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

Saturday, March 5, 2016

week ending Mar 5

The Fed could be back in play in 2016: One or more rate hikes by the Federal Reserve in 2016 remains a real possibility. Why would the Fed consider such a policy action given the recent collapse in inflation expectations? Over the past couple of months many analysts and the futures markets have assigned a rather high probability to the so-called "one and done" - no change in policy in 2016. Indeed, here is what we've heard recently from St. Louis Fed President James Bullard: Reuters: - The Federal Reserve must act to stop inflation expectations from getting too low, St. Louis Fed President James Bullard said on Wednesday, reiterating his concerns about continuing to raise interest rates. The U.S. central bank cannot let low inflation expectations "get out of hand," he told a dinner of bond traders here, adding he "can't stomach" currently low readings. "It's just that they've fallen so far that it's got to be a concern." However a number of researches have suggested that with a relatively stable core inflation in the United States, oil prices would need to collapse to levels that are neither consistent with today's forward curve nor sustainable. Therefore, these studies argue, the current market-based inflation expectations are simply irrational.  Here is the latest analysis from Goldman Sachs. Source: Goldman Sachs   Also, a study from the St. Louis Fed shows a similar result. Source: St. Louis Fed  Moreover, US inflation measures are starting to stir - especially in the services sector. This is something the FOMC is not going to ignore. Below we have some of the recent reports.

Fed Watch: Fed Doves Still Have The Upper Hand For March - The Personal Income and Outlays report for January delivered a surprise for the Fed doves. It does not, however, derail their push for a March pause. I believe policymakers will still take a pass on the March meeting as they assess the impact of recent market unpleasantness. But if markets calm further ahead of the March meeting and data remains solid, beware that they may choose to re-instate the balance of risks into the FOMC statement. Furthermore, sufficiently supportive data may induce them to shift the risks to the upside to signal the hope of a June hike. Real personal consumption expenditures rose 0.4% in January and stands a respectable 2.9% higher than last year. The death of the consumer has been greatly exaggerated (although the death of the department store has not). Fairly firm consumer spending should be expected given the broad-based support from the labor market. Equally if not more important is that the report rewarded the defenders of the Phillips curve as core-PCE inflation spiked higher during the month: Core inflation was up 1.7 percent from a year ago, actually bringing the FOMC's target into view. Note that as of the December meeting, the Fed did not expect to see 1.6 percent until the end of the year. It is easy to see unemployment close to their year-end target of 4.7 percent by the next meeting. It is already at 4.9 percent. In other words, it is easy to see economic projections updated to reveal a faster than expected return to both mandates. It seems then like the Fed should consider picking up the pace of rate hikes rather than pausing. Indeed, there is some commentary that the current level of interest rates is inconsistent with the expected path of growth and inflation. This is sometimes described as Treasury market participants "underestimating" the Fed. Fed Governor Lael Brainard, however, continues to reconcile this apparent disconnect between the bond market and the economy with her focus on the international side of the equation. In yet another compelling speech, Brainard argues that the decline in the neutral rate of interest is a common shock that prevents policy diversion:

Fed Watch: Dudley the Dove - The beleaguered manufacturing sector saw an uptick in February, at least according to the ISM report:  This information builds on the stronger consumer spending and inflation numbers we saw last week. Not to mention solid auto sales for February. The news is sufficiently good that Torsten Sløk of Deutsche Bank argues (via Business Insider) that the Fed should raise rates: we have in recent months seen a solid turnaround in the employment data for the manufacturing sector and in the manufacturing ISM. Combined with the acceleration we are seeing in consumer spending and inflation I would argue that if the Fed is truly data dependent then they should be raising rates at their next meeting... I don't think the Fed will raise in March, nor do I think they should raise in March. I think the financial markets signaled fairly clear that further tightening now would be a mistake. The Fed would be wise to heed that call. And, if New York Federal Reserve President William Dudley is any indication, they will heed that call. Indeed, he goes even further than me. Whereas yesterday I raised the possibility of a "hawkish pause" at the March meeting where the Fed revives the balance of risks with an upside bias, he opens the door to the opposite. First, note that Dudley appears unmoved by the uptick in core inflation: Turning to the outlook for inflation, headline inflation on a year-over-year basis has begun to rise as the sharp falls in energy prices in late 2014 and early 2015 are removed from the calculations. However, inflation still remains well below the Federal Reserve’s 2 percent objective. As the FOMC has noted in its statements, this continued low inflation is partly due to recent further declines in energy prices and ongoing impacts of a stronger dollar on non-energy import prices. Although energy prices will eventually stop falling and the dollar will stop appreciating, these factors appear to have had a more persistent depressing influence on inflation than previously anticipated. This is actually quite dovish. If core inflation is a good signal for the direction of overall inflation, then the latter will leap sharply when the "transitory" impacts fades. This suggests to me that the forecast of a gradual return to target is almost certainly wrong. When (and if) inflation turns, it will turn quickly. Dudley is discounting that possibility. 

Forward guidance -- According to economic theory, one of the most promising ways in which monetary policy might be able to stimulate an economy in which the nominal interest rate has reached zero is to promise to follow a different policy rule once interest rates are again positive. A commitment to more stimulus and inflation in the future regime could in principle influence expectations and actions of people in the economy today, and thereby offer a means by which the central bank could help an economy recover from the zero lower bound. What the Fed actually did was to issue the following statement on August 9, 2011: The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.  The key departure from previous statements was the link to a calendar date one year and three quarters ahead. What did market participants make of this announcement? Federal Reserve Bank of San Francisco President John Williams last week described the August 2011 statement as a “sledgehammer” that very effectively delivered the Fed’s message. Williams noted for example that the Blue Chip consensus estimate of how long it would be before the Fed started raising interest rates jumped from 1 year before the statement to 1-3/4 years after the statement. Such “forward guidance” had the potential to start influencing economic activity the minute that the statement was issued in August of 2011. If markets were persuaded that the Fed was going to keep rates low for a longer period, longer term interest rates should fall on the news. And indeed, the yield on a 5-year U.S. Treasury bond fell by 20 basis points on the day the Fed released the statement. Lower interest rates on longer term borrowing could help to increase spending right away.

Fiscal Policy Success Is All About Monetary Policy - Kocherakota - Suppose that the US were to adopt a large fiscal stimulus program, with the aim of boosting aggregate GDP in 2020 by a considerable amount (15%?) relative to current forecasts. Under what circumstances would such a program be successful in achieving its goal? In this post, I’ll argue that the answer depends critically on the monetary policy response to the plan. I’ll describe two possible changes in the Fed’s operating framework that would lead its policy choices to be more supportive of the desired aggregate growth outcomes. There are two possible monetary policy responses.

  • Response 1: The Fed’s chosen path of interest rates is higher than currently anticipated. Assuming that inflationary expectations are little changed, the Fed’s tightening will drive down aggregate demand in unstimulated sectors of the economy. Suppose, for example, the government increased infrastructure spending greatly. If the Fed were to raise interest rates, it would constrain the growth of household consumption and business investment. By tightening sufficiently, the Fed could essentially eliminate the effects of any stimulus program on aggregate output. All that would happen is that the composition of aggregate activity would swing away from private expenditures toward public expenditures.
  • Response 2: There is little change in the evolution of interest rates. Without tighter monetary policy, an increase in public expenditures will not crowd out private consumption and private investment. In fact, if inflation expectations were to rise in response to the increase in economic activity, then there would be a decline in the real interest rate. That decline would generate more private sector investment and private sector consumption.
  • To sum up: an aggressive demand stimulus plan can achieve its aggregate objectives if (but only if) the Fed does not tighten significantly in response to the program.

The Treasury Market Raises Its Inflation Outlook -- The US Treasury market’s implied inflation forecast has surged in recent days, albeit after reaching unusually low levels last month. Nonetheless, the rollercoaster of revising expectations rolls on, and this time there’s an upside bias bubbling. The spread between the nominal 10-year yield and its inflation-indexed counterpart reached 1.48% yesterday (Mar. 1), based on daily data from That’s still a low rate relative to the roughly 1.5%-2.5% range in recent years. But the latest pop marks a sharp increase from mid-February, when the market’s inflation forecast at one point dipped to 1.18%. The upward bias of late looks reasonable in the wake of last week’s January report on personal income and spending, which revealed a firmer inflation trend. The personal consumption expenditures (PCE) price index increased 1.3% for the year through January, the strongest annual gain since Oct. 2014. Meanwhile, the Fed’s preferred inflation benchmark—core PCE, which excludes food and energy—ticked up to a 1.7% year-over-year increase, which marks the biggest advance since July 2014.

U.S. Has Record 10th Straight Year Without 3% Growth in GDP  --  The United States has now gone a record 10 straight years without 3 percent growth in real Gross Domestic Product, according to data released by the Bureau of Economic Analysis.  The BEA has calculated GDP for each year going back to 1929 and it has calculated the inflation-adjusted annual change in GDP (in constant 2009 dollars) from 1930 forward. In the 85 years for which BEA has calculated the annual change in real GDP there is only one ten-year stretch—2006 through 2015—when the annual growth in real GDP never hit 3 percent. During the last ten years, real annual growth in GDP peaked in 2006 at 2.7 percent. It has never been that high again, according to the BEA. The last recession ended in June 2009, according to the National Bureau of Economic Research. In the six full calendar years since then (2010-2015), real annual GDP growth has never exceeded the 2.5 percent it hit in 2010.  “The average growth rate for economic recoveries since the 1960s is 3.9 percent ranking the Obama recovery, with an average GDP growth rate of just 2.1 percent, among the slowest in history,” Before this period, the longest stretch of years when real GDP did not grow by at least 3.0 percent, as calculatd by the BEA, was the four-year stretch from 1930 to 1933—during the Great Depression.

Fed's Beige Book: "Economic activity expanded in most Districts"  ---Fed's Beige Book Reports from the twelve Federal Reserve Districts continued to indicate that economic activity expanded in most Districts since the previous Beige Book report. Economic growth increased moderately in Richmond and San Francisco and at a modest pace in Cleveland, Atlanta, Chicago, and Minneapolis. Philadelphia reported a slight increase in economic activity, and St. Louis described conditions as mixed. Most contacts in Boston cited higher sales or revenues than a year-ago but mixed results since the previous month. New York and Dallas described economic activity as flat, and Kansas City noted a modest decline in activity. Across the nation, business contacts were generally optimistic about future economic growth. And on real estate:  Residential real estate sales were up since the last report across all Districts, with the exception of New York and Kansas City where sales were somewhat weaker in part due to normal seasonal patterns. The Boston, Cleveland, St. Louis, and San Francisco Districts reported strong growth in sales, and contacts in Boston and Cleveland cited relatively mild winter weather as a positive contribution to growth. Low- to moderately-priced homes sold better than higher-priced homes in Cleveland, Kansas City, and Dallas. ... Residential construction generally strengthened since the previous survey period, with only Philadelphia and Kansas City reporting declines. Districts characterized nonresidential real estate sales and leasing growth as flat to strong.

Fed's Dudley sees risks to U.S. economic outlook tilting to downside | Reuters: An influential Federal Reserve official on Tuesday said he sees downside risks to his U.S. economic outlook, an assessment that could flag a longer pause before the Fed's next interest-rate hike than he and his colleagues had earlier signaled. "At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside," New York Federal Reserve President William Dudley said in remarks at a conference in Hangzhou, China sponsored by the People's Bank of China and the New York Fed. Although he said he still expects the U.S. economy to grow about 2 percent this year, enough to push unemployment down and begin to pull inflation up to the Fed's 2-percent target, he added, "on balance, I am somewhat less confident than I was before." The Fed raised U.S. interest rates in December for the first time in almost a decade, and signaled that it would probably raise rates four more times this year, a gradual pace by historical standards. The U.S. central bank in December raised its target range for its benchmark policy rate by one quarter of a percentage point, and currently aims to keep the rate between 0.25 percent and 0.5 percent. Dudley, a close ally of Fed Chair Janet Yellen and a permanent voter on U.S. monetary policy, suggested that the sharp global economic slowdown, stock-market sell-off and oil price slide since the beginning of the year may force the Fed to tighten monetary policy even more slowly.

Atlanta Fed sees sub-2 percent U.S. growth in first quarter: The U.S. economy is likely growing at a pace below 2 percent in the first quarter due to modest growth in consumer spending, the Atlanta Federal Reserve's GDP Now forecast model showed on Tuesday. The U.S. gross domestic product is on track to grow 1.9 percent in the first quarter, slower than the 2.1 percent rate that was the regional Fed's prior estimate on Friday, the Atlanta Fed said on its website. It said it downgraded its GDP outlook after data on factory activity in February from the Institute for Supply Management suggested a 3.1 percent growth in consumer spending, lower than its earlier estimate of 3.5 percent.The lower spending figure was mitigated by a forecast rise in real estate and government outlays in the first quarter to 2.4 percent from an earlier 1.0 percent increase. Earlier Tuesday, ISM said its index of national factory activity increased 1.3 points to 49.5 last month, the fifth straight month of contraction. The Commerce Department said construction spending increased 1.5 percent to $1.14 trillion, the highest level since October 2007.

February Employment and Revised Q4 GDP Show a Healthy U.S. Economy - (12 graphs) The U.S. economy continues to grow and add jobs in spite of  weakness elsewhere in the world.  We are now well beyond talking about this as a recovery – it is a mature expansion albeit with growth rates slightly lower than we would like and lower than previous recoveries as our graphs show. The good news is that we have full employment and we continue to grow and be a driving force in the world economy in spite of weakness almost every where we look. The slowdown in China, the contractions in Japan, Brazil and other emerging markets, and the uneven growth in Europe have not been enough to interfere with our party. This does not mean there are no problems – labor force participation rates and wage growth are low and thus are not making inroads into the declining fortunes of the middle class.  These problems are long term and structural and to a large extent the result of the most recent wave of globalization.  Last Friday’s release of the 2nd estimate for real GDP in Q4 2015 increased growth from the advance estimate of 0.7% to 1.0% at a seasonally adjusted annual rate. The revision increase was mainly from inventories, according to the BEA. The report did little to change the perception of the underlying strength of the economy. According to ActionEconomics!, the big upward surprise to inventories was primarily due to the difficulty estimating quarter-end prices from such large declines in oil prices. Overall, for 2015, GDP increased 2.4%, the same as in 2014. Growth in Personal Consumption Expenditures (PCE) was a major contributor to strength, but its growth has slowed over the past few quarters, increasing at a 2.0% clip. The Bureau of Labor Statistics released the employment situation for February, revealing a 242,000 increase in payroll employment. In addition, employment was revised up for both December, +9,000 and January +21,000. The 254,000 increase in private service producing jobs was led by health care and social assistance, +57,400, retail trade, +54,900 and leisure and hospitality, +48,000. The goods producing sector, on the other hand, shed -15,000, led by the continued decline in the mining and logging sector (oil), -18,000 and manufacturing -16,000; however, the construction sector added +19,000. While the overall employment numbers are encouraging, average weekly hours fell slightly to 34.4, and there was a slight decline in average hourly earnings, $25.38. These are not significant given the extent of variation in these numbers. What is clear is that wage growth is beginning to look more like previous cycles and as the job markets tighten it may be that this trend will improve. Productivity, which had been showing signs of improvement, drifted down slightly but some of this may be seasonal.

The case for infrastructure spending -- now - Suppose your house needs a new roof, and the interest rate on the loan you require to get the work done is extraordinarily low -- but expected to rise in the future. In addition, construction work has been slow in the area, meaning labor and other costs are at bargain rates for the time being. Should you get the work done now or wait until later when it might cost quite a bit more? That's the situation the U.S. now faces over infrastructure spending. The nation has considerable needs for bolstering its infrastructure, interest rates remain ultralow but are expected to rise in the future, and the costs for labor and raw materials are below normal due to the slow recovery from the Great Recession but are likely to increase over time. Why wait to do the work?The case is even more compelling for two additional reasons. First, investment in infrastructure can improve productive capacity and increase America's economic growth rate, which has been slow in recent years due to falling productivity. But investment in infrastructure could help reverse this trend. Second, wages have been stagnant, and labor markets haven't yet fully recovered from the recession. Government spending on infrastructure will put people to work, and as labor markets begin to tighten it will put upward pressure on wages.

Closing the Investment Gap - Laura Tyson – The weakness of private investment in the United States and other advanced economies is a worrisome – and perplexing – feature of the recovery from the 2008 global financial crisis. Indeed, according to the International Monetary Fund, through 2014, private investment declined by an average of 25% compared to pre-crisis trends. The shortfall in investment has been deep and broad-based, affecting not only residential investment but also investment in equipment and structures. Business investment remains significantly below pre-2008 expectations, and has been hit hard again in the US during the last year by the collapse of energy-sector investment in response to the steep drop in oil prices.  Interestingly, the investment shortfall in the US coincides with a strong rebound in returns to capital. By one measure, returns to private capital are now at a higher point than any time in recent decades. But extensive empirical research confirms that at the macro level, business investment depends primarily on expected future demand and output growth, not on current returns or retained earnings. According to the IMF, this “accelerator” theory of investment explains most of the weakness of business investment in the developed economies since the 2008 crisis. In accordance with this explanation, investment growth in the US has been in line with its usual historical relationship with output growth. In short, private investment growth has been weak primarily because the pace of recovery has been anemic. Businesses have marked down their pre-crisis investment plans to reflect a post-crisis “new normal” of slower and more uncertain growth in demand for their output.

Don’t Fall for Obama’s $3 Billion Arms Buildup at Russia’s Door -- There is no Russian resurgence. Washington is playing on your Cold War fears to get you to pay for something the U.S. does not need and can’t afford.   In one of the key justifications for the new $600 billion defense spending request, the Department of Defense has fallen back on a tried-and-true Cold War boogeyman: the threat of Russian aggression against allies in Europe. While there is no ignoring the Russian annexation of Crimea in 2014 and the Russo-Georgian war in 2008, to interpret these events as some kind of Russian “resurgence” is to grossly inflate the danger Russia poses to NATO and the United States.President Barack Obama wants to quadruple the budget for the European Reassurance Initiative, or ERI, from $789 million to $3.4 billion. What’s the ERI? It’s a U.S. program started in 2014 in response to the Crimean annexation to bolster the ability of NATO to deal with destabilizing actions. In other words: Obama just asked Congress to fund the biggest military buildup by NATO in Eastern Europe since the Cold War. But what will this program accomplish? It’s meant to deter further Russian aggression, but fails to identify where that aggression might reasonably fall. A NATO buildup of this magnitude also neglects to take into account just how provocative such a move would be; by concentrating troops on Russia’s border, we are playing into Putin’s long-standing criticisms of NATO encirclement.

James Galbraith: The Friedman v. Romers Growth Debate on the Sanders Plan – A Summing Up -  James K. Galbraith - Here is a brief summary of the state-of-debate over the Sanders economic program and the growth projections made by Professor Gerald Friedman.  Major points

    • 1) The growth projections have no bearing on the desirability of Sanders’ program, which consists of major structural reforms in health care, education, and public investment, in public governance and in the distribution of the tax burden.
    • 2) The original mudslinging by four past Chairs of the Council of Economic Advisers was based on nothing, except that Friedman’s growth numbers looked high. No analysis preceded that claim.
  • Lesser points
    • 3) The Romers believe that the economy would recover along a baseline track, irrespective of whether there was stimulus or not.
    • 4) Jerry Friedman probably does not believe this, but is working in the Keynes tradition of underemployment equilibrium, according to which one-time changes in the scale of public activity generate permanently higher levels of output and employment. This is consistent with the view that the New Deal and WWII ended the Depression, which did not return after the war ended.
    • 5) There could be a “math error” in the Friedman paper; if so it should be acknowledged and corrected. But the Romers’ main complaint is a point of theory, which holds, in their words, that “temporary spending could cause a temporary boom, but its effect on the level of GDP a few years after its end will be, to a first approximation, zero.” This is a point of theory, and it is not holy writ.
    • 9) Returning to point (1): these matters have no bearing on the desirability of Sanders’ program.

Response to the Romers - Gerald Friedman  (pdf)

The Earned Income Tax Credit Is Worth Far Less in San Francisco. Should We Fix That? -- The U.S. economy could get more bang for its buck out of a popular tax credit designed to fight poverty by adjusting benefits for national cost-of-living differences, according to a new paper.  There’s already bipartisan support for expanding the earned income tax credit, or EITC, which acts as a wage subsidy for the lowest-income workers. Both President Barack Obama and House Speaker Paul Ryan have endorsed proposals to expand the EITC, primarily by boosting the credit for childless workers. But national income limits for the tax benefit make it far more valuable to the working poor in low-cost parts of the country, and far less effective at boosting workforce participation in more expensive regions, according to a report from Andrew Hanson and Zackary Hawley, economists at the right-leaning R Street Institute. Nationally, around one in five taxpayers benefit from the EITC, with an average tax reduction of $2,371. More than half of taxpayers in Rio Grande City, Texas, claim the benefit, compared with just 5.5% of those in Los Alamos, N.M.  Local labor-market conditions play an important role here. Places with higher-paying jobs (read: Los Alamos) will have better economic opportunities and fewer working poor, of course. Family size also plays its part—the credit is far less generous for childless workers. The local cost of living, however, also dramatically influences the value of the credit and the share of taxpayers that benefit. After adjusting for local living-cost differences, the maximum value of the EITC ranges from nearly $4,000 for a single taxpayer with one child in Memphis, Tenn., to nearly $2,100 in San Francisco and $1,500 in Manhattan.

Identity Thieves Bypass IRS Protections for Previous Victims - The Tax Foundation noted last year that identity thieves filed hundreds of thousands of fraudulent tax returns with the help of an insecure IRS website that allowed them to get victims’ tax filings from previous years. The IRS website that enabled identity thieves has been taken offline, but the IRS is still enabling identity thieves to get all of the information they need to file fraudulent returns for previous victims. Last year, the IRS’s Get Transcript website allowed anyone with specific personal knowledge to access their previous filings. However, this knowledge-based authentication (KBA) using data from credit reports is relatively easy to fool. Searching Google for the intended victim can return most of the information required by KBA questions. The IRS, in acknowledging their role in facilitating this identity theft, closed down the Get Transcript website. Unfortunately, they have not abandoned the flawed approach of using KBA for protecting taxpayer data.  The IRS provides an Identity Protection PIN (IP PIN) to victims of identity theft with the goal of preventing it going forward. This IP PIN is mailed to individuals at the start of tax season, and is required to file a return. But the IRS also allows taxpayers to retrieve their IP PIN online by answering the same kinds of knowledge-based authentication questions that let thieves take advantage of the older Get Transcript website.

A Feisty Debate on Corporate Tax: Tax Justice Network vs. Tim Worstall - Naked Capitalism - Yves here. NC regulars will cringe at the “taxes fund spending” remarks in this video, sine in economies like the US and UK that issue their own currencies, spending precedes taxation and the real role of taxation is to create incentives and disincentives, as well as to control inflation. But our legal conventions are based on the gold standard era, not on monetary operations for a fiat currency issuer.  I’m surprised that Alex Cobham of Tax Justice Network did not mention that multinationals have persuaded policymakers to give “tax holidays” as they did in the US in 2004, allowing them to repatriate profits that had been booked offshore. Mind you, this had nothing to do with the location of cash (which is typically sitting in banks in New York) or the ability to spend. Yet the tech giants and pharmaceutical companies pressing for the 2004 tax holiday argued they needed the waiver so they could invest. When they got the break, they used the profits to pay dividends and higher executive bonuses.

Financial transaction taxes in theory and practice - Brookings Institution - The Great Recession, which was triggered by financial market failures, has prompted renewed calls for a financial transaction tax (FTT) to discourage excessive risk taking and recoup the costs of the crisis. . The idea is not new, however. Keynes proposed a FTT in 1936 as a way to discourage the kind of speculation that fueled the stock market bubble that led to the Great Depression.  Taxes on financial transactions have a long history. [...] The FTT is experiencing a resurgence in the developed world. Ten European Union (EU) countries have agreed to enact a coordinated FTT that is scheduled to go into effect in January 2017 (assuming participant countries can work out some significant differences). France adopted a FTT in 2012 that will be integrated with the EU tax if and when it takes effect. In the United States, several recent Congressional proposals for FTTs have been introduced, including those put forth by Rep. Peter DeFazio (D-OR) and Sen. Tom Harkin (D-IA), and by Rep. Keith Ellison (D-MN) and Sen. (and Democratic primary presidential candidate) Bernie Sanders (I-VT). Proponents advocate the FTT on several grounds. The tax could raise substantial revenue at low rates because the base — the value of financial transactions — is enormous. A FTT would curb speculative short-term and high-frequency trading, which in turn would reduce the diversion of valuable human capital into pure rent-seeking activities of little or no social value. They argue that a FTT would reduce asset price volatility and bubbles, which hurt the economy by creating unnecessary risk and distorting investment decisions. It would encourage patient capital and longer-term investment. The tax could help recoup the costs of the financial-sector bailout as well as the costs the financial crisis imposed on the rest of the country. The FTT — called the “Robin Hood Tax” by some advocates — would primarily fall on the rich, and the revenues could be used to benefit the poor, finance future financial bailouts, cut other taxes, or reduce public debt.

Clarence Thomas Breaks 10 Years of Silence at Supreme Court  — Breaking a decade-long silence, Justice Clarence Thomas on Monday suddenly started asking questions from the Supreme Court bench.  After saying nothing for years during oral arguments that have helped shape the fabric of American law, Justice Thomas seemed eager to re-engage as he subjected a government lawyer to a number of pointed inquiries. But Justice Thomas said nothing to clear up why he had chosen to end his silence now, exactly 10 years and one week after his last question. His record will stand for a long time — it has no modern competition. It has been at least 45 years since any other member of the court went even a single term without asking a question. Justice Thomas’s explanations for his disengagement have varied, but he has said lately that the other justices simply asked so many questions that they were rude to the lawyers before them. The member of the court who asked the most questions was Justice Antonin Scalia, whose empty seat next to Justice Thomas’s remained draped in black. It was hard to escape the conclusion that the absence of the voluble Justice Scalia, who had dominated Supreme Court arguments for nearly 30 years before his death on Feb. 13, somehow liberated Justice Thomas and allowed him to resume participating in the court’s most public activity.

Should we ban the $100 bill? --Ashok Rao has an excellent post on this question, and it is not obvious that a ban is in order.  Here are a few parts of his multi-faceted argument:

  • There is an information tradeoff. Imagine if criminals transacted only in $10,000 notes. It would be reasonably easy for intelligence agencies to sneak a traceable note to probe criminal networks. This would be close to impossible with a $20 note (not the least because this is a high velocity note used by normal people).
  • Citing the high use of $100 among criminals doesn’t mean much. Of course criminals use the lightest / most compact / highest denomination currency at their disposal. Therefore suggestions along the lines of “n% of criminal activity is transacted in $100 bills” mean little because if we got rid of the $100 and managed to avoid the problems noted in point (1) it would be the case that “n% of criminal activity is transacted in $20 bills”.

I found this information on premia interesting, note the premia serve as an implicit tax for trading in $100 bills, though I wonder who exactly reaps that surplus?: Finally, Ashok tell us this: Would we not be hurting innocent people in oppressive regimes? Aren’t there autocracies in Africa and Eastern Europe that use HDN [high denomination] dollars as a means of trade in otherwise embargoed necessities?

Next Up in the Stimulus Parlor Game: Helicopter Money - Wall Street’s favorite parlor game of late has been speculating about what kind of aggressive policies central bankers can come up with next. The most recent one making the rounds is among the most radical: helicopter money. It’s the concept of printing money and pretty much dropping it from the sky by giving it directly to consumers to buy stuff or to the government to spend on things like infrastructure. It follows a fervent discussion over negative interest rates–that is, the idea of taking certain lending rates below zero, previously thought to be the lower bound. It even elicited some discussion from Federal Reserve Chairwoman Janet Yellen this month. And recent arguments about getting rid of large currency denominations like the $100 bill have been inflected with ideas about economic stimulus. The irony about the timing of these conversations is that, in the U.S., we’re not even close to having to prop up the economy with more extraordinary measures. The unemployment rate is at 4.9%. Last quarter’s gross domestic product growth, seen as a soft patch, was revised higher Friday. . The Federal Reserve Bank of Atlanta puts first quarter growth estimates at 2.1%. And the Fed raised interest rates for the first time in nearly a decade in December. It might even do so again.

CFTC Commissioner Giancarlo Admits to Hijacking Advisory Committee to Boost Commodity Speculators -- David Dayen - Last week, an advisory committee to the Commodity Futures Trading Commission produced a highly dubious report recommending that the agency abandon the Dodd-Frank mandate of setting position limits in futures markets to eliminate excessive speculation. The report was just an enhanced form of lobbying; eight of the nine members of the Energy and Environmental Markets Advisory Committee (EEMAC) have ties to industries that would personally benefit from killing the rule. The big question was how an official advisory committee of a federal agency could turn into a purely distilled conduit for corporate talking points? And the answer is Christopher Giancarlo, the lone Republican commissioner on CFTC at the moment, who took advantage of the committee, twisted it to his own ends, and produced a work product destined to be used in future litigation to overturn the position limits rule.This all came out in a meeting of the EEMAC last Thursday, the same day the report was released. Only a few outlets reported on the meeting, and there’s no archived video of it yet on the CFTC website; it should pop up at some point. But Tyson Slocum of Public Citizen, the only consumer/public interest voice on the committee and the lone dissenter on the report, gave me the blow-by-blow.

This One Photo Captures Why Americans Can’t Win Against Wall Street - Pam Martens - There are 15 U.S. Senators who are members of the U.S. Senate Banking Committee’s Subcommittee on Securities, Insurance, and Investment that has been investigating the charges that the stock market is rigged by the stock exchanges along with dark pools run by large broker-dealers that are operated as opaque, unregulated quasi stock exchanges, high frequency traders at hedge funds, conflicted payment for order flow, and tricked-up order types – to mention just a few of the ways the public investor is getting fleeced. The Subcommittee held a critically important hearing yesterday to review what progress the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), the self-regulatory Wall Street watchdog, were making to rein in the abuses on Wall Street. Despite the lack of trust the public feels toward Wall Street and the abysmal 14 percent approval rating of Congress (according to the most recent Gallup poll), 73 percent of the Senators on this hearing panel couldn’t be bothered to show up for the hearing. Outside of the Republican Chair of the hearing, Senator Mike Crapo, not one other Republican out of a total of eight on the Subcommittee attended. Out of the seven Democratic Senators on the panel, three showed up: Senator Mark Warner, the Ranking Member, Senator Elizabeth Warren, and Senator Joe Donnelly. Senator Chuck Schumer, Democrat from New York, whom one might think would have an interest in restoring trust in Wall Street, was noticeably absent. Schumer derives substantial campaign financing sums from Wall Street and what Wall Street wants is business as usual.

As A Frenzied Wall Street Buys Shale Equity Offering At A Record Pace, Exxon's CEO Has A Stark Warning - If Saudi Arabia is shocked at the relentless ability of the U.S. shale "marginal producers" to continue pumping even with oil prices below breakeven costs for many (which as reported recently have mysteriously tumbled from $70 to $40) at a time when the junk bond market - the traditional conduit of how energy companies have financed themselves - it should thank Wall Street, for one simple reason: investors have pumped a whopping $9.2 billion in new equity into energy companies year to date, the most since Bloomberg records began in 1999. Some examples:

  • Hess Corp. and Devon Energy Corp., have each offered more than $1 billion in new equity, while smaller companies like QEP Resources Inc. and Synergy Resources Corp. have also managed to successfully raise funds.
  • Diamondback and Marathon both said their equity issuances would help provide liquidity to fund their capital programs. John Hess, chief executive officer of Hess, said he wanted extra cash to maintain a strong balance sheet, and equity offerings are more receptive than debt with the Bank of America/Merrill Lynch High Yield Energy Index rising to a record effective yield of 21 percent on Feb. 11.
  • Pioneer Natural Resources Co.’s $1.6 billion offer on Jan. 5 was followed a week later by Diamondback Energy Inc.’s announcement of a $250 million sale. Pioneer Chief Executive Officer Scott Sheffield said he raised equity fearing lower oil prices. "
  • Weatherford, the world’s fourth-largest oilfield services provider, was the latest to throw its hat in the ring, offering 100 million shares at $5.65 a share, giving the underwriters a 30-day option for up to 15 million more.

The euphoria won't last, and the equity issuance window is already closing: confirmation of this comes from none other than Exxon CEO Rex Tillerson who moments ago said that the "wave of oil equity issuances is destroying value", adding that "global economic conditions are not inspiring", that "demand won't solve it quickly" and that "we're still oversupplying the market." Translated: everyone who bought the record amount of stock sold by shale will soon be starting at a partial or total loss.

U.S. Distressed-Debt Ratio Rises for Ninth Straight Month: Chart - S&P’s distress ratio rose to 33.9 percent in February from 29.6 percent in January, its ninth consecutive monthly gain, the credit-rating company said in a report Friday. That’s the highest level for this measure of high-yield debt since July 2009. The ratio is based on debt trading at an option-adjusted spread of 1,000 basis points relative to U.S. Treasuries. "Drops in oil prices affected the profitability of oil and gas companies, where spreads have widened considerably, and had a spillover effect on the speculative-grade spectrum as a whole," S&P said in its report.

Corporate Default Rate Jumps Past Lehman Moment - Wolf Richter  - The US corporate default rate, according to Standard & Poor’s Global Fixed Income Research, soared from 2.8% in January to 3.3% in February, a big jump for just one month, and the highest rate since December 2010, when it was recovering from the Financial Crisis, with QE and ZIRP running at full bore, and with banks and big corporations getting bailed out by the Fed and the Treasury. And it’s higher than it had been during the early phase of the Financial Crisis in September 2008, when Lehman Brothers filed for bankruptcy, when all heck was breaking lose, when stocks and bonds were plunging, and when the default rate was “only” 2.96%. But this time it’s different, they reassure us. In December 2007, the default rate was 1.02%. At the time, banks were already cracking at the seams. Bear Stearns would soon pop. The Financial Crisis was visible on the horizon. And the economy entered what would later be called the Great Recession. By November 2009, nearly two years later, the default rate peaked at 12%. These aren’t overnight fireworks. Credits take their time to react. But then newly created money surged through the system. What followed was the greatest credit bubble in US history. By July 2014, the default rate had dropped to 1.4%. That was the peak of the Fed’s fanciful handiwork that had “saved” the economy, an era when even the riskiest borrowers could get new money to fill their financial sinkholes, when bankruptcies had become rare, when the business cycle had been abolished, and before the price of oil fell off the cliff. Then it all came unglued again. And in February, S&P’s US trailing-12-month speculative-grade corporate default rate finally accomplished the feat and jumped above the rate of the Lehman-moment:

Shortage Of 10-Year Treasuries Hits Record Levels: Repo Rate Plunges To Historic Lows - Yesterday, when looking at the suddenly tumble in the repo rate of the 10 Year, which we noticed that it had drifted sharply into "super duper" special territory, and which according to SMRA was bid at -1.75% while CA saw it as low as -2.75%, we asked: is a major Treasury squeeze on deck." We don't know the answer just yet: so far, we have yet to see a sharp move higher in the price of either the cash or synthetic 10Ys, however what we do know is that as of this morning, whether it is due to shorting or not (and as Credit Agricole's David Keeble did note yesterday the "specialness may be related to an accumulation of shorts and playing against swap spreads"), there has never been a greater shortage of 10Y paper at least as demonstrated by what just happened in the repo market where the 10Y, according to ICAP unit GovPX, hit a whopping -2.90%, or just shy of the fail rate! The following chart from Stone McCarthy, which has the 10Y at "only" -2.6%, shows the shortage of 10-Y collateral as the highest since June 12, 2014. If one uses the -2.9% lowest bid, however, it means that there has never been as acute a shortage of 10-Year paper as there is right now. According to SMRA this is a temporary phenomenon: "pressure will likely ease up following its auction announcement this morning." However, on several previous occasions, that was not the case, and what ended up happening every single time was a sharp squeeze sending 10-Y prices surging. In any event, we will find out tomorrow when we get the updated repo rate; if it persists at "near fail" levels, it will confirm that there is indeed something strange going on with the short side of the 10Y and explain the substantial selling pressure in past few days, as well as the jump in yields which has been dubbed as one of the main reasons unleashing the ongoing risk-on rally across all asset classes.

Hedge funds have been getting crushed, and it is hurting everyone else in the market -- Hedge funds are having a tough time, making life much harder for everyone else in the market. The industry's poor performance lately has investors pulling money out of the funds. That has led to a dropoff in bond-market liquidity, as funds that might have snapped up bonds as their prices fell instead steer clear, said Mark Heppenstall, chief investment officer of Penn Mutual Asset Management. "Hedge funds were a backstop for the markets and helped provide that liquidity," said Heppenstall, who oversees over $20 billion in assets managing the investment arm of Penn Mutual Insurance. "So when they started to underperform for a while and started to shift into risk off, it eliminated that." That shift has made life harder for everyone. "Liquidity is the main source of the extreme downward and upward moves in the market right now," he said in an interview with Business Insider. The original problem Liquidity, in the most basic sense, is the idea that sellers can find buyers easily and vice versa. So when liquidity dries up, the sellers have to drop their asking price to find someone willing to take on the asset. The consensus on Wall Street is that this liquidity is deteriorating. Executives  including JPMorgan's Jamie Dimon and Blackstone's Steve Schwarzman have brought up this concern.

Investors pile into US junk bond funds: Investors piled into US junk bond funds at the fastest pace on record as a relief rally in global equity and fixed income markets coaxed fresh money off the sidelines. US funds invested in high yield debt counted $5bn of inflows in the week to March 2, the greatest seven-day haul since record keeping began in 1992, according to fund flows tracked by Lipper. The moves highlight an easing of investor anxiety after a string of better than expected economic reports in the US, a stabilisation in crude prices and the view that central banks in Europe, Japan and China are prepared to provide further economic stimulus if needed."People are a little less concerned about China and there's less talk about recession in the US," said Sabur Moini, a high yield portfolio manager with Payden & Rygel. "Generally the tone is much better, valuations are certainly attractive and that is why you have money coming in." Flows tracked by EPFR also showed the largest weekly shift into high yield bond funds since the group began tracking the asset class in 2003. Investors instead sold off positions in Treasuries, with shorter dated notes notching the largest withdrawals since the fourth quarter of 2014.The record move into junk bond funds, which buy debt from companies rated double B plus or lower by one of the major rating agencies, has buoyed prices and sent yields lower. Yields fall when bond prices rise. Junk bond yields slid to 8.73 per cent on Thursday from a recent high of 10.1 per cent hit in mid-February, when a global market sell-off reduced new bond issuance to a trickle.  The gains have nonetheless been concentrated in the highest rated junk bonds, particularly those rated double or single B. The difference between the yield of the average issue in the Bank of America Merrill Lynch index of double B rated companies and benchmark Treasuries has declined more than 25 per cent in the past three weeks to 434 basis points.

Keeping Investors on a Need-to-Know Basis - Gretchen Morgenson -- Trust, but verify. That’s certainly a timeless investing rule. But for anyone interested in vetting regulatory filings made by investment advisers with the Securities and Exchange Commission, it can be easier said than done. Large investment advisers, under S.E.C. rules, must give their clients extensive information about their operations and update it regularly. These materials are, in turn, published online in the Investor Adviser Public Disclosure database for all to view.  Two types of documents appear on this website: Part 1 is a factual questionnaire completed by money managers that includes their regulatory records, assets under management and other facts.  Part 2 is a descriptive and lengthy brochure explaining crucial aspects of an investment adviser’s operations. Included in this document is a narrative outlining the risks, fee arrangements and potential conflicts that investing with the money manager involves.   This brochure, according to the S.E.C., is “designed to promote effective communication” between an investment adviser and its clients. Toward that end, the regulator requires investment advisers to highlight any material changes made to the same document issued previously.  A look through these filings shows that investment advisers regularly report that their filings contain no such changes. But checking on previous brochures filed by some advisers raises questions about these statements.

Argentina Reaches Deal With Hedge Funds Over Debt - Argentina has agreed to pay $4.65 billion to four hedge funds in a deal that could put an end to more than a decade of mudslinging and legal attacks that had cut the country off from global financial markets.The agreement, announced on Monday, opens the door for Argentina to attract foreign investment needed to revive its stalling economy.“This is the equivalent of a giant albatross being lifted from Argentina’s neck,” said Brett Diment, the head of emerging market debt at Aberdeen Asset Management. “The litigation and lack of access to international capital has had a sclerotic effect on the country for years but it was facing a real financial squeeze this year,” he said.The four hedge funds, which include the billionaire Paul E. Singer’s NML Capital, were the last major hedge fund investors among a group that declared legal war on Argentina in the United States courts 12 years ago.  These holdouts, so named for their refusal to participate in Argentina’s two restructurings after the country defaulted on $100 billion of debt in 2001, sought billions in bond repayments and eventually succeeded in preventing Argentina from paying any of its creditors. And they went to great lengths to compel Argentina to pay — at one point persuading authorities in Ghana to seize an Argentine navy ship as collateral, with a crew of about 300 on board. They also moved to impound other government assets, including a satellite. Their ultimate victory illustrates the outsize influence hedge funds can have in the countries where they bet their money. And their legal tactics are likely to be used again by other investors contesting the debt obligations of sovereign powers.

Washington warns top banks to stay away from Russian bonds - The US government has urged major banks not to bid on a potentially lucrative but "politically risky" Russian bond deals, claiming it could undermine international sanctions against Moscow, the Wall Street Journal reported.Unnamed sources told the media that the caution has been issued by the State Department and the Treasury following questions from some banks whether they were permitted to arrange a bond sale for Russia. Washington's warnings not to bid on a Russian Eurobond deals won’t strongly influence the possibility and cost of their placement, Russian presidential aide Andrei Belousov said on Thursday. The Russian Finance Ministry has sent a prospectus to 25 Western investment banks and three Russian lenders as it wants to raise $3 billion by issuing Eurobonds. It may become the country’s first debt placement on international markets since Western sanctions were rolled out on Russian entities in 2014. Russia’s dollar-denominated 2023 bond now has a yield of 4.53 percent, sliding from 4.9 percent in September 2013 when Moscow raised $7 billion, data from the Financial Times showed. According to the WSJ, some bank officials, including those at Citigroup, said they won’t participate. Goldman Sachs and J.P. Morgan Chase say they are still weighing their options.

Bill Black: The Clintons Have Not Changed – The Clintonian War on the IG Watchdogs - Secretary Hillary Clinton is asking Democratic voters to believe that she has experienced a “Road to Damascus” conversion from her roots as a leader of the “New Democrats” – the Wall Street wing of the Democratic Party.  When exactly this conversion occurred is never stated, but an interesting fact has emerged that demonstrates it did not occur during her service as the Secretary of State.  A Wall Street Journal story provides the key facts, but none of the analysis. Newly released emails indicate that former Secretary of State Hillary Clinton and her top staff were involved in the selection process for the State Department’s internal watchdog, a position that ultimately went unfilled throughout her four-year tenure. The WSJ’s angle is that such involvement in the selection of the Inspector General (IG) is a threat to the IG’s vital independence.  True, and also true as the story notes that Hillary was far from rare as an agency or department head in seeking to select behind the scenes the supposedly independent IGs. The function of the IG is to “speak truth to power.”  Naturally, “power” hates IGs with a purple passion.  Government leaders are most likely to hate having its abuses made public by IG when the government leader is secretly acting in concert with immensely powerful private leaders for their mutual benefit at the expense of the public. What the WSJ missed is that the Clinton’s, for decades, have sought to destroy the independence and effectiveness of the IGs precisely because of the threat that they pose of blowing the whistle on these abuses.  The Obama administration, of course, is famous for its prosecutions of those who blow the whistle on such abuses.  The real story is not that Hillary attempted to select a lap dog as IG – the real story is that for her entire tenure as Secretary, four years, she left unfilled the leadership position of the only institution in the State Department dedicated to maintaining integrity and preventing the abuse of public power to aid cronies.  That aid, of course, comes with the clear expectation that the cronies will make the head of the State Department wealthy as soon as she or he steps down.  There is no possible defense for that, and it does not happen accidentally.  The primary blame goes to President Obama, who made no nomination for the position for the entire four years.  It wasn’t Republican intransigence that explains this scandal.

DNC Chair Joins GOP Attack On Elizabeth Warren’s Agency-- Payday lenders have been gunning for the Consumer Financial Protection Bureau since the day President Barack Obama tapped Elizabeth Warren to set up the new agency. They've had plenty of help from congressional Republicans -- longtime recipients of campaign contributions from the payday loan industry. As the CFPB has moved closer to adopting new rules to shield families from predatory lending, the GOP has assailed the agency from every conceivable angle -- going after its budget, attempting to tie its hands with new layers of red tape, fomenting conspiracy theories about rogue regulators illegally shutting down businesses and launching direct attacks on payday loan rules themselves.  To date, the GOP blitz has resulted in a few close shaves for the young agency, but no actual defeats. But the industry has cultivated a powerful new ally in recent weeks: Democratic National Committee Chair Rep. Debbie Wasserman Schultz (D-Fla.). Wasserman Schultz is co-sponsoring a new bill that would gut the CFPB's forthcoming payday loan regulations. She's also attempting to gin up Democratic support for the legislation on Capitol Hill, according to a memo obtained by The Huffington Post.

That OTHER Consumer Agency: Why the FTC remains important – Katie Porter - Since the launch of the CFPB, we haven't blogged as frequently at Credit Slips about the Federal Trade Commission (FTC). It remains hard at work, and in fact, I think has used some of the shift of some of its responsibilities to the CFPB to focus on a number of cutting edge issues. For example, their conferences and reports on big data analytics are top notch.  Chris Hoofnagle, UC Berkeley, has written an excellent book about the FTC and its approach to privacy. In part, it is an institutional history, using the FTC Act's passage and the advertising cases of the 1960s and 1970s to understand how and why the FTC is approaching privacy concerns today. The digital economy, the socialization and personalization of consumer finance, and alternative scoring algorithms all present new questions for privacy law. His thoughts on how the FTC developed in reaction to troubling applications of the common law are particularly useful in thinking about how courts might interpret new issues created by CFPB regulations. Business practitioners, consumer advocates, and academics will all benefit from Hoofnagle's analysis. FTC Privacy Law and Policy also contains a look at the FTC's role in policing credit reporting agencies and the credit reporting regulations. Hoofnagle is even-handed, pointing to both successes and weaknesses on that front.  This is definitely worth a read, and I'm happy that it's available in paperback at an affordable price. I think the book also would make a great foundational text in a seminar on consumer law.

The End of Big Banks - Simon Johnson - After nearly a decade of crisis, bailout, and reform in the United States and the European Union, the financial system – both in those countries and globally – is remarkably similar to the one we had in 2006. Many financial reforms have been attempted since 2010, but the overall effects have been limited. Some big banks have struggled, but others have risen to take their place. Both before the 2008 global financial crisis and today, just over a dozen big banks dominate the world’s financial landscape. And yet the ground is shifting beneath the financial sector, and big banks could soon become a thing of the past. Few officials privately express satisfaction with the progress of financial reform. In public, most of them are more polite, but the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, struck a chord recently when he called for a reevaluation of how much progress has been made on addressing the problem of financial institutions that are “too big to fail” (TBTF). Kashkari worked for Henry M. Paulson in the US Treasury Department, beginning in 2006. He not only watched the financial crisis develop; in October 2008 he became the assistant secretary responsible for the Troubled Asset Relief Program (TARP), with the goal of stabilizing the financial system. He is a Republican who has worked at both Goldman Sachs (a big bank) and PIMCO (a large asset-management company). So people pay attention when he says, “I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy.” And Kashkari is correct in his assessment of the Dodd-Frank financial reforms of 2010. Kashkari is now proposing exactly the right approach: to hold public conferences and extensive discussions to evaluate whether large banks should be broken up, whether they (and other financial institutions) should be forced to fund themselves with more equity and less debt, or whether there should be a debt tax to discourage excessive leverage. The first conference will be on April 4 (I will be one of the speakers).

Stress tests: The small print matters - Bank Underground -- Stress testing is ubiquitous in today’s banking supervision regime. The stress test results are eagerly anticipated and received by the public and can have serious consequences for banks presenting ‘bad’ numbers. The public discussion of the stress scenarios seems to be focussed on their economic meaning (here is an example). The statistical smallprint relating to stress tests receives much less public attention. I pick up two modeling choices for closer inspection:

  • Stress scenarios are meant to be point scenarios.
  • Stress test results tend to be presented as single values.

I demonstrate that depending on the understanding of the scenario and the representation of the results, there is a wide range of plausible outcomes of a stress test. The following analysis is focussed on the most common approach to stress testing in banks. This approach is based on the use of historically observed time series to estimate forecast models for loss-related quantities like default rates or values of specific asset classes. To achieve this, regressions are run on the economic variables that specify the stress scenario. It is at this step that a choice on the statistical meaning of the stress scenario must be made.

Would Monetary Tightening Increase Bank Wholesale Funding? - NY Fed - The recent financial crisis clearly revealed that the reliance of banks on short-term wholesale funding critically increased their funding liquidity risks; during market disruptions, it becomes more likely that banks will be unable to roll over those funds and will hence be forced to fire-sell illiquid assets and possibly contract lending. To limit such risk, the Basel Committee on Banking Supervision (BCBS) has introduced new liquidity regulations such as the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) to prevent excessive reliance on runnable funding in the banking sector. But what forces contributed to the banking sector’s reliance upon wholesale funding and how will the new liquidity regulations interact with monetary policy? Drawing on our recent Staff Report, we argue that monetary tightening by central banks, perhaps intended to contain credit booms, can lead banks to increase their reliance upon wholesale funding and contribute to systemic imbalances. Importantly, we explain how the new liquidity regulations adopted since the crisis would help mitigate any such increase in systemic risk.

February 2016: Unofficial Problem Bank list declines to 228 Institutions  This is an unofficial list of Problem Banks compiled only from public sources.  Here is the unofficial problem bank list for February 2016.  Update on the Unofficial Problem Bank List for February 2016. During the month, the list fell from 238 institutions to 228 after 11 removals and two additions. Assets dropped by $3.5 billion to an aggregate $66.0 billion. The asset total was updated to reflect fourth quarter figures, which resulted in a small increase of $728 million. A year ago, the list held 357 institutions with assets of $109.2 billion. This past week, the FDIC released fourth quarter industry results and an update on the Official Problem Bank List. FDIC said the official list held 183 problem banks, a decline of 20 during the quarter. Over the same horizon, the unofficial list declined by 27 banks. Actions have been terminated against Centrue Bank, Streator, IL ($942 million Ticker: TRUE); Four Oaks Bank & Trust Company, Four Oaks, NC ($690 million); OneUnited Bank, Boston, MA ($649 million); New Peoples Bank, Inc., Honaker, VA ($634 million; Highlands Union Bank, Abingdon, VA ($618 million Ticker: HBKA); Arthur State Bank, Union, SC ($459 million); The First National Bank of Russell Springs, Russell Springs, KY ($206 million); The First National Bank of Absecon, Absecon, NJ ($147 million Ticker: ASCN); Asian Bank, Philadelphia, PA ($130 million); F&M Bank and Trust Company, Hannibal, MO ($114 million); and Ruby Valley National Bank, Twin Bridges, MT ($91 million). Gateway Bank, FSB, Oakland, CA ($142 million) found a merger partner in order to get off the list. Additions this month were Dieterich Bank, N.A., Dieterich, IL ($574 million) and Louisa Community Bank, Louisa, KY ($32 million).

The Craziest Video You’ll Ever Watch on JPMorgan’s Jamie Dimon - Two interesting things happened this week in Jamie Dimon’s world: two gutsy attorneys, Helen Davis Chaitman and Lance Gotthoffer, published a book comparing JPMorgan Chase to the Gambino crime family, explaining how the bank could and should be prosecuted under RICO statutes for serial frauds against the investing public. Taking a diametrically different tack, Bloomberg Markets magazine editor, Joel Weber, fawned over Dimon in a Bloomberg TV interview, repeatedly asserting that Jamie Dimon is all about the customer. This Bloomberg video is so hilarious we had to watch it several times to make sure it wasn’t satire.  As Weber makes his case that Dimon is all about the customer, his Bloomberg colleague, Stephanie Ruhle, is having none of it, reminding the obviously star-struck Weber that the big banks are hated in this country for good reason. Instead of acknowledging the serial frauds at JPMorgan, Weber suggests (and this is the belly laugh/roll on the floor part) that banks are hated because when you go to a car dealer to buy a car you walk out with one. But if you go into a bank for a loan or credit card, it might turn you down. This brand of logic is on a par with Hillary Clinton suggesting that Wall Street was lavishing millions of dollars on her in speaking fees because she was kind to Wall Street during 9/11.

How the U.S. Government and HSBC Have Teamed Up to Hide the Truth From a Pennsylvania Couple - Democrats rail against big corporations, while Republicans rail against big government. This charade has been used to successfully divide and conquer the public for decades while big government and big business successfully schemed to divert all wealth and power to an ever smaller minuscule segment of the population — themselves. It took awhile, but the people are finally starting to get it and they are royally pissed off. One of the primary mechanisms for this historic elite theft has been the creation of a two-tiered justice system in which the rich, powerful and connected are never prosecuted for their criminality. Instead, the government actively protects them by pretending corporate entities commit crimes as opposed to individuals. Of course, this is impossible, but yet it’s how the government handles white collar crime. The Orwellian named “Justice Department” casually utilizes deferred prosecution agreements (DPAs), in which companies pay a little fine and the criminals themselves walk away with not just their freedom, but ill gotten monetary gains as well. Nowhere is this most apparent than when it comes to the big banks. The individuals who work at these criminal cartels can literally do anything they want with total impunity. One of the most egregious examples of this was the $1.9 billion settlement arranged with HSBC for laundering Mexican drug cartel money and dealing with sanctioned countries. If you or I did this we’d be sitting in a concrete box eating porridge through a straw for the rest of our lives, but when “masters of the universe” at big banks do it, the parent company just pays a slap on the wrist fine and life goes on. That’s how oligarch justice works. The Wall Street Journal reports:.—When Dean Moore ran into roadblocks with a request for mortgage relief, he did what many people do: He sat down at his kitchen table to bang out an angry letter. The letter has thrust Mr. Moore, a chemist, and his wife, Ann Marie Fletcher-Moore, a part-time bookstore manager, into a high-stakes battle over whether HSBC Holdings PLC must release a secret report on its compliance with a $1.9 billion money-laundering settlement.

One Way to Make Mortgages Easier to Get - WSJ: To broaden mortgage access, the U.S. government wants to revive the market that brought the economy to its knees. But years of effort haven’t succeeded in rekindling it. For the eighth straight year, the market for mortgage-backed securities issued by private financial institutions, as opposed to government-backed companies or agencies, was moribund in 2015. The volume of such bonds backed by loans to borrowers with shakier credit histories—known as subprime or Alt-A—fell 36% from the previous year to $1.67 billion, according to Inside Mortgage Finance, a trade publication. By comparison, lenders issued $269.1 billion of such bonds in 2003, before the housing boom. Few lenders or investors expect a return to the boom days, when investors fueled speculative home purchases by borrowers with little chance of paying. But government officials do want private investors to take on a bigger role, and in 2014 the Treasury Department launched an effort with lenders, investors and other mortgage-market participants to diagnose and fix issues restraining the market. On Monday, those involved plan to unveil an outline of principles agreed on by many of the major players to lay the groundwork for a new market. Whether they succeed could have broad implications for the economy and borrowers. Without a private-bond market, mortgages will remain harder to get for borrowers who don’t meet government requirements because of weak credit histories or hard-to-document income. Its absence also could hurt more stable borrowers if future policy makers decide to pull the government back from lending and there is no private market to take its place.

The fuzzy math of mortgage bankers -- In a recent HousingWire article published on February 22, 2016,entitled “The Math Behind the Need for GSE Reform," Mortgage Bankers Association CEO David Stevens articulates several points relating to the conservatorships of Fannie Mae and Freddie Mac (collectively the “GSEs”) which merit close scrutiny against the facts.  As background, the Third Amendment  to the GSE Preferred Stock Purchase Agreements (“PSPA”) required the sweep of 100% of any declared dividends to Treasury. Since the return to profitability by the GSEs, 100% of their income has been paid, as dividends, to the Treasury. In Mr. Stevens’ article claims:  “If the [net worth sweep] had not been in place … Freddie [would have] had to pay the 10% dividend (as required in the prior PSPAs)”. This claim suggests that Mr. Stevens is either ignorant about the reality of the terms of the agreement or, worse, intentionally misleading. The 10% dividend is not legally required at all – and especially not in perpetuity. The contract is nothing more than an agreement between two government agencies and could be amended at any time without congressional approval.  As was the case with AIG, where a 10 percent cumulative dividend was reduced to a 5 percent non-cumulative dividend, and eventually to no dividend.  Furthermore, there is no contractual or statutory requirement for the GSEs to pay the Treasury a cash dividend – let alone that they have to permit all of their profits to be swept into the Treasury each quarter in perpetuity. To suggest otherwise is fallacious and must be recognized as what it is, the propaganda of the handful of "too big to fail" members of the MBA who would benefit from a wind-down of the GSEs.

Fannie Mae: Mortgage Serious Delinquency rate unchanged in January --Fannie Mae reported today that the Single-Family Serious Delinquency rate was unchanged in January at 1.55%. The serious delinquency rate is down from 1.86% in January 2015. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.  Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure". Note: Freddie Mac reported last week that their Single-Family serious delinquency rate declined in January to 1.33%, up from 1.32% in December.The Fannie Mae serious delinquency rate has only fallen 0.31 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017. The "normal" serious delinquency rate is under 1%, so maybe Fannie Mae serious delinquencies will be close to normal some time in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

MBA: Mortgage Applications Decreased in Latest Weekly Survey, Purchase Applications up 27% YoY -- From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 4.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 26, 2016. The previous week’s results included an adjustment for the President’s Day holiday.  The Refinance Index decreased 7 percent from the previous week, reaching its lowest levels since January 2016. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index increased 14 percent compared with the previous week and was 27 percent higher than the same week one year ago.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.83 percent from 3.85 percent, with points decreasing to 0.39 from 0.42 (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 27% higher than a year ago.

Black Knight: House Price Index up 0.1% in December, Up 5.5% year-over-year -- Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted. From Black Knight: Black Knight Home Price Index Report: December Transactions U.S. Home Prices Up 0.1 Percent for the Month; Up 5.5 Percent Year-Over-Year:

• U.S. home prices were up 0.1 percent for the month, and have gained 5.5 percent from one year ago
• At $253K, the national level HPI remains 5.3 percent off its June 2006 peak of $268K, and up 27 percent from the market’s bottom in January 2012
• Among the 20 largest states tracked by Black Knight, New York and Texas both hit new peaks in December
• Of the nation’s 40 largest metros, 8 hit new peaks – Austin, TX; Dallas, TX; Denver, CO; Houston, TX; Nashville, TN; Portland OR, San Antonio, TX and San Francisco, CA
The year-over-year increase in the index has been about the same for the last year.

CoreLogic: House Prices up 6.9% Year-over-year in January  -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).From CoreLogic: CoreLogic US Home Price Report Shows Home Prices Up 6.9 Percent Year Over Year in January 2016 Home prices nationwide, including distressed sales, increased year over year by 6.9 percent in January 2016 compared with January 2015 and increased month over month by 1.3 percent in January 2016 compared with December 2015, according to the CoreLogic HPI.... “While the national market continues to steadily improve, the contours of the home price recovery are shifting,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The northwest and Rocky Mountain states have experienced greater appreciation and account for four of the top five states for home price growth.”  This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 1.3% in January (NSA), and is up 6.9% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase. The second graph shows the YoY change in nominal terms (not adjusted for inflation). The YoY increase had been moving sideways over the last year, but has picked up a recently. The year-over-year comparison has been positive for forty seven consecutive months.

Zillow Forecast: Expect "Modestly Slower Growth" in January for the Case-Shiller Indexes than in December --The Case-Shiller house price indexes for December were released last week. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: January Case-Shiller Forecast: Modestly Slower Growth Expected The December Case-Shiller indices grew at a pace in line with prior months, with all three headline indices showing annual appreciation above 5 percent per year. Zillow expects all three January Case-Shiller indices to show slower growth, with the 10-City Composite Index expected to register sub-5 percent annual growth for the first time in months. The January Case-Shiller National Index is expected to gain another 0.6 percent in January from December, down from 0.8 percent growth in December from November. We expect the 10-City Index to grow 4.9 percent year-over-year, and the 20-City Index to grow 5.6 percent over the same period. The National Index looks set to begin 2016 up 5.6 percent year-over-year, the only instance in which monthly or annual growth next month is expected to surpass this month’s pace. All SPCS forecasts are shown in the table below. These forecasts are based on [the] December Case-Shiller data release and the January 2016 Zillow Home Value Index (ZHVI), also released [last week]. The January Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, March 29. Although the 10-city and 20-city indexes will probably show modestly slower growth, this suggests the year-over-year change for the Case-Shiller National index will be slightly higher in January than in the December report.

NAR: Pending Home Sales Index decreased 2.5% in January, up 1.4% year-over-year --From the NAR: Pending Home Sales Cool Down in January The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 2.5 percent to 106.0 in January from an upwardly revised 108.7 in December but is still 1.4 percent above January 2015 (104.5). Although the index has increased year-over-year for 17 consecutive months, last month’s annual gain was the second smallest (September 2014 at 1.2 percent) during the timeframe...The PHSI in the Northeast declined 3.2 percent to 94.5 in January, but is still 10.9 percent above a year ago. In the Midwest the index fell 4.9 percent to 101.1 in January, but is still 1.4 percent above January 2015.Pending home sales in the South inched up 0.3 percent to an index of 121.1 in January but remain 1.3 percent lower than last January. The index in the West decreased 4.5 percent in January to 96.5, but is still 0.4 percent above a year ago. This was below expectations of a 0.5% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in February and March.

U.S. pending home sales hit one-year low; manufacturing weak | Reuters: Contracts to buy previously owned U.S. homes fell to their lowest level in a year in January amid a persistent shortage of properties for sale, which could slow the housing market ahead of the spring selling season. Other reports on Monday showed factory activity contracting in the Midwest and remaining subdued in Texas this month as the manufacturing sector continued to be buffeted by a strong dollar, weak global demand and spending cuts by energy firms. But coming on the heels of recent strong data on consumer spending, the labor market, industrial production and durable goods orders, Monday's reports did little to change the view that the economy was regaining momentum after slowing to a 1.0 percent annual rate in the fourth quarter. "The disappointing data tone points to ongoing weakness in the housing and manufacturing sectors,""Nevertheless, with underlying domestic fundamentals remaining supportive to growth, the economic recovery should regain its footing in the first quarter." Growth estimates for the first quarter are above a 2 percent rate. The National Association of Realtors said its pending home sales index declined 2.5 percent to 106.0 last month, the lowest level since January of last year. The NAR attributed the drop to tight housing inventories, which are limiting choice for potential buyers and pushing up home prices.

Construction Spending March 1, 2016: Construction spending rose a strong 1.5 percent in January in strength, however, that does not include housing. A one-month surge in highway & street spending skewed the headline higher as did gains for manufacturing and on Federal construction projects. The residential component was unchanged in the month as a 0.2 percent slip in single-family homes offset another jump in the much smaller multi-family subcomponent which rose 2.6 percent in the month. Demand on the multi-family side, reflecting strength in rental prices, has been very strong with year-on-year spending up 30.4 percent vs 6.6 percent for single-family homes. Together, residential spending is up a year-on-year 7.7 percent. Other year-on-year rates include an impressive 33.9 percent gain for highways & streets which is a big category. Federal, a far smaller category, is up 9.9 percent. Turning to the private nonresidential components, offices lead at a 24.8 percent year-on-year gain. The median-to-high single digit year-on-year gain for residential spending is roughly in line with gains in both sales and prices. Historically, these are moderate rates of growth for the housing sector but, right now, are among the very highest for the economy as a whole. On the non-residential side, today's gains are a very good start for first-quarter business investment.

US Construction Spending up 1.5 Percent in January - ABC News: U.S. construction spending increased in January by the largest amount in eight months as weakness in homebuilding was offset by a solid rebound in nonresidential activity. Construction spending increased 1.5 percent in January, the biggest gain since May, following a 0.6 percent increase in December, the Commerce Department reported Tuesday. The advance pushed total spending to a seasonally adjusted $1.14 trillion in January, the highest level in more than eight years. Economists are optimistic that construction will continue to show solid gains this year, helping to boost overall economic growth. For January, home building activity showed no gain, but spending on nonresidential projects rose 1 percent following two months of declines. Spending on government projects increased 4.5 percent with state and local and federal spending both showing gains. The flat reading for residential construction reflected a slight 0.2 percent drop in single-family construction and a 2.6 percent increase in the smaller apartment sector. The gain in nonresidential building was led by a 6.7 percent jump in construction of hotels and motels. Spending on office buildings was up but spending in the category that covers shopping centers fell. Spending on state and local government projects rose 4.4 percent while spending on federal building projects increased an even bigger 5.8 percent. The January increase in activity was bigger than economists had expected and the government also revised up December figures to show a stronger gain of 0.6 percent, rather than the initial tiny 0.1 percent rise. Construction activity for all of 2015 showed a 10.5 percent increase to $1.1 trillion, the highest annual level for spending since 2007. A home construction boom peaked in 2006 before falling for the next five years. Construction spending has been climbing since 2012.

Construction Spending increased 1.5% in January -- The Census Bureau reported that overall construction spending increased 1.5% in January compared to December:The U.S. Census Bureau of the Department of Commerce announced today that construction spending during January 2016 was estimated at a seasonally adjusted annual rate of $1,140.8 billion, 1.5 percent above the revised December estimate of $1,123.5 billion. The January figure is 10.4 percent above the January 2015 estimate of $1,033.3 billion.Both private and public spending increased in January: Spending on private construction was at a seasonally adjusted annual rate of $831.4 billion, 0.5 percent above the revised December estimate of $827.3 billion. ...In January, the estimated seasonally adjusted annual rate of public construction spending was $309.4 billion, 4.5 percent above the revised December estimate of $296.2 billion.   This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been increasing, but is 36% below the bubble peak. Non-residential spending is only 4% below the peak in January 2008 (nominal dollars). Public construction spending is now 5% below the peak in March 2009. The sharp increase in public spending in January was due to more spending on streets and highways (up 34% year-over-year). The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 8%. Non-residential spending is up 11% year-over-year. Public spending is up 13% year-over-year.

January 2016 Construction Spending Growth Rate Improved: The headlines say construction spending improved - and above expectations. The backward revisions make this series very wacky - but the rolling averages insignificantly improved. Econintersect analysis:

  • Growth acceleration 0.7 % month-over-month and Up 8.8 % year-over-year.
  • Inflation adjusted construction spending up 7.7 % year-over-year.
  • 3 month rolling average is 9.3 % above the rolling average one year ago, and up 0.1 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.
  • Up 1.5 % month-over-month and Up 8.2 % year-over-year (versus the reported 10.4 % year-over-year growth last month).
  • Market expected -0.2 % to 0.8 % month-over-month (consensus +0.5) versus the +1.5 % reported

Hotel Occupancy in 2016: Tracking Record Year - Here is an update on hotel occupancy from STR: US results for week ending 20 February The U.S. hotel industry reported positive results in the three key performance metrics during the week of 14-20 February 2016, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy increased 0.6% to 64.3%. Average daily rate for the week was up 2.1% to US$120.04. Revenue per available room rose 2.7% to US$77.17. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The occupancy rate should continue to increase into the Spring, and then increased further during the Summer travel period.

Restaurant Performance Index indicates expansion in January --Here is a minor indicator I follow from the National Restaurant Association: Restaurant Performance Index Bounced Back Above 100 in January Although same-store sales and customer traffic indicators remained mixed, the National Restaurant Association’s Restaurant Performance Index (RPI) bounced back above 100 in January. The RPI stood at 100.6 in January, up 0.8 percent from December’s level of 99.7. The January gain pushed the RPI above the 100 level, which signifies expansion in the index of key industry indicators....“Despite an uptick in the RPI in the first month of the year, restaurant operators still report mixed results about their business environment,” said Hudson Riehle, senior vice president of research for the National Restaurant Association. “Except for the capital expenditures arena, the current situation indicators remain dampened. However, operators are somewhat more optimistic regarding higher sales in six months.”

Gallup: "The Amount Of Debt Americans Carry Is Staggering And Grows Every Day" -- One day after the St. Louis Fed spent thousands in taxpayer funds to "discover" that, gasp, "consumers across the country are borrowing more to buy cars and go to school", yes really... Consumers across the country are borrowing more to buy cars and go to school— St. Louis Fed... today it's Gallup's turn to point out what has been abundantly clear to all non-economist types, and is the reason why the so-called recovery remains nothing but a myth, namely that "Americans Are Buried Under a Mountain of Debt."More from John Gleming:

  • Americans who don't have enough to live comfortably carry higher credit card balances
  • Those who enjoy spending money more than saving money carry more credit card debt
  • Student loan debt associated with highest level of indebtedness

The amount of debt Americans carry is staggering and grows every day. A prior article explored the kinds and amounts of consumer debt that Americans carry, other than mortgages. Gallup found that only a subset of Americans carries the bulk of consumer debt. This article examines how consumer debt affects different groups of Americans, especially millennials. Those who say they don't have enough money to live comfortably appear to be using their credit cards to supplement their available resources with high-interest credit. It seems that though their total consumer debt balances are 17% lower than those of Americans who say that they do have enough money to live comfortably, across all generations except traditionalists, Americans who say that they don't have enough money to live comfortably carry 36% larger credit card balances than those who say that they do have enough money.

Exporting Death & Destruction - Nothing says Nobel Peace Prize like being the world's largest (by a long way) exporter of arms... The US was by far the top arms exporter in 2011-15, with a 33 per cent share of the global market. Exports from the US have increased 27 per cent in the last five years. As The Independent reports, the number of major weapons switching hands around the world was up 14 per cent in the last five years, compared to the five years before that. The Stockholm International Peace Research Institute, an independent resource on global security, has released a study that shows that India is the world's largest importer of arms. The chart above shows that Asia was the main importer of weapons in the last five years, as the region races to arm itself ahead of its regional rivals: China and Pakistan. The high levels of Indian imports are also the result of its small domestic arms industry, which means it has to buy weapons from overseas. Russia is the biggest supplier of arms to India, ahead of the US. But US imports there are growing. They were 11 times higher in 2011-2015 than 2006-2010. Leaving us with one big (quite scary) question - why is India suddenly preparing for war?

Electric Car War Sends Lithium Prices Sky High --With lithium prices skyrocketing beyond wildest expectations, talk heating up about acquisitions and mergers in this space and a fast-brewing war among electric car rivals, it’s no wonder everyone’s bullish on this golden commodity that promises to become the ‘’new gasoline”. Moreover, land grabs, rising price predictions, and expectations of a major demand spike are leaping out of the shadows of a pending energy revolution and a new technology-driven resource era. For once, we have agreement across the board on a commodity: Demand for lithium will continue to rise throughout the year--and beyond--spurred by the rise of battery mega/gigafactories and a burgeoning energy storage business that will change the way we live. That’s why Goldman Sachs calls lithium the “new gasoline”. It’s also why The Economistcalls it “the world’s hottest commodity”, and talks about a “global scramble to secure supplies of lithium by the world’s largest battery producers, and by end-users such as carmakers.” In fact, as the Economist notes, the price of 99%-pure lithium carbonate imported to China more than doubled in the two months to the end of December—putting it at a whopping $13,000 per ton. But what you might not know is that this playing field is fast becoming a battlefield that has huge names such as Apple, Google and start-up Faraday Future throwing down for electric car market share and even reportedly gaming to see who can steal the best engineers. Apple has now come out of the closet with plans for its own electric car by 2019, putting it on a direct collision course with Tesla. And Google, too, is pushing fast into this arena with its self-driving car project through its Alphabet holding company. Then we have the Faraday Future start-up—backed by Chinese billionaire Jia Yueting--which has charged onto this scene with plans for a new $1-billion factory in Las Vegas, and is hoping to produce its first car next year already.

U.S. Light Vehicle Sales at 17.43 million annual rate in February  = Based on an estimate from WardsAuto, light vehicle sales were at a 17.43 million SAAR in February.  That is up about 7% from February 2015, and mostly unchanged from the 17.45 million annual sales rate last month. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for February (red, light vehicle sales of 17.43 million SAAR from WardsAuto). This was below the consensus forecast of 17.6 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. Although slightly below expectations, sales are off to a solid start in 2016.

Factory Orders March 3, 2016: Factory orders rose a strong 1.6 percent in January as wide strength in durable goods, where orders rose 4.7 percent, was offset by energy-related weakness in orders for non-durable goods which extended a long series of declines at minus 1.4 percent. Core capital goods, boosted by orders for machinery, fabricated metals, and computers, are a key positive in the report, up 3.4 percent to nearly offset a 3.5 percent decline in December. This nation is a heavy exporter of capital goods and the gains in this report point to improvement for the nation's trade gap, at least for January. Other areas of strength include aircraft orders and also motor vehicle orders where domestic retail sales have been very solid. Turning to shipments, they rose 0.3 percent in the month though shipments of core capital goods, reflecting prior weakness in orders, did dip 0.4 percent in what is a soft start to first-quarter business investment. Unfilled orders inched 0.1 percent higher after dipping a sharp 0.5 percent in December. Inventories are a plus, falling 0.4 percent and moving the inventory-to-shipments ratio down to 1.36 from 1.37. Inventory overhang has been a running concern in the factory sector where growth in output over the last year has come to a standstill. But the sector did show lots of life in January. But that was January. The early indications on February are broadly negative for a sector where weak exports, made weaker by the strong dollar, and a collapse in energy spending continue to take a serious toll. Note that the gain for machinery came despite another steep downturn, at minus 5.8 percent, for mining & oil field equipment.

Factory orders rebound, but miss expectations - — Factory orders rose 1.6% in January after two straight monthly declines, the Commerce Department reported Thursday. But the increase fell short of the 2.4% rise that economists surveyed by MarketWatch had expected. December’s figures fell an unrevised 2.9%. Orders for durable goods — products meant to last at least three years — rose a revised 4.7% in January, down from prior estimate of a 4.9% gain. Orders for nondurable goods fell 1.4%. The rebound in January’s factory orders was led by an 11.4% gain in transportation equipment, pushed higher by big gains in civilian and defense aircraft. Other highlights: machinery equipment orders jumped 6.6%. Shipments of core capital goods, a category used to help determine quarterly economic growth, slipped 0.4% in January. That’s negative for first-quarter gross domestic product.

As Exxon Slashes 2016 CapEx Forecast By 25%, US Faces Big Hit To GDP -- And the CapEx hits just keep on coming. Two weeks after Goldman reported something troubling, namely that there is a massive gap of nearly 20% between sellside CapEx estimate for what US oil companies will spend on CapEx and what implied guidance suggests as shown in the table below... ... moments ago Rex Tillerson, the CEO of world's formerly biggest by market cap company, Exxon, confirmed that the great CapEx drought of 2016 will be a definite reality, one which will subtract billions from U.S. 2016 GDP in the form of fixed investment, also known as Capital Expenditures, when it announced that it now expected full year 2016 capex to decline by 25% from 2015 to just $23 billion. To be sure, Tillerson tried to spin the attempt to preserve some $7 billion in cash in a positive light: “We have the financial flexibility to pursue attractive opportunities and can adjust our investment program based on market demand fundamentals.” The confirmation: ExxonMobil anticipates capital spending of $23 billion in 2016, down 25 percent from 2015. The company continues to selectively advance its investment portfolio, building upon attractive longer-term opportunities. “We are focused on maximizing benefits across the energy value chain,” Tillerson said. The company captures unique value from its diverse, high-quality resource base from exploration, development and production all the way through to the fuels, lubricants and petrochemical products used by consumers. Among the other noted highlights, is that "ExxonMobil generated $33 billion of cash flow from operations and asset sales and $6.5 billion of free cash flow in 2015." Of course, the company wants to keep generating billions in cash, hence the need for dramatic capex cuts.

US tech firms bypassing Pentagon to protect deals with China, strategist says  - Silicon Valley companies are shying away from selling cyberwarfare services to the Pentagon to avoid jeopardising their relationship with the Chinese market, a leading geopolitical strategist has suggested. Peter Singer, an author and senior fellow at the New America Foundation thinktank, said the United States and China are engaged in a new cold war – being fought partly in cyberspace – that “could turn hot”. Known tactics in this new cold war include Chinese cyber-spies stealing secrets relating to the US military’s F-35 stealth jet to build a clone warplane. Meanwhile, China has complained that the US takes advantage of its power to “unscrupulously monitor other countries” under the pretense of fighting terrorism. China’s hi-tech military capabilities – including the world’s fastest supercomputer, a soon-to-launch “unhackable” quantum communications satellite, a hypersonic weapons programme and armed ground robotics – have left the United States trying to play catch-up, Singer explained during a talk at the RSA security conference in San Francisco. “In the past the government led the way with innovation and industry followed,” said Singer, citing the Arpanet, a precursor to the internet, as an example. “Now it’s the private sector – as seen in the debate over encryption. This is changing the way that government leaders talk – the tone alternates between asking for help and threatening.”

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

Trade Deficit Increased in January to $45.7 Billion  - Earlier the Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $45.7 billion in January, up $1.0 billion from $44.7 billion in December, revised. January exports were $176.5 billion, $3.8 billion less than December exports. January imports were $222.1 billion, $2.8 billion less than December imports.  The trade deficit was larger than the consensus forecast of $43.9 billion. The first graph shows the monthly U.S. exports and imports in dollars through January 2016.  Imports increased and exports decreased in December. Exports are 6% above the pre-recession peak and down 7% compared to January 2015; imports are 4% below the pre-recession peak, and down 5% compared to January 2015. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $32.06 in January, down from $36.60 in December, and down from $58.96 in January 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012. The trade deficit with China decreased to $28.9 billion in January, from $28.6 billion in January 2015. The deficit with China is a substantial portion of the overall deficit.

January 2016 Trade Data Becoming Recessionary.: A quick recap to the trade data released today continues to paint a relatively dismal picture of global trade. The unadjusted three month rolling average value of exports and imports decelerated,. Many care about the trade balance which degraded. Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported down month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth unchanged month-over-month (unadjusted data) - down 7.9 % year-over-year (down 1.7 % year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating but barely in expansion. Exports of goods were reported down, and Econintersect analysis shows unadjusted goods exports growth deceleration of (not including services) 0.3 % month-over month - down 10.6 % year-over-year (down 5.0% year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating and in contraction.PNG

  • The decline in seasonally adjusted (but not inflation adjusted) exports was food and industrial supplies. Import decrease was due to capital goods.
  • The market expected (from Bloomberg) a trade deficit of $-45.3 to $-40.9 billion (consensus $-43.9 billion deficit) and the seasonally adjusted headline deficit from US Census came in at a deficit of $45.7 billion.
  • It should be noted that oil imports were down 28 million barrels from last month, and up 4 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

The headline data is seasonally but not inflation adjusted. Econintersect analysis is based on the unadjusted data, removes services (as little historical information exists to correlate the data to economic activity), and inflation adjusts. Further, there is some question whether this services portion of export/import data is valid in real time because of data gathering concerns. Backing out services from import and exports shows graphically as follows:

Why Globalization Reaches Limits - Gail Tverberg - We have been living in a world of rapid globalization, but this is not a condition that we can expect to continue indefinitely.  Each time imported goods and services start to surge as a percentage of GDP, these imports seem to be cut back, generally in a recession. The rising cost of the imports seems to have an adverse impact on the economy. (The imports I am showing are gross imports, rather than imports net of exports. I am using gross imports, because US exports tend to be of a different nature than US imports. US imports include many labor-intensive products, while exports tend to be goods such as agricultural goods and movie films that do not require much US labor.) Recently, US imports seem to be down. Part of this reflects the impact of surging US oil production, and because of this, a declining need for oil imports. Figure 2 shows the impact of removing oil imports from the amounts shown on Figure 1. Figure 2. Total US Imports of Goods and Services, and this total excluding crude oil imports, both as a ratio to GDP. If we look at the years from 2008 to the present, there was clearly a big dip in imports at the time of the Great Recession. Apart from that dip, US imports have barely kept up with GDP growth since 2008. Let’s think about the situation from the point of view of developing nations, wanting to increase the amount of goods they sell to the US. As long as US imports were growing rapidly, then the demand for the goods and services these developing nations were trying to sell would be growing rapidly. But once US imports flattened out as a percentage of GDP, then it became much harder for developing nations to “grow” their exports to the US. I have not done an extensive analysis outside the US, but based on the recent slow economic growth patterns for Japan and Europe, I would expect that import growth for these areas to be slowing as well. In fact, data from the World Trade Organization for Japan, France, Italy, Sweden, Spain, and the United Kingdom seem to show a recent slowdown in imported goods for these countries as well.

Chicago PMI declines to 47.6  -- Chicago PMI: Feb Chicago Business Barometer Down 8.0 pts to 47.6 The Chicago Business Barometer recoiled 8.0 points to 47.6 in February following a sharp increase to 55.6 in the previous month, led by significant declines in Production and New Orders ...The Barometer’s decline was led by an 18.5 drop in Production, which completely reversed January’s near 16 point gain, pushing it back into contraction. New Orders also fell sharply and Order Backlogs slipped further into contraction, a situation that has persisted for a year. Employment also declined significantly, leaving it at the lowest since November 2009 and the fifth consecutive month below 50.  ..Chief Economist of MNI Indicators Philip Uglow said, “If one looks beyond the gyrations seen over the past three months then trend activity has been running a little below the 50 neutral mark, highlighting continued sluggish activity levels, with manufacturers under particular pressure. Still, given the weakness in Q4, it looks like activity should pick up during Q1.” This was well below the consensus forecast of 52.9.

Chicago PMI Collapses From 'Mysterious' January Bounce As Employment Crashes To 7 Year Lows -- Following the biggest beat on record in January jumping to 55.6, Chicago PMI collapsed in February to a stunning 47.6 - below the lowest estimate from economists. The entire report is a disaster with New orders tumbling, production sharply lower, and employment contracting for the 5th month in a row - to its lowest since March 2009. As one respondent warned, business was just "limping along at the moment with little promise in sight."From one-year high "HOPE" to near 7 year low "NOPE"... As MNI reports, Business was just "limping along at the moment with little promise in sight", one purchaser commented in the report. Other purchasers commented that area business was stifled by state budget hold ups and a lack of an expansion in backlogs while job losses continued, especially among the 50+ and over workers.

PMI Manufacturing Index March 1, 2016: Growth in Markit Economics' manufacturing sample is slowing to a crawl, at 51.3 for final February which is, next only to February's flash of 51.0, the second lowest reading since October 2012. January, at 52.4, was a good month for the manufacturing sector with industrial production up and durable orders up, but the early indications on February are uniformly negative. Production in this report slowed as did new orders where growth is at a 3-1/2 year low. Export orders fell the most since April last year. Backlog orders are also down and employment growth moderated for a second straight month. Respondents in the sample are citing caution among their customers as a key negative. In a convincing kicker, selling prices are down the most in more than 3-1/2 years. This report, which runs hot compared to other manufacturing reports, is sitting near recovery lows and is offering its own signal of renewed trouble for manufacturing, a sector that continues to get hit by weak exports and weak energy-related demand.

ISM Manufacturing index increased to 49.5 in February -- The ISM manufacturing index indicated contraction in February. The PMI was at 49.5% in February, up from 48.2% in January. The employment index was at 48.5%, up from 45.9% in January, and the new orders index was at 51.5%, unchanged from January. From the Institute for Supply Management: February 2016 Manufacturing ISM® Report On Business® . "The February PMI® registered 49.5 percent, an increase of 1.3 percentage points from the January reading of 48.2 percent. The New Orders Index registered 51.5 percent, the same reading as in January. The Production Index registered 52.8 percent, 2.6 percentage points higher than the January reading of 50.2 percent. The Employment Index registered 48.5 percent, 2.6 percentage points above the January reading of 45.9 percent. Inventories of raw materials registered 45 percent, an increase of 1.5 percentage points above the January reading of 43.5 percent. The Prices Index registered 38.5 percent, an increase of 5 percentage points above the January reading of 33.5 percent, indicating lower raw materials prices for the 16th consecutive month. Comments from the panel indicate a more positive view of demand than in January, as 12 of our 18 industries report an increase in new orders, while four industries report a decrease in new orders." Here is a long term graph of the ISM manufacturing index. This was above expectations of 48.5%, but still suggests manufacturing contracted in February.

U.S. Manufacturing Index Rises But Still Indicates Contraction In February: While the Institute for Supply Management released a report on Tuesday showing a much bigger than expected increase by its index of manufacturing activity in the month of February, the index still pointed to the fifth straight month of contraction. The ISM said its purchasing managers index rose to 49.5 in February from 48.2 in January, but a reading below 50 continues to indicate a contraction in manufacturing activity. Economists had expected the index to inch up to 48.5. Bradley J. Holcomb, chair of the ISM Manufacturing Business Survey Committee, said, "Comments from the panel indicate a more positive view of demand than in January, as 12 of our 18 industries report an increase in new orders."The bigger than expected increase by the headline index was partly due to an acceleration in production growth, as the production index climbed to 52.8 in February from 50.2 in January. The employment index also rose to 48.5 in February from 45.9 in January, although the reading below 50 still points to a contraction in employment in the manufacturing sector. The report also said that the new orders index came in at 51.5 in February, matching the reading reported for the previous month. On the inflation front, the prices index jumped to 38.5 in February from 33.5 in January but still indicates lower raw materials prices for the sixteenth consecutive month.

Growing "Signs Of Distress" In US Manufacturing Data Demolish Decoupling Dream -- Following the weakness in global PMIs, and yesterday's Chicago PMI collapse, US Markit Manufacturing PMI dropped to cycle lows at 51.3 from 52.5 (very slightly better than expectations of 51.2) with job growth at 5-month lows, production at slowest in 28 months, and work backlogs tumbling to the lowest since Sept 2009. Then ISM Manufacturing hit, hovering at its weakest in 7 years rose modestly to 49.5 but remains in contraction for the 5th month in a row (longest streak since 2009). As Markit concludes, "the February data add to signs of distress in the US manufacturing economy." Remember the "America is an island and the rest of the world's economic collapse doesn't matter" meme... well that is over!! While ISM data showed a modest rise, New Orders were unchanged as Import and Export Orders fell.  ISM Respondents show a mixed bag:

  • "Low oil prices and reduced activity continue affecting our business." (Petroleum & Coal Products)
  • "U.S. business demand is solid; international demand is soft." (Chemical Products)
  • "Mobility spend is up." (Computer & Electronic Products)
  • "Business has to get better. And it appears it is. Healthy backlog for 2016." (Fabricated Metal Products)
  • "Very strong demand for product. Material availability very good and commodity pricing continues to be depressed." (Machinery)
  • "Airlines are still ordering planes and spare parts for plane galleys." (Transportation Equipment)

ISM Non-Manufacturing Index Decreased to 53.4% in February -- The January ISM Non-manufacturing index was at 53.4%, down from 53.5% in January. The employment index decreased in February to 49.7%, down from 52.1% in January. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management: February 2016 Non-Manufacturing ISM Report On Business®  "The NMI® registered 53.4 percent in February, 0.1 percentage point lower than the January reading of 53.5 percent. This represents continued growth in the non-manufacturing sector at a slightly slower rate. The Non-Manufacturing Business Activity Index increased to 57.8 percent, 3.9 percentage points higher than the January reading of 53.9 percent, reflecting growth for the 79th consecutive month at a faster rate. The New Orders Index registered 55.5 percent, 1 percentage point lower than the reading of 56.5 percent in January. The Employment Index decreased 2.4 percentage points to 49.7 percent from the January reading of 52.1 percent and indicates contraction after 23 consecutive months of growth. This is the first time the employment index has contracted since February 2014. The Prices Index decreased 0.9 percentage point from the January reading of 46.4 percent to 45.5 percent, indicating prices decreased in February for the fourth time in the last six months. According to the NMI®, 14 non-manufacturing industries reported growth in February. The majority of the respondents' comments continue to be positive about business conditions. The respondents are projecting a slight optimism in regards to the overall economy. There is an increase in the number of industries reflecting growth in both New Orders and Business Activity; however, the NMI® has decreased slightly due to the contraction in the Employment index."

ISM Survey Shows Manufacturing in Contraction for 5th Month in a Row - The February 2016 ISM Manufacturing Survey is yet another month of manufacturing malaise.  Manufacturing is in a 5th month of contraction, although much less so than last month.  PMI was 49.5%, 1.3 percentage points higher than January.  New orders had no change in acceleration but employment and production did improve.  A contracting manufacturing sector five months in a row is now due to supplier deliveries, contracting inventories and employment.  A five month contraction in manufacturing is surely a very sick coal mine canary, regardless.  The ISM Manufacturing survey is a direct survey of manufacturers.  Generally speaking, indexes above 50% indicate growth and below indicate contraction.  Every month ISM publishes survey responders' comments, which are part of their survey.  This month the comments were amazingly upbeat considering the actual index.  Petroleum and Coal mentioned low prices impacting their business.  Food and beverages said business was sluggish while Chemical productions mentioned a weak overseas demand.  New orders had no change from last month and stayed at 51.5%, which is slight growth.  The Census reported January durable goods new orders shot up by 4.9%, where factory orders, or all of manufacturing data, will be out later this week.  Note the Census one month behind the ISM survey.  The ISM claims the Census and their survey are consistent with each other and they are right.  Below is a graph of manufacturing new orders percent change from one year ago (blue, scale on right), against ISM's manufacturing new orders index (maroon, scale on left) to the last release data available for the Census manufacturing statistics.  Here we do see a consistent pattern between the two and this is what the ISM says is the growth mark: A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau's series on manufacturing orders. Below is the ISM table data, reprinted, for a quick view.

The "Malaise Has Spread To Services"- Service Industries Cut Jobs For The First Time In Two Years - For many months, the general consensus was that the "malaise" in US manufacturing (which is clearly in a recession) is isolated, and would not spread to the service sector. That is no longer the case. As a very gloomy Markit report noted earlier, "business activity stagnated in February as malaise spread from the manufacturing sector to services. The Markit PMIs are signalling a stagnation of the economy in February, suggesting growth has deteriorated further since late last year. Prices pressures are waning again in line with faltering demand. Average prices charged for goods and services are dropping once again, down for the first time in five months, as firms compete to win new business." And then it was the ISM's turn where despite a modest beat to expectations, overall growth in U.S. service industries slowed for a fourth straight month in February, prompting the first job cuts in two years as the Employment indicator dipped from 52.1 to 49.7, the first contraction in two years.

Dallas Fed Mfg Survey February 29, 2016: Highlights: Dallas, together with Kansas City, are two Fed districts that are being hit hardest by the collapse in oil prices. The Dallas Fed's general activity index came in at a deeply minus 31.8 in February vs minus 34.6 in January. New orders contracted a further 8.4 points in the month to minus 17.6 for their lowest reading since 2009 in what is a very ominous signal for the months ahead. Unfilled orders are also in contraction as are production and shipments. Price contraction deepened for both raw materials and selling prices. Inventories are down as is employment. In fact, in a rare sweep of weakness, all 17 current components are in contraction! The company outlook index is at minus 17.4 with a quarter of the sample saying their outlook has worsened during February. The latter is a telling reading and suggests very strongly, in line with all other anecdotal readings this month, that the factory sector, hit by weak exports and a weak energy sector, fell back in February.

Dallas Fed: "Texas Manufacturing Activity Contracts Again" in February --From the Dallas Fed: Texas Manufacturing Activity Contracts Again Texas factory activity contracted again in February, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, remained negative but edged up from -10.2 to -8.5, suggesting output declined but at a slightly softer pace than in January. Most other indexes of current manufacturing activity also indicated further contraction in February. The new orders index fell 8 points to -17.6, reaching its lowest level since May 2009, when Texas was in recession. The growth rate of orders index remained strongly negative at -17.4. The capacity utilization index was largely unchanged at -8.2. Meanwhile, the shipments index rose 10 points to -1.1 after plunging last month. Perceptions of broader business conditions remained strongly negative in February. The general business activity index has been negative for more than a year and came in at -31.8, up slightly from the January reading. ... Labor market indicators reflected further decline in February. The employment index dropped 7 points to -11.1, hitting its lowest reading since November 2009. This was the last of the regional Fed surveys for February. All five of the regional surveys indicated contraction in Febuary, especially in the Dallas region (oil prices). Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

"We Are In A Recession": According To These Dallas Fed Respondents The U.S. Economy Is In Freefall -- For those interested in hearing some horror stories from ground zero of America's recession, look no further than Texas, where the best recap of sentiment on the ground comes straight from the Dallas Fed respondents, who have not been this depressed since the Global Financial Crisis. Here are some key examples, starting with the one that summarizes it best:

  • "We are in a recession. Oil prices are a symptom, not the cause."
  • Last October we lost about 40 percent of our volume due to customer internal consolidations because of the weak economy. Most of the loss was due to product sourcing out of China. Our U.S.-based customer closed U.S. plants’ processing units and are buying from China sources, so it has no need for us to package its products for export around the globe. We have been granted new business that will come on board in March and April 2016. This will make up for some of the losses.
  • Don't know if it is the weather, uncertainty created by the presidential election, or just a slowdown in the world economy, but things are definitely slowing down. Volumes are down and new orders are quiet. Low energy prices are the saving grace keeping margins good.
  • Our backlog has declined (50 percent less than the same time last year). We are receiving a very high volume of requests for proposals, but either are not winning them or the projects are on hold. Pricing to obtain any work has decreased for the benefit of the owner/contractor.
  • We are experiencing a severe downturn in our business, as the oil and gas exploration and production segment has significantly reduced their capital budgets for 2016 based on declines in the WTI price.
  • Customers are becoming more cautious about investing in expansion than they were this time a year ago.
  • There is continued weakness in oil- and gas-related equipment manufacturing. We anticipate improvement in the second half of the year, but no change in wages.
  • It's a tough time in the oil patch. We plan on cutting 20 percent of staff this month after cutting 25 percent a year ago. We are not sure how we can sustain our skill sets with these dramatic troughs.

Trade Deals Like the TPP Are Murdering American Manufacturing - In the week before Valentine’s Day, United Technologies expressed its love for its devoted Indiana employees, workers whose labor had kept the corporation profitable, by informing 2,100 of them at two facilities that it was shipping their factories, their jobs, their communities’ resources to Mexico. A few workers shouted obscenities at the corporate official. Some walked out. Others openly wept as United Technologies shattered their hopes, their dreams, their means to pay middle-class mortgages. Three days later, 1,336 workers at Philadelphia’s largest remaining manufacturer, Cardone, learned that company planned to throw them out too and build brake calipers in Mexico instead. Two weeks earlier, a Grand Rapids, Mich., company called Dematic did the same thing to its 300 workers.  No surprise. In the first decade of this century, America lost 56,190 factories, 15 a day.  Republican presidential candidates talk incessantly of building a physical wall to keep impoverished Mexican immigrants out of America. What they fail to offer is an economic barrier to prevent the likes of United Technologies and Cardone and Dematic from impoverishing American workers by exporting their jobs to Mexico.

Some Real Costs of the Trans-Pacific Partnership: Nearly Half a Million Jobs Lost in the US Alone -- The Trans-Pacifc Partnership (TPP) Agreement, recently agreed to by twelve Pacifc Rim countries led by the United States,1 promises to ease many restrictions on cross-border transactions and harmonize regulations. Proponents of the agreement have claimed significant economic benefits, citing modest overall net GDP gains, ranging from half of one percent in the United States to 13 percent in Vietnam after fifteen years. Their claims, however, rely on many unjustified assumptions, including full employment in every country and no resulting impacts on working people’s incomes, with more than 90 percent of overall growth gains due to ‘non-trade measures’ with varying impacts. A recent GDAE Working Paper finds that with more realistic methodological assumptions, critics of the TPP indeed have reason to be concerned. Using the trade projections for the most optimistic growth forecasts, we find that the TPP is more likely to lead to net employment losses in many countries (771,000 jobs lost overall, with 448,000 in the United States alone) and higher inequality in all country groupings. Declining worker purchasing power would weaken aggregate demand, slowing economic growth. The United States (-0.5 percent) and Japan (-0.1 percent) are projected to suffer small net income losses, not gains, from the TPP. This GDAE Policy Brief is intended to help clarify the differences with other modeling studies and to present our findings in a less technical manner.

Trans-Pacific Partnership, currency manipulation, trade, and jobs: U.S. trade deficit with the TPP countries cost 2 million jobs in 2015, with job losses in every state - Economic Policy Institute Summary The Trans-Pacific Partnership (TPP) agreement between the United States and 11 other Pacific Rim countries lacks an absolutely key component to keep it from doing potential damage to the U.S. economy. The missing piece of this trade and investment deal is a set of restrictions and/or enforceable penalties against member countries that engage in currency manipulation. Currency manipulation is one of the key driving forces behind the high and rapidly rising U.S. trade deficit with the 11 other members of the TPP. In 2015, the U.S. deficit with TPP countries translated into 2 million U.S. jobs lost, more than half (1.1 million) of which were in manufacturing. Without such provisions against currency manipulation, the TPP could well follow other trade agreements and leave even greater U.S. trade deficits in its wake. Currency manipulation occurs when a country artificially depresses the value of its currency. Currency manipulation acts like a subsidy to the exports of the manipulating country, and a tax on U.S. exports to every country where U.S. exports compete with the currency manipulator’s exports. In this way, currency manipulation increases U.S. imports, suppresses U.S. exports, and inflates U.S. trade deficits. As past EPI research has shown, currency-manipulation-fueled trade deficits have reduced U.S. gross domestic product (GDP), eliminated millions of U.S. jobs, driven down U.S. wages, and propelled the outsourcing of U.S. jobs to currency manipulators. Many members of the proposed TPP, including Malaysia, Singapore, and Japan, are known currency manipulators. Others, namely Vietnam, appear to be following the lead of currency manipulators by, for example, acquiring excess foreign exchange reserves to depress the value of their currency. Currency manipulation explains a substantial share of the large, persistent U.S. trade deficit with the 11 other TPP countries that has not only cost millions of U.S. jobs but also increased income inequality and put downward pressure on American wages. We can’t afford a trade agreement that not only allows but would intensify these harmful trends:

Congressional Testimony: “Triple Threat to Workers and Households—Impacts of Federal Regulations on Jobs, Wages and Startups” --Testimony of EPI Research and Policy Director Josh Bivens before the U.S. House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law hearing on “Triple Threat to Workers and Households: Impacts of Federal Regulations on Jobs, Wages and Startups,” Rayburn House Office Building, February 24, 2016.  The premise of today’s hearing, that regulations are dragging down job creation and wage growth, is wrong. It is a distraction from the real causes of sluggish living standards growth for the vast majority of American households, which are Congress’s decision to embrace fiscal austerity rather than making job-creating investments in infrastructure and education to restore genuine full-employment, and the rise in inequality over the past generation of economic life. This rising inequality is driven by intentional policy decisions to shift economic leverage away from low- and middle-wage workers. A key part of this shift in leverage was the failure to update labor laws and labor standards to ensure that workers can bargain for a fair share of the growth they help create.

Weekly Initial Unemployment Claims increase to 278,000 --The DOL reported: In the week ending February 27, the advance figure for seasonally adjusted initial claims was 278,000, an increase of 6,000 from the previous week's unrevised level of 272,000. The 4-week moving average was 270,250, a decrease of 1,750 from the previous week's unrevised average of 272,000.  There were no special factors impacting this week's initial claims. The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

February 2016 Job Cuts Fall by 18%: After surging to a six-month high to begin the new year, downsizing slowed in February, as US-based employers announced 61,599 job cuts during the month, 18 percent fewer than the 75,114 in January The February total was up 22 percent from a year ago, when employers announced 50,579 job cuts during the month. Planned job cuts total 136,713 through the first two months of the year, up 32 percent from the same period in 2015, when employers announced layoffs totaling 103,620 in January and February. Just as in 2015, the energy sector has seen the heaviest job cutting in the opening months of the year. These firms announced another 25,051 job cuts in February, bringing the year-to-date total to 45,154. Most of the cuts in the sector have been attributed to low oil prices. The 45,154 energy cuts through February represents a 24 percent increase from 2015, when employers in the sector announced 36,532 planned layoffs in the opening two months of the year. Several energy-centric metropolitan areas have seen unemployment rates increase, but most are still enjoying rates that are below the national average. The latest available date from the US Bureau of Labor Statistics shows that the unemployment rate in Houston increased from 4.0 percent in December 2014 to 4.6 percent in December 2015.

US layoffs ease in Feb, totaling 61,599: Challenger: Layoffs by U.S.-based companies eased in February after surging to a six-month high at the start of the year, global outsourcing firm Challenger, Gray & Christmas reported Thursday. The companies announced 61,599 job cuts last month, down 18 percent from January's 75,114. Despite the month-to-month fall, downsizing in February was 22 percent higher than in February 2015. In the January-February period, announced layoffs were 32 percent higher than during the first two months of 2015. Pink slips in the energy sector accounted for 40 percent of February's downsizing. Employers in the sector announced 25,051 cuts."Low oil prices continue to take a toll on workers in the energy and industrial goods sectors. Since January of 2015, these two sectors alone have seen workforce reductions in excess of 200,000, the majority of which were attributed to oil prices," Challenger CEO John A. Challenger said in a statement. Thus far, the pain in the oil and gas patch has not spread into the wider economy in areas that benefited from America's energy boom prior to the downturn, Challenger reported. The firm noted Houston's unemployment rate ticked up slightly from 4 percent to 4.6 percent in December, while it has fallen slightly in Bismarck, North Dakota. The technology sector also saw an uptick in layoffs, with about 16,000 cuts announced in the first two months of the year, up 143 percent from last year.

ADP: Private Employment increased 214,000 in February  --  From ADP: Private sector employment increased by 214,000 jobs from January to February according to the February ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. ...Goods-producing employment rose by 5,000 jobs in February, just over a quarter of January’s upwardly revised 19,000. The construction industry added 27,000 jobs, which was slightly above January’s upwardly revised 26,000. Meanwhile, manufacturing lost 9,000 jobs, the second largest drop in five years. Service-providing employment rose by 208,000 jobs in February, up from a downwardly revised 174,000 in January.  ...Mark Zandi, chief economist of Moody’s Analytics, said, “Despite the turmoil in the global financial markets, the American job machine remains in high gear. Energy and manufacturing remain blemishes on the job market, but other sectors continue to add strongly to payrolls. Full-employment is fast approaching. This was above the consensus forecast for 185,000 private sector jobs added in the ADP report. 

ADP: US Payrolls Rise At A Solid Rate In February -- US companies added 214,000 workers to payrolls last month, according to the ADP Employment Report for February. The news offers more support for thinking that the economic expansion is in no immediate danger of sliding into a recession. In fact, today’s numbers inspire a degree of upside revision for the near-term outlook. Last month’s 214,000 increase in private payrolls reflects a moderately stronger pace vs. the revised gain of 193,000 for January. Meanwhile, the year-over-year trend is showing signs of stabilizing after decelerating in recent months. ADP advises that payrolls increased 2.08% in February vs. the year-earlier level—unchanged from January’s annual gain. “Large businesses showed surprisingly strong job gains in February, despite the continuation of economic trends that negatively impact big companies like turmoil in international markets and a strengthening dollar,” said Ahu Yildirmaz, who heads the ADP Research Institute. “The gains were mostly driven by the service sector which accounted for almost all the jobs added by large businesses.” At the very least the new report strengthens the case for expecting a decent gain in this Friday’s official labor-market numbers for February. The consensus forecast via anticipates that the Labor Dept. will report that the US economy added 180,000 workers in the private sector last month—a projection that marks a moderate improvement over January’s sluggish increase of 158,000.

February 2016 ADP Job Growth at 214,000 - Above Expectations -- ADP reported non-farm private jobs growth at 214,000. The rolling averages of year-over-year jobs growth rate remains strong but the rate of growth continues in a downtrend (although insignificant again this month).

  • The market expected 165,000 to 205,000 (consensus 185,000) versus the 214,000 reported. These numbers are all seasonally adjusted;
  • In Econintersect's February 2016 economic forecast released in late January, we estimated non-farm private payroll growth at 120,000 (based on economic potential) and 200,000 (fudged based on current overrun of economic potential);
  • This month, ADP's analysis is that small and medium sized business created 65 % of all jobs;
  • Manufacturing jobs contracted by 9,000.
  • 97 % of the jobs growth came from the service sector;
  • January report (last month), which reported job gains of 205,000 was revised up to 193,000;
  • The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 - it is now 2.08% (statistically unchanged from last month's 2.09%)

A Closer Look at the Latest ADP Employment Report - In yesterday's ADP employment report we got a February estimate of 214K new nonfarm private employment jobs, an increase from January's 193K, revised downward from 205K. The popular spin on this indicator is as a preview to the monthly jobs report from the Bureau of Labor Statistics. But the ADP report includes a wealth of information that's worth exploring in more detail. Here is a snapshot of the monthly change in the ADP headline number since the company's earliest published data in April 2001. This is quite a volatile series, so we've plotted the monthly data points as dots along with a six-month moving average, which gives us a clearer sense of the trend. As we see in the chart above, the trend peaked 20 months before the last recession and went negative around the time that the NBER subsequently declared as the recession start. At present this indicator has been hovering around the 200K monthly new jobs since around the middle of 2011. It is showing no signs of weakening. ADP also gives us a breakdown of Total Nonfarm Private Employment into two categories: Goods Producing and Services. Here is the same chart style illustrating the two. The US is predominantly a services economy, so it comes as no surprise that Services employment has show stronger jobs growth. The trend in Goods Producing jobs went negative over a year before the last recession. At present this series is skating fractionally above contraction. For a sense of the relative size of Services over Goods Producing employment, the next chart shows the percentage of Services Jobs across the entire series. There are a number of factors behind this trend. In addition to our increasing dependence of Services, Goods Production employment continues to be impacted by automation and offshoring. The percentage in the chart above has leveled off for the past six years, apart from a fractional upward slope during 2015. It will be interesting to watch the trend in the months ahead.

Gallup Good Jobs Rate March 3, 2016: The Gallup Good Jobs (GGJ) rate in the U.S. was 44.6 percent in February. This is nominally down from the January rate (44.7 percent) but higher than the rate in any February since Gallup began measuring it in 2010. The current rate is 0.7 percentage points higher than in February 2015, suggesting an underlying increase in full-time work beyond seasonal changes in employment. The percentage of U.S. adults in February who participated in the workforce -- by working full time, working part time or not working but actively seeking and being available for work -- was 67.2 percent. This is up slightly from the rate in January (66.8 percent) and higher than the 66.9 percent average workforce participation rate since June 2013. Before that, from January 2010 to June 2013, it had been almost a point higher, averaging 67.7 percent. Gallup's unadjusted U.S. unemployment rate was 6.2 percent in February, up slightly from January's 5.5 percent. It is still the lowest rate in any February since Gallup began tracking the measure in 2010, including last year's 6.7 percent. Gallup's U.S. unemployment rate represents the percentage of adults in the workforce who did not have any paid work in the past seven days, either for an employer or for themselves, and who were actively looking for and available to work. Much of the increase in unemployment in February was matched by rising workforce participation, indicating that many who were unemployed but not previously looking for work may be returning to the workforce. Gallup's measure of underemployment in February was 14.7 percent, also up slightly from January but in line with the rates since April 2015. Gallup's U.S. underemployment rate combines the percentage of adults in the workforce who are unemployed (6.2 percent) with those who are working part time but desire full-time work (8.5 percent).

The U.S. Added Only 70,000 Jobs In February Based On Withheld Taxes - Two weeks ago, we looked at what is perhaps the best coincident indicator of the true, not-seasonally adjusted, picture of the US labor market, namely withholdings of income and employment taxes. We reported that while for most of 2015, tax withholdings rose at a rate of 5% or more from a year ago, on the back of job growth and gains in wages, commissions and other incentive pay, in recent months there has been a substantial dropoff in this key indicator. As shown in the chart below, revenue inflows to the Treasury Department steadily slowed through the fall, bringing the annual growth rate down to just below 4% by the start of 2016. That’s when growth seemingly collapsed — to just 1.8% over the past five-plus weeks, from Jan. 11 through Feb. 16.We also said that over the past 10 full weeks, starting Dec. 7, tax withholdings have grown just 3.1% from a year ago, adding that while December and January data can be influenced by the size and timing of year-end bonuses, the pronounced weakness has been sustained for long enough to rule that out as the principal cause. Today, TrimTabs put an actual jobs number to this particular decline in tax withholdings, and estimates that the true pace of job growth in February was far below the consensus estimate of 188,000 (a number which already looked woefully inaccurate after today's latest Services ISM reported which confirmed the first contraction in service jobs in the past two years) and predicts that in February the US economy added only 55,000 to 85,000 jobs, less than half of the official estimate. As TrimTabs CEO David Santschi notes, BLS reports "tend to be highly inaccurate, and that the jobs situation generally has been far worse than the BLS has been reporting. In fact, TrimTabs estimates job growth in February was 55,000 to 85,000 - call it 70,000 - the lowest number in two years." If TrimTabs correct, it would mean that the payrolls chart would look as follows:

February Employment Report: 242,000 Jobs, 4.9% Unemployment Rate - From the BLS: Total nonfarm payroll employment increased by 242,000 in February, and the unemployment rate was unchanged at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services. Job losses continued in mining. .. The change in total nonfarm payroll employment for December was revised from +262,000 to +271,000, and the change for January was revised from +151,000 to +172,000. With these revisions, employment gains in December and January combined were 30,000 more than previously reported....In February, average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.35, following an increase of 12 cents in January. Average hourly earnings have risen by 2.2 percent over the year. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 242 thousand in February (private payrolls increased 230 thousand). Payrolls for December and January were revised down by a combined 30 thousand.This graph shows the year-over-year change in total non-farm employment since 1968. In February, the year-over-year change was 2.67 million jobs. A solid gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate increased in February to 62.9%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio increased to 59.8% (black line).

Jobs report: Solid jobs, moderate wages point to Goldilocks job market: not too hot, not too cold -- Jared Bernstein - Payrolls were up 242,000 last month and the unemployment rate held steady at 4.9% in another solid jobs report from the the Bureau of Labor Statistics. Job gains over the prior two months were revised up slightly, adding 30,000, such that the average monthly gains over the past year were well above 200,000 (223K, to be precise). The closely watched labor force participation rate ticked up to 62.9%, as over 500,000 entered (or re-entered) the labor force, another sign of improving conditions.  Other signs, however, were more moderate. Average weekly hours fell by two-tenths of an hour, a significant drop, driven by the ongoing weakness in extraction industries (as well as utilities). Hourly wages, after adding a strong 12 cents in January, fell 3 cents in February (this is a common pattern with “high frequency” data–a strong month followed by a weaker one). The combination led weekly earnings to fall $6 (-0.7%) in February, though they’re up 1.6% over the past year. Factory employment, which added 23,000 in January, gave back 16,000 in jobs last month, as our manufacturers continue to struggle with the effects of the strong dollar, which make our exports less price competitive. More manufacturing sub-industries lost jobs than added jobs, and over the past year, factory jobs are up only 12,000–0.1%, compared to 1.9% for total payrolls. Overall, though, job growth is strong. The monthly smoother shows average monthly employment growth over 3, 6, and 12-month intervals, and because the monthly pace has been so consistent, the bars are all about the same height. Even as the labor force is perhaps finally beginning to edge up a bit–one month definitely does not a new trend make–that’s still a good enough job-growth clip to further lower the unemployment rate, as long as the Fed keeps their feet off of the brakes.

February Payrolls Smash Expectations, Surge To 242,000 Even As Hourly Earnings Post Unexpected Drop If bulls were expecting a February payrolls miss, they did not get it when moments ago the BLS reported that nonfarm payrolls surged by 242K in the past month, smashing expectations of 195K, with the January and December prints both revised higher by 21K and 9K respectively. The unemployment rate at 4.9% printed unchanged from the prior month and as expected. According to the BLS, over the  past 3 months, job gains have averaged 228,000 per month. The move higher in jobs was mostly driven by minimum wage jobs in healthcare (+57,000), retail (+55,000), and food service professions which rose by 40,000. This explains why for yet another month, wage growth was not only not there, but with a -0.1% decline after the January minimum wage hike induced bounce, posted a drop of -0.1%, which was the first drop since December 2014. As shown in the chart below, the February hourly earnings drop was only the 6th drop in the past decade. Worse, the average weekly earnings tumbled from $878.15 to $872.04, which rising just 1.7% Y/Y, was the weakest increase since February 2014. There was good news in the participation rate, which ticked up solidly from near 30+ year lows of 62.7% to 62.9%, the highest since May 2015, as people not in the labor force declined by 374K. More details from the full report: Total nonfarm payroll employment increased by 242,000 in February. Job growth occurred in health care and social assistance, retail trade, food services and drinking places, and private educational services. Mining employment continued to decline. Health care and social assistance added 57,000 jobs in February. Health care employment increased by 38,000 over the month, with job gains in ambulatory health care services (+24,000) and hospitals (+11,000). Over the past 12 months, hospitals have added 181,000 jobs. In February, employment rose by 19,000 in social assistance, mostly in individual and family services (+14,000). Retail trade continued to add jobs in February (+55,000).Food services and drinking places added 40,000 jobs in February. Over the year, employment in the industry has grown by 359,000.

BLS Jobs Situation Improved In February 2016. Weakness In Economically Intuitive Sectors.: The BLS job situation headlines looked good. Jobs growth insignificantly accelerated this month. However, economic intuitive sectors degraded this month. The rate of growth for employment insignificantly accelerated this month (red line on graph below).

  • The unadjusted jobs increase month-over-month was average for times of economic expansion.
  • Economic intuitive sectors of employment were NEGATIVE.
  • This month's report internals (comparing household to establishment data sets) was inconsistent with the household survey showing seasonally adjusted employment growing 530,000 vs the headline establishment number of growing 242,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey added 555,000 people to the workforce.

A summary of the employment situation:

  • BLS reported: 242K (non-farm) and 230K (non-farm private). Unemployment rate unchanged at 4.9%.
  • ADP reported: 214 K (non-farm private)
  • In Econintersect's February 2016 economic forecast released in late January, we estimated non-farm private payroll growth at 120,000 (based on economic potential) and 200,000 (fudged based on current overrun of economic potential);
  • NFIB comments on this Jobs Report is towards the end of this post.

US Private Payrolls Rebounded Sharply In February - American companies added 230,000 workers to payrolls in February, a solid improvement over the upwardly revised 182,000 gain for January (based on seasonally adjusted data). Today’s update from the Labor Dept. handily beat the consensus forecast for a rise in the low 180k range. The year-over-year growth rate for private-sector jobs continued to tick lower, but the annual pace of 2.18% through last month continues to reflect a bullish tailwind for the labor market. Today’s release offers another upbeat round of macro data that raises doubts on the veracity of recent worries about the US economy. Wage growth was soft, however. Average hourly earnings dipped 0.1% last month vs. January, marking the first drop in more than a year–a drop that throws cold water on the prospects for firmer wage growth. From a top-down perspective, however, today’s update sends a strong signal that February’s economic profile will remain firmly in the growth column once all of last month’s numbers are published. The January review of the US trend pointed in that direction and today’s figures certainly strengthen the case for anticipating that forward momentum will prevail for the foreseeable future. Michael Feroli, chief US economist at JPMorgan Chase, tells Bloomberg that the news “indicates the resilience of the economy. The labor market doesn’t appear to be hurt by financial market volatility.”  Does this mean that a rate hike is back on the table for the Fed’s monetary meeting that’s scheduled for later this month? Well, sure. Today’s numbers juice the odds in favor of the hawks. With recession risk off the table via the spectrum of numbers in hand at the moment, squeezing policy no longer looks like a low-probability event.

February Jobs Report – The Numbers -- February’s 242,000 payroll gain extended the streak of consecutive months of job creation to 65. To top it off, revisions showed there were 30,000 more jobs created in the U.S. in December and January than previously estimated, according to revised data released Friday. Friday’s release is the last nonfarm jobs report before the Federal Reserve’s next meeting on March 15-16, when the central bank will update its assessment of the U.S. economy. There is little expectation the Fed will raise short-term interest rates at the meeting, and there are questions whether any increase in the Fed’s target range of 0.25% to 0.50% will happen at all in coming months. But Friday’s strong employment reading offers comfort about the strength of the U.S. economy as officials wrangle with an outlook that remains relatively optimistic despite weak global economic growth.  The unemployment rate was unchanged at 4.9% in February, in line with what economists expected. The current rate is within the range Fed officials view as the likely long-run average. But in a positive sign for workers sidelined by the recovery so far, a broader measure of unemployment that includes Americans stuck in part-time jobs or too discouraged to look for work ticked lower last month, to 9.7% from 9.9% in January. Job growth was solid for industries tied to the services economy in February. Education and health services led last month’s job creation, adding 86,000 jobs, followed by gains in retail trade, restaurants and bars, as well as construction. Low oil prices continue to hurt the U.S. mining industry, a sector that includes oil and gas. Employment in mining shrank by 19,000 in February.  Average hourly earnings for private-sector workers were $25.35 in February, a 3-cent decrease from January. From a year earlier, wages are up 2.2%. With the unemployment rate at a postrecession low, many economists are looking for signs of stronger pay gains in 2016. Slow wage gains during much of the expansion were blamed for lackluster consumer spending and sluggish economic growth.

242,000 Jobs Added in February: 304,000 of Them Were Part-Time; Average Weekly Earnings Sank -- Jobs came in well above expectations at 242,000 despite tax data collections that support a Job Growth estimate of 55,000 to 85,000.  A quick dive into the details shows the report is a lot weaker than the headline number indicates. Of the 242,000 jobs added, 304,000 of them were part time. That means the economy actually shed 62,000 full-time jobs. Average hours worked declined as did average weekly earnings despite minimum wage hikes in numerous states at the beginning of the year. First let’s look at the BLS Employment Situation Summary, unofficially called the Jobs Report. BLS Jobs Statistics at a Glance:

  • Nonfarm Payroll: +242,000 – Establishment Survey
  • Employment: +530,000 – Household Survey
  • Unemployment: +24,000 – Household Survey
  • Involuntary Part-Time Work: No Change – Household Survey
  • Voluntary Part-Time Work: +304,000 – Household Survey
  • Baseline Unemployment Rate: No Change – Household Survey
  • U-6 unemployment: -0.2 at 9.7% – Household Survey
  • Civilian Non-institutional Population: +180,000
  • Civilian Labor Force: +555,000 – Household Survey
  • Not in Labor Force: -374,000 – Household Survey
  • Participation Rate: +0.2 at 62.9 – Household Survey

The February Jobs Report in 14 Charts - U.S. employers added 242,000 jobs in February and an uptick in the number of Americans joining the labor force kept the unemployment rate unchanged at 4.9%, the Labor Department said Friday. Of course, the guts of the monthly employment report provide a more textured view of the job market. Here’s the latest overview, in charts: Average hourly wages declined in February, reversing recent signs of a pickup in their annual growth rate. The official unemployment rate stayed at 4.9% in February, but a broader measure of underemployment, which includes workers who have part-time jobs but say they would like to have full-time work, fell to 9.7%. The share of Americans working or looking for work—known as the labor-force participation rate—climbed to 62.9%, an increase of 0.5 percentage points over the past six months. The share with jobs, known as the employment-to-population ratio, climbed to 59.8%, also a half-point increase since September. The increase in work has been even quicker for workers ages 25 to 54, the ages at which Americans are most likely to be working. Their labor-force participation and employment population ratio has risen by 0.6 percentage points since September. Unemployment rates have been persistently higher for black and Hispanic men and women than for white men and women. During the recession, Hispanic men and women had unemployment rates that were as high as those for black women. Unemployment for Hispanic men has fallen especially quickly and is now within one percentage point of the unemployment rate for whites. The job market remains much stronger for those with college degrees and much weaker for those who did not complete high school. Annual job growth has slowed a bit from its highs of one year ago, but it’s still running well ahead of the annual average witnessed for most of the current economic expansion. Slightly less than half of unemployed workers lost their jobs through a layoff. The majority of unemployed people quit their jobs, started searching for the first time (such as recent graduates) or returned to job hunting after an absence (such as caring for family members or going back to school).The share of Americans who weren’t in the labor force who found a job in February rose to its highest level since the 2007-09 recession, reversing a recent downtick. . And the share of the unemployed who dropped out of the labor force in February continued to decline. . The number of unemployed Americans who have been looking for work for more than six months, despite sustained declines, is still above the level seen in December 2007 when the last recession began. . The median spell of unemployment lasts for 11.2 weeks, a little bit under three months. That’s improved substantially from the financial crisis, though it has climbed slightly over the past three months. . There have now been nearly 10 million full-time jobs added since the recession ended in June 2009, compared with just a few hundred thousand new part-time jobs. . Going back to when the last recession began in December 2007, the net gain in full-time jobs is almost equal to the net gain in part-time jobs.

Weather Slows Job Growth in February, Unemployment Stays Flat - Dean Baker - The Labor Department reported a sharp increase in the number of people entering the labor force in February and finding jobs, pushing the employment-to-population ratio (EPOP) to 59.8 percent, the highest rate in the recovery. The establishment survey showed the economy creating 242,000 new jobs. Apparently the snowstorms that hit the East Coast in early February did not markedly affect employment growth. Upward revisions to the prior two months data brought average growth over the last three months to 228,000. The big job gainers were retail, which added 54,900 jobs, restaurants with a gain of 40,200 jobs, and health care with a rise of 38,100 jobs. The first two numbers are considerably faster than average gains over the last year, while the gains in the healthcare sector are almost exactly in line with previous growth. Construction added 19,000 jobs in February. The relatively high-paying professional and technical services sector added 17,600 jobs. Educational services added 28,200 jobs in February, but most of this gain reversed a sharp fall reported for January. Interestingly, the temp sector shed jobs for the second consecutive month. Employment in the sector had been essentially flat since October. Manufacturing lost 16,000 jobs, reversing most of the gain reported for January. After showing modest growth from 2010 to 2014, manufacturing employment has been virtually flat since the start of 2015 due to the rising trade deficit. In contrast to the strong growth in employment, the average workweek reportedly fell by 0.2 hours in February, leading to a decline in the index of aggregate weekly hours. Weather may have been a factor in this decline as some businesses were likely closed for a day or two during the reference period. The average hourly wage also reportedly fell by 3 cents in February. The reported decline is most likely a reporting error, but still the average hourly wage has only increased at a 2.0 percent annual rate comparing the last three months to the prior three months. There is certainly no case of accelerating wage growth in these data.  The recent rise in the EPOP suggests that many of the people who had left the labor force during the downturn are now coming back, although the EPOP is still down by more than three full percentage points from the pre-recession level. Most of the drop-off is among prime age workers who still have an EPOP that is 2.5 percentage points below its pre-recession peak. The percentage of unemployment attributable to voluntary job leavers edged down to 9.7 percent, a level that is more consistent with a recession than a robust labor market. Also, all the duration measures edged up in February. The measures of duration and share of long-term unemployed are also not consistent with a strong labor market.There was no change in the number of people involuntarily working part-time in February. It is down by more than 3 million from the peak in 2010, with most of the drop coming since the end of 2013 when the health care exchanges came on line. By contrast, voluntary part-time employment has risen by almost 1.8 million (10.0 percent) since the ACA exchanges began to operate. There also has been a substantial rise in the number of incorporated self-employed, with a gain of more than 400,000 (7.6 percent) over the last two years.

Strong February jobs numbers belie politician pessimism -- Lots of good stuff in the February jobs report, a sharp contrast to the more pessimistic take on the US economy often seen in the 2016 presidential race. The strong top-line numbers — much better-than-expected 242,000 new jobs, plus 30,000 in upward revisions for December and January, steady 4.9% unemployment rate — don’t even tell the whole story.  Both the labor force participation and employment rates rose by 0.2 percentage points, while the U-6 unemployment-underemployment rate fell by 0.2 to 9.7%. (Indeed, the labor force has grown by 1.5 million over the past three months, according to the Wall Street Journal, the biggest such rise since early 2000.)  It’s a 15-month high for the LFPR, while employment rate (the employment-population ratio) is at its highest level since April 2009. Overall, the economy has added some 10 million full-time jobs since summer 2009.The one black mark is a familiar one: wages. Hourly earnings edged lower, reducing the annual growth rate to 2.2% from 2.5%.

In The Past Year, The U.S. Added 360,000 Waiters And Only 12,000 Manufacturing Workers - We already know that US jobs "growth" continues entirely on the back of (seasonally adjusted) minimum wage job growth, and since this has been one of our preferred topics exposing the hollow core of the so-called "recovery", we once again show the divergence between the two job categories that have come to define the New Paranormal: waiters and bartenders, aka the only truly growing (minimum wage) job category, and manufacturing workers - well paid jobs which sadly are no longer being created. Here is how this "recovery" has looked: since last February, the US has added 360K waiters; in the same time, a paltry 12,000 manufacturing workers have been added as shown in the chart below. How about longer-term? The next chart shows the cumulative growth (and decline) in waiter and bartender jobs since the start of the depression in December 2007. Waiter jobs added: 1.6 million and rising by 40K in February; manufacturing jobs lost: 1.4 million and dropping by 16K in February.

This Wasn't Supposed To Happen: U.S. Weekly Earnings Drop Most On Record -- The headline jobs number was certainly good, beating expectations and well higher than last month's disappointing (and upward revised) 182K print. However, a quick look below the headline reveals an amazing statistic: while we already noted that average hourly earnings posted only their first decline since December 2014, and just the 6th in the past decade, declining by -0.1%, what is the real surprise is that average weekly hours worked also dropped substantially by 0.2 from 34.6 to 34.4. This, naturally, is the denominator in the average hourly earnings calculation, and for it drop drop with the average also sliding, means that weekly earnings must have dropped. And drop they did: as the chart below clearly shows, based on the data which showed a whopping tumble in average weekly earnings from 878.15 to just 872.04, at -0.7%, this was the biggest monthly drop in the entire series history! The drop confirms that the jump in earnings observed in January, and which led many to prematurely conclude that wage growth has finally arrived, was nothing but a headfake driven by the increase in minimum wages across various states, which has now been fully digested, and as a result wage growth is once again what it was before: non-existent.Finally, it goes without saying that in the middle of a 'recovery' this is simply not supposed to happen.Productivity and Costs March 3, 2016: An upgrade for fourth-quarter output, first indicated by last week's second estimate for fourth-quarter GDP, gave productivity a lift and brought down unit labor costs. But productivity is still in the contraction column, at an annualized rate of minus 2.2 percent vs an initial estimate of minus 3.0 percent, while labor costs rose at annualized 3.3 percent vs an initial estimate of 4.5 percent. Output as measured in this report rose at an annualized 1.0 percent in the quarter vs an initial estimate of only plus 0.1 percent. Compensation was revised lower, down 2 tenths to an annualized plus 1.1 percent which also brought down revised labor costs. The fourth quarter was a weak one and early indications on first-quarter growth are much more positive. Further strength in growth would help improve productivity and help bring down costs.

This Is the Largest Job-Growth Streak Ever—Kind Of - We did it! This is the biggest streak of job creation in recorded history. As long as you don’t think about it too hard. February’s numbers make it official: This is now the largest sustained period of jobs growth the U.S. has seen since it started keeping track in 1939. Since 2010, the economy has added more than 13 million jobs without suffering a negative month. By this strict definition of “streak” as “consecutive months without a drop in nonfarm payrolls,” it’s also by far the longest at 65 months.But “largest” is only in absolute terms. When you adjust for the changing size of the U.S. workforce, this streak has added fewer jobs, proportionally, than others—even though it’s been going on far longer. . This streak’s record-setting length is equal parts blessing and curse — the pace of growth is much slower than during previous streaks. And it’s even slower still when you calculate it as a share of overall payrolls, instead of just a straight number of jobs.

The Typical U.S. Worker May Get Bigger Raises Than in the Jobs Report -  The wage measure featured in Friday’s jobs report may undershoot raises for the bulk of U.S. workers. The most closely watched wage figure, average hourly earnings for all employees, advanced 2.2% in February from a year earlier, the Labor Department said. According to payroll processing firm Automatic Data Processing Inc., that’s likely well less than the annual increase received by the typical U.S. worker: a full-time employee at the same company for more than a year. Those employees—more than 60% of all workers—saw their average hourly earnings increase 4.1% in the fourth quarter of 2015 compared with a year earlier, ADP said. The two figures differ mainly because the all-workers measure is influenced by those who recently entered the workforce and those who departed. Younger workers and those reentering the workforce typically earn less than older workers who are retiring. ADP’s comparable measure for all workers tracks with the Labor Department’s figure, improving a little better than 2% annually. Also, as the labor market improves, part-time workers are taking full-time jobs. But they sometimes trade hourly earnings for better benefits and more stability. Hourly wages for workers who switched from a part-time job to a full-time position at a different employer fell 5.8% in the fourth quarter from a year earlier, ADP said.

Comments: A Strong Employment Report  -- This was a strong employment report.  The unemployment rate was unchanged at 4.9% even as the participation rate increased (another strong household survey).  Not only was the headline number above the consensus forecast, but revisions were up for the previous two months.  This was strong job growth. Earlier: February Employment Report: 242,000 Jobs, 4.9% Unemployment Rate A few more numbers:  Total employment is now 5.1 million above the previous peak.  Total employment is up 13.8 million from the employment recession low. Private payroll employment increased 230,000 in February, and private employment is now 5.5 million above the previous peak. Private employment is up 14.3 million from the recession low. In February, the year-over-year change was 2.67 million jobs.  Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate increased in February to 81.2%, and the 25 to 54 employment population ratio increased to 77.8%. The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.  This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. . The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees. Nominal wage growth was at 2.2% YoY in February. This series is noisy, however overall wage growth is trending up. Note: CPI has been running under 2%, so there has been real wage growth.The number of persons working part time for economic reasons was little changed in February. This level suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that declined to 9.7% in February - the lowest level since May 2008.

Silicon Valley Has Not Saved Us From a Productivity Slowdown - Tyler Cowen - American middle class wages haven’t been rising as rapidly as they once were, and a slowdown in productivity growth is probably an important cause.In mature economies, higher productivity typically is required for sustained increases in living standards, but the productivity numbers in the United States have been mediocre. Labor productivity has been growing at an average of only 1.3 percent annually since the start of 2005, compared with 2.8 percent annually in the preceding 10 years. Without somehow improving productivity growth, living standards will continue to lag, this widely held narrative concludes. Still, not everyone views the situation this way. For instance, Marc Andreessen, the Silicon Valley entrepreneur and venture capitalist, says information technology is providing significant benefits that just don’t show up in the standard measurements of wages and productivity. Consider that consumers have access to services like Facebook, Google and Wikipedia free of charge, and those benefits aren’t fully accounted for in the official numbers. This notion — that life is getting better, often in ways we are barely measuring — is fairly common in tech circles.Until recently, this debate was inconclusive. It consisted mainly of anecdotes, with individuals describing how important advances like the Internet were — or were not — to them personally. But now Chad Syverson, a professor of economics at the University of Chicago Booth School of Business, has looked more scientifically at the evidence and concluded that the productivity slowdown is all too real. These results are outlined in his recent National Bureau of Economic Research working paper “Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown.” Professor Syverson notes that a slowdown has come to dozens of advanced economies, more or less at the same time, which indicates it is a general phenomenon. Furthermore, the countries with smaller tech sectors still have comparably sized productivity slowdowns, and that is not what we would expect if a lot of unmeasured productivity were hiding in the tech industry.

Does the US have a productivity or a measurement problem? - Brookings - Abstract - After 2004, measured growth in labor productivity and total-factor productivity (TFP) slowed. We find little evidence that the slowdown arises from growing mismeasurement of the gains from innovation in IT-related goods and services. First, mismeasurement of IT hardware is significant prior to the slowdown. Because the domestic production of these products has fallen, the quantitative effect on productivity was larger in the 1995-2004 period than since, despite mismeasurement worsening for some types of IT—so our adjustments make the slowdown in labor productivity worse. The effect on TFP is more muted. Second, many of the tremendous consumer benefits from smartphones, Google searches, and Facebook are, conceptually, non-market: Consumers are more productive in using their nonmarket time to produce services they value. These benefits do not mean that market-sector production functions are shifting out more rapidly than measured, even if consumer welfare is rising. Moreover, gains in non-market production appear too small to compensate for the loss in overall wellbeing from slower market-sector productivity growth. Third, other measurement issues we can quantify (such as increasing globalization and fracking) are also quantitatively small relative to the slowdown. Finally, we suggest high-priority areas for future research.

How a Less-Skilled American Workforce May Be Holding Back Growth - Theories abound as to why U.S. productivity growth has stalled. Economists attribute it to everything from a slowdown in business investment to inadequate measurement techniques that fail to capture efficiency gains from new technologies. A recent research note from J.P. Morgan Chase offers another theory: It’s at least partly because the American workforce as a whole is simply less skilled than it used to be. That matters because productivity growth drives wage growth, which by some estimates has stagnated for most of America’s workers. Growth in “labor quality,” a measure of the skill set of the average worker, has declined in the last few years, according to the report. In 2015, the growth in overall workforce skills contributed less than 0.1 percentage points to GDP growth, the smallest contribution of labor quality to growth since 1979. Michael Feroli, the author of the note, estimates that contribution will remain below 0.1 percentage points for the next few years. Compare that with previous decades: In the postwar era through 1980, growth in labor quality contributed 0.25 percentage points to GDP growth each year. From 1980 to 2005, that contribution rose to around one-third of a percentage point.

Around a third of workers fear for jobs and pay, research says - The scale of workers' insecurity since the economic crisis is revealed in research showing that 32% believed that there was a risk of losing their jobs and 38% were anxious that their pay would be cut. Many workers also feared arbitrary dismissal and loss of autonomy and pay, as well as discrimination and victimisation by management. Duncan Gallie, Professor of Sociology at the University of Oxford, and his colleagues analysed survey data on 2,949 people in Britain for a paper published in the journal Work, Employment and Society. The data, from a representative sample taken in 2012, showed that when workers thought about the future:

  • 7% thought it was very or quite likely they would lose their jobs in the next twelve months, and 25% thought there was some risk of this.
  • 38% feared (were 'very' or 'fairly' anxious) that their pay would drop.
  • 32% feared they would have less say in how they did their jobs.
  • 25% feared their jobs would be changed to work needing less skill, and 23% feared their job would become less interesting.
  • 19% feared they would be victimised by management and 18% that they would be discriminated against.
The researchers compared some of the findings with survey data from 2000 and 2001. This showed that the proportion who thought there was a risk they could lose their job had risen from 23.4% to 31.9% (a rise of 36%). Fear of victimisation had risen from 15.9% to 19.3% (a rise of 21%) and discrimination from 17.2% to 18.4% (a rise of 7%).

U.S. incomes are finally growing - The missing piece from the economic recovery has finally materialized. Median household income, adjusted for inflation, is now higher than it was before the recession that began at the end of 2007, according to new data published by Sentier Research. The typical family earned $57,153 in December, which is 4.3% higher than a year earlier and nearly 1% higher than December 2007. And month-to-month gains during the last several months have been the most rapid in the history of the survey, which dates to 2000. If the pace of growth continues in 2016, household incomes will hit a new record high well in advance of the November elections. Despite widespread worries of another recession, data on jobs and income show that ordinary workers are increasingly better off. Famed billionaire businessman Warren Buffett said in his latest annual letter that “America’s economic magic remains alive and well." The numbers back him up. Every month, Sentier calculates a household-income index, based on Census Bureau data, that allows it to measure the purchasing power of the typical family month-by-month, after adjusting for inflation. Here’s what the index looks like, with the red line representing household income (left scale) and the dark line representing the unemployment rate (right scale):

Workers At Tesla's Gigafactory Stage Mass Walk Out Protesting Out Of State Workers --All is not well in the non-GAAP paradise known as Tesla's Gigafactory, where labor tensions are suddenly running high. According to Bloomberg, at least 100 workers at the construction site for Tesla's massive (and taxpayer subsidized) battery factory near Reno, Nevada, walked off the job Monday to protest use of workers from other states, a union official said.  It used to be that workers were upset when foreigners were brought in; now it's workers from out of state. Local labor leaders are upset that Tesla contractor Brycon Corp. is bringing in workers from Arizona and New Mexico, said Todd Koch (no relation to the billionaire family by the same name) president of the Building and Construction Trades Council of Northern Nevada. The escalation in interstate labor tensions mirrors the fragmentation of Europe, where with an imminent collapse of the Schengen customs union, members of the neighboring EU countries will soon revolt when working side by side. Perhaps it only makes sense that with globalization now running in reverse, and with Europe falling apart at the seams, that the US will follow suit by defederalizing.

Raising the local minimum wage doesn’t hurt local businesses - Jared Bernstein - When the national minimum wage goes up, no business is at a competitive disadvantage — they all face the same wage floor. It’s fair to wonder whether sub-national minimum wages might encourage businesses to avoid an increase by moving, a question with implications for people all over the country — from Olympia, Wash., to Lexington, Ky., to Bangor, Maine — who are trying to secure a raise. The geographical variation that has sprung up over time, however, has allowed economists to test Hubbard’s claims, and the evidence supports the actions of the Birmingham city council. Partly because of federal inaction, 29 states, plus the District of Columbia, have set minimum wages above the federal level, with floors ranging from $7.50 in Maine and New Mexico to $10 in Massachusetts and California to $10.50 in Washington, D.C. (rising to $11.50 in July). Southern states are the least likely to be in this group. City lawmakers began to adopt higher wage floors at the local level more than a decade ago. Four counties and 19 cities have minimums above their state’s level, including Santa Fe, N.M., ($10.84), San Francisco ($12.25) and SeaTac, Wash. ($15.24). Several more have either proposed or passed higher minimum-wage laws that have yet to take effect. This variation has provided opportunities for something rare in empirical economics: quasi-experimental studies. In one famous paper, economists Alan Krueger and David Card compared fast-food employment in New Jersey, which raised its minimum wage in 1992, with that in Pennsylvania, which did not. “We find no indication that the rise in the minimum wage reduced employment,” they concluded.

Puerto Rico: Eminent Domain, Greenbacks, and the Exchange Stabilization Fund--Some Outside-the-Box Musings - The Puerto Rico situation feels a little like a McGuyver episode.  How do we get out of a locked room with only a rubber band and a toothpick?  Here are some half-baked thoughts, first on the nature of the problems and then some ideas for solutions.   To set the stage, there seem to me to be three core problems facing Puerto Rico.  First and most immediate is a leverage problem.  There’s simply too much leverage for what the Puerto Rican economy can support.  Second, there is a priorities problem.  There are lots of different issuers of Puerto Rican governmental-ish debt.  There is a lack of clarity regarding exactly who has a claim to what and the relative priorities of that debt.  Absent clarity on that matter, it is hard for creditors to negotiate a restructuring.  If everyone thinks that he or she is entitled to be repaid first, there’s not going to be a deal.  (This is a general problem of municipal debt, as local governments play lack of clarity regarding priority—e.g., the status of general obligation bonds—to borrow at lower rates than they should get.)  Third, there is a problem with Puerto Rico’s economic model, and this is a problem connected with the weird political arrangement Puerto Rico has with the United States.   Bankruptcy (be it Chapter 9 or a Puerto Rican domestic regime) is a solution for the first and second problems.  Bankruptcy is great for deleveraging, and it creates a forum for resolving priority disputes.  But bankruptcy ain’t going to fix a broken economic model.  If a business plan isn’t feasible, bankruptcy won’t make it so.  And Puerto Rico doesn’t have a clear model for how it can support its current standard of living on its tax base.  What comparable advantages does Puerto Rico have over other Caribbean economies?  The connection with the United States, perhaps, but Puerto Rico hasn’t figured out how to really monetize that.  And Puerto Rico’s political situation doesn’t help things either.  Without a clear economic model going forward (which probably involves renegotiating the political arrangement in some way), I don’t see Chapter 9 fixing much.  Just because we’re bankruptcy lawyers doesn’t mean that bankruptcy has to be the solution to everything. 

States reduce jobless checks, adding pressure to unemployed: (AP) — When Demetrius White recently lost his job as a $10-an-hour forklift driver loading pallets of shampoo, he applied for unemployment benefits to help support his family. That aid will not last as long as it once did, because White is among the first group of people affected by a new Missouri law reducing the duration of jobless benefits. His $200-a-week checks will last no more than three months — just half as long as what has typically been available. "That's a dramatic change, really," White said. "Thirteen weeks, I don't know if I'll be able to find a job." States traditionally have offered up to half a year of aid for the unemployed as they search for new jobs. But since the end of the Great Recession, eight states have reduced the number of weeks that people can draw benefits, while others have cut the amount of money the unemployed can collect. The cutbacks generally are intended to help shore up unemployment insurance trust funds, which went insolvent in 35 states following the recession that began in 2008. The changes could save hundreds of millions of dollars for businesses that pay unemployment taxes.  The White House warns that states are engaging in a "damaging erosion" of unemployment benefits. Obama's budget plan would require all states to provide at least 26 weeks of benefits while expanding coverage to more part-time and intermittent workers.

In One Month We Will Begin Intentionally Starving Poor People -- At the end of March, 22 states will begin imposing work requirements on people who want food stamps. Hundreds of thousands of people will likely lose their food aid.  The Wall Street Journal reports that starting on April 1, all of those states plan to reinstate a rule that had been set aside after the financial crisis led to mass unemployment: that adults with no dependents or disabilities are limited to “three months of food stamps in any three-year period—unless they work at least 80 hours a month, or meet education and training or volunteer benchmarks.” Food stamps, by the way, are a government program that works extremely well.  If people are unable to find a job, it is cruel to force them to starve, and it is foolish to make a poor, unemployed, hungry person sit through classes that will not directly lead to a job, or spend their time volunteering, for no income, simply so they can have food to eat, but no money or free time to obtain it. The likely outcome of reinstating these rules: “The Center on Budget and Policy Priorities estimates that 500,000 to one million people will lose access to food stamps this year, citing the experience in states where work requirements already returned.”  This is the human cost of all of those years of right-wing rhetoric about fairy tale “welfare queens” ripping off the system. That rhetoric was used only for momentary political gain. But it engendered a deep belief in certain parts of the public that even food is too gracious of a gift for our poorest citizens. So now, hundreds of thousands of people will go hungry, so that some other, smaller number of better-off people can believe that they are not being ripped off by people they do not know and will never see. Congratulations.

America has locked up so many black people it has warped our sense of reality -- For as long as the government has kept track, the economic statistics have shown a troubling racial gap. Black people are twice as likely as white people to be out of work and looking for a job. This fact was as true in 1954 as it is today. The most recent report puts the white unemployment rate at around 4.5 percent. The black unemployment rate? About 8.8 percent. But the economic picture for black Americans is far worse than those statistics indicate. The unemployment rate only measures people who are both living at home and actively looking for a job. The hitch: A lot of black men aren't living at home and can’t look for jobs — because they’re behind bars. Though there are nearly 1.6 million Americans in state or federal prison, their absence is not accounted for in the figures that politicians and policymakers use to make decisions. As a result, we operate under a distorted picture of the nation's economic health.  Imagine how the white and black unemployment rates would change if all the people in prison were added to the unemployment rolls. According to a Wonkblog analysis of government statistics, about 1.6 percent of prime-age white men (25 to 54 years old) are institutionalized. If all those 590,000 people were recognized as unemployed, the unemployment rate for prime-age white men would increase from about 5 percent to 6.4 percent. For prime-age black men, though, the unemployment rate would jump from 11 percent to 19 percent. That's because a far higher fraction of black men — 7.7 percent, or 580,000 people — are institutionalized.  Now, the racial gap starts to look like a racial chasm. (When you take into account local jails, which are not included in these statistics, the situation could be even worse.)

Mandatory Self-Reliance Classes for Welfare Recipients? Utah Bill Is Red-State Cruelty at Its Worst - The Utah Senate just passed a bill that would require public assistance recipients to take a two-hour self-reliance class. If recipients don't complete the training within 90 days, they would be cut off from their welfare. A Think Progress piece by Bryce Covert explains why many find the bill curious and unnecessary. "The bill seems to be premised on the idea that low-income people are poor because they’re bad with money," writes Covert, "which would mean that teaching them to be better with money could solve their poverty. But that’s not borne out by data. Generally speaking, the poorest Americans spend larger portions of their budgets on necessities and spend less on eating out, entertainment and alcohol than others with more stable income."  The bill, SB153, was proposed by Republican State Senator Lincoln Fillmore, a local businessman who joined the Utah Senate in 2015. Fillmore is also president of the charter-school-management company Charter Solutions. A 2010 Desert News story about the company noted how "the business of offering support services to charter schools is becoming increasingly intertwined with charter school politics" in Utah. "Tension over the issue peaked...when the Utah Association of Public Charter Schools reworked its management," the piece explains. "Four of the board's seven members now have strong ties to Parents for Choice in Education, an advocacy organization that is notorious for its support of privatization. Two board members, including Fillmore, operate charter school management companies."

San Francisco deputies charged with forcing inmates into 'fight club' - Three San Francisco sheriff’s deputies were charged Tuesday for allegedly forcing jail inmates to face off in gladiator-style fights and wagering on the bouts for their own entertainment. In announcing the charges, San Francisco district attorney George Gascón called the behavior of deputy sheriffs Eugene Jones and Clifford Chiba, and former deputy Scott Neu, “serious crimes that damage the moral authority of law enforcement. “Subjecting inmates who are in the care and custody of the state to degrading and inhumane treatment,” Gascón said in written statement, “makes a mockery of our justice system and undermines any efforts towards rehabilitation.” What authorities are calling a non-consensual “fight club” behind bars first came to light when the father of an inmate, who had been forced to fight a year ago, alerted his son’s public defender. Other inmates later came forward. Neu was charged with four felony counts of assault by an officer under color of authority and four felony counts of making criminal threats. He was also charged with misdemeanor counts of inhumanity to a prisoner, and cruel and unusual punishment of a prisoner.

Nearly half of American children living near poverty line --  Nearly half of children in the United States live dangerously close to the poverty line, according to new research from the National Center for Children in Poverty (NCCP) at Columbia University's Mailman School of Public Health. Basic Facts about Low-Income Children, the center's annual series of profiles on child poverty in America, illustrates the severity of economic instability and poverty conditions faced by more than 31 million children throughout the United States. Using the latest data from the American Community Survey, NCCP researchers found that while the total number of children in the U.S. has remained about the same since 2008, more children today are likely to live in families barely able to afford their most basic needs. "These data challenge the prevailing beliefs that many still hold about what poverty looks like and which children in this country are most likely to be at risk," said Renée Wilson-Simmons, DrPH, NCCP director. "The fact is, despite the significant gains we've made in expanding nutrition and health insurance programs to reach the children most in need, millions of children are living in families still struggling to make ends meet in our low-growth, low-wage economy." According to NCCP researchers, the number of poor children in the U.S. grew by 18 percent from 2008 to 2014 (the latest available data), and the number of children living in low-income households grew by 10 percent.

South Dakota 'genital check bill' vetoed after outcry from transgender supporters - South Dakota’s governor vetoed a bill Tuesday that would have made the state the first in the US to approve a law requiring transgender students to use bathrooms and locker rooms that match their sex at birth. South Dakota would have been the first state to take such a step. But Republican governor Dennis Daugaard rejected the bill after the American Civil Liberties Union, the Human Rights Campaign and transgender students and adults called the legislation discriminatory. In his veto message, Daugaard wrote that the bill “does not address any pressing issue” and that such decisions were best left to local school officials. The Republican-controlled Legislature approved the proposal last month, with supporters saying it was meant to protect student privacy. Some advocates have called the South Dakota bill the first “genital check bill” because it raised questions about how schools would determine a student’s genital characteristics. Daugaard vetoed the legislation at the 11th hour, after it was hotly debated in the legislature, in the business community and among South Dakota residents.

Better Textbooks Raise Student Achievement Cheaply and Effectively -- Teacher quality can be measured using value-added student achievement scores. Value-added scores, however, let us do much more. We can measure the value not only of different teachers but of different teaching methods. Thus, value-added scores and more generally big data are tools not just to weed out low-quality teachers but to raise the quality of all teachers. At Brookings Thomas Kane reports on new research evaluating textbooksWe matched each teacher to the students they were teaching and assembled data on students’ demographic characteristics, performance on prior state tests, and the averages of such characteristics for the peers in their classroom. We also estimated each teacher’s impact on student performance in the prior school year (2013-14) to use as a control.   After controlling for the measures of student, peer, and teacher influences above, we estimated the variance in student outcomes on the new assessments associated with the textbook used.  The textbook effects were substantial, especially in math. In 4th and 5th grade math classrooms, we estimated that a standard deviation in textbook effectiveness was equivalent to .10 standard deviations in achievement at the student level. That means that if all schools could be persuaded to switch to one of the top quartile textbooks, student achievement would rise overall by roughly .127 student-level standard deviations or an average of 3.6 percentile points. Although it might sound small, such a boost in the average teacher’s effectiveness would be larger than the improvement the typical teacher experiences in their first three years on the job, as they are just learning to teach.  What makes this research especially important is that textbooks have no unions and it’s easy to replace one textbook with a better textbook. Moreover: An annual report on the effectiveness of textbooks would transform the market, by providing publishers and software developers with a stronger incentive to compete on quality.

As Detroit Starts to Mend, Its Schools Lurch Toward Fiscal Crisis— Since this city emerged from bankruptcy at the end of 2014, it has eked out a tentative recovery, tearing down thousands of abandoned houses, restoring streetlights and luring new businesses.  But the public school system in Detroit is now on the verge of its own fiscal crisis. Darnell Earley, the departing state-appointed emergency manager, said the Detroit Public Schools, battered by declining enrollment and debt of $3.5 billion, could run out of money by April. Some officials in Michigan have predicted that the district is headed for bankruptcy. The financing problem is adding uncertainty to a system already burdened by decrepit buildings, teacher disgruntlement, low test scores and a reputation as one of the country’s most troubled school districts. Falling into default or bankruptcy could further jeopardize the education of its 45,000 children and hurt the city’s fledgling recovery, officials said. The school system’s enrollment loss has resulted in a steep decline in revenue for the district, making it more difficult to maintain buildings, among other duties.   The district’s only salvation may be the Republican-controlled State Legislature, whose members are considering bills in both chambers that would gradually pay down hundreds of millions in debt and effectively divide the district into two parts.“Without that, all bets are off,” Mr. Earley said in an interview in his office last week. “The whole thing will just kind of bottom out.”Mr. Duggan and other local leaders are pressing lawmakers to pass legislation in the next several weeks. “We don’t have any other options,” Mr. Earley said.

Chicago schools fast running out of cash as standoff with Illinois governor worsens | Reuters: Chicago’s cash-starved public schools' district may be choked off from more loans and find itself unable to meet a $676 million pension payment in June because of a deepening legal dispute with Illinois’ governor. The state’s school board, stocked with Republican Governor Bruce Rauner’s appointees, is expected to declare Chicago’s school system in “financial difficulty” as early as April under an Illinois law authorizing state takeovers of financially distressed school systems. Rauner, who is seeking to take over the schools' district, contends that finding would bar the nation’s third-largest public school system from further borrowing. Chicago Public Schools (CPS), which only just borrowed $725 million through a bond sale, says it is exempt from the law, thus keeping Rauner and his State Board of Education from dictating financial decisions involving the system, including its ability to borrow additional funds. CPS plans to tap an existing $370 million credit line with Barclays Bank to help pay its June 30 pension obligation, according to Moody’s Investors Service analyst Mark Lazarus. But that could also be in jeopardy because of Rauner's stance. The district has indicated a need to sell more debt, but that seems unlikely now. “I’d say it’s dangerous to issue it, and it would be more dangerous to buy it,”

West Virginia Votes To Block Science Standards Because They Teach Global Warming - Beginning this summer, public school students in West Virginia were supposed to learn about human-induced climate change three times — in sixth-grade science, in ninth-grade science, and in a high school elective course on environmental science. Now, it’s unclear whether students will learn about climate change at all. That’s because the West Virginia House of Delegates voted last Friday to block new science standards from being implemented for at least another year, due to the fact that they mention climate change as a man-made problem. “In an energy-producing state, it’s a concern to me that we are teaching our kids potentially that we are doing immoral things here in order to make a living in our state,” Delegate Jim Butler, (R) told the Charleston Gazette-Mail. “We need to make sure our science standards are actually teaching science and not pushing a political agenda.” Butler also worried that the new curriculum would “expect students to believe” in global warming and “prove it with evidence.” If Butler’s concerns were realized, West Virginian students would join an overwhelming number of scientists, governments, and businesses, all of which accept climate change as a man-made phenomenon driven by the burning of fossil fuels. But West Virginia’s overwhelmingly Republican House of Delegates seems to side with the three percent of scientists that doubt the human connection to climate change. Also speaking to the Charleston Gazette-Mail, Delegate Michel Moffatt (R), who introduced the amendment, worried that students would “twist” the climate science curriculum to conclude that “all fossil fuels are bad.” And Delegate Frank Deem (R) speaking in support of the amendment, said that “there’s nothing that upsets [him] more than the idea that it’s a proven fact that climate change is man made.”

Creationist who thinks Obama was a gay prostitute poised to join Texas Board of Education: A woman who believes in the New World Order conspiracy theory and that President Obama worked as a gay prostitute could soon win a seat on the Texas state Board of Education, the Houston Chronicle reports. Mary Lou Bruner fell just 2 points short of gaining the 50 percent needed to avoid a run-off. Bruner, who claims to be a retired teacher who holds a Masters in special education, believes sex education materials “stimulate” children to experiment with sex and that the United Nations has a plan to wipe out two-thirds of the world population. According to the Chronicle, Bruner has deleted most of her Facebook posts with questionable content — but not before Gawker and others could collect screen shots of them. Many can be viewed via a simple image search in Google. “Obama has a soft spot for homosexuals because of the years he spent as a male prostitute in his twenties,” Bruner wrote in October. “That is how he paid for his drugs.” Bruner also believes climate change is a conspiratorial hoax.Bruner also believes that dinosaurs co-existed with humans and, in fact, were on Noah’s Ark. “The dinosaurs on the ark may have been babies and not able to reproduce,” she wrote. “It might make sense to take the small dinosaurs onto the ark instead of the ones bigger than a bus.” She also links school shootings with the teaching of evolution in schools. Also troubling is the fact that Bruner has hateful views on Muslim people. “The USA should ban Islam and stop all immigration. from Muslim countries because Islam’s stated goal is to conquer the USA and kill the infidels (nonbelievers),” she wrote.

National Poll Finds Bipartisan Suport for Serious Regulation of Charter Schools - According to a new, nationwide poll, Americans overwhelmingly want public charter schools to be more accountable, have less selective admissions policies, employ better-trained teachers, and refrain from harming traditional local schools by siphoning away precious taxpayer funds. Overall, the poll shows wide support for regulating many aspects of the school privatization movement.  “Americans embrace proposals to reform the way charter schools are authorized and managed,” said a report by GBA Strategies, which conducted the poll of 1,000 registered voters in January for two groups that have documented fiscal malfeasance by charter operators, In The Public Interest and the Center for Popular Democracy. “The public overwhelmingly supports initiatives to strengthen charter school accountability and transparency, improve teacher training and qualifications, prevent fraud, serve high-need students and ensure that neighborhood public schools are not adversely affected.” In addition to the report’s findings, in which bipartisan majorities—including charter school supporters—called for greater transparency, oversight and a shift in academic priorities, the poll also reaffirmed the need for greater experimentation in traditional public schools, which was the initial concept for charter schools, but has rarely been borne out in today’s charter industry, which is dominated by privately run corporate education franchises.

Kansas cuts higher education amid disappointing revenues - (AP) — Republican Gov. Sam Brownback cut Kansas’ higher education spending Tuesday after the state’s tax collections fell $54 million short of expectations in February. The lower-than-anticipated revenues last month left the state facing a small deficit in its current budget, for the fiscal year ending June 30. The Department of Revenue’s report on monthly tax collections came only two weeks after the Republican-dominated Legislature passed a bill aimed at keeping the budget balanced through June 2017. Brownback ordered a $17 million cut in spending on state universities, or 3 percent of the tax dollars allocated to them, over the next four months. The Board of Regents said it will decide by the end of the week how the reductions will fall. The state must make further adjustments to keep its budget balanced. Senate President Susan Wagle, a Wichita Republican, said it can no longer rely on “budget maneuvers” it has used in the past, including this year. “The time has come to cut every government funded entity,” Wagle said in a statement. “The reduction will be small when equitably spread across the board.” Kansas has struggled to balance its budget since Republican legislators slashed personal income taxes in 2012 and 2013 at Brownback’s urging in an effort to stimulate the economy.

USC tuition will top $50,000 /year for the first time - USC, always striving to reach new heights, is set to cross a dubious milestone: Tuition for the 2016-2017 academic year will surpass $50,000 for the first time. With a price tag of $51,442 for tuition and an additional $841 in fees, USC is sure to be in the running for the unofficial title of most expensive place in the country to get a college degree. According to U.S. News & World Report, Vassar College in New York won that honor for the current school year by charging $51,300 in tuition and fees. Even Harvard, that paragon of academic excellence, charges undergraduates a mere $45,278 in tuition and fees. The bigger tuition bill comes as USC is rising both in academic reputation and as a financial powerhouse. In two decades, it has climbed from 51st to 23rd in U.S. News & World Report's rankings of national universities. It's now in the midst of a $6-billion fundraising drive. "We're competing with the Stanfords and the Ivy League schools of the world, and when you're competing for best faculty in the world, that's expensive," said USC Provost Michael Quick. "As we build infrastructure, that's expensive."

Beware of the Philly pension blob: Philadelphia's pension crisis, as Finance Director Rob Dubow has noted, is unfolding like the plot of the science fiction classic The Blob. The movie's menace started as a small, gelatinous lump found outside Phoenixville. The more it ate, the bigger it got, until it threatened to engulf the entire town. The city pension fund's ravenous appetite has more than doubled in 15 years. It now devours 15 percent of Philadelphia's general fund. That's money that won't be spent on services like caring for abused children or staffing libraries. This fiscal year, city taxpayers are expected to feed $612 million to pensions, which is a little less than the Police Department's budget. It's expected to be even more expensive next year. Making matters worse, as The Inquirer's Claudia Vargas reported recently, the fund's assets performed so poorly last year that it lost $220 million of its value - roughly enough to run the city's prisons. That would be significant even if the pension fund were healthy, but it isn't: It has only 46 percent of what it needs to meet its projected obligations. The fund is so troubled that the city's fiscal oversight board publicly called on officials to deal with it last week. And since City Council rejected a 2014 offer for the Philadelphia Gas Works, which would have significantly reduced the pension problem, other, more painful solutions must be pursued quickly. Outside of better investment returns or asking taxpayers for even more, city workers will have to be a major source of additional funds. They will have to understand that although it is grossly unfair to ask them to pay for promises that irresponsible politicians made but couldn't keep, stabilizing the fund benefits workers as well as taxpayers. Changes to future benefits also have to be considered.

U.S. top court rejects union challenge to New Jersey pension reforms - The U.S. Supreme Court on Monday rejected a bid by unions representing public employees, including teachers and state troopers, to force the state of New Jersey to pay the full share of its annual public pension contribution. The court declined to hear the unions' appeal, leaving in place a July 2015 ruling by the New Jersey Supreme Court that allowed Republican Governor Chris Christie's administration to make only partial contributions to public pension funds. “We’re heartened by the U.S. Supreme Court’s decision today," said Christie spokeswoman Joelle Farrell, who said that all parties need to come back to the table and find a solution "that is fair for all taxpayers." Over several administrations, New Jersey has short-changed its public pensions, leaving them poorly funded. Under bipartisan 2011 reforms, the state promised to step up contributions over seven years until reaching the full amount that actuaries say is necessary to keep the funds healthy. In exchange, New Jersey teachers, state troopers and other government workers agreed to pay more. In 2014, Christie slashed the state's contribution for two years, citing a severe revenue shortfall, and ultimately paid less than 30 percent of what was required under the reforms, according to the unions' petition asking the U.S. Supreme Court to hear the case.

New York State Pension Funds Lost $5.3 Billion From Fossil Fuel Holdings Over 3 Years - The New York State Common Retirement Fund lost at least $5.3 billion over the last three years by remaining invested in fossil fuel holdings.These are the findings according to a new report from Corporate Knights, an investment research company, and publicised by grassroots global climate campaign Specifically, the report concluded that the New York State Common Retirement Fund (NYS-CRF) joined several other US state-based pension funds in losing billions by remaining invested in the top 200 coal, oil, and gas companies over the past three years. According to Corporate Knights, by remaining invested in over 30 companies from the top 200 dirtiest fossil fuel companies, instead of reinvesting in green companies, the NYS-CRF lost out on $5.3 billion.“The era of fossil fuels is coming to an end, and this report demonstrates very clearly why divestment is not only environmentally sound, but financially responsible,” said New York State Senator Liz Krueger, co-sponsor of the Fossil Fuel Divestment Act. “By staying invested in fossil fuels over the last three years our state pension fund missed out on over $5 billion in potential returns. Investment in fossil fuels is a sinking ship, and it’s high time we headed for the lifeboats.” put that figure into a frightening example: $5.3 billion represents what could have been $4,500 back into the pockets of each of the Fund’s 1.1 million members.

The State of American Retirement: How 401(k)s have failed most American workers -- Economic Policy Institute - Overview: Today, many Americans rely on savings in 401(k)-type accounts to supplement Social Security in retirement. This is a pronounced shift from a few decades ago, when many retirees could count on predictable, constant streams of income from traditional pensions (see “Types of retirement plans,” below). This chartbook assesses the impact of the shift from pensions to individual savings by examining disparities in retirement preparedness and outcomes by income, race, ethnicity, education, gender, and marital status. The first section of the chartbook looks at retirement-plan participation and retirement account savings of working-age families. The charts in this section focus on families headed by someone age 32–61, a 30-year period before the Social Security early eligibility age of 62 when most families should be accumulating pension benefits and retirement savings. The second section looks at income sources for seniors. Since many workers transition to retirement between Social Security’s early eligibility age and the program’s normal retirement age (currently 66, formerly 65), the charts in the second section focus on retirement outcomes of people age 65 and older. Jump to the charts

Supreme Court Rules Against Vermont Health-Care Data Law - WSJ: The Supreme Court on Tuesday quashed state efforts to gather health-care data from insurance plans, ruling that such reporting requirements run afoul of federal laws regulating employee benefits. The case came from Vermont, where a 2005 law mandates that larger health insurance plans report “information relating to heath care costs, prices, quality, utilization or resources required” to a state database. Boston-based Liberty Mutual Insurance Co. objected, contending the law conflicts with the federal Employee Retirement Income Security Act of 1974, which pre-empts state laws that “relate to any employee benefit plan.” Liberty Mutual sued in its capacity as a self-insured employer with workers based in Vermont. Blue Cross Blue Shield of Massachusetts Inc. administers the plan for Liberty Mutual, which has about 140 employees in Vermont and tens of thousands nationwide. Companies sometimes object to state rules, which can vary across the country, when federal laws also apply. The Supreme Court by a 6-2 vote agreed with Liberty Mutual. Another 17 states have similar database initiatives, according to a brief filed by the National Governors Association. “Differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability,” Justice Anthony Kennedy wrote for the majority.

The “Cadillac Tax”: Driving Firms to Change Their Plans? - New York Fed- Since the 1940s, employers that provide health insurance for their employees can deduct the cost as a business expense, but the government does not treat the value of that coverage as taxable income. This exclusion of employer-provided health insurance from taxable income—$248 billion in 2013, according to the Congressional Budget Office—is a huge subsidy for health spending. Many economists cite the distortionary effects of this tax subsidy as an important reason for why U.S. health care spending accounts for such a large share of the economy and why spending historically has grown so rapidly. In this blog post, we focus on a provision of the Affordable Care Act (ACA) that is intended to chip away at this tax subsidy, the colloquially labelled “Cadillac Tax” on the priciest employer-provided health insurance plans.  Drawing on results from business surveys conducted in August 2015 by the Federal Reserve Bank of New York, as well as the more comprehensive 2015 Employer Health Benefits Survey published by the Kaiser Family Foundation, we explore the possible impact of this provision on businesses in the Second District and how individual firms might respond.

The Critics of Sanders’s Health Plan Understate Benefits and Overstate Costs - Friedman - In his article “The False Lure of the Sanders Single-Payer Plan,” Paul Starr is wrong about Senator Bernie Sanders’s improved “Medicare for All” plan, and wrong about single-payer health care, because he relies on a flawed analysis by Kenneth Thorpe.While Thorpe does not provide enough documentation to make an explicit comparison between his estimates and those provided in detail by the Sanders campaign, we can extract enough to conclude that his analysis relies on fundamentally flawed assumptions. To conclude that the Sanders health plan will cost $1.1 trillion more per year than estimated, Thorpe is assuming that national health expenditures over the next decade will total $51 trillion, or 21 percent of GDP. (This estimate is the sum of projected public spending for and outside of state Medicaid programs as well as Thorpe’s estimate of new federal spending in the Sanders plan, using a 100 percent actuarial value for the Sanders plan, rather than the plan’s 98 percent.) This $51 trillion estimate is nearly $4 trillion above current projections from the Center for Medicare and Medicaid Services (or CMS, which estimates it to be 20 percent of GDP), and $10 trillion more than projected by Sanders (17 percent of GDP). Compared with CMS, however, Thorpe’s projection includes at least two areas of savings: He anticipates a 4.7 percent decrease in spending from reduced administrative waste, and a reduction in provider prices to save a further 1.3 percent of spending. With these savings, Thorpe must be assuming more health-care spending from a $6.6 trillion increase in real medical services, which includes $1.3 trillion from covering the uninsured and $5.3 trillion from increased utilization by Americans freed of copayments and deductibles. This is an 11 percent increase in spending, including an increase of nearly one-third for “discretionary” activities, such as doctor visits.

Ending HIV: A Missing Piece in the Health-Care Debate - For the Republican presidential candidates, the Affordable Care Act (ACA) has been a sort of collective punching bag. Every single candidate wants a repeal of the health-care law, which was a stinging victory for President Obama and the Democrats. Donald Trump would replace it with something vague and "terrific." Sen. Ted Cruz essentially foreshadowed his candidacy by shutting down the government over the ACA. Sen. Marco Rubio has called it "fatally flawed." Health care is certain to be one of the most partisan debates of the upcoming election, and even Democrats are arguing over the issue now that Bernie Sanders has unveiled his single-payer "Medicare for All" proposal. What we haven't heard in the presidential debates is that the ACA - or a universal, single-payer health-care system - is crucial for combatting HIV/AIDS. Activists and public health experts agree that people living with HIV or at risk of contracting the virus are already benefiting from the ACA, which provides crucial pieces to the puzzle of fighting HIV/AIDS across the population. 

Hospitals vulnerable to cyber attacks on just about everything - They entered the hospital and moved from floor to floor, dropping malware-laced USB thumb drives with the hospital’s logo where staffers might tend to pick them up. Within 24 hours, infection spread as hospital employees used the bobbytrapped drives at nursing stations that obediently called in to request malware from the researchers’ server. In this case, the infection was benign: an emulation of malware that can download and install itself off a USB stick, take control of the targeted system, and grant control to a remote adversary. The dangers of people plugging in rigged USB sticksis nothing new. But it was only one of a dizzying array of attacks the team launched in a two-year project aimed at dissecting hospital security. The researchers have documented their findings in a paper titled Securing Hospitals. If you flip to page 28 of their report, you’ll see there are far more primary attack surfaces, as Independent Security Evaluators enumerated, including:

  • Medical records. Removing somebody’s allergy to penicillin, for example, could injure them if a doctor administers the antibiotic.
  • Work orders. For example, altering an instruction to deliver morphine to Patient A instead of Patient B could have catastrophic consequences.
  • Medicine. Hospitals are vulnerable to malicious actors losing or destroying medicine, altering inventory so a healthcare worker administers the wrong medication, or sending the wrong medicine to the wrong patient.
  • Surgery. Orders are vulnerable to being altered, which could result, for example, in the wrong leg being amputated or organs being removed from the wrong patient.
  • Blood, organs and other biological material. Attack surfaces include the climate control systems necessary for storage of these crucial materials.

Pfizer: tax dodger, price gouger -- A new report from Americans for Tax Fairness concludes: “In addition to dodging its fair share of taxes, Pfizer—maker of Celebrex, Lipitor, Lyrica, and Viagra, among many other health-care products—has also been aggressively raising prescription drug prices, thereby straining patients and our health care system and in some cases putting needed medications out of reach. By dodging taxes while boosting prescription drug prices, Pfizer squeezes American families and communities from two sides at once. In the company’s biggest insult to America yet, Pfizer’s merger will allow it to go on enjoying all the benefits of being based here—everything from a publicly educated workforce to an excellent communications infrastructure to a reliable patent system—without adequately paying to support them.”  The two wealth-extracting techniques go together, very often. This is what modern capitalism is increasingly becoming.  Why doesn’t Pfizer’s leadership focus on what it was originally set up to do: wealth creation? And don’t get us started on shareholder value.

The Great Recession May Have Worsened Drug Abuse, Especially Among White Men - Mortality rates for white, middle-aged Americans have been on the rise since 1999. Newly released research shows the 2007-2009 recession may have worsened that unfortunate trend. “There is strong evidence that economic downturns lead to increases in substance-use disorders involving hallucinogens and prescription pain relievers,” “These effects are robust to a variety of specification choices and are concentrated among prime-age white males with low educational attainment.” The findings match up with research from Princeton University professors Anne Case and Angus Deaton, who last year found that suicide, alcohol abuse, drug overdoses and chronic liver diseases drove a rise in the death rate among middle-aged whites between 1999 and 2013. By comparison, death rates for black and Hispanic Americans in that age group declined over the same period. They zero in on the Great Recession and its potential impact on substance abuse. They find “clear evidence that substance-use disorders involving analgesics and hallucinogens are both strongly countercyclical,” meaning that such drug use rises when the economy sinks. The relationship between unemployment and painkiller abuse is especially robust among people in sales and service occupations. In blue-collar fields like construction, maintenance, machine operators, transportation workers and the armed forces, substance-use disorders involving heroin were strongly countercyclical.

Is this the end of the trade in surrogacy? | Bangkok Post: opinion: The global trade in babies born through commercial surrogacy is slowly being shut down. India, Nepal, Thailand and Mexico have introduced measures that would limit or ban foreigners from hiring locals as surrogate mothers. Cambodia and Malaysia look likely to follow suit. In an industry in which the conventional wisdom has long dismissed efforts to “buck the market”, this is a surprising — and welcome — development. Uncritical proponents of biotechnology tend to celebrate the fact that technological breakthroughs have outpaced government regulations, arguing that this has allowed science to progress unfettered. But the determination of countries that have historically been centres of commercial surrogacy to stop the practice underscores the naivete of that position. It is no coincidence that the countries cracking down on cross-border surrogacy are those in which the practice takes place. The argument that all parties — surrogate mothers, babies and commissioning parents — benefit from the transaction has not withstood scrutiny. Consider India, where the surrogacy industry is valued at US$400 million (about 14.2 billion baht) per year; until recently, some 3,000 fertility clinics were operating. As worries have mounted that commercial surrogacy leads to human trafficking and the exploitation of women, India’s authorities have concluded that the ethical concerns outweigh the economic benefits.India has yet to finalise its anti-surrogacy legislation. But the way the debate has evolved since the first bill was proposed in 2008 illustrates the rapid change in how the practice is viewed.

Health care takes on the fight against trafficking -- Dr. A rolled his eyes. It was last October, and he had just come across a triage note that said, “I have a tracker in me.” Dr. A — we’re not using his name or identifying his hospital, which is in a major American city, to protect patient safety — is 28 years old, a resident and about as green as they come. And he’s got a patient who claims she’s got a GPS tracking device implanted in her side. “When you work on the east side of our hospital, psychiatric patients are a dime a dozen,” he said. But this patient is different.  She’s put together. She’s lucid. She’s got an incision. A group crowded around the computer to see her x-ray. “Embedded in the right side of her flank is a small metallic object only a little bit larger than a grain of rice,” he said. “But it's there. It's unequivocally there. She has a tracker in her. And no one was speaking for like five seconds — and in a busy ER that's saying something.” A tracking chip was removed in October 2015 from a patient who was a victim of human trafficking. - It turns out this 20-something woman was being pimped out by her boyfriend, forced to sell herself for sex and hand him the money. “It was a small glass capsule with a little almost like a circuit board inside of it,” he said. “It's an RFID chip. It's used to tag cats and dogs. And someone had tagged her like an animal, like she was somebody's pet that they owned.”

Science: You Now Have a Shorter Attention Span Than a Goldfish: The average attention span for the notoriously ill-focused goldfish is nine seconds, but according to a new study from Microsoft Corp., people now generally lose concentration after eight seconds, highlighting the affects of an increasingly digitalized lifestyle on the brain.Researchers in Canada surveyed 2,000 participants and studied the brain activity of 112 others using electroencephalograms (EEGs). Microsoft found that since the year 2000 (or about when the mobile revolution began) the average attention span dropped from 12 seconds to eight seconds.“Heavy multi-screeners find it difficult to filter out irrelevant stimuli — they’re more easily distracted by multiple streams of media,” the report read.On the positive side, the report says our ability to multitask has drastically improved in the mobile age.Microsoft theorized that the changes were a result of the brain’s ability to adapt and change itself over time and a weaker attention span may be a side effect of evolving to a mobile Internet.The survey also confirmed generational differences for mobile use; for example, 77% of people aged 18 to 24 responded “yes” when asked, “When nothing is occupying my attention, the first thing I do is reach for my phone,” compared with only 10% of those over the age of 65. And now congratulate yourself for concentrating long enough to make it through this article.

Flint Is in the News, but Lead Poisoning Is Even Worse in Cleveland - NYTimes: — One hundred fifty miles northwest of here, the residents of Flint, Mich., are still reeling from the drinking water debacle that more than doubled the share of children with elevated levels of lead in their blood — to a peak, in mid-2014, of 7 percent of all children tested.Clevelanders can only sympathize. The comparable number here is 14.2 percent.The poisoning of Flint’s children outraged the nation. But too much lead in children’s blood has long been an everyday fact in Cleveland and scores of other cities — not because of bungled decisions about drinking water, but largely because a decades-long attack on lead in household paint has faltered. It is a tragic reminder that one of the great public health crusades of the 20th century remains unfinished. “Unless there is some sort of concerted national effort to do something about this problem, it’s going to persist for years to come,” “Lead is a big problem in this country, and it frustrates me to no end that except in rare cases, it passes unnoticed.” Four decades ago, political leaders declared war on lead, citing evidence that even vanishingly small amounts of it have a pernicious impact on young brains, stunting intellectual growth and affecting cardiovascular, immune and hormone systems. The federal government began phasing out leaded gasoline in 1975, and banned lead-based household paints in 1978. In 2000, a cabinet-level task force proposed to end lead poisoning in children within a decade. By 2006, blood lead levels in children under 6 had fallen to close to a tenth of their 1970s levels. But progress since has slowed. By the most recent estimate, about 37 million homes and apartments still have some lead paint on walls and woodwork, 23 million with potentially hazardous levels of lead in soil, paint chips or household dust. The Centers for Disease Control and Prevention estimate that four million of those most dangerous households have children. A half-million children — in Atlantic City, Philadelphia and Allentown, Pa., where a remarkable 23.1 percent of children tested had excessive lead — are believed to have enough lead in their blood to merit a doctor’s attention.

Water Contamination Investigation Expanded After Tests Showed PFOA in Several Wells of Vermont Town -- Consumer advocate Erin Brockovich and the law firm Weitz & Luxenberg announced today they are expanding their investigation into perfluorooctanoic acid (PFOA) water contamination to include North Bennington, Vermont. The announcement comes after new tests by the State of Vermont revealed several wells in the town contain the same chemical that was found in the Hoosick Falls, New York and Petersburgh, New York water systems. The Vermont Department of Environmental Conservation announced it found elevated levels of PFOA in North Bennington within a mile-and-a-half of the former Chemfab factory after testing several wells in the area. Chronic PFOA exposure has been linked to testicular cancer, kidney cancer, thyroid disease, high cholesterol, ulcerative colitis and pregnancy-induced hypertension. Studies suggest other health consequences include a possible connection to pancreatic cancer. “Drinking PFOA contaminated water can have a devastating impact on human health,” said Robin Greenwald, head of the environmental and consumer protection unit at Weitz & Luxenberg. “We are undertaking this independent investigation to understand why this has occurred and the ways in which residents have been harmed. We will be talking to residents about their legal options and to the authorities about how the ongoing contamination can be stopped.” 

Are You Drinking Teflon Contaminated Water? - The bad news about a toxic chemical used to make Teflon keeps getting worse.  Perfluorooctanoic acid or PFOA, was used for decades by DuPont and other companies to make non-stick, waterproof and stain-resistant products. PFOA and related chemicals, which studies show can cause cancer and reproductive disorders, pollute virtually all Americans’ blood and pass from mother to child in the womb. Last summer scientists at Harvard and the University of Massachusetts found that PFOA is hazardous at the tiniest doses—hundreds of times smaller than what the U.S. Environmental Protection Agency (EPA) says is safe. How could it get worse? Consider:

  • Long known to severely contaminate drinking water near a DuPont plant in Parkersburg, West Virginia, PFOA was recently found at high levels in the water supplies of Hoosick Falls, New York and nearby North Bennington, Vermont. Health officials say residents should not use contaminated water for drinking, cooking or brushing teeth.
  • In Hoosick Falls, the EPA warned residents not to drink water with more 100 parts per trillion of PFOA—four times lower than the agency’s current non-enforceable health advisory level. But because EPA did not consider the most recent science, the new level is still 100 times higher than what the Harvard-UMass study said is safe.
  • California state scientists just listed PFOA and its chemical cousin, PFOS, as high priority for review and potential addition to the state’s official registry of chemicals known to cause reproductive disorders. PFOA contaminates 14 California water systems serving more than 1.4 million people—more than any other state—and adding it to the registry under the state’s Safe Drinking Water Act could require expensive treatment of those systems to reduce the pollution.

Last August EWG reported that EPA’s sampling program found PFOA in 94 water systems serving more than 6.5 million people in 27 states. Since then, reports to EPA by by local utilities have upped the number to 103 water supplies serving nearly 7 million people. (Contamination was not reported from any additional states). The recently reported PFOA contamination includes: (see embedded table)

Bottled Water Goes Off the Deep End - Because they peddle one of the most basic and ubiquitous resources on the planet, bottled water companies are notorious for manufacturing demand for their products, often by resorting to old Madison Avenue mind games, like exploiting our subconscious interest in exclusivity or by suggesting that their products are more pure than tap water. Perrier was once extolled as the “champagne of water.” Tibet Spring sources its water from the Himalayas.  The latest entry into the bottled water market threatens to overshadow all of these in sheer preposterousness, thanks to Kona Deep and its “premium deep ocean water.” If the prospect of washing down your lunch (or cocktail hour crudités, if we’re still being fancy) with a mouthful of saltwater sounds unappealing, don’t worry, Kona Deep has you covered. This is not just any water from the ocean, it’s desalinated water from the ocean. But water is not a luxury, it’s a human right, and the process of bottling water already squanders tons of resources. According to the Pacific Institute, the manufacturing, production and transportation of bottled water is 1,100 to 2,000 times as energy intensive as the treatment and distribution of tap water, using enough oil to fuel between 1.2 and 2.1 million cars a year. Then there’s the bottles themselves, which use up about 23,000 tons of plastic a year—the equivalent of between 0.8 million and 1.4 million barrels of oil—80 percent of which are not recycled. Desalination, which separates salt from seawater in order to create fresh water for irrigation and drinking, is also a big energy drain. The National Research Council estimates that seawater desalination in California is nine times more energy intensive as surface water treatment and 14 times more energy intensive as groundwater treatment. Moreover, emissions from desalination plants contribute to global climate change. There’s also the cost—desalinated water is often twice as expensive as water from municipal systems, which ironically, is where much of the bottled water sold today comes from.

'Super Lice' Are Now In 25 States -- Head lice have become literal superbugs, and the news is taking the Internet by storm. Lice have developed a high level of resistance to the most common over-the-counter treatments in 25 states, according to research presented at a meeting of the American Chemical Society. "If you overuse a product, over time, the selection pressure will cause insects to develop resistance to it," Kyong Yoon, an assistant professor of biological and environmental science at Southern Illinois University-Edwardsville and lead author of this ongoing research, told a group of journalists. Head lice are most commonly treated with pyrethroids, a widely used class of indoor-outdoor insecticides, often used for mosquito control. Yoon and his team found that lice developed a gene mutation, known as knock-down resistance (kdr) against the pyrethroids -- rendering them ineffective. In 104 out of the 109 lice populations Yoon tested, the insects were resistant to pyrethroids. "Lice don't have wings, and they don't jump, so they move where people move,"

We have our strongest evidence yet that Zika virus may be linked to a paralyzing disorder called Guillain-Barré Syndrome — here’s what that means -- A new report provides the most conclusive evidence to date linking Zika virus to some cases of Guillain-Barré Syndrome, a neurological disorder that causes paralysis that is usually temporary, but in rare cases may be fatal. As STAT reports, the vast majority of GBS patients who developed the disorder during a Zika outbreak in French Polynesia two years ago had previously been infected with the virus. What's more, people infected with Zika had a 24 times greater risk of developing GBS, scientists reported in The Lancet medical journal. Zika is a mosquito-borne virus that causes flu-like symptoms such as fever, joint pain, rash, or red eyes. Zika infections are mild in most individuals except for pregnant women, where scientists have cited a potential link to birth defects such as microcephaly.  In early February, Colombian officials said that three people had died after contracting the Zika virus and developing GBS, and six other deaths were being investigated. But scientists didn't have direct evidence linking Zika to GBS until now.  Guillain-Barré Syndrome is a disorder caused by the body's immune system attacking the nervous system outside of the brain and spinal cord. GBS usually begins with weakness and tingling in the legs, which can spread to the arms and upper body. Most people who develop GBS generally recover well. But in some cases, it can cause almost complete paralysis that can interfere with breathing, blood pressure, or heart rate — which can be fatal. The syndrome usually develops several days or weeks after someone experiences a respiratory or gastrointestinal viral infection, but in rare cases, it may be triggered by surgery. There was a small increase in GBS in people who got the swine flu vaccine in 1976, but the CDC says any risk from flu vaccination is likely very small — smaller than the risk from getting the flu itself.

Mayo Researchers Identify New Borrelia Species That Causes Lyme Disease – video - Dr. Bobbi Pritt, Mayo Clinic, discuss how Mayo Clinic researchers, in collaboration with the Centers for Disease Control and Prevention (CDC) and health officials from Minnesota, North Dakota and Wisconsin, have discovered a new bacterial species that causes Lyme disease in people. The new species has been provisionally named Borrelia mayonii. Prior to this finding, the only species believed to cause Lyme disease in North America was Borrelia burgdorferi.

 Why The Government Is Suppressing The Lyme Disease Epidemic | Interview With Lorraine Johnson – video -- Abby Martin interviews Lorriane Johnson, CEO of, about the growth of Lyme Disease and why the CDC changed their projections of the number of people with it from 30,000 to 300,000.

Bees Are Dying And That Could Be Devastating For Food Security: Pesticides are killing off the world's bee and butterfly populations, endangering the survival of global agriculture, according to a new study released on Friday. About 16 percent of the world's vertebrate pollinators "are being driven toward extinction by diverse pressures, many of them human-made, threatening millions of livelihoods and hundreds of billions of dollars worth of food supplies," the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services said. The number of invertebrate pollinators going extinct is upwards of 40 percent in some areas. And pollinated crops are the providers of the world's fruit, vegetables, seeds, nuts and oils. Although bees and butterflies are at the highest risk of extinction, other animals like moths, wasps, beetles, birds and bats are also important contributors to pollination. The declines are concentrated in northwestern Europe and North America, according to the study, which is the first of its kind to assess the pollinator decline on a global scale. Without these pollinators, "many of us would no longer be able to enjoy coffee, chocolate and apples, among many other foods that are part of our daily lives," said Simon Potts, Ph.D., one of the study's authors and a biodiversity professor at the University of Reading.

Monsanto Is Suing California For Telling People The Truth About Its Chemicals - Monsanto is suing the State of California for its intent to include glyphosate — the main ingredient in its wildly popular herbicide, Roundup — on its Proposition 65 toxic chemicals list.  California’s decision came after the World Health Organization’s International Agency for Research on Cancer (IARC) classified glyphosate as a “probable carcinogen” in March 2015. Researchers discovered “limited evidence” of a link between the weedkiller and non-Hodgkin’s lymphoma in humans, as well as “convincing evidence” of its link to other forms of cancer in rodents. Thus, IARC decided unanimously that glyphosate is “probably carcinogenic.” California announced in September it would include glyphosate among the noxious chemicals under Prop 65, which “mandates notification and labeling of all known to cause cancer, birth defects, or other reproductive harm, and prohibits their discharge into drinking waters of the state,” Alternet summarized. Monsanto has pushed back against the classification by the IARC from the beginning. Glyphosate-laden Roundup remains the most heavily used herbicide on the planet — despite an ever-widening list of nations implementing whole or partial bans on the substance. Indeed, Center for Food Safety believes the addition of glyphosate to the Prop 65 list is so imperative, Alternet reports the organization filed a motion to intervene in the Monsanto lawsuit on Wednesday: “CFS was one of the first public interest organizations to raise awareness about how the use of glyphosate in Roundup Ready crop systems fosters herbicide-resistant weeds and increases the use of the herbicide and the detrimental effects associated with it, and has repeatedly sought to prevent the planting and approval of glyphosate-resistant, genetically engineered crops through federal litigation.” Echoing concerns of an increasingly knowledgeable public, CFS believes in transparency and the right to be informed of risks from being exposed to toxic substances. Monsanto’s lawsuit to block such labeling belies its indifference to harming the world’s population and contaminating the planet — or, worse, its intent to profit despite such harm.

Foreign-Owned Fish Farms Are Devastating B.C.'s Wild Salmon- The salmon farming industry has long been banned in Alaska, where it's believed to be a threat to the state's healthy wild salmon populations. But that's not the case in Canada, where Norwegian-owned aquaculture multinationals have done a terrific job of winning over the federal government. These controversial corporate citizens are largely to blame for the gradual dying out of Canada's most famed fish. So says the Canadian scientist, TV personality, and leading environmentalist Dr. David Suzuki. During the Harper administration, Suzuki bluntly referred to the federal government as "corporate cheerleaders" for the aquaculture industry in a conversation with this article's author. And nothing has really changed since the swearing-in of Canada's new Liberal government. It's hard to argue that Dr. Suzuki is wrong, especially since Canada's federal government and its B.C. provincial counterpart actively promote salmon farming. They even go so far as to use Canadian taxpayers' dollars to subsidize the business operations of Norwegian-owned fish farms in B.C.  This unholy alliance may help explain why it's still legal for salmon farms to unintentionally become ambush sites for juvenile salmon migrating out to the open ocean.

Drugs found in Puget Sound salmon from tainted wastewater -  The Seattle Times - Puget Sound salmon are on drugs — Prozac, Advil, Benadryl, Lipitor, even cocaine. Those drugs and dozens of others are showing up in the tissues of juvenile chinook, researchers have found, thanks to tainted wastewater discharge. The estuary waters near the outfalls of sewage-treatment plants, and effluent sampled at the plants, were cocktails of 81 drugs and personal-care products, with levels detected among the highest in the nation. The medicine chest of common drugs also included Flonase, Aleve and Tylenol. Paxil, Valium and Zoloft. Tagamet, OxyContin and Darvon. Nicotine and caffeine. Fungicides, antiseptics and anticoagulants. And Cipro and other antibiotics galore.Why are the levels so high? It could be because people here use more of the drugs detected, or it could be related to wastewater-treatment plants’ processes, said Jim Meador, an environmental toxicologist at NOAA’s Northwest Fisheries Science Center in Seattle and lead author on a paper published this week in the journal Environmental Pollution. “The concentrations in effluent were higher than we expected,” Meador said. “We analyzed samples for 150 compounds and we had 61 percent of them detected in effluent. So we know these are going into the estuaries.”The chemicals turned up in both the water and the tissues of migratory juvenile chinook salmon and resident staghorn sculpin. If anything, the study probably underreports the amount of drugs in the water closer to outfall pipes, or in deeper water, researchers found. Even fish tested in the intended control waters in the Nisqually estuary, which receives no direct municipal treatment-plant discharge, tested positive for an alphabet soup of chemicals in supposedly pristine waters.

Toxic Moss Sets Off a Panic in Laid-Back Portland  — The 346 clumps of moss that science researchers from the United States Forest Service scraped from tree trunks and branches across this city looked as ordinary as moss gets — ancient, simple and common to the point of invisibility in the Pacific Northwest’s palette of green.But the moss had a riveting tale to tell, with shock waves that are still spreading.Toxic heavy metals, notably cadmium, which can cause cancer and kidney malfunction, were detected in the samples, with high concentrations in particular around two glass factories in residential neighborhoods, both of which had used metals for coloring their products.  In a city that prides itself on being an environmental example to the world — from its throngs of bike commuters to its antisprawl development rules — the moss study results roared, producing an upheaval of surprise, anger and fear. Residents shouted or wept in public meetings last month, raging at state officials, who released the results and then found themselves blamed for not knowing what the factories were putting up their smokestacks. On Tuesday, the director of Oregon’s Department of Environmental Quality, Dick Pederson, resigned abruptly, saying he had health concerns that needed immediate care. After the moss studies were released, local officials, who have said they are cautiously optimistic that public health impacts from the glass plants will in the end be minimal, raced in to take soil samples and set up air monitors. But residents near the plants were also cautioned last month to forgo, at least for now, even the spring rites of backyard gardening, until the test results can be further analyzed — a warning that sent another shiver through a city where “eat local” is almost a mantra.

Why Is Mine Waste Being Dumped Directly Into the Ocean? - Picture a 4-foot diameter pipe running into the ocean filling the offshore canyons at a rate of 160,000 tons per day. The pipe runs from an enormous gold and copper mine directly into the Indian Ocean. The pipe is filled with mine “tailings”—a toxic sludge of heavy metals, rock and coagulants mixed in with the pulverized mine wastes that spreads and covers the seabed dramatically impacting plant and animal life and polluting the surrounding water. That is the Deep Submarined Tailings Disposal (DSTP) system at Newmont Mining’s Batu Hijau copper and gold mine in Indonesia.  Although Batu Hijau is the biggest mine that is using DSTP, at least 16 mines in eight countries are also using DSTP, with others to follow. Indonesia, Papua New Guinea and Norway lead the way using DSTP at their mines. In Chile, mines in the mountains north and east of Santiago are proposing to run pipes 50-100 kilometers so they can dump into the canyons of the Pacific Ocean off of the Chilean coast. The enormous Los Pelambres Copper Mine in Chile proposes to use DSTP in the future, discharging its wastes directly into the ocean. While you might think this mining disposal would be limited to the unregulated developing world, Norway actually leads with the most mines using this polluting disposal system. The mining wastes are dumped into Norway’s pristine fjords, filling much of those fjords over time.

Frozen peatlands in a warming world  - If you’re a regular Bogology reader than you’ll already be aware of the important role peatlands play in the global carbon cycle. Whilst they cover just 2-3% of the Earth’s surface, peatlands contain between a quarter and a third of all the organic soil carbon on earth (see our infogram, here). Estimates vary, but it is generally agreed that peatlands contain approximately 600 gigatonnes of carbon (GtC). To put that in context, it’s more than all the vegetation on earth (ca. 560 GtC) and not too much less than the amount currently stored in the entire atmosphere (ca. 850 GtC) [1]. The peatlands in the circum-Arctic contain nearly 300 GtC, almost half of all the carbon stored in the entire world’s peatlands [2] and remain frozen as permafrost for most or all of the year. Whilst frozen, the carbon in these peatlands is rendered ‘inert,’ locked in and protected from decomposition, which would otherwise lead to it being lost into the atmosphere in the form of carbon dioxide and methane – compounding already dangerous levels of greenhouse gases in our atmosphere. Unfortunately this huge frozen carbon store is at serious and increasing risk. The effects of global warming are now well documented across the world, but what many people may not realise is that different areas of the world are warming at different rates. The northern high-latitudes and the ecosystems within them are considered more at risk of rising temperatures than many other areas of the world. As a result of this on-going warming, zones of permafrost have retreated rapidly polewards in recent decades, leaving in their wake evidence of peatland degradation in the form of collapsed peat domes and thaw lakes as the land melts. The ultimate fate of permafrost peatlands and the carbon they contain remains uncertain, however, owing to a complex set of feedbacks between peat growth, hydrology and vegetation.

Supreme Court ends challenge to the Chesapeake Bay cleanup plan -- The Supreme Court has declined to hear a challenge to the Chesapeake Bay cleanup plan, the largest attempt by the federal government and states to rid the pollution from a body of water and to restore its health. The high court’s refusal ends an attempt by the American Farm Bureau Federation to stop the cleanup. The organization argued that the Environmental Protection Agency overstepped its authority in leading the effort because the bay can be managed only by the states that sit in its watershed.The lower court ruling now stands. In that 2013 decision, U.S. District Court Judge Sylvia H. Rambo wrote that the EPA is within its rights under the Clean Water Act to partner with the six states in the bay watershed to cut the pollution that pours in from sewers, construction developments and chemical and biological waste from farms. “The ecological and economic importance of the Chesapeake Bay is well documented,” she wrote, concluding that “the court endorses the holistic, watershed approach used here. This approach receives ample support in the [Clean Water Act], its legislative history, and Supreme Court precedent.” The question is whether the EPA could now move to clean other massive, multistate water bodies. Impaired waters have led to fish-killing dead zones and other marine life die-offs for decades.

Whether we cut pollution or we don't, someone is going to be unhappy -- Here are the basics of the economics of pollution:

  1. Pollution, as a by-product of economic activity, imposes a cost on someone other than those making the decision of how much to pollute. 
  2. Because those deciding how much to pollute don't bear the full cost of polluting, they over-pollute.
  3. Over-pollution results in total costs of the economic activity to be higher than is optimal (efficient).
  4. To reduce the total costs to optimal levels, policies or instruments are needed to bring the external costs of pollution into the market where the pollution is generated.
  5. Those in the market where the pollution is generated are unhappy when external costs are internalized.
  6. Those outside the market where the pollution is generated are happy when external costs are internalized.
  7. The Supreme Court has to decide who should be happy.

Does Science Advance One Funeral at a Time? - Pierre Azoulay, etal explore the famous quip by physicist Max Planck. They show that the premature deaths of elite scientists affect the dynamics of scientific discovery. Following such deaths, scientists who were not collaborators with the deceased stars become more visible, and they advance novel ideas through increased publications within the field of the deceased star. These "emerging stars" are often scientists who were not previously active within that field. The results suggest that outsiders to a specific scientific field are reluctant to challenge a research star who is viewed as a leader within that field.  The authors tracked the publication records of scientists — both collaborators and non-collaborators — before and after a "research superstar" died. To narrow the scope of their study, they focused on academics in the life sciences, a sector which is heavily supported by National Institutes of Health funding and produces a high volume of research. They established a list of 12,935 elite scientists using criteria such as the amount of research funding received, publication citations, number of patents, membership in prestigious organizations, and career awards and prizes. They then examined records of 452 of those elite scientists who died prematurely — before retiring or becoming administrators — between 1975 and 2003.  The findings confirm previous work showing that the number of articles by collaborators decreased substantially — by about 40 percent — after the death of a star scientist. Publication activity by non-collaborators increased by an average of 8 percent after the death of an elite scientist. By five years after the death, this activity of non-collaborators fully offset the productivity decline of collaborators. "These additional contributions are disproportionately likely to be highly cited," the researchers found. "They are also more likely to be authored by scientists who were not previously active in the deceased superstar's field."'

Elephants Being Slaughtered for Ivory Faster Than They Can Reproduce -- Despite a decrease in poaching, the overall African elephant population has fallen for the fourth year in a row, according to new data released by the United Nations to mark World Wildlife Day. Years of unprecedented elephant poaching for ivory have threatened the survival of these gentle giants. As The Guardian reported, elephant poaching peaked in 2011, when it accounted for about 75 percent of all deaths. The new UN report said that 60 percent of elephant deaths are at the hands of poachers, meaning that the overall elephant pollution is likely falling. At least 20,000 elephants were killed for ivory in 2015. Roughly 100 African elephants are killed each day, according to 96 Elephants, a campaign ran by the Wildlife Conservation Society. Poachers seeking ivory, meat and body parts, have decimated elephant populations, leaving only 400,000 remaining compared to 1,200,000 in the 1980s.  “African elephant populations continue to face an immediate threat to their survival, especially in central and west Africa where high levels of poaching are still evident,” secretary general of the Convention on the Trade in Endangered Species (CITES), John Scanlon, told The Guardian

Prize-Winning Activist Berta Cáceres Murdered in Honduras -- Berta Cáceres, 2015 Goldman Environmental Prize winner, was murdered last night in her home. Reportedly, her assassins waited until well after dark before breaking into the house where she slept. Her brother was also injured in the attack.  "This is a sad day for Honduras and the world,” said Jagoda Munic, chair of Friends of the Earth International.  “Given the situation  in Honduras, in which indigenous, environmental and human rights activists like Berta Cáceres are targeted by government and corporate security forces alike, international pressure is needed to bring the murderers to justice and protect those brave enough to speak out on behalf of their fellow citizens and the environment.”  Cáceres rallied her fellow indigenous Lenca people of Honduras and waged a grassroots campaign that successfully pressured the world’s largest dam builder to pull out of the Agua Zarca dam.

In ‘Half Earth,’ E.O. Wilson Calls for a Grand Retreat - This week, the biologist Edward O. Wilson, professor emeritus at Harvard University and recipient of two Pulitzer Prizes, will publish his 32nd book, a personal exhortation to conserve biodiversity titled “Half Earth: Our Planet’s Fight for Life.”The book offers an improbable prescription for the environment: Dr. Wilson suggests that humans set aside roughly 50 percent of the planet as a sort of permanent preserve, undisturbed by man.We spoke for three hours in the cafeteria of the assisted-living facility in Lexington, Mass., where Dr. Wilson and his wife, Irene, have lived the past 14 years. Our conversation has been edited and condensed for space and clarity.

February Shatters Global Temperature Records, Satellite Data Show -- February ​shattered the global ​satellite temperature records to become the warmest ​above average month in recorded history. While not yet confirmed by official datasets, this new finding is particularly notable as it comes from one of the two satellite datasets frequently referenced by climate deniers.  Last month was likely somewhere between 1.15°C and 1.4°C warmer than average, marking the fifth straight month that global average temperatures were more than 1°C above average. Parts of the Arctic were 16°C above average, reaching temperatures more often seen in June. The region likely saw its lowest February sea ice levels ever, and the heat is only expected to continue through March.

NASA sees a different kind of El Nino -- A new NASA visualization shows the 2015 El Niño unfolding in the Pacific Ocean, as sea surface temperatures create different patterns than seen in the 1997-1998 El Niño. Computer models are just one tool that NASA scientists are using to study this large El Nino event, and compare it to other events in the past. "The start of an El Niño is important," said Robin Kovach, a research scientist with the Global Modeling and Assimilation Office (GMAO) at NASA's Goddard Space Flight Center in Greenbelt, Maryland. The visualization shows how the 1997 event started from colder-than-average sea surface temperatures - but the 2015 event started with warmer-than-average temperatures not only in the Pacific but also in in the Atlantic and Indian Oceans. The '97 El Niño was much stronger in the Eastern Pacific, with much warmer water up to the coast of South America. In 2015, the warmest waters are instead in the Central Pacific and extend west of the International Date Line. The water temperature variations typical of El Niño are not only at the surface of the equatorial Pacific, but below the surface as well. And these variations were also different in 2015, compared to 1997. At the height of the El Niño in November, colder-than-average temperatures in the Western Pacific and warmer-than-average temperatures in the Eastern Pacific were stronger and extended deeper in 1997 than in 2015.

Mapped: The sensitivity of the world’s ecosystems to climate -- The Earth is covered by a huge variety of ecosystems, from the lush rainforests of the hot and humid tropics to the rugged tundra of the cold and windswept Arctic. New research, published in Nature, maps how sensitive these different types of vegetation are to the ups and downs of the climate from one year to the next. >The map below illustrates the study’s new “vegetation sensitivity index”, which indicates to what extent plant growth is affected by fluctuations in the climateclimate variability are shaded red, while those with low sensitivity are shaded green.You can see there are highly sensitive regions around the Gulf of Guinea in West Africa, along the mid-to-high latitudes of the northern hemisphere, in the tropical forests of South America, and along the eastern side of Australia. So, how do the researchers work out if an ecosystem is “sensitive” or not? Plants need warmth, water and sunlight (as well as nutrients) in order to grow.  Using satellite data for 2000-13, the researchers estimated how plant growth across the world has varied with fluctuations in temperature, water availability and cloud cover. Satellites measure changes in plant growth by the “greenness” of the vegetation.

Extreme tornado outbreaks have become more common, says study: Most death and destruction inflicted by tornadoes in North America occurs during outbreaks—large-scale weather events that can last one to three days and span huge regions. The largest ever recorded happened in 2011. It spawned 363 tornadoes across the United States and Canada, killing more than 350 people and causing $11 billion in damage.  Now, a new study shows that the average number of tornadoes in these outbreaks has risen since 1954, and that the chance of extreme outbreaks —tornado factories like the one in 2011—has also increased. The results are expected to help insurance and reinsurance companies better understand the risks posed by outbreaks, which can also generate damaging hail and straight-line winds. Over the last 10 years, the industry has covered an average of $12.5 billion in insured losses each year, according to Willis Re, a global reinsurance advisor that helped sponsor the research. The article appears this week in the journal Nature Communications. Every year, North America sees dozens of tornado outbreaks. Some are small and may give rise to only a few twisters; others, such as the so-called "super outbreaks" of 1974 and 2011, can generate hundreds. In the simplest terms, the intensity of each tornado is ranked on a zero-to-five scale, with other descriptive terms thrown in. The lower gradations cause only light damage, while the top ones, like a twister that tore through Joplin, Missouri, in 2011 can tear the bark off trees, rip houses from their foundations, and turn cars into missiles. For this study, the authors calculated the mean number of tornadoes per outbreak for each year as well as the variance, or scatter, around this mean. They found that while the total number of tornadoes rated F/EF1 and higher each year hasn't increased, the average number per outbreak has, rising from about 10 to about 15 since the 1950s

Inconvenient weather fact for tornado season: The frequency of violent tornadoes has been declining over time -  We’re coming into “tornado season” now – a majority of strong to violent tornadoes (F3+ ratings) typically occur between March and June.    The bottom chart above shows that all of the ten most deadly tornadoes in US history have occurred during those four months. In anticipation of some newsworthy tornadoes this season and the inevitable link of any violent weather events to climate change by the media and climate activists, I thought it would be a good time to update this 2013 CD post on tornadoes and climate change. As I reported back in 2013 here and here, there’s just one small, very inconvenient problem with making a connection between global warming climate change and an increasing frequency of violent, deadly tornadoes – it’s a link that doesn’t actually exist. Here are some inconvenient weather facts based on data from the National Oceanic and Atmospheric Administration’s (NOAA) National Climatic Data Center. The top chart above displays the annual number of “strong to violent tornadoes” (F3 to F5 on the Fujita Scale) in the US from 1954 to 2014, with these highlights:

  • 1. Between 1954 (earliest year available) and 2014, there has been a downward trend in the frequency of strong to violent tornadoes in the US, and that declining trend is statistically significant at the 1% level (see lighter blue line in chart, based on a linear regression model). On average, there has been a decline of 0.46 violent tornadoes every year since 1954, or a decline of 4.6 violent tornadoes every decade since the 1950s.
  • 2. Although there was a significant number (84) of violent tornadoes in 2011 (which generated responses like Bill McKibben’s op-ed in the Washington Post that linked tornadoes like the one that hit Joplin, Missouri to climate change), there were actually more violent tornadoes in the years 1957 (99), 1965 (102), 1973 (88) and 1974 (138).

Drought in Syria Likely the Worst in 900 Years -- The unrelenting drought gripping Syria and the rest of the eastern Mediterranean is likely the worst to affect the region in 900 years, according to a new study.  Previous research found that the influence of climate change made the drought three times more likely, and the region is expected to become even drier over time. Nearly 12 million people have been driven from their homes in Syria by a years-long civil war, which reports link to socioeconomic instability brought about by the climate change-fueled drought.

Valley surrounding southern Arizona city is sinking: — The valley surrounding a southern Arizona city is sinking. The Casa Grande Dispatch reports ( ) geologists determined the valley around Eloy is 20 feet lower than it was 50 years ago, and earth fissures are likely to blame. Earth fissures are believed to be created by quickly depleting groundwater causing land to cave in. Six new Arizona Geological Survey maps show these hazards in southern Arizona, including study areas east of Picacho Peak. Dozens of earth fissures have been reported in the area. No human deaths have been linked to earth fissures, though the survey has been mapping them since a horse fell into one and died in 2007. "If you stop drawing on the groundwater table, we would anticipate at some point the subsidence would stop," said survey geological extension service chief Michael Conway. Earth fissures open the possibility of potential groundwater contamination, among other hazards. "A concern that we have is that contaminated fluids can get into these fissures and actually propagate very, very quickly into a groundwater aquifer," Conway said.

Gas from thawing permafrost could add further to global warming, study says: - Arctic permafrost that is thawing due to global warming is releasing greenhouse gases, further compounding the problem of climate change, according to a study released on Thursday. As the permafrost thaws, changes in the way its soil microbes function and the soil carbon decomposes add to the emissions of carbon dioxide and methane into the atmosphere, according to the study by U.S. and Chinese scientists. Carbon dioxide and methane are the main greenhouse gases that trap heat and contribute to climate change. Permafrost is the perennially frozen ground that covers a quarter of the land in the Northern Hemisphere, primarily in the Arctic, said the study published in the monthly Nature Climate Change journal. Working in Alaska, researchers warmed plots of tundra to thaw the permafrost and after 18 months found numerous changes in the soil microbes, it said. "This study highlights the critical role that microbes play in mediating carbon losses from Arctic soils," said Susan Natali, a scientist at Woods Hole Research Center in Massachusetts and co-author of the Nature Climate Change paper, in a statement. "The rapid response of the microbial community to warming suggests that the large store of soil carbon currently contained in permafrost will be highly susceptible to decomposition once it is thawed." Previous studies have suggested that permafrost could decline by as much as 70 percent by the end of the century, according to the statement.

Climate scientists worry about the costs of sea level rise -- As humans add greenhouse gases to the atmosphere, it not only warms the planet, but also raises the oceans. Ocean waters are rising for a number of reasons including thermal expansion of water (as water warms, it expands to a larger volume), as well as ice melt which then flows as liquid into the ocean. My next post will cover four recent studies that quantify how much ocean levels will rise in the future. However, here I will focus on the economic costs of rising seas. A paper was just published by Drs. Boettle, Rybski and Kropp that dealt with this question. The authors of this study note that if you are concerned about societal and economic costs, the rate of sea rise isn’t the entire story. Much of the damage is caused by extreme events that are superimposed on a rising ocean. Damage is highly nonlinear with sea rise.  Consider a river that has a dike system capable of confining a rise of water up to six feet. Such a system would have little or no economic/societal damage for “floods” up to six feet, but just one more foot of water rise would put the waters over the dike and could cause significant losses. So what really matters is, do events overshoot some level that commences damage?

Sea levels don’t care about climate deniers’ skepticism - In recent years, a variety of Republican policymakers have identified rising sea levels as one of those things people just aren’t supposed to talk about. In 2012, for example, GOP officials in North Carolina tried to prohibit a state-appointed science panel from relying on the scientific evidence related to sea levels. Around the same time, Republican state lawmakers in Virginia commissioned a study on climate change and the state’s Eastern shore, but “sea level rise” was to be omitted. The GOP sponsor of the study pointed to “sea level rise” as an example of “liberal code words.” But the funny thing about reality is just how little it cares about the far-right’s ideological agenda. The New York Times reported yesterday: The worsening of tidal flooding in American coastal communities is largely a consequence of greenhouse gases from human activity, and the problem will grow far worse in coming decades, scientists reported Monday. Those emissions, primarily from the burning of fossil fuels, are causing the ocean to rise at the fastest rate since at least the founding of ancient Rome, the scientists said. They added that in the absence of human emissions, the ocean surface would be rising less rapidly and might even be falling. The Times piece noted related research that “confirmed previous forecasts that if emissions were to continue at a high rate over the next few decades, the ocean could rise as much as three or four feet by 2100. Experts say the situation would then grow far worse in the 22nd century and beyond, likely requiring the abandonment of many coastal cities.” That would very likely include cities like Miami, Florida – where Republican presidential hopeful Marco Rubio, a climate denier who believes we must do nothing about the crisis, lives.

Arctic Sea Ice Growth Could Be Lowest On Record Again -  The latest reports available Monday show that the Arctic sea ice was at the lowest it’s ever been for this time of year since records began more than three decades ago, according to daily readings from the National Snow and Ice Data Center.  “I have a feeling the February sea ice might be the lowest, continuing the record lowest in January,” said   “Air temperatures in the Arctic are warmer than normal … near the poles, for example, about 8 Celsius above normal.” Sea ice is frozen water that grows and melts on the ocean surface. During its life cycle, sea ice becomes the solid base that wildlife and native communities need to survive. So diminishing sea ice is problematic for the Arctic ecology that includes everything from sea ice algae to migratory birds to marine mammals.   But sea ice also helps moderate planetary climate with the albedo effect that reflects excessive sunlight back into space. In turn, dwindling sea ice creates large areas of open water that causes the Earth to absorb more of the sun’s solar energy, warming the ocean, the region, and thawing permafrost that holds harmful greenhouse gasses.  By all accounts, sea ice growth has been sluggish this winter. This has happened as 2015 was the warmest year on record. In January, the Arctic averaged about 13.5°F (7.5°C) above average, leading to a new record low of Arctic sea ice extent for the month. Extreme warmth in the region sent sea ice to a new record low for that month, as sea ice extent was 402,000 square miles below average, according to the National Snow and Ice Data Center.

Arctic on Thin Ice as Extreme Heat Takes a Toll -- For the second month in a row, the Arctic has set a record for lowest ever sea ice extent, according to the National Snow and Ice Data Center.  Ice extent is 448,000 square miles below average for February and 200,000 square miles lower than the previous record-low February. The region has experienced extreme heat over the past few months, with temperatures reaching as high as 23°F above average. Sea ice usually hits its annual low in September, but these early records have scientists concerned for what the rest of the year will bring in the Arctic. For a deeper dive: Washington Post, Climate Central, Arctic Journal, TakePart...

Leading Scientists Say Warming Slowdown Was Real -- A global warming slowdown has come and gone, but an academic brouhaha continues to boil over the nitty gritty details of what once was a great scientific mystery. On Wednesday, a group of prominent scientists published a commentary faulting colleagues who have published papers downplaying or dismissing the significance of a 13-year slowdown in warming rates at the planet’s surface. “We shouldn't sweep the early 2000s warming slowdown under the rug,” said Penn State meteorology professor Michael Mann, one of 11 authors of the commentary published in Nature Climate Change. Temperature measurements taken at the surface of the planet from 2001 to 2014 revealed a lull in the rate of global warming, sometimes called the “warming hiatus,” before spiking upward again. 2014 was the hottest year on record until the record was easily beaten in 2015. Until 2009, scientists had little explanation for the phenomenon. By 2014, though, it was known that the slowdown was caused primarily by a phase in a slow-moving Pacific Ocean cycle, with fierce trade winds driving more heat than normal into ocean depths. The slowdown at the planet’s surface coincided with a rise in temperatures in ocean depths, worsening sea-level rise. “The temporary slowdown in no way implies that human-caused warming has ceased or slowed down,” Mann said. “It was temporarily masked by natural factors.”

Carbon Budget is Only Half as Big as Thought - Climate scientists have bad news for governments, energy companies, motorists, passengers and citizens everywhere in the world: to contain global warming to the limits agreed by 195 nations in Paris last December, they will have to cut fossil fuel combustion at an even faster rate than anybody had predicted.  Joeri Rogelj, research scholar at the International Institute for Applied Systems Analysis in Austria, and European and Canadian colleagues propose in Nature Climate Change that all previous estimates of the quantities of carbon dioxide that can be released into the atmosphere before the thermometer rises to potentially catastrophic levels are too generous. Instead of a range of permissible emissions estimates that ranged up to 2,390 billion tons from 2015 onwards, the very most humans could release would be 1,240 billion tons. In effect, that halves the levels of diesel and petrol available for petrol tanks, coal for power stations, and natural gas for central heating and cooking available to humankind before the global average temperature – already 1°C higher than it was at the start of the Industrial Revolution – reaches the notional 2°C mark long agreed internationally as being the point of no return for the planet. In fact, the UN Framework Convention on Climate Change summit in Paris agreed a target “well below” 2°C, in recognition of ominous projections − one of which was that, at such planetary temperatures, sea levels would rise high enough to submerge several small island states.

Rising U.S. Emissions Make Paris Promises Elusive - The EPA's data shows another rise in greenhouse gas emissions in 2014, and the methane mystery might drive those numbers further in the wrong direction.  New data this week showing how little progress the United States has made in cutting greenhouse gas emissions since President Obama took office is the latest evidence to undercut the pledges the United States made in negotiating the Paris climate treaty. The Clean Power Plan's crackdown on coal-fired power plants is on hold, thanks to the Supreme Court. Methane emissions are turning out to be higher than previously thought, as natural gas booms. People are buying more gas-guzzling cars, thanks to low prices at the pump. And now, in a draft of its annual greenhouse gas emissions tally, the EPA reported that emissions in the year 2014 climbed almost 1 percent from 2013 to 2014. That brought emissions back above the level of Obama's first year in office, 2009. In negotiating the Paris treaty, signed in December, the U.S. pledged to cut emissions 26 to 28 percent by 2025, below the level of 2005. The new data shows that from 2005 to 2014 emissions went down just 7.5 percent, leaving most of those promised reductions off in the distance, like a hazy mirage. Most of that decline is due to the nosedive in emissions that came with the Great Recession of 2008 and 2009.

Climate Change Could Kill Half a Million Annually by 2050 -- The impacts of climate change on the global food supply could lead to more than 500,000 deaths a year by 2050, according to a new study in the Lancet. Droughts, floods and other climate-related impacts will hurt crop yields and reduce the amounts of fruits and vegetables available. On average, the consumption of fruits and vegetables will drop 4 percent by 2050, leading to an increase in malnutrition and disease, particularly in less developed countries. Without climate change, the study found that projected increases in the global food supply would actually save nearly 2 million lives in 2050 compared to 2010. (video)

Does a Carbon Tax Work? Ask British Columbia - — Ted Cruz says climate change is not happening. Donald Trump says he doesn’t believe in it. Marco Rubio, whose hometown, Miami, is projected to be largely underwater within the not too distant future as ice caps shrink and the sea level rises, argues that government efforts to combat it will “destroy our economy.”But those views are not widely shared by conservatives elsewhere around the world. Indeed, not that long ago in a not too distant country, a right-leaning party that shares many of the antitax, pro-business beliefs of Republicans in the United States did exactly what its unbelieving candidates so fear.In 2008, the British Columbia Liberal Party, which confoundingly leans right, introduced a tax on the carbon emissions of businesses and families, cars and trucks, factories and homes across the province. The party stuck to the tax even as the left-leaning New Democratic Party challenged it in provincial elections the next year under the slogan Axe the Tax. The conservatives won soundly at the polls.Their experience shows that cutting carbon emissions enough to make a difference in preventing global warming remains a difficult challenge. But the most important takeaway for American skeptics is that the policy basically worked as advertised.

2 ethanol tankers among 16 derailed train cars in western NY (AP) — Crews are working to contain a leak on an ethanol tanker that was among 16 cars on a freight train that derailed in far southwestern New York and forced the evacuation of several homes. A spokesman for Norfolk Southern says a train derailed on the rail company’s line around 9:30 p.m. Tuesday in the town of Ripley, about 60 miles southwest of Buffalo. Gov. Andrew Cuomo had earlier said the accident occurred around 11:30 p.m. Tuesday. Emergency services officials say Wednesday morning that no one was injured and there was no fire. But two of the derailed cars contained ethanol that leaked. Officials say one tanker has been contained and crews are working on the other. A derailed tanker containing propane is intact. Officials say between 25 to 30 people have been evacuated from their homes. Other residents near the site have been urged to remain inside their homes. Ripley is located on the Pennsylvania border in western Chautauqua County, on Lake Erie.

Roll Back the Biofuel Mandate -- Biofuels have long been used as blending components in U.S. transportation fuels to meet a wide variety of fuel specification and environmental requirements. Prior to the recent resurgence in domestic oil and natural gas production, laws passed in 2005 and 2007 established a broad program to blend renewable fuels into the domestic transportation fuel (gasoline and diesel) pools. These minimum volumes of ethanol and biomass-based diesel (biodiesel) were mandated to rise each year through 2022.  At the time that the legislation was enacted, the blending requirements were viewed as being well below the bounds where they would create adverse operational effects. The law now requires an increasingly aggressive program each year for blending biofuels with petroleum based transportation fuels. Specifically, ethanol is blended into gasoline, and biodiesel is blended into diesel. These volumetric targets began in 2006 at a total of 260,000 barrels/day and are mandated to rise to 2.35 million barrels/day in 2022 (see figure).   Under the statute, the U.S. Energy Information Administration is required to estimate future gasoline and diesel consumption, and then set percentage targets for renewable fuels for refiners to blend into transportation fuels. However, EPA has not issued the volumetric requirements on a timely basis in recent years as the introduction of higher volumes of biofuels into transportation fuels has come against technical and cost constraints.

Keystone lawsuit shows TTIP’s threat to climate action – report - A $15 billion lawsuit by the company behind the Keystone XL pipeline against the US government shows the serious threat to democracy posed by special privileges for investors, a new report has said. TransCanada is suing under investor-state dispute settlement (ISDS) clauses of the North American Free Trade Agreement (NAFTA) to demand damages following rejection of the controversial pipeline due to its climate impact.Keystone illustrates how the increasingly common ISDS clauses, that are contained in the draft EU-Canada trade agreement (CETA) and the proposed EU-US deal (TTIP), can be used to undermine climate action, the report by T&E, Friends of the Earth Europe and Sierra Club stated. Last year US president Barack Obama denied permission to build the US-stage of the Keystone XL pipeline, which would have transported crude oil from Canada’s tar sands to American refineries, as it was not in the interest of national security and would have undercut America’s climate leadership. TransCanada’s lawsuit is under chapter 11 of NAFTA, which allows multinational corporations to sue governments if they feel they have not been treated as a domestic company would have been. TransCanada has reportedly invested $3.1 billion in the project but is seeking five times this amount in damages. It will be able to launch its case as early as May 2016. A three-judge tribunal will issue a ruling, which cannot be appealed to any national court. It can award damages but not force the US to grant permission for Keystone to be built

Flood board appeals dismissal of suit against oil companies  - (AP) — A south Louisiana flood board’s lawyers head to a federal appeals court in hopes of reviving a lawsuit against dozens of oil and gas companies. The Southeast Louisiana Flood Protection Authority-East filed the suit in 2013. It claims coastal oil and gas activity contributed to damage and loss of wetlands that form a hurricane buffer for New Orleans. A federal district judge dismissed the suit last year. The 5th U.S. Circuit Court of Appeals hears arguments in the board’s appeal on Monday. Opponents of the lawsuit say it is a needless attack on a vital Louisiana industry. Issues in the appeal include whether the suit belongs in state or federal court and whether the judge was correct to dismiss it.

5 Years Later Fukushima Still Spills Toxic Nuclear Waste Into Sea, Top Execs Face Criminal Charges -- Five years after the worst nuclear disaster since Chernobyl, three former executives of Tokyo Electric Power Co. (Telco) were indicted Monday for allegedly failing to prevent the tsunami-sparked crisis at the Fukushima Daiichi nuclear plant.   Former Tepco chairman Tsunehisa Katsumata and former vice presidents Ichiro Takekuro and Sakae Muto were charged with contributing to deaths and injuries stemming from the nuclear meltdown triggered by the March 11, 2011 earthquake and tsunami. Their indictment is Japan’s first criminal action taken in connection with the nuclear crisis. If convicted, the three men could face up to five years in prison or a penalty up to 1 million yen. According to The Japan Times, the trio have been blamed for injuries to 13 people, including Self-Defense Forces personnel, hydrogen explosions at the plant and the deaths of 44 patients who were forced to evacuate from a nearby hospital. The indictment seeks to answer in court the question of whether the three bosses should be held criminally responsible for the disaster, the publication stated. Tepco had been warned years earlier about the dangers of an earthquake and a tsunami hitting the plant. According to The Japan Times, the inquest committee said the former executives received a report by June 2009 that the plant could be hit by a tsunami as high as 15.7 meters and that they “failed to take pre-emptive measures knowing the risk of a major tsunami.”

Reindeer are still very radioactive 30 years after Chernobyl -- April 26 marks the 30-year anniversary of the worst civilian nuclear disaster in history. When a nuclear power plant at Chernobyl, in what is now Ukraine, exploded, it coated the earth with radioactive material — as far as the picturesque, snow-capped mountains of Scandinavia, where for generations, the indigenous Sami people lived in harmony with nature. Many worked as boazovázzi, or "reindeer walkers," herding the animals over hundreds of miles of terrain and selling their meat come slaughter season. The reindeer were a cultural and economic centerpiece for the Sami people. Chernobyl poisoned their way of life by turning the reindeer radioactive. Thirty years later, the reindeer walkers are still devastated. Photographer Amos Chapple with Radio Free Europe traveled to the Norwegian village of Snasa, where he met with herders fighting to preserve their traditions. Chapple shared a few photos with us, and you can read the whole story here.

Norway's Radioactive Reindeer - The Atlantic: (photo essay) Thirty years ago, the Chernobyl Nuclear Power Plant disaster took place, releasing massive amounts of radioactive material into the atmosphere, which drifted across much of Russia and Europe. Today, Sami reindeer herders in central Norway are still affected by the fallout, as their herds feed on contaminated lichen and mushrooms. As reported by Amos Chapple and Wojtek Grojec, in this story from Radio Free Europe/Radio Liberty, “Reindeer meat is a mainstay in the Scandinavian diet. The meat from one reindeer currently fetches around $400 for the Sami herders. But only if the deer isn’t too radioactive to eat.” Even though Norwegian authorities enforce a relatively high contamination limit for food (3,000 becquerels per kilogram—compared the EU limit of 600), some years—even as recently as 2014—reindeer pulled aside for slaughter have to be released back into the wild because they are too radioactive.

Flash - France nuclear incident 'worse than reported' - France 24: (AFP) - A 2014 incident in France's oldest nuclear plant, located near the German and Swiss borders, was more serious than previously reported, German media claimed Friday. Flooding at the Fessenheim plant disabled electrical control systems and forced operators to launch an emergency reactor shut-down, reported public broadcaster WDR and Sueddeutsche Zeitung daily. Operators decided to insert boron into the reactor cooling system, a procedure the report likened to "pulling the emergency brake", and which a nuclear safety expert said was a unique event in Western Europe so far. The joint news report said that operators temporarily lost full control over the plant's reactor 1 in the April 9, 2014 incident after water had incapacitated one of two parallel reactor security systems. The official reports by French nuclear safety agency ASN had not mentioned the use of boron, the media report said. "I am not aware of any other case where a power reactor here in Western Europe suffered an incident in which it had to be shut down with the use of boron," nuclear safety expert Manfred Mertins was quoted saying. Fessenheim houses two 900 megawatt reactors and has been running since 1977, making its France's oldest operating plant. Due to its age activists have long called for it to be permanently closed.

NY nuclear plant 65,000% radiation spike is worse than Fukushima: - A radioactive flow from the Indian Point nuclear power plant is leaking into groundwater that leads to the Hudson River, raising the possibility that the U.S. may have its very own Fukushima-like disaster only 25 miles from New York City. The Indian Point nuclear plant is located on the Hudson River, and it serves the electrical needs of about two million people. But last month, when workers were preparing a reactor for refueling, they accidentally spilled contaminated water containing the radioactive hydrogen isotope tritium, The Free Thought Project (TFTP) reports.  That caused an enormous radiation spike in groundwater monitoring wells, and one well's radioactivity increased by 65,000 percent. Entergy, the Louisiana company that owns the plant, offered an explanation of the readings that can't be described as anything other than "Ho-hum," saying they were "fluctuations that can be expected as the material migrates." The company further said that the tritium contaminated water spill was contained within the plant, and never made it to the Hudson River or any other water source. "There is no impact to public health or safety," said Entergy spokeswoman Patricia Kakridas. Maybe so, but this is the ninth leak in just the past year, and four of those were serious enough to shut down the reactors. However, this most recent leak contains a number of radioactive elements such as strontium-90, cesium-137, cobalt-60, and nickel-63, meaning it isn't limited to tritium contamination, according to the New York Department of State's Coastal Zone Management Assessment.

Bird Poop Likely Caused N.Y. Nuclear Reactor Outage - NBC News: — Bird droppings were the likely cause of a December shutdown at a nuclear power plant outside New York City, according to the operator. An Indian Point reactor safely shut down for three days starting Dec. 14 following an electrical disturbance on outdoor high voltage transmission lines, Entergy Corp. said. An outside expert is analyzing whether what's technically called bird "streaming" was the culprit. In a report to the Nuclear Regulatory Commission last month, the New Orleans-based company said the automatic reactor shutdown was apparently from bird feces that caused an electric arc between wires on a feeder line at a transmission tower.
"If it has nowhere to send its electricity, the generator senses that and automatically shuts down," Entergy spokesman Jerry Nappi said.   Plant managers told the NRC they were revising preventive maintenance for additional inspection and cleaning and installing bird guards on transmission towers.  Nappi said he couldn't recall a similar incident in the past several years from birds at Indian Point, which is located along the Hudson River north of New York City. He didn't immediately know whether a carcass was found nearby or what type of bird was suspected.  Nuclear Regulatory Commission spokesman Eliot Brenner said it's not uncommon for wildlife to trigger electrical outages on transmission lines regardless of the generation source of the electricity. "Squirrels are the biggest offenders," he said.

Why didn't state notify Estill County of illegal nuclear dump right away? - ABC 36 News: – The state didn’t notify Estill County officials for at least two weeks after learning that nuclear waste was illegally dumped in a landfill across from two schools. Estill County officials wanted to know why the state didn’t tell them right away and so did ABC 36 News, so we went to Frankfort for answers. The Kentucky Department for Public Health says the reason the state didn’t tell Estill County officials as soon as it learned of the illegal dumping at Blue Ridge landfill is because the state radiation branch did an assessment at the site and didn’t find any above normal radiation levels, so there wasn’t any risk to the public. Estill County officials say they weren’t told until last Thursday, February 25, that 1,500 tons of nuclear waste had been illegally dumped in the landfill across from the county high school and middle school. A West Virginia-based company is accused of dumping the waste by container from July 2015 to November 2015, according to Estill County officials. The state says it doesn’t believe there is an ongoing health risk at the site because the material is buried. The state did say had there been any health risk at all, the county would have been notified immediately. “I think we were trying to put the pieces together about what had actually been dumped at this particular site. At one point, we were just trying to find what sites, and actually that’s part of our investigation, just trying to put the pieces together, and what material it might be,” said Kraig Humbaugh, Deputy Commissioner, Kentucky Department of Public Health.

Radioactive waste a test for Bevin administration - The Courier-Journal   – The dumping of out-of-state radioactive waste in Kentucky is the first high-profile test of how Gov. Matt Bevin's administration enforces environmental rules. It may also test how far the administration is willing to go to prevent future dumping. The millionaire businessman campaigned against burdensome environmental regulations and made a former coal mining company executive, Charles Snavely, a top environmental regulator by putting him in charge of the Environment and Energy Cabinet. But hundreds of Estill County residents are now worried about their health, and pressure is on the energy cabinet and the Kentucky Cabinet for Health and Family Services - a partner in the investigation with its public health and responsibilities - to determine whether anyone was exposed to excessive radiation. State authorities are also pulling investigative threads to determine what rules may have been broken and by whom - and to find out how widespread the dumping might have been across Kentucky. "I would hope that they would really investigate this matter and use this case to show how serious they are going to be about regulations of dangerous and potentially dangerous concerns," said Nancy Farmer, a retired school teacher and former Irvine City Council member.  "I have made it abundantly clear that my commitment is to enforce the laws we are charged with upholding, to keep the citizens of the commonwealth safe and healthy, to protect our natural resources and promote a healthy business climate," said Snavely.  "We will hold the violators accountable to the law just as we would in any situation under our jurisdiction."

Days of Revolt: Sacrifice Zones - The Real News Network  --In this episode of teleSUR's Days of Revolt, Chris Hedges and two Native American activists discuss the violation of land and lives of Indigenous peoples, particularly the decades of open-pit uranium mining that is responsible for spreading nuclear contaminants across the continent today -   March 1, 2016

Koch-Backed Group Is Bankrolling Efforts To Mine Uranium Near The Grand Canyon --A dark money group backed by Charles and David Koch is behind a well-funded effort to undermine protections at the Grand Canyon and overturn the Antiquities Act, the law President Teddy Roosevelt used to permanently protect the area in 1908. If successful, the campaign could stop a permanent ban on uranium mining near the canyon’s rim, despite support for such a ban by a vast majority of Arizonans. “Dark money” groups can raise unlimited amounts of money from donors they do not have to disclose, thanks to two infamous Supreme Court decisions. The Koch brothers’ anti-park effort is being run through the Arizona-based Prosper Inc. and its sister organization the Prosper Foundation Inc., which share a physical address, a logo, a staff, and a founder — Kirk Adams. Adams served as Speaker of the Arizona House of Representatives from 2009 to 2011, ran a failed attempt for the U.S. House of Representatives in 2012, and is currently the Chief of Staff to Arizona Governor Doug Ducey. Earlier this year, Prosper co-authored a report with the Arizona Chamber of Commerce Foundation, which declared that protecting the public lands around the Grand Canyon National Park as a national monument would be a “monumental mistake” that represents “unwarranted and unwanted federal overreach” and would “undermine” the state of Arizona. It calls the Antiquities Act — which has been used by 16 out of the last 19 American presidents to protect places like the Grand Canyon, Chaco Canyon, and Arches — “the worst kind of federal overreach.”

Duke Energy CEO: Cyber-threats grow (AP) — The volume of cyberattacks on the country’s largest electric company is astounding, and much of it is coming from computer hackers backed by foreign governments, Duke Energy Corp. CEO Lynn Good said Tuesday. So besides hardening online defenses, Duke Energy is focusing on how quickly the company could restore power if the flow to any of its 7.2 million customers in six states is switched off by malicious outsiders, Good said in an interview with The Associated Press. “Most of the cyberexperts that you talk to would say it’s a matter of time, that at some point there will be a vulnerability that someone can exploit,” said Good, who has led the Charlotte-based company for three years. “That’s the world that we live in.” To illustrate the threat, Good pointed to a December hack of Ukraine’s power grid that blacked out electricity to more than 225,000. The attack in the country, which is in conflict with neighboring Russia, was coordinated and highly sophisticated, U.S. authorities said in a report released last week. National Security Agency and U.S. Cyber Command chief Adm. Michael Rogers has warned that it’s not a matter of if, but when attackers target U.S. power systems. “If I were to share with you the number of attacks that come into the Duke network every day, you would be astounded,” Good said during earlier remarks at a breakfast with business leaders. “And it’s not from people working out of their garage; it’s from nation-states that are trying to penetrate systems.”

Big Batteries, the Elusive Key to Clean Energy, Boomed in 2015 -  Large-scale energy-storage systems, long considered the elusive link to integrating solar and wind power into electric grids, are slowly becoming a reality. U.S. homes and businesses -- mainly utilities -- installed storage systems with 221 megawatts of capacity in 2015, according to a study released Thursday by Boston-based GTM Research and the Energy Storage Association. That’s about enough to power a city the size of Cincinnati, Ohio, for an hour and is more than triple the 2014 total. The U.S. has about 580 megawatts of energy storage installed now, up from 80 megawatts in 2008. The increase comes as power companies struggle to incorporate energy from wind and solar farms, where production ebbs and flows based on breezes and sunshine. Renewable energy isn’t the only driver. Advocates for storage say the technology lets utilities run power plants more efficiently and makes once-fragile grids more resilient in the face of storms, blackouts and terror attacks. “We can look back at 2015 as the year when energy storage really took off,” Utilities are the largest users of storage technology, accounting for 187 megawatts, or 85 percent, of systems installed in 2015. Most were in the markets served by the electric grid run by PJM Interconnection LLC. Utilities’ customers accounted for 35 megawatts

New bill would have Utah taxpayers invest $51 million in California coal port - Salt Lake Tribune: A Utah senator wants to invest $51 million in taxpayer money to issue loans to help build a deep-water port in California to export Utah coal overseas, a proposal that has sparked outcry in California and from environmental groups. "It's a once-in-a-lifetime opportunity for Utah," said Senate Majority Whip Stuart Adams, R-Layton, who released the bill late Monday night, with just eight working days left in the annual legislative session. SB246 would use sales-tax revenue to give out loans to help acquire an ownership interest in a port near Oakland, Calif. Adams said access to the port would be a huge benefit for rural Utah, particularly the energy-producing areas of the state, which are struggling with double the unemployment rate of urban parts of the state.Mark Clemens, director of the Utah chapter of the Sierra Club, called the move a "misappropriation" of public money to have taxpayers help build a port to export coal to a world market already saturated with coal. "One has to ask: Would they go to this — one can't call it anything other than a shell game — if it wasn't to somehow escape potential legal or fiduciary responsibilities of some kind?" he said. "It just makes my head spin to think of the waste and stupidity of an undertaking like this at a time when coal mines are in such deep holes financially that it's entirely possible few of them will ever be able to do the necessary reclamation to close themselves down. The Utah Legislature is throwing taxpayer money into the same black hole," Clemens said. "It's disgraceful."

Foresight Energy looks to seal burning Illinois coal mine (AP) — The owner of a central Illinois coal mine where an underground fire has smoldered for the past year is seeking permission to seal the mine. The St. Louis Post-Dispatch reports that Foresight Energy on Tuesday asked the federal Mine Safety and Health Administration to close the Deer Run Mine near Hillsboro to cut off oxygen fueling the fire. The St. Louis-based company says it has tried to fight the fire by sealing specific areas in the mine and filling them with extinguishing agents and inert gas. Foresight is simultaneously seeking approval from Illinois regulators to expand the longwall mine into areas unaffected by the fire. The company ceased mine production in early January because of the elevated carbon monoxide levels below ground as well a depressed market.

Tax cut on the way, ailing West Virginia coal seeks even bigger break (AP) — Already set for a break, the ailing coal industry is making a late-game plea for a bigger tax cut in cash-strapped West Virginia. Democratic Gov. Earl Ray Tomblin signed a bill Monday that will eliminate a 56-cent-per-ton surtax on coal by July 1 at the latest, a break worth about $51.5 million in the 2017 budget year. The surtax has long helped pay down a workers’ compensation debt. Later that day, a bill emerged in the Republican-led Legislature to drop the overall coal severance tax. The bill headed for a vote Wednesday would drop coal’s tax rate from 5 to 4 percent of its gross value in July 2017, and to 3 percent in July 2018. But it may be overly weighed down by an amendment accepted Tuesday that adds tax cuts for oil and natural gas producers. Tomblin’s administration expects the larger coal tax cut itself would leave a hole in the state budget of well more than $100 million, and further deplete money for struggling coal-producing counties, said Tomblin spokeswoman Shayna Varner. “At a time when the state is already dealing with financial difficulties, additional tax cuts are not something the state can consider at this time,” Varner said. Voicing desperation, West Virginia Coal Association President Bill Raney told state senators Monday his industry needs any help possible. The Mountain State’s coal industry has shed thousands of jobs amid competition from natural gas, thinning coal seams, more productive competing coal regions, dismal domestic and international markets and federal regulatory pressures.

Supreme Court Rejects Attempt To Let Coal Plants Emit Unlimited Mercury -  Regulations that limit heavy metal pollution from oil- and coal-fired power plants will continue to be enforced by the EPA — at least for now — thanks to Supreme Court Chief Justice John Roberts. On Thursday, Roberts unilaterally rejected a petition from 20 conservative-led states asking the court to temporarily halt the regulations. Halting the regulations would effectively allow power plants to emit unlimited mercury, arsenic, chromium, and other toxic heavy metals into the environment.  Led by Michigan, the states had asked the Supreme Court to halt the Mercury Air Toxics Standard — commonly referred to as MATS — while the D.C. Circuit court considers its legality.  Last summer, the Supreme Court found that the EPA had not properly considered how much the rule would cost power plant operators, and ordered the EPA to do a proper cost-benefit analysis. That analysis is expected to be done in mid-April, and then the D.C. Circuit is expected to take up the case. The states, however, argue that one month is too long to wait. At an estimated price tag of $9.6 billion per year, the rule is one of the most expensive EPA regulations in history. Some coal plants have already chosen to shut down rather than comply.  But the EPA argues that the costs will eventually be outweighed by benefits to public health. Due to reductions in harmful pollution, the agency argues, up to 11,000 premature deaths would be prevented every year; IQ loss to children exposed to mercury in the womb would be reduced; and annual monetized benefits would be between $37 billion and $90 billion.

The Poison in Tennessee: —It was a decade or so ago that I stood on this same windy point above the Emory River basin. At the time, the view from this vantage looked very much as though a big chunk of the moon had fallen into the river–a huge gray mountain running toward sheer cliffs on all sides, earth-moving machines strewn like a child's Tonka trucks at all angles along its face. And a guy who was preparing to move away told me about the night he looked out his front window and saw trees marching by his front door.  On the night of December 22, 2008, a Tennessee Valley Authority dike holding back a virtual reservoir of coal ash—what they call "slurry" here—gave way and sent 5.4 million cubic yards of the slurry pouring down into the Emery and Clinch Rivers. On land, the great wave of toxic sludge—mercury, selenium, arsenic and Christ alone knows what else—gouged the landscape, sending trees walking down into the valley and wrecking homes all along the waterfront. Even now, though, even as the river runs unchecked into the basin and out into the lake again, the Kingston fly-ash spill is still causing untold damage and poisoning people one state away. As part of its cleanup, the TVA started shipping the coal ash by truck and by rail to Uniontown, Alabama, with sadly predictable results. The agency failed, according to the civil rights complaint, to take actions to avoid disproportionate adverse impacts on the basis of race.  , "When it was in Tennessee, it was treated as if it was hazardous material because the white middle class folks made sure it was handled that way. Then it came down here and they treated it like it was just household waste. Why is it hazardous in Tennessee and not in Uniontown?

Mosul dam engineers warn it could fail at any time, killing 1 million people: A tragedy is just waiting to happen in one of the largest cities in the Middle East, engineers warn. The Iraqis who built the dam structure for the Mosul dam warn that the structure is “increasingly precarious” and threatens to kill 1 million people. They also said the government’s answer has been ridiculous. The Mosul Dam is the largest dam in Iraq, providing electricity for the 1.7 million residents of Mosul. However, it has a long record of instability. Built in an unstable geological setting, the earthen embankment dam is located on top of gypsum, a soft mineral which dissolves in contact with water – a recipe for disaster. Leaks began right after the dam was built in 1986, with 24 machines continuously pumping grout into the dam base. More than than 50,000 tonnes of material have been injected, but did little to stabilize the structure. A September 2006 report by the United States Army Corps of Engineers noted, “In terms of internal erosion potential of the foundation, Mosul Dam is the most dangerous dam in the world.” Now, the engineers responsible for building the structure in the first place warn that the situation is reaching critical levels, after winter snows melted and more water flowed into the reservoir, raising pressure. After the city was more or less under the control of the Islamic State, the injection machinery wasn’t operated anymore and the maintenance crew was dissolved. The government was slow in reacting, and while negotiations with an Italian construction firm for carrying out urgent repairs is being discussed, no agreement has been reached.

China to close more than 1,000 coal mines in 2016: energy bureau | Reuters: China will aim to close more than 1,000 coal mines over this year, with a total production capacity of 60 million tonnes, as part of its plans to tackle a price-sapping supply glut in the sector, the country's energy regulator said. China is the world's top coal consumer but demand has been on the wane as economic growth slows and the country shifts away from fossil fuels in order to curb pollution. In a notice posted on its website on Monday, the National Energy Administration (NEA) said the closures would form part of the plan released earlier this month to shut as much as 500 million tonnes of surplus production capacity within the next three to five years. ( China has a total of 10,760 mines, and 5,600 of them will eventually be required to close under a policy banning those with an annual output capacity of less than 90,000 tonnes, the China National Coal Association has estimated. China has promised to stop approving all new coal mine projects for three years in a bid to control capacity. The country produced 3.7 million tonnes coal last year and has an estimated capacity surplus of 2 billion tonnes per annum. Last year, the supply overhang dragged down domestic coal prices by a third, but there has been some recovery this year with thermal coal at the port of Qinhuangdao up 2.7 percent at 380 yuan ($58.29) per tonne. Apart from coal, China will also aim to tackle overcapacity in the thermal power sector this year by controlling new builds and cancelling projects in regions with the biggest capacity surpluses

Torn Between Two Fossil Fuels—Update On The Natural Gas Challenge To Coal Generation. For the first time ever, U.S. natural gas-fired power plants are routinely generating more electricity than their coal-fired counterparts, at least during the spring, summer and fall. Prior to 2015 coal held a clear lead over natural gas in power generation but last year they were neck and neck at 33% of fuel consumed for power generation according to the latest Energy Information Administration (EIA) statistics released Friday (February 26, 2016). This is partly due to tightening federal environmental rules, but another major driver is very low natural gas prices, which have been averaging below $2/MMBtu. Coal prices have been falling too as coal markets respond to stronger-than-ever competition from gas, but not enough to prevent a lot of coal-to-gas switching in the power sector. Today, we update last fall’s analysis of the death-match battle between coal and natural gas with a look at how persistently low gas prices may keep gas on top. In April 2015, U.S. power plants fired by natural gas produced more electricity than coal-fired plants—that had never happened before. Coal retook the lead in May and June, but since then gas has remained on top, and in some months gas’s edge over coal has been significant. In October, for example, gas-fired units generated 35% of the nation’s power, compared with 31% for coal, and in December--the latest month for which EIA statistics are available—the score was gas 34%, coal 28%. What a difference a year makes. In October 2014, coal-fired generation held a huge 38%-to-27% edge over gas, and the following month coal’s margin over gas was a still-significant 35% to 31%. As we discussed back in September 2015 – the last time we looked at the contest (see Torn Between Two Fossil Fuels) - as recently as 2008 coal-fired units were producing more than twice the electricity that gas units did. Since then, U.S. production of natural gas has continued growing, natural gas prices (which spiked to more than $13/MMBtu in 2006) have fallen (and become less volatile), and federal rules on power plant emissions have been tightened considerably, with possible implementation of the Environmental Protection Agency’s (EPA) Clean Power Plan (CPP)—a potential game-changer for coal and gas—looming.

Politicians optimistic about future of oil and gas in the Ohio Valley - WTRF  - Hundreds were at Barnesville High School on Saturday for the National Association of Royalty Owners, or NARO, conference. The day-long event provided support and information for people who work or own land in the oil and gas industry. "You can't go anywhere in the world today and talk about energy and talk about oil and gas that you don't see a map of Eastern and Southeastern Ohio on the wall," Ohio Congressman Bill Johnson said. Oil and gas in the Ohio Valley is the resource that helps many put a roof over their head and food on the table. But times have been hard in the industry in the past few years. "No one has a crystal ball, but I am still optimistic long term about the future in Eastern Ohio when it comes to energy production," Ohio Senator Lou Gentile said. Legislation in Washington has caused coal mines to fold and miners to lose their jobs. "I'd just like to see a lot of our coal miners get back to work there has been a lot of lay off lately," Ohio State Representative Jeff Thompson said. The general public is just asking for money and jobs to come back into the region. "This is a resource that belongs to the people here," Johnson said. The elected officials and the people making policy decisions they need to understand that."

Ohio Group Still Calling For Increased Fracking Tax - WOSU --Natural gas closed at a 17 year price low Thursday, and low prices have led to worry among lawmakers about the nature of Ohio’s oil and gas industry—but one group is still calling for an increase to the drilling tax.  A struggling market for natural gas has led top Republican and Democratic leaders to hold back on increasing the so-called fracking tax. But the liberal leaning think tank, Policy Matters Ohio, says data shows that companies pumped more natural gas from the state’s shale last year than the year before. "Every year that we wait and we don’t impose an adequate severance tax on growing production we lose an opportunity to invest in our own state," says Wendy Patton of Policy Matters.  Republican Senate President Keith Faber has suggested drawing up an increased tax plan now and put it into effect once the market rebounds.

Environmental group appeals decision related to injection well - Athens County Fracking Action Network is appealing a court decision that rejected ACFAN’s effort to have the Ohio Oil & Gas Commission hear its objections to a permit issued for an injection well. The Messenger previously reported that ACFAN tried to challenge before the commission a 2013 state permit issued for K&H Partners’ second injection well in Troy Twp. However, the commission ruled it lacked jurisdiction, a position upheld last month by Judge Patrick Sheeran of Franklin County Common Pleas Court. Athens County Fracking Action Network has filed notice it is appealing Sheeran’s ruling to the 10th District Court of Appeals in Franklin County. The Ohio Department of Natural Resources and K&H Partners argued that the 2013 permit was not an injection permit, but instead was a drilling permit that by state law could not be taken to the Oil & Gas Commission. ACFAN had argued that the commission could consider the matter because the 2013 permit was actually an injection permit, based on an administrative rule governing injection wells. In agreeing that the commission lacked jurisdiction, Sheeran relied on written arguments that were filed in the case. He had denied ACFAN’s request for oral arguments to be made in court. Although the case is headed to the appeals court, ACFAN has another case pending in Franklin County Common Pleas Court before Judge Richard Frye. The second involves the same issues, but concerns a permit issued for K&H Partner’s third injection well in Troy Twp.

Shipping Fracking Wastes by Barge - When GreenHunter Water LLC proposed shipping fracking wastes by barge, a lot of folks objected. The USCG decision last week to evaluate permits to barge fracking wastes case-by-case has not quelled public concern.  High volume hydraulic fracturing uses million and millions of gallons of water per well to extract natural gas from shale. During shale gas extraction, the water used is exposed to process chemicals plus metals and radon from the earth. GreenHunter was transporting oil and gas wastes using its over 400 truck fleet and the company needed permission from USCG and COE in order to shift transport from trucks to barges. In 2011, GreenHunter sought permission from the USCG to transport Appalachian fracking wastes by barge over the Ohio River. In 2013, GreenHunter made a parallel application to the COE to build a barge offloading facility on the Ohio River.  USCG expected the GreenHunter request to be the first of many to barge fracking wastes. Hence, USCG proposed a policy change in 2013 designed to standardize both the process for barge owners seeking to transport wastes from shale gas extraction as well as the information submitted to USCG. Public response to the proposals before both COE and USCG was robust and overwhelmingly negative. 70,094 comment letters were sent to USCG opposing transport of fracking wastes by barge; only 21 supported the USCG proposal to allow shipping of fracking wastes by barge. Of the 460 comments COE received, 447 asked COE not to grant the permit to build a barging facility.  On February 23, 2016, one year after COE permit was issued, USCG withdrew its proposal. Rather than issue a blanket policy, USCG said it would evaluate requests to barge fracking waste on a case-by-case basis under the existing decades old USCG regulations. 

University of Cincinnati study finds fracking's bad rap is not supported - A three-year study by the University of Cincinnati in Carroll and surrounding counties determined hydraulic fracturing, or fracking, has no effect on groundwater in the Utica shale region, is not being released to the public. Dr. Amy Townsend-Small, the lead researcher for the University of Cincinnati Department of Geology, released the results during the Feb. 4 meeting of the Carroll County Concerned Citizens in Carrollton. During her presentation, which was videotaped and is available for viewing on YouTube, Townsend-Small stated, “We haven’t seen anything to show that wells have been contaminated by fracking.” When asked at that meeting if the university planned to publicize the results, Dr. Amy Townsend-Small, an assistant professor at the University of Cincinnati Department of Geology and the leader of the study, said there were no plans to do so. “I am really sad to say this, but some of our funders, the groups that had given us funding in the past, were a little disappointed in our results. They feel that fracking is scary and so they were hoping this data could to a reason to ban it,” she said. Rep. Andy Thompson, R-Marrietta, whose district includes Carroll, Harrison and Belmont counties, is calling for the university to release its findings. Thompson noted the study received state funding in the form of an $85,714 grant from the Ohio Board or Regents and federal funding from the national Science Foundation for an isotope ratio mass spectrometer.

Fracking unsustainable as Chesapeake Energy closes -- For nearly a decade, government government officials in Pennsylvania have allowed fracking companies to exploit our land, our water and our people.. We couldn’t tax this industry at the state level, they said; that might drive the fracking companies away.  Chesapeake’s move isn’t the result of any government overreach, regulation or taxation. It’s simply the result of an industry that isn’t living up to expectations, that is unsustainable and that was a bad bet for Pennsylvania from the very beginning. It’s not just Chesapeake that’s down on it’s luck, though; it’s the entire industry that’s in a tailspin. So, the fracking companies are packing up and leaving Pennsylvania. And what are we left with?We’re left with patches of our state forests and other public lands clear cut to make way for fracking rigs and roads to allow heavy truck traffic in and out. We’re left with communities that lack access to clean drinking water and with residents of those communities who will suffer from the health effects of using contaminated water for years to come. We’re left with small towns that were destroyed in the wake of the fracking boom by rapid population growth that couldn’t be supported, causing rents to rise so much that lifetime residents were forced to leave, and causing crime rates to skyrocket higher than small police forces were able to handle.  State lawmakers encouraged fracking companies to come to Pennsylvania and wreak havoc while posting record profits for a few years, and —despite efforts by Democratic lawmakers in recent years—the state received no additional revenue in return. That’s a bad deal for Pennsylvanians.

Inside the Fight to Frack Pennsylvania Township - Since the community began changing its zoning laws in late 2014, the pad, if approved, would be only the second shale gas site in Penn Township - a rural-residential suburb about 20 miles east of Pittsburgh in Westmoreland County.Penn Township hosts a mix of cookie-cutter single family homes in subdivisions and sprawling farms - some of which have been in families for generations. You can get away from city lights out here. Find a nice home and good school districts among picturesque rural scenery.But not for long, some fear.It's been nearly a decade since the shale industry planted roots in Pennsylvania, and this community is just experiencing its first shale development.It's this mix of suburbia-meets-rural landscape that's at the heart of the drilling debate in Penn Township: Many residents who live in residential areas don't want drilling near their homes - fearful of what the activity could mean for their health, property values and way of life.  Other residents want to lease their land to drillers. Editor's note: This is the first story in our Clearing the Air series about shale gas drilling in Penn Township. PublicSource has followed the events there since April 2015. We placed air quality sensors at five homes to monitor pollutants near the contested well pad for two months. The data collected are being analyzed. PublicSource will share the results with residents and report on what we found.

First US Overseas Ethane Exports Ready to Set Sail. -- Just a few years ago, the possibility of overseas ethane exports was almost incomprehensible. Lack of infrastructure, high handling costs, no suitable ships and minimal market demand made ethane exports seem extremely unlikely.  But then the shale gas boom transformed the ethane market.  Now U.S. ethane production greatly exceeds demand and each day hundreds of thousands of barrels of ethane are being rejected into the natural gas stream.  Consequently a few pioneers are hammering through the challenges associated with overseas ethane exports, including the construction of specialized tankage, loading facilities, ships and unloading facilities.  And international chemical companies are spending hundreds of millions of dollars to modify olefin crackers to use the cheap feedstock.  Now the first of those pioneers has made it to the new ethane frontier. In today's blog we examine the impact of imminent ethane exports from the Energy Transfer/Sunoco Terminal at Marcus Hook, PA.

West Virginia kills bill allowing private property survey (AP) — The West Virginia Senate has voted down a bill that would have let surveyors for natural gas pipelines enter people’s private property without permission. Senators voted 23-11 to kill a bill Monday that says letting surveyors for natural gas companies on people’s property is in the public interest. The legislation would have required trying to get consent to go on someone’s property. Companies would also have to send a notice of their intent to perform studies on someone’s property. The bill would not have required or prevented landowners from being present when surveyors were on site. The bill was one of several aiming to help natural gas companies in West Virginia.

Coal, natural gas to get tax break in West Virginia (AP) — Gov. Earl Ray Tomblin has approved tax breaks for West Virginia’s coal and natural gas industries. The Democrat signed a bill Monday dropping additional severance taxes of 56 cents per ton of coal and 4.7 cents per thousand cubic feet of natural gas. The surtaxes have helped pay a workers’ compensation debt for years. Tomblin proposed dropping the two levies, and the Republican-led Legislature passed Tomblin’s bill. They would disappear July 1. Tomblin also can eliminate them earlier. The bill permits using the money until July 1 to help balance this year’s $384 million budget gap. Tomblin’s administration expects it would cost $51.5 million in lost coal revenue and $58.1 million lost from natural gas in the 2017 budget year. Standard severance taxes on coal and natural gas aren’t affected.

Radioactive waste fuels calls for dump closure - A crowd of at least 300 people broke into loud applause Tuesday night when residents called on Estill County's top elected official to shut down a dump that state officials say accepted illegal radioactive waste from outside Kentucky for five months last year.Florida-based Advanced Disposal, which operates the landfill, "breached the community trust" not only by accepting the low-level nuclear waste from out-of-state oil and gas drilling operations, but also by accepting any waste at all from another state in violation of an agreement with Estill County, said Michael Wilson."Give them a cease and desist order," said Wilson, a banker in the Appalachian foothills community of Irvine."I have no problem shutting them down." said Estill County Judge Executive Wallace Taylor, adding later that such a decision "was for another day." But he said county officials had identified four violations of its agreement with the county, and "if we can verify they knowingly done something wrong, (company officials) will be locked up, and I will do it myself."For their part, the company blamed those who sent or delivered the waste, called TENORM, which officials said could cause lung cancer."It appears they misrepresented the waste," said Dave Retell, a senior manager with Advanced Disposal. "They told us one thing, and it seems it was something else."

Kentucky to look at new fracking rules - Kentucky is making a bid for its own fracking boom, the sort of which has fueled economic growth and environmental concerns in Ohio, Pennsylvania and West Virginia – and the radioactive waste sent to two Kentucky landfills. While state officials investigate what they have called illegal dumping in Estill and Greenup counties, there's a new call for tightening rules on TENORM, as the drilling waste is called, before any big score in the Rogersville Shale formation of Central Kentucky. "We need a cradle to grave program that says here is where these wastes are being generated, here is who is managing them, and where they are being disposed," said Louisville attorney Tom FitzGerald, director of the Kentucky Resources Council. The Kentucky Oil and Gas Association "continues to be committed to the modernization and responsible regulation of the Kentucky's oil and gas industry," said Bob Barr, a board member of the industry group. A working group charged with making recommendations to modernize state oversight of oil and gas drilling needs to resume its deliberations, FitzGerald said. Kentucky Energy and Environment Secretary Charles Snavely said that group will begin work again and is being charged with evaluating potential remedies for harmful substances.

Natural Gas Prices Fall Near 17-Year Low - WSJ: —The U.S. natural gas market faces another year of ultralow prices as winter comes to an end and the start of liquefied natural gas exports has failed to boost prices. Natural gas prices plunged 26% in February and briefly dropped to their lowest level since the 1990s Monday as weather forecasts for the next two weeks turned warmer. Winter typically marks the peak of natural gas demand as homes and offices turn up the heat. About half of U.S. households use natural gas as their primary heating fuel. But the El Niño weather phenomenon has kept temperatures warmer than normal across much of the U.S. this year, reducing natural-gas demand. Weather forecasts released Monday called for warmer weather in the next two weeks than previously expected, squashing any expectations that a late-winter cold spell could help shrink the oversupply of natural gas. Natural gas futures for April delivery settled down 8 cents, or 4.5%, to $1.711 a million British thermal units on the New York Mercantile Exchange. Prices settled at the same level last Thursday, when it was the lowest closing price reached since March 1999. Output remains high, even as companies have sharply cut spending on new drilling due to plummeting oil prices. The Energy Information Administration said Monday that natural-gas production in December was 0.3% lower than the prior month but 2% higher than a year before.

Shale gale crushing natural gas prices: Natural gas is the cheapest it's been in nearly two decades, and it could get even cheaper, thanks to U.S. shale drillers. The U.S. is producing at a near-record pace, but the warm winter has only resulted in more oversupply as the industry heads into the time of year when it starts to store fuel for the next winter. Natural gas futures for April were trading at $1.66 per million BTUs Thursday, the lowest level since late February 1999. "The Northeast has been the main driver of the growth this winter, really contributing to those record highs. It's also been the driving force of the entire shale revolution of the past five years," said Thad Walker, Platts Bentek energy analyst. In the last decade, the U.S. was looking to import natural gas, but the "shale gale" has resulted instead in massive oversupply. The latest government data aren't helping. Natural gas futures sank even further after the weekly storage report showed demand for natural gas last week was well below normal. The U.S. Energy Information Administration said domestic inventories fell by 48 billion cubic feet last week, a shocker when compared to the normal 137 bcf decline usually seen at this time of year. "Demand hasn't been there and production is so high, and that's a nasty combination," "We're still getting a lot of stuff out of the Marcellus. Low prices aren't a deterrent." The Marcellus shale stretches from Upstate New York, down to Pennsylvania to West Virginia and over to Ohio. According to December data, drillers in Texas and New Mexico saw a decline in production but Ohio and Pennsylvania continued to add production.

The Scariest Chart For NatGas Bulls -- With analysts calling NatGas's glut even bigger than crude's, the following 'chart' has just become the scariest in the world for the energy complex. As Bloomberg warns, if you live in the eastern U.S., it’s almost time to put that snow shovel away and get out the gardening tools, as March temperatures are expected to be considerably higher than expected across the entire US (except Florida, sorry). As Bloomberg continues, after a slight hiccup later this week -- which could bring a little sleet and even a few snowflakes -- the warmth that has dried out the West Coast and drought-stricken California during most of February will shift east. Temperatures may reach 8 degrees Fahrenheit (4 Celsius) above normal by mid-month from the Midwest to the Atlantic, and even higher across the Great Lakes and parts of Ontario and Quebec, said Commodity Weather Group LLC in Bethesda, Maryland. “The pattern is going to change,” March is expected to be considerably hotter than expected everywhere (except Florida)

Report: Cheap natural gas leads to more plants and pollution (AP) — The nation’s boom in cheap natural gas — often viewed as a clean energy source — is spawning a wave of petrochemical plants that, if built, will emit massive amounts of greenhouse gases, an environmental watchdog group warned in a report Monday. The Washington-based Environmental Integrity Project said hydraulic fracturing of shale rock formations and other advances, such as horizontal drilling, have made natural gas cheap and plentiful — so plentiful that the United States has begun exporting gas. The watchdog nonprofit, which says its mission is to hold polluters accountable and champion environmental laws, is led by Eric Schaeffer, former director of the U.S. Environmental Protection Agency’s Office of Civil Enforcement. Thanks to this energy boom, the group calculated that if 44 large-scale petrochemical developments proposed or permitted in 2015 were built they would spew as much pollution as 19 new coal-fired power plants would. The report said all these projects potentially could pump about 86 million tons of greenhouse gases into the atmosphere each year. That would be an increase of 16 percent for the industry’s emissions in 2014, the report found. The report combined new natural gas, fertilizer and chemical plants and petroleum refinery expansions projects.

Trees Cut as Maple Syrup Farmers Lose Eminent Domain Battle Over Constitution Pipeline  -- Guarded by heavily armed U.S. marshals, a Constitution Pipeline tree crew began felling trees in the Holleran family’s maple sugaring stand Tuesday while upset landowners and protesters looked on. The cutting began 11 days after Federal Judge Malachy Mannion dismissed charges of contempt against the landowners for allegedly asking a tree crew that had arrived on the property not to cut the trees. The charges were dismissed due to the prosecution’s inability to show enough evidence of violation of the February 2015 order that cited eminent domain in giving Constitution Pipeline Company permission to cut on the property without landowner permission. The judge expanded on the original order, adding a 150-foot “safety buffer” to be maintained around all tree-cutting activity, effectively extending the size of the Right of Way. All visitors and family members are remaining outside of the buffer while trees are being felled this week.  North Harford Maple is a family business owned by Cathy Holleran that produces maple sap and syrup utilizing their sugarbush, which includes 1,670 linear feet of the proposed 125-foot-wide right of way. “I have no words for how heartbroken I am,” Megan Holleran, a family member and field technician for North Harford Maple, said. “We’ve been preparing for this for years, but watching the trees fall was harder than I ever imagined it would be.”

A Proposed Natural Gas Pipeline is Next to a Nuclear Power Plant. What Could Go Wrong?  - What’s scarier than an aging nuclear power plant? An aging nuclear power plant next to a natural gas pipeline. That could be the new reality for the Indian Point Energy Center, a nuclear power station located in Westchester County, just 45 miles north of Manhattan. A proposed expansion of a natural gas pipeline across the power station’s property has environmentalists and other groups concerned that an accident could turn the power plant into an unrivaled disaster. It’s a bit like smoking next to a gas tank — a gas tank filed with nuclear fuel near one of the densest population centers on the planet. Despite how ill-advised this sounds, the pipeline has already been approved by the Federal Energy Regulatory Commission. Why would they allow such a thing? Well, as the New York Times notes, approval was partly based on reviews carried out by the Entergy Corporation — which happens to be the same company that owns the plant. New York Gov. Andrew Cuomo, a resident of Westchester County, is not having any of it. Cuomo recently directed his administration to conduct an independent safety analysis of the pipeline project after hearing that radioactive water had leaked from the aging plant and into the groundwater. This is just the latest strike against Indian Point by the Cuomo administration, which called for the plant’s closure last year. “The safety of New Yorkers is the first responsibility of state government when making any decision,” said the governor in a statement.  The Nuclear Regulatory Commission, however, seems unconcerned. “Our expert confirmed that both units could safely shut down, even if the pipeline were to rupture and a blast of flame were to come from that line,” said Neil Sheehan, spokesperson for the commission.

Cuomo administration requests halt on natural gas pipeline — The Cuomo administration has asked the Federal Energy Regulatory Commission to halt construction of a natural gas pipeline near the nuclear power station in New York City’s suburbs. State health, environmental, utility and security agencies say they are launching an analysis at Gov. Andrew Cuomo’s direction of the safety risks from Spectra Energy’s Algonquin pipeline that would run from Pennsylvania to New England.  Their analysis includes recent unplanned shutdowns at Entergy’s aging Indian Point nuclear plant, which Cuomo has questioned keeping open. It’s 25 miles north of New York City and its nearly 9 million inhabitants. Assembly members Sandra Galef and David Buchwald, both Westchester County Democrats, say they asked the governor last year for a safety assessment.  A call to FERC was not immediately returned Monday.

NY inspectors find defects in rail line used by oil trains - (AP) — Rail inspectors report examining 215 crude oil tank cars, 190 miles of track and 26 switches, finding four critical defects and 16 others in the latest round of New York inspections. Targeted inspections began in 2014 following deadly derailments the year before in Canada and the U.S. and fires from volatile oil. Inspectors examined cars at the CSX yard in Selkirk, south of Albany, and at the Canadian Pacific yard in Albany, and tracks in the Adirondacks, central New York and Hudson Valley. The report shows four critical defects found along 29 miles of CSX mainline tracks between Rome and Syracuse. They were immediately repaired.

Lawmakers: Delay permit for piping oil beneath St. Clair River — Two members of Congress want the Obama administration to put the brakes on a move to allow piping of crude oil beneath the St. Clair River through lines that are nearly a century old. Houston-based Plains LPG is applying to move the oil through two pipelines that run from Marysville, Michigan, to Canada. Because they cross an international border, the U.S. State Department has jurisdiction over the matter. The lines were constructed in 1918. A 30-day public comment expired quietly last week with very little feedback. In a letter to Secretary of State John Kerry, Reps. Candice Miller and Debbie Dingell say the proposal has caught many Great Lakes advocates by surprise. They ask him to suspend the permitting process and give more people time to comment.

Forest Service seeks public comment on pipeline survey  (AP) — The U.S. Forest Service says the public can weigh in through March 21 on whether to allow surveys through the George Washington National Forest for a proposed natural gas pipeline. The energy companies behind the Atlantic Coast Pipeline are proposing a 14.3-mile route through the national forest for the $5 billion energy project. The pipeline would run from West Virginia, through Virginia and into North Carolina. The Forest Service is seeking comment on a revised pipeline path through the national forest. It rejected an initial proposal because of its potential impact on a rare salamander. Foresters say they’ll use the public comments and an environmental review to decide whether to issue a permit for the pipeline survey. Dominion Resources is partnering with other energy companies on the proposed pipeline.

Cheniere Energy showcases first LNG export (VIDEO) - Cheniere Energy released a video highlighting the first ever export of liquefied natural gas from the continental United States. Aerial shots show tugboats guiding the tanker to Cheniere’s Sabine Pass LNG Terminal and workers pumping LNG into vessel tanks. The cargo was loaded onto the tanker Asia Vision on Feb. 24. Brazil’s Petrobras purchased the 160,000 cubic meter shipment, which will be taken to the company’s regasification plant in All Saints’ Bay, Bahia. The exported LNG will supply Brazil’s domestic market. Most of the cargo is expected to be used by thermal power plants. The Sabine Pass LNG Terminal is located on the border between Texas and Louisiana in Cameron Parish, La. The terminal has two docks deep recessed far enough so that no LNG vessel will protrude into the open waterway while docked. As of Wednesday afternoon, Asia Vision was located south of Barbados.

Update Of Existing And Proposed US LNG Export Terminals -- March 4, 2016; Introduction Of The CAVE Dwellers  -- EIA map of existing and proposed LNG export terminals in the US at this link.

  • Four LNG export terminals are currently under construction: Dominion Energy's Cove Point LNG facility in Cove Point, Maryland, is scheduled to bring one train totaling 0.82 Bcf/d online near the end of 2017.
  • Corpus Christi LNG, another Cheniere project, is under construction in Corpus Christi, Texas. The terminal is scheduled to begin service in 2018, with total permitted capacity at 2.14 Bcf/d.
  • Sempra Energy's Cameron LNG terminal, located in Hackberry, Louisiana, is under construction and is scheduled to bring three trains online in 2018. A total of 1.7 Bcf/d has been permitted.
  • Freeport LNG's terminal planned for Freeport, Texas, has three trains under construction totaling 1.8 Bcf/d. The first two are scheduled to begin service in 2019, and the third in 2020.
  • Another terminal, Southern Union's Lake Charles (Louisiana) LNG facility, has been approved by FERC but is not yet under construction. Lake Charles also has an LNG import terminal. Several more LNG export terminals, mostly on the Gulf Coast, have been proposed or have pending applications with FERC.
One can, of course, scratch off the two proposed LNG export terminals in the Pacific Northwest and the one in Maine, both part of the "no-growth sanctuary regions" of the US where CAVE dwellers now reside. The Citizens Against Virtually Everything have strongholds in several regions across the US, but are probably most prominent in the heartland of America, the Pacific Northwest, northern California, and the New England states.

Drillers: Oil well rules dire for business; others disagree (AP) — An industry-funded study warns of dire consequences if pending rules to prevent another catastrophic oil spill in the Gulf of Mexico go into effect, but critics questioned that claim. The dire economic analysis was done by Wood Mackenzie, a business research firm, and commissioned by the Gulf Economic Survival Team, a Louisiana-based industry group. The study was released Monday. Drilling companies and their supporters in Congress have blasted the safe-drilling regulations, known as the “well control rules.” They’re an outgrowth of BP’s catastrophic oil spill in 2010, which spewed millions of gallons of oil into the Gulf. Supporters say the rules are vital in making the industry safe. According to Wood Mackenzie, the regulations could raise drilling costs by 20 percent or more. In worst-case scenarios, the analysis said exploration could drop by as much as 55 percent; less drilling could translate to $70 billion in lost state and federal tax revenues by 2030 and up to 190,000 lost jobs. Critics called this forecast unrealistic. Regulators have estimated the safety measures won’t be a major burden and would save money by preventing costly oil spills and saving lives.

Bill Banning Fracking Bans Gets Shut Down In Florida Senate - It wouldn’t have been the first time something like this happened. People in small towns and counties get together, vote, and agree to ban fracking. And then the state legislature comes in and passes a ban on bans.  But not this time.  The Florida Senate’s Appropriations Committee has finally killed a bill that would have stopped towns from banning fracking, a week after the committee voted the measure down by a 10-9 vote. The bill’s sponsor, Sen. Garrett Richter (R) made a motion Tuesday to not consider the bill.  “This is a controversial subject. The controversy will continue, and I daresay it will draw even more concerns,” Richter said. “I can pretty much assure you demand (for oil and gas) is not going to go away, but Senate Bill 318 is going away.” Every senator on the committee represents a county that has opposed the bill, numerous sources reported.  A House version of the bill passed that chamber in January. And, in fact, this is the second time a bill to ban fracking bans has passed the House and then died in the Senate.  Environmentalists in the Sunshine State celebrated the decision Tuesday and called for more protections of Florida’s water. “Today’s decision is a victory for the health and safety of families throughout the state as well as everything that makes Florida run — tourism, agriculture and fishing,” Wenonah Hauter, executive director of Food & Water Watch, said in a statement. “However, the legislature’s job isn’t done. Even today, dangerous practices like acid fracking could still move forward in the future and threaten the health and safety of countless Floridians.”

Public outcry spurs Florida to drop Everglades fracking bill: Florida environmentalists have had a bit of good news after state lawmakers, bowing to public outcry, unexpectedly dropped a bill backed by the oil industry that would have promoted fracking in the ecologically sensitive Everglades. At least 40 local authorities statewide had already passed ordinances and resolutions banning fracking for oil and natural gas on their lands, and they would have been forced to cede this to a single state agency if the bill had become law, The Guardian reports. Today was a good day for democracy and the Florida Everglades, said Kim Ross, of Floridians Against Fracking. This grassroots group of activists organized scores of rallies in recent months, including one in which 100 people protested at the capitol building on Tuesday. "The people of Florida voted close to 80 percent to say they didn't want frack," she said, noting that the bill "really awakened a sleeping giant." "This is only a small part because the Everglades needs so much more," she said. "There are all kinds of water and pollution issues. But for today at least this is a great and wonderful moment.

Oil pipeline protesters interrupt Minnesota water summit (AP) — Gov. Mark Dayton asked more than 800 people attending his inaugural Water Summit on Saturday to brainstorm ideas for solving Minnesota’s water quality challenges, but not before opponents of the proposed Sandpiper crude oil pipeline interrupted his remarks to urge him to play a greater role in scrutinizing the project. Just after Dayton took the stage in a downtown hotel ballroom, the megaphone-wielding protesters joined him on the stage, holding banners that said, “Love Water Not Oil.” They also said tribes should have been given a more prominent role in the summit, since the pipeline would cross sensitive lands and wetlands that are important to Minnesota’s Ojibwe Indian bands. The 616-mile Sandpiper would carry North Dakota crude oil across northern Minnesota to Enbridge’s terminal in Superior, Wisconsin. Dayton agreed to meet with the protesters after his speech and they quietly left the stage after a couple of minutes. But the incident illustrated how deeply many Minnesota residents treasure their water in the Land of 10,000 Lakes.

BLM proposes flaring rule that could have big impact state revenues, royalty owners -- A new rule will be presented by the Bureau of Land Management Thursday in Dickinson that could have a big impact on state tax revenues and royalty owner income. The proposed rule, which is aimed at curbing emissions and flaring, would seek to limit flaring from wells with mineral leases, but industry representatives warn the rule is duplicative to existing state regulations and could cost North Dakota taxpayers and royalty owners a total of $62.9 million in lost revenues and income if it is implemented. “The industry supports the goals of capturing greater quantities of associated gas and reducing waste but this one-size-fits-all federal process could come at a cost to North Dakotans and infringes upon the states’ rights,” said Tessa Sandstrom, spokesman for the North Dakota Petroleum Council. According to the North Dakota Department of Mineral Resources, about one-third of North Dakota’s spacing units would be impacted by the proposed rule. These units would also contain leases held by private mineral owners. The limits could make it difficult for industry to produce new wells, the Director for the Agency told KX News in a recent interview. “So about 1/3rd of our spacing units would get all of our attention so all of the investment, all the capital, all the pipelines and compression and gas plants would have to be focused on getting pipes to those federal leases at the expense of gathering gas from our private and state leases.” says Helms.

Rail still moves crude from the Midwest to coastal regions, but in smaller volumes – Today in Energy – EIA - The movement of crude by rail (CBR) within the United States, including intra-Petroleum Administration for Defense Districts (PADD) movements, reached 928,000 barrels per day (b/d) in October 2014, with most of the shipments originating in the Midwest (PADD 2) and going to the East Coast (PADD 1), West Coast (PADD 5), and Gulf Coast (PADD 3). Since October 2015, CBR volumes have declined as production has slowed, crude oil price spreads have narrowed, and pipelines have come online. The economics of CBR flows depend largely on significant domestic crude discounts compared with international crudes. As domestic crudes that price in the Midwest, such as West Texas Intermediate (WTI) and Bakken, are no longer at large discount to waterborne crudes such as North Sea Brent, there is less of a cost advantage for costal refineries to run the domestic crudes. The Bakken crude oil spot price discount to Brent averaged $8 per barrel (b) in August 2015. It narrowed to average only $2/b in November 2015, and by January 2016 averaged $1.69/b (Figure 1). The narrower the spread between domestic and imported international crude, the more likely costal refineries will choose to run imported crudes rather than domestic supplies shipped via rail.

Some Colorado officials support rules on natural gas burning (AP) — More than two dozen elected officials from western Colorado cities and counties have endorsed a federal crackdown on oil companies that burn off natural gas on public land. They sent a letter to federal officials Monday saying the practice causes pollution and robs taxpayers of royalties they could have earned on the gas. The Obama administration proposed new rules last month. The Bureau of Land Management is holding a public meeting on the proposals Monday in Lakewood. Energy companies frequently burn off vast supplies of natural gas at drilling sites because it doesn’t earn as much as oil. Twenty-six officials signed the letter. They’re from Archuleta, Eagle, Gunnison, La Plata, Pitkin, Routt, San Miguel and Summit counties and the communities of Aspen, Basalt, Carbondale, Glenwood Springs, Grand Junction and Paonia.

Feds: pipe corrosion led to Santa Barbara coast oil spill (AP) — External corrosion on an oil pipeline was the root cause of a leak that spilled more than 140,000 gallons of crude on the Santa Barbara coast in May, federal regulators reported. The spill occurred after pumps on the Plains All American Pipeline were shut down and restarted, sending a larger volume of oil surging through the 2-foot-wide pipe at higher pressure, the Pipeline and Hazardous Materials Safety Administration said in preliminary findings. After the leak occurred, however, and plunging pressure in the pipeline triggered an alarm, it wasn’t shut down for more than 30 minutes.The spill two weeks before the popular Memorial Day weekend forced the state to close popular beaches as the oil fouled a pristine stretch of coastline and an oil sheen spread over miles of the Pacific Ocean. More than 300 dead animals, including pelicans and sea lions, were recovered after the spill that sent tar balls drifting more than 100 miles away to Los Angeles beaches. The report said the leak in Line 901 happened after a pump unintentionally shut down at the pumping station on nearby Line 903 while a technician was removing a non-working pump. Pressure increased in Line 901 and its pump was stopped remotely from the company’s control room in Midland, Texas. The leak happened just before 11 a.m., about two-to-three minutes after the pump was restarted. Pressure jumped to 721 pounds per square inch — from the 677 psi it had been operating at before the shutdown. About two minutes later, pressure dropped below 200 psi and a low-pressure alarm was triggered in the control room. An oil company that wanted to pump oil through the pipeline reported to the controller that there wasn’t enough pressure in pipeline to deliver its product. The pump on Line 903 exceeded a high temperature limit and then shutdown. The controller tried to restart it several times, but didn’t shut off the pump on Line 901 until about 11:30 a.m. A pipeline leak monitoring system had been turned off at the control center, the report said, though it noted that was still under investigation.

Murkowski presses Corps of Engineers on Arctic port — U.S. Sen. Lisa Murkowski is again asking the Army Corps of Engineers to advance a northern deep-water Alaska port to serve vessels in Arctic waters. The Alaska Republican at a budget hearing Wednesday questioned the assistant secretary of the Army for civil works, Jo-Ellen Darcy, on why the corps is not seeking funding a proposed port expansion in Nome. The corps in October suspended a study of a deep-water port for large oil and gas support ships in the Arctic Ocean after Royal Dutch Shell ended exploratory drilling off Alaska’s northwest coast. Darcy says the agency is looking at expanding the scope of the study. Murkowski in a release says developing a port for the Arctic is about more than just oil and gas exploration

Calfrac Well Services job cuts deepen; 1,700 fewer staff in North America - Calgary Herald: More cuts in its U.S. division have reduced the North American workforce of Calfrac Well Services Ltd. by about 1,700 since the end of 2014, the company said Wednesday, as it unveiled a fourth-quarter net loss of $141 million. In a news release, Calfrac said its U.S. workforce has now been slashed by 60 per cent since the end of 2014, an increase from the 50 per cent it disclosed in October. It said its Canadian workforce is 40 per cent smaller, the same percentage as in October. Spokeswoman Ashley Connolly later said the Canadian workforce has fallen by 643 positions, from 1,565 to 922, and Calfrac’s corporate workforce is off by 14 jobs, from 143 to 129. Its U.S. head count is 694, down 1,042 from 1,736 at the end of 2014. “Retaining key employees has always been a keen focus for the company but, unfortunately, with the current downturn shaping up to be the worst in decades, the company has had to make some difficult decisions in order to position itself to survive in this environment, and has been forced to let go of some of its long-standing employees,” president and chief executive Fernando Aguilar said on a conference call. Later, he said the company will continue to “aggressively” control costs. “Where we don’t see activity happening in front of us, we will park equipment, for sure,” he said in response to an analyst’s question. “If activity is not happening, as we know, then more people will have, unfortunately, to leave the company.”

Growth in domestic natural gas production leads to development of LNG export terminals - Today in Energy - U.S. Energy Information Administration (EIA)  The first export shipment of liquefied natural gas (LNG) produced in the Lower 48 states on February 24 is a milestone reflecting a decade of natural gas production growth that has put the United States in a new position in worldwide energy trade. With the rapid growth of supply from shale gas resources over the past decade, U.S. natural gas production has grown each year since 2006. The resulting decline in domestic natural gas prices has led to rising natural gas exports, both via pipeline to Mexico and, since last week, to overseas markets via LNG tankers.  The United States is currently a net importer of natural gas, and gross imports represented nearly 10% of total supply in 2015, based on data through November. The United States imported 7.5 billion cubic feet per day (Bcf/d) of natural gas, mostly from Canada by pipeline, and exported 4.8 Bcf/d, mostly to Mexico by pipeline. For years, Alaska has exported LNG, mostly to Pacific Rim countries, but these volumes have been small. In addition to the Sabine Pass terminal that was the source of last week's LNG shipment, four other LNG export terminals are currently under construction.  When natural gas is cooled to -260 degrees Fahrenheit, it becomes a liquid that is 1/600th of its gaseous volume, making it easier to transport via vessel. The U.S. Gulf Coast has a large existing pipeline network, which makes the area attractive for developing export terminals. Many of the LNG export terminals now under construction or proposed are at sites that have functioned, and may continue to function, as LNG import terminals. Several LNG import terminals were built in the 1970s, and a new wave of terminals was constructed in the mid- to late-2000s. As domestic production increased, LNG imports declined, as many new terminals were barely used and the utilization rates of older terminals declined.

Pipe dreams  - The European Commission's energy security package lays out the EU's commitment to the Energy Union but leaves some doubt about its commitment to the clean energy transition. February saw the launch of the European Commission's energy security package (, which consists of a number of measures designed to bolster the EU's Energy Union strategy and increase its energy security, while aiming to meet climate change commitments. The package has four main elements: security of gas supply regulation across member states, increased intergovernmental agreements on energy, a strategy for internal sharing and storage of liquefied natural gas (LNG), and a heating and cooling strategy to aid the decarbonization of buildings and industry. Gas, as far as the Commission seems to be concerned, is a top priority.  Natural gas already accounts for about one-quarter of EU energy consumption, but more than half of it must be imported. The gradual shutdown of coal power stations means gas was always likely to pick up the slack. The EU's reliance on gas has been a continuing source of uncertainty for the region, in part because of geopolitical factors, like the Ukraine–Russia conflict. It is understandable, then, that gas would be a focus as the EU attempts to reduce the impact that international instability has on crucial energy supplies. Indeed, the bulk of the security package is directed towards gas supply and distribution across the Union, providing additional resilience and flexibility for member states in the event of disruption by increasing transparency around contracts and by thinking more regionally instead of nationally. Unfortunately, the proposals still leave the EU fundamentally reliant on imports of natural gas. The strategy around LNG and storage will go some way towards providing additional strength, if sufficient storage can be developed, by also offering flexibility for gas supply management to accommodate the expected increase of intermittent renewable energy generation. Overall, though, there seems little concrete in the proposals in terms of considering diversity of source as a route to energy security — beyond adding more LNG to the mix.

Ex-Chesapeake CEO McClendon Indicted Over Lease Bid Rigging -- Aubrey McClendon, the co-founder and former chief executive officer of Chesapeake Energy Corp., was indicted on charges that he conspired to rig bids for the purchase of oil and natural gas leases in northwest Oklahoma, the U.S. said. McClendon is accused of orchestrating a scheme between two “large oil and gas companies” to not bid against each other for leases, the U.S. Justice Department said Tuesday in a statement. From December 2007 to March 2012, the conspirators decided ahead of time who would win the leases and the winning bidder would then allocate an interest in the leases to the other company, the government said. The companies, which aren’t defendants in the case, are identified in the indictment as Company A and Company B. During his almost quarter-century at the helm of Chesapeake, the 56-year-old McClendon embraced drilling and fracking innovations that unleashed the shale revolution ignored by the world’s biggest energy producers, building the company into what was for a time the largest U.S. source of gas. McClendon was in the vanguard of the shale revolution that upended U.S. gas markets and paved the way for the renaissance in American crude oil production. At Chesapeake, he amassed a shale empire that rivaled Exxon Mobil Corp.’s before he was dismissed in 2013 amid conflict-of-interest probes and a shareholder revolt led by billionaire Carl Icahn. According to the indictment, McClendon was the chief executive officer, president and a director of Company A until at least March 2012. Company B was a corporation with its principal place of business in Oklahoma City, according to the charging document.

DOJ indicts ex-CEO of Chesapeake Energy on conspiracy charges: Former Chesapeake Energy CEO Aubrey McClendon was indicted Tuesday on federal charges of conspiring to rig bids for oil and natural gas leases. The indictment, filed Tuesday in Oklahoma, alleges that McClendon led a conspiracy between two companies not to bid against one another for purchases of some leases in Oklahoma. The leases give a company the right to draw oil and natural gas from the land for a certain period of time. The alleged conspiracy took place between December 2007 and March 2012, the indictment said. The companies are accused of deciding who would win the bids, then giving an interest in the leases to the other company. The Justice Department did not say which other company it believes was involved in the alleged scheme. "While serving as CEO of a major oil and gas company, the defendant formed and led a conspiracy to suppress prices paid to leaseholders in northwest Oklahoma," said U.S. Assistant Attorney General Bill Baer in a statement. "His actions put company profits ahead of the interests of leaseholders entitled to competitive bids for oil and gas rights on their land."

America’s Biggest Gashole Indicted for Fracketeering! - What a fracking surprise. The Justice Department said McClendon’s indictment is “the first case resulting from an ongoing federal antitrust investigation into price fixing, bid rigging and other anti–competitive conduct in the oil and natural gas industry.” Aubrey McClendon, the former CEO of Chesapeake Energy, was indicted Tuesday for rigging bids to buy oil and gas leases.The scheme occurred in northwest Oklahoma from December 2007 to March 2012, according to the U.S. Department of Justice.The Justice Department said McClendon’s indictment is “the first case resulting from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in the oil and natural gas industry.”McClendon, who is also the co-owner of the Oklahoma City Thunder, is accused of leading the conspiracy between two large energy companies, deciding ahead of time which one would win the bids. The winner would then allocate part of the leases to the other company, according to the indictment.Chesapeake Energy accused of reducing royalty paymentsThe suit filed in U.S. Middle District Court by Edward M. and Kathleen Ostroski of the Athens area in Bradford County seeks to become a class action to include more than 2,000 others whose aggregate damages they say exceed $5 million.When landowners signs leases with an oil and gas company, they give permission for drillers to extract oil and gason their properties for a certain period of time.In Pennsylvania, the leases are usually good for several years, and many state residents accused Chesapeake of fraud, claiming they were being shortchanged on royalty payments. State law requires a minimum 12.5 percent royalty payment, but landowners said they were being charged too much for post-production costs and other fees. Former Gov. Tom Corbett, who received nearly $500,000 in campaign contributions from McClendon, asked Attorney General Kathleen Kane in February 2014 to investigate the allegations

Exclusive: Texas fund EMG halts new deals with indicted McClendon | Reuters: Private equity fund Energy & Minerals Group told investors on Wednesday it will stop entering new deals with Aubrey McClendon, the former chief executive officer of Chesapeake Energy Corp (CHK.N), a day after the U.S. government charged him with breaking antitrust laws. In a letter to investors seen by Reuters, EMG's Managing Partner John Raymond said his fund would "cease any and all new business activities" with McClendon, a legend in the U.S. energy industry. The comments mark another reversal of fortune for McClendon, removing EMG as one of his main sources of capital to find and develop land in Ohio, Pennsylvania and other shale-rich states, as well as overseas. The U.S. Justice Department charged McClendon on Tuesday with rigging bids for oil and gas acreage. McClendon has denied the charges and was not immediately available for comment on Wednesday. Houston-based EMG, which has invested some $3 billion in ventures with McClendon since he left Chesapeake in 2013 after investors questioned his leadership, said the allegations will not affect any of its portfolio companies.

Ex-Chesapeake CEO McClendon dies in car wreck -  Aubrey McClendon, a founder and former chief executive of Chesapeake Energy (CHK), died in a fiery single-car crash Wednesday, a day after he was charged with conspiring to rig bids for oil and natural gas leases. McClendon, 56, crashed into an embankment while traveling at a "high rate of speed" in Oklahoma City just after 9 a.m., said Capt. Paco Balderrama of the Oklahoma City Police Department. Flames engulfed McClendon's vehicle "immediately," Balderrama said. "He pretty much drove straight into the wall," Balderrama said. He added that police determined McClendon was not wearing a seatbelt after earlier being unable to tell. Police said they still needed to determine an exact cause of the crash. McClendon — a key player in the U.S. shale boom — co-founded Chesapeake in 1989 and stepped down from the company in 2013. Chesapeake is the second-largest natural gas producer in the United States. He also founded American Energy Partners, where he had been chief executive.

How Chesapeake CEO Aubrey McClendon Helped Push Coal to the Brink -- Aubrey McClendon, the former Chesapeake Energy CEO, died March 2 in a car wreck the day after being indicted for conspiracy to rig bids on oil and natural gas leases. He will likely be remembered for two things: being a pioneer of the shale gas boom and a possible criminal who, in death, may have eluded a prison sentence. But McClendon may have had one other lasting legacy: he helped hasten the collapse of the coal industry in the United States. Between 2007 and 2012, McClendon and his associates contributed around $26 million to the Sierra Club to oppose the building of new coal-fired power plants. McClendon’s motivations were hardly pure; he knew that preventing new coal plants meant more demand for his company’s product, natural gas. And the contributions led to a scandal for the environmental group, whose well-funded “Beyond Coal” campaign has been instrumental in not only preventing new plants, but also shutting down aging ones. Executive director Michael Brune had a simple explanation for accepting money from a big gas company that was drilling hundreds of wells using hydraulic fracturing: the enemy of our enemy is our friend. “The Sierra Club board of directors … determined that natural gas, while far from ideal as a fuel source, might play a necessary role in helping us reach the clean energy future our children deserve,” Brune wrote in a 2012 blog post. “The idea was that we shared at least one common purpose [with Chesapeake]—to move our country away from dirty coal." The Sierra Club turned down further contributions from McClendon and his Chesapeake colleagues as it began to worry about the boom in natural gas fracking. That didn’t affect the outcome: McClendon’s philanthropy helped make it very unlikely that any new coal plants will be built in the U.S.—and helped push coal, the backbone of America’s power sector for more than a century, into a sudden and dramatic twilight.

Landowner’s lawyers sue Oklahoma City energy giants - Attorneys for a northwest Oklahoma landowner have filed a lawsuit against Oklahoma City energy giants Chesapeake Energy and Sandridge Energy in connection to a federal indictment against ex-Chesapeake CEO Aubrey McClendon. The federal class-action lawsuit was filed Thursday in Oklahoma City on behalf of an Alfalfa County landowner who signed a lease agreement with Chesapeake Energy in 2011. The indictment against McClendon alleged he and unnamed co-conspirators orchestrated a conspiracy to rig bids for landowner leases in northwest Oklahoma. Federal prosecutors sought to withdrew the indictment after McClendon died Wednesday in a single-car crash. The lawsuit also names ex-Sandridge CEO Tom Ward, a longtime friend of McClendons and co-founder of Chesapeake. Neither Ward nor Sandridge officials immediately returned messages seeking comment on the lawsuit. Chesapeake has said it’s cooperating with federal investigators.

Top Drillers Shut Down U.S. Fracking Operations as Oil Prices Continue to Tank - Steve Horn - It was a tumultuous week in the world of hydraulic fracturing (“fracking”) for shale oil and gas, with a few of the biggest companies in the U.S. announcing temporary shutdowns at their drilling operations in various areas until oil prices rise again from the ashes. Among them: Chesapeake Energy, Continental Resources and Whiting Petroleum. Chesapeake formerly sat as the second most prolific fracker in the U.S. behind ExxonMobil, while Continental has been hailed by many as the “King of the Bakken” shale basin located primarily in North Dakota. Halliburton too, the drilling services goliath and namesake of the “Halliburton Loophole” exempting the industry from U.S. Environmental Protection Agency (EPA) enforcement of the Safe Drinking Water Act as it applies to fracking operations, has recently announced it will cut 5,000 drilling jobs globally (8 percent of its workforce). “Continental Resources Inc., the shale oil pioneer controlled by billionaire wildcatter Harold Hamm, halted all fracking in the Bakken shale formation in the U.S. Williston Basin after posting its first annual loss since the company’s public debut in 2007,” wrote Bloomberg. “Continental said it has no fracking crews currently working in the Bakken. The company continues to drill there, focusing on areas with the highest returns, but will leave most wells unfinished this year.” Chesapeake's immediate future is just as bleak, if not more so, and it will halt drilling in the Marcellus Shale, Utica Shale, Eagle Ford Shale and elsewhere. The company sits as the top-producing driller in both the Utica and the Marcellus. Whiting, the most prolific shale oil producer in the Bakken, will halt all of its fracking in the near-future. The company, 83 percent of whose produced oil comes from fracking the Bakken, will simultaneously slash its spending budget by 80 percent.  North Dakota and Oklahoma, with economies largely dependent on revenues generated from oil and gas drilling, have both projected $1 billion budget shortfalls for the forthcoming budget cycle. Things are even worse in Alaska, with a pending $3.5 billion budget shortfall.

Bond Markets Losing Faith Even In Large Oil Companies -  Energy bonds have become so beaten down that the yields on bonds from some investment grade energy companies are spiking above the yields on junk-rated U.S. debt, a very rare event that highlights the growing unease with which investors are viewing even the relatively strong oil producers. In fact, the spiking bond yields on investment-grade energy debt show that even solid oil drillers “with the best of intentions can still just run out of room to move and run out of time. Things could get very bad,” Matthew Duch, a money manager at Calvert Investments Inc., told Bloomberg in an interview. The magnitude of the crisis facing the oil and gas sector is illustrated by the fact that broader U.S. corporates with credit ratings in junk territory are seen as less risky than investment-grade oil and gas companies. Such a situation isn’t sustainable – the ratings agencies are now catching up to a rapidly deteriorating business climate for these oil drillers. In February, Devon Energy, Anadarko Petroleum, Hess Corp., and Murphy Oil – all sizable oil companies once thought to be safe – lost their investment-grade ratings from Moody’s. The bond markets, in other words, are no longer confident that even large oil and gas companies are creditworthy. The net debt levels across the U.S. energy sector ballooned in 2015, quadrupling from the year before. Net debt is now eight times EBITDA.

Refining Outlook Shaped by Regulation And Economic Growth - The U.S. refining industry appears to be transitioning from an era of high margins and record throughputs. Falling crude prices at first increased refining margins – especially as demand for cheap refined products like gasoline expanded. Now product inventories are brimming and margins are squeezed. As we explain today the industry can look forward to an extended period of low crude prices while regulatory requirements and the pace of economic growth largely drive refined product trends.  We have previously covered Turner, Mason & Company’s analysis of the world refining market.  (see A New World Order). Turner, Mason has a deep understanding of refining and refining technology worldwide as well as the impact of changes in crude feedstock bought about by the U.S. shale revolution (see Here Comes The Reckoning Day). The company also produces a biannual review of industry fundamentals and key drivers – the latest version of which is titled “The 2016 Crude and Refined Products Outlook” (February 2016). The 160 page report covers a range of key topics for the refining industry including the current low crude price environment, refined product trends, regulatory issues impacting refiners and anticipated changes in infrastructure. The report contains an updated price and petroleum demand forecast from 2016 through 2030 that incorporates the impacts of crude production breakeven costs, price elasticity for petroleum demand and effects of regulatory initiatives and geopolitical events. The outlook starts where everyone is focused these days – with crude prices and supply/demand. We’ll provide a glimpse of Turner, Mason’s view on that topic first and then hone in on a couple of important trends that the report highlights in the refined product markets – impacting gasoline and diesel.

Anadarko cutting spending almost in half, selling assets (AP) — Anadarko will sell more assets and reduce by nearly half its spending on oil and natural gas exploration this year. One of the world’s biggest independent oil and natural gas exploration and production companies, Anadarko said Tuesday it will cut capital expenditures this year to between $2.6 billion and $2.8 billion, from about $5.5 billion last year. “Nearly all of the reduction is being taken out of our U.S. onshore activities,” company spokesman John Christiansen said in an interview. Cutbacks by Anadarko and other U.S. producers have played out throughout the year in rig counts, the number of active U.S. drilling sites. Oilfield services company Baker Hughes said last week that the number of rigs exploring for oil and natural gas declined again to 502, less than half the 1,267 rigs that were active last year. Anadarko expects to operate about five rigs in 2016, only a quarter of the rigs it had in play last year. Of the capital expenditure cuts, $2.5 billion will be in the U.S. Anadarko Petroleum Corp. said in a printed statement Tuesday that it plans to reduce its debt while it awaits opportunities that will emerge in a “more compelling price environment.” Oil, which had traded for more than $100 in the past year, costs around $30 now. Prices for natural gas are already down close to 30 percent just this year.

Anadarko Slashes 80% Of Onshore Rigs, To Lay Off 95% Of Contractors -- Anadarko Petroleum Corp. will not only be slashing its capital budget this year by 50 percent and its rig count by 80 percent in order to weather the oil price slump, forecasting a 3-percent fall in production, but it’s also reportedly planning to cut over a thousand jobs and get rid of almost all of its contractors. On Tuesday, Anadarko unveiled plans to lower capital spending, lower dividends and monetize non-core assets to improve its cost structure, including a 50-percent budget reduction from last year and an onshore 80-percent rig-count slash that would bring its rigs down to five from 25 last year. According to an “exclusive” report by Benzinga, Anadarko has also let 95 percent of its contractors go and is planning to lay off 1,200-1,500 workers next week. Benzinga cited an unnamed source for this information on Thursday. If true, that would reduce the 5,800 workers Anadarko had as of December by as much as one-quarter.  In its earnings result on Monday, Anadarko reported $0.57 earnings per share for the quarter, which come in above the consensus estimate of $0.52. The company earned $2.05 billion for the quarter, which was below analysts’ expectations of $2.22 billion. The company says it should have $3 billion in cash by the end of this year, and it’s progressing on asset sales, having divested $1.3 billion already and targeting a similar amount through 2016. Anadarko shares were up a bit on the news. On Monday, the company closed at $37.95 per share, but was up to $40.11 at close on Tuesday, and $42.65 on Wednesday. By early trading on Thursday it was over $43.00.

NOG Reports 4Q15 And Full Year (2015) Results: For The Year A Loss Of $16.08/Share; Adjusted: Net Income 78 Cents/Share --From the press release:

  • Oil and gas sales, including cash from settled derivatives, totaled $363.7 million for 2015 and $86.5 million for the fourth quarter of 2015
  • Reduced capital expenditures by 76% compared to 2014, while still growing total production by 3% year-over-year to 16,285 barrels of oil equivalent ("Boe") per day, above stated guidance
  • Reduced cash general and administrative expenses by $2.1 million or 14% compared to 2014
  • Ended the year with $403.4 million of liquidity, composed of $3.4 million in cash and $400 million of revolving credit facility availability
  • Participated in the completion of 292 gross (18.6 net) wells
  • 1.8 million barrels of oil are hedged for 2016 at an average price of $77.50 per barrel

Northern's adjusted net income for the year was $47.6 million , or $0.78 per diluted share.  GAAP net loss for the year, which was impacted by a $1.2 billion non-cash impairment charge, was $975.4 million, or a loss of $16.08 per diluted share.  Adjusted EBITDA for the year was $277.3 million. 

CEO says Exxon ready for acquisitions, investing in business (AP) — Exxon is interested in acquisitions while oil prices are low, but CEO Rex Tillerson says sellers have unrealistic price expectations. Tillerson said Wednesday that Exxon Mobil Corp. is in financial position to pursue acquisitions or change its spending plans depending on what happens to the oil market. Earlier this week Exxon raised $12 billion from a bond sale, increasing speculation that it could seek to scoop up competitors. Tillerson said Exxon hasn’t made any deals yet because potential sellers are acting like homeowners who think their house is worth more than it is. Those other companies, he said, have burdened themselves with debt during the oil slump, making them less attractive takeover targets. “Some of the value has been destroyed and the expectation (of sale price) hasn’t changed,” he said at Exxon’s annual meeting with investors in New York. Asked about oil prices, Tillerson said they could still fall. U.S. benchmark crude has rallied since late January and gained 23 cents to $34.64 a barrel in New York on Wednesday afternoon, but it is still nearly 70 percent below its price in June 2014. “We’re still overproducing, oversupplying a market that doesn’t need it, doesn’t want it,” and the global economy is too weak to boost demand much, he said.

Fracking Fracas: Sanders Attacks Clinton on Environment: he environmental policy debate between Democratic contenders Bernie Sanders and Hillary Clinton could soon become much more heated. Leading up to Super Tuesday, a slew of contests that could make or break Bernie Sanders’s candidacy, the Vermont senator has gone on the offensive on the surprising issue of fracking—the controversial method of drilling for natural gas. The campaign last week made several media buys in Minnesota and Colorado for a new ad that touts Sanders as the only candidate who firmly opposes fracking. The fracking ads look like a last-ditch effort by Sanders, who was badly beaten by Clinton in the recent South Carolina primary, to differentiate himself from the former secretary of state. The ads tout Sanders as “the only candidate to oppose fracking.” Fracking is the process of drilling into shale formations and injecting a cocktail of water, sand, and chemicals to create tiny fractures that access pockets of oil and natural gas. The process has helped fuel a natural gas extraction boom in the United States and made the nation the largest natural gas producer in the world. But it has also become a flashpoint for environmental outrage, due to research that links fracking with contamination of local water and air, and even with abnormal earthquakes. Sanders’s fracking ads appear designed peel away liberal support from Clinton, particularly in such states as Colorado and Minnesota, where fracking is hotly debated and which experts have said are must-wins for Sanders.

Fossil Fuel Donations Fuel Presidential Super PACs  - Fossil fuel heavy hitters pumped more than $100 million into Republican presidential campaigns last year, more money than ever before, according to campaign filings compiled by Greenpeace.  Fossil fuel funds comprised 57 percent of Texas Senator Ted Cruz’s Super PAC. “Ted Cruz’s complete denial of climate change science is perfectly in line with the business interests of his biggest funders,” said Jesse Coleman, a Greenpeace oil and gas campaigner. Chris Christie, Jeb Bush and Marco Rubio all received significant fossil fuel contributions and Democratic candidate Hillary Clinton received seven percent of her Super PAC money from oil and gas interests.   For a deeper dive: The Guardian, GreenWire

Some charts and updates on America’s amazing shale revolution, it’s not over yet…The Energy Information Administration released a lot of year-end production and other energy-related data this week, and there’s been a lot of shale energy-related news recently, so I present below 10 items (including 6 charts) highlighting America’s Amazing Shale Revolution.  US Crude Oil Production (above). According to new data from the Energy Information Administration (EIA), the US produced an average of 9.43 million barrels of crude oil per day (bpd) last year, which was the fourth highest year for domestic crude oil output in history (see chart above). Slightly higher crude oil production took place in 1970 (9.6 million bpd, the highest amount ever), 1971 (9.5 million bpd) and 1972 (9.44 million bpd). More than maybe any other chart, I think the one above of US oil production over more than a century captures the “Great American Shale Oil Revolution in One Chart.” From the previous peak US oil production in the early 1970s, there was a gradual decline over more than three decades from nearly 10 million bpd to only 5 million bpd by 2008. And then, thanks to revolutionary, “Made in the USA” drilling and extraction technologies, America’s petropreneurs unlocked the oceans of oil trapped in tight shale rock formations miles below the ground. Amazingly, it only then took 7 years of shale oil production to completely reverse the previous 36-year decline in America’s crude oil output, bringing the country’s oil production to 9.7 million bpd last April, before falling gradually to bring the annual average last year down to 9.43 million bpd. Carpe oleum.

U.S. shale's message for OPEC: above $40, we are coming back - (Reuters) - For leading U.S. shale oil producers, $40 is the new $70. Less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more; now some say they will settle for far less in deciding whether to crank up output after the worst oil price crash in a generation. Their latest comments highlight the industry's remarkable resilience, but also serve as a warning to rivals and traders: a retreat in U.S. oil production that would help ease global oversupply and let prices recover may prove shorter than some may have expected. Continental Resources Inc , led by billionaire wildcatter Harold Hamm, is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week. Rival Whiting Petroleum Corp , the biggest producer in North Dakota's Bakken formation, will stop fracking new wells by the end of March, but would "consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Less than a year ago, when the company was still in spending mode, Volker said it might deploy more rigs if U.S. crude hit $70. While the comments were couched with caution, they serve as a reminder of how a dramatic decline in costs and rapid efficiency gains have turned U.S. shale, initially seen by rivals as a marginal, high cost sector, into a major player - and a thorn in the side of big OPEC producers. Nimble shale drillers are now helping mitigate the nearly 70-percent slide crude price rout by cutting back output, but may also limit any rally by quickly turning up the spigots once prices start recovering from current levels just above $30.

What crash? U.S. oil output rises to 43-year high - Mar. 1, 2016: The U.S. pumped an average of 9.43 million barrels per day last year, according to new government figures. That's the highest level since 1972 and represents an impressive growth of 89% since 2008. The crash in oil prices has caused production to slow a little in recent months. But shale oil producers have held up far better than many feared. "The U.S. oil industry has demonstrated remarkable resilience," said Jason Bordoff, a professor at Columbia University and a former energy adviser to President Obama. The shale oil revolution has given consumers a big boost in the form of cheap gasoline prices, which are now below $2 a gallon nationally. It's also made America one of the planet's biggest oil players behind Saudi Arabia and Russia.It's also fueled the epic oil supply glut.  OPEC, led by the Saudis, decided to fight back in November 2014 by deciding to pump oil aggressively -- despite the oversupply issue. The thinking was that strong OPEC output would cause prices to drop to uncomfortably low levels which U.S. shale producers would struggle to cope with.  Prices did drop, even more than OPEC members were prepared for. Oil touched $26 a barrel last month, down 75% from its mid-2014 peak.  However, OPEC's strategy has failed to kill off the U.S. oil boom. At least so far. Despite the drop in prices, domestic production rose 8% last year and is now up 45% since 2012.  Strong U.S. output has been fueled by a wave of innovation that has improved companies' productivity and efficiency. The oil companies have also benefited from lower service costs due to the downturn.

Slow Train Coming –Canadian Crude Rail Load Terminals Overbuilt and Underutilized --In Part 1 of this series we noted that CBR volumes are falling across the U.S. and Canada. The decline is mostly in response to narrower spreads between U.S. domestic crude benchmark West Texas Intermediate (WTI) and international equivalent Brent. The lower spreads reduce the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines (which mostly transport crude to the Midcontinent and Gulf Coast). When WTI was discounted to Brent by upwards of $25/Bbl in 2011 and 2012 because of congestion caused by a lack of pipeline capacity, it made sense to use rail to get stranded crude to market. We described the resulting increase in U.S. CBR shipments from 33 Mb/d in January 2010 to a peak of 928 Mb/d in October 2014 (according to EIA). As new pipelines have been built out to provide less expensive options to get stranded crude to market so the WTI discount has narrowed dramatically and CBR traffic has declined. Primarily in response to the narrowing spread - CBR volumes fell during 2015 but not as fast as you might expect – dropping only 20% between January and November 2015 (latest EIA data) even though the spot market economics often made no sense. As we discussed in Part 2 – looking at the epicenter of the CBR boom in North Dakota – the slower than expected decline in rail shipments is mostly because committed shippers and refiners continue to use rail infrastructure that they invested in and because some routes still do not have pipeline access. In Part 3 we looked at CBR traffic out of the Niobrara shale region in the Rockies. Rail load terminal infrastructure there was built in Colorado and Wyoming in response to increased crude production from the Niobrara shale over the past 4 years. Now although crude production in the region is down from 2014 peaks and expected to only grow slowly in the next 5-years if oil prices stay low – midstream companies continue the build out and expansion of rail terminals as well as new pipelines. This time we look at the fate of CBR load terminals built out in Western Canada in today’s low crude price environment.

Railcars Are The New Oil-Storage Space — The U.S. is so awash in crude oil that traders are experimenting with empty railcars as new places to store it, Nicole Friedman and Bob Tita report. Thousands of railcars ordered to transport oil are now sitting idle because low crude prices have made shipping by train unprofitable. At the same time, traditional storage tanks are running out of room as U.S. oil inventories swell to their highest level since the 1930s. So the railcars provide a form of “rolling storage.”  Still, the use of railcars for storage could be limited by the cost of track space and safety and liability concerns that have followed a string of high-profile transport accidents. Railroads and users face responsibility for leaks, collisions or other mishaps.  The tumble in oil prices continues to cause producers to cut back operations, but investors are wondering when those cuts will lead to a significant oil output decrease, Christian Berthelsen reports. The U.S. Energy Information Administration’s estimates of U.S. oil production have fallen only 6% since their peak last April.

Exporting America’s Gas Reserves to Brazil. Cheap -- Not to Europe to counter the Russians! Surprise. That was just $hillary’s cover story at the State Department to get LNG export terminals approved for her benefactors. You knew that, right ? Next shipments will go to China – not Europe – as soon as the Chinese cut a ditch through Nicaragua. How to Get Fracked Gas to China via Upstate New York And Nicaragua.  The United States has exported its first liquefied natural gas (LNG) cargo from the lower 48 states, after a tanker set sail from Cheniere Energy’s Sabine Pass export terminal in Louisiana.The Asia Vision LNG tanker left the dock at the Sabine Pass terminal at 0139 GMT (7.39 p.m. on Wednesday local time), shipping data on Reuters showed.Expected to become an importer of LNG just a decade ago, the shale gas revolution in the United States unlocked cheap, abundant gas supplies, allowing the country to become an exporter instead. Up yours AmericaThe first U.S. exports come just days before production begins at the Chevron Corp-led Gorgon LNG project in Australia, the world’s most expensive LNG terminal at $54 billion, and will add to a wave of supply at a time when demand is faltering in major consuming countries and prices plummeting in line with oil.The first cargo of about 3 billion cubic feet (bcf) of gas will go to Petrobras in Brazil, Meg Gentle, executive vice-president of marketing at Cheniere said on the sidelines of the CERAWeek conference in Houston.U.S. Henry Hub natural gas prices for January GT-HH-IDX fell to the lowest for the month since 1999 with near-record production of shale gas outpacing demand growth. Spot LNG prices in Asia, where the bulk of LNG is consumed, were down about three-quarters from their peaks in 2014

Natural gas crashes as Japan demand wanes, Australia supply takes off: Natural gas prices have crashed to 17-year-lows in the past week, underscoring burgeoning supply in the global market just as U.S. exports its first ever shale gas cargo. On Monday, natural gas prices on the New York Mercantile Exchange settled 4.5 percent lower to their lowest level since 1999 after U.S. weather forecasts signaled warmer weather in the weeks ahead, curbing demand for natural gas used for heating. The decline brought February losses in natural gas to 26 percent. Prices recovered on Tuesday but the outlook remains depressed. Japan, the world's largest importer of natural gas, is restarting its nuclear reactors six years after the 2011 Fukushima disaster, with three out of 43 nuclear reactors brought back online since August and more expected to come. Japan is likely to bring back more reactors online, which will make the country less dependent on liquefied natural gas (LNG, the super-cooled version of natural gas made for easier storage and shipping) for electricity generation.

Mexico will defer oil exploration projects to slash spending (AP) — The state-run oil company, Petroleos Mexicanos, said Monday it will slash spending 22 percent and cut unprofitable production about 100,000 barrels a day as it struggles with liquidity problems and past-due payments to suppliers. The company, known as Pemex, said it will cut $5.5 billion from its 2016 budget, delay deep-water exploration and decrease production of super-heavy crude because of low world oil prices. Delaying production and exploration projects will account for about two-thirds of the $5.5 billion spending cut. Pemex still faces a serious issue: It owes suppliers almost $7 billion, a debt the company acknowledges is a problem. “Pemex is facing liquidity problems, but not one of solvency,” said company general director Jose Antonio Gonzalez, who estimated daily production will fall about 4.5 percent from the current level of 2.23 million barrels a day to about 2.13 million by the end of the year. He said Mexico’s crude oil mix is selling for about half as much — $25 a barrel — as the $50 estimate included in last year’s 2016 budget plan. Gonzalez refused to say how many jobs might be cut. He said some of the delayed projects could be revived if partners were found who could lower production or exploration costs.

Liberal Democrats' fracking U-turn 'massively disappointing' - The Liberal Democrats have backed the lifting of the moratorium preventing fracking for gas in Scotland. Party members supported an amendment which called for the temporary halt to be ended by the next Scottish Government, "providing the potential for Scottish-sourced unconventional gas to supply our important petrochemical industry". Environmental campaigners at WWF Scotland branded the move "massively disappointing". Liberal Democrat activist Ewan Hoyle claimed expert advice shows unconventional oil and gas extraction, also known as fracking, could be done safely. In January 2015, the Scottish Government announced a moratorium on granting planning consents for such developments, to allow for a full public consultation on the controversial process. Mr Hoyle argued the report from the Independent Expert Scientific Panel on Unconventional Oil and Gas was "really quite reassuring" and "suggests we can extract these unconventional reserves safely if we regulate the industry appropriately". He told the party conference in Edinburgh: "I joined this party coming from a scientific background, partly because I felt the Liberal Democrats held evidence and expert advice in high regard." Mr Hoyle also said with the Ineos petrochemical plant in Grangemouth having built "enormous storage tanks in order to accept imported fuel from the US", he believes it would be "more environmentally friendly to manufacture our own petrochemicals and drive a resurgence in Scottish manufacturing from locally sources methane".

World outside US and Canada doesn’t produce more crude oil than in 2005:  After a delay of several months the US Energy Information Administration has published the latest international energy statistics for October 2015 This is an opportunity to update crude oil graphs How Fig 1 is created: for each country, the minimum production in the period Jan 2001 (original IPS start month) to October 2015 is taken (=base production) and deducted from the country’s total production, giving the incremental production which is then stacked in a way that allows to interpret which changes occurred. The stacking order is:

(a)    Base production
(b)   Countries with growing production
(c)    Countries with flat, peaking or declining production
(d)   OPEC and Middle East countries
(e)    Canada (mainly tar sands)
(f)    United States (mainly shale oil)

The red horizontal line is the maximum crude oil production level in May 2005 (the Katrina year). We can see that almost all additional oil produced now above that level is US shale oil. In other words: without US shale oil (which required cheap money from quantitative easing), the world would be in a deep oil crisis. The grey line shows the September 2005 production level outside the US and Canada. The graph shows that the October 2015 production level is only slightly higher than in 2005, possibly within the accuracy of statistics.

Don’t stop worrying about oil --The collapse in oil prices has come after a surge in U.S. production. This has led many to theorize that the U.S. has finally dislodged the Organization of the Petroleum Exporting Countries (OPEC) from its position of dominance. Historically, the OPEC cartel has managed production to keep prices high, even when, as is happening today, a weaker global economy exerts downward pressure on them. Its apparent failure to do so at this moment has led some to forecast low energy prices as far as the eye can see. According to this line of reasoning, U.S. production will undercut any attempt by OPEC to raise prices, as American oil will flood the market and drive the price down when OPEC attempts to raise it. As the nearby chart illustrates, such optimism is poorly grounded. For each of the years, the chart shows the share of world oil produced by OPEC, the U.S., and the countries that were members of OPEC during the 1973 OPEC oil embargo. While there is an uptick in the U.S. share near the end, the chart casts doubt on the notion that American oil now captures a share of the world oil market so large as to undermine OPEC’s ability to influence the price of oil. America produced 13.1 percent of the world’s oil in 2014. In 1973, when the first OPEC oil embargo sent the American economy into a tailspin, the U.S. produced 18.7 percent of the world’s oil. If OPEC could send oil prices through the roof when the U.S. controlled more of the world’s oil supply than the U.S. does at present, it seems difficult to believe that OPEC could not similarly send prices back up if it chose to do so. So what gives? Why is OPEC playing along with low prices now?

Cushing, Oklahoma is the center of the oil universe - Berman - World oil prices are controlled by the amount of crude oil stored at Cushing, Oklahoma. That’s because Cushing is the pricing point for WTI (West Texas Intermediate) oil prices, the most-traded oil futures contract in the world.   It has 73 million barrels of working capacity, about 13 percent of total U.S. storage. Several important oil pipelines converge there as oil moves from production sites to refineries on the Gulf Coast (Figure 3) WTI and Brent oil prices have good negative correlation with the volume of crude oil stored at Cushing. Comparative inventory, the present volume of oil compared with the 5-year average, and oil-price volatility, the rate at which the price of oil moves up and down, are shown in Figure 1. From the beginning of 2014 until the end of July, comparative inventory fell and world oil prices were high averaging more than $100 per barrel. From August to the time of the November 28 OPEC meeting, Cushing inventories rose and oil fell below $70. OPEC’s decision not to cut production caused a spike in volatility and prices dropped to $46 per barrel by the end of January 2015. Cushing storage fell from mid-April to mid-June 2015 and oil prices rallied to $60 per barrel. Concerns about China’s economic growth and the lifting of sanctions on Iran added to flattening Cushing inventories and oil fell to near $38 per barrel by mid-August. When inventories fell again in late August, prices increased to almost $50 per barrel and then plateaued until the end of October. Storage had flattened but the outlook for Chinese growth had improved as the People’s Bank of China announced stimulus measures. From the beginning of November to the end of 2015, comparative inventories increased again and oil prices plunged below $30 per barrel with the near-collapse of China’s stock markets. Flattening comparative inventories in early 2016 and rumors of an OPEC production cut and then, a partial OPEC production freeze moved oil prices back above $30 per barrel where they have remained through February. Expectation and reality both influence oil prices but Figures 1 and 2 show that the reality of Cushing comparative inventory change is the dominant factor. World economic and political events have the power to affect oil prices but without support from Cushing storage levels, these changes are relatively short-lived.

The Cushing Spillover "Domino Effect" Has Arrived -- A little over a week ago, before we described the increasingly more perilous situation facing US refiners, we summarized the oversupply threat facing the biggest U.S. commercial hub located in Cushing, OK as follows: "when looking specifically at Cushing, the storage facility is virtually operationally full (or at 80%) with just 4-5 more months at current inventory build left until the choke point is breached, and as we have reported previously, storage requests for specific grades being denied however the silver lining is that there is a lot of open pipeline space from Cushing to gulf coast .. It is this capacity that is currently being filled because if looking at today's DOE breakdown, while PADD 2 saw inventories rise by 2.25 million barrels to a new record high 155 million, the Midwest storage hub at Cushing was up only 36,000 - a divergence which confirms that Cushing is now routinely denying storage requests, something we noted first two weeks ago." Today, we return to this so critical (if not now then certainly in the next few months) hub with a blog post by Genscape which looks at the troubling domino effect of an operationally full Cushing (and by extensions PADD2), and how this is starting to spill over into PADD3, aka the Gulf Coast storage, where things are likewise about to go from bad to much worse. From Genscape: U.S. Gulf Coast storage inventories have increased nearly 7mn bbls so far in 2016, and could continue to build as market participants seek storage there as an alternative to Cushing, OK, where stocks are near maximum capacity. As of February 19, 2016, Gulf Coast stocks, including those in Houston, Beaumont-Nederland, TX, and Corpus Christi, TX, reached near 75mn bbls, only 739,000 bbls shy of the record high level reached in October 2015. On January 5, 2016, Cushing inventories surpassed a previous record high level by 125,000 bbls. Due to extensive storage expansion, capacity utilization at Gulf Coast storage locations was lower the week ending February 19, 2016 at 58 percent compared with capacity utilization during the October 2015 high. At that time utilization was 62 percent. The inventory peak in October 2015 also followed a record-high at Cushing.

Shale Just Set The Oil Price Ceiling: "Above $40 And We Start Pumping Again" -- Last week we reported that in what has been Saudi Arabia's biggest victory to date in its war against U.S. oil and gas producers, both Whiting Petroleum, which is North Dakota's largest oil producer, and Continental Resources would indefinitely suspend fracking operations for the foreseeable future. The reason was simple: oil prices are too low to make incremental drilling and pumping profitable, and instead most shale companies are now entering hibernation, limiting cash outlays in the form of dividends and capex spending, in hopes of weathering the crude oil storm, which has already gone on far longer than even the most pessimistic mainstream pundits expected it would.  Which, of course, is the right response: as the saying goes the cure for low oil prices is low oil prices, and as more shale companies halt drilling, exploring and production, the 3 mmb/d oversupplied oil market will slowly return to equilibrium. There is logically a flipside to that as well: as those companies which have recently mothballed operations either voluntarily or because they had to when they went bankrupt when oil was at $30, return to market the previously oversupplied market condition will promptly return as well, thereby pressuring oil lower yet again. question is at what "breakeven" price does it make sense for US shale companies to return. As Reuters reports, less than a year ago major shale firms were saying they needed oil above $60 a barrel to produce more; however in just one year this number has changed and quite drastically at that. We hinted at this three weeks ago in an article which many readers had a hostile reaction to: specifically we warned of "Another Leg Lower In Oil Coming After Many Producers Found To Have Far Lower Breakevens." As we reported then, "what many thought would be the "breaking" price point for virtually every shale play has just been lowered, and quite dramatically at that. It also means that algos and traders who had reflexively bought any dip below $30 on expectations this is close to the "sweet spot" and where the Saudis would relent, will have to drop their support levels by as much as a third."

OilPrice Intelligence Report: Oil Finds Some Support As U.S. Output Falls - More and more U.S. shale companies have conceded that their production levels are set to fall this year, which brings cuts in U.S. output into clearer focus. Last year, although all companies were hurting from the crash in prices, there was also a sense of triumphalism in the face of the bust, a confidence in the fact that OPEC was unable to break American shale. However, while the magnitude of cost cutting and resilience was impressive, reality is setting in this year. Several companies have already announced that production would fall amid a sharp reduction in upstream spending this year. The EIA released its most up to date monthly production figures, which showed that overall U.S. oil production fell to 9.26 million barrels per day in December, a decline of 50,000 barrels per day from the month before. Output is now more than 400,000 barrels per day lower than the April 2015 peak. Oil prices inch up. The declines are starting to create a little bit of bullishness in the oil markets, with prices surging to the mid-$30s per barrel, up dramatically from their January lows. Investors are starting to become more confident that the worst is over. With U.S. output now solidly in decline – a trend that will likely accelerate in the months ahead as drilling slows even further – the supply glut will start to ease, albeit slowly. Hedge funds and other major investors are starting to reduce their short positions and take stronger net-long positions, an indication that speculators think that oil prices have bottomed out. It is not hard to imagine $40 oil just around the corner. Rail cars for oil storage. Production is slowing but storage is still at a premium. The glut in oil supply and the shrinking availability of storage is leading to the growing practice of storing oil in rail cars. The Wall Street Journal reported that delivering crude by rail is starting to decline because it is no longer profitable with oil prices down in the mid-$30s per barrel. But with rail cars sitting idle, many are starting to be used to store oil, a practice that the industry has dubbed “rolling storage.” The practice will likely remain limited on a permanent basis, however, as storing oil on railcars is subject to safety regulations, liability concerns and a need for track space.

Crude Crushed After API Reports Biggest Inventory Build In 11 Months -- Following last week's builds overall and at Cushing, and Genscape's Cushing build warnings, expectations were for a 3.3m build overall (and 700k build at Cushing). API reported a massive 9.9mm build - the largest since April 2015; and a yuuge build at Cushing of 1.8mm (most in 3 months). Gasoline saw a draw but Distilates a notable build. Following today's v-shaped recovery in WTI, and NYMEX close ramp, the API data has sent crude reeling. Charts: Bloomberg.  API:

  • Crude +9.9mm (+3.3mm exp)
  • Cushing +1.8mm (+700k exp)
  • Gasoline -2.2mm (-1.1mm exp)
  • Distillates +2.7

Russia's Putin says global deal to cap oil output is close (AP) — Russian President Vladimir Putin says the country is close to an international deal to cap oil output and that any agreement will have the backing of Russia’s oil sector. Saudi Arabia, Russia, Venezuela and Qatar floated a production cap last month, but it was conditional on other producers joining in. Addressing top state and private sector oil executives, Putin said Energy Minister Alexander Novak “is agreeing and practically has agreed with his partners in the global market” to cap oil output, in comments reported by state news agency Tass. Putin told the oil executives that “as the minister has reported, you are all in agreement with this proposal.” The Russian economy is in recession after being hit hard by the low price of oil, which has also hammered government revenue.

Art Berman Sees Oil Heading To $16, Will Lead To "Banking Bloodbath" - As Nate Hagens noted, "people think that the economy runs on money but it runs on energy," and as Art Berman details in the following interview how the current oil price collapse represents devaluation from over-investment in unconventional oil - and most commodities - because of cheap capital, and is simply a classic bubble. "Continued oil prices of $30 per barrel or less are the only reasonable path to higher growth and a balanced oil market," Berman contends, adding that he expects $16.50/bbl - "I think we're gonna get there." Berman concludes ominously, we're not going 'back' to anything - "Normal is over, and there is no new normal yet." Full Art Berman interview below (via Macro Voices): Breakdown:

  • 18:25 - OPEC will cut production in 2016
  • 19:05 - OPEC’s objective is to kill shale drillers’ source of funding
  • 24:00 - He doesn’t believe recent EIA figures saying consumption has fallen dramatically
  • 24:40 - US production must drop in a more meaningful way before OPEC can affect crude price
  • 27:00 - Baker Hughes Rig Count is only focused on by traders because it’s available data, not because it matters
  • 33:15 - As long as storage numbers are 80% of capacity or more, prices will remain “crushed”
  • 38:40 - These shale operators “have no money”
  • 44:40 - Very few options beyond increasing Cushing storage capacity, which takes time
  • 53:00 - Future investments in the Oil Sands are dead

‘Critical Mass’ of Oil-Producing Countries Agree to Freeze Production - WSJ: —A “critical mass” of oil-producing countries have agreed to freeze oil production, Russia’s energy minister said Tuesday, as African, Latin American and Persian Gulf producers expressed optimism about joining the deal. After meeting with President Vladimir Putin and top Russian oil executives, Energy Minister Alexander Novak said countries producing 73% of the world’s oil had agreed to the tentative deal, according to state news agency TASS. Mr. Novak said capping oil production would prove effective even without Iran, which hasn’t said it would take part. The deal was brokered in February in Doha among Russia and members of the Organization of the Petroleum Exporting Countries: Venezuela, Qatar and Saudi Arabia. Russia and Venezuela said last week they were planning a broad meeting of producers in mid-March to expand the agreement to freeze their production. Mr. Novak said talks were continuing on how to monitor implementation of the production freeze. He said the aim was to stabilize the price of oil around $50-$60 per barrel, as any higher price would again create excess supply.  Oil producers have turned to the concept of limiting their output to January levels as a form of action to boost prices that have fallen more than two-thirds since the middle of 2014. Saudi Arabia’s oil minister Ali al-Naimi, the de facto leader of OPEC, has said outright supply cuts aren’t on the table because producers don’t trust each other.

Oil ends up on Wall Street, but pulls back on U.S. crude builds | Reuters: Oil markets closed up as much as 2 percent on Tuesday, before giving back most of their gains in post-settlement trade after data suggesting a huge build in U.S. crude stockpiles already at record high levels. The American Petroleum Institute, an industry group, said domestic crude inventories rose by 9.9 million barrels last week, way above a 3.6 million barrels increase expected by analysts in a Reuters poll. [API/S] [EIA/S] API's numbers often vary to official supply-demand figures for oil released each Wednesday by the U.S. Energy Information Administration (EIA). Even so, some traders braced for the possibility of the EIA reporting a large build as well in crude inventories for last week that could cut short the oil market rebound of the past two weeks. Crude prices rose in eight of the last 13 sessions, gaining 22 percent in all. "This is a big build that surprised even me," said Tariq Zahir, an oil bear who has bet on weaker U.S. crude oil prices for more than a year now. "If the EIA has equally bearish numbers tomorrow, we can really see pressure come on to this oil rally." U.S. crude was up 14 cents, or 0.4 percent, at $33.89 a barrel by 5:17 p.m. EST (2217 GMT). It had settled up 65 cents, or 2 percent, at $34.40 a barrel. Brent, the global benchmark for crude, was up 4 cents at $36.61, after trading in the negative earlier. It had settled up 24 cents, or 0.6 percent, at $36.81.

 Crude Inventory +10.37M Barrels vs +2.5M Expected- U.S. crude oil refinery inputs averaged about 15.9 million barrels per day during the week ending February 26, 2016, 167,000 barrels per day more than the previous week’s average. Refineries operated at 88.3% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.3 million barrels per day. Distillate fuel production increased last week, averaging 4.8 million barrels per day. U.S. crude oil imports averaged 8.3 million barrels per day last week, up by 490,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 7.8 million barrels per day, 7.2% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 454,000 barrels per day. Distillate fuel imports averaged 306,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 10.4 million barrels from the previous week. At 518.0 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 1.5 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 2.9 million barrels last week and are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 3.7 million barrels last week but are well above the upper limit of the average range. Total commercial petroleum inventories increased by 9.9 million barrels last week. Total products supplied over the last four-week period averaged about 19.7 million barrels per day, down by 1.1% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged about 9.3 million barrels per day, up by 6.9% from the same period last year. Distillate fuel product supplied averaged over 3.4 million barrels per day over the last four weeks, down by 18.8% from the same period last year. Jet fuel product supplied is up 6.1% compared to the same four-week period last year.

Crude Tumbles After DOE Confirms Biggest Inventory Build In 11 MonthsFollowing last night's yuuge inventory build reported by API (+9.9m) and large rise in Cushing levels (+1.8m), DOE reported a crude build of even yuuger 10.37mm barrels (against the 7.1mm expectation) - the largest since early April 2015. Cushing saw a 1.2mm build - the most in 3 months. On the other side of the ledger, production fell for the 6th week in a row (-2.6% YoY to lowest since Nov 2014). Crude prices recovered from API's losses as algos ran stops on the back of headlines about Saudi increases prices to Asia but DOE's headline sent WTI back to its lows. API:

  • Crude +9.9mm (+3.3mm exp)
  • Cushing +1.8mm (+700k exp)
  • Gasoline -2.2mm (-1.1mm exp)
  • Distillates +2.7


  • Crude +10.37mm (+7.1m exp)
  • Cushing +1.19mm
  • Gasoline -1.468mm
  • Distillates +2.88mm

Which means Cushing has seen inventory builds in 16 of the last 17 weeks...As storage concerns are becoming extreme... As we detailed previously....Genscape joins the ever louder chorus that the US is approaching the capacity tipping point: Production is at its lowest level since Nov 2014, and is now down 2.6% YoY (the biggest YoY drop since Aug 2012) But while US production is down, US imports (of cheap Iranian oil?) are at their highest in 2 years... As refinery throughput is at a seasonal record... (ready for another glut in gasoline?)

Oil up, shrugs off big U.S. crude build and erases early dip - (Reuters) - Oil traded higher again on Wednesday, erasing a brief dip that followed data showing a huge build in U.S. crude stockpiles to record highs. Global benchmark Brent crude was up 30 cents at $37.11 a barrel by 11:15 a.m. EST. Earlier, Brent had fallen 71 cents to a session low of $36.10 after the U.S. government said crude inventories rose 10.4 million barrels to 518 million in the week to Feb. 26. That build reported by the U.S. Energy Information Administration was almost triple the 3.6 million-barrel increase expected by analysts in a Reuters poll. U.S. crude was up 40 cents at $34.80, after sliding to an intraday low of $33.55. Traders were hopeful that prices will not sink back to lows hit in mid-February, when U.S. crude fell to a 12-year low of around $26, and Brent just above $27. The selloff in oil began in mid-2014 when prices were above $100 a barrel. "It seems more likely that $26 is in the rear view mirror at the moment," said Anthony Headrick, energy market analyst at CHS Hedging. "Fundamentals remain bearish but prospects of OPEC freeze and downward cycle in U.S. output will likely limit a retest of the recent lows." Bulls in the oil market have pushed for price gains over the past two weeks after Saudi Arabia and fellow OPEC members Qatar and Venezuela joined Russia in proposing a production freeze at January's highs.

Bakken-Brent Spread And US Crude Oil Imports -- March 2, 2016 -- Two connecting dots. First, this from the weekly EIA report: The Bakken crude oil spot price discount to Brent averaged $8 per barrel (b) in August 2015. It narrowed to average only $2/b in November 2015, and by January 2016 averaged $1.69/b (Figure 1). The narrower the spread between domestic and imported international crude, the more likely costal refineries will choose to run imported crudes rather than domestic supplies shipped via railSecond, from John Kemp's tweets earlier today:  US weekly crude oil imports were running at some of the highest rates in two years this past week. 

U.S. Has Too Much Oil. So Why Are Imports Rising? - Despite domestic production declining and demand surging, the EIA reported oil inventories surge by more than 10 million barrels, or more than three times what was expected. The 10.4 million barrel increase was mostly due to a near record increase in imports of 490,000 b/d (3.4 million barrels weekly) and an adjustment swing of 352,000 b/d (2.5 million barrels weekly) by the EIA. The latter has been a repeated pattern to exaggerate the levels of inventory, a pattern going back to 2015. Thus, over half of the said increase in inventory was driven by higher imports and an arbitrary adjustment that seems routine by the EIA. Domestic production actually fell by 25,000 B/D in the week ending on February 26. Also gasoline inventories fell 455,000 barrels, or nearly 5 percent, as capacity utilization rose 1 percent. Total gasoline supplied, which is a gauge of demand over last 4 weeks, has risen a whopping 7 percent. Now the real question is with U.S. production declining and inventories at record levels, why are refiners still importing at such heights? The 8.2 million barrels per day imported in the week came very close to the record in December, missing by some few percentage points. U.S. commercial domestic crude oil stocks are now nearly 17 percent above last year levels. None of this adds up: We are producing less, inventories are rising, while demand is at records and yet we are using more imported oil? The chart below depicts these very odd phenomena. Moreover, most incremental U.S. output is light sweet crude from shale regions, as is the imported oil. The only logical answer that seems possible is that OPEC is undercutting light sweet U.S. crude pricing, so as to incentivize refiners to use imports. So are we then to believe Saudi Arabia that it isn’t at war with U.S. shale?

Expect Large Builds in Oil Inventories For Next 7 Weeks (Video) - Starting this time last year we added over 40 Million Barrels to US Oil Stockpiles. The question is can storage facilities handle another 40 Million Build in Oil Stocks over the next 7 weeks?

Another Very Strange Morning For Oil - Following yesterday's modest drop in US crude production and yuuge build in inventories, headlines about possible Venezuela meetings sent algos into panic-buying mode. This morning the headlines are from Nigeria, whose Petroleum Minister "expects a dramatic price move"claiming a meeting between OPEC and NOPEC will happen on March 20th. Combine that idiocy with significant US Dollar weakness this morning and the surge in Oil ETF share creation and the perfect storm of higher prices in oil (as hedgies pile in). Nigeria’s Petroleum Minister Emmanuel Kachikwu anticipates dramatic price move after meeting between OPEC and non-OPEC producers, he says at conference in Abuja, the capital. “Both the Saudis and the Russians, everybody is coming back to the table” “We’re beginning to see the price of crude inch up very slowly. But if the meeting that we’re scheduling, it should happen in Russia, between the OPEC and non-OPEC producers happen about March 20, we should see some dramatic price movement” Later confirmed mtg planned to take place on March 20.  Producers target recovery to $50 a bbl

OPEC Ministers Now Resorting To Outright Lies In Desperate Attempts To Push Oil Higher - The key (recurring) catalyst for today's early spike in oil, was the latest desperate attempt by an imploding OPEC member, this time Nigeria to push oil higher when overnight its petroleum minister Emmanuel Kachikwu said that key members of OPEC intend to meet with other producers in Russia on March 20 to renew talks on an agreement to cap oil output, Nigeria’s petroleum minister said. The headlines in question:


As Kachikwu hopefully added, "there will be a dramatic price movement” when the meeting takes place. As a reminder, oil-exporter Nigeria recently saw its dollar reserves dry up, forcing it to beg for a massive loan from the World Bank as the current price of oil dooms this particular nation to a very painful economic collapse. Sure enough, the algos bought this hook, lie and sinker and proceed to force another attempt at squeezing near record shorts. The only problem is that moments ago, we got confirmation that not only are such desperate attempts to prompt "dramatic price movements", higher of course, laughable, they just suffered a spectacular loss of credibility when moments ago Reuters reported that no decision on the date or venue of a possible meeting between OPEC and non-OPEC producers has been made yet, a Gulf OPEC delegate said on Thursday. "There has been no decision made regarding the meeting yet. No date or location decided yet. The Gulf countries prefer that it would be held in the first half of April, and preferably in Doha, or some other Gulf city," the delegate told Reuters.

Dallas Fed Unplugs Oil Bulls, Warns of Liquidity Crunch, Contagion - Wolf Richter -The rally in crude oil has been red hot. In the three weeks since February 11, WTI shot up a short-crushing 34% to $34.69 a barrel at the moment. Now the talk in the oil patch is at what price these desperate shale oil drillers will once again increase production. Continental Resources CEO John Hart and Whiting Petroleum CEO Jim Volker told analysts this week that they’d step on the accelerator once oil reaches the $40 to $45 range. After all, drillers have to produce oil to be able to service their mountain of debts. They can’t just switch to selling T-shirts. Alas, that looming increase in production won’t help deal with the glut. And a glut it is. Dallas Fed President Robert Kaplan hammered this home as part of a wide-ranging speech today. The Dallas Fed, whose district in addition to Texas includes northern Louisiana and southern New Mexico, figured that global oil production in 2016 will exceed consumption by an average of 1 million barrels per day. So that would amount to adding another 300 million barrels by year-end to the already ballooning crude oil inventories around the world. In OECD countries, inventories continue to rise, he said, and are now at “roughly 400 million barrels above the historical five-year average.” But the excess of production over consumption is coming down to 500,000 barrels per day by the end of the year, not because production will decline, but because consumption in 2016 is expected to grow by about 1.2 million barrels per day: These excess inventory levels will increase through 2016, and there is now some discussion in the industry about potential limits in storage capacity. We estimate that the market will not find some degree of daily production/consumption balance until mid-2017 and, at that point, excess inventories will begin to decline. Several factors and assumptions, based on data over the past several months, underlie this outlook, he said:

  • The official return of Iran to the world oil markets
  • Increased supply from OPEC nations
  • Slower-than-expected supply declines from US producers despite substantial cuts in drilling and capital spending
  • And slower-than-expected demand from emerging-market countries.

But he added that the outlook would be “meaningfully impacted by a change in OPEC production strategy” – in one direction or the other.

OilPrice Intelligence Report: Oil Up On OPEC Rumors, U.S. Shale Shutdowns: We start today's newsletter with this week’s key figures for the oil and gas industry from which we see that oil has rallied and U.S. production has experienced a slight decline. While we continue to see rising U.S. crude inventories, it seems that a production decline has kept oil prices from falling. Oil prices have had a relatively quiet week, posting a handful of less volatile trading sessions compared to what we have become used to. WTI moved up to about $35 per barrel this week and Brent rose to nearly $38. Oil prices have gained more than 30 percent since early February. . Oil storage levels in the U.S. continue to break records. For the most recent data available, the EIA says that crude inventories surged by 10.4 million barrels to a record high of 518 million barrels. The ongoing gains in storage levels will continue to act as a drag on oil prices, a sign that the glut still is not over. On the bullish side of things, more and more companies are reporting expected declines in production, signaling that the supply overhang will ease with time. These two forces seemed to have cancelled each other out this week as oil prices rallied and then flattened out.  The U.S. Supreme Court denied a request to issue a stay on the EPA’s mercury emissions rule. The request was brought by a coalition of 20 states, who were no doubt encouraged by the Court’s decision to put a hold on the EPA’s greenhouse gas rule just before the death of Justice Antonin Scalia. However, the Supreme Court rejected the mercury rule request and did not issue a comment, suggesting it did not think there was a serious case for it. The mercury rule limits mercury emissions from power plants, and it went into effect in 2015.

US rig count drops 13 this week to 489; Texas down 4: (AP) — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 13 this week to 489, a near record low. The Houston company said Friday that 392 rigs sought oil and 97 explored for natural gas amid depressed energy prices. A year ago, 1,192 rigs were active. Among major oil- and gas-producing states, Texas declined by four rigs, North Dakota and Oklahoma dropped by three, Colorado declined by two, and Louisiana, New Mexico and West Virginia each lost a rig. Alaska gained a rig. Arkansas, California, Kansas, Ohio, Pennsylvania, Utah and Wyoming all were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999

U.S. Oil Rig Count Falls to 2009 Levels - WSJ: The U.S. oil-rig count fell by eight to 392 in the latest week, according to Baker Hughes Inc., reaching levels last seen in late 2009. The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices began to fall. The latest total of 392 active oil rigs marks the first time it has fallen below 400 since late 2009. There are now about 69% fewer rigs of all kinds from a peak of 1,609 in October 2014. According to Baker Hughes, the number of U.S. gas rigs dropped in the latest week by five to 97, a fall to levels unheard of in Baker Hughes’ current format, which dates back to 1987. The U.S. offshore-rig count was 24 in the latest week, down three rigs from last week and down 27 rigs from a year ago. In total, the U.S. rig count is down 13 from last week at 489. Oil prices rose Friday on a weaker dollar and expectations of another large drop in U.S. drilling. Prices held their gains after U.S. data showed stronger-than-expected job growth in February. Recently, U.S. crude oil climbed 3.6% to $35.83 a barrel.

US rig count one away from historic low — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 13 this week to 489, a near record low. The Houston company said Friday that 392 rigs sought oil and 97 explored for natural gas amid depressed energy prices. A year ago, 1,192 rigs were active. Among major oil- and gas-producing states, Texas declined by four rigs, North Dakota and Oklahoma dropped by three, Colorado declined by two, and Louisiana, New Mexico and West Virginia each lost a rig. Alaska gained a rig. Arkansas, California, Kansas, Ohio, Pennsylvania, Utah and Wyoming all were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

Oil ends sharply higher, logs 10% weekly gain as output draws focus - The U.S. oil benchmark closed at its highest level since early January as traders turned their focus toward signs of falling U.S. production and continued talk of a potential output freeze by other major producers. A drop in the number of active U.S. oil-drilling rigs for the 11th straight week helped cement those gains, with both the U.S. and global benchmark posting weekly advances of more than 9%. On the New York Mercantile Exchange, April West Texas Intermediate crude added $1.35, or 3.9%, to close at $35.92 a barrel—the highest finish since Jan. 5. For the week, WTI rose 9.6%. May Brent crude, the global oil benchmark, added $1.65, or 4.5%, to finish at $38.72 a barrel on London’s ICE Futures exchange. That marked the highest finish since Dec. 10 and a weekly advance of 9.3%. The number of active rigs drilling for crude in the U.S., viewed as a rough proxy for activity in the oil industry, fell by 8 to 392 rigs as of Friday, according to data from Baker Hughes Inc. BHI, -0.75% The total number of active U.S. drilling rigs fell 13 to 489. The total tally was the lowest since the 488 count recorded on April 23, 1999, which was the lowest number since records began in the late 1940s. The fall in oil rigs “supports the idea that U.S. oil output is going to continue to decline in coming weeks,”  While the number of U.S. oil rigs has fallen for 11 weeks straight, oil output hasn’t fallen by as much as some expected because drillers have increased their efficiency and employed new technologies. Still, domestic output has seen a 2.6% year-over-year drop in the week that ended Feb. 26. Futures also continued to find support on talk of a planned meeting later this month between major oil producers who are expected to discuss a possible freeze in crude production.

WSJ: Oil Prices up 37% since Low in February  - From the WSJ: Oil Prices Jump as Drilling Drops Light, sweet crude for April delivery settled up $1.35, or 3.9%, Friday at $35.92 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 5. Prices are up 37% from the 13-year low reached last month. For the week, U.S. crude was up 9.6%.... U.S. oil output has fallen from a peak in April as companies sharply cut spending on new drilling, but it hasn’t declined as much as some investors expected because producers increased their efficiency and lowered drilling costs. Some analysts say U.S. production is due to drop more quickly this year because companies have announced new budget cuts in recent weeks.

Iraq's oil exports in February fall below planned levels (AP) — Iraq’s Oil Ministry said Tuesday that crude exports averaged 3.225 million barrels a day in February, far below levels planned to provide the nation with badly needed cash for ongoing military operations against Islamic State extremists. Last month exports grossed about $2.2 billion, based on an average price of about $23 per barrel, ministry spokesman Assem Jihad said in a statement. Iraq’s 2016 budget is based on an expected price of $45 per barrel with a daily export capacity of 3.6 million. January’s daily exports averaged 3.283 million barrels, bringing that month’s revenues to $2.261 billion. The figures do not include oil being independently exported from Iraq’s self-ruled northern Kurdish region since mid-2015, preventing the government from reaping revenues of nearly 600,000 barrels a day. Iraq holds the world’s fourth largest oil reserves, some 143.1 billion barrels, and oil revenues make up nearly 95 percent of its budget. But like other oil-reliant countries, Iraq’s economy has been severely hit by plummeting oil prices since 2014. This year’s budget stands at nearly 106 trillion Iraqi dinars, or about $89.7 billion. It runs with a deficit of over 24 trillion dinars (about $20.5 billion) that are planned to be relieved through loans from local and international lenders.

'Even God Forgot This Place': Welcome to the Oilfields of Azerbaijan -- In the late 13th century, the explorer Marco Polo travelled to the region that comprises modern-day Azerbaijan and reported seeing gushing oil geysers, some of which ignited and lit up the night sky. These days, the sky above the capital Baku is more likely to be illuminated by spotlights from stadiums or skyscrapers paid for by the country's black gold. The city just hosted the inaugural European Games, an Olympics-style multi-sport tournament for athletes from 50 countries, and Azerbaijan's government has spent billions on glittery decorations and lavish ceremonies. Yet rumors of a further devaluation of the country's currency, dipping oil prices, and discontent over the Games' ballooning costs are exposing the vulnerability of a nation whose economy is one of the most oil-dependent in the world.  But the precipitous decline in the price of oil from $110 to a low of $50 has caused some panic in the Azerbaijani government, including a recent 30 percent devaluation of the Manat currency. It is abundantly clear, however, that nation's vast wealth from hydrocarbons has never truly touched the neighborhoods around the oilfields. A few houses in Balakhani stand clean, bright and proud behind metal gates fringed with vines, while others are clustered in areas with an appearance that verges on post-apocalyptic. The wind whips up putrid fumes of burning plastic next to an oil-slicked lake entirely ringed with a crest of blackened bottles, tires, ossified birds, and children's clothes. Some shacks sit in the shadow of the hypnotic Soviet-era "nodding donkey" pumps, which oscillate metronomically, squeaking as they suck the ground dry. Villagers are not accustomed to seeing foreigners, yet welcoming hand signals, offers of tea, and requests for selfies are numerous. "What are you doing here? Even God forgot this place!" a young man told VICE News.

Peruvian president investigated in Brazil Petrobras probe (AP) — Brazilian police investigating a massive kickback scheme at state-run oil company Petrobras are now looking closely at Peruvian President Ollanta Humala and a former Argentine transportation minister, according to an internal document obtained by The Associated Press. The 44-page federal police report dated Feb. 5 now moves the sprawling corruption probe beyond Brazil’s borders, saying investigators suspect Humala received $3 million in bribes from the large Brazilian construction company Odebrecht in exchange for contracts in Peru. Humala’s press office did not respond Friday to repeated requests for comment. It tweeted that the president had called Brazil’s ambassador in Peru to deny the allegations. Attempts to find a lawyer representing the former Argentine minister, Ricardo Raul Jaime, were unsuccessful. The document is being reviewed by Brazilian Judge Sergio Moro, who is presiding over the sprawling Petrobras case that has brought down top Brazilian politicians and company executives. Moro’s office declined to comment. Legal experts say the judge could ask Brazil’s foreign minister to ask Peruvian authorities for an investigation or order prosecutors to go after Humala in Brazilian courts.

Arab States Face $94 Billion Debt Crunch on Oil Slump, HSBC Says -  Gulf Cooperation Council countries may struggle to refinance $94 billion of debt in the next two years as the region faces slowing growth, rising rates and rating downgrades, according to HSBC Holdings Plc. Oil-rich GCC states have to refinance $52 billion of bonds and $42 billion of syndicated loans, mostly in the United Arab Emirates and Qatar, HSBC said in an e-mailed report. The countries also face a fiscal and current account deficit of $395 billion over the period, it said. Expectations that these funding gaps "will be part financed through the sale of sovereign U.S. dollar debt will complicate efforts to refinance existing paper that matures over 2016 and 2017," Simon Williams, HSBC’s chief economist for the Middle East, said in the report. "With the Gulf acting as a single credit market, the refinancing challenge will likely be much more broadly felt" and "compounded by tightening regional liquidity, rising rates and recent downgrades," he said. GCC states, which collectively produce about a quarter of the world’s oil, are taking unprecedented measures to shore up their public finances as crude prices struggle to rebound from the lowest levels in 12 years. The countries, which include Saudi Arabia and Oman, have also been hit by a series of rating cuts, while billions of dollars have been drained from the region’s banking system.

Saudi Cash Reserves Drop To Lowest Level In 40 Months Amid Crude Carnage - The trend we flagged in November of 2014 continues unabated. When the Saudis moved to artificially suppress crude prices in an effort to preserve market share by bankrupting the cash flow negative US shale space, Riyadh was gambling. Gambling on how long US producers could rely on wide open capital markets to keep them afloat. Gambling on how tolerant everyday Saudis would be should it become necessary to cut subsidies to shore up the budget. Gambling on the extent to which the market would test the riyal peg. And on and on. In short, the kingdom was betting that it could ride out the price storm without essentially going bankrupt. But the downturn has lasted longer than the Saudis might have expected, and now that some 1,000,000 b/d of Iranian supply is set to come back online by year end, Riyadh has to a certain extent lost its ability to control the situation. Complicating matters is the war in Yemen, which next month will drag into its second year. Not only has the conflict been costly, it's also put Riyadh in a bad spot from a reputational perspective. Last week, the European Parliament recommended a wholesale embargo on arms sales to the Saudis in light of the 3,000 civilians the kingdom has "accidentally" killed over the course of the campaign to rout the Iran-backed Houthis. All of this costs money. Lots of it. The war, the 16% budget deficit, maintaining the riyal peg - it's all costly and it's showing up in the depletion of Saudi reserves which in January fell 2.4%, or $14.3 billion, falling below $600 billion for the first time since the summer of 2012.

We just got another massive sign of how badly Saudi Arabia is suffering from the oil price crash - Saudi Arabia, whose economy has taken a beating in recent months thanks to the crash in oil prices, just got another terrible piece of news. On Monday, HSBC economists Simon Williams and Razan Nasser dropped a note on the country's foreign-exchange holdings, and things look pretty dire for the oil-reliant nation. It shows that FX reserves dropped by more than $14 billion (£10.1 billion) in January, falling to their lowest level in nearly three years. The amount of reserve assets held by the Saudi government now stands at $602 billion (£434.5 billion), nearly $150 billion (£108.3 billion) down from its recent peak in late 2014, just before oil prices started plummeting. Here's the chart:

"There Is A Dollar Shortage": Abu Dhabi Warns On Decreased Dollar Supply -- It’s not entirely clear whether Saudi Arabia knew what they were setting in motion when the kingdom moved to deliberately suppress crude prices at the end of 2014. The idea (of course) was to preserve market share by bankrupting the US shale space and if there were “ancillary benefits” - like say forcing Moscow to give up its support for Bashar al-Assad - well then all the better. Unfortunately for Riyadh, things didn’t really go as planned. The kingdom’s budget deficit ballooned to 16% of GDP (which, for the uninitiated, is an unmitigated disaster) and this year’s target of 13% will invariably prove to be elusive unless the Saudis decide to either drop the war in Yemen, drop the riyal peg, or (preferably), both. In any event, the demise of the petrodollar has predictably created a shortage of, well, petrodollars, and it’s starting to show up in the UAE. “National Bank of Abu Dhabi PJSC, the United Arab Emirates’ largest bank, said there’s a reduced supply of dollars in the country as the region grapples with the impact of oil trading around $30 per barrel and credit downgrades,” Bloomberg reported, earlier today, adding that “banks in the U.A.E., holder of the world’s sixth-largest oil reserves, are facing deteriorating conditions as lower crude leads to a decline in government spending, slower economic growth and falling asset quality.” “There is a dollar shortage,” PJSC CEO Alex Thursby told reporters in Abu Dhabi on Wednesday. “It’s not a crisis, but it is tightening." As Bloomberg goes on to note, "the U.A.E.s’ banking sector has lost 56 billion dirhams ($15.25 billion) in government deposits since September 2014."

OPEC watching Iran, Russia, unlikely to cut output in June | Reuters: OPEC is very unlikely to cut output at its next meeting in June, even if prices remain extremely low, according to OPEC sources and delegates, as it will be too early to say how fast Iranian output is rising. The sources, which include officials from the Middle East, say OPEC countries such as Saudi Arabia also want to test Russia's commitment to freezing output before taking any further steps to stablize prices. More than 18 months after oil prices began a steep slide due to excess supply, Saudi Arabia, Qatar, Venezuela and non-OPEC Russia agreed last month to freeze output at January levels in the first global oil pact in 15 years. Saudi Arabian Oil Minister Ali al-Naimi said last week a supply cut was not on the cards although adding that the production freeze was only the first step to balance the market after prices fell to their lowest since 2003. "Maybe by the end of the year (a cut could be possible) when it is really clear that Iran is actually producing the volumes they are talking about. But not in June," a source from one of OPEC's Middle Eastern producers said. January was peak or near-peak production for Russia and Saudi Arabia, the world's two top oil exporters, but Iran - OPEC's No.3 producer - is the key supply uncertainty for 2016 as it is raising output after the lifting of Western sanctions in January, adding barrels to the already saturated market.

Deepening default fears cast shadow over Venezuela's oil flows - (Reuters) - As Venezuela grows closer to exhausting nearly every means of paying its debt, some oil market participants are seriously pondering the possible implications of an unprecedented event: the default of a major crude producing company. State-run firm PDVSA faces around $5.2 billion in payments to bondholders in 2016, much of it in October and November, a sum that some experts say it will be hard-pressed to meet after the government used nearly all of its available cash reserves to pay $1.5 billion in maturities last week. A default could curtail some of the OPEC member's exports by crippling its ability to import crude and fuels used to blend its extra heavy oil, experts and sources say. It could also degrade the quality of domestic gasoline by limiting purchases of necessary components. With the risk growing and payment delays to suppliers already emerging, some firms that sell to PDVSA have begun hedging their bets by using intermediaries or seeking higher prices, fearful they might never get paid, according to sources who deal with the firm. "A possible PDVSA default is worrying for everybody," a source from a U.S. oil company that buys from PDVSA told Reuters. And if they scrape together enough funds to pay off bondholders, "they will not be able to pay suppliers." The implications of a default for global oil supplies swamped by the biggest glut in decades are difficult to divine, but experts are closely watching the deteriorating finances of exporters for anything that could jolt markets.

A New Libya, With ‘Very Little Time Left’ -- It was a grisly start to the new era for Libya, broadcast around the world. The dictator was dragged from the sewer pipe where he was hiding, tossed around by frenzied rebel soldiers, beaten bloody and sodomized with a bayonet. A shaky cellphone video showed the pocked face of Col. Muammar el-Qaddafi, “the Leader” who had terrified Libyans for four decades, looking frightened and bewildered. He would soon be dead. The first news reports of Colonel Qaddafi’s capture and killing in October 2011 reached the secretary of state in Kabul, Afghanistan, where she had just sat down for a televised interview. “We came, we saw, he died!” she exclaimed.  Two days before, Mrs. Clinton had taken a triumphal tour of the Libyan capital, Tripoli, and for weeks top aides had been circulating a “ticktock” that described her starring role in the events that had led to this moment. The timeline, her top policy aide, Jake Sullivan, wrote, demonstrated Mrs. Clinton’s “leadership/ownership/stewardship of this country’s Libya policy from start to finish.” The memo’s language put her at the center of everything: “HRC announces … HRC directs … HRC travels … HRC engages,” it read.  And Mrs. Clinton would be mostly a bystander as the country dissolved into chaos, leading to a civil war that would destabilize the region, fueling the refugee crisis in Europe and allowing the Islamic State to establish a Libyan haven that the United States is now desperately trying to contain.

Iran Pivots Toward Democracy As Moderates Sweep Elections -- In what amounts to a referendum on President Hassan Rouhani’s leadership, voters in Tehran turned out overwhelmingly for moderates in closely watched parliamentary elections that may serve as an important signal for where Iran is headed. Pro-Rouhani candidates are set to sweep all 30 of Tehran’s parliamentary seats. The 290-member body is dominated by hard-liners, but that looks set to change under the President, whose decision to negotiate with the US over the country’s nuclear program was an enormous political gamble. “The early victories and reports of a high turnout spurred claims of victory on social media by activists and media who share Rouhani’s ambition of overhauling the post-sanctions economy with the help of foreign investment and perhaps easing some social restrictions,” Bloomberg notes. “Yet to secure control of the legislature and confront entrenched conservative power in other governing institutions like the judiciary, the president will need similar wins nationwide.” Turnout was high, which would seem to indicate that younger voters came out en masse to support the President’s agenda. The vote comes a year ahead of Presidential elections where Rouhani might well seek a second term. Iran should “use international opportunities to start a new chapter in the growth and blossoming of the national economy,” the President said on Saturday.

Iran, South Korea seal € 5bn pact - Iran said on Sunday that it had signed a basic agreement with South Korea to attract funds worth a total value of €5 billion for its development projects. The agreement was signed between Iran’s Finance Minister Ali Tayyeb-Nia and the visiting South Korean Minister of Trade, Industry and Energy Joo Hyung-hwan. Tayyeb-Nia told reporters that similar agreements have been previously signed with South Korea including one with the country’s Exim Bank to provide a total of €8 billion to Iran to implement its development projects. The Iranian minister further emphasized that South Korea is expected to provide Iran with loans worth a total of $15 billion based on the agreements that have been sealed so far. Tayyeb-Nia also said Minister Joo had told him that South Korean wants to invest in Iran’s auto industry as well as its tourism sector and its oil and gas projects. In a separate development, Valiollah Seif, the governor of the Central Bank of Iran (CBI), has been quoted by the media as saying that Iran and South Korea have agreed to create a joint bank account to settle the outstanding payments for Iran’s oil sales to South Korea. Seif said the agreement was reached during a meeting with South Korea’s Minister of Trade, Industry and Energy Joo. The joint account, he added, will be created in the central banks of the two countries.

South Korea plans to boost Iran oil imports, especially condensate | Reuters: South Korea plans to boost imports of Iranian oil, especially condensate, this year to meet growing demand after sanctions on the Islamic nation were lifted in January. The world's fifth largest importer of crude is also a big buyer of condensate, a super light oil that can be processed into fuels and petrochemicals. Iran's return would help ease tight condensate supply in a market dominated by fellow OPEC producer Qatar. "We will increase oil and natural gas (liquids) imports from Iran, especially Iranian condensate," South Korea's trade and energy ministry said on Tuesday. Iran is exporting 100,000 barrels of oil a day to South Korea, one of its main crude customers, and hopes to double that figure by the end of 2016, Oil Minister Bijan Zanganeh was quoted as saying on Monday. The Islamic Republic on Jan. 17 emerged from years of economic isolation as sanctions over its disputed nuclear program were lifted. That encouraged a tripling of South Korea's oil imports from Iran in January, but shipments remained far below pre-sanction levels. South Korea's trade ministry said the two countries would establish a payment system to facilitate smooth trade of crude and condensate between National Iranian Oil Company and South Korea's SK Energy and Hyundai Oilbank

Japan's oil import prices rise as glut looks to ease- Nikkei Asian Review: -- Japanese oil companies will pay more for imported crude on the back of a potential output freeze. Japan imports about 80% of its crude from Saudi Arabia and other major oil-producing nations under long-term contracts. Prices are reviewed monthly, with adjustments to the average for Dubai crude -- the benchmark for Asia -- and Oman crude. The long-term contract price for Arabian light crude oil, from Saudi Arabia, rose to $28.92 a barrel for February, up 13% from January, when the price hit the lowest in more than 12 years. As signs emerged that oil exporters may cap output, Dubai crude in the spot market climbed to a two-month high Tuesday. Output by OPEC members likely edged down to around 32 million barrels a day for February. Iran boosted production after Western sanctions were lifted, but countries such as Nigeria and Iraq recorded declines. As export heavyweights including Saudi Arabia and Russia have moved to freeze output, the market share war that had been overheating appears to be running its course. Because Iran's oil field infrastructure is aging, an increase in the country's exports this year will be limited to 400,000 barrels a day, below the government target of 1 million barrels, said Sushant Gupta, research director at Wood Mackenzie, a U.K. energy consultancy.

China crude oil imports fall in January from record high | Reuters: China's crude oil imports fell 20 percent in January from record high volumes the previous month to their lowest level since October, official customs data showed on Monday. January crude oil imports were also down 4.6 percent on a year earlier at 26.69 million tonnes, or 6.29 million barrels per day. China's imports reached a record 7.81 million bpd in December to close out 2015 with an average 6.71 million bpd - a figure well above China's still growing demand for oil. China took advantage of low global oil prices last year to add up to 185 million barrels to its reserves, Reuters calculations show, while oil demand - refinery throughput plus net imports of oil products - grew 3.1 percent. In January, fuel exports rose 45.2 percent to 3.01 million tonnes, or 679,700 bpd, after hitting a record 975,500 bpd in December, as China continued to export more diesel amid weakening demand for the industrial fuel. Diesel exports in the first quarter of 2016 may high a record high for that period, flooding Asia with supply at a time when profit margins are close to six-year lows, industry sources have said.

Crude Oil Prices Fall as China Manufacturing Data Disappoint - WSJ: Crude-oil prices were lower in early Asia trade Tuesday, after China’s official manufacturing data showed a seventh consecutive contraction in February, deepening concerns that oil demand from the world’s second-largest economy will slow. On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $33.61 a barrel at 0219 GMT, down $0.14 in the Globex electronic session. May Brent crude on London’s ICE Futures exchange fell $0.22 to $36.35 a barrel. China’s official manufacturing purchasing managers’ index, a gauge of the nation’s factory activity, fell to 49.0 in February from 49.4 a month earlier, official data from the National Bureau of Statistics showed. A PMI reading above 50 indicates an expansion in manufacturing activity, while a reading below 50 points to a contraction. However, some economists cautioned that seasonal factors were likely in play as most factories were closed for a week in February during the Lunar New Year break. “Slowing manufacturing activities in China will definitely weigh on sentiment,” China’s aggressive consumption of oil has been a bright spot in the gloomy oil market. But as China moves gradually from a heavy industry-based economy to a more service-oriented one, analysts say the country’s oil-demand growth will weaken.

China expects to lay off 1.8 million workers in coal, steel sectors | Reuters: China said on Monday it expects to lay off 1.8 million workers in the coal and steel industries, or about 15 percent of the workforce, as part of efforts to reduce industrial overcapacity, but no timeframe was given. It was the first time China has given figures that underline the magnitude of its task in dealing with slowing growth and bloated state enterprises. Yin Weimin, the minister for human resources and social security, told a news conference that 1.3 million workers in the coal sector could lose jobs, plus 500,000 from the steel sector. China's coal and steel sectors employ about 12 million workers, according to data published by the National Bureau of Statistics. "This involves the resettlement of a total of 1.8 million workers. This task will be very difficult, but we are still very confident," Yin said. For China's stability-obsessed government, keeping a lid on unemployment and any possible unrest that may follow has been a top priority. The central government will allocate 100 billion yuan ($15.27 billion) over two years to relocate workers laid off as a result of China's efforts to curb overcapacity, officials said last week.

China official manufacturing PMI comes in at 49.0, down from 49.4 in January: Twin gauges of Chinese factory activity revealed slowing growth in February, underpinning the case for more monetary stimulus a day after the country's central bank moved to improve liquidity conditions. Output from large factories contracted for the seventh straight month in February, a government survey revealed on Tuesday. The official manufacturing Purchasing Managers' Index (PMI) came in at 49.0, below Reuters forecasts for 49.3 and January's reading of 49.4. A number below 50 points indicates a decline in factory activity, while one above suggests expansion. But Chinese government data has long been taken with a pinch of salt so when it comes to assessing the state of factories, investors tend to gravitate towards a private gauge that tracks smaller and medium sized firms, known as the Caixin manufacturing PMI. Released 45 minutes following the official report, February's Caixin reading edged down to a five-month low of 48.0, versus 48.4 in January. "Companies that reported lower output generally cited weak market conditions and reduced intakes of new work. Furthermore, total new business declined for the eighth month in a row, albeit at a modest pace that was similar to January," Caixin said in a statement, adding that the decline in production was the quickest seen since September.

Caixin China PMI sinks as well -  Operating conditions faced by Chinese goods producers continued to deteriorate in February. Output and total new orders both declined at slightly faster rates than at the start of 2016, which in turn contributed to the quickest reduction in staffing levels since January 2009. Lower production was a key factor leading to the steepest fall in stocks of finished goods in nearly four-and-a-half years during February. At the same time, lower intakes of new work enabled firms to marginally reduce their level of work-in-hand for the first time in ten months. Prices data indicated weaker deflationary pressures, with both selling prices and input costs declining at modest rates. The seasonally adjusted Purchasing Managers’ Index™ (PMI™) – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – posted at 48.0 in February, down from 48.4 at the start of the year, and its lowest reading for five months. Operating conditions have now worsened in each month for the past year. That said, the rate of deterioration remained modest overall. Manufacturing companies in China signalled a further fall in production during February. Though modest overall, the latest reduction was the quickest seen since September 2015. Companies that reported lower output generally cited weak market conditions and reduced intakes of new work. Furthermore, total new business declined for the eighth month in a row, albeit at a modest pace that was similar to January. New export work fell for the third month in a row, albeit at a softer pace. Staff numbers declined at the sharpest rate since January 2009 during February. Companies that recorded lower headcounts widely commented on company downsizing policies as part of cost-cutting initiatives, along with the non-replacement of voluntary leavers.

Debts rise at China's big steel mills, consumption falls | Reuters: China's major steel mills added to their debt pile in 2015 while consumption of steel products fell for the first time in two decades, a senior official said on Wednesday, adding to the industry's difficulties as it tries to tackle a crippling glut. The debt ratio of major steel mills rose 1.6 percentage points to 70.1 percent from a year ago, taking the big mills' debt to 3.27 trillion yuan ($499 billion), Li Xinchuang, the vice secretary general of the China Iron & Steel Association (CISA), told a conference. At the same time, steel product consumption in China fell 5.4 percent to 664 million tonnes in 2015 from a year ago, the first drop since 1996, said Li, who is also head of the China Metallurgical Industry Planning and Research Institute. China is trying to rein in its bloated steel sector, and aims to cut crude steel capacity by 100 million to 150 million tonnes within the next five years, as well as ban new steel projects and eliminate so-called "zombie" mills. However, slower demand and rising debt will put further pressure on the industry, with prices already at multi-year lows.

China Begins to Tackle Its ‘Zombie’ Factory Problem - WSJ: —China’s leaders two decades ago decided that a combination of restructuring, privatization and massive job cuts was needed to revitalize the economy and shake up state industries weighed down by debt, overcapacity and declining profits. An estimated 20 to 35 million people lost jobs in the late 1990s.  The same ills are now back, and reform of the country’s swollen industries is expected to feature prominently in China’s next five-year plan as the National People’s Congress, China’s annual legislative session, starts Saturday in Beijing. But this time around, the government is taking a more modest approach to cutting off its “zombie” factories as it confronts slowing economic growth that has unnerved Chinese leaders and global markets and raised fears of social unrest.  Beijing has outlined plans to cut 1.8 million steel and coal workers over the next five years. To ease social pain, it will put 100 billion yuan ($15.3 billion) into a restructuring fund for severance, retraining and relocation.  Economists query whether the initiatives are enough. Beijing aims to cut up to 150 million tons of capacity in its steel industry by 2020, for example, but the annual surplus is currently around 400 million tons, according to the China Iron and Steel Association.

Hundreds of thousands of Chinese shipyard workers face the axe - Reuters is reporting that China aims to lay off 5m to 6m state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution. Coal and steel industries are likely to lead the cutbacks, with other sectors where overcapacity is hurting including cement, glassmaking and shipbuilding also facing significant change. The government has already drawn up plans to cut as much as 150m tonnes of crude steel capacity and 500m tonnes of surplus coal production in the next three to five years. On shipbuilding, which has seen massive contraction in the last three years, the job losses could be in the hundreds of thousands, Splash understands. Jin Peng, secretary general of the country’s national shipbuilding association, said he does not know the scale of the potential redundancies in the sector. He did state however: “Overcapacity is still one of the major problems in the shipbuilding industry, and the industry is facing a major reshuffle and does need a restructuring.” Martin Rowe, a veteran broker with Clarkson Platou in Hong Kong, commented: “Clearly as Chinese labour costs rise – especially in coastal provinces where most of the big state yards are – and the country moves towards a more services driven economy the raison d’etre for shipyards being a sink for labour falls away.” Rowe suggested China would do well to examine how yards in Japan managed to survive in a previous scenario when a major economy transitioned “from metal bashing to widget manufacturing and services”.

Protests Rise as China Lays Off Millions of Coal Workers -- China is finally making progress in curing its coal addiction, but the withdrawal symptoms are starting to hit some of its most vulnerable citizens. The government said on Monday that 1.8 million workers in the coal and steel industries will be laid off this year, representing more than 10 percent of the total steel workforce and fully one-fifth of the workers in the coal industry, according to economic research firm IHS Insights. The central government says it will invest more than $15 billion in retraining and job placement for laid-off workers. The damage will be most keenly felt in places like Shanxi Province, where I traveled extensively for my book Coal Wars. Many sizable cities there are totally dependent on the coal economy, and the job losses will have ripple effects that could cause massive social unrest. Already coal miners in Anyuan, the scene of the Great Strike of 1922 that helped launch Mao and the Communist Party on the road to power, are turning out by the hundreds to protest layoffs and pay cuts, the Washington Post reported. Coal use was down nearly 4 percent in 2015 from the year before, a slowdown being driven both by market forces and by Beijing’s determination to curb toxic air pollution and shift to cleaner sources of power. Already, China is the world’s largest producer of wind power, and a massive push in wind, solar, and nuclear power is planned for the next 10 years.

China eyes 13 percent money supply growth to buffer economy in 2016: sources | Reuters: China plans to target broad-based money supply growth of around 13 percent this year, sources said, a signal that further monetary policy easing is likely during a painful economic restructuring that could see millions of workers losing jobs. Top leaders have already pledged "supply-side structural reforms" to tackle excess factory capacity and "zombie firms", and are also expected to lean more on fiscal stimulus as they seek to avert a hard landing for the world's second-largest economy. "A 13 percent rise in M2 is sufficient for keeping liquidity flush in the near term, but we may see faster rises later this year as the central bank is likely to loosen policy further," said one of the sources. The target, which is set to be announced by Premier Li Keqiang at the annual parliament session that opens on Saturday, was endorsed by top party leaders at a closed-door Central Economic Work Conference in December, said a number of people with knowledge of the outcome of the meeting. The sources also said the inflation forecast for this year was set to be around 3 percent, more than double the actual rate in 2015. China's top economic planner has said the government would target economic growth of 6.5-7 percent this year, confirming a Reuters report, and the sources said the money supply and inflation forecasts are in line with that target.

China central bank resumes easing cycle to cushion reform pain | Reuters: China's central bank resumed its easing cycle on Monday, injecting an estimated $100 billion worth of long-term cash into the economy to cushion the pain from job layoffs and bankruptcies in industries plagued by overcapacity. The People's Bank of China (PBOC) said on its website it was cutting the reserve requirement ratio, or the amount of cash that banks must hold as reserves, by 50 basis points, taking the ratio to 17 percent for the biggest lenders. The cut came just days after China used its role as host of the Group of 20 (G20) to reassure trading partners that it did not intend to further devalue the yuan, after a surprise 2 percent devaluation last August threw markets into a spin. The PBOC's announcement also comes shortly before the annual meeting of China's parliament, which must try to engineer a huge economic shift toward services and consumption and away from basic manufacturing, while also keeping growth stable. The move was a surprise to some observers, given that the PBOC had previously said it would rely more on daily injections of short-term money to keep cash flowing, rather than the long-term addition of funds from an RRR cut. The cut is effective from March 1, and it comes after signs of increasing tightness in the money market last week, despite repeated daily injections through open market operations, including a 230 billion yuan injection on Monday morning.

Moody's lowers outlook on China's credit rating to negative from stable: Moody's Investors Service Wednesday lowered the outlook on China's credit rating from stable to negative, citing a weakening of fiscal metrics and a continuing fall in foreign exchange reserves. The rating agency also noted uncertainty over the capacity of authorities to implement the reforms needed to address imbalances in the world's second-largest economy. Moody's current Aa3 rating on China is seven notches above junk so even if the agency were to follow up on its warning and lower the rating, investors won't have to suddenly start selling the country's bonds. Still, the warning underscores how the build-up in credit in the country's stuttering economy is making market observers nervous. Rival Standard & Poor's assesses China's creditworthiness at similar levels to Moody's, while Fitch rates China a notch lower. S&P and Fitch both have stable outlooks on the country.

China Economy: Credit Rating Outlook Negative Says Moody's: The credit ratings agency Moody’s has declared that the outlook for China’s credit rating is “negative” amid growing concerns about the Chinese government’s ability to manage a slowdown of growth.In a note Wednesday, Moody’s Investors Service said it would keep its ratings of both long-term and short-term Chinese government debt at Aa3, meaning a very low credit risk. But the outlook for the ratings had moved from “stable” to “negative” Moody’s said, blaming rising government debt and liabilities.It said the revision was also down to “Uncertainty about the authorities’ capacity to implement reforms — given the scale of reform challenges — to address imbalances in the economy.”China’s economy is now growing at its lowest rate for 25 years as the country’s manufacturing sector and demand for commodities slow. The government insists that it is undergoing a managed transition to a services-led economy, but the Moody’s announcement will increase the pressure on China’s leaders to push forward with reforms at the annual National People’s Congress, which begins on Saturday in Beijing.

China Faces 15 Trillion Bombshell As Shadow Banking Sector Collapses -- We’ve spent more time than most documenting China’s wealth management product problem. WMPs are part and parcel of Beijing’s sprawling shadow banking complex which, until 2014 that is, helped pump trillions of yuan into China’s economy and shouldered the burden when it came to propping up the most important economy on the planet. But WMPs are dangerous. In fact, we flagged them as an 8 trillion black swan back in August on the way to asking what would happen if China’s shadow banking sector were to collapse altogether. This is space that’s running what amounts to an enormous maturity mismatched fraud. Of course the describes the entire fractional reserve banking system, but in the case of China’s WMPs, it’s all on the verge of implosion. Don’t believe us? Just ask anyone who bought into products sold by Fanya Metals’ Shan Jiuliang. This is a very real threat to the Chinese banking sector. The multifarious nature of the space's liabilities makes it virtually impossible for anyone to assess what the embedded risks are. As we first documented last summer, some 40% of credit risk is carried off balance sheet and that figure might well have grown recently, especially considering mid-tier bank's propensity to extend new credit through new cateogries of channel loans that are classified as "investments" and "receivables"

China central bank cuts reserve requirement ratio by 0.5 percentage points: China's central bank, the People's Bank of China, has cut further the reserve requirement ratio, the amount of cash the country's banks have to hold, in an attempt to calm investor jitters over the world's second largest economy. The PBOC cut the ratio by 0.5 percentage points after the country's markets closed Monday. The cut, which comes into effect Tuesday, means that most large Chinese banks will have a reserve ratio of 17 percent, Reuters reported.  This is the fifth time since last February that the PBoC has cut its ratio, the last cut being on October 23. . In a statement reported by Reuters, the PBOC said the move was made to ensure ample supply of liquidity in the system.

China Continues to Focus on Growth, Not Reform  - The central government will hold the National People’s Congress (NPC) meeting on March 5th. All the signs point to more monetary and fiscal stimulus, especially since the G20 gathering in Shanghai. The key is how to use the fiscal stimulus efficiently. The key concern for those against additional stimulus in China is that it will only feed overcapacity in state-owned enterprises. This is why I expect a strong warning in the NPC statement that the stimulus will exclude “zombie companies”, loss-making state-owned firms that use up lots of resources. After a series of official spokesmen confirmed that the central government is determined to tackle overcapacity, it is clear that the NPC will need to make reference to this issue. It may even announce concrete measures, such as restructuring of zombie companies in sectors which have more capacity than is needed, including steel, cement, coal, flat panel glass, paper making and shipbuilding. There are rumours that funds of at least 150 billion yuan, equivalent to $23 billion, will be earmarked to help corporates lay off 5 to 6 million workers and retrain them within 3 years. Given the amount of excess capacity in China, and the fact that fiscal and monetary policy will be more lax than they are even now, it is difficult to believe that the above strategy will solve the problem. The incentives to accumulate additional overcapacity will still be there.

As Economy Slows, Experts Call on China to Drop Growth Target - Every March, China releases a closely watched growth target for the year, a number that looms large for the world’s economists, executives and policy makers. But a growing number of those experts are now calling for China to stop setting that goal, saying the target actually harms the economy and encourages officials to falsify data.  On Saturday, at the start of the National People’s Congress, the government announced a target for 2016 that acknowledges a worsening slowdown. It is a range, 6.5 percent to 7 percent economic growth over last year, rather than a number, suggesting that leaders are rethinking their adherence to hard-and-fast goals. Still, even the broader target is unlikely to reduce skepticism of official Chinese figures.The government’s reading on the growth rate last year was 6.9 percent. The new target range means that leaders expect China’s growth could dip this year, which would further depress the global economic outlook The Chinese government also announced its intent to keep the annual growth rate at a minimum of 6.5 percent through 2020, according to a copy of the 13th Five-Year Plan released Saturday.Economists say that is necessary to meet another goal China has set: having both the size of the economy and per capita personal income in 2020 be double that of 2010. The annual growth target — a product of China’s mix of central planning and quasi capitalism — gives a general sense of what leaders think of the country’s economic health, but no indication of how the growth is supposed to happen or what policies the leaders are adopting. Economists and investors want to know whether China is really addressing deepening economic problems.

“Is Currency Devaluation Overrated” - Menzie Chinn - That’s the title of a symposium in the current issue of The International Economy. Martin Feldstein, Ted Truman, Joe Gagnon, Bill Cline, Mohamed El-Erian, Cathy Mann, and José de Gregorio (among many others) contribute. Here’s my take: There’s a long history of skepticism regarding the effectiveness of currency depreciation as a means of spurring net exports and GDP growth. In the post-War period, elasticity pessimism was often invoked as a rationale for foregoing devaluation. In the 1980’s, a more sophisticated argument based on hysteresis effects – big exchange rate appreciations could not be undone be a sequence of small exchange rate depreciations — was forwarded. The most recent incarnation is based upon plausible arguments, but I’ll argue they are only quantitatively relevant in specific cases. The most recent manifestation of elasticity pessimism is based on the observation that for some countries, the large imported component in some countries’ exports means that depreciation enhances competitiveness only marginally. That’s because a depreciation increases the cost of imported inputs even as it increases the price at which exports can be sold. But, while East Asia – and China in particular – looms large in popular imagination, this region represents an extreme manifestation of global supply chains and vertical specialization (i.e., imports used in exports). In fact, in quantitative analyses of how much vertical specialization alters our perceptions of competitiveness, China is an outlier, rather than the norm.  More closed economies, such as the US, are much less subject to this effect. And even for China, that effect is likely to decrease over time as that country’s producers incorporate more and more domestically sourced labor and inputs in export goods.

South Korea posts longest export drop in history -- Korea’s exports posted another double-digit decline in year-on-year growth in February, as demand shrivels with the slowdown in China and unit prices of major products remain low. According to the Ministry of Trade, Industry and Energy on Tuesday, the nation’s total exports were $36.4 billion in February, a 12.2 percent fall from the same month last year. Exports shrank for the 14th straight month, the longest such streak in Korea’s history. Compared to a shuddering 18.8 percent year-on-year fall in January, the rate of decrease fell slightly last month. However, since exports are the main growth component of the Korean economy, the February figure strongly suggests the government’s 3.1 percent growth target for GDP this year is unattainable. “Outbound shipments of major products dropped in February amid persisting adverse conditions – low oil prices, falling unit prices and a global slowdown,” said Lee In-ho, a deputy trade minister. “The government forecasts that exports will continue to go downhill in the midst of growing uncertainties in the global economy.” According to the ministry’s analysis, exports of vessels plummeted by a whopping 46 percent in February from a year earlier, leading the overall decline. The fall is attributed to a lengthy slump in the global shipbuilding market. Exports of display panels tumbled 22.1 percent during the same period due to falling prices of liquid crystal displays as a result of increasing production of panels by Chinese companies. The unit price of a 32-inch liquid crystal display panel slid from $94 to $51 as of last month. Semiconductor exports dipped 12.6 percent year on year because of price declines of dynamic random-access memory chips from $3.44 per 4 gigabytes to $1.84. In addition, automobiles declined 9.3 percent, while auto parts inched down 2.1 percent.

Japan Hits Demographic Tipping Point With First Official Population Decline In History -- As troubling as Japan's deflationary, and now negative interest rate, economic quagmire is, the biggest threat facing Japan has little to do with its balance sheet and everything to do with its demographics, for the simple reason that not only is Japan's population the oldest it has ever been, as well as the oldest on average in the entire world, but is now also officially shrinking. According to data released yesterday by the Ministry of Internal Affairs and Communications, in the latest 5 year census, Japan’s population declined last year for the first time in nearly a century.  The Internal Affairs and Communications Ministry said the latest census shows that Japan’s population as of Oct. 1, 2015, was 127,110,047 - a decline of 947,305, or 0.7 percent, since the last census conducted in 2010.    The number of Japanese dropped to 127.1 million in a national census for 2015, down 0.7 percent compared with five years earlier, and was the first recorded decline since the 5-year census started in 1920. As the Shimbun adds, in the 2015 census, men accounted for 61,829,237 of the population, and women 65,280,810.   The population of Fukushima Prefecture, where many residents are still being forced to live away from home due to damage caused to their hometowns by the 2011 Fukushima nuclear power plant disaster, saw the biggest decrease, or 115,458, a 5.7 percent decline from the last census. The two other prefectures hit hardest by the disaster — Iwate and Miyagi — also saw population declines.  To be sure, this is not exactly a surprise: Japan's ministry had estimated that the nation’s population had been declining for four straight years since 2011, but the latest results are the first official confirmation via a census that the national population has gone down since the government began conducting them.

Japan considers making bitcoin a legal currency  --Japan’s governing Liberal Democratic party is planning to propose legal changes that would define bitcoin and other cryptocurrencies as currencies. The changes would mean bitcoin could be more tightly regulated and taxed, and are likely to lead to more investment in developing cryptocurrency infrastructure in Japan. Tomonori Kanda, an official in the financial affairs section at the party’s headquarters, said legislative changes were discussed on Wednesday and the LDP aimed to raise the matter in parliament. “There is a long way to go,” he said. “But we have discussed reform and believe it is the right way to go.” The timing of the change was yet to be decided, he said.Japan considers bitcoin a commodity. The new definition would consider anything that can be exchanged for goods and services or legal tender as a currency, bringing bitcoin, dogecoin and many other cryptocurrencies into the fold. According to a report in the Nikkei newspaper, the changes were proposed by government body the Financial Services Agency. However, an FSA official in Tokyo refused to confirm that any changes to legislation were being considered. “We have not decided anything yet,” the official said. “The way things work here is that any change would have to be approved by parliament first, and then we would work on writing the legislation.”

Japan PM Abe to form panel to debate extra stimulus budget: sources | Reuters: Japanese Prime Minister Shinzo Abe will pull together a new advisory panel to debate the need for a supplementary budget for the coming fiscal year from April to stimulate the flagging economy, sources told Reuters on Tuesday. It is unusual for the government to discuss an extra budget before the annual budget clears parliament. The budget for the new fiscal year is set to pass the lower house later on Tuesday, after which it will move to the upper chamber for debate. The prime minister will announce the plan on Tuesday, the sources said. Abe hopes the move will encourage other countries to embrace more fiscal spending and shift away from austerity, the sources said. If Japan rolls out the extra spending, it could set an example after the Group of 20 nations called for more fiscal spending to help support the ailing global economy at their meeting last weekend. Abe will convene a panel of experts in mid-March to analyze the world economy and debate the need for an extra budget. The panel will hold meetings about five times in the run-up to the Group of Seven Summit meeting that Japan will host in late May, sources said.

S&P: Large Japan economic stimulus would raise concerns | Reuters: Japan's government is unlikely to be able to launch a stimulus package to support its struggling economy without raising concerns about the size of its spending, ratings agency Standard & Poor's said on Wednesday. Faced with a flagging economy, Japan is laying the groundwork for new government spending to pre-empt any weakness in household consumption, which would add to its already heavy debt burden. S&P cut its rating on Japan from AA- to A+ in September, which is four notches below its top rating of AAA, because it doubts the government can reverse the country's economic deterioration. The agency also raised its outlook to stable from negative. "The size of any stimulus will have to be carefully calibrated. At this point I don't think the government can put out a package big enough to support the economy without triggering concerns," Kim Eng Tan, S&P's Asia-Pacific senior director of sovereign ratings, said in an interview. Tan said continued yen strength could remove the external support, such as the receipts inbound tourism bring in, which Japan's budget balance enjoys. If domestic demand and inflation are unable to make up for the loss of this external support, the fiscal balance could again deteriorate and pose a credit negative factor in the long run, he added.

Japan’s Negative Interest Rates Are Driving up Sales of Safes The Japanese are spending—but not in a way that is likely to strengthen the country’s economy. Following the Bank of Japan’s decision to lower interest rates below zero in January, many consumers have reportedly rushed to hardwares store in search of one thing: safes. Negative interest rates mean customers effectively pay a fee for parking cash in banks, so Japanese citizens are beginning to hoard yen, according to the Wall Street Journal, and they need somewhere to put it. Sales of safes have doubled from the same period a year earlier at chain hardware store, Shimachu, according to the Journal. The chain has already sold out of one model worth $700. Others savers are considering more unconventional storage spaces.  “In response to negative interest rates, there are elderly people who’re thinking of keeping their money under a mattress,” Mariko Shimokawa, a Shimachu saleswoman told the Journal ... But hoarding cash is exactly what the Japanese central bank wants to avoid. Bank of Japan Gov. Haruhiko Kuroda lowered rates to -0.1% for certain deposits on Jan. 29. The idea was to prop up the economy and increase inflation by encouraging consumers to spend and borrow while discouraging banks from keeping large reserves. Officials have already noticed the increase in safe sales. The issue of cash hoarding was brought up in a parliamentary hearing Monday, with opposition lawmaker Katsumasa Suzuki saying that the increase in safe sales suggested a “vague sense of unease,” the Journal reported.

How Low Can They Go? -- Not long ago, nearly everyone thought that nominal interest rates could not go below zero. Now, we have negative policy rates in the euro area and Japan, while in Sweden and Switzerland, the lowest controlled rate is below -1%. And government securities worth trillions of dollars bear negative rates, too.  When we first wrote about negative rates a year ago, we argued that the effective lower bound (ELB, rather than ZLB) for nominal rates was determined by the transactions costs of storing and transferring cash. While Fed staff estimate pure storage costs—exclusive of security and insurance—at about 0.35%, we reasoned from the behavior of money market mutual funds with broader transactions costs that the ELB might be in the range of -0.50% (minus one-half percent). Below that, we thought, there would be a move into cash, facilitated by banks and others who would efficiently manage the notes for clients. [...]  As we continue trying to figure out what the transactions costs are for storing, transporting, and insuring large amounts of cash, we have two further thoughts. First, on a per unit basis, these costs are probably lower the larger the jurisdiction.  econd, the floor is probably a soft one because the eventual prospect of higher interest rates limits the potential profit from a large investment in cash management. That is, because of the fixed costs involved in setting up cash accounts, and the threat that rates will rise, banks will hesitate to pay the start-up costs until rates are expected to stay low enough long enough to warrant the risk. The bottom line: international experience suggests that negative interest rates, at least as low as we are seeing today and (in some places) significantly lower, will become a permanent part of the monetary policy toolkit. If that’s right, we need not worry quite so much whether a 2% inflation target is too low.

Everything You Need to Know About Negative Rates - WSJ -- The Bank of Japan, the European Central Bank and several smaller European authorities have ventured into the once-uncharted territory of negative interest rates. But what are negative rates, and how do they come about?  All are a bit different, but as a rule the central bank is the bank for a country’s (or monetary union’s) banks. Commercial banks have accounts with the central bank, just as households and businesses have accounts with commercial banks. A commercial bank’s account at the central bank is part of what makes it a bank: It allows it to go about the daily business of moving money. What is a negative interest rate? It’s like a normal interest rate, except the lender pays the borrower. The central bank can lend to commercial banks, simply by creating new reserves. Perhaps the commercial bank that is borrowing is doing so because it needs the reserves to make a transfer to another bank—in which case the new reserves would be moved to the central-bank account of that second bank. The central bank can charge interest on the loan it made to the first bank, and it can pay interest on the deposit it is taking from the second bank. Those rates provide a ceiling and floor on the overnight rate: One bank wouldn’t borrow reserves from another bank if it could get the same loan cheaper from the central bank. Likewise, one bank wouldn’t lend reserves to another if it could get a better rate simply by leaving them on deposit. [So] What rate is now negative in Japan and the eurozone?  The deposit rate—the floor. Instead of getting paid for depositing with the central bank, the commercial bank now pays the central bank when it does.

The Global Run On Physical Cash Has Begun: Why It Pays To Panic First - Back in August 2012, when negative interest rates were still merely viewed as sheer monetary lunacy instead of pervasive global monetary reality that has pushed over $6 trillion in global bonds into negative yield territory, the NY Fed mused hypothetically about negative rates and wrote "Be Careful What You Wish For" saying that "if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances." Well, maybe not... especially if physical currency is gradually phased out in favor of some digital currency "equivalent" as so many "erudite economists" and corporate media have suggested recently, for the simple reason that in a world of negative rates, physical currency - just like physical gold - provides a convenient loophole to the financial repression of keeping one's savings in digital form in a bank where said savings are taxed at -0.1%, or -1% or -10% or more per year by a central bank and government both hoping to force consumers to spend instead of save. For now cash is still legal, and NIRP - while a reality for the banks - has yet to be fully passed on to depositors. The bigger problem is that in all countries that have launched NIRP, instead of forcing spending precisely the opposite has happened: as we showed last October, when Bank of America looked at savings patterns in European nations with NIRP, instead of facilitating spending, what has happened is precisely the opposite: "as the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain."

India to pump almost $13bn into rural development - India has pledged billions of dollars to help improve the lives of farmers and boost the rural economy, as part of a "budget for the poor" unveiled on Monday.Arun Jaitley, the country's finance minister, proposed spending nearly $13bn on rural development, promising higher incomes for farmers who form the majority of India's 1.2 billion people.The benefits for farmers could have been prompted by legislative assembly elections that are due in five states in the next few months.Presenting the annual budget for 2016-17, Jaitley forecast that India's economy would grow by 7.6 percent in the year ending March 2016. The Indian government intends to distribute the benefits of growth among the poorer sections of society, including the vast majority of India's farmers, he said."We plan to double farmers' income in five years," Jaitley said."We have a shared responsibility to spend prudently and wisely for the people, especially for the poor and downtrodden."Jaitley outlined what he called the government's "nine pillars" of a "transformative agenda" for the economy.They include measures to boost education, increase spending on roads, irrigation and other infrastructure, intensify oversight of government spending and reform India's complicated tax regime.

India files trade complaint against U.S. over temporary work visas | Reuters: Trade tensions between India and the United States intensified on Friday as New Delhi filed a complaint with the World Trade Organization over steep fee increases for U.S. non-immigrant temporary work visas. The WTO said in a statement that India has disputed the doubling of the fees for H-1B and L-1 work visas and limits on their numbers. The visas are typically used by thousands of Indian nationals hired by information technology services firms operating in the United States. The complaint comes just days after the United States won a WTO ruling in favor of its challenge to India's domestic content rules for its solar power subsidy program after months of negotiations failed to produce a settlement. In its filing, India said the new U.S. visa measures seemed inconsistent with the WTO commitments the United States had made, because the moves treat Indian IT workers in the United States less favorably than their American counterparts. In December, the U.S. Congress doubled the cost of sponsoring H-1B visas to $4,000 each and L-1 visas to $4,500 each as part of a major spending bill. Indian business lobby NASSCOM estimated that would inflate costs for Indian IT export firms by $400 million a year. India is upset that the visa fees were raised without consultation. Its $150 billion outsourcing sector provides about three quarters of the country's annual revenue from the United States. The outsourcing companies send thousands of staff every year to work at client locations.

The Modi Government and India’s Economy  -- Most of the news in India today is not really about the economy. Instead, the dominant narrative is about social discord: The ongoing turmoil in universities in different parts of the country resulting from high-handed central government behaviour that has even resulted in the death of a Dalit student in Hyderabad. The unprecedented (and unwarranted) attack on students of Jawaharlal Nehru University in Delhi based on unsubstantiated charges of “sedition” for shouting supposedly “anti-national” slogans, an accusation based on doctored videos aired by compliant media and followed by physical attacks on students and teachers by lumpen elements that have gone unpunished. The spectacle of members of the Jat caste in Haryana on the rampage, destroying property and allegedly gang raping women while demanding reservation for their caste in government employment. Other threats of personal and sexual violence from those closely or loosely affiliated with the ruling coalition, freely directed at anyone who disagrees with the imposition of “Hindutva” ideology or speaks up for the rights of marginalised victims of discrimination. There are those who believe that much of this is tolerated and indeed encouraged by the Modi government so as to distract attention from other failures, most spectacularly the failures on the economic front. That may sound surprising. With so much bad news, the economy actually seems to be the one bright spot. India is now officially the world’s fastest growing economy, with GDP growth of 7.6 per cent in the past year. This is why it has been lauded as the new Asian tiger, or even elephant on steroids, in a global economy that otherwise is full of gloom and showing signs of impending crisis. The fact that India is a huge beneficiary of the low global oil prices is another reason for seeing it in a “sweet spot” that brings a lot of potential for growth.

Tulsi Gabbard, the first Hindu in the US Congress, on Modi, Hinduism, and linking Islam to terror  As one of the first two female combat veterans elected to US Congress and also its first Hindu and first American Samoan representative, Tulsi Gabbard wears the maverick label quite easily. And this week, the 34-year-old congresswoman from Hawaii reminded everyone of it, as she broke ranks with the Democratic party establishment and relinquished her post as vice chair of the Democratic National Committee on Feb. 29 to endorse Bernie Sanders for president.  Described last October by the Washington Post as “the Democrat that Republicans love and the DNC can’t control,” Gabbard offered a sample of her independent streak a year ago, when she spoke out of sync with her fellow Democrats and criticized US president Barack Obama’s handling of Islamic extremism—specifically over his unwillingness to brand ISIL an “Islamic” group. “[Obama] is completely missing the point of this radical Islamic ideology that’s fueling these people,” Gabbard told Fox News last February. Her viewpoint on this subject is all the more notable given her military experience in the Middle East, where she served in a field medical unit in Iraq and was a trainer for the Kuwait National Guard. But it also aligns nicely with the stance toward Islam held by India’s right-wing Bharatiya Janata Party (BJP) and its Hindu nationalist leader, Narendra Modi, with whom Gabbard shares a great rapport. Gabbard was among the few to criticize the US government’s decision to deny a visa to Modi before he was prime minister, in the wake of accusations that his government in the state of Gujarat did not do enough to save Muslims during the horrific communal violence carried out there in 2002. The Gujarat riots claimed more than 1,000 people, including close to 800 Muslims. Gabbard had called the no-visa decision a “great blunder.” And in November 2013, five months before Modi would win election as prime minister, Gabbard opposed a House resolution that called for “religious freedom and related human rights to be included in the United States-India Strategic Dialogue and for such issues to be raised directly with federal and state Indian government officials,” saying it would weaken the friendship between India and US.

Australia Finds Something Else to Export to China - WSJ: If they won’t take iron ore, give them an education and a vacation. That is the nimble Australian economy in a nutshell. The country whose reliance on Chinese demand to fuel growth has quickly adjusted to new realities. Australia reported surprisingly strong fourth-quarter gross domestic product Wednesday, rising 3% from a year earlier. That’s despite a colossal collapse in the prices of the country’s key exports. Or what used to be its key exports. The last two months of 2015 were the first time in nearly six years that Australia’s services exports—which include inbound tourism and education—outstripped exports of metal ores and minerals in value terms. And it isn’t just because the price of iron ore has fallen. Services exports have grown strongly, the main ingredient being a weak Australian dollar.
Chinese parents surely notice that a seat at the University of Melbourne is suddenly a bargain compared with the U.S. alternative. Data out Monday from the Australian government showed foreign enrollment at the country’s educational institutions hit 645,000 in 2015, up 25% from 2012, when the Australian dollar was near its peak strength.

EEU, SCO preparing ‘most ambitious trade agreement’ | Russia & India Report: Member countries of the Eurasian Economic Union (EEU) and the Shanghai Cooperation Organization (SCO) are working on an agreement for a continental economic partnership, said Alexey Likhachev, First Deputy Minister of Economic Development, during the first Russia-China Construction Forum. “In fact, we are now going to work on specific approaches to a continental economic partnership, a comprehensive agreement within the framework of the SCO. The SCO today includes countries such as China and Russia as well as many Central Asian countries. However, also involved in this work, on the one side, are Armenia and Belarus, which are members of the EEU, and on the other side, India and Pakistan. The latter two countries have already begun a not so easy, but in future, I think, successful path of accession to the Shanghai Cooperation Organization. Thus, about half the world’s population will be covered by this huge agreement,” he said. Likhachev noted that this agreement would provide for the freedom of movement of goods, facilitate trade turnover, and allow for the free movement of capital and investments. “This will be a comfortable environment for increasing the share of settlement payments being carried out in national currencies and, of course, preferential access to our services market, and first of all to construction and transport services,” he explained.

Australia's net foreign debt tips over $1 trillion as second widest current account deficit recorded - Australia's net foreign debt has expanded beyond $1 trillion for the first time on record. Net foreign debt in the December quarter came in at $1,006 billion — an increase of 2.8 per cent on the previous quarter's $971 billion. Figures released by the Australian Bureau of Statistics also show that the quarterly current account deficit has blown out to $21.1 billion, the second deepest deficit since the data was first recorded in 1959. The December quarter deficit widened 12 per cent from the $18.8 billion deficit reported in the September quarter. It is only $49 million less than the largest seasonally adjusted deficit, recorded in the June quarter last year. The crash in commodity prices drove exports down by 4.9 per cent, outweighing the 0.8 per cent in imports. Exports of non-rural goods — principally resources — fell by $2.7 billion to $45.5 billion on the back a 6 per cent slide in prices. The value of iron ore and mineral exports fell by 10 per cent, while export volumes were down 3 per cent. Coal exports fell by a similar amount.

New Zealand Says Laws To Implement TPP Will Be Passed Now, Despite US Uncertainties, And Won't Be Rolled Back Even If TPP Fails -- As Techdirt has noted, there is evidence from multiple sources that TPP will produce negligible economic benefits for most of the nations involved. Some governments are clearly well aware of this, because they are desperate to avoid an objective cost-benefit evaluation that would show that claims about TPP's value don't stack up. Even given that pig-headed determination to push the deal through, basic prudence would surely dictate that before making all the complex legislative changes required by TPP, countries should at least wait to see whether it's going to happen. Not in New Zealand, apparently, judging by this blog post by Kennedy Graham, a Member of Parliament for the Green party there:  Yesterday in Parliament I asked the Prime Minister if he is planning to change our laws to implement the Trans-Pacific Partnership Agreement (TPPA), even before it is clear if the US Congress will ratify it.  The Prime Minister said he was going to push ahead with changing our laws and wouldn't wait to see if the US was going to actually ratify the agreement.  If Congress doesn’t agree to the TPPA, or if the Japanese Parliament doesn’t, the whole deal falls apart. This is because the TPPA requires ratification by countries representing at least 85 percent of the total GDP, and that means the US and Japan have to be on board. We could find ourselves in a lose-lose situation where we've changed our laws to suit the TPPA, but the TPPA itself never comes into force so the tariffs and other trade barriers don't disappear for our exporters.  So then I asked, if the TPPA becomes null and void because the US Congress dumps it, will New Zealand reverse the changes to our laws that we’ll have already made?  The Prime Minister's answer was no. The Government won't delay introducing and passing legislation to ratify the TPPA, and then won't reverse the laws if it doesn’t go ahead.

Lagos's blackout nightmare: the suburb that's been in darkness for five years - When the electric transformer in his neighbourhood was vandalised five years ago, Akinnuoye Olagunju, then 21, didn’t think they would never have power again. Officials from the energy utility demanded that his father, as well as each of the 2,000 or so people in Oreta, pay a communal bribe to repair the damage: 2,000 naira ($10) each, a lot of money in this sleepy and impoverished fishing village. They refused. Five years later, the power is still off. Olagunju eventually moved out of his family house. “The heat was too much,” he says, now 27, and an official of the Lagos State Traffic Management Agency. “Everyone was having rashes and the NEPA people [energy officials] refused to come and fix anther one for free.”What’s worse is at night, under cover of darkness, “land grabbers” – young men who use physical intimidation to muscle into construction projects, extort scared residents and even sell land they don’t own – move in to squat and vandalise properties. Olagunju is one of the millions of people in Lagos whose collective power needs have effectively overwhelmed the grid – despite the fact that Nigeria is, by far, the largest oil producer in Africa. Even in parts of the city that are connected to the grid, power outages are regular and random. Many middle class families own an inverter; poorer Lagosians, like many of those in Ikorodu, resort to minuscule “I-pass-my-neighbour generators”, so called because they give the owners an illusion of superiority over their fellow residents, though a single tank can power a small household for only about three hours.

80% of Nigeria's revenue goes into debt servicing - IDB -: Nigeria spends 80 per cent of its annual revenue to service debts. This was disclosed on Tuesday by the Islamic Development‎ Bank The Resident Representatives of IDB in Nigeria, Abdallah Mohammed Kiliaki, who made this known during courtesy visit to the Chairman of the Senate Committee on Local and Foreign Debts, Senator Shehu sani, lamented that the amount is very high when compared to other countries. Kiliaki explained that ‎Nigeria’s Debts GDP ratio is low at 17 per cent, but resources being used to pay the debts are enormous going by percentages taken on yearly basis. He said: “‎My visit is very crucial because we need to look at the debt profile of a country before we give new a contractual sort of financing. “We also work closely with the International Monetary Fund and the World Bank to ensure that our financing has the required threshold of grant financing, which is normally 35 per cent, but at the same time there were financing that is not a burden to a country to the extent that the debt may not be sustainable. “When talking about unsustainable debt, it means that a country or a borrower is unable to pay. “So we take very serious note of that. “When you look at the debt GDP ratio of Nigeria, it is very low. “It is very low. “It is 17 per cent compared to Italy and other countries, which is about 150 per cent, while that of the United States is about 100 per cent.

Global Currency War? U.S. Officials Are Counting on a Continuing Truce - WSJ: Some investors were calling for a coordinated currency intervention when officials from the world’s top economies met recently. Instead they got an agreement to “consult closely” with each other on exchange-rate polices. No big deal? U.S. officials see it differently, framing the resolution as an important commitment that could help prevent a cascade of global exchange-rate depreciations. “There won’t be any surprises. We won’t see countries acting in a way that could trigger the kind of competitive devaluation that leads to potentially a currency war,” U.S. Treasury Secretary Jacob Lew said Tuesday. U.S. officials pushed the language early in the G-20 talks as part of their effort to preempt the type of volatility that has rocked markets over the last year amid historic capital outflows from emerging markets. Investors are particularly concerned China will revert to currency devaluation as its economy slows further. Meanwhile, Europe and Japan are charting unprecedented paths into negative-interest-rate territory in a bid to revive anemic output, policies that depreciate their currencies. The G-20 accord matters in a few ways. First, peer pressure may make governments think twice, with officials aware they will face a browbeating by fellow G-20 members if they embark on policies seen as stealing growth from other economies. Second, dialogue can help countries craft stronger policies as officials share experience and alternatives. Third, the commitment is meant to send a signal to markets about a consensus on the dangerous risks currency volatility represents to the global economy. And deliberations could help countries better communicate their intentions so policies aren’t misinterpreted by investors.

Opposing Corporate Coup, Campaigners Block Trade Talk Doors -- As European Union and U.S. negotiators arrived for the latest round of controversial trade talks in Brussels on Monday, opponents of the mammoth TransAtlantic Trade and Investment Partnership (TTIP) made their resistance known by blockading access to the negotiating site for hours.The demonstration highlighted growing, transcontinental opposition to the pro-corporate trade agreement, which would impact 800 million people and account for nearly 30 percent of the global economy. Beginning Monday morning, 30 Greenpeace activists from seven countries chained themselves at the entrances of a conference center where the meeting was due to take place. Some demonstrators climbed the front of the building to deploy a large banner depicting a 'dead-end' road sign that read: "TTIP: dead end trade deal." The blockade was lifted only after Belgian police secured a side entrance for negotiators. Demanding an end to the talks, Greenpeace vowed "to continue to take peaceful action against TTIP to defend democracy, people, and the environment."  "This trade deal is not about trade," said Greenpeace TTIP campaigner Susan Jehoram Cohen on Monday. "It's about the transfer of power from people to big business."

The movement against TTIP/CETA transatlantic agreements is strengthened - The pan-European movement against transatlantic agreements met at a conference this weekend in Kassel, Germany. The 500 representatives of the various initiatives of citizens and social organizations discussed the continuation of the resistance, the strategy and prospect of the movement. As a first step, they decided to organize a big demonstration on April 23 in Hanover, on the eve of Obama's visit, where he and Merkel will open the doors of the global exhibition of industry-the largest of its kind that is being conducted for many years in this city.  It was also decided to be organized a major conference of the movement at the beginning of the next year, on the formulation of alternatives to the current neoliberal policies for trade and economy. The movement of citizens Stop TTIP-CETA, aims not only to react and criticize the plans of its opponents, but also to present a complete and positive proposal to the societies on both sides of the Atlantic, on the possibilities of an alternative economy and a fair trade. The important fact for the movement was the failure of the 12th meeting of the negotiators in Brussels to find common ground, although Martin Schulz, the President of the European Parliament, had secured the majority through various tricks in order to proceed in a resolution for further negotiations. The pressure that has been exercised last October through large demonstrations in European capitals - 250,000 protesters participated in Berlin - and more than 3.2 million citizens' signatures, had a significant effect on this. This gives time to the movement to confront its biggest problem. That is, to convince the northern European unions of workers to stand against the agreements. Currently, only the German unions have taken a position against them. The movement has also failed so far to exert enough pressure on the Social Democrats MEPs, so that the majority of them in European level to vote against. Only the majority of Austrian and the British Social Democrat MEPs have stand against, so far.

Global Manufacturing Rolling Over: Over 70% Of Global PMIs Decline In February -- Moments ago we got the two latest monthly US manufacturing surveys in the form of the downbeat Markit PMI, according to which "the February data add to signs of distress in the US manufacturing economy", offset by the traditionally more optimistic ISM, whose chair Bradley Holcombe went so far as to say "US manufacturing may have found a bottom." Then overnight we also received the latest Markit manufacturing sentiment update from around the globe. Suffice it to say, it did not support Holcombe's cheerful "bottom hunting" outlook. As the below table shows, 28 regions have reported so far. Seven saw improvements in their manufacturing sectors in February, twenty recorded a weakening, and India was unchanged.This means that over 70% of the world saw manufacturing sentiment deteriorate in February compared to January.

Carriers ditching canal transits to save costs and soak up capacity - Carriers are ditching canal transits on backhaul trips from the US East Coast (USEC) to Asia and North Europe to Asia, opting to save fees and head via the southern tip of Africa instead. Soon they might start to do the same on fronthaul trips, moots Danish analysts SeaIntel. Since the end of October 2015, 115 vessels deployed on Asia-USEC and Asia-North Europe services have made the backhaul trip to Asia by sailing south of Africa instead of through the Suez and Panama Canals, according to SeaIntel analysis. Of the 115 voyages, three were vessels on Asia-North Europe, while the rest were deployed on Asia-USEC. There are plans by carriers to switch more Asia-North Europe sailings to the south of Africa routing in the coming weeks, the consultancy suggested. Now it seems likely some liners will look at adding an extra ship into their loops to make this canal-avoiding route on fronthaul trips too. CEO and partner in SeaIntel, Alan Murphy commented: “Carriers considering the longer route will be mindful of the potential loss of business as a result of the longer transit times, but it should be remembered that carriers introduced slowsteaming without major opposition from shippers, who seem to value lower freight rates over shorter transit times. Potentially, we may see carriers offering business class fast services through the Suez Canal, and economy fare around the south of Africa.” The SeaIntel analysis shows that 12 of the 19 dedicated Asia-North Europe services could sail south of Africa on the headhaul if 3.5 days was added to the transit time. The potential savings vary from service to service, ranging from $7.3m to $19.4m on an annualised basis, compared to the current routing through the Suez Canal. On top of this, with the extra 3.5 days transit time on the backhaul carriers could save around $5m per service in fuel savings, if the backhaul routing was rerouted to south of Africa, and this is in addition to the backhaul canal fee savings of approximately $20m a year per service. If instead carriers were to route the vessels through the Suez Canal on the backhaul, the extra 3.5 days of sailing time would not add any significant savings on the backhaul fuel consumption, due to the already low sailings speeds.

Global government debt to keep rising in 2016: S&P - The United States, China, Brazil and India are expected to keep world government debt rising this year, Standard and Poor's said on Monday, despite a small reduction in the annual global borrowing bill. The rating agency released a new report saying the stock of global government debt was expected to rise 2 percent to $42.4 trillion, with new borrowing of $6.7 trillion set to continue to outstrip the amounts being repaid. A number of major countries are behind the underlying trend. U.S. borrowing is expected to increase 8 percent or $163 billion year-on-year, while world number two economy China is forecast to ramp its borrowing 18 percent or $51 billion. The rise in China and in the likes of Brazil and India is set to drive year-on-year emerging market borrowing up 9.4 percent or $587 billion and lift the total EM total debt stock to $6.8 trillion by the end of the year. S&P said it saw the biggest absolute increase in annual borrowing in Brazil, which it expects will borrow $14 billion more in 2016 an increase of 8 percent. Poland and India are both forecast to see $12 billion increases which is an 38 percent rise for the former and 8 percent increase for the latter. In contrast, Japan, the euro zone and others such as Canada, the UK, Mexico and Ukraine are expected to see year-on-year drops in headline borrowing numbers.

Brazilian economy’s steep slide raises spectre of depression - Brazil’s economy contracted sharply in 2015 as businesses slashed investment plans and laid off more than 1.5 million workers, official data showed on Thursday, setting the stage for what could be the country’s deepest recession on record. Gross domestic product (GDP) shrank 3.8 per cent last year, capped by another steep contraction in the fourth quarter , according to Brazilian statistics agency IBGE. It was the worst performance of any G20 nation in 2015. It was also Brazil’s largest annual contraction since 1990, when the country was struggling with hyperinflation and a debt default. The outlook for 2016 is nearly as bad, with a central bank survey forecasting a 3.45 per cent contraction. Back-to-back annual drops of that magnitude would amount to the longest and deepest downturn since Brazil began keeping records in 1901. Brazil is “replicating the lost decade of the ‘80s in just two years,” Goldman Sachs economist Alberto Ramos said in a research report. He added that the economy was close to an outright depression given that its contraction began nearly two years ago. A paralyzing political crisis, rising inflation and interest rates and a sharp drop in prices of key commodity exports have formed a toxic cocktail for Latin America’s largest economy. The disastrous burst of a major mining dam and the biggest oil strike in 20 years added further strain in 2015. Last year’s contraction matched market expectations in a Reuters poll. Yields on interest rate futures rose after the data was published, also reflecting a split central bank decision to leave interest rates unchanged on Wednesday.

Brazil In "Dire Straits" As PMI Crashes To Record Lows -- “The Brazilian economic downturn took a real turn for the worse in February,"according to Markit's Composite PMI, which collapsed to record lows at 39.0. Despite a slightly less bad than expected GDP print this morning (stil down a record 5.89% YoY), hope was quickly extinguished as PMIs showed economic activity continuing to contract at a record pace, job losses accelerating, and manufacturing's collapse accelerating. As Market sums up, "With the global economy also showing signs of slowing, which will impact on external demand, it looks as if the downturn is set to continue to run its course in the coming months."

The Ontario Government Is Investigating Giving Everyone Free Money -  The idea of a basic income for everyone, provided by the government regardless of employment status, is coming back to Canada for the first time since Pierre Elliott Trudeau was in power.  The notion of a basic income for all citizens has circled the fringes of Canadian politics for years. Now, the Ontario Liberal Party has announced plans to investigate a basic income pilot project this year as part of the 2016 budget, which was published on Thursday.  In other words, every single person in one lucky Ontario community may soon receive a payday from the government for doing nothing at all, with no strings attached—sort of. The Liberal Party has indicated that the handout may come at the cost of “savings” in some social services currently provided by the government.  “We will be testing the potential of a basic income to determine if it will provide more consistent support to clients, streamline the delivery of income support, and achieve savings in other areas, such as health and housing supports,” Alissa von Bargen, a spokesperson for the Office of the Minister of Community and Social Services, wrote me in an email.  The plan is in its early stages, Bargen added, writing that the provincial government will discuss the idea with community stakeholders, researchers, and other levels of government over the course of the year.  Also in the 2016 budget is a plan to make university education free for students who come from households making less than $50,000 CAD per year, through a grants program.

Big banks urge Ottawa to spend $20-billion in rapid stimulus - Two of Canada’s big banks want the federal government to pump $20-billion into economic stimulus for a fast jolt to the flagging economy. Bank of Nova Scotia urged Ottawa to spend that much by mid-2017. Such a measure, the bank said, would equal 1 per cent of gross domestic product and would play into its new economic forecast for GDP growth of 1.3 per cent this year and 2.5 per cent in 2017. Canadian Imperial Bank of Commerce called for $20-billion in the government’s first year alone, saying the pledges on the table just aren’t enough. The Liberal government of Prime Minister Justin Trudeau has indeed promised to spend billions in infrastructure stimulus. But, beyond the recent campaign pledges, there have been no details on the final amount, the targets and the timeline. And remember, the fiscal outlook has changed rapidly, with Ottawa now forecasting a deficit of $18-billion even without their promised spending. Canadians will get the details when Finance Minister Bill Morneau unveils his budget on March 22. While Scotiabank and CIBC are the first to have specific calls, other bank economists have said further stimulus would be welcome, and that the government certainly has the fiscal room to accommodate it.

World's super rich keep buying up luxury goods in face of wealth decline - The global super rich continued to splash out on super-yachts and luxury goods last year, despite a decline in their overall wealth in the wake of financial market turmoil. According to the latest wealth report from estate agents Knight Frank, published on Wednesday, sales of super-yachts – boats longer than 24 metres – soared 40% in 2015, with the rich roaring off to ever more far-flung destinations, such as the Antarctic and outposts in Asia, rather than their traditional ports of call in the Mediterranean and the Caribbean.  The number of ultra rich – people with $30m (£22m) or more in assets – fell 3% last year. There are now 187,500 with assets in excess of that benchmark, down from from 193,100 in 2014. This was the first decline since the financial crisis. Between them, they controlled $19.3tn in assets, down from $22tn the year before. This reflected the rollercoaster global stock markets, the slump in commodity prices and slowing economic growth in China and other countries. The number of dollar millionaires around the globe also fell from 13.6 million in 2014 to 13.3 million last year. Together, they hold assets worth $66tn – more than the value of all global shares added together. But the report believes that the decline in the number of millionaires is just a blip, and predicts that by 2025, there will be more than 18 million of them. So-called investments of passion such as art, cars, stamps and jewellery remain popular among the super rich. Knight Frank’s art index rose by a muted 4% last year, but a number of records were set in the world’s auction houses.

Ukraine bans officials from criticizing government | Reuters: Ukraine banned government officials on Tuesday from publicly criticizing the work of state institutions and their colleagues, after damaging disclosures last month that highlighted slow progress in fighting corruption. The move immediately drew criticism from some civil servants who saw it as a blow to freedom of speech at odds with the embattled government's Western-backed reform drive. The rule on "loyalty" is one of several outlined in a new ethics code that civil servants must follow or face disciplinary action, according to a decree posted on the government website. "The government has decided to introduce standards of ethical conduct for civil servants to restore public faith in the work of the state bodies and officials," the decree said. Government employees should "avoid any public criticisms of the work of state institutions and their officials," the code stipulates, alongside rules on the need for transparency and integrity.

NATO Bombs Good, Russian Ones Barbaric – German Politician Sums up Merkel’s Policy on Syria  - YouTube - auf Deutsche, with subtitles

Greece seeks to stem migrant flow as thousands trapped by border limits | Reuters: Greece moved to slow the flow of migrants from its islands to the mainland on Friday as thousands of homeless refugees were trapped in the country by border limits imposed along a Balkan route to richer nations in northern Europe. From its northern frontier with Macedonia to its port of Piraeus in the south, Greece was inundated with refugees and migrants after border shutdowns cascaded through the Balkans, stranding at least 20,000 in the country. At Idomeni, a small community on the border with Macedonia, Reuters witnesses saw hundreds of families walking towards the frontier to join an estimated 3,000 more at a makeshift camp where many pitched tents in a field close to razor wire fence. More than 500 km further south, hundreds of people were temporarily accommodated at a disused airport west of Athens. Sleeping mats were strewn across the terminal among biscuit wrappers as many women sat on the floor, some weeping. "Planes bombed our homes, it was dangerous to stay there," said mother of three Rajiya Zara, 38, nine months pregnant. "I'm afraid for my children." Between 300 and 400 people refused to stay at the airport, and took off on their own. "Help Us," a large piece of paper held by one said. "We are human, open the borders", read another, scrawled on a sleeping mat.

Refugees in Greece: No way out -  Economist - Khaled, a 28-year-old truck driver, is waiting for a smuggler to help him cross Greece’s northern border with Macedonia, closed since February 21st to Afghan migrants like him.  “We mustn’t get stuck in Greece,” he says firmly. That may be hard to avoid. Last week Austria restricted arrivals to 3,200 per day, of whom 80 may apply for asylum. Macedonia, Serbia and Croatia are clamping down too. By February 23rd a backlog of 4,000 migrants had gathered at the Greek-Macedonian frontier; Greek police turned back dozens of buses carrying new arrivals. On February 24th ten countries along the migration route met in Vienna to discuss further steps. Greece was not invited. At the port of Piraeus, where ferries bring the migrants who arrive in Greece’s Aegean islands, aid workers urged Afghans to remain in government-run reception facilities rather than attempt the journey north. For months experts have warned that if northern Europe restricts refugee flows without an overall plan for handling migration, Greece faces disaster. The United Nations predicts 1m arrivals this year. Alexis Tsipras, the prime minister, worries that Greece will become “a black box” for migrants. As razor wire goes up across the Balkans, his fears may be about to come true. The crisis could hardly have come at worse moment for Mr Tsipras. His left-wing Syriza government faces a revolt by lawyers, doctors and farmers against reforms demanded by Greece’s international creditors. Farmers angry at moves to raise their income taxes to the same level as other Greeks blocked highways with their tractors, closing border crossings with Bulgaria and Turkey. A meeting on February 22nd with Mr Tsipras proved fruitless. Two days later the supreme court prosecutor threatened to investigate protest leaders; the blockades were quickly removed.

Refugee crisis: European leaders demand urgent support for Greece - Aid agencies and NGOs have said Europe’s “unconscionable” response to the refugee crisis is courting humanitarian disaster, as Brussels scrambled to prepare emergency summits and desperate scenes unfolded across the continent, from Greece’s border with Macedonia to a makeshift camp outside Calais. With the EU entering what many see as a make-or-break phase in tackling the crisis, the bloc’s most senior leaders called for urgent action to support Greece as at least 8,500 refugees and migrants remained trapped without permanent shelter on the country’s closed northern border with Macedonia. Frontex, the EU’s border control agency, said 30 times as many migrants entered Europe in January and February as in the same two months of last year, and the UN’s refugee agency announced that 131,724 people had crossed the Mediterranean – the vast majority of them reaching Greece – so far in 2016, almost as many as made the journey in the first six months of 2015. The UNHCR said the continent stood “on the cusp of a largely self-induced humanitarian crisis”, with governments “not working together despite agreements … and country after country imposing new border restrictions”. In a scathing statement, Human Rights Watch condemned the EU’s “utter failure to respond collectively and compassionately to refugee flows”. Germany’s chancellor, Angela Merkel, said Europe must deal decisively with “the difficult situation” in Greece, while the European council president, Donald Tusk, demanded support for Athens. Readiness to stand by Greece was “a test of our Europeanness”, Tusk said.

Greece Scrambles to Shelter Migrants as Neighbors Shut Their Gates— Terminal E2 in Piraeus, the port city near Athens, is typically a cheerful holding spot for tourists waiting to board ferries for sunny Greek island vacations. But on a recent day, nearly 1,000 exhausted migrants who had just crossed the Aegean Sea from Turkey sprawled across the sweat-soaked floor and on the asphalt outside, waiting to hear if they could continue toward Germany. The answer came soon enough: Syrians and Iraqis could board buses for Greece’s northern frontier with Macedonia, which was already choked with nearly 10,000 migrants after Macedonia sealed its border over the weekend. Everyone else — including Afghans, who made up the bulk of the crowd — would be shuttled to one of a rapidly growing number of refugee camps being set up around Athens. With thousands of migrants still arriving each day, and thousands more being turned away from Greece’s northern border, the rough outskirts of Athens, Piraeus and the northern city of Thessaloniki near the frontier are becoming the new hot spots to hold them. Camps have been opening at the rate of nearly one a day, including at Greece’s dilapidated former Olympic Stadium and in mothballed military bases, to house more than 25,000 people who cannot move forward because of the new border restrictions and because they cannot or will not turn back. The government is planning to open additional camps between Athens and northern Greece to accommodate an expected surge. Following scenes of chaos at the Macedonian border, where migrants on Monday broke down part of a razor-wire fence, the migration minister, Ioannis Mouzalas, warned Wednesday that more than 100,000 migrants would soon be stuck in Greece. The crisis could endure for up to three years, he added, as Greece becomes a reception country — rather than a transit country — for asylum seekers.

Tsipras Rages, Greece "Will Not Become A Warehouse Of Souls" -- European Council President Donald Turk is visiting Athens today to talk about the Refugee Crisis. He met with Prime Minister  Alexisi Tsipras and both men agreed that Unilateral actions by European Union member states to deal with the migrant crisis troubling the bloc is hurting solidarity and must stop. “We will not allow Greece to be turned into a warehouse of souls! We will accept permanently only so many migrants [a rate] corresponding to our population in the Europe of 28,” Tsipras said during a joint press conference with Tusk and stressed that “Greece already assumed a disproportional weight in the refugee crisis.”  Criticizing a “weak Europe” that cannot solve the problem, Tsipras said that “We ask that unilateral actions stop in Europe. Greece will demand that all countries respect the European treaty and that there will be sanctions for those that do not.” “We will make every effort to apply the Schenghen treaty and the Geneva convention. We will not push back people in the sea, risking the lives of children.” EUCO President Donald Tusk sent first of all a message to the millions refugees and migrants awaiting in Turkey to cross over to Europe. “Here from Athens, I want to appeal to all potential illegal economic migrants wherever you are from: Do not come to Europe. Do not believe the smugglers. Do not risk your lives and your money. It is all for nothing. Greece or any other European country will no longer be a transit country. The Schengen rules will enter into force again.”

EU's Tusk warns illegal economic migrants: Do not come here -- European Council President Donald Tusk has warned illegal economic migrants against coming to Europe, during a new push to solve the EU migrant crisis. He said illegal economic migrants were risking "lives and money" for nothing. Mr Tusk is visiting Greece and Turkey to try to secure agreement on reducing the flow of migrants travelling west. More than 25,000 migrants have been left stranded in Greece by a tightening of border controls to the north, raising fears of a humanitarian crisis. On Thursday, a group of migrants blocked a railway line on the Greek side of the border with Macedonia to protest at the restrictions. The restrictions were imposed after Austria and several Balkan countries decided only to allow Syrian and Iraqi migrants across their frontiers. The move effectively barred passage to thousands of people seeking to reach western Europe illegally, including Afghans as well as some more likely to be regarded as economic migrants. Separately, UK Prime Minister David Cameron and French President Francois Hollande are meeting to discuss security and migration issues, including conditions at the French port of Calais, where thousands of migrants hoping to enter the UK have been living rough.

Germany opens its doors to Yazidi women and children enslaved by Isis - The shelter, in a sleepy village hundreds of miles outside Stuttgart, is one of several dozen that has opened across the German region of Baden-Württemberg since spring last year as part of a special-quota project designed to support some of the estimated 2,500 women and children who have escaped after being held hostage by Islamic State. Security at the shelter is tight. The only clue as to who is inside comes when a teenage boy shouts instructions in Kurdish to a child attempting to ride a bike in the empty car park. “These women and children have been enslaved by Isis, who believe they are their owners. They are victims and witnesses to war crimes, so we protect them by running our mission in a secret, secure way,” The first women and children began arriving in Baden-Württemberg last March. As well as being one of Germany’s wealthiest regions, it is also home to a large number of the 50,000 Kurdish Yazidis, a persecuted minority group from northern Iraq. Last year, the federal parliament issued 1,100 resident visas on humanitarian grounds, and set up an office with a budget of €95m (£74m) to allocate places to women and children kidnapped by Isis. In a number of murderous dawn attacks that began on 3 August 2014, Isis militants laid siege to the areas around the ancient city of Sinjar, displacing roughly 300,000 people and committing what the UN described as possible genocide against Iraq’s indigenous Yazidi population. Activists say more than 6,000 women and children were kidnapped by militants, many experiencing horrific abuse.

Germany's Merkel blasts 'repulsive' mob who screamed at migrants - German chancellor Angela Merkel has said the actions of protesters who shouted abuse at a bus full of migrants were "repulsive" and "unjustifiable". Video of about 100 people trying to block migrants from entering a shelter in the eastern village of Clausnitz on February 18 prompted concern about growing radicalisation in Germany amid the influx of migrants.  Mrs Merkel told public television ARD that Germans who questioned her actions in the refugee crisis "aren't convinced yet, but I think that I can convince them if the issue is resolved". She said more needed to be done to solve the problems causing people to flee to Europe, but added that those coming to Germany must abide by its laws.

Schengen collapse will wipe €28bn from Europe's economies: Europe could see €28bn wiped off the value of its economies as it faces the imminent collapse of the Schengen system of open borders, according to a leading investment bank. Up to 0.2pc of the European Union's GDP could be erased as a result of the spiralling costs of cross-border travel and disruption to internal trade that would return in a post-Schengen Europe, Morgan Stanley warned. The bank's analysts estimate a 5pc surge in the cost of cross-border travel, while trade flows between countries could fall by up to 20pc as border checks and waiting times are reintroduced to Europe.   Unlike the process of negotiating an EU exit for Britain, Morgan Stanley said a chaotic dismantling of the 30-year old passport-free zone would plunge the EU into political turmoil. "Contrary to the Brexit process, which would follow an orderly legal procedure if implemented, the risk surrounding a suspension of Schengen is that it could lead to disorderly political developments related to border controls, which in turn could cause a material hit to private-sector confidence", said Elga Bartsch, at Morgan Stanley. "This uncertainty would likely lead to a material decline in investment spending, especially if the suspension of Schengen coincided with an exit of the UK. Morgan Stanley's forecast is more than twice the economic costs estimated by the European Commission, which stands at 0.1pc of EU GDP. Separate analysis from a think-tank linked to the French government estimated that €110bn would be wiped off the EU over a decade. The prospect of a full-blown dismantling of the passport-free zone - where people and trade can move without restriction between 26 countries - is looking increasingly likely as Brussels buckles under the pressure of an unprecedented influx of refugees.

Euro zone January unemployment at lowest rate since August 2011 | Reuters: Euro zone unemployment dipped for a third consecutive month in January, against market expectations of an unchanged reading, dropping to its lowest level since August 2011. The EU statistics agency Eurostat reported on Tuesday that the jobless rate in January was 10.3 percent, from 10.4 percent in December 2015. The average expectation in a Reuters poll of 44 economists was for an unchanged reading, with forecasts ranging from 10.2 to 10.5 percent. Euro zone unemployment, a lagging economic indicator, peaked at 12.1 percent in the first half of 2013. Eurostat estimated that 16.647 million people were unemployed in the euro area in January and 21.789 million in the EU's 28 members. That represented decreases of respectively 105,000 and 163,000 from December 2015 and of 1.445 million and 2.034 million from a year earlier. The unemployment rate fell in 24 member states, was stable in Estonia while increasing in Latvia, Austria and Finland. The largest decreases were in Spain, Slovakia, Ireland and Portugal.

Eurozone retail sales climb for 3rd straight month - Eurozone retail sales rose more strongly than expected in January, and for the third straight month, an indication that consumers benefiting from lower energy prices and falling unemployment have continued to provide some support for the currency area's modest economic recovery. Separately, surveys of purchasing managers indicated that economic activity slowed less sharply than first estimated in February, although businesses cut their prices more sharply than in previous months. The eurozone economy slowed in the second half of last year as demand for the currency area's exports from China and other large developing economies slowed. That left consumers to drive economic growth, and the January rise in retail sales suggests they continued to do so as 2016 got underway. The European Union's statistics agency said sales were 0.4% higher than in December, and 2.0% higher than in the first month of 2015. Eurostat also doubled its estimate of month-to-month sales growth for December, to 0.6%. Economists surveyed by The Wall Street Journal last week had forecast a 0.1% month-to-month rise. Lower energy prices over the last 18 months have created a headache for the European Central Bank, which saw consumer prices fall in February from a year earlier, leaving it further away from its inflation target. But lower oil prices have left households with more cash to spend on other goods and services that are produced within the eurozone. Spending power has also been boosted by a steady, if slow, decline in the unemployment rate, with the number of people without jobs falling by 105,000 in January alone. However, consumer spending may not prove strong enough to offset the impact of weakness in other parts of the global economy. A survey of 5,000 manufacturing companies and service providers across the eurozone recorded a second straight month of slowing activity in February, although slightly shallower than first estimated. Data firm Markit said its composite Purchasing Managers Index fell to 53.3 from 53.6, its lowest level in 13 months, having earlier estimated it declined to 53.0.

Euro zone factory growth at one-year low in February - PMI - Euro zone manufacturing activity expanded at its weakest pace for a year last month as deep price discounting failed to put a floor under slowing order growth, a survey showed on Tuesday. Although the overall expansion was slightly better than previously thought, Markit's Purchasing Managers' Index (PMI) will make gloomy reading for the European Central Bank, coming little more than a week before its next policy setting meeting. "Concerns are growing that the region is facing yet another year of sluggish growth in 2016, or even another downturn. Lacklustre domestic demand is being compounded by a worsening global picture," said Chris Williamson, Markit's chief economist. Markit's manufacturing PMI for the euro zone dropped to 51.2 from January's 52.3. That was slightly better than an earlier flash estimate of 51.0 and above the 50 mark that separates growth from contraction. A sub-index measuring output, which feeds into Thursday's composite PMI and is seen as a good growth barometer, also fell to a one-year low. It registered 52.3 compared to January's 53.4, up from the 51.9 flash estimate. Worryingly for policymakers, the slowdown came as factories cut prices at the steepest rate since mid-2013 -- the output price index slumped to 47.6 from 48.3. Input prices fell at their fastest rate since July 2009.

Every German Bond Yield Through Eight Years Is at a Record Low -- European bond bulls who drove benchmark German debt yields through eight years to record lows were vindicated after data showed euro-area consumer prices dropped this month by the most in a year. Slow price growth has fueled the prospect of the European Central Bank expanding its monetary stimulus program in March to boost growth and inflation. German bonds have been supported this year as a slide in commodities and stocks prompts investors to seek haven assets. Ten-year bund yields declined to their lowest since April on Monday. The annual inflation rate in the 19-nation bloc fell to minus 0.2 percent from a reading of 0.3 percent in January and compared with the zero percent forecast in a Bloomberg survey of economists. “One reason bunds have done well is the decline in oil prices that have led inflation expectations to drop quite significantly and is pushing the ECB into doing more easing,” said“The next driver for bunds will be the coming ECB meeting and how aggressive they are in terms of policy easing.” Germany’s 10-year bund yield fell four basis points, or 0.04 percentage point, to 0.11 percent as of 4:09 p.m. in London, and touched 0.10 percent, its lowest since April 22. The 0.5 percent security due February 2026 rose 0.43, or 4.30 euros per 1,000-euro ($1,088) face amount, to 103.92. The nation’s 10-year yield has dropped 52 basis points this year, set for the biggest two-month decline since May 2012. The yield on German nine-year securities dropped below zero on Monday for the first time since April. 

Mervyn King: new financial crisis is 'certain' without reform of banks - Another financial crisis is “certain” and will come sooner rather than later, the former Bank of England governor has warned.Mervyn King, who headed the bank between 2003 and 2013, believes the world economy will soon face another crash as regulators have failed to reform banking. He has also claimed that the 2008 crisis was the fault of the financial system, not individual greedy bankers, in his new book, The End Of Alchemy: Money, Banking And The Future Of The Global Economy, The Global Economy, serialised in The Telegraph. “Without reform of the financial system, another crisis is certain, and the failure ... to tackle the disequilibrium in the world economy makes it likely that it will come sooner rather than later,” Lord King wrote. He added that global central banks were caught in a “prisoner’s dilemma” - unable to raise interest rates for fear of stifling the economic recovery, the newspaper reported. A remark from a Chinese colleague who said the west had not got the hang of money and banking was the inspiration for his book. Lord King, 67, said without understanding what caused the crash, politicians and bankers would be unable to prevent another, and lays the blame at the door of a broken financial system. He said: “The crisis was a failure of a system, and the ideas that underpinned it, not of individual policymakers or bankers, incompetent and greedy though some of them undoubtedly were.”

European sovereign debt crisis could cause Eurozone implosion - ex-BoE chief - Political instability arising from European states’ crippling debt burdens may lead to the Eurozone’s implosion, ex-Bank of England (BoE) governor Mervyn King has said. The former central banker and staunch Euroskeptic made the prediction in his latest book, The End of Alchemy: Banking, the Global Economy and the Future of Money. The newly published work, which is being serialized in the Telegraph, calls for tighter Eurozone integration and significant debt write-offs for Europe’s most austerity-stricken states. However, it also acknowledges such a policy path is dependent on stronger EU states’ willingness to bail out their debt-shackled neighbors. In its pages, King argues Europe’s monetary union has created a “dangerous” cocktail of conflicts between bureaucratic EU elites and sovereign states. He predicts that peripheral EU nations will grow weary of the effort needed to sustain membership of the Eurozone, despite the fact an exit could breed chaos and plummeting living standards. “If the alternative is crushing austerity, continuing mass unemployment, and no end in sight to the burden of debt, then leaving the euro area may be the only way to plot a route back to economic growth and full employment,” he warns. King's book examines the future of banking and a range of imbalances in the global economy. The Ex-BoE chief argues that the world will face future financial crises because the issues that created the 2007/08 crash have not been resolved.

Mervyn King: the eurozone is doomed -- The eurozone is doomed to fail and will lurch from crisis to crisis unless it is broken up, according to the former governor of the Bank of England. In his new book, Lord King claims that steps towards fiscal union will not quell tensions in the 19-nation bloc and could even tear it apart.  He warns of a looming “economic [and] political crisis” triggered by endless bail-outs, austerity demands and pressure from the “elites in Europe” and the US to create “a transfer union” to solve the eurozone’s woes.

In the second extract of The Telegraph’s exclusive serialisation, Lord King warns that this has “sowed the seeds of division” in the bloc and created support for populist parties. Further steps towards political union, where countries are forced to cede sovereignty and yield to Brussels diktats, could spark a public backlash. “It will lead to not only an economic but [also] a political crisis,” he says. “Monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy at the national level on the other. This is extraordinarily dangerous.”

Fresh recession will cause eurozone collapse, warns Swiss bank : A recession in Europe could lead to the collapse of the eurozone, as the single currency would buckle under the political turmoil unleashed by a fresh downturn, a leading investment bank has warned. In a research note titled "Close to the edge", economists at Swiss bank Credit Suisse warned the fate of monetary union hangs in the balance if Europe's policymakers are unable to ward off another global slump and quell anti-euro populism. "The viability of the euro is contingent on the current recovery," said Peter Foley at Credit Suisse. "If the euro area were to relapse back into recession, it is not clear it would endure." Although the bloc's nascent recovery was likely to persist in the coming months, Credit Suisse said there were worrying signs of deterioration emanating from Europe's economies. These include heightened credit stress in the banking sector and market volatility.

Central banks: from omnipotence to impotence? Bruegel - Like the price of financial assets, the market assessment of the capacity of central banks to achieve their price stability objective fluctuates between omnipotence and impotence. We do not agree with this binary view of the world and we examine in this post the case of the European Central Bank (ECB). We argue that the ECB still has some instruments left. It should consider moving beyond increasing sovereign debt purchases, which would be ineffective and pose risks. More important is to step up work on structural and fiscal policies.

The preordained disappearance of cash - Michel Santi  - In Sweden, the Church has had to adapt because its followers are carrying less and less cash around with them. It has therefore now become commonplace for churches in places like Stockholm to display their bank details on giant screens during Sunday services, so that church-goers can whip out their phones and make an instant payment using an app – “Swish” – which has been set up by the country’s banks and which is now seriously competing with credit cards. This comes with the greatest of satisfaction for the Church’s finances as it is being overwhelmed with donations that have now been made easier than ever thanks to this electronic service. In fact, Sweden is the pioneering nation in terms of electronic payment services, which is masterfully demonstrating that cash is on its way to becoming a barbarous relic of the past, as I have been saying since 2013. Even homeless people now have card readers enabling them to receive charity, in a country where cash now makes up only 2% of its entire economy. Sweden has in fact become a country where retailers don’t think twice about contacting the police if a customer tries to make a substantial payment in cash. Because, as the authorities are essentially saying, “paying in cash is suspicious…”

Bavarian Banks Hoard Cash in Revolt Against ECB Negative Interest Rates -- Wolf Richter - The Association of Bavarian Savings Banks, which represents 71 savings banks in the German State of Bavaria, has had it with the ECB’s negative deposit-rate absurdity, and it’s now instigating a palace revolt.  In 2014, when negative interest rates first hit Eurozone banks and ricocheted out from there, Germans called it “punishment interest” (Strafzinsen) because these rates were designed to flog banks and savers until their mood improves. But inexplicably, their mood hasn’t improved.  Bank stocks have gotten clobbered as their profits have gotten hit by the negative interest rate environment. Stocks of Eurozone companies in general have come down hard, and the Eurozone economy simply hasn’t responded very well though the ECB is flogging it on a daily basis with its punishment interest. And so Bavarian savings banks have had enough. The Frankfurter Algemeine has obtained a memo by the Association of Bavarian Savings Banks that openly encourages its member banks to stash cash in their own vaults rather than depositing it at the ECB and paying the penalty interest of 0.3% to the ECB on these deposits.

Offshore Ireland Implicated in Bank Collapse, Once Again - We have written a great deal about the role of Ireland and the Irish Financial Services Centre (IFSC) and its role as an offshore haven, posing risks not just for tax but for global financial stability too. As Prof. Jim Stewart and others have pointed out: Ireland played an important role in the global financial crisis that emerged in 2007, and in the aftershocks, under a spectacularly tax haven mentality. Now an excellent piece of digging by two Bloomberg reporters, Donal Griffin and Joe Brennan, takes the story forwards with a tale about Vneshprombank Ltd., a Moscow financial institution that has just had its banking licence revoked after Russian regulators found a $2.5 billion hole in its balance sheet, and a related Irish special purpose vehicle called VPB Funding Ltd.  “The Irish capital, home of Europe’s costliest banking meltdown, remains a hub for the sort of opaque operations that contributed to the global financial crisis, threatening risks that policy makers are seeking to stamp out. “There’s concern that Irish SPVs are exporting risk to other financial systems around the world and could have contagion effects,’’ said Shaen Corbet, a lecturer in finance at Dublin City University.“ This Bloomberg graph underlines the point:

The Implications of Brexit for the Rest of the EU - Britain will hold a referendum on whether to stay or leave the EU. Current polls point a very close vote. This column argues that Brexit could have serious economic and political consequences for the rest of the EU. The economic and financial frictions could be limited if both parties try to strike an amicable separation agreement. But political considerations, including the desire of the rest of the EU to prevent Brexit emulation, might result in a far more damaging outcome, not just for the UK.

Fog in the Channel: Brexit through the eyes of international trade - In 2014, total UK trade was about 900 bn euros, with a total trade deficit of 139.5 bn. The UK imported predominantly from the EU, with which it had a trade deficit of 93 bn euro, and exported mostly to non-EU countries, with which it also had a trade deficit of 46bn. EU countries accounted for 53% of UK imports and 48% of UK exports. All but 2 of the top-10 trading partners of the UK belong to the European Union. The UK’s main trading partner in 2014 was Germany, which accounted for 12.3% of all UK trade in that year. In second position was the United States (9.5%), followed by the Netherlands (7.5%), China (7.3%) and France (5.9%). Together, these 10 countries accounted for 61.4% of UK trade in 2014. The UK was a net importer from 7 of its 10 main trading partners. The biggest bilateral imbalance in 2014 was the 36.3 bn euro trade deficit recorded with Germany, followed by the 26.2 bn trade deficit with China and the 12.3 bn deficit with the Netherlands. The biggest surplus position (16.5 bn) was recorded with Switzerland, followed by a 7.5bn surplus with Ireland and a 5.1bn surplus with the US. Trade policy for EU Member States is conducted exclusively at the EU level. In case of Brexit, all the EU trade agreements of which the UK is automatically part as an EU member state would need to be re-negotiated on a bilateral basis.

G20: Brexit would be a 'shock' - Feb. 27, 2016: The world economy will suffer a "shock" if Britain leaves the European Union, finance ministers and central bankers have warned. "Downside risks and vulnerabilities have risen, against the backdrop of volatile capital flows, a large drop of commodity prices, escalated geopolitical tensions, the shock of a potential UK exit from the European Union and a large and increasing number of refugees in some regions," policymakers said in a joint communique at the end of a two-day G20 meeting in Shanghai. The U.K. will hold a referendum on membership in the EU on June 23, and markets are becoming increasingly concerned about the impact on trade, jobs and investment if voters choose to leave the bloc of 500 million people. U.K. Chancellor George Osborne described the prospect of a UK exit as "deadly serious." "The financial leaders of the world's biggest countries have given their unanimous verdict. They say that a British exit from the EU would be a shock to the world economy," Osborne told the BBC in Shanghai. "If it's a shock to the world economy, imagine what it would do to Britain."   Some prominent politicians, including London mayor Boris Johnson, have backed the Brexit campaign.. Opinion polls show voters in Europe's second biggest economy are deeply divided over the issue, and many remain undecided.

Would Brexit lead to “up to a decade or more of uncertainty”? - The government has today published its official assessment of how the withdrawal process from the EU would look in the event of a vote in favour of Brexit on June 23. The report’s central claim that negotiating the UK’s exit from the EU, the UK’s future arrangements with the EU, and finally UK trade deals with countries outside of the EU would likely take around ten years – “up to a decade or more of uncertainty” – has made headlines and been widely criticised by Leave campaigners. So how credible is this claim?  Looking at some examples of previous trade negotiations, be they between the EU and other global economies or exclusively between non-EU parties, we see that this process can be very drawn out, with years passing between the start of negotiations and the entry of the FTA into force. The fastest negotiations the EU has concluded are with Mexico and South Korea at just over four years, but the agreement between the EU and Switzerland took the best part of a decade. Looking at the experience of non-EU negotiations, the US-Australia FTA was negotiated in just under four years, but the Canada-Korea deal took over 10 years, suggesting the EU is not uniquely sluggish.

Osborne’s desire to further cut spending makes little sense - Martin Wolf - George Osborne wants to burnish his image as an iron chancellor of the exchequer. He has already committed to achieving a fiscal surplus by 2019-20. He now suggests that further tightening of fiscal policy may be needed in response to the “storm clouds” he identified when in Shanghai last week. Mr Osborne may be preparing for bad news in his Budget on March 16. The question is whether his plan makes sense. The answer is no. The fiscal objective is itself questionable. The aim is to achieve an overall surplus, unless growth drops below 1 per cent. This is to offer respite in the event of a recession. Just compare what the government would do if a deficit opened up while the economy grew 1.1 per cent for three years (namely, tighten policy), with what it would do if it grew 3 per cent, 0.9 per cent and then 2 per cent (not tighten at all in the second year). Why should an overall fiscal surplus be important, anyway? The answer is that it is a quicker way to lower the ratio of debt to gross domestic product. But that would only be true if achieving the surplus did not itself slow the growth of GDP. As the Institute for Fiscal Studies notes in its Green Budget, “running a surplus is not necessary to bring debt down as a share of national income”. Moreover, if the government is in a position to invest by borrowing at low real interest rates, as now, it makes sense to do so. The government must worry about its balance sheet, not just its debt. Yet the absurdity of the target is brought out better still by the comments Mr Osborne made last week. He said, first, “this country can only afford what it can afford”; second, “the economy is smaller than we thought”; third, the UK must tighten further, to ensure “economic security”; and, finally, “the last time we didn’t [live within our means] we were right in the front rank of nations facing economic crisis”. This is bad history and worse economics. It is a myth that the UK’s crisis was due to a failure of the government to live within its means. The truth is the opposite. The government did not have a fiscal crisis. The country had a financial crisis whose economic results were cushioned by the government’s deficits.

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