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

Saturday, April 2, 2016

week ending Apr 2

Janet Yellen Says Fed Still Plans to Raise Interest Rates but Carefully - Janet L. Yellen, the Federal Reserve chairwoman, said on Tuesday that the United States economy remained on track despite a rough start to the year because the drag from weak growth in other countries was being offset by lower borrowing costs.Ms. Yellen told the Economic Club of New York that the economy “had proven remarkably resilient,” and that the Fed expected better days ahead. She said the Fed still intended to pursue a careful, patient course toward higher interest rates as the economy improved.The cautious tone of her remarks, however, suggested no rate increase was likely at the Fed’s next meeting, in April, shifting the eyes of Fed watchers to its subsequent meeting in June.“I consider it appropriate for the committee to proceed cautiously in adjusting policy,” Ms. Yellen said.Stocks jumped and bond yields fell in the moments after the publication of Ms. Yellen’s remarks, part of a now-familiar pattern in which markets celebrate signs of economic softness and Fed restraint because that means interest rates will stay lower for longer.

Yellen: The Outlook, Uncertainty, and Monetary Policy --From Fed Chair Janet Yellen: The Outlook, Uncertainty, and Monetary Policy. Excerpts on risks:  Although the baseline outlook has changed little on balance since December, global developments pose ongoing risks. These risks appear to have contributed to the financial market volatility witnessed both last summer and in recent months.One concern pertains to the pace of global growth, which is importantly influenced by developments in China. There is a consensus that China's economy will slow in the coming years as it transitions away from investment toward consumption and from exports toward domestic sources of growth. There is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. These uncertainties were heightened by market confusion earlier this year over China's exchange rate policy. A second concern relates to the prospects for commodity prices, particularly oil. For the United States, low oil prices, on net, likely will boost spending and economic activity over the next few years because we are still a major oil importer. But the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms. In the case of countries reliant on oil exports, the result might be a sharp cutback in government spending; for energy-related firms, it could entail significant financial strains and increased layoffs. In the event oil prices were to fall again, either development could have adverse spillover effects to the rest of the global economy.

Yellen Says What Markets Want to Hear --Mohamed El-Erian --Markets had a predictable immediate reaction to comments by Federal Reserve Chair Janet Yellen on Tuesday that they interpreted as relatively dovish signals about the thinking of the world’s most important central bank. Within minutes of her remarks, risk assets rose, government bond yields fell, the dollar weakened and the VIX declined. Sustaining this trend will require two policy signals, one short-term and one longer-term -- assuming that the global economic environment remains relatively stable. QuickTake Negative Interest RatesShe used her much-anticipated lunchtime speech to the Economic Club of New York to paint a cautious and measured picture of the U.S. economy, and of the delicate balance that Fed policy makers must maintain. The Fed chair acknowledged that the overall mixed U.S. picture for 2016 so far contained encouraging signs, including the continued strengthening of the labor market. Yet she also emphasized “external” risks, including slowing global economic conditions, the level of the dollar and market reactions to China’s currency policy. She even recognized the influence of some structural headwinds to growth and the unusual uncertainty facing the inflationary outlook. This cautious assessment of the economy was accompanied by a rather measured appraisal of what the Federal Reserve can do to further support growth as part of its dual-mandate of maximum employment and stable inflation. She argued that the Fed had not run out of policy ammunition and stressed the need for careful policy gradualism within a cautious approach overall -- music to the ears of markets that have been conditioned to depend on the Fed to suppress financial volatility and push asset prices higher. But she also cautioned about the extent to which the central bank can continue to be effective. And she refrained from venturing into the debate about negative interest rates, which has been fueled by the decision of her counterparts in Europe and Japan to push theirs below zero.

Fed's Williams Sees Gradual Hikes as U.S. Economy Stays on Track - Federal Reserve Bank of San Francisco President John Williams said the U.S. economy appears to be weathering cooler global growth and he repeated that the central bank will raise interest rates at a gradual pace. “Despite recent financial market volatility, my overall outlook for both the U.S. and the global economy remains largely unchanged over the past few months,” Williams said Tuesday in a speech in Singapore. “We took the first small step with a modest rate hike in December, and the future pace will be, as we’ve said repeatedly, gradual and thoughtful.” Fed officials are discussing how quickly they should raise rates a second time following their first hike for nearly a decade in December. Williams, who doesn’t vote on monetary policy this year, didn’t comment on the timing in his text, though he was among Fed officials who last week saidincreases could be considered as soon as April. “I see continued growth in the U.S., and I don’t see the global situation as dire,” Williams said. “The ability of governments and central banks to respond to their own needs while navigating global conditions may not be a miracle cure, but it offers stability.” Williams said he expects the U.S. economy to expand at “a bit above 2 percent this year,” pushing the unemployment rate down to around 4.5 percent by the end of 2016. “On the inflation side, we’re not quite where I’d like us to be, but recent developments have been very encouraging and add to my confidence that we’re on course to reach our goal” of 2 percent, he said.

Fed caution due to fears of Japan-style malaise, Evans says - — The Federal Reserve is being cautious about further interest rate hikes because inflation remains low and any stumble could put the economy in a Japan-like malaise, said Chicago Fed President Charles Evans on Thursday. “Inflation has been quite low and that is really the reason continued caution is called for,” Evans said in an interview on Bloomberg Radio. The U.S. economy faces the risk that if it continues to “under-run” 2% inflation and then growth stalls, the U.S. could slip into the deflationary malaise experienced by Japan, he said. “You don’t want to repeat that,” Evans said. To avoid this outcome, the Fed needs to be “proactive” and hit its target, he said. As a result, the Fed should not “fear” overshooting 2% inflation, at least for a brief period of time, to ensure the central bank hits its target, he said. With the labor market not generating any inflation pressure, it doesn’t make sense to “try preempt further labor market gains” just because of inflation concerns, he said. The Fed raised interest rates in December for the first time in a decade. But the U.S. central banks has held steady since, and has pulled back its forecast from 4 to 2 potential rate hikes this year. Evans said he supports two interest rate hikes this year. If his confidence firms that inflation will get to the 2% target, he said he would support more hikes.

Labor Market Is Strong, but Fed Is Focused Elsewhere - Friday’s jobs report has less significance than prior reports when it comes to monetary-policy effects, says Rick Rieder, CIO of fundamental fixed income at BlackRock. The report continues to show “the historic strength witnessed recently in labor markets, which are today as robust as at any time in a generation,” Mr. Rieder says. Labor markets slowed only modestly in March after a very strong February payroll print, he notes. “In aggregate, the hiring of 8.1 million people over the past three years is equal to all the job creation accomplished in the 14 years prior to that; which is illustrative of an economy that has been operating at a very high level,” Mr. Rieder says. Wages are likely to firm over the next year, he says, noting that average hourly earnings rose solidly last month, by 0.3%, and experienced a 2.3% year-over-year gain. But recent pronouncements, including FOMC statements, press conferences and comments from Fed Chairwoman Janet Yellen this week, suggest that the Fed is willing to let the labor market “run a bit hot,” in terms of hiring and wage growth, Mr. Rieder says. “The Fed has a multitude of tools to deal with a system running hot, but fewer options for reversing any growth or inflation contagion from challenged global economic or financial conditions,” he says. It’s likely to move at most two times this year, with the potential for no movement at all in policy rates, Mr. Rieder says. What it does will depend on growth and stability in the rest of the world and the path of the US dollar, he says.

Fed Watch: Yellen Pivots Toward Saving Her Legacy -  As 2016 began to evolve, it quickly became apparent that Federal Reserve Chairman Janet Yellen faced the very real possibility that her legacy would amount to being just another central banker who failed miserably in their efforts to raise interest rates back into positive territory. The Federal Reserve was set to follow in the footsteps of the Bank of Japan and the Riksbank, seemingly oblivious to their errors. In September of last year, a confident Yellen declared the Fed would be different. From the transcript of her press conference: . But, really, that’s an extreme downside risk that in no way is near the center of my outlook. Shuddering financial markets in the wake of the Fed’s first rate hike since 2006 certainty tested Yellen’s confidence that failure to exit the zero bound was nothing more than an “extreme” tail risk. Indeed, it looked all too possible, even as policymakers such as Federal Reserve Vice-Chair Stanley Fischer and San Francisco Federal Reserve President John Williams counseled dismissing financial market turbulence as something the economy could withstand as it has in the past (ignoring though the role the Fed play in such resilience). Luckily for Yellen, she heeded the warnings of Federal Reserve Governor Lael Brainard, who has since last fall has cautioned that the Fed faced more danger than commonly believed within the confines of the Eccles Building. With her speech this week, Yellen clearly embraced Brainard’s warnings. She is choosing the risk of overheating the economy – and sending inflation above target – over the risk of failing at the one and perhaps only chance to leave the zero bound behind. While the exit from the zero bound remains uncertain, Yellen’s new path is at least more likely to succeed than blindly ignoring financial market signals by following through with expected rate hikes. And that’s important for more than just Yellen’s legacy. Her legacy is intertwined with the health of the US economy.

Bernanke on monetary policy options - Rajat directed me to a series of posts by Ben Bernanke, discussing monetary policy options if the US once again hits the zero rate bound. Bernanke thinks this problem is likely to occur in the next recession, and I agree. Here's the punch line: To anticipate, I'll conclude in these two posts that the Fed is not out of ammunition, and that monetary policy could help cushion a possible future slowdown. That said, there are signs that monetary policy in the United States and other industrial countries is reaching its limits, which makes it even more important that the collective response to a slowdown involve other policies--particularly fiscal policy. A balanced monetary-fiscal response would both be more effective and also reduce the need to use unconventional monetary tools. In a recent post, I quoted from a 2004 Bernanke paper, where he indicated that if monetary policy is less effective at the zero bound, then the Fed might need a higher inflation target. Here he suggests fiscal stimulus as the relevant alternative. I prefer his 2004 approach, as I think a higher inflation target would be far less costly than fiscal stimulus. However I also think that NGDP targeting, level targeting, is superior to either fiscal stimulus or a higher inflation target.  The first post in Bernanke's series focuses on negative interest on reserves. Bernanke thinks this is an attractive option, but suggests that it's unlikely that the Fed could push rates as far below zero as Switzerland (minus 0.75%) without either technical or political complications. In the second post in the series Bernanke focuses on a long-term bond yield peg, such as the 2.5% cap on long term Treasury bond yields maintained by the Fed during and after WWII. Here again Bernanke takes a more interest rate-oriented approach than I would prefer, viewing low rates as easy money. In contrast, NeoFisherians might view a low bond yield peg as a policy that actually lowered inflation expectations, i.e. a contractionary policy.

Central Bank Forecasts: What's in a Dot? - There has been some discussion of central bank forecasts and policy projections, including some blog posts by Tony Yates, Tony Yates part II, Narayana, David Andolfatto, and an editorial on Bloomberg. The FOMC's dot plots are part of the economic projection materials published four times per year after the March, June, September, and December FOMC meetings. Many central banks in the world publish forecasts. For example, several times a year, the Bank of England publishes detailed forecasts in its Inflation Report. What's the value of a central bank's forecasts? For the most part, the central bank does not have any important information you don't have, that would be relevant for a macroeconomic forecast. Nor does the central bank possess any special knowledge about how to conduct macroeconomic forecasts. Basically, any professional forecasting firm should be able to do it as well or better. So, we're not interested in a central bank's forecasts because these are good forecasts. But perhaps we care about the central bank's forecasts because this tells us something about what the central bank will do. For example, the central bank could be pessimistic, and wrong, but I pay attention because monetary policy matters for my decisions. I'm better off if I know about the pessimistic central bank forecast than if I did not know.

The Trouble With Predictions - By Narayana Kocherlakota -  Policy makers have made some famously bad predictions over the past eight years. Given how this undermines public trust, it's worth considering how they could do better. Here are a few of the bigger mistakes that come to mind: In March 2007, Federal Reserve Chairman Ben Bernanke testified in Congress: "The impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.” In November 2009, most members of the policy-making Federal Open Market Committee (of which I was a member) said that they expected the U.S. economy to grow at a rate of between 3.1 percent and 4.3 percent over next three years. (In reality, growth averaged less than 2 percent per year.) In January 2009, the chair-designate of President Barack Obama's Council of Economic Advisers estimated that the government's stimulus program would bring the unemployment rate down to about 7 percent by the end of 2010. (It actually remained well above 9 percent.) These errors have had an adverse impact on public confidence -- in the Fed's ability to foresee crises and achieve its goals, in the power of fiscal stimulus to mitigate recessions. This loss of faith matters. It contributes to the kind of uncertainty that can be a drag on the economy. So how can policy makers improve? Two changes would help. First, when offering forecasts, they should also give a sense of the associated uncertainty. All forecasts have risks about which the public should be aware, and the field of statistics has well-established ways to express them.  Second, and more challenging: Policy makers must recognize that the public views their forecasts as statements of goals, not mere academic prognostications. When the Chair of the Federal Reserve says that the subprime crisis is well-contained, he is implicitly telling Congress that the Fed has the wherewithal to protect the public. When Fed officials predict growth of 3 to 4 percent, they are implying that they have the tools and will to make that outcome happen. When the Council of Economic Advisors announces that the unemployment rate will fall to 7 percent, it is saying that the president and Congress will do what is necessary to hit that target.

Fed’s Dudley: US Economy In a ‘Good Place’  (MNI) - New York Federal Reserve Bank President William Dudley made a largely upbeat appraisal of the U.S. economy without indicating when he thinks the Fed should raise short-term interest rates late Thursday afternoon. The economy is in a "relatively good place," having made "considerable progress" on both employment and inflation, Dudley said in remarks prepared for the Virginia Association of Economists in Lexington, Virginia. Dudley, who as vice chairman of the Fed's policymaking Federal Open Market Committee voted for the FOMC's 25 basis point December hike in the federal funds rate but voted to keep rates on hold in January and March, said that the Fed's various monetary policy tools proved "effective" in enabling it to lift the funds rate and other rates. He did not explicitly get into the question of when the FOMC might make a second rate hike, however.

Negative Interest Rates – Are There Any Positives? -- naked capitalism - Yves here. I’m a bit mystified that central bankers were so confident that an untested experiment like negative interest rates would work out as planned, particularly since some of the assumptions as to why they thought it would work seem utterly barmy. But this is what happens when you put stock in theories that were debunked (by no less than Keynes), like the loanable funds model, that mainstream economists treat as gospel.  First, monetary authorities contended they could pressure consumers into spending more by penalizing cash holding. But they can only punish holding cash at banks. Since consumers are perfectly capable of withdrawing cash and storing it in mattresses, and central bankers don’t want to precipitate slow-motion bank runs, in practice they can’t go very far at all in that direction. Second, they seem to believe that making lending rates lower will lead to more borrowing, and thus will stimulate the economy. But we’ve had years of negative real interest rates and anyone who is a reasonably smart investor knows that. And as far as consumer borrowing is concerned, banks don’t necessarily pass on the further rate reductions to consumer rates. And even if they do, most consumers won’t borrow.   Third, after central banks have made such a fetish of setting inflation expectations, how can they have convinced themselves that moving into negative rates sets all sorts of negative expectations? It signals that central banks are desperate, which is not a plus for confidence. It signals deflationary expectations. And that reinforces what citizens are experiencing: wage pressures, benefit cuts, shorter job tenures. The monetary authorities are flashing a big red warning to expect even more of the same. And they expect businesses and consumers to borrow and spend as a result of their fiddling with the dials? Help me.

Oil, Inflation Expectations, and Credibility, by Tim Duy: In an IMF blog post, Maurice Obstfeld, etal offer a solution to the "puzzle" of the weak positive macroeconomic response to low oil prices. Specifically, they posit a sharp rise in real interest rates due to falling inflation expectations is the culprit: Even though oil is a less important production input than it was three decades ago, that reasoning should work in reverse when oil prices fall, leading to lower production costs, more hiring, and reduced inflation. But this channel causes a problem when central banks cannot lower interest rates. Because the policy interest rate cannot fall further, the decline in inflation (actual and expected) owing to lower production costs raises the real rate of interest, compressing demand and very possibly stifling any increase in output and employment. Indeed, those aggregates may both actually fall. Something like this may be going on at the present time in some economies. Chart 3 is suggestive of a depressing effect of low expected oil prices on expected inflation: it shows the strong recent direct relationship between U.S. oil futures prices and a market-based measure of long-term inflation expectations. Initially, I was a bit enamored with this idea. As I thought on it more, however, I came to see it as a cautionary tale of chart crime. But digging underneath the surface a bit uncovered some interesting questions about monetary policy and credibility. Specifically, how worried should we be that inflation expectations will soon become unanchored? Obstfeld et al. rely on a version of this widely publicized chart to support their contention: The first and most obvious problem is that this chart really proves nothing. For example, I could just as easily presented this chart: Now I can tell a story that the rising dollar (note the inverted scale) is driving down inflation expectations and thus driving up the real interest rate. Oil, on the other hand, is having exactly the effect we might expect - just look at sales of light trucks and SUVs, not to mention vehicle miles traveled:This problem, however, just scratches the surface. Look at either of the first two charts above and two red flags should leap off the screen.

The Core PCE Price Index at Its Highest Since February 2013 - The  Personal Income and Outlays report for February was published this morning by the Bureau of Economic Analysis. The latest Headline PCE price index year-over-year (YoY) rate is 0.96%, down from the previous month's downwardly revised 1.24%. The latest YoY Core PCE index (less Food and Energy) came in at 1.68%, up from the previous month's downwardly revised 1.66%. Core YoY is the highest since February 2013. The adjacent thumbnail gives us a close-up of the trend in YoY Core PCE since January 2012. The first string of red data points highlights the 12 consecutive months when Core PCE hovered in a narrow range around its interim low. The second string highlights the lower range of the past 14 months. The latest month is back above the 1.5% level. The first chart below shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. Also included is an overlay of the Core PCE (less Food and Energy) price index, which is Fed's preferred indicator for gauging inflation. The two percent benchmark is the Fed's conventional target for core inflation. However, the December 2012 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low FFR and quantitative easing) are in place. More recent FOMC statements now refer only to the two percent target. The index data is shown to two decimal points to highlight the change more accurately. It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision and the annual revision reaches back three years). But core PCE is such a key measure of inflation for the Federal Reserve that precision seems warranted. For a long-term perspective, here are the same two metrics spanning five decades.

Trimmed Mean PCE Inflation Rate - Dallas Fed: The Trimmed Mean PCE inflation rate is an alternative measure of core inflation in the price index for personal consumption expenditures (PCE). It is calculated by staff at the Dallas Fed, using data from the Bureau of Economic Analysis (BEA). Series description February 2016 The Trimmed Mean PCE inflation rate for February was an annualized 1.8 percent. According to the BEA, the overall PCE inflation rate for February was -1.3 percent, annualized, while the inflation rate for PCE excluding food and energy was 1.8 percent. The tables below present data on the Trimmed Mean PCE inflation rate and, for comparison, overall PCE inflation and the inflation rate for PCE excluding food and energy. The tables give annualized one-month, six-month and 12-month inflation rates. The following chart plots the evolution of the distribution of price increases in the monthly component data over the past year. The chart shows the percentage of components each month, weighted by their shares in total spending, for which prices grew between 0 and 2 percent (at an annual rate); between 2 and 3 percent; between 3 and 5 percent; between 5 and 10 percent; and more than 10 percent.

4th Quarter revised up…again - The final estimate of 4th quarter GDP for 2015, 1.4% doubled the first estimate from January, 0.7%.  Yet, looking at the year -over-year change (the blue line in the graph below) growth has slowed over the past several quarters and one can pick out some “mini-cycles” since the Great Recession. The final estimate for annual growth for 2015 came out at 2.4%, exactly the same as 2014. Real personal consumption expenditures (PCE) grew at 2.4%, a slight revision up as well, but again shows a downward trend over the past year or so. Residential fixed investment (structures) grew at a solid 10.1% and has remained at fairly steady pace since the 4th quarter of 2014. However, nonresidential structures declined at a 5.1% pace after declining 7.2% in the 3rd quarter of 2015.Since the trough of the last recession, dated Q2 of 2009 from the NBER, the recovery has been the weakest in recent history, as can be seen in the graph below. For example, take the 1969 cycle, about in the middle of the lines below. Roughly 7 years after bottoming out, the economy grew by about 25%. The current recovery is  but 15% higher 7 years after the trough. The same slow growth is true about consumption.  The table below shows the averages for contractions and expansions since 1854. Over time the contractions have gotten shorter and the expansions longer. Just as a point of reference, the current expansion is about 28 quarters long.

Services Use More Than Estimated as Q4 GDP Revised Upward to 1.4% -  Robert Oak - Q4 GDP was revised upward again to now be 1.4%.  That's double the original advance report of 0.7% and the first revision was 1.0%.  The primary cause of the upward revision was more consumer spending in services than previously estimated.  The trade deficit Q4 GDP impact was significantly less.  Residential housing was revised upward as well.  With this revision Q4 GDP still shows fairly weak economic growth, although almost double the original estimate is quite an overall revision. As a reminder, GDP is made up of: Y=C+I+G+(X-M)  where Y=GDP, C=Consumption, I=Investment, G=Government Spending, (X-M)=Net Exports, X=Exports, M=Imports*.  GDP in this overview, unless explicitly stated otherwise, refers to real GDP.  Real GDP is in chained 2009 dollars. The below table shows the Q4 GDP component revision comparison in percentage point spread.  As we can see import damage was less and the real change was in investment.  Changes in private inventories is part of investment. Consumer spending, C while bright spot in overall GDP really wasn't that strong in comparison to other quarters.  Below is a percentage change graph in real consumer spending going back to 2005.Goods was revised downward again to 0.36 percentage points from 0.42 percentage points and the advance report had 0.53 percentage points for goods spending.  Within goods, durables contributed 0.28 percentage points.  Services was revised significantly higher, from a 0.96 percentage point contribution to 1.30 percentage points.  Within services, health care remained high but was revised down to 0.30 percentage points from a 0.41 percentage point contribution to Q4 GDP.  Household consumption was revised from 0.83 percentage points to 1.10 percentage points.  Imports and Exports, M & X net was revised again, from -0.25 percentage points to -0.14 percentage points.  That is much less of a dent from the trade deficit than previously estimated.  That said, exports really imploded in comparison to Q3, not a good sign for U.S. producers, although different price indexes impact total exports greatly. Government spending, G now contributed 0.02 percentage points to Q4 GDP, which is not a significant revision.   Federal spending was a 0.15 percentage point contribution while state and local spending was a -0.13 percentage points contribution. Investment, I is made up of fixed investment and changes to private inventories.  The change in private inventories alone was revised from a -0.14 percentage point contribution to -0.22.  Below are the change in real private inventories and the next graph is the change in that value from the previous quarter.  Fixed investment is residential and nonresidential and was just 0.06 percentage points of GDP contribution.  Nonresidential was a -0.27 individual percentage point contribution.

Household Spending, Home Building Fuel Modest US Growth— Consumer spending and home construction are helping sustain modest U.S. economic growth despite problems caused by a strong dollar, low oil prices and an excess of business stockpiles. The economy, as measured by the gross domestic product, grew at a 1.4 percent annual rate in the October-December period, the government said Friday. That was better than the 1 percent growth rate the government had estimated a month ago. Much of the new-found strength came from consumer spending on services such as recreation, which helped offset a manufacturing slump caused in part by a global economic slowdown. "The consumer and housing are driving the economy despite some nasty headwinds," said Nariman Behravesh, chief economist at IHS Global Insight. "Manufacturing for all intents and purposes is in a recession, whereas the service sectors are doing fairly well and housing has been a bright spot." Nearly two-thirds of the upward revision in GDP came from the boost in consumer spending, which accounts for about 70 percent of economic activity. Analysts were encouraged by the revised fourth-quarter estimate, saying it provided momentum for the rest of the year, when they expect growth to reach a stronger if still-modest 2 percent annual rate. "Real economic growth was stronger than we thought late last year, and this makes us more hopeful that the first quarter will be better than expected," said Chris Rupkey, chief economist at MUFG Union Bank in New York. Economists say that steady job growth will support further gains in spending and help ease the pressures from overseas. The rise in the dollar's value has contributed to a higher trade deficit by making U.S. exports more expensive overseas and imports less expensive for Americans. Another source of weakness has come from the drop in oil prices, which has triggered layoffs at energy companies and sharp reductions in investment spending on drilling and exploration.  Friday's report showed that residential investment grew at an annual rate of 10.1 percent in the October-December quarter. That surge helped offset a 2.1 percent drop in nonresidential investment resulting in part from the cutbacks at energy companies.

Behind U.S. GDP Data Is Reason for Recession Worry: Weak Profits - On the face of it, the latest government update on how the U.S. economy performed in the fourth quarter looked a bit more encouraging. Growth was revised to a 1.4 percent annualized pace from a previously estimated 1 percent, and the adjustment to gross domestic product was for a good reason -- consumer spending rose more than previously thought. Yet beyond the headline number, there is a reason for some concern. Corporate profits plunged 11.5 percent in the fourth quarter from the year-ago period, the biggest drop since a 31 percent collapse at the end of 2008 during the height of the financial crisis. For 2015 as a whole, pretax earnings fell 3.1 percent, the most in seven years, according to the Commerce Department. That’s “bad news,” . History shows that when earnings fall, the economy often follows them downward into recession as profit-starved companies cut back on hiring and investment. There are, however, some caveats to such a gloomy conclusion. Last quarter’s numbers were unusually depressed by a $20.8 billion penalty payment by BP Plc to settle claims over the 2010 oil spill in the Gulf of Mexico. Taking that into account, earnings fell about 7.6 percent, according to Bloomberg calculations. That’s still weak but not as bad as the 11.5 percent slump. Behravesh also pointed out that the decline was heavily concentrated in the petroleum and coal industries, where profits plummeted by more 75 percent in 2015 as energy prices collapsed. That makes it less worrying from the point of view of the overall economy. "Greater profits are a growth engine for the economy, but we are looking past this data today as it seems to be related to the big decline in oil,"

Here’s Another Sign a Recession Is Coming -  Corporate profits are often used as an indicator of general economic health. And, typically, a strong economy is a large driver of stock prices. But if you look at all the factors in this equation, something isn’t adding up.The S&P 500 is hovering near all-time highs, up about 9% from two years ago, and down only slightly this year. But data over the last week shows that U.S. corporate profits are struggling big time. And it isn’t just energy companies.Late last week, the Department of Commerce said corporate profits before taxes fell 11.5%, by nearly $160 billion, from a year ago. For the year, profits decreased $64 billion, compared to an increase of $35 billion in 2014 from the year before.The trend isn’t just a blip. Estimates for the first quarter this year are similarly bleak, according to senior earnings analyst John Butters at Factset. He says the bottomline of S&P 500 companies will fall 8.7% in the first quarter. If so, it will be the first time the index has seen four consecutive quarters of earnings declines since 2009.There is a good chance he is right. Of the 119 companies in the index that have issued earnings guidance for the first quarter this year, 93, or 78%, of those companies have warned they are likely to miss estimates. Of course, companies are likely to pre-report if its going to be bad news to blunt the blow. Still, this quarter’s negative pre-reports is above the 5-year average of 73%, according to Factset. This statistic suggests more CEOs than normal see the prospects of their companies worsening rather than improving.So far, though, much of these declines have been dismissed by investors because they are coming from energy companies. Take out this sector, Butters says, and the earnings decline is only 3.9%. However that shouldn’t give investors a false sense of hope.“The slowdown is indeed appearing in other industries as well,” says Jesse Edgerton, economist at J.P. Morgan Chase.

The Fed's Next Headache: One Third Of Q1 GDP Growth Was Just "Revised" Away -- On Friday, the US government's Bureau of Economic Analysis had some good and some not so good news: the good news was that the final estimate of Q4 GDP was revised higher from 1.0% to 1.4% (driven by an odd rebound in spending on Transportation and Recreational services). The bad news was that pre-tax earnings tumbled 7.8%, the most since the first quarter of 2011, after a 1.6 percent decrease in the previous three months, suggesting that while it is only the "strong" US consumer that is keeping the US economy afloat on their shoulders. Unfortunately moments ago we got a revised glimpse of the true state of the US consumer, and unfortunately it was anything but strong. As we reported moments ago, while the February personal consumption expenditures (aka personal spending) - that all important data about the well-being of the US consumer - was in line with expectations rising 0.1%, it was the January revision that was striking. From a 0.5% increase reported a month ago, it was now revised to a paltry 0.1%. In nominal dollar terms, this means that instead of US consumer spending a whopping $67.5 billion more in January, the increase was a paltry $14.7 billion, a delta of $52.8 billion!As a result of the revision, that other most important indicator of consumer health, the savings rate, also jumped, and as of February, it is now at 5.4%, matching the highest print in four years suggesting that US consumers are far more eager to save (deflationary) than to spend (inflationary). What this revision also means is that absent a massive rebound in March spending, or some dramatic revision to the February data next month, up to 0.5% of Q1 GDP was just wiped away. Which is a problem: recall that last week the Atlanta Fed slashed its Q1 GDP estimate from 1.9% to 1.4%, matching the final Q4 GDP print. As a result of today's spending data, the Atlanta Fed will have no choice but to revise its Q1 "nowcast" to 1.0% or even lower, which would make the first quarter the lowest quarter since the "polar vortex" impacted Q1 of 2015, and the third worst GDP quarter since Q4 2012. It means one-third of already low Q1 GDP growth has just been wiped away.

Q1 GDP Crashes To 0.6% Per Latest Atlanta Fed Estimate - Earlier today we said that following the abysmal January spending data revision as shown in the chart below: ... that "the Atlanta Fed will have no choice but to revise its Q1 "nowcast" to 1.0% or even lower, which would make the first quarter the lowest quarter since the "polar vortex" impacted Q1 of 2015, and the third worst GDP quarter since Q4 2012. It means one-third of already low Q1 GDP growth has just been wiped away." It was "even lower." Moments ago the Atlanta Fed which models concurrent GDP, slashed its Q1 GDP from 1.4% to a number not even we expected: a paltry 0.6%, which would match the "polar vortexed" GDP print from Q1 2015, and should the number drop even more, will be the lowest since Q1 of 2014 when the US economy suffered its most recent contraction of nearly -1%. This is what it said: The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.6 percent on March 28, down from 1.4 percent on March 24. After this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis, the forecast for first-quarter real consumer spending growth fell from 2.5 percent to 1.8 percent. The forecast for the contribution of net exports to first-quarter real GDP growth declined from –0.26 percentage points to –0.52 percentage points following this morning's advance report on international trade in goods from the U.S. Census Bureau.

1Q16 GDP Sinks To 0.6% -- In Light Of Today's Consumer Spending Report -- March 29, 2016The Wall Street Journal is reporting: The U.S. economy is looking soft as the first quarter draws to a close. Consumer outlays rose modestly in February, ticking up by a seasonally adjusted 0.1% for the third consecutive month. Incomes have been rising faster, but Americans seem to be saving rather than spending. The personal-saving rate hit 5.4% last month, matching its highest level since the end of 2012. Early-year fluctuations in financial markets may have contributed to consumers’ caution. “The equity markets were pretty volatile and the upper-income brackets started doing not so much spending, and even the middle class most likely said, ‘Let’s take it a bit easy, let’s put a bit more aside,’ ” said Chris Christopher, director of consumer economics at IHS Global Insight.  The weakness in consumer spending damped hopes for a pickup from the fourth quarter’s 1.4% growth rate for gross domestic product, the broadest measure of goods and services produced across the economy.  Forecasting firm Macroeconomic Advisers on Monday estimated GDP growth at a 1% pace in the first three months of 2016, down from an earlier prediction of 1.5%. The Federal Reserve Bank of Atlanta’s GDPNow model predicted growth at a 0.6% pace in the first quarter, marked down from an earlier estimate of 1.4% growth. GDPNow:The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.6 percent on March 28, down from 1.4 percent on March 24. After this morning's personal income and outlays release from the U.S. Bureau of Economic Analysis, the forecast for first-quarter real consumer spending growth fell from 2.5 percent to 1.8 percent. The forecast for the contribution of net exports to first-quarter real GDP growth declined from –0.26 percentage points to –0.52 percentage points following this morning's advance report on international trade in goods from the U.S. Census Bureau.

JPM "Shaves" First Half GDP By 0.5% Due To Weaker Durable Goods And Consumer Spending -- Here is JPM's chief economist Michael Feroli doing what banks are so good at doing: cutting their own US GDP growth forecasts. We are shaving about a half percentage point off of our estimate for first half US real GDP growth. We estimate Q1 GDP increased at a 1.2% annualized pace (down from 2.0%), and we project Q2 GDP growth at 2.0% (down from 2.25% prior). The downward revision to Q1 follows a string of softer source data, starting with the February durable goods report and punctuated by the downward revision to January real consumer spending.  The downward revision to Q2 owes to slightly lower expectations for consumer spending -- thanks to the rebound in gasoline prices and the corresponding hit to real disposable income -- as well as to somewhat weaker momentum on capital spending.If our tracking of Q1 GDP is correct, it would be the second consecutive quarter of growth close to potential, which we estimate at 1.4%. (Though labor markets would suggest we've just had two consecutive quarters of above-trend growth: the Q1 unemployment rate will likely be 0.3%-point below the Q3 average, and the employment-to-population ratio will be 0.4%-point above the Q3 figure). Even so, growth in the quarter about to end has generally disappointed expectations set at the beginning of the year. Consumption growth in Q1 appears to have slowed to a 1.9% growth rate, which would be the slowest since the weather-impacted Q1 of last year, which came in at 1.8%. Moreover, the saving rate looks to have moved up from 5.0% in Q4 to 5.4% in Q1, which would be the first increase in a year (though we caution that prior increases in the saving rate over the past year have been revised away, a caveat to keep in mind when looking at the Q1 increase). The Q1 consumption disappointment is primarily due to a weak January outcome. Since then financial conditions have recovered, and most measures of consumer sentiment have held steady at fairly healthy levels. So we are inclined to see the disappointment in consumer spending in Q1 as fairly modest in magnitude and part of the inherent quarterly volatility. We look for a very modest firming in consumption over the remainder of the year to growth in the low- to mid-2's.

House GOP Budget Gets 62 Percent of Budget Cuts From Low- and Moderate-Income Programs | Center on Budget and Policy Priorities: The House Republican budget plan, which could come to the House floor in April, would prove especially harmful to low- and moderate-income families and individuals, cutting programs for such people by an unprecedented amount while taking a strikingly unbalanced approach to deficit reduction. It also would be inconsistent with statements of Republican leaders like House Speaker Paul Ryan that reducing poverty is a top priority. Specifically, the plan, which the House Budget Committee approved on March 16, would cut programs for low- and moderate-income people by about $3.7 trillion over the next decade.  In 2026, it would cut such programs overall by 42 percent — causing tens of millions of people to lose health coverage and millions to lose basic food or other support.In addition, the plan would secure 62 percent of its budget cuts from low-income programs even though they account for just 28 percent of total non-defense program spending (and just 24 percent of total program spending, including defense). While cutting supports and services severely for Americans of lesser means, the budget would secure no deficit reduction at all from the more than $1 trillion a year in tax credits, deductions, and other preferences, collectively known as “tax expenditures” — which disproportionately benefit high-income households and which former Reagan Administration economics adviser (and Harvard professor) Martin Feldstein has called the most wasteful part of the budget.

Senators Try to Scuttle Syngenta/ChemChina Merger, in a Harbinger for U.S. Posture Toward Chinese Investment -This is a big week for the future of American industry. Chinese Premier Xi Jinping will meet one-on-one with President Obama on the sidelines of a summit in Washington. The Chinese will apparently use the meeting to make a new offer on a bilateral investment treaty that would pave the way for more foreign direct investment in both countries. This is a top economic priority for both Xi and Obama. While this discussion unfortunately detours into xenophobia too easily and unthinkingly, more investment in the U.S. from subsidized, state-owned or state-influenced Chinese enterprises would have a dramatic effect on domestic competition. And one already-proposed deal could provide an early preview of what that might look like.  China National Chemical Corporation wants to buy Syngenta AG, a Swiss agriculture company with substantial holdings in the U.S. Syngenta sells more pesticides than any company in North America, and is among the biggest sellers of genetically modified seeds. So this $43 billion deal would put a significant portion of U.S. food infrastructure in Chinese hands. We actually have a parallel for this. Smithfield Foods wanted to enter the lucrative Chinese market for pork for many years. When Chinese middle-class incomes rose to a level where their protein consumption accelerated, instead of opening their pork markets to foreign producers, the country’s biggest meat company, Shuanghui International Holdings, simply bought out Smithfield (in a $7.1 billion deal, much smaller than the Syngenta purchase).

TPP Under Fire in the US as Other Signatories Advance Towards Ratification - The Trans-Pacific Partnership (TPP) is taking a beating in the ongoing US presidential election cycle, leaving some observers to wonder if it can survive such a political backlash against trade agreements. But as the leading candidates seem to compete for who can bash US trade policies the hardest, other countries have been pressing forward to ratify the TPP since the deal's signature in February.  In the US, chances are close to nil that the TPP could get ratified anytime soon. The White House is still seeking congressional support for the massive 12-country deal but the political environment could not be any more unfavorable. Presidential candidates are pointing to trade agreements as the root cause of economic inequality. For the Obama administration, things look grim in Congress as well.  More and more lawmakers are coming out against the TPP, while others who had long championed the deal are now holding back their support over their stance that some of the provisions do not go far enough to protect certain industries. The soonest the TPP's ratification vote may happen is during the "Lame Duck" period after November's election. But even as the United States stalls on the TPP, other countries are moving towards ratification. Below is a summary of how TPP is advancing outside the United States:

Neil Irwin on Donald Trump’s Trade Scorecard - Dean Baker -  Neil Irwin takes issue with Donald Trump using the trade surplus between countries as a scorecard on trade. He is largely right with a couple of important qualifications.  Irwin notes that a country with a trade surplus should see its currency rise against the dollar if it doesn’t reinvest the money in dollar assets. He then comments that if it does reinvest the money in dollar assets, whether or not it benefits the United States depends on what the money is used for.  But there is a deeper point here. In an era of “secular stagnation,” which means there is not enough demand in the economy, the foreign assets may in effect be invested in nothing. Most of the foreign capital that went into the United States in the housing bubble years did not get directly invested in housing. It was invested in government bonds and short-term deposits.  These investments don’t directly create any jobs; they are simply assets on a balance sheet. Insofar as foreigners invest their surplus dollars in U.S. assets not directly linked to employment (which will generally be the case) a trade deficit will be associated with higher unemployment, unless the economy has some other force generating employment to offset it.  Currently we are running an annual trade deficit of around $540 billion (@ 3 percent of GDP). This could be offset by spending more on education, infrastructure, clean technology or other areas, but the Very Serious People will not let us run larger budget deficits. In that context, it is quite reasonable to link a trade deficit to higher unemployment, so Trump is not wrong in that respect. The other issue that Irwin doesn’t get quite right is the reference to the dollar as “the reserve currency.” The dollar is a reserve currency, but not the only one. Countries also hold euros, yen, British pounds, and even Swiss Francs as reserve currencies. The dollar is by far the predominant reserve currency, but there is no necessary reason that countries need to accumulate more dollars if they want more reserves. 

Trade Deficits: These Times are Different - Krugman - Neil Irwin has a good think piece on Trumpism and the trade deficit; but as Dean Baker rightly suggests, it arguably suffers a bit from being a discussion of the effects of trade deficits in normal times. And these times aren’t normal.  In normal times, the counterpart of a trade deficit is capital inflows, which reduce interest rates, and there’s no reason to believe that trade deficits reduce employment on net, even if they do redistribute it. But we are still living in a world awash with excess savings and inadequate demand, where interest rates can’t fall (or at any rate not much) because they’re already near zero. That is, we’re in a liquidity trap. And in that kind of world it’s true both that trade deficits do indeed cost jobs and that there are basically no benefits to capital inflows — we already have more desired savings than we are managing to invest. One indicator of how the rules differ in these circumstances: Remember all the hand-wringing about our dependence on Chinese financing, and how U.S. interest rates would spike if the Chinese stopped buying our bonds? Well, the Chinese have stopped buying bonds and started selling them. Here’s the annual rate of change of Chinese reserves:

White House says U.S. leadership, prestige at stake in debate over Pacific Rim trade deal - The Obama administration is fighting back against an anti-free trade mood on the 2016 campaign trail, arguing that the United States' credibility and prestige in Asia is at stake in the debate over a Pacific Rim trade deal that the president has made a top priority in his final year. "Failure to move forward ... would be a profound setback for American interests in the region," Ben Rhodes, a White House deputy national security adviser, said Tuesday of the 12-nation Trans-Pacific Partnership. "It would be a signal that we do not have staying power and cause countries to hedge on their alignment with the United States." The administration is running out of time to get the accord ratified by Congress and faces an uphill slog to win approval with the leading presidential candidates in both parties opposed to the deal. Republican front-runner Donald Trump has denounced free trade deals as harmful to American workers and a drag on the U.S. economy. Democratic front-runner Hillary Clinton, who supported the TPP as secretary of state under Obama, has come out against the TPP under pressure from the left, including labor unions and her opponent Sen. Bernie Sanders (Vt.), who also opposes it.

New Analysis Shows 'Frivolous' Corporate Sovereignty Suits Increasingly Used To Deter Regulation Rather Than Win Compensation -- The rise in public awareness of the dangers of corporate sovereignty provisions in agreements like TPP and TAFTA/TTIP has brought with it a collateral benefit: academics are starting to explore its effects in greater depth. An example is a new paper from Krzysztof J. Pelc, who is an Associate Professor at McGill. Called "Does the Investment Regime Induce Frivolous Litigation?" (pdf), it looks at how the investor-state dispute settlement (ISDS) mechanism has evolved in recent years, and in a very troubling direction.  Along the way, the paper explores one of the central arguments made by those supporting the inclusion of corporate sovereignty chapters in major agreements: investors lose most of the claims that they bring against governments, so ISDS is really nothing to worry about. But Pelc identifies a key question posed by this line of thinking:  Why would investors continue to file these highly costly cases, if the expected success rate is so low? By analyzing 1421 individual claims in 676 investment disputes from 1993 to present day, Pelc discovered that most disputes are over what are claimed to be instances of indirect expropriation by governments. That's in contrast to the traditional direct kind, for example when dictators send their armed thugs to throw foreign investors out of a factory they own -- something that almost never happens these days. Indirect expropriation is claimed by companies to include things like enforcing higher standards for drug patents, or simply trying to protect key water supplies from pollution. Pelc explains why investors are doing this, even though the odds of winning are low: If litigation exerts a sufficient deterrent effect, firms may benefit even when they lose a case. The result is an increased likelihood of frivolous litigation, where the purpose of a challenge is not so much to win the dispute or obtain compensation, as it is to deter further regulation.  Pelc says his analysis shows this kind of "frivolous" corporate sovereignty litigation is becoming more common:

Trump, Cruz Tax-Cut Plans Would Force Historically Dramatic Cuts: The tax-cut proposals from Republican presidential candidates Donald Trump and Ted Cruz, in conjunction with their calls for balancing the budget, would dictate low levels of government spending not seen since about 1950, as we explain in a new paper.  Programs that receive support across the political spectrum and are important to the well-being of most Americans would dramatically shrink or disappear altogether.  Even if policymakers didn’t achieve budget balance under their tax-cut plans but simply offset the costs of the plans themselves, the consequences to essential programs — and to low- and middle-income Americans — would be severe. These conclusions emerge from an analysis of the Urban-Brookings Tax Policy Center’s (TPC) revenue estimates of the Trump and Cruz tax plans — which would reduce revenues by $9.5 trillion and $8.7 trillion over the next ten years, respectively, according to TPC — and CBPP estimates of what such revenue levels imply for government spending.  This analysis examines only the Trump and Cruz plans because TPC has not analyzed John Kasich’s proposals and because the proposals of Democratic candidates Hillary Clinton and Bernie Sanders would raise revenues, not reduce them.  The specific findings include...As dramatic as these figures are, they understate the pressure that the two candidates’ proposals would place on many government programs.  Both have proposed large spending increases in certain areas, including Senator Cruz’s proposal to increase defense spending by $2.7 trillion over the next decade and Mr. Trump’s proposal to increase spending on veterans by $500 billion to $1 trillion over this period.  Offsetting the cost of such increases, as well as the tax cuts, would require even deeper cuts to other programs. ...

Why did Donald Trump Propose Huge Tax Cuts for the Rich? - Trump is running as a bombastic billionaire progressive. His argument (to the extent that he has one) is that he is already rich so he doesn’t have to serve the rich. However, he also officially promised the yugest tax cut of all the candidates. I think this makes no political sense. Obviously he wants to cut his own taxes — he is rich selfish and greedy — but you aren’t supposed say your are out for yourself alone out loud. Notably, Trump never mentions his campaign’s official proposal. He talks about raising taxes on some rich people. Jonathan Chait is puzzled Trump … barely differs from Ted Cruz in the specific proposals … . Trump has attracted the support of the majority of Republican voters who favor higher taxes on the rich, but Trump himself would reduce them.  Clicking the link to a Rand survey I found this figure: So why did he propose cutting his own taxes ? Other Republicans can’t attack him for this very unpopular proposal, but, if he is the nominee, the Democratic candidate surely will. The only explanation I can think of goes as follows: Trump wanted a detailed serious looking policy proposal (one including numbers) and the only serious looking policy proposal his staff could generate was a huge tax cut for rich people. The usual Republican wonk shortage was exacerbated by the fact that no semi serious Republican was willing to have anything to do with them.

'Make Elites Compete: Why the 1% Earn So Much and What To Do about It' - Jonathan Rothwell at Brookings:... In his “defense of the one percent,” economist Greg Mankiw argues that elite earnings are based on their higher levels of IQ, skills, and valuable contributions to the economy. The globally-integrated, technologically-powered economy has shifted so that very highly-talented people can generate very high incomes.It is certainly true that rising relative returns to education have driven up inequality. But as I have written earlier, this is true among the bottom 99 percent. There is no evidence to support the idea that the top 1 percent consists mostly of people of “exceptional talent.” In fact, there is quite a bit of evidence to the contrary.Drawing on state administrative records for millions of individual Americans and their employers from 1990 to 2011, John Abowd and co-authors have estimated how far individual skills influence earnings in particular industries. They find that people working in the securities industry (which includes investment banks and hedge funds) earn 26 percent more, regardless of skill. Those working in legal services get a 23 percent pay raise. These are among the two industries with the highest levels of “gratuitous pay”—pay in excess of skill (or “rents” in the economics literature). At the other end of the spectrum, people working in eating and drinking establishments earn 40 percent below their skill level. ... Much more here.

Oxfam Report on Rent Seeking Among the Top Wealthy Reinforces Neoliberal Shibboleths  - Yves Smith - It’s frustrating to see a group that is dedicated to good causes, and has chosen a deserving target, go off the rails in trying to make its case. Worse, like minded individuals who are hunger for backup for the beliefs who cite half-baked studies play into a stereotype that the Powers That Be are keen to promote: “Those who deny that we are living in the best of all possible worlds don’t know what they are talking about.” Today’s object lesson is a report by Oxfam, Extreme Wealth is Not Merited” by Oxfam. Author Didier Jacobs works through some assumptions (more on that shortly) and comes to the implausibly precise estimate that 74% of American billionaires’ wealth comes from rent seeking (oddly, the chart from which you can compute that result is in the webpage summarizing the paper but not the paper proper). And mind you, there are good efforts on this front. Later this week, we’ll discuss a recent paper on inequality that hasn’t gotten the attention it deserves that is much more careful and more important, points to concrete policy measures. This isn’t the first report by Oxfam on wealth that has been criticized for simplistic-to-the-point-of-being-misleading statistics.  Now of course, it’s not hard to agree that a sizable portion of the current top wealth comes from rent extraction of various sorts, given the correlation in time frames between deregulation, greatly weakened anti-trust enforcement, and the dramatic rise in concentration of wealth and incomes in the US. But just because a piece of work confirms one’s prior beliefs does not mean it’s sound. This report has such significant conceptual flaws that it’s better to address them than get down in the weeds of lower-level issues.

America's Missing $15 Billion in Corporate Taxes -  After three decades of failing to shrink the federal government by “starving the beast,” a subtler strategy is taking hold: Starve the IRS. This strategy quietly grants tax relief to tax cheats among those business owners, investment partners and landlords – as well as megacorporations – willing to shortchange the government. The number of people willing to cheat rises as the chances fall that their cheating will be detected, especially when there is virtually no risk of prosecution. The Starve-the-IRS strategy manages to achieve both these goals while also arousing popular resentment against the IRS, the federal tax police department. The reason: Short funds mean the agency lacks the resources to answer phone calls, train its staff in the complexities of tax law and administration, and correct mistakes – both human ones and those caused by not having up-to-date computers and software.  If you have not noticed that a smaller share of your income is going to Washington that’s because this strategy is not intended to benefit you. Congress requires that taxes be withheld from your paycheck before the residue is handed over. An automated system passes the taxes to government, along with an annual report on your earnings. This independent verification of income makes cheating virtually impossible for the nearly 70% of taxpayers who do not itemize deductions and leave few opportunities for most of the rest to pay less than Congress says they owe. Congress applies a different set of rules to corporations, business owners, partnerships and landlords. Congress trusts these taxpayers to voluntarily report their income and voluntarily assess their tax liability.

 New $25 Million Fraud on Wall Street Is Making Some Rich Guys Nervous -- Pam Martens - There were a lot of sweaty palms on Wall Street yesterday. As the Government Accountability Office released a report suggesting that regulation of Wall Street is a complex maze of inefficiency and fragmentation leaving gaping holes in which crooks can find fertile ground, the U.S. Justice Department was perp-walking a 2002 Harvard Law School graduate (whose family name resides on the student center there) on charges reminiscent of a Bernie Madoff startup. According to the unsealed complaint from the U.S. Justice Department’s regional U.S. Attorney’s Office for the Southern District of New York, 39-year old Andrew Caspersen, whose father and grandfather were the former heads of Beneficial Corp.,  is alleged to have defrauded approximately $24.6 million from a charitable foundation by setting up a fake account, transferring $17.6 million of that amount to his “personal brokerage account” at an unnamed brokerage firm, then churning the hell out of options on the S&P 500 Exchange Traded Fund (SPY), which racked up losses of $14.5 million. What else Caspersen traded is not mentioned, but the complaint notes that as of December 31, 2015, his personal brokerage account had a “net loss of approximately $25 million.” The Justice Department is calling this a $95 million fraud because on top of the $24.6 million that was defrauded from the charity, Caspersen attempted to obtain “an additional $20 million investment from the same charitable foundation and a $50 million investment from another multinational private equity firm headquartered in New York,” ostensibly to cover up the first fraud. The sweaty palms on Wall Street stem from the fact that some very big names are involved here. While the fraud was taking place, Caspersen was a managing director at PJT Partners Inc., whose largest shareholder is Blackstone Chief Executive Stephen Schwarzman.

Obama Video: President Has His Facts Seriously Wrong on Financial Reform - Pam Martens -  On March 7 of this year, President Obama called the full Financial Stability Oversight Council (F-SOC) to the White House for a meeting. F-SOC was created under the 2010 financial reform legislation known as Dodd-Frank to monitor systemic risks building up in the financial system and, ideally, nip them in the bud before they got out of hand. Immediately following his meeting with F-SOC on March 7, President Obama held a press conference (see video below) with the F-SOC members sitting around him at a large conference table. Sitting two seats away from the President was Mary Jo White, Chair of the Securities and Exchange Commission. Directly across the table was Thomas Curry, head of the Office of the Comptroller of the Currency (OCC) that oversees national banks, and Jack Lew, U.S. Treasury Secretary who Chairs F-SOC. All three of these individuals (and likely everyone else around the table with the possible exception of President Obama) is intimately aware that the vast majority of derivatives today are not traded in central clearinghouses as was promised under the 2010 Dodd-Frank legislation almost six years ago. And yet, President Obama boldly stated to the press in attendance on March 7 that when it comes to derivatives “you have clearinghouses that account for the vast majority of trades taking place.”  [...]  The Dodd-Frank reform promised to bring these derivative bets out of the shadows by moving the trades from secret contracts between a Wall Street bank and a counterparty to trading in the open at clearinghouses, which would provide transparency as well as adequate capital to pay off if a party to the trade became insolvent.  Beginning last year, the Office of the Comptroller of the Currency began releasing a quarterly breakdown of how many derivatives remain over-the-counter and how many have moved to clearinghouses. For four quarters now, the OCC has reported that the “vast majority” of derivatives have not moved to clearinghouses.

The Financialization of the World Is Kind of Mysterious -- In the course of a general critique of the US economy over the past few decades, Brad DeLong says this: The US today spends 8% of GDP on finance. That is twice as much as 40 years ago. Once again, the U.S. gets nothing for it—gets, in fact less than nothing, because the lion's share of responsibility for the 10% growth shortfall of the past decade rests on the shoulders of the hypertrophied dysfunctional finance system. It is not as though anybody claims that the plutocrats of high finance and of our corporations are doing a materially better job at running their organizations and allocating capital by enough to justify their now even-more outsized compensation packages. It is not as though we can see the impact of paying more to financiers in the tracks of faster economic growth. Rather the reverse. I know I'm probably revealing more ignorance here than I should, but how did this happen? Finance isn't a monopoly. In fact, it's one of the most globalized, fluid, and competitive industries on the planet. Why haven't its profits long since been reduced to zero, or close to it? I can understand occasional blips as markets change—CDOs and SIVs get hot for a while, so experts in CDOs and SIVs make a killing—but the overall industry? How has it managed to hold onto such outlandish rents for such a sustained period?

US Financial-System Risk Eases After Reaching 4-Year High --Financial stress in the US economy has ticked lower in recent weeks after jumping to a four-year high in February. The Cleveland Fed’s multi-factor benchmark is still elevated by historical standards, but this daily measure of distress in the financial system has fallen moderately through most of this month to date. Risk levels have also pulled back in March via two other financial stress indexes published by regional Fed banks. The main takeaway: financial stress is no longer threatening to cross into the red zone for the immediate future. It’s important to recognize that financial risk has climbed relative to the unusually low levels of recent years, but for the moment the threat of an acute warning signal has receded. Let’s review the numbers for four indexes published by regional Fed banks that quantify stress in the financial system across a range of factors. Each benchmark uses a different methodology and dataset and so reviewing all of the indexes provides a diversified risk profile of the US financial system. Here’s a summary of current readings, based on figures collected this morning (Mar. 30).

Something Did Break After All: Repo Rate Soars Most Since September 2008 --Back on December 31, the day which was the first quarter and year-end after the Fed's first rate hike cycle in nearly a decade, we pointed out something unexpected - the Fed's rate hike corridor had just been broken when the Fed Funds rate traded as low as 0.12%, far below the mandated minimum of 0.25%.  SMRA confirmed as much, and added that "the fed funds rate has dropped to 0.12% this morning, down from 0.47% yesterday. The fed funds rate has dropped at month-end for all of 2015, with some of the larger of these moves occurring at quarter end, like today.  It appears that these drops will still occur even after the fed rate hike, and possibly that the will be even more extreme, since today's drop was about 23 basis points, as opposed to previous declines this year, which were usually between 5 and 10 basis points."  It was unclear what had caused this dramatic breach of the Fed's corridor, but we had some ideas: Just imagine what would happen on December 31, 2016 if the Fed Funds rate plunged from 1.25% to 0.12% overnight? That would suggest that while the Fed may have drained liquidity for 99% of the quarter, on the one day it matters - the day when the bank's balance sheet snapshot is formalized for 10-Q and 10-K purposes, ZIRP regime has returned.  Which is why today, March 31, another quarter and (and the Japanese fiscal year end) we were paying particular close attention to the funding markets, both on the fed funds and the general collateral repo side. On the fed funds, and reverse repo, side, things we relatively normal: the Fed's reverse repo spiked from $127.1 billion (from 59 counterparties) to $303.8 billion (from 99) overnight. A lot, but we've seen more (and certainly below the expanded ceiling of $2 trillion) and largely to be expected as banks rush to make their balance sheets appear pretty for the regulators, with lots and lots of securities rented from the Fed for 1 day. Fed Funds dipped to 0.25% and briefly slid below it but nothing worth writing home about.  But while FF was "fine", something did break in the general collateral repo market.  Here is Wedbush' Scott Skyrm with a rather scary chart and an attempt at an explanation:

Corporate profits are near record highs. That’s a problem. - Larry Summers - As the cover story in this week’s Economist highlights, the rate of profitability in the United States is at a near-record high level, as is the share of corporate revenue going to capital.   The stock market is valued very high by historical standards, as measured by Tobin’s q ratio of the market value of the nonfinancial corporations to the value of their tangible capital. And the ratio of the market value of equities in the corporate sector to its GDP is also unusually high. All of this might be taken as evidence that this is a time when the return on new capital investment is unusually high.  The rate of profit under standard assumptions reflects the marginal productivity of capital.  A high market value of corporations implies that “old capital” is highly valued and suggests a high payoff to investment in new capital. This is an apparent problem for the secular stagnation hypothesis I have been advocating for some time, the idea that the U.S. economy is stuck in a period of lethargic economic growth.  Secular stagnation has as a central element a decline in the propensity to invest leading to chronic shortfalls of aggregate demand and difficulties in attaining real interest rates consistent with full employment. Yet matters are more complex.  For some years now, real interest rates on safe financial instruments have been low and, for the most part, declining.  And business investment is either in line with cyclical conditions or a little weaker than would be predicted by cyclical conditions.  This is anomalous, as in the most straightforward economic models the real interest rate is the risk adjusted rate of return on capital.  And an unusually high rate of investment would be expected to go along with a high rate of return on existing capital.

Investment banks face sharp trading falls -  Global investment banks suffered declines of as much as 56 per cent in their trading businesses in the first three months of the year, analysts believe, stoking fears of further lay-offs for staff and lower dividends for shareholders. Europe’s shrinking investment banks bore the full brunt of 2016’s difficult environment for the buying and selling of assets such as bonds, stocks and commodities on behalf of clients. Their woes were highlighted by Credit Suisse’s admission last week that its trading revenue fell by 40-45 per cent in the period. Not only are many of Europe’s banks reorganising and trying to sell assets into a falling market, but they also have less exposure to the US market, which has fared better than Europe and Asia. But Wall Street’s biggest banks are suffering too, with analysts predicting first-quarter falls in trading revenue of up to 48 per cent for Goldman Sachs and 56 per cent for Morgan Stanley as slowing Chinese growth, stubbornly low oil prices and fading hopes of a US interest rate rise weigh heavily on client activity and market performance. The difficult first quarter shows the continuing challenges faced by investment banks as they try to create sustainable profitability now that post-crisis reforms have limited opportunities and raised costs. Jon Peace, banks analyst at Nomura, said the trading slump would have practical implications for European banks who still need to build capital to satisfy new regulations. “Weaker trading profits will delay the return of normalised cash dividends for the weaker banks, and limit the absolute dividend payouts for the stronger banks,” he said. Huw van Steenis, London-based banks analyst at Morgan Stanley, said it could take more than three years for investment banks to “structurally remove cost and capital” to deal with the new market realities. Banks have already begun pruning. Credit Suisse has announced 2,000 extra job cuts in its markets division after a brutal first quarter and Morgan Stanley said late last year it would cull 1,200 jobs in fixed income and back- office functions.

Private Equity Kingpins Whine as Stock Market Values Languish -- Yves Smith - What word best describes how distasteful it is to see obscenely rich men complain that they aren’t as rich as they think they ought to be? The subhead on a new Financial Times story on private equity tell us: “PE believes investors do not grasp their long-term cash flow generation capabilities.” In other words, this is a lament I heard all the time as a young thing at Goldman: company execs believe their stock price is wrong, which always means “too low”.  In this case, one can read between the lines and detect that the frustration is more than a bit personal. All of the eight private equity firms that went public did so in the last decade, which means the founders and top team still have large personal shareholdings. They are upset that their net worths are less than they were not all that long ago: After a sharp sell-off in recent months that the industry contends is undeserved, their chief executives have resorted to loudly complaining about the market on their earnings calls. Leon Black, chairman of Apollo Global, recently referred to the valuation of his company as an “absurdity”.  Of the group of eight — Fortress, Blackstone, Och-Ziff, KKR, Apollo, Carlyle, Oaktree, Ares — six sit below their initial public offering prices. Their sense of grievance has been consistent since listing but has taken a sharper tone after this most recent sell-off: they believe public market investors simply do not grasp their long-term cash flow generation capabilities. The article is not specific as to what these deal mavens mean by “long-term”. Analysts don’t forecast longer than 12 to 18 months and even before high-frequency trading collapsed typical ownership time horizons, the average ownership period has been well under a year. So the private equity overlords are telling investors to treat the shares of their companies more generously than other stocks.

SEC fears ‘eye-popping’ start-up values The head of the US market watchdog has warned Silicon Valley that the growing number of highly valued private tech groups — or unicorns — risks harming investors in ways that company managers have a duty to prevent. Mary Jo White, the chair of the Securities and Exchange Commission, said her agency was concerned about the “eye-popping” valuations of some unlisted start-ups and the consequences for investors — including company employees — of the market overheating. In an unusually forthright speech at Stanford Law School on Thursday, she said: “Being a private company obviously does not mean that you can disregard the interests of investors. Indeed, being a private company comes with serious obligations to investors and the markets.” A private market for start-up shares has grown alongside the current tech boom, and reaching “unicorn” status — meaning a valuation of $1bn or higher — is a mark of success for young companies. Ms White expressed worries that start-ups might bend rules on financial disclosures or corporate governance as they strive to reach that milestone. “The concern is whether the prestige associated with reaching a sky-high valuation fast drives companies to try to appear more valuable than they actually are,” she said. “Whether the source of the obligation is the federal securities laws or the fiduciary duty that is owed to shareholders, the resulting candour and fair dealing should be fundamentally the same.”

A Firm Elizabeth Warren Wants Examined for Statements on Fiduciary Duty Reform is Where the SEC’s Tainted Former Exam Chief, Andrew Bowden, Landed as General Counsel -  Yves Smith - Readers may recall that Andrew Bowden looked like a potential hero of financial reform who turned out to have feet of clay. He gave a brutal speech, by regulators’ standards, in May 2014, describing how more than half the firms in private equity were effectively stealing from investors or engaging in other serious compliance abuses. But distressingly, mere months later, Bowden was walking his bold talk back even though it was inconceivable that there had been any meaningful change.  In March of last year, at a conference at Stanford Law School, in the Q&A section, Bowden not only made fawning remarks about private equity profits and returns, which is a violation of agency rules (officials are prohibited from endorsing investments) but worse, said he’d really like his son to work in private equity. The questioner shot back, “I’d love to hire your son, by the way. That’s a deal.” Even though this exchange could be depicted as friendly banter, it was way too close to looking like soliciting a bribe. Three weeks after we broke that story, The SEC’s Andrew Bowden: A Regulator for Sale?, Bowden resigned.  Ironically, yesterday the day that the SEC officials again visited the visited Stanford Law School. And yesterday was the day that David Sirota reported that the company at which Andrew Bowden is now genera counsel, Jackson National Life Insurance (“Jackson”), is under the hot lights for their statements about pending regulatory reform. The reason Elizabeth Warren called for a probe of Jackson, along with three other insurers, is that their bleating to regulators about how proposed rules would ruin their business contradicted what they told investors. SEC rules prohibit making misleading or false statements.

Private Equity Funds Liable to Union Pension Plan | Bloomberg BNA: — Two private equity funds are jointly liable for $4.5 million in pension fund debts owed by one of the companies they own, a federal judge in Massachusetts ruled. This decision is a blow to the private equity community, which may be forced to reevaluate the risks associated with investing in companies that have obligations to multiemployer pension plans. The case involves a federal law that imposes pension liability on any entities found to be “trades or businesses” under “common control” with a company that has withdrawn from a multiemployer pension plan. Three years ago, the U.S. Court of Appeals for the First Circuit issued a highly publicized decision finding that at least one private equity fund affiliated with Sun Capital Advisors qualified as a trade or business under this provision of the Multiemployer Pension Plan Amendments Act . Building off that ruling, Judge Douglas P. Woodlock of the U.S. District Court for the District of Massachusetts concluded that both of the Sun Capital funds involved in the dispute qualified as trades or businesses under common control with bankrupt brass company Scott Brass Inc. Given this, Woodlock found the Sun Capital funds jointly liable for more than $4.5 million in withdrawal liability that Scott Brass owed to a Teamsters pension fund.

Impatient Banks: A Real Red Flag For The Oil Patch -- Lenders to the oil and gas industry have been extraordinarily lenient amid the worst downturn in decades, allowing indebted companies to survive a little while longer in hopes of a rebound in oil prices. But the screws are set to tighten just a bit more as the periodic credit redetermination period finishes up. Banks reassess their credit lines to oil and gas firms twice a year, once in the spring and once in the fall. While the lending arrangements vary from bank to bank and from borrower to borrower, lenders largely punted on both redetermination periods last year, providing a grace period for drillers to wait out the bust in prices. But oil prices have not rebounded much since the original crash in late 2014. Time could run out for companies that have been hanging on by a thread.  Debt was not seen as a big problem in the past, as triple-digit oil prices had both lenders and borrowers eager to see drilling accelerate and spread to new frontiers. Indeed, debt rose even when oil prices exceeded $100 per barrel. According to The Wall Street Journal, the net debt of publically-listed global oil and gas companies grew threefold over the past decade, hitting a high of $549 billion last year. In fact, debt accumulated in the sector at a faster rate between 2012 and 2015 – a period when oil prices were exceptionally high – than in previous years. With oil prices down more than 60 percent from the 2014 peak, piling on ever more debt to a loss-making operation looks increasingly untenable. Distressed energy loans – loans in danger of default – account for more than half of the energy portfolio at several major banks. “When oil was at $100 a barrel, debt was easy to get,” Simon Thomson, CEO of Cairn Energy, told the WSJ in an interview. “What we’re seeing today is a number of people suffering the hangover of having secured that debt and now possibly having trouble servicing it.”

In Yahoo, Another Example of the Buyback Mirage - Gretchen Morgenson - It is one of the great investment conundrums of our time: Why do so many stockholders cheer when a company announces that it’s buying back shares?Stated simply, repurchase programs can be hazardous to a company’s long-term financial health and often signal a management that has run out of better ways to invest in the business.And yet investors love them.Not all stock repurchases are bad, of course. But given the enormous popularity of buybacks nowadays, those that are harmful probably outnumber the beneficial.Those who run companies like buybacks because they make their earnings look better on a per-share basis. When fewer shares are outstanding, each one technically earns more.But a company’s overall profit growth is unaffected by share buybacks. And comparing increases in earnings per share with real profit growth reveals the impact that buybacks have on that particular measure. Call it the buyback mirage.AdvertisementContinue reading the main story Consider Yahoo. The company bought back shares worth $6.6 billion from 2008 to 2014, according to Robert L. Colby, a retired investment professional and developer of Corequity, an equity valuation service used by institutional investors. These purchases helped increase Yahoo’s earnings per share about 16 percent annually, on average.But a good bit of that performance was the buyback mirage. Growth in Yahoo’s overall net profits came in at about 11 percent annually. Given these figures, Mr. Colby reckoned that Yahoo, if it had invested that same amount of money in its operations, would have had to generate only a 3.2 percent after-tax return to produce overall net profit growth of 16 percent annually over those years.

Too Rigged to Fail: The Homeowner Hamster Wheel of Mortgage Fraud: Ask anyone in casual conversation about the current state of homeownership or the sky-high cost of rent in most US cities and you'll find that the majority of them are having a difficult time meeting the basic demands of bills, expenses, mortgage or rent payments, home and auto repairs, medical expenses, and the simplest needs of day to day living. I am astonished at how many times I've had conversations at parties, or with friends, as to so many people have lost their homes to short sales, foreclosure or been duped by a mortgage servicing bank that denied refinance options and workout options for homeowners trying to retain their homes. Most weary homeowners quickly hand over the keys in short sales and give up after attempting to submit documents for the Home Affordable Modification Program (HAMP), which the government set up ostensibly to help struggling homeowners stay in their homes after the largest banks crashed the world economy in 2007-08. People don't like to talk about foreclosures or short sales. It's distressing and often there is an association of some sort of "shame" with these epic losses, even though we are all aware of the too-big-to-fail fraudulent trade practices that have been in place since the bailout of the big banks took us off the cliff.Had the banks actually implemented and structured the housing programs properly, and acted honorably in regard to modifying millions of trouble mortgages, American consumers would have gotten back on their feet. I'm not talking about Mr. Potter vs. George Bailey -- I'm talking about a good economic recovery and a fair negotiation with the middle class that was annihilated by industry-wide greed, corruption and gluttony.

California Cracks Open the Court Doors for Foreclosed Homeowners -- Katie Porter - As California Monitor, my staff and I fielded tens of thousands, probably hundreds of thousands, questions from homeowners. The hardest conversations were the easiest from a legal perspective. If someone's home was foreclosed in California, we advised there was little, if any, likely recourse. The California Homeowner Bill of Rights created a new remedy for consumers, but for homeowners before its January 2013 effective date, the options were nearly nil. The California Supreme Court, in a decision that surprised many, staked out a clear right for homeowners to contest in court whether the foreclosing party had proper rights in the mortgage to allow it to foreclose. In Yvanova v. New Century Mortgage Corp, the court reversed the Court of Appeals and remanded to allow the plaintiff to present her action alleging wrongful foreclosure. The court was careful to stay away from the merits, making no ruling on whether the plaintiff could prove the assignment was void. But, I think the court engaged in a bit of chicanery in declaring that its "ruling in this case is a narrow one." Yvanova is a big change from the developing body of lower court cases in California denying a borrower standing to file a claim based on violations of the the terms of a pooling and servicing agreement.  The LA Times story identifies a number of open questions that must be answered to know if any homeowners will actually win damages in wrongful foreclosure cases based on pre-Homeowner Bill of Rights' actions. For one thing, the statute of limitations for wrongful foreclosure is uncertain in California--partly because the state has had so few cases. While I think the court is correct on the law in Yvanova, the wheels of justice may have turned too slowly to help people.

Fannie Mae: Mortgage Serious Delinquency rate declined in February, Lowest since July 2008 -Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in February to 1.52%, down from 1.55% in January. The serious delinquency rate is down from 1.83% in February 2015. This is the lowest rate since July 2008. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.  Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure". The Fannie Mae serious delinquency rate has only fallen 0.31 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017. The "normal" serious delinquency rate is under 1%, so maybe Fannie Mae serious delinquencies will be close to normal some time in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

Freddie Mac: Mortgage Serious Delinquency rate decreased in February, Lowest since Sept 2008 -- Freddie Mac reported that the Single-Family serious delinquency rate decreased in February to 1.26% from 1.33% in January. Freddie's rate is down from 1.81% in February 2015. This is the lowest rate since September 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%. These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  . Although the rate is generally declining, the "normal" serious delinquency rate is under 1%. The serious delinquency rate has fallen 0.55 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of this year. I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Recheck the Math on Reverse Mortgages - Katie Porter - Tara Twomey is just a keen observer of the consumer finance world, and she recently alerted me to a trend. Reverse mortgages are being aggressively hawked as a valuable financial planning tool, and the media is picking up the story. Even the reverse mortgage industry rag is excited at its publicity rash. While I'm all for consumer finance journalism, these articles often report on studies that bear little resemblance to most Americans' situations.  Reverse mortgages are a complex product marketed specifically to older Americans. (If you doubt the complexity, read Tara's great article that ponders how a reverse mortgage should be treated in a homeowner's bankruptcy.) Precisely for this reason, FHA requires counseling for its reverse mortgage, called a Home Equity Conversion Mortgage (HECM). While we can hope that homeowners receive adequate information and make fully-informed decisions, the chatter about reverse mortgages is starting out their inquiry into reverse mortgages with some questionable assumptions.. In a typical example featured in these stories, the couple owns a $400,000 home and has retirement savings of $1 million. Yeah, you read that right--tax-deferred, non-social security retirement savings of a cool mil'. Reality: about one-third of Americans have no retirement savings/pension at all. Even among those in the 55-64 year age bracket, one in five has zero dollars in retirement savings. Zero--to state the obvious--is a long way from $1 million. Even after excluding those with no savings,  the typical account balance of near-retirement households was only $104,000. Again, a long way from $1 million.

MBA: "Refinance Applications Down, Purchase Applications Up in Latest MBA Weekly Survey"  - From the MBA: Refinance Applications Down, Purchase Applications Up in Latest MBA Weekly Survey Mortgage applications decreased 1.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 25, 2016. ..The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 21 percent higher than the same week one year ago. ...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.94 percent from 3.93 percent, with points increasing to 0.36 from 0.35 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity picked up earlier this year as rates declined. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 21% higher than a year ago.

Mortgage News Daily: "Mortgage Rates Drop After Yellen Speech"  - From Matthew Graham at Mortgage News Daily: Mortgage Rates Drop After Yellen Speech Mortgage rates moved decisively lower today, following a speech from Fed Chair Janet Yellen. ... In fact, the MBS gains were so steep that most lenders didn't adjust rates to fully account for the market movement. This is typical when volatility increases, for better or worse. If markets are able to hold current levels, rates would continue to drop. As it stands, the most prevalent conventional 30yr fixed quote on top tier scenarios is now easily back down to 3.75%, with many lenders pushing back into 3.625%. Just last week, there were quite a few lenders up at 3.875%.  Here is a table from Mortgage News Daily:  Home Loan Rates.  View More Refinance Rates

Is HUD housing affordable? Not when you factor in costs to commute - Where to live can be a dilemma for many Americans. Do you pay more for housing located near work and other destinations or do you pay less for housing that requires extensive driving? What about families with housing subsidies? Does this tradeoff on housing and transportation expenses hold true for them?  That's what researchers from Florida Atlantic University, the University of Texas, Arlington, and the University of Utah sought to find out in the first study to evaluate the affordability of the U.S. Department of Housing and Urban Development (HUD) Section 8 Multifamily recipients. The evidence-based research, recently published in the journal Housing Policy Debate, is the largest sample of household travel records ever assembled for such a study outside the National Household Travel Survey.  "HUD does not factor transportation costs into how they measure affordability. Many low-income people on Section 8 are forced to live in inaccessible locations where they can find landlords willing to accept the vouchers, which are often far from their jobs or quality transit service to reach their jobs," said John Renne, Ph.D., study co-author. "Transportation costs, after housing, is the second biggest expense in the budgets of most American households, especially for those who live in suburban areas with poor transit connectivity."

U.S. January 2016 home prices rise just 0.1% - January’s home prices rose slightly, 0.1% month-over-month and 5.3% yearly, according to the home price index report by Black Knight Financial Services. The report considers repeat sales data and loan-level mortgage performance data to produce its measure of home prices available. Black Knight also uses data from non-disclosure states, states that do not include property sales price information as part of their public records, by combining and matching records across its data assets. This increase is almost equivalent to December 2015’s increase from November with a monthly increase of .01% and an annual increase of 5.5%. With a national HPI of $253 thousand, home prices are now just 5.4% below the June 2006 peak of $267 thousand, according to the report. New York came out on top again with 0.9% month-over-month increase, and Illinois saw the most decrease at 0.4%.

Black Knight: House Price Index up 0.1% in January, Up 5.3% year-over-year - Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted. From Black Knight: Black Knight Home Price Index Report: January Transactions; U.S. Home Prices Up 0.1 Percent for the Month; Up 5.3 Percent Year-Over-Year

• U.S. home prices were basically flat for the month, rising just 0.1% from December, and up 5.3% on a year-over- year basis
• This puts national home prices up 26.7% since the bottom of the market at the start of 2012
• At $253K, the national level HPI is now just 5.4% off its June 2006 peak of $267K (this last has been revised slightly - from $268K - due to additional historical data)
• New York again led gains among the states with 0.9 percent month-over-month appreciation, while Illinois saw the most negative movement at -0.4 percent

S&P Case-Shiller HPI March 29, 2016: Month-to-month gains in home prices have been solid since the third quarter, based on Case-Shiller data where the 20-city adjusted index rose 0.8 percent in January for the fourth straight gain near or at a monthly 1.0 percent. The year-on-year index, however, has been stuck at plus 5.7 percent for the last three months. The breadth of strength is very convincing with all 20 cities showing both monthly and year-on-year gains going all the way back to September. The strongest rates of monthly gains in the latest report are once again in the West led by Seattle and Portland, both at 1.5 percent, with San Diego and Los Angeles right behind at 1.1 percent and 1.0 percent. Detroit and Chicago, which are often at the rear, are at the top with respective January gains of 1.4 and 1.0 percent. Year-on-year, appreciation is strongest in Portland (11.8 percent), Seattle (10.8 percent), and San Francisco (10.5 percent). At the rear is Washington DC (2.1 percent) and New York (2.8 percent). Aside from the West, however, rates of gains are on the slow side which, given lack of wage growth, points to lack of punch for household wealth. And the year-on-year rate is likely to be held back in the Spring months given hard comparisons with pricing strength last spring.

Case-Shiller: National House Price Index increased 5.4% year-over-year in January -- S&P/Case-Shiller released the monthly Home Price Indices for January ("January" is a 3 month average of November, December and January prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.  From S&P: Home Price Increases Continue in January According to the S&P/Case-Shiller Home Price Indices The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 5.4% annual increase in January 2016. The 10-City Composite is up slightly at 5.1% for the year. The 20-City Composite’s year-over-year gain is 5.7%. After seasonal adjustment, the National, 10-City Composite, and 20-City Composite rose 0.5%, 0.8%, and 0.7%, respectively, from the prior month.  Before seasonal adjustment, the National Index, the 10-City Composite, and the 20-City Composite all remained unchanged in January. After seasonal adjustment, all three composites reported strong advances. Eleven of 20 cities reported increases in January before seasonal adjustment; after seasonal adjustment, all 20 cities increased for the month..The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 11.8% from the peak, and up 0.5% in January (SA). The Composite 20 index is off 10.2% from the peak, and up 0.8% (SA) in January. The National index is off 3.3% from the peak, and up 0.7% (SA) in January. The National index is up 30.6% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

S&P/Case-Shiller: Home prices up 5.7% - According to the latest S&P/Case-Shiller U.S. National Home Price Index, prices in 20 major metropolitan areas increased to 5.7% in January from the previous year. “Home prices continue to climb at more than twice the rate of inflation,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The low inventory of homes for sale -- currently about a five-month supply – means that would-be sellers seeking to trade-up are having a hard time finding a new, larger home. The recovery of the sale and construction of new homes has lagged the gains seen in existing home sales. This may be starting to change: starts of single family homes in February were the highest since November 2007. The single-family-home share of total housing starts was 70% in February, up from a low of 57% in June 2015, and approaching the 75%-80% range seen before the housing crisis,” added Blitzer. The 10-City Composite is up slightly at 5.1% for the year. The 20-City Composite’s year-over-year gain is 5.7%. After seasonal adjustment, the National, 10-City Composite, and 20-City Composite rose 0.5%, 0.8%, and 0.7%, respectively, from the prior month. Portland, Seattle, and San Francisco reported the highest year-over-year gains among the 20 cities with another month of double digit annual price increases. Portland led the way with an 11.8% year-over-year price increase, followed by Seattle with 10.7%, and San Francisco with a 10.5% increase. Eleven cities reported greater price increases in the year ending January 2016 versus the year ending December 2015. Phoenix reported an annual gain of 6.1% in January 2016 versus 6.3% in December 2015, ending its streak of 12 consecutive months of increasing annual gains. The western part of the country saw the largest price gains in the past year; the northeast is the weakest region.

Case-Shiller Home Prices Jump Driven By West Coast Chinese Buyers - US Home prices rose 5.75% YoY according to Case-Shiller (the fastest rate since July 2014) as it appears the Chinese buyers are migrating south from Canada with Portland, Seattle, and San Francisco reported the highest year-over-year gains among the 20 cities with another month of double digit annual price increases.  Home prices continue to climb at more than twice the rate of inflation amid a suply shortage as West Coast propertty markets become "Vancouvered." The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 5.4% annual increase in January 2016. The 10-City Composite is up slightly at 5.1% for the year. The 20-City Composite’s year-over-year gain is 5.7%. After seasonal adjustment, the National, 10-City Composite, and 20-City Composite rose 0.5%, 0.8%, and 0.7%, respectively, from the prior month. Portland, Seattle, and San Francisco reported the highest year-over-year gains among the 20 cities with another month of double digit annual price increases. Portland led the way with an 11.8% year-over-year price increase, followed by Seattle with 10.7%, and San Francisco with a 10.5% increase. Eleven cities reported greater price increases in the year ending January 2016 versus the year ending December 2015. Phoenix reported an annual gain of 6.1% in January 2016 versus 6.3% in December 2015, ending its streak of 12 consecutive months of increasing annual gains. The western part of the country saw the largest price gains in the past year; the northeast is the weakest region. Portland, Seattle, and San Francisco home prices are now above 2006/2007 bubble highs...

Real Prices and Price-to-Rent Ratio in January -- The year-over-year increase in prices is mostly moving sideways now around 5%. In January, the index was up 5.4% YoY. In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 3.3% below the bubble peak.   However, in real terms, the National index is still about 17% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through December) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to October 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to April 2005 levels, and the CoreLogic index (NSA) is back to June 2005. Real House Prices The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to January 2004 levels, the Composite 20 index is back to September 2003, and the CoreLogic index back to January 2004. In real terms, house prices are back to late 2003 levels.This graph shows the price to rent ratio (January 1998 = 1.0). On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to May 2003 levels, and the CoreLogic index is back to August 2003. In real terms, and as a price-to-rent ratio, prices are back to late 2003 levels - and the price-to-rent ratio maybe moving a little more sideways now.

Zillow Forecast: Expect Slightly Slower Growth in February for the Case-Shiller Indexes --The Case-Shiller house price indexes for January were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: February Case-Shiller Forecast: More of the Same, But Slightly Slower The January Case-Shiller indices grew at the exact same annual pace as December. Looking ahead, expect all three February Case-Shiller indices to show similar but slightly slower slower growth, with the 10-City Composite Index expected to register sub-5 percent annual growth for the first time in months, according to Zillow’s February Case-Shiller forecast. The February Case-Shiller National Index is expected to gain another 0.3 percent in February from January, down from 0.5 percent growth in January from December. We expect the 10-City Index to grow 4.5 percent year-over-year, and the 20-City Index to grow 5.3 percent over the same period. The National Index also looks set to rise 5.3 percent year-over-year.All SPCS forecasts are shown in the table below. These forecasts are based on today’s January Case-Shiller data release and the February 2016 Zillow Home Value Index (ZHVI). The February Case-Shiller Composite Home Price Indices will not be officially released until Tuesday, April 26.The year-over-year change for the 10-city and 20-city indexes, and the Case-Shiller National index, will probably be slightly lower in the February report than in the January report.

U.S. Home Prices Are 14% Overvalued According To Bank of America -- There has been an odd shift when it comes to US sentiment toward home ownership: while in the past, the higher home prices rose the greater the demand was for housing (leading ultimately to the housing debt bubble of 2006), this time around we are getting increasingly more frequent indications of just the opposite. Some have started to notice: as we noted one week ago, in its traditionally cheerful assessment of the US housing market, the NAR's Larry Yun snuck in an unexpected warning:"Home prices ascending near or above double-digit appreciation aren't healthy – especially considering the fact that household income and wages are barely rising." He did it again just a few days later:"The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers." This is about as close to a warning that the US housing market is back into bubble territory as one can hope to get from the NAR. To be sure, we noted this surprising development one week ago in "For The Average American, Owning A Home Is Increasingly Unaffordable."  Recently MarketWatch came to the same conclusion noting that "there’s a paradox in Monday’s existing-home-sales data. Sales slid 7.1% to the lowest pace since November, the National Association of Realtors said. NAR has warned for many months that low levels of supply, which are pushing prices ever higher, will eventually cripple the market." And according to a Bank of America research report, the recent trends in which ordinary Americans are left behind from the "American Dream" will persist for one simple reason: "home prices are currently overvalued by 14% on the national level." This is what BofA's chief economist Michelle Meyer says: In order to gauge the ‘fair value” of home prices, we typically compare prices to the trend in income. The logic is simple – the more income one earns, the more housing he/she can access. However, prices will occasionally diverge from income, as we are experiencing now and clearly did during the early 2000s. As we have been arguing, home prices are currently overvalued - by our estimates 14% on a national level.

NAR: Pending Home Sales Index increased 3.5% in February, up 0.7% year-over-year --From the NAR: Pending Home Sales Move Forward in February The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.1 in February from a downwardly revised 105.4 in January and is now 0.7 percent above February 2015 (108.3). Although the index has now increased year-over-year for 18 consecutive months, last month's annual gain was the smallest...The PHSI in the Northeast declined 0.2 percent to 94.0 in February, but is still 12.6 percent above a year ago. In the Midwest the index shot up 11.4 percent to 112.6 in February, and is now 2.5 percent above February 2015. Pending home sales in the South increased 2.1 percent to an index of 122.4 in February but are 0.4 percent lower than last February. The index in the West climbed 0.7 percent in February to 96.4, but is now 6.2 percent below a year ago.  This was above expectations of a 1.5% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in March and April.

February 2016 Pending Home Sales Index Improves --The National Association of Realtors (NAR) seasonally adjusted pending home sales index improved - to the highest index reading since last July. Our analysis of pending home sales agrees, and we are forecasting relatively good March home sales. The quote of the day from this NAR release: ... the one silver lining from last month's noticeable slump in existing-home sales was that price appreciation lessened to 4.4 percent, which is still above wage growth but certainly more favorable than the 8.1 percent annual increase in January.... Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing). The NAR reported:

  • Pending home sales index was up 3.5 % month-over-month and up 0.7 % year-over-year.
  • The market was expecting month-over-month growth of 0.5 % to 2.0 % (consensus 1.5 %) versus the growth of 3.5 % reported.

Econintersect's evaluation using unadjusted data:

  • the index growth was up 6.5 % month-over-month and up 5.1 % year-over-year.
  • The current trends (using 3 month rolling averages) insignificantly improved and remains in expansion.
  • Extrapolating the pending home sales unadjusted data to project March 2016 existing home sales, this would be a 5.1 % expansion year-over-year for existing home sales.

February Pending Home Sales Surge By Most On Record As Price-Growth Slows With stock markets roller-coasting by the most on record, February pending home sales rose 3.5% MoM (seasonally-adjusted) dramatically beating expectations. In fact, sales spiked 29.5% MoM (non-seasonally-adjusted) - the best February spike ever. Price gains have slowed notably, which is being cheered by NAR's Larry Yun. Panic buying homes in Feb...Lawrence Yun, NAR chief economist, says pending sales made promising strides in February, rising to the highest index reading since last July (109.8)."After some volatility this winter, the latest data is encouraging in that a decent number of buyers signed contracts last month, lured by mortgage rates dipping to their lowest levels in nearly a year and a modest, seasonal uptick in inventory," he said."Looking ahead, the key for sustained momentum and more sales than last spring is a continuous stream of new listings quickly replacing what's being scooped up by a growing pool of buyers. Without adequate supply, sales will likely plateau."According to Yun, the one silver lining from last month's noticeable slump in existing-home sales was that price appreciation lessened to 4.4 percent,which is still above wage growth but certainly more favorable than the 8.1 percent annual increase in January."Any further moderation in prices would be a welcome development this spring," adds Yun. "Particularly in the West, where it appears a segment of would-be buyers are becoming wary of high asking prices and stiff competition."

Construction Spending decreased 0.5% in February -- The Census Bureau reported that overall construction spending decreased 0.5% in February compared to January: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2016 was estimated at a seasonally adjusted annual rate of $1,144.0 billion, 0.5 percent below the revised January estimate of $1,150.1 billion. The February figure is 10.3 percent above the February 2015 estimate of $1,037.5 billion.  Both private and public spending decreased in February: Spending on private construction was at a seasonally adjusted annual rate of $846.2 billion, 0.1 percent below the revised January estimate of $847.2 billion. ... In February, the estimated seasonally adjusted annual rate of public construction spending was $297.8 billion, 1.7 percent below the revised January estimate of $302.8 billion. This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been increasing, but is 34% below the bubble peak.  Non-residential spending is only 4% below the peak in January 2008 (nominal dollars). Public construction spending is now 9% below the peak in March 2009. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 11%. Non-residential spending is up 11% year-over-year. Public spending is up 9% year-over-year. Looking forward, all categories of construction spending should increase in 2016. Residential spending is still very low, non-residential is increasing (except oil and gas), and public spending is also increasing after several years of austerity. This was below the consensus forecast of a 0.2% increase for February, however construction spending for December and January were revised up. Overall construction spending is up 10.3% year-over-year, a solid increase.

February 2016 Construction Spending Growth Rate Declined?: The headlines say construction spending declined - and below expectations. The backward revisions make this series very wacky - but the rolling averages again improved. Econintersect analysis:

  • Growth acceleration 0.3 % month-over-month and Up 11.4 % year-over-year.
  • Inflation adjusted construction spending up 10.4 % year-over-year.
  • 3 month rolling average is 10.5 % above the rolling average one year ago, and up 0.6 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.

The BLS reports seasonally adjusted data - manipulated with multiple seasonal adjustment factors, and Econintersect believes the unadjusted data gives a clearer picture of the jobs situation. Non-seasonally adjusted non-farm payrolls improved 776,000 - better than last year but average for March's in times of economic expansion. US Census Analysis:

  • Down 0.5 % month-over-month and Up 10.3 % year-over-year (versus the reported 8.2 % year-over-year growth last month).
  • Market expected -0.5 % to 0.7 % month-over-month (consensus +0.2) versus the -0.5 % reported

Lower income households are getting clobbered by rent increases - Tomorrow just about every data point in the world will be reported ... but while we are waiting, here is an important story that will particularly be of interest to our progressive readers.   A study by the Pew Foundation shows that rents are killing lower income households. Oddly, it hasn't been picked up by progressive blogs.  I came across the study by way of Mike Shedlock, who claimed that it shows that consumers haven't been spending any of their gas savings. Ummm, actually, no, since the first thing that Pew tells us is that  Expenditures are a key but often overlooked element of family balance sheets. ....  [T]his chartbook uses the Bureau of Labor Statistics’ Consumer Expenditure Survey to explore household expenditures, examining changes in overall spending and across individual categories from 1996 to 2014.  Since gas prices only started their big decline late in 2014, actually the Pew study tells us absolutely zero about what consumers have done with their gas savings in 2015 and 2016.  But I digress. Here is the overall summary graph from the Pew Foundation:  More important is the breakdown in expenses of shelter, transportation, and healthcare costs that Pew finds contributed the  most to the increase in household expenditures.

Attention President Obama: One Third Of U.S. Households Can No Longer Afford Food, Rent And Transportation - While the Fed has long been focusing on the revenue part of the household income statement (which unfortunately has not been rising nearly fast enough to stimulate benign inflation in the form of nominal wages rising at the Fed's preferred clip of 3.5% or higher), one largely ignored aspect of said balance sheet has been the expense side: after all, for any money to be left overand saved, expenses have to surpass income. However, according to a striking new Pew study while household spending has returned to pre-recession levels (the average household spent $36,800 in 2014) incomes have not.  Specifically, while the median income had fallen by 13% from 2004 levels over the next decade, expenditures had increased by nearly 14%. But nobody was more impacted than the one-third of households which the study defines as "low-income." Pew finds that while all households had less slack in their budgets in 2014 than in 2004, lower-income households went into the red by over $2,300. In other words, approximately one third of American households were no longer able to cover the core necessities - food, housing and transportation - with average income.  According to Pew, households spent more in 2014 than they did in 1996, after adjusting for inflation; this holds whether the figures are based on averages (means) or medians. The typical household saw its expenditures grow by more than 25 percent, from $29,400 in 1996 to $36,800 in 2014. Mean expenditures grew 27 percent since 1996, rising from $43,200 to $54,800.

Personal Income and Outlays March 28, 2016 The outlook for the consumer has buckled, at least a bit following a surprisingly weak personal income and spending report for February. Income rose a soft 0.2 percent with wages & salaries slipping 0.1 percent. But the worst news comes from the spending part of the report, up only 0.1 percent and with January revised sharply lower, now also at 0.1 percent vs an initial jump of 0.5 percent. And, in what will also push back chances for an April FOMC rate hike, inflation data are on the soft with the core PCE up only 0.1 percent and the year-on-year rate unchanged at 1.7 percent and no closer to the Fed's 2 percent goal. Overall prices are down 0.1 percent with the year-on-year rate at plus 1.0 percent. Turning back to income, the fall in wages & salaries is the first since September last year but was offset in part by a rise in disposable income that reflected gains for both income transfers and rental income. And consumers continued to put money in the back as the savings rate, in perhaps a sign of consumer defensiveness, rose 1 tenth to 5.4 percent for a 3-year high. The downward revision to January retail sales to minus 0.4 percent from an initial plus 0.2 percent (posted at mid-month) swept January spending in this report likewise lower. Both durable goods and non-durable goods now show contractions in the month with growth in service spending pulled lower. Data for February are also soft with spending on non-durable goods down sharply on lower fuel prices and with spending on durable goods and services little changed. GDP estimates for the first quarter will not be going up following this report and estimates for the second quarter and beyond may be coming down. The lack of wage gains, together perhaps with softness in home appreciation, may be holding back the consumer more than thought. This report points squarely at weakness, weakness for what is the core itself of the U.S. economy.

Personal Income increased 0.2% in February, Spending increased 0.1%  - The BEA released the Personal Income and Outlays report for February:  Personal income increased $23.7 billion, or 0.2 percent ... according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $11.0 billion, or 0.1 percent...Real PCE -- PCE adjusted to remove price changes -- increased 0.2 percent in February, in contrast to a decrease of less than 0.1 percent in January. ... The price index for PCE decreased 0.1 percent in February, in contrast to an increase of 0.1 percent in January. The PCE price index, excluding food and energy, increased 0.1 percent, compared with an increase of 0.3 percent. The February PCE price index increased 1.0 percent from February a year ago. The February PCE price index, excluding food and energy, increased 1.7 percent from February a year ago.  The following graph shows real Personal Consumption Expenditures (PCE) through February 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.The dashed red lines are the quarterly levels for real PCE. The increase in personal income was larger than expected.  And the increase in PCE was at the 0.1% increase consensus. On inflation: The PCE price index increased 1.0 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.7 percent year-over-year in February. Using the two-month method to estimate Q1 PCE growth, PCE was increasing at a 1.8% annual rate in Q1 2016 (using the mid-month method, PCE was increasing 1.6%). This suggests sluggish PCE growth in Q1.

US Consumer Spending & Income Growth Slow In February -- US personal income and spending ticked higher in February, but the year-over-year growth trend slowed on both counts, the Bureau of Economic Analysis reports. There’s still a positive trend in the numbers—enough to keep the economy expanding for the near-term future, but today’s numbers leave little room for arguing that growth is set to accelerate after what’s shaping up as a sluggish first quarter.  Personal consumption expenditures (PCE) increased 0.1% last month vs. January. That’s the third straight monthly advance at the 0.1% mark, the weakest run of growth in a year. Meanwhile, disposable personal income (DPI) grew at a bit faster—0.2%–in February, although this was half the pace in the previous month and the slowest gain since last November. Turning to the year-over-year trend offers a bit more encouragement. In particular, private-sector wage growth is still rising at a solid 4.6% rate. But note that the latest gain eased closer to the low end of annual increases over the past year. The broad trend for income and spending continues to provide support for anticipating that the consumer sector will remain a positive factor for the US economy in the immediate future. As noted last week, the numbers for the macro profile published to date point to low recession risk for the US through February. Today’s release doesn’t conflict with that analysis. At the same time, the data du jour imply that the trend will remain sluggish.

February 2016 Inflation Adjusted Personal Income and Consumption Growth Mixed.: The data this month showed good income growth with spending growth weak (significant downward revision in last month's expenditure data). Still year-over-year consumption is growing faster than income.

  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth trend is up and consumption is down.
  • Real Disposable Personal Income is up 2.7 % year-over-year (2.6 % last month), and real consumption expenditures is up 2.8 % year-over-year (2.6 % last month)
  • this data is very noisy and as usual includes moderate backward revision (detailed below) - this month the changes changed the year-over-year trends.
  • The third estimate of 4Q2014 GDP indicated the economy was expanding at 1.4 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - income and expenditure must grow at the same rate.
  • The savings rate continues to be low historically, improved this month.

The inflation adjusted income and consumption are "chained", and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics. Per capita inflation adjusted expenditure has exceeded the pre-recession peak.

January Spending Surge "Revised" Away, Pushing Savings Rate To Highest Since 2012; Personal Income Slides - In February headline data for income modestly beat expectations (+0.2% MoM vs +0.1% MoM) and spending met expectations at +0.1% MoM respectively. However, income growth YoY slowed to 4.0% - near its weakest since Nov 2013. Spending growth also slowed to +3.8% YoY (from 2.9% in Jan) but the big story is the major downward revisions in spending. January's +0.5% 'surge' in spending was revised to a mere +0.1% trickle - the weakest in over a year. Since QE3, income growth has been a one way street lower... And January's "surge" in spending has magically disappeared: The spending and income data in context: This means that the worst case scenario for the Fed is materializing: Americans are savings away increasingly more of their incomes, at least according to the latest revision, which has seen the US personal savings rate jump to 5.4%... ... matching the highest since the dramatic 2012 year-end revision which saw the savings rate slashed from around 7.5% to the upper 4% range: And with this revision, Q1 GDP of 1.4% (per the Atlanta Fed) is about to be revised to 1.0% or lower. Still what does anyone care about the reality of a collapse in real economic data? We have Bullard to keep markets afloat.

February Disposable Income Per Capita Rose 0.1%, 0.2% When Adjusted for Inflation - With the release of today's report on February Personal Incomes and Outlays we can now take a closer look at "Real" Disposable Personal Income Per Capita. The first chart shows both the nominal per capita disposable income and the real (inflation-adjusted) equivalent since 2000. This indicator was significantly disrupted by the bizarre but predictable oscillation caused by 2012 year-end tax strategies in expectation of tax hikes in 2013. At two decimal places, the nominal 0.12% month-over-month increase in disposable income comes in at 0.23% when we adjust for inflation. The year-over-year metrics are 2.94% nominal and 1.92% real. The BEA uses the average dollar value in 2009 for inflation adjustment. But the 2009 peg is arbitrary and unintuitive. For a more natural comparison, let's compare the nominal and real growth in per capita disposable income since 2000.   Nominal disposable income is up 65.6% since then. But the real purchasing power of those dollars is up only 23.9%. Let's take one more look at real DPI per capita, this time focusing on the year-over-year percent change since the beginning of this monthly series in 1959. The chart below highlights the value for the months when recessions start to help us evaluate the recession risk for the current level.

US Redbook Sales at 11-week High: The latest US Johnson Redbook sales data recorded a 3.1% weekly advance from 2.9% previously and a 1.5% annual gain from 0.8% in the previous weekly data. The improvement followed a run of disappointing data with figures all below 1.0% for the first four weeks of March and the latest release was the highest level since January 10th of this year. Weekly data is inevitably volatile, especially given the impact of holidays and potentially stronger sales in the run-up to Easter. Nevertheless, the data should help ease fears created by weaker than expected personal spending data released on Monday when spending was reported to have increased 0.1% for February and January. The Redbook index is based on sales data from around 9000 large general merchandise stores and represents over 80% of the equivalent official monthly US sales data. The release should help bolster confidence that overall spending levels improved late in March after a soft patch, although there will still be the risk of lacklustre sales for the month as a whole when the official data is released.

How Millennials and Low-Income Consumers Are Propping Up the U.S. Economy -  Consumer-spending growth allowed the U.S. economy to dodge contraction territory late last year, and the source of strength was not the wealthy, but rather low-income consumers and millennials. Younger consumers and those with lower incomes punched above their weight class in the final months of 2015 fueling a 2.35% increase in year-over-year spending in December in 15 U.S. metro areas, according to data released today by the J.P. Morgan Chase & Co.  Those same groups were leading contributors to consumption gains in October and November. Separate government data showed consumer spending more than accounted for all economic output gains in the fourth quarter, counteracting drags from weak business investment and a slowdown in international trade. Those under 25 accounted for nearly 1 percentage point of overall spending growth, J.P. Morgan data said. Those under 35 accounted for nearly the entire gain, 1.9 percentage points. Americans ages 55 and older, conversely, slowed their spending in December compared with a year earlier, according to the data constructed from more than 14 billion anonymized debit and credit card transactions.Sliced another way, the data shows Americans on the bottom end of the income distribution—many of whom are younger—were a leading source of gains. The bottom 20% of income earners accounted for 1.25 percentage points of total consumption growth. The upper 20% were a 0.43 point drag.

Hotels: Supply increased faster than Demand in January and February -- From Freitag’s 5: US RevPAR growth underwhelms in February

    • 1. RevPAR has now grown for 72 months - Even though the numbers are small, they are positive. We expect them to be so for the next 18 months. Just like last month, RevPAR growth was driven by average daily rate, as occupancies are on a declining trajectory: This should not come as a surprise because we have been warning about pipeline growth for a while.
    • 2. Supply growth has outpaced demand growth for two consecutive months. Demand increased only 0.6%. It is worth pointing out that demand is still growing, so while that continues to be true we are breaking demand records every month..
And weekly data from STR: US hotel results for week ending 19 MarchThe U.S. hotel industry reported positive results in the three key performance metrics during the week of 13-19 March 2016, according to data from STR. In year-over-year comparisons, the industry’s occupancy increased 1.9% to 70.5%. Average daily rate for the week was up 4.2% to US$127.72. Revenue per available room increased 6.2% to US$90.04. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The occupancy rate should continue to increase into the Spring, and then increase further during the Summer travel period. The red line is for 2016, dashed orange is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels. 2015 was the best year on record for hotels. So far 2016 is just behind 2015.

Everything we thought about millennials not buying cars was wrong - The financial crisis temporarily crippled millennials' futures, just as many were graduating with lots of student-loan debt into a job market that wasn't creating jobs. The dire situation coincided with a meltdown of the auto industry in 2009, when annual sales in the US fell from a prerecession peak of about 17 million to a harrowing 10 million.  Just when carmakers needed young people to buy cars, young people were in no position to take the plunge — understandably, as no jobs meant no credit, and without credit it's nearly impossible for first-timers to obtain a set of wheels.  This set off a frenzy of speculation that a permanent behavioral shift was underway, and that millennials would form the vanguard of a "de-ownership" trend. A certain amount of fear gripped the industry, which was anything but confident that sales would rebound to a record 17.5 million in 2015.  But along with the prediction that Americans would never buy SUVs again, the theory that millennials would stick to skateboards, bikes, mass transit, and feet has turned out to be unsupportable. The AP delivered the good news: Millennials — especially the oldest ones — are these days buying cars in big numbers. They just had a late start.Now the largest generation in the U.S., millennials bought 4 million cars and trucks in the U.S. last year, second only to the baby boomers, according to J.D. Power's Power Information Network, which defines millennials as those between 21 and 38 in 2015. Millennials' share of the new car market jumped to 28 percent. In the country's biggest car market, California, millennials outpaced boomers for the first time.

U.S. Motorists Burning Through Record Levels of Gasoline  - U.S. motorists are taking advantage of cheap gasoline, fueling up and hitting the roads. According to the EIA, gasoline demand is at a record high for this time of year. The U.S. through 9.4 million barrels per day of finished motor gasoline in March, as the economy continues to grow and motorists fill up their tanks with $2 per gallon gasoline. That level of consumption is unusually high for this time of year and about 600,000 barrels per day higher than the same month a year ago. Also, gas demand is up more than 8 percent since January. Part of the reason is due to an unseasonably warm winter. Part of it is also due to the continuing improvement in the labor markets – the U.S. added more than 200,000 jobs in both February and March.  But cheap fuel also deserves a lot of credit. The American auto market had a record year in 2015, and sales of light trucks and SUVs led the way.

U.S. Light Vehicle Sales decline to 16.45 million annual rate in March -- Based on an estimate from WardsAuto, light vehicle sales were at a 16.45 million SAAR in March. That is down about 4% from March 2015, and down about 6% from the 17.43 million annual sales rate last month.  This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for March (red, light vehicle sales of 16.45 million SAAR from WardsAuto). This was well below the consensus forecast of 17.6 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. This was below expectations, however sales for 2016 - through the first three months - are still up about 3% from the comparable period last year.

Consumer confidence rebounds in March - Consumer confidence jumped in March, reflecting more optimism among Americans as stock markets rebounded from steep losses early in the year and worries about a recession faded. The index of consumer confidence climbed to 96.2 last month, beating the Wall Street forecast. Economists polled by MarketWatch had projected the index to rise to 94.2. The index reading for February was also revised higher to 94.0 from 92.2, the privately run Conference Board said Tuesday. Americans turned “more favorable as last month’s turmoil in the financial markets appears to have abated. On balance, consumers do not foresee the economy gaining any significant momentum in the near-term, nor do they see it worsening,” said Lynn Franco, director of economic indicators at board. The present situation index, a measure of current conditions, slipped to 113.5 from 115.0. But the future expectations index rose to 84.7 from 79.9.

As Conference Board Confidence Jumps, Gallup Confidence Dumps - A yuuge surge in stocks - amid collapsing earnings and GDP expectations - appears to have enabled a modest bounce off 2-year lows for consumer confidence. The Conference Board’s index of consumer confidence increased to 96.2 in March from 94 a month earlier - butstill below January's levels. The bounce was driven purely by "hope" as expectations for the future rose and current conditions dropped to 4-month lows. At the same time Gallup's consumer confidence survey plumbes new depths to its lowest since 2015. For now, Stocks helped to blind 'consumers' to the economic collapse... “Consumer confidence increased in March, after declining in February,” said Lynn Franco, Director of Economic Indicators at The Conference Board. “Consumers’ assessment of current conditions posted a moderate decline,while expectations regarding the short-term turned more favorable as last month’s turmoil in the financial markets appears to have abated. On balance, consumers do not foresee the economy gaining any significant momentum in the near-term, nor do they see it worsening.” And while the below-the-surface data is not as bullish, Gallup's most recent survey of Economic Confidence shows more weakness. This is what the direct polling service found for March economic confidence: Americans' confidence in the economy dipped last week, with the U.S. Economic Confidence Index averaging -13 for the week ending March 27. This score is down from -9 the previous week.Since July, Americans' economic confidence has remained fairly steady, apart from a couple of exceptions in late August and mid-January. Before falling back to -13 last week, index scores in recent weeks began to show signs of improving confidence.

ATA Trucking Index increased 7.2% in February -- From the ATA: ATA Truck Tonnage Index Jumps 7.2% in February American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index jumped 7.2% in February, following a revised 0.3% reduction during January. In February, the index equaled 144 (2000=100), up from 134.3 in January. February’s level is an all-time high. Compared with February 2015, the SA index was up 8.6%, which was up from January’s 1.1% year-over-year gain... “While it is nice to see a strong February, I caution everyone not read too much into it,” said ATA Chief Economist Bob Costello. “The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February. Normally, fleets report large declines to ATA in February tonnage, in the range of 5.4% to 6.7% over the last three years. So, the small increase this year yielded a big seasonally adjusted gain. If March is strong, then I’ll get more excited. “I’m still concerned about the elevated inventories throughout the supply chain. Last week, the Census Bureau reported that relative to sales, inventories rose again in January, which is troubling.” he said. “We need those inventories reduced before trucking can count on more consistent, better freight volumes.” Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

Trucking Tonnage Improved in February 2016: Truck shipments are reported up in February - with one index showing significant year-over-year growth whilst the other showing year-over-year contraction. ATA Trucking The American Trucking Associations' (ATA) trucking index improved 7.2 % in February, following a revised 0.3% decline in January. February's level is an all-time high. From ATA Chief Economist Bob Costello: While it is nice to see a strong February, I caution everyone not read too much into it. The strength was mainly due to a weaker than average January, including bad winter storms, thus there was some catch-up going on in February. Normally, fleets report large declines to ATA in February tonnage, in the range of 5.4% to 6.7% over the last three years. So, the small increase this year yielded a big seasonally adjusted gain. If March is strong, then I'll get more excited. I'm still concerned about the elevated inventories throughout the supply chain. Last week, the Census Bureau reported that relative to sales, inventories rose again in January, which is troubling. We need those inventories reduced before trucking can count on more consistent, better freight volumes.Compared with one year ago, seasonally adjusted tonnage increased 8.6 %. Econintersect tries to validate ATA truck data across data sources. It appears this month that jobs growth says the trucking industry employment levels were relatively unchanged month-over-month. Please note using BLS employment data in real time is risky, as their data is normally backward adjusted significantly.

Rail Traffic Volumes Tumble As Coal Stockpiles Soar At Record Rate -- For the first two months of 2016, it seemed as if a modest, if stable, rebound was finally taking place among one of the hardest hit transportation sectors of 2015, rails. Alas, like virtually everything else, this too has proven to be nothing more than a dead cat coming back to life and getting run over by a train. As RBC writes in a recent notes, rail traffic volume declines have again intensified. "On a Y/Y basis, traffic slowed by -14% Y/Y for week 11 as all rails posted stiff volume declines and on a segment basis only Motor Vehicles carloads were higher (+7% Y/Y). Since week 7 when volumes grew by +4% Y/Y, the sharpest traffic decline has come in Intermodal carloads (from growth of +17% Y/Y for week 7 to a -12% Y/Y decline last week). Coal headwinds have also intensified in recent weeks and the segment remains the major laggard so far this quarter (-30% Y/Y QTD)." Visually: And while we have touched on some of the primary catalysts for the ongoing decline in railroad traffic, chief among which the drop off in global trade and the plunge in oil transportation, a third - just as important factor - has been the situation involving US coal power plants, where as the EIA writes, "coal stockpiles at electric generating facilities totaled 197 million tons at the end of 2015, the highest level since June 2012 and the highest year-end inventories in at least 25 years."

Rail Week Ending 26 March 2016: The Slide Continues: Week 12 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 negative. 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).For this week, total U.S. weekly rail traffic was 470,271 carloads and intermodal units, down 16.5 percent compared with the same week last year. Total carloads for the week ending Mar. 26 were 232,348 carloads, down 18.5 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 237,923 containers and trailers, down 14.5 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 18.5 percent to 9,629 carloads; and motor vehicles and parts, up 0.1 percent to 18,676 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 37.8 percent to 66,281 carloads; petroleum and petroleum products, down 22.1 percent to 10,738 carloads; and grain, down 16.1 percent to 19,144 carloads. For the first 12 weeks of 2016, U.S. railroads reported cumulative volume of 2,905,113 carloads, down 13.7 percent from the same point last year; and 3,085,831 intermodal units, up 2.2 percent from last year. Total combined U.S. traffic for the first 12 weeks of 2016 was 5,990,944 carloads and intermodal units, a decrease of 6.2 percent compared to last year.

Lakes ports seek project shipments to offset decline in bulk cargo | The Great Lakes is a quirky market for shipping in general and for breakbulk and project cargoes in particular. It’s a seasonal trade with an eclectic cargo mix, an assortment of ports, long inland water routes that place unique operating demands on carriers, and a mid-continent geography invites competition from other coasts. “It’s a unique market in which to operate,” said Etienne de Vel, commercial manager for European services, and director at FedNav (Belgium). “It’s a small market, a mature market, and you have to know the habits and the players.” Over the years, the Lakes has developed several breakbulk/project niches, including steel imports, heavy-lift cargoes such as turbines and other industrial equipment, and blades and rotors for energy-generating windmills in the U.S. Midwest and Canada. Those cargoes are becoming more important amid forecasts of continued weakness in bulk cargoes such as iron ore and grain on the Great Lakes and St. Lawrence Seaway, which opened to oceangoing ships on March 21. Steel imports at U.S. and Canadian ports on the Lakes are expected to decline in 2015 after a strong 2014 that left buyers with excess inventories and domestic producers clamoring for anti-dumping actions. Shipments related to oil and gas development are slowing because of the drop in petroleum prices, but shipments of wind energy blades and rotors are offsetting that decline in some ports. Bulk grain, which fell 10 percent last year, has an effect on Lakes breakbulk activity. Carriers such as FedNav often pick up export grain after dropping off import steel. If grain exports soften because of poor crop harvests, commodity markets or currency exchange, carriers have difficulty arranging a profitable round trip.

International Trade in Goods March 28, 2016: Trade in goods popped up February, with exports up 2.0 percent and imports up 1.6 percent. The total goods deficit is an initial $62.9 billion. Exports of foods were especially strong in the month as were exports of consumer goods. Exports of capital goods, by far the largest component, inched higher. Pulling back exports was a 1.4 percent decline for industrial supplies that was tied in part to oil-based price weakness. Imports were led by a 6.9 percent jump in consumer goods, one that hints at rising business expectations here at home. Imports of capital goods were also up and together with the gain for exports of capital goods are positives for global business investment. Imports of food were also up offsetting a decline for industrial supplies. Cross-border activity has been a major negative for the global economy but February's goods data are positive. This report represents the goods portion of the monthly international trade report which will be posted a week from Tuesday.

Dallas Fed: "Texas Manufacturing Activity Rebounds in March"  -- From the Dallas Fed: Texas Manufacturing Activity Rebounds in March Texas factory activity expanded slightly in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded to positive territory this month—coming in at 3.3—after two months of negative readings....Perceptions of broader business conditions remained negative but showed signs of slight stabilization in March. The general business activity index jumped 18 points but remained negative for a 15th month, posting a reading of -13.6. The company outlook index posted a fourth negative reading in a row but edged up to -11.0. Labor market indicators reflected continued decline in March. The employment index was largely unchanged at -10.3, with 12 percent of firms noting net hiring and 22 percent noting net layoffs. The hours worked index remained negative for a third month in a row but edged up to -5.6. This was the last of the regional Fed surveys for March. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Dallas Fed Respondent Sums It Up: "Anyone Saying We're Not In Recession Is Peddling Fiction" - Headlines will crow of the seasonally-adjusted 'beat' of expectations for the Dallas Fed survey (-13.6 vs -25.8 exp) but this is the 15th month in contraction (below 0) - something only seen in recession. Scratching below the surface we see employees, workweek, and capex all in contraction and forward expectations for new orders and employment tumbled. Perhaps that reality is what drove one respondent to rage, "anyone who says the economy is not in recession is peddling fiction." The Respondents... The instability of the domestic oil and gas exploration and production activity continues to wreak havoc on demand for our products. Uncertainty is the main issue regarding oil pricing and refining cash flows. The positive March versus February comparison (as well as the six-months-ahead view) is due entirely to an extremely poor February. Volume remains well below monthly volume in the fourth quarter. Headcount was reduced in February, allowing remaining staff to return to a 40-hour workweek. We are expanding due to longer-term strategy. While we are spread among a plethora of general manufacturing nationwide, we are experiencing a major falloff of inquiries and orders in Texas directly related to the restricted price of oil. As a long-lead-time capital equipment manufacturer, we are working off backlog. Anyone who says the economy is not in recession is peddling fiction.

March 2016 Texas Manufacturing Survey Manufacturing Is Now In Expansion. - Of the five Federal Reserve districts which have released their March manufacturing surveys - all but one are in expansion. A complete summary follows. Texas factory activity expanded slightly in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded to positive territory this month—coming in at 3.3—after two months of negative readings. Other indexes of current manufacturing activity also rose this month, although some remained in contractionary territory. The new orders index jumped 13 points but was still negative at -4.8, suggesting demand continued to fall but at a slower pace than last month. The growth rate of orders index has been negative since October 2014, although it did rise in March, to -11.7. The capacity utilization index bounced back to positive territory after negative readings so far this year, coming in at 3.3. Shipment volumes were largely unchanged this month as the shipments index remained near zero. Perceptions of broader business conditions remained negative but showed signs of slight stabilization in March. The general business activity index jumped 18 points but remained negative for a 15th month, posting a reading of -13.6. The company outlook index posted a fourth negative reading in a row but edged up to -11.0. Labor market indicators reflected continued decline in March. The employment index was largely unchanged at -10.3, with 12 percent of firms noting net hiring and 22 percent noting net layoffs. The hours worked index remained negative for a third month in a row but edged up to -5.6. Price pressures were mixed and wages continued to rise. Abatement in downward pressure on input costs was seen in March, as the raw materials prices index moved up to zero. The finished goods prices index has been negative for more than a year and edged up to -8.2 this month. Meanwhile, the wages and benefits index stayed positive and rose from 12.3 to 14.7, suggesting a slightly accelerated rise in compensation.

Regional Fed Manufacturing Overview: March Sees Increase, but Still Negative Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia.  Regional manufacturing surveys are a measure of local economic health and are used as a representative for the larger national manufacturing health. They have been used as a signal for business uncertainty and economic activity as a whole. Manufacturing makes up 12% of the country's GDP.  The other 6 Federal Reserve Districts do not publish manufacturing data. For these, the Federal Reserve’s Beige Book offers a short summary of each districts’ manufacturing health. The Chicago Fed published their Midwest Manufacturing Index from July 1996 through December of 2013. According to their website, "The Chicago Fed Midwest Manufacturing Index (CFMMI) is undergoing a process of data and methodology revision. In December 2013, the monthly release of the CFMMI was suspended pending the release of updated benchmark data from the U.S. Census Bureau and a period of model verification. Significant revisions in the history of the CFMMI are anticipated."  Here is a three-month moving average overlay of each of the five indicators since 2001 (for those with data).  Here is the same chart including the average of the five. Readers will notice the range in expansion and contraction between all regions - this month's average is at -7.9, which is an improvement from last month's -11.5, but still in negative territory.

Chicago PMI March 31, 2016: Expansion is March's score for the often volatile Chicago PMI which surged 6 full points to a higher-than-expected 53.6. This is once again, for the 4th month in a row, outside of Econoday's consensus range! Contraction was the score in February at 47.6. Details for March show strength for both new orders and backlog orders which are solid pluses for future activity. Production this month was also strong as was employment which is rising once again and at its best rate since April last year. Inventories are still in contraction and input prices are still falling. Most anecdotal indications on the month of March have been positive including this report which tracks both the manufacturing and non-manufacturing sectors of the Chicago economy.

Chicago PMI increases to 53.6 -- Chicago PMI: March Chicago Business Barometer Up 6.0 Points to 53.6 The Chicago Business Barometer increased 6.0 points to 53.6 in March, led by sharp bouncebacks in Production and Employment. The increase in the Barometer was led by a very sharp rise in Production, which followed an even steeper decline in the previous month. The biggest surprise came from the Employment component which rose above the 50 mark in March and to the highest level since April 2015. Chief Economist of MNI Indicators Philip Uglow said, “The most signficant result from the March survey is the pick-up in the Employment component which has remained weak for much of the past year. Looking through some of the recent volatility, the data are consistent with steady, not spectacular, economic growth in the US.“  This was above the consensus forecast of 50.3.

PMI Manufacturing Index April 1, 2016: Highlights Growth in Markit Economics' U.S. manufacturing sample is marginal with the PMI coming in at 51.5 for the final reading on March. This is up only slightly from February's 51.0. A positive is strength in new orders which points to better rates of plus-50 growth in the months ahead. Employment is also up though the reading here contrasts with the big decline in this morning's payroll data on manufacturing. Production held unchanged while backlog orders shrank. The sample is destocking with prices, for both inputs and products, falling. A positive in the report is stabilization for export orders which appear to be getting an early boost from the fall in the dollar. Yet for now, the manufacturing sector is just dragging along, evident in durable goods data and also this morning's data on factory hours. The ISM is up next at 10:00 a.m. ET.

ISM Mfg Index April 1, 2016: Highlights A big surge in ISM new orders is certain to shake up what has been a very downbeat outlook for the manufacturing sector. ISM's composite index came in at 51.8 for March, a plus 50 reading made more respectable by the now ended string of sub-50 readings that go all the way back to October. But it's the new orders index, getting a boost from exports, that steals the show, surging nearly 7 points to 58.3 for the best result since November 2014. Other readings include strength in production and backlogs and, again, new export orders which jumped 5.5 points to 52.0 for their best showing since December 2014. ISM's new orders index, which is widely watched and is actually a component of the index of leading economic indicators, fits in with what may be emerging talk of a June rate hike.

ISM Manufacturing index increased to 51.8 in March -- The ISM manufacturing index indicated expansion in March after five months of contraction. The PMI was at 51.8% in March, up from 49.5% in February. The employment index was at 48.1%, down slightly from 48.5% in February, and the new orders index was at 58.3%, up sharply from February. From the Institute for Supply Management: March 2016 Manufacturing ISM® Report On Business®  "The March PMI® registered 51.8 percent, an increase of 2.3 percentage points from the February reading of 49.5 percent. The New Orders Index registered 58.3 percent, an increase of 6.8 percentage points from the February reading of 51.5 percent. The Production Index registered 55.3 percent, 2.5 percentage points higher than the February reading of 52.8 percent. The Employment Index registered 48.1 percent, 0.4 percentage point below the February reading of 48.5 percent. Inventories of raw materials registered 47 percent, an increase of 2 percentage points above the February reading of 45 percent. The Prices Index registered 51.5 percent, an increase of 13 percentage points above the February reading of 38.5 percent, indicating higher raw materials prices for the first time since October 2014. Manufacturing registered growth in March for the first time since August 2015, as 12 of our 18 industries reported sector growth, and 13 of our 18 industries reported an increase in new orders in March."  Here is a long term graph of the ISM manufacturing index. This was above expectations of 50.5%, and suggests manufacturing expanded in March.

March 2016 ISM Manufacturing Survey Now in Expansion.: The ISM Manufacturing survey is now in expansion after 5 months in contraction. The key internals were positive. The PMI manufacturing Index, also released today, is in expansion. The ISM Manufacturing survey index (PMI) marginally imiproved from 49.5 to 51.8 (50 separates manufacturing contraction and expansion). This was at expectations which were 48.5 to 54.0 (consensus 50.5).The noisy Backlog of Orders improved but remains in and is now in expansion. Backlog growth should be an indicator of improving conditions; a number below 50 indicates contraction. Backlog accuracy does not have a high correlation against actual data. Excepts from the ISM release: "The March PMI® registered 51.8 percent, an increase of 2.3 percentage points from the February reading of 49.5 percent. The New Orders Index registered 58.3 percent, an increase of 6.8 percentage points from the February reading of 51.5 percent. The Production Index registered 55.3 percent, 2.5 percentage points higher than the February reading of 52.8 percent. The Employment Index registered 48.1 percent, 0.4 percentage point below the February reading of 48.5 percent. Inventories of raw materials registered 47 percent, an increase of 2 percentage points above the February reading of 45 percent. The Prices Index registered 51.5 percent, an increase of 13 percentage points above the February reading of 38.5 percent, indicating higher raw materials prices for the first time since October 2014. Manufacturing registered growth in March for the first time since August 2015, as 12 of our 18 industries reported sector growth, and 13 of our 18 industries reported an increase in new orders in March." Of the 18 manufacturing industries, 12 are reporting growth in March in the following order: Printing & Related Support Activities; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; Paper Products; Primary Metals; and Computer & Electronic Products. The five industries reporting contraction in March are: Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; and Petroleum & Coal Products.

ISM new orders surge to 58.3: the shallow industrial recession is ending --OK, probably ending, since nothing is perfect.  But if there are reasons to be more concerned about 2017, this morning's ISM report is very strong evidence that the shallow industrial recession we have had for the last year is ending, either now or within the next 3 months. Last month I wrote that "For me to be confident that this slowdown was ending, I would want to see new orders spike to at least 54."  Well, as forecast by the regional Fed reports, New Orders blew out to the upside at 58.3.  With the sole exception of the month of September 2001 (for obvious reasons), there has never been a reading over 55 in a downturn in industrial production that hasn't either coincided, or been shortly followed by, the end of that downturn.  This is true all the way back to 1948, although the below graph (thru January), for clarity, just focuses on the last 20 years:  Here is a close-up fo the last 10 years, updated through this morning, comparing ISM new ordes (red) with industrial production(blue): Let me put this about as strongly as I can: this has been the single most important datapoint so far this year.

US Manufacturing Surveys Bounce Despite The Biggest Industry Job Losses In 7 Years -- Following China's miraculous PMI jump back into expansion, Markit reports US Manufacturing also rose to 51.5 in March (despite the biggest drop in manufacturing jobs since 2009). As Markit details, output growth is unchanged from February’s 28-month low, and prices charged decline amid further drop in input costs. ISM Manufacturing also jumped from 49.5 to 51.8 - the first 'expansion' in 7 months. Finally, we note that ISM Prices Paid exploded higher (from 38.5 to 51.5) - the biggest jump since Aug 2012.  "V"-shaped recovery in ISM Manufacturing. Every ISM Respondent thinks everything is awesome...

  • "Unemployment rate is low in our county, making it hard to find workers. We are understaffed and running lots of overtime." (Plastics & Rubber Products)
  • "Business in telecom is booming. Fiber plant is at capacity." (Chemical Products)
  • "Current trends remain steady. No issues with delivery or costs." (Computer & Electronic Products)
    "Capital equipment sales are steady." (Fabricated Metal Products)
  • "Requests for proposals for new equipment [are] very strong." (Machinery)
  • "Government is spending again. Have received delivery orders." (Transportation Equipment)
  • "Things are starting to pick up. Our business is seasonal and it is that time of year." (Printing & Related Support Activities)

Visualizing Why Manufacturing Jobs Aren't Coming Back -- The market for industrial robot installations has been on a skyward trend since 2009, and it is not expected to slow down any time soon. According to the World Robotics 2015 report, the market for industrial robots was approximated at $32 billion in 2014, and in the coming years it is expected to continue to grow at a compound annual growth rate (CAGR) of at least 15%. As VisualCapitalist's Jeff Desjardin notes, that means between 2015 and 2018, it’s anticipated that 1.3 million industrial robots will be installed worldwide. This will bring the stock of operational robots up to just over 2.3 million, mostly working in the automotive and electronics sectors. For how long can the global robot population continue to grow?

Nafta May Have Saved Autoworker Jobs - When Donald Trump threatened to “break” the North American Free Trade Agreement, auto industry workers offered up some of the loudest cheers.  But the autoworkers’ animosity is aiming at the wrong target. There are still more than 800,000 jobs in the American auto sector. And there is a good case to be made that without Nafta, there might not be much left of Detroit at all.  “Without the ability to move lower-wage jobs to Mexico we would have lost the whole industry,” said Gordon Hanson of the University of California, San Diego, who has been studying the impact of Nafta on industries and workers since its inception more than two decades ago. Even in the narrowest sense — to protect jobs in car assembly plants — a wall of tariffs against America’s southern neighbor would probably do more harm than good.To be sure, Rust Belt voters drawn to Mr. Trump and Mr. Sanders are not wrong to be angry. Trade and the deals to reduce trade barriers often threaten the livelihood of workers in the industries exposed most directly to foreign competition. In the home of the once proud Big Three carmakers, which virtually owned the American car market through most of the 20th century, the issue is personal. Nafta put them in direct competition with Mexican workers earning little more than one-fifth of their compensation. The American trade deficit in autos and parts tripled in the two decades after the trade deal struck with Mexico and Canada took effect in 1994, to about $130 billion in 2013. The industry lost 350,000 jobs, or about a third of its workers, over the period.Still, for all the brickbats thrown at it, the Nafta trade deal itself had a relatively modest impact, most studies agree. For one thing, the Mexican economy is still tiny compared with that of the United States and its trade surplus has remained relatively small.

Donald Trump Understands the Nexus Between Trade and Immigration -- Marshall Auerback --For all of the vaunted gains in profitability, it is unclear that globalization has been the huge win-win, as its apologists all argue. Internationally, the richest 5 percent of people receive one-third of total global income, as much as the poorest 80 percent. While a few poor countries are catching up with the rich world, the differences between the richest and poorest individuals around the globe are huge and likely growing.And domestically, U.S. workers have been semi-permanently replaced by low cost foreign workers. Prior to these great advances in technology, displacement of the current labor force could only have occurred through immigration of workers into the country. The upshot is that a huge number of Americans have experienced stagnant wages and incomes for over a quarter of a century. Trade agreements have exacerbated this problem, and the results of this unconcern are evident today in the campaigns of Donald Trump & Bernie Sanders.Trump, however, has taken this one stage further with his hardline stance on immigration. For all of the media attention being devoted to walls along the Mexican border, or an outright ban on Muslim immigration, there is method to Trump’s madness, which goes well beyond racism (even though there is much of that in his rhetoric). By linking immigration and trade, however crudely, Trump has exposed the broader paradox and inherent contradictions which lurk between the two. Historically, immigration law has concerned itself with many considerations, the most of which is the displacement of US workers. By contrast, advocates of free trade ignore this consideration, or blithely suggest that the resultant unemployment in a displaced sector (e.g., the automobile industry), is a “negative externality”, which is generally offset by the resultant gains in competitive efficiency, and lower cost goods. Cheap imports, then, outweigh the displacement of workers.  But we do not extend this logic to immigration, or we would move straight to a policy of open borders.

Weekly Initial Unemployment Claims increase to 276,000  --The DOL reported: In the week ending March 26, the advance figure for seasonally adjusted initial claims was 276,000, an increase of 11,000 from the previous week's unrevised level of 265,000. The 4-week moving average was 263,250, an increase of 3,500 from the previous week's unrevised average of 259,750. There were no special factors impacting this week's initial claims. This marks 56 consecutive weeks of initial claims below 300,000, the longest streak since 1973. The previous week was unrevised. Note: The following graph shows the 4-week moving average of weekly claims since 1971.

March 2016 Job Cuts Fall But Q1 Up 31%. Heavy Layoffs in Energy and Retail.: Job cuts declined for the second consecutive month in March, as US-based employers announced plans to trim payrolls by 48,207 during the month. The March total was 21.7 percent lower than the 61,599 job cuts in February. It was the lowest monthly total since December, when 23,622 were announced. Despite last month's decline, the March figure was 31.7 percent higher than the same month a year ago (36,594), making it the fourth consecutive year-over-year increase. Through the first quarter of 2016, employers announced 184,920 job cuts, up 31.8 percent from the 140,241 cuts tracked the first three months of 2015. The first quarter saw 75.9 percent more job cuts than in the final quarter of 2015, when 105,079 job cuts were recorded. Of the 184,920 job cuts announced in the first quarter, 50,053, or 27 percent, were directly attributed to falling oil prices. That is slightly (5.0 percent) higher than a year ago, when oil-related job cuts totaled 47,610. While there were fewer oil-related job cuts a year ago, they represented a larger portion of total job cuts, accounting for 34 percent of first-quarter layoff announcements. Said John Challenger, chief executive officer of Challenger, Gray & Christmas:Job cuts have slowed since surging in the first two months of the year, but the pace is still well above that of 2015. And, it is not just the energy sector that is seeing heavier job cuts. Layoff announcement have increased significantly in the retail sector and computer sector, as well. While it may be too early to sound the alarm bells, the upward trend outside of the energy sector is somewhat worrisome.

Job Cuts Pile Up - Wolf Richter - Turning points in the vast US labor market rarely come with a big drumroll that no one can miss. Instead, they wedge themselves into the rosy scenario bit by bit, here and there, posing contradictions where none are expected. And today, we got one of those contradictions: unemployment claims v. job-cut announcements. The number of people who applied for unemployment insurance during the week of March 20 to 26 rose by 11,000 to 276,000, the Labor Department reported today. While up, these initial claims are still near the low of 253,000 established on March 5, which had been the lowest level since the late 1960s! So even at 276,000, initial unemployment claims are still very low by historical standards. Red flags go up when claims jump well above 300,000. Serious fretting begins when claims hit 400,000. That’s a sign that laid-off people can’t find new jobs and are filing for unemployment insurance to tide them over. Companies have already started laying off people. The announcements and rumors bubble up on a daily basis. And today, the Challenger Job Cut Report confirms it in a chilling way. In March, job cuts announced by the largest US-based companies soared 31.7% year-over-year to 48,207. The fourth month in a row of year-over-year increases. Up 40% from March 2014. Job-cut announcements in the first quarter jumped to 184,920, up 32% from 2015, and up 52% from 2014. These are not minor increases. And they only include the largest US-based companies that announce layoffs to the media. They do not include smaller companies that might be trimming their payrolls quietly.

Econoday Economic Report: Gallup Good Jobs Rate March 31, 2016: The Gallup Good Jobs (GGJ) rate was 44.4 percent in March. This was down slightly from the February rate (44.6 percent) but higher than the rate in any March since Gallup began measuring it in 2010. The current rate is 0.3 percentage points higher than in March 2015, suggesting an underlying increase in full-time work beyond seasonal changes in employment. The percentage of U.S. adults in March who participated in the workforce was 67.0 percent. This was down slightly from the rate in February (67.2 percent) but still higher than the 66.9 percent average workforce participation rate since June 2013. Gallup's unadjusted U.S. unemployment rate was 6.0 percent in March, down slightly from February's 6.2 percent. It is the lowest rate in any March since Gallup began tracking the measure in 2010, including last year's 6.4 percent. March underemployment was 14.5 percent, down slightly from February (14.7 percent) but in line with the rates since April 2015. The current underemployment rate of 14.5 percent is the lowest Gallup has measured in any March over the past seven years.

ADP: Private Employment increased 200,000 in March -- From ADP: Private sector employment increased by 200,000 jobs from February to March according to the March ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis...Goods-producing employment rose by 9,000 jobs in March, up from a downwardly revised 2,000 in February. The construction industry added 17,000 jobs, which was down from February’s 24,000. Meanwhile, manufacturing added 3,000 jobs after losing 9,000 the previous month.Service-providing employment rose by 191,000 jobs in March, down from 204,000 in February.  Mark Zandi, chief economist of Moody’s Analytics, said, “The job market continues on its amazing streak. The March job gain of 200,000 is consistent with average monthly job growth of the past more than four years. The only industry reducing payrolls is energy as has been the case for over a year. All indications are that the job machine will remain in high gear.”  This was close to the consensus forecast for 203,000 private sector jobs added in the ADP report. 

ADP: US Private Payrolls Rise By A Respectable 200,000 In March -- US companies added 200,000 jobs last month (seasonally adjusted), according to this morning’s update of the ADP Employment Report. Although March’s gain was slightly below the previous month’s increase, today’s release suggests that the year-over-year trend for private-sector job creation is settling in to a low-2% trend–a pace that’s strong enough, if sustained, to keep the US recovery on track. “The job market continues on its amazing streak,” says Mark Zandi, chief economist of Moody’s Analytics, the firm that co-produces the data with ADP. “The March job gain of 200,000 is consistent with average monthly job growth of the past more than four years. The only industry reducing payrolls is energy as has been the case for over a year. All indications are that the job machine will remain in high gear.” Today’s update will revive the discussion about the sustainability of job growth–and economic growth overall. One school of thought posits that the upside to a relatively modest recovery since the Great Recession is the potential for growth to persist for longer than usual, relative to the historical record. The current expansion (measured from the end of the last recession in June 2009) is 73 months—the fifth-longest duration on record, based on NBER’s data that stretches back to the mid-19th century.

March Employment Report: 215,000 Jobs, 5.0% Unemployment Rate -From the BLSTotal nonfarm payroll employment rose by 215,000 in March, and the unemployment rate was little changed at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in retail trade, construction, and health care. Job losses occurred in manufacturing and mining. ... The change in total nonfarm payroll employment for January was revised from +172,000 to +168,000, and the change for February was revised from +242,000 to +245,000. With these revisions, employment gains in January and February combined were 1,000 less than previously reported....In March, average hourly earnings for all employees on private nonfarm payrolls increased by 7 cents to $25.43, following a 2-cent decline in February. Over the year, average hourly earnings have risen by 2.3 percent. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 215 thousand in March (private payrolls increased 230 thousand). Payrolls for January and February were revised down slightly by a combined 1 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In March, the year-over-year change was 2.80 million jobs.  A solid gain. The third graph shows the employment population ratio and the participation rate.

US Private Payrolls Rise At Strongest Annual Pace In 5 Months - Private payrolls in the US increased 195,000 in March (seasonally adjusted), a moderately lower gain vs. February’s 236,000 advance, according to this morning’s update from the Labor Department. But the year-over-year trend improved, pointing to sustainable and healthy growth for the labor market in the near term.The annual pace for payrolls at US companies ticked up to 2.25% vs. the year-earlier level. The slightly faster year-over-year increase marks the first improvement in the annual trend in five months. As a result, private payrolls posted the strongest annual rise since last November. If anyone’s still talking about an imminent recession signal for the US economy, they’re not looking at the annual changes for payrolls for insight. “We’ve been through some rough patches, but we continue to generate a lot of jobs,” . “In a consumer-driven economy, that’s going to keep us headed in the right direction.” It’s been clear for weeks that recession risk remained low through last month–a view that was effectively confirmed in the preliminary numbers via the US macro profile for February. Although there’s still a long way to go for March data, today’s update is effectively a down payment on expecting that February’s upbeat profile will spill over into the first quarter’s final month. The manufacturing sector is still weak, but for the moment the troubles in that corner remain relatively contained and pose little immediate danger for the broad economy–based on numbers published to date.

Payrolls Rise 215K In March, Beat Expectations As Average Hourly Earnings, Unemployment Rise - And so the confusion remains: why did Yellen go uber dove three days ahead of a day in which the BLS reported that in March not only were 215K jobs created, more than the consensus 205K, if below last month's 245K, but in which average hourly earnings rebounded a solid 0.3%, above the 0.2% expected, and well above last month's -0.1% decline.  Wages rose: However, the fly in the the ointment was that the unemployment rate picked up modestly from 4.9% to an above expectations 5.0%. This was due to a modest increase in the participation rate to 63% from 62.9%, as 396K new civilians entered the labor force, rising to 159,286K, while 246K new jobs were added (per the Household survey) while people not in the labor force declined by 206K to 93,482K. And the last notable point: average hourly hours worked were flat at 2 year lows, which bodes poorfly for both productivity growth and for GDP. On net, the report was better than expected, which means it is "good news" if only for the economy, but will it be good news for the market, which will now start discounting another Fed rate hike all over again. As of this moment, futures are near day lows, so Goldman's latest forecast that "Good news is good news again" was again wrong. From the report: Total nonfarm payroll employment rose by 215,000 in March. Employment gains  occurred in retail trade, construction, and health care, while job losses  occurred in manufacturing and mining. Retail trade added 48,000 jobs in March. Employment gains occurred in general merchandise stores (+12,000), health and personal care stores (+10,000), building  material and garden supply stores (+10,000), and automobile dealers (+5,000).  Over the past 12 months, retail trade has added 378,000 jobs. Construction employment rose by 37,000 in March. Job gains occurred among residential specialty trade contractors (+12,000) and in heavy and civil engineering construction (+11,000). Over the year, construction has added 301,000 jobs. Employment in health care increased by 37,000 over the month, about in line with the average monthly gain over the prior 12 months. In March, employment rose in ambulatory health care services (+27,000) and hospitals (+10,000). Over the year, health care employment has increased by 503,000.

Unemployment Rate Edges Higher as Prime-Age Workers Re-enter Labor Market - Dean Baker - The economy added 215,000 jobs in March, with the unemployment rate rounding up to 5.0 percent from February's 4.9 percent. However, the modest increase in unemployment was largely good news, since it was the result of another 396,000 people entering the labor force. There has been a large increase in the labor force over the last six months, especially among prime-age workers. Since September, the labor force participation rate for prime-age workers has increased by 0.8 percentage points. This seems to support the view that the people who left the labor market during the downturn will come back if they see jobs available. However, even with this recent rise, the employment-to-population ratio for prime-age workers is still down by more than two full percentage points from its pre-recession peak. Another positive item in the household survey was a large jump in the percentage of unemployment due to voluntary quits. This sign of confidence in the labor market rose to 10.5 percent, the highest level in the recovery to date, although it's still more than a percentage point below the pre-recession peaks and almost five percentage points below the peak reached in 2000. Other items in the household survey were mixed. The number of people involuntarily working part-time rose by 135,000, reversing several months of declines. However, involuntary part-time work is still down by 550,000 from year-ago levels. The number of people voluntarily working part-time fell in March, but it is still 654,000 above its year-ago level. One of the desired outcomes from the ACA was that it would free people from dependence on their employer for health care insurance, allowing them to work part-time or start a business if they so choose and get insurance through the exchanges. There has been a substantial rise in self-employment since the exchanges began operating in 2014.  In the first quarter of 2016, incorporated self-employment was up by more than 400,000 (7.8 percent) from the same quarter of 2013. Unincorporated self-employment was also up by almost 360,000 (3.9 percent). While the employment growth in the establishment survey was in line with expectations, average weekly hours remained at 34.4, down from 34.6 in January. This indicates that February’s drop in hours was not just a result of bad weather. As a result, the index of aggregate hours worked is down by 0.2 percent from the January level. This could be a sign of slower job growth in future months. The employment growth in March was largely in retail (47,700 jobs), construction (37,000), health care (36,800), and restaurants (24,800). Retail has added more than 180,000 jobs over the last three months. This is an extraordinary pace that is unlikely to continue. Construction growth also has been unusually rapid the last six months, rising at 37,000 per month. Health care employment growth sped up sharply in 2015 to almost 40,000 a month, from less than 25,000 a month in 2014. That pace appears to be continuing into 2016.

March Jobs Report – The Numbers -- U.S. employers added a seasonally adjusted 215,000 jobs in March, roughly in line with the 213,000 forecast by economists. Over the past three months, employment growth had averaged 209,000, a slight slowdown from the 223,000 average during the 12 months prior to March. Even with the somewhat slower pace, the latest report should reassure Fed officials that the labor market remains healthy.  The unemployment rate was 5% in March, meaning that nearly eight million Americans who wanted a job couldn’t find one last month. Economists had expected the rate to hold steady at February’s 4.9%. While a higher rate is not usually welcome, it partly reflects a growing labor force. The unemployment figure averaged 4.6% in the years before the recession, peaked at 10% in 2009 and has since gradually fallen. The current reading is near the rate many economists consider full employment.  The headline unemployment rate gets much of the attention, but it’s not the only measure of labor-market slack. An alternative rate, which includes people looking for work, stuck in part-time jobs or who have been discouraged about finding a job, rose one-tenth of a percentage point to 9.8% in March. February’s 9.7% reading had been the lowest since 2008. The recession accelerated one demographic trend: People dropping out of the workforce. In March, the share of Americans participating in the workforce rose to 63%, the fourth consecutive increase and the highest level in a year. If the labor market continues to improve, that should draw more workers back, but an aging population means it likely won’t return to levels seen before the downturn. Average hourly earnings of private-sector workers rose 7 cents to $25.43 last month. That’s a 2.3% increase from a year earlier. The average workweek, meanwhile, held steady at 34.4 hours last month. For many households, incomes haven’t been keeping pace with expenses in recent years, so an uptick in take-home pay would be welcome–and also another sign of the improving labor market.  Retail trade added 48,000 jobs in March, leading overall payroll gains. Construction, health care, and restaurants and bars rounded out the top sectors. Manufacturers shed 29,000 jobs, with most of those concentrated in durable goods. Since reaching a recent peak in March 2015, durable-goods manufacturing has lost 68,000 jobs. Employment in mining, a sector that includes the oil and gas industry, also fell again. Since September 2014, 185,000 mining jobs have been wiped out.

Payroll Jobs +215,000, Unemployment Rate Ticks Up to 5.0% as More People Enter Labor Force - Today’s employment report shows an increase of 215,000 jobs, very close to the Bloomberg consensus estimate of 210,000 jobs. The Household Survey and Payroll Survey (Establishment Survey), were in sync this month. There was not another surge in part-time employment.  There were no major revisions. Year-on-year hourly earnings are up a somewhat disappointing 2.3 percent. Average hours worked did not change, also a disappointment. Let’s dive into the details in the BLS Employment Situation Summary, unofficially called the Jobs Report. BLS Jobs Statistics at a Glance:

  • Nonfarm Payroll: +215,000 – Establishment Survey
  • Employment: +246,000 – Household Survey
  • Unemployment: +151,000 – Household Survey
  • Involuntary Part-Time Work: +135,000 – Household Survey
  • Voluntary Part-Time Work: -187,000 – Household Survey
  • Baseline Unemployment Rate: +0.1 to 5.0% – Household Survey
  • U-6 unemployment: +0.1 to 9.8% – Household Survey
  • Civilian Non-institutional Population: +191,000
  • Civilian Labor Force: +396,000 – Household Survey
  • Not in Labor Force: -206,000 – Household Survey
  • Participation Rate: +0.1 at 63.0 – Household Survey

Please consider the Bureau of Labor Statistics (BLS) Current Employment Report. Total nonfarm payroll employment rose by 215,000 in March, and the unemployment rate was little changed at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in retail trade, construction, and health care. Job losses occurred in manufacturing and mining.

Unemployment Report Shows Signs of Life in Labor Participation Rate -- The March 2016 unemployment report shows some interesting movements.  The official unemployment rate ticked up 0.1 percentage points to 5.0% yet this is actually good news as more people came out of the woodwork and participated in the labor force.  The labor force grew by almost 400 thousand and those employed shot up by another 246 thousand.  Those not in the labor force declined by another -206,000 implying people who had previously given up started looking for work again.  The labor participate rate ticked up another one tenth of a percentage point to a still very low 63.0%, yet there is now a clear pattern of increased participation.  That said, while this report has many strong positive indicators it is a long way off to get those who fell off the labor force cliff in the last eight years to climb back up it again.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status. Those employed now stands at 151,320,000, a monthly gain of 246 thousand.  From a year ago, the ranks of the employed has increased by 2.987 million. Those unemployed number 7,966,000.  From a year ago the unemployed has decreased by -591,000.  The monthly change of those unemployed was a gain of 151 thousand. Those not in the labor force is 93.482 million.  The monthly decline was -206,000.  The below graph are the not in the labor force ranks.  Those not in the labor force has increased by 292,000 in the past year, a huge, massive improvement from the annual change of past months. The labor participation rate is 63.0%.  This is a 0.1 percentage point increase from last month.  Pre-recession, the January 2008 labor participate rate was 66.2%.  Below is a graph of the labor participation rate for those between the ages of 25 to 54, which increased 0.2 percentage points from last month. The rate is 81.4%, a level not seen since August 1985, discounting events after 2008.  These are the prime working years where one should not see record low participation rates.  In January 2008 the prime working years labor participate rate was 83.3%. The civilian labor force, which consists of the employed and the officially unemployed, stands at 159,286,000.  The civilian labor force has grown by 2,396,000 over the past year and grew by 396,000 in the past month alone.  

BLS Jobs Situation Improved In March 2016. Weakness In Economically Intuitive Sectors.: The BLS job situation headlines looked good. Jobs growth accelerated this month on the back of last month's downwardly revised data. Economic intuitive sectors were mixed. The rate of growth for employment accelerated this month (red line on graph below).

  • The unadjusted jobs increase month-over-month was average for times of economic expansion.
  • This month's data is not quite as good as it seems as last months gains were revised downward.
  • Economic intuitive sectors of employment were mixed.
  • This month's report internals (comparing household to establishment data sets) was fairly consistent with the household survey showing seasonally adjusted employment growing 246,000 vs the headline establishment number of growing 215,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey added 396,000 people to the workforce
  • BLS reported: 215K (non-farm) and 195K (non-farm private). Unemployment rate worsened from 4.9% to 5.0%.
  • ADP reported: 200 K (non-farm private)
  • In Econintersect's March 2016 economic forecast released in late February, we estimated non-farm private payroll growth at 130,000 (based on economic potential) and 210,000 (fudged based on current overrun of economic potential);
  • NFIB comments on this Jobs Report is towards the end of this post.

The March Jobs Report in 14 Charts -  U.S. employers added 215,000 jobs in March, but the unemployment rate ticked up to 5% as more Americans looked for work. Here’s a look at the guts of the monthly employment report.  The share of Americans working, or looking for work, rose to 63%, the highest since early 2014. The number of Americans with jobs rose to the highest level since early 2009.  Labor-force participation among workers ages 25 to 54, the years Americans are mostly likely to be working, also climbed this month, though it remains lower than prior to the recession. The unemployment rate ticked up to 5% as a result of the increase in the labor force. The broadest gauge of unemployment and underemployment rose to 9.8% in March from 9.7% in February. One year ago, the unemployment rate stood at 5.5%, and the broader gauge of underemployment stood at 10.9%. Unemployment rates rose slightly for college graduates, high-school graduates and high-school dropouts this month, following the slight increase nationally. Unemployment rates also climbed slightly for black and Hispanic men and women this month. The rate was unchanged for white men and women. The trend in recent years, however, has been steadily downward for all major demographic groups. Average hourly earnings are up around 2.3% from a year earlier. Average weekly earnings stumbled in February as employers cut back on hours. March saw some bounce back on that front, and average weekly earnings are up around 2% over the past year. The share of workers unemployed due to a permanent layoff climbed slightly last month, rising to 36.7% from 35.7%. But over the course of the recovery, fewer of the unemployed have lost their previous jobs. Employers have added 2.8 million jobs over the past 12 months, the best pace since last November. The share of the unemployed who’ve been without work for six months or longer had been steadily declining until the middle of last year. It hasn’t made much progress since then. For the past three months, spells of unemployment have been lasting slightly longer. The median unemployed worker has been without work for 11.4 weeks right now, up from 10.5 weeks in December. The share of Americans who weren’t in the labor force and who found a job in March ran to the highest level since September 2008. Meanwhile, the share of Americans who don’t have a job and are quitting the workforce altogether has fallen back to where it was when the last recession began. Around 10 million more people are working full-time jobs (or are working at least 35 hours a week) compared with when the current economic expansion cycle began in the middle of 2009. The number of people working part-time has been essentially flat over that span. Since the end of 2007, when the last recession began, the economy has recovered all of the full-time positions that employers shed. The net change in full-time hiring is closer to the net change in part-time hiring of around three million new jobs.

Jobs Report: Another solid month, LFPR on the rise, but manufacturing hit by the strong $ -- In yet another in a series of solid monthly reports on the status of the US labor market, payrolls rose 215,000 last month and the unemployment rate ticked up slightly, but for a good reason: more people entered the labor force looking for work. Wage growth remains subdued, up 2.3% over the past year. That’s a bit faster than earlier in the recovery, but still reflecting the fact that while the job market is clearly on a reliable, tightening path, some slack remains and many workers still lack the bargaining power they’d have at full employment.  I’ll get into this a bit more below, but as noted, the labor force participation rate (LFPR) ticked up to 63% last month, back to where it was in early 2014, and half a point higher than its recent trough, representing about 800,000 more people in the job market. Especially given the fact that unemployment’s stayed nice and low as these folks have joined the fray, this is, as noted, a positive development.  Smoothing out monthly bips and bops, we get JBs patented Jobs Smoother, which shows average monthly gains over 3, 6, and 12 month intervals. Basically, what we’re looking for here is bars consistently north of 200K, and that’s what we’ve got. Despite some negative headwinds, including volatile financial markets, weakening GDP growth, slower growth abroad, and the strong dollar hurting our exports, we’re still cruising along with employers reliably adding 200K+ jobs per month. (More on these dynamics below.) With consistent job growth of this magnitude, we should hope to pull more labor market sideliners back into the game, and that may be occurring as per the recent uptick in the LFPR shown below. This critical metric has far from recovered off of its recessionary lows, but since the LFPR reflects demographic change–more retirees will lower it in a way that says more about aging boomers like myself than labor demand–we shouldn’t expect to go back to levels that prevailed under a younger age structure. That said, at least some of the loss in the LFPR could and should be recouped, and I’ll vigilantly track this apparent trend reversal circled at the end of the figure to see if it sticks.

Comments: Another Solid Employment Report -- This was another solid employment report. Total employment is now 5.3 million above the previous peak. Total employment is up 14.0 million from the employment recession low. Private payroll employment increased 195,000 in March, and private employment is now 5.6 million above the previous peak. Private employment is up 14.4 million from the recession low. In March, the year-over-year change was 2.80 million jobs. Employment-Population Ratio, 25 to 54 years old Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate increased in March to 81.4%, and the 25 to 54 employment population ratio increased to 78.0%. The participation rate and employment population ratio for this group has increased sharply over the last several months. The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s. This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. On a monthly basis, wages increased at a 3.4% annual rate in March. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.3% YoY in March.  This series is noisy, however overall wage growth is trending up.

Waiters And Bartenders Rise To Record, As Manufacturing Workers Drop Most Since 2009 - On the surface, the March jobs reported was better than expected... except for manufacturing workers. As shown in the chart below, in the past month, a disturbing 29,000 manufacturing jobs were lost. This was the single biggest monthly drop in the series going back to December 2009. But not all is lost: as has been the case for virtually every month during the "recovery", virtually every laid off manufacturing worker could find a job as a waiter: in March, the workers in the "Food services and drinking places" category, aka waiters, bartenders and minimum wage line cooks, rose again to a new record high of 11,307,000 workers, an increase of 25K in the month, offsetting virtually all lost manufacturing jobs.  This is how the two job series have looked since the start of 2015: 24k manufacturing jobs have been lost in the past 14 months compared to an increase of 365K food service workers.

Where The March Jobs Were: The Minimum Wage Deluge Continues -- In March the US economy added a healthy 215K jobs, beating expectations and more importantly, pushing the average hourly earnings up by 0.3% on the month. Which, however, is curious because a cursory look at the job additions in the month reveals that nearly two-third of all jobs, and the three top categories of all job additions, were once again all minimum wages jobs.

  • Education and Health: 51K
  • Retail Trade: 48K
  • Leisure and Hospitality: 40K

Just these three top sectors (as shown in the chart below) accounted for 65% of all job gains. This "growth" of minimum wage labor took place while some of the highest paying jobs, including mining and logging, manufacturing and transportation and warehousing all posted declines in March. The only silver lining was that construction jobs posted a healthy 37K bounce, while government "workers" added a solid 20K. And, it bears repeating once again, that in a month in which all sentiment surveys showed a steady rebound in manufacturing, the US economy actually lost the biggest number of manufacturing workers since 2009.

Job Growth in Last Decade Was in Temp and Contract - If you believe the Silicon Valley sloganeers, we are in a “gig economy,” where work consists of a series of short-term jobs coordinated through a mobile app. But anyone who cares about the future of work in the United States shouldn’t focus too narrowly on the novelty of people making extra money using their mobile phones. There’s a bigger shift underway. That’s a key implication of new research that indicates the proportion of American workers who don’t have traditional jobs — who instead work as independent contractors, through temporary services or on-call — has soared in the last decade. They account for vastly more American workers than the likes of Uber alone. Most remarkably, the number of Americans using these alternate work arrangements rose 9.4 million from 2005 to 2015. That was greater than the rise in overall employment, meaning there was a small net decline in the number of workers with conventional jobs.That, in turn, raises still bigger questions about how employers have succeeded at shifting much the burden of providing social insurance onto workers, and what technological and economic forces are driving the shift. The labor economists Lawrence F. Katz of Harvard and Alan B. Krueger of Princeton found that the percentage of workers in “alternative work arrangements” — including working for temporary help agencies, as independent contractors, for contract firms or on-call — was 15.8 percent in the fall of 2015, up from 10.1 percent a decade earlier. (Only 0.5 percent of all workers did so through “online intermediaries,” and most of those appear to have been Uber drivers.)

 23% Of Americans In Their Prime Working Years Are Unemployed -- Did you know that when you take the number of working age Americans that are officially unemployed (8.2 million) and add that number to the number of working age Americans that are considered to be “not in the labor force” (94.3 million), that gives us a grand total of 102.5 million working age Americans that do not have a job right now?  I have written about this before, but today I want to focus just on Americans that are in their prime working years.  When you look at only Americans that are from age 25 to age 54,23.2 percent of them are unemployed right now.  The following analysis and chart come from the Weekly Standard…  Here’s a chart showing those in that age group currently employed (95.6 million) and those who aren’t (28.9 million)  “There are 124.5 million Americans in their prime working years (ages 25–54).Nearly one-quarter of this group—28.9 million people, or 23.2 percent of the total—is not currently employed. They either became so discouraged that they left the labor force entirely, or they are in the labor force but unemployed. This group of non-employed individuals is more than 3.5 million larger than before the recession began in 2007,” writes the Republican side of the Senate Budget Committee..

Laid-off IT workers muzzled as H-1B debate heats up --IT workers are challenging the replacement of U.S. employees with foreign visa holders. Lawsuits are on the rise and workers are contacting lawmakers. Disney workers who lost their jobs on Jan. 30, 2015, are especially aggressive. There's a reason for this.  The Disney severance package offered to them did not include a non-disparagement clause, making it easier for laid-off workers to speak out. This is in contrast to the severance offered to Northeast Utility workers. The utility, now known as Eversource Energy and based in Connecticut and Massachusetts, laid off approximately 200 IT employees in 2014 after contracting with two India-based offshore outsourcing firms. The employees contacted local media and lawmakers to pressure the utility to abandon its outsourcing plan. Some of the utility's IT employees had to train their foreign replacements. Failure to do so meant loss of severance. But an idea emerged to show workers' disdain for what was happening: Small American flags were placed in cubicles and along the hallway in silent protest -- flags that disappeared as the workers were terminated. The utility employees left their jobs with a severance package that included this sentence: "Employee agrees that he/she shall make no statements to anyone, spoken or written, that would tend to disparage or discredit the Company or any of the Company's officers, directors, employees, or agents." That clause has kept former Eversource employees from speaking out because of fears the utility will sue them if they say anything about their experience. The IT firms that Eversource uses, Infosys and Tata Consultancy Services, are major users of the H-1B visa.

Almost two-thirds of people in the labor force do not have a college degree -- Almost two-thirds of people in the labor force (65.1 percent) do not have a college degree. In fact, people without a college degree (which includes those without a high school degree, with a high school degree, some college education, and an associates’ degrees) make up the majority of the labor force in every state but the District of Columbia. Mississippi has the highest share of non-college educated workers (75.7 percent) while Massachusetts and the District of Columbia have the lowest shares (51 percent and 33.7 percent, respectively). It is no secret that wages for typical workers have stagnated over the past 35 years. The lagging recovery of construction and manufacturing sectors, two sectors which traditionally provide strong wages for workers without college degrees, is one reason for this wage stagnation. Trade agreements like the Trans-Pacific Partnership threaten to make the possibility of strong, middle-class jobs even more elusive for non-college educated workers. We cannot solve the problem of low and stagnating wages for non-college educated workers by expecting everyone to pursue more education. We need solutions that will raise wages for all workers, regardless of educational attainment. These solutions include raising the minimum wage, strengthening collective bargaining rights, prioritizing very low rates of unemployment through monetary policy, and reducing our trade deficit by stopping destructive currency manipulation.

Deaths, Injuries and the the Gender Gap in Pay  -- A few days ago, released a report ( ) looking at the gender gap in pay, which they claim is about 24%. That is, women make about 76 cents for every dollar made by men. Glassdoor also indicates that adjusting for education, years of experience, location, job title, and job type, the gender gap in the US drops to about 5.4%, which means adjusting for the aforementioned factors, women in the US make about 94.6 cents for every dollar earned by men.   I skimmed through the report, and two obvious things missing (admittedly hard for to capture) from the analysis are death and injury. Men are more likely to get injured or even die on the job. This is true even for the same job.  For example, consider the most white collar office workplace with which you are familiar. Every so often, it is decided that some file cabinet, or some other heavy equipment has to be moved, and it just isn’t worth the requisition or the wait to have someone come up from Maintenance and move it. Regardless of the gender composition of the hyper white-collar workers at the workplace, what is the gender composition of the subgroup that moves the stuff? Because in the one time out of a thousand that something falls on someone, that’s the gender composition of those who will get hurt or worse. . Let’s try to quantify this differential in injuries and deaths. We can start by looking at the number of men and women in the workforce, which is among the really cool data available in Figure 2 below:

When Workers Get More of the Income Pie - Justin Fox - Profits at U.S. corporations fell last year for the first time since 2008, according to the Bureau of Economic Analysis. If that sounds a little ominous, it should. History shows that when earnings fall, the economy often follows them downward into recession as profit-starved companies cut back on hiring and investment. That's Bloomberg's Rich Miller and Alexandre Tanzi, who quote economic forecasters with varying views of how seriously we should take the profit decline. I have previously come down on the "not very" side of that debate, but I could be wrong. The economy is complex, forecasting is hard, strange stuff can happen. There's definitely something important going on with corporate profits, though, especially if you look beyond the business cycle to the long-run picture. Pre-tax corporate profits hit an all-time high of 14.2 percent of national income in 2012, and after-tax profits hit an all-time high of 11 percent. Even in 2015 -- as already noted, not a great year for corporate profits -- after-tax profits still chewed up a larger share of national income than in any previous years other than 2014, 2013, 2012, 2011, 2010, 2006 and ... 1929. (That last one sounds a little ominous, too.) I use profits' share of national income because that's a better way of looking at trends over time than simple dollar amounts would be. As for national income, it's similar to the better-known gross domestic product but includes income from overseas (an important element of corporate profits), which GDP does not. What the chart shows, among other things, is that since the early 1990s corporations have, with occasional cyclical interruptions, been gobbling up an ever-larger slice of the economic pie. Since the late Since the late 1990s people have (at least I have) been wondering how long this can go on. As I wrote -- incorrectly, it turned out t -- in 2004: "Corporate profits simply cannot sustain a growth rate faster than that of GDP."

African American workers are hurt more by the decline in union and manufacturing jobs - The sources of income growth and mobility in the U.S. labor market have changed dramatically over the past several decades. Good-paying union jobs and manufacturing employment were once a prominent foundation for the country’s middle class, but these jobs have been eviscerated in recent history—with a disproportionate effect on African Americans. Since the 1980s, union membership has plummeted for all demographic groups across the United States. For black workers, however, union jobs have disappeared significantly faster than they have for white workers. (See Figure 1.) Figure 1 In 1983—the earliest year for which we have comparable data—31.7 percent of black workers were union members or covered by a union contract, compared to 22.2 percent of white workers. By 2015, however, union representation rates for black and white workers had fallen to 14.2 percent and 12.5 percent, respectively. While this was a steep decline for white workers (a drop of 43.6 percent), the fall for black workers was substantially sharper (a drop of 55.2 percent). Research shows that the decline of unions is a significant cause of rising wage inequality among male workers. Recent work also demonstrates a strong correlation between union membership and intergenerational earnings mobility. African Americans may be disproportionately losing these positive benefits of unionization. A major reason for the fall in unionization has been the large decrease in manufacturing employment, due primarily to long-term downward trends among rich countries but also to a large trade deficit. Yet the overall decline in the role of manufacturing has actually been more acute for African Americans than it has been for white workers. (See Figure 2.)

Victory for Unions as Supreme Court, Scalia Gone, Ties 4-4 — The Supreme Court handed organized labor a major victory on Tuesday, deadlocking 4 to 4 in a case that had threatened to cripple the ability of public-sector unions to collect fees from workers who chose not to join and did not want to pay for the unions’ collective bargaining activities. It was the starkest illustration yet of how the sudden death of Justice Antonin Scalia last month has blocked the power of the court’s four remaining conservatives to move the law to the right. A ruling allowing workers to refuse to pay the fees would have been the culmination of a decades-long campaign by a group of prominent conservative foundations aimed at weakening unions that represent teachers and other public employees. Tuesday’s deadlock denied them that victory, but it set no precedent and left the door open for further challenges once the Supreme Court is back at full strength. When the case was argued in January, the court’s conservative majority seemed ready to say that forcing public workers to support unions they had declined to join violates the First Amendment. Justice Scalia’s questions were consistently hostile to the unions.His death changed the balance of power in this case, and most likely in many others. The clout of the court’s four-member liberal wing has increased significantly. Its members — Justices Ruth Bader Ginsburg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan — can create deadlocks, as they did Tuesday, and they can sometimes attract the vote of Justice Anthony M. Kennedy for a liberal result.

Deal reached to take California minimum wage to $15 an hour — California legislators and labor unions have reached a tentative agreement that will take the state’s minimum wage from $10 to $15 an hour, a state senator said, a move that would make for the largest statewide minimum in the nation by far. “This is not a done deal,” Sen. Mark Leno, D-San Francisco, told The Associated Press on Saturday. “Everyone’s been operating in good faith and we hope to get it through the Legislature.” Leno said if an agreement is finalized, it would go before the Legislature as part of his minimum-wage bill that stalled last year. If the Legislature approves a minimum-wage package, it would avoid taking the issue to the ballot. One union-backed initiative has already qualified for the ballot, and a second, competing measure is also trying to qualify. “This is an issue I’ve been working on for many years,” Leno said. “The governor and stakeholders have all been negotiating earnestly and in good faith for some time.” Leno did not confirm specifics of the agreement, but most proposals have the wage increasing about a dollar per year until it reaches $15 per hour. The Los Angeles Times, which first reported the deal, said the wage would rise to $10.50 in 2017, to $11 an hour in 2018, and one dollar per year to take it to $15 by 2022. Businesses with fewer than 25 employees would have an extra year to comply.

$15-an-Hour Minimum Wage in California? Plan Has Some Worried -  California is on the verge of making itself a guinea pig in a bold economics experiment.By moving toward a plan to raise the statewide minimum wage to $15 an hour by 2022, the state could raise living standards for millions of workers. But it could also increase unemployment among some of the very same economically marginal workers the wage increase is intended to help.Many economists, even some on the left, worry that a potential loss of jobs in a number of cities where wages are comparatively low could largely offset, and perhaps even more than offset, the boon of higher incomes at the bottom of the wage scale.“Just as the benefits of this policy are likely to be greater because it covers a greater share of the work force than for past minimum wage increases, the risk of these costs is also higher,” said Ben Zipperer, an expert on the minimum wage at the liberal Washington Center for Equitable Growth. “It’s very unclear how that’s going to stack up.”San Francisco and San Jose, both high-wage cities that have benefited from the tech boom, are likely to weather the increase without so much as a ripple. The negative consequences of the minimum wage increase in Los Angeles and San Diego — large cities where wages are lower — are likely to be more pronounced, though they could remain modest on balance.But in lower-wage, inland cities like Bakersfield and Fresno, the effects could play out in much less predictable ways. That’s because the rise of the minimum wage to $15 over the next six years would push the wage floor much closer to the expected pay for a worker in the middle of the wage scale, affecting a much higher proportion of employees and employers there than in high-wage cities.

New York Budget Deal With Higher Minimum Wage Is Reached - — Gov. Andrew M. Cuomo and state legislative leaders announced on Thursday that they had reached a budget agreement that would raise the minimum wage in New York City to $15 by the end of 2018, but initiate slower increases elsewhere, even in the city’s wealthy suburbs.For Mr. Cuomo, the wage agreement came with clear concessions, as some lawmakers outside the city won a softer phase-in period. Long Island and Westchester County will not reach a $15 wage for nearly six years; areas north of Westchester are assured only of reaching $12.50 by 2021.In announcing the $15 wage, New York became the second state to embrace that threshold; California lawmakers passed a similar measure only hours earlier on Thursday. The movement began in earnest in New York City in late 2012, when fast-food workers began the so-called Fight for $15, which became a nationwide effort to increase wages and support unions.The wage issue was one of the final obstacles to reaching a timely accord on the next state budget, estimated to be more than $150 billion, which mixes high-profile policy measures with nuts-and-bolts infrastructure spending and aid to schools.With the minimum wage deal and another hard-fought measure — one that would eventually provide employees across the state 12 weeks of paid time off to care for newborns or sick relatives and for families dealing with military deployments — the governor was able to claim victory on two signature issues.

Kansas Tried Tax Cuts. Its Neighbor Didn't. Guess Which Worked. - For the past few years, Kansas's Republican Governor Sam Brownback and his allies in the state's legislature have been a fiscal experiment involving big cuts in income taxes for individuals and businesses. The theory was that this "march to zero income taxes," as Brownback has called it, would spur entrepreneurship, economic growth and lots of job creation -- 25,000 new jobs in each of the next four years, Brownback pledged during his successful re-election campaign in 2014. There have been repeated budget shortfalls since Brownback first took office in January 2011, which have led to repeated proclamations in the national news media that the Kansas experiment has failed. In the sense that the tax cuts haven't paid for themselves, that's true. But the budget crises have helped Brownback push through the policies he favors -- he and the legislature have so far made up for the lost revenue with increased sales taxes and cutbacks in spending on education and other government functions.  Has this approach succeeded in stimulating Kansas's economy and creating jobs? To know that for sure you'd have to know what would have happened in the absence of Brownback's experiment, which is of course not possible. But there is a simple substitute -- just look at what's been happening in Nebraska. But by other measures -- median household income, per-capita income, percentage of the population living in urban areas, acreage under cultivation -- the two states are pretty similar. They're also both run by Republicans, although Nebraska's legislators are elected via a nonpartisan primary and runoff that seem to reward moderation in a way that Kansas's more conventional elections don't. While Nebraska has elected governors with Brownbackian opinions on taxes, the legislature has yet to approve a Kansas-scale tax experiment. Which makes it an imperfect but possibly useful scientific control.

In Twin Cities, How Many Stadiums Are Enough? - WSJ: The Twin Cities of Minneapolis and St. Paul have been an epicenter of the U.S. stadium-and-arena boom, rolling out five major sports facilities since 1990 that together cost more than $2 billion. Now, the neighboring cities are readying for a sixth: a 20,000-seat, $150 million Major League Soccer stadium to be built by 2018 in St. Paul about halfway between the two downtowns. The St. Paul City Council earlier this month approved $18 million in spending on infrastructure for the stadium, which is meant to spur neighboring real-estate development. The stadium, which is otherwise to be constructed with private dollars, also would be exempt from property taxes. This amount of public aid is low compared with the other nearby facilities—a new Minnesota Vikings football stadium, for instance, was aided with about $500 million of public dollars. But taken with the other facilities that have a combined seat count of nearly 200,000, this latest project illustrates how the Twin Cities are an acute example of the rapid increase in stadiums and arenas in U.S. cities. These developments come despite a growing chorus of warnings from economists who say the stadiums are almost always poor drivers of economic development. Even when these facilities do spur nearby investment, economists and critics say the cost to the public is typically far higher than with traditional economic-development programs.

Federal Judge in Puerto Rico Calls Walmart Tax Unlawful -  A federal judge in San Juan on Monday threw out a new tax that Puerto Rico had tried to impose on the American retailing giant Walmart, calling it unlawful.Walmart had argued that the new tax would confiscate more than 100 percent of its profit from operations in Puerto Rico, making it one of the most onerous taxes on earth.The judge, José Antonio Fusté of the United States District Court in Puerto Rico, said in his opinion on Monday that it gave him no pleasure to throw out the tax, considering the commonwealth’s dire financial condition. But he said it was unlawful and that Puerto Rico’s crisis was not an excuse “to take revenue that it’s not entitled to, to pay for essential services.”The new tax was more than triple the old rate, he said, “designed to capture Walmart Puerto Rico, the biggest fish in the pond.”If Walmart paid it on time, and waited to get a refund through the usual channels, it would most likely never see the money again, he added.

A new bill would force prepaid phone buyers to register themselves -- A bill proposed this week would require people to provide identification and officially register themselves when buying a prepaid phone. Representative Jackie Speier (D-CA), who introduced the bill, called the prepaid phone "loophole" an "egregious gap in our legal framework" that allows terrorists and criminals to prosper. The bill, Closing the Pre-Paid Mobile Device Security Gap Act of 2016, was only introduced on Wednesday and has yet to be approved by the House Judiciary Committee. It’s unclear whether it will gain more traction, but nonetheless, similar attempts to register prepaid buyers have proven controversial, as critics point out that regulations may penalize legitimate buyers. Senator Chuck Schumer (D-NY) introduced a similar bill six years ago that would have required identification to purchase one. As explained in a New York Times story at the time, terrorists and criminals aren’t the only ones who purchase the temporary devices. Journalists use them, too, primarily for confidential conversations with sources who prefer to remain unassociated with news organizations. Victims of abuse and people with lower incomes also often purchase the phones.

Winter in the Hamptons: food pantries, poverty and homelessness -- Maria is called forward to pick up a brown paper bag filled with essentials including pasta, eggs and cornflakes and is invited to choose between butternut squash or carrots as this week’s vegetables. Maria, who declined to provide her surname, is the 34th “client” so far today at East Hampton Food Pantry, a community initiative set up just streets away from some of the most expensive and exclusive real estate in the world. By the end of the day, the food pantry’s organisers expect more than 400 families to have followed Maria through the doors of 219 Accabonac Road to collect their weekly food parcel to help them get through the cold, dark Long Island winter. In the summertime the Hamptons, a collection of historic oceanfront towns and villages 100 miles from Manhattan, is a billionaires’ playground. But come Labor Day in early September when the likes of Sean “P Diddy” Combs, Jerry Seinfeld and Martha Stewart shut up their mansions and head back to Manhattan or Beverly Hills, the glitz gives way to the gritty reality of life for the mostly immigrant community who live out east all year.

Watch Detroit Neighborhoods Fall Into Ruin Through Google Street View Images --Google Street View’s trove of data and visuals has been used to collect images of streets that made history, of colorful glitches and surreal scenes of oblivious bystanders. For Alex Alsup, it’s a tool to track Detroit’s rapid and continuing devastation following the financial crisis. Alsup has spent thousands of hours exploring the city virtually. A selection of the images of foreclosed homes he's captured through Google and Bing's mapping services is currently on view at Prizer Gallery in Austin, Texas, and closes Saturday.  The chief product officer at Detroit-based property data company Loveland Technologies is quick to clarify that he’s not an artist. He instead described his show, “A Hurricane Without Water,” as archaeological, documenting the impact of foreclosure on properties over time. Alsup uses Google's Time Machine feature to look back several years, and returns to properties he saved in past years to compile records of properties year after year, mostly between 2009 and 2014. He started the ongoing project three years ago and publishes it on his blog, Goobing Detroit.  In the worst cases, you can see vacancy spreading through entire blocks in just a few years, blight taking over empty homes, and foliage growing over the blight.

Law enforcement investigators seek out private DNA databases -- Investigators are broadening their DNA searches beyond government databases and demanding genetic information from companies that do ancestry research for their customers. Two major companies that research family lineage for fees around $200 say that over the last two years, they have received law enforcement demands for genetic information stored in their DNA databases. and competitor 23andme report a total of five requests from law agencies for the genetic material of six individuals in their growing databases of hundreds of thousands. turned over one person’s data for an investigation into the murder and rape of an 18-year-old woman in Idaho Falls, Idaho. 23andme has received four other court orders but persuaded investigators to withdraw the requests. The companies say law enforcement demands for genetic information are rare. But privacy advocates and experts are concerned that genetic information turned over for medical, family history research or other highly personal reasons could be misused by investigators— and that the few known cases could be the start of a trend. “There will be more requests as time goes on and the technology evolves,” said New York University law professor Erin Murphy, author of “Inside The Cell: The Dark Side of Forensic DNA.”

Law enforcement took more stuff from people than burglars did last year -- Here's an interesting factoid about contemporary policing: In 2014, for the first time ever, law enforcement officers took more property from American citizens than burglars did. Martin Armstrong pointed this out at his blog, Armstrong Economics, last week. Officers can take cash and property from people without convicting or even charging them with a crime — yes, really! — through the highly controversial practice known as civil asset forfeiture. Last year, according to the Institute for Justice, the Treasury and Justice departments deposited more than $5 billion into their respective asset forfeiture funds. That same year, the FBI reports that burglary losses topped out at $3.5 billion. Armstrong claims that "the police are now taking more assets than the criminals," but this isn't exactly right: The FBI also tracks property losses from larceny and theft, in addition to plain ol' burglary. If you add up all the property stolen in 2014, from burglary, theft, motor vehicle theft and other means, you arrive at roughly $12.3 billion, according to the FBI. That's more than double the federal asset forfeiture haul.

Feds to Cops: Keep Robbing People  -- Via: Washington Post: The Justice Department has announced that it is resuming a controversial practice that allows local police departments to funnel a large portion of assets seized from citizens into their own coffers under federal law. The “Equitable Sharing Program” gives police the option of prosecuting some asset forfeiture cases under federal instead of state law, particularly in instances where local law enforcement officers have a relationship with federal authorities as part of a joint task force. Federal forfeiture policies are more permissive than many state policies, allowing police to keep up to 80 percent of assets they seize. … Asset forfeiture is a contentious practice that lets police seize and keep cash and property from people who are never convicted of wrongdoing — and in many cases, never charged. Studies have found that use of the practice has exploded in recent years, prompting concern that, in some cases, police are motivated more by profit and less by justice. … Asset forfeiture is fast growing — in 2014, for instance, federal authorities seized more than $5 billion in assets. That’s more than the value of assets lost in every single burglary that year.

Up to half of people killed by US police are disabled - Not only are the total numbers of police-involved deaths in the US appalling – 1,134 in 2015 alone – the final tally for the year highlighted once again the shockingly disproportionate number of African Americans affected, as was exposed by a Guardian investigation, The Counted. Young black men aged between 15 and 34 accounted for 15% of all deaths logged (five times higher than for their white counterparts), despite being just 2% of the population. There is another, much less well-documented feature of police brutality and violence: the prevalence of disabled people and, in particular, those with mental difficulties, who are victims. In an attempt to put the problem on the radar, the Massachusetts-based disability rights non-profit organisation the Ruderman Family Foundation has published an eye-opening paper in which it estimates that a third to half of all people killed by police in the US have a disability. In addition, according to the foundation, almost all well-known and widely reported cases of police violence involve a disabled person.The report, compiled by David M Perry, a professor of history at Dominican University in Illinois, and long-time disability rights activist Lawrence Carter-Long, makes use of available data (there are no official, comprehensive statistics collected on police-based violence and disability at local, state or federal level) and is a call to action for the media to shine a light on the problem. Perry and Carter-Long say it is shocking that the prevalence of disability is not being accurately, or commonly, reported. “Media coverage of police violence fails to recognise or report the disability element when Americans are injured or killed by law enforcement, resulting in their stories being segregated from the issue in the media,” they conclude.

The Deadly Consequences of Solitary With a Cellmate - Imagine living in a cell that's smaller than a parking space — with a homicidal roommate.  In all this discussion about the harmful effects of segregation, solitary is often described as the isolation of one person in a cell, ignoring the many who, like Bernard Simmons and David Sesson, are locked in a tiny room together for nearly 24 hours a day. While there are no national statistics on the number of people confined in double-cell “solitary,” at least 18 states double-up a portion of their restrictive housing, and over 80 percent of the 10,747 federal prisoners in solitary have a cellmate.  In many places, prisons have turned to double celling to cope with overcrowding. "If you can come up with a better way to do this, understanding the fact that we are 162 percent of capacity without double celling, I'm willing to listen to you," an Illinois Corrections Department spokesman told reporters and mental health advocates in 1994, when the state faced criticism for doubling up the mental health units at Menard. Illinois is under particular pressure as one of the most over-stuffed prison systems in the country. “We've done this utterly bizarre thing, which is to put two people in cells that were built for one and leave them both in there for 23 or more hours a day,” says Craig Haney, a psychologist who has studied solitary for more than 30 years. “The frustration and anger that’s generated by being in isolation is intensified by having to navigate around another person’s habits, trials, and tribulations.” “I’ve heard it described as a powder keg,”  “An accident waiting to happen.”

On pardons, Obama could go down as one of the most merciless presidents in history -- On April 21, 2014, with the announcement of Clemency Project 2014, then-Attorney General Eric H. Holder Jr. encouraged federal prisoners to seek relief, noting that, despite sentencing reforms Obama signed into law in 2010, there were “still too many people . . . sentenced under the old regime” who needed attention. Holder said the Justice Department was “committed to recommending as many qualified applicants as possible for reduced sentences.” Was the administration ever serious about Clemency 2014? The rules for commutation requests even reaching the overburdened pardons office under the initiative are inexcusably discouraging. The worst is that inmates must have served at least 10 years of their sentence. Other rules state they must not have “a significant criminal history” (whatever that means); they must be nonviolent, low-level offenders; and they must be serving a sentence harsher than they would have gotten if convicted of the same offense today. Those who fall “outside of this initiative,” according to the Justice Department, can still seek clemency under the old rules if their applications are “especially meritorious.” The results of this great, unprecedented effort? Obama has a clemency record comparable to the least merciful presidents in history. He has granted just 70 pardons, the lowest mark for any full-term president since John Adams, and 187 commutations of sentence. Meanwhile, 1,629 pardon petitions have been denied (more than five of the previous six presidents), as well as 8,123 requests for commutations (a new record). An additional 3,444 requests have been “closed without presidential action.”

One Third Of UK Children Spend Less Time Outdoors Than US Prison Inmates  -- Given the high rate of incarceration in the US, it’s important that Americans don’t take their freedom for granted because, well, because the government won’t hesitate to throw you in jail. Once there, UN guidelines only require that you get to breathe fresh air for one hour a day - the standard minimum guidelines call for "at least one hour of suitable exercise in open air daily." You can believe that inmates cherish that hour and you can imagine how shocked the residents of Indiana’s Wabash maximum security prison were to find out from researchers that one third of all children aged 5 to 12 in the UK play outdoors for less than 30 minutes each day, while a fifth of parents surveyed said their children don’t go outside at all. “Outdoor play isn’t happening,” the “Dirt Is Good” initiative found in a survey of 12,000 parents. “Almost a third of children play outside for 30 minutes or less a day and one in five don’t plan outside at all on an average day.” Watch below as inmates react to the study.   So what are kids in the UK doing instead? Why, staring at screens of course. "Children spend twice as much time on screens inside as they do playing outside," the same study found

Chicago Teachers Union sets plans for Friday walkout: In addition to early morning pickets at schools, the Chicago Teachers Union plans a full day of teach-ins and rallies at sites around the city during a one-day strike Friday that the union promises will shut down the schools, according to a preliminary schedule issued Monday. The union exhorted members to participate in the walkout with a bulletin listing several ongoing grievances with the district and a warning that "we know that (Chicago Public Schools CEO Forrest) Claypool is planning scores of school closings, furloughs and layoffs for next school year." The union offered no specifics on those charges, and a CPS spokeswoman said the allegations are "not true." The CTU has set rallies at Chicago State University, the University of Illinois at Chicago, City Hall and the Thompson Center. Workers were also expected to protest at a Southwest Side plant owned by Mondelez International, where workers are being laid off.

As Detroit schools went broke, principals allegedly took nearly $1 million in bribes and kickbacks - When Ronald Alexander appeared via video conference on the “The Ellen DeGeneres Show” last month, he was described as “the most amazing man.” Alexander, 60, was the principal of Charles L. Spain Elementary-Middle School, a Detroit public school that became the recipient of a $500,000 donation facilitated by the show.“Of all the people in the whole world, I am the happiest principal on Earth,” Alexander said into the camera with a wide grin.   His mood may have since changed, as Alexander was named on Tuesday as one of 12 current and former Detroit principals charged with taking bribes and kickbacks from a school supplies vendor and fabricating invoices from the city’s beleaguered public schools. The alleged scheme began in 2002 and continued until January 2015. “A case like this is a real punch in the gut for those who are trying to do the right thing,” Detroit’s U.S. Attorney Barbara McQuade said at a press conference. “Public corruption never comes at a good time.”

Campbell Brown: The New Leader of the Propaganda Arm of School Privatization - naked capitalism - Perhaps guided by the old adage that you have to spend money to make money, the champions of education “reform” have poured billions into the effort to privatize and profit from America’s schools. Those funds are used on multiple fronts: launching charter schools, underwriting the political campaigns of politicians, and of course, investing in media to propagate the free-market privatization vision. Among the most visible properties in this effort is the Seventy Four, the well-funded, power broker-backed education news website run by former journalist-turned-school privatization activist Campbell Brown. Launched last year, the site’s reported $4 million annual budget comes from a collective of school privatization’s big hitters: The Dick and Betsy DeVos Family Foundation, Bloomberg Philanthropies, Jonathan Sackler (of OxyContin producer Purdue Pharma) and the Walton Family Foundation. Philanthropy of this sort has an endgame—the privatization of America’s public schools—and media manipulation is an essential part of a winning strategy. Brown, leveraging her longstanding image as a truth-seeking newsperson in service of her new brand as an earnest education reformer, has been indispensable to this effort. As the head of the Seventy Four, under the guise of providing hard-hitting education news, she leads one of the key media efforts to push the anti-union, pro-privatization message of the charterization movement, all while keeping its billionaire backers out of the picture and off the front page.

Why Are Educators Learning How to Interrogate Their Students? - Specifically, teachers and school administrators would be taught an abbreviated version of the Reid Technique, which is used across the country by police officers, private-security personnel, insurance-fraud investigators, and other people for whom getting at the truth is part of the job. Schneider, who is a staff attorney at the Chicago Lawyers’ Committee for Civil Rights Under Law, was alarmed. She knew that some psychologists and jurists have characterized the technique as coercive and liable to produce false confessions—especially when used with juveniles, who are highly suggestible. When she expressed her concerns to Brian Schwartz, the I.P.A.’s general counsel, he said that the association had been offering Reid training for many years and found it both popular and benign. . Like the adult version of the Reid Technique, the school version involves three basic parts: an investigative component, in which you gather evidence; a behavioral analysis, in which you interview a suspect to determine whether he or she is lying; and a nine-step interrogation, a nonviolent but psychologically rigorous process that is designed, according to Reid’s workbook, “to obtain an admission of guilt.” . Buckley described to trainees how patterns of body language—including slumping, failing to look directly at the interviewer, offering “evasive” responses, and showing generally “guarded” behaviors—could supposedly reveal whether a suspect was lying. (Some of the cues were downright mythological—like, for instance, the idea that individuals look left when recalling the truth and right when trying to fabricate.) Several times during the session, Buckley showed videos of interrogations involving serious crimes, such as murder, theft, and rape. None of the videos portrayed young people being questioned for typical school misbehavior, nor did any of the Reid teaching materials refer to “students” or “kids.” They were always “suspects” or “subjects.”

Schools Are Slow to Learn That Sleep Deprivation Hits Teenagers Hardest -- As a pediatrician, I find that there are few topics that parents want to discuss more than sleep. Parents worry about their own sleep deprivation when babies arrive. Later, they worry about their children’s. It’s harder than you might think to determine how much sleep an adult actually requires. Modern technology has significantly altered how and when we might naturally sleep. Electricity allows us to be productive long after the sun has gone down. Coffee and other stimulants allow us to wake up more quickly. Measuring “natural” levels of sleep would require us to return to a simpler time.  As part of a German science television show, five men and women volunteered to return to Stone Age conditions for eight weeks. Counting the periods of awake time between going to sleep and waking up in the morning, they had been spending less than six hours asleep each night before the experiment, and without outside interference they slept about seven and a quarter hours a night. This might be the closest we’ll get to figuring out what a modern human body naturally requires.  Granted, many people probably aren’t getting that much.   Complicating things, not all people react to sleep deprivation in the same way. Some people just need less sleep, and that may be somewhat genetic. Many news reports that highlight the dangers from too little sleep are assuming that all adults need at least eight hours. There’s just little evidence that’s so. There’s one group where that may not be true, however. Younger people need more sleep than adults. The National Heart, Lung and Blood Institute recommends that newborn babies get 16 to 18 hours of sleep a day. It’s likely that many of them get that, because we let them.  The usual recommendation for preschool children is 11 to 12 hours, school-age children 10 hours and teenagers about 9 to 10 hours a night. It’s likely few teenagers are sleeping that much.

Audit shows UC admission standards relaxed for out-of-staters - SFGate: The University of California has been admitting thousands of students from out of state with lower grades and test scores than state residents as a way to raise cash, a state audit released Tuesday reveals. In the last three years, nearly 16,000 nonresident undergraduates — about 29 percent of those admitted — have won spots at the coveted public university with grade-point averages and scores below the median of admitted Californians, according to the 116-page audit. The report criticizes university practices it says undermine state residents’ access to UC in favor of nonresidents, who pay about three times the basic tuition and fees of in-state students: $38,108 versus $13,400. The state’s Master Plan for Higher Education says UC should admit only nonresidents who are at least as qualified as the “upper half of residents who are eligible for admission,” according to the report from State Auditor Elaine Howle.

Dropouts Need Not Apply: Silicon Valley Asks Mostly for Developers With Degrees -  There’s a long-lived myth that Silicon Valley and the technology industry are meritocracies where all that matters is the caliber of your code. But it turns out that tech companies are more likely than other employers to require college degrees when hiring software developers. Seventy-five percent of job ads for those roles at technology companies specify an educational requirement, compared with 58% of openings posted by the full universe of employers that are hiring software developers, according to Burning Glass Technologies, a labor-market data firm that analyzed 1.6 million ads for software-developer jobs nationwide. And in 95% of the tech-sector job ads that list a minimum credential, the employer calls for a bachelor’s degree or higher, versus 92% of the ads from all employers seeking developers. Matt Sigelman, Burning Glass’s chief executive, said he was struck by “the extent of the discord between, on the one side, the meritocratic mystique and the lore of the Bill Gateses and Mark Zuckerbergs”—both Harvard University dropouts—“and on the other side, the reality of so many of the best kinds of jobs being closed to those who don’t have a college degree.” Nationally, 68% of adults over age 25 don’t have bachelor’s degrees.

The rise of the ‘gentleman’s A’ and the GPA arms race - Catherine Rampell --The waters of Lake Wobegon have flooded U.S. college campuses. A’s — once reserved for recognizing excellence and distinction — are today the most commonly awarded grades in America.  That’s true at both Ivy League institutions and community colleges, at huge flagship publics and tiny liberal arts schools, and in English, ethnic studies and engineering departments alike. Across the country, wherever and whatever they study, mediocre students are increasingly likely to receive supposedly superlative grades.  Such is the takeaway of a massive new report on grade inflation from Stuart Rojstaczer, a former Duke University professor, using data he and Furman University professor Chris Healy collected. Analyzing 70 years of transcript records from more than 400 schools, the researchers found that the share of A grades has tripled, from just 15 percent of grades in 1940 to 45 percent in 2013. At private schools, A’s account for nearly a majority of grades awarded.These findings raise questions not only about whether the United States has been watering down its educational standards — and hampering the ability of students to compete in the global marketplace in the process. They also lend credence to the perception that campuses leave their students coddled, pampered and unchallenged, awarding them trophies just for showing up.

Higher Education Is Morally & Financially Bankrupt - A system that piles debt on students in exchange for a marginal or even zero-return on their investment is morally and financially bankrupt. Every once in a while you run across an insider's narrative of a corrupt, morally bankrupt sector that absolutely nails the sector's terminal rot. Here is that nails-it narrative for higher education: Pass, Fail: An inside look at the retail scam known as the modern university. Here are excerpts of the article, which was published in Canada but is equally applicable to higher education in the U.S.: A university degree, after all, is a credential crucial for economic success. At least, that’s what we’re told. But as with all such credentials—those sought for the ends they promise rather than the knowledge they represent—the trick is to get them cheaply, quickly, and with as little effort as possible. My students’ disaffection is the real face of this ambition. I teach mostly bored youth who find themselves doing something they neither value nor desire—and, in some cases, are simply not equipped for—in order to achieve an outcome they are repeatedly warned is essential to their survival. What a dreadful trap. One in particular matches perfectly with the type of change I’ve observed on my watch: the eradication of content from the classroom. All efforts to create the illusion of academic content are acceptable so long as they are entertaining, and successful participation requires no real effort and no real accountability.  Remove your professor hat for a moment and students will speak frankly. They will tell you that they don’t read because they don’t have to. They can get an A without ever opening a book.

Where is higher education economically vulnerable? -- Disruptive threats nearly always start with an attack on the large sources of profit. In the newspaper industry, the first real blow was not the replacement of the traditional newsroom as we initially feared: it was the erosion of classified revenue that paid for the newsroom by companies with weird names like eBay and Monster. In higher education, the real threat won’t be a frontal assault on core degree programs, but the erosion of the most profitable continuing education courses and graduate programs. Coding bootcamps aren’t likely to expand their focus to challenge the preeminence of the degree any time soon. But the explosion of non-accredited programs is beginning to threaten the MBA. They have proven that they can iterate quickly and deliver a more modern learning product at a fraction of the price. Higher education will never be replaced, but the most profitable courses will be attacked, creating revenue implications that have a ripple effect across institutions.That is from Frederick Singer, via Jeff Selingo.  Do note that Jeff’s new book There is Life After College is coming out April 12.

What Consequences? Judge Rules Student Loans Of Broke Lawyers Can Be Cancelled - Following SCOTUS' decision not to hear a case making it easier to get rid of student debt, andThe White House's push to ease student loan 'burdens', WSJ reports a federal judge ruled law-school graduates who file for bankruptcy protection can cancel the debt they racked up while studying for the bar exam. In an opinion filed Thursday, Judge Carla Craig of the U.S. Bankruptcy Court in Brooklyn, N.Y., said bar-exam loan debt is “a product of an arm’s-length agreement on commercial terms” and doesn’t fall into the category of student loans that stick with a borrower who files for bankruptcy. The decision, which is the most thorough recent ruling on the matter, contradicts the widely accepted notion that student loan-related debt can be canceled in bankruptcy only under rare cases of extreme financial hardship. In her 20-page ruling, Judge Craig said bar-study loans were akin to commercial or consumer loans and weren’t an “educational benefit,” like a scholarship or stipend, and thus could be erased in a bankruptcy case. The U.S. Supreme Court recently declined to hear a case that could have made it easier to get rid of student loan debt. The White House, however, said last year that it would examine whether it should be easier for student loans to be canceled by bankruptcy, opening the door for student debt made by private lenders to be treated on par with credit-card debt and mortgages.  “We’re starting to chip away at the absolute immunity of student loans from bankruptcy,”

Judge’s Ruling on Law School Grad’s Debt Could Signal ‘Seismic’ Shift in Loan Practices -- A judge's recent ruling that part of a law school graduate's loans can be canceled breaks new ground for other students who owe a mountain of debt. Lesley Campbell applied for a loan while she was studying for the bar as a student at Pace University Law School in 2009. She received a "bar loan" of $15,000 from Citibank, a bankruptcy court document states, and she made payments on the loan until June 2012. But in November 2014, after having failed the bar exam, she filed for Chapter 7 bankruptcyprotection. With nearly $300,000 in student loan debt, Campbell, of Brooklyn, New York, found an administrative job with a hotel management company that paid about $50,000, according to a bankruptcy document.Campbell wanted the loan to be canceled, or "discharged," when seeking bankruptcy relief, arguing that it wasn't an "educational benefit" under the U.S. bankruptcy code. Citibank moved to dismiss that claim, arguing that the loan was an "educational benefit" in the fact that the eligibility for the bar loan was dependent on the plaintiff being a law student. But Judge Carla Craig of U.S. Bankruptcy Court in Brooklyn wrote in her decision on Thursday, "The fact that [Citibank's] underwriting standards required [Campbell] to be a law student does not turn an arm's length consumer credit transaction into a 'benefit' within the meaning of [the bankruptcy code]," Craig wrote in her opinion.  "This opinion confirms what we have believed all along -- that these types of loans are dischargeable,” Campbell's lawyer, William Brewer III, of the Brewer Storefront, said in a statement. The Brewer Storefront is the community service affiliate of the law firm Brewer, Attorneys and Counselors.“We believe this is a seismic development. It flips the script for thousands of people who our client believes have fallen victim to predatory loan practices and been told they cannot discharge these loans," Brewer added.

PERS deficit climbs to $21 billion | -- The amount of unfunded liabilities carried by the Public Employees Retirement System has exceeded $21 billion, up from $18 billion last year. The deficit stems from high pension costs, poor returns on investments that fund state pensions, and a Oregon Supreme Court decision overturning legislative efforts to rein in pension costs. Public employers will be forced to consider budget cuts, layoffs or tax increases to pay for pension costs. The public employees' retirement fund — which holds more than $65 billion — lost 5 percent of its value between January 2015 and 2016. Pension investments in public equity, real estate and alternative energy have fallen markedly. In January, public equity lost 6.66 percent, real estate 1.17 percent and alternative energy 0.05 percent. Other investments have remained flat. The cost of the unfunded liabilities will be shouldered by public employers like state and local governments, school districts and emergency service departments. Those employers are expected to have at least 30 percent of payroll go towards paying down the unfunded liability, according to a January report from Matt Larrabee of Milliman, an actuarial firm that conducts PERS financial estimates.

“The Battle for VA Healthcare and Its Funding”: VA healthcare has its faults; but, it still is one of the more successful examples of publicly funded healthcare even while hampered by a lack of funding to provide more capacity in strategic places for new Iraq and Afghanistan veterans and aging Vietnam veterans like myself. Libertarian Pete Hegseth, a veteran of Afghanistan and Iraq and the CVA, both sponsored by the Koch Brothers, are hawking a dismantling of the VA hospitals in favor of higher cost and less result-oriented commercial healthcare and their own ideological interests. The history of the VA has always included struggles with ideological, political, and commercial (healthcare providers, pharma and hospital supply) interests. In the seventies, activists went as far as to stage scenes (Life Magazine picture depicting care for Vietnam veterans) to make the care look worst than what it was. For commercial interests, it is all about selling more services, healthcare procedures, and pharma as compared to the evidence based treatments received at the VA. For the Kochs, Libertarians, and Pete; it is all about a Randian ideology, an ideology which Ayn Rand could not live up to and forsook to accept Social Security and Medicare.The VSOs have bought into the Koch funded CVA push to do so in favor of commercial healthcare and giving veterans healthcare vouchers. Together they have orchestrated an attack on the VA by claiming 40 veterans in Phoenix , AZ had died while waiting for their appointments. I did not pick the claim of 40; but, I believe it is time to debunk it and challenge subsequent claims based upon the lack of integrity and truth in the original claim.

More to the Story on Killing the VHA: Ater I posted my article on the VA, it received a comment from Suzanne Gordon who writes on healthcare and has covered VA healthcare at her blog and also at American Prospect; Unfriendly Fire Fall 2015. Unfriendly Fire discusses the VHA coming under severe criticism from Libertarian ideologues and conservative right wing politicians even though the VHA offers far better care than what the commercial healthcare system offers. I would urge you Suzanne Gordon’s article on American Prospect. I also checked out Suzanne Gordon’s blog and her latest post. She was discussing the 15 member Commission on Care put in place after the made up Phoenix scandal claiming 40 veterans died while waiting for an appointment (never happened in the manner described or happened at all). It appears a gang of seven members of the commission have taken it upon themselves to meet in private away from the other 8 members and drew up a proposal to eliminate the VHA by 2035 rather than strengthen it. Besides meeting secretly and outside of the public-eye together which may be a violation of the Federal Sunshine Act, the commission gang of seven met with Congressmen Jeff Miller and Paul Ryan. Congressman Jeff Miller is the House Veterans’ Affairs Committee chairman and a staunch advocate of privatizing the Veterans Health Administration who has decided to interfere with the congressionally appointed Commission on Care not only by meeting privately with select members of the commission but also by writing a stern letter criticizing the one member of the Commission veterans can count on, Phillip Longman.

Who’s Aging More Rapidly Than U.S.? Parts of Asia, Europe - America’s population is aging rapidly, but not as fast some parts of Asia and Europe. That’s among the findings of a U.S. Census Bureau report released this week that stacks up U.S. demographic trends with the rest of the world. The number of Americans ages 65 and over is expected to reach 88 million by 2050, up from 48 million in 2015. That means that seniors will account for 22.1% of the U.S. populace, up from 14.9% today. Currently the U.S. ranks as the 48th oldest nation in the world out of 228 countries. Because pockets of Asia, Europe and even Latin America are growing longer in the tooth more quickly, the U.S. is projected to drop to a relatively youthful 85th place in the global age rankings by 2050. South Korea, Hong Kong and Taiwan are on pace to nudge out Germany, Italy and Greece for second, third and fourth place in the 2050 age rankings. Japan, long plagued by a graying citizenship, is expected to retain its current ranking as the world’s oldest country in 2050. And the world’s seniors aren’t kicking up their feet up like they used to. The Census report notes that labor-force participation among the older population continues to rise in many developed countries, while remaining highest in poor nations. More than 90% of seniors receive a pension in wealthier countries such as the U.S., Japan, Australia and Italy. In China, that coverage dips to less than one-third of the elderly, and in India, it’s about one-tenth.

CBO Misses Its Obamacare Projection by 24 Million People | The Weekly Standard: Three years ago, on the eve of Obamacare’s implementation, the Congressional Budget Office (CBO) projected that President Obama's centerpiece legislation would result in an average of 201 million people having private health insurance in any given month of 2016. Now that 2016 is here, the CBO says that just 177 million people, on average, will have private health insurance in any given month of this year—a shortfall of 24 million people. Indeed, based on the CBO's own numbers, it seems possible that Obamacare has actually reduced the number of people with private health insurance. In 2013, the CBO projected that, without Obamacare, 186 million people would be covered by private health insurance in 2016—160 million on employer-based plans, 26 million on individually purchased plans. The CBO now says that, with Obamacare, 177 million people will be covered by private health insurance in 2016—155 million on employer-based plans, 12 million on plans bought through Obamacare's government-run exchanges, and 9 million on other individually purchased plans (plus a rounding error of 1 million). In other words, it would appear that a net 9 million people have lost their private health plans, thanks to Obamacare—with a net 5 million people having lost employer-based plans and a net 4 million people having lost individually purchased plans.

Health Insurance Premiums Rising Faster Than Wages -- Health insurance premiums have increased faster than wages and inflation in recent years, rising an average of 28 percent from 2009 to 2014 despite the enactment of Obamacare, according to a report from Freedom Partners.  President Obama signed the Affordable Care Act into law on March 23, 2010, and Wednesday is the law’s sixth anniversary.  The Obama administration expressed concern in 2009 about skyrocketing health care premiums in a report entitled, “The Burden of Health Insurance Premium Increases on American Families.” They were concerned that premiums had increased by 5.5 percent from 2008 to 2009. However, from 2010 to 2011 in the first year after Obamacare was enacted, premiums increased by 9.4 percent.  “In 2009, when the [Executive Office of the President] issued its report, states had seen premiums increase on average by 30 percent between 2004 and 2009,” states the Freedom Partners report. “But since 2009, health insurance premiums have continued to grow faster than wages in nearly every state, averaging a 28 percent increase from 2009 to 2014, resulting in a greater amount of disposable income being consumed by rising premiums.” According to the report, while premiums increased by 28 percent from 2009 to 2014, wages increased by only 7.8 percent. From 2004 to 2009 when premiums increased by 30 percent, wages increased by only 12.2 percent. The data also finds that health care costs have exceeded the rate of inflation. “The average annual cost of a family’s employer-sponsored health insurance policy was $17,545 in 2015, which marks a 4.2 percent increase from the 2014 average of $16,834, while the inflation rate remained low at 0.1 percent,”

Newest Policyholders Under Health Law Are Sicker and Costlier to Insurers - — People newly insured under the Affordable Care Act were sicker, used more medical care and had higher medical costs than those who already had coverage, the Blue Cross and Blue Shield Association said Tuesday in a new study of its policyholders.Because insurers’ premiums have to cover their medical expenses, the new report helps explain why Blue Cross plans have sought, and insurance commissioners have approved, substantial rate increases in many states. Another round of rate review is about to begin, with insurers generally required to file rate requests for 2017 in the next two months.The findings are noteworthy because Blue Cross and Blue Shield plans operate across the country and have the largest share of the individual market in many states, giving them an unrivaled source of claims data.In its report, the Blue Cross and Blue Shield Association examined the use of medical services by people who enrolled in its plans before and after major provisions of the Affordable Care Act took effect in 2014.One of those provisions essentially required insurers to offer coverage to people who had previously been denied coverage because of their medical problems.  People newly enrolled in individual Blue Cross health plans in 2014 and 2015 were found to have higher rates of certain diseases and conditions, including high blood pressure, diabetes, depression, coronary artery disease, H.I.V. and hepatitis C, than people who already had coverage.Diabetes was nearly twice as common among newly enrolled consumers as among those previously enrolled, the report said. Hepatitis C was more than twice as common, and H.I.V. was more than three times as common, it said.

Healthcare Is About To Surpass Housing As The Biggest Source Of American "Growth" -- Following yesterday's breakdown of 2015 GDP growth components, there was little surprise that the biggest source of "growth" for the US economy in the past year was healthcare growing at an absolute dollar pace nearly double that the second highest category (recreational vehicles of all things, because in the eyes of the BEA the US has gone on unprecedented Winnebago spending spree). It was also no surprise that the biggest source of "growth" within healthcare was the tax known as the "Affordable Care Act",  Ironically, without the Obamacare tax, US growth in 2015 would have been as much as 0.5% lower, pushing GDP down from the upwardly revised 2.4% to 1.9% or lower. But while we knew that on the margin the biggest source of growth in the US economy is now a tax cleverly masked as "discretionary spending", how does healthcare stack up in absolute dollar terms.  It is here where we were genuinely surprised because what we found was disturbing. It has long been known that of the real $16.5 trillion in US GDP, some 70% is due to personal consumption and spending (68.8% to be precise), and that the single biggest component of US consumer spending has for decades been housing. After all there is a reason why the saying "American Dream" implies the purchase of a house (sadly this has been downgraded to renting in recent "New Normal years). And, in Q4 this was still the case: some $1.973 trillion of the total annualized spending (aka growth) came from outlays on housing and utilities.  What was troubling is that over the past 5 years there has been virtually no growth when it comes to spending on housing. What was even more troubling is that the second highest spending category, Health Care at $1.9 trillion, has been soaring in recent years, more than offsetting the housing weakness, and as the chart below shows, the US economy is within 2-3 quarters of the moment when outlays on healthcare (and Obamacare) will surpass spending on Housing.

Internists Unveil 7-Point Plan To Deal With High Drug Prices - It's not just patients who are getting tired of ever rising drug prices. Doctors are joining the chorus of frustration. The latest voice? The American College of Physicians, whose membership includes 143,000 internal medicine doctors. It published a position paper Monday calling for the government and industry to take steps to rein in spiraling costs. "This is consistent with our mission to put the patient first," Dr. Wayne Riley, ACP president, tell Shots. We've heard from our patients, and our patients are frustrated with dealing with this."The article, being published Tuesday in Annals of Internal Medicine, says that the U.S. is the only country in the 34-member Organization for Economic Cooperation and Development, which includes most advanced economies, that doesn't have any government regulation of drug prices.The ACP paper offered seven recommendations that would change that, and that the physician group says will help control U.S. drug prices. The recommendations include allowing Medicare to negotiate prices with drugmakers and re-importing drugs from countries like Canada, where they're often sold at a lower cost.The ACP also wants drugmakers to disclose the actual research and production costs of developing and manufacturing each drug, and to disclose the prices paid for drugs — including discounts and rebates — that take advantage of basic research funded by the government, such as the National Institutes of Health and the Department of Veterans Affairs."We particularly feel strongly about those drugs that came to market and made it through the R&D process with support of the NIH grants or VA grants, [that they] should be particularly compliant with more transparency,"

Texas healthcare company owner ordered nurses to overdose hospice patients: FBI -- The founder and owner of a hospice care company in Texas directed nurses to induce overdoses in several patients as a means of increasing their profits, KXAS-TV reported on Tuesday. According to an FBI affadavit, 34-year-old Brad Harris — an accountant with no health-related training — has ordered nurses working for him at Novus Health Care Services to “overdose hospice patients with palliative medications such as morphine to hasten death.” Records stated that Harris ordered one nurse to cause overdoses in three patients. The nurse resigned rather than follow the order, but it is unclear what happened to the patients. Another employee refused to follow Harris’ orders in late 2013 when directed via text message to “increasing [a] patient’s medication dosage to approximately four times the maximum allowed.” Harris founded the company in July 2012, and has been under investigation since October 2014 for allegedly recruiting patients “who did not qualify for services” in order to bill the government for services that were not medically necessary. He also allegedly ordered employees to fake the signatures of doctors employed by the company in order to decide which Novus home care patients would be moved into hospices. If a patient was determined to be using hospice care for “too long,” Harris also allegedly ordered nurses to “make [them] go bye-bye” via text message, and also asked executives to “find patients who would die within 24 hours.”

Employers balk at OSHA silica dust rule - The Occupational Safety and Health Administration's final silica rule will be expensive and difficult for employers to meet and ignores the benefits of respiratory devices in reducing silica dust exposure, according to employer representatives.The Occupational Exposure to Respirable Crystalline Silica rule will reduce the permissible exposure for crystalline silica to 50 micrograms per cubic meter of air, averaged over an eight-hour shift, from the current 100 micrograms per cubic meter of air standard for general industry, despite industry contention that the lower limit is unattainable. “There's definitely concern that there's not going to be a way to get to this limit, either technologically or economically…,” said Matthew Linton, of counsel at Holland & Hart L.L.P. in Denver. “Obviously, OSHA disagreed and moved the rule forward anyway.”  The rule aims to curtail silicosis — a preventable occupational lung disease caused by the inhalation of respirable crystalline silica dust that can progress to respiratory failure and death, according to the Centers for Disease Control and Prevention. The number of deaths from silicosis declined to 165 in 2004 from 1,065 in 1968, but about 2 million U.S. workers remain potentially exposed to respirable crystalline silica, according to a CDC study published in February 2015. Employers will also be required to use engineering controls such as wetting down work operations or using local exhaust ventilation to keep exposures below the limit and work practice controls such as wetting down dust before sweeping it before turning to respirators. This is another point of contention for some employer advocates, who say putting engineering controls first ignores improvements in respiratory technology that show these devices would be more effective in reducing silica dust exposure. However, respirators are not as protective as engineering controls and not always practical as they need to be fitted and refitted for each individual employee, according to OSHA.

A little-known condition accounts for one-third of US hospital deaths : When it comes to under-the-radar killers, sepsis is at or near the top of the list. It can begin quietly, often looking like the flu, pneumonia, or a urinary tract infection. And then it escalates, quickly erupting into widespread infection and inflammation that can cause organ failure and death if not treated fast enough. Sepsis accounts for one-third to one-half of all deaths that occur in US hospitals, or between 225,000 and 350,000 deaths a year. That puts it right behind heart disease and cancer as a leading cause of death among Americans. Yet sepsis barely gets mentioned in the press and hasn’t attracted a fraction of the research interest as heart disease and cancer. New research published Monday in JAMA is a welcome addition. Like other academic medical centers, Dartmouth-Hitchcock Medical Center treats patients with sepsis all the time. Sometimes it is detected in the emergency department, often among patients who have been transferred from other centers because they are going downhill fast. Sometimes it crops up in patients who were admitted to the medical center for something else, like kidney problems or an operation, but who picked up a bug that morphed into serious infection. It could be an adolescent or a 90-year-old with cancer receiving immunosuppressive therapies that make them more susceptible to a life-threatening infection such as sepsis. Because of the different streams of patients, we didn’t realize the full effect that sepsis was having on our patients. When we took a close look at it in 2014, we were very troubled to learn that nearly half of the patients who came to Dartmouth-Hitchcock with sepsis, or who developed sepsis in our hospital, died; the national average is between 35 percent and 60 percent.

A Victorian-era illness is suddenly spreading in Europe -  The stuff of Victorian nightmares is marching through the country once again: cases of scarlet fever have hit a 50-year high. fter barely 2,000 annual cases of the highly contagious illness in recent years, there were 17,586 in England and Wales in 2015. Particularly bad outbreaks have hit London, Yorkshire and the Midlands, and a “peak season” is expected over the next few weeks. Near Norfolk, school classrooms have been disinfected after outbreaks, which most commonly affect two- to eight-year-olds.The reason for its return is baffling scientists, but the fever has taken an interesting journey since the 19th century.“The scarlet fever that would have been around in the Victorian era is a completely different beast to what we see now,” says Dr Theresa Lamagni, Public Health England (PHE)’s head of streptococcal infection surveillance. “It was a very severe infection that led to a lot of childhood deaths, but over the course of the last century its virulence diminished hugely.”The theory is that a bacterial pathogen evolves to become weaker over time because it will not be passed on if it rapidly kills its host, and scarlet fever was diminishing in force before the advent of the modern antibiotics that treat it today. There have been no recorded fatalities during the current outbreak. There is no sign that the fever has developed an increased resistance to antibiotics, nor is it a virulent new strain.

Mind control: Scientists can now make people alter their prejudices and belief in God: For the first time, scientists have discovered that they can change the way people think about religion and politics by directing magnetic energy to their brains to temporarily shut off specific regions of the brain.Scientists from the University of York and the University of California, Los Angeles (UCLA) conducted an experiment using transcranial magnetic stimulation (TMS), a non-invasive, safe method of stimulating small areas of the brain that is used by doctors to treat severe depression, as well as to evaluate damage caused by injuries, strokes, multiple sclerosis, amyotrophic lateral sclerosis, movement disorders and motor neuron disease. The study analysed the brains of 38 UCLA undergraduates from a multitude of races who were divided into two groups. One group had enough magnetic energy directed at their brains to temporarily shut down the posterior medial frontal cortex, a part of the brain located near the surface and roughly a few inches up from the forehead that is associated with detecting problems and triggering responses that address them. The other group, meanwhile, received a much lower dose of magnetic energy that did not affect their brains in any way. The researchers discovered that the group which had the targeted brain region shut down reported 32.8% less belief in God, angels, or heaven, and were 28.5% more positive in their feelings toward an immigrant who criticised their country.Their research, entitled Neuromodulation of Group Prejudice and Religious Belief is published in the journal Social Cognitive and Affective Neuroscience.

Toxic Chocolate | As You Sow: If you have a sweet tooth, you may have read studies talking about the health benefits associated with eating moderate amounts of chocolate. But our research has found a potential health risk in popular chocolate products that’s been flying under the radar – some chocolate contains toxic metals like lead and cadmium. As You Sow has conducted independent laboratory testing of 50 chocolate products for lead and cadmium. We found that 35 of the chocolate products contain lead and/or cadmium. Many of those chocolates had levels of lead and/or cadmium above the safe harbor threshold of California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (Proposition 65). Based on these results, we have filed notices with 18 manufacturers, including Trader Joe’s, Hershey’s, Green and Black’s, Lindt, Whole Foods, Kroger, Godiva, See’s Candies, Mars, Theo Chocolate, Equal Exchange, Ghirardelli, Earth Circle Organics, and more, for failing to provide the legally required warning to consumers that the products contain cadmium or lead, or both. No level of lead is safe for children. Lead exposure has been a significant public health issue for decades. Lead is linked to a variety of neurological impairments, including learning disabilities, seizures, and a lower IQ. Developing fetuses and children are especially vulnerable to lead exposure because their brains are in critical growth and development stages.

Red Meat, It's What's for Dinner Again - Beef is making a comeback. After decades of diners shunning steaks and burgers for healthier protein options such as chicken and turkey, Americans will eat an estimated 54.3 pounds of the red meat this year -- the first increase since 2006 and almost half a pound more per person than in 2015, according to data from the U.S. Department of Agriculture. Cheaper prices are spurring discounts and new menu items at restaurant chains, including Chili’s and Wendy’s Co. Protein-centric diets such as the Paleolithic, or Paleo, and Autoimmune Protocol that eliminate grains and sugar also are fueling the shift. “Certainly there’s been a big push towards eating more meat and more meat proteins,” . Increased beef production also is contributing to the rise, he noted. “Suddenly there is this extra supply of meat,” Kalo said. “You’re going to have to somehow consume all of it.” At the start of 2014, U.S. cattle supplies were the lowest in more than six decades after years of drought in the South and Southwest. The shortage sent beef prices surging to records. Since then, ranchers have been able to raise more cattle, and the latest USDA numbers show herds at a five-year high. That’s helping to drive prices down. In February, a pound of uncooked ground beef retailed for $4.38, about 7 percent below a year ago, according to data from the Bureau of Labor Statistics.

Buyer Beware: You Might Be Eating Food From Cans Lined With Toxic BPA --  Modern canned foods have a chemical-based lining that is effective in reducing canned food being tainted with botulism. That’s good. But what those canned food makers use to make those linings is often not disclosed, and it may be toxic to our health. One chemical has been especially problematic in food products. It’s called Bisphenol A (BPA).  You may have heard of BPA. Around four or five years ago the Food and Drug Administration (FDA) banned the chemical from being used in baby bottles and sippy cups. The BPA can migrate from can food linings into the food itself, where people then consume it and get exposed. The FDA cited strong evidence that BPA can effect hormone activity in people, and exposure has been linked to developmental problems in children, diabetes, breast and prostate cancer, erectile dysfunction and much more. As a result, the Safer Chemicals, Healthy Families coalition has put BPA on its list of Hazardous 100+ chemicals. So let’s just say it’s something you should avoid.  And here’s the rub. The new report tested almost 200 food cans from around the U.S., various types of food, retailers, and manufacturers that are household names like Campbell’s and Del Monte. We found BPA is common. It’s everywhere. Two-thirds of cans we tested had it. And it’s often not disclosed.

Estrogen, antibiotics persisted in dairy farm waste after advanced treatment, study finds -- When University at Buffalo chemists began studying waste disposal at a dairy farm in New York State, they thought that the farm's advanced system for processing manure would help remove estrogens and antibiotics from the excrement. Instead, the scientists found that the chemicals largely persisted in the treated materials, which are typically reused as fertilizer and animal bedding on the farm. The waste management process -- an advanced anaerobic digestion system -- also converted a less harmful form of estrogen in the manure into a form that may pose a greater ecological threat. The study underscores how far waste treatment techniques have fallen behind the times. Hormones and antibiotics, if not removed from waste, can migrate into the environment and threaten wildlife. Estrogens, for example, can enter rivers and lakes, causing male fish to develop female traits -- a phenomenon that can harm reproduction. Rogue antibiotics pose a different kind of challenge, encouraging the spread of antibiotic resistance, in which disease-causing bacteria stop responding to drugs. Even waste treatment systems that are considered to be state-of-the-art often fail to account for chemicals used routinely in modern society.  "One of the messages of our work is that even anaerobic digestion, an advanced treatment, doesn't totally remove these chemicals which may pose a danger to the environment. We need to start looking closely at additional treatment techniques to identify better practices."

USDA Deregulates Two Lines of Genetically Engineered Corn From Monsanto, Syngenta - The U.S. Department of Agriculture (USDA) said last week it will allow farmers to plant two new strains of genetically modified (GMO) corn, one created by Monsanto and the other by Syngenta, without government oversight. The new strains are tolerant of the weed killers dicamba and glufosinate.  The decision is likely to lead to ever-greater use of these and other pesticides to grow genetically engineered crops, giving consumers yet another reason to want food products containing GMO ingredients to be labeled accordingly.Like earlier GMO crops that were modified to be herbicide-tolerant, the new GMO corn is designed to survive being blanketed with toxic chemicals that kill weeds and other plant life on the field.  Reuters reported that Monsanto created the new corn strain in response to growing competition facing its signature Roundup herbicide from generic alternatives to glyphosate, Roundup’s key ingredient. But perhaps more notably, Monsanto wants to diversify its herbicide portfolio because more and more weeds have evolved into so-called superweeds that can withstand glyphosate.This news is the latest illustration of the chemical treadmill created by genetically modified crops. Once one herbicide stops working, manufacturers come up with a new set of chemicals.We don’t always know the health effects of the increased use of these herbicides, especially in combination with other environmental contaminants, but we do know that the massive expansion of GMO crops has led to an explosion in herbicide use, specifically glyphosate, by U.S. farms.

Another nail from the Monsanto RoundUp coffin: Glyphosate reduces vital symbiotic tree root fungi by 87% -- Abstract: Glyphosate is the most widely used herbicide in the world, but its effects on non-target organisms, such as arbuscular mycorrhizal fungi (AMF), are unclear. No studies have been found that made reference to effects of glyphosate on AMF spore viability despite its importance as a source of propagules for the perpetuation and spread of AMF in the system. The objective of this study was to evaluate the effect of glyphosate application on AMF spore viability, and their ability to colonize roots. Soil samples were collected from a grassland area located in the Flooding Pampa region (Argentina). We evaluated three herbicide rates: 0, 0.26 and 1× recommended field rate, 10 and 30 days after application. Part of the soil from each tray was used to estimate the spore viability, and the remainder was used as substrate for growing Lolium multiflorum Lam. One month after sowing, total root colonization and percentage of arbuscules and vesicles were determined. The spore viability in herbicide untreated soils was between 5.8- and 7.7-fold higher than in treated soils. This reduction was detected even when the lower rate was applied. Root colonization was significantly lower in plants grown in glyphosate treated soil than in untreated ones. A decrease in arbuscular colonization (but not in vesicles) was found in plants grown in soils treated with the highest herbicide rate. That would indicate that symbiosis functionality was affected, given that arbuscules are the main site for host–fungus nutrient exchange. The results indicate that soil residence time of glyphosate and/or its degradation products was enough to reduce AMF spore viability and their ability to colonize roots. This decrease in propagules viability may affect plant diversity, taking into account the different degrees of mycorrhizal dependency between plant species that may coexist in grassland communities.

Groups Sue FDA Over Approval of Genetically Engineered Salmon -- A broad coalition of organizations sued the U.S. Food and Drug Administration (FDA) today for approving the first-ever genetically engineered (GE) food animal, an Atlantic salmon engineered to grow quickly. The man-made salmon was created by AquaBounty Technologies, Inc. with DNA from three fish: Atlantic salmon, Pacific king salmon and Arctic ocean eelpout. This marks the first time any government in the world has approved a GE animal for commercial sale and consumption. “This case is about protecting our fisheries and ocean ecosystems from the foreseeable harms of the first-ever GE fish, harms FDA refused to even consider, let alone prevent. But it’s also about the future of our food: FDA should not, and cannot, responsibly regulate this GE animal, nor any future GE animals, by treating them as drugs under a 1938 law.” In approving the GE salmon, FDA determined it would not require labeling of the GE fish to let consumers know what they are buying, which led Congress to call for labeling in the 2016 omnibus spending bill. FDA’s approval also ignored comments from nearly 2 million people opposed to the approval because the agency failed to analyze and prevent the risks to wild salmon and the environment, as well as fishing communities, including the risk that GE salmon could escape and threaten endangered wild salmon stocks. “It’s clear that the market has rejected GE salmon despite FDA’s reckless approval,” “Major retailers including Costco, Safeway and Kroger won’t sell it and polls show the vast majority of people don’t want to eat it. Yet under this approval it won’t be labeled, violating our fundamental right to know what we are feeding our families.”

Cuba’s sustainable agriculture at risk in U.S. thaw -- President Obama’s trip to Cuba this week accelerated the warming of U.S.-Cuban relations. Many people in both countries believe that normalizing relations will spur investment that can help Cuba develop its economy and improve life for its citizens. But in agriculture, U.S. investment could cause harm instead. For the past 35 years I have studied agroecology in most countries in Central and South America. Agroecology is an approach to farming that developed in the late 1970s in Latin America as a reaction against the top-down, technology-intensive and environmentally destructive strategy that characterizes modern industrial agriculture. It encourages local production by small-scale farmers, using sustainable strategies and combining Western knowledge with traditional expertise. Cuba took this approach out of necessity when its economic partner, the Soviet bloc, dissolved in the early 1990s. As a result, Cuban farming has become a leading example of ecological agriculture. But if relations with U.S. agribusiness companies are not managed carefully, Cuba could revert to an industrial approach that relies on mechanization, transgenic crops and agrochemicals, rolling back the revolutionary gains that its campesinos have achieved.

Global food production threatens to overwhelm efforts to combat climate change --Each year our terrestrial biosphere absorbs about a quarter of all the carbon dioxide emissions that humans produce. This a very good thing; it helps to moderate the warming produced by human activities such as burning fossil fuels and cutting down forests. But in a paper published in Nature today, we show that emissions from other human activities, particularly food production, are overwhelming this cooling effect.  Apart from CO₂, there are two other main greenhouse gases that contribute to global warming, methane (CH₄) and nitrous oxide (N₂O). In fact, they are both more potent greenhouse gases than CO₂. The global warming potential of methane and nitrous oxide is 28 and 265 times greater than that of CO₂, respectively.The human emissions of these gases are largely associated with food production. Methane is produced by ruminants (livestock), rice cultivation, landfills and manure, among others.Other human-induced emissions of methane come from changes to land use and the effects of climate change on wetlands, which are major producers of global methane. Nitrous oxide emissions are associated with excessive use of fertilisers and burning plant and animal waste. To understand how much excess nitrogen we are adding to our crops, consider that only 17 of 100 units of nitrogen applied to the crop system ends up in the food we eat.

These Farmers Will Get Paid To Cut Their Greenhouse Gas Emissions - - When Mark Isbell, a third-generation rice farmer in central Arkansas, tallies up his profits for this year, he’ll count a few extra dollars from a unique source: the greenhouse gases that his 3,200-acre farm didn’t emit.  Isbell is part of a small group of farmers participating in a new project piloted by the Environmental Defense Fund (EDF), in conjunction with the USDA, and approved by the American Carbon Registry. The program encourages rice farmers in California and the Mid-South to adopt a series of greenhouse-gas mitigating practices on their fields by allowing them to cash in on the carbon emissions that they offset using California’s carbon market.“We’ve always focused on efficiency and trying to take advantage of new opportunities. Though there is a small amount of risk, we felt like the potential reward outweighed that. We thought that we might as well go on the adventure and give it a try.” Isbell is participating in the project along with 20 other farmers who collectively cultivate 22,000 acres of rice across the United States. According to Robert Parkhurst, director of agricultural greenhouse gas markets for the Environmental Defense Fund, that participation is equal to just under one percent of all rice farmers in the United States — and while that seem like a small slice of agriculture’s addition to greenhouse gas-fueled global warming, Parkhurst sees it as a meaningful first step towards getting farmers to adopt practices that could help stave off the worst of climate change.“Having just shy of one percent of all rice growers in the U.S. say I’m interested in participating is huge,” he said. “We’re looking at doing this with fertilizer across the U.S. We’re looking at doing this with range land. At some point we might be able to do this with enteric fermentation. This is the thin edge of the wedge, if you will.”

"Thirsty Land" Documentary Trailer - Big Picture Agriculture - This film, by producer and director Conrad Weaver, is about the drought in the American West and Southwest, and how it affects agricultural production and the communities in drought regions. Film production partners are the Daugherty Water for Food Institute and the Institute of Agriculture and Natural Resources at the University of Nebraska.   To visit the film website, go here.

What Will Farming Look Like When There's No Water Left? - Jesus Ramos is a first-generation Mexican immigrant and farm owner who, after coming to America to work as a field hand, grew his business into a 140-acre orange farm. But today, Jesus and his family’s way of life is under threat. California is experiencing an unprecedented drought and the exceptionally dry conditions are particularly alarming for farming communities like Terra Bella, where Jesus lives and works. In the short film, Life After Water, an interactive documentary by MediaStorm and Verse, the filmmakers utilize stunning, yet worrisome arial drone footage of Jesus’s farm to show the drought’s effect on Terra Bella’s farming community. The film grapples with the inevitable question that will arise if climate change doesn’t stop: what will we do when the water ends?

U.S. water rights at stake as Saudis buy up land in California: Saudi Arabia's largest dairy company will soon not be able to grow alfalfa to feed its 170,000 cattle in its own parched country, so it is buying up more of California's drought-stricken land to grow alfalfa. In January this year, the Almarai Company of Saudi Arabia bought $32 million worth of land in California's Palo Verde Valley, doubling its holdings there, and an additional 10,000 acres of farmland in Vicksburg, Arizona for $48 million, reported Digital Journal. The two areas were carefully chosen by the Saudi company. Palo Verde farmers live in an area that is allowed "first dibs" on water from the Colorado River. And in Blythe, Arizona, there are fewer well-pumping restrictions than other parts of the state. The 14,000-acre purchase allows Saudi Arabia to take advantage of farm-friendly U.S. water laws. But Fox News says the acquisition has also revived a debate over whether regulations and a number of questionable laws favor western farmers too much.  Alfalfa is a low-profit but water-intensive crop. So the question of reduced water restrictions for those growing this crop are thought of as being ludicrous when people in cities are being asked to reduce their water consumption by taking fewer showers and not washing their cars, reports the Associated Press

Peru Tries to Adapt to Dangerous Levels of UV Radiation Brought on by Climate Change: Cusco's proximity to the equator and its altitude—some 11,150 feet above sea level—mean that come summer in the Southern Hemisphere, sunlight doesn’t have to travel far to reach Cusco. It also doesn’t encounter much interference along the way—not a good state of affairs for those who live here. The amount of ultraviolet radiation that makes it to Earth is limited by atmospheric ozone, a molecule made up of three oxygen atoms bound together. At higher altitudes, there are fewer ozone molecules between the Earth and the sun, making UV readings normally elevated in mountainous regions near the equator. In 2006, climate researchers found Cusco and the surrounding area to have the highest UV readings in the world. But now, as climate scientists say the planet is reaching critical temperatures worldwide, Peruvian meteorologists are recording record levels of UV radiation throughout the country, while meteorologists in Chile, Argentina and Bolivia are recording similarly increased levels in regions close to Peru. The effects of prolonged exposure to ultraviolet radiation can be calamitous. The risk of developing skin cancer doubles after only a few acute exposures, say dermatological researchers, while repeated exposure can cause cataracts and permanent eye damage. The planet is affected too: Increased UV can limit photosynthesis in crops and raise the temperature of the uppermost layer of the ocean, killing off the phytoplankton that are a key source of nutrition in the ocean's food chain.

England’s growing season now almost a month longer, says Met Office - Carbon Brief: The growing season for crops and plants in England over the past decade is around a month longer than it was during 1961-90, say scientists at the UK’s Met Office. Their analysis also shows the number of days where temperatures dipped low enough for a frost has decreased in recent years. The changes are a “double-edged sword” for UK crops, another scientist tells Carbon Brief, and shows that farmers need to be able to adapt their choices of crop to the UK’s changing climate.  The growing season is the part of the year when conditions are warm enough for plants and crops to grow. The season starts when average daily temperatures for five days in a row rise above 5C. It ends once five consecutive days fall back below 5C. For the UK, the growing season is longer in the warmer parts of the country, such as southwest England, and shorter in the chillier areas of northern England and Scotland. In their analysis, the Met Office uses data from the Central England Temperature (CET) record, which covers a roughly triangular area between the three points of London, Bristol and Lancashire. With temperature data back to 1659, the CET is the longest instrumental record in the world. In the late 19th century, central England’s growing season was around 244 days. About a century later, between 1961 and 1990, this had increased by about a week, the Met Office says.

Zika’s coming and we aren’t ready. --If you’re worried about Zika’s arrival in the United States—and you should be—Laurie Garrett has a must-read article at Foreign Policy on the fecklessness of national political leaders and the appalling lack of preparation in the cities that will be hardest hit. [W]hat Congress fails to recognize is that most aspects of public health, especially insect control, have long been the responsibilities of states, which, in turn, typically throw the onus down the line to the county or municipal levels. In the absence of federal support, localities are typically hard-pressed to maintain serious mosquito-control programs and year-to-year budgets, allowing loss of civil service expertise over time. At local levels, mosquito control tends to lose financial support and personnel when no crisis is perceived, and city or county governments then respond in haste with poorly trained personnel or outsourced contractors when infestation becomes politically significant. In the absence of federal backing and ongoing funded strategic approaches, local insect abatement is typically reactive and may be executed by workers pulled from entirely different departments in city or county governments.  It’s an age-old problem: our federal system diffuses power to manage disease outbreaks to state and local officials who aren’t up to the task. For one example among many, Michael Willrich’s masterful book Pox documents how poorly equipped localities were to deal with smallpox flare-ups in the late 19th and early 20th centuries—and how the untimely but inevitable federal response led to the first major expansion of federal power over public health.

Almost half the world cooking as if it were the stone age, WHO warns -- The good news is that more people have mosquito nets, and better access to clean water and toilets. The bad news, says Dr Maria Neira, head of public health and the environment for the World Health Organisation (WHO), is that populations have grown fast and little progress has been made in the past 10 years to prevent illness in developing countries. “Yes, we are spending more on treating TB, malaria and diarrhoea than we were 10 years ago. But we are not spending anything like enough on building good sanitation and water systems. Only 3% of our health spending goes to stop people becoming sick; 97% is spent when people are sick.” The global disease figures, released last week in a major WHO report, are stark, says Neira. The environment now contributes to more than 100 of the most dangerous diseases and kills 12.6 million people a year – nearly one in four of all deaths. One in five cancers are linked to environmental causes, as are one in four strokes. The number of people dying from poisonous air in burgeoning cities is rising fast.Most of these environmental diseases are entirely preventable, according to Neira. “We have failed in the last 10 years to help developing countries avoid making mistakes in cities; we have failed to help them avoid congestion and air pollution, and we have failed dramatically to increase the number of people using clean cooking stoves,” she says. The report, conducted once a decade to show broad health trends, identifies a significant shift from deaths caused by infectious, parasitic and nutritional diseases to non-communicable diseases (NCDs) including strokes, cancers and heart illness, which are linked to sedentary lifestyles, cities and pollution.

Mexico City orders all cars off the road one day a week to tackle air pollution --  Authorities in Mexico City have temporarily ordered all cars to remain idle one day a week in response to this notoriously smoggy capital’s worst air-quality crisis in over a decade. Until now vehicles have been exempt from the Mexican capital’s “no circulation” rules if owners obtain a holographic sticker from a smog-check centre certifying them as lower-emission.  But the Environmental Commission of the Megalopolis, a cross-government agency comprising the capital and surrounding suburbs that together are home to more than 20 million people, said via Twitter that all cars must now comply, even if they have the exemption sticker. Vehicles will also be forced to remain idle one Saturday a month. The measure will begin on Tuesday and run until 30 June, around the time that summer rains typically arrive and improve the region’s air quality significantly. Officials have been meeting to consider anti-pollution measures since a Phase 1 emergency due to high ozone levels – the first since 2005 – was declared two weeks ago, when warm temperatures and still air left pollution trapped in Mexico City’s volcano-ringed valley. At the time, government officials and environmental activists pinned at least some of the blame on a supreme court decision last year that overturned a rule barring all cars over eight years old from the streets one day a week. The ruling is said to have put an extra 1.4m vehicles back on the roads each day.

Schools Nationwide Still Grapple With Lead in Water - — Anxious parents may wonder how a major school system like Newark’s could overlook lead in the drinking water of 30 schools and 17,000 students. The answer: It was easy. They had to look only a few miles away, at the century-old classrooms of the schools here, across the Hackensack River.  The Jersey City Public Schools district discovered lead contamination in eight schools’ drinking fountains in 2006, and in more schools in 2008, 2010 and 2012. But not until 2013 did officials finally chart a comprehensive attack on lead, which by then had struck all but six schools. The problem is persistent and widespread. Baltimore’s public schools switched entirely to bottled water in 2007 because ripping out the lead plumbing would have been impractical. Sebring, Ohio, found elevated lead levels in August after workers had stopped adding an anti-corrosion chemical to the water supply. The Los Angeles Unified School District allotted $19.8 million in September to retrofit or remove its 48,000 drinking fountains to erase a small but tenacious lead threat. Ithaca, N.Y., schools switched temporarily to bottled water in January after water tests found elevated lead levels at two schools. Congress could easily have cracked down on lead in schools. In fact, it once did. The 1988 Lead Contamination Control Act required schools to scrap lead-lined water coolers, test drinking water and remedy any contamination they found. But a federal appeals court struck down part of the law affecting schools in 1996. And while some states have devised their own lead-testing rules, federal lawmakers have yet to revisit the issue.

Why didn't Flint treat its water? An answer, at last: Back in 2014, Flint water treatment workers expected they'd add corrosion control to the city's drinking water -- chemicals that would that would have prevented a public health crisis -- after the city switched its water supply. But the Michigan Department of Environmental Quality said they didn't have to. Up to this point, it's been hard to understand why the state didn't require Flint to use corrosion control, chemicals that stop lead from leaching into the city's water supply. And the state's rationale, that it misunderstood federal guidelines, has mystified water treatment experts interviewed by the Free Press. It also drew scorn from the Flint Water Advisory Task Force, appointed by Gov. Rick Snyder himself to investigate the crisis -- the task force called MDEQ's interpretation of the rule "egregious" and "lax," saying it bypassed important and obvious questions about water safety. D But testimony at a legislative hearing this week from the city's utilities chief may help explain why: When Flint began to pump drinking water from the Flint River, the city's water treatment plant wasn't capable of adding corrosion control treatment, not without equipment upgrades the broke city couldn't afford. In fact, Flint didn't start to install the required equipment until November 2015, when MDEQ signed off on a October permit application for a temporary phosphate feed system while a permanent feed was under construction, according to state records. That's the same month Snyder finally acknowledged that there was a problem in Flint, that the abundant evidence amassed by independent researchers was accurate, and that the city's drinking water was not safe. 

Toxic Pollution Is Still Seeping Into The Anacostia River - For over 140 years the Anacostia River that traverses Prince George’s County in Maryland into Washington, D.C. has been the dumping ground for industry and residents alike. While the industry disposed of toxic wastes, people dumped trash in obnoxious proportions and with that, the Anacostia turned into one of the most polluted rivers in the country.  “Twenty-seven years ago we were pulling refrigerators, tires, cars,”, “people were dumping a lot of stuff.”  Now, “the river is much better than it was, but we still have a long ways to go.”  Indeed, the Anacostia River remains an imperiled watershed that suffers not just from trash but also from ongoing toxic pollution, according to a new report. The report was commissioned by the District Department of Energy and Environment and is part of the Anacostia River Sediment Project that aims to clean the river of its toxic past. The report unveiled earlier this month confirmed the existence of polynuclear aromatic hydrocarbons, or PAHs, and PCBs, chemicals that have been banned for decades as they can cause cancer. Pesticides, lead, and mercury were found, too.   Even now, about two billion gallons of untreated sewage and stormwater go into the river each year. That includes oil, fertilizers, pesticides, and trash. And yet the report notes ongoing toxic pollution that officials found surprising since many of the companies have changed how they operate or have closed altogether. “Something is happening basically as we speak,” Wesley Rosenfeld, assistant general counsel at the DOEE, told the Bay Journal last week. “We can’t clean up the river without eliminating an ongoing source of contamination,” he said, explaining that high levels of contaminants in some of these areas can’t be legacy toxic chemicals.

Water Treatment Plant Hacked, Chemical Mix Changed for Tap Supplies: Wow! They don’t say where this supposedly happened. Via: Register: Hackers infiltrated a water utility’s control system and changed the levels of chemicals being used to treat tap water, we’re told. The cyber-attack is documented in this month’s IT security breach report (available here, registration required) from Verizon Security Solutions. The utility in question is referred to using a pseudonym, Kemuri Water Company, and its location is not revealed. A “hacktivist” group with ties to Syria compromised Kemuri Water Company’s computers after exploiting unpatched web vulnerabilities in its internet-facing customer payment portal, it is reported. The hack – which involved SQL injection and phishing – exposed KWC’s ageing AS/400-based operational control system because login credentials for the AS/400 were stored on the front-end web server. This system, which was connected to the internet, managed programmable logic controllers (PLCs) that regulated valves and ducts that controlled the flow of water and chemicals used to treat it through the system. Many critical IT and operational technology functions ran on a single AS400 system, a team of computer forensic experts from Verizon subsequently concluded. … The same hack also resulted in the exposure of personal information of the utility’s 2.5 million customers. There’s no evidence that this has been monetised or used to commit fraud. Nonetheless, the whole incident highlights the weaknesses in securing critical infrastructure systems, which often rely on ageing or hopelessly insecure setups.

'High risk' of severe water stresses in Asia by 2050: Study: Some 1 billion people in Asia could be without water by 2050, according to new research. A group of researchers at the Massachusetts Institute of Technology says there is a "high risk of severe water stress" across large patches of Asia, home to a big chunk of the world's population. The primary driver of this water stress will not necessarily be climate change, according to the study published Wednesday in the peer-reviewed journal PLoS One. "We find that water needs related to socioeconomic changes, which are currently small, are likely to increase considerably in the future, often overshadowing the effect of climate change on levels of water stress," the researchers wrote in their study. Without mitigating the effects of industrialization and population growth, an additional 1 billion people across Asia could face critical shortages of water by 2050, the study said. The team focused on densely populated river basin regions in China, India and Southeast Asia. The region they examined is, in whole, home to roughly half of the world's population, two of the world's largest (and still growing) economies, and several smaller nations at various levels of development and population growth. Different needs will drive stresses in different regions, according to the study. Industrial demand for water will likely dominate in China, with lesser needs in India and Vietnam. India, on the other hand will see household use rise, as its population grows.

13 striking photos that show how polluted China's water has become If you woke up tomorrow and suddenly discovered that your local river had turned blood redand that an awful, caustic smell had permeated your air, you would be alarmed, right? For residents of Wenzhou, China, and millions like them in China's rapidly industrializing and growing cities and towns, this has become a reality.  In April 2015, China issued a water pollution and prevention action plan, which outlined how China would improve its water quality by 2020. The plan has proved to be more difficult than the country anticipated, and it is having a hard time stopping the pollution. The following photos show instances of water pollution around China dating from 2006 to the present.

China's forests recovering at the expense of other nations, study says: - After taking a beating from decades of logging, China's forests have begun to regenerate, but the problem of deforestation may have shifted to other nations exporting wood to the world's most populous country, researchers said on Friday. Between 2000 and 2010, about 1.2 percent of China's territory - an area larger than Portugal - experienced a significant net gain in tree cover. Instead of cutting down its own trees to make products for exports, China has become one of the world's leading timber importers, potentially increasing deforestation overseas, the study said. "It is encouraging that China's forests have been recovering in the midst of its daunting environmental challenges," . Protecting forests reduces global warming as trees suck climate-changing carbon dioxide gas out of the atmosphere. Healthy forests also protect water and soil resources, so their fate in China, a nation of 1.3 billion people has global ramifications. Based on studying NASA images and official data, researchers concluded that a government programme to regenerate forests by banning logging in some areas and cracking down on illegal timber harvesting is working.  Researchers cited Madagascar, Vietnam and Indonesia as countries that are felling forests to fulfill Chinese demand, potentially increasing climate change and hurting biodiversity in the process.

Fish kill in Florida's Indian River Lagoon: 'Heartbreaking images' - Florida may be the fishing capital of the world, but you'd never know it from the latest scenes around the state's Indian River Lagoon. Usually idyllic beaches, waterways and estuaries near the massive, biodiverse ecosystem along central Florida's Atlantic coast are littered with scores of dead, rotting fish; an estimated hundreds of thousands of them are floating belly up in brackish, polluted water as far as the eye can see. "The heartbreaking images can be seen for miles," said Mike Conner, who has been fishing the area since the 1970s. "All up and down the coast, it's the same story, and it could get worse before it gets better." But the devastation isn't merely what is visible on the surface; it runs far deeper. El Nino has soaked Florida recently, even during its usual "dry season."  In January, parts of central Florida received triple the amount of rain they normally do for the month. All that rainwater eventually made its way into estuaries via urbanized neighborhoods, picking up fertilizer and other pollutants along the way. But that's not all. Temperatures were warmer than usual during the winter, allowing a toxic algae bloom and brown tide to deplete the water of oxygen.  "Our oysters are dead, seagrasses are dead," said Conner, the fisherman. "It (will be) hard to recover. You never fully recover."

Car Engine Cover, Fishing Net and Plastic Bucket Found in Stomachs of Dead Sperm Whales -- Large quantities of marine debris were found in the stomachs of sperm whales that washed up dead in Germany’s North Sea coast earlier this year. The whales first surfaced in January and February near the coastal town of Tönning in the German state of Schleswig-Holstein. After officials ordered a necropsy of the bodies, post-mortem results were announced in a presentation at the Multimar Wattforum Centre on March 23. Four of the 13 whales had large amounts of plastic waste in their stomachs, and some of the garbage included a 13-meter-long fishing net, a 70-centimeter-long plastic car engine cover and the remains of a plastic bucket, according to a press release from the Schleswig-Holstein Wadden Sea National Park. “These findings show us the effects of our plastic society: Animals inadvertently take in plastic and other plastic waste and suffer, and at worst, starve with full stomachs,” environment minister Robert Habeck said in a statement (via Google Translate). “This reminds us that we step up the fight against waste in the sea,” he said. The whales were said to be all young bulls between the ages of 10 to 15 and weighed between 12 to 18 tons. Before surfacing in the shallow waters of the Wadden Sea in the North Sea, scientists suspected that the last time the whales had anything to eat besides plastic trash was in the Norwegian Sea.  Ursula Siebert from the Hanover Veterinary College told MailOnline she does not believe the whales died from consuming marine debris. Instead, she said that heavy storms in the north-eastern Atlantic pushed squid—the sperm whales’ main source of food—into the North Sea. She said the whales followed the squid into shallow waters before finally beaching on the shoreline. As the Whale and Dolphin Conservation (WDC) explained, without support from the water, the sheer weight of the whales crushed their lungs and other organs, leading to death.

While Japan Kills Whales For ‘Research,’ Norway Kills Whales For A Dying Market -- Norway has killed more whales than any other nation over the past four years, and some of that meat has become animal feed for the Norwegian fur industry, according to new documents unveiled by two environmental organizations. Revelations from the Environmental Investigation Agency (EIA) and the Animal Welfare Institute (AWI) come as Norway opened up its whaling season Friday, and a week after Japan reported killing more than 300 minke whales — including pregnant females — for what it labeled as research. Now, groups are once again calling for an end to whaling — though this time the attention is placed on Norway, which along with Iceland and Japan, ignores a 30-year-old international moratorium on whale hunting. “We’ve been really concerned about the fact that whaling continues, and [that] in cahoots with Iceland, [Norway has] been exporting whales to Japan,” Jennifer Lonsdale, director of the Environmental Investigation Agency (EIA), told ThinkProgress. “Why would a wealthy country like Norway insist on carrying on whaling?” The groups also say that in 2014 more than 113 tons of whale meat — the equivalent to about 75 minke whales — was used by Rogaland Pelsdyrfôrlaget, the largest manufacturer of animal feed for the Norwegian fur industry.“Whaling is inherently cruel and has no place in a civilized society,” said Susan Millward, executive director of AWI, in a statement. “Killing these sentient and magnificent animals to feed suffering animals on fur farms underscores why the world opposes whaling, and clearly demonstrates that Norwegians have no legitimate need for whale meat.”

Great Barrier Reef coral bleaching at 95 per cent in northern section, aerial survey reveals - ABC News (Australian Broadcasting Corporation): An aerial survey of the northern Great Barrier Reef has shown that 95 per cent of the reefs are now severely bleached — far worse than previously thought.Professor Terry Hughes, a coral reef expert based at James Cook University in Townsville who led the survey team, said the situation is now critical. "This will change the Great Barrier Reef forever," Professor Hughes told 7.30. "We're seeing huge levels of bleaching in the northern thousand-kilometre stretch of the Great Barrier Reef." Of the 520 reefs he surveyed, only four showed no evidence of bleaching. From Cairns to the Torres Strait, the once colourful ribbons of reef are a ghostly white. "It's too early to tell precisely how many of the bleached coral will die, but judging from the extreme level even the most robust corals are snow white, I'd expect to see about half of those corals die in the coming month or so," Professor Hughes said. This is the third global coral bleaching since 1998, and scientists have found no evidence of these disasters before the late 20th century.

A Nightmare Is Unfolding in the Great Barrier Reef -  This week, marine biologists dropped some horribly depressing news: the Great Barrier Reef is dying. The world’s largest reef is in the midst of a widespread coral bleaching event, and scientists aren’t sure whether it will fully recover. Over the past few days, Terry Hughes of James Cook University has led aerial surveys of more than 500 reefs from Cairns to Papa New Guinea, including the most pristine sections of the Great Barrier Reef. Everywhere Hughes traveled, he was met with a nightmarish scene—the ghostly white remains of a once vibrant ecosystem. All told, Hughes estimates that 95 percent of the northern Great Barrier Reef is “severely bleached,” marking the worst such event on record. “Almost without exception, every reef we flew across showed consistently high levels of bleaching, from the reef slope right up onto the top of the reef,” Hughes said in a statement. “This has been the saddest research trip of my life.” Coral reefs are extremely temperature-sensitive, and when the water gets a bit too toasty, they expel their symbiotic algae, called zooxanthellae. When this happens, the coral loses both its vibrant color and its ability to feed itself. Bleaching leaves reefs more susceptible to disease and starvation. Coral bleaching events used to be infrequent and geographically restricted, but recently, they’ve become much more common, widespread, and devastating. The first global bleaching event occurred during the 1997-1998 El Niño and killed a whopping 18 percent of corals across the planet. Since 2014, we’ve been witness to a souped-up repeat of that event. Corals are bleaching everywhere, because the planet has been too damn hot for too many months on end. In the fall, the National Oceanic Atmospheric Administration (NOAA) predicted that the current global bleaching epidemic would impact nearly 40 percent of all reefs. In February, NOAA added that this year’s monster El Niño was exacerbating the die-off which might not end until 2017.

Ocean temps predict U.S. heat waves 50 days out, study finds | UCAR - University Corporation for Atmospheric Research: -- The formation of a distinct pattern of sea surface temperatures in the middle of the North Pacific Ocean can predict an increased chance of summertime heat waves in the eastern half of the United States up to 50 days in advance, according to a new study led by a scientist at the National Center for Atmospheric Research (NCAR). The pattern is a contrast of warmer-than-average water butting up against cooler-than-average seas. When it appears, the odds that extreme heat will strike during a particular week—or even on a particular day—can more than triple, depending on how well-formed the pattern is. The research is being published in the journal Nature Geoscience. "Summertime heat waves are among the deadliest weather events, and they can have big impacts on farming, energy use, and other critical aspects of society," said Karen McKinnon, a postdoctoral researcher at NCAR and the lead author of the study. "If we can give city planners and farmers a heads up that extreme heat is on the way, we might be able to avoid some of the worst consequences."

2015 Global Insured Losses Lowest Since 2009 Despite El Niño Effects -- One of the strongest El Niño periods on record and a positive phase of the North Atlantic Oscillation were the climate drivers in 2015 that led to an exceptional season of Pacific tropical storms and severe windstorms and flooding in Europe, according to a report published by Guy Carpenter & Co.  Nevertheless, 2015 was a quiet year in terms of global insured losses, which totaled around $30.5 billion, said the report titled “Global Catastrophe Review – 2015.” Insured losses for 2015 were below the 10-year and 5-year moving averages of around $49.7 billion and $62.6 billion, respectively. Last year also marked the lowest total insured catastrophe losses since 2009 and well below the $126 billion seen in 2011, Carpenter added. The most destructive and deadliest catastrophic event of 2015 came in the form of the powerful magnitude 7.8 earthquake that struck Nepal in April. This event saw a tragic loss of life around 9,000 with millions more affected, including 500,000 people rendered homeless. Then in September a magnitude 8.3 earthquake struck near Illapel, Chile, causing estimated insured losses ranging from $600 million to $900 million. Characterized by warm waters in the tropical east Pacific, the strong El Niño seen in 2015 was associated with record-setting tropical cyclone activity in the North Pacific basin, but relatively quiet activity in the North Atlantic, the report said. Heavy Pacific typhoon activity affected mainland China, Japan, the Philippines and Taiwan, while Mexico saw landfall of Hurricane Patricia, the strongest hurricane observed in the Western Hemisphere. In total, the 2015 tropical season produced 27 major hurricanes, surpassing the previous record of 21 major hurricanes seen in 1992.

Arctic sea ice reaches new record low mark for wintertime: (AP) — The growth of Arctic sea ice this winter peaked at the lowest maximum level on record, thanks to extraordinarily warm temperatures, federal scientists said Monday. The National Snow and Ice Data Center says ice covered a maximum of 5.607 million square miles of the Arctic Ocean in 2016. That's 5,000 square miles less than the old record set in 2015 — a difference slightly smaller than the state of Connecticut. It's also some 431,000 miles less than the 30-year average. That difference is the size of Texas and California combined. Records go back to 1979 when satellites started measuring sea ice, which forms when Arctic Ocean water freezes. This year's ice didn't break the record by much, but it's "an exclamation point" on a longer-term trend, said NASA scientist Walt Meier, who helped calculate the data. The sub-par showing doesn't necessarily mean that the minimum extent this summer will also break a record, scientists said. The summer minimum is more important for affecting Earth's climate and weather. Data center scientist Julienne Stroeve says winter temperatures over the North Pole were 16 degrees warmer than normal, while other parts of the Arctic ran 4 to 11 degrees warmer than normal. Data center chief Mark Serreze said in a press release, "I have never seen such a warm, crazy winter in the Arctic."

Arctic Sea Ice Hits Yet Another Record Low -- Sea ice in the Arctic hit its lowest annual maximum on record, beating the record set just last year. “I’ve never seen such a warm, crazy winter in the Arctic,” said National Snow and Ice Data Center director Mark Serreze. Arctic sea ice this year was 1.12 million square kilometers below the 1981-2010 average, and 13,000 square kilometers below last year’s record low. Most of the Arctic experienced above-average temperatures all winter, with temperatures occasionally reaching more than 20°F above average. National Snow and Ice Data Center said that these unusually warm temperatures “no doubt” played a role in the record low ice extent. Watch this short animation that shows the Arctic sea ice freeze cycle from the last summertime minimum extent to March 24, when it reached its wintertime maximum extent: at 5.607 million square miles, it is the lowest maximum extent in the satellite record: And watch this time lapse of the relative age of Arctic sea ice from week to week since 1990. The oldest ice (9 or more years old) is white. Seasonal ice is darkest blue. Old ice drifts out of the Arctic through the Fram Strait (east of Greenland), but in recent years, it has also been melting as it drifts into the southernmost waters of the Beaufort Sea (north of western Canada and Alaska). This video was produced by the team, based on data provided by Mark Tschudi, University of Colorado-Boulder:

If Global Warming Is Real … Why Is Iceland So Cold?  -   On Twitter the other day, climatologist Michael Mann mentioned a denier trying to debunk global warming by saying that Iceland was having a record cold wave. Mind you, in general this is trivial to debunk. There are two words in the phrase “global warming,” and one of them is global. Averaged over the entire planet, temperatures are going up. But there will always be some places, over some period of time, which will get colder. Even get record cold snaps! But that area near Iceland is special. The map above shows global temperature anomalies for 2015, deviations from the average (where the average is calculated over the baseline of 1951–1980). As you can see, most of the Earth was much warmer than average, but there’s a cold blob off Iceland and Greenland. It turns out this blob is not just some random fluctuation. In fact, counterintuitively, global warming predicts this cold spot! Peter Sinclair, who makes very well thought-out and simple climate change videos, made an excellent one last year explaining this pretty clearly: In a nutshell, there’s a flow of water in the Atlantic Ocean that brings cold water down from the polar region, and warm water to the poles. It’s called the Atlantic Meridional Overturning Circulation, or AMOC, but you can think of it as a conveyor belt of heat. It depends on a lot of factors, but it turns out one very strong influence is how salty the water is. Fresh water is less dense than salt water and floats on top of it. This is where global warming kicks in. As ice melts off Greenland, a lot of cold fresh water gets dumped into the north Atlantic—hundreds of billions of tons per year. This floats on the surface, acting like a lid on the AMOC. The warmer water gets blocked, and this slows down the conveyor. That area near Iceland stays cold.

Antarctica at Risk of Runaway Melting, Scientists Discover - The world’s greatest reservoir of ice is verging on a breakdown that could push seas to heights not experienced since prehistoric times, drowning dense coastal neighborhoods during the decades ahead, new computer models have shown. A pair of researchers developed the models to help them understand high sea levels during previous eras of warmer temperatures. Then they ran simulations using those models and found that rising levels of greenhouse gases could trigger runaway Antarctic melting that alone could push sea levels up by more than three feet by century’s end. The same models showed that Antarctica’s ice sheet would remain largely intact if the most ambitious goals of last year’s Paris agreement on climate change are achieved. The new findings were published Wednesday in the journal Nature, helping to fill yawning gaps in earlier projections of sea level rise. The models were produced by a collaboration between two scientists that began in the 1990s. In those models, rising air temperatures in Antarctica caused meltwater to seep into cracks in floating shelves of ice, disintegrating them and exposing sheer cliffs that collapsed under their own weight into the Southern Ocean. Similar effects of warming are already being observed in Greenland and in some parts of Antarctica, as greenhouse gas pollution from fossil fuels, farming and deforestation warms the air. Last year was the hottest on record, easily surpassing a record set one year earlier. The ice sheets are also being melted from beneath by warming ocean temperatures.

Climate Model Predicts West Antarctic Ice Sheet Could Melt Rapidly -  For half a century, climate scientists have seen the West Antarctic ice sheet, a remnant of the last ice age, as a sword of Damocles hanging over human civilization.The great ice sheet, larger than Mexico, is thought to be potentially vulnerable to disintegration from a relatively small amount of global warming, and capable of raising the sea level by 12 feet or more should it break up. But researchers long assumed the worst effects would take hundreds — if not thousands — of years to occur.Now, new research suggests the disaster scenario could play out much sooner.Continued high emissions of heat-trapping gases could launch a disintegration of the ice sheet within decades, according to a study published Wednesday, heaving enough water into the ocean to raise the sea level as much as three feet by the end of this century.With ice melting in other regions, too, the total rise of the sea could reach five or six feet by 2100, the researchers found. That is roughly twice the increase reported as a plausible worst-case scenario by a United Nations panel just three years ago, and so high it would likely provoke a profound crisis within the lifetimes of children being born today.The situation would grow far worse beyond 2100, the researchers found, with the rise of the sea exceeding a pace of a foot per decade by the middle of the 22nd century. Scientists had documented such rates of increase in the geologic past, when far larger ice sheets were collapsing, but most of them had long assumed it would be impossible to reach rates so extreme with the smaller ice sheets of today.

Sea-level rise could nearly double over earlier estimates in next 100 years - Sea-level rise could nearly double over earlier estimates in: A new study from climate scientists Robert DeConto at the University of Massachusetts Amherst and David Pollard at Pennsylvania State University suggests that the most recent estimates by the Intergovernmental Panel on Climate Change for future sea-level rise over the next 100 years could be too low by almost a factor of two. Details appear in the current issue of Nature. DeConto says, " "This could spell disaster for many low-lying cities. For example, Boston could see more than 1.5 meters [about 5 feet] of sea-level rise in the next 100 years. But the good news is that an aggressive reduction in emissions will limit the risk of major Antarctic ice sheet retreat." With mechanisms that were previously known but never incorporated in a model like this before, added to their ice-sheet model to consider the effects of surface melt water on the break-up of ice shelves and the collapse of vertical ice cliffs, the authors find that Antarctica has the potential to contribute greater than 1 meter (39 inches) of sea-level rise by the year 2100, and greater than 15 meters (49 feet) by 2500 if atmospheric emissions continue unabated. In this worst case scenario, atmospheric warming (rather than ocean warming) will soon become the dominant driver of ice loss. The revised estimate for sea-level rise comes from including new processes in the 3-dimensional ice sheet model, and testing them against past episodes of high sea-levels and ice retreat. The researchers find that "ocean-driven melt is an important driver of Antarctic ice shelf retreat where warm water is in contact with shelves, but in high greenhouse-gas emissions scenarios, atmospheric warming soon overtakes the ocean as the dominant driver of Antarctic ice loss." Further, they find that if substantial amounts of ice are lost, the long thermal memory of the ocean that will inhibit the ice sheet's recovery for thousands of years after greenhouse-gas emissions are curtailed.

Climate Model Predicts Melting of West Antarctic Ice Sheet Could Double Sea Level Rise -- It is no longer a question of “if” the unthinkable happens, but a question of “when.” And the “when” could happen sooner than you think. For decades climate scientists have been worried about what happens if the vast West Antarctic ice sheet melts. The melting of the ice-sheet, which is greater than the size of Mexico, has always been seen as somewhat of a doomsday scenario as it has to the potential to rise sea level by several meters. This is due to the fact that much of the ice-sheet sits on the ground, rather than floats.  Scientists have known about the threat for decades. As the respected British environmental journalist, Paul Brown, wrote 20 years ago in his book Global Warming—Can Civilization Survive?: If the West Antarctic Ice sheet melted “it could add between 4 and 7 m (13-23 feet) to sea level rise … such figures appear to create the potential for a series of large-scale catastrophes.” Maybe because the thought is so unthinkable, it has been easy to dismiss. The deniers and climate skeptics have long responded that this kind of speculation was scaremongering. The other source of comfort is that even in their worst nightmare scenarios, scientists thought that this would happen over a period of hundreds, if not thousands, of years. But not any more. Scientists now believe that that the vast ice sheet is melting much more quickly than before, in part due to rising air temperatures as well as rising sea-temperatures. Yesterday a paper, published in the prestigious journal Nature predicted that “Antarctica has the potential to contribute more than a metre of sea-level rise by 2100.” Added to melting ice in other regions, this means that sea level rise could be some five to six feet higher by the end of this century.

Will We Adapt to Even Faster Coastal Sea Level Rise? - Matt Kahn - It is front page news in the NY Times that coastal areas are likely to face even faster sea level rise by the year 2100. So, we have been given over 50 years notice that we must get ready for a serious threat.  I suggest that capitalism can figure out how to adapt to this threat. We see the punch coming and we have strong incentives to protect ourselves. No doom and gloom here. Instead, watch spatial general equilibrium play out as areas will compete for economic activity. "Higher ground" will be identified and we will rebuild there.  Our urban capital stock is durable but not infinitely lived.  The New York Times should read my paper.

Life is about to get much worse -- Climate change is hard for people to understand or take seriously because its FUTURE impacts will be so vast in scale and intensity. It would be easier for people to “believe in”face if its signs were more local and present (one reason I suggested rebranding it “local warming” years ago).  Sadly, it seems that we’re about the arrive in that moment of vast intensity a lot quicker than previously forecast.  Last week, James Hansen (one of the first scientists to bring CC to public attention) and many co-authors published an article (link in this summary) explaining how previous estimates of glacial melting in Antartica and Greenland need to be updated to consider positive feedback effects that are hastening the process. These effects are due to the slowing of ocean circulation that will simulataneously mean warmer seas near the Antarctic ice shelves (helping those glaciers slide into the water more quickly) as well as colder seas near Northern Europe (as the “conveyor” of warm water from the Caribbean shuts down).  The upshot of their estimates (which combine data from a past era that had similar GHG concentrations to today’s except that today’s have accumulated far faster) is that temperatures and storms will be getting much worse in the next 10-20 years (if not now), while sea levels will rise by at least 2m (6 feet) and as much as 6-7m (20 feet) by 2100 — far higher than current IPCC restimates of 1m. These results are far more pessimistic than anything the IPCC has put out for three reasons. First, the IPCC operates by consensus, meaning that the most conservative estimates are used. Second, IPCC data and models are in “uncharted territory,” so it is not easy to decide if natural systems are going to retard or reinforce man-made trends. Finally, the law of averages means that hundreds of co-authors will tend to agree on a business as usual, linear path of change, rather than the new normal, exponential path that Hansen et al. predict.

We had all better hope these scientists are wrong about the planet’s future - An influential group of scientists led by James Hansen, the former NASA scientist often credited with having drawn the first major attention to climate change in 1988 congressional testimony, has published a dire climate study that suggests the impact of global warming will be quicker and more catastrophic than generally envisioned. The research invokes collapsing ice sheets, violent megastorms and even the hurling of boulders by giant waves in its quest to suggest that even 2 degrees Celsius of global warming above pre-industrial levels would be far too much. Hansen has called it the most important work he has ever done. The sweeping paper, 52 pages in length and with 19 authors, draws on evidence from ancient climate change or “paleo-climatology,” as well as climate experiments using computer models and some modern observations. Calling it a “paper” really isn’t quite right — it’s actually a synthesis of a wide range of old, and new, evidence. “I think almost everybody who’s really familiar with both paleo and modern is now very concerned that we are approaching, if we have not passed, the points at which we have locked in really big changes for young people and future generations,” Hansen said in an interview. The research, appearing Tuesday in the open-access journal Atmospheric Chemistry and Physics, has had a long and controversial path to life, having first appeared as a “discussion paper” in the same journal, subject to live, online peer review — a novel but increasingly influential form of scientific publishing. Hansen first told the news media about the research last summer, before this process was completed, leading to criticism from some journalists and fellow scientists that he might be jumping the gun.

Carbon dioxide stored underground can find multiple ways to escape  - When carbon dioxide is stored underground in a process known as geological sequestration, it can find multiple escape pathways due to chemical reactions between carbon dioxide, water, rocks and cement from abandoned wells, according to Penn State researchers. The researchers investigated the properties of porous rocks into which carbon dioxide is injected. These rocks, known as host rocks, function like containers for the carbon dioxide. The team looked at two abundant host rocks, limestone and sandstone, which have different chemical properties. "We were interested in examining these rocks because they are widely found underground, but there have been concerns that carbon dioxide may escape once it's injected underground," said Li Li, associate professor of petroleum and natural gas engineering. "Even if it doesn't escape to the Earth's surface, there are concerns that it may leak into groundwater drinking aquifers." In addition to encountering host rocks, carbon dioxide stored underground may also contact and dissolve into saltwater deposits. When this happens, the carbon dioxide increases the acidity of the saltwater. The high-acidity saltwater-carbon dioxide mixture can dissolve certain types of rocks, such as limestone, as well as cement casings on abandoned oil and gas wells. "If this plume of carbon dioxide-saturated brine reaches an abandoned well, it will react with the cement," said Zuleima Karpyn, associate professor of petroleum and natural gas engineering and Quentin E. and Louise L. Wood Faculty Fellow in Petroleum and Natural Gas Engineering. "This may open up cracks in the cement depending on the conditions, which would increase the likelihood of carbon dioxide escaping. We were trying to assess what would happen in the process if the host rock itself were to react with the carbon dioxide-saltwater mixture."

A Wake-Up Call on Climate Change and Clean Energy -- A new study from the Institute for New Economic Thinking at the Oxford Martin School and the Smith School for Enterprise and Environment, University of Oxford, shows that we are uncomfortably close to the point where the world’s energy system commits the planet to exceeding 2°C.   In the paper, to be published in the peer-reviewed journal Applied Energy, the authors calculate the Two degree capital stock – the global stock of electricity infrastructure from which future emissions have a 50% probability of staying within 2°C of warming. The researchers estimate that the world will reach Two degree capital stock next year, in 2017.  The researchers found that based on current trends, no new emitting electricity infrastructure can be built after 2017 for this target to be met, unless other electricity infrastructure is retired early or retrofitted with carbon capture technologies.  “Investors putting money into new carbon-emitting infrastructure need to ask hard questions about how long those assets will operate for, and assess the risk of future shut-downs and write-offs.”   The team recommend that given the rapid declines in cost of zero-carbon technologies and strong evidence that as those technologies deploy at scale their costs further decline, the least risky and most economically prudent course of action is to shift all new energy investment to zero carbon as rapidly as possible.  If this doesn’t happen, argue the researchers, the implications are stark. If the 2°C target is to be taken seriously, then current and future assets will have to be written off before the end of their economically useful life (become stranded assets) or we will have to rely on large scale investments down the line, in carbon capture and storage technologies that are as yet unproven and expensive.

The $2.5 Billion U.S. Power Line That No State Can Stop - A $2.5-billion transmission line carrying wind power to the U.S. Southeast is coming -- whether state regulators there like it or not. On Friday, the U.S. Energy Department used a decade-old statute to clear Clean Line Energy Partners LLC’s 705-mile (1,134-kilometer) power line for construction over any objections from the states involved. The Energy Department’s approval of the line, proposed to carry 4,000 megawatts of power from the wind-rich Oklahoma panhandle through Arkansas and into Tennessee, marks the first time the 2005 statute has been used to bypass state approval and push through an interstate transmission project. “Moving remote and plentiful power to areas where electricity is in high demand is essential for building the grid of the future,” Energy Secretary Ernest Moniz said in a statement. “Building modern transmission that delivers renewable energy to more homes and businesses will create jobs, cut carbon emissions, and enhance the reliability of our grid.” The approval highlights a potential workaround for some U.S. transmission developers who have for years dealt with regulatory delays and roadblocks at the state level while trying to site new power lines. The statute gave the Energy Department authority to clear interstate projects co-sponsored by either of two of its four public power agencies. It’s just the latest twist in the battle over transmission siting between state and federal agencies as U.S. regulators push for stronger, multi-state lines capable of moving renewable power to where it’s needed.

A fifth of car fuel-efficiency savings are eroded by increased driving - Around a fifth of the energy-saving benefits of fuel-efficient cars are eroded because people end up driving them more, according to a study into British motoring habits over the last 40 years. Using data from 1970 to 2011, energy experts at the University of Sussex found a long-term 'rebound effect' among British car-drivers of around 20 per cent. Published in the February issue of the journal Energy Economics, this is the first estimation of this so-called 'rebound effect' -- a term used to describe the increased consumption of cheaper energy services -- for car travel in Great Britain. . Dr Lee Stapleton, Research Fellow in the University's Centre on Innovation and Energy Demand, said: "Improvements in fuel efficiency should lead to reductions in fuel consumption. But since improved fuel efficiency makes driving cheaper, some of the potential fuel savings are 'taken back' through increased driving. "We call this the rebound effect and it is well-documented in other sectors. For instance, we know that insulation of housing encourages people to enjoy warmer homes, rather than taking all the benefits in the form of lower bills. "Until now, we didn't know the size of this effect for British motoring. We found evidence of a significant, long-term rebound and expect our results to be of interest for public policy."

FTC sues Volkswagen, says “Clean Diesel” advertising was deceptive - The Federal Trade Commission (FTC) sued Volkswagen Group of America (VGoA) on Tuesday, alleging that VGoA deceived American consumers with its “Clean Diesel” ad campaign. The FTC charged that "Super Bowl ads, online social media campaigns, and print advertising,” targeted environmentally conscious consumers, when in reality, Volkswagen’s Jettas, Passats, Golfs, and other diesel vehicles were the opposite of environmentally conscious. Volkswagen Group was charged with a Notice of Violation from the Environmental Protection Agency (EPA) in September, alleging that the automaker had installed so-called defeat devices, or illegal software, on its 2009-2015 diesel cars that made them emit up to 40 times the amount of nitrogen oxide (NOx) as is legally allowed under normal driving conditions. The cars had been certified by the EPA because during EPA lab tests, VW’s software would sense that the car was being tested in a lab and let the emissions control system work properly under those conditions.  Volkswagen later admitted that up to 11 million diesel vehicles were equipped with the software, prompting investigations in the US and Europe. The Department of Justice sued VW Group in January, and the company has been in ongoing negotiations with the EPA and California’s air regulator to find a fix for the cars that would put them in compliance with the Clean Air Act.

Florida’s Misleading Anti-Solar Measure Will Go To Voters -- Score one for the Koch brothers.  A measure that opponents say is intentionally confusing and will stifle solar growth was given the go-ahead by the Florida Supreme Court on Thursday. It will appear on the Florida ballot in November.  Environmental and solar advocates challenged the measure, titled, “Rights of Electricity Consumers Regarding Solar Energy Choice,” saying that it does not reflect any choice and does not create new rights. Sponsored by utility companies and other groups tied to the Koch brothers, the measure will prevent people from selling their electricity to third parties. This would effectively prevent solar leasing in the state, because under that system, an owner — usually a solar company — installs panels at a home and then sells the generated electricity back to the homeowner.  “This amendment hoodwinks voters by giving the impression that it will encourage the use of rooftop solar when, in fact, it would do the opposite,” Earthjustice attorney David Guest told the News Service of Florida.  The measure was proposed by a group called Consumers for Smart Solar, which has already spent nearly half a million dollars just getting the it on the ballot. A competing measure, which would have reduced barriers to rooftop solar, did not receive enough signatures to make the ballot.

The World's Largest Renewable Energy Developer Could Go Broke: There is a “substantial risk” that SunEdison may file for bankruptcy, the world’s largest renewable energy developer said in a regulatory filing on Tuesday. The company’s fall isn’t a referendum on the solar industry as a whole, as much as it is on SunEdison’s aggressive growth strategy fueled by excessive debt and financial engineering, analysts say. SunEdison “just thought they were smarter than everyone else,” said David Levine, the founder and CEO of Geostellar, a solar energy marketplace that has done deals with the company. The company's shares have fallen steeply since they hit a high of $30 in July. They were at just $1.26 before the filing. The stock immediately dropped another 40 percent when the market opened after the filing, and the company was trading at just $0.59 by Tuesday lunchtime.  SunEdison loaded up a total of $11 billion in debt to develop or acquire renewable energy projects. Once projects were complete, they sold them to one of two separate, public companies, called yieldcos, which SunEdison controlled. The company also created two internal financing entities, called warehouses, that raised a total of $2.5 billion to build renewable energy projects, which would be sold to the yieldcos once they were complete.  The theory was that the risk of building and managing renewable energy projects could be split into its various components and investors could buy exactly the slice they wanted. To work, SunEdison needed to keep raising more money to build new projects, and its yieldcos needed to keep raising money to keep buying those projects so that the company could pay down its debt in order to borrow more to build new projects.

Electricity Prices in Free Fall · Germany’s switch to renewable energy sources is a success story. Ever since the country dedicated itself to a transformation of its energy supply following Japan’s Fukushima nuclear disaster five years ago, renewables have been booming. Last year, they accounted for a third of the energy consumed in Germany. But while this success goes far in protecting the climate and environment, it has an economic downside. The electricity market has come apart at the seams. While wind and solar electricity are being fed into the grid at set prices on a priority basis, natural gas- and coal-fired power plants, and soon nuclear power plants, are being forced off the market. The price of electricity on the wholesale market has been in freefall for five years, plunging from €60 ($67.37) per megawatt-hour to the current €20. The situation poses an existential threat for German operators of conventional plants like E.ON and RWE. According to Trendresearch, a marketing research institute commissioned by Handelsblatt, the use of conventional power plants will continue to decrease. The gas- and coal-fired power plants and the nuclear power plants that remain on the grid will produce around 435,000 gigawatt hours of electricity this year. Although that’s about two-thirds of the total German electricity production, the power plants were designed for 521,000 gigawatt hours. This means the utilization of their capacity is lagging around 17 percent below what they were designed for. By 2020, the gap between capacity and production is likely to increase to 23 percent.

In Venezuela, An Electricity Crisis Adds To Country's Woes : Parallels : NPR: At the Caracas Paper Co. printing presses and cutting machines used to churn out 13,000 tons of notebooks, manila folders and envelopes every year. Now, it produces less than half that amount.That's due to a paper shortage as well as frequent power outages. The blackouts can last up to three hours, says production manager Antonio Lamarca. And they come just as the government is urging Venezuelan businesses to ramp up production and help rescue the economy."The machinery shuts down. There's no water, so the bathrooms don't work. We have to send the workers home," Lamarca says.Some factories have adapted by installing diesel generators. But paper plant consultant Jose Sotelo says that a generator big enough to keep all these machines running would break the company's budget.Venezuela might seem like an odd place for an energy crisis. It's home to the world's largest oil reserves as well as huge natural gas deposits and massive rivers for hydroelectric dams.But the El Niño weather effect has drastically reduced water levels at the country's main hydroelectric complex. And so now, on top of food shortages and triple-digit inflation, people must put up with power outages. Venezuela's government announced a weeklong holiday last week to conserve electricity

This Country Is Embracing Coal While The Rest Of The World Is Trying To Cut Emissions -  Scotland just closed its last coal-fired power plant. England said it will be coal-free in the next decade. The United States has the Clean Power Plan, which doesn’t exactly end coal, but it puts a pretty hefty damper on it. Even China has announced it is not going to build any more coal plants.  Japan, on the other hand, is planning to build 45 domestic coal plants, and the Japanese foreign investment bank is considering financing a massive project in Indonesia. As host of the next G7 meeting and a powerful player on the international stage, Japan’s doubling down on coal is not great news for the climate — and environmentalists are wondering how long it will last.  Coal has been a primary source of generation since electric power became widespread, accounting for 32 percent of generation in Organization for Economic Cooperation and Development (OECD) countries in 2014, according to the International Energy Agency. And it has contributed hugely not only to climate change, but also to the air pollution that kills millions of people each year. Mining for coal is notoriously hard and dangerous, and it, too, has taken a massive environmental toll in the United States and abroad. In light of this, and the recent arrival of inexpensive wind and solar, much of the world is trying to move away from coal generation. In fact, according a new report from CoalSwarm, the Sierra Club, and Greenpeace, coal generation has declined for two years in a row. In Japan, though, coal consumption went up nearly 5 percent just last year.  But you can’t build efficient coal plants and solve the climate problem

US to consider sharp hike in royalties on coal — Royalty rates on coal extracted from massive strip mines on public lands could increase 50 percent under a pending overhaul of a U.S. government program that critics say contributes to climate change, documents released Thursday show. The royalty hike was contained in an Interior Department notice providing the first outlines of a planned three-year evaluation of the government’s sale of coal from public lands, primarily in the West. Lower royalty rates to stimulate mining also will be considered. The Obama administration in January imposed a moratorium on new coal leases to address the costs of climate change from burning coal and ensure a fair financial return to taxpayers. Interior spokeswoman Jessica Kershaw says Thursday’s notice sets “sideboards” for that review. “This isn’t a hard and fast determination on the actual royalty rate increase or decrease at this point,” Kershaw said in an emailed response to questions from The Associated Press. The royalty increase from 12.5 percent to 18.75 percent would apply to coal from strip mines. That would be comparable to royalties on offshore oil and gas leases, the Interior Department said. Underground mines pay an 8 percent royalty. The Powder River Basin of Wyoming and Montana is home to many of the largest mines and has emerged as the focal point of the debate over U.S. coal mining.

As coal stockpiles at power plants rise, shippers are reducing coal railcar loadings - Today in Energy - U.S. (EIA): Coal stockpiles at electric generating facilities totaled 197 million tons at the end of 2015, the highest level since June 2012 and the highest year-end inventories in at least 25 years. More than 40 million tons of coal were added to stockpiles at electric generating facilities from September through December, the largest build during that timespan in at least 15 years. In addition to relatively low overall electricity generation, largely attributable to the warmest winter on record, coal-fired electricity has recently been losing market share to electricity produced using natural gas and renewable resources.  Coal stockpiles typically follow a seasonal pattern in which stocks build during the lower electricity demand periods of the spring and fall and then get drawn down during periods of higher electricity demand in the summer and winter. In 2015, the stockpile build from August to December was 40 million tons, far higher than the 11 million ton average stockpile build for these months over 2001-14. Coal stockpiles typically decrease in December, averaging a roughly 3 million ton decline for the month over 2001-14. However, stockpiles this December increased by more than 8 million tons. As stockpiles grew toward the end of 2015, shipments of coal by rail fell. Weekly coal railcar loadings averaged nearly 94,000 carloads per week from September through December 2015, 22% below average loadings for that time of year over the previous five years. Railcar loadings were even lower in the first months of 2016. Through February, weekly coal railcar loadings averaged slightly more than 75,000 carloads, 35% below the previous five-year average.

Global coal and gas investment falls to less than half that in clean energy - Global investment in coal and gas-fired power generation plants fell to less than half that in renewable energy generation last year, in a record year for clean energy. It was the first time that renewable energy made up a majority of all the new electricity generation capacity under construction around the world, and the first year in which the financial investment by developing countries in renewables outstripped that of the developed world. Catherine Mitchell, professor of energy policy at the University of Exeter, said the developments were “extremely significant” and showed a new trend. She said: “We are looking at serious sums of money being invested in clean energy, with the dirtiest forms of fossil fuels the losers. This is the direction of travel that we need to see to have a chance of escaping the worst impacts of climate change.” About $286bn (£200bn) was invested globally in renewable energy last year, more than the previous peak of $278bn reached in 2011, according to research published on Thursday by the UN Environment Programme (Unep).  The figures exclude investment in large hydroelectric plants but include solar, onshore and offshore wind and biomass.

Asia loses its appetite for coal - – Asia, the world’s biggest coal market by far, is showing signs of turning its back on what is the most polluting of fuels, shelving or cancelling a large number of coal-fired power plant construction projects. Four Asian countries – China, India, Indonesia and Vietnam – together account for about 75% of an estimated 2,457 coal-fired power stations at present planned or under construction around the world. A study published by the Energy & Climate Intelligence Unit (ECIU), a UK-based non-profit organisation, says a combination of factors – including slowing economic growth and a rapid growth in renewables – means that a large percentage of these plants will never be built. That’s good news for people living in cities such as New Delhi and Beijing, where coal-burning power plants are major contributors to health-threatening levels of air pollution. It’s also good news for the planet: the burning of coal accounts for nearly 50% of global energy-related carbon emissions and is a main driver of climate change.  The ECIU says that in both India and China existing coal-fired power plants are under-utilised. In China – at present the world’s biggest coal producer and consumer – a faltering economy, over-optimistic projections of electricity demand and rapidly falling costs for renewable power are among the factors slowing coal demand.  In India, the world’s second biggest coal consumer, severe infrastructure problems are one factor hampering full use of existing coal plants. In both countries, says the study, this may make new plants progressively less profitable, and less attractive to investors. Also, both countries are “massively expanding” renewable and nuclear generation.

Borrowing from 'Frozen,' Japan plans to seal Fukushima leak in wall of ice (+video) - — Japanese regulators on Wednesday approved the use of a giant refrigeration system to create an unprecedented underground frozen barrier around buildings at the wrecked Fukushima nuclear plant in an attempt to contain leaking radioactive water. The Nuclear Regulation Authority said the structure, which was completed last month, can now be activated. The plant's operator, Tokyo Electric Power Co., said it plans to turn on the ice wall on Thursday, starting with the portion near the sea to minimize the risk of contaminated water escaping into the Pacific Ocean. The system will be started up in phases to allow close monitoring and adjustment.  Nearly 800,000 tons of radioactive water that is already stored in 1,000 industrial tanks at the plant has been hampering the decontamination and decommissioning of the nuclear facility, which was damaged by a massive earthquake and tsunami in 2011. The success of the ice wall is believed to be key to resolving the plant's water woes. The project, proposed by construction giant Kajima Corp., is more than a year behind schedule because of technical uncertainties. Some experts are still skeptical of the technology and question whether it's worth the huge cost.

'Ice Wall' Is Japan's Last-Ditch Effort To Contain Fukushima Radiation - Japanese authorities have activated a large subterranean "ice wall" in a desperate attempt to stop radiation that's been leaking from the Fukushima Daiichi nuclear power plant for five years. The wall consists of a series of underground refrigeration pipes meant to form a frozen soil barrier around the four reactors that were crippled during the 2011 Tohoku earthquake and tsunami. Construction of the $312 million government-funded structure was completed last month, more than a year behind schedule, the Associated Press reports. The nearly mile-long barrier is intended to block groundwater from entering the facility and becoming contaminated. Tokyo Electric Power Co., or TEPCO, which owns the plant, activated the system Thursday, a day after obtaining approval from Japan's Nuclear Regulation Authority.

Five Years After Fukushima, 16 U.S. Cleanup Ships Are Still Contaminated With Radiation --The Fukushima disaster was over five years ago, and may have been largely forgotten by the general public and the media (perhaps because the Japanese olympics are just four years from now), but its effects still linger. Perhaps nowhere more so than for those who took pare in the Fukushima clean up effort: as Starts and Stripes reports, sixteen U.S. ships that participated in relief efforts after Japan’s nuclear disaster five years ago remain contaminated with low levels of radiation from the crippled Fukushima Dai-ichi nuclear power plant. In all, 25 ships took part in Operation Tomadachi, the name given for the U.S. humanitarian aid operations after the magnitude-9.0 earthquake and subsequent tsunami on March 11, 2011. In the years since the crisis, the ships have undergone cleanup efforts, the Navy said, and 13 Navy and three Military Sealift Command vessels still have some signs of contamination, mostly to ventilation systems, main engines and generators.

NY nuclear plant outage extended to replace missing bolts (AP) — A planned outage at the Indian Point nuclear power plant will be extended for several weeks after officials found missing bolts during an inspection. Entergy Corp., which runs the facility north of New York City, said Tuesday that more than 2,000 bolts had been inspected when the Indian Point 2 reactor was shut down. Company officials said more than 200 of the bolts needed further analysis and that some of the bolts on the reactor’s inner liner were missing. The company says there was no impact on public safety or health. Democratic New York Gov. Andrew Cuomo said it was the latest in a series of incidents that he says raises concerns about the plant’s management. He says state officials will continue to investigate the plant’s operations.

Belgian nuclear guard shot and security access badge stolen - (Reuters) - Two days after bomb attacks at Brussels airport and on a packed metro killed 31 people and injured hundreds, a security guard who worked at a Belgian nuclear plant was murdered and his pass was stolen, Belgian media reported on Saturday. The French language Derniere Heure (DH) newspaper reported the security guard's badge was de-activated as soon as it was discovered he had been shot dead in the Charleroi region of Belgium and his badge stolen. A police spokeswoman said she could not comment because an investigation was ongoing. In a nation on high alert following this week's attacks, the report stokes fears about the possibility militants are seeking to get hold of nuclear material or planning to attack a nuclear site. On Thursday, DH had reported the suicide bombers who blew themselves up on Tuesday originally considered targeting a nuclear site, but a series of arrests of suspect militants forced them to speed up their plans and instead switch focus to the Belgian capital. Late last year, investigators found a video tracking the movements of a man linked to the country's nuclear industry during a search of a flat as part of investigations into the Islamist militant attack on Paris on Nov. 13 that killed 130 people. The video, lasting several hours, showed footage of the entrance to a home in northern Belgium and the arrival and departure of the director of Belgium's nuclear research program.

"Dirty Bomb" Fears Rise After Belgian Nuclear Guard Murdered, Access Badge Stolen -- Hours after brothers Khalid and Ibrahim El-Bakraoui and two other men (one of whom may or may not have been bombmaker Najim Laachraoui) detonated explosives-laden vests and luggage at the Brussels airport and metro murdering nearly two dozen people and wounding scores more, we were alarmed but not entirely surprised to see Belgium evacuate the Tihange nuclear power plant. We say we weren’t entirely surprised because way back on November 30, a raid on an Auvelais home rented by Mohamed Bakkali - who was arrested four days earlier and may have used the residence to shelter the Paris attackers including the supposed leader of the Brussels cell Abdelhamid Abaaoud - turned up an hours-long (some reports had suggested it was a mere 10 minutes long, an apparently incorrect assessment) surveillance tape that appeared to show a top Belgian nuclear official (see here). “A small video camera stashed in a row of bushes silently recorded the comings and goings of the family of a Brussels-area man with an important scientific pedigree last year, producing a detailed chronology of the family’s movements,” Foreign Policy wrote, late last month. “At one point, two men came under cover of darkness to retrieve the camera, before driving away with their headlamps off, a separate surveillance camera in the area revealed later.” If, as some suspect, those two men were the Bakraoui brothers, it would suggest that the Brussels cell which is now well on its way to going down in jihadist lore as the most “successful” sleeper cell in the history of radical Islam, was in the advanced stages of trying to procure the materials needed to build a dirty bomb.

Belgian Media Explains What To Do During A Nuclear Disaster  - Electrabel is disgusted with the media. Why? Because in the aftermath of the Brussels attacks, the electric utility thinks journalists have made too much of the alleged threat to the country’s nuclear infrastructure. Hours after four attackers detonated explosives-laden belts and luggage in the Brussels airport and metro, reports began to surface that the Tihange and Doel nuclear power plants were being evacuated. That would have been alarming enough on its own, but last month it emerged that when Belgian authorities raided a home in Auvelais last November in connection with the Paris attacks, investigators recovered hours of surveillance footage apparently recorded by terrorists at the home of a top nuclear official. There’s now some speculation that the Bakraoui brothers (two of the four Brussels bombers) were involved in covertly monitoring the official’s home. Obviously, that suggests that the cell was (and probably still is) interested in either sabotaging a nuclear facility and/or obtaining radioactive material for the purposes of developing a dirty bomb. That’s not an attempt to sow panic, it’s simply the conclusion one comes to when told that terrorists were in possession of video tapes depicting the day-to-day routine of nuclear officials and their families. Electrabel would later say the Tihange had actually not been “evacuated” per se. Rather, non essential personnel were told they could go home.  “Electrabel deplores that its sites are being used regularly this week to illustrate articles without any link to the company or its 5,000 workers," a statement reads. Hopefully the company doesn’t expect this “deplorable” state of affairs to improve any time soon because if you know anything about the history of Tihange and Doel (see here and here for more), you know why Belgians are worried.

Obama’s Plans for Nuclear Arsenal Raise Fears of New Arms Race - Over the past year, the US has called out what it sees as “irresponsible” Russian comments about using nuclear weapons. Ashton Carter, Defence secretary, complained of “Moscow’s nuclear sabre-rattling” while General Philip Breedlove, Nato commander, has called the statements “destabilising”. Yet the Obama administration — which is hosting a big summit this week on nuclear security — is facing its own criticism at home over plans to modernise the US nuclear arsenal, a project that could cost as much as $1 trillion over the next three decades. “We now are at a precipice of a new nuclear arms race,” William Perry, former secretary of defence and a one-time mentor to Mr Carter, said this year. Yet supporters of the nuclear upgrade reject all suggestions that the weapons will encourage thoughts of a limited nuclear war. “It is a complete fallacy that any American leader would say, ‘this is a low-yield weapon, so I am going to use it’,” says Franklin Miller, former senior White House official in charge of arms control. When President Barack Obama signed the 2010 New Start Treaty with Russia to reduce stockpiles of nuclear weapons, he reached a separate side agreement with the US Senate: the treaty would only be ratified if the administration modernised the nuclear arsenal. As a result, the Pentagon is putting in place ambitious plans to upgrade each section of the nuclear triad, including adding a long-range bomber, submarines and missiles.

PUCO to decide FirstEnergy power plant subsidy case Thursday | -- The Public Utilities Commission of Ohio said late Tuesday it will vote Thursday on requests from FirstEnergy and American Electric Power to have customers help subsidize continued operations of older power plants. FirstEnergy in August 2014 filed a new rate plan containing unprecedented "power purchase agreements" between FirstEnergy Solutions, its unregulated company that owns its power plants, and its traditional utilities like the Illuminating Co., that are today just distribution companies. The agreements as proposed would have the Illuminating Co., Ohio Edison and Toledo Edison buy all of the electricity produced by the Davis-Besse nuclear power plant on Lake Erie and the coal-fired W.H. Sammis coal-fired plant on the Ohio River. The distribution companies would pay FirstEnergy Solutions whatever it cost to generate the power plus a 10.38 percent profit -- and then immediately sell that power into the wholesale grid. If the companies received less money in the competitive markets where lower-priced power from gas-fired plants sets the pace, then customers would have to make up the difference. Extra charges would appear on the delivery side of their bills, meaning no customer could avoid the charges, even those customers buying power from other companies.

Ohio regulators OK 2 deals that subsidize older power plants -- (AP) — Regulators in Ohio approved two closely watched energy deals on Thursday allowing two utility companies to impose short-term rate increases on electricity customers to subsidize some older coal-fired and nuclear power plants. The Public Utilities Commission of Ohio took a single combined vote on the power purchase agreements, which were separately filed by Akron-based FirstEnergy and Columbus-based AEP. The deals have attracted mountains of written testimony, websites, email-writing campaigns and sparring in television ads. That’s because they follow an old model at a time of sweeping change in the U.S. energy market that consumer groups believe should be driving prices down, not up, and forcing coal-fired plants to close. Opponents immediately hinted they’d challenge the deals, and a group of independent power producers has asked the Federal Energy Regulatory Commission to intervene in the cases. It could take up to 60 days for any re-hearing request to be filed and processed before a lawsuit could be filed. With the plans, the power companies got profit guarantees to cover operational costs at certain aging coal-fired and nuclear plants as they modernize the power grid and transition to cleaner energy sources.

U.S. government outlines man-made earthquake risks in Northeast Ohio -  - Injection wells that pump wastewater into the earth's core have raised earthquake risks in parts of the central United States to the same level as sections of California along the San Andreas fault, a new federal study says. The U.S. Geological Survey this week released its first maps of areas that are prone to earthquakes because of human activities. It found that roughly 7 million people live and work in sections of the central and eastern U.S that are subject to "damaging shaking" from man-made quakes. Perry, Ashtabula and Youngstown are among the 21 hot-spots the survey identified as vulnerable to human-induced earthquakes. Ohio's tremor risks aren't as great as parts of Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas where quakes have escalated dramatically since 2008.  The number of earthquakes of 3.0 magnitude or larger in those areas soared from an average of 24 each year before 2009 to 1,010 in 2015, the study said. Through mid-March, that region experienced 226 tremors. The study's authors attributed the rise to wastewater disposal, although they stressed that most injection wells aren't associated with earthquakes. In Ohio, the study said tremors from man-made causes decreased in recent years, though it offered no explanation why. Survey The study said there weren't any quakes of 2.7 magnitude or higher in Northeast Ohio last year and there were just two the prior year, both in the Youngstown area. For that reason, it predicted there's no great risk of man-made earthquakes this year in northeast Ohio. "Our assessment of induced earthquake hazard was dependent on the assumption that past earthquake rates will remain constant over the next year of the forecast," the study said.

Judge agrees to hear oral arguments in case related to injection well -- Although it’s too soon to know if the ultimate outcome will change, something different has happened in Athens County Fracking Action Network’s second attempt at challenging a ruling related to an injection well. On Monday, Franklin County Common Pleas Judge Richard Frye agreed to hear oral arguments in the case — something ACFAN was unable to get in a prior case. ACFAN filed a case last year in common pleas court that attempts to reverse a ruling by the Ohio Oil & Gas Commission. The commission had refused to hear the organization’s appeal of a permit issued in connection with a K&H Partners’ third injection well in Athens County’s Troy Twp. The commission said it lacked jurisdiction because it was a drilling permit, not an injection permit (which ACFAN disputes). When it filed the common pleas case, ACFAN also asked to make oral arguments, saying that the case involves issues of significant statewide public impact. K&H Partners disagreed and opposed oral arguments. On Monday, Frye scheduled oral arguments for April 29. This is AFCAN’s second attempt to challenge in Franklin County Common Pleas Court the commission’s refusal to hear a permit appeal. The prior case —involving the same issues, but with K&H Partners’ second injection well — was heard by Judge Patrick Sheeran, who decided against a request for oral arguments and ultimately ruled in favor of the Oil & Gas Commission in the case. Sheeran’s ruling in the case has been appealed by ACFAN to the 10th District Court of Appeals.

Range Resources sells Marcellus assets --Range Resources closed its Bradford County, Pennsylvania non-operated asset sale. The purchase agreement was made in early February and included the company’s non-operating Marcellus interest in Bradford County, Pennsylvania for about $112 million, according to Zacks. Wall Street 24 notes that the sale of the Bradford County assets caused shares of Range Resources stock to increase, indicating a 3.65 percent incline to $31.84 per share. The company received $110 million of sales proceeds at the closing in addition to keeping the net cash flow since the effective date. The transaction allows the company to reduce debt in addition to covering other corporate costs and increasing liquidity.  Range Resources is one of the largest companies operating in the Marcellus Shale. According to their website, 95 percent of the the company’s capital budget is directed towards the Marcellus as part of long-term investment in natural gas-rich shale play that covers parts of Pennsylvania, New York, Ohio and West Virginia.

Move It on Over—Ports and Pipelines Delivering East Coast Refined Products -- Most of the gasoline, diesel, heating oil and jet fuel consumed in the U.S. East Coast region is piped in via long-distance pipelines from Gulf Coast refineries, but substantial amounts are moved in by ship—either from the Gulf Coast by Jones Act vessels or from overseas. These shipped-in volumes then need to make their way from port to consumer. Today we continue our examination of how transportation fuels and heating oil are delivered to East Coast users with a look at the ports and connecting pipelines that help move these critically important fuels. This is the third episode in our series describing the complicated but efficient networks developed since World War II to transport (as of now) some 4 MMb/d of gasoline, diesel, heating and jet fuel (which we have dubbed GDHJ) into the 17 East Coast states (and District of Columbia) that comprise Petroleum Administration for Defense District (PADD) 1. That 4 MMb/d represents four-fifths of the East Coast’s consumption; the other 1 MMb/d is produced by refineries in the Central Atlantic states (mostly along the Delaware River near Philadelphia). As we said in Episode 1, the Gulf Coast region (PADD 3) produces about 7.5 MMb/d of GDHJ, and sends a good bit of that output (about 2.8 MMb/d) to the East Coast, more than 80% of it (about 2.3 MMb/d) via the two primary refined products conduits between and through the two regions: the 2.5 MMb/d Colonial and the 700 Mb/d Plantation pipelines. In Episode 2, we described those pipelines in some detail: their routes, injection points, storage-tank terminals, spurs and delivery points. Today we consider the very different situations that each of the four sub-regions in PADD 1 (New England, Central Atlantic, Southeast, and Florida) find themselves in regarding the sources of their GDHJ and the means by which these refined petroleum products are delivered.

Too big to fight: In Pa. pipeline wars, landowners lose before judge rules on eminent domain - --The woods that gave Pennsylvania its name have become battlegrounds in pipeline wars raging across the state. These are passionately fought legal cases that pit rural landowners against huge corporations tasked with revolutionizing America's energy future and maximizing profits amid an industry downturn. While the fracking boom changed the country's dependence on foreign oil, it's the pipeline development that is reversing the U.S. from an energy importer to exporter. That's a plan supported by the president and his federal agencies, including the commission that regulates pipeline development in Pennsylvania. "The big gorilla in the way is FERC," It's difficult to put a legal block in front of a pipeline before construction starts because the federal regulatory process overrides a lot of other decisions, attorneys say. Simply put, a pipeline builder can cut down thousands of trees across Pennsylvania long before a county judge says it's allowed.  But in Pennsylvania pipeline fights, landowners lose before a judge issues a ruling. Ellen Gerhart Ellen Gerhart opposes pipeline  This week, the Gerharts lost hundreds of trees on the 28-acre Huntingdon County property they purchased in 1982 and soon enrolled in the Pennsylvania Forest Stewardship Program. The silent promise they made to never develop or profit from the land was superseded by a pipeline project the minute the Pennsylvania Public Utility Commission classified the Mariner East 2 as a public utility.But this pipeline is not like the natural gas lines that deliver winter heat to numerous homes across the state.It's a behemoth that stretches hundreds of miles from the shale fields of Ohio, West Virginia and southwestern Pennsylvania to a Sunoco Logistics hub in Marcus Hook. Once it reaches that export terminal, it can ship overseas the 450,000 barrels a day of propane and butane moving through the lower half of the state.Those exports are why nearly all landowners and plaintiffs' attorneys say these pipelines don't deserve eminent domain status.

More Details On The REX Natural Gas Pipeline Reversal From Marcellus/Utica To The Midwest -- --Back on March 18, 2016, RBN Energy provided an update on that huge pipeline moving natural gas from the east (Marcellus/Utica) to the midwest. Today RBN produced another update. For me to understand this massive pipeline here are the data points from today's update: The US is in the midst of the "biggest infrastructure overhaul in many decades, designed to reverse traditional flow patterns out of the Northeast Region and allow Marcellus/Utica shale gas to target growing and new demand markets primarily in the Southeast US."  In addition to the REX, "there are several other pipelines looking to reverse flow out of the Northeast, but the REX is, by far, the most significant, not only volume-wise but also because it touches nearly every US region via interconnects with other major long-haul gas pipelines."So far:

  • build-out and expansion of the Seneca Lateral, near Clarington, OH, has been completed
  • build-out of the East-to-West (E2W) expansion; has been completed
  • last August, E2W came on-line, bringing capacity to 1.2 Bcf/d in Zone 3 of REX (between its eastern terminus point in Clarington, OH, and Moultrie County, IL; this brought total westbound capacity in the zone to 1.8 Bcf/D for that stretch of REX

Today, RBN focused on the next phase of expansion: Zone 3 Capacity Enhancement project (REX Z3CE) Details of REX Z3CE:

  • approval granted for adding 800 MMcf/d east-to-west capacity (Clarington, OH, west to Mexico, Missouri, just west of the Illinois state line)
  • RBN Energy says that Tallgrass has begun construction; project should be completed by 4Q16
  • the incremental 0.8 Bcf/d will bring the total westbound capacity to "a huge 2.6 Bcf/d"
  • firm contracts to ship natural gas from six (sic -- I count seven) shippers

U.S. production of hydrocarbon gas liquids expected to increase through 2017 - U.S. production of hydrocarbon gas liquids (HGL)—a group of products including ethane, propane, butanes, and natural gasoline—is expected to increase from 3.86 million barrels per day in 2015 to 4.33 million b/d in 2017, according to EIA's Short-Term Energy Outlook (STEO). HGLs are produced at both natural gas processing plants and petroleum refineries, but natural gas plants are expected to provide more than 95% of the forecast production growth.  Between 2008 and 2015, HGL production at natural gas processing plants (including fractionation facilities) increased as a by-product of the growing supply of natural gas from shale gas and tight oil formations. Projects that increased the capacity to produce, store, transport, export, and consume HGLs enabled the supply of HGLs to expand at a faster rate than natural gas production. STEO expects HGL production growth to continue to outpace natural gas production growth in 2016 and 2017, as more HGL infrastructure projects are completed.  The United States, which was a net importer of all HGL products in 2007, became a net exporter of natural gasoline in 2008, of butane and propane in 2011, and of ethane in 2014. Annual average net propane exports (gross exports minus gross imports) increased from 10,000 b/d in 2011 to an estimated 500,000 b/d in 2015, as the capacity to export liquefied petroleum gas (LPG), including propane and butanes, increased by almost 1 million b/d.

EPA aims to cut methane leaks from natural gas companies (AP) — The Obama administration on Wednesday announced a new partnership with 41 energy companies that have agreed to voluntarily reduce methane emissions from natural gas operations to help combat climate change. The Environmental Protection Agency unveiled the Natural Gas STAR Methane Challenge Program at this week’s Global Methane Forum held in Washington. Methane is a potent greenhouse gas, capable of trapping 25 times more heat in the atmosphere than an equivalent amount of carbon dioxide. EPA Administrator Gina McCarthy said the voluntary program is meant to protect public health and combat climate change while providing a platform for companies to report actions taken to reduce methane emissions. The announcement comes after the worst methane leak in the nation’s history was finally plugged last month at an underground storage facility owned by Southern California Gas Co. The months-long disaster required the evacuation of 6,400 families and released the climate-warming equivalent of the annual pollution from more than a half million cars.

West Virginia natural gas producer fined for discharge (AP) — A natural gas pipeline company has paid a $14,440 fine to settle an environmental complaint stemming from a ruptured pipe in West Virginia’s Northern Panhandle. The Environmental Protection Agency announced Wednesday that Williams Ohio Valley Midstream paid the penalty after 132 barrels of natural gas components discharged last year in Moundsville. Media outlets report the components leaked into three waterways, including a tributary of the Ohio River. The penalty will go into a federal trust fund to be used for future oil spill cleanups. Williams Ohio Valley Midstream is a division of Tulsa, Oklahoma-based Williams.

Study: Straits of Mackinac oil spill could affect vast shoreline areas — (AP) — A newly released study says hundreds of miles of Lake Michigan and Lake Huron shoreline are at risk of contamination if oil pipelines in the Straits of Mackinac rupture. The report by the University of Michigan Water Center is based on 840 computer simulations of possible spills from twin lines that run across the floor of the straits linking Michigan’s two peninsulas. They are owned by the Canadian company Enbridge, which says they’ve never leaked and remain in good shape. Environmentalists are pushing to have them removed.  Hydrodynamics expert David Schwab directed the study released Thursday. He says when all simulated spills are plotted on a map, 720 miles of shoreline in the U.S. and Canada are considered potentially vulnerable. High-risk areas include Mackinac Island and shores near Mackinaw City.

TransCanada to sell assets, stock to raise cash for Columbia Pipeline buy - : Canadian pipeline giant TransCanada is engaged in sales of its stock and some North American assets in order to fund its proposed acquisition of the Columbia Pipeline Group, a TransCanada spokesman said Wednesday. TransCanada had announced earlier this month it would buy in a $13 billion all-cash deal. The company plans to sell all of its electric power generating assets in the US Northeast, TransCanada spokesman Mark Cooper said in an email. This includes "hydroelectric plants on the Connecticut and Deerfield Rivers," Cooper said. "The decision to sell came down to some tough financing decisions we needed to make in order to realize the rare opportunity to gain a foothold in the Marcellus and Utica basins through the Columbia acquisition."TransCanada's hydroelectric assets, located in New Hampshire, Vermont and Massachusetts, include 13 hydroelectric stations, which 43 generating units capable of producing 560 megawatts of power. Other TransCanada-owned electric generation assets in the US Northeast include: the 2,480-MW Ravenswood Generating Facility, a multi-fuel plant, capable of burning natural gas, fuel oil and kerosene, in New York City; the 560-MW Ocean State Power plant in Rhode Island, which can be fueled by gas or fuel oil; and the 132-MW Kibby Wind Power Project, New England's largest wind power project, comprising an array of 44 wind turbines in Maine. In addition to the proposed power asset sales, TransCanada has raised C$4.42 billion ($3.37 billion) in the largest stock sale in Canadian history, according to press reports.

Atlantic drilling off table but survey permits pending (AP) — While drilling for oil and natural gas in the Atlantic is off the table for now, permits are still pending that could allow seismic surveys to map just how much might be out there. The Obama administration announced earlier this month that the Atlantic will not be included in the next round of offshore energy leases from 2017 through 2022. Interior Secretary Sally Jewell said the decision was based in part on local opposition. Dozens of coastal communities passed resolutions opposing offshore drilling worried that oil spills could hurt fisheries and tourism. Two years ago, however, the Bureau of Ocean Energy Management opened areas in the Atlantic to energy surveys and eight companies currently have pending applications to use seismic air guns to map the ocean floor. Environmental groups worry the loud sounds from the air guns will harm marine life such as whales and turtles. The advocacy group Oceana released maps Tuesday showing areas where permits are being sought and where they overlap crucial marine habitat. Almost 40 fishermen and others who make their living on the waters off Delaware, Maryland and Virginia also sent a letter to the governors of the three states. “Allowing seismic blasting could disrupt the spawning, feeding and migration patterns that support our fisheries and replenish fish populations from year to year,” the letter warned.

Gas Pipeline Uses 160 Eminent Domain Suits To Get Property In 3 States  -- Eminent domain is a tough pill to swallow for Americans who take their property rights very seriously, and the aggressive moves by Sabal Trail to seize property for a natural gas pipeline running through three southern states is turning into a drama of immense proportions. Sabal Trail, the joint venture planning to build a 500-mile natural gas pipeline through Georgia, Alabama, and Florida, has gone to court in order to secure the right of way through the land where the pipeline should pass.  So far, Sabal Trail has filed 160 eminent domain suits and more are expected, according to a report by the Orlando Sentinel. The company is desperately trying to get the right of way through 346 more properties, though it says it has already secured the agreement of 1,248 landowners in the area along the route. But it’s doubtful that any of these will be allowed by the respective courts to reach the stage of contestation and litigation due to the stated regional importance of the pipeline project.  Florida satisfies almost two-thirds of its power needs with natural gas. Coal is a distant second at around 22 percent, making gas the major source of power for the state. The numbers are not as high for Georgia and Alabama, but natural gas is a significant component of the energy source mix there as well.  Sabal Trail, which is owned by Spectra Energy Corp (NYSE: SE) and NextEra Energy (NYSE: NEE), will carry one billion cubic feet of gas daily once it starts operating at full capacity, and will supply it to regional utilities Florida Power and Light, Duke Energy, and Spectra. Construction works are slated to begin in late June, and the pipeline should be operational in May 2017. The pipeline project, however, is facing serious opposition, which focuses on environmental and health concerns. There are those who believe that any opposition will be crushed, because the project is so important it cannot be stopped.  As for those who disagree, the news that Kinder Morgan has suspended the construction of the Palmetto pipeline because of strong local opposition is somewhat reaffirming. Palmetto would have carried crude oil from South Carolina to Florida, but the Georgia legislature passed a moratorium on new oil pipeline construction in the state.

Gulf Coast waterborne crude flows adjust to a new world --Waterborne crude volumes (including imports) delivered to coastal refineries in Texas, Louisiana and Mississippi by domestic producers peaked at 27% of inputs in 2014 as regional plants processed increasing quantities of shale crude. Since then, these volumes have plummeted to 15% of inputs in March 2016 as Gulf Coast refiners have returned to more competitive imports instead. At the same time Eagle Ford crude volumes shipped along the Gulf Coast have fallen 28% this year in response to declining production and narrow price differentials between Texas and Louisiana ports. Gulf Eagle Ford crude now also plays a far smaller part in export markets than WTI grades. Overall exports have not increased since the end of the export ban but volumes to Canada have plummeted as shipments to other nations have increased. Today we review the shifts in waterborne flows across the Gulf Coast region.

Coast Guard: Unknown amount of crude in Louisiana bayou (AP) — The U.S. Coast Guard says an unknown amount of crude oil has spilled into a bayou in southern Louisiana. The Coast Guard said in a statement Monday night it received a report around 8 p.m. that a tanker on Bayou Teche near Morgan City was being filled with crude oil when the spill began. The statement says the source of the spill has been secured and crews have deployed more than 200 yards of boom. Times-Picayune reports some residents of nearby St. Mary Parish were advised to shelter in place. The cause of the spill is under investigation. The Coast Guard says the spill was reported by PSC Industrial Outsourcing. The company couldn’t immediately be reached by The Associated Press early Tuesday. A stretch of the 135-mile-long waterway will be closed to commercial traffic during the cleanup.

Drilling ban at Joe Pool Lake sets up showdown between Texas, Army Corps -- A move by the U.S. Army Corps of Engineers to protect its dam at Joe Pool Lake is leading to a showdown with state regulators over who controls drilling near the reservoir. Last week, the corps said it is banning drilling, including hydraulic fracturing, within 4,000 feet of the dam. The federal agency also said it would limit injection wells to at least five miles from the dam out of fears of “induced seismicity,” or tremors triggered by human activities. Corps officials said the tougher restrictions — which grew out of a study about whether drilling could damage the structural integrity of the dam — went into effect immediately. One corps official said the agency is willing to go to court to enforce them, if necessary. But in a letter sent to the corps on Thursday, Texas Railroad Commission Executive Director Kimberly Corley questioned the federal agency’s actions, stating that the Railroad Commission has the authority to oversee the oil and gas industry in Texas, including hydraulic fracturing and injection wells.Corley took issue with the corps for taking steps without consulting the commission or other appropriate state agencies and without going through a formal rule-making process. The letter also asked pointed questions about information used by the corps in establishing its restrictions.

Pain in the Permian | Petroleum Economist: THE CONVOYS of 18-wheelers ferrying equipment across the vast terrain easily outnumber all other vehicles on the road. They’ve long since overwhelmed a highway that was built for people passing through this desolate stretch of West Texas, now servicing one of the biggest oilfields in the world. Construction crews are laying down new tarmac as quickly as they can, but it’s not fast enough. Racing from oilfield to oilfield, horns blaring, the big rigs make navigating the road a sometimes-harrowing adventure for sedans like mine. And the dust: kicked up by the bustle, it coats everything. If this is your first impression of the place, you’d think business is still booming in the Permian shale, the beating heart of the Texan tight oil industry. Along this stretch of Interstate 20 between Midland and Odessa in West Texas – the main artery running through the Permian – evidence of the bonanza is ubiquitous. Highway road signs won’t dispel your ideas about West Texas: this is the country of God – "Repent", one of the billboards implores – of high-school football and, of course, of oil. But look more closely and it doesn’t take long to see that the brutal oil-price collapse is inflicting serious pain in American oil country. Try Helmerich and Payne’s storage yard, a parking lot for rigs: for every rig that leaves for the oilfield, many more are returning, swelling the space. At least three dozen rigs lay idle during my recent visit, a growing steel forest rising above I-20, reminding everyone that the boom times have ended. And you can’t avoid the billboards promising quick cash for distressed oil companies: "Sell us your wireline trucks & tools! Cash in 48 hours".

USGS: Human Activity “Significantly Increases” US Earthquake Risk  - On Monday, for the first time, the U.S. Geological Survey has released an analysis of the magnitude of “human-induced” earthquakes. That such a thing as human-induced earthquakes can exist is scary enough, but the “dramatic increase in seismicity” in places like Oklahoma has forced the USGS to consider the threat more broadly. “By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” said Mark Petersen, Chief of the USGS National Seismic Hazard Mapping Project, in a statement. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” The USGS also released its first-ever one-year earthquake hazard outlook on Monday, taking into account the current impact of fracking and wastewater injection (part of the oil and gas recovery process). So, not only do we now have overwhelming proof of the effect of the oil and gas industry on earthquake risk, but we have a prediction that increased seismic activity will continue until practices change. For now, that means that Oklahoma bears a risk of earthquakes on par with California. In fact, Oklahoma is now one of the most seismically active places in the entire world. Recently, the state’s Republican governor, Mary Fallin, allocated funds to increase monitoring of the earthquakes, and the state’s Corporation Commission requested well operators to reduce the amount of wastewater injected below the surface. The state also launched a website,, to discuss the threat.

7 million Americans at risk of man-made earthquakes, USGS says - Earthquakes are a natural hazard -- except when they're man-made. The oil and gas industry has aggressively adopted the technique known as hydraulic fracturing, or fracking, to shatter subsurface shale rock and liberate the oil and gas lurking there. But the process results in tremendous amounts of chemical-laden wastewater, which the industry disposes of by pumping into deep wells. And the Earth moves. On Monday, the U.S. Geological Survey published for the first time an earthquake hazard map covering both natural and "induced" quakes. The map and an accompanying report indicate that parts of the central United States now face a ground-shaking hazard equal to the famously unstable terrain of California. Some 7 million people live in places vulnerable to these induced tremors, the USGS concluded. The list of places at highest risk of man-made earthquakes includes Oklahoma, Kansas, Texas, Arkansas, Colorado, New Mexico, Ohio and Alabama. There are also states with wastewater-disposal wells but no record of recent natural earthquakes -- suggesting that the practice of injecting wastewater deep into the Earth can be done more safely in some places than in others.It's not immediately clear whether this new research will change industry practices, or even whether it will surprise anyone in the areas of newly estimated risk. In Oklahoma, for example, the natural rate of earthquakes is only one or two a year, but there have been hundreds since fracking became commonplace in the last decade.

U.S. Geological Survey creates forecast for human-induced earthquakes -- In its first-ever earthquake forecast, the U.S. Geological Survey says temblors likely will increase in certain parts of the country, particularly Oklahoma and Texas, where a boost in oil drilling and injection wells has caused problems. The agency's forecast said activity should decrease in Ohio this year, despite a cluster of induced earthquakes in recent years. Geological Survey scientists used seismicity data and reports to create a map that looks at natural and induced earthquakes. They said on Monday that the report is timely because the number of earthquakes have increased rapidly since 2010. A year ago, the USGS released results of its first widespread examination of possible links between earthquakes and the oil and gas industry. Geologists found 17 regions nationwide, including the Mahoning Valley area around Youngstown, Ohio, where residents were at higher risk of earthquakes. Oil and gas drilling and wastewater injection wells spurred hundreds of earthquakes in Oklahoma, Texas, Arkansas and Ohio, according to the 2015 report. Today's forecast calls for increased risk of earthquakes in Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas in the next year. More people in Oklahoma and Texas are at risk of induced earthquakes than natural earthquakes, according to the Geological Survey. Four Ohio counties could see earthquakes in the future because of human causes, including oil and gas activity, the report found: Belmont, Guernsey, Harrison and Washington. All four are counties where oil and gas activity has grown.

Fracking leads US scientists to include manmade quakes in risk maps - Telegraph: The threat from manmade earthquakes is now so great that parts of the American Midwest have the same risk of suffering a damaging tremor as areas that straddle seismic faults, such California, according to a new assessment by the US Geological Survey. For the first time it has included “induced” as well as natural quakes to cover the growing risk from activities linked to fracking for oil and gas. Mark Petersen, head of the agency's mapping project, said: "By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the US.”The risk maps are used by emergency management officials and the country's engineering and design associations in deciding how and where to construct buildings. The new designation puts an additional seven million people in the Central and Eastern US in areas threatened by earthquakes. Oklahoma is at the greatest risk for hazards associated with induced seismicity, the USGS said, followed by Kansas, Texas, Colorado, New Mexico and Arkansas. Oklahoma has seen a huge increase in the number of tremors that rank above magnitude 3.0. Last year it experienced 907 such seismic events compared with two in 2009. Last month it was rocked by 5.1 magnitude quake, adding stength to scientists' concerns that a string of small tremors was building up to a big one. Scientists estimate the chances of a 6.0 magnitude shock during the next year to be between five and 12 per cent - about the same as quake-prone parts of California.

Induced Earthquakes Increase Chances of Damaging Shaking, Wastewater Disposal From Fracking Primary Cause -- For the first time, new U.S. Geological Survey (USGS) maps identify potential ground-shaking hazards from both human-induced and natural earthquakes. In the past, USGS maps only identified natural earthquake hazards.  This is also the first one-year outlook for the nation’s earthquake hazards, and is a supplement to existing USGS assessments that provide a 50-year forecast The report shows that approximately 7 million people live and work in areas of the central and eastern U.S. (CEUS) with potential for damaging shaking from induced seismicity. Within a few portions of the CEUS, the chance of damage from all types of earthquakes is similar to that of natural earthquakes in high-hazard areas of California. “By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” Mark Petersen, chief of the USGS National Seismic Hazard Mapping Project, said. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” Induced earthquakes are triggered by human activities, with wastewater disposal being the primary cause for recent events in many areas of the CEUS. Wastewater from oil and gas production operations can be disposed of by injecting it into deep underground wells, below aquifers that provide drinking water.

Map shakes up views on fracking - - NZ Herald News: Earthquakes are a natural hazard - except when they're man-made.The oil and gas industry has aggressively adopted the technique known as hydraulic fracturing, or fracking, to shatter subsurface shale rock and liberate the oil and gas lurking there. But the process results in tremendous amounts of chemical-laden wastewater, which the industry disposes of by pumping into deep wells.And the Earth moves.Yesterday, the United States Geological Survey published for the first time an earthquake hazard map covering both natural and "induced" quakes.The map and an accompanying report indicate that parts of the central US now face a ground-shaking hazard equal to the famously unstable terrain of California.Some 7 million people live in places vulnerable to these induced tremors, the USGS concluded.The list of places at highest risk of man-made earthquakes includes Oklahoma, Kansas, Texas, Arkansas, Colorado, New Mexico, Ohio and Alabama.There are also states with wastewater-disposal wells but no record of recent natural earthquakes - suggesting that the practice of injecting wastewater deep into the Earth can be done more safely in some places than in others.It's not immediately clear whether this new research will change industry practices, or even whether it will surprise anyone in the areas of newly estimated risk.

New USGS maps show higher chances of damaging earthquakes in Oklahoma —New maps released on Monday by the USGS show potential ground-shaking hazards from both human-induced and natural earthquakes.The USGS said the maps are also the first one-year outlook for earthquake hazards and the first time the USGS has identified human-induced earthquakes. “By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” said Mark Petersen, Chief of the USGS National Seismic Hazard Mapping Project. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” The USGS said wastewater disposal was the primary cause for human-induced earthquakes. The new maps show six states face the highest hazards: Oklahoma, Kansas, Texas, Colorado, New Mexico and Arkansas. Oklahoma and Texas have the largest populations exposed to human-induced earthquakes, according to the USGS. “In the past five years, the USGS has documented high shaking and damage in areas of these six states, mostly from induced earthquakes,” said Petersen. “Furthermore, the USGS Did You Feel It? website has archived tens of thousands of reports from the public who experienced shaking in those states, including about 1,500 reports of strong shaking or damage.” According to the USGS, the new hazard model estimates where, how often and how strongly earthquakes can be expected during 2016.

Drilling makes Oklahoma as earthquake-prone as California --Drilling for oil and gas has made parts of Oklahoma and Kansas as likely to be hit by major earthquakes as California. A new United States Geological Survey (USGS) hazard map shows that the risk of a "damaging" quake within the next year is now as high in north Oklahoma -- 10-12 percent -- as anywhere else in the US. The revelation comes from the USGS changing the way it forecasts earthquakes in the country. In the past, its hazard maps only highlighted natural risks, meaning only California and small parts of Idaho, Montana, Nevada, Washington and Wyoming were mapped. Now, it factors in "induced earthquakes" triggered by human activity, with the primary cause being wastewater disposal from oil and gas production. This tainted liquid is injected into deep underground wells, which can lead to an increase in pressure that negatively affects the seismic stability of an area. Based on the risks posed by wastewater, much of Oklahoma is now highlighted, while smaller sections of Alabama, Arkansas, Colorado, Illinois, Kansas, Kentucky, Missouri, New Mexico, Texas, and Tennessee also carry a warning. It should be noted that most states have at most a five-percent or less chance of damage. Only Oklahoma and a tiny area in southern Kansas are at higher risk. Far from being alarmist, the USGS' assessment is mostly based on one- and two-year earthquake data from the above states. Last year, 907 quakes of magnitude 3 and above hit Oklahoma. 106 have been recorded this year, with three measuring around magnitude 5, which ranks among the largest in the state's history. It's now third only to California and Alaska in earthquake frequency. The USGS saysfurther data on both induced and natural earthquakes is required to improve its hazard models. It also notes that its methodology for mapping the western states only factors in natural risks, and suggests it should expand its induced quake data to cover states like California. However, it's not simple to determine the reasons for tremors in areas with naturally high seismic activity, and more research is needed.

Pair of earthquakes hit Crescent in central Oklahoma - US News: (AP) — The U.S. Geological Survey says two earthquakes hit central Oklahoma in the overnight hours, but no damage or injuries have been reported. The USGS says a 4.2 magnitude quake struck late Monday in Logan County. The quake was centered 3 miles north-northeast of Crescent, and the USGS says it was felt as far north as Wichita, Kansas. A 4.1 magnitude earthquake hit the same area shortly after 5 a.m. Tuesday. The USGS says that temblor had an epicenter 4 miles north of Crescent, or 37 miles north of Oklahoma City. Another smaller quake hit near Enid around 10:30 p.m. Monday. On Monday, the USGS released a survey that found Oklahoma has a 1 in 8 chance of damaging quakes in 2016, surpassing California as the state with the highest probability.

See How Oil Drilling Created an Earthquake Crisis in Oklahoma -- In the last few years, Oklahoma has become one of the most seismic places on the planet. Last year, there were almost 6,000 earthquakes, 900 of which were magnitude 3 or higher, according to the U.S. Geological Survey (USGS). Scientists say the increase is due to hundreds of saltwater disposal wells around the state that pump brackish water that comes up naturally during drilling back underground.The state’s quakes have become so frequent that the USGS released a new nationwide hazard map Monday which, for the first time, included manmade earthquakes and showed parts of Oklahoma to be as seismic as California. See how oil drilling causes earthquakes in the video above, and read more about it here.

Everyone panic. The fracking induced earthquakes are coming to kill you all - Joel Achenbach at the Washington Post is out to save you all from a potential catastrophe. The evil oil and gas industry is going to cause most of the people reading this to flee in terror from their homes as earthquakes ravage the land and zombies begin to feast on the flesh of the living. Okay.. it’s not quite that bad, but a quick read of this study will likely have you checking for the nearest exits in your buildings. You see, fracking is causing earthquakes in unusual places (which is actually true, though not nearly on the calamitous scale as is implied) and it could impact up to half the people in the country. On Monday, the U.S. Geological Survey published for the first time an earthquake hazard map covering both natural and “induced” quakes. The map and an accompanying report indicate that parts of the central United States now face a ground-shaking hazard equal to the famously unstable terrain of California.Some 7 million people live in places vulnerable to these induced tremors, the USGS concluded. The list of places at highest risk of man-made earthquakes includes Oklahoma, Kansas, Texas, Arkansas, Colorado, New Mexico, Ohio and Alabama. Most of these earthquakes are relatively small, in the range of magnitude 3, but some have been more powerful, including a magnitude 5.6 earthquake in 2011 in Oklahoma that was linked to wastewater injection. As usual, it’s hard to even know where to begin with this sort of “analysis” since the mixture of facts, speculation and hyperbole render the final product something of a mess. While I admit I initially expressed doubts about the entire concept of fracking induced earthquakes back when the first reports emerged, the industry has confirmed that this is indeed a known phenomenon. But the descriptions which seek to compare Oklahoma and Ohio to the communities along the San Andreas fault are laughable.

Millions at risk of manmade quakes. How can fracking states lessen tremors? - The US Geological Survey has added manmade earthquakes to its 2016 earthquake forecast for the central and eastern United States (CEUS), which have become increasingly common in the region in part due to oil and gas drilling activity. Earthquake activity in the CEUS region – particularly in states like Oklahoma, Kansas, and Texas – has increased markedly, according to the USGS, in large part because of "induced seismicity." Unlike natural earthquakes, these seismic events can be attributed to human activity, and in the CEUS, that usually means wastewater disposal from oil and gas drilling. Yet induced seismicity is such a novel issue regulators are struggling to figure out how to reduce the number of manmade quakes. States like Kansas have made some progress, but induced earthquakes are not considered in building-code maps, and nearly 8 million people live in areas that are vulnerable to that kind of activity, according to the agency's 2016 forecast." .Kansas is one state that, tentatively, suggests it may have found an answer. From 2000 to 2013 the state never saw more than four earthquakes magnitude 2.5 or greater every year, but in 2014 that number jumped to 154, including nine quakes of a magnitude 3.5 or more. In March 2015, state regulators ordered drilling companies in some of the most vulnerable areas to dramatically reduce their wastewater injection volumes. Results have been promising in two of those areas: Harper and Sumner counties, which are in the Arbuckle Shale that straddles the Kansas-Oklahoma border.

Induced Earthquakes Raise Chances of Damaging Shaking in 2016 - For the first time, new USGS maps identify potential ground-shaking hazards from both human-induced and natural earthquakes. In the past, USGS maps only identified natural earthquake hazards. This is also the first one-year outlook for the nation’s earthquake hazards, and is a supplement to existing USGS assessments that provide a 50-year forecast The report shows that approximately 7 million people live and work in areas of the central and eastern U.S. (CEUS) with potential for damaging shaking from induced seismicity. Within a few portions of the CEUS, the chance of damage from all types of earthquakes is similar to that of natural earthquakes in high-hazard areas of California.“By including human-induced events, our assessment of earthquake hazards has significantly increased in parts of the U.S.,” said Mark Petersen, Chief of the USGS National Seismic Hazard Mapping Project. “This research also shows that much more of the nation faces a significant chance of having damaging earthquakes over the next year, whether natural or human-induced.” Induced earthquakes are triggered by human activities, with wastewater disposal being the primary cause for recent events in many areas of the CEUS. Wastewater from oil and gas production operations can be disposed of by injecting it into deep underground wells, below aquifers that provide drinking water.

Here’s the U.S. Earthquake Forecast, Now Including the Quakes We Cause A cluster of central states surrounding Oklahoma now faces the highest risk of earthquakes induced by human activities "such as fluid injection or extraction," according to a short-term seismic forecast by the U.S. Geological Survey. The report, which for the first time includes quakes that may be linked to oil and gas production, comes after an alarming six-year rise in the incidence of quakes throughout the central and eastern U.S. There, some seven million people, concentrated near Oklahoma City and Dallas-Fort Worth, face an increased risk of earthquakes. There were more than 1,000 quakes last year with a magnitude greater than 3 on the 10-point Richter scale, up from an annual average of 24 between 1973 and 2008. The states facing the highest risk from human-induced quakes are, in order, Oklahoma, Kansas, Texas, Colorado, New Mexico, and Arkansas, according to the report, published Monday. The largest populations at risk live in Texas and Oklahoma. Scientists predict that any damage would probably be on par with some of the cracking in homes and commercial buildings already witnessed since the oil-and-gas boom began. North-central Oklahoma is the most prone to quakes this year, according to the research, with a 12 percent risk. The link to the energy industry is largely based on wastewater from wells subjected to hydraulic fracturing, or fracking, the engineering advance that let drillers free hydrocarbons trapped in shale. The production process yields a lot of water, which may be disposed of by injecting it into storage wells. That is the practice suspected in the increased earthquake activity. As the number of quakes in Oklahoma, Texas, and other central states has risen in the last decade, so has concern among local residents, environmentalists, and regulators. Oklahoma saw a 5.1-magnitude temblor in February, coincidentally three days before the Sierra Club sued three companies under a federal law governing dangerous waste disposal. It’s the latest in a string of accusations against companies involved in the disposal of wastewater.

Pipelines Threaten Liens on Oil Firms That Don’t Pay Up -  Pipeline companies that rode the energy boom are confronting the risk that their customers, cash-starved oil producers, may not pay their bills. Inter Pipeline Ltd., whose customers include big oil sands players, has threatened to slap liens on crude oil it transports and is seeking letters of credit from shippers with ratings that have been chopped below investment grade. Rival Pembina Pipeline Corp. is hoping to avoid losses by matching new requests to ship crude with producers that bought more capacity than they now need. Some companies that transport and process oil and gas are going a step further, eyeing possible royalty stakes in producer lands in exchange for building new facilities, people familiar with such negotiations said. The moves reflect intensifying concern that debt-burdened firms – if they survive at all – could renege on shipping commitments made when oil fetched closer to $100 (U.S.) a barrel.

Legislature Approves Protections Against Fracking Waste, Reforms at Oil & Gas Commission — Bold Nebraska applauds the Nebraska Legislature today for approving LB 1082 by a 48-0-1 vote, a bill to reform the Nebraska Oil & Gas Conservation Commission (NOGCC) and put stronger protections for our water and land in place against fracking waste. Although Bold Nebraska believes the bill could have gone much farther, LB 1082 is a step in the right direction.LB 1082:

  • Requires periodic sampling and reporting of fracking waste fluids, and monitoring of produced water transporters in Nebraska.
  • Requires periodic evaluation of financial assurance for companies engaged in fracking waste disposal.
  • Requires notification of counties, cities, villages and natural resource districts of fracking wastewater injection well applications.
  • Reduces the “promotional” aspect of the Nebraska Oil & Gas Commission, and refocuses the agency’s purpose on promoting health, safety and protection of natural resources.

Governor Opposes Earthquake Damage Lawsuit Bill - Gov. John Hickenlooper said Thursday he would not sign a legislative bill that would make it easier to residents to sue oil and gas companies for damage caused by earthquakes induced by operations that pump wastewater down into underground wells.The U.S. Geological Survey released maps this week that show the most likely places for those earthquakes to occur, NPR reports: 7 million people are now, suddenly, living in quake zones. There are 21 hot spots where the quakes are concentrated. They're in places where, historically, noticeable earthquakes were rare: Texas, Colorado, Arkansas, Kansas, New Mexico, and Oklahoma. Ohio and Alabama have also experienced some induced quakes. State Rep. Joe Salazar, D-Thornton, who sponsored the legislation, says it's a response to concerns over fracking operations that are moving closer to more populated areas. Oil and gas industry groups say fracking is safe and oppose the bill. The governor studied those maps and isn't convinced of the danger. " I don’t think there’s a real risk," he said. "It makes us appear like we’re anti-business. And I think that’s something that’s not conducive to what we’re trying to get done.”

Proposed bill: local control over oil and gas activity - Boulder Weekly: Comments from lawmakers, advocates and industry personnel were heard this week by a state assembly panel on a bill that would give local control on oil and gas operations to municipalities and counties in Colorado. House Bill 16-1355 was introduced on March 11, and it now sits on the desk of the Democrat-majority State, Veterans and Military Affairs committee. The bill was introduced by four house Democrats, including east Boulder County representatives Mike Foote and Matt Jones. The bill would repeal certain rights afforded to oil and gas interests in the state, while also providing new abilities to concerned municipalities. For instance, the bill repeals the ability of the Colorado Oil and Gas Conservation Commission (COGCC) to designate oil and gas development areas as areas of state interest. The removal of this clause would gut the state’s ability to claim that oil and gas siting and regulation decisions is a matter, exclusively, of state interest. The bill allots municipalities and counties the power to determine oil well drilling site locations, claiming that local authorities are in the “best position to determine the appropriate locations for oil and gas facilities and will properly balance the interests of all property owners as well as the effects on public health, wildlife and the environment.”

Colorado Bill Threatens Oil, NatGas Operators, Industry Says -- The Colorado House passed HB 1310 to the state senate last week, causing continued concern among officials at the Colorado Oil and Gas Association (COGA) and across the industry. HB 1310 narrowly passed out of committee earlier this month, causing concerns by the state's two main industry trade associations, which fear a chilling impact on oil and natural gas activities, including hydraulic fracturing (see Daily GPI, March 15). Those concerns were magnified when the measure was passed by the lower house last week and sent on to the state senate, though one knowledgeable capitol watcher told NGI it has little chance of passage. "The bill ignores 70 years of legal precedent as applied to the liability of oil/gas companies in Colorado and actually treats oil and gas as if it's hazardous waste rather than products that Coloradans rely on every single day," said COGA spokesman Doug Flanders. HB 1310 would "radically change" state law and legal standards, he said. "We're very disappointed that it passed out of the full House despite opposition from a broad and diverse coalition of business leaders and organizations." The measure's own language indicates that if were to be signed into law it "would hold oil and gas operators strictly liable for their conduct if oil/gas operations, including a hydraulic fracturing treatment or reinjection operations cause an earthquake." Plaintiffs would be given five years after discovery of alleged damages or injury to file a legal action. Any quake damage to the surface owner’s property could conceivably be found to be the liability of the oil/gas operators working in the area. The legislation makes it easier for the landowners to sue, and to allege oil and gas operations have harmed their land, structures on the land or any persons on their land.

Colorado oil and gas bill deserves defeat - The Denver Post: While officials in most Colorado cities and towns would seek responsible accommodation with the energy industry if they had final say in all siting decisions — indeed, most already do this — a few clearly would not choose such a course. They would instead either ban energy extraction outright or impose so many conditions and rules on permits as to make them impossible to obtain. They would effectively seize mineral property rights, in other words, with no intention of providing a cent in return. And never mind the Fifth Amendment's prohibition on taking private property without just compensation. It's those mineral property rights, it turns out, that distinguish oil and gas development from most other industries. We're not imagining this prospect, since a few jurisdictions have taken such action even in the face of case law that fails to support their cause. That's among the reasons House Bill 1355 is a bad idea, whatever its intent. In giving such crucial authority over oil and gas facilities to local governments, it turns on a green light to regulation driven not only by legitimate concern over local impacts — noise, transportation and a variety of other above-ground issues — but also a fervent anti-drilling ideology. In effect, the bill would displace the state as the ultimate authority on oil and gas drilling and undermine Colorado's clear interest in the orderly and safe production of energy.

Stanford Researchers: Fracking & Its Impact On Drinking Water Sources - Many have long speculated about fracking and its possible negative impact on drinking water. Recent research released today from Stanford scientists finds for the first time that fracking operations near Pavillion, Wyoming have had a clear impact on underground sources of drinking water. The research paints a picture of unsafe practices, including the dumping of drilling and production fluids containing diesel fuel, high chemical concentrations in unlined pits, and a lack of adequate cement barriers to protect groundwater. The new study has been published in Environmental Science & Technology. “This is a wake-up call,” said lead author Dominic DiGiulio, a visiting scholar at Stanford School of Earth, Energy & Environmental Sciences. “It’s perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources.” As part of the so-called frackwater they inject into the ground, drilling companies use proprietary blends that can include potentially dangerous chemicals such as benzene and xylene. When the wastewater comes back up after use, it often includes those and a range of potentially dangerous natural chemicals. “Decades of activities at Pavillion put people at risk. These are not best practices for most drillers,”

Fracking Contaminates Groundwater: Stanford Study - Another scientific study has confirmed that fracking, the controversial technology that blasts apart low-grade rocks containing molecules of hydrocarbons, can contaminate groundwater. "We have, for the first time, demonstrated impact to Underground Sources of Drinking Water (USDW) as a result of hydraulic fracturing," says the study published in the journal Environmental Science & Technology. Researchers from Stanford University published their findings after combing through publicly available data on the drilling, fracking and cementing of scores of tight gas wells in Pavillion, Wyoming. "Given the high frequency of injection of stimulation fluids into USDWs to support [coalbed methane] extraction and unknown frequency in tight gas formations, it is unlikely that impact to USDWs is limited to the Pavillion Field, requiring investigation elsewhere." The scientists matched chemical compounds used in fracking to chemicals found in two groundwater monitoring wells drilled by the U.S. Environmental Protection Agency in 2008. No jurisdiction in Canada has yet set up long-term groundwater monitoring wells to track the movement of contaminants from oil and gas drilling into groundwater. The researchers also discovered that industry fracked directly into aquifers at depths as shallow as 213 metres with highly toxic chemicals, including benzene.

New Study Confirms Fracking Contamination That The EPA Walked Back On In 2011 -- A new study out of Stanford University offers residents of Pavillion, Wyoming a little more clarity on an issue that has been plaguing them for nearly a decade: is hydraulic fracturing to blame for years of contamination in their drinking water?  The town initially made headlines in 2008, when residents began complaining of strange odors and tastes in their drinking water. In 2011 the EPA got involved, first issuing a draft report that connected fracking to the contamination. The agency later walked back on the report, however, and refused to issue a finalized version and instead handing the matter over to state officials. Years later, the state has yet to move forward with the report.This may be causing widespread impacts on drinking water resources. So researchers at Stanford decided to take measures into their own hands, looking at publicly available records and documents obtained through the Freedom of Information Act to see if they could pinpoint the source of Pavillion’s water contamination. Their conclusion, which was published earlier this week in Environmental Science and Technology, was that fracking operations near Pavillion have had a clear influence on the quality of groundwater. “This is a wake-up call,” lead author Dominic DiGiulio, a visiting scholar at Stanford School of Earth, Energy & Environmental Sciences, said in a press statement. “It’s perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources.”

Stanford University report finds fracking CAN pollute underground drinking water, conflicting with previous studies -- A newly released study of fracking in a small Wyoming town has found that common practices in the industry may have widespread impacts on drinking water – a conclusion in direct conflict to U.S. EPA and Yale University reports last year that no such evidence exists. The latest study was conducted by scientists at Stanford University based on findings from hydraulic fracturing operations in Pavillion, Wyoming, population 231. The findings were reached based on public records and were published in the latest edition of Environmental Science & Technology.The Stanford study found a direct link between fracking operations near the town and underground sources of drinking water. The research cited such unsafe practices as the dumping of drilling and production fluids containing diesel fuel, high chemical concentrations in unlined pits, and a lack of adequate cement barriers to protect groundwater."This is a wake-up call," said Dominic DiGiulio, a visiting scholar at the Stanford School of Earth, Energy & Environmental Sciences, and the lead author of the study. "It's perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources." Co-author Rob Jackson said, "Decades of activities at Pavillion put people at risk. These are not best practices for most drillers." Yale researchers released a report in October that concluded fracking does not contaminate drinking water, based on an analysis of groundwater collected from private residences in northeastern Pennsylvania. The study mirrored the EPA findings released in June.

New Research: ‘People at Risk’ Due to Fracking and Toxic Groundwater: A new study, called a “wake up call,” has revealed the link between hydraulic fracturing, or fracking, and poisoned groundwater. A Stanford University study, published in Environmental Science and Technology, has determined that there is a "clear impact" on groundwater in Pavillion, Wyoming, where residents have observed the quality of their water deteriorating since the 1990s. "This is a wake-up call," Dominic DiGiulio, the lead author of the study wrote. "It's perfectly legal to inject stimulation fluids into underground drinking water resources. This may be causing widespread impacts on drinking water resources." The town of Pavillion is in close proximity to 180 drilling operations. In 2011, the Environmental Protection Agency (EPA) warned that the operations may have contaminated the town's water supply. Two years later, however, the EPA handed their investigation over to the state of Wyoming, after criticism from the local energy industries and the state's fossil fuel regulators, Common Dreams reported. Once the investigation was in their hands, state regulators stopped all research, despite an alert from the federal Agency for Toxic Substances and Disease Registry that residents not use tap water for drinking, cooking, or bathing. "When you look at everything as a whole, it seems implausible that all this is due to natural conditions," DiGiulio told InsideClimate News. "When you look at the compounds, it's a virtual fingerprint of chemicals used in the field."

Fracking Found Guilty of Contaminating Water Supply  --- Some background – these studies confirm that my pal John Fenton’s waster was contaminated by fracking. I met John at a conference in Colorado. We talked about his situation and it was apparent that his deep water well had been directly contaminated by rather shallow fracking operations – because there was not enough distance between the water strata and the frack target. Subsequent studies by the DOE confirmed that a frack can travel up to 2,000 feet vertically – far less than the separation between Fenton’s water well and the frack zone. DOE: Fracks Can Hit Aquifers! A DOE test well in Pennsylvania has proven that a frack can travel up to almost 2,000 feet. Which means that a frack can contaminate an aquifer – if the separation between the two is less than 2,000 feet. Immediately. That means that any fracked horizontal lateral that is closer than 2,000 feet to any aquifer may have already contaminated that aquifer. No longer a matter of “if” – just how many have been contaminated and by how much. The frackers were so worried that the EPA would find evidence of direct contamination that they persuaded the feds to shut the EPA studies down ! New independent studies now confirm the obvious: the frack was too close to the Fenton’s water, and so their water got fracked.  Truth will out.

Fracking in Wyoming Forces Residents to Find Water Elsewhere: The US state of Wyoming has provided cisterns for residents of an area where hydraulic fracturing, or fracking, in oil and gas wells has poisoned well water, Powder River Basin Resource Council organizer Shannon Anderson told Sputnik on Thursday. "Once fracking started, there was groundwater contamination both from the wells and also from pits, some leaks and that sort of thing," Anderson said in describing the town of Pavillion and surrounding areas. "The state has actually funded cistern systems for landowners to get new water sources because they can’t use ground water any more. Their domestic wells are polluted,"  . The Powder River Basin Resource Council operates a network of community organizers throughout Wyoming that focus on conserving natural resources in one of most pristine regions of the United States. . A study by Stanford University scientists published earlier this week shows dozens of instances between 2000 and 2005 where fracking near Pavillion took place at depths at or near the water level for domestic wells. The pollution from accumulated methane was so great that at one point flames would erupt when a lighted match was placed next to a sample of well water, Anderson explained. The Stanford study is likely to give fresh momentum to a nationwide effort to ban fracking, a process where water and chemicals are injected into the ground at high pressure to break apart rock formations to unlock pockets of oil and gas.

Regulators: More than 14,000 gallons of saltwater spill: North Dakota oil regulators say more than 14,000 gallons of saltwater have spilled from a central tank battery about 14 miles southwest of Grassy Butte in Billings County. The North Dakota Oil and Gas Division says Cobra Oil and Gas Corp. reported that the 14,280 gallons were released, contained and recovered at the site. The cause is listed as an equipment failure. The division says a state inspector has been to the site of the release. Saltwater, or brine, is a byproduct of oil production. It is many times saltier than sea water and can easily kill vegetation.

Opposition to Fracking Mounts in the U.S. - - -- Opposition to the practice of hydraulic fracturing or "fracking" has increased significantly in the past year as environmental concerns, such as earthquakes, have grown, even though the procedure has helped keep oil prices low.  In the past year, the price of oil has fluctuated between roughly $25 and $60 per barrel, a staggering drop from its peak of around $120 in mid-2014. One major reason the price of this commodity has remained so low is fracking, which now accounts for half of the oil production in the U.S. As recently as 2000, fracking made up only 2% of the nation's oil output. In Gallup's 2016 Environment survey, conducted March 2-6, Americans have a clearer position on fracking than they did a year ago. Last year, 40% said they favored fracking and 40% were opposed, with a substantial 19% not knowing about or having no opinion on fracking. In 2016, support for fracking has slipped to 36%, while opposition has climbed to 51%. The percentage of Americans with no opinion has dropped to 13%, perhaps as the term becomes more commonplace in the culture, or as the media has more extensively covered the arguments for and against fracking. Americans' turn against fracking comes as the percentage predicting there will be a critical energy shortage in the next five years has fallen to a new low, likely because of lower gas prices. With oil and gas relatively cheap, many Americans may not see the need to fracture the earth through fracking. Lower oil and gas prices may also be the reason a majority of Americans are opposed to nuclear energy for the first time. Additionally, more people would like to prioritize alternative energy over traditional energy sources. Fracking, while a relatively new way to extract oil, is still a means of harnessing fossil-fuel energy, helping explain why Americans may be growing averse to it. Republicans had the biggest drop in support for fracking, falling from 66% support in 2015 to 55% this year. Still, Republicans' support for fracking far exceeds support among independents (34%) and Democrats (25%). Views among the last two groups are essentially unchanged from last year.

Federal oil, gas leases stall over bird concerns in US West (AP) — Concerns over a bird that ranges across the American West continue to delay federal oil and gas lease sales, five months after Interior Secretary Sally Jewell proclaimed the Obama administration had found a way to balance drilling and conservation. The Interior Department said it will defer the sale of almost 60,000 acres of leases that were nominated by companies in eastern Montana as the agency works on new policies for greater sage grouse. More than 8 million acres of leases previously were deferred in Colorado, Utah, Nevada, Montana, North Dakota, South Dakota and Wyoming. It remains unclear when those will be freed up for sales or removed from consideration. Jewell said in September that Endangered Species Act protections were not needed for the grouse, a chicken-sized bird that inhabits sage brush ecosystems spread across 11 Western states. Grouse numbers declined significantly over the past several decades because of the loss of habitat. Officials said the decision to forgo protections avoided the need for draconian restrictions on drilling, livestock grazing and other activities that help drive the region’s economy. It followed a sweeping overhaul of federal public land management plans to limit drilling near grouse breeding areas and allowing oil and gas exploration to proceed elsewhere. The U.S. Bureau of Land Management still is crafting policies to put those plans into effect, agency spokesman Al Nash said. Completion of that work is several months away, he said.

New Mexico reviews water injection wells for damages  (AP) — New Mexico’s state land commissioner is ordering a broad examination of easements for injection wells used by the oil and natural gas industry to dispose of waste saltwater, in response to environmental damage at a site in the southeast of the state. State regulators blame Midland, Texas-based Siana Operating for spills of oily water at an injection well site 20 miles southwest of Eunice, New Mexico. They have been waiting for a remediation plan from the company to fix the damage and remove old equipment. Photographs taken by the land office showed an unlined pool of water, oil on the ground and traces of liquid on the ground nearby. Public Lands Commissioner Aubrey Dunn has instructed his agency’s district managers to look at each of about 60 saltwater disposal easements on state trust land for possible damages. Administrative reviews of leases also are planned. The site visits and reviews could take months to complete, agency spokeswoman Emily Strickler said. Wastewater from drilling operations is typically delivered by truck to disposal sites like Siana’s, where most oil is skimmed off before water is injected deep underground. State regulators accuse Siana of trespassing and damaging the site outside Eunice after it stopped making lease payments years ago. Siana owes $113,000 in unpaid royalties for water disposal and unpaid annual rental fees, according to a March 18 notice from the State Land Office.

This Is What's Happening To People Who Live Near The Worst Gas Leak In US History - On February 18, SoCalGas and the national media declared the “worst methane gas leak in U.S. history” permanently sealed, but just over a month later, hundreds of Porter Ranch residents who evacuated — and are now returning home — are suffering the same symptoms they suffered when the gas leak was active. They are experiencing nausea, dizziness, fatigue, headaches, nosebleeds, and many, including children, are also experiencing a new ailment: irritated skin rashes across their bodies. Neither SoCalGas, which owns the Aliso Canyon facility, the Los Angeles County Department of Public Health, nor any other government agency has provided a concrete explanation for these continued symptoms. In fact, one of Los Angeles County’s top medical officials recently told local physicians to refrain from performing tests to determine what is causing the symptoms. Late last week, preliminary lab tests from an independent UCLA study found evidence of benzene, a carcinogen, in at least two Porter Ranch homes. Benzene was reported to have been released in the 100 metric tons of methane that spewed into the Los Angeles basin for four months — a fact SoCalGas previously attempted to downplay and withholdMany residents have said the rashes, which can be extensive, are new and did not occur during the initial, months-long gas leak from October to February. During that time, thousands of families were evacuated and the Department of Public Health received 700 health complaints. Others reported experiencing skin irritation before they relocated, though it appears to be more widespread now.  “The main symptoms are headaches, difficulty breathing, watery eyes, coughing and general fatigue. It feels like I’m in a thick fog of sorts that’s oppressive,” she said. She and her husband were not eager to return home, still concerned about toxins in the area and the health of their newborn baby. But amid long delays receiving reimbursements from SoCalGas — and unable to charge more expenses on their credit card — they moved back to Porter Ranch. Ritenour told Anti-Media that like many other families, she and her husband have had to pay out-of-pocket for relocation services — and have experienced long delays receiving reimbursement checks.

Slow Train Coming – Crude By Rail Shipments to California Drying Up - Although California refineries initially met the criteria that spurred development of crude-by-rail (CBR) shipments to other coastal regions (lack of pipeline infrastructure and wide crude price differentials between stranded inland supplies and coastal alternatives) neither rail shipments or terminal build outs have made much of a dent in the Golden States’ crude supply. At their height in December 2013 CBR shipments into California reached 36 Mb/d – just 2% of the State’s 1.9 MMb/d refining capacity and they have since dwindled to a trickle. Today we examine the low pace of shipments. Recap: This is Part 7 in our series updating the sorry state of the CBR business in North America in 2016 compared to its heyday a few years back. In Part 1 of this series we noted CBR declines in response to narrower spreads between U.S. domestic crude benchmark WTI and international equivalent Brent. The lower spreads reduce the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines. CBR became a big deal when WTI was discounted to Brent by upwards of $25/Bbl in 2011 and 2012 because of congestion caused by a lack of pipeline capacity. Back then it made sense to use rail to get stranded crude to market. As a result, U.S. CBR shipments grew from 33 Mb/d in January 2010 to a peak of 928 Mb/d in October 2014 (according to Energy Information Administration - EIA). As new pipelines have been built out to provide less expensive options to get stranded crude to market so the WTI discount has narrowed and CBR traffic has declined. Primarily in response to the narrowing spread – overall CBR volumes fell during 2015 but not as fast as you might expect – dropping only 30% between January and December 2015 (latest EIA data) even though spot market economics for rail shipments often made no sense. As we discussed in Part 2 – looking at the epicenter of the CBR boom in North Dakota – the slower than expected decline in rail shipments is mostly because committed shippers and refiners continue to use rail infrastructure that they invested in (and made take-or-pay commitments to) and because some routes do not have pipeline access (East Coast and West Coast).

U.S. Lifted The Crude Oil Export Ban, And Exports Went…Down -- Just over three months after the authorities lifted the four-decade ban on crude oil exports, the U.S. has actually exported less this year than it did over the same period the year before, when the ban was still in place.  According to Clipper Data market intelligence cited by the Financial Times, we’ve seen a 5 percent decline in U.S. crude oil export volumes since the beginning of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per day now, compared to 342,000 barrels per day during the first months of 2015.  And there’s no official data yet—not since the beginning of this year, when the U.S. Energy Information Administration (EIA) noted that during the week ending 22 January, the U.S. had exported just shy of 400,000 barrels of oil, which again was 25 percent less than what was exported for the same week in 2014.An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude oil, but things haven’t really picked up pace since then.January’s cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude exports in December, according to data by the U.S. Census Bureau. Shipments during January went to Curacao and France, in addition to Canada, the primary destination. The total number of tankers that have set sail with U.S. crude oil will not be known until comprehensive data on February’s shipments is released by the U.S. Census Bureau.  Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments to leave the U.S. post-export ban went to Europe: one to Germany and the other to France, to be used in a refinery in Switzerland. Dutch media outlets reported in January that a tanker from Houston had reached Rotterdam port, but this remains just a drop in the global export bucket.

The U.S. Is a Big Oil Importer Again - In the three months since the U.S. lifted its 40-year ban on crude oil exports, a curious thing has happened. Rather than flooding global markets, U.S. crude shipments to foreign buyers have stalled. At the same time, imports into the U.S. jumped to a three-year high in what looks to be a reversal of a yearslong decline in the amount of foreign crude brought into the American market. As of March 25, the four-week average of imports was running at 7.9 million barrels a day, 9.8 percent higher than the year before. “That’s not a one-week blip,” says Tim Evans, an energy analyst at Citi Futures. “We’re seeing a consistent pattern.”   U.S. producers, who reaped the benefits of the shale revolution, no longer enjoy a steep price advantage over foreign rivals in selling to domestic refiners. Production has fallen by about 600,000 barrels a day from its peak of 9.6 million in 2015. Now refineries are buying foreign oil to replace the lost U.S. output—and, along with traders, are storing much of the less-expensive imported oil to sell when prices rise.  A week before the Senate approved lifting the export ban on Dec. 18, WTI traded around $3 below Brent. Over the next month, the discount disappeared, and, for the first time in six years, WTI traded at a premium to Brent for a few days in January. WTI is now less than a dollar cheaper than foreign barrels available on the Gulf Coast.  So refineries along the coasts are choosing to buy imports instead of WTI. One of the biggest winners is Nigeria, which is regaining lost market share. Imports from Nigeria surged to 559,000 barrels a day in mid-March, compared with an average of 52,000 for all of 2015. Refiners are also taking more heavy oil from Mexico and Venezuela. Not only is it about $9 a barrel cheaper than WTI, it’s also what U.S. refineries prefer to handle.

Scramble for oil storage extends, suggesting excess has room to run - (Reuters) - Trading houses are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production. Traders such as Vitol, Gunvor and Glencore are looking to extend or lock in new leases on storage tanks for crude oil and refined products in key hubs as far out as the end of 2018, sources at storage firms and trading houses say. Storing oil in a heavily oversupplied market has been a cash cow for traders and oil companies in recent years as markets bet that future oil prices will be significantly higher than current ones, in what is known as contango. Ian Taylor, chief executive of top oil trader Vitol, said on Tuesday that "stocks of crude and products continue to build and these will weigh upon the market". Like other traders, Vitol has invested in recent years in storage, and last August acquired the other half of its VTTI storage subsidiary for $830 million (£586 million). Oil prices have risen 30 percent since mid-February to around $40 per barrel, as global production shows signs of slowing, which has led to a significant narrowing of the crude contango despite a stock overhang of 300 million barrels. Crude oil has found more of a balance in recent weeks through supply disruptions in Iraq, Libya and Nigeria.

Oil Explorers Face Challenge to Secure Financing as Oil Prices Fall - Just a few years ago, when oil sold for about $100 a barrel, banks here were lining up to give international oil explorers access to billions of dollars to finance new drilling and projects. But as oil prices stay mired in a funk, the money is drying up. Senior executives from companies such as Tullow Oil and Cairn Energy have been meeting with their bankers for a biannual review of the loans that allow them to keep drilling and building out projects. For many European companies, it has been a nail-biting experience, as banks worry about the growing pile of debt taken on by oil companies with little or no profits. Several companies said they expect their ability to tap credit lines to be diminished after the reviews. Some lenders have brought in teams that specialize in corporate restructuring to scrutinize companies’ balance sheets, spending and assets, though not at Tullow or Cairn, a person familiar with the matter said. In the past, the reviews were generally conducted solely by banks’ energy specialists.The new scrutiny in Europe comes as oil-company debt emerges as an issue across the world with prices for crude near $40 a barrel—down more than 60% from June 2014. Globally, the net debt of publicly listed oil and gas companies has nearly tripled over the past decade to $549 billion in 2015, excluding state-owned oil companies, according to Wood Mackenzie, the energy consultancy. Reviews of these loans have high stakes. If a bank decides a company has already borrowed more than it can afford, the reviews could trigger a repayment, more cost cuts or even a fire sale of assets to raise cash.

SandRidge eyes bankruptcy, restructuring in U.S. shale bust - (Reuters) - SandRidge Energy Inc confirmed on Wednesday it has hired advisers to evaluate options including a bankruptcy filing, in what could be the most high-profile reorganization yet in U.S. shale oil industry. The company, battered by a 60 percent slide in oil prices since mid-2014, said in a regulatory filing there was substantial doubt about its financial viability. The company "has engaged advisors to assist with a private restructuring or reorganization under Title 11 of the U.S. Bankruptcy Code in the foreseeable future," the filing said. ( SandRidge officials could not immediately be reached by phone. SandRidge is one of dozens of oil and gas companies with piles of debt that look increasingly difficult to pay as revenues, oil and gas output, and reserves tumble on low prices. A pullback in expensive new drilling means SandRidge's oil and gas output fell 18 percent in the fourth quarter of 2015 compared with the same period a year ago. Reuters reported in January that the heavily indebted oil and gas company was exploring debt restructuring options, including an orderly bankruptcy. SandRidge, which is working with law firm Kirkland & Ellis and investment bank Houlihan Lokey on restructuring options, has drawn down its revolving credit line and has tried to trim costs with asset sales and job cuts. In December, Capital One Securities ranked SandRidge as the most indebted of 50 U.S. shale oil producers, noting that its net debt to cash flow ratio exceeded 10, far above a ratio of 2 that analysts consider desirable. (

Hybrid airship deal could benefit oil, mining industries (AP) — The long-held vision of giant airships nearly the length of a Canadian football field delivering workers and supplies to the oilsands and the North’s mining sector is a step closer to reality. U.S.-based Lockheed Martin has announced it has a letter of intent to sell 12 hybrid airships to Straightline Aviation of the United Kingdom. Straightline and Hybrid Enterprises, Lockheed Martin’s hybrid airship reseller, are finalizing the purchase agreement, which has a potential value of US$480 million. Straightline expects to start receiving the airships, which have a maximum speed of 110 kilometres an hour and a cargo capacity of 20 tonnes, in 2018 with the final ones arriving by 2021. The airships are expected to be deployed in Canada’s North, Alaska, southeast Asia and the Middle East. "They have to find ways of getting oil out of the ground less expensively, more efficiently, without compromising safety.” Zeppelins have long been held out as a promising idea to serve as a workhorse in Canada’s North and the oilsands, where huge pieces of heavy equipment often need to be transported to places with no all-weather roads.

Quakes from fracking on the rise in Canada - While man-made earthquakes in the central United States have been linked to disposal of drilling wastewater, a new paper links a growing pattern of quakes in western Canada to the specific practice of hydraulic fracturing. A team of scientists from Canadian universities and government agencies compared earthquakes in a broad swath of western Canada to "fracked" oil and gas wells and found a strong correlation. "In western Canada," the study said, "most recent cases of induced seismicity are highly correlated in time and space with hydraulic fracturing."  Their paper, being published today online in the journal Seismological Research Letters, linked quakes to 39 fracked wells in the foothills region of the Western Canada Sedimentary Basin. They also correlated seismicity linked to disposal operations, but that trend has remained steady in recent years. The number of quakes linked to fracking has shot up significantly. The earthquakes in the United States linked to fracturing have been relatively weak, usually barely strong enough to be felt. But quakes linked to fracking in Canada have been as strong as magnitude 4.6.

90 per cent of seismic activity in B.C.-Alberta region linked to fracking: Study: A new report, set to be published in the journal of the Seismological Society of America, examines an area straddling the B.C.-Alberta border and finds that between 90 and 95 per cent of seismic activity Magnitude 3 or larger in the last five years was caused by oil and gas activity, with most of it linked to hydraulic fracturing, or “fracking.” "The biggest implication of this study is that we can no longer deny the link between induced earthquakes and hydraulic fracturing," said Honn Kao, an earthquake seismologist with the Geological Survey of Canada and co-author of the report. Asked if more work is needed to better understand the link between seismic activity and resource extraction in Western Canada, Kao said: "The answer is definitely yes. "We now know much more about induced seismicity than four years ago when our research project started. But we still have a long way to go before we can claim that the phenomenon is well-understood," The report notes that between 2010 and 2015, "both seismicity rates and the number of HF (fracking) wells rose sharply," adding: "It is remarkable that, since 1985, most of the observed M =3 seismicity (activity of Magnitude 3 or greater) in the WCSB appears to be associated with oil and gas activity."

Fracking, not disposal, behind human-caused earthquakes in western Canada: study - New research suggests that hydraulic fracking of oil and gas wells is behind human-caused earthquakes in western Canada. The study, published Tuesday by a group of top Canadian researchers, concluded that it isn’t injecting wastewater underground that’s causing problems in Alberta and British Columbia — a major step in understanding seismic events in those provinces that have already changed regulations and caused public concern.“It’s critical that we get to a complete scientific understanding of the issue,” said David Eaton, a University of Calgary geophysicist and a co-author of the study. Fracking involves pumping high-pressure fluids underground to create tiny cracks in rock and release natural gas or oil held inside. Scientists have previously concluded that oilpatch activity can cause earthquakes by making it easier for faults in underground rock to slip, but they didn’t know whether the Canadian quakes were caused by fracking or by the injection of wastewater back underground.  Public interest in the issue has been high, especially after an event in January shook pictures on the walls of homes in Fox Creek, Alta., a community in the centre of the Duvernay oil and gas field. Measuring between a 4.2 and 4.8 magnitude, that quake was the largest of hundreds of similar shakers around the community since 2013.

Fracking—not wastewater disposal—linked to most induced earthquakes in Western Canada: A survey of a major oil and natural gas-producing region in Western Canada suggests a link between hydraulic fracturing or "fracking" and induced earthquakes in the region, according to a new report published online in the journal Seismological Research Letters. The study's findings differ from those reported from oil and gas fields in the central United States, where fracking is not considered to be the main cause of a sharp rise in induced seismicity in the region. Instead, the proliferation of hundreds of small earthquakes in that part of the U.S. is thought to be caused primarily by massive amounts of wastewater injected back into the ground after oil and gas recovery. The SRL study does not examine why induced seismicity would be linked to different processes in the central U.S. and western Canada. However, some oil and gas fields in the U.S., especially Oklahoma, use "very large amounts of water" in their operations, leading to much more wastewater disposal than in Canadian operations, said Gail M. Atkinson of Western University. It is possible that massive wastewater disposal in the U.S. is "masking another signal" of induced seismicity caused by fracking, Atkinson said. "So we're not entirely sure that there isn't more seismicity in the central U.S. from hydraulic fracturing than is widely recognized." The fracking process uses high-pressure injections of fluid to break apart rock and release trapped oil and natural gas. Both fracking and wastewater injections can increase the fluid pressure in the natural pores and fractures in rock, or change the state of stress on existing faults, to produce earthquakes.

Fracking Is Triggering Major Earthquakes in Western Canada - The vast majority of large earthquakes that rocked British Columbia and Alberta last year were caused by the oil and gas sector, and especially hydraulic fracking, according to a new report. The comprehensive study — published in the peer-reviewed journal Seismological Research Letters — looked at 12,389 fracking wells and 1,236 wastewater wells along the B.C.-Alberta border. The good news is only a small fraction of them — 39 fracking wells and 17 wastewater wells — caused any caused seismic activity. But the few that did were responsible for 90 per cent of seismic events over magnitude 3.0 to hit the region during the last five years. Fracking wells, specifically, were deemed responsible for 60 per cent. While there's been no damage or injuries connected to these human-triggered quakes, lead author Gail Atkinson worries it's only a matter of time. "Only a small fraction of hydraulic fracture wells induce significant earthquakes, but there are so many drilled every year, that this significantly changes seismic hazard in the region, and poses risks to critical infrastructure in the immediate vicinity of such operations," Atkinson, a professor at the University of Western Ontario's Department of Earth Sciences and an expert in seismic hazards, told VICE News. "These risks need to be more carefully considered and regulated to avoid damage."

Many Man-Made Earthquakes in Western Canada Can Now Be Linked to Fracking - Some fracking operations in western Canada are producing a surprising—and for many Canadians, troubling—side effect: earthquakes.  How widespread is the problem? According to a new study published Tuesday, at least 39 fracked wells in Alberta and British Columbia are suspected of triggering about 65 earthquakes between 2010 and 2015. "We now confirm that many induced earthquakes in Western Canada can be linked to hydraulic fracturing operations," study author Honn Kao wrote in an email to InsideClimate News. Kao is a scientist at Natural Resources Canada, the country's main environmental regulatory agency. The Canadian study is the latest in a string of investigations focusing on man-made quakes tied to the oil and gas industry in North America. Earlier this week, the United States Geological Survey published new maps that took into account the threat of man-made, or "induced," events for the first time. Unlike in Canada, however, the main culprit for man-made quakes in the central and eastern U.S. is the deep underground disposal of oil-and-gas-related wastewater—not fracking.Kao, along with his 12 colleagues from academia and government, also examined the link between wastewater disposal wells and earthquakes in Canada. They found wastewater activities had a smaller impact on earthquakes there, identifying 17 disposal wells with possible links to past seismicity, according to their work published in the journal Seismological Research Letters.

What the frack? Fracking may cause 90 percent of earthquakes in Western Canada: A new paper due to be released by the Geological Survey of Canada argues that more than 90 percent of the large earthquakes being caused in Canada may be the result of fracking. Proponents of fracking have long argued that the intensive extraction process will not induce earthquakes, but mounting evidence says otherwise. “Fracking” is a process by which high pressure water and chemicals are injected into cracks and holes in the earth. This forces natural gas and oil to the surface. The new study has discovered a link between hydraulic fracturing and the vast majority of the major earthquakes that have occurred in British Columbia and Alberta's oil fields since 1985.  Researchers examined every earthquake of a magnitude 3.0 or greater on the Richter scale since 1985. They also examined data from 12,289 hydraulically fractured wells. The researchers then found that more than 90 percent of the earthquakes appeared to be associated with a hydraulic well. Looking at the data further, scientists could only find links to seismic activity in roughly 5 to 10 percent of the earthquakes. Fracking induced earthquakes appear to be caused both by the initial drilling process, and the re-injection of waste water back into the earth after the process is completed. In the United States, fracking is suspected of causing earthquakes in Oklahoma, California, Colorado, and elsewhere. The full paper will be featured in the May-June issue of the journal of the Seismological Society of America.

Fracking earthquakes are rare, isolated events, says B.C. Oil and Gas Commission - Earthquakes from fracking are rare and usually not felt, says the B.C. Oil and Gas Commission, in response to a report released last week that show a definite link between hydraulic fracturing and large earthquakes. The report says 90 per cent of all large earthquakes with a magnitude larger than 3.0 in northeastern B.C are linked to fracking. It is simply a matter of time before a fracking-triggered earthquake causes damage, said one of the report's lead authors. However, the report also said less than one percent of fracking wells directly trigger earthquakes. That's the piece of information the oil and gas industry is highlighting. "These are isolated events, they're rare events. It's very rare that they are ever felt at surface," said Ken Paulson, chief operating officer for the B.C. Oil and Gas Commission.  Any wells that cause a 4.0 magnitude or larger earthquake must shut down and implement measures that mitigate the risk for another earthquake, said Paulson. "You can reduce the pressures or you can reduce the pump rates," he said. Alternatively, well operators can choose to avoid the fault altogether.

Alberta and oil prices: How Middle East geopolitics and religion affect our future - Calgary - CBC News: Calgary is unlike most other cities. It is a city of 1.2 million people separated from its two nearest urban neighbours by 300 kilometres of prairie and 1,000 kilometres of mountains. Yet as a city Calgary's economic fortunes are affected less by the surrounding landscapes and neighbouring cities, and more by difficult-to-comprehend and impossible-to-influence decisions made on the other side of the planet.   For better or for worse Calgary's well-being and prospects hinge on the world price of oil. Here is a look at the escalating rivalry between Iran and Saudi Arabia and what its impact might be on Calgary.

Fracking and man-made earthquakes in NZ: If fracking and deep well injection of the waste produced by fracking, is causing earthquakes in the US, are the same activities undertaken here causing earthquakes in New Zealand ?If fracking and ‘deep well injection’ of the waste produced by fracking, is causing earthquakes in the US, are the same activities undertaken here causing earthquakes in New Zealand ? 24 separate fracking procedures went ahead at just one well pad in Taranaki between Jan and March of this year. The oil and gas industry in New Zealand have aggressively adopted the technique known as hydraulic fracturing, or fracking, to shatter subsurface tightsand rock and liberate oil and gas from within that rock. And just like in the US, this process results in tremendous amounts of chemical-laden wastewater, which is disposed of by pumping it under pressure, into deep wells. The industry is so aggressive in NZ, they even fracked on Easter Friday, one of only two days in the year when business is expected to give way to family and religious rights. It is great that the Herald reports on the dangers of fracking in America, but now, we need media to get stuck in at home and report on the dangerous situation right here. With more than 1200 oil and gas wells drilled in and around NZ, and hydraulic fracturing being used routinely throughout Taranaki with plans to expand, the risk to our communities must be made known to all and no longer swept under the national rug.

Let’s listen to all the fracking arguments - I honestly don’t know how I feel about fracking - you hear a lot of horror reports of environment disaster in America, of landscapes laid bare and poisonous vapours spilling from the earth. Fracking companies will, no doubt, say that these are historical issues, that huge advances have been made and that checks and measures in the UK would protect our communities from the worst of the ecological impact. There is also a legitimate business argument for shale extraction - that it will create a lot of jobs and it will plough a lot of money back into rundown areas. Plus, there is also a genuine need for us to provide fuel as other natural resources diminish, or have to be imported from an increasingly unstable world. The other argument, of course, is that we are relying on information from a certain point of view. We are told that reserves are diminishing, that coal streams are no longer ‘sustainable’, and that alternatives need to be sought. You could, of course, rephrase this as ‘getting the rest of the coal out of UK streams will cost the shareholders’ and therefore we’d much sooner just close everything down and import in the cheap stuff in from abroad. Fracking, we can assume, means big money - particularly if they are prepared to throw millions at the communities that it impacts on. But then, this is nothing new. Much of our region has had its coal taken out, its landscapes marred and its economy blighted for generations. What is different is that, in the case of coal, those who made the profit kept all of it. What I do know, however, is that there are a lot of arguments spinning around here, and we should listen to them all.

Spain's Lower House of Parliament Approves Ban on Fracking: Spain’s lower house of parliament, the Congress of Deputies, on Tuesday adopted a draft law that would ban the oil and gas companies from production with the help of hydraulic fracturing, known as fracking.  The draft law was proposed by the Left Republicans of Catalonia party and was supported by the parliamentary majority. Two parties — the right-wing conservative People’s Party and the center-right regionalist Asturias Forum — voted against the proposal. The centrist Citizens party abstained from a vote. The law requires the government to ban all fracking-related activities, citing environmental concerns. Over 120 companies have been granted a license for fracking across Spain. Canadian energy company BNK, which is planning to extract oil in the Burgos province, is ready to start work in late 2016.

Argentina oil production extends decline as rig activity slows - Argentina’s oil production declined 1.6% in January, extending a slide that started in 1998, energy ministry data reveals. Crude production dropped to 524,947 barrels per day (BPD) in January, from 533,261 BPD one year earlier, the ministry said. January’s production was 38% less than the record 847,000 BPD in 2004, Platts reported. “Most of the fields in Argentina are mature and they are declining in production,” Alejandro Gagliano, a partner at Giga Consulting, an oil industry consulting firm in Buenos Aires, told Platts Tuesday. “A lot of investment is needed to sustain production.” Argentina has not attracted much oil investment since a 2001-02 economic crisis ushered in a populist-left government whose policies cut profit potential and made it harder for businesses to plan. These included price caps, trade restrictions and bans on paying dividends abroad. A lack of access to foreign capital markets and low interest rates, a response to the country’s $100 billion bond default in 2001, further discouraged spending. Foreign companies left, and those that stayed reduced spending. The country’s rig count fell to roughly 45 in 2002, from 50-100 in the mid-1990s, when production was growing after the county started opening up fields for private investment, Kallanish Energy reports. More rigs were deployed during the 2000s, reaching an average of 60 to 90, according to Baker Hughes. The fleet reached a peak of 112 in November 2014, holding steady above 100 between March 2014 and November 2015, Platts reports.

Norway Has More Problems Than Just $40 Oil -- Bloomberg -- Over the past 25 years, exploration wells off Norway averaged 27 million bbls -- 27 million bbls/exploration well -- until this past year. This past year, on average, each exploratory well off Norway averaged less than 5 million bbls of oil and gas.  Bloomberg is reporting Norway has more problems than $40 oil: The collapse of crude prices isn’t the only problem facing energy companies in Norway: Explorers in western Europe’s biggest oil-producing nation also have had their leanest drilling spell in almost a decade. Companies searching off Norway found less than 5 million barrels of oil and gas for every exploration well drilled last year, the lowest ratio since 2006. That compares with a 27 million-barrel average over the past 25 years.   The dismal results, due in part to the depletion of the North Sea, are bad news for a country whose oil production has shrunk by half since 2000. The slump in prices has already dried up income from crude extraction, which feeds the world’s biggest sovereign wealth fund and has made Norwegians some of the richest people on the planet. In January the government made its first withdrawal from the fund since it was set up in the 1990s as the market rout eroded growth.   The dwindling drilling success has left the country’s top explorers -- Statoil ASA and Lundin Petroleum AB -- impatient to tap an entirely new region of the nation’s Arctic, bordering Russian waters. Norway plans to award licenses in an area known as the Barents Sea Southeast before summer and drilling could begin as soon as 2017.

Holy Gas: Donald Trump’s Foreign Policy Team Member Pushed Offshore Drilling in Israel“ --  When Republican Party presidential campaign front-runner Donald Trump named 2009 DePaul University graduate George Papadoupolous as a member of his foreign policy advisory team, some in the media raised eyebrows, while others jested that his wunderkind status makes him more likely to serve as office coffee fetcher than in a position of such prestige. But you aren’t named to sit on such a team without serious connections, few of which the media made with regards to Papadoupolous, who has spent most of his professional career working as a research assistant at the Hudson Institute and now works as director of the Center for International Energy and Natural Resources Law & Security at the London Center of International Law Practice. The story of who Papadoupolous is begins and ends with the Hudson Institute, a think-tank with a long history of climate change denial and anti-science advocacy. A DeSmog investigation has revealed that the Hudson Institute, via Koch Brother’s funding its advocacy efforts, has proven instrumental in opening up Israel’s offshore natural gas reserves for drilling in the Mediterranean Sea for Noble Energy. Likewise, the efforts of Papadoupolous have helped pave the way for Noble to tap into the Mediterranean. One may not realize the full extent of this, though, without some Hebrew language skills.

UNAOIL: How the West Bought Iraq -- Basil Al Jarah was an oil industry fixer. But had authorities known his true business, they might have taken a far keener interest in the man waiting for a plane to Amman in 2011. Because by that stage, Al Jarah and his employer, a Monaco-based company called Unaoil, had cultivated an astonishing web of influence in the upper echelons of Iraqi power – all based on the simple expedient of bribing the right man at the right time. As tens of thousands of secret emails reveal, Al Jarah and Unaoil were at the heart of a global bribery operation funded, sometimes wittingly, by dozens of US, British, European and Australian multinationals. These firms paid huge sums to Unaoil. In return, Unaoil used its friends in high places to win billions of dollars worth of government contracts. In Iraq, the man charged with making those friends was Al Jarah. From 2003 onwards, he used his influence to help deliver huge contracts to Unaoil's clients. It did not matter if these clients were more expensive or less capable than their competitors. Unaoil and Al Jarah were, in effect, fleecing the people of Iraq, and in the process making a mockery of the US government's promise, after toppling Saddam Hussein, to ensure Iraq's oil wealth would benefit all Iraqis.  Al Jarah was careful to cover his tracks. He struck deals in hotel rooms late at night and used code words to communicate. To understand the scale of Unaoil’s Iraq operation, someone would have to break these codes. And to do that they would need access to thousands of emails. It is almost certain Al Jarah never believed this possible.  But last year, Fairfax Media and Huffington Post began investigating the underbelly of the global oil and gas industry. After many months of digging and a trip across Europe, our reporters uncovered a treasure trove of emails and memos.  They reveal him routinely bribing government officials who were deemed “useful to us” and to Unaoil's clients – multinationals such as British firms Rolls-Royce, Petrofac and Clyde Pumps, US listed giants Weatherford, Cameron/Natco and FMC Technologies and European firms such Saipem, SBM Offshore and MAN Turbo.

Unaoil Bribery Scandal: The company that bribed the world -- In the list of the world's great companies, Unaoil is nowhere to be seen. But for the best part of the past two decades, the family business from Monaco has systematically corrupted the global oil industry, distributing many millions of dollars worth of bribes on behalf of corporate behemoths including Samsung, Rolls-Royce, Halliburton and Australia's own Leighton Holdings. Now a vast cache of leaked emails and documents has confirmed what many suspected about the oil industry, and has laid bare the activities of the world's super-bagman as it has bought off officials and rigged contracts around the world. Amassive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft. After a six-month investigation across two continents, Fairfax Media andThe Huffington Post can reveal that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia’s Leighton Holdings and Korean heavyweights Samsung and Hyundai. The investigation centres on a Monaco company called Unaoil, run by the jet-setting Ahsani clan. Following a coded ad in a French newspaper, a series of clandestine meetings and midnight phone calls led to our reporters obtaining hundreds of thousands of the Ahsanis’ leaked emails and documents. The trove reveals how they rub shoulders with royalty, party in style, mock anti-corruption agencies and operate a secret network of fixers and middlemen throughout the world’s oil producing nations.

There's A Huge New Corporate Corruption Scandal. Here's Why Everyone Should Care.: Most people remember that the Arab Spring started with a guy who lit himself on fire. What they don’t remember is that he did it as a protest against corruption:   The Arab Spring was “mostly about corruption,” said FBI Special Agent George McEachern, one of the leading investigators of global graft. “Corruption leads to failed states, which leads to terrorism." That's what makes the corruption revealed in a new trove of confidential emails from a mysterious Monaco-based company called Unaoil so significant. On Wednesday, The Huffington Post and its Australian partner, Fairfax Media published the results of a months-long investigation of Unaoil, an obscure firm that helps big multinational corporations win contracts in areas of the world where corruption is common. Hundreds of major international corporations -- including Halliburton, its former subsidiary KBR, Rolls-Royce and Samsung -- counted on Unaoil to secure lucrative contracts in Iraq, Kazakhstan, Libya, Syria, Tunisia, and other countries in Africa, the Middle East, and the former Soviet Union, tens of thousands of internal emails and documents reveal. It's common for large multinational corporations to partner with smaller firms with local expertise to win contracts. But in many cases, Unaoil wasn't winning contracts because of its expertise -- it was winning them by paying millions of dollars in bribes to corrupt officials.

Mainstream Media Ignores Blockbuster Expose of Massive Bribery in Iraq by Unaoil -- Yves Smith - The only rationale that made sense for why the US launched the Iraq War was fun and profit, specifically, to develop Iraq’s oil reserves, the second biggest in the world. Under Saddam Hussein, development and even maintenance had languished. The oil for food program, which was meant to assure that oil revenues were spent on food, pharmaceutical, and other essentials for the population, was rife with bribery. If you look at the Wikipedia entry, you’ll be impressed by how many were on the take, including even some reporters who received oil “coupons” that entitled holders to receive at least nine million barrels of oil.    Even though George Bush declared that Iraq’s oil belonged to the Iraqi people (which meant the West would still “help” and take its cut), a blockbuster report from a joint investigation by Fairfax Media and Huffington Post reveals the depth and reach of a massive looting scheme, with an obscure Monaco family oil company, Unaoil, as the fixer in chief. The story implicates a large number of multinational companies as well as two Iraqi oil ministers. At least one of the concerns called out in the story, Rolls Royce, is already under investigation by the UK’s Serious Fraud Office.. The overview and first story from this three part series have been releases. From the overview: A massive leak of confidential documents has for the first time exposed the true extent of corruption within the oil industry, implicating dozens of leading companies, bureaucrats and politicians in a sophisticated global web of bribery and graft. After a six-month investigation across two continents, Fairfax Media and The Huffington Post can reveal that billions of dollars of government contracts were awarded as the direct result of bribes paid on behalf of firms including British icon Rolls-Royce, US giant Halliburton, Australia’s Leighton Holdings and Korean heavyweights Samsung and Hyundai….Rolls-Royce and Petrofac from Britain; US companies FMC Technologies, Cameron and Weatherford; Italian giants Eni and Saipem; German companies MAN Turbo (now know as MAN Diesal & Turbo) and Siemens; Dutch firm SBM Offshore; and Indian giant Larsen & Toubro. They also show the offshore arm of Australian company Leighton Holdings was involved in serious, calculated corruption.

Unaoil Corruption Scandal: Monaco Raids Company Offices Amid Revelation Of Involvement Of Foreign Companies --  Police officials in Monaco raided offices and homes of officials from oil company Unaoil on a request from the United Kingdom after allegations of corruption, involving several foreign companies. The large-scale corruption was revealed in a joint report Thursday by Australia's Fairfax Media and the Huffington Post which said that Unaoil and its owners — the Ahsani family — used multi-million dollar commissions to bribe corrupt government officials in oil-rich countries to win contracts for companies like Texas-based oilfield services giant Halliburton, its former subsidiary KBR, U.K.-based automaker Rolls-Royce, South Korean conglomerate Samsung and automaker Hyundai. Monaco government said in a statement on its website, cited by Reuters, on Friday that the U.K.’s Serious Fraud Office (SFO) had sent an urgent request for international assistance in criminal matters. The joint report by the two media outlets said the U.S. Department of Justice, anti-corruption police in the U.K. and Australia had started a joint investigation into the dealings of Unaoil. Although the Reuters report said the company has not yet commented on the scandal, the Thursday joint report said the company denied any wrongdoing. “Monaco authorities conducted searches of the homes of the leaders of the company Unaoil and at its headquarters in the Principality,” the statement from Monaco’s government said, according to Sydney Morning Herald, adding: “The leaders of this company were also interviewed on 29 and 30 March 2016. These searches and interviews were conducted in the presence of British officers, in connection with a case of vast corruption with international ramifications that involves many foreign companies active in the petroleum sector.”The statement added: “The items collected during the search will be now be used by the British authorities in their investigations.”

Police Raid Offices Of Monaco Firm Accused Of Bribing World's Oil Producers -- Two days ago we brought you excerpts from a Huffington Post investigative report on Unaoil, a previously obscure Monaco company that allegedly functions as a kind of Bribery Incorporated for state actors looking to curry favor with the world’s oil exporters. A treasure trove comprising “hundreds of thousands” of leaked e-mails and documents led Huff Post and Fairfax Media to publish an expose on the “jet-setting Ahsani clan” which apparently has links to nearly every producing country on the planet and knows just which palms to grease when Western governments need to make inroads."They rub shoulders with royalty, party in style, mock anti-corruption agencies and operate a secret network of fixers and middlemen throughout the world’s oil producing nations," Huff Post wrote, on the way to documenting the Ahsani family's connections to Bashar al-Assad, Muammar Gaddafi, and the regime in Tehran, among other governments. Pictured below are Ata Ahsani and his two sons, Cyrus and Saman. Apparently, the family is worth more than $200 million which Huff Post reckons makes them part of the "global elite." The shady family business has been certified by anti-corruption agency Trace International which the Post rightly says "raises serious questions about the worth of such international accreditation."  On Friday, we learn that the Ahsanis' homes as well as Unaoil's offices have been raided by authorities at the request of Britain's Serious Fraud Office. "Authorities in Monaco have raided the headquarters of an oil company, as well as the homes of some of its bosses, as part of a British-led investigation into a corruption scandal implicating businesses all over the world," The Guardian writes. "In a statement released on Thursday, it said that the Monaco-based firm Unaoil was at the centre of the inquiry and that officials had acted after an urgent request for assistance from the UK’s Serious Fraud Office (SFO)." “These searches and interviews were carried out in the presence of British officials as part of a vast, international corruption scandal implicating numerous foreign oil industry firms," Monaco said in a statement. "The information collected is going to be examined by the British authorities as part of their investigation."

Unaoil raided on corruption charges in Monaco, multinationals implicated - Oil company Unaoil and the homes of its bosses have been raided by authorities in Monaco as part of a UK-led corruption investigation involving several multinational oil businesses. Unaoil directors were questioned by Monaco police on Tuesday and Wednesday, the Monaco government said in a statement. Officials in the principality acted after receiving a request from the UK’s Serious Fraud Office (SFO) and information collected by Monaco’s investigation will be used by UK authorities as part of their investigation, the statement said. The raid follows a joint report published on Wednesday by Australia’s Fairfax Media and the Huffington Post. The report alleges Unaoil “systematically corrupted the global oil industry” by paying millions in bribes on behalf of multinational oil companies to secure contracts in countries such as Kazakhstan and Iraq. Eni is one of the companies implicated by the report. The Italy-based oil producer told Reuters it plans to investigate the claims of corruption, adding that “none of the people mentioned in the articles are currently employed by Eni”. Unaoil’s chief executive, Ata Ahsani, said “The answer is absolutely no” when asked by both publications whether Unaoil had paid bribes. The joint report is the result of a six-month investigation by journalists, and cites hundreds of thousands of internal emails sent between 2002 and 2012. Unaoil has reportedly not questioned the authenticity of the files. Fairfax Media said the emails hold evidence of bribes paid to Middle Eastern oil chiefs and other officials. A number of unnamed Australian companies, including WorleyParsons, are also said to be implicated.

Police raids and more revelations: the fallout of the Unaoil scandal: In a day of dramatic developments, the Monaco company at the centre of Fairfax Media's global bribery revelations has been raided by police, while the board of top-100 Australian company Primary Health Care admitted it knew its chief executive was being investigated before he was appointed. Now Fairfax Media can reveal another Australian company to be hit by corruption allegations (unrelated to Unaoil), with federal police investigating consulting giant Sinclair Knight Merz over allegations that the company paid kickbacks to overseas officials. In continuing fallout from the joint Fairfax Media-Huffington Post investigation into corruption in the oil industry, the Monaco government revealed that it had raided the homes and offices of Unaoil's principals, who ran the company exposed as the global bagman for the oil industry. Unaoil executives "were also interviewed… in the presence of British officers in connection with a case of vast corruption with international ramifications that involves many foreign companies active in the petroleum sector," the Monaco government's statement said. Fairfax Media revealed on Thursday that the British police had teamed up with the Australian Federal Police, the US Department of Justice and the FBI to investigate the vast cache of leaked Unaoil emails on which our stories have been based.  Unaoil was hired over almost two decades by large multinational firms, including the offshore arm of Australia's Leighton Holdings, to pay bribes to top overseas officials in return for winning government funded contracts in oil-rich nations.Fairfax also revealed that the chief executive of Primary Health Care, Peter Gregg, was under criminal investigation over a $15 million payment he allegedly made in a former job as chief financial officer of Leighton Holdings. He appears to have signed documents making the payment to a United Arab Emirates firm, Asian Global Projects and Trading, to guarantee the supply of steel to the Australian construction giant at "preferred and commercially beneficial" prices. No steel was ever supplied and Fairfax Media has obtained documents revealing the Dubai company that received the money has engaged in bribery and money laundering.

'Biggest bribery scandal': US, UK, Australia launch probe into mass oil industry corruption - An investigation into a massive global oil bribery scandal has been launched by authorities in the US, Britain, and Australia, after leaked confidential files indicated that some of the world’s most powerful corporations were part of the racket.  The global investigation by authorities comes after the biggest leak of confidential files in the history of the oil industry, obtained by The Huffington Post, unveiled widespread corruption taking place in oil-rich countries. The US Department of Justice, FBI, UK National Crime Agency and Australian Federal Police are now jointly investigating the allegations in what could become the world’s biggest probe into corruption allegations. The scandal is being revealed in a three-part series titled The Bribe Factory, which is the result of a six-month investigation by The Huffington Post and Australia's Fairfax Media. The report’s first release disclosed apparent dodgy dealings in the Middle East and North Africa. The second will focus on alleged corruption in former Soviet states, and the final will focus on Asia and Africa. Citing the trove of leaked documents, the report has revealed that government contracts worth billions of dollars were awarded on the basis of bribes, many of which were organized by a 'fixer' company known as Unaoil. Although many outside the oil industry have never heard of Unaoil, it has allegedly been participating in major illegal deals behind the scenes, convincing Western corporations that they will not be able to get contracts in oil-rich countries without its help. The company stands accused of portraying itself as a lobbyist and charging major companies multi-million dollar fees in exchange for bribing government officials in order to get good deals for the corporations. According to the leaked documents, major international companies across the US, Europe, Asia, and Australia have taken part in dealings with Unaoil.

Khafji oil field restart seen bearish for Mideast crude market - The Middle East sour crude complex is likely to come under bearish pressure on news of Kuwait and Saudi Arabia agreeing to restart production from the 300,000 b/d offshore Khafji oil field, but the market was slow to react Wednesday in the absence of a clear timeline for the resumption. Analysts say the plan to resume production in the Saudi-Kuwait neutral zone field also raises a broader question on the commitment of some major oil producers to freeze output to support prices. "...even the idea of a freeze [in oil production] may be tested by [the] announcement that Saudi Arabia and Kuwait are preparing to restart the 300,000 b/d Khafji oil field. Without some clarification to the effect that overall output won't be increased, even the freeze idea may not hold," Citi analyst Timothy Evans said in a note to clients on Tuesday. OPEC members Saudi Arabia, Qatar and Venezuela last month agreed with Russia to maintain production at January levels, if other oil producers joined. Major oil producers are due to meet again in Doha, Qatar, on April 17 to discuss a potential freeze in production.

These Aboriginal Groups Are Trying to Halt a Natural Gas Boom in Australia's Northern Territory  -- Conservationists and indigenous communities in northern Australia are gearing up for a fight, as some of the world's largest energy companies line up to frack the region for shale gas. Santos, Sasol, Inpex and, more recently, businessmen who have made billions from fracking in the United States have all been lured to the McArthur Basin in Australia's Northern Territory. American Energy Partners (AEP), the company established by US fracking pioneer Aubrey McClendon — who died two weeks ago — has sealed four deals that cover a total area of 55 million acres of oil and gas properties. Texas-based private equity firm Energy & Minerals Group, meanwhile, has snapped up an 18 percent stake in a venture with Australian company Pangaea Resources. While production is still at an exploratory stage, prospecting is causing concerns among the four main Aboriginal communities in the Gulf of Carpentaria region. The area is one of the most remote parts of Australia's northern tropical savanna, a highly biodiverse region home to substantial areas of Aboriginal-owned and managed land. Traditional owners and activists fear fracking could contaminate ground and surface water supplies and the unique natural environment."We need clean water, we need clean country," Gadrian Hoosan, a spokesman for the Garawa people, said. "We need sustainable jobs in the community that will last for a lifetime — fracking doesn't provide that."

Exxon Mobil in talks to buy into Eni's giant Mozambique gas field -sources  --Exxon Mobil is in talks to buy a stake of around 15 percent in Italian oil major Eni's giant Area 4 gas field in Mozambique, two sourcesfamiliar with the matter said. Exxon is seen as a front-runner to buy into Eni's gas development and this would be the U.S. firm's first big acquisition since the oil price collapse. Area 4, in which Eni holds a 50 percent operating stake, is located in Mozambique's Rovuma Basin, where gas in place amounts to some 85 trillion cubic feet -- one of the richest gas discoveries of recent times.  Two sources said Exxon was in talks to buy a stake of that size (15%), one of whom said Eni was also negotiating with other firms. A banking source familiar with the matter said Exxon was interested in buying Eni's whole 50 percent stake, while a fourth source said Exxon was looking at unspecified stakes in all Eni holdings up for sale, also including assets in Egypt and elsewhere in Africa.

Shell Looking To Sell The Famous Brent Field, But Who Will Buy?  - Royal Dutch Shell has confirmed media reports that it is looking to sell part of its production holdings in the North Sea, saying all these assets—33 in total, including the Brent field that gave its name to the international benchmark—are being reviewed along with others, in other parts of the world.  The sale is part of Shell’s efforts to raise around $30 billion to restore some of the money it spent on buying BG Group for around $57 billion. Plans are to carry out the sales over the next three years. Of the total, less than $10 billion is expected to be generated this year, Shell’s CEO Ben van Beurden said at the presentation of the company’s 2015 financial results.  No buyers have been confirmed, although reports have it that one company interested in the assets is private equity fund Neptune Oil and Gas, founded by former Centrica head Sam Laidlow. The $5-billion fund is looking for distressed assets from the energy industry around the world. Shell’s divestment plan is quite ambitious given the current market environment. It is under pressure from investors to deliver the sales and cut further jobs to prop up its balance sheet, so it may have to settle for a lower price than it would be happy with. It’s a buyers’ market out there, so if Neptune decides it wants to snap up the North Sea fields, it’s very likely that it will dictate the terms. Especially if no other candidates turn up.

Connecting The Dots: Shell, Brent, And Saudi Aramco -- March 31, 2016 --It's being reported that Shell wants to sell some/all of oil producing assets in the North Sea, including it's Brent field. The story is here.  There are very few comments but this one is interesting: Saudi Aramco should buy all of Shell. Then turn around and sell the global reserves (Saudi doesn't need more oil that's harder to produce than its own). The proceeds from the oil will equal or exceed the costs of the whole Shell company, which means Saudi Aramco gets Shell's refineries, petchem plants and other downstream physical assets at no costs.  At least one other comment suggested Saudi Aramco was a player.  With Shell and Saudi Aramco recently splitting up their midstream/downstream assets in the US, presumably to make it easier for Saudi Aramco to monetize its assets, one wonders if the comment above "holds water."  Also, note that in an earlier post (the same link as above): After the split, Saudi Aramco wants to buy more US refineries. Reuters is reporting: Saudi Arabia's national oil company wants to buy more U.S. refining and chemical plants to expand its footprint in the world's largest energy market once the break-up of its joint venture with Royal Dutch Shell Plc is complete.  Ending an often rocky nearly 20-year relationship, Shell and Saudi Aramco announced on Wednesday plans to break up Motiva Enterprises LLC after almost two decades, dividing its assets and leaving Aramco with one plant, the nation's largest crude oil refinery, in Port Arthur, Texas.  Officials from Saudi Refining, the downstream arm of Aramco, told employees following the announcement that the state-owned firm was intent on buying more assets once the Motiva break-up is finished. I find it "hyperbole" to suggest Saudi Aramco would buy Shell, but at least "everyone" is on the same page when it comes to talking about Saudi Aramco acquiring more refining and chemical plants around the world.

Implications of shale oil for Arab producers | VoxEU OX- Lower oil prices are putting increasing pressure on Arab oil producers, and many pundits have been quick to blame US shale oil producers for the decline in prices and in Arab oil revenues. This column measures how much the the shale oil boom contributed to the fall in the global price of crude oil. The Brent price of crude oil since 2011 would have been as much as $10 per barrel higher in the absence of US shale oil. But as large as this effect is, it pales in comparison with the decline in the price of oil that took place after June 2014, to which shale oil actually contributed little. The column goes on to discuss the policy options facing Arab oil producers.

Oil Firms Slow Exploration to Weather Low-Price Era - WSJ: —The world’s biggest oil companies are draining their petroleum reserves faster than they are replacing them—a symptom of how a deep oil-price decline is reshaping the energy industry’s priorities. In 2015, the seven biggest publicly traded Western energy companies, including Exxon Mobil and Royal Dutch Shell, replaced just 75% of the oil and natural gas they pumped, on average, according to a Wall Street Journal analysis of company data. It was the biggest combined drop in inventory that companies have reported in at least a decade. For Exxon, 2015 marked the first time in more than two decades it didn’t fully replace production with new reserves, according to the company. It reported replacing 67% of its 2015 output. In the past, shrinking reserves could send investors and executives into a panic over a company’s future prospects. Italian oil producer Eni has shifted spending away from high-risk, high-reward projects in favor of squeezing more out of fields that are already producing. That shift shows how producers are responding to low prices by pulling back on new exploration in favor of maximizing profits. The risk is that cutting back on new projects now, when prices are low, could lead to shortages and price spikes in the future. Historically, energy companies spent heavily in the present to find resources for the future—new wells that would replace the barrels they pump every day. When they decide they can extract the oil and gas economically, firms book those resources as proved reserves, untapped inventories to be exploited at a profit down the road. The current oil glut has forced companies to cut spending wherever they can. So they have pulled back on exploratory drilling and spending on new projects. Across the oil sector last year, companies approved just six new developments, according to Morgan Stanley researchers.

This is what an oil bust looks like — In the oil and gas patches it has become clear that the economic gains of the so-called shale revolution are being wiped away by one of the worst fossil fuel downturns in U.S. history. Now, the oil companies are crying for help. First, they got the crude oil export ban lifted. Next they want proposed federal rules on methane emissions weakened or scrapped. As if any of that will help. Back in 2010, the price of a barrel of Brent crude (the international oil price benchmark) topped $80. That made it profitable to extract oil from tight shale formations, which is especially costly. A drilling frenzy ensued, domestic oil production skyrocketed, oil companies raked in profits and oil patch communities prospered. But all that new oil on the market, plus China’s slowing economic growth, began to dampen oil prices in the summer of 2014. Instead of curtailing production to keep prices afloat, OPEC’s leaders launched a thinly veiled price war, clearly aimed at putting U.S. producers out of business. Here are some indicators that OPEC won the war:  The U.S. rig count has collapsed to levels not seen since, well, ever. With both oil and natural gas prices at near-record lows, it simply doesn’t make economic sense to spend up to $10 million to drill a well. So the rigs are shutting down. In September 2014, 1,931 oil and gas rigs were operating in the U.S.; today there are just 476. Energy-state tax revenues are crashing. A single oil or gas well can be a big moneymaker for state and local governments, generating royalties, severance taxes, gross receipt taxes and property taxes. Price shifts hit these revenue streams hard. During the last quarter of 2015, all the major Western energy-producing states saw significant decreases in severance tax revenues, levied on the value of produced oil and gas and minerals, compared to the previous year..  Even as unemployment declines nationwide, it’s going up in the oil and gas patches. Following the great Recession of 2008, the counties that were fastest to recover tended to be those with a lot of oil and gas drilling. Now, the opposite is true. North Dakota, whose economy soared between 2010 and 2014, is down in the dumps. Nearly 20,000 jobs have been lost in the state during the last year, most of them in the oil and gas and construction sectors.

Oil Enthusiasts Stay Out of Rally Led by Shrinking Bearish Bets - Oil enthusiasts haven’t been jumping on board the latest rally. As crude has soared more than 50 percent since Feb. 11, the number of bets on increased prices has barely budged. Instead, the upward pressure on prices appears to have come from traders cashing out of bearish wagers at an unprecedented pace. The liquidation of short positions during the last seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest on record. "The rally has come from shorts getting scared out of their positions, and you’re not seeing a lot of money coming in on the long side," . "It really calls into question the fortitude and staying power of the rally." There has been plenty of bullish news to stoke the rebound. About 15 or 16 oil-exporting countries will attend a meeting to consider an output freeze next month, Organization of Petroleum Exporting Countries Secretary General Abdalla El-Badri said in Vienna last week. U.S. crude production fell to the lowest since November 2014. But American supplies remain stubbornly abundant as imports surge, and a production freeze by Saudi Arabia and Russia would still leave those countries’ output at historically high levels. "Even a freeze will lock in record production, and the countries not participating -- Iran and Libya -- have the most barrels to add,"   Short positions on West Texas Intermediate crude, or bets that prices will fall, have dropped by 131,617 contracts since Feb. 2, the biggest liquidation in CFTC data going back a decade. To close out a bearish position, traders buy back futures and options, putting upward pressure on prices. In the same period, bullish wagers fell by 971.

It's Official: The Oil Surge Was Driven By The Biggest Short-Squeeze Ever -- Two months ago, just before crude dropped to 13 year lows, we warned oil traders that there is "a constant short squeeze threat" because "oil shorts are at all-time highs", adding that "we have seen extreme short positioning building up in the oil futures market. The quantity of short positions opened is at an all-time high for Brent, and still high for WTI futures."  We also warned that "a positive surprise could happen quite sharply, as short positions are likely to be squeezed by a profit-taking move. On WTI, the in-the-money short positions are really dominating at the front end of the curve while out-of-the-money long positions are dominating at the long end of the curve: the front end of oil curve could thus be more exposed to some profit-taking." It was, and just a few days later, the algos took this warning to heart and, courtesy of the most recurring headline (that of a "farcical" oil production freeze) as a recurring catalyst, unleashed an historic short squeeze. Actually make that a record short squeeze. Wait, that's impossible: surely it was more than just shorts covering and oil rose because actual longs were piling in, one could say. One would be wrong, and it is now official: as crude soared 50% since Feb. 11, Bloomberg writes, the number of bets on increased prices has barely budged. "Instead, the upward pressure on prices appears to have come from traders cashing out of bearish wagers at an unprecedented pace. The liquidation of short positions during the last seven weeks covered by data from the U.S. Commodity Futures Trading Commission was the largest on record."

Crude Rises After Gasoline Draw, Crude Build --Following last week's major surge in crude inventories, API reported a 2.6mm build (against expectations of a 3.1mm build) - 7th week in a row - which briefly jumped crude prices higher. A 319k draw at Cushing combined with draws in Gasoline (6th week in a row) and Distillates left oil pushing back to late-day highs. API Details:

  • Crude +2.5mm (+3.1mm exp.)
  • Cushing -319k (confirming Genscape
  • Gasoline -1.94m
  • Distillates –95k

As Net-Long Positions Near Records, Is The Oil Rally Overdone? - Since February, major investors have predicted that oil prices were poised for a huge rally.Hedge funds and money managers piled into bets on rising oil prices, going long on the crude rally.  Short sellers were squeezed, and the stampede become too much for many, resulting in a large liquidation of shorts. The short selling drove the rally, increasing oil prices by about 50 percent since early February. That has fueled optimism that the worst of the oil bust is over. And there is good reason to think that a rally is justified. U.S. oil production is off by about 600,000 barrels per day since the April 2015 peak. Disruptions in Nigeria and Iraq have caught the markets by surprise, knocking off another several hundred thousand barrels per day. Gasoline demand is at record highs in the United States, and OPEC is a few weeks away from meeting to discuss its production freeze deal, which may not cut into oversupply, but has nevertheless given the markets some hope. But there are warning signs on the horizon. The fundamentals are still very weak. Inventories are at record highs in the U.S. and still rising, and global oil production continues to exceed demand. As I wrote last week, the rally could be overdone. Barclays backed that hypothesis up in a recent report, warning that several commodities could be poised for declines as the recent two-month price rally exceeds what the fundamentals suggest is merited. In other words, the reason that oil faces downside pricing risk is that there is a disconnect right now between the fundamentals and market sentiment. On the one hand, you have incredibly bullish speculators. John Kemp at Reuters writeshedge funds and money managers have cobbled together a near-record high in net-long positions as of March 22, as shorts were closed out and investors bet that oil prices were on their way up. Net-long positions have surged to the equivalent of almost 579 million barrels, double the volume of net-long positions recorded at the end of 2015.

Oil prices fall 3 percent as investors focus again on glut | Reuters: Oil prices fell about 3 percent on Tuesday, reflecting growing concern that a two-month rally was fading as demand fails to keep up with swelling global supply, including new output from Kuwait and Saudi Arabia. Prices bounced, but only briefly, after U.S. Federal Reserve Chair Janet Yellen made remarks that investors saw as dovish for the U.S. interest rate outlook. Brent futures settled down $1.13 at $39.14 a barrel while U.S. crude settled $1.11 lower at $38.28 per barrel. Prices rebounded marginally in post-settlement trading after data from industry group American Petroleum Institute showed a 2.9 million barrels rise in crude stocks last week, less than the 3.3 million barrels analysts had expected. API The decision by Kuwait and Saudi Arabia to resume oil production at the jointly operated 300,000-barrel-per-day Khafji field, at a time when production is supposed to be frozen, triggered the selloff in oil, traders said. "The capacity of that field in the Neutral Zone is more than what Ecuador produces. If they do freeze, it will not be at the January levels but at a lot higher figure," one trader said, referring to the Kuwait-Saudi border area where Khafji is located.

Crude Pops As US Production Tumbles To 16-Month Lows - Following last night's API-reported near-expectations build in crude, DOE reports a smaller-than-expected 2.3mm build (against expectations of a 3.1mm build) and draws in Cushing, Gasoline, and Distillates. Oil prices surged on this. Production is more in focus now as it has fallen 9 of the last 10 weeks to its lowest since Nov 2014.  Crude prices dropped pre-data, then spiked,. but are struggling to maintain gains. Of course, crude is soaring on the heels of Yellen's dove-tardiness. API Details:

  • Crude +2.64mm (+3.1mm exp.)
  • Cushing -319k (confirming Genscape)
  • Gasoline -1.94m
  • Distillates -95k
DOE Details:
  • Crude +2.3m (+3.1m exp.)
  • Cushing -272k (-500k exp.)
  • Gasoline -2.5m
  • Distillates -1.075m
This is the 7th weekly build in inventories in a row...

John Kemp's Weekly Energy Tweets -- March 30, 2016

  • US gasoline stocks, adjusted for demand: 26 days in 2016; 26 days in 2015; 10-yr range 22 - 26 days; average 24 days; at high end of normal, but manageable
    US gasoline stocks fell 2.5 million bbl last week; only 6% higher than 2015 at this time; gasoline stocks have come way, way down but still well above historical levels
    I talked about US gasoline consumption earlier (at this link); looking for gasoline demand record this calendar year
    US commercial crude stocks continue to rise, but perhaps at a slower rate: increased another 2.3 million bbls last week; now at +63 million bbls (+13%) over 2015 level; the graph needs to be reset
    US crude oil imports eased back a bit from previous week's very high 8.4 million bopd to a more normal 7.8 million bopd
    US refinery throughput accelerated last week to 16.2 million bopd, up by one-half million bopd (+3.2%) compared with 2015
    US distillate stock adjusted for consumption (44 days) is still far above 2015 (33 days) but not getting worse
    US distillate consumption is finally back within the 10-year max-min range; but very, very low consumption

U.S. Oil Rig Count Down by 10 - The U.S. oil-rig count fell by 10 to 362 in the latest week, according to Baker Hughes Inc., BHI -2.01 % maintaining a trend of declines.   The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to fall. But it hasn’t fallen enough to relieve the global glut of crude.  There are now about 72% fewer rigs of all kinds since a peak of 1,609 in October 2014.  According to Baker Hughes, the number of U.S. gas rigs declined in the latest week by four to 88.  The U.S. offshore-rig count was 26 in the latest week, down two from the previous week and down five from a year earlier.  Oil prices tumbled Friday after comments from a Saudi royal family member cast more doubt on a deal for major global exporters to cap output. Saudi Arabia’s deputy crown prince, Mohammed bin Salman, said in an interview with Bloomberg News that the kingdom will freeze its oil output only if Iran and other major producers agree to curb theirs.  U.S. crude oil fell 3.65% to $36.94 a barrel.

Report: Total US Rig Count Drops By 14 Rigs - In its latest tally, Baker Hughes Inc. said the total U.S. rig count is down to 450, dropping 14 rigs from the week ending March 25. Data showed the overall number of oil and gas rigs in the U.S. fell for the 15th straight week to the lowest level since at least 1940, Reuters reported. Oil rigs are down to 362, dropping 10, and natural gas rigs are down to 88, dropping four rigs since last week. The U.S. rig count was 1,028, down 578 rigs, compared to the same week last year. Since then, oil rigs dropped by 440 and natural gas rigs dropped by 134. The U.S. offshore rig count is 26, down two from last week, and down five rigs year-over-year. The Canadian rig count is down by six for a total of 49 rigs, Baker Hughes said in its report. Oil rigs remain unchanged at 11, but gas rigs are at 38, down by six. A year ago, Canada’s overall rig count was 100. Gas rigs are down by 42 year-over-year, while oil rigs are down by nine. Energy firms have sharply reduced oil and gas drilling since the sell-off in crude markets began in mid-2014, forcing more than 50 U.S. producers to file for bankruptcy protection since the start of 2015. Many analysts think the combined oil and gas rig count will rise later this year because there are indications that prices could have bottomed.

Baker Hughes Rig Count Analysis - Story of the Year in Oil Markets (Video) - Today`s Baker Hughes Rig Count data spells real trouble for U.S. Oil Production for the remainder of 2016. At this pace, we are going to start having massive declines in U.S. Domestic Oil Production.

Saudi Arabia loses oil market share to rivals in key nations -- Saudi Arabia lost market share in more than half of the most important countries it sold crude to in the past three years, even as the kingdom increased output to record levels. The world’s biggest oil exporter lost ground to rivals in nine out of 15 top markets between 2013 and 2015, including China, South Africa and the US, according to an analysis of customs data. Saudi Arabia set itself a goal in late 2014 of maintaining its crude market share amid a glut that prompted a collapse in oil prices, but the imports data compiled by FGE, an energy consultancy, suggest the country’s strategy suffered setbacks in some of its key customer countries last year. Other data show that Saudi Arabia achieved a limited increase in global market share in 2015 compared to 2014, although last year’s figure was lower than that recorded in 2013. “Saudi Arabia has had a very difficult time selling oil in this environment,” says Ed Morse, an analyst at Citigroup. “Its rivals are going into a very crowded market in a very aggressive way.” Oil producers including Russia and Iraq are putting pressure on Saudi Arabia in markets it regards as strategically important trading partners. Saudi Arabia signalled a shift in its market share strategy last month by reaching a provisional agreement with Russia and some other producers to cap output at January levels. This deal partly reflects the damaging impact of falling oil prices on producer economies, including Saudi Arabia.

Does Saudi Arabia's Play For Market Share Make Sense? - Props to Saudi Arabia. Unlike other producers, including U.S. shale producers, it maintained financial strength and flexibility during the last boom. When it began to shift the paradigm of global supply, the kingdom was explicit about its goal - market share - even if it didn’t always trumpet the proactive steps it was taking towards that goal. The now-evident objective of low prices, having been achieved and sustained, begs the question of why Saudi Arabia defended its market share. Their actions suggest that they intended to drive prices toward a basement price—stepping supply up when prices reached the $60s, slowly tuning it down when prices hit the $40s and below, and increasing its capacity for production even as prices fell. The recent address of Saudi Oil Minister Ali Al-Naimi in Houston was straightforward and polite, but it might be crudely paraphrased as, ”Get used to the low prices. Adapt or die.” The possibility of his bluffing is belied by historical actions. As recently as Monday, the OPEC report on monthly volumes showed the kingdom continuing to produce more than half a million barrels a day above its rates in late 2014. Saudi Arabia has had the will and means to drive prices, giving market forces some push. As oil has been its only resource and industry of value, the kingdom has treated the business as the treasure that it is. The centuries-long fate of the royal family and its kingdom depends upon how they manage themselves during the era of oil, particularly the epoch of increasing demand. Surely, the highly intelligent, disciplined and motivated planners knew the short-term consequences of the actions which the rest of the world is just beginning to appreciate fully. And even last month, Minister Al-Naimi professed the acceptability of $20 oil. Normally the benefit of market share is obvious—increased revenue and increased performance. This assumes, however, stable prices and economies of scale. If one maintains market share, or even gains a few percent, but prices drop by 50 or 70 percent, then revenue drops to half or a third of what it had been. Said differently, the Saudis could have absorbed all of the increasing production from the rest of the world, dropped their production by half to about 5 million barrels per day (mb/d) and still have had the same or more revenue than they have enjoyed during this transition. Market share is not its own reward. Evidently Saudi Arabia has some strategic plan that results in its making more money in the long run than it is losing in the short run.

Will Weak Fundamentals Force Saudis To Action? - The world’s seven largest oil companies only replaced about 75 percent of the oil that they produced in 2015, the first time in years that reserves essentially fell. ExxonMobil only replaced 67 percent of its production. Chevron, Total, and Eni replaced more than 100 percent, but the rest of the majors did not.   Israel’s High Court shot down a proposal to regulate the natural gas industry due to a provision that would prevent major regulatory changes for 10 years. The Israeli government has a year to revise the proposal. The decision could delay development of the Leviathan gas field, a large deposit discovered by Noble Energy and Delek Group.   Credit redeterminations are underway for many embattled shale drillers. Companies like LINN Energy LLC and SandRidge Energy have already maxed out their credit lines. Any cuts to credit lines for companies struggling to meet debt payments could force them into bankruptcy. Some analysts predict as much as a 30 percent cut to distressed shale drillers. India added 300,000 barrels per day in oil consumption in 2015 and is expected to continue to post strong growth rates. India is set to be the world’s most important country in terms of oil demand growth, taking that mantle from China as the Chinese economy continues to slow. The IEA expects India to consume 4.2 million barrels per day (mb/d) in 2016, overtaking Japan as the world’s third largest oil consumer. The Indian government is hoping to incentivize domestic oil production to help meet rising demand.  The U.S. Department of Energy gave approval to a $2.5 billion electric transmission line that would help bring wind power to the Southeast. The project, proposed by Clean Line Energy Partners, is a 705-mile transmission line that would carry 4,000 megawatts of wind power from Oklahoma to Tennessee. DOE used a statute that would override state objections to the project, which has bedeviled interstate transmission lines in the past. The decision will surely face lawsuits, but if all goes according to plan, the project could begin construction in 2017 and be completed by 2020.

Saudi Arabia Will Only Freeze Oil Production If Iran Joins - Bloomberg -- Saudi Arabia will only freeze its oil output if Iran and other major producers do so, the kingdom’s deputy crown prince said, challenging the country’s main regional rival to take an active role in stabilizing the over-supplied global crude market. The warning by Mohammed bin Salman, 30, who’s emerged as Saudi Arabia’s leading political force, leaves the outcome of a meeting between OPEC and other big oil producers this month in question and sent prices sharply down. Iran has already said it plans to boost its production after the lifting of sanctions following a deal to curb the country’s nuclear program. "If all countries agree to freeze production, we’re ready," bin Salman said in an interview with Bloomberg. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.” In London and New York, oil prices sank more than 4 percent after the comments, with West Texas Intermediate erasing all of its gains for this year. Brent crude fell as much as $1.78 to $38.55 a barrel and WTI dropped $1.62 to $36.72 a barrel. After the Organization of Petroleum Exporting Countries abandoned its efforts to boost oil prices in November 2014, focusing instead on protecting its market share, Saudi Arabia increased production to an all-time high of more than 10.5 million barrels a day, claiming that customers were asking for more oil. The meeting of oil producers in Doha on April 17 follows a gathering in February between Saudi Arabia, Qatar, Russia and Venezuela in which the quartet tentatively agreed to cap their production at January’s level. The deal, which helped to lift the price of Brent above $40 a barrel from a 12-year low of $27.10 a barrel in January, was contingent on other countries joining it. Iranian Oil Minister Bijan Namdar Zanganeh will attend the Doha discussions but won’t join a production freeze, according to a person familiar with the nation’s policy. 

OilPrice Intelligence Report: Oil Falls As Saudi Arabia Questions Freeze Deal: The oil markets closed out the week largely where they started, trading just below $40 per barrel. In fact, prices dropped on Friday after some comments from Saudi Arabia’s Prince Mohammed bin Salman (more on that below) and expectations that the Fed could revert to a more hawkish position after a strong jobs report in the United States.Saudi Arabia’s Prince Mohammed bin Salman said in an interview with Bloomberg this week that his country will only freeze oil production if Iran agrees to do the same, throwing the success of the April 17 Doha meeting into doubt. Iran has already said that it would not participate until it was able to return its oil production to pre-sanctions levels, meaning that it plans on adding at least 1 million barrels per day in additional output. “If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them," the powerful 30-year-old prince said. "If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”  Prince bin Salman also said that Saudi Arabia is planning to build up its Public Investment Fund (PIF), a sovereign wealth fund, in order to plan for the future. The Prince said the government hopes to grow the PIF to $2 trillion in assets, and use it to help the Saudi economy transition to a world beyond oil. The partial IPO of Saudi Aramco will provide some of the funds, and the public offering could happen as soon as 2017. He expects the PIF to be the “largest fund on Earth” and it will aggressively invest in a wide range of assets around the world. “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil,” he said.

Oil Tumbles After Saudis Say They Will Freeze Oil Production Only If Iran Joins - And so the great "oil production freeze" rumor, which helped halt oil's plunge after it hit a 13 year low in early February and forced a 50% short squeeze higher, dies.  Moments ago, Bloomberg released details of a 5-hour long interview with the Saudi deputy Crown Prince Mohammed bin Salman in which he said that the Saudis would freeze production only if Iran joined. "If all countries agree to freeze production, we’re ready,” the deputy crown Prince said, adding that "if there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door." When asked if Iran needs to join freeze, his response: "without a doubt. If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them." As a reminder, Saudi Arabia is among big producer countries meeting this month in Doha to conclude a plan to freeze output; whether Iran needs to participate hasn’t been clear because country is in process of restoring output after years of sanctions. And while Iran’s oil minister is attending Doha meeting, the country has said that it won’t join a production freeze.  Salman adds that the oil price slump doesn’t pose a threat to Saudi Arabia, as short-term budgetary benefits need to be evaluated against "threat to the lifespan of oil" adding that "for us it’s a free market that is governed by supply and demand and this is how we deal with the market." And since we, and the market, both doubt this story is part of an elaborate April fool's joke, the price of oil just tumbled as suddenly market participants realize they have been manipulated for the past 2 months and that the structural oversupply in the market will persist.

Saudi Arabia is Freezing Oil Production By Default (Video) -- When you are already pumping as much oil as you possibly can - by default - you are forced to freeze production, or agreeing to a production freeze.

Forget The Tough Talk – Saudi Arabia Is Desperate For a Production Freeze - At a time when the Saudis are desperately trying to hang on to their dwindling market share, it is intriguing to consider exactly why Russia and the OPEC nations are even discussing an oil production freeze, and what they hope to achieve, knowing that any increase in price will bring back the U.S. shale oil drillers with a vengeance, increasing the supply glut. But on closer scrutiny, the production freeze seems to be aimed at maintaining the market share of the two larger players, Saudi Arabia and Russia. Data compiled by FGE energy consultancy suggests that Saudi Arabia is losing its leadership position in 9 out of 15 of its major markets. The competitors eating into the Saudi share include Russia, Iraq, the African suppliers and the United States. Though Saudi Arabia talked about maintaining market share when prices began to fall in 2014, it later realized that when crude prices are low, competing producers were aggressively entering new markets and the maintaining Saudi market share was tougher than anticipated.  By the end of 2015, Saudi Arabia supplied 8.1 percent of the global oil demand, which is higher than the 2014 figure of 7.9 percent, but still well below its 8.5 percent global market share in 2013. Saudi Arabia realized that the price war was not helping it to increase its market share, instead, the price was taking a toll on revenue due to plummeting crude oil prices. Ballooning budget deficits, depleting foreign reserves, and the necessity of introducing unpopular measures brought about memories of the Arab Spring. Similarly, Russia, which is pumping at close to its peak capacity, is worried about losing its market share in Europe to Saudi Arabia.

These Are The Oil Producers That May (Or May Not) Attend Next Month's "Farcical" OPEC Meeting -- The one catalyst most responsible for sending the price of oil from its 13 year lows hit in early February some 50% higher in the following month, has been the recurring rumor about an "imminent" OPEC production freeze meeting which was initially supposed to take place in early March, then on March 20, and now on April 17 (we expect this to be rescheduled shortly as well). As a reminder, Qatar has invited all OPEC members and major producers from outside the exporting group to attend talks on April 17 on a deal to freeze output at January levels to support the global oil market, Qatar's energy ministry said. "The need has become an urgent matter to bring back balance to the market and recovery to the global economy," the ministry said in the invitation letter. The ministry had said that around 15 OPEC and non-OPEC producers, accounting for about 73 percent of global oil output, are supporting the initiative. The problem is that all it takes is forone or two member nations to avoid the meeting and thus make any attempt at supply cuts moot. So here is, according to Reuters, the latest summary of who is, may or won't be attending next month's Doha meeting:

Qatar says 12 countries confirmed for oil cap meeting — (AP) — Qatar’s oil minister says 12 countries have agreed so far to participate in a meeting it’s hosting next month to discuss a freeze in oil output levels. Qatar announced earlier this month it would be the venue for between OPEC and non-OPEC producers on April 17 to discuss the production cap. The talks are aimed at bolstering oil prices that have fallen from over $100 a barrel in 2014 to less than $40 a barrel at present.  Minister of Energy and Industry Mohammed Bin Saleh al-Sada said on Thursday that Qatar is still expecting official confirmation from producers that have verbally expressed plans to attend the meeting. Those confirmed so far are Saudi Arabia, Russia, Kuwait, the United Arab Emirates, Venezuela, Nigeria, Algeria, Indonesia, Ecuador, Bahrain, Oman and Qatar.

Iran's 'Suez Canal': Tehran Could Connect Caspian Sea and Persian Gulf: One of the most ambitious initiatives that Tehran plans to launch will see an artificial channel link the Caspian Sea and the Persian Gulf. The project, which is expected to be completed in the 2020s, is particularly interesting for Russia due to the cold spell with Turkey, but European and post-Soviet states will also benefit from it. In Iran, "work is underway to construct a navigable channel linking the Caspian and the Persian Gulf," economic analyst Alexei Chickin observed.. The initiative itself is not new. The idea first emerged in the late 19th century and by 1890s Russian engineers developed blueprints for the navigable channel that would offer Russia and others the shortest way to the Indian Ocean bypassing the Turkish Straits and the Suez Canal in Egypt. The project was endorsed by Iran's former President Mahmoud Ahmadinejad. In 2012, former Iranian Energy Minister Majid Namjoo estimated that the cost of the project would be approximately $7 billion.  In February 2015, Chairman of the National Security and Foreign Policy Committee of the Iranian Parliament Alaeddin Boroujerdi told the Fars news agency that Khatam-al Anbiya, an engineering company owned by the Iranian Revolutionary Guard Corps (IRGC), was taking a close look at the project. But not everyone has welcomed the idea with open arms. "The West and Turkey have directly or indirectly tried to block the waterway [from being created]. As a matter of fact, the United States imposed sanctions" on companies that have been involved in the project, Chickin explained.

Saudis To "Modernize" Economy As Interbank Rates Surge & Money Supply Collapses At Record Pace -- For the first time since January 2009, 12-month Saudi interbank rates have breached 2.00% - double the 1% lows of August. This 'stress' is also evident in the record pace of collapse of Saudi money-supply. While Riyal forwards have rallied back from extreme bets on devaluation, they remain concerning for Saudi officials who to undertake some deep and fundamental changes to their economy, reforms that no amount of browbeating from organizations like the IMF could induce. As's Nick Cunningham details, a new report from The Atlantic Council finds that the extensive decline in oil revenues is focusing minds in Riyadh. The fiscal pressure is forcing “the kingdom’s leadership to modernize the economy,” the report concludes. Saudi Arabia ran a fiscal deficit of about $98 billion in 2015, a figure that will decline only slightly to $87 billion this year. That deficit total is also probably closer to $120 billion in reality though, given that the costs from the war in Yemen were not included. The fiscal squeeze is forcing some changes. First, the Saudi government is looking at new taxes, including a 5 percent value added tax (VAT). That may seem like a run-of-the-mill austerity measure, but for Saudi Arabia it is a novel proposal: it will be the first tax imposed in the country. More to the point, the VAT is illustrative of where Saudi Arabia is heading. The Atlantic Council argues that the kingdom is starting to reform its economy in fundamentally positive ways. Low oil prices are forcing it to rely more upon taxes and less on oil revenues. That would start to make Saudi Arabia less of a “rentier state,” a country that has no need to build much of an economy because resource extraction is so lucrative. Rentier states often suffer from greater corruption and a deeper lack of responsiveness to the needs of the public, since abundant oil revenues mean that the government does not need revenue from its populace.

Saudi embassy hired mafiosi to smuggle Turkish PM Erdoğan’s son out of Italy ahead of money laundering charges --  Italian police spokesman Lt. Colonel Domenico Grimaldi says that Bilal Erdoğan was able to jump bail on money laundering charges because the Saudi embassy paid the mafia to help get him clear, assisting them with fraudulent diplomatic papers and a Saudi prince disguise. Bilal Erdoğan is the son of Recep Tayyip Erdoğan, the prime-minister of Turkey, a gollum-looking authoritarian kleptocrat who built himself a 1,000-room palace as a kind of capstone on a political career dominated by corruption, the detritus of which includes recorded phone calls in which the PM conspired to hide millions in ill-gotten gains from investigators. “Mafia activities continue to plague our judicial system and the Polizia di Stato is blamed for this humiliating security lapse in Rome airport. We also found that a notorious mafia gang active in Calabria and Sicily was hired by members in the Saudi embassy and they managed to release Mr. Erdoğan from Regina Coeli Prison,” police spokesman Lt. Colonel Grimaldi told AFP.They moved Bilal Erdoğan to Excelsior Hotel, added Lt. Colonel Grimaldi, and Erdoğan was caught on cameras leaving the Hotel, donned traditional Arab dress and adroitly disguised as a Saudi diplomat; Bilal passed the security check holding a fake Saudi diplomatic passport and we believe, he couldn’t have escaped without the connivance of a number of police officers in Leonardo da Vinci Airport. Rome’s Police spokesman: Saudi embassy helped Erdoğan’s son to escape the police custody; using a forged Saudi passport and disguised as an Arab diplomat [AWD News]

Children Pay ‘Highest Price’ as Yemen Falls Apart, U.N. Says - — A yearlong conflict is threatening to cause a humanitarian catastrophe in Yemen, one of the world’s poorest countries, the United Nations reported on Tuesday, saying that “children are paying the highest price.”The effects of the conflict and the deteriorating humanitarian conditions have brought Yemen “to the point of collapse,” Unicef, the United Nations Children’s Fund, said in a report, adding that the country was at risk of becoming a failed state.At least six children have been killed or maimed in the fighting every day for the past year, Unicef said, calling that “the tip of the iceberg” because that number represented only the cases that had been verified. The toll is almost certainly much higher, the organization said.For the past year, a Saudi-led coalition has sought to re-establish the government of President Abdu Rabbu Mansour Hadi, which was driven into exile by Houthi rebels and their allies.Mr. Hadi was able to reach the southern port city of Aden in September, but the front lines have hardly shifted since, despite a costly campaign marked by intensive Saudi-led airstrikes.

Unlikely partners? How Western media largely ignored State Dept-Google-Al Jazeera plot against Assad - The Western media has quietly ignored an unexpected collaboration between Washington, Google, and “independent” Al Jazeera aimed at helping to overthrow Syria’s Bashar Assad. Would they be as oblivious to a similar cozy “partnership” involving Russia? Last Monday, WikiLeaks lifted the lid on a correspondence between Jared Cohen, the President of ‘Google Ideas,’ and then-Secretary of State Hillary Clinton’s staff in the summer of 2012. In his July 25, 2012 email to top State Department’s officials, Cohen pitched his about-to-be-launched “tool” to Clinton’s inner circle, asking it to “keep close hold” of it. The leak revealing the project, which would seem to be an outrageous scandal to some, has actually been quite difficult to spot in the news. Since WikiLeaks released the latest batch of Clinton’s emails on March 21, a Google news search spits back about 30 web sources related to the story. Of those, only two – The Independent and Daily Mail – could arguably be considered major mainstream media outlets. That means there were slim chances that the eye of an average newsreader would catch wind of the State Department’s teamwork with the US’ biggest tech giant, Google, and Arab media outlet Al Jazeera. According to what Cohen wrote, it appears that Google’s innovative visualizer worked to “publicly track and map the defections in Syria and which parts of the government they are coming from.” “Our logic behind this is that while many people are tracking the atrocities, nobody is visually representing and mapping the defections, which we believe are important in encouraging more to defect and giving confidence to the opposition,” he said. Google also collaborated with Al Jazeera, which took primary ownership over the tool, because of “how hard” it was to get information out of Syria.

Syrians Armed By The CIA Are Fighting Syrians Armed By The Pentagon -- Syrian militias armed by different parts of the U.S. war machine have begun to fight each other on the plains between the besieged city of Aleppo and the Turkish border, highlighting how little control U.S. intelligence officers and military planners have over the groups they have financed and trained in the bitter five-year-old civil war.   The fighting has intensified over the last two months, as CIA-armed units and Pentagon-armed ones have repeatedly shot at each other while maneuvering through contested territory on the northern outskirts of Aleppo, U.S. officials and rebel leaders have confirmed.  In mid-February, a CIA-armed militia called Fursan al Haq, or Knights of Righteousness, was run out of the town of Marea, about 20 miles north of Aleppo, by Pentagon-backed Syrian Democratic Forces moving in from Kurdish-controlled areas to the east.   “Any faction that attacks us, regardless from where it gets its support, we will fight it,” Maj. Fares Bayoush, a leader of Fursan al Haq, said in an interview.  Rebel fighters described similar clashes in the town of Azaz, a key transit point for fighters and supplies between Aleppo and the Turkish border, and on March 3 in the Aleppo neighborhood of Sheikh Maqsud.   The attacks by one U.S.-backed group against another come amid continued heavy fighting in Syria and illustrate the difficulty facing U.S. efforts to coordinate among dozens of armed groups that are trying to overthrow the government of President Bashar Assad, fight the Islamic State militant group and battle one another all at the same time.

Full Metal Retard Part Deux: CIA-Backed Rebels Now At War With Pentagon-Armed Fighters In Syria's Aleppo - It would be difficult to find a program that better exemplifies the word “failure” than the Pentagon’s “train and equip” effort in Syria. Last May, US Central Command issued a hilariously absurd press release outlining what was quite obviously going to be a disastrous effort to arm rebel fighters.  [...]  Throw in the fact that the FSA - not to mention all the other "moderate" rebels fighting in and around Aleppo - just got finished having their proverbial asses handed to them by Russia and Hezbollah and you'd think things couldn't get much sillier for the Pentagon.  But you'd be wrong.  As The LA Times reports, Pentagon-armed Kurdish units (so these are different fighters from those involved in "train and equip") are now engaging in firefights with CIA-armed forces in what is surely the most ridiculous example of US strategy gone horriby (and hilariously) awry to date."Syrian militias armed by different parts of the U.S. war machine have begun to fight each other on the plains between the besieged city of Aleppo and the Turkish border, highlighting how little control U.S. intelligence officers and military planners have over the groups they have financed and trained in the bitter five-year-old civil war," the Times writes. "The fighting has intensified over the last two months, as CIA-armed units and Pentagon-armed ones have repeatedly shot at each other while maneuvering through contested territory on the northern outskirts of Aleppo, U.S. officials and rebel leaders have confirmed." Here's more:

The fate of the temple of Bel is a symbol of the tragedy engulfing Syria - Something incalculably precious has been wiped off the face of the Earth. Satellite photos have confirmed that the temple of Bel, a monument that for almost 2,000 years had stood resplendent amid the ruins of Palmyra, is no more. Scholars had been dreading the worst since the fighters of Islamic State annexed the ancient city back in May. Few had put much faith in the initial assurances of the conquerors that they would spare the archaeological site: too much ruin had already been visited on the antiquities of the territory under their control for that. And sure enough, at the end of June, the militants demolished the iconic statue of a lion sacred to Allat – a goddess who had suffered the signal misfortune of being condemned by name in the Qur’an. Then last month they destroyed a temple dedicated to Baal Shamin, a deity often paired with Allat. That was tragedy enough. Related: Tolerant and multicultural, Palmyra stood for everything Isis hates | Tim Whitmarsh The worst, though, was yet to come. The temple of Bel was (and how it stabs the heart to be obliged to use the past tense here) a monument fit to be ranked alongside the Parthenon or the Pantheon as one of the supreme architectural treasures to have survived from classical antiquity. Built soon after the absorption of Palmyra into Rome’s sphere of influence, it was dedicated in 32AD, at a time when Tiberius ruled the empire, and Jesus still walked the Earth. The god to whom it was dedicated, though, was older by far than the Pax Romana. “Bel” in Akkadian meant “Lord”, and as such it was a title the Babylonians in their own imperial heyday had bestowed upon Marduk, the deity who reigned as their lord of lords. It was a tribute to the prestige of the great city that the Palmyrenes should gradually have assimilated Bel to the similarly named guardian of their oasis, a god named Bol. When the Romans arrived on the scene, they in turn had no problem in identifying this potent deity with the king of their own pantheon. Bel was, in short, a thoroughly cross-cultural god.

Exclusive: Russia, despite draw down, shipping more to Syria than removing - Reuters: When Vladimir Putin announced the withdrawal of most of Russia's military contingent from Syria there was an expectation that the Yauza, a Russian naval icebreaker and one of the mission's main supply vessels, would return home to its Arctic Ocean port. Instead, three days after Putin's March 14 declaration, the Yauza, part of the "Syrian Express", the nickname given to the ships that have kept Russian forces supplied, left the Russian Black Sea port of Novorossiysk for Tartous, Russia's naval facility in Syria. Whatever it was carrying was heavy; it sat so low in the water that its load line was barely visible. Its movements and those of other Russian ships in the two weeks since Putin's announcement of a partial withdrawal suggest Moscow has in fact shipped more equipment and supplies to Syria than it has brought back in the same period, a Reuters analysis shows. It is not known what the ships were carrying or how much equipment has been flown out in giant cargo planes accompanying returning war planes. But the movements - while only a partial snapshot - suggest Russia is working intensively to maintain its military infrastructure in Syria and to supply the Syrian army so that it can scale up again swiftly if need be.

Copper Continues To Crumble Amid Record China Inventories -- Having bounced miraculously off the early January lows - despite no significant fundamental shift - scrambling all the weay up to its 200-day moving-average, copper prices have been tumbling for the last 7 days, the longest losing streak since early Jan. "Worries over Chinese demand is still weighing on the market," warns one analyst and rightly so as, just like the oil complex, copper inventories (in China) just hit a record high. Miracle ramp... Is fading now as stockpiles soar... Rising supply of late-cycle commodities, including copper and aluminum, together with uncertain Chinese demand may continue to weigh on metal prices this year, according to Bloomberg Intelligence analyst Zhu Yi. Copper inventories tracked by the Shanghai Futures Exchange are at a record. “Worries over Chinese demand is still weighing on the market,” Robin Bhar, an analyst at Societe Generale SA in London, said by phone. Of course much of this 'inventory' is collateral for China's crazy CCFDs enabling smaller players to get loans and stay alive considerably longer than they should. If any liquidation occurs of these zombies then prices will accelerate lower as CCFDs are unwound.

Miners buy back own bonds to soothe debt fears - Global miners have bought back billions of dollars of their debt in a display of financial strength designed to address investor concerns over their leverage as they try to deal with the after-effects of the commodities slump. Miners including Barrick Gold and Anglo American completed $2.5bn of bond repurchases this month. They join other miners including Vedanta Resources, Glencore and Fortescue Metals Group to have bought back part of previously issued debt in recent months. Indebtedness has become one of investors’ biggest fears about mine operators, with falling commodity prices making it more difficult to service previous borrowing. Debt levels ballooned in the commodity upswing as miners poured money into projects to meet increased demand for metals such as iron ore and copper. Low interest rates also made such borrowing attractive. Buying back debt is a way to address balance sheet concerns without issuing new stock at, for some miners, valuations that have plummeted along with commodity prices. Shares in Anglo lost three-quarters of their value in 2015, for example. Barrick has been one of the largest buyers of its own debt. Last week the Canadian gold miner completed a repurchase of $750m of bonds, following $2.1bn of such buybacks in 2015. Barrick mainly used cash from asset sales to cut its debt from $13bn to $10bn last year and has vowed to reduce the figure by $2bn this year. “Our shareholders want to see us bring down our total debt and that is one of our key priorities. We have strong liquidity with little debt due before 2018 and more than half our outstanding debt matures after 2032,” said Barrick.

World's Biggest Oil Market Is Too Tied To Mideast To End Addiction -- March 31, 2016  - Bloomberg is reporting:

  • Mideast producers have cut official selling prices; defend against other suppliers taking their markets
  • Saudi Arabia is selling Arab Light in Asia for 75 cents below benchmark Middle East prices (compare with $2.75 premium in early 2014)
  • Iran offering its oil at a deeper discount than Saudi Arabia for first time in a decade 
  • strategy working; but IEA has warned there is an increased possibility of oil-security surprises in the "not-too-distant" future
  • with non-OPEC supplies falling, Asian refiners have no choice but to buy Middle Eastern oil: cheaper and available in large volumes

Asia likes Mideast oil:

  • shorter shipping times
  • attractive prices
  • type of crude oil the refineries were optimized for
South Korea:
  • imports from the Middle East climbed last year to the highest level since at least 1980
  • wants to diversity purchases to guard against geopolitical risks tied to some of the world's biggest suppliers 
  • imported 845 million bbls in 2015; high since 1980 when that country started compiling the data
  • refiners are shunning shipments from distant ports, taking more cargoes from Persian Gulf
  • wants to diversity purchases to guard against geopolitical risks tied to some of the world's biggest suppliers
  • but, India's Reliance Industries, owner of the worlds biggest refining complex is shifting from crudes tied to Brent to grades priced against Dubai, the Middle East marker
  • Saudi Arabia and Oman have boosted supplies to China this year as volumes from Venezuela and Colombia have shrunk
  • more than half of the top 10 suppliers were from the Middle East last year

China's Sinopec expects steady throughput, 5% lower crude output in 2016 - Asia's largest refiner China Petroleum and Chemical Corp, or Sinopec Corp., plans to lift refining throughput a marginal 0.64% and cut crude production by 5% in 2016 as a result of cutting capital expenditures by 10.6% from 2015, it said in annual results late Tuesday. Sinopec, which is 71% held by parent company China Petrochemical Corp., or Sinopec Group, said it plans to spend Yuan 100.4 billion ($15.4 billion) this year. Its 2015 capital expenditures totaled Yuan 112.25 billion, down 27.4% from 2014 and 17.4% lower than planned. Nearly half of the budget this year will go to domestic oil and gas exploration projects, including development projects in the second-phase Fuling shale gas field, the Pingbei and Huangyan gas fields and the Daniudi gas field, and for the first-phase pressure boosting project to transport gas from Sichuan to Eastern China.Refining investment this year will be Yuan 19.5 billion, mainly to revamp the Zhenhai and Maoming refineries as well as quality upgrading for gasoline and diesel. Spending in the refining segment totaled Yuan 15.13 billion last year, mainly for oil products quality upgrading projects and refinery revamping.

CNOOC Overtakes Sinopec as China's Second-Biggest Oil Producer  |  Rigzone-- Oil’s plunge has reordered the pecking order among China’s biggest explorers. China Petroleum & Chemical Corp.’s move to close some high-cost fields has caused it to slip to number three in oil and gas production as rival Cnooc Ltd. got a boost from new domestic offshore projects. Sinopec, as China Petroleum is known, produced almost 472 million barrels of oil equivalent in 2015, down 1.7 percent. Cnooc overtook it by pumping about 496 million, jumping nearly 15 percent. PetroChina Co. remained the largest, at 1.49 million barrels. “Sinopec has the most mature exploration and production portfolio of the all three Chinese oil majors,” said Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co. “For Cnooc, however, offshore China still has legs to grow. Strong reserves replacement by Cnooc suggests that they can stabilize production even in a low oil price environment.” Cnooc sees output slipping this year to 470 million to 485 million barrels of oil equivalent, putting in neck-and-neck with about 476 million from Sinopec. PetroChina sees output falling 2.7 percent this year to 1.45 billion barrels, according to its earnings statement last week.

BP signs first shale gas production sharing contract in China - BP and China National Petroleum Corporation (CNPC) today signed a production sharing contract (PSC) for shale gas exploration, development and production in the Neijiang-Dazu block in the Sichuan Basin, China. Witnessed by BP Group Chief Executive Bob Dudley and CNPC Chairman Wang Yilin, the contract is BP’s first shale gas PSC in China and covers an area of approximately 1,500 square kilometres. CNPC will be operator for this project. “We are pleased to reach this significant milestone as part of our strategic partnership with CNPC, building on our successful cooperation in and outside of China,” Dudley said. “We are looking forward to working together with CNPC on technology, operational and subsurface techniques in unconventional resources. We will bring our worldwide experience to our first unconventional gas project in onshore China with CNPC. We will combine this with CNPC’s knowledge and experience to bring gas to China’s growing clean energy market. China continues to be an important part of BP’s portfolio.” This PSC is the first achievement from BP and CNPC’s framework agreement on strategic cooperation that was signed last October during the visit to the UK of President of The People’s Republic of China, Mr. Xi Jinping. In addition to unconventional resources, the framework agreement covers possible future fuel retailing ventures in China, exploration of oil and LNG trading opportunities globally, and carbon emissions trading as well as sharing of knowledge around low carbon energy and management practices.

Slowing in China: Not Just Economy but Political Resolve - China’s economic collapse no longer seems imminent. The Wall Street hedge funds who bet against the Chinese currency have taken heavy losses and battered stock markets are stabilizing. As WSJ’s Andrew Browne writes in his “China’s World” column: In fact, collapse was never in the cards. Over the short term, as Beijing has demonstrated, it has enough financial firepower left to fight off threats to stability and prevent the economy from stalling. It’s time to worry about something much more likely: political failure.At the root of the problem is the reluctance of Chinese leaders to finally implement the economic overhauls they promised, starting with the closure of “zombie” state enterprises. There’s now a window of opportunity to jump-start the long delayed process—but don’t bank on it happening. What’s missing from the picture is a political resolve akin to the determination displayed by leaders in the 1990s who tore apart state-owned industries as their losses threatened a banking disaster. Then, when complacency set in again, Beijing shocked the economy by joining the World Trade Organization in 2001, exposing state enterprises to head-on competition from the world’s best companies.

Now on China's Default Watch: $617 Billion in Regional Debt -- China’s default watch is starting to include the 4 trillion yuan ($617 billion) debt of financing arms of regional authorities, so far spared amid at least a dozen bond delinquencies over the past two years. While the resilience of local-government financing vehicle bonds has helped it trade at a lower yield than similarly rated corporate securities, that gap is starting to be eroded. The discount for five-year AA+ LGFV notes narrowed 6 basis points from a record high of 32 basis points in January. Total borrowing by 29 of China’s provinces surged to 16.2 trillion yuan at the end of last year, up 53 percent from 2013, according to a March 22 Bloomberg Intelligence report. “It’s possible LGFVs will have defaults,” . “We should watch out for default risks in regions that rely on few industries, have net population outflow, resource shortages and huge debt pressure.” Regional debt started to explode in China after the 2008 global financial crisis, when the government urged provinces that were then banned from selling bonds to boost infrastructure spending. While regulators allowed the exchange of that debt into newly permitted municipal notes, there are still 4 trillion yuan of LGFV bonds outstanding, according to Bloomberg-compiled data, bigger than the size of Sweden’s economy. Liabilities are swelling just as slowing economic growth reduces the ability of provinces to support the financing platforms, which typically don’t have enough cash flows to repay their obligations. As a ratio of provincial tax revenue, local government debt has risen to 195 percent in 2015 from 153 percent in 2013, the Bloomberg Intelligence report said.

Mounting debts could derail China's plans - China's campaign to slim down its bloated industries could be derailed by more than $US1.5 trillion ($A1.97 trillion) of debt in its steel, coal, cement and non-ferrous metal sectors, which threatens to overwhelm local banks. Tackling industrial overcapacity has become a priority for Beijing to make its slowing economy more efficient and address a supply glut that has hammered coal and steel prices. China is providing more than 100 billion yuan ($A20.2 billion) in the next two years to handle layoffs from coal and steel, but that will only be made available once debts have been settled. Critics say there is no clear mechanism for tackling the debt burden, which will put huge strain on the weakest sections of the banking sector. The debt figures, revealed in papers submitted to China's parliament in March, highlight the dilemma facing state firms grappling with surplus capacity and how difficult it will be to pull off this central plank of Beijing's economic reform plans. Costs for the estimated 1.3 million coal-sector layoffs alone are as much as 195 billion yuan, and coal industry delegates attending parliament urged government to provide more support to deal with the mounting debts of hundreds of stricken "zombie" firms. The four sectors targeted in the battle against overcapacity owe around 10.2 trillion yuan, according to documents submitted to parliament by Wang Mingsheng, head of Anhui-based coal firm Huaibei Mining. China's statistics bureau puts coal and steel debts alone at eight trillion yuan, of which about a third is bank debt.

"Made Out Of Sand" - A Dramatic Look Inside A Newly Built Chinese Apartment - While real estate is all about "location, location, location," it appears there are sometimes more prescient factors that any prospective buyer should pay attention to. Amid yet another government-fueled housing bubble, it seems in their haste to fulfil a rapacious demand for property in which to gamble their hard-grafted assets, Chinese construction companies have cut a few corners. As the following stunning video shows, a "newly constructed apartment" crumbles before the owners' eyes as the 'concrete' walls turn to sand...  LiveLeak exposes, in the following video, just how poor the standards can be of so-called “new” properties. LiveLeak footage shows two men in a supposedly “new apartment building” in China where the concrete walls crumble like sand.

'Not fit to lead': letter attacking Xi Jinping sparks witch-hunt in Beijing - It wasn’t a very long letter - the equivalent of about 920 words in English and it appeared only briefly on a Chinese website.  But its content was potentially incendiary. . It called for president Xi Jinping to resign. Many China watchers initially dismissed it as a prank, as opposed to a sign of real dissension within the ruling Communist party.  But only a few weeks later, the mysterious letter has taken on a life of its own – largely because of the government’s outsized reaction to it. State security agents have detained more than two dozen people thought linked to the letter’s distribution. They scrubbed the Chinese internet of all search terms related to it. They have also detained and harassed family members of exiled Chinese journalist who have commented on the letter, and even tried to get one of those commentaries retracted by a German broadcaster. Party leaders apparently see the letter as a real threat, some China experts have concluded, and so they have launched a manhunt to determine how it became an internet sensation. “In the beginning this letter didn’t seem like much,” said Bill Bishop, author of the Sinocism newsletter, which tracks Chinese politics. “But now, given the reaction, it has become much more important. They are going after multiple people, in China and now outside of China.”

Hong Kong retail sales plunge 13.6 per cent to record biggest slump since 1999 -- Hong Kong retail sales plunged 13.6 per cent year on year in the first two months of 2016 – the biggest slump since 1999 – and the worst may be yet to come. Retailers are likely to see a double-digit sales decline in the first quarter and end this year with revenue contracting at a rate in the high single digits, according to the Hong Kong Retail Management Association. Sales have been declining every month for the past year, and the latest slump is attributed to dwindling visitor numbers, which dropped 13 per cent during the same period. Visitors from the mainland fell 18 per cent despite 7 per cent growth in overseas visitors, according to the Hong Kong Tourism Board. Large-scale lay-offs and even “a tide of shop closures” would not be surprising if the situation persists over the next few months, industry insiders warned.  “This year will definitely be worse,” said Thomson Cheng Wai-hung, chairman of the association. He admitted the extent of the current downturn had far exceeded industry expectations, with sales declining 3.7 per cent for the whole of last year. “Apart from the severe drag from the protracted slowdown in inbound tourism, asset market consolidation might also have weighed on local consumption sentiment,” a government spokesman said, adding that the near-term outlook for retail sales would still be constrained. In 20 retail categories surveyed, only one – supermarket goods – recorded growth, expanding 0.2 per cent in the first two months, while 13 saw double-digit declines. The value of total retail sales in February slid 20.6 per cent to HK$37 billion compared with the same period last year, a further deterioration from January when it contracted by 6.6 per cent.

Vietnam and Cambodia trying to keep China and US happy -- The United States army plans to store disaster relief equipment in Vietnam and Cambodia, a top American general has revealed. General Dennis Via, who heads the US Army Materiel Command, told reporters at an Alabama symposium recently that the stockpiling of such equipment in these two countries is part of a broader strategy to pre-position supplies across the world for rapid deployment. Unlike its pre-positioned supplies in Europe, which include tanks, those placed in this region will generally be "light" equipment geared towards humanitarian assistance, he was quoted as saying in online magazine Breaking Defense. For example, he said, they were looking at placing a combat support hospital in Cambodia. Thailand, a US treaty ally, was not mentioned as part of the arrangement. Cambodia and Vietnam, which are both deepening their engagement with the US, are treading carefully to avoid rattling China, say analysts. China's shadow looms large in the region through its tourists, aid, investments and increasingly assertive claims over the South China Sea. Vietnam's growing engagement with the US is in part spurred by recent Chinese incursions into what it considers its territory. Both China and Vietnam lay claim to the Paracel and Spratly islands.

Japanese retail sales fall the most since 2014 tax hike -- Japanese retail sales posted their biggest monthly contraction in February since April 2014, when the government infamously raised the sales tax for the first time 17 years. Data this morning showed retail sales fell 2.3 per cent month-on-month in last month, down from a revised -0.4 per cent (previously -1.1 per cent) in January, and more than double economists’ expectations for a 0.9 per cent drop. It was the biggest month-on-month fall since April 2014, when the government decided to increase the national sales tax 3 percentage points to 8 per cent. That was the first tax increase since 1997 and led to a 13.4 per cent month-on-month slump in retail sales. Another 2 percentage point increase slated for October last year was delayed as the Japanese economy fell into recession. Despite the sharp month-on-month drop, year-on-year, retail sales grew 0.5 per cent in February, the first increase since October. In particular, the monthly drop in sales sits somewhat in contrast to this morning’s more encouraging household spending data, which rebounded by the most in six months. Data also showed department store and supermarket sales rose 2.2 per cent year-on-year in February, up from a revised 0.9 per cent (previously 1 per cent) in January, and ahead of expectations for a 1.6 per cent gain.

Japanese Industrial Production Crashes Most Since 2011 Tsunami -- While we are sure this will not deter Japanese officialdom from declaring that QQE and NIRP is working and that the deflation-mindset is being beaten, the fact is that when February's 6.2% collapse in Japanese industrial production is compared to the devastatingly poor plunge aftwer March 2011's quake, tsusnami, and nuclear 'event', something has gone disastrously wrong in Japan. Across every sub-sector, it was a total disaster...

Japan public divided as laws easing limits on military take effect | Reuters: Laws loosening the limits of Japan's pacifist constitution on its military took effect on Tuesday as surveys showed the public remained divided over a change that allows Japanese troops to fight overseas for the first time since World War Two. Prime Minister Shinzo Abe has said the security legislation, the biggest change in Japan's defense policy since the creation of its military in 1954, is vital to meet new challenges including a rising China. Critics say the changes, which triggered demonstrations ahead of their enactment last September, violate the pacifist constitution and increase the risk of involvement in foreign wars. Opposition parties plan to campaign for the laws' repeal in an upper house election in July. "The security environment surrounding our country is increasingly severe," Abe told reporters at a news conference after parliament approved the state budget. "In a world where no one nation can defend itself on its own, this legislation will help prevent wars," he said. A crowd protested against the bill outside parliament as Abe spoke, holding placards saying "Oust the Abe Administration" and "We won't condone war".

Japan's negative rates a looming headache for central bank | Reuters: Driving interest rates below zero, the Bank of Japan has turned a comatose government bond market into an enormous free-for-all, complicating the central bank's own efforts to kick-start growth and end deflation. The $9 trillion market for Japanese government bonds had been all but paralyzed since the BOJ began a massive monetary easing three years ago that made the bank the dominant buyer. But in the two months since the BOJ announced it was imposing a negative interest rate, JGBs have become a volatile commodity, with prices swinging wildly as below-zero yields confound investors' attempts to find fair market value. "The JGB market is really in a bubble, when you think about it as an investment vehicle," said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo. "Their prices have moved away from fundamentals, and people don't have a traditional way to measure their value." As the BOJ's dominance distorts bond market functions and dries up liquidity, the central bank could have a hard time tapering its buying binge when it eventually chooses to exit its "quantitative and qualitative easing" program. The bank theoretically could just sit on its enormous holdings until the bonds mature, but policymakers are unlikely to want those assets to remain on the balance sheet for decades. On the other hand, it might be difficult to smoothly taper off its asset purchases, much less sell its holdings.

'Helicopter money' could spur economy— Helicopters dropping money in the streets: it's a vivid metaphor for a drastic form of central bank stimulus gaining attention as a possible way to help the global economy out of its malaise. The idea of “helicopter money” is straightforward: central banks would create new cash and give it to people, like an air drop of supplies. As people spend or invest it, economic growth and inflation would rise. The potential efficacy is tempting in a world where central banks are struggling to nudge up low inflation and growth with their current tools: repeated interest rate cuts — often below zero — and extraordinary stimulus programs like bond purchases. As the world economy faces the threat of deflation, a long-term weakness in prices and wages that kills off growth for years on end, the sound of choppers bearing bank bags is being heard more and more in discussion among economists. “Helicopter money may be the next big thing, as policymakers reach the limits of standard unconventional practices,” says Andrew Kenningham, senior global economist at Capital Economics in London. European Central Bank head Mario Draghi was asked this month about the possibility of using “helicopter money” after the bank announced a further round of stimulus measures, including negative interest rates and more massive bond purchases aimed at pushing up inflation and growth. “We haven't really thought or talked about it,” he said. “It's a very interesting concept that is now being discussed by academic economists and in various environments. “ Nobel laureate economist Milton Friedman first proposed the idea almost 50 years ago. It is close to — but not quite the same — as quantitative easing, the method central banks such as the U.S. Federal Reserve, Bank of Japan, Bank of England, and ECB have used since the financial crisis and Great Recession of 2007-2009.

Flood of Central Bank Moves Can't Lift World Out of Rut - Central bankers have managed to steer the world economy clear of a recession while leaving it stuck in the same rut that led to its troubles in the first place. A torrent of monetary stimulus in recent weeks helped spark a turnaround in financial markets by assuaging investors’ fears of an impending global downturn. Yet it did little to lift hopes among economists of a stronger pickup that would put growth on a more solid footing. “The global economy will continue to muddle along,” said Charles Collyns, chief economist for the Institute of International Finance in Washington and a former U.S. Treasury official. He sees growth this year of about 2.5 percent -- the same as in 2015 and well short of the 3.7 percent average over the five years leading up to the global financial crisis. The concern is that policy makers are mainly putting off the pain for now while adding to the difficulties they’ll face later. What’s more, the meager growth they’ve generated means a downside shock still threatens to sink the world into recession, with central bankers already pressing against the limits of their powers. “The returns to monetary easing are still positive, but they’re diminishing,”

Central Banks need to get real (not nominal) -  While the ECB and Bank of Japan are exploring negative interest rates, the US Federal Reserve is preparing us for a slow and cautious increase in short-term interest rates. Long-term rates remain at very low levels and inflation expectations have come under pressure and also remain below what they were a few months or years ago. And as this is going on markets are trying to figure out if they like low or high interest rates. And even if they decide that they like low rates, are negative rates too low? In all these debates there seems to be an unusual amount of what economists call money illusion or lack of understanding of the difference between nominal and real interest rates. This confusion, in my view, is partly motivated by the communication strategy of central banks that seem to obsess with the asymmetric nature of their inflation targets (for both the ECB and US Fed, inflation targets are defined as close but below 2%) and are not clear enough on their final goal and its timing. How do we want interest rates to react to aggressive monetary policy? The common answer is that we want interest rates to go down. This is correct if we think in real terms: given inflation expectations (or actual inflation), we want interest rates to move down relative to those inflation levels. But in some cases, in particular when inflation expectations are lower than what central banks would like them to be, the central bank by being aggressive is targeting higher inflation expectations and this can possibly lead to higher nominal (long-term) interest rates. This is what happened in the three rounds of quantitative easing by the US Federal Reserve. 10-Year interest rates went up which was a signal of increasing inflation expectations (and even higher expectations of future real interest rates). This was seen as a success.

Global economy snapping back into gear? - Just when it all seemed very bleak, the global economy has shown some tentative signs of a rebound in recent weeks. The improved data significantly reduce recession risks in the near term. Last month, in our regular report on the results of our “nowcasts” for world economic activity, we pointed to a sharp weakening in eurozone growth, leading to new lows for global growth in the recent slowdown. The US and China both seemed to be stuck in a prolonged malaise, and the world growth rate had slumped to more than one percentage point below trend. Furthermore, momentum was negative. Economic commentators, including the IMF and the major central banks, were warning of increased downside risks to global economic projections. In fact, they are still issuing these warnings. This month, however, the data have failed to co-operate with the pessimists. Global activity growth has bounced back to 2.6 per cent, compared to a low point of 2.2 per cent a few weeks back. Much of this recovery has occurred in the advanced economies, with our nowcast for the United States showing a particularly marked rebound after more than 12 months of progressive slowdown. It would be wrong to place too much importance on a single month’s data, especially when the nowcasts are heavily influenced by business and consumer surveys.These surveys have remained mixed, but downward momentum has been partly reversed in most advanced economies, especially in the US where the regional Fed surveys for March have been identified by the nowcast models as major upside surprises. In fact, sentiment had become so pessimistic that even slightly better data have represented positive surprises relative to economists’ expectations, according to the Citigroup Surprise Indices. These better numbers still leave the global economy growing at 0.7 per cent below trend, so spare capacity in the world system is still rising, and long term underlying inflation pressures should therefore still be dropping.

O.E.C.D. Lowers Its Forecast for Global Growth This Year - Sluggish global growth threatens to keep governments around the world from being able to pay pensions and bondholders, the chief economist of the Organization for Economic Cooperation and Development said on Wednesday. The O.E.C.D., representing mostly advanced economies, lowered its forecast for worldwide economic growth to 3 percent this year from the 3.3 percent it estimated in November. “These kinds of numbers mean we are not going to make good on these commitments,” Catherine Mann, the group’s chief economist, told reporters. She said that to jump-start growth, countries need continued stimulus from central banks, government spending and tax policies that encourage expansion and economic overhauls.

World Trade Collapses in Dollars, Languishes in Volume - Wolf Richter -- The World Trade Monitor for January, as measured in seasonally adjusted volume, declined 0.4% from December and was up a measly 1.1% from January a year ago. While the sub-index for import volumes rose 3% from a year ago, export volumes fell 0.7%. This sort of “growth,” languishing between slightly negative and slightly positive has been the rule last year. The report added this about trade momentum: Regional outcomes were mixed. Both import and export momentum became more negative in the United States. Both became more positive in the Euro Area. Import momentum in emerging Asia rose further, whereas export momentum in emerging Asia has been negative for four consecutive months. This is also what the world’s largest container carrier, Maersk Lines, and others forecast for 2016: a growth rate of about zero to 1% in terms of volume. So not exactly an endorsement of a booming global economy. But here’s the doozie: In terms of prices per unit expressed in US dollars, world trade dropped 3.8% in January from December and is down 12.1% from January a year ago, continuing a rout that started in June 2014. Not that the index was all that strong at the time, after having cascaded lower from its peak in May 2011. If June 2014 sounds familiar as a recent high point, it’s because a lot of indices started heading south after that, including the price of oil, revenues of S&P 500 companies, total business revenues in the US…. That’s when the Fed was in the middle of tapering QE out of existence and folks realized that it would be gone soon. That’s when the dollar began to strengthen against other key currencies. Shortly after that, inventories of all kinds in the US began to bloat. Starting from that propitious month, the unit price index of world trade has plunged 23%. It’s now lower than it had been at the trough of the Financial Crisis. It hit the lowest level since March 2006:

Rousseff blow as coalition partner quits - President Dilma Rousseff’s biggest coalition partner, the centrist Brazilian Democratic Movement party, on Tuesday abandoned her government, increasing the odds that the leader of Latin America’s largest country will be impeached. The decision by the party, a loose grouping of regionalist politicians, catapults to the fore of national politics Ms Rousseff’s vice-president and PMDB leader Michel Temer, who will take over the presidency if she is impeached, a process that could start as early as next month. “The PMDB is the biggest party in the house, it controls the lower house and the senate,” PMDB lawmaker Hugo Motta told the FT after the decision at a meeting in Brasília. “This decision carries a lot of weight in the outcome of the impeachment. Even though the process also depends on other parties, this is a very strong signal.” Ms Rousseff and her leftist Workers’ party need only one-third of the 513-seat lower house plus one seat to oppose or abstain from an impeachment vote for her to remain in power. But the withdrawal of the PMDB is expected to be followed by that of other smaller centrist parties in the ruling coalition, which could leave her short of the numbers needed to avert impeachment. Only 15 months into her second four-year term, Ms Rousseff is being hampered by what is expected to be Brazil’s worst economic downturn in more than a century and a sprawling corruption investigation into state-owned oil company Petrobras. Mr Temer, who did not participate in Tuesday’s PMDB meeting, has already outlined a market-friendly policy platform that investors hope will revive the economy if he assumes power.

Brazil returns to deficit in February due to deepening recession | Reuters: Brazil posted a primary budget deficit of 23.040 billion reais ($6.38 billion) in February, central bank data showed on Wednesday, erasing a hefty surplus from the previous month as a contracting economy curbs revenues and raises unemployment benefit payments. The country had been expected to post a primary budget deficit of 10 billion reais, according to the median forecast of nine analysts surveyed by Reuters. In the 12 months through February, the primary budget deficit rose to an equivalent of 2.11 percent of gross domestic product from 1.75 percent in 12 months through January.

Brazil Posts Largest Budget Deficit Ever As Rousseff Cries "Coup," Olympic Ad Sales Top $1 Billion -- On Tuesday, embattled Brazilian President Dilma Rousseff was dealt a bitter blow when PMDB - the party of VP Michel Temer and House Speaker Eduardo Cunha - officially left the coalition government. "Dialogue, I regret to say, has been exhausted," Tourism Minister Henrique Eduardo Alves, a PMDB leader and former speaker of the lower house of Congress, said on Monday as he resigned from Rousseff's cabinet. To let the market tell it, a complete political meltdown is great news. As we showed yesterday and as we’ve discussed on a number of occasions this month, the more precarious things get politically in Brazil, the harder the BRL and Brazilian risk assets rally. Why? Because the assumption is that when it comes to the country’s floundering economy, anythingis preferable to the current arrangement. With output in free fall, inflation running in the double digits, and unemployment marking an inexorable rise, it’s difficult to imagine how things could possible get any worse. Indeed, the prospect that Rousseff and Lula will be sent packing has created so much upward pressure on the BRL that the central bank has begun selling reverse swaps to keep a lid on the currency lest its rapid appreciation should end up short circuiting a much needed economic adjustment. Meanwhile, Brazilian stocks have soared this year amid the turmoil. Of course this state of affairs simply isn’t sustainable. As Craig Botham, an emerging markets economist at Schroder Investment Management put it, "you don’t invest in a place where you don’t know who’s in charge." Right. And you also don’t invest in a place where the economic fundamentals get worse by the day.

Bombshell: King Of Jordan Blames Turkey For Terror In Europe, Says Israel "Looks Other Way" On Al-Qaeda -  -- Jordan has at times appeared to be more genuine in its commitment to fighting extremism than say, the Saudis, whose determination to spread Wahhabism adds fuel to the ideological fire that drives the groups the kingdom claims to be fighting. "The global war -- what I call the Third World War by other means -- is one that is a generational one," Abdullah told CNN in January. "Not only inside Islam, as we as Muslims gain the supremacy against the crazies, the outlaws, of our religion, but also reaching out to other religions that Islam is not what they have seen being perpetuated by 0.1% of our religion." On Friday, we learn that Abdullah met with US lawmakers in secret during the week of January 11 and disclosed that British SAS forces as well as Jordanian soldiers had been on the ground fighting ISIS in Libya since at least the beginning of the year. But the revelation that British SpecOps were fighting in Libya wasn't the most interesting thing to emerge from the meeting which purportedly included John McCain, Bob Corker, the chairman of the Senate foreign relations committee, and House Speaker Paul Ryan. Indeed, according to notes seen by The Guardian, Abdullah also implicated Erdogan in perpetuating Sunni extremism as well as purposefully sending terrorists to Europe. The King also suggested that Israel is allowing al-Nusra to operate on its borders because Netanyahu views the al-Qaeda affiliate as a counterweight to Hezbollah. Below, find the bullet points from The Guardian presented with no further comment because frankly, nothing further need be said here. The memo indicates that Abdullah also told US lawmakers:

  • The Turkish president, Recep Tayyip Erdogan, “believes in a radical Islamic solution to the problems in the region” and the “fact that terrorists are going to Europe is part of Turkish policy, and Turkey keeps getting a slap on the hand, but they get off the hook”.
  • Intelligence agencies want to keep terrorist websites “open so they can use them to track extremists” and Google had told the Jordanian monarch “they have 500 people working on this”.
  • Israel “looks the other way” at the al-Qaida affiliate Jabhat al-Nusra on its border with Syria because “they regard them as an opposition to Hezbollah”.

US Saber Rattling Continues With Plans to Beef Up Troops in Eastern Europe - U.S. military officials announced Wednesday plans to beef up numbers of American troops and equipment in Eastern Europe to counter what the Pentagon described as "an aggressive Russia." It comes just weeks after Russia's foreign minister warned that NATO's military build-up near Russia's borders is "counterproductive and dangerous," and that the military alliance's members "are whipping up 'Russia's threat' myth." Part of the plan was already revealed by the Obama administration last month. U.S. European Command said in a statement Wednesday that starting in February 2017, there will be continuous rotations of three Army combat teams and upgraded equipment in Europe. "That equipment would allow for the rapid deployment of ground forces," Military Times reports. The Guardian notes that the plan marks a reversal of Barack Obama’s reduction of forces after concluding that Russian aggression poses an enduring threat to continental stability. The shift in course is the latest in a series of small restorations of the military status quo before Obama, suggesting that senior officers have already begun to look past his presidency.

Pentagon Orders Hundreds Of Military Families To Evacuate Turkey - Has the US finally had enough of its "ally" Erdogan?   Moments ago the DOD announced that the Secretary of Defense, in coordination with the Secretary of State, has authorized the ordered departure of all DoD dependents not assigned to Chief of Mission authority from Adana (to include Incirlik Air Base), Ismir, and Mugla, Turkey.This decision allows for the deliberate, safe return of family members from these areas due to continued security concerns in the region. It adds that while "this step does not signify a permanent decision to end accompanied tours at these facilities", the evacuation "is intended to mitigate the risk to DoD elements and personnel, including family members, while ensuring the combat effectiveness of U.S. forces and our mission support to operations in Turkey. The United States and Turkey are united in our common fight against ISIL, and Incirlik continues to play a key role in counter-ISIL operations." “The decision to move our families and civilians was made in consultation with the Government of Turkey, our State Department, and our Secretary of Defense,” said Gen. Philip M. Breedlove, Commander, U.S. European Command. “We understand this is disruptive to our military families, but we must keep them safe and ensure the combat effectiveness of our forces to support our strong Ally Turkey in the fight against terrorism.”

EU-Turkey migrant deal bound to fail - Next Monday, the deal made between the European Union and Turkey to stem the flood of refugees into the EU goes into effect. It will promptly blow up in everybody's face, for three reasons. First problem: the EU won't be able to "process" the arriving migrants as fast as new ones arrive. Migrants are arriving on the Greek islands of Chios and Lesbos at the rate of almost 2,000 per day, and as the weather improves even larger numbers will attempt the short sea crossing from Turkey. Up to now the migrants have quickly been moved on to the mainland of Greece, but the Turkish-EU deal means that new arrivals will now pile up on the islands in detention camps while awaiting a decision on their asylum claims. Living conditions will become intolerable and there will be protests, some of them violent. The EU has authorised a force of 4,000 security and migration officials and translators to register the new arrivals and investigate their claims for asylum. Even if these officials had all arrived on the islands (most haven't), they wouldn't be enough. It takes time to interview the claimants, write up the claims, make decisions to accept or reject them, and even allow appeals -- and meanwhile another 2,000 will be arriving each day. Second problem: within one or two weeks the time will come for the first rejected asylum claimants to be sent back to Turkey. Having spent all their money and endured great hardships to get this far, they will not go back willingly. It will require physical force to get some of them on the planes or boats that will take them back -- enough force that there will be real casualties. Third problem: by June, as part of this deal, Turkish citizens will have the right to visa-free travel to the European Union. Around one-fifth of Turkey's population, some 15-20 million people, are Kurds. Since last summer, President Recep Tayyip Erdogan's government, having broken a two-year ceasefire with the separatists of the Kurdish Workers' Party (PKK), has been waging a pitiless war against them...

Hours after EU deal, Turkey rounds up 1,300 migrants bound for Greece | Reuters: Turkish authorities rounded up some 1,300 migrants on Monday that they said were planning to sail to Greece from hideouts near secluded Aegean beaches and forests, hours after striking a deal with the European Union on stemming refugee flows. Turkish gendarmes apprehended hundreds of Syrians, Iraqis, Iranians and Afghans and three human traffickers, near the town of Ayvacik in Canakkale province, coastguard officials told Reuters. In the largest operation of its kind in recent months, the migrants were sent to a repatriation center where some could face deportation, the officials said. Turkish Prime Minister Ahmet Davutoglu on Sunday struck a deal with EU leaders to prevent migrants from traveling to Europe in return for 3 billion euros (dollars) in cash, a deal on visas and renewed talks on joining the 28-nation bloc. A record 500,000 people fleeing a four-year civil war in Syria have traveled through Turkey then risked their lives to reach Greece in rickety boats this year, their first stop in Europe before traveling north.

Europe on the Brink - Europe appears to be falling apart.  Last week, an ISIS cell killed dozens of people and wounded hundreds more in twin suicide bombings at the Brussels airport and in the Maalbeek metro station, and the following weekend, a proposed March Against Fear was cancelled due to “security concerns,” which no doubt amped up the city’s anxiety even more. On Sunday, riot police clashed with a mob of hundreds of angry men wearing black, some with shaved heads, who stormed into the square carrying an anti-ISIS banner and screaming Nazi-like slogans. “It was important for us to be here symbolically,” a woman said, but “there were lots of men who were here and doing the Nazi salute, shouting 'death to Arabs,' and so we weren't able to get through.” Adam Liston told the BBC that the atmosphere in the square was “really positive” at first. “Then a bunch of skinheads just turned up, marched into the square, and started a major confrontation with the peace protesters. They got in the face of the protesters and police. They set off flares and chanted and it was getting quite ugly.” There were no violent Nazi-like demonstrations in the United States against Arabs or Muslims, not even on or after September 11, 2001, when ten times as many people were murdered in the most spectacular terrorist attack in world history. But as Tom Wolfe famously put it, the dark night of fascism is forever descending on the United States and landing in Europe.

France: Exodus of 10,000 millionaires amid rising Muslim tensions: Rising tensions in France, especially in Paris following a series of Islamist terrorist attacks in 2015, have spurred an exodus of its super-wealthy citizens, a new report on migration trends of millionaires and high-net worth individuals across the world reveals. The report warns that other European countries, including the UK, Belgium, Germany and Sweden "where religious tensions are starting to emerge", will also see similar trends.Regarding a Brexit, the report suggests millionaires would want to stay in Britain even if it leaves the single currency bloc. The report was compiled by New World Wealth, an agency that gives information on the global wealth sector. The report was based on data collected from investor visa programme statistics of each country; annual interviews with around 800 global high net worth individuals and with intermediaries like migration experts, second citizenship platforms, wealth managers and property agents; data from property registers and property sales statistics in each country; and by tracking millionaire movements in the media.According to the report, Millionaire migration in 2015, France topped the list of countries with maximum millionaire outflows as it lost 10,000 millionaires, or 3% of its millionaire population. Among the cities that saw maximum millionaire outflow, Paris, was at the top – losing about 6% of its millionaire population or 7,000 millionaires in 2015 to the UK, the US, Canada, Australia and Israel.

Germany wants refugees to integrate or lose residency rights | Reuters: German Interior Minister Thomas de Maiziere said he is planning a new law that will require refugees to learn German and integrate into society, or else lose their permanent right of residence. The initiative comes after voters punished Chancellor Angela Merkel's conservatives in regional elections earlier this month, giving a thumbs-down to her open-door refugee policy and turning in droves to the anti-immigrant party Alternative for Germany (AfD). Around 1 million migrants arrived in Germany last year - many fleeing conflict and economic hardship in the Middle East and Africa - and de Maiziere said around 100,000 more had arrived so far this year. Germany expected that in return for language lessons, social benefits and housing, the new arrivals made an effort to integrate, he told ARD television. "For those who refuse to learn German, for those who refuse to allow their relatives to integrate - for instance women or girls - for those who reject job offers: for them, there cannot be an unlimited settlement permit after three years," he said. De Maiziere, who belongs to Merkel's conservatives party, added that he wanted "a link between successful integration and the permission for how long one is allowed to stay in Germany." Vice Chancellor Sigmar Gabriel welcomed the draft law, which is planned for May.

Sweden cuts maximum mortgage term to 105 years (the average is 140): Think there's a housing affordability crisis in Britain, with low mortgage rates likely to drive house prices even higher? Take a look at Sweden where lending policies have been more generous, and where house price inflation has been (at least recently) more extreme. A number of banks and analysts have warned that Sweden's housing market is overheating, with HSBC in January saying: "The pace of acceleration in the housing market points to a bubble."  House prices across the country were up 18pc last year. This compares to Britain's house price rises in 2015 of between 5pc and 10pc, depending on which index is used. Now Sweden is dealing with its overheated housing market by reining in mortgage availability. Regulators introduced restrictions which will mean mortgage terms - the time homebuyers have to clear the debt - will be drastically reduced to just... 105 years. The move comes because historically there has been no time limit on mortgage duration.

The US is Beginning to Dominate Global Investment Banking: Implications for Europe --naked capitalism Yves here. This paper is more thoughtful and nuanced that its headline might lead you to believe. Nevertheless, there are some additional issues that it does not address. First is that it ignore the elephant in the room: that Germany is committed to deflationary policies and even worse, is not backing the measures needed to move to Eurozone-wide bank deposit scheme or a viable resolution mechanism. We’ve highlighted some very informative posts by Thomas Fazi which discusses the flaws at length. And even more alarming is that the banking union headfake measures and the proposed sovereign bail in regime both make the EU more, not less, crisis-prone. That’s before you get to the fact that the refugee crisis has good odds of producing political fractures, starting with a Brexit (yes, a Brexit is not the same as an EU member exit, but it raises the specter that that is viable, and makes Marine Le Pen’s threat to depart appear more viable). So as much as the authors can claim that more muscular European banks would be a good thing for Europe, banking policies are even more hostile to that aim than this article indicates. And that’s before you get to the fact that deflation is destructive to banks, even though the ECB has tried to construct negative interest rate policies that limit the damage. Second, the article fails to consider that the real issue is not who dominates investment banking services, but whether having as much market-based credit (as in securitized credit traded in capital markets, as opposed to bank lending) is a good thing. The evidence suggests not. The ostensible advantage of cheaper credit due to vastly reduced use of “costly” bank equity is offset by more frequent and severe crises, at least in part due to bad incentives. Worse, in the post-crisis phase, as we saw in the US (but was effectively covered up by the authorities), banks needed and got a second bailout, for their mortgage securitization and resulting foreclosure fraud crises. Securitization creates poor incentives and the complexity and rigidity of the securitization structures, compounded the propensity for servicers to be high-volume, highly routinized operations makes it well nigh impossible to restructure loans gone sour, which is the best solution not just for borrowers and lenders, but also for the economy as a whole.

NHS would be put under threat by Brexit, says Jeremy Hunt --The National Health Service will face budget cuts, falling standards and an exodus of overseas doctors and nurses if the UK leaves the European Union, health secretary Jeremy Hunt has said. In a controversial intervention in the Brexit debate, Hunt warns in an Observer article that leaving will create risks to levels of service and investment and could trigger a loss of key staff that will leave gaps on the NHS frontline. His decision to link the future of the NHS to arguments over EU membership was labelled by pro-Brexit campaigners as scaremongering. While opinion polls show the remain side narrowly ahead, with less than three months to go before the in/out referendum on 23 June, No 10 remains concerned that high numbers of undecided voters could still back Brexit.  It is now focusing on arguments it hopes will persuade them of the risks and effects on their everyday lives of voting to leave. Hunt argues that, with the NHS budget already under huge pressure, funding levels can only be maintained if the British economy remains strong.  He cites a series of economic surveys, including from the CBI, the London School of Economics and Oxford Economics, as evidence of the adverse impact of an exit on the UK economy and the government’s ability to stick to high levels of funding for public services.

Would Britain face break-up after Brexit? - What will the UK be voting for in less than three months’ time? On paper, the question is straightforward – “Should the United Kingdom remain a member of the European Union or leave?”  However, pundits are warning that those voting for schism may get even more of one than they imagine. If the country does vote for a Brexit, it will set in motion a process to legally extract the UK from the institutions of the EU. In so doing, the pace of change could snowball, reawakening calls for independence in Scotland, Northern Ireland and elsewhere in Europe. There are no constituencies in a referendum. But close attention will be paid to where those having their say are from. That’s because it is quite possible that the UK could vote to leave the EU against the express wishes of voters in the regions. Already, Nicola Sturgeon, the Scottish First Minister, has made clear that Scotland’s government could use a vote to leave the EU as a catalyst to hold a second referendum on Scottish independence. She believes that such a vote would count as a “material change of circumstance” in Scotland’s relationship with the rest of the UK – the spur necessary to hold a second vote. Earlier this year, she said: “If Scotland had voted to stay in and the UK as a whole votes to come out… it’s highly likely that will trigger an overwhelming demand for a second referendum on independence. "The democratic outrage of being taken out of Europe against our will, I think it would be almost inevitable.”

Bank of England risks being caught in Brexit cross-currents: (Reuters) - The Bank of England could be pulled in very different directions if British voters take the historic step of leaving the European Union in a referendum set for June 23. Many economists believe a so-called Brexit would deliver a shock to Britain's economy that the central bank could attempt to soften by cutting interest rates from their current record low of 0.5 percent. Yet at the same time, a vote to leave the EU could also provoke an inflationary fall in the value of sterling, potentially putting pressure on the BoE to raise borrowing costs. The Bank may also have to take steps to steer Britain's huge financial services industry through any upheaval in markets. Governor Mark Carney said last month the BoE was making contingency plans for the EU referendum, but gave no details. Below are possible implications of a Brexit for the bank.

Exclusive: royal family considering dramatic Brexit intervention - The royal family is seriously considering making a dramatic intervention in the referendum debate with an announcement that it supports Britain remaining inside the European Union. That the royals are prepared to risk provoking a potential constitutional crisis shows just how deep their anger is at parts of the British press and senior politicians. According to a senior source close to official figures, there was particular resentment at the Sun’s newspaper’s depiction of the Queen as a Brexit supporter.  But the anger runs through the generations at Buckingham Palace: there was fury at the claims about “workshy” Prince William, a campaign mounted by two papers with an anti-EU stance, the Daily Mail and the Sun. And there was a feeling last week that rock bottom had been hit with a story in the Mail that Kate was now posher than the other royals. Using outside experts who advised that the intervention would need to be presented by a figure with impeccable European credentials, a strong affinity with the continent and the character to speak out, the family has decided that the move should fronted by Prince Philip.

Scotland and Wales 'could form own country' if Britain votes to leave EU - Scotland and Wales are in preliminary talks to split away from the UK and form a new country if Britain votes to leave the EU in June. The extraordinary proposal has been discussed by members of the Welsh Assembly and Scottish Government, and it is being taken seriously by the UK Government. The Independent can reveal the plans today after it was passed redacted documents by a Cabinet Office whistle-blower. Under discussion are designs for a bridge or tunnel linking the two countries directly via the Isle of Man, with the “Celtic Union” among a number of name suggestions that would ultimately be decided at a second referendum. Dubbed a “joint cessation”, the plans come amid concerns among Welsh and Scottish leaders that they will be pulled out of the EU against the wishes of their people.

No comments: