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

Saturday, April 16, 2016

week ending Apr 16

What in the World’s Going on with Banks this Week? Emergency Meetings, Summits, Crashing EU Banks... Just about every major banker and finance minister in the world is meeting in Washington, D.C., this week, following two rushed, secretive meetings of the Federal Reserve and another instantaneous and rare meeting between the Fed Chair and the president of the United States. These and other emergency bank meetings around the world cause one to wonder what is going down. Let’s start with a bullet list of the week’s big-bank events:

  • The Federal Reserve Board of Governors just held an “expedited special meeting” on Monday in closed-door session.
  • The White House made an immediate announcement that the president was going to meet with Fed Chair Janet Yellen right after Monday’s special meeting and that Vice President Biden would be joining them.
  • The Federal Reserve very shortly posted an announcement of another expedited closed-door meeting for Tuesday for the specific purpose of “bank supervision.”
  • A G-20 meeting of finance ministers and central-bank heads starts in Washington, D.C., on Tuesday, too, and continues through Wednesday.
  • Then on Thursday the World Bank and the International Monetary Fund meet in Washington.
  • The Federal Reserve Bank of Atlanta just revised US GDP growth for the first quarter to the precipice of recession at 0.1%.
  • US banks are expected this coming week to report their worst quarter financially since the start of the Great Recession.
  • The press stated that the German government will sue the European Central Bank if it launches a more aggressive and populist form of quantitative easing, often called “helicopter money.”

The Fed Just Held An Emergency Meeting To Discuss Capital Markets - As we reported on Friday morning, in a surprise announcement the Fed revealed under its "Government in the Sunshine" protocol that it would hold a closed meeting under expedited procedures in which it would review the "advance and discount rates to be charged by Federal Reserve Banks." The last time such a meeting took place was less than a month before the Fed hiked rates for the first time in years. What took place during the meeting will remain a mystery, however what made it particularly interesting is that just hours later it was followed by another impromptu closed-door session, this time between president Obama and Janet Yellen. What information was exchanged during the follow up meeting is also a secret, although the White House was kind enough to release the following statement: "The President and Chair Yellen met this afternoon in the Oval Office as part of an ongoing dialogue on the state of the economy. They discussed both the near and long-term growth outlook, the state of the labor market, inequality, and potential risks to the economy, both in the United States and globally. They also discussed the significant progress that has been made through the continued implementation of Wall Street Reform to strengthen our financial system and protect consumers." We also will never know if there is any coincidence between these two meeting and the fact that just after they took place, the S&P went from red on the year to fresh 2016 highs in under two days.

Is The Fed Preparing For The Next Financial Earthquake To Hit? -- The Fed announced a series of three “expedited procedure, closed” meetings Monday thru Wednesday this week:  FRB Board Meetings.  The Monday meeting was allegedly “a review and determination by the Board of Governors” of the advance and discount rates charged by the Fed.   This is somewhat an absurd waste of time as both of those bank funding mechanisms have become antiquated and rarely used.  The discount window collects dust until a specific bank’s credit profile has collapsed to an extent that prevents it from accessing the interbank-lending market.  It’s seen as an act of desperation.  It’s doubtful that the meeting was convened to discuss the discount rate.  The announced subject matter of the two subsequent meetings are perhaps of more interest:  “bank supervisory matter” (Tuesday) and “periodic briefing and discussion on financial markets, institutions, and infrastructure” (Wednesday). I find the latter two topics in the context of the fact that it appears that the European banking system – to which the U.S. Too Big To Fail Banks are inextricably tied – appears to be melting down.

What tools does the Fed have left? Part 3: Helicopter money - Bernanke -- In previous posts, I discussed tools that the Fed might use in response to a future slowdown in the U.S. economy. I argued that, even if the scope for conventional interest-rate cuts is limited by already-low rates, the Fed has additional policy tools available, ranging from forward guidance about future rate policies to additional quantitative easing to targeting longer-term rates. Still, so long as people have the option of holding currency, there are limits to how far the Fed or any central bank can depress interest rates.[1] Moreover, the benefits of low rates may erode over time, while the costs are likely to increase. Consequently, at some point monetary policy faces diminishing returns.  In this post, I consider the merits of helicopter money as a (presumably last-resort) strategy for policymakers. I make two points. First, in theory at least, helicopter money could prove a valuable tool. In particular, it has the attractive feature that it should work even when more conventional monetary policies are ineffective and the initial level of government debt is high. However, second, as a practical matter, the use of helicopter money would involve some difficult issues of implementation. These include (1) the need to integrate the approach with standard monetary policy frameworks and (2) the challenge of achieving the necessary coordination between fiscal and monetary policymakers, without compromising central bank independence or long-run fiscal discipline. I propose some tentative solutions for these problems. To be clear, the probability of so-called helicopter money being used in the United States in the foreseeable future seems extremely low. ... However, under certain extreme circumstances—sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies—such programs may be the best available alternative. It would be premature to rule them out.

Bernanke says so-called helicopter money could work -  Former Fed chief Ben Bernanke earned the nickname “Helicopter Ben” for a speech in which he cited Milton Friedman’s imagery of dropping money from the sky in the fight against deflation. Now, Bernanke is taking on the concept that’s becoming more popular in economic circles — so-called helicopter money. That refers to either a tax cut, or public spending, being financed by a permanent increase in the money supply. That has a benefit over traditional fiscal injections, because households don’t have to fear future tax increases to pay for the current spending. Bernanke, in a blog post in his current role at the Brookings Institution, says there are a number of factors standing in the way of helicopter money, or as he likes to call it, a money-financed fiscal program. He also says there’s no need for such stimulus now. But Bernanke also sees a role for helicopter money. “Under certain extreme circumstances—sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies—such programs may be the best available alternative. It would be premature to rule them out,” Bernanke writes.

How to Make the Fed Work Better - -- Narayana Kocherlakota - The U.S. Federal Reserve is an unusual institution: It makes key policy decisions on behalf of the public, yet its constituent parts -- the 12 regional Feds -- are legally part of the private sector. In a new series of proposals, Professor Andrew Levin of Dartmouth University argues that making the regional Feds into truly public institutions is crucial to improving the Fed’s accountability, transparency and governance. I’ve known Levin for a long time, and I have a great deal of respect for his integrity and acumen. That said, I think his aims can be achieved without such a radical reform. All it requires is some changes at Fed’s Board of Governors in Washington, D.C. -- a fully governmental entity that already oversees and has a great deal of control over the regional Feds. Levin, for example, suggests that the process of appointing presidents at the regional Feds is too opaque. I agree, but the problem is in Washington, not in the regional banks. Currently, the six non-banker directors of the regional Fed nominate a candidate, who must then be approved by the Board of Governors. The Board is supposed to represent the interests of the public, but it’s hard to know how well it’s doing its job because it provides no information about its deliberations.The solution is simple, and requires no change to the Federal Reserve Act. The regional Fed’s non-banker directors would offer a slate of up to three finalists. The Board of Governors would then undertake a public panel interview of each finalist, and hold a public vote to approve its preferred candidate (it could also choose nobody and ask for a new slate of candidates). In this way, the public could see how the board reached its decision. Many of Levin’s other goals (which I don’t necessarily endorse) can readily be accomplished by the board of governors without any change in the law. Levin proposes a term limit for regional Fed presidents, suggests that the re-appointment process for presidents is insufficiently rigorous and argues that the regional banks should be subject to the Freedom of Information Act. The board already has the authority to make all these changes at any time.

With plenty of punch, central bankers wait in vain for the world to drink --  Central bankers usually worry about when to remove the punch bowl of cheap finance but when they gather in Washington, D.C. this week they will face a different problem: how to force the world to drink. Amid a flood of cheap money and a historic experiment with negative interest rates, households, corporations and banks in the developed world have turned their backs on borrowing. Credit growth has flat-lined and an array of metrics indicate the world has become a more cautious place, potentially upending whatever bang for the buck central banks might expect. In the U.S. households are paying down mortgages instead of borrowing against homes to fund consumption, altering behavior that arguably helped fuel the 2007 financial crisis but that also contributed to economic growth. A Chicago Federal Reserve Bank composite index of household, bank and corporate leverage has been below average for nearly four years. European and U.S. companies are socking away cash and the Bank of Japan's descent into negative rates has yet to boost consumption, corporate investment, or even faith in an economic rebound. Even as global liquidity expands, the appetite for it remains moribund.

Does the Fed chair have too much power? - CNN - The job of being chair of the U.S. Federal Reserve was once described as being "God on a good day." That was before the 2008 financial crisis and the Great Recession, but still, the Fed chair is the director of the world's largest economy. Stocks, bonds and exchange rates surge and fall based solely on the words that come out of the Fed chair's mouth.  Talk about a power trip.  But the four people alive today who have actually held the position don't think it's anything like being a deity.  "You can't exactly do what you want," former Fed chair Paul Volcker said Thursday at an event at International House in New York. "You have a board. You have a public. You've got [regional] reserve bank presidents."  CNN's Fareed Zakaria moderated the discussion with former Fed chairs Volcker, Ben Bernanke, Alan Greenspan and current chair Janet Yellen. It was the first time all four living Fed chairs were interviewed at the same time.  Major decisions on interest rates and other measures to boost or slow down the economy are all made by a committee. The chair only gets one vote.

Negative rates are not the fault of central banks - Martin Wolf -- Almost nine years after the west’s financial crisis started, interest rates remain ultra-low. Indeed, a quarter of the world economy now suffers negative interest rates. This condition is as worrying as the policies themselves are unpopularLarry Fink, chief executive of BlackRock, the asset manager, argues that low rates prevent savers from getting the returns they need for retirement. As a result, they are forced to divert money from current spending into savings. Wolfgang Schäuble, Germany’s finance minister, has even put much of the blame for the rise of Alternative für Deutschland, a nationalist party, on policies introduced by the European Central Bank. “Save the savers” is an understandable complaint by an asset manager or finance minister of a creditor nation. But this does not mean the objection makes sense. The world economy is suffering from a glut of savings relative to investment opportunities. The monetary authorities are helping to ensure that interest rates are consistent with this fact. Ultimately, market forces are determining what savers get. Alas, the market is saying that their savings are not worth much, at least at the margin. Why does such a savings glut exist? That is the important question. Given its current account surplus of almost 9 per cent of gross domestic product — that is, savings far in excess of what it absorbs domestically, even at ultra-low interest rates — Germany might ask what its domestic interest rate would be if it had to absorb this glut at home. Unfortunately, the rest of the world cannot absorb these savings easily either. The savings glut (or investment dearth, if one prefers) is the result of developments both before and after the crisis. Even before 2007, real long-term interest rates were in decline. Since then, weak private investment, reductions in public investment, a slowing trend growth of productivity and the debt overhangs bequeathed by the crisis have interacted to lower the equilibrium real rate of interest. But the objective of price stability means that policy is aimed at balancing aggregate demand with potential supply. The central banks have merely discovered that ultra-low rates are needed to achieve this objective.

Martin Wolf Defends Central Banks’ Negative Interest Rate Policies  -  Yves Smith - The Financial Times has become even more erratic of late, mixing first-rate stories with all-too-obvious pumping for special interest. Today, the pink paper had a twofer in the articles it flagged above its masthead, Tamper with tax havens at your peril and Martin Wolf’s Don’t blame central banks for negative rates. While Financial Times readers laughed off the first article, they are likely to take the second one seriously. Wolf is too good an economist not to know that his column exculpating central bankers is off base, but he’s also regularly invoked (as he does here) Bernanke’s “saving glut” theory, which conveniently lets the Fed and its confreres off the hook.  Contra Wolf, central banks are largely responsible for the mess we are in. The Fed stopped supervising primary dealers in 1992. Later that decade, after a derivatives crash that destroyed more value than the 1987 crash, the Fed took the view that it was fine to let banks not only use derivatives with minimal supervision, but allowed them to develop their own risk models with no central bank involvement, insuring that supervisors would be behind the curve. Greenspan and Rubin later fought successfully against the regulation of credit default swaps, a major driver of the crisis. The Fed ignored warnings its own Ed Gramlich and from the Bank of International Settlements about a housing bubble in the early 2000s, and refused to act to supervise and restrict subprime mortgages as required under the Home Owners Equity Protection Act. Central banks bailed out the financial system without making demands or imposing reforms. No bank boards or executives were replaced. Banks were not told they’d need to write down and modify dud loans, most of all consumer mortgages.

CEO Keith Neumeyer: "There's Going To Be A Major Revolt If We See Negative Rates" -- CEO Keith Neumeyer Warns: "There’s Going To Be a Major Revolt… We’re Going To See RiotsWith negative interest rates now the order of the day in much of the Western world, it’s only a matter of time before financial institutions start charging American depositors for the privilege of keeping their money safe in the U.S. banking system. And according to Keith Neumeyer in his latest interview with SGT Report, that could spell disaster for socio-economic stability. Neumeyer, who is the CEO of one of the world’s top primary silver producers First Majestic Silver and the Chairman of mineral bank firm First Mining Finance, says that should The Fed and government policy makers implement negative interest rates and continue on their current course of bailing out big business while impoverishing average Americans, we could well see riots in the streets.  Negative interest rates are a way that governments are trying to tax the people… it’s going to start with big corporations that have a lot of cash sitting around in the banks and then it’s going to trickle down to the average person on the street… the people that get hurt are the small investor… the people that could least afford it…  the retired people that rely on their interest on their savings that they expected to have… this is all changing… the world is changing… I think there’s going to be a major revolt… If we actually do see negative interest rates in North America…  we’re going to see riots. The Fed has lost credibility. And that has left the average person on the street with an air of uncertainty and concern over the stability of the system. This, says Neumeyer, is why many investors, both large and small, have started turning to tangible assets as a safe haven.

What’s Wrong With Negative Rates? - Joseph E. Stiglitz – I wrote at the beginning of January that economic conditions this year were set to be as weak as in 2015, which was the worst year since the global financial crisis erupted in 2008. The underlying problem – which has plagued the global economy since the crisis, but has worsened slightly – is lack of global aggregate demand. Now, in response, the European Central Bank (ECB) has stepped up its stimulus, joining the Bank of Japan and a couple of other central banks in showing that the “zero lower bound” – the inability of interest rates to become negative – is a boundary only in the imagination of conventional economists.  And yet, in none of the economies attempting the unorthodox experiment of negative interest rates has there been a return to growth and full employment. In some cases, the outcome has been unexpected: Some lending rates have actually increased. It should have been apparent that most central banks’ pre-crisis models – both the formal models and the mental models that guide policymakers’ thinking – were badly wrong.  They continued to use the old discredited models, perhaps slightly modified. In these models, the interest rate is the key policy tool, to be dialed up and down to ensure good economic performance. If a positive interest rate doesn’t suffice, then a negative interest rate should do the trick. It hasn’t. In many economies – including Europe and the United States – real (inflation-adjusted) interest rates have been negative, sometimes as much as -2%. And yet, as real interest rates have fallen, business investment has stagnated. According to the OECD, the percentage of GDP invested in a category that is mostly plant and equipment has fallen in both Europe and the US in recent years. (In the US, it fell from 8.4% in 2000 to 6.8% in 2014; in the EU, it fell from 7.5% to 5.7% over the same period.) Other data provide a similar picture.

Key Measures Show Inflation close to 2% in March  --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.0% annualized rate) in March. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.5% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.1% annualized rate) in March. The CPI less food and energy rose 0.1% (0.8% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for March here. Motor fuel was up 29% annualized in March following several months of large declines.

U.S. inflation survey slips in cautious sign for Fed | Reuters: An increasingly important gauge of U.S. inflation sagged last month back to near record low levels from earlier in the year, adding to the uncertainty over how fast the Federal Reserve can proceed with interest rate hikes in the coming months. Expectations for inflation one year in the future fell to 2.53 percent in March from 2.71 percent in February, according to the New York Fed's survey of consumers, which was released on Monday. That was the fourth decline in the last six months and put expected inflation at just over a tenth of a percentage point above January's reading of 2.42 percent, which was the lowest level since the survey began in mid-2013. The U.S. central bank has a 2 percent target for inflation in the medium term. It raised rates in December for the first time in nearly a decade and projections from Fed policymakers indicate two more rate hikes this year. The New York Fed survey showed that median expectations for inflation three years in the future declined to 2.50 percent in March from 2.62 percent in February. The decline in one-year expectations came despite expectations for gasoline prices to continue their recent rise. The median year-ahead expectation for gas prices is for a gain of 7.3 percent, while consumers expect prices for food, rent and medical care to decline slightly, the New York Fed said.

Is Cheap Oil Contractionary? - Krugman  - Low oil prices were supposed to be a big boost for the world economy; but it didn’t happen. Maury Obstfeld, my long-time textbook co-author and now chief economist at the IMF, offers an interesting argument about why: he suggests that it’s because of the zero lower bound. Falling oil leads to falling inflation expectations, and since interest rates can’t fall, real rates go up, hurting recovery. Matt O’Brien is skeptical, and so am I — even though I am very much in favor of rethinking our usual assumptions when the economy is at the ZLB. First, a priori, falling oil prices shouldn’t affect expectations for the rate of inflation of non-oil goods and services, or at least it’s not obvious that it should — and that’s the inflation rate that should matter for investment. Still, you could argue that oil is in fact driving those expectations, whether it should or not. What Matt does is question whether correlation is causation. I’d make another point: even using market expectations, real interest rates have in fact gone down, not up, in the face of falling oil prices:  How is this possible, given the zero lower bound? It’s all about the term structure: long-term rates aren’t at zero, although they’re at least somewhat supported by the floor on short-term rates. And as it turns out, during the recent oil crash long-term rates fell enough to more than offset the decline in expected inflation.

Fed's Beige Book: Economic activity expanded in the "modest to moderate range" in most Districts -- Fed's Beige Book "Prepared at the Federal Reserve Bank of Chicago and based on information collected on or before April 7, 2016." Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand in late February and March, though the pace of growth varied across Districts. Most Districts said that economic growth was in the modest to moderate range and that contacts expected growth would remain in that range going forward. Consumer spending increased modestly in most Districts and reports on tourism were mostly positive. Labor market conditions continued to strengthen and business spending generally expanded across most Districts. Demand for nonfinancial services grew moderately overall. Manufacturing activity increased in most Districts. Construction and real estate activity also expanded. Credit conditions improved, on net, in most Districts. Low prices weighed on energy and mining output as well as prospects for agricultural producers. Overall, prices increased modestly across the majority of Districts, and input cost pressures continued to easeAnd on real estate:  Construction and real estate activity generally expanded in late February and March, and contacts across Districts maintained a positive outlook for the rest of the year. Residential real estate activity strengthened, on balance, with robust growth in San Francisco, Cleveland, and Boston, but more mixed reports from Dallas, Kansas City, and Atlanta. Several Districts credited a mild winter for stronger home sales, and the pace of home price increases picked up in a number of Districts. Multi-family construction remained strong in most Districts. Chicago, Cleveland, and St. Louis also noted some improvement in demand for single-family home construction, and a contact in San Francisco reported backlogs of more than six months for new single-family units. Commercial real estate activity generally increased, with leasing activity and rents rising in many Districts: particularly strong leasing was noted in retailing in Chicago and in the industrial sector in Dallas.

Just Released: U.S. Economy in a Snapshot—More Data for More Charts –NY Fed - We launched the U.S. Economy in a Snapshot in June 2015 to provide interested readers with a monthly update of current economic and financial developments. Combining charts and summary points, the packet covers a range of topics that include labor and financial markets, the behavior of consumers and firms, survey responses, and the global economy. For those interested in producing charts from the packet, we are excited to announce that we are now expanding, to the fullest extent possible, the number of charts for which we post spreadsheet data. Our goal is to make it easier for readers to construct and disseminate charts they find particularly interesting.  The latest U.S. Economy in a Snapshot and accompanying spreadsheet data, as well as previous packets, posting schedule, and subscription instructions, can be found here. We also tweet highlights of each release on our New York Fed Research Twitter account (follow @nyfedresearch). For followers, we hope you find the data enhancements useful. For first-time visitors, we invite you to become a regular monthly reader of the Snapshot to gain a better understanding of developments in the economy.

The Incredible Shrinking ‘GDPNow’ Forecast; Could it Be Right? - With input from a report Friday that wholesale inventories declined by 0.5% in February, more than the 0.2% drop expected, the Atlanta Federal Reserve’s tool for forecasting first quarter gross domestic product fell to a new low. GDPNow points to just a 0.1% gain in first quarter GDP down from 0.4%. It dropped from 0.7% to 0.4% on Monday thanks to declines in the forecasts for consumer spending growth and equipment investment growth. Even that was well below the consensus of economist opinion, which predicts growth for the current quarter between roughly 1.4% and 2.4%. The Q1 GDPNow estimate was as high as 2.3% in mid-March, but has been falling with almost every release. The U.S. economy grew at at 2% rate in the third quarter and a 1.4% rate in the fourth quarter, according to the Department of Commerce’s final estimate released on March 25. The advance estimate for the first quarter won’t be out until April 28. The long delay is the reason why the GDPNow tool was created. On the bright side, a new report from economists at Goldman Sachs finds that the GDPNow model (and other GDP-tracking models used by economists), tend to overreact to each new release. Goldman’s Elad Pashtan and Chris Mischaikow also note there also seems to be a seasonal bias in first quarter estimates. They think GDP is actually growing at close to a 2% rate.

Just Released: Introducing the FRBNY Nowcast  - NY Fed -  The first official estimate of GDP this quarter will not be published until the end of July. In fact, we don’t even know what GDP was last quarter yet! But while we wait for these crucial data, we float in a sea of information on all aspects of the economy: employment, production, sales, inventories, you name it. . . . Processing this information to figure out if it is rainy or sunny out there in the economy is the bread and butter of economists on trading desks, at central banks, and in the media. Thankfully, recent advances in computational and statistical methods have led to the development of automated real-time solutions to this challenging big data problem, with an approach commonly referred to as nowcasting. This post describes how we apply these techniques here at the New York Fed to produce the FRBNY Nowcast, and what we can learn from it. It also serves as an introduction to our Nowcasting Report, which we will update weekly on our website starting this Friday, April 15.  The chart below is the main visual tool that we created to track the evolution of the FRBNY Nowcast in real time, as macroeconomic news hits the tape. The black line with diamonds is our best estimate of GDP growth in the first quarter, based on information available at the dates represented on the x-axis. For instance, the last diamond says that the nowcast for GDP growth in the first quarter was 1.1 percent as of last Friday, based on information released until then. The first diamond in the series, instead, was our estimate of that same first-quarter GDP growth on November 27, 2015, when we started tracking the current quarter. The difference between two consecutive nowcasts, or the nowcast revision, is the weighted average effect of the news received during the week. The impact of the news on the nowcast is represented by the colorful bars, with different colors associated with news from particular sectors. For instance, news from international trade data contributed positively to the nowcast last week, increasing it by about 0.1 percentage point, as shown by the light green bar in the picture.

New York Fed Launches Its Own GDP Tracker - MoneyBeat - WSJ: The Federal Reserve Bank of New York is getting into the economic “nowcasting” game. The bank bank announced on Tuesday that it has built its very own near real-time tracker of U.S. gross domestic product, which it will publish weekly on its Liberty Street Economics blog starting Friday.  The offering puts the New York Fed in competition with another Fed branch: the Atlanta Fed, which has been producing its GDPNow tracker since mid-2014. Investors hungry for information about the U.S. economy have increasingly turned to the GDPNow in recent months amid the ongoing debate about the pace of U.S. growth. The blog post from the New York Fed announcing its tracker doesn’t mention the Atlanta Fed’s product. One difference is immediately apparent between the two: The Atlanta Fed’s tracker currently pegs first-quarter GDP at a meager 0.1%. The New York Fed’s tracker has it at 1.1%. One thing that’s clear: In a high-frequency, low-latency, hyperconnected world, waiting for the actual GDP report for a read on the economy is not really an option for most investors. The way GDP reports are currently compiled and released dates back to the 1930s, and the first reading comes out a full month after the quarter’s closed. Of course, the two Fed banks aren’t the only ones to perform this service. Most Wall Street firms with a research staff of any size have their own way of calculating GDP; Macroeconomic Advisors produces a pretty popular version. Additionally, other Fed banks have their own economic weather vanes.

    ‘GDPNow’ Got You Down? Meet the NY Fed’s New ‘Nowcast’ - The Atlanta Federal Reserve‘s tool for forecasting gross domestic product, “GDPNow” has been falling precipitously for the last month and currently indicates just 0.1% first quarter growth, down from 2.3% in mid-March. If that seems a bit dire, a more upbeat version is now available. On Tuesday, the New York Federal Reserve introduced its “Nowcasting Report.” Based on data from last week, it forecasts first quarter GDP at 1.1% and second quarter GDP at 1.9%. It will be updated weekly starting April 15.  Ian Lyngen of CRT Capital notes that the New York tool is a lot more optimistic than Atlanta’s. He writes Tuesday: It will be interesting to see how the models develop over time, but regardless of one’s perspective, the year is starting off on a slower trajectory. The New York Fed’s blog has a friendly explanation of the new tool and admits — like all forecasts — it isn’t perfect. Here’s more from that article on what you can expect: How reliable is the model that underlies the FRBNY Nowcast? For a complete answer to this important question, we refer you to the many academic studies that have been conducted on the subject. Overall, their findings suggest that nowcasting techniques produce results that are comparable to, and often more accurate than, those of the best human forecasters, with the added advantage of being automatic and free of judgment. This does not mean that nowcasting is always spot-on. The amount of noise in macroeconomic data is significant—even the official GDP release is revised twice before becoming “final.” As a result, the nowcast makes mistakes in any given quarter, like all economists’ forecasts do.

    Just Released: The New York Fed Staff Forecast—April 2016 - NY Fed - Consumer spending is anticipated to grow around 2½ percent, slightly slower than in 2015, as real income growth is sustained through faster growth of compensation and low overall inflation. Residential investment growth is expected to increase somewhat, supported by continued improvement in the labor market and low mortgage interest rates. Business fixed investment is expected to begin to recover as oil and gas drilling stabilizes and the manufacturing capacity utilization rate moves higher, but that recovery should still be fairly subdued. These developments favorable to growth will likely be offset to some extent by a continued substantial drag from net exports.   While lower than last year’s forecast, projected growth in 2016 will remain above the economy’s potential growth rate—which we now estimate to be 1¾ percent. As a result, the unemployment rate should decline by the end of this year to around 4¾ percent, which is our estimate of the unemployment rate associated with stable inflation. Inflation, as measured by the personal consumption expenditures (PCE) deflator, should move gradually higher with relatively stable energy and import prices, but remain below the FOMC’s longer-run objective of 2 percent. For 2017, we expect growth of real GDP to slow to a pace close to our estimate of potential growth because much of the resource slack in the economy is likely to have dissipated by then. The unemployment rate is expected to be roughly stable, with productivity growth gradually moving up to its long-term trend of 1¼ percent to 1½ percent (on a nonfarm business sector basis). In addition, the staff anticipates that the labor force participation rate will stabilize in 2017. Inflation is expected to approach the FOMC’s objective owing in part to well-anchored inflation expectations.

    Real retail sales forecast continued lack of growth in GDP - With this morning's report on consumer prices, let's take a look at inflation and real retail sales. First of all, YoY CPI decelerated -0.1% to +0.8%: The only thing driving the elevated core measure is owner's equivalent rent, which is due to a shortage of rental construction, as an increasingly nationwide and oligopolized market of builders focused instead on higher margin luxury houses, frequently all cash purchases by foreigners. There is absolutely nothing in this report which ought to cause the Fed to consider raising interest rates. Now, on to retail sales. First of all, real retail sales have gone sideways since last July: There hasn't been any significant decrease, but the flatness is reminiscent of most of 2006-07. This is true even if we strip out motor vehicle sales (blue in the graph below), which have looked increasingly wobbly: So far, not so good, especially since both real retail sales and motor vehicle sales are short leading indicators, meaning they are forecast virtually no growth in GDP in the quarter or two ahead. Finally, let's compare these monthly measures with one of my favorite weekly indicators, Gallup's daily consumer spending. Gallup's measure is nominal, not inflation-adjusted, and does not include motor vehicles. They don't publish YoY charts, but here is their graph of monthly sales for the last 8 years:

    Atlanta Fed Stuns Everyone, Revises GDP Higher Despite Retail Sales, Inventory Miss -- Following today's triple whammy of economic misses, in which first retail sales both declined and missed expectations, and then both business inventories and sales declined and missed from downward revised numbers, AtlantaFed watchers were certain that the keeper of the GDP Nowcast would cut its GDP estimate from 0.1% to zero or even negative.  However, this did not happen. Perhaps due to another tap on the shoulder as a negative GDP print would be just too much to justify the relentless market rally, or as a result of the NY Fed's own competing service now trying to steal the limelight with its own 1.1% GDP forecast, moments ago the Atlanta Fed stunned everyone when it announced that instead of revising its concurrent GDP tracker lower, it actually pushed it up from 0.1% to 0.3%.  This is what it said:  The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.3 percent on April 13, up from 0.1 percent on April 8. After this morning's retail sales report from the U.S. Bureau of the Census, the forecast for first-quarter real consumer spending growth increased from 1.6 percent to 1.8 percent.What makes this particularly curious is that even Goldman Sachs, which keeps a concurrent tally of GDP components and revises it after every major data point, revised its GDP estimate down from 0.9% to 0.8%: "Details of the retail sales report were slightly negative for our tracking estimate of Q1 GDP growth: we revised down by one tenth to +0.8% (qoq ar)."

    The NY Fed Just Cut Its First Half GDP Forecast To 1.0% - The New York Fed's 'decidedly-more-optimistic-than-Atlanta-Fed's-GDPNow-model' NowCast model for GDP growth just tumbled back to reality after a week of dismal data finally forced its hand. Treasury bond yields are extending their tumble as NYFed slashes Q1 growth to just 0.8% (from 1.5% in Feb) and collapsed Q2 growth to 1.2% from 1.9% last week. This cuts the entire H1 estimate from 1.5% to 1.0%... shamed down to GDPNow's reality. Q1 cut... And Q2 slashed...  And what drove the drastic cut... Source: NYFed  This means the US has to grow 3.4% in the second half to hit the Fed's target! It appears the shaming of their 'optimism' has worked. And the reaction in bonds is clear...

    A Note on the Likelihood of Recession:  Delong - With global inflation currently more than quiescent, there is no chance that global recovery will be—as Rudi Dornbusch used to say—assassinated by inflation-fighting central banks raising interest rates. As for recovery being assassinated by financial chaos, we face a paradox here: Financial risks that policymakers and economists can see are those that bankers can see and hedge against as well. It is only the financial risks that policymakers and economists do not see that are truly dangerous. Many back in 2005 saw the global imbalance of China's export surplus and feared disaster from a fall in the dollar coupled with the discovery of money-center institutions having sold massive amounts of unhedged dollar puts. Very few, if any--even among those who believed US housing was a massive bubble likely to pop—feared that any problems created thereby would not be rapidly handled and neutralized by the Federal Reserve. The most likely danger of recession is thus absent, and the second most likely danger is unknowable. That leaves the third: a global economy that drifts into a downturn because both fiscal and monetary policymakers sit on their hands and refuse to use the stimulative demand management tools they have. Here there is, I think, some reason to fear. A passage from a recent speech by the nearly-godlike Stan Fischer was flagged to me by Tim Duy: If the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the United States. But we have seen similar periods of volatility in recent years--including in the second half of 2011--that have left little visible imprint on the economy, and it is still early to judge the ramifications of the increased market volatility of the first seven weeks of 2016. And Tim commented: This… again misses the Fed's response to financial turmoil…. I really do not understand how Fed officials can continue to dismiss market turmoil using comparisons to past episodes when those episodes triggered a monetary policy response. They don't quite seem to understand the endogeneity in the system… However, anything that could be called a “global recession” in the near term still looks like a less than 20% chance to me. But that is up from a 5% chance nine months ago. ...

    US economy in charts: gloom versus data FT -- From Donald Trump’s assertions that the US is not winning any more to Bernie Sanders’ warnings of a “rigged economy”, anger about America’s economic performance has been a persistent theme on the presidential campaign trail.Yet forecasts from the International Monetary Fund suggest the US has emerged as the healthiest among a sickly crop of leading economies, with GDP tipped to rise more than any other large advanced country next year and unemployment set to hover at half the euro area average.The yawning gap between firm, if unspectacular, economic readings and the sour mood in large parts of the electorate also presents a conundrum for Hillary Clinton, the Democratic frontrunner, as she seeks to capitalise on President Barack Obama’s economic turnround story while not appearing out of touch with a gloomy population. Despite the gloom seen on the campaign trail, perceptions about the health of the US economy vary sharply within the electorate itself — and indeed along party lines. Polling from the Pew Research Center shows Republicans are far more likely than Democrats to say the economic situation is poor and that things have become worse for people like them over the past 50 years. Yet the overall message from polling is fairly downbeat: seven years after the recovery started Americans are still unhappy with the economy’s performance. Some 43 per cent of registered voters say conditions are only fair, and 29 per cent say they are poor, while 28 per cent say they are good or excellent.

    The Mohamed A. El-Erian interview: How bad a slowdown do you need as a wake-up call? - Mohamed A. El-Erian spent seven years at the top of the Pacific Investment Management Co. (PIMCO), during which time he oversaw the management of almost $2 trillion of assets.  He stepped down in 2014, citing a need to spend more time with his family, and has since written a book about central banks and the global economy called “The Only Game in Town.” In it, El-Erian describes a world heading toward a crisis point as central banks run out of policy tools to spark a meaningful recovery from the 2008 financial crisis. Business Insider called him at home to talk about financial volatility, his unique career path, and how to invest money in a world turned upside down by negative interest rates. This interview has been edited for clarity and length.

    These 2 Charts Show The Next Recession Will Blow Out The US Budget - John Mauldin -- Next year, the US national debt will top $20 trillion. The deficit is running close to $500 billion, and the Congressional Budget Office projects that figure to rise. Add another $3 trillion or so in state and local debt. As you may imagine, the interest on that debt is beginning to add up, even at the extraordinarily low rates we have today. Sometime in 2019, entitlement spending, defense, and interest will consume all the tax revenues collected by the US government. That means all spending for everything else will have to be borrowed. The CBO projects the deficit will rise to over $1 trillion by 2023. By that point, entitlement spending and net interest will be consuming almost all tax revenues, and we will be borrowing to pay for our defense. Let’s look at the following chart, which comes from CBO data: By 2019, the deficit is projected to be $738 billion. There are only three ways to reduce that deficit: cut spending, raise taxes, or authorize the Federal Reserve to monetize the debt. But implicit in the CBO projections is the assumption that we will not have a recession in the next 10 years. Plus, the CBO assumes growth above what we’ve seen in the last year or so. What a budget might look like if we have a recession I asked my associate Patrick Watson to go back and look at the last recession and determine the level of revenue lost, and then to assume the same percentage revenue loss for the next recession. We randomly decided that we would hypothesize our next recession to occur in 2018. Whether it happens in 2017 or 2019, the relative numbers are the same. Here’s a chart of what a recession in 2018 would do.

    Treasury: Budget Deficit increased in Fiscal 2016 to Date compared to Fiscal 2015 --  The Treasury released the March Monthly Treasury Statement today. For fiscal year 2016 through March, the deficit was $461 billion compared to $439 billion for the same period in fiscal 2015 (the fiscal year ends in September).  In March, the Congressional Budget Office (CBO) released their new Updated Budget Projections: 2016 to 2026. The projected budget deficits were revised up recently. This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO. My guess is the actual deficit will be smaller in ficsal 2016 than the current CBO projection of 2.9% of GDP. The decline in the deficit, as a percent of GDP, from almost 10% to 2.5% in 2015 was the fastest decline in the deficit since the demobilization following WWII (not shown on graph). Note: In the year 2000 there were some projections that showed the entire debt could be paid off by now! But then along came some significant tax cuts, the Iraq war, two recessions, and other policy mistakes. Just a reminder that policy does matter. The deficit is projected to remain stable for the next few years, before starting to slowly increase again.

    TIME runs incoherent rant as cover story  - After a too-short hiatus, fear-mongering about the debt is back in a big way. TIME magazine is so worried that they’ve taken it upon themselves to not only put out an entire series to remind people that they must still fear the debt boogeyman, but have also allowed the headline story to center on long-debunked ramblings about the glories of the gold standard. There is so much wrong in the headline story that it would take a treatise to correct, but let’s just focus on a couple of easy things. First: $13,903,107,629,266 (the size of the federal government’s debt)—that’s a big number. But context, one of many things lacking in this article, is also important. $18,164,800,000,000 is a larger number, and one that happens to be U.S. Gross Domestic Product (GDP). As was highlighted in our recent piece on Donald Trump, what matters is the size of public debt relative to the size of the economy. For further context, Greek debt at its recent peak was 175 percent of Greek GDP. That’s a level that the Congressional Budget Office baseline doesn’t even have the U.S. government hitting in three decades. And even Greek debt had to be combined with screaming policy incompetence among European Union policymakers to spark an economic crisis. Finally, if we believe that the confidence fairy may tolerate a couple of years of deficits but will come roaring back to punish us because of sustained debt levels, then it’s worth noting that Japan, where debt currently sits at 123 percent of GDP, has had a debt-to-GDP ratio of over 80 percent since 2004—with no signs yet of creditors fleeing.

    Government Spending Cuts Escalate Clashes Over Monetary Policy - WSJ: Many central bankers want advanced economies to boost government spending to snap the global economy out of its funk. Winning cooperation from elected officials is proving difficult. In the U.S., government outlays on goods and services as a share of the economy have fallen to historic lows. Consumption and investment by all governments—local, state and federal combined—dropped to 17.6% of gross domestic product in the fourth quarter of 2015, matching its lowest level in 66 years, according to the Commerce Department. Meanwhile, demographic changes have pushed up government transfer payments to individuals. A clash over government spending is playing out around the world, deepening worries about relying on overburdened monetary policy. The debate, already a focus of the Group of 20 leading economies, is expected to get added attention this week when financial officials gather for the International Monetary Fund’s spring meeting in Washington. Fed officials and counterparts in other central banks have already forced down interest rates and launched multiple rounds of asset purchases to spur an economic expansion. Many say it’s past time for fiscal policy to step in and take advantage of low rates to funnel money into infrastructure and other projects. “There’s no getting around the fact that monetary policy in the United States and many other advanced countries has been under a substantial burden and has not gotten a lot of help from fiscal policy,” Fed Chairwoman Janet Yellen said recently.

    How Not to Audit the Pentagon: The Military Waste Machine Is Running Full Speed Ahead -- naked capitalism - Yves here. Tom Engelhardt, in his introduction to this piece at TomDispatch, underscores how the US has allowed virtually no expenditure by the Pentagon be challenged, no matter how dubious it is (let’s start with the F-35) while American bridges and roads are in disrepair. Despite having a fiat currency and the reserve currency to boot, the excuse in DC for “all guns, no butter,” is that we somehow can’t afford it. Funny how we always have the money for the next bombing run in Iraq.  Not only is the US overspending on its military, we are managing to break the cardinal rule of being self-sufficient. US defense contractors are permitted to use foreign-sourced chips, which means from China. We even buy military uniforms and boots from China.   While this article points out how the effort to audit the Pentagon failed, it doesn’t flag the magnitude of the problem. This admittedly dated clip will give you an idea of the size of the Pentagon budgetary dark matter:

    Saudi Arabia Warns of Economic Fallout if Congress Passes 9/11 Bill - — Saudi Arabia has told the Obama administration and members of Congress that it will sell off hundreds of billions of dollars’ worth of American assets held by the kingdom if Congress passes a bill that would allow the Saudi government to be held responsible in American courts for any role in the Sept. 11, 2001, attacks.The Obama administration has lobbied Congress to block the bill’s passage, according to administration officials and congressional aides from both parties, and the Saudi threats have been the subject of intense discussions in recent weeks between lawmakers and officials from the State Department and the Pentagon. The officials have warned senators of diplomatic and economic fallout from the legislation.Adel al-Jubeir, the Saudi foreign minister, delivered the kingdom’s message personally last month during a trip to Washington, telling lawmakers that Saudi Arabia would be forced to sell up to $750 billion in treasury securities and other assets in the United States before they could be in danger of being frozen by American courts.Several outside economists are skeptical that the Saudis will follow through, saying that such a sell-off would be difficult to execute and would end up crippling the kingdom’s economy. But the threat is another sign of the escalating tensions between Saudi Arabia and the United States.

    The Case for Free Trade Is Weaker Than You Think -- Greg Ip - Economists disagree on plenty, but they’re pretty much unanimous that free trade is good and protectionism is bad. Elite opinion among noneconomists concurs: Editorial pages have roundly condemned Republican presidential front-runner Donald Trump for threatening to tear up trade agreements and slap steep tariffs on Mexico and China. But the case for free trade and against protectionism is not absolute. If workers lose their jobs to imports and central banks can’t bolster domestic spending enough to re-employ them, a country may be worse off, and keeping those imports out can make it better off. This occurs only in certain conditions, says a new paper by Harvard University’s Larry Summers and two co-authors, but those conditions may now be present. Mr. Summers, a former Treasury secretary, is no protectionist and no fan of Mr. Trump, whose election, he warns, could lead to recession in the U.S. and financial crisis abroad. But he does worry that chronically weak demand could make protectionism both respectable and irresistible. Others, such as New York Times columnist Paul Krugman and Michael Pettis at Peking University have already noted how in a world with too little demand, one country’s trade surplus inflicts unemployment on the country with a deficit. The world is no longer on the gold standard, but Mr. Summers claims that conditions today resemble the chronic underconsumption and excess saving that preoccupied Keynes in the 1930s. Depressed investment and low inflation have kept interest rates stuck near zero in most developed countries, a condition Mr. Summers says resembles the “secular stagnation” that economists fretted over in the 1930s.

    Global trade should be remade from the bottom up - Larry Summers --Since the end of the second world war, a broad consensus in support of global economic integration as a force for peace and prosperity has been a pillar of the international order. From global trade agreements to the EU project; from the Bretton Woods institutions to the removal of pervasive capital controls; from ex­panded foreign direct investment to increased flows of peoples across borders, the overall direction has been clear. Driven by domestic economic progress, by technologies such as containerised shipping and the internet that promote integration, and by legislative changes within and between nations, the world has grown smaller and more closely connected.  Yet a revolt against global integration is under way in the west. The four leading candidates for president of the US — Hillary Clinton, Bernie Sanders, Donald Trump and Ted Cruz — all oppose the principal free-trade initiative of this period: the Trans-Pacific Partnership. Proposals by Mr Trump, the Republican frontrunner, to wall off Mexico, abrogate trade agreements and persecute Muslims are far more popular than he is. The movement for a British exit from the EU commands substantial support. Under pressure from an influx of refugees, Europe’s commitment to open borders appears to be crumbling. In large part because of political constraints, the growth of the international financial institutions has not kept pace with the growth of the global economy. What will happen next — and what should happen? Elites can continue pursuing and defending integration, hoping to win sufficient popular support — but, on the evidence of the US presidential campaign and the Brexit debate, this strategy may have run its course. This is likely to result in a hiatus in new global integration and efforts to preserve what is in place while relying on technology and growth in the developing world to drive further integration. Much more promising is this idea: the promotion of global integration can become a bottom-up rather than a top-down project. The emphasis can shift from promoting integration to managing its consequences.

    Pro-TPP Op-Eds Remarkably Similar to Drafts by Foreign Government Lobbyists -- OPINION COLUMNS PUBLISHED in California newspapers over the last year in support of the Trans-Pacific Partnership use language nearly identical to drafts written and distributed by public relations professionals who were retained by the Japanese government to build U.S. support for the controversial trade agreement.Take this column by former San Diego Mayor Jerry Sanders, who now serves as the president and CEO of the San Diego Regional Chamber of Commerce, in the San Diego Union-Tribune, titled: “Trans-Pacific trade pact benefits San Diego.” Much of the language in Sanders’s op-ed also appears in a “San Diego Draft op-ed” distributed by Southwest Strategies, a consulting firm paid by the Japanese government to promote the TPP:

    A Progressive Logic of Trade – Dani Rodrik - The global trade regime has never been very popular in the United States. Neither the World Trade Organization nor the multitudes of regional trade deals such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) have had strong support among the general public. But opposition, while broad, was diffuse. The difference today is that international trade has moved to the center of the political debate. The US presidential candidates Bernie Sanders and Donald Trump have both made opposition to trade agreements a key plank of their campaigns. And, judging from the tone of the other candidates, standing up for globalization constitutes electoral suicide in the current political climate. The populist rhetoric on trade may be excessive, but few deny any longer that the underlying grievances are real. Globalization has not lifted all boats. Many working families have been devastated by the impact of low-cost imports from China and elsewhere. And the big winners have been the financiers and skilled professionals who can take advantage of expanded markets. While globalization has not been the sole (or even the most important) force driving inequality in the advanced economies, it has been a contributor. What gives trade particular political salience is that it often raises fairness concerns in ways that the other major contributor to inequality – technology – does not. When I lose my job because my competitor innovates and introduces a better product, I have little cause to complain. When he does so by outsourcing to firms abroad that do things that would be illegal here – for example, prevent their workers from organizing and bargaining collectively – I may have a real gripe.

    Senate bill draft would prohibit unbreakable encryption: — A draft version of a Senate bill would effectively prohibit unbreakable encryption and require companies to help the government access data on a computer or mobile device with a warrant. The draft is being finalized by the chairman of the Senate Intelligence Committee, Sen. Richard Burr, R-N.C., and the top Democrat, Sen. Dianne Feinstein of California. Their goal, they said in a statement, is to ensure adherence to any court order that requires helping law enforcement or providing decrypted information. "No individual or company is above the law." It was not immediately clear when they would introduce the bill. The draft language ran into opposition from another committee member, Sen. Ron Wyden, D-Ore., who said the proposal would require "American companies to build a backdoor" into devices. "They would be required by federal law per this statute to decide how to weaken their products to make Americans less safe," he said. Wyden pledged to do "everything in my power" to prevent the plan from passing.

    A New Bill To Outlaw Encryption -- Those in power are simply liars; why we elect such people is beyond me. We cannot afford career politicians because they ALWAYS create a divide between themselves and the people. NO REPUBLIC has ever resisted converting into an oligarchy. It just does not work. I reported that Obama slipped and actually said the truth by mistake. In the case against Apple, he said if the government could not break into phones then EVERY American had the equivalent of a Swiss bank account in their phone. This is not about terrorism; it is about the hunt for money and their mismanagement of the economy.  Here is the proposed bill to outlaw encryption (encryption-bill-discussion-draft). While this is still in draft version, it demonstrates that it is them against us. Passage of this bill will DESTROY the world economy because of their greed. Outlawing encryption will end the ability to make secure payments online as hackers can gain access to anything that the government can.

    US anti-encryption law is so 'braindead' it will outlaw file compression The proposed bill put forward by Senators Richard Burr (R-NC) and Dianne Feinstein (D-CA) to force US companies to build backdoors into their encryption systems has quickly run into trouble. Less than 24 hours after the draft Compliance with  Court Orders Act of 2016 was released, more than 43,000 signatures have been added to a petition calling for the bill to be withdrawn. The petition, organized by CREDO Action, calls for Congress to block the proposed law as a matter of urgency. Meanwhile, in the technical world, experts have been going through the legislation and pointing out glaring holes in the draft bill. Bruce Schneier, the guy who literally wrote the books on modern cryptography, noted that the bill would make most of what the NSA does illegal, unless No Such Agency is willing to backdoor its own encrypted communications. "This is the most braindead piece of legislation I've ever seen," Schneier – who has just been appointed a Fellow of the Kennedy School of Government at Harvard – told The Reg. "The person who wrote this either has no idea how technology works or just doesn't care." He pointed out that it isn't just cryptographic code that would be affected by this poorly written legislation. Schneier, like pretty much everyone, uses lossy compression algorithms to reduce the size of images for sending via email but – as it won't work in reverse and add back the data removed – this code could be banned by the law, too. Files that can't be decrypted on demand to their original state, and files that can't be decompressed back to their exact originals, all look the same to this draft law. Even deleted data could be covered, he opined. Are software companies to put in place mechanisms to retrieve any and all deleted information? It could be inferred from the bill as it stands.

    Bernie Sanders Would Ask President Obama to Withdraw Supreme Court Nominee - The topic of President Obama’s nominee to the Supreme Court came up at Thursday night’s Democratic Debate and Sen. Bernie Sanders said if were elected president, he would ask Obama to withdraw his nominee, Merrick Garland. “If elected president, I would ask the president to withdraw that nomination,” Sanders said Thursday. The Vermont senator clarified that he believes the president has every right to nominate someone to fill the seat left vacant by Justice Antonin Scalia’s death. “A third grader in America understands the President has the right to nomination someone to the Supreme Court,” Sanders said, while adding that Republican leaders in the Senate have vowed not to hold hearings or votes for Obama’s nominee. But, Sanders has a very specific litmus test for Supreme Court justices and in his opinion, Garland is not up to snuff on Citizens United. Any nominee, he said, would need to make it “crystal clear” that he or she would vote to overturn Citizens United. It wasn’t the first time Sanders voiced his disinterest in the president’s nominee, though he has said he would vote to confirm him. In an interview with MSNBC’s Rachel Maddow Sanders said, “I think there are some more progressive judges out there.”

    Sen. Elizabeth Warren Introduces Tax Filing Simplification Bill Hitting For-Profit Companies - With less than a week left before the April 18 deadline to file tax returns this year, Sen. Elizabeth Warren, D-Mass., is to introduce a bill Wednesday that would change filing procedures in coming years and hit major for-profit tax filing industry players. Warren’s bill, the Tax Filing Simplification Act of 2016, seeks to establish a free online tax preparation and filing service that would give citizens access to tax return information provided by third parties like employers and allow them to file directly file with the federal government. The bill is taking aim at the Internal Revenue Service, seeking to prevent it from entering into agreements with third parties that block its own ability to provide free online services. As part of the Free File Alliance, the IRS works with private services like H&R Block, Intuit and Jackson Hewitt. A report issued by Warren's office details the powerful lobby of for-profit tax filing companies that have opposed making tax filing easier. Estimates from the Sunlight Foundation and found that Intuit (known for its TurboTax software), H&R Block and Jackson Hewitt have spent almost $41 million since 1998 on federal lobbying opposing return-free filing. The bill would amend the 1986 tax code by having the secretary of the treasury establish an online tax preparation and filing software by 2018. It would also enable taxpayers to “download third party-provided return information relating to individual tax returns for taxable years beginning after 2016.” The bill seeks to give taxpayers access to information from the U.S. Treasury website in a timely fashion and in formats that can be downloaded or printed to be used later to file tax returns. A group of 41 academics, including economists and legal scholars, have signed a letter supporting Warren’s proposed bill, describing the American tax filing system as “one of the most confusing and expensive” in the world that provokes anxiety due to its complexity.

    Inversions Strengthen the Progressive Case for Abolishing the Corporate Income Tax --The Obama administration has taken off the gloves in its war on runaway corporations. On April 4, theTreasury released a new set of rules designed to curb “inversions,” a strategy in which a US company cuts its corporate tax burden by merging with a foreign company and moving its official tax residence out of the United States. The pharmaceutical giants Pfizer and Allergan immediately announced that they would abandon their pending mega-billion inversion deal.  The new rules are a change in policy for the administration. At one time, President Obama saw the US corporate tax code as needing deep reform, not stronger enforcement. In his 2011 State of the Union Address, he said: So tonight, I’m asking Democrats and Republicans to simplify the system.  Get rid of the loopholes.  Level the playing field.  And use the savings to lower the corporate tax rate for the first time in twenty-five years—without adding to our deficit.  It can be done. It could have been done, but it wasn’t. Now, instead, Obama seems have adopted the views of progressive icon Senator Elizabeth Warren, as expressed in a speech last November, reported on the progressive website Common Dreams. Who bears the burden of the corporate income tax? Not corporations as such, which are legal entities that can feel no pain. One way or another, the economic burden of the corporate tax must fall on corporations’ human stakeholders—shareholders, creditors, workers, or customers.In short, the idea that the corporate tax is a tax on the rich is largely an illusion. Politicians on both the left and the right like to rally their base by pretending it is a tax on capital, but capital skips away to low-tax jurisdictions, leaving workers with fewer jobs and lower wages.

    We mustn’t let this Panama Papers anger go to waste -- Carl Levin --  The Panama Papers’ 11 million plus documents detail how thousands of clients of one Panama law firm used shell corporations to hide billions of dollars in cash and other assets. The clients allegedly include 140 government officials and 200 Americans. It is suspected that many of the shell corporations hold funds associated with corruption, drug trafficking or tax evasion. The corporate form was invented for the legitimate purposes of limiting personal liability and facilitating business, not hiding ownership. But corporations are now frequently used as a secrecy tool to hide wrongdoing, and it’s time to reverse course. G20 world leaders have made a start with a joint commitment to increase corporate transparency. The United Kingdom is leading the way, mandating public disclosure of the true owners – the “beneficial owners” – of UK companies. The European Union has followed, directing its members to obtain beneficial ownership information for EU corporations and make it available to persons with a “legitimate interest”, including law enforcement and journalists. The United States is far behind. We now require more information to get a library card than to form a US corporation. That may be why the Panama law firm had a Nevada office. Bipartisan legislation pending in the US Congress requiring the collection of beneficial ownership information for US corporations has languished despite law enforcement pleas for action. The biggest impediment is opposition from the secretaries of state of our 50 states, who financially benefit from forming new corporations and don’t want to ask questions that might jeopardize their revenue. Our states need to wake up to the damage they are doing and stop forming corporations with hidden owners.

    Was it wrong to hack and leak the Panama Papers? - Let’s say a group of criminal defense lawyers kept a database of their confidential conversations with their clients.  That would include clients charged with murder, robbery, DUI, drug abuse, and so on.  In turn, a hacker would break into that database and post the information from those conversations on Wikileaks.  Of course a lot of those conversations would appear to be incriminating because — let’s face it — most of the people who require defense attorneys on criminal charges are in fact guilty.  When asked why the hack was committed, the hacker would say “Most of those people are guilty.  I want to make sure they do not escape punishment.” How many of us would approve of that behavior?  Keep in mind the hacker is spreading the information not only to prosecutors but to the entire world, and outside of any process sanctioned by the rule of law.  The hacker is not backed by the serving of any criminal charges or judge-served warrants. Yet somehow many of us approve when the victims are wealthy and higher status, as is the case with the Panama Papers.  Furthermore most of those individuals probably did nothing illegal, but rather they were trying to minimize their tax burden through (mostly) legal shell corporations.  Admittedly, very often the underlying tax laws should be changed, just as we should repeal the deduction for mortgage interest too.  But in the meantime we are not justified in stealing information about those people, even if some of them are evil and powerful, as is indeed the case for homeowners too. Once again, politics isn’t about policy, it is about which groups should rise and fall in relative status.  And many people believe the wealthy should fall in status, and so they will entertain the morality of all crimes and threats against them.  These revelations will of course lead to some subsequent cases of blackmail, against Chinese officials for one group.

    Michael Hudson: Panama – Laundering Haven for War Budgets (video & transcript) Yves Smith - In his posts on Mossack Fonseca, Richard Smith has explained that one of the tests of whether the reporters have exhumed all the dead bodies is whether they discuss the involvement of oil and gas companies in the Panama money game. Michael Hudson give important historical insight into the use and misuse American companies have made of Panama in this Real News Network interview.

    Putin Sees U.S., Goldman Sachs Behind Leak of Panama Papers -- President Vladimir Putin acknowledged that information in the Panama Papers implicating people in his inner circle to offshore transactions was accurate, but dismissed the leak -- which he tied to Goldman Sachs Group Inc. -- as part of U.S. efforts to influence Russia’s upcoming elections. “Odd as it may seem, they aren’t publishing false information on offshores,” Putin said during his annual call-in show Thursday. “They’re not accusing anyone of anything specific. They’re just casting a shadow.” The leak of more than 11 million documents revealed how politicians, banks, celebrities and criminals across the globe used offshore companies to hide wealth over the past four decades. While the practice can be completely legal, the anonymous ownership of shell companies can enable tax evasion, money laundering, sanctions-dodging and kleptocracy. The documents show at least $2 billion in transactions involved people and companies that had ties to Putin, according to reports published this month by the International Consortium of Investigative Journalists. Putin claimed that U.S. institutions will continue to use provocations ahead of upcoming elections. Russia will vote for parliament in September and for president in 2018. The Russian president, a former KGB officer who has called the Internet a “CIA project,” said Goldman Sachs owns the parent of the German newspaper that received leaked files from Panamanian law firm Mossack Fonseca. The newspaper, Sueddeutsche Zeitung, is owned by a Munich publishing family and a German media group that has no corporate affiliations to Goldman Sachs, according to a statement from Stefan Hilscher, the managing director of the paper. The U.S. bank declined to comment.

    Swiss banker whistleblower: CIA behind Panama Papers: Bradley Birkenfeld is the most significant financial whistleblower of all time, so you might think he'd be cheering on the disclosures in the new Panama Papers leaks. But today, Birkenfeld is raising questions about the source of the information that is shaking political regimes around the world.  Birkenfeld, an American citizen, was a banker working at UBS in Switzerland when he approached the U.S. government with information on massive amounts of tax evasion by Americans with secret accounts in Switzerland. By the end of his whistleblowing career, Birkenfeld had served more than two years in a U.S. federal prison, been awarded $104 million by the IRS for his information and shattered the foundations of more than a century of Swiss banking secrecy. In an exclusive interview Tuesday from Munich, Birkenfeld said he doesn't think the source of the 11 million documents stolen from a Panamanian law firm should automatically be considered a whistleblower like himself. Instead, he said, the hacking of the Panama City-based firm, called Mossack Fonseca, could have been done by a U.S. intelligence agency. "The CIA I'm sure is behind this, in my opinion," Birkenfeld said. Birkenfeld pointed to the fact that the political uproar created by the disclosures have mainly impacted countries with tense relationships with the United States. "The very fact that we see all these names surface that are the direct quote-unquote enemies of the United States, Russia, China, Pakistan, Argentina and we don't see one U.S. name. Why is that?" Birkenfeld said. "Quite frankly, my feeling is that this is certainly an intelligence agency operation.".  "If you've got NSA and CIA spying on foreign governments they can certainly get into a law firm like this," Birkenfeld said. "But they selectively bring the information to the public domain that doesn't hurt the U.S. in any shape or form. That's wrong. And there's something seriously sinister here behind this." The public relations office for the CIA did not immediately return a message for comment.  Birkenfeld also said that during his time as a Swiss banker, Mossack Fonseca was known as one piece of the vast offshore maze used by bankers and lawyers to hide money from tax authorities. But he also said that the firm that is at the center of the global scandal was also seen as a relatively small player in the overall offshore tax evasion business.

    We Stopped Pfizer’s Tax Dodge, Now Let’s End the Buybacks - Now that new Treasury Department rules have effectively thwarted Pfizer’s attempt to evade its U.S. tax obligations by using its proposed merger with Allergan to do a tax inversion, it’s time policymakers turned their attention to a far more common — and even more damaging — corporate practice: stock buybacks. This mode of distributing corporate cash to shareholders helps pump up the pay of Pfizer’s senior executives, while, as President Obama said of the tax inversion, “it sticks the rest of us with the tab.”  Last October, in justifying the proposed merger that would effect the tax inversion, Pfizer CEO Ian C. Read complained that the company’s U.S. tax burden meant that his management team had to take on global competition “with one hand tied behind our back.” But, as research by the AIRnet has shown, Pfizer makes debilitating decisions that deplete its finances far more than taxes do. During Read’s reign as CEO from 2011 through 2015, Pfizer paid out $44.7 billion in buybacks and $32.9 billion in dividends. Buybacks alone dwarfed the $16.0 billion Pfizer provisioned for U.S. income taxes over the same period.  Buybacks have clearly helped inflate the pay of Ian Read; in his five years as CEO he has raked in $76.8 million in direct compensation, of which 63% came from stock-based pay. Other senior Pfizer executives as well as stock-market traders who have been adept at timing their Pfizer stock sales have also gained from buybacks. While it’s obvious that buybacks make executives and some other shareholders rich, how buybacks “stick the rest of us with the tab” may be far less evident. Pfizer boosts its profits by charging high drug prices. Yet from 2011 through 2015, Pfizer spent an equivalent of 71% of its profits on buybacks while also distributing 52% of its profits as dividends. By charging high drug prices to enrich shareholders, Pfizer increases the healthcare burden on America’s households – who foot huge Medicare/Medicaid pharmaceutical bills as taxpayers, and face higher retail drug prices, insurance premiums, and co-payments as patients. Bringing stock buybacks by pharmaceutical companies under control is an obvious way of making healthcare more affordable.

    Tax-Rule Changes Ripple Widely - WSJ - The Treasury Department’s new corporate rules will reach far beyond the few companies that moved their legal addresses to low-tax countries, forcing many firms based in the U.S. to change their internal financing strategies and tax planning. Corporate tax lawyers, who have spent the past week trying to understand one of the Obama administration’s most far-reaching tax regulations, say the rules cast aside decades of precedents and force corporations to alter routine cash-management techniques. The rules would also end a strategy used by companies such as Illinois Tool Works to repatriate foreign profits without paying U.S. taxes. Tax lawyers were surprised at how many transactions may be affected by the rules, which address the line between internal company debt and equity. “The breadth and scope of the regs are quite a bit beyond what anyone expected,” said Jason Bazar, a partner at Mayer Brown LLP in New York, who advises companies on cross-border transactions. “They’ve assumed the worst in certain transactions and not considered the commercial considerations.” Treasury released two sets of rules April 4. The first put into regulatory language the anti-inversion notices the government issued in 2014 and 2015 and added a crackdown on “serial inverters” like Allergan that are the product of multiple inversions. In an inversion, a U.S. company takes a foreign address, typically through a merger with a smaller firm. The serial-inverter provision helped doom Pfizer’s attempt to merge with Allergan, a deal that would have put the combined company’s address in Ireland.

    Aetna Hires Tom Daschle, Other Former Government Officials, As Feds Consider Its Merger With Humana: Eleven years after leaving his post, former Senate Majority Leader Tom Daschle registered to lobby for the first time in February, filing paperwork to solely represent insurance giant Aetna. Daschle’s hiring comes at a particularly important time: Aetna has enlisted an army of former government officials-turned-lobbyists just as the company is asking the Justice Department to approve a controversial $37 billion merger with fellow insurance giant Humana. As watchdog groups warned that the merger could increase premium prices and violate antitrust laws, Aetna — which posted $60.3 billion in total revenue last year — spent a total of $4.1 million lobbying the federal government, including the office of the president, during 2015. As part of that lobbying effort, the company spent $3 million on lobbying by its own officials, and federal records show it employed a total of 25 former federal officials as lobbyists in 2015 — including many who worked on legal and antitrust issues during their time in government. In all, employees of Humana, Aetna and Aetna's outside lobbying firms have delivered more than $1.4 million worth of campaign contributions to Barack Obama's presidential campaigns, according to data compiled by Federal records show that since mid-2015 — when the proposed Aetna-Humana merger was first announced — Aetna spent $460,000 to sign up five outside lobbying firms whose federal records list the merger as an issue they are working on. Those five firms list 15 former government officials-turned-lobbyists working for Aetna in 2015.

    Are Wall Street Banks Paying Their Fair Share of Taxes? - Bernie Sanders is running a commercial that will likely get Jamie Dimon calling his tax director to mansplain the fact that JP Morgan Chase pays around $8 billion in income taxes per year. Bank of America paid over $6 billion in income taxes last year. But before we accuse Mr. Sanders of not doing his homework, let’s remember that both of these banks have very high levels of pretax income. Both of these banks also have effective tax rates below 30% even though the U.S. Federal tax rate is 35%. How did that happen? The 10-K filing for JP Morgan Chase includes passages such as:  Tax-exempt income…Represents securities which are tax exempt for U.S. federal income tax purposes…Non-U.S. subsidiary earnings…Predominantly includes earnings of U.K. subsidiaries that are deemed to be reinvested indefinitely. 10-K filing for Bank of America notes:  The effective tax rate for 2013 was 29.3 percent and was driven by our recurring tax preference items and by certain tax benefits related to non-U.S. operations, partially offset by the $1.1 billion negative impact from the U.K. 2013 Finance Act, enacted in July 2013, which reduced the U.K. corporate income tax rate by three percent. The UK income tax rate is 20% and if these banks strangely used transfer pricing to shift income out of the UK into the US, their income tax authority would surely object. Of course the IRS should make sure income shifting is not going the other way. But I know of no evidence that either bank is abusing transfer pricing to avoid U.S. income. The other item in both of their 10-K filings relate to the tax exemption for municipal bonds.

    Wall Street Campaign Cash Has Flooded Into States That May Try To Close Wall Street’s Big Tax Loophole: Hundreds of protesters were led away from the steps of the United States Capitol on Monday, hands secured behind their backs with white plastic zip ties after they refused to stop their demonstration against the carried-interest tax loophole, which lets wealthy hedge fund managers pay lower tax rates on much of their income. While efforts to close the loophole have stalled in Congress, advocacy groups are now pressing legislators in seven states to end the same tax preference in their local tax codes — a move that would bring in nearly $7.5 billion a year in fresh tax revenue. Proponents of the reform argue that state tax codes should not allow hedge fund managers and private equity executives to classify the “carried interest” earnings they make off of clients' investments as capital gains, which are taxed at lower rates. They say those earnings should instead be taxed as regular income. The trouble for those advocates, however, is that — just as in Washington, D.C. — the finance and investment industry in those states is a major campaign contributor. According to state data compiled by the National Institute on Money in State Politics and reviewed by International Business Times, financial interests have flooded state politician campaign coffers with $158 million since 2010, including more than $24 million to the current governors of those states. That gubernatorial cash haul includes nearly $14 million from 10 of the highest-earning hedge fund managers.

    U.S. Corporate Taxes May Be 16% or 40%—It’s All How You Do the Math - WSJ: What do the biggest U.S. companies actually pay in corporate taxes? Good luck figuring that out. In 2012, profitable large corporations in the U.S. paid an average tax rate of 16.1% and about one-fifth paid no taxes at all, according to a new Government Accountability Office report. “At a time when Republicans tell us that we don’t have enough money to rebuild our crumbling infrastructure or provide universal child care, maybe, just maybe we should stop allowing huge corporations to pay nothing in federal income taxes,” said Democratic presidential candidate Sen. Bernie Sanders, who asked for the study. “Corporate greed is destroying the fabric of America. It must come to an end.” But calculated a different way, those same companies paid 17.3%, or 18.5%, or 19.5%, or 21.1%, or 22% or 23% or 26.3% in taxes. Where does that data come from? The very same GAO report. What is going on here? Let’s flash back to sixth-grade math. To calculate a tax rate expressed as a percentage, you need two things: A numerator (taxes) and a denominator (income). Each of those requires a choice. Are the taxes just U.S. taxes or should they include foreign taxes? Should taxes be measured under accounting standards or as actual taxes paid? Should the rate reflect the fact that companies can make a profit this year but deduct past years’ losses? Should all companies be included or just ones making a profit? Should it focus on large corporations as GAO defines them with assets over $10 million or on the very largest companies with assets exceeding $2.5 billion?

    It’s time to raise, not lower, corporate income taxes -- While the rest of us will dutifully pay our fair share of taxes on April 18th, we should not be surprised if some large multinational corporations in the United States don’t pay any taxes at all this year. The U.S. corporate income tax base has eroded rapidly in recent decades. While corporate income tax revenue was 5.9 percent of GDP in 1952, last year it accounted for only 1.9 percent of GDP. The Treasury Department’s recent actions to stem the tide of corporate inversions were an important step in slowing the erosion of the U.S. corporate income tax base. Unfortunately, corporate inversions are just the tip of the iceberg of corporate tax avoidance. The corporate income tax code is riddled with special interest loopholes. For example, businesses can reorganize their legal structure to avoid corporate taxes, and they can defer taxation indefinitely on foreign profits. Congress can and should close these (and other) loopholes. Beyond closing these loopholes, any corporate tax reform should raise revenue. The corporate income tax largely falls on the owners of capital, making it a steeply progressive form of taxation. Given the rise in economic inequality, we cannot afford to lock in the erosion of such a progressive form of taxation with misguided corporate tax reform that doesn’t raise any net new revenue.

    Oxfam: Top U.S. Corporations Have Stashed $1.4 Trillion Offshore --The top 50 U.S. companies have stored $1.4 trillion in tax havens, Oxfam America reported Thursday. Oxfam released its new report, “Broken at the Top,” ahead of Tax Day in the U.S. and shortly after of the Panama Papers leak to show the extent to which major corporations such as Pfizer, Walmart, Goldman Sachs, Alphabet, Disney and Coca-Cola keep money in offshore funds. The use of over 1,600 subsidiaries lowered their global tax rate on $4 trillion of profit to an average of 26.5%, compared to the statutory minimum of 35%, according to Oxfam. Additionally, for every dollar of taxes these companies paid, they collectively received $27 in federal loans, loan guarantees and bailouts — footed by American taxpayers. “The vast sums large companies stash in tax havens should be fighting poverty and rebuilding America’s infrastructure, not hidden offshore in Panama, Bahamas, or the Cayman Islands,” Oxfam America president Raymond Offenheiser said in a statement.

    The Real Welfare Cheats: We often hear how damaging welfare dependency is, stifling initiative and corroding the human soul. So I worry about the way we coddle executives in their suites.  A study to be released Thursday says that for each dollar America’s 50 biggest companies paid in federal taxes between 2008 and 2014, they received $27 back in federal loans, loan guarantees and bailouts. Goodness! What will that do to their character? Won’t that sap their initiative? ... The study compiled by Oxfam says that each $1 the biggest companies spent on lobbying was associated with $130 in tax breaks and more than $4,000 in federal loans, loan guarantees and bailouts. ... One academic study found that tax dodging by major corporations costs the U.S. Treasury up to $111 billion a year. ... Among the 500 corporations in the S.&P. 500-stock index, 27 were both profitable in 2015 and paid no net income tax globally... Those poor companies! Think how the character of those C.E.O.s must be corroding! And imagine the plunging morale as board members realize that they are “takers” not “makers.” ...  When congressional Republicans like Ted Cruz denounce the I.R.S., they empower corporate tax cheats. ... Meanwhile, no need to fret so much about welfare abuse in the inner city. The big problem of welfare dependency in America now involves entitled corporations. So let’s help those moochers in business suits pick themselves up and stop sponging off the government.

    Wall Street Wages Double in 25 Years as Everyone Else’s Languish -- Five years after Occupy Wall Street protesters took over Zuccotti Park in downtown Manhattan, spawning a national discussion about the divide between America’s highest and lowest earners, the pay gap has only gotten wider. Now, even as bankers bemoan their declining bonuses and job prospects, it’s helping fuel the campaigns of Donald Trump and Bernie Sanders. The spread is even more pronounced over the past 25 years. When adjusted for inflation, wages for investment bankers and securities-industry employees, including salary and bonuses, increased 117 percent from 1990 through 2014, according to U.S. Bureau of Labor Statistics data. Over the same period, wages for all other industries rose 21 percent, to $51,029 in 2014, about one-fifth of the $264,357 that bankers and brokers earned that year. The investment banking and securities-dealing industry includes companies primarily engaged in underwriting, originating and maintaining markets for securities. Presidential candidates have been quick to capitalize on the gap. Front-runners for both parties -- Democrat Hillary Clinton and Trump, the billionaire Republican -- have targeted a law that allows financial managers to have their income taxed at a lower rate. Sanders, a Vermont Senator, has proposed taxing Wall Street speculators to pay for his proposal to make public colleges free. Texas Senator Ted Cruz has mocked Manhattan money and said he’d let big banks go bankrupt. “This wage differential is right at the top of both Trump’s and Sanders’s agendas as one of the issues that most resonates with the public,” said John Challenger, chief executive officer of Chicago outplacement company Challenger, Gray & Christmas. “The end result is in the anti-Wall Street current that’s been rumbling around the U.S.”

    Court Case Against the CFPB Hinges on These Four Issues -  A federal appeals court has set the stage for yet another legal showdown over the Consumer Financial Protection Bureau's structure in a major test of the bureau's authority. The U.S. Court of Appeals for the D.C. Circuit will hear oral arguments Tuesday about the single-director structure of the CFPB. The closely watched case, PHH v. CFPB, is widely expected to be appealed to the Supreme Court, even though a ruling is not likely until the end of the year. In questions last week, two judges focused on constitutional issues raised by PHH Corp., a New Jersey mortgage lender that appealed a $109 million judgment last year by CFPB Director Richard Cordray. The agency's director had overturned an administrative law judge's $6.4 million fine alleging PHH illegally accepted kickbacks from mortgage insurers to whom it had referred customers, arguing it did not take into account the extent of the damage done to consumers by the firm. As part of PHH's suit, it argued that the CFPB's single-director structure violates the Constitution's separation of powers doctrine by limiting the president's "removal authority." Under the statute creating the agency, the CFPB director can only be removed "for cause," setting up a possible constitutional conflict. Lawyers will parse the roughly 15 minutes or so of oral arguments Tuesday to glean how the three-judge panel might rule. In a case with a wide range of possible outcomes, experts are focused on four major issues:

    • Constitutional Questions About the Authority of a Single Director
    • The CFPB's Novel Interpretation of Respa
    • The Scope of the CFPB's Statute of Limitations
    • The Amount of Damages - One of the most galling aspects of the case for many in the industry was Cordray's decision to expand the scope of the allegations and increase the disgorgement amount to $109 million from $6.4 million.

    CFPB Gets Pummeled in Court Hearing on Constitutionality — Federal appeals court judges hearing a case challenging the constitutionality of the Consumer Financial Protection Bureau appeared highly receptive to arguments that the agency's single-director structure violates the Constitution. "This is a novel structure with very few precursors that I found — very few even historical" precursors, Judge Brett Kavanaugh, one of three judges considering the case, said during oral arguments on Tuesday. "If you have that kind of structure, you want it to be a group of nonpartisan or bipartisan commissioners." Lawrence Demille-Wagman, a senior litigation counsel for the CFPB, argued that Congress had endowed different executive agencies with a variety of structures, ranging from bipartisan commissions like the Securities and Exchange Commission and the Commodity Futures Trading Commission to executive agencies like the Office of the Comptroller of the Currency and the Social Security Administration. But Kavanaugh countered that in the cases of agencies led by a single director, the top officials serve at the pleasure of the president. At issue was a court battle between the nonbank mortgage lender PHH, which sued the CFPB after the agency's director, Richard Cordray, issued an order against the firm for $109 million over an alleged kickback scheme. As part of the suit, PHH argued that the agency's single-director structure and its funding outside of congressional appropriations were unconstitutional. During oral arguments, Kavanaugh appeared more supportive of the CFPB's claims that many agencies receive funding outside of Congress."On that issue, you're right," Kavanaugh told Demille-Wagman. "On the single-headed agency, not so much." It was a bad sign for a case that could have critical implications for the CFPB.

    D.C. Circuit Poised to Disrupt Consumer Protection Bureau Power Structure | National Law Journal: A federal appeals panel in Washington on Tuesday appeared ready to disrupt the organizational structure of the Consumer Financial Protection Bureau, which vests power in the hands of a single director. During arguments in the U.S. Court of Appeals for the D.C. Circuit in a challenge to the constitutionality of the consumer agency, the question appeared to be not whether the judges would alter the bureau’s structure, but rather how much. The judges pressed the bureau’s lawyer to defend the novelty of the CFPB’s structure and why it didn’t violate separation of powers. A single director heads the bureau, and the president’s ability to remove the director is limited. It is “very dangerous in our system” to vest so much power in one person, Judge Brett Kavanaugh said during arguments. The three-judge panel could declare the bureau’s structure unconstitutional in its entirety, or the judges could chip away at a smaller piece—by expanding the president’s authority to remove the director, for instance. The judges and the lawyers arguing on Tuesday did not address how a decision declaring the bureau unconstitutional would affect its previous actions. Olson argued that a ruling that only addressed future actions by the bureau would not be sufficient. The court considered the case of PHH Corp., which provides home mortgage loans. PHH in 1994 created Atrium Insurance Co., which provided mortgage insurance providers with “reinsurance,” taking on some of the risk. PHH appealed a determination last year by CFPB Director Richard Cordray that the company engaged in a kickback scheme by referring customers only to mortgage insurers that had contracts for reinsurance from Atrium. PHH challenged Cordray’s decision on the grounds that he wrongly interpreted the federal Real Estate Settlement Procedures Act and more broadly that the director’s decision was invalid because the bureau itself was unconstitutional.

    CFPB's Payday Rule Poses Real Danger to Lenders | Bank Think -- A recent piece in BankThink by Ken Rees endorsing the Consumer Financial Protection Bureau’s short-term lending rule calls for it to be issued without any further delay. But Rees incorrectly leads readers to believe that the CFPB is contemplating a modest set of changes designed to enhance competition and improve consumer protection, and that payday lenders want to thwart these regulations through delay. This is simply not the case. The truth is the CFPB has quickly moved to a regulatory solution that creates more problems than it solves. As was shown through a mandated review of the pending proposal by a small-business advisory panel – convened by the bureau – an estimated 80% of small and medium-size lenders subject to the envisioned regulation could be driven from the market. Competition and innovation would be greatly diminished. Rees passes over the many questionable features of the CFPB’s approach: using an ability-to-repay standard that exists in no form within a real-world model; adopting an arbitrary 60-day cooling off period between loans for a borrower; establishing a limit on the number of loans for an individual that is both arbitrary and devoid of consideration of the consumers’ needs; and ignoring the availability of many alternative, effective reforms that better serve consumers and operators.  The changes imposed by the looming CFPB proposal would force many operators to shut down, leaving consumers scrambling for other forms of credit that are not readily available. For those left searching for alternatives, Rees provides a very limited solution that would only benefit the least risky of borrowers. Such selectivity would not begin to serve the needs of the 19 million households that currently use short-term credit.

    Obama SEC Pick Lisa Fairfax in Limbo Because of Lack of Substance on Everything, Not Just Corporate Political Spending Disclosure -- David Dayen - My initial understanding of the vacancies on the Securities and Exchange Commission was that the selection of Lisa Fairfax last October to replace Luis Aguilar as a Democratic commissioner represented a victory for the reform coalition in the Senate. In fact I've written as such. Covington & Burling lawyer Keir Gumbs was the clear choice of the Administration, but his work advising issuers and investors about corporate disclosure of political activities, which opponents defined as advising CEOs to hide their political spending, did him in. Fairfax, a law professor at George Washington University, was reportedly put forward by Sherrod Brown and placed on a list of acceptable nominees by Elizabeth Warren (there's some question now of whether or not that was the case). Swapping Fairfax for Gumbs was reported as a win for the reformers. So why did Democrats block her from advancing in the Senate Banking Committee, probably dooming her nomination?  The reversal, or at least perceived reversal, turned on the same issue that tripped up Gumbs: a long-delayed measure to force public companies to disclose their political spending. But that masks a larger dissatisfaction with Fairfax, in particular for her vague, mushy answers both in public and in private meetings with Senators. She has earned a reputation as something of a cipher, whose presence on the SEC could be malleable depending on the other leadership.

    Caesars Bankruptcy Fight Over Alleged Fraudulent Transfers Opens Window on Private Equity Looting -- Yves Smith - Private equity firms Apollo and TPG did such an effective and over-zealous job of asset stripping after loading up their 2008 acquisition, Caesars Entertainment, with over $18 billion of debt that they’ve been hauled into court by creditors who are charing the two firms with fraudulent conveyance. And yes, sports fans, the operative word is fraud. The underlying idea is that if a company is insolvent, yet the people in charge divert cash or other assets to themselves, they’ve stolen from creditors and need to give the money back. The British, by the way, have a simpler approach to this issue. If a company is “trading insolvent,” as in continuing to operate while broke, the directors are personally liable.  Cases based on arguing fraudulent comparatively rare; one of the largest in recent years that involved similar claims, namely fraudulent conveyance and breach of fiduciary duty, was by Mervyns against the consortium of private equity firms that bought it, which included Cerberus and Sun Capital, as well as other parties, was settled in 2012 $166 million. By contrast, a court-appointed examiner last month found that creditor claims against the Apollo and TPG in the Caesars deal are between $3.6 to $5.1 billion before including criminal and common law fraud claims. The report also stated that the Caasers subsidiary that held most of the company’s assets was insolvent mere months after the 2008 acquisition.  And by happenstance, CalPERS is an investor in the Caesars, which filed for bankruptcy in early 2015. Some Caesars employees visited a CalPERS board meeting in July 2013 meeting to describe how Apollo and TPG were ruining the company for fun and profit. A representative of the union Unite Here, which represented some of the casino workers, spoke first. Her account makes clear how private equity firms profit whether the deal works out or not:

    Feds charge Texas AG Ken Paxton with fraud -- Dallas Morning News: – The U.S. Securities and Exchange Commission accused Texas Attorney General Ken Paxton on Monday of breaking federal securities laws, yet another blow to the first-term Republican, who faces three criminal indictments and a state bar complaint. The new civil charges allege Paxton convinced – even “pressured” – five people to invest in a North Texas tech firm called Servergy Inc., all while hiding that he had not invested himself, and was, in fact, getting paid a commission by the company. “Despite a duty to do so, Paxton knowingly or recklessly failed to inform the individuals he recruited that he was being compensated to promote Servergy to investors,” the SEC complaint read. . Paxton is accused of raising $840,000 from investors for the company in exchange for 100,000 shares of Servergy stock from then-chief executive William Mapp III.  Paxton will fight these new charges in federal court, his attorney said Monday, while he simultaneously appeals three criminal indictments a Collin County grand jury lodged against him last year. Two of the indictments allege the same misconduct as mentioned in the SEC charges, while a third accuses him of funneling clients to a friend’s investment firm without being properly registered with the state.

    Bill Black: “Liberal” Economists Cheered the New Democrats’ Deregulation of Finance - This is the second part of my series on how Hillary and Bill Clinton and Paul Krugman have pivoted in response to Bernie Sanders’ series of electoral wins and are racing hard right on finance and crime.  In my first column I wore my criminology “hat” to explain how Bill was disinterring outrageous (false and racist) positions that Hillary and he had once championed.  This was all the more bizarre because Hillary and Bill had recently repudiated those positions.  In the mid-1990s, Hillary and Bill sought to spread a “moral panic” about subhuman black “super predators” in order to secure passage of the crime bill that led to mass incarceration and then to maintain the 100-to-one disparity in sentencing for crack v. powder cocaine once it was known that the scientifically baseless sentencing disparity was leading to a dramatic rise in the incarceration of blacks and Latinos.  I also deplored Bill’s false claim that Black Lives Matter protesters were “defending” those who murdered black children. In this second column I provide context essential to understanding Krugman’s race to the right on finance.  Readers are unlikely to understand how ultra-right wing the economic policies were of the Clinton administration.  Bill Clinton and Al Gore were two of the most powerful leaders of the “New Democrats” – a group of Democrats determined to move the party strongly to the right on economics, budget, national security, regulation, and crime.  The New Democrats’ policy apparatus was funded overwhelmingly by Wall Street but its ideological support came from economists who were “liberal” on some social issues.  The Clintons and Gore delivered for Wall Street by embracing the three “de’s” – deregulation, desupervision, and de facto decriminalization that encouraged and allowed twin bubble to rapidly expand.  The “dot com” bubble was the first bubble to burst.  The housing bubble burst in late 2006, leading to the financial crises of 2008 and the Great Recession that began in 2007.

    Rise of Institutional Investors Raises Questions of Collusion -  BlackRock, Vanguard and other big institutional investors own roughly 70 percent of the public stock market, according to some reports. People are starting to ask whether this allows companies — now having the same owners — to compete less and raise prices.In Senate testimony last month, the Justice Department’s antitrust chief, William J. Baer, said the department was investigating the potential antitrust implications of the rise of institutional shareholders. More specifically, he noted that institutional shareholders hold big minority stakes in many companies in the same industry.Take, for example, the airline industry. Across all of its funds, BlackRock held 8.3 percent of United, 6.6 percent of JetBlue, 4.7 percent of Delta and 4.5 percent of Southwest, as of March 31, 2013. Mr. Baer said the Justice Department was exploring whether such cross-ownership either explicitly or implicitly pushed companies to compete less.After all, if there is less competition in the airline industry and higher fares result, it will arguably benefit BlackRock over all, because it holds shares in not just one company but several in the industry. Less competition may mean higher costs for consumers but more profits for the airlines and BlackRock’s investors.Asked about the Justice Department investigation, a spokesman for BlackRock noted to Bloomberg last year that most of the asset manager’s funds were not actively managed and that “while we can’t comment on the D.O.J.’s investigation of the airline industry, we expect fair and ethical competition between the companies we invest in on behalf of our clients.”

    Investors Pour $10.7 Billion Into Junk Bonds as Fears Fade -- Investors poured the most money in more than four years into junk-bond debt last month as memories faded of December’s collapse of Third Avenue Management’s mutual fund, which sent tremors through the high-yield credit market. About $10.7 billion in net inflows streamed into junk funds in March, according to Morningstar Inc., after a rebound in oil prices also helped restore confidence in the debt. “It seemed it was a big scare at the time,” Morningstar analyst Alina Lamy said in an interview. “Based on the past couple of months, it seems like they forgot about it pretty quickly.” Plunging oil, gas and coal last year dragged down the high-yield market, allowing investors this year to cherry pick non-energy related credit that had fallen in price but was less vulnerable to default. In February, investors jumped back in, adding about $3.7 billion to high-yield funds. The March inflow was the biggest one-month gain for high-yield debt since $11.1 billion in October 2011, according to Morningstar. Actively managed junk funds attracted $7.3 billion in March compared with $3.4 billion to passively managed funds.  .In the 12 months through March, investors pulled a net $10.6 billion from high-yield funds, including $11.2 billion in December redemptions. That month, Third Avenue froze withdrawals on its $788 million Focused Credit Fund, triggering a selloff in high-yield bonds.

    We Haven’t Seen This Big Red Flag since the Great Recession -- The junk bond market continues to show signs of cracking… For months now, we’ve pointed to the decline of junk bond values as one of the biggest red flags in the entire market. The bond market is where companies, countries, and individuals go to borrow money. It’s far larger and more important than the stock market. The U.S. bond market, for instance, is about twice as large as the U.S. stock market. If an economy, industry, or company is in trouble, warning signs usually appear in the bond market long before they show up in the stock market. We’ve focused specifically on the bond market’s riskiest offerings, junk bonds, which are bonds issued by companies with shaky balance sheets. They’re riskier than bonds issued by strong companies, so they pay higher yields. When the economy slows down, companies in poor financial shape feel the pain first. That’s why junk bonds often point out problems before other assets do.

    US Commercial Bankruptcies Suddenly Soar | Wolf Street: Leaving ugly skid marks on the economy, banks, and investors. The “end of the credit cycle” is a harmless-sounding moniker for an era when defaults and bankruptcies suddenly re-materialize, as if out of nowhere, and when investors get to eat big losses in what they thought were conservative investments. It’s when new money for Corporate America gets a little more skittish, and credit just a little tighter – not all at once, but over time. And for over-indebted junk-rated companies, that slight tightening and the accompanying rise in rates at the top triggers liquidity crises, defaults, and bankruptcies at the bottom. Ratings agencies have responded to the end of the credit cycle by downgrading companies in a relentless tango. With each downgrade, credit tightens just a bit more for these companies, causing additional risks and operational difficulties. As liquidity dries up for them, they slash investments and cut costs, which wipes out the hope for growth – the essential ingredient that kept the illusion alive. In that vein, Standard & Poor’s reported that it downgraded 44 US junk-rated companies in March, while upgrading just 15. This comes on top of the 82 issuers it downgraded in February. In the first quarter, about 45% of S&P’s downgrades hit oil & gas companies. Not a surprise, given the state the industry is in. But 55% of the downgrades hit companies outside oil & gas! Note that top among the reasons S&P cited for the March downgrades is “operating performance.” That includes the disappearing hope for growth:

    Sorry Paul, but the Bailout WAS about the Banks -- Paul Krugman claims that "Many analysts concluded years ago" that the big banks were not at the heart of the financial crisis and that breaking them up would not protect us from future crises.  Incredibly, his claim is linked to an article by ... Paul Krugman.  Maybe a Nobel Prize comes with a license to cite oneself as Gospel authority, but I don't believe that Krugman's Nobel Prize was for his expertise on bank regulation.  So what's wrong with Krugman's claim?  Let's go piece by piece.

    • Claim 1.  "Predatory lending was largely carried out by smaller, non-Wall Street institutions like Countrywide Financial." Wrong.  The actual loan origination was generally not carried out by Wall Street institutions.  It was carried out by mortgage companies, mortgage brokers, and commercial banks (I can only think of only two large commercial banks that are "Wall Street institutions--Citi and JPMorgan).  But this is silly.  It's like saying that the banks didn't do the origination, their loan officers did.  The mortgage companies, mortgage brokers, and commercial banks were just origination agents for a Wall Street-based securitization machine.  The Wall Street institutions provided the funding for the predatory lending--warehouse lines of credit from commercial banks and then the ultimate funding from securitizations organized by Wall Street.  Absent securitization there just isn't that much predatory mortgage lending.  The proof is the disappearance of all of the subprime mortgage companies with the implosion of the securitization machine.  And for the cherry on top, let me note that Krugman ignores the direct ownership of some of the mortgage companies and commercial bank originators by Wall Street institutions.  Lehman, Bear Stearns, Goldman, AIG...all owned origination entities. 
    • Claim 2.  "The crisis itself was centered not on big banks but on 'shadow banks' like Lehman Brothers that weren't necessarily that big." Wrong.  This is semantics.  Krugman seems to equate "bank" with depositary (which is not consistent with equating "banks" with "Wall Street").  That's not right.  For starters, many investment banks owned depositaries.  But more to the point, when people talk about breaking up the "banks," they aren't referring to "depositaries" but to large financial institutions of any stripe. The reason is two-fold.  

    One Forgotten Document Casts Embarrassing Light on Krugman’s “Sanders Over the Edge” Column -- Economist Paul Krugman has repeatedly attempted to recast the 2008 Wall Street collapse as triggered by shadow banks rather than the biggest banks on Wall Street. Krugman refuses to let the facts on the ground get in his way. (Later in this article, we’ll produce a document to show just how ridiculously off base Krugman really is.) On December 14, 2014 Krugman wrote in his column at the New York Times: “In fact, I’d argue that regulating insured banks is something of a sideshow, since the 2008 crisis was brought on mainly by uninsured institutions like Lehman Brothers and A.I.G.” Apparently, Krugman, like his colleague Andrew Ross Sorkin, is ignorant of the fact that both Lehman Brothers and AIG owned FDIC-insured banks at the time of their failure, backstopped by the U.S. taxpayer. Last Friday, Krugman was back at his propaganda desk again, this time attacking Presidential candidate Senator Bernie Sanders in the process. In his column perniciously titled “Sanders Over the Edge,” which the New York Times has generously decided not to put behind its pay wall, Krugman attempts to undercut Sanders’ pledge to break up the big banks by regurgitating the same set of false facts. When Krugman says “the crisis itself was centered not on big banks,” he has placed himself on factually unsupportable ground. The two largest taxpayer bailouts in the crisis were Citigroup, the largest U.S. commercial bank by assets in 2008, and AIG, the big insurance company, which was in fact a bailout of the biggest banks. Citigroup received a bailout of $45 billion in equity infusions; over $300 billion in asset guarantees; and more than $2 trillion in cumulative, below-market-rate loans from the Federal Reserve. Citigroup was such a basket case in 2008 that those Federal Reserve loans were kept secret until Bloomberg News pried them loose after years of court battle.

    Krugman Kinda, Sorta Retracts a Key Part of Last Friday’s ‘Sanders Over the Edge’ Op-ed naked capitalism Yves here. You have to look really hard to see this as a retraction. Sanders’ name is not mentioned once in the current Krugman op-ed, while Sanders was named in the headline of last week’s op-ed and that op-ed title is featured clearly right below Krugman’s latest column. But Mann is probably correct, that for Krugman, this part she flags is meant as a retraction, or at least a walkback, which is just further confirmation of how intellectually dishonest he is. Beverly Mann: I posted here twice in the last few days about the stunningly bungled political commentary about the New York Daily News editorial board interview of Sanders, a transcript of which that paper released last Tuesday.  The second of my two posts was titled:Why did Paul Krugman and the Washington Post editorial board—both of whom know better—misrepresent that it was Sanders rather than the New York Daily News editorial board that was wrong about what Dodd-Frank provides, and about whether it would be Treasury or instead the financial institutions themselves that would determine the method of paring down? In today’s op-ed Krugman has retracted that allegation against Sanders in his op-ed from last Friday.  But what prompted the retraction—and especially the timing of it—is itself important: The federal judge’s opinion in the MetLife case was issued on March 30, the news reports about it were published mostly on March 31, and the New York Times published a critical editorial on it on Apr. 4, the day of the New York Daily News editorial board’s interview of Sanders. A significant part of the media-criticism frenzy of Sanders for saying that he was unsure about the extent to which Dodd-Frank authorizes the federal government to determine that a financial institution is systemically so important because of its size that it must be pared down concerned questions about that opinion, by that one federal judge, issued less than a week earlier and containing some strange and unexpected—and inaccurate—statements about the relevant part of that statute.

    U.S. banks' dismal first quarter may spell trouble for 2016 | Reuters: It is only April, but some on Wall Street are already predicting a rotten 2016 for U.S. banks. Analysts say it has been the worst start to the year since the financial crisis in 2007-2008 and expect poor first-quarter results when reporting begins this week. Concerns about economic growth in China, the impact of persistently low oil prices on the energy sector, and near-zero interest rates are weighing on capital markets activity as well as loan growth. Analysts forecast a 20 percent decline on average in earnings from the six biggest U.S. banks, according to Thomson Reuters I/B/E/S data. Some banks, including Goldman Sachs Group Inc (GS.N), are expected to report the worst results in over ten years. This spells trouble for the financial sector more broadly, since banks typically generate at least a third of their annual revenue during the first three months of the year. "What's concerning people is they're saying, 'Is this going to spill over into other quarters?'" Goldman's lead banking analyst Richard Ramsden said in an interview. "If you do have a significant decline in revenues, there is a limit to how much you can cut costs to keep things in equilibrium."

    Banks Face New Headache on Oil Loans - WSJ: The $147 billion question for banks: Will energy companies max out their credit lines? When big banks announce earnings starting Wednesday, the spotlight will be on vast energy loans that most investors didn’t know much about until recently. These unfunded loans have been promised to energy companies, which haven’t yet tapped the money. Many banks historically haven’t disclosed these loans, but began doing so recently following the extended slide in prices for oil and gas.  In the first quarter, a handful of energy borrowers announced more than $3 billion of drawdowns against these types of loans. Those commitments are expected to trickle down to bank earnings and saddle firms with more energy exposure just as they are trying to pare it back. “Let’s not sugarcoat it. This is not necessarily a loan a bank wants to make at this point,” said Glenn Schorr, a bank analyst at Evercore ISI. Oil prices have risen in recent weeks, with the U.S. benchmark settling at $42.17 a barrel on Tuesday, but analysts say the unfunded loans to the sector still are a headache for banks at that price. Banks in recent months have set aside billions of dollars to cover potential losses tied to energy companies, a trend likely to continue as more loans go bad. Fitch Ratings Inc. released a report Tuesday that said that nearly 60% of unrated and below-investment-grade energy companies are likely to have loans labeled as “classified,” or in danger of default under regulatory guidelines. “Banks often use a company’s proven energy reserves as collateral for loans and typically reset the value of these reserves twice a year, usually in spring and fall. The draws made so far were done ahead of the spring redetermination process, in which banks are expected to cut the credit lines of energy firms by an average of more than 30%, according to a survey from law firm Haynes & Boone LLP.

    Oil And Gas Sector Troubles Drive Corporate Default Rate To Highest Level In Seven Years: S&P -- The troubled oil and gas industry has been a big factor in driving global corporate defaults to their highest rate in seven years. Four more companies defaulted this week, bringing the overall tally to 40 so far this year, the ratings agency Standard & Poor’s said Friday in a research note. The last time defaults hit such heights was in the depths of the global recession in 2009. About one-third of that total, or 14 defaults, came from oil and gas companies, which are struggling to pay off debt acquired when oil prices were higher. U.S. crude prices are down more than 60 percent from their June 2014 peak of $105 a barrel, trading at around $39 a barrel Friday. Investors now face tens of billions of dollars in energy defaults as the worst oil crash in decades leaves drillers struggling to stay afloat.  U.S. companies saw the highest number of defaults, with 34 of the total thus far in 2016. S&P in February lowered its ratings on Paragon Offshore PLC to "D," or "default," after the Houston company said it was filing for Chapter 11 bankruptcy protection and had entered talks with bondholders and other creditors. The ratings agency also slapped a D rating on Energy XXI Ltd., which said in March it would delay two interest payments on loans worth a combined $1.54 billion. Despite the gloomy days, some investors are still banking on a near-term recovery. Investors issued around $8.9 billion in equity to U.S. oil and gas companies in the first quarter  — a more than tenfold jump above the $0.8 billion in equity issued in the same period last year, the Carbon Tracker Initiative said Wednesday in a report, citing Bloomberg data on 60 exploration and production companies.

    Wells Fargo Misjudged the Risks of Energy Financing -  At its annual investor conference in San Francisco in May 2014, with oil trading at $102 a barrel, Wells Fargo & Co. boasted that in just two years it had almost doubled its energy exposure and seized the title of Wall Street’s top oil and gas banker. The timing couldn’t have been worse. Crude prices peaked a month later and have since plummeted to $40. Wells Fargo has downgraded 38 percent of its energy loans and set aside $1.2 billion to cover potential losses, according to company filings. The loans are coming under increasing scrutiny from regulators and investors, even though they make up only 2 percent of the bank’s portfolio. Wells Fargo’s foray into oil shows how Wall Street misjudged the risks hidden in an esoteric type of energy financing long thought to be bulletproof. To fuel the growth of its energy desk, the bank targeted some of the least creditworthy borrowers in the shale patch, offsetting the risk by demanding oil and gas as collateral. This type of financing, known as reserves-based lending, was considered safe because banks historically got back every penny they loaned, even after default, according to a 2013 Standard & Poor’s report. “The perception was the risk was reasonably low,” Dennis Cassidy, co-head of the oil and gas practice at consulting firm AlixPartners in Dallas, said of reserves-based lending across the industry. “The volume and velocity of deal flow was such that it was a rubber stamp. They were not scrutinizing price assumptions and forecasts. Everyone was open for business. It was full on, full throttle.”

    Wells Fargo Has A Problem: $32 Billion In Junk-Rated Oil And Gas Exposure - The Full Breakdown -- Following its recent critical profile by Bloomberg which earlier this week penned, "Wells Fargo Misjudged the Risks of Energy Financing", which came about 4 months after we wrote an almost identical report, the biggest US bank by market cap knew it had to reveal more than just the usual placeholder data in its investor presentation today. Sure enough, Warren Buffett's favorite bank finally opened its books more than usual as concerns built about its $17.4 billion in total outstanding oil and energy loans (at the end of 2015). This is what it revealed. First, the big picture. As the chart below shows, Wells' net income has been consistently declining in the past year, with earnings of $5.5BN down from $5.8BN a year ago even as revenues grow 4% over the same period. Here is the reason: Net Interest Margin continues to decline, as a result of the continued curve flattening. This ongoing decline in NIM is forcing Wells to issue ever more loans to maintain its average loan/yield constant. As the chart below shows, it is doing just that, with period end loans outstanding soaring by $86BN from a year ago to $947.3BN. All of that, however has to do with the structural constraints of the economy, and the ongoing collapse in rates. What about Wells' overall credit book? Here we find some curious observations here. Net charge-offs rose to $886 million, up $55 million, or 7%, LQ on $87 million higher oil and gas portfolio losses. And yet, despite the abovementioned $17.8 billion (as of Q1) in loans to oil and energy and despite the deteriorating conditions, Wells only built reserves by a paltry $200 million reserve build in the quarter, resulting in a 0.38% net charge-off rate "as continued improvement in residential real estate was more than offset by higher oil and gas reserves."

    US banks spell out toll of low oil prices -- Three of America’s biggest banks have each taken $500m hits on their energy portfolios and warned of more pain to come, as they spelt out the damage inflicted by lower oil prices. Wells Fargo, Bank of America and JPMorgan Chase were among the most aggressive lenders to the oil boom, putting together portfolios on the basis that high prices were here to stay. But as explorers and producers continue to struggle with crude at about $40 a barrel, down more than 60 per cent from the 2014 peak, the bills are coming due for the lenders that backed them. Wells on Thursday announced that it would pump up its reserves for energy losses to $1.7bn, from $1.2bn at the end of the fourth quarter, while Bank of America added $525m to its buffer. A day earlier, JPMorgan Chase said it had increased its reserves by $529m during the quarter — and said it could add another $500m by the time the year is out.The disclosures have been the focus so far of the US banks’ first-quarter earnings season. On each earnings call, analysts have repeatedly grilled executives on their discussions with borrowers, asking if the troubles on the oil patch were likely to get worse — and if the banks were seeing spillover effects in other areas such as mortgages, car loans and credit cards.The banks have emphasised that their energy loans are manageable, accounting for about 2 per cent of their total loan books.They have also stressed that second-round effects of the oil slide appear, for now, to be contained to oil-dependent regions. Wells Fargo said it had spent a lot of time examining consumer portfolios in states such as Texas, Oklahoma and the Dakotas, and noted that delinquency rates were now more in line with nationwide averages, after years of outperformance. "We in the financial markets got worried about stresses spreading; it looks like that was overblown,” said Brennan Hawken, an analyst at UBS.

    More Energy Defaults: Energy XXI Files Chapter 11; Gulf Keystone Delays Bond Payment -- Following yesterday's historic bankruptcy of the world's largest coal miner Peabody Energy, the defaults continue hot and heavy overnight when first Energy XXI, which had already warned it would unlikely make its bond payments, filed for a prepack Chapter 11, and then Gulf Keystone announced it would delay a bond payment. This is what XXI posted overnight to explain its prepackaged bankruptcy:  Energy XXI Enters Restructuring Support Agreement With Second Lien Noteholders to Strengthen Balance Sheet and Reduce Debt  Energy XXI announced today that it and certain of its subsidiaries have entered into a Restructuring Support Agreement (the "RSA") with holders of more than 63% of  the Company's secured second lien 11.0% notes (the "Second Lien Notes") on the  material terms of a balance sheet restructuring plan that will strengthen the Company's financial position by reducing long-term debt and enhancing financial flexibility. Through the Chapter 11 restructuring, Energy XXI will eliminate more than $2.8 billion in debt from its balance sheet, substantially deleverage its capital structure and position the Company for long-term success.  The RSA eliminates substantially all of the Company's prepetition funded indebtedness other than its first lien reserve based loan facility, resulting in a significantly deleveraged balance sheet upon the Company's emergence from the Chapter 11 bankruptcy process.  The RSA also provides that John Schiller will continue as the reorganized company's Chief Executive Officer and a member of its board of directors.  The Company is also continuing ongoing negotiations with a steering committee of lenders under the Company's first lien reserve based loan facility that is not party to the RSA at this time.

    $14 Billion In Junk Bond Defaults Push April Total To Highest Since 2014 -- Following yesterday's bankruptcy of Peabody Energy and today's Chapter 11 filing of XXI Energy, defaults among American junk bonds just topped $14 billion in April, the highest monthly volume in two years according to Fitch calculations, and that is only for the first two weeks. April's surge in bankruptcy filings is not unexpected: according to JPM's default tracker, the number of bankruptcies was on a tear in both the month of March and the first quarter. In the past month alone seven companies defaulted totaling $16.4bn, including $12.3bn in high-yield bonds and $4.1bn in leveraged loans. This marked the third highest monthly volume since the last default cycle, trailing only April 2014’s $39.5bn (TXU) and December 2014’s $18.3bn (CZR). With two weeks left in the month, April may well surpass March. For context, during the last default cycle in 2008/2009, monthly default volume exceeded the March total only six times. By comparison, nine companies defaulted in February totaling $9.7bn (upwardly revised as UCI International totaling $400mn in bonds was added), which followed five defaults totaling $5.25bn in January and five defaults totaling a 2015-high $8.2bn in December. Default activity has clearly picked up over the last several months, with March marking the fifth consecutive month of greater than $5bn in default volume and the seventh $5bn month from the past ten. Further evidencing the recent pickup in activity, an average of $6.8bn has defaulted per month over the last eight months, compared with a $2.1bn average over the prior seven months and a modest $1.6bn monthly average from 2010 through 2014 (excluding TXU and CZR).

    Using new models and big data to better understand financial risk | MIT News: The financial crisis of 2008, which saw the failure of major investment banks Bear Stearns and Lehman Brothers, and the subsequent government bailout of insurance giant American International Group (AIG), had a ripple effect around the globe. How did America’s housing collapse lead to the downfall of these institutions? And why did that, in turn, translate into a severe economic downturn? Not having a clear picture of systemic risk in the financial system, an issue encapsulated in the “too big to fail” interventions, is widely cited as the reason for this financial contagion — the chain reaction of failures between connected parties. However, in the nearly eight years since the crisis, with additional upheavals from the sovereign debt crisis and flash crashes that have followed, researchers and regulators are still teasing out the nuances of risk in a globally connected market, while exploring new ways to manage a system that is evolving at an unprecedented pace. Researchers at MIT's Institute for Data, Systems, and Society (IDSS) have been a big part of these efforts, looking deeply at the problem of systemic risk in finance through a multidisciplinary lens. By bringing together engineers, information theorists, mathematicians, economists, biologists, and policy experts, IDSS has the opportunity to reframe the way the system is viewed. The goal is to generate new questions, better models, and, ultimately, a more robust and resilient financial system.

    For a Generalist, ‘Too Big to Fail’ May Be Too Tricky to Judge - About two years ago, I was speaking with an executive at MetLife who floated the idea that the company should sue the government to overturn its designation as a firm that was too big to fail. The company believed that it was being unfairly labeled, and that the regulations that came with the designation were hindering its business.My initial reaction, I distinctly remember, was to say: “That’s a terribly risky idea. The government always wins.”  Boy was I wrong.  As we all know, MetLife won its case against the government last week, and its position has been vindicated, at least until the decision is appealed.A judge determined that the government’s process for designating MetLife a systemically important institution was not just “fatally flawed,” but seemingly purposely so. “Every possible effect of MetLife’s imminent insolvency was summarily deemed grave enough to damage the economy,” Judge Rosemary M. Collyer wrote in her opinion.Not surprisingly, Jacob J. Lew, the Treasury secretary, took great umbrage. “In overturning the conclusions of experienced financial regulators, the court imposed new requirements that Congress never enacted, and contradicted key policy lessons from the financial crisis,” he said.I have no idea if MetLife is too big to fail. I’ve read hundreds of pages of legal briefs from both sides, and talked to company and government officials and outside experts, and I’m still not sure. I’ve tried to make sense of it, but it is a highly complicated puzzle and to make such a determination with any degree of certainty requires mathematically projecting how money will flow between hundreds of institutions around the globe. Which raises this question: How can any judge with anything short of a doctorate in statistics and economic modeling be tasked with effectively overseeing the decisions of a group like the Financial Stability Oversight Council, which includes the leaders of the Treasury, the Federal Reserve, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, and the list goes on.

    Big Banks Use a Footnote to Look Smaller - Matt Levine  - One thing that makes banking regulation hard is that it's impossible to know how big a bank is. There are lots of regulatory reasons why you might want to know that -- is it too big to fail? too big relative to its capital? -- but you just can never quite measure it. You get out your giant tape measure, and you try to wrap it around the bank, but the bank squirms and oozes and you can never quite see all of it at once. This shimmering evanescent quality is, to the connoisseur, part of what makes banks so beautiful. But not everyone is a connoisseur. Some people find banks ugly, and the bigger, the uglier. But these people, too, run into the measurement problem: How can you know how mad to be at a bank, if you can't tell how big it is? The Wall Street Journal had a fun story on Thursday about "footnote 151." This is at its heart a story about how to measure bank bigness. But since you get -- or get rid of -- what you measure, it is also a story about how regulation can make banks simultaneously less risky but also more creative. But first, measurement. Back in the olden days, before the financial crisis, bank regulation was mostly a matter for connoisseurs. Bank regulators knew that it was impossible to measure banks, but they also knew that the doomed but noble struggle against that impossibility was enough to give a life meaning. They developed something called "risk-based capital regulation." The idea here, as the name implied, was to measure banks based on the riskiness of their assets. But then the crisis happened, and it rather discredited risk-based capital. There are two reasons for this. First, risk-based capital regulation seems to have contributed to the crisis. If mortgages require more capital than mortgage-backed securities, and if capital is expensive for banks, then banks will want to turn their mortgages into mortgage-backed securities. So they did. You know the rest of the story. It turns out that regulators are not perfect at measuring risk. And by enshrining their risk measures in capital regulation, they created regulatory arbitrages: If you can make something look less risky for capital regulation, without actually making it less risky, you will be tempted to do so. And that will make the system more risky.

    Supervising Large, Complex Financial Institutions: Defining Objectives and Measuring Effectiveness - NY Fed - Last month the New York Fed held a conference on supervising large, complex financial institutions. The event featured presentations of empirical and theoretical research by economists here, commentary by academic researchers, and panel discussions with policymakers and senior supervisors. The conference was motivated by the recognition that supervision is distinct from regulation, but that the difference between them is often not well understood. The discussion focused on defining objectives for supervising the large, complex financial companies that figure so prominently in our financial system and ways of measuring how effectively supervision achieves these goals. This post summarizes the key themes from the conference and introduces the more in-depth posts that will follow in this blog series.

    The Economics of Bank Supervision: So Much to Do, So Little Time - NY Fed - While bank regulation and supervision are the two main components of banking policy, the difference between them is often overlooked and the details of supervision can appear shrouded in secrecy. In this post, which is based on a recent staff report, we provide a framework for thinking about supervision and its relation to regulation. We then use data on supervisory efforts of Federal Reserve bank examiners to describe how supervisory efforts vary by bank size and risk, and to measure key trade-offs in allocating resources. 

    How Does Supervision Affect Banks? - NY Fed - Supervisors monitor banks to assess the banks’ compliance with rules and regulations but also to ensure that they engage in safe and sound practices (see our earlier post What Do Banking Supervisors Do?). Much of the work that bank supervisors do is behind the scenes and therefore difficult for outsiders to measure. In particular, it is difficult to know what impact, if any, supervisors have on the behavior of banks. In this post, we describe a new Staff Report in which we attempt to measure the impact that supervision has on bank performance. Does more attention by supervisors lead to lower risk at banks and, if so, at what cost to profitability or growth?

    A Peek behind the Curtain of Bank Supervision -- NY Fed - Since the financial crisis, bank regulatory and supervisory policies have changed dramatically both in the United States (Dodd-Frank Wall Street Reform and Consumer Protection Act) and abroad (Third Basel Accord). While these shifts have occasioned much debate, the discussion surrounding supervision remains limited because most supervisory activity— both the amount of supervisory attention and the demands for corrective action by supervisors—is confidential. Drawing on our recent staff report “Parsing the Content of Bank Supervision,” this post provides a peek behind the scenes of bank supervision, presenting a statistical linguistic analysis based on confidential communications from Fed supervisors to the banks they supervise. Our analysis tackles several fundamental questions: What are the precise supervisory issues being raised? What drives the issues supervisors bring up? How does bank supervision relate to the other two pillars of the Basel Accord: capital regulations and market discipline?

    The Fed's Approach to Risk Management - The primary task of the central bank is to avert catastrophe, making sure that nothing really bad happens. This risk management approach imparts a natural asymmetry to policymakers’ words and deeds. Sometimes, it calls for bold, aggressive action. Others times, it means cautious plodding. Everyone agrees that 2008 was a clear case of the former. Most Federal Reserve officials argue that the current circumstance exemplifies the latter.  The argument is straightforward: The baseline forecast is for moderate economic growth, with labor markets continuing to tighten and wage gains slowly rising. Consistent with this, the FOMC’s projections show inflation returning to 2% over the next two to three years. But the risks—especially those arising from global factors—remain on the downside. It is easy to conceive of scenarios in which some combination of shocks from China, Europe and Japan cause inflation to fall short of the Fed’s objective and growth to falter. Moreover, conventional monetary policy tools are better at combating inflation that is a tad high than at countering deflation. That is, added to the asymmetry of risks is an asymmetry of policy effectiveness. As a result, it is no surprise that FOMC participants expect only gradual interest rate increases.  Let’s consider each point in a bit more detail, starting with the labor market. The following chart shows three different measures of labor utilization: the standard unemployment rate (labeled “U3”); a broader measure that also includes “marginally attached persons,” who are not currently looking for work but indicate that they want a job, are available for a job and have looked for work sometime in the past 12 months (U5); and a measure of underemployment that adds to U5 those who are employed part-time but would like to work full time (U6).

    Regulators Set to Reject Some Big Banks’ ‘Living Wills’ - WSJ: Regulators are set to reject the so-called living wills of at least half of the U.S.’s systemically important banks, including J.P. Morgan Chase JPM 1.86 % & Co., sending them scrambling to revise plans for a potential bankruptcy, according to people familiar with the matter. The move, which could come as soon as this week, would raise the prospect of higher capital requirements or other regulatory sanctions for some of the institutions, and underscore fears that the firms remain “too big to fail” without a taxpayer bailout. At least half of the eight American banks labeled “systemically important” by global regulators are expected to receive a harsh verdict on their “living wills” that they were required to submit under rules crafted since the financial crisis aimed at preventing another bank bailout, these people said. The long-awaited assessment by the Federal Reserve and Federal Deposit Insurance Corp. isn’t yet final and could change, but regulators are putting the finishing touches on their feedback to the firms and will make their views public soon, these people said. The Fed’s governing board was set to hold a closed meeting Tuesday afternoon to discuss the matter, one of the people said. Banks have generally said their plans are adequate, and that, to the extent regulators find fault, they expected them to be technical matters that can be fixed without big corporate changes.  J.P. Morgan has previously said its living will is credible and that it has a “fortress balance sheet” that would prevent it from ever needing to tap taxpayers for help in a crisis. “We will be vigilant and will never take such a high degree of risk that it jeopardizes the health of our company…this is a bedrock principle,” Chief Executive James Dimon said in his recent shareholder letter. But the regulators’ conclusions would mean J.P. Morgan and other firms will have to rewrite their bankruptcy strategies to address issues regulators have identified, or face sanctions, such as being required to hold higher levels of capital, which restricts borrowing and protects against losses—but can also eat into profitability. If they fail to submit strategies the regulators consider acceptable repeatedly over a period of years, regulators could force them to divest certain assets.

    JPMorgan, B of A to Flunk Living Wills: Report | American Banker: The Federal Reserve Board and Federal Deposit Insurance Corp. are set to give at least four megabanks a "harsh verdict" on their living wills, including JPMorgan Chase and Bank of America, according to an article by The Wall Street Journal, which cited "people familiar with the matter." The paper said the results of the living wills, which it said are "not yet final and could change," are due out this week for the eight biggest and most complex U.S. banks. The other two banks that flunked their living wills are: Bank of New York Mellon and State Street, the paper said. Citigroup is expected to receive a positive review, according to the article. If banks receive failing grades, they start a regulatory clock to improve their living wills within a year or face possible asset divestures and other steps mandated by regulators. The FDIC found flaws with the living wills of several big banks last year, but the Fed declined to start the regulatory clock for fixes, saying the process was still too new. Regulators have not yet provided feedback to the firms involved, but that is expected soon. A spokesman for JPMorgan declined to comment on the article.

    The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns -- Pam Martens -  Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system. A rational observer of Wall Street’s serial hubris might have expected some key segments of this letter to make it into the business press. A mere eight years ago the United States experienced a complete meltdown of its financial system, leading to the worst economic collapse since the Great Depression. President Obama and regulators have been assuring us over these intervening eight years that things are under control as a result of the Dodd-Frank financial reform legislation. But according to the letter the Fed and FDIC issued on April 12 to JPMorgan Chase, the country’s largest bank with over $2 trillion in assets and $51 trillion in notional amounts of derivatives, things are decidedly not under control. At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.”  It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”

    Regulators Warn 5 Top Banks They Are Still Too Big to Fail - The nation’s top bank regulators have added an unexpected voice to the growing chorus of critics worried that the biggest American banks, nearly eight years after the financial crisis, are still too big to fail.The Federal Reserve and the Federal Deposit Insurance Corporation said on Wednesday that five of the nation’s eight largest banks — including JPMorgan Chase and Bank of America — did not have “credible” plans for how they would wind themselves down in a crisis without sowing panic.That suggests that if there were another crisis today, the government would need to prop up the largest banks if it wanted to avoid financial chaos.The announcement coincides with a presidential campaign that at times has been dominated by a debate over what danger the big banks still pose to the nation’s economic security. Senator Bernie Sanders of Vermont has called for the biggest banks to be broken up, a stand that his opponent, the front-runner for the Democratic presidential nomination, Hillary Clinton, has criticized.But Mr. Sanders’ position has drawn sympathy from some on the other side of the political spectrum, including the new president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, who was a Treasury official during the financial crisis. In long letters sent to the banks this week, the two regulatory agencies pointed to the dangers created by the global reach and complexity of the largest banks, which are bigger now than they were before the 2008 crisis.The current arrangement could “pose serious adverse effects to the financial stability of the United States,” the regulators said in their letter to JPMorgan.

    Five Big Banks Get Bad Grades on Living Wills, No One Gets Clean Pass; Admission That “Too Big to Fail” is Alive and Well -- Yves Smith - Eight big banks got their living will grades announced yesterday. Five, Bank of America, JP Morgan, Bank of New York Mellon, State Street, and Wells Fargo, were told if they didn’t submit better plans by October, they’d face sanctions, like restrictions on dividends and acquisitions. Two got split grades. The Fed thought Goldman’s plan was fine, but the FDIC disagreed, and the two regulators had the opposite view of Morgan Stanley. Citigroup, which fared the best, was nevertheless told its scheme had shortcomings. Citigroup, Goldman, and Morgan Stanley have until July 2017 to fix their living wills. Yellen probably felt cornered into taking this step and it also may have been one of the big reasons for meeting with Obama and Biden earlier in the week. Elizabeth Warren had earlier called the Fed chair out over her failure to take the living wills seriously. Yellen didn’t give a good answer because she had not good answer. Worse, Neal Kashkari at the Minneapolis Fed is putting the “too big to fail” issue front and center in a series of conferences and is seeking broad public input. Bernie Sanders and Hillary Clinton are whacking each other almost daily about their plans to tame what Bill Black calls systemically dangerous financial institutions. But the Fed’s move, while consequential, is certain to make almost no-one unhappy. These measures are more serious than a wet-noodle lashing. Even though curbs on growth via acquisitions and dividends may sound like a trivial punishment, it hits banks, and more important, bank executives where they care most, in their stock prices. Why own a bank stock unless it is too big to fail, pays dividends, buy back stock, or buy other players to as least look like they are growing? And CEO, particularly those former Master of the Universe bank CEOs, take particular umbrage at being told what to do. So trust us, there was plenty of consternation in the executive suites of the banks that were fingered.

    Living Wills to the Rescue – Kocherlakota -  Many economists and politicians remain concerned about the too-big-to-fail issue. Some, including presidential candidate Bernie Sanders, urge Congress to break up the banks. Perhaps I’m overly cynical, but I see little chance of any legislative movement on this front in the next five years. That said, there’s potential for change to come from regulators. Today, the Federal Deposit Insurance Corp. and the Federal Reserve Board jointly declared that five major financial institutions (Bank of America, Bank of New York Mellon, JP Morgan Chase, State Street, and Wells Fargo) lacked credible plans to dismantle themselves in bankruptcy. Under the 2010 Dodd-Frank Act, that declaration gives regulators the power to force major changes at the banks -- including requiring them to sell assets. The Dodd-Frank Act sought to address the problem by requiring systemically important financial institutions to formulate plans for their rapid but orderly resolution. These so-called “living wills” were intended to end the “too big to fail” problem. If regulators ever felt that a large financial institution was insolvent, they could use the living wills to ensure that the economy would be left unaffected by the imposition of appropriate losses on creditors. If a systemically important financial institution was not able to come up with a credible living will, then the act empowered regulators to take more drastic measures. They could require the institution to finance itself with more loss absorbing equity capital, or ultimately to restructure -- a process that would likely involve shrinking. It has proven very challenging for large financial institutions to actually come up with workable resolution plans. In August 2014, the FDIC found the living wills of 11 financial institutions (four of the five above and seven others) not credible. But without a similar finding by the Federal Reserve Board, the FDIC’s determination was not sufficient to trigger a regulatory response. Today, more than 18 months later, the two regulators have agreed that the five institutions need to make large changes in their living wills by October 1, 2016. That’s the first important step in a process that may require those institutions to have a lot more capital or restructure.

    Cheat Sheet: Why JPM, B of A, Wells Flunked Their Living Wills (and Citi Didn’t) | American Banker: – In declaring that five U.S. banks' resolution plans were "noncredible," regulators provided new details on exactly what each institution did wrong. Following is a guide to the issues cited by regulators and the banks' reaction to the findings. JPMorgan Chase: What regulators criticized:

    • Liquidity risk, including the potential for ring-fencing, because the bank's plan relies on funds held by foreign entities
    • Insufficient model to estimate the company's liquidity needs
    • Plans to align legal and business lines through divestiture were not "sufficiently actionable"
    • No analysis of how JPMChase would phase out trading portfolios if counterparties cease trading with the bank
    • Inadequate governance mechanisms for the implementation of the resolution plan.

    Citigroup was the only bank to pass both the FDIC and Fed's assessments of the living wills. Still, regulators flagged several areas its plan could be improved.  What regulators said improved:

    • Funding structure, including increase of high-quality liquid assets, better capital and liquidity policies and better operational management of liquidity
    • Compliance with clean holding company requirements
    • Development of specific legal entity criteria to simplify the company's structure
    • Reduction in asset sizes and number of business and legal entities
    • A better shared-services plan – which would allow different entities to maintain operations independently if the holding company were to shut down.

    Living-Will Grades for Foreign Banks Are Already Obsolete - — The living-wills process remains a guessing game for the largest, most complex financial institutions, which are still awaiting regulators' evaluation of last year's effort even while they prepare for a new round of submissions due in July. But for foreign banks, this year's cycle is extra complicated. On the same month they are required to file their 2016 resolution plans, they must also complete a restructuring of their U.S. operations under an intermediate holding company. "This is a race to get everything legally organized and have systems, IT and reporting in place under an IHC by July 1, while simultaneously having to do a living will," said Sally Miller, chief executive of the Institute of International Bankers. The living wills were conceived as an iterative process, a back-and-forth between regulators and banks, which are required to redraft a new plan every year to account for changes in the regulatory and economic environment, as well as their business structure. But feedback from last year's plan is already so late that most banks can't incorporate in a meaningful way into the 2016 living wills. For foreign-based companies with more than $50 billion in nonbranch U.S. assets that will be required to set up an intermediate holding company, it's even worse. Last year's plans now refer to an entirely different business model than the one they are required to put in place by July of this year.

    Shrunken Citigroup Illustrates a Trend in Big U.S. Banks - Citigroup became the nation’s first megabank some two decades ago by expanding into new businesses while pushing to knock down barriers that limited its size.A much different Citigroup was evident on Friday as it reported its quarterly results. Business lines like subprime lending, which used to define the company, have all but disappeared.Over the last seven years, Citigroup has sold more than 60 businesses, shedding retail bank branches from Boston to Pakistan. In all, the bank’s holdings have shrunk by $700 billion — an amount roughly equivalent to Switzerland’s economic output. The bank’s chief executive said on Friday that since he took over in 2012, the company’s work force had declined by 40,000 jobs, through layoffs or selling businesses.On the campaign trail, and in the Democratic debate Thursday, the conversation has often returned to an assumption that very little has changed in the nation’s banking system since the 2008 financial crisis. But Citigroup’s financial results were one of many reminders this week of just how much success the government has already had in pushing banks to become simpler and safer, if not always smaller.

    Complexity, not size, is the real danger in banking - John Kay  Mr Sanders’ recent stumbles illustrate a misdirection in his attack on the banking establishment. The central problem is not so much “too big to fail” but “too complex to fail”: Lehman was a systemically important financial institution but not an important financial institution. Nor was it a big one; it had fewer employees than Citigroup today has compliance staff. Lehman’s collapse created major problems for the global financial system because of the extent of its interactions, with more than 1m outstanding contracts at the time of its bankruptcy. Similarly, Long Term Capital Management was insignificant in size when it failed but capable of massive impact by virtue of the exposure of other institutions to its activities. There is some force in the claim that size in banking has actually been conducive to stability. Britain had no banking crisis in the Great Depression because the sector was highly concentrated. The US had many failures because the fragmentation imposed by restrictions on interstate banking meant that many banks lacked sufficient geographical or sectoral diversification to weather losses. Ahead of the global financial crisis , it was argued that the growth of securitisation and other complex instruments similarly contributed to financial resilience. The reverse proved to be the case; trade between institutions represented concentration and multiplication of risks rather than diversification. Complexity is the enemy of stability. Financial conglomerates have become too diverse and sprawling for their chief executives or boards to understand what they do. The same complexity creates endemic conflicts of interest and is associated with cross subsidy between activities. There are fundamental differences in the cultures required to trade derivatives, to give private financial advice to big corporations, to manage assets on behalf of savers and to provide an efficient retail banking service. And these conflicts and interdependencies undermine resilience. 

    House Passes Bankruptcy Alternative for Big Banks | American Banker: — The House passed a bill Tuesday that would create a new bankruptcy system for large financial institutions. The Financial Institution Bankruptcy Act of 2016 was re-introduced this Congress and would amend the bankruptcy law for bank holding companies and large financial companies with more than $50 billion in financial assets. "The potential failure of a financial institution is a burden that cannot be placed on the American people," said Reps. Dave Trott, R-Mich, and co-sponsors Bob GoodLatte, R-Va., and Tom Marino, R-Pa., said in a statement referencing the resolution authority currently held by the Federal Deposit Insurance Corp. Lawmakers said the bill will "ensure shareholders and creditors of a financial institution, not taxpayers, bear the risk and the losses associated with the failure of a financial institution" and "establishes a transparent, predictable process, overseen by an experienced bankruptcy judge, to handle the failure of financial institutions." House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said that the legislation is a key component to a bill that he hopes to pass out of committee on Wednesday which would repeal Title II of the Dodd-Frank Act. Title II currently serves an alternative to bankruptcy and appoints the FDIC as receiver if a large financial institution becomes insolvent. "Instead of ending 'too big to fail' and taxpayer-funded Wall Street bailouts, the Dodd-Frank Act enshrines them into law," Hensarling said, noting that the FDIC would be responsible for facilitating a wind-down.

    Four Key Issues that Must Be Solved Before Next Big Failure | American Banker: — Two unanswered questions following the crisis are whether the government will allow the next major bank that faces insolvency to fail, and whether the broader financial system would survive such a failure. In a recent speech, Federal Deposit Insurance Corp. Chairman Martin Gruenberg, whose agency was tasked by the Dodd-Frank Act with facing those questions head on, stopped short of declaring victory but emphasized how far the FDIC has come in setting up its new resolution regime. The agency has been continually building international relationships, urging needed flexibility on derivatives contracts and designing a resolution blueprint with options for how to keep "critical" subsidiaries operating during the failure of a parent.   But there remain crucial operational issues to sort out before the government could clean up the failure of a massive firm without the risk of the resolution threatening the system.Dodd-Frank envisioned two strategies for unwinding a colossal firm. The first is banks must prepare themselves to be unwound through a traditional bankruptcy in a manner that prevents systemic effects. They must submit regular "living wills" to regulators to attest to their resolvability. But when a firm actually fails, and officials determine a bankruptcy would still be disastrous, the second strategy are special powers given to the FDIC to resolve the firm while taking steps to protect the broader economy.To that end, the FDIC has discussed several options including where the agency closes the parent and transfers subsidiaries to a bridge entity with new management. However, the FDIC has stressed that it is not limited to that strategy. The agency could enter a subsidiary and wind down its operations, for example. To access capital in a resolution, shareholders would be wiped out while creditors could become equity holders. The agency says however the firm is resolved the component parts of the failed company would end up looking quite different than before. But to ensure the plan works, regulators still have a lot to do, including wrapping up a key rulemaking requiring sufficient long-term debt levels at systemically important firms, and building on the FDIC's coordination with other countries to prepare for a cross-border failure.

    FDIC Under Fire by Own Panel of Experts | American Banker: — Federal Deposit Insurance Corp. officials fielded tough questions Thursday about how they have wielded the resolution planning powers given to them by the Dodd-Frank Act. The grilling from the agency's advisory committee on systemic resolution came a day after regulators failed most of the largest U.S. banks on their living wills. But panel members questioned the value of the process, suggesting it was unrealistic. "Has there ever been a self-funded bankruptcy restructuring by a large financial company in the history of the world?" asked Simon Johnson, a professor at the MIT Sloan School of Management and an outspoken critic of big banks. Several experts argued that regulators had missed the forest for the trees in their determinations. Armed with numbers, Richard Herring, a professor at the Wharton School of the University of Pennsylvania, questioned the depth of the plans submitted by the banks. JP Morgan, he said, had thousands of legal entities, but had only addressed about two dozen in its living will."This raises real questions about how well aligned their business structure is with their legal structure," he said. "We really are lacking some details that would enable us to see how particular institutions have progressed over time." Peter Fisher, a former Treasury undersecretary for domestic finance in the George W. Bush administration, said that despite their high level of technical details, the determinations failed to address fundamental concerns.

    Housing’s “Deadly Embrace” in Financial Cycles - naked capitalism - Yves here. It is a great source of frustration to see the global financial crisis depicted again and again as a housing crisis. Had it merely been a housing crisis, we would have had worse-than-savings-and-loan-crisis bust (which was seen as a lot scarier at the time than it is in hindsight), but not the sort of near-collapse of the financial system that took place in September and October 2008.  Credit default swaps on the risky tranches of subprime at the level of 4-6X real economy lending. These were dressed up as largely AAA risk though heavily synthetic CDOs (there was not enough of a market for pure synthetic CDOs to have satisfied the demand for subprime shorts). The de facto guarators were highly leveraged firms who were themselves vulnerable: monolines, AIG, Eurobanks, and US investment and commercial banks. Nevertheless, this IMF paper makes an important policy point, that merely regulating mortgage finance won’t prevent dangerous housing booms and busts. Another noteworthy feature of this analysis is that it rejects the use of the loanable funds model, which was debunked by Keynses but remains a fixture at central banks. Indeed, you’ll see Martin Wolf at the Financial Times relying on this hoary canard in Don’t blame central banks for negative rates which invokes Bernannke’s the savings glut hypothesis of the crisis, which is something numerous parties, including your humble blogger, have shredded. (The best shellacking comes in the Claudio Borio-Peti Disyatat BIS paper, Global imbalances and the financial crisis: Link or no link?; see Andrew Dittmer’s layperson summary here).

    Wells Fargo "Admits Deceiving" U.S. Government, Pays Record $1.2 Billion Settlement -- Nearly a decade since the housing bubble burst the dirty skeletons still emerge from the closet, and still nobody goes to jail. In the latest example of how criminal Wall Street behavior leads to zero prison time and just more slaps on the wrist, overnight Warren Buffett's favorite bank, Wells Fargo, admitted to "deceiving" the U.S. government into insuring thousands of risky mortgages. Its "punishment" - a $1.2 billion settlement of a U.S. Department of Justice lawsuit, the highest ever levied in a housing-related matter. The settlement with Wells Fargo, the largest U.S. mortgage lender and third-largest U.S. bank by assets, was filed on Friday in Manhattan federal court. It also resolves claims against Kurt Lofrano, a former Wells Fargo vice president.  According to the settlement, Wells Fargo "admits, acknowledges, and accepts responsibility" for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance. According to Reuters, the San Francisco-based lender also admitted to having from 2002 to 2010 failed to file timely reports on several thousand loans that had material defects or were badly underwritten, a process that Lofrano was responsible for supervising. According to the Justice Department, the shortfalls led to substantial losses for taxpayers when the FHA was forced to pay insurance claims as defective loans soured.

    U.S., Goldman Sachs, reach $5B settlement over risky mortgages | PBS NewsHour: — The Justice Department on Monday announced a $5 billion settlement with Goldman Sachs over the sale of mortgage-backed securities leading up to the 2008 financial crisis. The deal resolves state and federal probes into the sale of shoddy mortgages before the housing bubble and subsequent economic meltdown. It requires the bank to pay a $2.4 billion civil penalty and an additional $1.8 billion in relief to underwater homeowners and distressed borrowers, along with $875 million in other claims. “This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” Acting Associate Attorney General Stuart Delery said in a statement. The agreement is the latest multi-billion-dollar civil settlement reached with a major bank over the economic meltdown in which millions of Americans lost their homes to foreclosure. Other banks that settled in the last two years include Bank of America, Citigroup and JPMorgan Chase & Co. But the deal, which includes no criminal sanctions or penalties, is likely to stir additional criticism about the department’s inability to hold bank executives personally responsible for the financial crisis.

    Goldman Sachs Agrees to Pay $5 Billion Settlement Over Mortgage-Backed Securities -- The Justice Department announced a $5 billion settlement with Goldman Sachs over the sale of mortgage-backed securities leading up to the 2008 financial crisis.The deal announced Monday resolves state and federal probes into the sale of shoddy mortgages before the housing bubble and economic meltdown.It requires the bank to pay a $2.4 billion civil penalty and an additional $1.8 billion in relief to underwater homeowners and distressed borrowers, along with $875 million in other claims.The agreement is the latest multi-billion-dollar civil settlement reached with a major bank. Other banks that settled in the last two years include Bank of America, Citigroup and JPMorgan Chase & Co.  Goldman had previously disclosed the settlement in January, but federal officials laid out additional allegations in a statement of facts.

    Goldman Slammed With $5.1 Billion Fine For "Serious Misconduct" In Mortgage Selling -- Hot on the heels of Wells Fargo's $1.2 billion settlement, Bloomberg reports that Goldman Sachs will pay $5.1 billion to settle a U.S. probe into its handling of mortgage-backed securities involving allegations that loans weren’t properly vetted before being sold to investors as high-quality bonds.As AP reports, The Justice Department announced a $5 billion settlement with Goldman Sachs over the sale of mortgage-backed securities leading up to the 2008 financial crisis. The deal announced Monday resolves state and federal probes into the sale of shoddy mortgages before the housing bubble and economic meltdown. It requires the bank to pay a $2.4 billion civil penalty and an additional $1.8 billion in relief to underwater homeowners and distressed borrowers, along with $875 million in other claims. The agreement is the latest multi-billion-dollar civil settlement reached with a major bank. Other banks that settled in the last two years include Bank of America, Citigroup and JPMorgan Chase & Co. Goldman had previously disclosed the settlement in January, but federal officials laid out additional allegations in a statement of facts. As NY AG Schneiderman notes,

    • Settlement Includes $670 Million For New Yorkers, Including $190 Million In Cash And $480 Million In Consumer Relief Committed To Mortgage Assistance, Principal Forgiveness, And Affordable Housing Programs
    • New York Has Now Received $5.3 Billion In Cash And Consumer Relief From National Mortgage Settlement And Residential Mortgage-Backed Securities Working Group Settlements Combined Since 2012

    Goldman and Wells Fargo FINALLY Admit They Committed Fraud - Goldman Sachs has finally admitted to committing fraud.  Specifically, Goldman Sachs reached a settlement yesterday with the Department of Justice, in which it  admitted fraud: The settlement includes a statement of facts to which Goldman has agreed.  That statement of facts describes how Goldman made false and misleading representations to prospective investors about the characteristics of the loans it securitized and the ways in which Goldman would protect investors in its RMBS from harm (the quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted):

    • Goldman told investors in offering documents that “[l]oans in the securitized pools were originated generally in accordance with the loan originator’s underwriting guidelines,” other than possible situations where “when the originator identified ‘compensating factors’ at the time of origination.”  But Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investorsabout the pools of loans to be securitized.”
    • Specifically, Goldman has now acknowledged that, even when the results of its due diligence on samples of loans from those pools “indicated that the unsampled portions of the pools likely contained additional loans with credit exceptions, Goldman typically did not . . . identify and eliminate any additional loans with credit exceptions.”  Goldman has acknowledged that it“failed to do this even when the samples included significant numbers of loans with credit exceptions.”

    Similarly, Wells Fargo settled with the Department of Justice last week and – as part of the settlement – admitted fraud: Wells Fargo & Co admitted to deceiving the U.S. government into insuring thousands of risky mortgages, as it formally reached a … settlement of a U.S. Department of Justice lawsuit.

    Goldman Mortgage Settlement Is Much Less Than Meets the Eye -- State and federal officials said on Monday that Goldman Sachs would pay $5.1 billion to settle accusations of wrongdoing before the financial crisis.But that is just on paper. Buried in the fine print are provisions that allow Goldman to pay hundreds of millions of dollars less — perhaps as much as $1 billion less — than that headline figure. And that is before the tax benefits of the deal are included.The bank will be able to reduce its bill substantially through a combination of government incentives and tax credits. For example, the settlement calls for Goldman to spend $240 million on affordable housing. But a chart attached to the settlement explains that the bank will have to pay at most only 30 percent of that money to fulfill the deal. That is because it will receive a particularly large credit for each dollar it spends on affordable housing.Goldman is the last of the major American banks to settle with the government. Past deals with other banks also contained some of these concessions, but Goldman appears to have negotiated an even sweeter deal on certain points. For all the banks, the credits suggest that the amounts that the banks will have to actually spend on consumer relief will be much lower than the numbers announced in the news releases.“They appear to have grossly inflated the settlement amount for P.R. purposes to mislead the public, while in the fine print, enabling Goldman Sachs to pay 50 to 75 percent less,”

    Documents Undercut U.S. Case for Taking Mortgage Giant Fannie Mae’s Profits -- On a Friday in August 2012, the federal government changed the terms of its bailout of Fannie Mae and Freddie Mac, sending all the mortgage finance giants’ profits to the Treasury. The surprise decision prompted a lawsuit from shareholders, who argued that the collection of profits was an improper taking of private property without compensation. As the lawsuit proceeds through Federal Claims Court, documents unsealed in the case on Monday undermine an important defense made by the United States government. Lawyers for the Justice Department maintained early on in the litigation that Fannie and Freddie were in a death spiral and financially weak. Funneling all their profits to the Treasury was a way to protect taxpayers from future losses at the government-sponsored enterprises, the Justice Department said. In a deposition taken last July, for example, Susan McFarland, Fannie’s former chief financial officer, said she told high-level officials at the Treasury on Aug. 9, 2012, that the company was, in fact, “now in a sustainable profitability, that we would be able to deliver sustainable profits over time.” The mortgage finance giants Fannie Mae and Freddie Mac remain wards of the state years after the credit crisis receded into memory. Under their original rescue, in 2008, they were required to pay a 10 percent dividend on the money they had drawn from the Treasury. The revised deal, under which their profits are swept every quarter into the Treasury’s general fund, prompted shareholders to sue in Federal Claims Court. Fairholme Funds, a mutual fund company that owns shares in Fannie and Freddie, filed the suit in 2013.

    Wall Street’s Fraud of the Week Club - A $5.1 billion fraud settlement from Goldman Sachs, a $1.2 billion fraud agreement with Wells Fargo – and that’s just from the past week. Over the last several years banks have paid an estimated $200 billion in fraud fines and settlements. How many settlements, how many billions, will it take to convince some fact-resistant pundits and politicians that there is an epidemic of fraud on Wall Street? When a gullible equity research outfit recommended that investors buy into Countrywide, a Goldman executive who knew what was being kept secret wrote: “If they only knew.” No matter how hard some politicians and press try to persuade us otherwise, the evidence shows that the banking community is rife with unpunished fraudsters. Its political influence, however, apparently remains undiminished. The latest Goldman Sachs settlement is a case in point. While the settlement documents are somewhat obscure and difficult to read (as is typical in agreements of this kind), the facts are incontestable. Simply put, the people at Goldman Sachs lied – a lot – to investors. The settlement included “a statement of facts to which Goldman has agreed,” meaning that its high-priced lawyers aggressively negotiated each and every word. Despite those efforts, at least some of the ugly truth comes through loud and clear. Some excerpts:

    Why You Should Care About Big Banks Cutting Deals with the Feds to Avoid Prosecution - On Monday, Wall Street behemoth Goldman Sachs agreed to shell out more than $5 billion for deceiving investors and contributing to the 2008 financial crisis. The settlement, which was brokered by several state attorneys general as well as the feds, is supposed to provide $1.8 billion in relief to distressed homeowners, along with a hefty civil penalty.  But while $5 billion seems like a sizable punishment, it's really just a drop in the bucket for a global player like Goldman; in the last four years, Goldman's revenue has been more than $135 billion. In other words, the penalty will affect them about as much as a Nerf dart gun might upset an NFL linebacker.  Monday's announcement is particularly glaring because after other majors like JP Morgan and Bank of America struck deals of their own, Goldman was the last of the big banks facing scrutiny over the meltdown. That means it's safe to say some the more notorious swindlers in American history have officially gotten off scot-free.  The statement of facts in the settlement tells a story familiar to anyone who followed the financial crisis or saw The Big Short. Like the other big banks, Goldman Sachs peddled residential Mortgage-Backed Securities (MBS), which is another way of saying they put bunches of crappy loans into bundles. They then sold those bundles to investors while vouching for their quality, when in reality they hadn't bothered to look into borrower's ability––or even desire––to repay them. As laid out in the settlement, between December 2005 and 2007, Goldman's practice was to spot check various loans to see if they met underwriter's guidelines. In many cases, 80 percent of the loans went unchecked. In fact, in numerous loan pools, more than 20 percent of the loans were graded as "EV3," which is shorthand for saying they carried an unacceptable level of risk and were basically doomed to fail.

    CoreLogic: Foreclosure Inventory Declines 23.9% Year-over-year -- CoreLogic released their National Foreclosure Report for February this morning.  CoreLogic reported that the national delinquency rate was at 3.2% in February, the lowest since November 2007. From CoreLogic:  Approximately 434,000 homes in the United States were in some stage of foreclosure as of February 2016, compared to 571,000 in February 2015, a decrease of 23.9%. This was the 52nd consecutive month with a year-over-year decline. As of February 2016, the foreclosure inventory represented 1.2% of all homes with a mortgage, compared to 1.5% in February 2015.  CoreLogic breaks down the foreclosure inventory by judicial vs non-judicial foreclosure states (see page 8 and 9 of the report). The judicial foreclosure states - that are still working through the backlog of foreclosures - have far more foreclosure inventory than the non-judicial foreclosure states.

    MBA: "Mortgage Apps Jump 10% in Latest MBA Weekly Survey"  --  From the MBA: Mortgage Apps Jump 10% in Latest MBA Weekly Surveym  Mortgage applications increased 10 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 8, 2016.  The Refinance Index increased 11 percent from the previous week to its highest level since February 2016. The seasonally adjusted Purchase Index increased 8 percent from one week earlier its highest level since October 2015. The unadjusted Purchase Index increased 9 percent compared with the previous week and was 24 percent higher than the same week one year ago. 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 is picking again with lower rates. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 24% higher than a year ago.

    "Mortgage Rates Holding Near 3-Year Lows" -- From Matthew Graham at Mortgage News Daily: Mortgage Rates Holding Near 3-Year Lows  Mortgage rates were little changed today, keeping them in line with the lowest levels in nearly 3 years. Specifically, there have only been 2-3 days with better rates since May 2013, depending on the lender. That puts the average lender at 3.625% in terms of conventional 30yr fixed rate quotes for top tier scenarios. Some of the more aggressive lenders continue to offer 3.5%. These rates are a mere quarter point higher than the all-time lows seen from late 2011 through early 2013.   Here is a table from Mortgage News Daily: Home Loan Rates..  View More Refinance Rates

    This Is the Last Time to Get a Low-Rate Mortgage—Again -  The average rate on a 30-year fixed mortgage fell to 3.59% last week, according to Freddie Mac.  That’s a new low for 2016 and the lowest rate for mortgages since February last year. Such a low rate will no doubt encourage more homeowners to refinance, giving a boon to mortgage lenders facing an uncertain housing market. But there are several reasons to doubt an upcoming refinance boomlet could turn into a full-fledged boom. These rates are low, but they’ve been low for a while. Early last year, rates unexpectedly fell sharply, hitting 3.59% on Feb. 5 before rising, according to Freddie. That led more than 1.2 million borrowers to refinance in the first half of the year, according to Black Knight Financial Services. Could that happen again? Sure, but it seems unlikely. A rate of 3.59% seemed shockingly small the first time rates dipped so low after the crisis, but now borrowers might find them downright quaint. Consider: Between 2012 and the end of 2015, Freddie reported the average mortgage rate 209 times. In 40 of those reports, or about a fifth, rates were lower than they are now. When rates fell this low in February 2015, the Federal Housing Administration had just cut the insurance fees it charges on low-down-payment loans by half a percentage point. That gave borrowers a bigger incentive to refinance, and without it, many fewer borrowers would have likely bothered. That kind of catalyst isn’t there this time.

    Mortgage Rates and Ten Year Yield -- With the ten year yield falling to 1.73%, there has been some discussion about whether mortgage rates will fall to new lows. Based on an historical relationship, 30-year rates should currently be around 3.7%.  As of Friday, Mortgage News Daily reported: "the average lender continuing to quote conventional 30yr fixed rates of 3.625% on top tier scenarios." Pretty close to expected. The graph shows the relationship between the monthly 10 year Treasury Yield and 30 year mortgage rates from the Freddie Mac survey. Currently the 10 year Treasury yield is at 1.73% and 30 year mortgage rates were at 3.59% according to the Freddie Mac survey last week.  To reach new lows (on the Freddie Mac survey), mortgage rates would have to fall below the 3.35% lows in 2012. For that to happen, based on the historical relationship, the Ten Year yield would have fall to under 1.5%.  So I don't expect new lows on mortgage rates unless the Ten Year yield falls further.

    FNC: Residential Property Values increased 5.7% year-over-year in February - In addition to Case-Shiller, and CoreLogic, I'm also watching the FNC, Zillow and several other house price indexes.  FNC released their February 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.1% from January to February (Composite 100 index, not seasonally adjusted).   The 10 city MSA increased 0.1% (NSA), the 20-MSA RPI increased 0.2%, and the 30-MSA RPI increased 0.2% in February. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  From FNC: FNC Index: February Home Prices Up 0.1%  The latest FNC Residential Price Index™ (RPI) indicated U.S. home prices moved slightly higher in February after dropping unexpectedly in January. Not adjusting for seasonality, February home prices were up 0.1%. On a yearover-year basis, prices continue to climb at a moderate pace, up 5.7% from a year ago.  Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.  The index is still down 14.2% from the peak in 2006 (not inflation adjusted).

    The Salary Needed to Buy A Home in 27 Different U.S. Cities -- Most U.S. housing markets peaked sometime in 2006, and it wouldn’t be until just before the third-round of quantitative easing in 2012 that this fall would finally be cushioned. Since then, as VisualCapitalist's Jeff Desjardins details, the combination of QE and record-low interest rates have helped re-inflate the housing market. For better or worse, real estate in many U.S. cities are now approaching or passing their 2006 housing highs, but with a growing disparity between individual metropolitan areas. Today’s 3D map comes to us from, and it shows the very different salaries needed to buy a median home in 27 different U.S. metropolitan areas. The salaries range between $31,134 to $147,996, which is a discrepancy of over $100,000.

    Report: U.S. Office Vacancy Increased Slightly in Q1 2016 From CBRE: U.S. Office Vacancy Inches Up Slightly in Q1 2016 Vacancy in the U.S. office market inched up by 10 basis points (bps) during the first quarter of 2016 (Q1 2016), rising to 13.2%, according to the latest analysis from CBRE Group, Inc. Even with the increase, the national office vacancy rate remains at the lowest level since 2008. Despite the slight increase, vacancy continued to improve in the majority of U.S. markets, with rates falling in 33 markets, rising in 25, and remaining unchanged in five. Suburban vacancy remained at 14.7% while downtown vacancy increased by 10 bps, to 10.4%. The overall national office vacancy rate has fallen 70 bps over the past four quarters....The slight rise in the national vacancy rate was fueled by significant new supply coming to certain markets including Boston, Washington D.C., Dallas and Orange County. Compounding that issue, Washington had negative absorption and Dallas only modest absorption, trailing this new supply. ...“We expect the U.S. office market to improve in 2016 as the U.S. economy continues to expand, moving closer to full employment and driving demand for office space,” noted Mr. Havsy. “Office demand is expected to outpace new supply in the next two years, further tightening the vacancy rate and keeping rent growth above inflation in a majority of the U.S. office markets.”

    Americans pay more in taxes than for housing, food, clothes combined - In 2016, Americans will likely spend roughly $1.6 trillion on food, $2.1 trillion on housing and $360 billion on clothing, totaling about $4.1 trillion. Meanwhile, their total tax bill will be about $4.9 trillion ($3.34 trillion in federal taxes and $1.6trillion state and local taxes). While that number may seem staggeringly high, Americans still spend a lower portion of their income on taxes than residents of other countries, according to an analysis of 39 countries released this week by the Pew Research Center. For example, a single, childless American making the average wage in 2014 paid 24.8% of his or her gross income in federal income tax and payroll taxes, compared to 27.3% on average across all 39 countries measured. “Much of the difference in relative tax burdens among different countries is due to the taxes that fund social-insurance programs, such as Social Security and Medicare in the U.S.” the Pew researchers write. “These taxes tend to be higher in other developed nations than they are in the U.S.”

    Retail Sales April 13, 2016 - Retail sales, down a disappointing 0.3 percent in March, were pulled lower by auto sales but unfortunately do show wider weakness. Auto sales fell a very steep 2.1 percent in March and last posted a monthly gain way back in November. This is the biggest drop for vehicle sales since February last year. In an offset, gasoline sales, boosted by higher prices at the pump, jumped 0.9 percent. Excluding just gasoline -- which offers a very telling reading on consumer demand -- retail sales fell 0.4 percent. Excluding both autos and gasoline, sales rose 0.1 percent which is 2 tenths below expectations. A look at year-on-year rates helps to clarify trends in the data. Overall retail sales are up only 1.7 percent, well down from 3.7 percent in February. Excluding autos, sales are up only 1.8 percent. The best reading comes from ex-auto ex-gas which is at plus 3.9 percent for, however, a 9 tenths decline from February. The reading of the greatest concern, however, is once again excluding only gasoline where year-on-year sales slowed to plus 3.3 percent from February's 5.4 percent. A sign of the month's weakness is contraction at restaurants, which like autos is a discretionary category and which fell a very sharp 0.8 percent in the month. A plus is building materials which rose a very strong 1.4 percent for a second month in gains that point to extending strength for residential investment. Other components include a sharp decline for apparel and for department stores, offset by a second straight strong gain for health & personal care. There are upward revisions to February but they definitely do not offset weakness, despite whatever uncertainties over Easter adjustments, in the immediate month of March. This report, especially the stubborn weakness for auto sales, raises key questions over the health of the consumer, who is benefiting from low unemployment but not from wage strength. The report especially raises questions over the outlook for overall economic growth.

    Retail Sales Down In March 2016: Retail sales declined according to US Census headline data. Our view is that this month's data was mixed, There was an improvement in the rolling averages. Backward data revisions were generally up. Econintersect  Analysis:

    • unadjusted sales rate of growth decelerated 3.3 % month-over-month, and up 3.6 % year-over-year.
    • unadjusted sales 3 month rolling year-over-year average growth accelerated 0.2 % month-over-month, 3.8 % year-over-year.
    • unadjusted sales (but inflation adjusted) up 3.8 % year-over-year
    • this is an advance report. Please see caveats below showing variations between the advance report and the "final".
    • in the seasonally adjusted data - building materials, gasoline stores, and health / personal care stores were strong. Most everything else was weak.
    • U.S. Census Headlines: seasonally adjusted sales down 0.3 % month-over-month, up 1.7 % year-over-year (last month was originally reported at 2.9 % year-over-year).

    Retail Sales decreased 0.3% in March -- On a monthly basis, retail sales were down 0.3% from February to March (seasonally adjusted), and sales were up 1.7% from March 2015.  From the Census Bureau reportThe U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $446.9 billion, a decrease of 0.3 percent from the previous month, and 1.7 percent above March 2015. ... The January 2016 to February 2016 percent change was revised from down 0.1 percent to virtually unchanged. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were down 0.4%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 3.4% on a YoY basis. The decrease in March was below expectations for the month, however retail sales for January and February were revised up.

    US Retail Sales Tumbled In March - Consumer spending in the retail sector fell 0.3% in March, well below expectations for a modest increase, the US Census Bureau reports. The news is just one data point and so all the obvious caveats apply. Nonetheless, taking the numbers du jour at face value sends a dark message, in part because the reversal in sales last month took a substantial bite out of the year-over-year trend.  Spending is still higher in March vs. the year-earlier level, but the sluggish annual gain is worrisome nonetheless. The question is whether the latest reversal marks a turning point for the business cycle—or is the latest release just noise? No one knows at this point and a convincing answer is probably weeks away at the earliest, courtesy of deeper context via the incoming data from other corners. Meantime, let’s dig a bit deeper into today’s report.  The soft data for March left the trend in retail sales close to its slowest growth rate since the recession ended in mid-2009. Spending advanced just 1.7% last month vs. the year-ago figure (seasonally adjusted data). The weak gain is troubling for several reasons. First, it’s a dramatic slowdown from the 3.6% year-over-year rate in the previous month. In addition, the 1.7% annual pace for March is uncomfortably close to the post-recession low of 1.3% (as of Apr. 2015). Note, too, that the current year-over-year rise is well south of the growth rate at the start of the last recession.  The main evidence for arguing that today’s disappointing sales data is noise is the firm growth in the labor market. Private payrolls in March posted the best annual gain in five months. Meantime, initial jobless claims continue to print near 40-year lows, based on numbers through the end of last month. As long as payrolls are advancing at a healthy clip and new filings for unemployment benefits stay low, there’s a good case for thinking that today’s soft retail sales report is a one-off event. Note that a key reason for today’s weakness is the hefty retreat in auto sales. Stripping out this component (transactions at auto and parts dealers) reveals that headline spending rose 0.2% last month. Sales at general retail stores, such as Wal-Mart, were higher in March as well (+0.5%), which implies that the consumer appetite to spend is intact, excluding autos.

    Retail Sales - US: Retail Sales Round out Q1 on a Soft Footing

    • Retail Sales fell by 0.3% in March, which was weaker than the market had expected. Core metrics were better on an absolute basis, but also generally disappointed market expectations. Autos were the main pocket of weakness in March with incomplete positive offsets noted elsewhere.
    • This release will do little to counterbalance the well-entrenched narrative of Q1 weakness. In a less encouraging development, the handoff to Q2 for consumer spending looks rather muted. This will certainly keep the Fed sounding cautious, which is a view supported by weak PPI data also released this morning.    

    Autos exerted a heavy drag on March retail sales, as the headline fell by 0.3% m/m which was much worse than what the market had expected (+0.1%) and our more conservative forecast (-0.1%). The 2.1% decline in auto sales left the ex-autos metric higher by 0.2% though pockets of weakness elsewhere (clothing and eating/drinking establishments stand out) left this series shy of the 0.4% the market had forecast. Turning to pockets of relative strength, higher gasoline prices motivated a 0.9% increase in sales at gasoline stations while building materials increased by 1.4% for the second consecutive month. Note that there were also positive revisions to the February data, with the headline now showing a flat print (previous: -0.1%) and the ex-autos & gas metric increasing from 0.3% to 0.6%.  This print solidifies the well-entrenched narrative of a very weak Q1 for the US economy. Our current tracking for annualized growth remains around 0.6%. What is arguably a greater source of concern, is that this print makes for a poor handoff to Q2 for consumer spending. For the Federal Reserve, who are balancing concern over the global backdrop with a softer spate of domestic data, momentum in growth heading into the middle of the year is quite important. This print therefore argues for continued caution and will place more emphasis on other parts of the economy to keep the recovery narrative entrenched.

    April Retail Sales Plunge Most Since 2005 -- Something ugly this way comes. As we noted last week, despite proclamations that any weakness in US spending or economic data is merely seasonal or transitory, BofA's credit and debit card spending data revealed that sales were notably weak. Today we get further confirmation of what Retail ETF investors have been seeing for a while as Johnson-Redbook reported a 2.8% plunge in Same-Store-Sales - the worst start to an April since 2005. Which confirms the chart below shows the seasonally adjusted retail sales ex-autos measure from the BAC aggregate card data was unchanged SA in March, leaving the 3-month moving average to decline 0.2%. While a part of this weakness owes to a continued decline in gasoline prices. We find that retail sales ex-autos and gasoline was up 0.3% mom SA, which continues to be in a downward trend. This confirms the downward revision to the Census Bureau data in January which made government data more consistent with the BAC internal data. According to Bank of America, "we therefore also look for only a slight improvement in March Census Bureau sales, in a similar pattern as the BAC internal data" which means that Q1 GDP is weak for a very specific reason: consumer spending remains anemic.

    US Retail Sales Tumble Into Recession Territory Driven By Auto Sales Plunge -- After stumbling sideways around unch MoM for 3 months, US retail sales tumbled 0.3% in March (considerably worse than the 0.1% MoM gain expected) confirming BofA's credit card data as we warned. March's print is practically the weakest month since Feb 2015 and is unlikely to get much better given the dismally weak start to April, as we noted here. After 3 months of low-base bounce in YoY retail sales, March saw it collapse back to just 1.7% YoY - deep in recession territory. March Retail Sales plunge...The string of misses for Control Group Retail Sales continues... As Auto Sales collapse 2.1% MoM... which should not surprise since US Auto Sales (SAAR), via WARD's Automative Group, tumbled 3.5% YoY to end March - the biggest YoY plunge since July 2009 (pre-Cash-for-Clunkers)... and perhaps just as problematic, Restaurants tumbled 0.8% - where all the hiring has been. and if you are hopeful about April, Johnson-Redbook reported a 2.8% plunge in Same-Store-Sales - the worst start to an April since 2005. Finally, as Goldman notes, weakness in auto sales and production could be an unwelcome headache for the manufacturing sector. Growth in auto output has accounted for 40% of the increase in manufacturing production since January 2012, not including spillovers to related sectors (Exhibit 4).

    Consumer Sentiment April 15, 2016: A week of mostly weak economic data ends on a drop for consumer sentiment, to a much lower-than-expected 89.7 for the flash April reading vs 91.0 for final March. Weakness is centered in the expectations component, down 1.9 points to 79.6 to signal, perhaps, emerging doubts over future job and income prospects. The assessment of current conditions is down only 2 tenths to 105.4 in an early indication that consumer activity in April will roughly match that of March, which however was a weak month judging by the retail sales report posted earlier in the week. In another headache, long-term inflation expectations are eroding further despite the rise in oil prices, down 2 tenths for the 5-year outlook to 2.5 percent. One-year expectations are stable at 2.7 percent. The decline in this report isn't exactly incremental but is far from a free fall, especially the resilience in current conditions. Still, low wage growth and a heated political climate are not proving to be positives for consumer confidence.

    Preliminary April 2016 Michigan Consumer Sentiment Continues Slow Decline: The University of Michigan Preliminary Consumer Sentiment for April came in at 89.7, a 1.3 point decrease from the 91.0 March Final reading. had forecast 92.0. Surveys of Consumers chief economist, Richard Curtin makes the following comments: Consumer confidence continued its slow overall decline in early April, marking the fourth consecutive monthly decline. To be sure, the sizes of the recent losses have been quite small, with the Sentiment Index falling just 2.9 Index-points since December 2015, although it was down 6.2 Index-points from a year ago and 8.4 points below the peak in January 2015. None of these declines indicate an impending recession, although concerns have risen about the resilience of consumers in the months ahead. Consumers reported a slowdown in expected wage gains, weakening inflation-adjusted income expectations, and growing concerns that slowing economic growth would reduce the pace of job creation. These apprehensions should ease as the economy rebounds from its dismal start in the first quarter of 2016. Overall, the data now indicate that inflation-adjusted personal consumption expenditures will grow by 2.5% in 2016. See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy. To put today's report into the larger historical context since its beginning in 1978, consumer sentiment is 5.1 percent above the average reading (arithmetic mean) and 6.3 percent above the geometric mean. The current index level is at the 53rd percentile of the 460 monthly data points in this series.

    "It's Getting Worse" - Economic Outlook Plummets In Gallup Poll, Rising Gas Prices Blamed -- According to the latest Weekly Economic Confidence poll released by Gallup, Americans' confidence in the US economy is getting worse. The poll asks people to rate the economy as of today, and whether or not the economy as a whole is getting better or worse. It turns out that ordinary people are not as excited about the US economy as those who are cheerleading minimum wage job creation and market levels being close to all time highs, and certainly not as excited as that group of people called each month by either the Conference Board or UMich, the two far more closely tracked confidence indicators. The Economic Confidence Index for the week ending April 10th came in at -14. Down from the prior week, and hitting a low not seen since the first week of November last year.

    Consumer Inflation Expectations Remain Low, Spending Growth Expectations Weaken - NY Fed - The March 2016 Survey of Consumer Expectations (SCE) results indicate a decline in median inflation expectations at both the one-year and the three-year ahead horizons. The median expected change in gasoline prices increased sharply. Median expected household spending growth declined, while expected household income growth rose slightly. Labor market expectations were mixed, with earnings growth expectations remaining stable while the mean perceived probability of losing a job and that of finding a job (if current job were lost) both increased slightly. The main findings from the March 2016 Survey are: Inflation:

    • Median inflation expectations declined at both the one-year (to 2.5 percent from 2.7 percent in February) and the three-year ahead horizon (to 2.5 percent from 2.6 percent in February). The decline at the one-year horizon was concentrated among household heads with lower education, income and numeracy.
    • Median inflation uncertainty (that is, the uncertainty expressed by respondents regarding future inflation outcomes) decreased at both the one-year and the three-year ahead horizons, with both reaching new series lows.
    • Median home price change expectations decreased slightly to 3.0 percent, essentially in line with the readings that have prevailed since August 2015.
    • The median year ahead expected gasoline price change rose significantly to 7.3 percent, perhaps reflecting recent increases at the pump and indicating that consumers expect further increases in gas prices.
    • Expectations for price changes in other items remained fairly stable, with the median expected price change for food, rent and medical care declining slightly and that for college education rising slightly.

    U.S. Consumer Prices Rose a Scant 0.1% in March, Showing Little Inflation Pressure - WSJ: —U.S. consumer prices rose in March for the first time in four months, but the mild gain underscores that only modest inflation pressures exist in the economy. The consumer-price index edged higher last month, a 0.1% gain from a month earlier, the Labor Department said Thursday. Prices for gasoline, medical care and shelter all increased in March, but those gains were partially offset by a decline in prices for food and clothing. Underlying prices, excluding volatile energy and food categories, also barely budged ahead. That muted performance, after strong gains in the first two months of the year, suggest inflation isn’t bouncing back as quickly as some economists projected. After several years of low inflation, consumer prices appeared to be accelerating early this year, supported by a bottoming out of commodities prices, including oil, and the recent weakening of the dollar. But the weaker-than-expected inflation increase last month underscores that lackluster demand and a soft global economy are still keeping price gains in check. “Overall inflation, for the time being, is back to where it was before December,” . Inflation pressure should build during the year, but “the change will be very gradual.”

    March 2016 CPI: Inflation Moderates: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 0.9 % - a decline from last month's 1.0 %. The year-over-year core inflation (excludes energy and food) rate declined 0.1% to 2.2 %, and remains slightly above the target set by the Federal Reserve.As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. The major influence on the CPI was energy prices. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.9 percent before seasonal adjustment. The food index declined in March, while the indexes for energy and for all items less food and energy rose, leading to the slight seasonally adjusted increase in the all items index. The food index fell 0.2 percent after rising in February, as five of the six major grocery store food groups declined. The energy index rose for the first time since November, with all of its major components except natural gas increasing. While the index for all items less food and energy increased in March, the 0.1 percent advance was the smallest increase since August. Major component indexes were mixed in March. The indexes for shelter, recreation, medical care, education, tobacco, and personal care were among those that rose, while the indexes for apparel, airline fares, communication, household furnishings and operations, and used cars and trucks all declined. The all items index rose 0.9 percent over the last 12 months, a slightly smaller increase than the 1.0- percent change for the 12 months ending February. The index for all items less food and energy has risen 2.2 percent over the last 12 months, and the food index has increased 0.8 percent. Despite rising in March, the energy index has declined 12.6 percent over the last year.

    CPI Tame Again, Increases 0.1% for March -- Robert Oak - The Consumer Price Index increased 0.1% in March as energy prices increased for the first time since November.  Gasoline by itself increased 2.2% for the month.  Inflation without food or energy prices considered increased 0.1% with shelter and medical costs once again leading the charge.  From a year ago overall CPI has increased 0.9%, which is very low. Yet, without energy and food considered, prices have increased 2.2% for the year. Overall CPI in February declined by -0.2% and January had no change. CPI measures inflation, or price increases. Yearly overall inflation is shown in the below graph and cheap gas has really caused overall inflation to appear very tame. Core inflation, or CPI with all food and energy items removed from the index, has increased 2.2% for the last year. This is above typical inflation target rates of 2.0%. For the past decade the annualized inflation rate has been 1.9%. Core CPI's monthly percentage change is graphed below. This month core inflation increased 0.1%. Within core inflation, shelter increased 0.2%, with monthly rental costs increasing more than home ownership, 0.3% vs. 0.2%. Apparel prices fell by -1.1% after increasing 1.6% in February. Used cars decreased by -0.1%, new vehicles prices were unchanged while airfare declined by -0.9% for the month. The energy index is down by -12.6% from a year ago. The BLS separates out all energy costs and puts them together into one index. For the year, gasoline has declined -20.9%, while Fuel oil has dropped -34.8%. Fuel oil for the month increased 1.7%. Natural gas declined by -0.7% for the month. Graphed below is the overall CPI energy index. Graphed below is the CPI gasoline index and it's very happy, astounding implosion. Core inflation's components include shelter, transportation, medical care and anything that is not food or energy. The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels. Shelter increased 0.2% and is up 3.2% for the year. Rent of a primary residence just keeps increasing and this month by 0.3% and is up 3.7% for the year. Graphed below is the rent price index.  :Rent is regional and in some cities protests are breaking out as people are subject to no cause evictions and rents skyrocket monthly. Food prices overall declined by -0.2% for the month. Food and beverages have now increased just 0.8% from a year ago. Groceries, (called food atnbs home by BLS), dropped -0.5% for the month, and are down -0.5% for the year. The fruits and vegetables index dropped by -1.9% and this is the largest monthly decline since January 2005. Veggies by themselves declined -3.2% and fresh fruit dropped by -1.7%. Yet it is other fresh fruits causing the decline as Apples increased 1.6% for the month and are up a whopping 11% for the year. Tomatoes on the other hand, classified as a vegetable instead of the fruit that it is, declined by -7.2% for the month. Beef steak increased 1.6%, roasts 2.2% but are finally down annually -2.0% for steak and -3.3% for roasts. Ground beef had no change and is down by -8.8% for the year. Eating out, or food away from home increased 0.2% for the month and is up 2.7% for the year. One really needs to drill down in these indexes to see what exactly is causing the price change as one cannot eat lettuce alone for long. Graphed below are overall grocery prices, otherwise known as the food at home inflation index.

    Core CPI Hovers Near 8 Year Highs As Shelter/Rent Pops, Autos Drop -- Having surged to its highest since 2008 in February, Core CPI's YoY gain inched back from 2.3% to 2.2% YoY in March hovering at post-crisis highs. The food index declined in March, as did the cost of 'shelter' and medical care but used cars and truck prices declined, as we noted previously.Still above Fed "mandate" levels and near 8 year highs...The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.9 percent before seasonal adjustment. The food index declined in March, while the indexes for energy and for all items less food and energy rose, leading to the slight seasonally adjusted increase in the all items index. The food index fell 0.2 percent after rising in February, as five of the six major grocery store food groups declined. The energy index rose for the first time since November, with all of its major components except natural gas increasing.While the index for all items less food and energy increased in March, the 0.1 percent advance was the smallest increase since August. Major component indexes were mixed in March. The indexes for shelter, recreation, medical care, education, tobacco, and personal care were among those that rose, while the indexes for apparel, airline fares, communication, household furnishings and operations, and used cars and trucks all declined.

    Why no economic boost from lower oil prices?  - Jim Hamilton - Many analysts had anticipated that a dramatic drop in oil prices such as we’ve seen since the summer of 2014 could provide a big stimulus to the economy of a net oil importer like the United States. That doesn’t seem to be what we’ve observed in the data. There is no question that lower oil prices have been a big windfall for consumers. Americans today are spending $180 B less each year on energy goods and services than we were in July of 2014, which corresponds to about 1% of GDP. A year and a half ago, energy expenses constituted 5.4% of total consumer spending. Today that share is down to 3.7%.  But we’re not seeing much evidence that consumers are spending those gains on other goods or services. I’ve often used a summary of the historical response of overall consumption spending to energy prices that was developed by Paul Edelstein and Lutz Kilian.  The black line in the graph below shows the actual level of real consumption spending for the period September 2013 through February of 2016, plotted as a percent of 2014:M7 values. The blue line shows the forecast of their model if we assumed no change in energy prices since then, while the green line indicates the prediction of the model conditional on the big drop in energy prices that we now know began in July of 2014. These calculations suggest that while there was a modest boost in spending in the second half of 2014 and first half of 2015, it was significantly less than would have been predicted from the historical relation between spending and energy prices. Moreover, any boost seems to have completely vanished by this point, with actual consumption even a little below what would have been predicted had there been no drop in energy prices at all.

    Why Aren't Low Oil Prices Leading to Increased Consumer Spending? (IMF) --Though a decline in oil prices driven by higher oil supply should support global demand given a higher propensity to spend in oil importers relative to oil exporters, in current circumstances several factors have dampened the positive impact of lower oil prices.  First and foremost, financial strains in many oil exporters reduce their ability to smooth the shock, entailing a sizable reduction in their domestic demand. The oil price decline has had a notable impact on investment in oil and gas extraction, also subtracting from global aggregate demand.  Finally, the pickup in consumption in oil importers has so far been somewhat weaker than evidence from past episodes of oil price declines would have suggested, possibly reflecting continued deleveraging in some of these economies. Limited pass-through of price declines to consumers may also have been a factor in several emerging market and developing economies.

    Energy expenditures as a percentage of PCE at All Time Low -- Here is a graph of expenditures on energy goods and services as a percent of total personal consumption expenditures through February 2016. This is one of the measures that Professor Hamilton at Econbrowser looks at to evaluate any drag on GDP from energy prices. Data source: BEA Table 2.3.5U. The huge spikes in energy prices during the oil crisis of 1973 and 1979 are obvious. As is the increase in energy prices during the 2001 through 2008 period.  In February 2016, with WTI oil prices averaging $30.32 per barrel, energy expenditures as a percent of PCE declined to an all time low of just under 3.7%. 

    Energy charts of the day: Another energy milestone as the energy share of consumer spending falls to a record low -  The top chart above displays the share of monthly consumer expenditures that is spent on “energy goods and services,” on a monthly basis back to January 1959 (BEA data here).  The energy share of consumer spending fell to an all-time record low in February of this year at slightly less than 3.7%. During the Great Recession, when oil, gasoline, and natural gas prices were spiking, the energy share of spending peaked at 6.8% in July 2008, nearly double the energy share in February. And back during the 1979-1980 energy crisis/oil shock, the energy share of consumer spending exceeded 9% in 18 of the months between March of 1980 and March of 1982. The bottom chart above displays the monthly CPI series for Gasoline and Natural Gas between January 2000 and February 2016 and helps explain why the energy share of consumer spending reached an all-time low in February. The CPI for natural gas was the lower in January and February than in any months going back to early 2003, and the CPI for gasoline was the lowest in February in 12 years, except for a few months in late 2008 when it was slightly lower.

    Is Life Better Than It Was Decades Ago? For Some Voters, Probably Not - The Pew Research Center recently polled voters on whether life in America is better or worse than it was 50 years ago “for people like them.”  Overall, 46% of voters say that life is worse. As you might have guessed, this is especially true of Republican voters and especially especially true of Donald Trump’s supporters. This isn’t entirely in voter’s imaginations either– not necessarily over the past 50 years, but certainly in recent decades, some different demographic groups have had quite different outcomes.Overall, Mr. Trump’s supporters are the most negative on the question, but Ted Cruz and Dennis Kasich’s supporters also feel like they’re losing ground. By contrast, the supporters of Hillary Clinton and Bernie Sanders tend to say feel like things are getting better. Although Pew did not ask strictly about economics, here are the economic outcomes for a handful of groups in recent decades. . First, this truly has been a very different economy depending on how much schooling someone has. Families headed by someone with a master’s degree earn almost 10% more than they did 25 years ago, even after adjusting for inflation, and have regained much of the ground that they lost during the recession. Those with only a college degree have seen their incomes fall in the two most recent recessions, and they haven’t caught back up yet. They earn about as much as they did 25 years ago. For those without a college diploma, however, the last 15 years have been especially difficult. After making some modest gains through the year 2000, their incomes fell in the 2001 and 2007-09 recession and have yet to really even begin to recover. These families earn about 15% less than they did 25 years ago.

    Used Car Price Plunge "Could Bring The Whole House Of Cards Down" --When we first warned that something was breaking in the American auto market, the Phil-LeBeau-ians crawled out of the woodwork to explain how everything is still awesome (brushing the weakness in stocks) despite soaring inventories and shrinking credit. Then when used-car prices began to leak lower, a few paid attention and the recent weakness in new car saleshas shocked most. Now, however, used-car-prices are plunging at a similar pace to 2008...And RBC's Joseph Spak wonders if declining used vehicle prices (biggest YoY since 2013)... Is "the card that brings the whole house down." The reason for concern is lower used vehicle prices have a potential spillover effect to many other industry factors. If we think about volume, price, mix, credit – all have been incredibly positive and supportive of the recovery. All are also no doubt related, but that’s what makes it a bit scary. Lower used vehicle values mean lower trade-in value which means lower vehicle affordability. Maybe the consumer is underwater (especially if bought on longer term loans). New volumes could decline if the consumer holds off (or looks to the secondary market). Mix worsens as the consumer affordability is lower. ATPs decline as OEMs incentivize to keep volume and/or mix going. Captive finance companies may write down lease portfolios. In general, monthly payments go higher which raises the credit risk which in turn means auto loan rates could increase which could then stymie demand/mix.

    Used-Car Inventories Surge To Record Highs As Goldman Fears "Spillovers From Demand Plateau" - Just 24 hours ago we explained the beginning of the end of the US automaker "house of cards," detailing how the tumble in used-car-prices sets up a vicious circle as Goldman warns"demand has plateaued." This is most evident in the surge in pre-owned vehicle inventories to record highs, forcing, as WSJ reports, dealers to lower prices, further denting new-car pricing. The effect of any sales slowdown, as Goldman ominously concludes, is considerable as spillovers from auto manufacturing can be significant given its highest "multiplier" of any sector in the economy. As we noted previously used-car-prices are plunging at a similar pace to 2008...And Used Cars... (via WSJ) Inventories of used cars in good condition are soaring in the U.S., and finance companies and dealers are scrambling to offer leases as a way to make payments affordable for people who don’t qualify for cheap deals on new cars or those looking to save cash. Wholesale pricing fell during each of those months verus 2015, Manheim Consulting data shows. Manheim estimates used-vehicle supply will hit records in during a three-year period starting in 2016. Lower used-car prices will eventually dent new-car pricing power, analysts said.

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

    March 2016 Producer Prices Year-over-Year Inflation Is Now Insignificantly Below Zero.: The Producer Price Index year-over-year inflation is insignificantly below zero. The intermediate processing continues to show a large deflation in the supply chain. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate dropped from 0.0 % to -0.1 %.. In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower. Removing food and energy (core PPI) was originally done to remove the noise from the index, however the usefulness in the twenty-first century is questionable except in certain specific circumstance.

    "Less bad" producer commodity deflation - a good sign  -- As an initial matter, while this morning's retail sales number wasn't good, after the poor report on March auto sales, I can't imagine why anybody was surprised.  Since inflation adjustments in retail sales are important, I'll withhold further comment until the CPI is reported tomorrow.  Like the big decline in corporate bond yields that I wrote about Monday, this morning's producer price report is in line with the idea that the shallow industrial recession is ending.  We have over 100 years of data on producer commodity prices, and what they show is that deflationary (or even severe disinflationary) recessions always end at very least when the YoY% decline is less than half of its worst level (1927, 1929-32), and most often right when the change in YoY commodity prices are at their worst.

    Import and Export Prices April 12, 2016: Yes, a 6.5 percent monthly surge in petroleum prices did make for a 0.2 percent overall gain for import prices in March but when excluding petroleum, import prices fell 0.2 percent. In a telling sign of how deflationary cross-border price pressures have been, import prices excluding petroleum last posted a gain way back in March 2014. Export prices came in unchanged on the month which is, nevertheless, the best reading since May last year. Prices for exported industrial supplies rose 0.7 percent, offset by a 2.5 percent monthly decline for agricultural products where, in an important reading for farmers, year-on-year prices are down 11.1 percent. Total year-on-year export prices are down 6.1 percent with import prices down 6.2 percent, both readings showing little improvement from recent trend. Country data for imports show the greatest monthly declines for NICs( newly industrialized countries) at minus 0.5 percent and China at minus 0.2 percent. Year-on-year, price declines are steepest for Canada and Latin America, at minus 12.5 and at minus 9.7 percent respectively, both strong reflections of low oil and commodity prices. Prices of finished goods, both imported and exported, are down to flat with year-on-year readings for all categories either flat or slightly negative. Global deflation is the theme and an initial rise for oil-based prices isn't yet making much impact.

    Import and Export Price Year-over-Year Deflation Continues in March 2016.: Trade prices continue to deflate year-over-year. Import Oil prices were up 4.9 % month-over-month, and export agricultural prices declined 2.5 %.

    • with import prices down 0.3 % month-over-month, down 6.2 % year-over-year;
    • and export prices unchanged month-over-month, down 6.1 % year-over-year..

    There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.There are three cases of deflation outside of a recession - early 1990′s, late 1990′s, and mid 2000′s. Import price deflation is normally associated with strengthening of the dollar relative to other currencies. According to the press release: The price index for U.S. imports rose 0.2 percent in March, the first monthly increase for the index since a 0.1-percent uptick in June 2015. The March advance was the largest 1-month rise since the index increased 1.1 percent in May 2015. Despite the upturn, overall import prices remained down over the past year, falling 6.2 percent from March 2015 to March 2016.  U.S. export prices recorded no change in March. This is the first time that the index did not decline since a 0.5-percent rise in May 2015. Prior to March, export prices decreased 0.5 percent in February, 0.8 percent in January, and 1.1 percent in December. In March, agricultural prices declined and the price index for nonagricultural exports advanced. Overall prices for U.S. exports decreased 6.1 percent over the past year.

    LA area Port Traffic Decreased Sharply YoY in March due to Labor Slowdown last Year -- There were some large swings in LA area port traffic early last year due to labor issues that were settled in late February 2015. Port traffic slowed in January and February last year, and then surged in March 2015 as the waiting ships were unloaded (the trade deficit increased in March too).  This has impacted the YoY changes for the first few months of 2016.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.  On a rolling 12 month basis, inbound traffic was down 3.1% compared to the rolling 12 months ending in February. Outbound traffic was up 0.4% compared to 12 months ending in February. The downturn in exports over the last year was probably due to the slowdown in China and the stronger dollar. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). Imports were down sharply year-over-year in March, but last year imports surged after the labor issues were resolved. So the year-over-year data was negatively impacted.

    West Coast Ports Look to Make Comeback in Cargo Volume - WSJ: —Cargo volumes at the nation’s West Coast ports appear to be making a comeback from a lackluster year in 2015, reporting gains in the first quarter of 2016 and a hopeful improvement on the export side. At the nation’s largest container port, the Port of Los Angeles, loaded export containers increased 7.6% to 432,092 20-foot equivalent units, a standard measure for container cargo, during the first three months of the year. Loaded import containers were up 8.8% to 1,027,184 TEUs. Empty containers on the export side, which ballooned in 2015, continued the trend, rising 19.4% for January through March in Los Angeles. Year over year, the month of March saw steep declines compared with March 2015—the result of an unusual surge in container traffic immediately after the West Coast dockworkers’ union and port employers agreed to contract terms in late February of that year after months of protracted negotiations and delays at the ports. January and February of 2015 were uncommonly slow as the negotiations dragged on, but in the first two months of 2016 much of that traffic recovered.  Compared with the first three months of 2014, when the West Coast ports were operating without disruptions, the first quarter of this year saw an improvement of roughly 6% in overall container volume at the Port of L.A. Dockworkers handled more than 2 million TEUs relative to 2014’s 1.92 million and 2015’s 1.82 million in the first quarter. The Port of L.A. said the first quarter of 2016 was the busiest in its 109-year history. Los Angeles was the second major U.S. port to report March volumes. Last week, the Port of Oakland—a major West Coast hub for U.S. agricultural exports bound for Asia—reported surging export volumes in March and a strong quarterly performance overall. March export volume was up 9.9%, the third straight month of volume gains. For January through March of this year, overall cargo volume at the Port of Oakland was up 18.9% year over year.

    Rail Week Ending 09 April 2016: The Data Now Looks Recessionary: Week 14 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. All rolling averages are in decline. The deceleration in the rail rolling averages began one year ago, and now rail movements are being compared against weaker 2015 data. There were port labor issues one year ago which affected intermodal movements - which skew the results both positively and negatively (this week again negatively as it is being compared to the shipping surge at the end of the strike). HOWEVER, one can ignore the strike which only affects intermodal - and concentrate on carloads which are diving into the abyss.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 479,059 carloads and intermodal units, down 14.1 percent compared with the same week last year. Total carloads for the week ending Apr. 9 were 229,704 carloads, down 20 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 249,355 containers and trailers, down 7.8 percent compared to 2015. Two of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 20.7 percent to 9,274 carloads; and motor vehicles and parts, up 0.9 percent to 17,986 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 44.9 percent to 58,166 carloads; petroleum and petroleum products, down 22.3 percent to 11,910 carloads; and grain, down 20.5 percent to 18,871 carloads. For the first 14 weeks of 2016, U.S. railroads reported cumulative volume of 3,372,955 carloads, down 14.2 percent from the same point last year; and 3,589,027 intermodal units, up 0.8 percent from last year. Total combined U.S. traffic for the first 14 weeks of 2016 was 6,961,982 carloads and intermodal units, a decrease of 7.1 percent compared to last year.

    US factory output fell again in March (AP) — U.S. factory output dropped in March for the second straight month as manufacturers churned out fewer cars, metal parts and machinery. Factory production fell 0.3 percent, following a 0.1 percent drop in February, the Federal Reserve said Friday. The figures suggest that American manufacturers are still struggling with the triple whammy of weak overseas growth, the strong dollar and sluggish consumer and business spending at home. Automakers cut back sharply, as sales slowed last month after a record 2015. Another factory report also released Friday suggested that goods production in the U.S. could be stabilizing. The New York Federal Reserve’s Empire State index, based on a survey of manufacturers in the state, rose in April to its highest level in more than a year. And earlier this month, the Institute for Supply Management, a nationwide trade group of purchasing managers, said that its survey showed manufacturers expanded in March. But the Fed’s industrial production report, a direct measure of output rather than a survey, points in the other direction.

    Fed: Industrial Production decreased 0.6% in March -- From the Fed: Industrial production and Capacity Utilization --Industrial production decreased 0.6 percent in March for a second month in a row. For the first quarter as a whole, industrial production fell at an annual rate of 2.2 percent. A substantial portion of the overall decrease in March resulted from declines in the indexes for mining and utilities, which fell 2.9 percent and 1.2 percent, respectively; in addition, manufacturing output fell 0.3 percent. The sizable decrease in mining production continued the industry's recent downward trajectory; the index has fallen in each of the past seven months, at an average pace of 1.6 percent per month. At 103.4 percent of its 2012 average, total industrial production in March was 2.0 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.5 percentage point in March to 74.8 percent, a rate that is 5.2 percentage points below its long-run (1972–2015) average. This graph shows Capacity Utilization. This series is up 10.2 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 74.8% is 5.2% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.  The second graph shows industrial production since 1967. Industrial production decreased 0.6% in March to 103.4. This is 18.3% above the recession low, and 2.0% below the pre-recession peak. This was below expectations of a 0.1% decrease. The decline was most related to mining and utilities.

    US Industrial Output Continued To Slide In March -- Manufacturing output in the US contracted for the second straight month in March, according to this morning’s update from the Federal Reserve. The slide weighed on the broader measure of industrial production, which slumped a hefty 0.6% last month. The decline pushed the year-over-year trend for industrial activity deeper into the red. The news raises doubts about the nascent signs of a manufacturing turnaround via the sentiment data. The ISM Manufacturing Index, a measure of the mood in the sector, ticked above the neutral 50 mark in March—the first sign of growth for this metric in seven months. But if that was a prelude of better days ahead for the battered manufacturing sector there was no sign of revival in today’s hard-data report from the Fed. Indeed, manufacturing’s slump deepened via the Fed numbers, with output diving 0.3% last month—a bit more than February’s 0.1% slide. Monthly data is noisy, of course, but the year-over-year figures don’t look encouraging either. Industrial output in annual terms contracted again in March–the seventh consecutive month of annual red ink. Using industrial production alone as a guide suggests that the US economy is in recession. But other indicators suggest otherwise, including yesterday’s numbers for initial jobless claims. Stepping back and looking at a broad spectrum of market and economic indicators for the US continue to align with a low-recession risk posture. The industrial production data begs to differ, but that’s still the exception and its not yet obvious that a weak industrial sector is enough to kill economic growth writ large. But note that the March report on retail sales delivered a surprisingly weak profile earlier this week.

    March 2016 Industrial Production Remains In Contraction Year-over-Year. Well Under Expectations.: The headlines say seasonally adjusted Industrial Production (IP) declined. The year-over-year data remains in contraction. It is hard to see a bright spot in this data.

    • Headline seasonally adjusted Industrial Production (IP) decreased 0.6 % month-over-month and down 2.0 % year-over-year.
    • Econintersect's analysis using the unadjusted data is that IP growth decelerated 0.5 % month-over-month, and is down 2.5 % year-over-year.
    • The unadjusted year-over-year rate of growth was unchanged from last month using a three month rolling average, and is down 2.0 % year-over-year

    IP headline index has three parts - manufacturing, mining and utilities - manufacturing was down 0.3 % this month (up 0.4 % year-over-year), mining down 2.9 % (down 12.9 % year-over-year), and utilities were down 1.2 % (down 7.7 % year-over-year). Note that utilities are 10.6 % of the industrial production index, whilst mining is 15.5 %.

    US Industrial Production Plunges As March Auto Manufacturing Tumbles Most Since 2008 -- The US economy has never - ever - seen Industrial Production drop YoY for seven months in a row without being in a recession. Down 2.0% YoY in March, the weakest since December and down 0.6% MoM (weakest since Feb 2015) the decline in factory output is driven a 1.6% plunge in vehicle production (2.8% collapse in motor vehicles specifcally) in March. This 1.76% drop is the worst for a March since 2008. As The Fed details, Manufacturing output decreased 0.3 percent in March. The production of durables moved down 0.4 percent. The largest declines, about 1 1/2 percent, were registered both by motor vehicles and parts and by electrical equipment, appliances, and components. Several industries posted increases, with the largest, nearly 1 percent, for computer and electronic products. After increasing 0.9 percent in January and decreasing 0.5 percent in February, the output of nondurable manufacturing edged down in March, as gains in the production of petroleum and coal products and of chemicals nearly offset declines for most other industries. The output of other manufacturing (publishing and logging) fell almost 1 percent.  It really should be no surprise that Auto production is hitting the wall, as we have been discussing, inventories are extreme...price and sales weakness is occurring amid a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years...

    NY Fed: April "General business conditions climbed nine points, highest in more than a year"  -- From the NY Fed: Empire State Manufacturing Survey Business activity expanded for New York manufacturing firms for the first time in over a year, according to the April 2016 survey. After remaining in negative territory for seven months, the general business conditions index rose to a reading slightly above zero last month, and climbed nine more points to reach 9.6 in April. ..The index for number of employees edged up to 2.0, indicating that employment levels remained fairly steady, and the average workweek index was unchanged at 2.0, a sign that hours worked remained largely the same. ..Indexes for the six-month outlook indicated that conditions were expected to improve in the months ahead. The index for future business conditions moved up four points to 29.4—its third consecutive rise. The index for future new orders remained elevated at 36.6, and the index for future shipments climbed to 37.2. Future employment indexes conveyed an expectation that employment levels and the average workweek would rise modestly over the next six months.  This was above the consensus forecast of 3.0, and indicates manufacturing expanded in the NY region in April. 

    April 2016 Empire State Manufacturing Index Expansion Grows.: The Empire State Manufacturing Survey improved and advanced further into expansion.

    • Expectations were for a reading between -0.50 to 10.00 (consensus +3.00) versus the 9.6 reported. Any value above zero shows expansion for the New York area manufacturers.
    • New orders subindex of the Empire State Manufacturing Survey is now in expansion, whilst the unfilled orders sub-index improved by remains in contraction.
    • This noisy index has moved from -1.2 (April 2015), +3.1 (May), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September), -11.4 (October), -10.7 (November), -4.6 (December), -19.4 (January 2016), -16.6 (February), +0.6 (March) - and now 9.6.

    As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the more pessimistic. Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know. From the report: The April 2016 Empire State Manufacturing Survey indicates that business activity expanded for New York manufacturers. The headline general business conditions climbed nine points to 9.6, its highest level in more than a year. The new orders and shipments indexes registered an increase in both orders and shipments, and inventories were slightly lower than last month. The prices paid index climbed sixteen points to 19.2, pointing to a pickup in input price increases, while the prices received index rose above zero, a sign that selling prices increased. Employment levels and the average workweek were little changed from March. The six-month outlook continued to improve, with the index for future business conditions rising for a third straight month.

    As Empire Fed Prints Highest In Over A Year, Are The Fed's "Global" Concerns Easing? - Following the all-clear from China, soaring stock prices, and 'stability' in oil, Empire Fed business conditions just hit a 17-month high. In other words,The Fed is gonna need some bigger 'turmoil' excuses or defending "no rate hikes" is going to look a whole lot more political than their independence would suggest. As The NY Fed notes: Business activity expanded for New York manufacturing firms for the first time in over a year, according to the April 2016 survey. After remaining in negative territory for seven months, the general business conditions index rose to a reading slightly above zero last month, and climbed nine more points to reach 9.6 in April. Thirty-one percent of respondents reported that conditions had improved over the month, while 22 percent reported that conditions had worsened. After a steep gain last month, the new orders index edged up two points to 11.1, pointing to an increase in orders. The shipments index edged lower but, at 10.2, still signaled a modest increase in shipments. The unfilled orders and delivery time indexes both came in close to zero. The inventories index was -4.8, indicating that inventory levels were slightly lower.

    Business Inventories April 13, 2016: Sales are falling but fortunately so are inventories which fell 0.1 percent in February vs a 0.4 percent decline for sales. The combination keeps the inventory-to-sales ratio, which has been trending higher, at 1.41. Retail inventories rose a very steep 0.6 percent in February especially against a 0.2 percent decline for sales. Retail inventories of autos, where sales have been weak, rose 1.3 percent in the month to swell the inventory-to-sales ratio to 2.14 from 2.12. Inventories at both manufacturers and wholesalers fell in the month to keep ratios for these readings stable. Retail inventories, given this morning's weak retail sales report for March, may be a risk to the nation's inventory outlook, especially for autos where inventory backup also points to trouble for factory production. Lower down the supply chain, however, sales and inventories are balanced, at least for now.

    U.S. business inventories fall slightly, sales weaken further - U.S. business inventories fell marginally in February as automobile stocks rose, but persistently weak sales suggested businesses could take longer than previously thought to reduce a glut of unsold merchandise. The Commerce Department said on Wednesday that inventories, a key component of gross domestic product, slipped 0.1 percent in February, which was in line with economists' expectations. Inventories in January were revised down to show a 0.1 percent drop instead of the previously reported 0.1 percent gain. Retail inventories excluding autos, which go into the calculation of GDP, rose 0.3 percent in February after increasing 0.2 percent in January. Auto inventories rose 1.3 percent in February after increasing 0.8 percent in January. Inventories subtracted about two-tenths of a percentage point from fourth-quarter GDP growth. Economic growth estimates for the first quarter are currently as low as a 0.2 percent annualized rate. The economy expanded at a 1.4 percent pace in the fourth quarter. Businesses accumulated record inventories in the first half of 2015, which outpaced demand. Despite their concerted efforts to reduce unsold goods through deep discounts, inventories still remain too high and pose a downside risk to GDP growth in the first half of 2016. Business sales fell 0.4 percent in February after decreasing 0.8 percent in January. At February's sales pace, it would take 1.41 months for businesses to clear shelves. That matched February's inventory-to-sales ratio, which was the highest since May 2009. The high ratio suggests businesses could continue working through the inventory overhang through the first half of the year, hurting manufacturing and curbing GDP growth.

    February 2016 Business Sales and Inventories Data Is Mixed.: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales improved compared to the previous month - and there was am improvement in the rolling averages. Inventories marginally declined. The inventory-to-sales ratios remain at recessionary levels. This series underwent its annual revision, but trends were not affected, Personally, I would ignore all February data because leap year seems to be spoiling both the unadjusted and adjusted data. Econintersect Analysis:

    • unadjusted sales rate of growth accelerated 5.9 % month-over-month, and up 2.0 % year-over-year
    • unadjusted sales (but inflation adjusted) up 3.0 % year-over-year
    • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 1.2 % month-over-month, and is down 1.4 % year-over-year.
    • unadjusted business inventories growth down 0.6 % month-over-month (up 1.1 % year-over-year with the three month rolling averages improving), and the inventory-to-sales ratio is 1.51 which is at recessionary levels (well above average for this month).

    US Census Headlines:

    • seasonally adjusted sales down 0.4 % month-over-month, down 1.4 % year-over-year (it was reported down 1.1 % last month).
    • seasonally adjusted inventories were down 0.1 % month-over-month (up 1.2 % year-over-year), inventory-to-sales ratios were up from 1.37 one year ago - and are now 1.41.
    • market expectations (from Bloomberg) were for inventory growth of -0.2 % to 0.2 % (consensus -0.1 %) versus the actual of -0.1 %.

    Q1 GDP Double Whammy: Business Inventories Slide, Sales Tumble -- Business inventory-to-sales ratio pushes to new deeply recessionary cycle highs at 1.41x... As inventories met expectations of a modest 0.1% drop MoM in February but sales tumbled 0.4%. Auto inventories rose 1.3% - the most since Sept 2015 (but sales were unchanged as opposed to +1.4% in Sept 2015). The breakdown is ugly across the board... Q1 GDP takes a double whammy as not only did inventories drop (and recent gains were revised lower) but sales tumbled.

    Beige Book Gems: Toy Demand, the Flu and Atlantic City - For the Federal Reserve, and Fed-watchers, the beige book offers anecdotal evidence every six weeks on how the ground-level economy is faring—and sometimes, those anecdotes stand out. Below are some of the gems from the latest beige book, released Wednesday and based on information collected before April 7.

    • Children’s demand for toys not tied to market uncertainty in Boston district: “A toymaker says that volatility in financial markets and uncertainty surrounding the economy at the beginning of the year had no discernible effect on demand for toys.”
    • A “rare” positive for Atlantic City, from the Philadelphia district: “Atlantic City casino revenues rose 15% in February compared with the prior year—a rare increase that may reflect stronger-than-normal convention bookings.”
    • Stomach bug hits in Richmond district: “An executive at a health-care organization reported being ‘inundated’ as a result of a large, late-season increase in flu and norovirus cases.”
    • Soggy ground bad for logging in Minneapolis district: “Logging in northern Wisconsin was slowed by a warm winter that made the ground too soft for equipment.”
    • Energy firms loathe job cuts in Dallas district: “Some energy contacts noted they were loath to cut more jobs and were instead completely eliminating overtime or no longer matching 401(k) contributions, but many energy firms said they may still have to trim head counts further this year.”

    NFIB: Small Business Optimism Index declined slightly in March - From the National Federation of Independent Business (NFIB): Small Business Optimism Drops to a New Two Year LowThe Index of Small Business Optimism fell 0.3 points from February, falling to 92.6. Statistically, no change. Four of the 10 Index components posted a gain, six posted small declines, the biggest gain was in Expected Business Conditions, a 4 point improvement to a still very negative number. ... Reported job creation improved in March, with the average employment change per firm rising to an average gain in employment of 0.02 workers per firm, not much, but positive. ...This graph shows the small business optimism index since 1986. The index decreased to 92.6 in March.

    Verizon won’t fix copper lines when customers refuse switch to fiber - Verizon has reportedly switched 1.1 million customers from copper to fiber lines over the past few years under a program it calls "Fiber Is the Only Fix." But some phone customers have refused the switch to fiber because they prefer to keep their copper lines—even though Verizon apparently is refusing to fix problems in the copper infrastructure. The Philadelphia Inquirer reports that it obtained internal company documents that describe the effort to switch problematic copper lines to fiber. Verizon customers with copper-based landline phones who call for repairs twice in 18 months "will be told that their 'only fix' is to replace decades-old copper line with high-speed fiber as Verizon won't fix the copper," the report said. While Verizon still has a few million copper-line customers, the Fiber Is the Only Fix policy is responsible for 1.1 million changes to fiber in Pennsylvania and other states. The policy is also in place in New York, Massachusetts, Virginia, and Delaware, and it's expected to expand to New Jersey, the report said. The Verizon documents obtained by the Inquirer apparently confirm what customers have been saying for years about Verizon technicians' reluctance to fix copper lines. "Once at the customer's home, the Verizon technician tells the customer that the only solution is to switch to fiber, which includes the installation of a FiOS box," the Inquirer reported. "If a flagged copper customer needing repairs ultimately declines fiber upgrade, the Verizon document commands: 'Do not fix trouble' with the copper line."

    The Tyranny of the Noncompete Clause - Justin Fox - In “Regional Advantage,” her classic 1994 explanation of why Silicon Valley became the center of the tech universe and Route 128 outside Boston did not, AnnaLee Saxenian of the University of California at Berkeley argued that a key difference was that in Silicon Valley people jumped from company to company, while along Route 128 they stayed put. In Silicon Valley, Saxenian told me in a 2014 interview: People start companies, they fail, they succeed, they move on. And that seeds new companies, and those people carry on the knowledge and the know-how but it gets recombined with other skills and technology. Whereas you can think about the 128 company as being autarkic. The company was the family was the unit, and everything stayed within the company.  Saxenian wrote that in Silicon Valley, “Early efforts to take legal action against departed employees proved inconclusive or protracted, and most firms came to accept high turnover as a cost of business in the region.” Along Route 128, which rivaled Silicon Valley in the 1960s and 1970s before falling behind in the 1980s, it was a different story. One leading firm, Data General, “repeatedly sued competitors and former employees to prevent the loss of proprietary corporate information.” . In Massachusetts, as in 46 other states, it’s possible for employers to enforce post-employment covenants not to compete -- aka noncompete clauses. In California it generally isn’t. Noncompete clauses usually ban employees from going to work for a competitor or starting a competing firm for some pre-determined period of time. Such agreements have been around since at least the 1400s, with proponents defending them as a way to encourage employers to develop new technologies and invest in worker training (because they have less reason to fear losing their secrets and their valuable employees to a competitor) and critics depicting them as an unfair restraint of trade that hurts workers.

    US Jobless Claims Drop To Lowest Level Since 1973 -- This is as good as it gets… at least by the standard of jobless claims. New filings for unemployment benefits dropped 13,000 last week to a seasonally adjusted 253,000—the lowest since the Watergate scandal was consuming the Nixon administration. Taken at face value, today’s numbers provide cover for dismissing yesterday’s surprise decline in retail spending in March as noise. “Jobless claims are running really low and all other labor market data are telling us that the economy is creating a lot of jobs,” Patrick Newport, an economist at IHS Global Insight, tells Bloomberg. “This is further confirmation that the labor market is strong.”  The upbeat outlook holds up in the year-over-year data too. Claims fell more than 12% last week vs. the year-earlier level (before seasonal adjustment). The numbers suggest, rather strongly, that economic growth is set to roll on for the foreseeable future.

    JOLTS Shows Job Hiring Strong -- The BLS February 2016 JOLTS report shows very high job openings once again.  Job openings have more than recovered from the recession and now job openings are greater than the number of new hires.  Actual hiring has also reached prerecession levels and is at a nine year high.  The Job Openings and Labor Turnover Survey shows there are now 1.4 official unemployed per job opening for February 2016.  Job openings and hires were both 5.4 million.  The bottom line is all of those who dropped out of the job market should consider coming back for clearly demand for workers is finally very strong. There were 1.8 official unemployed persons per job opening at the start of the recession, December 2007.   Below is the graph of the official unemployed per job opening, currently at 1.44 people per opening.  This ratio hasn't been seen March 2007. If one takes the U-6 broader measure of unemployment that includes people who are forced into part-time work and the marginally attached, the ratio is 2.86 people needing a job to each actual job opening. In December 2007 this ratio was 3.2. Here too we see ratios returned to prerecession levels. Job openings for the past year have exceeded hire levels which is not the case for most of the survey's history. Currently job openings stand at 5,445,000. Below is the graph of actual hires, currently 5,422,000. We can see hires have finally recovered to pre-recession levels. More interesting in June 2009, the height of the recession, hires exceeded job openings by 1.2 million. Yet since February 2015, job openings have exceeded hires and in February 2016, hires exceeded openings by 23,000. This shows great demand for workers, although tech companies and now other sectors are notorious to put out fake job openings in order to claim they have a labor shortage and thus demand more guest worker Visas in order to import cheap labor. This undercuts and displaces those workers with U.S. citizenship. Graphed below are total job separations, currently at 5.05 million.  The term separation means you're out of a job through a firing, layoff, quitting or retirement and is also called turnover.  From a year ago, separations were 4.74 million.

    BLS: Unemployment Rate decreased in 21 States in March -- From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in March. Twenty-one states had unemployment rate decreases from February, 15 states had increases, and 14 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today....  South Dakota and New Hampshire had the lowest jobless rates in March, 2.5 percent and 2.6 percent, respectively, followed by Colorado, 2.9 percent. The rates in both Arkansas (4.0 percent) and Oregon (4.5 percent) set new series lows. (All region, division, and state series begin in 1976.) Alaska had the highest rate, 6.6 percent.  This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska, at 6.6%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only seven states and D.C are at or above 6% (dark blue).

    Labor force participation increases in most states -- The Regional and State Employment and Unemployment report for March was released today by the Bureau of Labor Statistics and the data show a continuation of what has been a steady improvement in the economies of most states. The exceptions to these positive trends are states with energy-dependent economies that have lost jobs and seen their unemployment rates go up. From December 2015 to March 2016, 30 states and the District of Columbia saw their unemployment rates decline, while 14 states saw unemployment rise. This is a drop in the number of states with falling unemployment rates. Though we expect that to happen to some extent as we get closer to pre-recession levels of unemployment, 25 states and the District of Columbia still have unemployment rates higher than where they were in December 2007. The states with the largest declines in their unemployment rates were Tennessee (-1.1 percentage points), Oregon (-1.0 percentage points), and Arkansas (-0.7 percentage points). States with the largest increases in their unemployment rates were Wyoming (+0.8 percentage points), followed by Illinois, Indiana, and North Dakota (+0.4 percentage points for all three). Six states experienced no change at all in their unemployment rates. From December 2015 to March 2016, 40 states and the District of Columbia added jobs. The largest winners noticeably all occurred in Western states: Hawaii (+1.7 percent), Nevada (+1.2 percent), and Oregon and Washington (both +1.1 percent). Of ten states that lost jobs, the hardest hit states continue to be energy dependent states like North Dakota (-1.0 percent), Wyoming (-0.8 percent), and Alaska (-0.3 percent). Arkansas was also tied with Alaska, losing 0.3 percent of employment.

    Labor Force Participation: Aging Is Only Half of the Story - Atlanta Fed's macroblog - The labor force participation rate (LFPR) is an important ingredient in projecting employment growth and the unemployment rate. However, predicting the LFPR has proven difficult. For example, in 2011 the Congressional Budget Office (CBO) projected that the LFPR in 2015 would be about 64.3 percent. In reality, the LFPR turned out to be 62.6 percent. Based on the CBO projection, the economy would have needed to create about 4 million more jobs to reach the 2015 unemployment rate of 5.3 percent. Why is the LFPR so hard to predict? Leaving aside the challenge of projecting the size of the population, movements in LFPR primarily reflect shifts in the age distribution of the population as well as a number of behavioral factors. Although the aging trends are largely baked in, the behavioral factors vary over time. According to our estimates, about half of the 3.4 percentage-point decline in the LFPR between 2007 and 2015 is the result of the aging of the population, while behavioral factors account for the rest. The complication is that the specific behaviors can change. The following chart shows a decomposition of the change in LFPR from 2007 to 2011 and from 2011 to 2015. Though the aging of the population contributed about the same amount to the decline in LFPR in both periods, the contributions from other factors have varied a lot. (We delve into the changes in the factors following the chart.)

    All the Job Growth is in "Alternative" Jobs  -- There's a widespread sense that fewer American jobs involve an ongoing connection to a employer, and a larger share are in some sense temporary or on-call. "Gig economy" jobs with companies like Uber are the most prominent recent example of this concern, but while the issue seems potentially much broader, hard data is lacking. The US Bureau of Labor Statistics has sometimes conducted a Contingent Worker Survey, but for budgetary reasons, that survey hasn't been conducted since 2005.  The Secretary of the US Department of Labor, Thomas Perez, announced a few ago that the the survey would be done again in May 2017. But in the meantime, efforts to spell out "How Many in the Gig Economy?" (February 16, 2016) have typically used a wide variety of definitions and partial data sources, making it hard to reach clear conclusions. Lawrence F. Katz and Alan B. Krueger took on this challenge head-on. The RAND Corp. conducts research using an American Life Panel, "a nationally representative, probability-based panel of over 6000 members ages 18 and older."  Katz and Krueger contracted with RAND to include a set of questions about contingent workers in the October-November 2015 American Life Panel Survey. The headline finding is that the share of US workers in "alternative" arrangements didn't rise much from 1995 to 2005, but did indeed rise substantially from 2005 to 2015. However, at least so far, only a small share of that increase is due to on-line gig economy jobs like Uber.

    The Gender Gap in Pay and Hours Worked by Mike Kimel -- This post looks at differences between the hours worked, by gender, and the degree to which it could explain the gender gap. To lay the groundwork, the table below shows the number of full time employed (but not self-employed) men, women, their weekly wages, and hours worked.  If this data is to be believed, on average, full time working men have a weekly pay about 21% higher than full time working women, and men work about 6.3% more hours per week. This only includes people working full time during the job, so people on leave are not included.  The difference may be greater when only managers and non-hourly professionals are included, and these tend to be higher paid positions. This is a bit data, but it is the most recent example I could find – in 1999, male managers put in 14% more hours per week than their female equivalents, and male non-manager non-hourly professionals worked almost 17% more hours than women.   Are these numbers accurate? Well, our cousins across the pond report a similar patternFor example, full-time men worked on average 44 hours per week whilst full-time women worked 40 hours per week.  So it seems safe to note that a) on average, men are paid more per hour than women, b) on average, men work more hours than women, and c) the word “whilst” is by no means extinct in the wild, as a specimen was observed in its natural habitat less than three years ago. It should be noted that women also seem to take more sick leave than men, though that won’t be covered in this post.   Now, there is the possibility that men work more hours because they are paid more, and while I believe that is part of the story, I don’t think it is the whole story. And perhaps the numbers can give us more information. Figure 2 below is similar to Figure 1, but it includes some straight line extrapolation from one week to fifty two.Notice that the extra 6.37% hours per week extra that men, on average, work relative to women implies that in general, men work 135 extra hours per year than women. Dividing 135 extra hours by 40.8 hours a week (i.e., the amount of hours in a typical woman’s full-time week) gives us 3.3 weeks. Thus, the average woman would need to work an extra 3.3 weeks a year to spend the same time at the job as the average man.

    Why education doesn't bring women equal pay - Women are closing the education gap with men, but a global study of gender equality shows these advances are failing to bring equal access to quality jobs and government representation. The study, which explored decades of data from more than 150 countries, finds that women have reached 91 percent of the education that men have - but only 70 percent of their rate of employment, and just 25 percent of political representation. The findings challenge the assumption that education--a hallmark of international development efforts--translates into equal access to high-paying jobs, and suggest greater policy interventions are required to close political and workplace gender gaps. According to study author Stephanie Seguino, a University of Vermont economist, the belief that markets will fix these gaps fails to account for centuries-old gender norms and male hierarchies that education alone can't change. "Clearly, education alone is not enough to solve this problem," says Prof. Seguino, whose study is published in Journal of African Development. "We need concrete policy tools to break down gender barriers, because the market's 'invisible hand' is not working." The study offers two key reasons for women's lower employment and income: greater exclusion from high-paying jobs, and a disproportionate amount of unpaid household work, including care for children and aging parents. Seguino says policy changes are needed to level the playing field, including paid parental leave, affordable daycare - and potentially even gender quotas.

    About 40,000 unionized Verizon workers walk off the job | Reuters: Nearly 40,000 Verizon workers walked off the job on Wednesday in one of the largest U.S. strikes in recent years after contract talks hit an impasse, and got a boost as U.S. Democratic presidential hopeful Bernie Sanders joined them at a Brooklyn rally ahead of the New York primary next week. Front-runner Hillary Clinton, who will face Sanders in the primary on April 19, also voiced support for the strikers and urged Verizon to go back to the bargaining table. The strike was called by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers that jointly represent employees with such jobs as customer services representatives and network technicians in Verizon Communications Inc's (VZ.N) traditional wireline phone operations. The strike could affect service in Verizon's Fios Internet, telephone and TV services businesses across several U.S. East Coast states, including New York, Massachusetts and Virginia. The walkout does not extend to the wireless operation. Verizon said it had trained thousands of non-union employees over the past year to ensure no disruption in services. "There's no way that these 10,000 people ... can make up for 40,000 people who have decades of experience (in highly technical jobs)," CWA representative Bob Master said.Verizon and the unions have been talking since last June over the company's plans to cut healthcare and pension-related benefits over a three-year period.The workers have been without a contract since its agreement expired in August. Issues include healthcare, offshoring call center jobs, temporary job relocations and pensions.

    LA unions call for exemption from $15 minimum wage they fought for -- Los Angeles city council will hear a proposal on Tuesday to exempt union members from a $15 an hour minimum wage that the unions themselves have spent years fighting for. The proposal for the exemption was first introduced last year, after the Los Angeles city council passed a bill that would see the city’s minimum wage increase to $15 by 2020. After drawing criticism last year, the proposed amendment was put on hold but is now up for consideration once again. Union leaders argue the amendment would give businesses and unions the freedom to negotiate better agreements, which might include lower wages but could make up the difference in other benefits such as healthcare. They argue that such exemptions might make businesses more open to unionization. Because the California governor, Jerry Brown, signed a law raising the state minimum wage to $15 an hour by 2022, workers who are part of the union would see their wages increase eventually – potentially two years later than those who are not part of union.  The amendment was originally proposed by Rusty Hicks, executive secretary-treasurer of the Los Angeles County Federation of Labor, AFL-CIO. AFL-CIO is the largest federation of labor unions in the US, with about 12.5 million members. Hicks is also the co-convener of the Campaign to Raise the Wage. At the time of its passage, Hicks lauded the $15 minimum wage.  “We are one step closer to making history in Los Angeles by adopting a comprehensive minimum wage policy that will change the lives of hundreds of thousands of hard-working Angelenos,” said Hicks.   Hicks did not respond to a request for comment.

    The Economy Grew Last Year, But Poor Americans Needed More Charity - While broad economic measures improved last year, one measure of the acute needs of poor Americans worsened. It’s another example of a two-tiered recovery in which wealthier households have advanced while middle- and lower-income Americans struggle, a theme in this year’s presidential race. The Salvation Army’s Human Needs Index, which measures seven types of poverty-related assistance provided at the charity’s 7,500 centers, turned upward, reversing sharp improvement it showed in 2013-14. The index peaked at 3.00 in 2012 and fell to 1.97 in 2014 before climbing to 2.28 last year, the group said Wednesday.

    Update: The California Budget Surplus -- Here is the most recent update from California State Controller Betty Yee: CA Controller’s March Cash Report Shows Higher-Than-Expected Revenues  March state revenues surpassed estimates in Gov. Jerry Brown’s proposed 2016-17 budget by $218.6 million, with both the corporation tax and the retail sales and use tax beating expectations, State Controller Betty T. Yee reported today.  Overall, total revenues of $7.40 billion outstripped projections in the proposed budget released in January by 3 percent. Corporation tax revenues of $1.71 billion were $47.5 million, or 2.9 percent, higher than expected. Sales tax revenues of $1.79 billion beat expectations by $36.0 million, or 2.0 percent. Only the personal income tax, which has normally surpassed projections in the past few years, came up short. Revenues of $3.49 billion were $31.2 million, or 0.9 percent, less than expected.... Compared to projections when this year’s budget was signed last summer, revenues for the first nine months of the fiscal year are $2.26 billion higher than expected, with both the corporation tax and the personal income tax exceeding estimates. Compared to the prior fiscal year, revenues to date are higher by $5.20 billion, or 7.1 percent.  California is doing much better.

    Puerto Rico Debt Crisis: Island Unveils Proposal To Restructure Debt As Bond Default Looms: Puerto Rico unveiled a proposal Monday to restructure a large chunk of its $70 billion debt. The U.S. territory is proposing to reduce a $49 billion slice of the island’s total debt to between $32.6 billion and $37.4 billion by exchanging existing debt for two types of new bonds: about $28 billion of base bonds and about $2 billion of tax-exempt capital appreciation bonds. The bonds would allow creditors to be paid regardless of Puerto Rico’s economic growth rate. Officials said the deal would lower the debt service-to-revenue ratio on tax-supported debt from 36 percent to 15 percent. While the 15 percent ratio still exceeds that of the most heavily indebted U.S. states, Puerto Rico said it structured the new debt service schedule “to give the Commonwealth the opportunity to further reduce that ratio as a result of economic growth and to develop into a stronger credit over time,” the government said in a statement. The plan would not include a “growth bond” or interest holiday, which the island initially proposed in a Feb. 1 restructuring offer, Reuters said. But the new proposal would include a local option for Puerto Rican residents who hold the island’s bonds. Residents could opt to receive base bonds with long-dated maturity and 2 percent interest. The restructuring plan arrived days after Puerto Rico Gov. Alejandro Garcia Padilla declared an emergency at the island’s Government Development Bank (GDB), the territory’s primary fiscal agent. Padilla Saturday suspended the bank’s lending power and froze most withdrawals to prevent a run on the bank, which is struggling to avoid default on a critical May 1 debt payment.

    New York City to pursue sweeping homelessness reforms: mayor | Reuters: New York City will implement a raft of reforms to combat its high level of homelessness, Mayor Bill de Blasio said on Monday, following a three-month review of the problem. In New York, the United States' largest city, around 58,000 people sleep in shelters each night, representing the largest homeless population for any U.S. metropolitan area, according to the National Alliance to end Homelessness. Nearly half of those homeless are children. The changes announced on Monday are intended to address the issue in four key areas: preventing at-risk residents from losing their homes, moving homeless out of shelters and into permanent housing, improving conditions at shelters and reducing the number of homeless who sleep in the streets.The number of homeless has more than doubled from around 23,000 two decades ago and has remained stubbornly high, leaving de Blasio's administration open to criticism. New York's large shelter population is in part due to a landmark court case that established a "right to shelter" mandate requiring city authorities to provide housing for those without it. In response, the mayor has proposed spending an additional $66 million dollars to fight the problem, though he said the organizational changes announced on Monday would lead to savings of $38 million to help offset those new costs.

    North Carolina community relieved as restroom gender compliance officer appointed (photo essay) Located by the harbor near the new Town Dock, Oriental’s public bathroom opened to great acclaim in December. However, the Town was forced to quickly shutter the facility when the NC legislature passed HB2 on March 26. NC Law HB2 mandates that “users of public restrooms use bathrooms corresponding to the gender on their birth certificate.” Without a way to check birth certificates, bathroom use had to be shut down, or the town was vulnerable to a stiff $10,000 daily Gender Non-Compliance fine. That’s all been solved. At a Tuesday news conference Governor McCrory has announced the GCF (Gender Compliance Fund), a 6 million dollar program providing revenue for communities to hire Gender Compliance Officers. Oriental Town Hall officials wasted no time. Oriental’s GCF funding allowed for the hiring of one Gender Compliance Officer. The town tapped Kim Daniels, whose pharmaceutical background provided the required knowledge base. Thursday at 8am the public restroom re-opened with GCO Daniels on duty. While manual authentication may seem harsh just to use a public restroom, Governor McCrory wants all NC citizens to know “that we’re all in this together.” McCrory states “every member of my staff, including myself, has been manually authenticated to insure the veracity of the process.”

    States Where Day Care Costs More Than College - Think college is expensive? Try sending your kid to full-time day care or preschool. In nearly half the country, it’s now more expensive to educate a 4-year-old in preschool than an 18-year-old in college, a finding that illustrates the rising burden many families face affording care for children. The annual cost of care for a 4-year old at a full-time day-care center or school is greater than the average cost of in-state tuition at a four-year institution in 23 states, according to new data from the Economic Policy Institute, a left-leaning think tank.  In Massachusetts, the state with the highest child-care costs, care for a preschooler is  $12,781 annually or almost 20% more than an undergrad’s average tuition of $10,702. Care for a 4-year old is 73% more expensive than college in Florida, the state with the largest disparity. Florida has among the country’s lowest college tuition costs but average child-care costs of $7,668 a year.  “High-quality child care is out of reach for many families,” said EPI research assistant Tanyell Cooke. “This crisis is not limited to low-income families, nor is it unique to certain parts of the country. It affects everyone, in every state.” In 40 U.S. states, the average cost of child care exceeded 10% of the median income for a family of four, the EPI research showed. The government defines child care costing less than 10% of a family income as “affordable.”

    The Extreme Sacrifice Detroit Parents Make to Access Better Schools- The No. 43 bus comes around 6:20 a.m., Johnson said. Shownn is exhausted at that hour and sometimes sleeps on his mother’s shoulder during the 25- to 40-minute ride along Schoolcraft Road toward Woodward Avenue. The bus drops the pair in Highland Park, where they typically wait 20 minutes for their next bus while peering warily through the dim light cast by the Walgreens across the street. Mother and son typically arrive at University Prep Science & Math Middle School, a well-regarded charter school in the Michigan Science Center, around 7:30 a.m. and Johnson waits with her son until his classes begin at 7:50. She then makes her way back home—the same two buses—until reaching Brightmoor around 9:30 a.m. That’s about three and a half hours before she has to leave again on another four buses to return to Shownn’s school and bring him home. Total daily journey: 52 miles, five to six hours. Like many big cities, Detroit has shuttered scores of traditional neighborhood schools in favor of charter schools and public-school magnet programs. Detroit kids can also attend schools in suburban districts. But many of the city’s new options do not provide transportation, and new schools are often far from where kids live—a serious challenge in a city where a quarter of families have no access to a car and where the public-transit system is woefully insufficient. That means some families, like Williams’s and Johnson’s, make extreme sacrifices to access quality schools. Work gets neglected; personal obligations go unmet; children miss sleep and lose ground in class by too often showing up late. Other families, those without cars or the time and resources to make long commutes to school, are stuck with the few schools left in their neighborhoods. And the nearby option is often a school with a long track record of poor performance: Just 10 Detroit schools posted test scores high enough to rank above average on the state’s last top-to-bottom ranking in 2014, six selective public schools and four charter schools.

    Department Of Education - Our Work Here Is Done -- It appears a few children were left behind.  The Department of Education was created in 1979 and now has an annual budget of $73 billion, with 5,000 government bureaucrats roaming its hallways. When you include all Federal, State and Local spending on public education it totals about $700 billion per year, or $13,000 per student. The Department of Education was created to improve the education of our children. After 37 years and trillions of dollars “invested” in our children, see below what they have achieved..

    • In a study of literacy among 20 ‘high income’ countries; US ranked 12th
    • Illiteracy has become such a serious problem in our country that 44 million adults are now unable to read a simple story to their children
    • 50% of adults cannot read a book written at an eighth grade level
    • 45 million are functionally illiterate and read below a 5th grade level
    • 44% of the American adults do not read a book in a year
    • 6 out of 10 households do not buy a single book in a year
    • 3 out of 4 people on welfare can’t read
    • 20% of Americans read below the level needed to earn a living wage
    • 50% of the unemployed between the ages of 16 and 21 cannot read well enough to be considered functionally literate
    • Between 46 and 51% of American adults have an income well below the poverty level because of their inability to read
    • Illiteracy costs American taxpayers an estimated $20 billion each year
    • School dropouts cost our nation $240 billion in social service expenditures and lost tax revenues

    Do Cheaters Ever Prosper? A Lesson From N.Y. Student Tests - A 2011 analysis for The Wall Street Journal showed a bulge in New York City students’ test scores right over the passing mark. The evidence strongly suggested teachers were manipulating grades on statewide Regents Exams and helped spur changes to testing procedures. Thomas Dee, a professor at Stanford University, updated the numbers from his initial analysis after the state took steps to eliminate grade inflation. The findings: Teachers who manipulated scores appear to have been motivated by altruism, score manipulation was eliminated by 2012, and the graduation gap between black and white students is about 5% larger in its absence. “There are a number of different social goals in play here,” Mr. Dee said. “We may value consistency in scoring procedures as a mark of fairness. On the other hand, we may think as well that proximity to the threshold has a natural variance and if teachers have additional information, that [manipulation] may be a good thing.” That little bump of a few points can have lifetime consequences. Inflating a student’s score to fall just above a cutoff increases his or her probability of graduating from high school by 27%, Mr. Dee and co-authors found. Separate data shows employment and earnings prospects are significantly higher for people with high school degrees than they are for those without. There are also negative consequences. Students pushed over the hump end up about 11% less likely to get an advanced diploma—something within reach with the proper educational emphasis.

    Pearson’s Quest to Cover the Planet in Company-Run Schools -- APEC isn’t just new to Tondo or Manila. It’s a different kind of school altogether: one that’s part of a for-profit chain and relatively low-cost at $2 a day, what you might pay for a monthly smartphone bill here. The chain is a fast-growing joint venture between Ayala, one of the Philippines’ biggest conglomerates, and Pearson, the largest education company in the world. In the US, Pearson is best known as a major crafter of the Common Core tests used in many states. It also markets learning software, powers online college programs, and runs computer-based exams like the GMAT and the GED. In fact, Nellie already knew the name Pearson from the tests and prep her sister took to get into nursing school. But the company has its eye on much, much more. Investment firm GSV Advisors recently estimated the annual global outlay on education at $5.5 trillion and growing rapidly. Let that number sink in for a second—it’s a doozy. The figure is nearly on par with the global health care industry, but there is no Big Pharma yet in education. Most of that money circulates within government bureaucracies. Pearson would like to become education’s first major conglomerate, serving as the largest private provider of standardized tests, software, materials, and now the schools themselves.

    School Is To Submit -- How did the industrial era get at least some workers to accept more domination, inequality, and ambiguity, and why hasn’t that worked equally well everywhere? A simple answer I want to explore in this post is: prestigious schools. While human foragers are especially averse to even a hint of domination, they are also especially eager to take “orders” via copying the practices of prestigious folks. Humans have a uniquely powerful capacity for cultural evolution exactly because we are especially eager and able to copy what prestigious people do. So if humans hate industrial workplace practices when they see them as bosses dominating, but love to copy the practices of prestigious folks, an obvious solution is to habituate kids into modern workplace practices in contexts that look more like the latter than the former. In his upcoming book, The Case Against Education, my colleague Bryan Caplan argues that school today, especially at the upper levels, functions mostly to help students signal intelligence, conscientiousness, and conformity to modern workplace practices. He says we’d be better off if kids did this via early jobs, but sees us as having fallen into an unfortunate equilibrium wherein individuals who try that seem non-conformist. I agree with Bryan that, compared with the theory that older students mostly go to school to learn useful skills, signaling better explains the low usefulness of school subjects, low transfer to other tasks, low retention of what is taught, low interest in learning relative to credentials, big last-year-of-school gains, and student preferences for cancelled classes.

    Getting a Student Loan With Collateral From a Future Job - At Purdue University, some undergraduates will have a new option to help finance their degrees: pledging to pay a percentage of their future incomes in return for funds today.Starting this fall, juniors and seniors will have access to the school’s Back a Boiler program, an alternative financing arrangement known as an income-share agreement.Such programs are not loans. Instead, students get funds to cover current education expenses, and, in return, they agree to pay a percentage of their future income over an agreed-upon period of time. When that repayment term ends, so does the student’s obligation, even if their total payments are less than the amount they received.Though an emerging corner of the educational finance industry, such programs help ease the often crushing debt many American college students face after graduation, proponents say. A small number of lenders have tested the model in recent years, but Purdue is the first American university to officially embrace the concept.“It looked to us like it was interesting enough that somebody ought to try it,” said Mitch Daniels, the university president and a former governor of Indiana. “For some students, this may be a very preferable option to some of the private loans that are out there.”

    Graduates from poorer backgrounds earn less than richer peers on same course, major international study finds - Even after taking account of the subject studied and the university attended, the average student from a higher-income background earned around 10 per cent more than the average student from other backgrounds. The study analysed how parental income can affect a graduate's earning capability. The research, which examined anonymised tax data and student loan records going back to 1998, found a marked link between parental income and earning potential of their children. Even after taking account of the subject studied and the university attended, the average student from a higher-income background earned around 10 per cent more than the average student from other backgrounds. Between the richest and the poorest graduates the differential was even starker. The 10 per cent highest-earning male graduates from richer backgrounds earned about 20 per cent more than the 10 per cent highest earners from relatively poorer backgrounds. In 2012/13, the average gap in earnings between students from higher and lower-income backgrounds was £8,000 a year for men and £5,300 a year for women, 10 years after graduation.

    Student Debt Is Holding Back Millennials? Not So Fast -  - WSJ - The conventional wisdom among student activists and and elected leaders is that high levels of student debt are causing young Americans to delay key milestones like buying a home, getting married and having kids. New research paints a more complicated picture. It suggests student debt is indeed a barrier for a significant minority—college dropouts—but that it’s generally not holding back those who earned degrees. The research comes Monday from Navient Corp., which services federal and private student loans. It was spun off from SLM Corp.—owner of private lender Sallie Mae—in 2013. Navient teamed up with private research firm Ipsos and surveyed more than 3,000 people between ages 22 and 35. The key findings: The likelihood of holding a mortgage, getting married and having children increase with age and educational attainment. And those who took out student debt and earned a degree are far more likely to have done those things than those who borrowed and dropped out. Perhaps more surprisingly, they were more likely to even than some who graduated and didn’t borrow.

    Obama to forgive permanently disabled people's student debt -- Nearly 400,000 permanently disabled Americans will have their student loans totaling $7.7 billion forgiven by the Obama administration.  According to U.S. law, anyone with a severe disability is eligible to have the U.S. government discharge their federal student loans. Four years ago the government made it easier for the disabled to apply for the discharge by allowing anyone totally and permanently disabled to use their Social Security designation to apply. However, few took advantage of the regulation. The U.S. Department of Education is now trying to identify those who are eligible for forgiveness and guide them through the application process. The new plan follows on Obama's announcement last year of a Student Aid Bill of Rights designed to reform the way in which student loans are repaid.  Ted Mitchell, Education Under Secretary said:“Too many eligible borrowers were falling through the cracks, unaware they were eligible for relief. Americans with disabilities have a right to student loan relief. And we need to make it easier, not harder, for them to receive the benefits they are due.” Persi Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, said many disabled students simply do not know they are eligible for debt relief:“Borrowers just frankly don’t know about this program. In the past it’s been incredibly complicated to apply and that process has been getting better over time, but some people just assume that it’s not going to work.” The Department of Education, working with the Social Security Administration has identified 387,000 who meet the criteria for discharge of their loans. Of those, about 179,000 are in default on their loans. This could put them at risk of losing any tax refunds and of having Social Security benefits garnished.

    It Begins: Obama Forgives Student Debt Of 400,000 Americans –- Joining the ranks of "broke lawyers" who can cancel their student debt, "Americans with disabilities have a right to student loan relief,” now according to Ted Mitchell, the undersecretary of education, said in a statement. Almost 400,000 student loan borrowers will now have an easier path to a debt bailout as Obama primes the populist voting pump just in time for the elections. On top of "the student loan bubble’s dirty little secret," here is another round of student debt MarketWatch reportsThe Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter. If every borrower identified by the Department decides to have his or her debt forgiven, the government will end up discharging more than $7.7 billion in debt, according to the Department.

    Why Obama is forgiving the student loans of nearly 400,000 people - Hundreds of thousands of student loan borrowers will now have an easier path to getting their loans discharged, the Obama administration announced Tuesday. The Department of Education will send letters to 387,000 people they’ve identified as being eligible for a total and permanent disability discharge, a designation that allows federal student loan borrowers who can’t work because of a disability to have their loans forgiven. The borrowers identified by the Department won’t have to go through the typical application process for receiving a disability discharge, which requires sending in documented proof of their disability. Instead, the borrower will simply have to sign and return the completed application enclosed in the letter. If every borrower identified by the Department decides to have his or her debt forgiven, the government will end up discharging more than $7.7 billion in debt, according to the Department. “Americans with disabilities have a right to student loan relief,” Ted Mitchell, the undersecretary of education, said in a statement. “And we need to make it easier, not harder, for them to receive the benefits they are due.” Eligible borrowers who do decide to take advantage of the discharge option should be aware that the forgiven debt may be considered taxable income. The Obama administration asked Congress in its 2017 budget proposal to get rid of the tax penalties for disability discharges, but meanwhile borrowers may find themselves paying taxes on the forgiven loans.

    US faces ‘disastrous’ $3.4tn pension funding hole -- The US public pension system has developed a $3.4tn funding hole that will pile pressure on cities and states to cut spending or raise taxes to avoid Detroit-style bankruptcies. According to academic research shared exclusively with FTfm, the collective funding shortfall of US public pension funds is three times larger than official figures showed, and is getting bigger.  Devin Nunes, a US Republican congressman, said: “It has been clear for years that many cities and states are critically underfunding their pension programmes and hiding the fiscal holes with accounting tricks.” Mr Nunes, who put forward a bill to the House of Representatives last month to overhaul how public pension plans report their figures, added: “When these pension funds go insolvent, they will create problems so disastrous that the fund officials assume the federal government will have to bail them out.” Large pension shortfalls have already played a role in driving several US cities, including Detroit in Michigan and San Bernardino in California, to file for bankruptcy. The fear is other cities will soon become insolvent due to the size of their pension deficits. Joshua Rauh, a senior fellow at the Hoover Institution, a think-tank, and professor of finance at the Stanford Graduate School of Business, who carried out the study, said: “The pension problems are threatening to consume state and local budgets in the absence of some major changes. “It is quite likely that over a five to 10-year horizon we are going to see more bankruptcies of cities where the unfunded pension liabilities will play a large role.” The Stanford study found that the states of Illinois, Arizona, Ohio and Nevada, and the cities of Chicago, Dallas, Houston and El Paso have the largest pension holes compared with their own revenues. In order to deal with the large funding shortfall, many cities and states will have to increase their contributions to their pension funds, either by raising taxes or cutting spending on vital services.

    Fun and Games in Scaring People About Social Security - Dean Baker -- As we all know, one of the major recreational sports of media outlets is finding new and innovative ways to scare people about Social Security. One of my favorites is "infinite horizon accounting." This is when you project out Social Security spending and revenue into the infinite future and then calculate the difference. It gives you a REALLY BIG NUMBER.  We got an example of the casual use of this infinite horizon accounting in a column by Wharton Business School Professor Olivia Mitchell. The column was actually on a different topic, but towards the end the piece tells readers: "The Social Security shortfall is enormous. Actuaries have estimated that it’s on the order of $28 trillion in present value. That’s twice the size of the gross domestic product of the U.S." Note that there is no mention of the time horizon for the $28 trillion shortfall, so readers would have no way of knowing that it is for all future time. The comparison to current GDP is both wrong (GDP in 2016 will be over $18 trillion) and misleading. Why would we compare a deficit measured for all future time to this year's GDP? If we compared the deficit to future GDP it would be 1.3 percent, a bit more than one-third of the annual military budget. It's also worth noting that the bulk of this deficit is for years after 2100. In other words, we are being cruel to children not yet born by writing down Social Security spending paths that exceed what they are projected to tax themselves. Can you envision anything so cruel? (The big problem is that the projections assume they will live longer and therefore have longer retirements.)

    The Government Breaks Through On Deficit Reduction, Will Lower Social Security Payments It's well known that the US government is broke, and if it used accrual accounting instead of cash accounting it would be staggeringly worse, as all of its future liabilities would be shown. Knowing this, government officials are working tirelessly (and even on some weekends, much to the dismay of Jack Lew) to find ways to reduce spending.  Thanks to all of those long nights scrubbing the budget line by line, a way to save costs has finally been found. As MarketWatch reports, A popular tool families use to help boost retirement income known as "file and suspend" will be taken away after April 29th of this year, courtesy of the Bipartisan Budget Act of 2015. File and suspend is essentially a way for one person who is eligible to file for his/her retirement benefits to file, but delay getting them until age 70 (in return for an 8% per annum credit). Once the benefits are filed for, however, that person's spouse can file for spousal benefits and begin to receive those right away, thus increasing income to the couple.  One final element of this strategy is that if the higher income earner dies, the spouse can now receive the full benefit including that 8% per year credit amount earned by delaying, which significantly increases the income of the surviving partner. The point of cutting out this "loophole" as the government so proudly calls it, is to save money.

    America: No Country for Old People  --According to a recent study, “Senior Poverty in America,” by Rebecca Vallas, director of policy in the Poverty to Prosperity Program at the Center for American Progress, 10% of seniors (4.6 million people) fall below this country’s official poverty line. In 1966 it was 29%. That sounds like progress. Vallas attributes the decline mostly to Medicare, Medicaid, and other programs established during this period. But this appearance of progress, she says, doesn’t account for the desperate situation of millions of seniors today. The programs have helped people, but their success at lowering poverty among some seniors masks the desperate situation of millions of others. The official poverty line is too low, has grown increasingly out of whack over the years from the real cost of living, and uses a faulty method (being originally defined as three times the basic food budget) that does not correspond to current spending patterns for low-income people. The official poverty line defines poverty for a single person as an income less than $11,770, and for a couple, $15,930 (for Alaska and Hawaii it’s slightly higher). Rent alone absorbs a huge portion of this. Even seniors at 125% of the poverty line spend more than three quarters of their income on rent, Vallas found—$11,034 for singles, and $14,934 for a couple. It’s hard to imagine finding an apartment in many urban areas with rent that low. According to Vallas, seniors across the board spend 14% of their income on medical costs. Adding that to rent, poor seniors are left with about 10% of their income for food, bus fares, and everything else. It’s no wonder that so many people in line at county food banks are old. Even an income of twice the official poverty line is hardly enough to make ends meet, and the number of seniors under this line is much greater—32% of those over 65 and 40% of those over 75. A better criterion for poverty is the Supplemental Poverty Measure (SPM).  The SPM is based on real-life expenditures for basic necessities like food, housing, clothing and utilities. It varies from place to place and isn’t meant to qualify or disqualify people for government programs. Vallas found that about 15% of seniors fall below this line, and 45% are “economically vulnerable”—below twice the SPM.

    UnitedHealth Makes Good on Threat to Pull Out of Obamacare - The Affordable Care Act suffered another jolt late last week with the news that UnitedHealth Group, the nation’s largest health insurer, was making good on its threat to pull out of Obamacare, beginning with its operations in Georgia and Arkansas. UnitedHealth roiled the market last November when it revealed that it was considering exiting Obamacare after incurring hundreds of millions of dollars in losses related to ACA business. Then UnitedHealth CEO Stephen Hemsley confessed to investors meeting in New York in December that the company should have stayed out of the program a little longer to better gauge its profitability potential. The company had cautiously tiptoed into the market in January 2015 after sitting out the first full year of Obamacare operations in 2014. “It was for us a bad decision,” Hemsley admitted to his investors. “In retrospect, we should have stayed out longer.” So it wasn’t a huge surprise on Friday when UnitedHealth spokesperson Tyler Mason confirmed to The Washington Post that the company, indeed, was pulling out of Georgia and Arkansas, two relatively small states that proved to be highly unprofitable terrain for the company.

    The Beginning Of The End For Obamacare: Largest US Health Insurer Exits Georgia, Arkanasas -- It all came to a head in late November of last year when none other than the U.S.’s biggest health insurer, UnitedHealth, cut its 2015 earnings forecast with a warning that it was considering pulling out of Obamacare, just one month after saying it would expand its presence in the program. At the time UnitedHealth Group said it would scale back marketing efforts for plans it’s selling this year under the Affordable Care Act, and may quit the business entirely in 2017 because it has proven to be more costly than expected. In a statement, UnitedHealth said that "the company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.  Fast forward to today, this largest U.S. health insurer, announced it has decided to pull the plug on two state Obamacare markets. Going forward, UnitedHealth said it will no longer sell plans for next year in Georgia and Arkansas, according to state insurance regulators. Tyler Mason, a UnitedHealth spokesman, confirmed the exits and declined to say whether the company would drop out of additional states, Bloomberg reported. As per our extensive coverage of the topic, the reason for the pull out is simple: many, if not most, insurers have found it difficult to turn a profit in the new markets created by the Affordable Care Act, "where individuals turned out to be more costly to care for than the companies expected. UnitedHealth and Aetna Inc. both posted losses from the policies last year, as did big Blue Cross and Blue Shield plans in states like North Carolina."

    Insurers warn losses from ObamaCare are unsustainable  - Health insurance companies are amplifying their warnings about the financial sustainability of the ObamaCare marketplaces as they seek approval for premium increases next year. Insurers say they are losing money on their ObamaCare plans at a rapid rate, and some have begun to talk about dropping out of the marketplaces altogether. [United Health, the nation's largest healthcare insurer, has announced it will drop out.] “Something has to give,” said Larry Levitt, an expert on the health law at the Kaiser Family Foundation. “Either insurers will drop out or insurers will raise premiums.” While analysts expect the market to stabilize once premiums rise and more young, healthy people sign up, some observers have not ruled out the possibility of a collapse of the market, known in insurance parlance as a “death spiral.” In the short term, there is a growing likelihood that insurers will push for substantial premium increases, creating a political problem for Democrats in an election year. Insurers have been pounding the drum about problems with ObamaCare pricing. The Blue Cross Blue Shield Association released a widely publicized report last month that said new enrollees under ObamaCare had 22 percent higher medical costs than people who received coverage from employers. And a report from McKinsey & Company found that in the individual market, which includes the ObamaCare marketplaces, insurers lost money in 41 states in 2014, and were only profitable in 9 states.

    News About Obamacare Has Been Bad Lately. How Bad? -- It’s been a few weeks of bad news about the Obamacare marketplaces. On Friday, we learned that UnitedHealth has decided to pull out of Obamacare marketplaces in two states. The week before, the Blue Cross and Blue Shield Association put out a paper offering not-too-subtle hints that some members were losing money. Reed, you wrote recently about how surprising stasis in the employer insurance market means we can look forward to much smaller Obamacare marketplaces than most people expected when the health law passed. And the parade of struggling start-up insurer companies has extended to Maine’s Community Health Options, one of the co-ops that had long been held up as one of the most successful. Health insurers need to submit their rates to regulators in the next few weeks — or decide to exit markets. Should we be worried about a health insurance apocalypse? I think people have a tendency to catastrophize, especially when it comes to Obamacare. UnitedHealth, which is one of the nation’s largest health insurers, has only reluctantly embraced the new market, and the company is always held up as an example of why the sky is falling and why Obamacare is going to crash and burn: If United can’t make it, no one can. United has only a small fraction of the individual market, but some of the Blues are also struggling. What is most troubling is the fact that many insurers are losing money. You may not sympathize much with the insurance companies — and no one does — but they have to make enough money to pay claims. Do you think those losses are temporary — or a sign that the market is fundamentally unstable and potentially unsustainable?

    Sales of Short-Term Health Policies Surge - WSJ: A type of limited health coverage with features largely banned by the Affordable Care Act is flourishing, as some consumers grab onto an alternative they say is cheaper than conventional plans sold under the law. Sales of short-term health insurance are up sharply since the health law’s major provisions took effect in 2014, according to insurance agencies. New sales figures show the temporary policies, traditionally sold to consumers who are trying to fill coverage gaps for a few months, have continued their surge recently—even though people who buy them face mounting financial penalties because the coverage doesn’t meet the ACA’s standards. Robin Herman, the 34-year-old owner of a marketing firm in San Francisco, bought a short-term policy in December. The monthly cost of her short-term coverage, plus conventional ACA-compliant plans for her two children, is roughly one-quarter of what she would have paid for conventional health plans covering all three of them, she says. “This is saving me a ton of money for the year,” she said, despite the penalty. Plans that comply with the health law’s rules cost more than her old pre-ACA policy and are “just not affordable,” she said. Ms. Herman’s new policy, like many short-term plans, doesn’t cover pre-existing conditions, a limitation no longer allowed in full health coverage. Ms. Herman’s plan also caps total benefits at $1 million, another feature prohibited in ACA plans. It doesn’t cover most prescription drugs. To get the plan, Ms. Herman had to qualify as healthy by answering a questionnaire. ACA plans are sold to every consumer regardless of health status.

    Doctors Hear Patients’ Calls for New Approaches to Hypothyroidism - WSJ: Doctors and patients have been at each other’s throats for decades over how to treat a little gland in the neck—and patients may be gaining ground. The butterfly-shaped thyroid gland produces hormones that regulate virtually every system in the body. Not enough production of thyroid hormones, known has hypothyroidism, can cause fatigue, weight gain, depression and other metabolic and fertility problems. Too much, the less common hyperthyroidism, can cause heart palpitations, tremors and bone loss. Because those symptoms can have several other causes, many doctors diagnose thyroid disorders mainly with blood tests. Many also rely on a single form of treatment for hypothyroidism, which has made the synthetic hormone levothyroxine (Synthroid and other brands) among the most prescribed medications in the world. But a vocal group of patients say they haven’t gotten better on levothyroxine, though their blood tests have returned to normal. They’ve banded together online to share their frustrations and promote alternative therapies.

    How many of the elderly take supplements? Also, why that might be really bad. - There are a few topics I cover here or at Healthcare Triage that just won’t seem to go away. . But the one that trumps them all is supplements. Americans seem obsessed with them. The one group I thought might not be overtaken by this craze was the elderly. Boy, was I wrong. “Changes in Prescription and Over-the-Counter Medication and Dietary Supplement Use Among Older Adults in the United States, 2005 vs 2011“: Researchers wanted to look at how the prevalence of dietary supplements and over-the-counter medication use changed in the elderly from 2005 to 2011. They were especially concerned about how these products might potentially be the cause of major drug-drug interactions. They conducted a longitudinal, nationally representative cohort study of community-dwelling adults age 62-85.  What makes this baffling is that supplements aren’t heavily regulated in this country. That means that it’s entirely possible that what you think you’re taking bears no resemblance to what you’re actually swallowing. Don’t take my word for it; investigations have confirmed this is not an unlikely thing to happen. And while doctors and EMRs regularly screen for prescription medications, we often miss over-the-counter medications, let alone supplements.  In this study, more than 2000 participants, average age 71 years or so, were interviewed in both time periods. In 2005, 84% used at least one prescription medication, and in 2011, that increased to 88%. The concurrent use of at least five prescription medications increased from 31% to 36%. Over-the-counter medications decreased, from 44% to 38%. But the use of supplements increased, from 52% to 64%. The potential for major drug-drug interactions increased significantly as well. It was about 8% in 2005, increasing to more than 15% in 2011. Most of these new potential problems were due to interactions between medications patients were prescribed and supplements they were taking. It’s bad enough that so many Americans are taking supplements which (1) can be expensive), (2) often provide no proven benefit, and (3) may not even be full of what the bottle says they are. What’s worse is that many of these supplements may also be increasing the potential for adverse outcomes due to other medications that they’re already taking. Physicians, and the health care system, need to be aware that even among the elderly, huge numbers of people are taking these substances, which might not only be doing them no good, but also be doing them harm.

    Amid clinic closures, young doctors seek abortion training | Reuters: Even as scores of U.S. abortion clinics have shut down, the number of doctors trained to provide the procedure has surged – but only in some parts of the country. Two little-known training programs say they have expanded rapidly in recent years, fueled by robust private funding and strong demand. Launched nearly a quarter century ago amid protest and violence, the programs now train more than 1,000 doctors and medical students annually in reproductive services, from contraception to all types of abortion, according to interviews with Reuters. But their impact is limited. Most of the doctors end up working near where they train, not in several Southern and Midwestern states that have imposed waiting periods, mandated counseling and enacted other controls. "I don’t think we have a provider shortage anymore," said Sarah W. Prager, a University of Washington Medical School professor. "What we have is a distribution problem. We have a lot of providers in some of our city centers, but in rural areas there are very few people willing or able to provide care." Texas is emblematic of areas of scarcity. More than half the clinics in the state have closed since 2013 when a law went into effect that required clinics to meet surgery center standards and abortion providers to have hospital admitting privileges. In its first abortion case in nearly a decade, the U.S. Supreme Court is considering whether the Texas law violates the right to abortion. The case focused attention on a decline in clinics in the United States. According to a survey by the Guttmacher Institute, a nonprofit research organization that supports abortion rights, the number of clinics dropped nearly 40 percent after peaking in 1982.

    Stuff Matters  -- Dave Cohen - Yesterday I visited a doctor and got some prescriptions. One of those (at my request) was a simple tetracycline anti-biotic. These kinds of drugs have been around in generic versions for decades. I figured I'd pay about 10 bucks for a standard two-week course.  The drugstore I use didn't even have it in stock and quoted me a price — $400. An alternative doxycycline would cost me $175. I went to another pharmacy and asked them did they have tetracycline in stock? What would it cost me? The guy quoted me a price — $11.79. He told me to come back in half an hour while they transferred the prescription and got it ready. A half hour later, I went back and when the guy rang it up, the real price came up — $428. There was a conference at the pharmacy and much confusion. Four people working there came over to explain to me that the price was the price. I also found out that the doxycycline alternative would cost me $295. I have medical insurance, but it doesn't cover drugs. Needless to say, I didn't get the drug I had requested yesterday. A search of the internet turned up this article, which is from 2013. "When a drug costs 30 times what it once did.  Diane Shattuck filled a prescription in December for a generic antibiotic called doxycycline. With insurance, she paid $4.30 for 60 pills at a CVS store in Orange. She returned at the end of February to refill her prescription. This time, she was told her cost for the drug would be about $165. "It was bizarre," Shattuck, 73, told me. "And no one at CVS could explain why the price was so high." Unfortunately, I won't be able to offer a clear-cut answer, either. But my effort to untangle Shattuck's situation cast a harsh light on the shadowy world of drug pricing. It revealed that different manufacturers can charge wildly different prices for what is essentially the same generic medicine, and that drugstores can rake in unconscionable profits by passing along marked-up meds to customers without the slightest explanation.

    What happened when Easter secretly taped her surgeons - - After Easter was sedated, the surgeon recounted their dispute to the other doctors. “She’s a handful,” he said in the recording. “She had some choice words for us in the clinic when we didn’t book her case in two weeks.” “She said, ‘I’m going to call a lawyer and file a complaint,’” he recalled with a laugh. (Easter said she never mentioned a lawyer.) “That doesn’t seem like the thing to say to the person who’s going to do your surgery,” another male voice retorted. The comments afterward became personal. The surgeon and the anesthesiologist repeatedly referred to her belly button in jest. “Did you see her belly button?” one doctor said, followed by peals of laughter. At another point in the procedure, the anesthesiologist appeared to refer to Easter as “always the queen,” to which the surgeon responded, “I feel sorry for her husband.” The surgeon also used the name “Precious” several times in a manner that Easter interpreted as racial. …After the doctors concurred that there had been many “teaching moments” that day, the anesthesiologist asked, “Do you want me to touch her?” “I can touch her,” the surgeon is heard saying.

    The link between health inequality and income inequality may not be what we assume -- So there’s a major new study out that looks at health inequality. Among the findings are that a) the very rich live a lot longer than the very poor, and b) geography matters. From the Health Inequality Project:The richest American men live 15 years longer than the poorest men, while the richest American women live 10 years longer than the poorest women. The gaps between the rich and the poor are growing rapidly over time. The richest Americans have gained approximately 3 years in longevity since 2000, but the poorest Americans have experienced no gains. … Life expectancy varies substantially across cities, especially for low-income people. For the poorest Americans, life expectancies are 6 years higher in New York than in Detroit. For the richest Americans, the difference is less than 1 year.But health inequality is one thing, income inequality another. And the relationship might not be what many might automatically assume:Correlational analysis of the differences in life expectancy across geographic areas did not provide strong support for 4 leading explanations for socioeconomic differences in longevity: differences in access to medical care (as measured by health insurance coverage and proxies for the quality and quantity of primary care), environmental differences (as measured by residential segregation), adverse effects of inequality (as measured by Gini indices), and labor market conditions (as measured by unemployment rates).Rather, most of the variation in life expectancy across areas was related to differences in health behaviors, including smoking, obesity, and exercise. Individuals in the lowest income quartile have more healthful behaviors and live longer in areas with more immigrants, higher home prices, and more college graduates.

    New study shows rich, poor have huge mortality gap in U.S. | MIT News: Poverty in the U.S. is often associated with deprivation, in areas including housing, employment, and education. Now a study co-authored by two MIT researchers has shown, in unprecedented geographic detail, another stark reality: Poor people live shorter lives, too. More precisely, the study shows that in the U.S., the richest 1 percent of men lives 14.6 years longer on average than the poorest 1 percent of men, while among women in those wealth percentiles, the difference is 10.1 years on average. This eye-opening gap is also growing rapidly: Over roughly the last 15 years, life expectancy increased by 2.34 years for men and 2.91 years for women who are among the top 5 percent of income earners in America, but by just 0.32 and 0.04 years for men and women in the bottom 5 percent of the income tables. “When we think about income inequality in the United States, we think that low-income Americans can’t afford to purchase the same homes, live in the same neighborhoods, and buy the same goods and services as higher-income Americans,” says Michael Stepner, a PhD candidate in MIT’s Department of Economics. “But the fact that they can on average expect to have 10 or 15 fewer years of life really demonstrates the level of inequality we’ve had in the United States.”   In addition to reporting the size and growth of the income gap, the study finds that the average lifespan varies considerably by region in the U.S. (by as much as 4.5 years), but that the sources of that regional variation are subtle, and, like the aggregate national gap, subject to further investigation.

    How the Life-Expectancy Gap for Rich and Poor Skews Social Security -- A growing body of research in recent years points to the striking fact that wealthier people are living significantly longer than less wealthy people, and the gap appears to be widening. Just this week, a study led by Stanford University economist Raj Chetty, showed that life expectancy differed for the top 1% and bottom 1% of the income distribution by 15 years for men and by 10 years for women. Now, a new study from the Government Accountability Office shows the dramatic effect this is having on Social Security. To show the effect of changing U.S. life expectancy, the GAO studied the benefits that men earning $20,000 or $80,000 could expect to receive from the Social Security system over the course of their lives.  Typically, such benefits would be calculated based on the average life expectancy for U.S. men., but GAO calculated the benefits by looking at the life expectancy that’s actually typical for men at different income levels. An income of $20,000 is roughly the 25th percentile. At age 62, the average U.S. man will live another 21 years. The benefits he would expect to earn over the rest of his life would be about $156,000. But as the research of Mr. Chetty and others has shown, the average man at this income range won’t live quite that long. Based on the average life expectancy of low-income men, they should expect to collect only $138,000 from Social Security. Waiting to retire still improves Social Security’s payout, on average. Retiring at age 70 would result in $214,400 in benefits with an average life span, but only $184,800 given the typical life span. This same effect works in reverse for men earning $80,000 a year—roughly the 75th percentile. These men could expect to earn about $355,000 from Social Security if they retired at age 62, and had the average U.S. man’s life. But men with this level of income tend to live longer, and once this is accounted for, they should actually expect to receive about $411,000.

    Where You Live Could Determine How Long You Live - Higher income has already been linked to greater longevity and better health. A new study by a prominent researcher of mobility suggests geographic location plays an outsized role in life expectancy for lower earners. That means if you’re poor, you’re likely to live for longer in a city like San Francisco or New York than in a city like Detroit or Cincinnati. Across the U.S., the gap between expected longevity of rich and poor is widening, according to the study led by Stanford University economist Raj Chetty. The findings are stark: Life expectancy differed by 15 years for men and 10 years for women between the top 1% and bottom 1% of income distribution. The study examined 1.4 billion records of income-tax files for people aged 40 to 76 years from 1999 through 2014, data that include age, gender and geographic location. For a 40-year-old man in the bottom income percentile in the U.S., average life expectancy is on par with peers in Pakistan and Sudan. By contrast, a 40-year old man in the top 1% of American income distribution has higher life expectancy than men anywhere on the planet. “Conditional on reaching 40 years of age, individuals in the top 1% of income have 10 to 15 more years to enjoy their richly funded lives and to spend time with their children and grandchildren, and they are pulling away from everyone else,” said Angus Deaton, a Nobel-winning economist at Princeton University who is an expert in inequality and poverty.Mr. Deaton and fellow Princeton professor Anne Case‘s research last year found that suicide, alcohol abuse, drug overdoses and chronic liver diseases drove a rise in the death rate of middle-aged whites between 1999 and 2013.

    More than 50 health, religious and labor groups urge Congress to reject TPP trade deal - More than 50 public health, religious and labor groups — including Doctors Without Borders, the Catholic lobby group Network and the Communications Workers of America — are urging Congress to reject the Trans-Pacific Partnership, the 12-nation free trade agreement between the United States and Pacific Rim nations.   In a letter sent to Congress on Tuesday, the groups argue that the intellectual property and pharmaceutical provisions in the pact would make it more difficult for people in TPP countries to access affordable medicine. Among their concerns are that TPP grants several years of exclusivity to pharmaceutical makers for certain drugs that would delay the availability of generics. “In the U.S., the TPP is a danger to public health and fiscal responsibility because it would lock in policies that keep prices of too many medicines unaffordably high,” says the letter, which is also signed by AIDS and HIV prevention and advocacy groups, Oxfam America, National Nurses United and National Physicians Alliance. The move comes a day after 225 agriculture, farm and food groups sent their own letter to Congressional leaders, urging them to approve TPP. In the letter, dated Monday, they applaud TPP’s removal of many tariffs that allows them to better compete in the Asia market. “TPP will help level the playing field for U.S. exports and create new opportunities for us in the highly competitive Asia-Pacific region,” says the letter, which was signed by the National Cattlemen’s Beef Association, National Association of Wheat Growers, National Corn Growers Association and others. TPP was signed in New Zealand in February, but Congress must ratify it with an up-or-down vote. It is unlikely the vote will happen before the November presidential election.

    CIA invests in skincare line that collects your DNA: The Central Intelligence Agency's venture-capital arm, In-Q-Tel, provided funding for an unlikely company: Skincential Sciences, according to documents obtained by The Intercept.  Skincential's consumer brand, Clearista, makes "skin resurfacing" products designed to make your skin clearer and more "youthful," according to its website.  But the CIA isn't just interested in youthful-looking skin.  Skincential developed a patented technology that painlessly strips a thin outer layer of skin, collecting unique biomarkers that can be used for DNA collection, according to The Intercept.  It's a system that allows the CIA to glean data about people's unique biochemistry. "I can't tell you how everyone works with In-Q-Tel, but they are very interested in doing things that are pure science," Russ Lebovitz, the CEO of Skincential, told The Intercept. "If there's something beneath the surface, that's not part of our relationship and I'm not directly aware. They're interested here in something that can get easy access to biomarkers."

    3 Toxins Found in the Cord Blood of Every One of the 10 Newborns Tested --National media outlets, public health officials and Congress have all focused recently on lead contamination in drinking water. The tainted water in Flint, Michigan, Newark, New Jersey and many other communities around the country poses a serious, potentially lifelong public health threat to millions. But industrial pollution in people happens long before they take their first sip of water. Most of us encounter chemicals that can cause brain damage, cancer and other serious health problems in a place critical to human development—the mother’s womb. In 2009, Environmental Working Group (EWG) conducted a pioneering study testing the umbilical cord blood of 10 babies for toxic chemicals. In all, the tests found more than 230 industrial pollutants across the 10 samples. Among those that were in the cord blood of every one of the 10 newborns were lead, mercury and polychlorinated biphenyls (PCBs). Here’s why these toxins are so dangerous:

    Monsanto's Willing Executioners -- Monsanto wields a three-decade-old Supreme Court patent ruling like a scythe as it cuts down farmers who dare to save seeds for the next planting season. It has also beaten back challenges from organic farmers who fell victim to "genetic drift" when Monsanto's patented crops cross-pollinated with their non-GMO neighbors and therefore rendered them unsellable.  Monsanto acts like a corporate Borg, methodically amalgamating conventional farmers while also quietly eliminating their organic competition through the sheer ubiquity of its patented pollen. With 90 percent of soybean, corn and cotton acreage in the United States now planted with genetically modified (GM) seeds -- and with other common food crops quickly following suit -- noncompliant farmers are quite literally surrounded.  Interestingly enough, Monsanto spent decades as a fairly typical industrial chemical company, producing PCBs, DDT and even Agent Orange. But it pivoted away from its chemical business -- which it oddly calls "former Monsanto" -- in the mid-1970s. Luckily for the new Monsanto, Congress recently inserted a paragraph into a pending revamp of the Toxic Substances Control Act. It shields the new Monsanto from "hundreds of millions" of dollars in lingering liability from the PCBs made by the former Monsanto.

    GE Mosquitoes? Tell FDA No! - Global Justice Ecology Project: Imagine a company releasing millions of experimental, genetically engineered, biting insects into a populated island environment. Sounds like the plot to a new Jurassic Park, doesn’t it? Unfortunately, this plot is very real, and it will happen unless we stop it. Our environment should not be a testing ground for experimental genetically engineered (GE) mosquitoes. But if approved, millions of genetically engineered mosquitoes could be released into the Florida Keys, for the first time in the U.S. Why would anyone want to do this? Oxitec—the creator of the GE mosquitoes—claims that their GE mosquitoes might help reduce the spread of diseases like zika and dengue by reducing mosquito populations. Reducing the spread of mosquito-borne diseases is important, but independent scientists have critiqued the GE mosquito as a potentially ineffective and risky attempt to address dengue. There are flaws in Oxitec’s experimental logic; for example, there have been no dengue fever cases in the Florida Keys since 2009 and the Center for Disease Control notes that there is not data from any of Oxitec’s other trials that show a reduction in diseases. Even a great reduction in these mosquitoes still leaves enough mosquitoes in peoples’ homes and backyards to spread disease. Oxitec, owned by synthetic biology giant Intrexon, which also owns the GE apple and GE salmon, has proposed moving this experiment from the lab into the Florida Keys, without adequate understanding of the impacts. We need to tell FDA that it should not approve this risky experiment. We need independent environmental and health safety assessments and strong regulations to protect people and the environment before these, and other, GE insects are released into living ecosystems.

    USDA Silences Its Own Scientists’ Warnings About the Dangerous Effects of Pesticides on Bees -- Evidence has been mounting that the U.S. Department of Agriculture (USDA) has been silencing its own bee scientists who have raised the alarm about the deadly impact that pesticides, particularly neonicotinoids, have on bees. Last month, for example, the Washington Post reported the story of Jonathan Lindgren, a USDA bee scientist, who filed a whistleblower suit alleging that he was disciplined to suppress his research. In 2014, Dr. Jeffery Pettis, another USDA bee scientist and beekeeping advocate, was demoted, leading several beekeeping and environmental organizations to express concern that the agency has actively suppressed bee science that would negatively impact agrochemical companies like Bayer and Syngenta. In the spring of 2014, 10 USDA scientists took action, filing a petition calling on the USDA to stop ordering its own researchers to “retract studies, water down findings, remove their name from authorship and endure long indefinite delays in approving publication of papers that may be controversial.

    Corn Imports Surge in U.S., Despite Record Harvests at Home - WSJ -- There is something unusual going on in the U.S. corn market. Even as record harvests have left the U.S. awash in corn, imports of the crucial animal feed are surging. It is happening because moves in currencies, ocean shipping fees and railroad rates have combined to produce an unexpected result: Bringing in corn from places like Brazil and Argentina can be cheaper for poultry and livestock producers in the U.S. Southeast than buying it from the Midwest. Wade Byrd sees the phenomenon in his own backyard. Increasingly, the truckloads of grain that rumble past his Clarkton, N.C., farm to nearby hog producers are carrying corn from thousands of miles away in South America rather than U.S. operations like his. Imports remain a very small part of the market in the U.S., the world’s largest exporter of corn. Still, the notable surge is a telling indicator of how the commodity bust and strong dollar have distorted prevailing patterns of commerce. The U.S. Agriculture Department projected Tuesday that buyers would import 50 million bushels of the grain this season, up 56% from last season, even as U.S. bins swell with grain. U.S. buyers haven’t imported that much corn since 2012-2013, when a severe drought slashed domestic production, sending futures prices to all-time highs. Brazil, the second-largest corn exporter behind the U.S., is on track this season to harvest its second-largest corn crop on record, as is Argentina. Exporters in Argentina were offering corn at a roughly 6% discount to U.S. supplies for a period earlier this year, and Brazilian corn was cheaper than its U.S. counterpart for much of last year.   In April, it could cost about $0.80 to $1.50 a bushel to ship corn from west to east in the U.S. by rail, while per-bushel costs to ship corn from South America to the U.S. recently have ranged from about $0.35 to $0.50.

    Welcome To The Real Hunger Games --  What bull market in grains?  It’s the bull market that Chinese agriculture authorities all but announced in the last few weeks … after finally removing longtime price supports for corn (wheat and cotton, too, according to the Financial Times). It sounds like a snoozer of a news item, but it’s a huge development. Here’s why… For a decade, China’s official state policy was to subsidize farmers for grain production in order to build a good-sized stockpile for its population of 1.3 billion people. They did this by setting the price for China-grown corn far above the global price. As the Financial Times recently pointed out, a Chinese farmer could get the equivalent of $7.50 a bushel for corn (sold on the country’s Dalian Commodity Exchange). That’s nearly double the price that a farmer in Iowa could get for his crop, selling it through the Chicago Board of Trade.  Chinese farmers, being no dummies, planted lots and lots of the stuff. They’ve planted so much that China now has veritable mountains of grains in storage. According to the latest USDA estimates, China now stores 53%, or 111 million tons, of the entire global inventory of corn, and nearly 40%, or 94 million tons, of global wheat stocks!

    In Iowa corn fields, Chinese national's seed theft exposes vulnerability | Reuters -  Tim Burrack, a northern Iowa farmer in his 44th growing season, has taken to keeping a wary eye out for unfamiliar vehicles around his 300 acres of genetically modified corn seeds. Along with other farmers in this vast agricultural region, he has upped his vigilance ever since Mo Hailong and six other Chinese nationals were accused by U.S. authorities in 2013 of digging up seeds from Iowa farms and planning to send them back to China. The case, in which Mo pleaded guilty in January, has laid bare the value -- and vulnerability -- of advanced food technology in a world with 7 billion mouths to feed, 1.36 billion of them Chinese. Citing that case and others as evidence of a growing economic and national security threat to America's farm sector, U.S. law enforcement officials are urging agriculture executives and security officers to increase their vigilance and report any suspicious activity. But on a March 30 visit to Iowa, Justice Department officials could offer little advice to ensure against similar thefts, underlining how agricultural technology lying in open fields can be more vulnerable than a computer network or a factory floor. "It may range down to traditional barriers like a fence and doing human patrols to making sure you get good visuals on what's occurring,"

    Lifting the Patent Barrier to New Drugs and Energy Sources - Malaria has preyed on humans for centuries. Hundreds of thousands of children die each year from the disease. Considering the market’s size, why haven’t pharmaceutical companies rushed to develop a vaccine against the deadly parasite that causes it?  The answer is easy: There is no money to be made from a vaccine for poor children who could not possibly pay for inoculation. Last year, GlaxoSmithKline finally introduced the world’s first malaria vaccine for large pilot tests among African children. The move, however, is not an endorsement of the profit motive as a spur for innovation. The Bill and Melinda Gates Foundation picked up much of the tab. And Glaxo does not expect to make money on its investment.  The lack of interest of the pharmaceutical industry, which generates huge profits protected by a web of patents enforced around the world, raises an important question. Do we need a different way to spur innovation and disseminate new technologies quickly around the world? Are patents, which reward inventors by providing them with a government-guaranteed monopoly over their inventions for many years, the best way to encourage new inventions? The question does not apply only to how we develop lifesaving drugs. It has acquired new urgency as the world rushes to discover and spread new technologies to replace fossil fuels as sources of energy and stave off impending climate change. The debate was center stage in the negotiations that led to the Trans-Pacific Partnership trade agreement. The Obama administration, spurred by the drug industry, insisted that patent protections should be tightened further around the world. But several other countries argued that they raised excessive barriers for poor countries, costing lives.

    Zika virus may cause broader range of brain disorders than previously believed - The Zika virus may cause a wider range of brain disorders than previously thought, according to a small study released on Sunday. Scientists already suspect the mosquito and sex-spread virus causes fetal brain disorder and temporary paralysis. The study followed patients with symptoms of arboviruses, the family of infectious agents that includes Zika and dengue, who came to a hospital in Recife, Brazil, between December 2014 and June 2015. Six people developed neurological symptoms and two suffered attacks that swelled the brain and damaged its myelin, the fatty material that protects nerves there and at the spinal cord. The research was presented on Sunday at the annual conference for the American Academy of Neurology in Vancouver. Its abstract concluded that “there is strong evidence that this epidemic has different neurological manifestations” than those already documented.All the people arrived in the hospital with a fever, then a rash, and some suffered red eyes, itching and aching muscles and joints – the known symptoms of the Zika virus. The neurological symptoms sometimes began immediately, or as long as 15 days after patients first sought treatment. All six people tested positive for the Zika virus, and negative for dengue fever and chikungunya. After they left hospital, five reported problems with motor functioning; one reported trouble with vision and memory.

    US soldiers burned their waste in the Mideast wars — and now it’s killing them -- Thousands of U.S. military personnel who served on bases in Iraq and Afghanistan recall the dense black smoke from burn pits where everything from IEDs to human waste was incinerated. Now many have died, and more are gravely ill. Those battling a grim menu of cancers, as well as their loved ones and advocates, trace their condition to breathing in the toxic fumes they say could be the most recent wars’ version of Agent Orange or Gulf War Illness. “The clouds of smoke would just hang throughout the base,” Army Sgt. Daniel Diaz, who was stationed at Joint Base Balad, in Iraq’s Sunni Triangle from 2004-2005, told . “No one ever gave it any thought. You are just so focused on the mission at hand. In my mind, I was just getting ready for the fight.”During the wars in both Iraq and Afghanistan, the burn pit method was adopted originally as a temporary measure to get rid of waste and garbage generated on bases. Everything was incinerated in the pits, say soldiers, including plastics, batteries, appliances, medicine, dead animals and even human waste. The items were often set ablaze with jet fuel as the accelerant. Joint Base Balad, where Diaz was partially stationed, burned up to 147 tons of waste per day as recently as the summer of 2008, according to The Army Times. The incineration of the waste generated numerous pollutants including the same chemical compound found in Agent Orange, which left many Vietnam vets sick after it was used as a defoliant.“It’s killing soldiers at a much higher rate than Agent Orange did in the Vietnam Era,” “Soldiers from that war were seen dying in their 50’s, 60’s or 70’s. Now with the soldiers returning from Iraq and Afghanistan, we are seeing them die in their early 20’s, 30’s, and 40’s.”

    Flint water still not safe to drink, says Virginia Tech professor -- Virginia Tech --The water in Flint, Michigan, is still not safe to drink, said Virginia Tech Professor Marc Edwards, a nationally renowned expert on municipal water quality credited with helping expose the high lead levels in the city's water. “The system is slowly improving," Edwards said. "The more the residents use the water, the faster the system will heal." The Flint Water Study team released results of its second round of testing Tuesday at a news conference on Virginia Tech's Blacksburg campus.  Two weeks ago, Flint homeowners were sent a personal letter from the Flint Water Study team with their individual results. While tests reflect improvement, residents should continue to use water filters and drink from bottled water. Testing by the U.S. Environmental Protection Agency (EPA) confirmed that the lead filters distributed in Flint reduce water lead to below 3 parts per billion, even in homes with the worst lead.Virginia Tech's student team worked with Flint residents in a historic sampling in summer 2015 that demonstrated serious lead in water contamination throughout the city. This month marks two years since city officials switched Flint’s drinking water source to the Flint River from the Detroit system. Last month, the team was able to re-sample 174 of the original 269 homes tested in August 2015.  Analysis of the first draw shows that levels of lead in Flint water at 23 parts per billion, which is still above the 15 parts per billion federal standard as set by EPA. But levels have improved from the 29 parts per billion lead level from the August 2015 testing. More dramatic improvements were observed in flushed water samples, with a 50 percent reduction in lead levels in March 2016 compared to August 2015.

    Water systems across country repeatedly exceed federal lead standards PBS: Looking beyond the lead-tainted drinking water crisis in the city of Flint, Michigan, an Associated Press investigation of Environmental Protection Agency records has found nearly 1,400 water systems providing tap water to nearly 4 million Americans exceeded the acceptable lead level at least once between 2013 and 2015. AP reporter Megan Hoyer co-wrote the story “Tainted at the Tap” and joins me now from Washington, D.C. How wide-ranging is this? Is this every part of the country geographically? Is it size of cities, big and small?

    • HOYER: It is. What we found were – we looked at roughly 77,000 water systems across the U.S. And what we found was, you know, the ones that had lead limit levels that were higher than the federal standard ranged in – they were in almost every state, and they ranged from very small systems with 20 or 25 customers to very large systems. We saw cities and counties that served hundreds of thousands of people that had repeatedly been over the limit.
    • PBS: And you also point to the fact that the notifications were different from town to town and how people felt like whether they really knew that there was a danger or not differed.
    • HOYER: So when a system is over the federal lead limit, it has 60 days to put out a notification to its customers telling them that there’s been lead found in the water. And what we’ve found were those notifications were often written in a way that was confusing to customers. Where customers didn’t understand the severity of the problem. They were told to simply run their water for 30 seconds to two minutes, and that would flush a lot of the lead out of the water. They were told that the systems were aware of the problem and were working toward it, but a lot of these systems had had problems for years and years.

    High copper and lead levels found in water at 19 Detroit schools - Detroit's hard-pressed school system has found elevated levels of lead and copper in nearly a third of its elementary schools, contamination that one expert says could be found nationwide, wherever school authorities spend the time and money to look. The news gave parents in the 46,000-student district yet another reason to worry, and prompted the teachers' union to appeal for help from autoworkers, who trucked bottled water to a school where some students were drinking from bathroom sinks after the water fountains were shut down as a precaution. "Our students want water all day long," Detroit teachers' union president Ivy Bailey said Thursday. Nine of every 10 schools and day care centers in the U.S. are not required to test for lead contamination under federal law, since their water is already tested by municipal suppliers. But like most other school districts nationwide, Detroit has aging buildings with lead pipes and water fixtures that have parts made with lead — and that's where the trouble lies.  The testing was prompted by the crisis in Flint, where lead flowed from taps after state authorities switched that city's water supply from Detroit's system to the Flint River to save money. About 8,000 Flint-area children under age 6 have potentially been exposed to lead. In Detroit, school officials discovered that even though the municipal water complies with U.S. Environmental Protection Agency standards, elevated levels of lead and some of copper were found in the drinking water fountains or kitchens at 19 of the 62 schools tested so far.

    EPA: No changes to federal lead water rule until next year (AP) — The Environmental Protection Agency’s top water regulator said Wednesday that officials are working urgently to strengthen a federal rule limiting lead and copper in drinking water — a key focus in the ongoing lead-contamination crisis in Flint, Michigan. But Joel Beauvais, acting chief of the EPA’s water office, said proposed changes will not be released until next year, with a final rule expected months after that. Beauvais told Congress that he and others at the EPA “certainly have a sense of urgency” about making changes to the lead and copper rule, but added, “We also want to get them right.” Meanwhile, Michigan’s two senators said late Wednesday they have agreed to remove a bipartisan proposal to provide federal funds to help Flint from a larger energy bill stalled in the Senate. Democratic Sens. Debbie Stabenow and Gary Peters said they were disappointed that despite weeks of negotiations, Sen. Mike Lee, R-Utah, has refused to allow a vote on the Flint legislation. Stabenow and Peters said their bill would help not just Flint, but communities across the country with aging water infrastructures. The Michigan senators said they would seek to find a way to move the Flint aid package through the Senate. Their decision to strip it from the energy bill allows the long-stalled energy measure to move forward.

    EPA: Gumshoes’ depleted ranks worry former enforcers -- U.S. EPA's former top cop is worried about the agency's ability to catch lawbreakers. Budget cuts and staff reductions have chiseled away at the agency's workforce in recent years, leaving EPA's criminal enforcement program with fewer cops to track down crooks who dump hazardous waste, illegally spew air pollution and commit other environmental crimes. Even as the agency has pushed to staff back up, the criminal program hasn't gotten the necessary support from top agency officials, said Doug Parker, who left his post last week as director of EPA's Criminal Investigation Division after two decades working on criminal enforcement. The enforcement program Parker left last week is very different from the one he joined when he became a special agent in 1993, he said in a recent interview. The ranks of special agents -- EPA's "boots on the ground" -- have been depleted to nearly an all-time low. The staffing depletion could have big consequences for the environment and the public, he said. Advertisement "EPA's criminal enforcement program is the only law enforcement organization that spans the country that focuses on environmental crime and the serious public health impacts that arise from it,"

    97% of Endangered Species Threatened by 3 Common Pesticides -- The U.S. Environmental Protection Agency (EPA) has released its first-ever analysis on the effects of three common pesticideschlorpyrifos, diazinon and malathion—on endangered and threatened species and designated critical habitat nationwide. The resounding conclusion? Pesticides are terrible for them. According to the report, malathion and chlorpyrifos harms an astounding 97 percent of the 1,782 animals and plants protected under the Endangered Species Act. Diazinon harms 79 percent. Malathion is often used on fruit, vegetables and plants for pests, as well tick removal on pets. Chlorpyrifos is used to exterminate termites, mosquitoes and roundworms. Diazinon is used against cockroaches and ants. The three chemicals species are “likely to adversely affect” these species, the EPA found. “For the first time in history, we finally have data showing just how catastrophically bad these pesticides are for endangered species—from birds and frogs to fish and plants,” Lori Ann Burd, environmental health director at the Center for Biological Diversity, said in a statement. “These dangerous pesticides have been used without proper analysis for decades, and now’s the time to take this new information and create common-sense measures to protect plants, animals and people from these chemicals.”

    What Will Happen When Genetically Engineered Salmon Escape Into the Wild?  - In late 2015, the Food and Drug Administration (FDA) gave the greenlight to AquaBounty, Inc., a company poised to create, produce and market an entirely new type of salmon. By combining the genes from three different types of fish, AquaBounty has made a salmon that grows unnaturally fast, reaching adult size twice as fast as its wild relative. Never before has a country allowed any type of genetically engineered animal to be sold as food. The U.S. is stepping into new terrain, opening Pandora’s box. But are we ready for the consequences? The genetically engineered salmon that the FDA approved will undertake a journey that stretches halfway around the globe in order to arrive at your dinner table. AquaBounty plans to produce the salmon eggs in a lab on Prince Edward Island in Canada, fly them to Panama to be raised, slaughtered and filleted and then bring them back to the U.S. so they can be sold to your family. How many tons of greenhouse gases are emitted during that 5,000-mile trip? That’s a far cry from the farm-to-table experience of eating seafood caught and sold by your local fisherman. Even worse, the FDA has so far refused to require food labels, so you won’t even know if the fish you’re eating is genetically engineered.   The FDA has failed to fully examine the risks this new species of salmon may present to wild salmon—and the environment—should it escape into the wild, which even some supporters of the FDA decision acknowledge is inevitable. Once free, these fish will enter a world where wild salmon are already in a precarious state. In this fragile environment, genetically engineered fish would compete with their wild counterparts for food and space and could even potentially interbreed with them. They will also bring new diseases and cause changes to basic food webs and ecosystem processes that are difficult to anticipate.

    Humans an Invasive Species Heading for a 'Crash,' Study Says - Human population growth has followed the trajectory of a typical invasive species, says a study published Wednesday in the journal Nature, and that suggests there may be a looming global population "crash." "The question is: Have we overshot Earth’s carrying capacity today?" said Elizabeth Hadly, a professor in environmental biology at Stanford University and senior author of the paper, in a press statement. "Because humans respond as any other invasive species," Hadly continued, "the implication is that we are headed for a crash before we stabilize our global population size." The study examined 1,147 archaeological sites via radiocarbon dating to understand the patterns of human population growth in South America. As a successfully invasive species, upon arrival "humans spread rapidly throughout the continent," the study authors note.  Once humans reached the continent's carrying capacity—meaning its resources couldn't support further population growth—"consistent with over-exploitation of their resources," the study found that humans' population growth halted and the species "remained at low population sizes for 8,000 years." "This coincided with the last pulses of an extinction of big animals," the study discovered. "Practices such as intensive agriculture and inter-regional trade led to sedentism, which allowed for faster and more sustained population growth. Profound environmental impacts followed," the study found. This is what makes humans perhaps the most successful invasive species yet: unlike animals whose population growth is limited by their natural environment, humans are capable of exponentially growing their population several times over, through the invention of new resource-exploiting technologies and cultural shifts such as the establishment of trade.

    Sierra Nevada Snow Won’t End California’s Thirst - — Thanks in part to El Niño, snowpack in the Sierra Nevada is greater than it has been in years. With the winter snowfall season winding down, California officials said that the pack peaked two weeks ago at 87 percent of the long-term average.That’s far better than last year, when it was just 5 percent of normal and Gov. Jerry Brown announced restrictions on water use after four years of severe drought. But the drought is still far from over, especially in Southern California, where El Niño did not bring many major storms.Despite the better news this year, there are plenty of worrying signs about the Sierra snowpack, which provides about 30 percent of the water Californians use after it melts and flows into rivers and reservoirs, according to the state Department of Water Resources. Many of those concerns stem from the effects of climate change and the structure of Sierra forests, which can influence how the snowpack accumulates and melts. Because the snow, in effect, serves as a reservoir that is released over time, any changes can affect how much water is available for people, industry and agriculture, and when. “We’ll be getting more rain and less snow here,” said Roger C. Bales, a professor at the University of California, Merced, and a principal investigator with the Southern Sierra Critical Zone Observatory, which studies snowpack and other water-related issues. “That means less snowpack storage and faster runoff.”

    Climate Change Worsening Colorado River Droughts | Climate Central: Even as the number of Americans relying on the Colorado River for household water swells to about 40 million, global warming appears to be taking a chunk out of the flows that feed their reservoirs. Winter storms over the Rocky Mountains provide much of the water that courses down the heavily-tapped waterway, which spills through deep gorges of the Southwest and into Mexico. But flows in recent decades have been lighter than would have been expected given annual rain and snowfall rates — and a new study has pinpointed rising temperatures as the likely culprit. “For a given precipitation over the cool season, from October through April, we’re seeing less flow than we’ve seen in the past,” said James Prairie, a researcher with the U.S. Bureau of Reclamation’s Upper Colorado Regional Office. He was not involved with the new study.

    Millions Face Starvation As Haiti’s Drought Stretches Into Its Third Year — Mirene Raymond hasn’t seen a real downpour since last year. The 69-year-old rice farmer is one of millions at risk of malnutrition and starvation due to the combined effects of climate change and El Niño.“This is the first time in my life that I’ve seen things this bad,” The El Niño weather pattern has caused drier than usual conditions in Haiti that have led officials to declare a national emergency. Climate scientists have warned for years of a stronger impact of El Niño due to rising ocean temperatures. Upward temperature trends have also exacerbated droughts and devastated agricultural production around the world.  Crop losses for this year have already been reported in Haiti. As a drought in the Caribbean stretches into its third year running, Raymond has tapped into all of her reserves. She used to be able to sell much of her harvest, and even buy rice from other farmers, to sell at a higher price at a local market.  This year, however, Raymond and other farmers in the once fertile Artibonite Valley will survive on what they grow. “The Artibonite used to be able to supply the whole country with rice. People from all over Haiti used to come here to buy rice. With things as they are, we can’t even supply enough rice for people living in the region,” she said. “Now we harvest just enough for us to eat.” More than five million Haitians face food insecurity, according to a study by the World Food Program (WFP). Of those, 1.5 million Haitians are severely food insecure. That’s twice the number recorded last autumn.“The drought has pushed people further into poverty and hunger, and many households have experienced several back-to-back poor harvests. As a result, any alternative livelihood strategies and survival strategies are nearly depleted,”

    We’re running out of water, and the world’s powers are very worried - Secret conversations between American diplomats show how a growing water crisis in the Middle East destabilized the region, helping spark civil wars in Syria and Yemen, and how those water shortages are spreading to the United States. Classified U.S. cables reviewed by Reveal from The Center for Investigative Reporting show a mounting concern by global political and business leaders that water shortages could spark unrest across the world, with dire consequences. Many of the cables read like diary entries from an apocalyptic sci-fi novel. “Water shortages have led desperate people to take desperate measures with equally desperate consequences,” according to a 2009 cable sent by U.S. Ambassador Stephen Seche in Yemen as water riots erupted across the country. On Sept. 22 of that year, Seche sent a stark message to the U.S. State Department in Washington relaying the details of a conversation with Yemen’s minister of water, who “described Yemen’s water shortage as the ‘biggest threat to social stability in the near future.’ He noted that 70 percent of unofficial roadblocks stood up by angry citizens are due to water shortages, which are increasingly a cause of violent conflict.” Seche soon cabled again, stating that 14 of the country’s 16 aquifers had run dry. At the time, Yemen wasn’t getting much news coverage, and there was little public mention that the country’s groundwater was running out. These communications, along with similar cables sent from Syria, now seem eerily prescient, given the violent meltdowns in both countries that resulted in a flood of refugees to Europe.

    Sardine Fishing Banned in Pacific Northwest as Stocks Hit Historic Low -- Regulators from the U.S. Pacific Fishery Management Council have banned sardine fishing off California, Oregon and Washington to allow the struggling species to recover. This is the second year in a row that the West coast fishing regulatory body was forced to take this action. Ominously, as The Oregonion pointed out, the council might have to continue the ban for years to come since there are less than 65,000 metric tons of adult sardines in the ocean this year, according to federal estimates. Under West coast fishery rules, sardine fishing must cease when adult stocks dip below 150,000 metric tons. The council writes that sardines were once “the most abundant fish species in the California current” which runs from Oregon to Baja California. Reuters, however, reported that Pacific sardine numbers have plummeted 90 percent since 2007. Sardine stocks are at historic lows and might get worse, according to The Maritime Exclusive, “The sardine fishery closure is the second in as many years; it was closed mid-season last year due to low stocks, but it has since fallen further, and is expected to be down by 30 percent over last year by summer.” The council is also considering the full closure of coho and chinook salmon fisheries off Washington state’s coast for the first since 1994.

    Thousands of Dead Sardines Found Floating in Chile’s Queule River -- A massive fish kill in the Queule River Estuary in Chile last week has left fishermen overworked, residents in fear and thousands of tons of dead sardines floating along local shorelines. According to a statement on the website Chile’s National Fisheries and Aquaculture Service (SERNAPESCA), the entire area has been declared a human health hazard and the dead sardines have been banned for consumption. Seven major areas in the estuary have been affected by the sardine die-offs with Playa de Los Piños being hit the hardest. The news comes at a bad time for a region already struggling with stocking its national fisheries. Sardines, along with anchovy, were recently closed to fishing in the country due to low catch numbers. SERNAPESCA estimates that there were several hundred tons of dead fish in the water.Fisherman Hernan Machua, told El País that 1,000 tons of dead sardines have been scooped out of the water so far and several thousand tons remain. He also added that more help from the government in the clean up efforts was desperately needed.Last week, SERNAPESCA tweeted images of the massive sardine die-offs. The images were captured during an aerial evaluation of the extent of the fish kill. The evaluation team included the mayor of Queule: Over the weekend SERNAPESCA tweeted this image of fishermen beginning the removal of the dead fish:

    The Largest Coral Atoll In The World Lost 80 Percent Of Its Coral To Bleaching  --As global ocean temperatures begin to recover from the record-breaking El Niño, the tremendous impact on the world’s coral reefs is still being calculated.  Coral reefs are more important than many people realize: Taking up just 0.2 percent of the ocean, they support about a quarter of all marine species, and provide support to livelihoods of 500 million people. But beyond that, a healthy reef is stunningly beautiful. They’re part of what makes life on Earth so special. During an El Niño event, corals can “bleach” — abnormally hot water makes their symbiotic bacteria emit toxins, and the coral polyps, which are tiny animals, expel them reflexively. Since healthy bacteria provide food to the corals, without them, the corals can starve to death.  When that happens, reefs that have grown up over centuries can die in a matter of weeks.  “This is a huge, looming planetary crisis, and we are sticking our heads in the sand about it,” Justin Marshall, a coral researcher at the University of Queensland, recently told the New York Times. Take Kiritimati (pronounced “Christmas”) Atoll, for example, about 1,300 miles south of Hawaii. If you look at a map of this El Niño, Kiritimati Atoll is right smack dab in the middle. Kiritimati is the largest coral atoll in the world, and up until about 10 months ago, one of the most pristine marine ecosystems on Earth. Over the past two weeks, a team of researchers led by Julia Baum, a biologist at the University of Victoria and Kim Cobb, a climate scientist at Georgia Tech, has been stationed at Kiritimati, and via hundreds of dives they have taken comprehensive measurements of the reef’s health, or lack thereof in this case. Their estimate is, as of early April, about 80 percent of the coral colonies at Kiritimati are now dead, and another 15 percent are severely bleached and likely to die. It’s as if someone decided to cut down 90 percent of the Redwood Forest. Overnight, an entire ecosystem has essentially blinked out of existence.

    This summer’s sea temperatures were the hottest on record for Australia: here’s why - The summer of 2015-2016 was one of the hottest on record in Australia. But it has also been hot in the waters surrounding the nation: the hottest summer on record, in fact.  While summer on land has been dominated by significant warm spells, bushfires, and dryness, there is a bigger problem looming in the oceans around Australia. This summer has outstripped long-term sea surface temperature records that extend back to the 1950s. We have seen warm surface temperatures all around Australia and across most of the Pacific and Indian oceans, with particularly warm temperatures in the southeast and northern Australian regions. These record-breaking ocean temperatures around Australia are somewhat surprising. El Niño events, such as the one we’re currently experiencing, typically result in cooler than normal Australian waters during the second half of the year. So what is the cause? The most likely culprit is a combination of local ocean and weather events, with a substantial contributor being human-caused climate change. In the north, the recent weak monsoon season played a role in warming surface waters. Reduced cloud cover means more sunshine is able to pass through the atmosphere and heat the surface of the ocean. Trade winds that normally stir up the water and disperse the heat deeper into the ocean have also remained weak, leaving the warm water sitting at the surface. We’ve also seen high ocean temperatures in the Indian Ocean. Around 2010, temperatures in the region suddenly jumped, likely because of the La Niña event in the Pacific Ocean. The strong events during this period transferred massive amounts of warmth from the Pacific Ocean into the Indian Ocean through the Indonesian region. The warmer waters in the Indian Ocean have persisted since and have influenced land temperatures.

    We Just Crushed The Global Record For Hottest Start Of Any Year by Joe Romm - NASA reports that this was the hottest three-month start (January to March) of any year on record. It beat the previous record — just set in 2015 — by a stunning 0.7°F (0.39°C). Normally, such multi-month records are measured in the hundredths of a degree. Last month was the hottest February on record by far. It followed the hottest January on record by far, which followed the hottest December by far, which followed the hottest November on record by far, which followed the hottest October on record by far. Some may detect a pattern here. We reported two weeks ago that “Last Month Was The Hottest March In The Global Satellite Record.” It was also the hottest March on record — by far — in the dataset of the Japan Meteorological Agency (JMA), as the World Meteorological Organizationtweeted Thursday. JMA: Global temp records smashed (again) in March, 1.07°C above 20th C avg #climateaction  As has been the story all winter, the biggest and most worrisome warming is occurring in the Arctic. Indeed, as we reported on Wednesday, blistering temperatures over Greenland jump-started the summer melt season — with 12 percent of Greenland’s massive ice sheet melting by Monday, beating the previous record by a month. Even though 2015 crushed the previous record for hottest year — which of course was just set in 2014 — it seems increasingly likely that 2016 will top 2015, even as the current El Niño fades.

    The North Atlantic Blob: A Marine Cold Wave That Won’t Go Away - When you look at a map of global surface temperatures for 2015, the first impression you might get is a planet with a bad sunburn. Almost every part of the globe saw above-average temperatures during Earth’s warmest year on record, and there was unprecedented warmth across many parts of the tropical and subtropical oceans (Figure 1). The next thing you’d probably notice is a blue blob in the North Atlantic, sticking out like a frostbitten thumb. No one knows exactly why, but this blob of unusually chilly water, roughly half the size of the United States, has taken up what seems like semi-permanent residence in the North Atlantic Ocean. It’s normal for ocean temperatures to wax and wane on all kinds of time scales. What’s more uncommon is for a cold anomaly this large and strong to persist for so long, especially when the rest of the planet is trending ever warmer.. Once a marine heat wave or cold wave takes shape, its blob of above- or below-normal SSTs may feed back into the atmosphere, helping to intensify and reinforce the circulation patterns that brought it to life. There is one important distinction: cold surface blobs are easier than warm blobs to disrupt. This is because the ocean is more likely to mix (convect) when colder water sits astride warmer water, just as the atmosphere is more prone to intense storminess when cold upper level air moves atop warm, moist surface air. When you consider this instability, it’s even more impressive that the North Atlantic’s cold blob has outlived the Northeast Pacific’s warm blob.  “The persistence--the staying power--of this anomaly is really pretty remarkable,” noted Michael Mann (Pennsylvania State University) in an email. “It is particularly striking that during the warmest year on record globally [2015], this region saw its coldest year on record.”

    El Nino Is Turning The Pacific Ocean's Coral Reefs Into Ghost Towns --Established coral reefs, the monuments of nature that we see today, have been around for thousands of years. They have endured over not just generations but grown over the course of geologic epochs. They are integral landmarks of the sea. But despite their seeming invincibility, they are dying at an astonishing pace. On separate occasions, researchers from the Georgia Institute of Technology (Georgia Tech) and the University of Victoria examined coral reefs around the tiny Christmas Island in the Pacific Ocean.. They were only gone for five months. But when they got back, the reefs had transformed from a struggling community where 30 percent of the reefs had died, to an area where 80 percent are dead, 15 percent are bleached, and 5 percent are still hanging in there.“To see the reefs change this dramatically in just a few months is shocking,” biologist Julia Baum said. “We were bracing ourselves for the worst, but seeing it with our own eyes was surreal. Christmas Island’s coral reefs are like ghost towns now. The structures are all still there, but no one is home.”The culprit in this case is El Niño. The climate event that has been going on for the past several months has warmed ocean water temperatures around Christmas Island by 2.7 to 5.4 degrees Fahrenheit (1.5 to 3 degrees Celsius). In warmer oceans, symbiotic algae flee coral structures, leaving the tiny coral animals to fend for themselves until things calm down. This is called bleaching because it leaves the normally colorful reefs looking white.Unfortunately, the waters haven't cooled off yet, which leaves the algae floating in the currents, and the corals starving in their homes on the sea floor. Eventually, without food, the corals die.

    Will La Niña Follow One of the Strongest Ever El Niños? - Back in November, El Niño reached a fever pitch, vaulting into the ranks of the strongest events on record and wreaking havoc on weather patterns around the world. Now it is beginning to wane as the ocean cools, so what comes next? It’s possible that by next fall, the tropical Pacific Ocean could seesaw into a state that is roughly El Niño’s opposite, forecasters say. Called La Niña, this climate state comes with its own set of global impacts, including higher chances of a dry winter in drought-plagued California and warm, wet weather in Southeast Asia. But El Niños and La Niñas are particularly difficult to predict at this time of year, so exactly what happens remains to be seen.El Niño and La Niña are part of a cycle that runs over the course of three to seven years. While El Niño features warmer-than-normal ocean waters in the central and eastern tropical Pacific — much warmer in the case of this exceptional El Niño — La Niña features colder-than-normal waters in the same region. Those changes in ocean temperatures are accompanied by changes in the atmosphere: During El Niño, convection and rains shift eastward and the normal east-to-west trade winds weaken or even reverse, while during La Niña, the normal dry state of the eastern Pacific intensifies along with the trade winds. Those atmospheric effects set off a domino effect around the world that can shift normal weather patterns.

    La Nina 2016-2017: What it means for you - With a monstrous and record-setting El Niño on the wane, the implications of its disastrous worldwide consequences are starting to settle in. But there’s new evidence that, on its heels, a potentially strong La Niña could emerge later this year—bringing with it a renewed stretch of extreme weather. On Thursday, the National Multi-Model Ensemble, a blend of the most reliable seasonal forecasts available, showed the clearest signal yet that tropical Pacific waters will cool rapidly over the next six months, likely ushering in La Niña conditions. Here’s exactly what’s about to happen, as explained by the fine folks at the National Oceanic and Atmospheric Administration:  In a nutshell, El Niño’s burst of warm water has slackened the trade winds across the tropical Pacific Ocean, and pushed the atmosphere there into an unsustainable setup. El Niño is now in the process of eating itself, as Anthony Barnston, one of the world’s foremost experts on El Niño and La Niña told Climate Central’s Andrea Thompson. As this happens, the trade winds will return with a vengeance, and will promote cooler, upwelling ocean water (which we call La Niña) that will shift weather patterns worldwide. A consensus of longer-range computer models now show La Niña conditions emerging by around July, and should peak this winter at a moderate intensity. Though this time of year is known for its relatively less reliable forecasts of this sort, virtually every strong El Niño on record has quickly transitioned to at least a weak La Niña, and there’s no reason to believe that this year will be any different. An additional boost of confidence: A few weeks ago, NOAA researchers fixed a bug in one of their flagship long-range models, which had been showing a continuation of El Niño conditions until 2017. Since then, it’s gotten on board with the La Niña forecast, too.

    Greenland’s Ice Melt Breaks Record, Starting Nearly Two Months Early -- Greenland’s melt season kicked off a month and a half early this year, scientists at the Danish Meteorological Institute (DMI) reported.  Greenland’s melt season typically runs from June until September, but almost 12 percent of Greenland’s ice sheet was melting as of Monday, which scientists say is unprecedented. “We had to check that our models were still working properly,” said Peter Langen, a climate scientist at DMI.  Maps show the current melt area centered around southwest Greenland. The graph shows the current melt season in blue and the average in black.  Areas of Greenland recorded temperatures this month that would have been unusually warm even in July and scientists expect more temperature records to be broken before the season is over.

    Unusually Early Greenland Melt: Polar Portal: An early melt event over the Greenland ice sheet occurred this week, smashing by a month the previous records of more than 10% of the ice sheet melting.Based on observation-initialized weather model runs by DMI, almost 12% of the Greenland ice sheet had more than 1mm of melt on Monday 11th April, following an early start to melting the previous day. Scientists at DMI were at first incredulous due to the early date. “We had to check that our models were still working properly” said Peter Langen, a climate scientist at DMI. “Fortunately we could see from the stations on the ice sheet that it had been well above melting, even above 10 °C. This helped to explain the results”. The former top 3 earliest dates for a melt area larger than 10% were previously all in May (5th May 2010, 8th May 1990, 8th May 2006). “Even weather stations quite high up on the ice sheet observed very high temperatures on Monday”, said Robert Fausto, a scientist at GEUS who maintains melt data. “At KAN_U for example, a site at 1840 m above sea level, we observed a maximum temperature of 3.1°C. This would be a warm day in July, never mind April”. Other PROMICE stations in the network at lower levels had daily average temperatures between 5 and 10 °C.

    Warm, Southerly Winds Gust to Hurricane Force Over Greenland in Staggering Early Season Heatwave — Temperatures Now Hitting up to 41 Degrees (F) Above Average at Summit  The wavy, crazy Jet Stream.  Over the past few years, it’s become more and more clear that a human-forced heating of the Arctic has basically driven the Jet Stream mad. Big loops, omega blocks, and huge ridges and troughs have all become a feature of the new climate we’re experiencing. Related to these features have been a number of superstorms, severe droughts, ocean hot and cold pools, and extreme rainfall events. As we have  seen with Sandy, the Pacific Hot Blob, the UK floods, The California Drought, the record Alaska and Canadian Wildfire Seasons of 2015, the Russian Heatwave and Fires of 2011, the Pakistan Floods of 2011, and so, so many more extreme weather events, these new climate features present a risk of generating extraordinary or never before seen weather. Intense storms, extreme winds, and extreme cold flashes and heatwaves can all be generated as the result of such mangled weather patterns. And for much of the North Atlantic this past weekend, such abnormal conditions dominated. The US East Coast experienced a freak cold flash, the UK was pummeled by yet one more unseasonable gale, but perhaps worst of all — a head of extraordinarily warm air roared northward, riding upon gale to hurricane force winds, setting sights on Greenland. The warm wind pulse began in the North Atlantic in a tropical region near 26 North, 55 West. This warm air flooded in train over thousands of miles of open ocean. Running northward, it roared along the back of a high pressure system centered over the Mid Atlantic Ridge and in front of two strong lows — one centered near Newfoundland and a second over southwestern Baffin Bay. In places, the pressure gradient between the lows and highs was so tightly packed that the northward flowing airs hit hurricane force. Off the southwest tip of Greenland, winds consistently achieved hurricane force gusts. And these winds flowed on northward, bringing with them a surge of above freezing temperatures to

    Scorching Greenland Sees Summer Ice Melt Season Start In April -- Joe Romm - Blistering temperatures and rainfall over Greenland have jump-started the summer melt season weeks early. On Monday, a stunning 12 percent of Greenland’s massive ice sheet was melting — “smashing by a month the previous records of more than 10 percent of the ice sheet melting,” according to the Danish Meteorological Institute (DMI). DMI scientists were “at first incredulous.” One DMI climate scientist said, “We had to check that our models were still working properly.” But in fact, temperatures over parts of Greenland this month have been measured as high as 17.8°C — a scorching 64°F. “Even weather stations quite high up on the ice sheet observed very high temperatures on Monday,” explained Dr. Robert Fausto of the Geological Survey of Denmark and Greenland (GEUS). At one “site at 1840 meters [1.1 miles] above sea level, we observed a maximum temperature of 3.1°C [37.6°F]. This would be a warm day in July, never mind April.”  Here are the key charts from DMI: Greenland holds the second-biggest chunk of land-locked ice in the world (after Antarctica), and its melt, by itself, could raise sea levels 20 feet. Equally worrisome, accelerated Greenland ice melt has been implicated in the slowdown of the Gulf Stream system. That slowdown, in turn, appears to be one reason “ocean temperatures off the U.S. east coast are warming faster than global average temperatures,” as Stefan Rahmstorf, Co-Chair of Earth System Analysis at the Potsdam Institute for Climate Impact Research, has explained. And that faster warming of the coastal U.S. has, in turn, helped supercharge monster storms like Blizzard Jonas and Superstorm Sandy.

    Sea-level rise factors unravelled - BBC News: Global sea-level rise since the 1970s has been predominantly driven by greenhouse gas emissions and not natural climate variability, a study suggests. Over the last 100 years, sea levels have been rising much faster than over previous millennia. Now, scientists have modelled the cumulative forces driving observed sea-level rise in the modern era. Details of the work are published in Nature Climate Change. "The influence of greenhouse gases (GHGs) and aerosols - the human component, due to the burning of fossil fuels principally - is small in the beginning of the 20th century, only about 15%," says Dr John Church, a sea-level rise expert at CSIRO, the Australian federal research agency. "But after 1970 it's the dominant factor, contributing to about 70% of the rise from 1970 up to present day." "Natural internal climate variability, while it affects sea-level on short periods, has very little impact on the trend during the 20th century." The findings illustrate the extent to which humans have influenced sea-level rise over the last 115 years, and raise concerns about future sea-level and climate change scenarios. As the Earth's climate continues to warm, the rate of sea-level rise is expected to accelerate, increasing the risk of coastal flooding. "There are thresholds we could well cross during the 21st century, which would lead to multi-metre sea-level rise unless there is urgent and significant mitigation,"

    The Contribution of Wildfires to Atmospheric CO2 -- How much do wildfires contribute to the amount of carbon dioxide in the Earth's atmosphere?  That's the question we're tacking today, because a number of massive fire in Indonesia's peat-filled forests in 2015 are reputed to have dumped a considerable amount of CO2 into the air, which we think have been showing up in the Mauna Loa Observatory's measurements of the gas.  But to find out by how many parts per million that the concentration of carbon dioxide in the air may have increased as a result of the fires, we first have to know just how much CO2 is estimated to have been generated as a result of the out-of-control burning that occurred in Indonesia in 2015.  For that information, we turned to Guido van der Werf's Global Fire Data site, where we found that he had provided estimates of the number of gigatonnes of carbon dioxide equivalents for Indonesia's fire through November 2015.   Van der Werf describes the chart's data for 2015: We expect that the GFED estimate for the 2015 fires will be about 1.75 billion metric ton of CO2 equivalents, with substantial uncertainty. Above the greenhouse gas emissions from Indonesian fires are plotted according to GFED for 1997-2014 with estimates for 2015 based on active fires. These are converted to emissions based on a relation between the two, established using data from previous years, see the figure and text below for more information. The numbers on the right indicate fossil fuel CO2 emissions for various countries for 2013 derived from the EDGAR database.

    Should the World Ditch the 2-Degree Celsius Target? - Scientific American: The main goal posts in the global fight against climate change are set in the wrong place, one researcher argues in a new paper this week. The established international target of limiting global warming to 2 degrees Celsius leaves too much wiggle room and doesn’t move the world fast enough to avert catastrophic warming, explained Oliver Geden, head of the E.U. research division at the German Institute for International and Security Affairs. “The whole discourse on 2 degrees is focusing on targets and not action,”  He made his case for setting an objective of driving carbon emissions down to zero in a commentary article published Monday in the journal Nature Geoscience. In theory, an international temperature target gives countries a trajectory for fighting climate change. In practice, it doesn’t tell anyone much about who needs to act and what they should do. With a temperature target, negotiators set a warming limit, calculate the maximum amount of greenhouse gas emissions that could be released without breaching that barrier and then allocate limits to countries within that carbon budget.  However, within that framework, a country could still build a new coal power plant if it was within its carbon budget. Meanwhile, under the Paris Agreement, the intended nationally determined contributions—voluntary proposals from more than 180 countries for how they will contribute to the global climate fight—would still lead the world to overshoot the 2-degree warming limit. To keep countries moving in the right direction, Geden said it’s better to aim for net zero greenhouse gas emissions.

    Can We Cut Carbon Emissions and Still Have Economic Growth? -- Yves Smith - (video) This Real News Network segment marshals data to make a provocative argument: there are more ways to decouple carbon emissions and GDP growth than most observers believe. This isn’t airy fairy idealism but a look at the experience of the 21 countries that have increased GDP while lowering their carbon output.   Given the short time of this interview, this is a still a nuanced discussion. I apologize for the lack of a transcript, but Real News Network did not supply one.    And there is a second issue: can carbon emissions be reduced enough to ward off disastrous outcomes without reduction in growth? On the one hand, both advanced and emerging economies are profligate in the way we use resources. If there were a full bore effort to tackle this issue, I believe vastly more could be achieved on this front than is now dreamed possible. But we have too much of what passed for talent in this country being sucked into activities with low to negative social value, like implementing the gig economy, designing financial “innovations,” and lobbying.

    Can Markets Solve Climate Change? This Democratic Socialist Thinks So. - Climate scientists, economists, and the American people overwhelmingly agree on the danger of human-induced climate change. While economists initially resisted policies to combat climate change on the basis of its price tag, the tide is changing. The question today is not whether we can afford to reduce carbon emissions, but rather if we can find the political will to do so. Unfortunately for us and the planet, most US politicians show little interest in transitioning away from fossil fuels. While President Obama’s executive actions to increase fuel-economy standards and reduce power-plant emissions are steps in the right direction, they are small steps and we have a very long way to go. Combating climate change should be a central issue in the current presidential election. However, the Republicans actually promise to further deregulate the fossil fuel industry and accelerate climate change. Only the Democrats say that bold action is necessary—and they differ drastically on the meaning of “bold.”  Just how much do the Democratic presidential candidates differ? It’s hard to tell from their talking points—both argue for swift action and for making America a leader in the green-energy transition. Secretary Clinton wants to “reduce greenhouse gas emissions by up to thirty percent in 2025 relative to 2005,”  However, it isn’t quite clear how Clinton would achieve this goal, and the campaign did not respond to our request for details.  The Democratic primary debate on March 6 highlighted this policy difference when the candidates were asked if they support fracking. Clinton gave a long-winded answer, saying that she supports fracking as long as it meets a list of standards. Sanders’s response: “My answer is a lot shorter. No. I do not support fracking”.

    Cap-and-trade alone not enough to fight climate change | Toronto Star: In the coming weeks, Ontario will finalize a new law and a regulation that will guide the province’s approach to climate action for decades to come. Carbon pricing through cap-and-trade is just one part of that plan. Which is good, because carbon pricing alone is not sufficient to cut carbon emissions to the extent required. A key feature of Ontario’s approach is to use revenues from cap-and-trade to fund actions to further reduce carbon pollution, which is a good idea — if the province chooses those actions wisely and learns from the experiences of other jurisdictions about what not to do. British Columbia’s example shows that a price on carbon alone is not enough to sufficiently cut emissions. At $30 per tonne, B.C. has the highest carbon price in North America. Yet, B.C. is not on track to meet its carbon reduction targets. Rather, emissions in B.C. are rising. Why? Because the price is too low and because the province’s revenue neutral system leaves no money to fund complementary programs to reduce emissions. To rely solely on pricing, economic models say that the price of carbon needs to be $100 to $200 per tonne to achieve significant emissions reductions. And that kind of price isn’t on the table. So, a combination of carbon pricing plus complementary actions is needed.

    "A Look at Six State Proposals to Tax Carbon" - As the political likelihood of passing comprehensive national climate policy has remained low, many states have taken up the mantle. This devolution of climate policy has been further reinforced by the US Environmental Protection Agency’s (EPA’s) efforts to regulate carbon dioxide from existing power plants under the Clean Power Plan, which requires states to develop their own plans for compliance with emissions standards. Certainly there is no shortage of policy ideas in the “laboratories of democracy” that indirectly aim at carbon emissions by promoting technology adoption or energy efficiency. Currently, two prominent examples of subnational policies aimed specifically at carbon emissions exist: California’s cap-and-trade system and the Northeast’s Regional Greenhouse Gas Initiative (RGGI), which also employs a cap-and-trade approach. Recently, six states have each proposed legislation to introduce a comprehensive state-wide carbon tax: Massachusetts, New York, Oregon, Rhode Island, Vermont, and Washington. (Vermont has a second legislative proposal that is more stringent but has less support in the legislature at this time.) And in California, where there is a robust cap-and-trade program, some legislators have suggested a transition to a tax. It should not come as a surprise that these proposals have been introduced by Democratic members of state legislatures, and that these states have a history of ambitious greenhouse gas (GHG) mitigation goals. ...

    Judge Denies Motions by Fossil Fuel Industry and Federal Government in Landmark Climate Change Case -- U.S. Magistrate Judge Thomas Coffin of the Federal District Court in Eugene, Oregon, decided in favor of 21 young plaintiffs in their landmark constitutional climate change case against the federal government. Judge Coffin ruled Friday against the motion to dismiss brought by the fossil fuel industry and federal government. The court’s ruling is a major victory for the 21 youth plaintiffs, ages 8-19, from across the U.S. in what Bill McKibben and Naomi Klein call the “most important lawsuit on the planet right now.” These plaintiffs sued the federal government for violating their constitutional rights to life, liberty and property, and their right to essential public trust resources, by permitting, encouraging and otherwise enabling continued exploitation, production and combustion of fossil fuels. “This decision is one of the most significant in our nation’s history,” plaintiffs’ attorney Philip Gregory said. “The court upheld our claims that the federal government intensified the danger to our plaintiffs’ lives, liberty and property. Judge Coffin decided our complaint will move forward and put climate science squarely in front of the federal courts. The next step is for the court to order our government to cease jeopardizing the climate system for present and future generations. The court gave America’s youth a fair opportunity to be heard.” As part of Friday’s historic decision, Judge Coffin characterized the case as an “unprecedented lawsuit” addressing “government action and inaction” resulting “in carbon pollution of the atmosphere, climate destabilization and ocean acidification.”

    Climate change consensus increasingly questioned amid government crackdown on dissent - The latest government crackdown on climate dissent, exemplified by last week’s subpoena of the Competitive Enterprise Institute, comes amid a surge of scientific research that pokes holes in the catastrophic climate change consensus. As of March 27, researchers had published 133 “consensus-skeptical” papers this year, bringing to 660 the number of such studies appearing since January 2014, blogger Kenneth Richard wrote on the skeptics website NoTricksZone. “There has been quite an uptick in papers that question the consensus this year,” said Anthony Watts, who runs the influential WattsUpWithThat? website. Studies published on his website and others include in the past few weeks include those that say:

    • An exhaustive study published April 7 in Nature by University of Stockholm researchers examining hydrological patterns going back 1,200 years found that climate models cannot accurately predict extreme rainfall and drought.
    • An article published April 4 in Nature Geoscience linked the melting of the Greenland ice sheets to hot spot activity within the Earth’s core, a finding that “must be included in studies of the future response to climate change,” said lead author Irina Rogozhina, a scientist at the Center for Marine Environmental Sciences at the University of Bremen in Germany.
    • A March 21 paper by meteorologist Martin Hertzberg and chemist Hans Schreuder, evaluating figures behind the United Nations Intergovernmental Panel on Climate Change “consensus,” concluded that “nothing in the data supports the supposition that atmospheric CO2 is a driver of weather or climate.”

    In spite of that research — or maybe because of it — Democrats have renewed their efforts to clamp down on climate dissent. Two weeks ago, 17 attorneys general — 16 Democrats and Mr. Walker, an independent — announced that they would investigate and prosecute climate-related “fraud,” citing investigations by journalism outlets accusing Exxon Mobil Corp. of stifling its own scientific research in support of the “settled science.”

    USA Today, Bloomberg Contributors Obscure Role Of Industry-Funded Think Tank In “Exxon Knew” Scandal -- Denise Robbins-- Contributors at USA Today and Bloomberg View are echoing false attacks on attorneys general who are investigating whether oil companies deceived the public on climate change, and grossly misrepresenting why the attorney general of the U.S. Virgin Islands has subpoenaed records from an oil industry-funded think tank as part of his investigation. A coalition of attorneys general has committed to holding fossil fuel companies including Exxon accountable if they obfuscated climate change research in order to protect their financial interests. This follows reports from InsideClimate News and the Los Angeles Times showing that Exxon’s own scientists confirmed by the early 1980s that fossil fuel pollution was causing climate change, yet Exxon funded organizations that helped manufacture doubt about the causes of climate change for decades afterwards. One of the climate denial organizations that Exxon funded was the Competitive Enterprise Institute (CEI), and U.S. Virgin Islands Attorney General Claude Walker is now subpoenaing CEI for “records of the group's donors and activities involving climate policy,” as InsideClimate News reported. CEI said it “will vigorously fight to quash this subpoena,” and called it "an affront to our First Amendment rights of free speech and association.” Now, contributors at USA Today and Bloomberg View are defending CEI and Exxon by misrepresenting Exxon’s alleged wrongdoing. Bloomberg View’s Megan McArdle authored a column on April 8 headlined, “Subpoenaed Into Silence on Global Warming,” in which she claimed the attorneys general are trying to “shut down dissenters” and criminalize “advocating for policies that the attorneys general disagreed with.” Similarly, USA Today contributor Glenn Reynolds proclaimed in an April 11 column that the attorneys general investigations look like “a concerted scheme to restrict the First Amendment free speech rights of people they don’t agree with,” and that their goal is to “treat disagreement as something more or less criminal.”

    Study: Journalists’ Fear of Appearing Biased Benefits Special Interests -- Despite an overwhelming scientific consensus that climate change is real and that it is man-made, many Americans today remain skeptical. According to a Gallup poll released last month, only 69 percent of Americans believe scientific reports of record-high temperatures, and the general public remains almost evenly divided between those who believe climate change is caused by human activity and those who believe it is caused by natural changes in the Earth’s temperatures.  Americans in general are more skeptical of anthropogenic climate change than people from other countries. A 2014 Ipsos MORI poll found that 54 percent of Americans believe that “the climate change we are currently seeing is largely the result of human activity,” compared with 80 percent in France, 72 percent in Germany, and 93 percent in China.  Some of this, perhaps, has to do with the prominent media coverage given to climate change skepticism in US media outlets. While climate change skeptics are largely relegated to the margins of the scientific community, in American media they have been given “roughly equal attention” — according to a 2007 paper by Maxwell T. Boykoff and J. Timmons Roberts — long after the formation of scientific consensus, thereby giving a sense of false balance to a debate that, scientifically speaking, has long been resolved.  A new paper by Jesse M. Shapiro of Brown University seems to suggest that this sort of “balanced” reporting can in fact serve special interests who wish to cast doubt on the scientific consensus on climate change, by adding ambiguity to the debate.

    Germany To Abandon $1.1 Trillion Wind Power Program By 2019 -- Germany plans to stop building new wind farms by 2019, gradually turning away from its $1.1 trillion wind power program, according to a Thursday report in Berliner Zeitung.  The government plans to cap the total amount of wind energy at 40 to 45 percent of national capacity, according to the report. By 2019, this policy would cause a massive reduction of 6,000 megawatts of wind power capacity compared to the end of 2015’s capacity.  “The domestic market for many [wind turbine] manufacturers collapses completely,” Julia Verlinden, a spokesperson for the German Green Party, told Berliner Zeitung. “With their plan, the federal government is killing the wind companies.” Verlinden goes on to blame the political influence of “old, fossil fuel power plants.”   The government estimates that it will spend over $1.1 trillion financially supporting wind power, even though building wind turbines hasn’t achieved the government’s goal of actually reducing carbon dioxide (CO2) emissions.

    China Is Adding a Three Gorges Dam Worth of Wind Every Year - In the past two years, China has added 53.2 gigawatts of wind energy capacity, with plans for another 31 GW in 2016. These are world-leading achievements, but their significance can be difficult to convey. A more concrete reference is needed. Where does this activity stack up against, say, the largest power plant in the world?  In 2012, the last of the turbines in the Three Gorges Dam began generating electricity at rated power. Construction of the 22.5-gigawatt dam -- again, the biggest power station anywhere the world -- took 18 years. It exacted a large social and environmental toll: more than 1 million people were displaced and ecosystems were destroyed.  Now consider that by the end of 2016, China will have installed one Three Gorges Dam worth of low-cost, low-impact wind energy every year for the past three years. That’s a compelling comparison. And it further shows how China’s dominance in renewables mirrors its dominance in industrial materials. (Last year, China accounted for 52 percent of the world's 62.7 gigawatts of wind energy installations. This is similar to the country’s share of worldwide coal, concrete and copper consumption, among others.) Of course, nameplate capacity doesn’t equate to annual energy production, both for variable or baseload sources. The U.S. Energy Information Administration estimates that utility-scale solar photovoltaic installations in America had an average capacity factor of 29 percent in 2015, with utility-scale wind farms at 33 percent, coal plants averaging 55 percent, combined-cycle natural gas plants at 56 percent and nuclear plants at 92 percent.

    Cuckoo clocks? Venezuela shifting time hoping to save energy— Venezuela’s government is changing the clock again as part of its efforts to stave off an electricity crisis. The move comes nine years after former President Hugo Chavez created Venezuela’s own, unique time zone in a stroke of anti-imperialist independence. President Nicolas Maduro said Thursday that the new change will take effect May 1. He didn’t provide details about how much or in what direction the clocks would move, saying only that it’s an additional emergency measure to prevent power outages as a severe drought reduces power output by lowering water levels at hydroelectric dams. As part of the energy-saving drive, he also declared Monday a public holiday. “It’s a very simple measure that represents an important savings,” Maduro said about the shift in the time zone. The move follows Maduro’s decision requiring cinemas to close early and shopping centers to generate their own electricity and his call for women to ease up on hair blowers in a bid to reduce energy consumption by 20 percent. More controversially, he has also started giving state employees Fridays off. The surprise furlough for Monday means that as of Tuesday, when Venezuelans celebrate independence day, 17 of the last 31 calendar days will have been non-work days for many Venezuelans. Maduro gave workers off the three days leading up to the Easter holiday last month.

    US gas used for power generation dips to 10-week low on cold weather in South - Natural gas consumption used for power generation dipped to a 10-week low over the weekend, averaging 21.1 Bcf/d Saturday and Sunday as temperatures in the South averaged 4 degrees Fahrenheit below the historical average, data from Platts Analytics showed Monday. US daily power burn last dipped below 21 Bcf/d early this year when mild temperatures prompted gas burn to dip to 20.8 Bcf/d on January 31. On Saturday power burn in the Southeast and Texas fell 900 MMcf/d and 400 MMcf/d, respectively, while smaller day-on-day declines were also seen in all other US regions expect the Rockies. The unexpected drop in power burn over the weekend bucks the 2016 trend which has seen natural gas consumption for power generation rise 7% year on year to an average 24.4 Bcf/d.

    CHART: Power Is A LOT More Expensive Under Obama - The average American’s electric bill has gone up 10 percent since January, 2009, due in part to regulations imposed by President Barack Obama and state governments, even though the price of generating power has declined. Record low costs for generating electricity thanks to America’s new natural gas supplies created by hydraulic fracturing, or fracking, haven’t translated into lower monthly payments for consumers due to new regulations. The price of generating electricity in the eastern U.S. fell by half under Obama, but utilities raised monthly bills for residential customers, according to government data. The biggest price increase in the U.S. was in Kansas, where prices rose from 8.16 cents per kilowatt-hour in January, 2009, to 11.34 cents in January, 2015. That’s a 39 percent increase in the price of electricity during Obama’s tenure. States like Idaho, Nebraska, Wyoming, South Dakota, Missouri, Utah, and Ohio saw enormous increases in the price of electricity as well, according to data from the Energy Information Administration. States with large and developed natural gas and oil industries generally saw their average electric bill drop. The biggest price drop was in Texas, where prices fell by almost 10 percent during Obama’s tenure. States like Louisiana, Arkansas, Maryland, Florida, Delaware, New Jersey, Maine and the District of Columbia all saw the average electric bill fall since January, 2009.

    The raw truth about the methanol plant - There is a bitter fight going on about building the world’s largest methanol plant in the tide flats of Tacoma. Northwest Innovation Works (NWIW), which is owned by the Chinese government and BP (British Petroleum), are planning a $3.4 billion investment at the Port of Tacoma. Due to the larger-than-expected public concern, NWIW has asked the city to pause the environmental review while they try a media blitz to swing public support. I think the proper term for this pause is “greenwashing the public.”To start at the beginning, look at the owners of the company: China has one of the worst environmental records in the world. Their citizens go around with masks on to prevent inhaling the pollutants in their cities. Their use of coal with little cleaning equipment is impacting the whole world. This Chinese company has little or no past building experience, and their partner, BP, is still not through cleaning up the Gulf of Mexico after the oil spill. We are really picking strange bedfellows if we want a proven environmental track record. Methanol itself is not a very pleasant chemical. It will be used to produce plastics in China (whether the world needs more plastics is another conversation). Methanol is very toxic to humans and can cause blindness, coma and death. It is commonly called “wood alcohol” and is used frequently to denature other alcohols to prevent them from being consumed. One of the worst characteristics of methanol is that it creates a large oxygen demand when spilled. What makes this so significant is that even small spills will consume all the oxygen out of water so that nothing can live. Puget Sound has about 6 mg/liter of oxygen dissolved in the water. Most fish need about 4mg/liter to breath. These are very small amounts, (6 mg of oxygen = 0.00021 ounces). If 1 gallon of methanol is spilled in the Sound, it will completely deplete the oxygen from 198,000 gallons of water. So a relatively minor spill of only 100 gallons would kill everything in 19.8 million gallons of water. That would probably wipe out the Blair Waterway. The worst-case spill would be to lose the contents of a tanker of methanol. That would kill everything in south Puget Sound.

    Green and Indigenous groups furious over Queensland's Carmichael coalmine lease approval - Conservationists and traditional owners have been floored by Queensland’s decision to grant mining leases for Adani’s mega-coalmine while two court challenges are unresolved. The Queensland government has cleared the last major state hurdle for the Indian miner to proceed with its $22bn coalmine (which would be Australia’s largest), rail and port project in the Galilee Basin and at Abbot Point. But even Adani says it won’t make a final investment decision on the project until legal challenges by “politically motivated activists” are concluded, and it has the last approvals it needs. Two groups fighting the mine in separate court battles have accused the state government of a morally bankrupt backflip that endangers the Great Barrier Reef and trashes Indigenous rights. The Australian Conservation Foundation (ACF) and the Wangan and Jagalingou (W&J) traditional owners both said the mines minister, Anthony Lynham, gave assurances that no leases would be issued until their court challenges were resolved. As recently as February, Lynham said he wanted to “give certainty to Adani” and added: “Granting a mining lease in the presence of two JRs [judicial reviews], does not provide the certainty.” The ACF questioned whether Adani or the coal lobby had pressured Lynham to abandon his concerns about the courts possibly ruling against the project.

    Hundreds of coal plants are still being planned worldwide — enough to cook the planet - I've written before about the global coal renaissance — the single biggest energy and climate story of the past 15 years. Since 2000, countries like China, India, Indonesia, and Vietnam have been building coal-fired power plants at a torrid pace:  The coal boom has had undeniable benefits, helping poor countries climb out of poverty. But it also has serious downsides: Carbon dioxide emissions accelerated in the 2000s, and if coal continues to be the world's leading source of electricity, we'll cook the planet. So the biggest, most important climate question for the next 15 years is: How long will this global coal boom last? Or, put another way, when will the rise of clean energy finally stop coal's growth for good? One invaluable data source here is an annual report from three environmental groups: CoalSwarm, the Sierra Club, and Greenpeace. Each year, the authors document all the new coal plants that have been announced, permitted, or are currently being built around the world. In their 2016 "Boom and Bust" report, they find the equivalent of 1,500 new coal plants in the pipeline worldwide. That's a staggering number. If even one-third of these plants get built and operate for their full lifetime, we'll likely bust through the 2°C global warming threshold that world leaders have promised to stay below. Even 3°C could be tough to avoid. But there's a major asterisk here: It's not yet certain all these plants will actually get completed. Since 2010, two-thirds of proposed coal projects have gotten scrapped. China, which today accounts for half the world's planned capacity, has seen its coal appetite wane in the last few years and is tacking toward cleaner energy sources. India is another big question mark. So is Southeast Asia. Let's take a closer look.

    Leading global coal miner Peabody files for bankruptcy | Reuters: Leading global coal producer Peabody Energy Corp (BTU.N) filed for U.S. bankruptcy protection on Wednesday after a sharp drop in coal prices left it unable to service debt of $10.1 billion, much of it incurred for an expansion into Australia. The Chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metal prices began to fall in mid-2014 as once fast-growing markets including China and Brazil started to slow. Peabody, the world's biggest private-sector coal producer, said it expected its mines to continue to operate as usual and said its Australian assets were excluded from the bankruptcy. Peabody estimated its assets at $11.0 billion and liabilities at $10.1 billion as of the end of 2015, according to court documents. . Peabody has agreed to $800 million in debtor-in-possession financing from both secured and unsecured creditors, subject to court approval, including a $500 million term loan, a $200 million bonding accommodation facility for cleanup costs and a letter of credit worth $100 million, it said.

    Peabody Energy Files for Chapter 11 Bankruptcy -- U.S. coal giant Peabody Energy Corp. filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s enduring the worst slump in decades. The company filed Chapter 11 petitions for most of its U.S. entities in U.S. Bankruptcy Court in St. Louis Wednesday, listing $10.1 billion in debt. All of Peabody’s mines and offices are continuing to operate and are expected to continue doing so for the duration of the process, according to a statement. Founded in 1883 by 24-year-old Francis S. Peabody with $100, a wagon and two mules, the miner is now the largest private-sector coal company in the world, with customers in 25 countries and about 8,000 employees, according to its website. It joins at least four other coal companies that have sought bankruptcy as the industry endures its worst downturn in decades -- a result of tougher environmental policies, a flood of cheap natural gas and a global glut of metallurgical coal that’s dragged prices for steelmaking component to the lowest in more than 10 years. The price of metallurgical coal has tumbled about 75 percent since its 2011 peak. That’s been particularly painful for Peabody, which spent $4 billion in 2011 to acquire Australia’s MacArthur Coal Ltd. in an effort to expand its sales of the steelmaking component. No Australian entities are included in the filings, and Australian operations are continuing as usual, according to the statement. “The factors affecting the global coal industry in recent years have been unprecedented,” Peabody said in the statement. “Still, multiple third-party estimates project that both the U.S. and global coal demand will stabilize. Coal currently fuels approximately 40 percent of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come.”

    World’s Largest Coal Company Files for Bankruptcy -- Peabody Energy, the world’s largest privately owned coal company, filed for bankruptcy today, becoming the latest in a series of coal giants to do so. The bankruptcy filing is one of the largest on record in the commodities market.  Shares of the energy company fell 75 percent this year, driven by the low demand for and price of coal, which has also fallen 75 percent since 2011. Peabody also cited the increasing use of natural gas and “ongoing regulatory challenges” as reasons for its filing. Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, said Peabody’s filing should serve as a “wake-up call” for the rest of the industry. Producers accounting for about 45 percent of U.S. coal production have filed for bankruptcy since coal’s steep decline began.  For a deeper dive: Reuters, CNN, Bloomberg, Financial Times, Wall Street Journal, Washington Post, Sydney Morning Herald, BBC, Grist, IB Times, BusinessGreen, Climate Home, USA Today

    Peabody’s Bankruptcy: A Giant Falls, But Its Obligations Remain -- This week, a giant that had been teetering for many months finally fell, as Peabody Coal officially declared bankruptcy. For market watchers around the globe, this was a decisive movement in the long decline of an industry that once seemed invincible—the New York Times called it “Wall Street’s retreat from King Coal.” For those of us who live and work in Appalachia, this is the IMAX version of a movie we’ve seen many times before, one where coal company executives take the money and run, attempting to leave communities and taxpayers holding the bag for ruined communities, workers, mountains and rivers. This time, we can’t let them get away with it. There’s way too much at stake. The federal representatives of coal communities need to push Congress to invest in economic redevelopment and diversification, help shore up health care and pension plans for coal workers and their families, and ensure toxic mining sites are cleaned up and reclaimed.  The transition away from polluting coal to clean energy is essential to protecting the health of our communities and our climate and the Peabody bankruptcy is one of the clearest signs that there’s no reversing that trend. Thanks to to the grassroots leaders who stopped the construction of 184 coal plants, secured the retirement of one-third of U.S. coal plants (232 and counting) and secured enough clean, renewable energy to replace that coal, the U.S. energy landscape has changed in a profound, irreversible way. Coal was providing half of U.S. electricity just five years ago and in 2015 that dropped to a historic low of 34 percent.

    Radioactive Reindeer Roam Norway 30 Years After Chernobyl -- THE CHERNOBYL NUCLEAR Power Plant explosion remains the worst civilian nuclear disaster ever. The catastrophe blanketed much of western Russia and Europe beneath a toxic cloud, and even now, 30 years later, radiation appears in unusual places—like the migratory reindeer of Norway.  The reindeer live in southern and central Norway, where they graze on lichen and fungus—two things that ravenously absorbed the fallout of Chernobyl. As a result, many of the animals contain levels of radioactivity far beyond the European Union limit for consumption. That troubling for the Sami, an indigenous population that relies upon them for sustenance.  Photojournalist Amos Chapple spent a week in the village of Snåsa in January on assignment for Radio Free Europe1. He worked with a veterinarian and other experts to documenthow Sami herders live with the lingering effects of Chernobyl. Chapple, who photographed the coldest town on earth, braved single-digit temperatures during the project.  He and Grojec followed Sami herders as they corralled the reindeer and Norwegian scientists as they tested them. Some were vaccinated and released, including those with radiation levels too high for human consumption. Although researchers saw a spike in radiation in 2014, the animals Chapple photographed fell within Norway’s limit.  In the days after Chernobyl, reindeer tested by the government ranged from 30,000 to 60,000 becquerel (a measure of radiation) per kilogram. That prompted authorities to increase the acceptable level from the EU cap of 600 becquerel per kilo to ensure the Sami could maintain their way of life. Today, the acceptable limit stands at 3,000.

    Chesapeake Forced To Pledge Entire Company As Collateral To Preserve Existing Credit Facility As we enter the critical spring borrowing base redetermination season, which as we previewed previously is the biggest threat to near-insolvent energy companies whose banks may, and in many cases will, decide their assets are worth far less and as a result dramtically cut their revolver availability, one of the biggest question marks was how generous would the banks of troubled gas giant Chesapeake be, whose $4 billion credit facility is one of the few things keeping the company still afloat.  We got the answer earlier today when the company announced it had succeeded in maintaining its entire $4 billion borrowing base and as a result would not suffer an imminent liquidity crunch. From the release: Chesapeake Energy Corporation today announced it has amended its $4.0 billion secured revolving credit facility agreement maturing in 2019 with its bank syndicate group. Key attributes include:

    • Borrowing base reaffirmed at $4.0 billion, consistent with current availability
    • Next scheduled redetermination of borrowing base postponed until June 2017
    • Senior secured leverage ratio covenant relief granted until September 2017
    • Interest coverage ratio covenant reduced to 0.65x through March 2017

    Following the recent redetermination review by its bank syndicate group,Chesapeake's senior secured revolving credit facility borrowing base was reaffirmed at $4.0 billion, consistent with current availability.

    Court says protected area does not extend below parks | Great Lakes Echo: Citizens have no legal right to vote on whether to approve leases for drilling for oil and gas under city-owned parks and cemeteries, the Michigan Court of Appeals has ruled. A three-judge panel unanimously rejected a challenge by the nonprofit Don’t Drill the Hills Inc. to a decision by Rochester Hills to lease underground oil and gas rights to one company and to allow another company to relocate an oil pipeline. City attorney John Staran said the decision is significant to local governments across Michigan because the court found a lease is not a “sale” of parkland that would trigger a public vote. “The court applied common sense and the plain and ordinary meaning to ‘park’ and ‘open space,’” Staran said. “Park means park. Not the sky above and the subterranean minerals that are not part of the park.” But Don’t Drill the Hills argued that the proper legal interpretation of “park” shouldn’t be limited to the surface. “The park is the whole real estate parcel, and they’re saying a park is just the surface. If you extract this natural resource, which is then sold for a profit, then a portion of the property is gone because mineral rights are property,”

    A Pipeline Built In The 50s Still Runs Underneath The Great Lakes, And People Want It Out  - When Line 5 was built to transport oil and gas underneath the water strait that separates Lake Michigan from Lake Huron, it was considered a feat of modern construction. It not only was over-engineered and designed for the cold, underwater environment, it was considered convenient, too, as it eliminated tanker traffic on the Great Lakes and reduced the risk of an oil spill. But all that was more than 60 years ago, way before Enbridge, the line operator, suffered the largest inland oil spill in U.S. history after one of its pipelines ruptured in Michigan in 2010. Since then, attitudes towards Enbridge and its aging Line 5 have eroded and now, a campaign to shut the line down is in full force. Just on Wednesday, some two dozen groups that include environmental organizations and tribes called on Michigan Gov. Rick Snyder to shut the line on the basis of eight alleged easement violations. One presumed violation is the company’s failure to meet the pipeline’s wall thickness requirement due to corrosion and manufacturing defects. Closing the line that travels under the Straits of Mackinac, groups said, is urgent. “Such action is needed to address the unacceptably high risk of a catastrophic oil spill in the Great Lakes that would devastate our public drinking waters, our economy, and our Pure Michigan way of life,” the Oil & Water Don’t Mix campaign said in the letter. It also claimed Enbridge lacks proper emergency response plans. Built in 1953, Line 5 is a 30-inch-diameter pipeline that travels through Michigan’s upper and lower peninsulas as it runs some 645 miles from Wisconsin to Canada. Thirty percent of the light crude oil it carries stays in Michigan, according to Enbridge, and some 85 percent of homes in northern Michigan are heated with its gas. The line, which carries about 23 million gallons of oil and natural gas liquids daily, is located right in the middle of Lake Michigan and Lake Huron, both important water sources for cities like Chicago and Detroit. Oil transportation largely relies on trains and pipelines. Out of those two, pipelines spill more often than trains. In the U.S., pipelines spilled three times as much crude oil as trains over the period of 2004 to 2012, according to an International Energy Agency study. And last year, the Pipeline and Hazardous Materials Safety Administration reported 314 “significant” incidents causing damages of more than $305 million, and 10 fatalities.

    Startup arms shale royalty owners against mineral buyers: – Since the start of the shale boom in the United States, landowners have asked themselves the question, “What is the shale revolution worth to me?” An answer to this essential question has been out of reach for the typical landowner—not anymore., a new startup, is a a simple-to-use website that forecasts the income and production potential for each well on a royalty owner’s property. For the first time ever, mineral owners get free access to the kinds of data and forecasts only available to the operators who produce their minerals. “Our goal is to modernize mineral ownership so owners can manage their mineral assets more like their stock portfolios. So they can see the impact of commodity price swings and production forecasts on their pocketbook immediately,” said Benjamin Hall, CEO of ShaleCast. “The thought of having an asset of this size and importance and not knowing its value would be incomprehensible in most other industries. No one sells a used car without a Blue Book value or puts a home on the market without comparables from their neighborhood, but every day that’s what landowners who sell their minerals do,” Hall added. Billions of dollars from lease bonuses, royalty payments and mineral purchases have been made to landowners infusing communities with revenue and providing a boost to local businesses. Despite the current environment of low oil and gas prices, mineral investors continue to look for discounted minerals buys; this is when an uninformed mineral owner is most susceptible to making a bad financial decision.

    Ky. awaits answers on fracking waste - The illegal shipment into Kentucky of radioactive waste from oil and gas fracking operations and the illegal dumping of the out-of-state waste in at least two Kentucky landfills is so far producing more questions than answers. One question, raised by Anya Litvak’s recent reporting in the Pittsburgh Post-Gazette, is why Kentucky regulators failed to respond proactively to block shipments in mid-2015 when notified by West Virginia regulators of plans to truck the waste from a Fairmont, W. Va. processor to Kentucky. An official with the Radiation Health Branch of the Cabinet for Health and Family Services informed a West Virginia official that Kentucky law strictly forbids importation of such waste.  But the shipments came to Kentucky anyway. There apparently was no follow up on Kentucky’s end until January, when the Division of Waste Management in the Cabinet for Energy and Environment was tipped off and confirmed that radioactive fracking leftovers had ended up in landfills in Estill and Greenup counties. The public didn’t learn of the illegal dumping until late February. Since then environmental officials have cited the two landfills for accepting the material and Attorney General Andy Beshear has launched an investigation.

    Ky. slow to act on radioactive waste dumping -  The tip arrived in a phone call from a West Virginia bureaucrat to a staffer in the Kentucky Cabinet for Health and Family Services - radioactive oil-and-gas drilling waste was headed our way.  Kentucky Energy and Environment Cabinet officials were notified that same day, July 21, 2015, according to emails obtained by the Courier-Journal under West Virginia's open records law. But it took the Energy Cabinet seven months to alert Kentucky landfill operators to be on the lookout for illegal shipments of radioactive drilling waste and that they should not accept any it. The Health Cabinet waited another three weeks - until March 4, two days after the Courier-Journal first reported the dumping - to order the company alleged to have quietly brought the waste into Kentucky to stop, and for landfills to stop accepting it. By then, from July through November, state officials claim, more than 1,000 cubic yards of the waste from fracking operations in Ohio, Pennsylvania and West Virginia had made its way to Blue Ridge Landfill in Estill County, hauled in by Advanced TENORM Services of West Liberty, the records show.There, state officials feared that landfill workers, customers and maybe students at two nearby schools, might have been exposed to dangerous levels of radiation, the emails show. Later, state officials found out, even more radioactive waste had also been sent to the Green Valley Landfill in Greenup County, though they've said it wasn't as "hot" as the concentrated waste sent to the Estill dump.

    Amidst Fracking Pollution, A West Virginia Town Fights For A Fracking Waste Ban  - The smell of gas surrounding the northern streets of Lochgelly, West Virginia, was so pungent that Brad Keenan could taste it as he was driving home with his windows up that evening in 2004. He called 911 and the gas company, thinking a punctured gas line was to blame, but the smell and the evacuation it prompted came from something few knew existed in town: fracking waste.   At least two open pits holding fracking wastewater were responsible for the smell that got homes evacuated and forced some businesses and a daycare center to temporarily close, according to interviews and published reports.  Wolf Creek, a major waterway traversing his 140-acre property, is polluted. Twelve years have passed since the emergency evacuation put a little-known, state-permitted fracking disposal site under the county’s spotlight, yet things haven’t improved. The company is still marred in controversy. Locals worry about confirmed fracking chemicals in Wolf Creek as it connects to the water supply. And last year, the state renewed Danny E. Webb Construction’s permit to continue disposing fracking waste in underground injection wells, also known as brine disposal wells. The feud in Fayette county is now likely to intensify with two companies facing officials who, in the coming months, will defend in federal court an ordinance approved in January that banned fracking waste disposal. Hearings were set for this month, but habitual court delays are already being reported. One argument officials have raised against fracking waste in Fayette is that zoning laws don’t even allow traditional landfills.

    Bernie Sanders Proposes National Ban on Fracking - ABC News: Bernie Sanders has a new addition to his campaign speech. Speaking to crowds around New York state and Pennsylvania in the last week, the progressive Democratic candidate has ratcheted up his focus on environmental issues, specifically talking at length about his opposition to fracking. Last fall, Sanders introduced during sweeping legislation to ban the extract of any fossil fuels on federal lands, but in Binghamton, New York on Monday, the Vermont senator went even further, proposing a national ban on the controversial natural shale gas extraction technology. “In my view, if we are serious about safe and clean drinking water, if we are serious about clean air,” he said. “If we are serious about combating climate change, we need to put an end to fracking not only in New York and Vermont, but all over this country.” Last year, after a significant activist movement, New York prohibited fracking despite the state’s large shale gas resources. The issue works in Sanders favors in two ways, as both a way to contrast his record with his primary opponent as well as highlight recent successes of grassroots organization. “I want to applaud you for standing up to Governor [Andrew] Cuomo,” Sanders told his fans in upstate New York. “What may have been considered unrealistic or pie in the sky just a few years ago has now been achieved in New York because you made it happen.” The senator has argued that his policy agenda would only be achievable through increased grassroots activism and political involvement. In Binghamton, Sanders was introduced by one of the nation’s leading frack-tivists, filmmaker Josh Foxx, who made a name for himself with his politically-charged documentary about fracking called "GasLand." Foxx argued that there was only one candidate who genuinely opposed the practice.

    Sanders: ‘No Fracking Anywhere’: Another day, another TV ad from Sen. Bernie Sanders, this time with a focus on fracking – a hot topic in New York not that long ago, which galvanized a group of advocates (AKA, the fracktvists), many of whom remain active in politics and are now Sanders supporters. The ad maintains Sanders is the only presidential candidate who would ban the controversial natural gas drilling technique “everywhere.” He focused on this issue while appearing earlier today for a campaign event in Binghamton in New York’s Southern Tier, which was ground zero in the fracking debate. “The growing body of evidence tells us that fracking is a danger to our water supply, our most precious resource,” Sanders told some 5,000 supporters who packed the Veterans Memorial Arena to hear him speak. “It is a danger to the air we breathe. It has resulted in more earthquakes. It is highly explosive. And it is contributing to climate change.”  Sanders’ home state of Vermont has adopted a fracking ban, as has New York – after more than five years of heated debate and foot-dragging by the Cuomo administration. In Binghamton, Sanders applauded Cuomo for finally coming down on the side of the fracktivist community against big oil, but he also said that if we are “serious” about combatting climate change and protecting the environment, then federal officials will ban fracking across the nation. Sanders noted that his primary opponent, Hillary Clinton, promoted fracking overseas while she was serving as secretary of state in the Obama administration. Sanders and his supporters have been pressuring Clinton for her campaign cash ties to big oil

    Democratic Debate Brings Fiercest Exchange Yet on Climate Change, Fracking  - During last night’s Democratic debate at the Brooklyn Navy Yard, a site that was flooded by Hurricane Sandy, presidential candidates Bernie Sanders and Hillary Clinton displayed the fiercest exchange around climate change yet. “The movement has pushed climate change to the forefront of this presidential election,” said Yong Jung Cho, spokesperson for 350 Action. “From the 400,000 people in the streets of New York City at the People’s Climate March and a statewide ban on fracking in New York, to young people across the country asking candidates over 130 questions on climate over the course of the election, tonight’s debate was proof that organizing works.”  Next Tuesday’s highly anticipated primary in New York, one of the only states with a ban on fracking, will be pivotal in defining each candidate’s climate platforms. Earlier this year, the Porter Ranch disaster just miles outside of Los Angeles shined a harsh spotlight on the dangers of existing natural gas infrastructure and intensified concerns around the impact fracking has on communities and the climate. During her tenure as Sec. of State, Hillary Clinton traveled abroad selling fracking to the world, though she recently expressed her support for the statewide ban on fracking New York. Just yesterday, Clinton introduced a new platform that speaks to the widespread issue of environmental injustice. Across the country, fracking has disproportionate impacts on low-income communities and communities of color. The latest research on fracking affirms that methane emissions from the fracking are significantly more potent than carbon dioxide. Activists are concerned that Clinton’s referral to natural gas as a “bridge fuel” is inconsistent with how serious of a problem she considers climate change.

    Clinton: Natural gas is a bridge fuel to be crossed 'quickly'  - The Democratic presidential candidates are stepping up their fight over natural gas as they drill for votes in the frack-phobic state of New York ahead of Tuesday's primary. Hillary Clinton argued at last night's Democratic debate that supporting fracking during her years as secretary of State was necessary to help wean the world from coal power and to assist Europe in getting out from under Russian pressure. The subject of New York's own fracking ban never came up at the debate, but Sen. Bernie Sanders brought back attacks that Clinton fostered fracking in other countries, an issue he's highlighted to the delight of his green backers. "For economic and strategic reasons it was American policy to try to help countries get out from under the constant use of coal, building coal plants all the time," Clinton said. "So we did say natural gas is a bridge. We want to cross that bridge as quickly as possible ... in order to deal with climate change."   In attacking what he sees as "incrementalism" in dealing with climate change, Sanders gave little credibility to the 195-nation Paris climate change agreement. "Of course the agreement is a step forward, but you know agreements and I know agreements, there's a lot of paper there," Sanders said. "We've got to get beyond paper right now." Clinton said she was "bewildered by how to respond," and the agreement "gives you the framework to actually take the action." Sanders called on Clinton to commit to supporting a carbon tax to facilitate a move to low-carbon economy. Clinton avoided the question with a long winded answer outlining how she supported Obama's carbon rules and the importance of getting the president's Supreme Court nominee approved.

    Natural Gas Price Ticks Higher on Small Inventory Decrease - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 3 billion cubic feet for the week ending April 8. The five-year average for the week is an injection of around 22 billion cubic feet, and last year’s storage addition for the week totaled 101 billion cubic feet. Natural gas inventories rose by 12 billion cubic feet in the prior week. Natural gas futures for May delivery traded down about 2.8% in advance of the EIA’s report, at around $1.98 per million BTUs, and traded around $2.01 after the data release. Last Thursday natural gas closed at $2.02 per million BTUs. On Wednesday the contract posted its high for the past five trading days at $2.04. The 52-week range for natural gas is $1.73 to $3.17. One year ago the price for a million BTUs was around $2.95. The EIA expects the summer build in working natural gas inventories to total about 1.6 trillion. That represents a relatively small summer build because injections are expected to be limited by available storage capacity. Recent data show that natural gas storage facilities in most regions of the United States already hold 44% to 73% of their design capacity. The forecast build puts inventories at the end of October at a record high. Demand for natural gas is expected to be low over the whole country into the middle of next week. Stockpiles are about 63% above their levels of a year ago and about 52% above the five-year average.

    U.S. natural gas production reaches record high in 2015 - Today in Energy - U.S. EIA - U.S. natural gas production reached a record high level of 79 billion cubic feet per day (Bcf/d) in 2015, an increase of 5% from the previous year, even as natural gas prices remained relatively low. Production from five states—Pennsylvania, Ohio, West Virginia, Oklahoma, and North Dakota—was responsible for most of this growth, offsetting declines in much of the rest of the United States. EIA uses three different concepts to measure natural gas production. Gross withdrawals are the full volume of compounds extracted at the wellhead, which includes all natural gas plant liquids and nonhydrocarbon gases after oil, lease condensate, and water have been removed. Marketed natural gas production, which is used in this analysis, excludes natural gas used for repressuring the well, vented and flared gas, and any nonhydrocarbon gases. Dry natural gas production equals marketed production minus natural gas plant liquids.Natural gas production from Pennsylvania, Ohio, West Virginia, Oklahoma, and North Dakota accounted for 35% of total U.S. natural gas production in 2015. In most cases, production in these states continued to increase in 2015, but at a slower pace than in the previous year. For instance, in Pennsylvania, the second-highest producing state, year-over-year natural gas production growth fell from 2.6 Bcf/d in 2014 to 1.5 Bcf/d in 2015.  In contrast, natural gas production growth continued to increase in Ohio, with production increasing by 1.4 Bcf/d in 2015, 41% higher than production growth in 2014. Most of the increase in Ohio's natural gas production is from the relatively less-developed Utica Shale play. Production from the Utica Shale will likely grow in the future.

      New gas-fired power plants are concentrated near major shale plays - In 2015, a combination of low natural gas prices, increases in gas-fired generation capacity, and coal power plant retirements led to a 19% annual increase in gas-fired power generation, with the gas share of total generation increasing from 28% in 2014 to 33% in 2015. The April 2016 Short-Term Energy Outlook forecasts that this year, for the first time, natural gas-fired generation will exceed coal generation in the United States on an annual basis. Growth in gas-fired generation capacity is expected to continue over the next several years as 18.7 gigawatts (GW) of capacity, completed in 2016 or currently under construction, comes online between 2016 and 2018. This represents a 4% increase over the gas-fired capacity level at the end of 2015. Many of these additions are concentrated around the prolific Marcellus and Utica shale region, largely located in Pennsylvania, West Virginia, and Ohio, which have been leading the growth in U.S. natural gas production over the past several years. Among the states in relatively close proximity to the Marcellus and Utica, Virginia will account for the largest cumulative additions of gas-fired capacity over the 2016-18 period, with 2.3 GW of gas-fired capacity under construction, followed by Ohio with 1.9 GW, Pennsylvania with 1.8 GW, and Massachusetts with 0.7 GW, according to EIA's Electric Power Monthly.  Natural gas production from the Eagle Ford and Haynesville shale resources, located in Texas and Louisiana, has also grown, and there are notable levels of gas-fired capacity under construction in those areas. Texas has the second largest cumulative additions of gas-fired capacity, at 3.2 GW over the 2016-18 period, with neighboring Louisiana at 0.8 GW. In addition for the same period, Texas far exceeds the other states in planned gas-fired capacity with received and pending permits to construct 6.6 GW (cumulatively) over 2016-18.

      Natural gas storage ends winter heating season at record high - Today in Energy - U.S. Energy Information Administration (EIA): Working natural gas inventories ended the winter heating season at 2,478 billion cubic feet (Bcf), exceeding the previous end-of-March record high of 2,473 Bcf, set in 2012, according to EIA's Weekly Natural Gas Storage Report. Inventory withdrawals during the traditional heating season (November through March) were relatively limited this year because of winter weather that was the warmest on record and continued high levels of domestic natural gas production. Heading into the winter heating season, inventories were at a record high of 4,009 Bcf on November 20, 2015. In the previous five winters, the total withdrawal from the end of October through the end of March averaged 2,176 Bcf. In the most recent winter, weekly withdrawals were often smaller than the five-year average level, and the total withdrawal was only 1,475 Bcf. EIA expects the summer build in working natural gas inventories will total about 1,600 Bcf. This amount would be a relatively small summer build, as injections are expected to be limited by available storage capacity. Recent data show that natural gas storage facilities in most regions of the United States already are at 44%-73% of their design capacity. The forecast build puts inventories at the end of October at a record high.   EIA's Short-Term Energy Outlook (STEO) expects that this summer could be similar to the summer of 2012 in terms of natural gas storage and its impact on natural gas prices and consumption. In 2012, following a warm winter, end-of-March inventories were at record-high levels. Low natural gas prices at the time and high production levels led to record-high consumption of natural gas in the electric power sector, both for the summer and the year as a whole. In 2015, natural gas use by electric power generators broke the 2012 record, and STEO projects another record will be set for 2016.

      U.S. Natural Gas Market Begins Injection Season with Record Storage Overhang -- U.S natural gas storage inventories ended the winter heating season at a record high for this time of year of 2,480 Bcf as of April 1, 2016. Yesterday (Thursday April 14) the Energy Information Administration (EIA) reported that U.S. natural gas storage fell a notch as of April 8 to 2,477 Bcf or 956 Bcf (63%) higher than the corresponding week last year. CME/NYMEX Henry Hub natural gas futures prices for May delivery closed at $1.970/MMBtu yesterday, 56 cents lower than last year at this time. Moreover the current 12-month strip is averaging $2.48, 32 cents lower than last year at this time. In today’s blog, we look at how inventories got here and implications for the summer market. This is our latest update examining the fundamental factors influencing the U.S. natural gas market – particularly the supply/demand balance. The last time we looked at the supply/demand balance was in early February (2016) in Hot Stuff. At that time, production was near record highs, the storage surplus was still growing rapidly and prices had not yet found a bottom. About a month later in early March, we revisited storage levels in Nat Gas Storage Limits. Now, with the traditional winter heating (withdrawal) season behind us as of March 31, it’s time to look at where inventories are heading into injection season and the supply/demand numbers driving the market.

      Spinning Wheel – Prices for Natural Gas Liquids (NGLs) Headed Back Up! -- Prices headed up!! That’s something that you haven’t heard much lately. But big changes are just over the horizon for NGLs as new petrochemical plants and export projects come online. These projects will encounter a market environment far different than what was expected when they were being planned. Instead of an oversupplied market driving NGLs lower relative to crude oil and natural gas, the projects will confront a tight market, with NGL prices higher relative to the other hydrocarbons. In today’s blog we explain why what must go up must come down, and vice versa. In the first installment of Spinning Wheel we assessed the rapid descent of propane stocks since late November, in spite of the 2015-16 El Nino “winter of no winter”, as a result of extremely strong export volumes.  The week before that we highlighted the inaugural waterborne ethane exports in Ethane: Boat On The Water!! First US Overseas Ethane Exports Ready To Set Sail. . Today, we are going to take a look at how increasing ethane exports and growing petrochemical demand will impact NGL prices.

      US Senate leaders revive long-delayed energy bill — Leaders in the US Senate have agreed to resume debate on an energy bill intended to speed reviews of LNG export applications, expedite natural gas pipeline permitting and expand energy efficiency programs. Senate majority leader Mitch McConnell (R-Kentucky) late yesterday scheduled floor votes on the energy bill, which stalled earlier this year after Democrats blocked the bill over an unrelated issue. Republicans and Democrats reached a deal to schedule a final vote on the bill, which could occur as soon as today. The move pushes Congress closer to making its first major change to energy policy since 2007, before the US shale drilling boom drove an 85pc jump in crude production and a 40pc rise in gas production. Proponents say the bill will help the US take advantage of those resources while also supporting efficiency and conservation. The bill attempts to expedite the permitting of gas pipelines by giving the Federal Energy Regulatory Commission more authority to set deadlines for environmental reviews. Pipeline companies have complained new projects have faced delays because of an uncertain permitting process. The bill would require the US Energy Department to reach a decision on an application to export LNG within 45 days after environmental reviews are complete. Project developers could then ask a federal court to enforce that deadline, if the agency failed to act. The bill would reaffirm a policy that crude from the US Strategic Petroleum Reserve (SPR) should be sold only to cope with supply shortages, improve energy security or maintain or preserve the reserve's facilities. But lawmakers have shrugged off that policy repeatedly. Congress last year authorized the US energy secretary to sell 124mn bl of crude from the SPR to raise revenue for infrastructure spending and to fund the government. Those sales are required to occur from 2017-2026

      Researchers fly over 8,000 well pads and find hundreds of methane leaks | PublicSource: As Pennsylvania’s natural gas production continues to expand, so does the possibility of potentially harmful methane emissions. A new study from scientists in the Environmental Defense Fund’s Oil and Gas program examined the most common sites for methane leaks at oil and gas pads nationwide. A team of researchers partnered with Gas Leaks Inc., a company that uses infrared technology to inspect well pads, to fly a helicopter over thousands of pads in seven regions in the United States. In total, the researchers flew over 8,000 pads in areas saturated by drilling, including North Dakota’s Bakken Shale and the Marcellus Shale in Southwestern Pennsylvania. The goal, according to a blog post from researchers involved, was to “better characterize the prevalence of ‘super emitters’” — the largest sources of the gas industry’s methane pollution. Results of the study, accepted on Tuesday in the Environmental Science and Technology journal, show that 90 percent of leaks from nearly 500 sources sprung from the vents and hatches, or doors, on gas tanks. The leaks were not a problem caused by old age, as emissions were more likely to be detected at newer wells. According to researchers, this is a clear indication that control systems already in place to prevent leaks are not up to par.

      Review faults EPA oversight of oil and gas wastewater - A federal review has faulted the U.S. Environmental Protection Agency for not taking sufficient steps to safeguard drinking water supplies from the wastewater generated by the oil and gas industries.  The Government Accountability Office said in its report to members of Congress that the EPA has failed to adequately collect information from state and regional regulators about inspections or their enforcement actions to protect underground sources of drinking water. Auditors also found the EPA has not consistently carried out oversight of programs that regulate injection wells where oil and natural gas companies send streams of wastewater into the ground. “The most important thing is that finally the government investigators confirm that EPA does not have the adequate amount of information to safely oversee its programs and ensure that underground sources of drinking water are protected,” said John Noel, national oil and gas campaigns coordinator for the group Clean Water Action in Washington, D.C. “It confirms our suspicion that drinking water is not being protected at the highest levels.” An increase in U.S. oil and gas production since the 2000s has led to growing amounts of wastewater, and much of that water ends up routed back into aquifers through a type of injection wells called “class II” wells. The GAO said that as of 2013, there were more than 176,000 of these wells across the country, in states such as Pennsylvania, Virginia, Texas, Oklahoma, New Mexico and California. State agencies and EPA regional offices are supposed to report information to the EPA about their regulatory programs relating to the injection of oil and gas wastewater into aquifers.  But GAO auditors found the federal agency “has not consistently conducted oversight activities necessary to assess whether state and EPA-managed programs are protecting underground sources of drinking water.”

      Storage Operators at the St. James Crude Hub -- Two midstream operators have added at least 13 MMBbl of crude storage to the St. James hub during the past 8 years (NuStar and Plains All American). These companies have invested in the hub because of its proximity to the Gulf Coast and pipeline connectivity to refineries throughout the Eastern U.S. and as far northwest as Edmonton, Alberta. St. James has also been an active recipient of crude flowing east across the Gulf by barge and tanker from the Eagle Ford via Corpus Christi. These crude movements require terminal, storage and blending facilities. Today we describe crude storage facilities at St. James. In Part 1 of this series we discussed how the St. James, LA crude trading hub (located on the Mississippi River 60 miles upriver from New Orleans) provides feedstock to 2.6 MMb/d of regional refining capacity on the Eastern Gulf Coast as well as to refineries in the Midwest. St. James is also an important storage and distribution hub for crude produced in North Dakota, South Texas, the Gulf of Mexico and onshore Louisiana as well as imports arriving at the Louisiana Offshore Oil Port (LOOP). We detailed the 12 refineries that St. James supplies directly in the Gulf Coast region as well as pipeline connections bringing crude into and out of St. James. This time we detail the growth of storage capacity at St. James.

      The Destructive Havoc That Fracking Has Caused To The Environment, By The Numbers - Since 2005, when the "Halliburton loophole" in the Energy Policy Act exempted fracking from parts of the Safe Drinking Water Act, the Clean Water Act, and other environmental laws, the oil and gas industry has drilled or permitted more than 100,000 fracking wells. A new report from Environment America adds up how much damage fracking has caused so far. The industry has used at least 239 billion gallons of water. "There's really no safe or sustainable way of dealing with fracking toxic waste."  In states suffering from drought, that's water that might have used for drinking or farming. In Colorado, where almost all fracking wells are in areas of high water stress, oil and gas companies have at times paid as much as $3,300 for an acre-foot of water at auction, 100 times more than what a farmer might pay. Once the water is sucked back out of the well, it's toxic and can't be used for anything else. And there aren't any failsafe ways to store it. "We've seen that wastewater leak from retention ponds," says Rachel Richardson, director of Environment America’s Stop Drilling program and co-author of the report. "Sometimes it's been dumped directly into streams. It's escaped from faulty wells. And that's a huge risk to our drinking water. There's really no safe or sustainable way of dealing with fracking toxic waste."157 of the chemicals used in fracking are known to be toxic; another 781 might also be, but toxicity data isn't available.  Since 2005, fracking has also damaged 679,000 acres of forest and rural landscape, a total area a little smaller than Yosemite. It's contributed to smog. In Oklahoma, it's made once-rare earthquakes an everyday occurrence (in 2015, the state had 907 quakes with a magnitude greater than 3.0 on the Richter scale.)

      Fracking’s Total Environmental Impact Is Staggering, Report Finds The body of evidence is growing that fracking is not only bad for the global climate, it is also dangerous for local communities. And affected communities are growing in number. The report, released Thursday, details the sheer amount of water contamination, air pollution, climate impacts, and chemical use in fracking in the United States. “For the past decade, fracking has been a nightmare for our drinking water, our open spaces, and our climate,” Rachel Richardson, a co-author of the paper from Environment America, told ThinkProgress. Fracking, a form of extraction that injects large volumes of chemical-laced water into shale, releasing pockets of oil and gas, has been on the rise in the United States for the past decade, and the sheer numbers are staggering. Environment America reports that at least 239 billion gallons of water — an average of three million gallons per well — has been used for fracking. In 2014 alone, fracking created 15 billion gallons of wastewater. This water generally cannot be reused, and is often toxic. Fracking operators reinject the water underground, where it can leach into drinking water sources. The chemicals can include formaldehyde, benzene, and hydrochloric acid. Fracking is also bad news for the climate. Natural gas is 80 percent methane, which traps heat 86 times more effectively than CO2 over a 20-year period. Newly fracked wells released 2.4 million metric tons of methane in 2014 — equivalent to the annual greenhouse gas emissions of 22 coal-fired power plants. At this point, more than a thousand square miles of the country have been disturbed by fracking activity, the report says, with 137,000 fracking wells drilled or permitted across more than 20 states.

      Texas fracking numbers are mind-boggling, but what do they really mean? --  Environmental groups have analyzed the data and come up with a set of staggering numbers to illustrate the impact of fracking in Texas. Related Methane emissions underestimated by EPA, study says Fracking has done no widespread harm to drinking water, EPA says Ten billion pounds of chemicals — many of them carcinogenic — were injected underground as part of the drilling process. Texas fracking has used 120 billion gallons of water since 2005, while producing 15 billion gallons of wastewater in 2014. And at least 2.5 billion pounds of methane, which contributes to global warming, were released in 2014.There are phenomenally large numbers in the “Fracking by the Numbers” report from Environment Texas Research & Policy Center and the Frontier Group. The report’s subtitle, “The Damage to Our Water, Land and Climate from a Decade of Dirty Drilling,” tells you the groups’ stance against fracking.  Luke Metzger, director of Environment Texas, said there was already awareness of the damage caused by fracking. But he said recent access to downloadable data allowed his group, part of the Environment America Research & Policy Center, to present a fuller understanding.  He said this gives the public “an overall picture” of what fracking is doing and points to the need for more action “To protect the public and our environment, states should take action to ban fracking, or, failing that, to ensure that oil and gas companies are held to the highest level of  environmental performance, transparency and accountability,” the study’s executive summary argues.  The study focuses on Texas but also includes information from other states.

      How Eagle Ford drilling prospects vary by location -- The oil price collapse has opened a wide rift between high quality “good” assets, breakeven “bad” assets, and ruinous “ugly” assets.  The consequences will impact energy markets for decades to come.  In our recently published Drill Down Report, we demonstrate the differences between good, bad and ugly wells by examining the diversity of production economics across the Eagle Ford basin and why producers have been zeroing in on the counties——and areas within those counties—where initial production (IP) rates are highest, and preferably where large volumes of associated natural gas and natural gas liquids can be found as well. Today we consider Eagle Ford counties in more depth—their IPs, their internal rates of return (IRRs), and the number of new-well permit applications in each county in the first quarter of 2016. As we discussed in our previous Good, Bad and Ugly blog, U.S. oil producers responded to the crude oil price collapse that started in mid-2014 by pulling in the reins on drilling activity.  At first, the cutbacks came slowly—a lot of momentum had built up in the boom years, and more than a few prognosticators thought that lower prices were only a short-term phenomenon, so why cut drilling to the bone?  But oil prices kept falling, and here we sit, with crude selling for about $40/Bbl and the rig count is now down to a paltry 354 rigs drilling for crude. The catch is that the rigs still drilling are anything but evenly distributed.  They are tightly focused on the areas where producers can get the most bang for their buck – the core areas. In our latest RBN Drill Down Report, we show that—now more than ever—all production economics is local, and that it is only when we understand the rate of return (or profitability) of wells at a more granular level that we can begin to figure out when it makes sense to drill and complete wells (or not) in each of the counties within the Permian, the Bakken, the Eagle Ford and other major U.S. basins.

      As Man-Made Earthquakes Thunder Through Oklahoma, Residents Get Innovative With the Law - Jackie Dill finds it nearly impossible to talk about her 1930s homestead without dissolving into tears. “We feel so helpless and hopeless,” says the 65-year-old, quietly sobbing with her husband, Jim, beside her. “I try to be a brave soul, but it rips my heart out. Last year was ungodly. I held my breath every day.” In Oklahoma, a stone or brick home might save you from a tornado. But it might kill you if there’s an earthquake—and the Dills, who live in the one-story stone-and-mortar farmhouse with their five dogs, have been overwhelmed with quakes. “Each year, it’s gotten worse,” Jackie says. “I counted 34 earthquakes in a single day last year. You know when it’s coming, because there’s a roar like thunder in the ground and the dogs start to howl. Then there’s a big bang and a drop.”The earthquakes have cracked her home’s foundation, walls, windows, sills and plumbing. A magnitude-4.4 quake last November buckled the rafters and split the front porch off the house, which is now sunken below the ground at one corner, she says. They do not have earthquake insurance and cannot afford the repairs. “Even if we had the resources, the house could just get hit again,” she says.  The Oklahoma Independent Petroleum Association (OIPA), the industry’s largest trade group, has yet to acknowledge a direct link between energy companies’ practices and earthquakes, calling for further study of the issue. (OIPA did not return Newsweek's calls for comment.) Meanwhile, on March 28, the United States Geological Survey (USGS) published its annual seismic hazard forecast, which, for the first time, accounted for induced earthquakes. “ Wastewater disposal,” the agency wrote, was the primary cause for recent events in many areas of the [central and eastern U.S.].” “So we tolerate far more risk than we ever should.... We hate lawyers, but if our leaders aren’t doing enough to reduce seismic events, citizens have no recourse other than the courts at this point.”

      US oil, gas leasing continues fall, unused leases hit high: BLM - Platts - The number of oil and natural gas leases on US and tribal lands continued to fall in fiscal 2015, while the number of approved yet unused drilling permits reaching a record high, Bureau of Land Management data showed Monday. The data, updated to include statistics through fiscal 2015, seems to back up frequent arguments from US producers that the Obama administration is doing little to promote drilling on federal lands amid the ongoing shale renaissance. But it also bolsters claims often made by administration that these same producers are often letting leases on federal lands remain idle or simply not interested in drilling on lands the government has opened for oil and gas development. Production from federal and tribal onshore leases accounted for 7% of total US oil production and 11% of total US natural gas production in fiscal 2015, BLM said. In fiscal 2015 industry bid on just 15% of the over 4 million acres of federal land BLM offered for lease and continued to produce on only 40% of the federal acres currently under lease, the agency said in a statement."At the end of the last fiscal year, there were 32.1 million acres of public land under lease -- an area the size of Alabama -- yet only 12.8 million acres were producing, an increase of 70,000 acres from the prior year," the BLM said. More precisely, the total number of producing leases on federal lands has fallen from 14.54 million in fiscal 2008 to 12.76 million in fiscal 2015 while the total number of wells spud each year on federal lands has fallen from 5,044 in fiscal 2008 to 1,621 in fiscal 2015.

      The new climate rallying cry: keep it in the ground - Nobody said a word as the auctioneer took his place at the lectern, but the tension was deafening. Nearly 100 protesters had packed the room at Utah's Salt Palace Convention Center, mad as hell that the federal government was about to sell oil and gas leases for up to 45,000 acres of public land. Some of the activists held signs: "Our lands, our future," or, "Don't auction our climate." "OK, let's start the sale, ladies and gentlemen. The first parcel on there is No. 1266, it's up there in the upper corner if you want to follow along. It consists of 162-plus acres of it, located out in Juab County. And who will give me an opening bid of $2 to start? Two-dollar bid?" The protesters hadn't planned to disrupt the auction. But once the bidding got underway, they couldn’t help themselves. A few of them started chanting, and soon everyone joined in. Their voices got louder and louder: "People gonna rise like the water, gonna calm this crisis down. I hear the voice of my great-granddaughter, saying, 'Keep it in the ground!'" A federal official told the activists that if they didn't quiet down, Salt Lake City police would escort them out. He gave them 60 seconds to stop chanting; police officers stood, ready to act. They stopped chanting — but only for a few minutes, unable to sit silently as oil and gas leases were auctioned off for as little as $2 an acre. This time, they didn't get another chance. As police moved in and ordered them to leave, one of the protesters, Tim Ream, shouted at the bidders, "Show this to your grandkids! Show it to them and explain what’s happening with the climate!"

      Minnesota regulators set 12 public meetings on oil pipelines -  (AP) — Minnesota regulators plan a dozen public meetings on Enbridge Energy’s proposed Sandpiper oil pipeline across northern Minnesota and its plan to replace its Line 3 pipeline. The meetings will deal with the scope of an upcoming environmental review. Sandpiper would carry North Dakota light crude to Enbridge’s terminal in Superior, Wisconsin, while the Line 3 replacement would carry Canadian tar sands oil to Superior, sharing much of the same route as Sandpiper. Regulators have prepared a draft laying out what the environmental review would cover and a tentative schedule. The Public Utilities Commission will use the review in deciding if the pipelines are needed and what route they should take. The meetings run from April 15-May 11 in communities along the planned route, and May 9 in St. Paul

      Keystone XL may be dead, but big pipelines are still an issue - Last November, to the relief of almost everyone not on the TransCanada payroll, President Obama nixed the northern leg of the Keystone XL pipeline that would have taken oil from the Canadian Tar Sands all the way to the US Gulf Coast. It was a good thing. But just because Keystone XL won’t be constructed (until a Republican is in the White House) doesn’t mean that we’re free from fantastically long pipelines, and the number of leaks from these pipelines is increasing. Last year, an analysis of federal data by the Associated Press found that the annual number of significant leaks in oil pipelines had risen by 60 percent since 2009, more or less a match for the increase in U.S. crude oil production. Around two-thirds of those leaks were caused by corrosion, material failure, bad welds or equipment failures. The rest were caused by natural disasters or human error. All of which leads to the EPA suggesting a tighter look at another mega-pipeline in the works. The pipeline will cross through Illinois, Iowa, North Dakota and South Dakota. Dakota Access, a unit of Dallas-based Energy Transfer Partners, has received state permits to proceed with the 1,168-mile pipeline, which will carry nearly half a million barrels of oil a day from northwestern North Dakota's Bakken oil fields.  Bakken is one of those fields opened up by fracking, which has completely upended oil and gas production in the US and provided a sudden abundance of cheap oil. This pipeline will cross dozens of rivers (including the Missouri and Mississippi) cut through threatened tall grass prairie, run past the home range of endangered species, and, oh yeah, cut through Native American tribal lands where the EPA official in charge believes it could threaten drinking water supplies.

      EPA, other agencies seek more careful review of oil pipeline - (AP) — The Environmental Protection Agency and two other federal agencies have asked the U.S. Army Corps of Engineers to more carefully review and revise its preliminary plan for the Dakota Access oil pipeline, saying it should pay closer attention to the impact a spill would have on drinking water for Native American tribes. Besides the concerns over water for the tribes near the pipeline route, the EPA, Department of the Interior and Advisory Council on Historic Preservation also want a better look at whether the route would disturb historic sites. The pipeline will cross through Illinois, Iowa, North Dakota and South Dakota. Dakota Access, a unit of Dallas-based Energy Transfer Partners, has received state permits to proceed with the 1,168-mile pipeline, which will carry nearly half a million barrels of oil a day from northwestern North Dakota’s Bakken oil fields. It awaits final federal approval from the corps, which has jurisdiction over portions of the pipeline that cross public waterways including the Missouri and Mississippi rivers and must consider impact on historical sites, animal habitat for threatened species and the environment. The corps’ Omaha District is responsible for the project in South Dakota and North Dakota, where the pipeline crosses the Missouri River. Corps officials in Omaha released a draft environmental assessment in December that concluded the company’s proposed route “is not expected to have any significant direct, indirect, or cumulative impacts on the environment.” In March, corps officials received letters from the EPA, Interior Department and Advisory Council on Historic Preservation criticizing that evaluation. The EPA said the corps should better assess the potential impact of a pipeline leak to drinking water sources for Native American tribes. Philip Strobel, an EPA official responsible for ensuring compliance with the National Environmental Policy Act, said the Missouri River is used as the drinking water supply for much of western South Dakota and five Tribal Nations — the Cheyenne River, Crow Creek, Oglala, Rosebud and Lower Brule Sioux tribes.

      Oil bust leaves energy industry, real-estate sector locked in battle over empty oilfield worker camps – A no trespassing sign collects dust next to an empty, chained-off parking lot for an equally empty work camp in the heart of North Dakota oil country. The sign and limp chain haven’t kept curious locals from trying to get a closer look at the Black Gold camp – a few brave ones have confessed on condition of anonymity to looking in the windows and scurrying through the vacant halls.Black Gold is one of many camps that are haphazardly scattered in and around Williston, the hub of the state’s shale oil boom. This camp on the northern edge of town was once filled with hundreds of oilfield workers during the shale boom, but, now, like others in the area, sits as empty as a ghost town as crude prices have collapsed. Civic politicians in Williston want the camp gone and have voted to give all camp operators within the boundaries of the city notice that they will need to clean up and leave this July. The deadline is an attempt to turn the city’s transient workers, who fly in and out on work shifts, into permanent, property-tax paying residents. It has also put the local government in the middle of a fight between the energy industry, which has threatened legal action if they are kicked out, and real-estate developers that are keen to sell or rent their apartments and condos to oilfield workers currently in camps. Across the border, officials in Canadian cities are, like their southern counterparts south, also trying to figure out the best way to move oilfield workers from camps into permanent housing. “What we would like to see (companies) do is have workers live in the community and not promote the work camps,”

      Utility regulator, SoCal Gas at odds over reopening of natural gas field - SoCal Gas and the California Public Utilities Commission (CPUC) are at odds over how quickly the Aliso Canyon natural gas storage facility will be reopened after a devastating leak that released tens of thousands of tons of methane into the atmosphere this past winter. SoCal Gas, which operates the 115-well Aliso Canyon field, says the field can be up and running again, minus the broken well that had leaked for months, by late summer. But in a Friday meeting of energy officials and residents of the impacted Porter Ranch community, CPUC President Michael Picker said, "I assume we won't have Aliso Canyon back on-line this year,”  The issue here is that the Aliso Canyon storage field, which is one of the biggest west of the Mississippi, provides the bulk of the natural gas that Southern Californian utilities run on. The field is currently at one-fifth of its capacity, and the utility is currently barred from filling the reservoirs with any more natural gas. State energy officials have said that the reduced natural gas reserves could mean that the Los Angeles area might experience “limited power outages” for up to 14 days this summer and up to 32 days this year. Last week, CPUC put together a plan (PDF) to deal with the shortages that included making use of a “Flex Alert” program that "calls on residents and businesses to reduce their energy use on days during the summer when electricity demand is highest,” according to a press release. The release continued: "Other measures recommended in the plan include greater coordination among state and local gas and electrical utilities, more energy efficiency programs, and closer matching of gas supply and demand by large gas customers.”

      Report Potentially Dangerous Fracking Chemicals Used in California – California has almost 50,000 oil wells and more than 4,100 gas wells – and a new report says federal law allows companies to use chemicals for drilling and fracking with virtually no health testing and then use confidentiality claims says federal law allows companies to use chemicals for drilling and fracking with virtually no health testing and then use confidentiality claims to hide basic information on what's being injected. The report, by the nonprofit advocacy group the Partnership for Policy Integrity, reviewed EPA records and found that health information was made public in only two of 99 cases. Dusty Horwitt, senior counsel with the Partnership for Policy Integrity, says the 1976 Toxic Substances Control Act is too lax. "Companies can claim the chemicals' name confidential, same thing with the expected production volume, how people might be exposed to the chemical,” he states. “And that prevents people from identifying in some cases where the chemicals are used." The EPA has expressed concern about many of these chemicals, saying exposure can cause skin and eye irritation and be toxic to the brain, liver and kidneys. Oil and gas companies say they comply with the law and are within their rights to claim proprietary information as confidential. Horwitt says the EPA tests don't take into account the possibilityof leaks or spills, and adds that researchers found that two of the chemicals of concern have been used in . "We think it's important that someone from the state of California or an independent researcher go to these well sites and make sure that these chemicals aren't migrating into groundwater or otherwise getting out into the environment where they can come into contact with people," he states. Two bills are making their way through Congress that improve the rules on confidentiality and make it easier for the EPA to request more health tests. But Horwitt notes that the bills still don't require public disclosure of information about the chemicals or the health testing.

      Feds: EPA fails to protect water from oilfield contamination (AP) — The U.S. Environmental Protection Agency is failing in its mandate to protect underground drinking water reserves from oilfield contamination, according to a federal review singling out lax EPA oversight in California, where the state routinely allowed oil companies to dump wastewater into some drinking water aquifers. The U.S. Government Accountability Office review also sampled EPA operations around the country before concluding federal regulators were failing to collect paperwork and make on-site inspections necessary to ensure states are enforcing the Safe Drinking Water Act when it comes to oilfield operations. “The takeaway overall is that the EPA doesn’t collect and states don’t provide the information for the EPA to exercise the oversight that’s its job,” said Kassie Siegel, senior counsel at the Center for Biological Diversity, one of the environmental groups critical of state and federal regulation of oilfield waste and drinking water. “It shows a massive failure to protect our drinking water,” Siegel said, emphasizing the problem in California. The federal review released last month made an object lesson of California, the country’s No. 3 oil-producing state, where state and federal regulators have acknowledged since at least 2014 that state-permitted oilfield operations were violating safe-drinking water laws. Violations included allowing oilfield companies to dump wastewater into at least 11 underground aquifers that were supposed to have been protected by federal law as potential sources of drinking water. An Associated Press analysis in 2015 cited more than 2,000 permits California had given oil companies to inject into federally protected drinking water reserves. The AP analysis found granting of such permits had sped up since 2011 under Gov. Jerry Brown, although the state said it believed its dates on some of the permitting information were wrong.

      Stricter offshore drilling rules issued, upsetting industry: (AP) — The Obama administration issued new rules Thursday to make oil and natural gas offshore drilling equipment safer and to reduce risks in digging wells, but the oil industry and its supporters in Congress say they are costly and questioned their need. The rules published by the Interior Department came nearly six years after the catastrophic blowout of a BP well in the Gulf of Mexico killed 11 workers and injured many others aboard Transocean’s Deepwater Horizon drilling rig. The out-of-control leak dumped millions of gallons of oil into the Gulf. Meanwhile, another federal agency — the U.S. Chemical Safety Board — issued recommendations Wednesday saying even more rigorous safety standards are needed to make offshore drilling safe. That agency said offshore workers should be involved more in safety decisions and regulators given more authority to enforce rules. The Interior Department rules target blowout preventers, massive valve-like devices meant to prevent oil and gas from escaping when a driller loses control of a well. The device failed in the BP spill. Officials said the rules will improve the inspection, maintenance, and repair of blowout preventers, which are known as BOPs. For example, the devices will need to be broken down and inspected every five years. Also, companies will have to use BOPs that are better equipped to shear drill pipe in the case of an emergency. This was one of the problems in BP’s disaster. In addition, drilling of highly complex wells must be monitored in real-time by experts onshore.

      AP source: Rule on offshore drilling aims to enhance safety  — The Obama administration is planning to issue a final rule designed to enhance the safety of offshore oil drilling equipment. The rule, expected to be announced Thursday, comes in response to the 2010 Deepwater Horizon explosion, which killed 11 people and dumped millions of gallons of oil into the Gulf of Mexico. Federal investigators blamed a faulty blowout preventer for the spill and called for stronger regulations of equipment that prevents oil and gas from rushing to the surface. An administration official not authorized to speak publicly confirmed the timing of the rule announcement on condition of anonymity. Industry officials have complained that the proposed changes would cost billions of dollars more than projected.

      Exxon Says `$25 Billion Rule' Will Sink Deepwater Oil Drilling -  The world’s biggest oil explorers have bitterly contested a U.S. plan to toughen offshore drilling rules that Exxon Mobil Corp. said will cost as much as $25 billion over 10 years and render many offshore discoveries worthless. The Obama administration issued sweeping new regulations Thursday as part of an effort to reduce the number of well blowouts after the explosion aboard the Deepwater Horizon rig in 2010. The government has pegged the rules’ costs at less than $1 billion. The changes arrived amid the worst oil slump in a generation. ConocoPhillips and Chevron Corp. have already abandoned some Gulf prospects because they wouldn’t be profitable at current prices. Before the final regulations were announced, consulting firm Wood Mackenzie Ltd. predicted they would cause exploration outlays in the Gulf to tumble by 70 percent over the next two decades, wiping out as many as 190,000 jobs. “The   “Oil companies and the service providers are trying to come up with ways to reduce costs so the idea that they can absorb any additional expenses -- they’re not in that ballpark at all.” . The regulations, first proposed last year, strictly control the types of fluids pumped into wells, require redundant safety devices and stipulate continuous monitoring from shore. The changes were needed because well blowouts have continued at about the same rate as before the explosion at BP Plc’s Macondo well in 2010 that killed 11 and spewed millions of gallons of crude, the government says.

      Exxon Mobil Exports First Cargo of Offshore Gulf of Mexico Crude  - Exxon Mobil is shipping a cargo of crude produced from its deepwater Julia field in the Gulf of Mexico to its refinery in Rotterdam, Netherlands, marking the first export of offshore oil to leave a U.S. port since a ban was lifted. The crude came from initial well tests conducted on the Julia project, Aaron Stryk, a company spokesman, said in an emailed statement on Thursday. The oil company is sending a modest 18,000 barrels of oil on a Panamax tanker, the PGC Marina. Refiners typically do tests to see how new crudes will impact yields from making fuels. While only a small volume, the cargo is the first known export of offshore oil from the United States since Congress lifted a ban last December. Until now, all other shipments had been of light onshore oil. The vessel departed from Gramercy, Louisiana, in early April and is expected to arrive in Rotterdam on April 19, according to the data. It was not clear whether Exxon would continue to export Julia crude, but the firm anticipates an initial production of 34,000 bopd following the startup of the field in the second quarter of this year. Initial testing on the Julia field, a joint venture between Norway's Statoil and Exxon Mobil located roughly 200 miles south of New Orleans, Louisiana, began in March.

      Three Oil Majors Have Debt Ratings Cut by Moody's on Price Rout - Bloomberg: Chevron Corp. and Royal Dutch Shell Plc had their ratings reduced by one level, while Total SA’s was cut two steps, according to statements by the New York-based rating company on Friday. Chevron will generate negative cash flow amid rising debt for at least the next two years, while Shell will have elevated leverage following its acquisition of BG Group Plc, Moody’s said. Prices are expected to stay low through this year and next and continue to pressure Total’s operating cash flows and credit metrics, Moody’s said. Oil companies big and small are having their credit ratings cut as the collapse in crude prices reduces cash flows and limits their ability to sustain debt payments. Prices in New York are down by more than 60 percent from a mid-2014 peak. Chevron and Shell’s ratings were lowered to Aa2, the third-highest grade, from Aa1. Total’s rating was brought down to Aa3, from Aa1. BP Plc’s rating was confirmed at A2, as its credit metrics and business profile compare favorably with its major oil peers and the July 2015 settlement over the Macondo spill reduced legal uncertainties and gave clarity on its business, Moody’s said. The actions conclude reviews started in January and February by Moody’s, which expects that global oil prices will remain weak over the medium term. The world is “awash in oil” and high inventories and production are declining slowly, Moody’s analysts led by Terry Marshall said in a March 30 report. If U.S. crude rises above $50 a barrel, investment by lower-cost, short-cycle producers will undercut the effort by Organization of Petroleum Exporting Countries to bring down the global glut, the analysts said.

      U.S. shale oil firms feel credit squeeze as banks grow cautious | Reuters: Nearly two years into an epic oil rout, U.S. shale drillers that have upended global energy markets are finally feeling a credit squeeze as banks make their biggest cuts yet to their loans. Every six months, oil and gas producers and their banks negotiate how much credit they should be given based on the value of their reserves in the ground. In previous reviews, banks were willing to offer borrowers some leeway, encouraged by producers' hedges against falling prices and their ability to keep cutting costs in step with crude's slide that began in mid-2014. This time, with many companies' hedges largely gone and crude prices used in the reviews as much as 20 percent lower than six months earlier, banks are getting tough. Just a few weeks into the current round of talks more than a dozen companies have had their loans cut by a total of $3.5 billion, equivalent to a fifth of available credit, according to data compiled by Reuters.U.S. crude CLc1 settled up $1.81, or 4.48 percent at $42.17 a barrel. In post-settlement trade, both Brent and WTI pared gains under pressure from a larger-than-expected build in U.S. oil inventories suggested by data from the American Petroleum Institute, a trade group. Brent retreated to $44.19 by 4:50 p.m. EDT, while WTI pulled back to $41.64. Oil markets were already boosted ahead of an OPEC member meeting with outside producers in Doha, Qatar, on Sunday, but the comments fueled hopes that oil producers will agree on steps to tackle a supply glut. Still, some analysts remained skeptical. While the market was being driven higher on a global supply-demand rebalancing, the threat of record-high inventory levels and producers increasing output once prices rebound continued to loom.

      Pay Shrinks for Most Oil CEOs, as Crude’s Swoon Hits Stocks - WSJ: Most—but not all—top oil executives are seeing their pay shrink, after a plunge in crude prices that has erased $200 billion in stock-market value from the world’s largest publicly traded energy companies.  Bob Dudley, BP’s chief executive, enjoyed about a 20% bump in pay to $19.6 million in 2015, despite his company’s $5.2 billion loss for the year and an accompanying stock-price decline of 11%.  Many BP shareholders are incensed by the increase, and investor-advisory firms including Institutional Shareholder Services are counseling them not to ratify Mr. Dudley’s pay package at the company’s annual meeting Thursday.  “This proposed increase is both unreasonable and insensitive,”  BP defended the pay package. “Despite the very challenging environment, BP’s safety and operating performance was excellent throughout 2015, and management also responded early and decisively to the steep fall in the oil price,” a company spokesman said. Other executive pay packages shrank along with stock prices. Exxon Mobil released data Wednesday that showed CEO Rex Tillerson’s salary rose 6% to $3 million in 2015 even as the company’s shares lost 15% of their value. But Mr. Tillerson’s total pay fell 18% to $27.3 million, due to a lower bonus, stock awards and interest-rate-related changes in his pension.  For the past five years, oil giants Exxon, Chevron. Royal Dutch Shell and BP have paid their top bosses nearly $500 million in combined compensation, even though the companies’ annualized returns for the period have undershot those of the S&P 500. In 2015, Chevron chief John Watson’s pay, including salary, bonus and stock options, rose 3%, but with pension-benefit changes his total compensation fell by 15% to about $22 million.

      BP chief suffers shareholder revolt over $20M pay pack - (AP) — British energy producer BP has suffered a revolt by shareholders who objected Thursday to increasing Chief Executive Bob Dudley’s pay package by 20 percent after profit plunged last year. Almost 60 percent of shareholders rejected the remuneration report, which awarded Dudley a $19.6 million pay package even though the company experienced a drop in profit and planned thousands of job cuts worldwide. But the vote was only advisory, and merely registered displeasure. The company said it got the message — and promised to review its remuneration policy ahead of next year’s meeting. New proposals are expected to be put forward for shareholder approval in 2017. “We hear you,” Chairman Carl-Henric Svanberg said in excerpts released Thursday. “We will sit down with our largest shareholders to make sure we understand their concerns and return to seek your support for a renewed policy.” Aberdeen Asset Management, which manages more than 290 billion pounds ($411 billion), was among those complaining BP’s award system was too complex. A representative from the Church of England also questioned the morality of such a rise, given that Britain is undergoing a time of fiscal austerity. Shares in BP fell almost 14 percent in 2015. Its earnings plunged 91 percent in the fourth quarter, though much of that can be attributed to falling global oil prices.

      Introducing IOGCC: The Most Powerful Oil and Gas Lobby You’ve Never Heard Of -- Steve Horn - The Interstate Oil and Gas Compact Commission (IOGCC) is far from a household name, but a new investigation published by InsideClimate News’ Pulitzer Prize-winning investigative reporter Lisa Song may have just put what is likely the most powerful oil and gas lobbying node you’ve never heard of on the map. Titled, “Is the IOGCC, Created by Congress in 1935, Now a Secret Oil and Gas Lobby?,” the article’s origins lay in the hundreds of documents obtained from open records requests and historical archives by me and Jesse Coleman, a researcher at Greenpeace USA, that are part of an ongoing investigation into IOGCC.  Song’s article for the award-winning InsideClimate News reveals documents that show for the first time that it was IOGCC at the front and center, and not just Halliburton, which created what many now know as the Halliburton Loophole. That regulatory loophole exempts the oil and gas industry from U.S. Environmental Protection Agency enforcement of the Safe Drinking Water Act as applied to hydraulic fracturing (“fracking”) and is seen as what opened the Pandora’s Box for industrial high volume slickwater horizontal drilling in the United States.But before getting too far into the weeds of IOGCC‘s deeds, what exactly is it? Simply put, the Interstate Oil and Gas Compact Commission is a quasi-governmental organization founded and headquartered in Oklahoma City and located on property adjacent to the Governor’s Mansion and on Oklahoma state property given to the organization via a land deed. IOGCC exists due to a 1935 act of Congress that allowed the oil-producing states to compact together, under authority of theU.S. Constitution, in an effort to conserve oil and limit what were then wasteful production practices. All of the oil and gas producing states of the United States are dues-paying members, with dues paid based on production stats: the more you produce, the more money that goes into the pot. IOGCC‘s official members, gubernatorial appointees of each respective member state, are generally the top oil and gas regulators of each state. Caveat: sometimes Governors pick lobbyists or industry attorneys instead.

      Is the IOGCC, Created by Congress in 1935, Now a Secret Oil and Gas Lobby? - Earthworks (blog)  --When Congress severely limited the Environmental Protection Agency's ability to regulate hydraulic fracturing in 2005, it was a victory for a quasi-governmental organization that has been quietly working for decades to restrict federal oversight of oil and gas.  The group, the 80-year-old Interstate Oil and Gas Compact Commission, began fighting for a fracking exemption as early as 1999. Congressionally sanctioned as an interstate compact, the IOGCC characterizes itself as a government entity, which allows it to call its lobbying of lawmakers "education." But in reality, it is led by regulators from industry-friendly oil and gas producing states, and a full third of its members come from the industry itself. The group has worked behind the scenes for decades to prevent federal regulation so stridently that in 1978, the Justice Department argued it should be disbanded because it had evolved into an advocacy organization. That seemed particularly true when the group pushed to exempt fracking from the Safe Drinking Water Act. The IOGCC passed a resolution in 1999 advocating a bill introduced by Sen. James Inhofe (R-Okla.) and six years later, claimed credit when a similar measure finally became law at the start of George W. Bush's second term.  The provision—known as the Halliburton loophole after the oilfield services giant—was part of the 2005 Energy Policy Act. Along with advances in drilling and fracking technology, it helped enable the modern fracking boom that has created vast economic benefits, but also has been implicated in cases of drinking water contamination, air pollution and rising emissions of climate-changing methane. The loophole is just one example of the IOGCC's influence on U.S. energy policy, according to interviews with more than two dozen energy policy experts, scientists, current and former congressional staffers, environmentalists and IOGCC members, as well as a review of hundreds of pages of documents shared by Greenpeace and DeSmogBlog.

      Canada provides record-high share and amount of U.S. crude oil imports in 2015 - EIA - Although total U.S. crude oil imports in 2015 continued to be lower than levels reached during the mid-2000s, imports from the United States' top foreign oil supplier—Canada—were the highest on record, according to annual trade data from EIA's Petroleum Supply Monthly. Canada provided 4 out of every 10 barrels of oil imported into the United States in 2015. U.S. gross crude oil imports from all sources averaged 7.4 million barrels per day (b/d) in 2015, down 27% since the 2005 high of 10.1 million b/d. As gross crude oil imports decline, a growing share of remaining imports are being sourced from four top suppliers: Canada, Saudi Arabia, Venezuela, and Mexico. Canada, America's largest crude oil supplier since 2004, sent a record-high 3.2 million b/d of gross crude oil exports to the United States in 2015, up 10% from the year before, accounting for a record 43% of total U.S. crude oil imports. Canada also receives nearly all U.S. crude oil exports, making up 422,000 b/d, or 92%, of the 458,000 b/d of crude oil exported from the United States in 2015. Canada generally produces heavy, sour crude oil that is well-matched to processing capacity in the United States, where many refineries have the equipment needed to process such oil. Canada has few alternative outlets for the heavy crude produced in Alberta, where most of Canada's proved oil reserves are located. Canada is expected to continue to provide a large share of U.S. oil imports for the foreseeable future, especially given the expansion of pipeline and rail shipping capacities to transport Canadian oil.

      Canadian oil sands producers target single-digit sustaining capital - Oil | Platts --  Alberta's leading oil sands producers are currently working on ways to reduce the sustaining capital for their projects in order to maintain global competitiveness and also attract investment, executives said Tuesday. Sustaining capital is the expenditure needed to keep an asset operating at its current level. With a sustaining capital of C$9/b to C$11/b ($7.05/b to $8.62/b), Cenovus Energy is trying to reduce it to "just a single" digit, Chief Financial Officer Ivor Ruste told the 2016 CAPP Scotiabank Investment Symposium in Toronto. A similar target is also on the radar of its fellow producer Suncor Energy, which currently requires an investment of C$5/b to C$10/b for maintaining output from its steam-assisted gravity drainage oil sands facilities in the province, CFO Alister Cowan told attendees, adding that just under C$3 billion has been set aside in 2016 as sustaining capital for the company's oil sands operations.The companies' costs are being cut by reductions in drilling costs and headcounts, focusing more on brownfield rather than greenfield developments and cutting input costs like diluents and replacing them with lower-priced solvents, they said.  Diluents are needed to transport bitumen through pipelines by making it more viscous and thus easier to ship. "The cost of drilling is about C$9 million/well pair [for a SAGD oil sands facility] and our target now is to try to bring it down to C$7 million/well pair over the next 18 months,"

      $hillary Was Paid Over $1.6 Million to Support Keystone XL - Keystone XL Banks Paid $1.6M For Hillary’s Canadian Speeches. — Two Canadian banks tightly connected to promoting the controversial Keystone XL pipeline in the United States either fully or partially paid for eight speeches made by former Secretary of State Hillary Clinton in the period not long before she announced her campaign for president. Those speeches put more than $1.6 million in the Democratic candidate’s pocket. Canadian Imperial Bank of Commerce and TD Bank were both primary sponsors of paid Clinton speeches in 2014 and early 2015, although only the former appears on the financial disclosure form she filed May 15. According to that document, CIBC paid Clinton $150,000 for a speech she gave in Whistler, British Columbia, on Jan. 22, 2015. Clinton reported that another five speeches she gave across Canada were paid for by tinePublic Inc., a promotional company known for hosting speeches by world leaders and celebrities. Another speech was reported as paid for by the think tank Canada 2020, while yet another speech was reportedly funded by the Vancouver Board of Trade. But a review of invitations, press releases and media reports for those seven other speeches reveals that they, too, were either sponsored by or directly involved the two banks. Both banks have financial ties to TransCanada, the company behind the Keystone XL pipeline, and have advocated for a massive increase in pipeline capacity, including construction of Keystone. Further, Gordon Giffin, a CIBC board member and onetime U.S. ambassador to Canada, is a former lobbyist for TransCanada and was a contributions bundler for Clinton’s 2008 presidential campaign.

      Mexico Energy - Mexico's reserves slashed by a fifth: regulator - Mexico's proven hydrocarbon reserves fell to 10.24 billion boe in January, a drop of 22.2% from the 13.17 billion boe of a year earlier, the National Hydrocarbons Commission announced March 31. Ulises Neri, head of the commission's technical unit, told a meeting of the commission's executive that the drop was due in part to the reduction in value of the proven reserves as a result of the sharp fall in world markets, and to the drop in exploration activity by the state company Pemex. Proven oil reserves fell to 7.6 billion barrels on January 1, down from 9.71 billion barrels a year earlier, Neri added. The Mexican results follow an international trend. The world's top six oil producers saw their proved reserves shrink by more than 2.8 billion boe last year as the price slump and growing difficulty in accessing new resources takes a rising toll on sources of future growth. According to annual statements and filings, the West's biggest integrated oil companies also failed to replace, on average, their production with new reserves for a second year running, with just half of all production replenished over the year.

      Mexico Announces Over $4 Billion in Aid for Struggling Pemex - ABC News: The government announced more than $4 billion in aid Wednesday for state oil company Petroleos Mexicanos, whose finances, production and exploration projects have been hit by the fall in crude prices. The package will include a direct infusion of $1.5 billion to the company better known as Pemex, the Treasury Department said in a statement. The government will also provide over $2.6 billion to pay company pensions and retirements this year. In return, the government wants Pemex to commit to reducing its liabilities and debt by the same amount. "The adverse economic conditions that the hydrocarbons sector is going through on an international level and the depletion of different wells have weakened Pemex's financial situation," the department said in the statement. Pemex reported in March that it had secured lines of credit to pay 85 percent of its vendors. The company closed 2015 with around $8.4 billion in debt, of which it paid $1.1 billion in the first quarter. In late February, Pemex announced it was cutting about $5.5 billion from its 2016 budget, mostly in exploration and production. Mexico's oil production peaked in 2004 at about 3.4 million barrels a day but has since slid to about 2.2 million a day today. President Enrique Pena Nieto sought to modernize the company and improve production by pushing through legislation that opened up Mexico's energy sector to some private investment for the first time in decades. But the law was followed closely by the global plunge in oil prices, crimping the country's oil ambitions.

      Fracking Boom Spreads Threats Across the World -- "If we continue methane production at current rates, the world will run up against the 1.5° limit in 12-15 years. If we stop producing methane, which means stopping fracking of natural gas and oil, the world wouldn't run up against that limit for about 50 years," Robert Haworth, a Cornell professor who has done cutting edge research on fracking, told The Nation.   Emissions from fracking are "big enough to wipe out a large share of the gains from the Obama administration's work on climate change - all those closed coal mines and fuel-efficient cars. In fact, it's even possible that America's contribution to global warming increased during the Obama years," writes Bill McKibben of in The Nation. In the US, methane emissions are up over 30% since 2002, accounting for 30-60% of the enormous spike in atmospheric methane, according to a Harvard University study. While researchers don't attribute a source for the rise, it occurred since fracking began in earnest in the US.    "Methane emissions make it a disastrous idea to consider shale gas as a bridge fuel, letting society continue to use fossil fuels over the next few decades," says Robert Haworth, Professor of Ecology and Environmental Biology at Cornell University, whose research first exposed the spike in methane.  The industry is digging its own grave by allowing these emissions, because it originally had widespread support as an alternative to coal. President Obama saw it as a bright spot in a dead economy when he entered office - offering lots of jobs and home grown, cheap energy that even brought overseas manufacturers back home. But as frackers moved from rural areas where few people live to places like the Marcellus Shale in Pennsylvania, contamination of farms and drinking water became obvious ... and the movement against it began.

      Global trade of LNG hits record high: Global trade of liquefied natural gas (LNG) reached record numbers in 2015, according to a new report. The International Group of LNG Importers said shipments of LNG grew by 2.5 percent to an all-time high of 245.2 million tons annually. Increased trade was driven by new liquefaction plants in Indonesia and Australia. The new facilities began exporting LNG to customers in Europe and the Middle East and contributed 11.4 million tons per year of new liquefaction capacity. Australia became the second-largest exporter of LNG, surpassing Malaysia. There were 19 exporting counties in 2015. Qatar was the global export leader, supplying 32 percent of LNG volumes in 2015. With the opening of Cheniere Energy’s Sabine Pass export facility early this year, the United States is on track to become the world’s leading supplier of flexible LNG. Even with abundant supplies of LNG, demand may be wavering. Markets in South Korea and Japan experienced their first decline since the 2009 recession. “In a global context of lower energy prices and sluggish economic growth, the LNG industry is holding its breath for the impact of an export wave from the United States,” GIIGNL president Domenico Dispenza said. Though global demand remains uncertain, several markets have emerged. Three counties — Egypt, Jordan and Pakistan — started importing LNG in 2015, alleviating some pressure from the supply glut.

      Northern Territory fracking debate 'life or death', says cattle farmer - The fracking debate in the Northern Territory is a matter of “life or death” for farmers, a pastoralist says.  Daniel Tapp, a cattle farmer, says he is very concerned about over-allocations of water for mining activity in the NT. “We can’t live without water,” he said in Darwin on Tuesday after a hearing held by the Senate select committee on unconventional gas mining. “We’ve got a real strong industry up here, potentially the food bowl of the north, and this puts it all at risk, whether it’s at risk by contamination or simply by depletion. Our aquifers have been stretched to their limits already.” The NT government hopes that new regulations it is drafting for the mining industry will be more transparent and will build community confidence. There has never been a recorded instance of groundwater contamination or significant environmental harm caused by fracking for shale gas in the NT, the inquiry heard. If NT Labor wins the August election it has promised a moratorium on fracking until it can be sure the practice is safe, amid increasing anti-fracking community sentiment.

      United States cattle producer warns Northern Territory pastoralists about impacts of fracking - A cattle producer from the United States says Northern Territory pastoralists should be wary of assurances offered by mining companies wanting to conduct hydraulic fracturing on their land.  Hydraulic fracturing, also known as fracking, is shaping up to be an issue at the upcoming Northern Territory election, with Labor promising to introduce a moratorium on the gas-extracting method if it is elected to government. John Fenton said he had an oil and gas company frack wells on his farm in Wyoming, which he said went on to cause a number of issues. A study by Stanford University recently found evidence that fracking practices near Mr Fenton's home in Pavillion, Wyoming had caused an impact on underground drinking water.  Speaking to ABC Rural in Katherine, where he was invited by anti-fracking group Lock the Gate, Mr Fenton said oil and gas companies could not ensure the safety of fracking wells. "The companies that are coming here and saying they can do [fracking] right here in Australia are very often associated with the very same companies in my country who have destroyed a big portion of our water and air," he said.  "[They] are now laying off men by the thousands and leaving our country because the industry is bankrupt."

      Gazprom improves oil recovery at Orenburg field in Russia with multistage fracking - Energy Business Review: Gazprom Neft has conducted five multistage fracking operations to improve recovery rate in the eastern part of Orenburg oil and gas-condensate field in southwestern Russia. The company said that the fracking operations, combined with new technologies, led to a 50% increase in flow rates. The technologies include viscoelastic diverting acid (VDA), which is designed to cause an extensive network of fissures to develop, while allowing additional inflow of oil into the well. Gazprom said that the acid can form a gel, which could temporarily block potential cracks and directs the remaining acid to other parts of the strata while increasing the coverage area. The viscosity of the gel, however, will be reduced after interacting with hydrocarbons and then be and washed away with the oil into the well. In order to further optimize oil recovery, the VDA was used throughout the entire horizontal well shaft. Gazprom Neft first deputy CEO Vadim Yakovlev said: "Combining multiple technologies significantly improves efficiency in field development. "Continuing the implementation of our Technology Strategy, Gazprom Neft is successfully testing and improving the most up-to-date methodologies of enhanced oil recovery. "Positive results from pilot projects mean the company has the opportunity to utilise experience gained at other assets." Gazprom added that the impact of drilling operations has been significantly improved with the use of various technologies including the development and refinement of drilling mud for use throughout the entire length of the well bore.

      Central Asian oil: destined to disappoint? - The Barrel Blog: The stagnation pervading Central Asia’s oil industry could be alleviated by a couple of big announcements in the coming months, on the Kashagan and Tengiz fields. But industry veterans are more heedful of the numerous obstacles presented by the region, from the geological to the bureaucratic, and an unpromising global context. Home to some of the world’s largest oil and gas fields, ex-Soviet Central Asia and particularly Kazakhstan was once an exciting frontier for the industry. But of late Kazakh oil production has stagnated at around 1.7 million barrels per day, partly because of a decade of delay starting output from the giant Kashagan project. A consortium led by Chevron has also delayed plans to increase output at Tengiz from around 600,000 b/d to nearly 900,000 b/d, a project that could cost tens of billions of dollars. In neighboring Turkmenistan, planned gas exports to Europe have made little headway due the cost of building a trans-Caspian pipeline, doubts about European demand, and difficult regional politics. Turkmenistan’s gas exports have increased — the International Energy Agency expects it to have pipeline capacity for 80 billion cubic meters/year of exports to China by the early 2020s — and it has hopes of eventually building another pipeline across Afghanistan to South Asia. But for now Turkmenistan is increasingly reliant on China as a sole client. More marginal projects, in Tajikistan and Uzbekistan, are languishing.

      Schlumberger to Pare Venezuela Services on Lack of Payments - Schlumberger Ltd. will reduce activity in Venezuela after the world’s largest oil services provider failed to collect enough payments from the national oil company. The reduction will take place this month in close coordination with all customers in Venezuela to continue servicing those with available cash flow, the Houston- and Paris-based contractor said in a statement Tuesday. Venezuela, which holds the biggest oil reserves of any country, has been battered by the collapse of prices as most of the government’s revenue comes from petrodollars. In October, Schlumberger was said to be shifting some of its workers from Brazil to Venezuela, reinforcing the contractor’s commitment at the time as others in the industry pulled back. By late January, Schlumberger said it had entered into a deal with Petroleos de Venezuela SA during the fourth quarter to receive certain fixed assets in lieu of payment of about $200 million of accounts receivable. "Schlumberger appreciates the efforts of its main customer in the country to find alternative payment solutions and remains fully committed to supporting the Venezuelan exploration and production industry," the company said in the statement. "However, Schlumberger is unable to increase its accounts receivable balances beyond their current level."

      The Invisible Money Makers Who Thrived During 2015's Oil Slump - Even in the closely knit energy industry they are virtually unknown. On the streets of Geneva, London and Houston they go unrecognized. Yet a handful of executives were oil-industry standouts in 2015. They thrived because of -- not despite -- plunging crude prices. From Total SA to Trafigura Group Pte, trading emerged as the industry’s cash cow.  Take Vitol Group BV, the world’s largest independent energy-trading operation. The 50-year-old company reported net profit of $1.6 billion last year -- the fourth highest ever, buoyed in part by the strategies employed by the teams headed by Mark Couling, chief oil trader. “The oil trading industry as a whole enjoyed the best year since 2008-09,”   Oil traders were rewarded by a surge in volatility. They also capitalized by holding onto crude to take advantage of the market contango -- a situation where future prices are higher than current prices -- allowing them to buy oil cheap, store it in tanks to sell later and locking in a profit via derivatives. Vitol hired one of the world’s largest tankers, the Overseas Laura Lynn -- a 380-meter-long vessel (about equal to the Empire State Building laid on its side) capable of carrying 3 million barrels of oil -- to store crude offshore of Dubai. Competitors including Glencore Plc prospered by hiring capacity on land from St. Lucia in the Caribbean to Saldanha Bay in South Africa. “A combination of low prices and contango is great for traders,” nt.” It wasn’t just the independent houses. Although better known for their oil fields, refineries, and petrol stations, BP Plc, Royal Dutch Shell Plc and Total SA are also the world’s biggest oil traders.

      Hopes and Fears About Oversupply Whipsaw Oil Prices - Dallas Fed - Russia and several members of the Organization of the Petroleum Exporting Countries have introduced the idea of a production freeze, and a meeting is set for April 17 in Doha to discuss further details. A major roadblock on the road to Doha is Iran, which is slowly reentering the oil market this year following the lifting of nuclear sanctions. Iran has summarily dismissed all talks of participating in the freeze until it reaches pre-sanction production levels. Saudi Arabia also made it clear on April 1 that its participation is contingent on Iran, essentially ruling out the possibility of a meaningful agreement. Whether an agreement is reached or not, it remains unclear if the freeze would change the supply outlook for 2016 without Iran’s participation. The other countries are unlikely to significantly boost supply in 2016 and, in several cases, appear to be currently producing at very high levels. For example, Russian production has recently increased to levels last seen in the early 1990s.Unlike the freeze, unplanned outages have materially affected global supply in recent months. Outages cut global production levels in February by almost 450,000 barrels per day, with Iraq and Nigeria accounting for 75 percent of the cuts. Reductions in U.S. crude production are expected to play an important part in reducing oversupply in the oil market. Newly released data, while lagged, hint that these cuts began in fourth quarter 2015 and continued into first quarter 2016. U.S. crude production averaged 9.18 million barrels per day in January 2016, down half a percent from the previous month and down more than 1.7 percent from January 2015. Shale production led to the recent decline, falling more than 1.7 percent in January and another 1.4 percent in February (Chart 2).

      Reports of Oil Rally's Death Premature as Inventories Decline - Hedge funds betting that oil’s rally was over missed an 11 percent gain after U.S. crude inventories unexpectedly fell. Short positions in West Texas Intermediate crude jumped 35 percent in the week ended April 5, according to the U.S. Commodity Futures Trading Commission. The next day, the government reported a 4.94 million-barrel drop in U.S. oil inventories, the first decline in eight weeks. "Everybody thought there was going to be a build in the inventories" and the actual data proved otherwise, said Carl Larry, director of oil and gas issues in Houston for consultant Frost & Sullivan, Inc. "The market’s bouncing back a little." WTI oil for May delivery dropped 6.2 percent to $35.89 a barrel on the New York Mercantile Exchange during the report week, before rebounding to $39.72 April 8. Prices were up 1.7 percent at $40.40 as of 11:24 a.m. on Monday. The drop in supply data last week ran counter to analysts’ forecasts for an increase. Production declined to the lowest level since November 2014 while refiners used the most crude in three months, Energy Information Administration data showed on Wednesday.

      Crude Speculators Got Short … and Got Crushed - MoneyBeat - WSJ: CFTC data out this afternoon shows financial speculators in the benchmark U.S. oil contract ramped up short sales against the market 35% in the week through Tuesday as euphoria about the recent market rally faded. The increase in short sales was the largest since July, and they came into the market when the price was between roughly $35 and $38 a barrel. The 50% rally in crude prices between February and March was attended by a lot of skepticism and not much evidence of improvement in supply-and-demand conditions, but what happened next illustrates the inherent danger in betting against a market that is intrinsically tilted toward the bulls. U.S. oil prices rallied nearly 11% between Tuesday and Friday, ending the week at $39.72 and creating sharp losses for anyone who clung to those losing bearish bets. When the market turns against recently-established short trades, so-called weak shorts bail out — driving prices up even further as they buy back in to cover their position. That might help explain oil’s 6.6% gain Friday — a day with few clear triggers for a surge.

      Most Of Last Week's Crude Oil Drawdown Went Right Into Storage - Last week, oil investors cheered the big 4.9M barrel reduction of crude stocks, leading to single-day 5% jump in the price of oil.  At the same time, gasoline stocks went up by 1.4M barrels and distillate product stocks went up by 1.8M barrels. Total product stocks were up by 3.2M barrels. That means 65% of the crude drawdown effectively went right back into storage on the product side. How should we interpret this weekly data? I took a look at a few crude oil and product storage relationships and their history, and analyzed them. I wanted to see what I could glean from weekly storage change data since everyone makes a big deal about the weekly numbers. That includes traders playing the markets. I found that a plot of the combined weekly crude oil, gasoline, and diesel fuel stocks change was revealing. (Note that there are other components I could have included but these are the largest.) Here it is, obtained using last week's EIA data. Notice that the weekly change is actually too variable to reveal much information, averaging nearly zero with a very small positive slope over time. As an alternative, I also plot the 3-month moving average, which is much more interesting. We see that the moving average also fluctuates around zero but it occasionally has a noticeable, revealing feature.

      Oil prices fall on producer meeting doubts, stronger dollar | Reuters: Oil futures traded lower on Wednesday on concerns that a producer meeting, planned for Sunday in Doha to discuss freezing output, will do little to trim oversupply and a strengthening dollar. Brent crude was down 34 cents at $44.35 a barrel at 0916 GMT, after hitting a four-month high in the previous session, when it settled up $1.86. U.S. crude declined by 49 cents to $41.68 a barrel after gaining $1.81 the day before. Comments by Saudi oil minister Ali al-Naimi in the al-Hayat newspaper in which he confirmed his country's position that an outright production cut was out of the question weighed on prices, traders said. "Forget about this topic," al-Naimi told the paper, when asked about any possible reduction in his country's crude output

      Oil Slides After Algeria Oil Minister Admits Russia Refused To Cut Output --First it was the Saudis who said they would not cap oil output unless Iran joins the production freeze, which it won't. And now, Bloomberg reports citing APS, that Russia was in on the plot to make the Doha meeting a total and complete farce.


      More details: Planned April 17 meeting of OPEC, other major producers in Doha, Qatar, aims to reach agreement to freeze oil production at Jan. levels, Algeria’s state-run news agency APS reports, citing Energy Minister Salah Khebri. Meeting “crucial” because if all countries agree to cap production, this will allow oil market to recover gradually “Oil producers don’t want to cut their output. We have already asked for the decrease of production, but some countries have  refused, including non-OPEC members, especially Russia,” Khebri says, according to APS  Which to regular readers should not come as a surprise: recall that as we wrote three weeks ago, What Oil Production Freeze: Russia Just Revealed The Laughable Loophole In The OPEC "Agreement"  Oil algos finally pay attention. And as goes Crude, so goes stocks...

      U.S. Oil Climbs Back Above $40 - WSJ: The U.S. oil benchmark settled above $40 a barrel for the first time in nearly three weeks and the global Brent contract touched a four-month high Monday, as the dollar faded and hopes rose for a coming agreement among sovereign producers that would begin to reduce the global crude glut. Both major contracts rose for the second trading session in a row, after surging more than 6% on Friday. The U.S. benchmark ended 1.6% higher at $40.36 a barrel on the New York Mercantile Exchange, while the Brent contract rose 2.1% to end at $42.83 a barrel on the ICE Futures Europe exchange. Analysts said there appeared to be little direct reason for the gains Monday, and said it was likely a combination of a softening dollar, hopes that U.S. oil production and inventory data this week would extend declines last week and that Sunday’s meeting of producers in Doha, Qatar, would yield an agreement to freeze output levels. A softening dollar can drive oil higher as it becomes cheaper for traders using foreign currencies. Oil prices have surged more than 14% in the last week, including Friday’s 6% gain, as U.S. Energy Department data last week showed a surprise decline in U.S. supplies, prompting bearish speculative traders to close out short sales against the market. And the agency’s estimate of domestic oil production was just barely above 9 million barrels a day, stoking hopes that it would fall under that threshold in this week’s report.

      Crude Continues To Surge Ahead Of Doha: Oil prices have regained ground over the past week, with more and more data points emerging to back up the flurry of bullish bets that the markets saw since February. The outcome of the Doha meeting on April 17 will be a pivotal moment for the short-term trajectory of oil prices. By mid-week, oil is in positive territory, trading up on shrinking shale production, a weak dollar, and anticipation of the Doha meeting. WTI is back above $40 per barrel and Brent traded above $43 per barrel on Tuesday. Can Doha produce a result? Heading into the meeting, there are not high hopes for a significant result, with most participants at or near a peak in production. At the same time, several key members are not exactly sitting idle. Kuwait Oil Company could soon offer offshore drilling contracts to drill in the Persian Gulf, according to Bloomberg. Kuwait is hoping to boost output from 3 million barrels per day to 3.165 mb/d by late 2016 or at some point in 2017. Also, the rig count in Saudi Arabia, Kuwait, and the UAE is at its highest level in decades. Saudi Arabia’s Shaybah field could add 250,000 barrels per day in production by June. This raises questions about how all the parties involved in the Doha meeting will reach an agreement on a freeze.  Oil traders see the bottom for crude prices. After nearly two years of a down market, oil traders are growing confident that we have passed the low point. “The down market is behind us,” Torbjorn Tornqvist, CEO of Gunvor Group Ltd., said on Tuesday at the FT Global Commodities Summit in Lausanne. “It is the beginning of the end of that for sure.” Although there will be a lot of volatility for quite a while, Tornqvist said that “from here on, the trend is up.”

      Crude Jumps On Russia-Saudi "Production Freeze" Headline -- Total chaos reigns as equity market "participants" flip from manic-sellers (IMF un-growth and Italian sbank bailout failure) to panic-buyers after the following headline hits Bloomberg:


      Saudi Arabia, Russia reached consensus on oil freeze during talks Tuesday, Interfax reports,citing unidentified “informed diplomatic source” in Doha. Interfax cites source as saying Saudi Arabia will make final decision on freezing oil production regardless of Iran’s position Just a day after Algeria said Russia would not agree. And the funniest thing about all of this farce is that if this headline proves true it is merely the original agreement - in principal - but with both Saudi Arabia and Russia now producing at new record highs. Stocks have begun to fade the euphoria...

      WTI Crude Tops $42 As Russia "Hopes" For Deal At Doha -- Despite the day's rampacious rally in stocks and crude aftwer "unidentified sourtces" said a Russia-Saudi deal was done, Russia's Dmitry Peskov just issued a statement that "there is hope" for a deal at Doha. This sent stocks and crude jumping once again... even though we suggest "hope" for a deal is not "a deal." Russian Energy Minister Alexander Novak briefed Russian President Vladimir Putin on latest talks with Saudi Arabia, Kremlin spokesman Dmitry Peskov says in message without saying when talks took place. “There is hope” that an oil output freeze agreement can be reached in Doha regardless of Iran’s position following Saudi talks. So buy more crude and stocks...

      Oil Strategist: "Doha Freeze Talks, If Anything, Look Bearish For Oil" - In the past few weeks, we have expressed our view why the much anticipated OPEC Doha meeting on "freezing" oil production will be one of the biggest "sell the news" events when it comes to oil. Yesterday, even Goldman opined why the OPEC Doha meeting will likely be a dud when Damien Courvalin said: "Don't Expect A Bullish Surprise." Now, we present the view of Bloomberg oil strategist Julian Lee, who says "Doha Freeze talks, if anything, look bearish for oil." Here's the simple reason why. Crude oil’s ~35% rally since Doha talks were announced in mid-Feb. shows a market expecting OPEC, non-OPEC nations to proceed with plan to freeze crude production at Jan. levels. Russia, Saudi Arabia are among at least 16 producing nations w/ ~60% of global crude output attending an April 17 meeting in Doha to discuss production freeze That price rally may have gone too far given that Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman said late last mo. that freeze plan depends on Iran, all big producers participating. Iran, among those expected to attend, looks almost certain to reject curbs on its own output: Country has said it won’t allow its exports to be restrained and is seeking to bolster them after lifting of sanctions; needs oil revenue to rebuild its economy; plans to raise output to 4m b/d by March 2017 from 3.2m last mo. Best that can be hoped for from Doha mtg is an output freeze that won’t take any oil off market and would simply allow several of the biggest producer countries to keep pumping at or near record levels.  That’s unlikely to provide much additional price support given size of the rally that’s already occurred this year.

      Brent hits four-month high on reports of oil output freeze deal | Reuters: Global oil prices hit four-month highs on Tuesday, hovering just under $45 a barrel after a report that top producers Russia and Saudi Arabia have agreed to freeze output ahead of a much-anticipated producers meeting on Sunday. Russia's Interfax news agency quoted a diplomatic source in Doha saying that Russia and Saudi Arabia reached a consensus on Tuesday about an output freeze and that the final decision will not depend on Iran. The output freeze news came as the U.S. government said that U.S. crude output was forecast to fall by 560,000 barrels per day in 2017 to 8.04 million bpd, underscoring that the 21-month price rout is picking up steam. "People are now realizing that this OPEC meeting could be a historic turning point for the market," said Phil Flynn, an analyst at Price Futures Group. "Now, with U.S. production cuts, our sense is that we're entering a new cycle upwards." Brent crude LCOc1 prices settled up $1.86, or 4.3 percent, at $44.69 a barrel.

      Oil price optimism grows as Brent climbs to 2016 high - The heads of the world's largest oil trading houses sought to draw a line under nearly two years of falling prices on Tuesday as Brent crude rose to its highest level so far in 2016. Vitol, Trafigura, Mercuria, Gunvor, Glencore and Castleton, which sell enough oil to meet almost a fifth of global demand — were all but unanimous in telling a Financial Times conference in Lausanne that oil prices were unlikely to revisit the sub-$30 lows they hit in early January. Brent crude oil, the international benchmark, climbed by nearly 4 per cent to hit a four-month high of almost $45 a barrel on Tuesday amid mounting expectation of a deal to freeze production at this weekend’s Opec summit in Doha. Prices fell back in Asian morning trading on Wednesday with Brent crude down 0.8 per cent at $44.35 a barrel by mid-morning. It is still up 12.2 per cent in the month to date. West Texas Intermediate, the US marker, was down 1.1 per cent at $41.71 a barrel having touched $41.83 on Tuesday. It is up 9 per cent in the month to date. Igor Sechin, head of the Kremlin-backed oil company Rosneft, echoed the traders’ view, and argued that a price of at least $50 a barrel was needed to avert future supply shortages. “The oil price is growing. I think everyone is expecting the successful outcome of our work,” Mr Sechin told the FT conference in an apparent reference to a possible deal on an output freeze this weekend. “We will need higher price levels than $45 or even $50 a barrel.” The remarks came ahead of a weekend meeting in Qatar when Opec kingpin Saudi Arabia and other big oil producers, including Russia and Venezuela, will try to freeze output in a bid to hasten the end of an oil glut. This is potentially the first significant concerted action to stabilise prices since the oil price went into freefall in late 2014.

      American Petroleum Institute (API) data: Build of 6.2mln barrels: Stockpile data for oil via API's weekly survey:

      • Crude build of 6.223 mln barrels
      • Cushing draw of 1.93 million barrels
      • Gasoline draw 1.58mln barrels
      • Distillate draw 530K bbls

      The crude stockpile build was well above expectations (they were around 1.9 mln)  The API data is closely watched as a guide to the official EIA inventory data due tomorrow morning (US time).  The 'expected' for the data from EIA tomorrow is a stock build of 733.33Kbbls for US Crude Oil Inventories.

      Oil price optimism grows as Brent climbs to 2016 high - The heads of the world's largest oil trading houses sought to draw a line under nearly two years of falling prices on Tuesday as Brent crude rose to its highest level so far in 2016. Vitol, Trafigura, Mercuria, Gunvor, Glencore and Castleton, which sell enough oil to meet almost a fifth of global demand — were all but unanimous in telling a Financial Times conference in Lausanne that oil prices were unlikely to revisit the sub-$30 lows they hit in early January. Brent crude oil, the international benchmark, climbed by nearly 4 per cent to hit a four-month high of almost $45 a barrel on Tuesday amid mounting expectation of a deal to freeze production at this weekend’s Opec summit in Doha. Prices fell back in Asian morning trading on Wednesday with Brent crude down 0.8 per cent at $44.35 a barrel by mid-morning. It is still up 12.2 per cent in the month to date. West Texas Intermediate, the US marker, was down 1.1 per cent at $41.71 a barrel having touched $41.83 on Tuesday. It is up 9 per cent in the month to date. Igor Sechin, head of the Kremlin-backed oil company Rosneft, echoed the traders’ view, and argued that a price of at least $50 a barrel was needed to avert future supply shortages. “The oil price is growing. I think everyone is expecting the successful outcome of our work,” Mr Sechin told the FT conference in an apparent reference to a possible deal on an output freeze this weekend. “We will need higher price levels than $45 or even $50 a barrel.” The remarks came ahead of a weekend meeting in Qatar when Opec kingpin Saudi Arabia and other big oil producers, including Russia and Venezuela, will try to freeze output in a bid to hasten the end of an oil glut. This is potentially the first significant concerted action to stabilise prices since the oil price went into freefall in late 2014.

      Crude Extends Losses After Bigger Than Expected Inventory Build Trumps Production Slowdown -- After a significant draw the previous week, API reported a large 6.22mm build overnight, now confirmed by DOE with a 6.63mm build. Cushing was expected to see a considerable draw due to the outage at TransCanada's Keystone crude pipeline outage and was almost triple expectations (-1.76mm vs -610k exp). A larger than expected draw in gasoline inventories and build in Distillates was also evident as Production data fell for the 11th week of the last 12 to the lowest since Oct 2014. Oil prices are tumbling... API:

      • Crude +6.22mm (+1mm exp.)
      • Cushing -1.93mm (-800k exp.)
      • Gasoline -1.58mm
      • Distillates -530k


      • Crude +6.63mm (+733k exp.)
      • Cushing -1.76mm (-610k exp.)
      • Gasoline -4.23mm (1.42mm exp.)
      • Distillates +505k (+233k)

      As Bloomberg's Javier Blas notes, U.S. refineries are processing record amounts of crude oil for the time of the year -- and from here until late July is all up. The strong refinery intake should reduce the crude glut, but risk exacerbating an overhang in middle distillates like diesel. U.S. crude oil stocks traditionally start to decline at the end of April, as refineries ramp-up activity ahead of the driving season. But with current stocks well above the previous 5-years range, it will take months (or even years) to work through the glut.

      Weekly Energy Tweets And News -- April 14, 2016 - Earlier today it was reported that OPEC forcast non-OPEC production falling faster than predicted, from 700,000 bopd to 730,000 bopd or about a 0.03 percent change.  As soon as I read that, I knew that the price of oil rests on the Chinese and the Indian economy. Right on cue, Bloomberg/Rigzone report: China’s crude imports climbed to a record in the first quarter as higher refining margin encouraged refiners to boost purchases. The world’s biggest energy user increased inbound shipments to 91.1 million metric tons in the first three months of the year, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to about 7.34 million barrels a day, 6 percent higher than the previous quarter and 13 percent up from the same period last year, according to Bloomberg calculations. Imports last month fell about 4 percent from February’s record to 7.71 million barrels a day, the third-highest ever. The nation’s net oil-product exports jumped to 1.3 million tons in March, the highest in three months, Wednesday’s data show. Refiners are importing more oil to take advantage of local retail fuel prices that are frozen when oil trades below $40 a barrel. The margin for major Chinese refineries to process Oman crude was about $16 a barrel in the first quarter, 68 percent higher than last year’s average...The other weekly energy tweets:

      • US crude oil inventories rose 6.6 million bbls last week to an estimated 537 bbls. It should be noted that storage capacity has been increasing this year, and we are in a state of contango.
      • US crude imports rebounded to 7.9 million b/d last week after slumping to 7.3 million the week before
      • US gasoline stocks adjusted for implied consumption at 25.5 days demand, same as in 2015
      • implied US gasoline consumption remains high averaging 9.4 million b/d over last 4 weeks (+500,000 b/d over 2015)

      IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop - Global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC, the International Energy Agency said. The world surplus will diminish to 200,000 barrels a day in the last six months of the year from 1.5 million in the first half, the agency said in a report on Thursday. Production outside the Organization of Petroleum Exporting Countries will decline by the most since 1992 as the U.S. shale oil boom falters. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions. “There is no doubt as to the direction of travel for the supply-demand balance,” the Paris-based adviser to industrialized nations said. “There are signs that the much-anticipated slide in production of light, tight oil in the U.S. is gathering pace.” Oil prices, which sank to 12-year lows in January amid a global surplus, have climbed 30 percent in the past two months as OPEC and Russia work on a plan to limit their crude production. Still, without any proposal to reduce supply, there will be little real impact from the accord, due to be finalized in Doha this weekend, the IEA said. . The latest outlook represents a shift for the agency, which as recent as February raised its estimates of the global surplus raised its estimates of the global surplus and warned that the potential for further price losses had intensified. Supplies outside OPEC will decline by about 700,000 barrels a day this year to an average of 57 million a day. While U.S. shale output “has been more resilient to lower prices and the drop in drilling activity than expected,” there’s growing evidence “that output declines are accelerating,” the IEA said.

      IEA sees oil markets moving 'close to balance' in second half 2016 -  Platts - Global oil markets will move "close to balance" in the second half of this year as the fall in US tight oil production gathers pace and India helps drive global demand, the International Energy Agency said Thursday. The agency's latest monthly oil market report estimated that global oil supply had dropped by 300,000 b/d month-on-month in March, two thirds of the drop being outside OPEC, but also noted several bearish factors for prices. These included global demand growth slowing to 1.2 million b/d in the first quarter of this year, led by Europe and North America.Commercial oil stocks in the OECD countries appear to have continued their "relentless rise" in February and March, rising by a counter-seasonal 7.3 million barrels in February to create an overhang 387 million barrels above the average at the end of the month, the IEA said. Refined product stocks had fallen by just 11.5 million barrels in February, barely a third of the five-year average for the month, due to mild weather. The IEA also foresees little impact for the time being from a meeting of oil producing countries this Sunday, called to discuss a possible freeze in production levels. It noted that Iranian oil production had risen by nearly 400,000 b/d since the start of the year. In Iraq, surging production in the south is helping compensate for disruption in the north of the country, although a political crisis and shortfalls in payments to companies operating in the south could bode ill for production next year, the IEA said. Regarding Sunday's meeting in Qatar: "If there is to be a production freeze, rather than a cut, the impact on physical oil supplies will be limited," the report said.

      As Oil Nations Consider a Freeze, Looking for Tensions to Thaw - When officials from OPEC, Russia and some other oil-producing countries meet this weekend in Doha, Qatar, to discuss freezing petroleum production at current levels, the session’s significance might have more to do with style than substance.The fact is that the two biggest players at the meeting — Saudi Arabia and Russia — are already pumping virtually flat out. They have little room to increase production even if they wanted to.But signals the two countries have sent recently, indicating they would rather discuss cooperation than continue cutthroat competition, have buoyed oil prices well above their lows in mid-January, when the Brent crude international benchmark dipped below $30 a barrel. On Monday Brent crude was trading above $41.Analysts, oil buyers and speculators will be watching the Doha meeting mainly to see whether the 13 members of the Organization of the Petroleum Exporting Countries and Russia show signs of being able to cooperate enough to exercise market discipline — and maybe even to cut production at some point, if necessary, to bolster oil prices. Signs of disharmony, or a last-minute cancellation of the summit, might send oil prices plummeting yet again, and possibly stir up the broader financial market anxieties that accompanied the winter sell-off.

      Oil Spikes Back To $42 After IEA Comments --Forget Doha, says the International Energy Agency (IEA), bet it all on US production crashing. First, IEA says Doha Don't Matter...A deal to freeze oil production by OPEC and non-OPEC producers will have a limited impact on global supply and markets are unlikely to rebalance before 2017, the International Energy Agency (IEA) said on Thursday.The IEA, which oversees the energy policies of industrialized nations, said even though the decline in U.S. output was gathering pace and Iran was not adding as many barrels as expected, the world would still produce more oil than it consumes throughout 2016. Then, as Bloomberg reports, IEA says global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC... The world surplus will diminish to 200,000 barrels a day in the last six months of the year from 1.5 million in the first half, the agency said in a report on Thursday.Production outside the Organization of Petroleum Exporting Countries will decline by the most since 1992 as the U.S. shale oil boom falters. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions.“There is no doubt as to the direction of travel for the supply-demand balance,” the Paris-based adviser to industrialized nations said. “There are signs that the much-anticipated slide in production of light, tight oil in the U.S. is gathering pace.” And the algos love it...

      US rig count drops 3 this week to 440, another all-time low (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by three this week to 440, again reaching an-time low amid depressed energy industry prices. A year ago, 954 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 351 rigs sought oil and 89 explored for natural gas. Among major oil- and gas-producing states, Texas lost three rigs and Alaska, North Dakota, Pennsylvania and Wyoming each dropped one. New Mexico gained two rigs while Kansas and Louisiana gained one apiece. Arkansas, California, Colorado, Ohio, Oklahoma, Utah and West Virginia were unchanged. The U.S. rig count peaked at 4,530 in 1981. The previous low of 488 set in 1999 was eclipsed March 11, and has continued to dip.

      The oil rig count downward trend continues in Texas, U.S. | Fuel Fix: Texas again led the way in another drop in the number of rigs actively drilling for crude as just 351 oil rigs are left nationwide. Both Texas and the U.S. saw a net loss of three rigs in the past week, according to weekly data compiled by Baker Hughes. That leaves a U.S. total of 440 rigs, including 89 gas-seeking rigs, which represents the lowest total count since the oil field services company first began compiling the data in 1944. Texas’ Permian Basin and Eagle Ford remain the two most active shale plays in the county, based on drilling activity, but each lost one rig this week. Texas is still home to 45 percent of the nation’s operating rigs. Analysts have projected the rig count would dip through most of the first half of 2016. The oil rig count is now down more than 78 percent from its peak of 1,609 in October 2014 before oil prices began plummeting. The benchmark price for U.S. oil was down nearly $1 on Friday and hovering near $40.60 per barrel. While many companies have stopped actively drilling new wells, it hasn’t stopped them from producing oil from existing wells. So oil production is taking much longer to fall than the rig count.

      Crude Oil Prices Rise On New Record Low US Rig Count - With all eyes on Doha this weekend, today's rig count data may have even less signaling power than normal. The US oil rig count has risen for only one week this entire year and continues to track lagged crude prices lower, dropping 3 to 351 (lowest since Oct 09). With gas rigs unchanged, the total rig count dropped once again to a new fresh record low at 440. The reaction in crude oil prices was a small bounce. The US oil rig count is tracking lagged crude prices perfectly still...


      Oil Slips While All Eyes Are On Doha - Oil prices held their ground above $40 per barrel this week, bouncing around at their highest levels since December 2015. Prices lost some ground at the end of the week but held their ground, awaiting the result from Doha when several OPEC members sit down with Russia to hash out their production freeze deal. There has been a lot of confusion surrounding the meeting – whether Saudi Arabia would sign up without Iran’s participation, whether or not any participant would agree to something that places restrictions on their production – but it is unlikely that they would agree to meet unless a positive result was all but assured. Whether that has any material impact on global oil supplies is another matter. Saudi Arabia’s oil minister has already explicitly ruled out a production cut. Nevertheless, oil prices could receive a modest bounce if the parties emerge with a formal “production freeze” deal, even if they had little capacity to increase production anyway. IEA issues bullish report on oil. The three main energy bodies – OPEC, IEA and EIA – released monthly reports this week, and the IEA’s was the most bullish of the bunch. The Paris-based energy agency said that the excess global oil supply may currently stand at around 1.5 million barrels per day (mb/d), but that glut would shrink rapidly to just 0.2 mb/d in the third and fourth quarter of this year. The EIA does not see markets tightening that much until sometime in 2017. If the IEA is correct, oil storage levels will start to draw down significantly in the second half of 2016. Oil prices will continue to be volatile, but the price floor will rise. In other words, prices will go up and down, but we could see higher highs and higher lows.The IEA’s bullish prediction is echoed in the latest movements in the futures market. The contango structure has switched over to backwardation, an indication that speculators are no longer as concerned about a short-term glut in supply as they once were. Some supply disruptions in Nigeria, along with maintenance in the North Sea, has temporarily cut into global production. Meanwhile, in the U.S., the latest EIA data was mixed – weekly oil production dipped below 9 mb/d but oil inventories jumped again to a new record of 536 million barrels.

      US oil closes at $40.36, down 2.75 pct, ahead of Doha: U.S. oil prices fell nearly 3 percent on Friday in thin trade as analysts anticipated a meeting of major oil exporters would provide a floor for the market, but do little to help to clear global oversupply quickly. Futures slightly pared losses after oilfield services firm Baker Hughes reported the number of rigs drilling for oil in U.S. fields fell by 3 to a total of 351 in the previous week. At this time last year, U.S. producers were operating 734 oil rigs. Oil producers led by top exporters Saudi Arabia and Russia will meet in Doha, Qatar on Sunday to discuss freezing output around current levels in an effort to contain a glut exacerbated by production that exceeds demand by about 1.5 million barrels a day. It would be the first joint action by major OPEC and non-OPEC producers in 15 years, although Iran has refused to participate, saying that it wants to rebuild its output to levels achieved before imposition of the recently lifted economic sanctions. "Unless there's a total surprise, the likelihood is that the Doha meeting on Sunday between OPEC/non OPEC will produce something very wishy washy and will be nothing more than smoke and mirrors," one trader said. "I therefore want to sell crude today."

      Iran will not attend Doha oil freeze talks on Sunday: sources | Reuters: Iran will not attend a meeting between OPEC and non-OPEC member countries about freezing oil output levels in Qatar on Sunday, two sources familiar with the situation told Reuters. Producers are struggling with low oil prices and an oversupplied market but have been loath to cede market share by cutting output. Instead, OPEC members Saudi Arabia, Qatar and Venezuela reached a preliminary agreement with Russia in February to freeze production at January levels. They will seek backing for that deal from other producers at Sunday's meeting in Doha, Qatar. Iran's oil minister had not been scheduled to attend, but Tehran was due to send Iran OPEC Governor Hossein ‎Kazempour Ardebilli, oil ministry news agency Shana reported on Friday. Sources told Reuters that Iran had been informed that only those countries willing to agree to freeze their output level should attend. Iran has said it supports the freeze but would not join it until it raises its output and market share to their pre-sanctions levels. Sanctions imposed by the United States and other world powers were lifted in January in return for Tehran agreeing to long-term curbs on its nuclear program. A rise in Iran's oil output will undermine efforts to rebalance the market in 2016, a Reuters poll of oil analysts showed this week. Its production has already surpassed 3.5 million barrels per day (bpd) and exports are set to reach 2 million bpd next month, Iran's deputy oil minister was quoted as saying by state news agency IRNA on Saturday.

      Oil producers gather to weigh output freeze as global industry watches - CBC News: The members of OPEC and some non-OPEC oil producers will sit down in Doha, Qatar, on Sunday with ​the goal of hammering out a production freeze meant to ease oversupply that has led to a massive, devastating drop in prices. Joining the members of OPEC, minus Libya, will be four countries who are not part of the cartel — Russia, Mexico, Oman and Azerbaijan. Several other large oil producers, including Canada, the United States, Norway and Brazil, won't be there. Whether the parties can work out a deal is far from clear. A Bloomberg survey of 40 analysts and oil traders found an even split on whether they think a deal will be struck. The driver behind the meeting has been the dramatic fall in crude prices to 12-year lows. Producers everywhere have been feeling the pain. Billions in spending plans have been chopped. Tens of thousands of jobs have been cut.  Oil prices have been hammered — with the price for West Texas Intermediate crude falling from around $100 US a barrel in mid-2014 to a low around $27 US a barrel in January of this year. There's been a small recovery in recent weeks, pushing the price for WTI on Tuesday back above $42 US a barrel for the first time since November, partly due to speculation that the Doha meeting will produce an agreement, the International Energy Agency said.

      What to expect as key meeting on oil-output freeze looms - But on Wednesday, Saudi Arabia’s Oil Minister Ali al-Naimi played down the prospect of oil producers taking action at the meeting. When asked about such action, al-Naimi reportedly said, “Forget about this topic.” Until Saudi Arabia officially says it has agreed to a production freeze, “rumors will be bought [and] news will be sold,” said John Macaluso, an analyst at Tyche Capital Advisors. The market is often at the mercy of comments from key oil producers. Prices have been volatile, though generally climbed, with Brent and WTI crude up by more than $10 a barrel, since Feb. 16. That is when Saudi Arabia, Russia, Qatar and Venezuela said they wouldn’t increase their output above January’s levels as long as other major producers followed suit. But one member of the Organization of the Petroleum Exporting Countries, Iran, has already rejected the idea, vowing to ramp up production until it reaches the pre-sanction level of 4 million barrels a day. A Platts survey pegged Iranian output at 3.23 million barrels a day in March. “The oil rally is almost completely based on the idea that we will hear an official announcement of a freeze by Russia and the Saudis,” said Kevin Kerr, managing editor and executive publisher of Commodities Watch. “The question is, what about everyone else?” he said. Will a freeze “be adhered to” even if one is announced? [That is] a lot of ‘what ifs’ for the market.”

      What's at risk if Doha oil freeze deal fails -- At best, oil producers meeting in Doha this weekend are expected to come up with a sketchy deal to freeze production at record levels. Analysts say that would do very little to change the world oil glut, but it might help producing nations buy time until the oil market stabilizes. "I think it will be a very loosely worded agreement," said John Kilduff of Again Capital. "I think it's going to be transparent there is no deal." Oil prices have gained sharply over the past two months on high hopes that the Sunday meeting of OPEC and non-OPEC countries will result in a deal to freeze crude production at January levels. But oil analysts now say the best deal producers may agree to could be what seems more like the outlines of a deal. "There's a lot of rhetoric, a lot of statements around the oil market, but the fundamental thing you have to look at is money. It's revenues, and the revenues of these countries that export oil have really collapsed," said Dan Yergin, vice chairman of IHS.  That could indeed be what brought producing nations to the table. "In 2014, OPEC revenues were about a trillion dollars. Last year, they were half a trillion dollars. This year they're on a course to be down another 20 percent," said Yergin. "This creates inordinate pressure on governments. Very difficult choices have to be made. Budgets have to be cut, credit ratings go down. There is a risk of social turmoil and problems. I think that is really weighing on producers, forcing them to find some way to stabilize things." According to a new CNBC Oil Survey, there's better than a 50/50 chance of a freeze agreement being reached, and any deal would be seen as supportive of prices. If it fails, the survey respondents see prices falling sharply,

      Qatar's Oil-Freeze Letter to Norway Reveals Doha Deal Logic - The preliminary agreement by Russia, Saudi Arabia, Venezuela and Qatar to freeze output has already put a floor under crude prices and a deal this weekend to include other producers would extend the recovery, according to Qatar’s Energy Ministry. Analysts and traders have puzzled over exactly why oil producers have devoted so much diplomatic energy to the meeting in Doha on April 17, when the consensus is that the freeze would have little immediate impact on crude production. The letter -- an invitation to the Doha meeting that Norway declined -- gives some answers. Qatar, which is hosting talks between at least 15 countries to finalize the accord, told Norway’s Ministry of Petroleum and Energy that the plan to cap output at January levels has already “changed the sentiment of the oil market,” according to a letter from Energy Minister Mohammed Al Sada obtained by Bloomberg through a freedom-of-information request. If more producers like Norway join in, it will temper the global oil surplus and “build up on this” price recovery, Qatar reasoned. Oil prices, which sank to 12-year lows in January amid a global surplus, have climbed more than 30 percent in the past two months amid speculation producers would make the first significant attempt at coordinating oil output between the Organization of Petroleum Exporting Countries and producers outside the group in 15 years. Oil market watchers see a 50-50 chance that producers will strike a deal, but either way they don’t anticipate any impact on crude supply because most of the countries are already pumping flat out. While the initiative is supporting prices, any agreement that only limits supply rather than implements output cuts will do little to tackle the global glut, the International Energy Agency said on Thursday.

      Saudi Prince Drops Friday Night Bomb: "No Deal Without Iran...We Are Selling At Every Opportunity" - In what appears to be a Doha party-pooping statement, Saudi deputy crown prince Mohammed bin Salman stated unequivocally that The Kingdom won’t restrain its oil production unless other producers, including Iran, agree to freeze output at a meeting this weekend in Doha. This a major problem because - if you remember - this week's melt-up in oil (and thus stocks) was predicated on an anonymous diplomat cited by Interfax saying a deal will get done without Iran (which the Russians refused to confirm). All that hope crushed by a reality that has been painfully obvious that no side will be given in the Iran-Saudi tete-a-tete... and now, as Citi warned "expect a sharp sell-off."  As Bloomberg reports, the world’s biggest crude exporter would cap its market share at about 10.3 million to 10.4 million barrels a day, if producers agree to the freeze, Prince Mohammed bin Salman said during an interview on Thursday at King Salman’s private farm in Diriyah, the original home of the Al Saud royal family. “If all major producers don’t freeze production, we will not freeze production,” said Prince Mohammed, 30, who has emerged as Saudi Arabia’s leading economic force. Adding - rather pointedly that... “If we don’t freeze, then we will sell at any opportunity we get.” “If prices went up to $60 or $70, that would be a strong factor to push forward the wheel of development,” Prince Mohammed said. “But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.” Prince Mohammed also said that Saudi Arabia isn’t concerned because “we have our own programs that don’t need high oil prices.”  Simply put, "no deal," given Iran is sending a junior minister in a clear message that it will do nothing.

      Indonesia eyes overseas oil storage to hold buffer stocks -- Indonesia is in talks with several Middle East nations to lease oil storage tanks as Southeast Asia's biggest consumer aims to eventually create buffer crude and oil product stocks equivalent to 30 days of consumption but faces domestic infrastructure challenges. The country, which consumes around 1.5 million-1.6 million b/d of refined products, last year unveiled long-term plans to build 30 days of stocks over the next five years. Indonesia currently has no mandate on stock levels oil companies need to hold. State-owned Pertamina is expected to hold stocks equal to between 18 and 22 days of demand, and its stocks currently hover at around 18 days. The government would have preferred holding stocks domestically but since domestic storage availability is insufficient, the country is looking overseas, director general of oil and gas at the energy and mines ministry Wiratma Puja said last week.

      Crude congestion Reuters maps of global tanker congestion. Huge traffic jams of tankers have formed around the world with some 200 million barrels of oil either waiting to be loaded or delivered as ports struggle to cope with record volumes in perhaps the most visible sign of the global oil glut. Almost all of the over 660 Very Large Crude Carriers (VLCCs), the largest tankers in use to transport seaborne oil, are used to ship crude between the Middle East and Asia’s consumption hubs around India and the Far East. The map above shows all of these super tankers in operation on April 11. Each icon on the maps represents a large crude tanker of either VLCC or Suezmax size. Hundreds of other small and medium crude carriers are also present in the region but not shown here. Waiting in line Each orange symbol below represents a parked large crude tanker. Ships in transit are not shown.The exporters Despite war and conflict, there are 19 VLCCs and suezmax tankers with a combined capacity of 43 million barrels waiting to be filled off Iraq's Basra as the port struggles to cope with the country's rising crude output. A further 19 are waiting off the eastern coast of the U.A.E. at the ports of Fujairah and Khor Fakkan, also due to loading delays.   China's independent refiners, freed of government constraints after securing permission to import just last year, have gorged on plentiful low-cost crude in 2016. This has created delays for tankers that have quadrupled to between 20 to 30 days at Qingdao port in Shandong province, the key import hub for the plants, known as teapots.

      OPEC cuts forecast for non-OPEC crude oil supply in 2016, trims demand outlook -  Platts --  OPEC believes crude supply outside the producer group is set to fall more than expected, with weaker Chinese, Colombian, UK and US oil output eclipsing better outlooks for Canada, Norway, Oman and Russia. The outlook for non-OPEC supply has been hit largely by lower expectations for crude oil production from China's onshore mature fields. OPEC also cited the postponement of major new projects due to reduced cash flow as the impact of lower prices takes its toll.The 13-member producer group now sees output falling 730,000 b/d over the year, up from a previous estimate of 700,000 b/d, to average 56.39 million b/d in 2016. Indeed, OPEC also partly attributed the 20% surge in oil futures in March on weaker non-OPEC supply in 2016, supply disruptions in Iraq and Nigeria, signs US shale is shrinking, along with expectations of a supply intervention plan by major crude exporters in Doha on April 17.  OPEC highlighted that bigger oil producers were adapting to lower prices, with lower production costs mainly in the US, hedging and some companies swallowing losses rather than cut output. The question remained for how long, as OPEC also warned that oversupply persists amid record stock levels.

      India Echoing Pre-Boom China As New Center Of Oil Demand Growth -- In the energy world, India is becoming the new China. The world’s second-most populous nation is increasingly becoming the center for oil demand growth as its economy expands by luring the type of manufacturing that China is trying to shun. And just like China a decade ago, India is trying to hedge its future energy needs by investing in new production at home and abroad. India may have one advantage its neighbor to the northeast didn’t. While China’s binge came during a commodity super-cycle that saw WTI crude reach a high of $147.27 a barrel in 2008 -- due in no small part to its demand -- India’s spurt comes during the biggest energy price crash in a generation. While oil has tumbled more than 50 percent from mid-2014 levels, the South Asian nation spent $60 billion less on crude imports in 2015 than the previous year even while buying 4 percent more. “In addition to the boost from low oil prices, structural and policy-driven changes are under way which could result in India’s oil demand taking off in a similar way to China’s during the late 1990s, when Chinese oil demand was at levels roughly equivalent to current Indian oil demand,” said Amrita Sen, chief oil analyst for Energy Aspects Ltd. in London. In 1999, China’s economy was less than a 10th of its current size of more than $10 trillion, and bicycles vied for space with taxis and buses on crowded streets in major cities like Shanghai. In the ensuing 17 years the economy, spurred on by foreign investment in manufacturing, grew from the seventh largest in the world to No. 2. Vehicle sales surged and oil demand has nearly tripled since then, positioning the country to overtake the U.S. as the world’s largest crude importer this year. -

      India, Iran seek to boost ties on crude oil, LPG, petchems -   Platts - India and Iran have agreed to boost energy cooperation, with Tehran eyeing increased crude oil sales to the Asian importer, while New Delhi explores the potential for Indian companies to invest up to $20 billion in various projects in the Middle Eastern country. After holding talks with visiting Indian oil minister Dharmendra Pradhan in Tehran, Iranian oil minister Bijan Zanganeh said he was hopeful that crude oil exports to India would rise from the current 350,000 b/d. "We hope that this figure is increased with the support and assistance of the Indian government, now that sanctions have been lifted," Zanganeh was quoted as saying by Shana news agency.The Indian side has positively responded to the offer. "Iran is the sixth-largest oil exporter to India. But we would like Iran to increase its oil exports to India and regain its previous position," Pradhan was quoted as saying by Shana. According to latest shipping data obtained by Platts and cFlow, Platts trade flow software, Iran was the sixth-largest crude oil supplier to India in the January-February period, with imports at 1.74 million mt, up nearly 13% from 1.54 million mt in the same period a year earlier.

      Saudi Arabia gets credit rating downgrade: Saudi Arabia's reputation for sterling finances encountered a setback Tuesday as Fitch Ratings downgraded the country's credit ratings. The downgrades follow the crushing decline in oil prices, which has battered the country's fiscal picture even as it continues to pump out petroleum at a steady clip. The agency downgraded Saudi Arabia's long-term and local-currency issuer ratings from AA to AA- and left the outlook for both ratings at negative, signaling possible future downgrades. The move stemmed from Fitch's assumption that oil prices will average about $35 per barrel in 2016 and about $45 per barrel in 2017. It also comes more than a month after Saudi Arabia oil minister Ali bin Ibrahim Al-Naimi told industry executives in Houston that a production cut by the Organization of the Petroleum Exporting Countries is "not gonna happen" despite a global glut of oil. He signaled at the time that Saudi Arabia was prepared to keep pumping oil at low prices to maintain market share as the market weeds out higher-cost players. But that strategy is coming at a cost for Saudi Arabia. Oil's slide triggered a gaping budget deficit of 14.8% of gross domestic profit in 2015, up from 2.3% a year earlier, according to Fitch. Fitch said that hole would "narrow only marginally" this year. In addition to rising debt, Fitch said one of its concerns is geopolitical risks emanating from tension between Saudi Arabia and Iran.

      Fitch Sees Saudi's Oil Price Averaging $35/Bbl In Current Calendar Year -- The headline caught my attention: Saudi Arabia gets credit rating downgrade, as reported in USA Today. But the real story was in the fourth paragraph: The move stemmed from Fitch's assumption that oil prices will average about $35 per barrel in 2016 and about $45 per barrel in 2017.  For as long as most folks can remember, Saudi Arabia set their national budget based on $100 oil. Then in 2015, Saudi Arabia set their 2016 (this year's) budget on $60 oil, which seemed to confirm the "word on the street" that Saudi Arabia never expected oil to drop below $60/bbl as an average for an entire year.  I've run the numbers under several scenarios. I don't know how "we" get to $60 oil as an average this year. Fitch suggesting that the 2016 (this year's) average will be $35/bbl, suggests that Fitch sees new lows this year. 

      GCC states set to borrow billions to fund deficits | The oil-rich states in the Gulf Cooperation Council (GCC) region could end up borrowing $285 billion to $390 billion through 2020 to contain budget shortfalls caused by lower oil prices, according to a new report. The cumulative borrowings, which will be generated through the issuance of local and international debt/bonds, is a significant jump from the $72.1 billion raised between 2008 and 2014, noted the latest research furnished to Gulf News by Marmore, a fully-owned subsidiary of Kuwait Financial Centre (Markaz). Between 2015 and 2016 alone, countries in the GCC are expected to register a fiscal deficit of $318 billion as a result of lower oil prices. “Prolonged lower oil prices could further exacerbate the fiscal situation,” the report said. “Assuming low oil prices persist, public foreign assets could decline substantially over the next five years. The bulk of the financing requirement would be concentrated in Saudi Arabia, while Kuwait, Qatar and the UAE are expected to preserve the sizable foreign assets.” The GCC states include Saudi Arabia, Kuwait, Oman, UAE, Qatar and Bahrain. Most of these economies rely heavily on revenues from oil. The price of oil has dropped significantly in recent times. After rallying to $115.19 per barrel in June 2014, Brent crude plummeted to $27.88 per barrel on January 20, 2016, posting a massive decline of about 75 per cent. The drop has affected GCC economies, considering that the money generated from oil constitutes approximately 80 per cent of overall government revenues. Some analysts, however, are skeptical about the assumptions raised by the Markaz research. Experts have also said that certain GCC states, like the UAE, remain resilient and are poised to weather the impact of lower oil prices.

      How 315 Billion Petrodollars Evaporated - The world’s top oil exporters are burning through their petrodollar assets at an accelerating pace, increasing the pressure to reach a deal to freeze production to bolster prices. The 18 nations set to gather in Doha on Sunday to discuss a production freeze have spent $315 billion of their foreign-exchange reserves -- about a fifth of their total -- since the oil slump started in November 2014, according to data compiled by Bloomberg. In the last three months of 2015, reserves fell nearly $54 billion, the largest quarterly drop since the crisis started. The petrodollar burn has consequences beyond the oil nations, affecting international fund managers like Aberdeen Asset Management Plc and global currencies markets. Oil nations have traditionally held their reserves in U.S. Treasuries and other liquid securities. Nonetheless, the impact in credit markets has been muted as central banks continue to buy debt. "We expect 2016 to be yet another painful year for most of the oil states," said Abhishek Deshpande, oil analyst at Natixis SA in London. The gathering in Doha will comprise both OPEC and non-OPEC states, though any deal to boost prices will probably be largely cosmetic as countries are already pumping nearly at record levels. In a letter inviting countries to the Doha meeting, Qatar Energy Minister Mohammed Al Sada said oil countries need to stabilize the market in "the interest of a healthier world economy as the present low price is seen to be benefiting no one." Saudi Arabia accounts for nearly half of the decline in foreign-exchange reserves among oil producers, with $138 billion -- or 23 percent of its total -- followed by Russia, Algeria, Libya and Nigeria. In the final three months of last year, Saudi Arabia burned through $38.1 billion, the biggest quarterly reduction in data going back to 1962.

      Iran's Massive Oil Fleet Begins To Move: 29 Million Barrels Depart Iran In Past 2 Weeks -- A recurring oil market theme in the past few months has been the speculation that despite its jawboning that it is ready and willing to boost crude production, Iran has had a hard time getting both the funding and the required infrastructure to substantially boost its production to recapture its supply levels last seen before the recent US sanctions. That however appears to be changing fast.  Recall all those tankers we have profiled before on anchor next to the Iran shore? They have finally started to move. According to Bloomberg, tankers carrying about 28.8 million barrels of crude, or more than 2 million a day, left the Persian Gulf country’s ports in the first 14 days of April, according to tanker-tracking data. That compares with a rate of about 1.45 million barrels a day in March. As a result, Iran’s crude shipments have soared by more than 600,000 barrels a day this month, adding to the pressure facing producer nations as they prepare to meet in Doha to discuss freezing output to prop up oil prices. Putting that number in context, 600,000 barrels a day is precisely how much US oil production has declined by since peaking late last year as a result of the collapse in oil prices and the mothballing of various rigs.  Where is all this fresh oil headed? According to Bloomberg, most of these tens of millions in fresh barrels of oil are headed to China which will be the biggest recipient of Iranian crude loaded so far this month, while flows to Japan are resuming after halting in March, the tracking data show. To be sure Iran is taking advantage of supply disruptions at other OPEC exposrters: Nigeria and Iraq saw a combined decline of 90,000 barrels a day, according to the International Energy Agency.

      Angola Could Be OPEC's First Member To Fall -- OPEC-member Angola, which is dependent on oil for 95 percent of its export revenues, isfacing an urgent cash flow problem, and the only way out is external help as thedominoes start to fall. Angola has sought financial aid from the International Monetary Fund (IMF) to weather the crisis engulfing the African nation due to low oil prices, while President José Eduardo dos Santos has gone as far as to dip into the country’s sovereign wealth fund just to pay civil servant salaries. The Finance ministry said in a statement: “The government of Angola is aware that the high reliance on the oil sector represents a vulnerability to the public finances and the economy more broadly. The government will work with the IMF to design and implement policies and structural reforms aimed at improving macroeconomic and financial stability, including through fiscal discipline.” Along with the drop in oil prices, it doesn’t help that Angola’s economy has largely become a kleptocracy - a government run by those gunning for status and personal gain at the expense of the nation. For those who may argue with this terminology, we can look at the Angolan President’s daughter, Isabel dos Santos, who is worth $3.3 billion and is the richest woman in Africa, according to Forbes. Meanwhile, 68 percent of the Angolan population lives below the poverty line. President José Eduardo dos Santos has run the country since 1979, but until now, he hasavoided seeking aid from the IMF, most likely because the IMF has been known to delve into the state’s finances to locate irregularities—irregularities such as the President’s daughter’s net worth being over 6,000 times Angola’s GNI.

      Russia Refutes Its Own Rumor, Says Doha Deal Will Have Few Detailed Commitments - Yesterday, Russia said there was a virtual deal assured with Saudi Arabia to "freeze" production (at record levels) that did not require Iran's participation. And now, it appears the Russians are walking that confident "hope" back. Russia's energy minster just told a briefing that the Doha "freeze" deal would be "loosely-framed with few detailed commitments." Not exactly what the market was hoping for... And finally, the incessant bullshit on mainstream media that "everyone" is short oil into the Doha weekend is utter tripe - in fact Oil ETF shorts are at the lowest level in 4 months.

      Second Russian intelligence report on Turkey’s current assistance to Daesh -- The main supplier of weapons and military equipment to ISIL fighters is Turkey, which is doing so through non-governmental organizations. Work in this area is overseen by the National Intelligence Organization of Turkey. Transportation mainly involves vehicles, including as part of humanitarian aid convoys.The Beşar foundation (President — D. Şanlı) is most actively engaged in pursuing these objectives and, in 2015, formed around 50 conveys to the Turkmen areas of Bayırbucak and Kızıltepe (260 km north of Damascus). Donations from individuals and entities are “officially” its main source of funding. In point of fact, the organization’s account receives such funds from a specific budget allocation of the National Intelligence Organization [MIT]. The Beşar foundation has opened current accounts in Turkish and foreign banks with the support of the Government.The İyilikder foundation (President — Mr. I. Bahar) is also a major supplier of weapons and military equipment to Syrian territory under ISIL control, having dispatched around 25 different supply convoys in 2015. The leadership of this non governmental organization is funded by sources from European and Middle Eastern countries. Funds in hard currency are transferred to Kuveyt Türk and Vakıf bank accounts. The Foundation for Human Rights and Freedoms [IHH] (President — Mr. B. Yıldırım) is actively engaged in delivering munitions to terrorists in Syria. It is officially supported by the Government of Turkey and acts under the direction of the Turkish intelligence services. Since 2011, the foundation has sent 7,500 vehicles with various supplies to territory under ISIL control. This organization is funded from Turkish sources and by other States. The Turkish banks Ziraat and Vakıf are used for fundraising.

      U.S. Delivers 3,000 Tons Of Weapons And Ammo To Al-Qaeda & Co in Syria - The United States via its Central Intelligence Agency is still delivering thousands of tons of additional weapons to al-Qaeda and others in Syria.  The British military information service Janes found the transport solicitation for the shipment on the U.S. government website Janes writes:  The FBO has released two solicitations in recent months looking for shipping companies to transport explosive material from Eastern Europe to the Jordanian port of Aqaba on behalf of the US Navy's Military Sealift Command.  Released on 3 November 2015, the first solicitation sought a contractor to ship 81 containers of cargo that included explosive material from Constanta in Bulgaria to Aqaba...The cargo listed in the document included AK-47 rifles, PKM general-purpose machine guns, DShK heavy machine guns, RPG-7 rocket launchers, and 9K111M Faktoria anti-tank guided weapon (ATGW) systems. The Faktoria is an improved version of the 9K111 Fagot ATGW, the primary difference being that its missile has a tandem warhead for defeating explosive reactive armour (ERA) fitted to some tanks.The Janes author tweeted the full article (copy here). One ship with nearly one thousand tons of weapons and ammo left Constanta in Romania on December 5. The weapons are from Bulgaria, Croatia and Romania. It sailed to Agalar in Turkey which is a military pier and then to Aqaba in Jordan. Another ship with more than two-thousand tons of weapons and ammo left in late March, followed the same route and was last recorded on its way to Aqaba on April 4. We already knew that the "rebels" in Syria received plenty of weapons during the official ceasefire. We also know that these "rebels" regularly deliver half of their weapon hauls from Turkey and Jordan to al-Qaeda in Syria (aka Jabhat al-Nusra):

      Let The Carpet Bombing Begin: U.S. Deploys B-52s In Fight Against ISIS -- Several months ago, the US press and military had a field day with Donald Trump's suggestion to send the heavy equipment to Syria and Iraq and "carpet bomb" the Islamic State. In February, Army Lt. Gen. Sean MacFarland, who directs the coalition fighting ISIS in Iraq and Syria, butchered the idea and detailed why it's militarily unacceptable. "Indiscriminate bombing where we don't care if we are killing innocents or combatants is just inconsistent with our values," he said in response to a question from CNN on the possibility of using carpet bombing. According to Reuters, for the first time in 25 years, the U.S. Air Force deployed B-52 bombers to Qatar on Saturday to join the fight against Islamic State in Iraq and Syria. This is the first time the B-52 has been based in the Middle East since the end of the Gulf War in 1991.

      As Islamic State is pushed back in Iraq, worries about what's next | Reuters: As U.S.-led offensives drive back Islamic State in Iraq, concern is growing among U.S. and U.N. officials that efforts to stabilize liberated areas are lagging, creating conditions that could help the militants endure as an underground network. One major worry: not enough money is being committed to rebuild the devastated provincial capital of Ramadi and other towns, let alone Islamic State-held Mosul, the ultimate target in Iraq of the U.S.-led campaign. Lise Grande, the No. 2 U.N. official in Iraq, told Reuters that the United Nations is urgently seeking $400 million from Washington and its allies for a new fund to bolster reconstruction in cities like Ramadi, which suffered vast damage when U.S.-backed Iraqi forces recaptured it in December. "We worry that if we don't move in this direction, and move quickly, the progress being made against ISIL may be undermined or lost," Grande said, using an acronym for Islamic State. Adding to the difficulty of stabilizing freed areas are Iraq's unrelenting political infighting, corruption, a growing fiscal crisis and the Shiite Muslim-led government's fitful efforts to reconcile with aggrieved minority Sunnis, the bedrock of Islamic State support. Some senior U.S. military officers share the concern that post-conflict reconstruction plans are lagging behind their battlefield efforts, officials said. "We're not going to bomb our way out of this problem,"

      World War Three may have already begun in Iraq and Syria - The recent death of a Marine in Iraq exposed the fact the United States set up a firebase there, which in turn exposed the fact the Pentagon misrepresented the number of American personnel in Iraq by as many as 2,000. It appears a second firebase exists, set up on the grounds of one of America’s largest installations in the last Iraq war. Special operations forces range across the landscape. The Pentagon is planning for even more troops. There can be no more wordplay: America now has boots on the ground in Iraq.The regional picture is dismal. In Syria, militias backed by the Central Intelligence Agency are fighting those backed by the Pentagon. British, Jordanian and American special forces are fighting various enemies in Libya, which, as a failed state, is little more than a nascent Iraq likely to metastasize in its neighbors.But Iraq remains the center of what Jordanian King Abdullah now refers to as the Third World War. It is where Islamic State was birthed, and where the United States seems to be digging in for the long haul.Though arguably the story of Islamic State, Iraq and the United States can be traced to the lazy division of the Ottoman Empire after World War One, things truly popped out of place in 2003, when the U.S. invasion of Iraq unleashed the forces now playing out across the Middle East. The garbled post-invasion strategy installed a Shi’ite-dominated, Iranian-supported government in Baghdad, with limited Sunni buy-in.

      China’s steel glut will take years to resolve; faces global pressure -- China is facing increasing international pressure to tackle a steel supply glut that has flooded global markets and left beleaguered overseas producers at risk of closure. China produces half the world’s steel but those hoping it will tackle its surplus capacity quickly will be disappointed, despite rhetoric from Beijing. A steel production glut that has taken years in the making, will equally take years to resolve. The economy is growing at its slowest pace in 25 years and labour unrest is on the rise, a worry for the ruling Communist Party that fears the social unrest that millions of laid off steel workers could bring. “Closures can not be completed overnight,” said a person with ties to China's leadership. “Stability is the top priority.” China’s fading economic growth has exposed the huge surplus capacity in steel making, leaving many producers with heavy losses that are adding to already high debts. Many see the solution in exports, which rose to a record in 2015, a major factor dragging global prices down to decade lows. Tata Steel has blamed a flood of cheap steel imports, including from China, for a decision to pull out of Britain, putting 15,000 jobs at risk. On Monday, more than 40,000 German steel workers took to the streets to protest against dumping from China, among other issues such as industry consolidation that they fear will cost them their jobs. Hillary Clinton, widely expected to be the Democrat candidate in US Presidential elections this year, added her voice to the criticism, saying on Monday she would “impose consequences when China breaks the rules by dumping its cheap products in our markets.”

      China's producer price deflation eases, monetary support may slow | Reuters: China's producer prices fell less than expected in March while consumer inflation stabilised, a sign that strong deflationary pressures in the country's industrial sector may be lessening. Some economists said receding worries over factory gate price declines might point to less aggressive monetary easing in the coming months. They have been watching how inflation evolves this year following a prolonged easing campaign by China's central bank beginning in late 2014, which has boosted credit, but has yet to result in substantial price increases. Producer prices in March fell 4.3 percent from a year earlier, extending their decline to a full four years, but at a slower rate than a median forecast in a Reuters poll of a 4.6 percent decline. Economists said the slower fall in producer prices was driven by recovering global commodity prices and also the uptick in construction activity at home. "PPI has benefited from a pick-up in real estate and infrastructure investment and new orders from the government,"

      China CPI Misses, Drops Sequentially As PPI Declines For 49 Consecutive Months -- There was some good and some bad news in tonight's Chinese March inflation (and deflation in the case of PPI) data.  The good news, for those who believes that rising inflation is a positive economic outcome, was that Producer Prices declined "only" 4.3% Y/Y, or less than the –4.6% exoected, and better than the -4.9% drop last month. On a sequential basis, PPI rose by 0.5% on the back of various commodity input prices posting a modest increase in the past month on the back of China's epic January loan injection. However, putting that rebound in context, on an annual basis, Chinese gate inflation, or rather deflation, has now been negative for 49 consecutive months. The not so good news, was in the CPI print, which rose 2.3% Y/Y, missing expectations, and in line with last month's identical increase. This tied headline inflation at a 22 month high, even as non-food inflation rose a paltry 1% in March.

      China first quarter GDP growth seen at 6.7 percent year on year, slowest since 2009 - Economists say that China grew at its slowest pace since the financial crisis in the first quarter, highlighting continued downward pressure on the world's second largest economy despite some tentative recent signs of stabilization. Growth in first quarter gross domestic product (GDP) likely slowed to 6.7 percent from the same period last year, down from 6.8 percent in the fourth quarter of 2015, according to a Reuters poll of 64 economists. That would be the weakest pace of expansion since the first quarter of 2009, when growth fell to 6.2 percent. China's economy grew 6.9 percent in 2015, its slowest rate in more than two decades. Forecasts for annual growth in the first quarter ranged from 5.8 percent to 7.2 percent, with a median of 6.7 percent.

      China's economy grows at weakest pace in seven years: hinese growth has slowed to its weakest pace in seven years, as analysts warn that the world’s second largest economy has become increasingly reliant on debt to keep growing. Official figures showed that China's economic output rose by 6.7pc in the first quarter of the year, compared with a 6.8pc increase in the final three months of last year. A spokesman for the National Bureau of Statistics (NBS), which compiled the data, said that the growth rate was “better than expected” and that the economy showed “a turn to stabilisation”. The pace of quarterly growth was the weakest reported since the financial crisis in 2009. It came as fears have grown about China’s growth prospects, and the possibility of a sudden slowdown in activity, or a so-called “hard landing”. While the growth data appeared to show only a moderate dip in activity, in part as a result of stronger housing and infrastructure activity, the  NBS spokesman admitted that “difficulties on structural adjustment persist and downward pressure on the economy cannot be ignored”. Communist leaders have acknowledged that growth is likely to remain lower than the levels achieved in recent years. However, Li Keqiang, China’s premier, has said that missing the government’s annual growth target of 6.5pc to 7pc would be “impossible”.

      As China’s Growth Slows, Banks Feel the Strain of Bad Debt -  — For Chinese banks, the decision to lend to companies like Bohai Steel was for years a no-brainer. Lenders took heart from its state backing, which appeared as solid as the millions of tons of steel pipes that rolled off its production lines each year.That ironclad image is now tarnished. Plunging demand and a worsening glut in production capacity have left Bohai Steel struggling to repay as much as $30 billion in debt. Worried creditors — more than 100 of them — are locked in negotiations with the company and local officials.China’s bad loans are on the rise, as companies that borrowed heavily in headier times struggle against a slowing Chinese economy. Underscoring the slowdown, China said on Friday that growth in the first three months of this year fell to 6.7 percent, a seven-year low. Growth might have been even slower, had China not revved up lending during the quarter — a solution that could add to debt problems later on.The stakes are high for banks and for the Communist Party, which ultimately controls wide swaths of China’s economy.China’s total local currency loans have more than tripled since the start of 2009, to 98.6 trillion renminbi, or about $15 trillion, at the end of March, according to official Chinese figures from CEIC, a data provider. That is equal to 144 percent of China’s gross domestic product in the 12 months to the end of March — relatively high for China’s level of development, and still rising. In January, Goldman Sachs said other countries that experienced similar debt run-ups faced either financial crises or prolonged slowdowns.

      The Rise of Shadow Banking in China -- Atlanta Fed's macroblog  -- China's banking system has suffered significant losses over the past two years, which has raised concerns about the health of China's financial industry. Such losses are perhaps not all that surprising. Commercial banks have been increasing their risk-taking activities in the form of shadow lending. See, for example, here, here, and here for some discussion of the evolution of China's shadow banking system.  The increase in risk taking by banks has occurred despite a rapid decline in money growth since 2009 and the People's Bank of China's efforts to limit credit expansions to real estate and other industries that appear to be over capacity. One area of expanded activity has been investment in asset-backed "securities" by China's large non-state banks. This investment has created potentially significant risks to the balance sheets of these institutions (see the charts below). Using the micro-transaction-based data on shadow entrusted loans, Chen, Ren, and Zha (2016) have provided theoretical and empirical insights into this important issue (see also this Vox article that summarizes the paper).Recent regulatory reforms in China have taken a positive step to try to limit such risk-taking behavior, although the success of these efforts remains to be seen. An even more challenging task lies ahead for designing a comprehensive and sustainable macroprudential framework to support the healthy functioning of China's traditional and shadow banking industries.

      Follow Up on Chinese NPLs -- I wanted to make some brief follow up points that will be a little more technical than what appears in my BloombergViews piece.  As usual start there and finish up here.

      1. I am decidedly pessimistic about the state of the Chinese economy and finances, but I really do not see a near term risk of what we would think of as a financial crisis. China is saddled with enormous sums of bad debt, people are taking their money out of China, surplus capacity is simply astounding, and cash flow growth through the economy is hovering around zero.  There is very little to be positive about, but I see little risk this year of some type of crisis.
      2. I do not believe we have reached or are even at a near term inflection point, barring some exogenous shock, where financial conditions so escape policy and bankers control that the path is set.
      3. Maybe my biggest concern is the inability of bankers and regulators to face the problem. I actually should just say regulators as they are clearly the driving force at play.  As one simple example, after all the talk about deleveraging in December, debt growth has pretty much exploded.  Not only are they not deleveraging, they are adding fuel to the fire.
      4. The supposed 1 trillion RMB debt for equity swap does not even begin to address the size of the problem. Caixin highlights one steel producer, let me say it again one steel producer, with 192 billion RMB in loans in cannot pay with its largest subsidiary not having paid interest since 2011.  Let’s make a simple assumption that you wanted to keep this steel company in business and complete a 100% debt for equity swap.  You would immediately use up 20% of the 1 trillion in capital on one company.  Even the Xinhua has noted the larger problem of unprofitable steel firms which made only a small profit in 2014 and a large loss in 2015.  Accounting for the debt and overstatement of financial health, 1 trillion in capital will not even begin to address the problems in one industry.

      IMF sees $1.3 trillion in 'at-risk' Chinese company debt - Times of India: The International Monetary Fund said Wednesday that corporate China's balance sheets have deteriorated to the point that some $1.3 trillion in borrowings is at risk of default. It said that the financial health of Chinese companies has declined as profitability has sunk amid slower economic growth, and there is clear evidence that more companies are not earning enough to cover the interest owed on borrowings. Such "debt at risk" has risen to 14 percent of all debt at listed Chinese companies, triple the level of 2010, the IMF said in its Global Financial Stability Report. That means that bank loans at risk amount to nearly $1.3 trillion, it said. "These loans could translate into potential bank losses of approximately 7 percent of GDP."The IMF said that, given the buffers Beijing has built up for its banks, and still-strong economic growth, the huge number is recognized by authorities and is "manageable." Even so, it added, "the magnitude of these vulnerabilities calls for an ambitious policy agenda." The IMF said Beijing needs to address the massive corporate debt overhang and further strengthen financial institutions

      It's Never Been This Hard for Chinese Debtors to Pay Interest -  Firms generated just enough operating profit to cover the interest expenses on their debt twice, down from almost six times in 2010, according to data compiled by Bloomberg going back to 1992 from non-financial companies traded in Shanghai and Shenzhen. Oil and gas corporates were the weakest at 0.24 times, followed by the metals and mining sector at 0.52. The People’s Bank of China has lowered benchmark interest rates six times since 2014, driving a record rally in the bond market and underpinning a jump in debt to 247 percent of gross domestic product. Yet economic growth has slumped to the slowest in a quarter century and profits for the listed companies grew only 3 percent in 2015, down from 11 percent in 2014. The mounting debt burden has caused at least seven firms to miss local bond payments this year, already reaching the tally for the whole of last year. "We will likely see a wave of bankruptcies and restructurings when the interest coverage ratio drops further,” said Xia Le, chief economist for Asia at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “Return on assets for Chinese companies has been declining due to rising debt. Profitability is also slowing due to overcapacity in many sectors, which has weakened the ability of companies to repay their debts."

      Tale of Two Chinas Is Emerging as Economy Slows, Fidelity Says - A tale of two Chinas is emerging as the country transforms its export-based economy to one centered on consumption and services, according to analysts at Fidelity International. "There is a story of two halves, old and new, and also a story of north and south," Henk-Jan Rikkerink, Fidelity’s London-based global head of research, said during a visit to Hong Kong. Regions of the country where businesses focus on "moving up the value chain, greater innovation, higher wage growth, and all of that supports the China consumer story" are flourishing, with growth rates above 6 percent, Rikkerink said. "The areas that are very heavily dependent on resources are struggling more as demand declines and capital spending is cut." Yunnan province, a popular tourist destination in the south of the country, achieved 8.7 percent growth last year, well above the national average of 6.9 percent. In contrast, Liaoning in the northeastern rust belt managed just 3 percent. Fidelity surveys views of its 200 analysts around the world each year to produce a global business sentiment indicator on a scale of 1-10, with 10 the most positive. Results of the latest survey show that China scored 4.1, indicating a deteriorating overall corporate climate. The 2014 reading was 4.4. "Our analysts overall are forecasting a deceleration, not a collapse," said Rikkerink. "About half the China analysts are reporting that their industries are either in slowdown or in recession, and therefore returns expectations are not as positive in 2016 as they were in 2015 in terms of the year ahead. That is feeding through to capital expenditure as well as management confidence."

      China internet regulator says web censorship not a trade barrier | Reuters: China's online censorship system protects national security and does not discriminate against foreign companies, the country's internet regulator said, after the United States labeled the blocking of websites by Beijing a trade barrier. The U.S. Trade Representative (USTR) wrote in an annual report that over the past year China's web censorship has worsened, presenting a significant burden to foreign firms and internet users. China has long operated the world's most sophisticated online censorship mechanism, widely known outside the country as the Great Firewall, though USTR had not listed it as a trade impediment since 2013, when Xi Jinping became China's president. The Cyberspace Administration of China (CAC) said that its online censorship did not target specific countries or violate its trade commitments. "The aim of the internet security inspection system is to guarantee the security and controllability of information technology products and services, safeguard user information security, and strengthen market and user confidence," CAC said in a fax to Reuters late on Friday. "China scrupulously abides by World Trade Organization principles and its accession protocols, protects foreign enterprises' lawful interests according to law, and creates a fair market environment for them," the regulator said.

      China's jump in exports soothes growth fears, boosts markets | Reuters: China's exports in March returned to growth for the first time in nine months, adding to further signs of stabilisation in the world's second-largest economy that cheered regional investors. March exports rose a blistering 11.5 percent from a year earlier, the first increase since June and the largest percentage rise since February 2015. Fears of a hard landing in China even as policymakers press on with tough reforms to rebalance the economy have rattled financial markets, with investors eagerly hunting for tentative signs the economic slump may be bottoming. Economists, however, warned that Wednesday's data was not evidence of stronger global demand as it was heavily skewed by base effects and seasonal distortions from the Lunar New Year. And despite signs of green shoots for China, first quarter GDP data on Friday is expected to show the economy growing at its slowest pace since the financial crisis. Combined with tepid inflation, that is likely to keep Chinese monetary policy loose for some time yet. Investors celebrated, nevertheless, with key Chinese stock indexes hitting three-month highs and the yuan firming, while regional stock markets and the Australian dollar, which often trades as a proxy to Chinese growth, also firmed.

      China's Economy Slows to 6.7%, Lowest Rate Since 2009: — China’s economic growth slowed in the first quarter to 6.7% compared with the previous year, according to official data released Friday.The report showed that the world’s second largest economy grew at its slowest pace since the global financial crisis in 2009.The Chinese economy is undergoing a prolonged slowdown as the country’s leaders try to engineer a tricky transition away from a growth model based on export manufacturing and investment and instead focus on more sustainable services and private consumption.The latest numbers matched most economists’ expectations and suggest the economy is on track to meet the official full-year growth target of 6.5 to 7%.

      Economists React: China Q1 Growth Slows, But March Data Offer Hope - China’s economic growth slipped further in the first quarter of the year, but data in March all surpassed expectations, offering some hope for the prospects of the world’s second largest economy. China’s gross domestic product grew 6.7% in the first quarter from a year earlier, a tad down from a 6.8% pace recorded in the final quarter of last year, the National Bureau of Statistics said Friday. The growth was in line with market expectations, but still it’s the slowest quarterly growth since the first quarter of 2009 when China was hit by the global financial crisis. However, on the bright side, other economic data also released on Friday, including industrial output, fixed-asset investment, retail sales and new credit, all rose more than expected in March, suggesting that Beijing’s stimulus policies have had an effect on economic activity. Following are excerpts from economists’ views on the latest data, edited for length and style:

      U.S. Sees Big Losses for China From Corn Stocks Write-Down - WSJ: An overhaul of China’s agricultural policy will probably result in losses of more than $10 billion for the state agencies that hold huge stockpiles of inedible corn, according to the U.S. Agriculture Department. Some analysts estimate that more than 20 million metric tons of China’s corn are “so moldy or deteriorated that they are no longer suitable for human consumption or feed use,” wrote the USDA’s Beijing bureau in a report published Wednesday. Some of it may be used to make ethanol fuel, while some may be worthless, the USDA said. In a bid to unwind China’s expensive agricultural subsidy program, policy makers announced last month that the prices of all crops except wheat and rice will be set by the market. Under its current system of minimum prices, China has accumulated vast surpluses of crops, even as it imports cheaper grain from overseas. China’s total corn stocks will fall by six million tons to 103.4 million tons in the year to June 2017, the USDA said—the first annual decline in six years—as the overhauls push down prices and incentivize consumption of domestic rather than imported grain. The  BMI Research forecast that China’s corn market will swing from a surplus of around 5.2 million tons in 2015 to a 6.4 million ton deficit by 2020. The USDA said state-owned grain storage firm China Grain Reserves Corp., or Sino Grain, plans to sell “an unspecified large quantity” of three-year-old grain at 1,400 yuan ($216) a ton in the second quarter of 2016, citing an industry contact. The support price paid by the government to farmers for corn was most recently set at 2,000 yuan a ton, down from 2,250 yuan in 2014. Since its removal, corn has traded at around 1,550 to 1,650 yuan a ton in the cash market, the USDA said.

      Beijing trains gun on underground banks to check cash exodus - Beijing will intensify its crackdown on the country’s underground banking system to stem illegal capital outflows, as part of its efforts to keep the financial sector in order. State-level law-enforcement authorities and financial regulators are determined to root out illegal money transfers abroad that not only threaten China’s financial stability but also fuel criminal activities such as drug trafficking, terrorism and corruption, Zhang Shenghui, chief of inspection department at the State Administration of Foreign Exchange (SAFE), told state-owned Economic Information Daily. Admitting that the regulator has been facing increasing pressure to control money outflows since the second half of last year amid yuan’s depreciation, Zhang said the SAFE would tighten loopholes with stronger supervision and data analysis. Yuan’s value and capital outflows expected to stabilise His remarks came after a round of nationwide inspections that uncovered illegal deals worth more than 1 trillion yuan involving money transfers. Li Youhuan, a professor at Guangdong Academy of Social Sciences who researches fund flows, said the amount is a drop in the bucket of illegal transactions through the underground banking system, and that it would take some time before the regulatory loopholes are fully plugged. The SAFE, along with the central bank, the ministry of public security, the supreme court and the supreme procuratorate, waged a high-profile war against underground banks last year following a stock market rout and a one-off devaluation of the yuan. Illegal capital outflows could cripple China’s financial system, spark social unrest and trigger a loss of confidence in the world’s second-largest economy

      China voices anger at G7 comments on disputed islands - BBC News: China has said G7 nations should "stop making irresponsible remarks" after foreign ministers released a statement on maritime territorial disputes. The ministers, meeting in Japan, said they opposed "any intimidating coercive or provocative unilateral actions" that could increase tension.   China claims almost all the South China Sea and areas of the East China Sea, angering neighbours who have competing claims. It has also been reclaiming land. Experts say satellite images of the reclamation work could indicate that China may be steadily militarising the islands it is creating or expanding.The foreign ministers of the G7 group of industrialised nations - US, Britain, Canada, France, Germany, Italy and Japan - did not explicitly mention China in their statement. But they called on all states to "refrain from such actions as land reclamations" and building outposts "for military purposes" that could risk stability or change the status quo.

      Is China’s ‘Assertiveness’ in the South China Sea All About Nationalism? --In a number of recent discussions I’ve been a part of, “nationalism” has been repeatedly raised to describe China’s policies toward its territorial disputes with its neighbors. Also, this term has often appeared in international media stories about China’s stance in the East and South China Seas disputes (for example, here, here, and here.) The idea is that “nationalism” is unnecessarily — or even dangerously — playing an important role in China’s policies toward the ongoing maritime disputes in the region. Is that true? Describing China’s stance as merely “nationalist” oversimplifies China’s strategies, policies, and behaviors. These critiques also have a bad habit of foregoing a discussion of nationalism in a general sense and instead implying that only China’s disagreements with others are proof of “narrow nationalism” or even “expansionism.” These misconceptions — that China’s behaviors are only driven by nationalism, and that Chinese nationalism is somehow distinct from similar tendencies in, say, Vietnam or the Philippines — only cloud an already complicated situation. When it comes to territorial disputes, states can be more or less “confident” or “assertive” in their behavior, whether they are “nationalist” or not. In the South China Sea, the other claimants have broken their promises, incrementally occupied a majority of the islands and rocks, and “unilaterally” changed the status quo; that situation is causing China’s reactions now. But accusations against China have dominated, perhaps simply because China is China.  There is a clear line between preserving sovereign rights and using territorial disputes as an excuse for expansionism. China is often accused of the latter, but the reasons for China to have reminded relatively restrained (and thus less nationalistic) are obvious.

      Japan machinery orders fall, strong yen clouds outlook - (Reuters) - Japan's core machinery orders fell less than expected in February in a sign that capital expenditure is starting to stabilise, but a strong yen, which can hurt corporate earnings, clouds the outlook.The 9.2 percent monthly decline in core orders, a highly volatile data series regarded as a leading indicator of capital spending in the coming six to nine months, was less than economists' median estimate for a 12.4 percent month-on-month fall, Cabinet Office data showed on Monday. Japan's policymakers are counting on capital expenditure to create more jobs and raise wages. However, if recent gains in the yen continue, companies could curb investment plans on worries that corporate profits will fall. "On the whole, capital expenditure is rising gradually, but the momentum this fiscal year may be slower than last fiscal year," said Shuji Tonouchi, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities. "The Bank of Japan's negative interest rates have not boosted lending, and a strong yen threatens corporate profits." Orders from manufacturers fell 30.6 percent from the previous month, which was the largest decline on record. Orders from the services sector rose 10.2 percent, marking the biggest increase since September. In January, core machinery orders jumped 15.0 percent from the previous month, the biggest gain since January 2003, due to large orders from the steel industry, and economists said this led to the pull-back in February.

      The yen may be sending investors a dire warning: The yen hit a 17-month high against the dollar on Monday in the currency market's latest warning sign to equity investors. The strength of the Japanese yen this year has been a bit of a surprise for many investors. The Japanese central bank has taken steps this year that could be expected to weaken the yen, most notably the move to negative interest rates. Yet the yen has risen 10 percent versus the U.S. dollar, a huge move for the currency market.On its face, this might be considered a boon for U.S. companies. After all, as the dollar weakens against the yen, U.S. goods become less expensive for Japanese consumers, which could potentially serve as a tailwind for foreign sales. Similarly, U.S. goods become less expensive as compared to Japanese goods for customers in other countries. But when it comes to sentiment, it's a different story. The Japanese yen is considered a "risk-off" asset, meaning that it's something that's bought as investors seek safety, and sold as investors embrace risk. According to many traders, this is not due to the traditional drivers of currency movements — relative inflation, interest and economic growth rates. Rather, it is because the yen is used as a "funding currency." Due to low (and now subzero) Japanese interest rates, it is remarkably cheap to borrow yen in order to fund other investments. Of course, stocks — and U.S. stocks in particular — are among the most popular investments that would be funded. From this standpoint, the surge in the yen is a disturbing sign indeed.

      No, Japan Does Not Intervene in FX These Days - There has been recent speculation that the Japanese authorities might intervene to push down the yen.  One can see the reasoning.  The yen has appreciated against the dollar by about 9 per cent this year, even though the fundamentals have gone the other way: weak growth and renewed easing of monetary policy. Saturday’s Financial Times even cites BNY Mellon as saying of the Bank of Japan, “Since mid-1993, they have on average intervened once every 20 trading days in dollar-yen.”   But this is misleading.  The period of frequent intervention was in the 1980s and 1990s.  The Japanese have rarely intervened in the foreign exchange market since 2004.  The last time was in 2011, in cooperation with the US and others, to dampen a strong appreciation of the yen that came in the aftermath of the Tohoku earthquake and tsunami. The G-7 partners in February 2013 agreed to refrain from foreign exchange intervention, in a US-led effort to short-circuit fears of competitive depreciation (a sort of truce in the supposed “currency wars”).   Intervention will return some day.  But it strikes me as unlikely that the Bank of Japan would intervene now without the cooperation of the US (and other G-7 partners); and unlikely that the latter would agree at the current juncture.

      War On Cash Escalates: Japan Starts Testing Fingerprints As "Currency" -- The war on cash just got serious, and of course, it is the extreme policy experimenters of Japan that are pushing the boundaries. Having dived headlong into negative interest rates, Japanee policymakers recognize full well the historical reaction of "hording cash" will not 'create' the nirvana of 2% inflation and break the 'deflation mindset' that they so long have waited for. So, following in the footsteps of Venezuela, as Japan News reports, starting this summer, the government will test a system which will enable people to buy things at stores using only their fingerprints - thus enabling full monitoring (and inevitable control) of spending (or saving). The government hopes to increase the number of foreign tourists by using the system to prevent crime and relieve users from the necessity of carrying cash or credit cards. The experiment will have inbound tourists register their fingerprints and other data, such as credit card information, at airports and elsewhere. Tourists would then be able to conduct tax exemption procedures and make purchases after verifying their identities by placing two fingers on special devices installed at stores.

      Olivier Blanchard eyes ugly 'end game' for Japan on debt spiral: Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned. Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250pc of GDP this year and spiralling upwards on an unsustainable trajectory.“To our surprise, Japanese retirees have been willing to hold government debt at zero rates, but the marginal investor will soon not be a Japanese retiree,” he said. Prof Blanchard said the Japanese treasury will have to tap foreign funds to plug the gap and this will prove far more costly, threatening to bring the long-feared funding crisis to a head. “If and when US hedge funds become the marginal Japanese debt, they are going to ask for a substantial spread,” he told the Telegraph, speaking at the Ambrosetti forum of world policy-makers on Lake Como. Analysts say this would transform the country’s debt dynamics and kill the illusion of solvency, possibly in a sudden, non-linear fashion.

      Abe ready to set aside TPP ratification for now to preserve standing in polls | The Japan Times: The ruling coalition may give up trying to get the Trans-Pacific Partnership ratified during the current Diet session if resistance from opposition parties means it is delayed beyond the end of April, a senior ruling lawmaker said Wednesday. In that case, deliberation on the agreement and related bills would be carried over to a Diet session in the fall. The current ordinary Diet session runs until June 1. Meanwhile, Prime Minister Shinzo Abe has instructed the coalition not to “forcibly” proceed with the TPP deliberations, Kyodo News reported. He is thought to fear a voter backlash in the Upper House election this summer. The potential postponement was announced by Tsutomu Sato, the Diet affairs chief of the ruling Liberal Democratic Party, speaking to reporters at the Diet. But he added, the LDP-Komeito coalition has not yet given up on seeking ratification by the end of the current Diet session. Later Wednesday, the LDP and the Democratic Party, the largest opposition force, agreed to resume deliberations on the TPP deal and will convene a session of the Lower House TPP special committee on Friday. Still, frustration remains palpable among many lawmakers. The records of TPP negotiations, released by the government in response to opposition demands, were largely blacked out, ostensibly to protect secret parts of the multinational trade negotiations. This has given ammunition to opposition parties. They have been lambasting the government and boycotted all deliberations at the Lower House on Wednesday.

      Negative Swap Rates Wreck Hedging in Blow for Japan Loan Demand --Negative rates for swapping interest payments are hindering the ability of corporate borrowers to hedge their liabilities -- another way in which the Bank of Japan’s unorthodox attempt to revive lending could backfire. The fixed rate paid in exchange for floating-rate payments for a year in Japan’s interest rate swap market fell below zero after the BOJ started charging banks for reserves in February, and was at minus 0.049 percent on Thursday. Floating-rate loans in Japan aren’t allowed to have repayment rates below zero, causing a disconnect with traditional hedging methods. “Interest-rate swaps aren’t functioning properly” as hedging tools, said Satoshi Oda, the head of the syndication department at Credit Agricole SA in Tokyo. “Without swaps, banks will have trouble making floating-rate loans and will need to extend fixed-rate loans, but most banks don’t like lending at fixed rates, so they’re becoming hesitant about making new loans.”

      BOJ chief denies negative interest rate has backfired -  Japan's financial markets would be in worse shape if the central bank had not adopted a negative interest rate, Bank of Japan (BOJ) governor Haruhiko Kuroda has said, rejecting suggestions that the policy has been counterproductive. "I really don't think that the introduction of the negative interest rate backfired or caused the yen to appreciate and stock markets to decline in Japan," Mr Kuroda said on Wednesday during a question-and- answer session at Columbia University here. "If anything, I can say that if we didn't introduce the QQE with the negative interest rate, financial markets in Japan would have been even worse." Japan decided in January to start charging lenders on some of their excess reserves to spur credit growth and investment, in addition to its quantitative and qualitative easing (QQE) measures.But, so far, all these measures have not served their intended purpose of boosting public spending or accelerating inflation towards the bank's ambitious 2 per cent target. The yen has rallied almost 11 per cent since Jan 29, when the negative rate was announced, while the benchmark Topix stock gauge has fallen 5 per cent and the banking index has plunged 15 per cent. Yesterday, Japan's biggest bank delivered a rare criticism of the BOJ, saying that its negative interest rate policy has contributed to anxiety among households and companies and that prolonging it may weaken financial institutions.

      Kuroda: Market would have been worse without negative interest rate - — The nation’s financial markets would have been in worse shape if the Bank of Japan had not adopted a negative interest rate, said Gov. Haruhiko Kuroda, rejecting suggestions the new policy has been counterproductive. “I really don’t think that the introduction of the negative interest rate backfired or caused the yen to appreciate and stock markets to decline in Japan,” Kuroda said during a question and answer session at Columbia University in New York. “If anything, I can say that if we didn’t introduce the QQE with the negative interest rate, financial markets in Japan would have been even worse.” The yen has rallied almost 11 percent since Jan. 29, when the BOJ announced it would charge financial institutions for a portion of the funds that they park at the central bank. The benchmark Topix stock gauge has fallen 5 percent while the banking index has plunged 15 percent. Although BOJ policy has been the subject for debate among investors, weaker global growth, changes to the outlook for U.S. interest-rate hikes and uncertainties in China and emerging markets have all been influential. Kuroda, who is in the United States for spring meetings with the International Monetary Fund and talks with colleagues from Group of 20 nations, reaffirmed his belief that his monetary policy is having its intended effects and will in time spur inflation to a 2 percent target. The BOJ will add to stimulus without hesitation if needed, he said.

      Japan warned not to devalue the yen Japanese officials were met by firm warnings not to devalue the yen as they took their quest to talk down the currency to Washington. Taro Aso, Japanese finance minister, told his US counterpart Jack Lew that he was gravely concerned by the surge that took the yen above Y108 to the dollar earlier this week. But the US Treasury said both men had agreed to honour their G20 exchange rate commitments, showing Japan’s lack of options as a stronger yen drags on its economy. Overall, the tone of Japan’s rhetoric suggests it is unlikely to intervene unless the yen moves sharply higher. However, pressure is growing on the Bank of Japan to offset the currency’s impact by easing monetary policy when it meets at the end of April. Mr Aso said his message to Mr Lew was that “extreme and disorderly movements in the foreign exchange market have a negative effect on the economy, and I’m gravely concerned by recent one-sided moves”. Japanese officials have been using similar formulas for the past couple of weeks and would most likely step up their rhetoric before an actual intervention.

      IMF commends negative rates despite the risks - Taipei Times: The IMF on Sunday defended negative interest rates set by central banks, given “significant risks” of slow growth, while acknowledging potential for dangerous boom-and-bust cycles. Six central banks, notably the European Central Bank and the Bank of Japan, have taken the unprecedented measure, aimed at loosening the reins on credit to help spur consumer spending and investment. “Although the experience with negative nominal interest rates is limited, we tentatively conclude that overall they help deliver additional monetary stimulus and easier financial conditions,” three top officials at the IMF said. In the middle of last month, IMF managing director Christine Lagarde said that the unorthodox negative short-term rates, in which commercial banks pay central banks to hold their money, had probably supported stronger economic growth. While in theory the concept should work, economists are closely studying what happens in Europe and Japan amid worries that negative rates could actually provoke businesses and consumers to be more cautious about spending. “Negative interest rates may induce boom and bust cycles in asset prices. These potential risks require close monitoring and supervisory scrutiny,” the IMF officials said.

      IMF defends central banks' use of negative interest rates despite risks | The Japan Times: The IMF on Sunday defended the use of negative interest rates by central banks in light of the “significant risks” of slow growth, while acknowledging the potential for dangerous boom-and-bust cycles. Six central banks, notably the European Central Bank and the Bank of Japan, have taken the unprecedented measure, aimed at loosening the reins on credit to help spur consumer spending and investment. “Although the experience with negative nominal interest rates is limited, we tentatively conclude that overall they help deliver additional monetary stimulus and easier financial conditions,” three top officials at the International Monetary Fund wrote in a blog. It comes ahead of the IMF’s annual Spring Meetings this week in Washington. In mid-March, IMF Managing Director Christine Lagarde said that the unorthodox negative short-term rates, in which commercial banks pay central banks to hold their money, had probably supported stronger economic growth. While in theory the concept should work, economists are closely studying what happens in Europe and Japan amid worries that negative rates could actually provoke businesses and consumers to be more cautious about spending. The three IMF officials also had words of caution. “Negative interest rates may induce boom-and-bust cycles in asset prices. These potential risks require close monitoring and supervisory scrutiny,” they said.

      Asian rating downgrades hit highest level in years | Reuters: (IFR) - Asian credit downgrades have increased on a scale not seen in years, putting pressure on bond prices as more issuers head towards junk ratings. Downgrades in Asia ex-Japan across all three major agencies outnumber upgrades five to one in the first quarter of 2016, the worst ratio since 2009, according to a Deutsche Bank report this week. Moody's Investors Service said the quarter registered the highest number of negative rating actions since 2011. "The number of negative rating actions is significantly higher than the number of positive actions for Asia ex-Japan," said Clara Lau, a group credit officer at Moody's. "Our rating trend tracker shows the proportion of positive versus negative actions, and that is as low as 0.01 in the first quarter." In the first quarter of this year, Standard & Poor's made eight upgrades in Asia Pacific, compared to 48 downgrades, a ratio of 0.17. That compares to a ratio of 0.57 in the first quarter of last year and 0.37 for the whole of 2015. Fitch Solutions recorded six upgrades and 23 downgrades in Asia Pacific so far this year, but that drops to four upgrades and 23 downgrades if Japan is excluded. "On our calculations, we've had negative actions of 232 in 2016 (outlooks, reviews, downgrades) against just 28 positive,"

      India begins anti-dumping investigations over steel imports | Reuters: India has initiated investigations into the possible dumping of cheap steel products into the country by six nations including China, Japan and South Korea, a government department source said on Monday. Russia, Brazil and Indonesia are the other three countries being investigated by New Delhi over the export of cheap hot-rolled flat steel products in coils and sheets, a source at the Directorate General of Anti-Dumping & Allied Duties (DGAD) told Reuters. Exporters have 40 days to respond to the notice of initiation, the source said. A formal notification will be issued on Tuesday. Indian steelmakers JSW Steel, Essar Steel and Steel Authority of India had approached the DGAD seeking anti-dumping duties on cheap imports flooding local markets and pressuring margins. Overseas purchases of steel surged by 20 percent in the financial year to March 30, according to government data. India last month extended safeguard import taxes on some steel products until March 2018, having already imposed a floor price in February in an effort to curb purchases of cheap foreign steel.

      India’s Audacious Plan to Bring Digital Banking to 1.2 Billion People - India is trying to yank its cash-based economy into the 21st century. But how do you get 1.2 billion people, many of whom have never seen a bank or opened an account, to send digital payments to each other? The government's answer is an effort it has named the Unified Payment Interface. Debuting Monday, it's a system designed to make transferring and receiving money as easy as exchanging e-mail or text messages. The goal is to bring banking and financial services to hundreds of millions of citizens, many of them poor and disadvantaged, in one fell swoop. The network was created by India's retail banks and backed by India's central bank—and they're confident it will work because it's built on top of an even more audacious project: India's biometrics-enabled national ID system, called Aadhaar after the Hindi word for foundation. So far, India's attempt to assign every citizen a unique 12-digit number associated with a person's unique iris, fingerprint or facial features, is succeeding—just last week, Aadhaar reached its milestone of registering 1 billion people. With more than 80 percent of Indians enrolled, it gives the payments system a solid base to build on. "The interface will bring banking to the unbanked," said Vinod Khosla, billionaire investor and co-founder of Sun Microsystems. His Bangalore-based incubator Khosla Labs is backing an Indian startup called Novopay, which offers mobile banking at 44,000 kiranas, or neighborhood convenience stores, in the country.

      Weakest Deposit Growth Since 1963 Means Higher India Rates -- India’s bank deposits are growing at the slowest pace in half a century, frustrating attempts by policy makers to lower one of the highest borrowing costs among emerging markets. Savers parked about 94 trillion rupees ($1.4 trillion) with banks in the year through March 31, the smallest increase since 1963, according to ICRA Ltd., the local unit of Moody’s Investors Service. A continued slowdown may keep lenders from passing on policy rate cuts to customers, and could also compel them to sell holdings of government bonds to raise more cash. "The ability of banks to cut cost of funds and bring down interest rates will be limited,”. Since India’s economy is driven by bank credit, the lack of cheap funding will constrain growth, he said. Prime Minister Narendra Modi is seeking lower interest rates to spur investment and help banks clean up piles of bad debt. While India is the world’s fastest-growing big economy, the slowdown in deposits is yet another sign that its expansion is far below potential. The lackluster deposit growth is part of a vicious cycle that’s preventing economic growth from taking off. Manufacturing slack -- highlighted by falling factory output and a record drop in exports -- has damped corporate profits and loan demand, depriving banks of the ability or need to lure more deposits. While credit growth has picked up from a 20-year low to more than 11 percent, it’s still far from peak levels of almost 36 percent in 2005. Fitch Ratings sees credit growth of around 15 percent and deposit growth of 13 percent in the year through March 2017.

      Pakistan Received $19.3 Billion in Remittances in 2015 Amid Falling Oil Prices --Pakistani diaspora sent home $19.3 billion in remittances in 2015, representing 12.8 % increase over 2014, according to a World Bank Report titled "Migration and Development Brief" released today. Pakistan's $19.3 billion in remittance make up 6.9% of 2014 GDP, essentially closing the rising trade deficit amid the nation's falling exports. The 12.8% increase over 2015 is substantial but it is down from 16.7% jump seen in 2014 over 2013. The report attributes the slower remittance growth from Gulf Cooperation Council (GCC) countries like Saudi Arabia and United Arab Emirates to falling oil prices.  This report comes soon after the Panama Leaks that show how Pakistan's corrupt elite, including Prime Minister Nawaz Sharif's family, are moving and hiding in offshore tax havens the hard-earned dollars sent home by overseas Pakistanis to keep Pakistan's economy afloat. In Q4 of 2015, year-on-year growth of remittances to Pakistan from Saudi Arabia and the UAE were 11.7 percent and 11.6 percent, respectively, a significant deceleration from 17.5 percent and 42.0 percent in the first quarter, said the report. Global remittances, which include those to high-income countries, contracted by 1.7% to $581.6 billion in 2015, from $592 billion in 2014, the World Bank said. India was the top recipient with $68.9 billion in remittances in 2015, a decline from $70 billion in 2014. This marks the first decline in remittances since 2009, according to the report. The growth of remittances in 2015 slowed from 8% in 2014 to 2.5% for Bangladesh, from 16.7% to 12.8% for Pakistan, and from 9.6% to 0.5% for Sri Lanka. “Slower growth may reflect the impact of falling oil prices on remittances from GCC countries,” the report said. The only country in South Asia to see dramatic growth in remittances was Nepal. The overseas Nepalese workers sent home $7 billion in 2015, an increase of 20.9 percent in 2015 versus 3.2 percent growth in 2014. After the devastating earthquake that hit the Himalayan nation, many Nepalese migrant workers returned home to take care of their families, as the average number of returns at the airport jumped five times to around 4,000 per day.

      Cash Flees South Africa in Longest Run of Outflows Since '99 - South African investors are shifting cash overseas at the most-sustained pace since outflows triggered by the end of apartheid as political upheaval undermines confidence in the continent’s second-biggest economy. Money poured out of the country for the 16th consecutive quarter in the final three months of 2015, the longest streak of quarterly outflows since the five years through September 1999, according to central bank data. An increase in South Africans investing abroad followed a gradual relaxation of exchange controls almost each year since 1995, about a year after Nelson Mandela’s African National Congress won the first all-race elections. Outflows show no sign of abating as President Jacob Zuma faces mounting pressure to resign after the country’s top court last month ruled he failed to uphold the constitution and members of his party rallied to his defense to defeat an opposition-led effort to have him impeached. Investec Asset Management has seen 60 percent of domestic flows shift into its offshore funds in the first three months of this year, compared with 40 percent in the prior quarter, the company said on Monday. “We see a net outflow of rand across all our desks,”"Poor decisions by Zuma and the ruling party triggered a widespread urge to move assets abroad.” Rand Rebound Last quarter, Sable channeled 500 million rand ($34 million) for private individuals out of the country, compared with 450 million rand in the final three months of 2015, he said. A rebound in the rand, along with other emerging-market currencies that are gaining against the dollar, has also allowed South Africans to pile up on offshore holdings,

      Nigeria Grapples With Abrupt End to Rapid Growth - WSJ: In Africa’s top economy, the oil bust is beginning to hit the streets. With 187 million people, and trillions of dollars in untapped crude oil, Nigeria was meant to power Africa’s rise. Instead, it is becoming—for the moment—a symbol of how fast and far low oil prices have dragged emerging markets down. Months of dwindling oil revenue have prompted a scarcity of dollars here, as the government hoards foreign exchange.…the World Bank said Nigeria’s economic growth slid to 2.8% in 2015 from 6.3% the year before, and the International Monetary Fund says this year’s growth will slip to 2.3%, slower than the population, which adds 13,000 people daily.  Factories are closing because they can’t find dollars to import parts. Supermarkets are struggling to keep shelves stocked. Power plants have virtually stopped producing electricity because they can’t pay for maintenance. New shopping malls are empty and ordinary citizens are going to lengths to find some basic goods.…on the streets, daily frustrations are mounting. Electricity is so scarce that the country’s national power plants didn’t produce a single watt for several days last week—they couldn’t import parts and services, said two senior members of Mr. Buhari’s administration. Internet providers face similar woes. Nigerians abroad are stuck with ATM cards they can’t use because the central bank has limited withdrawals outside the country. Bitcoin trades are up as Nigerian professionals scrounge for ways to move money—and increasingly, themselves—out of the country.

      About That "Surge" In The Baltic Dry Index -- Some 'entertainers' among the mainstream media have proclaimed the recent dead-cat-bounce in The Baltic Dry Freight Index as representative of some renaissance in China and thus the world's trade.. and thus why one should "buy buy buy" stocks. However, three quick points of note suggest this is nothing but noise as the index flounders around record lows. First, at 555, The Baltic Dry has just managed to rebound to its previous all-time historical lows from 1986... impressive eh? Second, we have seen this historical pattern before...  And third, as the chart above shows, both China's Containerized Freight Index and China's Rail Freight Index have collapsed to record lows amid this 'rebound' strongly suggesting that whatever this bounce is predicated on, it is perhaps merely indicative of adesperate unwind of the malinvestment boom and thus floods the world with a renewed deflationary impulse (just as we saw in US Import Prices).

      Demand for World Bank loans nears crisis levels | Business | The Guardian: Demand for loans from the World Bank has reached levels unsurpassed outside of financial crises as developing countries struggle to cope with the weakness of the global economy. Ahead of its half-yearly spring meeting in Washington later this week, the Bank said it expected to lend more than $150bn (£105bn) in the four years from 2013 – a period when global economic activity repeatedly failed to match expectations. The Bank said its growth forecast of 2.9% for 2016 already looked under threat after a deterioration in the outlook since the start of the year, adding that it was increasing its financial help to both middle-income and the least-developed countries. Those developing countries that rely heavily on exports of commodities have been hard hit over the past two years by the slowdown in China, which has led to a crash in the cost of oil and industrial metals. “We are in a global economy where growth is expected to remain weak, so it is critically important that the World Bank play our traditional role of helping developing countries accelerate growth,” said Jim Yong Kim, the bank’s president. “We have an historic opportunity to end extreme poverty in the world by 2030 but the only way we can achieve this goal is if developing countries – from middle-income to low-income nations – get back on the path of faster growth that helps the poorest and most vulnerable.”

      Global Growth: Too Slow for Too Long - IMF - Global growth continues, but at an increasingly disappointing pace that leaves the world economy more exposed to negative risks. Growth has been too slow for too long.  The new World Economic Outlook released today anticipates a slight acceleration in growth this year, from 3.1 to 3.2 percent, followed by 3.5 percent growth in 2017. Our projections, however, continue to be progressively less optimistic over time.  The downgraded forecasts reflect a broad-based slowdown across all countries. ... Both to support global growth and to guard against downside risks to that baseline scenario, we propose a three-pronged policy approach based on monetary, fiscal and structural policies. ... With its downside possibilities, the current diminished outlook calls for an immediate, proactive response. To repeat: there is no longer much room for error. But by clearly recognizing the risks they jointly face and acting together to prepare for them, national policymakers can bolster confidence, support growth, and guard more effectively against the risk of a derailed recovery.

      IMF Cuts 2016 Global Economic Growth Outlook to 3.2% - WSJ: The world economy is increasingly at risk of stalling, the International Monetary Fund warned Tuesday as it once again cut its forecast for global growth prospects. The IMF said it was forced to downgrade its growth forecast for this year to 3.2%, down by 0.2 percentage point from its projection issued in January. China’s slowdown and weak commodity prices are taking a deeper toll on emerging markets than expected and rich countries are still struggling to escape the legacies of the financial crisis, the fund said. The downward revision is the fourth straight cut in a year, putting world economic growth just a hair over last year’s 3.1% and only marginally above the 3% rate the IMF has previously considered a technical recession globally. “Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation,” IMF Chief Economist Maurice Obstfeld said as the fund launched its flagship report. The IMF is worried such stagnation could further stifle investment, smother wage growth, curb employment and push government debt to unsustainable levels in some countries. “Does that culminate in some crisis and recession? It’s not clear at all that would be the case,” Mr. Obstfeld said. “But we definitely face the risk of going into doldrums that could be politically perilous,” he said. The increasingly dour outlook sets the tone for the semiannual IMF and World Bank meetings this week in Washington, where financial leaders from around the globe will gather to take stock of the global economy. Recessions in Russia and Brazil are proving to be deeper and longer than the IMF anticipated after political problems compounded the effects of a plunge in commodity prices. Dozens of other oil exporters—from Venezuela to Canada, Saudi Arabia to Nigeria—are also facing sharp slowdowns.

      IMF Cuts Global Growth Forecast Again; Warns Of "Secular Stagnation" As World Needs More Stimulus - Moments ago the IMF did what it does better than anyone (with the exception of the Fed): it once again admitted its forecast of world growth had been too optimistic, and as a result in its just released quarterly World Economic Outlook report, it cut its forecast for 2016 global GDP growth from 3.4% to 3.2%, and from 3.6% to 3.5% for 2017. Indicatively, back in July 2014 the IMF was forecasting 4.0% GDP growth in 2016. It is now 20% lower.While growth forecasts for the U.S. and euro area were marked down by 0.2 percentage point, the deepest reductions in advanced economies came in Japan. A chart of its h istorical revision is shown below. In the report, the IMF warns that a prolonged period of slow growth has left the global economy more exposed to negative shocks and raised the risk that the world will slide into stagnation, saying that "the danger of secular stagnation and an entrenchment of excessively low inflation in advanced economies, as well as of lower-than-anticipated potential growth worldwide, has become more tangible." So how does one avoid this crunch? More QE, ZIRP, NIPR and so on, of course: Monetary policy should remain accommodative where output gaps are negative and inflation is too low. In addition, given the uncertain effects of product and labor market reforms on prices, and amid persistent low inflation in many countries, strong and credible monetary policy frameworks are essential. Specifically, such frameworks—including quantitative easing or negative deposit rates, where  relevant—can keep medium-term inflation expectations anchored and ease the zero-lower-bound constraint on policy interest rates, thus preempting risks that structural reforms will create deflation, increase the real interest rate, and weigh on aggregate demand in the short term.

      World faces 'lost year' as policymakers sleepwalk towards fresh crisis, warns IMF: he world is sleepwalking into a fresh crisis as investors start to lose faith in policymakers’ ability to revive the global economy, according to the International Monetary Fund. In its bluntest warning to date on the costs of policy inaction, the IMF said “financial and economic stagnation" could take hold unless governments prevented a "pernicious feedback loop of fragile confidence, weaker growth, low inflation and rising debt burdens" from forming. José Viñals, the head of the IMF's financial stability division, said a prolonged slowdown could knock around 4pc off global output relative to current expectations over the next five years amid repeated bouts of market turmoil. Mr Viñals said a $1.3 trillion (£912bn) corporate debt timebomb in China also posed "potentially serious challenges" to financial stability if defaults pushed banks over the edge. The IMF's global financial stability report said a "loss of market confidence" would drag global bourses into a bear market. Under this scenario, Stocks in the UK, US, eurozone and China would lose a fifth of their value over two years, it estimated. The triple threat of slower growth, rising risks from China and diminished faith in policymakers' ability to prevent a fresh downturn meant households and businesses were likely to save more and spend less in the uncertain global environment. Economic powerhouses such as China and India would see output losses of more than 4pc by 2021 compared with current IMF forecasts, it said, while world output world be 3.9pc lower relative to the baseline. “This would be roughly equivalent to foregoing one year of global growth, said Mr Viñals.

      What Comes After Negative Rates? Helicopter Money - WSJ: Negative rates invert the norms of banking. Borrowers are paid for taking money, while savers pay to hand over a deposit. High-level opposition from savers should be little surprise; this month has seen high-level opposition from two of their leading representatives, the head of the world’s biggest mutual-fund company, Blackrock, and the finance minister of Europe’s biggest net saver, Germany. They would say that. But there are three serious worries about negative rates shared even by those who are implementing them: They might have perverse effects, they might work too well, or they might not work at all. The most obvious perversity of negative rates is that they amount to a tax on banking—and taxing something almost always results in less of it. Negative rates are applied by central banks to the reserves of the banking system, which are swollen thanks to quantitative easing. Any individual bank might try to pass on the reserves, but for the system as a whole they can’t be passed on. Another perverse effect is visible in Switzerland, which has pursued negative rates most aggressively in its efforts to hold down the value of the franc. Banks have been unwilling to pass on negative rates to individual depositors, and have tried to compensate for profits by jacking up mortgage rates, even as headline interest rates fall.

      DEUTSCHE BANK: There is no need to fear helicopter money - Central banks across the globe are facing big problems. Widely accepted methods of stimulating growth and inflation, like ultra-low interest rates, are struggling to do that.  In Europe for example, inflation is completely flat, with only a few nations managing to find any meaningful price growth. That has led to calls for more unconventional monetary policy decisions, including the potential use of so-called helicopter money.  There have been serious concerns about both the possible inflationary effects of helicopter money, and its legality, and because of that – as Business Insider's Ben Moshinsky pointed out earlier this month — in recent years, helicopter money has "remained as more a thought experiment than a viable policy."But according to analysts at Deutsche Bank, there's no need to fear the unknown when it comes to helicopter money, because we've been there before. Deutsche argues that helicopter money has been widely used in the past, and as a result putting it into practice would be "less unconventional than you think." Here's Deutsche: The starting point of any discussion on the institutional constraints of monetary financing should be that in contrast to negative rates, it has been widely used in the past.  Monetary financing has been used in the developed world. During the two world wars governments harnessed their central banks in funding their military expenses. The note goes on to point out that monetary financing — the economic term for helicopter money — was used broadly during the Great Depression in the late 1920s, and was hugely effective. This was particularly true, Deutsche Bank says, in Japan.

      The New Face of the IMF’s Global Growth Strategy -- If the International Monetary Fund needs a poster child for their prescription for the global economy, it need to look no further than Canada and its new finance minster, Bill Morneau.The IMF has been pushing the world’s largest economies to boost government spending—or slow down belt-tightening plans—to help give central-bank efforts traction as their easy money policies run out of steam and the global economy risks stalling. Few countries, from the U.K. to Japan and China to Germany, are heeding that advice. Then comes Canada and its freshly installed Liberal government, which is now breaking with the policies of its Conservative predecessors to ramp up spending on infrastructure while cutting taxes for the middle class. All of this will add to Canada’s debt, but as Mr. Morneau is eager to point out, Canada is uniquely well positioned to take on more debt.“If you look at our balance sheet, our net debt to GDP, we’re in a very advantageous position compared to all other G-7 countries,” he said, referring to the Group of Seven industrialized countries. Unlike most other of the group’s rich-country members, Canada has far more room in its budget to maneuver. Besides its moderate debt levels, its health-care and pension-fund liabilities are covered for the next several generations and has a relatively low budget deficit, all legacies of former governments.

      Flash - Dark economic cloud over IMF-World Bank meeting - (AFP) - Worries that the global economy is nearing a stall made worse by the specter of '"Brexit" cloud the air as the world's finance chiefs gather in Washington beginning Thursday for the IMF-World Bank Spring meetings. Finance ministers and central bankers will be greeted with dire warnings that if they do not take immediate action to boost growth and consumption, the world risks slowing to the point that recession is possible. The IMF opened the week by cutting its forecast for world economic growth for the third time in six months, saying growth has been "too slow for too long." It said intensifying financial and political risks around the world, from volatile financial markets to the Syria conflict to global warming, had left the economy "increasingly fragile." - Rising requests for aid - And it said it was concerned over rising nationalism and "fraying" unity in the European Union under pressure from the migration crisis and the possibility Britain might pull out of the European Union -- Brexit. Britain votes on whether to remain in the 28-nation EU on June 23. The Fund lowered its growth forecast for 2016 to 3.2 percent, compared to the 3.8 percent it expected a year ago. "Lower growth means less room for error," IMF chief economist Maurice Obstfeld said. "The weaker is growth, the greater the chance that the preceding risks, if some materialize, pull the world economy below stalling speed."

      It’s the end of globalization as we know it - At first, it seems like a small thing. Reuters reports this morning that the European Union is weighing whether to start requiring visas from Canadian and US visitors to the region. This would be an incredibly shortsighted thing to do, given the lucrative tourist trade based on North Americans traveling to the continent. And it likely won’t happen. But its mere discussion—a response to the US visa requirements for visitors from poorer parts of the EU such as Romania, Poland, and Bulgaria—underscores the very real backlash against pro-globalization economic ideology of the last 25 years. As the the Wall Street Journal recently pointed out, the key forces of globalization—rising international trade and capital flows—have stalled out. In many senses, they’re foundering on a particularly tricky bit of globalization that is now a snag between the EU and the US: The flow of people. The movements of people in recent decades has pushed the political limits of globalization in the rich world. The evidence is everywhere. It’s in Donald J. Trump’s ugly comments about Mexican immigrants and his promises to build an impregnable wall between the US and its southern neighbor. It’s manifest in the complaints about an influx of eastern Europeans in the the UK, now fueling the push for Brexit. The neofascist Golden Dawn party has held Nuremberg-style rallies in Greece, amid ongoing economic strain and the more recent migration crisis. In Germany, Frau Merkel’s determinate promise—”we’ll manage it”—to deal with an influx of immigrants collided headlong with real anxiety among the electorate. Her party suffered major losses in recent state elections, including to the anti-immigrant AfD party.

      Crisis in Brazil - The BRIC countries are in trouble. For a season the dynamos of international growth while the West was mired in the worst financial crisis and recession since the Depression, they are now the leading source of anxiety in the headquarters of the IMF and the World Bank. China, above all, because of its weight in the global economy: slowing output and a himalaya of debt. Russia: under siege, oil prices falling and sanctions biting. India: holding up best, but unsettling statistical revisions. South Africa: in free fall. Political tensions are rising in each: Xi and Putin battening down unrest with force, Modi thrashed at the polls, Zuma disgraced within his own party. Nowhere, however, have economic and political crises fused so explosively as in Brazil, whose streets have in the past year seen more protesters than the rest of the world combined. Picked by Lula to succeed him, Dilma Rousseff, the former guerrilla who had become his chief of staff, won the presidency in 2010 with a majority nearly as sweeping as his own. Four years later, she was re-elected, this time with a much smaller margin of victory, a 3 per cent lead over her opponent, Aécio Neves, the governor of Minas Gerais, in a result marked by greater regional polarisation than ever before, the industrialised south and south-east swinging heavily against her, and the north-east delivering an even larger landslide for her – 72 per cent – than in 2010. Within three months, huge demonstrations packed the streets of the country’s major cities, at least two million strong, demanding her ouster. In Congress, Neves’s Brazilian Social Democracy Party (PSDB) and its allies, emboldened by polls showing Dilma’s popularity had fallen to single figures, moved to impeach her. On May Day, she was unable even to give the traditional televised address to the nation: when her speech on International Women’s Day in March had been broadcast people banged saucepans and blew car horns, a form of protest that became known as panelaço. Overnight, the Workers’ Party (PT), which had long enjoyed by far the highest level of approval in Brazil, became the most unpopular party in the country. In private, Lula lamented: ‘We won the election. The following day we lost it.’ Many militants wondered if the party would survive at all.

      Brazil's Rousseff decries conspiracy as impeachment advances | Reuters: Brazilian President Dilma Rousseff said on Tuesday her vice president was orchestrating a conspiracy to topple her, as efforts to impeach the leftist leader gained momentum in Congress. Aided by her mentor and predecessor, Luiz Inacio Lula da Silva, Rousseff scrambled to secure enough support from a dwindling array of allies to block impeachment in a lower house vote due on Sunday that analysts project she will lose. A congressional committee voted on Monday by a larger-than-expected margin to recommend that Rousseff be impeached for breaking budget laws to support her re-election in 2014, a charge Rousseff says was trumped up to remove her from office. Political risk consultancies estimate at 60 to 65 percent the odds of impeachment clearing the lower house, since the committee vote was expected to sway undecided lawmakers to join the opposition. While Rousseff fights for her political survival, her government is largely paralyzed as Brazil, the world's seventh-largest economy, struggles with a deep recession and its biggest-ever corruption scandal. "They now are conspiring openly, in the light of day, to destabilize a legitimately elected president," Rousseff said in a speech on Tuesday, referring to an audio message sent by Vice President Michel Temer to his supporters on Monday in which he called for a government of national unity to overcome Brazil's political crisis.

      State of Rio de Janeiro Unable to Pay Pension Checks - The government of Rio de Janeiro announced on Wednesday that due to cash flow problems it would not be able to pay over 137,000 state retirees this month. Officials blame the sharp decline in tax revenues and the decrease of oil prices in the international market for the lack of funds. Calling it a tragedy acting governor Francisco Dornelles said that only those retirees earning less than R$2,000 will receive their pensions in April. Officials admitted that the deficit in the state’s accounts have reached over R$18 billion. “The country is facing a great recession,” justified Dornelles when announcing the measures, adding, “Rio may be the state most affected by this recession, but we want to reiterate our commitment stating that we will do all that is in our power to pay (pension, wages) before May 12th.” Dornelles also stated that until all active and inactive state employees have received their wages and pensions, he and all his aides would not receive their salaries. According to officials the expenditures with social security payments and pensions have always taken a big part of the state’s revenues. These hefty expenditures, however, were always paid by Rio’s revenues, with petroleum royalties and participation payments.

      Fight to Impeach Brazil’s Leader Tears at Fabric of Daily Life - — The wall, nearly a mile of corrugated metal, plunges down the center of the majestic lawn that faces Brazil’s National Congress, the modernist icon designed by Oscar Niemeyer.It was hastily erected in recent days, and is meant to separate the hundreds of thousands of protesters expected to descend on Brasília, the Brazilian capital, this weekend as members of Congress vote on whether to begin impeachment proceedings against President Dilma Rousseff.The left side of the wall, facing Congress, is reserved for supporters of the left-leaning Ms. Rousseff, the right for people demanding her ouster.“It’s not pretty, but the wall is necessary to keep the two sides from tearing each other apart,” a 21-year-old police officer in head-to-toe riot gear said as she stood in the searing sun on Friday afternoon. “When these protesters come together, they behave like soccer hooligans.”Brazilian politics is a blood sport in the best of times, but the battle over Ms. Rousseff’s impeachment is inflaming passions as never before, cleaving families, turning friends into enemies and transforming children into unwitting surrogates for the warring sides. Social media has been flooded with venom, and those who claim to be neutral often find themselves accused of treachery.

      Global inequality may be much worse than we think -- It’s familiar news by now. Oxfam’s figures have gone viral: the richest 1% now have more wealth than the rest of the world’s population combined. Global inequality is worse than at any time since the 19th century.  But Oxfam’s wealth figures don’t quite tell the whole story. What about income inequality? And – more importantly – what about inequalities between countries? If we expand our view beyond the usual metrics, we can learn a lot more about how unequal our world has become.  Given that the rich hide so much of their wealth in tax havens and secrecy jurisdictions, it is impossible to know how much they really have. Recent estimates suggest that up to $32tn is stored away in tax havens – around one sixth of the world’s total private wealth. If we were to add that to Oxfam’s metrics, inequality would look much, much worse. But that’s wealth. Many analysts object that we shouldn’t be measuring wealth inequality, but rather income inequality. This has been a major criticism of Oxfam’s numbers. And when you look at income inequality, it doesn’t seem so bad. We can measure income inequality with the Gini index. A score of 0 represents total equality and a score of 1 represents total inequality, where one person has everything and everyone else has nothing. According to Milanovic, the global Gini index has decreased slightly, from 0.72 in 1988 to 0.71 in 2008. The Gini index is a troublesome measure, though, because it only captures relative changes. If the incomes of the rich and the poor increase by the same rate, then the Gini index remains the same, even though absolute inequality is increasing.  Economist Robert Wade argues that this is a highly misleading measurement, as it obscures the true extent of inequality. We should be using the absolute Gini index, he says. So what happens if we do that? We see that inequality has exploded over the past few decades, from 0.57 in 1988 to 0.72 in 2005.

      The Global Architecture of Wealth Extraction - Wealth inequality has reached truly epic proportions — with 62 individuals amassing the same aggregate wealth as 3.7 billion. Most of us intuitively sense that this outcome was rigged by design by a global elite. Here in the United States we know about things like Citizens United (those with money can influence elections) and the Koch Brothers (part of the cabal that purchased this little piece of legislation). We get that the bankers who collapsed the financial system made out like bandits, quite literally. Those unlucky enough to be born anyplace where the tornado of colonialism touched down have been taught that “our people” should blame themselves for the personal character flaw of being on the receiving end of conquest and pillage. What we’ve been lacking is a name for this integrated system of tax havens, corporate handouts, gutted governments, privatized lands held in common, and so forth. I use the phrase global architecture of wealth extraction and want to describe here how it makes up the core of political systems around the world. Last year, I worked with a talented graphic designer by the name of Zoe Lowney to help tell this story as a timeline for modern history. This is what she came up with: (infographic).  We intuitively get that the game has been rigged for some time. But most of us don’t know the details of how things came to be this way. As this graphic demonstrates, the architecture of wealth extraction had to be carefully built up in waves of creative destruction over the span of several hundred years.

      #panamapapers Offshore Funds: On the Run With (Almost) Nowhere to Go? --  Yves Smith - As strange as it may seem, a confluence of developments in the banking industry means the Panama Papers revelations looks likely make it a lot more difficult for offshore money, as tax evasions and tax secrecy are often politely called, to stay hidden. This would serve as a marked contrast to the last international-headlines-gripping leaks, the Snowden revelations. Even though Snowden gave a big window into the reach of the surveillance state, not all that much has changed, save the Chinese making more active efforts to avoid cloud computing and US technology vendors, and the Europeans bashing US concerns over violations of their privacy laws.  By contrast, the massive Mossack Fonseca records haul feeds into trends in banking that mean that a lot of these funds are going to find it hard remain secret. We’ll summarize them below.

      • Tax base expansion initiatives. The US and European Union have been working on a program to expand the base of income that is subject to tax. Budget-starved European member states have been moving the plan forward ahead of schedule. This is one of the few positive developments to come of of governments failing to understand the implications of having a fiat currency (you can and typically need to run deficits, since the private sector sets unduly high return targets and chronically underinvests; the constraint on deficit spending is creating too much inflation).
      • Increasingly tough “know your customer” rules. The US going aggressively after foreign banks that have falsified records as a part of money-laundering has led to increased compliance. Even Standard Chartered, which thought the US had no business telling it not to do business with Iran, was brought to heel and its CEO forced to resign for his continued intransigence.

      Now the US can throw its weight around only as far as dollar-based transactions are concerned, since those ultimately clear through US facilities. But the UK has also adopted stringent “know your customer” rules. It now takes weeks to open a new account that is not a personal account, say for your rugby club.

      Panama raids offices of Mossack Fonseca law firm | Reuters: Panama's attorney general late on Tuesday raided the offices of the Mossack Fonseca law firm to search for any evidence of illegal activities, authorities said in a statement. The Panama-based law firm is at the center of the "Panama Papers" leaks scandal that has embarrassed several world leaders and shone a spotlight on the shadowy world of offshore companies. The national police, in an earlier statement, said they were searching for documentation that "would establish the possible use of the firm for illicit activities." The firm has been accused of tax evasion and fraud. Police offers and patrol cars began gathering around the company's building in the afternoon under the command of prosecutor Javier Caravallo, who specializes in organized crime and money laundering. Earlier, founding partner Ramon Fonseca said the company had broken no laws, destroyed no documents, and all its operations were legal. Governments across the world have begun investigating possible financial wrongdoing by the rich and powerful after the leak of more than 11.5 million documents, dubbed the Panama Papers, from the law firm that span four decades.

      The Guardian view on tax avoidance: half-hearted politicians are the weakest link | Editorial -The Guardian: In any discussion about tax-dodging, the same old images crop up: squeezing a balloon, pumping a punctured tyre, playing whack-a-mole. Three different ways to express the single frustration in tax policy, which is that the system as a whole is only as strong as its weakest link. Leave the smallest crack for funds to sneak through, and an entire industry – international, ingenious and utterly ruthless – stands ready to funnel them through. The shell companies and border-sprawling organograms unearthed in the Panamanian vaults of Mossack Fonseca are a prompt to reflect on this old insight anew. There are implications for finance ministers when they make decisions alone, and more especially when it comes to them acting together. They struggle to grasp either. On the home front, the “mind the gap” principle points to keeping taxes as simple as possible, with as few deductible allowances as fairness permits, and the smallest number of rates compatible with ensuring that the rich pay the biggest bills. Give any advantage to one form of remuneration or investment over another, and the tax industry will expend enormous effort on the socially wasteful but individually enriching business of making one thing look like another. Sadly, chancellors after a budget-day headline can rarely resist the temptation to unveil complex new perks. It is not leftwing to worry that complexity allows avoidance. It was no socialist but Nigel Lawson who aligned the taxation of capital gains and higher incomes, because he understood that any difference between the two amounted to an invitation to executives to pay themselves in share options, rather than salaries. Sadly, George Osborne doesn’t understand this – or chooses not to care – and slashed the rate of capital gains tax last month.

      Iceland's Pirate Party Polls At Stunning 43% Following PM's Resignation-- So what is the Pirate Party? Motherboard explains:  Over 20,000 protesters descended on the Icelandic capital of Reykjavik last week following the release of the Panama Papers, over 11 million files from the database of Mossack Fonseca, one the world’s largest offshore law firms. Gathered in front of the Icelandic Parliamentary building, the protesters were calling for the resignation of their prime minister Sigmundur Davíð Gunnlaugsson after the Panama Papers revealed that he and his wife had major financial conflict of interest tied up in a shell company in the British Virgin Islands.  On Tuesday, Gunnlaugsson bowed to the will of his constituency and appealed to Icelandic president Ólafur Ragnar Grímsson to sign for his release and hold a recall election. Gunnlaugsson’s request was denied and instead Grímsson requested Gunnlaugsson to resign and appointed Sigurður Ingi Jóhannsson, Gunnlaugsson’s deputy, as the new prime minister. Many Icelanders have criticized this move as a meaningless political reshuffling, seeing as Gunnlaugsson is still retaining his position as chairman of the Progressive Party and a member of Parliament, and nearly two-thirds of Icelanders say they don’t trust the new government. Still others saw this as nothing more than a political move meant to suppress the ascendancy of Iceland’s unlikely political champion: the Pirates. Founded in 2012, the Icelandic Pirate Party was modeled after the Swedish organization of the same name founded six years earlier. An anti-establishment party founded on principles of direct democracy, copyright reform, and personal privacy, the Icelandic Pirate Party elected its first representatives to Parliament in 2013

      E.U.’s Five Biggest Economies Join Tax Crackdown After Panama Papers - — With political aftershocks still being felt after the leak of the so-called Panama Papers, the European Union’s five biggest economies, including Britain and Germany, have agreed to share information on company ownership to try clamping down on tax evasion.The deal, announced on Thursday in Washington, on the sidelines of the spring meetings of the International Monetary Fund, followed days of controversy. Disclosures in the Panama Papers led the prime minister of Iceland, Sigmundur David Gunnlaugsson, to temporarily step aside. They have also embarrassed Britain’s prime minister, David Cameron, whose father’s name appeared among the millions of documents leaked from the Panamanian law firm Mossack Fonseca, describing the use of offshore tax havens by some of the world’s richest and most powerful people. Another casualty of the leak emerged in Spain, where the minister of industry, energy and tourism, José Manuel Soria, quit on Friday. Spain is one of the five signatories to the new information-sharing initiative, along with Britain, France, Germany and Italy. The British chancellor of the Exchequer, George Osborne, described it as a “hammer blow against those who hide their illegal tax evasion in the dark corners of the financial system.”The announcement by the five countries was welcomed by the International Monetary Fund and by the Organization for Economic Cooperation and Development.

      Alberta budget forecasts $10.4 billion deficit, outlines carbon tax | CTV News: -- The Alberta government, with oil prices taking massive bites out of its bottom line, blew past its own spending safeguards Thursday to deliver a budget that forecasts almost $58 billion in debt within three years. Finance Minister Joe Ceci confirmed that this year's deficit will be $10.4 billion and said there is no expectation of balancing the books before 2024. He also outlined details of a planned carbon tax that will cost a two-income household earning more than $100,000 annually about $500 a year by 2018. But there are no other new or increased taxes. Ceci told reporters that making deep cuts to a tanking oil-powered economy would only make things worse. "We are continuing to put the pedal to the metal so that we can support Albertans through this downturn, the worst downturn in a generation," he said. "We're going to come out the other side in 2017." Next year's budget deficit is forecast to be $10.1 billion and another shortfall of $8.4 billion is expected the year after that. The last $3.8-billion of rainy-day savings in the Contingency Fund will be gone this year and Alberta will borrow $5.4 billion just for day-to-day operations. The $58-million debt by 2019 is a significant leap. In the NDP's budget last fall, the plan was for a $48-billion debt, but not until 2020. By comparison, British Columbia, a province with a similar population, has a $65-billion debt. And Alberta was not the only oil-reliant province grappling with red ink Thursday. The first budget of the new Liberal government in Newfoundland and Labrador detailed a range of new taxes and levies, but still results in a deficit of almost $2 billion.

      Romania will veto the EU-Canada trade deal – Romania will not ratify the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada which was concluded in 2014, as an angry reaction to the refusal by Ottawa to lift the visa requirement of its nationals, but also for the lack of EU solidarity for solving the issue. The Romanian Ministry of Foreign Affairs has published a position regarding Canada maintaining the visa requirement for Romanian citizens, expressing disappointment that Ottawa had not delivered on its promise to solve the issue, contained in the Statement of the 2014 EU-Canada summit. Canada has a visa-free regime with all EU countries except Romania and Bulgaria. “In this situation the Romanian authorities will reassess, at EU level, the approach to the relationship between the EU and Canada so as to secure the goal of having obligatory visas for Romanian citizens eliminated”, the Position of the Romanian foreign ministry reads. Asked to explain this text, a Romanian high official who asked not to be named said that Romania would “veto” the CETA ratification. Normally the ratification of CETA should conclude by the end of 2016 or 2017. Romania however will not ratify the agreement, EurActiv was told.

      Mind Your Own Business: Belgium’s Wallonia Vetoes EU-Canada Free Trade Deal: — The government of the French-speaking Belgian region of Wallonia has refused to ratify the EU-Canada free trade agreement approved by the Belgian cabinet, the region's minister-president said. "As long as we do not have all the guarantees…. it will be impossible for us to ratify such a text [the Comprehensive Economic and Trade Agreement (CETA)], and it is not possible to give full powers to the Minister of Foreign Affairs to sign it either," Paul Magnette was quoted by the RBTF broadcaster as saying late on Wednesday.  The opponents draw a parallel between CETA and the US-EU Transatlantic Trade and Investment Partnership (TTIP), which has been criticized for the lack of transparency in the negotiations and the power it would give to international corporations at the expense of small and medium-sized businesses. The CETA was agreed in 2013, with the trade negotiating mandate was made public only in December 2015. The European Commission claims that CETA is aimed at removing customs duties, ending limitations in access to public contracts, broadening services market and helping prevent illegal copying of EU innovations and traditional products.

      Russia's budget deficit widens to 3.7 percent of GDP in first quarter - Xinhua | (Xinhua) -- Russia's federal budget deficit amounted to 712.9 billion rubles (10.8 billion U.S. dollars at current price), or 3.7 percent of the country's gross domestic product in the first quarter of 2016, the Russian Finance Ministry said Friday. Federal revenue totaled 2.908 trillion rubles in the first three months, while federal expenses reached 3.621 billion rubles, said the ministry. The Russian economy has plunged into recession since 2014 amid the drop of global oil prices and Western sanctions imposed over Moscow's alleged intervention in the Ukraine crisis. But Russia's federal finances were relatively robust with low sovereign debt and the budget deficit had been controlled within 3 percent of its GDP, proportionately less than that in a number of European Union states.

      IMF cuts eurozone growth forecast amid 'major' challenges - The IMF cut its growth forecasts for the eurozone on Tuesday as the refugee crisis, terrorism and the threat of Britain choosing to exit the EU weighed on the outlook. Europe has never quite emerged from the debilitating debt crisis that erupted in 2010 in Greece before spreading across the eurozone, requiring massive German-led bailouts and sparking acrimony that nearly saw the single currency area implode. While predicting "weak growth", the IMF said deep problems endured in the eurozone, with unemployment still high and crucial reforms still not done in many of the bloc's 19 member nations. The IMF said the eurozone should grow a modest 1.5 percent this year, down from the 1.7 percent estimated in January and slower than the 1.6 percent seen in 2015. Next year, the eurozone economy would likely expand 1.6 percent, down from the earlier forecast of 1.7 percent. Adding onto the "Brexit" danger, "is the tragedy of large scale refugee inflows, especially from the Middle East", said Maurice Obstfeld, the IMF's chief economist. "The result could be a turn to toward more nationalistic policies, including protectionist ones," he warned.

      Macedonian Police Use Tear Gas to Stop Migrants at Border - — The Macedonian police used tear gas and rubber bullets on Sunday to disperse hundreds of migrants who tried to break through a border fence in a large refugee camp in the northern Greek town of Idomeni. It was the latest in a series of increasingly frequent uprisings by migrants stuck in Greece after countries sealed the main route they had been using to get to Germany.Greek television showed migrants running from clouds of tear gas and falling to the ground as the wind blew toxic fumes into the encampment. More than 12,000 people, mostly women and children, have been stuck there for more than a month amid hopes that the border would reopen.  Tensions have been rising at migrant camps and gathering places across Greece, where more than 52,000 migrants are trapped after Balkan countries closed their borders two months ago to stem a growing flood of asylum seekers. More than one million migrants entered Europe last year, prompting European politicians to radically shift their immigration policy in a bid to shut the doors to large numbers of newcomers. Since a European Union deal with Turkey to stem Europe’s migrant crisis went into effect on March 20, requiring mass deportations of migrants who arrived from Turkey after that date, tensions have intensified. At camps on Greek islands, deportations of migrants who crossed illegally from Turkey began last week, setting off a wave of anxiety among migrants who fear they may be among those facing a return to Turkey or, at least, stuck in Greece for the foreseeable future.

      Bringing Europe’s Migration Crisis Under Control George Soros – The asylum policy that emerged from the European Union’s negotiations last month with Turkey became effective on April 4, when 202 asylum-seekers were deported from Greece. The policy has four fundamental flaws.

      • It was negotiated with Turkey and imposed on the EU by German Chancellor Angela Merkel.
      • It is severely under-funded.
      • It is not voluntary, for it establishes quotas that many member states oppose and requires refugees to take up residence in countries where they don’t want to live.
      • It transforms Greece into a de facto holding pen with insufficient facilities for the number of asylum-seekers already there.

      All of these deficiencies can be corrected. The European Commission implicitly acknowledged some of them on April 6 in a new set of proposals for reforming Europe’s asylum system. But the Commission’s proposals still rely on compulsory quotas. That will never work. Commission First Vice-President Frans Timmermans is inviting an open debate.  A comprehensive asylum policy for Europe, I believe, should establish a firm and reliable annual target of 300,000-500,000 refugees. This is large enough to give refugees the assurance that they can eventually reach their destination, yet small enough to be accommodated even in today’s unfavorable political climate.

      EU Gives Greece Two Weeks to Form Border Control Plan -- The European Commission on Tuesday gave Greece two weeks to present a concrete plan to improve protection of Europe’s external borders in order to stop massive refugee inflows. The European Commission finds that Greece has failed to file an adequate plan to deal with the refugee crisis. If Athens fails to implement an adequate plan, the Commission will extend existing border checks on travelers from Greece to other parts of the passport-free Schengen area until at least mid-November, so that migrants trapped in Greece would not be able to travel further to Europe. “The commission confirms that it will be prepared for this eventuality and would act without delay,” the commission said in a report Tuesday. In the document, the commission finds that while Greece has made some progress since its first warning in November, it has still failed to submit concrete timelines, cost estimates and name the authorities responsible for various requirements. Currently, there are about 53,000 refugees and migrants who came from Turkey and are stranded on Greek soil. The vast majority of them wish to cross to prosperous central and northern European countries. Europe has closed the Balkan Route, meaning that refugees cannot cross through Greece’s northern and northwestern neighbors, namely Bulgaria, Former Yugoslav Republic of Macedonia and Albania. In addition, the EU deal with Turkey to take back all migrants arriving in Greece from its shores have significantly reduced the numbers coming into the EU bloc. Under the EU-Turkey deal, Greece must focus on returning people and stop issuing temporary stay permits to migrants who land on Greek islands that have allowed them to travel onto the mainland and then further north, the commission says.

      Greece, Portugal make common cause against austerity, refugee crisis - France 24: (AFP) - Left-leaning Greece and Portugal on Monday said they were determined to push for "alternatives" to European austerity and join forces to tackle the refugee crisis. "The neoliberal right-wing in Europe wanted to impose a single model without alternatives. Greece and Portugal have proven that other democratic paths are possible," said Portugal's Socialist Prime Minister Antonio Costa, adding that his government would present the EU with a new mix of measures at the end of April. "We must have a new balance between funds allocated for servicing the debt, and funds allocated for investment and economic growth, job creation and convergence," he said according to the official translation after talks with Greek Prime Minister Alexis Tsipras. Tsipras and Costa had earlier signed a joint declaration pledging to resist austerity and work together to address Europe's refugee crisis. "We do not have the refugee flow facing Greece, but every refugee who reaches Greece is a refugee that reaches Europe, and Portugal too, in our view," Costa said. Portugal has agreed to take in up to 10,000 refugees, more than double its quota of 4,500 under an EU scheme that has failed to make much progress in the bloc.

      ECB seeks to mollify Germany after dispute over 'helicopter money' | Reuters: Almost a month after stoking a divisive debate about how far it should go in pumping money into the flagging euro zone economy, the European Central Bank is trying to soothe relations with Germany after unusually strong criticism from Berlin. Late last week, German Finance Minister Wolfgang Schaeuble was reported as blaming the ECB's cheap-money policy in part for the rise of the country's right-wing anti-immigration Alternative for Germany (AfD). The discussion is likely to continue when ECB President Mario Draghi meets Schaeuble this week in Washington at the International Monetary Fund's spring gathering of central bankers and ministers from around the world. A storm of protest erupted in thrifty Germany after Draghi last month described the idea of "helicopter money" - sending money directly to citizens - as a "very interesting" - if unexamined - concept. Late last week, top ECB officials, including the ECB's chief economist and its vice president, backpedalled, saying the idea was not on the table. But the damage had already been done. "The ECB's policy was already unpopular in Germany and the idea of helicopter money was the straw that broke the camel's back," said Joerg Kraemer, an economist with Commerzbank in Frankfurt. "People feel that ideas like this are dangerous."

      First Denmark, Now Belgium Is Paying People To Take Out A Mortgage - Back In January of 2015, we asked "who will offer the first negative rate mortgage?"  We didn't have to wait long before Denmark's Nordea Credit unleashed this idiocy. And now two banks in Belgium have followed suit, paying instead of charging interest on mortgages to a handful of customers. Thanks to Mario Draghi's generosity with "other generations' slavery", the negative rate mortgage is now a reality. As Het Nieuwsblad reports (via Google Translate), Getting paid to borrow money for your house. It seems too good to be true, but for some clients of BNP Paribas and ING is not a dream but reality. The interest rate on their home loan is dropped below zero and so they get money from the bank. For those who in 2012 closed a mortgage loan with a variable rate at BNP Paribas Fortis or ING are now very lucky. Due to a decline in interest rates, the interest rate on their home loan has also fallen below zero. In other words, the banks pay their customers rather than collect interest. This writes the newspaper De Tijd.  When a loan with fixed interest rate you pay a fixed rate for the duration of your loan. But at a variable interest rate, the interest rate can change at any time, depending on the conditions on capital markets. The rate is now so low that is below the zero interest rates for some customers. The European Central Bank (ECB) lowered its deposit rate below zero, after all, and also buys bonds en masse to push market interest rates down.

      Swiss negative rates not yet at lower limit -SNB's Maechler | Reuters: Switzerland's central bank has room left to push interest rates further into negative territory, Swiss National Bank policymaker Andrea Maechler reiterated on Thursday, adding Swiss inflation was still low. The SNB uses negative interest rates and currency intervention as its main policy tools to rein in the strong franc and try to give the export-dependent economy a boost. It now charges banks 0.75 percent for surplus deposits at the central bank and aims to keep three-month money market rates around the same level. "There is a lower bound, that's an easy question to answer," Maechler told a financial panel when asked whether there was a lower limit for rates and if negative interest rates were working. "The more difficult one would be where is it? On that one I don't have an answer. There is a lower bound, it's not infinite." She said the SNB was not ruling out a further cut in interest rates.

      Austria Just Announced A 54% Haircut Of Senior Creditors In First "Bail In" Under New European Rules - Just over a year ago, a black swan landed in the middle of Europe, when in what was then dubbed a "Spectacular Development" In Austria, the "bad bank" of failed Hypo Alpe Adria - the Heta Asset Resolution AG - itself went from good to bad, with its creditors forced into an involuntary "bail-in" following the "discovery" of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.Austria had previously nationalized Heta’s predecessor Hypo Alpe-Adria-Bank International six years ago after it nearly collapsed under the bad loans it ran up when it grew rapidly in the former Yugoslavia. Having burnt through €5.5 euros of taxpayers’ money to prop up Hypo Alpe, Finance Minister Hans Joerg Schelling ended support in March 2015, triggering the FMA’s takeover. This was the first official proposed "Bail-In" of creditors, one that took place before similar ad hoc balance sheet restructuring would take place in Greece and Portugal in the coming months. Or rather, it wasn't a fully executed "Bail-In" for the reason that creditors fought it tooth and nail. And then today, following a decision by the Austrian Banking Regulator, the Finanzmarktaufsicht or Financial Market Authority, Austria officially became the first European country to use a new law under the framework imposed by Bank the European Recovery and Resolution Directive to share losses of a failed bank with senior creditors as it slashed the value of debt owed by Heta Asset Resolution AG.

      Spanish government discretionary fiscal deficit rises and real GDP growth returns - Bill Mitchell - I noted by way of passing in a blog last week that a recent article in Spain’s highest-circulation newspaper El País (March 31, 2016) – Public deficit for 2015 comes in at 5.2%, exceeding gloomiest forecasts. The latest data shows that the Spanish government is in breach of Eurozone fiscal rules and is growing strongly as a result. Those who claim that Spain demonstrates how fiscal austerity can promote growth should examine the data more closely. The reality is that as growth has returned (albeit now moderating again), the discretionary fiscal deficit (that component of the final deficit that reflects the policy choices of government) has increased. Government consumption and investment spending has supported the return to growth, which had collapsed under the burdens of fiscal austerity between 2010 and 2013. Spain demonstrates how responsible counter-cyclical fiscal policy works.

      Eurozone March Inflation Revised Up To Zero: Euro area consumer prices were unchanged in March after a decline in the previous month, revised data from Eurostat showed Thursday. The consumer price index showed no change from the same month a year ago, following a 0.2 percent drop in February. Headline inflation initially reported for March was a 0.1 percent fall, a second straight decline. Headline inflation has been below the European Central Bank's target of 'below, but close to 2 percent' since early 2013. Compared to the previous month, consumer prices rose 1.2 percent. The core inflation that excludes energy and fresh food prices accelerated to 1 percent from 0.8 percent in the previous month. The figures were unchanged from the preliminary estimate. Energy prices tumbled 8.7 percent annually in March after an 8.1 percent slump in the previous month.

      Eurozone Industrial Output Falls In February: Eurozone industrial production declined in February after recovering a month ago, Eurostat reported Wednesday. Industrial production fell 0.8 percent in February from January, when it grew by revised 1.9 percent. Economists had forecast a 0.7 percent drop. Output for January was revised down from 2.1 percent. On a yearly basis, industrial output growth eased to 0.8 percent from revised 2.9 percent in January. It was slower than the expected 1.3 percent increase. Nonetheless, production grew for the second straight month. Production in the EU28 fell 0.7 percent in February from prior month and increased 0.8 percent from last year.

      Youth Unemployment in the Mediterranean Region and its Long-Term Implications - naked capitalism Yves here. This post is written in anodyne technocratic terms, but the data is sobering. A key point is the influx of migrants, particularly from Syria, which has a well-educated population, is going to make an already-dire situation worse. Denying young people any hope of a decent future is certain to lead to radicalization. Yet European leaders act as the Market Gods must be appeased, no matter what the human cost. Youth unemployment in the Mediterranean region has consequences for the whole of Europe. Tackling youth unemployment in the region must continue to be a high policy priority.Europe’s Mediterranean neighbourhood has become a focal point of attention due to the refugee crisis. With over a million people arriving in Europe in the course of 2015, the question of how to address the growing immigration pressures has become a central political issue.

      Countries around the Mediterranean are also under scrutiny due to mounting security concerns in Syria, Libya and elsewhere. Youth unemployment is an urgent issue in many countries across the Mediterranean region, where 25.4 million people are unemployed, of whom 7-8 million are aged 15-24. (World Bank 2014; United Nations World Population Prospects 2015).  490 million people live in the region, of which 192 million are part of the 8 EU member states. The proportion of young people not in education, employment or training has increased since the financial crisis, and in many countries youth unemployment rates are higher than unemployment in the older working age population. The figures available may even underrepresent the true level of unemployment due to non-participation in the labour market.

      The Brexit Alarm – I have no special expertise on the question of whether Britain should leave (or “Brexit”) the European Union. True, I did live in the United Kingdom until a bit less than a year ago. And here in California, we have our own Brexit-like debate, with a movement to place a proposal to secede from the United States on the November ballot. But while the idea of California independence might seem comical, the Brexit referendum on June 23 is no laughing matter.  Most obviously, Brexit would damage Britain’s export competitiveness. To be sure, ties with the EU would not be severed immediately, and the UK government would have a couple of years to negotiate a trade agreement with the European Single Market, which accounts for nearly half of British exports. The authorities could cut a bilateral deal like Switzerland’s, which guarantees access to the Single Market for specific industries and sectors. Or they could follow Norway’s example and access the Single Market through membership in the European Free Trade Association.  But Britain needs the EU market more than the EU needs Britain’s, so the bargaining would be asymmetric. And EU officials would most likely drive a hard bargain indeed, in order to deter other countries from contemplating exits of their own. The UK would have to accept EU product standards and regulations lock, stock and barrel, with no say in their design – and would be in a far weaker position when negotiating market-access agreements with non-EU partners like China.  In addition, Brexit would undermine London’s position as Europe’s financial center. It is quite extraordinary that the principal center for euro-denominated financial transactions is outside the eurozone. This attests to the strength of EU regulations prohibiting discrimination within the Single Market. But in a post-Brexit world, Frankfurt and Paris would no longer be prevented from imposing measures that favored their banks and exchanges over London’s.

      Who Loses the Most From ‘Brexit’? Try Goldman Sachs - WSJ: A vast construction site in the heart of London is a testament to Goldman Sachs Group Inc.’s $500 million bet on the city’s global financial clout. But the bank’s new European headquarters might be a little emptier than planned if the U.K. votes in June to leave the European Union, Goldman’s executives say. The warning underscores a twist in what is turning into an increasingly fractious fight over whether the U.K. should opt for “Brexit”: the business groups that have the most to lose are neither European nor British. For years, big U.S., Swiss and Japanese investment banks have used the U.K. as a financial springboard into the EU. A key attraction: the right to seamlessly sell their services across 28 nations without having to get regulatory approval in each individual country. Today, the U.K. is a European hub for derivatives and foreign-exchange trading. Around half of the U.K.’s £6.9 trillion ($9.8 trillion) in banking assets are held by non-British institutions, according to Fitch Ratings. To save on costs and build economies of scale, banks concentrated large chunks of their global operations in Britain. Come the vote on June 23, this structure could be blown apart. Big international banks “have the most to lose,” said Chris Bates, a partner at law firm Clifford Chance, who has advised several banks on their Brexit plans. No one knows what exactly would happen if the U.K. voted to leave the EU. The process could take years. The U.K. might be able to negotiate access for its banks to the EU. Or it might not.

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