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

Saturday, March 12, 2016

week ending Mar 12

No Rate Hike Expected At Next Week’s Fed Meeting -- The Federal Reserve will leave its Fed Funds rate unchanged at the current target range of 0.25% to 0.50% at its policy meeting next week, writes The Wall Street Journal’s John Hilsenrath–reportedly one of the most “well-connected” journalists on Fed matters. Supporting evidence for anticipating that the central bank will stand pat includes the recent numbers on key Treasury yields, the Effective Fed Funds rate and the market’s inflation expectations. The 2-year yield—widely seen as the most sensitive spot on the yield curve for rate expectations—ticked lower yesterday (Mar. 8), dipping to 0.88%, based on daily data from Although this yield has bounced higher in recent weeks as US recession fears have faded, the current rate is still well below the 1%-plus levels reached in December, when the Fed increased Fed funds by 25-basis points. The market’s reluctance to challenge December’s highs for the 2-year maturity imply that the crowd isn’t expecting a rate hike at next week’s FOMC announcement (Wednesday, Mar.16).

Fed Watch: State of Play - We are heading into the March FOMC meeting next week. The recessionistas are on the sidelines, waiting for data to turn in their favor. I suspect they have a long wait. In the meantime, FOMC participants will hone their arguments as they prepare for what is likely to be a contentious meeting. At stake is not a decision of rates; they will hold steady. At stake is a decision on the balance of risks. Do they want to send a dovish, neutral, or hawkish signal for the April and June meetings? I expect them to default to the neutral/dovish side. I don’t think there is sufficient weight on the hawkish side of the FOMC to drive an aggressive rate signal at this juncture. Labor markets shook off the January “slowdown” with nonfarm payrolls rising an above-consensus 242k. The twelve-month trend is slowing, but ever-so-gradually: The unemployment rate held constant near the Fed’s estimate of the natural rate: This is actually good news, as it reflects a faster pace of labor force growth: The labor force participation rate is now 0.5 percentage points above its September low. Assuming this trend will continue, the US economy can sustain fairly strong job growth while unemployment rates drift lower very gradual, in line with the Fed’s expectations. It would also give the Fed a bit more breathing room with regards to raising rates. And it would help boost potential GDP growth as it helps offset weakness in productivity growth.  Incoming data, including the inflation uptick, will solidify the positions of those FOMC participants opposed to an extended pause. A fairly clear split emerged in recent weeks. David Harrison at the Wall Street Journal: The report likely will accentuate a growing split among Fed officials. On one side are regional Fed bank presidents such as San Francisco’s John Williams, Richmond’s Jeffrey Lacker and Kansas City’s Esther George who continue to press for rate increases this year. In the other camp are policy makers who prefer to take a more cautious approach and wait until the effects of the global financial turmoil and the fall in oil prices have played themselves out. Count the Dallas Fed’s Robert Steven Kaplan, Boston’s Eric Rosengren and Philadelphia’s Patrick Harker among them. And to be sure, the Fed will have its external critics as well...

Hilsenrath: Fed to "Keep Options Open for April or June" -- It is pretty clear that there will not be a rate hike at the FOMC meeting next week, but the Fed will want to keep the April and June meetings in play. From Jon Hilsenrath at the WSJ: Fed Likely to Stand Pat on Rates, Keep Options Open for April or June Federal Reserve officials are likely to hold short-term interest rates steady at their policy meeting next week and leave open-ended when they’ll next raise rates given their uncertainties about markets and global growth. For Fed Chairwoman Janet Yellen, that likely means crafting a message that gives the central bank flexibility to lift rates in April or June should the economy perform well in the weeks ahead, without committing to a move in case economic data disappoint or new market turmoil erupts.

Calmer markets, positive data prime Fed to push ahead with rate rises: (Reuters) - Barely a month ago Federal Reserve Chair Janet Yellen cut an isolated figure in her semi-annual testimony to Congress, forced to defend the U.S. central bank's data-dependent approach while around her stocks plunged and oil prices sagged. But a recent string of positive economic news has dragged markets back closer to the Fed's overall outlook, allaying recession fears and suggesting the Fed will have more credibility at its meeting next week when it says further rate hikes this year remain firmly on the table. "Financial markets for a while were completely out in the weeds, running around looking at things that turned out not to be real risk," said Torsten Slok, chief international economist at Deutsche Bank. When the Fed raised its benchmark interest rate in December for the first time in a decade from near zero, its so-called "dot plot" of policymakers' forecasts penciled in four quarter-point hikes this year. Markets at the time priced in three increases. Fed policymakers meet on March 15-16. They are expected to hold interest rates steady and are seen likely nudging down their expectations to three hikes for 2016. As recently as two weeks ago, investors and traders had priced out any rate rise this year. They currently expect one, according to an analysis of fed funds futures by the CME Group.

Former Fed President: "We Injected Cocaine And Heroin Into The System To Create A Wealth Effect" -- Just two months ago, former Fed President Dick Fisher admitted that "The Fed front-loaded an enormous market rally in order to create a wealth effect." Today he is back, taking a victory lap onthe 7th anniversary of the crisis lows by explaining, rather stunningly, to CNBC that "we injected cocaine and heroin into the system" to enable a wealth effect (that he admits did not work, despite its success in raising asset prices), and "now we are maintaining it with ritalin." Fisher also confirmed his previous warning that "The Fed is a giant weapon that has no ammunition left." Fisher explains how The Fed achieved its goals... but admits that didn't really fix anything... And here is CNBC's higher quality (edited) version where the blame for everything is pinned on "feckless fiscal authorities..." Once again, Fisher appears to be undertaking a major "cover-your-ass" episosde,proclaiming that he was against QE3 which is what has forced "valuations to be very richly priced."

Markets betting on near-zero interest rates for another decade (Reuters) - World markets may have recovered their poise from a torrid start to the year, but their outlook for global growth and inflation is now so bleak they are betting on developed world interest rates remaining near zero for up to another decade. Even though the U.S. Federal Reserve has already started what it expects will be a series of interest rate rises, markets appear to have bought into a "secular stagnation" thesis floated by former U.S. Treasury Secretary Larry Summers. The idea posits that the world is entering a peculiarly prolonged period in which structurally low inflation and wage growth - hampered by aging populations and slowing productivity growth - means the inflation-adjusted interest rate needed to stimulate economic demand may be far below zero. As there's likely a lower limit to nominal interest rates just below zero - because it's cheaper to hold physical cash and bank profitability starts to ebb - then even these zero rates do not gain traction on demand. For all the debate about the accuracy of that view, it's already playing out in world markets, with long-term projections from the interest rate swaps market showing developed world interest rates stuck near zero for several years. Take overnight interest rate swaps. They imply European Central Bank policy rates won't get back above 0.5 percent for around 13 years and aren't even expected to be much above 1 percent for at least 60 years. Japan's main interest rate won't reach 0.5 percent for at least 30 years, they suggest, and even U.S. and UK rates are set to remain low for years. It will be six years before U.S. rates return to 1 percent, and a decade until UK rates reach that level.

Is US inflation (finally) rising? - Gavyn Davies - A few months ago, this blog commented that a rise in inflation in the advanced economies early in 2016 was “almost certain”. Thank goodness for the word “almost”. Since then, oil prices have plumbed new depths, and the markets have remained obsessed with fears about deflation. The case for higher inflation in 2016 rested on the fact that the impact of energy on headline consumer price inflation would change direction when oil prices stabilised. This “inevitable” arithmetic effect has been delayed by the slump in oil prices in January, but it should manifest itself in the near future.The key question, though, is whether this automatic rise in headline inflation presages a more important turning point for underlying inflation in the advanced economies – a turning point that has been wrongly predicted for several years now. The answer is that there are some tentative signs of a slow rise in underlying inflation in the US, where price increases have been higher than expected in recent months. In contrast, inflation rates in the Eurozone and Japan have surprised on the low side. There, fears of “secular stagnation”, leading to deflation, still seem all too real.

Economic policymakers are at sea on inflation - Larry Summers - Market measures of inflation expectations have been collapsing and, on the Fed’s preferred inflation measure, are now in the range of 1 to 1.25 percent over the next decade. Inflation expectations are even lower in Europe and Japan. Survey measures have shown sharp declines in recent months. Commodity prices are at multi-decade lows, and the dollar has only risen as rapidly as it has in the past 18 months twice during the past 40 years when the value of the dollar has fluctuated freely. The Fed’s most recent forecasts call for short-term interest rates to rise almost 2 percent in the next two years, while the market foresees an increase of only about 0.5 percent. Consensus forecasts are for U.S. GDP growth of only about 1.5 percent for the six months from October to this month. And the Fed is forecasting a return to its 2 percent inflation target on the basis of models that are not convincing to most outside observers.   While there is certainly substantial anxiety about the macro environment, as judged from the meeting of the Group of 20 major economies in Shanghai last month, there is no evidence that policymakers globally are acting strongly to restore their credibility as inflation expectations fall below target. In a world that is one major adverse shock away from a global recession, little if anything was agreed upon to spur demand. Central bankers communicated a sense that there was relatively little left that they could do to strengthen growth or even to raise inflation. This message was reinforced by the highly negative market reaction to Japan’s move to negative interest rates. No significant announcements regarding non-monetary measures to stimulate growth or a return to target inflation were forthcoming.

All Clear on Recession Risk? Not Yet - Not long ago, fear of recession was rampant. Prices of stocks, junk bonds and oil were crumbling, deflation probabilities rising, and critics were calling on the Federal Reserve to forswear higher interest rates. Nerves have calmed considerably since. Blue chip indexes are up nicely from their Feb. 11 low. Junk bond yield spreads have narrowed. Oil has stopped going down and the dollar has stopped going up, so expected inflation has risen. Especially important for everyone’s blood pressure, volatility has receded. Vix, the options price-based stock market fear gauge, is back down to December levels. A model developed by Cornerstone Macro put the odds of recession, as signaled by the markets, at 64% on Feb. 11. That has since fallen to 47%. But no one, including the Fed, should take much comfort from this. The risk of recession hasn’t declined. In fact, it may have edged up. As everyone knows, markets aren’t the economy, and the two can often send contradictory signals. Financial markets throughout last month were sending a much more dire message than economic data on jobs, retail sales and gross domestic product. Using economic data, J.P. Morgan put the probability the economy would fall into recession in the coming 12 months at 32% on Feb. 12. (A typical probability is around 20%.) However, unlike the odds based on financial indicators, those macro probabilities had not declined as of Thursday. Some indicators, such as surveys of factory purchasing managers, remain in recession territory.Today’s report that nonfarm payrolls rose 242,000 in February confirms that the U.S. is not in recession now. But caveats are in order.

It’s Time To Start Planning For The Next Recession -  After the financial world exploded in 2008, the Federal Reserve took all sorts of unprecedented steps to save, and later jump-start, the U.S. economy. It bailed out banks. It bailed out foreign banks. It bailed out non-banks. It cut interest rates to (pretty much) zero. It bought government bonds. It bought mortgage bonds. It started — and this one was truly radical — holding press conferences. But lots of people thought the Fed needed to go further and rethink its approach to monetary policy. In newspaper op-eds, CNBC interviews and, most of all, the blogosphere, economists and wannabe-economists (that’s me) argued over a smorgasbord of jargon-filled proposals: nominal GDP targeting, price-level targeting, negative interest rates. Now that the fire is out, though, the Fed is returning to the debate. Last week, I sat down with John Williams, president of the Federal Reserve Bank of San Francisco, who was in New York for a conference on monetary policy. Williams said changing policies during or immediately after the crisis would have been a mistake.  But it would also be a mistake, he said, to put those discussions off for too long. “Now that we’re more or less at full strength, I do think it’s time now to think about what the right strategy is,” Williams said. The strategy in question is how the Fed should manage the economy when interest rates are low. Ordinarily, when the Fed wants to stimulate the economy, it cuts interest rates to encourage borrowing. But during the recession, the Fed cut rates all the way to zero, rendering its traditional tool ineffective. That isn’t a problem right now — the Fed is in the process of raising rates, after all — but it could become one again before long. For various (and not very well-understood) reasons — an aging population, slowing productivity growth — the economy’s underlying rate of growth seems to have fallen in recent years. That means interest rates are likely to stay low as well, which means that even a comparatively mild recession could force the Fed to cut rates back to zero.

Spreads and Recession Watch, March 2016 -- Five Thirty Eight warns us to prepare for a recession; Wall Street Journal‘s Real Time Economics cautions “All Clear on Recession Risk? Not Yet”, even if the latest employment indicate continued growth. Time to review market indicators of the outlook. Notice that while both spreads have shrunk considerably, they remain positive. As of 3/3, the ten year – three month spread was 1.53%. Plugging this value into the equation for predicting recessions, estimated over the period of the Great Moderation (see this post) yields an implied probability of recession of 6.7% (down from 9.3% based on the 2/11 spread). Across the globe, most spreads are positive. Contrast this with mid-April 2015, when many of the spreads were negative or near zero. As noted in this post, there’s little evidence that inversions reliably predict recessions in these other countries. Note that one could argue that Brazil is in recession, while India did not experience one. Further, China’s inversion was steeper nearly a year ago than it is now. Just because the yield curve does not signal an imminent recession in the US, and current employment growth continues, doesn’t mean we should stay the course on raising the Fed funds rate [1]. In particular, monetary conditions are already tightening as foreign investors (private and official sector) are decumulating their stocks of US Treasurys. Figure 1 shows that by December 2015, foreign holdings were essentially unchanged relative to December 2014.

WSJ Survey: Economists See a Slight Decline in the Still-Elevated Odds of U.S. Recession - The U.S. stock market has partially recovered from its swoon earlier this year and the most recent report on the jobs market showed the economy added 242,000 jobs in February. So, has the risk of recession passed? Not so fast, at least according to forecasters in The Wall Street Journal’s monthly survey of business, financial and academic economists. The average estimate of the odds of a recession in the next 12 months fell slightly—to 20% in this month’s survey from 21% last month. The risks of recession are “certainly lower than the market thought even a month ago,” said David Berson, the chief economist of Nationwide Insurance. Still, the odds of a recession are double what they were last summer. About 72% of economists in the WSJ survey see economic risks currently weighted to the downside. Nearly all of them cite the strong dollar, slow foreign growth and tightening financial conditions. “Global risks to growth continue to present the largest downside risks to the U.S. economy, ” said Chad Moutray, the chief economist of the National Association of Manufacturers. The international weakness has challenged exports and the financial market volatility is causing “industry to pull back a little in hiring and capital spending,” he said.

The U.S. May Be an Engine of the World Economy, But Perhaps Not For Long -- The U.S. is once more a key driver of global growth but its influence is still not as pronounced as it was 20 years ago—and it could well begin to fade in the coming years.  Data provided by the World Bank show that the U.S. accounted for an estimated 0.6 percentage points of the world’s 2.4% growth rate in 2015, or roughly 23%. That’s the largest U.S. contribution since the recession. But before we start crowning the U.S. the world’s once-and-future driver of growth, it makes sense to check out the situation in the late 1990s. Back then, the U.S. routinely contributed more than 1 percentage point to the global-growth rate. In percentage terms, the U.S. contributed 28.3% of the world’s growth in 1996, 29.6% in 1997 and a whopping 47% in 1998, when many Asian countries were muddling through a financial crisis. Those days aren’t likely to come again. China and other emerging markets grew at breakneck pace during the 2000s and early 2010s, a time when the U.S. and Europe were struggling with the effect of their own financial crises. Even in 2009, as developed economies were in the throes of a recession, China represented a positive contribution to global growth. In 2013, China singlehandedly accounted for almost a third of the world’s growth.

Trade War! - Paul Krugman says that if Trump creates a trade war, it won’t cause a recession: Now suppose we have a trade war. This will cut exports, which other things equal depresses the economy. But it will also cut imports, which other things equal is expansionary. For the world as a whole, the cuts in exports and imports will by definition be equal, so as far as world demand is concerned, trade wars are a wash. I think this is too sanguine. A trade war would be something like a “reallocation shock”. Exporters see demand shrink, but those who compete with importers see demand increase. So would it be a wash like Krugman says, right?  I don’t think a big reallocation shock will necessarily be so smooth and frictionless. Those who see increased demand may need time and investment to increase output. If they think the shock, aka trade war, is temporary, they might not be willing to make the investments and so the increased demand just leads to higher prices and not more real production.  Of course exporters could just bite the bullet and lower prices and keep output unchanged too. But the problem is not symmetric, as some producers could be credit constrained and may not be able to weather the trade war and be forced to close.  Will this lead to a recession? Maybe not. It depends on how big the trade war is, how long it lasts and how long people believe it will last, how well those who are hurt weather it, whether helped sectors increase output, and how smoothly resources can move from hurt sectors to helped sectors. As we have seen from the work of David Autor, reallocation of labor following trade shocks isn’t necesssarily a fast, frictionless process.

GDPNow Jumps to 2.2% Following Jobs Report: Atlanta Fed Explains Why - Following Friday’s mediocre jobs report, the Atlanta Fed GDPNow Forecast made a surprising leap. The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 2.2 percent on February 5, up from 1.2 percent on February 1. After this morning’s employment report from the U.S. Bureau of Labor Statistics, the forecast for real consumer spending growth increased from 2.5 percent to 3.0 percent and the forecast for real gross private domestic investment growth increased from -0.4 percent to 2.1 percent.  Why? I pinged Patrick Higgins, senior economist at the Atlanta Fed and he provided the following explanation: About 30 series from the employment situation report are used to calculate the dynamic factor that feeds into the forecasts of the monthly source data for the model. The January 2016 value of the dynamic factor was -0.73 after the February 1 GDPNow update and is 0.04 as of today. The factor has mean 0 and standard deviation 1, so the current estimate for January is very close to average. To provide some historical context, the value of -0.73 was about in-line with values seen in late 1991 and early 2003. It is technically complicated to decompose how much particular variables in the employment report are responsible for the rise in the dynamic factor. One thing that can be said, however, is that it’s not due to average hourly earnings growth since that variable is not in the model. Also less weight is being put on the January ISM Manufacturing report since we now have more January data than we did on February 1.

US Treasury Curve Collapses To Dec 2008 Lows --The spread between the 30Y US Treasury yield and 2Y has plunged by 7.5bps this morning (as 2Y sells off and 30Y rallies post-Draghi) to 175bps. This is the flattest curve since Dec 2008 lows (at 172bps) which can only bode poorly for financials...  30Y bonds are bid (juicy yield compared to Europe) and 2Y yields are surging (room for a Fed rate hike)...Charts: Bloomberg

February 2016 CBO Monthly Budget Review: Receipts Are Up 5%: The federal budget deficit was $352 billion for the first five months of fiscal year 2016, CBO estimates - $34 billion less than the shortfall recorded in the same span last year. Receipts were 5 percent higher than they were at this time a year ago, and outlays were 2 percent higher. If not for shifts in the timing of certain payments (which otherwise would have fallen on a weekend), the deficit for the first five months of fiscal year 2016 would have been about the same as it was last year. Total Receipts: Up by 5 Percent in the First Five Months of Fiscal Year 2016 Receipts through February totaled $1,247 billion, CBO estimates—$62 billion more than the amount for the same period last year. The changes between last year and this year were as follows:

  • Individual income taxes and payroll (social insurance) taxes together rose by $57 billion (or 6 percent).
    • An increase of $43 billion (or 5 percent) in amounts withheld from workers' paychecks accounted for most of that gain. Growth in wages and salaries probably explains that increase.
    • Nonwithheld receipts, largely reflecting payments for the 2015 tax year, rose by $12 billion (or 9 percent). Almost half of the increase occurred in January, when individuals made their last quarterly payment of estimated taxes for 2015.
    • Income tax refunds decreased by $3 billion (or 3 percent).
  • Corporate income taxes declined by about $11 billion (or 11 percent). About two-thirds of that decline occurred in December, when most corporations made their first quarterly estimated payment of those taxes in the current fiscal year.

Still not enough: US gov’t collects record $1.2 trillion in taxes, or over $8k per taxpayer  - Uncle Sam hauled in $1.248 trillion in taxes for the first five months of fiscal year 2016, costing each taxpayer $8,263, according a monthly Treasury Department statement. Even after adjusting for inflation, however, the government is still in the red. The federal government collected more money between October 2015 and February 2016 than it did any other five months in history, said the Treasury statement, released on Thursday. The US fiscal year begins on October 1 and runs through September 30. READ MORE: US credit card debt skyrockets, approaching $1 trillion Income taxes accounted for $597 billion, or almost half, of the tax haul. The second largest source of revenue was Social Security and other payroll taxes, which totaled $428 billion. Other Treasury receipts include revenue from corporate, unemployment insurances, excise, estate, and gift taxes. However, even with this record windfall, the statement showed that the Treasury continues to come up short. In the same five-month period, the government spent $1.601 billion, which translates to a deficit of $353 billion – 28 percent of the total tax revenue. In February alone, the government ran a deficit of $192 billion. The national debt is $19.1 trillion, and has been growing since the last federal budget surplus in 2001. Currently the US national debt sits at 105 percent of the country’s annual GDP, and each taxpayer’s share would be about $160,000, according to Treasury data.

Afghanistan: The Forever-War We Never Question - The U.S. and NATO will never get out of Afghanistan if their leaders never even have to explain why they are there.War is so normal in the United States of America — being in a constant state of it, somewhere else — that the longest-running foreign conflict in the country’s history is hardly even an afterthought in the race to become the nation’s next commander in chief. In 17 televised debates and town halls, the Republicans and Democrats running for president have been asked all of two questions about the war in Afghanistan, now in its 15th year. The antiwar movement having died off with the election of President Barack Obama, who dramatically escalated the war before promising to end it, Afghanistan is of little concern outside a small room in Nevada where a U.S. pilot is remotely firing a Predator drone’s Hellfire missiles. On the Republican side, Ben Carson was asked about Obama’s decision last year to “leave 10,000 U.S. troops in Afghanistan” indefinitely. That was in November 2015, and Carson dodged the question, shifting to a question of his own — on humiliation as counterterrorism — that he posed as an answer. “How do we make them look like losers?” he asked, arguably elevating the discourse on foreign policy in this most humiliating of election campaigns. No Republican has been asked about Afghanistan since. At nearly half of their debates, the name of the country hasn’t even been mentioned in passing.

Hillary's Scary New Cash Tax - Have you heard of “negative interest rates”? It’s become a phenomenon with economists and the media. There’s a good chance you’ve read an article about it. We’ve covered it many times in the Dispatch. I’m writing to tell you something about negative interest rates you haven’t heard. You certainly won’t hear about it in the mainstream press. What’s coming at you is a historic event. It’s something our grandchildren will hear stories about...much like the Great Depression or the Cold War.   If you know what’s coming, it could mean the difference between having lots of free cash in retirement or barely getting by. To understand the gravity of this moment, let’s cover one of the most bizarre ideas in the world... negative interest rates. In a normal world, your bank pays you interest on your savings. It takes your money, pools it with other people’s money and loans it out. The bank makes money by paying out less in interest on your deposit than it earns in interest from borrowers. For example, it might pay out 3% to depositors while earning 6% from borrowers. This is how it has worked for decades. Negative interest rates turn your “normal” bank account upside down. Negative interest rates could only exist in a crazy world where idiot politicians are in control. Unfortunately, that’s just what we’re dealing with right now. Politicians all over the world are ordering banks to charge depositors (you) a fee for storing cash. It’s a perversion of saving. It’s a perversion of capitalism. It’s a perversion of planning for the future. And it’s going to result in disaster.

The real Trump tax scandal: David Cay Johnston: There’s a big story in the tax returns that Donald Trump claims he cannot release because of what he describes as a routine audit. The big story is not the true size of his wealth, but about how Congress has turned the income tax into a source of massive wealth for many of the richest Americans, including Trump. That may seem hard to believe because the income tax burdens most of us. But the riches to be mined from the tax code are well known to America’s top tax lawyers and their clients. Since 1986, Congress has accomplished what medieval alchemists and Sir Isaac Newton could not in their quest for a philosophers' stone that they believed would transform lead into gold. Our lawmakers have magically transformed income taxes into a source of wealth for many in the donor class by adding just a few lines to the nearly 6,500-page Internal Revenue Code. It's all about tax rules that require you to depreciate, or reduce, the value of buildings over time, even if the market value of the structures is going up. If your depreciation is greater than your traditional income from work and businesses, Congress lets you report negative income. If these paper losses are just a dollar more than traditional income, it wipes out your income taxes for the year. If Trump's returns show he has paid no income taxes in some years, that could be a reason he has not yet released details.

Democrats and Republicans Are Quietly Planning a Corporate Giveaway—to the Tune of $400 Billion -The bad news is that key leaders of the Democratic Party—including the president—are getting on board on another monster tax break for US multinational corporations with Republicans, despite some talk about confronting income inequality. Influential Democrats intend to negotiate with Republican counterparts on the size and terms of post-facto tax “forgiveness” for America’s globalized companies. This is real money they’re talking about—a giveaway of hundreds of billions.   Why haven’t voters heard about this from candidates? Because Republicans and Democrats both know it would make angry voters even angrier.   The major multinationals complain about a tax problem that most citizens would love to have for themselves: Thanks to a loophole in the tax code, the companies do not have to pay US taxes on profits they have earned in foreign countries until they bring the money home to American shores. Altogether, the globalized US companies have accumulated $2.1 trillion in untaxed profits, most of it parked in overseas tax havens.  Multinationals are demanding reduced tax rates before repatriating foreign earnings—and permanently reduced future rates.  The multinationals are waiting for Congress to forgive them their debts.  Some leading Republicans advocate eliminating taxation of foreign corporate income entirely.  The tax-forgiveness scheme could bring home hundreds of billions in supposedly “new” revenue for those vital projects.  For cynical politicians, the deal looks like a “twofer.” You can please constituents with infrastructure projects and reward corporate patrons in the same stroke. In reality, of course, the revenue loss from the giveaway will inevitably be dumped on other taxpayers, either by cutting domestic programs or running up the national debt.  Senator Elizabeth Warren called it “a giant wet kiss for the tax dodgers.”

Galbraith: Attack on Sanders’ Economic Plan By Former Chairs of the Council of Economic Advisors Irresponsible - Yves here. Jamie Galbraith discusses in some detail why Gerald Friedman, the Clinton supporter who gave a favorable review of Sanders’ economic plan, is owed an apology by his detractors. (Real News Network video and transcript)

Gerald Friedman Responds to the Romers on the Sanders Plan: Different Models, Different Politics  - Differences between my evaluation of the impact of the Sanders economic program from that of the Romers reflect different views of the economy, the difference between a static model where national income and employment are largely fixed and a dynamic one where these are shaped by effective demand and are, therefore, susceptible to change in response to economic policy. There are no errors in arithmetic.* It is a fundamental difference in vision that divides our approaches; the same distinction that divided John Maynard Keynes from those he labelled the Classicals in his General Theory of Employment, Interest, and Money.   Under these “Classical” assumptions, policy can do little. It can mildly speed recovery from a shock, but recovery would occur in any case even without government policy, perhaps a little slower. Policy can do little or nothing to raise the long-run growth rate. Because the economy moves naturally towards its full-employment equilibrium, persistently low output must be due to a shock to technology or to the supply of factor inputs rather than to a failure of policy or to a shortfall in demand. Thus, in the Classical view, the appropriate response by policy makers is to adjust downward expectations for economic capacity rather than seek to raise output to a higher level of income and employment.  The Romers critique of my work comes from this old, pre-Keynesian model where the economy tends towards full employment equilibrium and moves to full employment on its own without need for government intervention or stimulus. They can acknowledge the need for government action on occasion, such as after a severe negative shock like the financial crisis of 2007-9. But even then, government stimulus spending is only expected to slightly speed recovery, bringing the return of full employment forward by about 6 months. Without stimulus, the economy will return on its own to full employment at a capacity output set without regard to the level of output and employment reached under the stimulus; and the stimulus itself does nothing to raise output after it is withdrawn. Instead, output levels gravitate towards a full employment level set by factor endowments, by preferences, and by the level of exogenous technology without regard for the level of employment and production. This is a static model in the sense that output is determined outside of the model itself; increasing economic output now has no lasting benefit.

A Look At The Critique Of Gerald Friedman's Analysis Of The Sanders Economic Program: Gerald Friedman, a University of Massachusetts Amherst economics professor, has taken a hit from the national press and four former chairs of the President's Council of Economic Advisers. Friedman's analysis of the economic effects of Bernie Sanders' economic proposals projected five-plus percent growth rates in the first three years of the program. Did Friedman do a "standard analysis" or did he engage in "fantasy economics"? The CEA chairs lambasted the projections as fantastic. Austan Goolsbee caricatured them as "flying puppies". The CEA's attack was immediately challenged by James K. Galbraith and others, who pointed out that Friedman was using standard economic models and concepts, similar to those used at the Congressional Budget Office (CBO) and the CEA itself. What is it then, standard fare or fantasy economics? First, a bit of speculation The timing of and absence of detail in the attacks suggest the four CEA chairs responded to the headline numbers without having studied the detail. A second consideration is that Friedman personally supports Hillary Clinton, so the motive for bias is not clear. A third piece of context is the historical record, which shows that five-plus growth is not unprecedented. It was - as Galbraith pointed out - last seen in the mid-1980s during Ronald Reagan's military build-up accompanied by federal budget deficits far exceeding any in the post-war era prior to Reagan. Note also that the average growth rate under Democratic presidents prior to Barack Obama was 4.2 percent.The multiplier is the increment of new activity produced by an investment or government spending program. The stimulus money spent is income to workers and businesses, who each save some, but spend most, which becomes income to other workers and businesses and results in further spending. The nature of multipliers is a fascinating and neglected area of economics which we could happily explore at a length not appropriate to this piece. A study done by mainstream economists Mark Zandi and Alan Blinder (conservatively) estimated multipliers that vary from very low - in the .33 area, implying a dollar's worth of spending produces only thirty-three cents of GDP (for corporate tax cuts) to 1.57 (for infrastructure spending) and 1.74 (for increases in food stamps).

Self-Protectionist Moment: Paul Krugman Protects Himself and the Establishment - Thomas Palley --Paul Krugman has a new op-ed (“A Protectionist Moment?”) in which he tries to walk away from his own contribution as an elite trade economist to the damage done by globalization, while also continuing to lend his political support to Hillary Clinton and the neoliberal globalization wing of the Democratic Party. His article inadvertently spotlights all that is wrong with the economics profession through the lens of the trade debate. On one hand, Krugman writes “So the elite case for ever-freer trade is largely a scam, which voters probably sense even if they don’t know exactly what form it’s taking. On the other hand, he writes “In this, as in many other things, Sanders currently benefits from the luxury of irresponsibility: he’s never been anywhere close to the levers of power, so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn’t and can’t.” Krugman has been a booster of trade and globalization for thirty years: marginally more restrained than other elite economists, but still a booster. Now, the political establishment has what it wanted and the effects have been disastrous for those not in the top 20 percent of the income distribution. At this stage, as exemplified by Krugman, the economics elite is moving to reinvent itself with a combination of minor backpedaling and its own studies that belatedly acknowledge the damage wrought by globalization. There is no professional cost to be paid for the grievous injuries it has helped inflict; no mention is made of the fact that outsider critical economists have long predicted and written about these injuries; and the policy recommendation is we must stay the course because we are now locked-in and have few options.

Senator Sanders and Financial Regulation -- Today I was reminded that Senator Sanders voted against TARP. That made me conclude that Senator Sanders’ position on financial regulation is truly unique. Here are the votes on TARP, “Audit the Fed” (discussed here), and Dodd-Frank, presented as a Venn diagram. It’s obvious that Senator Sanders occupies a unique position in the financial regulatory policy terrain. (Unique is not necessarily the same as good, by the way).  Here’s my take at the time on the advisability of opposition to TARP

Exclusive: U.S. watchdog to probe Fed's lax oversight of Wall Street | Reuters: A U.S. watchdog agency is preparing to investigate whether the Federal Reserve and other regulators are too soft on the banks they are meant to police, after a written request from Democratic lawmakers that marks the latest sign of distrust between Congress and the central bank. Ranking representatives Maxine Waters of the House Financial Services Committee and Al Green of the Subcommittee on Oversight and Investigations asked the Government Accountability Office on Oct. 8 to launch a probe of "regulatory capture" and to focus on the New York Fed, according to a letter obtained by Reuters. In an interview, the congressional agency said it has begun planning its approach. The probe, which had not been previously reported or made public, is the first by an outside agency into the perception that government regulators are "captured" by and too deferential toward the bankers they supervise, so that Wall Street benefits at the public's expense. Such perceptions have dogged the U.S. central bank since it failed to head off the 2007-2009 financial crisis that sparked a global recession. The Fed's biggest critics have since been Republicans looking to curb its policy independence, but the request by Democrats could cool its somewhat warmer relationship with the left. "We currently do have some ongoing work looking at the concept known as regulatory capture. We're in initial stages of outlining that engagement," Lawrance Evans, director of the GAO's financial markets and community investment division, said

President Obama Calls Surprise Meeting With Financial Stability Oversight Council -- Pam Martens - Last Friday, the Obama administration announced that the President would be meeting at the White House with key Wall Street regulators yesterday. In fact, the meeting yesterday included 9 of the 10 voting members of the Financial Stability Oversight Council (F-SOC), the body created under the 2010 Dodd-Frank financial reform legislation to prevent another catastrophic collapse of the U.S. financial system. The President also brought along a key group of his economic advisers and, interestingly, Neil Eggleston, the White House Counsel. (See full attendee list below.) F-SOC is chaired by U.S. Treasury Secretary, Jack Lew, who likely functions as President Obama’s eyes and ears on the Council and for financial stability issues in general.. (See video of full press conference below.)  Lew may have some qualms about what’s he’s hearing in F-SOC meetings from the Office of Financial Research, another body created under Dodd-Frank. The Office of Financial Research has raised repeated warnings about the interconnected mega banks posing potential threats to stability.  Shoring up his legacy was clearly on the mind of the President, based on his comments during the press conference. (See full transcript here.) At one point the President suggested that the political bashing coming at him from the campaign trail was getting under his skin,  The problem with the President’s new public relations push to cement his image as the fierce enforcer of Wall Street reform is, unfortunately, the facts on the ground.

US settlement fails, bond shortages and 3% charges --  Izabella Kaminska - ¡Ay, caramba!  Something’s gotten hold of The Bond… keeping its yields and its coupons apart... The above chart is overnight US bond repo rates. It comes from Scott Skyrm at Wedbush who incidentally also notes the following: The 10 Year Note is not the only Treasury with a shortage in the Repo market. The Bond just started trading very special this week. Like the 10 Year Note, when the reopening settles on March 15th, the Bond fails will all clean up. Keep in mind, the lowest rate that a Bond ever traded (before this week) was the 3.75% 8/41 which traded as low as -1.25%. The recent shortage in Bonds is interesting – are the shorts a spillover from the 10 Year Note, or is there a general short in the long-end of the market. Which is interesting because of the general pick up in settlement fails the last five days. On that front, note the following chart from operations specialist Fred Sommers at OpsRisk: What’s going on? We haven’t got the foggiest. Skyrm himself puts the current spike in fails down to a combination four factors: 1. ongoing tri-party system reform; 2. increased shorts in the market; 3. the auction cycles; and 4. a recent decrease in 10-year and 3-year issuance amounts. Something to keep an eye on in any case.

Ready for more punishment: Investors load up on oil share offerings - The $9.2 billion investors paid to snap up new equity offerings from U.S. oil companies in 2016 proves those investors are indeed ready for more punishment. The amount is in line with the pace of such equity offerings in 2015 even as the mood in the oil markets has grown more dour. In June of last year I wrote: New investors in U.S. oil company shares must believe they are catching the bottom and will have a very profitable ride up from here. This demonstrates that OPEC's work is not done and accounts in part for the decision to leave production quotas unchanged. 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. A lot of investors did end up catching a falling knife as oil careened downward from about $60 a barrel last summer to Friday's close of about $36. Investors this year may still find that the knife is falling, though it admittedly doesn't have as far to fall this time around. Still, it seems they misunderstand OPEC's strategy or believe that that strategy will fail. As I said in the same piece: 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. It seems that the oil industry still has friends in the investment world and that OPEC's work is therefore not yet done. The big question then is: Will OPEC stay the course or relent with a production cut this year to raise prices? I doubt that OPEC will relent. As bad as the OPEC countries including Saudi Arabia are hurting, to give up at this point would make all the previous suffering pointless. Saudi Arabia is really the linchpin in OPEC. No member can resist the will of the Saudis because they control such huge and flexible oil flows.

Media Attention and Investment Decisions -- Correlations between media attention and capital flows to investment vehicles are well established. However, the question arises of whether this is due to new information conveyed or if it is just an artefact of the attention itself. This column employs fund rankings from the Wall Street Journal to investigate the issue. It shows that media attention does drive these investment decisions, even if no new information is conveyed. It further argues that financial intermediaries are aware of this effect and exploit it.

Oil Crash Risks $19 Billion Wave of Junk Debt Defaults - Investors are facing $19 billion in energy defaults as the worst oil crash in a generation leaves drillers struggling to stay afloat. The wave could begin within days if Energy XXI Ltd., SandRidge Energy Inc. and Goodrich Petroleum Corp. fail to reach agreements with creditors and shareholders. Those are three of at least eight oil and gas producers that have announced missed debt payments, triggering a countdown to default.  "Shale was a hot growth area and companies made the mistake of borrowing too much," said George Schultze, founder and chief investment officer of Schultze Asset Management in New York, which has been betting against several distressed energy companies. "It’s amazing that so many people were willing to lend them money. Many are going to file for bankruptcy, and bondholders and equity are going to get wiped out en masse." Bondholders are paying dearly for backing a shale boom that was built on high-yield credit. Since the start of 2015, 48 oil and gas producers have gone bankrupt owing more than $17 billion, according to law firm Haynes and Boone. Fitch Ratings Ltd. predicts $70 billion of energy, metal and mining defaults this year, and notes that $77 billion of energy bonds are bid below 50 cents, according to a note Thursday. A representative at Energy XXI declined to comment. Representatives for SandRidge and Goodrich didn’t respond to requests seeking comment. “Absent a material improvement in oil and gas prices or a refinancing or some restructuring of our debt obligations or other improvement in liquidity, we may seek bankruptcy protection,” Energy XXI said in a March 7 public filing.

Is Passive Investment Actively Hurting the Economy? - If you have so much as tiptoed into the arena of personal finance over the past few decades, you will have heard about the virtues of passive investing. The argument goes like this: the stock market will outperform other investments over the long term, yet no individual is in a position to outsmart the market as a whole. So the best way to reap the rewards of investing in stocks with minimal risk is to put your money in a fund that tracks the performance of some broad, indexed measure of the market, such as the S. & P. 500. If you have an I.R.A. or a 401(k), there is a reasonably good chance that some of your money is invested this way; low management fees make index funds an attractive option. Until the last part of the twentieth century, anyone who wanted to invest in the stock market had to buy individual stocks. But in the early nineteen-seventies, academic models for how to index stocks began to gain traction in the media, which encouraged Jack Bogle, the founder of Vanguard, to introduce the first indexed mutual fund, in 1975.  The more recent rise of exchange-traded funds (E.T.F.s), which are indexed to a broad market or a sector but trade daily like stocks, has accelerated the trend. Depending on how you count, as many as twenty per cent of stocks are now owned by indexed funds.   As the number continues to rise, some scholars, economists, and investment professionals have begun to wonder anew how high it can go, and whether, as passive investing grows, it is having harmful effects on the economy as a whole. It stands to reason that beyond some threshold, a market that has more passive than active investors will behave differently than markets have in the past. One way to think about this is to imagine that investment decisions are increasingly on autopilot: more and more money will pour into a set of firms largely independent of the considerations that have traditionally guided investors, such as supply, demand, management performance, growth potential, or broader economic factors.

The Oil Short Squeeze Explained: Why Banks Are Aggressively Propping Up Energy Stocks -- Last week, during the peak of the commodity short squeeze, we pointed out how this default cycle is shaping up to be vastly different from previous one: recovery rates for both secured and unsecured debts are at record low levels. More importantly, we noted how this notable variance is impacting lender behavior, explaining that banks - aware that the next leg lower in commodities is imminent - are not only forcing the squeeze in the most trashed stocks (by pulling borrow) but are doing everything in their power to "assist" energy companies to sell equity, and use the proceeds to take out as much of the banks' balance sheet exposure as possible, so that when the default tsunami finally arrives, banks will be as far away as possible from the carnage. All of this was predicated on prior lender conversations with the Dallas Fed and the OCC, discussions which the Dallas Fed vocally denied accusing us of lying, yet which the WSJ confirmed, confirming the Dallas Fed was openly lying. This was the punchline: [Record low] recovery rate explain what we discussed earlier, namely the desire of banks to force an equity short squeeze in energy stocks, so these distressed names are able to issue equity with which to repay secured loans to banks who are scrambling to get out of the capital structure of distressed E&P names. Or as MatlinPatterson's Michael Lipsky put it: "we always assume that secured lenders would roll into the bankruptcy become the DIP lenders, emerge from bankruptcy as the new secured debt of the company. But they don't want to be there, so you are buying the debt behind them and you could find yourself in a situation where you could lose 100% of your money." And so, one by one the pieces of the puzzle fall into place: banks, well aware that they are facing paltry recoveries in bankruptcy on their secured exposure (and unsecured creditors looking at 10 cents on the dollar), have engineered an oil short squeeze via oil ETFs...

Theft of Your Money on Wall Street: Another GAO Report Won’t Help - Pam Martens - It was considered big news last week that House members Maxine Waters of the Financial Services Committee and Al Green of the Subcommittee on Oversight and Investigations have requested that the Government Accountability Office (GAO) launch an investigation of “regulatory capture” on Wall Street. That news broke on Friday, one day after Senator Elizabeth Warren grilled the head of a Wall Street self-regulatory agency in a Senate hearing on a new study showing that stockbrokers with serial records of misconduct are allowed to remain in the industry. Warren also cited another recent study showing that even when investors prevail in arbitrations against bad brokers, they may never get paid. According to the study, over $60 million in fines owed to investors have not been paid since 2013. The individual that Senator Warren was grilling is Richard Ketchum, head of the Financial Industry Regulatory Authority (FINRA), a self-regulatory body financed by Wall Street that oversees brokerage firms and has a division that runs a private justice system known as mandatory arbitration that hears all claims against bad brokers. FINRA was previously known as the National Association of Securities Dealers (NASD) but its reputation became so damaged as a self-regulator that it changed its name to FINRA. (Like that was really going to help.) What the public doesn’t know is that for over 30 years, the GAO has been investigating these identical problems on Wall Street and making recommendations for cleaning up the mess. After 30 years, it should be abundantly clear that reading GAO reports and shaking one’s head isn’t getting the job done. Serious, radical reform of Wall Street is necessary and that means eliminating crony regulators and the entire self-regulatory system.

The Incredible Story Of How Hackers Stole $100 Million From The New York Fed -- The story of the theft of $100 million from the Bangladesh central bank - by way of the New York Federal Reserve - is getting more fascinating by the day. As we reported previously, on February 5, Bill Dudley's New York Fed was allegedly “penetrated” when “hackers” (of supposed Chinese origin) stole $100 million from accounts belonging to the Bangladesh central bank. The money was then channeled to the Philippines where it was sold on the black market and funneled to “local casinos” (to quote AFP). After the casino laundering, it was sent back to the same black market FX broker who promptly moved it to “overseas accounts within days.” That was the fund flow in a nutshell. As we explained, the whole situation was quite embarrassing for the NY Fed, because what happened is that someone in the Philippines requested $100 million through SWIFT from Bangladesh's FX reserves, and the Fed complied, without any alarm bells going off at the NY Fed's middle or back office."Some 250 central banks, governments, and other institutions have foreign accounts at the New York Fed, which is near the centre of the global financial system," Reuters notes. "The accounts hold mostly U.S. Treasuries and agency debt, and requests for funds arrive and are authenticated by a so-called SWIFT network that connects banks." Well, as it turns out, Bangladesh doesn't agree that the Fed isn't ultimately culpable. "We kept money with the Federal Reserve Bank and irregularities must be with the people who handle the funds there," Finance Minister Abul Maal Abdul Muhith said on Wednesday. “It can’t be that they don’t have any responsibility," he said, incredulous.

Treasury Drops a Bombshell: Fed’s Stress Tests Get It Wrong -  Pam Martens --Four days after the Federal Reserve Board of Governors held an open meeting to propose a new rule to contain counterparty risk on Wall Street on a bank by bank basis, researchers at the U.S. Treasury’s Office of Financial Research (OFR) dropped a bombshell on the Fed. The researchers, Jill Cetina, Mark Paddrik, and Sriram Rajan, produced a study which shows, in their opinion, that the Fed’s stress test that measures counterparty risk on a bank by bank basis is all wet. The problem, say the researchers, is not what would happen if the largest counterparty to a specific bank failed but what would happen if that counterparty happened to be the counterparty to other systemically important Wall Street banks. The researchers note that the Fed’s stress test “looks exclusively at the direct loss concentration risk, and does not consider the ramifications of indirect losses that may come through a shared counterparty, who is systemically important.” By focusing on “bank-level solvency” instead of the system as a whole, the Fed may be ignoring the real problem of systemic risks in the system. The researchers write: “A BHC [bank holding company] may be able to manage the failure of its largest counterparty when other BHCs do not concurrently realize losses from the same counterparty’s failure. However, when a shared counterparty fails, banks may experience additional stress. The financial system is much more concentrated to (and firms’ risk management is less prepared for) the failure of the system’s largest counterparty. Thus, the impact of a material counterparty’s failure could affect the core banking system in a manner that CCAR [one of the Fed’s stress tests] may not fully capture.”

Government officials will not pursue criminal charges against Citigroup - Government officials chose not to pursue criminal charges against Citigroup executives or employees related to packaging and selling mortgage-backed securities dating back to the 2008 financial crisis, according to an article by Nate Raymond for Reuters. The decision was made following Citigroup’s $7 billion settlement in 2014, resolving federal and state civil claims mortgage bonds. From the article: Its release marked the first public acknowledgement by U.S. authorities that executives at a major bank linked to the financial crisis would face no criminal charges for their involvement in selling billions of dollars of toxic mortgage bonds. The report said prosecutors reviewed the evidence to see if any individuals could be charged and determined "there was not enough compelling evidence."The review came at the request of the Justice Department, which requested that all mortgage-backed securities settlements reached with the government be reviewed with the intention of determining if individuals could be held responsible, according to the article. Among those settlements was Bank of America, which reached a settlement of $16.65 billion over toxic mortgages.  The bank admitted to failing to disclose known uncertainties regarding potential increased costs related to mortgage loan repurchase claims connected to more than $2 trillion in residential mortgage sales. Most recently, Morgan Stanley settled for $3.2 billion over deceptive mortgage bond practices. The settlement stems from Morgan Stanley’s alleged misrepresentations about the security and safety of residential mortgage-backed securities it sold before the financial crisis. Also included is JPMorgan Chase, which reached a settlement of $13 billion.

Wall Street Journal Analysis of Mortgage Settlements Shows Very Little Went to Wronged Borrowers -- Yves Smith - We’ve depicted the various settlements of mortgage liability, most importantly, the 2012 49 state/Federal deal called the National Mortgage Settlement, as a “get out of jail almost free” card for banks. It was tantamount to a second bailout for the widespread failure to securitize mortgages in accordance with the bank’s own requirements, and the resulting foreclosure abuses that resulted.   The Wall Street Journal has endeavored to find out where the money, which nominally totals $110 billion across the six biggest banks, went. While the story does not say so crisply, perilously little benefitted borrowers despite concerted efforts to pretend otherwise.  The reason that the Journal fails to discern this fact it that it perpetuates one of the myth of these deals, which yours truly, Dave Dayen, and others who have written regularly on this topic, have debunked: that the “consumer relief” portion of these deals represented a meaningful cost to the perps, and was beneficial to homeowners.  Of that $110 billion, nearly $45 billion was called “consumer relief,” which experts argued had real economic costs to the banks on the order of ten cents on the dollar:But those were not hard dollar payments, but mere credits for the banks doing things they would have done anyhow, such as bulldozing vacant homes, or making modification where it suited them (too often of securitized first mortgages which enhanced the value of second mortgages they owned). Mind you, mortgage investors were up in arms about the fact that the National Mortgage Settlement gave credits for modifying mortgages that banks did not own.  What does the Journal tell us of what happened to the hard dollar components? Roughly $50 billion went into a black hole at Treasury: Of $109.96 billion of federal fines related to the housing crisis since 2010, roughly $50 billion ended up with the U.S. government with little disclosure of what happened next, according to a Wall Street Journal analysis….

The Whistleblowers’ Third Lemon Award is to Fannie and FHFA -  William K. Black -- The Bank Whistleblowers United’s third weekly lemons award is made jointly to the Federal Housing Finance Agency (FHFA) and Fannie Mae (with a dishonorable mention to the federal judiciary).  The award goes for these entities’ indifference and even hostility to whistleblowers.  On September 6, 2008, the FHFA placed Fannie and Freddie into conservatorship in conjunction with the largest public bailout in global history.  Fannie and Freddie failed in an orgy of fraudulent mortgage loans. Fannie had suffered enormous losses in the early 2000s from a variant of “accounting control fraud.”  Those frauds were brought to the attention of the public and the FHFA’s predecessor agency (OFHEO) by a Fannie Mae whistleblower, Roger L. Barnes.  The Washington Post reported: Two exhaustive investigations have backed up Roger L. Barnes’s allegations that Fannie Mae’s financial statements could not be trusted and that accounting managers manipulated numbers to meet rising earnings targets. Naturally, Barnes experienced retaliation that destroyed his career at Fannie Mae, though he was the person doing everything right according to the law and Fannie’s own policies.  Fannie’s regulators forced out its CEO and CFO in response to the securities fraud.  Paragraph 2 of the SEC complaint against Fannie Mae for securities fraud explicitly charged that the purpose of the fraud was to produce hundreds of millions of dollars in bonuses to Fannie’s officials.  Fannie’s early forms of accounting control fraud that were addressed by the SEC’s complaint led to regulatory restrictions on growth that shifted Fannie’s new senior managers towards a new form of accounting control fraud using liar’s loans that caused losses so large that Fannie failed. 

Delinquent Loans May Still Face Foreclosure After Exceeding Statutes of Limitations - High-end estimates of loan-level delinquency timelines show that approximately 98,000 seriously delinquent mortgage loans may be facing some degree of exposure to foreclosure statutes of limitations in Florida, New Jersey, and New York—three of the states that were hit hardest by the foreclosure crisis, according to Black Knight Financial Services’ January 2016 Mortgage Monitor released Monday. The courts are currently deliberating in those three states discussing the specifics of how the statues of limitations laws apply to foreclosures. In Florida, the foreclosure statute of limitations applies to mortgages that are five years or more overdue, while in New York and New Jersey, it applies to mortgages that are six or more years past due. According to Black Knight, Florida has the largest volume of loans facing possible exposure to statutes of limitations with roughly 40,000, despite experiencing a 38 percent reduction over the past 12 months. For New York and New Jersey, the number of such loans is currently 35,000 and 22,000, respectively, after both experienced increases over the previous 12 months due to “limited resolution in severely delinquent loan populations” in both states, Black Knight reported.“Without taking into account additional carrying costs and/or fees incurred by mortgage servicers, Black Knight estimates the current potential unpaid principal balance (UPB) risk exposure in these three states at approximately $30 billion, concentrated primarily in private-label securities,” Black Knight stated in the report. “As it stands today, roughly $1 out of every $10 of principal in private-label securitizations in these three states is tied to a mortgage that is more than five years delinquent in Florida or more than six years delinquent in New York and New Jersey.”

Black Knight January Mortgage Monitor --Black Knight Financial Services (BKFS) released their Mortgage Monitor report for January today. According to BKFS, 5.09% of mortgages were delinquent in January, up from 4.78% in December. BKFS reported that 1.30% of mortgages were in the foreclosure process. This gives a total of 6.39% delinquent or in foreclosure. Press Release: Black Knight’s Mortgage Monitor: Declining Interest Rates Boost Refinanceable Population by 1.5 Million in First Six Weeks of 2016; $20 Billion in Potential Annual Savings After mortgage interest rates fell by 30 basis points in the first six weeks of 2016, Black Knight revisited its recent analysis of the population of refinanceable borrowers that could both qualify for and benefit from refinancing their 30year mortgages. Using broad-based eligibility criteria, Black Knight found this population has grown significantly since the start of the year. As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, millions of mortgage holders could potentially save thousands of dollars per year by refinancing at today’s rates. “When Black Knight last looked at the refinanceable population just two months ago, there were 5.2 million potential candidates, and that number was on the decline,” said Graboske. “That analysis was shortly after the Federal Reserve raised its target rate by 25 basis points, at which time the prevailing wisdom was that mortgage interest rates would rise in response. Global economic shocks then sent investors looking for the safety of U.S. Treasuries, driving down yields on benchmark 10-year bonds. Mortgage interest rates began to fall in defiance of prevailing wisdom, and the refinanceable population grew by 30 percent in the first six weeks of 2016. As a result, an additional 1.5 million mortgage holders could now likely both qualify for and benefit from refinancing, bringing the total number of potential refinance candidates to 6.7 million. This graph from Black Knight shows their estimate of refinance candidates

Grand Delusion Returns To The Housing Market With SoFi's Interest-Only Mortgage - Oh what a tangled web we weave. It is blatantly apparent that the mortgage industry isn’t generating enough new business with responsible, conventional mortgage products in our new echo bubble for housing. The fact that lenders are creating more new schemes to lure buyers into overpriced homes just as they did prior to the last housing crash should give any rational person cause for concern.  The latest offer from SoFi is reminiscent of the glory days prior to The Big Short blowup. What is SoFi’s solution to a stagnant borrower pool you ask??? The SoFi interest-only mortgage! Because nothing spells clueless and irresponsible like burying yourself in debt for a house you probably can’t afford. Here’s the basic offer from SoFi.  “Put as little as 15% down on mortgages up to $3 million. Pay just interest for the first 10 years of the 40-year 7/1 ARM loan. No mortgage insurance.”  As Anthony Sanders mentioned, it’s like AEI’s Wealth Building Mortgage, but in reverse. Of course AEI’s product is available with NO (zip, zero, nada) money down.Stack up these two mortgage with Bank of America’s new 3-percent-down (Sure I want to be upside down on my home) partnership product with Freddie Mac for low and moderate income buyers, and you start to get a picture of what’s ailing the housing market. In a word it’s AFFORDABILITY. The Fed, in it’s quest to bailout banks and the financial sector, neglected to send the memo that they were re-inflating asset prices beyond the reach of most Americans. That memo wasn’t sent because it would run counter to the “recovery” meme that is so often used as justification for trickle-down monetary policy. And while we’re on the subject of affordability (or lack of it), perhaps someone at the National Association of Realtors can work on producing a better index of housing affordability. Would that be too much to ask? I think it’s pretty obvious the current index is broken.

CoreLogic: "1 Million US Borrowers Regained Equity in 2015"  -- From CoreLogic: CoreLogic Reports 1 Million US Borrowers Regained Equity in 2015 CoreLogic ... today released a new analysis showing 1 million borrowers regained equity in 2015, bringing the total number of mortgaged residential properties with equity at the end of Q4 2015 to approximately 46.3 million, or 91.5 percent of all mortgaged properties. Nationwide, borrower equity increased year over year by $682 billion in Q4 2015. The CoreLogic analysis also indicates approximately 120,000 properties lost equity in the fourth quarter of 2015 compared to the third quarter of 2015. The total number of mortgaged residential properties with negative equity stood at 4.3 million, or 8.5 percent, in Q4 2015. This is an increase of 2.9 percent quarter over quarter from 4.2 million homes, or 8.3 percent, in Q3 2015 and a decrease of 19.1 percent year over year from 5.3 million homes, or 10.7 percent, compared with Q4 2014. ... For the homes in negative equity status, the national aggregate value of negative equity was $311 billion at the end of Q4 2015, increasing approximately $5.5 billion, or 1.8 percent, from $305.5 billion in Q3 2015. On a year-over-year basis, the value of negative equity declined overall from $348 billion in Q4 2014, representing a decrease of 10.7 percent in 12 months....“In Q4 of last year home equity increased by $680 billion or 11.5 percent, the 13th consecutive quarter of double digit growth," said Frank Nothaft, chief economist for CoreLogic. “The improvement in equity reflects positive home prices and continued deleveraging of mortgage balances by households.  On states:  Nevada had the highest percentage of mortgaged residential properties in negative equity at 18.7 percent, followed by Florida (17.1 percent), Illinois (14.6 percent), Arizona (14 percent), and Rhode Island (13.5 percent). These top five states combined account for 30.8 percent of negative equity in the U.S., but only 16.5 percent of outstanding mortgages.

MBA: Mortgage Applications Increased in Latest Weekly Survey, Purchase Applications up 30% YoY - From the MBA: Purchase Apps Up, Refinance Apps Down in Latest MBA Weekly Survey Mortgage applications increased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 4, 2016. ..The Refinance Index decreased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 4 percent to the highest level since January 2016. The unadjusted PurchaseIndex increased 6 percent compared with the previous week and was 30 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 3.89 percent from 3.83 percent, with points decreasing to 0.38 from 0.39 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity has picked up recently as rates have declined. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 30% higher than a year ago.

More and More People are Renting. Thank the Suburbs - Renting is less and less confined to the high rises of Manhattan or brick-apartment blocks of downtown Chicago and spreading further into the single-family homes of the American suburbs. Nearly 22 million more people were renting in metropolitan areas around the U.S. in 2014 than in 2006 and much of that increase was driven by the growth in suburban renters, according to a new report from New York University’s Furman Center, which studies real-estate and urban policy, and Capital One. While the renter population in major cities increased by nine million people during that eight-year period, in the surrounding suburban areas it increased by 12 million people. As downtown areas are becoming less affordable to lower- and middle-income residents, some have them have been pushed to the suburbs, likely accounting for some of the growth in the renter population. “The story really is that the pressure in the market is growing. It may have started in the cities, but it’s moving further out,” said Laura Bailey, managing vice president of community finance at Capital One. The median rent in principal cities, adjusted for inflation, grew 5% from 2006 to 2014, compared with 2% for the surrounding suburbs.

Demographics: Renting vs. Owning - It was six years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive.  The drivers in 2011 were 1) very low new supply, and 2) strong demand (favorable demographics, and people moving from owning to renting). The move "from owning to renting" is mostly over, and demographics for apartments are still positive - but less favorable than 6 years ago.  Also much more supply has come online.  Slowing demand and more supply for apartments is why I think growth in multi-family starts will slow this year (or maybe be flat compared to 2015). On demographics, a large cohort had been moving into the 20 to 29 year old age group (a key age group for renters).  Going forward, a large cohort will be moving into the 30 to 39 age group (a key for ownership).  Note: Household formation would be a better measure than population, but reliable data for households is released with a long lag. This graph shows the longer term trend for three key age groups: 20 to 29, 25 to 34, and 30 to 39 (the groups overlap). This graph is from 1990 to 2060 (all data from BLS: current to 2060 is projected). We can see the surge in the 20 to 29 age group (red). Once this group exceeded the peak in earlier periods, there was an increase in apartment construction. This age group will peak in 2018 (until the 2030s), and the 25 to 34 age group (orange, dashed) will peak in 2023. This suggests demand for apartments will soften in a few years. For buying, the 30 to 39 age group (blue) is important (note: see Demographics and Behavior for some reasons for changing behavior). The population in this age group is increasing, and will increase significantly over the next decade. This demographics is positive for home buying, and this is a key reason I expect single family housing starts to continue to increase in coming years.

Fannie Mae: "Millennials ... Are the Driving Force Behind the Recent Surge in Apartment Demand"  - From Patrick Simmons at Fannie Mae: Housing Myths, Debunked: Millennials, Not Baby Boomers, Are the Driving Force Behind the Recent Surge in Apartment Demand By far, the most important generational driver of apartment demand growth between 2009 and 2014 was the Millennials. Millennials have been reaching adulthood and entering the housing market in large numbers in recent years. For many of these new housing market entrants, the first step in their housing careers after leaving the parental nest has been occupancy of an apartment. As can be seen from the chart at bottom-left when the 2014 button is selected, Millennials’ demand for apartments increased by millions between 2009 and 2014, far outpacing the demand growth from Boomers. In fact, the increase in Millennials’ consumption of apartments during this period was more than 10 times that of Boomers, as can be seen when the “All cohorts” button is selected. Check out the interactive graphic. This is related to my post earlier this week, see: Demographics: Renting vs. Owning. The huge surge in the prime rental age group is nearing the end, and over the next decade, there will be a pickup in the key 30 to 39 demographic (homebuyers).

Will Inequality Turn Entire Cities Into Ghettos? --It’s a charged word, ghetto, no matter where in its linguistic history you focus. It once referred to areas of cities where Jews were confined and restricted because they weren’t Christian. Today, according to Merriam-Webster, a ghetto is “a part of a city in which members of a particular group or race live usually in poor conditions.”  It is time to recognize that “particular group” is a malleable term. The residents of a ghetto are the “other,” the ones who aren’t the same as the mainstream or majority. But one person’s mainstream is another’s other, and the mechanisms to keep people out of sight have changed. No longer does someone lock a gate at night. Instead, economic pressures and market forces fence people in. Once that meant by neighborhood. Today, it has turned into entire cities becoming unwelcoming based on income inequality., which tracks mortgage rates, analyzed the salary necessary to buy a median-priced home with a roughly 4 percent mortgage in 27 different metropolitan regions. Below are the areas along with the necessary salaries:

Fed's Flow of Funds: Household Net Worth increased in Q4  --The Federal Reserve released the Q4 2015 Flow of Funds report today: Flow of Funds. According to the Fed, household net worth decreased in Q4 compared to Q3: The net worth of households and nonprofits rose to $86.8 trillion during the fourth quarter of 2015. The value of directly and indirectly held corporate equities increased $758 billion and the value of real estate rose $458 billion.  Household net worth was at $86.8 trillion in Q4 2015, up from $85.2 trillion in Q3.  The Fed estimated that the value of household real estate increased to $22.0 trillion in Q4 2015. The value of household real estate is still $0.5 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 Q4 2015, household percent equity (of household real estate) was at 56.9% - up from Q3, and the highest since Q2 2006. This was because of an increase in house prices in Q4 (the Fed uses CoreLogic). Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 50+ million households with mortgages have far less than 56.7% equity - and several million still have negative equity.

Mortgage Equity Withdrawal Slightly Negative in Q4 -- The following data is calculated from the Fed's Flow of Funds data (released last week) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW", but there is still little (but increasing) MEW right now - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).  For Q4 2015, the Net Equity Extraction was a negative  $24 billion, or a negative 0.7% of Disposable Personal Income (DPI) .  MEW for Q2 and Q3 was slightly positive - the first positive MEW since Q1 2008 -and the decline in Q4 was probably seasonal.This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.  Note: This data is still heavily impacted by debt cancellation and foreclosures. The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $22 billion in Q4. The Flow of Funds report also showed that Mortgage debt has declined by almost $1.3 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. With residential investment increasing, and a slower rate of debt cancellation, MEW will likely turn positive.

Consumer Credit Growth Weakest Since March 2013 -- Against expectations of a $17 billion surge, US consumer credit grew at just $10.5 billion - the weakest and biggest miss since March 2013. The biggest driver of this disappointment was an actual contraction in revolving credit (down $1.1 billion) for the first time since Feb 2015.

January 2016 Consumer Credit Rate of Growth Slows: The headlines say consumer credit rate of annual growth significantly softened - and came in well below market expectations. The backward revision was significant and downward, and trend lines were affected. The headline said: In January, consumer credit increased at a seasonally adjusted annual rate of 3-1/2 percent. Revolving credit decreased at an annual rate of 1-1/4 percent, while nonrevolving credit increased at an annual rate of 5-1/2 percent. Econintersect's view: [table] Overall takeaways from this month's data:

  • At first glance, it looked like there was little change in consumer credit. This is due to the significant backward revisions. The data values for consumer credit growth last month was 6.9 % (unadjusted) and 5.75% (seasonally adjusted) Vs. 6.5 % (unadjusted) and 3.5 % (seasonally adjusted) this month.
  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013.
  • Student loans growth rate was -0.6 % month-over-month and year-over-year growth is now 11.9 % year-over-year.
  • Revolving credit (credit cards and this series includes no student loans) which has been slightly accelerating.

The market expected (from Bloomberg) consumer credit to expand $6.5 to $20.0 billion (consensus = $16.5 billion) versus the seasonally adjusted headline expansion of $10.5 billion reported. Note that this consumer credit data series does not include mortgages.

U.S. Consumer Borrowing Slows Amid Market Turmoil - WSJ: Borrowing by U.S. consumers decelerated to start the new year, a possible sign of caution among households at a time of volatility in global financial markets. Outstanding consumer credit, a measure of non-real estate debt, rose by a seasonally adjusted $10.54 billion in January from the prior month, the Federal Reserve said Monday. The 3.58% seasonally adjusted annual growth rate was the slowest growth pace since March 2013; in dollar terms, it was the smallest increase since November 2013. “Although the amount of outstanding credit continues to move higher, the upward trend has downshifted lately,” “a little surprising considering that it has coincided with some firming in the recent spending data.” Economists surveyed by The Wall Street Journal had expected a $17.0 billion increase in January. Consumer credit rose at a 7.28% pace in December, revised up slightly from an earlier estimate.  Revolving credit outstanding, mostly credit cards, decreased at a 1.35% annual pace in January compared with growth at a 7.05% pace in December. It was the first monthly decline for revolving credit since February 2015. Nonrevolving credit outstanding, including student and auto loans, increased at a 5.36% annual pace in January compared with December’s 7.36% growth rate.  Consumer spending, which generates the bulk of U.S. economic activity, decelerated in the final months of 2015 but picked up in January, according to Commerce Department data. There have also been signs of firmer wage growth as the job market continues to tighten, though worker pay slipped last month. The unemployment rate in February was 4.9% and average hourly earnings for private-sector workers rose 2.2% from a year earlier, the Labor Department said Friday.

US credit card debt skyrockets, approaching $1 trillion - A new study from says credit card debt in the US has jumped by about $71 billion to $917.7 billion in 2015. The average American household with credit card debt now owes $7,879, which is the highest figure since the 2008 financial crisis. says $7,879 is just $500 from an “unsustainable tipping point”, when the risk of mass defaults rises dramatically.  The $71 billion debt ballooning last year is 24 percent higher than in 2014. The fourth quarter of 2015 alone saw credit card debt load surge to $52.4 billion. In the entire 2014 total credit card debt amounted to $57.4 billion. "With seven of the past 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits," said CEO Odysseas Papadimitriou in a statement. “All of this has us wondering: Is 2016 the next 2008 for credit markets?” the statement added. According to the Fiscal Times estimates, if credit card debt in the US continues to grow at the current pace, American consumers would have to pay down their debts at a record rate to prevent escalated defaults and tightened credit availability.   “While credit card debt levels are trending significantly upward, charge-off rates remain near historical lows and are, in fact, down on a year-over-year basis. Something clearly has to give, and it does not seem to be our spending habits,” says the report from CardHub.

Update: Energy expenditures as a percentage of consumer spending -- Here is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through January 2016. This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices.The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.  In February 2016, WTI oil prices averaged close to $30 per barrel, down from $32 in January, so when PCE data for February is released on March 28th, we will probably see energy expenditures as a percent of PCE, were at all time lows.    However, the new lows will not last long since oil prices have increased in March.

Wholesale Trade March 9, 2016: Wholesalers had been keeping their inventories down as sales have slowed but they got behind in January. Inventories rose 0.3 percent in the month which isn't alarming in itself but relative to sales, which fell 1.3 percent, inventories look heavy. The stock-to-sales ratio rose two notches to 1.35 from 1.33 for the highest reading of the recovery, since April 2009. Industries where inventories rose relative to sales include furniture, farm products, computers, and autos. Very few industries at the wholesale level show leaner levels in the month. Year-on-year, wholesale inventories are up 2.0 percent against a 3.1 percent decline for sales. Increases for inventories are a positive for GDP calculations but not for the production or employment outlooks nor for business confidence. Heavy inventories were a question during the fourth quarter and may be becoming one for the first quarter as well.

January 2016 Wholesale Sales Weakness Grows: The headlines say wholesale sales were down month-over-month with inventory levels remaining at levels associated with recessions. Our analysis shows a declining trend of the 3 month averages. The best way to look at this series may be the unadjusted data three month rolling averages. Note that Econintersect analysis is based on the change from one year ago. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 2.3 % month-over-month.
  • unadjusted sales year-over-year growth is down 6.4 % year-over-year
  • unadjusted sales (but inflation adjusted) down 6.2 % year-over-year
  • the 3 month rolling average of unadjusted sales decelerated 0.2 % month-over-month, and down 4.2 % year-over-year. There has been a general deceleration trend since late 2014.
  • unadjusted inventories up 2.0 % year-over-year (deceleration of 0.1 % month-over-month), inventory-to-sales ratio is 1.51 which is historically is at recessionary levels.
  • sales down 1.3 % month-over-month, down 3.1 % (last month was reported down 4.5 %) year-over-year
  • inventories up 0.3 % month-over-month, inventory-to-sales ratios were 1.28 one year ago - and are now 1.35.
  • the market (from Bloomberg) expected inventory month-over-month change between -0.4 % to 0.3 % (consensus -0.1 %) versus the +0.3 % reported.

Wholesale Trade "Gap" Reaches Record High As Sales Tumble, Inventories Rise - Worst.Case.Scenario. In 24 years, the ratio of wholesale inventories to sales has only been higher than the current 1.35x once - at the peak of the recession in the last financial crisis. Wholesale sales tumbled 1.3% MoM (worse than the -0.3% exp) and inventories rose 0.3% MoM while expectations were for a drop of 0.1% (inventories over sales difference rose from $143.6BN to $151.2BN in one month, a new record high.) And finally, automotive inventories rose to 1.78x sales - the highest since the crisis. Keep stacking, despite tumbling sales...Which leaves us firmly in the "recession imminent" section of the business cycle... And there has never been a wider absolute spread between inventories and sales... And as far as the automotive sector - that bubble may have a problem... This cannot end well.

Update: Framing Lumber Prices down about 15% Year-over-year --Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs. The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).  Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand). In 2015, even with the pickup in U.S. housing starts, prices were down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts. Overall the decline in prices is probably due to more supply, and less demand from China.

Update: U.S. Heavy Truck Sales  -- The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the February 2016 seasonally adjusted annual sales rate (SAAR). Heavy truck sales really collapsed during the recession, falling to a low of 181 thousand in April 2009, on a seasonally adjusted annual rate basis (SAAR). Since then sales increased more than 2 1/2 times, and hit 491 thousand SAAR in November 2015.  Heavy truck sales declined in February to 440 thousand SAAR. The level in November 2015 was the highest level since December 2006 (9 years ago). Sales have been above 400 thousand SAAR for 20 consecutive months, are now above the average (and median) of the last 20 years.  These are strong sales, especially considering the recent weakness in the oil sector.

Deflation Is Coming To The Auto Industry As Used Car Prices Drop, Off-Lease Deluge Looms -- Last week, we learned that vehicle leasing as a percentage of monthly light-vehicle sales hit a record in February at 32.3%.  In other words, a third of the over 1 million cars and light trucks “sold” during the month were leases, according to J.D. Power. This is indicative of what is now a long-term trend. Have a look at the following chart from WSJ, which shows that since 2009, the share of monthly auto leases as a percentage of vehicle sales well more than tripled: Of course the thing about leased vehicles is that they come back, and as WSJ wrote last week, “about 3.1 million vehicles will return to dealer lots off leases this year, up 20% from 2015 [and] the number will climb to 3.6 million in 2017 and 4 million in 2018.” So what does that mean for dealers? Deflation.  And what does that mean for the automakers? Hefty losses.  Nothing about this is hard to understand. You get a supply glut causing pricing assumptions for your existing inventory to prove wildly optimistic and you end up with giant writedowns. This has happened before. "The auto industry expanded the use of leasing in the mid-1990s, helping to fuel retail sales of new vehicles," WSJ recounts. "Eventually, a glut of off-lease cars sent resale values down and auto lenders who had bet residuals would remain high ended up racking up billions of dollars in losses, having to sell the cars for much less than they anticipated."

Rail Week Ending 27 February 2016: Beginning To Show A Mixed Picture, Better Than A Negative One: Week 8 of 2016 shows same week total rail traffic (from same week one year ago) improved according to the Association of American Railroads (AAR) traffic data. Intermodal traffic continued to improve year-over-year, which accounts for approximately half of movements but the weekly railcar counts remained in contraction. HOWEVER, February total carload and intermodal were positive for the first monthly positive reading in almost a year. The deceleration in the rail rolling averages began one year ago, and now rail movements are being compared against weaker 2015 data. There was a port strike one year ago which affected intermodal movements - but the rolling averages are all accelerating including the one year rolling averages(which almost completely removes this anomaly).A summary of the data from the AAR: Carload traffic in February totaled 979,042 carloads, down 10.1 percent or 110,132 from February 2015. U.S. railroads also originated 1,049,126 containers and trailers in February 2016, up 12.9 percent or 119,778 units from the same month last year. Please note, in February 2015, intermodal volumes were severely affected by a labor dispute at West Coast ports. For February 2016, combined U.S. carload and intermodal originations were 2,028,168, up 0.5 percent or 9,646 carloads and intermodal units from February 2015. In February 2016, nine of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with February 2015. These included: motor vehicles and parts, up 19.4 percent or 12,573 carloads; miscellaneous carloads, up 30.6 percent or 5,345 carloads; and waste and nonferrous scrap, up 15.6 percent or 1,781 carloads. Commodities that saw declines in February 2016 from February 2015 included: coal, down 27.3 percent or 112,620 carloads; petroleum and petroleum products, down 20.8 percent or 11,720 carloads; and metallic ores, down 25.3 percent or 4,944 carloads. Excluding coal, carloads were up 0.4 percent or 2,488 carloads from February 2015.

LA area Port Traffic Increased Sharply YoY in February due to Labor Slowdown last Year  - There were some large swings in LA area port traffic early last year due to labor issues that were settled in late February. Port traffic slowed in January and February last year, and then surged in March 2015 as the waiting ships were unloaded (the trade deficit increased in March too).  This will impact the YoY changes for the first few months of 2016. Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.  On a rolling 12 month basis, inbound traffic was up 2.6% compared to the rolling 12 months ending in January. Outbound traffic was up 0.8% compared to 12 months ending in January. The recent downturn in exports is probably due to the slowdown in China and the stronger dollar. The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

U.S. trade deficit widens as exports hit 5-1/2-year low | Reuters: The U.S. trade deficit widened more than expected in January as a strong dollar and weak global demand helped to push exports to a more than 5-1/2-year low, suggesting trade will continue to weigh on economic growth in the first quarter. The Commerce Department said on Friday the trade gap increased 2.2 percent to $45.7 billion. December's trade deficit was revised up to $44.7 billion from the previously reported $43.4 billion. Exports have declined for four straight months. Economists polled by Reuters had forecast the trade deficit widening to $44.0 billion in January. When adjusted for inflation, the deficit increased to $61.97 billion from $60.09 billion in December. Trade subtracted a quarter of a percentage point from gross domestic product in the fourth quarter, helping to hold down growth to a tepid 1.0 percent annual rate. In January, exports of goods fell 3.3 percent to $116.9 billion, the lowest level since November 2010. Overall exports of goods and services dropped 2.1 percent to their lowest level since June 2011. There were declines in food exports, which were the weakest since September 2010. Industrial supplies and materials exports fell to their lowest level since March 2010. Petroleum exports also fell, touching their lowest level since September 2010.Exports of non-petroleum products were the weakest since February 2011. Exports to the United States' main trading partners fell broadly in January. Imports of goods fell 1.6 percent to $180.6 billion, the lowest level since February 2011. Import growth is being constrained by ongoing efforts by businesses to reduce a stockpile of unsold merchandise. Lower oil prices as well as increased domestic energy production are also helping to curb the import bill. There were declines in imports of industrial supplies and materials.

Visualizing 31 Years of Trade Between the U.S. and China -- Every now and again, we like to look at the historical data that underlies our ongoing series of analysis on the topic of trade between the U.S. and China. In our first chart, we're presenting the value of goods and services that the U.S. exports to China, both in terms of U.S. dollars, which is what the U.S. economy sees, and in terms of Chinese yuan, which is how China's economy sees the value of the same goods. Since 2013, we've seen what had been an exponential growth trajectory turn more into a S-shaped logistic curve, which corresponds to the deceleration of economic growth within China's economy.  Let's next look at the historical data for the value of the goods and services that the U.S. imports from China, spanning the same period from January 1985 through January 2016. Once again, we're presenting the value of the goods in terms of U.S. dollars and in Chinese yuan.  this chart, we see that the value of goods that the U.S. imports from China in recent years is somewhere between three and four times the value of the goods that the U.S. exports to China. The chart reveals that the value of the goods imported by the U.S. grew at an exponential rate up until 2006, after which it stalled out with the onset of the deflation phase of the first U.S. housing bubble, before crashing during the Great Recession and then resuming a more linear uptrend in the years since 2013, coinciding with a period of slow economic growth in the U.S.  Our final chart shows the year over year growth rate of the value of goods that the U.S. imports from China, in terms of the U.S. dollars that the U.S. economy sees those goods, and the value of goods that the U.S. exports to China, in terms of the Chinese yuan that China's economy sees those goods. With that being the case, this chart provides a strong indication of the relative economic health of both nations' economies.

NFIB: Small Business Optimism Index decreased in February From the National Federation of Independent Business (NFIB): Small Business Optimism Falls Again This Month The Index of Small Business Optimism fell 1 point from January, falling to 92.9. None of the 10 Index components posted a gain, six posted small declines, and four were unchanged. ... Reported job creation reversed in February, with an average employment change per firm falling to a decline in employment of -0.12 workers per firm. ... This graph shows the small business optimism index since 1986. The index decreased to 92.9 in February.

February 2016 Small Business Optimism Hits Two-Year Low: The National Federation of Independent Business's (NFIB) optimism index fell 1 point in February to the lowest reading in two years, with six of the 10 indices declining and four remaining unchanged, The market was expecting the index between 92.4 to 94.6 with consensus at 94.2 - versus the actual at 92.9.NFIB chief economist Bill Dunkelberg states: A ho-hum outcome this month confirms that the small business sector is not performing with any strength. Small business owners are still waiting for a good reason to invest in the future." The overall Index dropped 1 point in February and now stands at 92.9, which is the lowest reading in two years and well below the 42-year average of 98. Spending and hiring plans weakened a bit as expectations for growth in real sales volumes fell. Earnings trends also weakened as owners continued to report widespread gains in worker compensation while holding the line on price increases. More firms reduced prices than raised them, a sign that small businesses are finding ways to absorb higher labor costs without affecting consumers. Also, the political climate continued to be the second most frequently cited reason for reluctance to expand. Sales trends have moved down over the past few months. That trend continued in February. Expectations for future business conditions remained very negative, which indicates that small business owners do not plan to increase hiring or capital spending. Political uncertainty remains a major concern and the President does not seem inclined to address the major concerns of small business owners. Every month, the Fed dithers on interest rate policy, giving the impression that the economy is weak.

US Services Firms Show Resilience From Manufacturing Recession - The U.S. service economy, while slowing, is avoiding the contraction seen across the nation’s industrial sector.Total revenue across a dozen broad categories of service industries rose an estimated 2.1% in the fourth quarter from a year earlier, the Commerce Department said Thursday. That was a step down from annual revenue growth of 3.1% in the third quarter and 4.1% in the second quarter but far better than the retrenchment hitting American factories.Eight out of 12 service sectors reported annual revenue declines or weaker annual growth compared with the prior quarter, including two of the largest categories: health care and social assistance, and professional, scientific and technical services. Revenues in the enormous finance and insurance sector, though, strengthened at the end of 2015. For all of 2015, services revenue rose 3.3% from the prior year compared with 5.8% growth in 2014 without adjusting for inflation.Economists have warned in recent months that the risk of a recession has risen amid financial-market volatility and pronounced weakness in the industrial sector. The service sector, historically, tends to follow the direction of the manufacturing sector. But the latest resilience of private service-providing firms, which account for about two-thirds of U.S. economic output and the vast majority of workers, indicates the overall economy may be able to avoid a downturn.

BLS Household Survey Report Holds Promising Unemployment Numbers - The February 2016 unemployment report is being reported as great news once again.  The official unemployment rate is 4.9%, a rate not seen since February 2008 and no change from January.  Overall, this month's CPS does have some great news in it.  There were over half a million more employed than the previous month and those not in the labor force declined by over 300 thousand.  The labor participate rate ticked up two tenths of a percentage point to a still very low 62.9%.  That said, one month's changes in the household survey does not a trend make, yet this report has many strong positive indicators.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status.Those employed now stands at 151,074,000, a monthly gain of 530 thousand.  From a year ago, the ranks of the employed has increased by 2.843 million.  Those unemployed number 7,815,000.  From a year ago the unemployed has decreased by -831,000.  The monthly change of those unemployed is really unchanged, a gain of 24 thousand. Those not in the labor force is 93.688 million.  The monthly decline was -374,000.  The below graph are the not in the labor force ranks.  Those not in the labor force has increased by 666,000 in the past year, a huge improvement from the annual change of past months.  The labor participation rate is 62.9%,  This is a 0.2 percentage point increase from last month, but the rate is still at 1980's lows.  Below is a graph of the labor participation rate for those between the ages of 25 to 54.  The rate is 81.2%, a level not seen since February 1985, discounting events after 2008.  These are the prime working years where one should not see record low participation rates or see what appears to be oscillation since the 2008 financial crisis.   The civilian labor force, which consists of the employed and the officially unemployed, stands at 158,890,000.  The civilian labor force has grown by2,012,000 over the past year and grew by 555 thousand in the past month alone.  New workers enter the labor force every day from increased population inside the United States and both legal and illegal immigration.

Weekly Initial Unemployment Claims decrease to 259,000 - The DOL reported: In the week ending March 5, the advance figure for seasonally adjusted initial claims was 259,000, a decrease of 18,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 278,000 to 277,000. The 4-week moving average was 267,500, a decrease of 2,500 from the previous week's revised average. The previous week's average was revised down by 250 from 270,250 to 270,000.  There were no special factors impacting this week's initial claims.  The previous week was revised down. The following graph shows the 4-week moving average of weekly claims since 1971.

Why Aren't More Americans Working? - According to today's employment report, 59.8 percent of Americans ages 16 and older had jobs in February. That's the highest employment-to-population ratio in years, and the rate of increase is clearly on the rise. Look back some more years, though, and the story is different. The recent gains are real, but by the standards of the past few decades, a 59.8 percent employment-to-population ratio isn't impressive. Let this be another lesson in how the presentation of information shapes our understanding of it. The second chart paints a gloomy picture -- the picture that Donald Trump may be referring to when he says the true unemployment rate is 40 percent or higher. A 59.8 percent employment-to-population ratio means that 40.2 percent of American civilians 16 and over don't have jobs. That percentage includes high-school students, 100-year-olds and lots of other people who don't want or need jobs, so the true unemployment rate clearly isn't 40 percent. Still, in April 2000 the employment-to-population ratio peaked at 64.7 percent. Now it's significantly lower. What's going on? The answer that I keep gravitating to is that despite the 4.9 percent unemployment rate, the job market is still pretty weak, and probably malfunctioning in some way. This isn't the only possible answer. In 2014, for example, two economists at the Federal Reserve Bank of New York divided people responding to the Census Bureau's Current Population Survey (from which the unemployment rate and the charts in this article are derived) into 280 cohorts defined by "birth, sex, race/ethnicity, and educational attainment." They determined that most of the decline in the employment-to-population ratio since 2000 could be explained by the changing makeup of the population. But demographics aren't destiny. The employment-to-population ratios by age group, for example, have changed a lot since 1990. First, the women:

Goldman: "Quits and Gross Hiring Are Mostly Back to Normal"  A few excerpts from a research piece by Goldman Sachs economist Daan Struyven: Quits and Gross Hiring Are Mostly Back to Normal: Two years ago, Fed Chair Janet Yellen introduced a “dashboard” of labor market indicators that included two measures of worker flows, the hiring rate and the quit rate. At the time, these two measures reinforced the case that there was more labor market slack than the headline unemployment rate suggested.  Today, the hiring and quit rates have recovered substantially to levels nearly in line with historical averages and consistent with the current U6 underemployment rate. This recovery of gross job flows has arguably had two positive effects. First, industry-level data suggest that higher turnover may have contributed to faster wage growth. Second, the increase in the hiring rate may have made it easier for unemployed workers to re-enter employment.  But the recovery in dynamism still looks somewhat incomplete. In particular, re-employment rates for the long-term unemployed have yet to fully normalize. We see this as an indication that despite considerable progress, the labor market has not yet fully healed.  Struyven is referring to the JOLTS. Here is a graph from the recent report:

It Pays to Work: Work Incentives and the Safety Net - CBPP: Some critics of various low-income assistance programs argue that the safety net discourages work.  In particular, they contend that people receiving assistance from these programs can receive more, or nearly as much, from not working — and receiving government aid — than from working.  Or they argue that low-paid workers have little incentive to work more hours or seek higher wages because losses in government aid will cancel out the earnings gains.  Careful analysis of the data and research demonstrates, however, that such charges are largely incorrect and that it pays to work.  In the overwhelming majority of cases, in fact, adults in poverty are significantly better off if they get a job, work more hours, or receive a wage hike.  Various changes in the safety net over the past two decades have transformed it into more of what analysts call a “work-based safety net” and substantially increased incentives to work for people in poverty. ...

HR Departments Are Now Asking Workers If They’re Gay: A growing number of corporations are adding sexual orientation to the demographic data they collect about their workers. Companies ranging from JPMorgan Chase to Facebook to AT&T now ask workers about their sexual orientation or gender identity, Bloomberg reports.  The questions are typically optional, but organizations say the data can help them develop appropriate benefit plans and boost office diversity. Still, there are concerns. Some businesses have decided not to collect the data for fear that an employee might be outed if the data was stolen or released by a disgruntled worker. Workers who travel abroad could face issues too, as homosexuality is still a crime in many countries. Meanwhile, religious freedom laws in some U.S. states could limit access to certain services for members of the LGBT community.

High-Skill Immigration: The H-1B Program -  In previous posts (here and here), I argued that we should care about high-skill immigration because of the possibility that high-skill immigrants import knowledge and capabilities that “rub off” on the rest of us, thereby increasing our productivity. I also showed that there is evidence for such spillovers in the “experimental” context (such as the sudden dismissal of renowned Jewish scientists by the Nazi regime), but the evidence is restricted to cases where the immigrants have exceptionally high skills, where there is close personal contact between the exceptional immigrants and the native workers, and where the number of high-skill immigrants is sufficiently small relative to the market. Obviously, such flows of truly exceptional immigrants are rare. The political argument for high-skill immigration is instead presented in the context of something like the H-1B visa program, which allows employers to import 65,000 (mostly) high-tech workers annually. In the H-1B context, “high skills” typically mean that the immigrant has at least a college degree.

Blockbuster Job Growth Still Isn’t Turning Into Big Raises For American Workers - The economy added 242,000 jobs in January while the unemployment rate stayed unchanged at 4.9 percent, according to the latest data from the Bureau of Labor Statistics. Analysts had expected 190,000 jobs to be added. That maintains the lowest unemployment rate in 2008. The number of jobs added in December of last year was revised up by 9,000, while January was revised up by 21,000. With revisions included, the economy has been adding jobs at a 228,000 average monthly pace, matching the pace of growth in 2015. The labor force participation rate and employment-population ratio both edged up in February, signs that more people are joining the labor force and seeking jobs. Job gains were concentrated in health care and social assistance (57,000), retail (55,000), food service and drinking places (40,000), private education services (28,000), and construction (19,000). Retail has added 339,000 jobs over the last year, while food and drinking places have added 359,000. Even with strong jobs growth, wages slipped in February. After a 12-cent gain in February, average hourly earnings declined by 3 cents, and they’ve grown by just 2.2 percent over the last year.

Reviving the Working Class Without Building Walls - Can the government help Donald Trump’s supporters? The political system is in shock over the insurrection of the white working class, which has flocked to Mr. Trump’s candidacy.  On the wrong side of globalization and technological change, no longer at home in an increasingly multiethnic America, these voters have eagerly embraced his simple proposal to make things better: walls against the imports and the people they believe have robbed them of a shot at prosperity.That strategy, if it amounts to that, would visit a disaster of epic proportions upon the world economy. It harks back to the Smoot-Hawley tariffs of the 1930s, which pushed the world into a tit-for-tat trade war in which everybody raised their barriers against everybody else’s imports, entrenching the Depression. As Lawrence H. Summers, Treasury secretary under President Clinton and former chief economic adviser to President Obama, warned, “Even the possibility of Trump becoming president is dangerous.” But the raw anxiety of his supporters remains unaddressed. It is not obvious how to restore the America Mr. Trump’s legions pine for. The nation’s diversity would not go into reverse regardless of how high he built his wall along the nation’s southern border. Their economic discontent — born of the mismatch between expectations based on an earlier America, where plenty of blue-collar jobs offered a decent standard of living, and the more cutthroat reality they face today — can seem intractable, too.

What's Up with Wage Growth? - SF Fed - Improvements in labor market indicators such as job growth and the unemployment rate are strong signals that the U.S. economy is returning to health. One puzzling exception has been the sluggish rise in wages. While wage growth typically rises as unemployment falls, this relationship has been muted in the current recovery. In this Economic Letter, we show that changes in the composition of the workforce propped up wages during the recession, despite a significant increase in labor market slack. As the labor market has recovered, this pattern has reversed. We find that cyclical components, such as the entry of low-wage workers to full-time jobs, have combined with secular components, specifically the exit of higher-wage retirees, to hold down recent measures of overall wage growth. ... So what are the implications of these insights? The main one is that sluggish wage growth may be a poor indicator of labor market slack. In fact, correcting for worker composition changes, wages are consistent with a strong labor market that is drawing low-wage workers into full-time employment. In this context, wage growth measures that focus on the continuously full-time employed are likely to do a better job of gauging labor market strength, since they are constructed to more clearly capture the wage dynamics associated with improving labor market conditions. The Federal Reserve Bank of Atlanta’s Wage Growth Tracker is an example. How to best gauge the impact of wage growth on overall inflation is less clear. As long as employers can keep their wage bills low by replacing or expanding staff with lower-paid workers, labor cost pressures for higher price inflation could remain muted for some time. If, however, these lower-wage workers are less productive, continued increases in unit labor costs could be hiding behind low readings on measures of aggregate wage growth.

Is weak U.S. wage growth all because of who’s getting jobs? - The weak wage growth in the United States continues to confound some economists. Although the U.S. unemployment rate is under 5 percent—many economists’ estimate for the lowest possible rate of unemployment that won’t trigger accelerating inflation—U.S. wage growth is far from robust. And while the traditional Phillips curve would have us believe that high wage growth is right around the corner, it hasn’t arrived yet. Perhaps this is because the unemployment rate isn’t as good a measure of labor market slack as in the past. Or, as a new article from the Federal Reserve Bank of San Francisco argues, it may be because the composition of workers in the labor market is pushing down measured wage growth. Why would the change in the composition of workers over time affect the measurement of wage growth? Consider the changes in the percentage of the workforce in certain occupations. Let’s say a lot of jobs are created in high-paying occupations over the course of an economic recovery. The workforce would then have a higher average wage, because more workers would be in higher-paying jobs, but that tells us nothing about the pace of wage growth within occupations. While the average wage growth would be high, wage growth for workers in those occupations might have been quite low. Our nominal measures of wages and wage growth, such the Current Establishment Survey’s average hourly earnings, don’t account for changes in worker composition. But the Employment Cost Index tries to account for this issue by holding the occupational mix of workers constant at some ratio in the past and then measuring the pace of wage growth for that combination.

Wage inequality continued its 35-year rise in 2015 - Introduction and key findings: Over the last three-and-a-half decades, rising inequality has been a defining feature of the American economy. The way rising inequality has directly affected most Americans is through sluggish hourly wage growth in recent decades, despite an expanding and increasingly productive economy. For example, had all workers’ wages risen in line with productivity, as they did in the three decades following World War II, an American earning around $50,000 today would instead be making close to $75,000. A hugely disproportionate share of economic gains from rising productivity is going to the top 1 percent and to corporate profits, instead of to ordinary workers—who are more productive and educated than ever. This rising inequality is largely the result of big corporations and the wealthy rewriting the rules of the economy to stack the deck in their favor. This has prevented the benefits of productivity growth from “trickling down” to reach most households. Unfortunately, although inflation-adjusted wages grew across the board in 2015 (due to a sharp dip in inflation), the trend of rising wage inequality continued unabated last year. This paper begins by detailing the most up-to-date hourly wage trends through 2015 and then examines the continued growth in inequality that began in the late 1970s. This rising inequality is confirmed by the latest wage data, analyzed across the wage distribution and education categories, including striking differences by race and gender.

Wages Grew 4% or Faster in One in Eight Large U.S. Counties - Pay for workers in more than one in eight large U.S. counties rose faster than 4% in the third quarter of 2015 from a year earlier, showing pockets of the country are experiencing outsized gains amid tepid overall growth. Average weekly wages increased 2.6% nationwide in the third quarter of 2015 from a year earlier, a still historically modest rate that helps explain why the broader economy has struggled to accelerate. But in places from Music City to the Chicago suburbs to the California coast, wages are growing much faster. Weekly wages grew 4% or better in 44 of the 342 U.S. counties with at least 75,000 jobs, according to Labor Department data released Wednesday. Meanwhile, wages fell from a year earlier in 21 counties, including Midland, Texas, and Union, N.J. The disparity shows the uneven nature of the recovery across the country. Rockland County, N.Y., had by far the largest wage gain, up 24.9% in the third quarter of 2015 from a year earlier. Those gains were led by a leap in manufacturing pay for the county northwest of New York City. Employment in the county grew 2.6%. Lake County, Ill., north of Chicago, was second, with wages growing 11.7%. Those were the only two counties with double-digit percentage gains. Wages in California’s Marin and Santa Cruz counties each rose 6.1%. Wages in Davidson, Tenn., the county that includes Nashville, rose 5.5%. Pay in Williamson, Tenn., just to the south, rose 5.2%. Williamson led the country in job growth, with employment growing 6.5%.

Emerald City Minimum Wage Shenanigans - The recent piece by AEI “scholar” Mark Perry on Seattle’s minimum wage – see here – has continued to make its way throughout the right wing echo chamber. It was picked up at the Competitive Enterprise Institute (of which I’ve never heard), then on over to the Foundation for Economic Freedom (never heard of them, either) and, finally, to the granddaddy of them all, ZeroHedge. Of course, Perry’s piece was thoroughly and thoughtfully debunked by Michael Hiltzik at the LA Times, and I followed up on Hiltzik’s work here. The issue really centered around Hiltzik’s discovery that the employment levels in least five other cities around the Seattle area were moving in lock-step with Seattle’s. After all, Seattle’s minimum wage – if it were having a deleterious effect – should have that city standing apart from its neighbors. But that’s not what the data show, as I clearly demonstrated: There are six – yes, six – cities represented in that chart, and their employment levels, indexed to 100 at January 2014, have moved in near-perfect sync with one another. How is Seattle faring worse than any of its neighbors – Bellevue, Everett, Federal Way, Lynnwood, or Redmond? Answer: It’s not. Neither Perry nor any of those subsequently citing his work noticed nor, I’m sure, care. It matters not. Only the narrative, the ideology, matters.

Study sees positive impact of raising New York’s minimum wage to $15 an hour - A proposed gradual increase in New York’s minimum wage from $9 to $15 an hour would increase wages by an average of 23 percent for nearly 3.2 million workers by mid- 2021 and will not have a negative effect on overall employment, says a comprehensive new study released today by UC Berkeley. “The policy will have large positive effects on living standards and very small effects on employment,” concludes UC Berkeley’s team of labor market researchers from the Institute for Research on Labor and Employment in the latest in a series of studies of minimum wage policies under consideration or being implemented by cities and states across the country.The New York analysis is based on a comprehensive new labor market model that the researchers developed to project how workers, businesses and consumers will adjust over the five years of the higher minimum wage’s phase-in. The model draws on an extensive academic literature on the economics of labor markets, business practices and consumer markets and examines the interactions among the various effects. If New York enacts a $15 minimum wage, the Berkeley team forecasts some additional automation in low-wage industries, with higher payroll costs for businesses partly offset by savings in employee turnover expenses and employee productivity gains. Consumers would absorb a 0.2 percent annual price increase over the phase-in, equivalent to about a nickel for a $3 box of Cheerios. Consumer inflation has averaged nearly 2 percent a year in recent years.

Your chances of becoming poor may be higher than you think -- The odds of striking it rich by playing the Powerball are 1 in 292 million -- worse than the odds of being struck by lightning -- yet that doesn’t stop us from daydreaming about being flooded with wealth and sailing off to Bali. The opposite, however, doesn’t appear to be true: Most of us spend relatively little time imagining what it would be like to be plunged into poverty, even though the odds of that happening are far, far greater. Just what are your chances of falling into poverty? Sociologists  have calculated how likely you are to become poor based solely on your age, education, race and marital status. The calculator predicts probabilities for five, 10 and 15 years in the future. [Use the calculator to find out your risk of falling into poverty] Now, probabilities aren't predictions. You'll notice that the calculator doesn't ask about your income, your savings and debt and how well your 401(k) is performing -- or if you even have one. Certainly, those factors influence how well individuals can weather unexpected life events, such as illness or unemployment. But in the aggregate, Hirschl said, the four criteria used in the calculator are the strongest predictors of economic distress.

Women over 65 are more likely to be poor than men, regardless of race, educational background, and marital status - Women age 65 and older are much more likely to be poor than their male counterparts—and older, minority, and unmarried women are at greatest risk. The chart below replicates findings in a new report by the National Institute on Retirement Security, but uses an alternative measure of poverty that takes into account out-of-pocket medical expenses and other factors in addition to income. Hispanic senior women have the highest poverty rate of any group—31 percent, compared with 28 percent of Hispanic men over the age of 65. Senior women who never married have a similarly high poverty rate (29 percent); comparatively, senior men who never married have a poverty rate of 21 percent. As women get older, they also become more likely to be in poverty: 17 percent of women between the ages of 70–79 and 22 percent of women 80 and over are in poverty. Meanwhile, men in these age groups have a poverty rate of 11 percent and 17 percent, respectively.Though EPI’s new report on the state of American retirement shows that the retirement gap between men and women is shrinking, this is not a feel-good story about women catching up to men. Instead, it’s a story about men sinking to the level of women, and the reality that neither men nor women are able to save enough for retirement. Women also remain much more vulnerable in retirement because they live longer (and therefore must save more), are more likely to fare worse if they are divorced, widowed, or have never been married, and have lower career earnings.

Q&A: Rebecca Traister on the ‘Revolutionary Rupture’ From the Rise of Single Women - Around half of all American women are now single—the culmination of a steadily rising trend in women marrying later, not remarrying or not marrying at all. In “All the Single Ladies,” Rebecca Traister chronicles the surge in the number of single women today and the role they have played throughout American history.  She documents the single women at the country’s social and cultural vanguard, such as author Louisa May Alcott, abolitionist and suffragette Susan B. Anthony, and muckraker Nellie Bly. But she is quick to point out that “while the victories of independent life are often emblematized by the country’s most privileged women, the war was fought by many Americans who have always had far fewer options to live free: women of color, poor and working-class women,” who worked in factories, on farms and as domestic workers out of necessity.

Revealed: the 30-year economic betrayal dragging down Generation Y’s income The full scale of the financial rout facing millennials is revealed today in exclusive new data that points to a perfect storm of factors besetting an entire generation of young adults around the world. A combination of debt, joblessness, globalisation, demographics and rising house prices is depressing the incomes and prospects of millions of young people across the developed world, resulting in unprecedented inequality between generations. A Guardian investigation into the prospects of millennials – those born between 1980 and the mid-90s, and often otherwise known as Generation Y – has found they are increasingly being cut out of the wealth generated in western societies. Where 30 years ago young adults used to earn more than national averages, now in many countries they have slumped to earning as much as 20% below their average compatriot. Pensioners by comparison have seen income soar.In seven major economies in North America and Europe, the growth in income of the average young couple and families in their 20s has lagged dramatically behind national averages over the past 30 years. In two of these countries – the US and Italy – disposable incomes for millennials are scarcely higher in real terms than they were 30 years ago, while the rest of the population has experienced handsome gains. It is likely to be the first time in industrialised history, save for periods of war or natural disaster, that the incomes of young adults have fallen so far when compared with the rest of society.

Puerto Rico: Colonial Chickens, Structural Priority, and Contingent Debt - By way of a preface, my dominant sense of Puerto Rico's crisis continues to be that it is all about colonial chickens coming home to roost (see Melissa's roundup). One could, therefore, get on a high horse about mismanagement and corruption--but staying on the horse is hard when you consider that the Commonwealth economy is entirely a function of its century+-long relationship with the United States. The Jones Act, the military bases, the random tax breaks, and a massive but incoherent patchwork of federal transfers are symptoms of the broader dysfunction (this is where comparisons with Greece and the young euro sound especially beside the point). A durable solution to the crisis therefore requires a vision of what Puerto Rico's economy should be about in the United States and in its Caribbean neighborhood, which therefore implicates the status question. Until then, it is important to keep in mind--as Adam Posen said in December (at the very very end of the video)--that investing in the people of Puerto Rico is not necessarily the same as investing in the place. It might just be that even a perfectly reformed Puerto Rico is a much smaller place for the foreseeable future.  Onto the less-intractable business.

Arizona Advances Bill To Spend Millions Each Year Putting Photos On Food Stamps Cards - Rep. Justin Olson’s (R) bill would kick about 120,000 people off of the Supplemental Nutrition Assistance Program (SNAP) rolls. It would cancel the state’s policy of categorical eligibility, by which anyone enrolled in welfare or Social Security is automatically approved for food stamps without administrators spending time and money on another application. It would also bar the state from ever seeking waivers from federal work rules that are designed to respond to economic hardship that makes work requirements impractical. Olson’s bill seemed doomed early Tuesday in the House, as a number of Republicans defected over its core provisions. But they came back into the fold, the Arizona Republic reports, after Olson promised his colleagues he would erase the provisions that would shrink SNAP rolls. Assuming Olson makes good on that promise, the legislature will instead work to require that SNAP recipients’ photographs appear on their electronic benefits transfer (EBT) cards. The bill also channels a 2015 Kansas measure by banning public assistance cards from being used on cruise ships, in psychics’ offices, and at public swimming pools.  Adding photographs to benefits cards will cost Arizona taxpayers $6 million in year one and $4.2 million more in every subsequent year, the state’s fiscal analysts say. While conservatives who support that policy say the goal is to reduce fraud – which swallows just 1 percent of all food stamps money nationwide – any such reduction would not save Arizona a dime. Food stamps and other anti-poverty benefits are entirely federally funded, with states paying only for half the cost of administering the systems.

Ohio lost 112,500 jobs due to trade with TPP countries (graphic): EPI | – Ohio lost 112,500 jobs in 2015 resulting from the United States' trade deficit with countries that are part of the Trans-Pacific Partnership agreement, according to an analysis by the Economic Policy Institute. That places Ohio sixth, in terms of the percentage of jobs lost to trade with TPP countries, among the 50 states and the District of Columbia ranked in the report released Thursday by the liberal Washington, D.C.-based think tank. The lost jobs represent nearly 2.2 percent of employment in Ohio, according to the analysis. The total number of lost jobs includes those directly and indirectly impacted by the trade deficit with TPP countries. It also includes the number of jobs EPI says would have been created through the multiplier or "respending" effect had trade with those countries been more balanced. The TPP is a free trade agreement between the United States and 11 partnership countries, including Canada, Mexico, Japan, Singapore and Malaysia. While the countries have reached final agreement on the trade accord, it probably will not go into effect for several months. The agreement must clear several hurdles, including final ratification by Congress.

Illinois Comptroller Leslie Munger spells out Illinois' financial trouble – The average taxpayer doesn’t operate on a multibillion-dollar budget, so it’s probably difficult to wrap one’s head around the state’s fiscal nightmare, Illinois Comptroller Leslie Munger told members of the Joliet Region Chamber of Commerce & Industry on Tuesday. Imagine, if you would, Munger said: $7,000 in bills on the kitchen table, $2,000 in bills in the mail, $110,000 in credit card debt and $100 in your bank account for daily spending. Illinois is grappling with that same ratio, she said, but tack on six additional zeroes at the end of those figures. “That’s no way to run a state,” she said. As comptroller, Munger writes the checks for expenses such as payroll, vendors’ services and pension obligations. Illinois is running out of money, she warned, because 90 percent of expenses that would appear in a typical state budget are being spent at or above fiscal year 2015 levels because of court orders and consent decrees. “Every day we have to decide: Do we make a payment to foster care, or do we pay the developmentally disabled? These are all court-ordered payments,” Munger said. “Do I run the payroll, which I’m federally obligated to do? … Do I make the contributions into the pension system? Do I pay Medicaid?”

How Social Media Policing and Online Vigilantism May Increase Wrongful Convictions --  Just like the billion-plus people who log onto Facebook every day and the thousands of self-promoters who brag on Twitter about crimes they've committed, the cops have been flocking to social media for several years now. From the Wayne County Sheriff's Office in Ohio to the New York City Police Department, they've been setting up social media accounts, all in a bid to communicate more effectively with the public and, ostensibly, to solve cases. From the perspective of the forces involved, this strategy has worked wonders, with a litany of people incriminating themselves via boastful Facebook posts, and the public obligingly responding to closed-circuit television footage with the names of suspects. Yet despite the noticeable benefits to police departments of harnessing social media and big-data technology to transform thousands (if not millions) of people into unofficial police informants, there are numerous demonstrated and potential downsides to this change in police operations. Not only does it open the floodgates of official police channels to the slews of misinformation often associated with the dawn of the internet, but also it threatens to stimulate a growth in misguided internet vigilantism and increase wrongful convictions. If this happens on any considerable scale, then the use of new digital technologies in policing, far from strengthening the balance of justice in the world, may only weaken it further.

Senior U.S. immigration judge says 3 and 4 year old children can represent themselves in court - The ACLU deposed Judge Jack H Weil, a senior judge responsible for training other immigration judges, in a case over whether 3- and 4-year-olds needed legal representation during deportation hearings. Judge Weil insisted that children as young as three could be taught the basics of immigration law and didn't need taxpayer-funded lawyers in order to get a fair hearing. Judge Weil was a witness for the DoJ, which is contesting the ACLU's lawsuit to provide counsel to people facing deportation. Later, he said that his remarks were taken out of context, though he said he couldn't clarify without consulting the DoJ, and has not yet made any clarification. The judge's remarks included "I've taught immigration law literally to 3-year-olds and 4-year-olds. It takes a lot of time. It takes a lot of patience. They get it. It’s not the most efficient, but it can be done." He later reiterated, "I’ve told you I have trained 3-year-olds and 4-year-olds in immigration law. You can do a fair hearing. It’s going to take you a lot of time." ACLU attorney Ahilan Arulanantham, who questioned Weil, said that he confirmed the judge's statements "because what he said was so outrageous. As I asked further questions, he obviously meant what he said."

Cashing in on Kids: 172 ALEC Education Bills Push Privatization in 2015: Despite widespread public opposition to the corporate-driven education privatization agenda, at least 172 measures reflecting American Legislative Exchange Council (ALEC) model bills were introduced in 42 states in 2015, according to an analysis by the Center for Media and Democracy, publishers of and (A PDF version of this report may be downloaded here.) One of ALEC's biggest funders is Koch Industries and the Koch brothers' fortune. The Kochs have had a seat at the table - where the private sector votes as equals with legislators - on ALEC's education task force via their "grassroots" group Americans for Prosperity and their Freedom Partners group, which was described as the Kochs' "secret bank." The Kochs also have a voice on ALEC's Education Task Force through multiple state-based think tanks of the State Policy Network, ALEC's sister organization, which is funded by many of the same corporations and foundations and donor entities. ALEC's Education Task Force is also funded by the billionaire DeVos family, which bankrolls a privatization operation called "American Federation of Children," and by for-profit corporations like K12 Inc., which was founded by junk-bond king Michael Milliken. ALEC's education task force has pushed legislation for decades to privatize public schools, weaken teacher's unions, and lower teaching standards. ALEC's agenda would transform public education from a public and accountable institution that serves the public into one that serves private, for-profit interests. ALEC model bills divert taxpayer money from public to private schools through a variety of "voucher" and "tuition tax credit" programs. They promote unaccountable charter schools and shift power away from democratically elected local school boards.

Why Has Charter School Violence Spiked at Double the Rate of Public Schools? - A few weeks after The New York Times released a controversial video of a Success Academy Charter School teacher lashing out at a student, New York City’s deep-pocketed charter school advocates are looking to shift the public narrative on who is committing violence in city schools. [...] Over the last few weeks, Families for Excellent Schools, a charter school lobbying and advocacy group with close ties to Success Academy, has placed TV ads, held a press conference, and taken to social media, claiming New York City public schools are in a violent “state of emergency.” The charter school campaign appears to be a response to the public backlash that Success Academy has received for its controversial disciplinary approach.  Taking state data, which includes “violent” incidents not involving the police, Families for Excellent Schools asserts that between 2014 and 2015 schools suffered a 23 percent uptick in violence. The public action was meant to undermine New York Mayor Bill de Blasio, who recently claimed school violence has gone down, thanks to his administration’s softer disciplinary approach.  A Nation analysis of the charter school group’s data, however, suggests the move may backfire, since the numbers also show that charter schools themselves reported a far higher spike in incidents of school violence, 54 percent, more than double that of the public school average between the 2014 and 2015 school years.  Breaking the data down further, The Nation also found that while NYC public schools, perhaps responding to the district’s disciplinary reforms, actually dropped in nonviolent offenses like “criminal mischief” and “other disruptive incidents” at -6 percent and -23 percent, respectively, charter schools had a 65 percent surge in reported incidents of “criminal mischief” and a 33 percent surge in “other disruptive incidents.” Notably, charter schools also had far higher reported surges in drug and weapons possession incidents, at 53 percent and 27 percent respectively, whereas public schools only had 5 percent and 9 percent jumps for the same categories.

Learn Different -- There is no principal’s office and no principal. Like the five other AltSchools that have opened in the past three years—the rest are in the Bay Area—the school is run by teachers, one of whom serves as the head of the school. There is no school secretary: many administrative matters are handled at AltSchool’s headquarters, in the SOMA district of San Francisco. There aren’t even many children. Every AltSchool is a “micro-school.” In Brooklyn Heights, there are thirty-five students, ranging from pre-kindergarten to third grade. Only a few dozen more children will be added as the school matures. AltSchool’s ambition, however, is huge. Five more schools are scheduled to open by the end of 2017, in San Francisco, Manhattan, and Chicago, and the goal is to expand into other parts of the country, offering a highly tailored education that uses technology to target each student’s “needs and passions.” Tuition is about thirty thousand dollars a year. In December, I visited a classroom for half a dozen pre-kindergartners. Several children were playing “restaurant,” and one girl sat in a chair, her arms outstretched as if holding a steering wheel: she was delivering food orders. “I’m taking a shortcut,” she announced. A teacher sitting on the floor told her, “That’s a good word—you used it correctly.” Then she took out her phone and recorded a video of the moment.  Students at AltSchool are issued a tablet in pre-K and switch to a laptop in later years. (For now, AltSchool ends at the equivalent of eighth grade.) When I visited a mixed classroom for second and third graders, most of the children were sunk into their laptops. All were engaged in bespoke activities that had been assigned to them through a “playlist”—software that displays a series of digital “cards” containing instructions for a task to be completed. Sometimes it was an online task. Two children were doing keyboarding drills on a typing Web site. Their results would be uploaded for a teacher’s assessment and added to the student’s online Learning Progression—software developed by AltSchool which captures, in minute detail, a student’s progress.

More people with mental illnesses are being put in prisons and jails, not mental hospitals.More than 2,000 Boston public school students walk out of class to protest budget cuts - The students marched through downtown Boston after walking out of class to protest planned budget cuts, carrying signs and chanting, “What do we want? Education!,” as shoppers and onlookers walking down Newbury Street pulled out their cell phones to record the demonstration. Students made their way in large throngs toward Boston Common, the State House, and Faneuil Hall, on foot and by bus, despite warnings from the school district that they would be marked absent if they left class. “Pretty much every student in my class walked out. I don’t think there’s anyone left,” said Harry Saunders, a senior at Snowden International School. “But I’m surprised how many people are here.” Protest organizers posted a letter on Twitter prior to the walkout stating that budget cuts next year will prohibit students from learning “at full capacity” and “make it impossible to get into the college of your dreams.”  The city’s public schools are facing the deficit due to rising expenses and a decline in state and federal aid. The exact amount of the deficit, however, has yet to be determined. The initial budget shortfall was estimated at about $50 million, though the mayor’s office has said the total figure will be lower when the school committee votes on the final budget March 23.

Smartwatches that allow pupils to 'cheat' in exams for sale on Amazon - The watches are making exams a ‘nightmare to administer’, according to one deputy head Smartwatches that allow pupils and students to cheat in exams are being openly sold on Amazon. An advert for one such watch, which has 4GB of memory, was offered on the website for £44.95. “This watch is specifically designed for cheating in exams with a special programmed software. It is perfect for covertly viewing exam notes directly on your wrist, by storing text and pictures. It has an emergency button, so when you press it the watch’s screen display changes from text to a regular clock, and blocks all other buttons,” the seller wrote. Joe Sidders, the deputy head at Monkton Combe senior school, in Bath, told BBC News that such devices were making exams a “nightmare to administer”. “I expect the hidden market for these sorts of devices is significant, and this offering on Amazon is just the tip of the iceberg,” he said. Mr Sidders said it was irresponsible to sell such devices and called for exam boards to challenge those involved in making them. A spokesman for Amazon said the company did not want to comment on the sale of the cheating watches.

McGraw-Hill Destroys Textbook After Complaints That Maps Are Anti-Israel -- Inside Higher Ed reports that the educational publishing company McGraw-Hill is withdrawing and destroying all copies of a textbook after complaints that it contained maps that were anti-Israel. The book, Global Politics: Engaging a Complex World, had a series of maps that documented the Palestinian loss of land that occurred between 1946 and 2000. A number of Israel supporters criticized the maps, insisting that they're based on anti-Israel propaganda, as in this blog post. The post claims that all land given up by Israel has been given in the "pursuit of peace."[Israel] has offered a great deal more for peace with the Palestinians," reads the post, "The book could have gone into why they continuously reject these peace offers…but it chose not to. The textbook authors have taken a false narrative and are teaching it to students across the nation." Insider Higher Ed ran a statement from Catherine Mathis, a spokeswoman for McGraw-Hill Education. "As soon as we learned about the concerns with it, we placed sales of the book on hold and immediately initiated an academic review," said Mathis, "The review determined that the map did not meet our academic standards. We have informed the authors and we are no longer selling the book. All existing inventory will be destroyed. We apologize and will refund payment to anyone who returns the book." The map used in the book can be seen below.

Income Inequality May Cause Boys to Drop Out of High School More Often - The stark reality of the U.S. is that people born poor are likely to remain that way. But the exact reasons income inequality perpetuates across generations is tricky to pin down. A pair of economists may have found one of the links, however. It turns out that poor students who grew up in areas with high income inequality are significantly more likely to drop out of high school than students who grew up in areas with less inequality. “Greater educational attainment is a key pathway by which an individual from a low-income background can move up in the income distribution and obtain a middle-class life, or potentially even higher,” write the economists Melissa Kearney at the University of Maryland and Phillip Levine at Wellesley College. Their research is being presented this week at the Brookings Institution. “If children from low-income backgrounds are responding to large gaps between their economic reality and middle-class life by dropping out of school, that would perpetuate economic disadvantage and impeded rates of upward mobility.” They found the size of the gap between households at the 50th percentile and those at just the 10th percentile helps predict whether boys will drop out of high school. The reason for this, they suspect, is that these boys believe that even attaining a middle-class standard of living may be beyond their reach.

How should we teach students about climate change? - A recent survey of US science teachers, published in Science, revealed a damaging misperception among teachers that has grave consequences for how students are being taught about climate change. The survey found that only 30 percent of science teachers in US middle and high schools are aware that the scientific consensus on human-caused global warming is 80 percent or higher. This stands in stark contrast to the actual 97 percent consensus level among climate scientists, found in surveys, public statements, and peer-reviewed papers. The gaping chasm between the perceived and actual level of scientific agreement on climate change, known as the “consensus gap,” has an unfortunate result: Many teachers present their students with both the mainstream consensus view that humans are causing global warming and the opposing minority view. This approach, known as “teach the controversy,” was initially promoted by groups opposed to teaching evolution in schools.  The problem with “teach the controversy” when it comes to human-caused global warming or evolution is that there is no controversy—not a scientific one, at least. Teaching that scientists have major disagreements where they do not is simply to spread misinformation. How, then, should teachers approach climate change, when there is indeed social controversy surrounding it? The research suggests that acknowledging and explaining the controversy—a method sometimes called misconception-based instruction—is the optimal approach. Done correctly, this teaching method offers our best chance to reduce the spread of climate misinformation to our next generation of voters and policy makers.

Obama's Education Secretary Pick a 'Lackey of the Corporate Machine' -- Noted intellectual Noam Chomsky, author and activist Naomi Klein, and education historian Diane Ravitch are among those urging the U.S. Senate to reject President Barack Obama's pick for the next education secretary, saying the policies he's supported "have been ineffective and destructive to schools, educators, and most importantly students." Their concerns are outlined in a letter published by the Washington Post on Thursday. Obama's choice is John King, who's held the position of Acting Secretary of Education since the departure of Arne Duncan. King has already received an "astounding pass" from the Senate education committee last month, as Valerie Strauss wrote in an earlier story for the Post. At the hearings, he "was not asked one single direct question about the tumultuous 3 ½ years he spent as the commissioner of education in New York state. Not by Republicans, and not by Democrats," she wrote.  King's critics have previously pointed out that he was a teacher for a mere three years, has been a fervent supporter of charter schools and high-stakes testing, displayed "autocratic behavior as state commissioner of education [which] spurred a massive parent opt out from state testing," and was hit with the charge of being "responsible for more attacks on public educators than almost anyone else.","[King's] agenda is just as terrible and oppressive as the former Secretary Arne Duncan," adding, "This country needs a secretary of education who will help bring some sanity into our classrooms, not a lackey of the corporate machine." The letter is posted in full below:

Econ Duel! Is Education Signaling or Skill Building? - Alex Tabarrok - Marginal Revolution University has a brand new feature, Econ Duel! Our first Econ Duel features Tyler and me debating the question, Is education more about signaling or skill building?

Starving Public Education - Paul Krugman -- Which brings me to Governor Cuomo’s sudden proposal, seemingly out the blue, to cut half a billion dollars in state funding for CUNY and shift the burden to the city. Full disclosure: I am now a CUNY employee. But that’s not the reason I think this would be a terrible idea. The point is, instead, that CUNY as an institution is doing such obvious good, especially in an era of growing inequality and hardening class lines, that it’s hard to understand why anyone who isn’t the hardest of hard-line conservatives would want to undermine it. CUNY has long been a powerful engine of social mobility; my father, the son of penniless immigrants, went to Brooklyn College, which gave him opportunities he could never have found otherwise. And it’s still playing that role. If you look at the student body today, you see a portrait of the American dream in action: hundreds of thousands of students, roughly 40 percent of whom are their family’s first generation in college, come from households with income less than $20,000, or both, all getting an affordable education that leaves them far less burdened by debt than all too many of their contemporaries. We need more of this kind of thing — much more — not savage budget cuts that are driven by no fiscal imperative I can see. Don’t do this, Mr. Governor.

Spending on public higher education overlooks net benefits as investment in state's future -  In spite of the overwhelming evidence of a skills deficit, a depressed middle class and growing inequality, the state of Illinois continues to underinvest in public higher education. But considering higher education funding as an investment that lowers state welfare and prison costs, generates tax revenues and leads to economic growth in the future -- and not as mere consumption spending -- could reframe the debate, according to an article by ... Walter W. McMahon, an emeritus professor of economics and of educational organization and leadership at the University of Illinois. Published in the Journal of Education Finance, the article develops the total return of public education relative to the full costs to the state of Illinois, the key criteria for determining whether there is under- or over-investment for the most efficient statewide development.McMahon concluded that public education in Illinois contributes to investment returns of 9.5 percent for K-12; 15.3 percent for community college; and 13.4 percent for university, respectively, for every dollar that's spent -- returns that are well above the 7.2 percent the money would have earned if invested in an index fund that tracked returns of the S&P 500, McMahon noted. "All told, the state of Illinois' education investment pays for itself every 2.3 years in state budget savings alone."

College Degrees Are on the Rise, But Not Among Older Americans -- College attainment continues to climb, but not among all age groups. And a growing share of those earning undergraduate degrees had prior degrees or certificates. Those are the two big findings in research released this week by the National Student Clearinghouse, a nonprofit that collects student data from colleges and universities. The number of Americans earning an undergraduate degree—either a bachelor’s or an associate’s—reached 2.8 million last year, up 0.3% from 2012. The growth was due entirely to degree attainment by students under age 25, or those of traditional college age. The number of graduates under age 25 grew by more than 89,000, or 5.4%, between 2012 and 2015. Among those age 25 and older, the number fell by roughly 77,000, or 6.8%.  The trend is even starker if you focus just on first-time graduates–those who never earned a prior degree or certificate. The number of students under age 25 who earned their first degree grew by 63,000, or 4.3%, between 2012 and 2015. But among those ages 25 and older, the number fell more than 118,000, or 15.4%.  The shift makes sense given today’s strengthening economy and the historic boom in college enrollment that occurred during the recession. During the enrollment boom, a disproportionate share of new students were older Americans who had lost their jobs and went to school for the first time to learn a new trade. Many of them have since returned to the workforce as the economy improves, and enrollment trends have returned to normal.

So, why is a college degree worth less if you are raised poor? A response to readers’ comments -- Brookings -- There is plenty of soul-searching going on about the state of public debate in America right now. But here’s a small reason to be hopeful: my recent blog post, “A college degree is worth less if you are raised poor,” has generated lots of attention in both traditional and social media, and also dozens of thoughtful comments and questions. Several readers have even personally emailed or called me on their own speculations of what could be going on.  The blog was based on research I’m undertaking with my Upjohn Institute colleague Tim Bartik, and we thought many of the points raised deserved a response. The data we are using will allow us to look at a range of possible explanatory factors including occupation, geography, college type, family background, and levels of academic preparation. Responders to our blog raised a number of other possibilities:

  1. Mentors, advisors, and role models: Several people mentioned how a lack of mentors can serve to limit low-income students’ horizons. In many cases, these remarks came from the commenters’ personal experience.
  2. Social and professional networks: Numerous responders echoed Harvard political scientist Robert Putnam in stressing social capital: networks that can help provide connections to opportunities for further learning and jobs. Low-income students not only may have smaller networks initially, but they may also lack the practice, experience, and resources to develop them further.
  3. Differences in risk tolerance: Low-income students may be less willing or able to bear the risk of waiting for something better to come along.
  4. Self-promotion: Perhaps reflecting differential experiences in parenting and the home environment, a few people described (again from personal experience) how coming from a low-income background affected their confidence or their comfort in fitting in with others from a different social class. This discomfort could manifest in a reluctance to ask for assistance from peers, promote one’s own accomplishments, or negotiate for additional salary.

The US cities luring millennials with promises to pay off their student debts - Sara Brassfield is more than $125,000 in debt for a college degree she never completed. She has no savings and can’t imagine ever buying a home.  “I am one pay cheque away from being homeless.” Brassfield is one of more than 40 million Americans with some type of student debt. Altogether, they owe more than $1.3tn. The class of 2015 is the most indebted ever, with most graduates having taken out an average of $35,000 in loans. Now help may be at hand from unlikely quarters. Some cities and state governments are starting schemes that offer young people money to put towards a house deposit, or to buy their student debt off them, in exchange for moving to parts of the US that do not usually attract millennials. Among those leaving the coastal cities for towns in the centre that are willing to give them a break is 31-year-old Lee Waldron. When he graduated from college in 2006, he was $30,000 in debt. Ten years later, there is about $10,000 left. The main reason Waldron was able to pay down so much of his debt is the Kansas Opportunity Zones programme.  Designed to reverse the trend of declining population in many of the state’s rural areas, the local lawmakers created a scheme that would offer college graduates tax breaks and up to $15,000 in student loan repayment. In 2015 alone, Opportunity Zones provided $1.2m in student loan repayments.

401(k)s are a tax break, not a retirement system -- Today, many Americans rely on savings in 401(k)-type accounts to supplement Social Security in retirement. This is a pronounced shift from a few decades ago, when many retirees could count on predictable, constant streams of income from traditional pensions (see “Types of retirement plans,” below). This chartbook assesses the impact of the shift from pensions to individual savings by examining disparities in retirement preparedness and outcomes by income, race, ethnicity, education, gender, and marital status. The first section of the chartbook looks at retirement-plan participation and retirement account savings of working-age families. The charts in this section focus on families headed by someone age 32–61, a 30-year period before the Social Security early eligibility age of 62 when most families should be accumulating pension benefits and retirement savings. The second section looks at income sources for seniors. Since many workers transition to retirement between Social Security’s early eligibility age and the program’s normal retirement age (currently 66, formerly 65), the charts in the second section focus on retirement outcomes of people age 65 and older.

Stop with the zombie lies: No, Social Security is not ‘going broke' - CNN’s Dana Bash, who ought to know better, said that “Social Security is projected to run out of money within 20 years.” The discussion about America’s most successful and beloved social program had some interesting implications for the general election. But before we get to that, I need to say this slowly and clearly, so there’s no misunderstanding: Social Security is not going to “run out of money.” The idea that the program is going to “run out of money” or is “going broke” is a zombie lie, one that deserves to have its head lopped off with a quick slice of Michonne’s katana. We’re going to have to get a little wonky for a bit, but I’ll try to make this as painless as possible. The short version: under the worst-case scenario, meaning that a poor economy in coming years deprives the system of money and no changes to the program’s financing are made, then Social Security recipients will find themselves getting smaller checks than they ought to. And that would be a bad thing — if you rely on Social Security as your main or only source of income, it would be terrible to get only 77 percent of what you should (I’ll reveal why I’m using that number in a moment). But if the program were only able to deliver 77 percent of its benefits, it would not be “broke” or have “run out of money.” When the entitlement doomsayers use those words, they want everyone to believe that the program will be, well, broke, which would mean it would be able to pay nothing to the recipients. And that’s a lie.

Why Seniors—Not CEOs—Deserve a Raise -- Elizabeth Warren -- Social Security isn’t a luxury—it’s a lifeline. Social Security works. No one runs out of benefits, and payments don’t rise and fall with the stock market. Despite scare tactics from Republicans in Congress, the facts are clear. Social Security has a $2.8 trillion surplus. If we do nothing, Social Security will be safe for the next 18 years, and after that will continue to pay three-quarters of benefits through the end of the century.  Of course, we don’t have to sit by and do nothing. Since its beginning, Social Security has been adjusted from time to time, and that is what we need to do now. With some modest adjustments, it is possible to keep the system solvent for decades more, even while increasing benefits.  For the millions of Americans who rely on Social Security, the situation got worse this year. For just the third time since 1975, seniors who receive Social Security—along with many who receive veterans’ benefits, Social Security disability benefits, and other monthly payments—aren’t receiving any annual increase from their cost of living adjustment (COLA). CEOs at the top 350 American companies received, on average, a 3.9 percent pay increase last year. But seniors and veterans? Not a dime more.  That’s why a group of us in Congress have introduced the Seniors and Veterans Emergency Benefits Act (SAVE Benefits Act). This bill would give a onetime payment of $581 to those people who aren’t receiving a COLA this year—a raise equal to the 3.9 percent pay increase the top CEOs received.

The Affordable Care Act isn’t wiping out unpaid hospital bills -  The economy of Gillette, Wyo., has slumped along with the fortunes of companies like Devon Energy and Peabody Energy, which have slashed jobs because of the prolonged downturn in oil and gas prices.  Taxes on property, coal and oil support the county-owned hospital, but revenue has dipped because of dwindling population and a rising number of uninsured residents amid the layoffs. Wyoming, so far, has chosen not to expand Medicaid under the Affordable Care Act. The promise of the Affordable Care Act for hospitals was that bad debt—a figure that reflects bills a hospital can't collect—would shrink substantially under the law's coverage expansions. The reality, so far, is less uniformly dramatic, even though 20 million fewer Americans are uninsured. Even in states that agreed to expand Medicaid, the popularity of high-deductible plans in those insurance exchanges has added to hospitals' mounting concerns over how patients can pay those bills, if at all. In Wyoming and other states that did not expand Medicaid, hospitals are seeing little relief from patients who can't pay their bills or need financial aid.  Campbell County Health's bad debt increased 42% between 2013 and 2015.  Modern Healthcare reviewed the bad debt reported by hospitals and health systems for the third quarter of the calendar year in 2013, 2014 and 2015. The 52 hospitals and health systems in the sample are ones with figures for all three years in Modern Healthcare's financial database. They include some of the nation's largest multihospital systems, such as Ascension Health, St. Louis, and Catholic Health Initiatives, Englewood, Colo.

Sanders is Right, the US Needs a Healthcare System More Like Those in Europe -- Presidential candidate Bernie Sanders has reopened the healthcare debate by urging America to adopt a system more like that of other wealthy countries. “The United States is the only major country on earth that doesn’t guarantee health care to all people,” he says, “And we end up spending far, far more per capita on health care as do the people of any other country: Canada, U.K., France, whatever.” Yet, even though he’s right, his healthcare platform is under attack, not just from the right, but also from the left. Here is why I think his critics are wrong.  Sanders calls his plan “Medicare for All,” but that is misleading. As we will see, his proposal—at least the brief version posted on his campaign website—differs from Medicare in some important ways. It also differs from many of the systems in other countries that he admires most.  Liberals tend to call Sanders’ plan a “single-payer” system. That is correct, in that Medicare for All would in fact be a system under which a single agency would make directly pay healthcare providers with funds from the government budget. However, many of the best healthcare systems of other wealthy countries are not single-payer systems in that sense. Their plans are surprisingly diverse. Some, like those of Germany and France, funnel payments through multiple independent insurance funds. Others, including those of the UK and Canada, are more decentralized than the “single payer” label suggests. None of them covers 100 percent of national healthcare expenditure.  Conservatives describe the healthcare systems of Scandinavia, Germany, France and other wealthy countries as “socialized medicine,” but that term doesn’t uniformly fit, either. Socialized medicine suggests something like Veterans Administration healthcare in the US—a system that not only features a single payer, but one in which doctors are salaried government employees and hospitals are government owned.

Christians Flock to Groups That Help Members Pay Medical Bills - When Chris Doyle learned that his health insurance deductible would climb to $10,000 last year, he and his wife, both evangelical Christians, “spent a couple weeks just praying,” he said.  Then they opted out of insurance altogether, joining something called a health care sharing ministry, which requires members to help cover one another’s major medical costs as they come up. While such nonprofit ministries have been around for decades, interest in them has grown since the Affordable Care Act passed in 2010, largely because the law exempts members from the requirement to have health insurance or pay a yearly fine. Samaritan Ministries International, which Mr. Doyle and his wife, Sarah, joined last winter, plays matchmaker, assigning member families to help pay the medical bills of other members. The money is mailed directly to the families in need, often with handwritten prayers or notes of support — or in the case of one family here, strawberry stickers and a drawing of an elephant for their 5-year-old as she recovered from ear tube surgery.  Because they are not insurance companies, sharing ministries provide no guarantee that members’ medical debts will be paid; members are advised to trust that God will provide. The ministries say the payment system is helping Christians fulfill a biblical mandate to share one another’s burdens.   “Our only assets are the good will and continued participation of our members,"

PLOS Medicine: Trans-Pacific Partnership Provisions in Intellectual Property, Transparency, and Investment Chapters Threaten Access to Medicines in the US and Elsewhere: The recently negotiated Trans Pacific Partnership Agreement (TPP) contains provisions that would dramatically and negatively impact access to affordable medicines in the United States and elsewhere if it is ratified. Provisions in the Intellectual Property (IP) Chapter of TPP lengthen, broaden, and strengthen patent-related monopolies on medicine and erect new monopoly protections on regulatory data as well. IP Chapter enforcement provisions also mandate injunctions preventing medicines sales, increase damage awards, and expand confiscation of medicines at the border. IP rightholders gain new powers in the Investment Chapter to bring private, IP-related investor-state-dispute-settlement (ISDS) damage claims directly against foreign governments before unreviewable, three-person arbitration panels. Unrestricted IP-investor damage claims deter countries’ willingness to render adverse IP decisions and to adopt IP policy flexibilities designed to increase access to affordable medicines. The Transparency Chapter contains provisions that allow pharmaceutical companies more access to government decisions listing medicines and medical devices for reimbursement. At the very least, these multiple TPP provisions that extend pharmaceutical powers should be scaled back to the minimum consensus standards reached in the 1994 World Trade Organization (WTO) Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Health advocates should convince the US Congress and opponents in other countries to reject an agreement that could so adversely impact access to medicines.

How an army of DC Pharma lobbyists have locked in one of the biggest ripoff schemes in America - After an 18-month investigation into the high cost of Gilead’s hepatitis C drug Sovaldi—initially listed at $84,000 for a course of treatment or $1,000 per pill—the Senate Finance Committee said the prices did not reflect the cost of research and development and that Gilead cared about “revenue” not “affordability and accessibility.” That sounds like an understatement. Sovaldi and the related pill Harvoni cost Medicare and Medicaid more than $5 billion in 2014, charged senators. But Gilead is far from the only drug company camping out on our tax dollars. In the 2000s, atypical antipsychotics were widely prescribed to children with behavior problems enrolled in Medicaid programs provoking lawsuits from states as their budgets were sacked. In 2008, the Texas attorney general’s office charged Risperdal maker Janssen (Johnson & Johnson’s psychiatric drug unit) with defrauding the state of millions “with [its] sophisticated and fraudulent marketing scheme,” to “secure a spot for the drug, Risperdal, on the state’s Medicaid preferred drug list and on controversial medical protocols that determine which drugs are given to adults and children in state custody.” The same year Alaska won a $15 million settlement from Eli Lilly in a suit to recoup medical costs generated by Medicaid patients who developed diabetes while taking Zyprexa.

States Move to Control How Painkillers Are Prescribed - A growing number of states, alarmed by the rising death toll from prescription painkillers and frustrated by a lack of federal action, are moving to limit how these drugs are prescribed.On Thursday, Massachusetts lawmakers passed a bill expected to be signed next week that would sharply restrict the number of pain pills a doctor can prescribe after surgery or an injury to a seven-day supply. Officials in Vermont and Maine are considering similar actions, and governors across the country are set to meet this summer to develop a broad approach that could reduce the use of painkillers like OxyContin, Percocet and Vicodin.The states’ push points to a looming change affecting how doctors use narcotic painkillers, or opioids, which are the most widely prescribed class of medications in the United States. The move comes against the backdrop of a public health crisis involving heroin-related overdoses.The governor of Vermont, Peter Shumlin, said in an interview that states were taking action because drug industry lobbyists had the ability to block federal initiatives.“The states are going to lead on this one because Big Pharma has too much power,” said Mr. Shumlin, a Democrat.In recent years, some states have enacted tough new rules to reduce prescriptions for the drugs. But the pace of activity in states has grown so intense that experts are having difficulty keeping track. Currently, there are about 375 proposals in state legislatures that would regulate pain clinics and several aspects of prescribing painkillers, according to the American Academy of Pain Management, an organization for medical professionals that receives drug industry funding.

Americans Want Fewer Politicians, More Sustainability in our Dietary Guidelines -- A recent survey found that a majority of Americans don't want politicians meddling in the creation of the Dietary Guidelines for Americans, the roadmap for health advice that's updated every five years, and with which some experts took issue when they were first released.  The poll also found there was overwhelming support for the inclusion of environmental provisions and sustainable agriculture practices for the 2015-2020 version undertaken by the United States Department of Agriculture and the Department of Health and Human Services. The latest guidelines don’t have any reference to sustainable agriculture, despite an advisory panel made up of the country’s top nutrition experts explicitly stating it should be included. The Dietary Guidelines Advisory Committee, made up of doctors, professors, and researchers from the country’s leading institutions, and chaired by Barbara Millen, a professor at the Boston University School of Medicine, was formed in early 2013 to help update the guidelines.

Low-fiber diet may cause irreversible depletion of gut bacteria over generations -- A study by Stanford University School of Medicine investigators raises concerns that the lower-fiber diets typical in industrialized societies may produce internal deficiencies that get passed along to future generations. The study, conducted in mice, indicates that low-fiber diets not only deplete the complex microbial ecosystems residing in every mammalian gut, but can cause an irreversible loss of diversity within those ecosystems in as few as three or four generations. Once an entire population has experienced the extinction of key bacterial species, simply "eating right" may no longer be enough to restore these lost species to the guts of individuals in that population, the study suggests. Those of us who live in advanced industrial societies may already be heading down that path. The proliferation of nearly fiber-free, processed convenience foods since the mid-20th century has resulted in average per capita fiber consumption in industrialized societies of about 15 grams per day. That's as little as one-tenth of the intake among the world's dwindling hunter-gatherer and rural agrarian populations, whose living conditions and dietary intake presumably most closely resemble those of our common human ancestors, said Justin Sonnenburg, PhD, associate professor of microbiology and immunology and senior author of the study, to be published Jan. 13 in Nature. Virtually all health experts agree that low-fiber diets are suboptimal. Probably the chief reason for this is that fiber, which can't be digested by human enzymes, is the main food source for the commensal bacteria that colonize our colons, Sonnenburg said. Thousands of distinct bacterial species inhabit every healthy individual's large intestine. "We would have difficulty living without them," he said. "They fend off pathogens, train our immune systems and even guide the development of our tissues."  Surveys of humans' gut-dwelling microbes have shown that the diversity of bacterial species inhabiting the intestines of individual members of hunter-gatherer and rural agrarian populations greatly exceeds that of individuals living in modern industrialized societies, Sonnenburg said. In fact, these studies indicate the complete absence, throughout industrialized populations, of numerous bacterial species that are shared among many of the hunter-gatherer and rural agrarian populations surveyed, despite those groups' being dispersed across vast geographic expanses ranging from Africa to South America to Papua New Guinea.

Study to mine social media to identify signs of mental illness: - Every minute of every day there are about 347,000 tweets on Twitter. On Facebook there are 293,000 statuses. Four hundred hours of YouTube videos are uploaded. Facebook users Liked more than 4.1 million posts per minute in the most recent year. Twitter users tweeted more than 347,000 times, a considerable increase from 277,000 last year. Apple uses downloaded 51,000 apps, a slight increase from 48,000 a year before. This data is being mined by marketers in order to produce target ads, but it is also being used by governments, scientists, and law enforcement agencies to help with their needs.The data has been used for purposes as diverse as predicting epidemics and foiling cyber-terrorists. Soon the data will be mined as a means to identify and monitor people who show signs of mental illness on line.

Health apps aren't just collecting your info. They may be selling it, too - STAT: Health apps, like prescription drugs, come with side effects, it turns out. A new study has found that an astoundingly large number of health apps may be sharing users’ medical information. Many can also switch on smartphone cameras and make changes to the software on your phone. What was found: More than 80 percent of the 211 diabetes apps studied did not have privacy policies. And out of a randomly selected subset of 65 apps, 56 of them (86 percent) used tracking cookies, which could allow them to send information about the user to other companies, such as marketing firms, according to the analysis, published Tuesday in the Journal of the American Medical Association. Why it matters: Co-author Sarah Blenner, now at the University of California, Los Angeles, warned that the sharing or selling of personal information could lead to discrimination. Users with certain medical profiles, for instance, could have a tougher time getting life insurance. The apps are not bound by Health Insurance Portability and Accountability Act, or HIPAA — the federal privacy law that governs doctors and insurance plans. “They are free to trade, sell, and use the information in any way that they want,” said Mark Rothstein, an expert on health privacy at the University of Louisville.

The tragic collapse of America’s public mental health system, in one map - Vox - America's criminal justice system has, in many ways, become a substitute for the US's largely gutted mental health system. You may have heard something like that before, but never has it been clearer than in this map from MetricMaps: The map essentially tells two stories: the rise of mass incarceration and the collapse of America's public mental health system. From the 1970s through the 2000s, America began locking up a lot more people as part of the country's broader shift to tough-on-crime laws to deal with skyrocketing crime. At the same time, the country pulled back and defunded its public mental health system. This wasn't, at the time, totally malicious — the system during the '60s and '70s was plagued with abuse and neglect, captured in popular media like One Flew Over the Cuckoo's Nest. The problem is a new public mental health system wasn't built in its place. States, in fact, cut back on mental health spending even more after the Great Recession. That left the criminal justice system as the only system that can respond to people with mental illness in most areas across the country.

Britain: Number of Children Prescribed Anti-Depressants Increases by 50% in Seven Years -- Fill children with metals, feed them GMO food, sit them in classrooms for most of the day, make them do lots of homework at night, which does nothing except make them hate school… And then, when little Johnny is feeling a bit down… Via: Independent: The number of children in the UK prescribed anti-depressants increased by more than 50 per cent between 2005 and 2012, according to a new study. The World Health Organisation (WHO) said the use of the drugs to treat young people was a concern, the BBC said. After fears that anti-depressants could lead to suicidal behaviour in young people, usage in Britain fell, but the study suggests there has been a resurgence in the UK as well as in other Western countries. “Anti-depressant use amongst young people is and has been a matter of concern because of two reasons. ”One, are more people being prescribed anti-depressants without sufficient reason? And second, can anti-depressants do any major harm?“ He also said that WHO was worried that young people were being given drugs not licensed for under-18s.The study, ”Trends and patterns of antidepressant use in children and adolescents from five western countries, 2005-2012“, is published in the European Journal of Neuropsychopharmacology. In the period examined, there was a 54% increase in the number of young people prescribed anti-depressants in the UK. This is compared with rises of 60% in Denmark, 49 per cent in Germany and just 26 per cent in the US and 17 per cent in the Netherlands, the BBC said.

Painkillers now kill more Americans than any illegal drug. Watch why. - Vox: It's a terrifying fact: More than 47,000 people in America died of drug overdoses in 2014 — in what's been widely called an epidemic. But the biggest killer of this epidemic isn't cocaine, meth, or even heroin; it's totally legal opioid painkillers. Here's how it happened:Since the 1990s, doctors have been under more and more pressure to treat pain as a serious medical issue. Pharmaceutical companies took advantage of this desire, marketing opioid painkillers like OxyContin and Vicodin as a safe, effective solution to pain. The result: Millions of Americans got hooked on the drugs, and tens of thousands have died from overdoses. In 2014, nearly 19,000 died from overdoses linked to opioid painkillers. What's worse, as doctors have pulled back on painkillers to halt the epidemic, users have gone to another opioid — heroin. In 2014, more than 10,000 people died from overdoses on that drug as well. In response to all of this, the Obama administration and other levels of government have stepped up funding for treatment and prevention — and experts agree this will help many of the people currently struggling with addiction.

Scientists can’t agree whether salt is killing us. Here’s why. -- The debate over the perils of salty diets may be one of the most polarized in all of science. On one side, scientists warn ominously that most Americans are killing themselves with salt. On the other, scientists insist most Americans are fine. The inability to resolve this question may seem puzzling. It is a question with deadly consequences, at least potentially. How much salt is healthy? Given the marvels of technology, it seems like that ought to be an easy one. Now a review of hundreds of papers on the topic indicates that the inability to reach a consensus stems at least partially from the fact that the two groups of scientists operate, in essence, in parallel scientific universes. In one, the scientists write papers about the dangers of our salt consumption, and typically cite other papers that point to the same conclusion. In the other, the scientists write papers dismissing or minimizing the danger, and typically cite papers agreeing with their position. Each side, in other words, steers away from taking into account contrary results. “We found that the published literature bears little imprint of an ongoing controversy, but rather contains two almost distinct and disparate lines of scholarship,” according to the paper from researchers at Columbia University and Boston University, and published by the International Journal of Epidemiology.

We’re Losing the Race Against Antibiotic Resistance, but There’s Also Reason for Hope -- A century ago, the top three causes of death were infectious diseases. More than half of all people dying in the United States died because of germs. Today, they account for a few percent of deaths at most. We owe much of that, of course, to antibiotics.  It is hard to overstate how much less of a threat infectious diseases pose to us today. But we take antibiotics for granted. We use them inappropriately and indiscriminately. This has led many to worry that our days of receiving benefits from them are numbered. When I was a medical student, doctors around me were panicking about methicillin-resistant Staphylococcus aureus (MRSA). Before then, infection with that bacteria had been almost exclusively contained to health care facilities.  . Today, community-acquired MRSA is so common that we pretty much just assume the presence of MRSA for any infections we believe are caused by staph. Concern about the rise of resistance often focuses on overuse of antibiotics. There’s plenty of evidence that we, the users, are the problem. In a recent multicountry study conducted by the World Health Organization, almost two-thirds of people believed that antibiotics could be used to treat colds and the flu, which are, of course, caused by viruses. Antibiotics kill bacteria, not viruses.  The same people also knew that antibiotic resistance was a real problem that could affect them, but this knowledge did not seem to prevent them from misusing the drugs.  Bacteria are very good at the evolution game, and killing off more susceptible strains leaves the more resistant ones to fill the gap. Bacteria have also become good at transmitting resistance abilities through plasmids, small, circular DNA molecules that can be transferred from bacteria to bacteria.The widespread use of antibiotics in the raising of animals has clearly contributed to the development of resistance as well. The Food and Drug Administration estimates that more kilograms of antibiotics are sold in the United States for food-producing animals than for people.

Flesh-eating bacteria: Vibro Vulnificus in Florida ocean hospitalizes 32, kills 10 -   New warnings issued Monday surrounding a bacteria found in the ocean that has already killed several people in Florida. It is called Vibrio vulnificus, a cousin of the bacterium that causes Cholera and it thrives in warm saltwater. "Since it is naturally found in warm marine waters, people with open wounds can be exposed to Vibrio vulnificus through direct contact with seawater," the Florida Department of Health said in a statement. The Florida Department of Health reports 13 people have contracted the bacteria and 3 have died from the strain. Last year, 41 people were infected and 11 died. Florida isn't the only state to report Vibrio vulnificus infections. Alabama, Louisiana, Texas and Mississippi have also recorded cases. "It's quite discouraging because the beach is one of the more popular hobbies in Florida," said Tracy Brown of West Palm Beach. Brown, who was enjoying a day at the beach with her daughter, had not really heard about the Vibrio bacterium. She was stunned to hear someone could become sick by simply entering the water. "The last thing you want to think about is going to the beach and leaving with something you least expect," said Brown. Florida Department of Health experts said anyone with a compromised immune system or anyone with an open cut should not go into the water. Those who do jump into the ocean should wash off before heading home . "It's definitely something to take serious, but there are a number of other bacteria, that you could run into," said Tim O'Connor, a spokesperson for the Florida Department of Health.

I shower once a week. Here’s why you should too - When I was a kid, bathtime was a once-a-week affair. We weren’t an unhygienic family – this is just how most of us lived in the 1960s, and I do not remember any horrific body odors resulting from it. By the time I was an adult, I was showering every day. With hindsight, I should have stuck to the old ways. The average 10-minute shower uses 60 litres of water. A power shower uses three times that and a bath about 80 litres. So a family of four each having a daily 10-minute power shower (I know that is a very conservative estimate for some teenagers) will consume a staggering 0.25m litres of water every year. The annual average cost for electricity for four 10-minute showers per day would be up to about £400, or £1,200 if a power shower is involved. Even worse, the power-shower family would be emitting a staggering 3.5 tonnes of CO2. As we can afford only one tonne of carbon emissions per person – for everything from food to transport – if we are to keep global temperatures below the critical 2C threshold, this would consume nearly all of the family’s carbon budget. The daily bath or shower, then, is terrible for the environment and our bank balances. That’s one reason I have reverted to a weekly shower, with a daily sink-wash that includes my underarms and privates. But there are health consequences too. I first became aware of these when I was a touring ballet dancer and met a friend whose skin had been severely damaged by excessive use of soap products. He was condemned to treat himself with medical creams for the rest of his life. According to dermatologist Joshua Zeichner, parents should stop bathing babies and toddlers daily because early exposure to dirt and bacteria may help make skin less sensitive, even preventing conditions like eczema in the long run. The American Academy of Pediatrics recommends three times a week or less as toddlers’ skin is more sensitive; and as the elderly have drier skin, they should not be frequently washing all of their bodies with soap.

Teen Girls See Big Drop in Chemical Exposure With Switch in Cosmetics --A new study led by researchers at UC Berkeley and Clinica de Salud del Valle de Salinas demonstrates how even a short break from certain kinds of makeup, shampoos and lotions can lead to a significant drop in levels of hormone-disrupting chemicals in the body. The results, published yesterday in the journal Environmental Health Perspectives, came from a study of 100 Latina teenagers participating in the Health and Environmental Research on Makeup of Salinas Adolescents (HERMOSA) study.  Researchers provided teen study participants with personal care products labeled free of chemicals such as phthalates, parabens, triclosan and oxybenzone. Such chemicals are widely used in personal care products, including cosmetics, fragrance, hair products, soaps and sunscreens and have been shown in animal studies to interfere with the body’s endocrine system. “Because women are the primary consumers of many personal care products, they may be disproportionately exposed to these chemicals,” . “Teen girls may be at particular risk since it’s a time of rapid reproductive development and research has suggested that they use more personal care products per day than the average adult woman.”

Meet the ‘rented white coats’ who defend toxic chemicals | Center for Public Integrity: The National Institutes of Health’s budget for research grants has fallen 14 percent since its peak in 2004, according to the American Association for the Advancement of Science. With scarce resources, there’s little money for academics to study chemicals that most already deem to be toxic. Yet regulatory officials and attorneys say companies have a strong financial interest in continuing to publish research favorable to industry. Gradient belongs to a breed of scientific consulting firms that defends the products of its corporate clients beyond credulity, even exhaustively studied substances whose dangers are not in doubt, such as asbestos, lead and arsenic. Gradient’s scientists rarely acknowledge that a chemical poses a serious public health risk. The Center for Public Integrity analyzed 149 scientific articles and letters published by the firm’s most prolific principal scientists. Ninety-eight percent of the time, they found that the substance in question was harmless at levels to which people are typically exposed. “They truly are the epitome of rented white coats,” said Bruce Lanphear, a Simon Fraser University professor whose own research showing that even tiny amounts of lead could harm children has been called into question by Gradient scientists. A panel of experts convened by the Centers for Disease Control and Prevention concluded in 2012 that there is no reliable evidence for a safe level of lead.

'Don't Drink The Water' In Newark Public Schools, Officials Say: Elevated levels of lead and discoloration caused officials to shut off the water taps at 30 schools in Newark, New Jersey, on Wednesday. The state Department of Environmental Protection and the city's school district are currently using alternate water sources, according to a joint release from both parties. City officials have emphasized that this is a problem with lead piping in the various schools and that overall Newark's water is unaffected. "The problem is localized in the finite number of schools, and those are the schools that are the oldest and still have lead piping," Frank Baraff, the city's communications director, told The Huffington Post Wednesday. The city's water supply is "perfectly safe," he said. Baraff, who said the school district and state officials are committed to total transparency as they work to alleviate the issue, also stressed that the situation is not as severe as the ongoing water crisis in Flint, Michigan. Still, there was no mistaking the seriousness of the issue. The affected buildings range from high schools to elementary schools citywide. Baraff said he's been communicating with local hospitals in the area, and that families have already started bringing in their children for blood tests. "At this point, the main recommendation is... don't drink the water in any of the schools,"

Newark School Officials Knew of Lead Risks, 2014 Memo Shows - In August 2014, as 35,000 students prepared to return to Newark’s public schools, Keith Barton, the managing director of operations for the district, sent a memo with an urgent message to all principals, custodians and building managers: Before anyone drank from the water fountains, they should run the water for at least 30 seconds.Mr. Barton directed custodians to run and flush every water fountain for two minutes before school started each day, and to tell cafeteria workers to run and flush cold water faucets in kitchens for two minutes before preparing food.The memo, he wrote, was part of an effort “to reduce the risk of possible lead contamination.”That effort failed. On Wednesday, water at 30 of Newark’s 67 schools was shut off after being found to contain high levels of lead. The move left state and school officials trying to reassure nervous parents that they had the situation under control, even as questions swirled about how the problem had been handled in the first place. The potential danger of lead exposure was something school officials in Newark had been aware of for years, and the district had installed lead-reduction filters on water fountains and kitchen prep sinks, particularly in schools built before 2006, according to Mr. Barton’s memo. But it took a crisis in Flint, Mich., to focus attention on the issue of lead contamination in Newark, New Jersey’s largest city.

Flint’s Water Crisis: A Chronicle of Disenfranchisement, Denial, and Buck-Passing  - Yves Smith - The ACLU of Michigan just released a must-see short documentary on the Flint water crisis. It’s important that this not be forgotten even as the scandal has died down and eyes are moving off Michigan now that the Democratic debate and state primary have passed.  This piece is powerful because it’s told by the local citizens who were abused (and this is not an overstatement) by emergency managers who were instructed to prioritize making bond payments. Even though readers may know many of the elements of this story from the extensive media coverage, it has a completely different impact not simply seeing it put together in one place, chronologically as it unfolded, but witnessing the appalling record of official efforts to deny that there was a problem (including deliberately constructing completely unrepresentative tests) and repeatedly telling flat out lies. It’s also not hard to discern that the emergency managers, their allies, and the state government held the Flint citizens in utter contempt. The class/race bias and condescension are palpable.   The documentary is also a testament to the persistence of the efforts of Flint citizens in mustering allies (such as the ACLU as well as the environmental engineers at Virginia Tech) to develop rock-solid evidence of the contamination of the water and publicize the developing public health crisis. The fact that the city’s overlords and state officials thought they could get away with what amounts to poisoning of a population this large is another symptom of elite insularity.  Again, this is a relatively short video given the ground that it covers. I hope you’ll view it and circulate widely.

Senator Mike Lee defends delay of Flint aid bill, says Michigan has ‘large rainy-day fund’ — Utah Republican Sen. Mike Lee issued his first statement Friday explaining why he has a “hold” on a $250 million bill to provide federal funds to Flint, Michigan, and other communities facing problems with their drinking water. Lee, a tea party favorite, says the problems in Flint are “man-made” and the state has “a large rainy-day fund totaling hundreds of millions of dollars” that should be used before federal resources are utilized. “The people and policymakers of Michigan right now have all the government resources they need to fix the problem,” Lee said. “The only thing Congress is contributing to the Flint recovery is political grandstanding.” The bill, agreed to by bipartisan negotiators two weeks ago, would finance water projects in affected communities around the country like Flint where the drinking water supply was poisoned by lead pipes causing serious health hazards for its residents. The bill also has provisions to deal with the health problems caused by the lead.

$1.2 million for Gov. Rick Snyder's attorneys a 'kick in the teeth to taxpayers' — Gov. Rick Snyder plans to pay attorneys $1.2 million for Flint water work, while Attorney General Bill Schuette requested $1.5 million to pay a law firm investigating the crisis. Gov. Rick Snyder expanded contracts for attorneys in connection with the Flint water crisis, according to a March 8 agenda of the State Administrative Board. "It's beyond outrageous that Snyder wants to take $1.2 million from Michigan taxpayers to pay for defense attorneys over his involvement in the poisoning of Flint's water," Michigan Democratic Party Chair Brandon Dillon said in a March 8 statement. The agenda states Snyder "authorized an agreement with Barris, Sott, Denn & Driker, for the provision of legal services related to civil litigation about municipal drinking water in the City of Flint, Michigan, in an amount not to exceed $400,000." Snyder "authorized an agreement with Warner Norcross & Judd LLP, for the provision of legal services related to records management issues and investigations regarding municipal drinking water in the City of Flint, Michigan, in an amount not to exceed $800,000."

Exclusive: Navy Secretly Conducting Electromagnetic Warfare Training on Washington Roads: Without public notification of any kind, the US Navy has secretly been conducting electromagnetic warfare testing and training on public roads in western Washington State for more than five years. An email thread between the Navy and the US Forest Service between 2010 and 2012, recently obtained via a Freedom of Information Act (FOIA) request filed by Oregon-based author and activist Carol Van Strum in November 2014, revealed that the Navy has likely been driving mobile electromagnetic warfare emitters and conducting electromagnetic warfare training in the Olympic National Forest and on public roads on Washington's Olympic Peninsula since 2010. In one of the 2012 emails, Navy contractor Gerald Sodano explained that the Navy "utilized EW [electronic warfare] ranges outside the local vicinity." But he went on to say that the aim of establishing an electromagnetic warfare range on the Olympic Peninsula would be to conduct all training locally on the Olympic Peninsula, rather than further afield. This means that rather than using expansive training areas the Navy already has access to in Yakima in eastern Washington State, the Navy aims to use the Olympic National Forest and areas adjacent to Olympic National Park instead.

Mystery cancers are cropping up in children in aftermath of Fukushima - Months after the disaster, Fukushima Prefecture set about examining the thyroids of hundreds of thousands of children and teens for signs of radiation-related cancers. The screening effort was unprecedented, and no one knew what to expect. So when the first round of exams started turning up thyroid abnormalities in nearly half of the kids, of whom more than 100 were later diagnosed with thyroid cancer, a firestorm erupted. One result, says Kenji Shibuya, a public health specialist at University of Tokyo, was “overdiagnosis and overtreatment,” leading dozens of children to have their thyroids removed, perhaps unnecessarily. Activists trumpeted the findings as evidence of the dangers of nuclear power. The large number of abnormalities appearing so soon after the accident “would indicate that these children almost certainly received a very high dose of thyroid radiation from inhaled and ingested radioactive iodine,” antinuclear crusader Helen Caldicott wrote in a post on her homepage.  Scientists emphatically disagree. “The evidence suggests that the great majority and perhaps all of the cases so far discovered are not due to radiation,” says Dillwyn Williams, a thyroid cancer specialist at University of Cambridge in the United Kingdom. In journal papers and in a series of letters published last month in Epidemiology, scientists have attacked the alarmist interpretations. Many acknowledge that baseline data from noncontaminated areas were needed from the outset and that the public should have been better educated to understand results and, perhaps, to accept watchful waiting as an alternative to immediate surgery. But most also say the findings hint at a medical puzzle: Why are thyroid abnormalities so common in children? The “surprising” results of the screening, Williams says, show that “many more thyroid carcinomas than were previously realized must originate in early life.”

California Widow Sues Monsanto Alleging Roundup Caused Her Husband’s Cancer - A wrongful death lawsuit has been filed against Monsanto Co. by the widow of a prominent Cambria, California farmer alleging that Monsanto had known for years that exposure to glyphosate—the main ingredient in the agribusiness giant’s flagship weedkiller Roundup—could cause cancer and other serious illnesses or injuries.  The lawsuit, which seeks wrongful death and punitive damages, was filedtoday in Los Angeles federal court by attorneys Michael Baum, Cynthia Garber and Brent Wisner of Baum, Hedlund, Aristei & Goldman, and Robert F. Kennedy, Jr. of Kennedy & Madonna on behalf of Teri McCall. Teri McCall claims Roundup caused her husband of 43-years, Anthony Jackson “Jack” McCall, to develop terminal cancer after he used the herbicide on his 20-acre fruit and vegetable farm for nearly 30 years. According to a press release from the law firms, Jack McCall was admitted to a hospital in September 2015 to treat swollen lymph nodes in his neck. He found out that same day that the swelling was caused by anaplastic large cell lymphoma (ALCL), a rare and aggressive version of non-Hodgkin lymphoma. Glyphosate, which is the most widely applied pesticide worldwide, was declared as “probably carcinogenic to humans” last March by the World Health Organization’s International Agency for Research on Cancer (IARC). The organization also observed that non-Hodgkin lymphoma and other haematopoietic cancers are the cancers most associated with glyphosate exposure.

Why Is Glyphosate Sprayed on Crops Right Before Harvest? -- Glyphosate, the main ingredient in Monsanto’s Roundup herbicide, is recognized as the world’s most widely used weed killer. What is not so well known is that farmers also use glyphosate on crops such as wheat, oats, edible beans and other crops right before harvest, raising concerns that the herbicide could get into food products. Glyphosate has come under increased scrutiny in the past year. Last year the World Health Organization’s cancer group, the International Agency for Research on Cancer, classified it as a probably carcinogen. The state of California has also moved to classify the herbicide as a probable carcinogen. A growing body of research is documenting health concerns of glyphosate as an endocrine disruptor and that it kills beneficial gut bacteria, damages the DNA in human embryonic, placental and umbilical cord cells and is linked to birth defects and reproductive problems in laboratory animals. A recently published paper describes the escalating use of glyphosate: 18.9 billion pounds have been used globally since its introduction in 1974, making it the most widely and heavily applied weed-killer in the history of chemical agriculture. Significantly, 74 percent of all glyphosate sprayed on crops since the mid-1970s was applied in just the last 10 years, as cultivation of GMO corn and soybeans expanded in the U.S. and globally.  Farmers often had trouble getting wheat and barley to dry evenly so they can start harvesting. So they came up with the idea to kill the crop (with glyphosate) one to two weeks before harvest to accelerate the drying down of the grain.  The pre-harvest use of glyphosate allows farmers to harvest crops as much as two weeks earlier than they normally would, an advantage in northern, colder regions.

Farmers union head skeptical of Trans-Pacific Partnership | Crop Protection News: The U.S. Department of Agriculture is trying to gain support on Capitol Hill for its Trans-Pacific Partnership by telling partners on about the benefits it anticipates, including job growth and rural prosperity. However, the National Farmers Union (NFU), which represents over 200,000 family farms and ranches, believes the USDA’s promises are the same kind made with previous trade pacts that did not come to fruition. “While access to global markets is important for American agriculture, a trade agreement that does little to fix currency manipulation, rein in foreign predatory trade practices, or improve the $531 billion trade imbalance is not the solution,” NFU President Roger Johnson said. The NFU believes the TPP will hurt rural communities more than help them by opening American jobs up to cheaper, foreign labor. “In its current form, the TPP stands to hurt our rural economies by pitting American jobs against foreign labor that is paid mere pennies per hour,” Johnson said. “Beyond the farm gate, any consumer that cares about where their food comes from should be concerned with the TPP. This is an issue that affects all Americans alike. I continue to urge Congress to give thoughtful consideration to opposing the TPP.”

Food Fraud Infographic | Big Picture Agriculture: Sadly, the amount of food fraud in the world is horrendous. What a poor testament of human nature, greed, and self-honor. The only thing that can combat this is growing your own, knowing your supplier or local grower, more testing, and more public awareness.

We Might Be Severely Underestimating Climate Change’s Impact On Agriculture -- For all intents and purposes, climate change is not going to be good news for agriculture. Studies have shown that it will likely reduce crop yields, create a malnutrition crisis, and make large portions of the globe inhospitable to staple crops like maize or bananas. But researchers from Brown and Tufts universities have a dire message for the world: studies linking climate change to a decrease in crop production might be underestimating the true impact of climate change on agriculture. “The real missing pieces have been about peoples’ decision making,”   “This is not just about suitability. It’s not just about the climate. It’s farmers making decisions in real time.” The study, published Monday in Nature Climate Change, looked at how climate change might affect crop production in the Brazilian state of Mato Grosso, a rapidly developing agricultural region of the country that produced 10 percent of the world’s soybeans in 2013.  But the study didn’t just look at crop yields, or the productivity of a certain crop per given unit of land. The study took a much broader approach, looking at how farmers might react to climate shocks — how much land farmers will put into rotation if the climate changes, and how many different crops a farmer might grow. It’s not just about the climate. It’s farmers making decisions in real time. “They need to get their crops in the ground as soon as they can, they are planting short cycle soy varieties that they need to harvest at the peak of the rainy season, and then they need to plant that corn at the peak of the rainy season, and then hope that the rainy season lasts long enough so the corn gets enough water.”

Why the Oregon Refuge Occupiers Had a Legitimate Grievance…..Just Not the One They Went After  - The history of the refuge and grazing, the diversion of water, the low grazing prices charged ranchers, and the over grazing of land in the early years is mostly correct. To take over a refuge and federal land, it is hard to understand why someone would risk life and limb to challenge the local authorities, the government, and the military. In any case, it is a sure recipe to lose, go to prison, or die when you challenge the authorities, are armed, and considered dangerous. One man did pay with his life and the rest are under restraint by the authorities. This short commentary is not so much an argument of whether their stance was right or wrong as much as whether it was worth it or the right one to make. By taking over the Refuge, I believe the protesting ranchers left the public with the wrong impression.  The domination of the beef production by the meat packers and retailers plus the failure of Government to react to it has increased the costs faced by smaller ranchers and contributed to the controversy of grazing rights. With the consolidation of meat packers and the rise of giant retailers such as WalMart, prices for bringing cattle to feed lots decreased forcing cattlemen to reduce cost. Two ways to reduce cost are increase the size of your herds which requires more land or increase the numbers of meat packers so no one meat packer can influence the market. Smaller ranches have higher costs in production over larger ranches result from the numbers of cattle brought to market. Fewer cattle to feed lots or markets result in higher costs per head. In my opinion, the argument should be made with the government about the consolidation of meat packer market. Grazing rights and the ownership of land by the Federal Government is not necessarily the right argument to make. Whether the Government can own or control land was decided by SCOTUS (Light vs. U. S. and U.S vs. Grimaud) years previous and after the Sagebrush wars when the Federal Government started to charge fees for access after land was designated as national parks.

GOP congressman furious after Obama thwarts plan to sell sacred Apache land to foreign mining firm: Two Arizona congressional representatives are angry that President Barack Obama has intervened to prevent sacred Apache land from being sold off to foreign business interests, according to Tucson Weekly. Republican Congressman Paul Gosar had joined forces with Democratic U.S. Rep. Ann Kirkpatrick in an effort to sell off the ancestral Native American land, known as Oak Flat or Chi’chil Bildagoteel to the Apache community, to mining firm Resolution Copper, owned by an Australian-British corporation. According to the New York Times, it would have been the first time in history Native American lands would have been handed over to a foreign company by Congress. The land was set to be handed over due to last-minute language added to a must-pass military spending bill. But according to the Weekly, the Obama administration prevented that from happening. The site has long been used for Apache coming-of-age ceremonies, particularly for girls. “This fraudulent action is the latest in a long list of egregious bureaucratic abuses of power by the Obama Administration. I will continue to fight this overreach,” Gosar wrote in a statement. “Shame on the Park Service and Forest Service for ramming a bogus historic place listing down the throats of Arizonans,” Gosar continued. “Clearly, the Obama Administration cares more about pandering to extremist environmental groups and a D.C. lobbyist from the Clinton Administration than following the law and listening to the American public.”

‘Sitting on the edge of a knife’: Deforestation ramps up in Queensland -- The northeastern Australian state of Queensland is home to lush tropical forests, unique wildlife, and rivers that feed into the largest reef system in the world. But researchers write that Queensland’s wilderness is under increasing strain, with data showing a big ramp-up in deforestation over the last two years. In total, satellite data compiled and analyzed by the Queensland Government indicate more than 296,000 hectares of woody vegetation (ranging from very sparse woodland to dense forest) was lost in the state between 2013 and 2014. This number is up nearly 400 percent from 2009-2010, which saw around 77,500 hectares lost, according to the data.  Scientists from the University of Queensland and other Australian institutions responded to the findings in an article published last week in The Conversation, an academic and research online news source. They write that much of this clearing is the result of pasture expansion, and is occurring despite ambitious restoration goals in greater Australia.  “There’s a strong rural lobby in Queensland that’s simply grown accustomed to clearing lots of land,” Bill Laurance, a research professor at James Cook University and co-author of the article, told Mongabay. “They feel entitled to do this, as though it’s their traditional right.  According to them, nobody—especially the government—is going to tell them what to do.

23 Million Salmon Dead Due to Toxic Algal Bloom in Chile  - Chile’s salmon industry is once again in a tailspin as the ongoing and toxic algal bloom in the country’s coastal waters has led to the death of nearly 23 million fish—or 15 percent of Chile’s salmon production—putting the total economic blow from lost production around $800 million, Reuters reported.   Jose Miguel Burgos, the head of the government’s Sernapesca fisheries body, told Reuters that the amount of dead fish in Chile could fill 14 Olympic-size swimming pools. The 100,000 tonnes in lost production—including Atlantic salmon, Coho and trout—is equivalent to some $800 million in exports, Burgos added. Chile exported $4.5 billion of farmed salmon, on 800,000 tonnes of shipments last year. Algal blooms are becoming an increasingly frequent phenomenon in fresh and saltwater bodies around the world that can contaminate or kill aquatic life and make people sick. Warming waters from climate change, inorganic fertilizers, and manure runoff from industrial agriculture and wastewater treatment plants have been pegged as conditions that can cause algal blooms.

Scientists may have found a new bug capable of transmitting Zika — and it could be bad news for how far the virus can spread -- Another, far more common mosquito could transmit the Zika virus, Brazilian researchers suggest. Currently, Zika is mainly transmitted from person to person via one species of mosquito, the Aedes aegypti. But scientists are exploring the idea that the virus could spread via a far more common species called the Culex quinquefasciatus, Reuters reports. Culex quinquefasciatus is 20 times more common than Aedes aegypti in Brazil. Once infected with Zika, only a small proportion of people ever show symptoms, which most commonly include fever, rash, joint pain, and red eyes. There is no vaccine or treatment available for the virus. Zika poses a big concern because of its connections with birth defects in babies whose mothers have had Zika symptoms and with a neurological condition called Guillain-Barré Syndrome.  To find out if this other, more common mosquito species could carry Zika, researchers injected 200 of them with the virus. They then watched to see if it made its way into the bug's salivary glands, which is where it would need to be to infect a person. It did, which means it's possible that could happen outside the lab as well. The bug is a subtropical species, with a range as far north as Virginia and covering most of Central and South America. They're active in the night, as opposed to Aedes aegypti, which is a daytime biter. It's been known to carry other viruses, including West Nile virus. 

WHO: Zika Sexual Transmission Is Unexpectedly Common: — The sexual transmission of the Zika virus is more common than previously thought, the World Health Organization said Tuesday, citing reports from several countries.After a meeting of its emergency committee on Tuesday, the U.N. health agency also said there is increasing evidence that a spike in disturbing birth defects is caused by Zika, which is mostly spread by mosquito bites.WHO Director-General Dr. Margaret Chan said “reports and investigations in several countries strongly suggest that sexual transmission of the virus is more common than previously assumed.”She said nine countries have now reported increasing cases of Guillain-Barre syndrome, a rare condition that can cause temporary paralysis and death, in people beyond women of child-bearing age, including children, teenagers and older adults. “All of this news is alarming,” Chan said. Despite the lack of definitive evidence proving that Zika causes birth defects and neurological problems, Chan said officials shouldn’t wait for definitive scientific proof before making recommendations.“Women who are pregnant in affected countries or travel to these countries are understandably deeply worried,” Chan said.

Will Climate Change Boost Mosquito-Borne Disease? -The immense amount of coverage of the Zika virus outbreak has focused attention on the health care situation in Brazil, particularly with the Rio Olympics almost upon us. Most recently, U.S. women’s soccer goalkeeper Hope Solo has said that, because of the virus, she is unsure about whether she will participate in the games. A recent PBS Frontline report showed how Zika strained the country’s health care system — the largest in the world — which was already overwhelmed by a huge increase in two other mosquito-borne illnesses: dengue fever and chikungunya. Pouring gasoline on the fire is an economic crisis resulting in fewer doctors and nurses to a combat greater numbers of cases. And of course, it isn’t just Brazil. The spread of Zika across the Americas has prompted the World Health Organization to declare a public health emergency. One of the questions raised about the outbreak is whether climate change is involved. After all, it has to varying degrees also been implicated in the spread of other mosquito-borne diseases. There have been big increases in cases of West Nile Virus and dengue in the United States, while chikungunya has recently been reported in western Europe. And if climate change is responsible, it’s easy to understand why. As temperatures around the country rise, the areas that are conducive to such mosquitoes could expand, and the insects could start to emerge earlier in the year, meaning more opportunities for bites that could spread disease. It’s notable that the 2012 West Nile Virus outbreak in the United States followed an unseasonably warm late, spring, summer and early fall. But within that overall trend, there some nuance.

El Niño rain and snow storms headed for California.-- The drought break that Californians have been waiting for all winter is about to arrive: a series of storms bringing loads of rain and snow from the El Niño–fueled Pacific Ocean. Over the next 10 days, beginning Friday, a series of Pacific storm systems will batter the California coastline, bringing intense tendrils of moisture northeastward from the deep tropical Pacific Ocean where El Niño has juiced the atmosphere’s energy. So far this winter, these storms have been largely directed on the Pacific Northwest, where on Tuesday, Seattle clinched its rainiest winter in history. That energy will now be directed squarely at California.  These storms are sometimes referred to as atmospheric rivers, or, more colloquially, as the “Pineapple Express” for their origins near Hawaii. The amount of moisture one of these storms contain is comparable to the flow of the Amazon River—and it now looks like California will get at least two big ones by midmonth, one this weekend and one next weekend. The event is such a big deal that for the first time ever, Air Force Hurricane Hunter aircraft will be dispatched into the atmospheric rivers, laden with scientific equipment to better understand what makes them tick.

California awash in water for first time in a long while - (AP) – The first West Coast waves of a week of powerful storms arrived to provide strong evidence March will not be as parched as the month that preceded it. Steady rain fell in Northern California on Saturday and was expected to go statewide Sunday. Fresh and growing snow blanketed the slopes of the Sierra Nevada, ending a dry spell and raising hopes the drought-stricken state can get much needed precipitation. Droves of snowboarders, skiers and sledders packed Sierra slopes while tourists braved wet weather and visited San Francisco landmarks before an even more blustery storm arrived later in the day. "It doesn't matter if it rains, we want to see as much as possible because we only have four days," said Olle Klefbom, a tourist from Sweden wearing rain jackets and holding umbrellas with his family, who waited for a cable car on Saturday afternoon. "We want to go to Alcatraz this afternoon. But if it rains too hard, we'll go shopping instead." Dozens of arriving flights into San Francisco International Airport were delayed by more than two hours, and dozens more short flights were cancelled, officials said. California is not the only place expecting severe weather. Conditions are especially ripe for tornadoes in the Southeast and Great Plains. Specifically, Louisiana, Texas, Oklahoma, Arkansas, Missouri, Kentucky, southern Illinois, Alabama, Mississippi, Georgia, Florida, North and South Carolina and parts of Virginia.

L.A. officials seeded clouds during El Nino storm in hopes of more rain - Clouds over Los Angeles County were seeded with silver iodide to increase the amount of rainfall during Monday's storm, marking the first cloud seeding done by the Department of Public Works since 2002. Los Angeles County has used cloud seeding to boost water supplies since the 1950s, backing off in times of heavy rain or when wildfire devastation creates an outsized risk of flooding or debris flows. A 2009 cloud seeding contract for services was terminated after the Station Fire, which burned roughly 250 square miles of the Angeles National Forest. Then, last October, the state's severe drought led the county Board of Supervisors to approve a new one-year contract with Utah-based North American Weather Consultants for as much as $550,000 a year. This week's storm offered a good opportunity for "the first go-round for cloud seeding" this season, Department of Public Works spokesman Steve Frasher said.  North American Weather Consultants has set up land-based generators in 10 locations between Sylmar and Pacoima, Fraser said. Only some of those generators were used Sunday night, as weather conditions were not ideal in all areas. The generators shoot silver iodide into the clouds, creating ice particles. Water vapor freezes onto those particles, which fall as rain.

Drought-hit California county still relying on water tanks, despite rainfallReveal reported in early January about the water tank program in Tulare County, California. What began as an emergency response measure to the drought was becoming the norm for hundreds of families who no longer had running water.  At the crisis’ peak, Tulare County reported about 1,400 private well failures. To combat the problem, the county began installing 3,000-gallon tanks and delivering water to residents for free. Homeowners were the only ones who qualified for the program initially.  Socorro Ambriz’s well ran dry in July. She didn’t qualify for the tank program because she rented her home. So Ambriz and her family cobbled together a system to get water into her house. After our story ran, Ambriz paused her routine. Heavy rains brought water back to her well, at least for now. But more than 800 domestic wells still are dry, according to Tulare County officials. And where the water has returned, the supply remains unpredictable.  Ambriz knows that, and so do county officials, who have advised residents to continue using their tanks because the well water could contain unsafe levels of arsenic or nitrates. Tim Lutz of the Tulare County Health and Human Services Agency said residents should test their water before using it and, until they know it’s safe, continue to use bottled water for drinking and cooking.   But no one knows how long the water will last. [more]

Vietnam hit by worst drought in 90 years - Vietnam is suffering its worst drought in nearly a century with salinization hitting farmers especially hard in the crucial southern Mekong delta, experts said Monday. “The water level of the Mekong River has gone down to its lowest level since 1926, leading to the worst drought and salinization there,” Nguyen Van Tinh, deputy head of the hydraulics department under the Ministry of Agriculture, told AFP. The low-lying and heavily cultivated Mekong region is home to more than 20 million people and is the country’s rice basket. Intensive cultivation and rising sea levels already make it one of the world’s most ecologically sensitive regions. Scientists blame the ongoing 2015-2016 El Nino weather phenomenon, one of the most powerful on record, for the current drought. Water shortages have also hampered agriculture in nearby Cambodia, Laos, Thailand and Myanmar. Le Anh Tuan, a professor of climate change at the University of Can Tho in the heart of the Mekong region, said as much as 40-50 percent of the 2.2 million hectares (5.4 million acres) of arable land in the delta had been hit by salinization. “We do not have any specific measures to mitigate the situation,” Tuan told AFP, adding that residents had been urged to save water for domestic rather than agricultural use.

Drought in eastern Mediterranean worst of past 900 years A new NASA study finds that the recent drought that began in 1998 in the eastern Mediterranean Levant region, which comprises Cyprus, Israel, Jordan, Lebanon, Palestine, Syria and Turkey, is likely the worst drought of the past nine centuries. Scientists reconstructed the Mediterranean’s drought history by studying tree rings as part of an effort to understand the region’s climate and what shifts water to or from the area. Thin rings indicate dry years while thick rings show years when water was plentiful. In addition to identifying the driest years, the science team discovered patterns in the geographic distribution of droughts that provides a "fingerprint" for identifying the underlying causes. Together, these data show the range of natural variation in Mediterranean drought occurrence, which will allow scientists to differentiate droughts made worse by human-induced global warming. The research is part of NASA's ongoing work to improve the computer models that simulate climate now and in the future. "The magnitude and significance of human climate change requires us to really understand the full range of natural climate variability," said Ben Cook, lead author and climate scientist at NASA's Goddard Institute for Space Studies and the Lamont Doherty Earth Observatory at Columbia University in New York City. "If we look at recent events and we start to see anomalies that are outside this range of natural variability, then we can say with some confidence that it looks like this particular event or this series of events had some kind of human caused climate change contribution,"

Why This City of 21 Million People Is Sinking 3 Feet Every Year -- Mexico City is sinking. Home to 21 million people, who consume nearly 287 billion gallons of water each year, the city has sunk more than 32 feet in the last 60 years because 70 percent of the water people rely on is extracted from the aquifer below the city. Many of Mexico City’s buildings are seriously leaning because of the land subsidence.  “There’s no fixing it,” journalist Andrea Noel told producer Alan Sanchez in the video below from Fusion. “Once land is subsided, it’s subsided.”  The water table is sinking at a rate of 1 meter (3.2 feet) per year. As the city population grows and water demand increases, the problem will only get worse.  “It needs to be stopped because it’s too late to be remedied,” Noel said. “The city needs to find a way to figure out their water problem. They really need to look into alternatives like collecting rainwater, which makes so much sense in a city like this, which gets so much rainfall every year.” It’s not just Mexico City either. A recent NASA analysis found that 4 billion people—nearly two-thirds of the world population—are at risk as water tables drop all over the world.

China’s Expansion Spells Nicaragua’s Destruction - With 42 percent of people below the poverty line, Nicaragua has the weakest social indicators in Latin America. The country’s economic situation is mainly a result of the U.S. embargo following the 1980s Sandinista Revolution. Nicaragua also lacks diversification in its economy and infrastructure, and it has an unskilled workforce. In July 2013, Nicaraguan President Daniel Ortega made an agreement with Chinese businessman Wang Jing, president of the startup investment firm Hong Kong Nicaragua Canal Development (HKND), to create a transoceanic channel. Competing with the smaller Panama Canal, this Gran Canal initiative includes many sub-projects such as a port on the Pacific and Atlantic coasts, an international airport, free trade areas, and an oil pipeline. It would also represent a firm push toward progress, economic growth, and social welfare.Even though the economic and social boost that Nicaraguans could see from with this transoceanic channel, many related issues appear to be underestimated if not concealed, despite warnings from local experts. The transoceanic channel will extend to 173 miles, and its area of influence will affect many protected areas such as natural reserves, wetlands, archipelagos, islands, and Lake Cocibolca, in particular. Due to its low depth, the lake will be drained to reach a minimal depth of 33 yards throughout the 65 miles of the canal route to allow safe passage for containers up to 547-yards-long. The drenching operation will result in over 1 billion tons of waste—the destination of which remains unknown.

Science is warning us that a food crisis is coming to Southern Africa. Will we stop it? -- In April, harvest season begins in Southern Africa. An ongoing drought means the season will yield a historically poor crop. Countries including Malawi, South Africa, and Zimbabwe will have major shortfalls of grain. By one count, more than 20 million people in the region already have limited access to food—notwithstanding the drought. Without intervention, the next year will put those people and millions more at risk of malnutrition or even starvation. But knowing all this makes intervention more possible than ever. Famines are a powerful illustration of how suddenly nature can undercut a poor or poorly prepared society. We have paid dearly for our failure to respond to them efficiently. Economist Stephen Devereux has estimated 70 million people (pdf) were killed by famine in the 20th century alone. Today, analysts employing new sources of information, better technology, and networks of human monitors have made it possible to foresee agricultural disaster far enough ahead so that resources can be mobilized to prevent starvation.  The impending food crisis in Southern Africa has yet to capture the international media’s attention, but it is the subject of ongoing analysis by a network of agriculturists, climatologists and economists. Global monitoring centers, such as the Famine Early Warning Systems Network (FEWS), issue regular updates. If the crisis does devolve into a famine, the world will have known it was coming for at least six months.

Regional Climate Change and National Responsibilities by James Hansen & Makiko Sato - Global warming of about 1°F (0.6°C) over the past several decades now “loads the climate dice.” Fig. 1 updates the “bell curve” analysis of our 2012 paper[1] for Northern Hemisphere land, which showed that extreme hot summers now occur noticeably more often than they did 50 years ago.  Our new paper[2] shows that there are strong regional variations in this bell curve shift, and that the largest effects occur in nations least responsible for causing climate change. In the United States the bell curve shift is just over one standard deviation[b] in summer and less than half a standard deviation in winter (Fig. 2).  Measured in units of °F (or °C) the warming is similar in summer and winter in the U.S., but the practical implication of Fig. 2 is that the public in the U.S. should notice that summers are becoming hotter but is less likely to notice the change in winter.  Summers cooler than the average 1951-1980 summer still occur, but only ~19% of the time.  Extreme summer heat, defined as 3 standard deviations or more warmer than 1951-1980 average, which almost never occurred 50 years ago, now occur with frequency about 7%. Warming in Europe (see paper) is modestly larger than in the U.S. In China (Fig. 2) warming is now almost 1½ standard deviations in summer and one standard deviation in winter, a climate change that should be noticeable to people old enough to remember the climate of 50 years ago.  Bell curve shifts in India (see paper) are slightly larger than in China. In the Mediterranean and Middle East the bell curve shift in summer is almost 2½ standard deviations (Fig. 2). Every summer is now warmer than average 1951-1980 climate, and the period with “summer” climate is now considerably longer.  Given that summers were already very hot in this region, the change affects livability and productivity as noted below.  Bell curve shifts in the tropics, including central Africa (see paper) and Southeast Asia (Fig. 2), which also was already quite hot, are about two standard deviations and occur all year round.

It’s Official: This Winter Was America’s Warmest on Record  - This winter was the warmest on the record for the continental U.S., new data from the National Oceanic and Atmospheric Administration shows, as average temperatures climbed nearly 5 F above normal. Every state in the lower 48 saw temperatures at least 1.7 F above average. New England lead the pack, with all six states experiencing the warmest winter ever. Alaska was a “freakish” 10.6 F above average. The last six months were the warmest such period on record for the contiguous U.S. Global weather data will be released later this month, but scientists are already expecting February to once again smash global heat records as the warmest month on record.  For a deeper dive: news: AP, The Hill, USA Today, Climate Central, Washington Post; commentary: Slate, Eric Holthaus column For more climate change and clean energy news, you can follow Climate Nexus on Twitter and Facebook, and sign up for daily Hot News.

March 2016's shocking global warming temperature record. -- Our planet’s preliminary February temperature data are in, and it’s now abundantly clear: Global warming is going into overdrive. There are dozens of global temperature datasets, and usually I (and my climate journalist colleagues) wait until the official ones are released about the middle of the following month to announce a record-warm month at the global level. But this month’s data is so extraordinary that there’s no need to wait: February obliterated the all-time global temperature record set just last month. Using unofficial data and adjusting for different base-line temperatures, it appears that February 2016 was likely somewhere between 1.15 and 1.4 degrees warmer than the long-term average, and about 0.2 degrees above last month—good enough for the most above-average month ever measured. (Since the globe had already warmed by about +0.45 degrees above pre-industrial levels during the 1981-2010 base-line meteorologists commonly use, that amount has been added to the data released today.) Update, March 3, 2016: Since this post was originally published, the heat wave has continued. As of Thursday morning, it appears that average temperatures across the Northern Hemisphere have breached the 2 degrees Celsius above “normal” mark for the first time in recorded history, and likely the first time since human civilization began thousands of years ago.* That mark has long been held (somewhat arbitrarily) as the point above which climate change may begin to become "dangerous" to humanity. It's now arrived—though very briefly—much more quickly than anticipated. This is a milestone moment for our species. Climate change deserves our greatest possible attention.

The mercury doesn’t lie: We’ve hit a troubling climate change milestone -- Bill McKibben - Thursday, while the nation debated the relative size of Republican genitalia, something truly awful happened. Across the northern hemisphere, the temperature, if only for a few hours, apparently crossed a line: it was more than two degrees Celsius above “normal” for the first time in recorded history and likely for the first time in the course of human civilization. That’s important because the governments of the world have set two degrees Celsius as the must-not-cross red line that, theoretically, we’re doing all we can to avoid. And it’s important because most of the hemisphere has not really had a winter. They’ve been trucking snow into Anchorage for the start of the Iditarod; Arctic sea ice is at record low levels for the date; in New England doctors are already talking about the start of “allergy season.” Advertisement This bizarre glimpse of the future is only temporary. It will be years, one hopes, before we’re past the two degrees mark on a regular basis. But the future is clearly coming much faster than science had expected. February, taken as a whole, crushed all the old monthly temperature records, which had been set in … January. January crushed all the old monthly temperature records, which had been set in … December. In part this reflects the ongoing El Nino phenomenon — these sporadic events always push up the planet’s temperature. But since that El Nino heat is layered on top of the ever-increasing global warming, the spikes keep getting higher. This time around the overturning waters of the Pacific are releasing huge quantities of heat stored there during the last couple of decades of global warming.

Why is 2016 smashing heat records? - Yet another global heat record has been beaten. It appears January 2016 - the most abnormally hot month in history, according to Nasa - will be comprehensively trounced once official figures come in for February.  Initial satellite measurements, compiled by Eric Holthaus at Slate, put February’s anomaly from the pre-industrial average between 1.15C and 1.4C.  The UN Paris climate agreement struck in December seeks to limit warming to 1.5C if possible. “Even the lower part of that range is extraordinary,” said Will Steffen, an emeritus professor of climate science at Australian National University and a councillor at Australia’s Climate Council. It appears that on Wednesday, the northern hemisphere even slipped above the milestone 2C average for the first time in recorded history. This is the arbitrary limit above which scientists believe global temperature rise will be “dangerous”. The Arctic in particular experienced terrific warmth throughout the winter. Temperatures at the north pole approached 0C in late December – 30C to 35C above average. Mark Serreze, the director of the US National Snow and Ice Data Centre, described the conditions as “absurd”. “The heat has been unrelenting over the entire season,” he said. “I’ve been studying Arctic climate for 35 years and have never seen anything like this before”. All this weirdness follows the record-smashing year of 2015, which was 0.9C above the 20th century average. This beat the previous record warmth of 2014 by 0.16C.

El Niño, La Niña and Atmospheric Carbon Dioxide -- What effect does El Niño have on the rate at which the concentration of carbon dioxide changes in the Earth's atmosphere changes? And for that matter, what is the effect of El Niño's cooler counterpart, La Niña, have on airborne CO2 as well?  We're asking the question today because we've ruled out China's attempts to stimulate its economy in 2015 as a significant contributor to the increase in atmospheric CO2 levels that have been observed since July 2015. In China's place, we're considering the impact that widespread and intense wildfires in Indonesia as the most likely culprit that contributed to the increase measured at the remote and high altitude Mauna Loa Observatory in the middle of the Pacific Ocean.  Reports on Indonesia's wildfires have pointed to the effect of El Niño on weather patterns as an influence that explains its severity, where the warming of surface waters in the Pacific Ocean contributed to drier than normal conditions on the Indonesian islands of Sumatra and Borneo, which in turn, promoted the rapid spread of wildfires on these islands once they had started. That observation agrees with what the National Aeronautics and Space Administration (NASA) has reported on the topic back in 2004.

Hotter planet spells harder rains to come – study - Severe rainfall has increased throughout the world’s wettest and driest regions and is set to intensify this century, new research suggests. Since 1950, daily extremes have risen 1-2% a decade, a study published in journal Nature said on Monday. That trend is expected to last until at least 2100, prompting emergency planners to take precautions against flash flooding. Dry regions such as Saharan Africa, the Arabian Peninsula or Australia, whose parched soil poorly absorbs excess water, would be most vulnerable. Global warming increases the amount of water vapour in the atmosphere, leading to heavier downpours. The study led by Markus Donat at the University of New South Wales in Australia couldn’t say exactly where extreme rainfall would occur, but underlined the heightened risks. Tropical regions were most uncertain. Floods made up almost half of all weather-related disasters in the last two decades, according to the UN office for disaster risk reduction. They affected 2.3 billion people, 95% of whom were in Asia.

The Economist Takes a Strange Turn on Science -- In recent issues of The Economist, a strange habit has popped up: a reliance on a controversial climate skeptic for scientific climate consensus. Said scientist, Bjorn Lomborgh, known to many for pushing climate skepticism and presenting climate change mitigation and the fight against HIV/Aids as an “either-or scenario”, has somehow become the go-to source for climate change analysis in The Economist, an otherwise reasonable magazine. In a recent climate special – coming on the heels of the successful climate conference held in Paris this past DecemberThe Economist took a closer look at geoengineering as a potential option for avoiding climate catastrophe; the basic idea being that instead of preventing global greenhouse gases, could we instead reverse the effects? While there are many open questions about this approach, including from an ethical point-of-view, the biggest problem with geoengineering is that it assumes we can foresee or accurately model the consequences of any global intervention; something we are really not good at doing. None of this comes across when reading The Economist’s take on it, as one is instead told that, “…[a] report published in 2012 for the Copenhagen Consensus Centre estimated that marine-cloud brightening would prevent global warming even more effectively than a carbon tax.

Greenland’s melting is ‘feeding on itself,’ scientists say --  A new scientific study released Thursday has delivered yet another burst of bad news about Greenland — the vast northern ice sheet that contains 20 feet of potential sea level rise. The ice sheet is “darkening,” or losing its ability to reflect both visible and invisible radiation, as it melts more and more, the research finds. That means it’s absorbing more of the sun’s energy — which then drives further melting.“I call it melting cannibalism. You have melting feeding on itself,” says Marco Tedesco, the lead author of the study and a researcher with Columbia University’s Lamont Doherty Earth Observatory. The research was published in The Cryosphere by Tedesco and five other authors from U.S. and Belgian universities. Scientists have long feared that when it comes to the Greenland ice sheet’s melt, there are a number of so-called “positive feedbacks,” or self-amplifying processes, that could make it worse. For instance, one of the best known of these involves simple elevation, a crucial feature for an ice sheet that is well over a mile high into the atmosphere in places.   In the new study, however, researchers examined a different so-called feedback — this one involving a property called the ice sheet’s “albedo,” or simply its overall reflectivity. Bright white snow, falling atop the ice sheet, reflects light away, preventing it from being absorbed and thus blocking its heat energy from melting ice. However, there are many different hues and properties of ice and snow (and water), not all of which are equally reflective of either visible or non-visible radiation. (The “darkening” in question here refers both to changes that we can all see with our eyes, and also important changes that we can’t see).

Flood Damage Costs Will Rise Faster Than Sea Levels, Study Says - Communities facing rising sea levels are likely to see the cost of flood damage increase faster than water levels, concludes a new study. Three scientists in Germany made this sobering conclusion while developing a new analysis tool to help coastal communities worldwide understand and calculate the estimated economic costs of rising sea levels driven by climate change. So far, the investigation of flood-related damages has lagged behind studies on sea level rise, said Jürgen Kropp, one of the study authors and a climate scientist at the Potsdam Institute for Climate Impact Research in Potsdam, Germany. This new study, published Monday in the journal Natural Hazards and Earth System Sciences, comes on the heels of two related climate papers. One found that the current rate of sea level rise is the fastest on record for at least the last 28 centuries. That study, by researchers from seven institutions including Potsdam, was published last week in the journal Proceedings of the National Academy of Sciences. The other, by scientists at Climate Central, concluded that the coastal flooding of American towns and cities will continue to intensify in the future due to manmade global warming. "For decision makers, it's important to know what the expected costs [of coastal flooding] will be for the future"—not just how much sea levels will increase, said Kropp. This new analysis underscores that urgency, showing "damages rise much faster than sea levels," he said. U.S. communities already feeling the impact of, and responding to, sea level rise have probably already figured this out or wouldn't find the results surprising, flood expert Chad Berginnis told InsideClimate News. But for rest of the country, "it could be a very surprising conclusion,"

The US Is Dumping an Insane Amount of Methane Into the Air - It's no secret that the United States has a methane problem. Methane accounts for about one half of one percent of the country's greenhouse gas emissions—it's released mostly from natural gas production, landfills, and agriculture (cow farts and burps). But as a greenhouse gas, it's incredibly potent in the short term, capable of trapping up to 90 times more heat than carbon dioxide over a 20-30 time period. And although the Obama administration has proposed some potential solutions, methane emissions are currently unregulated by the federal government. A couple new analyses came out this week painting a picture of just how severe methane emissions really are.  The first deals with the Aliso Canyon natural gas facility near Los Angeles, which was finally plugged on Feb. 12 after spewing gas from a major leak for four months. In a new study published Thursday in the journal Science, scientists reported that the leak single-handedly doubled Los Angeles' methane footprint. The study, one of the first peer-reviewed measurements of the leak and based on a series of scientific flights over the site, found 60 metric tons of methane leaking every hour.  Aliso Canyon is an extreme case, but methane leaks are frighteningly common, and they take a significant toll for the environment. This week the Environmental Protection Agency released an updated draft of its Greenhouse Gas Inventory, the official accounting of America's carbon footprint. In 2014, total greenhouse gas emissions in the US were 6.8 billion metric tons of carbon dioxide equivalent (a metric used to make apples-to-apples comparisons between different gases).  The new figures for methane emissions from the oil and gas sector are about 27 times higher than previous estimates. According to the Environmental Defense Fund, that difference represents a 20-year climate impact equal to 200 coal-fired power plants. It also represents about $1.4 billion worth of lost natural gas.

Obama, Trudeau target methane emissions in new agreement (AP) — President Barack Obama and Canadian Prime Minister Justin Trudeau committed on Thursday to curbing methane emissions by reducing methane emissions from the oil and gas sectors by at least 40 percent over the next decade from 2012 levels. It’s a goal the Obama administration had cited previously, and it rolled out regulations in August that were focused on emissions from new and modified oil and natural gas wells. But U.S. officials said better data indicate more regulation is needed. And Canada has agreed with that assessment. “To get all the way to that goal, we’re going to have to tackle emissions from existing sources,” said Gina McCarthy, the administrator of the Environmental Protection Agency. The agreement also commits Canada to regulating methane emissions from new and existing oil and gas production. Environment and Climate Change Canada intends to publish its initial proposals by early next year. The oil and gas industry has objected to the Obama administration’s efforts targeting new and modified wells. The American Petroleum Institute said additional regulation could discourage the shale energy revolution that had lowered costs for consumers while also reducing emissions.

NOAA: Carbon Dioxide Levels ‘Exploded’ in 2015, Highest Seen Since End of Ice Age - The amount of carbon dioxide in the atmosphere rose 3.05 parts per million in 2015, the largest year-to-year increase ever recorded, scientists at the National Oceanic and Atmospheric Administration (NOAA) report finds. It was the fourth year in a row that CO2 concentrations grew by more than 2 parts per million. “Carbon dioxide levels are increasing faster than they have in hundreds of thousands of years,” a lead scientist at NOAA said. Some of the spike in CO2 levels can be attributed to last year’s monster El Niño event and the rest the scientists chalk up high levels of fossil fuel emissions. CO2 levels in the air, which contribute to climate change and extreme weather events, have increased more than 40 percent since the beginning of the industrial revolution.  For a deeper dive: Washington Post, Climate Home, Mashable, Independent, BBC News, Climate Central

CO2 levels make largest recorded annual leap, NOAA data shows - Atmospheric concentrations of carbon dioxide last year rose by the biggest margin since records began, according to a US federal science agency. Fossil fuel burning and a strong El Niño weather pattern pushed CO2 levels 3.05 parts per million (ppm) on a year earlier to 402.6 ppm, as measured at the Mauna Loa Observatory in Hawaii, the National Oceanic and Atmospheric Administration (Noaa) said on Wednesday. “Carbon dioxide levels are increasing faster than they have in hundreds of thousands of years,” said Pieter Tans, lead scientist at Noaa’s Global Greenhouse Gas Reference Network. “It’s explosive compared to natural processes.” The big jump in CO2 broke a record held since 1998, also a powerful El Niño year.Drought and erratic rainfall caused less carbon to be stored by parched forests and drylands, on top of the effect of fossil fuel emissions, Noaa said. CO2 levels in the air have increased over 40% since 1880, as industry ramped up emissions. The build-up of those gases traps heat, which warm the planet and stoke extreme weather. Last year was the hottest year on record, according to multiple weather agencies. The last time the Earth experienced such a sustained CO2 rise was between 11,000 and 17,000 years ago, in which period CO2 jumped by 80ppm. Today’s rate is 200 times faster, said Tans.

Dangerous global warming will happen sooner than thought – study - The world is on track to reach dangerous levels of global warming much sooner than expected, according to new Australian research that highlights the alarming implications of rising energy demand.University of Queensland and Griffith University researchers have developed a “global energy tracker” which predicts average world temperatures could climb 1.5C above pre-industrial levels by 2020. That forecast, based on new modelling using long-term average projections on economic growth, population growth and energy use per person, points to a 2C rise by 2030. The UN conference on climate change in Paris last year agreed to a 1.5C rise as the preferred limit to protect vulnerable island states, and a 2C rise as the absolute limit. The new modelling is the brainchild of Ben Hankamer from UQ’s institute for molecular bioscience and Liam Wagner from Griffith University’s department of accounting, finance and economics, whose work was published in the journal Plos One on Thursday. It is the first model to include energy use per person – which has more than doubled since 1950 – alongside economic and population growth as a way of predicting carbon emissions and corresponding temperature increases. The researchers said the earlier than expected advance of global warming revealed by their modelling added a newfound urgency to the switch from fossil fuels to renewables.

India vs US @ WTO on Solar Panels, Work Visas - You can have a national solar program...but the WTO says you should not discriminate against foreign solar panels.  A few years ago, the US complained that India was discriminating against foreign producers of solar panels by requiring that government-subsidized purchases meet a local content requirement under a national procurement program. [See case DS 456.] Late last year, the WTO dispute settlement mechanism ruled against India. Recently, an appeal by India on the matter was also rejected: A three-member dispute settlement panel of the WTO, which was set up in 2013 after the US complained that India unduly favours local solar manufacturers, had ruled against India in August and the February 24 ruling is a reiteration by the panel after India went in appeal. India's Solar Mission offers a subsidy of up to Rs 1 crore per MW to solar developers sourcing components from local manufacturers. It also stipulates that 10% of the solar capacity target of 100,000 MW by 2022 should be built with domestically manufactured solar modules, which has led to a small part of the solar auctions being reserved for developers employing only domestic content.  India had suggested a compromise by which the domestic content requirement would not be imposed on private solar developers or made part of the auctions and would be restricted to public services such as the railways and defence. But even this failed to cut much ice with the US or the WTO.  Unhappy about this state of affairs, India has hit back at the US timing-wise with a complaint that the US was failing to meet its commitments concerning the temporary movement of natural persons to the US. That is, Indian services firms needing engineers and others to complete work Stateside have found it increasingly difficult to do so given (a) higher visa expenses and (b) fewer available visas.

21 Kids Take on the Feds and Big Oil in Historic Climate Lawsuit  [Editor’s note: Twenty-one youth plaintiffs, as well as climate scientist Dr. James Hansen as guardian for future generations, is suing the federal government to cease conduct that promotes fossil fuel extraction and consumption, and instead develop and implement an actual science-based climate recovery plan. The complaint argues the youth have a fundamental constitutional right to be free from the government’s destruction of their Earth’s atmosphere. Yesterday’s court appearance was scheduled for the judge to hear oral arguments from the U.S. government and the fossil fuel industry on their motions to dismiss the landmark constitutional climate change lawsuit.] At Wednesday morning’s historic hearing, U.S. Magistrate Judge Thomas M. Coffin questioned Department of Justice attorney Sean C. Duffy on whether the federal government was allowing tradeoffs between present and future generations. To illustrate his question, the Judge used an example of a discount rate, and pondered whether the government’s actions were effectively trading future harm for present day benefits.  “Are you robbing Peter to pay Paul?” the judge asked a flustered Duffy. The hearing began with Duffy denying the federal government’s duty under the public trust doctrine to protect essential natural resources for the benefit of all present and future generations. The judge asked, “Both (water & air) are vital to life, right?”“Yes, your honor,” replied Duffy. The Judge also asked if the government could sell the Pacific Ocean to Exxon. Remarkably, Duffy had a constitutional argument handy to support even that proposition.

35 Students Occupy DEQ Lobby Demanding Investigation of Illegal Coal Ash Dumping [Update: 17 students have been arrested. For the latest update via Twitter, click here.]  Thiry-five students from the Virginia Student Environmental Coalition are refusing to leave the Virginia Department of Environmental Quality’s (DEQ) lobby until the director, David Paylor, complies with their demands regarding Dominion Resources’ dumping of coal ash wastewater into the James River and Quantico Creek. This action is taking place in light of the recent news that Dominion illegally dumped 33.7 million gallons of untreated wastewater into Quantico Creek last summer. The demands are as follows:

  • 1. The DEQ repeals the permits issued to Dominion to begin dumping coal ash wastewater from their Bremo and Possum Point power plants.
  • 2. The current permits are re-issued only after an investigation into the 2015 dumping of untreated wastewater into Quantico Creek.
  • 3. The permits for coal ash wastewater release are rewritten to comply with the best available technology standards, in accordance with the Clean Water Act and that a mechanism for independent third party monitoring is implemented.

Students from the University of Virginia, University of Mary Washington, College of William & Mary, Virginia Tech and Virginia Commonwealth University entered the headquarters at 629 E Main St, Richmond, Virginia, at 10 a.m. and presented their intentions and demands, requesting to speak with Paylor immediately. A rally is also taking place outside of the building.

Dominion, James River Association settle on coal ash water (AP) — More stringent water treatment and fish testing will be required along the James River under a settlement reached by Dominion Virginia Power and the James River Association on the release of coal ash wastewater. The announcement Wednesday ends the association’s legal challenge of a state permit allowing the so-called dewatering of coal ash impoundments at Bremo Power Station in Fluvanna County. Water is drained from the ponds before the power company caps the potentially toxic remnants of coal-fired power generation. But a separate challenge will move forward of the dewatering plan for Dominion’s Possum Point power plant in northern Virginia. The Potomac Riverkeeper Network said the state permit for discharges into Quantico Creek and the Potomac River is inadequate to protect the waterways. Late Tuesday, Prince William County announced it had reached settlement with Dominion and would not challenge the Possum Point permit. The settlement governing the Bremo discharges followed weeks of debate, protests and arrests over the discharge of millions of gallons of coal ash wastewater into state waterways. Much of the anger has been directed at the Virginia Department of Environmental Quality, which issued the permits. The DEQ said in a statement it was pleased Dominion will voluntarily “go beyond federal and state regulatory requirements to further enhance water quality protections at its Bremo and Possum Point power stations.” It defended the permits, saying they protect water quality and human and aquatic health.

Settlement Gives Utility The Go-Ahead To Dump Coal Ash Wastewater Into Virginia Rivers -- A utility company that will legally dispose of coal ash water in two Virginia waterways agreed Wednesday to treat waste going into the James River to a more stringent standard than the state requires, though legal appeals to controversial plan remain.  The settlement agreement between Dominion Virginia Power and the James River Association comes a day after the company reached a similar deal with Prince William County regarding Quantico Creek, a tributary of the Potomac River located within its borders. Quantico Creek and James River will start receiving discharges as early as April.  Two months ago, the Virginia Water Control Board issued permits allowing Dominion to drain coal ash water into Quantico Creek and the James River in southeastern Virginia, as Dominion was directed by the EPA to close its coal ash ponds at two power plants. That entails treating and draining the less-polluted top water from coal ash ponds at the Possum Point power plant by Quantico Creek, and the Bremo Bluff power plant by the James River.  But Dominion’s plan was questioned from the get-go. Just on Monday, 17 college students protesting the plan were arrested in Richmond. Critics have long said the permits were lax and didn’t take advantage of best available technology to keep the river safe enough from pollutants. For their part, Dominion and the DEQ said the permits were stringent and protective.  Still, environmentalists, Prince William County, and Maryland filed separate appeals to the permits last month. Yet now only two parties, Maryland and the Potomac Riverkeeper, have pending appeals. Both are related to Quantico Creek.

Dominion, James River Association settle on coal ash water (AP) — More stringent water treatment and fish testing will be required along the James River under a settlement reached by Dominion Virginia Power and the James River Association on the release of coal ash wastewater. The announcement Wednesday ends the association’s legal challenge of a state permit allowing the so-called dewatering of coal ash impoundments at Bremo Power Station in Fluvanna County. Water is drained from the ponds before the power company caps the potentially toxic remnants of coal-fired power generation. But a separate challenge will move forward of the dewatering plan for Dominion’s Possum Point power plant in northern Virginia. The Potomac Riverkeeper Network said the state permit for discharges into Quantico Creek and the Potomac River is inadequate to protect the waterways. Late Tuesday, Prince William County announced it had reached settlement with Dominion and would not challenge the Possum Point permit. The settlement governing the Bremo discharges followed weeks of debate, protests and arrests over the discharge of millions of gallons of coal ash wastewater into state waterways. Much of the anger has been directed at the Virginia Department of Environmental Quality, which issued the permits. The DEQ said in a statement it was pleased Dominion will voluntarily “go beyond federal and state regulatory requirements to further enhance water quality protections at its Bremo and Possum Point power stations.” It defended the permits, saying they protect water quality and human and aquatic health.

State orders end to hauling radioactive waste - Kentucky officials have begun to take enforcement actions in their investigation of radioactive oil and gas drilling wastes they say was brought illegally into Kentucky and dumped at two landfills.  State health officials ordered the company they say hauled the fracking waste into Kentucky to stop or face $100,000 per incident fines and potential criminal charges.  And two landfills in Kentucky were sent violation notices Tuesday from the Kentucky Energy and Environment Cabinet. The violation notices claim the landfill operators in Greenup and Estill counties failed to accurately characterize the waste for what it was, allowing what's considered an illegal release of a hazardous material into the environment. They were also cited for poor record keeping and other violations. The Energy Cabinet and the Cabinet for Health and Family Services have been investigating a potential pipeline of sorts of radioactive waste from out of state fracking operations into Kentucky. Health Cabinet assistant counsel Jennifer Wolsing wrote a March 4 letter made public Tuesday that claims BES LLC, doing business as Advanced TENORM Services, imported, collected, transported and/or deposited radioactive oil and gas drilling waste in several Kentucky counties since at least June 2015. Wolsing said the state would go to court to stop the  ompany if it did not comply.As of Tuesday, health cabinet officials had not heard from the company, said Beth Fischer, cabinet spokeswoman.

Fukushima Nuclear Disaster 5 Years On: Water, Water Everywhere (Part I) - Forbes: Now, on the fifth anniversary of what is known here as the Great East Japan Earthquake, how much progress has TEPCO and the government made in dealing with what was fundamentally a man-made disaster? The answer is they continue to face the same four huge challenges they grappled with in 2011: dealing with contaminated water that has grown into a million-ton headache; locating and somehow retrieving the molten fuel debris; removing spent fuel rods from the damaged reactor storage pools; and disposing of millions of cubic meters of radioactive waste. Most evident of these challenges is the contaminated water. Cooling water must be continuously circulated through the damaged reactors Units 1, 2 and 3, where nuclear fuel has melted through at least the inner containment vessels. Consequently, the cooling water injected into the reactor becomes contaminated and finds its way down into the turbine basements adjacent to each reactor; there, it mixes with incoming ground water to greatly compound the problem. Some of the pooled water is partly decontaminated, cooled and recirculated through the reactors again, the rest is treated and pumped out and stored in tanks to prevent it flowing into the Pacific Ocean.Naohiro Masuda, TEPCO’s Chief Decommissioning Office, told the foreign press in Japan March 2nd that there are over 1,000 such storage tanks located inside and outside the plant, each holding as much as 1,000 metric tons of treated water. And with groundwater streaming in at 150 metric tons a day, a new tank is being added weekly. The stored water, while filtered and largely decontaminated, still contains tritium—radioactive hydrogen, which can cause cancer if ingested.

Crippled Fukushima Reactors Are Still a Danger, 5 Years after the Accident - Scientific American: Japan in February started up a third reactor among those that had been shut down. But even as the government seeks to leave the disaster behind, Fukushima remains a wound that will not heal—for former residents, the local landscape and for the Japanese psyche. Two-thirds of the populace dreads another accident enough to oppose the restarts. More than 1,100 square kilometers of villages, mountains and forests remain uninhabitable, and future generations will still be cleaning up the plant site, according to Japan's Ministry of Economy, Trade and Industry (METI). Echoing citizens' groups, some scientists are complaining that important questions about the disaster's impact are not being addressed. Authorities, they suspect, are subtly discouraging certain kinds of scientific research, possibly because they fear findings that could further alarm the public. . Exacerbating widespread suspicions of a cover-up, this February Tepco admitted it had waited for two months after the accident before announcing the meltdowns—which possibly delayed evacuations and endangered lives. The uranium fuel in three of the six reactors eventually melted, and explosions blew holes in the roofs of three reactor buildings, releasing radioactive iodine, cesium and other fission products over land and sea. Emergency managers on site, desperately trying to cool the molten cores, poured water into the damaged reactor buildings using fire-hoses. As a result, highly contaminated water flowed directly into the Pacific Ocean. Since then, Tepco has substantially cleaned up the site. It has capped shredded roofs, removed spent fuel from a damaged reactor and constructed ice walls to stanch the flow of groundwater that was washing contaminants from the site into the ocean. Because the molten fuel still generates heat by radioactive decay, however, Tepco has to keep pumping water through the reactor buildings and collecting as much as possible—some 400 cubic meters a day, stored in on-site tanks. Around 8,000 workers are now assisting in the cleanup.

Fukushima Five Years Later: "The Fuel Rods Melted Through Containment And Nobody Knows Where They Are Now" -- Today, Japan marks the fifth anniversary of the tragic and catastrophic meltdown of the Fukushima nuclear plant. On March 11, 2011, a massive earthquake and tsunami hit the northeast coast of Japan, killing 20,000 people. Another 160,000 then fled the radiation in Fukushima. It was the world’s worst nuclear disaster since Chernobyl, and according to some it would be far worse, if the Japanese government did not cover up the true severity of the devastation. At least 100,000 people from the region have not yet returned to their homes. A full cleanup of the site is expected to take at least 40 years. Representative of the families of the victims spoke during Friday’s memorial ceremony in Tokyo. This is what Kuniyuki Sakuma, a former resident of Fukushima Province said: For those who remain, we are seized with anxieties and uncertainties that are beyond words. We spend life away from our homes. Families are divided and scattered. As our experiences continue into another year, we wonder: 'When will we be able to return to our homes? Will a day come when our families are united again?' There are many problems in areas affected by the disaster, such as high radiation levels in parts of Fukushima Prefecture that need to be overcome. Even so, as a representative of the families that survived the disaster, I make a vow once more to the souls and spirits of the victims of the great disaster; I vow that we will make the utmost efforts to continue to promote the recovery and reconstruction of our hometowns. Sadly, the 2011 disaster will be repeated. After the Fukushima nuclear meltdown, Japan was flooded with massive anti-nuclear protests which led to a four-year nationwide moratorium on nuclear plants. The moratorium was lifted, despite sweeping opposition, last August and nuclear plants are being restarted. Meanwhile, while we await more tragedy out of the demographically-doomed nation, this is what Fukushima's ground zero looks like five years later. As Reuters sums it up best,  "no place for man, or robot."

5 Years After Fukushima, ‘No End in Sight’ to Ecological Fallout - The environmental impacts of the 2011 Fukushima Daiichi nuclear disaster are already becoming apparent, according to a new analysis from Greenpeace Japan, and for humans and other living things in the region, there is “no end in sight” to the ecological fallout. The report warns that these impacts—which include mutations in trees, DNA-damaged worms, and radiation-contaminated mountain watersheds—will last “decades to centuries.” The conclusion is culled from a large body of independent scientific research on impacted areas in the Fukushima region, as well as investigations by Greenpeace radiation specialists over the past five years. According to Radiation Reloaded: Ecological Impacts of the Fukushima Daiichi Nuclear Accident 5 Years Later, studies have shown:

  • High radiation concentrations in new leaves, and at least in the case of cedar, in pollen;
  • apparent increases in growth mutations of fir trees with rising radiation levels;
  • heritable mutations in pale blue grass butterfly populations and DNA-damaged worms in highly contaminated areas, as well as apparent reduced fertility in barn swallows;
  • decreases in the abundance of 57 bird species with higher radiation levels over a four year study; and
  • high levels of caesium contamination in commercially important freshwater fish; and radiological contamination of one of the most important ecosystems—coastal estuaries.

The report comes amid a push by the government of Japanese Prime Minister Shinzō Abe to resettle contaminated areas and also restart nuclear reactors in Japan that were shut down in the aftermath of the crisis.

Radioactive Waste Still Leaking Five Years After Fukushima Nuclear Disaster -- naked capitalism Yves here. While the Fukushima nuclear disaster seems like it took place a long time ago, but the site is still leaking radioactive water and the cleanup and remediation will take decades, as this Real News Network story explains. (video and transcript)

Fukushima ‘decontamination troops’ often exploited, shunned (AP) — The ashes of half a dozen unidentified laborers ended up at a Buddhist temple in this town just north of the crippled Fukushima nuclear plant. Some of the dead men had no papers, others left no emergency contacts. Their names could not be confirmed and no family members had been tracked down to claim their remains. They were simply labeled “decontamination troops” — unknown soldiers in Japan’s massive cleanup campaign to make Fukushima livable again five years after radiation poisoned the fertile countryside. The men were among the 26,000 workers — many in their 50s and 60s from the margins of society with no special skills or close family ties — tasked with removing the contaminated topsoil and stuffing it into tens of thousands of black bags lining the fields and roads. They wipe off roofs, clean out gutters and chop down trees in a seemingly endless routine. Coming from across Japan to do a dirty, risky and undesirable job, the workers make up the very bottom of the nation’s murky, caste-like subcontractor system long criticized for labor violations. Vulnerable to exploitation and shunned by local residents, they typically work on three-to-six-month contracts with little or no benefits, living in makeshift company barracks. And the government is not even making sure that their radiation levels are individually tested.

Court orders Japan reactor to shut down, keeps 2nd offline (AP) — A court issued an unprecedented order Wednesday for a nuclear reactor near Kyoto to stop operating and ordered a second one to stay offline. The Otsu District Court, which issued the injunction, said the emergency response plans and equipment designs at the two reactors have not been sufficiently upgraded after the 2011 Fukushima nuclear disaster. The order requires Kansai Electric Power Co. to shut down the No. 3 reactor and keep the No. 4 unit offline at the Takahama plant in Fukui prefecture in western Japan, home to about a dozen reactors. The two reactors restarted this year after a high court in December reversed an earlier injunction by another court. The No. 3 reactor, which uses a riskier plutonium-based MOX fuel, resumed operation in late January, while the No. 4 reactor had to be shut down late last month after operating for just three days because of a series of technical problems. Kansai Electric said it would abide by the decision and start the shutdown procedures for the No. 3 reactor Thursday morning. The utility, meanwhile, said that the decision was “disappointing” and that it planned to appeal.

Locals eating radioactive food 30 years after Chernobyl: Greenpeace tests | Reuters: Economic crises convulsing Russia, Ukraine and Belarus mean testing in areas contaminated by the Chernobyl nuclear disaster has been cut or restricted, Greenpeace said, and people continue to eat and drink foods with dangerously high radiation levels. According to scientific tests conducted on behalf of the environmental campaigning group, overall contamination from key isotopes such as caesium-137 and strontium-90 has fallen somewhat, but lingers, especially in places such as forests. People in affected areas are still coming into daily contact with dangerously high levels of radiation from the April, 1986 explosion at the nuclear plant that sent a plume of radioactive fallout across large swathes of Europe. "It is in what they eat and what they drink. It is in the wood they use for construction and burn to keep warm," the Greenpeace report, entitled "Nuclear Scars: The Lasting legacies of Chernobyl and Fukushima" says. The research report seen by Reuters ahead of publication on Wednesday said Ukraine "no longer has sufficient funds to finance the programmes needed to properly protect the public... this means the radiation exposure of people still living in the contaminated areas is likely increasing." Ukraine is suffering economic hardship, worsened by a pro-Russian insurgency in its eastern territories, while Russia and Belarus are also experiencing financial pressures. The report found that in some cases, such as in grain, radiation levels in the contaminated areas - where an estimated 5 million people live - had actually increased.

7 Top NRC Experts Break Ranks to Warn of Critical Danger at Aging Nuke Plants -- Seven top Nuclear Regulatory Commission (NRC) experts have taken the brave rare step of publicly filing an independent finding warning that nearly every U.S. atomic reactor has a generic safety flaw that could spark a disaster.  The warning mocks the latest industry push to keep America’s remaining 99 nukes from being shut by popular demand, by their essential unprofitability, or, more seriously, by the kind of engineering collapse against which the NRC experts are now warning.  According to Reuters, the NRC engineers worry the flaw leaves U.S. reactors “vulnerable to so-called open-phase events in which an unbalanced voltage, such as an electrical short, could cause motors to burn out and reduce the ability of a reactor’s emergency cooling system to function. If the motors are burned out, backup electricity systems would be of little help.” A small but well-funded band of reactor proponents has been pushing nukes as a solution to climate change. That idea was buried at recent global climate talks in Paris, where a strong corporate pro-nuke push went nowhere.  So some key industry supporters have shifted their efforts to keeping the old reactors open, which is where it gets really dangerous.  Each of the 99 remaining U.S. reactors is in its own particular state of advanced decay. All are based on technology dating to the 1950s, and all but one are at least 30 years old.  Ohio’s Davis-Besse has a shield wall that is literally crumbling.

Leaking Beachfront Nuclear Reactor Near Miami Threatening Florida Everglades - According to a study released by Miami-Dade County Mayor Carlos Gimenez on Monday, the waters of Biscayne Bay measured 215 times the level of radioactive tritium as is found in normal ocean water. Tritium is a radioactive isotope traceable to nuclear plant cooling tower operations. In this case,the leak appears to be emanating from the aging canals in the Turkey Point Nuclear Generating Station located nearby. “This is one of several things we were very worried about,” said South Miami Mayor and biological sciences professor, Philip Stoddard, as the Miami New Times reported. “You would have to work hard to find a worse place to put a nuclear plant, right between two national parks and subject to hurricanes and storm surge.” Biscayne Bay harbors one of the largest coral reefs on the planet and is situated near the Everglades. Hot, salty water from the canals appears to be flowing back into both national parks, which has caused concern among environmentalists and others from the time Turkey Point planned to expand its reactors in 2013. “They argued the canals were a closed system, but that’s not how water works in South Florida,” Stoddard remarked. “How much damage is that cooling canal system causing the bay is a question to be answered,” Everglades Law Center Attorney Julie Dick told the Miami Herald prior to reviewing the report. “There are a lot more unknowns than knowns and it just shows how much more attention we need to be paying to that cooling canal system.”

FPL nuclear plant canals leaking into Biscayne Bay, study confirms | Miami Herald: A radioactive isotope linked to water from power plant cooling canals has been found in high levels in Biscayne Bay, confirming suspicions that Turkey Point’s aging canals are leaking into the nearby national park.  According to a study released Monday by Miami-Dade County Mayor Carlos Gimenez, water sampling in December and January found tritium levels up to 215 times higher than normal in ocean water. The report doesn’t address risks to the public or marine life but tritium is typically monitored as a “tracer” of nuclear power plant leaks or spills. The study comes two weeks after a Tallahassee judge ordered the utility and the state to clean up the nuclear plant’s cooling canals after concluding that they had caused a massive underground saltwater plume to migrate west, threatening a wellfield that supplies drinking water to the Florida Keys. The judge also found the state failed to address the pollution by crafting a faulty management plan. This latest test, critics say, raise new questions about what they’ve long suspected: That canals that began running too hot and salty the summer after FPL overhauled two reactors to produce more power could also be polluting the bay.

FPL nuclear plant canals likely violating water quality laws - Florida Power & Light’s troubled cooling canals, blamed for contaminating groundwater and now found to be leaking into Biscayne Bay, are likely violating local water laws and federal operating permits, critics said on Tuesday. Following the release of a report that found a radioactive “tracer” at levels up to 215 times more than normal in Biscayne Bay, Miami-Dade County commissioners called for quicker action and closer scrutiny of the nuclear power plant’s canals. The county’s chief environmental regulator said he planned to issue another violation — the county cited the utility in October for polluting groundwater — to force FPL to take more steps to fix the chronic problems.Critics, including state Rep. Jose Javier Rodriguez, D-Miami, environmentalists and neighboring rock miners, also demanded the U.S. Environmental Protection Agency intervene. "Evidence of radio active material at high density in Biscayne Bay? How much more do we need to see." “This is the last straw,” Rodriguez said. “Evidence of radioactive material at high density in Biscayne Bay? How much more do we need to see?” Rodriguez and others said the state has repeatedly failed to address worsening conditions. In February, a Tallahassee judge ordered the state to redo an administrative order managing the canals, saying it lacked the most “fundamental element of an enforcement action: charges.”

World's highest court will hear case from tiny island country in the Pacific that's taking on 3 nuclear nations - A small chain of Pacific islands will face off against Britain, India and Pakistan in court next week to try and get an international ruling ordering them to start work on dismantling their nuclear arsenals. While nobody expects the Marshall Islands to force the three powers to disarm at Monday's hearing, the archipelago's dogged campaign at the International Court of Justice highlights the growing scope for political minnows to get a hearing through global tribunals. All three are expected to argue that the Marshall Islands' claims are beyond the Hague court's jurisdiction and should be thrown out. But many activists and academics believe getting them into court is a victory in itself. The island republic, a US protectorate until 1986 and home to just 50,000 people, was the site of 67 nuclear tests by 1958, the health impacts of which linger to this day. "The success will be in putting the issue back on the agenda ... This is as much as the Marshall Islands can hope for," said Dapo Akande, professor of international law at Oxford University. "When the Marshall Islands goes to the ICJ, it's equal with Britain and with India," Akande added. "Big countries get dragged into disputes to which they otherwise would not have needed to pay attention."

Interactive Map Details What You Need to Know About the World’s Nuclear Power Plants - From the latest crisis over plans for Hinkley Point in the UK, to today’s fifth anniversary of the Fukushima disaster, nuclear power plants are currently much in the news. To help provide a global overview of the nuclear power sector both today and throughout its history, Carbon Brief has produced this interactive map. It shows the location, operating status and generating capacity of all 667 reactors that have been built or are under construction, around the world, ever since Russia’s tiny Obninsk plant became the first to supply power to the grid in 1954.

The Nuclear Industry Prices Itself Out Of Market For New Power Plants -  In the modern era, nuclear power plants have almost always become more and more expensive over time. They have a “negative learning curve” — along with massive delays and cost overruns in market economies. This is confirmed both by recent studies and by the ongoing cost escalations of nuclear plants around the world, as I’ll detail in this post.The cost escalation curse of nuclear power  “Ever since the completion of the first wave of nuclear reactors in 1970, and continuing with the ongoing construction of new reactors in Europe, nuclear power seems to be doomed with the curse of cost escalation,” read one 2015 journal article, “Revisiting the Cost Escalation Curse of Nuclear Power.” In the United States, the cost of Georgia Power’s newest twin Vogtle reactors may top initial estimates of $14 billion and reach $21 billion, according to recent Georgia Public Service Commission testimony. Of course, the first two Vogtle Units begun in 1971 took 18 years to build (a decade over schedule) at a final price of $9 billion — ten times the original price tag.  Even the French can’t build an affordable, on-schedule next generation nuclear plant in their own nuclear-friendly country. Their newest Normandy plant, which originally was projected to cost €3bn ($3.3 billion) and start producing power in 2012 “will not start until 2018 at a cost of €10.5bn [$11.3 billion],” the Financial Times reported last year. The high and rising price of new nuclear power plants does not mean new nukes will play no role in the fight to avoid catastrophic warming, as I discussed in January. It does means that, barring a huge unprecedented and ahistorical price drop in next-generation nuclear plants, the role nuclear power plays will be a limited one — a very limited one in market economies especially if the industry can’t reverse decades of cost escalation. Certainly an R&D breakthrough is worth pursuing, but adding even more policies to specifically accelerate deployment of new nukes makes little sense at this point.

Illinois AG mulling legal case over delayed coal mine rules (AP) — Illinois Attorney General Lisa Madigan’s office is considering legal action against the state’s natural resources agency for what prosecutors call a failure to follow the terms of a court-brokered plan to toughen oversight of coal mines. The tougher regulations were part of broader reforms touted with much fanfare two years by the administration of former Gov. Pat Quinn. They followed criticisms by environmentalists who alleged the state Department of Natural Resources was too cozy with mining companies and other businesses it regulates. The rules included a requirement that regulators provide earlier citizen notification of new mine applications and that mine permit applicants be available to answer questions at public hearings. But two years later, the new rules have not been enacted, and the resources agency now wants to package the new rules with other pending changes that some environmental groups say actually weaken public participation. “It is frustrating that the new rules are not yet in place,” said Ann Spillane, Madigan’s chief of staff. “It is past time for the department to stop delaying the implementation of new rules and to fully comply with the court order by allowing meaningful public participation.” The threat of renewed legal action comes as the coal industry is battling economic and political challenges that threaten many jobs in central and southern Illinois. The DNR is now overseen by the administration of Republican Gov. Bruce Rauner, a former venture capitalist who defeated Quinn, a Democrat, in 2014 after the new regulations had been announced.

Oregon To Be First U.S. State To Ban Coal-Fired Power -- Citizens of Oregon will no longer derive their energy from coal, putting the environmentally-conscious state at the front of the line of U.S. jurisdictions that are turning their backs on the widely-derided fossil fuel. The Clean Energy and Coal Transition Act commits to eliminating the use of coal-fired power by 2035 and to double the amount of renewable energy by 2040. It will also require its two largest utilities to increase their share of clean energy such as solar and wind to 50 percent by 2040, the Guardian reported. Critics say the bill, which has been passed but still has to be signed into law by Governor Kate Brown, will drive up power costs.Coal provides about a third of Oregon's electricity, but most of it is imported from Utah, Montana and Wyoming. The state only has one operating coal-fired power plant, the 36-year-old Boardman facility supplying about 550 megawatts, but it is due to shut down by 2020. State Republicans criticized the bill as leading to higher electricity costs for households but Pacific Power, a large Oregon utility, answered that the move to renewables would only raise costs by less than 1 percent by 2030, the newspaper said. The other major utility in the state, Portland General Electric, also backed the deal. Noah Long of the US Natural Resources Defense Council said the law could limit emissions in other states if it reduces their coal use.

Natural gas-fired US power generation to surpass coal in 2016: EIA - The US Energy Information Administration expects lower natural gas prices will result in natural gas fueling 33.4% of US electricity generation in 2016 compared with 32% for coal, according to the agency's monthly Short Term Energy Outlook released Tuesday. It marks the first time the agency has projected natural gas generation to surpass coal on an annual basis. In the report's February edition, the agency forecast gas would fuel 32.3% of US generation in 2016 compared with 33.3% for coal. As a result of decreasing demand, US coal production is projected to total just 784 million st in 2016, which would be a 12.4% decline from 2015 production, according to the agency. The 2016 estimate, were it to hold, would be the lowest annual production total since 1983. Furthermore, the drop in production in 2016 would represent a larger year-over-year decline than the 10.2% decline between 2015 and 2014.

Obama's Not Really Waging a War on Coal — But China Is -- Roughly 1.3 million Chinese workers will climb out of mines in the coming years and file out of coal-fired power plants for the last time. Some 500,000 colleagues, laid off from the steel sector, will join them. Together this mass will face the uncertainty of China's shifting economy and effort to turn towards cleaner energy. But those forced out of work by their government's war on coal can also expect aid in transitioning to new jobs. Yin Weimin, the country's minister for human resources and social security, said on Monday that 100 billion Chinese Yuan ($15.27 billion) would be set aside to help dislocated workers. While this sounds like a lot of money, Elizabeth Economy, an expert on China with the Council on Foreign Relation, said that the challenge facing the world's largest producer of coal is similar to that facing the United States, the world's second. "In this regard, China is not very different from the United States, workers are being laid off and they have families to support," said Economy. "The question is what are [government leaders] going to do with the money. If it's a one-time payment, it's not going to last very long, and workers will be asking, 'What about our pensions?'"  The 1.8 million layoffs have been announced as China is trying to ease pollution and shift to a more consumer-driven economy by ceasing overproduction of manufactured goods. The plan is to cut 500 million tons of coal production capacity by 2020, but there is no set timeframe for the layoffs. Economy warned that there could be wide gaps between the economic messages Beijing sends abroad and what happens domestically. And, she added, the central government risks political fallout from the mass layoffs in the state-run coal sector.

Will Fossil Fuel Prices Fully Recover? --World market prices for coal have slumped and for months languished at around US$ 45/tonne, compared to US$95/tonne in February, 2014. Over the last 2 years, coal prices have more than halved and fallen almost every month.For weeks, crude oil prices have been around US$ 30-33/barrel, sometimes falling as low as $26/barrel. Some forecasters (Goldman Sachs) predict that oil prices could stay low and do so for longer than predicted. Some question if fossil fuel prices will ever recover given the emergence of disruptive technologies making electricity generation from renewable sources increasingly competitive with fossil fuels, even at their present depressed prices. Others point to agreement by OPEC to reduce production in order to stimulate price. However, that agreement has only been reached by 4 OPEC members (Saudi Arabia, Qatar, Russia and Venezuela) and then only when confronted by Iranian production coming on to the world market, following the lifting of international sanctions. It is seen by some as an ineffectual move to restore oil prices, since the agreement is not to exceed record high January pumping levels. Far more certain is that the present price malaise is a taste of the state of things to come for those who have invested in the shares of fossil fuel producers. Without sustained price recovery, the value of shares in some fossil fuel companies will decline and could eventually wind-up as stranded assets of little or no value. Evidence of this is seen in closure of coal mines and the unsustainable position of oil and gas producers using older technology where cost of pumping oil and gas is close to or below its market value.

Why We Need to Keep 80 Percent of Fossil Fuels in the Ground: Physics can impose a bracing clarity on the normally murky world of politics. It can make things simple. Not easy, but simple. Most of the time, public policy is a series of trade-offs: higher taxes or fewer services, more regulation or more freedom of action. We attempt to balance our preferences: for having a beer after work, and for sober drivers. We meet somewhere in the middle, compromise, trade off. We tend to think we’re doing it right when everyone’s a little unhappy. But when it comes to climate change, the essential problem is not one group’s preferences against another’s. It’s not—at bottom—industry versus environmentalists or Republicans against Democrats. It’s people against physics, which means that compromise and trade-­off don’t work. Lobbying physics is useless; it just keeps on doing what it does. So here are the numbers: We have to keep 80 percent of the fossil-fuel reserves that we know about underground. If we don’t—if we dig up the coal and oil and gas and burn them—we will overwhelm the planet’s physical systems, heating the Earth far past the red lines drawn by scientists and governments. It’s not “we should do this,” or “we’d be wise to do this.” Instead it’s simpler: “We have to do this.” And we can do this. Time, however, is precisely what we don’t have. We pushed through the 400 parts per million level of CO2 in the atmosphere last spring; 2015 was the hottest year in recorded history, smashing the record set in … 2014. So we have to attack this problem from both ends, going after supply as well as demand. We have to leave fossil fuel in the ground.

Court rejects appeal of 2014 Broadview Heights suit - Drilling - Ohio - Last week, the eighth appellate court of Ohio ruled against Mothers Against Drilling in Our Neighborhoods (MADION) in a class action lawsuit brought by Broadview Heights residents in 2014.The lawsuit was filed with the assistance of the Community Environmental Legal Defense Fund(CELDF) against the State of Ohio and two corporations seeking to drill for oil and gas within the City. In the filing, MADION asserted the people have a community right to local, democratic self-government to protect their health, safety, and welfare.The people of Broadview Heights exercised that right in November 2012, adopting a CELDF-drafted Community Bill of Rights banning fracking with 67% of the vote. The lawsuit was filed to enforce their Community Bill of Rights.The court, however, was not moved by the will of the people, and affirmed the decision of a lower court, which recognized the corporate claimed “right” to bring industrial drilling and fracking into residential neighborhoods against the will of the people of that community.Tish O’Dell, member of MADION and President of the OHCRN, stated, “The court affirmed the corporate claimed ‘right’ to use Broadview Heights as resource colony for the benefit of a few people, living far removed from the harms – people who hide behind the corporate shield, and, with permits in hand, site harmful projects for the sake of profits. We, the People of Broadview Heights, are being told that our will, expressed through a democratic vote, is meaningless in Cuyahoga County. We are being told to watch the toxins be injected and emitted into our neighborhoods and then WAIT. Wait for the harm to start surfacing in our community and in our children.”

County group plans to bring charter proposal back in November  - The Athens County Bill of Rights Committee is preparing to launch a petition drive March 15 to put a charter proposal before voters on the November General Election ballot. The ACBORC was unable to get a charter proposal last year on the November 2015 ballot after a decision by the Ohio Supreme Court, but with that decision in hand and alterations to the proposal made, the group plans to try again this year. Last week they mailed a postcard to last year’s petition signers informing them of the upcoming effort. The postcard states that a “new and improved charter petition for November 2016 will be ready to sign” this coming Tuesday, which is Ohio’s Primary Election day. “You signed our Charter petition last year, but your right to vote was denied by Jon Husted, Ohio Secretary of State,” the card states. “The Ohio Supreme Court denied Husted’s objections, but also declared the charter petition to be incomplete.” The ACBORC’s charter did not and does not propose to alter the structure of Athens County government with regard to officeholders or duties, but does seek to assert local control over regulation of oil and gas hydraulic fracturing and other activities related to oil and gas development (including waste injection wells). “Meanwhile, 600,000 gallons of toxic fracking wastes are being dumped in Athens County every day!” the note card warns.

Ohio's oil, natural gas production increases in 4Q - During the fourth quarter of 2015, Ohio’s horizontal shale wells produced 6,249,116 barrels of oil and 303 billion cubic feet of natural gas, according to figures released today by the Ohio Department of Natural Resources.  The production totals for the fourth quarter of 2015 increased over the third quarter of 2015 with oil production increasing by 10 percent and gas increasing by almost 25 percent.  Quarterly production in 2015 also shows a fourth quarter horizontal shale well production increase of more than 75 percent for oil and 80 percent for gas from 2014’s fourth quarter totals. The ODNR quarterly report lists 1,265 wells, 1,230 of which reported production. Thirty-five wells reported no production.

Utica Drives Ohio Oil, NatGas Production to New Records - Ohio's horizontal Utica and Marcellus shale wells continued to set records in the fourth quarter, when operators reported producing 303 Bcf of natural gas and more than 6.2 million bbl of oil, according to data released Wednesday by the Ohio Department of Natural Resources (ODNR). Gas production was up by 25% from 3Q2015, while oil production rose 10% over the same period (see Shale Daily, Dec. 3, 2015). For the year, shale drillers nearly reached 1 Tcf of gas production at 953.9 Bcf. ODNR’s RIck Simmers, chief of the Division of Oil and Gas Resources Management, told an industry conference in Pittsburgh earlier this year that the state expected operators to exceed 1 Tcf in 2015 (see Shale Daily, Jan. 27). Fourth quarter production still increased significantly from the same period in 2014, when ODNR reported 3.5 million bbl of oil and 164.8 Bcf of gas (see Shale Daily, Feb. 26, 2015). Ohio law does not require the separate reporting of natural gas liquids; those totals are included in oil volumes. The state said 1,230 horizontal wells reported production in the fourth quarter. Another 35 wells listed showed no production. The average amount of oil produced by each well during the quarter was 5,081 bbl, while the average amount of gas was 245.9 MMcf. At the end of last week, ODNR records showed that 2,140 Utica wells had been permitted to date and 1,613 had been drilled. Forty-four Marcellus wells were permitted and 29 had been drilled.

Ohio Fracking Wells Double Production in 2015 - With the growth in hydraulic fracturing in Ohio to tap gas and oil hidden deep underground in the Utica Shale formation, the Buckeye state now has 1230 wells in production.  They pumped out 22 million barrels of oil last year, twice as much as in 2014.   Natural gas added up to 950 billion cubic feet, or 110% of the 2014 totals.   The increase comes despite very low oil and gas prices.  ODNR spokesman Eric Heis says the number of applications for drilling permits has been slowing. “Production has gone up because more wells have been drilled. That does not mean production has gone up as much as it has the past few years.  With prices, you see a slowdown in the industry.”   Ohio’s severance tax on the oil and gas produced also rose from $6 million dollars in 2014 to $21 million last year.   Governor Kasich wants to raise the tax rate, arguing it's one of the lowest in the country.  Heis says what money does come in goes to help fund ODNR. “That money helps fund the oil and gas department including the inspectors, vehicles for the department to get out every few weeks.”   Along with gas production, the amount of wastewater pumped back underground is also up.  Most of the wastes pumped into injection wells in Ohio used to come from out of state but last year 55% was produced from Ohio’s own fracking wells.  The highest producing gas well was in Guernsey County and Belmont County had the top oil well.  

Injections of wastewater rise in Ohio despite lull in fracking - Columbus Dispatch --The amount of fracking wastewater pumped underground in Ohio increased by more than 15 percent last year, even as shale drilling has slowed nationwide, according to new numbers from the Ohio Department of Natural Resources. Ohio took in nearly 29 million barrels of fracking wastewater in 2015, according to a Dispatch analysis of department data. That is about 4 million more barrels than in 2014.  Ohio, which is situated to accept wastewater from states that don’t allow injection waste wells, has more than 200 injection wells. Fewer than 10 have been approved in Pennsylvania, where much of the fracking boom in this part of the country has taken place. West Virginia has about 60.  That means about 13 million barrels a year comes from Pennsylvania and West Virginia, according to the Natural Resources data. Ohio typically takes more fracking wastewater from outside Ohio than inside. But last year, about 55 percent of the fracking wastewater that ended up in Ohio injection wells came from Ohio, the Dispatch analysis shows. Wastewater generally travels in tanker trucks on Ohio’s highways until it reaches injection well sites, which are primarily in eastern and southeastern Ohio. Athens County, for example, took more than 4 million barrels of fracking wastewater in 2015, an increase of 1.1 million barrels, or nearly 40 percent.

Fracking waste may be impacting politics and science - Did you know that in the past year the Portage County Commissioners, the Portage County Township Association, the Portage County Health Department, Ohio Township Association, the Ohio Farm Bureau, various grassroots groups and many concerned individuals have sent requests to the ODNR and Ohio Governor John Kasich to stop injecting hydraulic fracking waste into injection wells in Ohio until further study can be made regarding the effect on our groundwater?None of these requests have been acknowledged, but then again, one must consider the several million dollars in campaign contributions gas and oil have contributed to state candidates, political committees and parties in just Ohio.Picture the immense size of the Ohio State football field. Imagine it has sides 12.5 feet tall. Fill it with chemical and radiological waste 185 times and that is how much waste fluid was injected into our aquifers under high pressure in 2014.There were 134 football fields full injected in 2013 and 118 in 2012. There will be much more this year.These are statistics for the entire state of Ohio.Portage County took 89,293,680 gallons of frack waste in 2015. Trumbull, Ashtabula and Athens counties are much bigger dumping grounds than Portage. They are really getting hammered.What is in this fluid you may ask and so may our first responders, the people at the front line of hazard response. Guess what, we don’t get to know, it’s gas and oil’s ” proprietary” secret. Oil and gas got a pass on that one, in fact, they are exempt from seven major federal environmental laws, including the Safe Drinking Act of 1974.

Truck overturns, spills fracking wastewater that taints reservoir - Columbus Dispatch - A truck hauling drilling wastewater overturned in eastern Ohio early this morning, sending thousands of gallons of toxic water into a nearby creek and contaminating a reservoir in Barnesville in Belmont County. The truck crashed along a curve just after 3 a.m. today, said Barnesville Fire Chief Bob Smith. The driver, Hiley Wogan of Chesterhill, Ohio, was flown by helicopter to a hospital in Columbus, Smith said. About 5,000 gallons of drilling wastewater spilled into a field, then a creek and finally into one of Barnesville's three reservoirs. Smith said the reservoir is closed while the Ohio Environmental Protection Agency tests the water. James Lee, an EPA spokesman, said the agency is investigating the spill. Smith said the truck is owned by ECM, a brine hauling company with a location in Cambridge, Ohio, not far from Barnesville.

Drinking water reservoir contaminated by oil and gas wastewater in Ohio -- Earlier this week a truck carrying oil and gas wastewater overturned in the small Ohio town of Barnesville. It spilled 5,000 gallons of wastewater into a stream only a few hundreds yards from where the stream runs into a drinking water reservoir. The accident happened around 3 a.m. one morning. According to news reports, the Ohio EPA is testing water in the reservoir to determine the level of contamination. It's been reported that the oil and gas operator says the wastewater was produced water from a producing well, rather than fracking wastewater. Both, however, can contain materials quite toxic to human health, including radioactive materials, heavy metals, and hydrocarbons. Fortunately, Barnesville has other reservoirs to supply its immediate drinking water needs. There were no other vehicles involved. Photos from the scene show the extent of the rollover, so one has to wonder if it was driver error or a safety problem with the truck.  Oil and gas wastewater can be very toxic. This accident illustrates why we need much stronger regulations for how oil and gas waste, whether it is production waste or fracking waste, is handled, transported, stored and disposed. It should not be transported near a drinking water reservoir at all, and should be in trucks with safe drivers and safe mechanics. Dangerous oil and gas waste should not be exempt from our federal hazardous waste regulations, or from any truck safety regulations.

Coast Guard's decision on barging seems like bad news for everybody - A U.S. Coast Guard decision regarding the barging of oil-and-gas industry fracking waste has drawn criticism both from those who support the barging and those who oppose it. Since 2012, a Texas-based company has been seeking official approval to barge deep-shale drilling waste to an off-loading facility in Meigs County on the Ohio River. But the company has been stymied by the U.S. Army Corps of Engineers expressly forbidding such barging, leading the company to approach the U.S. Coast Guard for a rule change. At issue are two different types of fracking waste, one known as legacy fluid, which is associated with traditional oil and gas wells, and the other is what the Coast Guard calls shale gas extraction waste water (SGEWW), which comes from the new deep-shale, horizontal hydraulic fracturing wells. GreenHunter Resources Inc., of Texas, has argued that it has had approval to barge "oil-field waste" from the Coast Guard and handle "legacy waste" at its offloading terminal. This, the company says, means that it's allowed to do so with the wastewater from horizontal hydraulic fracturing operations. This would distinguish it from waste materials from the shale gas extraction wastewater (SGEWW) on which the Coast Guard has not yet made a determination and the Army Corps has explicitly forbidden. Environmentalist opponents, however, say SGEWW and fracking wastes are one and the same. The company's Mills Hunter Facility off-loading complex, once it has been built along the Ohio River in Meigs County near Portland, company officials have said, would double the injection capacity at the company’s Meigs facility from 14,500 42-gallon barrels per day to about 30,000. Complicating matters further, however, is that last Tuesday GreenHunter issued a statement that it and its various subsidiary companies have filed for Chapter 11 bankruptcy. It remains to be seen how this will affect the company’s frack waste barging proposal. So far, both GreenHunter and its bankruptcy attorney have declined comment. Meanwhile, in a decision the week prior to that, the Coast Guard announced it was withdrawing a proposal for new rules regarding the shipping of fracking wastewater by barge on the Ohio River, and instead would review each application individually.

Michigan grants permit to drill oil well on church land: (AP) — The state’s environmental agency has granted a permit to drill an exploratory oil well on church property in suburban Detroit. The Michigan Department of Environmental Quality is allowing Traverse City-based Jordan Development to drill at Word of Faith International Christian Center in Southfield. The decision comes after a Feb. 17 meeting in Southfield that attracted about 1,000 supporters and opponents. The city opposed the drilling. Some residents say it will lower property values, increase emissions and pose a risk of contamination. The church says money that comes from the project would be used for good works. The DEQ says it will monitor the drilling to ensure that oil and gas regulations are followed and that there are no impacts to groundwater.

As EPA Struggles With Fracking Pollution Data, Polluters Safely Settle Lawsuits - Before Cabot Oil and Gas Corporation fracked inside the property of Frederick and Debra Roth, the couple’s groundwater had always been clean.  Their water had no visible gases, malodors or off-tastes, according to court documents, and the Roths knew that. Part of the deal was that Cabot would test their groundwater before drilling began, monitor it, disclose test ,results and most importantly, promise not to disturb the couple’s lifestyle. Otherwise, the contract said according to court documents, Cabot would take “all steps necessary” to return everything back to normal. But in August of 2010, five months after fracking began, the Roths noticed a disturbing change. Their water was brown, cloudy, and started to smell. Event the toilets that used the polluted water showed yellow and pink staining. Mistrusting their groundwater, the Roths, who lived outside rural Springville, Pennsylvania, stopped drinking the water, and filed a lawsuit that the company promptly challenged.  “In most of these cases the company says the contamination is pre-existing … that it’s naturally occurring,” said Tate Kunkle, who represented the Roths but can’t comment directly on the case because the settlement reached in 2013 precludes him and his clients from doing so. “The biggest problem when you get these cases is to link the precise [polluting] avenue,” he added in an interview with ThinkProgress.

Fracked Families Win $4.24 Million Suit Against Frackers -- A federal jury awarded two Dimock Twp. couples $4.24 million today after finding Cabot Oil & Gas responsible for contaminating their well water. The verdict comes following 8.5 hours of deliberations over two days. The decision following the 14-day trial is a huge victory for Nolen Scott Ely, his wife, Monica-Marta Ely and Raymond and Victoria Hubert, who pursued the case for six years after rejecting a settlement offer in 2012. The Ely family received $2.75 million. The Hubert family received $1.49 million. The Elys and Huberts alleged Cabot was negligent in drilling two natural gas wells near the Susquehanna County homes, which contaminated their wells with high levels of methane. Cabot maintained the methane was naturally occurring.

Pennsylvania families win $4.2 million damages in fracking lawsuit | Reuters: A federal jury ruled on Thursday that Cabot Oil & Gas Co must pay more than $4.2 million in damages to two families in northeastern Pennsylvania who said the company's fracking operations contaminated their ground water. Six jurors in federal court in Scranton awarded $1.3 million each to Scott Ely and Monica Marta-Ely, a married couple in Dimock. Each of their three children received an award of $50,000. A second couple, Ray and Victoria Hubert, also of Dimock, about 32 miles (50 km) south of Binghamton, New York, each received $720,000, and their daughter Hope was awarded $50,000. The families had no immediate reaction but were seen thanking jurors after the verdict in the U.S. District Court of the Middle District of Pennsylvania, which came after 13 days of testimony. Cabot had no immediate comment but spokesman George Stark said the company was preparing a statement. The Elys and Huberts were the last of more than 40 families who had sued Cabot. They alleged that their water was contaminated with methane gas after the company began using the process of hydraulic fracturing, or fracking, to extract gas from underground shale formations near Dimock in 2008. The other families settled with the company in 2012.

Jury Awards Two Dimock Couples $4.2 Million After Finding Cabot Oil & Gas Negligent in Fracking Contamination Case --A federal jury awarded two Dimock Township couples $4.24 million today after finding Cabot Oil & Gas responsible for contaminating their well water. The decision, following the 14-day trial and 8.5 hours of deliberation over two days, is a huge victory for the families. “Congratulations to the Ely and Hubert families for winning in federal court today against Cabot Oil & Gas for poisoning their water from drilling and fracking operations,” Mark Ruffalo, on behalf of Americans Against Fracking, said.  The Dimock case dates back to 2009 when 44 plaintiffs brought a lawsuit against the company. In the five years since initiating litigation, the Elys and Huberts were the only plaintiffs remaining on the case as the vast majority had settled with the company. The Ely’s were awarded $2.6 million and their three children $50,000 each. The Huberts were awarded $1.4 million, with another family member awarded $50,000. “$4.2 million will not bring back drinkable well water to the long-suffering families of Dimock, Pennsylvania,” Sandra Steingraber, PhD, science advisor for Americans Against Fracking, told EcoWatch. “No amount of money can do that. Once groundwater is polluted, it’s polluted forevermore. But what this important jury decision does do is strip away the mirage of omnipotence that Cabot and other gas companies operate behind. Fracking poisons water. That’s what the science shows. The frackers will be held responsible. That’s what this court decision shows.” A NPR StateImpact report, prior to the trial, said that Cabot Oil & Gas had already accumulated more than 130 drilling violations at its Dimock wells, yet insisted that methane migration in Dimock’s water is naturally occurring. The company is currently banned from drilling in a 9-mile area of Dimock but is trying to lift the ban.

Jury awards last Dimock plaintiffs $4.2 million over water well contamination: A federal jury on Thursday found Cabot Oil and Gas Corp. responsible for contaminating two Susquehanna County water wells through its natural gas drilling operations and awarded the families a total of $4.24 million. The Ely and Hubert families of Dimock Township were the last plaintiffs in a high-profile case that began in 2009 and originally included 44 of the rural town’s residents, who claimed shoddy Cabot wells drilled early in the Marcellus Shale gas boom allowed methane and other constituents to migrate into their drinking water. Cabot maintains that anything tainting the water supplies is there naturally or comes from sources other than its operations. The jury awarded Nolen Scott Ely and Monica Marta-Ely each $1.3 million plus $50,000 for each of their three children. The jury awarded Ray and Victoria Hubert each $720,000 plus $50,000 for their daughter. The trial in the U.S. District Court for the Middle District of Pennsylvania started on Feb. 22 and stretched into a third week. The jury of four men and four women deliberated for about 8 hours on Wednesday afternoon and Thursday morning before reaching the verdict. In a statement, Cabot said it is surprised by the verdict because the plaintiffs lacked evidence to support their nuisance claims. Cabot’s attorneys indicated in court on Thursday that they will move to set aside the verdict because they said the plaintiffs’ attorney repeatedly mentioned excluded evidence and acted in other ways that prejudiced the jury against the company. Cabot’s attorney Jeremy Mercer described it as a calculated effort “to throw skunks into the jury box.”

Will water contamination verdict have broader implications? -- Opponents of natural gas drilling say the decision of a federal jury Thursday will have wide-ranging impacts. For more than two weeks, two families from Dimock Township have been trying to prove Cabot Oil & Gas negatively impacted their water. Jurors decided Thursday that Cabot was negligent in its gas drilling operations in Susquehanna County. The jury awarded the two families a total of $4.24 million. "I'm just so, at a loss for words!" Scott Ely said outside the federal courthouse in Scranton.His supporters are thrilled that a federal jury found the company cause a nuisance. "This is going to send shock waves to Harrisburg," Craig Stevens of Silver Lake Township said. The Ely family and Ray Hubert's family first filed their civil lawsuit in 2009. At that time, dozens of other families also claimed damages but most settled with Cabot as the years progressed. "They made a bad deal! They were under a lot of pressure and made a bad deal and it's very regrettable because at the outset, I represented all of them," attorney Leslie Lewis said. Several of the families who settled with Cabot were in the courthouse for the verdict. Because of the settlements they made with Cabot, they couldn't comment in public. Scott Ely says this is also a "win" for them. "I was trying to be their voice," Scott Ely said. "I hope this goes worldwide, goes viral to show what these industries are doing to us," gas drilling opponent Vera Scroggins of Brackney said. Now that the jury has spoken, gas drilling opponents want this to be a wake-up call to state regulators. "I'm taking this message to Harrisburg tomorrow in person," Stevens said. "I'm going to demand a meeting with the governor and I'm going to tell him this had to happen in federal court, you should be embarrassed of yourself!"

The Latest: Gas driller to appeal $4.24 million verdict -  One of the largest gas drillers in Pennsylvania says it will appeal a $4.24 million jury verdict that found the company polluted the well water of two families. Houston-based based Cabot Oil & Gas Corp. said Thursday the jury’s verdict “disregards overwhelming scientific and factual evidence” that it conducted itself properly in the small village of Dimock. The verdict comes at the end of a long-running federal lawsuit pitting homeowners against Cabot. Dimock was the scene of the most highly publicized case of methane contamination to emerge from the early days of Pennsylvania’s natural-gas drilling boom. State regulators blamed faulty gas wells drilled by Cabot for leaking combustible methane into Dimock’s groundwater. Cabot claimed the methane was naturally occurring.

The Greek tragedy of the billionaire who fracked up Pa.: Fracking – the controversial technique of drilling for  natural gas and oil – claimed some new victims in Pennsylvania yesterday: A once-majestic stand of maple trees that the Holleran family of Susquehanna County has been working to produce maple syrup since the 1950s. A big pipeline firm, the Williams Companies, successfully used the right of eminent domain to win the right to clear the Hollerans' stand of trees to make way for a new pipeline intended to carry to natural gas fracked from the Marcellus Shale to large urban markets. According to StateImpact PA, at least three U.S. Marshals armed with semi-automatic weapons and pistols and wearing bulletproof vests were there to protect the pipeline workers from about 20 peaceful protesters carrying signs that read “No Eminent Domain for Corporate Gain” and “Sap Lines Not Pipelines.” It was just one more way that the fracking boom has ripped Pennsylvania – and Pennsylvanians – apart since its gold-rush mentality swept through big chunks of the northern and western corners of the commonwealth about a decade ago. It was right around the moment that the first chainsaw was cutting into maple bark when a newsflash swept through the business world and beyond: Aubrey McClendon -- the ostentatious Oklahoma billionaire who was also essentially the godfather of our Pennsylvania fracking explosion, enmeshed in controversy until his final hours – had died under murky circumstances.

The Noxious Legacy of Fracking King Aubrey McClendon - WHEN FRACKING BILLIONAIRE Aubrey McClendon died after crashing his Chevy Tahoe into a bridge last week, the federal investigation into his alleged bid-rigging came to an end. At his memorial in Oklahoma City today, his friends and family will remember him as a “swashbuckling innovator” and a loyal friend, but his most enduring legacy may be his role in convincing policymakers and the public that natural gas could be an environmental boon and a solution to global warming. More than any other individual, McClendon personified the excesses of the fracking boom, gobbling up land so quickly and spinning the boom’s story so effectively that regulators, environmentalists, and even Wall Street struggled to keep pace. McClendon was not only the founder of Chesapeake Energy, the most important fracking company in the technique’s history, but he also co-founded one of the gas industry’s most important lobbying arms, America’s Natural Gas Alliance. In creating both, McClendon became an architect of the energy market’s reorientation around a product whose climate-warming emissions rival those of coal. “His desire for ‘more’ … was the driving force in the rapid development of U.S. shale resources,” Wall Street Journal reporter Russell Gold wrote in his book, The Boom. “McClendon wasn’t a mere participant in the great shale land grab. He created it.”

America’s Biggest Fracking Gashole Was Killed by Exploding Gas Bomb - Aubrey McClendon’s SUV was powered by compressed natural gas – which exploded into fireball when he attempted a high speed single car frack job of a concrete bridge abutment. Literally hoisted by his own fracking petard.  Shoulda been driving a Tesla, huh ? Ain’t Karma a bitch ?

EIA’s March 2016 DPR Natural Gas Revisions Defy Previous Production Declines -- The monthly Energy Information Administration (EIA) Drilling Productivity Report (DPR) provides a leading indication of expected crude and natural gas production from seven leading shale basins across the U.S. The latest DPR released earlier this week (March 7, 2016) included a massive 2.5 Bcf/d upward revision to the shale gas production forecast for March. The upward revisions fly in the face of expectations of production declines at recent 17-year low prices. But they also validate daily pipeline flow data showing actual production climbing to a new daily record in February 2016 and continuing to stay robust. Today we break down the latest DPR data, what the revisions mean and consider implications for the market. We’ve been following the DPR carefully since it was first published in 2013 (see Higher and Higher). Since then it has become an industry bellwether for shale basin production trends. The report takes lagged EIA production estimates, well production data from individual states as well as rig counts, and other data sources to produce a forecast for oil and gas production volumes from the seven major U.S. shale plays: Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica. Unlike many other production forecasts, the DPR’s methodology is designed to capture the net impact of both the changing decline rates of existing wells (producing longer than 30 days) and the changing productivity of new wells . We provided a detailed explanation of the DPR’s model inputs, methodology, assumptions and risks in our blog series “Every Rig You Take.” The report’s bottom line is that if the monthly change in rig productivity in a shale basin is enough to offset monthly volume declines from older declining wells, then the DPR forecasts a rise in production and if the decline in volume from existing wells is the larger of the two, the DPR shows a decline in production.

The Challenges of Making LNG the Go-to Bunker Fuel - In January 2015 new international regulations came into force that reduced the permitted sulfur content in ships “bunker” fuel in Northern European and North American coastal regions. So far, international shipping companies and cruise lines have been responding to these rules primarily by switching to marine gasoil (MGO), burning lower-sulfur fuel oil, or sticking with higher-sulfur fuel oil and adding “scrubbers” to capture most of the sulfur being emitted by their ships’ engines. More recently, though, some of the shipping sector’s biggest players have unveiled plans to boost the use of liquefied natural gas (LNG) as a bunker fuel, figuring that LNG bunkering will not only help them meet existing regulations but the tougher rules likely to be implemented over the next few years. Today, we begin a short series on the opportunities and challenges associated with shifting ships from fuel oil to LNG.  Besides death and taxes, another certainty in today’s world is that the rules governing emissions from fossil-fired power plants, industrial boilers, and engines of just about every size and type will be tightened, and then tightened again. The same holds true, of course, for fuels used in ship engines (known as bunkers).

Constitution Pipeline project delayed for lack of NY permit (AP) — A proposed 124-mile pipeline to deliver low-cost gas from Pennsylvania’s shale gas fields to New York and New England has been delayed for lack of a state water quality permit. Constitution Pipeline Company says Thursday it’s changing its projected start of service from the fourth quarter of 2016 to the second half of 2017. The company says it won’t be able to complete tree-clearing before the end of March, as required to avoid harm to nesting birds.  The company has completed tree-felling along the Pennsylvania leg of the project. But work can’t begin in New York until state regulators issue a water quality certification. Environmental groups and some local residents are lobbying Gov. Andrew Cuomo to deny the permit, saying the pipeline will pose human health and environmental risks.

Bill McKibben Arrested + 56 Others in Ongoing Campaign Against Proposed Gas Storage at Seneca Lake - Sandra Steingraber - The fight over the fate of the Finger Lakes received national attention today when best-selling author, environmentalist and founder of, Bill McKibben, joined the opposition. McKibben, 55, was arrested this morning with 56 area residents as part of an ongoing civil disobedience campaign against proposed gas storage in Seneca Lake’s abandoned salt caverns. This is a developing story, but at this time all arrestees have been released except for McKibben who is still in custody at the Schuyler County sheriff’s department. Organized by the direct action group, We Are Seneca Lake, the protesters formed a human blockade on the driveway of the gas storage and transportation company, Crestwood Midstream. During the blockade, which began shortly after sunrise, the protesters blocked all traffic entering and leaving the facility. In a public statement to fellow blockaders, McKibben thanked We Are Seneca Lake for serving as a “curtain raiser” for the larger global movement to break free from fossil fuels that is now unfolding in frontline communities all over the planet. “Today and every day there are places like this where people are standing up … This place is so important because it’s one of the places where people are understanding that it’s not just carbon dioxide we are fighting, it’s also methane, that there are two greenhouse gases and they are both spurring this incredible heating that we are seeing,” McKibben said. “… If we can hold off the fossil fuel industry for just a few more years, this stuff will never be built again.”

The Latest: Trump says fracking approval can help him win NY - GOP presidential front-runner Donald Trump says he thinks he can win New York, despite Democrats' significant voter registration advantage, because he's in favor of a practice called fracking. Trump tells an audience in New Orleans on Friday night that "New York has been let down" because its governor, Andrew Cuomo, will not allow hydraulic fracturing to release natural gas. He says that, had Cuomo made a different decision, the state would have been able to lower taxes and pay off its debt. He points to Pennsylvania, which allows the natural gas extraction process, saying: "They took those beautiful, beautiful natural resources. They took 'em out." He says that in Pennsylvania, people drive around in Cadillacs. He then pivoted to a Cadillac-sponsored event being held on one of his golf courses.

From Seneca Lake to China Via S Jersey – NJ LPG Export Terminal Planned --The Bill reports on a new fracking scheme to export America’s natural gas reserves to Brazil and China via tankers across from the Philadelphia airport. The Bill connects the rail lines all the way back to Watkins Glenn.  And $hillary’s push to ship America’s gas reserves overseas.  “I have been tracking the redevelopment of the former Dupont gunpowder plant in Paulsboro, Gloucester Co., NJ for about a year. It struck me as odd and suspicious because the plans of the new owners, Fortress Investment Group, an affiliate of a hedge fund, were shrouded in secrecy: The massive 1,800 acre site is directly across the Delaware River from the Philly Int’l airport, and had been owned by BP and used as a storage “tank farm” for decades, before being abandonded, and contaminated, about 10 years ago. The answer comes in today’s Marcellus Drilling News. It is to be an LPG export facility as an alternative to the ones now on the Gulf Coast.

Keystone Pipeline Operator TransCanada in Takeover Talks - WSJ - TransCanada Corp., the company behind the controversial Keystone XL oil pipeline project, is in takeover talks with Columbia Pipeline Group Inc., a U.S. natural-gas pipeline operator with a market value of about $9 billion. The companies could reach a deal in the coming weeks, according to people familiar with the matter. Details of the possible deal—including the role of Columbia Pipeline Partners LP, a publicly traded affiliate of Columbia Pipeline Group—couldn’t be learned. The negotiations could still break down, the people cautioned. With a typical takeover premium, a deal could value Columbia Pipeline Group at about $10 billion. The company also carries a debt load of nearly $3 billion. Houston-based Columbia Pipeline Group owns about 15,000 miles of gas pipelines from New York to the Gulf of Mexico, together with one of the country’s biggest underground storage systems and related gathering and processing assets. Most of its assets overlay the Marcellus and Utica shale formations in Pennsylvania, West Virginia and Ohio. It had profit of $307.1 million last year, up about 15%. Revenue declined slightly to $1.33 billion. The company was spun off from NiSource Inc., a natural-gas utility operating in seven Eastern states, in the middle of last year. Shares of both Columbia Pipeline Group and Columbia Pipeline Partners have fallen sharply since then as the slump in energy prices undercut oil and gas output and thus demand for pipeline capacity.

Pipeline investors hit by US court ruling - A judge has allowed a US oil and gas company to abandon pipeline contracts while in bankruptcy, in a first-of-its-kind decision that has rattled investors in energy infrastructure. Sabine Oil & Gas, a shale energy producer under Chapter 11 bankruptcy protection, sought permission to break contracts with two pipeline companies so it could pursue better deals and save as much as $115m. On Tuesday a judge ruled in its favour. “The court defers to the business judgment of the debtors to reject the agreements,” Judge Shelley Chapman said at a hearing in US bankruptcy court in Manhattan. The decision has important implications for the midstream energy sector, which gathers, processes, transports and stores oil and gas. Income-hungry investors had flocked to midstream companies on the belief that their generous payouts were backed by long-term, immutable contracts with customers. As they suffer low gas and oil prices, bankrupt producers are challenging these contracts in court. Some midstream companies have warned of “counterparty risk” in reference to their less creditworthy customers. After the ruling, investors dumped shares and units of pipeline companies and partnerships, with Kinder Morgan down 5.3 per cent, Plains All American off 5.9 per cent and Williams Companies dropping 9.4 per cent. However, it would be hard to draw broad precedents from any single case, lawyers and analysts said. “While this is an important decision, it’s one of those decisions that is state specific, fact specific and play specific,” said David Karp, partner at Schulte Roth & Zabel, a law firm, who is not involved with the case. “There are many other agreements out there that this decision will not cover.”

The Sabine Slam: Court Decision Threatens Midstream Sector -- A federal bankruptcy judge ruled that Sabine Oil & Gas could withdraw from its contract obligations with pipeline companies to ship a certain volume of oil and gas through their pipelines. The court decision may seem arcane, but it could have major ramifications for both producers and midstream companies. Under the contracts, a company like Sabine Oil & Gas promises to ship a certain volume of hydrocarbons through the pipeline at a set fee. If they fail to do so, they still have to pay the pipeline company for the use of the pipeline capacity. Sabine Oil & Gas, a struggling producer, says that it can no longer ship enough volume to meet the contractual agreement and it wanted to be let out of the contract. The company went to a bankruptcy judge in Manhattan, who ruled in Sabine’s favor. The pipeline contracts are very attractive to investors in midstream companies, who love the secure and stable revenue streams that such arrangements offer. The ruling could lead to a lot of uncertainty for the midstream sector. The Alerian MLP Index, an index fund that tracks pipeline companies, fell by more than 6 percent on March 8. Still, the judge ruled that Texas law was not clear enough to make the ruling binding.That likely means more litigation will be forthcoming. “One could see this ruling as something favorable for producers, but it’s something that’s going to play out further in the courts,” Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, told The Wall Street Journal.  More and more oil and gas producers are falling into bankruptcy, and even for those that avoid such a fate, meeting obligations with pipeline companies is becoming more difficult.The cloudy legality around how to get out of these contracts is creating uncertainty not just for drillers, but also for pipeline companies. The latest decision on Sabine Oil & Gas will do little to remove that uncertainty.

Study: Fracking wastewater wells more likely located near communities of color and poverty – During the years that community health researcher Jill Johnston lived and worked in San Antonio, Texas was experiencing an explosion of fracking. She and the community partners she worked with on environmental health issues had a strong hunch that most of the fracking wastewater wells were being located near communities of color. So, they decided to dig a little deeper and quantify the pattern. The results of that effort were published this month in the American Journal of Public Health. It turns out that Johnston and her colleagues were right — the study found that fracking wastewater disposal wells in southern Texas are disproportionately permitted in areas with higher proportions of people of color and people living in poverty. It’s a pattern that many researchers and advocates describe as “environmental injustice.” Environmental justice, according to the U.S. Environmental Protection Agency, is the “fair treatment and meaningful involvement of all people regardless of race, color, national origin, or income with respect to the development, implementation, and enforcement of environmental laws, regulations, and policies.” “Those who are profiting off all the oil and gas extraction in the Eagle Ford Shale (in south Texas) are very different communities from the people who bear the externalities of fracking,” Johnston told me. “Who’s getting the benefits and who’s getting left with the waste and the potential negative consequences?”

Oklahoma Earthquakes Continue To Haunt the Oil and Gas Industry --  The fracking industry got another shot of bad news on March 4, when Oklahoma regulators leaked word that a clampdown on oil and gas wastewater disposal would begin soon. The new actions are the latest attempt to quell a spate of earthquake activity in the state, which has been linked to the practice of injecting massive quantities of fracking wastewater deep underground, in addition to wastewater from conventional drilling sites. The numbers that link oil and gas wastewater disposal rates to earthquakes in Oklahoma are fairly straightforward. Wastewater disposal volumes rose 81 percent over the past six years, while earthquakes increased from an average of twice yearly to the current rate of twice daily. The problem consists of making a direct connection between specific disposal wells and earthquakes. However, the U.S. Geological Survey has collected enough data to assert confidently that there is “a strong connection in many locations between the deep injection of fluids and increased earthquake rates.” Apparently the pileup of evidence finally convinced the OCC (Oklahoma Corporation Commission) to act last spring and summer, when it began asking companies in some parts of the state to trim their wastewater injection rates and to shorten their disposal depths. Most agreed, with the exception of Sandridge Energy.

Oklahoma wants cuts to fracking wastewater injection to curb earthquakes - Technology & Science - CBC News: State regulators on Monday asked oil and natural gas producers in central Oklahoma to decrease their wastewater disposal operations to try to temper the sharp increase in the number and severity of earthquakes in the energy-rich state.  The proposal released by the Oklahoma Corporation Commission covers more than 400 wells across 6,000 square miles (16,000 square kilometres), and it comes less than a month after the commission issued a similar plan covering nearly 250 wells in northwestern Oklahoma. Oklahoma has about 3,800 disposal wells statewide. The commission wants the central Oklahoma cuts to be phased in over the next two months, and it plans to review the efficacy of the adjustments in about six months. Commission spokesman Matt Skinner said disposal volumes are about 970,160 barrels a day in the region, and regulators want to get that number down to 724,000 barrels a day, which is about a 25 per cent cut from current levels. A barrel equals 42 gallons. Skyrocketing earthquakes The number of earthquakes with a magnitude 3.0 or greater has skyrocketed in Oklahoma, from a few dozen in 2012 to more than 900 last year. Last month, a 5.1-magnitude temblor hit the state — the third-largest ever recorded in the state. Scientists have linked the quakes to the underground disposal of wastewater from oil-and-gas production.

Oklahoma regulators release plan to reduce temblors: (AP) — State regulators are asking oil and gas producers in central Oklahoma to restrict wastewater disposal operations to help temper a sharp increase in the number and severity of earthquakes. Monday’s request covers more than 400 wells across 5,200 square miles. It comes after a similar directive in February covering nearly 250 wells in northwestern Oklahoma. Scientists blame wastewater disposal volumes for increased seismicity. The Oklahoma Corporation Commission says the new cuts should reduce disposal volumes by 40 percent from 2014 levels. The number of earthquakes with a magnitude 3.0 or greater has skyrocketed in Oklahoma, from a few dozen in 2012 to more than 900 last year. A 5.1-magnitude quake hit northwestern Oklahoma Feb. 13, days before the commission’s earlier directive, which had been in the works since October.

Oklahoma Takes Action On Fracking-Related Earthquakes — But It's Too Late, Critics Say - More than five years after Oklahoma first experienced a startling increase in earthquakes linked to the disposal of huge volumes of wastewater created by hydraulic fracturing for oil, the state continues to shake and the number of strong quakes is increasing. In 2009, there were 20 quakes of magnitude 3.0 or higher, according to the U.S. Geological Survey. Last year, there were 890. In 2009, no quake measured 4.0 or greater. Last year, 30 did. Yet even as many Oklahomans track seismic data on their smartphones and struggle to sleep through the long, rumbling nights, there has been one notable location where people rarely seemed rattled. That is here, in the state capital, where the oil industry holds so much sway that for decades drill rigs have extracted crude from directly beneath the Capitol building. A Democratic state lawmaker, Cory Williams, said in an interview: “They own the place.” Now, however, after quakes have shaken the homes of some top elected officials — and those of the worried constituents who vote for them — the state is taking new steps to address the problem, even as critics say it is too little, too late. Last month, the Oklahoma Corporation Commission, the agency that regulates the oil and gas industry, asked oil producers operating in the northwest part of the state to reduce by 40 percent the amount of wastewater they dispose of deep underground.  Jeff Hickman, a Republican who represents Fairview, sponsored a bill that clarifies that the commission has the power to take enforcement actions — not just to politely ask the industry to change. And late in January, Gov. Mary Fallin, a Republican who only last summer acknowledged the connection between earthquakes and oil production, announced that she would direct $1.4 million in emergency funds to the commission and to the Oklahoma Geological Survey to hire more staff and improve technology and monitoring equipment.

Oklahoma Puts Limits on Oil and Gas Wells to Fight Quakes - Facing a six-year barrage of increasingly large earthquakes, Oklahoma regulators are effectively ordering the state’s powerful oil-and-gas industry to substantially cut back the underground disposal of industry wastes that have caused the tremors across the state. On Monday, the state Corporation Commission asked well operators in a Connecticut-size patch of central Oklahoma to reduce by 40 percent the amount of oil and gas wastes they are injecting deep into the earth. The directive covers 411 injection wells in a rough circle that includes Oklahoma City and points northeast. It follows a February request that imposed a 40 percent cutback on injection wells in a similar-size region of northwest Oklahoma. The actions significantly increase the effort to rein in the quakes, which the commission has long tried to reduce one well or a handful of wells at a time. But they are an equally notable challenge to the industry, which will most likely be able to make the cutbacks only by reducing oil and gas production. ... Although critics contend that earthquakes have caused millions of dollars of damage, Oklahoma’s political leaders have long been reluctant to impose restrictions on an industry that dominates the state’s economy. Until last spring, Gov. Mary Fallin, a Republican, maintained that the cause of the tremors was unclear, and the state Legislature refused to consider legislation addressing the issue. Ms. Fallin abandoned her position as the number of quakes rapidly increased. But the political leadership was not jolted into action until January, after a series of small earthquakes damaged homes and interrupted power in Edmond, an Oklahoma City suburb home to many in the state’s political and financial elite. ...

New Mexico orders company to clean oil disposal site spill  - (AP) — New Mexico regulators have accused a Texas company of trespassing and causing a spill at a disposal site used by the oil and gas industry. The State Land Office delivered a letter Wednesday to Midland, Texas-based Siana Operating ordering it to obtain an entry permit to remediate damage at the waste-water injection well it operates on state trust land in Lea County. The letter also threatened “any and all criminal and civil actions available” if requirements are not met. The company’s lease to use the facility had expired, the agency said. Separately, the state Oil Conservation Division issued an emergency order late Wednesday for Siana to temporarily shut off all of its wells, both for oil production and water disposal, until a hearing can be held on possible violations. State records list the company as an operator for at least 11 drilling locations. A Siana representative said the company was aware of the problem and was still considering its response.

Iowa regulators approve Bakken pipeline permit (AP) — The last state permit needed for a pipeline that will carry a half-million barrels of crude oil daily from North Dakota to Illinois was approved Thursday by Iowa utilities regulators, who also gave the Texas-based company authority to use eminent domain for land that property owners are unwilling to voluntarily provide. The Iowa Utilities Board voted unanimously to approve a hazardous pipeline permit for the so-called Bakken pipeline, 346 miles of which will cross through 18 Iowa counties and 1,300 parcels of land. “We weighed the public benefits of the proposed hazardous liquid pipeline project against the public and private costs and other detriments as established by the evidence on the record,” board member Elizabeth Jacobs said. “Together we weighed all the issues presented by the parties and found the issues of safety, economic benefits, environmental factors and landowners’ rights to merit the most significant weight in reaching our decision.” The board had to decide whether the pipeline met the requirements of Iowa law, which authorizes approval of a permit only if it “will promote the public convenience and necessity.” Individual landowners and a coalition of environmental and property rights groups spoke out against the project, which drew 3,700 letters of protest to the board, voicing concerns about pipeline leaks that could harm farmland, rivers and streams. Farmers also opposed the pipeline, complaining it will decrease land values, disrupt productivity of farmland and damage timber areas. Owners of 296 parcels of land have refused to sign easements allowing the pipe to go through their property. The board’s approval means Dakota Access may now proceed with condemnation proceedings using eminent domain authority to force them to cooperate.

Iowa Just Approved An Oil Pipeline That Will Cut Through Four States -  An oil line that would cut through four Midwestern states and 50 counties — using, at times, eminent domain to do so — got the last state permit it needed Thursday. Now, only one federal permit remains for the Bakken Pipeline’s construction to happen.  n After more than a year of review, the Iowa Utilities Board gave the green-light to the Bakken Pipeline, allowing the developer, Dakota Access, to build across 346 miles of mostly privately-owned Iowa farmland. North Dakota, South Dakota, and Illinois have already awarded the right-of-way to this mega-infrastructure that will transport at least 450,000 barrels of crude oil per day from the oil-rich Bakken region in North Dakota to a market hub in Patoka, Illinois. “We weighed the public benefit of the proposed … project against the private and public costs, and other determinations as established on the record,” said Boardmember Libby Jacobs. The board looked into safety, economic benefits, environmental concerns and landowners’ rights, too, she added before the three-member board unanimously approved the project.  The Iowa Sierra Club and the Private Property Rights Coalition said they will appeal the decision. Landowners dispute that Dakota Access provides a public benefit that warrants eminent domain powers.   Puntenney said about 250 Iowa landowners are holding out.  But the 1,168-mile long Bakken Pipeline, a piece of infrastructure comparable in length to the rejected Keystone XL, also crosses federal wetlands and waterways like the Mississippi River and the Missouri River — the longest river in North America. Hence, the Army Corps of Engineers has to issue a permit as well. That will happen once agencies assess possible harms to the environment, officials said. For the past several months three Army Corps of Engineers districts have been working on this verification, as they’ve received public comments.

Bakken pipeline approved in Iowa, but fight not over -- Thousands of construction workers could start work this spring on the Bakken oil pipeline through Iowa, but a statewide coalition of environmentalists, community activists and property owners is vowing to do everything possible to stop the project. The Iowa Utilities Board voted 3-0 on Thursday to approve a state permit for the underground pipeline, which will run diagonally for 346 miles across 18 Iowa counties. The project is proposed by Dakota Access LLC., a unit of Dallas-based Energy Transfer Partners. The massive pipeline project has deeply divided Iowans from many walks of life, from those who welcome it as a potential economic benefit to those who deride it as an environmental threat and a violation of private property rights. The board took about seven minutes to issue its decision. It came after 18 public informational meetings, 12 days of public hearings, and weeks of deliberations over the past year and a half. In the process, the board received more than 8,000 public comments and compiled more than 3,500 pages of transcripts.

North Dakota oil production drops by 30.6K barrels daily in January -(AP) — North Dakota’s Department of Mineral Resources says the state’s oil production decreased by about 30,600 barrels a day in January.The agency says the state produced an average of 1.12 million barrels of oil daily in January. The January production was about 105,380 barrels per day less than the record set in December 2014. North Dakota also produced 1.63 billion cubic feet of natural gas per day in January, down from 1.67 billion cubic feet daily in December. The January tally is the latest figure available because oil production numbers typically lag at least two months. There were 33 drill rigs operating in North Dakota’s oil patch on Friday — the lowest number since March 2007.

Is It All Over Now? Producers Lose Their Appetite For Bakken Crude Output -  For the past, year many shale oil producers have defied the expectations of many and kept output at or near to record levels in the face of falling oil prices and much tougher economics. Improvements in productivity, cost cutting and a concentration on “sweet spot” wells that generate high initial production (IP) rates have all helped cash strapped producers survive. But with oil prices so far in 2016 stuck in the $35/Bbl and lower range and with the worldwide crude storage glut still weighing on the market – producers are finally pulling back. Today we look at how increased pressure on North Dakota producers is putting the brakes on Bakken crude production. In December 2015, crude production in North Dakota Bakken fell by 2.5% to 1,152 Mb/d (from 1,182 Mb/d in November). That December output is down 6% from the record 1,227 Mb/d produced a year earlier in December 2014. . A number of signs point to the decline in production continuing during the rest of 2016 unless there is an extended oil price recovery. For a start, the number of new permits to drill wells in North Dakota is at a seven year low – indicating a low appetite for drilling (more on that in a minute). Second, there were 1183 inactive wells in the state in December - about 30% above normal for this time of year. The operators have essentially abandoned these inactive wells – usually because they are losing money. Many of these inactive wells are older and had very low production rates - less than 35 b/d. . A third indicator of declining producer interest in the Bakken is the large number of producing wells in North Dakota currently being transferred (sold) by one operator to another – 697 wells as of February 17, 2016 according to Helms. Some large producers such as Occidental Petroleum that is selling 346 wells - are leaving the North Dakota Bakken oil patch altogether. Others that are staying in the Bakken have sold off wells to other operators to raise cash – including Whiting Petroleum Corp (the largest Bakken producer – selling 331 wells) and EOG Resources, grandfather of the crude-by-rail phenomenon.

Wyoming pulls permits for abandoned experimental methane wells (AP) — Wyoming officials have revoked state permits for hundreds of abandoned coal-bed methane wells that were part of an experiment some hoped would reverse a bust in coal-bed methane. The 413 wells in Campbell County now are a long list of wells the state plans to plug and clean up over several years. The Wyoming Department of Environmental Quality pulled the permits Friday. Patriot Energy, which held the permits, and High Plains Gas, which bought the Patriot wells in 2014, no longer are in business and don’t have working phone numbers.

Idaho House approves oil and gas regulation bill: (AP) — The Idaho House on Monday approved legislation aimed at speeding up natural gas and oil production by changing the industry’s deadlines and decision-making process. Senate Bill 1339 would make the Idaho Department of Lands responsible for initial oil and gas decisions, while allowing the Oil and Gas Conservation Commission to oversee and reverse such decisions. It would also institute tighter deadlines for oil and gas industry appeals. Democratic Rep. Ilana Rubel, of Boise, says lawmakers have been inundated with letters from constituents in opposition of the bill. She argues that the new legislation would unfairly restricts public input because it reduces the public comment period on new drill projects from 15 to 10 days. The measure passed the body in a 50-19 vote. It now heads to Gov. C.L. “Butch” Otter’s desk for his signature.

FERC Denies Jordan Cove LNG Export Terminal and Pacific Connector Pipeline -- On Friday, the Federal Energy Regulatory Commission (FERC) rejected the proposal for the Jordan Cove LNG Export Terminal and Pacific Connector Pipeline because its public interest value did not outweigh the project’s adverse effects “We find the generalized allegations of need proffered by Pacific Connector do not outweigh the potential for adverse impact on landowners and communities,” FERC said, adding that “the record does not support a finding that the public benefits of the Pacific Connector Pipeline outweigh the adverse effects on landowners.” This is a huge victory for groups that have been fighting this project, including the Sierra Club, which intervened by filing a formal request calling for the Jordan Cove terminal and Pacific Connector pipeline to be rejected. “This historic victory is the result of over a decade of hard work by Oregonians and their allies across the environmental movement committed to protecting their communities from this dangerous proposal,” Sierra Club executive director Michael Brune said.

U.S. oil production continues to decline, and is now below its year-ago level - Today in Energy - (EIA): U.S. monthly crude oil production in December 2015 continued to decline, as oil production reached its lowest level since November 2014. Production also declined from year-ago levels for the first time in more than four years. This continued production decline is the result of lower crude prices, which have declined more than 70% since the summer of 2014. Crude oil production in December 2015 averaged 9.3 million barrels per day (b/d), down 166,000 b/d from December 2014 and the first year-over-year decline in U.S. monthly oil output since September 2011, according to the latest data from  EIA's Petroleum Supply Monthly report released at the end of February.  Domestic oil production has generally declined month to month since reaching a 44-year peak of almost 9.7 million b/d in April 2015. Even as production declined, output was still above levels from the same month a year earlier until EIA published production for December 2015. Most of the decline in oil production has occurred in states where a large portion of output comes from tight oil formations, including North Dakota, Texas, and New Mexico. Oil production from tight formations accounted for most of the increase in U.S. oil production during the past five years, and it is now making up most of the decline in output. EIA's Short-Term Energy Outlook forecasts U.S. oil production will continue to decline both on a month-to-month basis and from year-ago levels until the fourth quarter of 2017.

Contraction in U.S. Shale Pushes Oil to $40: Crude oil prices have rallied by more than 30 percent since early February and investors are growing more confident that a rebound is in order. Have oil prices finally turned a corner? The sudden wave of cautious optimism surrounding the direction of oil prices can be boiled down to the decline in U.S. oil production, a trend that is starting to pick up pace. While U.S. oil producers managed to stave off significant production declines in 2015, drillers are finally starting to capitulate with oil prices in the mid-$30s per barrel and below. The effects are starting to show up in the data. The EIA reported weekly estimates showing that U.S. production has now dropped below 9.1 million barrels per day (mb/d). That is a departure from the past few months - the U.S. saw little to no decline in output in the fourth quarter, as weekly figures pointed to a resilient rate of production that hovered between 9.1 and 9.2 mb/d. That trend continued into the early part of 2016 even though prices crashed below $30 per barrel. However, by the end of January, the EIA believes that U.S. oil production finally started to see output fall. Between January and the end of February, the U.S. lost over 150,000 barrels per day in production. The EIA's weekly figures are not as accurate as their retrospective monthly estimates, but since the monthly figures are published with several months of a lag, it could be a few more months before we get a more accurate picture of how fast output is falling.

DUC and cover | The Economist: NO ONE can deny that America’s shale-oil industry is having a hard time. In recent weeks it has suffered the indictment and subsequent death in a car crash of one of its pioneers, Aubrey McClendon; a shellacking from Hillary Clinton, who could become America’s next president; and a warning from Ali al-Naimi, Saudi Arabia’s oil minister, to cut costs, borrow money or face liquidation. The data illustrate the extent of its woes. Against that bleak backdrop, the mere hint this week that American oil prices were rebounding towards $40 a barrel, up from a low of less than $30 a barrel a month ago, must have felt like a get-out-of-jail-free card. With a chutzpah typical of the industry, some shale executives see $40 oil as the threshold above which they can resume drilling and make money again—even if America is still awash with record amounts of crude in storage. If they are right about that, it could change the entire dynamics of the oil market, quickly smoothing any upward or downward spike in prices. But it is not at all clear that they are. In theory, it is not hard for the frackers to increase production rapidly, once it becomes economical. Rig and drilling costs have fallen so fast that some wells could make money with prices around $40-45 a barrel, according to Rystad Energy, a consulting firm (see chart 2). Firms have laid off many workers, but with well-paid jobs hard to find elsewhere, it could be relatively easy to attract them back. In preparation for higher oil prices, producers from the Bakken field in North Dakota to the Permian and Eagle Ford in Texas have reported that they have hundreds of “drilled but uncompleted” ( DUC) wells. DUCs should be anathema to a self-respecting shaleman; they sink cash into the ground in the form of wells, but defer the all-important fracking that breaks open the shale rock and produces the oil. They could be a quick way to resume production, however. In late February Continental Resources and Whiting Petroleum, two big operators in the Bakken, said that above $40 a barrel they may begin fracking their rising inventory of DUCs. For most of the industry, however, the problem is not finding oil but finding cash. “No one is sitting on any excess capital,”

US shale industry’s best days are still ahead -- These days the oil market is a real street brawl. Filling up at the pump has turned into highway robbery. The average cost of a gallon of gasoline in the U.S. is below $1.80 — the lowest in almost a decade. Oil prices — hovering at $30 a barrel for the last few months — are wreaking havoc on producers around the world, but the pain has been particularly sharp here in the U.S. Many of our oil companies — the very companies that helped launch the shale revolution — are teetering on bankruptcy. Others that are somewhat better off are trying to maintain investor confidence by promising to more or less hibernate. For example, Whiting Petroleum and Continental Resources, the two largest producers in North Dakota’s prolific Bakken shale, have decided not to frack any new wells for the foreseeable future. Survival in this market means cutting investment until oil prices begin to rebound. Does this grim news mean that the gains of the shale revolution — increased U.S. energy security, stronger economic growth and a less powerful OPEC — will be lost? Far from it. It may be hard to see through the storm, but the U.S. shale industry’s best days are likely still ahead. Although Saudi Arabia still plays a central role in the global oil marketplace, America’s shale producers have broken OPEC’s ability to manipulate the market as it has since the 1970s. In 2008, U.S. crude oil production had fallen to only 5 million barrels a day, a drop of almost 50% from the peak production of 9.6 million in 1970 and down to the lowest level of domestic crude output in more than 60 years, going all the way back to 1946 (see chart above). But then the revolutionary drilling technologies of hydraulic fracturing and horizontal drilling sparked the great American shale revolution, and the abundance of domestic shale oil quickly reversed the 36-year decline in U.S. output in only seven years.

The oil industry will survive its wounds, but the pain isn’t over --  Two of the biggest names in the oil industry believe that the wounds inflicted by cratering crude prices will heal slowly, but the result will be a patient stronger in the broken places and better prepared for future growth. John Browne, former chief executive of UK major BP, and Mark Papa, ex-CEO of EOG Resources, one of the biggest US shale operators, said during the CERA conference in late February when the price lift comes, the industry will be changed in ways that prepare it for the coming decades, Browne said. “I think we’ll see a pretty fundamental restructuring” in the industry, said Papa, longtime EOG chief from its 1999 spinoff from now-defunct Enron until mid-2013. He is now a partner at private equity firm Riverstone Holdings. But in the next six to 12 months there may be a “decimation” of the industry, with many bankruptcies, he said. Of companies that survive, “a lot will be grievously wounded financially.” Management teams that do weather the storm will be more conservative, and as conditions improve they will not stretch their balance sheets even if oil gets to much higher levels, Papa said. They will also be very careful in making acquisitions of other companies. “Industry is going to act in a more mature fashion, particularly the independents,” he said, although he added “it will be interesting to see how majors respond to this.”

Chevron cuts spending budget again (AP) — Chevron is cutting its spending budget by nearly 40 percent for 2017 and 2018 as it deals with plunging oil prices, a bigger cut in spending than it previously expected. The oil and gas company said Tuesday that it expects to spend between $17 billion and $22 billion on drilling and other projects in 2017 and 2018, lower than the $20 billion to $24 billion range the company had expected in October. The company has a spending budget of $26.6 billion this year, down 24 percent from the year before. Several energy companies have announced plans to trim spending due to lower oil prices. Chevron Corp., based in San Ramon, California, has also cut jobs and sold some of its facilities and pipelines to raise cash.

Chevron Protects Dividend, Slashes Another 36% Off Spending --  Chevron continues to cut spending in order to keep its dividend. The California-based multinational just announced that it would cut its capex in 2017 and 2018 by another 36 percent, bringing annual spending down to between $17 and $22 billion. That is down from an October 2015 estimate, when Chevron said that it expected to spend $20 to $24 billion each year in 2017 and 2018. It is also sharply lower than the $26.6 billion Chevron is spending this year, which itself is a 25 percent reduction from last year’s levels. The severe cuts come as Chevron has had to take on debt in order to afford shareholder dividends, as the company has not generated enough cash flow to cover the payouts with oil prices as low as they are. Dividends cost the company $8 billion in 2015 alone. Chevron would need oil trading at $50 in order to cover the dividend with cash flow. This week is also notable for Chevron because the giant Gorgon LNG project in Australia is finally beginning operations. The $54 billion export facility has absorbed much of Chevron’s capital and attention, a project that has suffered from repeated delays and cost inflation. The total price tag is 45 percent higher than the original estimate. The bad news for Chevron is that the facility is set to export LNG into a market that is already oversupplied. Spot LNG cargoes have plunged by two-thirds over the past two years. For April delivery, LNG cargoes in East Asia have dropped to just $4.25 per million Btu (MMBtu). In early 2014, the same cargoes sold for over $17/MMBtu. Chevron will be insulated somewhat from these forces with contracts lined up for delivery under fixed prices. The long-term picture, the company believes, still looks strong. LNG export terminals can operate for decades. Nevertheless, the massive project is squeezing Chevron in the short-term, a time when it can least afford it. And with dividends untouchable, spending on exploration and production must be cut deeper.

Chevron shifts focus to Texas shale -- Chevron plans to focus on shorter-cycle investments in West Texas shale plays after its larger, long-term investments come into production this year. By the end of the decade, Chevron believes it can nearly triple its oil production in the Permian Basin by increasing its rig count from seven to 14. “Don’t be surprised if by the middle of the next decade 20 to 25 percent of our production is in this short-cycle shale and tight activity,”  The San Ramon-based oil company said it plans on doubling its spending in West Texas. Chevron has 1,300 drilling locations in the Permian that can turn a profit if oil reaches $40 per barrel. At $50, Chevron has 4,000 profitable locations. Chevron also has 5,500 profitable locations if oil sells at $60. Officials said the company will drill 175 wells this year with seven operated rigs and nine non-operated rigs. The company projects an output of 350,000 barrels a day by 2020 from the Permian Basin. Chevron currently produces 125,000 barrels a day from Permian shale. Increased efficiency has helped Chevron weather low oil prices. In the past year, Chevron said its cost to drill a horizontal well dropped to $7.1 million, a 40 percent drop. It now takes 20 days to drill a well, less than half the time it did before. Returns from the Permian Basin have increased by 30 percent. Though the company has become more efficient, it still plans to cut up to 25 percent of its upstream work force this year. That means about 4,000 jobs will be eliminated in 2016. Last year, Chevron slashed 3,000 jobs as oil prices neared 11-year lows.

Key Formula for Oil Executives’ Pay: Drill Baby Drill - WSJ: Markets have been waiting for U.S. energy producers to slash output during a period of depressed crude prices. But these companies have been paying their top executives to keep the oil flowing. Production and reserve growth are big components of the formulas that determine annual bonuses at many U.S. exploration and production companies. That meant energy executives took home tens of millions of dollars in bonuses for drilling in 2014, even though prices had begun to fall sharply in what would be the biggest oil bust in decades. The practice stems from Wall Street’s treatment of such companies’ shares as growth stocks, favoring future prospects over profitability. It has helped drive U.S. energy producers to spend more unearthing oil and gas than they make selling it, energy executives and analysts say. It has also helped fuel the drilling boom that lifted U.S. oil and natural-gas production 76% and 31%, respectively, from 2009 through 2015, pushing down prices for both commodities. “You want to know why most of the industry outspent cash flow last year trying to grow production?”  “That’s the way they’re paid.” Signs that oil production may finally be easing helped push up crude prices Friday to their highest levels of the year. Still, CEO pay and production are likely to remain a flash point for investors because few wells are profitable even at these higher crude prices. The persistence of U.S. production in the face of such economics has been one of the biggest puzzles in the energy market. Members of the Organization of the Petroleum Exporting Countries have increased production, betting that U.S. energy producers would curtail drilling or be forced out of business. But even as oil prices began their plunge in the second half of 2014, many companies kept drilling.

Upstream CAPEX Reductions -- March 11, 2016 From Woods Mckenzie: (graphic)  I think two interesting data points is the extent to which California Resources will quit drilling in California, and the fact that Whiting is not on the list (if it is, I missed it).

The $9.2 Billion Bet Against OPEC Dominance - The $9.2 billion investors paid to snap up new equity offerings from U.S. oil companies in 2016 proves those investors are indeed ready for more punishment. The amount is in line with the pace of such equity offerings in 2015 even as the mood in the oil markets has grown increasingly dour In June of last year I wrote: New investors in U.S. oil company shares must believe they are catching the bottom and will have a very profitable ride up from here. This demonstrates that OPEC's work is not done and accounts in part for the decision to leave production quotas unchanged. 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.A lot of investors did end up catching a falling knife as oil careened downward from about $60 a barrel last summer to Friday's close of about $36. Investors this year may still find that the knife is falling, though it admittedly doesn't have as far to fall this time around. Still, it seems they misunderstand OPEC's strategy or believe that that strategy will fail. As I said in the same piece:  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. It seems that the oil industry still has friends in the investment world and that OPEC's work is therefore not yet done. The big question then is: Will OPEC stay the course or relent with a production cut this year to raise prices?

EIA Forecasts Continued Crude Oil Production Decline Across US Shale In April, 2016 -- March 8, 2016  --From EIA: second-biggest US shale output drop is forecast for April, 2016 -- reported by Reuters --U.S. shale oil production in April is expected to chalk up the second-largest monthly decline on record, and the sixth straight monthly decrease.  Total output is expected to fall by 106,000 barrels per day to 4.87 million bpd. That would be the second largest monthly drop after a record 121,000 bpd-decline in January 2015, based on data dating back to 2007.  Production from the Bakken Formation in North Dakota is expected to fall 28,000 bpd, the fifth consecutive monthly drop, while output from the Eagle Ford Formation is forecast to drop 58,000 bpd, the ninth consecutive monthly slide.  Production from the Permian Basin in West Texas is expected to fall 4,000 bpd, the first decline since June. Oil production per rig rose to new records across the shale plays, jumping 6 bpd in the Bakken, 10 bpd in the Eagle Ford and 6 bpd in the Permian.  The biggest regional decline was expected to be in Eagle Ford, down 0.2 bcfd from March to 6.3 bcfd in April, the lowest level of output in the basin since April 2014.  In the Marcellus Formation, the biggest U.S. shale gas field, in Pennsylvania and West Virginia, April output was expected to decline by 0.1 bcfd from March to 17.3 bcfd. That would be the second monthly decline in a row and the biggest decline since July 2013.

On Fracking, Clinton And Sanders Give Vastly Different Answers - Democratic presidential candidates Hillary Clinton and Bernie Sanders gave vastly different answers on fracking at the CNN Democratic debate on Sunday, illustrating a key policy contrast between the two.The candidates were asked by University of Michigan student Sarah Bellaire about whether they support fracking, the controversial process of injecting high-pressure water, sand, and chemicals underground to crack shale rock and let gas flow out more easily. Clinton, who answered first, said she does — but only under certain conditions. Specifically, Clinton said that she would not support fracking when local communities don’t want it; when it causes pollution; and when fracking companies don’t disclose the chemicals they use. “By the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place,” she said, adding that some places with fracking are not sufficiently regulated. “We have to regulate everything that is currently underway, and we have to have a system in place that prevents further fracking unless conditions like the ones that I just mentions are met.”When asked the same question, however, Sanders had a different response.“My answer is a lot shorter. No. I do not support fracking,” he said to applause.  Sanders was then challenged by CNN debate moderator Anderson Cooper, who noted that many Democratic governors say that fracking can be done safely, and that it’s helping their economies. Cooper asked: “Are they wrong?”  “Yes,” he said, to more applause. Sanders also hit Clinton for her campaign contributions from fossil fuel interests.  Watch:

Hillary Clinton pivots on fracking - Hillary Clinton made a major left turn last Sunday night in her debate with Bernie Sanders.  The leading candidate for the Democratic nomination for President shifted her position on hydraulic fracturing. In answer to a question, Clinton outlined a set of conditions that would have to be met before she supported fracking, and then added this critical qualifier: “By the time we get through with my conditions, I do not think there will be many places in America where fracking will continue to take place.”   That is a policy shift from her earlier position outlined in a factsheet released last month, where she said “natural gas plays a critical role in reducing CO2 and other pollutants (and has)…yielded significant public health benefits.” Clinton may have been pulled to the left by Sanders who, in answer to the same question about whether he supported fracking, said simply, “no.”  It’s stunning that the technology that has led to the energy production resurgence in this country is so cavalierly dismissed by Sanders and Clinton.  Fracking has opened mammoth gas and oil reserves that were previously unreachable, guaranteeing energy stability and security for generations as well as creating a new economic force. The Energy Information Administration estimates that the United States will become a net exporter of LNG (liquefied natural gas) by the middle of next year, marking the first time since 1955 that we will export more than we import. The American Petroleum Institute says production from Marcellus reserves alone has risen from one billion cubic feet per day to 16 billion just in the last few years.  U.S. crude oil production increased 74 percent between 2008 and 2014. Most of the surge in gas production and about half of the oil comes from fracked wells.  In fact, there is so much gas and oil available here and around the world now that prices are hitting historic lows, keeping energy and gasoline bills down for consumers.

Hillary Clinton's Pledge to Limit Fracking Falls on Unconvinced Ears - – Hillary Clinton’s vow to regulate oil and gas fracking almost out of existence was met with skepticism Monday, failing to convince either industry or environment groups that she would – or could – end the controversial drilling practice if she becomes president. The front-runner for the Democratic party nomination used a debate in Flint, Michigan on Sunday night to oppose fracking anywhere local communities were against it, wherever it polluted air or water, and whenever companies refused to disclose what chemicals they use in the process.“By the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place,” she said.  But supporters and opponents of fracking dismissed her position as campaign rhetoric that would collide with the limited powers of a president to control an activity largely regulated at the state level. Defenders of fracking said no president would try to put the brakes on a drilling technique that has flooded the U.S. with cheap oil and gas. “Secretary Clinton’s answer is essentially campaign hyperbole, and meant to appease her environmental constituency,” “In reality, it has little substance to it.” Green groups welcomed Clinton’s shift from her past support for fracking. But they also urged her to stop laying down conditions and caveats. As secretary of state, Clinton supported fracking as a way to reduce U.S. dependence on imported energy, and even led a push to spread shale extraction to allies in Europe to wean them off Russian gas.

How Hillary Clinton's Ignorant War On Fracking Could Cost Her The Presidency - Breitbart News -- The FrackNation page temporarily suspended by Facebook is back up and running.  This means that — thanks to the Streisand Effect — the anti-fracking activists who put pressure on Facebook to close it down have shot themselves in their sandalled feet. Suddenly the whole world knows about the Dimock water trial — and what a huge setback it has been for the cause of anti-capitalist, enviro-Nazi lunacy.  Indeed, it’s possible that this once obscure trial may yet come to be recognised as the case that cost Hillary Clinton the presidential election.  To understand why you first need to appreciate what a hot-button issue fracking is with the liberal base. Sen. Bernie Sanders (I-VT) is flat against it. So — she suddenly decided at Flint, Michigan at the weekend — is Hillary. Hillary Clinton, though, needed more time to outline three conditions in a more nuanced answer on fracking. She’s against it “when any locality or any state is against it,” “when the release of methane or contamination of water is present,” and “unless we can require that anybody who fracks has to tell us exactly what chemicals they are using.” While this tough anti-fracking line might have played well with liberal activists, it’s unlikely to win widespread popular support when Clinton goes to the country.

Hillary Will Never Admit Publicly That She Supports Fracking, But She's a Booster Behind Closed Doors- Hillary Clinton fielded a question about whether she supports fracking in Sunday’s Democratic presidential debate. Here’s her equivocal answer and a rebuttal: Bernie and Hillary #1DBBD13 from JFOX on VimeoYou will never hear her say on a debate stage “I support fracking, let’s frack more.” That’s because hundreds of families harmed by fracking have spoken out about water and air contamination. The anti-fracking movement is one the fastest growing grassroots movements in the country. The word "fracking" has become as politically toxic as the practice itself. Hillary Clinton can’t say she supports fracking, but she does. It’s on her website: see “Hillary Clinton Plan for Ensuring Safe and Responsible Natural Gas Production.” I’m wondering if Hillary’s team edited this or if they just copied and pasted the industry’s talking points directly:  Domestically produced natural gas can play an important role in the transition to a clean energy economy, creating good paying jobs and careers, lowering energy costs for American families and businesses, and reducing air pollution that disproportionately impacts low income communities and communities of color. Hillary Clinton has tried to distance herself from the large sums of money she takes from the fossil fuel industry, but their influence over her energy policy could not be more apparent: Natural gas can play an important role in the transition to a clean energy economy.

More heat than light in the US fracking debate - Fracking is an ugly term for a useful activity. Advances in hydraulic fracturing, to give the technique its proper name, sparked the US oil and gas boom of the past decade, bringing cheaper fuel, tens of thousands of well-paid jobs, and even a reduction in carbon dioxide emissions thanks to the switch from coal to gas for power generation. So it is troubling that the two contenders for the Democratic party’s nomination for president have been competing over which of them is more eager to bring fracking to an end.  Speaking in the candidates’ debate on Sunday evening, Hillary Clinton sketched out new requirements to be imposed on companies seeking to use hydraulic fracturing. Once those conditions were in place, she suggested, “I do not think there will be many places in America where fracking will continue.” Mr Sanders was quick to depict that as craven equivocation. “My answer is a lot shorter,” he said. “No, I do not support fracking.” Stopping fracking would be a great plan for rescuing Saudi Arabia. For the US, though, it would be disastrous. If elected, Mrs Clinton or Mr Sanders would not be able to ban hydraulic fracturing overnight. Oil and gas regulation in the US is mostly handled by the states, and attempts to extend federal authority would face challenges in the courts. The candidates’ comments are nevertheless concerning, because they reflect a denial of the realities of US energy production. More than half of all the oil and gas extracted in the US comes from wells in shale and similar rocks, which need to be fracked to be brought into production. Banning fracking would devastate the industry, send energy prices soaring, and make the US a much larger importer of both oil and gas. Neither candidate offered any worthwhile ideas about how to make good the harm that a fracking ban would do.

The EPA Will Limit Methane From Existing Oil And Gas Facilities - -- The EPA will limit methane emissions from existing oil and gas facilities — a huge move by the federal agency, announced in conjunction with President Obama’s meeting with Canadian Prime Minister Justin Trudeau on Thursday.  The new rule will help the two countries achieve their goal of cutting methane emissions from oil and gas to 40 percent to 45 percent below 2012 levels by 2025.  “The two leaders regard the Paris Agreement as a turning point in global efforts to combat climate change and anchor economic growth in clean development,” the White House said in a statement. “They resolve that the United States and Canada must and will play a leadership role internationally in the low carbon global economy over the coming decades.”  The EPA will start the formal process of developing the rule next month, while Canada expects to have a proposed rule in 2017.  Environmentalists have been calling for methane emissions reductions for years. A previously announced rule by the EPA covered only new oil and gas facilities — this new addition will greatly increase expected reductions from the sector.  Without it, by 2018, almost 90 percent of the methane emissions from the U.S. oil and gas sector would have come from infrastructure built before 2011, the Environmental Defense Fund had estimated.  The rise in fracking has dramatically increased methane emissions across the country. In fact, while natural gas is often touted as a clean energy source because it emits less carbon when burned than coal does, studies show that methane leaks have completely erased any climate benefit of transitioning to natural gas.  Methane is a potent greenhouse gas — which makes up 80 percent of natural gas. While it breaks down faster than carbon dioxide, it traps heat 25 times more effectively than CO2 over a 100-year period, and 34 times more effectively over a 20-year period.

Opposition Is Growing To Obama’s Sweeping Trade Deal -- 40 environmental groups have signed a letter urging Congress to reject the TransPacific Partnership.  It’s something that all the major presidential candidates — on both sides of the aisle — can agree on: The United States should not ratify the TransPacific Partnership trade agreement. Now, a group of environmental advocates is pressuring Congress to reject ratification of the 12-nation agreement, which they say would allow 9,000 companies operating on U.S. soil to sue the government for imposing environmental regulations.   Under the agreement’s investor-state dispute settlement clause, corporations can sue states for thwarting economic expectations. The clause, known as ISDS, allows companies to file claims for damages or lost revenue incurred by rejected permits or a changed regulatory landscape. The claims are heard by three-member tribunals, often made up of corporate lawyers, that operate independently. Handing foreign companies equal — or even slightly advantageous — ground against the U.S. government, in an extra-judicial tribunal system, is not as far-fetched as it sounds. TransCanada, the company that tried to build the Keystone XL pipeline, represents just one example of how the TPP would work. The company has filed a claim under NAFTA for $15 billion in damages, alleging that U.S. denial of the permit was “arbitrary and unjustified.”  The Keystone suit is really the tip of the iceberg in terms of what we could see if TPP were to pass through Congress.

Could This Lawsuit Be the Straw That Breaks the TPP’s Back? - In November 2015, just after President Obama finally stood up to the fossil fuel industry and rejected the TransCanada Corporation’s application for its tar sands pipeline through the United States, I issued a warning: In The Hill, I applauded the Obama decision and laid out the reasons why, under current trade and investment rules, TransCanada had grounds to sue the United States under the 1994 North American Free Trade Agreement (NAFTA).  I hardly need remind readers that NAFTA launched the modern era of corporate-biased investment rules, and serves as the model for the investment chapter in the TransPacific Partnership (TPP) that now awaits votes in the U.S. Congress. Lo and behold, TransCanada came to the same conclusion that I did.  They hired a giant corporate “K Street” law firm, Sidley Austin, and in January 2016, the fossil-fuel giant put the U.S. government on notice of a potential lawsuit under the investment chapter of NAFTA.  To get the U.S. government’s attention, they claimed to have suffered $15 billion in losses because of the rejection.  In TransCanada’s “notice of intent,” they argue that the United States has never before rejected a cross-border pipeline and that repeated studies by the U.S. State Department showed that the pipeline would not have a deleterious environmental impact on climate.  They conclude that the U.S. rejection of their pipeline, some seven years after their application, is a political decision and is not permitted under the NAFTA rules. It is vital that people pause and ponder:  TransCanada, in its legally justified yet totally outrageous reaction, is reminding us of the reality of the investment rules our governments, under heavy pressure from global corporations, have inserted into thousands of trade and investment agreements.   And, we need to contemplate the assault on democracy that these rules and the TransCanada complaint represent.

Wall St. vets battle BP in fallout over Canada refinery | Reuters: A legal battle between a team of former Wall Street oil traders and behemoth producer BP plc (BP.L) over a remote Canadian refinery sheds rare light on the murky world of crude trading. The first salvo in the previously unreported dispute was fired by BP in December. The oil company demanded, through arbitration, $110 million from the private equity-backed NARL Refining for its alleged failure to properly manage and maximize profits from the Come-by-Chance plant in Newfoundland. NARL filed a counter arbitration claim along with two lawsuits accusing BP - which is the refinery's sole supplier under a two-year contract - of providing varieties of crude that benefit its trading book but hurt the refinery's equipment and profits. The dispute could jeopardize the ongoing operation of the 115,000 barrel per day (bpd) refinery. It also exposes a rift in the rough-and-tumble global oil market, where disputes often are handled quietly to avoid compromising long-term relationships or revealing trading strategies. "Disagreements among parties in supply contracts are not uncommon, but we don't typically see these conflicts out in the open," said Ed Hirs, an energy economist at the University of Houston. "That's why these contracts call for disputes to go to arbitration, keeping it out of public view."

Pemex says it has lines of credit to pay 1,300 vendors: (AP) — Mexican state-run oil company Petroleos Mexicanos says it has obtained lines of credit allowing it to pay 85 percent of its vendors, more than 1,300 businesses. Pemex said in a statement Tuesday that at the close of 2015 it had debt of $8.4 billion of which it has paid about $1.1 billion. Company director Jose Antonio Gonzalez Anaya met with the heads of business organizations Monday, explaining that Pemex was experiencing a liquidity problem but was solvent. In February, Pemex announced it would slash spending 22 percent and cut unprofitable production 100,000 barrels per day. It will cut $5.5 billion from its 2016 budget because of low world oil prices. Mexico had estimated that the price of oil in 2016 would be $50, but it is now forecast at $25.

WTI Crude Spikes To $37, Brent Over $40 After Genscape Report -- Stocks are up thanks to another mindless spike in WTI Crude this morning after Genscape reported a smaller than expected build at Cushing. WTI spiked over $37 and Brent back above $40 on the news as Futures and ETF shorts cover.  WTI back above $37 for the first time since Jan 6th...Futures shorts covering in size... And Oil ETF Shorts have collapsed back to "norms"... Finally we are worried for Dennis Gartman's health as he has just $7 until potentially bad things happen: As he said on CNBC "we won't see crude above $44 again in my lifetime."

Oil at 2016 high above $40 per barrel after producer price support talk | Reuters: Global oil markets jumped more than 5 percent on Monday, with Brent hitting a 2016 peak above $40 a barrel, after Ecuador said it was holding a meeting of Latin American crude producers as OPEC sought a higher anchor price for oil. Technically-driven buying in crude and a commodities rally also boosted oil. Industry data showing a smaller-than-expected build in stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude futures was another supportive factor. Oil has rallied more than 50 percent since hitting 12-year lows less than two months ago. The rally began after Russia and the Organization of the Petroleum Exporting Countries floated the idea of a production freeze to support prices in an oversupplied market. Ecuador's Foreign Minister Guillaume Long said his government will host a meeting in Quito on Friday with Venezuela, Colombia, Ecuador and Mexico "to reach consensus over oil, especially prices." Separately, major OPEC producers are talking about a new oil price equilibrium of around $50, New York-based consultancy PIRA told Reuters.

Why Oil Is Up 46% In 17 Trading Days - Forbes: Intervention has been the common theme we’ve discussed for the better part of the past two months. And this week, that theme is heating up. We’ve explained why oil at $30 has posed a threat to the global financial system and global economy. And we explained the parallels of the systemically threatening (current) oil price bust and the 2007-2008 housing bust. But we also noted the key differences, and why and how this “cheap oil” problem could be easily solved, unlike the housing bust.  The easy fix, as we’ve said is intervention. And as we’ve made this case, along the way, we’ve gotten signals that intervention was, indeed, coming. The Bank of Japan and the European Central Bank stepped in a little more than a month ago and, at least verbally, implying that they could outright buy oil (threatening that there were “no limits” to what they could buy as part of their QE programs). The seminal moment in the “oil bust crisis threat” was the day Chesapeake Energy, one of the largest producers of oil and natural gas, was reported to be exploring bankruptcy last month. The rumor was immediately denied by the company. But it was that moment, we think, that policy makers realized that Chesapeake could be another Lehman moment for global markets and the global economy. Days later, the Bank of Japan intervened in the currency markets. We argued that, given the timing and the coinciding bottom in oil, that the BOJ likely used the opportunity to buy oil (either directly or indirectly through ETFs, etc). Today, just 17 days later, oil printed over $38 today.  That’s 46% higher than it traded the day the BOJ intervened in the currency markets. Meanwhile, we’ve also argued that China could step in and be an outright buyer of oil, to stem the threat to the global financial system.  They stepped in and bought oil (and a host of commodities) in 2009.  Oil quickly doubled from $32, and went on to trade back to well over $100 again.

Oil Fundamentals Could Cause Oil Prices To Fall, Fast! -  Berman - Oil prices should fall, possibly hard, in coming weeks. That is because fundamentals do not support the present price. Prices should fall to around $30 once the empty nature of an OPEC-plus-Russia production freeze is understood. A return to the grim reality of over-supply and the weakness of the world economy could push prices well into the $20s. An OPEC-plus-Russia production cut would be a great step toward re-establishing oil-market balance. I believe that will happen later in 2016 but is not on the table today. In late February, Saudi oil minister Ali Al-Naimi stated categorically, “There is no sense in wasting our time in seeking production cuts. That will not happen.” Instead, Russia and Saudi Arabia have apparently agreed to a production freeze. This is meaningless theater but it helped lift oil prices 37 percent from just more than $26 in mid-February to almost $36 per barrel last week. That is a lot of added revenue for Saudi Arabia and Russia but it will do nothing to balance the over-supplied world oil market. The problem is that neither Saudi Arabia nor Russia has greatly increased production since the oil-price collapse began in 2014 (Figure 1). A freeze by those countries, therefore, will only ensure that the supply surplus will not get worse because of them. It is, moreover, doubtful that Saudi Arabia or Russia have the spare capacity to increase production much beyond present levels making the proposal of a freeze cynical rather than helpful.

EIA's Dire Oil Forecast: $34 Crude Due To Far More Resilient Production, Oversupply And Lower Demand -- Now that the massive USO-driven squeeze appears to be over (congratulations to whoever managed to sell equity and their secured lenders) the bad news can return. First, it was Goldman slamming the "unsustainable rally, and then just a few hours ago, the EIA released itslatest monthly short-term outlook report in which it brought even more bad news for long-suffering bulls who thought the pain was finally over. Instead, the pain is only just beginning, after the EIA revised its 2016 supply forecast higher as "production is more resilient to lower prices than previously expected" - why thank you desperate momentum chasing "investors" of other people's money, who can't wait for that secondary offering to repay JPMorgan's credit facility. The EIA also revised its forecast demand lower as a result of a decline in global economic growth. Yes, someone finally admitted that demand is lower. End result: a cut in forecast oil prices for 2016 and 2017 from $37 and $50 to just $34 and $40. Here is the summary, with the troubling parts highlighted: Global oil inventories are forecast to increase by an annual average of 1.6 million b/d in 2016 and by an additional 0.6 million b/d in 2017. These inventory builds are larger than previously expected, delaying the rebalancing of the oil market and contributing to lower forecast oil prices. Compared with last month’s STEO, EIA has revised forecast supply growth higher for 2016 and revised forecast demand growth lower for both 2016 and 2017. Higher 2016 supply in this month’s STEO is based on indications that production is more resilient to lower prices than previously expected. Notably, revisions to historical Russian data, which raised the baseline for Russian production, carry through much of the forecast. Additionally, lower expectations for global economic growth contributed to a reduction in the oil demand forecast.

Crude Chaos As Cushing Inventories Rise For 6th Straight Week -- Following Genscape's projection that Cushing inventories rose less than expected, various sources on Twitter report that API sees a 4mm build (in line with expectations of a 3.9mm build) after EIA's massive build of over 10.3mm barrels last week. Cushing saw a 692k build - the 6th week in a row but gasoliine and distilklates saw a draw. Crude sold off all day as the short-covering squeeze ended but as the data hit, WTI dipped, ripped, and dipped again... only to rally once more...  API:

  • Crude +4.4mm
  • Cushing +692k
  • Gasoline -2.1mm
  • Distillates -128k

Sixth weekly rise in Cushing Inventories..

OilPrice Intelligence Report: Oil Rally Stalls As Storage Concerns Spike - The EIA released its monthly Drilling Productivity Report, which projects that major U.S. shale basins will see production fall by 106,000 barrels per day in April, the sixth consecutive month of declines. It will also mark the second largest decline on record. All the major basins see output fall, including the Bakken, Eagle Ford, Niobrara and even the Permian basin, which has help up amid the collapse in prices. The bulk of the declines will come from the Eagle Ford (down 58,000 barrels per day), a trend that has become commonplace in recent months.  The solid production declines are raising hopes that the oil markets are slowly moving into balance. WTI bounced above $37 per barrel on Monday and Brent surpassed $40 per barrel, the highest prices since the beginning of the year. Oil prices have rallied by over 30 percent since early February. The price increase is starting to trickle down to the pump. Retail gasoline prices in the United States rose from $1.73 to $1.78 per gallon in the last week of February, the first full-week increase in over eight months.  The oil industry and its investors are hoping that the worst is over, but not everyone is convinced. “Only a real physical deficit can create a sustainable rally which is still months away should the behavioral shifts created by the low prices in January and February remain in place,” Goldman Sachs wrote in a new report.  China stepped up oil imports to take advantage of cheap oil while it lasts. There are some other forces at work as well that are pushing up imports. The Chinese government has decided not to cut retail fuel prices when oil falls below $40 per barrel, meaning that Chinese refiners can make more money selling within China than exporting. As a result, China’s exports of refined products are falling. At the same time, the government has granted more licenses to refiners, allowing the market to grow. That is increasing the demand for crude – resulting in higher imports. February imports jumped by 19 percent compared to January, pushing it over 8 million barrels per day, a new monthly record.

Crude Oil Price Rises on Big Gasoline Drawdown - The U.S. Energy Information Administration (EIA) released its latest weekly petroleum status report Wednesday morning. U.S. commercial crude inventories increased by 3.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 521.9 million barrels. The commercial crude inventory stands at historically high levels for this time of year, according to the EIA. Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 4.4 million barrels in the week ending March 2. For the same period, analysts had estimated an increase of 3.1 million barrels in crude inventories. API also reported gasoline supplies fell by 2.1 million barrels, compared with an analysts’ estimate that gasoline inventory fell by 1.5 million barrels. Total gasoline inventories decreased by 4.5 million barrels last week, according to the EIA, but remain well above the upper limit of the five-year average range. Total motor gasoline supplied (the agency’s measure of consumption) averaged over 9.3 million barrels a day for the past four weeks, up by 7% compared with the same period a year ago. West Texas Intermediate (WTI) crude oil rose above $38 briefly on Tuesday before settling at $36.50. Rising prices are almost entirely due to the decline in U.S. onshore production. The EIA reported earlier this week that shale oil production is expected to fall another 106,000 barrels per day in April, and the agency is forecasting average production of 8.7 million barrels a day for 2016, down from an estimated 9.4 million barrels a day in 2015. In February, U.S. production fell by 68,000 barrels a day in the major shale basins. Overall, including offshore, production fell by 80,000 barrels a day. The thing to watch here is offshore production.

U.S. crude hits three-month high on gasoline drawdown, OPEC speculation -- Oil prices rose as much as 5 percent on Wednesday, with U.S. crude hitting three-month highs after a big gasoline inventory drawdown amid improving demand overshadowed growing record high crude stockpiles. Speculation that top producers might agree soon to an output freeze also supported crude oil. Brent crude futures LCOc1 settled up $1.42, or about 4 percent, at $41.07 a barrel. U.S. crude futures CLc1 finished up $1.79, or 5 percent, at $38.29 a barrel after hitting a three-month high of $38.51. The U.S. Energy Information Administration said crude stockpiles rose 3.9 million barrels last week to reach nearly 522 million barrels, in its fourth week of building to record highs.[EIA/S] But gasoline inventories fell 4.5 million barrels, nearly triple forecasts, in the largest weekly draw in almost two years.U.S. gasoline demand over past four weeks was 7 percent higher than a year ago, the EIA said. "Gasoline is the star of the show today," said Matt Smith, director of commodity research at New York-headquartered energy data provider ClipperData. "Ongoing strength in demand has yielded a large draw to gasoline inventories despite a rebound in refinery runs." U.S. gasoline futures RBc1 hit six-month highs, rallying 6 percent. The crack spread for gasoline, a measure of profit margin refiners get for turning a barrel of crude into the motor fuel, scaled seven-month highs. Oil has gained about 50 percent from 12-year lows hit less than two months ago, since OPEC members Saudi Arabia, Qatar and Venezuela, along with non-OPEC exporter Russia, pledged to leave supply at January's levels if others cooperated.

Despite Record Cushing Inventory, Oil Jumps To $38 On Biggest Gasoline Draw In A Year - DOE's 3.88mm inventory build confirms API's print and is the 8th weekly rise in the last 9 for overall crude levels. Cushing also saw a build (690k) -- the 17th week of the last 18. But the market - for now - is focused on the 4.5mm barrel draw in gasoline inventories - the biggest in a year, as the seasonals pickup. Crude jumped on the news, seemingly ignoring the fact that Cushing inventories now stand at a record high 66.9mm barrels. Also notably, US production rose for the first time in 7 weeks.

EIA Inventory Report and Oil Market Analysis 3 9 2016 (Video) -- Gasoline demand is driving the oil complex higher, relatively strong gasoline numbers on the refinery input side and the gasoline demand side of the equation. Brent should test $44 a barrel pretty soon, unless something dramatically happens that is unforeseen as of today.

Worldwide, 550 Million "Missing Bbls" Of Crude Oil Unaccounted For -- March 9, 2016 -- This is also quite a story. Note: Missing barrels have been a feature of IEA statistics since the 1970s.  Over time, errors have occurred in both directions, and have ranged up to 1 million or even 2 million barrels per day.  Most of the time, the oil market ignores the miscellaneous to balance item, but it tends to become controversial when it becomes very large, either positive or negative.    Reuters is reporting: That leaves 550 million "missing barrels" unaccounted for, apparently produced but not consumed and not visible in the inventory statistics.   IEA data currently shows a miscellaneous to balance item of 0.5 million barrels per day in 2014 and 1.0 million barrels per day in 2015. As they say, all the gold in California is in a bank in the middle of Beverly Hills in somebody else's name. Meanwhile, all the banked oil in North Dakota is sitting in a DUC in the middle of the Bakken in some hedge fund's name. The Bakken is a brand new game.

The Curious Case Of The 550 Million Missing Barrels Of Crude Oil - Even as US crude oil inventories just hit a fresh record high for another week, both in Cushing and across all other regions, a more curious accumulation of excess oil inventory has emerged: according to the IEA, global oil production exceeded consumption by just over 1 billion barrels in 2014 and 2015. As Reuters reports, crude oil production exceeded consumption by an average of 0.9 million barrels per day in 2014 and 2.0 million bpd in 2015. Of this 1 billion barrels which the IEA believes was produced but not consumer, some 420 million are said to be stored on land in OECD member countries and another 75 million can be found stored at sea or in transit by tanker somewhere from the oil fields to the refineries. This means that as of this moment, about 550 million "missing barrels" are unaccounted for "apparently produced but not consumed and not visible in the inventory statistics." As Jack Kemp writes, like most "plugs", the missing barrels are recorded in the "miscellaneous to balance" line of the IEA's monthly Oil Market Report as the difference between production, consumption and reported stock changes. The miscellaneous item reflects errors in data from OECD countries, errors in the agency's estimates for supply and demand in non-OECD countries, and stockpile changes outside the OECD that go unrecorded. The current IEA data reveals that there is a miscellaneous to balance item of 0.5 million barrels per day in 2014 and 1.0 million barrels per day in 2015. This is not new: missing barrels have been a feature of IEA statistics since the 1970s, and as Reuters adds over time, errors have occurred in both directions, and have ranged up to 1 million or even 2 million barrels per day.

OilPrice Intelligence Report: Oil Prices Steady After Rising 40% in Recent Weeks: Oil prices have jumped around quite a bit this week. Investors are buoyed by the noticeable declines in U.S. oil production. Fresh EIA data also pushed oil prices up. Weekly production figures were flat, but gasoline stocks fell sharply, a sign that demand from U.S. motorists is strong. But the report was decidedly mixed – crude oil stocks continue to climb, hitting yet another record of 521 million barrels last week.  The Obama administration announced steps to address methane emissions from oil and gas wells on March 10, an effort that will also be taken up by Canada. The announcement was timed to correspond with the first visit to the U.S. by new Canadian Prime Minister Justin Trudeau. The initiative will seek to cut methane emissions by 40 to 45 percent below 2012 levels by 2025. It is important to note that the target is not new – the Obama administration has already announced such an objective. But the EPA will begin drawing up regulations on existing oil and gas wells, as opposed to just new wells drilled. It is unlikely that the agency will be able to complete the rule before the end of President Obama’s presidency, but the initiative would presumably be taken up if a Democrat wins the election. For Canada’s part, the effort will be a departure from the past. Former Conservative Prime Minister Stephen Harper was an ally of the energy industry and never sought to impose heavy regulation.

Oil price appears to have ‘bottomed out,’ energy agency says (AP) — The organization that represents major oil-consuming nations said Friday that signs of a market that has “bottomed out” are emerging. U.S. crude prices jumped to a high for the year. Brent crude, used as a global benchmark, hit a high for the year Tuesday and rose 1 percent Friday. Energy companies have been shutting down rigs and laying off thousands of workers as oil prices plunged to around $30 per barrel, from well over $100 per barrel just two years ago. A broad retreat by the energy sector played out again Friday on both fronts. The number of oil and natural gas rigs active in the U.S. fell for the 12th consecutive week, according to Baker Hughes on Friday, to 480. That’s the lowest level in decades, and perhaps the fewest since the earliest days of the oil drilling industry. And Texas driller Anadarko Petroleum Corp. said that it would cut 1,000 workers, 17 percent of its work force. The pain at Anadarko and other energy companies may finally be translating into a reduction of a massive and global oversupply of oil, the International Energy Agency said Friday. OPEC production tumbled by 90,000 barrels a day last month, the IEA said. U.S. production that had surged due to new drilling technology, is expected to fall by almost 530,000 barrels a day this year, according to the IEA.

Oil Rebounds After IEA Says Price "Bottomed" As Goldman Warns Of "Sharply Lower" Prices As Storage Fills -- In its latest monthly market report released early on Friday, the International Energy Agency forecast that oil prices may have bottomed as shrinking supplies outside OPEC and disruptions inside the group erode the global surplus. This comes just one month after it had a far gloomier assessment of oil prices, warned on excess supply, and asked if the market was witnessing a "false dawn." “There are signs that prices might have bottomed out,” the Paris-based adviser said. "For prices there may be light at the end of what has been a long, dark tunnel” as market forces are “working their magic and higher-cost producers are cutting output." It predicted that production outside the Organization of Petroleum Exporting Countries will decline by 750,000 barrels a day this year, or 150,000 barrels a day more than estimated last month, the agency said. Markets are also being supported by output losses in Iraq and Nigeria, and as Iran restores production more slowly than planned following the end of international sanctions, Bloomberg reports.As a reminder, on February 9, the IEA said "supply may exceed consumption by an average of 1.75 million barrels a day in the period, compared with an estimate of 1.5 million last month." Curious since then prices are far higher, and are now pushing into territory where even shale companies are considering resuming production.As shown in the chart below, oil prices have recovered 50 percent from the 12-year lows reached in early February when news of possible oil production cuts by OPEC unleashed a dramatic rally; instead all that was unveiled was a tentative production "freeze", one which may never happen as Iran has sternly refused to comply with the term. This “freeze” which caps Russian and Saudi production at already record high levels, while currently supporting prices, is unlikely to have a substantial impact on markets in the first half of the year, the IEA said.

US Rig Count Tumbles To Record (41-Year) Lows --In April 1999, the total US oil and gas rig count was 488, today, after dropping 9, the total rig count is 480- an all-time record low (since records began in 1975). Oil rigs dropped 3 to 386 (lowest Since Dec 09), the 12th weekly drop in a row (16th of 17 and 17th and 26th of the last 28 weeks). With production up last week, it remains to be seen when the rig count matters once again. A record low in total oil and gas rigs... (-6 in oil, -3 in gas)Oil rig counts continue to track a lagged oil price almost perfectly... Are we close? Charts: Bloomberg

US Rig Count Drops 9 This Week to All-Time Low of 480 - The number of rigs exploring for oil and natural gas in the U.S. declined by 9 this week to 480, a record low and another sign of the continuing economic woes in the oil and gas industry. The number of rigs seeking oil was at 386 while 94 explored for natural gas, Houston-based oilfield services company Baker Hughes Inc. said Friday. A year ago, 1,125 rigs were active. At the recent boom's height, the count had climbed to 1,931 in September 2014. But it has steadily fallen since then as oil prices plunged to about $30 per barrel, well below the $100 per barrel just two years ago. The rig count is seen as an important indicator of the strength and stability of energy prices and the health of the oil and gas industry. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999. In the latest count, there were only 386 rigs in the U.S. looking for oil and 215 of those were in Texas,  "That is absolutely incredible," he said. "Here we are the big oil state and we only have 215 rigs working. That just shows you how hard the industry has contracted." Among the major oil- and gas-producing states, Texas lost 12 rigs, Oklahoma lost three, New Mexico lost two and North Dakota and Ohio lost one. Louisiana and Pennsylvania each gained three rigs, Kansas gained two and California and Utah each gained one. Alaska, Arkansas, Colorado, West Virginia and Wyoming all were unchanged. Houston — home to more than 5,000 energy-related firms and nicknamed the energy capital of the world — has taken an economic hit during this latest oil downturn. About 50,000 industry workers were laid off in 2015, and another 21,000 layoffs are projected for this year, Jankowski said. The drop in the rig count can be used to gauge the job losses across the country, said Ed Hirs, an energy economist with the University of Houston. "It's a marker because each rig generally employs about 100 workers. So you can take the diminished rig count, multiply by a 100 and you get an idea of the direct loss of jobs in the industry." Hirs said

US rig count hits all-time low in recorded data - Oil & Gas Journal - The overall weekly US rig count is now at its lowest point in Baker Hughes Inc. data that begins in the 1940s, and perhaps since the infancy of US oil and gas industry in the mid-19th century. BHI reported that the count lost 9 units to 480 during the week ended Mar. 11, officially falling beneath the previous recorded low of 488 on Apr. 23, 1999, reached during the nadir of the 1998-99 industry downturn. “While there is no consistent series for drilling activity before 1948, we think it likely that to find a lower level of activity would require going back to the 1860s, the early part of the Pennsylvania oil boom,” said Paul Hornsell, head of commodities research for Standard Chartered Bank, in a research note published last week (OGJ Online, Mar. 4, 2016). The inauspicious benchmark is the latest of many suffered by the industry since crude oil prices began their plunge from more than $100/bbl during summer 2014 to less than a third of that value at the beginning of 2016. The first extended rig-count dive commenced on Dec. 5, 2014 (OGJ Online, Dec. 5, 2014)—when 1,920 units operated in the US—and didn’t end until June 26, 2015, falling in 28-consecutive weeks while shedding a total of 1,061 units (OGJ Online, June 26, 2015). More recently, the count has fallen in 10 straight weeks to begin 2016, and has lost 405 units since its last increase on Aug. 21, 2015, the apex of a modest summer rebound (OGJ Online, Aug. 21, 2015). The latest total is almost a tenth of the highest-ever weekly US rig count of 4,530 recorded by BHI on Dec. 28, 1981.

Oil: Why the worst is not necessarily over: IEA: While oil prices have "recovered remarkably" in recent weeks, this should not "be taken as a definitive sign that the worst is necessarily over," the International Energy Agency (IEA) warned Friday. "Even so, there are signs that prices might have bottomed out," the IEA said in its latest monthly report published on Friday echoing oil markets which have seen a recovery in recent weeks on the back of a weaker dollar which helps to fuel demand. "For prices there may be light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance," the IEA cautioned. "It is clear that the current direction of travel is the correct one, although with a long way to go. Without an increase in demand expectations, high-cost oil suppliers will continue to bear the brunt of the market-clearing process." On Friday, benchmark Brent crude futures were trading at $40.81 a barrel (up from the $32.80 a barrel last month when the IEA published its report). U.S. crude was also higher, at $38.69 a barrel. At the start of the year, prices tumbled to around $26 a barrel as supply continued to outstrip demand. But there are signs that prices could have finally bottomed out, the IEA said. These included: "possible action by oil producers to control output; supply outages in Iraq, Nigeria and the United Arab Emirates; signs that non-OPEC supply is falling; no reduction in our forecast of oil demand growth; and recent weakness of the US dollar." The IEA maintained its forecast for global oil demand growth for 1.2 million barrels a day (mb/d) in 2016, unchanged from last month. It said there had been a "sharp deceleration in demand growth in the three months to March, particularly in the US and China.

Does This "Panic Index" Show A Major Crisis Coming In Oil And Gas? --  Little-reported but extremely critical data point for the oil and gas industry emerged yesterday. With insiders in the debt business saying that risk levels in the sector have risen to unprecedented levels. That came from major ratings service Moody’s. With the firm saying that one of its proprietary indexes of credit problems in the oil and gas sector has hit the highest mark ever seen. That’s the so-called “Oil and Gas Liquidity Stress Index”. A measure of the number of energy companies that are facing looming credit problems because of overextended debt. Moody’s said that its Stress Index rose to 27.2 percent as of this week. Marking the highest level ever seen in this key indicator. In fact, that level is now considerably worse than seen during the last recession. When the Stress Index topped out at 24.5 percent. Moody’s said that the big jump in the index comes after a significant number of downgrades to energy company credit during February. With the firm having its biggest month ever for lowered credit scores — with a total of 25 firms seeing downgrades to their debt. Those downgrades are largely affecting the exploration and production space. With 17 of the affected firms coming from the E&P sector. But Moody’s also said that oilfield services firms have been hit with lowered credit ratings.

Will Russia End Up Controlling 73% of Global Oil Supply? - Russia has played a master stroke in the current oil crisis by taking the lead in forming a new cartel, but it’s a move that could spell geopolitical disaster. The meeting between Russia, Qatar, Saudi Arabia and Venezuela on 16 February 2016 was the first step. During the next meeting in mid-March, which is with a larger group of participants, if Russia manages to build a consensus—however small—it will further strengthen its leadership position. Until the current oil crisis, Saudi Arabia called the crude oil price shots; however, its clout has been weakening in the aftermath of the massive price drop with the emergence of US shale. The smaller OPEC nations have been calling for a production cut to support prices, but the last OPEC meeting in December 2015 ended without any agreement.  Now, with Russia stepping in to negotiate with OPEC nations, a new picture is emerging. With its military might, Russia can assume de facto leadership of the oil-producing nations in the name of stabilizing oil prices. Saudi Arabia has been a long-time U.S. ally, but that, too, is changing. Charles W. Freeman Jr., a former U.S. ambassador to Riyadh, recently noted that “We've seen a long deterioration in the U.S.-Saudi relationship, and it started well before the Obama Administration.”

Saudi minister: We'll maintain our oil market share: Saudi Arabia will maintain its oil market share and the idea that it would cut production, while other countries increase it is "not a realistic one," Saudi Foreign Minister Adel al-Jubeir said on Saturday. "Our view is market forces determine the price of oil and we will maintain our market share and markets will recover," he told a group of journalists in Paris.

Why Saudi Arabia Has No Intention To End The Oil Glut - In the geopolitical and oligopolistic global oil market, purely financial supply and demand has often been a secondary force, acting when it is allowed to act. It is the strategic behavior of the producing titans, not their talk or the slow-motion supply-demand balance, which has the real power to move markets. That is the case in the last two years and remains the case in 2016. The behavior of Saudi Arabia since 2014 has demonstrated the intent to increase both capacity and supply, a pattern not yet mitigated despite a distracting news feed from OPEC and the kingdom.Figure 1 shows the rig counts in Saudi Arabia and the United States from 2009 to last week. (footnote: The U.S. count is oil-directed rigs while it is the total rig count in Saudi Arabia which produces mainly associated gas and exports none.) The data is shown on two different scales in such a way that the curves are equivalent during 2012 and 2013 as this was a relatively stable baseline with Saudi running 80 to 85 rigs, and 1300 to 1400 were drilling for oil in the US. What is most interesting are the actions since then. As the shale oil revolution had sustained momentum at prices near $100 /bbl, Saudi Arabia began the second most rapid rig count expansion in its history starting in late 2013. During 2014, while the potential for oversupply was clearly known and even as prices turned sharply down in the latter half of the year, Saudi continued ramping up its rig count. In late November 2014, the semi-annual OPEC meeting turned dissentious, and the group closed without even the pretense of a target production volume. Starting in November and continuing through March, the Saudi rig count grew in its third largest expansion in history, increasing 15 percent in four months. At the same time, U.S. rig count was falling. Slowly at first in 2014, the rig count responded modestly to reductions in price. After the November 2014 OPEC meeting, though, the U.S. rig count began its freefall, retracing the path of the 2008 downturn. The contrast shows boldly in Figure 1. As the U.S. imploded, Saudi Arabia was ramping up.

"I'll Go Full Power If There's No Agreement" - Kuwait Breaks OPEC Production Freeze - Back in late February, when crude prices had just hit a 13 year low, one catalyst unleashed a furious short-covering rally: a WSJ report which cited a delayed SkyNews interview with the UAE energy minister, according to which OPEC would freeze, if not cut production. Since then we learned, courtesy of the Saudi oil minister Al-Naimi himself, that the Saudis will never reduce output, however, in a utterly meaningless gesture, Saudi Arabia and Russia agreed to "freeze" production at levels which are already at maximum capacity and under one condition: that all other OPEC members join the freeze, with the possible exception of Iran which may be allowed to produce until it hits its pre-embargo export levels.  Of course, even said "freeze" is nothing but a stalling tactic employed by an OPEC member (Saudi Arabia), to give the impression that OPEC still exists as a production-throttling cartel when OPEC ceased to exist in that capacity in November 2014. However, while many had pretended to at least play along with the charade, today a core OPEC member effectively broke ranks when Kuwait said it would only  agree to an output freeze if all major producers take part including Iran. According to Reuters, Kuwait's  oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers, including Iran, to be on board.  "I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh told reporters in Kuwait City. And since Iran has made it very, very clear it will not join the production freeze at its current mothballed output, and will need at least 9-12 months before it regains its pre-embargo capacity levels, one can forget about a production freeze well into 2017 if not for ever since by then at least one if not more OPEC members will be bankrupt (they know who they are: they are the source of those "ALL CAPS" flashing read headlines every day). Putting Kuwait's production in context, Kuwait - the small Gulf state Saddam invaded 25 years ago - is currently producing 3 million barrels of oil per day. Incidentally, this is precisely how much the oil market is oversupplied each and every day, and why in addition to PADD1, 2 and 3 being almost full, and excess oil now being stored in ships, pipelines and trains, and re-exported to Europe, quite soon empty swimming pools will be full with the "black gold" as the algos continue to refuse to pay any attention to the constantly deteriorating fundamentals.

Oil meeting on output freeze unlikely without Iran progress: sources | Reuters: A meeting between oil producers to discuss a global pact on freezing production is unlikely to take place in Russia on March 20, sources familiar with the matter say, as OPEC member Iran is yet to say whether it would participate in such a deal. OPEC officials including Nigeria's oil minister have said a meeting would take place in Moscow on that date, potentially as the next step in widening an agreement to freeze output at January levels struck by OPEC members Saudi Arabia, Venezuela and Qatar plus non-member Russia last month. But the biggest roadblock to a wider deal, OPEC delegates say, is Iran. Tehran feels it should be exempt from the agreement as it wants to recover market share it lost under Western sanctions. Kuwait said on Tuesday it will commit to the deal - if all major producers including Iran do so. "They are not agreeing on the meeting. Why would the ministers meet again now? Iran says they will not do anything," said an OPEC source from a major producer. "Only if Iran agrees, things will change."

Exclusive: Saudi Arabia seeks $6-8 billion bank loan to shore up state coffers | Reuters: Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom's government for over a decade. Riyadh has asked lenders to submit proposals to extend it a five-year U.S. dollar loan of that size, with an option to increase it, the sources said, to help plug a record budget deficit caused by low oil prices. The sources declined to be named because the matter is not public. Calls to the Saudi finance ministry and central bank seeking comment on Wednesday were not answered. Last week, Reuters reported that Saudi Arabia had asked banks to discuss the idea of an international loan, but details such as the size and lifespan were not specified. The kingdom's budget deficit reached nearly $100 billion last year. The government is currently bridging the gap by drawing down its massive store of foreign assets and issuing domestic bonds. But the assets will only last a few more years at their current rate of decline, while the bond issues have started to strain liquidity in the banking system.   Analysts say sovereign borrowing by the six wealthy Gulf Arab oil exporters could total $20 billion or more in 2016 - a big shift from years past, when the region had a surfeit of funds and was lending to the rest of the world.  All of the six states have either launched borrowing programs in response to low oil prices or are laying plans to do so. With money becoming scarcer at home, Gulf companies are also expected to borrow more from abroad.

Hillary Clinton's State Department Armed Saudi Arabia to the Teeth - As Hillary Clinton emerges as the front-runner for the Democratic Party’s presidential candidate, she’s receiving increased scrutiny for her years as secretary of state — and in particular her hawkish foreign policy. Many critics are focusing especially on her long relationship with Saudi Arabia.  On Christmas Eve in 2011, Hillary Clinton and her closest aides celebrated a $29.4 billion sale of over 80 F-15 fighter jets, manufactured by U.S.-based Boeing Corporation, to Saudi Arabia. In a chain of enthusiastic emails, an aide exclaimed that it was “not a bad Christmas present.” These are the very fighter jets the Saudis have been using to bomb Yemen since March 2015. A year later, at least 2,800 Yemeni civilians have been killed, mostly by airstrikes — and there’s no end in sight. The indiscriminate Saudi strikes have killed journalists and ambulance drivers. They’ve hit the Chamber of Commerce, facilities supported by Médecins Sans Frontières (also known as Doctors Without Borders), a wedding hall, and a center for the blind. The attacks have also targeted ancient heritage sites in Yemen. International human rights organizations are saying that the Saudi-led strikes on Yemen may amount to war crimes.

The Coming Collapse Of Saudi Arabia - In September 2014, U.S. Secretary of State John Kerry flew to Saudi Arabia. He was there to meet with King Abdullah, the country’s ruler and one of the richest men in the world. Informed observers say Kerry and Abdullah drew up a plan at this meeting to destroy their common enemies: Russia and Iran. To carry out the attack, they wouldn’t use fighter jets, tanks and ground troops. They would use a much more powerful weapon… Oil. Oil is the world’s most traded commodity. Saudi Arabia is the world’s largest oil exporter. It has arguably more control over the price of oil than any other country does. Insiders say Saudi Arabia agreed to flood the oil market at this secret meeting. The purpose was to drive down the price of oil. This would hurt Russia’s and Iran’s economies. They both depend heavily on oil sales. They wanted to hurt Russia for supporting their regional foe, Syrian President Bashar al-Assad. They wanted to hurt Iran for the same reason. Iran is the Saudis’ fierce geopolitical rival in the region. Their strategy has had some success. As you can see in the chart below, the price of oil has plummeted over 70% since John Kerry’s secret meeting with King Abdullah in September 2014.By keeping the market saturated with oil, the Saudis are driving down the price. They hope to drive it down low enough and long enough to bankrupt the shale industry…since shale oil costs more than Saudi oil to produce. This would knock out a major competitor and let the Saudis regain lost market share. But economic warfare doesn’t always go according to plan. I think the Saudis made a colossal mistake… I think the Saudis have overplayed their hand...big time. Oil makes up 90% of Saudi government revenue. So the price drop has been very painful. They’re bleeding through their reserves. The market is putting more pressure on their currency peg than at any time in its history. The government is only staying afloat by draining its foreign exchange reserves. This threatens Saudi Arabia’s ability to support its currency peg. If the currency peg breaks—which is exactly what the current market expects—the riyal would be devalued. This would increase the cost of living for Saudis across the board. It would also increase social unrest.

Why the Arabs don’t want us in Syria - Robert Kennedy - In part because my father was murdered by an Arab, I’ve made an effort to understand the impact of U.S. policy in the Mideast and particularly the factors that sometimes motivate bloodthirsty responses from the Islamic world against our country. As we focus on the rise of the Islamic State and search for the source of the savagery that took so many innocent lives in Paris and San Bernardino, we might want to look beyond the convenient explanations of religion and ideology. Instead we should examine the more complex rationales of history and oil — and how they often point the finger of blame back at our own shores. America’s unsavory record of violent interventions in Syria — little-known to the American people yet well-known to Syrians — sowed fertile ground for the violent Islamic jihadism that now complicates any effective response by our government to address the challenge of ISIL. So long as the American public and policymakers are unaware of this past, further interventions are likely only to compound the crisis. Secretary of State John Kerry this week announced a “provisional” ceasefire in Syria. But since U.S. leverage and prestige within Syria is minimal — and the ceasefire doesn’t include key combatants such as Islamic State and al Nusra — it’s bound to be a shaky truce at best. Similarly President Obama’s stepped-up military intervention in Libya — U.S. airstrikes targeted an Islamic State training camp last week — is likely to strengthen rather than weaken the radicals. As the New York Times reported in a December 8, 2015, front-page story, Islamic State political leaders and strategic planners are working to provoke an American military intervention. They know from experience this will flood their ranks with volunteer fighters, drown the voices of moderation and unify the Islamic world against America. To understand this dynamic, we need to look at history from the Syrians’ perspective and particularly the seeds of the current conflict. Long before our 2003 occupation of Iraq triggered the Sunni uprising that has now morphed into the Islamic State, the CIA had nurtured violent jihadism as a Cold War weapon and freighted U.S./Syrian relationships with toxic baggage.

China Crude Oil Imports Hit Record 8 MMbopd In February  (Reuters) - China's February crude oil imports jumped 20 percent on year to their highest ever on a daily basis, as prices at their lowest in more than a decade drove buying from a group of new importers and state and commercial stockpiling. The world's second-largest oil consumer imported 31.80 million tonnes of crude last month, or a record 8.0 million barrels per day (bpd), data from China's General Administration of Customs showed on Tuesday. China's robust crude demand has been supported by independent refiners, also known as teapots, that have been receiving import quotas from Beijing over the past nine months. "This is the teapot effect," said Virendra Chauhan, an analyst at Energy Aspects in Singapore. "Higher teapot demand and stronger refining margins which encouraged higher refinery throughputs have contributed to increased imports," he said. On a daily basis, February's imports also jumped roughly 27 percent from 6.29 million bpd in January. Last week, Beijing-based consultancy SIA Energy said it expects China's 2016 crude imports to rise by 860,000 bpd, or nearly 13 percent, boosted by storage needs, robust gasoline demand and fuel exports. The country's top energy group state-owned China National Petroleum Corporation (CNPC) forecast in January that the China's net crude imports would rise 7.3 percent this year. China's imports reached a previous record of 7.81 million bpd in December, closing out 2015 with an average 6.71 million bpd, according to customs data for the full year. -

"The Iron Ore Market Has Gone Berserk" - What Drove Iron's Biggest Surge Ever - 'Efficient' markets at their very best once again. Following a 19% spike overnight, analysts and traders alike are stunned by "the departure from fundamentals" as "the iron ore and steel markets have gone berserk." On the heels of home price surges, sent soaring after government suggestions that they will support growth, "investors are expecting further monetary easing by the Chinese government to boost steel demand," but as Bloomberg notes there has been no "corresponding increase in physical orders." As Bloomberg reports, Monday’s surge was accompanied by a rally in producer stocks.Australia’s Fortescue Metals Group Ltd. jumped 24 percent in Sydney trading, where Rio Tinto Group and BHP Billiton Ltd. also climbed. Rio, the second-biggest mining company, rebounded from an earlier decline in London trading and was up 0.4 percent by 12:15 p.m. local time. “There may be some short-covering in the futures markets today,” said Xu Huimin, an analyst at Huatai Great Wall Futures Co. in Shanghai, referring to investors closing bets on declines. “The crazy surge in futures prices has surprised traders and steel mills, as they haven’t seen a corresponding increase in physical orders.” “The recent boom of the real estate market and price has positive influence on the steel price,” Michael Zhu, president of Hong Kong-based trader Millennia Resources Ltd. and former global sales director of Vale SA, said by e-mail. The “market believes the demand for steel will be increased with the recovery of real-estate market.”

Iron Ore 'Frenzy' Sends Dry Bulk Shipper Stock Up 340% In 2 Days -- The "berserk" iron ore market has created a tsunami of utter idiocy and short-covering across many sectors, most egregiously - dry bulk shippers. DRYS is up 18%, DSX up 20%, and NM up 25%, but Eagle Bulk (EGLE) is the big winner as the mania underlying iron ore combined with an earlier filing said to amend forebearance as the company tries to find financing alternatives, spiked the stock up 340% in 2 days. Up 340% in 2 days... back to unchanged on the year... Eagle Bulk Shipping Inc. owns a fleet of dry bulk vessels and transports a range of major and minor bulk cargoes.  The Company transports iron ore, coal, grain, cement, and fertilizer along worldwide shipping routes. And the utter farce is that while Iron ore prices surge on the heels of China's NPC, they ironically stated that they will rationalize capacity - thus implying notably less exports (and therefore less demand for dry bulk shippers)

Copper Stockpiles in China Surge to Record as Metal Flows East -- Stockpiles of refined copper in Shanghai extended their advance to a record as the difference between domestic and foreign prices encouraged imports by China, the world’s biggest consumer. Inventories tracked by the Shanghai Futures Exchange are higher than stockpiles monitored by the London Metal Exchange for the first time in a more than a decade. Inventories followed by the Shanghai bourse jumped 11 percent this week to a record 305,106 metric tons, equivalent to around two weeks of consumption in China. Reserves in London have declined for 11 days to the lowest level in more than a year. Copper has gained 4 percent this year in London amid a surge in metals prices on expectations that China may introduce a new round of stimulus to bolster the slowing economy. The metal for three-month delivery rose as much as 1.6 percent to $4,933 a metric ton Friday, heading for an increase of around 4 percent this week, the best such performance since September.

Don’t let the rally fool you: Commodity companies are headed for a massive debt cliff | Financial Post: If you think commodity producers are out of the woods as markets rally, here’s a reality check: many are still grappling to contain debt.Another year of belt-tightening hasn’t kept pace with an earnings slump after prices collapsed. One gauge of leverage among mining, energy and agriculture companies continued to rise in the fourth quarter and is more than double year-earlier levels. While raw materials have rebounded in the past month, they are still well below levels of even two years ago — 28 per cent in the case of copper and 64 per cent for crude. To end the gluts that sank prices, companies ought to be cutting more output, but many are still so deeply in debt that they need to keep churning out cash to stay above water. “I call it the commodity conundrum,” said Jessica Fung, a commodities analyst with BMO Nesbitt Burns Inc. in Toronto. “Cutting production is absolutely the last resort for any company because you’re basically shutting down your revenue generation. And then what?” Unless commodity prices extend gains, the conundrum holds grim consequences for 2016 for some producers. The debt burden is growing for many miners and drillers no matter how hard they pump and dig. Corporate defaults will reach a six-year high this year, led by commodity companies, according to Moody’s Investors Service, which in January put 55 mining companies and 120 oil and gas drillers on watch for possible downgrade.

In New Economic Plan, China Bets That Hard Choices Can Be Avoided— As economic growth has fallen while debts and excess industrial output have risen, Chinese leaders have faced growing questions about whether they will carry out the painful policy surgery many experts say is needed to cut away the financial dead weight on the economy.  But the answer that Prime Minister Li Keqiang gave on Saturday was to wager that China could enjoy a relatively painless cure that avoids hard choices between spurring growth and restructuring. Chinese leaders’ usual two-sided rhetoric about their options — peril is close at hand, but so is a sure cure — was especially striking in Mr. Li’s latest annual report to the legislature, the National People’s Congress. “Domestically, problems and risks that have been building up over the years are becoming more evident,” Mr. Li told the roughly 3,000 delegates to the congress, a Communist Party-controlled body. But “there is no difficulty we cannot get beyond,” he said in the speech, which was broadcast live nationwide. Continued economic growth of at least 6.5 percent can be achieved in 2016, and a similar rate is foreseeable until 2020, he said. That, Mr. Li suggested, would help dull the pain from cuts to wheezing state-supported industries that must shed millions of workers, as part of a program that China’s powerful president, Xi Jinping, has promoted as “supply-side structural reform.” The Chinese economy, Mr. Li said, is “hugely resilient and has enormous potential and ample room for growth.” Those may have been reassuring words for workers worried about losing their jobs at failing mines, steel mills and industrial plants. Mr. Li said the government’s policies could help create more than 10 million jobs in towns and cities this year, and more than 50 million by the end of 2020. But many economists and investors have become much less confident that China can manage such rates of unstinted growth without piling up more bad lending and misused capital.

China says economy will 'absolutely not' experience hard landing | Reuters: China's economy isn't headed for a hard landing and isn't dragging on the global economy, China's top economic planner said on Sunday, but uncertainty and instability in the global economy do pose a risk to the country's growth. China on Saturday acknowledged it faced tough battle to keep world's No.2 economy growing by at least 6.5 percent over the next five years while pushing hard to create more jobs and restructuring state-owned enterprises. The comments, as Beijing kicked off its 12-day annual national parliament, underscored the challenges facing China as its economy transitions from an investment and export focused economy to one based more on services and consumption. "China will absolutely not experience a hard landing," Xu Shaoshi, head of the National Development and Reform Commission (NDRC), told reporters at a briefing. "These predictions of a hard landing are destined to come to nothing." China's economy grew 6.9 percent in 2015, the slowest pace in a quarter of a century, but still comfortably the fastest among major economies. It has set a growth target of 6.5 percent to 7 percent for this year, introducing a band rather than a hard target as it seeks greater flexibility in juggling growth, job creation and restructuring of a host of "zombie companies" in bloated industries.

China’s Communist Party Is Looking for Answers in Reaganomics - You’ve really got to give China’s Communist Party propagandists an A for effort.  As part of a new roll out of reforms designed to bolster falling growth, the Party PR team has launched a state-approved rap song that puts policy to a back beat. “Reform the supply side, upgrade the economy,” runs the tune. Maybe it looses something musical in translation. But the question is whether it makes any sense economically. “Supply side” economics, a term most associated with the tax cuts and deregulation of Reagan years in America, seems an unlikely reform slogan for China’s state-led economy. After all, the Reagan Revolution represented the kind of naked free-marketism Karl Marx bemoaned and the Chinese revolution claimed it would redress.  But a kind of supply side economics is what’s being pushed this week at the National People’s Congress in Beijing, as leaders acknowledge the existence of “zombie firms” that may require “bankruptcy liquidations.” Translation: policy makers are talking openly about the fact that large swaths of China’s economy are in meltdown, and trillions of dollars of government stimulus has done nothing to offset the fact. Can supply side economics help China? It depends on how the concept is implemented. Though supply side theory has become synonymous with the laissez-faire, trickle-down Capitalism—which in an age of rising inequality have been largely discredited—the core idea was developed, ironically, by a French economist, Jean-Baptiste Say. Say said that supply—the creation of new goods, products, and services—created its own demand, by dispersing money into the economy in the form of wages and profits, which could then be spent by a rising consumer class. The key and often-forgetten caveat is that Say believed there could be supply and demand mismatches – powerful institutions like the state or large financial firms could distort the rules of the game. Wealth, in effect, didn’t always trickle down if it was being funneled off the side by vested interests.

Why (Officially) Communist China Is Looking for Answers in Reaganomics -- As part of a new rollout of reforms designed to bolster falling growth, the party PR team has launched a rap song that puts policy to a backbeat. “Reform the supply side, upgrade the economy,” it runs. Maybe it loses something in translation, but the real question is whether it makes any economic sense. “Supply side” economics, a term most associated with the tax cuts and deregulation of the Reagan years in the U.S., seems an unlikely reform slogan for China’s state-led economy. After all, the Reagan revolution represented the kind of naked free-marketism that Karl Marx bemoaned and the Chinese revolution once claimed it would obstruct.  But a species of supply-side economics is what’s being pushed at the National People’s Congress in Beijing as leaders acknowledge the existence of “zombie firms” that may require “bankruptcy liquidations.” Translation: policymakers are talking about the fact that large swaths of China’s economy are in trouble, and more than a trillion dollars of government stimulus has done nothing to offset the fact.  Can supply-side economics with Chinese characteristics help the world’s second largest economy? It depends on how the strategy is implemented. Though supply-side theory has become synonymous with laissez-faire, trickle-down capitalism—which in an age of rising inequality has been largely discredited—the core idea was developed by the 19th century French economist Jean-Baptiste Say. He argued that supply—the production of new goods, products and services—created its own demand, dispersing money into the economy in the form of wages and profits, which could be spent by a rising consumer class. You can see why the concept might appeal to China, a country with production prowess to spare, and one desperately in need of boosting domestic demand for goods.

China – A 5-Year Plan And 50 Million Jobs Lost  --Ilargi: China never had an actual economic model or growth model. It simply printed an obscene amount of money, especially after 2008, and used it to build factories, 30-story see-through apartment blocks and highways into nowhere cities, without giving much if any thought to where this would lead when their formerly rich western customers had less to spend on its ever increasing amount of ever more useless products, or when its workers would stop spending ever more on apartments as investments, or when no more roads and bridges were needed because nowhere was already in plain sight. Or all of the above. It was ‘to infinity and beyond’ from the start, but that’s a line from a kids’ fantasy story, not a 5-year plan or an economic model. Going into its 10-day, 3,000 delegates National People’s Congress opening on Friday, China was facing -and very much still is- two major and interconnected problems. Both are problems that the country has never faced before -not a minor point to make. The first is a giant debt load, one that could easily be as high as $40 trillion, or 350% of GDP, once one includes the shadow banking system (watch the shadows!). The second is the Communist Party’s -economic- credibility. The debt problem is impossible to solve without very far-reaching restructurings of both the debt itself and of the entire Chinese economy. There appears to be a problem within the problem, however: the Party neither looks prepared to truly tackle the debt nor does it seem to know how.

Awash in Empty Homes, China Asks Migrant Workers to Settle Down - — Migrant workers are the unsung heroes of China’s economic miracle. Numbering more than 270 million, they abandon their impoverished farms and villages to move to the cities, where they run the factories and build the highways and high-rises that have made China’s growth the envy of the world.Now, as China’s economy slows, the country’s leaders have a new mission for them: Buy homes.China is looking for ways to get migrant workers to help buy up a huge glut of unsold homes that is dragging down the country’s economic growth. Chinese leaders have eased taxes and down payment requirements. They are taking new steps to offer mortgages. And they have eased the tough laws that traditionally have kept migrant workers from putting down roots in big cities. The housing glut is one of the biggest drags on China’s economy, and therefore one of the major drags on global growth. The empty homes have discouraged further investment in real estate, idling cranes and construction workers around the country. Investment in Chinese real estate reached nearly $1.5 trillion last year, according to official figures. Economists say the property sector’s impact on the economy is even greater when related industries like steel and furniture-making are included. But growth has come to a standstill. After growing by double-digit percentage rates for more than a decade, Chinese real estate investment last year grew just 1 percent. The precise size of the housing glut is unclear. China nationally tracks square meters available for sale. Government data shows that the space in unsold residential units reached a high last year at 452 million square meters, more than twice as much as in 2011 and 130 times the size of Central Park in New York.

China’s Exports Tumble Amid Broad Slowdown - WSJ: China’s worsening export performance is expected to strengthen Beijing’s commitment to doing more to shore up flagging growth in the world’s second-largest economy. On Tuesday, China reported its largest monthly drop in exports since the financial crisis. The customs administration said exports in February fell 25.4% in dollar terms year-over-year, compared with a drop of 11.2% in January. While trade flows were affected by February’s long Lunar New Year holiday, the decline was sharply lower than the median 15% drop forecast by 17​economists surveyed by The Wall Street Journal. Imports also declined, falling 13.8% last month, the agency reported, compared with an 18.8% drop in January, in a further cooling of demand in China that is affecting its Asian neighbors. China’s trade surplus narrowed sharply in February to $32.59​billion from $63.29​billion in January. ​​ The worse-than-expected trade results dovetail with other data signaling an economy facing more choppiness ahead, economists said. “China’s exports declined more than expected in February, confirming our view that external trade will likely be a drag on economic growth in 2016 amid lackluster global demand,”  “Government stimulus to boost domestic activity will be critical for stabilizing economic growth in 2016.” China has started out the year on a weak footing after gross domestic product growth slowed to 6.9% last year, its weakest pace in a quarter-century.

Chinese exports plunge 25% in February - BBC News: Chinese exports have seen their sharpest drop in almost seven years, adding to concerns over the health of the world's second largest economy. Exports dropped sharply by 25.4% from a year earlier, while imports fell 13.8%. The weak data comes on the heels of Beijing registering the slowest economic growth in 25 years. China's National People's Congress, currently underway in the capital, has just revised the 2016 growth target down, predicting a "battle for growth". The February trade figures are likely to raise new fears over China struggling to maintain economic growth while implementing reforms and trying to shift towards more services and domestic spending. Customs figures showed exports fell to $126.1bn (£88.5bn) last month. That was down 25.4% from a year earlier and worse than an expected fall of about 15%.  The poor trade data marks the worst performance since the height of the global financial crisis in May 2009. However, analysts cautioned that the data might have been affected by the longer-than-usual Chinese Lunar New Year holidays. With China often referred to as "the engine of global growth", the weaker global demand for its goods is read as an indicator of the general global economic climate.

China Trade Balance Plunges To 11-Month Lows As Exports Crash Over 25% -- Worse than expected is an understatement. Things are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline - the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows. As Bloomberg notes, China’s exports in yuan terms fell 20.6% year on year in February, down from a 6.6% drop in January, and missing expectations of an 11.3% fall. Imports were down 8.0%, an improvement from January’s 14.4% drop. The trade surplus came in at 209.5 billion yuan ($32 billion), down from 406.2 billion yuan. The Chinese New Year holiday, which fell at the start of February in 2016 and in the middle of February in 2015, distorts the data in unpredictable ways. Holiday effects mean the outsize drop in February exports overstates the weakness in China’s factory sector. Even so, looking at a year-to-date figure for the first two months of the year, the picture is only slightly less gloomy. In the year through February, exports are down 13.1%.

Are You Kidding Me? Chinese Exports Plunge 25.4 Percent Compared To Last Year: We just got more evidence that global trade is absolutely imploding. Chinese exports dropped 25.4 percent during the month of February compared to a year ago, and Chinese imports fell 13.8 percent compared to a year ago. For Chinese exports, that was the worst decline that we have seen since 2009, and Chinese imports have now fallen for 16 months in a row on a year over year basis. The last time we saw numbers like this, we were in the depths of the worst economic downturn since the Great Depression of the 1930s. China accounts for more global trade than any other nation (including the United States), and so this is a major red flag. Anyone that is saying that the global economy is in “good shape” is clearly not paying attention. If someone would have told me a year ago that Chinese exports would be 25 percent lower next February, I would not have believed it. This is not just a slowdown – this is a historic implosion. The following comes from Zero HedgeThings are not getting better in China as Exports crashed 25.4% YoY (the 3rd largest drop in history), almost double the 14.5% expectation and Imports tumbled 13.8%, the 16th month of YoY decline – the longest ever. Altogether this sent the trade surplus down to $32.6bn (missing expectations of $51bn) to 11-month lows. So much for that whole “devalue yourself to export growth” idea…I don’t know how anyone can possibly dismiss the importance of these numbers. As you can see, this is not just a one month aberration. Chinese trade numbers have been declining for months, and that decline appears to be accelerating.

China’s Export Slump Shows Growth Push Hinges on Local Demand --China’s export slump deepened in February, highlighting the challenge for policy makers seeking to keep the economy humming at home while trade acts as a brake on growth. The week-long Chinese new year holidays fell in February this year, closing factories and curbing shipments. That saw exports tumble 25.4 percent in U.S. dollar terms from a year earlier, the biggest decline since May 2009. Imports extended a streak of declines to 16 months, slumping 13.8 percent, leaving a trade surplus of $32.6 billion. Breaking Down China's Trade DataA slowdown in global trade is making it harder for China’s leaders, who are gathered in Beijing this week to set the nation’s economic plans, to keep growth at the targeted 6.5 percent to 7 percent range. After early declines, China’s benchmark stock index eked out a gain in the final minutes of trading amid speculation of buying by state-backed funds. "Exports got pummeled again in February, highlighting the downturn in global demand,. . It’s easy to blame Chinese New Year distortions, but there is a much deeper malaise that is becoming apparent in the numbers." Reflecting uncertainties over the global outlook, the government didn’t set a specific target for trade at the annual congress meeting after it failed to meet the goal last year. Clouding interpretation of February’s reading is the week-long Chinese New Year holiday, which spurs manufacturers and importers to front-load or delay orders.

IMF issues warning on global growth as China exports fall The world faces a growing “risk of economic derailment” and needs immediate action to boost demand, the International Monetary Fund warned on Tuesday as new figures pointed to the worst monthly collapse in Chinese exports since 2009. Speaking in Washington, David Lipton, the IMF’s influential second-in-command, warned that the global economy was “clearly at a delicate juncture”. Policymakers around the world need to take urgent action to respond to slowing growth and fresh threats posed by turmoil in commodity and financial markets, he added. “Now is the time to decisively support economic activity and put the global economy on a sounder footing,” Mr Lipton told the National Association for Business Economics. Among the “most disconcerting” signs of trouble in the world economy, he said, were “a sharp retrenchment in global capital and trade flows” over the past year. Those concerns were highlighted by the weak trade figures out of China on Tuesday. They showed both imports and exports falling in February as China’s demand for commodities such as crude oil, iron ore and copper fell and weaker global demand dragged on exports of manufactured goods. In dollar terms China’s exports fell 25.4 per cent in February from a year earlier, the worst one-month decline since early 2009 and down from an 11.2 per cent drop in January. Imports fell 13.8 per cent, trimming losses after an 18.8 per cent fall in January.

China tries to reassure on economy, cuts growth target (AP) — China’s leadership tried to quell anxiety about its slowing economy following financial turmoil and rising labor unrest as it cut its growth target Saturday and promised to open the oil and telecom industries to private competitors in sweeping industrial reforms. Premier Li Keqiang announced a growth target of 6.5 to 7 percent in a report to the national legislature on Beijing’s plans for the year. That was down from last year’s “about 7 percent” and reflects the ruling Communist Party’s marathon efforts to replace a worn-out model based on trade and investment with more self-sustaining growth driven by consumer spending. Li, the country’s top economic official, warned that China faces “more and tougher problems,” including weak export demand. But he expressed confidence that communist leaders can maintain stable growth. “China has laid a solid material foundation and its economy is hugely resilient,” the premier said in an address to nearly 3,000 delegates to the National People’s Congress, a 12-day affair that kicked off Saturday. “As long as we work together as one to surmount all difficulties, we will definitely achieve the targets for economic and social development in 2016.” In a wide-ranging speech lasting nearly two hours, Li said Beijing will “oppose separatist activities” in Taiwan, the self-ruled island China claims as part of its territory. He announced no new initiatives following the recent election of Taiwanese President Tsai Ying-wen, who takes office in May.

China February FX reserves fall to $3.20 trillion, lowest since late 2011 | Reuters: China's foreign exchange reserves fell $28.57 billion in February, slightly less than expected and easing from January's slump, suggesting the central bank is scaling back its interventions to support the yuan as capital outflows slow. Still, China's foreign reserves declined for a fourth straight month, and the $3.20 trillion at the end of February was the lowest level since December 2011, data from the People's Bank of China showed on Monday. Economists polled by Reuters had predicted reserves would fall $30 billion from $3.23 trillion at the end of January. China's reserves are still the world's largest, but it has been burning through them at such a pace that some analysts believe Beijing might soon have to allow a sharp fall in the value of the yuan or back-pedal on liberalization and tighten capital controls. "It shows that outflows did slow down somewhat, but there are a lot of factors," said Yang Zhao, chief China economist at Nomura in Hong Kong The yuan steadied in February after volatile moves in December and January, helped in part by a weaker dollar as expectations of U.S. interest rate hikes faded, Zhou said.

China Food Inflation Explodes To 4 Year Highs As Producer Prices Slump For 47th Straight Month -- For the 47th month in a row, China's Producer Prices have fallen year-over-year - a record deflationary streak. CPI rose 2.3% YoY - the fastest pace since May 2014 (against expectations of a 1.8% rise in consumer prices, and at the upper end of the +1.5% to +2.4% range). PPI printed as expected with a  4.9% YoY plunge in producer prices (-4.5% to -5.5% range). However, what is most disturbing - from both a social unrest and economic-stimulus-hope basis, is that Food prices exploded 7.3% YoY - the most in 4 years. CPI accelerating and PPI slumping.. "The uptick in consumer prices is certainly striking," Bloomberg Intelligence economists wrote in a report. "But with virtually the entirety of the increase coming from food prices, it’s not an increase that’s likely to be sustained for long. Food prices are subject to supply shocks and seasonal blips." It look slike Food-flation is here to stay... As Bloomberg noted recently, "It’s really a problem of lack of domestic growth and domestic demand,". "The longer you get negative PPI, the more the risk that inflation expectations get dragged lower." Factory-gate deflation will probably moderate to about 5 percent in the first quarter, according to Niu Li, an economist at the State Information Center, a research arm of the National Development and Reform Commission, the nation’s chief planning agency. "The producer-price index is still much lower than what we thought, indicating severe difficulties in the industrial sector," Niu said in an interview. "The PBOC is unlikely to impose any major change in its monetary policies because of the reading." And so with PPI tumbling and CPI surging - expectations for some yuuge stimulus package are wishful thinking. Charts: Bloomberg

China Car Sales Hit the Brakes in February -- Growth cooled in the world’s largest light-vehicle market in early 2016, raising a caution flag for dealers becoming reluctant to put too much inventory on car lots amid concerns about the broader economy and stock market. As WSJ’s Rose Yu and Lilian Lin report: New car sales fell modestly in February, capping off a two-month sales period that is traditionally affected by the Lunar New Year. China sold about 1.38 million cars—sedans, sport-utility vehicles and minivans—last month, down 1.5% from a year earlier. Light inventories on dealer lots could limit the size of an expected rebound in coming months if buyers can’t get the models they are looking for or if deals are modest. Although February represented the first decline in six months, industry watchers pay closer attention to the 5.1% uptick during the first two months of the year because of the holiday’s impact. More than 3.6 million vehicles were sold during that two-month span, representing a weaker growth rate than the 7.8% rise forecast by the China Association of Automobile Manufacturers. Auto sales sizzled in late 2015 following a sluggish summer, and recent trends paint a murky picture. A plunging stock market in the first two months of the year exacerbated worries about cooling demand. Rises in housing prices also had an impact on car sales, analysts said. “We were repeatedly told by industry contacts that there was ‘no visibility’ beyond the Lunar New Year,”  “While it could be argued that an earlier Lunar New Year holiday this year has been negative for car sales growth, we believe the recent trends point to industry volume growth in the mid-single digits.”

China steelmaker to cut up to 50,000 jobs (AFP) - One of China's largest steelmakers plans to shed up to 50,000 jobs, its chairman said, as the country struggles to reduce overcapacity while growth in the world's second-largest economy slows. The comments by Ma Guoqiang, the head of state-owned group Wuhan Iron and Steel, are a stark illustration of the challenges facing Beijing as it seeks to retool the economy while avoiding social unrest - anathema to the leadership. The firm's steel division currently has 80,000 employees but might retain only 30,000 of them, Ma said on the sidelines of the National People's Congress, the country's rubber-stamp parliament."Probably 40,000-50,000 people will have to find other ways forward," he told, a news portal run by the Communist Party's mouthpiece the People's Daily, according to a transcript on the website. China's economy grew at its slowest pace in a quarter of a century last year and its outlook remains bleak, with the government last week lowering its 2016 growth target to 6.5-7 per cent, down from "about seven per cent" previously. Authorities have prioritised reducing borrowing, overcapacity and inventory as they seek to maintain growth and make it more sustainable. The government has announced a goal of cutting steel capacity by up to 150 million tonnes within five years.

Desperate “Dumb Money” from China Now Chasing Unicorns -- Wolf Richter: Money creation in China has gone bonkers. Authorities have opened the valves, and new credit is surging through money pipelines, including state-owned banks and the “shadow banking” system, and so loans in just the first two months this year soared by $1 trillion. Where did this money go?  We don’t know, but we’re getting indications that some of it is showing up right here in the US. At the same time, “China is getting into the venture capital business in a big way. A really, really big way,” as Bloomberg put it: Government-backed venture funds raised about 1.5 trillion yuan ($231 billion) last year to bring the total to 2.2 trillion yuan. “That’s the biggest pot of money for startups in the world and almost five times the sum raised by other venture firms last year globally….”  While China is drowning in this sea of liquidity, its exports in February crashed 25% in dollar terms year over year. Part of it was due to the Chinese New Year effects. The rest was due to weakening global demand for Chinese goods: It was the 11th month of declines in 12 months. Exports of goods are crashing, but hey, no problem, exports of money are booming. Capital flight takes on ever fancier dimensions: mansions in Southern California, tony condos in San Francisco, huge commercial and residential development projects, corporate acquisitions, and so on. Prices have surged for seven years and have reached ludicrous heights. So this is a good time to buy.But this deal marks what everyone has been waiting for: a sign that the Chinese, in their desperate efforts to get these piles of money out of the country, have finally gone nuts.

Moody’s: China Doomed to Fail as it Chases ‘Impossible Trinity’ - China is bound to fail in at least one of its three conflicting aims to achieve growth, institute reform and maintain stability, says Moody’s as it engages in a war of words with Beijing over the country’s economic prospects. China’s three policy objectives formed an “impossible trinity”, the ratings agency said in a research report published on Tuesday. Beijing could at best achieve only two of those objectives at one time, it said. The research note – authored by six analysts and led by Michael Taylor, Moody’s managing director and chief credit officer for the Asia-Pacific – was released just hours after China reported a 20 per cent drop in February exports – its biggest fall since 2009 when the country was hit hard by the global financial crisis. In the face of its “trilemma”, Moody’s said, China was now pursuing growth and stability over reform, as seen from its government work report delivered to the National People’s Congress. “While the combination of growth and stability might seem to minimise risks in the short run, it is likely to leave unaddressed, in the long run, the deep imbalances evident in China’s economy, thereby increasing the long-term adjustment costs,” the report said.

"In The Last Seven Years, China Accounted For 40% Of All Global Debt Creation" -- Back in November 2013, when few had an idea just how massive China's debt bubble truly was, we explained "How In Five Short Years, China Humiliated The World's Central Banks" and said the following: In order to offset the lack of loan creation by commercial banks, the "Big 4" central banks - Fed, ECB, BOJ and BOE - have had no choice but the open the liquidity spigots to the max. This has resulted in a total developed world "Big 4" central bank balance of just under $10 trillion, of which the bulk of asset additions has taken place since the Lehman collapse. How does this compare to what China has done? As can be seen on the chart below, in just the past 5 years alone, Chinese bank assets (and by implication liabilities) have grown by an astounding $15 trillion, bringing the total to over $24 trillion, as we showed yesterday. In other words, China has expanded its financial balance sheet by 50% more than the assets of all global central banks combined! And that is how - in a global centrally-planned regime which is where everyone now is, DM or EM - your flood your economy with liquidity. Perhaps the Fed, ECB or BOJ should hire some PBOC consultants to show them how it's really done. To give a sense of perspective of the numbers involved, we showed the following chart: To be sure, since November 2013, all those numbers have grown substantially, especially at the ECB and BOJ but nowhere more so than in China, where a little over a year later, a famous study by McKinsey showed that not only has the world not delevered, but that the global "debt creation dynamo" was none other than China...

China Economic Planner Says Slowdown Isn’t Stunting Global Growth - WSJ: The head of China’s top economic-planning agency Sunday rejected suggestions the Chinese slowdown was dragging on global growth and markets, saying the world’s second largest economy continues to be a source of demand and vitality. National Development and Reform Commission chief Xu Shaoshi cited the 6.9% growth the economy clocked last year and the high volume of commodities it is importing as among the contributions China is making to global economic health. Even as the government is lowering its growth target for the slowing economy, Mr. Xu ruled out any likelihood of a hard landing. Mr. Xu’s defense is one of the more forceful from a senior official since China’s slowdown, the surprise shifts in the central bank’s currency policy, and the government’s botched handling of a stock market meltdown began reverberating through global markets last year. “China is fully capable of keeping economic growth within a reasonable range,“ Mr. Xu said Sunday at a news conference on the sidelines of China’s annual legislative session. ”All predictions of a hard landing will definitely fail.” Worries about China’s deceleration—and how the Chinese leadership is managing it—have dominated policy and business discussions across the globe. At a meeting of the Group of 20 major economies last month in Shanghai, Chinese leaders strove to reassure major trading partners that Beijing wouldn't devalue the yuan as it navigates the economic tangle. The International Monetary Fund, along with other institutions, investors and analysts, has said the decelerating Chinese economy and its rebalancing away from smokestack industries and toward services will continue to drag global growth this year and next.

Four Danger Signs to Watch For in the Chinese Economy -- With each 10th of a GDP percentage point shaved off of China’s growth figures, mines and mills across the world idle, sending some resource-rich nations into recession. China’s economic outlook affects not only the fates of 1.3 billion Chinese but also the fortunes of many nations across the planet.Little wonder, then, that as China’s National People’s Congress (NPC) got under way last weekend for its annual conclave in Beijing, the state of the world’s second largest economy was at the forefront of people’s minds. The nation’s propaganda department chose the meeting of the rubber-stamp body to introduce a curiously worded political slogan, “the four consciousnesses,” referring to President Xi Jinping’s order to highlight the primacy of the Communist Party in Chinese life. But it was Premier Li Keqiang’s announcement on Saturday that the government expected the economy to grow between 6.5% and 7% that made far bigger headlines. After all, last year, China narrowly missed its self-proclaimed target of 7% GDP expansion, recording the nation’s slowest economic uptick in 25 years with 6.9% growth. This year’s figure is the first time the government has set a goal below 7% in two decades. On Sunday, amid NPC meetings in Beijing, a top economic-planning official, Xu Shaoshi, dismissed fears of a hard landing in China, saying there was “no way” such a slowdown would ensue, according to the official Xinhua news agency. But here are four economic indicators to be concerned about in the year ahead:

Chinese Shipping Majors Splash $2.5 Billion for 30 Giant Valemax Vessels - WSJ: Chinese shipping majors Cosco Group, China Merchants Group and ICBC Financial Leasing Co. have placed orders for 30 giant Valemax vessels worth a combined $2.5 billion, people involved in the matter said Thursday. The move will tighten Beijing’s grip on iron-ore shipments from Brazil over the next decade and increase pressure on Western shipowners struggling to find cargo in one of the industry’s longest ever downturns. The ship orders will also boost Chinese shipyards suffering from a slump in demand, and in the long run will help control costs for Chinese steelmakers by stabilizing freight rates. The people said the three state-controlled shipping companies ordered 10 ships each from four local yards—Shanghai Waigaoqiao Shipbuilding, Beihai Shipbuilding, CIC Jiangsu and Yangzijiang Shipbuilding—with deliveries scheduled to begin in 2018.“Despite the collapse in the dry-bulk market, the Chinese are ordering new vessels to effectively control iron-ore freight rates over the next 10 years or so,”. “This will put more pressure on dozens of independent shipowners struggling to cope with record low freight rates.” Valemaxes can move up to 360,000 tons of cargo. They are twice as big as Capesize vessels, the biggest mass-production dry-bulk ships, which move around 180,000 tons.

Too Many Boats for Too Little Cargo Leaves Shippers High and Dry -  Shippers of commodities are in the midst of an unprecedented crisis as waning Chinese growth and a surge in supply push earnings to new lows. These charts show how it happened, how commodity shipping is collapsing and how there’s one glimmer of hope for owners to turn things around. In the mid-to-late 2000s ship owners gambled that China’s economy would continue to grow at about 10 percent a year. The result: the number of the largest commodity carriers, called Capesizes, has almost doubled since 2008. The fleet hit a record 1,655 vessels in early 2015 -- the same year in which the Chinese economy grew at the slowest pace in 25 years. Owners are now fighting for whatever market share they can get. Clarkson Research forecasts that this year will see a second consecutive drop in the amount of coal and iron ore shipped around the world. Not since data going back to 1990 has the world seen two consecutive declines in the trade of those two key commodities. Coupled with near-record numbers of ships, that’s leading to enormous losses for the world’s owners. Golden Ocean Group Ltd. said last month it lost $69 million in the final quarter of 2015, versus net income of $5.2 million a year earlier. Slowing demand for ships and a glut of supply can only mean one thing: record low costs to lease them. Capesize carrier fees have been breaking new lows almost every day this year, and now don’t even cover a third of the daily cost of their crew. When other operating costs and financing costs are included, owners stand to lose around $14,000 a day per ship. When you’re making a loss on every transaction, it might seem like a good idea to sell some ships to raise capital. But in the Capesize market, carrier prices have plunged. A ship that would have cost $65 million in 2014 would now cost just $35 million. That leaves owners, some of whom borrowed to buy, with an even trickier predicament when trying to stabilize their finances.

Container Blood Bath: Freight Rates Hit New: The World Container Index’s composite index, an average of spot freight rates on 11 global East-West routes connecting Asia, Europe and the US, reached a record low of US$701 per 40-foot container on March 10, says Drewry Shipping Consultants. This was the lowest reading since the World Container Index (WCI) starting tracking weekly transatlantic, transpacific and Asia-Europe rates in June 2011. “The World Container Index’s composite index is now 60% lower than the average of the past 5 years and has decreased by 62% in the past year,” said Richard Heath, director of WCI. Jonathan Chappell, an analyst at Evercore ISI in New York says that there’s been an arms race in building bigger and bigger ships and they’re coming at a time the economy is slowing. An oversupply of massive new container ships serving the China-to-Europe routes has pushed smaller ships to the Atlantic Ocean and depressed rates between North America and Europe, said Andrew Abbott, chief executive officer of Atlantic Container Line (Canada) Ltd. He calls the plunge in container rates “a bloodbath.” The cost of shipping industrial commodities such as coal, ore and grain recently hit record lows, according to the Baltic Dry Index.

China vows specific plans for peace treaty, denuclearization of Korean Peninsula: -- Chinese Foreign Minister Wang Yi has vowed to put forward specific plans in Beijing's proposal for pursuing peace treaty talks with North Korea in tandem with denuclearization negotiations. Wang made the remarks during a press conference on Friday after talks with Russian Foreign Minister Sergei Lavrov in Moscow, according to a transcript of Wang's remarks posted on the Chinese foreign ministry's website. Wang said the "parallel track" approach of pursuing both a peace treaty and denuclearization at the same time is an "equitable, reasonable and workable solution." Wang said China will "put forward specific plans" to help materialize the Chinese proposal. In the wake of North Korea's fourth nuclear test and rocket launch this year, China has proposed to pursue peace treaty talks with the North in tandem with denuclearization negotiations as a way to defuse heightened tensions on the Korean Peninsula. Signing a peace treaty, which would replace the armistice that halted the 1950-53 Korean War, has been one of Pyongyang's long-running goals, but the U.S. and South Korea have demanded the North abandon its nuclear program first.

Japan central bank to cut next fiscal year's growth, price estimates | Reuters: The Bank of Japan (BOJ) is expected to cut next fiscal year's economic and price forecasts at a quarterly review in April, sources say, reflecting growing gloom in the bank after its most recent stimulus measures fell on stony ground. Downgrading its forecasts could heighten pressure for additional easing measures, though there is waning confidence that monetary policy is providing an effective boost to the economy. The BOJ's decision to adopt negative interest rates in January failed to boost stock prices or arrest an unwelcome rise in the yen, and the economy remains stagnant despite nearly three years of its pumping between 60 and 80 trillion yen ($530-700 billion) annually into the economy. While many BOJ officials remain optimistic about domestic demand, some fret that global market turbulence and sluggish emerging market demand are taking a heavier-than-expected toll on exports and factory output. To reflect weak external demand, BOJ board members may cut their growth and price projections at a quarterly review to be conducted at a critical policy meeting on April 27-28, sources familiar with its thinking said.

Moody's, Fitch flag warnings on delaying Japan’s sales tax hike - A delay in Japan's planned increase to its sales tax could have negative implications for the country, rating agencies Moody’s and Fitch Ratings said on Monday (Mar 7). According to Reuters, both rating agencies warned of risks amid recent discussions in Japan's parliament over whether to postpone the sales tax hike scheduled for April 2017. Any delay by Japan in raising its sales tax would pose a major burden on government finances, Reuters reported ratings agency Moody's as saying On the other hand, Fitch noted that a delay in the sales tax hike could have negative implications for the country's sovereign debt rating. "We're not in the business of giving policy advice," Andrew Colquhoun, head of Asia-Pacific sovereign rating at Fitch, told Reuters in a phone interview. "But what I would say is that if the sales tax increase didn't happen, without other equivalent fiscal consolidation measures, the deficit would be higher, the debt would be rising faster than we currently expect, and that would be credit-negative, and could result in a negative rating action." In April 2015, Fitch cut its rating on Japan after the government failed to take steps to offset a delay in a sales tax increase. It cut by one notch to A, which is five notches below the top AAA rating, with a stable outlook.

Japan mulls second tax-hike delay as spending falls | Reuters: Japan's government has begun informally discussing a second delay to a hike in sales tax, as Prime Minister Shinzo Abe prepares for elections with household spending lower than when he came to office and still falling. With consumers in a funk and retailers struggling to raise prices, Abe's efforts to lift the world's third-biggest economy clear of decades of deflation and stagnation are under threat. For now, Abe and the Finance Ministry insist that the tax will rise in 13 months to 10 percent from 8 percent, backed by many economists worried by Japan's enormous national debt, especially as moves are afoot to raise government spending ahead of summer elections for the Upper House of parliament. But some bureaucrats and ruling party politicians are quietly starting to game-plan a second delay to the unpopular measure. "Considering the state of the Japanese economy, a delay is favourable,"  Abe has long said he would only delay the hike again if Japan were to suffer a shock on the magnitude of the 2008 collapse of U.S. investment bank Lehman Brothers bank, which ushered in the global financial crisis.

JGB 30-year yield sinks to record low after firm auction | Reuters: The 30-year Japanese government bond yield sank to a fresh record low on Tuesday as firm demand at an auction of the maturity added bids in an already bullish bond market. The 30-year yield fell 11.5 basis points to 0.570 percent, a record low. The benchmark 10-year yield also declined to a new record trough of minus 0.090 percent. A fall in JGB yields accelerated after the Bank of Japan adopted negative interest rates in January, with maturities up to 11 years now yielding below zero. The 800 billion yen ($7.07 billion) of new 30-year JGBs sold on Tuesday attracted firm investor bids as the tenor still offers positive yields.

Negative rates, fat margins: Japan regional banks ramp up car, holiday loans | Reuters: Japanese regional banks are aggressively expanding their unsecured retail lending business, lured by the segment's fat margins now the country's central bank has squashed already ultra-low interest rates into negative territory. Unsecured loans, typically offering up to 1 million yen ($8,800) in fast cash for anything from shopping trips to vacations, can command interest rates of close to 15 percent in some cases - way above rates for business like mortgages or small firm borrowing. Car loans are also popular. Small-sized loans combined with high profit margins make the risk of lending without collateral worth taking for the banks. In an over-banked, low-return market, the hunt for domestic yield is much more pressing for Japan's scores of regional lenders than global giants like Mitsubishi UFJ Financial Group Inc (8306.T), able to draw on overseas and investment banking. Bank of Yokohama Ltd (8332.T), Japan's No.2 regional lender by assets, said its outstanding unsecured retail loan portfolio jumped 39 percent year-on-year to 59.4 billion yen ($527.5 million) for the first fiscal half ended last September. Continued growth at that rate would see it beat its own target of 70 billion yen for the 12 months through March. "With interest rates falling on all other loans such as business and mortgage loans, they are pretty much the only one we can make profit on," said an official at the bank. While Bank of Yokohama's unsecured loans make up only a fraction of its overall retail lending of 4.9 trillion yen, their margins are very attractive as borrowers are willing to pay a higher interest rate for funds extended relatively easily and quickly.

Why is labor mobility in India so low? | Microeconomic Insights: Migration from rural areas of India to the city is surprisingly low compared with other large developing countries, leaving higher paying job opportunities unexploited. This research shows that well-functioning rural insurance networks are in part responsible for this misallocation in the labor market, creating incentives that keep adult males in the village. Policies that provide private credit to wealthy households or government safety nets to poor households would encourage greater rural-urban migration but they could also have unintended distributional consequences. Rural-urban migration is exceptionally low in India. Changes in the rural and urban population between decennial censuses over the period 1961-2001 indicate that the migration rate for working age adult males (those aged 25-49) ranged from 4% to 5.4%.  An independent measure of migration constructed from the nationally representative India Human Development Survey conducted in 2005 suggests a male rural-urban migration rate of 6.8%; while in the male subsample of the Indian Demographic and Health Survey (DHS), the migration rate is 5.3%. To put these statistics in perspective, the corresponding migration rate from the 1997 Brazil DHS, which also includes a male sample, is over twice as large at 13.9%. India’s unusually low rural-urban migration is also reflected in its rates of urbanization. Figure 1 plots the percentage of the adult population for four large developing countries – China, India, Indonesia and Nigeria – who are living in cities, as well as the change in this percentage between 1975 and 2000. Urbanization in all four countries was low in 1975, but India had fallen far behind the others by 2000.

South Africa's debt already priced for junk as growth slows | Reuters: (Reuters) - An expected cut in South Africa's credit ratings to "junk" grade is already being priced in by investors who are increasingly shunning the country's financial assets. Africa's most industrialised economy is seen at risk of losing its investment-grade status because of persistently weak growth and large deficits. Many investors are also unhappy with President Jacob Zuma's handling of the economy. A change in ratings to speculative grade, known as "junk", typically leads to a sharp rise in borrowing costs. That would be bad news for South Africa, whose debt servicing needs are already projected by the Treasury to rise to nearly 180 billion rand ($12 billion) in 2018-19. But South African dollar debt trading in JP Morgan's Emerging Markets Bond Index is already yielding more than that of countries with similar credit ratings, such as Romania or India, and even some lower-rated peers like Russia and Turkey. "A lot of things that people say would happen if we are downgraded, have already happened," NKC African Economics analyst Francois Conradie said. "A lot of capital left the country in the second half of last year, especially in December." "Even at investment-grade we are already paying as much as other countries that are sub-investment grade -- it's like we have already been downgraded."

Emerging market credit hangover squeezes firms, economic growth | Reuters: Asian credit markets have become a harsher place for borrowers in the past year as widening spreads and falling currencies saddle firms with elevated debt-servicing costs in another sign of increasing stress in emerging economies. The problems in Asia are being felt more acutely in the high yield sector as slowing economies mean firms aren't earning enough to cover their cost of capital, triggering a vicious cycle of shrinking investment, lower economic growth, faltering profits and defaults. The sector has boomed in recent years thanks to China, which now accounts for roughly 50 percent of the outstanding market in Asia - a dominance that is now all the more concerning as its economy cools to its slowest pace in a quarter of a century. "In an outlook of slowing growth and worsening profitability, the high yield sector is particularly vulnerable and most investors we talk to are staying clear of that space," said the head of credit trading at an Asian bank in Singapore. In many ways firms are now paying the price for binging on dollar-denominated debt when the U.S. Federal Reserve launched a burst of liquidity during the 2008-9 financial crisis lasting several years, making it extremely cheaper to borrow dollars. Fast forward to 2016 and it's a different story, particularly as a slowdown in China's economy and a turn in Fed policy have tightened financial conditions and driven up defaults.

Crime Could Account For 1.5% Of The World's GDP: Criminal networks earn huge sums of money every year but just how much? Precise numbers are difficult to obtain, of course, but the UN Office on Drugs and Crime estimates that drug trafficking, counterfeiting and many other forms of illicit trade bring in an estimated $870 billion every year. That's equivalent to 1.5 percent of global GDP. Brink recently published a list of 12 types of illegal trade compiled by Global Financial Integrity, arriving at a slightly lower total. It found that drug trafficking makes $320 billion in revenue for the world's criminals while counterfeiting yields $250 billion. This chart shows estimated annual revenues for illicit trade by sector.

Lula and the BRICS in a fight to the death - “BRICS” is the dirtiest of acronyms in the Beltway/Wall Street axis, and for a solid reason: the consolidation of the BRICS is the only organic, global-reach project with the potential to derail Exceptionalistan’s grip over the so-called “international community.” So it’s no surprise the three key BRICS powers have been under simultaneous attack, on many fronts, for some time now. On Russia, it’s all about Ukraine and Syria, the oil price war, the odd hostile raid over the ruble and the one-size-fits-all “Russian aggression” demonization. On China, it’s all about “Chinese aggression” in the South China Sea and the (failed) raid over the Shanghai/Shenzhen stock exchanges. Brazil is the weakest link among these three key emerging powers. Already by the end of 2014 it was clear the usual suspects would go no holds barred to destabilize the seventh largest global economy, aiming at good old regime change via a nasty cocktail of political gridlock (“ungovernability”) dragging the economy to the mud. Myriad reasons for the attack include the consolidation of the BRICS development bank; the BRICS’s concerted push for trading in their own currencies, bypassing the US dollar and aiming for a new global reserve currency to replace it; the construction of a major underwater fiber-optic telecom cable between Brazil and Europe, as well as the BRICS cable uniting South America to East Asia – both bypassing US control. And most of all, as usual, the holy of the holies – connected with Exceptionalistan’s burning desire to privatize Brazil’s immense natural wealth. Once again, it’s the oil.

News of the Bizarre: Venezuelan Central Bank Sues Website for Causing Inflation -- Is a US website causing the collapse of the Venezuelan economy?  Of course not, that’s impossible.  But, that’s what Venezuela’s Central Bank seems to want to prove as it pursues legal action to prove as it pursues legal action to shutdown The U.S. District Court of Delaware, where the complaint was filed, dismissed the initial claim last week. But Venezuela will file an amended complaint. Venezuela is a terrible mess and is obviously looking for targets to blame. According to the Venezuelan central bank, the website has pushed up the country’s triple-digit inflation lying about exchange-rate data to make the situation seem even worse than it is. Only a central bank could blame a website for monetary and price inflation that would not exist without central bank printing presses. According to the ridiculous lawsuit, “Defendants are deliberately misrepresenting and effectively manufacturing a market — a phony, distorted market for the exchange of bolivares into dollars and vice-versa, with the aim of lining their pockets with ill-gotten gains.” Of course, Dolartoday is innocent. The website merely prints the exchange rate being offered in Cucuta, Colombia.  But, even if it were publishing some wildly egregious exchange rate, even higher than it currently is, how could it destroy a country’s entire economy?  Only a central bank can do that!

'El Chapo’ Guzmán’s daughter accuses Mexican government - An exclusive interview given by a woman claiming to be Sinaloa cartel chief Joaquín "El Chapo" Guzmán's daughter has added to allegations that the Mexican government colluded with the drug lord and his cartel. Rosa Isela Guzmán Ortiz, reportedly the American daughter of the Sinaloa kingpin, told The Guardian that her father had "bought protection at the highest official level," and sent intermediaries to "meetings with senior politicians and their representatives." "All I know is that my dad told his lawyer to deliver some cheques to [a politician’s] campaign, and asked that he respect him," she told The Guardian. These transactions, in Guzmán Ortiz's telling, are in part what allowed "El Chapo" to rise from his humble origins in the mountains of Sinaloa state in northwest Mexico to his status as a leader of one of the most powerful drug-trafficking organizations on the planet. Guzmán Ortiz said her father's elaborate jailbreak in July was the result of a deal between the kingping and the government. "My dad’s escape was an agreement," she told The Guardian. She also accused senior Mexican officials of reneging on that deal by allowing Guzmán's recapture in January. “If there’s a pact, they don’t respect it," Guzmán Ortiz said. "Now that they catch him they say he’s a criminal, a killer. But they didn’t say that when they asked for money for their campaigns. They’re hypocrites.”

How Vancouver Is Being Sold To The Chinese: The Illegal Dark Side Behind The Real Estate Bubble -- One month ago, when describing the latest in an endless series of Vancouver real estate horror stories, in this case an abandoned, rotting home (which is currently listed for a modest $7.2 million), we explained the simple money-laundering dynamic involving Chinese "investors" as follows.

  • Chinese investors smuggle out millions in embezzled cash, hot money or perfectly legal funds, bypassing the $50,000/year limit in legal capital outflows.
  • They make "all cash" purchases, usually sight unseen, using third parties intermediaries to preserve their anonymity, or directly in person, in cities like Vancouver, New York, London or San Francisco.
  • The house becomes a new "Swiss bank account", providing the promise of an anonymous store of value and retaining the cash equivalent value of the original capital outflow.

We also explained that hundreds if not thousands of Vancouver houses, have become a part of the new normal Swiss bank account: "a store of wealth to Chinese investors eager to park "hot money" outside of their native country, and bidding up any Canadian real estate they could get their hands on." This realization has now fully filtered down to the local population, and as the National Post writes in its latest troubling look at the "dark side" of Vancouver's real estate market, it cites wholesaler Amanda who says that "Vancouver seems to be evolving from a residential city into almost like a lockbox for money... but I have to live among the empty houses. I’m a resident, not just an investor."

Helicopter Money Comes To Canada: Ontario Pledges "Basic Income Experiment" -- Earlier today, we explained why so-called “helicopter money” can’t save the world when ZIRP, NIRP, and QE have all failed to revive global demand and boost inflation. The reason: QE is helicopter money. That is, we’ve been doing this for 8 years and it hasn’t worked yet.. It’s deficit financing with one (very tenuous) degree of separation. The fact that the middlemen (the banks) didn’t pass along the benefits to you doesn’t make the mechanics of it any less ridiculous.But if that’s helicopter money “v.1,” Main Street thinks it didn’t work out so well. Banks recovered, Jamie Dimon and Lloyd Blankfein became billionaires, financial assets soared, and everyday people got Gene Wilder’d.Well if helicopter money “v.3” entails flying around and raining actual banknotes onto the hapless masses, then we suppose we should at least try “v.2” first, and “v.2” is what many have called a “basic income.”The idea is to send everyone a monthly check that would either supplement or replace altogether, complex systems of state benefits thereby making households better off and saving the government money in the process.As The Independent notes, Ontario is set to become the latest locale to float the idea: “Ontario has announced it could soon be sending a monthly cheque to its residents as it plans to launch an experiment testing the basic income concept."

Faltering US economy leads global slowdown - Markit - Global economic growth slowed to near-stagnation in February, according to PMI data. The JPMorgan Global PMI, compiled by Markit from its worldwide business surveys, sank to its lowest since October 2012. The headline PMI is broadly consistent with annual global GDP growth of just over 1% (compared to a long-run average of 2.3%). Weakness was broad-based across both the developed and emerging markets. The emerging market PMI Output Index (covering both manufacturing and services) hit its second lowest reading since March 2009. Emerging markets have acted as a drag on the global economy by historical standards over the past three years, with the emerging market PMI indicative of only 3.5% annual GDP growth in February. Of the BRIC nations, India is seeing the strongest expansion but only Russia saw faster growth in February. The developed world PMI fell to its lowest since April 2013, signalling just 0.5% annual GDP growth. Rates of expansion slowed in all four largest developed economies, with a steep slowdown in the US the most worrying, pushing the US down to stagnation and below the equivalent index for Japan. Slower growth was also seen in the UK, which is now seeing the same modest pace of expansion as the eurozone. Markit’s US PMI series for both manufacturing and services fell sharply again in February. Bad weather was partly to blame, but weaker underlying demand meant February was the second-worst month since the global financial crisis. Although both the surveys and official data showed job creation remaining robust, and keeping further rate hikes on the table, slower economic growth may soon feed through to weaker hiring.

The IMF and the Next Crisis  --The IMF has issued a warning that “increasing financial market turbulence and falling asset prices” are weakening the global economy, which already faces headwinds due to the “…modest recovery in advanced economies, China’s rebalancing, the weaker-than-expected growth impact from lower oil prices, and generally diminished growth prospects in emerging and low-income economies.” In its report to the finance ministers and central bank governors of the Group of 20 nations before their meeting in Shangahi, the IMF called on the G20 policymakers to undertake “…bold multilateral actions to boost growth and contain risk.” But will the IMF itself be prepared for the next crisis? The question is particularly appropriate in view of the negative response of the G20 officials to the IMF’s warning. U.S. Treasury Secretary Jacob J. Law sought to dampen expectations of any government actions, warning “Don’t expect a crisis response in a non-crisis environment.”  The IMF, then, may be the “first responder” in the event of more volatility and weakening. The approval of the long-delayed 14th General Quota Review has allowed the IMF to implement increases in the quota subscriptions of its members that augment its financial resources. Managing Director Christine Lagarde, who has just been reappointed to a second term, has claimed the institution of new Fund lending programs, such as the Flexible Credit Line (FCL) and the Precautionary and Liquidity Line (PLL), has strengthened the global safety net. These programs allow the IMF to lend quickly to countries with sound policies. But outside the IMF, Lagarde claims, the safety net has become “fragmented and asymmetric.” Therefore, she proposes, “Rather than relying on a fragmented and incomplete system of regional and bilateral arrangements, we need a functioning international network of precautionary instruments that works for everyone.” The IMF is ready to provide more such a network.

Should We Worry About A Global Economic Slowdown? -- International Monetary Fund (IMF) says yes: The International Monetary Fund is sounding louder and louder alarms about the state of the global economy. The problem is, few major economies seem to be hearing them. “The IMF’s latest reading of the global economy shows once again a weakening baseline,” the fund’s No. 2 official, David Lipton, warned Tuesday in a speech to the National Association for Business Economics. While the world economy is still expanding, he said, “we are clearly at a delicate juncture, where risk of economic derailment has grown.” On the other hand, the Peterson Institute for International Economics (PIIE) says no: After five years of disappointing recovery throughout the major economies, almost everyone is ready to believe the worst. Global markets have displayed the fruits of that pessimism in recent months... [W]e share a conviction that public discussion of the global economic out-look has run off the rails of late... Global economic fundamentals today are not so grim... and policymakers and the public should base their decisions on fundamentals, not market swings .. So the IMF sees declining global aggregate demand growth and worries policy makers in advanced economies are not paying close enough attention to it. PIIE tells us the fundamentals are not so bad and to be more upbeat. Who is right?  Well, there is this OECD composite leading indicator which suggest a slowdown is ahead for the two largest economies in the world.

The Fear Factor in Global Markets - Kenneth Rogoff - The phenomenal market volatility of the past year owes much to genuine risks and uncertainties about factors such as Chinese growth, European banks, and the oil glut. For the first two months of this year, many investors were panicked that even the United States, the world’s most comforting growth story, was about to fall into recession. Indeed, among the experts who participate in the Wall Street Journal’s monthly poll, 21% believed a recession was around the corner.  I won’t deny that there are risks. A big enough hit to China’s growth or to Europe’s financial system could certainly tip the global economy from slow growth to recession. An even more frightening thought is that by this time next year, the US presidency may have turned into a reality television show. Yet, from a macroeconomic perspective, the fundamentals are just not that bad. Employment numbers have been strong, consumer confidence is solid, and the oil sector is just not large enough relative to GDP for the price collapse to bring the US economy to its knees. In fact, the most under-appreciated driver of market sentiment right now is fear of another huge crisis.

2008 Revisited? - Nouriel Roubini -- The question I am asked most often nowadays is this: Are we back to 2008 and another global financial crisis and recession?   My answer is a straightforward no, but that the recent episode of global financial market turmoil is likely to be more serious than any period of volatility and risk-off behavior since 2009. This is because there are now at least seven sources of global tail risk, as opposed to the single factors – the eurozone crisis, the Federal Reserve “taper tantrum,” a possible Greek exit from the eurozone, and a hard economic landing in China – that have fueled volatility in recent years.  First, worries about a hard landing in China and its likely impact on the stock market and the value of the renminbi have returned with a vengeance. While China is more likely to have a bumpy landing than a hard one, investors’ concerns have yet to be laid to rest, owing to the ongoing growth slowdown and continued capital flight.  Second, emerging markets are in serious trouble. They face global headwinds (China’s slowdown, the end of the commodity super cycle, the Fed’s exit from zero policy rates). Many are running macro imbalances, such as twin current account and fiscal deficits, and confront rising inflation and slowing growth. Most have not implemented structural reforms to boost sagging potential growth. And currency weakness increases the real value of trillions of dollars of debt built up in the last decade.  Third, the Fed probably erred in exiting its zero-interest-rate policy in December. Weaker growth, lower inflation (owing to a further decline in oil prices), and tighter financial conditions (via a stronger dollar, a corrected stock market, and wider credit spreads) now threaten US growth and inflation expectations.  Fourth, many simmering geopolitical risks are coming to a boil. Perhaps the most immediate source of uncertainty is the prospect of a long-term cold war – punctuated by proxy conflicts – between the Middle East’s regional powers, particularly Sunni Saudi Arabia and Shia Iran.  Fifth, the decline in oil prices is triggering falls in US and global equities and spikes in credit spreads. This may now signal weak global demand – rather than rising supply – as growth in China, emerging markets, and the US slows.

Here Come The SDR Bonds - Over two years ago now I began a series of articles titled SDR’s and the New Bretton Woods.  The ten post series focused on the SDR and its eventual evolution into an internationally traded asset. There was very little information out there at the time on this future transformation of the IMF’s Special Drawing Right currency, and POM broke new ground on many of the facts, trends, and methodologies behind the transition to a multilateral monetary framework. Each month more and more information and confirmation of the POM thesis emerges which further validates much of what has been presented to readers for over two years.  The latest validation comes from the G20 Communique from last weekend’s summit in Shanghai. Item 11 under Issues for Further Action states the following: “We look forward to the IMF’s report to examine and reflect on the possible broader use of the SDR by July.” This one statement provides the largest validation yet for POM readers that we are in fact on the correct course with this thesis.  What isn’t clear in the statement is whether July is the deadline for the report to be presented, or when the broader use of the SDR should begin.  Considering the time it takes to decide on changes and implement them, it would be my interpretation that it is only the report which is meant to be completed by July.

Debtor days are over as BIS calls time on world credit binge : The world’s credit boom is beginning to show dangerous signs of unraveling, ushering in a period of fresh turmoil for the over-indebted global economy, the Bank of International Settlements has warned. The globe’s top financial watchdog called time on the world’s debt binge, noting that debt issuance and cross border flows in emerging economies slowed for the first time since the aftermath of the global credit crunch at the end of last year.   With financial markets thrown into fresh paroxysms in 2016, oscillating between extremes of “hope and fear”, the over-leveraged world was finally approaching a day of reckoning, said Claudio Borio, the bank's chief economist. “We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time”, he said. The Swiss authority - known as the “central bank of central banks” - has long rang the alarm bell over the state of global indebtedness, warning that unprecedented monetary policy was storing up problems in a world which still lumbers under weak productivity, insipid growth, and has no appetite for major reforms. In its latest quarterly review, the BIS said some of its starkest warnings were now coming into fruition.

Faith in 'healing' central banks has faded: BIS: While financial markets have regained some composure since the start of the year, mounting global debt levels, sticky growth and the prospect of long-term negative rates are issues that are not going away anytime soon, the Bank for International Settlements has warned. Concerns about growth in China and other emerging market economies and the health of some of the world's largest banks made for a very difficult start to 2016 for most investors, resulting in one of the worst stock market sell-offs since the financial crisis of 2008."Underlying some of the turbulence was market participants' growing concern over the dwindling options for policy support in the face of the weakening growth outlook," the Basel based group, which serves as a representative for central banks around the world said in its quarterly review, published Sunday. More recently, markets have "regained a certain composure", after some positive economic indicators from the U.S. and a rate cut from China, which reduced the amount of cash banks must hold as reserves, helped boost sentiment. But the narrowing range of tools on offer for central banks to tackle sluggish growth as interest rates descend into negative territory and the unsustainable debt burdens, particularly in emerging markets point to a "gathering storm", head of the monetary and economic department at the BIS, Claudio Borio said. "We may not be seeing isolated bolts from the blue, but the signs of a gathering storm that has been building for a long time," Borio said.

Bank for International Settlements cautions over negative interest rates -- Negative interest rates are not always being passed on to businesses and consumers, and could ultimately undermine the business models of banks, pension funds and insurance companies, the Bank for International Settlements has warned. The BIS, known as the central banks' central bank, says the longer reference rates are set at zero or below, the higher the risk of hitting a "tipping point", where no-one benefits. Central banks around the world have increasingly used sub-zero short-term rates to stimulate economic activity and fight off disinflationary pressures arising mainly from the low energy and other input costs.  By effectively penalising banks for parking money, they hope to stimulate business and mortgage lending and dissuade household savings. However, the BIS warns that while negative interest rates in Denmark, the eurozone, Sweden, Switzerland and, most recently, Japan have lowered wholesale funding costs for banks, retail depositors had been shielded from them. Nor are lower funding costs always passed on to borrowers, it says. "The experience so far suggests that modestly negative policy rates are transmitted through to money market rates in much the same way as positive rates are," economists Morten Linnemann Bech and Aytek Malkhozov argue in a paper from the BIS's quarterly review.

Economists at Bank for International Settlements warn of risks from negative interest rates - Economists at a key central bank organization are warning of potential risks from the negative interest rates in place in Europe and Japan. Central banks in the eurozone, Denmark, Japan, Sweden and Switzerland have all taken rates below zero and into uncharted territory. But nobody's quite sure what the long-term results will be from the new and unconventional policies, which involve the central banks charging commercial lenders to deposit funds with them. The aim is typically to encourage people and businesses to spend money rather than save it. "There is great uncertainty about the behavior of individuals and institutions if rates were to decline further into negative territory or remain negative for a prolonged period," economists from the Bank for International Settlements (BIS), a group of 60 global central banks,  wrote in a report published SundayThe warning comes ahead of an European Central Bank meeting Thursday at which it could take interest rates even deeper below zero. Bank of Japan policymakers, who announced their negative interest rate policy in January, are due to meet next week.  The BIS report highlights the need for bigger studies on whether negative rates are actually effective in achieving policymakers' goals -- and their impact on financial and economic stability.

Economists Go Negative on Negative Interest Rates - When the European Central Bank meets on Thursday, policymakers are expected to push its deposit rate deeper into negative territory, to minus 0.4 percent. The stated aim is to head off deflation.An interest rate below zero means that European banks are paying the central bank to hold their reserves, rather than earning interest on those reserves. If the negative interest rates were applied to customer deposits at banks, then customers would actually pay the banks to park cash in bank accounts, rather than earning interest on those deposits.Theoretically, negative interest rates should help to stimulate the economy by encouraging banks to lend. But they could also backfire. For instance, if negative rates caused depositors to stuff money in the mattress instead of putting it in a savings account, the outflow of cash from the banking system could cause rates to rise.But that is not the only way that negative interest rates could badly backfire. Even if they helped the euro area, they could harm other economies, including the United States economy. That would occur if negative interest rates are used as a tool for devaluing the euro – a move that would make the dollar relatively stronger and, in the process, hurt American exports.

Bizarro World! 15 European Countries Now Have Negative 2 Year Sovereign Yields - As a measure of the problems facing Europe’s economy, 15 European “countries” now have negative 2 year sovereign yields. The list includes France, Germany and Italy. And the European Financial Stability Facility (EFSF) which isn’t a country at all, but a temporary crisis resolution mechanism by created by the euro area Member States in June 2010 (The EFSF has provided financial assistance to the three little PIGS, Ireland, Portugal and Greece). Much of Europe continues to be slow growing (<2%) in terms of GDP growth. And inflation rates are less than 2%.Of course, Japan have negative 10 year sovereign yields along with Switzerland (and Germany is getting mighty close to negative 10 year sovereign yields!). The implied Central Bank 3 month Policy Rates are also negative for the EuroZone, Sweden, Denmark, Switzerland, the Czech Republic and, of course, Japan. I love this Bloomberg title: “ECB Studies Stimulus Options That Won’t End Up Hurting Banks.” With euro-area inflation once again below zero and concerns mounting over the state of the global economy, ECB President Mario Draghi and his colleagues are considering whether monetary policy needs to give more impetus to the currency bloc’s recovery. The chief concern is that negative interest rates, especially if cut further, might squeeze banks’ profitability to the extent they pull back on lending to companies and households. How about “ECB Studies Stimulus Options That Won’t End Up Hurting HOUSEHOLDS?” Like those where bank deposit rates are HIGHER than the inflation rate?

Economist: For The ECB, It's No Longer About Oil -  Inflation in the euro area came in at 0.2 percent in February, piling further pressure on policymakers at the European Central Bank ahead of next week's monetary policy meeting. While the largest component of the price fall in the common currency zone remains energy, the ECB is becoming increasingly concerned about second round effects and the prospect of the oil-price collapse pushing the euro area into deflation. This is a theme taken up by Frederik Ducrozet, senior economist at Pictet Wealth Management in a note sent to clients on Thursday, in which he outlines the two problems the ECB needs to tackle at its March meeting. Preserving the credit channel While things have been improving over the past couple of years for bank lending in the euro area, Ducrozet warns that the ECB should "should take the threat of a potential impairment of the credit transmission channel very seriously" in any new policy measures—such as negative interest rates—announces to tackle inflation. If the external environment remains challenging, then the ECB should be wary of doing anything that puts further pressure on the banking sector. Ducrozet points says that the most worrying trend in the February inflation numbers is not the oil-driven headline decrease, but rather the unexpected fall in core inflation to 0.7 percent. With survey data suggesting deflationary dynamics have intensified and recent PMIs showing euro-area factories cut prices at the fastest pace in almost three years, he warns that while the risks of a deflationary spiral are low, "this is a risk the ECB cannot ignore in the current context."

The Revolt Begins: German Banking Association Tells Members To Start Hoarding Bills -- Just stunning. German newspaper Der Spiegel reported yesterday that the Bavarian Banking Association has recommended that its member banks start stockpiling PHYSICAL CASH. Europe, of course, has been battling with negative interest rates for quite some time. What this means is that commercial banks are being charged interest for holding wholesale deposits at the European Central Bank. In order to generate artificial economic growth, the ECB wants banks to make as many loans as possible, no matter how stupid or idiotic. They believe that economic growth is simply a function of loans. The more money that’s loaned out, the more the economy will grow. This is the sort of theory that works really well in an economic textbook. But it doesn’t work so well in a history textbook.Cheap money encourages risky behavior. It gives banks an incentive to give ‘no money down’ loans to homeless people with no employment history.It creates bubbles (like the housing bubble from 10 years ago), and ultimately, financial panics (like the banking crisis from 8 years ago). Banks are supposed to be conservative, responsible managers of other people’s money. When central bank policies penalize that practice, bad things tend to happen.

German bank Berlin Hyp issues first sub-zero non-state bond -A German bank has become the first non-state borrower to issue euro denominated debt at a negative yield, another milestone as the continent’s financial system moves further into the world of sub-zero interest rates.The issuance comes ahead of a European Central Bank meeting this week when the effect of negative interest rates will be in the spotlight. Berlin Hyp issued €500m of covered bonds with no coupon and priced to yield minus 0.162 per cent on Tuesday, according to Bloomberg data. That means investors are guaranteed to lose money if they hold the bonds to maturity. Covered bonds are issued by banks and are viewed as one of the safest corners of debt markets, because in case of default, buyers have recourse both to the bank itself and a pool of underlying assets. The debt instruments date back to 18th century Europe and play a major role in funding bank activity across the continent. Other covered bonds are trading at negative yields in secondary markets, but the Berlin Hyp deal marks the first time yields have been negative at the point of initial sale. Investors are in effect paying the bank to look after their money for three years. “It feels counter-intuitive,” said Joost Beaumont, a strategist at ABN Amro. “You invest in something and you already know the return will be negative.”

Reuters - Bad loans at Italian banks rise to 202 billion euros in January: (Reuters) – Gross bad loans at Italian banks rose further in January to 202.05 billion euros (£156 billion), data showed on Wednesday, highlighting the continuing damage to lenders’ balance sheets from a deep recession that ended in late 2014. However, the residual value of the stock of bad loans — which takes into account writedowns booked by lenders — fell to 83.61 billion euros in January from 88.95 billion euros in December, reflecting higher loan loss provisions by banks at the end of the year. The Bank of Italy said gross bad loans were up 9 percent from a year earlier in January, compared to an annual rise of 9.4 percent in December when the stock stood at 200.94 billion euros. With soured loans tying up precious bank capital, corporate loans in Italy continued to shrink at the start of the year. Data showed bank lending to non-financial companies fell 0.9 percent in January after a 0.7 percent drop in December. In a positive sign for the banking system, deposits grew 3.6 percent from a year earlier in January after a 3.9 percent rise in December. Weaker Italian banks suffered a drop in deposits in recent months as clients took fright at the rescue in November of four ailing banks which imposed losses on shareholders and junior bondholders. Tough new European Union rules on state aid that came into force in January would also see deposits of more than 100,000 euros “bailed in” to help avert a bankruptcy.

EU Commission warns Italy over its budget, urges measures | Reuters: The European Commission warned Italy on Wednesday that its 2016 budget may break EU fiscal rules and urged Rome to take measures to redress the situation. The warning came in a letter sent to the Italian authorities. Similar letters were sent to Belgium, Croatia, Finland and Romania. Spain received a more formal warning to reduce its excessive deficit. "We have identified six countries whose budgetary strategies may entail risks to respecting their commitments under the Stability and Growth Pact. There is still time to take necessary measures and this is why we are sending an early warning signal today," the Commission Vice President Valdis Dombrovskis said in a statement. The Commission letter followed a joint statement of euro zone finance ministers on Monday that warned Italy over its high debt and its expansionary 2016 budget. Italy's debt is the second biggest in the European Union, after Greece. It is projected to be 132.4 percent of the Gross Domestic Product in 2016, well above the 60 percent ceiling set by EU rules, according to forecasts of the European Commission.

Italy isn't Greece — it's worse -  Shares of Italy's largest financial institutions have plummeted in the opening months of 2016 as piles of bad debt on their balance sheets become too high to ignore. Amid all of the risks facing European Union members in 2016, the risk of contagion from Italy's troubled banks poses the greatest threat to the world's already burdened financial system. At the core of the issue is the concerning level of Non-Performing Loans on banks' books, with estimates ranging from 17% to 21% of total lending. This amounts to approximately €200 billion of NPLs, or 12% of Italy's gross domestic product. Moreover, in some cases bad loans make up an alarming 30% of individual banks' balance sheets. The red flags initially attracted the attention of the European Central Bank, prompting an official inquiry that investors viewed as a flashing "sell signal." Shares of Italian banking companies lost more than 25% in the first several weeks of the year.  Adding more worries to fuel the fire, on Friday the ECB demanded that one such troubled Italian bank, Banca Carige SpA, provide new strategic plans and additional funding to bolster its balance sheet and meet supervisory requirements by the end of the month. Initially, Italy proposed setting up a "bad bank" solution, in which troubled institutions could off-load their NPLs into a separate state-backed entity that would manage the assets while insulating the sector at large from the damaging effects of nonperformance. But in an effort to protect taxpayers from socialized losses, new European Union rules now ban the use of state aid to bail out banks. Instead of an overt bailout, the most recent agreement Italy has reached with the EU constitutes a "bail-in." In this agreement, banks will be allowed to cleanse their balance sheets by packaging the NPLs and selling them to investors, along with enticing government guarantees for the least risky portions of the debt. The catch? The securities must be priced at market rates.

Confronting the Fiscal Bogeyman - Barry Eichengreen  -- The world economy is visibly sinking, and the policymakers who are supposed to be its stewards are tying themselves in knots. Or so suggest the results of the G-20 summit held in Shanghai at the end of last month. The International Monetary Fund,  having just downgraded its forecast for global growth, warned the assembled G-20 attendees that yet another downgrade was pending. Despite this, all that emerged from the meeting was an anodyne statement about pursuing structural reforms and avoiding beggar-thy-neighbor policies.  Once again, monetary policy was left – to use the now-familiar phrase – as the only game in town. Central banks have kept interest rates low for the better part of eight years. They have experimented with quantitative easing. In their latest contortion, they have moved real interest rates into negative territory. The motivation is sound: someone needs to do something to keep the world economy afloat, and central banks are the only agents capable of acting. The problem is that monetary policy is approaching exhaustion. It is not clear that interest rates can be depressed much further.Negative rates, moreover, have begun to impair the health of the banking system. Charging banks for the privilege of holding reserves raises their cost of doing business. Because households can resort to safe-deposit boxes, it’s hard for banks to charge depositors for safekeeping their funds.  In a weak economy, moreover, banks have little ability to pass on their costs via higher lending rates. In Europe, where experimentation with negative interest rates has gone furthest, bank distress is clearly visible. The solution is straightforward. It is to fix the problem of deficient demand not by attempting to further loosen monetary conditions, but by boosting public spending. Governments should borrow to invest in research, education, and infrastructure. Currently, such investments cost little, given low interest rates. Productive public investment would also enhance the returns on private investment, encouraging firms to undertake additional projects.

ECB Stimulus in Perspective -- Today is a big day for the ECB. Mario Draghi and other monetary officials are expected to add further monetary stimulus via additional interest rate cuts and a possible expansion of the ECB's QE program. Many observers are getting excited and expecting big market moves.  Here is the thing. Even if the ECB cuts rates and adds more QE and even if there are big positive swings in market prices, these changes will only be tolerated up to the point they push core inflation to between 1.00 and 1.25 percent. That seems to be the ECB's true inflation target range per revealed preferences. Not only is that well below the ECB's stated inflation target of being "below, but close to 2 percent", but it is nowhere near enough to create the kind of catch-up spending growth needed to restore full employment in the Eurozone.  This is the same problem that plagues the Fed. As I recently noted in my FT Alphaville piece: The real reason for this failure [to create a robust recovery] is the Fed’s firm commitment to low inflation. Like a governor placed on a truck’s engine to control its speed, a commitment to low inflation helps prevent the economy from growing too fast. Normally, this is a good thing. But sometimes it can backfire. A truck driver may need to temporarily go faster to make up for lost time after being stuck in traffic. Similarly, an economy may need to temporarily speed up to get back to its full potential after a recession. Neither can happen with a rigid adherence to the speed limit.

ECB's Draghi signals end to rate cuts, overshadows stimulus - European Central Bank chief Mario Draghi unleashed a bold easing package on Thursday, cutting rates and expanding asset buys, but undid the very stimulus he hoped to achieve by suggesting there would be no further cuts. That comment drove the euro to unwanted gains against the dollar and prompted criticism from some that Draghi, who already in December disappointed markets by under-delivering, had once again botched his communication. Seeking to resurrect corporate activity and investments, the ECB said it would start buying corporate debt and even offered to pay banks for lending to companies in the ailing euro area in a bid to kickstart growth and stave off the threat of deflation. The Bank has sought for three years to push inflation up to its target level, spending 700 billion euros on asset buys in the past year alone. But it has been to no avail amid weak investment, high unemployment, high debt and productive slack in the economy. Draghi announced that ECB staff had slashed its inflation and growth expectations, predicting that even with fresh stimulus, price growth will not reach its target for years to come and growth will slow. Markets initially cheered the package but reversed course after Draghi hinted the ECB was done cutting rates and ruled out a tiered deposit rate structure -- a system of multiple rates already used in Switzerland and Japan to encourage lending to companies while also punishing banks that hold too much cash.

Euro Strengthens Despite Fresh ECB Stimulus Measures -- The European Central Bank fired off a salvo of measures aimed at bolstering the eurozone’s fragile economy but markets brushed off the efforts, raising questions about whether it and other central banks still have the tools to bolster weakening growth and inflation after years of easy-money policies.  Across the advanced world central banks are under pressure to launch fresh monetary stimulus or keep interest rates low in response to volatile financial markets, falling oil prices and a slowdown in emerging markets. Japan’s central bank stunned markets in January by setting the country’s first negative interest rates in an attempt to jolt the economy away from deflation. Federal Reserve officials are likely to hold short-term interest rates steady at their policy meeting next week and leave open-ended as to when they will next raise rates.  Financial markets initially rallied in response to the ECB’s larger-than-expected stimulus on Thursday, which included a series of rate cuts, additional bond purchases and ultracheap loans for banks. But investors’ initial enthusiasm over the stimulus measures faded when, afterward, ECB President Mario Draghi signaled that interest rates probably wouldn’t fall any lower amid concerns about the impact on Europe’s fragile banks. “They gave the market a gift and then took it away within an hour,”

Euro Bears Get Sore Heads as ECB Sparks Surprise Rally - If the European Central Bank's latest monetary easing salvo was a surprise in its intensity, then so was the seemingly perverse rise of the euro in response - a move that's left the most bearish currency forecasters scratching their heads.The euro rallied to its highest in almost a month against the dollar, surging as much as four cents at one point, confounding those who had bet negative interest rates and billions of euros of extra stimulus would send it lower.This has echoes of the yen's surge since the Bank of Japan's surprise move to negative interest rates on bank deposits in January and raises questions over the effectiveness of central bank stimulus, no matter how aggressive or surprising it may be.It wasn't supposed to be this way. A year ago most of the banking world's major players were calling for the euro to fall to parity or lower against the dollar. The consensus in the latest Reuters poll earlier in March was still for the euro to fall over the coming year.Negative interest rates and bond yields were supposed to drive the euro zone's huge savings pool overseas in search of higher returns, thus weakening the euro. Deutsche Bank analysts dubbed this their "euroglut" theory and said the euro could fall to $0.85 by the end of next year.One explanation for the apparently perverse euro move is that the ECB's measures on Thursday weren't aimed at lowering the exchange rate specifically, but at boosting bank lending and getting liquidity flowing through the corporate world.

Are Central Banks Really Out of Ammunition? - Adair Turner - The global economy faces a chronic problem of deficient nominal demand. Japan is suffering near-zero growth and minimal inflation. Eurozone inflation has again turned negative, and British inflation is zero and economic growth is slowing. The US economy is slightly more robust, although even there recovery from the 2008 financial crisis remains disappointingly slow, employment rates are well below 2007 levels, and annual inflation will not reach the Federal Reserve’s 2% target for several years. But the debate about which policies could boost demand remains inadequate, evasive, and confused. In Shanghai, the G-20 foreign ministers committed to use all available tools – structural, monetary, and fiscal – to boost growth rates and prevent deflation. But many of the key players are keener to point out what they can’t do than what they can. Central banks frequently stress the limits of their powers, and bemoan lack of government progress toward “structural reform” – a catch-all phrase covering trade liberalization, labor- and product-market reforms, and measures to address medium-term fiscal challenges, such as pension age increases. But while some of these might increase potential growth over the long term, almost none can make any difference in growth or inflation rates over the next 1-3 years. Indeed, some structural reforms, such as increasing labor-market flexibility (by, say, making it easier to dismiss workers), can initially have a negative effect on consumer confidence and spending. Vague references to “structural reform” should ideally be banned, with everyone forced to specify which particular reforms they are talking about and the timetable for any benefits that are achieved. If the core problem is inadequate global demand, only monetary or fiscal policy can solve it. But central bankers are right to stress the limits of what monetary policy alone can achieve.

Border Closures Spell Refugee Back-up in Greece - SPIEGEL - A rickety gate of galvanized wire is all that separates desperation from hope. The gate is part of the fence erected in the farming village of Idomeni on the border between Greece and Macedonia. At this moment, some 12,000 people are waiting for it to be opened.This is where Fortress Europe begins, secured with razor wire and defended with tear gas. Desperate scenes played out here on Monday, reminiscent of those witnessed in Hungary back in September. A group of young men used a steel beam as a battering ram to break down the gate. Rocks flew through the air as the gate flew off its hinges, prompting the volleying of tear gas cartridges and stun grenades from the Macedonian side. Men could be seen running and children screaming. One woman lay on the ground with her daughter, crying. This frontier has become Europe's new southern border, with Greece serving as Europe's waiting room -- and the possible setting for a humanitarian disaster. Around 32,000 migrants are currently stranded in the country, a number that the Greek Interior Ministry says could quickly swell to 70,000. The aid organization Doctors without Borders is even expecting 200,000 refugees. Greece's reception camps are already full, and the highly indebted country is stretched well beyond its capacity. The decision as to whether and how many refugees will be able to cross the border isn't one for border guard Gagaridou to make. Rather, it will be taken by the Macedonian government. Macedonia, for its part, is pointing fingers at countries further to the north, noting it is they who have tightened their borders, especially Austria, which created a chain reaction of border closures last week. The countries apparently felt they could wait no longer for the broader European solution German Chancellor Angela Merkel has promised will result from a special EU summit scheduled for March 7.

Sweden Warns Women Not To Go Out Alone After Dark: "This Is Serious" As you might have noticed, Europe is falling apart. Some manner of ambiguous “deal” with the Turks notwithstanding, the EU is going to collapse under the weight of the millions of asylum seekers that have inundated the bloc over the past 12 months. At this juncture, the so-called Balkan Route has for all intents and purposes been closed (Angela Merkel's protestations aside). This has left Greece in a terribly precarious situation. Tens of thousands of migrants are stuck now that Macedonia has sealed its borders, and barring some kind of dramatic breakthrough, Alexis Tsipras is going to watch as his country descends into chaos for the second time in 18 months.But while multiple countries have now suspended the bloc’s beloved Schengen in an effort to “stop the madness,” as it were, it’s too late to stop the chaos. As we’ve documented extensively, Europe was remarkably resilient in the wake of the Paris attacks, but after New Year’s Eve, when (rightly or wrongly) adult male Mid-East asylum seekers garnered a reputation for sexual assault, sentiment soured. Markedly. Since then, the entirety of the EU has been on high alert. Not for terrorists, but for sexual predators of “foreign origin.” Well, in the latest example of authorities suggesting that Europeans should adapt to threats rather than compelling authorities to protect citizens, police in Östersund advised women not to walk around by themselves at night, during at press conference on Monday.“Women in a town in northern Sweden have been warned not to walk alone at night in the wake of a spike in violent assaults and attempted rapes,” The Daily Mail writes. “Police in Östersund made the unusual move to ask women not to go out unaccompanied after dark, after reports of eight brutal attacks, some by 'men of foreign appearance', in just over two weeks.” Here’s more:

Turkey Wages Uphill Battle to Stop Migrant Smugglers on Aegean Sea - WSJ: Capt. Murat Yilmazarslan and his crew bore down on a dinghy packed with people making a dash across the Aegean Sea—a cheerless victory in the Turkish coast guard’s uphill battle to stop smugglers ferrying migrants to Europe’s door. Soon, their ship—the Umut, or Hope—and two patrol boats had intercepted the dinghy, filled with dozens of Afghans and others in neon orange life jackets, as a helicopter hovered overhead. The migrants, some who wept as they were ordered to board the Hope, gave up without a fight. It isn’t always so. Caught within sight of their goal, refugees have held babies above the water and threatened to drop them into the sea if they aren’t allowed to proceed to Greece, coast guard officials say. On occasion, intercepted migrants have held knives to their throats and threatened to kill themselves. In those cases, the officials say they alert the Greek coast guard and let the people continue their voyage.   The Turkish captain and his crew are at the front line of an international effort to stop the people smuggling and defuse the pressure on countries in Europe that say they are reaching, or have exceeded, their ability to take in more migrants from the east. A NATO fleet of five ships has been deployed to help overwhelmed coast guard officials like Capt. Yilmazarslan track and deter the smuggling boats, but the mission has been slowed by disagreement between Greece and Turkey over the specifics for the operation.

Riot Police Raid Turkey’s Largest Newspaper with Volleys of Teargas and Water Cannons - Law enforcement raid on a prominent media company and takeover of the nation’s largest-circulation newspaper have raised new fears of a press under assault by the administration of Turkish President Recep Tayyip Erdogan. Police late Friday forced their way into the offices of Zaman newspaper and its English-language sister publication, Today’s Zaman, after an Istanbul court ordered the seizure of Feza Media Group, which owns the two dailies. Police in riot gear peppered protesters and staff alike with volleys of tear gas and water cannons, a scene broadcast live on satellite television. Zaman has a daily circulation of more than 600,000, the largest in Turkey. Amnesty International described Friday’s actions as “deeply troubling.” “By lashing out and seeking to rein in critical voices, President Erdogan’s government is steam rolling over human rights,”  The shutdown also drew an unusually forceful rebuke from the U.S. State Department, which is generally hesitant to criticize Turkey, a NATO ally. At a regular news briefing Friday, a State Department spokesman, John Kirby, said the raid was “the latest in a series of troubling judicial and law enforcement actions” and was not “in keeping” with Turkey’s constitution. In October, days before the country’s general election, Turkish authorities ordered the seizure of Koza Ipek Group, which ran several prominent television stations critical of the government. Prosecutors have opened at least 1,845 cases of “insulting the president” since Erdogan rose to the presidency in August 2014 with 52% of the vote.

EU to push Turkey to take back migrants on 'large-scale' - (AFP) - European leaders will push Turkey at a summit on Monday to agree to "large-scale" deportations of economic migrants from Greece which is bracing for a fresh surge of migrant and refugee arrivals by the end of March. The European Union's 28 leaders are hoping for new commitments from Turkish Prime Minister Ahmet Davutoglu at their talks in Brussels in order to curb the chaos on the west Balkans route that begins in overstretched Greece. The EU will also push Ankara to drastically reduce the huge flow of migrants into Europe, as Turkey is the launch pad for most of the more than one million refugees and migrants who have come to the continent since early 2015. On Saturday, European Migration Commissioner Dimitris Avramapoulos said Greece -- already struggling with a buildup of 30,000 migrants -- was expected to receive "another 100,000" by the end of March. EU leaders will also try to increase aid for Greece which has seen non-EU Macedonia and EU countries on the Balkans route tighten their borders, stranding asylum seekers desperate to head northward to wealthy Germany and Scandinavia. Macedonia allowed just 240 people to cross the border with Greece between Saturday and early Sunday morning, Greek frontier police said. Meanwhile, there are already over 5,000 refugees and migrants waiting to cross to the Greek mainland from the Aegean islands facing Turkey, Greece's state agency ANA reported Sunday.

Erdogan mulls giant ‘refugee city’ in north Syria - Al Arabiya English: Turkish President Recep Tayyip Erdogan has suggested building a new city in northern Syria to house some of the millions of refugees escaping the country’s civil war, reports said Saturday. Erdogan said in a speech in Istanbul late Friday that the new city would be located near the Turkish border and said he had even discussed the idea with US President Barack Obama. “I am going to tell you something. What is the formula? We found a city in the north of Syria,” said Erdogan, quoted by the Anatolia news agency. He said that the city would be 4,500 square kilometers in area and its infrastructure could be built in cooperation with the international community. Refugees from Syria could be “resettled” there, he said. Such an area would make the city comparable to some of the largest urban centers in the United States. “We have discussed this with Mr Obama and even set the coordinates but it has not yet come to fruition,” said Erdogan. He gave no timescale for how the project could be realized.

Devil Demands and Receives More Concessions from Merkel: In Bed with a Dictator - Mish - When you make a bargain with the devil or a dictator, and they did not get everything they wanted in round one of bargaining, it’s a certainty round two is coming up. So here we are, with German chancellor Angela Merkel ready and willing to offer more concessions to Turkish President Recep Tayyip Erdogan in order to slow the refugee migration into the Eurozone. Merkel’s latest concessions come despite the fact that Erdogan is now the de-facto dictator of Turkey, having just taken over Turkey’s largest newspaper with a violent teargas raid by riot police.  Despite Friday’s newspaper takeover by Erdogan, Merkel flew to Turkey over the weekend. She is prepared to offer the devil more goodies if the devil would cover up her inane decision to welcome millions of refugees with open arms. When dealing with the devil, it should be no surprise to discover Last-Minute Demands Suddenly Got Bigger.Turkey has made a host of last-minute funding and political demands that threaten to derail a controversial EU-Turkey deal to dramatically reduce migrant flows to Europe. Ahead of crunch summit between EU leaders and the Turkish prime minister on Monday, Ankara has called for a an increase to the €3bn in aid previously promised by Brussels, faster access to Schengen visas for Turkish citizens and accelerated progress in its EU membership bid.

Refugee crisis: EU and Turkey reach 'breakthrough' deal - AJE News: Turkey and the European Union reached an agreement on a proposal to tackle the massive influx of refugees into Europe, as the United Nations expressed concern about the deal on Tuesday.Donald Tusk, the European Council president, said the leaders had made a "breakthrough" that sent "a very clear message that the days of irregular migration to Europe are over".The announcement came at the end of a long day of meetings in Brussels, during which Turkey is known to have asked for an additional $3.3bn in return for checking the flow of refugees across the Aegean Sea.The next step involves the presentation of the proposal to EU leaders at a key European Council meeting due to be held on March 17 and 18.   The UN said it had reservations about any deal involving "the blanket return of all individuals from one country to another", without their protection under international law being spelled out adequately."Legal safeguards would need to govern any mechanism under which responsibility would be transferred for assessing an asylum claim," the UN High Commissioner for Refugees (UNHCR) said in a statement. Europe's commitments to resettle refugees remained "very low compared to the needs, 20,000 places within two years on a voluntary places", it said. Turkey is due to receive $3.3bn until the end of 2018 to cover the costs of dealing with refugees, but it reportedly asked for double the amount during Monday's talks.

These 4 charts show just how dire the European economic situation is -- After the ECB's December meeting, president Mario Draghi stepped up to speak to the press having cut the bank's deposit rate by just 0.1%, disappointing the markets. At that point, things in Europe weren't looking too bad. As a note from Credit Suisse analysts led by Neville Hill released on Friday puts it:  A broad range of cyclical indicators – business and consumer confidence, PMIs – were relatively high, and rising. Corporate spending plans were picking up. Consumer spending, thanks to the boost to real incomes from lower oil prices and an improving labour market, was buoyant. Credit growth to the real economy was steadily improving. And although the ECB had to revise down its inflation forecasts on the back of a lower oil price, core inflation had risen through the course of last year to 1.0% by Q4. Sounds pretty good right? Well three months later, as Credit Suisse puts it: "That's all changed." To put it more eloquently: "The economic dataset facing the ECB is materially different" to how it was in December. In Credit Suisse's preview of the next week's ECB meeting, part of its weekly "Playbook" note, the bank uses a whole heap of charts to show just how much things have changed for the worse in Europe since December, and generally how worrying the European economic situation

Flash - German industrial production jumps in January - France 24: (AFP) - German industrial production jumped unexpectedly in January, propelled by increased activity in the manufacturing and construction sectors, the economy ministry said on Tuesday. The ministry calculated that factory output -- a key yardstick for gauging the health of Europe's biggest economy -- leapt by 3.3 percent in January compared with a month earlier, corrected for seasonal factors. Analysts had been projecting in a much more modest increase of just 0.4 percent in January following a contraction of 0.3 percent in December. Manufacturing output was up by 3.2 percent month-on-month and construction output jumped by 7.0 percent, while energy output edged up by just 0.1 percent, the ministry said.

EU referendum: Britain's biggest environmental charities using public cash to call for In vote - Telegraph: Britain's biggest environmental charities have been accused of using public donations to campaign for staying in the European Union. The charities watchdog will on Monday issue new guidance on political neutrality after Friends of the Earth, The Wildlife Trusts and Greenpeace all made public comments backing EU membership. The charities have all insisted that Britain being a member of the EU is vital to protecting Britain’s wildlife - with one suggesting that those backing Brexit want to make the country “the dirty man of Europe”. Their public support of the Remain campaign has prompted formal complaints from eurosceptics and has led to the Charity Commission issuing new guidance on political neutrality during the referendum. The new guidance from the charity watchdog says that charities should only get involved in referendum campaigning in “exceptional” circumstances and stresses that the importance of maintaining independence and neutrality. Eurosceptic MPs and charity transparency campaigners complained that donations from the public to protect the environment were being used to campaign against Brexit and said donors would be “infuriated” by the findings

Source: How a BREXIT Could Save Europe From Itself - It is those who love Europe, its diversity, its history and its humanity who should be the most enthusiastic about Brexit. A paradox? Not at all. The European Union, as currently constituted, has run out of road. It is doomed to fail, sooner or later, with catastrophic consequences for our part of the world, and the only way forward is for one major country to break ranks and show that there can be a better alternative consistent with Europe’s core enlightenment values. It would be far better if we, rather than a more socialist or nationalistic country, were the first to break the mould: Britain would have the opportunity to show that free trade, an open, self-governing society and a liberal approach could ensure the peace and prosperity at the heart of the European dream. Others would soon join us. If we vote to stay, we will lose the moral authority to speak out, and other, less benign, inward-looking, illiberal approaches may triumph instead. The eurozone is broken, and another, far greater economic crisis inevitable. The next trigger could be a fiscal meltdown in Italy, or another banking collapse, or a political implosion in Spain or France, or another global recession. Nobody can be sure what the proximate cause will be – but there will be one, and the fallout will be turmoil of a far greater magnitude than anything we saw in Greece. At the same time, the tensions fuelled by the migration crisis will grow relentlessly, especially if hundreds of thousands or even millions of people are settled across the continent over the next few years.

Queen backs Brexit The Sun reports: The Queen has been "revealed" to be a backer of a campaign for Britain to leave the European Union, known as a "Brexit," ahead of a referendum on the matter in June, according to a controversial report in The Sun newspaper on Wednesday. Running the headline "Queen backs Brexit" on its front page, the newspaper said that details had emerged "of an extraordinary alleged bust-up between her and Nick Clegg (the former leader of the Liberal Democrat party) over Europe" that purportedly showed her anti-European feelings.The Sun said that a "highly reliable source," which it did not name, who was present at a lunch at Windsor Castle at which Clegg was a guest, said that the Queen "let rip" at the well-known Europhile politician over Britain's continental neighbors, telling him that she though the political and economic bloc was "heading in the wrong direction." The senior source quoted by the paper said: "People who heard their conversation were left in no doubt at all about the Queen's views on European integration…The EU is clearly something Her Majesty feels passionately about." Buckingham Palace said it would not comment on "spurious" claims, and Clegg called the story "nonsense," the BBC reported. The palace insisted the Queen is "politically neutral" over the EU referendum.

Brexit Endangers London’s Status as a Financial Hub -- naked capitalism Yves here. It’s not hard to see why London’s status as the financial center in its time zone would be at risk in the event of a Brexit. But let me throw out some contrary thoughts for fun. First, financial markets are networks, and that means there are strong network effects that work against relocalization. While French and German customers might be able to demand that they be served out of Paris and Frankfurt, respectively, would the trading engines necessarily be moved out of the UK? For instance, London was the world’s top center for foreign exchange trading before it joined the European Union or any of its predecessors. Similarly, why would hedge funds, which are domiciled in tax havens, need to move their management teams out of London? Moreover, the executives in these firms have a big say in how they are managed, and one issue that is seldom discussed is that the UK has much greater depth in private schools. There are already a fair number of banking pros who work on the Continent four or five days a week and live in London because there aren’t enough spaces in the good schools in the country to which they and their competitors are assigned for all their kids to attend. And the wives often prefer London too. Second, it may be that a fair number of British voters don’t like what the dominance of the financial services has done to the British economy, particularly in terms of real estate prices. I suspect many would applaud it if the Russians who’ve bought up swathes of Belgravia, Chelsea, and Kensington were to decamp and turn all those vacnt-most-of-the-year apartments back over to the natives, and that there were fewer people with big City bonuses bidding up housing. Third, as Willem Buiter warned in 2007 and 2008, the UK has the profile of an economy that is at risk of having a banking crisis: small and open with an outsized banking sector. It is thus arguable that the considerable dislocation of a Brexit nevertheless (if it were to shrink the banking sector) would come with the upside of reduced systemic risk, and hence taxpayer downside.

No comments: