treaty trinity’. All parts of the trinity notably exclude the ‘BRICS’ countries of Brazil, Russia, India, China and South Africa.  If it sounds complicated, it is. The important point is that this trade agreement contains a crucial discussion of governments’ abilities to meaningfully protect civil liberties. And it is not being treated as a human rights discussion. It is being framed solely as an economic issue, ignoring the implications for human rights, and it is being held in a classified document that the public is now seeing months after it was negotiated, and only because it was released through WikiLeaks. The process is also highly secretive—in fact, trade agreement texts are classified. While the executive branch does consult with members of Congress, even congressional staffers with security clearance have until recently been prevented from seeing the texts. Furthermore, certain trade industry advisers are allowed access to U.S. negotiating objectives and negotiators that the public and public interest groups do not have

Why the mortgage interest tax deduction should disappear, but won't -- In the run-up to the 2012 U.S. Presidential election, Planet Money asked five economists from across the political spectrum for proposals that they would like to see in the platform of the candidates. The diverse group agreed, first and foremost, on the wisdom of eliminating the tax deductibility of mortgage interest.  The vast majority of economists probably agree. We certainly do. But it won’t happen, because politicians with aspirations for reelection find it toxic. What inspires us to discuss this now? An important anniversary in our profession’s understanding of economic policy. Forty years ago, in his celebrated book Equality and Efficiency: The Big Tradeoff, Arthur Okun explained how many policy choices involve a tradeoff between the distribution of income and the size of the economy. That is, the more redistributional a policy, the more of a drag it is on growth. While much of tax policy works this way, the tax deductibility of mortgage interest does not: it both raises inequality and reduces economic efficiency.The source of increased inequality is simple. The private benefits of the mortgage interest deduction rise both with a person’s income and with the cost of their house. The higher your income, the higher your marginal tax rate; and the bigger your house, the bigger the possible mortgage. When either rises, the value of the tax deduction rises, too.

Bulk Collection Is All Fun and Games Until Office of Personnel Management Gets Hacked -- Marcy Wheeler -- Reuters reports that, contrary to initial reports, the Office of Personnel Management hack revealed earlier this week did compromise the security clearance and background check information in the data, meaning the hack will be far more valuable as intelligence to set up phishing and other further spying efforts. The hack is believed to have been perpetrated by Chinese hackers, though it is unclear thus far whether or not they are part of the government. Data stolen from U.S. government computers by suspected Chinese hackers included security clearance information and background checks dating back three decades, U.S. officials said on Friday, underlining the scope of one of the largest known cyber attacks on federal networks.[snip] A total of 2.1 million current U.S. government workers were affected, according to a source familiar with the FBI-led investigation into the incident. This is, as a lot of the current and former government employees I follow on Twitter are realizing this morning, a devastating hack, one which will have repercussions both in the private lives of those whose data has been hacked as well as generally for America’s national security, because the data in the OPM servers offers a road map for further espionage targeting.  This WaPo piece quotes a number of cybersecurity people suggesting several recent major hacks are being used to pull together large data repositories — similar to in purpose but at this point just a mere shadow of what we do using bulk collection and XKeyscore.

Pimco Dumps Two-Thirds of Its Treasuries Before June Selloff - The Pimco Total Return Fund, which lost its place as the world’s largest bond fund this year, cut almost two-thirds of its U.S. government debt holdings in May just in time for a June selloff. Total Return, run by Pacific Investment Management Co., reduced government and related debt to 8.5 percent of assets from 23.4 percent in April, according to the company’s website, amid a second-quarter selloff in Treasuries. Benchmark 10-year yields reached an eight-month high on Wednesday, jumping from 2.12 percent at the end of May. “We are seeing a bearish sentiment in the market and we are heading for higher yields as we approach the first” Federal Reserve interest-rate increase, said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “All of the fundamentals are pointing in a bearish direction for the bond market. There is a reflation theme building.”

The Alleged Flash-Trading Mastermind Lived With His Parents and Couldn’t Drive - Navinder Singh Sarao will never rank among the most notorious inmates of HM Prison Wandsworth. William Joyce betrayed Britain to the Nazis. Ronnie Kray ruled the ganglands of the East End. Bruce Reynolds masterminded the Great Train Robbery. Today Nav Sarao sits in a 10-foot-by-six-foot cell at Wandsworth, considered one of the worst prisons in Britain, accused of an altogether different sort of crime: helping to wipe more than $1 trillion off financial markets five years ago. At “Wanno,” a forbidding Dickensian fortress south of the River Thames, time moves to the same monotonous rhythm: the jangle of guards’ keys at 6:30 a.m.; yard exercise at 8 a.m.; dinner at 4:30 p.m.; lockdown by 8 p.m. Until one morning in late April, virtually no one in the great investment houses of the City had ever heard of Sarao. But then Scotland Yard arrived in Hounslow, on the western fringes of London. What happened next stunned everyone. Sarao was arrested at his parents’ modest, suburban home that Tuesday and accused of helping to cause the so-called flash crash of 2010, when the U.S. stock market plunged in a matter of minutes. While prices recovered almost as quickly as they’d fallen, the episode staggered investors. No one could explain it. Here at last, authorities claimed, was an answer: a glorified day trader living with his mom and dad near Heathrow Airport.

The Elizabeth Warren Vs Jamie Dimon Feud Is Heating Up - There are few words in the English language that strike fear in the hearts of Wall Street bankers like “Elizabeth Warren.”  The senior senator from Massachusetts has led the fight for tougher regulations on Wall Street, and she has an uncanny knack for marshaling public support for such an esoteric project.  Jamie Dimon, perhaps America’s most famous banker, has a way with words himself. Earlier this week, the JPMorgan CEO disparaged the leadership in Washington, singling out Warren in particular, saying: “I don’t know if she fully understands the global banking system,” according to a Bloomberg News report.  On Friday, Warren fired back, saying on a Huffington Post podcast that:  “The problem is not that I don’t understand the global banking system. The problem for these guys is that I fully understand the system and I understand how they make their money. And that’s what they don’t like about me.” This is not the first time that the two have sparred. Warren’s 2014 book A Fighting Chance describes several run ins with the JPMorgan CEO, in which they disagreed over banking regulations.

DOJ Launches Probe Of Treasury Market Manipulation -- Two months before the CFTC and DOJ slammed one solitary trader in a London suburb with "seasonally-adjusted" allegations that it wasn't actually Waddell and Reed who flash crashed the market on May 6, 2010 as the SEC originally claimed but an E-mini spoofer named Nav Sarao (whose only real crime was exposing the rigging by the HFT cartel), we showed in explicit detail how HFTs were rigging the Treasury market with "egregious manipulation" in the futures market through spoofing. To regular ZH readers who have seen countless intraday examples of Treasury rigging, not to mention the power of HFT demonstrated during the October 15 flash crash, this was nothing new, but what made this particular case unique is that it was brought up in litigation by one HFT firm, HTG Capital Partners, which charged unnamed "John Does" with doing precisely what we had alleged HFTs do in all capital markets, all the time.

The $3 Trillion Traffic Jam: "It's About Time We Started Worrying About The Next Financial Crisis" --  "It’s about time we start getting worried about possibly the next [financial crisis],"warns BlueMountain's James Staley explaining that, "the lack of liquidity that currently exists today, is something that people on the buy side, sell side and regulatory side need to be focused on." In an effort to quantify just how big that 'issue' is, Bloomberg reports that the U.S. corporate-bond market has ballooned by $3.7 trillion during the past decade, yet, as Citi's Stephen Antczak warns, almost all of that growth is concentrated in the hands of three types of buyers, "we used to have 23 types of investors in the market. Now we have three. In my mind, that’s the key driver."As Bloomberg reports, for all the concern that Wall Street’s shrinking balance sheets will fuel a liquidity crisis when investors flee credit markets, Citigroup Inc. strategist Stephen Antczak saysinvestors may be overlooking an even bigger catalyst.  Almost all of the $3.7 trillion growth is concentrated in the hands of three types of buyers: mutual funds, foreign investors and insurance companies, according to Citigroup. That combination could lead to more selling than the market can absorb when the Federal Reserve raises interest rates for the first time since 2006, Antczak said.

Here Is What’s Fraying Nerves Among the Financial Stability Folks at Treasury -- On Monday, Richard Berner worried aloud at the Brookings Institution about what’s troubling the smartest guys in the room about today’s markets. Berner is the Director of the Office of Financial Research (OFR) at the Treasury Department. That’s the agency created under the Dodd-Frank financial reform legislation to, according to their web site, “shine a light in the dark corners of the financial system to see where risks are going, assess how much of a threat they might pose,” and, ideally, provide the analysis to the folks sitting on the Financial Stability Oversight Council in time to prevent another 2008-style financial collapse on Wall Street. Two notable concerns stood out in Berner’s talk. First was a concern about liquidity in bond markets evaporating rapidly for reasons they don’t yet “sufficiently understand.” Berner explained: “…liquidity appears to have become increasingly brittle, even in the world’s largest bond markets. Although liquidity in these markets looks adequate during normal conditions, it seems to disappear abruptly during episodes of market stress, contributing to disorderly price changes. In some markets, these episodes are occurring with greater frequency. None of these episodes disrupted U.S. financial stability, nor do we yet sufficiently understand their causes. But together they highlight a potential weakness in markets that could amplify the impact of financial shocks.” Another major concern are the bond mutual funds and ETFs that have mushroomed since the 2008 crisis and are stuffed full of illiquid assets or assets which might become illiquid in a financial panic.

Hopeless America: Firms Spend On Buybacks, Not Capex -- There is no clearer sign that Americans don't believe in America than US corporations electing to give earnings back to shareholders or buy back stock than to invest those earnings. However, this pattern has been evident Stateside ever since the global financial crisis. Firms simply refuse to make outlays that may have once promised to increase output in the future. Why would firms decide to return money to shareholders or buy back stock instead of making productive investments? The only logical explanation is that the US economy has prospects poor enough to discourage any sort of investment. In other words, the future of America is shot, and its firms use their money accordingly: Data show a broad array of companies have been plowing more cash into dividends and stock buybacks, while spending less on investments such as new factories and research and development...Laurence Fink, chief executive of BlackRock Inc., the world’s largest money manager, argued as much in a March 31 letter to S&P 500 CEOs. “More and more corporate leaders have responded with actions that can deliver immediate returns to shareholders, such as buybacks or dividend increases, while underinvesting in innovation, skilled workforces or essential capital expenditures necessary to sustain long-term growth...”   An analysis conducted for The Wall Street Journal by Standard & Poors Capital IQ shows that companies in the S&P 500 index sharply increased their spending on dividends and buybacks to a median 36% of operating cash flow in 2013, from 18% in 2003. Over that same decade, those companies cut spending on plants and equipment to 29% of operating cash flow, from 33% in 2003. So firms are using cash like it's game over for America. How will this play out in the future?

Stock Buybacks That Hurt Shareholders - We’re in a stock buyback binge. Companies are tripping over themselves to repurchase their own shares this year, and most investors see this as a bonanza.But not all of these buyback programs wind up benefiting shareholders. In fact, some can be quite costly and destroy value rather than create it.On the positive side, companies that buy back shares reduce the amount of stock they have outstanding. This has the effect of increasing earnings per share and the stakes of existing shareholders. That’s why many investors have been pushing for buybacks, especially at companies sitting on mountains of cash.Such calls are being heeded. April was the biggest month ever for buyback announcements — $141 billion, according to data compiled by Rob Leiphart at Birinyi Associates. If these buyback plans continue at the current rate, they will reach $1.1 trillion this year, he said, well above the peak of $863 billion in repurchase announcements in 2007. The best buybacks occur at companies that have concluded — after careful analysis — that their stocks are cheap and that purchasing them is a wise use of their capital. But veteran investors warn that companies must combine stock repurchases with other steps if they want to unlock value in their operations.Problems emerge when companies spend billions of stockholders’ dollars repurchasing shares with little to no effect on the amount of stock that remains outstanding. This can happen when they are buying back shares with one hand and, with the other, issuing stock options or restricted shares to executives and other employees as part of their compensation.

California drought not helping water funds, but stocks prosper | Reuters: The record California drought, now in its fourth year, is prompting fund managers to dive into the shares of water technology companies. Fund managers from T. Rowe Price, Janus, and Mairs & Power are among those that have increased their stakes in firms such as Ecolab Inc, Roper Technologies Inc and Flowserve Corp that make smart meters, efficient heaters, and software that helps restaurants, hotels and homeowners cut back on their water usage. Shares of Roper Technologies Inc, which makes leak testing and flow measurement equipment, are up nearly 13 percent for the year. Shares of Ecolab, meanwhile, which among other businesses makes commercial laundry systems that cut water consumption by 40 percent, are up 10 percent for the year. The rally in water technology companies should continue even if the California drought ends soon, analysts said. Global spending on water-related technology is set to grow to an estimated $25 billion by 2018, up from $15 billion in 2010, according Global Water Intelligence, an Oxford, England-based research firm. "It's clear that water scarcity is only going to increase, and we think that there will be a several-year investment cycle as homes and businesses look at ways to maximize the water they do have," said Pete Johnson, an analyst at the $4.3 billion Mairs & Power Growth fund.Despite the rush to water-related stocks, active and passive funds that focus on water are struggling, largely as a result of outsized positions in water utilities whose shares have been hit by concerns about the effects of mandatory usage cutbacks in California and the likelihood of rising interest rates.

Banks’ post-crisis legal costs hit $300bn - The total cost of litigation aimed at a group of the biggest global banks since 2010 has broken the £200bn ($306bn) barrier, according to a new study that challenges assumptions that banks are through the worst of post-crisis reparations. The annual study, carried out by the UK-based CCP Research Foundation, uses regulatory notices, annual reports and other public disclosures to tally the cost of fighting claims of misconduct over rolling five-year periods. In the latest report, which runs until the end of last year, the total for 16 banks stands at £205.6bn of fines, settlements and provisions — up almost a fifth from the previous year. Despite that trend, many bank executives continue to act as if these are irregular charges from “legacy” issues, said Chris Steares, research director at the foundation. He noted that a recent flurry of settlements for currency manipulation cited abuses continuing until 2013. “If you ask the banks if their reputational risk is going to change, they’d have to say yes,” he said. “[But] with conduct costs continuing to be incurred, year after year, it does beg the question whether behaviours are being changed for the better.” Some politicians in the US and UK have tried to draw a line under years of heavy lawmaking, taxes and fines, arguing that regulators should now go easier on the banks. Executives, too, have signalled that expenses have begun to fall, particularly after the resolution of cases linked to the mis-selling of residential mortgage-backed securities. Presenting earnings in April, for example, Bruce Thompson, Bank of America’s finance chief, noted two “much lighter” quarters of legal expenses which he hoped would allow the bank to hold less capital under international standards on operational risk.

HSBC to shed 50,000 jobs in quest for higher payouts - HSBC pledged a new era of higher dividends on Tuesday, laying out plans to slash nearly one in five jobs and shrink its investment bank by a third to combat sluggish growth across its sprawling empire. Chief Executive Stuart Gulliver has made it his mission to boost profits since taking the helm of Europe's largest bank by assets in 2011 but his efforts have so far been foiled by high compliance costs, fines and low interest rates. In the bank's second big overhaul since the financial crisis, it will speed up a cull of unprofitable units and countries by cutting almost 50,000 jobs - half of them from selling businesses in Brazil and Turkey. The bank also planned to increase its business in Asia, particularly in China. HSBC will cut its assets by a quarter, or $290 billion on a risk adjusted basis (RWA), by 2017, and slice $140 billion from its investment bank, which will subsequently make up less than a third of HSBC's balance sheet from 40 percent now. Gulliver also pledged higher payouts for investors. "I believe that we are in the foothills of another prolonged period of dividend growth for the firm," he said. The bank's dividend had grown for 17 years from 1991 to 2008.

How to Fix the Banks: Revisited - The bankers are angry. They feel the regulations designed to prevent another meltdown are cramping their style. Their bonuses are down. I agree. Red tape is not the way to save the banking system.The banks engaged in a freewheeling orgy of unregulated risk taking for two decades. And when the world crashed: they expected, and received, bailouts. But we don't need to bash the banks to save the system.As a society, we do not have a stake in saving HSBC. We do not have a stake in saving Barclays, or RSBC, or Lehmann Brothers, or Bank of America. But we do have a stake in saving the banking system. Here is a link to a piece I wrote in 2009 on how to do that.

CoStar: Commercial Real Estate prices declined in April, Up Solidly YoY --  From CoStar: Commercial Real Estate Price Growth Moderated In April Following First Quarter Surge Following strong gains of more than 5% in the first quarter of 2015, composite CRE prices saw a slight dip in April as overall sales activity moderated from its recent robust pace. The value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index decreased by 0.7% and 0.8%, respectively, in the month of April. Both indices have risen more than 2% over the last three months and are up more than 12% for the annual period ending in April 2015... The distress percentage of total observed sale pair counts fell to 6.2% in the first four months of 2015, well down from a peak of 32% in 2010. This graph from CoStar shows the the value-weighted U.S. Composite Index and the equal-weighted U.S. Composite Index indexes. The value-weighted index declined 0.7% in April and is up 12.8% year-over-year. The equal-weighted index declined 0.8% in April and up 14.5% year-over-year. The second graph shows the percent of distressed "pairs". The distressed share is down significantly and is close to late 2008 levels. Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

CoreLogic: "Number of Loans in Foreclosure Lowest Since 2007" - From CoreLogic: Number of Loans in Foreclosure Lowest Since November 2007 CoreLogic reported today that the national foreclosure inventory fell by 24.9 percent year over year in April 2015 to approximately 521,000 homes, or 1.4 percent of all homes with a mortgage. This marks 42 months of consecutive year-over-year declines ... Also in April 2015, the 12-month sum of completed foreclosures continued to decline, dropping by 19.8 percent to 538,000 since April 2014. The seriously delinquent inventory fell to 1.4 million loans, a 22.1-percent year-over-year decline. The report today was for April. Here is a map from the March report that shows foreclosure inventory by state. Some key "bubble" states - like Arizona and California - have mostly recovered. Several judicial foreclosure states - like New Jersey and Florida - are still struggling.  From CoreLogic today:  Judicial foreclosure states, on average, continued to have higher foreclosure rates than non-judicial states, averaging 2.3 percent and 0.7 percent, respectively, in April 2015. The foreclosure rate for judicial states peaked in February 2012 at 5.4 percent, while non-judicial states experienced peak foreclosure rates in January 2011. As of April 2015, 42 percent of outstanding mortgages were in judicial states, but 70 percent of total loans in foreclosure were in those states.

The Vacant Dead: The 50 US Cities With The Most "Zombie" Foreclosures --Over the past five years, first as a result of the 2010 robosigning scandal and then due to the natural build up of a massive backlog of cases in judicial states, which in some cases is well over 1000 days, America's conventional house clearing mechanisms of foreclosure and bank repossessions had become clogged up to previously unseen levels. Which was precisely how the banks wanted it: after all, by minimizing the supply of housing for sale, this served as an aritifical subsidy to the housing market. It achieved two things: it kept housing prices artificially high, and allowed millions to live in their house mortgage-free for years, while also providing a "spending stimulus" to millions who in lieu of spending cash on rent (or mortgage) could purchase discretionary items.  Five years later, however, with the stock market at all time highs and the housing recovery supposedly in full swing, albeit on an artificially inflated basis due to abnormally low inventory, the banks are starting to collect. As the following chart shows, the foreclosure completion process has suddenly soared now that banks are finally evicting deadbeats, and as a result REOs have surged 50% from a year ago to a 27 month high! Not what one would expect from a healthy, vibrant and "clearing" housing sector, it merely shows that the banks are now confident enough with the level of demand that they are happy to leak out far more of their accrued supply into the general market, something we dubbed "foreclosure stuffing" all the way back in 2012.

Black Knight April Mortgage Monitor -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for April today. According to BKFS, 4.77% of mortgages were delinquent in April, up from 4.70% in March. BKFS reported that 1.51% of mortgages were in the foreclosure process, down from 2.02% in April 2014. This gives a total of 6.28% delinquent or in foreclosure. It breaks down as:
• 1,463,000 properties that are 30 or more days, and less than 90 days past due, but not in foreclosure.
• 952,000 properties that are 90 or more days delinquent, but not in foreclosure.
• 764,000 loans in foreclosure process.
For a total of ​​3,179,000 loans delinquent or in foreclosure in April. This is down from 3,837,000 in April 2014.From Black Knight: we saw a slight seasonal uptick in delinquencies push the national rate back up to nearly 4.8 percent. As of April month-end, the nation’s foreclosure inventory fell by 18,000 to 764,000 total, a drop of over 250,000 from this time last year.  April saw a slight uptick in delinquency rates – rising 1.5 percent month-over month  Seasonal increases in April are typical (they’ve been seen in eight of the past 10 years)  Also: Black Knight’s April Mortgage Monitor: 62 Percent of Seriously Delinquent Loans Have Undergone Home Retention Actions; Florida Sees Greatest Backlog Improvement: This month, Black Knight examined the most recent data on home retention actions – i.e., loan modifications and repayment plans – and found that of the approximately 952,000 borrowers who are 90 or more days past due but not yet in foreclosure, 62 percent have been through some form of home retention program. As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, while overall retention actions have decreased over the past two years, they are making up a greater share of that seriously delinquent inventory.

Lawler: Preliminary Table of Distressed Sales and Cash buyers for Selected Cities in May - Economist Tom Lawler sent me a preliminary 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.

Majority of Americans Think the Housing Crisis Isn’t Over -  More than 40% of Americans surveyed believe that the country is still in the middle of the housing crisis, while one in five anticipate that the worst is yet to come, according to the report, titled the 2015 Housing Matters Survey. That pessimism stands in contrast with improvements in the housing market over the last couple of years. Prices have been climbing for 35 consecutive quarters, according to the S&P/Case-Shiller Home Price Index for March. With interest rates near historic lows and prices still well below peak values in most markets, owning a home is also very affordable at the moment. Overall, researchers found that more people are optimistic than last year when they conducted a similar survey. In 2014, 70% of those surveyed believed that we were still in the middle of a housing crisis or the worst was yet to come, compared to a total of 61% this year. But strong improvements in the economic data aren’t translating into a burst of optimism among typical Americans, according to the research, which was conducted by Hart Research Associates interviewing 1,401 adults around the country. Sixty percent of adults believe that affordability is a serious problem in America today, according to the survey. Half of Americans are making at least one sacrifice–including not saving for retirement, taking an additional job, or accumulating credit card debt—in the past three years in order to cover rent or a mortgage, according to the survey.

MBA: Mortgage Applications Increase in Latest Weekly Survey, Purchase Index up 15% YoY - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 8.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 5, 2015. The previous week’s results included an adjustment for the Memorial Day holiday. ... The Refinance Index increased 7 percent from the previous week. The seasonally adjusted Purchase Index increased 10 percent from one week earlier. The unadjusted Purchase Index increased 20 percent compared with the previous week and was 15 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) increased to 4.17 percent, its highest level since November 2014, from 4.02 percent, with points increasing to 0.38 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.The first graph shows the refinance index. The increase this week was probably related to the holiday adjustment. With higher rates, refinance activity should decline. 2014 was the lowest year for refinance activity since year 2000. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 15% higher than a year ago.

Another Bubble Alert: Home Down Payments Hit Three-Year Low -- Fannie Mae and Freddie Mac — the perpetually insolvent, bailed-out GSEs that a whole host of BTFDers and a few disgruntled billionaires swear can become cash cows again if they are just allowed to escape the evil clutches of government — are now allowed to back home loans with down payments as low as 3%. The decision to lower the minimum from 5% to 3% came from the GSEs’ regulator FHFA and its Director, Melvin Watt. Needless to say, some GOP lawmakers were not pleased with this initiative, noting (correctly) that this simply encourages banks to return to pre-crisis underwriting standards and once again imperils taxpayers by putting Fannie and Freddie on the hook for loans made to borrowers who cannot afford their homes. Of course this kind of argument falls on deaf ears in a society where the answer to debt is still more debt and in a world where even the IMF now recommends “living with” debt rather than repaying it.  Given the above we weren’t surprised to learn that during Q1, the average down payment on single family homes, condos, and townhomes fell to just 14.8% — the lowest level since Q1 2012. RealtyTrac has more: The Q1 2015 U.S. Home Purchase Down Payment Report shows the average down payment for single family homes, condos and townhomes purchased in the first quarter was 14.8 percent of the purchase price, down from 15.2 percent in the previous quarter and down from 15.5 percent a year ago to the lowest level since Q1 2012.. The report also shows that the average down payment for FHA purchase loans originated in the first quarter was 2.9 percent of the purchase price while the average down payment for conventional loans was 18.4 percent of the purchase price..

Mortgage Rates Right Back to 2015 Highs -- Mortgage rates bounced back up to the highest levels of 2015 today.  Yet again, it was a frustrating and seemingly serendipitous move, unable to be blamed on any particular event or data.  Markets and market-watchers don't like this because it makes it hard to know when and why the next big move will happen.  Even so, the phenomenon has been a fairly constant companion in the past 2 months as investors consider the possibility that global interest rates bottomed out in April.  With a big-picture consideration like that, trading in bond markets has become less about reacting to "normal stuff."  Instead, investors are merely trying to make their way toward higher rates as quickly as possible just in case this move is "the big one."  Where this stops, nobody knows.  But as we've discussed since the inception of this rate spike in late April, it doesn't make sense to bet against the momentum until and unless it's convincingly defeated.  Anything else is an attempt to catch a falling knife and this one is much bigger and more dangerous than most.

FNC: Residential Property Values increased 5.3% year-over-year in April --  FNC released their April 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 1.2% from March to April (Composite 100 index, not seasonally adjusted).   The 10 city MSA increased 1.7% in April, and the 20-MSA and 30-MSA RPIs both increased 1.6% and 1.4% respectively. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The year-over-year (YoY) change was higher in April than in March, with the 100-MSA composite up 5.3% compared to April 2014. The index is still down 17.5% from the peak in 2006 (not inflation adjusted).This graph shows the year-over-year change based on the FNC index (four composites) through April 2015. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals. Most of the other indexes are also showing the year-over-year change mostly steady at around 5% for the last several months.

Lawler on NAR: The “Curious Case” of Existing Home Sales in the South in April --The National Association of Realtor’s preliminary report on existing home sales in April came in well short of both consensus and those who track local realtor/MLS reports. For analysts in the latter category, the biggest “surprise” in the NAR’s sales estimates was in the South region: the NAR estimated that existing homes sales in the South this April were up just 2.9% on a not seasonally adjusted basis from last April’s pace, well below what one would have expected basis on local realtor/MLS reports. Below is a compilation of various home sales reports based on publicly-available realtor/MLS reports from various parts of the South region. Many of the reports are statewide estimates for MLS sales, though that is not the case for some states (noted below).  Based on these publicly-available1 home sales reports, it seemed reasonable to conclude that the NAR’s estimate of existing home sales in the South region would show a YOY increase of about 10%, and normally the aggregated regional reports and the NAR estimates are “reasonably” consistent. That was clearly not the case last month. I’m am fairly confident that the NAR’s estimate of the YOY increase in existing home sales in the South in April significantly understated the ‘actual' YOY gain.

Millennials Have No Hope Of Buying A Home In These 13 US Cities --In “This Is What Happens When A Millennial Tries To Get A Job,” we highlighted 1) high youth unemployment (U-6 at nearly 14%) and 2) the failure of America’s university system to prepare new entrants for the job market, on the way to painting a rather grim picture for America’s newly-minted college graduates. We’ve also been keen to emphasize the fact that the “strong” labor market is anything but, as wage growth is essentially non-existent and upside “surprises” benefit from the now ubiquitous “vanishing worker.” Given this, it’s no surprise that many of America’s best and brightest find themselves serving food and drinks after graduation even as they owe an average of $35,000 in student loans, debt which is curtailing homeownership — or at least delaying the process. Given the above, it’s not surprising that in many large US cities, buying a home is simply out of the question for most millennials, even assuming they have saved up 20% for a down payment. Bloomberg has more: Millennials have been priced out of some of the biggest U.S. cities, with residential real estate prices rising even as wage growth remains elusive.  The good news is that out of 50 metropolitan areas, 37 are actually affordable for the typical 18-34 year-old. The bad news is that the areas that often most appeal to young adults are also the ones where homeownership is the most out of reach..

New Housing Crisis Looms as Fewer Renters Can Afford to Own -- Last decade’s housing crisis has given way to a new one in which many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing.   The latest crisis looks very different from the subprime mania of the early 2000s, but it does share one trait: Policy makers in Washington appear either unaware or unwilling to do much about it.The U.S. homeownership rate is now below where it stood 20 years ago when President Bill Clinton launched a national campaign to encourage more Americans to buy homes. Conventional wisdom says the rate, now at 63.7%, is leveling off to where it was for decades before the housing-market peak. But this is probably wrong, according to research from the Urban Institute, which predicts homeownership will continue to slip for at least the next 15 years. Demographics tell the story. The Urban Institute researchers predict that more than 3 in 4 new households this decade, and 7 of 8 in the next, will be formed by minorities. These new households—nearly half of which will be Hispanic—have lower incomes, less wealth and lower homeownership rates than the U.S. average.The declines reflect a surge of new renter households, which is boosting rents. Together with tougher mortgage-qualification rules, this will leave households stuck between homes they can’t qualify to purchase and rentals they can’t afford, As rental households devote a greater share of their income to rent, families could face greater challenges in saving for a down payment. This could restrain a housing market that has failed to provide any real lift to the economy in the current expansion.

Looming rental crisis in the United States - The United States is not building enough homes to meet the nation's housing demand. It's difficult for many to accept this fact given some of the over-building that took place during the housing bubble. However that wave peaked around ten years ago and residential construction had since declined to historically low levels. This unprecedented weakness in construction activity has persisted over the past 6-7 years, with only limited signs of recovery. Here are two data points: >
1. Residential construction spending as a fraction of the GDP remains suppressed.
2. Housing starts also remain extremely low, especially considering US population growth.
This market has never recovered after the housing crisis - even to "pre-bubble" levels. Part of the issue of course is the nagging tightness in the mortgage market, as homeownership rate continues to decline. This is funneling more people into the rental market, rapidly tightening the availability of rentals across the United States. . Here are the vacancy rates in Ohio and Michigan for example. Limited apartment construction activity is clearly taking place around the country, particularly in major cities. However, just as the case with new houses and condos, rentals are being built for "high-end" clients. In most major cities, new rentals cost materially more than the average for those markets. At the same time wage growth in the US remains subdued. In spite of a slight improvement last month (to 2.3% YoY), rental costs continue to rise faster than wages. The chart below describes the situation over the past five years. This leaves an increasing number of households "behind", with millions more now spending over half of their income on rent.

Rent burdens for low-income families getting worse in major cities -- A recent report by New York University’s Furman Center for Real Estate and Urban Policy (funded by Capital One Financial Corp) examined the rental housing markets for the central cities in the 11 most populous metropolitan areas in the United States. The report paints a pretty bleak picture for low-income renters in these cities. Here are a few of the key findings: In all 11 cities except Atlanta, [from 2006-2013] the growth in supply of rental housing was not enough to keep up with rising renter population.The median rent grew faster than inflation in almost all of the 11 cities in this study [from 2006-2013].In five cities, the median rent also grew substantially faster than the median renter income [New York City, Los Angeles, San Francisco, Philadelphia, and Washington, DC]. In three cities, rents and incomes grew at about the same pace [Atlanta, Dallas, and Miami]. In the remaining three cities [Boston, Chicago, and Houston], incomes grew substantially faster than rents. Every city in this study saw its share of low-income renters who were severely rent burdened increase between 2006 and 2013. This increase occurred even as rates of severe rent burden were already very high among this population. [Severely rent burden was defined as paying 50% or more of income in rent]. The lack of affordable housing in many of these cities is well known. But a look at the rates of severe rent burden among low-income households in these cities is incredible. In Los Angeles and Chicago, 78% of low-income households pay more than 50% of their income in rent. And in New York City, 71% do.

The Power Of Landlords -- Landlords in every city are salesmen aiming to persuade potential renters, which may lead them to underplay a property’s flaws and exaggerate its strengths. But what’s happening in cities such as Baltimore is different: Landlords lure renters to disadvantaged neighborhoods, perpetuating housing segregation and limiting social mobility. Baltimore has a long history of de facto racial apartheid, but today, it persists within one of the very programs designed to dismantle the problem: housing vouchers.  It was hoped that Housing Choice Vouchers, previously called “Section 8,” would break up dense concentrations of poverty by subsidizing rents for poor families. But the program has fallen far short of its promise. By and large, voucher holders are not moving to areas of opportunity. They are not finding places to rent in neighborhoods that include a mix of higher-income people, the kind of move shown in recent research by Harvard economist Raj Chetty and others to have long-term positive impacts on health and economic well-being. Rather, voucher holders are now concentrated in poor neighborhoods. This is even more the case for black voucher holders, whose neighborhoods are far more segregated than those of white voucher holders. Why are these patterns of segregation being recreated under a system that was meant to undo them?

Cerberus reportedly making record-breaking bulk purchase of rental homes -- Cerberus Capital Management is reportedly set to buy 4,200 rental homes situated throughout the U.S. in one fell swoop. The transaction is believed to be the largest bulk purchase of homes in the history of the single-family rental business, according to a report from Bloomberg. From the Bloomberg report:: The investment firm plans to acquire the properties from BLT Homes, a rental company owned by closely held Building & Land Technology, according to three people with knowledge of the transaction. The houses are mostly in Midwest cities such as Indianapolis and Chicago, as well as in Florida, said the people, who asked not to be named because the deal is private. The Bloomberg report also states that the purchase would make Cerberus one of the ten largest owners of U.S. houses.

America's Housing Problem: Buying And Renting Are Both Unaffordable -- In Q1, the average down payment on single family homes, condos, and townhomes fell to just 14.8% — the lowest level since Q1 2012.  As discussed here on Sunday, this is the inevitable result of a move by FHFA to lower the minimum down payment on loans backed by Fannie and Freddie to 3% from 5%. This had the knock-on effect of prompting FHA to cut premiums in order to retain market share. The idea, of course, is to make the homeownership dream a reality for as many Americans as possible irrespective of whether or not they can actually afford their mortgage payments. After all, “it’s only right.”  As it turns out, the FHFA’s best efforts at resurrecting the same type of underwriting standards which precipitated the housing bubble haven’t been enough to transform what has become a nation of renters back into a nation of owners. Leaving aside — for now anyway — the issue of whether the homeownership rates that persisted pre-crisis were realistic, the factors impeding new home buying in America will be familiar to those who frequent these pages: student debt and lackluster wage growth. Meanwhile, rising rents are squeezing renters, making it even more difficult to scrape together enough for a down payment. WSJ has more: Last decade’s housing crisis has given way to a new one in which many families lack the incomes or savings needed to buy homes, creating a surge of renters and a shortage of affordable housing. The U.S. homeownership rate is now below where it stood 20 years ago when President Bill Clinton launched a national campaign to encourage more Americans to buy homes. Conventional wisdom says the rate, now at 63.7%, is leveling off to where it was for decades before the housing-market peak. But this is probably wrong, according to research from the Urban Institute, which predicts homeownership will continue to slip for at least the next 15 years.

Where Did All the Construction Workers Go? -- There should be plenty of workers in hard-hats looking for jobs. From April 2006 through January 2011, nearly 2.3 million construction jobs–more than 40%–were wiped out. As of last month, the sector was still more than 1.3 million jobs shy of its bubble-era peak.  But if workers are out there, builders can’t seem to find them. “It is just more and more difficult to get talent,”  The Arkansas-based construction and building services company has responded by offering incentives to workers who recruit other employees, improving benefits like paid time off and reducing health-care premiums. Elsewhere, there are signs wage gains are accelerating as companies compete for workers. But that leaves one big question unanswered: Where did everyone go? “ The Associated General Contractors of America’s survey last year found that 83% of construction firms reported trouble filling craft-worker positions such as carpenter, laborer and equipment operator. The fall from peak employment in April 2006 to trough in January 2011 took 58 months. The recession spanned December 2007 through June 2009. That lengthy stretch was simply too long for many workers to hold out and too deep to attract any new workers. Mr. Simonson guesses that many headed to the oil and gas industry—though the mining sector as a whole employs fewer than 900,000 people and didn’t add enough jobs to absorb construction’s losses— with others going back to school, to other industries, out of the country, into retirement or out of the workforce.  Home builders also lost track of a big chunk of their workforce, figuring they lost out to retirement and other industries.. “I’ve heard anecdotally that many went to be truck drivers. We don’t have a good sense.”

Fed's Q1 Flow of Funds: Household Net Worth at Record High -- The Federal Reserve released the Q1 2015 Flow of Funds report today: Flow of Funds. According to the Fed, household net worth increased in Q1 compared to Q4: The net worth of households and nonprofits rose to $84.9 trillion during the first quarter of 2015. The value of directly and indirectly held corporate equities increased $487 billion and the value of real estate rose $503 billion. Household net worth was at $84.9 trillion in Q1 2015, up from $83.3 billion in Q4.. The Fed estimated that the value of household real estate increased to $21.1 trillion in Q1 2015. The value of household real estate is still $1.4 trillion below the peak in early 2006 (not adjusted for inflation). The first graph shows Households and Nonprofit net worth as a percent of GDP. Household net worth, as a percent of GDP, is higher than the peak in 2006 (housing bubble), and above the stock bubble peak. This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations. This ratio was increasing gradually since the mid-70s, and then we saw the stock market and housing bubbles. This graph shows homeowner percent equity since 1952. Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008. In Q1 2015, household percent equity (of household real estate) was at 55.6% - up from Q4, and the highest since Q4 2006. This was because of an increase in house prices in Q1 (the Fed uses CoreLogic).

The Rich Have Never Been Richer: US Household Assets Hit $99 Trillion -- Moments ago the Fed's latest Flow of Funds report confirmed what the Philly Fed noted recently (and what blogger and Citadel trader Ben Bernanke vehemently denies): that the Fed keeps making America's uber rich ever richer, when in the first quarter thanks mostly to yet another $1.1 trilion increase in the value of financial assets (read stock market), the asset holdings of US households (or at least a very small subsection of them) rose by $1.6 trillion to a record $99 trillion, which net of $14.2 trillion in debt, means US household net worth is also a record $84.9 billion. This is what a snapshot of the US balance sheet as of Q1 looked like.  Of course, saying US "households" implies all of them. This is anything but the truth. As the following simple chart shows, the richest 10% benefit vastly more than everyone else from the relentless "wealth effect" generating melt up in stocks, courtesy of some $22 trillion in "assets" monetized by central banks.  Yes, ordinary middle-class Americans are seeing the value of their 401(k) and other pension-related investments go up, but since these are largely untouchable until retirement, it means that the relentless increase in direct equity holdings has benefitted just the richest few Americans. For everyone else, this is truly nothing more than a confidence game propped up by the biggest equity bubble in history.And in case there is any confusion, America's top 10% are encouraged to send their thank you cards to the Marriner Eccles building: of the $17 trillion increase in net worth since the last peak, financial assets, i.e., the Fed, is responsible for $16 trillion of this.

Household Net Worth: The "Real" Story - Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest balance sheet shows a total net worth that is 54.5% above the 2009 trough and 25.2% above the 2007 peak and at an all-time high. The nominal Q1 net worth is up 2.0% from the previous quarter and up 5.7% year over year. But there are problems with this analysis. Over the six decades of this data series, total net worth has grown about 8112%. A linear vertical scale on the chart above is misleading because it fails to provide an accurate visual illustration of growth over time. It also gives an exaggerated dimension to the bubble that began in 2002. But there is another more serious problem, one that has to do with the data itself rather than the method of display. Over the same time frame that net worth grew over seven-thousand-plus percent, the value of the 1950 dollar shrank to about nine cents. The Federal Reserve gives us the nominal value of total net worth, which is significantly skewed by money illusion. Here is a log scale chart adjusted for inflation using the Consumer Price Index.Here is the same chart with an exponential regression through the data. The regression helps us see the twin wealth bubbles peaking in Q1 2000 and Q1 2007, the Tech and Real Estate bubbles. The trough in real household net worth was in Q1 2009. From that quarter to the latest data point, net worth initially trended at about the same growth rate as the overall regression but has improved over the last six quarters. We are currently right on the regression. The next chart gives us a more intuitive sense of real net worth. Here we've divided the inflation-adjusted series above by the Bureau of Commerce's mid-month population estimates, which have been recorded since January 1959.

Retail Sales increased 1.2% in May -- On a monthly basis, retail sales were up 1.2% from April to May (seasonally adjusted), and sales were up 2.7% from May 2014.  From the Census Bureau reportThe U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $444.9 billion, an increase of 1.2 percent from the previous month, and 2.7 percent above May 2014. ... The March 2015 to April 2015 percent change was revised from virtually unchanged to +0.2 percent. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline increased 1.0%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 5.0% on a YoY basis (2.7% for all retail sales). The increase in May was close to the consensus expectations of a 1.3% increase, and sales in March and April were revised up. A solid report.

US Retail Spending Rises A Solid 1.2% In May - Retail sales revived last month, rising 1.2% in May, according to this morning’s monthly report from the US Census Bureau. The monthly advance represents a substantial improvement over April’s sluggish 0.2% increase. The news provides support for projecting that US economic growth in the second quarter won’t repeat the weak run in Q1. The trend in year-over-year terms looks encouraging as well, with consumption rising 2.7% for the year through last month–a handsome improvement over the previous annual rise of 1.5%. The latest year-over-year advance is still soft relative to recent history, but the healthy directional change is a clue for thinking that consumers may be poised to ramp up spending in the summer. A more compelling case for a bullish outlook on the retail sector comes by way of stripping out gasoline sales. Retail ex-gas is ahead by a healthy 5.2% for the year through May—the highest annual gain since January. In fact, using year-over-year retail-ex gas spending as a benchmark suggests that the recent weakness in consumer spending wasn’t all that weak after all. Although this measure of consumption decelerated recently, it remained well above the 4% mark, which implies that spending on Main Street has remained firm all along. Another disappointing report today would have suggested otherwise, but the worst fears of the perma-bears has turned out to be another false alarm. Indeed, the latest numbers enhance the outlook for growth. When you consider the moderate growth trend for retail sales along with the ongoing expansion in the labor market, the recent speculation in some circles that the US is destined for a new recession in the immediate future continues to look misguided.

May Retail Sales: Finally Some Evidence of a Spring Bounce - The Census Bureau's Advance Retail Sales Report released this morning shows that seasonally adjusted sales in May were up 1.2% month-over-month and 2.7% year-over-year. Core Retail Sales (ex Autos) came in at 1.0% MoM and 1.3% YoY. The forecasts were 1.1% for Headline Sales and 0.7% for Core Sales. Today's report now provides some evidence for the nervously awaited bounce in personal consumption. The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator. The year-over-year percent change provides another perspective on the historical trend. Here is the headline series. Here is the year-over-year version of Core Retail Sales. The next two charts illustrate retail sales "Control" purchases, which is an even more "Core" view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. Here is the same series year-over-year. Note the highlighted values at the start of the two recessions since the inception of this series in the early 1990s. For a better sense of the reduced volatility of the "Control" series, here is a YoY overlay with the headline retail sales.

The American consumer comes roaring back -- This morning's retail sales report puts to death one of the two weak areas in the US economy.   Last fall, there was a debate as to whether the decline in gas prices would be a net positive for the US economy (the majority view) vs. a negative due to impact on the Oil patch (Doomers!).  Prof. James Hamilton of Econbrowser wrote that the weakness in the Oil patch would be more concentrated and sooner, while the positives would be diffuse and take place over a longer period of time.  That's what has happened. With this morning's revision, as of April real inflation-adjusted retail sales were only -0.3% below their previous November high.  With a gain of +1.2% in May, there is simply no question that real retail sales blew through November to a new high. The graph below includes the revised data through March (blue), together with the broader measure of real personal consumption expenditures (red): Not only are retail sales and real retail sals at new highs, but it is almost certain that per capita real retail sales also made a new high in May.  This last measure is a pretty reliable long leading indicator, so it suggests the economy will continue to grow at least into the second quarter of next year.

Retail Sales Bounce as Expected, Led by Autos; How Much Longer Can Subprime Auto Sales Lead? --Economists got one right for a change. Retail sales bounced 1.2% led by autos vs. the Bloomberg Consensus Estimate of 1.3%. Auto sales were known to be strong ahead of the report, likely steering economists in the right direction. The consumer showed a lot of life in May, driving up retail sales 1.2 percent with gains sweeping nearly all components. A leading component in the month was motor vehicle sales which jumped 2.0 percent, excluding which retail sales still rose a very strong 1.0 percent. Another component showing special strength was gasoline sales which got a boost from higher prices. Still, excluding both of these components, retail sales ex-auto ex-gas gained a very solid 0.7 percent. These results offset weakness in April, when total sales rose only 0.2 percent (upward revised from no change). In contrast to weakness through most of the April report, there's only one component showing contraction in May and that's the usually solid health & personal care stores at minus 0.3 percent. Standouts on the plus side, apart from vehicles and gasoline, are building materials & garden equipment stores, up 2.1 percent, clothing & accessories stores, up 1.5 percent, and nonstore retailers, up 1.4 percent. Department stores, which sank a steep 2.9 percent in April, rebounded with a 0.8 percent gain. The long awaited rebound from the soft first quarter is finally here. Today's results will have forecasters upping their estimates for second-quarter GDP. These results will also be a key point of discussion, especially in arguments by the hawks, at next week's FOMC meeting. A sales snapback was coming at some point. May was the month following months of disappoints.This will add to GDP. We will see how much in the Atlanta Fed GDPNow forecsast later today. In spite of the snapback, year-over-year sales except for autos are hardly robust. A picture from the Commerce Department Advance Retail Sales Report for May 2015 tells the story.

U.S. Shoppers Go on Buying Binge - WSJ: U.S. retail sales surged in May, a sign consumers are stepping up spending after a cautious start to the year.  Sales at retailers and restaurants rose 1.2% from the prior month to a seasonally adjusted $444.9 billion in May, the Commerce Department said Thursday. Figures for the prior two months were upwardly revised to show stronger consumption than previously estimated this spring. Economists surveyed by The Wall Street Journal had expected a 1.3% gain in May.Retail sales rose 0.2% in April, up from a previously estimated flat reading. Sales rose a revised 1.5% in March, marking the strongest monthly gain in five years. The three consecutive monthly improvements helped offset declines from December through February. Retail-sales figures are a key barometer for overall consumer spending, which accounts for about two-thirds of economic output in the U.S. The consumer spending-pattern appears poised to follow a similar pattern as last year: Consumers pulled back during a frigid winter and then stepped up spending later in the year alongside stronger payroll gains. This year, shoppers could receive an additional boost from a small acceleration in wages and lower gasoline prices.

Where Did Americans Spend Their Money in May? - May’s retail sales report suggests that U.S. consumers have come out of hibernation. Overall sales at retailers and restaurants rose 1.2% from the prior month to a seasonally adjusted $444.9 billion in May, the Commerce Department said Thursday. Figures for the prior two months were also revised up, showing that consumption was stronger than previously thought earlier this year.Strong auto sales helped push overall retail sales higher. Motor vehicle and parts dealers reported a 2% rise from the prior month. But gains were broad-based and excluding autos, overall sales still posted a 1% rise. Americans have gotten a windfall from cheaper gasoline prices, though in recent months they’ve been more inclined to save than spend it. But in May, gasoline stations posted their biggest jump since 2012–and Americans shrugged it off. They spent more on building and gardening materials and clothing stores and nonstore retailers. Restaurants and bars sales, generally considered a nonessential expense, barely inched ahead. “All in all, good data that strongly supports the rebound thesis,” said Jay Feldman, director of U.S. economics research at Credit Suisse. “The bounce from the harsh weather in February now looks more pronounced in the revised data. And the current figures are beginning to square better with strong payroll growth and particularly potent gains in real income.” Retail sales excluding autos, gasoline, building and gardening materials and restaurants go into gross domestic product calculations. Credit Suisse’s tracking estimate for second-quarter GDP moved up to 2.8% from 2.6% after the retail report. And Macroeconomic Advisers said revisions to prior months may reverse what had been booked as a first-quarter contraction of 0.7%. The forecasting firm’s estimate is now for 0% growth in the opening months of the year.

Michigan Consumer Sentiment Beats Expectations with a 3.9 Point Rise - The University of Michigan preliminary Consumer Sentiment for June came in at 94.6, a bounce from the 90.7 May final reading but still below the interim high of 98.1 in January. had forecast 91.5 for the June preliminary. The latest survey findings were a welcome improvement following last month's interim low. Consumer confidence rebounded in early June, regaining its average level recorded since the start of the year. The June gain was due to the most favorable personal financial prospects since 2007, with households expecting the largest wage gains since 2008. Just as importantly, consumers expected the inflation rate to remain low over the foreseeable future. The expectation of rising interest rates has caused consumers to view current rates as attractively low, but it has not yet prompted the belief that it would be better to borrow-in-advance of future increases. [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.

UMich Consumer Sentiment Jumps As Income Growth Hopes Surge To 2008 Highs -- Preliminary June UMich consumer sentiment data rose from 90.7 to 94.6 as respondents appear very excited about soaring gas prices and far more excited abiout stocks than every other confidence survey recently. Current conditions soared from 100.8 to 106.8 as expectations only rose from 84.2 to 86.8. Where does the hope come from? Simple... income expectations are the highest since 2008 and the most divergent from reality ever.

The market for your personal data is maturing | mathbabe: As everyone knows, nobody reads their user agreements when they sign up for apps or services. Even if they did, it wouldn’t matter, because most of them stipulate that they can change at any moment. That moment has come. You might not be concerned, but I’d like to point out that there’s a reason you’re not. Namely, you haven’t actually seen what this enormous loss of privacy translates into yet. You see, there’s also a built in lag where we’ve given up our data, and are happily using the corresponding services, but we haven’t yet seen evidence that our data was actually worth something. The lag represents the time it takes for the market in personal data to mature. It also represents the patience that Silicon Valley venture capitalists have or do not have between the time of user acquisition and profit. The less patience they have, the sooner they want to exploit the user data. The latest news gives us reason to think that V.C. patience is running dry, and the corresponding market in personal data is maturing. Turns out that EBay and PayPal recently changed their user agreements so that, if you’re a user of either of those services, you will receive marketing calls using any phone number you’ve provided them or that they have “have otherwise obtained.” There is no possibility to opt out, except perhaps to abandon the services. Oh, and they might also call you for surveys or debt collections. Oh, and they claim their intention is to “benefit our relationship.”  Presumably this means they might have bought your phone number from a data warehouse giant like Acxiom, if you didn’t feel like sharing it. Presumably this also means that they will use your shopping history to target the phone calls to be maximally “tailored” for you.

Read This Before June 11 - The case for greater government involvement in any industry, whether banking or health care, is not always obvious and is often unconvincing. Not so the case for more oversight of the contents of your refrigerator. Those ubiquitous "sell by" dates on thousands of U.S. food products are almost completely arbitrary. They cost Americans hundreds of millions of dollars a year in wasted food. And by lulling consumers into a false sense of security that what they eat and drink is safe, these labels may also be dangerous. Sell-by dates and their kin -- "best if used by," "freshest before" and "freeze by" dates -- came into being in the 1970s out of an understandable desire to avoid foodborne illness. But the evidence is clear that the resulting system is remarkably haphazard, with Congress, the U.S. Department of Agriculture, the Food and Drug Administration and many states overseeing a hodgepodge of rules and regulations but no firm guidelines. Sometimes the rules are sublimely ridiculous: New Hampshire mandates a sell-by date for cream but not for milk. Food poisoning is a problem, of course. But so is food waste -- and by some estimates, Americans throw away 40 percent of the food they buy, or about 20 pounds per person per month. The average household throws away $275 to $455 a year worth of edible food because of freshness-date confusion. According to a study from the Johns Hopkins Bloomberg School of Public Health, more than 60 percent of Americans refer to the "use by" or "sell by" date when deciding when to discard a carton of milk. What's needed is some sort of consistent standard of labeling across the 50 states.  One idea is to codify labeling practices nationally and replacing "use by" or "sell by" dates on fresh products with "freshest before." To ensure that consumers understand that this is not an expiration date, retailers could post signs in their fresh-food sections. It would also help if the placement of labels were standardized, so consumers didn't have to hunt around on the package to find them. Consumers should also know that many foods past their freshness dates can safely be frozen.

Gas, food push US prices to near 3-year peak - U.S. producer prices in May recorded their biggest increase in more than 2-1/2 years as the cost of gasoline and food rose, suggesting that an oil-driven downward drift in prices was nearing an end. The Labor Department said on Friday its producer price index for final demand increased 0.5 percent last month, the largest gain since September 2012. That followed a 0.4 percent decline in April. In the year to May, the PPI fell 1.1 percent, marking the fourth straight 12-month decrease. Prices dropped 1.3 percent in the 12 months through April, the biggest fall since 2010. Economists had forecast the PPI rising 0.4 percent last month and falling 1.1 percent from a year ago. A sharp decline in crude oil prices since last year and a strong dollar have weighed on producer prices. While rising oil prices are easing some of the downward pressure on inflation, the upward trend in producer prices will be gradual because of the dollar's strength. The greenback has gained about 13.2 percent against the currencies of the United States' main trading partners since June 2014. The stabilization in producer prices should support views that the Federal Reserve will raise interest rates this year. Last month, gasoline prices surged 17 percent, the largest increase since August 2009. Food prices rose 0.8 percent in May, the biggest gain in just over a year, snapping five straight months of declines. Higher food prices were driven by a shortage of eggs after an outbreak of bird flu led to the culling of millions of chickens. Wholesale egg prices soared a record 56.4 percent last month.

Producer prices see fastest rise in May since 2012 - — The prices paid by U.S. companies to produce their goods and services rose in May by the largest amount since the fall of 2012, owing to what’s likely a temporary spike in the wholesale cost of gasoline and other fuels. The producer price index climbed a seasonally adjusted 0.5% last month, marking the second advance in three months following four straight declines. The price of goods rose 1.3%, while services were unchanged, the Labor Department said Friday. The price of energy — gasoline, diesel, jet fuel — surged to spearhead the increase. Gasoline prices rose in May even though the cost of a barrel of oil was basically unchanged. Part of the increase stemmed from some refineries shutting briefly for maintenance or switching over to summer fuel formulas. Yet gas prices at the retail level have leveled off in June, and they are down about $1 less per gallon compared to a year earlier. The wholesale cost of chicken eggs posted a 56.4% gain, the biggest rise since the government began keeping track during the Great Depression, due to the bird flu outbreak. The price of unprocessed “finfish” such as tuna, salmon, pollock and the like also leapt 97% last month. Even with the advance in May, producer prices over the past 12 months are 1.1% lower. They have been in negative territory for four straight months, indicating that inflationary pressures remain subdued. Excluding the volatile categories of food, energy and retail trade margins, producer prices actually fell 0.1% in May. The core rate has risen a scant 0.6% in the last 12 months.

Producer Price Index Remains Negative Year-over-Year - Today's release of the May Producer Price Index (PPI) for Final Demand came in at 0.5% month-over-month seasonally adjusted. That follows the previous month's -0.4% decline. Core Final Demand (less food and energy) came in at 0.1% month-over-month following a -0.2% change the month before. The forecasts were for 0.4% headline and 0.1% core.  The year-over-year change in seasonally adjusted Final Demand is -1.0%, the second lowest in the brief history of this data series, the lowest being the -1.3% in April.  Here is the summary of the news release on Finished Goods:  The Producer Price Index for final demand rose 0.5 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices fell 0.4 percent in April and advanced 0.2 percent in March. On an unadjusted basis, the final demand index declined 1.1 percent for the 12 months ended in May, the fourth straight 12-month decrease....In May, the increase in the final demand index can be traced to prices for final demand goods, which rose 1.3 percent. The index for final demand services was unchanged. More… The Headline Finished Goods for May came in at 1.5% MoM but is down -2.9% YoY. Core Finished Goods were up 0.3% MoM and 2.0% YoY. Now let's visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge over the past several months in headline PPI is, of course, energy related -- now fractionally off its interim low set last month. Core PPI has remained relatively stable over the past year.

Producer Prices Jump MoM Most Since Sept 2012 Driven By Higher Energy Costs -- Producer Prices Final Demand rose 0.5% MoM - the biggest monthly rise since September 2012. With the gasoline index up a stunning 17% (but but but) 80% of the broad-based advance is attributable to prices for final demand energy - which increased 5.9%. In contrast, Final Demand PPI YoY Ex Food & Energy dropped to +0.6% - the lowest on record in the short time series. Biggest jump in PPI in almost 3 years... The index for final demand goods moved up 1.3 percent in May following a 0.7-percent decline in April. Eighty percent of the broad-based advance is attributable to prices for final demand energy, which increased 5.9 percent. The indexes for final demand goods less foods and energy and for final demand foods rose 0.2 percent and 0.8 percent, respectively. Sixty percent of the May advance in prices for final demand goods can be traced to the gasoline index, which jumped 17.0 percent. Prices for diesel fuel, chicken eggs, jet fuel, pharmaceutical preparations, and motor vehicles also moved higher. In contrast, the index for residential natural gas fell 1.6 percent. Prices for hay, hayseeds, and oilseeds and for primary basic organic chemicals also decreased. The index for final demand services was unchanged in May after inching down 0.1 percent in April. In May, a 0.6-percent increase in margins for final demand trade services offset a 0.2-percent decline in prices for final demand services less trade, transportation, and warehousing and a 0.1-percent decrease in the index for final demand transportation and warehousing services. (Trade indexes measure changes in margins received by wholesalers and retailers. Among final demand services in May, margins for food and alcohol retailing advanced 4.2 percent. The indexes for apparel, jewelry, footwear, and accessories retailing; television, video, and photographic equipment and supplies retailing; inpatient care; and residential real estate services (partial) also moved higher. Conversely, prices for services related to securities brokerage and dealing fell 7.4 percent. The indexes for machinery and equipment wholesaling; loan services (partial); health, beauty, and optical goods retailing; and wireless telecommunication services and also declined.

Beef Prices Hit Record: Up 30% In Past Two Years --While the Fed may continue to claim inflation is non-existent, except for those "few" Americans who can't afford a house and thus have to rent (incidentally, in New York the average rent just hit a record), inflation is all too present for those other Americans who still enjoy occasionally eating eating beef as opposed to its sawdust-inspired substitute found in various fast-food venues across the US. According to the BLS, after a torrid 2014, in which there was a 24% surge in beef prices which central planners blamed on everything except their policies, in May the Beef and Veal price index just rose to a new all time high of 260.8, up 12.3% from a year ago, and up 30% in the past two years.  So yes, aside from soaring rent prices and costs of food that won't actually force you into an early grave, there is almost no inflation anywhere. Well, except gasoline prices too. After dropping sharply through the end of 2014 and in January, they have unambiguously surged pretty much in a diagonal line ever since.

Egg Prices Seem a Lot Higher? Blame Bird Flu - - Egg prices soared last month, the latest fallout from a severe U.S. bird-flu outbreak.  The producer-price index, a measure of prices businesses receive for their goods and services, showed chicken eggs skyrocketed 56.4% in May, according to Labor Department data released Friday. While food prices are notoriously volatile, that was the biggest one-month increase since the Labor Department started tracking the commodity in 1937. The surge in egg prices follows the most severe U.S. outbreak of avian influenza in history. The U.S. Department of Agriculture estimates that more than 47 million birds have been affected by the disease. That has forced some poultry companies to suspend operations and boost prices amid tightening supplies.“We expect significant increases in egg prices in the next fiscal year,” . In-store prices of branded, large AA eggs are up 16% to 35% over the last 30 days in key markets such as San Diego, Chicago, Atlanta, Phoenix and Jacksonville, according to Premise Data Corp., a firm that tracks food prices in real time. The outbreak of bird flu “severely impacted” poultry producers in parts of the country earlier this spring, according to the Federal Reserve’s “beige book,” an anecdotal look at economic conditions in its 12 regional districts. Poultry flocks, especially egg-layers in Iowa, were hit hard, sending egg prices higher.Egg producers weren’t the only casualty: The outbreak was also expected to cost Minnesota turkey producers more than $300 million.

Is Cheaper Oil Good News or Bad News for U.S. Economy? -- NY Fed - Oil prices have declined substantially since the summer of 2014. If these price declines reflect demand shocks, then this would suggest a slowdown in global economic activity. Alternatively, if the declines are driven by supply shocks, then the drop in prices might indicate a forthcoming boost in spending as firms and households benefit from lower energy costs. In this post, we use correlations of oil price changes with a broad array of financial variables to confirm that this recent fall in oil prices has been mostly the result of increased global oil supply. We then use a model to assess how this supply shock will affect U.S. economic conditions in 2015. We follow the approach in Groen, McNeil, and Middeldorp (2013) to distinguish demand and supply shocks on oil prices using correlations of oil price changes with a large number of financial variables. The assertion is that oil demand and supply shocks generate different price movements across these variables. Note that we use the Brent benchmark oil price this time instead of the West Texas Intermediate (WTI) oil price because the Brent price more accurately reflects other global benchmark measures. Furthermore, we expand the number of asset prices considered and extend the data set back to 1986. The chart below shows oil price changes along with the identified supply and demand drivers of prices cumulated from 1986 to 2000. The decomposition has supply side shocks driving the drop in oil price in the late 1980s and late 1990s as OPEC members, in particular Saudi Arabia, aggressively expanded their oil production.

US egg prices soar as avian flu batters poultry industry (AFP) - US farmers have been forced to kill almost 40 million chickens and other birds, causing egg prices to soar as a deadly version of the avian flu attacks the poultry industry. An outbreak of a particularly infectious version of the bird flu, believed to come initially from wild ducks and geese, has spread into 15 US states and two Canadian provinces, requiring the mass slaughter of egg-laying chickens and turkeys in particular.  That has turned into an 80 percent surge in the wholesale price of eggs, and a more modest hike in turkey meat costs, which could last for the rest of the year even if the flu outbreak can be successfully contained, according to industry officials. The midwest state of Iowa, the largest US egg producer, has seen some 25 million birds, mostly chickens for egg production, killed. The state has declared a state of emergency against the disease, and after discovering avian flu on a 63rd farm, on Thursday banned any public exhibition of live birds, including at fairs, auctions, swap meets and other events.

Egg rationing in America has officially begun --In recent days, an ominous sign has appeared throughout Texas. "Eggs [are] not for commercial sale," read warnings, printed on traditional 8 1/2-by-11-inch pieces of white paper and posted at H-E-B grocery stores across Texas. "The purchase of eggs is limited to 3 cartons of eggs per customer." H-E-B, which operates some 350 supermarkets, is one of the largest chains not only in the state, but in the whole country. And it has begun, as the casual but foreboding notices warn, to ration its eggs.  The news, as the grocer suggests, comes on the heels of what has been a devastating several months for egg farmers in the United States. Avian flu, which has proven lethal in other parts of the world, has spread throughout the United States like wildfire. Since April, when cases began spreading by the thousands each week, the virus has escalated to a point of national crisis. As of this month, some 46 million chickens and turkeys have been affected, according to the U.S. Department of Agriculture. Nearly 80 percent of those are egg-laying hens, a reality that has been crippling for the egg industry. But it's becoming increasingly clear that it isn't merely those who produce eggs that will suffer. Those who eat them will pay a price, too.

More Auto Title Lenders are Snagging Unwary Borrowers in Cycle of Debt -- Short-term lenders, seeking a detour around newly toughened restrictions on payday and other small loans, are pushing Americans to borrow more money than they often need by using their debt-free autos as collateral. Their hefty principal and high interest rates are creating another avenue that traps unwary consumers in a cycle of debt. For about 1 out of 9 borrowers, the loan ends with their vehicles being repossessed… But Jordan said it wouldn’t make a loan that small. Instead, it would lend her $2,600 at what she later would learn was the equivalent of 153% annual interest — as long as she put up her 2005 Buick Rendezvous sport utility vehicle as collateral. State law limits payday loans to $300, minus a maximum fee of $45. California also caps interest rates on consumer loans of less than $2,500 on a sliding scale that averages about 30%. Consumer loans above $2,500 have no interest rate limit. For that reason, essentially all auto title loans in the state are above that level, according to the state’s business oversight department.

U.S. Is Awash in Glut of Scrap Materials - WSJ: American companies have complained for the past year that the headwinds of a strong dollar and a slowing Chinese economy are hurting their earnings. For sellers of scrap metal, used cardboard boxes, and other waste, those headwinds are more like a hurricane. Waste has long been a major U.S. export, providing material to be melted in foreign steel mills or made into new paper products. But the strength of the dollar has made American waste pricier abroad, cutting demand in China, Turkey and other markets. U.S. exports of scrap materials have fallen by 36% since peaking at $32.6 billion 2011. Prices of shredded scrap steel have plunged about 18% so far this year and are down 41% since early 2012, according data collected by the Platts unit of McGraw Hill. The dollar is up about 17% since last July against a basket of major currencies compiled by the Federal Reserve.   That has been hard on the network of waste dealers and scrap gatherers who are the backbone of the industry.Bob Hooper, who goes by Hoop, finds discarded metal on curbs and in dumpsters around Pittsburgh and carries it to scrapyards in a rusting Chevy pickup with a bungee cord to keep the driver’s door shut. He was making as much as $400 a day selling scrap just three years ago, he said. “Now I’m doing $100 to $200.”  Or less. On a recent day, he hauled in more than 1,000 pounds of scrap, including two discarded refrigerators, a water heater and a broken microwave buried in egg shells and other moist trash. After gasoline expenses, he netted about $80.

Wholesale Trade June 9, 2015: Inventories relative to sales lightened up in the wholesale sector during April with inventories up 0.4 percent but far below a giant 1.6 percent surge in sales. The stock-to-sales ratio edged down to 1.29 from 1.30. Autos, where sales have been strong, show a sizable decline in the stock-to-sales ratio as do farm products, furniture, computer equipment, and electrical goods. All these categories, like autos, show strong sales gains in the month. Early indications on second-quarter inventories have been favorable with the risk of overhang, evident in the first quarter, now easing. Watch Thursday for the business inventories report which will round out related data for April. Wholesale inventories have been very heavy, the result of weak sales in the sector. Inventories are expected to rise another 0.3 percent in May.

Wholesale stockpiles rise as sales surge - - U.S. wholesalers boosted their stockpiles in April by the largest amount since January, while their sales surged at the fastest pace in 13 months. Stockpiles held at the wholesale level rose 0.4 percent in April from March, the Commerce Department reported Tuesday. Sales increased 1.6 percent after falling in March. It was the strongest advance since March 2014 and follows a number of months in which sales either declined or were flat. An increase in inventories can be an indication of rising business optimism as companies restock empty store shelves in anticipation of stronger demand. Economists are expecting sales at both the wholesale and retail levels to rebound in the coming months after a slowdown in the first quarter, caused in part by unusually frigid weather. A pickup in consumer spending, which accounts for 70 percent of economic activity, would help support overall growth. A harsh winter, a strong dollar and a plunge in energy prices that squashed investment spending combined to send the economy into reverse in the first three months of the year. The overall economy, as measured by the gross domestic product, contracted at an annual rate of 0.7 percent in the January-March quarter. Economists believe the economy has emerged from that soft patch and will see stronger activity for the rest of the year. They are forecasting growth of around 2 percent to 2.5 percent in the current April-June quarter and expect growth to accelerate to around 3 percent in the second half of this year.

Wholesale Inventory Ratio, Sales Stabilize At Recessionary Levels -- Despite continued slowing in the pace of inventory builds in the past few months, the ratio of inventory-to-sales remains mired in a recessionary quagmire; but today's data showed some hope - which stocks hated. Inventory-to-Sales dropped from 1.30 to 1.29 (still recessionary) as Wholesale Inventories rose 0.4% (againmst +0.2% expectations) and Wholesale Sales rose a notable 1.6% (against expectations of a 0.6% rise). YoY Wholesales Sales remain in negative territory however and confirm the recessionary warning that the ratio is sending. Inventories rose... But sales surged... Leaving Wholesale Inventory-to-Sales modestly iomproving but remaining mired in recessionary environment.... Charts: Bloomberg

U.S. April business inventories up 0.4%, sales rise 0.6% - -- Inventories at U.S. businesses rose 0.4% in April, the Commerce Department said Thursday. The gain was higher than the 0.2% gain expected by economists polled by MarketWatch. Business sales were up 0.6% in April, matching the gain in March. The inventory-to-sales ratio, an indication of demand, was unchanged at 1.36. One new piece of information was retail inventories, which rose 0.8% in April compared with a 0.1% increase in sales. Excluding autos, retail inventories rose 0.6%. The inventory-to-sales ratio in retail rose to 1.47 in April from 1.44 in March.

US business inventories post largest gain in nearly a year: U.S. business inventories recorded their biggest increase in nearly a year in April, which could see economists raise their second-quarter growth estimates.  The Commerce Department said on Thursday business inventories rose 0.4 percent, the largest gain since May 2014, after edging up 0.1 percent in March. Economists polled by Reuters had forecast inventories rising only 0.2 percent in April.  Inventories are a key component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, rose a solid 0.6 percent in April. That was the biggest increase since November 2013 and followed a 0.1 percent gain in March. That will likely boost GDP growth expectations for the second quarter.   In April, business sales increased 0.6 percent after a similar rise in March.  At April's sales pace, it would take 1.36 months for businesses to clear shelves - a relatively high ratio that suggests limited scope for businesses to aggressively accumulate stocks. The ratio was unchanged from March.

April 2015 Business Inventories and Sales Very Soft -- Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales declined compared to the previous month. Even with inflation adjustments, business sales is in contraction. The inventory-to-sales ratios remain at recessionary levels. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 1.6% month-over-month, and down 2.5% year-over-year
  • unadjusted sales (inflation adjusted) down 0.5% year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago decelerated 0.2% month-over-month, and is down 1.8% year-over-year.
  • unadjusted business inventories growth was unchanged month-over-month (up 2.6% year-over-year with the three month rolling averages decelerating), and the inventory-to-sales ratio is 1.36 which is at recessionary levels (well above average for Januarys). However, these ratios may be distorting the real picture as inventory values may not be properly revalued for inflation.

US Census Headlines:

  • seasonally adjusted sales up 0.6% month-over-month, down 2.3 % year-over-year
  • seasonally adjusted inventories were up 0.4% month-over-month (up 2.6% year-over-year), inventory-to-sales ratios were up from 1.29 one year ago - and are now 1.36.
  • market expectations were for inventory growth of 0.1 % to 0.5 % (consensus 0.2%) versus the actual of 0.4%.

The way data is released, differences between the business releases pumped out by the U.S. Census Bureau are not easy to understand with a quick reading. The entire story does not come together until the Business Sales Report (this report) comes out. At this point, a coherent and complete business contribution to the economy can be understood.

U.S. Import & Export Prices Up in May --Prices for U.S. imports increased 1.3 percent in May following declines in each of the previous 10 months, according to the U.S. Bureau of Labor Statistics. The May advance was driven by an increase in fuel prices. The price index for U.S. exports rose 0.6 percent in May, after a 0.7 percent decrease in April. Prices for U.S. imports advanced 1.3 percent in May, after decreasing 0.2 percent in both April and March, and 0.4 percent in February. The May increase was the first monthly rise since the index advanced 0.3 percent in June 2014 and the largest one month increase since the index rose 1.4 percent in March 2012. Despite the May increase, prices for imports decreased 9.6 percent over the past year, and have not recorded a 12 month rise since the index advanced 0.9 percent between July 2013 and July 2014. Import fuel prices rose 11.8 percent in May following a 1.3 percent advance in April and a 1.4 percent increase in March. The May rise was the largest monthly advance since the index increased 16 percent in June 2009. A 12.7 percent jump in petroleum prices in May led the advance in overall fuel prices. The price index for import natural gas declined 0.2 percent in May. Despite the May increase, fuel prices fell 40 percent over the past year. A 40.6 percent drop in petroleum prices and a 41.9 percent decrease in natural gas prices both contributed to the overall decline. Prices for nonfuel imports recorded no change in May, after decreasing 0.3 percent the previous month. Nonfuel import prices have not increased on a monthly basis since the index ticked up 0.1 percent in July 2014. In May, rising prices for foods, feeds and beverages offset lower prices for capital goods; nonfuel industrial supplies and materials; and automotive vehicles. Prices for nonfuel imports fell 2.2 percent for the year ended in May. Decreasing prices for finished goods; nonfuel industrial supplies and materials; and foods, feeds and beverages all contributed to the overall 12 month decline.

U.S. import prices rise as petroleum posts biggest gain since 2009 -  A surge in the cost of petroleum boosted U.S. import prices in May after 10 straight months of declines, but a strong dollar continued to curb underlying imported inflation pressures. The Labor Department said on Thursday import prices increased 1.3 percent last month, the largest gain since March 2012, after sliding by a revised 0.2 percent in April. Economists polled by Reuters had forecast import prices rising 0.8 percent after a previously reported 0.3 percent drop in April. In the 12 months through May prices fell 9.6 percent. Last month, imported petroleum prices surged 12.7 percent percent, the biggest increase since June 2009, after increasing 1.8 percent in April. Import prices excluding petroleum were unchanged in May. The dollar, which has gained about 13.2 percent against the currencies of the United States' main trading partners since June, is dampening underlying imported inflation pressures. Imported food prices rose 0.3 percent after declining 1.0 percent in April. The report also showed export prices rose 0.6 percent last month, the biggest gain since March 2014, after falling 0.7 percent in April. Export prices declined 5.9 percent in the 12 months through May.

Exports, Politics and Wealth: A District-by-District Look at Trade -- As noted Monday, many of the districts that have seen the biggest increase in export value since 2006–eight of the top 10–are represented by Democrats. Only two of those eight districts currently support President Barack Obama’s efforts to secure a major trans-Pacific trade pact.  Data from the trade consulting group Trade Partnership Worldwide illustrates how the congressional districts with the highest value of exports in 2013 (excluding oil and gas shipments) were places where the number of households earning more than $100,000 a year and the number of college graduates were above the national average–often far above. (See the complete chart.) Among the top 20 districts for exports, 17 were above the national average for households earning $100,000 or more (about 22% of households nationally) and 16 were above the national average for college graduates (about 28% of the population over 25 years of age nationally). All were in California, New York, Texas, Washington or Oregon. The numbers change a bit when you look at export growth between 2006 and 2013, but the point essentially holds. Wealthier, better-educated congressional districts tend to do better than other places. The vast majority of the export-winner districts tend to have poverty rates lower than the national average (15.4%) as well. Looking at the top 10 for export growth, two opponents of the president’s trade push are particularly interesting cases: New York Reps. Jerry Nadler and Carolyn Maloney. Their districts are, demographically speaking, elite in their composition. In Ms. Maloney’s district, 42% of the households earn more than $100,000 a year and more than 68% of the 25-or-older population has a bachelor’s degree or more. In Mr. Nadler’s district, 39% of the households earn more than $100,000 and 56% of the 25-or-older population has at least a bachelor’s. They are the kinds of populations that tend to benefit in the global economy.

Business Roundtable: CEOs Scale Back Plans for Hiring, Investment - U.S. business leaders have scaled back hiring and investment plans for the next six months, a reflection of heightened uncertainty after a patch of slower economic growth. The Business Roundtable‘s measure of the economic outlook among chief executive officers slipped to 81.3 in the current quarter from 90.8 in the first quarter, the lobbying group said Monday. The survey of 128 CEOs reflects expectations for sales, capital spending and hiring in the next six months. "Of particular concern is the downward movement of our CEOs’ investment plans,” said Randall Stephenson, chairman of the business group and chairman and CEO of AT&T. “Business investment is a key driver of economic expansion and job growth.” The survey showed 70% of CEOs expect sales to increase in the next six months, down from 80% in the first-quarter survey and the lowest level since 2012. Only 35% plan to increase capital spending, down from 45%, and 34% plan to boost hiring, down from 40%. The results are the latest in a string of mixed reports on the economy’s health. The Commerce Department last month reported a 0.7% contraction for gross domestic product in the first quarter of the year. The Business Roundtable’s chief executives, who completed the survey before those results were released, are forecasting 2.5% GDP growth for the full year, a 0.3 percentage point downgrade from their previous estimate.

NFIB: Small Business Optimism Index increased in May - From the National Federation of Independent Business (NFIB): Small business optimism level is finally back to a normal level The Index of Small Business Optimism increased 1.4 points to 98.3 ... May is the best reading since the 100.4 December reading but nothing to write home about. The 42 year average is 98.0 ... Eight of the 10 Index components posted improvements. ..Small businesses posted another decent month of job creation in May, a string of 5 solid months of job creation. On balance, owners added a net 0.13 workers per firm over the past few months.... Twenty-nine percent of all owners reported job openings they could not fill in the current period, up 2 points, revisiting the February reading, and the highest reading since April 2006.  This graph shows the small business optimism index since 1986.

Upbeat Small-Business Owners Say Sales Are Picking Up - Small-business owners are feeling more confident about their economic situation, according to a report released Tuesday. An improved trend in sales is pushing small firms to add workers and lift selling prices. The National Federation of Independent Business‘s small-business optimism index increased to 98.3 in May, from 96.9 in April. Economists surveyed by The Wall Street Journal projected the index to increase but only to 97.3 in May. The report noted the index has moved slightly above the index’s 42-year average of 98.0. “It appears that the small-business sector has finally attained a normal level of activity, which will hopefully keep the economy moving forward, even at a sub-par pace,” the report said. The earnings trend index jumped 9 percentage points to minus 7%. “Improved profit trends accounted for over half the index gain, a rather unusual but welcome development,” the report said. Sales activity increased sharply during the three months ended in May. The net percentage of businesses reporting higher nominal sales in the time period jumped 11 percentage points to 7%. Moreover, small business owners expect the environment to keep improving. The business conditions expectations increased 3 points to minus 3%. Higher sales are leading small companies to hire new employees. On balance, owners added a net 0.13 workers per firm over the past three months, the NFIB said, the fifth consecutive month of “solid” job increases. Small-business owners also said they were not done with expanding payrolls. The index covering hiring plans increased 1 point to 12% in May.

U.S. Manufacturers Temper Expectations for Hiring and Investment - U.S. manufacturers are dialing back expectations for hiring and investment, the latest evidence of the lingering fallout from a sharp economic slowdown in the first quarter of the year. The National Association of Manufacturers in a quarterly outlook survey found its members now expect capital investment to grow 1.9% over the next 12 months, down from a 2.3% forecast in March. Full-time employment is expected to expand only 0.8%, down from 1.9%, and wages are seen rising 1.6%, down from 1.9%. And in a new measure of manufacturers’ outlook, NAM debuted an index, now pegged at 51.7, down from 59.9 in March and 61.7 in December. Numbers greater than 50 suggest the manufacturing sector is expanding. Reflecting the stronger dollar, manufacturers now expect exports to grow only 0.4% over the next 12 months, down from an expected rate of 2.3% in March. The  manufacturers’ report parallels a Business Roundtable survey out earlier this week that found CEOs have scaled back hiring and investment plans for the next six months amid a string of mixed reports on the economy.The Commerce Department last month reported a 0.7% contraction for gross domestic product in the first quarter of the year. Also so far this year, consumer spending has been tepid, a strong dollar has weighed on exports and productivity–key to underpinning profits and incomes–has lagged.

People and Power – The Technology Threat (video) Yves Smith - A two-part Al Jazeera documentary examines how technology is hollowing out former mid-range skill, middle income jobs, and how that process is set to intensify over the coming decade. My brother and sister-in-law, who are both in outsourcing, say the studies they’ve seen on the number of jobs expected to be displaced come up with mind-bogglingly high estimates.  The documentary acknowledges that Luddites in the past have worried about workers being threatened by the march of technology when in fact growth has led to more jobs. But things aren’t that simple. The first two generations of the Industrial Revolution led to lower standards of large swathes of the population. And the prognosis for lower and even many higher skilled workers now is grim, with experts saying that they see the potential for substitution of workers as far greater than in other periods of technological advances.   Needless to say, these forecasts explain the reluctance of the top wealthy to continue to support public education. They don’t anticipate needing as many skilled workers. Moreover, well educated under-employed citizens would make for a more effective opposition.

The Jobs Recovery Is Going Strong -- The message from the May numbers released Friday morning was this: Don’t worry. Everything is just fine. The headline of 280,000 jobs added in May is the strongest number since December, but that’s just the start of it. An abysmal April job growth number was revised up to merely mediocre. Average hourly earnings rose by a healthy 0.3 percent.  The number of people in the labor force rose by almost 400,000, and the ratio of the population with a job ticked up to 59.4 percent, from 59.3 percent. Not all of the people who joined the labor force found jobs, so the unemployment rate rose to 5.5 percent, but this is a classic case of the jobless rate rising for good, rather than bad, reasons. The one mystery this leaves is how to reconcile the robust job growth the United States is experiencing with tepid readings on overall economic growth. Gross domestic product contracted at an 0.7 percent annual rate in the first quarter, and based on data that is out so far analysts expect a so-so 2 percent growth reading for the second quarter, which ends June 30. Combine those, and the American economy appears to have grown at something like an 0.7 percent annual rate for the first half of 2015, which is wildly inconsistent with the 217,000 average monthly job creation so far this year.  Indeed, if the January through May average job growth were to hold up for the remainder of the year, it would amount to 1.9 percent growth in the number of jobs in the United States in 2015, a rate more than twice as fast as G.D.P. growth has been. That leaves a few possibilities. One is we are in the middle of an unfortunate slump in productivity growth, and the nation’s output for each hour worked is stagnating or even declining. That would be terrible news for the long-term future of the economy, particularly if it persists. A second possibility is that there is measurement error, and one or the other of these data sets (either G.D.P. or jobs) is misleading. In other words, we should celebrate the fact that the jobs recovery looks to be on track. At the same time we should hope that overall growth measures join the party soon, because the alternative is pretty gloomy.

Young Black High School Grads Face Astonishing Underemployment -- Last week, I wrote about how high school graduates will face significant economic challenges when they graduate this spring. High school graduates almost always experience higher levels of unemployment and lower wages than their counterparts with a college degree, and their labor market difficulties were particularly exacerbated by the Great Recession. Underemployment is one of the major problems that young workers currently face. Approximately 19.5 percent of young high school graduates (those ages 17–20) are unemployed and about 37.0 percent are underemployed. For young college graduates (those ages 21–24) the unemployment rate is 7.2 percent and the underemployment rate is 14.9 percent. Our measure of underemployment is the U-6 measure from the BLS, which includes not only unemployed workers but also those who are part-time for economic reasons and those who are marginally attached to the labor force. When we look at the underemployment data by race, we often see an even worse situation. As shown in the charts below, 23.0 percent of young black college graduates are currently underemployed, compared with 22.4 percent of young Hispanic college grads and 12.9 percent of white college grads. And as elevated as these rates are, the picture is bleakest for young high school graduates, who are majority of young workers.

SF Fed Sees Involuntary Part-Time Workers Remaining Elevated -- High levels of part-time workers have long called into question how strong the job market recovery has been. The problem is, according to a paper published Monday by the San Francisco Federal Reserve, that question won’t be going away any time soon. In new research. the bank says the number of those forced to work part-time jobs “may remain significantly above” the levels seen before the Great Recession for some time to come. Broadly speaking, the high level of part-time workers now found in the economy make improvements in the jobless rate look better than it actually is. The unemployment rate, one of the most important indicators of the nation’s economic health, has undergone a rapid decline in recent years. After peaking at nearly 10% in the spring of 2010, it now stands at 5.5%. The rapid decline of the jobless rate has fueled speculation over Federal Reserve short-term interest rate rises. And while Fed officials have heralded the decline in the unemployment rate, key officials have frequently said the measure overstates the amount of job market progress, creating caution about any move to shift Fed rate policy back toward more normal levels. Of the 20% of American workers who labor part-time, the San Francisco Fed notes that three quarters of them do so by their own choice, based on their own needs. It’s the remainder that are stuck in part-time jobs who would prefer to be working full time. This pool of workers surged “substantially” during the economic troubles that began in 2007, and has yet to stage a notable recovery relative to the improvement seen in the broadest measurement of unemployment.

BLS: Jobs Openings increased to 5.4 million in April, Highest on Record --From the BLS: Job Openings and Labor Turnover Summary The number of job openings rose to 5.4 million on the last business day of April, the highest since the series began in December 2000, the U.S. Bureau of Labor Statistics reported today. The number of hires was little changed at 5.0 million in April and the number of separations was little changed at 4.9 million. ...Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.7 million quits in April, little changed from March.The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for April, the most recent employment report was for May. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in April to 5.376 million from 5.109 million in March. The number of job openings (yellow) are up 22% year-over-year compared to April 2014. Quits are up 11% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is another solid report. It is a good sign that job openings are over 5 million - at an all time high, and that quits are increasing solidly year-over-year.

Job Openings Rise to Highest Level on Record - The number of job openings rose to the highest level on record in April, the Labor Department said Tuesday, in the latest sign of health in the labor market. There were 5.4 million job openings in April, up from 5.1 million in March and the highest level since the department began tracking the measure in 2000. The number of hires stood at 5 million, a slight dip from March. The share of workers who voluntarily quit their jobs dropped slightly in April but remained at 1.9%. For the year, job openings were up in services, health care and social assistance industries but they fell in mining and logging industries, reflecting employers’ reaction to lower energy prices. The number of hires for the year grew among hotel and food service industries as well as among state and local governments, a sign of healthier budgets. The number of hires recorded by the Labor Department has traditionally exceeded the number of job openings. But the gap has closed in recent months and, in April, there were 369,000 more openings than hires. The share of the workforce laid off or otherwise discharged every month remained at 1.3%, similar to rates before the recession. And while the share of workers who quit their jobs voluntarily dropped slightly, it remained higher than at almost any point during the recovery.

Job Openings Rise as the Hires and Quits Rates Remain Stubborn -- This morning’s Job Openings and Labor Turnover Survey (JOLTS) report reflects the solid employment situation for April, which is considerably better than the weakness we saw in March. Job openings were up, which, along with a slight drop in the unemployment level, meant that the job-seekers-to-job-openings ratio fell to 1.6 in April. While this reflects an improvement, it fails to include the 3.1 million missing workers in April and is still far above its low-point of 1.1 in 2000. Furthermore, it remains the case that even if we continue moving forward at the pace of average employment over the last six months (236,000 jobs per month), the economy won’t resemble the strength of the pre-recession economy (such as it was) until the end of next year. The total number of job openings rose to 5.4 million in April while the number of hires was little changed at 5.0 million. While there has been a clear improvement, it is important to remember that a job opening when the labor market is weak often does not mean the same thing as a job opening when the labor market is strong. There is a wide range of “recruitment intensity” a company can put behind a job opening. If a firm is trying hard to fill an opening, it may increase the compensation package and/or scale back the required qualifications. On the other hand, if it is not trying very hard, it might hike up the required qualifications and/or offer a meager compensation package. Perhaps unsurprisingly, research shows that recruitment intensity is cyclical—it tends to be stronger when the labor market is strong, and weaker when the labor market is weak. This means that when a job opening goes unfilled and the labor market is weak, as it is today, companies may very well be holding out for an overly-qualified candidate at a cheap price.

U.S. job openings at record high; small business confidence up (Reuters) – U.S. job openings surged to a record high in April and small business confidence increased in May, signs that the economy was regaining momentum after stumbling at the start of the year. The second-quarter economic outlook also got a boost from other data on Tuesday showing a solid rise in wholesale inventories in April, as stabilizing oil prices helped lift sales by the most in more than a year. The Labor Department said job openings increased to 5.4 million in April, the highest since the series began in December 2000, from 5.1 million in March. The economy contracted in the first quarter and growth got off to a slow start in the second quarter, in part because of the lingering effects of a strong dollar and spending cuts in the energy sector. But a surge in job growth and automobile sales as well as gains in May factory activity suggest the economy is strengthening. In a separate report, the National Federation of Independent Business said its Small Business Optimism Index rose 1.4 points to 98.3 in May, the highest reading since December.In another report, the Commerce Department said wholesale inventories increased 0.4 percent after rising 0.2 percent in March. Economists polled by Reuters had forecast wholesale inventories rising 0.2 percent in April. Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP – wholesale stocks excluding autos – rose 0.2 percent, suggesting inventories will probably be a modest boost to growth in the second quarter. Sales at wholesalers surged 1.6 percent in April, the largest rise since March of last year. Sales had been weak since last August, in part due to the negative impact of lower oil prices on the value of petroleum goods sales.

Something Doesn't Add Up: JOLTed Optimism - The latest updates for the JOLTS showed that job openings in April surged to a new series high. Jumping by 267k (seasonally adjusted), the trend in job openings is being used as confirmation that there must be some robust underlying trend in overall payrolls despite the ubiquitous slump everywhere else. In other words, this is another series from the BLS that appears to be confirming the Establishment Survey’s view on the economic pickup. Job openings, a measure of labor demand, rose 5.2 percent to a seasonally adjusted 5.4 million in April, the highest level since the series began in December 2000, the Labor Department said in its monthly Job Openings and Labor Turnover Survey (JOLTS).   Ever since the start of 2014, weather be damned, the pace of job openings has simply decoupled from all perception except the Establishment Survey. While that offers “more confirmation” for economists, in reality it amounts to the same confirmation. The JOLTS survey is benchmarked to the BLS’s Current Employment Situation (CES), meaning that if there is atrend-cycle problem in the mainline payroll report it will passed along, directly, to JOLTS. From the BLS itselfJOLTS total employment estimates are benchmarked, or ratio adjusted, monthly to the strike-adjusted employment estimates of the CES survey. A ratio of CES to JOLTS employment is used to adjust the levels for all other JOLTS data elements.Given that baseline, it would be highly suspect and relevant only where the JOLTS figuresdiverge from the Establishment Survey. While none of the components had done so for most of 2014, that isn’t the case more recently. While Job Openings have supposedly surged, the hiring rate has not. Dating back to last October, hiring appears to have frozen if not slightly declined.

Weekly Initial Unemployment Claims increased to 279,000 --  Earlier the DOL reported: In the week ending June 6, the advance figure for seasonally adjusted initial claims was 279,000, an increase of 2,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 276,000 to 277,000. The 4-week moving average was 278,750, an increase of 3,750 from the previous week's revised average. The previous week's average was revised up by 250 from 274,750 to 275,000.  There were no special factors impacting this week's initial claims.  The previous week was revised to 277,000. The following graph shows the 4-week moving average of weekly claims since 1971.

The Labor Market Conditions Index for May Shows Weak Expansion - The Labor Market Conditions Index (LMCI) is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. It is a dynamic factor model of labor market indicators, essentially a diffusion index subject to extensive revisions based on nineteen underlying indicators in nine broad categories (see the table at the bottom for details). Today's release of the May data indicates weak expansion at 1.3. The April value was revised upward from -1.9 to -0.5. In fact, today's release includes revisions to 340 of the 465 data points in the series (that's 73%).The indicator, designed to illustrate expansion and contraction of labor market conditions, was initially announced in May 2014, but the data series was constructed back to August 1976. Here is a linear view of the complete LMCI. We've highlighted recessions with callouts for its value the month recessions begin and for the latest index value.  As we readily see, with the exception of the second half of the double-dip recession in the early 1980, sustained contractions in this indicator is a rather long leading indicator for recessions. It more useful as a general gauge of employment health. Note that in the most recent FOMC minutes for the April 28-29, the phrase "labor market conditions" was used seven times. Maximum employment, after all, is one of the Fed's mandates. Interestingly enough, the FEDS Notes article announcing the indicator doesn't chart the complete series with monthly granularity. Rather the authors use a column chart to show blocks of six-month averages for the two halves of each calendar year since 1977. This approach further supports the use of the indicator as a general gauge of health. Here is our larger version of the same graphic model.

What's swelling the ranks of involuntary part-timers - CBS News: During the Great Recession, involuntary part-time employment surged. So, now that the economy is recovering, shouldn't involuntary employment return to prerecession levels? Perhaps not, according to new research from the Federal Reserve Bank of San Francisco Changes in the U.S. economy's industrial composition toward services combined with shifting demographics and changes in labor costs appear to have caused a permanent increase in the percentage of people forced to accept involuntary part-time employment. The Bureau of Labor Statistics tracks two types of part-time employment. First is voluntary part-time employment, which is around 15 percent of total employment. In this case, the worker freely chooses to work less than full-time.  The other type is involuntary part-time unemployment, which is about 5 percent of all employment. This occurs when a worker would like to work full-time but can only find part-time work. This type of part-time employment concerns policymakers because it's an indication of slack in the labor market. That is, it implies that employment opportunities are insufficient to employ the workforce at desired levels. Voluntary part-time unemployment has been falling over the last few decades and didn't change much during the Great Recession. However, as the graph below shows, involuntary unemployment rose substantially during the downturn and has receded more slowly during the recovery than overall unemployment.

Falling Job Tenure: It's Not Just about Millennials: The image of a worker in the 1950s is one of a man (for the most part) who plans on spending his entire career with one employer. We hear today, however, that "...long gone is the lifelong loyalty to a corporation with steadfast servitude for years on end." One report tells us that "people entering the workforce within the past few years may have more than 10 different jobs before they retire." The reason? "Millennials don't like commitments." Well, the explanation is probably not that simple, but even simply measuring trends in job tenure is also not all that straightforward.  Despite a strong impression that entire careers spent with one employer are a thing of the past, some have declared the image of job-hopping millennials a myth. (You can read some discussions at, CNBC, and Marketwatch, for example.) These reports are all based on a September 2014 news release from the U.S. Bureau of Labor Statistics (BLS) stating that among every employee age group (even the youngest), median job tenure has not declined from when it was reported 10 years earlier. Chart 1 illustrates the biennial data on job tenure reported by the BLS and interpreted by the reports mentioned above as indication that job tenure is not falling. Each line represents an age range, from 20- to 30-year-olds at the bottom (the lowest median tenure among all age groups) to 61- to 70-year-olds on the top (the age group with the highest median tenure). It sure doesn't look as though workers at each age group are staying with their jobs for shorter periods.

All The Happy Workers - The end of capitalism has often been imagined as a crisis of epic proportions. Perhaps a financial crisis will occur that is so vast not even government finances can rescue the system. Maybe the rising anger of exploited individuals will gradually congeal into a political movement, leading to revolution.  But in the years that have followed the demise of state socialism in the early 1990s, a more lackluster possibility has arisen. What if the greatest threat to capitalism, at least in the liberal West, is simply lack of enthusiasm and activity? What if, rather than inciting violence or explicit refusal, contemporary capitalism is just met with a yawn? From a political point of view, this would be somewhat disappointing. Yet it is no less of an obstacle for the longer-term viability of capitalism. Without a certain level of commitment on the part of employees, businesses run into some very tangible problems, which soon show up in their profits.This fear has gripped the imaginations of managers and policymakers in recent years, and not without reason. Various studies of employee engagement have highlighted the economic costs of allowing workers to become mentally withdrawn from their jobs. Gallup conducts frequent and wide-ranging studies in this area and has found that only 13 per cent of the global workforce is properly “engaged,” while around 20 percent of employees in North America and Europe are “actively disengaged.” They estimate that active disengagement costs the U.S. economy as much as $550 billion a year. Disengagement is believed to manifest itself in absenteeism, sickness and—sometimes more problematic—presenteeism, in which employees come into the office purely to be physically present. A Canadian study suggests over a quarter of workplace absence is due to general burnout, rather than sickness.

Inside the World of Multiple Jobholders  -- What are the long-term trends for multiple jobholders in the US? The Bureau of Labor Statistics has two decades of historical data to enlighten us on that topic, courtesy of Table A-16 in the monthly Current Population Survey of households.  At present, multiple jobholders account for around five percent of civilian employment. The survey captures data for four subcategories of the multi-job workforce, the current relative sizes of which are illustrated in a pie chart. The distinction between "primary" and "secondary" jobs is a subjective one determined by the survey participants.  Not included in the statistics are the approximately 0.22% of the employed who work part time on what they consider their primary job and full time on their secondary job(s). Let's review the complete series to help us get a sense of the long-term trends. Here is a look at all the multiple jobholders as a percent of the civilian employed. The dots are the non-seasonally adjusted monthly data points, which are quite volatile, and a 12-month moving average to highlight the trend. The moving average peaked in the summer of 1997 and then began trending downward. It is now at 4.9%. The latest monthly data point is 4.8%.The next chart focuses on all four subcategories referenced in the pie chart. The trend outlier is the series illustrated with the red line: Multiple Part-Time Jobholders. Its trough was in 2002 and has been trending higher in early 2007, long before Obamacare. At about the same time we also see a steepening decline in the trend for the employed whose hours vary between full- and part-time for either their primary or secondary job.Here is a closer look at the two cohorts that have changed the most since the mid-2000s. We've rescaled the vertical axis to give us a clearer view of the trends.

Mall retail jobs: Low pay, uncertain hours, and punitive number-crunching. - It is 11 p.m., and the mall is silent. The hallways are dim and empty; the stores are shuttered. Hurriedly, I’m counting the day’s cash deposit, hoping my manager won’t find out I’ve been working off the clock.  Last August, the New York Times covered the erratic schedules of Starbucks employees at the mercy of “on-call” scheduling. Icing, too, requires that employees work “on call,” meaning I often did not know if or when I was needed until an hour before my shift. For an 18-year-old with few other obligations, this uncertainty was frustrating at most. But as the Times reported, not having a set schedule is nightmarish for employees with young children who must scramble at the last minute to find child care. Similarly, I could only shrug when I’d call in to find out that my scheduled shift had been canceled due to slow business. While it was an unwelcome blow to my paycheck, I was not depending on the money the way my older co-workers were. According to the U.S. Bureau of Labor Statistics, the median age of a retail employee is 39. While the median salary from a retail job is only slightly over $20,000 a year, a 2008 study by the New York–based Fiscal Policy Institute revealed that most of the state’s retail workers serve as the primary source of income for their families. These employees can’t afford to have their hours cut back on a moment’s notice.

On Substance, Martin O’Malley Was Right About American Wages: Don’t Let Nitpicks Convince You That There Is Not A Crisis in American Pay - Three separate sources have recently “fact-checked” claims that Martin O’Malley made about American wages in his recent speech announcing his candidacy for the Democratic nomination. The precise O’Malley quote was:  Today in America, 70 percent of us are earning the same or less than we were 12 years ago, and this is the first time that that has happened this side of World War II. O’Malley has said that our research on wages provided a basis for his claim (examples can be found here and here). First, let’s be clear on what our claim is and then I’ll talk about the fact checkers’ assessments of O’Malley’s use of the data.We have data on hourly wages by decile since 1973. Between 2002 and 2014, inflation-adjusted hourly wages for the bottom 7 deciles (i.e., 70 percent of the American workforce) fell. This is a remarkable economic fact and one that O’Malley is clearly right to highlight.Further, between 1947 and 1973 there is almost certainly no 12-year period when the bottom 70 percent of wage earners saw hourly wage declines. Precise wage data by decile is sketchy over this period, but the circumstantial evidence on this is overwhelming. Just look at this graph, which shows hourly pay for a grouping reflecting the bottom 80 percent of the workforce rising sharply until the early 1970s.

Are Wages and Benefits Growing Faster Than We Think? -- Worker wages and benefits may be picking up faster than we think.  Employer costs for employee compensation jumped 4.9% from a year earlier in March, the Labor Department said on Wednesday, the second consecutive increase at that relatively robust level. Average cost per hour worked rose to $33.49 in March, versus $31.93 a year earlier. Wages and salaries climbed 4.2% to $22.88 while benefits rose 6.4% to $10.61. Health insurance, one component of benefits, was up 2.5%. That’s well above a 1.2% gain as recently as the third quarter of 2013 and a sign the labor market is getting tighter as employers add jobs at a healthy pace.  “The growth reported over the most recent four quarters is one of the firmest over-year-ago changes in the ECEC on record back to 1991,” s. “The ECEC is not one of our preferred measures of wage inflation, but its recent firming echoes the message from many other related measures that have also been strengthening lately.”Many economists prefer the Labor Department’s employment cost index, which showed labor costs rose 2.6% in the first quarter, accelerating from 2.2% growth in the third and fourth quarters. The ECI is built with fixed weights for individual industries and occupations, so in theory it shows how compensation would have changed if the the composition of employment across industries and occupations had not changed. While it’s still not perfect, it better controls for an economy that may be growing unevenly across sectors, unlike the ECEC or more frequently reported hourly earnings data.

Notes on Walmart and Wages (Wonkish) -  Krugman -  Walmart reports that its recent wage hike is paying off via reduced turnover, which produces cost savings that offset the direct expense of the higher wages. In other words, efficiency wage theory is vindicated. What are the political/policy implications? What follows is a slightly wonkish note, largely to myself. Efficiency wage theory is the idea that for any of a number of reasons, employers get more out of their workers when they pay more. It could be effort, it could be morale, it could be turnover. The causes of the efficiency gain could lie in psychology, or simply in the fact that workers are less willing to risk better-paying jobs with bad behavior. ... Or to put it differently, efficiency wages suggest right away that the invisible hand’s grip on labor is a lot looser than people imagine, that wages are relatively easy to shift with social and political pressure. And this is one important reason attempts to reduce inequality can and should involve working on the distribution of market income as well as ex-post redistribution through taxes and transfers

Occupy's impact  - By Michael Levitin excerpted from here: --Until recently, Occupy’s chief accomplishment was changing the national conversation by giving Americans a new language—the 99 percent and the 1 percent—to frame the dual crises of income inequality and the corrupting influence of money in politics. One of Occupy’s largely unrecognized victories is the momentum it built for a higher minimum wage. The Occupy protests motivated fast-food workers in New York City to walk off the job in November 2012, sparking a national worker-led movement to raise the minimum wage to $15 an hour. In 2014, numerous cities and states including four Republican-dominated ones—Arkansas, Alaska, Nebraska, and South Dakota—voted for higher pay; 2016 will see more showdowns in New York City and Washington, D.C., and in states like Florida, Maine, and Oregon. From Seattle to Los Angeles to Chicago, some of the country’s largest cities are setting a new economic bar to help low-income workers. The tidal wave didn’t come from nowhere. The grassroots movement composed of fast-food workers and Walmart employees, convenience-store clerks, and adjunct teachers seized on the energy of Occupy to spark a rebirth of the U.S. labor movement. This renaissance was most recently visible on April 15, when tens of thousands of workers marched in hundreds of cities to demand better pay and conditions. McDonald’s and Walmart have responded with incremental wage hikes, and Senate Democrats this spring called for raising the federal minimum wage to $12 an hour. As Seattle City Council member Kshama Sawant, a socialist who rose to prominence with the Occupy movement, put it, “$15 in Seattle is just a beginning. We have an entire world to win.”

The Income of Top .001 Percent Is Growing -  A new IRS report examines incomes and tax burdens of all Americans. Its story of stagnation should be familiar to all. For 80 percent of Americans, average incomes fell between 2003 and 2012. That’s every taxpayer with income of less than $85,440 in 2012. As depressing as that news is, the real story from the report concerns the very top level of income earners. The biggest income gap in America is not between the top 1 percent of earners and the 99 percent below them, but rather within the top 1 percent, where the split between the have-mores and the have-a-lot-mores is a fast-widening chasm. Nearly 1.4 million households are in the top 1 percent income group, a statistical cohort whose members change somewhat from year to year. But for the first time ever, the IRS offers a close look at the top .001 percent of taxpayers. It shows that incomes in this rarefied air — the top 1,361 households — are soaring while their tax burdens are falling. The differences in income-growth rates from 2003 to 2012 between the top .001 percent and the rest of the top 1 percent are akin to watching a race to the skies between a helium balloon and a rocket. I analyzed the report to compare the 99.9 percent in the top 1 percent to the one in a thousand above them. Adjusted for inflation, average incomes for 99.9 percent of those prosperous households rose to almost $1.3 million in 2012, up $424,000 over 2003. As big as those numbers are, they pale next to the income growth among the one-in-a-thousand households above them on the income ladder. Those 1,361 households enjoyed an average income of $161 million, an increase of $84.6 million.

The Number of Salaried Workers Guaranteed Overtime Pay Has Plummeted Since 1979 -- Though some employees are not entitled to overtime pay under the Fair Labor Standards Act no matter how low their pay is (school teachers, for example), most salaried workers (those earning more than the salary threshold amount of $455 per week, or $23,660 annually) are entitled to receive overtime pay if the duties they perform are not determined to be “executive, administrative, or professional.” Those duties include managing a business, a store or department, providing important technical advice to a business operation, auditing accounts and providing legal representation. Employees earning less than the threshold amount are guaranteed overtime pay regardless of their duties. As the figure below shows, more than 12 million workers had salaries less than the exemption threshold in 1979. Today, because the salary threshold has not been indexed for inflation, only 3.5 million workers have salaries below the current $455 per week threshold and are thus guaranteed overtime pay. If the threshold set in 1975 had been indexed for inflation it would be $984 per week today. As the Obama administration prepares to announce a revised salary threshold that will make millions of salaried workers eligible for guaranteed overtime pay, this estimate of those currently covered establishes a baseline for evaluating the impact of the new threshold.

Raising the Overtime Pay Threshold Will Help More Workers Get the Pay They Deserve -- Hardworking, middle-class Americans have seen their wages stagnate in recent years, while for the most part, the benefits of the economic recovery have gone to the wealthy few. This weakening of the middle class is associated with the weakening of labor standards that protect workers, including overtime standards. The Obama administration is updating the pay threshold for overtime protection to bring it up to date with 2015 realities, a key step which will help ensure that we have an economy that works for everyone. Key facts:

  • The overtime threshold is a critical tool to make sure that workers with modest salaries are being paid what they earn. Salaried workers who earn below the threshold must be paid “time-and-a-half” for each hour worked beyond 40 hours per week (hourly workers in most occupations already enjoy these protections). A higher threshold will mean that more people are compensated fairly for all of the hours they actually work—primarily, people who work long hours for little pay.1
  • In 1975, more than 60 percent of salaried workers were guaranteed overtime pay, but today, only about 8 percent are guaranteed it.2 The current overtime threshold of $23,660 per year is below the federal poverty line for a family of four.3 Had it kept pace with its 1975 level, the overtime threshold would be more than $51,000 today adjusted for inflation, about equal to the U.S. median household income.4
  • Increasing the threshold for overtime pay will give middle-class workers and families a big boost, with the raise to the $51,000 threshold affecting 6.1 million workers by putting more money in their pockets.5 The workers it would benefit the most include women, African Americans, Latinos, workers under age 35, and workers with lower levels of education.6

Obama administration stops work on immigrant program - A series of legal setbacks have halted the government’s intensive preparations to move forward with President Obama’s executive actions shielding millions of illegal immigrants from deportation, even as community organizations continue a rapid push to get ready for the programs, according to U.S. officials and immigrant advocacy groups. Since a federal judge first blocked the new programs in February, the Department of Homeland Security has suspended plans to hire up to 3,100 new employees, most of whom would be housed in an 11-story building the government has leased for $7.8 million a year in Arlington, Va. That building, in the Crystal City area, is now sitting mostly unused, DHS employees say. Yet inside and outside the Beltway, community groups are mobilizing, educating immigrants and training volunteers to help them apply for relief, even though it remains unclear whether the program will ever begin. Most recently, a foundation headed by billionaire George Soros, undaunted by the court rulings, pledged at least $8 million to that effort.

TiSA: A Secret Trade Agreement That Will Usurp America’s Authority to Make Immigration Policy -- Proponents of Trade Promotion Authority (aka fast-track trade negotiating authority), which the House of Representatives will likely vote on soon, have made an unequivocal promise that future trade agreements like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) will explicitly exclude any provisions that would require a change to U.S. immigration law, regulations, policy, or practices. Many members of Congress in both parties have expressed concern that trade agreements might limit America’s ability to set immigration policy. Republican congressmen Paul Ryan and Robert Goodlatte have responded by explicitly assuring members of their party that there will be no immigration provisions in any trade bill. U.S. Trade Representative Michael Froman has stated in an interrogatory with Sen. Chuck Grassley (R-Iowa) and via letter that nothing is being negotiated in the TPP that “would require any modification to U.S. immigration law or policy or any changes to the U.S. visa system.”  Furthermore, just a few weeks ago, the Senate Finance Committee released a statement titled “TPA Drives High-Quality Trade Agreements, Not Immigration Law: The Administration Has No Authority Under TPA or Any Pending Trade Agreement to Unilaterally Change U.S. Immigration Laws,” and the committee’s May 12 report on the Fast Track bill that was eventually passed by the full Senate contained this relevant language: For many years, Congress has made it abundantly clear that international trade agreements should not change, nor require any change, to U.S. immigration law and practice…

The F.C.C. Should Help the Poor Get Online - NYTimes editorial - The chairman of the Federal Communications Commission has proposed expanding a telephone subsidy program to help the poor gain access to high-speed Internet service. A few Republican lawmakers — notably John Thune of South Dakota in the Senate and Fred Upton of Michigan in the House — have complained of fraud in the existing program. The complaints are overblown and are no reason to undermine an excellent idea.  The subsidy program, known as Lifeline, was created in 1985, when home telephone service was essential to all Americans. In the last decade, high-speed Internet service, or broadband, has become just as important. But many poorer Americans cannot afford broadband; the F.C.C. estimates less than half of all households earning less than $25,000 a year have high-speed service at home, while more than 95 percent of those with incomes of $150,000 or more have it.Under the proposal by the chairman, Tom Wheeler, Americans who qualify for Lifeline could chose to apply the program’s $9.25 a month subsidy toward wired or wireless Internet service. Currently, people can use the money only for a home phone or mobile phone service. To qualify, people have to make less than 135 percent of the federal poverty level or already receive benefits like Medicaid, food stamps or federal housing vouchers.Mr. Wheeler’s plan is modest — perhaps too modest. A subsidy of $9.25 a month, though helpful, will not go very far. The F.C.C. estimates that the average price for a home Internet connection that can download data at more than 15 megabits per second was $59.40 a month in 2013. And Lifeline’s $1.7 billion annual spending will not grow. Lifeline is an important benefit that helps keep the least fortunate Americans connected. There is no question it should be expanded to include Internet service, which children need to do homework and adults need to look for jobs and training.

These Five Restaurant Chains Are Costing American Taxpayers $1 Billion Per Year - The next time you sit down for a $20 bowl of spaghetti with unlimited breadsticks or pony up your cold hard cash for a $15 steak that isn’t really an Australian favorite in any stretch of the imagination, you might want to consider how some massive U.S. dining establishments are milking you out of your cold hard cash. A recent report has highlighted the effective double subsidy that America’s largest restaurant chains receive from taxpayers and customers. The report has drawn its conclusions from the Bureau of Labor Statistics as well as U.S. Census Bureau. According to the study, 9.4 billion dollars each year are incurred by American taxpayers to support full-service workers (waiters, waitresses, bartenders, cooks, and dishwashers) who require public assistance. More than 10% of that money goes to just a handful of massive US-based restaurant chains. According to the ROC United, “tipped restaurant workers live in poverty at 2.5 times the rate of the overall workforce,” and nearly 50 percent of families of full-service restaurant workers are enrolled in one or more public-assistance programs such as Medicaid, the Children’s Health Insurance Program, SNAP, Temporary Assistance for Needy Families (TANF) or low-income housing. Most of those workers are forced to seek public aid because the National Restaurant Association has spent millions of dollars lobbying to keep their minimum wage froze at $2.13 per hour since 1991. The ROC report reveals that the 5 largest restaurant chain operators in the United States have spent more than a combined $3.2 million on annual federal lobbying activities. Those efforts go almost inclusively into fighting against a higher minimum wage for their tipped workers.

Ford Shifts Grant Making to Focus Entirely on Inequality --The fight against inequality will take center stage at the Ford Foundation under a sweeping overhaul announced today by the nation’s second biggest philanthropy. Not only will Ford direct all of its money and influence to curbing financial, racial, gender, and other inequities, but it will give lots more money in a way grantees have been clamoring for: It hopes to double the total it gives in the form of unrestricted grants for operating support. The doubling of general operating support to 40 percent of the foundation’s grant-making budget, projected to be in excess of $1 billion over five years, will enable Ford to create what its president, Darren Walker, calls a "social-justice infrastructure" reminiscent of the support it provided nonprofits during the civil-rights era. "By giving a set of institutions core support or seed capital, we helped initiate and support entire movements," he said. "We contributed to an entire generation of social-justice leaders around the world." Now, he says, Ford hopes that providing support without strings attached will help make organizations more "durable" and allow them more leeway in designing their own programs. "We’re going to move away from bending our grantees to fit into our boxes and do a better job of listening and learning," he said.

Here Are the U.S. Cities Where Wage Growth Has Lagged Job Growth -- A Wall Street Journal analysis of the nearly 400 metropolitan areas tracked by the Labor Department found just 33 that met a pair of critical criteria: the average unemployment rate in 2014 was roughly at or below its 2005-07 average, and total nonfarm payrolls in December 2014 were above their level when the recession began in December 2007. In other words, the job market in those 33 metro areas has healed from the recession–with one catch. In 22 of those 33 cities, wage growth last year remained below its prerecession level, a sign that something remains amiss even in the nation’s healthiest cities. Columbus, Ohio, as well as Houston, Minneapolis, Oklahoma City and Topeka are among the 22 cities where wage growth remains unusually low, despite an unemployment rate now at or below its prerecession level.On the other end of the scale are 11 cities including Bismarck, N.D., and Midland, Texas, where both hiring and wage growth have recovered. Wages can be tricky to measure even at the national level: signs of a pickup in the Labor Department’s Employment Cost Index stand in contrast to continued sluggish growth in average hourly earnings, also measured by the Labor Department. To analyze metro-level wages, the Journal looked at the Labor Department’s Quarterly Census of Employment and Wages.  The average annual percent change for each metro area’s average weekly wage over the first three quarters of 2014–data for the fourth quarter won’t be released until June 17–was compared with the average wage growth in 2005 through 2007, the three years of expansion before the recession.Eleven cities saw stronger wage growth last year than they experienced during the last expansion. In a few others like Austin, Texas, wage growth was only a bit slower compared with 2005-07. But averaged across all 33 metro areas, wage growth was 0.8 percentage point lower in 2014 compared with 2005-07. Below is a sortable chart of the 33 metro areas, including their unemployment rates and wage growth averages for 2005-07 and 2014.

This Map Shows How Much Each State Grew Its GDP Last Year - A new report released by the Bureau of Economic Analysis on Wednesday shows how each state grew its GDP in 2014. The map demonstrates how U.S. growth keeps shifting further West, specifically in the Southwest where a growth rate of 4.3 percent was experienced. In Texas, residents helped the state’s GDP grow by 5.2 percent, the fastest of any state by dollar growth. The Rocky Mountain region saw a 3.9 percent expansion as the Far West, which includes California, Oregon, Washington and Nevada, grew 2.7 percent. The west was helped along by a surge in mining, professional, scientific and technical services. North Dakota was the fastest-expanding state with a GDP increase of 6.3 percent, following a 0.9 percent advance in 2013 that was revised down sharply from a previously reported 9.7 percent rate. The Plains slowed overall to a 1.3 percent advance, down from 1.8 percent the prior year. No region East of the Mississippi experienced growth. In Mississippi, the economy contracted 1.2 percent after dropping 1.1 percent in 2013. Alaska also contracted 1.3 percent following a 4 percent contraction the prior year. All 50 states combined for a 2.2 percent expansion in 2014, up from 1.9 percent growth the prior year.

States Confront Wide Budget Gaps Even After Years of Recovery - In Illinois, fights fights over the state budget and its $3 billion shortfall have hit such an impasse that Gov. Bruce Rauner, a Republican, issued a dire warning last week that a “major, major restructuring of the government” was around the corner.In Kansas, centrist Republicans have joined Democrats in attributing the state’s $400 million budget gap to deep tax cuts passed in 2012 and 2013 at the urging of Gov. Sam Brownback, a conservative Republican.And in Louisiana, lawmakers in the Republican-controlled State Legislature are in a standoff with their party colleague Gov. Bobby Jindal as they struggle with a $1.6 billion shortfall. Though the national economy is in its sixth year of recovery from the recession, many states are still facing major funding gaps that have locked legislaturs in protracted battles with governors. In some states, lawmakers have gone into overtime with unresolved budgets, special sessions and threats of widespread government layoffs. Only 25 states have passed budgets, according to the National Association of State Budget Officers, which tracks legislative activity.While some states led by Democrats are having budget problems, too, there are far more states where Republicans control both the legislature and the governor’s office: 23, compared with seven states controlled by Democrats. Some of the bitterest budget fights this year pit conservative Republicans against centrist Republicans over how to cut spending or raise taxes.

NY food banks running out of food: Food banks across the US state of New York are running out of food, amid falling funds and rising demand from people that have trouble affording food. About 2.6 million people have trouble affording food across New York with about 1.4 million New York City residents relying on food pantries to feed themselves, according to the Food Bank For New York City. The situation is even worse in the rest of the state, leading Hunger Action Network to ask the New York legislature for $16 million in additional funding just to keep the food shelves stocked through the end of the year. Michael Berg, the director of an organization that runs three food pantries in New York, told The Associated Press that demand for food there has risen by about 20 percent each year for the last few years. Contrary to the belief that people visiting food pantries are homeless and jobless, most customers are employed, but are not paid enough money to put food on the table without help. Food banks across the US have seen increased demand from hungry Americans since 2013, ever since Congress cut funding for the Supplemental Nutrition Assistance Program, formerly known as the food stamp program, by an average of $18 per person a month. About 40 percent of those receiving food stamp benefits then turned to emergency food services, leading to an increase in demand, according to The New York Times.

Illinois budget cuts blamed for spike in Chicago murder rate - Chicago has already passed the 1,000 mark for shooting victims this year, the Chicago Tribune reported, and the number of homicides so far this year is 18 percent higher than in the same period last year — a level of violence that rivals 2012, when gun violence in the city attracted international attention.  Meanwhile, the state’s new governor, Bruce Rauner, a Republican, announced in April that there would be deep cuts to social programs in Illinois this year — a total of $26 million dollars meant to help overcome a $1.6 billion budget deficit. Activists expect the cuts to have a cumulative effect, but they say there has already been an increase in the intensity of violence and shootings as well as killings. Their fear is not unfounded — scientific research conducted in Chicago shows how summer jobs can decrease the risk of youth becoming entangled in crime or violence.   The services that were cut include a drug addiction prevention program that lost $1.6 million. Homeless assistance lost $300,000. One after-school program, Teen REACH, lost $3.1 million. Summer job programs took a hit.

Bloody Police Beating Means Higher Tax Bills in Detroit Suburb - olice in Inkster, Michigan, dragged unarmed Floyd Dent out of his car in January and beat him bloody, an incident captured on video. Now, every property owner in the Detroit suburb of 24,500 is going to pay for it. Dent, a 57-year-old autoworker from nearby Dearborn, spent three days in a hospital and said he now suffers from memory loss. After prosecutors dropped charges of possessing cocaine, he settled with Inkster for $1.4 million. The penalty will cost a typical homeowner about $179 on July property tax bills. The one-time assessment is a burden in a city where 40 percent of residents are poor, said DeArtriss Richardson, 63, a retiree and former council member. The payout isn’t covered by the city’s liability insurance because of a $2 million deductible.

Dying Of Excitement -- “Excited delirium” is the name given to a condition in which a person, either as a result of mental illness or protracted use of stimulants such as cocaine or methamphetamines, becomes extremely violent; hyperaggressive; and is often found naked, agitated, incoherent, feverish, and displaying extraordinary strength. The phenomenon is reported most often in police encounters, requiring, on average, four officers to restrain the suspect. In approximately 10 percent of cases, according to the literature, the person with excited delirium may die suddenly. The heart or breathing simply stops. So when someone dies in that agitated state and no other cause of death is found, the medical finding is that excited delirium was the cause. It accounts for approximately 250 deaths in the United States each year, with one expert speculating that about 800 cases occur each year nationwide.  The obvious problem is this: What do we make of a syndrome that seems to occur almost unerringly when a police officer is choking, hog-tying, or stunning with a Taser someone with a mental illness or drug addiction? And why do many experts dispute that the diagnosis even exists? While excited delirium is used to explain a significant number of deaths occurring in police custody, the term has not been recognized as a genuine mental health condition by the American Medical Association, the American Psychological Association, or the World Health Organization. Excited delirium—which sounds, to the naked ear, something like “crazy-craziness”—is not found in the current version of the Diagnostic and Statistical Manual of Mental Disorders, either. Yet medical examiners and police departments keep claiming it as the cause of death of people in custody.

Miami Police Shoot and Kill a Homeless Man In Front of 50 Children -- Antonio Torres a Miami police officer shot Fritz Severe, a homeless man 5 times in front of 40 to 60 children attending a summer camp Thursday morning, according to local media. The homeless man, who was holding a metal stick, was allegedly shot five times after refusing to comply with officers demands for him to drop it. He was transported to a nearby hospital where he died from his injuries. Two officers were dispatched to the scene with a report of a violent dispute. A nearby library had called the police in order to remove the homeless man because he was brandishing a stick, witnesses said. Police fired at the man around 10 a.m at Gibson Park in the Overtown neighborhood of Miami, notable for its public swimming pool and athletic fields. The approximately 40 to 60 children who witnessed the shooting were attending a summer camp in the park.  One witness claims that the homeless man was well-known in the neighborhood and always carried a stick, reports the Miami HeraldNatalia Zea a news anchor for Miami’s CBS 4 tweeted that witnesses said that the homeless man did have a stick, but never lunged or made a move towards the officers.

Study: Juvenile incarceration yields less schooling, more crime -- Teenagers who are incarcerated tend to have substantially worse outcomes later in life than those who avoid serving time for similar offenses, according to a distinctive new study co-authored by an MIT scholar. "We find that kids who go into juvenile detention are much less likely to graduate from high school and much more likely to end up in prison as adults," says Joseph Doyle, an economist at the MIT Sloan School of Management and co-author of a new paper detailing the results of the study. Indeed, the research project, which studied the long-term outcomes of tens of thousands of teenagers in Illinois, shows that, other things being equal, juvenile incarceration lowers high-school graduation rates by 13 percentage points and increases adult incarceration by 23 percentage points. A key to the study is that it uses the variation in judges' sentencing tendencies to analyze a large pool of otherwise similar teenagers, thus isolating the effects of the sentences on the kids in question. "We think this is some of the first real causal evidence on the effects of juvenile detention on kids' outcomes,"

Creationist group: Kansas schools are indoctrinating students into atheism by teaching them ‘science’ - Kansas educators are on the defensive for teaching science in science classes, with a pro-creationist group accusing them of “indoctrinating” children into an “atheistic faith-based doctrine.” The Kansas State Board of Education is defending its curriculum, which teaches evolution and climate change in primary school classes, against the legal challenge from Citizens for Objective Public Education, an organization claiming the educational standards endorse a “non-theistic world view,” reports the Topeka Capital Journal. COPE claims the standards violate first and fourteenth amendment rights of “parents, students and taxpayers.” The case was thrown out in December but the decision to do so is currently being appealed. COPE asserts the state board of education is “indoctrinating” school children to accept an “atheistic faith-based doctrine” that “holds that explanations of the cause and nature of natural phenomena may only use natural, material or mechanistic causes, and must assume that supernatural and teleological or design conceptions of nature are invalid,” according to their website.

Inequitable school funding called ‘one of the sleeper civil rights issues of our time’ - Funding for public education in most states is inadequate and inequitable, creating a huge obstacle for the nation’s growing number of poor children as they try to overcome their circumstances, according to a set of reports released Monday by civil rights groups. Students in the nation’s highest-spending state (New York) receive about $12,000 more each year than students in the lowest-spending state (Idaho), according to the reports, and in most states school districts in wealthy areas spend as much or more per pupil than districts with high concentrations of poverty. In addition, many states were spending less on education in 2012 than they were in 2008, relative to their overall economic productivity, according to the reports. The two reports – the Education Law Center’s fourth annual report card on school finance and a companion piece co-authored with the Leadership Conference Education Fund – are meant to help galvanize policymakers and activists to take on longstanding school funding disparities. “School funding decisions are one of the sleeper civil rights issues of our time,” said Wade Henderson, president of the Leadership Conference on Civil Rights and Leadership Conference Education Fund. “The evidence from across the country is clear and compelling: Our nation must dramatically change the way that educational resources are distributed so that there is true equity in America’s classrooms.”

Aspirational parents condemn their children to a desperate, joyless life --We know that our conditions of life are deteriorating. Most young people have little prospect of owning a home, or even of renting a decent one. Interesting jobs are sliced up, through digital Taylorism, into portions of meaningless drudgery. The natural world, whose wonders enhance our lives, and upon which our survival depends, is being rubbed out with horrible speed. Those to whom we look for guardianship, in government and among the economic elite, do not arrest this decline, they accelerate it. The political system that delivers these outcomes is sustained by aspiration: the faith that if we try hard enough we could join the elite, even as living standards decline and social immobility becomes set almost in stone. But to what are we aspiring? A life that is better than our own, or worse? Last week a note from an analyst at Barclays’ Global Power and Utilities group in New York was leaked. It addressed students about to begin a summer internship, and offered a glimpse of the toxic culture into which they are inducted." Play time is over and it’s time to buckle up.”… Play time is over and it’s time to buckle up.” Play time is over, but did it ever begin? If these students have the kind of parents featured in the Financial Times last month, perhaps not. The article marked a new form of employment: the nursery consultant. These people, who charge from £290 an hour, must find a nursery that will put their clients’ toddlers on the right track to an elite university. They spoke of parents who had already decided that their six-month-old son would go to Cambridge then Deutsche Bank, or whose two-year-old daughter “had a tutor for two afternoons a week (to keep on top of maths and literacy) as well as weekly phonics and reading classes, drama, piano, beginner French and swimming. They were considering adding Mandarin and Spanish. ‘The little girl was so exhausted and on edge she was terrified of opening her mouth.’”

School ‘EMPATHY’ program helps youth cope with anxiety, depression, and suicidal thoughts - Silverstone, a professor in the University of Alberta’s Department of Psychiatry, is the creator of EMPATHY, a pilot program that has been used in Red Deer Public Schools since 2013 to help lessen incidents of youth anxiety, depression and suicide. Now, new research published in the May edition of the journal PLOS ONE gives definitive proof the program is having an impact. “We have had a significant decrease in suicidal thinking. Kids are not thinking about harming themselves as much. It’s quite profound,” says Silverstone. “We’ve also had a decrease in the entire school ratings for anxiety and depression, and this occurred in every school, in every grade.” The program began with a phone call in 2013. Silverstone remembers watching the news one night and seeing an interview with the superintendent of Red Deer Public Schools in which he spoke of a crisis due to several recent teenage suicides. Silverstone immediately called school administrators, describing a program he had in mind to introduce interventions to reduce suicidality, depression and anxiety. The conversation quickly led to the start of a pilot study involving all students at Red Deer Public Schools between the ages of 11 and 18. At the beginning of the school year, more than 3,000 students in grades 6 through 12 were screened for mental health issues and assigned an EMPATHY scale score. Following screening there were rapid interventions for the four per cent of youth identified as being actively suicidal or at high risk of self-harm. Within a few hours they had met with a resiliency coach, their parents were informed and they were offered a guided Internet program to help them address their problems. After taking part in the program, they were re-assessed, and if needed, referred to primary or specialist care. In addition, junior high students were also offered a 16-week resiliency program aimed at building their ability to interact with other youth and to deal with day-to-day stress in a way that didn’t lead to low mood or anxiety.

Five Social Disadvantages That Depress Student Performance: Why Schools Alone Can’t Close Achievement Gaps - Executive summary.  That students’ social and economic characteristics shape their cognitive and behavioral outcomes is well established, yet policymakers typically resist accepting that non-school disadvantages necessarily depress outcomes. Rather, they look to better schools and teachers to close achievement gaps, and consistently come up short.  This report describes how social class characteristics plausibly depress achievement and suggests policies to address them. It focuses on five characteristics for purposes of illustration:

  • parenting practices that impede children’s intellectual and behavioral development
  • single parenthood
  • parents’ irregular work schedules
  • inadequate access to primary and preventive health care
  • exposure to and absorption of lead in the blood.

These are not the only characteristics that depress outcomes, nor are they necessarily the most important. This report makes no judgment about the relative importance of the many adverse influences on child and youth development. Parental unemployment and low wages, housing instability, concentration of disadvantage in segregated neighborhoods, stress, malnutrition, and health problems like asthma are among other harmful characteristics. For each characteristic reviewed here, this report describes its average incidence by race (black versus white) and socioeconomic status. Data limitations preclude similar descriptions of Hispanics’ characteristics. Where research is available, we then review what is known about the characteristic’s prediction of cognitive (academic performance or IQ, for example) and non-cognitive (behavioral) outcomes. We next review the “plausible pathways” by which the characteristic influences youths’ outcomes—i.e., how these predictions might reflect causality. We conclude by recommending policies to reduce the intensity of these specific disadvantages.

Lake Wobegon on steroids, where all the students are valedictorians -- In today’s world of “easy As” and massive grade inflation, the concept of a single student being valedictorian presents a real problem. According to this report from The Columbus Dispatch about an Ohio School District, “Roughly 20% of all graduating seniors at Dublin’s three high schools were awarded valedictorian status.” Here’s more: Graduation ceremonies might still be going on if Dublin schools had asked all of its valedictorians to speak. There were 222 of them. That means two out of every 10 graduates at Dublin’s three high schools received top honors this year. Dublin Scioto had 44 valedictorians, Dublin Jerome had 82, and Dublin Coffman had 96. The valedictorian was once the single highest-performing graduate. But experts say it’s more typical to see multiple valedictorians or none at all as educators try eliminate the competition among students to be No. 1 of their class. Prediction: At some point in the future, in Lake Wobegon and beyond, “all the students will be valedictorians.”

I'm a liberal professor, and my liberal students terrify me - Vox: I'm a professor at a midsize state school. I have been teaching college classes for nine years now. I have won (minor) teaching awards, studied pedagogy extensively, and almost always score highly on my student evaluations. I am not a world-class teacher by any means, but I am conscientious; I attempt to put teaching ahead of research, and I take a healthy emotional stake in the well-being and growth of my students. Things have changed since I started teaching. The vibe is different. I wish there were a less blunt way to put this, but my students sometimes scare me — particularly the liberal ones. The student-teacher dynamic has been reenvisioned along a line that's simultaneously consumerist and hyper-protective, giving each and every student the ability to claim Grievous Harm in nearly any circumstance, after any affront, and a teacher's formal ability to respond to these claims is limited at best. I got called into my director's office. I was shown an email, sender name redacted, alleging that I "possessed communistical [sic] sympathies and refused to tell more than one side of the story." The story in question wasn't described, but I suspect it had do to with whether or not the economic collapse was caused by poor black people. I have intentionally adjusted my teaching materials as the political winds have shifted. (I also make sure all my remotely offensive or challenging opinions, such as this article, are expressed either anonymously or pseudonymously). Most of my colleagues who still have jobs have done the same. We've seen bad things happen to too many good teachers — adjuncts getting axed because their evaluations dipped below a 3.0, grad students being removed from classes after a single student complaint, and so on.

Why social sciences are just as important as STEM disciplines - In a shortsighted effort to save money, Congress is moving ahead with a plan to cut investment in the social sciences. The America Competes Act under consideration on Capitol Hill would reauthorize funding for the National Science Foundation and other agencies that supply the financial lifeblood to engineering and the physical sciences. However, as passed by the House, the bill would cut the foundation’s funding for the social sciences by about half in order to direct more money to science, technology, engineering and mathematics — the STEM disciplines. As an engineer and an educator, I deeply appreciate our national policymakers’ recognition that funding STEM research can improve our national security, create jobs and enhance our economic competitiveness. But I disagree with the notion that the social sciences are not just as important for the same reasons.  In fact, the social sciences are more important today than ever — and if you doubt me, just look at recent news about how social media are taking the social science world by storm. Social media — those ubiquitous digital tools that can seem like toys — are changing cultures and governments around the world. Researchers at several leading universities have begun looking at the role that social media messaging played in the Arab Spring protests, whose organizers used social media to get around government-controlled print and broadcast media, toppling governments and changing the Middle East before our eyes. Dramatically cutting social science funding would curtail such studies and deny policymakers a critical means of understanding political movements and uprisings around the world. U.S. intelligence agencies use social science analysis extensively as a means to improve our national security. For example, FBI Director James B.Comey recently warned that some terror groups are increasing their reliance on social media to disseminate information and gain new recruits.

Colleges Grow Wary of Lasting Commitments - Gov. Scott Walker’s move to weaken tenure in the Wisconsin public university system is bold — and, at least for a while, it is likely to remain an outlier. Tenure is such a central part of the fabric of American higher education that it is difficult to tamper with, even as colleges and universities face many of the same economic pressures as businesses, and public institutions grapple with state funding cuts. “The question is whether other states will follow Wisconsin’s lead,”. “It’s way too early to say, but we don’t see any movement in that direction. Still, in an era of rapid change, long life spans, economic strains and a dwindling college-age population, there is a high cost to awarding professors lifetime job guarantees. As a result, universities across the country — public and private, large and small — are becoming far more cautious about awarding tenure, particularly in departments in which enrollment is declining. Tenure can be a long commitment for a university, particularly now that mandatory retirement is illegal. Someone who gets tenure at 30, for example, may still be teaching 50 years later, which could hinder universities in reinvigorating their professorial ranks with younger people better versed in current scholarship or specializing in the interests of the moment. Nationwide, only about a quarter of the instructional work force is tenured or on a tenure track. A few colleges and universities do not even offer tenure, instead using a system of long-term or rolling contracts.  It is unclear what will happen in Republican-led Wisconsin, where Mr. Walker is edging toward a run for president. Last month, a committee of the State Legislature passed a proposal that would remove tenure protection in the public university system from state law, and leave tenure policy to the Board of Regents, most of whose members are appointed by the governor.

America, The Ponzi Scheme: A Commencement Speech For The Scammed -- It couldn’t be a sunnier, more beautiful day to exit your lives -- or enter them -- depending on how you care to look at it. After all, here you are four years later in your graduation togs with your parents looking on, waiting to celebrate. The question is: Celebrate what exactly? In possibly the last graduation speech of 2015, I know I should begin by praising your grit, your essential character, your determination to get this far. But today, it’s money, not character, that’s on my mind. For so many of you, I suspect, your education has been a classic scam and you’re not even attending a “for profit” college -- an institution of higher learning, that is, officially set up to take you for a ride. Maybe this is the moment, then, to begin your actual education by looking back and asking yourself what you should really have learned on this campus and what you should expect in the scams -- I mean, years -- to come. Many of you -- those whose parents didn’t have money -- undoubtedly entered these stately grounds four years ago in relatively straitened circumstances.  Still, you probably arrived here eager and not yet in debt. Today, we know that the class that preceded you was the most indebted in the history of higher education, and you’ll surely break that “record.” And no wonder, with college tuitions still rising wildly (up 1,120% since 1978).  Judging by last year’s numbers, about 70% of you had to take out loans simply to make it through here, to educate yourself.  That figure was a more modest 45% two decades ago.  On average, you will have rung up least $33,000 in debt and for some of you the numbers will be much higher.  That, by the way, is more than double what it was those same two decades ago.

Economists Warn New Graduates May Have To Tough It Out For 5 To 6 Weeks Before Landing Dream Job - Acknowledging that employment prospects for young Americans remain bleak, a report released Thursday by the National Bureau of Economic Research warns recent college graduates they may have to tough it out for up to six weeks before landing their dream job. “It is important for college graduates to realize that, in this tough economic climate, you may endure a month, possibly a month and a half, of sending out résumés before you secure the perfect job in the field of your choosing that exceeds even your wildest expectations,” said Dr. Kyle Ferguson, author of the report, adding that students should prepare themselves now for the possibility they may spend up to half the summer grinding it out in search of a deeply fulfilling position that satisfies every single one of their criteria. “It’ll definitely take multiple rounds of applications, and you may even have to settle and work at your second- or third-most ideal option during the month of June. However, if you keep your head up and stick with it, the data suggest that you will receive an employment offer for the position you have always longed for well before Labor Day weekend.” Ferguson added that, given currently stagnant wage growth, recent graduates should be willing to accept a salary at 90 to 95 percent of what they feel they deserve.

Obama Administration Opens Door for More Student-Debt Forgiveness - WSJ: The Obama administration said it would forgive federal student loans owed by Americans who can show they were lured to colleges by fraudulent recruiting, a move that potentially could involve billions of dollars and is one of the most aggressive measures yet to ease student debt. The move, announced Monday, is designed first of all to help former students of Corinthian Colleges Inc., a big for-profit chain that collapsed into bankruptcy reorganization this spring. Federal officials accused the company in 2014 of lying to prospective students about its graduates’ job success. Among the most egregious allegations, officials accused Corinthian-owned schools of paying temp agencies to hire its graduates for as short a time as two days so they could count as employed. One campus counted a 2011 accounting major as being employed in her field of study based on her job as a food-service worker at a Taco Bell, the Education Department said. Corinthian officials didn’t respond to requests for comment. The forgiveness push, though, would reach far beyond Corinthian and even the for-profit school sector. Officials said that under the emerging plan, the government will consider forgiving any loans made directly by the government—those held by the majority of the 43 million Americans with student debt—so long as the borrower can document a school persuaded him or her to take out the loan under conditions that would violate state laws.

The US Government Is Forgiving $544 Million In Student Debt From Bankrupt Corinthian Colleges - The US Department of Education revealed on Monday that it would forgive $544 million in student loan debt from the now-bankrupt for-profit chain Corinthian Colleges. During a press conference, Secretary of Education Arne Duncan also said the department is going to create a plan that will forgive the debt for students who were defrauded by the chain of useless schools. Lewin says “the government has never before opened debt relief to such a potentially large pool of students.” Corinthian Colleges shut down all of its remaining 28 ground campuses on Monday, April 27, leaving 16,000 students with no classes and a lack of support. The shutdown arrived two weeks after the US Government said it was fining the university $30 million for misrepresentation. Under the plan students who attended Corinthian Colleges throughout the United States and left on or after June 20 last year, will receive a closed-school discharge of their federal student loans. Santa Ana, California-based Corinthian, which had operated the Heald College, Everest and WyoTech schools and offered degrees in healthcare and trades, filed for bankruptcy on May 4. The for-profit school chain filed for Chapter 11 with $143 million in debt and about $19 million in assets.

Student Debt Cancellations Begin: Government To "Forgive" $3.6 Billion After Corinthian Closure --In late April, we asked if for-profit college closures would represent the next multi-billion dollar taxpayer-funded bailout. While the country’s $1.3 trillion student debt bubble represents a very real risk to taxpayers over time, for-profit institutions pose a more immediate threat.   As we noted when the doors were shut, for-profit students won’t have a particularly easy time transferring their credits (meaning they would have to start over at another school if they wanted to complete their degrees), and so will likely seek to take advantage of their 'right' to have their debt discharged. Fast forward to late May and sure enough, the government was scrambling to figure out what to do after Secretary of Education Arne Duncan received a group request from 78,000 students requesting loan forgiveness.  At the time, Reuters said that because the government had never used its authority to cancel student debt on a large scale, the Department of Education was "unsure how it would work," to which we responded as follows:  Well Department of Education, allow us to tell you how the debt “relief” will work. You will end up being forced to write it off because you closed down the school. Sure enough, The Department of Education now says it will forgive federal student loans made to Corinthian students who can prove they were victims of fraud. The potential cost to taxpayers: nearly $4 billion. And that is for just one for-profit school. AP has more: The federal government will erase much of the debt of students who attended the now-defunct Corinthian Colleges, officials announced Monday, as part of a new plan that could cost taxpayers as much as $3.6 billion.Corinthian Colleges was one of the largest for-profit schools when it nearly collapsed last year and became a symbol of fraud in the world of higher education and student loans. According to investigators, Corinthian schools charged exorbitant fees, lied about job prospects for its graduates and, in some cases, encouraged students to lie about their circumstances to get more federal aid.

Department of Education Makes Corinthian Debt Cancellation as Difficult as Possible – Alexis Goldstein - Today, the Department of Education decided against doing its job.   Instead of providing broad debt cancellation to former students of Corinthian Colleges, Inc, the Department decided to require students to jump through extensive loopholes in order to apply for relief.   It didn’t have to be this way. Congress granted the Department broad authority to cancel student debt when it’s shown that the school engaged in illegal, unfair or deceptive practices in violation of state or federal laws. And Corinthian, a chain of for-profit schools that’s now seeking bankruptcy protection, has long faced charges of false job placement statistics, securities fraud, and the unlawful use of military seals in advertisements.  But instead of using the vast evidence accumulated by multiple state Attorneys General and federal regulators alike that Corinthian defrauded students, the Department of Education is asking that harmed students re-prove they were injured. The list of documents students must produce if they are to even apply for debt cancellation is exhaustive, and an incredibly high barrier to meet:

  • It includes citations of “state & applicable law or cause of action” – most borrowers aren’t lawyers, and they aren’t going to know what to list. 
  • It also asks for "transcripts and registration documents indicating your specific program of study and dates of enrollment" – how will students obtain copies of these documents, given that the school is now bankrupt?

What’s perhaps even worse, is that the Department is creating fertile ground for scam artists to thrive. Even before today’s announcement, websites had been cropping up touting to offer “loan forgiveness” or “closed school discharges,” for a fee, despite the fact that these are all options available for free.

Plan to forgive for-profit college loans could cost taxpayers billions -- Saying students “deserve a college education free from rip-off scams,” U.S. Secretary of Education Arne Duncan unveiled the outline for a massive student loan forgiveness plan for students — an undertaking that could ultimately cost taxpayers billions of dollars. Duncan called the proposal “unprecedented.” It comes one month after the scandal-plagued Corinthian Colleges chain of for-profit schools filed for bankruptcy. Corinthian, which operated Everest University and other schools, is accused by the federal government of falsifying its job placement rates, misleading students and encouraging them to lie on loan applications . In a Monday afternoon conference call with reporters, Duncan told reporters that a college education is the pathway to the middle class, but “that path has to be safe.” “Some of these schools have brought the ethics of payday lending into higher education,” Duncan said. Curtis Austin, the head of Florida’s for-profit college lobbying group, the Florida Association of Postsecondary Schools and Colleges, said that all types of schools can make mistakes. Austin said he does not believe there are systemic problems with the industry. As to assertions that some for-profit colleges have used dishonest tactics, Austin responded “I don’t know of any that are currently operating that do that.”

Taxpayers To Lose Billions On Student Loan Refinancing -- Monday marked the beginning of what could end up being one of the largest taxpayer-funded bailouts in history. On the heels of Corinthian Colleges’ move to shutter its remaining campusesafter government investigations tied to deceptive practices forced the school to wind down operations last year, thousands of students have appealed to the Department of Education to have their federal student debt forgiven. The initial joint petition sent to Secretary of Education Arne Duncan came from dozens of consumer and labor organizations claiming to represent some 80,000 aggrieved students seeking to have their loans d ischarged on the basis that the government’s move to close the school was the result of Corinthian’s fraudulent practices.  Initially, the Education Department wasn’t sure how to proceed, but after two weeks of apparent deliberation, the decision was made that students who attended schools run by Corinthian would be eligible to have their federal student debt forgiven, a move that could cost taxpayers some $3.6 billion. Should the government crackdown on for-profit institutions continue, the taxpayer bill could run into the tens, if not hundreds of billions. For the Education Department, it’s a choice between eradicating fraud and saddling taxpayers with the bill once the schools are closed. Because nearly 90% of students at for-profit schools have funded their education with loans, and because these institutions only exist thanks to federal funding for students, every for-profit school that’s closed down represents a potential landmine for taxpayers. This, it should be noted, is just as much the government’s fault as it is the schools'. Questions about the integrity of for-profit colleges have existed for years and yet the government continued to allow them to operate while their CEOs reaped millions in compensation.

Obama’s student-loan bailout for Corinthian Colleges: Is it just the beginning? - Secretary of Education Arne Duncan decided to have U.S. taxpayers bail out students who attended the now-defunct Corinthian Colleges. Bragging that he was combating “the ethics of payday lending” in higher education, Duncan unilaterally ignored chunks of federal law so as to make more than 100,000 students eligible for billions in loan write-offs. In the words of a report by USA Today’s Greg Toppo: “Once among the USA’s largest for-profit college chains with more than 100 campuses, Corinthian ran afoul of the federal government five years ago when the congressional Government Accountability Office found that the chain’s recruiters encouraged students to commit fraud on financial-aid applications.” Corinthian was clearly a shady operation that engaged in unacceptable behavior. Even before this announcement, the Obama administration had decreed that students would be off the hook for more than $480 million in Corinthian’s high-cost private loans.Duncan used the opportunity to announce that he also intends to develop a process that will let any student from any college have his loans forgiven if he has been “defrauded” by his college. As Tamar Lewin reported in the New York Times, “Taxpayers could pay a huge price for forgiving so many federal loans; the government has never before opened debt relief to such a potentially large pool of students. The department estimated that if all 350,000 Corinthian students over the last five years applied for and received the debt relief, that cost alone could be as much as $3.5 billion.” Duncan voices no interest in protecting taxpayers or in determining which students were actually defrauded. What matters, as he explained earlier this week, is that “you’d have to be made of stone not to feel for these students.” He noted, “This is our first major action on this but obviously it won’t be the last.”

Why I Defaulted on My Student Loans - By the end of my sophomore year at a small private liberal arts college, my mother and I had taken out a second loan, my father had declared bankruptcy and my parents had divorced. My mother could no longer afford the tuition that the student loans weren’t covering. I transferred to a state college in New Jersey, closer to home. Years later, I found myself confronted with a choice that too many people have had to and will have to face. I could give up what had become my vocation (in my case, being a writer) and take a job that I didn’t want in order to repay the huge debt I had accumulated in college and graduate school. Or I could take what I had been led to believe was both the morally and legally reprehensible step of defaulting on my student loans, which was the only way I could survive without wasting my life in a job that had nothing to do with my particular usefulness to society. I chose life. That is to say, I defaulted on my student loans. As difficult as it has been, I’ve never looked back. The millions of young people today, who collectively owe over $1 trillion in loans, may want to consider my example. It struck me as absurd that one could amass crippling debt as a result, not of drug addiction or reckless borrowing and spending, but of going to college. Having opened a new life to me beyond my modest origins, the education system was now going to call in its chits and prevent me from pursuing that new life, simply because I had the misfortune of coming from modest origins. Am I a deadbeat? In the eyes of the law I am. Indifferent to the claim that repaying student loans is the road to character? Yes. Blind to the reality of countless numbers of people struggling to repay their debts, no matter their circumstances, many worse than mine? My heart goes out to them. To my mind, they have learned to live with a social arrangement that is legal, but not moral.

Elizabeth Warren Calls for Affordable College Education - Yves Smith - We criticized Elizabeth Warren at the time she proposed her first bill, a one-year interest rate reduction on student loans. While letting the current rules expire and having interest charges shoot up would have been a bad outcome, Warren presented her interest rate reduction as a meaningful remedy, when it was a band-aid over the gunshot wound of out-of-control higher education costs putting many young adults into debt slavery. Warren has finally stepped up and has taken on the problem of college education, calling for much more affordable college education:  And while not every college needs to graduate every student debt-free, every kid needs a debt-free option—a strong public university where it’s possible to get a great education without taking on loads of debt.  As an aside, “debt=free” bothers me as rhetoric, but Warren’s aim is clear. She fingers how the cost inflation in higher education has perilous little to do with delivery of learning, and how the schools themselves have become debt pushers, winning from getting students to borrow to pay more for their “product” and suffering no consequences when students become delinquent. She also takes aim at predatory student loan servicing.  One noteworthy lapse is Warren fails to finger the rise in number and compensation of the college adminisphere, which lards on expenses and contributes not a whit to teaching. However, she gets at them indirectly in her proposal. Here is the meat of the “get rid of gold plating” part of her plan:

How Elizabeth Warren would make debt-free college a reality - Elizabeth Warren called on schools, as well federal and state governments to create a viable path for Americans to attend college debt free, in a speech Wednesday. The Democratic Senator from Massachusetts has been one of the most prominent advocates of a proposal from progressive Democrats to allow students to graduate from public universities without any debt. Wednesday’s speech offered a variety of policy suggestions for achieving that goal, including requiring colleges to have a clear financial stake in their students’ success and debt levels, mandating minimum levels of state investment in public schools and establishing a partnership between federal and state governments to fund public universities modeled after the way governments use combined resources to build and maintain interstate highways. “Not every college needs to graduate every student debt-free, [but] every kid needs a debt-free option — a strong public university where it’s possible to get a great education without taking on loads of debt,” .Once somewhat of a far-fetched pipe dream, the idea of “debt-free college” has gained traction in mainstream Democratic circles in recent months. More than 60 members of Congress co-sponsored a resolution calling for debt-free college. The idea likely has mass appeal for voters. Tuition, even at public universities, has skyrocketed over the past several years, putting the idea of a college degree without debt out of reach for many aspiring students. Today about 40 million Americans have student loans, totaling about $1.2 trillion in outstanding debt and 70% college students graduate with debt.

Calpers to Cut External Money Managers by Half - WSJ: The largest U.S. public pension fund intends to sever ties with roughly half of the firms handling its money, one of the most aggressive industry moves yet to reduce fees paid to Wall Street investment managers. The California Public Employees’ Retirement System, or Calpers, will tell its investment board on June 15 of its plans to reduce the number of direct relationships it has with private-equity, real-estate and other external funds to about 100 from 212, said Chief Investment Officer Ted Eliopoulos. The action will be made public on Monday. The dramatic move by the $305 billion Sacramento-based retirement system will create some big winners and losers in the investing world. The list of external money managers Calpers uses include some of the biggest names on Wall Street, including private-equity firms Carlyle Group, KKR, and Blackstone Group. The push by Calpers to downsize could have broader ramifications beyond its own portfolio. Calpers is considered an industry bellwether because of its size and history as an early adopter of alternatives to stocks and bonds, and the shift could prompt other U.S. pensions to scale back their ties to Wall Street. “There really will be a significant amount of discussion at other pensions” about whether they should cut external managers in the wake of Calpers’s decision

One-Third Of Workers Have Less Than $1,000 In Retirement Savings - Nearly 33% of American workers have less than $1,000 stashed away for retirement. A recent study released by the Employee Benefit Research Institute (EBRI) as part of the Retirement Confidence Survey (RCS), also found that $25,000 in savings puts the average American in better shape than 50% of respondents. According to the study, of those who had no IRA, defined contribution, or defined benefits plan, 64% were in the category that reported having less than $1,000 in retirement savings. Respondents who reported having one of these plans were spread out across the spectrum of savings value. 20% of those with a plan had over $250,000 in their nest egg, and 17% had between $1,000 and $9,999. The study also found that 71% of employed workers have been offered a retirement savings plan and 83% of that group contributed money to their employer-based plan. Workers with an employer-based retirement plan were also more likely to engage in alternate retirement sources. 63% of respondents that have money in an employer plan also own an IRA, and 49% have a third source of retirement savings.

Social Security: What Italy and Germany Tell Us About Its Future - One of the big questions facing retirement planners is how much to count on Social Security in the decades ahead. The number of Americans past age 65 will double by 2050, part of the longevity revolution that threatens to leave Social Security insolvent by 2033. That doesn’t mean benefits would stop abruptly. Under the current system, enough funding would be in place to continue benefits at 77% of the promised level. Of course, anything is possible if laws change. But cuts probably are coming. Most Americans get that. Among those that have not yet retired, just 20% believe they will receive full benefits when they retire, according to a Pew Research report. Some 31% expect reduced benefits and 41% expect no benefits at all. Presumably, these findings skew along age lines. Most experts believe benefits adjustments will be phased in. Those currently 55 or older likely will see minimal change to their benefits while those under 30 likely will see big change. The longevity revolution is a global phenomenon, and government pensions are in trouble around the world. Two of the oldest nations on the planet are Germany and Italy and, demographically speaking, they are now where the U.S. will be in 35 years: a fifth of their population is older than age 65. If you think Americans are glum about prospects for collecting Social Security, these nations offer a glimpse of what’s coming. In Germany, just 11% think they will receive benefits at current levels, 45% think they will receive benefits at reduced levels and 41% expect to get no benefits at all, Pew found. In Italy, only 7% believe they will get full benefits, 29% expect benefits at reduced levels and 53% think they will get no benefits at all. Interestingly, Germans and Italians are twice as likely as Americans to believe this is primarily a problem for government to solve. In the U.S., there is a strong belief that this is a problem for families and individuals to fix, Pew found.

Why Progressives Should Reject Social Security Cap Increases -- The basic reason is simple: it undercuts the broader progressive agenda. Also it buys into a particular Right economic meme. Both are huge mistakes. To understand this we need to step back and examine overall tax policy and tax progressivity. What should progressives want? Well I suggest that as a first step we restore top marginal income rates back to Reagan levels (50%) and extend them to all income including realized capital gains. And then as some potential second stop restore those top rates to Kennedy levels (70%). At this point the Federal government would have the funds to start addressing all parts of the progressive agenda from childhood education and health to retirement security in a direct way, that is we could once again engage in the New Deal and the Fair Deal in a quest to achieve the Great Society. Or in more restrained rhetoric start working on social democratic solutions to broad societal problems. But if progressives and Social Democrats agree on this then proposals to lift current Social Security wage caps and/or extend FICA to all income starts crowding out any possibility to tax THAT SAME INCOME via changes in marginal rates. Moreover it floods cash into and through a Trust Fund system that doesn’t allow expenditures on anything other than the specific programs involved. With the result that the rest of the progressive agenda remains stymied by the crowding out effect even as the Right can ‘explain’ that ‘you can’t have nice things’ because all the money is going to Social Security. Thus proving that the whole program was ‘unsustainable’ to start with and that any extensions of it, say in the direction of Single Payer Health Insurance, is just foolish and ignorant. The truth is that the actual cash flow issues facing Social Security are minor and manageable within its current structures.

U.S. justices reject Maine challenge to Medicaid funding – Reuters  The U.S Supreme Court on Monday rejected the state of Maine's bid to revive its plan to trim some young people from its Medicaid rolls. By declining to hear the case, the court left intact an appeals court ruling that upheld the federal government's decision to reject the state's plan to cut 19- and 20-year-olds from Medicaid. Medicaid is a government health insurance program for low-income and disabled people. The Boston-based 1st U.S. Circuit Court of Appeals ruled in November that Maine's move would violate President Barack Obama's signature healthcare law, the Affordable Care Act.

The Chutzpah Caucus - Paul Krugman -- Sen. John Thune is coming in for quite a lot of ridicule for this: Obamacare is a failed policy, because we may be able to kill it with an absurd legal challenge! It’s a policy version of the classic definition of chutzpah: killing your mother and father, then pleading for mercy because you’re an orphan. But Thuneism is just a more naked version of the style of argument we’ve been seeing all along. Conservatives are constantly belittling the ACA for its failure to cover all the uninsured — only one-third covered, it’s often asserted, although that number is out of date and also ignores the fact that the law wasn’t supposed to cover undocumented immigrants. But what’s the biggest factor limiting coverage? Um, refusal of red states to expand Medicaid and their refusal to help implement the rest of the law:  In states that want Obamacare to work, most of the eligible uninsured have already been covered. So the general complaint is that “Obamacare is a failure because our sabotage has successfully slowed its implementation.” Thune is just taking that logic a bit further.

CBO Dynamic Scoring: How Obamacare’s ‘Poverty Trap’ Impedes Economic Growth -- Congressional Budget Office Director Keith Hall testified before the House Budget Committee last week about how dynamic scoring–considering macroeconomic effects of legislative proposals–affects the agency’s work. It could have a major effect on entitlement spending proposals.  Most of the debate over dynamic scoring has focused on the economic impact of tax cuts and government spending. Dr. Hall’s testimony highlighted a less discussed but equally important related element: the way that means-tested government programs lower economic growth by effectively raising marginal tax rates. For instance, a single mother making $20,000 per year might pay not only 15 cents in taxes for every additional dollar of income raised; her eligibility for food stamps, Medicaid, and the Earned Income Tax Credit might also be reduced or eliminated. The Urban Institute’s Gene Steuerle has calculated that these programs amount to a “poverty trap” for families of modest means by taking away as much as 80 cents out of every dollar in added income through a combination of higher taxes and reduced government benefits. CBO has conducted two analyses related to Obamacare that showed that the health law would exacerbate this—discouraging work and reducing the size of the labor force. The first analysis, released in August 2010, found that the law would reduce the U.S. work force by about half of one percentage point–the equivalent of approximately 800,000 workers by 2021. The second, released in February 2014, roughly tripled that estimate to 1.5% to 2% of the labor force, or about 2.3 million workers in 2021.I have written previously about CBO’s analysis of the Affordable Care Act and the impact of dynamic scoring under the agency’s previous director, Doug Elmendorf. In his testimony last week, Dr. Hall said that the reduction in government revenues caused by the way Obamacare discourages work is likely to lower the cost of repealing the law

Four Obstacles in Selling the Benefits of Medicaid Expansion to States -- The first is the argument I outlined yesterday—namely, the “poverty trap” exacerbated by several elements of Obamacare. In addition to concluding that the law as a whole will reduce the size of the labor force by the equivalent of approximately 2.3 million full-time workers in 2021, the Congressional Budget Office specifically has found that “expanded Medicaid eligibility under [the law] will, on balance, reduce incentives to work.”  Second, the Obama administration has rejected requests from states to impose work or job-search requirements in conjunction with the Medicaid expansion. While the administration has claimed to offer flexibility to states when it comes to altering the Medicaid benefit, it has steadfastly refused to consider any mandatory work or job-search requirement. Given the CBO’s analysis, the administration faces a rhetorical challenge in explaining how expansion can benefit the economy yet simultaneously reduce incentives to work—particularly as it declines to give states the ability through work requirements to mitigate against those disincentives. Additionally, the White House report solely examines the benefits of increased federal funding to states without examining the source of that funding. Most notably, the health law included more than 18 tax increases, which according to the most recent CBO estimates will raise over $1 trillion in revenue—with obvious dampening effects on state economies.  Perhaps most importantly, various economists, including Harvard’s Katherine Baicker, have dismissed the notion that health care should serve as an economic engine. While the administration claims states that expand Medicaid will grow their economies, it has made no attempt to argue that expansion represents the most economically efficient use of those dollars—that the funds could not be better used building roads, returned to citizens, or even remain in the Treasury to reduce the federal deficit.  “Health care is about keeping people healthy or fixing them up when they get sick. It is not a jobs program.”

On Health Care Reform, Nothing to Fear but the Scaremongers - A linchpin of the Affordable Care Act is that mid-sized and large employers must either provide health coverage for employees who work at least 30 hours a week, or pay a penalty.As with every other part of the law, Republican opponents concocted a scare story around that provision, saying that employers would cut workers’ hours in order to avoid the law’s requirements. As with other health-care scare stories, facts have trumped the scaremongering.  Each month, the Labor Department measures the number of part-time workers. It also measures whether the part-timers are “involuntary,” defined as those who would prefer full-time work if they could get it, or “voluntary,” defined as those who work part time because they want to. Between early 2014 and early 2015, as the health care law came into effect, the number of involuntary part-timers fell by 699,000, the biggest year-over-year drop in records that go back to 1994.Over the same period, the number of voluntary part-timers increased by 765,000, or 3.9 percent, record high increases in the data. These findings, in a recent report by the Center for Economic and Policy Research, are good news on two fronts.. Clearly, the predicted spike in involuntary part-time employment did not happen. What apparently did happen is that many full-time employees who wanted to work part time opted to do so once they no longer needed employer-provided coverage. Greater opportunity for workers to determine their work lives is a plus for the economy.  Having failed to scare Americans out of participating in the health reform, opponents have now hung their roll-back hopes on the Supreme Court, asking the justices to rule on a technicality in the law that could cause nearly 6.4 million low- and moderate-income Americans in 34 states to lose their coverage. The decision is expected in the coming weeks. The truly fearful aspect of the law is the opponents’ determination to undermine it, against all evidence that it is working as well as could reasonably be hoped.

If Supreme Court rules against Obamacare, few contingencies are in place: Millions of Americans could soon lose health insurance when the Supreme Court decides the latest challenge to the Affordable Care Act, but states have made few, if any, concrete plans to deal with the chaotic fallout potentially just weeks away. When the court rules later this month, the justices may eliminate insurance subsidies in as many as 37 states that use the federal marketplace established through the health law. A state could restore the aid if it runs its own marketplace, as California and 12 other states and the District of Columbia already do. Just two states whose residents are in jeopardy — Pennsylvania and Delaware — have outlined strategies for preserving subsidies, however. “I’m afraid the potential for major disruptions is only now starting to dawn on people,” said former Utah Gov. Mike Leavitt, a Republican who served as Health and Human Services secretary under President George W. Bush. Leavitt is working with a group of former federal and state health officials on contingency plans to help states. In many places, Republican legislators and governors oppose any action to accommodate the federal health law. But even GOP governors who are looking for ways to protect their residents are struggling to figure out what they can do. “It’s really bleak,” said a health official from one Southern state, who asked not to be identified out of concern that speaking publicly would make his state a target for conservative political activists. Groups opposed to Obamacare have pressured state legislatures not to expand health coverage under the law.

WikiLeaks Releases Section of Secret Trans-Pacific Partnership Agreement That Would Affect Health Care -- WikiLeaks has released a draft of an annex of a secret Trans-Pacific Partnership trade agreement, which would likely enable pharmaceutical companies to fight the ability of participating governments to control the rise of drug prices. It would empower companies to mount challenges to Medicare in the United States. For a number of years, the US and eleven other countries—Australia, Brunei, Canada, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam—have been negotiating proposals for the TPP. Drafts previously released by WikiLeaks have shown that the US has been the most extreme negotiator in the process. “This leak reveals that the Obama administration, acting at the behest of pharmaceutical companies, has subjected Medicare to a series of procedural rules, negotiated in secret, that would limit Congress’ ability to enact policy reforms that would reduce prescription drug costs for Americans – and might even open to challenge aspects of our health care system today,” according to Peter Maybarduk, director of Public Citizen’s Global Access to Medicines Program. Public Citizen is a watchdog group that has been at the forefront of challenging the TPP in the US. The annex, which is dated December 17, 2014, expressly names the Centers for Medicare & Medicaid Services as being covered by the trade agreement.  The watchdog group contends that the language could affect the ability of the Secretary of Health and Human Services to pursue pharmaceutical reform and “negotiate the price of prescription drugs on behalf of Medicare beneficiaries.”

Healthcare spending is growing faster again - From the WSJ: The U.S. Census Bureau has published new estimates of health spending based on their somewhat obscure but important Quarterly Services Survey. Analysis of the survey data shows that health spending was 7.3% higher in the first quarter of 2015 than in the first quarter of last year. Hospital spending increased 9.2%. Greater use of health services as well as more people covered by the ACA appear to be responsible for most of the increase. People are beginning to use more physician and outpatient services again as the economy improves. The number of days people spent in hospitals also rose.  Overall, as the chart above shows, the increase was much larger in first quarter of 2015 than in the first quarters of 2014 or 2013. The quarterly reports from the Census don’t tell us how rapidly health spending will continue to grow in the future. However, the fact that spending has been growing at higher rates over the last four quarters  suggests that the lowest of the lows of the health cost slowdown are now in the rear view mirror. Equally importantly, despite the fanfare surrounding current efforts to reform the delivery and payment in health care and the progress that has been made, it may also suggest that greater efforts will be needed in the future to keep cost increases manageable.

50 hospitals charge uninsured more than 10 times cost of care, study finds - Fifty hospitals in the United States are charging uninsured consumers more than 10 times the actual cost of patient care, according to research published Monday. All but one of the facilities are owned by for-profit entities and the largest number of hospitals — 20 — are in Florida. For the most part, researchers said, the hospitals with the highest markups are not in pricey neighborhoods or big cities, where the market might explain the higher prices. Topping the list is North Okaloosa Medical Center, a 110-bed facility in the Florida Panhandle about an hour outside of Pensacola. Uninsured patients are charged 12.6 times the actual cost of patient care. Community Health Systems operates 25 of the hospitals on the list. Hospital Corporation of America operates 14 others. “They are price-gouging because they can,” said Gerard Anderson, a professor at the Johns Hopkins Bloomberg School of Public Health, co-author of the study in Health Affairs. “They are marking up the prices because no one is telling them they can’t.” He added: “These are the hospitals that have the highest markup of all 5,000 hospitals in the United States. This means when it costs the hospital $100, they are going to charge you, on average, $1,000.”

Aging MDs prompt call for competency tests at AMA meeting - (AP) — With one out of four U.S. doctors older than 65, the American Medical Association adopted a plan Monday to help decide when it's time for aging senior physicians to hang up the stethoscope. The nation's largest organization of doctors agreed to spearhead an effort to create competency guidelines for assessing whether older physicians remain able to provide safe and effective care for patients. Doctors have no mandatory retirement age, unlike pilots, military personnel and a few other professions where mistakes can be deadly. All doctors must meet state licensing requirements, and some hospitals require age-based screening. But there are no national mandates or guidelines on how to make sure older physicians can still do their jobs safely. The AMA agrees it's time to change that. The plan it adopted is outlined in a report by one of its councils, which notes that the number of U.S. physicians aged 65 and older has quadrupled since 1975 and now numbers 240,000. In a vote without debate, the AMA agreed to convene groups to collaborate in developing preliminary assessment guidelines, as recommended in the report. The report says testing should include an evaluation of physical and mental health and a review of doctors' treatment of patients. It doesn't specify who would do the assessing nor how often it would take place. "Unfortunate outcomes may trigger an evaluation at any age, but perhaps periodic reevaluation after a certain age such as 70, when incidence of declines is known to increase, may be appropriate," the report says.

There's still a lot we don't know about the new cholesterol-lowering drugs - A panel of advisers to the Food and Drug Administration wants the drug regulator to approve a new class of cholesterol-lowering drugs known as PCSK9 inhibitors — but experts still have questions about possible risks and side effects. On Tuesday, the panel recommended that the agency approve Sanofi and Regeneron Pharmaceuticals’ drug, alirocumab. Yesterday, they backed a second PCSK9 inhibitor, Amgen’s evolocumab. If the FDA follows the panel's advice, the drugs could soon hit the market.These PCSK9 inhibitors are being touted "one of the biggest developments in a long time in cardiology" and "a triumph of the modern genetic revolution." Critics aren't so sure: they have expressed concerns about the safety and efficacy of this new class of medicines, pointing out that the long-term safety data isn't in yet and that it's unclear whether these drugs will have an impact on heart attacks and death.

The Sick Man Of Asia - China's Looming Health Disaster -- That the China Story is going to implode is already baked into the public health catastrophe that will unfold with a vengeance in the coming decade.  The human cost is staggering: at least half the population is suffering from chronic lifestyle/environmental-related illnesses and 225 million suffer from mental disorders. Here are some estimates of China's public health problems: (source links below)

  • -- Half the population is estimated to be prediabetic (suffering from metabolic syndrome/diabesity).
  • -- 12% of the populace now has diabetes, roughly 115 million people.
  • -- An estimated 70% of China's diabetics are undiagnosed; only 25% are receiving any treatment and of the 25%, the disease is only being controlled in 40% of those getting treatment.
  • -- Noncommunicable diseases--cardiovascular disease, chronic respiratory diseases and cancer, account for 85% of total deaths in China today -- much higher than the global average of 60%.
  • -- Mental disorders rose by more than 50 percent between 2003 and 2008. An estimated 17.5% of the population (225 million) suffers from some form of mental problem, one of the highest rates in the world.
  • -- More than 300 million people in China -- roughly equivalent to the entire U.S. population of 317 million -- smoke tobacco.
  • -- 200 million workers are directly exposed to occupational hazards.
  • -- Informal estimates suggest a large percentage of the urban population suffers from lung/pulmonary diseases. Over the last 30 years, deaths ascribed to lung cancer have risen by a factor of five in China.
  • -- 160 million Chinese adults have hypertension (high blood pressure).
  • -- In 2006, 80 percent of China’s health budget was spent on just 8.5 million government officials.

Red alert: Hong Kong warns against travel to South Korea amid deadly Mers outbreak --Hong Kong will this morning issue a formal travel warning advising against travel to South Korea, Chief Secretary Carrie Lam Cheng Yuet-ngor said, as an outbreak of Middle East respiratory syndrome claimed a seventh life.  The Security Bureau will announce a “red” travel alert on South Korea, the second highest warning, which urges travellers to avoid non-essential travel. Hong Kong’s No.2 official said the warning will be hoisted before today’s Executive Council meeting.  South Korean health authorities today announced that a 68-year-old woman had become the seventh fatality linked to Mers and reported eight new cases, raising the total number of infections to 95.  The announcement of the latest fatality came as Seoul vowed all-out efforts to contain any further spread of the potentially fatal respiratory disease since the first case was confirmed on May 20 – a 68-year-old South Korean man with a recent history of travel to four countries in the Middle East. As of Monday, more than 2,500 people have been quarantined while more than 1,900 schools, including kindergartens, have been temporarily closed.  South Korea now has the second-largest number of Mers patients after Saudi Arabia, which has reported more than 1,000 confirmed cases since the virus emerged there for the first time in 2012.

Hong Kong issues 'red alert' against South Korea travel due to MERS  -- Hong Kong issued a "red alert" advisory on Tuesday against non-essential travel to South Korea, where eight new cases of Middle East Respiratory Syndrome (MERS) were reported, bringing the total to 95 with seven fatalities. The number of new South Korean cases was a sharp drop from 23 on Monday, but the number of schools closed grew to 2,208, including 20 universities. "At this stage, to issue a clear message is something the Hong Kong government thinks is necessary," Hong Kong's number two official, Carrie Lam, told reporters just before the travel warning was posted. A red alert, the second-highest outbound travel advisory on a three-point scale, is defined as a "significant threat" according to the Hong Kong government, and means people should "adjust travel plans" and "avoid non-essential travel". On Monday, Hong Kong upgraded its response to the outbreak in South Korea to "serious".

Infographic: The spread of MERS - - Al Jazeera examines the deadly coronavirus which has spread to at least 20 countries and killed more than 300 people.

MERS Virus’s Path: One Man, Many South Korean Hospitals - — At first, doctors thought the 68-year-old man might have simple pneumonia. He coughed and wheezed his way through four hospitals before officials figured out, nine days later, that he had something far more serious and contagious.Along the way, health officials said, the man infected dozens who then became potential carriers themselves and infected dozens more and counting.The original diagnosis that missed what became South Korea’s first case of Middle East respiratory syndrome, or MERS, was possibly caused by incomplete information from the patient about his travels. And the World Health Organization acknowledged that MERS was not an easy virus to identify early because its symptoms are similar to other respiratory infections, like a common cold. But it was especially problematic in South Korea because of peculiarities in the hospital system, health experts said Monday.   Patients jostle, cajole and name-drop to get referrals to the biggest hospitals, which they believe attract the best doctors. Family members often stay with the patients in their rooms and do much of the nursing work — wiping sweat, emptying bedpans, changing sheets and exposing themselves to infections.“Chances of close contact are higher in a South Korean hospital emergency room, for example, where seats and beds are usually arranged close together.”As of Tuesday morning, the South Korean authorities had confirmed at least 95 MERS cases and were monitoring more than 2,500 people under quarantine for symptoms. At least seven patients have died. So many patients, including those in rural towns, seek medical care at large hospitals that securing a bed in a mega-hospital in Seoul, the capital, for a relative or friend has become a test of a person’s networking ability. Patients often visit small hospitals to get a referral to a bigger hospital. The two hospitals where the vast majority of MERS cases have occurred were among the biggest in their cities.

The Unintended Consequences Of North Carolina’s ‘Ag-Gag’ Law - On Wednesday, both the North Carolina House and Senate voted to override Gov. Pat McCroy’s veto of House Bill 405 — referred to by opponents as North Carolina’s “ag-gag” law. The bill is set to become law January 1, and environmentalist are worried that its impacts won’t be limited to animal rights and potential whistle-blowers.. “If there was a spill of swine waste due to a lagoon failure, or an equipment malfunction on a hog facility, this would really make an employee second-guess whether they call environment or public health officials to come respond to the problem.” The bill gives businesses in North Carolina the right to sue someone for gaining access to a nonpublic area in order to obtain workplace secrets or take photographs or video of workplace violations. The bill’s supporters say that it helps protect businesses from bad actors and strengthens private property rights, but opponents of the bill worry that its broad language might deter whistle-blowers and private citizens alike from reporting workplace violations — especially within the state’s large agricultural sector. North Carolina is one of the country’s leading producers of hogs and pigs — the two top counties in the country in terms of hog and pig sales are Duplin and Sampson, both located along North Carolina’s eastern coast. Most of those pigs are raised in factory farms, with an average of 4,300 hogs per farm in the state.  The hog industry is big business, with sales totaling $2.9 billion in 2012, but it also leaves North Carolina with a big problem: how to dispose of the millions of tons of waste created by the hogs each year. Many of North Carolina’s concentrated hog farming operations are located along the state’s Eastern shore, in an area that was historically swamp and wetland — these are areas that tend to be more prone to flooding, heightening the risk that waste from hog farms could enter North Carolina’s drinking water.

Increased Carbon In The Atmosphere Might Hinder Plants’ Ability To Absorb Nutrients --In contrast to a popular conservative argument, a new study has found that increased atmospheric carbon dioxide isn’t necessarily a boon to plant growth — instead, it causes plants to have a more difficult time absorbing nitrogen, a nutrient critical to plant growth and health. Published in the journal Global Change Biology, the study found that as carbon dioxide levels in the air increase, the concentration of nitrogen in plants decreases, thus decreasing the plant’s protein levels and growth ability. The team of international researchers studied the impact of increased atmospheric carbon across multiple types of ecosystems — from grasslands for forests — by looking at large-scale field experiments conducted in eight countries across four different continents. “For all types of ecosystem the results show that high carbon dioxide levels can impede plants’ ability to absorb nitrogen, and that this negative effect is partly why raised carbon dioxide has a marginal or non-existent effect on growth in many ecosystems,” Johan Uddling, senior lecturer at the Department of Biological and Environmental Sciences at the University of Gothenburg and lead researcher on the project, said in a press statement.   “The findings of the study are unequivocal. The nitrogen content in the crops is reduced in atmospheres with raised carbon dioxide levels in all three ecosystem types. Furthermore, we can see that this negative effect exists regardless of whether or not the plants’ growth increases, and even if fertiliser is added. This is unexpected and new,” Uddling said.

Climate Change Shortens Growing Seasons -- Ecologist Camilo Mora, an assistant professor at the University of Hawai’i-Mānoa, was skeptical when a climate denier mentioned research that indicated rising temperatures could give plants in the cool regions at high latitudes more time to grow. Until, that is, Mora looked up the research for himself.  "[It was] hard to admit, but this person was right," Mora says. But Mora, a former farmer himself, knew that temperature was just one factor, and those surprising research findings couldn't be the whole story. To get a full picture, Mora and his colleagues carried out research that considered the effects of climate change on soil moisture, as well as the amount of solar radiation.   In a study published today in PLoS Biology, the team reports that while a few high-latitude countries may indeed see some positive outcomes as the climate warms, globally, the prognosis is poor. Even with high-latitude gains, there could be an 11-percent drop in the length of growing seasons worldwide by 2100.   The researchers identified the range of temperatures, water supply, and sunlight under which plants grow around the globe. They then calculated the number of days per year that would fall within these thresholds of suitable growing conditions under three climate change projections—one in which strong carbon emission mitigation strategies are adopted, another with moderate mitigation strategies, and a "business-as-usual" scenario in which emissions continue at the current rate through the end of the 21st century."The only places that appear to benefit considerably from climate change will be Canada, Russia, and China," Mora says. But overall, any gains those high-latitude countries see due to rising temperatures would be offset by issues such as drought at lower latitudes. In the worst case, the "business-as-usual" scenario, by the end of the century, the tropics could lose as many as 200 growing days per year, the researchers found.

Monsanto Offers $2 Billion Guarantee In Continued Pursuit Of Syngenta - Monsanto is determined to acquire agribusiness competitor Syngenta and the company is willing to add $2 billion in guarantees to the purchase. The company has now throw in cash and stock worth $447 per Syngenta share, a 45% premium over the company’s 52-week average share price. A person close to Syngenta told Reuters that Syngenta’s board members are worried about the regulatory hurdles a potential merger would bring. Once combined the two companies would control more than half of the US seeds market. To ensure a smooth transition Monsanto is willing to provide $2 billion reverse break-up fee that would provide its competitor with guaranteed funds if the merger fails the antitrust sniff test.  Monsanto CEO Hugh Grant says the combined companies would, “create significant value for growers to ultimately meet the needs of broader society.” US lawmakers are likely to have issues with the merger because it could lead the company to move its headquarters out of the United States in an attempt to avoid paying US corporate taxes.

Bee-pocalypse Now? Nope. -- Last year, riding the buzz over dying bees, the Obama administration announced the creation of a pollinator-health task force to develop a “federal strategy” to promote honeybees and other pollinators. Last month the task force unveiled its long-awaited plan, the National Strategy to Promote the Health of Honey Bees and Other Pollinators. The plan aims to reduce honeybee-colony losses to “sustainable” levels and create 7 million acres of pollinator-friendly habitat. It also calls for more than $82 million in federal funding to address pollinator health. But here’s something you probably haven’t heard: There are more honeybee colonies in the United States today than there were when colony collapse disorder began in 2006. In fact, according to data released in March by the Department of Agriculture, U.S. honeybee-colony numbers are now at a 20-year high. And those colonies are producing plenty of honey. U.S. honey production is also at a 10-year high. Almost no one has reported this, but it’s true. You can browse the USDA reports yourself. Since colony collapse disorder began in 2006, there has been virtually no detectable effect on the total number of honeybee colonies in the United States. Nor has there been any significant impact on food prices or production.ow can this be? In short, commercial beekeepers have adapted to higher winter honeybee losses by actively rebuilding their colonies. This is often done by splitting healthy colonies into multiple hives and purchasing new queen bees to rebuild the lost hives. Beekeepers purchase queen bees through the mail from commercial breeders for as little as $15 to $25 and can produce new broods rather quickly.

Nitrate levels increase in city water, advisory continues -- Columbus Dispatch -- Nitrate levels at a Columbus water treatment facility increased overnight, according to city officials, who said the no-drink advisory for pregnant women and infants younger than 6 months has been continued. Tests on Monday showed unsafe levels of nitrate at the city’s Dublin Road water plant, prompting the city to issue an alert for people who live in portions of west, central and southwest Columbus, Grandview Heights, Grove City, Hilliard, Lincoln Village, Marble Cliff, the University District, Upper Arlington, Urbancrest and Valleyview. Health officials said the water should not be used to mix with baby formula, juice or other drinks, according to the advisory. Because boiling increases nitrate levels by concentrating the chemical, officials recommend bottled water. Nitrate levels on Monday reached 10.8 parts per million, just above the 10 ppm limit set by the federal government. Tests this morning showed nitrate levels of 11.7 parts per million. George Zonders, a spokesman for the city’s public water department, said the advisory likely could last a few days or a week or more. The last nitrate advisory, in 2006, lasted eight days. Zonders said the amount of rainfall in the Scioto River watershed would affect the advisory — more rainfall likely means more nitrate in the river, which supplies water to those residents affected. Nitrate levels increase when fertilizer and agricultural runoff wash into the Scioto River watershed. Zonders said about 80 percent of the 1,000-square-mile watershed is farmland.

China’s Pollution Crisis: Nearly Two-Thirds Of Underground Water Is Graded Unfit For Human Contact, Report Says -- In China, nearly two-thirds of groundwater -- the worst offender -- and one-third of surface water were graded as unfit for direct human contact in 2014, the Chinese Ministry of Environmental Protection said in a report Thursday. What's more, less than 4 percent of the nearly 1,000 surface water sites monitored by the ministry met the highest standard in 2014, Reuters reported.  The environment ministry uses six grades to rate China’s water supplies, with Grade I being the highest. Just 63 percent of the monitored sites were ranked good quality -- Grade III and above -- meaning they are suitable for human use. That figure was down from about 72 percent the previous year.  China’s underground water is getting more polluted, according to the 2014 report. The ministry classified about 62 percent of the 4,896 monitored groundwater sites as either “relatively poor” or “very poor.” This was an increase from 2013 when about 60 percent of samples from 4,778 sites ranked in the same categories. In April, the Chinese government promised to raise the availability of good, potable water rated as Grade III or above within five years to more than 70 percent in the country's seven major river basins and to more than 93 percent in its urban drinking supplies. The government has said it will also ban water-polluting plants in industries such as oil refining and paper production by the end of 2016.

Thousands of Sea Lion Pups Are Washing Ashore and Dying Along the California Coast -- In the new VICE News documentary, Starving and Stranded: California’s Sea Lions, journalist Kaj Larsen is trying to answer one big question. What is causing thousands of sea lion pups to wash ashore along the California coast?The Southern California coast hosts one of the most incredible marine ecosystems on the planet and one of the most notorious animal there is the California sea lion. Surfers, divers and beach goers have noticed a very disturbing development since December of 2014—thousands of sea lion pubs washing ashore. According to the National Oceanic and Atmospheric Association (NOAA), the number of sea lion strandings in 2015 alone has surpassed the total number of strandings combined from 2004-2012.  There are a number of reasons this unusual spike in deaths of baby sea lion pups could be happening. The warming of the oceans due to climate change and changes in prey availability are likely contributors. Sea lion mothers are forced to abandon their pups to travel further offshore to find food, leaving the pups to fend for themselves.  Colleen Weiler, a marine mammal biologist volunteering for the California Wildlife Center, explains that as the pups become malnourished and emaciated they get very cold and have zero energy so they want to be out of the water to get warm and rest. Weiler tells Larsen that they are receiving anywhere from 40-50 calls on weekdays and close to 100 calls on the weekends from people finding the baby sea lions washing up onshore.

IMF Warns Underpricing Water Is Fostering Shortages --The International Monetary Fund has already declared the world isn’t paying enough to emit greenhouse gases and energy consumption.  Now it is worried that water isn’t priced right either.  Governments should be charging consumers higher prices to encourage more sustainable water use and improve access for the poor, the IMF says in its latest staff discussion note.  The IMF typically steers clear of issues its sister institution, the World Bank, manages as part of its development mandate. But the world’s emergency lender said the issue is worth the IMF wading into because water challenges affect economic growth and public finances, particularly as amid shortages. “The IMF can—and should—play a helpful role in ensuring that macroeconomic policies are conducive to sound water management,” the fund economists argue. And, as California’s drought has highlighted in recent months, water isn’t just a developing-country issue. The fund said it can help governments get the incentives right, including “replacing perverse energy and water subsidies with targeted social support.” Translated, that means charging higher prices for water use and using the revenue to improve water supplies and sanitation for the poor. The IMF estimates that of the half-trillion dollars a year governments provide in water subsidies, high-earners disproportionately benefit. The fund says many countries treat water as though there were no limits to its supply. But underpricing is depleting water resources and fostering shortages in the near- and long-term. “Mismanagement of water—especially the price set on its use—is usually a driving factor,” the IMF economists said.

Lake Mead About to Hit a Critical New Low as 15-Year Drought Continues in Southwest --Lake Mead, America’s largest U.S. reservoir when at capacity, is about to hit a critical new low. The reservoir near Las Vegas on the Colorado River has been in decline for decades because the reservoir and the larger Colorado River system has been over-allocated for many years. As of yesterday, the elevation of Lake Mead was 1,075.96. The reservoir is only days away from hitting 1,075 feet, according to the U.S. Bureau of Reclamation’s projections. That number is the threshold set in a 2007 agreement as part of the U.S. Department of Interior’s Colorado River Interim Guidelines, which calls for delivery cuts if water levels in Lake Mead drops below that level.   These cuts will be the first set of mandatory water delivery curtailments to Lake Mead. Should the water levels continue to drop, as they are expected to—due to the prolonged drought, climate change and poor water management—more cuts will be required. The Western Water Policy Program recently released their spring report, The Bathtub Ring, which examines the impacts as Lake Mead levels decline to 1075 feet, 1050 feet, 1025 feet and 1000 feet.  The Bureau of Reclamation predicts the first round of cuts could take place in January 2017 with Arizona and Southern Nevada seeing the biggest cuts. Arizona plans to curtail “groundwater recharge efforts” and cut “deliveries to farmers with low-priority rights,” according to the Las Vegas Sun. Arizona’s cities “would be unaffected, at least initially.” Southern Nevada, for its part, “has prepared with conservation, saving enough water that residents and businesses won’t be affected if a portion no longer is available.”

California Begins To Rip Up Lawns Because "The Whole Damn State [Is] Out Of Water" - In early May, California’s water regulators backed a series of emergency measures proposed in an Executive Order issued by Governor Jerry Brown. The extraordinary conservation effort comes amid a historic drought, that some climatologists say will reach “Dust Bowl” proportions before all is said and done.  Recapping, the order called for a 25% reduction in overall water usage beginning on June 1 — so, last Monday. The state reduced its consumption by 13.5% in April (compared to 2013), suggesting residents will need to redouble their efforts if Brown’s targets are to prove realistic. While some communities have attempted to cast conservation as the “cool” thing to do, other localities say that in the absence of significant financial resources, the cuts simply aren’t feasible. AP has more: April's best conservers included Santa Rosa, a city of 170,000 people north of San Francisco, which reported a 32 percent drop in April compared to the same month in 2013. The city offered a host of programs to achieve savings such as paying residents to reduce 52 football fields' worth of lawn and giving away 50,000 low-flush toilets since 2007.Saved water "is the cheapest water you can find," said David Guhin, water director for Santa Rosa. "It's gotten to where lawns are uncool." Cool or no, many communities are still falling far short.

‘Wizards of Wall Street’ Helpless on Drought, Jerry Brown Says - California Governor Jerry Brown said climate change and a worsening four-year drought have left the state at the mercy of nature that not even the most creative technical and financial solutions can counter. Speaking at a meeting of the Metropolitan Water District of Southern California, the 77-year-old governor said the drought ravaging California’s $46.4 billion agriculture industry and reducing urban supplies is part of an historic pattern. What’s different now are warmer temperatures that dry soil and increase risk of wildfire and disease, Brown said. “While the wizards of Wall Street have many tools and great capacity, they can’t affect the weather,” Brown said at the meeting in Los Angeles. “Nothing is more fundamental than water.” About 47 percent of California is experiencing “exceptional” drought, the most severe classification, according to the U.S. Drought Monitor, a federal index. Brown said climate change is worsening the effects of drought, as well as carrying life-threatening consequences of its own. “It’s a very catastrophic existential threat that we have to take as seriously as though we were facing a military adversary,” he told the water board.

California Farmers Dig Deeper for Water, Sipping Their Neighbors Dry -- Mr. Hundal is an optimist. An immigrant from Punjab in northwest India, he arrived in California in 1986 with little money and, through a combination of borrowing and shrewdness, he managed to make a small fortune through farming. But he’s also a pragmatist. Since he can’t count on the virtually unlimited surface water he’s been allotted in the past, he’s been looking for water underground. This year, Mr. Hundal spent $300,000 to hire a contractor to dig three new wells, including the one in Tulare. Those didn’t pan out. So he wired $670,000 to a broker in Texas to buy his own used drill. No water, no problem. Mr. Hundal will drill when he wants.There’s a well-drilling boom in the Central Valley, and it’s a water grab as intense as any land grab before it. Drilling contractors are so swamped with requests that there is a wait of four to six months for a new well. Drilling permits are soaring. In Tulare County, home to several of Mr. Hundal’s almond farms, 660 permits for new irrigation wells were taken out by the end of this April, up from 383 during the same period last year and just 60 five years ago — a figure rising “exponentially,” said Tammie Weyker, spokeswoman for Tulare County Health and Human Services Agency.The new drill that Mr. Hundal ordered from Texas should be up and running in a few weeks. He says it can push 2,500 feet into the ground, tapping new aquifers and making way for wells that can produce thousands of gallons of water a minute. He plans to drill at least six new wells on his various farms across the Central Valley: Four of them are in Tulare, and two are on property 100 miles north.“It’s about survival,” he said. “Everybody is pulling water out of the ground.” “The neighbors aren’t bothered. Everybody is doing what they’ve got to do.”

California is sinking, and it’s getting worse - While the state’s drought-induced sinking is well known, new details highlight just how severe it has become and how little the government has done to monitor it. Last summer, scientists recorded the worst sinking in at least 50 years. This summer, all-time records are expected across the state as thousands of miles of land in the Central Valley and elsewhere sink. But the extent of the problem and how much it will cost taxpayers to fix are part of the mystery of the state’s unfolding drought. No agency is tracking the sinking statewide, little public money has been put toward studying it and California allows agriculture businesses to keep crucial parts of their operations secret. The cause is known: People are pulling unsustainable amounts of water out of underground aquifers, primarily for food production. With the water sucked out to irrigate crops, a practice that has accelerated during the drought, tens of thousands of square miles are deflating like a leaky air mattress, inch by inch.Groundwater now supplies about 60 percent of the state’s water, with the vast majority of that going to agriculture. Tens of thousands of groundwater pumps run day and night, sucking up about 5 percent of the state’s total electricity, according to a Reveal analysis of the increased pumping resulting from the historic drought. That’s an increase of 40 percent over normal years – or enough electricity to power every home in San Francisco for three years.The sinking is starting to destroy bridges, crack irrigation canals and twist highways across the state, according to the U.S. Geological Survey. Two bridges in Fresno County – an area that produces about 15 percent of the world’s almonds – have sunk so much that they are nearly underwater and will cost millions to rebuild. Nearby, an elementary school is slowly descending into a miles-long sinkhole that will make it susceptible to future flooding.

For New Mexico's Chiles, The Enemy Isn't Just Drought But Salt, Too - For some people, too much salt is bad for health. Too much salt is also bad for growing most crops.Salty soil is a common problem for farmers in the arid West and it's gotten worse because of the ongoing drought. Water is necessary to flush salts out; without it, salt builds up over time.In New Mexico, one crop that's suffering is the state's beloved chile pepper.Dry weather forces farmers to pump from underground aquifers. The water spills into irrigation canals that flow onto fields, making up for a short supply in the neighboring Rio Grande. But while groundwater can be a blessing, it's also a curse. "The aquifers tend to be salty," said Stephanie Walker, a vegetable specialist at New Mexico State University. Salt is part of a geologic legacy beneath the desert, leftover from ancient oceans that once covered the West. The shallow aquifer under New Mexico's chile fields concentrates the salt. Experts estimate salt content there has quadrupled in the last four years. "The longer growers have to pump water ... the more detriment to the vegetables that they are trying to grow," Walker says. The detriment comes in the form of root damage, which weakens certain crops, like chile. In New Mexico, production is down 40 percent from record highs a decade ago. That's despite better farming techniques that allow farmers to grow seven times more chile per acre than they did back in the 1990s.

May wettest month ever recorded in U.S. -- May was the wettest month ever recorded in the contiguous United States, the National Oceanic and Atmospheric Administration reported Monday. May saw an average rainfall of 4.36 inches across the nation, some 1.45 inches above normal and not only the wettest May on record but also the wettest month in 121 years of record keeping. For the meteorological spring season — March, April and May — the U.S. saw an average of 9.33 inches, the 11th wettest on record, NOAA reported in its monthly climate update released Monday. The wettest areas of the country were Colorado, Texas and Oklahoma, which saw its wettest month ever hit with record flooding. It was wet in Duluth, too, but not that far off normal. Duluth saw 3.73 inches of rain in May, a half-inch above normal and the first above-normal wet month in some time. International Falls was even wetter, with 4.79 inches, nearly 2 inches above normal for May. The extra moisture helped pull the Northland and much of Minnesota out of an extended dry period. The Minnesota State Climatology Office reports that May monthly precipitation totals were above historical averages across most of Minnesota. In many communities, May precipitation totals exceeded the historical average by 1 to 3 inches.

Forget April showers, this May was wettest in US records - Last month was the wettest on record for the contiguous United States, according to federal meteorologists. On average 4.36 inches of rain and snow - mostly rain - fell over the Lower 48 in May, sloshing past October 2009 which had been the wettest month in U.S. records with 4.29 inches. National Oceanic and Atmospheric Administration records go back to 1895. NOAA climate scientist Jake Crouch calculated that comes to more than 200 trillion gallons of water in May. Crouch said the record was triggered by a stalled pattern of storms that dumped massive amounts of rain in the central U.S., especially in Texas and Oklahoma, which had their rainiest months. Oklahoma and Texas had been in a five-year drought and it was washed away in just one month, Crouch said: "It's like one disaster ending a catastrophe." Colorado had its rainiest May on record. Arkansas, Nebraska and Utah had their second wettest month on record. Fourteen states had one of their 10 rainiest Mays on record, all of them west of the Mississippi River and east of California. Still, parts of the Northeast were unusually dry. It was the second driest May for Massachusetts and the third driest May for Rhode Island and New Jersey. Last month was 1.45 inches wetter than 20th-century average for May. It was only the seventh time the entire contiguous United States averaged four inches of rain or more.

Can Local Officials Who Ignore Climate Change Risks Be Sued? - The record downpour began soaking the Chicago area before dawn, and foul liquid was soon gushing into a retired doorman’s basement. It climbed the walls as if filling a giant fish tank, and the result was a rare legal test about climate change. The court case blames local officials for failing to prepare for worsening flooding as temperatures rise, this time causing damage to about 300 homes. The class-action lawsuit, now in its seventh year and recently suffering a major setback, is believed by some experts to be among the earliest efforts to link real flood losses to global warming and government negligence. The case has gone virtually unnoticed until now. It started with a cloudburst that challenged historic probabilities. Cars were swamped, sewers bled, and Dennis Tzakis’ basement churned with a watery mess of gravel and waste that had smashed two windows to get inside. After it filled the basement, it began exploring the first floor. Like the storm, the lawsuit is an outlier. It points to the effects of higher temperatures on rainfall patterns and alleges that the local government isn’t just failing to keep up with extreme weather, but it’s making the damage worse. The suit argues that the suburb of Park Ridge, Ill., the Water Reclamation District of Greater Chicago and two other suburban towns caused the flooding by installing mismatched drainage pipes decades ago, some of which are too small, and by failing to enact new standards requiring property owners to reduce runoff in an era of heavier rainstorms. The suit also blames Advocate Lutheran General Hospital, which built a campus of buildings and parking lots, that channeled rainwater into the neighborhood downstream. Up to 300 homeowners are plaintiffs in the case.

Earth has warmed as usual, with no slowdown - − Forget about the so-called “hiatus” in global warming. The planet’s average temperatures are notching up as swiftly now as they did 20 or 30 years ago. A team of US researchers has looked again not just at the data for the last 60 years but at how it has been collected, and done the sums again. They conclude, in the journal Science,  that the “estimate for the rate of warming during the first 15 years of the 21st century is at least as great as the last half of the 20th century. These results do not support the notion of a ‘slowdown’ in the increase of global surface temperature rise.” Climate sceptics have repeatedly claimed that global warming has slowed or stopped. This was not the case: 13 of the hottest years ever recorded have all occurred in the last 14 years, and 2014 was the hottest of them all. But when climate scientists looked at a graph of the rise of temperatures in the last 60 years, they saw – or thought they saw – a distinct drop in the rate of increase in global average temperatures in the last 15 years. This apparent dip became the subject of a whole series of studies. Researchers had never expected the rise to follow a straight line – all sorts of natural climate cycles would naturally affect annual records – but the rate of increase was slower, and more sustained in its slowness, than anyone could explain, especially as there had been no drop in the greenhouse gas emissions that drive global warming. By the time the NOAA team had finished, the recalibrated figures told a different story. Between 1998 and 2012, the world warmed at the rate of 0.086 °C per decade, more than twice the rate of 0.039 °C per decade measured by the Intergovernmental Panel on Climate Change.

What you need to know about the NOAA global warming faux pause paper - Last week, a paper out of NOAA concluded that contrary to the popular myth, there’s been no pause in global warming. The study made headlines across the world, including widely-read Guardian stories by John Abraham and Karl Mathiesen. In fact, there may have been information overload associated with the paper, but the key points are relatively straightforward and important.

  • 1. Rapid Global Warming Continues - Arguments about short-term temperature changes only deal with the Earth’s surface temperatures, which account for just 1–2% of the overall warming of the planet. More than 90% of that heat goes into the oceans, and as my colleagues and I noted in a paper published 3 years ago, if anything that warming is accelerating, building up heat at a rate faster than 4 atomic bomb detonations per second. As Michael Mann put it,there never was any “pause” or “hiatus” in global warming. There is evidence, however, for a modest, temporary slowdown in surface warming through the early part of this decade.
  • 2. The Surface Warming Slowdown is Probably Over -- This is a tough pill to swallow for those who have misused the short-term slowdown in global surface warming to argue against climate policies, but it’s likely over. 2014 was the hottest year on record, and 2015 looks likely to break the record again.These slowdown-based anti-policy arguments have been made by everyone fromRepublican presidential candidates to political think tanks to science-denying blogs. It’s a simple argument – if we pretend the surface warming slowdown can continue indefinitely, then global warming is less of a concern and we don’t need policies to stop it.

Global warming 'pause' didn't happen, study finds -- Global warming has not undergone a ‘pause’ or ‘hiatus’, according to US government research that undermines one of the key arguments used by sceptics to question climate science. The new study reassessed the National Oceanic and Atmospheric Administration’s (Noaa) temperature record to account for changing methods of measuring the global surface temperature over the past century.  The adjustments to the data were slight, but removed a flattening of the graph this century that has led climate sceptics to claim the rise in global temperatures had stopped. “There is no slowdown in warming, there is no hiatus,” said lead author Dr Tom Karl, who is the director of Noaa’s National Climatic Data Centre. Dr Gavin Schmidt, a climatologist and the director of Nasa’s Goddard Institute for Space Studies said: “The fact that such small changes to the analysis make the difference between a hiatus or not merely underlines how fragile a concept it was in the first place.” The results, published on Thursday in the journal Science, showed the rate of warming over the past 15 years (0.116C per decade) was almost exactly the same, in fact slightly higher, as the past five decades (0.113C per decade).

Science publishes new NOAA analysis: Data show no recent slowdown in global warming -- A new study published online today in the journal Science finds that the rate of global warming during the last 15 years has been as fast as or faster than that seen during the latter half of the 20th Century. The study refutes the notion that there has been a slowdown or "hiatus" in the rate of global warming in recent years.  The study is the work of a team of scientists from the National Oceanic and Atmospheric Administration's (NOAA) National Centers for Environmental Information* (NCEI) using the latest global surface temperature data.  "Adding in the last two years of global surface temperature data and other improvements in the quality of the observed record provide evidence that contradict the notion of a hiatus in recent global warming trends," . "Our new analysis suggests that the apparent hiatus may have been largely the result of limitations in past datasets, and that the rate of warming over the first 15 years of this century has, in fact, been as fast or faster than that seen over the last half of the 20th century."   The Intergovernmental Panel on Climate Change's (IPCC) Fifth Assessment Report, released in stages between September 2013 and November 2014, concluded that the upward global surface temperature trend from 1998­­-2012 was markedly lower than the trend from 1951-2012.  Since the release of the IPCC report, NOAA scientists have made significant improvements in the calculation of trends and now use a global surface temperature record that includes the most recent two years of data, 2013 and 2014--the hottest year on record. The calculations also use improved versions of both sea surface temperature and land surface air temperature datasets.

The climate context for India’s deadly heat wave  - The broiling heat wave that suffocated parts of India with temperatures regularly above 110°F at the end of May — and killed around 2,000 people in just a few days according to estimates — has finally waned. But the deadly episode has focused world attention on the plight of vulnerable populations during such extreme events and raised questions about how to better prepare for such disasters when the climate could be tipping toward more of them. While India is no stranger to heat waves this time of year, before the monsoon kicks in and brings relief with its rains, this event was notable because it has been so lethal so quickly. The severity of the event came from a deadly combination of meteorology, possibly with a boost from climate change, and highly vulnerable populations.   Such oppressive heat waves are likely to become more common in a warming world. That is one of the more robust links in climate science, but teasing out such a connection with specific, local events can be difficult, as a new analysis from scientists working with Climate Central, as part of its World Weather Attribution program, shows. The program combines observational data, output from multiple models, peer-reviewed research, and on-the-ground reports to more quickly analyze extreme weather events. This analysis found some suggestions that extreme heat waves in this region are more common than they once were, but more research is needed to firm up such a link.

The Deadly Combination of Heat and Humidity - THE most deadly weather-related disasters aren’t necessarily caused by floods, droughts or hurricanes. They can be caused by heat waves, like the sweltering blanket that’s taken over 2,500 lives in India in recent weeks. Temperatures broke 118 degrees in parts of the country. The death toll is still being tallied, and many heat-related deaths will be recognized only after the fact. Yet it’s already the deadliest heat wave to hit India since at least 1998 and, by some accounts, the fourth- or fifth-deadliest worldwide since 1900. The August 2003 heat wave in western Europe led to about 45,000 deaths. The July-August 2010 heat wave in western Russia killed about 54,000 people. These heat waves will only become more common as the planet continues to warm. But as anyone who’s spent a summer in the eastern United States knows, it’s not just the heat; it’s also the humidity. Together, they can be lethal, even if the heat doesn’t seem quite so extreme. Scientists measure the combination using a metric known as wet-bulb temperature. It’s called that because it can be measured with a thermometer wrapped in a wet cloth, distinguishing it from the commonly reported dry-bulb temperature, measured in open air. Wet-bulb temperature can also be calculated from relative humidity, surface pressure and air temperature. It’s essentially a measure of how well you can cool your skin by sweating, which is how humans stay alive in the worst heat. But high humidity can defeat that cooling system; it makes the heat that much more dangerous.. A person who is physically active at a wet-bulb temperature of 80 degrees will have trouble maintaining a constant core temperature and risks overheating. A sedentary person who is naked and in the shade will run into the same problem at a wet-bulb temperature of 92 degrees. A wet-bulb temperature of 95 degrees is lethal after about six hours.

Factcheck: Is climate change ‘helping Africa’? -- A new paper saying greenhouse gases in the atmosphere have boosted rainfall in a drought-stricken region of Africa has received quite a lot of media attention in recent days.The study, published on Monday in Nature Climate Change, found that rainfall in the Sahel region of Africa has increased by 10% in the past few decades, and that it could be down to climate change.  Despite no mention in the study of easing famine, a press release from the University of Reading made the link between the "accidental" return of "life-giving rains" in the Sahel to Bob Geldof's Live Aid concerts, held across the world in 1985 to raise funds for victims of famine.  A string of dramatic headlines followed. A comment piece by Geoffrey Lean In The Telegraph declared, 'Global warming has fought famine', while  The Times declared, 'Global warming does what Live Aid never could'. Reuters opted for the more muted, 'Climate change boosts rain in Africa's Sahel region', while  The Express suggested the new research means 'African drought is OVER'.  MailOnline went a step further, its headline suggesting 'Climate change is HELPING Africa'. The study's author tells Carbon Brief claims that climate change is "helping Africa" are misleading and that a temporary respite from the Sahel drought is no reason to slow action on tackling climate change.

Rich Countries Fail to Agree to Rapid Decline of Greenhouse Gas Emissions  --Some of the world’s richest countries are not doing enough to limit their greenhouse gas emissions, according to new analysis. The report by Climate Action Tracker (CAT) says that all the G7 countries and the member states of the European Union (EU) have so far agreed to keep their emissions at around their present levels for the next 15 years, instead of cutting them fast  With the G7 countries meeting in Germany yesterday and today, CAT—a consortium of four research organizations—has looked at the combined INDCs of all G7 governments and the EU, who account together for around 30 percent of global greenhouse gas emissions and 40 percent of global gross domestic product (GDP).  The combined climate plans for the G7 and the EU mark “a small step towards the right track to hold warming to two degrees Celsius, but they still leave a substantial emissions gap,” according to analysts from CAT, which reports on countries’ emissions commitments and performance.The gap yawns so wide that the present level of commitment shown by the two blocs would go less than one-third of the way to staying within the two degrees Celsius limit, they find. And they say there is “an extreme risk” that this low level of ambition could continue until 2030 to keep emissions so high that it would be impossible to stay within the two degrees Celsius warming limit, agreed by the world’s governments

G7 Summit: End use of fossil fuels by 2100 - Climate change is the topic of discussion today as the G7 summit meets for its second and final day, reports Shale Plays Media. The summit, hosted at the Schloss Elmau resort in the German Bavarian Alps, has so far addressed countering extremism, Russian sanctions and Greece falling from Eurozone inclusion. Today, however, German Chancellor and host of the summit Angela Merkel has committed the group to the task of addressing the decarbonization of the global economy for the remainder of the century. As reported by Shale Plays Media, Roger Harrabin for the BBC reported that the G7 has called for the transition of electricity generation from fossil fuels toward renewable energy sources, such as solar and wind, and nuclear power by the year 2050. Additionally, those in attendance came to the agreement that by the end of the century, fossil fuels should not be burned in any sector of the global economy.

G7 to limit global warming to below 2 degrees – — The G7 agreed Monday afternoon to limit the increase in global temperatures to a maximum of 2 degrees Celsius above pre-industrial levels, a victory for German Chancellor Angela Merkel, who wanted the group of wealthy countries to present a united front ahead of a climate summit in Paris this December. “Urgent and concrete action is needed to address climate change,” said a statement issued by the group, ending a summit held in the Bavarian Alps. The plan calls for meeting a United Nations recommendation for reducing emissions in 2050 from 40 to 70 percent below 2010 levels. That may be enough to prevent global temperatures from rising to dangerous levels. Merkel’s hope is that the example set by the G7 — making up most of the world’s leading industrial economies — will send a message to other polluters. “Even if G7 countries had zero emissions tomorrow we still couldn’t solve the climate problem. Other countries need to play a role,” she said, pointing out that China’s recent progress in switching to renewable energy sources like wind, solar and hydro electric show a commitment to tackling global warming. “I do believe that Germany has possibilities to help.” The G7 also reiterated an earlier commitment from developed countries to raise and spend $100 billion a year from private and public sources on climate mitigation by 2020. “We emphasize that deep cuts in global greenhouse gas emissions are required with a decarbonization of the global economy over the course of this century,” said the statement.

G7 leaders agree to phase out fossil fuel use by end of century - The G7 leading industrial nations have agreed to cut greenhouse gases by phasing out the use of fossil fuels by the end of the century, the German chancellor, Angela Merkel, has announced, in a move hailed as historic by some environmental campaigners.  On the final day of talks in a Bavarian castle, Merkel said the leaders had committed themselves to the need to “decarbonise the global economy in the course of this century”. They also agreed on a global target for limiting the rise in average global temperatures to a maximum of 2C over pre-industrial levels. Environmental lobbyists described the announcement as a hopeful sign that plans for complete decarbonisation could be decided on in Paris climate talks later this year. But they criticised the fact that leaders had baulked at Merkel’s proposal that they should agree to immediate binding emission targets. As host of the summit, Merkel said the leading industrialised countries were committed to raising $100bn (£65bn) in annual climate financing by 2020 from public and private sources. In a 17-page communique issued after the summit at Schloss Elmau under the slogan “Think Ahead, Act Together”, the G7 leaders agreed to back the recommendations of the IPCC, the United Nations’ climate change panel, to reduce global greenhouse gas emissions at the upper end of a range of 40% to 70% by 2050, using 2010 as the baseline.

G7 leaders bid 'Auf Wiedersehen' to carbon fuels -- Leaders of the world's major industrial democracies resolved on Monday to wean their energy-hungry economies off carbon fuels, marking a major step in the battle against global warming that raises the chances of a U.N. climate deal later this year. The Group of Seven's energy pledge capped a successful summit for host Angela Merkel, who revived her credentials as a "climate chancellor" and strengthened Germany's friendship with the United States at the meeting in a Bavarian resort. Ties between the Cold War allies have been strained in the last couple of years by spying rows but Merkel appeared to put that behind her on welcoming U.S. President Barack Obama, who declared their countries were "inseparable allies." Meeting in the picturesque Schloss Elmau at the foot of Germany's highest mountain, the Zugspitze, the G7 leaders pressed Greece to accept painful economic reforms to resolve its debt crisis and struck a firm tone on Russia's role in Ukraine. They agreed that existing sanctions against Russia would remain in place until Moscow and Russian-backed rebels in eastern Ukraine fully respect a ceasefire negotiated in Minsk in February, and said they could escalate sanctions if needed. On climate change, the G7 leaders pledged in a communique after their two-day meeting to develop long-term low-carbon strategies and abandon fossil fuels by the end of the century.

G7 to Support Climate Insurance for Poor - Scientific American: (Thomson Reuters) - Group of Seven leaders agreed on Monday to provide insurance against climate hazards for up to 400 million more vulnerable people and back development of early warning systems, but did not outline a clear path for increasing climate aid up to 2020. Experts at June 1-11 climate talks in Bonn were disappointed that G7 leaders gave only vague assurances they would work to mobilise $100 billion per year by 2020 to help poorer nations cope with extreme weather and rising seas, and to develop their economies cleanly - as promised by rich governments in 2009. Last month, German Chancellor Angela Merkel called for a roadmap for how the world will raise the additional $70 billion in climate funding needed to reach the $100 billion goal, from the current level of around $30 billion per year, saying the G7 summit should provide an "important signal" for that path. In a communique issued after the two-day summit in Bavaria, G7 leaders promised to "continue our efforts to provide and mobilize increased finance, from public and private sources, and to demonstrate that we and others are well on our way to meet the $100 billion goal". "We stand ready to engage proactively in the negotiations of the finance provisions of the Paris outcome," they said, referring to the U.N. conference in December where governments are due to agree a new global deal to tackle climate change.

Why climate uncertainty justifies action - Is there any significant likelihood that policy action will eliminate the risk of climate disaster? At present, the answer is no. This is so, even though leaders of the group of seven leading high-income countries say they support cutting emissions by 40 to 70 per cent by 2050. It is so, even though a major global conference in Paris at the end of the year aims to reach a universal and legally binding agreement, enabling “us to combat climate change effectively” and boost the transition towards “resilient, low-carbon societies and economies”. Why should we be sceptical? The answer is that we have heard similar commitments for nearly a quarter of a century; and yet we have only seen rising flows of emissions and stocks of greenhouse gases in the atmosphere. Even if governments met current commitments (itself unlikely), atmospheric concentrations of carbon dioxide would rise towards 700 parts per million by the end of the century, as against 280 ppm before the industrial revolution and some 400 ppm now. With 700 ppm, the median increase in expected global temperature is 3.5C. Keeping emissions on the path needed to limit the median expected increase to the recommended 2C — and then delivering — would require a revolution. (See chart).  The challenge is “almost uniquely global, uniquely long-term, uniquely irreversible and uniquely uncertain”.  Climate change is a problem of insurance. For this, it is not median outcomes that matter most, but the outliers — the “fat tails” of the probability distribution of temperature. As concentrations of greenhouse gases rise, scientists argue, so do median expected increases in temperature and, crucially, the likelihood of extreme outcomes. At 400 ppm, the chances of a 6C rise are near zero. At 550 ppm, the chances are only 3 per cent. But at 700 ppm, they may exceed one in 10.  If you had a 10 per cent chance of losing most of your wealth, would you keep the same portfolio? For the vast majority, the answer would be a loud “no”. You would insure yourself against such a disaster.

Overconsumption Is a Grave Threat to Humanity - - We are defusing the population bomb that Paul Ehrlich warned about. Or, rather, the women of the poor world are doing so. The average woman today, worldwide, has 2.5 children, half as many as her grandmother. And the fertility rate continues to fall. There is some more population growth to come, but if Africa follows the trend to small families seen everywhere else, we can expect "peak population" sometime later this century. We are not, as Ehrlich suggested, "doomed" by exponential population growth.  Ehrlich was right, however, to point out that humanity’s impact on the planet is a combination of three elements: our numbers, our consumption patterns and how we produce what we consume. So, because massive poverty and unmet demand for basic goods is a widespread problem in much of the poor world today, we still face a “consumption bomb" — our growing demands for both consumer goods and life necessities are responsible for runaway climate change and the depletion of soils, water and other essential planetary life-support systems. But there is hope. And our big opportunity to curb our impact lies in the third element of Ehrlich’s equation. We have to radically change how we produce what we consume. We have done this before. What Ehrlich failed to see in the 1970's was the power of the green revolution that came from the development of high-yielding crop varieties. World food production doubled in a generation.

It's Not a Numbers Problem - Give our species some credit: We’ve learned a lot in the half-century since Paul Ehrlich warned that overpopulation would spell our doom. Start with the term "overpopulation." It implies that there are too many people in relation to the planet’s resources, a concept that has fallen out of favor. We now know that resources are distributed so inequitably, and used so wastefully, that it is virtually impossible to determine how many people the planet can sustain. We’ve also learned that it’s absurd to attribute any environmental problem to human numbers alone. Americans, for example, comprise about 4 percent of the world’s population, but produce over 17 percent of climate-changing carbon emissions. So, for the global climate, consumption in the U.S. is a much bigger problem than, say, population growth in Niger. Does that mean that human numbers are irrelevant to environmental sustainability? Not exactly. Current inequities are not — and must not be — set for all time. Yet the planet could not support today’s 7 billion people living as Americans now do, much less a future world population of up to 11 billion.  In a sustainable, just world, Americans would consume a smaller share of the globe's resources, while those in what is now the developing world would consume more. To remain within planetary limits, we would all produce and consume differently. Those goals might be easier to achieve if we came in at the low end of the United Nations' population projections — with about eight billion human beings by 2050, rather than nearly 11 billion.

Asia Must Build a Less Wasteful Economy - It is likely that the global population will peak at higher than the 10 billion people. That is more than three times as many people as when Paul Ehrlich published "The Population Bomb" in 1968. Rather than reassuring ourselves by quibbling about whether he got it right or wrong, we should be looking at some facts about the impact of this huge human population on the planet. The science is clear. The threat is very real. Human activity is destabilizing the very basis for human survival. There may not have been a mass population wipe-out but Ehrlich's predictions have come true in a myriad of other ways. Yes, we have had advances in science and technology that have helped the privileged cope with many of these threats, but this has sadly become the basis for arguing that human ingenuity will overcome all planetary constraints. That conveniently turns a blind eye to the fact that human ingenuity has also contributed to massive stresses on the planet. Climate change, which is just the tip of the iceberg, is already upon us. Ice caps are melting faster than anyone ever thought possible, extreme heat-waves are killing people on the streets of India, hurricanes may becoming more intense and California is grappling with a drought that will require drastic changes to extravagant lifestyles in that rich state. But denial is the common currency of our times. Much of it can be attributed to our addiction to an economic model that is built around promoting relentless consumption by under-pricing resources and externalizing true costs. We need to worry about how much the world's growing population will consume based on our current economic model, which at its core thrives on a free ride on planetary resources. The simple fact is that the approximately five billion Asians we can expect by 2050 cannot and should not aspire to lifestyles that are currently taken for granted in the West. These are lifestyles from a bygone era when a small minority controlled the resources of the world, and the rest of the global populace

China’s emissions may have already peaked -- As new Chinese customs data reveals a 38.2% plunge in its coal imports up to May this year compared to last, a new study suggests that China’s emissions are likely to stabilise far sooner than many experts had expected.  The study was authored by Australian Fergus Green and former World Bank chief economist Nicholas Stern. It finds that while the Chinese Government has so far only been willing to commit to halting the growth of emissions by 2030 before bringing them down, overall emissions will probably peak by 2025 and possibly sooner. They believe it is reasonable to expect that emissions at this time would peak at around 12.5 to 14 gigatonnes of CO2 equivalent; this compares to an estimate that emissions were roughly 12 to 13 gigatonnes in 2014. The paper states: “China’s international commitment to peak emissions ‘around 2030’ should be seen as a conservative upper limit from a government that prefers to under-promise and over-deliver. It must be remembered that China’s pledge includes a commitment to use ‘best efforts’ to peak before 2030; we are beginning to see the fruits of China’s best efforts.” Back in June 2013, Climate Spectator reported on analysis by Rhodium Group in its China 2012 Energy Report Card. This data from 2012 hinted that China was in the process of executing a major turnaround in the energy and carbon intensity of its economy.   Two years on, what was then a hint is now far clearer. What’s extraordinary is that in June 2013 the hope was that China might moderate its rapid growth in the use of coal before it stabilised several years in the future. But in 2015 we’ve seen not just a drop in growth, but we are now seeing China on track for a 5% absolute decline in total coal consumption compared to 2014 (domestic production as well as imports). This comes on top of a 3.5% decline in 2014.

U.S. EPA moves toward regulating aircraft emissions - Reuters: The Obama administration on Wednesday released a scientific finding that greenhouse gases from aircraft pose a risk to human health, paving the way for regulating emissions from the U.S. aviation industry. The "endangerment finding" by the Environmental Protection Agency would allow the administration to implement a global carbon dioxide emissions standard being developed by the United Nations' International Civil Aviation Organization. In its 194-page finding, the EPA said it took "a preliminary but necessary first step to begin to address greenhouse gas emissions from the aviation sector, the highest-emitting category of transportation sources that the EPA has not yet addressed." The ICAO is due to release its CO2 standard in February 2016, with the aim of adopting it later that year. But the requirement is expected to apply only to new aircraft designs certified from 2020, leaving most of the world's existing fleets unaffected for years to come. Aviation accounted for 11 percent of energy-related carbon dioxide emissions from the transportation sector in 2013, and nearly 30 percent of global aircraft emissions in 2010, the latest year with complete global emissions data.

In twist, Obama emissions plan satisfies industry, worries greens: For two years, President Barack Obama has used his executive power to impose new rules to cut carbon emissions, targeting cars and power plants, buoying environmentalists and infuriating industry. His latest foray - regulating commercial aviation - had the opposite effect. On Wednesday, the administration took a first step toward cutting greenhouse gas emissions from the nation’s fleet of aircraft, releasing a scientific finding that said emissions from plane engines pose a risk to human health because they contribute to climate change. But the Environmental Protection Agency (EPA) did not immediately propose new regulations. Instead, it signaled it would implement a global emissions standard being developed by the United Nations’ International Civil Aviation Organization (ICAO) that is due to be released next year. Those rules are expected to apply only to new aircraft designs beginning in 2020, leaving most of the world’s existing fleets unaffected for years to come. That decision was greeted with cautious optimism from the aviation industry, which says it is making strides on energy efficiency and wants the United States to coordinate any new regulations with the rest of the world. That was precisely what worried environmentalists, who warned that relying on a global agreement forged under UN auspices seeking consensus would be doomed to produce weak rules.

The Case for a Carbon Tax - NYTimes editorial - In a welcome development, businesses are asking world leaders to do more to address climate change. This week, the top executives of six large European oil and gas companies called for a tax on carbon emissions.These companies — the BG Group, BP, Eni, Royal Dutch Shell, Statoil and Total — are not taking a bold environmental stand. They are being pragmatic. They want an efficient and predictable policy to limit greenhouse gas emissions because they realize something must be done. Numerous scientists, economists, environmentalists and political leaders have previously proposed similar ideas.A carbon tax would raise the price of fossil fuels, with more taxes collected on fuels that generate more emissions, like coal. This tax would reduce demand for high-carbon emission fuels and increase demand for lower-emisson fuels like natural gas. Renewable sources like solar, wind, nuclear and hydroelectric would face lower taxes or no taxes. To be effective, the tax should also be applied to imported goods from countries that do not assess a similar levy on the use of fossil fuels.Many countries already have some version of carbon taxes. In the United States, for example, federal and state taxes on gasoline and diesel, which are used to pay for road and transit projects, are effectively carbon taxes. But at the federal level, those taxes have not been increased since 1993, which has eroded their effectiveness. Revenue generated by carbon taxes could be used for a variety of purposes. A lot of the money should surely be given to households, especially the poorest, through tax credits or direct payments to offset the higher prices they would have to pay for gasoline, electricity and other goods and services because of the tax. Some of the money could be used to invest in renewable energy and public transportation, or to lower other taxes.

Paul Ryan’s New Amendment Would Make The Obama Trade Deal Even Worse For The Climate - A massive trade agreement between the United States and several Asian nations has been held up while President Obama waits for Congress to start the approval process. But in a bid to get more Republican support, Congress could throw away a U.S. tool for addressing international climate change goals.  House Ways and Means Committee Chairman Paul Ryan (R-WI) introduced an amendment to a customs bill this week that would “ensure that trade agreements do not require changes to U.S. law or obligate the United States with respect to global warming or climate change.” The customs bill would be part of a package that would make approving the Trans-Pacific Partnership trade agreement (TPP) a straight up-and-down vote in Congress, the so-called “fast-track” option.  Environmental groups have already taken a strong stand against the TPP. Under the proposed agreement, corporations will likely be able to sue governments that interfere with their business — even if the interference comes from enforcement of carbon reduction goals and passing environmental legislation. “We’re really nervous about a provision that binds the hands of negotiators and prevents them from doing anything on climate change.” He also pointed out that including climate change language in a bid to secure the votes needed to pass the fast-track might backfire, alienating Democrats.

Nancy Pelosi On TPP: ‘You Cannot Separate Commerce From The Environment’ - A customs package that would allow the controversial Trans-Pacific Partnership (TPP) trade agreement to go to a straight up-and-down vote in Congress failed to pass the House on Friday. Before the vote, House Minority Leader Nancy Pelosi (D-CA) lectured her colleagues on the importance of climate change and how it relates to the trade agreement. “You cannot separate commerce and environment,” Pelosi said on the House floor before the vote.  Environmental groups had already opposed the TPP, because under the agreement, corporations will likely be able to sue governments that interfere with their business — even if the interference comes from enforcement of carbon reduction goals and passing environmental legislation. But earlier this week, House Ways and Means Committee Chairman Paul Ryan (R-WI) doubled down on the environmental component of the TPP, introducing an amendment to the customs package that would “ensure that trade agreements do not require changes to U.S. law or obligate the United States with respect to global warming or climate change.”  The move was widely seen as an attempt to appease right-wing members of the House. But environmental activists, including Karthik Ganapathy, a spokesman for, warned that the move could alienate Democrats worried about climate change. It appears he was correct.  Pelosi specifically addressed the Ryan amendment in her speech on the House floor, noting that passage of the bill would mean the U.S. Trade Representative was barred from negotiating on climate change. “I hold myself second-to-none in this body in protecting the environment and recognizing the challenges of the climate crisis,” Pelosi said.

A Comprehensive Analysis of the Employment Impacts of the EPA’s Proposed Clean Power Plan - Abstract - Estimates made by the Environmental Protection Agency of the likely employment effects of a proposed rule (the Clean Power Plan or CPP) mandating reductions in greenhouse gas emissions from existing power plants are likely incomplete. These estimates undercount both positive and negative influences on employment. This paper provides a comprehensive overview of the channels through which the mandated emission reductions may lead to employment changes, both positive and negative. It finds that the CPP is likely to lead to a net increase in of roughly 360,000 jobs in 2020, but that the net job creation falls relatively rapidly thereafter, with net employment gains of roughly 15,000 jobs in 2030. This paper also provides comparisons of the composition of employment in job-gaining versus job-losing industries. While workers in job-losing industries are less likely to have four-year college degrees, jobs in these industries are far less likely to be low-wage than in the overall economy, or in job-gaining industries. Workers in job-losing industries are also substantially more likely to be represented by a union. The characteristics of employment in job-losing industries, as well as the likely geographic concentration of gross job losses in poorer states, is likely to lead to transition challenges for workers and communities in responding to the CPP. This suggests the potential for a key role for federal assistance and complementary policies to aid these groups.

Another jobs study, because jobs are what we are trying to get out of climate policy? -- In a world where benefit-cost analysis, not the macroeconomic impact, of environmental is what really matters, the Environmental Policy Institute says that the EPA's climate rule will cost more than advertised (because jobs are costs): The Environmental Protection Agency's (EPA) plan to cut greenhouse gas emissions at power plants will end up creating more jobs than it cuts, according to a new analysis of the proposed rule. EPA's Clean Power Plan would require existing power plants to cut their greenhouse gas emissions and transition to a cleaner supply of energy. The EPA has previously estimated that the plan would create 120,000 jobs by 2020 but lead to 24,000 job loses as plants move away from fossil fuel energy sources.  An Economic Policy Institute report released Tuesday said the jobs both lost and gained would have "a substantial ripple effect" in other industries. The plan would lead to a net increase of 360,000 new jobs by 2020, the report said. By 2030, the deadline for state compliance with Clean Power Plan greenhouse gas reduction targets, the plan's employment benefits will have wained, to the point where it would have created a net increase of 24,342 jobs total. The report, written by Josh Bivens, the research and policy director at the Economic Policy Institute, also warned that consumers and employers could be caught off-guard by higher electricity rates under the plan, possibly threatening between 25,000 and 150,000 jobs.  Job losses are likely to be “geographically concentrated,” Bivens wrote. While he described the plan’s impact on employment as “small (and positive),” he wrote that, “the concentration of job dislocations and the composition of jobs in the losing industries suggest that policymakers should consider complementary policies to adjust and to blunt some of the less desirable outcomes of the rule.”

Even Skeptics Can Profit From Climate Change - A new Mercer research report, "Investing in a Time of Climate Change," is fascinating for what it is (and isn't): a pure investment thesis, not a screed on science or politics.  The report is especially timely, given a new National Oceanic and Atmospheric Administration report showing the so-called global-warming hiatus was the result of an error in measuring ocean temperatures. There has been no slowdown in warming, according to the latest data.  I don’t want to debate the science, but rather to focus on the investment risks the report discusses.  In the real world, climate-change deniers are and will be giant money losers. The report identified four climate scenarios and four climate risk factors, each of which has differing “impacts on returns for portfolios, asset classes, and industry sectors between 2015 and 2050.”  The three broad conclusions of the report are:

  • • Climate change will give rise to investment winners and losers.
  • • The biggest risks are at the industry level.
  • • Impacts on asset-class returns will be material, but vary widely by climate-change scenario.

Below is a chart from the report showing projected returns by asset class:

Do 'whatever it takes' for a deal, says majority in global climate survey - Nearly two-thirds of people believe that negotiators at key UN climate talks in December should do “whatever it takes” to limit global warming to a 2C rise, according to what is believed to be the most comprehensive survey of global public attitudes to climate change ever conducted. The Worldwide Views on Climate and Energy consultation involved 10,000 citizens from 79 developed and developing countries. It was initiated by a coalition including the United Nations’ Framework Convention on Climate Change (UNFCCC) with support from, among others, the French, German and Norwegian governments and the European Space Agency. Of those participating, 78% said they are “very concerned” about the impacts of climate change, although this drops to 69% for citizens from developed countries. Globally, 89% said that climate change should be a national priority in their country, while 49% said they felt that it already was. 80% said that their country should take measures to reduce greenhouse gas emissions even if others do not. Asked how urgently the world should react to climate change, 63% of participants said the world should decide in Paris to do “whatever it takes” to limit temperatures to 2C. The results come six months before the UN climate change summit in Paris at which negotiators from more than 190 countries will attempt to hammer out a deal deal on tackling climate change, primarily through the reduction of greenhouse gas emissions. Current commitments to decrease emissions are due to expire in 2020.

The Only Solution to Climate Change — Outlaw Fossil Fuel Production - I once had the opportunity to speak one-on-one with one of our leading progressive politicians, and as we were discussing solutions to the climate problem, I mentioned the carbon industry and said, “You realize, fixing the climate crisis means we have to kill the carbon industry, right?” She (or he) stopped, thought, then said (paraphrasing): “Huh. You know, I think you’re right.”  Why do I bring this up? Because this person, who’s right about everything I want her (or him) to be right about, hadn’t thought through the climate problem to the obvious solution. If you don’t want it burned, you can’t dig it up. That means, we have to kill the industry. There’s just no other choice. The problem we seem to be facing is this: The industry gets that, and they’re fighting back. But most people who care about climate don’t. So we’re stuck, year after year, with more of this:  Do We Really Have to Impoverish the Whole Industry? Yes. If we don’t make them poor — or make them switch to a completely different business — they’ll make us extinct, or at least hunter-gatherers again, with only the odd pocket of “civilized” (agricultural, settled) humans in the odd, eco-friendly location left to show for everything we’ve done with our time on earth.  Future atmospheric temperatures look something like this if we we don’t stop burning carbon: Atmospheric temperature tracks pretty closely with atmospheric CO2 concentration, among other factors (this is temperature over the same period). The blue line near the middle of the chart above and also toward the right shows atmospheric CO2 in parts per million (ppm) prior to the Industrial Revolution. For most of the time humanoids have inhabited the earth, CO2 concentrations have been near 280 ppm. Thanks to the Industrial Revolution, we’ve brought that number up to 400 ppm, which is where we are today (this year in fact). As to the future, the tallest red line on the far right shows CO2 concentration under the IPCC definition of a “business as usual” (BAU) scenario … almost 2000 ppm … by 2100.

Renewable Energy Will Not Support Economic Growth - The world needs to end its dependence on fossil fuels as quickly as possible. That’s the only sane response to climate change, and to the economic dilemma of declining oil, coal, and gas resource quality and increasing extraction costs. The nuclear industry is on life support in most countries, so the future appears to lie mostly with solar and wind power. But can we transition to these renewable energy sources and continue using energy the way we do today? And can we maintain our growth-based consumer economy?  The answer to both questions is, probably not. Let’s survey four important sectors of the energy economy and tally up the opportunities and challenges.

Ditching Fossil Fuels and Switching to 100% Renewables No Problem, Says Stanford Study -- Is it possible for the U.S. to ditch fossil fuels? The answer is yes, according to researchers and engineers from Stanford University and U.C. Berkeley, who have developed a state-by-state plan to convert the country to 100 percent renewable energy in less than 40 years.  The study, published in the Energy and Environmental Sciences, showcases how each state can replace fossil fuels by tapping into renewable resources available in each state, such as wind, solar, geothermal, hydroelectric, and even small amounts of tidal and wave power. The report, led by Stanford civil and environmental engineering professor Mark Z. Jacobson and U.C. Berkeley researcher Mark Delucchi, argues that converting the current energy infrastructure into renewable energy will help fight climate change, save lives by eliminating air pollution, create jobs and also stabilize energy prices. You can check out an interactive map summarizing the plans for each state at The Solutions Project, an organization of scientists, business leaders and other forward-thinking minds with a mission of accelerating the world’s transition to 100 percent clean, renewable energy. The project’s concept has attracted high-profile funders including the Elon Musk Foundation and Leonardo DiCaprio Foundation, according to The Plaid Zebra. Undoubtedly, the plan involves a lot of difficult and expensive changes, but the authors believe that the complete transition to renewables is economically and technically viable.

U.S. could be fossil fuel free in a little over a generation --  One hundred percent clean and renewable by 2050. This might be implausible, but not impossible with the right road-map according to a recent study. Professor of civil and environmental engineering at Stanford Mark Z. Jacobson and colleagues, including U.C. Berkeley researcher Mark Delucchi, are the first to finally answer just what it would take for the United States to transition to complete clean and renewable energy. Their paper goes far beyond the goal of reducing greenhouse gas emissions, as many states have plans to do. The final analysis accomplishes the daunting task of presenting a consistent set of guidelines to convert each of the 50 states’ all-purpose (electricity, transportation heating/cooling, and industry) energy infrastructures to systems powered 100 percent by wind, water, and sunlight. The researcher’s guide for each state involved finding what made the most sense to their specific geological advantages and existing infrastructure. Jacobson and his colleagues also calculated the necessary fuel demands for the residential, commercial, industrial and transportation sectors of each state. Of course, the cost of swiftly replacing existing energy infrastructure is the nightmare of The United States’ federal budget. However, the researchers found that over time, the price tag would be roughly equal to the costs of maintaining the fossil fuel infrastructure currently in place. In addition, by 2050, every potential renewable source is expected to drop in cost while conventional fuel costs are expected to rise.

G.O.P. Assault on Environmental Laws - President Obama has announced or will soon propose important protections for clean water, clean air, threatened species and threatened landscapes. Mitch McConnell, the Senate majority leader, and other Republicans in Congress are trying hard not to let that happen — counterattacking with a legislative blitz not seen since Newt Gingrich and his “Contract With America” Republicans swept into office after the 1994 midterm elections bent on crippling many of the environmental statutes enacted under Presidents Johnson and Nixon. Bill Clinton threatened or used vetoes to block that assault. Mr. Obama should be prepared to do the same. The usual complaints about “executive overreach” and “job-killing regulations” have been raised. But beneath all the political sound bites lies a deep-seated if unspoken grievance that Mr. Obama is actually trying to realize the promise of laws that Congress passed years ago but wouldn’t stand a chance with today’s Congress. The nonsense about regulatory overkill has also infected the presidential campaign, the latest manifestation being a batty suggestion from Gov. Scott Walker of Wisconsin to shift the functions of the Environmental Protection Agency to the states. Mr. Walker presumably hopes to please business, but it would be hard to think of anything more unsettling to executives than the prospect of having to operate in 50 states with 50 different sets of rules — or anything more harmful to the evenhanded enforcement of federal environmental laws.

This Bloomberg Contributor Attacking Renewable Energy Is Paid For By Big Oil – by Denise Robbins for Media Matters -- Bloomberg Has Published Several Op-Eds By Robert Bryce That Promote Dirty Energy Or Attack Renewables. Since September 2013, Bloomberg has published several op-eds by Bryce that either attacked renewable energies or promoted oil. But Bloomberg Has Not Disclosed Bryce's Oil Industry Ties. Bloomberg identifies Bryce as simply "a senior fellow at the Manhattan Institute and the author of 'Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong.'" [Bloomberg, accessed 6/8/15] Bryce Is Frequently Quoted And Published In The Media But Not Fully Identified. A Media Matters analysis found that in 2011, Bryce was quoted at least 39 times in energy issue stories that didn't disclose his ties to the oil industry. [Media Matters, 10/7/11] Bryce Is The Manhattan Institute's "Senior Fellow For Center For Energy Policy." The Manhattan Institute lists four senior fellows as "experts" on its webpage for its Center for Energy Policy and the Environment. Of those, Robert Bryce is the only fellow exclusively attached to the Center. [Manhattan Institute, accessed 6/8/15; accessed 6/8/15]  ExxonMobil Gives Hundreds Of Thousands To Manhattan Institute's Center For Energy Policy Each Year.  ExxonMobil, the world's largest oil refiner, has donated hundreds of thousands to the Manhattan Institute. According to ExxonMobil's 2014 Worldwide Contributions and Community Investments report, the company donated $100,000 to Manhattan Institute's Center for Energy Policy last year. ExxonMobil's annual reports show that the company has given to Manhattan Institute nearly every year from 1998 to 2014, with the amount from that period totaling $800,000. . [ExxonMobil Worldwide Contributions and Community Investments, 2014; 2013; ExxonSecrets, accessed 6/8/15] Manhattan Institute Has Also Received Millions From Koch-Affiliated Organizations. The Manhattan Institute has been given over $1.9 million from the David H. Koch Charitable Foundation and the Claude R. Lambe Charitable Foundation, whose board of directors includes Charles Koch and his wife.

EIA: Coal production would fall to 1980s levels under Clean Power Plan -- Coal mined in the U.S. would fall 25 percent by 2024 if rules aimed at slashing carbon emissions go into effect, according to a recent analysis from the federal government’s energy numbers cruncher. By 2040, the U.S. Energy Information Administration report says, the nation would mine 20 percent less coal than it would without rules to cut emissions that cause climate change. That would be 10 percent below 2014 production levels — levels last seen in the 1980s. The analysis paints a grim outlook for coal producers already struggling with big losses due to cheap natural gas, other environmental rules and stagnant global demand for coal used in energy and steel production. But the EIA thinks a sharp downturn during the early years of carbon limits would be made up, somewhat, in the 15 years after 2025. The forecast is based on an expectation of growing demand for electricity and higher prices for natural gas. By 2024, Western coal production, much of it in Wyoming’s Powder River Basin, would fall 21 percent from last year’s levels. It would be 34 percent lower than 2024 forecasts that exclude the environmental rules. Gradual increases over the next 15 years would still leave mining in the region 19 percent below the EIA’s business-as-usual case.

The U.S.’s Biggest Coal Company Can’t Pay To Clean Up Its Own Mines -- A new investigation has found that the world’s largest private-sector coal company does not have adequate funds or insurance to clean up its own mining operations, increasing the risk that taxpayers will have to pay billions of dollars to clean up toxic coal mine sites across the country.  Reuters reported last week that St. Louis-based Peabody Energy is “under scrutiny” from the federal government over concerns that the company is violating federal bonding regulations that are intended to guarantee that if a mining company goes bankrupt, it has sufficient insurance to pay to clean up its own mines. Instead of paying a third party for cleanup insurance, Peabody Energy has sought to comply with federal and state rules by promising regulators that it has sufficient financial resources on hand to pay for any cleanup costs — a practice known as self-bonding. A review of securities filings by Reuters, however, found that at the end of 2014, Peabody’s assets were insufficient to meet federal and state self-bonding requirements. According to Reuters, “slumping coal prices and declining demand have put [coal] industry balance sheets under stress,” raising serious questions about whether Peabody and its competitors can continue to insure their own operations. In 2014, Peabody posted more than $700 million in losses.“One of the key elements of (federal mining law) is to hold mine operators responsible and avoid taxpayers being saddled with the bill,”

Norway Coal Divestment Not What It Seems - The Norwegian government has affirmed its plans to divest its coal related holdings. On June 5, parliament voted to go through with the divestment, which will see the country’s $890 billion government pension fund (NGPFG) – otherwise known as the oil fund – disassociate itself from any company that derives more than 30 percent of their revenues or power production from coal. According to the Institute for Energy Economics and Financial Analysis, the divestment will cover around $5.4 billion – easily the single biggest fossil fuel divestment to date. That’s all well and good, but it may not all be true – at least not to the extent advertised. In fact, the evidence suggests meaningful divestment will be hard to come by in the medium-term. According to three environmental groups – Future In Our Hands, Greenpeace Norway, and German NGO Urgewald – Norway’s recent divestment efforts have been mostly hot air. In 2014, the NGPFG, under the direction of Norges Bank Investment Management, divested from more than 50 coal companies including Peabody Energy, Arch Coal, and Coal India. Today, 23 percent of world coal production can be tied to companies with NGPFG investment – down from 42 percent in 2013. However, the fund’s coal industry holdings actually grew by nearly $400 million in that same period. The fund’s stake in oil and gas companies also rose about $2 billion, or roughly 7 percent.

West Coast of North America to be Slammed by 2016 with 80% As Much Fukushima Radiation As Japan -- A professor from Japan’s Fukushima University Institute of Environmental Radioactivity (Michio Aoyama) told Kyodo in April that the West Coast of North America will be hit with around 800 terabecquerels of Cesium- 137 by 2016. EneNews notes that this is 80% of the cesium-137 deposited in Japan by Fukushima, according to the company which runs Fukushima, Tepco (click image for larger version):  This is not news for those who have been paying attention.  For example, we noted 2 days after the 2011 Japanese earthquake and tsunami that the West Coast of North America could be slammed with radiation from Fukushima. We pointed out the next year that a previously-secret 1955 U.S. government report concluded that the ocean may not adequately dilute radiation from nuclear accidents, and there could be“pockets” and “streams” of highly-concentrated radiation. The same year, we noted that 15 out of 15 bluefin tuna tested in California waters were contaminated with Fukushima radiation. In 2013, we warned that the West Coast of North America would be hit hard by Fukushima radiation. And we’ve noted for years that there is no real testing of Fukushima radiation by any government agency.

Isis’s dirty bomb: Jihadists have seized ‘enough radioactive material to build their first WMD’ - The Isis militant group has seized enough radioactive material from government facilities to suggest it has the capacity to build a large and devastating “dirty” bomb, according to Australian intelligence reports.   Isis declared its ambition to develop weapons of mass destruction in the most recent edition of its propaganda magazine Dabiq, and Indian defence officials have previously warned of the possibility the militants could acquire a nuclear weapon from Pakistan.  According to the Australian foreign minister, Julie Bishop, Nato has expressed deep concerns about the materials seized by Isis from research centres and hospitals that would normally only be available to governments.

Editorial: One drilling mistake could prove devastating – Akron Beacon Journal - Since 2010, the U.S. Environmental Protection Agency has gathered data on one of the most controversial aspects of the oil and natural gas boom in Ohio and other states. The issue, impressed on many people by the documentary Gasland and incidents such as the contamination of aquifers in 2007 in Bainbridge Township, Geauga County, is how the technique of hydraulic fracturing affects the nation’s drinking water supplies. In a draft report released last week, the EPA did note a few specific instances of contamination, among them the Bainbridge incident. Still, the agency’s conclusion supports the contention of the industry that such drilling is generally safe. The EPA did not find evidence that hydraulic fracturing has “led to widespread, systematic impacts on drinking water resources.” That hardly amounts to a carte blanche for the industry. What the report makes plain is the massive scale of modern-day drilling, as many as 30,000 hydraulically fractured wells drilled each year, the activity affecting 25 states. Each well uses between 1 million and 5 million gallons of water mixed with sand and, in various combinations, more than 1,000 chemicals, about half with potential human health effects. Under high pressure, the mixture fractures rock and releases valuable resources. At the same time, many areas of potential vulnerability exist. In drier areas, tapping water for drilling can affect drinking water supplies. Mixing drilling fluid can lead to spills; so can handling the wastewater that comes back up after fracking takes place. Poorly constructed well casings, designed to prevent leakage into aquifers, can fail. There also is evidence of contaminants migrating into underground aquifers, although the EPA report characterizes the chances as “unlikely” in deep shale formations such as those in Ohio. In other parts of the country, hydraulic fracturing takes place in shallower formations or even layers where drinking water resources are at the same level. For state policymakers such as those in Ohio, the report must be viewed as a prescription for frequent, detailed inspections and careful monitoring. Providing the Ohio Department of Natural Resources with adequate funding must be a high priority, the department in almost total control of drilling in the state.

Fracking's dangers - Toledo Blade  Despite a recent federal report concluding fracking doesn’t adversely affect drinking water, the risks posed by fracking are clear. Oil and gas lobbies quickly looked to the Environmental Protection Agency’s new report on fracking safety to defend their absurd claims that fracking regulations aren’t necessary. Actually, the EPA’s limited report says nothing about the biggest danger of fracking: man-made earthquakes. It shouldn’t be read as a vindication of the practice, and certainly not as the last word on the dangers of fracking.  The report found that fracking, a method of releasing oil and natural gas by injecting water and chemicals deep into the Earth’s surface, has not shown any widespread effects on the quality of drinking water resources. But it notes that chemicals used in fracking have contaminated water supplies in some specific cases, and that it runs the risk of doing so again. The report also lacks data from long-term studies, which are critical to assessing environmental impacts. More important, though, is what the EPA report leaves out. Mounting evidence suggests that fracking is responsible for dramatic increases in earthquakes all over the country, including in Ohio. The Seismological Society of America found this year that fracking was responsible for dozens of earthquakes near Youngstown in 2011. Before the fracking boom of the last few decades, there were about 20 major earthquakes per year in the eastern and central United States. Last year, there were more than 650. The federal government also acknowledges the role of fracking in creating earthquakes, but it has limited authority to regulate the practice. That puts the burden on state and local governments to regulate the practice effectively. But industry-friendly officials in energy-rich states have mostly shirked that responsibility, and trusted the industry to regulate itself.

Lawmakers don't want injections - — Two Republican lawmakers want Michigan’s Monroe County to be declared off limits for deep underground injection of brine waste products from conventional oil drilling, citing a potential for groundwater contamination because of that county’s highly porous Karst geology.  The outcome of bills introduced into their respective chambers recently by state Sen. Dale Zorn (R., Ida) and state Rep. Jason Sheppard (R., Temperance) could have broader implications across Michigan and Ohio because of their amount of Karst.  “A Karst formation is like an underground river,” Mr. Zorn said. “We know this Karst area does have water flowing through it. If anything in the ground gets in there, it’s going to contaminate water.” Mr. Zorn and Mr. Sheppard said they are not against energy exploration, but said the sensitive geology of Monroe County is not conducive for waste products to be injected underground. “Any slip-up or error could ruin a lot of wells and a lot of farm fields,” Mr. Sheppard said. Karst, which includes limestone and other types of bedrock that can dissolve, is known for its porous, Swiss cheese-like formations. Only about 3 percent of Ohio has Karst geology near its surface, but much of that is in northwest and central Ohio, especially Delaware County. Portions of Seneca, Huron, Sandusky, Erie, and Ottawa counties, including the Marblehead Peninsula and the Lake Erie islands, also have Karst beneath them, according to the Ohio Department of Natural Resources.

Ohio severance tax is moving at a snail’s pace --According to Ohio’s Governor John Kasich, not much progress has been made regarding the new oil and gas severance tax. Although Gov. Kasich is optimistic about the tax being passed, legislators are moving at a snail’s pace when it comes to passing the tax.  The Governor participated in an interview with radio host Hugh Hewitt and explained there has been “virtually no progress” made.  The tax would increase what companies operating in the Utica Shale formation pay to drill.  A large portion of the revenue generated from the tax would be allocated to funding Gov. Kasich’s proposed income tax cut. During the interview, Gov. Kasich told Hugh that he cannot discuss the severance tax, if he were to go into detail he could ruin the entire chance of it being passed.  However, he did explain efforts are being towards a lower income tax: I’m not only for reducing taxes when you reduce government, but I’m also for creating a tax system that encourages consumption … And so far that’s part of our effort to try and get our income tax down. As reported by the Columbus Business First, “Kasich being at odds with the oil and gas industry has gone on longer than many expected.  The governor had wanted a tax of 6.5 percent on oil and gas and 4.5 percent on natural gas liquids from horizontally drilled wells.”  According to the industry, the proposed rates have the potential to slow oil and gas investment, especially considering how the industry has already suffered from the downturn.

New Ascent Resources sells 35,000 acres in eastern Ohio to Gulfport Energy for $407 million -- Aubrey McClendon’s American Energy Appalachian Holdings LLC has a new name and has sold off 35,000 acres of Utica Shale holdings in eastern Ohio for $407 million. The company, now known as Ascent Resources LLC, will be a standalone company that will be independent of American Energy Partners LP founded in 2013 by McClendon, the former CEO of Chesapeake Energy. The 35,000 acres and certain assets in Monroe, Belmont and Jefferson counties were purchased by Gulfport Energy Corp., another key player in the Utica Shale. The assets include four completed wells, 18 unfinished wells and 11 miles of pipeline. The land is in what’s called the dry gas window and will produce natural gas but little oil or other liquids. When the deals are completed, Oklahoma-based Gulfport will hold about 243,000 acres in the Utica Shale. The biggest chunk of the acquired land, 29,100 acres, is in Monroe County. There are also 6,200 acres in Belmont and Jefferson counties.

Utica and Marcellus well activity in Ohio -- The following information is provided by the Ohio Department of Natural Resources (ODNR) and is through the week of May 30th. 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, 551 drilled, 902 producing, 25 inactive, 24 in final restoration and 3 abandoned.  This brings the total number of wells in the Utica to 1,929.  The Marcellus Shale in Ohio remains unchanged from last week’s well report.  The area is still sitting at 15 wells permitted, 11 drilled, 14 producing and one well inactive.  There are a total of 44 wells in the Ohio Marcellus Shale.

Marcellus permit activity in Pennsylvania --  The Marcellus Shale formation in Pennsylvania saw quite a bit of action over the last week, and news of the possibility of new pipeline construction as surfaced. Sunoco Logistics Partners is  considering adding a second pipeline to its Mariner East II project.  The purpose of second pipeline would be to increase the flow of liquefied natural gas, but the company is unsure if it will use the pipeline right away.  In order for the pipeline to be put to use, Sunoco will have to be successful at selling capacity.  However, even though it may not be used right away, building the pipeline now makes sense.  According to Sunoco’s Communications Manager Jeffery Shield, since the company has plans to building one pipeline already, constructing a second one at the same time is logical.  By building it now, the company would cuts costs and limit construction.Sunoco has already been issued two permits to build two 350-mile long pipelines that would travel through Ohio and West Virginia.  The pipelines would eventually hook up to the Marcus Hook Industrial Complex, which is all part of the Mariner East II project.  According to a study conducted by Econsult Solutions, the project will bring in nearly $4.2 billion to Pennsylvania’s economy.  The pipeline will provide over 300,000 jobs over the course of the construction period and 300 to 400 permanent jobs once it is completed. The following information is provided by the Pennsylvania Department of Environmental Protection and covers June 1st through June 7th. New: 31 - Renewed: 3

Disturbing Study Links Fracking Wells to Low Birth Weights -- In an alarming new study, University of Pittsburgh researchers revealed that pregnant mothers who live in close proximity to fracking wells are more likely than their counterparts, who live farther away, to have babies with lower birth weights. Perinatal Outcomes and Unconventional Natural Gas Operations in Southwest Pennsylvania was published last week in the journal PLOS ONE. Hailing from Pitt’s Graduate School of Public Health, the researchers investigated birth outcomes for 15,451 babies born between 2007 and 2010 in three counties in the fracking-heavy state of Pennsylvania: Washington, Westmoreland and Butler. “Mothers whose homes fell in the top group for proximity to a high density of such wells were 34 percent more likely to have babies who were ‘small for gestational age’ than mothers whose homes fell in the bottom 25 percent,” states a summary of the report’s conclusions. “Small for gestational age refers to babies whose birth weight ranks them below the smallest 10 percent when compared to their peers.” Low birth weight is associated with medical problems later in life, including diabetes, heart disease and high blood pressure.The researchers say these findings held up even when numerous other factors were taken into account, including prenatal care, education, age and birthing history. They emphasized that the study does not definitively prove a causal relationship between fracking wells and low birth weights, but is certainly cause for concern—and further investigation.

Natural gas line bursts  – A natural gas pipeline rupture caused a voluntary evacuation of residents living in a three-mile radius of this Lycoming County village Tuesday evening. The line is owned by Williams, a natural gas pipeline company based in Tulsa, Okla., which wants to build a 178-mile line that would pass through Northumberland and Columbia counties. The Williams Transco 24-inch line ruptured at around 9:30 p.m. in a rural area north of Unityville near Wilson Road. State Route 118 was closed between routes 42 and 239 and an evacuation radius of 1 to 1.5 miles was quickly established, before being widened to three miles. Shelters were established at Lairdsville Elementary School and Unityville and Benton fire companies. Dan Jankowski, Benton EMA coordinator, said he could hear a loud roar from his home located about four miles away from the site. Other residents reported hearing a similar sound. Jankowski was manning the Benton shelter, where about 15 residents sought refuge before returning home when the evacuation order was lifted at 11:45 p.m. Jennifer Long, emergency management coordinator for Columbia County, did not know what caused the break and was unsure how much gas was released into the environment. A call into Lycoming County Department of Public Safety was not returned. Williams, a natural gas pipeline company based in Tulsa, Okla., announced this spring details of the Atlantic Sunrise Project, a 178-mile pipeline that would connect the natural gas fields of the northern tier to the existing Transco pipeline, which already distributes natural gas from Pennsylvania to southern states. According to a preliminary map, it would enter Northumberland County from the south in East Cameron Township through State Game Land 84. It would cross Upper Road and continue in a mountainous area into Coal Township and then Ralpho Township. It would enter Columbia County through Cleveland Township.

Gas line explosion in Lycoming County involves pipeline owned by same company that wants to build in Lancaster County - A natural gas pipeline rupture and explosion forced the evacuation of about 130 people Tuesday night in Lycoming County. The rupture occurred on a 24-inch natural gas pipeline owned by Williams, the pipeline company that wants to build a 42-inch gas pipeline through 36.5 miles in Lancaster County as part of the Atlantic Sunrise pipeline project. This is not the first Williams pipeline failure. Lance Latham, a spokesman for the Oklahoma-based Williams, said that “emergency shutdown equipment worked properly to quickly stop the flow of gas and isolate the section of line where the failure occurred. As a safety precaution, local emergency response personnel evacuated some nearby residents.” There were no reports of injuries. According to WNEP, a television station in Scranton, about 130 people were taken to two nearby fire stations. The evacuation order was lifted just before midnight. The cause of the pipe failure has not been determined, Williams said.

American Medical Association blasts secret shale records -- The American Medical Association, citing growing concerns about monitoring and tracking long-term human health impacts caused by shale gas development, is calling for the public disclosure of all chemicals used in the extraction technique known as hydraulic fracturing, or “fracking.” The new policy, adopted Tuesday by the nation’s largest physicians organization at its annual meeting in Chicago, states that in addition to requiring the chemical disclosures, monitoring “should focus on human exposure in well water and surface water and government agencies should share this information with physicians and the public.” Most of the 25 states in the U.S. where shale gas drilling and development is occurring — including Pennsylvania, where drilling in the Marcellus and Utica shale formations is booming — either don’t know or don’t publicly disclose all the chemicals used in fracking. “Keeping the names of the chemicals secret is preposterous,”  “It places an unreasonable burden on physicians. The AMA feels that if companies are going to be responsible petroleum and gas explorers and extractors, they need to disclose the chemicals they use and do better water testing. That’s not a radical position.” The industry says it meets all state laws. It has opposed calls to make public all of the chemicals used in the fracking process, citing commercial proprietary interests for keeping secret the chemicals used in fracking as biocides, friction inhibitors, anti-corrosives and acids to dissolve minerals.

Why New York's Fracking Ban for Natural Gas is "Unsustainable" - Forbes  - In December, New York became the 2nd state after Vermont to prohibit hydraulic fracturing (“fracking”) statewide. Although a few others have joined in, New York is the only state with significant shale gas potential to ban fracking, “the most important, and the biggest, energy innovation of this century.” This controversial decision by Governor Cuomo has even fueled secession talk by the southern part of the state that has sat idly by and watched neighbor Pennsylvania enjoy the huge economic benefits of shale development (as such, states like Texas and Oklahoma are banning fracking bans!). Fracking technology, after all, is a proven commodity that has been safely deployed for over 60 years in over a million wells – across the country to great success. New Yorkers should realize what’s at stake. New York sits atop the mighty Marcellus Shale, a huge source of oil and gas that also lies beneath much of Ohio, West Virginia, and Pennsylvania. The play covers some 18,750 square miles in New York and has transformed Pennsylvania into a natural gas powerhouse, surging state state output from 200 Billion Cubic Feet (Bcf) in 2008 to 3,800 Bcf in 2014. New York today isn’t a material gas producer, yielding just 22 Bcf a year, halved since 2009. Thus, New York now produces enough gas to cover its consumption needs for just 6 days. Nationally, New York consumes 5% of U.S. gas but produces 0% of U.S. gas. This is becoming increasingly awkward: New York, the 4th largest state with 19.8 million people, is increasingly turning to natural gas to fuel its economy, ranked 3rd at $1.5 trillion. Natural gas is easily New York’s most critical source of energy, supplying about 1,300 Trillion Btu a year, versus 615 Trillion Btu for 2nd place oil-based gasoline. By comparison, wind and solar renewables offer just 40 Trillion Btu. This heavily weighted oil and gas energy portfolio makes obvious New York’s necessity to develop its own shale resources, which are significant. Upper estimates have the Marcellus formation in New York containing 75-100 Trillion Cubic Feet of recoverable gas, but shale energy continues to prove previous assessments greatly understated as the resources get developed.

New forced pooling bill anticipated - Legislators are expecting a new forced pooling bill for the 2016 session, after the last-minute death of a 2014 bill. With that in view, industry and mineral owner representatives and a farmer schooled the Joint Standing Committee on Energy on the pros and cons of pooling Monday morning. Kurt Dettinger, attorney for the West Virginia Oil and Natural Gas Association (WVONGA), rehearsed some familiar points. Pooling — combining adjacent mineral leases into a unit big enough to drill one or more horizontal gas wells — helps prevent waste of gas resources and causes more efficient development by eliminating “stranded” properties that can’t be developed. So-called forced pooling allows developers to lease minerals belonging to unknown or missing owners, or to acquire leases on specified terms from otherwise unwilling owners. Also, Dettinger reminded them, pooling already exists for deep wells in the Utica. Last year’s bill and the coming one wrap in all wells — Marcellus and Utica — and offer protections not yet in law, he said. There is no threshold for mineral owner buy-in, for instance. The bill requires 80 percent — higher than any state in the nation. For pooled interests belonging to an unknown or missing owner, the dead and proposed bills allow the surface owner to acquire the mineral ownership after five years. “That’s a big, substantial benefit for surface owners,” he said.

Exploratory Drilling Approved For Louisiana Wetlands -  The Army Corps of Engineers this week issued a permit for an oil and gas company to fill three acres of wetlands in St. Tammany Parish, Louisiana, where it will begin exploratory drilling — the first step towards hydraulic fracturing (fracking). The decision raised questions for local leaders and environmental advocates about how much control they have over their natural resources.   The wetlands, in the town of Abita Springs, are part of a pristine aquifer — home to Abita Brewing Company, Louisiana’s most famous beer, and the sole source of drinking water for miles around. Unsurprisingly in a town where the official seal shows a woman kneeling by the water, the proposal to start fracking has been met with community outrage. In fact, Abita Springs sued the Army Corps of Engineers over its failure to hold adequate public hearings on the issue. That suit, as well as one seeking to prevent the drilling under a land-use law, was dismissed.  Wetlands are natural buffers to the effects of climate change, including both flooding and drought. In addition, they are important to regional biodiversity and erosion control. Louisiana loses a football field’s worth of land every hour, according to the U.S. Geological Survey. Part of the loss of land is due to oil and gas development.  Abita Springs Mayor Greg Lemons said he was “very disappointed” with the Army Corps’ decision to issue the permit.  “Louisiana has some of the best, sensitive, prettiest wetlands area in the world. Anything that can damage that or denude that is something we should really be thinking about not doing,” Lemons told ThinkProgress. “I’m of the understanding that the job of the Army Corps of Engineers is protecting wetlands.”

Concerns Over Earthquakes Spread To Texas -- The connection between wastewater injection wells and an alarming increase in the frequency of earthquakes is getting a lot more scrutiny these days. First was Oklahoma, which has suddenly become the earthquake capital of the United States. The culprit? Scientists are becoming more confident that the injection of wastewater into disposal wells causes fault lines to “slip,” contributing to the likelihood of an earthquake. The issue has become highly contentious in Oklahoma. But now the controversy has spread to Texas, where a subsidiary of ExxonMobil is under the microscope. After a series of earthquakes struck near Dallas, Texas regulators are demanding answers. The regulators will hold a set of hearings beginning on June 10 in which they will look into a set of earthquakes that have been linked to disposal wells operated by XTO Energy, a shale gas company purchased by ExxonMobil back in 2010. Research from Southern Methodist University, based in Dallas, may have found a link between nearby injection wells and the earthquakes. What is worrying state regulators is the fact that the fault line that was triggered had been dormant for a long time, but sprung to life after the disturbance from the disposal wells. In response to all the seismic activity, regulators sent requests to four energy companies, asking them to shut down their wells and look into the matter. Those companies were EOG Resources, Bosque Disposal Systems LLC, Metro Saltwater Disposal Inc., and Pinnergy Ltd.

Exxon to Face Regulators’ Questions Over Quakes - WSJ: Texas regulators are scrutinizing some of the biggest U.S. energy producers in the wake of several earthquakes that have rocked the Dallas-Fort Worth area this year. An Exxon Mobil subsidiary and EOG Resources Inc., one of the biggest shale-oil and gas pumpers, are facing questions about their use of injection wells to dispose of wastewater from hydraulic fracturing operations. The state’s oil-and-gas regulator on Wednesday begins a series of hearings in Austin to assess some oil companies’ role in causing the temblors. A growing body of scientific research from federal, state and academic researchers suggests that disposal wells, often used to get rid of the dirty water leftover from fracking and brine from oil-and-gas production, may be linked to increased seismic activity. Some in the energy industry are trying to discount those studies. The commission’s seismologist, Craig Pearson, has also expressed doubts that fracking or wastewater disposal wells are to blame for a recent spate of quakes in north Texas, home to a natural-gas exploration area called the Barnett Shale. But Ryan Lance, chief executive of ConocoPhillips, COP -0.58 % which is one of the biggest American shale drillers, concedes there is a link. “We’ve followed all the data and the evidence and it does appear that in some areas water disposal is creating seismic events,” Mr. Lance said last month. “We’re trying to understand how widespread it is.”

Exxon subsidiary: Quakes not caused by injection wells -   A major player in the oil and gas industry on Wednesday joined the debate over whether Texas earthquakes are being caused by injection wells with a resounding “no,” at least in one case. Representatives of Exxon Mobil subsidiary XTO Energy Inc. blame nature for a series of earthquakes that struck the towns of Azle and Reno, northwest of Fort Worth, in 2013 and 2014. They told Texas Railroad Commission examiners in Austin on Wednesday that their wastewater injection well, built close to a faultline, did not trigger the temblors.XTO argued that the faults beneath Azle and Reno have been active for 600 million years. “The earth has been moving continuously over time, and that movement is the result of natural tectonic forces far away but that express themselves right here,” said Tim George, an attorney for XTO. A study published in April by researchers at Southern Methodist University, the U.S. Geological Survey and the University of Texas concluded that two wastewater wells, including one operated by XTO, most likely triggered the events. The earthquakes culminated in two widely felt 3.6-magnitude tremors in November and December 2013. Companies use wastewater wells to bury fluid from the oil and gas production process, including fracking.The Railroad Commission, which regulates the oil and gas industry, asked representatives of XTO and EnerVest, the company that operates the second wastewater well, to appear in Austin to explain why their wells should not be shut down. XTO responded with more than 30 exhibits, dozens of slides, and three expert witnesses who testified more than eight hours.

Natural gas firm asked to show it's not causing Texas quakes - (AP) — A natural gas extraction company controlled by energy giant Exxon Mobil sought to prove Wednesday that it is not to blame for a recent rash of small earthquakes in North Texas, telling a powerful state agency that it believes the earthquakes occurred naturally. XTO Energy submitted evidence to the Texas Railroad Commission, which regulates the state’s massive oil and gas industry, during a hearing that will test the agency’s willingness to suspend permits for injection wells based on seismology. The wells store wastewater from hydraulic fracturing, which has opened vast reserves of natural gas in North Texas but critics blame for causing small earthquakes. The multiday hearing is the first time the commission is requiring a company to prove it’s not to blame for earthquakes. The commission, under recent policy changes, can now require companies to conduct seismic tests before applying for permits or revoke permits if wells are linked to earthquakes. Studies have suggested a link between small earthquakes and injection wells in parts of Texas, Oklahoma and other states, but the industry has steadfastly denied any connection. In Texas, a recent Southern Methodist University study looked at wells west of Fort Worth where thousands of gallons of wastewater from fracking are disposed each day. The study suggested the wells caused hundreds of earthquakes in 2013 and 2014 in the city of Azle and other nearby communities, where no seismic activity had previously been recorded.

Six facts about human-caused earthquakes - The following information was posted on the U.S. Geological Survey website on June 10, 2015:The central United States has undergone a dramatic increase in seismicity over the past 6 years. From 1973-2008, there was an average of 24 earthquakes of magnitude 3 and larger per year. From 2009-2014, the rate steadily increased, averaging 193 per year and peaking in 2014 with 688 earthquakes. So far in 2015, there have been 430 earthquakes of that size in the central U.S. region through the end of May.There are many questions and misconceptions about what's happening. How does the observed increase relate to oil and gas production activities? Does this connect to fracking—more formally known as hydraulic fracturing? What exactly is fracking? What are induced earthquakes?USGS scientists recently published a report that explains what is causing these seismic events and addresses common misunderstandings. The article is published in the Seismological Research Letters journal.

  • Fact 1: In the United States, fracking is not causing most of the induced earthquakes. Wastewater disposal is the primary cause of the recent increase in earthquakes in the central United States.
  • Fact 2: Not all wastewater injection wells induce felt earthquakes. Most injection wells do not trigger felt earthquakes. A combination of many factors is necessary for injection to induce felt earthquakes.
  • Fact 3: Wastewater is produced at nearly every oil and gas well, not just hydraulic fracturing sites.
  • Fact 4: The content of the wastewater injected in disposal wells is highly variable.
  • Fact 5: Induced seismicity can occur at significant distances from injection wells and at different depths. Earthquakes can be induced at distances of 10 miles or more away from the injection point and at significantly greater depths than the injection point.
  • Fact 6: Wells not requiring surface pressure to inject wastewater can still induce earthquakes.

After 3 weeks, evacuation remains in place for Karnes County families -- It’s been roughly three weeks since the South Texas oil well in Karnes County ejected toxic gas into the air, and some families remain displaced as decontamination efforts continue.  On a Tuesday afternoon in the middle of May, an oil well owned by Encana Corp exploded and shot hydrogen sulfide gas into the air, forcing an evacuation of several homes. Roughly 20 people were evacuated from their homes as a precautionary measure while Encana employees worked to shut down the well. Now, five families are still waiting to return home as Encana continues to decontaminate their houses, according to Doug Hock, a spokesman for the Canadian-based company. Three of the families are being hosted at a local motel and are provided food every day and a per diem by Encana.   In a recent report from the National publication Inside Climate News, Texan Leonard Cordova elaborated the impact of displacement on his family. The report noted that Cordova, his wife and their 2-year-old daughter have shared a hotel room since May 19. Their three indoor cats are staying with them. The family’s dogs are at a friend’s house, and their three outdoor cats are still living on the Cordova’s property, which is across the street from the well that blew. Cordova stated that to his knowledge, their home was one of the most contaminated. “They’re not allowing us to go back to our property,” Cordova told reporters. “They have guards out front, and if we try to go back, they call the police. We left with nothing but the clothes we had on. All my daughter had was a shirt and a diaper.” Encana has stated that any valuable items requested by the family could be retrieved by workers, but Cordova has told them he’s uncomfortable with the idea of strangers going through his personal belongings. In addition, Cordova has requested for temporary housing to escape the claustrophobic conditions on a hotel room but feels it’s unlikely due to the housing crunch from the latest oil boom.

Encana lost $197k on oil in accident -  When an oil well belonging to Encana Corp. exploded and shot gas into the air May 19 in Karnes County, the incident cost several families their homes as surrounding residents evacuated the area. According to a report released last week, the accident also proved to be an expensive loss for Encana, San Antonio Business Journal reports. The report, which Canadian company The Calgary sent to the Texas Commission on Environmental Quality (TCEQ), noted a loss of 138,000 gallons of oil, worth $197,000, which spewed into the air. The Texas Railroad Commission is investigating the blast but has yet to take regulatory action against Encana. The company had originally reported equipment testing and calibration to TCEQ while the surface pressure was at 0 psi. Encana attributed the the accident to a “downhole failure” while AAA Well Service worked on the premises. Well control specialists Boots & Coots, which quelled the effects of the accident, guessed that nearly 1,000 acres of surrounding land were affected.

"Tar balls" begin to dot Texas shorelines --  Seemingly out of nowhere, hundreds of “tar balls” have washed up along the shore in Corpus Christi and along southern Texas—baffling experts in the area. “We don’t have a source for the oil,” Jim Suydam, a spokesman for the Texas General Land Office, told ABC News reporters yesterday. Suydam stated that samples of the substance have been sent to the U.S. Coast Guard for analysis. As of now, researchers believe it’s some sort of produced crude oil from two different sources. “It is unlikely the source is from Texas waters, but possible sources include offshore rigs, a pipeline, a ship, or from natural seepage,” Suydam told ABC News in a statement. According to the report, the tar balls are dense accumulations of petroleum that have mixed with other materials such as sand, rock and shells. Some speculation about the sources include natural leaks along the continental shelf, which runs 40 to 100 miles off the Texas shoreline, or the result of frequent spills that occur when crude oil is transported from one tanker to another in the Gulf of Mexico before being brought into port. Director of environmental advocacy group Environment Texas Luke Metzer told ABC that he wouldn’t be a bit surprised if the source was manmade. Oil spills, he said, are just “a way of life” in Texas. He claimed that 543 spills occurred in 2012 alone, according to the Texas General Land Office.

Earthquakes in Kansas, Oklahoma prompt meeting over fracking - Environmental groups from Kansas and Oklahoma are hosting a public event this weekend that aimed at raising awareness about earthquakes and a hydraulic fracturing process commonly known as fracking that is used in drilling injection wells. The Sierra Club chapters from the two states have scheduled the meeting Saturday at the Medford Civic Center in Medford, Oklahoma. Both states have seen a rise in earthquake activity. On tap for the event is the screening of the film, “Groundswell Rising,” and a discussion with Todd Halihan, hydrogeology professor at Oklahoma State University. The environmental groups have been pushing for a moratorium on injection wells in the states.

Earthquakes near Colorado wastewater well decrease - The ground around a northern Colorado wastewater injection well has been relatively quiet for more than two months, offering hope that a 10-month string of more than 200 small earthquakes might have subsided. The bottom 450 feet of the 10,800-foot-deep well was plugged with cement last year, and that might be keeping the wastewater — a byproduct of oil and gas wells — from seeping into fractures and triggering earthquakes, researchers and regulators say. The newly shortened well is back in operation, and researchers say no quakes greater than magnitude 1 have been measured in a 7-mile radius around it since April 2. Colorado is one of a handful of states grappling with earthquakes blamed on such wells, which inject wastewater deep underground because it’s too salty or contaminated to be poured into rivers or lakes. Similar problems have been reported in Oklahoma and Texas, as well as Alabama, Arkansas, Kansas, New Mexico and Ohio. A 3.2-magnitude earthquake radiated from the site of the injection well in Weld County about 65 miles north of Denver on May 31, 2014. The quake was felt some 40 miles away but no damage was reported. Researchers and the Colorado Oil and Gas Conservation Commission, which regulates the industry, eventually zeroed in on the well as the likely cause.

Is Colorado's fracking battle over? - The national debate over hydraulic fracturing extends from one extreme to the other. New York state has banned the practice, while Texas recently passed a new law giving drillers carte blanche and local communities little recourse so long as a drilling site is “commercially reasonable.” To listen to Gov. John Hickenlooper, the debate in Colorado is all but over, with the industry having won a Texas-style victory. At a joint appearance with Sen. Cory Gardner last month in Denver, Hickenlooper suggested fracking opponents no longer have the enthusiasm or support to put regulatory measures on the ballot, as they did a year ago before the governor brokered a last-minute deal to remove them. “There will be proposals, but I don’t think there will be something that will be funded to any significant extent, and therefore I don’t expect something to get on the ballot,” Hickenlooper said, according to the Durango Herald. Boulder Congressman Jared Polis, who backed the ballot proposals and then agreed to remove them a year ago, says it’s too early to say what might be proposed for the 2016 Colorado ballot. “Given the pending Fort Collins and Longmont lawsuits that will hopefully confirm local authority to regulate fracking, and that we are 18 months out from the 2016 election, I can no more predict whether a ballot initiative is needed or would be viable in 2016 than I can predict who is going to win the World Series that year,”

Don't trust pro-oil messaging - The Coloradoan -- We live in an era when, if an entity wants to advance an interest and has sufficient monetary means, interest can be effectively promoted via TV commercials. It appears the oil and gas industry is employing that as a strategy given the current deluge of ads on most major networks. Some ads feature people represented as business professionals or a mother declaring they have looked into fracking and found it to be safe; or that fracking has been used for more than 60 years; or that Colorado has some of the strictest regulations in the nation and that we can breathe easy. On the other hand, numerous reports suggest the industry’s practices perhaps can’t be whitewashed quite so easily. For example, according to the COGIS Inspection/Incident Data Base on the Colorado Oil and Gas Conservation Commission’s website, there have been 268 incidents/spills year to date (through May 15). Some spills were in excess of 100 bbls of oil and produced water, condensate or both. Many resulted in contaminated soil; some occurred during rainy weather and in some cases the extent of contamination was reported as undetermined. There are also numerous research papers pointing to air quality/health concerns — including one published in November of 2014 by the scientific institute INSTAAR, of the University of Colorado Boulder titled “Influence of oil and gas emissions on ambient atmospheric non-methane hydrocarbons in residential areas of Northeastern Colorado.” The findings in this paper suggest O&G emissions are impacting a large population of Northern Front Range residents. Of particular concern were elevated levels of ozone precursors and benzene. Benzene levels in Platteville and Erie/Longmont were “of a high enough concentration for the potential of detrimental health effects if chronic exposure at these levels should occur.”

Emergency officials want more firefighting foam — An increase in crude oil traveling by rail through Wisconsin has prompted first responders to seek more firefighting foam so they’re better prepared for the possibility of a major train derailment. The state’s top emergency official says Wisconsin Emergency Management is working to stockpile the expensive material. He hopes to purchase 1,500 gallons of foam and store the firefighting material at several sites within two hours of where a derailment could occur. Wisconsin Public Radio reports that rail companies also are ramping up their firefighting foam supplies. A BNSF Railway spokeswoman says the company purchased more foam to ease the concerns of fire officials after a second track through La Crosse was approved. The state currently has one reserve of 1,600 gallons at Camp Douglas.

Alternate pipeline route would cross Central Minnesota - An alternative route for the proposed Sandpiper oil pipeline under consideration by state officials would bring the pipeline across Central Minnesota, including parts of Todd, Morrison, Benton and Mille Lacs counties. Last week, the Minnesota Public Utilities Commission approved a certificate of need for the $2.6 billion, 612-mile Enbridge Energy project, which would deliver light crude from the Bakken fields of North Dakota to a terminal in Superior, Wisconsin. The commission did not determine a route for the pipeline. Enbridge’s preferred route through north-central Minnesota is opposed by environmental groups and American Indian tribes who say it will impact sensitive lakes, wetlands and wild rice areas. Enbridge says Sandpiper is needed to move the growing supply of North Dakota crude safely and efficiently to market. It would carry about as much oil per day as 1,700 railroad tank cars. But environmentalists and tribal groups say the risk of leaks is too high. Opponents also argue that the pipeline will exacerbate the problem of climate change by continuing reliance on fossil fuels, when the emphasis should be on moving toward more renewable energy sources. Last Friday, the commission agreed on a 5-0 vote that the pipeline is necessary, but more review of the proposed route and an alternative route are required.

EIA: Bakken, overall production declines -- The momentum of the U.S. shale revolution is beginning to slow, according to the Energy Information Administration’s latest monthly drilling productivity report released this week. With the exception of the Permian Basin, the nation has experienced an overall decline in oil and gas production in the major shale plays. According to Shale Plays Media, by July production in the major U.S. shale plays is projected to drop by approximately 208,782 barrels of oil per day (bopd), down from April’s high of 5,694,580 bopd. This production downturn is largely attributed to a decrease in legacy production and increasing well depletion rates. The EIA reports that for the month of May, the Bakken produced 1.29 million barrels of crude oil per day, down 1 percent from April, but 23 percent greater than the same time period last year. Following the nationwide trend toward efficiency, though, the Bakken Shale produced 608 barrels of crude oil per day per rig, a 48 percent increase in production per rig compared to the previous year. This higher rate of production, however, has led to a decline in crude oil prices, leaving producers with less incentive to increase production. To read the full article, and to see activity in the other shale plays, click here.

Disappearing Bakken oil discount adds to output slowdown signs -- Oil traders scrambling to secure crude in the U.S. Midwest have pushed North Dakota's Bakken to a near premium for the first time in two years, a rally stoked by record refinery runs and an unprecedented slump in Canadian imports. Yet some traders say the surprising strength emerging from opaque physical crude markets in the heartland of the fracking boom also points to a more important, lasting factor: declining production of Bakken crude, a long-anticipated but as yet unproven twist in the shale revolution. The buying frenzy pushed Bakken delivered at Clearbrook, Minnesota WTC-BAK, to trade just 35 cents a barrel below the West Texas Intermediate benchmark last week, dealers say, the narrowest discount since July 2013. On Tuesday, it widened slightly to a 75-cent discount. Four months ago, it traded at a $7.50 discount. "The rapid spread contraction may be indicative of a faster-than-anticipated production decline, presenting upside risk to our price forecast" in the second half, Barclays analysts wrote in a report. There are other compelling reasons for Bakken crude's relative strength, to be sure. Canada's oil exports to the United States suffered their biggest monthly decline on record this spring due to maintenance on big oil sands projects as well as forest fires that slashed a tenth of Alberta's total oil production. Refiners in the U.S. Midwest region ran the most crude ever for the month of May thanks to a light maintenance slate and robust margins, triggering a bidding war for light barrels.Regardless, the disappearing discount offers a partial reprieve for large producers after the past year slashed global oil prices by as much as 60 percent to six-year lows.Thanks to the stronger differentials, Bakken crude BAK- has risen 54 percent from its mid-March low, whereas U.S. WTI prices CLc1 are up only 37 percent

Federal fracking rule to cost ND income, jobs -- If new federal hydraulic fracturing regulations go into effect later this month, North Dakota could potentially lose 1,900 jobs and $300 million annually in oil income, reports the Forum News Service (FNS). The federal rules set to take effect June 24 include new standards for constructing wells and for disclosing the chemicals used during the hydraulic fracturing process. A preliminary injunction has been filed by North Dakota against the Bureau of Land Management in an attempt to delay the rules from going into effect until the court is able to review a lawsuit filed by North Dakota, Wyoming and Colorado.  A hearing is scheduled for June 23 in the Casper, Wyoming, U.S. District Court. As reported by the FNS, North Dakota Industrial Commission member and Attorney General Wayne Stenehjem will attend the meeting. He said the federal rule would disrupt North Dakota oil and gas development and result in lost mineral royalties and tax incomes in the next fiscal year. In North Dakota, oil and gas activity on federal lands such as the Fort Berthold Indian Reservation account for roughly 40 percent of overall production. State officials, who favor state regulation, claim the BLM rules would create lengthy permitting delays. On Wednesday Stenehjem told the FNS, “We simply feel that our rules are better, they are effective and we are much better and much more capable of actually enforcing them than they are.” Department of Mineral Resources Director Lynn Helms believes that 10 of 22 companies with major operations on federal and tribal lands would most likely leave the state if the rules are implemented. As a result of this emigration, the state would lose 1,900 jobs and as much as $9.4 billion in royalties and taxes.

Bakken pipeline: Sandpiper one step closer to reality --The proposed Enbridge Sandpiper pipeline is one step closer to becoming a reality after the Minnesota Public Utilities Commission granted the project one of two necessary permits, reports the Dickinson Press. The pipeline, which has faced scrutiny and many protests in the state, was granted a certificate of need last week after Enbridge subsidiary North Dakota Pipeline Company illustrated its need to ship crude oil from the Bakken oil patch to existing Enbridge pipeline infrastructure in Superior, Wisconsin. The certificate approves a 24-inch diameter pipeline capable of carrying 225,000 barrels of oil per day (bopd) from the North Dakota border to a terminal located in Clearbrook, Minnesota. It also granted approval of a 30-inch pipeline capable of transporting 375,000 bpod from the Clearbrook location to Superior. The cost for the project is estimated to be approximately $2.6 billion and is projected to begin operations by the summer of 2017.As reported by the Dickinson Press, Enbridge spokesperson Lorraine Little said, “Enbridge is pleased with the Minnesota Public Utilities Commission’s unanimous decision to grant a certificate of need for the Sandpiper Pipeline Project. Sandpiper has broad and deep support throughout Minnesota as evidenced by the supporters who attended public hearings on the project earlier this year and by the thousands of others – including 65 Minnesota legislators and the majority of the county commissions along the route – who have expressed their support of Sandpiper.”

Bakken oil would benefit from export sales, economist says -- Bakken oil production will be around for years, but some political strings are going to have to be pulled to drive up sweet crude prices before things pick up, according an industry analyst. Rayola Dougher, of the American Petroleum Institute, met with Montana farmers in Sidney on Wednesday to talk oil and agriculture. Oil, natural gas and the fertilizer that comes from refining play major roles in farm production costs. In Bakken country, oil and farm interests are folded together. Dougher said its possible to have the higher crude prices the Bakken oil economy needs and still keep fuel affordable for farmers. API is lobbying Congress to waive the export ban on American oil, refineries located outside the United States and dependent on sweet crude would be willing to pay more for Bakken oil if they could get it, Dougher said, because their refining costs would go down. Adding more Bakken oil to the global mix would at the same time lower the average price for oil, including heavy crude, which is what most refineries in the United States are designed to refine.

Shale Oil Bomb Trains Kill Without Exploding - They just gas you with vented toxic gases. (If they didn’t vent they’d explode.) Then they choke you with diesel exhaust.  Surprise.  Bomb trains are killing people without exploding according to a new article. They do so by polluting the air in the communities they travel through. A shale oil bomb train is pulled by diesel engines that have no pollution controls. These are massive two stroke diesel engines,  similar to the outlawed two stroke lawn mowers – and nothing like the four stroke gasoline engines on a car with a catalytic converter. One diesel engines puts out the particulate pollution of thousands of cars or hundreds of trucks. Since they are not pressurized cars, they have pressure relief valves (PRVs) that vent pent up vapors, such as benzene, radon, methane etc.  If there are fifty shale oil tank cars on a siding in a residential neighborhood on a hot day, they are gassing the locals by venting toxic fumes into the atmosphere. Even without the diesel engines. How many of these shale oil bomb train cars a day do you want in your neighborhood/town/state/ planet ?

Oil drilling in Montana taps out -- Oil drilling in Montana has all but tapped out, according to state records showing that the state has been without a major drilling rig since April. Observers said the inactivity is due to low oil prices, which have also slowed drilling activity in North Dakota’s much more active Bakken formation, though crews are still drilling there. Montana drilling has been very limited during the Bakken oil boom, but it’s been decades since the state was without a single drilling rig. State Board of Oil and Gas officials suspect that Montana might have been without a drilling rig in 2009, though Rep. Tom Richmond, R-Lockwood, said it’s been much longer since the state experienced a drilling drought. Richmond was Board of Oil and Gas director before retiring last year. “We might have got close in 2009, but I’m thinking it was probably some time in the 1990s when it was zero,” Richmond said.  States keep weekly reports about intentions to drill, but the source to which many insiders defer is Baker Hughes.

5 'Raging Grannies' arrested in anti-Shell protest at Terminal 5 --  Five members of the Seattle activist group the “Raging Grannies” were arrested by police Tuesday morning during a protest outside Terminal 5. But it wasn’t easy. The women, dressed in long skirts and sun hats and sipping from porcelain teacups, were bound together by so-called “sleeping dragons,” makeshift sleeves constructed with materials designed to make their removal difficult and time-consuming. The “grannies” were part of two simultaneous protests against Shell’s offshore oil rig, which is at the terminal being prepared for Arctic drilling this summer. While a group of younger protesters camped out on an overpass above, with two heavy oil drums and signs, the grannies chained their wooden rocking chairs together on the BNSF Railway tracks below. The women were also bound together by the homemade arm sleeves. Seattle police Lt. Jim Arata warned the younger protesters that they had to move their oil drums and get off the overpass above Terminal 5, or face arrest. When the department’s Apparatus Response Team (ART) pulled up with a truck full of saws, jackhammers and other heavy-duty tools in case the protesters were chained to the oil drums, the protesters got up and walked away. The five grannies, on the other hand, stayed put when the team arrived. The department formed ART during Seattle’s 1999 WTO riots as a specialty team trained to safely remove protesters who chain themselves to objects or each other, Arata said.

44% of coastline clean after Santa Barbara County oil spill, officials say: More than 40 miles of California coastline has been cleared of oil from the Plains All American Pipeline oil spill off Santa Barbara County, officials say. Cleanup crews have cleared 44% of 96.5 miles of shoreline from Santa Barbara and Ventura counties – mostly sandy beaches that had only trace amounts of oil, according to a statement from the oil spill’s joint information center released Sunday. But other sections of rocky beach will have to be more meticulously cleaned by hand crews while a handful of boats sail off the coast to ensure no more oil washes ashore onto the cleaned areas, officials said. About 14,267 gallons of oil-water mix has been recovered. On May 19, an estimated 101,000 gallons of crude gushed from a rupture in a 10.6-mile-long pipeline and spilled up to 21,000 gallons of it into the Pacific Ocean near Refugio State Beach. Authorities say 136 birds and 67 mammals have been found dead since the spill. A review of the damaged pipeline by the federal Pipeline and Hazardous Materials Safety Administration found that corrosion had eaten away nearly half of the pipe’s metal wall. Regulators said an inspection by third-party metallurgists revealed metal loss of greater than 45% of the pipe wall's thickness in the area of the break. The 10.6-mile pipeline had “extensive” external corrosion, and the thickness of the pipe's wall where it broke had degraded to an estimated one-sixteenth of an inch, the pipeline agency said. Investigators found a 6-inch opening along the bottom of the pipe where it broke.

Editorial: Oil spill inquiries show the need for real oversight – Sacramento Bee - Though federal investigators have yet to pinpoint the precise cause of last month’s Santa Barbara oil spill, the basic story is becoming less and less mysterious. The federal Pipeline and Hazardous Materials Safety Administration revealed last week that the 28-year-old pipeline, buried just inland from a coastal paradise of beaches, had been severely eaten away by rot and corrosion. Unaddressed was who let it get to that point. Refugio State Beach lies on an immaculate stretch of shoreline. It has been at risk for as long as oil development has gone on off the mineral-rich Santa Barbara coast. We know this; California’s environmental movement grew out of the 1969 Santa Barbara oil spill. In fact, the pipeline that ruptured was built as an environmentally responsible alternative in crude oil transport. According to the Santa Barbara Independent, inland pipes were thought to be easier to secure than the potentially leaky oil tankers that the industry used to move cargo along the coast. But even best practices require policing. And records show that the federal regulators — and state fire marshals who, for a time, were deputized to do the federal inspections — clearly failed to force Plains All American Pipeline, the conduit’s Texas-based owners, to do proper maintenance.

Offshore oil drilling banned along new stretch of California coast as Obama administration doubles size of marine sanctuaries -  In the largest expansion of national marine sanctuaries in California in 23 years, the Obama administration on Tuesday more than doubled the size of two Northern California marine sanctuaries, extending them by 50 miles up the rugged Sonoma and Mendocino coasts. Under the dramatic move by the National Oceanic and Atmospheric Administration, the boundaries of the Gulf of the Farallones and Cordell Bank national marine sanctuaries expand from Bodega Bay to Point Arena, permanently banning offshore oil drilling along that stretch of coast. “These waters represent an extraordinary marine ecosystem, one of the richest on our planet,” said Maria Brown, NOAA’s superintendent of the Farallones sanctuary, headquartered in San Francisco. The announcement marks the largest expansion of national marine sanctuaries in California since President George H.W. Bush established the Monterey Bay National Marine Sanctuary in 1992.

Groups Oppose Plan to Open Over a Million Acres of Federal Property in California to Drilling and Fracking — A lawsuit filed today by environmental organizations seeks to block a federal plan to open up more than a million acres of public land and mineral rights in central California to drilling and fracking. Earthjustice filed the suit against the Bureau of Land Management in the Central District of California, Western Division, on behalf of the Center for Biological Diversity and Los Padres ForestWatch. The groups are suing BLM for approving a resource management plan that would allow oil and gas drilling and fracking on vast stretches of public land and mineral rights across California’s Central and San Joaquin valleys, the southern Sierra Nevada, and in Santa Barbara, San Luis Obispo and Ventura counties along California’s central coast. In 2013, a federal judge ruled BLM violated the law when it issued oil leases in Monterey County without considering the environmental risks of fracking. Today’s lawsuit points out that BLM failed to consider a reasonable range of alternatives and failed to adequately analyze and disclose the impacts of fracking on air quality, water, and wildlife, in violation of the National Environmental Policy Act. BLM’s resource management plan opens federal land to fracking without any meaningful analysis of fracking-related risks, including the use of toxic chemicals and pollution threats to California’s precious water supplies during an historic drought.

Trans-Alaska pipeline will go offline for summer maintenance starting Friday -- The trans-Alaska pipeline will shut down starting Friday for 36 hours of scheduled summer maintenance. Meantime, pipeline operator Alyeska Pipeline Service Co. is assessing the best way to fix a “weeping joint” discovered along an underground section of the line. The “weep” at a pump station between Delta Junction and Glennallen — with crude leaking a rate of 1 teaspoon each day — is contained and under constant monitoring, said Michelle Egan, corporate communications director for Alyeska. It’s falling into a drip pan when an employee isn’t wiping off accumulated oil with a rag, she said. The leak will be fixed after the shutdown, she said. Maintenance conducted during a shutdown involves multiple organizations and projects, with planning taking place over several months, she said. “It’s more prudent for us to go through the work we have planned,” she said. “There’s no reason this has to be addressed in this shutdown.” The leak appears to have been caused by possibly degraded material that separates the steel pipe from a steel fitting. More investigation will determine the cause, said Egan.

EPA's draft of four-year fracking study finds no inherent water risks -Back in 2011, the US Environmental Protection Agency (EPA) announced an effort to evaluate the publicly controversial technique of fracking, in which fluid pumped at pressure fractures rock that contains trapped natural gas or oil. Lots of research has been published since then, and the EPA has finally released a draft of its report for public comment and peer review.  The report is a useful summary of the practices being employed in fracking and the available data relating to concerns about contamination.   The report touches on every stage of the fracking process, from acquiring the water used to disposing of it afterward. It takes about four million gallons of water to frack a natural gas well, and almost 30,000 new wells are being drilled each year in the US. Overall, this adds up to a pretty insignificant sliver of our water use, but there are some areas where it is problematic.  Much of the scrutiny on fracking is focused below-ground, but the everyday handling of fluids above ground obviously runs the risk of spills. Estimates are spotty, but something like one to 10 percent of wells have had a surface spill of some volume—either water or chemicals getting ready to go down the well or water that has come back up. About eight percent of the spills the EPA surveyed made it into surface water or groundwater, and some of the others will have resulted in soil contamination that had to be dealt with. Open pits have been used in some instances to hold fluid at the surface, and these have sometimes resulted in contamination as well.  Much of the report details what we know about the potential for groundwater contamination from the natural gas wells themselves. It lays out all the potential pathways for that contamination, such as the different ways water or gas can leak from wells. As research has made clear, it’s very unlikely that fracturing the hydrocarbon source rock allows gas or fracking fluid to migrate into drinking water aquifers. (There are some instances where the geology is not so protective, though.) Instead, it’s the seal around the gas well that is the weak link in the chain.

Awkward: Day After EPA Finds Fracking Does Not Pollute Water, Top Oil Regulator Resigns Over Water Contamination -- Put this one in the awkward file: just hours after the EPA released yet another massive study (literally, at just under 1000 pages) which found no evidence that fracking led to widespread pollution of drinking water (an outcome welcome by the oil industry and its backers and criticized by environmental groups), the director of the California Department of Conservation,  which oversees the agency that regulates the state's oil and gas industry, resigned as the culmination of a scandal over the contamination of California's water supply by fracking wastewater dumping. Tom Burke, science adviser and deputy assistant administrator of the EPA's Office of Research and Development, told NPR that "we found the hydraulic fracturing activities in the United States are carried out in a way that has not led to widespread systemic impacts on drinking water resources. In fact, the number of documented impacts to drinking water resources is relatively low when compared to the number of fractured wells." In retrospect the EPA surely wishes it had picked a slightly different time and date to release its "imparial" results because less than 24 hours later on Friday afternoon, Mark Nechodom, director of the California Department of Conservation who was appointed by governor Jerry Brown three years ago, abruptly resigned following an outcry over oil companies injecting their wastewater into Central Valley aquifers that were supposed to be protected by law.

EPA Divided Over Fracking? - The EPA’s new report on fracking, which found no “evidence that these mechanisms have led to widespread systemic impacts on drinking water,” sparked a heated debate between FBN’s Stuart Varney and “Gasland” director Josh Fox. “Gasland” director Josh Fox argued “the EPA issued something of a retraction of that statement this weekend, because it lead to a lot of false reporting on the subject,” and charged that the Obama Administration supports fracking, and therefore the EPA is burying the lede on its findings. “What we are actually seeing here is a pattern within the Obama Administration specifically with regards to fracking and the EPA…Within the report is actually really damning evidence about fracking contaminating [ground water] Pennsylvania…Texas,” said Fox.  Varney had a different take.“Wasn’t that the actual way that fracking was conducted? It was [mistakes made] in how fracking was done as opposed to the whole process?” asked Varney. “No, what the report says is that fracking contaminates … ground water,” said Fox. “What the EPA has done time and time again on this issue, is issue a scientific report, which has actual science in it, and then slap on the top of it a press release or statement that says ‘Oh nothing really to see here,’” argued Fox. “Hold on a second,” said Varney. “Why would the EPA – which I thought was definitely anti-fracking, they don’t want you to frack – why would they come out with a 1,300 page report which concludes ‘we did not find evidence that these mechanisms [have any widespread, systemic impacts on drinking water?]” asked Varney.  Fox claimed the EPA is working to dumb down its own science on fracking to stay in line with the Obama administration’s agenda.

EPA Fracking Report Leaves Both Sides Claiming Victory - Both the energy industry and environmentalists are welcoming a report by the U.S. Environmental Protection Agency (EPA) that hydraulic fracturing, or fracking, has the potential to contaminate drinking water, but that there’s no evidence that the problem so far has been widespread. Five years ago Congress asked the EPA to study the issue, and on June 4 the agency’s Office of Research and Development (ORD) issued the document, which identifies only “specific instances where one or more mechanisms led to impacts on drinking water resources, including contamination of drinking water wells. The number of identified cases, however, was small compared to the number of hydraulically fractured wells.”  EPA spokesman Thomas Burke said the $30 million study “greatly advances our scientific understanding of fracking’s impacts, and it serves as a foundation for future study.” The report said that from 2000 to 2013 there were 6,800 sources of drinking water situated within one mile of a fracked well. “These drinking water sources served more than 8.6 million people year-round in 2013,” it said.  The U.S. energy industry and its allies welcomed the report. One representative, Erik Milito, director of the Upstream Group of the American Petroleum Institute, said it “confirms what the agency has already acknowledged and what the oil and gas industry has known. Hydraulic fracturing is being done safely under the strong environmental stewardship of state regulators and industry best practices.” Environmentalists also embraced the report, but for a different reason: the potential for broader water contamination. “The assessment smashes the myth that there can be oil and gas development without impacts to drinking water,” said John Noel of Clean Water Action.

Did the EPA just say fracking is safe? Depends who you ask. - The Environmental Protection Agency’s recent report on hydraulic fracturing, more commonly known as fracking, may have given oil and gas companies cause for celebration, but the report’s conditions and exceptions drew enough attention to keep the debate alive. Proponents of fracking rejoiced at the EPA’s announcement that it “did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States.” Erik Milito, director of Upstream and Industry Operations at the American Petroleum Institute, said the victory for oil and gas companies came as no surprise. “After more than five years and millions of dollars, the evidence gathered by EPA confirms what the agency has already acknowledged and what the oil and gas industry has known,” he said in an API press release.  While the report’s results initially sounded promising, critics latched onto the “but:” the EPA listed several ways in which fracking could potentially contaminate drinking water, and said that in a number of cases, water was, in fact, affected. Though cases in which drinking water was impacted were small in number compared with the sample size of cases studied overall, the EPA said the proportion could be inaccurate, a result of insufficient data and other limitations to the study. Michael Brune, executive director of environmental group The Sierra Club, was quick to cite the study’s results as a condemnation of fracking."The EPA's water quality study confirms what millions of Americans already know – that dirty oil and gas fracking contaminates drinking water," Brune said, according to The New York Times.

Why shale producers are happy with this EPA fracking study - The energy industry agrees with the U.S. Environmental Protection Agency — at least when it comes to the findings of an EPA study on hydraulic fracturing.  Michael Krancer, partner and chair of the energy industry team at law firm Blank Rome LLP, said a draft report on the EPA study shows that fracking is “safe,” with “no widespread issues.” Here’s what the EPA draft report released last week officially says: “There are above- and below-ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources.”  But the EPA did “not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States. Charles Perry, chief executive officer of energy-consulting firm Perry Management, said the report will “greatly benefit the oil producers.” The report makes “investors feel there will unlikely be any moves by the U.S. government to limit shale production and big frack jobs,” he said. That’s important for the shale industry. The U.S. government estimated that shale output accounted for about 49% of total U.S. crude production in 2014 and around 47% of total U.S. dry natural-gas production in 2013. A look at the benefits versus the risks show that it’s best to “embrace this technology,” as long as there’s strict oversight to make sure companies are doing things the right way, since mistakes “will be used as an excuse to hold back our economy,”

Leading Environmentalist: EPA an Oil Industry Mouthpiece - Anti-energy activist and documentarian Josh Fox believes the Obama administration’s Environmental Protection Agency is shilling for fossil fuel companies. “They will stick with the industry till all our water is contaminated, our air polluted and climate change has made our planet unlivable,” the filmmaker director said on Friday following the release of a widely anticipated EPA study on the environmental impacts of hydraulic fracturing, or fracking. The innovative oil and gas extraction technique has no “widespread, systemic impacts on drinking water,” the agency found. There were isolated incidents of water contamination among the wells tested, but “the number of identified cases … was small compared to the number of hydraulically fractured wells.”  Fox dismissed the findings in a column on the website EcoWatch.“What the EPA presented to the public yesterday was PR, not science and proof of the widespread, systemic contamination of our regulatory bodies by the oil and gas industry,” Fox wrote.“It is clear that EPA is a political agency not a scientific one,” he wrote on Twitter. Fox is one of the country’s most high-profile anti-fracking activists. His 2011 documentary Gasland was nominated for an Academy Award for Best Documentary and won a number of other awards.

Newsweek, Wash. Times Publish False Headlines About EPA Fracking Study -- Within hours of the Environmental Protection Agency (EPA) releasing a study on hydraulic fracturing, or "fracking," Newsweek and The Washington Times published online articles with headlines that falsely claimed the EPA determined fracking does not pollute drinking water. However, while the EPA said it found no evidence that fracking has led to "widespread, systemic impacts on drinking water resources in the United States," the study also identified "specific instances" where fracking "led to impacts on drinking water resources, including contamination of drinking water wells."   In its headline, Newsweek asserted: "Fracking Doesn't Pollute Drinking Water, EPA Says." The Washington Times' similar headline, "EPA: Fracking doesn't harm drinking water," was also adopted by The Drudge Report, a highly influential conservative news aggregator.  But the EPA study said none of those things. Rather, the EPA concluded:  From our assessment, we conclude there are above and below ground mechanisms by which hydraulic fracturing activities have the potential to impact drinking water resources. These mechanisms include water withdrawals in times of, or in areas with, low water availability; spills of hydraulic fracturing fluids and produced water; fracturing directly into underground drinking water resources; below ground migration of liquids and gases; and inadequate treatment and discharge of wastewater. We did not find evidence that these mechanisms have led to widespread, systemic impacts on drinking water resources in the United States. Of the potential mechanisms identified in this report, we found specific instances where one or more mechanisms led to impacts on drinking water resources, including contamination of drinking water wells. The number of identified cases, however, was small compared to the number of hydraulically fractured wells.

Here’s What Most Media Outlets Left Out of Their Reporting on EPA Fracking Study --The EPA emphasized that the lack of evidence of “widespread” drinking water impacts could be due to “limiting factors,” and that “data limitations” prevent the agency from having “any certainty” of how often fracking actually impacts drinking water: This finding could reflect a rarity of effects on drinking water resources, but may also be due to other limiting factors. These factors include: insufficient pre- and post-fracturing data on the quality of drinking water resources; the paucity of long-term systematic studies; the presence of other sources of contamination precluding a definitive link between hydraulic fracturing activities and an impact; and the inaccessibility of some information on hydraulic fracturing activities and potential impacts.  InsideClimateNews published a lengthy investigation about the many factors preventing the EPA from conducting a comprehensive study of fracking’s impact on drinking water. The investigation which was based on a review of internal EPA documents and interviews with people who had knowledge of the study, noted that geochemist Geoffrey Thyne said the EPA study was “not going to produce a meaningful result,” and that “[m]ore than a half-dozen former high-ranking EPA, administration and congressional staff members echoed Thyne’s opinion, as did scientists and environmentalists.” InsideClimateNews further detailed how the oil and gas industry had prevented the EPA from conducting the prospective studies necessary to determine fracking impacts: The EPA’s failure to answer the study’s central question partly reflects the agency’s weakness relative to the politically potent fossil fuel industry. The industry balked at the scope of the study and sowed doubts about the EPA’s ability to deliver definitive findings. In addition, concerns about the safety of drinking water conflicted with the Obama administration’s need to spur the economy out of recession while expanding domestic energy production.

Josh Fox Gets Kicked Off of Fox News While Exposing Misleading Coverage of EPA Fracking Report - Josh Fox was kicked off of Fox’s Varney and Co. this morning after he called out host Stuart Varney on his hypocritical stance on fracking. Varney said he wouldn’t frack his own land in upstate New York because it’s in a “watershed” but promoted, on air, last week (while not letting Sandra Steingraber finish a sentence) that we should frack the rest of New York. When Fox called him out on the hypocrisy and questioned Varney’s claim that he lit his tap water on fire, Varney became irate and told Josh, “The interview is over. You are outta here young man.” “If you said to me earlier that you would not want fracking in your own neighborhood, it’s irresponsible for you to say on air that the rest of America should frack,” Fox can be heard saying to Varney as he’s being faded out. Fox was on the program to address untrue headlines most of the mainstream media ran with claiming fracking was safe, following the release of a long-awaited U.S. Environmental Protection Agency (EPA) report on the practice. In the report, the U.S. EPA publicly confirmed for the first time that fracking contaminates groundwater. However, the EPA’s press release led with the misleading headline saying that EPA has found no “widespread” evidence of water contamination.As Fox explains on the show this is not the first time we’ve seen the EPA release a report where the science says one thing and then their PR department slaps on a press release that says something else.

In Response to Controversial EPA Fracking Report, Bill Introduced to Close Loopholes and Protect Water -- The release last week of a report by the U.S. Environmental Protection Agency (EPA) on the danger to drinking water supplies from fracking has stirred up quite a bit of debate. It’s been spun by fracking supporters as vindicating them, since it said it did not find “widespread, systemic impacts on drinking water resources in the United States.” But fracking opponents have pointed to its conclusion that the proximity of drinking water supplies to fracking operations and the incidents that have already occurred indicate a crisis in the making, and that these operations pose a significant risk to human health and the environment. They also noted that the report drew on insufficient and voluntary data. Regardless, the report has focused attention on the fact that oil and gas drilling operations were exempted from the Clean Water Act of 1972 by amendments added to the bill in 1987 and 2005. The amendments let the oil and gas industry circumvent permitting regulations that other industries are required to follow to protect waterways, despite fracking’s extensive use of toxic chemicals and the proximity of its operations to water sources. Yesterday, Sen. Ben Cardin of Maryland moved to close that loophole by introducing the FRESHER Act (Focused Reduction of Effluence and Stormwater runoff through Hydraulic-fracturing Environmental Regulation). It removes the exemption from oil and gas companies engaged in fracking and sets consistent national standards to protect water by requiring them to have a plan to protect streams from runoff before acquiring a permit.

Fracking group hopes memes, BuzzFeed-like website can help industry - A new website backed by the oil and gas industry hopes its Buzzfeed-y Hollywood-inspired memes can help sway anti-fracking attitudes. uses listicles and a meme gallery to attack those opposed to oil and gas drilling. There's pictures with short lines of pithy text featuring cartoon and movie characters, environmentalists, President Barack Obama – even the anti-fracking celebrity chef Mario Batali, which the meme admonishes for wearing Ugg shoes, which are made in part by natural gas components.

Harvard University economist says fracking can had millions of jobs, help renewable industry in the next 15 years -  New research from a Harvard University economist says hydraulic fracturing-led oil and gas activity can add millions of jobs – and even help grow the renewable energy industry by 2030. "Our analysis shows that developing unconventional resources today is unlikely to delay the rollout of renewables. Instead, it can actually enable their scale-up," says the report from the Harvard Business School and Boston Consulting Group.  Harvard economist Michael Porter told NPR such drilling "is a game changer" and already a big part of the country's gross domestic product. "It's at least as big as the state of Ohio," he said. "We've added a whole new major state, top-10 state, to our economy." Ohio grew its gross domestic product 2.1 percent in 2014 to $583 billion. The report says natural gas-powered plants, which are fast replacing coal plants, is the best way to lessen greenhouse gas emissions while renewables, which don't have the storage capacity of gas or coal, are built up. A different economist interviewed by NPR expressed skepticism at the report, noting that U.S. drilling and related companies have lost tens of thousands of jobs in the wake of the industry downturn, which has caused activity across the U.S., including Ohio's Utica shale play, to falter.

What Is the TPP and Why Is it so Bad? -- The Sierra Club put together a video to help explain in simple terms why the Trans-Pacific Partnership (TPP) would threaten our ability to tackle climate change. The minute-and-a-half video, released yesterday, is part of the organization’s campaign to demand fair trade, not toxic trade.  The video shows how the TPP, a massive proposed trade deal with 11 other Pacific Rim nations “would empower multinational corporations to sue the United States government in private trade courts over domestic laws.” It would also “require the U.S. Department of Energy to automatically approve all exports of natural gas to countries in the pact, opening the floodgates to fracking across the U.S.” The video ends by saying, “This is just some of what we know about the TPP. What lurks in the shadows of the pact may be even worse. The time has come to build a new model of trade that puts communities and our environment above corporate profits.”  “In under two minutes, this video tells the truth about a trade deal that the U.S. Trade Representative is hiding from the public” said Ilana Solomon, director of the Sierra Club’s Responsible Trade Program. “Clean air, clean water and climate activists around the world can help bring this environmental disaster into the light of day by watching and sharing this video.” Watch here:

U.S. Shale Oil Boom Grinds to a Halt as OPEC Keeps Pumping - The shale oil boom that turned the U.S. into the world’s largest fuel exporter and brought $3 gasoline back to America’s pumps is grinding to a halt. Crude output from the prolific tight-rock formations such as North Dakota’s Bakken and Texas’s Eagle Ford shale will shrink 1.3 percent to 5.58 million barrels a day this month, based on Energy Information Administration estimates. It’ll drop further in July to 5.49 million, the lowest level since January, the agency said Monday. With the Organization of Petroleum Exporting Countries maintaining its own oil production, U.S. shale is coming under pressure to rebalance a global supply glut. EOG Resources Inc., the country’s biggest shale-oil producer, hedge fund manager Andrew J. Hall and banks including Standard Chartered Plc have forecast declines in U.S. output following last year’s plunge in crude prices. The nation was still pumping the most in four decades in March. “Production has to come down because rigs drilling for oil are down 57 percent this year,” . “Countering that is the fact that the rigs we’re still using are more efficient and drilling in areas where you get higher production. So that has delayed the decline.” Despite the U.S. oil rig count falling for 26 straight weeks, domestic crude production surged 126,000 barrels a day, or 1.3 percent, to 9.53 million in March, the most since 1972, Energy Information Administration data show.

Is the Fracking Boom Coming to an End? -- Since fracking began its boom period in the last decade, its supporters have promoted it as the answer to all of  the U.S.’s energy issues. It would free us from dependence on foreign oil, they said, thereby strengthening national security. And in fact, the U.S. has become the world’s largest exporter of fossil fuels, while prices at the gas pump have dropped steeply as fracked oil and gas production has exploded. States like Texas, Colorado, North Dakota, Pennsylvania and Ohio have welcomed frackers to their shale deposits, even though others, such as New York and Maryland, have resisted the lure due to concerns about fracking’s impacts on human health and the environment. But could the gravy train be derailing? While production is still at record levels, there are signs that should worry any company or economy that is heavily invested in the fracking process.  Compared to conventional wells, fracked wells tend to be initially productive but taper off quickly and then are shut down as operators move to new locations. And that is starting to catch up with them.“Production has to come down because rigs drilling for oil are down 57 percent this year,” James Williams, president of Arkansas-based energy consultancy WTRG Economics, told Bloomberg News. “Countering that is the fact that the rigs we’re still using are more efficient and drilling in areas where you get higher production. So that has delayed the decline.” According to the U.S. Energy Information Administration (EIA), some of the largest shale deposits will see a downturn in their output, and very soon. Output will shrink 1.3 percent this month. Texas’ Eagle Ford shale deposit will be pumping 49,000 barrels less a day in July, the EIA projects, while North Dakota’s Bakken shale region will lose 29,000 barrels a day. Overall, the EIA is projected that fracking will fall by 93,000 barrels a day in July, the biggest drop since the onset of the boom in 2009.

100 Scientists Call For A Halt On Tar Sands Development -- The scientists published a consensus statement laying out 10 reasons why mining of tar sands — an energy source that’s found largely in Alberta, Canada’s Athabasca region and whose mining has led to significant deforestation and forest degradation in the province — needs to be halted. Those reasons — all of which were backed up by scientific research — included findings that the expansion of tar sands development would slow North America’s move to clean energy, that environmental protections on tar sands development were lacking, and that less than 0.2 percent of the region affected by tar sands mining had been reclaimed. “If Canada wants to participate constructively in the global effort to stop climate change, we should first stop expanding the oil sands. More growth simply shows Canada has gone rogue,” Thomas Homer-Dixon, professor of governance innovation at Ontario’s University of Waterloo, said in a statement.  The scientists also singled out the impact tar sands development has on the local environment in their statement. “Independent studies have demonstrated that mining and processing Albertan oil sands releases carcinogenic and toxic pollutants (e.g., heavy metals, polycyclic aromatic compounds) to the atmosphere from smoke stacks and evaporation, and to groundwater from leaching of tailings ponds,” they wrote. “This pollution harms terrestrial and aquatic ecosystems and the species within them.” This pollution also has a major impact on the native communities that live near tar sands development. The community of Fort Chipewyan, Alberta, home to the Athabasca Chipewyan First Nation (ACFN) and the Mikisew Cree First Nation, has been dealing with the tar sands contamination of the nearby wildlife for years. That contamination affects both tribes’ food source and traditional way of life, which is centered around hunting and fishing. Still, the Canadian government has long disputed that the contamination of the community comes from the tar sands.

Busting The "Canadian Bakken" Myth -- The financial pages of Canadian newspapers have been full of headlines lately announcing the potential of two large shale oil fields in the Northwest Territories said to contain enough oil to rival the Bakken Formation of North Dakota and Montana.  The report by Canada’s National Energy Board (NEB) evaluated, for the first time, the volume of oil in place for the Canol and Bluefish shale formations, located in the territory’s Mackenzie Plain. It found the “thick and geographically extensive” Canol formation is expected to contain 145 billion barrels of oil, while the “much thinner” Bluefish shale contains 46 billion barrels.  The report did not estimate the amount of recoverable oil, but points out that even if one percent of the Canol resource could be recovered, that represents 1.45 billion barrels. The calculation immediately had reporters comparing Canol and Bluefish to the Bakken, where the latest USGS estimate shows 7.4 billion barrels of technically recoverable oil (this includes the Three Forks Formation underlying the Williston Basin straddling North Dakota, Montana, Saskatchewan and Manitoba). “Northwest Territories sitting on massive shale oil reserves on par with booming Bakken field in U.S.,” enthused the Financial Post. “NEB and GNWT study finds 200 billion barrels of oil in the Sahtu,” gushed CBC News, referring to a region of the sprawling territory that cuts across three provinces and touches the Arctic Ocean. In truth, energy industry followers would do better to read a more subdued story in Bloomberg News, titled “Drop in oil prices means no drilling in Canada's biggest shale reserves.” Because while the report from the NEB does indeed point to a very large pool of potential shale oil, getting it out of the ground will be no small feat, especially at today's prices.  Knowledgeable oilmen like Hogg told Bloomberg that exploring the Canol costs three to four times more than in northeast British Columbia, where the Montney Basin has been a hot zone of oil and gas exploration recently. That's because the region lacks key infrastructure. A winter road is the only means of trucking drilling equipment to the Mackenzie Valley, with no all-weather road linking the potential oilfields to southern Canada.

UK Oil & Gas in the ground -- UK Oil & Gas, the company at the heart of a collection of companies associated with David Lenigas and the Horse Hill project to explore oil under Gatwick, has announced discussions about raising at least £4.5m from shareholders.  The move follows the release of the executive summary of a report by reputable oil services group Schlumberger about what resources may lie under the patch of South East England. It says confidential down the side, but we checked with Schlumberger and they gave permission to publish.  There is no question that there are billions of barrels of oil beneath southern England, but how much could be technically or profitably produced remains extremely uncertain. What we are talking about, really, is fracking. So add to the reading list the recent presentation by David Einhorn’s Greenlight Capital on the US fracking companies, which he argues were not economically profitable even at $100 per barrel of oil. What has sustained the industry is cash provided by Wall Street and spent drilling holes in the ground.The large oil frackers have spent $80 billion more than they have received from selling oil. Wall Street greased those skids by underwriting debt and equity securities that allowed them to garner billions in fees.The banks are clearly incentivized to enable the frack addicts. What’s less obvious is whether investors are furnished a clear analysis of the returns these companies actually generate.

US rig count seen bottoming out soon, recovering towards year-end --The U.S. drilling-rig count, which recorded its 26th straight weekly decline this week, is close to bottoming out ahead of a recovery in the second half of the year, mainly in the Permian and Eagle Ford shale plays in Texas, analysts said. Oil prices are expected to hold roughly at current levels over the next three to six months after OPEC agreed on Friday to stick by its policy of unconstrained output for another six months, but did not raise its output ceiling. That implied stability is expected to encourage drilling, especially in cost-efficient U.S. shale basins. More optimistic industry and equity analysts expect companies to put back to work up to 140 rigs by the end of the year. Most, however, expect the rig count to go up by about 50 if oil prices stay in the $55-$65 per barrel range. Brent crude hit a high of $63.43 on Friday. At the end of this week, 868 oil and gas rigs were working in the United States, including 27 offshore, according to oilfield services provider Baker Hughes Inc. That was the lowest number since January 2003, and down by seven from the previous week.

Crude Oil Jumps After API Reports Significant Inventory Draw -- While API and DOE data has not exactly been consistent recently, the fact that API reported a huge 6.7 million barrel inventory draw for the last week is significant. Of course, all eyes will be focused on production data tomorrow but for now, WTI prices are up at the highs of the day. WTI loves the news...For some context on the size of the draw... Charts: Bloomberg

Crude Soars Despite Record Saudi Production, Lowest China Demand Growth Since 1998 -- If Inventories down, then buy oil at the fastest pace in 2 months. That appears to be the algo logic as talking heads additionally blame Saudi airstrikes on Yemen for the over 6% surge in WTI in the last 2 days. However, as crude nears $62 (6 month highs) once again, we note that not only Saudi oil production just hit a new record high, but US production hit a new cycle high last week (DOE data today), and this is happening as China's energy demand grows at the slowest pace since 1998.  So slowing demand growth and soaring production...  means prices are ripping. This is happening as Saudi Oil Production hits a record high: Saudi Arabia increased its oil production to a fresh record in May as the kingdom stepped up its attempt to win back more customers and as Opec forecasts supply outside the group to fall in the second half of this year. The Kingdom's output in May reached 10.33m barrels a day, according to numbers submitted by Riyadh to Opec, confirming the widely held view that Saudi Arabia's production is heading higher, Anjli Raval, FT oil and gas correspondent writes. Saudi's oil output was 10.31m b/d in April, Riyadh told Opec.  While on the demand front, BP reports that demand growth was the lowest of the 21st century aside from the 2008 financial crisis: Global energy consumption growth slowed markedly last year to the lowest level since the late 1990s, apart from around the time of the financial crisis in 2008, BP said on Wednesday.

EIA: Crude oil inventories decline for sixth straight week - U.S. crude oil refinery inputs averaged 16.6 million barrels per day during the week ending June 5, 2015 , 169,000 barrels per day more than the previous week’s average. Refineries operated at 94.6% of their operable capacity last week. Gasoline production increased last week, averaging 10.0 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day. U.S. crude oil imports averaged over 6.6 million barrels per day last week, down by 750,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged about 7.0 million barrels per day, 2.3% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 666,000 barrels per day. Distillate fuel imports averaged 181,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 6.8 million barrels from the previous week. At 470.6 million barrels, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 2.9 million barrels last week, but are in the upper half of the average range.  Distillate fuel inventories increased by 0.9 million barrels last week and are in the middle of the average range for this time of year. Propane/propylene inventories rose 1.7 million barrels last week and are well above the upper limit of the average range.

Crude Pops (On The Biggest Inventory Draw In 11 Months) & Drops (On Production Rise) --Following API's considerably larger than expeted inventory draw last night, DOE reported a huge 6.81 million barrel draw (against expectations of a 3.46mm barrel draw). This is the biggest inventory draw in 11 months. In addition production rose once again (up 0.25%) tonew record highs at 9.61mm bbl/day. Crude prices are holding gains after this.  Inventories plunged by the most in 11 months. And production rose once again... It seems the machines took a little time to read the production data... One wonders - if production is so high everywhere and inventories are being drawn down and tanker fees are stillhigh - is all this production just going into the storage/carry trade? Charts: Bloomberg

US oil and natural gas rig count drops by 9 to 859 - (AP) - Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by nine this week to 859. Houston-based Baker Hughes said Friday 635 rigs were seeking oil and 221 explored for natural gas. Three were listed as miscellaneous. A year ago, with oil prices nearly double the current levels, 1,854 rigs were active. Among major oil- and gas-producing states, Alaska, Colorado, Kansas, New Mexico, Ohio, Texas, Utah and West Virginia each declined by one rig. Louisiana and Oklahoma both gained one rig apiece. Arkansas, California, North Dakota, Pennsylvania and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

US oil rig count falls for 27th straight week - The US oil rig count fell for a 27th straight week. The number of oil rigs in operation fell by seven to 635 this week, the lowest since August 6, 2010, according to data from driller Baker Hughes. The combined count fell by nine to 859. In the prior week, the number of oil rigs fell by four to 642, the lowest level since August 16, 2010. The combined count fell by seven to 868, the lowest level since January 24, 2003. Following the data, West Texas Intermediate crude oil gained slightly but was still down by less than 1%, near $60.36 per barrel. Production of crude oil is still on the rise despite the plunge in rig counts we've now seen for 26 straight weeks. In its short-term outlook released on Tuesday, the Energy Information Administration estimated that US oil production rose by 9.6 million barrels in May. That's about 400,000 barrels higher than the average production level in the fourth quarter of 2014. The EIA further forecast that US crude-oil production would begin to decline from this month until February 2016. Here's the latest chart showing the plunge:

EIA productivity report: Is it all downhill from here? -  Although the U.S. shale revolution has maintained impressive momentum over the course of the last year, depressed oil prices have taken their toll. The Energy Information Administration released its monthly drilling productivity report this week, and it has confirmed what many industry experts saw coming. With the exception of the Permian Basin, the U.S. has seen a drop in oil and gas production across the board in the major shale regions. According to Oilprice, the major shale plays in the U.S. will have decreased a projected 208,782 barrels of oil per day (bpd) by July, down from April’s peak of 5,694,580 bpd as production decreases took root shale by shale. Now, the last holdout is the Permian, where production has yet to decrease but has seriously plateaued.  The biggest factor in the downward trend is the decrease in legacy oil production, which the EIA report asserts is largely due to well depletion rates. The nation’s strongest areas saw the most troubling declines. The Bakken decreased 29,000 bpd from the previous month. The area’s peak point was at 1,311,703 bpd in March but will have decreased roughly 74,763 bpd by July. The Eagle Ford shale play has taken a massive hit as well. The region’s oil production has dropped 49,000 bpd from last month. The Eagle Ford peaked at 1,711,376 bpd back in March, but by July production will drop by 117,971 bpd. Although the Niobrara region isn’t the strongest oil producer in the country, it also saw a sharp decrease of 17,000 bpd from the previous month. With a peak of 459,861 bpd in March, the 49,712 bpd fall by July is perhaps even harder hitting for the smaller area. The lone wolf among the oil producers, the Permian shale play will actually see a 3,000 bpd increase month over month, and the EIA projects that the area will produce 2,059,851 bpd in July. However, production has been levelling out since the beginning of 2015. It is only a matter of time before the Permian caves to the trend and shows a decrease in production levels.

Global oil demand slowed to a crawl in 2014 – World oil demand grew by just 843,000 barrels per day (bpd) last year, the slowest pace for 14 years, outside U.S. recessions. Consumption increased by less than 1 percent to 92.1 million bpd in 2014, according to the BP Statistical Review of World Energy published on Wednesday. Demand in the advanced economies of North America, Europe and Asia has been declining for nine years and is now down by 5 million bpd since 2005. Over the same period, however, consumption in non-OECD economies has risen by almost 12.7 million bpd, according to BP. For the last decade, the non-OECD has absorbed all the growth in supply. In 2013 and 2014 emerging economies consumed more oil than the advanced economies for the first time. But last year the continued slide in OECD consumption (-475,000 bpd) was offset by relatively tepid growth in the non-OECD (+1.3 million bpd). Three years with oil prices consistently above $100 per barrel have prompted widespread measures to conserve fuel and switch to cheaper alternatives such as natural gas. The marked slowdown in global consumption occurred at precisely the same time oil supplies were soaring thanks to the shale revolution.

Why EIA, IEA, And BP Oil Forecasts Are Too High -- Gail Tverberg via Our Finite World blog, When forecasting how much oil will be available in future years, a standard approach seems to be the following:

  1. Figure out how much GDP growth the researcher hopes to have in the future.
  2. “Work backward” to see how much oil is needed, based on how much oil was used for a given level of GDP in the past. Adjust this amount for hoped-for efficiency gains and transfers to other fuel uses.
  3. Verify that there is actually enough oil available to support this level of growth in oil consumption.

In fact, this seems to be the approach used by most forecasting agencies, including EIA, IEA and BP. It seems to me that this approach has a fundamental flaw. It doesn’t consider the possibility of continued low oil prices and the impact that these low oil prices are likely to have on future oil production. Hoped-for future GDP growth may not be possible if oil prices, as well as other commodity prices, remain low.It is easy to get the idea that we have a great deal of oil resources in the ground. For example, if we start with BP Statistical Review of World Energy, we see that reported oil reserves at the end of 2013 were 1,687.9 billion barrels. This corresponds to 53.3 years of oil production at 2013 production levels. If we look at the United States Geological Services 2012 report for one big grouping–undiscovered conventional oil resources for the world excluding the United States–we get a “mean” estimate of 565 billion barrels. This corresponds to another 17.8 years of production at the 2013 level of oil production. Combining these two estimates gets us to a total of 71.1 years of future production. Given these large amounts of theoretically available oil, it is not surprising that forecasters use the approach they do. There appears to be no need to cut back forecasts to reflect inadequate future oil supply, as long as we can really extract oil that seems to be available. There is clearly a huge amount of oil available with current technology, if high cost is no problem. Without cost constraints, fracking can be used in many more areas of the world than it is used today. If more water is needed for fracking than is available, and price is no object, we can desalinate seawater, or pump water uphill for hundreds of miles.The amount of available future oil is likely to be much lower if real-world price constraints are considered.

OPEC's Oil Demand Growth Forecast Remains Unchanged - The Organization of the Petroleum Exporting Countries (OPEC) has left its demand growth forecast for crude oil unchanged. The organization on Wednesday said that it expects the current oversupply in the market to ease over the coming quarters. In the organization’s monthly market report, OPEC said oil demand growth in 2015 will remain unchanged at 1.18 million barrels per day. OPEC said its expectations of demand for its own oil this year remains at 29.3 million barrels a day — 300,000 higher than 2014. Risks in U.S. oil demand remain skewed to the upside as lower price environment plays a role in pushing up demand for transportation fuels that consume more gasoline such as SUVs and trucks. The organization believes non-OPEC crude oil output will remain unchanged at 680,000 barrels per day. The organization also said its own production rose by 24,000 barrels a day to 30.98 million barrels in May 2015. That output increased because of higher numbers from Iraq and Angola. Iraq produced 3.8 million barrels a day in May, up from 3.695 million barrels in the previous month. Saudi Arabia, the world’s largest oil exporter produced 10.333 million barrels a day last month, up from 10.308 million barrels a day in April. Even with demand outlooking unchanged and increasing supplies, OPEC believes the 2 million barrels a day of overproduction will “east in the coming quarters.” The report still suspects that U.S. production will decline in Q3 2015.

OPEC adjusts to new oil market reality -- OPEC has never really been a “cartel” in the conventional sense of an organization that agrees to restrict output to maximize revenues. So its decision on Friday not to cut production was entirely predictable and the only practical option open to its members. The strategy of maintaining production even as prices fall, led by the Saudis but now more or less embraced by most of the organization’s membership, is really the only sensible course. Most traders sense this: the price of Brent for delivery in December 2015 has been virtually unchanged since February and barely moved on Friday. If the organization was confronted by a temporary shortfall in demand it might make sense to cut output to secure more revenue. But faced with a permanent shock from the supply side, such as the shale revolution, and the permanent loss of demand from substitution and conservation, the organization’s only sustainable response is to continue pumping and allow the market to adjust. Attempts to buck the market always end in failure, a lesson top Saudi officials and others in OPEC have learned the hard way over the last 50 years.

OPEC Set To Continue Playing The Waiting Game -- Following OPEC’s decision not to cut production at its June 5, 2015 meeting in Vienna, oil prices should likely continue their descent that began in early May (Figure 1). Prices may fall into the $50+ per barrel range since there is no tangible reason for their rise from January’s $46 low. Saudi Arabia’s longer view of demand and market share dominated the decision not to cut. World oil production has undergone a structural shift from supply dominated by relatively inexpensive conventional production to increasingly more supply coming from expensive deep-water and unconventional production. Most conventional oil is located in the Arabian, Siberian and North Caspian basins (Figure 2) while deep-water and unconventional production is focused along the margins of the Atlantic Ocean and in North America. This shift is at the root of the current price conflict between OPEC and North American oil producers. Since 2008, OPEC liquids production has been fairly flat until mid-2014 (Figure 3). Non-OPEC production outside of North America has been flat. Most production growth has occurred in the U.S. and Canada but it is not only from tight oil. The competition for OPEC market share is from Canadian oil sands, Gulf of Mexico deep-water and tight oil production. U.S. plus Canadian production has increased 6.2 million barrels per day (mmbpd) since January 2008. OPEC production has increased 2 mmbpd over that period with 1.3 mmbpd (65%) of that increase since June 2014. Lower oil prices over the past year (Figure 4) have not yet resulted in any observable decrease in North American production. Higher prices over the last few months further complicate the situation for OPEC. The global production surplus has gotten worse, not better, in recent months but prices rose based on sentiment.

Delayed gratification for OPEC, more pain for investors -- Delayed gratification is said to be a sign of maturity. By that standard OPEC at age 55 demonstrated its maturity this week as it left oil production quotas for its members unchanged. It did so in the face of oil prices that are about 40 percent lower than they were at this time last year, delaying once again a return to the $100-per-barrel prices seen during the past four years. Why OPEC members chose to leave their oil output unchanged is no mystery. The explicit purpose for keeping oil prices depressed is to close down U.S. oil production from deep shale deposits--production that soared when oil hovered around $100 a barrel, but which is largely uneconomic at current prices. That production was starting to threaten OPEC's market share. If OPEC were to cut its oil production now and drive prices back up, it would only lead to increased drilling in the United States and loss of market share. In fact, even as spot oil prices sank below $45 per barrel in the United States earlier in the year, investors continued pumping money into U.S. oil drilling. According to The Wall Street Journal U.S. oil companies sold almost $17 billion in new shares in the first quarter of 2015, more than they sold in any quarter last year when prices were much higher. Preliminary estimates by the U.S. Energy Information Administration show that oil production continues to grow in the United States despite low prices. OPEC's next task is to convince those making new investments in oil that rather than catching a bottom in oil prices, they have caught a falling knife. The cartel must dampen enthusiasm for investment for the long term if the organization's members are going to benefit. A crippled U.S. oil industry without friends in the investment world is the only way to assure that rising prices won't simply lead to a stampede back into U.S. shale deposits.

Saudi Arabian oil output hits record - Saudi Arabia increased its oil production to a record level in May in an attempt to win back more customers and meet demand for its crude. Output in May reached 10.33m barrels a day, according to numbers submitted by Riyadh to Opec, the oil cartel, confirming the widely held view that Saudi Arabia’s production is heading higher. The kingdom’s oil output had been 10.31m b/d in April, Riyadh told Opec. In its monthly oil market report Opec said world oil demand would stand at 92.5m b/d this year, up from 91.3m b/d in 2014, unchanged from the previous month’s report. “The global economy recovery appears to have stabilised at a moderate level,” said the cartel on Wednesday. It expects non-Opec supply to decline in the second half of the year, compared with an increase in the first six months. A forecast of slower annual growth of 680,000 b/d was in line with previous predictions. “The current oversupply in the market is likely to ease in the coming quarters,” the group said. Opec expects demand for its crude to stand at 29.3m b/d a day in 2015 but output from the producers’ group stands at almost 31m b/d, according to estimates by analysts and traders. After the report ICE July Brent, the international oil marker, rose to a near three-week high of $66.36 a barrel, before paring its gains.

This Country Wants To Rejoin OPEC As Soon As Possible -- In a surprise announcement, Indonesia has decided to officially pursue full membership in the oil cartel. Indonesia is no stranger to OPEC. It used to be a member, but left six years ago. Now it hopes to rejoin by the time the group meets again in November 2015. The move is a curious one considering Indonesia is not a net oil exporter. It consumes around 1.5 million barrels per day and only produces 800,000 barrels per day. Indonesia has insisted on becoming a full member despite the fact that full membership typically requires being a net exporter. It originally suspended its membership in the cartel in 2008 once its imports started to quickly surpass its level of exports.  There are currently only 12 members of OPEC. Indonesia once was the only Asian country in OPEC and would be again if it rejoins. Meanwhile, Indonesia is seeking supply agreements with OPEC members in order to import oil. Indonesia has a fast growing economy and is continuously searching for more sources of supply. “We will discuss purchasing crude from them. We have a plan to build refineries, so we need crude supplies,” Wiratmaja Puja, a top official at Indonesia's Energy Ministry, said to Reuters in an interview. That would be crucial for a country that is desperate to increase its domestic production of refined products.

India seeks to use its oil thirst to drive bargains - – India is trying to use its position as one of the world’s biggest energy consumers to strike better bargains for its companies with oil exporting nations, in a marked change of approach under Prime Minister Narendra Modi. The oil ministry is moving beyond seeking additional barrels for import in talks with exporters. Now, the energy-deficient country wants to use its thirst for oil as a weapon to broker deals to help strengthen its economy and create jobs, Oil Minister Dharmendra Pradhan told Reuters in an interview. “We are a market. The quantum that we buy is our weapon,” 45-year-old Pradhan said. India, the world’s fourth biggest oil consumer and third biggest importer, ships in about 80 percent of the crude oil it consumes and fuel demand is rising with rapid economic growth. After clocking faster growth than China in the December quarter, India’s economy grew 7.5 percent in the quarter through March, outstripping its larger neighbor’s 7 percent in the same period. Last year, India’s economy grew at 7.3 percent. Consumption of petroleum products is estimated to be 166.9 million tonnes this fiscal year, and local oil output has remained almost stagnant for years.

Saudi Arabia ready to raise oil output further to meet demand -- – Saudi Arabia is ready to increase its oil output in the coming months to a new record to meet a rise in global demand, despite increased domestic use, a senior state oil company official said on Thursday. Ahmed Al-Subaey, Saudi Aramco’s [SDABO.UL] executive director for marketing, told Reuters the world’s top oil exporter was already talking to prospective Indian buyers for additional oil. Saudi Arabia increased production in May to around 10.3 million barrels per day (bpd) – its highest rate on record – as a result of increased global demand. Any increase in production in a market which already faces a glut would signal that OPEC is unrelenting in its decision to maintain global market share. The strategy is seen as a major factor in the sharp decline in oil prices over the past year. “We have plenty of crude… You are not going to see any cuts from Saudi Arabia,” Al-Subaey said after meeting Indian oil officials in New Delhi. Saudi Arabia has historically lowered its oil exports during the summer months when domestic demand peaks due to scorching temperatures and the need to power air conditioning. “We have enough in reserves and we have enough production to do so. We will match whatever the need is. If the market requires it, we will provide it,” he added.

"Oil army" of 27,000 raised to clash with ISIL terrorists --The government of Iraq is building a 27,000 person security force to protect vital oil and energy facilities against Isil-related terrorists. At the end of the recent Organization of the Petroleum Exporting Countries meetings Iraqi oil minister Adel Abdel Mahdi announced the details of the strong army against Islamic State insurgents. The Islamic State of Iraq and the Levant (Isil) fighting activity has heightened concerns that vital oil infrastructure and pipeline networks could be susceptible to sabotage and attacks. According to The Telegraph, Saudi Arabia, the Gulf States and Iraq – which together account for two thirds of OPEC’s production – are all now affected by the overbearing Isil jihadists. The threat is growing ever stronger due to the widening sectarian schism between the Sunni and Shia Muslims across the region in the wake of the Arab spring uprisings five years ago. Mr Abdel Mahdi stated that the oil army would be drawn from an existing energy police corp that is under control of the country’s Interior Ministry. The Telegraph reported that meetings will take place in the coming weeks to finalize the structure of the force, which will receive additional training and equipment. British oil majors Royal Dutch Shell and BP are both active in Iraq, operating some of the country’s largest fields in the Shia-Muslim dominated South. The nation produces roughly 4 million barrels per day and is OPEC’s second largest player.

Obama Considers Sending More Troops To Iraq -- Earlier today we described the situation currently facing Syria’s soon-to-be ex-President Bashar al-Assad as follows:  And speaking of time, the US-led alliance realizes very well that as long as Assad has to fight three fronts: i.e., the Nusra  Front in the northwestern province of Idlib and ever closer proximity to Syria's main infrastructure hub of Latakia, ISIS in the central part of the nation where they recently took over the historic town of Palmyra, and the official "rebel" force in proximity to Damascus, Assad's army will either eventually be obliterated or, more likely, mutiny and overthrow the president, putting the Ukraine scenario in play.  Meanwhile, the US is waiting just across the border for the right time to sweep in and effect a long overdue (in the eyes of the US and its Middle Eastern allies, if not in the eyes of Iran and Russia) regime change in Damascus.   Complicating the issue is ISIS, a one-time “strategic asset” that has, for all intents and purposes, gone rogue by deviating from the original Assad usurpation plan, and getting sidetracked by the whole internally conceived “establish a caliphate” idea.  Now, it appears the US doesn’t know whether it wants to stick with what was probably the original plan (i.e. wait until ISIS overruns Assad and then storm in with 10,000 marines to ‘liberate’ the country before installing a more ‘agreeable’ leader after some farce of an election) or speed up the process by claiming that Assad is in fact working with ISIS and using the imaginary unholy alliance as an excuse to invade now.

US Will Send 400 More Troops To Iraq Bringing Total To 3,500; Open New Military Base -- As reported yesterday, in the latest escalation of the "war on ISIS", Obama - winner of the Nobel peace prize for pulling US soldiers out of Iraq - was said to be sending even more US soldiers, pardon military advisors, to Iraq to halt the inexplicable, constant expansion of ISIS, now deep in Syrian territory. Earlier today, this was confirmed when Reuters reported that, as expected, the US will announce on Wednesday plans for a new military base in Iraq's Anbar province and the deployment of around 400 additional U.S. trainers to help Iraqi forces in the fight against Islamic State, citing an unnamed U.S. official. From Reuters: The plan would expand the 3,100-strong U.S. contingent of trainers and advisers in Iraq and would mark an adjustment in strategy for President Barack Obama, who is facing mounting criticism for not being tougher in combating Islamic State. U.S. officials, speaking on condition of anonymity, expressed hope that even a modestly strengthened U.S. presence could help Iraqi forces plan and carry out a counter-attack to retake Anbar's capital Ramadi, which insurgents seized last month.

The no. 1 appetite: China passes U.S. in oil imports -- The data is hard to pin down, but many are finally recognizing what was on the horizon for some time now. China is now the world’s largest oil importer.  As reported by Forbes, market analysis stated that in April, China had surpassed the United States in oil imports. It’s true that overall, China’s oil composition growth has slowed, however, their new title does point to the fact that China will consume significant amounts of crude for years to come. Just this morning, oil fell slightly on the news of slowed Chinese oil imports. Chinese petroleum imports fell 11 percent from a year earlier, according to Market Watch reports. Sturdy Chinese oil demand has been one of the few mainstays of oil support in 2015, making any signs of slowdown an obvious impact on petroleum prices. Nonetheless, China’s hearty reliance on oil imports has a major impact on global politics. As quoted in Forbes, Keith Johnson wrote in Foreign Policy on May 11, 2015, “… China’s continued and, indeed, deepening reliance on volatile regions for the world for energy supplies, especially the Middle East, points to continued security vulnerabilities for Beijing for decades to come.” With some credibility as Americans, we can see a potential political danger from oil addiction taking shape. As China’s dependence on crude from Saudi Arabia and natural gas from Russia continue, political unrest in the Middle East or sanctions on Russia could mean a disruption or price spike for China’s imports.

Oil Markets Could Be In For A Shock From China Soon  - Oil analysts and commodity traders watch the price of crude swing down and up, and are trying to figure out when and to what extent the OPEC “price war” will force supply reductions from US shale. Any insight into this development can clarify the trajectory of oil prices. But, of course, oil market dynamics are complex and fluid. US shale supply is hugely important for oil prices, but one of the more underreported factors influencing the price of oil is the pace of demand growth coming from China. Consumption of oil in China has climbed rapidly and consistently since it took off in 1990, accelerating into overdrive in the 2000s. The inexorable surge in demand caused oil markets to tighten in the lead up to the financial crisis, and then again in subsequent years as the global economy recovered. The rise in US shale production managed to finally halt the climb in prices, adding enough supply to send prices downwards. When it comes to demand, China is arguably the most important country to watch. And despite accounting for much of the world’s growth in demand in the 21st Century, China’s oil imports have been all over the map in recent months. In April, China imported 7.4 million barrels per day, a record high and enough to make it the world’s largest oil importer. But a month later, imports plummeted to just 5.5 million barrels per day. Much of that had to do with Chinese refineries going offline for maintenance, suggesting that the slowdown may have been just a slight detour from China’s seemingly ceaseless climb in import demand. On the other hand, China’s exceptionally high levels of imports could be temporary. China is in the midst of filling up its strategic petroleum reserve, a project aimed at stockpiling 100 days’ supply in a reserve by 2020. China has seized the opportunity of low oil prices to fill up its strategic reserve as quickly as it can, buying up crude while it is cheap. This elevated level of imports has soaked up some of the glut, diverting several hundred thousand barrels per day of global supplies to China. But what happens when China stops buying extra oil for its stockpile?

The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi -- China and Russia indicated that going forward, more trade between the two countries would be settled in yuan. From Reuters: Russia and China intend to increase the amount of trade settled in the yuan, President Vladimir Putin said in remarks that would be welcomed by Chinese authorities who want the currency to be used more widely around the world. Spurred on by their often testy relations with the United States, Russia and China have long advocated reducing the role of the dollar in international trade.Curtailing the dollar's influence fits well with China's ambitions to increase the influence of the yuan and eventually turn it into a global reserve currency. With 32 percent of its $4 trillion foreign exchange reserves invested in U.S. government debt, China wants to curb investment risks in dollar. Sure enough, Gazprom has confirmed that since the beginning of the year, all oil sales to China have been settled in renminbi. From FT: Russia’s third-largest oil producer, is now settling all of its crude sales to China in renminbi, in the most clear sign yet that western sanctions have driven an increase in the use of the Chinese currency by Russian companies. Russian executives have talked up the possibility of a shift from the US dollar to renminbi as the Kremlin launched a “pivot to Asia” foreign policy partly in response to the western sanctions against Moscow over its intervention in Ukraine, but until now there has been little clarity over how much trade is being settled in the Chinese currency. Gazprom Neft, the oil arm of state gas giant Gazprom, said on Friday that since the start of 2015 it had been selling in renminbi all of its oil for export down the East Siberia Pacific Ocean pipeline to China. Russian companies’ crude exports were largely settled in dollars until the summer of last year, when the US and Europe imposed sanctions on the Russian energy sector over the Ukraine crisis...

Did The World's Last Big Oil Price Support Just Falter? --China's trade balance surged once again, spiking to near the highest on record according to data released this weekend, driven by a collapse in imports (and a roughly in line export print). Exports dropped 2.5% YoY, dropping for the 4th month of last 5 but it was Imports that createred. Down a stunning 18.1% YoY (the 5th drop in a row) China imports collapse reflects both volume and price effects and crucially, as Goldman notes, volume effects may be even more critical. Hidden deep inside the data, China exposed the oil market's greatest fear - it appears to be done restocking its SPR. As Goldman Sachs reports, The weakness in import growth is likely to be a reflection of both price and volume effects (an official price index is not yet available for May) -- though volume effects might be more important this month amid modestly higher oil prices. Based on the released breakdown, the value of crude oil imports went down 50.3% yoy in May (vs. -43.9% yoy in April), cutting 6.3 percentage points from headline import yoy growth (in April it cut 5.6 pp). Imports of other major commodities such as steel and coal also declined further in yoy terms in May. But while a lot of the drop in imports is related to price, it is the scale of plunge in volume that is of most concern...

China natgas output drops for 2nd month, price cut eyed -- China’s natural gas output fell 2 percent in May from a year earlier, official data showed on Thursday, its second straight month of decline as the market expects Beijing to announce another price cut in the coming months to lift slowing demand. Output recorded a 2.9-percent year-on-year drop in April, to 9.4 billion cubic meters (bcm), the lowest since July 2014 in outright volumes. Such drops in output have been rare. Production was 9.9 bcm in May, slightly higher than April on a daily basis. Total output in the first five months of 2015 climbed 2.1 percent from the same period the  year before to 53.2 bcm, the National Statistical Bureau (NSB) said. China, the world’s largest energy guzzler, is keen to boost the use of natural gas to cut emissions and fight air pollution. But demand has been hit since last year as domestic prices, which are regulated by the government, were not cut until April, lagging the steep declines in global oil markets that Beijing uses as a benchmark for gas pricing. In the first four months of 2015, China burned 62.9 bcm of gas, up a tepid 2.4 percent from the same period last year, according to the National Development & Reform Commission.

US struggles for strategy to contain China’s island-building - China’s efforts to dredge new land on remote coral atolls in the South China Sea have left the US struggling to come up with a response. For Washington, Chinese land-creation has helped make allies of former adversaries now fearful of military domination by an assertive China. The latest example was the trip to Vietnam last week by Ashton Carter, US defence secretary, who pledged US patrol craft to the Vietnamese navy. But there is a limit to how far countries in the region are willing to present a united front to China, which has reclaimed 2,000 acres of land in the past 18 months, far outstripping all other claimants combined, according to Mr Carter. The Obama administration is also unsure about how strongly it should push back against what US officials see as a long-term Chinese plan to control the region’s waters. China claims 90 per cent of the waters of the South China Sea, a position contested by neighbours including Vietnam, Malaysia and the Philippines. But the Obama administration is increasingly finding itself in the uncomfortable position of taking the lead in efforts to confront Beijing, while stumbling in diplomatic action to establish consensus in Southeast Asia on what to do. “The obvious frustration for the US is that all the Southeast Asian countries, with the possible exception of the Philippines, do not want to make a choice between China, their main trading partner, and the US, the main provider of security in the region,” says Euan Graham of the Lowy Institute in Sydney. The second problem is that each of these countries has occupied its own islands, and some are doing their own land reclamation. At the Shangri-La security summit last month Mr Carter called on all parties to stop land reclamation. Last year a similar appeal by the US went unheeded by all but the Philippines, and subsequently collapsed. Other diplomatic efforts include a common “code of conduct” among the members of the Association of Southeast Asian Nations — four of which have claims in the South China Sea — which would put a commitment not to reclaim land in legally binding language and place additional diplomatic pressure on China. Asean is split between those countries that do not have claims, which are more China-friendly, and those that do. Meanwhile, China is seeking to deal separately with each claimant.

Why is the US upping the ante in the South China Sea? - Since March 2015, the US has hardened its attitude toward China’s activities in the South China Sea. Beijing appears genuinely surprised by the shift in tone and behaviour. In the past, the US has taken a more measured approach. So why has it escalated its language and flagged risky military exercises in the South China Sea? Why does the US risk upsetting the tenor of Sino-American relations over rocks, islets and reefs? Since 2010, the US response to the escalation of tensions in the long-running territorial dispute had been deliberately dispassionate. The US had a carefully formulated position that did not take sides, avoided the use of force and called for the dispute to be resolved by international law. But in March 2015, the incoming head of the US Pacific Command described China as building a great wall of sand in the South China Sea. In May, the Wall Street Journal reported that the Department of Defense was considering a series of exercises to pressure China. And the US dispatched military aircraft, including a Poseidon P-8, on an overflight of China’s reclamation activities, complete with CNN news crew in tow. For some time, policy analysts and some politicians have advocated for a ‘cost imposition’ approach to Beijing. This approach suggests that the US would be more likely to change China’s behaviour by making China pay a price for activities that make the US and its allies uncomfortable, rather than through diplomatic niceties. The shift in the US approach appears to be informed by this thinking. China’s reclamation activities have moved at such pace and have enough potential to change the strategic game in the South China Sea that -- so the thinking appears to be -- a more muscular approach is necessary.

China to Have Veto at Infrastructure Bank  - A new China-led infrastructure bank aims to differentiate itself from other lenders with a leaner, more efficient structure that ultimately gives Beijing veto power over major decisions, people close to the institution said. As WSJ’s Mark Magnier reports: The bank’s voting structure means that China will retain the upper hand as the largest shareholder, according to its articles of incorporation and people close to the bank. China has offered to forgo outright veto power in day-to-day operations, which helped win over some key founding members.  The articles, agreed to at a meeting of the bank’s 57 founding member countries last month, call for the Asian Infrastructure Investment Bank to be overseen by an unpaid, nonresident board of directors, unlike the World Bank and the Asian Development Bank. The new bank, which will be based in Beijing and use English as its operating language, will open bidding for projects to all, unlike the ADB, which restricts contracts to member countries, according to a copy of the articles reviewed by The Wall Street Journal.

Shunning Beijing’s infrastructure bank was a mistake for the US - The Obama administration’s negative response to China’s proposed Asian Infrastructure Investment Bank was a strategic mistake. Though some Chinese moves might be destabilising and require US resistance, this initiative should have been welcomed. The US should be careful about opposing ventures that are popular and likely to proceed. Losing fights does not build confidence. Moreover, the new bank’s purpose — to develop infrastructure in Asia — is a good goal. The world economy needs more growth. Many emerging markets are eager to boost productivity and growth by lowering costs of transportation, improving energy availability, enhancing communications networks, and distributing clean water. The AIIB offers an opportunity to strengthen the very international economic system that the US created and sustained. The AIIB’s designated leader, Jin Liqun, a former vice-president of the Asian Development Bank, sought advice in Washington. He engaged an American lawyer who was the World Bank’s leading specialist on governance. He also reached out to another American who had served as World Bank country director for China and then worked with the US embassy. If the AIIB was indeed threatening the American-led multilateral economic order, as its opponents seemed to believe, then its Chinese founders chose a curiously open and co-operative way of doing so. There is an easy way to connect the AIIB to existing multilateral efforts. In 2011 the World Bank created an infrastructure development hub in Singapore to learn how to make public-private partnerships more effective and backed it with a $1bn fund.

China's Global Ambitions Take Shape As AIIB Structure Revealed, Germany Pledges Full Support -- China is working diligently to expand its global economic and political footprint. Two critical pieces of the puzzle for Beijing are the $40 billion Silk Road Fund and the $50 billion AIIB.    The Silk Road Fund is backed by China’s FX reserves, the Export-Import Bank of China, and China Development Bank and seeks to increase ROIC for Chinese SOEs by investing in infrastructure projects across the developing world, while the AIIB is funded by 57 founding member countries (the US and Japan have not joined) and will serve to upend traditionally dominant multilateral institutions which have failed to respond to the rising influence and economic clout of their EM membership. This failure has been exemplified of late by Washington’s steadfast refusal to reform the IMF in order to ensure the Fund reflects the economic clout of its members. Although the failure falls largely at the feet of Congress — US lawmakers’ utter inability to legislate has left reform measures stalled — it recently manifested itself at the Presidential level when President Obama had an opportunity to change the structure of the IMF (for the better) without congressional approval but chose not to do so. WSJ has more on the structure of the AIIB:  The bank’s voting structure means that China will retain the upper hand as the largest shareholder, according to its articles of incorporation and people close to the bank. China has offered to forgo outright veto power in day-to-day operations, which helped win over some key founding members.The articles, agreed to at a meeting of the bank’s 57 founding member countries last month, call for the Asian Infrastructure Investment Bank to be overseen by an unpaid, nonresident board of directors, unlike the World Bank and the Asian Development Bank. The new bank, which will be based in Beijing and use English as its operating language, will open bidding for projects to all, unlike the ADB, which restricts contracts to member countries, according to a copy of the articles reviewed by The Wall Street Journal.

China growth data ‘overstated’ due to data error - China’s economic growth is being overstated by 1 to 2 percentage points due to a glitch in the way it is calculated, according to estimates by Capital Economics. If correct, this would mean the world’s second-largest economy only grew by 5-6 per cent in the 12 months to the first quarter of 2015, rather than the 7 per cent figure announced by Beijing. China’s official gross domestic product data have long attracted widespread scorn, with many commentators arguing the suspiciously smooth numbers are manipulated for political reasons. However, the Capital Economics analysis differs in that it is suggesting an error arises from a technical issue with how economic growth is calculated, rather than any deliberate attempt to mislead. Moreover, if the analysis is correct, it suggests that a swath of other emerging market countries, including India, could also be inadvertently overstating their economic growth numbers. The issue centres on the so-called “GDP deflator”, the inflation measure used to convert estimates of nominal GDP into real, inflation-adjusted terms. The deflator is a broader measure than indicators such as consumer or producer price inflation and is therefore often considered a more useful gauge of overall price pressures in an economy. It is the preferred inflation measure of the US Federal Reserve. Since GDP is a measure of domestic output, arguably this deflator should only reflect the prices of domestically produced goods and services. In practice, this means netting out the price of imports in the calculation of the GDP deflator, a routine practice in countries with “robust statistical systems”, For much of the time, a failure to do this might not matter too much. However, at times when import price inflation varies markedly from domestic inflation, such as when global commodity prices are rising or falling rapidly, it matters more.

China's Deficient Deflator Math Is One More Reason To Distrust Data -- It’s no secret that Beijing’s ‘official’ GDP prints likely overstate the pace at which China’s economy is growing. In fact, the numbers may be grossly exaggerated, as some analysts say the real rate of expansion is somewhere on the order of 4% (as opposed to 7%).  We’ve noted on any number of occasions that multiple key indicators — such as rail freight volume, industrial production, electricity consumption, etc. — suggest the dreaded “hard landing” is in fact here, and if Beijing fails to figure out how to balance a sharp decrease in shadow financing with the need to boost credit creation (i.e., if China can’t navigate the impossible task of deleveraging and re-leveraging simultaneously), things could get materially worse before they get better for an economy that’s attempting to mark a very difficult transition from investment-led growth to a consumption-driven model. For more on transparency and why the real rate of growth in China’s economy is “anybody’s guess”, see “Guessing Game: China's 'Real' GDP Growth Could Be As Low As 3.8%.” Beyond intentional misrepresentations however, China’s GDP data may suffer from a calculation error that at least one firm claims is endemic across emerging markets thanks to data collection limitations.

China trade shrinks amid slowing demand - China’s trade continued to shrink in May, underlining the slowdown in the world’s largest economy in purchasing power terms and raising expectations of further stimulus measures. Imports to China fell 17.6 per cent year-on-year in US dollar terms, nearly twice as bad as forecasts for a 10 per cent drop, according to government data released on Monday. This is the seventh consecutive month of falling imports, suggesting consumption in China continues to wane. Exports, the driver of China’s boom, fell 2.5 per cent from a year ago, a third straight month of decline. However, the drop was better than expected and compares with year-on-year falls of 6.4 per cent in April and 15 per cent in March. As a result of falling imports, China’s trade surplus jumped to $59.5bn from $34.1bn in April. This is the third-biggest monthly surplus on record, following figures in excess of $60bn in January and February.

More Evidence of the Weight of China on Global Inflation -- Last week my colleagues Bob Davis, Lingling Wei and I wrote about deflationary forces hitting the world’s tire and rubber industries from China. Today in The Wall Street Journal we see how these same forces are hitting another global goods market: junk. James Hagerty and Bob Tita report U.S. exports of scrap materials including cardboard boxes and junked aluminum cans are down 36% since 2011, thanks in part to waning demand from China, which has used U.S. scrap as a raw material to feed its industrial complex. As in many other industries, 2011 proved to be a pivotal year. When the global economy went into tailspin in 2008, China’s authorities responded by stepping up investment and pushing banks to lend more. A real estate boom ensued, as did more money thrown into building factories and infrastructure around them. China’s leadership was seen by many other world leaders as wise, capable and resourceful. Now we see how stepping back from this government-driven investment push is proving painful, with global consequences. The deflationary wind is hitting global goods markets and feeding into the U.S.. As the labor market tightens here, wages show signs of firming. Prices for services, which are especially exposed to domestic wages, are firming too. But goods prices, exposed to global trade, face persistent downward pressure. This could be a weight on overall inflation that plays into the Federal Reserve’s decisions about how aggressively to raise interest rates in the months and years ahead.

China's soft May inflation increases calls for fiscal stimulus - China's consumer inflation eased while producer prices stayed stubbornly in deflation in May, bolstering the case for fiscal stimulus as the world's second-largest economy shrugs off monetary easing. Annual consumer inflation eased to 1.2 percent in May thanks to a sharp drop in food costs, particularly pork, National Bureau of Statistics data showed on Tuesday, lower than a forecast 1.3 percent and the previous month's 1.5 percent. The producer price index (PPI) stayed unchanged at a negative 4.6 percent, meaning that Chinese factory pricing power is sliding deeper into its fourth year of contraction. "We are basically in the midst of a balance sheet recession with Chinese characteristics," said Andrew Polk, economist at the Conference Board in Beijing. "Companies and banks are busy repairing their balance sheets, and that suppresses borrowing appetite." Polk said that the solution requires both a "dramatic" reduction to interest rates combined with more government spending. Economists say weak producer prices are of particular concern as commodity prices - a major deflationary force at China's industrial heavyweights - are recovering yet producer prices remain depressed. "We think the reflationary pressure in China is still remote and the CPI is likely to stay low,"

PBOC Lowers China 2015 GDP, CPI Growth Forecasts - Researchers with China’s central bank have revised down their forecasts for the country’s economic growth and consumer inflation for 2015, citing increased downward pressure on economic growth. They now forecast China’s economy will expand 7%, slightly lower than a projection of 7.1% made six months ago, the People’s Bank of China said in a report posted on its website Tuesday. The report also lowered the forecast for this year’s consumer inflation to 1.4% from 2.2%. The mid-year report was written by a group of researchers led by Ma Jun, chief economist of the PBOC. Growth in industrial production, exports, investment in property and manufacturing have all been below expectations, they said. Long-term industrial deflation will likely affect consumer inflation, they added. Some banks have become more cautious about extending credit, especially to sectors with overcapacity, including export firms and property developers, the report said. Meanwhile, some companies are unwilling to invest, and demand for loans is relatively weak, the researchers said. Beijing set a target of keeping economic growth at about 7% this year. China’s economy grew at 7.0% in the first quarter, the slowest in six years.

China central bank admits defeat in war on deflation - China’s central bank this week faced reality and revised down its inflation estimate to half the level targeted by Beijing, implying it is failing — as global peers have before — to combat the threat of deflation. That is not only bad news for a country struggling to stimulate growth, it also threatens a ripple effect around the world: cheap made-in-China goods contained price rises around the world when that was a force for good. Now, as Europe, Japan and the US struggle with stagnant or falling prices, the spectre of exported deflation is a far from benevolent force. China’s consumer price inflation fell to an annual rate of 1.2 per cent in May, down from 1.5 per cent in and well below the government's official target of “around 3 per cent” for 2015. Wholesale prices have already been in deflationary territory for more than three years. This week researchers at the People’s Bank of China — led by Ma Jun, the former Deutsche Bank economist who now heads the central bank's research bureau — cut its full-year CPI forecast to 1.4 per cent, down from the 2.2 per cent projection published in December. The PBoC researchers cautioned that their forecasts were intended to “facilitate scholarly exchanges” and did not represent official central bank views. Still, the gap between the inflation forecast and the government's official target suggests officials are well aware that monetary easing measures adopted so far are not enough to boost price growth to the government’s desired level.

China Officially Doubles Down On Multi-Trillion Yuan Debt Swap Program -- Last week, in “China May Double Down On Debt Swap As ABS Issuance Stumbles,” we discussed the likelihood that China’s local government debt swap pilot program would be expanded in the very near future. The program is a big deal for two reasons: 1) China’s local governments simply cannot afford 7% coupons on CNY20 trillion in debt, and 2) thanks to the fact that the PBoC will accept the muni bonds as collateral for cash loans, each new muni issue translates to new credit creation in the real economy — or at least that’s the idea. If this sounds convoluted and self-defeating, that’s because it is. It’s a prime example of China attempting to deleverage and re-leverage at the same time. Local governments get to reduce their debt service burden (deleveraging) but the very mechanism which makes that possible also leads to further credit creation (re-leveraging). Because the total debt burden for China’s local government stands at around 35% of GDP, the debt swap program can theoretically be expanded from the initial CNY1 trillion to as much as CNY20 trillion and indeed, we now have confirmation that the quota on the pilot program has been doubled. WSJ has moreChina will let its cities and provinces issue another 1 trillion yuan ($161 billion) of bonds as it continues an effort to rev up the economy and help local governments refinance their hefty debt burdens. The move, which doubles the amount Beijing initially authorized, will help local governments refinance 1.86 trillion yuan in debt due this year, according to the official Xinhua News Agency. It said swapping 1 trillion yuan will save local governments about 50 billion yuan in annual interest payments.

MERS shockwave hits Korea Inc.: Middle East Respiratory Syndrome (MERS) is sending shockwaves throughout many industries here, putting an additional burden on Korea’s already sagging economy. According to travel agencies, hotels, airlines and other hospitality-related businesses, Monday, the spread of the highly infectious flu-like virus is beginning to have adverse effects on business as people increasingly choose not to venture out. Retail sales have dropped over the past few weeks, while construction firms are increasingly having a hard time carrying out projects in the Middle East because employees are reluctant to fly to the region for fear of contracting the MERS virus. “An increasing number of Chinese and other foreign tourists, who purchased our tour packages, have decided not to come to Korea, due to the spread of the MERS virus here,” a Mode Tour spokesman said. “We estimate that about 30 percent of Chinese travelers have canceled their visits to Korea. More foreign tourists will not come here if the virus continues to spread. Instead, they will go to Japan.” In addition, more and more Koreans are canceling travel plans abroad because they fear they could contract MERS on planes. “Basically, people do not want to stay with others in enclosed spaces,” the spokesman said. “We are concerned that MERS might reduce travel demand during the summer holiday season.”

Mostly Mortgages: Household Debt Surges by 10 Trillion Won in One Month -- According to depository financial institutions, household debt surged by more than 10 trillion won (US$8.93 billion) in a month. The Bank of Korea announced on June 9 that household debt by depository financial institutions increased by 10.1 trillion won (US$9.02 billion) to 765.2 trillion won (US$683.28 billion) from a month ago. This is the greatest increase since records started being collected in 2003. In particular, a 10 trillion won (US$8.93 billion) increase is unprecedented. The previous highest increase was 7.8 trillion won (US$6.96 billion) in Oct. last year. The amount of mortgage loans increased by 8 trillion won (US$7.14 billion), leading the total increase in household debt. Other loans, including credit line loans, also increased by 2.1 trillion won (US$1.88 billion). Household debt by deposit banks grew 8.7 trillion won (US$7.77 billion), while that of non-banking depository financial institutions increased 1.4 trillion won (US$1.25 billion).

Bank Of Korea Cuts Key Interest Rate to Stave Off Economic Fallout From MERS -  In an effort to stave off economic troubles caused by panic over the MERS (Middle East Respiratory Syndrome) outbreak, South Korea’s central bank lowered its seven-day repurchase rate to an unprecedented 1.5% Thursday, the fourth such reduction in 10 months, Bloomberg reports.  Authorities meanwhile announced that more people had died of the respiratory ailment, bringing the death toll to 10. The total infections now stand at 122, according to the Wall Street Journal.  As many as 3,000 people have been quarantined to date, and economists fear that a bleak mood will deaden any upward momentum the country’s already embattled economy might have been gaining.  This is the second straight year that the country has faced sudden threats to consumer sentiment, after last year’s sinking of the Sewol ferry also traumatized both the country’s people and its markets. Similarly, experts fear that worries over MERS could freeze domestic consumption, adding further troubles on top of the country’s plummeting exports, which fell 10% last year.  Public approval for President Park Geun-hye meanwhile dropped six percentage points in the past week, according to a Gallup Korea poll, suggesting that South Koreans were unhappy with Park’s handling of the crisis. She postponed a trip to the U.S. planned for next week and asked her Cabinet to execute “all preemptive measures” that might minimize the effect of MERS on the economy.  To date, all South Korean MERS casualties have been older than 55; all also had underlying medical conditions such as asthma, heart disease, and cancer. Still, this is the most extensive outbreak of MERS since the syndrome was discovered in Saudi Arabia in 2012.

MERS forces Korea central bank to cut rates to record low of 1.5%: South Korea's central bank has cut its policy rate by 25 basis points to a record-low 1.5 percent to offset any potentially harmful economic effects from an outbreak of the Middle East Respiratory Syndrome (MERS). A Bank of Korea media official announced the monetary policy committee's decision to lower the base rate without elaborating. Governor Lee Ju-yeol is due to hold a news conference later this morning. It was the fourth rate cut in less than a year and the seventh since the current easing cycle began three years ago as the trade-reliant economy, the fourth-largest in Asia, has struggled for traction over the past year.Fifteen out of the 28 analysts surveyed by Reuters had forecast the central bank would lower the rate to 1.5 percent, while the rest saw a steady rate. Krystal Tan, Asia economist at Capital Economics, said that the MERS outbreak could stop Korea's economic improvement in its tracks in the short term. She noted the downturn in tourism to South Korea and the fact that the outbreak had come at a time when exports were struggling.

Bank of Japan’s Kuroda Channels Peter Pan’s Happy Thoughts - Bank of Japan Gov. Haruhiko Kuroda on Thursday revealed a model of sorts as he navigates uncharted territory in monetary policy: Peter Pan. In his opening remarks at a conference in Tokyo, Japan’s central bank chief invoked the boy who can fly to emphasize the need for global central bankers to believe in their ability to solve a range of vexing issues, whether stubbornly sluggish growth or entrenched expectations of price declines. “I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘The moment you doubt whether you can fly, you cease forever to be able to do it,’” Mr. Kuroda said. “Yes, what we need is a positive attitude and conviction.” The remark underlined a core element of Kuroda’s philosophy as he has battled to defeat Japan’s deflation: It is all about confidence and expectations. Mr. Kuroda has distinguished himself from his predecessors not only by the unprecedented degree of his monetary easing but also by his efforts to instill a sense of optimism. For Japan to emerge decisively from more than a decade of deflation, the BOJ must do everything to eradicate what he calls a “deflationary mindset,” he says. If the BOJ convinces companies and households that inflation is here to stay, it will become a self-fulfilling prophecy as they begin to spend and invest.  Mr. Kuroda has led by example. He badly failed to deliver on his promise of 2% inflation. Kuroda has led by example. He badly failed to deliver on his promise of 2% inflation by this spring, but has kept saying his policy has shown its “intended effects.”

Asian rebound soothes nerves about global growth - According to Fulcrum’s “nowcast” factor models, global economic activity has improved significantly in the past month, with data from China and Japan recording stronger growth than has been seen for some time. The eurozone remains fairly robust (if only by its own rather unimpressive standards), but the US has failed so far to bounce back from a sluggish first quarter, even after the strong jobs report last Friday. There have been further downward revisions to forecasts for US GDP growth in the 2015 calendar year, including notably by the International Monetary Fund. This will be yet another year in which US growth has failed to match the optimistic expectations built into consensus economic forecasts at the start of the year. Despite some lingering doubts about the US, the improvement in global growth this month has significantly reduced the tail risk that the world might be heading towards a more serious slowdown. The reduced risk of a more severe global slowdown, along with signs of a bottoming in headline inflation in most economies, has probably been a factor behind the sell-off in bond markets in recent weeks, as the perception of global deflation risks has faded.The regular proxy for global activity that we derive from our “nowcast” factor models (covering the main advanced economies plus China, see graph on the right) shows that activity growth is now running at 3.5 per cent, which means that the slight dip in the growth rate that we identified around March/April has now been eliminated. Although the “recovery” in growth is only around 0.7 per cent from the low point, it is nevertheless significant because it suggests that the risk that a hard landing in China could drag the world economy into a more severe downturn has diminished, at least for now.

Who's India's Real Enemy? Pakistan? China?  -- First came "boli nahi, goli"  (Bullets, not talks). Then came "chappan inch ki chhaati" (56 inch chest, 44 actual according to Modi's tailor). It seems that India's Hindu Nationalist Prime Minister Narendra Modi's soaring rhetoric against Pakistan continues to soar ever higher.  Modi's rising rhetoric is now being emulated by his lieutenants including Defense Minister Manohar Parrikar, Home Minister Rajnath Singh and most recently Information Minister Rajyavardhan Rathore. Rathore is reported to have claimed that Indian forces have struck deep inside Myanmar and this Indian action has sent a "message" to Pakistan.  Indian military and Myanmar have both denied there was any cross-border attack into Myanmar. As I was reading the news of Hindu Nationalists' saber-rattling,  I started to wonder who is India's real enemy? Is it Pakistan? Or China? Or is it India's domestic problems of poverty, hunger, illiteracy, lack of  clear air and access of clean water and basic hygiene that result in tens of millions of deaths each year? Do the Indian leaders not know that their country is home to the world's largest population of poor, hungry and illiterates? Did recent heatwave deaths of over 2000 Indians not remind of India's extreme vulnerability to climate change?  Is it not true that more than half of India lacks access to clean water and toilets? Are they not aware that 13 of the top 20 most polluted cities are in India and 3 in Pakistan?  Do they not know that New Delhi is the dirtiest city in the world? Have they not seen data showing homelessness is driving 30 to 40 Indian youths per 100,000 to suicide, among the highest rates in the world? As these thoughts were running through my mind, I came upon a recent New York Times report  titled "Holding Your Breath in India" filed by the newspaper's New Delhi correspondent Gardener Harris who has been living in the Indian capital for several years.  Here are some of his observations:

Urbanisation is key to why India is so far in China’s wake -- Expectations are high that India will finally realise its full economic potential through a combination of Modi magic, its abundant young labour force and a more liberal policy regime. A recent adjustment in the country’s accounting has led to claims that it may already have replaced China as the world’s fastest growing economy. Yet, if India is to achieve the same sustained success as China, it needs to take a hard look at why its urbanisation process has failed so miserably in comparison. The reason why India has failed and China succeeded can be illustrated by two simple indicators: their respective ratios of urban to rural incomes and the prices of urban property. The ratio of incomes gives a sense of the relative differences in productivity between the cities and countryside. For China, this ratio is 3.2 – the highest in world. On average, urban workers are more than three times as productive as rural workers and are being compensated accordingly. No wonder some 270m migrant workers have flocked to the cities to secure better paying industrial jobs. For India, the same measure gives a ratio of 1.6, one of the lowest for emerging market economies, indicating that urban productivity is only moderately higher than in rural areas, and cities do not offer such a magnet of higher earnings. The other key indicator is the relative difference in property prices in China versus India. China’s mega-cities have seen a five-fold increase in property prices in renminbi terms, or nearly seven-fold in US dollars over the past decade. No wonder concerns about a possible property bubble in China dominate global financial news. Yet despite these astounding increases, property prices in Beijing and Shanghai are still only half those of their Indian counterparts of New Delhi and Mumbai. So because the productivity-related benefits are so much lower in India, the incentive for rural workers to migrate to the cities is much less than in China and this is accentuated by the relatively higher cost of living in Indian cities due to exorbitant property prices. These same inflated property prices coupled with other factors — notably logistical bottlenecks — put Indian manufacturers at a cost disadvantage in competing in global markets despite their lower wages. The net effect is to hobble India’s progress.

Pakistan Economic Review; KP Elections Aftermath; India Heatwave Deaths -- (video) How is Pakistan's economy performing after two years of Nawaz Sharif's government in power? What are its accomplishments and failures as laid out in the latest 2014-15 Economic Survey of Pakistan? Has there been an progress in resolving fundamental structural issues relating to taxation and  budget and current account deficits under Prime Minister Nawaz Sharif? Will the new budget for 2015-16 help grow the economy and improve macroeconomic indicators?Are allegations against PTI-led government of rigging in KP local elections politically motivated? Are PTI opponents justified in their demand for resignation of KP government and holding of fresh local elections?  Is the current intense heatwave in India caused by South Asia's high vulnerability to climate change? With over 2000 people Indians dead in the current heatwave, should India's Modi government pay more attention to issues of climate change? Viewpoint from Overseas host, Sabahat Ashraf ( discusses these issues and more with Riaz Haq ( and Misbah Azam ( on Velayat TV USA.

Pakistani Democracy's Disappointing Report Card On Education -- Data and graphs presented in Economic Survey of Pakistan 2014-15 show that the country has fallen considerably short of achieving UN Millennium Development Goals 2015 (MDG 2015), a set of goals agreed by UN member nations in the year 2000. Key MDG 2015 goals included: halving extreme poverty and hunger from 1990 levels, reducing by two-thirds the child-mortality rate and slashing maternal mortality by three-quarters and achieving universal primary education. Economic Survey of Pakistan 2014-15 Education Report also shows that the country was poised to achieve MDG goals in years 2001-2008 during President Musharraf's rule. Then came "democracy" in 2008 and human development progress dramatically slowed down. Human development index reports on Pakistan released by UNDP confirm the ESP 2015 human development trends.Pakistan’s HDI value for 2013 is 0.537— which is in the low human development category—positioning the country at 146 out of 187 countries and territories. Between 1980 and 2013, Pakistan’s HDI value increased from 0.356 to 0.537, an increase of 50.7 percent or an average annual increase of about 1.25.

The Global Struggle to Respond to the Worst Refugee Crisis in Generations - Eleven million people were uprooted by violence last year, most propelled by conflict in Syria, Iraq, Ukraine and Afghanistan. Conflict and extreme poverty have also pushed tens of thousands out of parts of sub-Saharan Africa and Southeast Asia. Here’s a look at the international response to what has become the worst migration crisis since World War II, according to the United Nations. About 11 million Syrians displaced, four million abroad, since 2011. In Iraq, nearly three million displaced since Dec. 2013. Years of violence in Iraq and Syria have stretched the capacities of neighboring countries to accommodate the displaced. In Jordan, unemployment has almost doubled since 2011 in areas with high concentrations of refugees, according to a recent International Labor Organization study. Lebanon began to require visas from Syrians in January. Refugees now make up about 20 percent of Lebanon’s population. In March, Turkey announced it would close the two remaining border gates with Syria.Indonesia and Malaysia, countries that in the past have quietly taken in many refugees from Bangladesh and Myanmar, first reacted to the new rise in migrants by vowing to send back smugglers’ boats. Facing public pressure, they reversed their stance in mid-May, saying they would provide shelter to migrants still at sea. An absence of landings and a paucity of sightings suggest that the inflow has subsided.

Final Forced Exchange Rate: 175 Quadrillion Zimbabwean Dollars (175,000 Trillion) = $5.00 -- For bank account holders in Zimbabwe, the government will do a forced exchange of Zimbabwean dollars to US dollars at the rate 175 Quadrillion Zimbabwean Dollars Per $5.00The Zimbabwean dollar will be taken from circulation, formalizing a multi-currency system introduced in 2009 to help stem inflation and stabilize the economy. The central bank will offer $5 for every 175 quadrillion, or 175,000 trillion, Zimbabwean dollars, Governor John Mangudya said in an e-mailed statement from the capital, Harare. While it marks the official dropping of the currency, transactions in the southern African nation have been made using mainly the U.S. dollar and rand of neighboring South Africa for six years.

Global Economic News Coverage Picks Up a Whiff of Inflation - News coverage of the global economy was little changed in May, although inflation news signaled some price pressures are building, according to data released Tuesday. The Absolute Strategy Research/Wall Street Journal global composite newsflow index stood at 55.1 in May after hitting a seven-month high of 55.3 in April. An index above 50 denotes a net positive news coverage on economic topics. “At 55.1, [the] NewsFlow [index] remains consistent with moderate economic growth, and equities beating bonds,” the report said. The global inflation index increased for the third consecutive month. The report said inflation news across the world continued to point toward rising price pressures–although the actual government price indexes have not yet signaled an upturn. The monetary policy newsflow index increased for the fourth consecutive month. The rise indicates central banks are making fewer easing policy moves, and talk about a Federal Reserve rate increase has risen. ASR said the news flow on corporate earnings weakened slightly on the global level but had mixed results across the six regions. Coverage of U.S. earnings was “quite weak” said the report, while “in the eurozone, earnings news flow improved dramatically, rising to a four-year high.” Regionally, all six composite indexes increased in May, although China’s news coverage had more negative stories about the economy than positive ones. The U.S. newsflow composite index increased to 58.4 last month. That was up from 57.5 in April and the highest U.S. reading since July 2014.

Fed tantrum sets off biggest exodus from emerging markets since 2008 -  Investors are withdrawing money from emerging markets at the fastest rate since the global financial crisis, raising the risk of a ‘sudden stop’ in capital flows as the US Federal Reserve prepares to turn off the spigot of cheap dollar liquidity. Data from the tracking agency EPFR show that equity funds in Asia, Latin America, and the emerging world bled $9.27bn in the week up to June 10, surpassing the exodus in the ‘taper tantrum’ in mid-2013 when the Fed first began to hint at monetary tightening. Jonathan Garner from Morgan Stanley said outflows from onshore-listed equity funds in China reached $7.12bn, the highest ever recorded in a single week. Brazil and Korea also saw large losses. The pace has quickened dramatically as the US economy gathers steam after a growth scare earlier this year. Signs of incipient wage inflation bring forward the long-feared inflexion point when the Fed finally raises rates for the first time in eight years. Morgan Stanley said its US tracking indicator for GDP growth in the second quarter has jumped from 1.5pc to 2.7pc over the last week and a half alone as a blizzard of strong figures changes the outlook entirely. The University of Michigan’s index of consumer sentiment roared back to life in June, jumping from 90.7 to 94.6. It follows news of a surge in US retail sales in May. Small investors have been pulling funds out of emerging markets for several months but the big pension funds and institutions have until now held firm. There is a danger that these giants could suddenly start for rushing for narrow exits at the same time.

Quantifying The Global Sovereign Bond "Carnage": $625 Billion Lost Since March, And Counting -- David Stockman - Shock waves have been rumbling through the global bond market in the last few days. On April 17 the yield on the 10-year German bund pierced through the 5bps level, but yesterday it tagged 100bps. That amounted to a 20X move in 39 trading days. It also amounted to total annihilation if you were front running Mario Draghi’s bond buying campaign on 95% repo leverage and didn’t hit the sell button fast enough. And there were a lot of sell buttons to hit. The Italian 10-year yield has soared from a low of 1.03% in late March to 2.21% last night, and the yield on the Spanish bond has doubled in a similar manner. Needless to say, this is not by way of a lamentation in behalf of the euro-bond speculators who have had their heads handed to them in recent days. After harvesting hundreds of billions of windfall gains since Draghi’s mid-2012 “whatever it takes ukase” they were overdue to get slapped around good and hard. Instead, what we have here is just one more striking demonstration that financial markets are utterly broken. The notion of honest price discovery might as well be relegated to the museum of financial history. The exact catalyst for yesterday’s panicked global bond sell-off, apparently, was Draghi’s public confession that although the ECB would stay the course on its $1.3 trillion QE program, it cannot prevent short-run “volatility” in the trading pits. Why that should be a surprise to anyone is hard to fathom, but it does crystalize the “look ma, no hands” essence of today’s markets. The trading herd goes in the direction enabled by the central banks until a few dare devils finally fall off their bikes, causing an unexpected pile-up and inducing the pack to temporarily reverse direction.

Bond crash across the world as deflation trade goes horribly wrong - Telegraph: The global deflation trade is unwinding with a vengeance. Yields on 10-year Bunds blew through 1pc today, spearheading a violent repricing of credit across the world. The scale is starting to match the 'taper tantrum' of mid-2013 when the US Federal Reserve issued its first gentle warning that quantitative easing would not last forever, and that the long-feared inflexion point was nearing in the international monetary cycle. Paper losses over the last three months have reached $1.2 trillion. Yields have jumped by 175 basis points in Indonesia, 160 in South Africa, 150 in Turkey, 130 in Mexico, and 80 in Australia. The epicentre is in the eurozone as the "QE" bet goes horribly wrong. Bund yields hit 1.05pc this morning before falling back in wild trading, up 100 basis points since March. French, Italian, and Spanish yields have moved in lockstep. A parallel drama is unfolding in America where the Pimco Total Return Fund has just revealed that it slashed its holdings of US debt to 8.5pc of total assets in May, from 23.4pc a month earlier. This sort of move in the staid fixed income markets is exceedingly rare. The 10-year US Treasury yield - still the global benchmark price of money - has jumped 48 points to 2.47pc in eight trading sessions. "It is capitulation out there, and a lot of pain,"

The latest IMF paper on debt -  -- This paper by IMF economists has attracted some media attention. (Flip Chart Rick has a good summary.) I want to talk about it because it does something that is quite rare - it talks about optimal debt policy in the longer run, rather than focusing on the shorter term issues associated with austerity. It also uses theory that I have used in a number of my own papers.  The headline result, that many will find startling, is that countries with what the IMF call ‘fiscal space’ have no need to reduce government debt at all, and should not therefore undertake fiscal consolidation to reduce debt - not today, or tomorrow. By fiscal space they effectively mean that the market is perfectly happy buying the debt, and are not suffering - and are unlikely to suffer - any kind of significant default premium that raises the interest on their debt. The paper suggests that most countries, including the UK, now have this fiscal space (see their page 4).  Many will find this message surprising, particularly coming from the IMF, because we are always hearing about why higher government debt is such a bad thing, and in particular how it imposes such a burden on future generations. However the result the paper is using is perfectly standard in the literature. To put it very simply, high debt does impose a burden, because the taxes required to pay the interest on that debt are ‘distortionary’ - for example income taxes prevent people from working as much as they should. But Analogies between households and governments are misleading: while we as individuals do not live forever and therefore need to pay back debt eventually, the state can act as if it will go on forever. We therefore face a trade-off: is it worth paying higher taxes now in order to reduce government debt so we can pay lower taxes in the future? (Conceptually we can make the same point when talking about government spending cuts.)

IMF Paper on Debt: A Rorschach Test -- International Monetary Fund staff economists have stimulated a much-needed discussion (at least on Think Tank) of the best approach governments of strong economies such as the U.S. and Germany should take to their debt burdens. “[T]he mantra that it is always desirable to reduce public debt must not go unquestioned,” they write. Their paper is something of a Rorschach test: Everyone seems to read into it something different. I read it as a challenge to those who argue that the highest priority of the U.S. government (and 2016 presidential candidates) ought to be taking action today to reduce the historically large debt-to-gross domestic product burden before it’s too late. I was thinking about folks who fixate on the national debt clock, who argue for cutting spending now (can you say “sequester”?), and who reason that the economy is growing slowly, in part, because uncertainty over future deficits is discouraging business investment and hiring. Salim Furth of the Heritage Foundation read it as an endorsement of European and U.S. fiscal policy because governments have, in fact, done pretty much what the IMF prescribed: Narrowed the deficit but not paid down the debt. Maya MacGuineas of the Committee for a Responsible Federal Budget found support for (self-described) deficit hawks, saying that most are “not talking about paying down the debt but calling for sensible deficit reduction that slows the growth of the federal debt to give the economy time to catch up.” You can read the IMF paper or a blog post summary for yourself. It’s clear to me that they are trying to provide intellectual ammunition to those (like Mr. Sen) who argue that spurring economic growth ought to be at least as high on the policy priority list, if not higher, for the U.S., Germany, and similarly situated economies than worrying about the size of their government debts.

Global Growth Has Slowed Says OECD - WSJ: The global economy slowed for the second straight quarter in the first three months of the year, the Organization for Economic Cooperation and Development said, as the recovery from the financial crisis remained weak and fitful. The Paris-based research body said on Thursday that the combined gross domestic products of the Group of 20 largest economies was 0.7% higher in the first three months of 2015 than it was in the final three of 2014. That marked a slowdown from a 0.8% rate of growth in the fourth quarter of last year, and 0.9% in the third. G-20 members account for 85% of total global economic output. It was the lowest rate of growth since the first quarter of last year, and as then was led by a contraction in the U.S. However, the U.S. wasn't alone in experiencing an early-year contraction, with economic output also falling in Brazil and Canada. A number of other major economies experienced slowdowns, including China, Germany, the U.K., Mexico and South Africa. By contrast, Italy and France emerged from stagnation, while Japan also picked up, as did India and Turkey. Economists believe the U.S. economy will rebound from its first-quarter setback. But a second straight quarter of slowing growth underlines the difficulties the world’s top policy makers face in exiting crisis-management mode and lifting growth out of a long-term funk, seven years after the financial crisis struck.

World Bank sees slower global growth, urges Fed to wait on rates - World Bank sees slower global g: (Reuters) - The World Bank on Wednesday cut its global growth outlook for this year and urged countries to "fasten their seat belts" as they adjust to lower commodity prices and a looming rise in U.S. interest rates. Kaushik Basu, the World Bank's chief economist, said the Federal Reserve should hold off on a rate hike until next year to avoid worsening exchange rate volatility and crimping global growth. In its twice-yearly Global Economic Prospects report, the global development lender predicted the world economy would expand 2.8 percent this year, below its 3 percent prediction in January. It said low commodity prices, especially the roughly 40 percent drop in oil prices since last year, had hurt commodity exporters more than anticipated. The World Bank also warned countries to prepare for higher U.S. interest rates, which would raise borrowing costs for developing economies. "We at the World Bank have just switched on the seat belt sign," Basu said in a press conference in Washington. "We are advising nations, especially emerging economies, to fasten their seat belts." Basu said lower commodities prices eventually should help global growth, and the World Bank kept its global growth forecasts unchanged for next year and 2017. It also predicted that India would be the fastest-growing major economy for the first time this year, growing at a rate of 7.5 percent, up from the previous forecast of 6.4 percent. But the World Bank cut its 2015 growth forecast for developing countries to 4.4 percent, from 4.8 percent in January, pointing to the drag of expected recessions in Brazil and Russia. It also lowered the growth outlook for the United States to 2.7 percent this year, from 3.2 percent in January, and to 2.8 percent next year, from a previous forecast of 3 percent. The U.S. economy slumped at the beginning of 2015 due in large part to bad winter weather, a strong dollar, port disruptions and deep energy sector spending cuts.

Aussie Central Bank Admits, Property Prices "Have Gone Crazy" - With The Philly Fed admitting QE has been the driver of inequality in the USA and the Kiwis slashing rates unexpectedly, the fact that Reserve Bank of Australia Governor Glenn Stevens uttered the following is even more crucial. "I think it's a social problem," Stevens told the Economic Society of Australia, adding ominously, "I think some of what's happening is crazy," specifically pointing to Sydney property prices as an example. No matter where we look around the world, Central Bankers appear to be exercising their honesty glands about the impact of their policies. However Stevens can't help himself at the end, noting "we remain open to the possibility of further policy easing." As Business Spectator reports, Sydney property prices have gone "crazy", but record low interest rates aren't entirely to blame, Reserve Bank boss Glenn Stevens says. The RBA governor waded into the property debate on Wednesday, telling a business lunch that he finds Sydney's soaring prices concerning. However the RBA remains open to cutting rates further and always took into account what was happening in property markets across the country - not just Sydney - when deciding whether to adjust the cash rate, he said."What is happening in housing in Sydney I find acutely concerning for a host of reasons, many of which are not to do with monetary policy," he told the Economic Society of Australia. "I think it's a social problem.

Will the Australian Government Walk Away from the TPP? - naked capitalism - Yves here. The Wikileaks release last week of the TPP chapter draft from December 2014 that covered drugs and medical devices made clear that it would interfere with effective and popular programs like Australia’s Pharmaceutical Benefits Scheme, that help contain pharmaceutical goods prices. The Australian Therapeutic Goods Administration reads the literature on the efficacy and costs of different drugs, and selects the ones it deems most effective (which often aren’t they very newest formulation, since Big Pharma has made a science of making minor tweaks in existing drugs so as to extend the patent life and support higher prices. The TGA will pick certain drugs in each category and bargain hard on price.  The idea that a loyal ally like Australia is even considering not signing the TPP is yet another sign that the deal is in trouble overseas as well as in the US. From MacroBusiness: Amid reports earlier in the week that US President, Barack Obama, is refusing to slash agricultural tariffs and import quotas as part of the Trans-Pacific Partnership (TPP) trade agreement, thus excluding Australian sugar and beef farmers from realising benefits, Agriculture Minister, Barnaby Joyce, has vowed today that the Government won’t sign any deal unless it includes significant cuts to agricultural protection: “If there’s nothing in it for us then we don’t need to sign it,” the minister told ABC radio on Friday. Previously, the Nationals, along with Liberal Senate agricultural committee member, Bill Heffernan, raised concerns about the impacts of the TPP on bio security, suggesting there is some disquiet within the Coalition.Meanwhile, Trans-Tasman health experts have sounded new warnings about potential adverse impacts on the Pharmaceutical Benefits Scheme (PBS) arising from the TPP, following the release of the annexe on “transparency and procedural fairness for pharmaceutical products and medical devices” by Wikileaks: “It sets a terrible precedent for using regional trade deals to tamper with other countries’ health systems… That will mean fewer medicines are subsidised, or people will pay more as co-payments or more of the health budget will go to pay for medicines instead of other activities or the health budget will have to expand beyond the cap. “Whatever the outcome, the big global pharmaceutical companies will win”…

New Zealand Central Bank Cuts Key Interest Rate, Signals More Easing - WSJ: —New Zealand’s central bank lowered interest rates for the first time in four years to help shield the export-reliant economy from plunging commodity prices and mounting deflation risks. “We expect further easing may be appropriate,” Gov. Graeme Wheeler said as the bank lowered the official cash rate a quarter of a percentage point to 3.25%. “This will depend on the emerging data.” New Zealand was one of the first countries to begin lifting interest rates following the 2008 financial crisis, as Chinese demand for dairy, the country’s chief agricultural export, helped propel economic growth. In addition to surging Asian demand for its dairy produce, the central bank was encouraged by growing economic migration contributing to a booming housing market in its largest city, Auckland. Emergency post-earthquake reconstruction in the second biggest city, Christchurch, also helped spur demand for construction and other services. While the economy continues to grow at an annual rate of around 3%, the steep drop in milk prices, down more than 50% from early last year, is worrying the central bank. With global dairy supply increasing and demand from China easing, it sees price pressure continuing for some time. Coupled with a slide toward near-zero inflation, the trend has prompted the central bank to reverse in course following four successive rate increases—the last of which occurred in July of last year. Consumer-price inflation has been running below the bank’s 1%-to-3% target range for some years, but the recent plunge in world oil prices has driven annual inflation down to 0.1%.

What Can the TPP Offer Canada? Not Much. -- The answers are equally obvious if you look past the hype: not much, and quite a lot. To begin with, Canada already has free trade deals in place with four of the larger TPP countries (Peru, Chile, the United States, and Mexico), and tariffs on trade with the others—representing 3 percent of imports and 5 percent of exports—are very low. Canada has a trade deficit with these non-FTA countries of $5 to $8 billion annually, and 80 percent of Canada’s top exports to these countries are raw or semi-processed goods (e.g., beef, coal, lumber), while 85 percent of imports are of higher value-added goods (e.g., autos, machinery, computer and electrical components). This Canadian trade deficit will likely widen if the TPP is ratified, as the United States found two years into its FTA with South Korea.Tariff removal through the TPP is therefore likely to worsen the erosion of the Canadian manufacturing sector and jobs that has been taking place since NAFTA—a result, in part, of the limits free trade deals place on performance requirements and production-sharing arrangements. NAFTA-driven restructuring did not even have the promised effect of raising Canadian productivity levels, which languish at 70 percent of U.S. levels twenty years into the agreement. Instead, Canada has experienced greater corporate concentration, a significant decline in investment in new production, and rising inequality. In short, there is little trade expansion up­side for Canada in this negotiation. And yet the Canadian public will eventually be asked to make considerable public policy concessions to see the TPP through. As many U.S. commentators have argued, the trade impacts of TPP are far less important than the serious concerns it raises about excessive intellectual property rights, regulatory harmonization, and the perpetuation of a controversial investor-state dispute settlement (ISDS) regime that has been extremely damaging to democratic governance globally, not to mention quite humiliating for Canada.

De-Dollarization Du Jour: Russia's Largest Bank Issues Yuan-Denominated Guarantees -- The unipolar, dollar-dominated post-war world is shifting under Washington’s feet.  Leading the push towards multipolarity and de-dollarization are a resurgent Russia and China, the rising superpower. The demise of the Bretton Woods world order is perhaps nowhere more apparent than in the launch of the BRICS bank and the establishment of the AIIB. These new structures represent a move away from US-dominated multilateral institutions and their very existence suggests that a failure to adapt to economic realities and an inability or unwillingness to meet the needs of the modern world may soon drive institutions like the IMF into irrelevancy.   If the demise of the existing supranational economic order seems improbable, or if calls for its downfall appear at the very least to be premature, consider recent events.  While the US obstructs efforts to reform the IMF and give member countries representation that’s commensurate with their economic clout, and as the Fund itself bickers with the EU over aid to Greece, the BRICS bank (which hasn’t even officially launched) has offered Greece a spot at the table with some reports suggesting Athens may be able to contribute its paid in capital in installments while receiving aid in the interim.   China has pledged to invest some $50 billion in Pakistani infrastructure via Beijing’s Silk Road initiative and the AIIB. The money will fund power plants, roads, railways, and, perhaps most importantly, the Iran-Pakistan natural gas pipeline. The vast sum represents 53% more than the US has given Islamabad over the past 13 years combined. China is also set to invest an equally large sum in Brazil and is even considering the construction a railroad over the Andes, which would connect Brazil to China via the Pacific and ports in Peru. Meanwhile, lawmakers in Washington fight over whether infrastructure spending could have prevented an Amtrak derailment.

Russia Central Bank Wants to Boost Gold, FX Reserves to $500B in Few Years - The Bank of Russia plans to boost its depleted international reserves to $500 billion to hedge the crisis-struck economy against capital flight and new shocks, the central bank chairwoman said Thursday. Speaking at a banking conference, Elvira Nabiullina said the current level of Russia’s reserves look sufficient but the country would need coffers big enough to cover possible “substantial capital outflows over two or three years.” Russia lost more than $150 billion in net capital outflows in 2014 on the back of Western sanctions and a drop in oil prices. To support the embattled ruble the Bank of Russia sold billions of dollars of foreign currency over the past year, which sent foreign-exchange reserves to around $385 billion in early 2015 from some $510 billion a year earlier. To beef up reserves, the central bank started buying around $200 million a day in mid-May. Russia also needs reserves to cover outstanding foreign debt at times when commodity exports remain the only reliable source of foreign currency as capital markets are closed for Russian borrowers due to Western sanctions. But one shouldn’t expect exports to thrive as oil prices are now some 1.5 times below the average level of the past five years, Ms. Nabiullina said. “The current economic indicators are better than economists had expected. But it’s too premature to say that all the crisis developments are behind… One should not bet that exports will pull the economy [out of the crisis],” Ms. Nabiullina. In what seemed to contrast with claims that the foreign-exchange crisis was overblown by government officials, Ms. Nabiullina warned the shortfall in reserves could be between $150 billion and $170 billion in 2015 compared with a year ago due to lower exports.

In Distorted European Markets, Negative Rates Pose Risks -Among the various monetary distortions that laid the groundwork for last week’s rout in European bonds, perhaps the most insidious and dangerous is the unprecedented experience of negative interest rates. By penalizing deposits, negative rates directly threaten the integrity of the financial system and pose a serious challenge for central bankers in the region. In fact, concerns about their potentially destructive impact are as good an explanation as any for why European Central Bank President Mario Draghi caused bond yields to spike when he indicated on Wednesday that he wasn’t bothered about volatility in that market. Yet the problem stems directly from central bank policy, and specifically that of the ECB. Gripped by a cycle of tit-for-tat monetary easing policies and a stealth currency war that has been marked by a falling euro, various central banks in Europe now charge banks to lend money to them. Moreover, a few commercial banks are passing on those costs to their institutional clients by doing the same. These are uncharted waters. In fact, economists once believed it was impossible to “breach the zero bound.” In this unknown territory, it’s not hard to imagine things going wrong, which is perhaps why central bankers like Mr. Draghi may have mixed feelings about what they have wrought. On the one hand, they want weaker currencies and easier credit conditions, but on the other, they’re letting the market know they’re happy with higher bond and deposit rates. The biggest fear with negative rates is that at some point savers might yank money from bank accounts and store it in cold, hard cash. After all, 0% interest on banknotes beats making payments to one of the Swiss banks now charging institutions to deposit funds. Quite conveniently, too, the Swiss franc comes in denominations as high as 1,000 francs.

Tug-of-war ahead as central banks seek control - The recent volatility in the sovereign bond markets of Europe and the US has rightly caught many people’s attention. Its primary drivers, German government bonds, have displaced the traditional global price setting role played by US Treasuries. It involves bonds that serve as benchmarks for a host of other government and corporate securities throughout the world, and thus has systemic global influence on borrowing, investment and saving behaviour. And it has spilled over to other markets, particularly commodities and foreign exchange but also equities. Assessing the underlying causes of this unusual volatility is key to forecasting its persistence and implications. The scale of the volatility is notable. In the past few weeks, German Bunds experienced the sharpest daily moves since the inception of the eurozone in 1999, a period that includes the bursting of the tech bubble in 2000-01, the 2008 global financial crisis, and the near disintegration of the eurozone in 2012. In tandem, JPMorgan finds that US Treasuries have registered the greatest number of “high volatility” days since 2011; and year-to-date, the number of days with yield movements of 10 basis points or more has already exceeded all those for 2014 as a whole. Many factors have fuelled the volatility, starting with an initial set of conditions characterised by overly compressed, and thus ridiculously low, interest rates — particularly in Germany, where Bunds up to the nine-year maturity point were trading at negative nominal yields while the benchmark 10-year declined to as low as 5 basis points, or 0.05 per cent. It was a starting point that proved particularly vulnerable to disruptions

ECB's balance sheet rises to 2.428 trillion euros | Reuters: The combined balance sheet of the European Central Bank and the euro zone's 19 national central banks rose by 11.660 billion euros (9 billion pounds) to 2.428 trillion euros in the week to June 5, the ECB said on Tuesday. The ECB is rolling out a scheme to buy government bonds and other assets known as "quantitative easing" to pump 1 trillion euros into the economy in order to lift inflation towards its target of just below 2 percent.

Italy’s Migrant Scams Now More Lucrative Than Drugs - Many of the more than 50,000 migrants who have landed on Italy’s shores since January, and many more of the 174,000 who arrived last year, unwittingly became the cover for a massive corruption racket that included kickbacks, bribes and bid fixing run by the very people they trusted to help them.  Money allocated to clothe and feed the migrants, who risked their lives for a better future, instead padded the pockets of Italian politicians and businessmen who admitted that migrant scams had become even more lucrative than drug trafficking, according to wire taps and interceptions from a court dossier complied by prosecutors investigating the Mafia Capitale or Capital Mafia in Rome. The latest revelations came over the weekend when Giuseppe Castiglione, Italy’s undersecretary for Agricultural, and five others were officially notified that they were under investigation for their alleged roles in procuring goods and services that were apparently never provided for the thousands of asylum seekers staying at the over-crowded CARA Mineo refugee center in Sicily, which is the country’s largest structure. Last week, 44 people were arrested in the growing migrant mismanagement scandal, many of them accused of essentially stealing from the poorest and most desperate of the migrants. Women’s centers and even foster home centers meant to protect children are embroiled in the scandal, which has become somewhat like unraveling a spider’s web. According to the authorities, shell companies and Rome’s city government entities essentially fed off each other while those in charge reaped profits.


Juncker Spurns Tsipras Meeting - Alexis Tsipras, the Greek prime minister, asked to meet Jean-Claude Juncker on Saturday but was spurned by the European Commission president rankled by the Greek leader’s denunciation of his efforts to broker a bailout deal. According to a senior official with a Group of Seven delegation, which began gathering in southern Germany on Saturday ahead of a two-day summit of the leaders of the seven leading industrialised powers that begins Sunday, Mr Juncker believed Mr Tsipras’ speech in parliament left little to discuss. “Unless he seriously addresses the issues, there’s no reason to meet,” said the G7 official. The G7 official said Greece’s creditors were taken by surprise both by Mr Tsipras’ outright dismissal of their offer in his parliamentary address as well as a decision to delay a €300m loan repayment owed to the IMF last Friday.  Mr Juncker’s rejection of a meeting with Mr Tsipras returns the bailout talks to a point of stalemate just a week after creditors believed the talks were making progress for the first time in nearly four months. Many officials believe a deal to release €7.2bn in desperately-needed bailout aid needs to be reached ahead of a June 18 meeting of eurozone finance ministers so that Athens has enough time to implement an agreed set of economic reforms in order to get the rescue funds before the bailout expires at the end of the month.

Junker Declines Tsipras Call: Greece "Not Serious", "No Reason To Meet" - In a speech to parliament on Friday, Greek PM Alexis Tsipras called a proposal drafted by the country’s creditors “an unpleasant surprise”. Tsipras, who submitted his own proposal to Angela Merkel, Francois Hollande, Jean-Claude Junker, and Mario Draghi on Monday just ahead of an emergency meeting between the four in Berlin, says the counterproposal he received on Wednesday from the troika was “unreasonable” and can’t possibly be the basis for a deal. He went on to say that Greece will not be “blackmailed” and even went so far as to suggest that the institutions’ draft was a negotiating “trick” and may ultimately be withdrawn.  While it’s as yet unclear whether Tsipras’ bluster is genuine or simply reflects the fact that thanks to the so-called “Zambia” option — whereby Greece will now bundle its June IMF installments into one payment due at the end of the month — the PM can now feign belligerence for another few weeks before ultimately conceding amid an acute liquidity crisis and a default to creditors. In the mean time, Tsipras must toe the line between adopting language that appeases the more radical members of Syriza, and testing the waters to discover what (if any) concessions would be acceptable to parliament.  As we’ve argued, the troika has every reason to stick to its guns. The risk of emboldening Syriza sympathizers in Spain and Portugal now far outweighs the projected fallout from a Grexit — or so the narrative goes. Greece, on the other hand, will face devastating economic consequences, political instability, and social unrest in the event the country returns to the drachma, meaning Tsipras’ move to effectively call the troika’s bluff might have been more show than anything else. That is, the longer the PM can put on a brave face, the harder he can say he fought when, in the end, he is forced to go to parliament with an unpopular deal or face an economic depression the depths of which are as yet impossible to measure.

German No 2 tells Greece that Europe has hit its limits -- German Vice Chancellor Sigmar Gabriel warned Greece in a newspaper interview on Saturday there was no more wiggle room in negotiations on a cash-for-reforms deal. Asked if he was expecting an agreement soon, Gabriel told German daily Stuttgarter Nachrichten: "That depends solely on the Greek government. Europe has gone up to its limits." Gabriel said that there was a mood in Germany now for letting the Greeks just leave the euro zone. "But this would get very expensive for certain," he said, adding that Greece would remain a member state in the European Union no matter what happened. "So there would still be the need for aid." Gabriel, who is economy minister and also head of Germany's Social Democrats, criticised Greek Prime Minister Alexis Tsipras. "His problem his that he's not willing to tackle the issues that need to be solved. He'd rather put them onto the shoulders of the European taxpayers. But this won't work." Gerda Hasselfeldt, a senior member of German Chancellor Angela Merkel's conservative allies in Bavaria, told the German newspaper Passauer Neue Presse that Athens now had to come up with detailed reform proposals. "The current programme must be implemented and it cannot be changed into something else on the quiet," Hasselfeldt said

Shooting ourselves in the foot - I wonder if Prime Minister Alexis Tsipras and his close aides have ever seriously questioned their strategy vis-a-vis international leaders and officials. Tsipras may be enjoying sky-high popularity in the opinion polls and he may strike a chord with our collective subconscious, but he is doing things wrong. Take for example his Sunday op-ed in Le Monde. The article did not win him any friends or allies in Paris, Brussels or anywhere else. In it, Tsipras was either playing the blame game in the event of an impasse with Greece’s lenders or was exclusively addressing the audience at home. The leftist leader has tried to build a relationship of trust with foreign leaders. He has even come to be seen as separate from SYRIZA and the coalition government and to be considered a reasonable interlocutor. International leaders are politicians, too; they know the rules of the game. However, when you say one thing on the phone and another in your op-ed or public statements, then you have a serious credibility problem.  This is a very crucial moment. Fairly or not, most of Europe’s establishment has written Greece off. Our empty geopolitical threats have backfired. As international relations expert at Oxford University Kalypso Nicolaidis was saying yesterday, it’s better if others – not you – warn against the risk of your country falling apart. Personal ties take time to build and yield results. A few weeks of serious negotiations under Giorgos Houliarakis made a big difference, despite efforts by the official economic policy team to undermine him. Tough-guy posturing may be a good sell at home, but it is extremely damaging when dealing with international officials. In the end, every stage in the negotiations decides the credibility of the country and its leader. It’s now time for Tsipras to prove that he has (a) achieved a good deal and (b) he can brave in-party obstacles and see it through.

Greek Banks On Verge Of Total Collapse: Bank Run Surges "Massively" As Depositors Yank €700 Million Today Alone - While the Greek government believes it may have won the battle, if not the war with Europe, the reality is that every additional day in which Athens does not have a funding backstop, be it the ECB (or the BRIC bank), is a day which brings the local banking system to total collapse. As a reminder, Greek banks already depends on the ECB for some €80.7 billion in Emergency Liquidity Assistance which was about 60% of total deposits in the Greek financial system as of April 30. In other words, they are woefully insolvent and only the day to day generosity of the ECB prevents a roughly 40% forced "bail in" deposit haircut a la Cyprus. The problem is that a Greek deposit number as of a month and a half ago is hopefully inaccurate. It is also the biggest problem for Greece, which has been desperate to prevent an all out panic among those who still have money in the banking system. Things got dangerously close to the edge last Friday (as noted before) when things for Greece suddenly looked very bleak ahead of this week's IMF payment and politicians were forced to turn on the Hope Theory to the max, promising a deal with Europe had never been closer. It wasn't, and instead Greece admitted its sovereign coffers are totally empty this week when it "bundled" its modest €345 million payment to the IMF along with others, for a lump €1.5 billion payment, which may well never happen.

G-7 Throws Greece Under the Bus - Yves Smith -Some observers thought that Greece might get a break in the G-7 summit this weekend. The assumption that the US would be worried that a default and possible Grexit would lead to much greater Russian influence on a strategically-located country, and the US would thus push the Troika to make more concessions to Greece.That dream has failed to materialize. While the G-7 has one more day to run, the statements coming out of it already signal that the assembled nations (U.S., Canada, Germany, France, Japan, Italy and the U.K) are backing the creditor position. This should come as no surprise. The Obama administration changed its position in February from pushing the lenders to come up with more pro-growth policies (meaning give relief to Greece) to stressing that Greece needed to “find a constructive path forward in partnership with Europe and the IMF to build on the foundation that exists.” That was code for “The structural reforms are in place and you need to work from them.” The Obama administration has again come down on the side of pressing Greece to implement structural reforms, and depicts this as a view shared by all G-7 participants. From BloombergObama put concerns over the deadlock onto the agenda of a G-7 summit hosted by Chancellor Angela Merkel in southern Germany on Sunday. Canadian Prime Minister Stephen Harper “emphasized the importance of addressing the Greek debt crisis,” according to a statement released by his office after a working session on the world economy. “There was unanimity of opinion in the room that it was important for Greece and their partners to chart a way forward that builds on crucial structural reforms” and returns to growth, White House spokesman Josh Earnest told reporters.

If You Think Greece’s Crisis Will End Soon, Think Again - Frustrated by Greece’s cat and mouse game with its creditors? Get used to it. Even if Prime Minister Alexis Tsipras clinches as much as 7.2 billion euros ($8 billion) from a bailout tranche creditors are withholding, he’s going to need another cash infusion shortly thereafter. What will ensue is a renewed battle after almost five months of trench warfare. The beleaguered country requires a third bailout of about 30 billion euros, according to Nomura International Plc analysts Lefteris Farmakis and Dimitris Drakopoulos. The final bill will depend on whether fellow euro member states grant Greece any debt relief, and what form that relief would take, they said. Tsipras says any aid must be on his terms rather than those of governments whose taxpayers have forked out billions in the past five years to keep Greece in the euro. The standoff has triggered an unprecedented liquidity squeeze, pushing the country’s economy back into recession, and thus raising the total sum of additional loans Greece may need after its current euro-area-backed bailout expires this month. “Any plausible deal at this stage is unlikely to do enough and it’s unlikely to be the end of the matter,” . “This could just play out again and again.” The latest episode in the five-year saga has focused on releasing the final tranche of Greece’s second bailout. The amount at stake roughly equals the bond repayments that Greece needs to make to the ECB in July and August. Here’s the problem for the policy makers struggling to avoid a default in Athens: Even if Greece muddles through until August, it faces a financing shortfall of about 25 billion euros through the end of 2016. That’s likely to worsen as the economy slides deeper into recession and tax revenue shrivels. .

Obama and Merkel make nice – — President Barack Obama, sharing a breakfast of beer and pretzels with Chancellor Angela Merkel, declared the US-German relationship as “one of the strongest alliances the world has ever known.” By traveling here with Merkel and spending time with local Germans, Obama sought to put an end to almost two years of frosty public relations following a string of spying revelations. The visit capped an intensive effort by the two leaders to repair a relationship that grew tense after the disclosure that Washington had tapped the German chancellor’s mobile phone. “My message to the German people is simple: we are grateful for your friendship, for your leadership, we stand together as inseparable allies in Europe and around the world,” Obama told a crowd of several thousand gathered in this small Bavarian village ahead of the G7 summit. Much of the discord seemed to have been forgotten, at least on this bright sunny morning in the Bavarian Alps. “Although it is true we sometimes we have differences of opinion from time to time, still the United States of America is our friend, our partner and indeed an essential partner with whom we cooperate closely,” Merkel said. “We cooperate closely because this is in our mutual interest. We cooperate because we need it. We cooperate because we want it, because we share this responsibility together. “Although it is true we sometimes we have differences of opinion from time to time, still the United States of America is our friend, our partner”  Minutes after finishing their public remarks, Merkel and Obama sat down with the locals, hoisted tall glasses of wheat beer and ate a traditional Bavarian breakfast of Weisswurst, white sausage, and pretzels.

European Leaders Voice Frustration With Greece in Debt Crisis - World leaders on Sunday increased the pressure on Europe to resolve the crisis over Greek debt, hours after one of the chief European negotiators expressed exasperation with the way the Greek leader was handling the talks.Chancellor Angela Merkel of Germany, host of the Group of 7 summit meeting in the Bavarian Alps, told the public broadcaster ZDF that she and the French president, François Hollande, had spoken to Prime Minister Alexis Tsipras of Greece by telephone late Saturday and had briefed other leaders attending the gathering on the conversation.“We can’t say yet that the problem is solved,” Ms. Merkel told ZDF. “We are working flat out,” she added, but said that any deal requires Europeans to bind together to help each other, as well as individual efforts from member states.President Obama also intensified pressure for a resolution, with the White House warning that a failure by Europe to reach a deal could spark broader financial instability around the globe.In a private meeting between Mr. Obama and Ms. Merkel on the sidelines of the summit, the two agreed “that it was important for Greece and their partners to chart a way forward that builds on crucial structural reforms and returns Greece to sustainable long-term growth,” Josh Earnest, the White House press secretary, said on Sunday.“There obviously is a deadline that’s looming,” Mr. Earnest added, saying the president was hopeful that Greece would pursue such changes “without causing undue volatility in the global financial markets.”

G-7 Unites to Push Greece on Resolving Creditor Standoff -  Greece faces a week of urgent diplomacy to free up bailout aid and avert a potential default as world leaders press for a final resolution to the standoff. With talks between the Greek government and creditors due to resume in Brussels on Monday, Prime Minister Alexis Tsipras faced a united front from Group of Seven leaders calling for movement to end the impasse and avert the risk of wider economic reverberations. President Barack Obama put concerns over the deadlock onto the agenda of a G-7 summit hosted by Chancellor Angela Merkel in southern Germany on Sunday. Canadian Prime Minister Stephen Harper “emphasized the importance of addressing the Greek debt crisis,” according to a statement released by his office after a working session on the world economy. “There was unanimity of opinion in the room that it was important for Greece and their partners to chart a way forward that builds on crucial structural reforms” and returns to growth, White House spokesman Josh Earnest told reporters at a briefing on the president’s 45-minute meeting with Merkel. The G-7 intervention raises pressure on both sides in the dispute to reach a compromise that unlocks the final 7.2 billion-euro ($8 billion) tranche of aid and brings Greece back from the edge of default, averting a possible exit from the 19-nation euro. A solution to the negotiations should be reached before June 14 and further high-level meetings are contingent on the likelihood of an accord, a French government official told reporters on the condition of anonymity.

Greece and Creditors Head for the Brink -- No one can be sure how the Greek drama will end, not least because it is no longer clear who, if anyone, is in control. Both sides have been bombarded for months by well-meaning advice to show flexibility and compromise to avoid an economic calamity in Greece and a geopolitical disaster for the eurozone and the world. Instead, positions have hardened to the point where the scope for compromise now looks vanishingly small. Last week, Greece’s creditors offered what was effectively a take-it-or-leave-it deal to unlock Greece’s bailout cash before the program expires at the end of the month. Some eurozone officials had been hopeful that Prime Minister Alexis Tsipras would use a speech in the Greek Parliament to signal his willingness to accept the terms on offer. Instead, he called the proposal absurd and vowed to reject many of its key demands.The creditors had clearly underestimated the scale of opposition to the proposals within Mr. Tsipras’s Syriza party and overestimated his willingness or ability to confront the party’s left wing. For his part, Mr. Tsipras appears to have overestimated how much flexibility he could expect from a process involving three independent, rules-based institutions with different mandates acting on behalf of 17 sovereign governments, each with its own political agenda. He called last week’s creditor proposal an “unpleasant surprise”—though the terms were broadly the same ones that the creditors have been demanding since June 2014, when the current bailout review began.  The dispute is partly one of substance. The creditors, led by the International Monetary Fund, insist that deep reforms to pensions and the public sector are essential to rectify deep structural problems built up during the boom years when Athens chased easy growth by raising pensions and civil-service wages to unaffordable, near-German levels. If Greece still had its own currency, it could simply inflate away this problem. But since it is a member of a currency union—and wishes to remain in one—the only way to bring pensions and salaries back to sustainable levels is to pursue a so-called internal devaluation.

Greece, Creditors Discuss Extending Bailout in Bid to Break Deadlock - WSJ: Greece and its creditors are discussing an extension of the country’s bailout program through March 2016, people familiar with the talks said, an offer aimed at breaking a protracted standoff over the terms for fresh aid and averting a Greek default. The proposal, first presented last week, is part of European officials’ efforts to prod the government in Athens to agree to painful concessions in exchange for rescue funds. But continued disagreements over the economic overhauls and austerity measures demanded by Greece’s lenders risk undermining the plan, people familiar with the plans say. The eurozone’s portion of Greece’s €245 billion ($276 billion) rescue program runs out at the end of June, raising questions over how Athens will pay off its debt beyond this month and remain in Europe’s currency union. With a debt load close to 180% of its gross domestic product and an economy back in recession, Greece is unable to raise money from international bond markets and has been depending on rescue loans from the eurozone and IMF for more than five years.

Creditors Offered Bailout Extension Till March 2016 if Greece Agreed to Pension and Labor Reforms - Yves Smith - As we’ve said, Greece’s creditors are continuing to demand that Greece give in on the two key sticking points in negotiations, that of pension and labor market “reform”. Given that Tripras has continued (if anything even more loudly via his Le Monde op ed and Parliament speech last week) to insist that he is not crossing his red lines, it’s hard to know what to make of the creditor offer.  Are they really not hearing Tsipras, or is this an effort to carry forward the Eurocrats’ narrative that they’ve tried everything? Plus Tsipras may have interpreted this offer as a sign of creditor weakness, emboldening him and Varoufakis to hold firm. We have separately pointed out that anything beyond small and/or cosmetic concessions on pensions would be a difficult sell to all of the 18 Eurozone nations that have to approve a deal, and this concession from the creditors even less conceivable the later the political sausage-making process starts.  Notice the timing. This proposal was made last week. It thus was presumably included in what Tsipras characterized as “absurd” creditor demands in his fiery speech to Parliament last Friday. It has thus not just been rejected but rejected with vehemence. From the Wall Street Journal: “What we offered would mean that Greece is fully financed until March 2016,” said one person, referring to a meeting last week between European Commission President Jean-Claude Juncker, Greek Prime Minister Alexis Tsipras and Jeroen Dijsselbloem, the Dutch finance minister who represents eurozone governments in the talks. At that meeting, Messrs. Juncker and Dijsselbloem offered the extension and the extra funding in return for Greece implementing policy overhauls as well as pension cuts and tax increases, the people said. But Mr. Tsipras rejected those terms as “unacceptable.” “Every additional day of capital outflows [from Greece’s banks] means less money can be taken from the [bank recapitalization fund and used to repay debt] and instead has to be used to stabilize the banks,” this person said.

Obama says time for Tsipras to make ‘tough choices’ - Barack Obama, the US president, put Athens on notice that it needed to urgently make difficult economic reforms in the clearest sign yet Greece was becoming isolated on the international stage for its combative stance towards its bailout creditors. Mr Obama said leaders gathering for the Group of Seven summit in Krün, Germany felt “a sense of urgency” for an agreement to be reached between Greece and its lenders to release €7.2bn in much-needed bailout aid to Athens. But breaking from past urgings for both sides to make concessions, Mr Obama put the onus on Alexis Tsipras, the Greek prime minister, saying it was time for “tough decisions”. “What it’s going to require is Greece being serious about making some important reforms, not only to satisfy creditors, but also to create a platform where the Greek economy can start growing again,” Mr Obama said at a post-summit news conference. “The Greeks are going to have to follow through and make some tough political choices that are going to be good in the long term.” Over the course of the eurozone crisis, Mr Obama has repeatedly used gatherings of G7 and G20 leaders to put pressure on Europeans — particularly German chancellor Angela Merkel — to be more generous in using their resources to help struggling economies. Indeed, some Greek officials have been hoping the White House would step into the current stand-off to weight the scales in their favour. Mr Obama did call on creditors on Monday to show some “flexibility”. But by publicly emphasising Greece’s obligations at such a critical time in the negotiations, Mr Obama has closed off one of the last potential escape valves for Athens.

Capital controls risk increasing: Greece is facing some tough decisions ahead, with time running dangerously short for its banks and economy, which are on the verge of crumbling. Deposits are shrinking by the day, Moody’s warns that capital controls are edging ever closer and all eyes will be on Wednesday’s crucial meeting of the European Central Bank’s board. Frankfurt will examine Greek lenders’ liquidity conditions and discuss whether or not to increase the emergency liquidity assistance available to them. Given that the outflow of deposits currently stands at some 250-350 million euros per day, it is certain that banks will require a further rise in the ELA limit, as the safety cushion of available cash is understood to have now fallen below 3 billion euros. In the last few weeks the ECB has only released enough liquidity to Greek banks to keep them on life support and it is expected to do the same on Wednesday despite pressure by board members who desire a toughening of the stance toward Greece. Most analysts agree that there will be no surprises this week, will Frankfurt expected to wait for the politicians to provide an end to the drama of the last few months. There should therefore be a small increase to the current ceiling of 80.7 billion euros. The continuing outflow of deposits is, according to ratings agency Moody’s, increasing the risk of the imposition of capital controls that would amount to a state of bankruptcy for bank deposits. Although Moody’s estimates that Greek lenders have sufficient collateral to draw additional liquidity of 35 billion euros through the ELA, it believes that the threat of capital controls has increased considerably.

The Greek Trap - Trying to save Greece has become an exercise in the absurd. Greece is near-enough bankrupt. Most Greeks know that. It can never repay its debts, no matter how many deals with creditors are pulled out of a hat.The country is now run by a radical left party whose ministers have close to zero executive experience. Their executive experience nonetheless exceeds their diplomatic experience. This stands at less than zero — and it shows. The party, Syriza, includes people who want to re-fight the Greek Civil War (1946-49) in the belief the Communists will triumph this time.For now, the party’s main enemies are international creditors and of course the Germans, who want the Greeks to present a plan of some sort to balance their books before doling out more cash — about $8 billion in fact — as part of an enormous bailout program. The thing is, however, that Syriza was elected precisely to say foreign-imposed austerity had already done enough damage to Greece.  The country, which desperately needs the $8 billion, is drowning under a welter of statistics that present a devastating picture of unemployment, unpayable pensions, youthful pensioners, uncollected taxes, drastic fiscal adjustments, and of course debt. Given all this, Alexis Tsipras, the prime minister, declared the latest proposals from creditors “absurd” — you see what I mean about diplomacy — a view that reportedly caused Jean-Claude Juncker, the chief executive of the European Union, not to pick up a call from Tsipras over the weekend. There’s one thing about reality: It tends to come back and kick you in the teeth. Forcing Greece and Germany to coexist in a currency union will always be an exercise in smoke and mirrors. Their economies are mismatched, their temperaments even more so.

A Greek Default Slashes U.S. Exports and Jobs --- Greece is small, both in terms of population and economic output, compared to the rest of the EU. However, a debt default could have outsized consequences extending well beyond Athens. The European economy is already sputtering, and a Greek default, combined with the almost inevitable political crisis that would follow, would almost certainly make matters worse, with repercussions that would inevitably cross the Atlantic. For example, Michael Hicks, an economics professor at Ball State University and economics and director of the Center for Business and Economic Research there, tried to put the issue in perspective just for the state of Indiana. “Even a mild European recession will have repercussions here. About 2.5 percent of Indiana’s GDP is exported to the rich nations in Europe. That means perhaps 75,000 direct jobs linked to the manufacture and transport of these goods and another 45,000 indirectly across the state. A meaningful downturn affecting northern Europe will cost tens of thousands of Hoosiers their jobs. What happens in Greece will impact us, and so we ought to care about the economics of a debt restructuring.” The Massachusetts Institute of technology’s Observatory of Economic Complexity says that more than 20 percent of total U.S. exports flow to Europe, meaning that a further slowdown there will have real consequences here.

ECB’s Mersch Downplays Danger From European Government Bond Yields’ Rise - European Central Bank executive board member Yves Mersch on Monday downplayed the danger posed by the recent rise in government bond yields in Europe, saying they reflect desirable outcomes such as a rise in inflation expectations and increased optimism about economic growth. Speaking at a conference in Frankfurt, Mr. Mersch said it isn’t the ECB’s job to set asset prices in financial markets. “Rising rates either mean that inflation expectations rise or that growth expectations rise. We like both,” Mr. Mersch said. His comments came amid recent volatile swings in bond prices that have pushed German yields sharply higher, though still quite low by historical standards. Last week, the 10-year German bond yield hit its highest level, 0.99%, since September after ECB President Mario Draghi said financial markets would have to become accustomed to bouts of volatility given the ultra-low level of interest rates. It traded around 0.89% late afternoon Monday in Europe, and was as low as 0.05% in April. “When markets have gotten on the wrong track we’re not in charge of stopping them. When the markets correct, it’s a correction. In that case you can’t tell the central bank that it should have prevented it,” Mr. Mersch said.

Greek Proposal on Bailout Standoff Not Acceptable, European Officials Say - WSJ: —European officials quickly dismissed a Greek compromise proposal meant to help end a standoff over the country’s bailout program, saying on Tuesday that the offer didn’t go far enough in meeting creditors’ demands. Weeks of negotiations and several high-level political meetings have brought the two sides closer together on some of the terms for unlocking urgently needed aid for Athens. But the back-and-forth makes clear that fundamental differences remain over how to prevent Greece from defaulting on its debt and possibly leaving the eurozone.  Time is running out before Athens must repay €1.6 billion ($1.8 billion) to the International Monetary Fund at the end of the month. Athens’s creditors are looking for additional pension cuts and tax increases before they would be willing to extend any more funds. The Greek proposal was sent as an attempt to help bridge the gap. But European Commission President Jean-Claude Juncker told other commissioners at the EU executive arm’s weekly meeting that it appears to backtrack from an agreement on budget targets struck between him and Greek Prime Minister Alexis Tsipras at a meeting last week, a person familiar with his remarks said. Greece’s proposal includes targets for its primary surplus—the excess of revenues over expenditures before interest payments are made—that are lower than the targets presented to Greece last week in a new proposal from the commission, the European Central Bank and the IMF, the three institutions representing Greece’s creditors. “That’s nonnegotiable,” an EU official said. “What’s been submitted [by Greece] is not a basis for further political discussion.”

Creditors Reject Latest Greek Proposal, Tsipras Meeting with Merkel and Hollande in Doubt as Default Risk Rises - Yves Smith - Greece’s creditors are not pleased, and perhaps more important, the Greek government has lost one of its few remaining advocates, Jean-Claude Juncker of the European Commission. The Eurocrats are finally waking up to the degree to which the two sides have talking past each other. The implication is that it is far less likely than they had believed.    Greece submitted two plans in response to the creditor proposal last week. One a short supplement to its 47 page proposal it sent last Monday. The new paper gave some ground on primary surplus targets (where as we noted the two sides were not far apart) and the amount to be raised from VAT (where Greece closed a bit less than half the gap). However, Greece’s plans are still deemed to fall well short, in terms of detail, in terms of how the government will meet the primary surplus targets From the Wall Street Journal: European officials quickly dismissed a Greek compromise proposal meant to help end a standoff over the country’s bailout program, saying on Tuesday that the offer didn’t go far enough in meeting creditors’ demands… Greece’s proposal includes targets for its primary surplus—the excess of revenues over expenditures before interest payments are made—that are lower than the targets presented to Greece last week in a new proposal from the commission, the European Central Bank and the IMF, the three institutions representing Greece’s creditors. While this is not a formal rejection, media reports with independent sourcing all had the creditors pouring cold water on the Greek counter. The Greek government also submitted a short document on debt reduction, even though the lenders have said repeatedly that that is not part of the bailout negotiations.  More important, the creditors suspect that Greece believes it can get them to relent an do a last minute deal on debt relief only. We’ve remarked in the comments section, with a bit of horror and disbelief, that both Varoufakis and Tsipras have said that Greece has until June 30 to get a deal done. That’s not accurate.

Dijsselbloem: Deal with Greece not at hand yet, rejects debt write-off - While the Greek government awaits for a creditors’ response to the reforms proposals it submitted late Monday, head of the Eurogroup Jeroen Dijsselbloem spoke and said: Deal with Greece is not at hand yet. Speaking to Dutch RTL Nieuws, Jeroen Dijsselbloem said:

  • 1. It is was not certain whether Greek Prime Minister Alexis Tsipras would meet the French and German leaders in Brussels on Wednesday.
  • 2. “I’ve heard a lot of optimism from the Greek side, and it’s an underestimation of the complexity of what’s being asked of them.”
  • 3.  “We’re not even in agreement about what still has to happen before the end of this month.”
  • 4. Greece has room to arrange its own budget as long as it doesn’t require further funding from other countries and as long as its spending is under control.
  • 5. the Greek pension system “simply must be modernised” as it is not sustainable.
  • 6.He rejected discussion of forgiving Greek debts. “We must now really look at the final issues that are on the table and that we are prepared to look at.”
  • 7. “If the Greeks are ready to come with serious proposals we can go on, and otherwise the process will lie still.”  via reuters.

Merkel, Hollande, Tsipras agree to intensify debt talks - Reuters: The leaders of Germany and France agreed with Greek Prime Minister Alexis Tsipras on Wednesday that negotiations between Greece and its creditors must be intensified to reach a deal to avert a Greek default but there was no sign of a breakthrough. A German government spokesman said after Chancellor Angela Merkel and President Francois Hollande reviewed the state of the talks with Tsipras on the sidelines of an EU summit in Brussels that the meeting took place in a constructive atmosphere. "It was agreed unanimously that the talks between the Greek government and the institutions (IMF, European Commission and European Central Bank) should be pursued with great intensity," the spokesman said in a statement. The talks have been deadlocked over Greece's rejection of the creditors' demands for cuts in pensions and unpopular labor market reforms as conditions for releasing frozen bailout funds.

Greek failure would mean eurozone end – Tsipras — Greece leaving the eurozone, dubbed the ‘Grexit’, would be a major blow for the European Union, as it would trigger a domino effect and eat deeply into taxpayers’ pockets, said the Greek Prime Minister Alexis Tsipras “ “I think it’s obvious. It would be the beginning of the end of the eurozone. If the European political leadership cannot handle a problem like that of Greece, which accounts for 2 percent of its economy, what would the reaction of the markets be to countries facing much larger problems, such as Spain or Italy which has two trillion of public debt?,” Greek Prime Minister Alexis Tsipras told Corriere Della Sera Tuesday. A ‘Grexit’ would be disastrous for the eurozone, as it would lay a heavy burden on European taxpayers, Tsipras added. He stressed that Greece is not using the possibility of leaving the eurozone as pressure or blackmail. "We want to put an end to this nightmare debates on Greece’s leaving the eurozone; it is an obstacle to economic stability in Europe,” said Tsipras.

Leaders fail to reach deal on Greek aid - Alexis Tsipras, the Greek prime minister, held another round of talks with his French and German counterparts on Wednesday night, with no signs that either side had moved closer to achieving a deal to release €7.2bn in bailout aid to his cash-strapped government. After a two-hour meeting following an EU summit with Latin American leaders, Mr Tsipras and a German government spokesman characterised the talks as “constructive” and said that negotiations to find agreement would intensify — similar language used after several previous meetings. “I think the EU leadership realises they must agree to a viable solution and a possibility for Greece to return to social cohesion with security and growth and also with a sustainable debt level,” Mr Tsipras said in brief comments to reporters as he left the meeting. “This will not only give security to Greece, but Europe as well.” Angela Merkel, the German chancellor, and François Hollande, the French president, left the talks without commenting but on Thursday morning Ms Merkel urged Greece to press ahead in its negotiations with the bailout monitors, saying: “every day counts”. The inconclusive talks came amid increasing signs that representatives of Greece’s bailout creditors were losing patience with Athens and were moving closer to taking a more hardline “take it or leave it approach” with Mr Tsipras’s government. According to three senior eurozone officials, German government representatives have told interlocutors that they believe Greece’s public rejection of a compromise offer from creditors presented to Mr Tsipras last week was a sign that a compromise may not be achievable. To stave off bankruptcy, Athens must agree a new list of economic reforms to release the €7.2bn in aid. Without the assistance, Greece could default on a €1.5bn loan repayment owed to the International Monetary Fund at the end of the month.

German central bank chief says time running out for Greece - Jens Weidmann, the influential president of Germany’s central bank, warned Athens on Thursday that time was running out for Greece to avoid insolvency and argued other European leaders should not underestimate the impact a Greek bankruptcy would have on the rest of the eurozone. Mr Weidmann, whose views on Greece have frequently swayed the German political debate, said the “risk of insolvency is increasing by the day” and that while eurozone governments had provided substantial aid in the past, future assistance should be tightly tied to economic reform measures. “Taxpayers from other euro-area countries have provided substantial funds to support the unavoidable adjustment process,” Mr Weidmann said in a speech in London. “But time is running out.” The Bundesbank chief joined a growing chorus of eurozone leaders putting pressure on Alexis Tsipras, the Greek prime minister, to abandon months of incremental concessions and quickly agree a package of economic reforms with its three bailout monitors to release €7.2bn in desperately needed bailout aid. Tweet this quoteTwo hours of talks between Mr Tsipras and his French and German counterparts late on Wednesday produced no breakthroughs, and Angela Merkel, the German chancellor, said there was a consensus that “Greece will now work emphatically at full steam with the three institutions in the coming days to try to clear up all the outstanding issues”. “Every day counts,” Ms Merkel said as she arrived for the second day of an EU summit with Latin American leaders in Brussels. Mr Tsipras is due to meet the head of one of the institutions overseeing the bailout — Jean-Claude Juncker, president of the European Commission — later on Thursday. Mr Juncker told colleagues this week that Mr Tsipras lost the commission’s support because of his negotiating tactics.

No progress on Greece deal - Alexis Tsipras, the Greek prime minister, held another round of talks with his French and German counterparts on Wednesday night, with no signs that either side had moved closer to achieving a deal to release EUR7.2bn in bailout aid to his cash-strapped government.  The lack of progress comes as Standard & Poor's downgraded its credit rating on Greece by one notch to triple C, which is speculative grade. S&P's view is that Greece will default on its debts within a year in the absence of a deal with its creditors.  "We decided to intensify the efforts to bridge the remaining differences and proceed, I believe, to a solution in the coming period," Mr Tsipras said after the talks. German Chancellor Angela Merkel and French President Francois Hollande left the meeting without commenting.  Meanwhile, many Greek citizens continue to pull money from banks and move funds out of the country, fearing that a radical government might resort to capital controls.

Eurogroup head says deal with Greece still possible by June 18 -Greece and its creditors can still reach a deal on what reforms the cash-strapped country has to implement to get more loans and avoid default, in time for the next meeting of euro zone finance ministers on June 18, the chairman of the ministers said. Speaking to reporters on a visit to Helsinki, however, Jeroen Dijsselbloem warned that time was running out fast and the institutions representing the creditors needed time to assess whether new proposals Greece might make. Dijsselbloem, who is also the finance minister of the Netherlands, said that while only a few issues remained to be solved in the four-month-old negotiations, the latest proposals from Athens, submitted to the institutions on Monday, did not make the cut. "We are still open to serious alternatives, but the alternatives of the last couple of days have not been of a high enough standard," he told a news conference after talks with Finish Finance Minister Alexander Stubb. "In the last talks which I had together with (European Commission) President (Jean-Claude) Juncker and Prime Minister (Alexis) Tsipras, we made quite clear that there is room to put in alternative measures, but the bottom line is that it has to add up, because Greece has to become financially independent again," he said.

Court orders Greece to reverse 2012 pension cuts - A top Greek court ruled on Wednesday that the government should reverse cuts to private sector pensions it made in 2012 as a condition of its bailout agreement with the European Union and IMF, court officials said. Greece has implemented waves of pension cuts since 2010 as part of austerity measures agreed with its international lenders to put its finances back on track. Creditors' demands for yet more pension cuts are a major sticking point as Athens tries to reach a deal with the EU and IMF over unlocking remaining bailout funds so that it can avoid defaulting on its debts. The country's top administrative court, the Council of State, ruled that the 2012 cuts violated Greek law and the European Convention on Human Rights because they deprived pensioners of the right to a decent life. The ruling, which does not cover the public sector, added that the Greek government should provide aid to pension funds should they lack the finances to pay the pensions - even though Athens agreed with the lenders in 2010 that this would be forbidden. The new leftist-led government of Prime Minister Alexis Tsipras has promised to roll back austerity and reverse some wage and pension cuts. The court said pension cuts in 2010 and 2011 were not unconstitutional since they were implemented under "extraordinary circumstances".

Did Greece's Time Just Run Out? -- Early last month, negotiations between Greece and creditors took a decisive turn the worst when the IMF broke from the rest of the troika on the feasibility of a third Greek bailout program.  The split came when Poul Thomsen, head of the IMF’s European department told EU creditors that Greece is so far off track economically, the Fund was not only against a new bailout for Athens, but in fact was considering whether or not to withhold its portion of remaining funds under the existing program. Thomsen said that EU creditors should be prepared to write down their Greek debt so as to make the country’s debt-to-GDP ratio more ‘sustainable.’ Unsurprisingly, Europe wasn't particularly enthusiastic about the idea. Thomsen’s remarks — which were delivered to EU finance ministers at an April meeting in Riga — were followed up by reports that the IMF had informed the ECB and the European Commission that the Fund would not be participating in a third Greek bailout program.  Earlier today, those reports were confirmed as the IMF has withdrawn its team and sent its lead negotiators back to Washington. Meanwhile, a meeting between Tsipras and European Commission President Jean-Claude Juncker was billed by one EU official as a "last attempt" to convey the urgency of the situation to the Greek PM. European Council President Donald Tusk (who met with Tsipras on Wednesday) has also voiced frustration at Athens' apparent belligerence in the face of economic oblivion. FT has more: In a series of meeting in Brussels, Mr Tsipras was told his government must quickly decide whether to accede to a raft of economic reforms or face bankruptcy. “We need decisions not negotiations now. It’s my opinion that the Greek government has to be, I think, a little more realistic,”   The IMF was equally direct, announcing its lead negotiators had returned to Washington and citing “major differences” and a lack of progress in negotiations. “There are major differences between us in most key areas,” said Gerry Rice, the IMF spokesman. “There has been no progress in narrowing these differences recently.”

IMF quits Greece talks amid ‘air of unreality’ as deal unravels - Only a week ago, officials on both sides of the negotiating table believed that a solution to Greece’s agonising stand-off with its creditors was mercifully at hand. In a late-night meeting on the 13th floor of the European Commission headquarters in Brussels, Jean-Claude Juncker, the commission’s president, presented a five-page plan for Greece that had been hammered out days earlier among Europe’s most powerful leaders in private talks at the chancellery in Berlin. If Alexis Tsipras, the Greek prime minister — who had flown in especially for the session — could accept the deal, or something close to it, the country would soon gain access to €7.2bn in bailout aid and avoid defaulting on its debts. After the four-hour session, Mr Juncker thought he had a deal: Mr Tsipras had accepted new budget surplus targets that were tougher than Athens had hoped but lower than the existing bailout programme. Mr Tsipras disagreed with raising taxes on energy and many of the pension cuts, but agreed to return with a counter-proposal that would identify cuts elsewhere to make up the difference. Since that moment last Wednesday, however, the putative agreement has fast unravelled. Members of Mr Tsipras’s radical Syriza party angrily denounced the plan as soon as they caught wind of the details. Faced with a political firestorm back home in Athens, Mr Tsipras cancelled a follow-on meeting with Mr Juncker and instead delivered a strident rejection of the plan before the Greek parliament, calling it “absurd” and containing “irrational, blackmailing demands”. Adding insult to injury, Mr Tsipras opted to delay a €300m payment due the same day to the International Monetary Fund — even though he had told his creditors he would not do so. Christine Lagarde, the IMF managing director, was caught out, having just hours earlier assured the public that Athens would make the payment.

EU issues final warning to Greece as last-ditch talks achieve nothing - Telegraph: The European Union has warned Greece in the clearest language to date that its patience is exhausted and the country will be abandoned to its fate unless it accepts creditor demands in short order. Donald Tusk, the EU’s president, said the radical-Left Syriza government must stop spinning out the negotiations and face hard choices before Greece spirals irrevocably into default. "There is no more time for gambling. The day is coming, I'm afraid, that someone says that the game is over," he said. The blunt language came as the International Monetary Fund pulled its officials out of the talks, citing a failure to break the deadlock after four months of wrangling. “There are major differences between us in most key areas. There has been no progress in narrowing these differences,” it said. Greek prime minister Alexis Tsipras failed to secure any substantive concessions during two days of stormy talks with key power-brokers in Brussels, including German Chancellor Angela Merkel and French president Francois Hollande. Mrs Merkel tried to put the best gloss on events, insisting that Greece had agreed to work “full steam ahead” to break the impasse. Yet her assurances belie the reality that Syriza and Europe’s creditor powers are no closer to a deal as bankruptcy looms. The Greek interior ministry has ordered regional governors and mayors to transfer all cash reserves to the central bank as an emergency measure.

UPDATE 1-Despite IMF walkout, Greece hopes for deal on June 18 (Reuters) - Greece hopes to clinch a deal with its lenders at a meeting of eurozone finance ministers on June 18, the state minister said on Friday, as time runs short for the country to stave off default at the end of the month. The statement by Alekos Flabouraris came a day after the International Monetary Fund walked away from negotiations in Brussels, citing major differences, and a top EU leader bluntly told Athens to stop "gambling" with its future. A Greek source told Reuters that the entire Greek delegation that had been negotiating a cash-for-reform deal had also left for home on Thursday, citing continuing disagreements. "I hope it (a deal) will come very soon, on June 18, when the Eurogroup takes place," Flabouraris, a close aid to Greek Prime Minister Alexis Tsipras, told state television ERT. Greece needs a deal to unlock aid before the end of the month when it is otherwise set to default on a 1.6 billion euro ($1.8 billion) repayment to the IMF. That could trigger capital controls and possibly push Greece out of the euro zone, with unpredictable consequences for the European economy.

IMF Walks Out of Greece Talks; "No More Space for Gambling"; Can Greece Default and Stay in Eurozone? Russia is the Key! -- In what appears to be a "take it or leave it message to Greece", IMF says Time for Compromise is Over, and walks out of talks.  Greece’s creditors on Thursday issued their starkest warnings to Athens since the start of a five-month stand-off over the country’s soon-to-expire €172bn bailout, with the International Monetary Fund withdrawing its negotiating team and European leaders saying the time for compromise had ended. The pointed language in public reflected growing private fears that Alexis Tsipras, Greek prime minister, had overestimated the amount of time he has left to cut a deal to release the bailout’s final €7.2bn aid tranche. "We need decisions not negotiations now. It’s my opinion that the Greek government has to be, I think, a little more realistic,” said Donald Tusk, the European Council president, who met Mr Tsipras privately on Wednesday. “There’s no more space for gambling, there’s no more time for gambling. The day is coming, I’m afraid, where someone says the game is over.”  The IMF was equally direct, announcing its lead negotiators had returned to Washington, citing a lack of progress in negotiations. “There are major differences between us in most key areas,” said Gerry Rice, IMF spokesman. “There has been no progress in narrowing these differences recently.” Can Greece Default and Stay in Eurozone?   In April, The Telegraph commented on April 25, that "Greece's Grand Plan" was to Default and Stay in the Euro. The article failed to explain how that would happen. The Financial Times article How Greece Can Default and Stay in the Euro involves the use of script as the mechanism. I don't buy that story either, at least as the primary solution, but at least the FT presented a means. There is one other possibility: Greece gets the external funding it needs from Russia for an interim period long enough for Greece to build a primary account surplus.

EU holds first talks on Greek default as Athens holds out hope --  EU officials have held their first formal talks on the possibility of a Greek default, officials said on Friday, but the darkening outlook failed to fluster Prime Minister Alexis Tsipras, who holed up with his negotiators after proclaiming optimism at an open air concert. In Athens, a government official denied that the possibility of Greece failing to honour its debt commitments had been discussed by the European Union, and said meetings with creditors would resume in Brussels on Saturday. No one knows, least of all in Athens or Brussels, whether the anti-austerity government can reach a deal with its lenders before an end-June deadline and thereby avoid putting the country in grave danger of crashing out of the euro zone. But senior euro zone officials are taking no chances, and discussed a series of scenarios in Bratislava late on Thursday, several officials told Reuters. These included a possible default on a 1.6 billion euro ($1.8 billion) payment that Greece must make to the International Monetary Fund, the global lender of last resort, at the end of this month, they said. While Europe let loose a barrage of warnings, the leftist Greek government exuded calm and optimism. A cheerful Tsipras was mobbed by supporters late on Thursday at an open air concert to celebrate the reopening of a TV station, still wearing the blue suit he had worn at crisis talks that morning in Brussels.

Greece hangs on as unemployment worsens again -  Disheartening news for the Greeks on Thursday who are patiently awaiting some gains after six years of austerity. The unemployment figures ticked up in Q1, and while they are below their absolute peak, more than one in four Greeks are still without a job. Now nearly four years into 20% or more territory, the jobless rate is staying stubbornly high despite some signs of economic recovery. By now people had been hoping to see some results for their sacrifices, but instead unemployment is back on the rise as the economy dips into recession again after modest growth at the end of 2014. It is all leading to some bleak opinions about the future. “Unfortunately we are a country without a future. It doesn’t matter if the current government has good intentions, and I believe it does; it doesn’t have the opportunity any longer to do anything for you, for me, or our young,” said one man. Standard and Poor’s rating agency added another nail to the Greek coffin on Thursday with a fresh downgrade of the country’s sovereign debt but despite all thus extra pressure some are convinced of Greece’s resilience and ability to stay afloat. “The fear of a Greek exit from the euro zone is diminishing. There is still no compromise but there is a clear goal of the European partners to keep Greece in. They don’t want to bear the consequences of a Greek exit from the euro zone, which makes the markets happy. However, this will only last in the short term. In the long term, we will have gained absolutely nothing with Greece staying in the euro zone,” says the Baader bank’s Robert Halver.

Did the Media (and Greece) Miss a Meaningful Concession by the Creditors? -- Yves Smith - Greece and its lenders appear to be on an inexorable path to a Greek default unless Greece capitulates in the next few days. In a move meant to tell Greece that the onus was on them to offer more concessions, the IMF negotiating team left for Washington, as other senior European officials, such as Bundesbank chief Jens Weidmann and European Council president Donald Tusk issued warnings.  The gap between the two sides on the structural reform hot topics of pension and labor market reforms has seemed for some time too large to possibly be surmounted. Moreover, even though the creditors have clearly rejected debt renegotiation as part of the bailout, making it clear that they planned to address that only after a reform package was settled, Greece has continued to try to get it on the table, including it in its 47 page document submitted a week ago Monday, as well as providing a memo along with its response to the five-page document provided by the creditors last week. This week, the media reported that European commission president Jean-Claude Juncker and Eurogroup chief Jeroen Dijsselbloem made an additional offer the week prior that Tsipras rejected, that of extending the bailout till March 2016 if the Greek government agreed now to certain structural reforms (press accounts varied as to how much Greece would have o concede to get the additional time; it was also not clear if this was a trial balloon or formally authorized). Consider this item on the first page of the creditor missive. It’s item 2, which one would think means the creditors wanted to make it prominent:

Greek deal 'unimaginable' without departed IMF, warns Jeroen Dijsselbloem -  Negotiations between Greece and its creditors cannot possibly make progress without the inclusion of the International Monetary Fund, the Eurogroup's chief has warned. Jeroen Dijsselbloem said that a debt deal would be "unimaginable" without the IMF, "because it needs to have proper content and if it has proper content, the IMF will also participate". The IMF's technical team left Brussels, where talks were being held, for Washington on Thursday. Gerry Rice, a spokesman for the IMF, said that the discussions were "well away from an agreement". The news knocked the Greek stock market on Friday morning, which lost much of the ground it had gained on hopes that tensions had thawed. Mr Dijsselbloem's comments came as Greece submitted a new proposal to its lenders, the Financial Times reported, citing an unnamed Greek official. Athens's proposals reportedly included debt restructuring, but not pension reforms, an element the IMF had pressed hard for. The plans are said to include "low" austerity targets for next year, indicating that they might fall shy of the 1pc primary surpluses demanded by Greece's creditors.

IMF has made €2.5 billion profit out of Greece loans - The IMF has been charging an effective interest rate of 3.6% on its loans to Greece. This is far more than the interest rate the institution needs to meet all its costs, currently around 0.9%. If this was the actual interest rate Greece had been paying the IMF since 2010, it would have spent €2.5 billion less on payments. Out of its lending to all countries in debt crisis between 2010 and 2014 the IMF has made a total profit of €8.4 billion, over a quarter of which is effectively from Greece. All of this money has been added to the Fund’s reserves, which now total €19 billion. These reserves would be used to meet the costs from a country defaulting on repayments. Greece’s total debt to the IMF is currently €24 billion. Tim Jones, economist at the Jubilee Debt Campaign, said: “The IMF’s loans to Greece have not only bailed out banks which lent recklessly in the first place, they have actively taken even more money out of the country. This usurious interest adds to the unjust debt forced on the people of Greece.”

Eurozone has discussed Greek default scenario: sources - Senior eurozone officials have discussed the scenario of a default by Greece if talks with its creditors fail, European sources told AFP on Friday, ratcheting up the pressure on Athens to bow to tough reform demands. "In discussions, a default was mentioned as one of the scenarios that can happen when everything goes wrong," a eurozone official told AFP on condition of anonymity. Another official source said: "Eurozone members have decided to start considering the consequences of non-payment (by Greece) and beyond."

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