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

Saturday, March 19, 2016

week ending Mar 19

Fed’s Plans to Raise Interest Rates Are Delayed, Not Derailed - It seems increasingly clear that the Fed’s plans to spend 2016 gradually raising its benchmark interest rate have been delayed, not derailed.  The challenge now confronting Janet L. Yellen, the Fed’s chairwoman, is forging a consensus among Fed officials about how soon to resume the march begun in December, when the Fed raised rates, by 0.25 percent, for the first time since the financial crisis. Some Fed officials still emphasize caution, arguing there is little risk in moving slowly. Lael Brainard, a Fed governor, has been particularly vocal in warning that the weakness of the global economy could weigh on domestic growth.“We should not take the strength in the U.S. labor market and consumption for granted,” Ms. Brainard said in a speech last week. “Given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path.” But other officials are antsy about inflation. Prices rose 1.7 percent in the 12 months through the end of January, according to the latest reading from the Fed’s preferred gauge. The modest uptick brings the Fed closer to its goal of 2 percent annual inflation for the first time in years. “We may well at present be seeing the first stirrings of an increase in the inflation rate,” Stanley Fischer, the Fed’s vice chairman, said in a speech last week. Fed officials predicted in December that they would raise the benchmark rate by about one percentage point over the course of 2016, most likely in four quarter-point increments. The Fed was widely expected to make the first of those increases this week. But when markets started gyrating, Fed officials hit the brakes, offering reassurances that they would not make any big decisions until things calmed down.

Fed Scales Back Rate-Rise Forecasts as Global Risks Remain -- Federal Reserve officials held off from raising borrowing costs and scaled back forecasts for how high interest rates will rise this year, citing the potential impact from weaker global growth and financial-market turmoil on the U.S. economy. The Federal Open Market Committee kept the target range for the benchmark federal funds rate at 0.25 percent to 0.5 percent, the central bank said in a statement Wednesday following a two-day meeting in Washington. The median of policy makers’ updated quarterly projections saw the rate at 0.875 percent at the end of 2016, implying two quarter-point increases this year, down from four forecast in December. “You have seen a shift this time, in most participants assessments of the appropriate path for policy,” Fed Chair Janet Yellen said at a press conference in Washington. “That largely reflects a somewhat slower projected path for global growth, for growth in the global economy outside the United States, and for some tightening in credit conditions in the form of an increase in spreads.” Yields on Treasury securities fell following the Fed’s actions, with the rate on the 10-year note dropping to 1.91 percent at 4:25 p.m. in New York from 1.99 percent just before the announcement.

FOMC Statement: No Change to Policy, Concern about Global developments -- Note: Fewer rate hikes expected. FOMC Statement: Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months. Household spending has been increasing at a moderate rate, and the housing sector has improved further; however, business fixed investment and net exports have been soft. A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. Inflation picked up in recent months; however, it continued to run below the Committee's 2 percent longer-run objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. However, global economic and financial developments continue to pose risks. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely. Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

Parsing the Fed: How the March Statement Changed from January - The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. The following tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the March statement compared with January.

Stanley Fischer and Lael Brainard Are Battling for Yellen’s Soul – Tim Duy - Federal Reserve Vice Chairman Stanley Fischer sits on Chair Janet Yellen’s left shoulder, muttering: … we may well at present be seeing the first stirrings of an increase in the inflation rate … Fed Governor Lael Brainard perches on the right, whispering: … there are risks around this baseline forecast, the most prominent of which lie to the downside. Yellen is caught in a tug of war between Fischer and Brainard. At stake is the Fed chair’s willingness to embrace a policy stance that accepts the risk that inflation will overshoot the U.S. central bank’s target. At the moment, Brainard has the upper hand in this battle. And she has a new weapon on her side: increasing concerns about the stability of inflation expectations. The lines of division within the Fed are clearly drawn. One side fears the inflationary consequences of a labor market quickly nearing full employment and below. Here’s Fischer in February: … a persistent large overshoot of our employment mandate would risk an undesirable rise in inflation that might require a relatively abrupt policy tightening, which could inadvertently push the economy into recession. Monetary policy should aim to avoid such risks and keep the expansion on a sustainable track. This side believes that overheating is the greatest risk to the expansion, and hence the state of the labor market warrants preventive medicine in the form of early interest rate hikes. Such concerns are only aggravated by the recent uptick in inflation. In addition, the residents of this camp tend to be dismissive of the negative implications of recent financial market turmoil. But Brainard & Co. are crafting another position to sway Yellen into the dovish camp—one that leverages the chair’s existing sympathy for Fischer and his Phillips curve view. The twist is that Brainard and her allies are shifting focus away from “resource utilization” toward “inflation expectations.” Anchored inflation expectations are an integral part of the Phillips curve story as they provide the central tendency for inflation over time.

What tools does the Fed have left? Part 1: Negative interest rates -- Ben Bernanke - The U.S. economy is currently growing and creating jobs, a situation I hope and expect will continue. We can’t rule out the possibility, though, that at some point in the next few years our economy will slow, perhaps significantly. How would the Federal Reserve respond? What tools remain in the monetary toolbox? In this and a subsequent post I’ll discuss some policy options the Fed might consider, focusing first on negative interest rates. ... To anticipate, I’ll conclude in these two posts that the Fed is not out of ammunition, and that monetary policy could help cushion a possible future slowdown. That said, there are signs that monetary policy in the United States and other industrial countries is reaching its limits, which makes it even more important that the collective response to a slowdown involve other policies—particularly fiscal policy. A balanced monetary-fiscal response would both be more effective and also reduce the need to use unconventional monetary tools.

Key Measures Show Inflation slightly above 2% in February --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.8% annualized rate) in February. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.6% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.2% (-2.0% annualized rate) in February. The CPI less food and energy rose 0.3% (3.4% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed has the median CPI details for February here. Motor fuel was down 81% annualized in February.

Foreign governments dump U.S. debt at record rate - Mar. 16, 2016: In a bid to raise cash, foreign central banks and government institutions sold $57.2 billion of U.S. Treasury debt and other notes in January, according to figures released on Tuesday. That is up from $48 billion in December and the highest monthly tally on record going back to 1978. It's part of a broader trend that gathered steam last year when central banks sold a record $225 billion of U.S. debt. "Foreigners have no longer been our BFF when it comes to buying U.S. Treasuries," Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a client note. So what are foreign central bankers doing with these piles of cash? They're mostly using the funds to stimulate their own economies as the global growth slowdown and crash in oil prices continue to take their toll. For instance, China has been liquidating its holdings of foreign debt to pump money into its slowing economy, plummeting currency and extremely volatile stock market. China, the largest owner of U.S. debt, trimmed its Treasury holdings by $8.2 billion in January, the Treasury Department said. The actual decline was likely larger considering China reported selling $100 billion of foreign-exchange reserves in January.

The US$ has ceased being a drag on the economy -- The biggest drag on the US economy for over a year and a half has been the surging US$, which favored imports and hobbled exports, counteracting the benefit to consumers of lower gas prices. As I have been documenting in the last several months, all of the trends from the 2015 economy are changing. And the biggest, most important of those trends, the strength of the US$, has also changed. Here is the YoY% change in the trade weighted US$,, both broad (blue) and against major currencies (red), as of the Fed's update yesterday: Not only is the US$ now down YoY against major currencies, but it has also faded to being just 3% positive YoY on the broad scale. This is a much more neutral reading, as shown in this longer term view: Note in particular that the YoY% change in the US$ has fallen to about where it was exiting the last two recessions. It will take a few months at least before this feeds through into imports and exports, as well as corporate profits. But for now the US$ has ceased being a drag on the economy.

February 2016 Leading Economic Index - Modest Economic Expansion to Continue Through Early 2016: The Conference Board Leading Economic Index (LEI) for the U.S marginally improved this month - and the authors believe "the outlook remains positive with little chance of a downturn in the near-term". This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index's value at 0.1 % to 0.3 % (consensus 0.2 %) versus the +0.1 % reported. ECRI's Weekly Leading Index (WLI) is forecasting very slow or possible negative growth over the next six months. Additional comments from the economists at The Conference Board add context to the index's behavior. The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.1 percent in February to 123.2 (2010 = 100), following a 0.2 percent decline in January, and a 0.3 percent decline in December. "The U.S. LEI increased slightly in February, after back-to-back monthly declines, but housing permits, stock prices, consumer expectations, and new orders remain sources of weakness," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "Although the LEI's six-month growth rate has moderated considerably in recent months, the outlook remains positive with little chance of a downturn in the near-term." The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.1 percent in February to 113.3 (2010 = 100), following a 0.3 percent increase in January, and a 0.2 percent increase in December.

Bloomberg: Modern Money Theory Gaining Converts -- Bloomberg just published an article focused on the rise of Modern Money Theory (MMT), featuring comments by Senior Scholar Randall Wray: The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency. Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen — but they’re also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don’t need to finance spending by collecting taxes, or even selling bonds. […] No one’s saying there are no limits. Real resources can be a constraint — how much labor is available to build that road? Taxes are an essential tool, to ensure demand for the currency and cool the economy if it overheats. But the MMTers argue there’s plenty of room to spend without triggering inflation.

Mirabile Dictu: Lead Story at Bloomberg Gives a Thumbs Up to MMT – Yves Smith - A prominent Bloomberg story, Ignored for Years, a Radical Economic Theory Is Gaining Converts, gives a positive and accurate, if superficial, treatment of Modern Monetary Theory (MMT). Interestingly, it attributes the increased receptivity to MMT as the result of investor frustration and concern with central banks resorting to desperate and destructive-looking measures like negative interest rates, and the accompanying recognition that the only way to pull stagnant and worse, deflating economies out of the ditch is through sustained fiscal stimulus, aka deficits. That’s anathema under the current neoliberal orthodoxy, but it’s becoming more obvious with every passing day that conventional thinking failed to anticipate the crisis and has done a mediocre-at-best job at dealing with the aftermath.  Key extracts from the Bloomberg account:“There’s an acknowledgment, even in the investor community, that monetary policy is kind of running out of ammo,” . “The focus is now shifting to fiscal policy.” That’s where it should have been all along, according to Modern Money Theory. The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency. Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen — but they’re also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don’t need to finance spending by collecting taxes, or even selling bonds. Given that heterodox ideas are typically shut out of the mainstream media, and when they are mentioned, seldom get a positive treatment, this article represents an encouraging departure. I suggest you read it in full. It’s a welcome sign that failed theories are finally leading ones with more promise to get a hearing.

‘The People’s Budget': Analysis of the Congressional Progressive Caucus budget for fiscal year 2017 -- The Congressional Progressive Caucus (CPC) has unveiled its fiscal year 2017 (FY2017) budget, titled “The People’s Budget—Prosperity not Austerity.” It builds on recent CPC budget alternatives in setting the following priorities: near-term job creation, financing public investments, strengthening low- and middle-income families’ economic security, raising adequate revenue to meet budgetary needs while restoring fairness to the tax code, strengthening social insurance programs, and ensuring long-run fiscal sustainability.  Figures A–C, visualizing The People’s Budget’s impacts on deficits, debt, and nondefense discretionary funding compared with current law, the president’s budget, and historical averages, appear in the body of the report. Tables 1 and 2 detailing the policy changes within the budget; and summary tables 1 through 4 depicting budget totals as well as comparisons with the current law baseline, appear at the end of the report. The People’s Budget aims to improve the economic well-being of low- and middle-income families by finally closing the persistent jobs gap that has plagued the U.S. economy since the Great Recession began. For that purpose, The People’s Budget provides upfront economic stimulus large enough to go beyond closing the CBO’s measure of the output gap (a measure of how far from potential the economy is operating). The budget would close the output gap and target genuine full employment by pushing the unemployment rate down to 4 percent. This paper details the budget baseline assumptions, policy changes, and budgetary modeling used in developing and scoring The People’s Budget, and it analyzes the budget’s cumulative fiscal and economic impacts, notably its near-term impacts on economic recovery and employment.1

Obama To Push Passage Of TPP Trade Deal Despite Rising Public Opposition -- Public opposition to the sovereignty killing corporate giveaway marketed as a free trade deal known as the Trans Pacific Partnership (TPP) has become so widespreadthat all the leading candidates for the U.S. Presidency are publicly against it. Specifically, Donald Trump and Bernie Sanders are virulently opposed, while Hillary Clinton is pretending to be against it in order to harvest votes. Essentially, the more time the American public has to learn about this scam, the more they are against it. Which is precisely why the Obama administration wants to push it through as quickly as possible. Reuters reports: U.S. President Barack Obama is fully committed to pushing for Congress to ratify the Trans-Pacific Partnership (TPP) deal despite anti-trade sentiment gaining steam on the presidential election campaign trail, National Security Adviser Susan Rice said on Wednesday. Voter anxiety and anger over international trade and the 12-nation Pacific trade pact have helped propel the campaign of Donald Trump, the Republican front-runner, as well as Senator Bernie Sanders, who is running against Hillary Clinton for the Democratic nomination.“The president remains fully committed to working to achieve ratification on the U.S. side and encouraging all of our TPP partners to move through their domestic processes to do the same,” Rice told Reuters in an interview on Wednesday.  You didn’t think Obama was gonna let some angry plebs prevent him from ensuring huge speaking fees upon leaving office, did you?

A Fundamental Shift in the Nature of Trade Agreements: Controversy over agreements that seek to encourage free trade has been going on for decades. But the nature of the underlying trade agreements has fundamentally shifted. The old trade agenda under first the GATT and then its successor the World Trade Organization was focused on reducing tariffs and other trade barriers. The new generation of trade agreements are about assuring that interlocking webs of production that cross international borders will be enabled to function. Richard Baldwin explores the change in "The World Trade Organization and the Future of Multilateralism," published in the Winter 2016 issue of the Journal of Economic Perspectives. Here's a taste of his theme: "[T]he rules and procedures of the WTO were designed for a global economy in which made-here–sold-there goods moved across national borders. But the rapid rising of offshoring from high-technology nations to low-wage nations has created a new type of international commerce. In essence, the flows of goods, services, investment, training, and know-how that used to move inside or between advanced-nation factories have now become part of international commerce. For this sort of offshoring-linked international commerce, the trade rules that matter are less about tariffs and more about protection of investments and intellectual property, along with legal and regulatory steps to assure that the two-way flows of goods, services, investment, and people will not be impeded. It’s possible to imagine a hypothetical WTO that would incorporate these rules. But in practice, the rules are being written in a series of regional and megaregional agreements like the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union. The most likely outcome for the future governance of international trade is a two-pillar structure in which the WTO continues to govern with its 1994-era rules while the new rules for international production networks, or “global value chains,” are set by a decentralized process of sometimes overlapping and inconsistent megaregional agreements."

The Trump-Sanders Bipartisan War on Free Trade – Ed Dolan - Like most economists, I am strongly inclined toward free trade. I cringe to see the way free trade is under attack, from both parties, during this primary season.  The two populist candidates are the worst offenders. Bernie Sanders, whom I support on many other issues [1] [2] [3], goes off the rails when it comes to trade. Donald Trump, whose policy views are sometimes too vague to pin down, has made clear-cut opposition to “horrible trade deals” a centerpiece of his campaign. Nor is the pushback from the rest of the field as strong as one might hope. Hillary Clinton has changed her position on the Trans-Pacific Partnership (TPP), which she supported as Secretary of State, and runs away from her previous support for the North American Free Trade Agreement (NAFTA), which she liked well enough when her husband signed it into law. On the Republican side, Ted Cruz, Marco Rubio, and John Kasich all profess to favor free trade in principle, but when pushed, as they were during last week’s Republican debate in Miami, they quickly go on defense, hedging their support for trade with numerous “ifs” and “buts”. Let’s take a look at some of the candidates’ least defensible arguments against free trade, starting with Trump and moving on to Sanders.

Free Trade Doesn't Have to Devastate Workers - Justin Fox  The past decade and a half have been tough for a lot of American workers. Real median household income in 2014 was more than $4,000 below the 2000 level. The share of American adults with jobs is well below the 2000 level, too.  One likely cause of this long malaise has been China's epic rise as a manufacturing exporter. Headline-grabbing new research has found depressed wages and increased job churn among U.S. workers in industries with big increases in imports from China, and lasting ill effects for the hardest-hit local labor markets. After centuries of emphasizing the benefits of free trade, mainstream economists have started paying more attention to the possible downsides. So have politicians. This isn't the first time that trade has been a big issue in a presidential campaign, but it may be the first time since Herbert Hoover's election in 1928 that the likely Republican nominee has been this vocal an advocate of higher trade barriers. What's more, a Democrat with similar views on trade is still very much in the race. This trade-bashing is understandable, in light of economic conditions. But it also made me curious. There are other wealthy nations in which median incomes and employment-to-population ratios have held up much better than in the U.S. since 2000, and where by certain measures living standards are now higher than in the U.S. Can any of their success be chalked up to higher trade barriers? Well, let's see. As a proxy for economic success I'll use the United Nations' Human Development Index, which combines per-capita income (not median income) with health and education indicators to give a more complete picture of how people are doing. These are the top eight countries in the most recent HDI ranking.

Trade isn’t going way. That’s good. FTAs may be going away. That’s also good. -- Jared Bernstein - In an oped in the NYT today, I riff off of the prediction that we may well see little in the way of “free trade agreements” FTAs in the next administration. I argue this is largely a positive, because while I see a rationale for establishing “rules of the road” between trading partners, the contemporary FTA model has broken down. The process has been captured by corrupting forces and it has long lost public trust. Real estate being in short supply on the Times oped page, I had to significantly whittle the thing down, so let me add some nuance here where real estate is dirt cheap. First, let me underscore that my argument is not an attack on expanded trade or globalization. I’m a supporter, and not just because of the expanded supply of goods, but because I want the Bangladeshis et al to have the opportunity to lift their national income through trade with wealthier countries. Furthermore, regardless of how you feel about it, the globalization toothpaste ain’t going back in the tube. Second, this is not an attack on the TPP, though it’s got problems. I do think the Obama administration worked hard to get some labor rights into the agreement, for example, and to make some other improvements, like taking tobacco out of the TPPs Investor State Dispute Settlement (ISDS) provisions (though the tobacco exclusion is telling: surely there are other industries in which an ISDS mechanism can present a threat to hard-won environmental and/or labor rights in member countries, and not just  the US).

On Trade, Angry Voters Have a Point - What seems most striking is that the angry working class — dismissed so often as myopic, unable to understand the economic trade-offs presented by trade — appears to have understood what the experts are only belatedly finding to be true: The benefits from trade to the American economy may not always justify its costs. In a recent study, three economists — David Autor at the Massachusetts Institute of Technology, David Dorn at the University of Zurich and Gordon Hanson at the University of California, San Diego — raised a profound challenge to all of us brought up to believe that economies quickly recover from trade shocks. In theory, a developed industrial country like the United States adjusts to import competition by moving workers into more advanced industries that can successfully compete in global markets.  They examined the experience of American workers after China erupted onto world markets some two decades ago. The presumed adjustment, they concluded, never happened. Or at least hasn’t happened yet. Wages remain low and unemployment high in the most affected local job markets. Nationally, there is no sign of offsetting job gains elsewhere in the economy. What’s more, they found that sagging wages in local labor markets exposed to Chinese competition reduced earnings by $213 per adult per year. In another study they wrote with Daron Acemoglu and Brendan Price from M.I.T., they estimated that rising Chinese imports from 1999 to 2011 cost up to 2.4 million American jobs. “These results should cause us to rethink the short- and medium-run gains from trade,” they argued. “Having failed to anticipate how significant the dislocations from trade might be, it is incumbent on the literature to more convincingly estimate the gains from trade, such that the case for free trade is not based on the sway of theory alone, but on a foundation of evidence that illuminates who gains, who loses, by how much, and under what conditions.”

Business Lobby: Election-Season Trade Opposition Will Blow Over --A couple of major presidential candidates have made rolling back free-trade agreements the centerpiece of their campaigns, drawing widespread support across the U.S. But one of the nation’s top business advocacy groups isn’t worried.The next president will support trade once elected, said John Engler, president of the Business Roundtable, whose members are chief executives at the country’s largest corporations.“Trade at election time can be pretty negative,” said Mr. Engler, a former Republican governor of Michigan. “Then after the election, we get the right things done.” His view reflects the business community’s calm demeanor in the face of Donald Trump, the Republican frontrunner, calling to “100%” redo U.S. trade deals.“We are getting absolutely crushed on trade,” Mr. Trump said at debate earlier this month in Detroit. “I say free trade, great. But not when they’re beating us so badly.”Expanding free trade, including ratifying the Trans-Pacific Partnership, is among the policy tools that could boost economic growth above a sluggish 2% pace, Mr. Engler said. The negative tone of the campaigns toward trade deals won’t make it easier for Congress to approve the TPP this year, he said, but he’s not worried about the future president. That includes Democratic frontrunner Hillary Clinton, who opposes the final version of the TPP, and Bernie Sanders.

The Campaign of Magical Thinking - Reagan presided over eight years of deficits that tripled the national debt. Yet the Republican faith that you can tax-cut your way to deficit reduction has never dimmed. This year’s Republican race is dominated by candidates whose budgetary plans make Reagan’s look downright reasonable. Not surprisingly, the most extreme plan is Donald Trump’s. He would slash taxes across the board, reducing revenues by nine and a half trillion dollars over the next decade, according to estimates by the nonpartisan Tax Policy Center. Yet he has also promised to balance the budget, protect Social Security and Medicare, and not cut services. How? Well, he says he’ll get rid of “waste and fraud and abuse,” and abolish the Department of Education and the Environmental Protection Agency. And he thinks that the tax cuts would spur an economic boom, so that revenues will actually increase. This is pure fantasy. Those spending cuts would save just a tiny fraction of what he claims, and the revenue projections have no basis in reality. Yet, unrealistic as Trump’s ideas are, they differ from those of his chief opponents only in degree, not in kind. Marco Rubio wants to couple a $6.8-trillion tax cut with significant increases in defense spending, while Ted Cruz has proposed an $8.6-trillion tax cut with—guess what?—significant increases in defense spending. Naturally, Rubio and Cruz have been vague about where they’d find the necessary trillions in cuts, and about how what the government does would be affected. This is par for the course. Paul Ryan’s infamous budget of 2012 would have effectively eliminated nearly all the federal government’s non-defense discretionary spending, even as he insisted that he wanted to “strengthen” the social safety net and keep the government investing in infrastructure.

Trump on His Foreign Policy Advisers: "I'm Speaking With Myself" -- On March 8, Morning Joe's Mika Brzezinski asked Donald Trump whether he had a foreign policy team. Trump gave a rambling response, saying, "Yes, there is a team. There's not a team. I'm going to be forming a team. I have met with far more than three people." On Wednesday morning, Brzezinski gave Trump another shot at the question. She asked him again about his foreign policy team and strategy and, more specifically, whom he consults with consistently. Trump replied: "I'm speaking with myself, number one, because I have a very good brain and I've said a lot of things. I know what I'm doing, and I listen to a lot of people, I talk to a lot of people, and at the appropriate time I'll tell you who the people are. But my primary consultant is myself and I have, you know, a good instinct for this stuff."

Wall Street Goons Are Coming for Senator Professor Warren - Charles Pierce-- Somebody's punching very far above his weight class these days. Senior House Financial Services Committee member, Rep. Blaine Luetkemeyer (R-MO) told a conference of bankers Wednesday morning that they needed to "find a way to neuter" Sen. Elizabeth Warren, according to Politico. Luetkemeyer was at an American Bankers Association conference in Washington when he made the remark, also calling Warren "the Darth Vader of the financial services world." Besides having a lovely way with a phrase, the Congresscritter is also a big old 'ho for the financial services industry. It's pronounced "LOOT-ke-meyer," emphasis on the "loot." According to Allied Progress, Luetkemeyer is an old friend to the banking and predatory lending industry, receiving more than $1 million in campaign donations from the industry. He's also scored more than $63,000 from predatory payday lenders which Senator Warren sought to put out of business with a bill she proposed in 2014 that would replace them with the United States Post Office. Nearly one in ten service members end up taking out loans from these sketchy lenders with high interest rates and end up crushed under the weight of debt…Luetkemeyer sponsored HR 766 last year, a bill that would close a Department of Justice (DOJ) effort that targets unscrupulous lending practices. In 2012, he proposed another bill that would weaken oversight of payday lenders by enabling them to skirt the regulatory authority of Warren's previous project, the Consumer Financial Protection Bureau, and state laws that have just as much oversight or stronger. I'm sure it's a comfort to Rep. Luetkemeyer's constituents that he is so cozy with the people he's tasked with overseeing. I have no doubt that Senator Professor Warren will laugh this off, but the knives are definitely out.

Koch Fronted Regulatory Hit Woman Edges Closer to Seat on SEC -  Democrats sitting on the U.S. Senate Banking Committee at Tuesday’s confirmation hearing to take testimony from President Obama’s two nominees for the Securities and Exchange Commission (SEC) must have felt like they were having an out of body experience — listening to the human personification of billionaire Charles Koch’s money aping his Ayn Rand, anti-regulatory double-talk from a witness seat. What had to be particularly nauseating to them was that this nominee was sent to them by President Obama who ran as a Democrat on a platform of hope and change. While the political makeup of the SEC is prescribed by law, so that one of these two nominees had to be a Republican, why pick this particular Republican? On October 20, 2015, President Obama announced that his nominee to fill a Republican seat on the SEC would be Hester Peirce, a Senior Research Fellow and Director of the Financial Markets Working Group at the Mercatus Center at George Mason University. According to SourceWatch, the Mercatus Center “was founded and is funded by the Koch Family Foundations.” The Board of the Mercatus Center looks like a Koch brothers’ fan club. Charles Koch, Chairman and CEO of Koch Industries, sits on the Board as does Richard Fink, Executive Vice President of Koch Industries, Peirce has repeatedly testified before Congress in an effort to neuter the Dodd-Frank financial reform legislation and the Consumer Financial Protection Bureau (CFPB). The CFPB looks out for the little guy in areas such as credit card abuses and student loan rip-offs. It is universally hated by Wall Street predators. In testimony before a House Committee on May 21, 2014, Peirce suggested making the CFPB’s budget subject to the “congressional appropriations process” which would effectively allow its budget to be neutered by Wall Street sycophants in Congress. She also recommended replacing its Director, Richard Cordray (who has apparently shown too much independent thinking) “with a bipartisan commission.”

The Financial System Is A Larger Threat Than Terrorism -- Paul Craig Roberts - In the 21st century Americans have been distracted by the hyper-expensive “war on terror.”  Trillions of dollars have been added to the taxpayers’ burden and many billions of dollars in profits to the military/security complex in order to combat insignificant foreign “threats,” such as the Taliban, that remain undefeated after 15 years.  All this time the financial system, working hand-in-hand with policymakers, has done more damage to Americans than terrorists could possibly inflict. The purpose of the Federal Reserve and US Treasury’s policy of zero interest rates is to support the prices of the over-leveraged and fraudulent financial instruments that unregulated financial systems always create.  If inflation was properly measured, these zero rates would be negative rates, which means not only that retirees have no income from their retirement savings but also that saving is a losing proposition.  Instead of earning interest on your savings, you pay interest that shrinks the real value of your saving. Central banks, neoliberal economists, and the presstitute financial media advocate negative interest rates in order to force people to spend instead of save.  The notion is that the economy’s poor economic performance is not due to the failure of economic policy but to people hoarding their money.  The Federal Reserve and its coterie of economists and presstitutes maintain the fiction of too much savings despite the publication of the Federal Reserve’s own report that 52% of Americans cannot raise $400 without selling personal possessions or borrowing the money*. Negative interest rates, which have been introduced in some countries such as Switzerland and threatened in other countries, have caused people to avoid the tax on bank deposits by withdrawing their savings from banks in large denomination bills. The response of depositors to negative interest rates has resulted in neoliberal economists, such as Larry Summers, calling for the elimination of large denomination bank notes in order to make it difficult for people to keep their cash balances outside of banks.Other neoliberal economists, such as Kenneth Rogoff want to eliminate cash altogether and have only electronic money.  Electronic money cannot be removed from bank deposits except by spending it.  With electronic money as the only money, financial institutions can use negative interest rates in order to steal the savings of their depositors.

Bernie Sanders and Elizabeth Warren are going after activist hedge funds -- Sens. Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont are going after activist hedge funds. The senators have sponsored a bill seeking to increase transparency and oversight of activist investors who take large stakes in companies, usually with the goal of gaining board seats and spurring change within companies. The Brokaw Act is cosigned by Democratic Sens. Tammy Baldwin of Wisconsin and Jeff Merkley of Oregon. Warren, a Democrat, and Sanders, an independent, have cosponsored the bill. The bill would narrow the window in which hedge funds must file 13D disclosures with the Securities and Exchange Commission once they have taken a 5% stake in a company. Right now that window is 10 days, but the bill would see it shortened to two days. The bill also seeks to block activist "wolf packs" — that is, activist investors who collectively hold more than 5% of a company but who individually hold less and therefore do not need to disclose their stakes. You can read more about the Brokaw Act here, via Baldwin. Here's a press release:

Hedge fund closing at fastest pace since global financial crisis: More hedge funds closed their doors in 2015 than at any time since the financial crisis, according to new research, as turbulent markets dragged down the industry's performance. Last year was the worst year for liquidations since 2009, with 979 funds closing, up from 864 in 2014, according to data from Hedge Fund Research. The fourth quarter of 2015 also saw the fewest new hedge funds starting up since 2009, with just 183 openings compared with 269 in the third quarter. The figures capture a period in which many of the industry's marquee names suffered significant losses. The HFRI Fund Weighted Composite index fell 0.9 per cent last year, HFR data show. December saw a flurry of funds converting into family offices, including Michael Platt's BlueCrest and Doug Hisch's Seneca Capital, or shutting entirely as Lucidus Capital Partners did following redemptions. Unnerved by jerky markets, hedge fund clients became fearful of risk and less patient with poor returns in the second half of the year, and started asking for their money back from lagging funds.The top 20 per cent of funds by assets received about 80 per cent of all new money last year, the prime brokerage group at Barclays found in an analysis of HFR data. So far, this year does not appear to be any kinder for the industry. Between market losses and redemptions, assets in hedge funds fell by $64.7bn in January, bringing total money in the industry below $3tn for the first time since crossing that threshold in May 2014, according to data provider eVestment. Redemptions in January were the worst since January 2009.

Oil Investors See $7.4 Billion Vanish as Dividends Targeted -- The check is not in the mail. Bludgeoned by falling energy prices, at least a dozen oil and natural gas companies have opted to cut dividends this year to preserve cash, cannibalizing payouts considered sacrosanct by many investors. The cost to shareholders: more than $7.4 billion in lost income, compared to what they would have received this year if the payouts remained the same. It’s another painful measure -- along with tens of thousands of layoffs and more than $100 billion in canceled investments -- of the toll taken on the industry by the worst oil and gas price slump in decades. The quarterly payments, prized by conservative shareholders as a source of steady income, are unlikely to be restored any time soon. Kinder Morgan Inc.’s 75 percent dividend cut was the biggest, amounting to a $3.44 billion loss for shareholders over the course of 2016.  Dividend-slashers including ConocoPhillips ($2.42 billion in annualized cuts) and Anadarko Petroleum Corp. ($447 million) made similar arguments. They followed the lead of Marathon Oil Corp., Eni SpA, Chesapeake Energy Corp. and Transocean Ltd., who cut payouts in 2015 as the industry girded for what’s expected to be a multiyear slump.

These Are The Energy Bonds Most Likely To Default In The Next Six Months - Over the past several weeks, courtesy of the jump in oil prices from 13 years lows, the narrowly reopened window granting some companies the chance to sell equity and in some cases debt (and promptly use the proceeds to repay their secured lenders), and the various last-ditch extensions afforded to near-default oil and gas companies, the dire reality of the default wave about to be unleashed in the shale patch has been swept under the rug, if only briefly. That is about to change. In a recent interview with Bloomberg, Fitch's Eric Rosenthal paints a very disturbing picture: the rating agency senior director predicts that about $40 billion worth of energy debt will likely default in 2016. Here are some of the highlights behind his forecast of a 6% default rate, the highest non-recessionary rate since 2000. [...] Finally, on a topic very dear to us, recovery rates and what to expect if there is a 20% cumulative default rate in the energy sector. The 30-day post-default energy price over the past 12 months is 23 percent and that figure is unlikely to rise considering current secondary levels. It doesn’t bode well for recoveries. In the worst cases, investors could be looking at cents on the dollar.  In short, it looks like we may be in the eye of the hurricane, and it is only a matter of time before the pent up avalanche of energy defaults is unleashed. But how long; what are the specifics? For those who enjoy combing through forward calendars, we have conducted a quick search of all U.S. 144A oil and gas bonds trading at 30 cents on the dollar or less, and which have an interest payment over the next six month, starting in April through September. As can be seen from the 141 individual bonds that satisfy these criteria, the eye of the hurricane is set to leave and unleash some very strong wind.

The Fed caused 93% of the entire stock market's move since 2008: Analysis - The bull market just celebrated its seventh anniversary. But the gains in recent years – as well as its recent sputter – may be explained by just one thing: monetary policy. The factors behind that and previous bubbles can be illuminated using simple visual analysis of a chart. The SS&P 500 (^GSPC) doubled in value from November 2008 to October 2014, coinciding with the Federal Reserve Bank’s “quantitative easing” asset purchasing program. After three rounds of “QE,” where the Fed poured billions of dollars into the bond market monthly, the Fed’s balance sheet went from $2.1 trillion to $4.5 trillion.  This isn’t just a spurious correlation, according to economist Brian Barnier, principal at ValueBridge Advisors and founder of What’s more, he says previous bull runs in the market lasting several years can also be explained by single factors each time. Barnier first compiled data on the total value of publicly-traded U.S. stocks since 1950. He then divided it by another economic factor, graphing the ratio for each one. If the chart showed horizontal lines stretching over long periods of time, that meant both the numerator (stock values) and the denominator (the other factor) were moving at the same rate. “That's the beauty of the visual analysis,” he said. “All we have to do is find straight, stable lines and we know we've got something good.”

Former Fed Employee Avoids Jail, Gets $2,000 Fine For Stealing Fed Secrets On Behalf Of Goldman Sachs -- One of the biggest scandals at the end of 2014 was the dramatic confirmation courtesy of 48 hours of declassified tapes by former NY Fed staffer Carmen Segarra that not only Goldman Sachs controls the New York Fed (headed by former Goldman managing director Bill Dudley), but that disturbingly one of Goldman Sachs' then-employees, former NY Fed regulator, then 29-year old Rohit Bansal was routinely being provided with confidential NY Fed documents.As the NYT reported then, "from his desk in Lower Manhattan, a banker at Goldman Sachs thumbed through confidential documents — courtesy of a source inside the United States government. The banker came to Goldman through the so-called revolving  door, the symbolic portal that connects financial regulators to Wall Street. He joined in July after spending seven years as a regulator at the Federal Reserve Bank of New York, the government’s front line in overseeing the financial industry. He received the confidential information, lawyers briefed on the matter suspect, from a former colleague who was still working at the New York Fed."The "colleague", and source of the stolen information, was another NY Fed employee, Jason Gross, whose official role was "bank examiner" ("bank leaker" would have been more appropriate).

Another Former Fed Employee Pleads Guilty To Stealing Secret Fed Data -- Another day, another criminal Fed employee admits to being just that. Recall that just yesterday we wrote about former NY Fed employee Jason Gross who somehow managed to avoid a prison sentence, but was slapped on the wrist with a $2,000 fine after he admitted to stealing confidential NY Fed data and handing it over to his former supervisor in his new role working for Goldman Sachs.  As it turns out he wasn't the only "cockroach" - moments ago the DOJ Office in Illinois announced that another former senior analyst at the Chicago Fed, Jeffrey Cho, 35, has pled guilty to stealing "sensitive financial data" which he took with him days before resigning from the Fed and moving to a different employer. The conviction carries a maximum sentence of one year in federal prison.  A sentencing hearing has been scheduled for June 21, 2016, at which point we can only expect Cho will get the Jason Gross treatment and get away with merely a fine. In the charge, the DOJ states that in his role as a Senior Supervision Analyst, Cho had access to sensitive, proprietary and valuable information belonging to the bank.  The information included financial data and materials relating to the bank’s responsibility to monitor the health of certain financial institutions in the United States. According to a written plea agreement, Cho was in discussions in May 2015 to take a new job outside of the bank.  Less than a week before accepting the outside company’s employment offer, Cho printed a confidential Federal Reserve document from his work computer and took it home with him.  After accepting the offer on May 12, 2015, Cho printed an additional 31 confidential Federal Reserve documents from his work computer and brought those home as well.  On the same day he resigned from the bank on May 26, 2015, Cho printed 3 more proprietary Federal Reserve documents from his work computer and brought them home. When confronted by FBI agents, Cho initially denied taking home the confidential documents, according to the plea agreement.  However, after a second interview with FBI agents the following month, Cho turned over four of the documents.  Cho told agents that he had shredded the remaining documents after his first interview with the FBI, according to the plea agreement.  On June 6, 2015, Cho turned over a bag full of shredded documents to the FBI, the plea agreement states.

The Untold Story of Why the SEC Paid Whistleblower Eric Hunsader $750,000 - Pam Martens and Russ Martens. On March 8, 2016 the Securities and Exchange Commission (SEC) wired $750,000 into the bank account of Eric Hunsader as a whistleblower award for spotting and documenting an illegality at the New York Stock Exchange. Hunsader is a trading software and market data expert and founder of Nanex LLC, a market data company that also provides a boatload of free research on behalf of the public interest. Hunsader is one more thing: he’s the SEC’s biggest critic when it comes to its failure to restore integrity to U.S. stock exchanges and U.S. markets.The SEC doesn’t release the names of its whistleblowers but Hunsader alerted the media himself to his award in order to silence critics and one particular executive at the New York Stock Exchange who had, heretofore, disparaged in public Hunsader’s allegations about the NYSE’s discriminatory dissemination of market data in order to benefit high frequency traders.In announcing the whistleblower award on January 15 of this year, the SEC seemed to go out of its way in its press release to pat its then unnamed whistleblower on the back, writing:  “This award demonstrates the Commission’s commitment to awarding those who voluntarily provide independent analysis as well as independent knowledge of securities law violations to the agency.  We welcome analytical information from those with in-depth market knowledge and experience that may provide the springboard for an investigation.” But the SEC’s appreciation wasn’t as generous as it might have been. According to the same press release, it could have awarded Hunsader up to 30 percent of the $5 million fine it collected from the New York Stock Exchange, or $1.5 million. Instead, it awarded Hunsader only 15 percent. And then there was the matter of the puny amount of the fine itself against the NYSE and how long it took the SEC to get the award to Hunsader.

JPMorgan Corners LME Aluminum Market, Leading To Strange "Price Anomalies" - While not nearly as exciting as JPM cornering and manipulating the gold or silver markets, over the past few years Jamie Dimon's bank appears to have cornered a very prominent commodity traded on the London Metals Exchange, aluminum, resulting in price "anomalies" which as Reuters politely puts it "mean prices do not always reflect fundamentals" and which as we put it, reflect outright manipulation, however because regulators are captured have so far completely slipped through the cracks. According to Reuters, large amounts of aluminum traded on the London Metal Exchange over the past couple of years "have at times been in the hands of a dominant position holder." Citing sources at commodity trading houses, warehouses, producers, brokers and banks "one such position holder is U.S. bank JPMorgan." Reuters adds that "other companies have done so in past" which perhaps is meant to mitigate JPM's culpability, but merely confirms that if it isn't one bank manipulating commodity markets, it's another - the famous example of Sumitomo's Yasuo "Mr. Copper" Hamanaka comes to mind. As Reuters points out, "while no rules have been broken, holding a large, sometimes dominant position can to an extent have an influence on prices in the short term for contracts that will soon reach maturity." For its part, the LME said it "would seek additional information from market participants regarding activity that raises concern."

JPM Announces $1.9 Billion Buyback One Month After CEO Jamie Dimon Buys 500,000 Shares In The Open Market - On February 12, Jamie Dimon made headlines when he bought 500,000 shares, or some $26 million worth of JPM stock which coming one day after the market hit its lowest point in the recent selloff, has become known as the "Dimon Bottom." Was it just good timing or was there something more to the purchase some wondered. As it turns out the purchase may have been nothing more than Jamie frontrunning his own company's multi-billion buyback, because as JPM announced moments ago, the company of which he is a CEO, just authorized the repurchase of an additional $1.9 billion in stock over the next three months, thereby assuring CEO Jamie of an even great profits on his recent acquisition. From the release: JPMorgan Chase & Co. (NYSE: JPM) (“JPMorgan Chase” or the “Firm”) today announced that the Firm’s Board of Directors has authorized the repurchase of up to an additional $1.88 billion of common equity through the end of the second quarter of 2016 as part of the Firm’s current equity repurchase program. This amount is in addition to the $6.4 billion of common equity authorized for repurchase by the Board last year. The Firm has received a non-objection from the Board of Governors of the Federal Reserve System to this increase in the amount of common equity that may be repurchased under the Firm’s 2015 capital plan.

Why was no one prosecuted for contributing to the financial crisis? New documents reveal why -- “This gags me.”  So said Elizabeth Warren in response to a Quora user, who asked, “What do you think are the real reasons that no Wall Street executives have been prosecuted for fraud as a result of the 2008 financial crisis?” Her answer, which she expounds on more thoroughly in her report Rigged Justice, is, “Weak enforcement begins at the top.” I’ve always thought the lack of prosecution was way more complicated than a simple lack of will, in part because there is a difference between criminally prosecutable behavior and that which is morally reprehensible.  But I’m not sure whether we’ll ever know the real answer. Newly public documents from the Financial Crisis Inquiry Commission show that the FCIC referred a handful of matters to the Justice Department for possible prosecution. Most of the time, nothing happened.  In the cases where something did happen, our modern system of justice—the special one that applies to big business, that is—means that those of us on the outside—citizens, on whose behalf justice is supposed to be served—will never know the underlying truth.    The newly disclosed documents go into even more detail about why this might have violated the law.  In a document entitled “Material Misstatements and Omissions in Various RMBS Offering Documents,” the FCIC laid out a potential case. Securities laws require sellers to “adequately describe for potential investors what they are offering, including the risks which may be associated with making such an investment.  If the seller makes a false or misleading statement of (or omits to state) a material fact in a prospectus, it can result in the issuer of the securities and underwriters being liable to investors and becoming subject to federal prosecution. The prospectuses and other offering materials used in connection the sale of residential mortgage backed securities in a substantial number of offerings between 2006 and 2007 (and maybe before), may have contained false statements and omissions relating to disclosures about the credit risks and origination standards of the underlying mortgage loans.”

Robert Rubin Was Targeted for DOJ Investigation - Fortune -  In late 2010, in the waning months of the Financial Crisis Inquiry Commission, the panel responsible for determining who and what caused the financial meltdown that lead to the worst recession in decades voted to refer Robert Rubin to the Department of Justice for investigation. The panel stated it believed Rubin, a former U.S. Treasury Secretary who has held top roles at Goldman Sachs and later Citigroup “may have violated the laws of the United States in relation to the financial crisis.” Rubin, the commission alleged, along with some other members of Citi’s top management, may have been “culpable” for misleading Citi’s investors and the market by hiding the extent of the bank’s subprime exposure, stating at one point that it was 76% lower than what it actually was. No government action was ever brought against Rubin. And there is no evidence that Department of Justice acted on the crisis commission’s recommendations. A source close to Rubin says the former Wall Street executive was never contacted by the Justice Department in relation to the commission’s allegations. Nonetheless, the fact that Rubin was among a relatively small group of top bankers who the crisis commission referred to the Justice Department for potential wrong-doing sheds new light on the financial crisis, and the government’s effort to pursue those who may have broken the law. Seven years after the bankruptcy of Lehman Brothers, the fact that no major Wall Street figure was ever prosecuted for crimes related to the financial crisis remains an sticking point for many. It is regularly brought up by presidential candidate Senator Bernie Sanders. When the Financial Crisis Inquiry Commission released its 662-page nearly five years ago, members of the commission said they had formerly referred evidence of possible misconduct of a number of individuals to the Department of Justice. But it declined to say who.

Former Citi Vice Chairman Robert Rubin, Target of DoJ Investigation, is Too Big to Jail  -- Yves Smith - The Financial Crisis Inquiry Commission released a raft of documents from its 2010 investigation, including interviews with senior government officials like Alan Greenspan, Hank Paulson, and Sheila Bair, as well as other individuals deemed to be prominent like Warren Buffett and subprime short-seller Steve Eisman. It’s hard to see the justification for keeping information from private individuals under wraps for this long.  Here is a juicy tidbit flagged by Fortune, on the long-standing stealth power in the Democratic party, Robert Rubin, singularly responsible for its strong dollar (as in anti labor) and bank friendly policies:  the commission voted on September 29, 2010, on whether to refer persons related to an item titled “Potential Fraud and False Certifications: Citigroup” to the office of the Attorney General of the United States. The staff notes that describe the item names Rubin, along with then Citi CEO Charles Prince, as having potentially violated the law. At the meeting, the commission’s general counsel Gary Cohen said that what the commissioners were voting on was just a referral and “not a recommendation for prosecution.” The vote was unanimous to refer the Rubin matter among the commission members present at the meeting, 6-to-0.….. By late summer 2007, Citi’s direct exposure to subprime bonds was $55 billion, according to the crisis commission. ...“based on FCIC interviews and documents obtained during our investigation, it is clear that CEO Chuck Prince and Robert Rubin . . . knew this information.” It says the two top officials were made aware of the extent of Citi’s exposure “no later than September 9, 2007.” Yet, according to the commission, on October 15, Citi executives told analysts on a call that the bank’s total exposure to subprime was just $13 million, or 76% less than it actually was. Two weeks later as pressure began to build on Citi, and values in the mortgage market fell, Citi told the market that its actual subprime exposure was $55 billion, and that its losses from mortgage-related assets could already be as big as $11 billion. Prince also announced he was resigning.

What Would Breaking Up the Banks Even Look Like? -- When regulators from around the world—including the U.S. and the E.U.—determined in 2008 that the banking system was terribly under-regulated, they all suggested a similar fix: Separate the departments involved in investment banking from those that deal with more run-of-the-mill insured deposit-taking. But recently there has been some back-sliding on such separation, and finance is still dominated by giant banks that mix the two. Yet separation makes a lot of sense. Why should to two such wildly different activities as investment banking and retail banking be bundled together in the same institution? It’s obvious what JPMorgan gains: a nice piece of ballast to offset embarrassing, high-stakes trading mishaps. But what about consumers? How does an ordinary person benefit from putting her deposit into a complex global bank? I have asked that question to experts for more than a decade and have yet to hear a satisfying answer. Breaking up the banks in this way isn’t a proposal confined to the political fringes. Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis—as well as a former banker and a Treasury official during the brunt of the crisis—argued in a recent speech that the too-big-to-fail problem has not been solved by current regulation: The failure of more than one bank in an economic downturn would still have enormous economic costs. His suggested options include breaking up large banks, turning large banks into public utilities, and taxing leverage to reduce systemic risk. He gave short shrift to those who argue that remedies like this could be disruptive, saying, “Those potential shortcomings must be weighed against the actual risks and costs that we know exist today…Better and safer are reasons enough to act.”

Collateral Requirements and Nonbank Online Lenders: Evidence from the 2015 Small Business Credit Survey - Businesses can secure a bank loan by offering collateral—typically a business asset such as equipment or real estate. However, the recently released 2015 Small Business Credit Survey (SBCS) Report on Employer Firms,conducted by seven regional Reserve Banks, found that 63 percent of business owners who had borrowed also used their personal assets or guarantee to secure financing. Surprisingly, the use of personal collateral was common not only among startups. Older and relatively larger small firms (see the following chart) also relied heavily on personal assets. Not every small business owner has sufficient hard assets, such as real estate or equipment, that can be used as collateral to secure a traditional bank loan or line of credit. For these circumstances, there are options such as credit cards and products offered by nonbank lenders (mostly operating online) that have less stringent underwriting requirements than banks. Many online nonbank lenders advertise unsecured loans or require only a general lien on business assets, without valuing those business assets. In the 2015 SBCS, 20 percent of small firms seeking loans or lines of credit applied at nonbank online lenders. These lenders have a good reputation for quick application turnaround, and the collateral requirements can be looser than those applied by traditional lenders. But when borrowers were asked about their overall experience, only a net 15 percent of businesses approved at nonbank online lenders were satisfied (40.6 percent were satisfied and 25.3 percent were dissatisfied). In contrast, small banks received a relatively high net satisfaction score of 75 percent (see the chart).

MBA: Mortgage Applications Decreased in Latest Weekly Survey, Purchase Applications up 33% YoY --From the MBA: Refinance Applications Continue to Drop in Latest MBA Weekly Survey Mortgage applications decreased 3.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 11, 2016. The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 0.3 percent to its highest level since January 2016. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 33 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 3.94 percent from 3.89 percent, with points increasing to 0.42 from 0.38 (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 33% higher than a year ago.

Homebuyers Are Getting Around the 20% Down Payment Requirement. Here's How - If you want to buy a home, chances are you need a mortgage. You probably already knew that. The most common type of mortgage is one with a 30-year term with a fixed interest rate (aka 30-year fixed). You probably already knew that, too. What you might not know is the variety of ways this common product can be structured, so you have the option of getting a loan set up in a way that suits your financial situation best. A structure that was common before the housing crisis and has since re-emerged is the 80/10/10, also called a "piggyback mortgage," which allows homeowners to save money while making a lower down payment. Piggyback mortgages fell out of favor after the burst of the housing bubble, because they're riskier for lenders to make, but they're making a bit of a comeback and may be something you want to ask about if you're considering getting a home loan. What Is an 80/10/10?The 80 is for the 80% of the home's value covered by the first mortgage, the 10 represents a 10% down payment from the buyer and the other 10 is a second loan to cover the 10% the buyer couldn't put down. The second lender takes on the risk of the loan, allowing the buyer to avoid PMI while protecting the lender of the larger loan. It's essentially an alternative to getting a loan for 90% of the home's value with a 10% down payment and having to pay PMI.

 FNC: Residential Property Values increased 6.4% year-over-year in January FNC released their January 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values decreased 0.3% from December to January (Composite 100 index, not seasonally adjusted).   The 10 city MSA decreased 0.4% (NSA), the 20-MSA RPI decreased 0.3%, and the 30-MSA RPI decreased 0.4% in January. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  From FNC: FNC Index: January Home Prices Down 0.3According to the latest FNC Residential Price Index™ (RPI), U.S. home prices in January showed a seasonal decline, down 0.3% from December, reflecting flat home sales during the same period. On a year-over-year basis, home prices rose 6.4% from December 2015.“January is typically a slow month for housing activity, and month-over-month fluctuations in home prices tend to reflect that,” said Yanling Mayer, FNC’s housing economist and Director of Research. ...In Houston, home prices were down 2.0%, or an average of 1.2% per month in the last 3 months, likely impacted by job losses in the energy sector from collapsing oil prices. Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The index is still down 14.3% from the peak in 2006 (not inflation adjusted).

Hamptons Super-Luxury Homes Whacked by Reversing “Wealth Effect” -- Wolf Richter: This had to happen. Now we’re getting reports that in the Hamptons, on Long Island’s east end, where Wall Street’s richest hobnob over the summer, home prices at the very top, after a phenomenal boom, are getting crushed. What’s getting blamed? The crummy performance of the markets last year. The average price in 2015 of the ten most expensive homes sold in the area has crashed 20% from a year earlier – to a measly $35.5 million. After soaring a mind-bending 180% in five years, from $15.9 million in 2009, the average price of the top ten homes had reached $44.6 million in 2014, according to a report by Town & Country Real Estate in East Hampton, cited by Reuters. The year 2009 was when the Fed’s “wealth effect” strategy was kicking in. It was precisely what Bernanke wanted to accomplish. He spelled it out in an editorial. The Fed’s “strong and creative measures” would inflate asset prices, which would lead those benefiting the most from it, including those on Wall Street that extract fees and get paid big bonuses, to feel wealthier and spend a little more, which would crank up the economy. Except it didn’t crank up the economy. Then 2015 came along, with turmoil, volatility, defaults, and bankruptcies. The S&P 500 peaked in May 2015, propped up by a dozen large-cap stocks, but it was rough sledding for the rest of the year, and many smaller stocks were taken out the back and shot.  And the good times dried up in hedge-fund land, according to the Barclay Hedge Fund Index: after a derisively small return of 2.9% in 2014, hedge funds outdid themselves in 2015 with a nearly invisible return of 0.04%, a mere rounding error. And this sort of disappointment shows in the Hamptons.

The Los Angeles war against tiny homes --So far Summer has given out 37 tiny 6- by 8-foot houses, which cost $1,200 each to build. They resemble sheds, painted in bright, solid colors, with solar panels on the roof, wheels to make them mobile and a portable camping toilet. But recently, city sanitation workers confiscated three of the houses from a sidewalk in South Los Angeles and tagged others for removal.“Unfortunately, these structures are a safety hazard,” says Connie Llanos, a spokeswoman for LA Mayor Eric Garcetti. “These structures, some of the materials that were found in some of them, just the thought of folks having some of these things in a space so small, so confined, without the proper insulation, it really does put their lives in danger.” Llanos says they’d be better off taking advantage of official resources like shelters or housing vouchers. And this: According to the latest count, 44,000 people live on the streets in and around LA. The city’s sweep put some people back on the sidewalks and since then Summers has been handing out tents instead. Here is the NPR feature.  Perhaps there is a way to recognize and regularize a greater number of these structures?

Hurdles to Multigenerational Living: Kitchens and Visible Second Entrances - WSJ: For the past five years, home builder Jon Girod has noticed a surge in inquiries from buyers wanting to bring their extended families together on the same property to save money. He said he gives them a standard disclaimer: Most local governments won’t approve a second kitchen for adults living in separate guest suites. That means no stoves or ovens—only hot plates or microwaves. The warning scares off many buyers, he said, but experienced ones know that once they move in it is easy to reconfigure the space without drawing attention from local planning officials. “It’s a cat-and-mouse game,” A growing number of Americans are living in a household with multiple adult generations as baby boomers look to support older parents as well as boomerang children struggling with student debt and a tough job market. The rub: There is a shortage of homes designed for multigenerational living arrangements. In all, more than 18% of the U.S. population lives in a multigenerational household, according to a 2014 Pew Research Center study, up from about 15% in 2000. Multigenerational households are defined as those that include at least two adult generations or with a skipped generation such as a grandchild living with a grandparent. The figures likely would be greater, experts said, if not for the labyrinth of local zoning rules designed to prevent the spread of attached apartments or Airbnb-style room rentals in settings dominated by traditional single-family homes. Local restrictions can run the gamut, from prohibitions on stoves and ovens to steep fees for separate utility hookups.

Housing Starts increased to 1.178 Million Annual Rate in February --From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in February were at a seasonally adjusted annual rate of 1,178,000. This is 5.2 percent above the revised January estimate of 1,120,000 and is 30.9 percent above the February 2015 rate of 900,000. Single-family housing starts in February were at a rate of 822,000; this is 7.2 percent above the revised January figure of 767,000. The February rate for units in buildings with five units or more was 341,000. Privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,167,000. This is 3.1 percent below the revised January rate of 1,204,000, but is 6.3 percent above the February 2015 estimate of 1,098,000. Single-family authorizations in February were at a rate of 731,000; this is 0.4 percent above the revised January figure of 728,000. Authorizations of units in buildings with five units or more were at a rate of 401,000 in February.The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in February. Multi-family starts are up 19% year-over-year. Single-family starts (blue) increased in February and are up 37% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in February were above expectations - especially strong for single family starts - and starts for December and January were revised up. A strong report

February 2016 Residential Building Continues Growth.: Written by Steven Hansen Be careful in analyzing this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry variations from month to month so the rolling averages are the best way to view this series - and the data remains in the range we have seen over the last 3 years. There are no warning signs except the rate of growth of building permits is decelerating.

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a +6.7 % this month.
  • Construction completions are lower than permits this month for the 13th month in a row (when permits exceed completions - this sector is growing)..
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is 14.8 % (permits) and 9.8 % (construction completions):
  • The 2015 rate of growth of this sector was equal to pre-recession levels.
Econintersect Analysis:
  • Building permits growth accelerated 1.1 % month-over-month, and is up 8.1 % year-over-year.
  • Single family building permits grew 21.1 % year-over-year.
  • Construction completions accelerated 3.6 % month-over-month, up 19.9 % year-over-year.

US Census Headlines:

  • building permits down 3.1 % month-over-month, up 6.3 % year-over-year
  • construction completions down 4.2 % month-over-month, up 17.5 % year-over-year.

Housing Starts Beat Expectations, As Slowdown In Rental Permits Suggest Further Rent Increases In Coming Months - Coming at the same time as an inflationary report which showed Core CPI rising at 2.30%, or the highest rate since October 2008, and one which will put further pressure on the Fed to hike rates as shelter inflation is now simply too big to sweep under the rug, we also got February's housing starts and permits, which while painting a mixed picture of the US housing market suggested further strength in the US housing sector in the past month. Housing starts rose from last month's disappointing an upward revised 1,099K (now 1,120K), to 1,178K, beating expectations of a 1,150K print, driven by a jump in single-family housing which rose from 767K to 822K, the highest print since the recession, on the back of a rebound in West (24.8%) and Midwest (18.6%) single-family housing, while multi-family or "rental" units were almost unchanged, rising from 333K to 341K. Permits, on the other hand, disappointed, sliding from an upward revised 1,204K to 1,167K, below the 1,200K consesus expectations, where single-family rose fractionally from 728K to 731K, even as multi-family permits declined by 9.1% from 441K to 401K, the lowest print since September 2015, and perhaps suggesting that home builders are refocusing their attention away from rental units and back to single-family housing.

Housing wobbles: As I have often said, housing is the single most leading sector of the economy, and if I could have only one data series, it would be housing permits (which are less volatile than, and slightly lead, starts). Yesterday's report on permits and starts tells us that, for now at least, this sector has stalled. Let's go to the graphs. First, here are permits (blue) and starts (red) for the last 5 years: Housing growth had slowed in 2013 and 2014 before moving significantly higher in early 2015. But since last summer, there have been no new highs in either series. Because the expiration of a housing program in NYC distorted the seasonal adjustment of permits by up to 300,000 last May and June, I have relied upon housing permits excluding the Northeast (blue in the graph below) and single family permits (red) to give me more accurately the underlying trend. Here's what they look like: These made their last new highs, respectively, 4 and 3 months ago. Both look to have plateaued for the last 4 months. Looking to the near future, housing prices (red in the graph below, weighted average of new vs. existing house prices) follow sales (blue): After a recent pause in price increases, the increase in sales in 2015 vs. 2014 should be reflected in an upward pulse in prices for most of this year. Housing sales, meanwhile, respond to interest rates and demographics. The next graph updates the YoY change in mortgage rates (red) vs. the YoY% change in permits (blue, divided by 10 for scale): Interest rates are flat YoY, giving neither help nor hurt. Demographics is a tailwind in view of the large Millennial generation. That's relatively good news. And we need good news in the housing market, because other long leading indicators have either turned down or at least show deceleration.

Higher Housing Starts & Lower Industrial Output In February - This morning’s US economic updates on housing construction and industrial output—the final batch of numbers ahead of this afternoon’s monetary announcement from the Federal Reserve—delivered a mixed bag of macro news, albeit with a moderately positive spin. The main takeaway: industrial production is still contracting at the headline level but manufacturing is expanding at a faster rate. On the housing front, new residential construction continues to trend higher. Overall, the numbers offer support for expecting moderate economic growth in the near-term future. Let’s take a look at the details, starting with today’s report on industrial activity for February. The headline index remains in negative territory, according to the Federal Reserve. Output contracted 0.5% last month, the fourth monthly decline in the last five months. Yet the manufacturing slice of industrial activity increased for the second month in a row, hinting at the possibility that worst has passed for this sector. Looking past the short-term noise reveals a tale of two trends. In year-over-year terms industrial output declined 1.0% through February—the fourth straight run of red ink for the annual comparison. But manufacturing’s growth rate is accelerating, rising 1.8% in February vs. the year-earlier level—the strongest year-over-year gain since last summer.“It does seem that after a recent spell of weakness, manufacturing seems to have found a base,”“This strengthens the tentative perception that manufacturing is making a firmer step in the first quarter, which is encouraging.” Moving on to housing starts, new residential construction increased to 1.178 million units (seasonally adjusted), which marks a five-month high. Even more striking is the sharply higher year-over-year gain for starts, which surged to a nearly 31% increase last month vs. the level from a year ago.

Comments on February Housing Starts: The housing starts report this morning was above consensus, and there were upward revisions to the prior two months - a strong report. Starts were up 30.9% from February 2015, but February was especially weak last year (see the first graph). The key take away from the report is that multi-family growth is slowing, and single family growth is ongoing. This graph shows the month to month comparison between 2015 (blue) and 2016 (red). The comparison for February was easy, and the year-over-year comparison will be easy in March too. After March, I expect much less growth year-over-year. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months). Multi-family completions are increasing sharply year-over-year. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts might have peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions. Note the exceptionally low level of single family starts and completions. The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

NAHB: Builder Confidence unchanged at 58 in March --The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 58 in March, unchanged from 58 in February. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Holds Steady in March Builder confidence in the market for newly-built single-family homes was unchanged in March at a level of 58 on the NAHB/Wells Fargo Housing Market Index (HMI). “Confidence levels are hovering above the 50-point mid-range, indicating that the single-family market continues to make slow but steady progress,” . “However, builders continue to report problems regarding a shortage of lots and labor.” “While builder sentiment has been relatively flat for the last few months, the March HMI reading correlates with NAHB’s forecast of a steady firming of the single-family sector in 2016,” said NAHB Chief Economist David Crowe. “Solid job growth, low mortgage rates, and improving mortgage availability will help keep the housing market on a gradual upward trajectory in the coming months.”..The HMI component gauging current sales conditions held steady at 65 in March while the index measuring sales expectations in the next six months fell three points to 61. The component charting buyer traffic rose four points to 43. Looking at the three-month moving averages for regional HMI scores, the Midwest posted a one-point gain to 58 while the South was unchanged at 59. The West registered a three-point decline to 69 while the Northeast fell one point to 46.

Fed: Q4 Household Debt Service Ratio Very Low -- The Fed's Household Debt Service ratio through Q4 2015 was released Mar 14th: Household Debt Service and Financial Obligations Ratios. I used to track this quarterly back in 2005 and 2006 to point out that households were taking on excessive financial obligations.  These ratios show the percent of disposable personal income (DPI) dedicated to debt service (DSR) and financial obligations (FOR) for households. Note: The Fed changed the release in Q3 2013.  The household Debt Service Ratio (DSR) is the ratio of total required household debt payments to total disposable income. The DSR is divided into two parts. The Mortgage DSR is total quarterly required mortgage payments divided by total quarterly disposable personal income. The Consumer DSR is total quarterly scheduled consumer debt payments divided by total quarterly disposable personal income. The Mortgage DSR and the Consumer DSR sum to the DSR. This data has limited value in terms of absolute numbers, but is useful in looking at trends.  The graph shows the Total Debt Service Ratio (DSR), and the DSR for mortgages (blue) and consumer debt (yellow). The overall Debt Service Ratio increased slightly in Q4, and has been moving sideways and is near a record low. Note: The financial obligation ratio (FOR) increased slightly in Q4 and is also near a record low (not shown) The DSR for mortgages (blue) are near the low for the last 35 years. This ratio increased rapidly during the housing bubble, and continued to increase until 2007. With falling interest rates, and less mortgage debt (mostly due to foreclosures), the mortgage ratio has declined significantly. The consumer debt DSR (yellow) has been increasing for the last three years.

How Excessive Debt Hurts the Economy and Why to Curb It - Deleveraging – the forced and rapid paying down of debt – has been one of the key factors behind the Great Recession of 2008/09 and the ensuing slow recovery of the US economy.  Figure 1 illustrates the dramatic rise of leverage in the household sector before 2008 as well as the subsequent deleveraging.  Deleveraging hurts the economy because it forces borrowers to repay their lenders, but lenders are far thriftier than borrowers. (This is the reason why borrowers are borrowers and lenders are lenders in the first place.) When funds are moved from big spenders to thrifty lenders, it reduces aggregate demand. During normal times, the Federal Reserve can counteract this and restore aggregate demand by cutting interest rates, but monetary stimulus becomes very difficult once interest rates hit zero – a phenomenon frequently referred to as a “liquidity trap.” This is precisely what happened in the US economy starting in December 2008, and as a result, the economy plunged into deep recession (see e.g., Eggertsson and Krugman, 2012, or Guerrieri and Lorenzoni, 2011). Although policymakers have employed a whole battery of monetary and fiscal stimulus tools since, the effectiveness of such stimulus has been limited, and it has taken the US economy a long time to recover. In our forthcoming paper, “Liquidity Trap and Excessive Leverage” (Korinek and Simsek, 2016), we argue that the right time to counteract a deleveraging-driven crisis is not after the event but at the time when leverage builds up. If we reduce the amount of debt that borrowers take on during the build-up phase, then the next deleveraging episode will be less severe, and the resulting recession will be mitigated.

Unpaid subprime car loans hit 20-year high - Mar. 15, 2016: The rate of seriously delinquent subprime car loans soared above 5% in February, according to Fitch Ratings. That's worse than during the Great Recession and the highest level since 1996. It's a surprising development given the relative health of the overall economy. Fitch blames it on a dramatic rise in loans with lax borrowing standards that have helped fuel the recent boom in auto sales. More Americans bought new cars last year than ever before and the amount of auto loans soared beyond $1 trillion.  But research conducted by a group that tracks people's credit scores, TransUnion, suggests that plummeting oil prices is a factor in rising defaults because of the flurry of pink slips in the oil industry. North Dakota, the epicenter of the shale oil boom and subsequent bust, experienced a 42% spike in seriously delinquent (60 days or more) auto loans during the fourth quarter, according to TransUnion. Louisiana, another state hit hard by the oil crash, had the highest auto delinquency rate, while late payments in Texas and Oklahoma jumped about 14% apiece.

Subprime Auto Delinquencies Soar Past Crisis Levels, Now Highest In 20 Years --On Thursday night, we brought you a first-hand account of what’s really going on in subprime auto. According to a reader who works in the industry, the securitization machine may be grinding to a halt for deals that are stuffed with loans to borrowers with low (or no) FICOs. Here’s an excerpt: “I work for a smaller but fast growing auto finance company [and] we grew from opening the doors in 2013 to having a $250 million portfolio as of today. Things for the last 3 years have been booming and it seemed like there would be no end to our growth. We were rated by S&P in January and were ready to start securitizing our portfolio. On March 1st I came into the office to find out that they had started layoffs.  I had a meeting with my boss who told me my job is safe but due to us not being able to securitize we were freezing hiring going forward but we were hopefully done with layoffs.” So why would a company not be able to securitize the loans on its book? Well presumably because someone, somewhere gets the feeling that demand for auto-backed ABS is going to dry up in the months ahead. There’s evidence from both Experian and the NY Fed (see here) to suggest that the market is getting riskier. More auto loan originations are going to borrowers with shoddy credit and loan terms are looking more and more stretched by the quarter. Investors may fear that the credit cycle is about to turn and when it does, you don’t want to be anywhere near the double B tranches in subprime auto - even if you can get 9%. With all of the above in mind, we bring you the following chart from Deutsche Bank which shows that 60+ day delinquencies for subprime auto ABS have now risen above crisis levels to 5.16% - levels we haven't seen since 1996.

Retail Sales March 15, 2016: Consumer spending did not get off to a good start after all in 2016 as big downward revisions to January retail sales badly upstage respectable strength in February. January retail sales are now at minus 0.4 percent vs an initial gain of 0.2 percent. The two major sub-readings also show major downward revisions with ex-auto sales now down 0.4 percent vs an initial gain of 0.1 percent and ex-auto ex-gas sales now at minus 0.1 percent from plus 0.4 percent. The latest for this latter core rate is really the main positive in today's report, up a solid 0.3 percent in February. Total sales for February are weak at minus 0.1 percent as is the ex-auto reading, also at minus 0.1 percent. But even in the core readings, details are not great with strength so far this year mixed across nearly all categories. Still, year-on-year strength is evident in two key discretionary components which are vehicles, up 6.8 percent, and restaurants which are up 6.4 percent. Non-store retailers, benefiting from growth in ecommerce, are up 6.3 percent. Sporting goods, a smaller discretionary category, are up 6.7 percent. And building materials & garden equipment, in a sign of strength for residential investment, are up 12.2 percent. The downside includes electronics & appliances which are at minus 3.2 percent and department stores down 2.2 percent. The weakest of all of course are gasoline stations, down 15.6 percent on the year as low fuel prices depress dollar sales. Given the skewing effect of gasoline, the ex-gas total is important to look at it and it's up 0.2 percent in the month for very respectable yearly growth of 4.8 percent.  This reading underscores the silver lining in the report, that retail sales, despite all the negatives, are moving in the right direction. January and February are the lowest sales months of the year, a fact that magnifies adjustment effects and can cause volatility in the readings. But that aside, consumer spending, despite high employment, is struggling to break out of a flat run that included a very soft holiday season.

Retail Sales decreased 0.1% in February  --On a monthly basis, retail sales were down 0.1% from January to February (seasonally adjusted), and sales were up 3.1% from February 2015. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for February, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $447.3 billion, a decrease of 0.1 percent from the previous month, and 3.1 percent above February 2015. ... The December 2015 to January 2016 percent change was revised from up 0.2 percent to down 0.4 percent.  This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 0.2%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 4.8% on a YoY basis. The decrease in February was at expectations, however retail sales for December were revised down. Even though disappointing (including revisions), sales ex-gasoline are up a solid 4.8% YoY.

Low gas prices drag down US retail sales in February — (AP) — U.S. retail sales slipped last month, pulled down by sharply lower gas prices, and Americans spent much less in January than previously estimated. The figures suggest that consumers remain cautious about spending despite steady hiring. Retail sales fell 0.1 percent in February, the Commerce Department said Tuesday. Excluding the volatile gas and auto categories, sales rose 0.3 percent. Overall sales were revised sharply lower in January, from a 0.2 percent gain to a drop of 0.4 percent. Americans’ reluctance to open their wallets could hold back growth in the first three months of this year. Economists had hoped that solid hiring and lower gas prices would entice consumers to spend more, yet Americans seem to be pocketing much of the savings from cheaper gas. The weak data could make it more likely that the Federal Reserve will hold off on raising the short-term interest rate it controls. Most economists have reduced their forecasts for rate hikes this year from four to two. Fed policymakers are meeting Tuesday and Wednesday. “Today’s report is decidedly negative for both the economy and the probability of a near-term rate hike from the Fed,” said Bricklin Dwyer, an economist at BNP Paribas. Sales were generally weak across the board: Auto dealers, electronics and appliance stores, grocery stores and department stores all reported lower sales. Gas station sales plunged 4.4 percent.Americans even cut back on online shopping, a rare occurrence. A category that includes catalog and online sales slipped 0.2 percent, its worst showing in 13 months. Shoppers did spend more in some areas: Sales at home supply, clothing, and sporting goods stores all rose. And people are still eating out. Sales at restaurants and bars jumped 1 percent.

February Retail Sales Drop -0.1% On Plunging Gasoline Prices - (10 graphics) The February 2016 Retail Sales report shows retail sales decreased -0.1% for the month as gasoline sales plunged by -4.4%.  Without autos & parts sales, retail sales still decreased by -0.1%.  Gasoline sales have dropped -15.6% from a year ago.  Declining gasoline sales are once again responsible for the disappointing figures, as without gas stations considered, retail sales increased by a modest 0.2%.  Retail sales have now increased 3.1% from a year ago.   Retail sales are reported by dollars, not by volume with price changes removed.  Retail trade sales are retail sales minus food and beverage services and trade sales dropped by -0.3% for the month.  Retail trade sales includes gas and have increased 2.7% from a year ago.  Total February retail sales were $447.3 billion.  Below are the retail sales categories monthly percentage changes.  These numbers are seasonally adjusted.   General Merchandise includes Walmart, super centers, Costco and so on.  Department stores by themselves saw no change from last month, not good news for them during the start of Holiday shopping.  Grocery stores by themselves showed a -0.3% monthly sales decrease.  Building materials and garden supply places had a great month with a 1.6% monthly gain.  Sporting goods also had a good month with a 1.2% increase and are up 6.7% for the year.  Restaurants and bars also had a good showing with a 1.0% increase and are up 6.4% for the year.  Miscellaneous brick and mortar store retailers had a miserable month with a -1.1% decline in sales.  Departments stores, part of the general merchandise category, declined by -0.4%.  Online shopping actually declined by -0.2% for the month, but is up 6.3% for the year.   Below is a graph of just auto sales.  For the year, motor vehicle sales have increased 7.1%.  Autos & parts together have increased 6.8% from a year ago.  Below are the retail sales categories by dollar amounts.   As we can see, autos are by far the largest amount of retail sales.  Yes folks, in spite of the great smartphone revolution, the automobile remains king. Graphed below are weekly regular gasoline prices, which is strongly correlated to retail sales figures. The below pie chart breaks down the monthly seasonally adjusted retail sales by category as a percentage of total sales by dollar amounts.

US Retail Spending Dips In Feb As Annual Growth Inches Higher -- Retail sales eased 0.1% in February and a previously reported gain for January was revised down to a 0.4% loss, according to this morning’s update from the Census Bureau. Is the slide a sign of trouble for the consumer sector? Maybe, although looking through the short-term noise via the year-over-year trend still looks encouraging. Retail spending actually inched higher in annual terms last month, rising 3.1% vs. the year-earlier level—the best gain in more than a year. The annual trend is even stronger after stripping out gasoline sales, which fell sharply last month (mostly due to lower energy costs). As a result, retail spending ex-gas accelerated to 4.8%, the best pace since last September, a clue for thinking that consumption still has a decent tailwind that will keep spending habits in the growth column for the near term. Yet the tendency to focus on the latest monthly changes inspires a wary outlook for consumption. “Consumers remain cautious and hesitant to spend despite an improving jobs picture and evidence of accelerating wage increases,” Alan MacEachin, an economist at Navy Federal Credit Union, tells Reuters. Perhaps, although the year-over-year trend implies that any hesitancy will be limited to restraining the growth rate rather than cutting spending outright. Bricklin Dwyer, an economist at BNP Paribas, also reads today’s update as a speed bump for the macro outlook, as AP relates: “Today’s report is decidedly negative for both the economy and the probability of a near-term rate hike from the Fed.” Nonetheless, until we see retail spending fading in the annual comparison, there’s still a reasonable case for arguing that the latest weakness may be noise.

Retail Sales Suffer Biggest 2-Month Drop In A Year After Huge Negative Revision - Thanks to dramatic downward revisions (from "resilient" historical data which we pointed out were entirely anomalous at the time and due entirely to seasonal adjustments) retail sales have dropped 0.54% in the last two months - the biggest sequential drop in a year. While the YoY change rose from +3.0% to +3.1%, it remains below historically-recessionary levels and given the revisions suggests Q1 GDP growth markdowns are on their way with sales down MoM for every cohort from gas stations to furniture. Retail Sales down most in a year:  And YoY changes still at weak recessionary levels... And the breakdown shows sales dropped across the board, with all the key segments, including the all important online sales, posting sequential declines:

  • Motor Vehicles: -0.2%
  • Furniture and Home Furnishing: -0.5%
  • Electronics: -0.1%
  • Food and Beverage: -0.2%
  • Gasoline Stations: -4.4%
  • General Merchandise: -0.2%
  • Miscellaneous: -1.1%
  • Online Sales: -0.2%

Retail Sales Down In February 2016?: Retail sales declined according to US Census headline data. Our view is that this month's data was strong, There was a significant increase in the rolling averages. Backward data revisions were generally down. Econintersect Analysis:

  • unadjusted sales rate of growth accelerated 5.2 % month-over-month, and up 6.2 % year-over-year.
  • unadjusted sales 3 month rolling year-over-year average growth accelerated 1.5 % month-over-month, 3.4 % year-over-year.
  • unadjusted sales (but inflation adjusted) up 5.8 % year-over-year
  • this is an advance report. Please see caveats below showing variations between the advance report and the "final".
  • in the seasonally adjusted data - sporting goods and food services were strong. Most everything else was weak.
  • seasonally adjusted sales down 0.1 % month-over-month, up 2.9 % year-over-year (last month was 3.4 % year-over-year).

The Latest: Fed still expects benefits of cheaper gas —(AP) — The latest on the U.S. Federal Reserve’s two-day policy meeting, which ended Wednesday. The central bank kept interest rates steady amid uncertainty about the global economy and financial markets. (All times local) 4:00 Federal Reserve officials are still waiting for cheaper oil and gas to boost consumer spending and perk up the economy. Fed Chair Janet Yellen says the typical U.S. household will have roughly $1,000 more to spend this year thanks to lower prices at the pump. Gas prices average $1.96 a gallon nationwide, 46 cents lower than a year ago. Economists have been anticipating for months that lower gas costs would boost consumer spending on other items and accelerate the economy’s growth. But Americans have remained cautious, pocketing much of the savings or using it to pay down debt. Yellen suggested that it may take time for households to digest the lower prices and change their behavior. Consumer spending “could slowly strengthen over time,” she says.

Consumer Price Index March 16, 2016: The CPI core is showing pressure for a second month, up a higher-than-expected 0.3 percent in February with the year-on-year rate up 1 tenth to plus 2.3 percent and further above the Federal Reserve's 2 percent line. Gains are once again led by health care with medical care up 0.5 percent for a second straight month which includes a 0.9 percent gain for prescription drugs. Shelter also shows pressure, up 0.3 percent as does apparel which is up 1.6 percent for a second straight sharp gain. Food rose percent 0.2 percent with the year-on-year rate at plus 0.9 percent. Energy prices, which may be on the climb this month, fell a sharp 6.0 percent in February and pulled down the total CPI which came in at minus 0.2 percent with the year-on-year rate at plus 1.0 percent. But it's not the total that Fed officials will be watching but the core which -- for a second straight month -- is signaling what policy makers want, that is upward pressure. This report isn't dramatic enough to revive much chance for a rate hike at today's FOMC but it will offer strong arguing point for the hawks.

February 2016 CPI: Inflation Moderates: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.0 % - a decline from last month's 1.4 %. The year-over-year core inflation (excludes energy and food) rate grew 0.1% to 2.3 %, and remains slightly above the target set by the Federal Reserve. As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator.The major influence on the CPI was energy prices.The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.2 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.0 percent before seasonal adjustment. The energy index continued to decrease and was the major cause of the seasonally adjusted decline in the all items index, more than offsetting increases in the indexes for food and for all items less food and energy. The gasoline index fell sharply, declining 13.0 percent, and the indexes for fuel oil and electricity also decreased, though the index for natural gas rose. The food index increased 0.2 percent in February, as the food at home index rose for the first time since September. Major grocery store food group indexes were mixed. The index for all items less food and energy rose 0.3 percent. Increases in the indexes for shelter, apparel, and medical care were the largest contributors to the rise, but almost all major components increased in February. The all items index rose 1.0 percent over the last 12 months, a smaller increase than the 1.4-percent change for the 12 months ending January. The energy index fell 12.5 percent over the past year, with all of its major components declining. The food index advanced 0.9 percent, with the index for food at home declining but the food away from home index rising. The index for all items less food and energy rose 2.3 percent, its largest 12-month increase since May 2012. Historically, the CPI-U general index tends to correlate over time with the CPI-U's food index. The current situation is putting an upward pressure on the CPI.

Bonds & Stocks Tumble As Core CPI Surges By Most Since October 2008 --Following last month's inflation 'jolt' to the marketplace, Core CPI increased 2.3% YoY in Feb - the biggest jump since October 2008 (led by the biggest monthly surge in apparel prices since 2009). Bond & Stock markets are dropping in the news as it corners The Fed further into a hawkish stance, despite the recessionary warning signals screaming from the manufacturing (and increasingly Services) sector. The Core CPI print has not been higher since October 2008... CPI Breakdown...The index for all items less food and energy increased 0.3 percent in February, the same increase as the prior month. The shelter index repeated its January increase of 0.3 percent, with the indexes for rent and for owners' equivalent rent both increasing 0.3 percent, and the index for lodging away from home rising 0.9 percent. The apparel index rose sharply in February, increasing 1.6 percent, its largest increase since February 2009. The medical care index rose 0.5 percent, the same increase as in January, with the index for prescription drugs rising 0.9 percent and the hospital services index advancing 0.5 percent. The index for motor vehicle insurance increased 0.4 percent in February, the same increase as last month. The index for education rose 0.3 percent. The indexes for new vehicles, used cars and trucks, alcoholic beverages, recreation, and tobacco all increased 0.2 percent in February. The indexes for personal care and for airline fares both edged up 0.1 percent, while the index for household furnishings and operations was unchanged. The communication index was one of the few to decline in February, falling 0.5 percent. The index for all items less food and energy increased 2.3 percent over the past 12 months, a figure that has been slowly rising since it was 1.7 percent for the 12 months ending May 2015. The index for shelter has risen 3.3 percent over the last year, its largest 12-month increase since the period ending September 2007, and the medical care index has increased 3.5 percent, its largest rise since October 2012.

Consumers’ Inflation Expectations Rebound - NY Fed - Results from the February 2016 Survey of Consumer Expectations (SCE) suggest a rebound in expectations about inflation, and growth in home prices, earnings, income and spending. Additional labor expectations are mixed as the mean perceived probability of finding a job and the mean perceived probability of losing a job both declined.  The main findings from the February 2016 Survey are: Inflation:

  • Median inflation expectations increased at the one-year horizon (from 2.4 percent in January to 2.7 percent in February) and at the three-year ahead horizon (from 2.5 percent in January to 2.6 percent in February). The increase was most pronounced among respondents with lower income, lower education and lower numeracy. Median inflation expectations at both horizons, however, remain at the low end of the range observed over the past two and a half years.
  • Median home price expectations increased by 0.1 percentage point in February to 3.1 percent, but remain below the series’ average.  The increase was broad-based, but especially large in the West and Northeast.
  • The median one-year ahead gasoline price change expectations rebounded sharply, from 2.8 percent in January to 4.9 percent in February. This increase marks a return to levels not seen since the summer of 2015.
  • Expectations for changes in the prices of medical care, college education, and rent also rose slightly, while food price expectations remained stable.

Consumer Sentiment March 18, 2016: Consumer sentiment remains solid but has definitely fallen back, to 90.0 for the March flash for the least optimistic readings since October. Weakness is centered in expectations, down 1.9 points to 80.0 which is the lowest reading since September for this component. Declines in expectations point to weakening confidence in the jobs and income outlook. Current conditions are also down but less so, at 105.6 for a 1.2 point decline to hint at a little less strength for the March labor market. One big plus in the report is a lift in inflation expectations, up 2 tenths for both the 1-year and 5-year outlooks which are both at 2.7 percent. The gains here likely reflect the rise underway at the gas pump but could also perhaps hint at a firming in wages. The slip in confidence measures has not been dramatic and does not offer any telling insight into the early effects of the 2016 presidential campaign, but it may be signaling a little less strength for consumer spending.

Preliminary March Consumer Sentiment decreases to 90.0  The preliminary University of Michigan consumer sentiment index for March was at 90.0, down from 91.7 in February: Consumer confidence eased in early March due to increased concerns about prospects for the economy as well as the expectation that gas prices would inch upward during the year ahead. All of the decline during the past year has been in the Expectations Index, which was due to a weakening outlook for the pace of growth in the national economy. While consumers do not anticipate a recession, they no longer expect the economy to outperform the 2.4% rate of economic growth recorded in the past two years. In contrast, personal financial expectations remained strong in early March, comparable to the favorable levels recorded nearly a decade ago. Overall, it would appear that consumers have accommodated slower economic growth as well as rising gas prices without an accompanying rise in uncertainty about their own personal financial situation. The most important element supporting consumers' optimism is their conviction that the slower pace of economic growth will not have an appreciable impact on maintaining the jobless rate at about its current low level. The data are still consistent with a 2.7% rate of growth in personal consumption expenditures during 2016. This was below the consensus forecast of 92.2.

Business Inventories March 15, 2016: It's been a weak morning for U.S. economic data and business inventories are no exception. Inventories rose an unwanted 0.1 percent in December against a 0.4 percent decline for sales in a mismatch that drives the stock-to-sales ratio from 1.39 to 1.40 for the fattest reading of the whole cycle, since May 2009. Inventories fell for factories but rose for wholesalers and also for retailers. Sales, however, fell for both retailers and especially for wholesalers. Heavy inventories are a negative for future production and future employment and today's report points to slowing for both during the first quarter.

January 2016 Business Sales and Inventories Continue To Be Bad.: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales declined compared to the previous month - but there was am improvement in the rolling averages. Inventories grew. The inventory-to-sales ratios remain at recessionary levels. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 1.4 % month-over-month, and down 3.5 % year-over-year
  • unadjusted sales (but inflation adjusted) down 2.69 % year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 0.2 % month-over-month, and is down 2.4 % year-over-year.
  • unadjusted business inventories growth up 0.1 % month-over-month (up 1.7 % year-over-year with the three month rolling averages improving), and the inventory-to-sales ratio is 1.56 which is at recessionary levels (well above average for this month).
  • seasonally adjusted sales down 0.4 % month-over-month, down 1.1 % year-over-year (it was reported down 2.7 % last month).
  • seasonally adjusted inventories were up 0.1 % month-over-month (up 1.8 % year-over-year), inventory-to-sales ratios were up from 1.36 one year ago - and are now 1.40.

US Business Inventory-Sales Ratio Jumps To Post-Crisis (7 Year) High -- Following the recessionary surge in Wholesale Inventories-to-Sales ratio, this morning's Total Business inventories-to-sales rose to 1.40x - the highest since May 2009. With a 0.4% slump in sales and 0.1% rise in inventories, the smell of recession lays heavy on US businesses... but then again - who cares if Draghi can keep buying 'assets' and saving the world? Look at this chart! And this... Do these look like the charts of a "recovering" economy? Someone has been peddling you fiction that everything is awesome.

Total electricity sales fell in 2015 for the 5th time in past 8 years -- EIA - Total electricity sales in 2015 fell 1.1% from the previous year, marking the fifth time in the past eight years that electricity sales have fallen. The flattening of total electricity sales reflects declining sales in the industrial sector and little or no growth in sales to the residential and commercial building sectors, despite growth in the number of households and growth in commercial building space. Declining rates of electricity demand growth reflect a combination of factors, including the market saturation and increasing efficiency of electricity-using equipment, a slowing rate of economic growth, and the changing composition of the economy, which has reduced the role of electricity-intensive manufacturing. Some improvements in energy efficiency have been market driven, reflecting the interest of consumers and businesses in reducing their electricity consumption and expenditures. Other improvements, mainly related to electricity use in homes and commercial buildings, have been driven by federal and state policies. Examples of policies at the federal level include energy efficiency standards for appliances and lighting equipment.  States, which regulate electricity distribution service through public utility commissions and other entities, have in some cases encouraged or mandated regulated utilities to provide energy efficiency programs for their customers. These programs may, for example, provide households and businesses with energy audits and significant rebates for the purchase of more efficient equipment. Some states have adopted more stringent building energy codes that can reduce the amount of energy needed for heating, cooling, and other purposes. Although efficiency policies have primarily focused on electricity use in the residential and commercial sectors, the slowing of electricity sales growth over the past decade is dominated by declining electricity sales to industry, which mainly reflect economic factors.

PPI-FD March 15, 2016: Producer prices came in soft across the board in February, down 0.2 percent overall and unchanged for the ex-food & energy reading and up 0.1 percent for ex-food/energy/services. These are all at or near consensus. Turning to details, demand for services is especially soft, unchanged in a reading that will not raise much confidence that inflation is moving toward the Fed's 2 percent target. Nevertheless, year-on-year rates, boosted by easy comparisons with greater price weakness this time last year, are improving. Overall producer prices are unchanged on the year (which is the first non-negative reading in a year) with the two core readings looking less weak at plus 1.2 and plus 0.9 percent. But the year-on-year rate for services, though improving, is only plus 1.5 percent which does not point to building pressure for consumer services where the year-on-year rate has stalled at about 2.5 percent. Energy prices continued to shrink in February, down 3.4 percent though energy prices for this report this time next month are likely to show strength given the ongoing upswing in oil. Food prices were especially weak in February, down 0.3 percent overall with vegetables down 19.0 percent in a loss however that follows 17 percent gains in the two prior months. There have been hints of price pressures building in the economy, especially the 3 tenths gain to plus 1.7 percent for the PCE core, but this report, despite the improvement in the year-on-year rates, doesn't point to any accelerating pressures. Watch for the consumer price report on tomorrow's calendar where a soft total rate is expected to be offset by strength in the core.

February 2016 Producer Prices Year-over-Year Inflation Is Now Zero.: The Producer Price Index year-over-year inflation is zero. The intermediate processing continues to show a large deflation in the supply chain - but the amount of deflation decreased. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price.  The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate dropped from -0.2 % to 0.0 %.. In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower. Removing food and energy (core PPI) was originally done to remove the noise from the index, however the usefulness in the twenty-first century is questionable except in certain specific circumstance.  Econintersect has shown how pricing change moves from the PPI to the Consumer Price Index (CPI). This YoY change implies that the CPI, should continue to come in around 2.0% YoY.

Import and Export Price Year-over-Year Deflation Continues in February 2016.: Trade prices continue to deflate year-over-year. Import Oil prices were down 3.9 % month-over-month, and export agricultural prices increased 0.6 %, with import prices down 0.3 % month-over-month, down 6.1 % year-over-year; and export prices down 0.4 % month-over-month, down 6.0 % year-over-year..There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.According to the press release: All Imports: U.S. import prices fell 0.3 percent in February and have not recorded a monthly advance since the index ticked up 0.1 percent in June 2015. The February decrease followed declines of 1.0 percent in January and 1.2 percent in December. The price index for overall imports decreased 6.1 percent between February 2015 and February 2016. Despite the downward trend over the past 8 months, the 12-month drop recorded in February was the smallest over-the-year decline since the index fell 5.6 percent for the year ended in December 2014. All Exports: Overall export prices decreased 0.4 percent in February as declining nonagricultural prices more than offset rising agricultural prices. The February decline followed decreases of 0.8 percent in January and 1.1 percent in December. The price index for overall exports has not recorded a 1-month increase since the index advanced 0.5 percent in May 2015. Export prices fell 6.0 percent over the past year.

February 2016 Sea Container Counts High For Imports: I know there was a port strike last year at this time so year-over-year analysis will likely be worthless in the periods January thru March this year. However, if one simply looks at the previous Januarys and Februarys since 2006 - imports indeed are at very high levels whilst exports are soft. This data set is based on the Ports of LA and Long Beach which account for much (approximately 40%) of the container movement into and out of the United States - and these two ports report their data significantly earlier than other USA ports. Most of the manufactured goods move between countries in sea containers (except larger rolling items such as automobiles). This pulse point is an early indicator of the health of the economy. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month:As the data is very noisy - the best way to look at this data is the 3 month rolling averages. There is a direct linkage between imports and USA economic activity - and the change in growth in imports foretells real change in economic growth. Export growth is an indicator of competitiveness and global economic growth. The continued underperforming of exports is not a positive sign for GDP as the year progresses.

Rail Week Ending 12 March 2016: Rail Returns To Its Slide Into The Abyss: Week 10 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. All rolling averages are again negative and in decline. The deceleration in the rail rolling averages began one year ago, and now rail movements are being compared against weaker 2015 data. There were port labor issues one year ago which affected intermodal movements - which skew the results both positively and negatively (this week negatively). A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 489,177 carloads and intermodal units, down 11.6 percent compared with the same week last year. Total carloads for the week ending Mar. 12 were 243,275 carloads, down 12.8 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 245,902 containers and trailers, down 10.3 percent compared to 2015. Please note, intermodal volumes last year at this time were higher than usual, reflecting the resolution of a labor dispute at West Coast ports. Four of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included miscellaneous carloads, up 19.7 percent to 9,448 carloads; motor vehicles and parts, up 15.7 percent to 20,104 carloads; and chemicals, up 4.7 percent to 31,529 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 34.1 percent to 71,221 carloads; petroleum and petroleum products, down 13.1 percent to 11,067 carloads; and metallic ores and metals, down 7.1 percent to 19,285 carloads. For the first 10 weeks of 2016, U.S. railroads reported cumulative volume of 2,437,375 carloads, down 12.9 percent from the same point last year; and 2,599,835 intermodal units, up 5.6 percent from last year. Total combined U.S. traffic for the first 10 weeks of 2016 was 5,037,210 carloads and intermodal units, a decrease of 4.2 percent compared to last year.

Industrial Production March 16, 2016: Industrial production fell 0.5 percent in February but includes a respectable and higher-than-expected 0.2 percent gain for manufacturing production which pulls this report to the positive column for the economic outlook. The utility component, down 4.0 percent in February after rising 4.2 percent in January, is very volatile reflecting month-to-month swings this time of year in heating demand. The mining component, down again at minus 1.4 percent, has been weak for the last year reflecting the price collapse for commodities. But the manufacturing component is the telling component with strength belying broad weakness in regional surveys and pointing perhaps to better-than-expected output for the first quarter. Vehicles have been a center of strength for manufacturing, though production here did slip 0.1 percent in the month, while business equipment is suddenly showing life, up 0.6 percent for a second straight month. The gain for this component hints at a revival for business investment. Capacity utilization overall is down 0.4 percentage points to 76.7 percent though manufacturing capacity, again the reading to focus on, is unchanged at 76.1 percent. The factory sector has been getting pulled back by weak exports and weak demand for energy equipment though this report, together with positive indications in yesterday's Empire State report, do suggest, or at least offer the hint, that the worst may over. Note that the traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

Fed: Industrial Production decreased 0.5% in February From the Fed: Industrial production and Capacity Utilization Industrial production decreased 0.5 percent in February after increasing 0.8 percent in January. Sizable declines in the indexes for both utilities and mining in February outweighed a gain of 0.2 percent for manufacturing. The output of utilities dropped 4.0 percent, as unseasonably warm weather curbed the demand for heating. Mining production fell 1.4 percent and has decreased nearly 1.3 percent per month, on average, over the past six months. At 106.3 percent of its 2012 average, total industrial production in February was 1.0 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in February to 76.7 percent, a rate that is 3.3 percentage points below its long-run (1972–2015) average.This graph shows Capacity Utilization. This series is up 10.2 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 76.7% is 3.3% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  The second graph shows industrial production since 1967. Industrial production decreased 0.5% in February to 106.3. This is 21.9% above the recession low, and 1.1% above the pre-recession peak. This was below expectations of a 0.2% decrease.

February 2016 Industrial Production Remains In Contraction Year-over-Year But Manufacturing Improved Relative To Last Month: The headlines say seasonally adjusted Industrial Production (IP) declined. The year-over-year data remains in contraction. However, manufacturing portion improved and is in expansion year-over-year.

  • Headline seasonally adjusted Industrial Production (IP) decreased 0.5 % month-over-month and down 1.0 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth decelerated 0.6 % month-over-month, and is down 1.3 % year-over-year.
  • The unadjusted year-over-year rate of growth was unchanged from last month using a three month rolling average, and is down 1.3 % year-over-year.

    IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.2 % this month (up 1.8 % year-over-year), mining down 1.4 % (down 9.9 % year-over-year), and utilities were down 4.0 % (down 9.3 % year-over-year). Note that utilities are 10.6 % of the industrial production index, whilst mining is 15.5 %. Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production. Historically manufacturing year-over-year growth has been negative when a recession is imminent. This index is nearing the warning area for a recession.

    Manufacturing 'Recession' Continues (Unless Industrial Production Is Doing Something It Has Not Done In 64 Years) - The current decline in US manufacturing would be the first time since 1952 that Industrial Production has declined for four straight months without the US economy not being in recession. A worse-then-expected 0.5% MoM plunge - near the worst since 2009, led to a 1.0% drop YoY, the 4th monthly decline... Another data point to ignore...

    Empire State Mfg Survey March 15, 2016: Highlights After seven straight months of contraction, the general conditions index of the Empire State report is back in the plus column, though just barely at 0.62 in a reading that signals fractional strength for factory activity during March. New orders are the report's most convincing headline, at plus 9.57 to end nine straight months of contraction. Unfilled orders, however, remain in contraction, but only slightly at minus 3.96, as does employment at minus 1.98. Inventories are in contraction as are selling prices. Yet still, the 6-month outlook is picking up, to plus 25.53 for a more than 10 point gain. Shipments are also positive, at 13.88 in what points to strength for the manufacturing component of the March industrial production report, the February edition of which will be posted tomorrow and is expected to be flat. Flat is really the theme of this report which, compared to the deep contraction of prior reports, is relatively good news for a factory sector that has been getting hit by weakness in exports and energy equipment.

    March 2016 Empire State Manufacturing Index Climbs Into Expansion: The Empire State Manufacturing Survey improved and is now showing its first positive reading since July of last year. Expectations were for a reading between -15.00 to -7.00 (consensus -11.25) versus the 0.6 reported. Any value above zero shows expansion for the New York area manufacturers. New orders subindex of the Empire State Manufacturing Survey is now in expansion, whilst the unfilled orders sub-index improved by remains in contraction. This noisy index has moved from +6.9 (March 2015), -1.2 (April), +3.1 (May), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September), -11.4 (October), -10.7 (November), -4.6 (December), -19.4 (January 2016), -16.6 (February) - and now 0.6. As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the more pessimistic. Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know. From the report: The March 2016 Empire State Manufacturing Survey indicates that business activity steadied for New York manufacturers. The headline general business conditions climbed seventeen points to 0.6, its first positive reading since July of last year. The new orders and shipments indexes rose well above zero for the first time in several months, pointing to an increase in both orders and shipments. Price indexes suggested a slight increase in input prices and a small decline in selling prices. Labor market conditions were little changed, with employment and the average workweek holding fairly steady. The six-month outlook improved, with the index for future new orders rising to its highest level in more than a year.

    Empire Fed Miraculously Surges By The Most Since 2010 Despite Continued Job Contraction -- Against expectations of a -10.5 print, Empire Fed Manufacturing spiked from -16.64 (7 year lows) to 0.62 (8-month highs). This is the biggest MoM rise since Dec 2010 as New Orders and Shipments miraculously surged to 18 month highs (hhmm?). Hope jumped to 3 month highs but what is odd about this unequivocally good print is that number of employees dropped once again (its 7th month of contraction) as did Prices Received. From worst to first... Do you believe in miracles?

    Philly Fed Manufacturing Survey showed Expansion in March -- Earlier from the Philly Fed: March 2016 Manufacturing Business Outlook Survey Firms responding to the Manufacturing Business Outlook Survey reported an improvement in business conditions this month. The indicator for general activity rose sharply in March to its first positive reading in seven months. Other broad indicators offered similar signals of growth: The indexes for shipments and new orders also rose notably. Firms continued to report overall weak employment. With respect to the manufacturers’ forecasts, the survey’s future indicators also showed significant improvement this month...The diffusion index for current activity increased from a reading of -2.8 in February to 12.4 this month, its first positive reading in seven months ... The survey’s indicators of employment improved but suggest continued weakness. The employment index increased 4 points but remained slightly negative at -1.1. This was above the consensus forecast of a reading of -1.4 for March.

    March 2016 Philly Fed Manufacturing Survey Also Returns To Expansion - - The Philly Fed Business Outlook Survey returned to expansion. Key elements improved. Both manufacturing surveys released so far for this month are in expansion, This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently. The index improved from -2.8 to +12.4. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) -4.0 to 0.9 (consensus -1.4). Firms responding to the Manufacturing Business Outlook Survey reported an improvement in business conditions this month. The indicator for general activity rose sharply in March to its first positive reading in seven months. Other broad indicators offered similar signals of growth: The indexes for shipments and new orders also rose notably. Firms continued to report overall weak employment. With respect to the manufacturers' forecasts, the survey's future indicators also showed significant improvement this month. The diffusion index for current activity increased from a reading of -2.8 in February to 12.4 this month, its first positive reading in seven months (see Chart 1). Both the current new orders and shipments indexes also showed improvement this month. The current new orders index returned to positive territory, increasing 21 points to 15.7. Nearly 37 percent of the firms reported an increase in new orders this month. The current shipments index rose 20 points, to 22.1. The unfilled orders and delivery time indexes showed notable improvement, increasing 11 points and 16 points, respectively.

    Philly Fed manufacturing index turns positive for first time in seven months - A reading of manufacturing activity in the Philadelphia area unexpectedly turned positive in March, marking the first positive showing in seven months. The Philadelphia Fed manufacturing index rose to 12.4 from a negative 2.8 in February, the regional district of the central bank said Thursday. That was much better than the negative 0.5 expected in a MarketWatch-compiled economic forecast. Any reading above zero indicates improving conditions. The Philly Fed readings for new orders and shipments also improved markedly. The new-orders index rose 21 points to 15.7, and the shipments index rose 20 points to 22.1. The average workweek was positive for the first time in three months, though the 4-point improvement in employment wasn’t able to put that index in positive territory. “The March survey confirms what the railcar data have been indicating – industrial sector activity is clearly improving,”  He was quick to add, however, that the reading is “middling” and not indicative of a boom, or for that matter, bust.The Empire State factory index, released Tuesday, had its first positive reading in eight months. The two regional manufacturing reports are of interest to traders primarily because they are seen as an early forecast of the national Institute for Supply Management factory survey due in two weeks.

    March Madness? Philly Fed New Orders Spike By Most In 11 Years -- It's March Madness in Philly. Thanks to the biggest jump in New Orders since Oct 2005,Philly Fed surged to 15-month highs (jumping from -2.8 to +12.4) crushiung expectations of -1.5. Number of employees improved modestly but remains in contraction but "hope" soared to 5 month highs led by exuberant expectations for capex and average workweek. Do you believe in miracles? The Manufacturing Business Outlook Survey suggests a pickup in general activity in March. The survey’s indicators for general activity, new orders, and shipments all improved notably from their readings in February. Firms reported that overall employment was steady. Indicators reflecting firms’ expectations for the next six months improved this month. So the headline surges to 15 month highs...

    About That U.S. Manufacturing Renaissance ... --- After a brutal period of downsizing and reorganizing, the U.S. manufacturing sector has become the most competitive in the world. Output per worker is higher than in any other major manufacturing country. Labor costs per unit of output are lower than in Brazil, Canada and Germany, and only slightly higher than in China. What's more, writes Gregory Daco of Oxford Economics in the new report from which the above facts are taken, "the U.S. is 'gifted' with a stable regulatory framework, a flexible labor market, low energy costs and access to a large domestic market." So that's great! Time for a manufacturing renaissance, right? Well, maybe, eventually. But -- and Daco notes this in his report -- there are few signs of it actually happening yet.  Yes, there are the almost 900,000 manufacturing jobs added in the U.S. since early 2010. But it's important to see that for what it is -- a modest rebound after a spectacular collapse:  There has also been a big decline in the trade deficit, from 5.6 percent of gross domestic product in 2006 to 3 percent in 2015. But that turns out to be a product of (1) an increase in the trade surplus in services and (2) the huge boom in domestic oil-production and accompanying fall in global oil prices. Strip out petroleum and petroleum products, in fact, and the trade deficit in goods is only down a little from its peak, and has grown markedly over the past two years. This seems like a good spot to mention that running a trade deficit isn't necessarily a bad thing. The growth in the deficit in 2014 and 2015 is due in part to the strength of the U.S. economy -- faster growth than in other major economies and a strengthening dollar have led to more imports and fewer exports. Still, you'd think that if there were a big return to manufacturing in the U.S. afoot -- "reshoring" is the term of art -- it would be making itself more apparent in the data. Consider, for example, trade in capital goods. While, the U.S. has been importing more cars and consumer goods than it exports for many decades, capital goods -- airplanes, medical equipment, semiconductors and so on -- have long been an area of comparative strength. Not so much anymore:

    Despite Donald Trump, Hillary Clinton Tough Talk, Eaton Shows Difficulty in Punishing Inversions -- Presidential candidates Hillary Clinton and Donald Trump have recently held out Eaton Corp.  as being a corporate ingrate that has abandoned its Cleveland headquarters for a low-tax haven and is now moving manufacturing operations to Mexico. And both candidates have spoken of punishing companies like Eaton for such actions. But the industrial conglomerate is more likely to be an example of how difficult it is for the government to deter corporate behavior, rather than crack the whip on companies. Mr. Trump, a Republican, and former Secretary of State Clinton, a Democrat, have cited Eaton in speeches railing against corporate decisions they say have caused middle-class anxiety about job security and income growth in the aftermath of the 2008 recession. “You have Eaton that’s moving to Mexico,” Mr. Trump said over the weekend during a campaign stop in Cleveland. “What are we doing? We want to keep our factories here. We want to keep our manufacturing here.” Mrs. Clinton pledged Tuesday to block companies like Eaton from moving its corporate headquarters from Cleveland to Ireland while pruning its work force for its U.S. plants. Eaton announced in January that it will close its Berea, Ohio, plant by the end of the year, displacing about 100 employees. Eaton moved its headquarters to Ireland in 2012 as part of a corporate deal. The plant, near Cleveland, makes hydraulics components used in construction, mining, energy and defense-related equipment. Going forward, Eaton plans to buy the parts made at the plant from outside suppliers and send them to an Eaton plant in Reynosa, Mexico, for assembly.

    Manufacturing employment has recovered to pre-recession strength in only one state --Today, the Bureau of Labor Statistics released January state employment and unemployment data that largely reaffirm the trend of general economic improvement in most states, while a handful of states continue are faltering a bit due to the decline in energy prices. 41 states and the District of Columbia saw gains in employment from January 2015 to January 2016, while 9 states experienced job losses. Tennessee (+3.7 percent), Oregon (+3.5 percent), and Colorado and Florida (both +3.4 percent) saw the largest percent gains among states with employment gains from January 2015 to January 2016. Over the same time period, North Dakota, Wyoming, and Alaska experienced the largest declines of -5.4 percent, -3.3 percent, and -0.8 percent, respectively. Changes in unemployment rates across the states largely corresponded with employment trends. 38 states had declines in their unemployment rates, four states had no change, and nine states experienced increases in their unemployment rates. New Jersey (-1.9 percentage points), Arkansas (-1.2 percentage points), and Rhode Island (-1.2 percentage points) experienced the largest declines. The largest increases in unemployment rates occurred in Wyoming (+0.9 percentage points), Kentucky (+0.5 percentage points), and Illinois (+0.3 percentage points).

    Manufacturing Jobs Are Never Coming Back - A plea to presidential candidates: Stop talking about bringing manufacturing jobs back from China. In fact, talk a lot less about manufacturing, period. It’s understandable that voters are angry about trade. The U.S. has lost more than 4.5 million manufacturing jobs since NAFTA took effect in 1994. And as Eduardo Porter wrote this week, there’s mounting evidence that U.S. trade policy, particularly with China, has caused lasting harm to many American workers. But rather than play to that anger, candidates ought to be talking about ways to ensure that the service sector can fill manufacturing’s former role as a provider of dependable, decent-paying jobs. Here’s the problem: Whether or not those manufacturing jobs could have been saved, they aren’t coming back, at least not most of them. How do we know? Because in recent years, factories have been coming back, but the jobs haven’t. Because of rising wages in China, the need for shorter supply chains and other factors, a small but growing group of companies are shifting production back to the U.S. But the factories they build here are heavily automated, employing a small fraction of the workers they would have a generation ago. Look at the chart below: Since the recession ended in 2009, manufacturing output — the value of all the goods that U.S. factories produce, adjusted for inflation — has risen by more than 20 percent, because of a combination of “reshoring” and increased domestic demand. But manufacturing employment is up just 5 percent. And much of that job growth represents a rebound from the recession, not a sustainable trend.

    CEOs Plan Less Hiring and See Growth Slowing in 2016 - : Chief executives of large U.S. companies are downgrading their 2016 hiring plans and growth expectations. More top corporate leaders said they expect to cut employment at their firms in the next six months than add jobs, according to the Business Roundtable’s first-quarter CEO Economic Outlook Survey, released Tuesday. The group’s members are chief executives at the country’s largest firms. The survey found 38% of those polled expect their companies to reduce employment in the next six months, versus 29% expecting to increase employment. The fourth-quarter survey showed 34% expecting a decrease, and 35% expecting an increase over the next half year. In the latest survey, the CEOs said the U.S. economy would grow 2.2% during 2016. That’s down from an expectation for a 2.4% advance this year recorded in the fourth-quarter poll. . The survey points “to an economy that continues to lack momentum,” said Doug Oberhelman, CEO of Caterpillar Inc. and chairman of Business Roundtable. He called on Washington lawmakers to ratify the Trans-Pacific Partnership trade deal, address tax reform and enact other “polices that would boost job creation and economic growth.” The Roundtable’s Outlook Index did increase to 69.4 from 67.5 in the fourth quarter. The slight improvement reflects a better outlook for sales growth and investment plans. Still, the reading is among the lowest since the recession ended. A year ago the index was 90.8. Readings above 50 indicate economic expansion.

    Weekly Initial Unemployment Claims increase to 265,000 --  The DOL reportedIn the week ending March 12, the advance figure for seasonally adjusted initial claims was 265,000, an increase of 7,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 259,000 to 258,000. The 4-week moving average was 268,000, an increase of 750 from the previous week's revised average. The previous week's average was revised down by 250 from 267,500 to 267,250. There were no special factors impacting this week's initial claims. This marks 54 consecutive weeks of initial claims below 300,000, the longest streak since 1973. The previous week was revised down. The following graph shows the 4-week moving average of weekly claims since 1971.

    BLS: Jobs Openings increased in January --From the BLS: Job Openings and Labor Turnover Summary The number of job openings rose to 5.5 million on the last business day of January, the U.S. Bureau of Labor Statistics reported today. Hires declined to 5.0 million while separations edged down to 4.9 million. Within separations, the quits rate was 2.0 percent, and the layoffs and discharges rate was 1.2 percent. ....The number of quits fell to 2.8 million (-284,000) in January. The quits rate was 2.0 percent. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  This series started in December 2000. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in January to 5.541 million from 5.281 million in December. The number of job openings (yellow) are up 11% year-over-year compared to January 2015. Quits are up 1% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is another solid report, and job openings are just below the record high set in July 2015.

    January 2016 JOLTS Job Openings Year-over-Year Growth Rate Improved - The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings improved from last month. The growth rate trends marginally improved in the 3 month averages, but the 2015 year-to-date averages continue to decline.

    • the number of unadjusted PRIVATE jobs openings - which is the most predictive of future employment growth of the JOLTS elements - shows the year-over-year growth marginally accelerated. The year-over-year growth of the unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) also improved.
    • The graph below looks at the year-over-year rate of growth for job opening levels and rate.

    The relevance of JOLTS to future employment is obvious from the graphic below which shows JOLTS Job Openings leading or coincident to private non-farm employment. JOLTS job openings are a good predictor of jobs growth turning points.

    Fewer Americans Got Hired or Quit Their Jobs in January -- The Labor Department had previously reported the economy added 172,000 jobs in January. Today’s report, known as the Job Openings and Labor Turnover Survey or Jolts, shows the churn going on behind that number—the millions of Americans losing or quitting one job and starting another that, on net, leads to the monthly change. The decline in hiring and quitting was a retrenchment from the progress the labor market seemed to be making. The monthly pace of both hiring and quitting declined sharply during the recession (layoffs, by contrast, skyrocketed during the recession). They had since regained all their lost ground and were about 10% above their levels at the end of 2007. Today’s report showed them losing a piece of that progress. And in a development that’s perplexed observers of the labor market, the number of job openings available at the end of the month continued to climb. Job openings are near their all-time peak, but for whatever reason, the pace of hiring is not following suit. Large numbers of jobs sit unfilled. There are, of course, two main ways a person can leave a job—involuntarily through layoff or firing, or voluntarily quitting. Generally, labor economists consider quitting to be the healthier of the two. People often quit when they have a new job lined up, or when they’re at least optimistic that they can find something better. When the economy is in recession, layoffs climb and people that have jobs cling to them.

    Some good news and some bad news in today’s JOLTS report -- This morning’s Job Openings and Labor Turnover Survey (JOLTS) report has both some optimistic news about the economy and some rather disappointing news (and revisions to the entire historical series). I’m optimistic because job openings increased in January, rising from 5.3 million to 5.5 million between December 2015 and January 2016. And, the rate of job openings—the number of job openings as a share of total employment and job openings—increased from 3.6 to 3.7. Over the last year the rate of job openings has risen from 3.4 to 3.7—a sign of an economy that continues to recover. But, what we need is for those job openings to translate into hires. Unfortunately, in January, the hires rate dipped, falling from 3.8 to 3.5 in one month. I wouldn’t put much stock in any one month’s fluctuations as the series are quite volatile, however, such a substantial drop in the hires rate is not an indication of positive movement in the labor market. While there has been clear progress in terms of growing job openings, it is also important to remember that a job opening when the labor market is weak often does not mean the same thing as a job opening when the labor market is strong. There is a wide range of “recruitment intensity” a company can put behind a job opening. If a firm is trying hard to fill an opening, it may increase the compensation package and/or scale back the required qualifications. On the other hand, if it is not trying very hard, it might hike up the required qualifications and/or offer a meager compensation package. Perhaps unsurprisingly, research shows that recruitment intensity is cyclical—it tends to be stronger when the labor market is strong, and weaker when the labor market is weak. This means that when a job opening goes unfilled and the labor market is far from full employment, as it is today, companies may very well be holding out for an overly-qualified candidate at a cheap price.

    JOLTS adds to accumulating evidence of late cycle weakness --Yesterday's JOLTs report (note: for January) has given us a more detailed look at the jobs market.  Last month was a particularly good report, but for most of the last 12 months I have been underwhelmed, noting that the pattern was similar to that in late in the last expansion.  First, here is a comparison of job openings (blue) and hires (red).  We only have one compete past business cycle to compare this with, so lots of caution is required, but in that cycle, hires peaked first and then openings continued to rise before turning down in the months just prior to the onset of the Great Recession:  That late 2005-06 pattern is what we hae been seeing for nearly a year now, as shown in this close-up of the last 2 years: The same thing shows up in the YoY comparisons: Early 2016 looks very much like early 2006. After making a new post-reession record last month (very good), quits fell back at their late 2015 level: Still, overall trend in quits appears to be positive, most like late 2005. The good news is, this still looks like a late cycle slowdown, but not an actual contraction. The bad news is, last month's good report was probably something of an outlier, and the evidence keeps accumulating that we are getting late in the expansion.

    BLS: Unemployment Rate decreased in 28 States in January -- From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in January. Twenty-eight states and the District of Columbia had unemployment rate decreases from December, 8 states had increases, and 14 states had no change, the U.S. Bureau of Labor Statistics reported today. ... North Dakota and South Dakota had the lowest jobless rates in January, 2.8 percent each, closely followed by New Hampshire, 2.9 percent. Mississippi had the highest rate, 6.7 percent, followed by Alaska, 6.6 percent.  This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Mississippi, at 6.7%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only eight states are at or above 6% (dark blue).

    Joblessness Is Falling—But Not in States Tied to Energy -- Unemployment has fallen broadly across the U.S.—but not in states tied to the energy sector. The jobless rate declined or held steady in all but nine states in the 12 months through January, the Labor Department said Monday. Nationally, the rate fell eight-tenths of a percentage point to 4.9% over the year. Of the states that saw their unemployment rates increase, most are closely tied economically to energy production. Wyoming, the nation’s top coal-producing state and also a big oil producer, posted the biggest increase in its unemployment rate over the year. It rose nine-tenths of a percentage point to 4.7% in January. Kentucky, another top coal producer, had the second-sharpest increase, with its jobless rate up half a point to 5.8%. Coal-producing Illinois was third, with its rate increasing three-tenths of a point to 6.3%. Then there are the big oil-producing states, which helped drive the nation’s economic recovery after the recession but are now hurting amid a sharp decline in oil prices. The jobless rate rose two-tenths of a point in Alaska to 6.6%. It grew a tenth of a point in North Dakota (2.8%), Texas (4.5%) and New Mexico (6.5%).

    Where U.S. Jobs Have Fallen Along With Energy Prices - Plummeting oil prices have hit a dozen job markets in the country hard and fast—while leaving most of the rest of the country unscathed. Only 12 metro areas saw their annual average unemployment rates tick higher in the 18 months since oil began its precipitous slide in July 2014, from over $100 a barrel for domestic crude to less than $40. Those areas were largely in places where energy rules the labor market, such as Odessa, Texas, Houma-Thibodaux, La., and West Virginia coal country. Lafayette, La., had the nation’s largest increase in its unemployment rate in that period, to a 6.3% annual average in January, up from July 2014’s annual average of 5%. The state, home to some of the country’s major refineries and ports, saw a string of mass layoffs in 2015. Oil-services company Frank’s International, which has laid off workers in Lafayette, now plans a third round of job cuts. By contrast, the broader U.S. labor market has fared well in the face of cheap oil. As of January 2016, the average annual unemployment rate fell or held steady in 375 out of 387 metropolitan areas from the 12-month average ending in July 2014. Nationally, the unemployment rate was 4.9% in January, when the economy added 151,000 jobs. It held steady in February, buoyed by the addition of 242,000 jobs. And the past 18 months have been surprisingly good to cities in the industrial Midwest, such as Michigan’s Muskegon and Detroit, and Decatur and Rockford in Illinois. That’s despite a strong U.S. dollar that’s made exports more expensive for overseas buyers, which has weighed on many domestic manufacturers. Between July 2014 and January 2016, the annual average unemployment rate fell by anywhere from 2.7 to 3.3 percentage points in those metro areas.

    Half of U.S. May Endure ‘Lost Decade’ of Depressed Employment -- Economic recovery has been unusually sluggish and uneven across regional U.S. job markets, with employment set to stay low for years to come in areas that endured the recession’s worst, according to new research.  At the current pace of improvement, employment rates across the U.S. won’t return to normal levels until the 2020s, “amounting to more than a relative ‘lost decade’ of depressed employment for…half of the country,” University of California, Berkeley, economist Danny Yagan wrote in a working paper posted this week on his website. He said the research paper soon will go through peer review. Recessions hit some places harder than others, and recovery doesn’t necessarily mean every place recovers all the jobs that it lost. Instead, unemployment rates can come down to prerecession levels as job seekers leave distressed regions and move to economically healthier areas of the country. “A state typically returns to normal after an adverse shock not because employment picks up, but because workers leave the state,” economists Olivier Blanchard and Lawrence Katz wrote in a 1992 paper. This time might be different in some ways. Three economists wrote in a National Bureau of Economic Research working paper last year that compared with the prerecession years, mass layoffs after 2007 prompted a “muted” migration response and many workers instead dropped out of the labor force. Falling labor-force participation has been a worrisome hallmark of the U.S. economy in recent years, though the recession’s damping effect on workforce participation appears to be fading as the economy gains strength.

    The End of Automatic Tipping Has Devastated Restaurant Paychecks : Unless you work in a restaurant, you may not have noticed that many restaurants no longer include “automatic gratuities” on the checks of large groups. But if you do work in a restaurant, this little change may have left you financially destroyed.Adding a mandatory tip to the checks of large parties was once standard practice in the restaurant business. It ensured that servers who worked on large groups wouldn’t end up getting screwed out of a proper tip percentage. (Tip percentage often goes down as the size of the bill goes up, thanks to human nature and greed.) A rule change by the IRS that took effect in 2014, though, mandated that restaurants treat these automatic gratuities as regular salary and deduct payroll, Social Security, and other taxes from them. Restaurants saw this as a massive new accounting headache. In turn, many of them simply did away with automatic gratuities altogether. Now, many checks carry printed “suggested tip” guidelines for customers, but those tips are no longer added onto the bill automatically.The end of auto-gratuities happened to benefit restaurants, including many large chain restaurant companies. For workers, it was bad news. Virtually since the change was made, servers have been complaining that it hurts their earnings by allowing large groups—which can monopolize the attention of servers for a whole shift—to skimp on tips, leaving them well short of what they would earn in a normal night serving many different tables.

    Pay Is Stagnant for Vast Majority, Even When You Include Benefits - EPI -- A newly released Bureau of Labor Statistics research paper by Kristen Monaco and Brooks Pierce provides important new data analysis of wage and compensation trends over the 2007–2014 period, updating earlier analyses by Pierce. This study draws on data from the Employer Costs for Employee Compensation (ECEC), an employer survey that provides detailed information on wage and benefits. Their bottom-line results in the figure above show the growth of both hourly compensation (all wages and benefits, but excluding payroll taxes) and wages (straight-time wages plus shift pay and other wage premiums) from 2007 to 2014 for all civilian workers. Their analysis confirms that there has been very broad-based stagnant pay whether one examines just wages or a more comprehensive compensation measure that also incorporates changes in health, pension, and other benefits. The bottom 80 percent of workers had stagnant or declining hourly compensation while the bottom 88 percent of workers had stagnant or declining wages. Monaco and Pierce’s research provides an additional rebuttal to Columbia University’s Glen Hubbard’s claim that there is no pay stagnation if one includes benefits along with wages, which I challenged in a recent analysis. As the figure shows, between 2007 and 2014 the median worker’s wages and compensation declined, respectively, by 4.0 and 1.9 percent. Among the bottom 40 percent of workers there was an even greater decline in compensation than there was in wages, indicating that including benefits as well as wages in an analysis results in a more adverse trend—the opposite of Hubbard’s claim.

    As Women Take Over a Male-Dominated Field, the Pay Drops - Women’s median annual earnings stubbornly remain about 20 percent below men’s. Why is progress stalling?It may come down to this troubling reality, new research suggests: Work done by women simply isn’t valued as highly.That sounds like a truism, but the academic work behind it helps explain the pay gap’s persistence even as the factors long thought to cause it have disappeared. Women, for example, are now better educated than men, have nearly as much work experience and are equally likely to pursue many high-paying careers. No longer can the gap be dismissed with pat observations that women outnumber men in lower-paying jobs like teaching and social work.A new study from researchers at Cornell University found that the difference between the occupations and industries in which men and women work has recently become the single largest cause of the gender pay gap, accounting for more than half of it. In fact, another study shows, when women enter fields in greater numbers, pay declines — for the very same jobs that more men were doing before.Consider the discrepancies in jobs requiring similar education and responsibility, or similar skills, but divided by gender. The median earnings of information technology managers (mostly men) are 27 percent higher than human resources managers (mostly women), according to Bureau of Labor Statistics data. At the other end of the wage spectrum, janitors (usually men) earn 22 percent more than maids and housecleaners (usually women). Once women start doing a job, “It just doesn’t look like it’s as important to the bottom line or requires as much skill,”

    Why the Fed should allow wages to rise, by Mark Thoma: On Wednesday, the Federal Reserve's Open Market Committee announced its decision to leave its target interest rate unchanged. I believe that was a wise decision. However, the committee noted that labor market conditions will be a key part of its decisions about future rate increases: A range of recent indicators, including strong job gains, points to additional strengthening of the labor market. ... The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen. ... In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. ... In assessing the need for future rate increases, it's important to take a closer look at one component of labor market conditions: how wage increases have been distributed. In 2015, wages increased by 2.2 percent, enough to outpace inflation over that period by a small margin, and wages have continued to rise at close to this rate, but how has that growth been distributed?

    Which Side Are You On, Hillary? - “We’ve got to stand up for unions,” Hillary Clinton declared in her closing statement during the Democratic debate in Milwaukee last month. The line offered the labor-friendly audience a comforting rebuke to Gov. Scott Walker’s relentless attacks on Wisconsin’s unions. It generated passionate applause.But Mrs. Clinton’s show of support contrasted with her long indifference to the concerns of organized labor. The results of Michigan’s primary last week highlighted this problem; exit polls showed that Mrs. Clinton narrowly lost union households to Senator Bernie Sanders. Over all, nearly 60 percent of Democratic voters thought free-trade agreements, which Mrs. Clinton has generally supported, caused job losses. Mr. Sanders won a majority of those voters, too, which raises the possibility of further upsets on Tuesday in primaries in Illinois and Ohio, where opposition to free-trade pacts is strong.Mrs. Clinton’s troubles with labor began before she arrived in Washington. From 1986 to 1992, as a corporate lawyer in Arkansas, she served on the board of Walmart. By then, Sam Walton, the company’s founder, was notorious for his anti-union fervor; in the early 1970s, Mr. Walton hired an attorney named John E. Tate to break up an organizing campaign at two Missouri Walmart stores. For decades afterward, Mr. Tate drove Walmart’s successful anti-union strategy. In 1988, Mr. Tate joined Walmart’s board, where he served alongside Mrs. Clinton.During Mrs. Clinton’s first presidential run, a former Walmart board member told ABC News that he could not recall her ever defending unions during more than 20 private board meetings. “She was not a dissenter,”

    Justice Dept. Condemns Profit-Minded Court Policies Targeting the Poor - — The Justice Department on Monday called on state judges across the country to root out unconstitutional policies that have locked poor people in a cycle of fines, debt and jail. It was the Obama administration’s latest effort to take its civil rights agenda to the states, which have become a frontier in the fight over the rights of the poor and the disabled, the transgender and the homeless.In a letter to chief judges and court administrators, Vanita Gupta, the Justice Department’s top civil rights prosecutor, and Lisa Foster, who leads a program on court access, warned against operating courthouses as for-profit ventures. It chastised judges and court staff members for using arrest warrants as a way to collect fees. Such policies, the letter said, made it more likely that poor people would be arrested, jailed and fined anew — all for being unable to pay in the first place.It is unusual for the Justice Department to write such a letter. It last did so in 2010, when the department told judges that they were obligated to provide translators for people who could not speak English. The letters do not have the force of law, but they declare the federal government’s position and put local officials on notice about its priorities.Ms. Gupta said that in some cities, hefty fines served as a sort of bureaucratic cover charge for the right to seek justice. People cannot even start the process of defending themselves until they have settled their debts. The letter echoes the conclusions of the Justice Department’s investigation of the Police Department and court in Ferguson, Mo. Investigators there concluded that the court was a moneymaking venture, not an independent branch of government. Ms. Gupta, who oversaw that investigation, has often cited Ferguson as a cautionary tale in her speeches, describing how fines for minor offenses like jaywalking pulled people into the criminal justice system and made it impossible to escape.

    Why the Poor Get Trapped in Depressed Areas - In modern America, it’s expensive to be poor. If you have a car, it’s old and habitually breaks down. Often, there aren’t banking services in your area and you must live with high-cost alternatives. And in white working-class towns decimated by years of outsourcing, the jobs available don’t provide the kind of wages to break the cycle of poverty.That’s not to say the situation of the American poor hasn’t preoccupied policy-makers and the pundit class. Recently, there’s been a bipartisan grumbling among elite wonks that the poor should just rent a U-Haul and leave their depressed communities if they want a better life. (Their dismissive attitude is presumably because America is extremely economically segregated; rich and poor hardly need to associate with one another.) Writing in the National Review, Kevin Williamson slathered contempt on working class whites for their irresponsibility; “The truth about these dysfunctional, downscale communities is that they deserve to die,” he sneered. Conservative Tyler Cowen took a more academic view of the matter in a blog post, citing a research paper that showed children experience long-run economic benefits when their families move out of public housing. And for Mother Jones, liberal Kevin Drum mused on the localized effects of globalization on manufacturing-dominated areas and wondered about “the apparent unwillingness of U.S. workers to move when they lost their jobs.” In each piece, the moral component is foregrounded: The working class refuses to move when things get tough because of either learned helplessness—“a conspiracy to give up,” Drum says—or because they cower in the face of difficult circumstances. (See David French’s condemnation of “how little effort most parents and their teen children made to improve their lives.”) Nobody in the pundit class, it seems, has attempted to actually understand how this country treats its poor—because while the suggestion to “go get a U-Haul” sounds simple, it’s an impossible task for somebody with no savings.

    Marijuana’s Economic Impact Could Hit $44 Billion by 2020 - The U.S. economic impact of marijuana could hit between $24 and $44 billion in the next four years, according to a new report by Marijuana Business Daily. Economic impact includes not only sales of marijuana itself, but also any other dollars pumped into the economy in association with marijuana, from grow-lights to pipes, Yahoo reports. MBD assigned marijuana an economic multiplier of four, meaning for every dollar spent on weed, three more dollars are also added to the economy.  MBD’s prediction for the 2016 economic impact of marijuana was between $14 and $17 billion.

    Vermont legislature on track to be first in U.S. to legalize marijuana | Reuters: Liberal-leaning Vermont could become the first U.S. state to legalize recreational marijuana use through legislation, rather than by voter initiative, in a move that advocates for the drug say could speed its acceptance across the nation. State representatives this month are set to take up a bill passed by the state Senate in February that would allow adults over 21 to purchase and smoke the drug beginning in 2018. The move follows a year of hearings in the Senate that lawmakers say allowed them to closely consider appropriate limits to place on the drug's use. The current proposal would prohibit users from growing plants at home and ban the sale of edible products containing marijuana extracts. But lawmakers must act before the end of May, when the current session ends, a deadline that may prove difficult to meet. It is uncertain whether it has enough support in the Democratic-controlled House to pass. The law would impose a 25 percent tax on sales of the drug, which would fund drug law enforcement and drug education programs.

    Legal marijuana is finally doing what the drug war couldn’t  - Legal marijuana may be doing at least one thing that a decades-long drug war couldn't: taking a bite out of Mexican drug cartels' profits. The latest data from the U.S. Border Patrol shows that last year, marijuana seizures along the southwest border tumbled to their lowest level in at least a decade. Agents snagged roughly 1.5 million pounds of marijuana at the border, down from a peak of nearly 4 million pounds in 2009. The data supports the many stories about the difficulties marijuana growers in Mexico face in light of increased competition from the north. As domestic marijuana production has ramped up in places such as California, Colorado and Washington, marijuana prices have fallen, especially at the bulk level. "Two or three years ago, a kilogram [2.2 pounds] of marijuana was worth $60 to $90," a Mexican marijuana grower told NPR news in December 2014. "But now they're paying us $30 to $40 a kilo. It's a big difference. If the U.S. continues to legalize pot, they'll run us into the ground."

    Thirteen Years for Two Joints - More than half of Americans believe that marijuana should be legal in the United States, according to a Gallup poll from October 2015. With 58 percent in favor, legalization is enjoying the highest support ever reported (up from 34 percent in 2001). Still, draconian sentencing laws surrounding marijuana have led to the imprisonment of millions of American citizens, many of whom are still serving time for possessing small amounts of weed for personal use.  One of those citizens is Bernard Noble, a father and aspiring restaurateur from New Orleans who was stopped by police and nabbed for possession of two joints in 2010. In keeping with Louisiana's habitual offenders law, Noble, who had two prior cocaine possession charges and a prior marijuana possession charge (he admits that he was a coke addict in the 90s), was sentenced to a staggering 13 and 1/3 years in prison for simple marijuana possession, a nonviolent offense.  In tracing Noble's story for this week's episode of Weediquette on VICELAND, I saw how a system of justice that's discriminatory to African-Americans at the moment of arrest, overly aggressive in its prosecution, and inhumane and profit-driven in its practices of incarceration can result in truly illogical outcomes.  People are getting rich from legal weed in Colorado, a development that's spurring business and generating tax revenue (and a topic that I'll be exploring in future episodes), but in states like Louisiana, weed is still a tool of the incestuous political economic machine of mass incarceration.

    Obama's prisoner clemency plan faltering as cases pile up | Reuters: In April 2014, the administration of President Barack Obama announced the most ambitious clemency program in 40 years, inviting thousands of jailed drug offenders and other convicts to seek early release and urging lawyers across the country to take on their cases. Nearly two years later the program is struggling under a deluge of unprocessed cases, sparking concern within the administration and among justice reform advocates over the fate of what was meant to be legacy-defining achievement for Obama. More than 8,000 cases out of more than 44,000 federal inmates who applied have yet to make it to the U.S. Department of Justice (DOJ) for review, lawyers involved in the program told Reuters. That is in addition to about 9,000 cases that are still pending at the DOJ, according to the department's own figures. Only 187 inmates have had their sentences commuted, far below the thousands expected by justice reform advocates and a tiny fraction of the 2.2 million people behind bars in the United States, which has the world's highest incarceration rate. The administration said it wanted to decide on all the applications before Obama's term ends next January, when the program will automatically expire.

    The Stunning Facts on Crime and Imprisonment Everyone Is Ignoring - America’s criminal justice establishment - comprised of major foundations, interest groups, and academics - has missed a number of mammoth trends crucial to designing modern reform policies. One trend that escaped official notice was revealed in a recent Wonkblog post by Stanford University professor Keith Humphreys: over the past 15 years, imprisonments have plummeted among African Americans while rising among non-Hispanic whites. That dramatic, undiscussed trend is part of the revolution in crime and violence sweeping the country. The racial pattern includes an equally surprising generational pattern in imprisonments, as well as in criminal arrests, gun violence, and other risks. Just 15 years ago, young adults ages 18-24 were nearly twice as likely to be imprisoned as their middle-aged parents (age 45-54). Today, after tremendous shifts both in numbers and per-capita imprisonment rates shown in the charts, young adults are less likely to be locked up than the middle aged. These generational trends in imprisonment have occurred among non-Hispanic whites, blacks, and Hispanics alike. Large declines in rates of imprisonment of young adults ages 18 to 24 and large increases among ages 45 and older occurred among all races and ethnic groups.

    These Are the 10 Most Racist Cities in America, According to Twitter -- Language aimed at women on social media often takes on sexist and misogynist overtones, particularly when women write about issues such as feminism. And for women of color, the intersection of racism and sexism can create a particularly hostile environment, thanks to every anonymous troll with 140 characters worth of bile to spill. Words matter, which is why this side of social media is both ugly and telling. You can learn a lot about a community by the frequency of its residents’ use of racial slurs on social media. Abodo, an apartment hunting site, decided to take a close look at tweets sent from around the country. Between June 2014 and December 2015, they assessed 12 million tweets, looking out for racist, sexist, fatist, transphobic, ableist and other types of slurs, and were able to identify where those users were most concentrated The only numbers here that give me pause are about anti-black tweets. If you guessed the South, you’re only partially right, as there is a healthy representation of all Americas here, from sea to shining sea. Check out the charts below, all from Adobo, that show how the numbers look when broken down:

    Facing $10B shortfall, Illinois lawmakers OK $3.8B more debt — Illinois Senate Democrats passed a $3.8 billion funding bill for colleges and social services Thursday amid Republican objections that the state doesn't have the money to fulfill the proposal's promises. Democrats used their considerable majority in the chamber to easily pass the bill on a 39-18 vote, which has already cleared the House. The proposal would appropriate nearly $1.9 billion to colleges and universities that have not received funding since July 1, when the current year budget should've taken effect. The bill's passage came on the day Comptroller Leslie Munger told a Senate committee the state owes nearly $9 billion to vendors who provide services to the state. That tab could top $10 billion by June 30, the end of the fiscal year, Munger told lawmakers. Much of the state's spending is currently on auto-pilot because of court orders that demand some services and functions be maintained. But the state otherwise has no authority to spend money because Democrats who control the General Assembly and Republican Gov. Bruce Rauner can't agree on a spending plan. Before the vote, Republican senators called the Democrats' bill phony and delusional. One lawmaker told his colleagues that the state's situation is akin to having $100 in a checking account with $7,000 in bills. "That's before the passage of this legislation," said Sen. Dale Righter, R-Mattoon. "Nobody -- nobody -- would look at someone who was managing their financial affairs that way and say that that even whiffs of responsibility." The budget standoff has led to layoffs at higher education institutions and the loss of tuition aid for low-income students. Social service programs across the state have also suffered, either closing or reducing the level of aid they provide.

    Don't Post About Me on Social Media, Children Say - Recently, university researchers asked children and parents to describe the rules they thought families should follow related to technology.In most cases, parents and children agreed — don’t text and drive; don’t be online when someone wants to talk to you. But there was one surprising rule that the children wanted that their parents mentioned far less often: Don’t post anything about me on social media without asking me.As in, no pictures of them asleep in the back of the car. No posts about their frustration with their homework.  The answers revealed “a really interesting disconnect,” said Alexis Hiniker, a graduate student in human-centered design and engineering at the University of Washington who led the research. She, along with researchers at the University of Michigan, studied 249 parent-child pairs distributed across 40 states and found that while children ages 10 to 17 “were really concerned” about the ways parents shared their children’s lives online, their parents were far less worried. About three times more children than parents thought there should be rules about what parents shared on social media.

    How Disney and Pixar mislead your kids -- It’s cool to be poor. That’s the implied message in some of the most popular children’s movies of all time, including classics such as "Snow White" and modern hits such as "Aladdin," "A Bug's Life" and "Ratatouille," according to a new study from Duke University researchers. The study examined the socioeconomic status of characters in 32 G-rated films and found a kind of Lake Woebegone effect: The wealthy were overrepresented, poverty was glamorized and upward mobility seemed effortless. “Inequality in these movies is downplayed, sanitized and even erased,” Duke sociology professor Jessi Streib, lead author of the study, tells me in the video above. “Poor characters don’t suffer any hardships, working class characters love being working class, and upper-class characters look out for the working class and the poor, so there’s no reason to be upwardly mobile.” To the cynical among you: Okay, go and ahead and groan. They’re just movies. Kids don’t need to learn about economic hardship from entertainment. That’s what parents and schools are supposed to do. And if Disney (DIS) and Pixar started working economic education into their films, they’d undoubtedly get pilloried for teaching a version of capitalism somebody or other disagreed with. Yet rising income inequality is clearly a dominant issue of our time—and besides, some of the messages in popular films are kind of weird. In "Beauty and the Beast"—which IMDB ranks as the second-best Disney movie of all time—the prince’s servants dance happily while singing, “Life is so unnerving, for a servant who’s not serving. He’s not whole without a soul to wait upon.” Not exactly a nursery rhyme most parents want their children to memorize.

    Mississippi House passes bill requiring teachers to grade parents - If a bill passed by the Mississippi House becomes law, students won’t be the only ones receiving grades from teachers.  Under House Bill 4, also known as the Parent Involvement and Accountability Act, teachers would be required to grade parents’ involvement with their children’s education. The legislation, by state Rep. Gregory Holloway (D-Hazlehurst), would mandate a section be added to each child’s report card on which the parents are graded on their responsiveness to communication with teachers, the students’ completion of homework and readiness for tests, and the frequency of absences and tardiness.Mary Clare Reim, research associate on education at the Heritage Foundation, said the bill is the wrong way to encourage more parental involvement. “My initial reaction is, this is absurd,” Reim said. “The concept that parents should be graded by teachers on their involvement is a reversal of what the education system should look like. Parents should be grading teachers on their performance. Putting grades on parental involvement from the top down is not the way this should work.”

     If CPS ever misses a debt payment, property owners would see taxes jump - As Chicago Public Schools' money troubles worsen, students and their families face increasing uncertainty. Dozens of classroom staff were laid off last month after the school district cut principals' second-semester budgets. A strike is looming as CPS prepares to slash teacher benefits. But if the school district ever comes up short on its debt payments, the investors who bought CPS' bonds can rest assured they will get what they are owed — straight from Chicago taxpayers. The school district's bond contracts include a little-known provision that would trigger a property tax increase if CPS fails to pay. The county clerk would deliver that additional revenue directly to a bank — much the way a creditor might garnish an individual's wages. "Citizens don't know the extent to which their own assets are pledged to pay bondholders," Had CPS secured voters' approval before issuing its bonds, the district would have a dedicated stream of property tax revenues available to pay off the debt. But for 20 years Chicago school officials have avoided holding referendums by promising to use an existing revenue source to make debt payments: mainly the per-pupil education funding the district gets from the state. Property taxes serve as a backup. Had CPS secured voters' approval before issuing its bonds, the district would have a dedicated stream of property tax revenues available to pay off the debt. But for 20 years Chicago school officials have avoided holding referendums by promising to use an existing revenue source to make debt payments: mainly the per-pupil education funding the district gets from the state. Property taxes serve as a backup. With this type of borrowing, called an alternate revenue bond, the pledged revenue stream usually covers the debt payments and the backup option isn't called upon.

    How the Cutthroat Walmart Business Model Is Reshaping American Public Education - Walmart’s recent decision to close 269 stores was a blip on the national media radar, but it was big news in small towns and suburban neighborhoods across America. “Before Walmart’s arrival, Winnsboro had two grocery stores,” a local reporter in that South Carolina town noted. Now that Walmart is gone, so is convenient access to groceries and other retail goods. “It’s the traditional story of a big corporation driving local competition out of town,” an article in Texas Monthly stated, “and then leaving.”  At the same time news of Walmart store closings spread through local media outlets, the Walton Family Foundation (WFF), the private foundation created with the retail giant’s wealth, announced that it would be “doubling down on its investments in school choice with a $1 billion plan to help expand the charter school sector and other choice initiatives over the next five years,” according to a report in Education Week. This immense treasure trove for expanding the number of charter schools in the country comes in addition to the millions the Waltons have already spent on charter schools. In fact, the foundation’s “strategic plan,” published in 2015, claims, “1 in 4 charters nationally have received WFF startup funds.” In her book The Death and Life of the Great American School System: How Testing and Choice Are Undermining Education, education historian Diane Ravitch explores whether there is any “commonality between the Walmart business philosophy and the Walton funding of school choice.” She likens the competition that charters pose to public schools to the competition that Walmart stores present to locally owned stores, and suggests parallel consequences: just as Walmart forces stores that can’t match their prices to shut their doors, so charters — which bleed students, and their funding, from traditional schools — cause local schools to close down.

    Hoisted From Comments: American Education, Then and Now --  Yves Smith - From a book I’ve started reading, American Amnesia: How the War on Government Led Us to Forget What Made Us Prosper, by Jacob Hacker and Paul Pierson, has an important tidbit on our deteriorating educational outcomes: The United States is now a mediocre performer in international education rankings. And we would look a lot worse if we had not done so well in the past. The share of Americans that have completed high school, for instance, remains impressive. Yet this high average reflects our big early lead. ….The big story, however, is our relative decline in higher education….Older Americans are among the most educated in the world. Younger Americans, not even close…. America’s youth fare particularly poorly when it comes to reading and technological skills…In all countries, the young are better at math and working with technology. Older Americans are close to international average for older adults. Younger Americans, while scoring slightly higher, are years behind their international peers….The same is true of the other skills measured by the OECD: The US falls further and further behind as you move down the age ladder.  Inequality is part of this story: As one OECD researcher put it: “The vast majority of OECD countries either invest equally in every student or disproportionately more in disadvantaged students. The US is one of the few countries doing the opposite.   And if Austin-based reader GlobalMisanthrope’s experience is representative, it’s much worse out there in the field that Hacker and Pierson realize. As he wrote yesterday:

    “Throwing money at the problem” may actually work in education: When it comes to tackling the United States’ large and growing achievement gap between high- and low-income children, today’s education policy entrepreneurs have increasingly adopted an accountability-and-evaluation mindset. Well-known policies including No Child Left Behind, Common Core standards, Race to the Top, and charter schools all stem from the conventional wisdom that we can’t just “throw money at the problem.” But in the case of our national education policy, does this conventional wisdom hold true? Maybe not. New research finds that an increase in relative funding for low-income school districts actually has a profound effect on the achievement of students in those districts. The researchers look at the impact of “adequacy”-based finance reforms, enacted by 27 states over the past 20 years. These reforms sought to ensure that low-income school districts had enough money to provide their students with a high-quality education, even if that meant that their costs exceeded that of high-income school districts—a focus on “adequacy” rather than “equity.”  But did these increased funds for low-income districts reduce educational inequality? By comparing outcomes in the states that implemented these school finance reforms and those that did not, they find that the reforms had a considerable impact on the achievement gap between high- and low-income school districts. They found that increasing funding per pupil by about $1,000 raises test scores by 0.16 standard deviations—roughly twice the impact as investing the same amount in reduced class sizes (according to data from Project STAR, a highly acclaimed study of Tennessee schools in the 1980s).

    The College Scorecard strikes out - AEI: Imagine trying to buy a house without knowing the sale price of comparable homes or the quality of local schools. No responsible person would make such a large investment without these key facts, which are readily available. Yet when it comes to picking a college, an equally important decision, federal policy prevents Americans from becoming well-informed.  The Education Department has tried to make progress on this front with its revamped College Scorecard, unveiled in September 2015, which reports graduation rates and earnings data for thousands of colleges. The problem is that the Higher Education Opportunity Act of 2008 limits the kinds of essential data that the federal government can collect from colleges and universities. The result is that the Scorecard isn’t only incomplete, it is often downright misleading. For starters, the Scorecard presents flawed federal graduation rates, which only count full-time students who start and finish at their first institution. In other words, graduation information excludes part-time students and those who transfer. Yet over 60% of students at community colleges attend part time, and more than half of bachelor’s degree recipients went to more than one school, according to the Education Department. A better metric would capture outcomes for all students.

    Heavy Recruitment of Chinese Students Sows Discord on U.S. Campuses - WSJ: On a recent Monday,  22-year-old Chutian Shao woke up in the apartment he shares with three Chinese friends. ... He recalls uttering two fragments in English all day. The longest was at Chipotle, where he ordered a burrito: “Double chicken, black beans, lettuce and hot sauce.”  At first glance, a huge wave of Chinese students entering American higher education seems beneficial for both sides. International students, in particular from China, are clamoring for American credentials, while U.S. schools want their tuition dollars, which can run two to three times the rate paid by in-state students.On the ground, American campuses are struggling to absorb the rapid and growing influx—a dynamic confirmed by interviews with dozens of students, college professors and counselors. Students such as Mr. Shao are finding themselves separated from their American peers, sometimes through choice. Many are having a tough time fitting in and keeping up with classes. School administrators and teachers bluntly say a significant portion of international students are ill prepared for an American college education, and resent having to amend their lectures as a result.In a recent computer engineering class, Mr. Shao sat quietly in the back of a large lecture hall, dividing his time between Chinese social media on his smartphone and a lecture by Dave Nicol. He doesn’t remember ever asking a question in class.Mr. Nicol, the professor, says he can’t pronounce the names of many international students he teaches. He excises colloquialism from his lectures to avoid confusing the nonnative English speakers. When they do speak, he often asks them to repeat themselves. “Their questions are not always clear,” says Mr. Nicol.

    Amid push for transparency, few colleges reveal investments  (AP) — Colleges and universities are under growing pressure from Congress and campus activists to reveal financial investments made through their endowments, but most institutions are standing firm against the idea. The movement includes federal lawmakers who are questioning whether to tax colleges on investment profits that can amount to billions of dollars a year. Many students and alumni are making inquiries too, demanding to know whether schools invest in certain industries. Those moves challenge the privacy that has long been granted to university endowments, which are large pools of investments meant to provide financial aid to current students and to sustain the schools for future generations. Endowments face little federal regulation compared with other fundraising institutions. Private foundations, for example, are required to spend at least 5 percent of their assets each year and pay a 2 percent excise tax on investment earnings. Colleges face no spending rules and, because of their educational purpose, are not taxed on their earnings. Despite the calls for transparency, record requests made by The Associated Press to dozens of the nation’s wealthiest colleges show a continued push to keep investments secret. Out of 50 public and private universities asked to disclose their investments, 39 schools with combined endowments of $255 billion refused to provide a single record. Four never responded to the requests sent in September. None of the private universities, which are not subject to open-records laws, released any information.

    Hillary’s emails reveal lucrative ties to for-profit colleges: Student loan debt continues to be one of the largest economic issues plaguing the U.S., with the total amount topping $1.3 trillion. Hillary Clinton’s higher education policy touts debt-free degrees for underprivileged students. But is she being genuine in her efforts to address the issue? While Hillary loves to rail against shady for-profit colleges on the campaign trail, she does have some financial ties to them that are likely to shape whether or not she holds them accountable for ripping students off. It was recently revealed through Hillary’s emails that during her first year as Secretary of State she insisted that Laureate Education be included in the guest list for an education policy dinner hosted at the U.S. Department of State. “It’s a for-profit model that should be represented,” she wrote in the August 2009 email, and as a result, a senior vice president at Laureate was added to the guest list. Several months later, former President Bill Clinton became an honorary chancellor of Laureate International Universities, which turned out to be incredibly lucrative. He was paid a cool $16.5 million between 2010 and 2014 for his role with the for-profit college.

    Universities Are Becoming Billion-Dollar Hedge Funds With Schools Attached | The Nation: Have you heard the latest wisecrack about Harvard? People are calling it a hedge fund with a university attached. They have a point—Harvard stands at the troubling intersection between higher education and high finance, with over 15 percent of its massive $38 billion endowment invested in hedge funds. That intersection is getting crowded. Yale’s comparatively modest $26 billion endowment, for example, made hedge fund managers $480 million in 2014, while only $170 million was spent on things like tuition assistance and fellowships for students.  What has gotten less attention is how it’s not just universities with eating clubs and legacies that are getting into the game. Many public universities are also doing so, in part because state support for education has been cut, but also to compete with richer schools by rapidly increasing their more limited wealth. Though the exact figure is hard to determine, experts I consulted estimate that over $100 billion of educational endowment money nationwide is invested in hedge funds, costing them approximately $2.5 billion in fees in 2015 alone. The problems with hedge funds managing college endowments are manifold, going well beyond the exorbitant—some would say extortionate—fees they charge for their services.  Consider the problem of conflict of interest on endowment boards of both public and private colleges. One 2011 survey showed that 56 percent of endowments allowed board members to do business with the university.

    Why Big-City School Systems Are Going Broke -- Detroit's school system, already $515 million in debt, can't afford to pay its staff past April 8. In Chicago, the city school district – the third-largest in the country – is a whopping $1.1 billion in debt. Already laying off staff and imposing unpaid furlough days, it most recently told principals to stop spending money altogether.  In Philadelphia, despite the school system there ending the year with an $88 million surplus, the city has backed a lawsuit against the state by other school districts over inadequate funding, citing its own inability to maintain buildings and struggles to employ teachers and school nurses. More than 2,000 public school students in Boston also walked out of their classrooms earlier this month in opposition to proposed budget cuts. While the financial woes are a result of a confluence of circumstances, analysts say one culprit stands above the rest.  "Pensions are one of the most untold stories of why this is happening," says Chad Aldeman, an associate partner at Bellwether Education Partners, an education policy organization in Washington. "These are big dollar amounts at play that people haven't conceptualized." According to the Federal Reserve, employee pensions across state and local governments are underfunded to the tune of $1.7 billion.  "Pensions in the U.S. as a whole are underfunded very, very substantially," says Don Boyd, director of fiscal studies at the The Nelson A. Rockefeller Institute of Government, a policy research arm of the State University of New York. "Teachers' plans are a disproportionate share of that. That's certainly true in some of these cities."

    Study Finds Public Pension Promises Exceed Ability to Pay - When Detroit went bankrupt in 2013, investors were shocked to learn that the city had promised pensions worth billions more than anyone knew — creating a financial pileup that ultimately meant big, unexpected losses for Detroit’s bondholders.Now, researchers at Citigroup say the groundwork has been laid for similar conflicts across the developed world: Governments have promised much more than they can most likely pay to current and future retirees, without revealing the disparity to investors who bought government bonds and whose investments could be at risk.Twenty countries of the Organization for Economic Cooperation and Development have promised their retirees a total $78 trillion, much of it unfunded, according to the Citigroup report.That is close to twice the $44 trillion total national debt of those 20 countries, and the pension obligations are “not on government balance sheets,” Citigroup said.“Total global government debt may be three times as large as people currently think it is,” the researchers warned, after gathering as much information as they could about various government pension plans and adjusting the amounts where necessary, to permit fair comparisons with bond debt.

    Moodys: Public Pension Underfunding to Worsen as Returns Lag  -- Yves Smith - We’ve had plenty of company in warning that protracted central bank policies, ZIRP, QE, and most important, that those represent negative real interest rates, are deadly to banks and long-term investors like pension funds and life insurers.  As a result, one of the things we’ve discussed regularly with CalPERS is how it is continuing to defend the indefensible, namely, its assumption that it will earn 7.5%. It rejected a plan by Governor Jerry Brown to have the giant pension fund lower its return target to 6.5% in return for a cash injection. Instead, CalPERS came up with a convoluted scheme to lower its return…maybe someday. From Reuters last November: Calpers will reduce its expected rate of investment returns in years after the fund outperforms its 7.5 percent target by 4 percentage points. The goal is to ultimately reduce the rate to 6.5 percent, although that could take decades under the new policy…. In July, CalPers announced that after years of steady returns it missed the 7.5 percent target, returning just 2.4 percent for the fiscal year ended June 30. Contrast that 7.5% return assumption with Moody’s outlook for fiscal year 2016, which ends June 30, courtesy the Financial Times: Moody’s said the funding deficit — the difference between the assets a pension fund has and what it has to pay out to current and future pensioners — will grow substantially this year….In the most optimistic scenario, where average returns totalled 5 per cent, the collective funding gap [for the 56 plans in its study] would still widen by more than $200bn. Moody’s estimates the scale of the unfunded liabilities is greater than officially reported because of the generous discount rate public pension plans use to value retirement benefits. The rating agency said the schemes collectively have a deficit of $1.7tn, which could rise to $2.2tn this year if the pension plans suffered negative returns.Now again, in case you missed it: CalPERS’ return assumption of 7.5% exceeds Moodys’ best case scenario of 5% by a full 2.5%. Mind you, CalPERS, which is 77% funded as of June 30, 2015, is a bit less stressed than the average public pension fund. The most underfunded state plans are those of Illinois, Connecticut, Kentucky, and Kansas.

    It Turns Out the Koch Brothers Took an Interest in the VA Hospital System -- A great number of people out there will tell you that there is nothing that unusual about how the Koch Brothers are slinging around their money in an attempt to refashion government at almost every level to conform to their dystopian concept of civilization. There are even people who will point to their various charitable endeavors as though these were somehow acceptable penance for their unceasing campaign to deform the country into something they can keep in their poolhouse. Then again, there's also someone like Alicia Mundy, who comes along and explains that, yes, the Kochs are every bit the conniving plutocrats that you think they are, and that, yes, they want everything and are half on the way to getting it.   This week's cautionary tale is the Veterans Administration. The Kochs and their operation are after the VA because privatizing everything helps make them more money and they are completely ethics-free with regard to how they go about it. Yet beneath the surface of events, a far different, deeper, and more consequential story is unfolding. The [Concerned Veterans for America], it turns out, is the creation of David and Charles Koch's network. The Koch family has famously poured hundreds of millions of dollars into think tanks, candidates, and advocacy groups to advance their libertarian views about the virtues of free markets and the evils of governments and unions. Seldom, however, has one of their investments paid off so spectacularly well as it has on the issue of veterans' health care. Working through the CVA, and in partnership with key Republicans and corporate medical interests, the Koch brothers' web of affiliates has succeeded in manufacturing or vastly exaggerating "scandals" at the VA as part of a larger campaign to delegitimize publicly provided health care.

    The Koch-Fueled Plot to Destroy the VA - If you're a hardcore libertarian, which program would you be most eager to privatize? The VA, of course, which is America's only genuine example of purely socialized medicine. In the past, the VA's status as health care provider to military vets has protected it from attack, but that's changed over the past few years. Why? Because of a carefully orchestrated smear campaign by a Koch-funded activist group called Concerned Veterans for America. Over at the Washington Monthly, Alicia Mundy reports: Though the CVA’s incorporation papers don’t reveal its donors, Wayne Gable, former head of federal affairs for Koch Industries, is listed as a trustee. The group also hired Pete Hegseth as its CEO...a seasoned conservative activist, having been groomed at a series of organizations connected to—and often indirectly funded by—the Koch brothers. ....Hegseth became a fixture on Fox and was a guest on Bill Maher’s show....By late 2013, Hegseth and the CVA were making the case that the VA needed “market-based” reform that provided vets with more “choice” to receive care from private doctors and hospitals. ....Then, on April 9, 2014, at a hearing in the House Committee on Veterans’ Affairs, Representative [Jeff] Miller dropped the bomb. He announced that his staff had been quietly investigating the VA hospital in Phoenix and had made a shocking discovery: some local VA officials had altered or destroyed records to hide evidence of lengthy wait times for appointments. And worse, Miller claimed, as many as forty veterans could have died while waiting for care. This latter charge guaranteed screaming headlines from the likes of CNN, but was later shown to be unsubstantiated....In only twenty-eight out of the more than 3,000 patient cases examined by the inspector general was there any evidence of patient care being adversely affected by wait times....In most VA facilities, wait times for established patients to see a primary care doc or a specialist were in the range of two to four days....For the VA system as a whole, 96 percent of patients received appointments within thirty days. In short, there was no fundamental problem at the VA with wait times, in Phoenix or anywhere else.

    The Voices of Patient Harm - ProPublica -- Patient safety is one of the most talked about topics in medicine today, but it’s rare to hear from patients who have been injured. Now, ProPublica has gathered more than 1,000 stories of patient harm, from all 50 states, as reported by patients or their loved ones. Their experiences – summarized here – add an important dimension to the patient safety debate, particularly when it comes to the neglect and abandonment many feel from a system that is supposed to be caring. Patients and their loved ones say they aren’t getting straight answers about what happened. They claim medical providers are not apologizing or accepting responsibility. Most of all, they assert that no one is being held accountable for the harm.More than 1 million patients suffer harm each year in U.S. health care facilities. Often, their harm isn’t acknowledged even as they live with the consequences. ProPublica set out to capture their stories. Here is what we learned.

    House Republicans Propose Steep Cuts to Essential Health Care Programs -- The budget proposal approved this week by the U.S. House of Representatives Budget Committee is predicted to balance the federal budget in nine years, largely through across-the-board reductions in spending. One exception to these cuts is an increase of $90 billion dollars in defense spending. The proposed changes to the health care system are profound–repealing the Affordable Care Act, block-granting the Medicaid program, and partially privatizing the Medicare program through premium support. Under premium support proposals, the federal government would give Medicare beneficiaries a subsidy to purchase private health insurance. Critics of premium support caution that privatizing Medicare would significantly increase costs for beneficiaries and weaken the Medicare program. The subsidy made available to people with Medicare purchase insurance may not keep up with the cost of coverage. The viability of traditional Medicare may also be at stake as younger, healthier people would be more likely to opt for private health plans, leaving older, sicker beneficiaries in traditional Medicare. Higher health costs among the remaining population could lead to unaffordable premium hikes. In addition to privatizing Medicare the budget would also consolidate Medicare Parts A and B and leave in place the sequester cuts instituted in 2011, which reduced payments to Medicare providers.  Learn more about the plan on the House Budget website.

    What New Delhi’s free clinics can teach America about fixing its broken health care system -- Rupandeep Kaur, 20 weeks pregnant, arrived at a medical clinic looking fatigued and ready to collapse. After being asked her name and address, she was taken to see a physician who reviewed her medical history, asked several questions, and ordered a series of tests including blood and urine. These tests revealed that her fetus was healthy but Kaur had dangerously low hemoglobin and blood pressure levels. The physician, Alka Choudhry, ordered an ambulance to take her to a nearby hospital. All of this, including the medical tests, happened in 15 minutes at the Peeragarhi Relief Camp in New Delhi, India. The entire process was automated — from check-in, to retrieval of medical records, to testing and analysis and ambulance dispatch. The hospital also received Kaur’s medical records electronically. There was no paperwork filled out, no bills sent to the patient or insurance company, no delay of any kind. Yes, it was all free. The hospital treated Kaur for mineral and protein deficiencies and released her the same day. Had she not received timely treatment, she may have had a miscarriage or lost her life.

    Big pharmacies are dismantling the industry that keeps US drug costs even sort-of under control - Big pharmacies are dismantling the industry that keeps US drug costs even sort-of under con: When US lawmakers convened a hearing last month to discuss the pricing of prescription drugs, it was the testimony of Martin Shkreli—the brash former Turing Pharmaceuticals CEO who raised the price of AIDS medication by 5,000%—that garnered the headlines. But the hearing also looked at an issue that, while it got far less attention, could make drugs more expensive for far more people: almost everyone in America, in fact. The impetus was October’s announcement from Walgreens, the US’s second-largest chain of pharmacies, that it was buying Rite Aid, the third. Critics said that would create a drugstore duopoly with CVS, the market leader. They didn’t, however, look as hard at another effect of the deal, which likely will bring about the final collapse of the industry tasked with keeping prescription-drug costs under control. Buried inside Rite Aid is a bundle of pharmacy benefit managers (PBMs). These are companies that handle the distribution of drugs for large employers, insurance companies, and government programs like Medicare. Walgreens says that acquiring Rite Aid’s PBMs would help it compete with arch-rival CVS, which controls a large and extremely profitable PBM called Caremark. But combining pharmacies and PBMs under one roof creates a conflict of interest. It can restrict patients’ access to certain prescription drugs, and can prevent independent drugstores from competing fairly for new customers. Worst of all, it could push up drug prices. When a pharmacy owns a PBM,  “it’s a sweetheart deal—the two entities no longer have an incentive to negotiate with each other.”

    Women increasingly choose contralateral prophylactic mastectomies. It doesn’t appear to be helping.  Dr Aaron Carroll - From Annals of Surgery, “Growing Use of Contralateral Prophylactic Mastectomy Despite no Improvement in Long-term Survival for Invasive Breast Cancer.” Women keep on choosing to have their contralateral breast removed in an effort to prolong like and prevent breast cancer recurrence. This is in spite of evidence showing it does no good. This study used SEER data to examine trends in that behavior. They identified about half a million women diagnosed with unilateral invasive breast cancer. About 60% of them had breast-conserving surgery. About a third had unilateral mastectomy, leaving about 7% choosing a contralateral prophylactic mastectomy. But that number increased, not decreased, over time. In 2002, under 4% chose that route; in 2012, almost 13% chose it. Women who choose contralateral prophylactic mastectomy need more surgery in general. About half of such women also get reconstructive surgery, compared to 16% of those who undergo a unilateral mastectomy. Here’s the kicker, though. With half a million patients available for analysis, they could find no benefit in breast cancer-specific survival or overall survival, even after taking into account hormone receptor status or age. For those of you keeping track at home, in the fully adjusted analyses the Hazard ratios for contralateral prophylactic mastectomy were actually significantly worse compared to breast conservation surgery ( breast cancer-specific survival: HR 1.08, 95% CI 1.01-1.16; overall survival: HR 1.08, 95% CI 1.03-1.14).  Worse.

    Life expectancy three years longer for children born into smaller families -- Children born into smaller families in the world's poorest nations will live an expected three years longer than those born into larger families, new Johns Hopkins Bloomberg School of Public Health research suggests. The findings, being presented at the International Conference on Family Planning in Nusa Dua, Indonesia, show that while family planning programs have sometimes been pitched as ways to moderate population growth and minimize pressure on resource-strapped nations, they have real health impacts on individuals.   Past studies have shown that contraceptive use reduces pregnancy and child mortality, averts maternal deaths and improves the general health of women and children, but little attention has been paid to the actual effect on families of having fewer children. Ahmed and Jose "Oying" Rimon, director of the Gates Institute, found that in families considered small (four or fewer children), the children have a life expectancy that is three years longer than the children in larger families (five or more children) even controlling for infant mortality.  Small family size, primarily achieved through the use of contraception, reduces the competition of siblings for both the attention and micronutrients provided by the mother, and also allows the family's often-limited financial resources to be spread farther. This appears to provide a positive healthy developmental environment that reduces mortality in the short-and long-term.

    Antibiotics becoming ineffective at treating some child infections --  Children are becoming powerless to fight off common infections because antibiotics they take are unable to kill the bacteria involved, experts warn. New research shows that overuse of antibiotics by children is to blame for bugs becoming drug-resistant for up to six months at a time in cases of urinary tract infections (UTI) caused by E coli. Antimicrobial resistance among children with such infections in rich countries is so great that certain common antibiotics do not work in about half of all cases, academics from Bristol University and Imperial College London found. “Prevalence of resistance to commonly prescribed antibiotics in primary care in children with urinary tract infections cased by E coli is high, particularly in countries outside the OECD. This could render some antibiotics ineffective as first-line treatments for urinary tract infection,” according to a Bristol PhD researcher Ashley Bryce and colleagues. They blame GPs for prescribing antibiotics to children too often. “Routine use of antibiotics in primary care contributes to antimicrobial resistance in children, which can persist for up to six months after treatment,” they add, in a paper published in BMJ. Their conclusions are based on an analysis of 58 previous studies looking at 77,783 cases of UTIs in 26 countries, including the UK, which were linked to the bacteria.  E coli causes an estimated 80% of them. NHS Choices states that UTIs are “a relatively common infection during childhood”. It is estimated that about one in 10 girls and one in 30 boys will have had a UTI by the time they turn 16.

    Doctors who get more Big Pharma cash prescribe more brand name drugs: Doctors have long disputed that the payments they receive from pharmaceutical companies have any relationship to how they prescribe drugs. There’s been little evidence to settle the matter — until now. A ProPublica analysis has found for the first time that doctors who receive payments from the medical industry do indeed tend to prescribe drugs differently than their colleagues who don’t. And the more money they receive, on average, the more brand-name medications they prescribe. We matched records on payments from pharmaceutical and medical device makers in 2014 with corresponding data on doctors’ medication choices in Medicare’s prescription drug program. (You can read our methodology here.) Doctors who got money from drug and device makers—even just a meal– prescribed a higher percentage of brand-name drugs overall than doctors who didn’t, our analysis showed. Indeed, doctors who received industry payments were two to three times as likely to prescribe brand-name drugs at exceptionally high rates as others in their specialty. Doctors who received more than $5,000 from companies in 2014 typically had the highest brand-name prescribing percentages. Among internists who received no payments, for example, the average brand-name prescribing rate was about 20 percent, compared to about 30 percent for those who received more than $5,000.

    Prescription Painkiller Crisis: Why Do Americans Consume 80 Percent Of All Prescription Painkillers? - If Americans are so happy, then why do we consume 80 percent of the entire global supply of prescription painkillers?  Less than 5 percent of the world’s population lives in this country, and yet we buy four-fifths of these highly addictive drugs.  In the United States today, approximately 4.7 million Americans are addicted to prescription pain relievers, and that represents about a 300 percent increase since 1999.  If you personally know someone that is suffering from this addiction, then you probably already know how immensely destructive these drugs can be.  Someone that was formally living a very healthy and normal life can be reduced to a total basket case within a matter of weeks. And of course many don’t make it back at all.  According to the CDC, more than 28,000 Americans died from opioid overdoses in 2014.  Incredibly, those deaths represented 60 percent of all drug overdose deaths in the United States for that yearA report released by the US Centers for Disesase Control and Prevention (CDC) in January revealed that drug-overdose deaths reached a new high in 2014, totaling 47,055 people. Opioids, a type of powerful painkiller that requires a prescription, were involved in 60% of those deaths. Many Americans that start out on legal opioids quickly find themselves moving over to heroin because it is often cheaper and easier to obtain, and the U.S. is now facing a tremendous epidemic of heroin abuse as well.  In fact, the number of Americans that die of a heroin overdose nearly quadrupled between 2000 to 2013.

    Doctors: We cannot 'engineer our way out of this epidemic'  A report released by the US Centers for Disesase Control and Prevention (CDC) in January revealed that drug-overdose deathsreached a new high in 2014, totaling 47,055 people. Opioids, a type of powerful painkiller that requires a prescription, were involved in 60% of those deaths.   In his address, Califf cited a number of strategies to reduce overdoses, including stronger warning labels, safer disposal to reduce diversion of drugs, and encouraging the development of opioids specifically designed to discourage abuse, such as pills that can't be crushed and snorted.  These drugs, often called "abuse-deterrents" are not new. The FDA has approved five of them since 2010, and another 30 are in development, according to The Associated Press. Abuse-deterrent formulations aim to prevent users from manipulating pills and abusing them. Abusers often crush them up for snorting or dissolve them so they can be injected. To prevent this, some drugmakers are experimenting with special coatings or polymers that prevent them from being crushed, or combining chemicals that attempt to cancel or reduce the effect of the drug if it were used improperly. Others have also tried adding what are called prodrugs to some formulas, which prevent the drug's activation until it enters the stomach. But there's one big problem with this strategy, which also happened to be the main focus of Califf's address: The evidence is anything but conclusive that abuse-deterrent drugs actually deter abuse.  One study from researchers at Washington University in St. Louis surveyed people at 150 drug-treatment facilities in 48 states on the primary drug they abused in the past month. The study found that the introduction in 2010 of an abuse-deterrent version of the powerful prescription painkiller OxyContin initially correlated with a steep decline in its abuse. But this effect leveled off in the following years. At the end of the study, more than 25% of those surveyed reported using OxyContin in the past month, leading the researchers to conclude that abuse-deterrent formulations have "clear limits" to their effectiveness.

    Debating the role of government and markets in food policy -- Politico's Agenda today has a special issue on food policy.  It prominently highlights the great work of my Friedman School colleagues Miriam Nelson and Christina Economos: Miriam Nelson got the call while she was rock climbing in Canada: It was the White House assistant chef, of all people, summoning her to a closed-door meeting with the new first lady of the United States. It was 2009, Nelson was one of the nation’s top experts on nutrition and exercise, a Tufts University professor at the time, and she wasn’t the only one: a half-dozen more got the same surprise invitation.... With Democrats holding control of Congress, Nelson and the others realized, the East Wing was formulating a big policy push that would use all available levers of the federal government to improve how Americans eat. They wanted a new law to make school lunches healthier; they saw ways to deploy federal stimulus dollars on new cooking equipment in public school cafeterias and to use government financing to get grocery stores into poor communities where fresh food wasn’t readily available. They wanted to overhaul the federal nutrition label so it confronted shoppers more directly with calorie counts. Even the more symbolic side of American food policy was coming under the microscope: A reboot of the decades-old “food pyramid” that told families how to balance a meal.You really got the sense that this is something that she was likely to take on,” recalled  I also enjoyed Danny Vinik's interesting poll of food policy experts. It seems revealing that most of the respondents would have supported stronger language in the Dietary Guidelines encouraging Americans to consume less meat (after all, that was the view of the more independent scientific Dietary Guidelines Advisory Committee), limits on healthy food marketing to kids, and state or local initiatives to tax soda.

    Man Urinates On Cornflakes Conveyor Belt; FDA Launches Criminal Probe “Products that could have been potentially affected were Rice Krispies Treats, Rice Krispies Treats cereal and puffed rice cake products, all of which would be past expiration date." That rather disconcerting bit comes from Kellogg’s and references an incident that apparently occurred in 2014 at a plant in Memphis, Tennessee.  In a video - originally uploaded to World Star Hip Hop on Friday - a worker appears to urinate on the assembly line. As The Daily Mail dryly notes, "At first it is not clear what he is urinating on, but as the self-shot cell phone video pans upwards, a conveyor belt leading to thousands of corn flakes can be seen. "[We] immediately alerted law enforcement authorities and regulators", a company spokesperson said. The FDA is conducting a criminal investigation into the matter but you shouldn't worry too much, because if you had any of the "potentially affected" products you apparently survived. They would all be past their expiration date at this juncture.  Here's the video for those who are inclined to view it: We suppose the question here is this: how often does this happen to your food? We'd imagine most people don't film their exploits and when they do, they don't upload them to the internet. We're reminded of another rather unfortunate incident that unfolded at Subway two years ago involving some bread.

    Vermont Officials Find Widespread Contamination in Water Wells Near Chemical Plant - WSJ: Vermont officials testing samples at drinking-water wells in North Bennington, Vt., found widespread contamination on properties near a closed chemical plant, Gov. Peter Shumlin announced on Tuesday. Of 67 samples taken this month, 52 private wells showed unsafe levels of perfluorooctanoic acid, Vermont officials said. Known as PFOA, perfluorooctanoic acid is used in various industrial and commercial products. The state plans to conduct soil samples starting Wednesday and has scheduled a community meeting to discuss findings and concerns. Public water supplies in North Bennington and nearby Bennington aren’t in danger, and only private wells have been found to be contaminated, officials said. Concerns about PFOA contamination in Vermont join growing worry about PFOA contamination near a factory in Hoosick Falls, N.Y., and reports of PFOA contamination near a plant in Merrimack, N.H. Saint-Gobain Performance Plastics Corp. operates the plants in Hoosick Falls and Merrimack, and used to operate the plant in North Bennington. In a statement, the Aurora, Ohio, company said it was cooperating with officials in all three states and is doing its own testing. The company said it isn’t required to do so since the EPA hasn’t ruled PFOA “to be a regulated or hazardous substance.” It also said none of its facilities now use PFOA.

    Yes, Really: Flint Fee to See Staff Emails with 'Lead:' $172,000 –  Rick Snyder's administration put the free in Michigan's Freedom of Information Act by publicly posting 21,730 pages of documents about Flint's water problems. The City of Flint, by contrast, now sets a $172,203 fee -- with an $86,100 deposit up front -- for electronic copies of employees' messages with the word "lead" sent between January 2014 and January 2015 That high fee and advance payment are "due to the voluminous nature of the information requested," a city representative responds to the Mackinac Center for Public Policy, Tom Gantert writes at its blog: “The city is not in a financial position to waive the cost of staff time required to assemble responses to FOIAs,” said David B. Roth, assistant city attorney, in a letter explaining the charge. Roth acknowledged the high cost to complete the FOIA request, which he attributed to the broad nature of the Mackinac Center's request. “We would be happy to work with you to narrow your request and find the documentation and information which will be responsive to your request,” Roth wrote. The Mackinac Center's request was broad, but the public interest is served by knowing what city employees knew about the water system contamination.

    Flint Whistleblower: Health Impact of DC Water 20-30 Times Worse than Flint –  The Virginia Tech professor credited with sounding the alarm about poisoned water in Flint says the District of Columbia’s own long-running problems with lead exposure dwarf the crisis in Michigan. One day after appearing before Congress to blast federal officials for their handling of the Flint crisis, Marc Edwards told InsideSources that District of Columbia residents were exposed to higher levels of lead-tainted drinking water for a longer period of time than the Flint residents he and his team have been helping over the past year. Asked Wednesday to compare the health emergency in Michigan and a similar, years-long crisis that unfolded in Washington beginning in 2000, Edwards said by email the long-term health impact of lead-tainted water in the nation’s capital will be “20-30 times worse” than what’s happened in Flint. Contamination levels in D.C. peaked in 2004 at three times the levels seen in Flint, with 6.5 times as many people exposed for twice as long as in Michigan, Edwards told InsideSources, calling the Washington crisis — and the way it was handled by local and federal officials — “a nightmare.” Edwards, a civil and environmental engineer, has been involved in water-quality issues throughout his career and before Flint was best known for bringing attention to lead contamination in the District after he began finding unusually high lead levels in area homes beginning in 2003. He was one of the authors of a 2009 study that calculated as many as 42,000 District children were exposed to the contaminated water during the worst years of the crisis, 2000 to 2004, and are at risk of future health and behavioral problems linked to lead.

    We Are All Flint - Erin Brockovich - We saw Flint coming. In fact, I've seen this whole national water crisis coming for years. I see these issues happen, I know where they are. I know when they're going to hit. And I know they're going to come up, year after year after year. I know because tens of thousands of people write to me each month. I started creating a map and I have more than 10,000 communities across the U.S. recording their plights. People come to me, saying, there's too many children on our street with cancer, or we've had too many high school kids die of brain tumors, or we live next to a superfund site and we think our water is contaminated. After one comes forward, then five follow, then 20, 30, more. I read hundreds of these emails everyday, and sometimes you have to be able to read between the lines. I can sense the urgency. I know when what people are saying is just not right. Some emails clearly speak volumes, and I'm like, we need to jump on this now. It's about being responsive: Last February, when my investigator Bob Bowcock and I heard about Flint, he was on a plane the next day.  What has always stuck me the most were the instances where people's health was deteriorating. This has been true from the time I was a little girl to my work in Hinkley and beyond. What's that common denominator? It's usually the water. The one thing that sustains us all.

    Cities Most at Risk for Zika With Warmer-Than-Average Summer Forecasted - Forecasts for a warmer-than-average summer have scientists concerned about how far the mosquitos that carry Zika virus could spread in the U.S. A new report from the National Center for Atmospheric Research evaluates the risk to 50 U.S. cities from the Aedes aegypti mosquito, which carries Zika. U.S. map showing 1) Ae. aegypti potential abundance for Jan/July (colored circles), 2) approximate maximum known range of Ae. aegypti (shaded regions) and Ae. albopictus (gray dashed lines), and 3) monthly average number arrivals to the U.S. by air and land from countries on the CDC Zika travel advisory. Additional details can be found in the text.  The mosquito flourishes in warm, wet conditions, which more cities than usual may experience this summer due to rising global temperatures. Miami, Orlando, Savannah and Charleston are the highest-risk cities, while New York, Philadelphia and Washington DC are at moderate risk.

    1 in 4 Deaths Worldwide Caused by Preventable Environmental Factors  - Nearly one in four deaths worldwide is caused by preventable environmental factors like pollution, according to a new report from the World Health Organization.  There has been a significant rise in deaths due to non-communicable diseases in the past 10 years, which the report’s authors link to pollution and climate change, among other factors. Increasing air pollution and rapid industrialization have lifted China and India to the top of the unhealthy environment list.“If countries do not take actions to make environments where people live and work healthy, millions will continue to become ill and die too young,” said the World Health Organization director general.  For a deeper dive: New York Times, IB Times, AFP, Bloomberg, Independent, The Guardian, Washington Post, VOA News, Greenwire

    Environment behind nearly quarter of global deaths: WHO - The Economic Times: One in four deaths worldwide are due to environmental factors like air, water and soil pollution, as well as unsafe roads and workplace stress, the World Health Organization (WHO) said today. An estimated 12.6 million people died in 2012 as a result of living and working in unhealthy environments, 23 per cent of all deaths reported globally, according to the new study. "If countries do not take actions to make environments where people live and work healthy, millions will continue to become ill and die too young," warned WHO chief Margaret Chan in a statement. The report defines environmental causes broadly, drawing links between a long line of environmental risk factors like pollution, chemical exposure, climate change, ultraviolet radiation and access to firearms and more than 100 diseases and injuries. As many as 8.2 million of the deaths could be blamed on air pollution, including exposure to second-hand smoke, responsible for heart disease, cancers and chronic respiratory disease, the report said. Among the deaths attributed to environmental factors were 1.7 million caused by "unintentional injuries", including road accidents. The report also counted 846,000 diarrhoeal disease deaths among environmental mortalities, adding that many were linked to pollution and unsafe drinking water.The report found that most environmentally-linked deaths happened in South-East Asia, which accounted for 3.8 million such deaths in 2012, followed by the Western Pacific region with 3.5 million.

    Will all of economic growth be absorbed into life extension? - That is the subject of the new JPE paper by Charles I. Jones, here is the abstract: Some technologies save lives—new vaccines, new surgical techniques, safer highways. Others threaten lives—pollution, nuclear accidents, global warming, and the rapid global transmission of disease. How is growth theory altered when technologies involve life and death instead of just higher consumption? This paper shows that taking life into account has first-order consequences. Under standard preferences, the value of life may rise faster than consumption, leading society to value safety over consumption growth. As a result, the optimal rate of consumption growth may be substantially lower than what is feasible, in some cases falling all the way to zero. It is a well-known stylized fact that the share of health care in gdp is generally rising… Which is better?  A society with quite patient, very long-lived individuals with a static standard of living, or a society of people who die at eighty but manage to double living standards every generation? Which would we choose? Addendum: Here is an earlier, “less gated” version of the paper.

    Portland Becomes 7th City to Sue Monsanto Over PCB Contamination -- Portland, Oregon is suing Monsanto over contaminating the city’s waterways with polychlorinated biphenyls (PCBs), a highly toxic group of chemicals that endangers human health and the environment.  Portland City Council unanimously passed a resolution Wednesday authorizing city attorney Tracy Reeve to sue the biotech giant. “Portland’s elected officials are committed to holding Monsanto accountable for its apparent decision to favor profits over ecological and human health,” Reeve said in a statement. “Monsanto profited from selling PCBs for decades and needs to take responsibility for cleaning up after the mess it created.”Portland is now the seventh West Coast city to sue Monsanto over PCB contamination, joining Seattle, Spokane, Berkeley, San Diego, San Jose and Oakland. According to a statement from the plaintiff’s law firm Gomez Trial Attorneys, Portland has spent and will continue to spend significant public funds to investigate and clean up PCB contamination in the Willamette River and Columbia Slough. The chemical is also one of the main targets of the massive Portland Harbor Superfund cleanup project.

    ‘Monsanto Rider’ Would Shield Chemical Giant From Liability for Injuries Caused by PCBs in Public Schools The New York Times reported last month that Congressional Republicans have clandestinely inserted a provision into the Toxic Substances Control Act (TSCA) reauthorization bill that will give Monsanto permanent immunity from liability for injuries caused by its toxic polychlorinated biphenyls (PCBs). The long awaited and grievously needed bill is now in the Conference Committee for reconciliation with a companion Senate bill. The so-called “Monsanto Rider” would shield the chemical colossus from thousands of lawsuits by cities, towns, school districts and individuals, who have been injured by exposure to PCBs.  Monsanto marketed PCB-based caulking to schools and other municipal buildings throughout the U.S beginning in 1950, touting the chemical’s ability to contract and expand with changing temperatures. Studies suggest that any school built or renovated between 1950 and 1977 may contain PCBs.  PCBs are known human carcinogens and potent endocrine disruptors, which can interfere with physical, intellectual and sexual development in children. PCBs persist in the environment and bio-accumulate in animals and humans. According to U.S. Environmental Protection Agency (EPA), children exposed to PCBs can suffer damage to their immune, reproductive, nervous and endocrine systems. Two recent publications from U.S. EPA and the National Institute Environmental Health Science Children’s Center at UC Davis report that PCBs can disrupt early brain development, by hijacking the signals that promote normal neuron branching which increase the risk of brain damage, including autism. Between 1935 and 1977, Monsanto was the exclusive manufacturer of PCBs in the U.S. Congress banned the manufacturing of PCBs in 1979 over concerns about its potential to cause severe health and environmental injury.

    These Workers Are Going Blind From Onions. Watch the Doc About a Small Town in Vietnam -- Poverty isn't something new to me. Four years spent in Vietnam with long days on the road and longer nights, and numerous adventures in rural communities, it's something that just isn't shocking to me anymore.  But, I don't think anything really prepared me for my visit to Vinh Chau, Soc Trang: A town of 1000 blind and a 1000 disabled people.  It's both simple and complicated. There are about 700 people blind in one eye and 300 more blind in both eyes. Most of them are ethnic Khmer residents who farm, process or handle onions. Vinh Chau is one of, if not, the most fertile red onion production centers of Vietnam, and it is a major reason for their vision loss. As the workers peel onions, tear dust and the preserving chemicals enter their eyes, and the frequent rubbing of their eyes causes ulcers. Unfortunately there's really no other way to make money here unless you own land or work for the landowners, and there's little medical treatment available. There are also numerous disabled people from birth defects, likely caused by wartime chemicals meant to wipe out the jungles, living in this town. It's a troubled place no matter which way you spin it.

    How climate change will affect what we eat in 2050: One of the most important consequences of climate change will be its effect on agriculture. A lot of research has focused on food scarcity as the world heats up, but the connection between agriculture and health goes beyond mere calories. The World Health Organisation’s Global Burden of Disease reported that, in 2010, the greatest number of deaths worldwide was attributable to imbalanced diets, such as diets low in fruit and vegetables and high in red and processed meat. Climate change is likely to make the problem of imbalanced diets worse. In a new study, we estimated that climate change could lead to more than half a million additional deaths worldwide in 2050 as a result of changes in the composition of diet and body weight. To put this into context, the estimated number of deaths as a result of climate change-induced heat stress is about 100,000 deaths. And the additional deaths as a result of the greater spread of dengue and malaria is below 50,000. Building a model To analyse the effects of climate change on diets and body weight, we used a series of computer models. We initially used models that estimated changes in temperature and rainfall around the world under different climate scenarios. The results of these models were then used in global crop models which estimated changes in crop growth around the world. Our models showed that about half a million additional deaths would occur due to reductions in fruit and vegetable consumption alone. Climate-related reductions in red meat consumption mitigated part of that health burden, but not to a large degree.  We found that an increase in the proportion of people who are underweight would lead to about a quarter of a million additional deaths, but also that reductions in the proportion of people who are overweight or obese would lead to a similar proportion of avoided deaths.

    Climate change threatens staple crops in Africa, study says - Carbon Brief: Without emissions cuts, much of sub-Saharan Africa will become unsuitable for growing key crops during this century, a new study suggests. Up to 60% of areas that currently grow beans, and up to 30% of areas that grow maize and bananas could no longer be suitable in a warmer climate. Fundamental changes to farming may be needed in the coming decades to maintain food security, the researchers say. Staple crops Last week, Carbon Brief reported on how climate change could slow progress towards curbing malnutrition across the world. That research warned rising temperatures could affect availability of fruit, vegetables and staple crops. In today’s study, just published in Nature Climate Change, another group of scientists looks at how climate change could make areas of sub-Saharan Africa unsuitable for growing similarly important crops. The researchers picked nine major crops that make up around half of all the food grown in Africa. Using crop models, they simulated whether those fruits, vegetables and cereals could still be grown as the climate is predicted to change during this century. Their results suggest that if carbon emissions aren’t cut, large swaths of Africa will be unviable for growing such key crops as maize, beans and bananas. The maps below show estimates of when and where the climate is expected to become unsuitable for growing each of the nine crops.

    Climate change could cause 500,000 more deaths by 2050 | Toronto Star: Food scarcity and malnutrition, triggered by climate change, could lead to half a million extra deaths by 2050, grim new research indicates. The deaths, say researchers in England and the United States, could occur as a result of changes in diets and bodyweight from decreased crop productivity. The researchers found that fewer fruits and vegetables would be available as a result of climatic changes. That decrease will increase rates of heart diseases, strokes and cancer, they found. Three-quarters of the projected extra deaths will be in China and India. Unless action is taken to reduce greenhouse gas emissions, climate change would cut the fruit and vegetables available to people in 2050 by 4 per cent, the calories available by 3 per cent and the red and processed meat by 0.7 per cent, the study found. Published in the medical journal The Lancet last week, the study provides the most advanced projections yet of the effects climate change will have on food and health in 155 regions worldwide by the year 2050.

    The hidden driver of climate change that we too often ignore - Humans are making global warming worse, all right — but in more ways than you think. That’s the result of an important new study in Nature, which finds that the Earth’s land “biosphere” — defined as all the plants, animals and microorganisms living on the surface of the Earth (excluding the oceans) — is now a “net source” of greenhouse gases to the atmosphere. Thus, the biosphere is now adding to global warming in much the same way that all of our fossil fuels are. The research points the finger at phenomena like animal agriculture, rice cultivation and waste disposal as key features of climate change that don’t get much attention, but that overall are causing the Earth to heat up even more than it would otherwise. It’s yet another finding that underscores the importance of a sector that has, somewhat surprisingly, largely escaped attention in the climate debate: global agriculture. And the world will need to produce even more food to keep up with growing populations, says Tian. To understand the new study, you have to consider that greenhouse gases that warm the planet are far more numerous than carbon dioxide, which gets the lion’s share of the attention. There’s also methane, which causes much  more warming over a 10-year time horizon (but dissipates far more quickly), and nitrous oxide, to name a few. And these gases pack quite a punch. “The methane global warming potential is 28 times larger than carbon dioxide,” says Tian. “And nitrous oxide is 265 times greater than carbon dioxide, in terms of global warming potential” over 100 years, he added. “These two gases are really important non-CO2 greenhouse gases,” Tian said. Methane doesn’t just emerge from leaks from oil and gas operations — it is also belched by ruminants (i.e., cows) and emerges from wetlands, landfills and much more. Nitrous oxide, meanwhile, is emitted from nitrogen fertilizers used in agriculture, among other sources.

    Study Finds Farming, Not Fracking, Behind Rising Methane Levels  |  Rigzone - Farming, not hydraulic fracturing, is responsible for the rise in methane levels in the atmosphere since 2007, according to research from the New Zealand National Institute of Water and Atmospheric Research (NIWA). The amount of methane, a greenhouse gas and a major contributor to climate change, in the earth’s atmosphere is estimated to have grown by about 150 percent since 1750, according to a March 11 NIWA press statement. Between 1999 and 2006, scientists observed a plateau in the amount of methane in the atmosphere after a steady increase since pre-industrial times. However, methane levels start rising again after 2006, and they continue to grow today. “We found we could distinguish three different types of methane emissions,” said Dr. Hinrich Schaefer, an NIWA atmospheric scientist who led the study, in the press statement. One is the burning of organic material, such as forest fires. Another is fossil fuel production, and the third is formed by microbes that comes from a variety of sources such as wetlands, rice paddies and livestock. . Scientists were not surprised to see the decline in Soviet production, but were surprised to see that analysis of data since 2006 rules out fossil fuel production as the source of methane rising again. Around 2006, hydraulic fracturing started to rise in the United States, Asia’s economy picked up again, and coal mining increased. But these changes were not reflected in the atmosphere. . Previous studies also have determined that methane originated from an areas that includes South East Asia, China and India – regions that are dominated by rice production and agriculture. While Schaefer said it would be wrong to conclude that the study gives fossil fuels a clean bill, he noted that the agricultural process is the major process that needs to be examined to reduce methane levels.

    Global food production threatens to overwhelm efforts to combat climate change -- Each year our terrestrial biosphere absorbs about a quarter of all the carbon dioxide emissions that humans produce. This a very good thing; it helps to moderate the warming produced by human activities such as burning fossil fuels and cutting down forests. But in a paper published in Nature today, we show that emissions from other human activities, particularly food production, are overwhelming this cooling effect. This is a worrying trend, at a time when CO₂emissions from fossil fuels are slowing down, and is clearly not consistent with efforts to stabilise global warming well below 2℃ as agreed at the Paris climate conference. To explain why, we need to look at two other greenhouse gases: methane and nitrous oxide.   Apart from CO₂, there are two other main greenhouse gases that contribute to global warming, methane (CH₄) and nitrous oxide (N₂O). In fact, they are both more potent greenhouse gases than CO₂. The global warming potential of methane and nitrous oxide is 28 and 265 times greater than that of CO₂, respectively. The human emissions of these gases are largely associated with food production. Methane is produced by ruminants (livestock), rice cultivation, landfills and manure, among others. Other human-induced emissions of methane come from changes to land use and the effects of climate change on wetlands, which are major producers of global methane. Nitrous oxide emissions are associated with excessive use of fertilisers and burning plant and animal waste. To understand how much excess nitrogen we are adding to our crops, consider that only 17 of 100 units of nitrogen applied to the crop system ends up in the food we eat.

    Global Greenhouse Emissions Numbers from Agriculture | Big Picture Agriculture (infographic) I can't imagine trying to calculate these numbers which are included in this info graphic from the FAO. The emissions listed include forestry and other land uses, in addition to agriculture. Another 705 million tons CO2 is emitted from energy use in agriculture. The food sector itself would add a lot of heft to these numbers for transport, preparation, refrigeration, cooking, and packaging.

    Vietnam’s Mekong Delta hit by worst drought in years -- THE southern tip of Mekong Delta in Vietnam in the country’s prime fertile rice-growing region has been hit by the worst drought the country has seen in recent years. Accompanied by a saline intrusion, the drought is reported to have affected over a million people who face water shortages in the region. This has spurred China to dispense twice the amount of water from a hydropower station to aid the situation. Officials blamed the drought on the El Nino weather phenomenon and excessive construction of hydropower dams on the upper stream of the river, the Associated Press reported. Yesterday, director of the department at the Ministry of Agriculture and Rural Development Ma Quang Trung was quoted as saying the level of inland saline intrusion was unprecedented, resulting in damage to some 180,000 hectares (444,780 acres) of paddy fields.The Department of Crop Production had estimated that the dry spell would cost VND34 trillion (US$1.5 billion) to deal with the heavy damage caused by drought and saltwater intrusion. Earlier this week, Chung told local media that 10 percent of the 1.5 million hectares of rice was sowed in the winter-spring crop in the delta. He said an estimated one million tons of rice could be damaged by the saltwater intrusion, which is forecast to peak in mid-April.Meanwhile, the New Straits Times reported Friday that farmers in Malaysia’s ‘rice bowl’ have delayed planting due to the dry conditions.

    Zimbabwe says up to 4 million need food aid after drought | Reuters: The number of Zimbabweans requiring food aid has risen to 4 million, up from 3 million initially, a state-owned newspaper said on Tuesday, as the southern African nation grapples with its worst drought in more than two decades. An El Nino induced-drought has hit Zimbabwe hard and last month it appealed for $1.6 billion in aid to help pay for grain and other food. "Indications are that the figure of vulnerable households requiring food assistance could be as high as four million people," Public Service, Labour and Social Welfare Minister Prisca Mupfumira told the Herald newspaper. Mupfumira was not immediately available for further comment. She said government stocks of maize, the staple food, were 91,326 tonnes as of March 10 - enough to last three months. Mupfumira did not give details of stocks held by private millers and farmers. The government has issued licenses to private millers to import grain while organizations such as the United Nations' World Food Programme are feeding 1 million people. The drought and low mineral commodity prices are taking their toll on the economy, with finance minister Patrick Chinamasa saying last week it was "under siege". Farmers have already lost cattle and crops and fear more pain as the year progresses. The El Nino weather pattern has also brought poor rains to other countries in the region, including South Africa, its biggest maize grower.

    Devastating photos show lakes vanishing around the world - Warm temperatures and lower snowfall rates are causing several lakes, like Lake Poopó in Bolivia, to vanish. Here are some troubling images of lakes around the world that are vanishing.

    Toxic Algae Will Thrive As The Planet Warms -  Last summer, one of the largest toxic algal blooms in recorded history hit the West Coast, shutting down fisheries from California to Washington. Scientists were seeing cells of the toxic bloom as far south as Mexico, and as far north as Homer, Alaska. At the time, Vera Trainer, manager of the Marine Biotoxin Program at NOAA’s Northwest Fisheries Science Center, told ThinkProgress that the bloom was uniquely widespread, “more so than we’ve seen in the past.”  But scientists now are saying that, with climate change, toxic algal blooms like the one seen last summer might become more common along the Pacific coastline, impacting marine communities as far north as Alaska with much more consistency than in the past.In a new study published in the journal Harmful Algae, researchers from the National Oceanic and Atmospheric Administration (NOAA) found the presence of domoic acid — the same toxic acid that shut down West Coast fisheries last summer — in marine mammals along the Alaskan coastline.  Algal blooms happen when microscopic marine algae proliferate in huge numbers. Not all algal blooms are toxic, but some kinds of algae do produce toxins, such as domoic acid, which is a powerful and fatal neurotoxin. Harmful algal blooms aren’t uncommon for the Pacific, normally occurring during the spring months when the water temperature is at its highest. But as climate change leads to both rapid declines in sea ice and increased ocean temperatures, the geographic range and duration of these toxic algal blooms is expected to increase. That’s because algae thrive in warmer waters, which both encourage growth in certain kinds of algae and discourage a mixing of ocean waters. Alaskan waters are some of the most rapidly warming waters in the world, having risen by three degrees Celsius in the past decade. “The waters are warming, the sea ice is melting, and we are getting more light in those waters,” Lefebvre told the Washington Post. “Those conditions, without a doubt, are more favorable for algal growth. With that comes harmful algae.”

    Risk level rises for North American forests – Drought and climate change are now threatening almost all the forests of the continental US, according to new research. Scientists from 14 laboratories and institutions warn in the journal Global Change Biology that climate is changing faster than tree populations can adapt.  Existing forests, effectively and literally rooted to the spot, are experiencing conditions hotter and less reliably rainy than those in which they had evolved.“Over the last two decades, warming temperatures and variable precipitation have increased the severity of forest droughts across much of the continental United States,” says James Clark, professor of global environmental change at Duke University, North Carolina. He and colleagues synthesised hundreds of studies to arrive at a snapshot of changing conditions and a prediction of troubles ahead.  Other research has already delivered ominous predictions for the forests of the US southwest, but the scientists warn that other, normally leafier parts of the continent face increasing stress. Dieback, bark beetle infestation and wildfire risk may no longer be confined to the western uplands. “While eastern forests have not experienced the types of changes seen in western forests in recent decades, they too are vulnerable to drought and could experience significant changes with increased severity, frequency, or duration in drought,” the authors say.Professor Clark puts it more bluntly: “Our analysis shows virtually all US forests are now experiencing change and are vulnerable to future declines. Given the uncertainty in our understanding of how forest species and stands adapt to rapid change, it’s going to be difficult to anticipate the type of forests that will be here in 20 to 40 years.”

    America’s year without a winter: The 2015-2016 season was the warmest on record - The Lower 48 states had its warmest winter in 121 years of record-keeping, NOAA announced this morning. Temperatures averaged over the country between December and February were nearly five degrees above the 20th-century average. Every state but two were warmer than normal and all six New England states set winter records. The warmth of this winter marked a stunning reversal from the previous year in New England, when it witnessed one of its harshest winters on record. Rather than punishing cold and paralyzing winter storms, temperatures regularly shot up into the 40s and 50s. Burlington, Vt., and Concord, N.H., tallied just half of their normal snowfall. Bare spots were common at ski resorts normally up to their shoulders in snow.  “If we didn’t have snowmaking, it would have been a disaster,” The lack of winter extended into the Last Frontier. Alaska logged its second warmest winter on record, almost 11 degrees above average. At the end of February, Anchorage had no snow on the ground for the first time on record during the month. An index that ratesthe severity of winter at 52 locations across the Lower 48 found only three where winter conditions were classified harsher than “average.” Most places earned a mild-moderate winter rating. Several were record mild.

    Record-Shattering February Warmth Bakes Alaska, Arctic 18°F Above Normal  - Joe Romm - How hot was it last month globally? It was so hot that the famed Iditarod sled race in Alaska brought in extra snow from hundreds of miles away by train.  It was so hot that NASA now reports that last month beat the all-time global record for hottest February by a stunning 0.85°F, when such records are usually measured in hundredths of a degree. It was so hot last month that large parts of the Arctic averaged more than 18°F (10°C) above normal. Not only did last month easily set the record for lowest February Arctic sea ice extent, as the National Snow and Ice Data Center (NSIDC) reported, but Arctic sea ice growth has been almost flat for over a month during a time when it normally soars to its annual maximum. It was so hot that February had the single biggest recorded monthly temperature anomaly (deviation from the 1951-1980 average temperature) — a whopping 2.4°F (1.35°C) above the average temperature for the month. The previous record deviation from the average — 2.0°F (1.13°C) — you may recall, was set in January.  In fact, as The Weather Channel noted, “The five largest monthly global warm anomalies in NASA’s database have all occurred within the past five months”:

    February breaks global temperature records by 'shocking' amount -- February smashed a century of global temperature records by “stunning” margin, according to data released by Nasa. The unprecedented leap led scientists, usually wary of highlighting a single month’s temperature, to label the new record a “shocker” and warn of a “climate emergency”. The Nasa data shows the average global surface temperature in February was 1.35C warmer than the average temperature for the month between 1951-1980, a far bigger margin than ever seen before. The previous record, set just one month earlier in January, was 1.15C above the long-term average for that month. “Nasa dropped a bombshell of a climate report,” said Jeff Masters and Bob Henson, who analysed the data on the Weather Underground website. “February dispensed with the one-month-old record by a full 0.21C – an extraordinary margin to beat a monthly world temperature record by.”  “This result is a true shocker, and yet another reminder of the incessant long-term rise in global temperature resulting from human-produced greenhouse gases,” said Masters and Henson. “We are now hurtling at a frightening pace toward the globally agreed maximum of 2C warming over pre-industrial levels.” The UN climate summit in Paris in December confirmed 2C as the danger limit for global warming which should not be passed. But it also agreed agreed to “pursue efforts” to limit warming to 1.5C, a target now looking highly optimistic.

    February Smashes Earth's All-Time Global Heat Record by a Jaw-Dropping Margin - On Saturday, NASA dropped a bombshell of a climate report. February 2016 has soared past all rivals as the warmest seasonally adjusted month in more than a century of global record keeping. NASA’s analysis showed that February ran 1.35 °C (2.43 °F) above the 1951-1980 global average for the month, as can be seen in the list of monthly anomalies going back to 1880. The previous record was set just last month, as January 2016 came in 1.14 °C above the 1951-1980 average for the month. In other words, February has dispensed with this one-month-old record by a full 0.21 °C (0.38 °F) -- an extraordinary margin to beat a monthly world temperature record by. Perhaps even more remarkable is that February 2015 crushed the previous February record -- set in 1998 during the peak atmospheric influence of the 1997-98 “super” El Niño that’s comparable in strength to the current one -- by a massive 0.47 °C (0.85 °F). Because there is so much land in the Northern Hemisphere, and since land temperatures rise and fall more sharply with the seasons than ocean temperatures, global readings tend to average about 4 °C cooler in January and February than they do in July or August. Thus, February is not atop the pack in terms of absolute warmest global temperature: that record was set in July 2015. The real significance of the February record is in its departure from the seasonal norms that people, plants, animals, and the Earth system are accustomed to dealing with at a given time of year. Averaged on a yearly basis, global temperatures are now around 1.0 °C beyond where they stood in the late 19th century, when industrialization was ramping up. Michael Mann (Pennsylvania State University) notes that the human-induced warming is even greater if you reach back to the very start of the Industrial Revolution. Making matters worse, we are committed to at least 0.5 °C of additional atmospheric warming as heat stored in the ocean makes its way into the air, as recently emphasized by Jerry Meehl (National Center for Atmospheric Research). In short, we are now hurtling at a frightening pace toward the globally agreed maximum of 2.0 °C warming over preindustrial levels.

    Drenched by 'March Miracle,' Northern California reservoirs inch toward capacity -- A series of storms pushed California’s biggest reservoir past its historical average for mid-March this weekend and put the second largest one on track for doing the same by Monday afternoon, officials said. Together the Lake Shasta and Lake Oroville reservoirs have the capacity to hold more than 8 million acre feet of water and after a wet weekend in Northern California, they were 79% and 70% full, respectively, by Monday morning, according to the state Department of Water Resources. Some people have referred to the recent series of powerful storms that have dumped rain and snow on the Sierra as the “March Miracle.” The storms filled Lake Shasta above its average for this time of year and by 2 p.m. Monday, Lake Oroville could surpass its historic average, said DWR spokesman Doug Carlson. Lake Shasta is the state's largest reservoir. Neither reservoir has reached its historical average in nearly three years, data show. “I don’t know if people here will be dancing in their cubicles when [Oroville] hits the historic average, but it will be the first time it’s done that for the duration of the drought.” Carlson said. According to the National Weather Service, it rained nearly a foot in El Dorado County and more than nine inches in Shasta County between Friday and Monday mornings. Since March 1, the Shasta reservoir has received more than 16 inches of rain. On March 6, Lake Oroville saw its biggest single-day rise in 12 years, DWR reported. If the soggy month continues, both reservoirs could actually fill to the brim by April, officials say. Neither reservoir has been full since about the beginning of the drought, officials said.

    What Weather Is the Fault of Climate Change? -  One view holds that no single storm or drought can be linked to climate change. The other argues that all such things are, in some sense, “caused” by climate change, because we have fundamentally altered the global climate and all the weather in it.While true, this “all in” philosophy doesn’t adequately emphasize the fact that not all of the extreme weather we experience today has changed significantly. Some of it is just, well, the weather.But some of our weather has changed significantly, and now a new report from the National Academies of Sciences, Engineering and Medicine has outlined a rigorous, defensible, science-based system of extreme weather attribution to determine which events are tied to climate change.Like the surgeon general’s 1964 report connecting smoking to lung cancer, the report from the National Academies connects global warming to the increased risk and severity of certain classes of extreme weather, including some heat waves, floods and drought.This is an important development. Climate change can no longer be viewed as a distant threat that may disrupt the lives of our grandchildren, but one that may be singled out as a factor, possibly a critical factor, in the storm that flooded your house last week. The science of extreme weather attribution brings climate change to our doorsteps.Understanding how climate change is affecting extreme weather is critical for insurers, policy makers, engineers and emergency managers as they assess risk and figure out how to make communities more resilient. This knowledge can help to steer decisions on where and how to build or rebuild after a storm or flood, or whether to build or rebuild at all.

    Singing Science: Weather vs. Climate to Adele's "Hello"

    El Niño’s Disastrous Worldwide Consequences Are Just Getting Started - As far as El Niños go, the one we’re experiencing now is a doozy. In fact, it’s probably the strongest that’s ever been measured. In the simplest terms, that means one thing: Get ready for another year of wild weather. In California, that wildness is on full display this week. On Monday, a line of thunderstorms rattled through the Los Angeles metro region during the morning commute, bearing lightning, hail, and wind gusts near hurricane force. Over the weekend, nearly a foot of rain fell in parts of the San Francisco Bay Area, and heavy snows near Lake Tahoe and on Mammoth Mountain measured nearly 60 inches. The extreme weather was part of a series of sprawling storm systems lined up to impact the West Coast—a classic feature of strong El Niño winters. Over the past month or two, the ocean temperature in the tropical Pacific has started to decline, but that doesn’t mean El Niño’s effects are waning. In fact, due to an atmospheric lag, extreme weather will likely keep getting worse for several more months. Though El Niño is typically the most powerful player among the world’s constantly feuding meteorological morphologies, it takes months for its burst of heat to filter around the globe from the tropical Pacific. Ocean temperatures in the El Niño regions of the Pacific usually peak in November or December, but globally-averaged temperatures don’t typically peak until between February and July of the following year. In other words, it might be awhile before global weather starts to return to a more normal state. That lag means weather patterns will remain skewed throughout much of 2016. It’s also how we know that, even though 2016 is still just getting started, it's already a shoo-in for the warmest year we’ve ever experienced as a civilization—beating 2015, which beat 2014, which beat 2010, which beat 2005, which beat 1998, which beat … you get the idea.

    Canada spending millions on uneconomical seal hunt: A newly released government document says the Canadian government is spending $2.5 million to monitor the annual commercial seal hunt, the largest marine mammal cull on the planet, which had an export value of only $500,000.  Canada's annual commercial seal hunt, which mainly takes place during March and April, sees thousands of young seals clubbed to death for their furs. An estimated 95-98 per cent of the seals killed during the commercial hunt are three weeks to three months old, sparking calls for a ban on seal hunting from animal activists. Commercial hunt has shrunk in recent years as major export markets such as the European Union, the United States and Russia have banned import of seal-fur products over animal-welfare concerns. Still, more than 38,000 seals were killed in the year 2015.  A government document obtained by Humane Society International, Canada reveals that the federal government spends about 2.5 million dollars annually to monitor the commercial seal hunt, which had an export value of only $500,000 in 2014 making the hunt economically nonviable.

    Remote Utah Enclave Becomes New Battleground Over Reach of U.S. Control - The remote juniper mesas and sunset-red canyons in this corner of southern Utah are a paradise for hikers and campers, a revered retreat where generations of American Indian tribes have hunted, gathered ceremonial herbs and carved their stories onto the sandstone walls.Today, the land known as Bears Ears — named for twin buttes that jut out over the horizon — has become something else altogether: a battleground in the fight over how much power Washington exerts over federally controlled Western landscapes.At a moment when much of President Obama’s environmental agenda has been blocked by Congress and stalled in the courts, the president still has the power under the Antiquities Act of 1906 to create national monuments on federal lands with the stroke of a pen. A coalition of tribes, with support from conservation groups, is pushing for a new monument here in the red-rock deserts, arguing it would protect 1.9 million acres of culturally significant land from new mining and drilling and become a final major act of conservation for the administration.But this is Utah, where lawmakers are so angry with federal land policies that in 2012 they passed a law demanding that Washington hand over 31 million acres managed by the Bureau of Land Management and the Forest Service to the state. The federal government — the landlord of 65 percent of Utah’s land — has not complied, so Utah is now considering a quixotic $14 million lawsuit to force a transfer. Conservative lawmakers across the state have lined up to oppose any new monument. Ranchers, county commissioners, business groups and even some local tribal members object to it as a land grab that would add crippling restrictions on animal grazing, oil and gas drilling and road-building in a rural county that never saw its share of Utah’s economic growth. Unemployment here is 8.4 percent, more than double the state average.

    More Plastic Than Fish in Oceans by 2050 Helps Drive Calls for Reduced Plastic Use: Our world is made of plastic. From grocery bags to water bottles to food containers, it is nearly impossible to be a consumer in today's market without producing plastic waste on a daily basis. This plastic is infiltrating our oceans at alarming rates, which could finally force us to address our plastic consumption. A combination of high functionality and low production costs has made plastic one of the most popular materials in the world. In the past 50 years, plastic use has increased 20 times. If current consumption rates continue, plastic use will double again in the next 20 years.  All of this will result in polluted, poisoned, plastic-filled oceans. According to a recent study by the World Economic Forum,, there may be more plastic than fish in the world's oceans by 2050. In order to combat this, many believe it's time to reduce our plastic use and even ban certain plastic products outright. Once plastic enters our oceans, it has a severe impact on the marine environment. Birds, whales, sea turtles and other animals often mistake plastic for food. Scientists are currently researching the long-term impacts of this, including potential impacts on human health. When plastic doesn't end up in a marine animal's stomach, it washes up on beaches, where cleanup crews experience the world's plastic problems firsthand. According to Alys Arenas, beach programs manager at Heal the Bay, plastic products, especially water bottles and straws, are some of the most prominent items found on beaches.

    Millions projected to be at risk from sea-level rise in the continental United States -- Sea-level rise (SLR) is one of the most apparent climate change stressors facing human society1. Although it is known that many people at present inhabit areas vulnerable to SLR2, 3, few studies have accounted for ongoing population growth when assessing the potential magnitude of future impacts4. Here we address this issue by coupling a small-area population projection with a SLR vulnerability assessment across all United States coastal counties. We find that a 2100 SLR of 0.9 m places a land area projected to house 4.2 million people at risk of inundation, whereas 1.8 m affects 13.1 million people—approximately three times larger than indicated by current populations. These results suggest that the absence of protective measures could lead to US population movements of a magnitude similar to the twentieth century Great Migration of southern African-Americans5. Furthermore, our population projection approach can be readily adapted to assess other hazards or to model future per capita economic impacts.

    13 Million Americans at Risk From Rising Seas -- More than 13 millions Americans could be at risk from sea level rise and related flooding by the end of the century, triple the latest estimates, according to a new study in Nature Climate Change.  Based on the high-end of the National Oceanic and Atmospheric Administration’s sea level rise projections, the study argues that current projections don’t take into account rapid population growth in coastal areas. Nearly 50 percent of the at risk population would be in Florida and an another 20 percent in other parts of the Southeast. The research also estimates that the cost of relocating the at risk communities would be approximately $14 trillion. For a deeper dive: News: New York Times, Carbon Brief, TIME, Reuters, Climate Central, USA Today, National Geographic, The Guardian, Mashable, Christian Science Monitor, Miami Herald,, Greenwire

    Sea level rise is accelerating; how much it costs is up to us -- As humans emit heat-trapping gases into the atmosphere, it’s causing the Earth to warm. It’s also causing the ocean waters to rise. In fact, water rise is one of the clearest signatures of a warming world. The questions we want to answer are, how much will sea levels rise, and how fast? </">The prestigious Proceedings of the National Academy of Sciences recently published a series of sea level rise papers. One paper covers the Antarctic ice sheet, and the authors look back in time at the world’ largest ice sheet.  What they find is that the atmospheric concentration of carbon dioxide will soon be at levels not encountered since the Miocene period (23 million to 5 million years ago).  A second paper published by Roelof Rietbroek and colleagues looked at the sources of sea level rise.  They conclude that the sea level rise from thermal expansion is higher than previously reported. The also find the water rise from melting of ice is consistent with measurements taken of ice melt around the world. Finally, they find that while the global oceans are rising steadily, there is tremendous regional variation so that some areas have very fast ocean water rise while others have slow ocean rise (or even ocean drop).  The third paper uses statistics to find the relationship between temperature and sea level for the Common Era. They find that the sea level rise accelerated in the early 19th century and the rate of water rise in the last century is likely higher than it has been in 2,700 years. The final part of the foursome uses historical information on sea level and climate change projections to make predictions about where ocean levels will be in the next 100 years or so. This study tries to separate how much sea level will rise because of various contributors, such as thermal expansion, melting mountain glaciers, the Greenland ice sheet, and the Antarctic ice sheet.

    NASA: Greenland is melting and it's time to pay attention -- Yes, yes, Greenland is melting. You already knew that…probably. And the giant flux of fresh water pouring out of the second largest ice sheet on the planet isn’t slowing down anytime soon. Greenland’s ice melt is actually accelerating. In the last decade alone, NASA’s twin GRACE satellites measured it shedding 2 trillion tons of ice like a fire hose pouring fresh water into the North Atlantic. But it’s easier to focus on politics, celebrity gossip, reality TV and cat videos than on Earth’s climate. It seems like everyone’s all “Greenland? Who cares. Whatever. Next.” And that upsets me.Is it really that easy to pretend the effects of global warming don’t exist?We overlook Greenland ice loss at our own peril. It’s one of the largest contributors to accelerating sea level rise, and in the U.S. alone, nearly 5 million people live in 2.6 million homes at less than 4 feet above high tide. If you happen to be one of them, you should definitely pay attention to Greenland.    Fortunately for all of us, NASA is paying attention to Greenland in a big way. We’re so concerned about the amount of ice loss that we’ve named a Greenland observing expedition Oceans Melting Greenland, or OMG for short, because that's the most appropriate response to the phenomenon.This week, OMG heads up north on one of NASA’s G-III modified airplanes to continue a five-year mission that will look closely at how warming ocean water interacts with glaciers surrounding Greenland and melts them. The project began this past year by mapping undersea canyons via a ship equipped with an echo sounder. For this next part of the investigation, a radar instrument attached to the bottom of the G-III, called the Airborne Glacier and Land Ice Surface Topography Interferometer (GLISTIN-A), will be able to measure precisely how much the oceans are eating away at the edges of the ice on a glacier-by-glacier basis.

    Developers don't get it: climate change means we need to retreat from the coast  -  Guardian: Sea-level rise may be the most predictable outcome of climate change. Expanding warmer waters and melting land ice both contribute to flooding – and scientists agree that we are locked into sea-level rise for centuries to come. The question is not if we will retreat from the coast, but when. Still, the rush to develop the coast occurs at a maddening pace. We now know that 13.1 million people are at risk of flooding along the US coast by the end of this century. A new study published in Nature Climate Change further suggests that massive migration will occur unless protective measures are taken. Since sea-level rise will speed up after the end of the century due to increased glacier and ice sheet melting, the flooding we face in this century is just the tip of the iceberg. The problem is particularly severe along our 3,000-mile low-lying sandy barrier island coast extending, with a few breaks, all the way from the South Shore of Long Island to the Mexican border. Along this long barrier island coast, Florida has the longest and most heavily developed shoreline. In Miami, a city perilously perched atop a very porous limestone, two multibillion-dollar construction projects are under way, despite the fact that parts of the city routinely flood during high tides and that widespread flooding by the rising sea in a few decades is a virtual certainty. No sea walls, levees or dikes can stop the rising waters from flowing through the underlying spongy limestone and into the city. Miami is ultimately doomed.

    Ice Shelf Twice the Size of Manhattan Is About to Break Off From Antarctica  -- NASA scientists fear that a growing crack in the Nansen Ice Shelf may cause it to break free from the Antarctic coast and form a massive iceberg more than twice the size of Manhattan. “Over the course of two years, a small crack grew large enough to spread across nearly the entire width of the Nansen Ice Shelf,” NASA said in a post last week. Ice shelves are thick plates of coastline ice that float over the ocean. This particular one, Nansen, measures about 20 miles wide and 30 miles long. A team of scientists first noticed the crack in 2013, but two NASA scientists Christine Dow and Ryan Walker discovered in December 2015 that the crack had grown substantially. Dow and Walker were visiting the ice shelf to install GPS stations on it to track how it was affected by tides. When they flew over the area, they realized that it was no longer a small crack.

    How cheap oil is undermining Obama's fuel-economy rules - One of the central planks in President Obama's climate plan is a rule to ratchet up fuel economy standards through 2025. New US cars and light trucks are supposed to get better and better mileage with each passing year. At least, that was the dream. But now cheap oil is messing that up. Recent data from the Transportation Research Institute at the University of Michigan shows that overall fuel economy for new cars, SUVs, vans, and pickup trucks sold in the United States has been stagnating ever since oil prices crashed last year:  This chart seems a little counterintuitive. How can fuel economy suddenly be flat if fuel economy standards are supposed to keep rising through 2025? The crucial thing to understand here is that Obama's fuel economy rules — known as CAFE standards — are "footprint-based." That is, every new car sold in the US has to get steadily more efficient with each model introduced between 2011 and 2025. But bigger car models have looser mileage requirements than smaller car models. So if consumers start shifting to larger vehicles with bigger "footprints," then overall fuel economy will rise more slowly — even if all models are getting more efficient. There's evidence that this is exactly what's now happening. During the late 2000s, when crude oil prices were high, Americans started shifting away from gas guzzlers. But ever since the oil price crash last year, gasoline has been cheap, averaging less than $2 a gallon nationally, and SUV sales have soared.

    Cheap Oil Is Undermining the Success of Nearly Every Climate Cleanup Plan - Scientific American: few months ago at the Paris climate talks, President Barack Obama and a panoply of world leaders talked at length about the importance of reducing carbon dioxide pollution associated with burning coal, the largest source of greenhouse gases. So far there is only one way to do that without pulling the plug on coal altogether: carbon capture and storage (CCS), a process by which CO2 is pulled from a smokestack before it escapes into the air and is then buried deep underground. Nearly every plan to mitigate global warming includes CCS, yet few countries have adopted the technology because there is little incentive to make the costly investment. Decades ago, however, the U.S. found a clever way to make the method economically viable: tie CCS to oil recovery. And while the scheme seemed to work, low oil prices now are putting CCS—and therefore almost all climate cleanup plans—in jeopardy. Oil-field workers first pumped carbon dioxide down into oil wells in 1972. Called enhanced oil recovery (EOR), the technique boosts the amount of petroleum that a well yields because the gas eases the flow of the oil, restores pressure underground to force more oil to the surface, and slips into nooks and crannies that other aids, such as water, will simply flow around. During the process, a portion of CO2 becomes trapped underground like the oil before it. “It will stay there for eternity,” says Richard Esposito, a geologist who has worked to develop CCS at the coal-burning electric utility Southern Company. This arrangement—using CO2 to get oil—is one of the few ways to make carbon capture pay,

    Reducing Carbon Emissions Won’t Halt Economic Growth - naked capitalism Yves here. I am sure a lot of readers will object to the thesis of this Real News Network show. But the reality is that a lot of minor conservation efforts have a big impact. Many readers are old enough to remember that during the 1970s energy crisis, office building were ordered to keep their thermostats at 77 degrees in the summer. I have to confess to being a bad actor by turning on a space heater when it gets cold in my apartment, rather than get a heated mat to put under my feet, which I am pretty sure would do pretty much the same job more efficiently. I wonder how Amazon would fare if it had to pay (or more accurately, have its customers pay) the full cost of its greenhouse gas externalities.  One thing that is frustrating about this interview, however, is Bob Pollin’s tendency to stay at the 50,000 foot level and argue (correctly) that the net economic impact of full bore push to lower greenhouse gas emissions would be positive for growth. What he oddly omits is that the “bad for growth” is a big fat phony excuse for a different set of issues: a lot of rice bowls of currently powerful incumbents would need to be broken. Start with airline flight. That would need to be taxed in a big time way to make airline ticket prices reflect its environmental cost. You can expect a lot fewer family get-togethers at Thanksgiving and the Christmas holidays. The one upside would be that private jets would be whacked even harder. And the US cannot pretend to be serious on this front if it does not make one of our more profligate energy users, the armed forces, similarly more parsimonious in how it uses energy.  To the Real News Network interview: (video & transcript)

    IEA: Carbon dioxide emissions flat as economy grows - Oil & Gas Journal: Emissions of carbon dioxide remained unchanged for the second year in a row in 2015 while the global economy continued to grow, according to preliminary data from the International Energy Agency. CO2 emissions totaled 32.1 billion tonnes last year, about their level since 2013. EIA said electricity generated by renewable energy “played a critical role.” Renewable energy accounted for about 90% of new electricity generation in 2015, IEA said. Of that increment, wind accounted for more than half. The global economy, meanwhile, grew by 3.1% in 2015 after growing by 3.4% in 2014, “offering further evidence that the link between economic growth and emissions growth is weakening,” IEA said. In more than 40 years of IEA records, past periods of stalled or declining CO2 emissions have been associated with global economic weakness—in the early 1980s, 1992, and 2009. Energy-related CO2 emissions declined in China and the US, the two largest emitters, in 2015. China’s emissions dropped by 1.5% as economic restructuring lowered activity of energy-intensive industries and government efforts reduced coal use in power generation. Emissions in the US fell by 2%, largely because of the switch to natural gas from coal in electricity generation.

    India's big move into solar is already paying off - Mar. 7, 2016: India's massive bet on solar power is paying off far earlier than anticipated. The price of solar power has plummeted in recent months to levels rivaling that of coal, positioning the renewable source as a viable mainstream option in a country where 300 million people live without electricity. Solar prices are now within 15% of coal, according to KPMG. If current trends hold, the consultancy predicts electricity from solar will actually be 10% cheaper than domestic coal by 2020. And that could turn out to be a conservative forecast. At a recent government auction, the winning bidder offered to sell electricity generated by a project in sunny Rajasthan for 4.34 rupees (6 cents) per kilowatt hour, roughly the same price as some recent coal projects. "Solar is very competitive," said Vinay Rustagi of renewable energy consultancy Bridge to India. "It's a huge relief for countries like India which want to get more and more solar power." Prime Minister Narendra Modi has made access to electricity a top priority, and has set the goal of making 24-hour power available to all 1.3 billion Indians. Currently, even India's biggest cities suffer from frequent power outages.To improve the power supply, Modi has set the goal of bringing 100 gigawatts of solar-based power online by 2022, a twenty-fold increase from current levels. Infrastructure must also be improved and the 280 gigawatt electric grid needs to be expanded and modernized.

    USA uses TPP-like trade-court to kill massive Indian solar project - The Jawaharlal Nehru National Solar Mission was on track to deliver deploy 20,000 MW of grid connected solar power by 2022 ("more than the current solar capacity of the world’s top five solar-producing countries combined") but because India specified that the solar panels for it were to be domestically sourced, the USA sued it in WTO trade court and killed it. The USA has its own domestic solar initiatives that generally have "buy local" rules, but those are permissible under the WTO. The WTO court ruled that India's buy-local rules were not, and ordered the initiative's cessation despite its role in helping India to meet its obligations under the United Nations Framework Convention on Climate Change (UNFCCC). The Trans Pacific Partnership, a secretly negotiated trade agreement, expands the sorts of powers the WTO creates to allow multinationals to sue governments to repeal policies that undermine their profitability. Expect lots more of this in the future if the TPP passes. By putting pressure on India’s solar program, and by hiding behind the biased WTO agreements, the United States wants to boost its solar exports to India, which it argues have fallen by 90% from 2011, when India imposed the rules. Claiming that India was unfairly restricting access to American suppliers, US trade representative Michael Froman justified the perverse move in February 2014: “These domestic content requirements discriminate against US exports by requiring solar power developers to use India- manufactured equipment instead of US equipment. These unfair requirements are against WTO rules, and we are standing up today for the rights of American workers and businesses.”

    Preview of the TPP? America Just Blocked a Massive Solar Project in India: - 1 million American homes have solar panels as of February 2016. However, the United States dragged India to the World Trade Organization claiming that India’s efforts to boost local production of solar cells and solar modules violated WTO rules.Just recently, a WTO panel has ruled that the domestic content requirement (DCR) imposed under India’s National Solar Mission (NSM), is inconsistent with its archaic treaty obligations under the global trading regime. The requirement in question mandates a percentage of components to be sourced locally, to boost homegrown production of solar cells and solar modules. Though India argued that NSM helps the country meet its climate commitments under the United Nations Framework Convention on Climate Change (UNFCCC), the WTO rejected the argument. They stated that domestic policies seen as violating WTO rules, cannot be justified on the basis that they fulfill UNFCCC or other international climate commitments. Like seriously?Reuters reported that the US Trade Representative’s office called the ruling “a significant victory that would hasten the spread of solar energy across the world and support clean-energy jobs in the United States.” Dan Whitten, vice president of communications for the Solar Energy Industries Association, told PV-Tech: “The WTO dispute settlement panel’s decision will clear the way for significant and rapid deployment of solar energy in India and can create jobs at home. This decision helps us bring clean energy to the people of India, as that nation’s demand for electricity rapidly grows. We look forward to working with our solar industry colleagues in India to help grow the solar supply in both our markets and around the world.”

    The world’s biggest polluter is now the global leader in renewable-energy spending - Quartz: In the past five years, China has become the top investor in renewable energy, far outstripping the European Union, the former market leader.    In 2015, cumulative sales of electric vehicles in China reached 450,000, 50% higher than in the EU. For the first time in 2014, China spent more on research and development of renewables than Europe. Ten years ago, Europe saw China as a market for its own green exports, Mabey said. “Today, China is on the verge of dominating the global clean energy economy. The EU must act decisively to stay in the race,” he said. China is building the infrastructure for cleaner electricity at the world’s fastest rate. And that’s a lot: globally last year, up to 90% of new energy capacity came from renewable sources, according to a report this week from the International Energy Association. China’s coal consumption began falling in 2014 for the first time this century, and last year its carbon emissions followed, falling by 1.5%.

    The U.S. Is Paying — Some — to Help Poorer Countries Adjust to Climate Change - This March, the United States made a long-awaited $500 million deposit to the Green Climate Fund — a new global institution with a mandate to help developing countries build clean energy, climate-resilient economies. As the world’s leading historical polluter, the U.S. has pledged $3 billion to help capitalize the fund. The funds were released as the leadership of the GCF gathered in Songdo, South Korea to decide, among other things, which private banks, public agencies, and international institutions will be allowed to channel financial contributions. Getting money into the hands of governments and communities in the Global South to address climate change isn’t just an environmental imperative. It’s also an equity issue. Faith and development groups see these funds as critical to enabling people in developing countries to meet their basic needs for energy access, food security, and viable livelihoods — all the more so because the United States is responsible for a quarter of the climate pollution released into the atmosphere since industrialization. So while this initial $500 million is a welcome contribution, the Obama administration’s climate justice legacy will rest on whether Washington can come up with the remaining $2.5 billion it’s pledged. One of the most innovative ideas for raising that money is a tax on financial speculation, which could generate tens of billions each year. The idea is already moving forward in 10 European countries and gaining popularity in the United States, too.

    Duke Energy vs. Solar Energy: Battle Over Solar Heats Up in North Carolina -- Around the nation, big utility companies are successfully lobbying lawmakers and regulators to restrict individual and corporate access to solar power, denying people significant savings on electricity bills and the opportunity to take part in the growing green energy economy. In third-party solar financing, a non-utility company installs solar panels on a customer’s property at little or no up-front cost, sometimes selling the solar energy back to the customer at rates typically lower than a utility would charge.Duke Energy, the largest utility in the U.S., has so far succeeded in keeping third-party solar illegal in North Carolina, but conservative and liberal factions alike are trying to change that, in different ways.At least four states—Florida, Kentucky, Oklahoma and North Carolina—currently ban third-party sales of solar energy. Twenty states have murky laws and in the remaining 26, companies are allowed to install solar panels on customers’ roofs and sell energy generated from these panels to the customer. But major electric utilities that burn coal or natural gas are ill-equipped to change their business models to accommodate renewables, which explains their frequent opposition to state initiatives that expand solar access.

    Solar Power Is About To Get MUCH Cheaper -- No form of energy generation is perfect, and one unambiguous positive feature about solar is that it keeps getting better. Solar power systems today are less terrible than they were five years ago, and the ones from 2010 are better than the ones from 2005, etc.Solar City seems poised to continue that aggressive trend of improvement in solar power. The company is in the process of building an enormous $750 million factory in Buffalo, NY that will produce 10,000 solar panels per day, or one gigawatt of power generation capacity per year. Once completed, the plant will be the largest in North America, and one of the biggest in the world. It’s hard to overstate the potential importance of this factory. If done right, the plant could catapult America to be one of the leaders in solar power in the future in the same way that the Rouge River plant made Ford Motor Company one of the world’s leading auto manufacturers. Solar power is not going away and those who think it is are fooling themselves. It’s crucial therefore that America build a leadership role in the industry. America maintains its place as the world’s leading superpower on the back of the technology and profits that its leading companies produce. For all the talk about a rising China, the reality remains that the U.S. is far and away the dominant economic and business power. To continue to dominate new industries, America needs to provide a way for new companies to grow into leadership roles. The Solar City factory shows that the country is still doing a good job on that front.

    Environmental Policies and Economic Performance - OECD Insights   A dirty, rundown environment has quantifiable costs for the economy and the well-being of societies. For example, the welfare costs of air pollution from road transport alone are estimated to amount to around 1.7 trillion USD in OECD countries, 1.4 trillion USD in China and 0.5 trillion in India. Without adequate policy action, costs will continue to increase, and can have tangible effects on economic growth, for instance via reduced labour productivity. Similarly, the prospects for long-term growth are under stress – for example, climate change is projected to decrease global GDP by 1 to 3.3 % by 2060. These are of course, but a microcosm of all the environmental challenges we face. Yet, action to address environmental pressures often proceeds too slowly. Policymakers have long feared that stringent environmental policies may constrain competitiveness and growth.  Such fears also underlie the so-called Pollution Haven Hypothesis, which sees a flight of industrial activity and pollution leakage to countries with laxer environmental standards. Moreover, arguments against tightening of environmental policies have re-emerged in the context of an increasingly globalised world with fragmented production and mobile capital. At the same time, there are solid indications that the future is not necessarily a race to the bottom and that environmental protection and growth are not an “either-or” dilemma. A counter argument is that more stringent environmental policies will encourage changes in behaviour by firms and households, reduce inefficiencies, and encourage the development and adoption of new technologies that may be good for the environment, and for the economy as well. After all, growth did not collapse following the implementation of numerous environmental policies over the years. Moreover, when scrutinised, the claims of negative effects of environmental policies have found little backup in the data. Empirical evidence from the OECD clarifies this. Based on analysis of two decades of data on the stringency of a subset of environmental policies and economic outcomes in 24 OECD countries, it shows that productivity has generally not been negatively affected by the introduction of more stringent environmental policies.

    Is some number better than no number? --Lucas Davis at the Energy Institute at Haas blog (emphasis added):Last month Meredith wrote about coal being too cheap and Max wrote about gasoline being too cheap. But what is the right price for energy?Nobody in recent years has done more to try to answer this question than Ian Parry, a University of Chicago trained economist now at the International Monetary Fund.  Over the last 20 years Parry has written dozens of articles on this topic, including influential work on gasoline taxes, pollution externalities, traffic congestion, and the double dividend.In his latest work, Parry has turned his attention in an ambitious new direction.  Together with a team of IMF researchers, Parry set out to quantify energy externalities for 156 countries.  The result is the aptly-named study, “Getting Energy Prices Right”.  The summary can be accessed for free here, or the entire report can be purchased for $28 here.  Following best practices for open science the team has also made all of the data from the project publicly-available here including all of the information on power plant locations, mortality rates, emissions factors and transport data.These figures begin to give a sense of the scale of the project.  You want to know local pollution damages from coal in Bangladesh?  They have it. Traffic congestion damages from gasoline in Morocco?  Sure.  Vehicle accident externalities from diesel consumption in Sri Lanka?  Yep.  Previous studies had measured marginal damages for particular energy types and for particular individual countries, but this new work provides comprehensive estimates for the entire planet. ...I’m a big believer in the idea that some number is better than no number...Some number is better than no number? Yes, always, at least in the context of environmental benefit-cost analysis (when the crucial step of sensitivity analysis is not ignored). But egads, that question gives me nightmares!

    NC reverses safety warning on well water near Duke ash dumps (AP) — North Carolina is reversing warnings about water that health officials said was too polluted to drink and now reassuring residents who live near pits that hold waste from decades of coal-burning for electricity that their well water is safe. The state health agency issued written warnings last April to the owners of 330 water wells near eight Duke Energy power plants that their well water was too contaminated with vanadium and hexavalent chromium to use. Now a new letter is being sent to homeowners who draw from 235 of those wells suggesting more confidence in the safety of the water. The remaining 95 water wells will continue to carry a “do not drink” warning because of the presence of arsenic, cobalt or other pollutant, an agency spokeswoman said. The letter, which the Department of Health and Human services began mailing out Friday, states that the water is “as safe to drink as water in most cities and towns across the state and country.” State agencies fanned out to test the groundwater near coal-burning plants owned by the country’s largest electric company after a massive coal-ash spill two years ago. The disaster left a 70-mile stretch of the Dan River coated in toxic sludge and raised about concerns arsenic and heavy metals in the water. The new guidance from North Carolina health officials reversing the earlier don’t-drink water warning is perplexing residents like Deborah Graham, who lives near Duke Energy’s Buck power plant in Salisbury. “I kind of feel the state is kind of flip-flopping and now trying to back-peddle to get themselves out of a situation,” Graham said. “I’m not going to drink the water.” She said she was persuaded by state toxicologist Ken Rudo’s warning last year that the state was being cautious due to the lack of clear research showing how much vanadium and hexavalent chromium — heavy metal elements — is too much.

    The Truth About This Mine Spill That The EPA Didn’t Tell You | Off The Grid News: The Environmental Protection Agency intentionally caused a spill of toxic waste at a Colorado mine that threatened water supplies for tens of thousands of people, the chairman of the Natural Resources Committee in the US House of Representatives is alleging. “There was nothing unintentional about EPA’s actions with regard to breaching the mine,” Rep. Rob Bishop (R.-Utah) said this month. “They fully intended to dig out the plug and breach it.” Bishop was referring to EPA cleanup efforts at the abandoned Gold King mine near Silverton in southwestern Colorado in August 2015. Contractors working for the agency breached a dam that was holding back toxic waste, pouring three million gallons of toxic waste out of a holding pond and into the nearby Animas River. The waste contained levels of lead, arsenic, cadmium and other toxic metals that were upwards of 12,000 times those considered safe for human consumption, as Off The Grid News previously reported. The river turned orange.  The leak threatened water supplies to several cities, including Durango (Colorado) and Farmington (New Mexico), as well as the Navajo nation. It disrupted the tourism economy by shutting down river rafting, and it threatened irrigation that the Navajo depend upon for agriculture. Bishop is one of several EPA critics who contend that the agency deliberately breached the dam as part of its cleanup efforts. They allege that EPA contractors intended to slowly drain the dam but didn’t realize what would happen if they did that. Bishop’s claims are supported by an email in which EPA officials admitted they planned to cause the breach, the Daily Caller News Foundation alleged.

    Mining Companies Pay Far Less Than They Should For Taxpayer-Owned Coal - The U.S. government is running a massive corporate welfare program for coal companies, prioritizing Big Coal's interests over the environment and taxpayers, according to a Greenpeace report released Thursday based on government documents.  Much of the country’s largest coal deposits west of the Mississippi River sit beneath federal land. That coal is owned by taxpayers and leased to coal companies by the government. Federally owned coal accounts for three-quarters of what’s mined by three of the largest U.S. coal companies -- Arch Coal, Peabody Coal, and Cloud Peak Energy -- according to documents obtained by Greenpeace recently through a Freedom of Information Act request. The companies have the right to mine that coal for a fraction of its real value. A problem with charging companies so little to mine government-owned coal is that it doesn't account for costs to the environment. Coal is one of the dirtiest fossil fuels, causing smog, acid rain, and air pollution when it burned by power plants. It’s the world’s leading cause of carbon emissions, which cause climate change, and even in the short term can cause respiratory, cardiovascular, and nervous system issues for those exposed to its pollutants. Adding the social cost of burning coal would bump up the price of leasing these mining rights by $5 billion to $55 billion -- depending on how you calculate damage to the environment -- to the totals paid to the government each year. And that’s just for the three largest coal companies, according to the report.

    Peabody Energy, largest U.S. coal company, may close - Mar. 16, 2016: Peabody Energy, the world's largest private-sector coal producer, warned early Wednesday it may go out of business, the latest sign of the brutal conditions in the battered industry. In a regulatory filing the company said that ongoing losses and its decision to miss certain interest payments means it may not have enough cash to "sustain operations and continue as a going concern." The company has 7,600 employees at its ongoing operations. Peabody reported a loss of $2 billion last year, up from a $787 million slide the previous year. Revenue tumbled 17% to $5.6 billion as the average price and amount of coal that it sold fell. It warned of further declines this year due to reduced use of coal by U.S. utilities along with lower demand from overseas markets. Shares of Peabody (BTU), which had already plunged 98% in the past two years, tumbled nearly 50% in trading Wednesday following the filing.

    The robots Japan enlisted to clean up Fukushima have been destroyed from radiation exposure - Not even robots can survive the nuclear winter of Fukushima. Five years after their deployment to the site of the Fukushima Daiichi nuclear power plant meltdown, the remote-controlled robots have “died” a mechanical death. Truly, there’s no such thing as immortality. The remote-controlled automatons were intended to swim through cooling pools to collect and dispose of highly radioactive and incredibly dangerous hunks of melted fuel rods, but massive amounts of radiation have obliterated their wiring, rendering them useless. Worse still, their corpses are nowhere to be found. Five of the robots sent to complete their cleanup mission never returned, and there’s really no way to look for them. The entire disaster was triggered by the devastating earthquake of 2011, which caused a 10-meter high tsunami to barrel down into the Fukushima Daiichi nuclear power station. 19,000 people were ultimately declared deceased or missing, and another 160,000 were displaced as a result of the tragedy. And half a decade later, officials with Tepco, the plant’s operator, still don’t know what to do about it all. “It is extremely difficult to access the inside of the nuclear plant,” Naohiro Masuda, Tepco’s head of decommissioning said in an interview. “The biggest obstacle is the radiation.” Radiation that not even robots can withstand.

    The Next Fukushima? Active Fault Line Discovered Directly Below Japanese Nuclear Power Plant -- Five years after the Fukushima disaster, things are getting worse. As we reported last week, "the fuel rods melted through their containment vessels in the reactors, and no one knows exactly where they are now. Tepco has been developing robots, which can swim under water and negotiate obstacles in damaged tunnels and piping to search for the melted fuel rods.  But as soon as they get close to the reactors, the radiation destroys their wiring and renders them useless, causing long delays, Masuda said." More troubling was our assessment that 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." And now we have the candidate for the "next Fukushima" - as Japan's Yomiuri Shimbun reports, one of the faults that run under the premises of Hokuriku Electric Power Co.’s Shika nuclear power plant in Ishikawa Prefecture can be reasonably concluded to be active, according to an evaluation compiled last Thursday by an expert panel at the Nuclear Regulation Authority.  According to the Shimbun, the No. 1 reactor at the Shika plant may have to be decommissioned under the new nuclear regulatory standards, which ban the construction of important facilities above an active fault. The fault in question lies directly under the No. 1 reactor building.

    Another Ohio court slaps down anti-fracking ‘bill of rights’ - Another Ohio court case has gone against community activists seeking local restrictions on oil and gas drilling. The appeals court’s decision in this Cuyahoga County civil case is especially noteworthy in that it directly addresses – and dismisses – the legal underpinnings of “community bill of rights” laws that voters have passed in the city of Athens and other communities around the state. A similar anti-fracking “bill of rights” is part of a charter amendment that local fracking opponents hope to place on the Athens County ballot next November.  In its decision in a case pitting Mothers Against Drilling in Our Neighborhoods (MADION) against the state of Ohio, Gov. John Kasich, the city of Broadview Heights and two oil and gas businesses, the Eighth District Court of Appeals voted 3-0 to uphold a Cuyahoga County trial court’s dismissal in July 2015 of a complaint brought by MADION. The local activist group, part of a statewide network of community organizers and supported by the Pennsylvania-based Community Environmental Legal Defense Fund (CELDF), had asked the court to uphold an anti-drilling bill of rights that voters passed in Cleveland suburb of Broadview Heights in November 2012.  In the main opinion in the Eighth District Court of Appeals decision of March 3, two of the appellate judges cite the majority decision in the Supreme Court’s Morrison (Munroe Falls) vs. Beck Energy Corp. decision from February 2015. That high-court ruling, based on ORC 1509, upheld the primacy of state law in oil and gas regulation, generally finding that what the state allows, in this case oil and gas development activities, local government and voters can’t prohibit. However, in its March 3 decision, the appellate court also addressed MADION’s claims regarding local community rights. The anti-fracking group had argued that the Morrison case cited as a precedent only addressed home-rule powers of “municipal corporations,” which “are distinct and apart from the people’s inalienable and fundamental right to local community self-government.” The appellate court decision, however, notes that “while MADION concedes that there is no case law to support its position, it maintains that the people’s right to local community self-government is deeply rooted in our nation’s history and tradition.”

    Bill of Rights group hopes to get charter on November ballot - The Athens Bill of Rights Committee will be back in action this week to collect signatures to again try to get a charter ballot initiative on the November ballot. The measure would ban injection wells and use of the county’s water supplies in the practice of hydraulic fracturing. The group had submitted a ballot initiative to the county elections board last year, but Secretary of State Jon Husted rejected the petitions. The matter was sent to Husted for consideration because of a protest filed by Joanne Prisley of Athens. The matter was then considered by the Ohio Supreme Court, which ruled that Husted shouldn’t be forced to put the issue on the ballot. One of Husted’s reasons for disqualifying the proposed charter from the ballot was that it did not meet a threshold requirement for charter initiatives because it did not create an alternative form of government. Husted also had rejected the charter petition on grounds that the charter unconstitutionally interfered with the state’s exclusive authority to regulate oil and gas operations. The Supreme Court ruled that Husted lacked authority to invalidate the petitions for that reason. Now the Bill of Rights Committee is back with a revised charter initiative. Committee Chairman Dick McGinn said that the new version actually specifies the structure of the county government and allows for a charter review process. He said the language doesn’t actually change how the county government currently functions. What the language does do is make it unlawful for any corporation or government to “deposit, store, treat, inject, dispose of, transport or process wastewater, produced water, ‘frack’ water, brine or other substances, chemicals or by-products that have been used in, or result from, the unconventional extraction of gas and oil, including but not limited to high volume hydraulic fracturing, acidification and other techniques on or into the land, air or waters of the county of Athens.”

    Medina, Portage counties seek community bill of rights votes - Grass-roots groups in Medina and Portage counties are trying to get community bill of rights charters approved by voters on Nov. 8. Sustainable Medina County is circulating petitions to put the issue before voters in a grass-roots campaign to block the Nexus natural gas pipeline and a pipeline compressor station west of Wadsworth in Guilford Township. The current structure of Medina County government would remain intact under the proposed charter, but the charter would give the county’s elected officials the authority to protect residents from “corporate harm.” In addition, the people’s right to initiative and referendum would be codified under the plan to give them more control. It is the second time that such an effort has been undertaken in Medina County. “This charter will empower the people of our county to say no to Nexus and its threats to the health and safety of our families and the environment,” said spokeswoman Kathie Jones of Wadsworth Township. The goal is to give the people a voice in whether the pipeline project across northern Ohio is in the best interest of Medina County and whether local residents are willing to expose their families and neighborhoods to the risk, she said. The $2 billion pipeline project running through Medina, Wayne, Summit and Stark counties needs approval from the Federal Energy Regulatory Commission. In order to block the pipeline, Medina County’s community bill of rights would have to be approved by voters and go into effect before the pipeline wins federal approval, expected in late 2016. The major concern in Portage County is injection wells for drilling wastes that threaten drinking water and the goal is “to legitimize democracy,” said Gwen Fischer of Hiram, a spokeswoman for the Portage Community Rights Group.The new petition-signing efforts got under way this week and are among five community bill of rights efforts under way in Ohio to protect communities from drilling. Similar initiative have begun in Athens County plus in the cities of Columbus and Youngstown.

    Attorney general joins investigations into illegal dumping of radioactive waste -- Kentucky Attorney General Andy Beshear announced Wednesday that his office is investigating radioactive waste disposal in landfills in Boyd and Estill counties. “I am deeply troubled by allegations involving the transporting and illegal disposal of radioactive waste in Boyd and Estill counties,” Beshear said in a statement. “As attorney general, protecting Kentucky families is my top priority, so I am particularly troubled that the Blue Ridge Landfill in Irvine allegedly containing these hazardous materials is located across the road from two schools. To the concerned parents in the community, I promise we are giving this investigation our full attention, and we share your concerns.” Beshear said his office is working closely with the Cabinet for Health and Family Services, and other state, local and federal officials. Landfills in Estill and Boyd counties were cited last week for accepting low-level radioactive waste, according to the Kentucky Energy and Environment Cabinet. The Estill County landfill is across the road from the county’s only high school and middle school. Advanced Disposal Services Blue Ridge Landfill Inc. in Estill County and Green Valley Landfill General Partnership in Boyd County each received a notice of violations from the cabinet.  Blue Ridge Landfill was accused of using inaccurate reporting in a quarterly report, disposing of unpermitted waste and failure to document the source of radioactive waste, according to the cabinet.

    Dimock Fracking Water Pollution Case Rains More Pain On Oil And Gas Industry : After six years and many reams of legal papers, two couples have just won a rare — and huge — $4.24 million jury verdict against a fracking company. The jury agreed with the evidence that Houston-based Cabot Oil & Gas Corp. contaminated their water wells in Dimock, Pennsylvania, with methane leaching underground from natural gas fracking sites. The case is significant because the two couples fought in court rather than go the usual route in fracking water pollution cases, which consists of reaching a financial settlement conditional on consenting to a gag order. The gag order practice has been known to impose a lifelong vow of silence on children as young as 7 and 10, and along with trade secrets protection it is one of the reasons why fracking critics and regulatory agencies have had quite a bit of difficulty assembling a complete picture of the risks and impacts of fracking on the nation’s water resources. Our friends over at DeSmogBlog have been tracking the Dimock fracking case closely: The case, Ely v. Cabot Oil and Gas Corp., is especially noteworthy because most of the 44 original plaintiffs in the case signed settlement agreements that included a “non-disparagement clause” that bars them from speaking about their experiences or the role that Cabot may have played in causing water in the region to become polluted… According to DeSmogBlog, a big breakthrough in the case occurred when the court granted permission to testify for other nearby homeowners who had signed the gag order with Cabot. The Associated Press has also been doing some notable reporting on the impacts of fracking. An account of the new $4.24 million verdict by Michael Rubinkam describes Cabot’s argument, that the “methane was naturally occurring” and predated the fracking operation. That argument highlights one of the critical obstacles for bringing a water pollution case against fracking operations. At the time of the drilling, state regulations in Pennsylvania and elsewhere did not require drillers to benchmark water quality in nearby wells, leaving those impacted without the benefit of a before-and-after comparison.

    Dimock Water Contamination Verdict Prompts Calls for Federal Action on Fracking: Last week, in a historic verdict, a Pennsylvania jury awarded $4.24 million to two families in Dimock, PA who sued a shale gas driller, Cabot Oil and Gas Corp., over negligent drilling that contaminated their drinking water supplies. Dimock has for years been one the nation's highest-profile cases where shale gas drilling and fracking was suspected to have contaminated water, a claim the oil and gas industry strenuously denied. Controversy over the water quality swirled as state and federal regulators repeatedly flip-flopped over who was responsible for the water contamination — and whether the water might even be safe to drink. For years, Cabot Oil and Gas has maintained that the problems with the water were simply cosmetic or aesthetic, and that even if the water was not good, their operations in the area had nothing to do with it. The federal jury's verdict last Thursday represents a legal conclusion that the water was in fact contaminated because of the negligence of the drilling company — no small matter for those who spent years living in a deeply fractured community where emotions over the shale rush have run high and pitted neighbor against neighbor. The verdict also has broader ramifications for the national debate over shale drilling and water contamination.The U.S. Environmental Protection Agency is currently reviewing the risks to American drinking water supplies from unconventional oil and gas drilling and fracking. And while the Ely v. Cabot case did not center directly on hydraulic fracturing, the wells surrounding the Ely property suspected of causing the contamination were mostly fracked shale gas wells. The jury's newly announced verdict in the case has community advocates in the region calling for EPA to reopen its investigation into the broader problems in Dimock and the broader region — and to include Cabot's negligence in contaminating Dimock's water in its national study of the potential for drilling and fracking to contaminate American drinking water supplies.

    Efforts under way to find abandoned Pa. gas, oil wells - Officials estimate as many as 200,000 abandoned gas and oil wells dating to the 1860s dot the state's landscape, many uncataloged with no surviving record of ownership. Most are conventional vertical wells drilled before unconventional drilling took off in the shale play during the past decade, and before regulations required better reporting. Abandoned and unmapped wells pose dangers to people living or working nearby, especially shale drillers. Crews fracking wells have come into contact — or “communicated,” in engineering parlance — with abandoned wells, causing liquids and gas to shoot from the surface. Numerous efforts among federal, state, university and industry groups are under way to locate, map, assess and plug the wells. The challenge of finding them — combined with the high cost of plugging them — threatens to slow the push.  When the drilling industry was most active, permit surcharges flowed, allowing hundreds of plugging operations a year, Pelepko said. Thirty-three were plugged last year, though, as drilling slowed. Depending on the depth of an oil or gas well and other factors, plugging it safely costs $5,000 to $200,000, DEP said. A well that poses an immediate risk to nearby structures or people will be plugged quickly, Pelepko said. Otherwise, the wells are ranked and addressed in order of need. Less known is the risk abandoned wells pose to air and water from escaping methane. The EPA does not include the wells in its annual inventory of emissions sources.  

    In Drive to Deflate Natural Gas Surplus, US Pounces on Canada -- U.S. gas drillers battered by the lowest prices in 17 years have found another release valve for their output: Canada. Over the past five years, the shale boom that unlocked vast supplies of natural gas across North America has tripled pipeline shipments from the U.S. to Mexico, and spurred the first seaborne exports from the lower 48 states. Now, pipeline companies led by Spectra Energy Corp., TransCanada Corp. and Energy Transfer Partners LP are gearing up to more than double the flow into Canada by 2027. The push begins next year, with plans to open or expand at least three major pipelines and reverse the flow northward on a fourth. Meanwhile, TransCanada may be going a step further, engaging in acquisition talks with Columbia Pipeline Group Inc., a company with a direct route into the U.S.’s prolific Marcellus shale play. The efforts come as gas stockpiles have reached historic highs, prices have fallen almost 40 percent since the end of 2011 and the fuel has established itself as the Bloomberg Commodity Index’s worst performer. All of that has spurred a desperate drive by drillers to expand their markets. “There’s so much supply growth in the eastern U.S. that producers are seeking any and all outlets to get the gas to market,” . “It’s another obstacle for Canadian producers.” Home-grown Canadian drillers such as Calgary-based Birchcliff Energy Ltd. and Encana Corp., are already feeling the heat. Nine years ago, supplies piped from Canada met 16 percent of U.S. demand for natural gas. By 2014, as U.S. output rose to a record for a fourth straight year, Canadian supplies had slipped under 10 percent. Some Canadian producers will hurt more than others. Those who keep their costs down and sell to markets that don’t vie with supplies from the eastern U.S. will remain competitive, . Meanwhile Encana, one of Canada’s largest gas producers, has said it was cutting spending this year by 55 percent amid the slide in oil and gas prices. The company is also reducing its workforce another 20 percent, which means that Encana will have more than halved its number of employees and contractors since 2013.

    TransCanada to buy Columbia Pipeline Group for $9.92 billion(AP) — TransCanada Corp., the Canadian company behind the Keystone XL pipeline, has agreed to buy Columbia Pipeline Group for nearly $10 billion as it expands in the U.S. Houston-based Columbia Pipeline owns 15,000 miles of interstate natural gas pipelines that extends from New York to the Gulf of Mexico. With the acquisition, TransCanada will have about 57,000 miles of pipeline in North America.  The acquisition comes after President Barack Obama in November quashed the Keystone XL after seven years of political wrangling, saying it would have undercut U.S. efforts to clinch a global climate change deal at the center of his environmental legacy.

    South America Emerging as Market for U.S. LNG. -  Lately, it’s not just liquefied natural gas (LNG) prices that are headed south, it’s LNG cargoes too. A few days ago, the first LNG shipment from Cheniere Energy’s Sabine Pass liquefaction/export terminal was sent to Brazil, where a drought has slashed hydroelectric production and boosted the need for natural gas-fired power. Today we consider what’s driving LNG and natural gas demand in Brazil, Argentina and other countries in the southern half of the Americas, and what that may mean for U.S. LNG exporters and gas producers. Given the impact that LNG exports are expected to have on U.S. natural gas production over the next 15 to 20 years, it’s not surprising that the recent buzz about the destination of the initial LNG shipment from Sabine Pass in southwestern Louisiana rivaled interest in Kanye West’s self-promotional feud with Taylor Swift (well, almost). As we all know, the Kanye vs. Taylor brouhaha continues, and—more relevant to today’s blog—Chevron Transport’s 160,000 cubic meter Asia Vision LNG tanker left Sabine Pass on February 24, 2016 (see Commencing Countdown) and is, by now approaching the Salvador da Bahia Regasification Terminal (photo below), a floating storage and regasification unit (FSRU) moored at Baía de Todos os Santos (Bay of All Saints) at Salvador, in Brazil’s state of Bahia. (Golar LNG Partners owns the FSRU, which is also known as Golar Winter; Petroleo Brasileiro—Brazil’s state-owned energy company, also known as Petrobras—charters it.)

    Go West, Young Molecule – Natural Gas Flows on REX’s Zone 3 East-to-West Expansion -- Tallgrass Energy’s Rockies Express Pipeline (REX) last week received final approval to begin construction on its Zone 3 Capacity Enhancement expansion project (Z3CE), which would expand east-to-west capacity out of the Marcellus/Utica shale production area to a record 2.6 Bcf/d. This project comes on the heels of REX’s East-to-West expansion (E2W), which came online last August and in one fell swoop gave Northeast producers their first substantial westbound firm forward-haul transportation capacity, totaling a full 1.8 Bcf/d. The upcoming Z3CE capacity (0.8 Bcf/d) will mark yet another milestone in the Great Pipeline Reversal that’s expected to ease supply congestion in the Northeast and support beleaguered Marcellus/Utica pricing points. That new capacity is not due in-service until late 2016. But now with nearly a full winter’s worth of pipeline flow data for the first E2W expansion, we can get a preview of potential impacts of the additional capacity on flows and pricing. Today we look at winter-to-date gas flows on REX and what they tell us about the Marcellus/Utica market.

    Virginia lawmakers back natural gas pipeline — (AP) — A coalition of Hampton Roads state legislators is lining up behind the Atlantic Coast Pipeline. The 33 members of the General Assembly collectively known as the Hampton Roads Caucus expressed their backing for the massive natural gas project in a letter to Virginia’s U.S. senators, Democrats Mark Warner and Tim Kaine. The pipeline would deliver natural gas from West Virginia and through Virginia and into North Carolina, covering more than 550 miles. The $5 billion energy project is backed by Dominion Resources and other energy companies.  In the letter, the caucus says the region’s natural gas transportation system has “reached a tipping point.” Members describe the pipeline as necessary for the region’s economy. The Federal Energy Regulatory Commission is reviewing the project.

    Pushed hard by opponents, Obama administration reverses, says no new drilling off SE Atlantic Coast: “Back in January 2015, the Obama administration pleased oil companies and kindled fierce opposition when it announced the Bureau of Ocean Energy Management’s five-year plan for offshore oil development off the southeast Atlantic Coast. Tuesday, Secretary of Interior Sally Jewell announced a surprising retreat:"We heard from many corners that now is not the time to offer oil and gas leasing off the Atlantic coast," Interior Secretary Sally Jewell said. "When you factor in conflicts with national defense, economic activities such as fishing and tourism, and opposition from many local communities, it simply doesn't make sense to move forward with any lease sales in the coming five years." "With this decision coastal communities have won a 'David vs. Goliath' fight against the richest companies on the planet, and that is a cause for tremendous optimism for the well-being of future generations," said Jacqueline Savitz, environmental group Oceana's vice president for U.S. oceans. At the same time the department announced that 10 potential lease sales in the Gulf of Mexico and three off the Alaskan coast would be evaluated. The area off the southeast coast is estimated to have at least 3.3 billion barrels of recoverable oil 31.3 trillion cubic feet of natural gas. Even though governors and other leaders in Virginia, North and South Carolina, and Georgia supported drilling off their coasts, opposition

    Brevard County approves fracking ban: Brevard County commissioners voted unanimously Tuesday to ban fracking within the county's borders. Under the ordinance, oil and gas exploration or production that uses "well stimulation" will be prohibited in Brevard, "including hydraulic fracturing, acidizing and acid fracturing." The ordinance also bans any well stimulation techniques originating outside Brevard "that in any way enters onto, into or under the ground within the boundaries of Brevard County." Speakers warned commissioners of the potential for water and air pollution, accidents, spills and methane leaks. Fracking is a controversial method of extracting oil and gas from deep underground. The drilling method involves injecting water, sand and chemicals underground to create fractures in rock formations, allowing natural gas and oil to be released. The process uses chemicals that the Centers for Disease Control and Prevention lists as cancer-causing or which could otherwise pose a public health risk.  On March 1, commissioners had unanimously passed a resolution opposing a Florida Senate bill that opponents of fracking fear would clear the way for the process in Florida. Senate Bill 318 died earlier this month in committee, but legislators have vowed to reconsider the bill in the future. Among Florida Senate Bill 318's most-controversial provisions was that it would have allowed only the state — and not counties or cities — to impose a ban on fracking.

    Court Decision Could Accelerate Oil And Gas Bankruptcies -- Oil and gas data experts Evaluate Energy showed yesterday that U.S. E&Ps took a huge hit in 2015. With the value of total proved reserves in the sector declining by an astounding $515 billion dollars.  The chart below shows just how great the damage is, compared to reserves valuations the last few years.  Factors like that have caused an increasing number of high-profile E&Ps to file for bankruptcy in America. And a critical court decision this week could mean even more coming. That ruling came Tuesday in the bankruptcy proceedings of Sabine Oil & Gas, detailed by Energy Law360. Where a New York judge ruled that bankruptcy allows Sabine to cancel contracts it holds with midstream firms on the company’s petroleum licenses in Texas. Here’s why this is a sea change for oil and gas law. Sabine held three separate contracts with pipeline firms in Texas, for the transport and sale of oil and gas that the company produced. These contracts came with clauses like “deliver or pay” features — where Sabine was obligated to send minimum volumes of production through the pipeline, or pay financial penalties to the pipeline operators. Such contracts could have been a stumbling block in bankruptcy — requiring the company to deliver production or cash at a time when its operations have slowed or stopped. And so Sabine had challenged in bankruptcy court to have the agreements nixed. And the judge in the case agreed. Ruling that the midstream contracts are not “running with the land” — in essence, saying that the contracts are not inextricably tied to the land assets that underlie Sabine. The decision opens the door for Sabine to sever the contracts as it restructures in bankruptcy. A strategy that other E&Ps immediately jumped on — with bankrupt producer Magnum Hunter Resources yesterday striking a deal to cancel four midstream contracts as it restructures.

    Pipeline officials work to contain gas spill in Sioux City (AP) — Iowa Department of Natural Resources officials say a pipeline company is working to contain a gasoline spill in Sioux City that reached a drainage ditch. Magellan Pipeline officials reported the spill Friday morning after finding a leaking pipe between tanks at their Sioux City bulk petroleum facility. They estimate that nearly 30,000 gallons of gasoline was released. It is unknown how long the pipe leaked. The company contained the spill before it could reach the Floyd River, but some fuel soaked into the ground and flowed into a tributary of the river. Magellan plans to excavate the contaminated soil. The company has set up booms to recover gas that spilled into a creek.

    Proposed waste site in Nordheim sits over natural gas pipeline - -- Residents of the small DeWitt County town of Nordheim have been putting up a big fight for more than 3 years.They're trying to stop the approval of a permit application for a fracking solid waste disposal site, that if approved will be built directly over a natural gas pipeline."The disposal cell they want to put in is approximately 200 feet from my back porch and 240 feet from my water well," said Nordheim rancher Paul Baumann.It is too close for comfort for Baumann.If Pyote's permit is approved by the Railroad Commission, Petro Waste Environmental will construct and operate a waste treatment facility where much of the oil and gas solid waste from fracking sites all over the Eagleford Shale will be disposed."Let me go back to where I heard they've said, it's an ideal location for this type of facility. It's far from ideal," said environmental engineer Ed Von Dran.Von Dran, who has been hired by the Citizens Against Pollution group as a consultant, said the fact that the site is elevated won't be good for drainage.He also said the fact that it sits on top of a natural gas pipeline presents another set of issues."It's not structured to allow for trucks to be driven over it daily," Von Dran said.On the proposed plan, a Southcross Energy pipeline runs diagonally across the property.Petro Waste Environmental CEO, George Wommack confirms if the plan is approved, they will be driving trucks across the pipeline easement on a regular basis."You start driving these big trucks and heavy equipment around it, it's gonna shift," Baumann said.

    Will Oklahoma Fracking Induce "The Big One"? - The “earthquake capital” title is one that Oklahoma’s state geologist, for his part, says the state doesn’t deserve. “We’re not the earthquake capital of the U.S.,” said Gerry Boak, director of the Oklahoma Geological Survey. If anything, he said, “we’re the minor league capital of the U.S.” Most of the Oklahoma quakes registered in 2015 were below 4.0-magnitude. Alaska registered a 7.1-magnitude earthquake in January —roughly equal to 1 million 3.1- magnitude quakes. That one quake alone was more powerful than all of Oklahoma’s earthquakes from last year combined, Boak says. California, too, tends to see more large (over 5.0-magnitude) quakes than Oklahoma, and seismic activity is spread throughout the state. In Oklahoma, the activity is concentrated in only about 16% of the state. That’s no coincidence: areas where quakes are happening are the same ones that have seen a boom in oil and gas production. Oklahoma may not be the earthquake capital, but Boak says, when it comes to earthquakes that have been induced by human activity, “there’s no place that can match Oklahoma.” The state is the largest example of induced seismicity in the U.S., probably the world. A recent post over at the data visualization site Metrocosm includes two graphics that bear out the connection. Here is a map showing the region where most of Oklahoma’s oil and gas production happens. All of Oklahoma’s injection wells, each one sized proportional to its annual injection volume. And here’s an animated graphic showing quakes over 3.0-magnitude since 2010 with that same area of Oklahoma outlined. Watch what happens in 2014 and 2015:

    Fracking ballot initiative gets state OK for petition drive (AP) — Backers of a proposal that would let local governments regulate or ban fracking have won approval to circulate petitions to put it before voters. The (Colorado) Secretary of State’s Office said Thursday supporters have until Aug. 8 to gather more than 98,000 signatures. If they succeed, voters would approve or reject the proposal in the Nov. 8 general election. The proposal would amend the state constitution to give cities and counties more power to regulate environmental issues, including oil and gas development. It’s called Initiative 40.   At least three other proposals that could limit oil and gas drilling are awaiting approval from elections officials before proponents can gather signatures.

    Idaho oil and gas commission starts rulemaking process (AP) — The Idaho Oil and Gas Conservation Commission on Thursday began the process of writing new rules for the oil and gas industry with input from the public under a new law aimed at speeding up energy production. The commission on a 4-0 vote set in motion a process known as negotiated rulemaking that will take months and is needed to align current rules with an industry-backed bill signed into law by Gov. C.L. “Butch” Otter on Wednesday. The new law makes the Idaho Department of Lands responsible for initial drilling decisions and the five appointed members of the commission more of an appellate body that approves or reverses those decisions. After the meeting, commission chairman Chris Beck said the change means experts will handle technical aspects and “we’ll be given the opportunity to make a decision if someone appeals it, and I think that’s appropriate.” Commissioners also voted 3-1 to approve a plan that outlines the overall strategy for the commission, which was formed in 2013.

    North Dakota Oil Production Drops for Second Month - WSJ --North Dakota on Friday said crude-oil production fell 2.65% in January to the lowest level in 18 months, reflecting a sharp drop in prices, as the number of drilling rigs active in the state fell to the lowest level in more than a decade. Oil production in January, the latest data available, fell to 1.12 million barrels a day, down from 1.15 million barrels a day the previous month, according to the North Dakota Department of Mineral Resources. That was the lowest level since the 1.11 million barrels a day produced in July 2014, and a second straight month of declines. “We’re losing altitude pretty rapidly,” North Dakota Department of Mineral Resources Director Lynn Helms said at a news conference in Bismarck. “February and March production declines could be equal to or greater than what we’ve seen in December and January,” he said.  After remaining resilient in the face of lower crude prices for much of last year, crude output in the state’s Bakken Shale formation has begun to drift down toward the million-barrel-a-day mark as operators cut the number of new wells drilled.

    Eagle Ford, Bakken production continues to drop — Two of the nation’s most-prolific shale plays continue to see production numbers drop slightly. The Eagle Ford Shale and Bakken formation produced less oil in January than in December, according to analytics and consulting group Platts Bentek. In fact, oil production from both Eagle Ford and Bakken formations reached their lowest levels since Platts Bentek started tracking them in October 2012. Eagle Ford production dropped by nearly 11,000 barrels per day in January. The shale play averaged a total of 1.4 million barrels per day. The Bakken produced 1.2 million barrels per day — a 3 percent decline from 2015 levels. An estimated 1,022 wells in the Eagle Ford Shale and 831 in the Bakken have been drilled, but not completed. Wells drilled after October 2015 were not included in the figure. Companies typically wait to hydraulically fracture existing wells in a better price environment.  West Texas Intermediate, a grade of crude oil used as a benchmark in oil pricing, closed at $37.18 per barrel on Monday. In June 2014, a barrel of oil sold for $107. “Current internal rates of return in both the Eagle Ford and Bakken shales are weak, under 10 percent,” Platts Bentek analyst Sami Yahya said. “And producers need to continue generating cash flow for their operations. The number of active rigs in those basins has gotten so low that it is almost a certainty that producers are dipping into their inventory of drilled but uncompleted wells.” Existing wells are cheaper to complete because there are no additional drilling costs.

    Slow Train Coming – The Decline and Fall of East Coast Crude By Rail -- If East Coast refiners bought their crude at the wellhead in North Dakota during February 2016 they would have paid average prices of about $4.90/Bbl below U.S. Benchmark West Texas Intermediate (WTI) at Cushing, OK – which works out at about $26.25/Bbl (price estimates from Genscape). If they shipped that crude by rail to refineries in Philadelphia, PA on the East Coast they would have paid about $14/Bbl rail freight - meaning the delivered cost of crude would be $26.25 + $14 or $40.25/Bbl. Alternatively they could have simply imported Bakken equivalent light sweet crude priced close to international benchmark Brent for an average $34/Bbl – saving a minimum of $6.25/Bbl. Today we describe how these economics have had a detrimental impact on crude-by-rail (CBR) shipments to the East Coast.

    Cargo ship leaks unknown amount of oil in LA Harbor — Cleanup efforts are under way after a large cargo ship leaked an unknown amount of oil in Los Angeles Harbor. The Coast Guard says the leak was reported Sunday evening, where an oily sheen was visible near the vessel Istra Ace. Officials didn’t immediately know Monday how much fuel entered the water. Los Angeles Fire Department spokeswoman Margaret Stewart said late Sunday that the leak had stopped and a private cleanup company placed booms in the water to contain the oil. The Coast Guard, the California Department of Fish and Wildlife, Los Angeles Port Police and fire officials are investigating the leak.

    Alaska included in future offshore lease sale schedule (AP) — The Obama administration’s five-year offshore drilling plan announced Tuesday includes three future lease sales off Alaska and six areas in state waters that will be closely reviewed for possible environmental and other conflicts with oil and gas activities. The plan by Interior Secretary Sally Jewell covers all potential federal offshore lease sales from 2017 through 2022. The public will have 90 days to comment. Most of the attention at Jewell’s news conference was directed at the elimination of potential drilling off the Atlantic Coast. Environmental groups were hoping there would be no lease sales in Arctic waters. The plan for Alaska includes potential sales in the Beaufort Sea in 2020, Cook Inlet in 2021, and Chukchi Sea in 2022. It calls for close review of a handful of areas important to migrating beluga, bowhead and gray whales and possible protections for hunting areas used by villages sprinkled along Alaska’s north coast.Cindy Shogun, director of the Alaska Wilderness League, said her group was disappointed that Arctic sites remain in the plan but appreciate that the locations could receive additional protection. “With the high risk of a large oil spill, drilling in America’s Arctic is irresponsible and risky,” she said in a prepared statement.

    The Terrible Oil News Nobody Noticed - A terrible bit of news went unnoticed in the commotion amid the modest rebound in oil prices over the past two weeks. While every news outlet shouted about Iran and OPEC, a U.S. energy icon quietly announced news that could potentially shatter the industry. As I’ve explained recently, many oil companies are teetering on the brink of bankruptcy. But news out of Alaska could lead to disaster. BP Prudhoe Bay Royalty Trust (BPT) – operated by the Alaskan division of oil giant British Petroleum (BP) – sells oil from the Prudhoe Bay oilfield. It just announced a 65% drop in its economic oil reserves.   From 1968 to 2015, Prudhoe Bay was the most prolific oilfield in the country, according to the U.S. Energy Information Administration (EIA).  Even though an oilfield can hold a tremendous amount of oil, only some of that oil is profitable at certain prices. Those barrels are called economic reserves. And that’s where the problem lies. The U.S. Securities and Exchange Commission requires publicly traded oil companies to calculate economic reserves using an average oil price from the previous year. Here’s what BP Prudhoe Bay Royalty Trust’s price and reserve calculation look like…Prudhoe Bay is a giant legacy field, with a vast network of pipes and wells already in place. So production costs are lower there than in most shale fields. So if Prudhoe Bay’s economic reserves fall 65%, the rest of the industry is in big trouble.

    Turning to frack tech, stricken U.S. oil drillers test new limits - (Reuters) - Fifty-stage frack jobs. Fifteen-foot cluster spacing. More than 2,000 pounds of proppant concentrate per foot. Top U.S. shale producers are pushing fracking technology to new extremes to get more oil out of their wells, as they weather lower-for-longer oil prices. While the impact of the techniques may be scarcely noticeable on current U.S. output with so few wells in operation, it could mean drillers are able to accelerate production more fiercely than ever once prices recover. The hunt for the next big technology to transform the process of fracking is still on, with companies looking at methods such as using carbon dioxide to coax more oil out of wells that have already been hydraulically fractured. Commentary from executives in recent weeks suggests they are doubling down on existing accomplishments and innovations to boost production. Pioneer Natural Resources is increasing the length of stages in its wells, Hess Corp is raising the total number of stages, EOG Resources is drilling in extremely tight windows, while Whiting Petroleum Corp and Devon Energy Corp have loaded up more sand in their wells, fourth-quarter earnings call comments show. Sector experts say these techniques could boost initial output per well by between 5 and 50 percent, demonstrating the resilience of the industry.

    Many Shale Companies Are Unable to Ramp Up Oil Output - WSJ: The U.S. was supposed to be the world’s new swing oil producer, able to nimbly open and close the taps in response to market forces, thanks to its bounty of shale fields. But as oil prices show some signs of stabilizing, American producers and oilfield-services companies are warning that they may not be able to jump-start drilling. The reason: Many independent companies are too financially strapped, have let go too many workers, or have idled too much equipment to immediately ramp up again. “The balance sheets of these shale-only producers have to be repaired for them to get back to drilling,” said John Hess, the chief executive of Hess Corp. HES 0.42 % “That’s going to curb any recovery.” Just as U.S. output fell more slowly than predicted—even as oil plunged from around $100 a barrel in 2014 to $30—it is likely to be slower in recuperating, even if prices rebound to $50 a barrel or more, some oil executives and analysts now say. More than three dozen U.S. oil and gas producers plan to cut their capital spending for 2016 by nearly half, on average, compared with last year, according to a Wall Street Journal analysis of company financial filings. Some of the largest U.S. oilfield-services firms have laid off 110,000 people in the past year, Evercore ISI analysts estimate, and many of those workers have no plans to return to the industry. Close to 60% of the fracking equipment in the U.S. has been idled during the downturn, according to IHS Energy, which estimates it would take two months for some of that equipment to return.

    Shale Sector Hampered in Role of Swing Producer — American oil producers and oilfield-services companies are warning that they may not be able to jump-start drilling despite their bounty of shale fields, Alison Sider, et al report. Many independent companies are too financially strapped, have let go too many workers or have idled too much equipment to immediately ramp up again. Some shale drillers are tempered by what occurred last spring, when producers jumped back into drilling new wells after oil prices briefly rose, inadvertently worsening a supply glut that ultimately made prices worse. “We have lost a lot of good people. They won’t be back,”  Meanwhile, hedge funds that own poorly performing high-yield debt issued by energy producers such as Continental Resources Inc. and Chesapeake Energy Corp. have been shorting the market as a way to hedge against further declines in the bonds, Christian Berthelsen reports. The paradoxical result is that these big investors are betting against themselves. Big oil producers have been negotiating for weeks on a deal to limit crude production in the hope of raising prices, but their talks are hitting obstacles, Benoit Faucon and Summer Said report. Separately, India wants to attract $25 billion in natural-gas and crude investment through reforms in the next few years, the Financial Times reports.

    Is Fracking Industry Too Wounded to Respond as Oil Prices Bottom Out? - Eventually what goes down, must come up. And to the relief of everyone in the oil industry, the global energy watchdog, the International Energy Agency (IEA) believes that there are signs that oil prices “might have bottomed out.”   The oil price is certainly showing signs of recovery. Indeed, in its latest monthly report, the IEA notes that oil prices have risen by a whopping forty percent since early February. But as the OilPrice website notes, much of this rise has nothing to do with the fundamentals of the oil market—supply and demand—it is due to the fact that speculators believe the price could go no further down. Whether this recent rise is actually good for the oil industry is open to debate. Some analysts believe that the rise could become “self-defeating” as it will allow some American shale producers to ramp up production, after moth-balling certain operations due to the price plunge. One such analyst Jeffrey Currie, the head of commodities research at Goldman Sachs, argues“My concern is if the market surges right back to $50 a barrel … we just end up with another problem six months from now.” But whether the U.S. shale industry can just crank up production and act as what is known as a “swing producer,” is now open to debate. Restarting production overnight is just not going to happen. The shale industry may have cut itself too close to the bone to be able to start running again.  The industry has shed more than 100,000 jobs in the last year and these cannot be replaced at a click of the fingers. Some 60 percent of fracking equipment is idle or offsite. Alex Beeker, a Wood Mackenzie analyst says simply: a recovery “doesn’t happen overnight.” Others agree. According to today’s Wall Street Journal “As oil prices show some signs of stabilizing, American producers and oilfield-services companies are warning that they may not be able to jump-start drilling.”

    Rex Energy lost $373 million last year - Utica driller Rex Energy lost $373 million last year in a glutted oil and natural gas market but expects to produce more this year. The company released its fourth-quarter and annual earnings report Tuesday. Rex Energy, based in State College, Pa., has the ninth most Utica Shale permits in Ohio and has 31 producing wells. The company’s annual loss works out to $6.85 per basic share. During the fourth quarter, Rex lost $100.5 million or $1.85 per basic share, according to a press release. During 2015, Rex produced 195.8 million cubic feet of natural-gas equivalent per day, an increase of 27 percent over 2014. Oil and natural-gas liquids accounted for 38 percent of annual production. The company spent $171 million on Marcellus and Ohio Utica operations in 2015. The company drilled 34 gross wells, fracked 39 gross wells and placed 33 gross wells in production. Gross wells are wells in which a driller has full or partial ownership. Rex expects to be reimbursed $18.5 million from ArcLight and $20 million from Benefit Street Partners under the terms of a joint exploration and development agreement announced March 1. In Carroll County last year, Rex drilled six gross wells and fracked three gross wells. The company placed four wells into sales during the first quarter Rex said it expects to produce approximately 200 million cubic feet of natural-gas equivalent per day during the first quarter of 2016. Annual production is expected to grow by 5 to 10 percent. The company expects to spend between $15 million and $40 million in operational capital in 2016.

    Aramco, Shell to divide Motiva JV’s refining assets - Saudi Aramco and Royal Dutch Shell PLC have entered a preliminary agreement to separate assets of Motiva Enterprises LLC, the Houston-based refining and marketing joint venture equally owned and operated by the companies since 2002 (OGJ Online, Feb. 13, 2002).  Aramco subsidiary Saudi Refining Inc. (SRI) and Shell’s US downstream affiliate signed a nonbinding letter of intent (LOI) to divide the assets on Mar. 16, the companies said in a joint statement. Under the LOI’s terms, the partners have agreed to evaluate options and select an optimal deal structure in order to form a definitive agreement to divide and transfer Motiva’s assets, liabilities, and employees. As part of the proposed agreement, SRI will retain the Motiva name, assume 100% ownership of the 600,000-b/d Port Arthur, Tex., refinery, retain 26 distribution terminals, as well as maintain an exclusive, long-term license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi Valley, the US Southeast, and US Mid-Atlantic markets. In exchange, Shell will assume sole ownership of the 235,000-b/d Norco refinery—where subsidiary Shell Chemical LP already operates a petrochemical plant—and the 242,250-b/d Convent refinery, which Motiva previously announced will be integrated to create the Louisiana Refining System (LRS) (OGJ Online, Mar. 26, 2015).  Shell also will retain nine distribution terminals, as well as Shell-branded markets in Florida, Louisiana, and the US Northeast.

    Shell, Saudi Aramco split assets, including big US refinery (AP) — Royal Dutch Shell PLC and Saudi Arabian Oil Co. will split up the assets of their joint U.S. venture, which will see the kingdom’s state-owned producer take full ownership of America’s biggest oil refinery, the companies announced late Wednesday. The Port Arthur, Texas, refinery, located about 90 miles (140 kilometers) east of Houston, produces some 603,000 barrels of oil a day, according to the U.S. Energy Information Administration. It had been part of a 50-50 joint venture between the two companies called Motiva Enterprises LLC, which formed in 1998. Under terms of the deal announced in a statement, a Saudi Aramco affiliate will retain the Motiva name and full control of the Port Arthur, Texas, refinery. It also will keep 26 distribution terminals and will have exclusive rights to sell gasoline and diesel under the Shell brand in Texas, the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets.   For its part, Shell will get sole ownership of refineries in Norco and Convent, Louisiana, as well as nine distribution terminals and Shell-branded markets in Florida, Louisiana and the Northeastern U.S. The companies did not disclose any preliminary financial details of the deal. Between the three refineries, Motiva said it produces some 1.1 million barrels of oil per day.

    Energy Wars Of Attrition - The Irony Of Oil Abundance -- With the advent of North American energy abundance in 2012, petroleum enthusiasts began to promote the idea of a “new American industrial renaissance” based on accelerated shale oil and gas production and the development of related petrochemical enterprises.  Combine such a vision with diminished fears about reliance on imported oil, especially from the Middle East, and the United States suddenly had -- so the enthusiasts of the moment asserted -- a host of geopolitical advantages and fresh life as the planet’s sole superpower. “The outline of a new world oil map is emerging, and it is centered not on the Middle East but on the Western Hemisphere,” oil industry adviser Daniel Yergin proclaimed in theWashington Post.  “The new energy axis runs from Alberta, Canada, down through [the shale fields of] North Dakota and South Texas... to huge offshore oil deposits found near Brazil.”  All of this, he asserted, “points to a major geopolitical shift,” leaving the United States advantageously positioned in relation to any of its international rivals. If the blindness of so much of this is beginning to sound a little familiar, the reason is simple enough.  Just as the peak oil theorists failed to foresee crucial technological breakthroughs in the energy world and how they would affect fossil fuel production, the industry and its boosters failed to anticipate the impact of a gusher of additional oil and gas on energy prices.  And just as the introduction of fracking made peak oil theory irrelevant, so oil and gas abundance -- and the accompanying plunge of prices to rock-bottom levels -- shattered the prospects for a U.S. industrial renaissance based on accelerated energy production.

    Propane Stocks – Spinning Wheel - What Goes Up, Must Come Down -- Blood, Sweat & Tears 1969 hit, Spinning Wheel tells us: “What Goes Up, Must Come Down”, and U.S. propane stocks are no exception. Having built to a record 106 MMBbl the week of November 20, 2015, (according to the Energy Information Administration – EIA), storage congestion became the topic of the day, but while this record is noteworthy, what is far more significant is the rapid descent propane stocks have taken since late November in spite of the 2015-16 El Nino “winter of no winter”. This is the second non-winter that the U.S. has experienced over the past five years, the last one occurring in 2011-2012. However, there are big differences in today’s market dynamics relative to 5 years ago, namely propane exports to the tune of 850 Mb/d. In today’s blog, we’ll walk through the market dynamics that have resulted in extremely steep propane stock draws since late November 2015. It is no secret that propane production has been running strong as a result of the shale gas boom and we’ve previously detailed the implications of growing supply from gas processing plants which has more than doubled from 565 Mb/d in January 2010 to 1,135 Mb/d in December 2015 (down slightly from the peak of 1,167 Mb/d in October 2015). We covered the growing supply of propane, falling prices and increasing export volumes in Sail Away, the impact weather has on propane markets in A Perfect Storm, and how prices impact propane as a petrochemical feedstock in Beyond Hypothermia.  In addition, RBN produced a comprehensive study for the Propane Education and Research Council (PERC) in 2015 to assess how propane market developments could impact the prospects for disruptions similar to those that occurred during the “Perfect Storm” winter (2013-14), a summary of which was published in our Drill Down Report: Next To You and an extensive blog series including Can’t Get Next To You.

    Fracking accounts for about half of U.S. oil production - Hydraulic fracturing accounts for about half of the crude-oil production in the U.S., the Energy Information Administration said in a report Tuesday. Hydraulic fracturing, also known as fracking, involves using a mix of water, sand, and other additives to coax oil and gas from dense rock formations, and has unlocked huge oil and gas deposits previously trapped in shale rock.  The technique has been around for more than 60 years, but only recently has been used to produce a significant portion of oil in the country, the EIA said. By 2015, the number of hydraulically-fractured wells grew to an estimated 300,000, and production from those wells grew to more than 4.3 million barrels a day, the government agency reported, using well completion and production data from DrillingInfo and IHS Global Insight. That output makes up about 50% of the country’s total oil output. Shale production had helped the U.S. surpass Saudi Arabia and Russia to become the world’s largest producer of oil in 2014, according to Platts. But the output growth contributed to a glut of oil supplies-- and a slump in prices that saw the U.S. benchmark CLJ6, +1.49% fall more than 70% from its mid-2014 peak.

    Fracking and Oil Production Sources in the United States -- Even though hydraulic fracturing has been in use for more than six decades, it has only recently been used to produce a significant portion of crude oil in the United States. This technique, often used in combination with horizontal drilling, has allowed the United States to increase its oil production faster than at any time in its history. Based on the most recent available data from states, EIA estimates that oil production from hydraulically fractured wells now makes up about half of total U.S. crude oil production. Hydraulic fracturing involves forcing a liquid (primarily water) under high pressure from a wellbore against a rock formation until it fractures.  This injected liquid contains a proppant, or small, solid particles (usually sand or a manmade granular solid of similar size) that fills the expanding fracture. When the injection is stopped and the high pressure is reduced, the formation attempts to settle back into its original configuration, but the proppant keeps the fracture open. This allows hydrocarbons such as crude oil and natural gas to flow from the rock formation back to the wellbore and then to the surface. Using well completion and production data from DrillingInfo and IHS Global Insight, EIA created a profile of oil production in the United States. In 2000, approximately 23,000 hydraulically fractured wells produced 102,000 barrels per day (b/d) of oil in the United States, making up less than 2% of the national total. By 2015, the number of hydraulically fractured wells grew to an estimated 300,000, and production from those wells had grown to more than 4.3 million b/d, making up about 50% of the total oil output of the United States. These results may vary from other sources because of the types of wells included in the analysis and update schedules of source databases.

    Methane Emissions Are Spiking, But Don’t Blame Fossil Fuels Just Yet - Since 2006, atmospheric levels of methane — a greenhouse gas 86 times more potent than carbon dioxide over a 20-year period — have steadily been on the rise. For years, scientists weren’t sure what was behind the rising levels of methane, but they had a few ideas: namely an increase in fossil fuel-related emissions. Now, a new study is pointing to a different culprit: agriculture-related methane emissions, especially from livestock and rice production.  Published last week in the journal Science, researchers from New Zealand’s National Institute of Water and Atmospheric Research (NIWA) found that the majority of methane released into the atmosphere since 2006 was produced by bacteria, pointing to sources like agriculture — rather than sources like fossil fuel production or the burning of organic material — as the culprit behind the increase in methane levels. The researchers were able to discern agricultural methane from other sources of methane by looking at the gas’ isotopic signatures — or the ratio of various carbon isotopes — using data from atmospheric monitoring stations around the world. By looking at the distinct isotopic signatures, the researchers could differentiate between methane produced from fracking, for instance, and methane produced from agriculture, because they each have different signatures.  The data also suggested that the increase in methane came from regions including India, China and Southeast Asia, suggesting that the rise was due to agriculture, not the growth of fracking in North America.

    Hydraulic Fracturing Market Size, Share, Trends, Growth, Analysis and Forecast to 2022: Brisk Insights - - According to a recent research report published by, the Global Hydraulic Fracturing Market is expected to grow at the CAGR of 12% during 2015-2022 and it estimated to be $75 billion by 2022. The Global Hydraulic Fracturing Market is segmented on the basis of industry type and geography. The report on Global Hydraulic Fracturing Market Forecast 2015-2022 provides detailed overview and predictive analysis of the market. The Global Hydraulic Fracturing Market is expected to grow exponentially due to huge adoption of shale type such as Antrim Shale, Bakken Shale, Barnett Shale, Eagle Ford Shale, Fayetteville Shale Haynesville Shale Marcellus Shale and so on. The increasing demand for Global Hydraulic Fracturing Market by type such as Perf-and-Plug, Sliding Sleeve is major driver for the market. Global Hydraulic Fracturing Market is expected to contribute highest in North America followed by Europe. The global rise in exploration and production of shale in Global Hydraulic Fracturing Market products are expected to create huge scope in emerging economies. The rise in production and consumption of shale products are expected to boost the market significantly in the next few years.

    The U.S. Is Exporting Its Oil Everywhere - Three months since the U.S. lifted a 40-year ban on oil exports, American crude is flowing to virtually every corner of the market and reshaping the world’s energy map. With American stockpiles at unprecedented levels, oil tankers laden with U.S. crude have docked in, or are heading to, countries including France, Germany, the Netherlands, Israel, China and Panama. Oil traders said other destinations are likely, just as supplies in Europe and the Mediterranean region are also increasing. One reason behind the rise in exports is cheap pipeline and railway fees to move crude from the fields in Texas, Oklahoma and North Dakota into the ports of the U.S. Gulf of Mexico. Another is that U.S. oil prices have been trading at a discount to Brent crude, allowing traders to move oil from one shore of the Atlantic to another at a profit. Exxon in early March became the first major U.S. oil company to ship American crude from elsewhere, sending the Maran Sagitta tanker from Beaumont, Texas, into a refinery it owns in Sicily, Italy. Days later, Sinopec lifted on the Pinnacle Spirt tanker a cargo of U.S. crude, a first for a Chinese oil group. Oil traders are starting to export American crude to store it overseas and profit from a market condition called contango. That’s where prices of oil for delivery today are lower than those in future months. Buyers with access to storage can fill up their tanks with cheap crude and sell higher-priced futures contracts to lock in a profit.

    The "Surprising" Answer What Energy Companies Have Spent Their Newly Issued Equity Proceeds On - One week ago, as confirmation that the recent oil rally is merely being used by banks to force debtor companies to sell equity and to repay as much secured loans as possible, we showed the case study of Weatherford International and its primary banker, JPMorgan. As we laid out, Weatherford had been in talks with JP Morgan Chase, its key lender, to re-negotiate its revolving credit facility - the only thing keeping the company afloat. "However, in a move that shocked the financial markets, JP Morgan led an equity offering that raised $565 million for Weatherford. Based on liquidation value Weatherford is insolvent. The question remains, why would JP Morgan risk its reputation by selling shares in an insolvent company?" "According to the prospectus, at Q4 2015 Weatherford had cash of $467 million debt of $7.5 billion. It debt was broken down as follows: [i] revolving credit facility ($967 million), [ii] other short-term loans ($214 million), [iii] current portion of long-term debt of $401 million and [iv] long-term debt of $5.9 billion." But the biggest surprise was that JP Morgan is also head of a banking syndicate that has the revolving credit facility. It was a surprise because JP Morgan also happened to be the lead underwriter on Weatherford's equity offering.The punchline: the proceeds from the offering are expected to be used to repay JP Morgan's revolving credit facility.

    Aubrey McClendon was driving 90 mph when he crashed - Oklahoma oil tycoon Aubrey McClendon was driving close to 90 mph just seconds before the fiery crash that killed him a day after his indictment on bid-rigging charges, Oklahoma City police said Monday. Based on black box data, investigators have determined that the former Chesapeake Energy Corp. CEO did not make any real attempt to brake before his natural gas-powered Chevy Tahoe slammed into an underpass in the March 2 crash. Oklahoma City Police Chief Bill Citty told reporters during a Monday press conference that McClendon “went left of center approximately 189 feet prior to that point of impact.” The 56-year-old fracking tycoon was not wearing his seatbelt before the wreck and, though he tapped his brakes repeatedly, “it’s not really enough to consider brakeage,” Citty said.“It didn’t really slow the vehicle.” In the last 31 feet before impact, the energy magnate let off the brakes altogether. Investigators believe the brakes were functioning properly. When he smashed into the bridge underpass, McClendon’s vehicle rotated about 7 feet counterclockwise and three wheels went airborne, causing the Tahoe to slow down to about 78 mph by the point of impact. McClendon suffered blunt force trauma and was probably dead before the flames scorched his body, Citty said.

    Special Report: The final days and deals of Aubrey McClendon - Reuters -- A Reuters review of records and interviews show:

    • * McClendon no longer controlled the bulk of his most bankable venture, the one that helped make him a billionaire while he was CEO of Chesapeake: his stake in thousands of company oil and gas wells awarded to him during his tenure. Records show he was in the process of transferring the last of these interests to a company controlled by a close friend, Clayton Bennett of Dorchester Capital.
    • * His largest investor was halting all new business with him. The backer, Energy & Minerals Group of Houston, informed its investors just before his death that McClendon no longer held any leadership roles in related firms.
    • * McClendon had recently reached an undisclosed, tentative agreement to pay at least $3 million to Chesapeake to settle a legal dispute in which his former company had accused him of taking confidential data with him when he left in 2013 to set up his new company.
    • * By fighting the U.S. criminal indictment, he faced a potential public airing of his business tactics. McClendon’s own emails were expected to represent the bulk of the government’s evidence against him, say two people familiar with the matter.

    Aubrey McClendon Left His Biggest Backer With Billions to Lose - The late Aubrey McClendon thrived on risk. John Raymond, his biggest backer, not quite as much. But with McClendon gone, the price of oil so low and debts piling up, Raymond could be in a tight spot. McClendon, who died March 2 in a car crash, had recently been ousted from Chesapeake Energy Corp. when he invited a handful of private equity firms to bankroll what he called “the second half of my career.” The terms outlined in the April 2013 pitch, obtained by Bloomberg, were so favorable to McClendon, however, that most investors turned him down, according to people familiar with the response. After some haggling, one of the few that accepted was Energy & Minerals Group, the firm led by Raymond, son of the former Exxon Mobil Corp. Chief Executive Officer Lee Raymond. Though there’s still time to salvage the bets, much if not all of the estimated $2.6 billion that an EMG fund put into a half-dozen enterprises set up by McClendon’s American Energy Partners LP could be lost, according to Carin Dehne-Kiley, a Standard & Poor’s credit analyst, who tracks three of the four biggest ventures. Side bets by EMG investors added hundreds of millions of dollars to that figure, said two people familiar with the matter who asked not to be identified because the information is confidential. That, too, is at risk. “There’s a good chance these guys will default in the next 12 months,” barring an oil-price rebound, Dehne-Kiley said of the EMG-backed American Energy Partners ventures that she tracks.

    Short-sighted Clinton opposes fracking - Columbus Dispatch -- To my amazement, I watched Democratic presidential hopeful Hillary Clinton this past Saturday say that she would impose burdensome regulations on hydraulic fracturing. “By the time we get through with all of my conditions, I do not think there will be many places in America where fracturing will continue to take place.” Her words. As a landowner’s advocate, I have watched firsthand how the advent of hydraulic fracturing into shale has transformed Ohio. Every Ohioan has benefited from the shale boom. Huge sums of money have been shifted from the Wall Street “elites” to landowners in eastern and southeastern Ohio in the form of bonuses, royalties and pipeline fees. Local businesses have been invigorated by the influx of oil-field workers. Ohio’s tax base has broadened substantially. Every person who heats their home with natural gas enjoys remarkably low prices thanks to the near-unlimited supplies of methane released by the hydraulic fracturing of shale. I cannot fathom how a candidate for President, campaigning on promises of prosperity, would threaten to kill the golden goose that has blessed Ohio, Pennsylvania and West Virginia. “Fracking” is the very method by which the United States has become an oil exporter for the first time in two generations and has unlocked more proved, obtainable natural-gas reserves than any other country.

    Hillary Clinton's Mistake on Fracking for Natural Gas - Hillary’s strong anti-fracking statement is, at the very least, politically unsavvy: battleground states Ohio and Pennsylvania are our key incremental natural gas producers, and fracking is their primary means to extract more gas. Ohio has the Utica shale gas play and Pennsylvania has the Marcellus gas shale play, and fracking is instrumental to energy and economic development in both states – crucial investments worth many tens of billions of dollars (here, here). Hillary should know that Ohio, Pennsylvania, and Florida (the last being increasingly a gas-based state that wants more fracked gas from the first two, here) remain the battleground states to focus on most because “since 1960 no candidate has won the presidential race without taking at least two of these three states.” And Hillary’s anti-fracking position appears highly hypocritical and illogical: she has been promoting fracking in other countries (see the facts on that from left leaning sites here, here). What’s even more strange for Hillary is that her former boss, President Obama, has been a supporter of fracking for natural gas (here, here, here)…not to mention California Governor Jerry Brown’s, a leading progressive on climate change policy, support of fracking (here). In fact, anti-fracking positions are a threat to the energy security of our entire nation, and will just make other states unfairly over reliant on Ohio and Pennsylvania gas (just ask New York how anti-fracking positions simply mean greater reliance on Pennsylvania’s fracked natural gas) – gas is just that much more reliable.

    Oil industry dreads Trump-Clinton choice - Politico -- The staunchly GOP-aligned oil industry that championed George W. Bush and Mitt Romney isn’t yet willing to embrace Donald Trump — and some of its lobbyists wonder if they could stomach seeing Hillary Clinton in the White House instead.  It’s yet another sign of how Trump’s unconventional campaign and bombastic rhetoric have upended many of the traditional assumptions of presidential politics. For oil and gas supporters, the industry’s traditional allegiance to the Republican Party is bumping up against the GOP front-runner’s support for ethanol, his puzzling remarks about grabbing “a chunk” of the Keystone XL pipeline and his attacks on oil as just another “special interest.”  Among those expressing uncertainty is the industry's top lobbyist, American Petroleum Institute CEO Jack Gerard, who told POLITICO this month that he doesn't know whom he will vote for in November. "It's probably premature for me to judge," said Gerard, a former Bush campaign bundler who in 2012 was widely viewed as a potential White House chief of staff or energy secretary if Romney won.   Another oil industry source was even blunter about the prospects of a match-up between Clinton, who promises to crack down on oil and gas pollution, and Trump, who has accused Republican rival Ted Cruz of being "totally controlled by the oil companies." "Is there a Door Number Three?" the source asked by email.

    Big Oil Is Scared of Trump for Terrible Reasons -- The Republican Party has few constituencies more loyal than the oil industry. Over the last two election cycles, the American Petroleum Institute has given 80 percent of its donations to GOP candidates. But with the party on the verge of nominating a reality star turned pseudo-fascist demagogue, even Big Oil’s eye is starting to wander across the aisle, Politico reports: The staunchly GOP-aligned oil industry that championed George W. Bush and Mitt Romney isn’t yet willing to embrace Donald Trump — and some of its lobbyists wonder if they could stomach seeing Hillary Clinton in the White House instead.They aren’t scared of Trump because he might destroy what’s left of our crumbling republic — they’re scared because he might not be committed to destroying the climate.“Would he take a carbon tax as part of a tax reform deal? Of course, because he cares about tax reform," said McKenna, the Republican energy lobbyist. "You start asking yourself policy questions, ‘Would he do X?’ The answer is usually yes."The lobbyists are also concerned by an interview the Donald gave to Field & Stream in which he came out against returning federal lands to the states. The oil industry believes those lands are best managed by local authorities who know their regions and are much easier to lobby for drilling rights.  “I don’t like the idea because I want to keep the lands great, and you don’t know what the state is going to do. I mean, are they going to sell if they get into a little bit of trouble?” Trump told the magazine. “And I don’t think it’s something that should be sold. We have to be great stewards of this land. This is magnificent land.”

    Judge: BP not to pay oil industry losses from moratorium (AP) — A federal judge ruled that BP does not have to pay for economic losses other businesses suffered when the federal government shut down deep-water drilling in the wake of BP’s catastrophic 2010 oil spill in the Gulf of Mexico. U.S. District Judge Carl Barbier in New Orleans issued his ruling late Thursday. The Obama administration imposed a six-month drilling ban in the Gulf to prevent another disaster. The offshore industry called the moratorium a costly mistake. Barbier’s ruling came in a lawsuit brought by six companies involved in offshore drilling, but plaintiffs’ lawyers said thousands of similar claims worth billions of dollars would be affected by the ruling.

    Obama Reverses Course on Drilling Off Southeast Coast - The Obama administration is expected to withdraw its plan to permit oil and gas drilling off the southeast Atlantic coast, yielding to an outpouring of opposition from coastal communities from Virginia to Georgia but dashing the hopes and expectations of many of those states’ top leaders.  The announcement by the Interior Department, which is seen as surprising, could come as soon as Tuesday, according to a person familiar with the decision who was not authorized to speak on the record because the plan had not been publicly disclosed.  The decision represents a reversal of President Obama’s previous offshore drilling plans, and comes as he is trying to build an ambitious environmental legacy. It could also inject the issue into the 2016 presidential campaigns, as Republican candidates vow to expand drilling.   In January 2015, Mr. Obama drew the wrath of environmentalists and high praise from the oil industry and Southeastern governors after the Interior Department put forth a proposal that would have opened much of the southeastern Atlantic coast to offshore drilling for the first time.  The proposal came after governors, state legislators and senators from Virginia, North Carolina, South Carolina and Georgia all expressed support for the drilling. Lawmakers in the state capitals saw new drilling as creating jobs and bolstering state revenue. But the offshore drilling proposal, which was still in draft form and was not to be finalized until later this year, provoked a backlash from coastal communities including Norfolk, Va., which supports the world’s largest naval base; Charleston, S.C.; and tiny tourist towns around Myrtle Beach, S.C., and on the Outer Banks of North Carolina. Over 106 of those coastal cities and towns signed resolutions asking Mr. Obama to shut down plans for new drilling.

    Obama bans oil drilling along Atlantic seaboard  - The Obama administration abandoned its plan for oil and gas drilling in Atlantic waters on Tuesday, after strong opposition from the Pentagon and coastal communities. The announcement from Sally Jewell, the interior secretary, to bar drilling across the length of the mid-Atlantic seaboard reverses Obama’s decision just a year ago to open up the east coast to oil and gas exploration, and consolidates his record for environmental protection. In a conference call with reporters, Jewell said Virginia, North Carolina, South Carolina, Georgia and Florida would remain off-limits for drilling until 2022 because of coastal communities’ concerns about risks to their fishing and tourist industries from an oil and gas spill, and warnings from the navy about interference with its systems. “We heard from many corners that now is not the time to offer oil and gas leasing off the Atlantic coast,” Jewell said. “When you factor in conflicts with national defense, economic activities such as fishing and tourism, and opposition from many local communities, it simply doesn’t make sense to move forward with lease sales in the coming five years.” Jewell left open a small possibility for future drilling in the Arctic, saying officials would still consider leases at three locations within the Chukchi and Beaufort seas, and Cook inlet. “We know the Arctic is a unique place of critical importance to many – including Alaska Natives who rely on the ocean for subsistence,” Jewell said. “We want to hear from the public to help determine whether these areas are appropriate for future leasing and how we can protect environmental, cultural and subsistence resources.”

    Near-Record Cash `Comfort' for Canada Oil Firms Amid Price Rout -- Canada’s biggest oil producers are sitting on a near-record pile of cash, giving them the resources to keep investing and manage debt while weathering the worst price rout in a generation. The five largest oil producers including Suncor Energy Inc. and Cenovus Energy Inc. have a combined C$8.5 billion ($6.4 billion) in cash and cash equivalents, an increase of 7.6 percent from a year earlier and more than twice the levels seen during 2009 downturn. The figures, which are little changed from a record C$9 billion in 2014, don’t include the proceeds from Imperial Oil Ltd.’s recent sale of its Esso-brand gas stations for C$2.8 billion. “Sitting on cash and a healthy balance sheet has become a competitive advantage,” . “These guys still have a lot of capital they need to spend.” Divestitures, cost cutting, equity raises, and dividend cuts have helped bolster balance sheets as Canadian oil producers buckle down for the “lower for longer” prices Suncor Chief Executive Officer Steven Williams has described. Compared with the last downturn when commodity prices made a quick recovery, the industry isn’t betting on a return to high prices and needs the money to keep their operations expanding. Having cash is an important survival tactic as commodity markets remain volatile despite the recent recovery that saw oil prices rebound toward $40 from more than a 12-year low of about $26 a barrel in February. West Texas Intermediate is expected to average C$39.50 this year, according to the estimates compiled by Bloomberg.

    Fracking review: Companies not required to negotiate land access under WA Government reform - Oil and gas companies that want to carry out fracking on West Australian land will not be obliged to negotiate with landowners, despite recommendations to Government to make it mandatory. The WA Government has announced it will adopt 10 of 12 recommendations made to them in November by an Upper House parliamentary committee and designed to beef up the regulation of the state's growing onshore oil and gas industry. The committee spent two years conducting a public inquiry into the implications of fracking, the practice used to extract onshore shale gas. The recommendations include increased fines for oil and gas companies that commit offences. The State Government argued a voluntary land access agreement that was brokered by the petroleum industry and agricultural groups in 2015 already existed, and hence did not need to be made compulsory. But the WA National's Member for Moore Shane Love said the agreement must be mandated to "give it real teeth". The State Government has also rejected a recommendation to form a statutory body to act as an independent arbiter for land owners and resource companies in land access negotiations.

    In oil price plunge, North Sea industry faces perfect storm - The North Sea oil industry, the biggest and oldest in Europe, is struggling with a toxic combination of aging, drying wells and the recent plunge in oil prices, which is forcing companies to rethink investments and putting thousands of jobs at risk. Estimates suggest more than a third of some 330 oil fields in the U.K. North Sea will close in the next five years. “There is a sort of perfect storm,” “Those cumulative factors are going to negatively impact on the North Sea unless there is a fairly significant upsurge in the price of oil.” For the North Sea, each new bust accelerates its downward spiral, hurting the countries that tap it — Britain, Norway and to a lesser extent the Netherlands. Norway on Thursday slashed interest rates in a bid to help the economy manage the oil sector’s drop. In Britain, the government this week offered tax relief to oil companies to protect jobs and stem a decline in government income. Tax revenue from the industry dropped to 2.1 billion pounds ($3 billion) last year from 10.9 billion pounds in 2011-12. Some of the biggest platforms are being dismantled as the industry forecasts production will drop to 45 million tons of oil equivalent this year, less than a third of the 150 million tons produced in 1999. Shell, for example, has started the process of decommissioning the Brent oilfield — which has produced 3 billion barrels of oil equivalent since 1976 and gave its name to the international crude oil benchmark. Oil companies are expected to invest about 1 billion pounds ($1.4 billion) in new projects this year, compared with a recent average of 8 billion pounds, industry association Oil & Gas U.K. says. And it is hitting workers hard. Some 5,500 people have lost their jobs, or 15 percent of the 36,600 directly employed in the industry at the end of 2013, according to Oil & Gas U.K. The group estimates that total direct and indirect employment supported by the industry has fallen to 375,000 from a peak of 440,000.

    Oil will be over $100 a Barrel in 3 Years (Video) - Here is the Oil Equation: Existing Supply minus Shale Destruction, minus Cap Ex Reductions, minus Depletion Rates Globally, minus Demand Growth versus Iranian New Supply. Oil will be above $45 a barrel by April, above $70 a barrel in fifteen months, and over $100 a barrel in 3 years once you start plugging in the numbers in the aforementioned oil equation. The scary thing is we now know what Russia, Saudi Arabia and OPEC have in terms of Spare Capacity - and it is much less than we thought five years ago.

    Why Oil Producers Don't Believe The Oil Rally: Credit Suisse Explains - For the past month, the price of oil has soared by a 50% on no fundamental catalyst; in fact, the "fundamental" situation has gotten progressively worse with the record oil inventory glut increasing by the day even as US crude oil production posted a modest rebound in the past week after two months of declines, while the much touted OPEC/non-OPEC oil production freeze has yet to be discussed, let alone implemented. With or without a valid catalyst, however, the short squeeze price action has drastically changed not only investor psychology, but that of the IEA as well, which on Friday announced that oil may have bottomed (if the agency's predictive track record is any indication, oil is about to crash). But while traders, algos and CNBC guest "commodity experts" may be certain that oil will never drop to $27 again, someone else is not at all convinced that oil prices will not drop again: oil producers themselves. We first noted this earlier this week,since January, the spread between Brent for delivery on the 2020 end of the curve and crude for prompt supply has dropped by nearly $8 to around $10.71 a barrel. "Brent's flattening contango since January comes as many producers want to cash in immediately on recent price rises. They've been heavily selling 2017/2018 and beyond, and it shows that they don't quite trust the higher spot prices yet," said one crude futures trader."This means that even the producers don't really expect a strong price rally until well into 2017 or later," he said. The companies that explore for oil and pump it out of the ground have been locking in price gains by selling off future output as a financial hedge, pulling down prices for those contracts, said sources with some of the producers and traders who had been counterparty to deals.

    Oil Prices Should Fall, Possibly Hard -- Art 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% 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. Saudi Arabia and Russia are two of the world’s largest oil-producing countries. Yet in January 2016, Saudi liquids output was only ~110,000 bpd more than in January 2014 and Russia was actually producing ~50,000 bpd less than in January 2014. The present world production surplus is more than 2 mmbpd. By contrast, the U.S. plus Canada are producing ~1.9 mmbpd more than in January 2014 and Iraq’s crude oil production has increased ~1.7 mmbpd. Also, Iran has potential to increase its production by as much as ~1 mmbpd during 2016. Yet, none of these countries have agreed to the production freeze. Iran, in fact, called the idea “ridiculous.”

    Oil Plunges Back To Draghi Lows - Just as we saw with the stock market following Draghi's December disappointment dead-cat-bounce, WTI Crude has collapsed back topost-Draghi lows, erasing all the WTF bounce from Friday. The driver - aside from the fact that there was no driver of the ramp - appears to be comments from Emirates Bank on the resilience of US shale (and the surprising lack of production drops for now). US shale-oil producers could decide to stay in the game with prices currently hovering around $40/barrel, according to Edward Bell at Dubai-based bank Emirates NBD. Market participants expected some shale producers to be pushed out as they struggled to compete in the low-price environment, and while US production is falling, it's not been happening at a rapid rate. With prices well off their recent lows, shale producers could decide to weather the storm and try to keep output high. US production has dropped around 120K/day so far this year, but still remains above 9M barrels. Finally, given the total lies that were spewed about a March meeting of OPEC/NOPEC, it appears April is the new March... OPEC and non-OPEC producers are likely to hold their next meeting on a plan to freeze output levels in a bid to support prices in mid-April in Doha,three OPEC sources said on Monday. An earlier plan was to meet on March 20 in Russia, but sources familiar with the matter said last week this was unlikely to take place.

    Oil Plunges Back To $36 Handle As Short-Squeeze Ends -  Remember last week when oil prices spiked despite a rise in crude production, inventory builds, continuing storage concerns at Cushing, and the admission that there is no March OPEC/NOPEC "freeze" meeting. Well that's all over. April WTI just broke back to a $36 handle - erasing all of those algo gains... Strong USD, weak Oil... Rinse. Repeat. As we noted previously, catching a falling knife is hard, especially when it’s covered in oil. The International Energy Agency today said oil prices may have bottomed out. Several people have tried to call the oil’s floor since prices started falling in the summer of 2014. So far nobody has been right. Of course it's different this time, this really is the bottom. Except, with ETF shorts having collapsed to "norms" the buyers of last resort will have their work cut out maintaining the dream with no one left to squeeze... Charts: Bloomberg

    Why Oil Prices May Not Move Higher - Arthur Berman - The oil-price rally that began in mid-February will almost certainly collapse. It is similar to the false March-June 2015 rally. In both cases, prices increased largely because of sentiment. As in the earlier rally, current storage volumes are too large and demand is too weak to sustain higher prices for long. WTI prices have increased 47 percent over the past 20 days from $26.21 in mid-February to $38.50 last week (Figure 1). A year ago, WTI rose 41 percent in 35 days from $43 to almost $61 per barrel. Like today, analysts then believed that a bottom had been reached. Prices stayed around $60 for 37 days before falling to a new bottom of $38 per barrel in late August. Much lower bottoms would be found after that all the way down to almost $26 per barrel at the beginning of the present rally. Higher prices were unsustainable a year ago partly because crude oil inventories were more than 100 mmb (million barrels) above the 5-year average (Figure 2). Current inventory levels are 50 mmb higher than during the false rally of 2015 and are they still increasing. International stocks reflect a similar picture. OECD inventories are at 3.1 billion barrels of liquids, 431 mmb more than the 2010-2014 average and 359 mmb above the 2015 level. Approximately one-third of OECD stocks are U.S. (1.35 billion barrels of liquids). For 2015, U.S. liquids consumption shows a negative correlation with crude oil storage volumes (Figure 3). During the 2015 false price rally, consumption began to increase in April and May following the lowest WTI oil prices since March 2009–response lags cause often by several months. Oil is accumulating in storage because of low demand and low prices. It makes more sense to pay the monthly storage cost (~0.65 per barrel) and sell the oil forward with ongoing futures contracts until the spot price increases and, hopefully, demand also increases. Many people think that the strip of futures contract prices are a reasonable guide to future prices. They are not. Futures prices mostly reflect the supply and demand of futures contracts. That in no way discounts the profound effect that futures trading has on oil prices. The WTI futures market is one of the biggest gambling casinos in the world. Bets are often made on sentiment that in turn is related to world events. Price fluctuations that are based primarily on sentiment, however, have little chance of lasting longer than the sentiment or related events that produced them.

    Oil back below $40 as Iran dashes hopes for quick deal on output: (Reuters) - Oil fell around 2 percent on Monday after Iran dashed hopes that there would be a coordinated production freeze any time soon, returning bearish sentiment to the market over a supply glut that has sent prices crashing. Global benchmark Brent crude futures fell back below $40 a barrel, trading at $39.69 at 0903 GMT, down 70 cents on Friday's close. Brent hit a 12-year low of $27.10 in January. U.S. crude was down 79 cents at $37.71 a barrel. "Oil is down because Iran said they would only join the output freeze group once they reached production of 4 million barrels a day (bpd)," said Tamas Varga, oil analyst at London brokerage PVM Oil Associates. Iran's oil exports are due to reach 2 million bpd in the Iranian month that ends on March 19, up from 1.75 million in the previous month, Iran's oil minister Bijan Zanganeh said on Sunday. Zanganeh poured cold water over hopes for a quick deal on freezing production, saying the OPEC member would join discussions only once its own output reached 4 million bpd. Zanganeh is to meet his Russian counterpart Alexander Novak in Tehran on Monday, according to news agency reports. Saudi Arabia appeared to have stuck to a preliminary deal with some other producers to freeze output as its crude production held steady in February at 10.22 million bpd, an industry source told Reuters. Worries about demand fundamentals also moved back into the spotlight as investment bank Morgan Stanley warned that a slowing global economy and high production would prevent any sharp rises in oil prices.

    Oil ends down 2 percent on technical pressure, stockpiles worry | Reuters: Oil settled 2 percent lower on Tuesday, extending losses for a second straight day, as the market yielded to technical resistance after running above $40 a barrel and worry that U.S. crude stockpiles were rising despite falling production. Uncertainty over how the U.S. Federal Reserve will word its policy statement on Wednesday also fed jitters in financial markets.  The oil market will be on the look out later on Tuesday for preliminary data on U.S. crude stockpiles, due at 4:30 p.m. EDT from industry group American Petroleum Institute (API). The government-run Energy Information Administration (EIA) will issue official inventory numbers on Wednesday, forecast to show U.S. crude stockpiles at record highs for a fifth straight week. Crude had rallied about 50 percent over the past six weeks after talk that major oil producers planned to freeze output at January levels boosted a market that sank to 12-year lows on a supply glut.

    Oil Pops After Lower-Than-Expected Crude Build -- Against expectations of a 3.2mm build, API reported a 1.5mm build after-hours today which sparked a modest pop in crude prices. Cushing saw its 7th weekly build (471k) as Gasoline extended its run of draws to the 4th week. API:

    • Crude +1.5m
    • Cushing +471k
    • Gasoline -1.2m

    5th weely crude build, 7th weekly Cushing build, but 4th weekly Gasoline draw..

    OilPrice Intelligence Report: Is The Latest Rally Yet Another False Start?: Oil prices lost some of their shine over the past week, as reality set in. Oil markets remain oversupplied, inventories are still rising, and hopes have faded surrounding OPEC’s ability to negotiate some kind of production cut. Iran punctured bullish sentiment when it said that it would not accept the OPEC-Russia production freeze deal until it had returned output to pre-sanctions level, which means that it has no intention of choking off output until it ramps up production by an additional 1 million barrels per day. Rally is too early. Even leaving aside Iran and the record high levels of oil sitting in storage, there could be a ceiling to the oil price rally due to the responsiveness of U.S. shale. A rally above $40 or $50 would bring U.S. shale production back online, due to the short lead times between new drilling and production. That would send prices back down. The key to a sustained rally is a more substantial cut back in production, which can only be possible if drillers are starved of capital, Goldman Sachs concluded recently. “An early rally in prices before a deficit materializes would prove self-defeating,” Jeffrey Currie, head of commodities research at Goldman Sachs, wrote in a March 11 report. A reaction from the shale industry could take longer than expected, others argue. With battered balance sheets, thousands of laid off workers, idled equipment, and depleted access to capital, it is not as if oil drillers can spring into action immediately. For example, North Dakota’s Director of Mineral Resources, Lynn Helms, thinks it could take oil prices rising above $60 per barrel before drilling picks up. “If you’ve been on a strict diet for a long period of time, it takes a while to put the weight back on,” Helms told reporters last week. As a result, even if oil prices rise, it will take time for damaged drillers to repair their balance sheets.

    Why a Serious Oil Rebound is Not Coming Soon -- Oil prices have shown signs of life over the past few weeks, as production declines in the U.S. raise expectations that the market is starting to adjust. As a result, Brent crude recently surpassed $40 per barrel for the first time in months. The energy world has been speculating about declines from U.S. shale, and the declines are finally starting to show up in the data.  Despite the newfound optimism that oil markets are balancing out, crude oil sitting in storage is at a record high in the United States. Energy investors may have preferred to focus U.S. production declines, or the fall in gasoline inventories in early March, but meanwhile crude oil stocks continue to signal that oversupply persists.  Crude stocks rose once again last week, hitting yet another record of 521 million barrels. Storage levels at Cushing, Oklahoma, an all-important hub where the WTI benchmark price is determined, have surpassed 90 percent of capacity. U.S. output may be starting to decline, but it is doing so at a painfully slow rate.  It isn’t just a U.S. problem. Crude oil storage levels continue to climb around the world. Commercial stocks in the OECD surpassed 3 billion barrels in 2015. The EIA sees oil storage in the OECD rising to 3.24 billion barrels by the end of this year. It doesn’t stop there. Storage levels rise a bit more next year, hitting 3.30 billion barrels by the end of 2017. That is a staggering forecast that should scare any oil investor. It also suggests that the price rally over the past few weeks, which has pushed oil prices up around 40 percent since early February, could be fleeting. There is evidence that suggests the rally was driven by speculators closing out short bets on oil, after accruing net-short positions at multiyear highs in recent months. The underlying fundamentals, however, have not appreciably changed in recent weeks. U.S. oil production is declining, but more or less at the same pace that it has for months. On the other hand, rising inventories undercut the notion that the market is adjusting. As a result, as the short-covering rally reaches its limits, and the markets digest the fact that the world is still oversupplied with oil, prices could fall once again.

    Major oil producers to talk output freeze in Qatar in April — (AP) — OPEC member states and other major oil producers plan to meet next month to discuss a freeze in oil output levels, Qatar’s top energy official said Wednesday. The gathering, which will build on earlier talks that included major suppliers Russia and Saudi Arabia, reflects a growing sense of urgency among producers to try to shore up crude prices following a steep drop that is straining their domestic budgets. Qatar holds the rotating presidency of OPEC and will host the upcoming talks, which are scheduled to take place the capital, Doha, on April 17. Some 15 oil-producing nations representing about 73 percent of world output have agreed to take part, according to a statement from Mohammed bin Saleh al-Sada, Qatar’s energy and industry minister. “The continuous efforts of the Qatari government have been instrumental in promoting dialogue among all oil producers to support the Doha initiative, helping the stabilization of (the) oil market to the interest of all,” al-Sada said in the statement,  Energy ministers from Russia and OPEC members Saudi Arabia, Qatar and Venezuela pledged to cap their output levels if others do the same in an effort to bolster oil prices during a meeting in Doha last month. Other major producers, including OPEC members Kuwait and the United Arab Emirates, have since expressed support for the initiative. The countries are seeking coordinated action because they are reluctant to give up market share to other producers.

    Crude Slides After Cushing Build, Smaller-Than-Expected Gasoline Draw -- For the 7th week in a row, Cushing inventories saw a build (+545k) pushing to new record high stockpiles but that was offset by a smaller-than-expected build in overall crude (+1.3m vs +3.2m and less than API overnight). Smaller-than-expected draws in Gasoline and Distillates are helping to fade the early gains in crude. DOE:

    • *CUSHING INVENTORIES ROSE 545,000 BARRELS, EIA SAYS (whisper +497k)
    • *GASOLINE INVENTORIES FELL 747,000 BARRELS, EIA SAYS (whisper -1.6m)

    Art Berman Clarifies Whatever Happened to Peak Oil -- KunstlerCast 275 — Kunstler - Original audio source

    Crude Mystery: Where Did 800,000 Barrels of Oil Go? - WSJ: There is mystery at the heart of the oversupplied global oil market: missing barrels of crude. Last year, there were 800,000 barrels of oil a day unaccounted for by the International Energy Agency, the energy monitor that puts together data on crude supply and demand. Where these barrels ended up, or if they even existed, is key to an oil market that remains under pressure from the glut in crude. Some analysts say the barrels may be in China. Others believe the barrels were created by flawed accounting and they don’t actually exist. If they don’t exist, then the oversupply that has driven crude prices to decade lows could be much smaller than estimated and prices could rebound faster. Whatever the answer, the discrepancy underscores how oil prices flip around based on data that investors are often unsure of. Barrels have gone missing before, but last year the tally of unaccounted-for oil grew to its highest level in 17 years. At a time when the issue of oversupply dominates the oil industry, this matters.“If the market is tighter than assumed due to the missing barrels, prices could spike quicker,” . Here’s how a barrel of crude goes “missing” in the data. Last year, the IEA estimated that on average the world produced around 1.9 million barrels a day more crude than there was demand for. Of that crude, 770,000 barrels went into onshore storage while roughly 300,000 barrels were in transit on the seas or through pipelines. That left roughly 800,000 barrels a day unaccounted for in the data. Global oil supply is about 96 million barrels a day.

    Oil Jumps After Latest Output Freeze Meeting "News" --One of the most farcical instances of report-it-then-promptly-deny-it headline hockey since last summer’s Greek bailout drama has been the incessant barrage of “news” surrounding the oft-celebrated oil output freeze deal struck last month by the Saudis, Qatar, Venezuela, and Russia. At the time, the market was hoping against hope for an agreement to cut production. After all, Russia and Saudi Arabia are pumping at record levels. As we put it at the time, “it was not exactly clear how ‘freezing’ output at a record level will ‘stabilize and improve’ the market.” Still, this market will take what it can get at this point and since the “agreement” on February 16, prices have indeed risen and some of the gains have - rightly or wrongly - been attributed to the “freeze.”Casting a pall over the entire thing is Iran who, having just begun to ramp up production after the lifting of international sanctions, isn’t particularly excited about the prospect of taking its foot off the pedal. Asked about participating in the freeze, Oil Minister Bijan Zanganeh said last week that Tehran should “just be left alone,” until production reaches 4 million b/d. At that point, Zanganeh says, “we will join them.”Of course that’s a non-starter for the likes of Kuwait, whose own oil minister Anas al-Saleh recently warned that his country will “go full power” if everyone (and “everyone” includes the Iranians) isn’t on board with the deal. On Monday, Russian Energy Minister Alexander Novak spoke with Zanganeh on the phone and once the call was over, indicated that Moscow “understood” its ally in Tehran’s position. “Since Iran’s production decreased under sanctions, we totally understand Iran’s position to increase production and revive its share in the global markets,” Novak said, adding that “within the framework of major oil producers (OPEC and non- OPEC), Iran is liable to have an exclusive way for increasing its oil production.”

    Global Oil Equation (Video) -  Costs for servicing oil projects have pulled back considerably after a nice decade of price spikes, but oil servicing costs are going to rise again, necessitating higher oil prices to justify capital allocation behavior. There is no cure for low prices like low prices when the globe utilizes around 95 million barrels of oil per day. Remember when oil spiked to $147 a barrel, well we were at 89 million barrels per day in global consumption. Global oil consumption is going to outpace the growth of global oil production over the next decade which is going to lead to a really tight oil market in the future.

    WTI Crude Slides Back Into Red For 2016 As The Fed And Oil Remain On Unsustainable Paths -- Oil prices have increased 50 percent since the lows exhibited earlier this year, a rise that is largely linked to the positive market reaction to the OPEC output freeze.  But WTI Crude has given up all its early morning "see oil is fixed" gains in a hurry as once again the algo ramps give way to the realization that, as OilPrice's Leonard Brecken via,notes, comes even as for all intents and purposes OPEC has nearly reached its production limits and Iran still plans in increasing output. What started the entire correction, in my view, was the carry trade on buying the Euro ahead of more quantitative easing (QE) and the Fed playing games by talking up a recovery and threatening to raise rates. That created a double whammy on a strong U.S. dollar beginning in the summer of 2014 when oil prices peaked. At the same time, U.S. producers did manage to ramp up output even further in the second half of 2014, at a time of rising inventories. By the first half of 2015 things began to self-correct as inventories began to fall. Oil prices started to make a recovery but reversed as OPEC flooded the market with more oil, which began in late 2014. Meanwhile the nuclear deal with Iran opened up the prospect of a new source of supply, a fact that was overhyped by the media.Demand remained strong for gasoline despite the weakening global economy, much to the media’s surprise. Inventories rose in absolute terms, but in terms of days of supply, storage remained at much more modest levels, only eclipsing the upper end of the historic five-year range in 2016.

    Collapsing Contango Means Tankers Full Of Oil Such As This One Will Soon Have To Unload Their Cargo -- One week ago we showed something the oil bulls did not expect: oil producer hedging had started.  As a trader cited by Reuters said "Brent's flattening contango since January comes as many producers want to cash in immediately on recent price rises. They've been heavily selling 2017/2018 and beyond, and it shows that they don't quite trust the higher spot prices yet."  He further explained that "This means that even the producers don't really expecting a strong price rally until well into 2017 or later," and Reuters added that the companies that explore for oil and pump it out of the ground have been locking in price gains by selling off future output as a financial hedge, pulling down prices for those contracts. We will have more to say on the topic of producer oil hedging, and specifically how they do it, in a subsequent post but for now it is worth noting that since last week the contango has flattened further as the spot price rose while the long end declined, suggesting even more hedging has taken place in recent days. One analyst who notes this trend, is Saxo Bank's Ole Hansen who observes that the rally in oil prices to 3 month highs has coincided with narrowing contangos that alter storage economics and threaten oil flooding back into the market. The reason for this is that storing oil, either on the ground or on ships, becomes less profitable the greater the flattening in the contango.  "As we’ve seen both Brent and WTI climb above $40 we have also seen the contango collapse." As examples, Bloomberg observes the WTI M1-M2 contango narrowing to earlier $1.25 today, the tightest since Jan. 22; while the WTI M1-M3 contango has reaches just $2.21, or the smallest in two months.

    US rig count, at 476, is lowest in 67 years of record-keeping: Baker Hughes - The total US rig count, which on Friday stood at 476, is now at its lowest point ever in the 67-year history of the Baker Hughes numbers, according to data released by the oilfield service company. That is down by four from last week and down from 1,069 working the same week in 2015 and a recent peak of 1,931 in late 2014. The previous low was 488 in April 1999, Baker Hughes records show. Meanwhile, the US oil rig count posted its first gain in three months, rising by one to 387 amid speculation that a recent rally in crude prices could signal that a long-awaited industry turnaround may be at hand. The 387 oil rigs this week were down 53% from 825 the same week a year ago, and a recent peak of 1,607 in late 2014. Also, the Eagle Ford Shale in south Texas, one of the US' largest oil plays, gained three rigs this week to 40, although this was about a third of the 122 rigs employed there the same week in 2015, Baker Hughes data show. "I think we're close to the bottom" of the down cycle, analyst Kevin Simpson said, although he added he did not expect a pickup in drilling "quite this early." "Companies have obviously scaled their operations to a lower price than we are at now," and are cautiously watching US and international production and demand estimates for signs of market balance, Simpson said.

    Crude prices fall from 2016 highs as U.S. oil rig count rises | Reuters: Crude prices settled lower on Friday after the U.S oil rig count rose for the first time since December, renewing worries of a supply glut after an output freeze plan helped boost the market to 2016 highs and multi-week gains. U.S. energy firms this week added one oil rig after 12 weeks of cuts, according to data by industry firm Baker Hughes. The addition, coming after oil rigs had fallen by two-thirds over the past year to 2009 lows, showed crude drilling picking up again after a 50 percent price rally since February. [RIG/U] "The rig count and crude prices have a direct relationship for sure," said Pete Donovan, broker at Liquidity Energy in New York. Brent crude finished down 34 cents, or 0.8 percent, at $41.20 a barrel, having risen $1 earlier to a 2016 high of $42.54. U.S. crude settled down 76 cents, or 1.9 percent, at $39.44, after also gaining $1 to a year high of $41.20.Despite the retreat, oil posted multi-week gains, with Brent up for a fourth straight week and U.S. crude a fifth week in a row. Both benchmarks rose about 2 percent this week. Over the past two months, prices rallied to reach above $40 after the Organization of the Petroleum Exporting Countries (OPEC) floated the idea of a production freeze at January's highs.

    US oil closes lower on profit-taking; rig count rises: Crude prices slipped on Friday after the U.S oil rig count rose the first time since December, renewing worries of a supply glut after an output freeze plan helped boost the market to 2016 highs and multi-week gains. U.S. energy firms this week added one oil rig after 12 weeks of cuts, according to data by industry firm Baker Hughes. The addition, coming after oil rigs had fallen by two-thirds over the past year to 2009 lows, showed crude drilling picking up again after a 50 percent price rally since February. "The rig count and crude prices have a direct relationship for sure," said Pete Donovan, broker at Liquidity Energy in New York. Brent crude was down 24 cents at $41.30 a barrel, having risen $1 earlier to a 2016 high of $42.54. U.S. crude for April delivery settled at $39.44 a barrel, was down 76 cents, or 1.89 percent, after gaining $1 earlier to a year high of $41.20. Despite the retreat, oil recorded multi-week gains. Brent was up for a fourth straight week and U.S. crude for a fifth week in a row. Global oversupply in oil pushed crude prices down from mid-2014 highs above $100 a barrel to 12-year lows earlier this year, bringing Brent to around $27 and U.S. crude to about $26.

    Rigged: Declining US oil and gas rigs forecast job pain - Brookings Institution - Lower prices mean oil and gas producers have less capital to invest in exploration and production, which means in turn that they employ fewer rigs. Since local employment in oil and gas states is more responsive to changes in rig counts than to oil prices directly, rig counts offer a revealing augury of employment trends.What does the rig tally say? Oil field services company Baker Hughes reports that the number of U.S. oil and gas rigs plummeted from 1,811 in January 2015 to just 489 at the beginning of March—down by 73 percent. North Dakota’s March count was 80 percent lower than in January 2015, while Texas was down 73 percent. A study from Rice University has estimated that the employment impact of putting a drilling rig into service creates 37 jobs immediately and 224 jobs in the long run, once all the relevant multipliers are factored in beginning with oil service company hiring, machinery and fabricated metal work, engineering, and management employment and ending with grocery store and pharmacy spending. Another study has found that the removal of an active rig eliminates 28 jobs in the near-term and 171 jobs in the long run. If this holds true, then the loss of 1,309 working rigs since January 2015 has the potential to lead to the loss of anywhere between 224,000 to 293,000 drilling-related jobs over the long term.

    Norway's Oil Minister to Companies: Don't Shut Output - Oil companies operating in Norway should hike recovery rates from mature fields despite falling crude prices, and resist the temptation to shut output earlier than planned, Energy Minister Tord Lien said. "Companies are obliged to maximise the value of each field to prevent profitable resources from being squandered," Lien of the right-wing Progress Party told Reuters on the sidelines of an industry conference. "This is something we must focus on, and it is important to communicate to companies that they have an independent responsibility to follow up," he added. "It's important to be clear on this from the government's side." Lien declined to say whether he was satisfied with the efforts currently made by energy firms in upholding production. Norway's oil output will drop to 1.53 million barrels per day in 2016 and 1.41 million in 2020 from 1.57 million in 2015. The NPD has previously said that if prices stay low it could accelerate a fall in crude production after 2020 if companies quit fields early or cancel the development of new projects. As part of its cost cutting effort, state-controlled Statoil last year postponed a decision on extending the lifetime of its Snorre field to 2040. The upgrade has been estimated to yield an additional 300 million barrels of oil.

    "They Should Leave Us Alone": Iran Wants No Part Of Oil Freeze Until Output Higher - On Tuesday, Kuwait's oil minister Anas al-Saleh delivered a rather stark warning to the rest of OPEC when he said the following about the much ballyhooed crude output freeze: "I'll go full power if there's no agreement. Every barrel I produce I'll sell.” That was a response to a question about what Kuwait would do if all major producers failed to agree to the freeze. Of course “all major producers” includes Iran and having just now begun to enjoy the financial benefits of being free to sell its oil without the overhang of crippling international sanctions, Tehran isn’t exactly thrilled about the idea of capping production at the current run rate of around 3 million b/d. As soon as sanctions were lifted, Iran immediately committed to boosting production by 500,000 b/d and said that by the end of the year, it would bring an additional 500,000 b/d of supply online. That would put Iranian production at around 4 million b/d total and, as we noted back in January, would mean the country will be raking in between $3 and $5 billion every month by the end of 2016.On Sunday, we got the latest from Iranian Oil Minister Bijan Zanganeh and the message was unequivocal: “They should leave us alone as long as Iran's crude oil has not reached 4 million. We will accompany them afterwards." So based on January’s ouput of 2.93 barrels, we’ve got a ways to go here. One can hardly blame Tehran. After all, the Saudis are producing at a record pace. So are the Russians. And so are the Iraqis. As Reuters writes, “sanctions had cut crude exports from a peak of 2.5 million bpd before 2011 to just over 1 million bpd in recent years.” There’s a lot of lost time (and money) to recover here and if everyone else gets to “go full power” - to quote Anas al-Saleh - then Tehran thinks they should as well.

    Iran petroleum sector says US companies welcome to invest  (AP) — U.S. companies are welcome to invest in Iran’s oil and gas industry, the Iranian oil minister said on Sunday. State-run Press TV quoted Bijan Namdar Zangeneh as saying that “in general, we have no problem with the presence of American companies in Iran.” He said it is the U.S. government that is “creating restrictions for these companies,” without elaborating. Zangeneh also confirmed that Iran’s state-run oil company has held talks with General Electric. “Of course, my deputy conducted these negotiations and when I inquired about them, it was said that the talks were positive,” he said. GE said in a statement responding to questions about the talks that it is considering possibly doing business in Iran. “In line with the easing of sanctions, we have begun looking at potential business opportunities in Iran, while fully complying with the rules laid out by the U.S. government,” the company said. Are you a premium subscriber?…Start your 2 week trial now for just $1.00! The TV report said Zangeneh also asked Siemens executives to invest in Iran’s oil and gas industry. “The German company must come to Iran to build equipment and parts needed in our oil industry and manufacture them here,” he said. All sanctions related to Iran’s nuclear program were lifted in January under a landmark agreement reached with world powers, but the U.S. maintains separate sanctions related to Iran’s ballistic missile program and its support for State Department-designated terrorist groups.

    U.S. Judge Orders Iran To Pay $10.5 Billion To 9/11 Victims And Insurers -- A New York City judge has ordered the Islamic Republic of Iran to pay more than $10.5 billion in damages to the estates and families of victims of the September 11, 2001, terrorist attacks on the World Trade Center and the Pentagon. U.S. District Judge George Daniels issued a default judgment on Wednesday, March 9, 2016, ordering Iran to pay $7.5 billion to the estates and families of the people killed in the tragic 9/11 incident. The total of $7.5 billion includes $2 million to the estates of each of the victims for the pain and suffering endured by their relatives and $6.88 million in punitive damages, according to Bloomberg.  Judge Daniels also ordered Iran to pay $3 billion to insurers, including Chubb Ltd., for losses incurred due to the payment of claims, such as property damages and business interruption, following the attacks. NY judge acquits #KSA in 9/11 case, rules against #Iran Read:  Daniels issued the default judgment after Iran failed to respond to the court summons to defend itself against allegations that the country was liable for damages because it helped the 9/11 terrorists. Judge Daniels’ latest judgment comes after he cleared Saudi Arabia of liability to pay billions in damages to the families of the 9/11 victims last year. After attorneys representing Saudi Arabia argued in court that there was no evidence linking Riyadh to the attacks, Daniels ruled that Saudi Arabia had sovereign immunity and agreed that there was no evidence that Saudi Arabia provided “material support” to the al-Qaeda terrorists.

    US Government Blames 9/11 On Iran, Fines Iran $10.5 Billion; Iran Refuses To Pay -- On March 14th, Iran announced that it will never pay the $10.5B that a U.S. court demanded it pay for the 9/11 attacks. The same Bill-Clinton-appointed judge who had ruled, on 29 September 2015, that Saudi Arabia has sovereign immunity for 9/11 and so can’t be sued for it, ruled recently, on March 9th that Iran doesn’t have sovereign immunity and fined Iran $10.5 billion to be paid to 9/11 victims and insurers; but, on March 14, Iran’s Foreign Ministry said Iran won’t pay, because, as the Ministry’s spokesman Hossein Jaberi Ansari put it, "The ruling is ludicrous and absurd to the point that it makes a mockery of the principle of justice while [it] further tarnishes the US judiciary’s reputation.”  The United States is allied with Iran’s enemy Saudi Arabia, the largest purchaser of U.S.-made weapons, and also the top influence in the Gulf Cooperation Council of Arabic oil royal families regarding where they buy their weapons. Those purchases, which are crucial to the stockholders in Lockheed Martin and other U.S. weapons-makers, are determined basically by the Saud family, the owners of Saudi Arabia.

    Saudis Open to Oil-Production Freeze Without Iran —Saudi Arabia, Kuwait and their allies would limit their oil output even if Iran doesn’t follow suit, OPEC officials said, a change in tone that paves the way for curbs on crude production to be set next month. The evolving position emerged after Qatar said Wednesday that it would host a meeting on April 17 in Doha for oil producers both inside and outside the Organization of the Petroleum Exporting Countries, the cartel that controls a third of the world’s crude production. The meeting would be a follow-up to a Feb. 16 pact among Saudi Arabia, Russia, Qatar and Venezuela to freeze their output at January levels in a bid to bring oil supply back in line with demand and raise prices that hit 12-year lows this year. On any given day, global oil supply of about 96 million barrels outstrips demand by almost two million barrels. Oil prices rose on Wednesday’s announcement. Brent crude, the international benchmark, was up 78 cents a barrel, or 2%, at $40.17 in London trading Wednesday afternoon. Saudi Arabia and its allies in the Middle East had said any agreement would be off if Iran refused to participate, but oil prices as low as $27 a barrel this year have hurt the Saudi economy and put domestic political pressure on the kingdom to move forward anyway, OPEC officials said.  Iran’s refusal is “not a deal beaker,” said an OPEC official from a Persian Gulf Arab country.  An agreement would have limited impact if it didn’t include Iran, the world’s seventh-largest oil producer trying to ramp up its output now that international sanctions have ended. Iran’s oil minister, Bijan Zanganeh, has said his country won’t consider joining until its production reaches four million barrels a day, up from about 3.2 million barrels a day currently. Mr. Zanganeh had initially expressed support for the freeze without committing to it. But after Saudi oil minister Ali al-Naimi appeared to insist at a Houston conference last month that Iran join the cap, Mr. Zanganeh publicly attacked the deal as “a joke” and said other producers should “leave us alone.”

    Emergency Meeting; Iran Problem Solved; Moving From Production Freeze To Out-Right Cut -- March 17, 2016: one SeekingAlpha contributor is calling this an emergency meeting with this summary:

    • a Saudi source confirms emergency meeting
    • 15 OPEC and non-OPEC producers to attend
    • the Iran "problem" appears to be solved
    • producers' talk can support prices
    • they may even try for a cut to get relief

    That was posted yesterday. Two key words. The first "key word" was "emergency." I can't disagree. The Mideast moves extremely slowly; the next regularly scheduled OPEC meeting is this June; they easily could have waited. June is but a few months away and they could always have done things "behind doors" but now, all of a sudden, April 17th.Second "key word": did you all catch that? Up until now it's been all about a "production freeze." All of a sudden we see the word, "cut."  And as noted on the blog the last couple of days, "the Iran problem appears to have been solved." I think the contributor is posting with a bit of hyperbole, along my lines (LOL) but it's getting very, very interesting. 

    How Saudi Arabia Turned Its Greatest Weapon on Itself - FOR the past half-century, the world economy has been held hostage by just one country: the Kingdom of Saudi Arabia. Vast petroleum reserves and untapped production allowed the kingdom to play an outsize role as swing producer, filling or draining the global system at will. The 1973-74 oil embargo was the first demonstration that the House of Saud was willing to weaponize the oil markets. In October 1973, a coalition of Arab states led by Saudi Arabia abruptly halted oil shipments in retaliation for America’s support of Israel during the Yom Kippur War. The price of a barrel of oil quickly quadrupled; the resulting shock to the oil-dependent economies of the West led to a sharp rise in the cost of living, mass unemployment and growing social discontent. [...]Then, in 2011, Prince Turki al-Faisal, the former chief of Saudi intelligence, told NATO officials that Riyadh was prepared to flood the market to stir unrest inside Iran. Three years later, the Saudis struck again, turning on the spigot. But this time, they overplayed their hand. When Saudi officials made their move in the fall of 2014, taking advantage of an already glutted market, they no doubt hoped that lower prices would undercut the American shale industry, which was challenging the kingdom’s market dominance. But their main purpose was to make life difficult for Tehran: “Iran will come under unprecedented economic and financial pressure as it tries to sustain an economy already battered by international sanctions,”   All the evidence suggests that Saudi officials never expected oil prices to fall below $60 a barrel. But then they never expected to lose their sway as the swing producer within the Organization of the Petroleum Exporting Countries, or OPEC. Despite wishful statements from Saudi ministers, the kingdom’s efforts last month to make a deal with Russia, Venezuela and Qatar to restrict supply and push up prices collapsed.

    Exclusive: Saudi Arabia orders 5 percent cut in contract spending | Reuters: Saudi Arabia's government, its finances strained by low oil prices, is opening a fresh austerity drive by ordering ministries to cut their spending on contracts by at least 5 percent, a document seen by Reuters shows. The spending cuts could further slow economic growth in the world's top oil exporter and hurt the construction industry, where many companies are struggling with deteriorating cash flow and rising labor costs. The document, sent by the central government to all ministries and state bodies, instructs them to reduce the value of outstanding contracts signed to support their operations, as well as construction contracts included in the 2016 state budget, by "not less than 5 percent of remaining obligations". It says these measures were proposed by the minister of economy and planning to "rationalize spending and increase its efficiency", and were approved by the king. Officials of the ministry could not immediately be reached for comment. The document leaves ministries to decide how contracts should be revised to make the required savings. It does not explain how the ministries should renegotiate contracts with their suppliers. Another clause in the document forbids ministries and government bodies from signing any contracts without the approval of the finance ministry. Previously, senior officials could agree small contracts without approval.

    Saudi Arabia launches austerity drive to cut public spending - Saudi Arabia’s government, its finances strained by low oil prices, is ordering ministries to cut their spending on contracts by at least 5%, a document seen by Reuters shows. The austerity drive could further slow economic growth in the world’s top oil exporter and hurt the construction industry, where many companies are struggling with deteriorating cash flow and rising labour costs. The document, sent by the central government to all ministries and state bodies, instructs them to reduce the value of outstanding contracts signed to support their operations, as well as construction contracts included in the 2016 state budget, by “not less than 5 percent of remaining obligations”.It says these measures were proposed by the minister of economy and planning to “rationalise spending and increase … efficiency”, and were approved by the king. Officials at the ministry could not immediately be reached for comment. The document leaves ministries to decide how contracts should be revised to make the required savings. It does not explain how the ministries should renegotiate contracts with their suppliers. Another clause in the document forbids ministries and government bodies from signing any contracts without the approval of the finance ministry. Previously, senior officials could agree small contracts without approval. The Saudi government ran a record budget deficit of nearly $100bn last year and has been seeking ways to narrow the gap. It is laying plans to boost non-oil revenues with taxes, but that will take years to have much impact, leaving spending cuts as the main way to bring state finances under control.

    The petrodollar fragility is out there  - Izabella Kaminska -  It was not too long ago that analysts and economists were arguing that core petrodollar states, such as Saudi Arabia, would be able to withstand a longstanding reversal in the oil price even as weaker petrodollar states such as Venezuela and even Russia took notable hits. Not so much any more. From Moody’s on Wednesday (our emphasis): We have changed our outlook for the Saudi Arabian banking system to negative, from stable. The change reflects the credit implications of our revised global oil price forecasts, which we expect to be lower for longer. It also captures new fiscal measures initiated in December by the Saudi government to tackle its rising budget deficit. The negative view reflects our expectation that the economic slowdown driven by the plunge in global oil prices and by government spending cuts will weigh on the Saudi banking sector over the next 12-18 months, although we expect banks will remain resilient, given their strong risk metrics. While credit growth will slow, loan performance will soften, and liquidity will tighten, we nevertheless expect the banks to continue to generate solid profits and maintain high capital buffers.  At issue, Moody’s notes, is the 14 per cent reduction in public spending announced by the Saudi government for 2016 and the new spending priorities being put in place: With the prospect of lower oil prices for longer and a fiscal deficit projected at around 15% of GDP in 2016, credit risks associated with a prolonged weakening environment have also risen. We believe the government may become increasingly selective in its spending priorities. This, in turn, would contribute to a more pronounced decline in business confidence and economic growth than currently foreseen in our baseline scenario.Whilst Moodys doesn’t put it this way, the other core issue is access to petrodollar liquidity and a changing perspective on whether distressed banks should always be state supported, meaning the government’s willingness and capacity to support banks in case of need should no longer be taken for granted.

    New Guard Rises in Saudi Arabia as Oil Crisis Forces Rethink -- After a year of plunging oil prices, all eyes were on Ibrahim Al-Assaf, Saudi Arabia’s finance minister for two decades, to deliver a budget that could restore confidence in the kingdom’s finances. Yet it was Adel Fakeih, economy minister for just eight months, who strode onto a shiny green television set to announce spending cuts and subsidy reductions. Another familiar face missing that day was oil minister Ali Al-Naimi, whose words continue to move global crude markets as they have since 1995. Changes to domestic energy prices were explained by Khalid Al-Falih, chairman of Saudi Arabian Oil Co. and health minister. The lineup at the end of December was one of the first signs of a shift in power to officials seen closely aligned with King Salman’s influential son, Deputy Crown Prince Mohammed bin Salman, as Saudi rulers confront a harsh new era of lower crude prices. With many of the new policy makers holding private-sector resumes, their mission is to overhaul one of the world’s most generous welfare systems through measures that were unthinkable a decade ago. The world’s largest oil exporter can no longer rely on “the old way of doing things,” said Fahad Nazer, who worked at the Saudi embassy in Washington and is now a political analyst at JTG Inc. “The economic and demographic challenges to the kingdom are too great, and they need to be resolved and confronted and addressed forcefully and quickly.”

    Quiet Support for Saudis Entangles U.S. in Yemen— Adel al-Jubeir, Saudi Arabia’s urbane, well-connected ambassador to Washington, arrived at the White House last March with the urgent hope of getting President Obama’s support for a new war in the Middle East. Iran had moved into Saudi Arabia’s backyard, Mr. Jubeir told Mr. Obama’s senior advisers, and was aiding rebels in Yemen who had overrun the country’s capital and were trying to set up ballistic missile sites in range of Saudi cities. Saudi Arabia and its Persian Gulf neighbors were poised to begin a campaign in support of Yemen’s impotent government — an offensive Mr. Jubeir said could be relatively swift. Two days of discussions in the West Wing followed, but there was little real debate. Among other reasons, the White House needed to placate the Saudis as the administration completed a nuclear deal with Iran, Saudi Arabia’s archenemy. That fact alone eclipsed concerns among many of the president’s advisers that the Saudi-led offensive would be long, bloody and indecisive. Mr. Obama soon gave his approval for the Pentagon to support the impending military campaign. A year later, the war has been a humanitarian disaster for Yemen and a study in the perils of the Obama administration’s push to get Middle Eastern countries to take on bigger military roles in their neighborhood. Thousands of Yemeni civilians have been killed, many by Saudi jets flying too high to accurately deliver the bombs to their targets. Peace talks have been stalled for months. American spy agencies have concluded that Yemen’s branch of Al Qaeda has only grown more powerful in the chaos.

    United Nations Warns ISIS in Libya Is Growing --The UN Security Council is worried about Libya—and rightly so. As we noted in February, the country has seen a doubling of Islamic State forces in recent months, and ISIS has expanded its control of territory, including Sirte, the home city of deposed leader Muammar al-Qaddafi. In a UN-issued report this week, the Security Council noted the Islamic State’s growing capacity, which has been buttressed by a flow of foreign fighters from places like Sudan, Tunisia, and Turkey. The development hasn’t gone unnoticed by the United States, which last month killed dozens of ISIS fighters (and two Serbian hostages) in airstrikes on a training camp. Ironically, the Libyan branch of ISIS, which grew largely from local militias in the failed state, is now promoting itself as the most credible defenders of Libya from outside forces, even as it absorbs fighters from abroad. “ISIL has been spreading a nationalistic narrative,” the UN report noted, “portraying itself as the most important bulwark against foreign intervention.” In the vacuum left by the U.S.-led intervention, the United Nations and a host of countries have been pushing Libya’s two governments and myriad competing militias to put aside their differences and help stabilize the country and its economy. Earlier this year, the head of Libya’s national oil company estimated the country had lost nearly $70 billion in potential revenue from petroleum exports because of the fighting.

    India's Oil Demand On Verge Of "Take-Off" -- Oxford Institute For Energy Studies -- March 15, 2016  --The article: India's Oil Demand: On the Verge of 'Take-Off' -- from The abstract:   In this new era of slower Chinese growth, a new contender has emerged: India, which in 2015 was the main driver of non-OECD oil demand growth.  In this paper we argue that in addition to the boost from low oil prices, structural and policy-driven changes are underway which could result in India's oil demand "taking off" in a similar way to China's during the late 1990s, when Chinese oil demand was at levels roughly equivalent to current Indian oil demand. These changes include: a rise in per capital oil consumption (reflected in rising motorization of the Indian economy), a massive program of road construction (amounting to 30 km/day), and a push towards increasing the share of manufacturing in GDP by 2022 (which could increase oil consumption by at least a third based on a conservative linear estimate). This paper also examines the implications of a take-off in domestic demand for India's recently acquired status as a net petroleum product exporter Some data points:

    • India, not China, is now driving non-OECD oil demand growth
    • world demand growth is at its strongest since 2010 -- remember, this report was released this month; mainstream media would have us believe global demand (because of China) for crude is oil is declining
    • growth demand in 2015 was independent of stimulus (although the 50% fall in oil prices provided a significant boost to consumer demand)
    • China is slowing down; the new kid on the block looking for growth: India
    • India is soon likely to overtake Japan as the 2nd-largest oil consuming economy in Asia
    • India's GDP growth is estimated to have overtaken China's in 2015 (7.2% vs 6.9%)
    • India's history of oil demand for the past decade suggests a pattern consistent with countries at relatively early stages of income and development
    • the upsurge in India's oil demand growth in 2014 and 2015 suggest that "something is going on"

    India in driver's seat as fuel demand roars at fastest rate ever | Reuters: Three hours east of New Delhi, in the village of Piplera, recently married Abhilekh Swami has stopped to refuel his first automobile, a Hyundai hatchback, at an Indian Oil filling station. Late model SUVs and Mercedes also ply the potholed roads and dusty lanes of the small gathering of dwellings in Uttar Pradesh. Swami, 28, an accountant with a private company, said he is averaging about 2,000 kilometres a month in the vehicle he bought last August, mostly for commuting to work, shopping and visiting relatives. Hundreds of thousands of Indians, spurred by cheap credit and rising incomes, are buying cars each month to free themselves from creaky, unreliable public transport. This is expected to help push India ahead of China as the energy demand growth leader, with its total fuel consumption rising by a tenth to a record in the fiscal year-to-date. Underpinned by annual economic growth of 7-8 percent, India's fuel demand is seen as a key oil price support over 2016-2017, eating into a supply overhang that has pulled down global crude as much as 70 percent since mid-2014. India has already pipped Japan as the world's third-largest oil consumer. By 2040, India will have more than doubled its current oil use to 10 million barrels per day (bpd), according to the International Energy Agency (IEA), about on par with China's consumption last year.

    Chinese Industrial Output Growth Slowest Since 2008: China's industrial production grew at the slowest pace since the financial crisis and retail sales rose at a slower pace at the start of the year, adding pressure on policymakers to roll out new measures to kick start economic activity. Industrial production expanded 5.4 percent in January and February, which was slower than the 5.9 percent increase seen in December, data published by the National Bureau of Statistics showed over the weekend. This was the weakest growth since late 2008. Economists had forecast 5.6 percent growth for January to February. Retail sales growth for the first two months of 2016 came in at 10.2 percent compared to 11.1 percent growth registered in December. The increase was slower than the consensus estimate of 11 percent growth and was the slowest since May 2015. The NBS publishes combined data for January and February to avoid distortion caused by the timing of Chinese New Year. Fixed asset investment gained 10.2 percent from the same period of last year. In 2015, FAI climbed 10 percent.

    China Retail Sales Data Feels the Heat in February: China’s retail sales have been increasing over past few months. However, the latest data suggest that slump in the Chinese economy has started weighing on the retail sector in the past two months.China’s retail sales surged 10.2% year-over-year (YoY) in first two months of the year, National Bureau of Statistics (NBS) published data on Saturday. The growth is lower than December in which retail sales grew at 11.1% from a year earlier. Total sales of consumer goods for the combined month of January and February stood at $815.2 billion (5.29 trillion yuan), according to the data.Online retail sector continues to expand and recorded 25.4% growth in first two months of the year. Food and beverages sector also supported the expansion and soared 11.3% from a year earlier. Construction and decoration material surged 16.4% and 14.9% YoY, respectively. However, automobile sector pressured retail sales data as sector recorded decelerated growth in the first two months.Analysts believe that Beijing’s pro-consumption policy is likely to boost retail sales in coming months. Consumption last year, contributed 66.4% to China’s total GDP. The Chinese government has been focusing to restructure the economy toward more consumption driven after slump in the Chinese economy last year.In 2015, the world’s second largest economy grew at slowest pace in a quarter century. Beijing, as a way to put the economy back on track, undertook several stimulus measures such as reduction in monetary policy to boost demand. These measures were broadly taken to support traditional growth driver, manufacturing sector, which has cooled down last year.

    China Economic Data Paint Gloomy Picture - WSJ: —Factories and retailers in China put in weaker-than-expected performances in the first two months of the year, as anemic demand and excess capacity continued to bear down on the world’s second-largest economy. Industrial production grew 5.4​% in January and February compared with a year earlier, down from December’s 5.9% pace, according to government data released Saturday, and just below the 5.6% forecast by economists polled by The Wall Street Journal. Meanwhile, retail sales clocked 10.2% growth in the two-month period, slower than December’s 11.1% increase. While industries have been battered by the economic slowdown, retail sales have been relatively buoyant, so the downtick surprised some economists, especially since it occurred around the Lunar New Year holiday when consumption is usually strong. “Overall, the picture is still quite gloomy,”  “Normally, because of Chinese New Year, there’s a big drop and a big jump. This year there’s only a big drop.” One area that did pick up was investment in factories, buildings and other fixed assets, which increased a faster-than-expected at 10.2​% year-over-year in January and February, compared with a 10% increase for all of 2015. Economists said that boost came largely from government spending on infrastructure and from investment in parts of the overbuilt property market.

    "Gloom" Returns To China's Economy: Industrial Production, Retail Sales Miss Lowest Estimates -After an unprecedented surge in Chinese attempts to stimulate the economy in late 2015, mostly on the fiscal side, coupled with recent monetary easing by the PBOC which cut the banks' reserve ratio recently and unleashed a tsunami of new loan creation in January, many expected that this unprecedented credit impulse would translate into at least a modest rebound for the economy, prompting a stable pick up in spending for the economy which many are touting is now consumer-spending driven as opposed to export and production. However, that did not happen: according to data released overnight by the National Bureau of Statistics, Chinese factories and retailers not only missed expectations, but slowed down materially from the December prints, as anemic demand and excess capacity continued to bear down on the world’s second-largest economy. Specifically, Jan-Feb factory output grew just 5.4% in January and February from a year earlier, data released by the National Bureau of Statistics (NBS) showed, slowing from a 5.9% rise in December to the weakest since November 2008; the print matched the lowest Wall Street estimate. Meanwhile, retail sales rose 10.2% over the two-month period from a year ago, below the lowest Wall Street estimate of 10.5%, and far below the December’s 11.1% increase, pushing the trend growth in this series to lows not seen since early 2015. "Overall, the picture is still quite gloomy,". “Normally, because of Chinese New Year, there’s a big drop and a big jump. This year there’s only a big drop.”

    The Real Reason to Worry About China --Kocherlakota - The world's largest currency union contains about 1.7 billion people and accounts for more than a third of global economic output. It also may be headed for a breakup...I’m talking, of course, about the U.S. and China. For more than 20 years, China has kept the yuan's value against the dollar in a very tight range. ... Over the past couple decades, China has been able to offset the effects of Fed policy by varying its relatively large level of public investment. It has always been clear, though, that China would no longer want to use fiscal policy in this way once its economy was sufficiently developed. The country's currency moves over the past few months suggest that it might have reached this point. ... Any such breakup presents a big problem: Many businesses and financial institutions have entered into contracts that make sense only under the premise that the exchange rate is not going to vary much over time.... As far as I can tell, U.S. economic policymakers aren’t putting much emphasis on the potential repercussions of a break-up of the China-US currency union. ... There's a significant risk that if the Fed keeps tightening in 2016, it could force an abrupt break-up. The resultant disorder in the world economy would not serve Americans well.

    China' Overcapacity Problem - China's economic slowdown has been at the front of the business news for several months and has largely been blamed for the collapse in commodity prices and the concerns about future economic growth.  A recent examination of China's economic issues by the European Union Chamber of Commerce in China looks at one of the nation's key economic problems; overcapacity.  Overcapacity is defined as the difference between production capacity and actual production.  China has had an overcapacity problem for some time largely as a result of the lingering negative impacts of the Great Recession.  At the same time as stimulus investment was growing in China, leading to the building of new manufacturing facilities, the demand for Chinese exports was dropping.  Some of this over-investment is due to the significant surge in lending that was encouraged by the government during and after 2009 as shown on this graphic: While credit growth fell significantly after 2011, you can see that it is total credit is still growing at between 15 and 20 percent plus on a year-over-year basis. With that background, let's look at China's overcapacity/underutilization problem.  There are eight industries that have been severely impacted by overcapacity:

    • 1.) crude steel
    • 2.) electrolytic aluminum
    • 3.) cement
    • 4.) chemicals
    • 5.) refining
    • 6.) flat glass
    • 7.) shipbuilding
    • 8.) paper and paperboard

    Here is a graphic that shows the dropping utilization rate (inverse of the overcapacity rate) for six key Chinese industries:

    China Weighs Letting Banks Sell Bad Debt to Investors - — China is exploring a new way to grapple with its mounting pile of bad corporate debt, though its top central banker sought on Saturday to dispel worries that the plan would simply shift the burden to other parts of the country’s vast economy.Under the tentative proposal, Chinese officials would allow banks saddled with growing quantities of bad loans to sell that debt to investors, said Zhou Xiaochuan, the governor of the People’s Bank of China. The goal is to help alleviate one of the major drags on China’s economy, the world’s second largest after the United States’ and a major driver of global growth.But Mr. Zhou and a deputy central bank governor, Pan Gongsheng, said they would take steps to make sure the effort did not create the kind of risk-laden financial products that played a major role in the 2008 global financial crisis. The effort would be modest, regulators would monitor it closely, and mom-and-pop investors would be kept out, they said.China’s corporate debt has ballooned in recent years during a broader lending-and-spending binge, led by the Chinese government in an attempt to keep the country’s economy humming. China’s total debt now stands at about 2.5 years’ economic output, a level that has raised worries among economists. Much of that is corporate debt, prompting many economists to warn that those loans pose a threat to China’s economic health. That lending spree has also led to a major surplus of Chinese steel factories, glassworks and other industrial facilities, dragging down China’s economic performance to its slowest rate in 25 years and casting a pall over the broader global outlook. On paper, China’s banks have some of the world’s lowest loan default rates. But economists inside and outside the country say many banks — in a practice known as “extend and pretend” — do not force companies to pay up or restructure, putting off the problem. That raises concerns that China’s big banks could have considerable amounts of bad loans on their books.

    China and FX reserve adequacy, redux -- In short, for a given amount of capital controls, China is doing just fine on the reserve front: We’ve been over this ground before so will only briefly walk it again. Basically, the arguments here revolve around the risk-weighted measure of reserve adequacy put out by the IMF. Here’s Deutsche’s summary of the IMF approach, which aims to correct for errors in other models (there’ll be more in the usual place): The IMF approach is based on construction of a risk-weighted measure of potential drains on foreign reserves. A broad set of risks is encompassed. Sources of risk include external liabilities as well as current account variables and some measure of potential capital flight. Specifically, four risk variables are considered:

    • (i) exports – to capture the potential loss from a drop in external demand or a terms-of-trade shock2 ;
    • (ii) short-term debt;
    • (iii) medium- and long-term debt and equity liabilities;
    • (iv) broad money as a measure of the risk of capital flight.

    Risk weights are then based on the relative importance of each of these variables during past episodes of pressure on foreign exchange markets. In other words, the risk weights are assigned based on observed outflows from the different potential sources of BoP pressure in past stress situations. Somewhat higher risk weights are applied to countries with fixed rather than floating exchange rate regimes. These risk weights are provided in the table…

    What a $13 Billion Bid for Starwood Says About China’s Economy --Talk about “capitalism with Chinese characteristics.” The husband of the grand-daughter of Deng Xiaoping, the Communist leader who orchestrated China’s first moves from a state-planned economy to a capitalist-ish system nearly forty years ago, has launched a surprise bid for Starwood, the luxury hotel brand. The $13 billion bid by Anbang, the firm owned by Wu Xiaohui, is a challenge to the existing Starwood merger deal with Marriott, the 89 year old U.S. hotel firm, which would create the world’s largest hotel company.  To me, the most interesting thing about the Chinese bid is what is says about the Chinese economy–investors are desperate to get their money out of the Middle Kingdom.  About a trillion dollars in capital has fled China in the last year, which is one reason that there have been such severe jitters in the Chinese stock market of late. Chinese government officials have struggled with how, or whether, to buoy the country’s currency and spend down foreign capital reserves as money flees. One way it’s going out the door is via acquisitions of foreign firms. Beijing-based Anbang has announced around $23 billion in foreign purchases in the last 18 months, including $6.5 billion worth of property from the Blackstone Group, and New York’s famous Waldorf Astoria hotel. They aren’t the only ones shelling out for overseas acquisitions. Overall, spending by Chinese firms is on track for a second record year—already its up to $102 billion according to Dealogic, which is only $4 billion shy of what was spend in 2015.

    Labor Protests Multiply in China as Economy Slows, Worrying Leaders -  As China’s economy slows after more than two decades of breakneck growth, strikes and labor protests have erupted across the country. Factories, mines and other businesses are withholding wages and benefits, laying off staff or shutting down altogether. Worried about their prospects in a gloomy job market, workers are fighting back with unusual ferocity.Last week, hundreds if not thousands of angry employees of the state-owned Longmay Mining Group, the biggest coal company in northeastern China, staged one of the most politically daring protests over unpaid salaries yet, denouncing the provincial governor as he and other senior leaders gathered for an annual meeting in BeijingChina Labor Bulletin, a labor rights group based in Hong Kong, recorded more than 2,700 strikes and protests last year, more than double the number in 2014. The strife appears to have intensified in recent months, with more than 500 protests in January alone.Most demonstrations have refrained from political attacks and focused on grievances such as wage arrears, unpaid benefits like pension contributions and unsafe working conditions. President Xi Jinping, concerned about challenges to the ruling Communist Party, has responded with a methodical crackdown, quashing protests, dismantling labor rights organizations and imprisoning activists. But his government has also sought to placate workers, putting pressure on businesses to settle disputes and making billions of dollars available for welfare payments and retraining programs.

    Caught On Tape: "Enormous Crowds" Of Unemployed Chinese Miners Take To The Streets, Clash With Riot Police - In early November, we said that far from the traditional risk factors affecting China's economy, including the slowing economy, the stock market (and now housing 2.0) bubble, the soaring NPLs, and record debt, the most under-reported risk facing China is the "breakdown in recent "agreeable" labor conditions, wage cuts and rising unemployment, leading to labor strikes and in some cases, violence." Some recent articles probing the severity of China's collapsing labor market were the following:

    A clear indication of this was the exponential rise in labor strikes on the mainland as tracked by the China Labor Bulletin:

    Massive Protests Over Chinese Coal Closure  --  Change is coming rapidly in the global coal sector these days. With key producer Indonesia reporting this week that exports from its South Kalimantan region fell 9.8% in 2015 — while stats in major consuming nation India showed that imports to power plants fell 9.6% in the ten months between April 2015 and February 2016. But one of the most critical points this past week came a long way from either of those locales. In a small town on the northern Chinese border.   That’s a place called Shuangyashan. Where reports over the weekend suggest a major confrontation is brewing over big changes happening in the Chinese coal sector. The Financial Times reported that thousands of workers at local coal mines here have taken to the streets in protest of late after local mines were apparently idled as part of a plan from Beijing to restructure and downsize the Chinese coal sector. The massive protests reportedly broke out after the state-owned firm running the Shuangyashan coal mine shut down the operation months ago. And then last week announced that it will pay no further restitution to workers who lost their jobs in the shutdown.  Laborers took to the streets afterward to protest what they say amounts to months of unpaid wages. This problem that is reportedly becoming increasingly wide-spread, as China continues to shut down overcapacity in the coal and steel sectors — with Beijing telling facility owners they need to bear some of the costs for such mothballing.

    China Freight Index Collapses To Fresh Record Low --The Baltic Dry Index has risen for the last few weeks, buoyed by hopes (a la Iron Ore) of a National People's Congress stimulus surge from China. While the scale of the 'bounce' is negligible in real terms compared to the total collapse, it has caused such momentum-muppets as Jim Cramer to proclaim China 'fixed' and investible. So we have one quick question - if everything is awesome, why did the China Containerized Freight Index just crash to new record lows?  It appears BDIY gets over-excited relative to CCFI... Chart: Bloomberg Only to rapidly crash back to CCFI reality shortly afterwards. Given the complete collapse back of Iron Ore, the hopes placated on the dead-cat-bounce in BDIY appear a little misplaced.

    Korea worst in income inequality in Asia-Pacific: Korea's income inequality is the worst among 22 countries in the Asia-Pacific region with the top 10 percent of the population receiving 45 percent of the total income, the International Monetary Fund (IMF) said Wednesday. The Washington, D.C.-based organization said that Korea's income inequality has worsened over the last two decades, undermining the country's growth sustainability. This was announced in its working paper, "Sharing the growth dividend: analysis of inequality in Asia," written based on 2013 ― the latest data available. "Korea shows a surprisingly large increase by 16 percentage points since 1995 and records the highest level among the available countries with the top 10 percent earning 45 percent," said the report. Korea suffers from widening income inequality between haves and have-nots. Generational income inequality also poses problems in Asia's fourth-largest economy, as young jobseekers have trouble landing quality jobs due to sluggish growth. The nation's youth unemployment rate hit a record high of 12.5 percent in February, up from 9.5 percent the month before; while the average jobless rate in surveyed countries reached 4.9 percent. The organization attributed this trend been attributed to rapid aging, the wage gap between regular and non-regular workers and gender occupational inequality. It also said that social mobility is declining in the country, referring to recent studies.

    Japan Is "Fixed" - Machine Orders Suddenly Spike By Most In Over 13 Years -- The Aussies did it with their employment data (and then admitted it), and now we see Japan's Economic and Social reserch Institute post the most ridiculous macro print ever. Over 4 standard deviations from expectations and almost double the highest expectations, Japan Machinery Orders spiked 15.0% MoM - the biggest since Jan 2003. Up 15% MoM versus expectations for a 1.9% rise... the biggest beat since Feb 2009 (oddly coincidental given everything that is going on).  Core machine orders Rise 8.4% y/y; est. -3.8%, Cabinet Office announces figures in Tokyo.  Some context... We presume this means that Japan is "fixed" and there will be no need for additional extraordinarily idiotically experimental monetary policy this week?

    Japanese Exports To US Plunge Most Since 2011 As Weak Yen Tailwind Evaporates = Japan just posted its largest trade surplus in 5 years (+JPY243bn) as exports dropped 4% YoY (worse than expected) but imports fell 14.2% (better than expected). However, the biggest standout was the ongoing deterioration in Japanese exports to the US which dropped by the most since 2011 as the 'advantages' of a devalued currency appear to have hit their limit. Time for some more devaluation Abe... or Peter Pan(ic).“The tailwind from the weak yen has gone. We can’t help but hold a pessimistic view on the outlook for exports,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said before the figures were released. “Domestic demand won’t be dependable at all, and the same goes for exports. I can’t deny the possibility of another economic contraction this quarter.”

    Japan reports biggest trade surplus in over 4 years (AP) — Japan posted its biggest trade surplus in over four years in February, thanks to a strengthening in the yen and weak oil prices, though both imports and exports fell, suggesting persisting slack demand both in Japan and overseas. Preliminary data reported Thursday showed exports fell 4 percent from a year earlier to 5.7 trillion yen ($50.5 billion) in February and imports dropped 14 percent to 5.46 trillion yen ($48.4 billion). The resulting 242.8 billion yen ($2.2 billion) surplus compares with a deficit of 426 billion yen a year earlier and a deficit of 648.8 billion yen in January. It was the biggest surplus since September 2011. Surging oil and gas imports following the closures of Japan’s nuclear plants after the March 2011 disaster in Fukushima have pushed Japan from perennial surpluses into deficits. A weaker yen accentuated those costs, but the prolonged slump in crude oil prices has alleviated some of the high cost of energy imports.

    Kuroda Says Minus 0.5% Rate Is Theoretically Possible for Japan -- The Bank of Japan has quite a lot of room to cut its key interest rate further and theoretically it could go to minus 0.5 percent, Governor Haruhiko Kuroda said in parliament Wednesday. While the BOJ kept policy unchanged on Tuesday, Kuroda underscored in a press conference a readiness to move on any of three fronts: a reduction in the present minus 0.1 percent rate, an acceleration in boosting the monetary base or an expansion in purchases of riskier assets. Questioned by a lawmaker in parliament Wednesday, he agreed that it would be theoretically possible to lower the rate to minus 0.5 percent. With the BOJ far from its 2 percent inflation goal and economic growth stalling, most analysts have seen additional stimulus as just a matter of time. The stakes are rising for Kuroda, with household and corporate sentiment waning and investors questioning whether monetary policy is reaching its limits.

    Japan Curve Inverts After 10-Year Yield Drops To New Record Negative Low -- It was just last week when we observed and reported a highly amusing example of what excessive central bank meddling hath wrought in DM government bond markets. Last Tuesday, yields on JGB 10s hit an all-time low of negative 10bps and yields on the 30Y plunged 21bps (the biggest percentage drop ever), as the post-NIRP curve crush continued unabated. Then, overnight (literally), the entire dynamic shifted when the bid-to-cover in the BOJ’s POMO hit 3.58 from 2.93 the previous week, as sellers abounded. The rush to unload to Kuroda tripped the Osaka circuit breaker as JGB futures dropped 0.6%. As Bloomberg’s Richard Breslow put it, “buying panic yesterday to front-run today’s QE buying led to panic selling today into BOJ bids 22 bps through Monday’s close. Oh, and did I mention, ahead of an auction tomorrow. The take-away is mayhem, not analysis.” Yes, “mayhem.” Or "sheer absurdity," brought on by monetary policy at the Keynesian brink. But most certainly not “analysis.” Well just a little over a week later, the very same dynamic that sent yields up 8bps and sent the 10Y sliding, happened again overnight - only in reverse. This time around, nobody wanted to sell to the BOJ as the POMO bid-to-cover was just 1.53. So with the selling impulse the lowest on record, yields of course plunged on what BofA’s Shuichi Ohsaki called “panic buying,” with the 10Y sinking more than 8bps through the (negative) depo rate to an all-time low of -0.135%. 20Y yields also hit record lows at 29bps.

    Worries grow over Indian corporate debt pile- Research published in February by Credit Suisse, an investment bank, found that the aggregate debt of 3,700 non-financial companies it studied amounted to $500 billion, of which $160 billion was chronically stressed -- defined as debt bearing interest payments that were not covered by earnings before interest and taxes in four or more of the past eight quarters. The bank found that $84 billion had been chronically stressed for 11 of the past 12 quarters.  Within that universe of debt, the companies that fared the worst were in the metals sector, followed by infrastructure and construction. Metals accounted for 36% of the debt where the interest coverage ratio was less than one, while metals together with infrastructure and construction accounted for about 60%, the report said. The problems in the metals sector reflect the impact of large global acquisitions made by Indian steel companies in the last decade, mainly funded by debt. One such acquisition that is still haunting the buyer is Tata Steel's 2007 purchase of the Anglo-Dutch steel group Corus for $13.7 billion -- a deal with which Tata Steel "completely destroyed themselves,"   "Veterans of the steel industry should have known that when you're at the peak of the commodity cycle, it doesn't make sense to do this ... in most cases these acquisitions are now hurting them,"

    Pakistan FDI Soaring With CPEC Energy & Infrastructure Projects - Pakistan is seeing soaring foreign direct investment (FDI) with improving security and the start of several major energy and infrastructure projects as part of China-Pakistan Economic Corridor (CPEC), according to the UK's Financial Times business newspaper. The year 2015 was a bumper year for foreign investment  pouring into Pakistan, says the Financial Times. The country saw 39 greenfield investments adding up to an estimated $18.9 billion last year, according to fDi Markets, an FT data service. This is a big jump from 28 projects for $7.6 billion started in 2014, and marks a new high for greenfield capital investment into the country since fDi began collecting data in 2003.The number of projects in 2015 is the largest since Pakistan attracted 57 greenfield projects back in 2005 on President Musharraf's watch.  China is now the top source country for investment into the country, surpassing the second-ranked United Arab Emirates, primarily due to its investments in power. China's Shanghai Electric, a power generation and electrical equipment manufacturing company, announced plans last year to establish a 1,320 megawatt coal-based power project in Thar desert using domestic coal, scheduled to launch in 2017 or 2018. Traditional energy and power projects made up two-thirds of last year’s total greenfield investment into Pakistan at $12.9 billion with alternative energy bringing in a further $1.8 billion. Among the more notable projects, UAE-based Metal Investment Holding Corporation announced plans to partner with Power China E & M International to invest $5 billion to build three coal-fired plants at Karachi’s Port Qasim. In addition, the transportation sector is also showing promise, with 12 projects totaling $3 billion being announced or initiated last year.

    New Zealand plans to give everyone a ‘citizen’s wage’ and scrap benefits - New Zealand could become one of the first developed countries to scrap benefits and introduce a basic citizens’ income. Leader of the opposition Andrew Little said his Labour party was considering the idea as part of proposals to combat the "possibility of higher structural unemployment". Citizens’ income, also known as Universal Basic Income (UBI), involves a basic, unconditional, fixed payment made to every person in the country by the state in lieu of benefits. Mr Little confirmed his party would debate the idea at its conference on employment at the end of March. He said significant changes to way people worked were "unavoidable" and "we expect that in the future world of work there will be at least a portion of the workforce that will rapidly move in and out of work". He told New Zealand news website Stuff: "The question is whether you have an income support system that means every time you stop work you have to go through the palaver of stand-down periods, more bureaucracy, more form filling at the same time as you're trying to get into your next job.

    Emerging debt swelled $1.6 trillion in 2015, poses risks - IIF -  (Reuters) - Total debt in emerging markets grew by $1.6 trillion in 2015 to more than $62 trillion, the Institute of International Finance said on Wednesday, warning that higher indebtedness raised repayment risks and endangered future economic growth. The Washington-based group, one of the most authoritative sources of data on investment flows to the developing world, noted that $730 billion of bonds issued by emerging markets governments and companies were due for repayment in 2016. Another $890 billion matures next year, a third of it in U.S. dollars. This debt-servicing hump is a result of a borrowing spree after the 2008 global financial crisis, Reuters has reported. The IIF said in a report that as countries increasingly use money they raise to repay maturing debt, "high levels of indebtedness -- and the need for eventual deleveraging -- will likely constrain EM growth going forward". The report noted year-to-date government bond and loan sales were almost 35 percent below the same period in 2015. "With a record level of upcoming redemptions through 2017, EM issuance has been subdued this year, with investors remaining uneasy about a potential rise in EM corporate default risk," it added.

    It’s payback time for emerging markets’ $1.6-trillion debt - Recent signs of stabilization in emerging markets may merely be the calm before the storm - a $1.6-trillion debt mountain is due for repayment in the next five years, a steep rise in maturities that could stir fresh trouble. The debt-servicing hump - with annual repayments jumping by more than $100-billion by 2020 compared with 2015 - is a result of a borrowing spree after the 2008 financial crisis. From African governments to Turkish banks, developing world borrowers flogged their debt on hard-currency bond markets in post-crisis years, encouraged by near-zero U.S. interest rates that sent investors hunting for higher yields. But it’s payback time. Almost $1.6 trillion is due for repayment from 2016 to 2020 with corporate debt accounting for more than three-quarters of the total, according to data from ICBC Standard Bank. Until now, a relatively light maturity schedule for company debt along with rock-bottom global interest rates have capped defaults in the $2-trillion corporate debt sector. But weak commodity prices, higher U.S. interest rates and above all, the sheer volume of repayments could make things tricky.

    The World Bank Is Supposed to Help the Poor. So Why Is it Bankrolling Oligarchs? A mile north of the chaotic heart of downtown Rangoon, where electrical wires dangle haphazardly overhead and street vendors hawk roasted pig intestines, sits an upscale complex of 240 luxury residences overlooking the iconic Shwedagon Pagoda and a serene man-made lake. Marketed to wealthy expatriates and foreign businesspeople on extended stays in Burma's bustling commercial capital, the newly built Shangri-La Serviced Apartments advertise "idyllic luxury in a modern metropolis" and amenities including a swimming pool, 24-hour private security, maids quarters, and a limousine service. Signs in the lobby inform guests that the complex now offers the Cartoon Network and yoga classes. In 2011, Burma haltingly emerged from decades of oppressive rule by a military junta when a nominally civilian government came to power. The United States eased sanctions against the country the following year, and foreign investors rushed into this resource-rich frontier market. The influx of wealthy expats formed a ready-made clientele for the Shangri-La, where apartments rent for as much as $7,000 a month. In a country where about half the population lacks electricity and there are just six physicians for every 10,000 people, Shangri-La residents enjoy luxuries that are unfathomable to the surrounding populace, including an on-call private doctor and high-speed wifi.The apartments are part of a global business empire controlled by Malaysian billionaire Robert Kuok, one of Southeast Asia's richest men and founder of the Shangri-La chain of hotels and resorts. His family's diversified holdings extend from sugarcane plantations and real estate to one of the world's largest palm oil companies, Wilmar International.

    A Note on Globalization and Labor - Krugman - But with trade becoming an issue in the election, I thought it might be useful to take on one myth: the supposedly necessary relationship between globalization and the decline of organized labor.You hear this myth from both sides of the political spectrum — from conservatives asserting that unions became unsustainable in the modern economy, and from protectionists on the left arguing that free-trade agreements killed labor.   I am very much in the camp that considers organized labor an essential force for equality, both because it gets higher wages for ordinary workers and because it’s a political counterweight to the power of organized money. So if globalization makes an effective union movement impossible, that’s a big problem.But there’s some evidence close at hand that the link is far from necessary:Photo Credit OECD

    How Much International Tax Evasion is There? -- naked capitalism Yves here. The short answer is “a lot”. This analysis confirms Gabriel Zucman’s estimates on how much in assets is hidden (a mind-boggling 6+% of the total) but estimates the stealth income as much lower than his estimates. Mind you, the amounts not reported are so great that including the estimated losses would make the US look like a far less significant capital importer than it appears to be.  Balance of payments statistics suggest that assets held abroad are greatly underestimated – particularly for mutual fund shares and bank deposits. This column looks into the role played by tax havens and estimates that unreported financial assets amount to between $6 and $7 trillion. On this figure, the related tax evasion is between $19 and $38 billion a year on capital income, and between $2 and $2.6 trillion on personal income. Recent policy initiatives such as automatic information exchanges constitute real progress, but some critical aspects might jeopardise their effectiveness.

    Global banking system awash with cash, but lending stagnates | Reuters: The global banking system has more cash now than at any time since the 2008 crisis but the failure of banks outside the United States to lend that money out is fast becoming the biggest barrier to economic growth. This is potentially dangerous for the world economy because after nearly a decade of unprecedented stimulus to revive the global economy and financial system, the effectiveness of central banks' policy measures is fading. The slowdown in the velocity of money is being blamed on a range of factors including the large amount of debt still in the system, banks sinking into a liquidity trap and the unwillingness of households, businesses and banks themselves to take risks. Rectifying this will require a mix of growth-friendly measures in fiscal policy, regulation, and structural reforms, analysts say. It won't be a quick or easy fix.

    BlackRock: Markets face headwinds from negative rates - Some major central banks are turning to negative interest rates to kick start their economies, but those measures pose headwinds to growth, BlackRock's Chief Investment Officer Russ Koesterich told CNBC's " Rundown". The Bank of Japan (BOJ) and the European Central Bank (ECB) are among central banks that have effectively started charging commercial lenders for the privilege of parking their funds in recent years, marking one of the most dramatic steps yet in policy efforts to fuel growth after years of lackluster economic activity. The aim was to encourage banks to lend more by making it costlier to just place funds with central banks but it isn't clear whether the policies have had the intended effect. "The tool that many central banks, particularly the Bank of Japan and the European Central Bank, have come to rely on is proving to come with some serious baggage," Koesterich said. "It exerts a tax on the banking system and it's very hard to accelerate an economy when the banking sector is struggling." The BOJ blindsided global financial markets on January 29 by adopting negative interest rates for the first time, amid pressure to revive growth in the world's third-largest economy as it struggled to create inflation. The move aims to motivate banks to both lower lending rates and lend more by charging banks to hold their reserves with the central bank. That followed moves by the ECB, starting in 2014, to turn to negative interest rates. Last week, the ECB went deeper into negative territory, cutting its main refinancing rate to 0.0 percent and its deposit rate to negative 0.4 percent. Central banks in Sweden, Denmark and Switzerland have also adopted negative rate policies.

    Maduro Slams US: We Never Kill Children or Bomb Hospitals -- Venezuelan President Nicolas Maduro has fiercely criticized Washington for its hypocrisy, double standards and interventionism."Unlike the U.S. we have never killed innocent children nor bombed hospitals, President Maduro told tens of thousands of Venezuelans during a mass rally in Caracas this Saturday. People took to the streets in massive numbers to show their solidarity in Caracas and other major cities across the country to show solidarity with Maduro and to reject U.S. President Barack Obama's extension of a decree that defines the Latin American nation as an “unusual and extraordinary threat to the national security and foreign policy of the United States.”

    Argentina sinks Chinese fishing vessel - Argentina's coast guard says it sank a Chinese fishing vessel that was fishing in a restricted area off the South American country's coast. The Argentine Naval Prefecture chased and eventually sank the Lu Yan Yuan Yu 010 vessel after detecting it illegally fishing within the country's exclusive economic zone, officials said Tuesday. First,according to a statement from the Argentine coast guard, warning shots were fired. The Chinese vessel, Argentine authorities said, responded by turning off its lights and deliberately trying to crash. "On distinct occasions, the offending boat realized maneuvers aimed at colliding with the coast guard, putting not only its own crew at risk, but also the personnel of the coast guard," the statement said. That's why the coast guard opened fire, Argentine officials said. Read More The vessel sank, and four people on board -- three crew members and the captain -- were rescued by Argentina's coast guard. China said that the other 28 crew members who'd been on the Chinese vessel were saved by Chinese fishing vessels nearby.

    Canada deficit to hit C$29 billion this year, may prevent another rate cut: Reuters poll - Canada will run a budget shortfall of C$28.6 billion ($21.4 billion) in the coming fiscal year, which should keep the Bank of Canada from cutting rates but will not necessarily provide a big boost to growth, a Reuters poll found. Economists were almost evenly split over whether the deficit would lift annual growth above the central bank's 1.4 percent forecast for this year, noting it might take time for the spending to work its way into the economy. Prime Minister Justin Trudeau's Liberal government was elected last October on a promise to run deficits for three years to help expand the economy. By contrast, the former Conservative government touted its balanced budget plans. Finance Minister Bill Morneau, who delivers his first budget on March 22, warned last month that the deficit would be much larger than the campaign target of C$10 billion, as low commodity prices are weakening growth. Government sources have said it would not be bigger than C$30 billion. Still, some economists said stronger growth in the United States, Canada's biggest trading partner, would have a bigger effect on the economy.

    Putin says Russians to start withdrawing from Syria, as peace talks resume | Reuters: President Vladimir Putin announced out of the blue on Monday that "the main part" of Russian armed forces in Syria will start to withdraw, telling his diplomats to step up the push for peace as U.N.-mediated talks resumed on ending the five-year-old war. Syria rejected any suggestion of a rift with Moscow, saying President Bashar al-Assad had agreed on the "reduction" of Russian forces in a telephone call with Putin. Western diplomats speculated Putin may be trying to press Assad into accepting a political settlement to the war, which has killed 250,000 people, although U.S. officials saw no sign yet of Russian forces preparing to pull out. The anti-Assad opposition simply expressed bafflement, with a spokesman saying "nobody knows what is in Putin's mind". Russia's military intervention in Syria in September helped to turn the tide of war in Assad's favour after months of gains in western Syria by rebel fighters, who were aided by foreign military supplies including U.S.-made anti-tank missiles. Putin made his surprise announcement, made with no advance warning to the United States, at a meeting with his defence and foreign ministers.

    Did Putin just 'smelled' the Western trap?: Putin managed to surprise nearly everyone with his sudden decision to withdraw Russian troops from Syria. The decision comes at a crucial moment, as jihadists' forces doesn't seem to have been completely defeated in all fronts. From : President Vladimir Putin has issued an order to begin withdrawal of Russian forces from Syria starting from March 15. “I think that the tasks set to the defense ministry are generally fulfilled. That is why I order to begin withdrawal of most of our military group from Syria starting from tomorrow,” Putin said on Monday at a meeting with Defense Minister Sergey Shoigu and Foreign Minister Sergey Lavrov. In Putin's words, during their operation in Syria, Russian military have demonstrated professionalism and teamwork, having performed all the set tasks. Perhaps Putin just 'smelled' the Western trap and tries to escape from the Middle East chaos before it's too late. As described in previous articles: dragging Russia in the Middle East front, is probably part of Washington's changing strategy at this moment, and has two main targets: The first target is to allow the US to withdraw progressively any forces from the Syrian mess, avoiding another endless attrition war. At the same time, Washington will start a new propaganda war to pass the blame for the mess to Putin and his allies. Simultaneously, Washington hopes to restore, to some degree, the relations with the European allies, as many of them are dissatisfied with the US policy, which generated the huge problem of the fleeing refugees, finding Europe totally unprepared to deal with it. Putin will be considered responsible for the new waves of refugees. [...] The second target, is to drag Russia into what the US try to avoid: an endless attrition war. Putin could be trapped in a condition similar to that of the Soviets in Afghanistan, although probably not for such a long period.

    The Rationale Behind Russia’s Withdrawal From Syria - After having rescued the Syrian Government’s position in Syria from certain defeat and securing a partial truce along with the onset of an imminent peace conference, the partial withdrawal is seen by many as a message to the Assad government to not take Russia’s military aid for granted, and to be more flexible in the upcoming peace negotiations. If we assume that all wars are essentially trade wars grown large, and in the Middle East, they almost always involve energy, then the Russian gambit in Syria can be viewed from a different perspective. Russia’s economy is currently in recession, partly as a result of western sanctions, but much more seriously hurt by the crashing of energy prices. Russia’s warming relations with Saudi Arabia has helped to bring about an OPEC-Russian sponsored freeze in oil production, with only Iran refusing to comply. With the Syrian withdrawal, Russia has tempered a major political feud with the Saudis over Russia’s support for Assad, a move that at once increases the prospects for a Russian-Saudi agreement on oil production cutbacks. There are also many who think that Russia is also increasing pressure on its allies to be more flexible, not only in peace talks but also oil production cuts. With the withdrawal of the Russian protective air shield, Iran and Hezbollah’s ground forces in Syria are suddenly exposed to the threat of Saudi and Turkish air attacks. Will the threat of a looming military catastrophe in Syria force Iran to comply with production cuts?Many oil insiders believe that after decades of punishing western sanctions, Iran’s oil industry is in no condition to meet its avowed quota for production, so that an agreement on cuts might cause little sacrifice. Russia’s actions may well have staved off other threats to its business. Recall that Robert Kennedy Jr., the nephew of the slain U.S. President, recently published an article in Sputnik, claiming that the major reason for the west’s attempt to overthrow the Assad government was to build a natural gas pipeline from Qatar that traversed Syria, capturing its newly discovered offshore reserves, and continued on through Turkey to the EU, as a major competitor to Russia’s Gazprom. By re-establishing the Assad government in Syria, and permanently placing its forces at Syrian bases, the Russian’s have placed an impenetrable obstacle to the development of the Qatar gas pipeline. Russia has also placed itself at the nexus point of other new offshore gas discoveries in the Eastern Mediterranean, including Israel, Cyprus, and Greece.

    Why Russia Is Leaving Syria: Putin Achieved Everything He Wanted - Earlier today, we took a closer look at Vladimir Putin’s seemingly abrupt decision to partially withdraw the Russian military from Syria. The prevailing view seems to be that Moscow somehow intended to put more pressure on Assad to be amenable to a negotiated, political solution and indeed that may be a part of the plan. However, as we noted, it’s not exactly as if The Kremlin is leaving the Syrian leader high and dry. Aleppo proper was surrounded just prior to the implementation of the ceasefire late last month. Hezbollah and Russia’s air force had the rebels pinned down. Their supply lines to Turkey were cut, and civilians were fleeing the city en masse to avoid what they assumed would be a bloody siege. At that point is was readily apparent that the opposition couldn’t hold out much longer. Besides, it's not as if the IRGC and Hezbollah are just going to pack up and leave once the Russians draw down their presence. So it isn't entirely clear that Assad is being forced to negotiate in Geneva by Putin's exit any more than the HNC, which surely doesn’t want to go right back into a situation where they are on the verge of surrender. Rather, it appears to us that Putin sensed the perfect moment to change tactics. As we wrote this morning, “if both sides come to some kind of tenuous agreement, Putin will get to claim that Russia’s military came, saw, and conquered, then brokered a peace settlement - two things no country had been able to do in Syria since the beginning of the war in 2011.”

    Europe’s Illusory Migration Deal with Turkey - Chancellor Angela Merkel surprised her European partners on March 8 by negotiating a new and supposedly far-reaching deal with Turkey in which Turkey is to be rewarded for helping to stanch the flow of migrants from the Middle East into Europe. Merkel appears to have salvaged a European solution to the migration crisis. But it is the European border vision of Hungarian prime minister Viktor Orban, not hers, that is quickly being implemented.  In theory, the new deal would end illegal migration to Europe through Turkey, which agreed to accept the return of any illegal migrant apprehended in Greece. It would also enable Merkel to continue to claim that Europe’s borders remain open, because the deal envisions a 1-1 swap arrangement in which one Syrian migrant would be transported directly from Turkey to Europe for each illegal migrant returned from Greece to Turkey. The idea here is to deny human smugglers their business model in the Aegean Sea.  Turkey would also receive more than the previously agreed €3 billion in financial support from the European Union, restart its EU accession negotiations, and likely benefit more from earlier visa-free travel to the borderless Schengen area than previously agreed. An added implication is that the European Union would refrain from criticizing the Turkish government’s dismal human rights record, including its accelerating crackdown on freedom of speech. If the deal is approved by EU leaders at their next summit in a few weeks, President Recep Tayyip Erdogan of Turkey—who forcefully shut down the country’s biggest opposition newspaper Sunday night—should be satisfied with the price he has extracted for appearing to help Europe and also, not least, Chancellor Merkel. Moreover, the agreement will almost certainly have next to no impact on migration to Europe or on the plight of refugees. Thus Erdogan hence managed to get paid for solving a problem that others’ in Europe had already dealt with.

    Idomeni refugees push to cross into Macedonia despite border closure --Hundreds of desperate refugees on Monday marched out of the water-logged Idomeni camp in Greece, seeking an alternative route across the sealed border of the Former Yugoslav Republic of Macedonia. The mainly Syrian and Iraqi refugees, including children, trudged through mud carrying their belongings towards a river about 5 kilometers (3 miles) to the west of Idomeni, where some 12,000 refugees are stranded. The refugees forded a swollen river that crosses into Macedonia, putting them closer to the sealed border as they searched for holes in a newly built barbed wire fence. Highlighting the dangers, Macedonian state TV MRT on Monday reported three Afghans were found dead in the river, apparently having drowned the previous day as part of a group of more than 20 refugees trying to cross the swollen Suva Reka river. Hours after setting out from the camp, several hundred refugees were able cross into Macedonia, where they were detained by border police and the army for illegally entering the country. Around 30 journalists following the refugees were also arrested. Macedonia's interior ministry said it was "taking steps" to return more than 700 illegal migrants back to Greece and would improve security where migrants crossed. After Austria last month put caps on the number of migrants it would allow to cross its border, in a domino effect Balkan nations first restricted, then last week completely sealed border crossings to anybody without EU visas, effectively trapping more than 40,000 refugees and migrants in Greece.

    2,000 Refugees Bypass Greek Border Fence, Stream Into Macedonia - Live Feed - Hundreds of refugees from a camp in northern Greece have managed to get around a border fence and cross into Macedonia, according to a Macedonian police spokeswoman. However, a Reuters photographer estimated the number to be closer to 2,000. As the following live feed shows, the flood of refugees continues... As RT reports, after walking for several hours, the refugees crossed a river while forming a "human chain" and found a way around the fence, which was put up by Macedonian authorities, photographer Stoyan Nenov said. Many of the refugees, who came from a camp near Idomeni, carried children on their shoulders as they crossed the river. Some of the asylum seekers were picked up and put in army trucks by Macedonian soldiers, though it was unclear where they would be taken. A spokeswoman for Macedonian police said: "We are taking measures to return the group to Greece...police and army have heightened security on the border at critical points." The spokeswoman said she believed the number of refugees who crossed the border totaled "several hundred," a significantly lower estimate than the number given by Nenov. Macedonia completely closed its border on March 9, leaving some 13,000 refugees stranded. The move came after Slovenia blocked access to refugees aiming to pass through the country on their way to Western Europe.

    Macedonia forcibly returns thousands of refugees to Greece - Thousands of desperate refugees who had made a dramatic push into Macedonia – bypassing its sealed border by wading through the freezing waters of a river – were forcibly returned to Greece on Tuesday amid heightened tensions between the two countries. As Athens and Skopje engaged in a war of words over the episode, hundreds of exhausted men, women and children began streaming back into the muddy, waterlogged camp they had sought to flee barely 24 hours earlier. “They hit everyone – women, children, men – and said ‘you are going back’,” said Halad al-Hassan, 32, from Raqqa, the Syrian city overrun by Islamic State militants last summer. “People are very shocked, too shocked to even want to speak,” he sighed, shaking his head in disbelief. “I’ve been here in Idomeni for 27 days. It’s very bad, very cold, very unbelievable. Why does Macedonia do this? Why has Europe closed the borders?” Dazed youngsters, blankets strewn across their shoulders against the biting cold, walked around aimlessly as charity workers – many having worked through the night – strove to cater for the estimated 2,500 people pushed back into Greece. Save the Children described how Macedonian authorities began sending people back in trucks, dropping children off shivering, wet and disorientated. “Some people collapsed by the roadside and needed medical attention on the tarmac and those that made it back to the camp faced a night out in the open, with rain starting to fall around 4.30am,” the organisation said. “Up to 600 people remained stuck in the other side of the river.”

    EU leaders meet to offer migrant deal to Turkey - Leaders of the European Union meet in Brussels on Thursday to agree on a deal to offer Turkey the following day that would secure Ankara's commitment to a scheme intended to halt migrant flows to the Greek islands. A year into a crisis in which more than a million people have arrived in chaotic misery, many of them Syrian war refugees and most of whom come from Turkey via Greece to Germany via dangerous sea crossings and long treks, hopes have risen around the summit table that they may have found a way to at least slow the movement. But leaders acknowledge there is no silver bullet and face many obstacles over the next two days, from howls of outrage that they plan mass expulsions of vulnerable people to a country with a patchy and worsening human rights record, to a lingering feud between Ankara and small but vocal EU member Cyprus. "Work is progressing but there is still a lot to do," European Council President Donald Tusk wrote to leaders inviting them to the summit he will chair. After discussing the economy, the 28 EU national leaders will discuss the migration issue over dinner, starting around 8 p.m. (1900 GMT).

    Migrant crisis: 'Many issues' in way of EU-Turkey deal - BBC News: EU leaders are meeting later to try to finalise a deal with Turkey to ease the migrant crisis. European Council President Donald Tusk said he was "more cautious than optimistic" about the negotiations. The proposed plan would see migrants arriving in Greece from Turkey sent back. For each Syrian returned, a Syrian in Turkey would be resettled in the EU. German Chancellor Angela Merkel has urged EU member states to do more. On Thursday Mr Tusk said the talks would be difficult: any agreement had to be acceptable to all 28 member states, he said, and fully comply with EU and international law. "Only if we all work together in a co-ordinated manner and keep our cool we will achieve success." Since January 2015 a million migrants and refugees have entered the EU by boat from Turkey to Greece. More than 132,000 have arrived this year alone. Turkey is currently home to a large number of refugees from Syria and Mrs Merkel paid tribute to the government's efforts. "What Turkey has done for... some 2.7 million refugees can't be praised highly enough," she told Germany's parliament on Wednesday. "Europe has not covered itself with glory in how, as a union of 28 members states with 500 million citizens, it has struggled with fairly sharing the burden."

    ‘Illegal, immoral & inhumane’: Thousands protest in Spain against EU-Turkey refugee deal - video - Thousands of people have demonstrated in more than 50 cities across Spain in protest against the draft agreement between Brussels and Ankara which could see the bulk of “illegal” immigrants stuck in EU sent back to Turkey in exchange for “genuine” asylum seekers.  “Refugees welcome” and “This agreement is illegal,” were some of the most popular slogans chanted at the rally in central Madrid’s Puerta del Sol square, where some 5,000 attendees gathered to protest against Ankara-Brussels agreement, according to organizers. Leaders of the European Union are to hold talks in Brussels on Thursday with Turkey’s Prime Minister, Ahmet Davutoglu, to try to hammer out a deal to curb the bloc’s worst migrant crisis in more than 60 years. The most controversial part of the deal entails sending thousands of migrants stuck in Greece back to Turkey, allegedly to deter them from making the dangerous and illegal journey across the Aegean Sea.  Under a provisional agreement reached last week, Turkey is to accept all migrants, in return for more money, faster visa-free travel for Turks and increased pace of EU membership negotiations. In return the EU would accept one Syrian refugee directly from Turkey for each migrant who illegally reached the European shores.

    EU agrees stance on Turkey migrant deal: (AP) — European Union leaders have agreed upon a common stance on a plan to send tens of thousands of migrants back to Turkey something they will propose to Turkish Prime Minister Ahmet Davutoglu later on Friday. At late night talks in Brussels on Thursday, leaders backed a mandate for negotiations with Turkey that they said would not result in mass deportations and some differences were bridged over sweeteners to give Turkey in exchange for its help. "The 28 have agreed on a proposal," French President Francois Hollande said. "It was late in the evening, but it has been done." But Dutch Prime Minister Mark Rutte said that reaching an agreement had not been easy. "There too, it is a complicated process," he said. "I think we can get a deal out of this, we have to get a deal out of this. But the race is not really finished yet." Desperate to ease the pressure placed on Europe's borders by the arrival of more than 1 million migrants in a year, the EU has turned to Turkey hoping to stem the flow of refugees into overburdened Greece. The plan would essentially outsource Europe's biggest refugee emergency in decades to Turkey, despite concerns about its sub-par asylum system and human rights abuses. Under it, the EU would pay to send new migrants arriving in Greece who don't qualify for asylum back to Turkey. For every migrant returned, the EU would accept one Syrian refugee, for a total of 72,000 people to be distributed among European states.

    Revealed: the neo-Nazi manifesto targeting single mothers and mentally ill that AfD doesn't want you to see - A leaked election manifesto has revealed that Germany’s vote-winning new anti-immigrant party has plans for draconian laws which would discriminate against handicapped children, single mothers, and the mentally ill – and oblige history teachers to end a perceived “over-emphasis” on the Nazi era in schools. The radical proposals are contained in an election manifesto produced by the right-wing populist Alternative für Deutschland (AfD) party, which made sweeping gains in three state elections last weekend in a show of public opposition to Chancellor Angela Merkel’s open-door refugee policy. The AfD’s success meant that the party is now represented in eight of Germany’s 16 state parliaments. A poll published by YouGov showed that more than 70 per cent of Germans now believe that the AfD is firmly on course to win seats in Germany’s national Bundestag parliament next year, when it will contest a general election for the first time.

    Merkel's party suffers drubbing in German state vote: Voters punished Chancellor Angela Merkel's conservatives in three German regional elections on Sunday, giving a thumbs-down to her open-door refugee policy and turning in droves to the anti-immigrant Alternative for Germany (AfD). The result is a big setback for Merkel, who has led Europe's biggest economy for a decade, and could narrow her room for manoeuvre as she tries to convince her European Union partners to seal a deal with Turkey to stem the tide of migrants. Merkel's Christian Democrats (CDU) lost ground in all three states - Baden-Wuerttemberg and Rhineland-Palatinate in the west and Saxony-Anhalt in the east - which were together widely seen as offering a verdict on Merkel's liberal migrant policy. "These results are a serious rebuke for Merkel and the most pronounced protest vote we've seen so far," said Holger Schmieding, an analyst at Berenberg Bank. The result in the two western states was the worst-case scenario for Merkel, who has staked her legacy on her decision to open Germany's doors to over 1 million migrants last year. But she still looks set to run for a fourth successive term as chancellor, with no real challenger for the right to lead her party into next year's federal election. "The result will increase the noise within the CDU and constrain the government's options on migrants and Greece, but Merkel's chancellorship is not at risk,"

    Eurozone Industrial Output Expands Most Since 2009: Eurozone industrial production rebounded at the fastest pace in more than six years, signaling that the manufacturing sector weathered the global slowdown at the start of the year. Industrial production grew 2.1 percent month-on-month, partly reversing a revised 0.5 percent fall in December, data from Eurostat revealed Monday. Production growth was the fastest since September 2009, when output climbed 2.3 percent. Economists had forecast a 1.7 percent rise for January after the initially estimated 1 percent decrease. On a yearly basis, industrial output expanded 2.8 percent, following a revised 0.1 percent drop in the previous month. The pace of growth was faster than an expected 1.6 percent.

    Yield-starved European insurers look past risks to mull emerging bonds | Reuters: Starved of yield in Western bond markets and at risk of defaulting on future payments to policyholders, Europe's 10-trillion euro insurance industry is turning to emerging debt for the higher returns it desperately needs. While emerging debt has mostly lost investors money in recent years and brings its own risks in the form of higher default rates, a survey by the world's biggest asset manager BlackRock found that half the insurers in Europe, Middle East and Africa planned to increase allocations to emerging debt in 2016. The firm has "quite a number" of requests for proposals from insurers to invest in emerging debt, said Patrick Liedtke, head of BlackRock's EMEA financial institutions group. Emerging debt holdings of insurance companies remain comparatively miniscule, unsurprisingly for a traditionally conservative sector, but they are likely to grow. Insurers are among the businesses that stand to lose most from the current near-zero or negative interest rates on much Western government debt, because they need steady income to pay out on policies and typically obtain this from high-grade government bonds. Almost a quarter of insurers could fail to meet obligations in the coming years if interest rates remain low for a prolonged period, Europe's insurance and pensions regulator warned in 2014.

    Everything Was Working Great... And Then Today's ECB Blog Post Left JPMorgan "Dazed And Confused" --In a historic first, earlier today ECB vice president Vitor Constancio penned an official ECB opinion piece, some might call it a blog post, titled "In Defense of Monetary Policy" just hours after the ECB's historic "all in" gamble which included the first ever monetization of corporate bonds. In it he tried to do two things:

    • To explain why, despite repeated rumblings that monetary policy is longer relevant, it is in fact essential, or as he says "not only is it wrong to start talking down monetary policy – it’s actually dangerous", and to do this he attempts to prove a counterfactual saying that without QE, European deflation would be far worse than it is now, and that structural reforms, while critical "it is difficult to see how they could spur growth significantly in the next two years, especially when the current problem is lack of global demand."  In other words, yes, we should no longer stimulate, but we can't stop as governments are too inefficient, and take too long to do what they have to, so we will keep stimulating.
    • The second one is both a justification for negative rates, in which far from the now accepeted reason that the ECB no longer wants to impair bank profitability, what Constancio suggests is that the only gating factor is fears about a flight to cash should rates go even more negative (and hence why the ECB has been so aggressively moving to eliminate the €500 bill).

    The problem with these two points, and especially the second one, is that it runs completely counter to the entire narrative that was sloppily errected overnight as justification for today's rally, which as a reminder was that the ECB will no longer cut rates to support European banks, and that the ECB is explicitly no longer targeting a weaker Euro but instead will do everything in its power to promote credit creation (as it did with LTRO1-4, as it did with QE1 and so on).We were not the only ones who wre left scratching our heads. In a note by JPM's Malcolm Barr, he admits that JPM is likewise "thoroughloy confused" by Constancio's blog, and says that"it is disappointing to us to see the ECB without a clear and convincing explanation for why it perceives a bound on rates at -0.4% at this point."

    ECB TLTRO 2.0 – Lending at negative rates  Silvia Merler - On Thursday, the ECB surprised observers by announcing a new series of four targeted longer-term refinancing operations (TLTRO II) to be started in June 2016. The incentive structure of the programme has changed: on one hand, this TLTRO II could be the first case of lending at negative rates; on the other hand, the link with lending to the real economy might have been weakened.  The ECB first announced its targeted long-term refinancing operations (TLTRO) in summer 2014, and operations started in September 2014. Under the first version of the programme, countries could borrow an initial allowance of 7% of their outstanding loans to the euro area non-financial private sector. They could then borrow additional funds in a second wave in March 2015 and June 2016, depending on their net lending to the real economy. ECB President Mario Draghi said on March 10 that the TLTRO has been successful. In terms of total outstanding ECB liquidity (figure 1), TLTROs have substituted for part of the liquidity drained by the redemptions of 3-year LTROs, keeping the total liquidity allocated through refinancing operations above 500 billion euros.

    The end of negative rates, but not central bank alchemy - Gavyn Davies   There is much talk that monetary policy has run out of ammunition. This talk surfaces as frequently in discussions with central bankers themselves as it does with investors. To quote the title of Mervyn King’s riveting new book, is this “The End of Alchemy?”  Last Thursday, the ECB announced a new package that included a rate cut deeper into negative territory. After initial doubts, the equity markets were impressed, because Mr Draghi had learned the lessons of past failures. The package cleverly protected the banks against the effects of negative rates, drew a line under further rate cuts, and instead included a boost to the ECB’s balance sheet that is likely to be much larger than markets initially realised (see graph below). At the ECB, negative rates are probably now dead, but other forms of “alchemy” are still very much alive. Why do risk assets apparently abhor negative interest rates? After all, bond yields have fallen in response to negative policy rates, and in the past other asset prices have usually benefited from a reduction in the discount rate to be applied to future corporate earnings.In theory, there should be no abrupt change in the effectiveness of monetary policy when rates pass through zero, assuming there is no stampede into paper currency as banks and their customers seek to avoid the levy from negative rates. But theory has not worked too well in this instance. Households seem to believe very strongly that the natural state of affairs is for nominal interest rates to stay positive. A sense that something must be very wrong if you have to pay to lend money could damage economic confidence. That is exactlywhat has happened in Japan, where consumer confidence has imploded since negative rates were announced.

    Norwegian Central Bank Cuts Main Rate, Strikes Cautious Note - WSJ: —Norway’s central bank cut its main interest rate on Thursday as it sought to boost the slowing oil-dependent economy and keep prices rising close to its 2.5% target. However, policy makers said they needed to tread carefully as the effects of taking rates toward zero remained unclear. The central bank, known as Norges Bank, cut its main rate to 0.5% from 0.75%, in line with the expectations of analysts polled by The Wall Street Journal. The Norwegian krone strengthened against the euro in response to the decision, suggesting the move was slightly less aggressive than markets had expected. Norges Bank said it may need to lower the main rate again this year and didn’t rule out taking the main rate to zero or even below in the event of a severe economic setback. “Our opinion is that zero is no absolute limit in rate-setting,” Governor Oystein Olsen told The Wall Street Journal in an interview. “But for [negative rates] to be an option at home, it would have to be due to new, unforeseen shocks to the Norwegian economy.” Still the governor added the bank would need to proceed with caution because the effects of monetary policy become more uncertain as they approach an eventual lower bound.

    Moody's: Negative interest rates in Switzerland, Denmark, Sweden are having unintended consequences, with Sweden most at risk of asset bubble -- The central banks of Switzerland, Denmark and Sweden (all rated Aaa stable) have been among the first to push policy rates into negative territory. A year into this novel experience, Moody's Investors Service concludes that, from among the three countries, Sweden is most at risk of an -- ultimately unsustainable -- asset bubble. Moody's report, entitled "Governments of Switzerland, Denmark & Sweden: Negative interest rates have unintended consequences, with Sweden most at risk of asset bubble," is available on Moody's subscribers can access this report via the link provided at the end of this press release. The rating agency's report is an update to the markets and does not constitute a rating action. The three countries' central banks have lowered their key policy interest rates to the current -0.75% in Switzerland, -0.65% in Denmark and -0.5% in Sweden, albeit for different reasons. The Swiss and Danish central banks were aiming to reverse the intense appreciation pressure on their currencies as a result of the ECB's introduction of its quantitative easing program. In Sweden, the central bank is focused on lifting persistently low inflation, in the context of the ongoing strong economic expansion. "In Moody's view, the Danish and Swiss central banks have achieved their main objective given that the appreciation pressure on their currencies has eased or, in the case of Denmark, even disappeared completely. But this is not the case for Sweden, where the Riksbank has not been successful in engineering higher inflation, while Sweden's GDP growth continues to be among the strongest in the advanced economies," says Kathrin Muehlbronner, a Senior Vice President at Moody's. "At the same time, the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent -- in the form of rapidly rising house prices and persistently strong growth in mortgage credit", adds Ms Muehlbronner. In Moody's view, these trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability as and when house prices reverse trends.

    Negative Interest Rate Conundrum --Across the developed world the persistence of a phenomenon that was initially seen as a freak occurrence—negative interest rates—is now a cause for concern. One form the tendency takes is for central banks to set their policy rates, which signal their monetary stance, below zero. The process was triggered by the European Central Bank (ECB). Under pressure to forestall deflation in the region, the ECB reduced its deposit rate to (minus) 0.1 per cent in June 2014. Since then, according to the Bank for International Settlements (BIS), till January 2016 four national central banks, from Denmark, Sweden, Switzerland and Japan, have moved the interest ‘paid’ on part of their deposits with them to negative territory. After the Great Recession began in late 2008, there was a widespread trend observed for policy rates to be cut to stall and reverse the economic downturn. This process has now gone so far in some countries, that rates have breached the zero-barrier. The ECB itself has in three steps cut its deposit rate to (minus) 0.2, (minus) 0.3 and (minus) 0.4 in September 2014, December 2015 and March 2016 respectively (Chart 1).The motivation for negative deposit rates is clearly to pressure or persuade banks to lend rather than hold on to reserves with the central bank. This is not the first time that central banks have opted for such a policy (the Swedish Riks bank had flirted with it in 2009-10). But this time around, the tendency is spreading fast, with more countries contemplating action along these lines. The difficulty is that these expectations are not being realised. Households and firms are still burdened with debt, and so are wary about borrowing more, and banks are cautious of increasing their exposure to them even if pushed by the central bank.

    Amount of Negative Interest Rates in the World - Barry Ritholtz - graph, in trillions and percent of the aggregate, now at 18.86%

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