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

Saturday, April 9, 2016

week ending Apr 9

Fed flip-flops reflect global uncertainty -- All it took was last Tuesday’s reassuring speech from Federal Reserve chair Janet Yellen for vocal market participants to change a narrative that had depicted the central bank as “inconsistent” and “confusing”. Yet the underlying issues are real and will not go away any time soon.  In the past three months, Fed policy signals have visibly fluctuated several times. Having initiated a tightening cycle by raising US interest rates in December for the first time in almost 10 years, the markets’ interpretation of the “blue dots” that Fed officials (inadvisably in my view) disseminate to express their individual paths for future policy pointed to four additional hikes in 2016, followed by another four in 2017. With this representing a tightening well in excess of what market participants were expecting, pronounced market volatility ensued, accompanied by an unsettling sell-off in risk assets. Concurrently, concerns intensified about economic weakness abroad, even to the extent of making some people worry about a US recession. In response, the Fed adopted a noticeably more dovish intra-meeting tone. Calming remarks from several officials culminated in a policy meeting that revised downwards the blue dots so as to signal the possibility of just two hikes this year. Comforted by rapidly recovering financial asset prices (including a 10 per cent surge in US stock indices and more abroad) and relative global economic stability, Fed signals changed once again with some officials even suggesting that a hike could be warranted as early as April. This immediately paused the global equity rally, leading vocal market participants to accuse the Fed of inconsistent and confusing communication. Some went further and openly doubted the credibility and competency of the institution. Such criticisms were put to rest, at least for now, by last Tuesday’s speech by Fed chair Yellen to the Economic Club of New York. In noticeably  dovish remarks that were music to ears of market bulls, Ms Yellen emphasised the external headwinds facing the US economy, the asymmetrical nature of the policy risks, and persistent structural puzzles. With that, she stressed that the Fed’s policy response would be cautiously gradual, erring on the side of accommodation. Equities took off, ending a winning “V-shaped,” quarter not just very near year-highs but also near some all-time record peaks.

Fed's Evans says market more pessimistic on U.S. rate hikes - Financial markets are more pessimistic than the U.S. central bank in their pricing of U.S. interest rate hikes, Chicago Fed President Charles Evans said on Tuesday. "Market expectations are pricing in a 20 percent likelihood of things deteriorating from here," said Evans during an investor conference in the Asian financial hub, citing recent surveys. "I don't have that outlook. In general, financial market expectations are more pessimistic than ours." Evans, a top Federal Reserve policymaker, also repeated his call for just two U.S. interest-rate hikes this year, saying that the risks to his forecast for economic growth are weighted to the downside. However, financial markets as evident from federal fund futures contracts, are pricing roughly one more rate hike for the remainder of the year. "A very shallow funds rate path, such as the one envisioned by the median FOMC participant, is appropriate," Evans said in a copy of the speech delivered to the Credit Suisse Asian Investment Conference. The FOMC, or Federal Open Market Committee, is the Fed's policy-setting body; in March the FOMC's median forecast called for two rate hikes this year. Evans also said the Fed has to be proactive and aggressive to reach its inflation target.

Fed Watch: Fed Has Little Reason to Hike Rates - Despite some occasionally hawkish rhetoric from a handful of disaffected Federal Reserve bank presidents, expect the Fed to remain on hold until inflationary threats clearly emerge. In practice, that means the Fed is not likely to raise rates until the unemployment rate resumes its downward trajectory. Soft though generally positive data coupled with market turbulence over the winter scared most policymakers straight with regards to their overly-optimistic plans to normalize policy. The risks to the outlook are simply too one-sided too believe this is anything like the tightening cycles of the past. Generally positive incoming data continues to defy the predictions of the recessionistas. ISM data, both manufacturing: and nonmanufacturing: posted improved headline numbers with general solid internals. The worst of the manufacturing downturn may be behind us. The JOLTS numbers: have remained fairly stable in recent months, suggesting no significant changes in dynamics in labor flows in and out of firms. Not surprisingly, nonfarm payroll growth remains on its steady path: The unemployment rate ticked up in March as the labor force grew: The Fed would like unemployment to settle somewhat below their estimates of the natural rate to promote further reduction of underemployment. So a stagnant unemployment rate at these levels argues for stable policy. One red flag I see is that temporary employment has stalled, suggesting some loss of momentum:Nothing to panic about, just something I am watching. Indeed, in many ways the current dynamic is not dissimilar to the mid-90s, when the economy sputtered in the wake of tighter monetary policy. Then, like now, the Fed need to back down in response. The economy subsequently gathered steam. Moreover, declining estimates of first quarter growth also give the Fed reason to remain on hold. Soft consumption, weaker auto sales, still anemic manufacturing, and a rising trade deficit have all conspired to bring the latest Atlanta Fed estimate of first quarter growth to an anemic 0.4%.

Sentiment on Fed runs against April rate hike, minutes show - Federal Reserve officials appeared reluctant to lift interest rates at their next meeting, which takes place at the end of this month, according to March meeting minutes released Wednesday. “Several” Fed officials, saying they backed a cautious approach to raising interest rates, “noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate,” the minutes said. At the same time, “some” other Fed officials spoke in favor of an April rate hike. Sentiment at the Fed could shift. The central bankers agreed that the data, rather than calendar dates, would determine the timing of the next rate hike. In an interview with Bloomberg Radio after the minutes were released, St. Louis Fed President James Bullard said there will not be a lot of data for Fed officials to chew over at their meeting later this month, suggesting the central bank may remain on the sidelines. “There hasn’t been all that much data since the March meeting and it has been mixed in various ways, so you can draw your own conclusion from that,” Bullard said, adding that there were “cross-currents” of “tepid” first-quarter growth and rising inflation.

FOMC Minutes: Many participants argued "asymmetry made it prudent to wait for additional information" - There were different views - a couple of members expect to raise rates at the next meeting.  However many participants argued for a cautious approach. From the Fed: Minutes of the Federal Open Market Committee, March 15-16, 2016. Excerpts:  Participants generally agreed that the incoming information indicated that the U.S. economy had been resilient to recent global economic and financial developments, and that the domestic economic indicators that had become available in recent weeks had been mostly consistent with their expectations.  Several participants also argued for proceeding cautiously in reducing policy accommodation because they saw the risks to the U.S. economy stemming from developments abroad as tilted to the downside or because they were concerned that longer-term inflation expectations might be slipping lower, skewing the risks to the outlook for inflation to the downside. Many participants noted that, with the target range for the federal funds rate only slightly above zero, the FOMC continued to have little room to ease monetary policy through conventional means if economic activity or inflation turned out to be materially weaker than anticipated, but could raise rates quickly if the economy appeared to be overheating or if inflation was to increase significantly more rapidly than anticipated. In their view, this asymmetry made it prudent to wait for additional information regarding the underlying strength of economic activity and prospects for inflation before taking another step to reduce policy accommodation. For all of these reasons, most participants judged it appropriate to maintain the target range for the federal funds rate at 1/4 to 1/2 percent at this meeting while noting that global economic and financial developments continued to pose risks. . A couple of participants, however, saw an increase in the target range to 1/2 to 3/4 percent as appropriate at this meeting, citing evidence that the economy was continuing to expand at a moderate rate despite developments abroad and earlier volatility in financial conditions, continued improvement in labor market conditions, the firming of inflation over recent months, and the apparent leveling-off of oil prices..

Fed Watch: Dovish Minutes - The FOMC minutes indicates the Fed is just a dovish as believed. This was somewhat surprising given the tendency of minutes to have a more balanced perspective which would appear to be hawkish relative to current market expectations. But not this time. This time the message was fairly clear: They can't ignore the asymmetry of policy risks any longer. Gradual went to glacial, with April now off the table, leaving June as the next possible data for a rate hike. Expect Fedspeak to sound somewhat hawkish given they will want to keep June on the table - but I am less than certain they will have the data in hand to justify another hike until the second half of the year. Meeting participants were generally confident in the outlook: participants shared the assessment that, with gradual adjustments in the stance of monetary policy, real GDP would continue to increase at a moderate rate over the medium term and labor market indicators would continue to strengthen. But outside of the consumer, all is not rosy:Many participants, however, anticipated that relative strength in household spending would be partially offset by weakness in net exports associated with lackluster foreign growth and ... business fixed investment seemed likely to remain sluggish.  And global concerns loomed large:  participants generally saw global economic and financial developments as continuing to pose risks to the outlook for economic activity and the labor market in the United States.  Caveats abound, however: Several participants also noted the possibility that economic activity or labor market conditions could turn out to be stronger than anticipated. Is the economy at full employment? Maybe:Some participants judged that current labor market conditions were at or near those consistent with maximum sustainable employment, noting that the unemployment rate was at or below their estimates of its longer-run normal level and citing anecdotal reports of labor shortages or increased wage pressures. Maybe not:  In contrast, some other participants judged that the economy had not yet reached maximum employment.

Dollar sinks again after Fed remains cautious | Reuters: The dollar's fall against the yen deepened on Thursday after minutes of the U.S. Federal Reserve's most recent policy meeting offered little optimism over the state of global growth and the prospect of a rise in interest rates in June. The U.S. currency .DXY, hammered since late March by the latest retreat in expectations for any further rises in U.S. rates, fell 1 percent to less than 109 yen, its weakest in 17 months. JPY= With oil up 1 percent and the prospect of any tightening of U.S. monetary policy receding, European stock markets scraped together some initial gains, but the mood remained fragile. Chinese shares fell more than 1 percent .SSEC and the broad Eurofirst index of Europe's leading companies .FTEU3 is in its fourth consecutive week of falls, down almost 10 percent since the start of January. A flood of money into the traditional safety of the yen has seen the Japanese currency gain 9.5 percent in the same period.

The Fed Should Ease - Narayana Kocherlakota - The steady improvement of the U.S. economy has led many to conclude that the Federal Reserve should keep removing stimulus by resuming interest-rate increases this year. I disagree: With inflation pressures low, there’s a lot more the Fed can and should do to get people back to work. To understand my point, consider three charts. The first shows the share of people in their prime working years -- age 25 to 54 -- who have a job (focusing on this age group helps strip out the effect of the baby-boom generation reaching retirement age):Welcome as it is, the rate of improvement strikes me as slow. Even if the employment-to-population ratio increased by another two percentage points in the next 30 months, it would still remain below its 2007 level. This argues for more monetary stimulus to generate a faster improvement. Granted, monetary stimulus is not costless. But there are no troubling signs of inflation at the moment. Consider, for example, the annual increase in the Fed’s preferred price measure over the past decade.  The Fed’s goal is to keep inflation close to 2 percent. As the chart shows, it has been below that level since early 2012.  Far from drifting upward, this measure shows what I would call a worrisome decline in investors’ assessments of longer-term inflation since mid-2014. These three charts all point to the same conclusion: Monetary policy makers should be seeking to ease, not tighten. Instead of satisfying a phantom need to “normalize” rates, the Fed should do what’s needed to get employment and inflation back to normal.

Rising U.S. inflation would take a bite out of the dollar | Reuters: Currency market strategists are predicting greater weakness in the U.S. dollar over the next few months, as the Federal Reserve seems to have closed the door on interest rate hikes through the spring and left the greenback alone with a destructive bedfellow: rising inflation. With the Fed's policy statement in March and remarks from Fed Chair Janet Yellen later in the month striking a cautious tone, strategists say this has set the stage for a rough patch for the dollar over the near-term as inflation nips at it. U.S. inflation has firmed in recent months, with the core Consumer Price Index rising 2.3 percent in the 12 months through February to mark the largest increase since May 2012. The core personal consumption expenditures price index, which is the Fed's preferred measure, gained 1.7 percent in the 12 months ended in February. The core inflation readings exclude food and energy prices. The Fed is targeting a 2 percent core PCE reading. Inflation typically undermines the dollar's strength by diminishing its spending power. Differences in inflation rates between the United States and the euro zone have been the main force behind the dollar's value against the euro since 2000, according to a research report from Fundstrat Global Advisors. While expectations for higher inflation once tended to ramp up bets on a swifter pace of Fed rate hikes and, in turn, boost the dollar, strategists say the perceived improbability of a Fed rate hike until at least June has reinstated inflation’s traditional role of eroding the dollar’s value.

So Just How Much of an Overshoot on Inflation Will the Fed Tolerate? -  The Federal Reserve formally adopted a 2 percent inflation target back in January of 2012.  Policymakers at the central bank amended their objective this year to clarify that they expect "symmetric errors" around the target; in other words there is the possibility of the central bank overshooting or undershooting its self-proclaimed goal on inflation. Despite this clarification, concerns about the Fed’s commitment to the target persist and have intensified following Fed Chair Janet Yellen's speech last month. Even before then, however, it was easy to see why such worries existed. The central bank began the process of policy “normalization,” first by ending quantitative easing and then by raising benchmark interest rates, even though inflation has fallen short of the Fed's self-proclaimed target every month since May of 2012. This raises a simple question: Given consistently below-target inflation since the Fed adopted its target, how much, if any, overshooting might the Fed be willing to tolerate as the expansion continues?

Wisdom wanes for don't fight the Fed (FT) For generations, “Don’t fight the Fed” was a mantra beaten into market neophytes by Wall Street’s grizzled veterans. Now the tables seem to have turned. The Federal Reserve’s unexpectedly dovish stance, reiterated by chair Janet Yellen last week, contrasts sharply with relatively firm economic data, and is stirring a longstanding debate over what really influences central bank officials. The US bond market, through low yields, has long reflected the wider market view that the Fed’s outlook for the economy, inflation and interest rate policy was optimistic. Now it appears the Fed is coming around to the market’s view, as the central bank worries more about the negatives than the positives in the economy. No matter the robust headline job-creation numbers from March. Or how despite market turmoil, US growth continues to trundle on at an underwhelming but respectable rate, the labour market is performing strongly and inflation is cautiously picking up. Friday’s mixed employment data only underlines Ms Yellen’s apprehension and keeps investors fretting about a renewed market volatility. After a dramatic V-shaped performance in asset prices during the first quarter, investors are on the defensive, led by sinking equities and sharply lower oil prices. That defensive posture has much to do with the market’s draining confidence in the Fed. Gnawing at investor sentiment is what central banks can do to offset fundamental forces, led by weaker emerging market growth and supply gluts for many commodities, while highly levered companies face falling revenues and lower profitability. ‘’Unfortunately for Yellen, risk is trading increasingly like they are losing faith with the big central banks, because central banks can’t create value where there is ‘none’, in growth dependent commodities, or relatively rich, earnings depleted equities,’’ says Alan Ruskin, Deutsche Bank strategist.

Fed To Hold Closed, Unexpected Meeting Under "Expedited Procedures" On Monday To Discuss Rates --With everyone's focus sharply attuned on anything to do with the Fed's rate hike policy, many will probably wonder why yesterday the Fed announced that this coming Monday, April 11, the Fed will hold a closed meeting "under expedited procedures" during which the Board of Governors will review and determine advance and discount rates charged by the Fed banks. As a reminder, the last time the Fed held such a meeting was on November 21, less than a month before it launched its first rate hike in years.

The Safe Asset Problem is Back: Negative Interest Rate Edition --by David Beckworth -- The safe asset shortage problem is back. Actually, it never went away but drifted into the background as the symptoms of this problem--sluggish growth and low interest rates--became the norm. As the figure above shows, yields on government bonds considered safe assets have been steadily declining since the crisis broke out.   This problem is now manifesting itself in a new form: central banks tinkering with negative interest rates. . The above figure indicates the downward march of global safe yields since 2008 is a global phenomenon. This decline has occurred outside of QE and prior to negative rates. It is a far bigger development than central banks playing with negative rates.  But many observers miss this point. They confuse the symptom--central bankers tinkering with negative interest rates--for the cause--the safe asset shortage. So I want to revisit the safe asset shortage problem in this post by reviewing what exactly it is, why it has persisted for so long, and what can be done to remedy it.  So what exactly is the safe asset shortage? It is the shortage of  those assets that are highly liquid, expected to be stable in value, and used to facilitate exchange for institutional investors in the shadow banking system. They effectively function as money for institutional investors and include treasuries, agencies, commercial paper, and repos. During the crisis many of the privately issued safe assets disappeared erasing a large chunk of the shadow banking's money supply. This happened just as the demand for safe assets was increasing because of the panic. As recently shown by Caballero, Farhi, and Gourinchas (2016), if this excess demand for safe assets is big enough it will push down the natural interest rate below zero. Since the central bank cannot push its policy rate very far past 0%, an interest rate gap will emerge and cause output to fall below its potential.

Does The US Economy Still Have A Money-Demand Problem? - The ongoing collapse of the velocity of M2 money supply screams loud on clear: YES. As the St. Louis Fed pointed out yesterday, M2 money velocity—the ratio of nominal GDP to the average of the money stock—has fallen to record lows, based on numbers dating to 1959. That’s a powerful sign that the crowd has a strong—and still growing–appetite for safe-haven liquidity. Therein lies Exhibit A for explaining why the post-2008 economic recovery has been unsatisfying. “In general, the velocity of money starts to increase after a recession is over, when confidence is restored,” the St. Louis Fed explained in a blog post on Thursday. “However, since 2007, the velocity of money in the U.S. has been decreasing, which means consumers and firms are still holding onto cash instead of spending it. This behavior, which also reflects a decrease in inflation, suggests that confidence in the recovery is still low. When confidence is restored, we should expect to see a rebound in the velocity of money.” Based on the chart above, however, a rebound that boosts confidence is nowhere on the horizon. If this sounds familiar, well, it is. An unhealthy craving for safety was a concern in 2011, for instance, when I asked: “Are We Facing Another Troubling Rise In Money Demand?” The numbers suggested the answer was “yes” at the time and nothing much has changed five years on. In fact, you can argue that conditions are deteriorating via the chart above. Granted, the economy is expanding, but in fits and starts. Meantime, stock prices are higher but Treasury yields are lower and perhaps set to fall even more.

Atlanta Fed Q1 GDP Estimate Crashes To 0.4% - Following this morning's disappointing trade data (but... but... surveys showed that the workers in the service sector are more optimistic... just ignore the actual hard data) we asked if today's Atlanta Fed GDP update would be above or below 0.3%.  Moments ago we got the answer: it was over, but by the smallest possible increment. And the answer is.... The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 5, down from 0.7 percent on April 1. After yesterday morning's light vehicle sales release from the U.S. Bureau of Economic Analysis and the manufacturing report from the U.S. Bureau of the Census, the forecast for real GDP growth declined from 0.7 percent to 0.4 percent due to declines in the forecasts for real consumer spending growth and real equipment investment growth. The forecast for real GDP growth remained at 0.4 percent after this morning's international trade report from the U.S. Census Bureau, as a slight decline in the forecast for real net exports was offset by a slight increase in the forecast of real equipment investment growth.

Merrill: "Fading the first quarter GDP fade" -- The Atlanta Fed GDPNow estimate has fallen to just 0.4% annualized growth for Q1.   The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 5, down from 0.7 percent on April 1.  From Merrill Lynch: Fading the first quarter fade: For the third year in a row, forecasters came into the first quarter looking for 2%-plus GDP growth, only to steadily revise estimates lower. [T]he Atlanta Fed’s GDPNow tracking [has declined] for 1Q in each year. They are far from alone: both we and the consensus have been doing the same thing. This weakness adds to market skepticism about a June Fed hike.   In both 2014 and 2015 we faded the weak 1Q data and argued that the recovery remained on track. Today, we see four reasons to reiterate that call. First, outside of the GDP adding up, the data look fine. Second, some of the weakness is likely due to lingering seasonal adjustment problems. Third, the fundamental backdrop points to moderate growth, not a big slowdown. Fourth, and perhaps most important, with potential growth slipping below 2%, and given the normal variation in the data, we should not be surprised to see near-zero quarters on an annual basis. CR note: No worries.

Atlanta Fed Slashes Q1 GDP Estimate To Only 0.1% - After today's latest atrocious wholesale inventory and sales data, we predicted that this may be the straw that tips Q1 GDP into contraction, or at best keeps it unchanged, per the Atlanta Fed. We were wrong. Moments ago the Fed with the highly-tracked GDP estimator, slashed its Q1 GDP estimate... to 0.1%. As a reminder, this number was as high as 2.7% precisely two months ago. The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate)in the first quarter of 2016 is 0.1 percent on April 8, down from 0.4 percent on April 5. After this morning's wholesale trade report from the U.S. Bureau of the Census, the forecast for the contribution of inventory investment to first-quarter real GDP growth fell from –0.4 percentage points to –0.7 percentage points.

GDPNow Forecast for First Quarter Falls to 0.1% Stagnation | Wolf Street: In a very unpleasant and totally unnecessary move, the Census Bureau reported this morning that February sales by wholesalers, adjusted for seasonal variations and trading day differences, but not price changes, dropped 3.1% year over year to $427.6 billion. This sales decline is largely in line with the overall sales decline among US businesses since late 2014. And businesses are finally taking the sales slump seriously and have begun whittling down their inventories. This has hit the Atlanta Fed’s GDPNow forecasts for the first quarter. Inventories have formed a massive overhang that has been growing as sales have declined. For quarters on end, businesses have not adequately adjusted their orders to reflect the new sales reality. Thus inventories – unsold merchandise – have ballooned, sending the crucial inventory-to-sales ratio soaring skyward to levels not seen since near the peak of the Financial Crisis. But now businesses are attacking the problem. Inventories at the wholesale levels dropped to $583.3 billion at the end of February, down 0.5% from January (though they’re still up 0.6% from their levels a year ago).... Rising inventories boost GDP. They represent additional sales by suppliers. “Inventory investment,” it’s called. Thus, rising inventories are often considered “a sign of optimism” — until they reach the danger zone, when they become overhang. At that point, businesses cut their orders to bring their inventories down, and this eats into sales by their suppliers, and it drags down GDP. It can also trigger layoffs and a whole chain reaction of unpleasant events. The data-dependent Atlanta Fed GDPNow model reacted to it: After this morning’s wholesale trade report from the U.S. Bureau of the Census, the forecast for the contribution of inventory investment to first-quarter real GDP growth fell from –0.4 percentage points to –0.7 percentage points. And its forecast for first quarter GDP dropped to 0.1% annualized — in serious stagnation mode, and a hair from falling into the negative:

Trump's prediction of 'massive recession' puzzles economists -  Donald Trump's prediction that the U.S. economy was on the verge of a "very massive recession" hit a wall of skepticism on Sunday from economists who questioned the Republican presidential front-runner's calculations. In an interview with the Washington Post published on Saturday, the billionaire businessman said a combination of high unemployment and an overvalued stock market had set the stage for another economic slump. He put real unemployment above 20 percent. "We're not heading for a recession, massive or minor, and the unemployment rate is not 20 percent," said Harm Bandholz, chief U.S. economist at UniCredit Research in New York. The official unemployment rate has declined to 5 percent from a peak of 10 percent in October 2009, according to government statistics. But a different, broader measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment is at 9.8 percent.

Fed’s Yellen Joins With Predecessors to Calm Recession Fears - WSJ: —Federal Reserve Chairwoman Janet Yellen and three former Fed leaders sought to dispel worries the U.S. is heading back toward recession despite concerns about slow global growth and the expansion’s advancing age. Ms. Yellen, joined Thursday in an unusual gathering in New York by former Fed Chairmen Ben Bernanke, Alan Greenspan and Paul Volcker, described an economy that is progressing without breeding obvious new financial bubbles that could derail growth. “This is an economy on a solid course, not a bubble economy,” Ms. Yellen said. It has made “tremendous progress” from the damage of the 2007-2009 financial crisis. “The domestic U.S. economy is moving forward,” Mr. Bernanke added. “I don’t see any particular reason to believe a recession is any more likely in 2016 than it was in 2015 or 2014.” Though the U.S. expansion is already older than the average post World War II expansion, he said expansions don’t die of old age. Instead, they reverse when imbalances throw off spending and investment. Messrs. Greenspan and Volcker largely concurred.

What are the chances of a recession? Not what you’d think -  The National Bureau of Economic Research — the entity that determines the official start and finish dates of economic contractions in the United States — defines a recession as a “significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.”  Lakshman Achuthan of the Economic Cycle Research Institute (a friend and occasional lunch partner) adds an important qualifier to help understand the context of this economic data: He notes that for an indication of recession to occur, data must be “pronounced, pervasive and persistent” — not merely a temporary shortfall in one indicator or another. I looked at the data going back to 1926. Historically, we see recessions occurring every 59 months (on average) over that period. This means the economy has been in a recession 18 percent of the time, with the average recession lasting a little more than a year. The post-World War II era — known as the great moderation — has experienced shorter and less frequent recessions. The amount of time the economy was in a recession has decreased. Occasional devastating financial crisis aside, the United States has matured to become a more advanced and (mostly) more stable economy.All too many pundits seem to forget that. When we see a bad retail sales number in the midst of a blizzard, or a soft new-homes start number, the recession callers take to the airwaves. Their own terrible track records never seem to give them any pause. We read that recession is “imminent” or “100 percent guaranteed in 2016” as two pundits declared recently. The language is not designed to inform or to describe probabilistic, data-driven models of a complex and nuanced global economy; rather, it is “look at me” talk and nothing more than marketing.

The Next Big Problem: "Stagflation Is Starting To Show Across The Economy" -- In the past few months, the Bureau of Labor Statistics has gone out of its way to show that U.S. worker compensation is finally rising. There is one problem with that: while that may be true on an hourly basis..... on a weekly basis, the picture is vastly different. What is happening is that weekly wage growth have gone nowhere in years, but because the average hours worked per week has declined and today hit a 2 year low of 34.4, it translates into more money per hour worked. But let's assume that wages, or at least the perception thereof, is indeed rising - is this helping the average American? Well, as we showed earlier this week, the net "after expense" income of average Americans measured in real dollars has declined from $17K in 2004 to $6,000 in 2014 because as wages have declined dramatically, expenses have surged. In fact, according to the recent Pew study, by 2014, median income had fallen by 13 percent from 2004 levels, while expenditures had increased by nearly 14 percent, As such a 2.5%, or 3.5% or even 10% increases in wages will not manage to offset the surging expenditures, mostly on rent.

Inflation is Rising While GDP Weakens... Stagflation, Here We Come! - The Fed has backed itself into a corner. For seven years now we’ve been told the US is in a recovery. However, if this were the case, the Fed would have started raising rates years ago (likely in 2012). No other recovery on record saw the Fed maintaining ZIRP for so long. There is simply no factually credible argument for why rates should be ZIRP if the economy is expanding. You cannot have claims of a “recovery” or expansion while ZIRP is in place. ZIRP is meant to be an emergency policy meant to pull the economy out of a severe recession, NOT a long-term program. In pictoral form, the red line in the chart below negates the blue line. There is simply NO WAY that GDP expansion is even close to accurate if rates have to be kept at zero for six years afterthe recession “ended.”Indeed, even the CPI data suggest the Fed is deceptive. Core CPI is well above the Fed’s “target” rate of 2%. Even a child could look at this chart and see the breakout occurring. The Fed claims to be “data dependent” but all of the data has hit levels at which the Fed claimed it would raise rates again!

We Need Fiscal Policy - Forbes: Janet Yellen admitted that monetary policy can’t do it alone. Yes, in her March 29 appearance at the Economic Club of New York, the Fed chair admitted that monetary policy was not enough to rescue the nation from its economic doldrums, and that government would have to spend. She added that in her experience, it had once been unthinkable that monetary easing would not be accompanied by government spending. This was the speech in which Yellen said that the federal funds rate would not be increased any time soon, because things are not so rosy. “It certainly would be helpful to see fiscal policy play a larger role,” Yellen said, advocating a mix of policies, especially, “investment-oriented fiscal policy,” which seems to mean infrastructure. (The government does not have a balance sheet that differentiates bridge-building from bombing.) . Yellen’s admission is a breakthrough of sorts. Her predecessor Ben Bernanke wouldn’t admit that monetary policy wasn’t going to achieve miracles (but maybe believed that it would). Yet she, like him, credited the long-running ZIRP with alleviating the situation after the bank meltdown. Yellen is not allowed to say the US economy isn’t growing and isn’t going to grow. No official, pubic or private, is allowed to admit that because it would become a self-fulfilling prophecy. So she says she doesn’t know. She is allowed to say that global growth has stalled—meaning Europe and China—and she uses the euphemism “uncertainty” to describe that.Maybe central bankers should just start telling the rest of the truth. Maybe they should stop looking at the numbers and start looking out the window. ZIRP is starving your mother and grandmother and other savers of interest income they need to live on. Consumption is not helped if retirees can’t spend. ZIRP doesn’t help anyone’s employment prospects. ZIRP did push up asset values.

Data collection is the ultimate public good - Larry Summers -  On Wednesday I spoke at a World Bank conference on price statistics. While price statistics are not usually thought of as a scintillating subject, I got a great deal of satisfaction out of preparing and presenting my remarks. In part this was because my late father Robert Summers focused his economic research on International price comparisons. It was also because I am convinced that data is the ultimate public good and that we will soon have much more data than we do today. I made four primary observations. First, scientific progress is driven more by new tools and new observations than by hypothesis construction and testing. ... Second, if mathematics is the queen of the hard sciences than statistics is the queen of the social sciences. ...Third, I urged that what “you count counts” and argued that we needed much more timely and complete data. ... Fourth, I envisioned what might be possible in a world where there will soon be as many smart phones as adults. ... This is the work of both governments and the private sector. It is fantasy to suppose data, the ultimate public good, will come into being without government effort. Equally, we will sell ourselves short if we stick with traditional collection methods and ignore innovative providers and methods such as the use of smart phones, drones, satellites and supercomputers. ...

Republicans keep door open to confirm Merrick Garland during the lame duck  - Even as they hold the line in refusing to grant the president’s Supreme Court nominee a hearing before November, two dozen Republican senators either support or do not rule out allowing a vote to confirm Merrick Garland during the lame-duck session. As the senators return to Washington today from a two-week recess, this is a scenario that many in the Capitol see as probable: If Hillary Clinton is elected president, she is virtually certain to nominate someone who is both more progressive and younger than President Obama’s pick to succeed Antonin Scalia. Even if they manage to hold their majority, it is a near mathematical certainty that Republicans will hold fewer Senate seats next year than they do now. So, to prevent Clinton from moving the court further leftward, Republicans could rush Garland through during the two months after the election and before the new Congress gets sworn in.

Feds move to slam shut tax inversion loophole: Corporate tax inversions could soon get more taxing — and more difficult to pull off. The Treasury Department and the Internal Revenue Service late Monday announced temporary restrictions to add barriers to inversions, which are corporate maneuvers some companies undertake at least in part to cut their future U.S. tax bills. The government is also proposing new rules on the transactions to make them less lucrative. The new regulations are expected to complicate or potentially block some corporate transactions, such as U.S. pharmaceutical giant Pfizer's record-breaking $160 billion planned merger with Ireland rival Allergan.  Using inversions, companies move their tax headquarters overseas by buying a company in a lower tax overseas jurisdiction and relocating the combined entity's headquarters in that country. These moves, pursued by a number of U.S. companies such as Eaton and Seagate Technology, have stoked criticism about the practice. President Obama, who is expected to address the inversion issue later Tuesday, previously said that firms utilizing the tax-saving tactic were unfairly "gaming the system." The White House subsequently initiated a series of moves aimed a blocking inversions.

Conflict of interest and inversions: two very big deals that must…MUST…not go unnoticed. - Jared Bernstein -- OK, it’s official: my mind is blown by two new, smart, common sense, progressive initiatives that the Obama administration–with great input from Treasury and the Labor Dept.–has managed to implement this week. Each deserves, and will get, individual attention and explanation from me. But for now, let us marvel at what’s happened here, especially as you may be distracted by the political horse race. The new conflict of interest rule, as I’ve written before, requires financial advisors providing advice on retirement accounts (and 401(k)’s that will ultimately get rolled over into such accounts) to put their clients’ interests ahead of their own.  Boom. That’s it.  Now, you may have thought that’s what happens already, and with many ethical advisors, it surely is. But before these new regs, brokers could and did nudge retirement savers to investments with higher fees or a broker’s commission that did more for the advisor than the advisee. Now, these financial advisors must meet a “fiduciary” standard, meaning they “cannot accept compensation or payments that would create a conflict unless they qualify for an exemption that ensures the customer is protected.”

The US finally cracked down this week on corporate tax dodging—and it is already working -- Pfizer’s $160 billion purchase of Allergan was expected to create the world’s largest pharmaceutical company—and, controversially, allow the companies to avoid billions in US corporate taxes by relocating Pfizer’s headquarters from New York to Dublin. But according to reports in Reuters, the Wall Street Journal, and CNBC, the deal will be called off as early as Wednesday morning because of new US Treasury rules that went into effect on April 4. The regulations aim to curb “inversions” by US companies, in which they claim a foreign headquarters to get lower taxes, although the bulk of their operations remain in the United States. The Treasury is now pushing the US Congress to make these temporary and proposed regulations law. Pfizer and Allergan have been studying the rules since they were made public. Pfizer’s board voted on Tuesday night to halt the deal, the Wall Street Journal reported (paywall). US companies’ artificial shifting of profits to low-tax havens costs $130 billion in corporate taxes a year, Gabriel Zucman, an economist at the University of California, Berkeley, told Quartz earlier. Even as official tax rates have stayed steady in the US, the rates that companies actually pay has been declining for years.

US tax crackdown provokes foreign fury -- A White House tax crackdown designed to put a halt to Pfizer’s planned $160bn takeover of Allergan has provoked fury from foreign multinationals with operations in the US. Barack Obama stepped up the offensive on Tuesday championing new proposals to deter “inversion” deals — such as Pfizer-Allergan — that companies use to move to low-tax jurisdictions, accusing them of exploiting “one of the most insidious tax loopholes out there”. Multinationals responded by saying they were being unfairly caught in the crossfire of Mr Obama’s campaign as their operations in the US could also be affected by the new rules. The angry rhetoric came a day after the Treasury department released new proposals which threatened the biggest planned inversion to date — Pfizer’s takeover of Irish-domiciled Allergan — and triggered big losses for some hedge funds, such as Paulson & Co and Third Point. “It came as a total surprise. Everyone thought the Treasury had used all their firepower,” said one hedge fund manager. Politicians have been riled by a defining trend of the recent boom in M&A, which has seen dozens of US companies using inversions to escape the US’s high corporate tax rate and its insistence on taxing overseas earnings. The Treasury’s latest moves would make inversions less lucrative by eliminating a tax benefit for “abusive” inverters. But its plan would also deny the benefit to foreign companies with US operations. “Rather than using a scalpel to deal with this issue they are using a machete,” said Nancy McLernon, president of the Organisation for International Investment, a trade group for foreign companies in the US.

Gillian Tett Shows She Does Not Understand Offshore “Profits,” Parrots Corporate Propaganda Instead -- Yves Smith - The Financial Times’ Gillian Tett needs to talk to experts on corporate taxation rather than take dictation from the likes of Apple’s Tim Cook. Her current column, A real-world solution to the tax repatriation ruckus, is unabashedly inaccurate and misleading.  Massive Tett Error #1. Corporate cash for companies like Apple is not offshore. Tett: President Barack Obama proposed raising an additional $238bn in tax by imposing a one-off levy of 14 per cent on repatriated cash piles if they were used for infrastructure spending… What the American economy needs is not on-off populist measures to ban tax inversions or repatriate overseas cash piles….the dismal status quo: a world of ever-growing offshore cash piles  This is nonsense and means that the basic premise of the article is 100% off base. Corporate profits are booked in offshore entities. Tax books are not the same as accounting books or movement of cash. As top tax expert Lee Sheppard wrote in Tax Notes in 2013 (no online source): But for reporting companies subject to generally accepted accounting principles and U.S. worldwide taxation, let’s stop talking about ‘‘offshore’’ earnings and ‘‘bringing the money home.’’ The earnings are merely booked offshore. The earnings are by and large not banked offshore. To the extent that the much-ballyhooed $2 trillion of deferred foreign earnings is classified as permanently reinvested in cash, most of that cash is sitting in U.S. banks, where it is propping up their capital.  Apple, for instance, runs its “offshore” profits as an internal hedge fund out of Nevada.

The Case for Higher Estate Taxes - Caroline Freund - According to conventional wisdom, inequality is an inevitable byproduct of strong economic growth. Talent, innovation, and entrepreneurship will inevitably capture the lion’s share of the income being generated, and efforts to redistribute wealth can only be counterproductive, because they weaken the incentives that drive an economy forward. The truth, of course, is more complicated. Not all sources of wealth – and by extension not all types of inequality – are the same. The wealth that is created when new products, processes, and technologies are introduced is, indeed, correlated with faster economic growth. But wealth obtained by other means has a much smaller effect, if any, on the economy. So there is no reason it cannot be safely redistributed. Consider, for example, the rise of a billionaire class, which many think represents the most extreme form of inequality. There are, essentially, four paths to becoming a billionaire. Company founders and executives, like Bill Gates and Jack Ma, became rich by providing useful products and services. Financial wizards, like George Soros and Warren Buffet, generated their wealth through smart investments.  Politically connected businessmen, such as the Mexican telecoms tycoon Carlos Slim or LUKoil president Vagit Alekperov, used their influence to make fortunes through resource extraction, state-protected monopolies, or privatization of government property. Finally, many extremely rich people, such as Liliane Bettencourt and Christy Walton, inherited their money.  Opponents of estate taxes offer three reasons why they could dampen economic growth: entrepreneurs will be reluctant to expand their companies if they cannot leave their wealth to their children; small firms will risk collapse when their owners die if their heirs cannot pay the taxes; and companies will flee to lower-tax jurisdictions or engage in costly and unproductive tax avoidance. All three worries are overblown, at best.

Massive data leak exposes over 11 million offshore records — A group of news media outlets published articles on Sunday based on what they said were 11.5 million leaked documents from a Panama law firm that helped some of the world’s wealthiest people — including politicians, athletes and business moguls — establish offshore bank accounts.  The German newspaper Süddeutsche Zeitung said its reporters had obtained the documents from a confidential source. The newspaper then shared the files with other media organizations, like The Guardian and the International Consortium of Investigative Journalists.In an article, the investigative journalism organization said the documents revealed the offshore accounts of 140 politicians and public officials, including a dozen current and former world leaders and several individuals with close ties to President Vladimir V. Putin of Russia. The organization said reporters at 100 news media outlets working in 25 languages had used the documents to investigate the law firm, Mossack Fonseca, and its clients, including political figures in countries like Iceland, Pakistan and Saudi Arabia.It is not illegal in many cases to have offshore bank accounts. But they are used in some instances by wealthy individuals and criminals to hide money and business transactions, and to avoid paying taxes. The leak followed a series of high-profile breaches in recent years in which individuals working for governments or companies have amassed internal files and then given them to media organizations. In 2013, Edward J. Snowden, a contractor for the National Security Agency, gave reporters what intelligence officials have estimated was at least 1.5 million documents from the agency. Hundreds of articles have been published based on those documents.

Massive leak exposes how the wealthy and powerful hide their money | McClatchy - A massive leak of documents has blown open a window on the vast, murky world of shell companies, providing an extraordinary look at how the wealthy and powerful conceal their money. Twelve current and former world leaders maintain offshore shell companies. Close friends of Russian leader Vladimir Putin have funneled as much as $2 billion through banks and offshore companies.  Those exposed in the leak include the prime ministers of Iceland and Pakistan, an alleged bagman for Syrian President Bashar Assad, a close pal of Mexican President Enrique Peña Nieto and companies linked to the family of Chinese President Xi Jinping. Add to those the monarchs of Saudi Arabia and Morocco, enough Middle Eastern royalty to fill a palace, honchos in the troubled body known as FIFA that controls international soccer and 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people. Also mentioned are 61 relatives and associates of current country leaders, and another 128 current or former politicians and public officials. The documents within the leak also expose how secretive offshore companies at times subvert U.S. foreign policy and mock U.S. regulators. When drug traffickers, money launderers or other crooks control companies, they undermine national security, and the trail of dark money flowing through them strips national treasuries everywhere of tax revenues. The data breach occurred at a little-known but powerful Panamanian law firm, Mossack Fonseca, which has an office in Las Vegas, a representative in Miami and a presence in more than 35 other places around the world. The firm is one of the world’s top five creators of shell companies, which can have legitimate business uses, but can also be used to dodge taxes and launder money. More than 11.5 million emails, financial spreadsheets, client records, passports and corporate registries were obtained in the leak, which was delivered to the Süddeutsche Zeitung newspaper in Munich, Germany. In turn, the newspaper shared the data with the Washington-based International Consortium of Investigative Journalists (ICIJ).

Panama leak draws scrutiny to tax havens - FT - A huge leak of documents from a Panamanian law firm has provided an unprecedented insight into the use of offshore financial centres by the rich and powerful, allegedly implicating members of Vladimir Putin’s inner circle. According to the International Consortium of Investigative Journalists, the documents demonstrate that as much as $2bn has been shuffled through banks and offshore companies said to be linked to associates and friends of the Russian president. More than 11m documents were leaked from Mossack Fonseca, a law firm that specialises in setting up offshore companies in tax havens. They include emails, bank records and client information dating back several decades. The documents were passed to Süddeutsche Zeitung, the German newspaper, and shared with the ICIJ. The year-long investigation involved more than 100 news organisations. “I think the leak will prove to be probably the biggest blow the offshore world has ever taken because of the extent of the documents,” said Gerard Ryle, director of the ICIJ. Edward Snowden, the former US National Security Agency contractor turned whistleblower, called the co-ordinated reports the “biggest leak in the history of data journalism”. The revelations have already embroiled current and former leaders across the globe. Sigmundur David Gunnlaugsson, Iceland’s prime minister, is facing allegations that he used an offshore vehicle to hide millions of dollars of investments in the country’s banks. The documents also appear to show that Juan Pedro Damiani, a Uruguayan lawyer and member of the ethics committee at Fifa, provided assistance to offshore companies reportedly linked to a former Fifa executive arrested in the corruption investigation at the football governing body.

Panama Papers: global reaction to huge leak of offshore tax files – live -- We’re getting close to 24 hours since the first reports based on the Panama Papers were published by news organisations around the world, so it’s time for a quick summary of reaction so far.

McAfee: Panama Papers show need for better cybersecurity - The hack of Mossack Fonseca, in terms of the certain fallout that will affect many of the wealthiest and most prominent people on the planet, is by far the largest and most damaging cyberattack on record.  I am just one of more than 200,000 people to have downloaded the Panama Papers, a record for hacked documents. It was a gold mine. The release contained 11.5 million documents chronicling the formation and actions of 214,000 offshore companies along with the names and manipulations of more than 14,000 clients. Among the clients are:

  • 12 heads of state
  • More than 150 politicians
  • 29 billionaires on the Forbes list
  • Multiple financiers of terrorism
  • Nuclear-weapons proliferators
  • Prominent sports and entertainment figures
  • Numerous CIA-linked companies

Implicated as well are dozens of major banks that worked with Mossack Fonseca in establishing these offshore entities. Among them are the banking giants Credit Suisse, UBS, Landesbank, and Rothschild. Mossack Fonseca is the fourth-largest "asset protection" law firm in the world, and its cybersecurity measures were obviously lacking. But they are not alone. Studies indicate that law firms are easy pickings for hackers, and Bloomberg reported last year that more than 80% of US law firms had already been hacked. Yet these law firms guard the gravest of our secrets, whether corporate secrets or those of an individual, and the damage done from a data breach could, as we might see, even bring down a head of state, as Iceland's prime minister is discovering. In America, over half a million attorneys are working in more than 4,500 law firms. This gives an average just over 100 lawyers per firm. Cybersecurity budgets at any firm employing 100 people, if they exist at all, are minimal. For most businesses of that size, the risks, in terms of potential damage from a hack, are small. But the damage of a data breach in law firms is monumental.

Here’s Why You Should Give a Shit About the Panama Papers -- The Panama Papers—11.5 million leaked documents that detail the inner workings of Mossack Fonseca, a law firm accused of helping drug lords, sports stars, Ponzi schemers, kings, presidents, prime ministers, FIFA officials, mafia members, high-profile thieves, high-ranking politicians, and at least one convicted sex offender launder money, evade taxes, and escape criminal prosecution—are a big deal.  Mossack Fonseca has ties to the $37 million Brink's-MAT robbery of 1983, which British media called "the crime of the century." Thirty-three of its clients have been blacklisted by the US government for allegedly doing business with Mexican drug lords, terrorist organizations, and "rogue nations" like North Korea and Iran. Its files have unearthed a secret, shady $2 billion trail of money that leads to Vladimir Putin. One of its clients played a crucial role in the Watergate scandal. Another was convicted for the torture and murder of a US drug enforcement agent.  With a story this big—dubbed by Edward Snowden as "the biggest leak in the history of data journalism"—it can be difficult to understand exactly what's at stake. The Panama Papers are, unquestionably, insane. But what do they have to do with you?  If you live in one of the 200 countries and territories that Mossack Fonseca's clients call home—and, given the fact you're reading this article, you probably do—the story of the Panama Papers is your story. The money the law firm helps to hide should be used to pay for your schools, your highways, your hospitals. The criminals it works with run the most violent illegal organizations your country has ever seen. The politicians who have taken and made bribes, dodged taxes, and amassed fortunes of unimaginable scale are your politicians.  To know this story—of hidden millions, of corruption, of murder and bribery and power and betrayal—is to know your own. Here's how the revelations came to be, and why you should care.

“I’m sorry, I can’t divulge information about that customer’s secret, illegal account” - In the past week, the privacy of billions of people has increased and the privacy of a smaller set of much richer people has decreased — the first group are users of WhatsApp, which has encrypted messages sent via its app, the second group are, or were, clients of Mossack Fonseca, the Panamian law firm whose documents were leaked to the press.  The obvious question is whether or not anyone should value the sort of privacy that Mossack Fonseca offered its clients to the same extent as the privacy WhatsApp (or Apple for that matter) offers its users.Here’s Tyler Cowen sort of making that point:Here’s Matt Levine considering it: I have to say I am a bit sympathetic to the argument of Ramon Fonseca, of Mossack Fonseca, who said in an interview not only that his Panamanian law firm has done nothing wrong in setting up offshore companies for wealthy people, but also that it “has fallen victim to ‘an international campaign against privacy.’” I mean, I was sympathetic to Apple in the iPhone hacking case, too, and it seems to me that setting up an offshore shell company is a little like strong encryption, but for your financial affairs. It’s certainly possible that you are doing bad stuff with your offshore shell company — as it is certainly possible that you are doing bad stuff with your encrypted iPhone — and it might be good if governments and reporters could crack that encryption. But then again, if you care about your privacy, you might prefer it if they couldn’t. And here is a snippet of the argument made by the FT’s David Allen Green: In the cases of both Apple and Mossack Fonesca there is (a) a commercial service provider, (b) offering a service to those expecting complete data security, but (c) a service that others believe should be subject to interference on the basis of the greater good. What is the difference? The difference, most would say, is the public interest. There is a public interest in Apple not complying with the order of the FBI but there is also a public interest in exposing how the rich and powerful use offshore tax havens to hide their assets.

Panama Papers Could Lead to Capitalism’s Great Crisis-  Rana Foroohar --It’s hard to know where to start in tallying up the explosive revelations in the Panama Papers, an analysis of leaked documents from global law firm Mossack Fonseca revealed by the International Consortium of Investigative Journalists (ICIJ). Yes, we’ve known for a while now that the shadow financial system was growing. But it’s another thing to take in 11.5 million documents showing the way in which Mossack Fonseca was working with big name financial groups like UBS, HSBC, Société Générale, and many others to help elites from the Communist Party leadership of China, to soccer star Lionel Messi, to global financiers hide cash in offshore havens around the world. It’s just the tip of a much bigger iceberg. “The size of the leak is unprecedented, but the tricks Mossack Fonseca has allegedly used for its clients are neither new nor surprising. Anonymous shell companies and the failure of governments to require lawyers, corporate service companies, or banks to collect beneficial ownership information on clients leave the door wide open for dirty money to flow around the globe virtually unhindered,” To me, this is one of the key issues at work in the U.S. presidential election. Voters know at a gut level that our system of global capitalism is working mainly for the 1 %, not the 99 %. That’s a large part of why both Sanders and Trump have done well, because they tap into that truth, albeit in different ways. The Panama Papers illuminate a key aspect of why the system isn’t working–because globalization has allowed the capital and assets of the 1 % (be they individuals or corporations) to travel freely, while those of the 99 % cannot. Globalization is supposed to be about the free movement of people, goods, and capital. But in fact, the system is set up to enable that mobility mainly for the rich (or for large corporations). The result is global tax evasion, the offshoring of labor, and an elite that flies 35,000 feet over the problems of nation states and the tax payers within them.

The Panama Papers: Where are the Americans? The Panama Papers sent ripples across the globe Monday after revealing that 140 politicians from more than 50 countries, including Russian President Vladimir Putin and Iceland Prime Minister Sigmundur David Gunnlaugsson, were linked to offshore accounts set up by the Panamanian law firm Mossack Fonseca. Despite its breadth, the scandal so far has barely touched American individuals and companies. There were no mass protests, as occurred in Iceland where protesters demanded the resignation of Gunnlaugsson; no U.S. leaders were forced to deny accusations of tax evasion as Putin did. How have Americans so far escaped the biggest leak of financial data of all time? It’s not because wealthy Americans don’t use offshore bank accounts to avoid U.S. taxes: they do—to the tune of $1.2 trillion in 2014, according to one estimate. Some professors have suggested that Americans may have disguised their accounts at Mossack Fonseca behind another party. But there’s also a more structural answer, tax experts say—one that has to do with shifts in global financial policy—and, to an extent, taste. Tax evasion overall is a far larger problem in developing countries, where norms around paying taxes are weak and rules designed to stop such evasion are ineffective. And when wealthy Americans do want to evade taxes, they turn to Bermuda, or the Cayman Islands, or Singapore. They don’t park their money in Panama. “Within the [high-net worth] world, there is a national taste as in anything else,” said Edward Kleinbard, a professor of law and business at the University of Southern California, “and I think Panama is a disfavored country among U.S. advisers because it is viewed as an outlier relative to world norms.”

This is much worse than the Panama Papers: How America became a world leader in tax avoidance – Dave Dayen -While we force foreign financial institutions to give up information on accounts held by U.S. taxpayers through the Foreign Account Tax Compliance Act of 2010, we don’t reciprocate by complying with international disclosure requirements standardized by the Organization for Economic Co-Operation and Development (OECD) and agreed to by 97 other nations. As a result, the U.S. is becoming one of the world’s foremost tax havens.Several states – Delaware, Nevada, South Dakota, Wyoming – specialize in incorporating anonymous shell corporations. Delaware earns between one-quarter and one-third of their budget from incorporation fees, according to Clark Gascoigne of the FACT Coalition. The appeal of this revenue has emboldened small states, and now Wyoming bank accounts are the new Swiss bank accounts. America has become a lure, not only for foreign elites looking to seal money away from their own governments, but to launder their money through the purchase of U.S. real estate.In addition, if the United States really wanted to stop Panama or the Cayman Islands or other offshore tax havens from allowing the wealthy to avoid hundreds of billions in payments, they could do so in about 15 minutes. Our recent free trade deal with Panama allegedly prevents Americans from creating offshore tax havens there, but in general, such tax information exchanges are insufferably weak. And the little America does abroad to police tax evasion dwarfs the next to nothing we do at home.The intertwining of global and political elites makes tax avoidance, whether legal or illegal, a secondary concern for the country, regardless of how it robs the country of resources and promotes the conception of a two-tiered economic and justice system where the upper class need not follow the same rules as the rest of us. Our politicians made a consistent choice that this rampant tax avoidance doesn’t bother them.

Lessons of the Panama Papers: Yes, the rich are different from us — they stole our money -- What have we learned so far from the Panama Papers, the largest volume of leaked documents in history, which have begun to peel the lid off a vast web of global greed, deception and iniquity among the highest level of the moneyed classes? For starters, they should serve to remind us how different the very rich are from the rest of us. Yes, it starts with the fact that they have more money, but it doesn’t end there. How did they get all that money, and what are they doing with it? Why do they have so much more money than the rest of us — unimaginably more, and on an unprecedented scale? Why do they seem so perpetually unsatisfied with their wealth, and so desperate to nurture it, shield it and multiply it?  For starters, they represent a data dump of literally staggering size, many times larger than any trove of government or corporate secrets ever disclosed by Wikileaks or anyone else. They also represent one of the biggest scoops in the history of investigative journalism, one that left the New York Times, the Washington Post and the rest of the mainstream American media completely flat-footed. More than a year ago, an anonymous source apparently provided the German newspaper Süddeutsche Zeitung with about 11.5 million files, or 2.5 terabytes of data, from the archives of Mossack Fonseca, a worldwide law firm based in Panama whose specialties include the creation of imaginative offshore tax havens and other strategies for “wealth management.”

Who Is The Richest Person In Every State -- Yesterday morning, following news that David Tepper was set to depart his home state of New Jersey for Florida (and being NJ's richest man, his departure is already being lamented) using the latest Forbes billionaire data, we presented a chart laying out the number of billionaires by state to show which states have the biggest "billionaire flight" buffer.  Due to popular demand, we are following this up with a listing of the richest people by state, in map format, courtesy of Salil Mehta.

Panama: Cheating “Epidemic” Crowds Out Honest Business, Implicates Banks - The Panama Papers are not simply a story of public corruption as depicted in news outlets like the Wall Street Journal, says former financial regulator William K. Black. They’re a reminder that such corruption destroys the possibility for honest businesses to succeed.  “Markets become completely perverse when cheaters prosper,” explains Black, a leading expert on corruption and finance and frequent speaker at Institute events. When cheating brings a competitive advantage, the victims are not only middle class taxpayers who have to shoulder a heavier burden, and the wider public that suffers from schools not being built and roads not being repaired. A less obvious victim is the honest business person.  “Those who want to do business honestly simply can’t compete against people who don’t pay taxes,” says Black. A company may start out with strong values and principles, but if all of its competitors are cheating, that business will either just fail, or else will “grit their teeth and go for it.” Thus, still more cheaters, and fewer straight shooters.  The amount of money revealed by the leaks to be stashed offshore provides the evidence that confirms what many watchdogs had been ridiculed for suspecting. “The numbers are absolutely enormous,” says Black.  Black and his fellow watchdogs are on the lookout for more than merely episodic cheating, but what he calls “really epidemic levels.” He asserts that what we have now is an epidemic.  “The largest banks in the world moved this money.” Black points out that the SWIFT system of financial messaging is a “creature of the largest commercial banks and the central banks working together — a privatized network, which people forget.”  “Why does HSBC ( implicated in the leak for using offshore structures to help clients dodge taxes) still exist?” he asks. “This is a bazillion-time loser, a recidivist felon… HSBC has never cleaned up its act. It’s a criminal enterprise.”

Why Do They Call It Panama Papers, Anyway? -- Marcy Wheeler - Nowhere I’ve seen explains where this source got the documents. For almost three years, we have openly debated what I consider a fair question: what was Edward Snowden’s motivation for stealing the NSA’s crown jewels and was any foreign country involved? People have also asked questions about how he accessed so much: Did he steal colleagues’ passwords? Did he join Booz Allen solely to be able to steal documents? I think the evidence supports an understanding that his motives were good and his current domicile an unfortunate outcome. And we know some details about how he managed to get what he did — but the key detail is that he was a Sysadmin in a location where insider detection systems were not yet implemented and credentials to have unaudited access to many of the documents he obtained. Those details are a key part of understanding some of the story behind his leaks (and how NSA and GCHQ are organized). Somehow, journalists aren’t asking such questions when it comes to this leak, the Unaoil leak that broke last week, or the leak of files on British Virgin Isles have activity a few years back (which, like this project, ICIJ also had a central role in). I’m sympathetic to the argument that IDing who stole these documents would put her or him in terrible danger (depending on who it is). But I also think this level of description the Intercept gave — in the first paragraph of a story about stolen recordings of jailhouse phone calls that revealed improper retention of attorney client conversations — would be useful.

Questioning the Picture Painted in the WSJ’s Interview With Jürgen Mossack - naked capitalism by Richard Smith - Unusually for the WSJ, this interview with Jürgen Mossack, co-head of Mossack Fonseca, isn’t behind the paywall. Someone (Mossack?) wants the word to get out as widely as possible. Says the WSJ: In his first in-depth interview since reports of the leaked documents were published, Jürgen Mossack said his firm did nothing wrong by selling some 240,000 shell companies registered in low- or no-tax territories around the world. The law firm, he said, works through intermediaries and can’t keep track of how the offshore entities that it sells are used. That’s one take. A more ambiguous picture emerges from one of the ICIJ’s pieces: For years, the Swiss banking giant UBS and a Panama law firm named Mossack Fonseca embraced each other in a mutually profitable relationship. UBS had customers who wanted offshore shell companies to keep their finances hidden. And Mossack Fonseca, one of the largest creators of offshore companies in the world, was happy to sell them. But in 2010, under threat of a U.S. criminal prosecution for tax evasion and money laundering, UBS was scrambling to contain the damage. The bank’s board of directors wanted out of the shell-company business. Tensions boiled over in a meeting in Zurich on September 28 when UBS asserted that Mossack Fonseca was responsible for identifying the owners of the shell companies behind the secret accounts – not the bank. Neither party ever really sorted out where the know-your-client buck stopped, but they reached an uneasy and ugly compromise:  UBS and Mossack Fonseca eventually worked out a deal in 2010 that benefited them both. The law firm would take over administration of UBS’s shell companies and give “special treatment” to the bank’s customers, who would retain their UBS bank accounts. Normally Mossack Fonseca required banks to provide “due diligence” information verifying owners’ identity and confirming that they were not involved in overt criminal activity before setting up or managing companies created for banks’ clients. But it now agreed to accept “DD light” from UBS, requiring much less documentation on the true owners and why they were using shell companies, according to a December 2010 email. As a result, Mossack Fonseca would deal with the customers directly, not through the bank, and UBS would put some distance between itself and the world of shell companies.

Beyond Panama: USA has become the banking secrecy jurisdiction du jour - Panama saw populist protests on Wednesday in response to Panama Papers revelations that the nation's lax tax laws are providing a haven for the world's wealthiest to stash their cash. But in the United States, where observers note that corporate greed is surely not lacking, the leak has yet to produce such a grassroots display of outrage. This may be because U.S. one-percenters have largely escaped the leak unscathed (more Czech nationals were named in the documents than Americans), and also because wealthy Americans already call one of the world's foremost tax havens their home. "The U.S. is one of the easiest places to set up an anonymous shell company to move ill-gotten gains around the world. It’s also one of the most popular places to do so for the criminal and corrupt," writes the UK-based anti-corruption group Global Witness.  "Already the largest location for managing foreign wealth," the Economist wrote back in February, the U.S. "has picked up business as regulators have increased information-exchange and scrutiny of banks and trust companies in Europe and the Caribbean. Money is said to be flowing in from the Bahamas and Bermuda, as well as from Switzerland."U.S. tax haven states enjoy the benefits of the incorporation fees, and have lobbied fiercely against stricter regulation. Furthermore, the CIA and other spy networks make use of these lax laws in order to secretly funnel aid and weapons to various governments, among other uses, as the Panama Papers made clear—and so such agencies also continue to benefit from the status quo."How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,"

Senator Elizabeth Warren Asks Jack Lew, Who Owned an Offshore Account at Citigroup, to Investigate Panama Papers -- Pam Martens -- Yesterday Senators Elizabeth Warren and Sherrod Brown sent a letter to U.S. Treasury Secretary Jack Lew, asking him to investigate potential U.S. involvement in the money laundering issues recently exposed by the leak of the Panama papers from the law firm, Mossack Fonseca. According to journalists who have seen the documents that were leaked by an unknown source, there were 617 “banks, law firms, accountants, company incorporators and other middlemen” operating in the United States that are implicated by the document leak in terms of helping clients conceal their assets. Unfortunately, Senators Warren and Brown appear to have short memories. Otherwise, U.S. Treasury Secretary Jack Lew would be the last person that comes to mind to conduct an investigation to protect “the integrity of the U.S. financial system.” How Lew was confirmed by the U.S. Senate for U.S. Treasury Secretary remains an open mystery at Wall Street On Parade. Lew had previously worked as an executive for the very division of Citigroup that blew up the bank during the 2008 financial crisis and cost taxpayers the largest bank bailout in U.S. history. When Lew left his executive position at Citigroup at the end of 2008 and joined Hillary Clinton’s State Department as Deputy Secretary of State, he retained an investment in Citigroup Venture Capital International (CVCI), a $7 billion private equity fund which was housed in the Cayman Islands at the infamous Ugland House. According to a previous Government Accountability Office (GAO) report, Ugland House is home to 18,857 corporations. In 2009, President Obama called it either “the largest building in the world or the largest tax scam in the world.” But Ugland House was not Lew’s only Citigroup problem during his confirmation hearing. Senators challenged Lew on the fact that he had accepted a $940,000 bonus from Citigroup in early 2009, even though the insolvent bank was subsisting solely on taxpayer bailout funds at that time.

Panama Papers: Obama, Clinton Pushed Trade Deal Amid Warnings It Would Make Money Laundering, Tax Evasion Worse --Years before more than a hundred media outlets around the world released stories Sunday exposing a massive network of global tax evasion detailed in the so-called Panama Papers, U.S. President Barack Obama and then-Secretary of State Hillary Clinton pushed for a Bush administration-negotiated free trade agreement that watchdogs warned would only make the situation worse. Soon after taking office in 2009, Obama and his secretary of state — who is currently the Democratic presidential front-runner — began pushing for the passage of stalled free trade agreements (FTAs) with Panama, Colombia and South Korea that opponents said would make it more difficult to crack down on Panama’s very low income tax rate, banking secrecy laws and history of noncooperation with foreign partners. Even while Obama championed his commitment to raise taxes on the wealthy, he pursued and eventually signed the Panama agreement in 2011. Upon Congress ratifying the pact, Clinton issued a statement lauding the agreement, saying it and other deals with Colombia and South Korea "will make it easier for American companies to sell their products." She added: "The Obama administration is constantly working to deepen our economic engagement throughout the world, and these agreements are an example of that commitment."Critics, however, said the pact would make it easier for rich Americans and corporations to set up offshore corporations and bank accounts and avoid paying many taxes altogether.

Momentum for Pacific Trade Deal Sapped in Election Year -  For the most part, the 2016 campaign spectacle has benefited President Obama.The Democratic incumbent, no longer the center of conflict, has seen his approval ratings edge up toward 50 percent and beyond. The unruly Republican brawl flatters Mr. Obama’s temperate demeanor by comparison, while increasing the odds that his party can hold on to the White House in November and safeguard his legacy.Yet there’s an important exception. The Trans-Pacific Partnership trade deal, a linchpin of Mr. Obama’s “pivot” toward Asia for American economic and foreign policy, represents his top remaining priority before Congress. And the accord has taken a serious political beating.One by one, mainstream Republican candidates reflecting the party establishment’s modern pro-trade consensus have fallen. Donald J. Trump, who calls the accord a “terrible deal,” vanquished them in part by rallying blue-collar Republicans behind his message that international trade was to blame for economic problems.Mr. Trump’s top challenger, Ted Cruz, reversed course to oppose the “trade promotion authority” that let the Obama administration complete negotiations.The only remaining Republican who backs the deal, Gov. John Kasich of Ohio, has been mathematically eliminated from a first-ballot nomination at the Republican convention.  As Mr. Obama’s secretary of state, Hillary Clinton praised the trade agreement as “the gold standard” for lowering tariffs and other trade barriers while protecting workers and the environment. In the meantime, Bernie Sanders, a relentless critic of income inequality and stagnant wages, condemned the final deal as a victory for “Wall Street and big corporations” when it was concluded on Oct. 5. Two days later, Mrs. Clinton declared her opposition.

Anti-Trade America? - – Rogoff - The rise of anti-trade populism in the 2016 US election campaign portends a dangerous retreat from the United States’ role in world affairs. In the name of reducing US inequality, presidential candidates in both parties would stymie the aspirations of hundreds of millions of desperately poor people in the developing world to join the middle class. If the political appeal of anti-trade policies proves durable, it will mark a historic turning point in global economic affairs, one that bodes ill for the future of American leadership. Republican presidential candidate Donald Trump has proposed slapping a 45% tax on Chinese imports into the US, a plan that appeals to many Americans who believe that China is getting rich from unfair trade practices. But, for all its extraordinary success in recent decades, China remains a developing country where a significant share of the population live at a level of poverty that would be unimaginable by Western standards.Consider China’s new five-year plan, which aims to lift 55 million people above the poverty line by 2020, a threshold defined as just CN¥2,300, or $354, per year. This compares with a poverty line of around $12,000 for a single person in the US. Yes, there are significant cost-of-living differences that make direct comparisons dubious, and, yes, poverty is as much a social condition as an economic one, at least in advanced economies; but the general point that inequality between countries swamps inequality within countries is a very powerful one. And China’s poverty problem is hardly the world’s worst. India and Africa both have populations roughly comparable to China’s 1.4 billion people, with significantly smaller shares having reached the middle class. Democratic presidential candidate Bernie Sanders is a far more appealing individual than “The Donald,” but his anti-trade rhetoric is almost as dangerous. Following prominent left-leaning economists, Sanders rails against the proposed new Trans-Pacific Partnership (TPP), even though it would do much to help the developing world – for example, by opening up Japan’s market to Latin American imports.

A Trade Deal for the 21st Century: An Alternative to the TPP - Dean Baker - It looks like the major media outlets are doing their full court press to lay the groundwork for the passage of the Trans-Pacific Partnership (TPP). In recent weeks the news and opinion pages have been filled with articles and columns on the wonders of trade and why all good people should support trade deals like the TPP. In fact, some of what these pieces say about the wonders of trade is true, there can be large benefits to countries from trading and there is no doubt that the United States is enormously richer as a result of international trade. But that hardly means that everyone was benefitted by the patterns of trade over the last three decades, nor is it a reason to support the TPP. But let's be positive about trade. It is possible to envision a different pattern of trade which will offer benefits for the bulk of the population of the United States and also for our trading partners in the developing world. Let's start with my favorite area in which to expand trade, highly-paid professionals. Our doctors and dentists, and to a lesser extent our lawyers, make far more than their counterparts in other wealthy countries. This is not the case for our autoworkers and steel workers. They earn considerably lower pay than their counterparts in Western Europe. We can correct this imbalance by removing the barriers that make it difficult for foreign professionals to practice in the United States. This means creating standards for medical care that will allow adequately trained doctors in Canada, Germany, and other countries to practice in the United States just like adequately trained doctors from New York or California. The potential gains from this change alone are enormous.

Hedge Funds Are Part of a Tricky Money Maneuver to Put Hillary in the White House -- Pam Martens - At the Democratic debate at Drake University in Des Moines, Hillary told the audience the following: “You have two billionaire hedge fund managers who started a Super PAC and they’re advertising against me in Iowa as we speak. So they clearly think I’m going to do what I say I will do….” But two hedge fund billionaires backing a Republican candidate pales in comparison to the tens of millions of dollars flooding into Hillary Clinton’s campaign from other hedge fund billionaires – including money flowing into a joint fundraising committee called the “Hillary Victory Fund” that is sluicing money to both Hillary’s main candidate committee, Hillary for America, as well as into the Democratic National Committee and 33 separate state Democratic committees, which has some observers crying foul.A recent article at CounterPunch, which questioned the ethics of the arrangement, quotes Paul Blumenthal, campaign finance reporter for the Huffington Post, as follows:“It is a highly unusual arraignment if only because presidential candidates do not normally enter into fundraising agreements with their party’s committees until after they actually win the nomination. And second, Clinton’s fundraising committee is the first since the Supreme Court’s 2014 McCutcheon v FEC decision eliminated aggregate contribution limits and congress increased party contribution limits in the 2014 omnibus budget bill.”

Bill Black: Krugman on the Corruption of Our Nation via Perverse Incentives -- Paul Krugman April Fools’ Day column launched another attack on Bernie Sanders. In it he announces that he, a strong Hilary Clinton supporter, is “Dad” and gets to set the rules for candidates – “it’s time to lay out some guidelines for good and bad behavior.” This is a lot like John McEnroe giving lectures on tennis etiquette. Two sentences later, Krugman mocks voters for Sanders in “very white states,” which is a pretty clear example of “bad behavior.” Tellingly, Krugman is oblivious to his bad behavior. Krugman ends with this patronizing and insulting sentence: “Sanders doesn’t need to drop out, but he needs to start acting responsibly.” Krugman is obviously itching to instruct Bernie to “drop out” and hand the contest to his candidate.  First, the Sanders campaign needs to stop feeding the right-wing disinformation machine. Engaging in innuendo suggesting, without evidence, that Clinton is corrupt is, at this point, basically campaigning on behalf of the RNC. There is something quite wonderful to using false “innuendo” to falsely declare a rival candidate guilty of using “innuendo.” But it gets better – for Krugman’s “second” basis for attacking Bernie and his staff is that they have a “conflict of interest.”  It’s important to realize that there are some real conflicts of interest here. For Sanders campaign staff, and also for anyone who has been backing his insurgency, it’s been one heck of a ride, and they would understandably like it to go on as long as possible. But we’ve now reached the point where what’s fun for the campaign isn’t at all the same as what’s good for America.That too is a paragraph that exemplifies the true meaning of April Fools’ Day. I’ll start with the “conflict of interest.” Under Krugman’s idiosyncratic definition of “conflict of interest” any candidate behind in an electoral contest should drop out, or at least praise his or her opponent. Krugman’s claim is self-refuting – and Hilary or Bill Clinton were both “guilty” of a “conflict of interest” under Krugman’s preposterous definition of that term.

The Myth that Obama’s Taking Huge Contributions from Wall Street Was Fine - Bill Black: I am now officially an economic advisor to Senator Sanders, and this column reflects some of that advice. Part of my advice is not to take money from Wall Street felons. (I am not taking credit for Bernie’s decision — at most I supported a decision he had already made over a year ago.) One of the reasons I reinforced Bernie’s decision was witnessing the problems President Obama experienced given his taking very large contributions from Wall Street. I channeled the prescient warning that Professor Thomas Ferguson (U. Mass, Boston) gave a group of us in 2008. He predicted, accurately, that Obama would not lead an effective crackdown on the endemic fraud by Wall Street elites that caused the financial crisis. Tom (he is a personal friend) is the expert on campaign finance. He authored the classic book on campaign finance entitled Golden Rule (as in the observation that he that has the gold makes the rules.).  Tom pointed out that (then) Senator Obama was accomplishing something unprecedented. He was not only raising more money from Wall Street than the Republicans were, he was doing so in the context of a nomination battle with (then) Senator Hillary Clinton. The Clintons were both preeminent leaders of the “New Democrats.” They crafted the coalition of conservative (on economics and national security issues) Democrats. The New Democrat’s apparatus was funded overwhelmingly by Wall Street and President Bill Clinton was famous for championing the three “de’s” – financial deregulation, desupervision, and de facto decriminalization. Even if Wall Street was willing to reverse decades of contributing primarily to Republicans, why would they choose Senator Obama over their great ally, Senator Hillary Clinton? Tom predicted that Obama would win the nomination and the election – and would reject emulating President Roosevelt’s “New Deal” and its transformation of finance. All three predictions proved accurate.

Trump Unbound - David Stockman - Even by The Donald’s standards his 95 minute long interview with the Washington Post was remarkable. He let loose so many stray shots as to leave the establishment press clucking in a chorus of disbelief. It undoubtedly started with the stink bomb he lobbied at the ” all is awesome” meme about the US economy and stock market: Donald Trump said that economic conditions are so perilous that the country is headed for a “very massive recession” and that “it’s a terrible time right now” to invest in the stock market, embracing a distinctly gloomy view of the economy that counters mainstream economic forecasts. . Presumably the last paragraph was written by Bob Woodward who was once the bête noir of the Washington/Wall Street establishment. But like nearly everyone else in the Imperial City he has been drinking the Cool-Aid for so many decades that he was shocked by Trump’s unfiltered bit of truth-telling about an economy that is failing 90% of the American public.Worse still, Woodward was apparently dumbfounded that Trump didn’t self-censor his thoughts about the economic troubles ahead for fear of unsettling the Wall Street casino. So imagine Woodward’s consternation when Trump——-the very embodiment of a billionaire financial tycoon—–let loose with the following counterpunch: “I know the Wall Street people probably better than anybody knows them,” said Trump, who has misfired on such predictions in the past. “I don’t need them.” Those last five words are what has the Washington GOP establishment in a cold sweat. The fact is, the Washington based apparatus of the GOP is beholden lock, stock and barrel to Wall Street and the broader financial services industry for sustenance. That is, PAC funds and the K-street influence peddling rackets which make life in the Imperial City so copasetic for careerist politicians and their apparatchiks.

‘There are going to be lots of dead unicorns’ FT - Unicorns, as billion-dollar start-ups have been dubbed, were one of the hottest topics of 2015. Asset managers, including Fidelity Management and Research, BlackRock and T Rowe Price, piled into private start-ups last year to take advantage of the boom in technology companies. But one year on, most fund houses appear to have taken a vow of silence when it comes to their investments in the billion-dollar fledglings. Few of the 25 or more asset managers and venture capitalists contacted would talk on the record about unicorns. They were even less happy to discuss the valuations of the start-ups they flocked to last year. Many fund managers were forced to write down their investments in start-ups in the final three months of 2015, including those in Dropbox, the file storage website, Snapchat, the disappearing-photo app, and MongoDB, a database. The writedowns have raised big questions about the soaring valuations of many young tech companies and whether asset managers rushed into an area where they had little understanding of the true value of what they were investing in. There are also fears that a tech bubble is emerging and that large-scale failures are likely, leading to so-called unicorpses — unicorns that die. “There are going to be lots of dead unicorns,” said Marc Benioff, founder and chief executive of Salesforce, the cloud computing company, at the World Economic Forum in Davos earlier this year. Regulators are also worried. Last week, Mary Jo White, the chairwoman of the Securities and Exchange Commission, said the US financial watchdog was concerned about the “eye-popping” valuations of some unlisted start-ups and the consequences for investors of the market overheating.

The Coming Default Wave Is Shaping Up to Be Among Most Painful -- When the next corporate default wave comes, it could hurt investors more than they expect. Losses on bonds from defaulted companies are likely to be higher than in previous cycles, because U.S. issuers have more debt relative to their assets, according to Bank of America Corp. strategists. Those high levels of borrowings mean that if a company liquidates, the proceeds have to cover more liabilities. "We’ve had more corporate debt than ever, and more leverage than ever, which increases the potential for greater pain," said Edwin Tai, a senior portfolio manager for distressed investments at Newfleet Asset Management. Loss rates have already been rising. The potential for them to climb further may mean that in general junk bonds are not compensating investors enough for the risk they are taking, said Michael Contopoulos, high yield credit strategist at Bank of America Merrill Lynch. The average yield on a U.S. junk bond is now around 8.45 percent, according to Bank of America Merrill Lynch indexes, about the mean of the last 10 years. In bad times, corporate bond investors on average lose about 70 cents on the dollar when a borrower goes bust. In this cycle, that figure could be closer to the mid-80s, Bank of America strategists said.

Is There a Crisis in the Economic Theory of the Firm? Participants at Harvard Business School Conference Agree: Firms Try to Change the Rules of the Game -- In recent years, it has become increasingly difficult to reconcile the growing political influence of American corporations with Milton Friedman’s theory of the firm. Friedman’s dictum that firms can and should only benefit society by focusing on maximizing returns has become sacrosanct in the last few decades, but is it still relevant at a time when firms are seen not only as economic actors but as political actors as well? Even Friedman, after all, assumed that firms operate within pre-set rules of the game. However, in the six years since the Citizens United ruling, in which the Supreme Court effectively relaxed restrictions on corporate political spending, has it become increasingly easier for firms to tweak the rules of the game in their favor? In November, a select group of top economists, legal scholars, political scientists, sociologists, and historians gathered at Harvard Business School for an innovative conference that aimed to answer this very question. For two days, the participants debated whether the underlying assumptions of Friedman’s theory of the firm are still valid in a post-Citizens United world.

Monopoly Is Not a Game - One of the basic lessons of economics is that monopolies are bad news. When there’s only one company in a market, it can jack up prices to above their efficient level. That gives a big boost to profits, but results in too few people being able to afford to buy what the company is selling. Most markets are not monopolies, but a similar principle holds for situations where there are only a few companies, called oligopolies. A lack of players stifles competition, raising profits but lowering overall economic output.It’s therefore natural to ask whether the U.S.’s subpar economic  growth is caused by a decrease in competition, and in fact, a bunch of people have been suggesting this explanation lately. In an article entitled “Too much of a good thing?," the Economist cites high rates of profit, record levels of merger activity and increasing industrial concentration as evidence of reduced competition. I’m not sure it’s a bulletproof case. It’s true that after-tax profits are historically high as a percent of gross domestic product. But pretax profits might be a better measure of market power, since they represent companies’ ability to wring value out of the economy (some of which then goes to the government as taxes). The following chart shows that pretax profits are high relative to the 1980s and ’90s, but are only back up to the level that prevailed from the ’50s through the ’70s: Nor is merger and acquisition activity unusually high. Although last year was a record, the number and total value of merger deals has been pretty stable since the turn of the century. How about those big banks? The U.S.’s megabanks may still be too big to fail, but the sector still is much less concentrated than in countries such as Canada, Germany, Japan and the U.K. Has federal antitrust enforcement become more lax? Not according to the law firm Gibson & Dunn, which reports that fines for anticompetititive behavior have been increasing for a decade:

Corporate defaults hit 7-year high (FT)  The global corporate default has climbed to its highest level in seven years, led by oil and gas companies. This week saw four new corporate defaults, which took the overall tally to 40 for 2016, ratings agency Standard & Poor’s said. That’s the highest year-to-date default tally since 2009. Of those, 14 defaults came from the oil and gas sector, and a further eight from the metals, mining, and steel sector. The overall default tally for the same time last year was 29. Companies in the US saw the biggest default rate with 34, with five in the emerging markets. Things could get worse, if the words of SocGen’s Albert Edwards are to be believed, with the French bank warning of a “tidal wave of corporate default” in the US.  Stripping out troubled energy and mining sectors, however, the default rate is at a post-crisis low, as investment house M&G pointed out this week.

CEO Pay Shrank Most Since Financial Crisis - WSJ: Compensation for the chief executives of the biggest U.S. companies fell more sharply last year than any year since the financial crisis, as weaker corporate performance slowed cash bonuses and accounting rules pared back pension growth. Median pay for the CEOs of nearly 300 large publicly traded companies slipped 3.8% to $10.8 million last year from $11.2 million in 2014, a Wall Street Journal analysis of compensation data from MyLogIQ found. Half of those CEOs saw total pay either decline or rise by less than 1%—also the worst showing for S&P 500 chiefs since the 2008 crisis. “Increases in CEO pay have taken a bit of a pause this year,” said John Roe, head of advisory services at ISS Corporate Solutions. Where pay is rising, Mr. Roe noted, “it’s in the places shareholders like to see it coming from most: It’s in equity.” The median rise in stock-based compensation—the biggest component of most CEO pay packages—was about 7%. The median rise in cash pay, including salary and annual bonus, was 2%, down from 5.6% growth in 2014, the Journal analysis found.

How Do Survey- and Market-Based Expectations of the Policy Rate Differ?  - NY Fed -  Over the past year, market pricing on interest rate derivatives linked to the federal funds rate has suggested a significantly lower expected path of the policy rate than responses to the New York Fed’s Survey of Primary Dealers (SPD) and Survey of Market Participants (SMP). However, this gap narrowed considerably from December 2015 to January 2016, before widening slightly at longer horizons in March. This post argues that the narrowing between December and January was mostly the result of survey respondents placing greater weight on lower rate outcomes, while the subsequent widening between January and March likely reflects an increased demand for insurance against states of the world where the policy rate remains at very low levels.

Fraud Key Profit Center for Wall Street: William Black -- Former top bank regulator Professor William Black says there is no hiding the cesspool that is Wall Street. Dr. Black says, “People on Wall Street agree that the system is rigged.  You get them into a bar, they will say the same thing.  When Bernie Sanders says the business plan of Wall Street is fraud, that’s simply an accurate, objective fact.  That is their key profit center . . . and it’s not just here.  The United States has been in a competition with the United Kingdom (UK) for decades now on this race to the bottom with the City of London and Wall Street.  The UK Parliamentary Inquiry, which is run by the Tories, found as a fact that . . . all of the retail profits of the largest banks in the United Kingdom came from the deliberate or ‘mis-selling’ of products to customers. . . . They deliberately ripped off entrepreneurs.  They deliberately ripped off their customers, and the Tories found it represented all of their retail profits. . . . You are talking in the range of $80 billion.”Why have a totally fraudulent financial system? Dr. Black, who is an expert in white-collar crime, says, “It’s hard to make money with competition.  It’s really hard.  People who have never been in business don’t understand how hard real competition is.  Real competition makes it hard to prosper, but if you rig the system, it makes it easy.  The reward for rigging is phenomenal.  We are talking every year, hundreds of billions of dollars in bonus compensation.  It’s far more than their straight salaries, and it is going to folks that it wouldn’t go to them if they didn’t rig the system.  And, no one is prosecuted.  They don’t even give back the fraud proceeds, even when they catch them red-handed.”

Big Banks Aided Firm At Center Of International Bribery Scandal: No business can operate without bankers -- not even the bribery business. British financial giant HSBC and American bailout kingpin Citibank processed transactions, managed money and vouched for Unaoil, a once-obscure firm that is now at the center of a massive international corruption scandal.  Police raided Unaoil's Monaco offices and interviewed its executives on Thursday, a day after The Huffington Post and Fairfax Media first exposed the company's practices. Law enforcement agencies in at least four nations are involved in a wide-ranging probe of the company and its partners. Halliburton, KBR and other corporate conglomerates relied on Unaoil to deliver them lucrative contracts with corrupt regimes in oil-rich nations. But without the help of banks like HSBC and Citibank, none of Unaoil's operations would have been possible. Both Citibank and HSBC declined to comment on whether Unaoil or the Ahsani family, who own and operate the firm, remain their clients. "As a matter of policy, we only maintain relationships with clients who have been vetted through our strict due diligence and compliance checks," HSBC spokeswoman Sorrel Beynon told HuffPost in a written statement.

The Fourth Whistleblowers’ Lemons Award Goes to DOJ for Ignoring Citi’s Criminals - William K. Black - The current award is particularly close to our hearts because it involves DOJ ignoring the sworn testimony of one our founders, Richard Bowen.  DOJ did not ignore Bowen’s testimony because it was discredited, but because it was proven accurate – and should have led to the indictment of Citigroup’s top leadership team. Two recent revelations prompt the timing our Lemon award to DOJ.  First, it is five years since the release of the Financial Crisis Inquiry Commission (FCIC) report, so the criminal referrals that FCIC made were revealed.   Citigroup’s senior managers were the subject of two, separate criminal referrals by FCIC.  One of those two referrals was based on Bowen’s testimony.  (Bowen’s explosive interview by FCIC’s staff was also made public.)   The mainstream press has ignored the referral based on Bowen’s testimony. Bowen met with the Assistant U.S. Attorney taking a leading role in DOJ’s “investigation” of Citigroup’s senior managers.  Bowen provided the AUSA with the key materials and insights necessary to bring an exceptionally strong case against Citigroup’s senior managers.  (He did the same with the SEC, which will likely lead to a future whistleblowers’ lemons award to that agency for not only failing to act, but also preventing public access to the damning evidence of securities fraud.)  We now know that the FCIC’s criminal referral against Citigroup’s senior leadership that was based on Bowen’s testimony and to interviews with the FCIC was not provided to that AUSA by the DOJ’s senior leadership. Second, we know that DOJ has refused to prosecute any Citigroup management leader.  We know this not because DOJ alerted the public to this failure, but because a report by the Inspector General (IG) of the Federal Housing Finance Agency (FHFA) revealed the DOJ’s failure.  The IG report noted that the evidence had established that Citigroup officials had committed the key elements of fraud.

IMF says insurers pose risks to the global economy - — Global regulators are not paying enough attention to the risks to the global economy from the insurance sector, the International Monetary Fund warned Monday. “The contribution of the insurance sector — particularly of life insurers — to systemic risk has increased,” and play an important role in financial turmoil spreading from one region to another, the IMF said. Low interest rates may have induced firms to take on more risk, the IMF said, and the asset composition of firms may have become more similar, increasing exposure to common shocks and fire sales, the international agency said. Insurance companies hold $24 trillion in assets, or about 12% of global financial assets, of which life insurance accounts for 85%, the IMF said. Before the financial crisis, insurers were not thought to pose significant systemic risks. But the near collapse of American International Group prompted a rethinking. Efforts in the U.S. to increase oversight of insurance companies has been met by industry resistance.  A federal judge last week sided with MetLife in its argument that it shouldn’t be designated a systemically important financial institution that should be subject to stricter regulations. The IMF said regulators should go beyond the solvency and contagion risks of individual firms and take on the systemic risk arising from common exposures.

Shelby’s Senate Banking Committee Has No Pretense of Fairness --  Pam Martens  -- Tomorrow the Senate Banking Committee, chaired by Senator Richard Shelby since the Republicans took control of the Senate in the 2014 midterms, will hold a hearing on “Assessing the Effects of Consumer Finance Regulations.” That title can be easily translated into “How to Achieve the Lobbyists’ Dream Wish of Killing Off the Consumer Financial Protection Bureau and Its Embarrassing Ability to Perpetually Show How Deregulation of the Financial Services Industry Has Led to Wholesale Looting of the Public.” Senator Shelby does not even make a pretense of presenting a balanced slate of witnesses at these hearings and one has to question why the Ranking Member, Senator Sherrod Brown, a Democrat, is not holding Shelby’s feet to the fire on this issue.  Tomorrow’s hearing has three panelists listed: Leonard Chanin, Of Counsel at Morrison and Foerster – a law firm that was a registered lobbyist for the American Bankers Association last year according to the Center for Responsive Politics; David Hirschmann, another registered lobbyist and CEO of the U.S. Chamber of Commerce Center for Capital Markets Competitiveness. The U.S. Chamber of Commerce has spent $62 million lobbying Congress since 1998 in an effort to gut or water down regulations of Wall Street and other big corporate groups.  Rounding out tomorrow’s panel is Todd Zywicki, a senior scholar at the rabidly anti-regulatory Mercatus Center and a Law Professor at the related George Mason University. According to SourceWatch,  the Mercatus Center “was founded and is funded by the Koch Family Foundations,” the nonprofits set up by the Koch brothers to sluice money into a sprawling maze of think tanks, corporate front groups, and university economic departments.

Jamie Dimon Tells Us We Need to Leave Too Big to Fail Banks Alone -- Yves Smith - Jamie Dimon likes to write grandiose letters to shareholders. Unfortunately, the financial media sees fit to treat them seriously. And his minders manage to save him from himself. Right after the crisis, Dimon’s annual missive contained an section praising the heroics of his staff, comparing them at length to the soldiers at Iowa Jima. Dimon was persuaded to get rid of that bit only because his outside PR firm threatened to quit.  This year’s letter, as recapped by the Financial Times, is every bit as exaggerated, although less obviously so to the outsider. The theme this year is why too big to fail banks like his need to be left alone by meanie regulators and rabid politicians.  Here is Dimon’s claim: Mr Dimon set out the benefits of structures spanning corporate and investment banking, arguing that they allow big banks such as JPMorgan to perform “mission-critical services . . . that regional and community banks simply cannot do”. Since when? Commercial banking services (commercial loans and revolving credit, cash management, foreign exchange) are sold to treasurers and assistant treasurers of banks. Investment banking services (public bond and stock offerings, mergers) are sold to chief financial officers and CEOs. Both commercial and investment banks deal in derivatives (plain vanilla ones like swaps to supposedly lower funding costs, more complex ones for tax and accounting gaming). And as we’ve argued, the more complex ones are negative value added from a societal perspective, so any arguments that rely on the importance of complex products that integrate derivatives with more traditional products should be taken with a fistful of salt.

The Fed’s Policy Nightmare: How to Raise Rates Without Killing the Big Banks - If anyone needs one more reason to break up the mega banks on Wall Street, simply look at what happened following the Federal Reserve’s quarter of a percentage point rate hike on December 16 of last year. On that date, the Fed moved off its seven year zero interest rate policy (ZIRP), which had been a bonanza for the banks and a starvation plan for seniors living on fixed income investments like Treasury notes and CDs, and raised its benchmark rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent from its former 0.0 to 0.25 percent. The following then happened in short order in 2016: By Friday, January 15, Citigroup closed down on the day a gut-churning 6.41 percent, bringing its share price losses to a whopping 30 percent from its July 2015 high. Citigroup had been the largest recipient of bailout funds from the government in 2008 as well as the largest bank bailout in the history of finance, receiving $45 billion in equity infusions, over $300 billion in asset guarantees, and more than $2 trillion cumulatively in secret loans from the Fed. By the close of trading on January 18, Morgan Stanley had lost 37 percent in share value from its July high; Goldman Sachs had lost 29 percent since the prior June; Bank of America was down 22 percent from July with JPMorgan Chase down by 19 percent in the same period. By January 20, a mere 35 days from the Fed’s quarter point rate hike and promise of more to come, the U.S. domestic crude, West Texas Intermediate, was trading at a new 12-year low of under $28 a barrel; globally, stocks had lost $15 trillion since the prior May; the 10-year Treasury note which had closed at a yield of 2.29 percent when the Fed announced its rate hike and plan to begin gradually normalizing rates back up, had gone rogue from the Fed and moved in the opposite direction. Instead of moving up in yield, the benchmark 10-year Treasury was trading on January 20 at a yield of 1.97 percent. (This morning it’s at 1.74 percent.)

Paul Krugman Crosses the Line - naked capitalism - In his recent New York Times opinion column, “Sanders Over the Edge” (4/8/16), economist Paul Krugman offers his readers a basketful of misinformation on important economic matters about which he should – and probably does – know better. The column contains a large number of snipes and a great deal of innuendo against Bernie Sanders and his supporters, but here I focus on his claims about “Too Big To Fail” (TBTF) banks, their role – non-role, according to Krugman –  in the financial crisis, and Sanders’ understanding of the policy tools available to deal with them. Krugman’s claims about these issues are misleading, almost certainly wrong, and, in my view, call into question the credibility of his New York Times column as a source of economic information and analysis. Krugman starts here: “Bernie is becoming a Bernie Bro.” I’ll leave it to others to dissect this one. Moving on: “Let me illustrate the point … by talking about bank reform.“The easy slogan here is ‘Break up the big banks.’ It’s obvious why this slogan is appealing from a political point of view: Wall Street supplies an excellent cast of villains. But were big banks really at the heart of the financial crisis, and would breaking them up protect us from future crises? Many analysts concluded years ago that the answers to both questions were no.” As you can see by following Krugman’s link here, this is not, what Krugman suggests it is: it is not a link to an article quoting multiple analysts presenting strong arguments with evidence that large banks were not responsible for the crisis. It is a link to an opinion piece by Paul Krugman himself. Period. And, moreover, in this linked piece, Krugman is far more circumspect and uncertain of the answers than if implied in his statement “that many analysts concluded years ago.” So, who are these “many analysts”? On what basis did they reach their conclusions? Certainly, we can find some analysts who argue (“conclude” is a word that suggests an answer based on a comprehensive analysis of the facts) that the financial crisis was the result of government mismanagement, or was simply a textbook example of a bank run and not due to the actions of large financial institutions per se...

Why the Banks Should Be Broken Up - Taibbi - Paul Krugman wrote an op-ed in the New York Times today called "Sanders Over the Edge." He's been doing a lot of shovel work for the Hillary Clinton campaign lately, which is his right of course. The piece eventually devolves into a criticism of the character of Bernie Sanders, but it's his take on the causes of the '08 crash that really raises an eyebrow. By way of making a criticism of the oft-repeated Sanders charge that the big banks need to be broken up, Krugman argues that banks were not "at the heart of the crisis." This is Krugman's assessment of who was responsible: "Predatory lending was largely carried out by smaller, non-Wall Street institutions like Countrywide Financial; the crisis itself was centered not on big banks but on 'shadow banks' like Lehman Brothers that weren't necessarily that big." Forget about the Sanders-Clinton race, because it's irrelevant to the issue. Krugman is just wrong about this. The root problem of the '08 crisis lay in a broad criminal fraud scheme in the mortgage markets. Real-estate agents fanned out into middle- and low-income neighborhoods in huge numbers and coaxed as many people as possible into loans, whether they could afford them or not. Those loans in turn were bought up by giant financial companies on Wall Street, who chopped them up into a kind of mortgage hamburger. Out of this hamburger, they made securities. These securities were then sold to institutional investors like pension funds, unions, insurance companies and hedge funds. In the typical scenario, the investors buying these toxic mortgage securities weren't told how risky the merchandise was. Many thought they were investing in AAA-rated real estate, when in fact they were buying up the flimsy home loans of part-time janitors, manicurists, strawberry pickers, people without ID or immigration status, and so on.

Yellen Fires Back on Kashkari’s TBTF Assessment - – Federal Reserve Chair Janet Yellen pushed back firmly – but politely – against a stance from one of the regional Fed bank presidents that the largest U.S. banks need to be broken up, saying that the Dodd-Frank Act has made banks and the financial system safer than before the crisis. Speaking in a panel presentation here, Yellen was asked whether she shares Minneapolis Fed Bank president Neel Kashkari's view that the largest banks are still "too big to fail" and therefore must be broken up by either the Fed, Congress or both. She defended the steps policymakers have made since the crisis to ensure there will be no need for bailouts again. "We have been very focused since the financial crisis, and the Dodd-Frank Act has directed us to pay attention and try to put in place policies that will deal with 'too big to fail,'" Yellen said. "So I certainly share President Kashkari's concern with 'too big to fail.' I feel more positive on the progress we have made." Yellen argued that the Fed has "greatly enhanced the safety and soundness" of the banking system, including requiring more and higher quality capital, higher liquidity, rigorous stress testing and other innovations. Yellen also cited 'considerable progress" made in streamlining the resolution process for the biggest banks and coordinating efforts with other central banks and bank regulators worldwide. "I certainly have not arrived at the conclusion that my colleague has," Yellen said. "I'm pleased with the way things are going." But when asked later whether Kashkari – who only began his post as president of the Minneapolis Fed late last year – ought to be espousing such a view when regional bank presidents traditionally only participate directly in monetary policy matters, Yellen defended him. She said that the Federal Reserve intentionally has been established as a decentralized central bank with a diversity of opinion and research interests.

Are Stress Tests Still Informative? -- NY Fed - Since the height of the financial crisis, each year the Federal Reserve has disclosed the results of its stress tests, and stress testing has become “business as usual” in the U.S. banking industry. In this post, we assess whether market participants find supervisory stress test disclosures informative. After half a decade, do the disclosures still contain information that the market finds valuable?   How Could the Stress Test Disclosures Not be Informative? It seems intuitive that the disclosure of supervisory stress test results would contain useful information for investors and other market participants. That’s because the stress tests are based on confidential information provided by bank holding companies (BHCs) and calculations made by supervisors. Some commentators have argued, however, that the U.S. stress tests have become predictable, offering little new information from year to year. Further research examining the market reaction to stress test disclosures has produced mixed evidence. Some studies find that even in recent years, stress test disclosures still significantly affect market prices, while others find that the price impact has declined significantly. Even in studies that determine there is a significant market reaction, some have found the reaction to be positive and some negative.

Elizabeth Warren Flays Former Fed Official Who Saw No Evil on Subprime Loans, Currently Peddling Line That Regulation is Too Costly (to Banks, Natch) -- Yves Smith - Even though I’ve seen Elizabeth Warren repeatedly make masterful use of her very limited time during Congressional hearings to interrogate witnesses, I can’t recall her ever getting angry. But she did yesterday with a completely deserving target, and if anything, her display of ire made her more, not less effective. The target was one Leonard Chanin who associate director of the Division of Consumer and Community Affairs at the Federal Reserve in the runup to the crisis. As we managed to ascertain by a peculiar bit of synchronicity in early 2007, the Fed then was deeply devoted to the idea that all mortgage fraud was being perpetrated against banks. And it became apparent shortly thereafter that even the bank regulator that is normally the most cronyistic, the Office of the Comptroller of the Currency, took its responsibilities under the Home Ownership and Equity Protection Act, which was designed to curb abusive practices with high fee, high interest rate mortgage loans, far more seriously than the Fed did. And what was Chanin’s excuse? “No one presented us with statistically valid data.” You’ll see what Warren does with that one.

Nobody Told Us -- Yesterday Senator Warren rightly excoriated former Fed consumer regulator, now industry lawyer Leonard Chanin after he claimed that, prior to the 2008 crisis, the Federal Reserve Board had only anecdotal evidence that subprime mortgages were a problem. Mr. Chanin served for many years as counsel for the Fed's Consumer and Community Affairs division. In fact, three times a year, from 1996 until 2007, members of the Fed's consumer advisory council called for regulation of subprime mortgages.  The Fed held regular hearings where witnesses told Mr. Chanin and his colleagues that 1) subprime foreclosures were a serious and growing problem and 2) Congress gave the Fed legal authority to do something about it. Here are a couple of instances in which I can recall having personally warned them.

Senator Elizabeth Warren in committee - (7 minute video)  Senate Republicans held a Banking Committee hearing today to talk about why we should roll back the rules on mortgages and credit cards because they’re just too costly for the banks. One of their witnesses, Leonard Chanin, had helped lead the Federal Reserve division that refused to regulate deceptive mortgages — including the subprime lending that helped spark the crisis.

Wells Fargo to Pay $1.2 Billion to Settle Lending Practices Claims -- Wells Fargo Bank will pay a $1.2 billion penalty to settle a claim that the bank illegally claimed certain loans were eligible for a federal insurance program, the Justice Department said Friday.The Justice Department argued that Wells Fargo had lent recklessly and relied on the federal government to pick up the tab when lessees defaulted.“The $1.2 billion settlement with Wells Fargo is the largest recovery for loan origination violations,” said Housing and Urban Development Secretary Julián Castro. “This monetary figure can never truly make up for the countless families that lost homes as a result of poor lending practices.”“Today’s court filing details a previously announced agreement in principle that resolves not only the pending lawsuit filed by the U.S. Attorney for the Southern District of New York, but also a number of other potential claims going back as far as 15 years in some cases,” said Franklin Codel, president of Wells Fargo Home Lending. “It allows us to put the legal process behind us, and to focus our resources and energy on what we do best—serving the needs of the nation’s homeowners.”

How secret offshore money helps fuel Miami’s luxury real-estate boom | Miami Herald: At the end of 2011, a company called Isaias 21 Property paid nearly $3 million — in cash — for an oceanfront Bal Harbour condo. But it wasn’t clear who really owned the three-bedroom unit at the newly built St. Regis, an ultra-luxury high-rise that pampers residents with 24-hour room service and a private butler. .In public records, Isaias 21 listed its headquarters as a Miami Beach law office and its manager as Mateus 5 International Holding, an offshore company registered in the British Virgins Islands, where company owners don’t have to reveal their names. There the trail ran cold. Until now.  That’s because the Miami Herald, in association with the International Consortium of Investigative Journalists, has obtained a massive trove of confidential files from inside a secretive Panamanian law firm called Mossack Fonseca. The leak has been dubbed the “Panama Papers.” Mossack Fonseca specializes in creating offshore shell companies for the world’s richest and most powerful people.  The firm’s leaked records offer a glimpse into the tightly guarded world of high-end South Florida real estate and the global economic forces reshaping Miami’s skyline.   And MF’s activities bolster an argument analysts and law-enforcement officials have long made: Money from people linked to wrongdoing abroad is helping to power the gleaming condo towers rising on South Florida’s waterfront and pushing home prices far beyond what most locals can afford. The leak comes as the U.S. government unleashes an unprecedented crackdown on money laundering in Miami’s luxury real-estate market. Buried in the 11.5 million documents? A registry revealing Mateus 5’s true owner: Paulo Octávio Alves Pereira, a Brazilian developer and politician now under indictment for corruption in his home country.

Black Knight February Mortgage Monitor  - Black Knight Financial Services (BKFS) released their Mortgage Monitor report for February today. According to BKFS, 4.45% of mortgages were delinquent in February, down from 5.09% in February, and the lowest since April 2007. BKFS also reported that 1.30% of mortgages were in the foreclosure process, down from 1.72% a year ago. This gives a total of 5.75% delinquent or in foreclosure. Press Release: Black Knight’s February Mortgage Monitor: Negative Equity Rates Improve, But Lowest-Priced Homes Continue to Struggle; “Serial Refinancers” Played Large Role in 2015 Refi Wave   This month, in light of its recent reports on rising equity levels nationwide, Black Knight looked at those on the other end of the spectrum and found that as of the end of 2015, there were still 3.2 million borrowers in negative equity positions, representing $126 billion in underwater first and second lien housing debt. While negative equity rates continue to improve on the national level, the recovery is decidedly imbalanced in terms of both home price levels and geography; borrowers whose homes are in the lowest tier of home prices continue to struggle with high negative equity rates. “Throughout 2015, the negative equity population in the U.S. decreased by over 30 percent, bringing another 1.5 million homeowners out from underwater on their mortgages,” said Graboske. “However, even after four years of improvement, the recovery has not reached all corners. When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets. That’s the highest share on record. In fact, while the national negative equity rate is now 6.5 percent, for homes in the lowest price tier, it’s over 16 percent. Furthermore, this group is seeing a slower recovery than the nation as a whole. At the current rate of improvement, it would take more than five years for the negative equity rate in this lowest price tier to reach 2005 levels – roughly two-and-a-half years longer than homes in the top 20 percent.”

Mortgage rates plummet to lows not seen in more than a year - Mortgage rates followed long-term Treasury yields downward, plummeting to lows not seen in more than a year.  The yield on the benchmark 10-year Treasury bond nosedived nearly 11 basis points (a basis point is 0.01 percentage point) last week, marking its biggest weekly decline in two months. The swoon came on the heels of the cautious tone struck by Federal Reserve Chair Janet Yellen in her remarks before the Economics Club of New York. Because home loan rates tend to follow the movement of long-term notes, mortgage rates also tumbled. According to the latest data released Thursday by the Federal Home Loan Mortgage Corp., the 30-year fixed-rate average sank to 3.59 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 3.71 percent a week ago and 3.66 percent a year ago. The 30-year fixed rate, which hasn’t been this low since February 2015, has dropped 42 basis points since the start of the year. The 15-year fixed-rate average plunged to 2.88 percent with an average 0.4 point, its lowest level in almost three years. It was 2.98 percent a week ago and 2.93 percent a year ago. The 15-year fixed rate has not fallen this low since May 2013. The five-year adjustable rate average dropped to 2.82 percent with an average 0.5 point. It was 2.9 percent a week ago and 2.83 percent a year ago.

CoreLogic: House Prices up 6.8% Year-over-year in February -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA). From CoreLogic: CoreLogic US Home Price Report Shows Home Prices Up 6.8 Percent Year Over Year in February 2016 Home prices nationwide, including distressed sales, increased year over year by 6.8 percent in February 2016 compared with February 2015 and increased month over month by 1.1 percent in February 2016 compared with January 2016, according to the CoreLogic HPI. ...“Fixed-rate mortgage rates dropped more than one-quarter of a percentage point in the first three months of 2016, and job creation averaged 209,000 over the same period,” said Dr. Frank Nothaft, chief economist for CoreLogic. “These economic forces will sustain home purchases during the spring and support the 5.2 percent home price appreciation CoreLogic has projected for the next year.” This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 1.1% in February (NSA), and is up 6.8% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase. The index is still 6.5% below the bubble peak in nominal terms (not inflation adjusted). The second graph shows the YoY change in nominal terms (not adjusted for inflation). The YoY increase had been moving sideways over the last year, but has picked up a recently. The year-over-year comparison has been positive for forty eight consecutive months.

A few comments on the Seasonal Pattern for House Prices -- A few key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.
3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now overstating the seasonal change (second graph below).
4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.
For in depth description of these issues, see Trulia chief economist Jed Kolko's article "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data" Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data).

Ominous Population, Job, & Housing Trends: Since '00, the core population of 25-54yr/olds has risen by 4.6 million (4%) and full time jobs among them have declined by a half million (-0.5%). The recession decimated the 25-54yr/old core population and this segment has yet to even return to '00 levels of full time employment let alone 2008 peak employment. Since '00, the population of 55+ Americans has grown by 27 million (+45%) and full time employment among this segment risen by 10 million (+93%). A large swath of boomers did not and have not retired maintaining existing or establishing new full time work. Theoretically, they are willing to work for less to maintain medical benefits and bridge shortcomings in their retirement savings. What about those deemed "not in labor force"? Clearly, a large portion of this 24 million (+35%) surge since '00 is coming from the worst possible source, the 25-54yr/old core of the population...not just boomers retiring. The impact of missing job skills, savings, etc. among the core will be felt for decades to come.What about the growth in new home ownership vs. the growth in full time jobs (hard to be a homeowner if you haven't a full time job)? The chart below shows since '00, the growth in new homes has been nearly equal to the number of full time jobs created (a complete reversal from the previous 40 years)...and based on the above chart, on a net basis, none of the growth in homeownership has been among the 25-54yr/olds. That means the 11 million new homes (net) have been purchased by the 55+yr/old growing population / growing full time employment base. Record rental income is the new source of cash flow for retirees with means, who have given up on bonds yielding next to nothing and become landlords with large portfolios of rentals...and soaring housing prices alongside declining wages will ensure young can't buy the homes they live in and instead offer the boomers lifetime renters (the new serf class). All thanks to the Federal Reserve's plan to financially engineer America to ensure the minority class of asset holders never get caught holding the bag at the expense of the vast majority holding nothing!

WSJ: "Housing Bust Lingers for Generation X" -- Bill Mcbride - A decade ago I was arguing one of the tragedies of the housing bubble was that many first time buyers would sour on homeownership for a long time, if not forever. Unfortunately that has happened. From Chris Kirkham at the WSJ: Housing Bust Lingers for Generation X The group of Americans known as Generation X has suffered more than any other age cohort from the housing bust, according to an analysis of federal data, suggesting homeownership rates for that group could remain depressed for years to come. ...There are now three million more renters in their 30s and 40s today than 10 years ago, even though the number of households in that age bracket declined, according to data from the Harvard Joint Center. ...Many people who lost homes to foreclosures or short sales face long waits before lenders will consider them again—up to seven years for foreclosures and up to three years for a short sale. A study last year by the National Association of Realtors estimated that about a third of the 9 million buyers who went through distressed sales or foreclosures between 2006 and 2014 will never return to homeownership.

Do Rising Rents, Especially For The Poor, Mean We Do Not Have A Housing Bubble? - Aggregate housing prices in the US have recently been approaching the levels seen at the peak of the housing bubble back in 2006.  Indeed, in some locations they have gone higher than they did then, such as in San Francisco.  This has led some to speculate that the US is getting back into a housing bubble again.  Maybe, but probably not, and the reason is not something to be happy about: rising rents, especially for lowest income Americans who cannot afford to buy even a cheap house. When in 2005 Robert Shiller published the second edition of his influential book, Irrational Exuberance, his new second chapter that documented the long historical path of price-rent ratios in US housing pretty much convinced anybody who looked at it that indeed the US was having a housing bubble as that ratio had been sharply rising and was at all time historical highs.  Indeed, it would peak a year later, with prices falling while rents did not as we plunged into the crash that led to the Great Recession through many channels. The Economist has provided some more detailed data on prices and rents for three major US  cities, high growth San Francisco, more  intermediate growth New York, and more slowly growing Philadelphia.  Checking the various charts at this site one finds that San Francisco now has noticeably higher house prices than at the 2006 peak, New York has come up from its bottom by about a third to  the former peak, and Philadelphia has nearly fully recovered its peak, but not quite.  OTOH, price to rent ratios have behaved very differently.  At the peak, San Francisco was at 30, but is now just at 20, although rising somewhat.  New York's has not been rising at all, was at 25 at the peeak and ow about 14 and stagnant.  Philadelphia was at 15 at the peak, at 10 at its bottom, but now only at 11.  It is simple arithmetic that if prices have been rising substantially while price to rent ratios have not been, then rents must be rising.

Lawler: Yellen on Household Formations “Not Keeping Up;” What Is Her Data Source?  From housing economist Tom Lawler:  In Federal Reserve Chair Yellen’s surprising “dovish” speech at the Economic Club of New York last week, she noted that a relatively slow pace of household formation was one of the “headwinds” that up to now had continued to restrain the U.S. economy. Here is a brief excerpt from her speech. "I anticipate that growth will also be supported by a lessening of some of the headwinds that continue to restrain the U.S. economy, which include weak foreign activity, dollar appreciation, a pace of household formation that has not kept up with population and income growth and so has depressed homebuilding, and productivity growth that has been running at a slow pace by historical standards since the end of the recession.”  I found the statement on the “lagging” pace of household formations somewhat fascinating, in that it is pretty widely known by competent housing economists and demographers that there currently are no good, reliable, or timely data on US household formations. Rather, there are multiple and often conflicting estimates of US household formations calculated based on different surveys conducted by the Census Bureau. In fact, there are even conflicting estimates of US household formations based on the SAME survey conducted by Census, but “controlled” to different benchmarks (in one case housing stock estimates, and in another case population estimates).

Goldman: "Household Formation Close to Normal" -- A few excerpts from a note by Goldman Sachs economists Hui Shan and Daan Struyven: Household Formation Close to Normal   Looking across various measures, we find that household formation has improved over the past few years and likely exceeded 1 million in 2015—an encouraging rebound from the subdued pace in years prior.   We continue to forecast an annual household formation rate of 1.2 million over the next few years. This forecast, coupled with the decline in the vacancy rate, supports our constructive view on homebuilding. Overall, we see continued evidence that housing will remain a tailwind to the economy.

Reis: Apartment Vacancy Rate increased in Q1 to 4.5% -- Reis reported that the apartment vacancy rate increased in Q1 2016 to 4.5%, up from 4.4% in Q4, and up from 4.3% in Q1 2015. The vacancy rate peaked at 8.0% at the end of 2009, and bottomed at 4.2% in 2014 and early 2015.  A few comments from Reis: The national vacancy rate increased once again during the first quarter, marking three consecutive quarters of national vacancy rate increases. This is the first time this has occurred since the fourth quarter of 2009 when the apartment market was still struggling due to the fallout from the Great Recession. This is the beginning of an upward trend in vacancy that should persist for at least the next five years. New construction continues to exceed net absorption by a wider margin over time which will cause vacancy to increase in the majority (if not all) of the coming quarters. While the apartment market should still remain tight, there is clearly not a bottomless pool of demand that absorbs all of the units that are being delivered to the market.  Vacancy once again increased by 10 basis points to 4.5% during the first quarter with construction exceeding net absorption. Demand and supply are now clearly out of balance, a dynamic that should persist for the foreseeable future. If anything, there will be greater upward pressure exerted on the national vacancy rate because construction is likely to exceed demand by an increasingly wider amount over time. During the first quarter construction exceed demand by 10,931 units. Although this difference is narrower than the previous quarter, it remains significant. With construction set to increase faster than net absorption this difference should continue to widen in the coming quarters.

Reis: Office Vacancy Rate declined in Q1 to 16.2% -- Reis released their Q1 2016 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined to 16.2% in Q1, from 16.3% in Q4. This is down from 16.6% in Q1 2015, and down from the cycle peak of 17.6%. From Reis: Although vacancy only declined by 10 basis points this quarter to 16.2%, the steady drumbeat of vacancy declines should be taken as a heartening sign.. The vacancy rate has now declined in six of the last seven quarters and remains at its lowest level since the second quarter of 2009 when it was at 16%. Although construction and net absorption both pulled back a bit this quarter, the trend over time is for both of those metrics to increase, not decrease. Therefore, a pullback this quarter should not be interpreted as a retrenchment in the market. Moreover, beginning the year with a compression in vacancy, which has not occurred consistently during this recovery, positions the market well. 10 basis points is in line with our forecast for 2016 and leaves the possibility that the market could slightly surprise to the upside if office-using employment growth remains robust.  Asking and effective rents both grew by 0.9% during the first quarter, marking the twenty-second consecutive quarter of asking and effective rent growth. These growth rates marginally exceeded last quarter's asking and effective rent growth of 0.8%. Consequently, the year-over-year rent growth figures were little changed versus the fourth quarter.

Reis: Mall Vacancy Rate unchanged in Q1 2016 -- Reis reported that the vacancy rate for regional malls was unchanged at 7.8% in Q1 2016 compared to Q4 2015, and down slightly year-over-year from 7.9% in Q1 2015. This is down from a cycle peak of 9.4% in Q3 2011. For Neighborhood and Community malls (strip malls), the vacancy rate was also unchanged at 10.0% in Q1 2016 compared to Q4, and down year-over-year from 10.1% in Q1 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011. Comments from Reis Senior Economist and Director of Research Ryan Severino: The national vacancy rate for neighborhood and community shopping centers was unchanged during the first quarter at 10.0%. Although the national vacancy rate technically did not decline, net absorption continues to exceed new construction, a heartening sign for a market that remains mired in a slow but steady recovery. The vacancy rate for malls also did not change, remaining at 7.8%. For neighborhood and community centers, the flat vacancy rate is just a blip, with more vacancy compression likely ahead. However, for regional malls, the vacancy compression cycle has largely ended. While results from the first quarter have not shown any acceleration in the retail recovery, the overall economic environment remains conducive to further improvement. The labor market continues to generate more than 200,000 jobs per month on average, wages are slowly but surely inching higher, and retail sales continue to grow. Although the retail market clearly has no shortage of challenges - from e-commerce to new subtypes to experiential shopping - there is no reason to think that the recovery will not persist during the balance of 2016, even if the pace of the recovery does not accelerate much....Asking and effective rents grew by 0.5% and 0.6% respectively during the first quarter. Quarterly rental growth rates for neighborhood and community centers have been virtually identical for the last six quarters. Consequently, the year-over-year growth rates have also changed very little in recent quarters, with asking and effective rents having grown by 2.1% and 2.2% respectively.

Urban Revival? Not For Most Americans -- Jed Kolko -- The U.S. population is now less urban than before the start of the housing bubble. While well-educated, higher-income young adults have become much more likely to live in dense urban neighborhoods, most demographic groups have been left out of the urban revival. In recent years, numerous studies and media reports have documented that college-educated young adults have been drawn to urban centers. At times some have claimed a broader demographic reversal in which cities grow faster than suburbs, and even the end of the suburbs. But, in fact, the U.S. continues to suburbanize. The share of Americans living in urban neighborhoods dropped by 7%, from 21.7% in 2000 to 20.1% in 2014. Even looking at only the densest urban neighborhoods where about one-third of the urban population lives, the share of Americans living in these neighborhoods fell by 5%, from 7.4% in 2000 to 7.0% in 2014. (See note at end of post for details on data, methodology, and definitions.) Headlines about educated young adults flocking to Brooklyn and San Francisco aren’t wrong – but they are far from the whole story and are unrepresentative of broader trends. Other demographic groups are suburbanizing faster than the young and rich are piling in to cities. This post looks at the change in urban living for detailed demographic groups, using individual-level data from the Census. The findings are consistent with analyses of the most recent county data and of detailed neighborhood data, both of which confirm that the American population overall continues to suburbanize. What’s new is that individual-level data show us how skewed the urban revival is toward rich, young, educated Whites without school-age kids.

Hotels: Occupancy Rate Tracking just behind Record Year - From STR: US hotel results for week ending 2 April The U.S. hotel industry recorded positive year-over-year results in the three key performance metrics during the week of 27 March through 2 April 2016, according to data from STR. In comparison with Easter week 2015, the industry’s occupancy rose 6.6% to 66.9%. Average daily rate for the week was up 5.0% to US$121.96. Revenue per available room increased 11.9% to US$81.61. The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  The occupancy rate should mostly move sideways for the next couple of months, and then increase further during the Summer travel period.

Consumer Credit Rises Nearly 6% in February - 24/7 Wall St.: The Federal Reserve on Thursday released its preliminary report on consumer credit for the month of February 2016. On a seasonally adjusted basis, consumer credit rose 5.75% in the month, up from 5.1% growth posted in January, and well below the December increase of 7.8%. In dollar terms, consumer credit rose by $17.3 billion month over month. Analysts had been expecting an increase of $14 billion. Total consumer debt rose to $3.57 trillion in February of which $940.6 billion is revolving (mostly credit card) debt and $2.63 trillion is non-revolving debt. Revolving debt rose by just $3 billion and non-revolving debt rose by $15 billion. Revolving credit comprises primarily credit card balances and non-revolving credit includes motor vehicle loans, student loans, among others, and may be secured or unsecured. Mortgage debt is not included in the report. The largest holder of consumer debt is the federal government which holds about $984.2 billion in debt, including certain types of student loans. Banks hold about $754.4 billion in revolving debt and around $646.8 billion in non-revolving debt. Finance companies and credit unions are also large holders of non-revolving debt, with February totals of about $618.6 billion and $299.2 billion, respectively.

U.S. consumer credit climbs 5.8% in February - — Americans added to their debt at a steady solid pace in February, suggesting that consumer spending will continue to prop up the economy. Consumer credit grew at a seasonally adjusted annual rate of 5.8%, for a gain of $17.2 billion, in February, the Federal Reserve said Thursday. The gain was above market expectations of a $14 billion gain. Consumer credit has been consistently solid over the past year with no monthly gains below 5%. Total consumer borrowing, which does not include mortgage debt, is now $3.57 trillion. Credit growth in January was revised up sharply, to a $14.9 billion gain from the prior estimate of $10.5 billion. The gain in February reflected a 6.6% gain in the category that covers auto loans and student loans. This was a bit below the 7% gain in January.  Pent-up demand for new vehicles and the need to increase educational credentials has been two big driver of this new strength in consumer credit, according to economists. Credit card borrowing rose 3.7% in February after a 0.3% drop in the prior month.

Consumer Credit Rises $17.2 Billion; Holding Of Federal Debt Hit New All Time High -- After a near record drop in non-revolving (student and car) loans in December, many were wondering if this pipeline which has kept the US auto sector afloat would remain shut. We are happy to report that for two consecutive months, this all important funding pathway has now been unclogged and nonrevolving loans are back to their soaring self. As the chart below shows, in the latest, just released month of February, total consumer credit jumped by $17.2 BN, beating expectations of $14.9 BN, and up from January's upward revised $14.9 BN (was $10.5 BN). This was driven by a $2.9BN increase in revolving debt, and a $14.3BN jump in nonrevolving student and car loans.

February 2016 Consumer Credit Rate of Growth Rate Improves.: The headlines say consumer credit rate of annual growth improved - and came in well above market expectations. This was the exact opposite of last month. The backward revision was significant, and trend lines were affected. Some of the graphics in this post are very interesting including the Ratio of Total Consumer Loans Outstanding to Consumer Spending. The headline said: In February, consumer credit increased at a seasonally adjusted annual rate of 5-3/4 percent. Revolving credit increased at a 3-3/4 percent annual rate, while nonrevolving credit increased at a 6-1/2 percent annual rate. Overall takeaways from this month's data:

  • There were significant backward revisions. The published data values for consumer credit growth last month was 6.5 % (unadjusted) and 3.5% (seasonally adjusted) Vs. the current revised values of 6.7 % (unadjusted) and 5.1 % (seasonally adjusted).
  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013.
  • Student loans growth rate decelerated 0.2 % month-over-month and year-over-year growth is now 11.7 % year-over-year.
  • Revolving credit (credit cards and this series includes no student loans) and has been slightly accelerating since 2010..

The market expected (from Bloomberg) consumer credit to expand $11.5 to $16.9 billion (consensus = $14.0 billion) versus the seasonally adjusted headline expansion of $17.2 billion reported. Note that this consumer credit data series does not include mortgages.

Gallup US Consumer Spending Measure April 4, 2016: Americans' daily self-reports of spending increased $5 to an average of $89 in March. March daily spending was only slightly lower in 2014 and 2015, when it averaged $87 and $86, respectively. Since 2008, averages for March have generally bested averages for January and February, and have usually increased again at some point in the spring -- with the exception of 2012 and 2013. For each of the past six years, the spending average for March has been a rough bellwether for that year's spending, coming within $3 of the annual average. The months of April, June and October have come within this same range of the yearly averages since 2010. This did not hold true in March 2008 and March 2009, however -- years in which the recession and the financial crisis dealt their immediate blows.

Bad News For Rebound Hopes: Consumer Spending Fails To Rise According To Card Spending Data -- While big banks blame the collapse in Q1 GDP on "residual seasonality" (more on that later), with BofA recently slashing its Q1 estimate from as much as 2.7% to just 0.2%, the reality is that something is not well with the US consumer. The latest proof of this comes from the most recent Bank of America credit and debt card spending data, which reveals that sales were once again down 0.1% yoy. And unlike on previous occasions, one can't blame it on gas at the pump, as gasoline prices have increased. Still, on a trailing basis, headline sales have been depressed by less spending at the pump due to lower prices. On a three month moving average, retail sales ex-autos are down 0.2% mom SA while retail sales ex-autos and gasoline are up a more moderate 0.3% mom SA. The chart below shows the seasonally adjusted retail sales ex-autos measure from the BAC aggregate card data was unchanged SA in March, leaving the 3-month moving average to decline 0.2%. While a part of this weakness owes to a continued decline in gasoline prices. We find that retail sales ex-autos and gasoline was up 0.3% mom SA, which continues to be in a downward trend. This confirms the downward revision to the Census Bureau data in January which made government data more consistent with the BAC internal data. According to Bank of America, "we therefore also look for only a slight improvement in March Census Bureau sales, in a similar pattern as the BAC internal data" which means that Q1 GDP is weak for a very specific reason: consumer spending remains anemic.

Gallup US ECI April 5, 2016: Americans were slightly more confident in the economy in March than they were in February; however, their confidence has not drastically changed in the past nine months. Gallup's U.S. Economic Confidence Index averaged minus 10 in March, up slightly from minus 13 in February and on the high end of the minus 10 to minus 14 range found since July. Overall, Americans' economic confidence is much higher than it was during the recession and immediate post-recession years, but it remains down from recent high points measured in early 2015. In March, the current conditions score improved to minus 3 from minus 5 the previous month. This was the result of 26 percent of Americans rating current economic conditions in the U.S. as "excellent" or "good," and 29 percent rating them as "poor." Americans continue to view current economic conditions more favorably than their outlook of the economy, as they have since March 2015. In the most recent polling, 39 percent of Americans said the economy was "getting better," while 56 percent said it was "getting worse." This resulted in an economic outlook score of minus 17, up from minus 20 in February. The Gallup Economic Confidence Index (ECI) is a broad indicator of Americans' confidence in national economic conditions, comparable to the Conference Board's Consumer Confidence Index and the Thomson Reuters/University of Michigan Consumer Sentiment Index.

Low Gas Prices Drove Down Transit Use, So Why Can’t You Find a Seat on the Train? - Transit ridership declined for the first time in five years during 2015, likely due to low gasoline prices, but subways and commuter trains were as crowded as ever. How can this be? There are more free seats on the bus. Americans took about 150 million fewer bus rides last year, but boarded trains in slightly higher numbers than in 2014, when transit use reached the highest level since 1958, according to new data from the American Public Transportation Association. The average price of a gallon of gasoline fell 27% in 2015 from a year earlier. A breakdown of the 10.6 billion transit trips taken last year shows bus ridership fell 2.8%, and train usage, including rides on subways, light-rail systems and commuter trains, rose a slight 0.2% last year from 2014. The rail increase was the smallest gain since ridership declined in 2009. The figures do not include Amtrak ridership or intercity buses. “We were all surprised how quickly people changed habits with low fuel prices,” said Joseph Schwieterman, a professor at DePaul University who studies urban transportation economics. “Cheap gas encourages people to jump behind the wheel.”

U.S. gasoline demand still strong despite poor weather in January: Kemp - Reuters: Unexpectedly weak gasoline consumption in the United States reported for the month of January has been blamed by some market participants for the continued slide in oil prices on Tuesday. Gasoline consumption fell almost 0.6 percent in January compared with the same month a year earlier, according to the U.S. Energy Information Administration ("Petroleum Supply Monthly", EIA, April 4). The EIA's monthly estimate for gasoline consumption contrasted with more recent weekly data showing strong year-on-year growth in gasoline demand. The monthly estimate has been seized on by bearish traders and analysts as evidence crude and gasoline prices have risen too far too fast over the last two months. But on closer inspection there is nothing surprising about the monthly reading for January, which is in line with the low weekly consumption numbers reported during that month. Consumption was likely disrupted by the extensive flooding across the Midwest at the start of the month and the snow blizzards which hit the East Coast at the end of January. Gasoline consumption only began to ramp up from the middle of February and has remained strong since then according to the weekly data (

Too much of a good thing | The Economist: AMERICA’S airlines used to be famous for two things: terrible service and worse finances. Today flyers still endure hidden fees, late flights, bruised knees, clapped-out fittings and sub-par food. The profit bit of the picture, though, has changed a lot. Last year America’s airlines made $24 billion—more than Alphabet, the parent company of Google. Even as the price of fuel, one of airlines’ main expenses, collapsed alongside the oil price, little of that benefit was passed on to consumers through lower prices, with revenues remaining fairly flat. After a bout of consolidation in the past decade the industry is dominated by four firms with tight financial discipline and many shareholders in common. And the return on capital is similar to that seen in Silicon Valley. What is true of the airline industry is increasingly true of America’s economy as a whole. Profits have risen in most rich countries over the past ten years but the increase has been biggest for American firms. Coupled with an increasing concentration of ownership, this means the fruits of economic growth are being hoarded. This is probably part of the reason that two-thirds of Americans, including a majority of Republicans, have come to believe that the economy “unfairly favours powerful interests”, according to polling by Pew, a research outfit. It means that when Hillary Clinton and Bernie Sanders, the Democratic contenders for president, say that the economy is “rigged”, they have a point.

Wholesale inventories and sales: bad news for Q1, good news for the year -- While this morning's report on wholesale sales and inventories for February isn't good news for Q1 GDP, in the longer term it means that the inventory correction is working itself out.  Let's start with the updated inventory to sales ratio for wholesalers, which declined .01 from 1.37 to 1.36: More specificallyWholesale inventories dropped 0.5 percent in February, the Commerce Department said on Friday, the sharpest decline since May 2013. Analysts polled by Reuters expected a 0.1 percent decline.The government also revised its reading for January to show a 0.2 percent decline in inventories rather than a 0.2 percent rise.  Wholesale sales, meanwhile, slid 0.2%.January's -1.3% decline in sales was also revised down -.2% to -1.5%.  More often than not, a big increase in the inventory to sales ratio is accompanied by a recession. But a minority of the time, it is just an inventory correction - most importantly, in 1998 when the US$ soared, just as it did in 2014-15. In either case, sales lead inventory, as shown in this graph through December (FRED won't update until next week):  In the inventory correction scenario,

  • - pressure of the US$ eases - which it already has this year.
  • - commodity prices firm - which appears to have happened beginning last November.
  • - new orders increase - which we have from the ISM new orders index in the first three months of this year.
  • - inventory continues to decline - this is now established for wholesalers for the last 5 months.
  • - sales increase - not yet (as of February)!

So while a negative GDP print for Q1 becomes more likely (as forecast by the Leading Indicators last summer), the progression of numbers gives me increased confidence that the shallow industrial recession that was caused in large part by the surge in the US$, is coming to an end.

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

  • unadjusted sales rate of growth accelerated 7.7 % month-over-month.
  • unadjusted sales year-over-year growth is up 0.7 % year-over-year
  • unadjusted sales (but inflation adjusted) down 0.1 % year-over-year
  • the 3 month rolling average of unadjusted sales accelerated 1.2 % month-over-month, and down 3.6 % year-over-year. There has been a general deceleration trend since late 2014.
  • unadjusted inventories up 0.5 % year-over-year (deceleration of 1.3 % month-over-month), inventory-to-sales ratio is 1.48 which is historically is at recessionary levels.

US Census Headlines based on seasonally adjusted data:

  • sales down 0.2 % month-over-month, down 3.1 % (last month was reported down 3.1 %) year-over-year
  • inventories down 0.5 % month-over-month, inventory-to-sales ratios were 1.31 one year ago - and are now 1.36.
  • the market (from Bloomberg) expected inventory month-over-month change between -0.6 % to 0.4 % (consensus -0.2 %) versus the -0.2 % reported.

Wholsale Inventories Drop Most Since 2013; Sales Miss As Slowdown Accelerates -- There was one thing keeping US GDP growing in recent months: rising inventory. Well, no more. Moments ago the Dept of Commerce reported the latest inventory data and following major historical revisions, not only was last month's inventory print slashes from 0.3% to -0.2%, but the February Inventory number was a dramatic -0.5% drop, far below the -0.2% expected.  This was the biggest sequential drop since the spring of 2013.It wasn't just inventories: wholesale sales also declined by 0.2%. The ongoing declines refuse to paint a pretty picture of the US economy. Worse, the nominal dollar spread between wholesale inventories and sales remains at record highs suggesting that the long overdue inventory liquidation has nowhere near begun yet. There was some good news: the inventories/sales ratio was 1.36, a modest decline from the January print. While perhaps hinting of some long overdue renormalization, this would mean that should inventory selling commence, the US GDP is about to lose as much as 1.5% in annualized growth, potentially pushing 2016 GDP growth to 1% or lower. And now we wait for the Altanta Fed to update its Q1 GDP model with a negative print.

Rail Week Ending 02 April 2016: March Totals Down 11 Percent From One Year Ago: Week 13 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. All rolling averages are in decline. The deceleration in the rail rolling averages began one year ago, and now rail movements are being compared against weaker 2015 data. There were port labor issues one year ago which affected intermodal movements - which skew the results both positively and negatively (this week again negatively as it is being compared to the shipping surge at the end of the strike). A summary of the data from the AAR: Carload traffic in March totaled 1,196,167 carloads, down 14.2 percent or 198,737 from March 2015. U.S. railroads also originated 1,250,925 containers and trailers in March 2016, down 7.7 percent or 104,343 units from the same month last year. For March 2016, combined U.S. carload and intermodal originations were 2,447,092, down 11 percent or 303,080 carloads and intermodal units from March 2015. In March 2016, seven of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with March 2015. These included: chemicals, up 5.5 percent or 8,439 carloads; miscellaneous carloads, up 24.8 percent or 5,925 carloads; and motor vehicles and parts, up 5.2 percent or 4,690 carloads. Commodities that saw declines in March 2016 from March 2015 included: coal, down 35.9 percent or 188,250 carloads; petroleum and petroleum products, down 22.4 percent or 15,524 carloads; and metallic ores, down 27.1 percent or 7,281 carloads. Excluding coal, carloads were down 1.2 percent or 10,487 carloads from March 2015. Total U.S. carload traffic for the first quarter of 2016 was 3,143,251 carloads, down 13.8 percent or 501,616 carloads, while intermodal containers and trailers were 3,339,672 units, up 1.5 percent or 49,958 containers and trailers when compared to the same period in 2015. For the first quarter of 2016, total rail traffic volume in the United States was 6,482,923 carloads and intermodal units, down 6.5 percent or 451,658 carloads and intermodal units from the same point last year.

Private Infrastructure Contracting May Be a Quick Way to Round Up Capital, but Does It Create Lasting Jobs? - “Infrastructure” is the Rorschach blot of budget politics, a catch-all for “build stuff” that can be touted as a magic bullet or dismissed as a liberal pork-laden boondoggle. But it’s not impossible to set some ground rules for steering clear of the perennial bridge to nowhere. In the Public Interest (ITPI), together with Partnership for Working Families, has laid out “best practices” for governments making deals with the devil—i.e., “public-private partnerships” or P3s—to be applied to legislation and project contracts in order to protect the integrity and social priorities of infrastructure investment.  Reflecting some of the more progressive community-workforce agreements and development agendas that some cities have developed with community and labor groups, the ITPI report recommends that contracts include employment opportunities for “disadvantaged communities, like low-income families, women, people of color, and those with a criminal record.” This system can be extended beyond the initial construction to foster long-term development, so local workers get dibs on the permanent jobs that maintain the project or serve the businesses sited on it (while the improved infrastructural backbone continues to benefit communities through greater overarching efficiency).  Linking employment provisions of projects to unions helps raise standards across different stakeholder industries by ensuring more stable career-track employment, fair-labor protections, and inclusive apprenticeship programs. For example, Los Angeles’s light-rail plan, which was developed cooperatively with labor and community groups, includes hiring targets for communities suffering high unemployment rates and reserves half of apprenticeship jobs for area residents.  But meeting community needs requires a deep enough investment. According to the American Society of Civil Engineers, the country needs to invest over $1.6 trillion just to restore its infrastructure to a sustainable quality, about $200 billion yearly up to 2020.

Trade Deficit Increased in February to $47.1 Billion -- The Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $47.1 billion in February, up $1.2 billion from $45.9 billion in January, revised. February exports were $178.1 billion, $1.8 billion more than January exports. February imports were $225.1 billion, $3.0 billion more than January imports. The trade deficit was larger than the consensus forecast of $46.2 billion. The first graph shows the monthly U.S. exports and imports in dollars through February 2016.  Imports increased and exports increased in February. Exports are 7% above the pre-recession peak and down 4% compared to February 2015; imports are 3% below the pre-recession peak, and unchanged compared to February 2015. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $27.48 in February, down from $32.06 in January, and down from $49.53 in February 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012. The trade deficit with China increased to $28.1 billion in February, from $22.5 billion in February 2015 (there was a port slowdown last year impacting imports). The deficit with China is a substantial portion of the overall deficit.

February 2016 Trade Data Improved: A quick recap to the trade data released today continues to paint a relatively improving picture of global trade. The unadjusted three month rolling average value of exports and imports accelerated. Many care about the trade balance which degraded.

  • Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported up month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth up 11.6% month-over-month (unadjusted data) - up 3.7 % year-over-year (down 7.9 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating and in expansion.
  • Exports of goods were reported up, and Econintersect analysis shows unadjusted goods exports growth acceleration of (not including services) 6.9 % month-over month - down 3.9 % year-over-year (down 10.6% year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating but in contraction.
  • The improvement in seasonally adjusted (but not inflation adjusted) exports was consumer goods. Import increase was due to consumer goods.
  • The market expected (from Bloomberg) a trade deficit of $-46.8 to $-43.0 billion (consensus $-46.2 billion deficit) and the seasonally adjusted headline deficit from US Census came in at a deficit of $47.1 billion.
  • It should be noted that oil imports were down 11 million barrels from last month, and up 22 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

U.S. trade data points to weak first-quarter growth | Reuters: The U.S. trade deficit widened more than expected in February as a rebound in exports was offset by an increase in imports, the latest indication that economic growth weakened further in the first quarter. But the growth picture should brighten in the months ahead, with other data on Tuesday showing that activity in the vast services sector picked up in March as new orders rose strongly, and sustained strength in the labor market. "There are some green shoots appearing this spring in the economic data which makes us more confident that 2016 is going to be a good year after a step-down in expectations and hopes at the start of the year," said Chris Rupkey, chief economist at MUFG Union Bank in New York. The Commerce Department said the trade deficit increased 2.6 percent to $47.1 billion in February, worse than economists' forecasts for a reading of $46.2 billion. When adjusted for inflation, the shortfall rose to $63.3 billion, the largest since March last year, from $61.8 billion in January. That prompted economists to cut their first-quarter gross domestic product growth estimates by as much as half a percentage point to as low as a 0.4 percent annualized rate. They see trade subtracting at least seven-tenths of a percentage point from GDP growth in the first quarter, up from 0.14 point in the fourth quarter. The economy grew at a 1.4 percent rate in the final three months of 2015.

February Trade Data Points to Some Bad Signs - Robert Oak - The U.S. February 2016 monthly trade deficit increased 2.6% from last month and now stands at -$47.1 billion.  America still runs a surplus in services, now at $17.7 billion, but the goods deficit is still massive and this month was -$64.7 billion.  The U.S. trade deficit hasn't been this high since August 2015.  This is in spite of petroleum imports being the lowest since September 2002.  There are further bad signs from February's trade data. Imported foods, feeds and beverages was the highest on record while industrial supplies and materials exports hit a March 2010 low. Graphed below are imports and exports graphed and by volume since 1995 and note the global trade collapse in 2009. For the month goods trade deficit increased by 1.4% while the services surplus shrank by -0.4%. Imports are in maroon and exports are shown in blue, both scaled to the left.  Below are the goods import monthly changes, seasonally adjusted.  On a Census basis, overall imports increased by $2.719 billion to $183,331 billion as crude oil imports dropped by -$1.314 billion.  Crude oil imports are now $6.707 billion.   Consumer goods imports are off the charts as pharmaceutical preparations increased by $1.344 billion.  Unreal, pharmaceutical preparations pretty much offset the dramatic -$1.3 billion decline in passenger car imports for the month.

  • Industrial supplies and materials:  -$0.948 billion
  • Capital goods:  +$0.998 billion
  • Foods, feeds, and beverages:  +$0.488 billion
  • Automotive vehicles, parts, and engines:  -$1.526 billion
  • Consumer goods:  +$3.596 billion
  • Other goods: +$0.111 billion

Below is the list of good export monthly changes, seasonally adjusted, by end use and on a Census accounting basis, increased by +$1.885 billion to $1118.091 billion.  Automotive and consumer goods led the increase as the U.S. exported $0.568 billion more in passenger cars and $0.629 billion more in gem diamonds.

  • Automotive vehicles, parts, and engines:  +$0.344 billion
  • Industrial supplies and materials:  -$0.179 billion
  • Foods, feeds, and beverages:  +$0.310 billion
  • Capital goods:  -$0.271 billion
  • Consumer goods:  +$1.064 billion
  • Other goods: +$0.618 billion

Q1 GDP To Be Revised Even Lower After February Trade Deficit Grows More Than Expected - As of this moment, the Atlanta Fed calculates Q1 GDP to be -0.7% (Bank of America has it at 0.6%). We expect this number to be promptly revised even lower following the latest disappointing trade data from the US, when moments ago the BEA reported that the US February deficit rose from $45.9BN to $47.1BN, missing the $46.2BN consensus estimate. This was the largest monthly deficit since August 2015's $50.5BN, and the number is likely only going to increase as the US is once again forced to start importing more oil with its own shale industry increasingly mothballed. From the BEA: The U.S. monthly international trade deficit increased in February 2016 according to the U.S. Bureau of Economic Analysis and the U.S. Census Bureau. The deficit increased from $45.9 billion in January (revised) to $47.1 billion in February, as imports increased more than exports. The previously published January deficit was $45.7 billion. The goods deficit increased $0.9 billion from January to $64.7 billion in February. The services surplus decreased $0.3 billion from January to $17.7 billion in February. Exports of goods and services increased $1.8 billion, or 1.0 percent, in February to $178.1 billion. Exports of goods increased $1.8 billion and exports of services decreased less than $0.1 billion. The increase in exports of goods mainly reflected increases in consumer goods ($1.1 billion) and in other goods ($0.6 billion). The decrease in exports of services mainly reflected decreases in transport ($0.2 billion), which includes freight and port services and passenger fares, and in financial services ($0.1 billion). An increase in travel (for all purposes including education) ($0.2 billion) was partly offsetting. Imports of goods and services increased $3.0 billion, or 1.3 percent, in February to $225.1 billion. Imports of goods increased $2.7 billion and imports of services increased $0.3 billion.  The increase in imports of goods mainly reflected an increase in consumer goods ($3.6 billion). A decrease in automotive vehicles, parts, and engines ($1.5 billion) was partly offsetting. The increase in imports of services reflected increases in travel (for all purposes including education) ($0.1 billion), in other business services ($0.1 billion), which includes research and development services; professional and management services; and technical, trade-related, and other services, and in transport ($0.1 billion).

Cheap Oil Means Record U.S. Trade Surplus With OPEC - Cheap oil, a strong dollar and slow growth abroad continue to break historical U.S. trade patterns. In February, the average price per barrel of imported crude slipped to $27.48, the lowest mark since December 2003. Petroleum imports fell to the lowest level since September 2002. And the U.S. registered a trade surplus with Organization of the Petroleum Exporting Countries nations–the highest on record–according to Census Bureau data. OPEC has felt the full force of rising U.S. oil production and a slowdown in many overseas markets that have translated into a global energy glut. A stronger dollar has also helped push down commodity prices while making American goods more expensive overseas. OPEC officials, of course, have contributed to the oil oversupply. They are set to meet in Qatar later this month to discuss a pact to freeze production to support prices, but global output has remained robust. The result? The U.S. has posted a trade surplus with the oil-producing bloc, which includes Saudi Arabia, Venezuela and Nigeria, in 10 of the past 12 months. For February, the figure was a record $1.8 billion. In the prior 30 years, the U.S. had only posted a surplus two other times.

ExIm Bank political stand-off robs Boeing of aircraft deals (FT) Boeing is losing valuable deals for aircraft and satellites to overseas rivals because of a stand-off in Congress over the future of the US Export-Import Bank which has limited the export credit agency’s financing capabilities, according to the aircraft maker’s chief executive.  Three of the five seats on the ExIm Bank’s board are vacant meaning it cannot approve transactions valued at more than $10m or lasting more than a year. H President Barack Obama in January nominated a Republican to fill one of the seats after Congress voted late last year to renew the bank’s charter for another five years. That vote followed a five-month shutdown that was forced by opponents who accuse the bank of cronyism and crowding out other private sector lenders. But Richard Shelby, Republican chairman of the Senate banking committee, has refused to hold confirmation hearings for the nominee, leaving the board in limbo and the bank’s operations seriously constrained. Mr Shelby, who alongside other Republican opponents sought to block ExIm’s reauthorisation last year, this week said: “I’m in no hurry to move those nominations.” For Boeing, which along with General Electric has historically been one of the bank’s biggest beneficiaries, the result has been yet another ExIm-related hit to its business, Dennis Muilenburg, the company’s chairman and chief executive said on Thursday. Speaking to the ExIm Bank’s annual conference in Washington he urged business leaders to lobby Mr Shelby and other members of Congress to confirm Mr Obama’s nominee as soon as possible. “We need a fully functioning bank. Without it we are losing deals,” he said. Ethiopian Airlines had told Boeing that it would have to buy aircraft from rivals unless its purchases were funded by the export credit agency. The company had also been excluded from a number of satellite deals around the world because it could not guarantee the availability of export credit financing.

U.S. and China Trade Appears to Rebound in February 2016 - Going by the exchange rate adjusted year-over-year growth rate of the value of trade between the two nations, the relative health of the economies of both China and the U.S. would appear to have rebounded in February 2016 as compared to previous months.  But there's more to the story. In the U.S., unionized longshoremen at the nation's west coast ports had been engaged in a disruptive work slowdown in the year ago period, which had slowed the unloading of goods being imported by the U.S. That labor action came to an end on 21 February 2015 when a five year agreement between the longshoremen and the Pacific Maritime Association, the operator of the nation's 21 west coast ports, came to an agreement. So much of the year over year improvement in the growth rate of goods imported to the U.S. from China really reflects the end of the union's work slowdown, which was a contributing factor to the slow economic growth the U.S. experienced in the first quarter of 2015. Meanwhile, although the year over year rate of growth of the goods that China imports from the United States was negative, it was never-the-less an improvement over previous months.  It was also quite a contradiction from the trade statistics that China had reported nearly a month earlier, where China's official government statistics had indicated that nation's imports from all nations had declined by 13.8%, while its exports to all nations has plummeted by 25.4%.

India Files H1B Visa Complaint Against US to WTO Amid Falling Exports -- India has recently complained to the World Trade Organization against the United States over changes to visas for skilled workers that Republican presidential candidates have targeted for elimination, according to a report in the UK's Financial Times. The WTO revealed that India had requested consultations with the US over moves by Washington to raise fees for L1 and H1B working visas and also restrictions on the number of those visas awarded. The move is the first step in initiating a dispute at the WTO.  India's WTO complaint is over an increase in fees on H1B visas that the US imposed on companies with workforces comprised of more than 50 percent foreign workers. A provision included in last year's federal spending bill added a new $4,000 fee for each H1B, which India argues is discriminatory to the country under its trade agreement with the US. Meanwhile, the annual gold rush in Silicon Valley to file applications for H1B visas has just begun, as the federal government began distributing some of the 85,000 H1B visas it is authorized to issue this fiscal  year, according to Vice News. India's overall exports have suffered 18th consecutive monthly decline in February 2016, according to India's Economic Times. Exports from India amounted to US$264 billion in 2015,  down -12.4% since 2011 and down -16.9% from 2014 to 2015.  Most of India's IT exports to the United States are made up of wages of H1B workers brought to the United States by a a handful of Indian body shops like Tata Consulting Services (TCS) and Infosys.  In 2014, 86% of the H1B visas for tech workers were granted to Indians, according to available data. Given India's heavy reliance on H1B workers for its IT exports earnings, it is natural that the Indian government gets very concerned whenever there's even a hint of the US possibly limiting H1B visas or making them more expensive.

Voters are Angry about Free Trade. What is the Right Policy Response? - The two most watched candidates of this presidential election season, Donald Trump and Bernie Sanders, have put anger over the effects of free trade at the center of their campaigns. In doing so, they have won millions of votes. Many of the arguments they use in their stump speeches are overly simplistic, but the anger is real. And, as Eduardo Porter noted recently, angry voters have a point: New research suggests that economists have long understated the costs of trade and underestimated the time required for the economy to adjust to trade shocks. If that research is correct, if free trade really causes more pain than we thought, what is the right policy response? Not protectionism, in my opinion, but there are measures we could and should take to ease the pain. Read on.  Jared Bernstein, a Senior Fellow at the Center for Budget and Policy Priorities, points out that how we assess the balance between the costs and benefits of trade depends on whether we view people as consumers or as workers. Consumers benefit from free trade through lower prices and access to a wider variety of products. The impact on workers is more complex. Some lose jobs at factories that can no longer compete with imports. Waiters at local restaurants lose income when unemployed factory workers stop taking their families out to dinner. At the same time, new jobs open up as trade expands employment in export industries, and as lower prices of imported goods leave consumers with extra money to spend on local goods and services. The impact on workers depends to a large extent on whether those who lose their jobs to import competition can find their way to the new jobs created elsewhere. To take an example from my last post, suppose consumers save $1.1 billion from cheaper imported tires at the cost of 1,200 jobs lost in the tire industry. At more than $800,000 in gains to consumers per job lost, that sounds like a huge net gain for the economy as a whole. But is it a net gain for Joe, the tire worker? Not unless he quickly finds a new job as good, or nearly as good, as the one he lost.

US gas demand rises 8.6% from Friday on colder Northeast temperatures - Total US natural gas demand jumped to 73.3 Bcf Monday, up 5.8 Bcf or 8.6% compared with Friday, as colder temperatures in the Northeast prompted a spike in residential and commercial demand, according to Bentek data. Total Northeast demand dipped to a 14-week low Friday of 13.8 Bcf as mild weather across the region saw temperatures rise to nearly 60 degrees Fahrenheit on average. A cold front entered the region Saturday, pushing temperatures down to the mid- to low 40s, as much as 9 degrees F below normal by Sunday. Northeast demand rose in response to the colder weather, with residential and commercial consumption spiking Monday to 11.8 Bcf from 5.7 Bcf Friday.The colder weather prompted storage withdrawals over the weekend as well as a jump in imports of Canadian gas. Implied withdrawals totaled 1.4 Bcf on Sunday and remained elevated Monday at 1.0 Bcf. Imports of Canadian gas, meanwhile, jumped Sunday to 1.3 Bcf, up 74% day on day, before edging higher still to 1.4 Bcf on Monday. Temperatures in the Northeast are expected to remain cooler through midweek, with highs in the mid-30s to low 40s F through Wednesday, keeping gas demand across the region elevated.

Tesla Says Model 3 Orders Top $10 Billion in First 36 Hours - NBC News: Tesla Motors said orders for its new Model 3 electric sedan topped 253,000 in the first 36 hours -- a fast start for the company's first mass-market vehicle, which may not begin to reach customers for another 18 months or more. Tesla Chief Executive Elon Musk tweeted on Friday that the Model 3, which is slated to go into production in late 2017, will sell at an average price of $42,000, including the price of options and additional features, which would give the initial flurry of orders an estimated retail value of $10.6 billion. The car's average selling price projected by Musk is well above the $35,000 base price. Analysts earlier had estimated the first Model 3s off the factory line in Fremont, California, could be loaded with extra equipment and sell for $50,000 to $60,000.

New Ford plant will create 2,800 new jobs -- in Mexico - CBS News: Ford says it's decision will create 2,800 new jobs by 2020 -- new jobs in Mexico. The move was immediately denounced by Donald Trump as " an absolute disgrace," and by the United Auto Workers as "very troubling."   Starting this summer, production of smaller Fords will move from the Wayne, Michigan plant to San Luis Potosi state in Mexico. At the 40-lane Wayne Bowl, manager Victoria Stone says it's a raw deal. "They're taking business away from us, they're taking business away from the city, the state of Michigan. And I was born and bred on Ford Motor Company." Veteran autoworkers in this country make about $60 an hour when all the benefits are factored in, versus about $8 an hour in Mexico -- an obvious incentive for Ford. During contract talks last year, the United Auto Workers did not fight Ford's plans to build smaller vehicles in Mexico. Instead it demanded, and won, higher wages at plants in the U.S. instead. And when the small car production moves south of the border, the plant in Michigan won't be shuttered. Analysts expect Ford will start production here on a new truck and SUV -- high-priced items in hot demand with gasoline prices low.

"It's Probably Nothing": Truck Orders Plunge 37% As Unsold Inventories Soar Most Since 2007 - When we last looked at order of heavy, or Class 8, truck one quarter ago - that all-important, forward looking barometer of domestic trade - we said that even with 2015 in the history books, and as we start 2016 where the base effect was supposed to make the annual comps far more palatable, the latest, January data, as abysmal: "the drop continues to be one of Great Recession proportions, manifesting in yet another massive 48% collapse in truck orders in the first month of the year as demand appears to have gone in a state of deep hibernation." Fast forward one quarter when we now have another three months of Class 8 truck data, and unfortunately the orderbook has gone from bad to worse. As the WSJ reports, orders for new big rigs plunged and inventories of unsold trucks soared to their highest levels since just before the financial crisis, as uncertainty about future demand and a weak market for freight transportation weighed on truck manufacturers. About 67,000 Class 8 trucks are sitting unsold on dealer lots, after sales in March dropped 37% from a year earlier to 16,000 vehicles, according to ACT Research. Class 8 trucks are the type most commonly used on long-haul routes. Inventories haven’t been this high since early 2007, said Kenny Vieth, president of ACT.

Industrial Production: Those Ugly Annual Benchmark Revisions and the Heightened Risk of Recession - Industrial Production is one of the Big Four economic indicators we report on every month, along with Nonfarm Employment, Real Retail Sales and Real Personal Income (excluding Transfer Receipts). Industrial Production has been the weakest link, by far, in the economic recovery from the Great Recession. On Friday we learned that IP is even weaker than we thought. Here is a snapshot of the annual benchmark revisions with an overlay of the pre-revision data since 2007, which gives us a sense of pre-recession trend, the contraction, and the subsequent recovery for this key metric. At this point in time, the post-recession recovery peak for this indicator occurred in November of 2014. The latest index level is 2.34% off that late 2014 peak an at a level below its pre-recession peak. We're currently about where we were in February of 2007. Here is a look at the year-over-year percent change in this indicator since 1950, updated with the latest annual benchmark revisions. We are now at a level lower that at the onset of all ten recessions over this timeframe. If we study the chart above more closely, we see that the latest YoY level is fractionally off the interim low of -2.3% set two months earlier in December. This index has never been at that -2.3% level outside the context of a recession. Here is an updated snapshot of the Big Four indicator we routinely track illustrating percent off their all-time high for the average of the four since before the last recession.

Factory Orders April 4, 2016: Factory orders fell 1.7 percent in February, more than reversing what was a strong January which, however, is revised 4 tenths lower to a gain of 1.2 percent. February weakness includes a 0.4 percent drop in non-durable orders, one that reflects weakness in petroleum and coal products, and a steep 3.0 percent decline in durable orders which are revised 2 tenths lower from the advance release of minus 2.8 percent. The February report makes for uncomfortable reading with orders for core capital goods falling 2.5 percent and pointing to continuing trouble for business investment. Other readings include a sharp 0.7 percent fall for total shipments, a 0.3 percent fall for unfilled orders, and a 0.4 percent fall for inventories though the latter is actually a positive given the decline in shipments and keeps the inventory-to-shipments ratio at 1.37. This year's fall in the dollar did nothing to visibly boost February's data though there are hints of relief in last week's giant surge for the ISM new orders index, one that points to a significant rebound in this report for March.

U.S. factory data signals further slowdown in economic growth | Reuters: New orders for U.S. factory goods fell in February and business spending on capital goods was much weaker than initially thought, the latest indications that economic growth slowed further in the first quarter. The Commerce Department said on Monday new orders for manufactured goods declined 1.7 percent as demand fell broadly, reversing January's downwardly revised 1.2 percent increase. Orders have declined in 14 of the last 19 months. They were previously reported to have increased 1.6 percent in January. The department also said orders for non-defense capital goods excluding aircraft fell by a steeper 2.5 percent in February instead of the 1.8 percent drop reported last month. These so-called core capital goods are seen as a measure of business confidence and spending plans. "This morning's report suggests a more sluggish manufacturing sector in the early part of the quarter," . The report added to weak consumer spending and trade data in suggesting economic growth moderated further at the turn of the year after slowing to a 1.4 percent annualized pace in the fourth quarter. Estimates for first-quarter gross domestic product growth are currently below a 1 percent rate.

Labor market index, Factory orders, Durable goods - : The Fed’s labor market index is showing some slack:  Highlights: Employment has been strong, especially the participation rate, but isn’t being reflected in the Federal Reserve’s labor market conditions index which came in at minus 2.1 in March vs a downwardly revised 2.5 percent decline in February. The index, experimental in nature, is a broad composite of 19 separate indicators and is rarely cited by policy makers. Another bad one, on the heels of very weak auto sales. And even though inventories are now falling, shipments and sales are falling just as fast, keeping the inventory to shipments and sales ratios at elevated levels: Factory Orders Highlights: Factory orders fell 1.7 percent in February, more than reversing what was a strong January which, however, is revised 4 tenths lower to a gain of 1.2 percent. February weakness includes a 0.4 percent drop in non-durable orders, one that reflects weakness in petroleum and coal products, and a steep 3.0 percent decline in durable orders which are revised 2 tenths lower from the advance release of minus 2.8 percent. The February report makes for uncomfortable reading with orders for core capital goods falling 2.5 percent and pointing to continuing trouble for business investment. Other readings include a sharp 0.7 percent fall for total shipments, a 0.3 percent fall for unfilled orders, and a 0.4 percent fall for inventories though the latter is actually a positive given the decline in shipments and keeps the inventory-to-shipments ratio at 1.37. New orders for manufactured durable goods in February, down three of the last four months, decreased $7.0 billion or 3.0% to $229.1 billion, down from the previously published 2.8% decrease. This followed a 4.3% January increase.

Manufacturing Recession Deepens: Factory Orders Drop To Five Year Low; 16 Consecutive Declines -- In 60 years, the US economy has not suffered a 16-month continuous YoY drop in Factory orders without being in recession. Moments ago the Department of Commerce confirmed that this is precisely what the US economy did, when factory orders not only dropped for the 16th consecutive month Y/Y, after declining 1.7% from last month.... but at $454 billion for the headline number, this was the lowest print since the summer of 2011.

February 2016 Manufacturing New Orders Declined?: US Census says manufacturing new orders declined. Our analysis says sales improved and is now in expansion. Unadjusted unfilled orders' growth remains in CONTRACTION year-over-year. Part of the reason for the poor growth is that the data is not inflation adjusted (deflation is occuring in this sector) - however, all the gains this month are wiped away as deflation lessened. Civilian and defence aircraft was the major tailwind - and most of the data was soft.. US Census Headline:

  • The seasonally adjusted manufacturing new orders is down 1.7 % month-over-month, and down 1.7 % year-to-date (last month was down 4.0 % year-to-date)..
  • Market expected (from Bloomberg) month-over-month growth of -2.1 % to -1.1 % (consensus -1.6 %) versus the reported -1.7 %.
  • Manufacturing unfilled orders down 0.3 % month-over-month, and down 1.6 % year-over-year.

Econintersect Analysis:

  • Unadjusted manufacturing new orders growth accelerated 3.6 % month-over-month, and up 0.1 % year-over-year
  • Unadjusted manufacturing new orders (but inflation adjusted) up 3.7 % year-over-year - there is deflation in this sector.
  • Unadjusted manufacturing unfilled orders growth accelerated 0.1 % month-over-month, and down 1.6 % year-over-year
  • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserve's Industrial Production Growth accelerated 0.1 % month-over-month, and up 1.2 % year-over-year.

US Manufacturing Jobs Have Rebounded...Back to Pre-WWII Levels: I read some pretty amusing articles. One in particular claiming that US manufacturing is entering or in the midst of a renaissance among rebounding employment. Link Here. Ok, I took the bait. Since the article was short on detail and long on anecdotes, I thought I'd do a little homework. Turns out during the great recession of '09-'10, manufacturing jobs fell to a low of 11.3 million and have now rebounded to 12.3 million. The present 12.3 million manufacturing jobs is the same # the US had as of July 1941 prior to the US entrance to WWII and a massive manufacturing mobilization...and the working age US population has more than doubled since pre-WWII. Manufacturing employment peaked in 1979 at 19.6 million and has generally been falling since. Or if we look at manufacturing employment as a ratio of the 25-54yr/old core population, we see the ratio has been falling since 1970, bottomed in 2010 and has ever so slightly improved since (partly thanks to more manufacturing jobs and equal part shrinking 25-54yr/old US population).Anyway, I guess "renaissance" is in the eye of the one man's renaissance is another's depression.  Just depends if you prefer story telling or punching a few keys to come up with hard data.

PMI Services Index April 5, 2016: The bulk of the nation's economy expanded but only modestly in March based on Markit Economics' service-sector sample where the PMI came in at a plus-50 level of 51.3 which is up 3 tenths from the March flash and up 1.6 points from February. But the improvement does not include new orders where growth, in an ominous indication for overall activity in the coming months, is at its lowest point in the 6-1/2 year history of the report. Backlog orders are also down. The weakness in orders contributed to a fall in business confidence to another record low. A positive is employment growth, at least for now. Price data are subdued with inputs flat and selling prices up only marginally. The order readings in this report point to increasing slowing for the economy's main engine, services. Up ahead is the ISM non-manufacturing report.

ISM Non-Manufacturing Index increased to 54.5% in March -- The March ISM Non-manufacturing index was at 54.5%, up from 53.4% in February. The employment index increased in March to 50.3%, up from 49.7% in February. Note: Above 50 indicates expansion, below 50 contraction. From the Institute for Supply Management:March 2016 Non-Manufacturing ISM Report On Business®. "The NMI® registered 54.5 percent in March, 1.1 percentage points higher than the February reading of 53.4 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 59.8 percent, 2 percentage points higher than the February reading of 57.8 percent, reflecting growth for the 80th consecutive month, with a faster rate in March. The New Orders Index registered 56.7 percent, 1.2 percentage points higher than the reading of 55.5 percent in February. The Employment Index increased 0.6 percentage point to 50.3 percent from the February reading of 49.7 percent and indicates growth after a month of contraction. The Prices Index increased 3.6 percentage points from the February reading of 45.5 percent to 49.1 percent, indicating prices decreased in March for the fifth time in the last seven months. According to the NMI®, 12 non-manufacturing industries reported growth in March. The majority of respondents’ comments indicate that business conditions are mostly positive and that the economy is stable and will continue on a course of slow, steady growth." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This was above the consensus forecast of 54.0, and suggests faster expansion in March than in February.

March 2016 ISM Services Index Stronger: The ISM non-manufacturing (aka ISM Services) index continues its growth cycle, and improved insignificantly from 53.4 to 54.5 (above 50 signals expansion). Important internals likewise improved, and remain in expansion. Market PMI Services Index was released this morning, and is now in expansion.. This was below expectations (from Bloomberg) of 52.9 to 55.2 (consensus 54.0). For comparison, the Market PMI Services Index was released this morning also - and it improved into expansion. Here is the analysis from Bloomberg: The bulk of the nation's economy expanded but only modestly in March based on Markit Economics' service-sector sample where the PMI came in at a plus-50 level of 51.3 which is up 3 tenths from the March flash and up 1.6 points from February. But the improvement does not include new orders where growth, in an ominous indication for overall activity in the coming months, is at its lowest point in the 6-1/2 year history of the report. Backlog orders are also down. The weakness in orders contributed to a fall in business confidence to another record low. A positive is employment growth, at least for now. Price data are subdued with inputs flat and selling prices up only marginally. The order readings in this report point to increasing slowing for the economy's main engine, services. Up ahead is the ISM non-manufacturing report. There are two sub-indexes in the NMI which have good correlations to the economy - the Business Activity Index and the New Orders Index - both have good track records in spotting an incipient recession - both remaining in territories associated with expansion.

Markit, ISM Paint Conflicting Pictures Of US Service Economy; Market Focuses On The More Bullish One -- First, it was Markit, which printed at the just barely expansionary Final March print 51.3, up from the preliminary 51.0, but the internals continued to deteriorate. As the chart below shows, and as the commentary confirms, the US service sector is barely hanging on by a thread. Some of the highlights:

  • Service sector output rises in March, following slight decline in previous month
  • New work expands at slowest rate seen in six-and-a-half year survey history
  • Optimism about the business outlook also dips to a post-crisis low

The details: U.S. service providers signalled a modest rebound in business activity and robust employment growth during March. However, incoming new business expanded at the slowest pace since the survey began in October 2009, which also contributed to a fall in business confidence to a survey-record low. Meanwhile, input cost inflation remained subdued in March and prices changed by service sector companies increased at only a marginal pace. The seasonally adjusted final Markit U.S. Services Business Activity Index registered 51.3 in March, up from 49.7 in February and back above the crucial 50.0 no-change value. Nonetheless, the latest reading was still the second-lowest since October 2013 and pointed to only a marginal upturn in service sector output. Moreover, the average for the first quarter of 2016 (51.4) signalled the weakest expansion of business activity since Q3 2012.The average index reading in Q1 2016 (51.5) was the weakest seen for any quarter since Q3 2012 (51.3). And then, as is customary, the traditionally more bullish ISM reported that in March, the non-mfg ISM rebounded from 53.4 to 54.5, modestly beating expectations of 54.2. The all important New Orders series rose from 55.5 to 56.7, which makes it the highest print since December of 2015. Other components likewise rose, with Business Activity rising +2 to 59.8; the Employment Index refuted the trend spotted by Markit, and also rose from a contractionary 49.7 to 50.3, while Prices Paid jumped from 45.5 to 49.1.  The full breakdown:

Weekly Initial Unemployment Claims decrease to 267,000 -- The DOL reported: In the week ending April 2, the advance figure for seasonally adjusted initial claims was 267,000, a decrease of 9,000 from the previous week's unrevised level of 276,000. The 4-week moving average was 266,750, an increase of 3,500 from the previous week's unrevised average of 263,250.  There were no special factors impacting this week's initial claims. This marks 57 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.

The New Magic Number for Monthly Job Growth: 145,000 - The U.S. economy needs to add 145,000 jobs per month just to hold the unemployment rate steady and absorb the flow of new workers into the labor force, according to estimates in the latest Wall Street Journal survey of economists. That makes 145,000 jobs per month the break-even pace of job growth. If the economy is consistently adding more than 145,000 jobs per month, then the unemployment rate should continue to drift down. If it falls below that 145,000 pace, however, the rate of unemployment will start to climb.While estimates vary somewhat, a plurality of economists think the magic number is between 140,000 and 159,000. As it happens, a pace of about 145,000 jobs per month is both the average and the median estimate.  . First, one must account for population growth. New jobs must be created to account for the growing population of people who graduate high school or college each year and enter the labor force. Second, one must account for the retirements of the Baby Boomers — the generation of people born in the years after World War II who are now reaching retirement age. That’s one reason some economists have low estimates for the pace of new jobs each month — essentially a large number of retirements will free up jobs for other workers. Then they must also account for the number of workers without jobs, but who might be expected to return to the labor force in the future — that could include people who have left the market to raise children or go to college, or those who have been discouraged by the weak economy in recent years. Put that all together and the best guess is you’re talking about 145,000 jobs per month.

The Conference Board Employment Trends Index (ETI) Declined in March --- The Conference Board Employment Trends Index (ETI) declined in March, after decreasing slightly in February. The index now stands at 127.48, down from 128.54 in February. The change represents a 1.1 percent gain in the ETI compared to a year ago. “The Employment Trends Index has been showing signs of weakening in recent months, suggesting that employment growth is likely to slow through the summer,” said Gad Levanon, Chief Economist, North America, at The Conference Board. “With GDP barely growing at a two percent rate, it’s difficult to see how employment can continue to expand by 200,000 or more jobs per month.” March’s decrease in the ETI was driven by negative contributions from four of the eight components. In order from the largest negative contributor to the smallest, these were: the Percentage of Respondents Who Say They Find “Jobs Hard to Get,” Percentage of Firms With Positions Not Able to Fill Right Now, Ratio of Involuntarily Part-time to All Part-time Workers, and Initial Claims for Unemployment Insurance. The Employment Trends Index aggregates eight labor-market indicators, each of which has proven accurate in its own area. Aggregating individual indicators into a composite index filters out “noise” to show underlying trends more clearly.

Which Wage Growth Measure Best Indicates Labor Market Slack? -  Atlanta Fed's macroblog - The unemployment rate is close to what most economists think is the level consistent with full employment over the longer run. According to the Federal Open Market Committee's latest Summary of Economic Projections, the unemployment rate is currently only 15 basis points above the natural rate. Yet, average hourly earnings (AHE) for production and nonsupervisory workers in the private sector increased a paltry 2.3 percent in March from a year earlier (as did the AHE of all private workers), and is barely above its average course of 2.1 percent since 2009.  In contrast, the Atlanta Fed's Wage Growth Tracker (WGT) suggests that wage growth has been increasing. The February WGT reading was 3.2 percent (the March data will be available later in April), considerably higher than its post-2009 average of 2.3 percent.  Why is there such a large difference between these measures of wage growth? Besides differences in data sources, the primary reason is that they measure fundamentally different things. The WGT is an estimate of the wage growth of continuously employed workers—the same worker's wage is measured in the current month and a year earlier. In contrast, the AHE measure is an estimate of the change in the typical wage of everyone employed this month relative to everyone employed a year earlier. Most of these workers are continuously employed, but some of those employed in the current month were not employed the prior year, and vice versa. These changes in the composition of employment can have a significant effect.

Two US Labor Market Indexes Predict Slower Employment Growth - Job growth in March posted a solid gain, inspiring a new round of upbeat comments on the outlook for US payrolls and the economy generally. But newly minted numbers for two multi-factor measures of the labor market hint at a weakening trend. In contrast with the upbeat message in the latest data for payrolls, broadly defined benchmarks of the labor market published yesterday by the Federal Reserve and the Conference Board (CB) reveal a worrisome round of deceleration unfolding in the first quarter. The conflicting signals raise a question: Is the US labor market weaker than the nonfarm employment numbers imply? Let’s take a closer look at the data for some insight, starting with the CB’s Employment Trends Index (ETI). This eight-factor benchmark (blue line in chart below) ticked down last month, touching its lowest level since last spring. ETI is still higher on a year-over-year basis, but by a thin 1.1%.“The Employment Trends Index has been showing signs of weakening in recent months, suggesting that employment growth is likely to slow through the summer,” said Gad Levanon, Chief Economist, North America, at The Conference Board. “With GDP barely growing at a two percent rate, it’s difficult to see how employment can continue to expand by 200,000 or more jobs per month.”In fact, a 2% rise in GDP constitutes wishful thinking at this point in the dark art of looking ahead to the “advance” first-quarter GDP report that’s scheduled for release at the end of this month. The Atlanta Fed’s GDPNow model as of Apr. 1 is projecting a weak 0.7% growth rate (seasonally adjusted annual rate) in Q1—down from the already sluggish 1.4% gain in last year’s Q4 GDP. The Federal Reserve’s Labor Market Conditions Index (LMCI) inched up slightly in March, but continues to print at negative values. In fact, this 19-factor index has been below zero for three straight months–the longest stretch of red ink for LMCI since the last recession.

Gallup U.S. Job Creation Index April 6, 2016: The March job creation index climbed to plus 32, matching the highest level of its eight-year history. The increase from February's plus 29 reading is the first upward movement since May of last year, when the index first reached the plus 32 level. The March job creation index for government workers was plus 27, an increase of two points from February's plus 25 and seven points from plus 20 a year ago. The nongovernment workers' index for March increased three points to plus 33. Job creation indexes for all four major regions -- East, Midwest, South and West -- showed gains in March. The East, which has trailed the other three regions for most of the past three years, climbed closer to them with a four-point gain, from plus 26 to plus 30 in March. The other three regions each gained two points: the South, from plus 29 to plus 31; the Midwest, from plus 30 to plus 32; and the West, from plus 32 to plus 34.

Americans’ Hiring Rose in February to the Highest Since Before the Recession - More Americans were hired to start a new job in February than in any month since before the recession that began in 2007—about 5.4 million people. The data comes from the Labor Department’s Job Openings and Labor Turnover Survey, or Jolts, which tracks underlying churn in the U.S. labor market, the millions of people who quit one job or start a new one each month. Tuesday’s report also showed an increase in the number of people who voluntarily quit a job in February, which rose to about three million from 2.9 million. Labor economists generally regard the overall rate of quitting as a sign of the labor market’s health. When the economy is thriving, more people have the opportunity or the confidence to search for a better job.  Still, the rate of hiring and quitting has yet to fully regain the vigor of the mid-2000s. It remains even further below its rate prior to the 2001 recession, when the labor market was at its strongest in recent decades. The number of job openings was unchanged in February.The total number of jobs in the U.S. economy was previously reported in the Labor Department’s monthly jobs report. That report, released last week, showed that the economy added a net total of 245,000 jobs in February and 215,000 jobs in March.Today’s report also shows a continued low rate of layoffs. Layoffs skyrocketed during the recession, but have declined in recent years. The layoff rate in February was 1.2% of workers, close to the record low of 1.1%. Unlike during the recession, the majority of workers who leave a job today do so of their own accord.

BLS: Jobs Openings "little changed" in February -- From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 5.4 million on the last business day of February, the U.S. Bureau of Labor Statistics reported today. Hires increased to 5.4 million while separations were little changed at 5.1 million. Within separations, the quits rate was 2.1 percent, and the layoffs and discharges rate was 1.2 percent. ... The number of quits was little changed in February at 3.0 million. The quits rate was 2.1 percent. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  This series started in December 2000. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for February, the most recent employment report was for March. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings decreased in February to 5.445 million from 5.604 million in January.  The number of job openings (yellow) are up 6% year-over-year compared to February 2015. Quits are up 9% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

February 2016 JOLTS Job Openings Year-over-Year Growth Rate Declined: The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings declined from last month. The growth rate trends marginally decelerated in the 3 month averages. There was no market expectations published by Bloomberg this month. The number of unadjusted PRIVATE jobs openings - which is the most predictive of future employment growth of the JOLTS elements - shows the year-over-year growth marginally decelerated. The year-over-year growth of the unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) also decelerated. The graph below looks at the year-over-year rate of growth for job opening levels and rate. The relevance of JOLTS to future employment is obvious from the graphic below which shows JOLTS Job Openings leading or coincident to private non-farm employment. JOLTS job openings are a good predictor of jobs growth turning points.The graph below uses year-over year growth comparisons of non-seasonally adjusted non-farm private BLS data versus JOLTS Job Openings - and then compare trend lines.

JOLTS, Labor Market Conditions Index give different clues to job growth -- After a blizzard of data last Friday, this week is pretty desolate.  But we do have two follow-up reports on the labor market: the Labor Market Conditions Index, and the JOLTS report.  Let's start with the LMCI.  As I have previously noted, the LMCI shows promise as a long leading indicator, as 40 years worth of data shows it turning negative usually a year or more before the onset of a recession: As you can see, it also does a good job forecasting the YoY direction of job growth. This month's report was the third in a row that was negative.  This is another small addition to the evidence that 2017 might be a poor year.  It also suggests that monthly job gains, currently averaging just under 225,000, will continue to decelerate.  Now let's turn to the JOLTS report.  While it is an extremely useful dissection of the labor market,  it has only existed for 15 years, and thus includes only one full expansion.  Comparing this month's report with those of a few months ago shows why trends in the report must be taken with many grains of salt.  For the last year I was unimpressed with the report.  True, job openings (blue in the graph below) were soaring to new heights, but actual hires (red) stalled -- the same pattern as in 2005-06. late in the last cycle.  Two months ago openings decreased significantly - something which happened just before the 2007 recession started.  Here is the complete series, including yesterday's report for February:  The pattern from the last expansion was: first, hires peak. Then, openings peak. Here is a YoY look at the same data: Openings had been rising faster than hires, which are have been barely positive. Until two months ago, when hires soared to a new all-time high, as shown in the first graph above at far right. Since then, the upward trend in hires has remained. Some more good news was contained in the quits rate, which also continued in an uptrend, if not quite at their record of two months ago (red in the graph below):

We need to keep translating job openings into hires to reach full employment -- According to this morning’s Job Openings and Labor Turnover Survey from the Bureau of Labor Statistics, the job-seekers to job-openings ratio held steady at 1.4 in February 2015, meaning there are still 14 job seekers for every 10 job openings in the economy. While there have been great improvements in the job-seekers ratio in the past several years, we are still far from a full employment economy. The job-seekers ratio also fails to reflect the missing workers in the economy today—in other words, those who are not actively seeking a job (in the last four weeks), but would likely start looking if the economy was stronger and they saw better opportunities for themselves in it.There is still a substantial gap between the number of job openings and the number of unemployed people, illustrating just how far we are from full employment. As shown in the figure below, this gap is far larger today than it would be in a tight labor market.

Philly Fed: State Coincident Indexes increased in 43 states in January -- From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for January 2016. In the past month, the indexes increased in 43 states, decreased in five, and remained stable in two, for a one-month diffusion index of 76. Over the past three months, the indexes increased in 44 states, decreased in five, and remained stable in one, for a three-month diffusion index of 78.  Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

GLUT: The U.S. Economy and the American Worker in the Age of Oversupply - Third Way: The aftermath of the Great Recession has posed serious challenges for policy makers especially in the area of job creation, income growth, and income polarization. While the number of jobs has rebounded, the quality of jobs has not–leading to a great deal of anxiety about the future of the middle class in the face of prolonged income stagnation. When it comes to ways out of the current dilemma, conventional economics have been tested and found wanting. Into this quandary comes valuable work by Daniel Alpert, who argues that the reason conventional economics offers such poor alternatives to policy makers is that insufficient attention has been paid to what he refers to as “oversupply” in the labor market. “The suddenness and extent of the integration of over 3 billion people into a global capitalist market, that really only hitherto consisted of about 800 million in the advanced economies, produced not only the imbalances and glut conditions that have been written about extensively since the Great Recession, but have echoed in the many crises since then.” Oversupply, he argues, is a global phenomenon that triggers a host of other economic ills, from “… declining productivity and falling labor force participation, inflation in real estate and stock markets, the value of the U.S. dollar, and even stock buybacks, swollen executive compensation, and increasing income and wealth polarization since the recession, to say nothing of the global financial crisis itself. “

Low-Skilled Immigrants Are Good for the Working Class - Noah Smith - Usually, when I talk about immigration, it’s the high-skilled variety I’m referring to -- people with college degrees or professional skills. When most Americans think about immigrants, however, they focus on the manual laborers -- many of them without documentation -- who come to the U.S. from Latin America to build houses, landscape lawns or pick vegetables instead of starting the next Google. This kind of immigration is somewhat out of favor, since these folks compete with low-skilled locals for manual labor jobs. Even though the effect of the competition is small, it isn't zero, and in the current political climate everyone wants to do everything they can to protect the working class. But this opposition is probably misplaced. New research shows that low-skilled immigrants may do a lot more for the native-born working class than we thought. The new evidence comes via new research by economists Mette Foged and Giovanni Peri. Their paper studies the impact of refugees in Denmark in the 1990s and 2000s. During that time, Denmark had a program of scattering refugees throughout the country, called the spatial dispersal policy. The refugees, many of them fleeing the Yugoslavian wars, were mostly uneducated and spoke little Danish. By comparing the areas where the government decided to send refugees with other areas, Foged and Peri were able to see what happened to natives when a large number of low-skilled immigrants got plunked down next door. Instead of a small negative effect on the local native-born -- as most studies in the U.S. tend to find -- Foged and Peri found a positive effect. That’s right -- low-skilled immigrants actually raised the wages of their less-educated native-born counterparts in the surrounding area. The data followed the native-born workers for a long time, letting the authors confirm that the change was durable.

California and New York’s bold $15 minimum wage proposals are exactly what we need | Economic Policy Institute: The plans to raise the minimum wage to $15 in California and New York are ambitious and welcome at a time when the eroding value of the federal minimum wage means more and more working families can afford less and less. California’s minimum wage would reach $15 in 2023 for all employees and in 2022 for those in firms with more than twenty-five employees. New York’s plan would raise the minimum wage to $15 by 2018 in New York City and by 2022 in the City’s suburbs and on Long Island. The minimum wage upstate would rise to at least $12.50, with the possibility of then going higher. These increases are significantly larger in scope than what has been typical of recent federal and state minimum wage hikes. Furthermore, both proposals would raise the wage floor to levels relative to the wages of typical workers that have not been the norm for at least three decades. The fact that these proposals are outside the bounds of recent experience does not automatically make them ill-conceived. Moving beyond the timidity of most recent minimum wage hikes is exactly what is needed if we are to undo decades of falling wages and deteriorating living standards for the lowest-paid third of America’s workforce. The Berkeley Labor Center estimates that 5.6 million workers—or the entire bottom third of the California workforce—would benefit from the California increase (excluding those already helped by various city initiatives). EPI’s analysis estimates that 3.2 million workers, or 37 percent of the New York workforce, would benefited from a statewide increase to $15, although the number affected by the current proposal would be less, given the smaller wage hike in the upstate region.

Skeptics Said $15 Minimum Wage Movement Was Unrealistic — 60 Million People Are Now Slated to Get It -- THE PUNDITS said it would never happen.  The Atlantic’s Derek Thompson wrote an article in 2013 titled “Why the Fast-Food Worker Strikes Are Doomed,” warning that “there are more people willing to do these jobs than there are people willing to strike...” Danny Vinik, today an assistant editor at Politico, said the strikes were “mistimed,” and cautioned that “we still have an unemployment problem and that means there are replacement workers available to firms. Fast-food workers have no leverage right now.” “The $15 goal is ambitious, and probably unrealistic in the current job climate,” the Christian Science Monitor’s Mark Trumbull concluded.  Brookings Institution economist Gary Burtless told Fox Business that the minimum wage wouldn’t rise to $15 unless we saw large inflation. But both California and New York on Monday implemented legislation that moves them toward a tiered minimum wage of $15 an hour, covering 60 million Americans. The hikes come as a direct result of organizing by thousands of people in the union-backed “Fight for 15” movement that kicked off in 2012 — organizing that was quickly decried by pundits and opponents as unrealistic and unlikely to ever succeed. The Fight for 15 movement began when several hundred fast-food workers in New York City went on a brief strike to call for higher wages; by the next year, this movement had spread to dozens of cities,, with workers going on miniature strikes and protest marches to call for a $15 an hour wage. This innovative tactic — organizing workers with no union representation to go on flash strikes to call attention to their meager wages — raised eyebrows among many in the pundit class who attempted to downplay its power.

How the $15 Minimum Wage Went From Laughable to Viable - BACK in November 2012, when Alterique Hall, an $8-an-hour McDonald’s cashier in New York, joined 200 fast-food workers in the first one-day strike for the Fight for $15 campaign, many scoffed at their demand for $15 an hour as pie in the sky. Frustrated with his meager pay, Mr. Hall said, “It’s time for a change.”Three and a half years later, that change is starting to arrive. Last Monday, Gov. Jerry Brown of California announced a deal with state lawmakers to raise California’s minimum wage to $15 an hour by 2022 — a move expected to lift pay for five million workers. And late Thursday Gov. Andrew M. Cuomo of New York reached a deal with legislative leaders to adopt a $15 minimum wage in New York City in 2018 and in its suburbs in 2021, with a $12.50 minimum in upstate New York.“Once California and New York go, it is likely that more states will follow,” said Paul K. Sonn, general counsel of the National Employment Law Project, an advocacy group for low-wage workers.In New Jersey, Democratic lawmakers have warned Gov. Chris Christie that if he vetoes a $15 statewide minimum, they will ask voters to approve a constitutional amendment that sets a $15 floor. And in Washington, D.C., Mayor Muriel Bowser has announced plans to push the City Council to embrace the idea. The Legislatures in Connecticut and Massachusetts are also weighing $15.

It’s Been 25 Years Since Restaurant Workers Got a Raise - "Whenever you feel like it's probably fine to not tip your server, that's one more bill stacking up because they're short on money. This is food for the week that our families will go without because you didn't think it was necessary, even after asking for everything under the sun and receiving it free of charge, mind you. This is one less basic necessity my daughter needs because even TWO more dollars is too much for you." These words from a young, Colorado waitress named Taylar Cordova -- accompanied by an image of a zero-tip check for a meal totaling $182 -- set the internet ablaze this week, receiving thousands of likes, shares, and comments on Facebook and sparking impassioned think pieces about the plight of our nation's 11 million restaurant workers. And it couldn't have been timelier. Thanks to the efforts of industry groups like the National Restaurant Association -- or "the other NRA," as I like to call them -- which has stymied efforts to raise wages for restaurant workers, April 1 marked the 25th year the federal tipped minimum wage has been frozen at an abysmal $2.13 per hour. And when you're paid $2.13 per hour by your employer, or even $5.29 as it is in Colorado, you are completely reliant on tips to pay your bills. Happy anniversary, everybody!

A huge 'lifetime wage gap' still exists between men and women, especially women of color -- A new state-level analysis of lifetime median earnings by the National Women’s Law Center has found a big gap between men and women. And an even larger gap between white men and women of color.  The NWLC based its “lifetime wage gap” on data showing the difference between women’s and men’s median annual earnings for full-time, year-round workers, multiplied by 40 years. The results were not adjusted for inflation. Nationwide, the analysis shows: Women would lose $430,480 over the course of a 40-year career. For Latinas the career losses mount to $1,007,080, and for African American women the losses are $877,480. [...]Compared to the earnings of white, non-Hispanic men, the lifetime wage gap would amount to more than $1 million for Asian American women in one state, for African American women in six states, for Native American women in 13 states, and for Latinas in 23 states. The differences among the states and District of Columbia, which NWLC treated as a state, are large. In D.C., for instance, the “lifetime wage gap losses” for all women compared to white, non-Hispanic men amounts to $289,000. But the differences by race and ethnicity are stark: Latinas’ losses come in at $1.8 million, African American women’s at $1.6 million, American Indian women’s at $1.1 million, and Asian American women’s at $908,000. In California, for Latinas the “lifetime wage gap losses” are $1.6 million, for African American women $1.0 million, for American Indian women $1.4 million, and for Asian American women $791,000.

The Nation’s Capital Has the Largest Lifetime Pay Gap Between White Men and Women of Color - Earnings-wise, it’s good to be a white man in the nation’s capital. And not so good to be a woman of color. Washington, D.C., has the largest pay gap in the country between the median earnings of white, non-Hispanic men and those of Latina and African-American women, according to a new state-level analysis by the National Women’s Law Center (which treats D.C. as a state). Over the course of a lifetime, that earnings gap adds up to well over a million dollars: Latinas’ “lifetime wage gap losses” total $1.8 million over a 40-year career in the District. African-American women will lose out on $1.6 million. Without taking race into account, the gender pay gap is roughly one-sixth as large: Women in Washington, D.C., earn $289,000 less over a lifetime than men. Emily Martin, NWLC’s vice president for workplace justice, called the wage gap for women of color “just staggering.” “[The finding] really makes clear that we need to take this seriously as a policy matter, and that there’s a lot more work to do,” she said. Nationally, women make $430,480 less than men over a 40-year career, the analysis found, based on median annual earnings for all full-time, year-round workers. Tallying up the cumulative difference highlights just how much is at stake for families, which increasingly rely on women’s earnings as the share of male-breadwinner families shrinks.

As states’ work mandates kick in, tens of thousands of people lose food stamps -- As many as 1 million Americans will stop receiving food stamps this year, the consequence of a controversial work mandate that took effect this week in 21 states as the economy improves. The revival of the mandate, which was hotly debated when adopted in the 1990s, is reigniting a discussion among policymakers and advocates for the poor about the fairness and wisdom of the social safety net in the new U.S. economy. The requirement, which generally stipulates that participants in the Supplemental Nutrition Assistance Program (SNAP) who do not have children or a disability must find a job within three months of receiving the benefit and work an average of 20 hours a week, was suspended in most states following the mortgage crisis amid widespread unemployment. Now, as jobs have returned, the work mandate was automatically reinstated in many states at the beginning of this year, and the three-month allowance for finding a job ended April 1. Even where unemployment remains relatively high, some governors have brought back the requirement, saying it encourages people to rejoin the workforce.

AEI Pushes Government Propaganda Telling Women to Marry Schlubs - William K. Black -- I wrote a two-part column on the joint report by AEI and Brookings on poverty reduction.  Part two of my column focused on the policy that report pushed most prominently – a government program of propaganda urging pregnant women to marry.  My first article, however, criticized Eduardo Porter’s February 2, 2016 column in the New York Times for ballyhooing the supposed wondrous nature of Brookings and AEI working together.  Porter portrayed them as “leading thinkers on opposite sides of the ideological divide.”  I pointed out that a majority of the group had hard-right views and that the group had an exceptionally weak member pushing a single idea – marriage propaganda.  I also pointed out that Brookings had, for decades, played the same very junior partner role of giving AEI cover for “joint” proposals with Brookings to cripple financial regulation. Porter’s original column did not stress the wonders of AEI and Brookings agreeing to push for government marriage propaganda, but it does indicate in three separate passages that he was aware of that AEI proposal. [...] Porter’s tone was clearly supportive of AEI’s push for governmental marriage propaganda directed at pregnant women. I write today in fairness to Porter, for his March 22, 2016 column returned to, focused on, rigorously critiqued, and strongly opposed the marriage propaganda proposal.  I discuss only one of his conclusions because it anticipates the hostile response from two members of AEI and Brookings group favoring a government program of marriage propaganda.  I know that these quotations from Porter’s second column make multiple points, but I will show that they add up to one decisive analytical failure by the propaganda proponents.

Steve Wynn "Nobody Likes Being Around Poor People, Especially Poor People" -  Steve Wynn is no stranger to controversy nor is his dislike of president Obama a secret. Back in the summer of 2011, when discussing Obama, he said  "the guy keeps making speeches about redistribution, and maybe's ought to do something to businesses that don't invest, they're holding too much money.  You know, we haven't heard that kind of money except from pure socialists." Then a few months later, he engaged in another major anti-Obama rant: "I am watching my employees standard of living drop off because of deficits. I think that the American public is beginning to make the connection between deficits and their own loss of the standard... I say right now that the Democratic agenda of spend and bribe the public has bankrupt this country, and until it stops, the citizens of this country are in for more hard times. And fancy speeches aren't going to change that. Only a fundamental realization that citizens are going to have to take real, sophisticated responsibility for how we allocate the resources of this country." Last September he again made waves when he became one of the first high profile personalities to endorse Donald Trump.Then, overnight, during a presentation to Wynn Resorts investors, Wynn tossed out another bombshell which, while taken out of context, will further inflame the already class tension within the US. This is what he said: "rich people only like being around rich people, nobody likes being around poor people, especially poor people." Whether or not what he said is true is secondary because as Robert Frank correctly points out, "this line is sure to go viral as the latest tone-deaf gaffe by a billionaire, akin to the 2014 remarks made by technology venture capitalist Tom Perkins saying that rich people were being persecuted and should get more votes."

Illinois marked 14th straight budget deficit in FY 2015: audit | Reuters: Illinois' overall financial condition deteriorated in fiscal 2015 as tax collections fell, with the state recording its fourteenth straight budget deficit, according to an annual audit released on Tuesday. The nation's fifth-largest state ended fiscal 2015 on June 30 with a general fund deficit that grew to $6.9 billion from $6.7 billion in fiscal 2014, the comprehensive annual financial report by Illinois Auditor General Frank Mautino showed. A temporary income tax hike enacted in 2011 partially expired midway through fiscal 2015, decreasing collections by $1.8 billion. "The state continues to show an inability to generate sufficient cash from its current revenue structure to pay operating expenditures on a timely basis," the audit said. It also warned that budget deficits, along with growing unfunded liabilities for pensions and retiree healthcare, and credit rating downgrades "may impact the state’s ability to access credit markets to pay operational expenditures more timely and may increase interest costs of those borrowings." Illinois, which already pays a big penalty in the U.S. municipal bond market, has the worst-funded pensions and the lowest credit ratings among the 50 states. The state is in its 10th month without a full fiscal 2016 budget due to an impasse between its Republican governor and Democrats who control the legislature.

How Much Should State Legislators Get Paid?  - Earlier this year, a Republican state lawmaker in New Mexico proposed a constitutional amendment that would give his colleagues (and himself) something most workers take for granted: a paycheck. Since 1912, when New Mexico entered the union as a sparsely populated frontier settlement, its state legislators have worked without a salary, although lawmakers receive a per diem that amounts to approximately $7,000 for up to two months of work per year. Today, it’s the only state with an unsalaried legislature. In an op-ed published in January, the amendment’s sponsor, Terry McMillan, argued that a volunteer legislature has its limits. We tend to prefer a professional fire department to a squad of volunteers, he said — why don’t we feel the same about the people in our government? The amendment, which would have raised New Mexico legislators’ salaries to match the state’s median household income, around $45,000, died quietly when the session ended in February. But arguments like McMillan’s raise a tricky question for American taxpayers: How much are our lawmakers really worth? . “It has been a chronic issue where lawmakers generally ask for more pay and the public is almost always resistant.” When they ask for more money, lawmakers like McMillan try to make the case to voters that they deserve a pay raise because of the time and knowledge required to do their jobs well. It’s a hard sell, because highercompensated legislatures such as those in Illinois, Pennsylvania and New York, where lawmakers are paid well above the state’s median income, routinely face accusations of incompetence or corruption. According to Squire and other political scientists, higher pay isn’t a magic bullet for better governance — but there’s evidence that when it comes to state legislatures, we get what we pay for.

Puerto Rico’s Senate Declares Debt Moratorium - Puerto Rico took steps on Tuesday toward a unilateral moratorium on all government debt payments, rejecting efforts in Washington to allow it to restructure only under close federal supervision.The Puerto Rican Senate authorized a declaration of emergency and a debt moratorium at around 3 a.m., after hours of debate. The island’s House of Representatives was debating such a measure late Tuesday but had not yet voted. Any bill would need to be signed by the governor, Alejandro García Padilla.The sudden moves seemed likely to complicate efforts in Washington to enact a rescue package for Puerto Rico. The House Natural Resources Committee, which has been drafting the rescue in consultation with Democrats in Congress and the Treasury Department, said it still planned to issue an updated version on Wednesday, despite Puerto Rico’s action.The rescue involves sensitive constitutional issues, and the drafters have been trying to strike a balance between Democratic and Republican Party priorities. So far, the lawmakers in Congress have called for sending a federal oversight board to Puerto Rico, auditing all major branches of government there, promoting fiscal reforms and eventually providing certain restructuring tools that are normally available only in bankruptcy.

Hedge funds sue to freeze Puerto Rico bank’s assets - A group of hedge funds asked a federal court in San Juan on Monday to freeze the assets of Puerto Rico’s powerful Government Development Bank, claiming it was insolvent and appeared to be spending what cash it had left to prop up other parts of the island’s troubled government. The bank had failed to provide financial information that creditors were entitled to under federal law, the hedge funds said in a lawsuit. They asked the US District Court in San Juan to bar further cash transfers by the bank, other than those essential to the safety and well-being of the island’s residents. Advertisement “Once GDB spends its last remaining funds — and it is only a matter of time — many essential services in Puerto Rico may come to a halt,” the hedge funds said in their complaint. By then, they said, there would be nothing left for the bank’s creditors, who “will suffer substantial losses.” The bank plays a critical role in Puerto Rico’s financial affairs, and if it stumbles, the effects would be widely felt. The Government Development Bank has a debt payment of about $422 million due May 1, and credit analysts doubt it has enough cash to make it.

As Water Infrastructure Crumbles, Cities Like Woodbury, N.J., Seek Private Help -  New Jersey has designated Woodbury’s water system as “emergent” because it can’t meet the need for water at peak demand times. So this town of 10,000 across the Delaware River from Philadelphia is considering selling its water system to a private company. Woodbury isn’t alone. More than 2,000 municipalities have entered public-private partnerships for all or part of their water supply systems, according to the National Association of Water Companies, which represents private water companies like Veolia North America and American Water. Partner municipalities include San Antonio; Akron, Ohio; and Washington, D.C. Miami-Dade County is considering partnerships for three water facilities, including one built in 1924. And Wichita, Kan., is starting to study the issue. The water crisis in Flint, Mich., where old pipes leached out lead into water supplies, has raised new worries that cities aren’t keeping up with maintenance and improvements. Maintaining, operating, replacing and upgrading the nation’s water infrastructure could cost $2.8 trillion to $4.8 trillion through 2028, according to the U.S. Conference of Mayors. The American Water Works Association estimates that replacing and expanding water pipes alone would cost $1 trillion through 2035. And the American Society of Civil Engineers gives U.S. water infrastructure a D grade.

A Man Is Facing Life in Prison After Allegedly Stealing Candy Bars -- In the dystopian criminal justice netherworld that is New Orleans, stealing candy is no laughing matter.After "career shoplifter" Jacobia Grimes was arrested in December for allegedly pocketing $31 worth of candy at a local store, the district attorney boosted the low-level theft to a full fledged felony charge that could put him behind bars for 20 years to life, the New Orleans Advocate reports.Because of Grimes's previous crimes, he's considered a "quad offender" and Orleans Parish DA Leon Cannizzaro was able to charge him with the felony under the state's habitual offenders law, intended for people who have committed theft at least two times before. (Grimes has been convicted five times of theft, though each case centered on items valued at under $500.)When Grimes appeared in court on Thursday to plead not guilty, even the judge was stunned."Isn't this a little over the top?" asked Criminal District Court Judge Franz Zibilich. He later added, "It's not even funny. Twenty years to life for a Snickers bar, or two or three or four."Louisiana has long been known for having some of the harshest sentencing laws in America. The state has also been coping with a budget crisis in the public defender system that leaves some accused people without counsel.

Chicago Disintegrates - Gun Shootings Soar An Unprecedented 89%: "It's The Struggling Economy" | Zero Hedge: According to a CNN report, gun violence in the windy city is on track to post its worst year in the 21st century, the result of an unprecedented surge in gun deaths in the first three months of the year. By March 31, 141 people had been killed, according to the Chicago Police Department. On Thursday, eight were shot and two of them died in one hour alone, Chicago Police said. The 141 deaths in the first three months of the year mark a 71.9% jump from the same period in 2015, when 82 people were killed. It's the worst start to a year since 1999, when 136 people died in the first three months the year, according to the Chicago Tribune. At that pace - an average of three killings every two days - Chicago would have 564 homicides by the end of the year. That would eclipse the 468 killings recorded in 2015 and 416 in 2014.

The US Is One of the Top Executioners in the World - The global death penalty rate is skyrocketing. According to the latest tallies, published today by Amnesty International, at least 1,634 people were put to death last year, a 54 percent increase from the previous year. That's the highest number of recorded executions in more than a quarter century, and it's not even counting deaths in China, the world's top executioner, where death penalty data is treated as a state secret. Most of those deaths were in the Middle East: Iran, Pakistan, and Saudi Arabia accounted for nearly 90 percent of all executions in 2015. The vast majority of Iran's executions were for drug-related crimes, while Pakistan lifted a moratorium on civilian executions in 2014 to more aggressively punish suspected terrorists. In Saudi Arabia, the justice system is so opaque that it's hard to know what's driving executions, but since the new king came to power last year, the country has drawn increasing international condemnation for its crackdown on dissidents. While executions surged in those three countries, the trend elsewhere was more heartening. Four more countries abolished the death penalty last year, which means that for the first time ever, more than half of all nations have legally abolished it. And where does the United States stand? Just like in 2014, it ranked fifth on the list of the world's top executioners last year. The country recorded 28 executions, its lowest annual amount since 1991, and 52 new death sentences, the lowest since 1977. Since 1846, 19 states have abolished the death penalty, but even though lethal punishment here is on the decline, we're still the only country in the Americas to execute people. You can read Amnesty International's full report here.

Mississippi vs. Everyone: State’s pushing obscene law that’s not only anti-LGBT, it could also force women to wear makeup --The 2016 legislative session has been a competition between red states to see who can pass the most hateful anti-LGBT bills under the guise of “religious freedom,’ but Mississippi state Republicans look like they’re going to emerge the winner. Friday, the state house passed the final version of a bill meant to protect and encourage business owners in the state to discriminate against LGBT people, while simultaneously enshrining, in violation of the constitution, the idea that conservative Christianity is the only legitimate religion.  But, because they have to win the war of the Bible-thumpers, Mississippi Republicans went a step further than other states that have passed similar anti-gay bills. This law not only protects discrimination against LGBT people, but against any person who has sex outside of marriage. It also makes it easier for employers and schools to strictly police the way you dress to make sure it’s masculine or feminine enough. If your boss thinks proper ladies wear make-up, he can cite “religious freedom” as a reason to force you to do so, and the law will protect him for it.

L.A. council OKs law limiting homeless people’s belongings to what can fit in a trash bin - The Los Angeles City Council approved a law Wednesday to rein in the tent-and-tarpaulin encampments whose dramatic spread has raised the political stakes of handling one of the nation's worst homeless crises. The ordinance -- a revised version of the law known as 56.11 that was adopted in June -- limits storage on sidewalks, parkways and alleys citywide to what homeless people can fit in a 60-gallon container, about the size of a city recycling or trash bin. The measure passed on a 13-1 vote, with Councilman Gil Cedillo opposing. The council backed off even stricter rules that would have limited homeless people to what they could carry in a backpack, if the city provided storage for other belongings. But the law allows the city to clamp down in this way in the future. City Councilman Joe Buscaino said the measure balanced the city's need for safe and clean streets with homeless people's personal property rights.

The real welfare queens are our legislators, not food-stamp recipients -- Catherine Rampell - There’s a certain population in this country that expects unlimited government handouts despite its piggish unwillingness to work.   Ladies and gentlemen, meet the new welfare queens: your democratically elected U.S. legislators, the laziest, most do-nothing generation of federal politicians in decades.  Sure, they talk a big game about work ethic and personal responsibility.  Thanks to legislators’ devotion to public industriousness, for example, tens of thousands of Americans lost access to food stamps Friday. Legislators had decided, as part of welfare reform, that non-disabled adults without dependents should be required to work to receive food stamps; the work requirements had been temporarily waived in many states during the downturn, but now those waivers are expiring. To be clear, “required to work” in this context means not willing to work, or looking for work, but actually working an average of at least 20 hours a week. Food-stamp recipients who cannot successfully land a 20-hour-a-week job or qualifying training program within three months of receiving the benefit get the boot.  No matter that the average spell of joblessness lasts about seven months; or that millions of workers who do find jobs often can’t get enough hours; or that most states do nothing to help place workers at risk of losing their food stamps into employment or training programs.  Our elected officials decided that jobs are so important that those who cannot find them should starve. And that ideally such sluggards should be denied other safety-net services, too — such as medical care. With the stated goal of promoting personal responsibility, the House Republicans’ 2017 budget proposes newly attaching work requirements to Medicaid, too. . These moochers and takers continue to receive taxpayer-funded paychecks and yet refuse to do their jobs.

Handouts Are Often Better Than a Hand Up -  WHEN we talk about how the United States can be more competitive with the rest of the world, childhood poverty rarely comes up. Yet America has a higher rate of childhood poverty than all but a few developed nations. Children are America’s poorest age group. In 2013, more than 12 million children lived below the poverty line, which for a family of four is slightly more than $24,000 a year. This comes to roughly 17 percent of American children. A third of these kids are white, another third are Latino, and about one-quarter are black, while the rest are American Indian and Asian-American.   On average, children in poverty have lower I.Q. scores than their wealthier peers. Recent research has made it clear that just the stress of growing up in a poor family can be toxic to the growing brain. It almost goes without saying that the cost to the American economy is severe. We need quick-acting, powerful solutions. Cash allowances, ideally paid to a child’s parents on a monthly basis, are a clean, direct way to raise a high proportion of children out of poverty. The United States once had a welfare program — Aid for Families With Dependent Children — that provided cash to families in need, but A.F.D.C. was hardly generous. Not only were the benefits paltry, the incentives were perverse: If you worked, you frequently lost most or all of your benefits. . In 1996, legislation put forward by congressional Republicans and ultimately supported by President Bill Clinton ended A.F.D.C. — “welfare as we know it” — and put Temporary Assistance for Needy Families in its place. But the welfare payments to families with children under T.A.N.F. — in part because of the program’s rules about work and looking for work and in part because the time period during which you can receive welfare is capped — reach a much smaller number of families than A.F.D.C. did. According to the Center on Budget and Policy Priorities, only 23 out of 100 poor families receive any T.A.N.F. benefits at all.

What Happens When America’s Kids Confront Extreme Inequality? - interview by Lynn Parramore -- Marc Levin, an independent film producer and director, has spent decades examining social justice issues in his award-winning documentaries. HBO Documentary Films’ “Class Divide” is the final film in a trilogy exploring how economic forces impact everyday people from Levin and partner Daphne Pinkerson. “Class Divide” looks at growing inequality in New York City and its profound impact on schoolchildren in the Chelsea neighborhood, where public school kids from the projects look across the street as the privileged sons and daughters of the wealthy attend Avenues: The World School, an $85 million for-profit facility with a yearly price tag of $45,000.  Young people from both sides of the street share their thoughts on a world in which rewards seem arbitrary and natural curiosity pushes them to look past the barriers erected by America’s increasingly rigid class structures. Levin, along with Pinkerson, shares the surprising revelations that emerged in the making the film. “Class Divide” will be shown on HBO in autumn, 2016, and will be screened at New York’s IFC Center from April 13th through April 19th.

Unions and the allocation of teacher quality in public schools - Economic Policy Institute - Introduction and executive summary:  A renowned California court decision in 2014 declaring that teacher tenure laws violated the state constitution has highlighted the issue of tenure and its relationship to the allocation of teachers across schools (Vergara v. State of California 2014). ). Moreover, the question has been raised as to whether teachers’ unions, through collective bargaining or legislation, could to some extent be responsible for this misallocation. This paper explores these issues using nationally representative data on schools and teachers from the 2011 National Assessment of Educational Progress (NAEP). First, it examines the extent to which there is a misallocation of teachers in terms of a gap between the qualifications of teachers in schools in general versus the qualifications of teachers in high-poverty schools, defined as schools in which over half of students are eligible for free or reduced-price lunch. Second, the paper examines whether a relationship exists between the strength of teachers’ unions in a state and the allocation of teacher quality across schools. Our analyses find that there is no relationship between union strength and a misallocation of teachers that disadvantages students in high-poverty schools. In other words, the misallocations are not more nor less severe or prevalent in states with stronger unions. Specifically, the results of regressions run using two measures of union strength (each measured in two ways, continuous and categorical) and three teacher quality credentials for four grade and subject combinations (reading/math, 4th/8th grades) consistently show that misallocations of teacher quality are not more nor less severe in states with stronger teachers unions.

STUDY: Nation’s Largest Public Schools Have More Police Than Counselors --A new report from education site The 74 unearths data that points at schools that are more concerned with hiring police officers than counselors. The 74’s Matt Barnum examined public records for the nation’s ten largest school districts to uncover one important statistic: the ratio of counselors to security personnel. What he found sheds light on where the districts—each of which counts students of color as the majority—choose to invest their time and funds. Of the largest five districts, three have more officers than counselors. They are New York City, Chicago and Miami-Dade. When the scope is widened to the top ten, four fall into the same category. Barnum describes these two staffing categories as follows: School counselors’ roles vary depending on where they work, but often focus on helping students deal with academic, behavior and social issues. High school counselors play a key role in helping students get into college. School security can range from uniformed personnel employed by the district to maintain school safety to armed police officers who can make arrests.Per 1,000 students, New York City has 5.28 security personnel, but just 2.9 counselors (ratio: 0.55 counselors to security). Chicago has 4.21 officers to 2.18 counselors (ratio: 0.52). And Miami has 6.32 officers to 2.28 counselors (ratio: 0.36).  The U.S. Department of Education’s Office for Civil Rights has made it quite clear that students of color—especially Black and Native American students—are disproportionately disciplined for minor offenses in schools, which frequently sets them on a path that leads to imprisonment. A previous study found that schools with more resource officers routinely have higher arrest rates.

Why Are K-12 School Leaders Being Trained in Coercive Interrogation Techniques? - One of America’s great paradoxes (or perhaps hypocrisies) is its claim to be a global beacon of freedom, even as it jails more of its citizens—by population percentage and in raw numbers—than any other country in the world. This tendency toward suspicion, hyper-enforcement and punishment is so pervasive it even trickles down to our kids. CNN cites a National Center for Education Statistics report that finds 43 percent of U.S. public schools have some form of security personnel patrolling their halls and grounds, a figure that rises to 63 and 64 percent, respectively, in public middle and high schools. In addition to the school resource officer, the over-policing of American society has now given rise to a new figure: the educator-interrogator.  As the Guardian noted last year and the New Yorker discussed recently, school administrators are increasingly being trained as interrogators to extract confessions from students for so-called “crimes”—most often, minor offenses from schoolyard scuffles to insubordination. Instruction in the interrogation arts is provided by John E. Reid and Associates, a global interrogation training firm that contracts with police departments, armed services divisions and security companies around the country. According to the New Yorker, the company has taught its patented “Reid Technique” to hundreds of school administrators in eight states. That training may be leading to an increasing number of students ‘fessing up, even when they have nothing to confess to. As the New Yorker notes, “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.’”

Why Talented Black and Hispanic Students Can Go Undiscovered -  Public schools are increasingly filled with black and Hispanic students, but the children identified as “gifted” in those schools are overwhelmingly white and Asian.The numbers are startling. Black third graders are half as likely as whites to be included in programs for the gifted, and the deficit is nearly as large for Hispanics.  New evidence indicates that schools have contributed to these disparities by underestimating the potential of black and Hispanic children. But that can change: When one large school district in Florida altered how it screened children, the number of black and Hispanic children identified as gifted doubled.That district is Broward County, which includes Fort Lauderdale and has one of the largest and most diverse student populations in the country. More than half of its students are black or Hispanic, and a similar proportion are from low-income families. Yet, as of 10 years ago, just 28 percent of the third graders who were identified as gifted were black or Hispanic. In 2005, in an effort to reduce that disparity, Broward County introduced a universal screening program, requiring that all second graders take a short nonverbal test, with high scorers referred for I.Q. testing. Under the previous system, the district had relied on teachers and parents to make those referrals.. The results were striking.The share of Hispanic children identified as gifted tripled, to 6 percent from 2 percent. The share of black children rose to 3 percent from 1 percent. For whites, the gain was more muted, to 8 percent from 6 percent.

College Kids Aren’t the Only Ones Demanding ‘Safe Spaces’ Matt Taibbi -- Trump's name is at the center of a rash of bizarre stories on campuses across America, the most recent being the universities of Kansas and Michigan-Ann Arbor. Students have been waking up to find "Trump '16" messages in chalk scrawled on sidewalks, sometimes alongside other messages (like "Build the Wall" or "Stop Islam"). At each stop, students have complained to administrators that Trump's very name makes them feel unsafe. In Michigan, students actually called the police. Just today at the University of Tennessee at Chattanooga, a member of student government reportedly has been asked to resign for a pro-Trump chalking. To be fair, the chalking in question did include a drawing of the notorious red "Make America Great Again" hat, making it especially horrifying. The effect of all of this will probably be to make Donald Trump the official face of the "safe space" controversy, a distinction he'll of course wear as a badge of honor.  Only in a few places (South Park's hilarious musical take is an example) has anyone tried to draw any connection between what's going on in schools, and the voraciously media-addicted culture of older Americans who with each passing year are themselves becoming more paranoid and incapable of dealing with opinions different from their own.

Would you rather have a degree without an education or an education without a degree? (video) I found this debate between Tyler Cowen and Alex Tabarrok (at Marginal Revolution University), on whether college education provides learning or signaling, interesting.  Particularly important right now:  If college education is primarily learning and learning is productivity enhancing, then universal college education will be productivity enhancing, but if college degrees simply provide workforce signaling--who is likely to be productive, and who is not--then universal college education will degrade this signaling mechanism.   I think I side with Alex on this one:  We are primarily providing a signaling role.  But I would qualify that a bit:  Tyler makes the point that in the process of learning, students acquire soft skills:  critical thinking, social interactions, how to acquiesce to rules...  I agree with this.  So a better question might be, does the content of college classes really matter?  While students will remember very few of the details of their individual classes (I remember taking a class on ancient world history, but remember little other than my professor pretending to be Julius Caesar) they likely gain other skills that are valuable to employers.   So of course, the answer to the question 'Is Education Signaling or Skill Building?' is: YES.

Unionizing Pays Big Dividend for Professors at Regional Public Universities - The Chronicle of Higher Education: Full-time instructors at regional public universities earn an average of about $21,000, or nearly 25 percent, more in pay and benefits annually if they belong to a union, concludes a groundbreaking new study of compensation at such institutions. The location and size of the employer also makes a big difference. Those in larger suburban public universities, the highest-paying category of institutions studied, earned an average of nearly $17,000, or 20 percent, more in pay and benefits annually than those at midsize rural institutions, the lowest-paying category. Such pay gaps become even larger when all three factors — location, size, and union status — are considered together. Unionized instructors at larger suburban institutions earn an average of about $40,000, or 50 percent, more than their nonunionized peers at midsize rural institutions, the study found. Past research on faculty earnings at public universities has offered a distorted picture by lumping in data from state flagships and from regional institutions, argues a paper summarizing the study’s findings. Given how the nation’s 390 public regional universities differ from flagships in their missions, student populations, and faculty workloads, they "deserve analysis in their own right," says the paper, presented in New York on Sunday at the annual conference of the National Center for the Study of Collective Bargaining in Higher Education and the Professions.

Want to Keep Your Coaching Job? Win, And Do This - It’s easy to measure winners on the court. Villanova, Oklahoma, North Carolina and Syracuse universities are having great success during this year’s March Madness. But what about academics at the NCAA schools sending players to these kinds of tournaments? They are, after all, students. Do the coaches have any incentive to make sure their players are studying as well as practicing? Broadly, the answer appears to be yes. New research from Harvard University’s Christopher Avery, University of Utah’s Brian Cadman and INSEAD’s Gavin Cassar shows that Division I coaches—for basketball and football—are less likely to get fired if their players are also doing well academically. “We didn’t know,” Mr. Avery said of the potential tie between academic success and a coach’s job security. “But we’re glad to see that there is some link between the coaching career and the academics.” Indeed, an improvement in one academic measure from near the bottom to near the top is worth about two wins a season for a basketball coach, the paper finds. It’s not as important as winning, but it’s something. The NCAA has frequently been the target of criticism for emphasizing money and athletics over academics. In 2011, for example, then-Education Secretary Arne Duncan said teams like Syracuse and Kansas State University should be booted out of the NCAA basketball tournament for failing to keep at least half their players on track toward graduation.

Former chancellors of research universities warn their future is in peril - The Hechinger Report: The system for funding American flagship public universities is “gradually breaking down,” said Robert J. Birgeneau, a former chancellor of the University of California, Berkeley, and the co-chair of a two-year project to examine the role of public research universities and recommend changes to help them stay competitive. With states’ investment in public universities having sharply declined since 2000, Birgeneau and Mary Sue Coleman, a former chancellor of the University of Michigan, urged the adoption of new funding methods that rely less on tuition revenue and more on a combination of private, federal and state resources. The recommendations came Thursday, in the last of five reports by the group that Birgeneau and Coleman co-chaired, called The Lincoln Project: Excellence and Access in Public Higher Education, an initiative of the American Academy of Arts and Sciences. The name is a nod to President Abraham Lincoln, who signed the 1862 Morrill Act allocating federal land to the states to be used for public higher education. The report recommended that states reverse the deep cuts to their higher education budgets and, together with the federal government, create tax incentives for businesses to encourage donations to scholarships. It urged businesses to be more vocal about the importance of fiscally healthy public colleges, and to contribute money to their scholarships and endowments. It had a longer list of proposals for public research universities, including making public yearly financial targets, increasing alliances with other colleges to forge reductions in expenses, and simplifying the process for businesses to use important university research.

More Than 40% of Student Borrowers Aren’t Making Payments - More than 40% of Americans who borrowed from the government’s main student-loan program aren’t making payments or are behind on more than $200 billion owed, raising worries that millions of them may never repay. While most have since left school and joined the workforce, 43% of the roughly 22 million Americans with federal student loans weren’t making payments as of Jan. 1, according to a quarterly snapshot of the Education Department’s $1.2 trillion student-loan portfolio. About 1 in 6 borrowers, or 3.6 million, were in default on $56 billion in student debt, meaning they had gone at least a year without making a payment. Three million more owing roughly $66 billion were at least a month behind. Meantime, another three million owing almost $110 billion were in “forbearance” or “deferment,” meaning they had received permission to temporarily halt payments due to a financial emergency, such as unemployment. The figures exclude borrowers still in school and those with government-guaranteed private loans. Navient Corp. , which services student loans and offers payment plans tied to income, says it attempts to reach each borrower on average 230 to 300 times—through letters, emails, calls and text messages—in the year leading up to his or her default. Ninety percent of those borrowers, which include federal borrowers as well as those who hold private loans, never respond and more than half never make a single payment before they default, the company says.

Majority of Millennials Have 'No Idea' When Student Loans Will Be Paid Off - The path to freedom from student debt is a long, winding, and arduous one with no end in sight for millennials. A new survey conducted online in February by research agency TNS on behalf of Citizens Bank found 59 percent of those polled have "no idea" when they will be able to pay back their student debt. The survey found millennials, defined as those between the ages of 18 and 35, have an average student debt of $41,286.60. That's significantly higher than the national average amount of debt for college graduates, which the Department of Education determined is$29,400. Not every millennial knew how much debt he or she carries: 15 percent of those polled by TNS said they weren't sure what their student loan balance was, and more than a third didn't know what the interest rate is on this debt. Those polled also had a limited understanding of the intricacies of their student debt. Almost half said they "don't understand" how privatized student loans work, and 44 percent said they don't entirely grasp the difference between federal and private student loans. About a third had never even heard of student debt refinancing. The millennials who are paying down their burdensome debt are cutting down on eating out, entertainment, and vacations to do so, the survey found. Eight percent said they don't plan to pay back the debt at all, while another 8 percent hope to defer the loan payments by going back to school. The majority of millennials said they regret taking out as many loans as they did, but a third took it a step further, saying they wouldn't have attended college at all had they known the extent of the costs in advance.

North Carolina Knowingly Allows Fox to Run State Pension Henhouse -- Yves Smith -  Among state pension systems, North Carolina’s has been one of the generally-better-run one, with it having comparatively modest underfunding (putting it in better shape than CalPERS and CalSTRS), and historically taking less risk, via having more allocated to fixed income and less to alternative strategies like private equity than its peers. However, the flip side is that North Carolina, thanks to the tender ministrations of the Fed pushing investors our of safe assets, North Carolina has been increasing its allocations to riskier strategies. North Carolina has a glaring weakness, which is a poor governance structure. It has only one trustee for the state pension system, its State Treasurer. Let us turn the microphone over to former North Carolina Chief Investment Officer Andrew Silton. As the lawyers like to say, res ipsa loquitur. From his website: Last month North Carolina’s State Treasurer accepted positions as a director for Channel Advisor, a public company in the Raleigh area, and James River Capital, a fund-of-funds in Richmond, Virginia.  She will be North Carolina’s Treasurer for the next nine months. Among her many public duties, Treasurer Cowell is sole fiduciary of North Carolina’s public pension plan. In my view, these private sector financial positions compromise her role as fiduciary for the pension plan and are a large step backward in the governance of its assets. While Treasurer Cowell’s private sector appointments may be legal, they are wrong. As sole fiduciary of the state’s pension plan, the Treasurer has a duty to act in the best interest of the beneficiaries, state employees, and taxpayers who ultimately bear the risk of the state’s pension plan. The standard of conduct is perhaps even higher than the conduct expected of her when she sits on the Council of State, Banking Commission, or Board of Public Instruction. Moreover, recusing herself from decisions that might involve a conflict is hardly a remedy. By accepting a board seat on public company and by advising a fund-of-fund company, the Treasurer has compromised her investment priorities.

Public Pension Funds Starting to Abandon Hedge Funds….More Than a Decade Late - Yves Smith - At the end of 2014, CalPERS announced that it would no longer invest in hedge funds and would exit its current investments. This development was reported extensively in the financial media and was depicted a sea change at the time, since CalPERS has often been a trend-setter among investors.  As we commented then, this move was long overdue. Even though CalPERS took the position that the reason for its action was that it was too hard to find suitable funds, our very first post in late 2006 was about the fact that CalPERS had experienced underperformance in its hedge fund investments for several years. Yet it said it was going to stick with the strategy was because it provided useful diversification.  The problem with that rationalization is that no one should pay hedge fund fees (a prototypical 2% annual management fee plus a 20% over for mere diversification is bollocks. The justification for this rich fee structure is that hedgies are supposed to deliver “alpha,” as in manager outperformance. However, as of 2006, it was already fairly reported in the financial trade press that hedge funds did not deliver much if any alpha. Indeed, the hedge funds were increasingly acknowledging that and stressing that irrespective of that nasty little lack of any real alpha problem, they were still an essential addition to any savvy investor’s portfolio by virtue of providing “alternative” or “synthetic” beta.  But there’s no justification for paying “2 and 20” for alternative beta. And as we noted in early 2007, investment products were being launched that delivered alternatve beta at much lower fee levels.

A Modest Proposal: Securitizing Loans for Large Health Care Expenses - I saw this headline in Kaiser Health News — “Mortgages For Expensive Health Care? Some Experts Think It Can Work” — so I said, “Nah,” and ignored it for a couple days, but then I clicked through to the academic paper Kaiser linked to — if “academic” has any meaning, the times being what they are — and I couldn’t find any tells that it was a parody or some kind of sick joke, so yeah. It’s for real! The paper is called “Buying cures versus renting health: Financing health care with consumer loans,” by Vahid Montazerhodjat, David M. Weinstock, and Andrew W. Lo, and it was published in Science Translational Medicine (STM), February 24, 2016. First, I’ll present the author’s scheme, and after briefly showing how it conforms to the simple rules of neoliberalism, I’ll look at potential scope creep if the proposal is implemented, debt-cropping, and the possibility of predatory servicing. I’ll conclude with a 30,000-foot view of the scheme’s implications. (I’m afraid I’m thinking of this post in terms of somebody who’s take out one of these loans — a consumer patient — rather from the finance perspective that Yves would offer. That said, readers with more nuts-and-bolts knowledge of securization than I have — like most of you — please feel free to chime in; that’s why I’m describing the scheme first.)

LSD could make you smarter, happier and healthier. Should we all try it? [WaPo].  In 1970, Congress dropped psychedelics into the war on drugs. After a decade of Timothy Leary, “The Electric Kool-Aid Acid Test” and news reports of gruesome murders, the federal government declared that the drugs had no medical use — and high potential for abuse. The chairman of New Jersey’s Narcotic Drug Study Commission called LSD “the greatest threat facing the country today . . . more dangerous than the Vietnam War.” But over the past decade, some scientists have begun to challenge that conclusion. Far from being harmful, they found, hallucinogens can help sick people: They helped alcoholics drink less; terminal patients eased more gently into death. And it’s not just the infirm who are helped by the drugs. Psychedelics can make the healthy healthier, too. On this subject, only a handful of peer-reviewed studies have been conducted; sample sizes are tiny. There’s still a great deal researchers don’t know. But early results suggest that, when used by people without a family history or risk of psychological problems, psychedelics can make us kinder, calmer and better at our jobs. They can help us solve problems more creatively and make us more open-minded and generous. Some experiments even suggest that a single dose can change our personalities forever. Is it possible that a drug labeled as one of the most destructive and dangerous could make everyone’s lives better?

Insulin Costs Have Tripled In Just 10 Years -- Insulin is no obscure drug — about 29 million Americans have some form of diabetes, and either type may require the hormone for treatment. Lately, however, insulin hasn’t been cheap. Those who rely on the drug have seen its price triple within a decade, and the problem has been so acute that since 2010, per-person spending on insulin has been higher than on all other diabetes drugs combined. Researchers from the University of Melbourne in Australia and the University of Michigan found that, while insulin costs have skyrocketed, the cost of other diabetes drugs have stayed about the same or even gone down. The authors said these findings should spur the industry to take a look at the effects and cost-effectiveness of non-insulin therapies. “In the United States, the more than three-fold increase in the cost of insulin over the past decade is alarming,” said Dr. William Herman, the Michigan co-author and a diabetes care researcher. “It is a burden to both patients and payers and may deny some people access to a lifesaving therapy. Although the newer, more expensive insulin analogs appear to have incremental benefits compared to older, less expensive insulin preparations, their premium price requires us to ask whether they are really necessary, and if so, for whom?”

How Big Pharma Drug Pricing Costs Us Our Health -  Imagine this: You're a man who has sex with other men. You know it puts you at high risk of contracting HIV, so you do some research and learn about a drug that will stop you contracting the virus. You go to your doctor and ask for it. "Yes, it exists," says your doctor, "but you can't have it." Or this: You've been diagnosed with hepatitis C, and you've heard that it can lead to liver cirrhosis. There's a "miracle" cure on the market, you're told, but it's not available to you in the UK. Or imagine that your mom tells you she has late-stage breast cancer, and there's a one-of-a-kind drug that could extend her life. "Sorry, it was too expensive," the specialist at the hospital tells you. "It was struck off the National Health Service." I am sitting in a small room with people who don't have to imagine this, because they have all had experiences like these. This is a meeting for AIDS activism and advocacy group ACT UP, in a support center in east London. The room is all gray plasterboard, with a round table in the middle, and a miserable-looking kettle in the corner. People arrive in dribs and drabs. A handsome gay man named Ashley is disseminating snacks while Paolo, an older guy, Italian, sits next to me and makes polite conversation. Sami, a trainee nurse, is last through the door, having come straight from a junior doctors protest. We're here to discuss a global shake-up of the way big pharma operates. Some people in this room have had their lives directly affected by illness: Paolo, for example, later told me he survived acute and hemorrhagic pancreatitis. Some want to campaign for access to drugs like the new, highly effective hep C treatments Sovaldi and Harvoni, which are currently unavailable on the NHS. Others, like me, are here to learn.

Rising US mortality, obesity, and children --In the current JAMA, David Ludwig reports that Since the end of the Civil War until the late 20th century, lifespan increased rapidly in the United States, a tremendous public health triumph brought about by a more dependable food supply, improved sanitation, and advances in medical care… [But] With the start of the obesity epidemic in the late 1970s, this trend began to slow, leading some to predict that life expectancy would decline in the United States by the mid-21st century.  This would be a shocking change in the historical trend of steadily improving population health and Ludwig thinks it’s happening. In this post, I will explain how children and their developmental trajectories play an important role in this story. Ludwig is commenting on CDC data that support the prediction by Olshansky and his colleagues that because of obesity, the steady rise in life expectancy during the past two centuries may soon come to an end. The data are just preliminary, but Ludwig argues that they show that Age-adjusted death rates for the first 9 months of 2015 increased significantly compared with the same period in 2014, most notably involving causes of death related to obesity. The CDC data are here and I have graphed them below.

CIA’s Venture Capital Arm Is Funding Skin Care Products That Collect DNA -- KINCENTIAL SCIENCES, a company with an innovative line of cosmetic products marketed as a way to erase blemishes and soften skin, has caught the attention of beauty bloggers on YouTube, Oprah’s lifestyle magazine, and celebrity skin care professionals. Documents obtained by The Intercept reveal that the firm has also attracted interest and funding from In-Q-Tel, the venture capital arm of the Central Intelligence Agency. The previously undisclosed relationship with the CIA might come as some surprise to a visitor to the website of Clearista, the main product line of Skincential Sciences, which boasts of a “formula so you can feel confident and beautiful in your skin’s most natural state.” Though the public-facing side of the company touts a range of skin care products, Skincential Sciences developed a patented technology that removes a thin outer layer of the skin, revealing unique biomarkers that can be used for a variety of diagnostic tests, including DNA collection. Skincential Science’s noninvasive procedure, described on the Clearista website as “painless,” is said to require only water, a special detergent, and a few brushes against the skin, making it a convenient option for restoring the glow of a youthful complexion — and a novel technique for gathering information about a person’s biochemistry.

Zika mystery deepens with evidence of nerve cell infections | Reuters: Top Zika investigators now believe that the birth defect microcephaly and the paralyzing Guillain-Barre syndrome may be just the most obvious maladies caused by the mosquito-borne virus. Fueling that suspicion are recent discoveries of serious brain and spinal cord infections - including encephalitis, meningitis and myelitis - in people exposed to Zika. Evidence that Zika's damage may be more varied and widespread than initially believed adds pressure on affected countries to control mosquitoes and prepare to provide intensive - and, in some cases, lifelong - care to more patients. The newly suspected disorders can cause paralysis and permanent disability - a clinical outlook that adds urgency to vaccine development efforts. Scientists are of two minds about why these new maladies have come into view. The first is that, as the virus is spreading through such large populations, it is revealing aspects of Zika that went unnoticed in earlier outbreaks in remote and sparsely populated areas. The second is that the newly detected disorders are more evidence that the virus has evolved. "What we're seeing are the consequences of this virus turning from the African strain to a pandemic strain,"

When Zika Hits the US, Poorest Areas Will be Hardest Hit - Springtime is coming, and with it, mosquito season.  US health officials met with a sense of urgency in Atlanta on Friday to step up the effort against Zika—a mosquito-borne virus that’s been linked to microcephaly, a devastating birth defect, and other neurological problems. Since it was first reported spreading in Brazil in May 2015, the virus has ripped like wildfire through most of the Americas. Now, with the weather getting warmer, experts worry it could start to spread locally in parts of the US. But there isn’t a firm plan in place, at every level of government, on how to proceed.“Right now, there’s no definition of a complete plan,” Dr. Tom Frieden, director of the Centers for Disease Control, told reporters in a press conference at the meeting. Local and state governments are working furiously to prepare for the eventuality of Zika landing in their district. (Several Americans have been infected, but most caught the virus while travelling outside the country.)  The Obama administration has requested $1.9 billion from Congress to fight the epidemic.groups One challenge is that Zika is a moving target, and still isn’t well understood. It was just ten weeks ago, Frieden said, that the CDC issued its very first travel advisory warning pregnant women to stay away from countries where it was spreading. .If it lands in the continental US, it’s the poorest neighbourhoods of Florida and the Gulf—where the Aedes bugs live—that will be hardest-hit. These places are more likely to have torn window screens, dilapidated housing, and standing water for mosquitoes to breed. Dengue, a virus that’s related to Zika and spread by the same type of mosquito, has been found in parts of Houston.

The Inclusive Cost of Pandemic Influenza Risk - Estimates of the long-term annual cost of global warming lie in the range of 0.2-2% of global income. This high cost has generated widespread political concern and commitment as manifested in the Paris agreements of December, 2015. Analyses in this paper suggest that the expected annual cost of pandemic influenza falls in the same range as does that of climate change although toward the low end. In any given year a small likelihood exists that the world will again suffer a very severe flu pandemic akin to the one of 1918. Even a moderately severe pandemic, of which at least 6 have occurred since 1700, could lead to 2 million or more excess deaths. World Bank and other work has assessed the probable income loss from a severe pandemic at 4-5% of global GNI. The economics literature points to a very high intrinsic value of mortality risk, a value that GNI fails to capture. In this paper we use findings from that literature to generate an estimate of pandemic cost that is inclusive of both income loss and the cost of elevated mortality. We present results on an expected annual basis using reasonable (although highly uncertain) estimates of the annual probabilities of pandemics in two bands of severity.

The risk of lead poisoning isn’t just in Flint. So we mapped the risk in every neighborhood in America: Neighborhoods where kids face the highest risk of lead poisoning exist all across America. The trouble is that exposure risk is surprisingly difficult estimate, due to a variety of state-by-state differences in reporting standards. So we worked with epidemiologists in Washington state to estimate risk levels in every geographic area in America. "As a parent, I found it very alarming," says Holly Davies, who works in Washington's Department of Ecology on lead exposure reduction. "My son was born in West Virginia, and there it was standard practice that at one year they get screened [for lead poisoning risk]. But here it wasn't a standard thing; I was the one who had to bring it up." The map you'll see below shows the risk of lead exposure across the United States. The areas where kids are at highest risk of lead exposure — an estimate calculated using government data about the surroundings — are scattered all across the country. These are the bright red areas in the map you see below — the places that public health researchers have identified as having the highest risk of lead exposure. You can see that the vast majority cluster in urban areas. There are also rural areas with high risks of lead exposure. While only 17 rural tracts have a lead exposure risk of 10, the highest risk, 55 percent of rural areas have lead exposure risk levels of 6 or greater. Some states with large percentages of rural census tracts, like Kansas and Nebraska, have large swaths of lead exposure risks. In Nebraska, 92 percent of rural areas have a lead risk exposure score of 6 or greater.

Why Your Water Could Be Worse Than Flint’s - Water distribution pipes in the United States were initially made of wood, then iron, then lead. Lead pipes, first manufactured in the mid-1800s, had almost completely displaced iron by the turn of the 20th century—they lasted longer and were easier to work with. But lead is also poisonous, especially to children, who absorb more lead than adults and are more susceptible to its irreversible health effects, such as nerve and brain damage. It didn’t take long for press accounts of lead poisoning to surface. In 1890, the Massachusetts State Board of Health advised the state’s cities and towns to avoid the use of lead pipes. By the 1920s, cities across the country had banned them. But the lead mining and manufacturing industries pushed back, establishing the Lead Industries Association in 1928, which aggressively advocated for the continued use of lead solder and pipes. Against the mountains of data on illnesses and deaths, industry prevailed. It wasn’t until 1986 that federal regulations banned lead in new drinking water distribution systems. But much of the old lead piping still remains. In the post-Reagan era, local governments pay for 95 percent of sewer infrastructure and 99 percent of public water infrastructure. Municipalities with money are slowly replacing pipes and investing in their water supply systems. The city of Madison spent $19.4 million to replace its lead pipes over an 11-year period, beginning in 2001. Flint, one of the most economically depressed cities in America, couldn’t afford new pipes. Reaganomics failed cities like Flint. Today, the city has 8,000 poisoned children to show for it.

There's another terrifying public health crisis in Michigan -- Zoe Schlanger of Newsweek last week provided a vivid description of the beleaguered working class community of River Rouge, located about 70 miles south of Flint, where many residents stricken by asthma and related problems  are literally gasping for breath and choking on emissions of sulfur dioxide, nitrogen dioxide and other toxic emissions. Newsweek told the story of Jacqueline Cason, 38, who suffered a mild case of asthma while she lived in Mississippi and but now faces frequent life threatening attacks since moving with her family to River Rouge.  “She gasps, desperately sipping the air but inhaling little or none. ‘It’s like being a fish out of water,’ she says.”  Much like Dante’s third ring of hell, the tiny city of River Rouge (population 7,000) is inundated with more than 50 major industrial operations.Those include two post-World War II vintage coal-fired power plants owned by DTE Energy – the major utility company -- that spew 34,000 tons of sulfur dioxide every year. DTE Energy’s southwest Detroit complex is one of five industrial facilities in Michigan that are out of compliance with federal air pollution standards when operating at full capacity. On nearby Zug Island, U.S. Steel blast furnaces daily blot out the sun with their dusty orange emissions that add to the area’s public health crisis.  Sulfur dioxide emissions are produced largely by metal extraction from ores and by power plant and refineries. The emissions smell like rotten eggs and can cause coughing and a burning sensation in the eyes. Experts say that prolonged exposure to SO2 can result in asthma-like symptoms in individuals without asthma and can aggravate existing cardiovascular disease.

Millions of people in Bangladesh still drinking arsenic-laced water -- Nearly 20 million Bangladeshis are still drinking water poisoned with high levels of arsenic despite millions of wells being tested and hundreds of thousands of safe ones having been bored to avert a major health crisis, a new report has suggested. The lack of progress in improving what the UN’s World Health Organisation called “the largest mass poisoning of a population in history” in the 1990s is blamed on government nepotism, rich country neglect and NGOs losing sight of the problem, says Human Rights Watch (HRW). Latest estimates suggest 43,000 people in Bangladesh die each year from arsenic-related diseases. These include skin lesions, cancers, and cardiovascular and lung illnesses.  According to the government, 5 million village wells were tested between 2000-03, with pumps painted red or green according to whether they were safe or unsafe. In 2003, an estimated 20 million people drank arsenic-laced water. But, says the report, all urgency to address the problem has disappeared and the rate of contamination is now much the same as it was in 2003. Recent studies have found 20 million people are still exposed to unsafe levels of arsenic contamination. According to HRW, some politicians are awarding safe wells to their supporters and allies instead of giving them to the people in rural areas who most need them, and there is little testing or monitoring of vulnerable communities.

Low-dose exposure of environmental contaminants can be harmful to the human brain - Individuals subjected to chronic low-dose exposure to organochlorine pesticides show and increased risk to obtain a future diagnosis of cognitive impairment. This is shown in a study now published in Environmental International. Organochlorine pesticides (OCPs) are a group of environmental contaminants that were banned in developed countries 20-30 years ago. But since they accumulate through the food chain and remain for a very long time in the human body, especially adipose tissue, high levels can still be found in a majority of the population of Sweden, as well as in most other industrial countries. The most commonly known of these compounds is the pesticide DDT. The research group at Uppsala University has previously shown associations between environmental contaminants and diabetes, atherosclerosis and stroke (links below, if needed). Using the same large data set they have now shown that the OCPs are related to future cognitive impairment. The results show that individuals with high levels of three OCPs (p,p'-DDE (a metabolite of DDT), transnona-chlordane and hexachlorobenzene) had about 3 times higher future risk of cognitive impairment than elders with low levels of OCP. These results are independent of factors such as sex, smoking, diabetes, exercise habits, alcohol intake, weight change and high blood pressure.

France to Ban Glyphosate Weedkillers Due to Health Risks -- France is banning glyphosate mixed with certain adjuvants (additives) due to its perceived risks to human health. The move comes less than two months after Ségolène Royal, France’s minister of ecology, sustainable development and energy, called for the ban. —France’s food, environment and health agency—sent a letter this week to manufacturers informing them that it intends to withdraw the authorization on herbicides containing glyphosate mixed with the adjuvant tallow amine, ANSES’ deputy director general Francoise Weber told Reuters. According to Weber, ANES made the decision after the European Food Safety Agency (EFSA) suggested greater potential risks compared to glyphosate alone.As EcoWatch noted previously, tallow amine aids the effectiveness of herbicides such as glyphosate and is one of the ingredients in Monsanto’s widely popular weedkiller Roundup. Monsanto confirmed to Reuters they are one of the companies affected by the French ban, adding that the debate over glyphosate in Europe is “political.” The agritech giant has long maintained the safety of their flagship product, which is also the world’s most popular herbicide.

Near 20-Year High: Bee-pocalypse Postponed Again, Until 2017: Despite the hype, there’s still no bee-pocalypse. Two weeks ago, the U.S. Department Agriculture released its latest count of commercial honeybee hives, and although the figure dipped 2.9 percent from the 20-year record-high set in 2014, the overall count of 2.7 million hives in 2015 remains strong. You wouldn’t know it from the news coverage. One Michigan television station recently led with the headline: “Numbers of managed honey bee colonies plummeting.” It explained: “According to the USDA the total number of managed honey bee colonies has decreased by 2.5 million since the 1940s.”[1] This is misleading for a number of reasons. First of all, there’s no plummeting of bee numbers. A full-strength hive can easily hold 30,000 or 40,000, which means there are around 80 billion honeybees in the United States—ten for every human on the planet. The United Nations counts about 80 million hives worldwide, meaning the global total of honeybees is a 13-digit number of a magnitude more commonly used to measure government debt. And secondly, honeybees are just one of over 20,000 known bee species, so it’s safe to conclude that the managed honeybee shortage just isn’t a real thing, especially since it has become an amateur fad and that has led to many deaths from mismanagement.

Palm Oil ‘Fatbergs’ as Big as Boulders Washing Up on UK Beaches  --Palm oil is already known to be an environmental blight and now we can add another item to its rap sheet. The much-maligned substance is surfacing on beaches in the UK in forms of congealed blobs known as “fatbergs,” posing a threat to children and especially pet dogs who might accidentally ingest it, according to British media.The germ-ridden chunks—some the size of boulders—are said to smell like diesel and are currently washing up on the coastlines of Kent and East Sussex, Mail Online reported. Storms that originated in Barbados, Jamaica and Trinidad are being blamed for pushing the marine pollution across the Atlantic. Unfortunately, the issue seems to be a regular occurrence in the UK’s coastal regions. Other British counties such as Hampshire, Devon and Cornwall have seen the waxy substance on their shores before. “Laboratory testing has shown that this substance is a non-toxic, degraded edible oil or fat. However, there have been reports of dogs becoming seriously ill after ingesting the substance. Some dogs that have consumed small quantities of palm oil have suffered from vomiting and diarrhorea, which has led to severe dehydration. Some dogs that have eaten larger amounts of the substance have suffered a range of effects including kidney damage, liver failure and blockages of the gut. In some instances this has resulted in the dog needing to be put down.” 

4 Million People Die Each Year Inhaling Black Carbon - One of global warming’s biggest culprits is lurking in the most unlikely of places. Black carbon from household stoves is fueling climate change and degrading public health and the issue has spurred a wave of investment in novel alternatives to solid fuel cookstoves. Millions of women in developing countries cook on stoves heated by burning wood, charcoal, crops and dung. Soot from these stoves collects in homes and in the atmosphere as black carbon, a potent greenhouse gas second only to CO2 in its ability to trap heat. But unlike CO2, which is harmless if inhaled, black carbon contains carcinogens that can enter the bloodstream and wreak havoc on vital organs. “Having an open fire in your kitchen is like burning 400 cigarettes an hour,” Kirk Smith, professor of environmental health at UC Berkeley told the World Health Organization. Smoke from cookstoves claims roughly 4 million lives each year, more than malaria, HIV/AIDS and tuberculosis combined. Women and children stand at greatest risk.So pernicious are black carbon’s effects that Sen. James Inhofe of Oklahoma, Capitol Hill’s most outspoken climate change doubter, supported a bill to investigate its dangers. Inhofe told the The Guardian he was concerned about the spread of lung disease in Africa, where so many families cook on wood stoves.

Choking On Pollution, Mexico City Begins Emergency Car Ban - Metropolitan authorities 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.  Thomé is just one driver of more than 6.8 million cars circulating Mexico City’s metropolitan area. These vehicles are now under an emergency car driving ban that took effect Tuesday and will last until June when the rainy season and winds pick up, ameliorating air pollution. Under this new program, all privately owned cars must remain off the streets one day per week in addition to one Saturday per month. Until now, vehicles were exempt from Mexico City’s “no circulation” or “Hoy No Circula” rules if owners had a holographic sticker certifying their cars were low emitters.  Two weeks ago officials issued a Phase 1 emergency for high ozone levels. While ozone is good as a protective layer in the stratosphere, ground-level ozone is harmful for humans, plants and the ecosystem. Ozone is also Mexico City’s biggest air pollution problem. Not since New Year’s of 2005 had the city issued a Phase 1 pollution warning for ozone.

Almost Half Of Natural World Heritage Sites Are Threatened By Industry, New Report Says -- Nearly half of all the natural World Heritage sites, including the Grand Canyon and the Papahānaumokuākea Marine National Monument in the United States, are threatened by harmful industrial activity, according to a new World Wildlife Fund survey.   World Heritage sites are symbols of conservation and culture that have been nominated by their countries for demonstrating outstanding universal value. Areas are inscribed on the UNESCO World Heritage List for their unique natural values, such as the scale of natural habitats, health of ecological processes, viability of populations of rare species, and exceptional natural beauty. Natural sites include iconic landscapes such as the Galapagos Islands, Mount Kilimanjaro, and the Grand Canyon, while so-called mixed sites may include archaeological areas like Macchu Picchu or Pueblo ruins in New Mexico. But despite their value, many sites are suffering from oil, gas and mineral extraction, as well as illegal logging and construction of large-scale roads and dams, according to the report published Wednesday.  Out of the 229 natural and mixed World Heritage sites, 114 have oil, gas, mining or fishing permits within their boundaries, or are otherwise considered under “high threat” or “very high threat” of development. Sub-Saharan African sites are suffering the most, according to the report. Of the 42 sites the region holds, 30 are threatened.

Homo sapiens, An Invasive Species --  Dave Cohen - Ah, population biologists. These are the folks who sometimes view Homo sapiens as being just like any other animal species. That's a refreshing take on things. The Stanford press release on a new Nature study of the human invasion of South America is called Populations of early human settlers grew like an 'invasive species'. ... the study ... finds that for much of human history on the continent, human populations grew like an invasive species, which are regulated by their environment as they spread into new places. ... The researchers found strong evidence for two distinct phases of demographic growth in South America. The first phase, characterized by logistic growth, occurred between 14,000 and 5,500 years ago and began with a rapid spread of people and explosive population size throughout the continent... Then, consistent with other invasive species, humans appear to have undergone an early population decline consistent with over-exploitation of their resources. This [decline] coincided with the last pulses of an extinction of big animals. Subsequent to the loss of these big animals, humans experienced a long period of constant population size across the continent. What is the upshot of this study?"The question is: Have we overshot Earth's carrying capacity today?" said senior author Elizabeth Hadly, the Paul S. and Billie Achilles Professor in Environmental Biology and a senior fellow at the Stanford Woods Institute for the Environment. "Because humans respond as any other invasive species, the implication is that we are headed for a crash before we stabilize our global population size."

The El Niño Bust in California - From Accuweather: El Nino-induced snow proves to be 'disappointing' for drought-stricken California Much-needed mountain snow and rain returned to California this winter, but fell short of expectations amid a super El Niño. The official snow season for California's Sierra Nevada came to an end at the start of April on a below-normal note and one that AccuWeather Senior Meteorologist Ken Clark called "disappointing." The amount of water stored in the snow for the entire mountain chain averaged 14 percent below normal on April 1, according to the California Cooperative Snow Surveys. The northern Sierra fared better than the southern Sierra with the amount of water in the snow averaging only 5 percent below normal, compared to the 27 percent below normal in the south. "The numbers are not anywhere near what many had wanted going into the winter," Clark said. "The much-heralded El Niño brought more snow than the previous four years, but that was not hard to accomplish." Here are some excellent graphs showing snow water content in the Sierra. This was close to an average year in the Northern Sierra, but below average in Central and South. There was more rain and snow than the previous four years, but this will still be considered year 5 of the drought.

California drought and the rise of the Ridiculously Resilient Ridge – Since early 2013, the state of California has been in the grip of an extraordinary multi-year drought. The accumulated precipitation deficit over the course of the ongoing drought is unprecedented in California’s century-long observational record, and when the additional drying effects of record-high temperatures are taken into account, the 2013-2016 event may in fact be the most severe in a millennium. The amount of water stored in the critically important Sierra Nevada snowpack reached its lowest level in over 500 years in 2015, and the loss of groundwater in the state’s aquifers hasliterally moved mountains. Drought-related impacts—including decreased agricultural and urban water availability, elevated wildfire risk, dramatically increased tree mortality, adverse effects upon riverine and marine ecosystems, and infrastructure damage to roads and pipelines —have been widespread. Over the past several years, California weather watchers have become well acquainted with the now-infamous “Ridiculously Resilient Ridge” of atmospheric high pressure—the unusually persistent atmospheric anomaly responsible for redirecting winter storms over the Pacific and ultimately bringing record-breaking warmth and dryness to the Golden State. Like a boulder displacing a narrow stream of water, this sluggish atmospheric feature consistently deflected the storm track to the north of California during the typical “rainy season” months of October to May. As a result, much of the state was left high and dry—even during what is typically the wettest time of year. [more]

Africa’s Traditional Crops Under Threat as Big Ag, Gates Foundation ‘Donate’ GMO Technology -  A new report from the African Centre for Biodiversity, a nonprofit that aims to protect the continent’s biodiversity and food production system, accuses the Bill & Melinda Gates Foundation, the United States Agency for International Development (USAID) and GMO companies including Monsanto of introducing GMO technology in Africa “under the guise of philanthropy.” The report, For your own good!, also warns that GMO companies are currently conducting R&D on the genetic modification of staple African crops such as cassava, sorghum, sweet potato, pigeon pea, cowpea, banana and rice. The report says that the key countries “targeted” include, Burkina Faso, Egypt, Ghana, Nigeria, Kenya, Uganda and Malawi. According to a press release of the report, several multi-national companies including Monsanto, Dupont and Pioneer Hi-bred have donated various patented GMO technology royalty-free to experimental programs led by government-employed African scientists. The main organizations carrying out the projects include the African Agriculture Technology Foundation and the Agricultural Biotechnology Support Program and the Program for Biosafety Systems. The on-going trials are focused on drought and salt tolerance, nitrogen use efficiency, resistance to tropical pests and diseases and nutritional enhancement, or biofortification, the release says. “This indicates that the GM industry, under the veil of technology donations and public financing, is effectively managing to make further inroads into imposing GM on the African continent,” Mariam Mayet, director of the African Centre for Biodiversity, said in a statement. “By focusing the research on traits meant to ‘benefit’ farmers and malnourished populations, through inter alia, biofortification, the industry is intent on giving a humanitarian face to the real involvement, vested interests and expanding influence of these [multinational corporations] in African agriculture.”

Food Not Bullets: Hunger Pangs of Starving Farmers Met by a Barrage of Bullets -- On the morning of April 1 police forces opened fire at some 5,000 farmers and indigenous Lumad demanding relief and subsidies for farm communities who have been intensely affected by the El Niño dry spell in Kidapawan City in the Philippines.  350 Pilipinas condemns the violent dispersal of protesting farmers, which has resulted in the death of three and 87 missing, by the combined forces of the police and army in Kidapawan province of North Cotabato. Around 5,000 farmers and indigenous peoples held a human barricade at the local National Food Authority (NFA) since March 30 to demand the immediate release of 15,000 sacks of rice to alleviate hunger brought about by crop failures due to three long months of drought. Gov. Emmylou Mendoza refused to engage the protesters in a dialogue because prior notice and appointment from the farmers were not made. Instead of heeding the legitimate calls of the starving farmers, protesters faced a hail of bullets from the armed police and soldiers. After the bloody dispersal, thousands of farmers seeking refuge at the United Methodist Church were then surrounded by police forces.

Bullets for rice: The massacre of protesting farmers in Kidapawan (video) Kilab Multimedia (Bill McKibben). Drought protest.

Palace on Kidapawan rally: No reason for deaths: – Malacañang on Saturday, April 2, promised an "impartial and thorough investigation of the Kidapawan incident in North Cotabato, as it maintained that no one "must die" for seeking government help. Undersecretary Manuel Quezon III, head of the Presidential Communications Development and Stategic Planning Office, made the statement in an interview on dzRB, in response to questions about the clash between police and farmers reeling from El Niño, which left two dead and over a hundred injured on Friday, April 1. "It is fair for all of us to expect and require thorough, impartial investigation. There is no reason why people must die in order to be asking for assistance from their own government," Quezon said. The Palace official described the incident as a "very, very heartbreaking tragedy" as it highlighted the plight of farmers. "Our farmers deserved better than to have to suffer to receive assistance and aid. All the more so because the assistance and aid is there, they have to go through the process and this is really, this compounds the tragedy," Quezon said.

Tigers Declared Extinct in Cambodia --Due to years of illegal poaching and loss of habitat, tigers are now “functionally extinct” in Cambodia, conservationists conceded for the first time Wednesday.  According to World Wildlife Fund (WWF)-Cambodia, the last tiger seen in Cambodia’s wild was in 2007 from a hidden camera set up in the Eastern Plains Dry Forest Landscape in Mondulkiri Protected Forest. “Today, there are no longer any breeding populations of tigers left in Cambodia, and they are therefore considered functionally extinct,” the conservation group said in a statement.The AFP reported that Cambodia’s dry forests used to be home to scores of Indochinese tigers, but intensive poaching of both tigers and their prey has devastated the population. But in a major effort to save the iconic species, on March 23 the Cambodian government approved its “Cambodia Tiger Action Plan” that would import tigers from abroad and introduce them to the Mondulkiri Protected Forest.  Un Chakrey, communications manager for WWF-Cambodia, told the New York Times that the tigers could be introduced as soon as 2020.

China’s Yangtze River to face catastrophic spring floods as near record El Nino strikes  - China will likely face massive spring floods due to the worst El Nino since the 1997/98 weather pattern which wreaked havoc in the Asia-Pacific region, says the state flood control authority. The extreme flooding China experienced almost 20 years ago started at the country’s longest river – the Yangtze – and two major waterways in the northeast. The floods, which lasted two months from June 1998, affected 220 million people across 24 provinces. Some 3,004 people died. The incident was one of the 20th century’s three most severe flooding disasters. And now China may see it happen again. Liu Ning – general secretary of the national flood prevention and drought relief commanding centre and also vice-minister of water resources – said it was highly likely the Yangtze would see heavy flooding at its middle section and downstream this year, Xinhua reported on Friday. Waterfalls in areas along the river were now carrying a higher-than-average volume of water and in many places, the flooding season had begun earlier than previous years, according to the report. Liu said China would generally face a more severe climate this year because of the El Nino effect that started in September 2015 and was expected to wind down by the end of June. The El Nino was impacting China in ways highly similar to climate events that caused the 1998 floods, Liu said. Climate scientists have long noted that strong El Ninos often cause severe flooding in southern China and this one will be no exception. Drought has already struck a swathe of countries in Southeast Asia such as Indonesia and the Philippines.

Agriculture on the Brink -- When it comes to farming, global temperature increases spurred by anthropogenic climate disruption (ACD) are bad news. Higher temperatures mean more droughts, wildfires, soil depletion and seasonal changes that, in general, have deleterious impacts on growing food. The Intergovernmental Panel on Climate Change's (IPCC) worst-case prediction by 2100 is a 4 degree Celsius increase in global temperatures. "When I look at what the models predicted for a [4 degree Celsius] world, I see very little rain over vast swaths of populations," Dr. Leifer's concerns are dire, not only in terms of the changing rainfall patterns predicted by the IPCC, but also regarding the rainfall patterns that are already occurring across the globe."If Spain becomes like Algeria, where do all the Spaniards get the water to survive?" he asked. "We have parts of the world which have high populations, which have high rainfall and crops that exist there, and when that rainfall and those crops go away and the country starts looking more like some of North Africa, what keeps the people alive?" The warning signs are already abundant. A group affiliated with the UN recently released a report showing how without dramatic international intervention, the ongoing decline of pollinating species around the world poses a dire threat to the global food supply. This is because increasing numbers of pollinating species, including butterflies and bees, are going extinct.Another recent study showed that lack of food production, again caused by ACD, will likely cause at least half a million deaths by 2050.

One-Third of Global Food Production Never Finds Its Way Onto Our Plate -- It’s easy not to think about food waste when your rotting tomatoes and days-old casserole dishes are hidden away in the back of the refrigerator—out of sight, out of mind. But when it comes time to clean it out, you have to face a lot of waste food, money and the resources that took to produce it. While food waste has made a rapid rise in terms of public awareness recently, new research suggests that the future effect could end up accelerating climate change at a worrisome rate in coming years.  According to a study released Thursday by Potsdam Institute for Climate Impact Research, food waste could account for about a tenth of global greenhouse gas emissions by 2050. “Agriculture is a major driver of climate change, accounting for more than 20 percent of overall global greenhouse-gas emissions in 2010,” Prajal Pradhan, one of the study’s authors, said in a statement. “Avoiding food loss and waste would therefore avoid unnecessary greenhouse-gas emissions and help mitigate climate change.” Around the world, about one-third of all food that’s produced is either lost or wasted every year. While farmers and grocery stores throw out tons of bruised fruits and misshapen vegetables that don’t meet the industry’s strict cosmetic standards, consumers are the culprits for wasting the most food. American households toss about $144 billion worth of produce and other items annually. In the UK, a study found that people were throwing out twice as much food as they originally thought—about $85 worth, to be exact.

Last Month Was The Hottest March In The Global Satellite Record, And The Arctic Is Still SizzlingJoe Romm -- Last month was the hottest March on record, according to newly-released satellite data. And it followed the hottest February on record.  The Arctic was literally off-the-charts warm last month, as we’ll see. It’s no surprise, then, that Arctic sea ice set a record for the lowest maximum extent. First, the University of Alabama at Huntsville (UAH) data shows that in March the lower troposphere (the lowest part of the atmosphere) was a remarkable 1.3°F (0.73°C) above the historical (1981-2010) average, a baseline that is already some 0.8°F (0.45°C) hotter than pre-industrial levels.  Higher highs and higher lows — the warming trend is quite clear in the satellite data. As the UAH’s Roy Spencer and John Christy — both leading deniers — have reported, the UAH data shows a “global climate trend since Nov. 16, 1978 [of] +0.12 C [0.22F] per decade.”  “Record-Shattering February Warmth Bakes Alaska, Arctic 18°F Above Normal,” was the Climate Progress story last month when NASA released its February temperature data. How warm was the Arctic in March? Off the charts. Look at what the heat did: It kept Arctic sea ice growth almost flat for over a month during a time when sea ice extent normally soars to its annual maximum. The result, as the National Snow and Ice Data Center (NSIDC) reported last week, was the lowest winter maximum on record.

Arctic's winter ice extent is the smallest on record -  NOAA - On March 24, 2016, the blanket of sea ice capping the Arctic Ocean reached its annual winter high. For the second year in a row it was a new record low. The National Snow and Ice Date Center (NSIDC) reported that Arctic sea ice extent reached 5.607 million square miles (14.52 million square kilometers), edging out 2015’s wintertime extent of 5.612 million square miles (14.54 million square kilometers). Adapted from NSIDC, this graph shows Arctic sea ice extent throughout the year. The gray line is the 1981–2010 average, and the semitransparent gray band surrounding it is the normal range of variability for that 30-year period. The extent line for 2015—the year of the previous record-low wintertime extent—is light blue. The extent line for early 2016 is white. NSIDC’s science team pointed out that the difference between this year’s new record low and last year’s is small, and within the error of measurement, but added that back-to-back winters have now seen the lowest ice cover extents of the past 37 years. The extent in 2016 was 431,000 square miles (1.12 million square kilometers) below the 1981–2010 average, which is like carving away an area of ice the combined size of Texas, Oklahoma, Arkansas, and most of Louisiana. The record-low maximum occurred amid unusual warmth in the Arctic. NSIDC reported that air temperatures were 4°–11°F (2°–6°C) warmer than average over almost the entire Arctic Ocean from December 2015 through February 2016. Unusually high temperatures continued in some regions through the first half of March. At the same time, southerly winds kept pushing the ice edge north of its usual location in some regions.

Melting of Arctic Sea Ice Already Setting Records in 2016 -- The decline of Arctic sea ice is already setting records in 2016, with the winter peak in March clocking in as the lowest since satellite records began, scientists say. A new and fuller summary of this year’s Arctic winter by the U.S. National Snow and Ice Data Centre (NSIDC) confirms the preliminary announcement last week that sea ice reached its annual maximum extent on March 24 this year.   With abnormally warm conditions right across the Arctic, some regions experienced temperatures 4-8C higher than average. While this meant slower ice growth in some places, in others it caused a dramatic thinning by 30cm in one week, according to early model results. Arctic sea ice ebbs and flows with the seasons, reaching a maximum extent for the year in February or March and a minimum in September, at the end of the summer melt period. This year, scientists were still waiting expectantly at the end of March, explains the NSIDC report: “Very early in the month, extent declined, raising anticipation that an early maximum had been reached. However, after a period of little change, extent slowly rose again, reaching the seasonal maximum on March 24.”As late as a week ago, scientists still hadn’t ruled out the possibility of a late season surge. But sea ice extent has dropped off quite a bit since then, suggesting the peak has been and gone. You can see this year’s sea ice behavior in the graph below from NSIDC, which shows sea ice extent over the 2015/6 winter (blue line) up to April 3 compared to previous years.

We’ve been getting these key details about Greenland’s melting all wrong - Ice melt in Greenland is one of the biggest preoccupations for climate scientists today, mostly because of the ice sheet’s potential contributions to sea-level rise.  Now, researchers say they’ve collected new data in Greenland that reveals how wrong some assumptions about the ice sheet have been — and the new information could fundamentally change our understanding of how future climate change may affect the ice.The new research, which was published last week in the journal Geophysical Research Letters, focuses on a field of study known as “bathymetry” — basically, the study of underwater topography, or what the floor of a body of water looks like.   “We know a lot of the mass loss of the glaciers is due to melting at the glacier front,” said Martin Truffer, a physics professor and glacier expert at the University of Alaska Fairbanks, who was not involved with the new research.  “And that melting happens because warm water can get right up to the ice and melt it that way.” It’s also believed that warm ocean water can help destabilize glaciers from the bottom up, melting the ice where it’s grounded to the seafloor and eventually causing large chunks to break away. Truffer pointed out that it’s “only in the last 10-plus years that people really started realizing how much of a role melting by ocean water played.” So scientists are still getting a handle on the kinds of information we need to really understand the process. And one under-studied part of the picture is underwater topography.

Global warming is changing the way the Earth spins on its axis - Global warming is shifting the way the Earth wobbles on its polar axis, a new NASA study finds. Melting ice sheets — especially in Greenland — are changing the distribution of weight on Earth. And that has caused both the North Pole and the wobble, which is called polar motion, to change course, according to a study published Friday in the journal Science Advances. Scientists and navigators have been accurately measuring the true pole and polar motion since 1899 and for almost the entire 20th century they migrated a bit toward Canada. But that has changed with this century and now it's moving toward England, said study lead author Surendra Adhikari at NASA's Jet Propulsion Lab. "The recent shift from the 20th-century direction is very dramatic," Adhikari said. While scientists say the shift is harmless, it is meaningful. Jonathan Overpeck, professor of geosciences at the University of Arizona who wasn't part of the study, said "this highlights how real and profoundly large an impact humans are having on the planet." Since 2003, Greenland has lost on average more than 600 trillion pounds of ice a year and that affects the way the Earth wobbles in a manner similar to a figure skater lifting one leg while spinning, said NASA scientist Eirk Ivins, the study's co-author.

Antarctic ice will likely melt much faster than originally feared, enough to double the rate of sea level rise  – Climate scientists may have collectively underestimated the hazards of sea level rise. If greenhouse gas emissions continue to increase at their present rate, then, in Antarctica alone, enough ice will have run into the sea by the end of the century to raise the high tide mark worldwide by a metre. And if the process continues, then by 2500 enough of Antarctica’s massive ice cap will have melted to raise sea levels by 15 metres. The new finding focuses only on revised calculations for Antarctica. It does not count the melting from all the world’s mountain glaciers, the permafrost, or the Greenland ice cap, and it is concerned principally with the immediate impact of global warming. But the consequences are ominous enough. “This could spell disaster for many low-lying cities,” says Robert DeConto, professor of climatology  at  the University of Massachusetts-Amherst. “For example, Boston could see more than 1.5 metres 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 retreat.” “We looked at the long-standing problem posed by geological evidence that suggests sea level rose dramatically in the past, possibly by up to 10 to 20 metres around 3 million years ago in the Pliocene,” Dr Pollard says. “Existing models couldn’t simulate enough ice sheet melting to explain that.” The scientists’ warning comes with an important proviso: this is what could happen if humans continue to burn fossil fuels at the present rate, to increase the carbon dioxide composition of the atmosphere, and to drive global warming.

Study: Hydrofracturing of ice shelves will cause the high ice walls of Antarctica to collapse: “New computer models have shown that Antarctica’s ice sheets, which contain 70% of the worlds fresh water, are on the verge of a breakdown that could push seas to heights not experienced since prehistoric times. From the abstract published in Nature on March 30. Polar temperatures over the last several million years have, at times, been slightly warmer than today, yet global mean sea level has been 6–9 metres higher as recently as the Last Interglacial (130,000 to 115,000 years ago) and possibly higher during the Pliocene epoch (about three million years ago). In both cases the Antarctic ice sheet has been implicated as the primary contributor, hinting at its future vulnerability. Here we use a model coupling ice sheet and climate dynamics—including previously underappreciated processes linking atmospheric warming with hydrofracturing of buttressing ice shelves and structural collapse of marine-terminating ice cliffs—that is calibrated against Pliocene and Last Interglacial sea-level estimates and applied to future greenhouse gas emission scenarios. Antarctica has the potential to contribute more than a metre of sea-level rise by 2100 and more than 15 metres by 2500, if emissions continue unabated. In this case atmospheric warming will soon become the dominant driver of ice loss, but prolonged ocean warming will delay its recovery for thousands of years.”

The alarming science driving much higher sea level projections for this century - For many scientists studying Antarctica, and particularly the vulnerable West Antarctic ice sheet, a major new study significantly increasing expectations for sea-level rise is the culmination of a large body of prior research — combined with alarming recent observations. The study, just published in Nature, is based on an improved understanding of past warm eras in Earth’s history that featured much higher seas. By creating advanced computer simulations of how Antarctica’s ice melts and flows — ones that can accurately capture sea level during these eras — the current study was also able to project considerable sea-level rise in the relatively near future.  In effect, it found that we’re about to start repeating the past. The research stated that for a very high-carbon-emissions scenario, melting ice from Antarctica alone could cause seas to rise 1.14 meters (3.74 feet), give or take 36 centimeters, by 2100 — and vastly more, more than 15 meters (over 50 feet), by 2500. The world has recently taken steps to try to avoid such a high-emissions pathway — steps whose effectiveness remains to be seen — but even in a more moderate emissions scenario, the study found the Antarctic contribution could be 58 centimeters (nearly two feet), give or take 28 centimeters, and close to six meters (nearly 20 feet) by 2500. That would be in addition to contributions from melting mountain glaciers, swelling seas caused by warming itself, and losses from Greenland. The smaller ice sheet in Greenland is melting even faster than Antarctica and contains up to six meters (20 feet) of potential sea-level rise, including about two meters in vulnerable areas where marine-based ice is in contact with the ocean.

Why the New Sea Level Alarm Can't Be Ignored: The release of a new study projecting that sea level could rise between five and six feet by 2100—when many children born today will still be alive and have been forced to move inland—made Thursday one of those days.  It’s different from other alarms, and here’s why.  They’re projecting it with a computer model of the West Antarctic Ice Sheet and of the Antarctic climate—that is, from the laws of physics. The geologic record offers some test cases. Some 125,000 years ago, for instance, Earth was in an interglacial period, like the one we’re in now, a warm interlude between 100,000-year-long ice ages. The temperature then was about the same as it is today, a degree or two warmer at most. But the best evidence indicates sea level was at least 20 feet higher—which in itself is disconcerting, suggesting as it does that we might be poised on the brink of something big. The West Antarctic Ice Sheet contains enough water to raise sea level 15 feet. And if you could strip away the ice and look at the bedrock, as scientists have done with airborne radar, you’d see how vulnerable it is: Most of the ice sits not on land but on the seabed. It’s a big dome of ice rising out of a seafloor basin, like a soufflé out of a bowl. Beyond the submarine ridges that form the sloping sides of the basin, floating ice shelves extend out to sea. They act like buttresses, propping up the ice dome and keeping it from collapsing and washing away.   Three key processes are work, the researchers write. First, as the ocean warms, it melts the floating ice shelf from below, thinning and weakening it. Second, as the atmosphere warms, it melts the ice shelf from above, generating pools that become crevasses that help break the shelf apart. And once the floating ice shelves are gone, and the warm ocean is lapping directly against the face of the grounded ice sheet, and the ice has retreated inside the submarine ridge that forms the edge of the basin, a third process kicks in. Because the seafloor slopes down toward the center of the basin and the ice dome, further retreat exposes an ever larger ice face to the warm water. That accelerates the melting.

Climate Models May Overstate Clouds’ Cooling Power, Research Says - The computer models that predict climate change may be overestimating the cooling power of clouds, new research suggests. If the findings are borne out by further research, it suggests that making progress against global warming will be even harder.The new paper, in the journal Science, focuses on what are known as mixed-phase clouds, which are found around the world and contain both cooled water and ice crystals.The balance of water and ice in clouds affects the impact that carbon dioxide levels have on atmospheric temperatures, a factor known as equilibrium climate sensitivity. A higher sensitivity would mean that carbon dioxide levels would cause more warming than previously thought.Using data from instruments aboard the Calipso satellite, which monitors clouds and particles suspended in the atmosphere, the researchers determined that mixed-phase clouds contain more water and less ice than expected.  Water droplets reflect more solar radiation back into the sky than ice crystals do. As the atmosphere warms, clouds tend to have more water and less ice in them, and the more watery clouds prevent solar radiation from reaching the earth. Warming is slowed.With less ice in the mix to start, however, there is less capacity for water to replace ice, said Ivy Tan, an author of the paper and a graduate student at the department of geology and geophysics at Yale University. The result, she said, is more warming.

The Terrestrial Biosphere Is A Net Greenhouse Gas Source - Dave Cohen - The news is all really bad on the climate change front lately. I don't usually report on that stuff but occasionally a result comes along which is too impressively bad to pass up. A recent Nature Letter met that criteria. It's called The terrestrial biosphere as a net source of greenhouse gases to the atmosphere. Here's the abstract. The terrestrial biosphere can release or absorb the greenhouse gases, carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O), and therefore has an important role in regulating atmospheric composition and climate. Anthropogenic activities such as land-use change, agriculture and waste management have altered terrestrial biogenic greenhouse gas fluxes, and the resulting increases in methane and nitrous oxide emissions in particular can contribute to climate change. Here we use bottom-up (inventory, statistical extrapolation of local flux measurements, and process-based modelling) and top-down (atmospheric inversions) approaches to quantify the global net biogenic greenhouse gas balance between 1981 and 2010 resulting from anthropogenic activities and its effect on the climate system. We are talking about the most important greenhouse gases here, including methane and nitrous oxide. The climate "forcing" (surface warming) created by those gases is expressed in terms of carbon dioxide equivalence, which is abbreviated as CO2e. Here's the result. Read it and weep. We find that the cumulative warming capacity of concurrent biogenic methane and nitrous oxide emissions is a factor of about two larger than the cooling effect resulting from the global land carbon dioxide uptake from 2001 to 2010. This results in a net positive cumulative impact of the three greenhouse gases on the planetary energy budget, with a best estimate (in petagrams of CO2 equivalent per year) of 3.9 ± 3.8 (top down) and 5.4 ± 4.8 (bottom up) based on the GWP100 metric (global warming potential on a 100-year time horizon). Long story short, due to human activity, the terrestrial biosphere is a net source of greenhouse gases expressed in CO2-equivalence.

Industrialised nations need to lead the world with an exit strategy for fossil fuels - At the UN climate conference in Paris in December 2015, 195 countries concluded a groundbreaking climate accord. They agreed to limit global warming to well below 2C to avoid extremely dangerous and irreversible climate change. The international community’s remaining emission “budget” is less than 1,000 gigatonnes of CO2. The Paris agreement is intended to ensure as quickly as possible that the annual global emissions go down, the budget is stretched, and the net emissions of greenhouse gases are reduced to zero over a few decades. The challenge of limiting the combustion of oil, coal and gas to this budget is enormous in view of the fossil reserves still underground. If we were to use all the known and probable reserves to generate energy, global emissions would amount to around 15,000 gigatonnes of CO2. So limiting global warming to 2C means this: of the 15,000 thousand gigatonnes of CO2, we need to leave at least 14,000 underground. Truly, our problem is not a scarcity of fossil resources, it is the exact opposite. We lack an exit strategy for oil, coal and gas. Energy efficiency and renewable energy are indispensable parts of a response to climate change, but they do not tell us why private companies and private individuals should stop extracting, marketing and consuming fossil fuels. In fact, the progress made on energy efficiency and renewables can actually exacerbate the problem. An oversupply of fossil resources lowers the price and makes it even more tempting to use them. And the temptation is great: the fossil energy industry offers profits, jobs and low energy prices.

To meet the Paris climate goals, do we need to engineer the climate?: The climate talks that convened in Paris at the end of 2015 produced a historic agreement, giving negotiators and climate activists good reason to celebrate. Now the task is to ensure that the ambition shown in Paris is matched by action.  It is now possible to imagine that the economy can grow, even as fossil fuel-based energy production declines. Add to this an announcement from the International Energy Agency that electricity produced worldwide from renewable sources looks to be on track to overtake coal-fired generation by 2030, and the much-needed renewable energy revolution may well be upon us. All is not necessarily rosy, however. For one thing, international agreements don’t always translate into domestic momentum. Witness, for instance, the decision by the Supreme Court of the United States to place a stay on a key part of the Obama administration’s plan to stem carbon emissions. A second piece of bad news, or, at least, news that will be unwelcome in many quarters, is that matching the ambition of Paris will demand consideration of options for addressing climate change that to this point have been widely deemed unpalatable.  Our read is that the Paris agreement will, through time, force closer consideration of so-called “climate engineering” or “geoengineering” schemes. In particular, we foresee increasing attention being paid to solar radiation management (SRM) or albedo modification technologies. This is a class of speculative responses that might cool the planet by reflecting some amount of solar energy back into space before it can trapped by the greenhouse gases in the atmosphere. Leading SRM proposals include depositing reflective sulfate particles into the stratosphere or increasing the reflectivity of marine clouds via the introduction of saltwater droplets.

The Roads to Decoupling: 21 Countries Are Reducing Carbon Emissions While Growing GDP | World Resources Institute: As countries embark on the transition to a new climate economy, there’s a debate about whether growth can drive, or even coexist with, climate stabilization. On the other side of the coin, it’s also a discussion of whether climate stabilization can drive growth. The debates on growth and resources are complex, fractious and centuries old, and while they won’t be resolved in the immediate future, recent developments show that global greenhouse gas (GHG) emissions stayed flat in 2014 and 2015 while GDP continued to grow. This emerging trend is supported by 21 countries that have managed to reduce GHG emissions while growing GDP. The United States is the largest country to experience multiple consecutive years in which economic growth has been “decoupled” from growth in carbon dioxide emissions. From 2010 to 2012, energy-related carbon dioxide emissions declined by 6 percent (from 5.58 to 5.23 billion metric tons), while GDP grew by 4 percent (from $14.8 to $15.4 trillion). In its analysis of the Clean Power Plan, the U.S. Energy Information Administration forecasts that moving to a cleaner electricity system after 2020 would bring about a sustained period of GDP-GHG decoupling. As illustrated in the figure below, CPP implementation is expected to reduce total U.S. energy-related carbon dioxide emissions by a further 6 percent between 2020 and 2025, while GDP increases by 13 percent in real terms over the same period.

Wind and Solar Are Crushing Fossil Fuels -- Wind and solar have grown seemingly unstoppable. While two years of crashing prices for oil, natural gas, and coal triggered dramatic downsizing in those industries, renewables have been thriving. Clean energy investment broke new records in 2015 and is now seeing twice as much global funding as fossil fuels. One reason is that renewable energy is becoming ever cheaper to produce. Recent solar and wind auctions in Mexico and Morocco ended with winning bids from companies that promised to produce electricity at the cheapest rate, from any source, anywhere in the world, said Michael Liebreich, chairman of the advisory board for Bloomberg New Energy Finance (BNEF). "We're in a low-cost-of-oil environment for the foreseeable future," Liebreich said during his keynote address at the BNEF Summit in New York on Tuesday. "Did that stop renewable energy investment? Not at all." Here's what's shaping power markets, in six charts from BNEF:  Government subsidies have helped wind and solar get a foothold in global power markets, but economies of scale are the true driver of falling prices: The cost of solar power has fallen to 1/150th of its level in the 1970s, while the total amount of installed solar has soared 115,000-fold. As solar prices fall, installations boom  The reason solar-power generation will increasingly dominate: It’s a technology, not a fuel. As such, efficiency increases and prices fall as time goes on. What's more, the price of batteries to store solar power when the sun isn't shining is falling in a similarly stunning arc. Just since 2000, the amount of global electricity produced by solar power has doubled seven times over. Even wind power, which was already established, doubled four times over the same period. For the first time, the two forms of renewable energy are beginning to compete head-to-head on price and annual investment.

Wind Farm Oil Leaks -- April 7, 2016  -  Oil Spills On Wind Farms -- Tell Me It Isn't So! From Michigan's Thumb: Ominous black spots on wind turbines in the Thumb have raised a few eyebrows. Huron County Building and Zoning Director Jeff Smith says residents have questioned what look like grease stains on six or seven turbines between Sebewaing and Owendale. “It was disturbing to see that,” Smith said, adding he drove through the area Monday. Seals on the turbine were coming out of bearing holders, Smith said, comparing it to a vehicle with a bad wheel bearing. He said he’s not sure if the bearings on the turbines are faulty or defective. “GE knew but did not tell us,” Smith said of turbine manufacturer General Electric, adding he got an email from NextEra Energy stating a cleaning crew is coming. There are 32 turbines in Exelon Wind Generation’s Harvest 1 project in Oliver and Chandler townships. A 400-foot, 485,000-pound turbine that fell on Feb. 25 spilled 25 gallons of greases, oil and coolant, according to the DEQ ( ). The spill posed “no imminent drinking water or environmental health threat,” a DEQ official told the Tribune. Exelon says the fallen turbine held about 400 gallons of oil. The leaks aren’t limited to just Huron County. South of Minden City, some of DTE Energy’s 20 turbines are planted in organic farm fields. A landowner on Charleston Road who farms about 1,000 acres said in February the Environmental Protection Agency and Michigan Department of Environmental Quality arrived about six months back when oil was leaking from a turbine’s nacelle, which encases inner components and is where the rotor attaches, but that oil did not leak onto the field.

This new transmission line will help unleash wind energy in the Great Plains. One down, dozens to go. -- Wind and sunlight have many advantages as fuel sources, but one big drawback is that they aren't portable. You can't carry them to a power plant. You have to build the power plant wherever you find them. That puts the US in an awkward situation, because the most intense wind and sunlight tend to be found in remote, low-population areas — think the sunny desert Southwest or the windy Great Plains. In order to exploit that wind and sunlight, the US needs some way to carry the power generated there to the population centers where it's needed. That is to say: The US needs new high-voltage, long-distance power lines. Big infrastructure like that is notoriously difficult to build in the US, but it can still happen. Last week brought heartening new evidence. On Friday, the Department of Energy approved the Plains and Eastern Clean Line, a new high-voltage direct-current (HVDC) power line that will extend from western Oklahoma to western Tennessee. It is meant to bring the abundant wind power of the sparsely populated Oklahoma Panhandle to dense population centers to the east.  Wind turbines in the panhandle will generate alternating current (AC). It will be transformed to direct current (DC) at one station, near Guymon, Oklahoma, then sent over the line. There will be a station in Russellville, Arkansas, where power can be offloaded into the midwestern AC grid, managed by the Midcontinent Independent System Operator (MISO). And there will a third station in Memphis, where power will be converted and fed into existing AC grids serving Southwestern and mid-South states.

California's Growing Imported Electricity Problem - California’s SB 350 requires the state to procure 50% of electricity from renewable energy and double energy efficiency savings by 2030. And the U.S. Environmental Protection Agency’s “Clean Power Plan” wants states to “to act more like California.” Yet, beyond power rates 45% above the U.S. average, California has another problem that makes it less of a model than some proclaim. California now imports 33% of its electricity supply from fast growing neighbors, with about 65% of that coming from the Southwest and 35% coming from the Northwest. These numbers increase most in summer months when air conditioning loads peak. Imports have been rising rapidly: in 2010, California “only” imported 25% of its power.Per the U.S. Energy Information Administration, California imports because “its wholesale power markets in the region are relatively open and generation from outside the state is often less expensive.” In fact, California imports about 6% of its electricity from out-of-state coal-fired power plants, with another 14% coming from ”unspecified imports,” of a cloudy origin that is generally attributed to hydropower, gas, nuclear, and other renewables. Besides having the most expensive electricity west of the Mississippi River in the continental U.S., California already has the least reliable electricity. California easily leads the nation with nearly 470 power outages a year, compared to 160 for second place Texas, which is really amazing because Texas produces 125% MORE electricity! (here). California’s reliability problems will be multiplied as more wind and solar enter the power mix, intermittent resources located in remote areas that cannot be so easily transported to cities via the grid.

Venezuelans get Fridays off for two months in emergency plan 'to save energy' - Venezuelan workers will get Fridays off in the months of April and May, in a bid to save energy in the black-out hit country, the president said. President Nicolas Maduro said Venezuelans will have “long weekends” in an appearance on state television on Wednesday night, announcing the measure as part of a 60-day plan to fight a power crunch. “This plan for 60 days, for two months, will allow the country to get through the most difficult period with the most risk. I call on families, on the youth, to join this plan with discipline, with conscience and extreme collaboration to confront this extreme situation,” Maduro said.The government’s plan will be effective from this Friday and last until June 6, according to Agence France Presse. Some Venezuelans took it to social media to express their surprise.  Maduro's no-work Friday decision is meant to last 60days #venezuela #PowerCrisis he doesnt seem to know people also burn electricity at home.  Many others wondered how the measure would impact schools, bureaucratic procedures and supermarkets. It was not immediately clear how the non-working Fridays would affect the public and private sector.

Would You Link to China's Global Power Grid?  -- Adam Minter over at Bloomberg has an interesting article on how China's State Grid Corporation, the world's largest electricity supplier, is busy buying up energy assets all over the world. Apparently, it's all part of CEO Liu Zehnya's plans to eventually establish--get this--a global power grid. From an environmental standpoint, what's interesting is that it's designed to link producers of renewables to faraway customers in a way that has not been possible before when nearly all energy grids were, well, national:China’s State Grid Corporation, the world’s biggest power company, is on an impressive buying binge. As Bloomberg News reports, the company is “actively in bidding” for power assets in Australia, hoping to add them to a portfolio of Italian, Brazilian, and Filipino companies. The goal isn’t simply to invest, however. State Grid's Chairman Liu Zhenya has a plan that he believes will stall global warming, put millions of people to work and bring about world peace by 2050. The idea is to connect these and other power grids to a global grid that will draw electricity from windmills at the North Pole and vast solar arrays in Africa’s deserts, and then distribute the power to all corners of the world. Among other benefits, according to Liu, the system will produce “a community of common destiny for all mankind with blue skies and green land.”

Natural gas plants running at a fast clip, EIA says - At Large: The evidence of natural gas’s rise over coal as the fuel of choice on the nation’s power grid continues to pile up. The U.S. Energy Information Administration reported Monday that for the first time on record last year the capacity factor of natural gas plants – the percentage of a plant’s total potential electrical output that is actually generated and put onto the grid – beat out that of coal plants. U.S. natural gas plants ran at a capacity factor of 56 percent, compared to 55 percent that of coal. The numbers illuminate a dramatic shift away from coal in recent years, as gas and renewable energy sources like solar and wind take an increasingly larger share of the grid. In 2005 coal plants ran at capacity factors of close to 70 percent, while gas plants were running at less than 40 percent on average, according to EIA. But the huge surge in natural gas production across Texas, Pennsylvania and other states has flooded the market, forcing down prices and making gas a more attractive option for power companies. Not only is gas plant construction surging, coal plants are retiring at a fast clip –  80 percent of all plant retirements last year were coal. At the same time, EIA said, utilities are shifting to combined-cycle gas plants that uses both gas and steam to generate electricity, producing up to 50 percent more electricity from the same amount of fuel.

Australia Is Letting the Great Barrier Reef Die Over a Lot of Coal  -- If there was one thing Australia could’ve done to save the Great Barrier Reef, it would’ve been to block the development of the country’s largest coal mine, which its state government approved with resounding confidence this week. The Great Barrier Reef, true to its name, is the most expansive reef ecosystem in the world. It’s the largest living organism on the entire planet, and is so big we can actually see it from outer space. Remember the Seven Natural Wonders of the World? It’s one of those, too. But its vast size will not keep it from dying—which it is—at an astounding rate, thanks to humans. Recent aerial and underwater surveys of the Great Barrier Reef showed that 95 percent of its northernmost quarter now shows signs of the “worst bleaching ever.” This is extremely bad. Coral bleaching is akin to some environmental force stripping away your skin, weakening your skeleton, and preventing you from ever being able to grow back either. Large barrier reefs can take anywhere from 100,000 to 30,000,000 years to fully form, but potentially-deadly bleaching can occur over a matter of a single, record-hot summer. The cause of the Great Barrier Reef’s illness is clear, and we know what we’d need to do to keep it from getting any sicker. The bad thing? Australia’s government just delivered the reef a poison pill.

New coal plants rise in 2015 despite falling consumption - Carbon Brief: Old coal plants are increasingly lying dormant, yet new ones keep getting built, according to a new report. The analysis by CoalSwarm, which includes researchers from Greenpeace and the Sierra Club, looks at the state of global coal over the last year. Their findings highlight a disconnect between the recent reductions in demand for coal, and the hundreds of gigawatts of new capacity that developers want to build in the future. In 2014, falling demand for coal in China meant that consumption fell for the first time, dipping by around 0.9%. While a relatively small decline, it is in sharp contrast with the annual average growth of 4.2% for the last decade. The trend is expected to have continued during 2015.  Beijing recently released its statistics for 2015, showing that coal demand had dropped again, and this time by a wider margin. The upshot is that existing coal plants are being used less across major coal-burning economies. The graph below shows that plants are, on average, producing a smaller percentage of their maximum possible output every year.  These are “symptoms of excess capacity and overbuilding”, says the report. Alternative sources of energy, weakening demand and more plants means that those in operation simply do not have to produce as much power anymore.

Report Ties Coal Plants to Water Shortage in Northern China— China’s consumption of coal, a major contributor to climate change and the country’s horrific air pollution, is worsening a severe water shortage in the northern part of the country, Greenpeace said in a report released Tuesday.China’s coal-fired power plants consume more water where water is scarce than plants in any other country, according to the report, which assessed global water depletion from coal use. A decades-long drought in northern China — home to the bulk of the country’s coal production and consumption — is worsening, and the central and local governments are grappling with widespread desertification. Officials have relocated millions of people. Beijing, the capital, where more than 20 million people live, has extremely low water levels.The problem is so severe in the north that China has built an enormous series of canals, the South-North Water Diversion Project, to transport water hundreds of miles from the Yangtze River.Greenpeace said the continuing burning of coal for power plants and factories in northern China, along with the growth of the coal-to-chemicals industry, was exacerbating the water crisis. In much of northern China, people are using water faster than it can be regenerated, Greenpeace said, “posing a serious threat to local ecology.”  At the end of 2013, China had 45 percent of the world’s coal-fired power plants, with a total installed capacity of 804 gigawatts, according to research by Greenpeace and a summary of findings in its 60-page report, “The Great Water Grab.” Nearly half of the plants were in water-scarce areas, and those had a total annual water consumption of 3.4 billion cubic meters, enough to meet the basic needs of about 186 million people, the researchers found. Across all of China, coal-fired power plants consume 7.4 billion cubic meters of water each year, enough to meet the needs of 406 million people, or about 30 percent of the nation’s population, according to the report.

Climate Change Puts Trillions of Dollars of Assets at Risk: Study - Trillions of dollars of non-bank financial assets around the world are vulnerable to the effects of global warming, according to a study on Monday that says tougher action to curb greenhouse gas emissions makes sense for investors. Rising temperatures and the dislocation caused by related droughts, floods and heatwaves will slow global economic growth and damage the performance of stocks and bonds, according to the report, led by the London School of Economics. "It makes financial sense to a risk-neutral investor to cut emissions, and even more so to the risk-averse," lead author Professor Simon Dietz, an environmental economist, told Reuters.  .If the rise were limited to 2C by 2100, the study's central scenario put the total of current financial assets that could be damaged at $1.7 trillion. But if the temperature rose a further 0.5C by the end of the century, $2.5 trillion would be at risk under the most likely scenario. Global regulators in the Financial Stability Board say all the world's current non-bank financial assets are worth $143 trillion. At the extremes of the study's thousands of scenarios based on a 2.5C rise, the value at risk ranges from 0.5 percent of total financial assets up to a worst case of 17 percent, or $24 trillion.

Why fossil fuel power plants will be left stranded --Virtually all new fossil fuel-burning power-generation capacity will end up “stranded”. This is the argument of a paper by academics at Oxford university. We have grown used to the idea that it will be impossible to burn a large portion of estimated reserves of fossil fuels if the likely rise in global mean temperatures is to be kept below 2C. But fuels are not the only assets that might be stranded. A similar logic can be applied to parts of the capital stock. February was the warmest month on record. The current El Niño — the warming of the global climate triggered by the Pacific Ocean — has boosted temperatures, just as it did in 1997-98. The recent supposed pause in rising temperature was relative to the sudden jump at that time. A comparison between 1998 and today shows temperature continues to climb, together with atmospheric stocks of carbon dioxide. This reminds us of the realities of climate change. Moreover, two forms of inertia govern climate policy. First, infrastructure in power generation, which generates a quarter of all anthropogenic emissions, is long-lived. In the EU, 29 per cent of thermal power plants are more than 30 years old and 61 per cent are more than 20 years old. Second, carbon dioxide remains in the atmosphere for centuries. Thus it is necessary to think not of annual flows but of cumulative emissions or of a global carbon budget. The Oxford paper assumes (optimistically) that emissions from all other sectors proceed in accordance with the emissions pathway judged by the Intergovernmental Panel on Climate Change to give a 50 per cent chance of keeping the temperature increase below 2C. It assumes, as well, that new generating plants are operated to the end of their normal economic lives. Under those assumptions, capital stock created after 2017 would break the global carbon budget. Yet, in the past decade alone, the emissions implied by the investment in power generation have been rising at 4 per cent a year. To shift suddenly to zero emissions would appear inconceivable.

Radioactive boars run wild around Fukushima reactors - Municipal incinerators have been used to dispose of the boars, but there is a shortage of personnel needed to perform the gruelling and messy task of chopping up their bodiesShin Yoshino/CorbisCommunities in northern Japan are being overwhelmed by radioactive wild boars which are rampaging across the countryside after being contaminated by the Fukushima nuclear disaster. The animals’ numbers are increasing as the boar breed unhindered in the exclusion zone around the stricken Fukushima Daiichi plant, and they are causing damage to farms well beyond the area poisoned by radiation. Hunters are shooting the boars as fast as they can, but local cities are running out of burial space and incinerator capacity to dispose of their corpses.

Nuclear Expert: “I’ve learned there’s a huge spike in death rates in Fukushima for young children”… Officials are covering up data — Gov’t committing inhuman acts on their own people — Doctor’s who treat patients suffering from radiation illness are being put out of business (AUDIO) Excerpt 1,  Arnie Gundersen, nuclear engineer: “I’ve been reflecting a lot over the last week and a half about what the trip meant to me personally and what I learned… The first thing is [the people are] terribly concerned about their country and concerned about their children… The second thing is the inhumanity of the Japanese government, the Japanese utilities and the Japanese banks toward their own population. I’m just appalled at how the power structure in Japan is ignoring what its people want and basically ramming nukes down the throat of their population… I think [the media sources in Japan] still feel pressure under that State Secrets Act. Nobody wants to push too hard against [Prime Minister Shinzo Abe's] administration. As a matter of fact, one of Abe’s prime key ministers came out and said twice now that if… the media doesn’t say what the administration wants them to say, they’re going to pull their licenses.” Excerpt 2, Gundersen: “The one thing I learned when I was in the resettlement communities [of people evacuated due to the Fukushima nuclear crisis] is that they’ve all been told that there will be no resettlement communities by the time the Olympics start. The plan is to move people back into their homes in the contaminated areas, or to move them somewhere else in Japan to permanent homes”… (Maggie Gundersen, founded of Fairewinds Energy Education:) “I was devastated when I saw some of the pictures that you took in Japan… these temporary housings just look like military barracks on bare pavement… And now to hide the radiation, extensive radiation, that’s there and re-depositing in the already cleaned areas from snowmelt, flooding, and rain — and to say it’s okay and send everyone back is a death sentence to all these families and children and grandchildren.”

The Most Dangerous Place on Earth A Nuclear Armageddon in the Making in South Asia -- Undoubtedly, for nearly two decades, the most dangerous place on Earth has been the Indian-Pakistani border in Kashmir. It’s possible that a small spark from artillery and rocket exchanges across that border might -- given the known military doctrines of the two nuclear-armed neighbors -- lead inexorably to an all-out nuclear conflagration.  In that case the result would be catastrophic. Besides causing the deaths of millions of Indians and Pakistanis, such a war might bring on “nuclear winter” on a planetary scale, leading to levels of suffering and death that would be beyond our comprehension. Alarmingly, the nuclear competition between India and Pakistan has now entered a spine-chilling phase. That danger stems from Islamabad’s decision to deploy low-yield tactical nuclear arms at its forward operating military bases along its entire frontier with India to deter possible aggression by tank-led invading forces. Most ominously, the decision to fire such a nuclear-armed missile with a range of 35 to 60 miles is to rest with local commanders. This is a perilous departure from the universal practice of investing such authority in the highest official of the nation. Such a situation has no parallel in the Washington-Moscow nuclear arms race of the Cold War era.

Local Groups Work to Stop Injection Wells - WOUB - After driving by Coolville, Ohio, on Route 50, a driver might decide to pull off at the rest stop right before Torch. To some passing through, the junction might appear to be simply a very busy spot for truck traffic. To residents of Torch, however, that truck traffic has a different meaning.The K&H Partners injection well sits across the street from the rest stop. Huge, tall, green tanks stand atop a hill as receptacles–ready to accept the toxic waste water from hydraulic fracturing. The site has inspired the creation of several opposition groups, including Torch Can Do.  Felicia Mettler is a member of Torch Can Do. Felicia describes herself as a stay-at-home mom. She has never taken an interest in activism, but after learning more about the injection site and fracking in general, Felicia decided to take a stand, which she has never regretted.  “I’m beyond angry, I’m scared, I’m aggravated, that our lawmakers who we have put in place to keep us healthy and keep us safe are not doing their job.” Felicia said while she stood on the road so that she would not be trespassing on K&H’s property. The K&H Partners has the largest injection well complex in Ohio. The recent approval of another site moved one activist group, the Athens County Fracking Action Network, to head to court. The group’s appeal of ODNR’s injection well license was rejected. ODNR said the sites are strictly regulated for Ohioans safety. Felicia, however, disagrees. Torch Can Do thinks the state should not allow fracking or injection wells anywhere in the state.“Why are you so afraid to protect us? Why are you so afraid to put these laws and regulations in place? That’s my question. And are we not important? Do we matter? Because that’s how we feel. These communities that are facing these which are very small communities feel like we are expendable. We don’t matter,” Felicia said.

Utica Shale drilling downturn to cost Ohioans lost royalty money and state tax income, expert says - The downturn in shale drilling will likely be costly for Ohio landowners hoping to cash in on Utica Shale royalties, says an energy researcher. The drilling slowdown and low commodity prices are projected to cost Ohio landowners $6.5 billion in lost income over the next five years, said Maria Cortez of Houston-based Wood Mackenzie, an energy research company. Cortez, speaking Wednesday at the Canton Chamber of Commerce’s daylong Utica Upstream conference, said the downturn will also cost the state of Ohio about $665 million in lost tax income over the five years. Those losses could reach $12 billion for landowners and $2 billion for the state of Ohio over the next nine years, she told the audience of 110 people at the Pro Football Hall of Fame. Cortez also predicted an increase in drilling companies acquiring one another through late 2017 when prices are expected to rise. In addition, she expects companies to develop more joint ventures to share costs in the Utica Shale. The Utica Shale in Ohio and the Marcellus Shale in West Virginia and Pennsylvania produce about one-third of all natural gas in the United States and will play an important role in exporting liquefied natural gas to other countries, she said. Those areas are “the OPEC of natural gas liquids” but increased prices are still likely 18 months away, she said. She said the Marcellus Shale should exceed 30 billion cubic feet per day by 2020, while the Utica Shale will double to 9 billion cubic feet per day in that time.

Tough year ahead for drillers - Canton Repository --This will be a difficult year for the oil and gas industry as drillers face bankruptcy and rig counts drop in the face of growing production from shale wells. The current challenges and future prospects of the industry were topics at the Utica Upstream conference held Wednesday at the Pro Football Hall of Fame.  Low prices for oil and natural gas, brought on by the shale-drilling boom, have made it less economical to drill new wells. As of last week, only 12 rigs were drilling Ohio’s Utica Shale, according to state statistics.Maria Cortez, a Houston-based analyst with Wood Mackenzie, an international research and consulting firm, said the Utica needs about 11 rigs to keep production at current levels and the rig count will likely hit bottom this summer.Wood Mackenzie estimates there are between 150 and 250 Utica wells that have been drilled but still need to be fracked, and companies are likely to complete that inventory before starting to drill new wells, Cortez said.The total cost of Utica wells has been rising to about $10 million per well in southeastern Ohio, but the wells are longer, produce more natural gas and liquids and actually cost less per foot, Cortez said.Natural gas prices currently stand near $2 per thousand cubic feet. Very few wells are economical below that threshold, Cortez said.“For the (Utica) play to be really competitive, we need $3 gas,” and prices should reach that point by year’s end, she said.An advantage the Utica has over the Marcellus is that the Utica has liquids, while the Marcellus produces only dry gas. If the oil price rebounds to above $50 a barrel, liquid-producing parts of the Utica could compete with the Marcellus, but that’s not likely to happen before the end of the year, Cortez said.

Groups call for more transparency in sharing Utica shale benefits and risks -Since 2011, shale gas drilling has been a way of life for some eastern Ohio communities, with residents acutely aware of both the benefits and drawbacks. But as production declines, are those perceptions changing? Organizers of a 2014 survey hope to find out. Following up on the Ohio Shale Country Listening Project, which anonymously questioned 773 people from five Ohio counties about the long-term impact of natural gas extraction, survey creators will interview citizens who provided the project with detailed answers about hydraulic fracturing’s effect on the local economy as well as their quality of life. With assistance from a research director at the University of London, the involved groups are also planning a peer-reviewed paper on Ohio’s fracking industry. The paper, set for publication this summer, will include the original survey and be framed to reach an international audience. Further data is needed to drill down into a local gas and oil boom that has not been well-received by all, surveyors said. The listening project — conducted over a four-month period in 2014 by the Ohio Organizing Collaborative with support from the Ohio Environmental Council, FracTracker and an area trade union — found that 43 percent of respondents had a negative view of regional shale development. Concerned residents, most of them from heavily drilled Carroll County about 90 miles south of Cleveland, worried about traffic accidents, water contamination and insufficient economic protection once shale growth entered an inevitable bust cycle.

DIGGING DEEPER INTO THE OHIO VALLEY SHALE: EPA Is Moving on Methane, Fracking Opposition Mounts -  The U.S. Environmental Protection Agency believes methane - the main component of natural gas - can be 25 times more harmful to the environment than carbon dioxide when it leaks into the atmosphere, while a new Gallup poll shows more than half of Americans now oppose fracking. Though many believe Obama's Clean Power Plan unfairly targets the coal industry by declaring that carbon dioxide emissions from power plants must be 32 percent below 2005 levels by the year 2030, administration officials want to cut methane emissions from the oil and natural gas industry 45 percent by 2025. Now, EPA Administrator Gina McCarthy is asking companies to meet the "Methane Challenge." "The voluntary Methane Challenge program is one important part of our overarching strategy to reduce methane emissions, and complements regulatory efforts that will help the United States meet the Obama Administration's goal of reducing methane emissions by 40 to 45 percent by 2025," McCarthy said. In December 2014, an unknown amount of methane leaked into the atmosphere over a 10-day period when the wellhead blew off at a Magnum Hunter operation in Monroe County. Moreover, processing plants, compressor stations and well sites throughout the Upper Ohio Valley often feature flare systems that can release methane into the air. However, the product is significantly more harmful to the environment if it is released without burning, such as in a vent or leak. The program will provide partner companies with a platform to make company-wide commitments to cut emissions from sources within their operations by implementing a suite of best management practices within five years.

Evidence of hormone-affecting chemicals found near wastewater injection well, researchers warn - Researchers working with the U.S. Geological Survey say they found evidence of chemicals that could cause hormonal changes in animals in a stream near a West Virginia facility that disposes of gas drilling wastewater in a deep underground well. Their study, set to be published online Wednesday in the peer-reviewed journal Science of the Total Environment, did not trace specific chemicals from the facility near Fayetteville or note any environmental damage. Instead, the study's authors said water samples taken near and downstream from the injection well indicated the presence of substances that could affect endocrine activity, while samples taken upstream and away from the facility did not. “It is absolutely a call for more in-depth analysis” at the facility and other sites, said lead author Susan Nagel, an associate professor in the Department of Obstetrics, Gynecology and Women's Health at the University of Missouri. Nagel's research has focused on substances that affect hormones and the endocrine system, and previous work linked chemicals used in fracking fluid to such issues. The study did not include the name of the facility, but the West Virginia Department of Environmental Protection identified it as the Danny Webb facility. The owner could not be reached.

A Fracking Well In West Virginia Is Leaking Chemicals That Can Affect Fertility -  Dangerous levels of chemicals that can harm fertility flow downstream from a West Virginia fracking wastewater disposal facility, federal and academic researchers reported on Wednesday. The finding raises questions about safety of similar deep disposal sites nationwide, several independent scientists said. The contamination near Fayetteville, West Virginia, flows from a brook called Wolf Creek a few miles upstream of a New River drinking water treatment facility for 11,300 people. The disposal site, which includes a deep waste well, several holding ponds, and storage tanks, sits on a hillside above the creek, and has been the site of a fight over its permit, revoked in 2014 and then renewed by the West Virginia Department of Environmental Protection in August. “I wouldn’t drink out of Wolf Creek,” University of Missouri toxicologist Susan Nagel, a study author, told BuzzFeed News. It’s unclear whether the contamination has reached residents’ drinking water, but that should be tested, Nagel said. U.S. Geological Survey scientists invited Nagel, an expert on “endocrine disrupting” chemicals linked to switched genders in fish, lowered fertility in mice, and hyperactivity in children, to test water upstream and downstream of the fracking waste site. “We found levels of these endocrine disrupting chemicals high enough to threaten health,” Nagel said.

Study: Water problems near W. Va. fracking disposal site - --Researchers found high levels of endocrine disruption activity in the water near or downstream from the wastewater site in Fayetteville, West Virginia. The study, published today in the journal Science of the Total Environment, adds to evidence that some chemicals in hydraulic fracturing waste are hormone-mimickers or blockers and are leaching out of wastewater disposal wells and into nearby water, potentially impacting fish and human health.  Along with water, the injections contain sand and a mix of chemicals—some of which have been linked to cancer, hormone impacts, and reproductive problems. It’s estimated that every well produces more than one million gallons of wastewater, which is eventually pumped into disposal wells. There are an estimated 36,000 fracking disposal sites in the U.S. and little testing has been done on nearby surface water, said lead author Christopher Kassotis, a postdoctoral fellow at Duke University.Kassotis and other university and federal researchers collected water upstream, downstream and around a wastewater facility that has a disposal well, holding ponds and storage tanks—all used to house excess wastewater from drilling. There is a small stream flowing through the site, which flows into Wolf Creek. Wolf Creek flows into the New River, which is used for some people’s drinking water.Samples near the site and downstream had “considerably higher” activity for a number of hormones, including estrogen, androgen and thyroid receptors, than reference samples in the watershed far from any disposal sites.

Where is uproar over radioactive waste? - It's been over a month, now, since we first learned that the Blue Ridge Landfill in Estill County had become the dumping grounds for illegally imported radioactive fracking waste...and so far, things seem to be business as usual. When the land men showed up last year, looking to lease our mineral rights for fracking, one of my first concerns was that my home would become convenient disposal for the huge quantities of poisonous water and sludge generated by the oil and gas industry.  And now, in the county where I grew up, and possibly across this beautiful state, it already has. Despite hundreds of folks from our community in Estill County and beyond showing up to demand accountability and answers, both have been in mighty short supply.  It's no secret among the locals that trucks creep in and out of the dump at all hours of the night, and I grew up hearing a lot of speculation as to what they were burying in there. And then, suddenly, it wasn't speculation anymore.  At least 2,000 tons of concentrated radioactive tailings from out-of-state oil and gas fracking operations (something we've been fighting to keep out of our own foothills) had slipped in "under the radar" and been dumped loose from the containers it was brought here in -- and no one seems to even know just exactly where, let alone have a plan for recovery. No one seems to know, either, how much of that loose radioactive particulate matter may have become airborne during the time the dumpings occurred (several months, July through November of last year); how much of it may have drifted across the road to the frighteningly close middle and high schools.  I attended that middle school the year it opened, and you sure can smell the dump from there.  When we smell something, it means we're breathing in its particles.

A Big Slowdown In Pennsylvania Fracking (podcast) A steady drop in natural gas prices has forced energy companies drilling in Pennsylvania to layoff workers and shut down operations. For the drilling hotspot Marcellus Shale, that means a big change to the local economy. Reid Frazier from the Allegheny Front at WESA in Pittsburgh reports.

Natgas Storage Spreads Are Back, Alright! - A few years ago, natural gas storage was one of the hottest segments of midstream infrastructure development.   But along came shale, then oversupply, then depressed prices.  The forward curve flattened out, killing off new storage development projects and putting a lot of financial pressure on those companies that own or lease storage capacity.  But recently things have shifted, at least part of the way back to the good ole days.  The summer/winter spread currently sits at $0.63/MMBtu (April 7, 2016), the highest level since 2012, and up significantly from the past years average of around $0.30/MMBtu.  Midstream companies with available storage should be able to lock in higher prices compared to past years.  In today’s blog, we look at the situation now facing natural gas storage operators and show how recent shifts in the market may affect their returns.

‘Fractivists’ Increase Pressure on Hillary Clinton and Bernie Sanders in New York -  A nasty row that erupted between Hillary Clinton and Bernie Sanders over oil and gas industry donors last week is catapulting the issue of climate change into the race for the Democratic presidential nomination as it moves to New York, where an army of activists upstate is driven by opposition to drilling.Mrs. Clinton has moved steadily left on the issue, under pressure from Mr. Sanders and his progressive allies, but she continues to come under assault, posing new challenges for her as the race moves to more liberal Northeastern states.Last week, her mask of composure slipped when she angrily replied to a Greenpeace activist in Purchase, N.Y., “I am so sick of the Sanders campaign lying about me.”Climate change is a powerful issue for voters in the Democratic base almost everywhere. But it has especially inspired grass-roots progressives in upstate New York, who fought — and won — a yearslong battle against fracking for natural gas.Even after Gov. Andrew M. Cuomo banned fracking statewide in 2014, many activists — who call themselves fractivists — remain on the front lines of climate fights, and many are skeptical about Mrs. Clinton because of views she held in the Obama administration and earlier, as a New York senator from 2001 to 2008.

How Much Money Has Hillary Clinton’s Campaign Taken From the Fossil Fuel Industry? – (Democracy Now video) According to a new report by Greenpeace, Hillary Clinton’s presidential campaign and the super PAC supporting her have received $138,400 from fossil fuel lobbyists and $1,327,210 from bundlers, totaling more than $4.5 million from lobbyists, bundlers and large donors connected the fossil fuel industry. Clinton maintains that she’s received only about $330,000 from individuals who work for fossil fuel companies—about 0.2 percent of the total raised by her campaign. We speak with Charlie Cray, research specialist for Greenpeace and lead researcher on the fossil fuel lobbyists’ contributions to the Clinton campaign, as well as Eva Resnick-Day, a democracy organizer for Greenpeace who confronted Clinton at a rally. Watch here:

Oil pipeline opponents say local bans will derail project: (AP) — Environmental groups are citing a provision in a 107-year-old transportation law in trying to derail an oil pipeline project from upstate New York to New Jersey. Daniel Raichel, a lawyer for the Natural Resources Defense Council, says the New York Transportation Corporations Law of 1909 gives villages and cities veto power over oil pipelines through their borders. Since five communities in the Hudson Valley have passed resolutions opposing the Pilgrim Pipeline project, the environmental groups say further state review is a waste of resources. The project calls for one pipeline carrying crude oil from the Port of Albany to New Jersey refineries, and another carrying refined petroleum north. Pilgrim spokesman Paul Nathanson says the state review was proceeding according to environmental laws. The state Department of Environmental Conservation and Thruway Authority had no comment.

TPP Would Fuel Climate Chaos and Empower Corporate Polluters --Many pundits were caught off-guard by the transpartisan fury over America’s trade policy rocking the presidential primary season. But it’s no surprise to me. I grew up in a working class family in Kenosha, Wisconsin. So I know why Americans have had enough of shiny promises, job-killing trade deals and Wall Street bailouts that propel ordinary people into an economic nose dive.Hard working Americans of all political stripes recognize when the rules have been rigged against them, because they live day-to-day with the results. No doubt revolutionary change is an appealing alternative. Since the North American Free Trade (NAFTA) and World Trade Organization agreements in the mid-1990s, America has lost more than five million manufacturing jobs net. Millions of service sector jobs also have been offshored.  Pacts like the recently-signed Trans-Pacific Partnership (TPP), currently sidelined without sufficient congressional support for passage, contain thousands of pages of enforceable rules that would fuel climate chaos and empower corporate polluters to challenge environmental laws across the globe.And if the TPP were approved, the Department of Energy would be required to automatically approve all natural gas exports to the 11 other TPP countries, eliminating our government’s ability to make decisions about our energy future and incentivizing a boom in dangerous fracking. The extreme secrecy of TPP negotiations allowed the Obama administration to claim it was the greenest deal ever. But when the TPP text was finally disclosed late last year, environmental groups that the White House claimed supported it, such as NRDC and Defenders of Wildlife, joined the Sierra Club, Greenpeace, and scores of others in opposition.

The Challenge of LNG/Gas Specification Compatibility - As if the international market for liquefied natural gas weren’t complicated enough, add the facts that 1) the LNG shipped from various export terminals differs in chemical composition, and 2) the specifications for the natural gas consumed by various countries around the world differ too. In other words, you can’t assume that the heating value and other important characteristics of the super-cooled gas in the LNG shipped from exporting country A will align with the gas specs enforced in importing country B. That’s a big deal to LNG exporters and traders who would like to be able to ship their LNG to wherever it would make the most money, but who need to consider a lot more. Today, we look into the increasing significance of LNG/gas spec differences as the old rules of the LNG market break down.  We’ve been giving increasing attention to the international LNG market, mostly because the first liquefaction/LNG export facilities in the Lower 48 states are coming online (Train 1 at Cheniere Energy’s Sabine Pass is already up and running, and Train 2 is nearing completion) and because natural gas flows to these facilities are starting to affect U.S. gas markets.  Our Drill Down report LNG Is a Battlefield provided a big-picture view of things, and our Begin the Sabine and Commencing Countdown, Engines On series described the pipeline infrastructure feeding Sabine Pass and the initial gas flows to the liquefaction/LNG export facility

NYMEX May gas futures settle 10.7 cents higher to eclipse $2 mark - The NYMEX May natural gas futures contract jumped 10.7 cents to $2.018/MMBtu Thursday, marking the first time a prompt-month contract has settled above the $2 mark since February 10. Amid some cooler-than-normal forecasts for April, the market shrugged off a bearish storage report. US natural gas storage volumes rose 12 Bcf to 2.48 Tcf for the week ended April 1, according to the US Energy Information Administration. That set a record high for this time of year, breaking the previous high of 2.474 Tcf set in 2012. The storage data was also bearish compared with the five-year average of a 19-Bcf withdrawal, according to EIA data."However, this may not be enough of a shock to offset the late-season heating demand due to the current forecast for colder-than-normal temperatures," said Timothy Evans, energy futures specialist with Citi Futures. "Prices may be able to absorb the bearish storage surprises and still test higher." Evans said cool forecasts point to a supportive net withdrawal from storage for both the weeks ending April 8 and April 15, but that may also be followed by warmer-than-normal conditions in the 11- to 15-day period. The National Weather Service's latest eight- to 14-day forecast showed a higher likelihood of above-normal temperatures in most of the eastern and central US, with below-normal temperatures in most of the US Southwest.

Why Natural Gas Prices Could Double From Here - – Art Berman - Natural gas prices should double over the next year. Over-supply plus a warm 2015-2016 winter have resulted in low gas prices. That is about to change because supply is decreasing (Figure 1). Total supply–dry gas production plus net imports–has been declining since October 2015* because gas production is flat, imports are decreasing and exports are increasing. Shale gas production has stopped growing and conventional gas has been declining for the past 15 years. As a result, the supply surplus that has existed since December 2014 is disappearing and will move into deficit by November 2016 according to data in the EIA March STEO (Short Term Energy Outlook). During the last supply deficit from December 2012 to November 2014, Henry Hub spot prices averaged $4.05 per mmBtu. Prices averaged $1.99 per mmBtu in the first quarter of 2016 so it is reasonable that prices may double during the next period of deficit. EIA forecasts that gas prices will increase to $3.31 by the end of 2017 but that is overly conservative because it assumes an immediate and improbable return to production growth once the supply deficit and higher prices are established. Production companies are in financial distress and are unlikely to return to gas drilling at the $2.75 price that EIA forecasts for November 2016. The oil-field service industry is in disarray and is probably unable to reassemble drilling and fracking crews and equipment in less than 6 to 12 months after demand resumes. There are currently on 92 rigs drilling for gas. That is 150 rigs less than the previous record-low set in 1992 (Figure 2). Production cannot be maintained at this level despite unrealistic faith in drilling efficiency and spare capacity from uncompleted wells.

The St. James Crude Hub Continues to Develop - The St. James, LA crude trading hub provides feedstock to 2.6 MMb/d of regional refining capacity as well as refineries in the Midwest. St. James is also an important distribution hub for crude from North Dakota, South Texas, the Gulf of Mexico and onshore Louisiana as well as imports arriving at the Louisiana Offshore Oil Port (LOOP). Crude storage and midstream infrastructure at St. James has been expanding in recent years as the trading hub handles larger volumes of domestic production. Today we begin a new series looking at infrastructure and crude pricing at St. James. St. James is located on the Mississippi River 60 miles upriver from New Orleans and about 60 miles Northwest of the Clovelly, LA landing point for crude imported through LOOP. We have previously discussed the offshore LOOP terminal (see Thrown For a LOOP) that is the only deep water port on the Gulf Coast capable of unloading million barrel plus cargoes from very large crude carriers (VLCCs) and ultra large crude carriers (ULCCs – up to 3 MMBbl). We have recently looked at the potential for LOOP to develop export capabilities (see The Great Beyond).  The map in Figure #1 shows the central position that St. James occupies in the Eastern Gulf Coast crude oil refining and distribution system. We will get to the inbound and outbound pipeline systems and refinery connections in a minute. Being on the Mississippi River means that St. James can also accommodate barge or tanker (up to Aframax size – about 750 MBbl) receipts or loadings and receive crude delivered from the Midwest via inland waterways. In the past 5 years midstream companies have built out rail unloading facilities at St. James that receive domestic crude – particularly from North Dakota (see Back to the Delta). The Louisiana hub has also been used as a transit point to ship surplus supplies of U.S. ultra light crude (condensate) from the Eagle Ford basin in South Texas to Canada via the Capline pipeline for use as a diluent in heavy Western Canadian oil sands (see Plains Trains and Diluent Deals). More recently St. James has been a receipt point for condensate delivered by barge down the Ohio River and Mississippi from the Marcellus and Utica (see Give a Little Bit).

Huge Fire Erupts at ExxonMobil Refinery Near Houston - An enormous fire erupted an ExxonMobil refinery in Texas on Thursday. The Baytown refinery caught fire, leading to huge black plumes of smoke into the air, visible from downtown Houston.  According to Reuters, the fire erupted at a lube oil hydrotreating unit, which removes sulfur from oil, a 20,000 barrel-per-day section of the refinery that produces diesel fuel. The fire was extinguished Thursday afternoon and ExxonMobil stated that no injuries were reported. Exxon also said that the oil refinery’s operations were not disrupted. The Exxon refinery produces 560,500 barrels of refined product per day, enough to rank it as the second largest refinery in the United States. Almost as soon as the fire in the ExxonMobil refinery was extinguished, we got reports of a fire in a refinery belonging to LyondellBasell Industries. CNBC reported that the fire occured in the coker unit of the refinery that can process over 263,000 barrels per day.

23.5M acres off Texas up for oil, gas leases in August: (AP) — The federal government will offer 23.5 million acres off of Texas for oil and gas leases in August. The Bureau of Ocean Energy Management says that’s all the available waterbottom in the western Gulf of Mexico. Spokesman John Filostrat (FIL-oh-strat) says the agency has not chosen a date or location. Last August marked the smallest sale ever for the western Gulf. Five companies bid on 33 tracts for a total of $22.7 million in high bids. Each tract drew one bid. A sale last month for central and eastern tracts was the central region’s fourth-lowest since regional sales began in 1983. Nobody bid on tracts in the eastern Gulf. Industry lobbyist Randall Luthi blamed the low sales on both low oil and gas prices and uncertainty over possible future regulations.

NETL National Energy Technology Laboratory : Project Captures First-Ever Comprehensive Hydraulic Fracturing Research Data from 1.5 Miles Underground -- The U.S. Department of Energy's National Energy Technology Laboratory (NETL), working with the Gas Technology Institute, Laredo Petroleum, and other industry partners, has collected what is possibly the world's most comprehensive hydraulic-fracturing research dataset in unconventional shale. This data - which will be made publicly available - provides a first-ever look at how induced underground fractures spread within horizontal wellbores. It will be used to help reduce potential environmental impacts, improve efficiency, and demonstrate safe and reliable operations of hydraulic fracturing. Hydraulic fracturing is a complex process with many variables affecting exactly where fractures propagate, their dimensions, and their ability to enhance production of hydrocarbons. Since the fractures are underground, they are never seen and operators have had to rely on various indirect measurements to infer their dimensions. Insights and understanding gained from this project will change that. Current fracturing operations are inefficient in several aspects. By improving the design and execution of hydraulic fracturing, the number of future wells drilled can be reduced along with the amount of water and energy needed in hydraulic fracturing operations. A smaller environmental footprint can result. At a test site in the Permian Basin of Texas, 11 new 10,000-foot-long horizontal wells were drilled and stimulated in the upper and middle Wolfcamp formations, and approximately 600 feet of unique core was obtained by drilling a one-of-a-kind core well through created hydraulic fractures. The process allowed researchers to obtain phenomenal quality core samples. Based on a first look at the core, the research team predicts that the fundamental understanding of hydraulic fracture propagation, modeling, and effectiveness is about to undergo a game-changing alteration. The data acquired at the site will help producers understand fracture connectivity and conductivity while identifying drainage patterns across multiple rock formations.

Seismic Report Links Earthquakes to Fracking | Alternet: Officially linking a controversial natural gas-drilling method to earthquakes for the first time, the U.S. Geological Survey released a groundbreaking report documenting links between fracking and skyrocketing seismic activity. Released on Monday, the agency's "2016 One-Year Seismic Hazard Forecast" contains no explicit reference to hydraulic fracturing, but the allusion to the process is unmistakable. "Earthquake rates have recently increased markedly in multiple areas of the Central and Eastern United States (CEUS), especially since 2010, and scientific studies have linked the majority of this increased activity to wastewater injection in deep disposal wells," the 58-page report states. "Such changes have caused concern to many, including residents, business owners, engineers, and public officials responsible for mitigating or responding to the effects of these earthquakes on nearby populations," it continues. These "induced earthquakes," as the report calls them, "create seismic hazard to buildings, bridges, pipelines, and other important structures and are a concern for about 7.9 million people living in the vicinity of these events." Colloquially known as "fracking," hydraulic fracturing extracts natural gas by pumping millions of gallons of a high-pressure slurry comprised of water, sand and chemicals to break apart shale deep in the Earth. In lawsuits from Arkansas to California, its opponents have long alleged that the technique caused "thousands of quakes" near drilling areas. Monday's report corroborates many of these allegations with several examples of earthquakes that rocked areas located near injection wells.

Another View: Quaking in our boots over fracking: “Drilling is Making Oklahoma as Quake Prone as California,” one headline blared. “Fracking fallout: 7.9 million at risk of man-made earthquakes,” read another. To some opponents of the drilling techniques that have unlocked massive stores of U.S. oil and natural gas, reports of fracking-related earthquakes are yet more evidence that drilling must end. In fact, as with many of fracking’s risks, its potential to induce seismic activity along otherwise relatively quiet fault lines is serious - but probably manageable. It justifies regulating the industry, not shutting it down. This week’s big news came from the U.S. Geological Survey (USGS), which released a startling earthquake hazard map with a big, red blob over Oklahoma. For the first time, the government’s earthquake monitor incorporated human-induced tremors into a one-year hazard projection. The resulting map showed that some parts of the country with a lot of fracking rival California’s tectonically active Bay Area in the severity of the projected hazard. This should come as no surprise to anyone living in affected areas. Most of the quakes are small, but parts of Oklahoma felt a 5.1 magnitude earthquake in early February. So, is fracking causing earthquakes across large swaths of the country? As best as scientists can figure, only in an indirect way. Small earthquakes are possible when drillers inject fluid into rock formations to fracture them and let oil and gas escape. A study released this week attributed many tremors detected on the surface in Western Canada to this process. But fracking per se does not seem to be the big problem in the United States. Rather, scientists point to how drillers dispose of the wastewater that flows out of their wells. Some of this is sent back into the ground in separate wastewater injection wells. This process puts pressure on the subterranean geology and can result in noticeable shifts.

Several earthquakes recorded in Oklahoma: (AP) — The U.S. Geological Survey has recorded several small to moderate earthquakes in Oklahoma, including a magnitude 4.0 quake. The temblor was recorded at 5:27 p.m. Thursday, 1 mile north of Luther — or 25 miles northeast of Oklahoma City. The Logan County Sheriff’s Office says no injuries or damage are reported. The quake is one of seven recorded since shortly after midnight. The others range in magnitude from 2.7 to 3.6. The number of magnitude 3.0 or greater earthquakes has skyrocketed in Oklahoma, from a few dozen in 2012 to more than 900 last year and scientists have linked the increase to the underground disposal of wastewater from oil-and-gas production. State regulators are asking oil and gas companies to reduce their wastewater disposal operations.

Are You One of the 7 Million Americans Threatened by Man-Made Earthquakes? - Believe it or not, even if you occupy the middle of the country, you could be facing a future filled with damaging earthquakes, too. But that’s not because volatile tectonic plates are sliding back and forth and crashing against each other to create massive cracks in the continent’s surface. It’s because oil and gas operations are sending enormous volumes of wastewater deep underground, where they can push the earth’s crust further downward, increase pressure against already existing fault lines and cause a great big rumble that will knock down your china cabinet– or worse. A new study by the U.S. Geological Survey (USGS) assesses the risk of earthquakes or seismic activity caused by humans. The agency particularly looked at earthquakes triggered when wastewater from oil and gas operations is injected underground, as it is during the “fracking” or hydraulic fracturing occurring in the energy fields east of the Rocky Mountains and west of the Mississippi River. What they found has sent shockwaves across news outlets, social media sites and of course, the households in the paths of these operations: “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.” “The chance of damage from all types of earthquakes is similar to that of natural earthquakes in high-hazard areas of California,” warns the USGS.

Colorado Republican Senate Candidate: Fracking Doesn’t Cause Earthquakes; God Does! -- The U.S. Geological Survey said this week that the link between fracking and earthquakes is stronger than ever.Fluid injection is a controversial tactic tied to hydraulic fracturing, the drilling technique known as “fracking” that has dramatically increased U.S. oil and gas production. When oil and gas is pumped out of the ground, salty water often flows out with it. This water is typically injected back under high pressure into disposal wells — a practice that the geological agency has said can induce earthquakes. So if you’re a Colorado Republican hoping to win a seat in the U.S. Senate, what do you do? You already know the answer because I said “Republican.”

Colorado House Defeats Local Control Fracking Bill « CBS Denver: – Colorado’s House on Monday defeated a bill to reassert local government control over the siting of oil and gas drilling, with some Democrats joining Republicans in deciding it isn’t the time to add to regulatory confusion while the state Supreme Court considers if such powers are legal. The bill, co-sponsored by Democratic Reps. Mike Foote of Lafayette and Su Ryden of Aurora, became a platform for another debate on state-versus-local authority over an energy industry whose operations increasingly affect urban and suburban communities along Colorado’s Front Range. Foote and Rep. Tracy Kraft-Tharp of Arvada offered an amendment they said would limit municipalities’ authority over fracking to the use of their noise, traffic and visual impact ordinances. Under the current system, Foote said, local governments are quickly sued by energy companies for trying to use that authority. Opponents said local input already is outlined under the 2015 findings of a fracking task force convened by Gov. John Hickenlooper. They insisted the commission already considers local impacts in siting rigs. And they said it wasn’t time for the bill because the state Supreme Court is considering the legality of a 2012 voter-approved fracking ban in Longmont.

6 Colorado Teenagers File Appeal in Fracking and Climate Lawsuit -- Six youth plaintiffs on Monday appealed Denver District Court Judge Eric Elliff’s adverse decision to their fracking and climate change lawsuit. In his decision, Judge Elliff affirmed the Colorado Oil and Gas Conservation Commission’s order to deny the fracking petition brought by the young plaintiffs, determining that the commission is required to “strike a balance between the regulation of oil and gas operations and protecting public health, the environment and wildlife resources.”  “Our health and safety are on the line,” said Xiuhtezcatl Roske-Martinez, 15-year-old plaintiff and youth director of Earth Guardians. “For the future of all Coloradans, it was imperative for us to file this appeal. It’s a preposterous idea that the commission need to strike a balance between regulation of oil and gas operations and protecting the health of Coloradans. The commission’s priority should be the health and safety of us, the people. Right now, our government is putting their profits above our futures and that needs to stop.

Study Fracking Elements Found in Sources of Drinking Water  - A Stanford University report has confirmed that toxic fracking chemicals ended up in a Wyoming town's source of drinking water, and suggests common industry practices may have widespread impacts. The study examined sites near the town of Pavillion, Wyo., and found evidence of fluids dumped that contain diesel fuel, high chemical concentrations in unlined pits and inadequate barriers to protect groundwater. Stanford University visiting scholar Dominic DiGiulio, the report's lead author, says the findings should be a wake-up call. "In the Rocky Mountain area of the United States, water is a precious resource, and I think we need to protect those resources for future use," he says. "And the concern about hydraulic fracturing is that it's not clear whether those resources are being protected." Hydraulic fracturing became the only industry legally allowed to inject toxic chemicals into underground sources of drinking water when Congress exempted it from the Safe Drinking Water Act in 2005. Concerns about fracking have rocked the U.S. political landscape and communities around the country. In a draft report last year, the Environmental Protection Agency announced that fracking posed no serious threats to drinking water, but recently the agency's own advisory board challenged those conclusions and said the impacts at Pavillion, and sites in Pennsylvania and Texas, deserve more attention.

Study finds fracking can pollute underground drinking water. Also discovers that sky is blue ... A Stanford University study shows that fracking can pollute underground drinking water. Using publicly available data and reports, researchers found organic compounds used in hydraulic fracturing were migrating into groundwater from unlined pits. The findings came from a case study of Pavillion, a small Wyoming town with a population of 231. For the first time, research showed, the fracking operations near the town had polluted underground sources of drinking water, making it unsafe to use. The study found that chemicals in Pavillion’s water were also the same substances companies used in local fracking operations. Faulty cement barriers placed around the steel casing inside an oil or gas well created the potential for fracking chemicals to seep underground, and tests of groundwater showed dangerous concentrations of diesel-related compounds such as benzene.Fields have been in operation near the town since the 1960s, with more than 180 oil and gas wells, some now plugged and abandoned. In 2008, the residents of Pavillion complained of a foul taste and odor in their drinking water and questioned whether it was related to physical ailments. The Environmental Protection Agency conducted testing, and in 2011, a preliminary report was issued linking shallow fracking to toxic compounds in aquifers. The EPA report was heavily criticized by the oil and gas industry and regulators, and the environmental watchdog agency never finalized its findings. Instead, it turned them over the state of Wyoming, which released a series of reports without firm conclusions. Wyoming has no plans to take further action on them.  Meanwhile, the federal Agency for Toxic Substances and Disease Registry told area residents to avoid bathing, cooking or drinking with water from their taps.

Ex-EPA scientist publishes Wyoming fracking study that agency abandoned -- In late 2011, the Environmental Protection Agency published a draft report on an investigation of groundwater contamination near Pavillion, Wyoming, where fracking had jump-started an oil and natural gas field that includes the Wind River Reservation. It's an unusual geologic setting, with little separation between the drinking water aquifer and the rocks being fracked for gas. Add poorly sealed gas wells, the draft report concluded, and you get fracking contamination that appeared to have reached the drinking water aquifer. Controversy ensued, and the EPA withdrew from the investigation before the report was ever finalized, giving the state of Wyoming control. One of the EPA scientists leading the investigation, Dominic DiGiulio, subsequently took a job at Stanford University. Along with Stanford colleague Rob Jackson, DiGiulio has tabulated all the EPA data that was sitting in scientific limbo—DiGiulio even went as far as using a Freedom of Information Act request to access EPA data from a couple of water samples that weren’t published. All that data now has a home in the form of a paper published in Environmental Science & Technology. The end result? The researchers stand by the EPA team’s original conclusions. During the investigation, the EPA drilled a pair of sampling wells between 200 and 300 meters deep—roughly the depth of the deepest water well in the area and the shallowest fracking activities. They were hoping for insight that couldn’t necessarily be gleaned from sampling shallower water wells alone, where an array of possible contamination sources can confuse things. As before, the researchers argue that samples from these wells indicate the presence of the chemical-laced water that's pumped down gas wells to hydraulically fracture rock, releasing the gas it holds.

EPA approves fracking chemicals despite lack of health tests - As fracking for gas and oil exploded across the landscape, federal law enabled chemical makers to win approval of fracking and drilling chemicals by EPA with no health testing and sweeping confidentiality claims that deny citizens even the most basic information on the chemicals’ identity, according to a two-year investigation by the nonprofit Partnership for Policy Integrity (PFPI).  More than 17 million Americans in the contiguous 48 states live within one mile of an active oil or natural gas well where these chemicals may be used.[1] Toxic Secrets:  Companies Exploit Weak US Chemical Rules to Hide Fracking Risks was based on a first-ever study of EPA’s health assessments and regulatory determinations for 105 fracking and drilling chemicals reviewed under the Toxic Substances Control Act’s (TSCA) New Chemicals program between 2009 and 2014.  Partnership for Policy Integrity (PFPI) received the records under a Freedom of Information Act (FOIA) request and separately obtained manufacturers’ submissions for most of the 105 chemicals from EPA’s public docket.  Passed in 1976, TSCA is supposed to protect the public from chemical risks in part by requiring review and regulation of new chemicals before they are used commercially. However, the investigation found that:

    • ·         Health studies were available in the public docket in only 2 percent of cases (2 of 99 cases). 
    • ·         EPA requested health studies in only five cases, despite expressing health concerns in 88 cases, including irritation to skin, eyes and mucous membranes; lung effects; neurotoxicity; kidney toxicity; and developmental toxicity. TSCA does not mandate health testing before a fracking chemical is put into widespread use.
    • ·         EPA approved almost all of these chemicals for manufacture, and the agency subsequently received notice that 37 of 70 chemicals expected to be produced at higher volumes (more than 22,000 pounds to millions of pounds per year) were, in fact, manufactured. The agency approved all of the 33 chemicals companies expected to be produced at lower volumes (limited to 22,000 pounds per year or less).

Fracking Wells Can Cut Their Toxic Chemical Use - Scientific American: When oil and gas companies extract fuel from the earth via fracking, they routinely add biocides such as glutaraldehyde to the high-pressure water they use to fracture rock formations deep underground. These compounds are a preemptive strike against microbes that produce hydrogen sulfide, which can corrode pipelines. New research, however, calls into question the across-the-board addition of toxic biocides to water used in fracking. Jason Gaspar and Pedro Alvarez at Rice University and colleagues, including scientists at energy firm Statoil, performed numerous tests at fracking sites in the Bakken Shale Formation in the north-central U.S. and in Canada. There, they found that H2S might be formed in fracking wells by geochemical reactions, rather than microbes (Environ. Sci. Technol. Lett.2016,  DOI:10.1021/acs.estlett.6b00075). At the Bakken sites, the team found, temperatures at the depths that the biocide-laden water is injected run about 120 °C, too hot for sulfogenic microbes to survive. In addition, DNA tests of injected water samples showed no evidence of microbes, and sulfur isotope analysis indicated that H2S recovered from the samples was produced abiotically. The researchers suggest that the H2S might instead have been produced via the reaction of underground calcium sulfate anhydrite with methane. H2S problems at other, cooler sites, such as the Marcellus shale formation in the eastern U.S., may still be caused by bacteria.

IUB threatens Dakota Access with fines over possible construction linked to Bakken pipeline : With allegations of construction projects related to the Bakken pipeline beginning in several areas of the state, the Iowa Utilities Board issued orders Thursday that may result in the company that proposed the pipeline, Dakota Access, being given hefty fines by the board. The pipeline, which would extend approximately 346 miles through Iowa as part of a 1,168-mile project to carry oil from the Bakken area near Stanley, N.D., to an oil transfer station near Patoka, Ill., was approved by the board on March 10 with several requirements attached that needed to be met before Dakota Access would be allowed to start construction. On March 23, the IUB received an email from Linda Murken, an Ames resident and member of the League of Women Voters, which is part of the The Bakken Pipeline Resistance Coalition, that expressed concern over an electrical substation being built in Story County that was on the same land where Dakota Access planned on building a pumping station for the pipeline. According to the land deal between Dakota Access and Consumer’s Energy, the property was deeded over to Consumer’s Energy for $10, “And other valuable consideration.”  After Murken filed her concerns with the IUB, several other people from around the state started reporting similar findings along the proposed path of the pipeline. Due to the allegations, and several other complaints filed with the IUB against Dakota Access, the board held a meeting Thursday to address the possible construction activity. Following that meeting, the IUB issued an order which reads, “The board finds that these public allegations of potential violation of the board’s order must be investigated and resolved. If Dakota Access is found to have violated the board’s order, the board may levy against Dakota Access a civil penalty in an amount not to exceed $100,000 for each violation. Each day that the violation continues constitutes a separate offense, up to a maximum of $200,000 for a related series of violations.”

TransCanada says spill forces shut down of Keystone pipeline: (AP) — TransCanada Corp. says the Keystone pipeline will likely remain shut down for the rest of the week while officials investigate an apparent oil spill in southeastern South Dakota. Oil was discovered on a 300-square-foot area in a ditch near a Freeman-area pump station. About 100 workers are at the site removing soil and determining the location of the leak. A company spokesman says crews have found no pipeline damage. TransCanada hasn’t released the amount of oil or speculated on cleanup costs. TransCanada says it has found no significant harm to the environment. State environmental officials are monitoring the cleanup. The Keystone pipeline runs from Alberta, Canada, to refineries in Illinois and Oklahoma, passing through the eastern Dakotas, Nebraska, Kansas and Missouri. Freeman is about 40 miles southwest of Sioux Falls.

Keystone XL’s Older Pipeline Twin Spills Oil In South Dakota -   Pipeline operator TransCanada shut down a section of its Keystone pipeline Sunday after about 187 gallons of crude oil spilled from the line in South Dakota, an accident that environmental groups say highlights the dangers of shipping oil by pipeline. So far, TransCanada has said that “no significant impact to the environment has been observed” and that the company “immediately began efforts to shut down the pipeline” when it received the report of the spill. The company also said it has notified landowners in the region.  The Keystone pipeline ships about 500,000 barrels of oil a day from Alberta, Canada to refineries in Illinois and Texas. The section of pipe running from Alberta to Cushing, Oklahoma has been shut down and will remain closed until Friday at the earliest, but the bottom portion of the pipeline — which runs from Cushing to Texas — is still up and running.  Environmental groups said Monday that the older Keystone’s spill drives home the threat that Keystone XL would have posed to the environment. They also pointed out that the Keystone pipeline, which was approved by President George W. Bush in 2008, leaked oil 12 times in its first year of operation alone. On average, pipelines spill oil more often than trains — the other major form of oil transport — but oil train spills are often more catastrophic, as the trains have the potential to explode. An oil train derailment and explosion in 2013 in Lac-Mégantic, Quebec killed 47 people and completely destroyed a town square.

TransCanada: 16,800 gallons of oil leaked in South Dakota: — TransCanada estimates that about 16,800 gallons of oil leaked into a field in South Dakota as part of a spill that has shut the Keystone pipeline down while officials investigate. The company says it reported the 400-barrel estimate Thursday to the National Response Centre and the Pipeline and Hazardous Materials Administration. It says the estimate is based on the excavation of soil to expose more than 100 feet of pipe and takes into account factors including oil observed in the soil and the potential area affected. TransCanada hasn’t yet said what caused the leak, which was reported Saturday. The company has told customers the pipeline will remain closed until early next week. About 100 workers are at the site, which is approximately 4 miles from the Freeman pump station in Hutchinson County, said TransCanada spokesman Mark Cooper. He said specialists at the site affirm that the leak is being controlled and there is no significant environmental impact and no threat to public safety. The pipeline runs from Alberta, Canada, to refineries in Illinois and Cushing, Oklahoma, passing through the eastern Dakotas, Nebraska, Kansas and Missouri. The Keystone pipeline can handle 550,000 barrels, or about 23 million gallons, daily. It’s part of a pipeline system that also would have included the Keystone XL pipeline had President Barack Obama not rejected that project last November.

Keystone Pipeline Leak Is Thousands Of Gallons Worse Than First Reported - Nearly a week after pipeline operator TransCanada shut down a section of its Keystone line over an oil leak, the company reported Thursday thousands of gallons of oil were spilled, not less than 200 as it first said. Based on soil excavations, TransCanada said about 16,800 gallons of oil leaked onto a field in South Dakota, the Associated Press reported. After the leak was discovered Saturday and the line was shut, TransCanada said about 187 gallons of crude oil had spilled, an accident that environmental groups said shows the dangers of shipping oil by pipeline. Though the spill is larger than first thought, it poses no significant environmental effects or threats to public safety, the AP said. The company behind the rejected Keystone XL line has yet to reveal what caused the leak, but it said the spill is being controlled, and reported the new estimates to the National Response Center and the Pipeline and Hazardous Materials Administration. The pipeline is part of the existing Keystone network that the proposed Keystone XL pipeline would have expanded. It runs from Alberta, Canada, to refineries in Illinois and Oklahoma via the Dakotas, Nebraska, Kansas, and Missouri. TransCanada said the pipeline won’t be fully operational until early next week. So far some 100 workers are at the site, located about four miles from Hutchinson County.  Misreported leak volumes often occur following oil spills as companies investigate accidents and discover oil seeped deeper in the ground or waterways than they first thought. Revised figures are at times much larger than first reported. In 2014, for instance, an oil spill in North Dakota was first reported to have caused a loss of 750 barrels of oil, a figure that climbed to about 20,600 barrels once the soil was further investigated.

California Members Urge Continued Offshore Fracking Moratorium - This week, Reps. Lois Capps (CA-24), Sam Farr (CA-20), and Jared Huffman (CA-02) sent a  letter urging the Federal Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) to maintain the current moratorium on offshore fracking along the California coast. The members note that a complete environmental impact analysis must be completed to show that there are no substantial threats of these well stimulation activities before the activity could be resumed. In January, BOEM and BSEE settled a lawsuit originated by the Santa Barbara-based Environmental Defense Center resulting in a required temporary moratorium on offshore fracking along the California coast until a comprehensive environmental review of the practices could be carried out. A draft environmental assessment was published in February, which proposed allowing the resumption of the use of techniques commonly referred to as offshore fracking, however, a complete review has not yet been completed. The letter sent by the California members highlights insufficiencies present in the environmental assessment and urges BSEE and BOEM to continue their examination of the threats associated with these practices. In addition, the letter questions the broader need for these practices to be continued given the potential for these practices to exacerbate climate change and the negative effects of this on California. 'In Santa Barbara, we know all too well how much harm oil extraction can do to our coast,' Capps said. 'That is why my colleagues and I are urging federal officials to maintain the moratorium on these controversial techniques until they are proven to be safe.' 'Offshore fracking poses a serious threat to coastal economies and the millions of jobs that depend on a healthy marine environment,' Rep. Farr said. 'California has already banned all forms of drilling along our coast. The Department of Interior should follow our lead by developing similar protections further out in federal waters.'

Groundbreaking fracking effort, plus first new oil production in years, on tap in Cook Inlet | Alaska Dispatch News - BlueCrest Energy expects to begin producing oil from Cook Inlet in the coming weeks, marking the first time in more than a decade that oil has flowed from a new field in the basin. The project is also noteworthy because the Texas-based company plans to conduct the area’s first large-scale fracking operation, using the same efforts that have helped turn the Lower 48 into an energy powerhouse. Benjamin Johnson, chief executive of BlueCrest Energy, said the company will produce oil from its Cosmopolitan prospect by April 15 using an old exploration well.  More oil will flow after new wells are drilled starting this summer, he said. The wells will be fracked — injected with water, sand and chemicals to fracture the rock formation and enhance oil production — after the company imports a powerful new drilling rig that can drill long-distance horizontal wells from shore.The $77 million rig was commissioned by the company with help from a $30 million loan from the Alaska Industrial Development and Export Authority. BlueCrest Rig No. 1 is being shipped in pieces, taking 115 truckloads to move the rig and related equipment from Texas to the West Coast so it can be hauled on ships to Alaska. Fifteen stories tall, it won’t be reassembled and ready to drill until the end of June, Johnson said. Constructed by rig builder Oderco in Liberty, Texas, the rig will be the most powerful in the state because of its drilling and lifting strength. The rig will drill wells more than 4 miles long from BlueCrest’s site 6 miles north of Anchor Point, where the company has also built a processing facility. “There’s never been any wells like this (in the Inlet), the long horizontal well with the huge multistage frack,” said Johnson, who decades ago helped develop the giant Kuparuk oil field for Arco Alaska Inc., the former big producer on the North Slope and the Kenai Peninsula.

Analyst Sees Oil, Gas Companies Adopting Novel EOR Technologies -  Rigzone - Tertiary methods such as thermal enhanced oil recovery (EOR), steam-assisted gravity drainage (SAGD), gas injection and chemical injection can help boost the North American thermal EOR market, according to a recent Frost & Sullivan report "North American Thermal Enhanced Oil Recovery Market".  California’s heavy oil production and exploration frontiers such as Canada’s oil sands have created an expansive market for thermal EOR in North America. Frost & Sullivan reports that oil production from thermal EOR in North America was 2.53 million barrels per day in 2013, and expects to reach 4.64 million barrels per day in 2020. SAGD is expected to be the highest revenue contributor, followed by steam injection. Other thermal EOR methods are still nascent, Frost & Sullivan said in a Feb. 9 press statement.  Thermal EOR in particular will find application in areas where oil is viscous and heavy; it currently accounts for 55 percent of the total EOR market in North America, said Mahesh Radhakrishnan, Frost & Sullivan energy and environment research analyst and author of the report. Nearly 80 percent of oil sands can only be extracted through the SAGD method, which is more expensive versus other thermal EOR methods.  “Though there will be a boost in SAGD application, the capital expenditure (CAPEX) and operational expenditure (OPEX) involved in the project make this technique prohibitively expensive,” said Radhakrishnan. “As OPEX accounts for more than 80 percent of the project cost, SAGD will be unfeasible if the oil costs less than $50/barrel.”

As US Shale Drillers Suffer, Even The Bankrupt Keep Pumping Oil  -- As oil prices nosedived by two-thirds since 2014, a belief took hold in global energy markets that for prices to recover, many U.S. shale producers would first have to falter to allow markets to rebalance. With U.S. oil prices now trading below $40 a barrel, the corporate casualties are already mounting. More than 50 North American oil and gas producers have entered bankruptcy since early 2015, according to a Reuters review of regulatory filings and other data. While those firms account for only about 1 percent of U.S. output, based on the analysis, that count is expected to rise. Consultant Deloitte says a third of shale producers face bankruptcy risks this year. But a Reuters analysis has found that bankruptcies are so far having little effect on U.S. oil production, and a tendency among distressed drillers to keep their oil wells gushing belies the notion that deepening financial distress will prompt a sudden output decline or oil price rebound. Texas-based Magnum Hunter Resources, the second-largest producer among publicly-traded companies that have filed for bankruptcy. It filed for creditor protection last December, but even as the debt-laden driller scrambled to avoid that outcome, its oil and gas production rose by nearly a third between mid-2014 and late 2015. Once in Chapter 11, its CEO Gary Evans said the bankruptcy, which injected new funds to ensure it would stay operational, could help to "position Magnum Hunter as a market leader."

Productivity gains in U.S. shale oil -- Horizontal fracturing of tight hydrocarbon-bearing formations was responsible for a phenomenal resurgence in U.S. oil production, which rose more than 4 million barrels per day from 2010 levels before peaking in April of last year. Only 1/4 of the drilling rigs that were active in the U.S. shale oil producing counties in November 2014 were still on the job this February. Despite this massive cutback in capital spending, total U.S. crude oil production had fallen only 400,000 barrels a day (a 4.5% drop) as of December. The reason that U.S. oil production has not fallen more is remarkable efficiency gains. Occidental Petroleum described a series of measures they have taken that have reduced the time it takes to complete a well by up to 50%, which could enable it to drill the same number of wells each month using half the number of rigs. Other innovations are allowing much more oil to be produced from each completed well. Decker, Flaaen, and Tito (2016) note that the average new well in the Bakken produced 200 barrels/day in 2007. Last year the number was 400 b/d. However, it remains true as ever that production from an average new well will have fallen off by half within a year of operation. Drillers have also been able to get deep cost discounts from the companies that sell to them as a result of the market bust. These along with the productivity gains have significantly lowered the price of oil at which the producers would be able to cover their costs (including capital costs). A survey by the Federal Reserve Bank of Kansas City asked operators (primarily working in the Niobrara Shale) what oil price would be needed in order for drilling to be profitable in their area. The median response was $60 a barrel, down significantly from the $79 estimate of a year earlier, but still far above current prices. Many analysts expect a third to a half of U.S. oil companies to file for bankruptcy in 2016.

Oil glut up close: How Cushing copes with full crude tanks | Reuters: From the air above this small Oklahoma town, the 300 steel oil storage tanks that dot the landscape appear filled to the brim, their floating lids bobbing atop more than 65 millions of barrels of oil. There may be no better place to witness what a world awash in crude looks like, and the 9 square-mile (23.3 square km)complex seems to bear out oil traders' fears that the industry is running out of space to contain a historic supply glut that has hammered prices. Such worries make weekly estimates of Cushing stockpiles from the Energy Information Administration one of the hottest market indicators. These inventories peaked in mid-March and have edged lower since then. Some traders reckon they are unlikely to exceed those records for years as refiners rumble back from seasonal maintenance and demand rises. Others warn the stockpile could rise again. Up close, from a 24-hour bunker that controls a quarter of tank space here, the ‘pipeline crossroads of the world’, reveals its secret - there is some spare room left. On March 24, the day after U.S. government data showed Cushing’s tanks held a near-record 66.23 million barrels of crude, Mike Moeller, manager at Enbridge, explained how the largest Cushing operator uses every last inch of usable space. Operators and technicians make it possible by moving a half-million barrels per day in internal pipelines that link the major pipelines and tanks of its 20 million barrel terminal.Every day, up to 6 million barrels of oil flows through Cushing's 13 major pipelines in or out of steel tanks – some the size of a football field - towering above the prairie otherwise studded with ranches and nondescript residential neighborhoods. The U.S. government estimates their operational limits at around 83 percent of their ‘shell,’ or design, capacity.

U.S. Oil Production to Drop to 5 Million Barrels Per Day over Next 12 Months (Video) - With the amazing drop in Oil Rigs just over the last two months, the pain for U.S. Oil Producers is just getting started, expect U.S. Oil Production to start dropping off a cliff. We delve into the Oil Data metrics as to why April, May and June are strong months to be invested from the long side in the Oil Market - the seasonally strong part of the market from a demand perspective.

House Republicans Say Oil Spill Prevention Rule Should Be Easier On Oil Companies -  Almost five years after the 2010 Deepwater Horizon spill sent millions of barrels of oil gushing into the Gulf of Mexico, the Obama administration announced a set of new offshore drilling rules that it hoped would prevent another massive oil spill. Now, as those rules appear to be racing towards finalization, House Republicans are asking the administration to revise the rules to lessen the burden on the oil industry. In a letter sent to the Office of Information and Regulatory Affairs (OIRA) last Friday, Reps. Rob Bishop (R-UT) and Ken Calvert (R-CA) expressed concern that the new rules could be so burdensome to the oil industry that they might “severely limit both existing and future safe energy development in our nation’s outer Continental Shelf.” They also worry that without a clear regulatory path toward permit approval, oil companies might be “unable to move forward on approving multi-billion dollar investments to develop our nation’s offshore energy resources.” The proposed regulations, first introduced by the Department of the Interior and the Bureau of Safety and Environmental Enforcement (BSEE) in April of last year, would require oil and gas companies to perform regular tests and maintenance on their blowout preventers, a piece of equipment that seals and controls oil and gas wells. The new rules would also require blowout preventers to undergo a third party review every year, and an additional detailed inspection every five years. Both Bishop, who is chairman of the House Natural Resources Committee, and Calvert, who is chairman of the House Subcommittee on Interior, Environment, and Related Agencies, wrote that the rules -- which they say set arbitrary limits on drilling not born out by science -- could staunch economic growth in the Gulf area and hinder the United States' ability to produce its own fuel.

$hillary’s Top Fund Raiser is a Frack Lobbyist! --Who got her fracking friends a fracking monopoly on Israel’s offshore gas field – from her pal Bibi Netanyahu ! Oy vey ! Such a fracking steal ! FTI Consulting subsidiary FTI Government Affairs and a top-level campaign finance bundler for Hillary Clinton’s presidential run, lobbied throughout 2014 and 2015 for offshore drilling off the coast of Israel on behalf of Noble Energy. The finding by DeSmog comes days after an irritated Clinton told an activist for Greenpeace USA, that she was “so sick of the Sanders campaign lying about me” with regards to her coziness to lobbyists and fossil fuel campaign cash. Dunn, according to his FTI biography, formerly worked for the Bill Clinton White House as the point man for the “business community’s support of President Clinton’s economic and trade agenda.”The lobbying disclosure forms confirm that Dunn lobbied the White House and State Department on developments in the Eastern Mediterranean, which is where Noble’s top energy assets offshore in Israel sit. Noble recently faced a major setback in Israel with the Supreme Court ruling that the contractual agreement the company landed with the Israeli government was illegal and akin to a monopoly. The court gave the company and Israel up to a year to negotiate a new deal.

US to try to block Halliburton from buying rival | (AP) — The Justice Department is expected to sue this week to stop Halliburton from acquiring Baker Hughes, according to a person familiar with the matter. The person spoke on condition of anonymity Tuesday because the lawsuit had not yet been announced. Halliburton and Baker Hughes help oil and natural companies by doing much of the actual drilling work for them. They announced in November 2014 that they planned to combine in a $35 billion deal that would create a bigger rival to Schlumberger Ltd., the world’s largest oilfield-services provider. The deal came together as the global oversupply of oil was beginning to cause a collapse in prices. The glut has slowed demand for drilling services and crushed the stock price of both companies.

GE's Oil Unit Seen Finding `Missing Piece' With Baker Hughes - Rigzone - General Electric Co. could become one of the top players in the oil services and equipment industry if it decides to bid for Baker Hughes Inc. A Justice Department lawsuit filed this week against Halliburton Co. to stop the merger of the world’s second- and third-largest oilfield service companies could soon put Baker Hughes back in play, with GE seen as the most likely bidder. Halliburton and Baker Hughes have said they plan to contest the government’s case, which could delay the timing of any future takeover offers. In December, GE was said to be exploring bids for various assets Halliburton was marketing in an attempt to secure antitrust approval for the deal. "This is one way you could really accelerate yourself in the oil and gas industry," . "Buy Baker to fill in the gap and all of a sudden, you’re one of the more dominant oil service companies out there." GE has expanded its oil and gas business in recent years through more than $10 billion in acquisitions, making it the company’s fourth-largest division. Yet, within the world of oilfield services and equipment manufacturing, the company ranks 11th, according to Tulsa, Oklahoma-based consultant Spears & Associates. Among GE’s four largest business units in the oilfield sector, none rank larger than third for market share. A large acquisition would vault GE into the top tier. "If they buy Baker Hughes, they’re immediately in the top 3,"  Oil and gas has become central to GE as Chief Executive Officer Jeffrey Immelt focuses operations on industrial manufacturing. He is selling the bulk of GE’s finance arm and its home-appliances unit while expanding divisions making drilling equipment, gas turbines and jet engines.

Mexico's proven oil reserves down a whopping 21 percent: (AP) — Mexico’s government oil commission says the country’s proven oil and gas reserves dropped by a startling 21 percent in 2015. The commission said Thursday that combined oil and gas reserves amounted to 10.24 billion barrels of crude equivalent at the end of 2015, compared to 13 billion barrels at the end of 2014. Mexico’s state-owned oil company has been thrown into crisis by the drop in world oil prices. The drop in revenue and temporary cash-flow problems have led the company to cut back on exploration.

Is the Tar Sands Boom About to Go Bust? -- It’s a small simple chart which has a huge significance for Canada and the climate. According to a Bloomberg analysis of recent industry data, two decades of expansion in the dirty tar sands of Alberta is set to come to an end in 2018. They conclude “no projects currently under construction are set to be completed that year or beyond.” Due to the collapse in the oil price, the tar sands producers are seriously struggling. There is too large a gap between the high cost of production of the tar sands and the current price of oil for many to invest over the long term. It is worth remembering that the crisis in the tar sands comes at a time when there is growing public pressure to build a clean energy future that does not hitch Canada’s economy to the destructive boom and bust cycle of oil. This concern can be seen in the growing opposition by front line communities across the country to new tar sands infrastructure such as pipelines and for support for building a safer, renewable energy economy. For the industry, these concerns would be easier to dismiss if it sat on a cushion of high oil prices. But the cushion has burst. Because of the oil price plunge, some half a million barrels a day of planned production capacity has been cancelled or put on hold over the last eighteen months.

Regulators allow Repsol to resume fracking after Alberta quake | Reuters: Regulators have given Repsol Oil and Gas Canada the green light to resume hydraulic fracking at a remote well in Alberta nearly three months after the region was rocked by an earthquake linked to the fracking, the company said on Thursday. The company, a unit of Spanish energy firm Repsol S.A., said in a statement that it had received Alberta Energy Regulator's approval to conduct modified flowback operations with reduced rates of pressure at the well. Repsol had suspended operations after a 4.8 magnitude quake on Jan. 12 occurred 18 km (11 miles) north of the town of Fox Creek. It was the largest earthquake in the area in more than a year. The company was conducting hydraulic fracturing at the time at its site 30 km from Fox Creek. An investigation by the Alberta Energy Regulator concluded with "high confidence" that the quake had been caused by fracking, the regulatory agency's spokesman Riley Bender said by telephone. The renewed work will begin after spring breakup, the period between April and July when the ground in Alberta thaws, and will last one to three weeks, Repsol said.

Fracking site shut down in Taranaki - Todd Energy have shut down one of their large multi-welled fracking sites in Taranaki. After nearly two years of construction, drilling, fracking and flaring at the Mangahewa-E site in Taranaki, they have closed it down and walked away.Fracking site shut down in Taranaki (with our help?) Todd Energy have shut down one of their large multi-welled fracking sites in Taranaki. After nearly two years of construction, drilling, fracking and flaring at the Mangahewa-E site in Taranaki, they have closed it down and walked away. ‘Mothballed’ is how Todd Energy representatives put it at a community information meeting in Tikorangi this week. Todd have been having a lot of problems getting gas out of the Mangahewa field sometimes producing saline fluid and little else and while Todd Energy have reported wanting to reduce the need for Hydraulic Fracturing (fracking), they have been ramping it up. Just this year, Todd have notified residents in Tikorangi of 24 separate fracking procedures and that’s just at one well pad. (Mangahewa-C) Over the same period, Frack Free Kapiti have been calling on the Todd family to stop fracking New Zealand. We have erected a large notice near the Todd’s beach property asking the public to ‘Tell the Todd’s to Stop Fracking New Zealand’. Frack Free Kapiti are pleased that one of the fracking sites has been closed down and we think the Todd family are getting the message that kiwis know fracking is not good for our environment, for our communities, or for our future.

The Six Indigenous Women at the Heart of Fracking Resistance in Argentina: These six Mapuche women have taken the risk of putting their bodies on the line to stop the drilling rigs from further endangering their community. Aboriginal women are central to the continent-wide resistance against extractivism, and the story of these women from the Campo Maripe community in the Argentine Patagonia is a solid example of their ongoing contribution, and the importance of indigenous resistance for social movements worldwide. Early one morning in March 2015, the lamgen Chela ('sister' in Mapuche language) says goodbye, gives me some jars of jam for my mother, and a message as I leave: "I know I don't know her, but say hello to your mom for me okay."A few months after my visit, on July 28th, I would come across in social media the image of Chela chained to a rig. The first thing that comes to mind when I see her face in the picture is her nice gesture that morning, the gift and words for another woman she doesn't even know: "I know I don't know her, but say hello to your mom for me okay." Chela is chained to a fracking rig with two other women from the community. Three Mapuche women chained to a US-owned machine on Indigenous territory seized by the Argentine state in an alliance enabled by capitalism, advancing with a renewed strength, and validated at all government levels, over the corpse of dead treaties: The first of them, International Labor Organization Convention 169, ratified by Argentina in 2000; second, a national law for the survey of aboriginal lands which governments past and present insist on ignoring the results of, as they prove the ancestral presence of the community on this land; finally, a significant achievement in 2014 -- the government of the province, after more than a decade without granting any legal statuses, legally recognizes Campo Maripe as a Mapuche community. Nonetheless, as mentioned above, it refuses to validate the land survey. The members of this community have never been consulted on what happens on their land. The extraction activity is illegal, but perfectly possible.

Shell Pulls Out Of Arctic-Focused Exploration Licensing Round In Norway  (Reuters) - Oil major Royal Dutch Shell has pulled its application from Norway's Arctic-focused oil licensing round, the firm said on Monday, in a blow to the Nordic country's ambitions to explore for oil and gas in its northern offshore areas. "The decision is part of an optimisation of Shell's global portfolio following the acquisition of BG and a persistently low oil price," the company's Norwegian unit said in a statement. "Norway remains one of our core areas." In December the Norwegian oil ministry said Shell was among the companies that had applied for drilling permissions in the so-called 23rd round, a licensing round set to move the search for hydrocarbons closer to the country's border with Russia. As recently as last month, the head of Shell's business in Norway had told Reuters the firm had hoped that it could begin drilling in 2017 if it won licenses in the 23rd licensing round. The Norwegian oil and energy minister said Shell's decision had no implication for the conduct of the licensing round. The awards would still be announced before July, he said. "We have many other competent companies that are competing hard for our promising, new exploration areas,"

National Oilwell Varco Signals "Massive" Layoffs In Norway -- WSJ -- Background: Norway has bigger problems than $40 oil. The Wall Street Journal is reporting that National Oilwell Varco Signals Further Mass Layoffs in Norway; the Oil Industry subcontractor blames reduced investment and equipment sales: — National Oilwell Varco said Monday that it would continue slashing jobs in Norway, after laying off 2,400 workers—half of its local staff—last year, as sinking oil-sector investment continues to hammer major industry subcontractors.  The company blamed its continued downsizing on deteriorating market conditions, with reduced investment and weak equipment sales. Over the past year, National Oilwell Varco has shed 1,800 permanent jobs and 600 contractors in Norway amid weaker activity in the North Sea. The company said about 500 offshore rigs and drillships are active globally, and about 300 units are retired so far, with more retirements expected, and no rapid rebound expected.

Indian state-owned refiners now allowed to make spot crude purchases – Platts - The Indian cabinet on Wednesday gave state-owned refiners the freedom to formulate their own crude import policies, meaning they will now be allowed to make spot purchases, a government press release said. The government said spot purchases needed be adopted to compete effectively in the market. The previous tender policy had certain limitations, it said. Developing their own policies would help oil companies adopt a dynamic, flexible policy for crude procurement, eventually benefiting consumers, the press release said. While the press release did not give any details, the refiners earlier mentioned the possibility of either setting up their own trading desks or joint trading desks initially for spot purchases. India's state-owned refiners typically bought 80% of their total crude requirements through term contracts and rest through tenders but stepped up their tender purchases last year when crude prices nose-dived.

Kuwait in deal to import 2.5 million tons of liquefied gas (AP) — Kuwait’s state oil company has signed deals to import 2.5 million tons of liquefied gas per year into the country to help power electricity plants during its scorching summer. The state-run Kuwait News Agency reported Thursday that the deals involve BP PLC, Royal Dutch Shell PLC and Qatargas. It offered no financial terms for the deal, though the state-run Qatar News Agency said Qatargas’ agreement called for it to offer a half a million tons a year for four years. KUNA said Kuwait needed the natural gas for summer time, when electricity use spikes from air conditioners. It said oil-rich Kuwait would be able to rely on its domestic production for the winter months.

Black swans and barrels: Thinking about oil -- With the intensity of ancient seers examining runes, policy makers, analysts, and economists watch every squiggle of movement in the oil markets, scrutinizing rig counts and poring over the footnotes in annual reports to glean portents of the future. With crude oil now hanging in there around $36—a significant jump from January-February when it lingered below $30—there is a sense that the price of crude is recovering. That makes sense—but it could still be wrong. The track record of oil-price predictions is not great, even among specialists. Very few people—possibly none—saw the run-up to $107.95 per barrel in June 2014 and the dive to less than $30 for much of February 2016. In the past, falling oil prices were seen as a net benefit for the global economy, and stock values therefore rose when prices fell. Cheap oil is a form of consumer stimulus; the rule of thumb has been that every fall in price of $10 per barrel boosts GDP growth by 0.25 percent or more. Importers benefit a little more than exporters suffer. This time, though, the market is seeing trouble in the form of a slowdown in China (a huge importer) and other developing markets, and generally unexciting global economic conditions. And this slump seems worse than usual for exporters. Russia and Saudi Arabia are both cutting public spending, for example, and diminished oil sales are another blow to struggling Brazil and Venezuela. Also, oil companies have cut back on investment sharply, with almost $400 billion in projects set aside. That has knock-on effects in terms of manufacturing. Finally, because energy companies are a major factor in equities, when they suffer, so do other stocks.

Low oil paradox: Why economy has not gained from big drop - Reality is proving unkind to economic forecasters. After the global oil price began dropping — it has fallen almost 70 per cent since late 2014 — the International Monetary Fund predicted a “shot in the arm” for the global economy. The world would rebound from its post-crisis torpor in 2016, the theory ran, with advanced economies picking up the baton for growth from emerging markets. But none of this has proved accurate. Christine Lagarde, head of the IMF, warned this week that growth had been “too low for too long”. Hopes that cheaper oil would recreate lost dynamism in Europe, China, the US and Japan have been dashed. Only India stands out as a happy exception. Less than 12 months ago expectations were high, with predictions of global growth of 3.5 per cent for 2016. But the landscape has deteriorated so rapidly, according to Citi, that at 2.5 per cent — the rate now forecast — the world economy is only just hovering above the threshold of a recession, generally defined as sub 2 per cent global growth. Profits are under pressure, with European companies expected to show the lowest growth in earnings since 2009. The US and Japan have failed to achieve a strong and sustained economic upswing. China’s growth is slowing, perhaps faster than official figures suggest. None of this was supposed to happen. Economists had predicted with great confidence two effects from cheap oil. There would first be a huge transfer of resources from oil producers to consumers, both within and between countries. At the same time, the gains would outweigh any losses.  The IMF initially calculated that every $20 per barrel fall in the oil price would increase global gross domestic product by 0.5 per cent, rising to 1.2 per cent if there were associated improvements in confidence.

The Narrative Has Changed: Goldman "Explains" That Higher Oil Prices Are Better For The Economy -- Back in late 2014 and early 2015, this website soundly mocked any and every economist that suggested that plunging oil prices - in a globalized economy where oil has been financialized beyond recognition and impacts every asset class, the stock market, global trade flows, and international diplomacy - is "unambiguously good."  It wasn't and it took a dramatic escalation in activist central banking to preserve market stability after collapsing oil prices dragged down energy stocks, and have led to a surge in bankruptcies, a US manufacturing recession, whose contagion is slowly spreading to the services sector. Which, however, meant that now that lower oil prices have been exposed as "unambiguously bad" for the global economy, it was time for a "very serious economist" to take the lead in explaining just why it is higher oil prices that are good for the economy. Over the weekend, Goldman did just that, when its economist David Mericle, wrote a note titled "Cheap Oil and the US Economy: Too Much of a Good Thing ." In it, he first does a mea culpa, one which soon every other economist will have no choice but to parrot, because it is now critical for the broader public to "understand" why higher gas prices - which even economists realize are critical to push the overall market higher - are "good for them."  Here's Goldman, proudly blazing a trail in this exciting narrative shift: When oil prices first began to decline in mid-2014, most observers expected a boost to US and global growth as the windfall from lower energy prices raised consumer spending. But as oil prices continued to fall sharply to levels below the breakeven points of many US producers, the cost side of the growth ledger quickly became apparent. The response of US producers was swift, with energy sector capital spending falling to half its initial level, while the boost to consumption has seemingly been more gradual. Taken together, this has meant that the collapse in oil prices has had a disappointing and possibly even negative effect on the US economy. With oil prices now rebounding from their January lows, we revisit the impact of oil prices on the US economy and assess the outlook under various price scenarios with the help of rich new detail on the production cost schedules of domestic producers.

Trump sparks worries for US oil industry - Financial Times - Donald Trump is stoking anxiety in the US oil industry as it watches Republicans head towards nominating a presidential candidate who has offered the sector little affection and few concrete policy proposals. US oil companies are already being crushed by low crude prices and their woes are being compounded by the spectre of a usually steadfast ally — the Republican party — becoming a vehicle for Mr Trump’s unpredictable candidacy. The real estate mogul has alarmed the industry with the few statements he has made on oil and gas — including repeated attacks on Ted Cruz, his main challenger, for taking millions of dollars of campaign donations from “big oil”. But executives and lobbyists say they are equally worried about the uncertainty stemming from the void left by Mr Trump’s apparent lack of policies. “We don’t really know where he is on a lot of different issues because he doesn’t really give specifics on a lot of different issues,” says Doug Flanders, policy director at the Colorado Oil & Gas Association, a trade group in a state where the shale energy revolution took off. Similar concerns are voiced privately in a variety of sectors, but they are acute in oil and gas because the industry’s environmental impact and role in energy supply leave it uniquely vulnerable to government regulation.

Crude Loses Key Technical Support As BNP Sees Oil "Revisiting The Year's Lows" -- The early exuberance in oil has faded today as WTI tumble to fresh one-month lows... ...crucially losing the key 40-week moving average once again as the downtrend looks set to continue. With BNP Paribas warning that WTI is set to revisit the lows of the year: Ahead of a producer gathering in Doha on 17 April aiming to freeze output, recent comments by Saudi Arabia indicate that the Kingdom’s participation is conditional on that of other producers, including Iran. That effectively puts a nail in the coffin of the Feb-Mar oil price rally. Iran will not accept a freeze of its output until such time that lost market share, due to US and EU sanctions, is reclaimed. In the meantime, key non-OPEC producers like Russia are posting new record highs in output. A production freeze from Russia will not help tighten global oil balances. Global oil balances will witness sizeable implied inventory builds in H1’16, suggesting that the price of oil can easily revisit the lows seen earlier this year. The time for redeterminations looms large over a sector that has been bid up once again on hope that this time it's different. It's not.. and the glut only got bigger during this short-squeeze.

Oil slips to one-month low on unexpected U.S. demand drop | Reuters: Oil slipped to a one-month low on Tuesday after a surprise fall in gasoline demand in the United States, the world's largest oil consumer, and doubts whether oil producers can agree an output freeze to dampen a global supply glut. U.S. gasoline demand, one of the strongest pillars supporting oil consumption, fell in January for the first time in 14 months, U.S. Energy Information Administration data showed. The world's largest oil producers are due to meet in Doha on April 17 to negotiate an output freeze, but a jump in Russian oil production to a 30-year high in March has cast doubt over the chances of an output cap being agreed. Brent crude, the global oil price benchmark, was down 31 cents at $37.38 a barrel at 0800 GMT, its lowest since March 4. U.S. futures fell by 41 cents to $35.29, also a one-month low. "The market was surprised by two figures: Russian production at a 30-year high and U.S. gasoline demand dropping for the first time in 14 months," said Frank Klumpp, oil analyst at Stuttgart-based Landesbank Baden-Wuerttemberg. "As long as most speculative money is long-positioned, there is more room for closing positions and falling prices."

Crude Spikes After Biggest Inventory Draw In 2016 -- WTI's 'mysterious' spike into the NYMEX close extended after hours (almost as if someone knew something). Inventories drewdown 4.6mm barrels according to API (drastically less than the expected 2.85mm build). This is the biggest weekly draw since Jan 1. Cushing was expected to see a build of 100k (after 2 weeks of draws) but saw a considerably larger one at+620k. Distillates inventories built as Gasoline drewdown very modestly. API:

  • Crude -4.3mm
  • Cushing +620k
  • Gasoline -116k
  • Distillates +2.7mm

Ending the 7 straight weekly build streak...

Oil prices are jumping on a possible OPEC deal to freeze output -- Oil prices jumped on Tuesday night after an awful start to the month.  Prices plunged last week after Saudi Arabia's Prince Mohammad bin Salman hinted that the country would only participate in output freezes if Iran also played ball.  But now OPEC is hinting that an agreement on a freeze can be reached whether Iran agrees or not. The Kuwaiti governor for the Organization of the Petroleum Exporting Countries (OPEC), Nawal Al-Fuzaia, said there were "positive indications an agreement [on a price freeze] will be reached," according to Reuters. This was apparently enough optimism for oil investors, and both West Texas Intermediate (WTI) crude oil and Brent oil rose on the announcement.  Major oil producers are due to meet in Qatar on April 17 to discuss curbing output. However Iran has said that it still expects its production to reach four million barrels a day by this time next year. (WTI) crude oil jumped 2.76% at OPEC's optimism, climbing to to $36.88 as of 8:45 am GMT:

Crude Jumps After DOE Confirms Biggest Oil Inventory Draw Since January; Cushing, Gasoline, Distillates Rise -- Following yesterday's API data, which showed the biggest draw of 2016 with a 4.6 million reduction in oil inventories, everyone was keenly looking forward to today's DOE data. Moments ago the DOE indeed confirmed the API data, reporting that in the past week oil inventories declined by 4.949MM, more than the API print, down from last week's 2.3MM and well below the expected 2.850MM increase. This was the largest draw since the first week of January. However, while in the recent past the crude builds were offset be declines in gasoline and distillate reductions, this time it was a mirror image, as first Gasoline rose by 1.438MM, above the -1.1MM draw, while Distillate increased by 1.799MM, above the -850K draw expected. This happened even as Refinery utilization rose 1.0% W/W, above the 0.35% expected, operating at a 91.4% of capacity in the past week. As a result Cushing holdings rose by 0.3MM, rising to 66.3MM barrels and once again approaching its operational capacity.  Some more headlines from the report:

  • CRUDE OIL STOCK EX SPR -0.9% APR 1 WK, +9.8% Y/Y

U.S. Oil Production Continues to Drop in Latest EIA Report (Video) -- We had nearly a 5 Million drawdown in Oil Inventories during what is technically still the building season for Oil Stocks.

Oil steady as Iraqi exports up, offsetting U.S. inventories drop - (Reuters) - Oil steadied at around $40 per barrel on Thursday as a surprise fall in U.S. inventories the previous day was offset by an increase in exports from Iraq, underlining global oversupply. Brent futures were at $39.60 at 1009 GMT, down 15 cents from the last close. U.S. crude futures were at $37.59 per barrel, down 16 cents from their last close. Oil exports from Iraq's southern ports have risen to an average of 3.494 million barrels per day (bpd) in April, an official from the state-run South Oil Company said on Thursday. This was above the 3.286 million bpd average for March. U.S. crude inventories fell 4.9 million barrels in the week to April 1, compared with analysts' expectations for an increase of 3.2 million barrels, according to data from the Energy Information Administration on Wednesday."We are in the aftermath of yesterday's (EIA) data, but if you zoom out there's still oversupply and record inventories," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam. "Production numbers from places like Iran and Iraq are in focus with people looking to see how it translates into the overall supply picture." In Europe, North Sea oil field maintenance expected next month lent support to Brent futures, which are priced off North Sea supplies. The over 4 percent slide in the dollar since the beginning of the year is also supporting oil, traders said, as it makes imports of dollar-denominated fuels cheaper for countries using other currencies, boosting demand.

OilPrice Intelligence Report: Oil Stages Comeback On Bullish EIA Data - Oil prices increased from the mid-$30s per barrel this week, with Brent once again rising above $40 per barrel and WTI sitting near $39 per barrel at the end of the week. Prices bounced around, trading down on growing pessimism surrounding the Doha meeting on April 17, but receiving a boost from the latest EIA figures. EIA data looks bullish. The U.S. saw oil production fall by 14,000 barrels last week. The U.S. oil industry has posted consistent declines in recent months, and while the weekly data from the EIA is sometimes inaccurate, the best guess is that the U.S. is producing 9.008 million barrels per day right now. While it could take weeks or months to know conclusively, the U.S. could be about to drop below the key threshold of 9 million barrels per day in oil production. Also, oil storage levels dropped last week for the first time in two months. Inventories fell by 4.9 million barrels to 529.9 million barrels and while that is down just a bit from the previous week’s record high, the oil markets grew optimistic that the drawdown finally marked an inflection point. If the U.S. posts a few more weeks of drawdowns, oil prices will likely firm up as the data will be pointing much more confidently towards the supply/demand situation reaching a balance. In other words, the data is showing more decisive signs that the global supply overhang will narrow and potentially disappear towards the end of this year.

Oil ends sharply higher after unexpected U.S. inventory drop - The U.S. oil benchmark scored its biggest one-day jump in three weeks Wednesday after weekly government data showed a large and unexpected fall in U.S. crude inventories and an increase in demand by refineries. On the New York Mercantile Exchange, light, sweet crude futures for delivery in May advanced $1.86, or 5.2%, to close at $37.75 a barrel. The jump was the biggest since March 16.   June Brent crude on London’s ICE Futures exchange rose $1.97, or 5.2%, to finish at $39.84 a barrel. The Energy Information Administration said oil inventories fell by 4.9 million barrels in the week ended April 1. Analysts surveyed by oil data firm Platts had forecast an inventory rise of 2.9 million barrels. Oil futures, however, had already found support after closely watched data from the American Petroleum Institute, an industry trade group, late Tuesday reportedly showed a 4.1 million barrel drop. The decline was the biggest for this week of the year since at least 1997, according to Bespoke Investment Group. In addition, the data showed U.S. refineries used over 16.4 million barrels a day on average, up 199,000 barrels from a week earlier. Refiners operated at 91.4% of operable capacity last week, the data showed. The refinery data, in particular, cheered market bulls, said Robert Yawger, director of energy futures at Mizuho Securities. Capacity utilization has risen strongly for two weeks in a row, and at above 90% is fueling ideas that refiners may be wrapping up their traditional spring “turnaround season” a bit early in anticipation of strong gasoline demand this summer, he said. Oil futures had previously found support on revived hopes that key global producers may agree to a production freeze later this month despite an escalating tussle between Iran and Saudi Arabia over the issue. Prices rose after Kuwait, a heavyweight in the Organization of the Petroleum Exporting Countries, expressed confidence that players within and outside the bloc will move ahead with the proposal to limit crude output.

Why the US Crude Oil Inventory Fell for the First Time in 8 Weeks - The EIA (U.S. Energy Information Administration) released its weekly petroleum status report on April 6, 2016. It reported that the US crude oil inventory fell by 4.9 MMbbls (million barrels) to 529.9 MMbbls for the week ending April 1, 2016. Market surveys from Platt’s to Reuters estimated that the US crude oil inventory could have risen between 2.9 MMbbls and 3.2 MMbbls for the same period. The unexpected decline in the US crude oil inventory supported crude oil prices on April 1, 2016. To find out more about crude oil prices, read the previous part of the series. The US crude oil inventory fell due to the rise in the refinery demand and drop in US crude oil imports.  The EIA divides the US into five storage regions—East Coast, Midwest, Gulf Coast, Rocky Mountain, and West Coast. In the Gulf Coast region, crude oil inventories fell to 277.5 MMbbls from 281.9 MMbbls for the week ending April 1, 2016—compared to the previous week. In contrast, the Midwest crude oil inventories rose to 155.6 MMbbls from 154.8 MMbbls for the same period. Crude oil stocks fell marginally by 0.8 MMbbls to 55.2 MMbbls in the West Coast region for the same period. The East Coast crude oil stocks fell to 17.8 MMbbls from 18.5 MMbbls for the same period. The Rocky Mountain region’s crude oil stocks were flat at 23.7 MMbbls for the same period. The rise and fall in US crude oil stocks impact storage costs. To learn more, read Crude Oil Storage Costs Rose 9 Times, US Crude Tests New Limits and Record US Crude Oil Inventory Led to a New Storage Space. The total US crude oil inventory hit an all-time high of 534.8 MMbbls for the week ending March 25, 2016. US crude oil inventories are also 9.8% more than the same period in 2015. They’re also 100 MMbbls more than the five-year average crude oil inventory. Record US crude oil inventories could put pressure on crude oil prices.

US oil ends 1.3 pct lower on Cushing data, high Iraq exports: U.S. oil prices fell over 1 percent on Thursday after industry data suggested a key pipeline shutdown had not reduced crude flows to the U.S. storage base by as much as expected. Market intelligence firm Genscape reported a build of 255,804 barrels at the Cushing, Oklahoma delivery hub for U.S. crude futures during the week to Tuesday, traders who saw the data said. The build came despite TransCanada having shut since Saturday its 590,000 barrels per day (bpd) Keystone crude pipeline that moves crude to Cushing and Illinois. Genscape did note a 481,485-barrel decline at Cushing in the five days to Tuesday, apparently due to the Keystone shutdown that was caused by a potential leak, traders said. But that wasn't enough to offset total inflows for the week. "I guess people were expecting even more impact from the Keystone closure," said a trader.Brent futures were down 36 cents, or 1 percent, at $39.47. U.S. crude futures fell 49 cents, or 1.3 percent, to $37.26 per barrel.    Higher Iraqi oil exports also underlined the global oversupply situation despite a positive U.S. government report on Wednesday on U.S. crude supply-demand that drove prices up by 5 percent. U.S. crude inventories fell 4.9 million barrels in the week to April 1, compared with analysts' expectations for an increase of 3.2 million barrels, according to data from the Energy Information Administration on Wednesday.

US rig count drops to 443 this week, Texas loses 7: (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by seven this week to 443, another all-time low amid depressed energy industry prices. A year ago, 988 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 354 rigs sought oil and 89 explored for natural gas. Among major oil- and gas-producing states, Texas lost seven rigs and North Dakota two. Alaska, California and Kansas each dropped one. Ohio and Oklahoma gained two rigs apiece, while New Mexico was up one. Arkansas, Colorado, Louisiana, Pennsylvania, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. The previous low of 488 set in 1999 was eclipsed March 11, and has continued to dip.

Oil posts 8% weekly gain on signs of fading U.S. output - Oil futures ended sharply higher Friday, boosted by expectations U.S. production will continue to decline, signs of solid underlying demand and some renewed optimism about the U.S. economy. On the New York Mercantile Exchange, West Texas Intermediate crude futures for delivery in May jumped $2.46, or 6.6%, to end at 39.72 a barrel. June Brent crudeon London’s ICE Futures exchange rose $2.51, or 6.4%, to close at $41.94 a barrel. Crude maintained gains after oil-field services firm Baker Hughes said the number of oil rigs fell for a third straight week. The number of rigs dropped to 354 from 362 a week earlier. Compared with the same time last year, the number of rigs has fallen by 406. Bullish traders have been cheered not only by data pointing to falling U.S. oil production, but also to expectations that U.S. producers won’t be able to quickly rebuild production even if crude continues to climb, said Phil Flynn, senior market analyst at Price Futures Group in Chicago. West Texas Intermediate, the U.S. benchmark, posted a weekly rise of 8%, while Brent, the global benchmark advanced 8.5%. Data earlier this week showed an unexpected drop in crude inventories and a strong rise in demand from refiners. A January plunge in oil futures did substantial damage to already fragile shale firms, Flynn said. Banks, meanwhile, have taken a painful hit on energy loans and likely won’t be eager to increase lending even as prices recover. That has helped quell fears that a rise in price would see producers quickly restart production in response, Flynn said.

Crude Surges Back To 2-Week Highs As Yellen Hope Trumps Iran Price Cuts - Only in the new normal of manic algos and goal-seeked short-squeezes could actual news thatIran is undercutting OPEC by slashing prices to maintain market share be out-followed by hopefulness driven by upbeat comment from Janet Yellen (because she has nailed everyting so far) and more chatter about a production freeze (which makes no sense whatsoever given the Iran news). For now, WTI is trading above $39.50 ahead of today's rig count data, back at 2-week highs. After yesterday's rollover collapse, everything is epically awesome once again... So the bad news... As Gulf News reports, Iran ratcheted up its offence in the oil market after breaking a pricing tradition, signalling it’s seeking to win market share at a time when rival producers are trying to forge a deal on freezing output. State-run National Iranian Oil Co. will sell the Forozan Blend crude for May to Asia below the level offered by rival Saudi Aramco for Arab Medium, the third month the Arabian Gulf state is giving the discount after setting it at a premium for almost seven years through February 2016, data compiled by Bloomberg show. NIOC will also sell the Iranian Light grade to Asian customers at 60 cents below Middle East benchmark prices, a company official said on Friday, asking not to be identified because of internal policy. While producers including Saudi Arabia, OPEC’s biggest member, and Russia are due to meet in Doha on April 17 to discuss a deal to freeze output in a step toward clearing a global glut, Iran is determined to regain market share lost over the past few years due to sanctions over its nuclear programme. To pry away customers relishing oil that is cheaper than mid-2014 levels by more than 50 per cent, the country is expected to focus on pricing and boosting supply.

Shocking Photo: Nearly 30 Oil Tankers in Traffic Jam Off Iraqi Coast -- Oil tankers are caught in a traffic jam near the Iraqi port of Basra, causing delays in loading. According to Reuters, around 30 very large crude carriers (VLCCs) are sitting in the Persian Gulf, and the backlog could cost ship owners more than $75,000 per day. Some could be waiting for weeks to reach the port. Check out this shocking satellite photo of the tanker traffic jam just off the coast of Iraq. The culprit is high oil production in Iraq. The port at Basra is struggling to load up all the oil tankers fast enough, forcing some to sit and wait. Iraq exported about 3.26 million barrels per day (mb/d) in March from its southern coast, which is up from just 2.5 mb/d in 2010. And the line of tankers appears to be growing. The gridlock is forcing up the cost of renting an oil tanker. That, combined with the shrinking capacity of available storage in China is pushing up tanker rates in Asia as well. Shipping data shows that VLCC rates have doubled from $37,250 per day to $74,700 per day. As of now, Reuters calculates that there are 27 VLCCs sitting in the Gulf near Basra, holding about 43 million barrels of oil, double the typical backlog. Some have been waiting for weeks. The current waiting time is 18 to 19 days, which is two to three times the normal wait of 5 to 10 days.

Iraq to probe claims of Unaoil corruption against top officials - BAGHDAD Iraqi Prime Minister Haider al-Abadi on Saturday directed the country's highest corruption watchdog to investigate claims of graft in the awarding of oil contracts by the OPEC exporter and urged the courts to prosecute. A joint report this week by Australia's Fairfax Media and the Huffington Post, citing hundreds of thousands of emails, linked energy services company Unaoil and several international oil companies to corrupt practices such as claims of bribery in countries including Iraq. "Prime Minister Haider al-Abadi directs the Integrity Commission to take legal measures and calls on the judiciary to open immediate legal proceedings concerning the grave newspaper reports," according to a statement from his office. Iraq, which relies on oil exports for most of its revenue, has been plagued by corruption and mismanagement for years, ranking 161 out of 168 on Transparency International's Corruption Perceptions Index in 2015. Graft continues to eat away at the government's resources as it struggles with high spending due to the costs of the war against jihadist group Islamic State, which seized a third of Iraq's territory in the north and west in 2014. Abadi has pledged to battle corruption and on Thursday proposed a cabinet reshuffle aimed at weakening patronage networks, but he faces resistance from politicians who fear reform would undermine their wealth and influence.

Iraq's PM orders probe into oil corruption allegations — Iraq’s prime minister on Saturday ordered an investigation into corruption allegations against senior oil officials following an expose into bribe-taking published in international media outlets. In a statement, Haider al-Abadi ordered “immediate” action by both the anti-corruption commission and the judiciary following reports published by the Huffington Post and Australia’s Fairfax media into large-scale bribe taking by Monaco-based Unaoil company. The report names four senior Iraqi officials as having received bribes from Unaoil between 2004 and 2012. They include former oil minister Abdul-Karim Elaibi and the outgoing higher education minister, Hussain al-Shahristani, who previously served as oil minister and deputy prime minister in charge of energy. The publications said they drew on information gleaned from hundreds of thousands of internal emails dated between 2002 and 2012 for their six-month investigation. The report said that Unaoil paid at least $25 million in bribes via middlemen to secure the support of powerful Iraqi officials, while complaining internally that they were “greedy.” The report also accused the company of bribing senior employees working for international oil companies in Iraq. Earlier Saturday, Hussain al-Shahristani denied he had been involved in any wrongdoing, calling on the two publications to hand over all the documents in their possession to the Iraqi government for the investigation.

"Production Freeze" Narrative Collapses In Two Days: Russian Oil Output Hits New Post-Soviet Record - How quickly the oil production freeze narrative has fallen apart. Indeed, it's been a tough two days for oil bulls holding on to hope that excess oil production will normalize in the near term and that the world's oil suppliers would somehow manage to curb oil production in the aftermath of the OPEC's November 2014 cartel collapse. First it was yesterday's Bloomberg story which cited the Saudi Deputy Crown Prince Mohammed bin Salman as s aying that the Saudis would not participate in an oil production freeze unless everyone including Iran which has made it  joined  "If all countries including Iran, Russia, Venezuela, OPEC countries and all main producers decide to freeze production, we will be among them." The second one came overnight. Recall that one month ago, just as Russia and Saudi Arabia were finalizing their "agreement" to freeze oil production which was the major catalyst for the oil surge from its 13 year lows hit in early February, we got the surprising news that far from throttling production, Russian crude and condensate production just set new post-Soviet daily record of 10.92 million barrels.

Iran Oil Minister Rejects Saudi Demand To Freeze Crude Production -- In the aftermath of Bloomberg's surprising Friday report, according to which Saudi Arabia flipflopped on its previous promise that it would freeze its oil output while allowing Iran to grow supply until it hit its pre-embargo peak, instead saying that it would only join the freeze curbe Iran - and all other OPEC member nations - also joined, crude tanked. Today, what little hope there may have been that Iran will suddenly change its mind and join the production freeze evaporated on Sunday when Iran's oil minister rejected a Saudi demand to stop throttling up its petroleum production. As the WSJ adds, this threatens what has become a farcical deal to "limit crude output and raise prices" when the major oil producers meet in Doha on April 17. The follows Zanganeh's admission that Iran's oil and condensates exports surpassed 2mm b/d, a trend Iran will certainly not want to imperil. As the WSJ notes, Zanganeh's remarks were his first comments since a report emerged last week that Saudi Arabia, the world's largest crude exporter, would limit its production only if Iran followed suit. The dueling positions by the Middle East's two biggest rivals for power and economic might have set off a scramble among other oil-producing nations to salvage a deal to freeze their output and stop growth in the world's petroleum supplies. Global oil production outpaces demand by almost two million barrels on any given day, sending prices to their lowest levels in over a decade. Ironically, in advance of the Doha meeting which many thought had a chance of reaching some agreement, other OPEC members had pushed their oil production to the limit, flooding the market with even more excess supply. Most will find it virtually impossible to throttle production back.

Saudis Retaliate To "Oil Freeze" Fallout: Ban Transport Of Iranian Crude In Territorial Waters - At first, when it announced the terms of its "oil freeze" agreement with Russia one month ago, Saudi Arabia seemed willing to grant Iran a temporary exemption from the supply freeze, at least until it recovers its pre-embargo production levels. That however changed on Friday when the country's Deputy Crown Prince Mohammed bin Salman, shocked Saudi Arabia's Arab allies in the Persian Gulf, telling Bloomberg his country would only join the freeze curbe Iran - and all other OPEC member nations - also joined. Following the Friday announcement, yesterday Iran's oil minister Zangadeh made it clear that the country rejects Saudi demands, and would continue ramping up production at will, in the process making the April 17 Doha meeting meaningless. And then, in a new and unexpected retaliation by Saudi Arabia for Iran's intransigence, moments ago the FT reported that Saudi Arabia has taken steps to slow Iran’s efforts at increasing oil exports, banning vessels that transport Iranian crude from entering their waters, according to traders and shipbrokers. More details from FT: Iranian vessels carrying the country’s crude are restricted from entering ports in Saudi Arabia and Bahrain, according to a circular sent by a shipping insurance company to its members in February. The notice said ships that have called to Iran as one of its last three ports of entry will also require approval from the Saudi and Bahraini authorities before entering their waters. Shipbrokers and traders have relayed the same messages since. Iranian oil executives have expressed their concern about the message circulating in the market, saying it is only adding to problems they face in selling their crude. Saudi Aramco, the state oil company, and The National Shipping Company of Saudi Arabia (Bahri) did not respond to requests for comment. It is not clear just how much of an impact this escalation will have because as shown in the map below, Saudi territorial waters are hardly a major factor in Gulf shipping lanes.

Saudi Arabia Tries to Slow Iran Oil Exports, Without Much Success -- Saudi Arabia has reportedly banned Iranian oil tankers from entering its waters in an effort to slow Iran’s oil exports. The FT reports that Iranian ships are restricted from entering Saudi ports, and Bahrain, a Saudi ally, has issued similar restrictions. Also, Iran has been unable to access some oil in storage at a facility in Egypt, which is partially owned by Saudi Arabia. The efforts may have had an impact, as even Iranian oil executives admit that they have been somewhat stymied. Oil sitting in floating storage off the coast of Iran has climbed by 10 percent this year to 50 million barrels.Before western sanctions Iran used to send oil by the SUMED pipeline across Egypt, allowing oil to move from the Red Sea to the Mediterranean Sea. The FT says that Saudi Arabia is blocking Iran from access to the pipeline, which would ease oil exports to Europe. On the diplomatic track, the two countries are also at odds over the pending OPEC production freeze deal. Several major OPEC members plus Russia are set to meet in Doha on April 17, but Iran has said that it will not abide by any freeze deal. Saudi Arabia said last week that it would only participate if Iran also signed up, raising doubts about the viability of the deal. Even with Saudi Arabia, the freeze would amount to little without Iran, since the participating countries have little scope for raising production. Meanwhile, despite the Saudi campaign to slow the growth of Iran’s oil exports, Iran is lifting exports. Iranian oil minister Bijan Zanganeh said on April 3 that Iran managed to increase oil and gas condensate exports by 250,000 barrels per day in March, allowing exports to surpass the 2 million-barrel-per-day mark.

Iran sticking to plan to regain its share of OPEC crude oil output: government - - Iran will not back down on its plans to regain its share of oil production within OPEC, the government said Tuesday ahead of a crucial meeting of global oil producers to decide whether to freeze crude output at January's levels to support prices. Government spokesman Mohammad Bagher Nobakht also called on other major producers to cut their output to make room for Iran. "We are determined to gain the share we previously had," Nobakht told a press briefing. Under restrictive international sanctions over its disputed nuclear program, Iran's crude production and exports fell from around 4 million b/d and 2.2 million-2.3 million b/d, respectively, to just under 3 million b/d and around 1 million b/d. Since mid-January with the implementation of a deal between Tehran and world powers, Iran has been increasing production to boost its exports. On Monday, Iranian oil minister Bijan Zanganeh said the country's oil and gas condensates exports have already exceeded 2 million b/d. Earlier, President Hassan Rouhani said condensate sales were around 200,000-300,000 b/d. "If anyone should reduce their share it's those who produced extra and took Iran's share for themselves," Nobakht said. "We are determined to regain our share within OPEC and will be pro-active. And we expect others who used this share to cut [their production]," he added

OPEC official: Oil production freeze deal likely to be reached: (AP) — Kuwait’s OPEC governor is saying members of the oil cartel and other producing countries likely will reach a deal later this month for a production freeze as crude prices sit below $40 a barrel. The state-run Kuwait News Agency quoted Nawal al-Fuzai on Tuesday as saying that oil ministers of OPEC nations and several non-OPEC nations showed interest in freezing production at the same rate of February, but that further negotiations are ongoing. Al-Fuzai says Iran remains a holdout on freezing production levels as it tries to recoup money lost to years of sanctions after its nuclear deal with world powers. Officials will meet April 17 in Qatar to negotiate a deal on the proposed freeze aimed at bolstering prices that have fallen from over $100 a barrel in 2014.

OilPrice Intelligence Report: Traders Lose Faith In OPEC Orchestrated Freeze -- Oil prices fell on Monday to one-month lows as the markets became more disillusioned with the prospects of a production freeze at the OPEC-Russia meeting in Doha on April 17. Saudi Arabia backtracked from its pledge to limit output, when the Deputy Crown Prince told Bloomberg that his country would participate only if Iran did as well.  With a massive war chest of cash reserves, the Saudi government has been able to muddle through the crash in oil prices. However, it is planning big changes for the economy in order to close its $98 billion budget deficit. Saudi Deputy Crown Prince Mohammed bin Salman told Bloomberg last week during a five-hour interview that the government was looking to raise $100 billion in non-oil revenue by the end of the decade, nearly triple today’s level. The government wants to trim subsidies, impose a value-added tax, as well as spin off parts of Saudi Aramco in an IPO. It also wants to create a $2 trillion sovereign wealth fund with the intention of diversifying the country’s income for the long haul. Iranian oil minister said that Iran increased oil and condensate exports by 250,000 barrels per day in March, allowing the OPEC member to top 2 million barrels per day in exports. Iran said that it would not participate in the OPEC freeze deal until it boosted exports to pre-sanctions levels, which would mean adding another 1 mb/d to its export total. Goodrich Petroleum announced on Friday plans to file for bankruptcy protection in the next few weeks. Goodrich came to an agreement with junior creditors for a debt-for-equity swap. The deal will result in $175 million in debt for 100 percent of the company. Senior creditors would be paid in full. The prepackaged bankruptcy could allow Goodrich to emerge from bankruptcy with its drilling operations largely unaffected.

Exclusive: Russia sees oil price of $45-$50 per barrel 'acceptable' as it prepares for freeze deal - sources | Reuters: Russia believes an oil price at $45-$50 per barrel is acceptable to allow the global oil market to balance, as it prepares to meet leading oil producers in Doha later this month, sources familiar with Russian plans said on Wednesday. Leading oil producers plan to meet in Doha on April 17 to cement a preliminary deal reached between Russia, Venezuela, Qatar and Saudi Arabia in February to freeze oil output at levels reached in January, to curb a surplus on the oil market. "Now there is discussion of how long production will be frozen and ways to monitor the agreement," one of the sources said. "The level of $45-50 (per barrel) is acceptable from the point of view of market balance: if prices go higher shale oil production could start to recover." A Russian Energy Ministry spokeswoman confirmed that the information provided by the sources was correct.

Are The Saudis And Russians Deliberately Sabotaging Doha? - The actions and intentions of Saudi Arabia and Russia - the two largest oil-producing nations attending the Doha meeting on 17 April - have dashed all hopes of any fruitful outcome.The most important meeting of the last three decades, which has promised to forge new friendships and a new cartel, is turning out to be the biggest farce, even before the curtain is raised. All of this undermines the efforts of the smaller nations, which were hopeful of a production freeze from the meeting. Instead, we’re looking at Russia, whose oil production is now at a 30-year high after the nation produced 10.91 million barrels per day (bpd) in March, according to Reuters. In fact, these output figures are second only to the record 11.47 million bpd Russia produced in 1987. Saudi Arabia is also firmly back on its non-committal path, saying that it will go along with the production freeze if everyone else does, including Iran—of which there is no chance. Saudi Arabia’s deputy crown prince Mohammed bin Salman on 1 April toldBloomberg: "If all countries agree to freeze production, we’re ready. If there is anyone that decides to raise their production, then we will not reject any opportunity that knocks on our door.”  According to a report by Helima Croft, global head of commodity strategy at RBC Capital markets, the five nations shown on the chart below are at the maximum risk of a major crisis due to lower oil prices. The chart shows the oil price levels required by respective nations to survive. “Our ‘fragile five’ states…were already facing severe political and security challenges when oil prices were above $100/bbl and the situation has grown far more grim as these countries have struggled to fund their state apparatuses and provide essential services,” the Financial Post quoted Croft as saying.

Saudis Moving to Reduce Dependence on Oil Money - A top Saudi prince has announced new elements of a plan to reduce the kingdom’s heavy dependence on oil, amid a drop in world prices that has sent shock waves through the Saudi economy.The plans include publicly selling shares of the state oil giant, Saudi Aramco, and routing much of its worth into a public investment fund, said the prince, Mohammed bin Salman, in an interview with Bloomberg published Friday.The fund could become the world’s largest, he said, with more than $2 trillion in assets.“Undoubtedly, it will be the largest fund on earth,” said Prince Mohammed, who is second in line to the Saudi throne and has emerged as the country’s most powerful and dynamic official. “This will happen as soon as Aramco goes public.”Although less than 5 percent of Saudi Aramco would be sold, the prince said the national oil company would be transferred to a government fund, now relatively small, called the Public Investment Fund, giving it instant heft and potential financial firepower.Saudi Aramco is the world’s leading oil producing company. It has about 10 million barrels per day of output, or about 10 percent of global production, and reserves of about 160 billion barrels. The company also has large refining and petrochemical interests inside Saudi Arabia and internationally, including in the United States.

Biggest Ever Saudi Overhaul Targets $100 Billion of Revenue - The biggest economic shake-up since the founding of Saudi Arabia would accelerate subsidy cuts and impose more levies, a plan to spread the burden of lower crude prices among a population more accustomed to government largess. Outlining his vision in a five-hour interview with Bloomberg News last week, Deputy Crown Prince Mohammed bin Salman said the measures would raise at least an extra $100 billion a year by 2020, more than tripling non-oil income and balancing the budget. “It’s a large package of programs that aims to restructure some revenue-generating sectors,” the prince said at the royal compound in Riyadh. Non-oil income rose 35 percent last year to 163.5 billion riyals ($44 billion), according to preliminary budget data. It’s a radical shift for a country built on petrodollars since the first Saudi oil was discovered almost eight decades ago. Prince Mohammed, 30, and his top aides said the administration navigated plunging oil prices last year through a series of “quick fixes.” While there are no plans to tax incomes, his policies would bring the kingdom closer to the rest of the world, where governments rely on charges to fund spending. The prince said authorities are weighing measures that include more steps to restructure subsidies, imposing a value-added tax and a levy on energy and sugary drinks as well as luxury items. Another revenue-raising plan under discussion is a program similar to the U.S. Green Card system that targets expatriates in the kingdom. The strategy would complement a plan to sell a stake in Saudi Aramco on the stock exchange and create the world’s largest sovereign wealth fund, steps meant to make the kingdom more reliant on investment income than oil within 20 years. The $2 trillion fund would be big enough to buy the four largest publicly traded companies on the planet.

For The Saudis, The World Is Moving Fast; Watch For The Saudis To "Depeg" The Riyal From The US Dollar --- Some time ago, as an update to an earlier note, I posted:  June 22, 2015: long article in Atlantic Monthly. A lot of data. Bottom line, Saudi Arabia is likely to be a net oil importer by 2040. The linked article did not mention that Saudi Arabia has announced that the $109 billion solar program has been delayed for eight years. Saudi Arabia has a severe cash flow problem. They are betting they can cripple the US oil and gas industry. By the end of calendar year of 2016 we will know if Saudi Arabia was successful. Saudi's export data here. In around numbers, Saudi produces 10 million bbls of crude oil daily and exports 75% of it. I doubt Saudi Arabia will go from exporting 7.5 million bopd  to 0 bopd overnight. So when analysts suggest Saudi will be a net oil importer by 2040 suggests that soon, perhaps starting as early as 2020, we might start seeing a steady decline (albeit very slowly) of Saudi exports.  And that explains Saudi Arabia's recent announcement that they are looking to monetize their assets and looking to become a major midstream and major downstream player ... soon. I posted that as an introduction to link this article being posted by Forbes which suggests that Saudi's last weapon in the crude oil price war may be "unpegging" the Saudi riyal to the US dollar.

Saudi Arabia Seeks To Use Soverign Wealth To Become Black Swan Sanctuary - Saudi Arabia is working to create the world’s largest sovereign wealth fund so it might redirect the nation away from dependence on oil! What do the Saudi’s know? Will they have time before the bottom falls completely out of the oil market? We’ve reported here on the emergence of cold fusion as the ultimate Black Swan transformational technology. It seems our birdering reports have been noted in Saudi Arabia. Crown Prince Mohammed bin Salman has, in interviews with Bloomberg News, described the nations new vision for a $2+ trillion sovereign wealth fund. The purpose of the fund is to begin immediately to rapidly and shockingly wean the kingdom off oil. In the near term the prince said Saudi hopes to sell public shares in Aramco’s parent company and transform the oil giant into an industrial conglomerate. The IPO is to take place within months.  “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.”  King Salman’s 30-year-old son is intending to transform the world’s biggest and richest oil exporter into an entirely new nation/economy. He notes that as his strategy takes shape, the speed of change may shock the conservative Saudi society accustomed to decades of government handouts. A news report of 1 year ago proposed the notion that the Saudi Royal family was very aware and working on a ‘black swan’ scenario. At the time the Saudi Oil Minister Ali Al-Naimi was said to have asked the rhetorical question, “Is there a black swan that we don’t know about which will come by 2050 and we will have no demand for oil?” It seems the kingdom got the answer he expected!

Something Just Snapped In Saudi Money Markets -- Away from the headlines about The Panama Papers, global financial markets turmoiled quietly this week with a surge in equity and FX volatility and banks suffering more death blows. However, something happened in Saudi Arabia's banking system that was largely uncovered by anyone in the mainstream... overnight deposit rates exploded to their highest since the financial crisis in 2009... It is clear that that the stress in Saudi markets has spread from the forward derivatives markets to actual funding problems. This suggests one of the two main things: either Saudi banks are desperatly short of liquidity or Saudi banks do not trust one another and are charging considerably more to account for the suspected credit risk. Either way, not good. So what is going on behind the scenes in Saudi Arabia?

Who is Winning the “Great Balancing Game” Between Pakistan, India, Saudi Arabia, and Iran? - In the last month, there has been an outbreak of “warm hugs” and “historical brotherly love” from Pakistan to Saudi Arabia — at least in summits and statements.  Beyond the photo opportunities, the summits, which came within a week of each other, were more about a “Great Balancing Game”. Arch-rivals India and Pakistan are maneuvering for position amid shifting Middle Eastern and Asian conflicts in which Iran and Saudi Arabia are jockeying for political, diplomatic, and military supremacy. But who fared best in the “balancing”? And who, far from bolstering position, may have found that the outcome is the risk of isolation?  The priority which dictates Pakistan’s political engagement in the Middle East, other than religion, is its national security vis-à-vis India. There is a natural reluctance to bolster political ties with countries that enjoy strategic and defense partnerships with India.  However, this priority has been joined, if not overtaken, by the need to negotiate the tension between Saudi Arabia and Iran. With Riyadh expecting a show of support, Pakistan joined the 34-country Islamic alliance and participated in the Northern Thunder military exercise.  India is a rising economy in Asia with its huge market attracting global investment, but this industrialization can only be sustained with a secure energy base.  That is a motive for India’s broad political, economic, and strategic engagement with Iran, but New Delhi also wants to strengthen geo-strategic ties with Gulf countries, tap into their petro-industry, and loosen their historically strong political relations with Pakistan.  Locked in a political turf war in the Middle East with Saudi Arabia and its other Gulf allies, Tehran needs security and defense partners to consolidate its regional standing.  The current crises in the Middle East and Pakistan’s decision against involvement in the Saudi-led intervention in Yemen opened up space for Tehran to make inroads within Pakistani ranks. This in turn might push Saudi into a more conciliatory approach to the Islamic Republic.  Since the ascent of King Salman to the throne, Saudi Arabia has adopted an aggressive and pro-active foreign policy against Iran, trying to isolate Tehran in the region. The kingdom is also aware of its own economic difficulties and a pressing need to find new markets for its petro-exports.  India’s rapidly-industrializing economy, needing energy resources and investment, is an ideal opportunity. Getting a share in the Indian energy market would both meet Riyadh’s economic objectives and balance New Delhi’s strategic relationship with the Islamic Republic

Saudi Arabia executions reach record high as beheadings set to double this year - Saudi Arabia has already executed 82 people this year and is on course to behead twice as many prisoners as it did in 2015, according to new statistics compiled by a leading human rights organisation likely to raise fresh concerns about the UK’s close ties to the Kingdom. The British Government has been urged to do more to put pressure on its Gulf allies to halt the bloodshed in light of the figures, which would see the total death toll in Saudi Arabia reach a record high of more than 320 by the end of the year if the current rate is maintained. This would be more than double the 158 executions carried out by the Kingdom last year, which was in itself a dramatic rise on the 88 people it beheaded in 2014. The figures were compiled by the UK organisation Reprieve using a combination of official statements from the Saudi government and reliable local media reports.  Earlier this week, the Defence Secretary Michael Fallon paid a low-key visit to Saudi Arabia to “help strengthen the UK-Saudi defence relationship”, meeting Crown Prince Muhammad bin Naif bin Abdulaziz Al Saud, the minister of interior who is in charge of ordering executions. Days later, at least two more prisoners were beheaded. The Ministry of Defence (MoD) said he had “reiterated the importance of working together to deal with global threats, including countering the poisonous ideology of Daesh and regional instability”.

Amnesty highlights 'disturbing rise' in global executions - BBC News: A surge in the number of executions recorded worldwide saw more people put to death last year than at any point since 1989, Amnesty International says. At least 1,634 people were executed in 2015, a rise of more than 50% on the previous year, the group found in its review of the use of the death penalty. Iran, Pakistan and Saudi Arabia were responsible for 89% of the executions. The total does not include China, where Amnesty said thousands more were likely killed but records were kept secret. On the other hand, the group also noted that for the first time ever a majority of the world's countries had fully abolished the death penalty. Fiji, Madagascar, Congo-Brazzaville and Suriname changed their laws in 2015, while Mongolia also passed a new criminal code that will take effect later this year. Amnesty said China remained the world's top executioner. It estimated that thousands of people had been put to death and thousands of others sentenced to death in 2015. It added that there were signs that the number of executions in China had decreased in recent years but the secrecy around the death penalty made that impossible to confirm for certain. Iran executed at least 977 people in 2015 - the vast majority for drug-related crimes - compared with 743 the year before, according to Amnesty. Those put to death, the group found, included at least four people who were under 18 at the time of the crime for which they had been convicted. This, it said, violated international law.

Bought and Sold? John McCain’s Foundation Took $1 Million from Saudi Arabia: A new scandal has erupted involving US Senator John McCain of Arizona — his nonprofit organization, the McCain Institute for International Leadership, received a $1 million donation from the repressive government of Saudi Arabia in 2014. The news is likely to impact his closely contested US Senate race against Arizona Congresswoman Ann Kirkpatrick, a race that pollsters say is within the margin of error. The contribution came as President Obama attempted to negotiate the nuclear agreement with Iran, Saudi’s regional adversary, raising concerns that a foreign government influenced internal US policy.

Exclusive: 21 Generals Lead ISIS War the U.S. Denies Fighting - In the war against the self-proclaimed Islamic State, the U.S. military is notably short on soldiers, but apparently not on generals.  There are at least 12 U.S. generals in Iraq, a stunningly high number for a war that, if you believe the White House talking points, doesn’t involve American troops in combat. And that number is, if anything, a conservative estimate, not taking into account the flag officers running the U.S. air war, the admirals helping wage the war from the sea, or their superiors back at the Pentagon. At U.S. headquarters inside Baghdad’s fortified Green Zone, even majors and colonels frequently find themselves saluting superiors at a pace that outranks the Pentagon and certainly any normal military installation. With about 5,000 troops deployed to Iraq and Syria ISIS war, that means there’s a general for every 416 troops, give or take. To compare, there are some captains in the U.S. Army in charge of that many people. Moreover, many of those generals come with staffs and bureaucracy that some argue slows decision-making against an agile terror group. The Obama administration has frequently argued that the U.S. maintains a so-called light footprint in Iraq to reassure the American public that its military is not back in Iraq. Indeed, at times, the United States has not acknowledged where it has deployed troops until one of them died. But if the U.S. footprint is so small, why does the war demand so many generals?

How Saudi Arabia's war in Yemen has made al Qaeda stronger and richer: – Once driven to near irrelevance by the rise of Islamic State abroad and security crackdowns at home, al Qaeda in Yemen now openly rules a mini-state with a war chest swollen by an estimated $100 million in looted bank deposits and revenue from running the country’s third largest port. If Islamic State’s capital is the Syrian city of Raqqa, then al Qaeda’s is Mukalla, a southeastern Yemeni port city of 500,000 people. Al Qaeda fighters there have abolished taxes for local residents, operate speedboats manned by RPG-wielding fighters who impose fees on ship traffic, and make propaganda videos in which they boast about paving local roads and stocking hospitals. The economic empire was described by more than a dozen diplomats, Yemeni security officials, tribal leaders and residents of Mukalla. Its emergence is the most striking unintended consequence of the Saudi-led military intervention in Yemen. The campaign, backed by the United States, has helped Al Qaeda in the Arabian Peninsula (AQAP) to become stronger than at any time since it first emerged almost 20 years ago. Yemeni government officials and local traders estimated the group, as well as seizing the bank deposits, has extorted $1.4 million from the national oil company and earns up to $2 million every day in taxes on goods and fuel coming into the port.AQAP boasts 1,000 fighters in Mukalla alone, controls 600 km (373 miles) of coastline and is ingratiating itself with southern Yemenis, who have felt marginalised by the country’s northern elite for years. By adopting many of the tactics Islamic State uses to control its territory in Syria and Iraq, AQAP has expanded its own fiefdom. The danger is that the group, which organised the Charlie Hebdo magazine attack in Paris last year and has repeatedly tried to down U.S. airliners, may slowly indoctrinate the local population with its hardline ideology.

Facebook Groups Act as Weapons Bazaars for Militias - A terrorist hoping to buy an antiaircraft weapon in recent years needed to look no further than Facebook, which has been hosting sprawling online arms bazaars, offering weapons ranging from handguns and grenades to heavy machine guns and guided missiles. The Facebook posts suggest evidence of large-scale efforts to sell military weapons coveted by terrorists and militants. The weapons include many distributed by the United States to security forces and their proxies in the Middle East. These online bazaars, which violate Facebook’s recent ban on the private sales of weapons, have been appearing in regions where the Islamic State has its strongest presence. This week, after The New York Times provided Facebook with seven examples of suspicious groups, the company shut down six of them. The findings were based on a study by the private consultancy Armament Research Services about arms trafficking on social media in Libya, along with reporting by The Times on similar trafficking in Syria, Iraq and Yemen.

Iraqi Kurds Say Want Russian Oil Firms To Work On Their Land (Reuters) - Iraqi Kurdistan is keen to attract Russian oil companies to work on its territory, the Interfax news agency on Friday quoted the head of the Iraqi Kurds' representative office in Moscow as saying. The semi-autonomous region of Iraq is ready to take all necessary measures, including security ones, to ensure that Russian energy firms can work safely there, Aso Talabani told the agency. Gazprom Neft, the oil arm of state gas company Gazprom, is currently working on four projects in Iraq, of which three - Halabja, Shakal and Garmian - are located in Iraqi Kurdistan. The company is continuing to explore the Halabja and Shakal blocks and is extracting a small amount of oil at Garmian.

What China's slowing economic growth means for its oil balance in 2016: After picking up significantly last year, China's oil demand is expected to moderate in 2016 in line with the country's slowing economic growth, says Song Yen Ling, senior analyst at Platts China Oil Analytics. This video shares Platts China Oil Analytics' demand forecast and where overall oil product expansion will be coming from, as well as import expectations now that more and more independent refineries are getting access to imported crude.

Subprime housing risks raise red flags in China - China's efforts to tackle a glut of vacant housing by spurring home lending have triggered a bigger problem: A surge in risky subprime-style loans that is generating alarm among regulators. Home buyers in China normally put down a third of the cost of a new property upfront. But a rapid rise in buyers borrowing for their down payments -- an echo of the easy credit that cratered the U.S. housing market and sparked the financial crisis -- has prompted authorities to clamp down. Peer-to-peer lenders, who raise money from investors and then lend it out at higher interest rates, made 924 million yuan ($143 million) in down-payment loans in January, more than three times the amount made in July, according to Shanghai-based consultancy Yingcan. A senior banking executive at one of China's top four state-owned banks said down-payment loans directly contributed to a recent run-up in housing prices in big cities. "It's a risky practice that should be contained," he said. Officials at various levels of government are now stepping on the brakes. The central bank and the housing ministry last month started to crack down on loans enticing home-buyers with "zero-down-payment" slogans.

Alibaba Surpasses Walmart As Largest Retail Company In The World -- We may not have the exact numbers yet, but in a filing with the SEC on Tuesday, China's online retail behemoth Alibaba Group announced that it had "become the largest retail economy in the world" at the end of its fiscal year on March 31, "as measured by gross merchandise volume (GMV) on its China retail marketplaces." As IBT notes, the company has yet to declare its financial results for its last quarter and the complete fiscal year, but the announcement makes it clear that BABA surpassed the $482.1 billion in 2015 revenues reported by Wal-Mart Stores Inc. for its fiscal year ended Jan. 31. To wit: Alibaba Group Holding Limited announced on April 5, 2016 that as of March 31, the end of its fiscal year 2016, it has become the largest retail economy in the world as measured by annual gross merchandise volume (GMV) on its China retail marketplaces. PricewaterhouseCoopers (PwC) has performed agreed upon procedures on data relevant to Alibaba Group’s GMV As a reminder, two weeks prior to the SEC filing, Alibaba’s Executive Vice Chairman Joe Tsai announced in a blog post on March 21 that “with 10 days remaining in our fiscal year ending March 2016, Alibaba's China retail marketplace platforms surpassed RMB 3 trillion [yuan] in GMV. That is about [$]476 billion in U.S. dollars and, if the platforms we operate were a province, we would rank as the 6th largest provincial economy in China." Inferring a full year's revenue from that number suggests that Alibaba closed the books with roughly $490 billion, or about $8 billion in sales more than America's flagship discount retailer.

China workers ‘to account for 12% of global consumption’ - China’s working-age population will account for 12 cents of every $1 spent worldwide in urban areas by 2030, reshaping the global economy much as the west’s baby-boomer generation did in its prime. Their annual consumption will more than double, from $2.5tn in 2015 to $6.7tn in 2030, according to the McKinsey Global Institute, the research arm of the eponymous consultancy. “This generation of consumers in China is more prosperous, more educated and more willing to spend a higher share of their income than previous generations were at the same age. “These consumers are now reaching income thresholds at which spending on services takes off rapidly,” McKinsey GI said. Despite China’s longstanding one-child policy, McKinsey forecasts that the number of Chinese people aged between 15 and 59 will rise from 521m to 628m by 2030. However, the rising incomes of these workers will have a far greater impact, with the proportion of urban working-age households with monthly earnings of $2,100 or more tipped to rise from 4 per cent in 2010 to 54 per cent by 2030. Driven by this, McKinsey sees the per capita consumption of urban working-age Chinese people rising at a compound annual growth rate of 5.4 per cent, raising spending per person from $4,800 to $10,700 by 2030.

Man who ran world’s largest army charged with taking US$12.3 million worth of bribes - China’s former top general who used to run the world’s largest army has been charged with taking bribes totalling 80 million yuan (HK$96 million), a source close to senior military officials told the South China Morning Post. Guo Boxiong, the retired military chief of the People’s Liberation Army, had been under investigation for corruption since last year and was expelled from the Communist Party in July. Guo, 74, a former vice-chairman of the Central Military Commission, is the highest-ranking military official to be netted in President Xi Jinping’s far-reaching corruption crackdown. A former member of the party’s 25-man Politburo, Guo is also the highest-ranking general to face a graft charge since the foundation of the People’s ­Republic of China in 1949. Military prosecutors had wrapped up the criminal probe into Guo and the case had been filed to a court, the source said.

Panama Papers probes opened, China limits access to news on leaks | Reuters: Authorities across the globe have opened investigations into the activities of the world's rich and powerful after a cache of leaked documents from a Panamanian law firm showed possible wrongdoing using offshore company structures. The "Panama Papers" have cast light on the financial arrangements of high profile politicians and public figures and the companies and financial institutions they use for such activities. Among those named in the documents are friends of Russian President Vladimir Putin and relatives of the leaders of China, Britain, Iceland and Pakistan, and the president of Ukraine. Leading figures and financial institutions responded to the massive leak of more than 11.5 million documents with denials of any wrongdoing as prosecutors and regulators began a review of the reports from the investigation by the U.S.-based International Consortium of Investigative Journalists (ICIJ) and other media organizations. Following the reports, China has moved to limit local access to coverage of the matter with state media denouncing Western reporting on the leak as biased against non-Western leaders. France, Australia, New Zealand, Austria, Sweden and the Netherlands are among nations that have commenced investigations, and some other countries, including the United States, said they were looking into the matter. Mossack Fonseca, the Panamanian law firm at the center of the leaks, has set up more than 240,000 offshore companies for clients around the globe and denies any wrongdoing. It calls itself the victim of a campaign against privacy and claims media reports misrepresent the nature of its business.

Global military spending is increasing -- Last year, the world’s military spending increased for the first time in four years, a directional shift that may herald even higher spending on armaments and operations in years to come, according to new data compiled by the Stockholm International Peace Research Institute (SIPRI). The world heaped more than $1.6 trillion on military programs and personnel in 2015, roughly 1 percent more than in 2014, a SIPRI analyst declared at the nonpartisan Stimson Center in Washington, D.C. on April 5. The increase follows four years of decline, which was preceded by 12 years of steady increases. So the brief falloff is over, and the familiar routine is back. “The dynamic for state spending has changed everywhere,” Aude Fleurant, Director of the Arms and Military Expenditure Programme at SIPRI said during a panel discussion. Many non-western countries in particular increased their military spending in 2015, she said. “There’s a possibility that this is a transitional year.” Fleurant added. If spending continues to rise, it would make the decreases between 2011 and 2014 insignificant, she said. Fleurant noted, however, that the evidence was not clearcut, because some countries boosted spending due to conflicts while others cut spending due to economic pressures.

100 Million Won Debt per Person: South Korea’s Total Liabilities Close to 5,500 Trillion Won - It has been found that the total debts of the South Korean government, the public and corporate sectors of the country and South Korean households are estimated to reach no less than 5,500 trillion won or so. The Bank of Korea and the Ministry of Strategy & Finance announced on April 5 that the central and local governments of South Korea and its public sector including state-run non-banking companies recorded total liabilities of 957.3 trillion won as of the end of 2014. The amount increases to 1,247 trillion won when the liabilities of state-run banking companies, estimated to have totaled 289.7 trillion won in 2012, are included in the calculation. Last year, the country’s public pension liabilities totaled 659.9 trillion won, divided into 531.8 trillion won for the public employee pension and 128.1 trillion won for the military pension. With this amount added, the total increases to 1,906.9 trillion won. However, it is expected to be around 2,000 trillion won now in view of the time lag. As of the end of last year, the household liabilities reached 1,207 trillion won or so, breaking the 1,200 trillion won mark for the first time ever. Besides, South Korean enterprises’ total debts hit 2,347 trillion won at the end of the first quarter of 2015. This amount is equivalent to 1.4 times the country’s GDP for 2015. The aggregate of all the amounts above is 5,460.9 trillion won, 3.2 times South Korea’s GDP for 2015

Japan firms' inflation expectations weaken, keeps BOJ under pressure | Reuters: Japanese companies' long-term inflation expectations weakened in March from three months ago, a central bank survey showed, a sign January's decision to adopt negative interest rates has failed to convince firms that price rises will accelerate over time. The survey reinforces market doubts over the Bank of Japan's argument that its massive money printing will nudge firms into boosting spending on expectations of future increases in prices. It also underscores the challenge the central bank faces in accelerating inflation to its 2 percent target from current levels around zero, keeping it under pressure to expand monetary stimulus again. Companies expect consumer prices to rise an average 0.8 percent a year from now, lower than a 1.0 percent increase expected three months ago, the survey showed on Monday. Firms polled by the BOJ, as part of its detailed "tankan" survey for March, also said they expect consumer prices to rise an annual 1.1 percent three years from now, less than 1.3 percent forecast in March. Moreover, companies' consumer inflation projections five years ahead was lowered to a 1.2 percent rise from a 1.4 percent increase, the survey showed.

'Godfather' of Abenomics warns sales tax hike will suck Japan into fresh crisis: -- Japan risks being sucked into a fresh crisis unless next year's controversial sales tax hike is shelved, one of the prime minister's top advisers has warned. Koichi Hamada, one of the architects of Abenomics, described the planned consumption tax increase to 10pc next April, from 8pc as a “black cloud” hanging over the world’s third largest economy. He warned that going ahead with the increase was likely to plunge Japan into another damaging recession. “The impact of the last storm was very hard for Japanese consumers,” he told the Telegraph. “If they see another black cloud on the horizon that will impact their willingness to spend.” japan Mr Hamada said global jitters meant the looming increase was likely to weigh on Japan’s cautious consumers long before the actual rise. The country’s last sales tax hike from 5pc to 8pc in 2014 sent the economy into recession and led policymakers to delay the second stage of the hike by 18 months to April 2017. While Mr Hamada supports an increase in the future, he urged policymakers to postpone it until they were confident that the economy could handle another rise. Backing an indefinite delay, he said: “My approach is much like a doctor. We have to see how the patient is first by taking their temperature and blood pressure before removing or changing the medicine.”

Japan's service sector activity at 50.0 in March PMI- Nikkei Asian Review: -- The Nikkei Japan Services Purchasing Managers' Index, or PMI, was 50.0 in March. It was 51.2 in February. The data pointed to a general stabilization in business conditions at Japanese service providers. A reading above 50 indicates economic expansion, while one below 50 points toward a contraction. (Nikkei) See more information online:

Government Pension Investment Fund likely lost more than ¥5 trillion last year --  The Government Pension Investment Fund is likely to record losses of more than ¥5 trillion for fiscal 2015, which ended Thursday, amid a deteriorating investment environment since January, according to recent estimates by financial experts. The GPIF, one of the world’s largest institutional investors, decided on a major shift in investment policy in October 2014 at the urging of Prime Minister Shinzo Abe’s administration, placing more emphasis on riskier assets such as stocks while cutting holdings of Japanese government bonds. The fund, which manages employee and national pension funds overseen by the Health, Labor and Welfare Ministry, reported last month ¥2.31 trillion of gains for the 2015 calendar year. But the latest projections indicate that the policy shift worked negatively in the fiscal year as the fund recorded losses of ¥510 billion in the nine months through last December and the Nikkei 225 stock average tumbled around 12 percent in the January-March quarter. Domestic bonds used to account for about 60 percent of the GPIF’s portfolio. But it has set a target to raise the proportion of domestic and foreign shares to around 50 percent. It would be the fund’s first red ink since fiscal 2010, when the massive earthquake and tsunami in the Tohoku region on March 11, 2011, pushed domestic stocks sharply lower.

Japan to print more high-denomination banknotes -- The bank of Japan is set to print an additional 180 million of its highest denomination banknotes as the population hides them away from a rainy day. Fewer 10,000 yen (£64) notes are being circulated widely, leading to the need for more in the fiscal 2016 year. Since 2010, 1.05 billion of these notes have been produced annually, but this is being upped by 17 per cent to 1.23 billion for the current period. While electronic payments are popular in Japan, cash in circulation is increasing, with the Asahi newspaper reporting it reached 90.3 trillion yen (£577 billion) in February. This is an increase of 6.7 per cent compared to a year earlier. The reason for this is down to money being stashed in people’s homes as opposed to going to banks, which is in turn two-fold. Changes to taxation laws in Japan have left people keen not to put their cash into banks, where they will receive negative nominal interest rates anyway.

Are the BoJ’s negative rates a con?  -- Some guesswork from Jefferies on Wednesday: The upcoming 27-28 April BoJ meeting is likely to push the authorities into finally admitting a plan to consolidate the JGB holdings into perpetual bonds alongside a formal move away from inflation targeting to nominal GDP targeting. There is a growing realization that there are effective limits to how much more JGBs can be acquired…Although there is certainly room for deposit rates to be dropped further into negative territory and possibly the BoJ acquiring local government debt, there is growing realization that at some point the BoJ is likely to announce a ‘tapering of JGBs’ towards the end of 2016 or early 2017… Currently, the Bank of Japan is buying just over Y80 trillion of JGBs per annum or the equivalent of three times to the rate of JGB issuance. The BoJ is approaching a shortage of JGBs for the central bank to buy, as commercial banks, pension and insurance funds have run down their holdings. In this sense, we continue to believe that the BoJ’s sudden policy U-turn on negative deposit rates in January was driven by the need to collapse the yield curve into negative territory as far as possible. The authorities are attempting to push bond yields down below existing nominal GDP, so that the existing debt can be converted or ‘consolidated’ into a perpetual zero coupon bond presumably before any ‘tapering announcement’. This is a drum that Jefferies has been banging for a while btw. Last time they explained it a little more fully: “This will allow it to do outright debt monetization whereby the central bank buys the bonds with the intention of never selling them, while the government never has the desire to repay the debt. Meanwhile the bonds are financed on the BoJ’s balance sheet at zero cost.”

Diet debate on TPP deal begins amid opposition - The Diet started deliberations Tuesday on a Pacific Rim free trade deal, with the ruling parties looking to have it ratified and related legislation enacted during the current session ending June 1. During debate that started in a plenary session of the House of Representatives, measures to support farmers, who will face an influx of cheaper products from abroad under the Trans-Pacific Partnership, are expected to be a major sticking point. Japan, the United States and 10 other countries signed the TPP accord, covering 40 percent of the global economy, in February, after reaching broad agreement on the trade framework last October. The other participating countries are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Prime Minister Shinzo Abe’s ruling bloc wants the Diet to ratify the pact and pass the necessary bills before the House of Councillors election this summer, while opposition parties are arguing that initially promised tariff protection for Japan’s five key farm products including rice, beef and pork is insufficient. Abe said during the lower house plenary session that the free trade agreement “should be evaluated as being consistent with the philosophy of resolutions” adopted by Diet committees in 2013, which called for the five key products to be exempt from tariff elimination. But Shiori Yamao, chairwoman of the main opposition Democratic Party’s policy research council, said the national interest has not been fully protected, referring to the fact that duties on about 30% of the key products will be removed.

Vietnam Seizes Chinese Ship In Gulf Of Tonkin - The territorial scramble for various resource rich areas in the East/South China Sea and specifically the Spratly islands has been a major point of contention involving China and most of its regional neighbors, recently expanding to the US which is determined not to let China have the upper hand, for nearly two years now, with occasional episodes of escalation that threaten the regional peace. One such episode took place on Thursday of last week when the Vietnamese coast guard seized a Chinese vessel for intruding into its territorial waters, according to a local report Saturday. As the Nikkei reports, in a rare move for Vietnamese authorities against a Chinese vessel, the coast guard in the northern port city of Haiphong seized the ship carrying diesel fuel in the infamous Gulf of Tonkin on Thursday.

4-star admiral wants to confront China. White House says not so fast: The U.S. military’s top commander in the Pacific is arguing behind closed doors for a more confrontational approach to counter and reverse China’s strategic gains in the South China Sea, appeals that have met resistance from the White House at nearly every turn. Adm. Harry Harris is proposing a muscular U.S. response to China's island-building that may include launching aircraft and conducting military operations within 12 miles of these man-made islands, as part of an effort to stop what he has called the "Great Wall of Sand" before it extends within 140 miles from the Philippines' capital, sources say. Harris and his U.S. Pacific Command have been waging a persistent campaign in public and in private over the past several months to raise the profile of China's land grab, accusing China outright in February of militarizing the South China Sea. But the Obama administration, with just nine months left in office, is looking to work with China on a host of other issues from nuclear non-proliferation to an ambitious trade agenda, experts say, and would prefer not to rock the South China Sea boat, even going so far as to muzzle Harris and other military leaders in the run-up to a security summit. “They want to get out of office with a minimum of fuss and a maximum of cooperation with China,” The White House has sought to tamp down on rhetoric from Harris and other military leaders, who are warning that China is consolidating its gains to solidify sovereignty claims to most of the South China Sea.  National Security Adviser Susan Rice imposed a gag order on military leaders over the disputed South China Sea in the weeks running up to the last week's high-level nuclear summit, according to two defense officials who asked for anonymity to discuss policy deliberations. China's president, Xi Jinping, attended the summit, held in Washington, and met privately with President Obama.

ASEAN’s destructive elites - The Association of Southeast Asian Nations has long been envisioned as a foundation stone for stability, security and increased prosperity in Asia. But with uncertainty plaguing the political systems of Myanmar, Malaysia, and Thailand, ASEAN may be entering a period of policy and diplomatic inertia. At a time when China’s economic downturn and unilateral territorial claims are posing serious challenges to the region, ASEAN’s weakness could prove highly dangerous. The problems that are now bedeviling Myanmar, Malaysia and Thailand may appear to have little in common. But they all spring from the same source: an entrenched elite’s stubborn refusal to craft a viable system of governance that recognises new and rising segments of society and reflects their interests in government policy. And yet, despite the shared roots of these countries’ political dysfunction, their prospects vary. Surprisingly, hope is strongest in Myanmar, where the military junta recognised the need for change, exemplified in the 2010 decision to free the long-imprisoned Nobel Peace laureate Daw Aung San Suu Kyi, and embark on a transition to democracy. Myanmar’s former military leaders, it seems, looked ahead dispassionately and saw a stark choice: either relinquish gradually their absolute power, allowing for a democratic transition, or permit China to tighten its grip on their country. China’s efforts to impose development plans that would deliver few, if any, benefits to Myanmar made the choice somewhat easier.

Baltic Dry Index hits 500 points as upturn continues, more period fixtures too - The Baltic Dry Index (BDI) has climbed by 13 points from Tuesday and was assessed at 500 points today, its highest level since December 14. The Baltic indices for all bulk carrier markets showed continued growth today, particularly the panamax and capesize indices, which grew respectively by 23 and 11 points from Tuesday’s level. The period market also saw a rare capesize fixture, concluded at roughly a 51% premium on what the vessel could be earning in the spot market right now. Brave Maritime’s cape Brave Argentina (177,700 dwt, built 2010) was fixed for six to eight months to an unreported charterer at $6,100 daily, delivering in Qingdao between April 14-16. The Baltic Capesize Index’s weighted TCA spot rate was today assessed at $4,027 per day, a $187 increase from Tuesday. For panamaxes, spot rates continue to be buoyed by active chartering activity, particularly for cargoes from east coast South America. Rates for trans-Atlantic voyages from Gibraltar/Skaw (P1A_03) today saw the biggest rate increase – some $387 – and were assessed at $5,505 per day. The Baltic Panamax Index’s weighted TCA spot rate was today assessed at $4,940 per day, up $180 from Tuesday and its highest level since November 4, 2015. The rate bottomed out at $2,260 per day on February 1 and has been climbing steadily since then, albeit with some volatility. Daily rates in the panamax spot market continue to offer a discount to those in the period market, but spot market rally has led to a spate of short-term period fixtures, all for roughly six-month terms.

RBI cuts rates to lowest since 2011, banks given liquidity comfort | Reuters: The Reserve Bank of India (RBI) cut its policy interest rate by 25 basis points to 6.50 percent on Tuesday, reducing it to a more than five-year low while dangling the prospect of another cut later this year if inflation trends stay benign. To make policy rate cuts more effective, the RBI also took steps to ensure increased liquidity in the financial system, as banks had cited tight cash conditions as a reason for not cutting their lending rates by more earlier. The combined moves signalled a new approach by Governor Raghuram Rajan, who was disappointed that the RBI's aggressive easing last year failed to have the impact he had hoped for due to commercial banks reluctance to lower rates for borrowers. Addressing a news conference following the policy review, Rajan voiced confidence that banks would take heed this time. "Borrowing rates are coming down significantly in this economy," Rajan said. "My hope is that we will see significantly more transmission over the next few months." Controlling inflation is the central bank's priority, but Prime Minister Narendra Modi's government would welcome any move to improve business conditions for industrialists who, despite data depicting India as one of the world's fastest growing economies, remain hesitant to invest.

Global funds drawn to India's record $120 billion sour debt | Reuters: Global distressed asset buyers such as J.C. Flowers & Co and Apollo Global are flocking to India, where banks have been ordered to clean up an estimated $120 billion of bad and troubled loans. Bad loans at Indian banks jumped by nearly a third to around 4 trillion rupees ($60.3 billion) late last year as the central bank drives a national clean-up of banks' balance sheets. That figure doubles to a record amount when restructured, or rolled over, loans are included - amounting to 11.3 percent of all loans, the government says. Foreign firms have been similarly attracted to China, which has also seen an explosion in bank bad loans, though, unlike India, China is not pushing banks to carry out a thorough asset quality review that would increase the number of bad loans. Reserve Bank of India Governor Raghuram Rajan wants lenders to fully disclose and provide for all problem loans by next March, an exercise that could force banks to consider selling off chunks of bad loans to specialists to free up capital. As more bad loans are likely to be revealed as part of that broad asset quality review, distressed-debt buyers sense an opportunity. J.C. Flowers, which has invested over $14 billion across several countries and recently announced a joint venture with financial services group Ambit Holdings, plans to set up a so-called Asset Reconstruction Company (ARC) as well as a distress-debt fund in India, Asia's third-largest economy.

India’s Central Bank Slashes Key Rate To Five-Year Low To Boost Growth Amid Easing Inflation -- In a widely expected move, the Reserve Bank of India (RBI) — the country’s central bank — lowered its key interest rate for the first time in six months. The repo rate, which is the rate at which a country’s central bank lends money to commercial banks, was cut to a five-year low of 6.5 percent from 6.75 percent. Additionally, in moves aimed at increasing liquidity in the financial markets, the RBI raised the reverse repo rate — the rate lenders charge the central bank — by 25 basis points, and reduced the minimum daily cash reserve ratio requirement to 90 percent from 95 percent. “The stance of monetary policy will remain accommodative. The Reserve Bank will continue to watch macroeconomic and financial developments in the months ahead with a view to responding with further policy action as space opens up,” RBI Governor Raghuram Rajan said in a monetary policy statement released Tuesday. “Perhaps more important at this juncture is to ensure that current and past policy rate cuts transmit to lending rates,” he added, addressing a reluctance among Indian lenders to lower their lending rates significantly. Rajan, who has now cut interest rates five times since January 2015, cited a drop in retail inflation as a reason for loosening the monetary policy. Inflation, as measured by the Consumer Price Index (CPI), dropped to 5.18 percent in February after rising for six consecutive months. The country, which has long struggled to rein in inflation, is benefiting from a drop in global oil and commodity prices. “Inflation has evolved along the projected trajectory and the target set for January 2016 was met with a marginal undershoot. Going forward, CPI inflation is expected to decelerate modestly and remain around 5 percent during 2016-17 with small inter-quarter variations,” Rajan said in the statement.

Modi fails to exploit an opening (FT) Narendra Modi has been prime minister of India for almost two years. The good news is that the Asian giant is now the fastest-growing large economy in the world. The bad news is that the Modi government is failing to take full advantage of the mandate it won in May 2014. This matters economically and politically. The more the economy succeeds, the smaller the temptation for Mr Modi’s Bharatiya Janata party to exploit the politics of resentful nationalism or of communal and caste division. This is not to downplay the achievements so far. Helped by falling oil prices and working together with Raghuram Rajan, the respected governor of the Reserve Bank of India, the government has stabilised the economy. Consumer price inflation has fallen from above 10 per cent in 2013 to below 6 per cent. The central government’s fiscal deficit is forecast to reach 3.5 per cent in 2016-17. Above all, the government forecasts economic growth at between 7 and 7.75 per cent this year. This looks remarkably good. Yet it could be better. Even if one puts to one side doubts about India’s economic statistics, private investment remains weak. The government has rightly emphasised improved administration, faster decision-making and greater ease of doing business. It is also making progress in opening financial access to the poor. Yet corruption remains a concern. Meanwhile, the government it is delivering little in the way of fundamental reforms, relying more on competition among states than on action at the centre.

Child survivors of Nepal earthquake ‘sold as slaves’ to British families: report --Child survivors of the Nepal earthquake are being sold to British families to work as domestic slaves, according to an investigation. Boys and girls as young as 10 are being bought for just £5,250 by black market gangs operating in the Punjab region of India, British newspaper The Sun has alleged. Thousands of people died when a 7.8 magnitude earthquake struck Nepal on April 25 and left millions in need of aid. The newspaper reported the gangs are preying on the children of Nepalese refugees and destitute Indian families. And it claimed wealthy British families were buying the youngsters to work as unpaid domestic servants. The Sun alleged a trader, named Makkan Singh, lined up youngsters for an undercover reporter to pick them up. He said: "We have supplied lads who have gone on to the UK. Most of the ones who are taken to England are Nepalese."For the supply of a boy, minimum 500,000 rupees (around £5,250 or $7,469). Then you will have other costs associated with taking him to the UK, but that's your responsibility extra to what you pay us. "Take a Nepalese to England. They are good people. They are good at doing all the housework and they're very good cooks. No-one is going to come after you.”

The Strange Case of the Missing Crisis - Capital has been flowing out of emerging markets for several years, driven by slowing growth, tumbling commodity prices, and the prospect of higher U.S. interest rates. Oddly enough, no big emerging country has gone bust as a result. The absence of a crisis is not normally worth noting. But it is in this case, because it demonstrates how much the emerging world has learned about the inherent dangers of fixed exchange rates, and, sadly, how much more they still have to learn. Emerging markets have long been major recipients of investment from foreign investors seeking to exploit their more promising economic potential. Yet such investment inflows are notoriously fickle, often slowing abruptly or reversing altogether. In its semi-annual World Economic Outlook, the International Monetary Fund notes one episode of slowing capital inflows, from 1981 to 1985, coincided with the developing country debt crisis of the 1980s, and another from 1995 to 2000 overlapped with the Asian crisis of 1997 to 1998. The current episode of capital outflows began around 2010 and has been comparable “in breadth and size” to similar episodes in the 1980s and 1990s, the IMF says. But “the incidence of external debt crises in the ongoing episode has so far been much lower.” Indeed, no major emerging economy has needed a bailout except Ukraine, which was invaded by Russia, surely an extenuating circumstance. In the past, emerging countries would fix their exchange rates to the dollar to control inflation and offer certainty to companies and investors. Interest rates at home were usually much higher than U.S. rates so domestic companies and governments could borrow more cheaply in dollars, so long as the currency peg held.

Brazil (Like Russia) Is Under Attack By Hyrbid War  -- Color revolutions would never be enough; Exceptionalistan is always on the lookout for major strategic upgrades capable of ensuring perpetual Empire of Chaos hegemony. The ideological matrix and the modus operandi of color revolutions by now are a matter of public domain. Not so much the concept of Unconventional War (UW). UW was spelled out by the 2010 Special Forces Unconventional Warfare manual. Here’s the money quote: “The intent of US [Unconventional Warfare] UW efforts is to exploit a hostile power’s political, military, economic, and psychological vulnerabilities by developing and sustaining resistance forces to accomplish US strategic objectives… For the foreseeable future, US forces will predominantly engage in irregular warfare (IW) operations.” “Hostile” powers are meant not only in a military sense; any state that dares to defy any significant plank of the Washington-centric world “order” – from Sudan to Argentina – may be branded “hostile”. The dangerous liaisons between color revolutions and UW have now fully blossomed as Hybrid War; a warped case of Flowers of Evil. A color revolution is nothing but the first stage of what will become Hybrid War. And Hybrid War can be interpreted essentially as the weaponization of  chaos theory – an absolute conceptual darling of the US military (“politics is the continuation of war by linguistic means”). My 2014 book Empire of Chaos essentially tracks its myriad manifestations.

Colombia Pays the Steep Cost of So-Called “Free” TradeDon Quijones: International arbitration lawyers have a soft spot for Latin America, for a reason: over the last ten years, the region has been one of the primary sources of their exorbitant fees, which can range from $375 to $700 per hour depending on where the arbitration takes place. By 2008, more than half of all registered claims at the International Centre for Settlement of Investment Disputes (ICSID) were pending against Latin American countries. In 2012, around one-quarter of all new ICSID disputes involved a Latin American state. Today the region faces a fresh deluge of ISDS claims. The countries most affected include Uruguay, whose anti-tobacco legislation has been challenged by Philip Morris at an international arbitration panel; Argentina, Ecuador and Colombia, which until a few years ago had never been on the receiving end of an investor-state dispute settlement (ISDS). Now it is the target of multiple suits that could end up setting its government back billions of dollars. The claimants include Glencore, the world’s biggest and most heavily leveraged commodities trader; Carlos Slim-owned América Móvil, the leading wireless services provider in Latin America and the third largest in the world; the Spanish insurance company Sanitas; the Swiss pharmaceutical giant Novartis; and the Canadian miner Eco Oro and US miner Tobie Mining and Energy. Each company on that list feels that decisions or actions taken by the Colombian government have in one way or another cost or will cost them profits to which they feel entitled. And each company is doing what it has the right to do under today’s trade treaties — suing the government of that country for damages.

World's richest banker Joseph Safra charged with £3m bribery - Authorities have charged the world’s richest banker for allegedly agreeing to pay 4.25 million (£3m) in bribes. Brazil’s Federal Prosecutor’s Office claimed Joseph Safra knew of a 2014 plan by Banco Safra executives to pay 15.3 million reals to tax auditors to reduce or annul fines on unpaid taxes. Also charged was former bank executive Joao Inacio Puga who allegedly negotiated the bribe-payment scheme.   Prosecutors added Safra was not directly involved in the bribery negotiations, but taped conversations showed Puga reported to him on the talks. The Safra Group, Safra’s investment holding company, said in a statement the charges were unfounded. ‘There have not been any improprieties by any of the businesses of The Safra Group,’ it said. ‘No representative of the group offered any inducement to any public official and the group did not receive any benefit in the judgment of the tribunal.’ The banker’s fortune is estimated at about $18 billion (£12.6b) by Forbes Magazine.

"Unprecedented Leak" Exposes The Criminal Financial Dealings Of Some Of The World's Wealthiest People - An unprecedented leak of more than 11 million documents, called the "Panama Project", has revealed the hidden financial dealings of some of the world's wealthiest people, as well as 12 current and former world leaders and 128 more politicians and public officials around the world. More than 200,000 companies, foundations and trusts are contained in the leak of information which came from a little-known but powerful law firm based in Panama called Mossack Fonseca, whose files include the offshore holdings of drug dealers, Mafia members, corrupt politicians and tax evaders – and wrongdoing galore. The law firm is one of the world's top creators of shell companies, which can be legally used to hide the ownership of assets. The data includes emails, contracts, bank records, property deeds, passport copies and other sensitive information dating from 1977 to as recently as December 2015.  It allows a never-before-seen view inside the offshore world — providing a day-to-day, decade-by-decade look at how dark money flows through the global financial system, breeding crime and stripping national treasuries of tax revenues. Mossack Fonseca’s fingers are in Africa’s diamond trade, the international art market and other businesses that thrive on secrecy. The firm has serviced enough Middle East royalty to fill a palace. It’s helped two kings, Mohammed VI of Morocco and King Salman of Saudi Arabia, take to the sea on luxury yachts.In Iceland, the leaked files show how Prime Minister Sigmundur David Gunnlaugsson and his wife secretly owned an offshore firm that held millions of dollars in Icelandic bank bonds during that country’s financial crisis. The files include a convicted money launderer who claimed he’d arranged a $50,000 illegal campaign contribution used to pay the Watergate burglars, 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people and movie star Jackie Chan, who has at least six companies managed through the law firm. The files contain new details about major scandals ranging from England’s most infamous gold heist to the bribery allegations convulsing FIFA, the body that rules international soccer.

A Panamanian bombshell -- Izabella Kaminska - A seemingly massive leak originating from one of the world’s most secretive law firms, Panamian-based Mossack Fonseca, has just been revealed by journalists working under the auspices of The International Consortium of Investigative Journalists. The 2.6 terabytes of data reveals how the firm has helped clients launder money, dodge sanctions and evade tax, according to media sources privy to the data.The named parties include heads of state, connections to Vladimir Putin and even sports superstars. One thing that strikes us immediately is the apparent use of bearer shares in most of these shady structures. From the ICIJ’s data pages:  As the ICIJ explains: …companies held by bearer shares often don’t need to register an owner’s name – ownership is determined by whoever holds the share certificates, providing a deep level of secrecy. When the British Virgin Islands cracked down on bearer shares in 2005, Mossack Fonseca moved bearer share clients to Panama. Also worth noting, how the number of active companies managed by Mossack Fonseca peaked in 2009: And these were the sorts of banks requesting the offshore structures: The most cited locations of companies structured by Mossack Fonseca: British Virgin Islands, Panama, Bahamas, Seychelles, whilst Hong Kong, United Kingdom and Switzerland head the list for the Top 10 countries where intermediaries working with the law firm were based in. More revelations are no doubt going to come in the days, weeks and months ahead — if only because 2.6 terabytes is a helluva lot of data to analyse. But we shouldn’t forget that this is as much the story of the unbacked, unregulated and non-guaranteed eurodollar “store of value” system — which has been struggling to stay afloat ever since the 2008 crisis struck — as much as it is about tax havens per se.

Tax evasion probes underway after Panama Papers leak | Reuters: Tax authorities in Australia and New Zealand are probing local clients of a Panama-based law firm at the center of a massive data leak for possible tax evasion. Other jurisdictions are likely to follow suit following the leak over the weekend of details of hundreds of thousands of clients in more than 11.5 million documents from the files of law firm Mossack Fonseca, based in the tax haven of Panama. The documents are at the center of an investigation published on Sunday by the International Consortium of Investigative Journalists and more than 100 other news organizations around the globe. The German newspaper Sueddeutsche Zeitung said it received the huge cache of documents and shared them with the other media outlets. The leaked "Panama Papers" cover a period over almost 40 years, from 1977 until last December, and allegedly show that some companies domiciled in tax havens were being used for suspected money laundering, arms and drug deals and tax evasion. "I think the leak will prove to be probably the biggest blow the offshore world has ever taken because of the extent of the documents," said Gerard Ryle, director of the International Consortium of Investigative Journalists. Britain's Guardian newspaper said the documents showed a network of secret offshore deals and loans worth $2 billion led to close friends of Russian President Vladimir Putin. Reuters could not independently confirm those details.

Mossack Fonseca: The Nazi, CIA And Nevada Connections... And Why It's Now Rothschild's Turn - For all the media excitement about the disclosed names in the "Panama Papers" leak, in this case represented by the extensive list of Mossack Fonseca clients, this is not a story about which super wealthy individuals did everything in their power, both legal and illegal, to avoid taxes, preserve their financial anonymity, and generally preserve their wealth. After all, that's what they do, and it should not come as a surprise that they will always do that, especially following last year's disclosure by the same ICIJ which revealed a list of 100,000 HSBC clients who had been dutifully avoiding the payment of taxes. What the story is about is the nebulous world of offshore tax evasion and tax havens, which based on data from the World Bank, IMF, UN, and central banks, hide between $21 and $32 trillion, where registered incorporation agents and law firms in small Caribbean countries (and not so small US states) make the laundering of money and the "disappearance" of the super wealthy, into untracable numbers hidden behind shell companies, possible. So, in order to learn some more about the real star of this story, the Panamanian lawfirm ofMossack Fonseca, we went to Fusion which has compiled a fascinating story of the company's history, founders, and key milestone events in its life.  These include the Nazis, the CIA, Mexican drug lords, and of course, the U.S.

What are the Panama Papers? A guide to history's biggest data leak - The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC. The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens. A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin – is at the centre of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married. Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.An offshore investment fund run by the father of British prime minister David Cameron avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents to sign its paperwork. The fund has been registered with HM Revenue and Customs since its inception and has filed detailed tax returns every year. A lengthier overview of the revelations can be found here.

Presenting The Mossack Fonseca Interactive Web Of Secret Companies (And All Available Source Files) - Even though, as we said in our previous post, the starting role in today's record document leak should be that of Mossack Fonseca (and its heir apparent, Rothschild, operating out of Reno, NV) the general population is far more curious to learn which names will emerge as a result of this historic crackdown involving 11 million documents and 2,600 gigabytes of data. And while the full disclosure effort will take months, if not years, here courtesy of Fusion, is a data map of the intersection between clients, shareholders, companies and agents who have used Mossack Fonseca's services. From Fusion: "the map represents just over a third of all the data we have access to through the leak. We’ve chosen to show you 115,373 of the most connected entities so you can see how, in many case, individuals are actually related in some way. What does that say? It tells us that the people who create shell companies through Mossack Fonseca move in similar circles. You will notice the option to select, “Leticia Montoya”, who is a Mossack Fonseca employee. Through the documents we have connected her with at least 10,000 companies as a stand-in director or shareholder. Ms Montoya earns around $900 a month in the HR department of the company. The other option is to see companies that are in some way connected with the United States. The Mossack Fonseca Universe: Meanwhile, for those who enjoy primary data, the full universe of currently available source documents is available at the following link. Based on a recent Wikileaks tweet, more may be becoming available soon.

The Panama Papers’ Sprawling Web of Corruption - The first reaction to the leaked documents dubbed the Panama Papers is simply awe at the scope of the trove and the ingenuity of the anonymous source who provided the press with 11.5 million documents — 2.6 terabytes of data — revealing in extraordinary detail how offshore bank accounts and tax havens are used by the world’s rich and powerful to conceal their wealth or avoid taxes.Then comes the disgust. With more than 14,000 clients around the world and more than 214,000 offshore entities involved, Mossack Fonseca, the Panama-based law firm whose internal documents were exposed, piously insists it violated no laws or ethics. But the questions remain: How did all these politicians, dictators, criminals, billionaires and celebrities amass vast wealth and then benefit from elaborate webs of shell companies to disguise their identities and their assets? Would there have been no reckoning had the leak not occurred?And then the core question: After these revelations, will anything change? Many formal denials and pledges of official investigations have been made. But to what degree do the law and public shaming still have dominion over this global elite? A public scarred by repeated revelations of corruption in government, sports and finance will demand to know.It took scores of reporters convened by the German daily Süddeutsche Zeitung, the recipient of the leaked cache, and the International Consortium of Investigative Journalists, with whom it shared the data, more than a year to sort through the information, and it will take governments, commissions and prosecutors a long time to determine what laws have been violated, what taxes have been avoided and what remedial steps must be taken.

Why the Panama Papers Scandal Isn’t Such a Scandal After All - When news of the Panama Papers broke earlier this week, it was a bombshell. But it later emerged that German prosecutors had reportedly launched an investigation into the Mossack Fonseca law firm at the center of the controversy a year ago. (The investigation is ongoing.) American officials have also for years been trying to track money shifted around the world through shell companies that the firm specializes in establishing. Though governments around the world have long decried tax havens and have aggressively pursued big banks in Switzerland and other countries, they have not pursued high-profile lawsuits against Mossack Fonseca or its clients despite knowledge of its business dealings. “They haven’t remotely the staff to investigate,” said William Black, a University of Missouri–Kansas City white-collar criminologist, referring to federal regulators and prosecutors. “They haven’t remotely the expertise. But mostly they don’t have the will.” First obtained by the German newspaper Süddeutsche Zeitung and released by the International Consortium of Investigative Journalists, the papers contain 11.5 million documents that detail how Russian, Chinese, British, and other world leaders or their associates have socked away untold riches in offshore shelters that help them avoid tax collectors. Black wasn’t surprised. In February, he noted, the Financial Action Task Force, a body that helps the US and other developed countries set standards to combat money laundering, took Panama off a list of countries with “strategic deficiencies” in curbing the practice. He also criticized how the US government celebrated the seeming takedown of Switzerland’s banking secrecy in recent years, when Swiss banks gave thousands of names of American account holders to federal authorities. In 2013, Wegelin & Co., then the oldest Swiss private bank, closed after pleading guilty to helping more than 100 Americans hide their money abroad to illegally evade taxes for nearly 10 years.

Putin Denounces "Panama Papers" As U.S. Plot To Destabilize Russia - The last few days days have been rife with speculation about the motivation, if any, behind the release of the Panama Papers, with the most prominent example coming from Wikileaks two days ago on Twitter which accused the journalist consortium behind the leak, the ICIJ, of being a "Washington DC based Ford, Soros funded soft-power tax-dodge which has a WikiLeaks problem" and adding that "PanamaPapers Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros." Washington DC based Ford, Soros funded soft-power tax-dodge "ICIJ" has a WikiLeaks problem #PanamaPapers Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros. — WikiLeaks (@wikileaks) April 5, 2016 As we further suggested, the fact that none other than Rothschild, which is trying to corner the US-based "tax haven" sector, stands to benefit from the collapse of the Panama offshoring industry (as international clients who demand to maintain their anonymous status are forced to move to the US), may lead to further questions about a potential conflict of interest behind said release.  But while these and many other questions will remain unanswered, including why the ICIJ is cherrypicking which names to release especially as pertains to US clients of the Panamanian law firm, earlier today Russian president Putin made his first public announcement on the topic of the Panama Papers. According to AP, Putin denied having any links to offshore accounts and described the Panama Papers document leaks scandal as "part of a U.S.-led plot to weaken Russia." Putin described the allegations as part of the U.S.-led disinformation campaign waged against Russia in order to weaken its government. "They are trying to destabilize us from within in order to make us more compliant," he said.

How offshore banking is costing Canada billions of dollars a year | Toronto Star: The hidden identities of 350 Canadians with offshore tax haven investments have been revealed in the private database of one of the world’s leading shell company registration firms, according to a Toronto Star analysis of a massive leak obtained by the International Consortium of Investigative Journalists and the German newspaper Süddeutsche Zeitung.  Obscured by figurehead directors, untraceable money transfers and anonymous company ownerships, these Canadians paid for the secrecy promised by Mossack Fonseca, a Panamanian law firm renowned internationally for establishing shell companies. Much of this is perfectly legal. For some international business transactions, offshore company registration is a logical choice. And there are international laws and treaties facilitating the legal flow of money into tax-friendly jurisdictions. But it comes at a tremendous cost to the public interest. Currently, Canadians have declared $199 billion in offshore tax haven investments around the world, according to Statistics Canada.But experts say that figure is a small fraction of the Canadian offshore wealth that goes undeclared. The precise annual cost to Canadian tax coffers is unknowable. But credible estimates peg Canada’s tax losses to offshore havens at between $6 billion and $7.8 billion each year. Tax avoidance — the legal movement of wealth to offshore bank accounts in order to minimize tax burdens — is a grey area. But there is a much darker element. Terrorist financing, money laundering and corruption are among the byproducts of offshore secrecy. The leaked records reveal a pattern of covert manoeuvres by banks, lawyers and companies concealing suspect transactions or manipulated records in ways that facilitated illegality.

Why the offshore tax haven crisis won’t get fixed, despite Panama Papers - In the summer of 2013 I was working on a story for Global TV’s newsmagazine show 16x9 about the legal ways Canadian corporations dodge paying their fair share of taxes – especially by exploiting offshore tax havens and treaties One person we interviewed was Diane Francis, the well-known business columnist for The Financial Post and a long-time critic of offshore tax havens. We filmed her in a room at her swanky apartment building in downtown Toronto. And one thing Francis said on that warm muggy day still resonates with me. When asked why Canada doesn’t have the political will to put an end to the abuse of offshore tax havens, Francis replied: “Because the offshore and taxation lobby is the most powerful in this country.” Francis’s observation comes to mind when reflecting on today’s revelations by the International Consortium of Investigative Journalists (ICIJ) called the “Panama Papers” exposing more rich and famous people who have been caught (once again) using offshore tax havens to hide their money from governments – including 350 Canadians. My response is not shock but why don’t governments fix the problem? After all, this is not a new issue by any means. In fact, the corrupting and corrosive impact of offshore tax havens, which now number as many as 70 (and includes Canada), has been well documented and lamented over for years. The OECD claims that offshore banks globally hide some (US) $5-trillion to (US) $7-trillion from tax authorities, or up to 8% of the world’s assets under management. Moreover, an estimated (US) $11.5-trillion is being stashed in offshore accounts worldwide for one reason or another. In Canada, Stats Canada documents how much corporate money flows to notorious offshore tax havens. In 1990, only $11-billion was being “invested” in offshore tax havens by Canadian corporations: today this sum is almost $200-billion a year and growing. Moreover, an estimated $8-billion is also lost annually through tax evasion, although this sum could be more than $20-billion.

Panama law firm says data hack was external, files complaint | Reuters: The Panamanian lawyer at the center of a data leak scandal that has embarrassed a clutch of world leaders said on Tuesday his firm was a victim of a hack from outside the company, and has filed a complaint with state prosecutors. Founding partner Ramon Fonseca said the firm, Mossack Fonseca, which specializes in setting up offshore companies, had broken no laws and that all its operations were legal. Nor had it ever destroyed any documents or helped anyone evade taxes or launder money, he added in an interview with Reuters. Company emails, extracts of which were published in an investigation by the U.S.-based International Consortium of Investigative Journalists and other media organizations, were "taken out of context" and misinterpreted, he added. "We rule out an inside job. This is not a leak. This is a hack," Fonseca, 63, said at the company's headquarters in Panama City's business district. "We have a theory and we are following it," he added, without elaborating. "We have already made the relevant complaints to the Attorney General's office, and there is a government institution studying the issue," he added, flanked by two press advisers.

Exclusive: U.N. audit identifies serious lapses linked to alleged bribery | Reuters: The United Nations' internal investigations office has uncovered serious lapses and due-diligence failures in the world body's interaction with organizations tied to an alleged bribery scheme involving a former U.N. General Assembly president. The 21-page confidential report by the U.N. Office of Internal Oversight Services' (OIOS), reviewed by Reuters, outlines the results of an audit ordered by Secretary-General Ban Ki-moon in response to charges against John Ashe, General Assembly president in 2013-2014, and six other people. The report gave the U.N. an overall grade of "partially satisfactory" in the March 22 report, which is available to U.N. member states on request. It noted "important deficiencies" in the way United Nations and its staff interacted with non-governmental organizations (NGOs) and oversees U.N. employees. It is the biggest financial corruption crisis to rock the United Nations since the Oil-for-Food scandal hit the world body during the tenure of Ban's predecessor Kofi Annan. U.N. officials and diplomats say latest scandal highlights the need for greater transparency at the United Nations. OIOS recommended improvements in internal U.N. risk management and controls in light of the irregularities uncovered - a U.N. document improperly altered, travel expenses paid by NGOs against U.N. guidelines, U.N. employees keeping iPads given to them by an NGO headed by an indicted individual. OIOS urged Ban to ensure that any outside organizations the U.N. deals with are properly vetted. It also said that the U.N. should review any continuing relations with NGOs linked to the indictment.

Global Bond Yield Plunges to Record-Low 1.3% in Warning Sign Global bond yields fell to a record, a warning sign for the worldwide economy. The yield on the Bank of America Corp. Global Broad Market Index plunged to 1.3 percent, the lowest in almost 20 years of data. Bonds in the gauge have returned 3.6 percent in 2016, while the MSCI All Country World Index of shares has slumped 1.5 percent, including reinvested dividends. Treasuries declined, with 10-year yields climbing for the first time in three days, before minutes of the Federal Reserve’s March meeting are published. A third of the world’s developed-market sovereign debt now has negative yields, based on Bloomberg bond indexes, after Europe and Japan cut interest rates below zero to counter deflation. Investors rushed to higher-yielding debt, fueling the global rally. Fed Chair Janet Yellen said last week the global economy presented heightened risks, prompting traders to push back calls for when the central bank will tighten policy.“It’s just a realization that we’re stuck for a while,” . “The U.S. cannot decouple, the Fed can’t raise rates until the global backdrop improves and there really isn’t any sign of that happening anytime soon.”

‘An Odd Time’ as Many Government Bonds Trade Below Zero Yields - WSJ A weeklong surge in government-bond prices has taken 10-year yields in Europe’s strongest economy to the brink of once-unthinkable territory: negative interest rates. The German bund’s yield hit 0.08% Tuesday, the lowest in a year and just a hair short of the all-time low for a closing yield of 0.073%, according to Tradeweb. The plunge in German bond yields has resulted from the latest bout of aversion to risk on the part of investors, as well as an increase in the European Central Bank’s bond-buying program and the ECB’s embrace of negative rates. The programs increase demand for debt and drive down yields, which fall when prices rise. Tumbling European bond yields could add to pressure on U.S. interest rates, even at a time when Federal Reserve officials are going out of their way to warn the markets that they may be underestimating the likelihood of further Fed rate increases this year. “We live in an odd time,’’ . “Did your economic textbooks ever discuss negative yields? This is the new normal.” Around one-quarter of global government bonds have been trading at yields below zero, including German bonds that mature in less than 10 years. Japan’s 10-year government bond dropped below zero for the first time earlier this year, after the Bank of Japan adopted a negative-rate policy. Even yields on some European firms’ bonds have dipped below zero recently. On Tuesday, the U.S. 10-year yield slipped to 1.727%, down sharply from 2.273% at the end of last year. The 10-year German bond’s yield recently settled at 0.095%, down from 0.63% at the end of 2015. The 10-year yield in Japan closed at negative-0.07%, down from 0.27% at the end of 2015. “This has been the conundrum for central banks,’’ “Just because yields are low doesn’t mean they can’t go lower."

Negative rates deepening liquidity trap -- For the first time since the Great Depression, the world is in a global liquidity trap. The unintended consequence of many central banks pushing negative interest rate policy is conjuring deflationary headwinds, stronger currencies, and slower growth — the exact opposite of what struggling economies need. But when monetary policy is the only game in town, negative rates are likely to beget even more negative rates, creating a perverse cycle with important implications for investors. When central banks reduce policy rates, their objective is to stimulate growth. Lower rates are designed to spur savers to spend, redirect capital into higher-return (ie riskier) investments, and drive down borrowing costs for businesses and consumers. Additionally, lower real interest rates are associated with a weaker currency, which stimulates growth by making exports more competitive. In short, central banks reduce borrowing costs to kindle reflationary behaviour that helps growth. But does this work when monetary policy is driven through the proverbial looking glass of negative rates? There is a strong argument that when rates go negative it squeezes the speed at which money circulates through the economy, commonly referred to by economists as the velocity of money. We are already seeing this happen in Japan where citizens are clamouring for 10,000-yen bills (and home safes to store them in). People are taking their money out of the banking system to stuff it under their metaphorical mattresses. This may sound extreme, but whether paper money is stashed in home safes or moved into transaction substitutes or other stores of value like gold, the point is it’s not circulating in the economy. The empirical data support this view — the velocity of money has declined precipitously as policymakers have moved aggressively to reduce rates.

Negative Interest Rates Benefit the Global Economy, Says IMF Chief Christine Lagarde - WSJ: Subzero interest rates in Europe and Japan are “net positives” for the global economy, International Monetary Fund chief Christine Lagarde said Tuesday, though she warned that the side effects of unorthodox central-bank policies should be closely monitored. Speaking ahead of the IMF’s Spring meetings in Washington, D.C., next week, Ms. Lagarde praised recent policy moves by the European Central Bank and the U.S. Federal Reserve, and called on governments to play their part by introducing growth-friendly reforms. “We are on alert, not alarm” on the outlook for the global economy, Ms. Lagarde told an audience at Frankfurt University. She pointed to a “loss of growth momentum” over the past six months, “exacerbated by China’s relative slowdown, lower commodity prices, and the prospect of financial tightening for many countries.” She said economic sentiment had been bolstered by fresh stimulus from the European Central Bank last month, and by an “apparent shift” toward a slower pace of rate increases by the Fed.“We see the recent introduction of negative interest rates by the ECB and Bank of Japan —though not without side effects that warrant vigilance—as net positives in current circumstances,” Ms. Lagarde said.ECB President Mario Draghi announced cuts to all the bank’s main interest rates last month as part of a major new stimulus aimed at driving up stubbornly low eurozone inflation. The ECB’s deposit rate—charged for storing funds with the central bank—fell by 0.1 percentage point to minus 0.4%.“I would like to commend President Draghi and the ECB for the steps it has taken to improve confidence and financial conditions in the euro area, which will further support the recovery,” Ms. Lagarde said.

DoubleLine's Gundlach says negative interest rates backfiring: Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital, said on Thursday that negative interest rates implemented by some major central banks, notably in Japan, are backfiring. "The negative interest rate experiment seems to be backfiring," said Gundlach, who helps oversee $95 billion for Los Angeles-based DoubleLine. "The best evidence of negative interest rates backfiring is the yen versus the dollar and the Nikkei." The dollar slumped against the yen again on Thursday in the wake of minutes from the last U.S. Federal Reserve meeting and expectations the Bank of Japan was unlikely to intervene, while global growth concerns weighed on equities.  In January, Japan joined the European Central Bank and the central banks of Sweden, Denmark and Switzerland in negative territory, in effort to boost their economies partly by way of weakening currencies. The dollar was last down 1.4 percent at 108.01, its biggest daily percentage drop in two months. The decline put the greenback's losses at about 10 percent for the year. Gundlach said: "Negative interest rates are not just deflationary, they are deflation. You lose money."

Unconventional Monetary Policy on Stilts - Nouriel Roubini – With most advanced economies experiencing anemic recoveries from the 2008 financial crisis, their central banks have been forced to move from conventional monetary policy – reducing policy rates via open-market purchases of short-term government bonds – to a range of unconventional policies. Although the zero nominal bound on interest rates – previously only a theoretical possibility – had been reached and zero-interest-rate policy (ZIRP) had been implemented, growth remained anemic. So central banks embraced measures that didn’t even exist in their policy toolkit a decade ago. And now they are poised to do so again. The list of unconventional measures has been extensive. There was quantitative easing (QE), or purchases of long-term government bonds, once short-term rates were already zero. This was accompanied by credit easing (CE), which took the form of central-bank purchases of private or semi-private assets – such as mortgage- and other asset-backed securities, covered bonds, corporate bonds, real-estate trust funds, and even equities via exchange-traded funds. The aim was to reduce private credit spreads (the difference between yields on private assets and those on government bonds of similar maturity) and to boost, directly and indirectly, the price of other risky assets such as equities and real estate.

ECB's Mersch warns on competitive currency devaluation: A key member of the European Central Bank (ECB) has highlighted tensions in the international currency markets, raising the threat that competitive devaluations could have on the euro zone's economic recovery. Yves Mersch, executive board member of the ECB's key monetary decision-making body, told CNBC at the Ambrosetti Workshop in Italy that the central bank's "target objective" was not the exchange rate but stressed that it was important that stronger nations were not trying to weaken their own currencies. "Everyone should be living up to promises (on) how the international monetary system is being run and that means there should not be a competitive devaluation, there should not be beggar-thy-neighbor policies. And the areas which (are) already more on the safer side, as what concerns both growth and inflation, should not try to talk down their currency" he said. When asked about the strength of the dollar, he said that he "very much hoped" that there is a "strong re-confirmation" of how the international monetary system is run when the Intentional Monetary Fund meet in Washington D.C. later in April. Mersch added that when it came to the Japanese yen, the Japanese economy was experiencing weakness that was similar to the euro zone's fragile recovery.

Zimbabwe: Cash Crisis Deepens, Helpless Central Bank Urges Use of Cards - AN exasperated Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has told Zimbabweans that it "a national responsibility for everyone" to use cards when transacting as the country's cash shortages deepened this week. Mangudya also hit out at business persons who don't bank their money, opting to keep daily takings at home as a recent order for tobacco farmers to be paid through banks failed to alleviate the liquidity crisis. The RBZ chief blamed civil service salary and bonus payments for the cash shortages. But but the opposition People's Democractic Party (PDP) recently insisted that the "cash crisis is because there is no production and real activity in the economy" with the key sectors having effectively "collapsed". "I ... urge people to use point of sale when transacting," Mangudya was quoted as saying by State media Tuesday. "It is a national responsibility for everyone; especially at a time we are not in a position to print money. There are local businesspeople that do not bank their daily takings, preferring to keep the money in safes at home, fuelling cash shortages."

Ukraine: Conflict Brings Hunger Crisis -  The two-year-old conflict in eastern Ukraine has left about 1.5 million people hungry, including nearly 300,000 in need of immediate help, the World Food Program, the main anti-hunger humanitarian agency of the United Nations, said on Monday. “As the conflict continues, we need to reach these people urgently,” the agency’s representative in Ukraine, Giancarlo Stopponi, said in a statement. The numbers of hungry Ukrainians have multiplied since the agency first intervened late in 2014 to help feed people upended in the conflict, distributing emergency rations and cash. Ukraine was historically known as Europe’s breadbasket for its rich soil and agricultural output. As of the first quarter of 2016, Ukraine is the only country in Europe to require and receive assistance from the World Food Program.

Russia Prepares for a Big War: The Significance of a Tank Army -- How big a war do you anticipate? A smallish one, a bigger one or a really big one? Your answer will determine the formations that you construct. An important decision point, which reveals your answer, is whether you add in the other combat arms and specialised support elements at brigade (ie 5000 or so troops) or at division (10,000 or so)? If at brigade, you have made a decision that you expect your future wars to be rather small and that all-arms formations of 5000-or-so soldiers is as big as you need. If on the other hand, you decide to create divisions – formations about three times as large – you are showing that you are expecting a larger war. If you then start combining these divisions into corps, armies or even army groups, you are expecting a really big, all-out war against a first-class enemy. Something the size of World War II in fact. In 1945, for example, the Western Allies entered Germany with three army groups, totalling eight armies, totalling 91 divisions: about four and a half million soldiers.  It is possible to have a bit of both, but it's only a bit. You may decide on independent brigades but also have a divisional headquarters. But, unless the brigades routinely exercise under the command of a standing divisional headquarters, and that headquarters controls assets, only the idea of divisional operations is kept alive. In short, if you stop at independent brigades, you are telling the world that you expect, and are planning for, relatively small wars. If you go to divisions you are expecting something larger and if you construct a corps (or army in Russian terminology) you are telling the world that you are preparing for a big war.

E.U. Suspects Russian Agenda in Migrants’ Shifting Arctic Route - — So many decrepit Soviet-era cars carried migrants into Europe from this frozen Russian town in recent months that border officials in Finland, who confiscate the rust-bucket vehicles as soon as they cross the frontier, watched in dismay as their parking lot turned into a scrapyard. To clear up the mess and provide some space for freshly confiscated cars, the Finnish customs service set up a separate dumping ground. Then last month, as suddenly and as mysteriously as it had started, the parade of migrants in rusty old cars came to an abrupt halt, or at least a pause. “We don’t know what is going on,” said Matti Daavittila, the head of the ice-entombed Finnish border post near Salla. “They suddenly stopped coming. That is all we know.” Compared with the hundreds of thousands of people fleeing war or hardship who made the trek to Europe last year through Turkey to Greece, the flow of refugees and migrants on the Arctic route through Russia — first into Norway and later into Finland — is tiny. But the stop-go traffic has added a hefty dose of geopolitical anxiety, not to mention intrigue, to a crisis that is tearing the European Union apart. It has sent alarm bells ringing in Helsinki, Finland’s capital far to the south, and in Brussels, where European Union leaders, at recent crisis meetings on migration, discussed the strange and ever-shifting Arctic route through Russia. The intrigue flows from a growing suspicion in the West that Russia is stoking and exploiting Europe’s migrant crisis to extract concessions, or perhaps crack the European unity over economic sanctions imposed against Moscow for its actions in Ukraine. Only one of the European Union’s 28 member states needs to break ranks for a regime of credit and other restrictions to collapse.

Shocking Video From Brussels Anti-Islam Protest Of Moment Muslim Woman Is Run Over By Car -  Various far-right groups, including the anti-migrant Generation Identitaire movement, demonstrated in Belgium's notorious Molenbeek district, the notorious terrorist breeding ground of the Belgian capital, on Saturday. At the same time, leftist groups held counter-rallies. Though the demonstrations were banned in Brussels following the March attacks, several rallies still took place in Belgian capital. Since the attacks in Brussels Zaventem Airport and Maelbeek metro station that rocked the Belgian capital on March 22, Belgium has been on high alert, while tension between various local groups and migrants has escalated to unprecedented levels, confirmed by today's events, when according to local news, at an anti-racism rally in the Brussels district of Molenbeek, the police clashed with hundreds of youths. Later, police temporarily closed the area after the police made 19 arrests at the Place de la Bourse, according to RTL Thirteen rioters were arrested in the neighborhood which appears like a warzone. According to RT, at least two armed far-right activists with Molotov cocktail arrested in the Molenbeek district. But the most shocking and violent moment took place when a car drove toward the police line, spraying a fire extinguisher. While driving off, the Audi hit a woman head on, according to twitter reports. The video below captures the moment of impact of what RT reports, was a Muslim woman wearing a hijab, without so much as slowing down, as she bounces off the bonnet. The woman was taken to hospital immediately afterwards. Viewer discretion advised.

Did Italy And Malta Actually Agree To Swap Oil Rights For Refugees? --As the Syrian refugee crisis reaches a critical impasse, both in terms of European security and refugee human rights, Brussels has found itself having to deny accusations of a secret pact between Malta and Italy to swap refugees for oil exploration rights. The Maltese opposition leader has claimed that Malta and Italy cut a secret deal in which Malta would surrender oil exploration rights in an offshore area disputed with Italy, while Italy would return the favor by picking up Malta’s share of migrant rescues at sea. In late March, the European Commission was forced to respond to the accusations as the Syrian refugee crisis has hit a fever pitch, denying the accusations; but it’s a complicated issue. Maltese opposition leader Simon Busuttil of the Nationalist Party, and a member of the European Parliament until 2013, accused the Maltese government late last year of allowing the Italian government to drill for oil in Maltese waters in a dubious oil-for-migrants swap. His accusations were boosted by the reporting of an Italian newspaper, Il Giornale, which claimed that Italian Prime Minister Matteo Renzi had agreed to the deal with Maltese Prime Minister Joseph Muscat.

Austria wants to deploy soldiers on Italy border, defence minister says | Reuters: Austria plans to deploy soldiers at the Brenner border with Italy to stem an expected increase in migrants trying to get to northern Europe, Defence Minister Hans Peter Doskozil told news outlets on Saturday. Austria, whose introduction of border restrictions in February has caused a sharp fall in the number of migrants to Germany, previously said it was preparing to introduce tighter controls if needed. But the minister's choice of words appeared to toughen the discourse. "As the EU's external borders are not yet effectively protected, Austria will soon ramp up strict border controls. That means massive border controls at the Brenner (Pass), and with soldiers," Doskozil told daily Die Welt. Separately, he told the Austrian newspaper Oesterreich he was leaving open-ended the number of soldiers who might be deployed for border duty at the Alpine pass, saying it would be based on need.

EU-Turkey refugee plan could be illegal, says UN official - The European Union’s plan to send refugees fleeing Syria’s civil war back to Turkey en masse could be illegal, a top UN official has said, as concerns mounted that Greece lacks the infrastructure needed for the deal to take effect on Monday. Peter Sutherland, the UN secretary general’s special representative for international migration and development, said that deporting migrants and refugees without considering their asylum applications first would break international law. In light of claims by an NGO that Turkey had already been pushing Syrians back over the border to their home country, he said none could be deported from Europe without guarantees that their rights would be protected. Sutherland spoke as Greece prepares to begin deporting migrants and refugees on Monday. Greek immigration officials have already said they need more staff to implement the plan. Asked during an interview on BBC Radio 4’s Today programme whether Europe’s scheme could be illegal, Sutherland replied: “Absolutely, and there are two fundamental reasons for this. “First of all, collective deportations without having regard to the individual rights of those who claim to be refugees are illegal. Now, we don’t know what is going to happen next week, but if there is any question of collective deportations without individuals being given the right to claim asylum that is illegal. “Secondly, their rights have to be absolutely protected where they are deported to, in other words Turkey. There has to be adequate assurances they can’t be sent back from Turkey to Syria, for example if they are Syrian refugees, or Afghanistan or wherever.”

Migrant crisis: European Commission proposes asylum reforms - The European Commission has come up with alternatives for a "more humane and efficient" way of handling asylum in response to the migrant crisis. The current EU system is widely thought to have failed because of the influx of a million people through Greece. Among the options is a plan to scrap a rule for refugees to claim asylum in the country they arrive in. The so-called Dublin regulation proved unworkable when Germany opened the door to Syrian refugees last August. European Commission Vice President Frans Timmermans argued the current system had to change, saying: "We need a sustainable system for the future, based on common rules, a fairer sharing of responsibility, and safe legal channels for those who need protection to get it in the EU." As most irregular migrants in the past three years have arrived in the EU in Greece and Italy, the two countries have been left with the majority of cases. Both states stopped registering every arrival and most new arrivals on the Greek islands since August continued their route through the Balkans. Eventually several countries put up fences and border controls in an attempt to halt the influx. Mr Timmermans said there were two options:

  • Amend the first-country rule with a "corrective fairness mechanism" to provide help to a struggling country
  • Scrap the the first-country rule altogether and move to a system based on redistributing refugees more evenly.

Syria's loss of students to rebuild future - BBC News: While the Syrian refugee crisis grabs the headlines, a less visible story with equally calamitous implications is unfolding in its shadow. An entire generation of Syrians has had its education truncated, and the country's once flourishing academic community has been scattered or driven underground. The scale of the problem, according to the president of the Institute of International Education (IIE), Allan Goodman, is "unprecedented" in the near 100-year history of his New-York based organisation. Higher education in Syria was expanding on the eve of the conflict in 2011, with some 350,000 full-time undergraduates and more than 8,000 lecturers and professors. Image copyright Reuters Image caption Rebel fighters outside Aleppo: A generation of Syrians has missed out on education More than a quarter of young people were going into higher education. Five years later, around 2,000 academics and hundreds of thousands of students are living in the refugee camps of Turkey and Jordan. Many more are lost among the millions of internally displaced Syrians. "Even in Iraq, when professors were being assassinated and there was terrible violence, many universities managed to stay open, and many students continued to study," says Mr Goodman. But in Syria, universities were often deliberately targeted and destroyed.

Greece on brink of chaos as refugees riot over forced return to Turkey - The Greek government is bracing itself for violence ahead of the European Union implementing a landmark deal that, from Monday, will see Syrian refugees and migrants being deported back to Turkey en masse.  Rioting and rebellion by thousands of entrapped refugees across Greece has triggered mounting fears in Athens over the practicality of enforcing an agreement already marred by growing concerns over its legality. Islands have become flashpoints, with as many as 800 people breaking out of a detention centre on Chios on Friday. Some 750 migrants are set to be sent back between Monday and Wednesday from the island of Lesbos to the Turkish port of Dikili.“We are expecting violence. People in despair tend to be violent,” the leftist-led government’s migration spokesman, Giorgos Kyritsis, told the Observer. “The whole philosophy of the deal is to deter human trafficking [into Europe] from the Turkish coast, but it is going to be difficult and we are trying to use a soft approach. These are people have fled war. They are not criminals.” Barely 24 hours ahead of the pact coming into force, it emerged that Frontex, the EU border agency, had not dispatched the appropriate personnel to oversee the operation. Eight Frontex boats will transport men, women and children, who are detained on Greek islands and have been selected for deportation, back across the Aegean following fast-track asylum hearings. But of the 2,300 officials the EU has promised to send Greece only 200 have so far arrived, Kyritsis admitted. “We are still waiting for the legal experts and translators they said they would send,” he added. “Even Frontex personnel haven’t got here yet.”

Afghan refugees trapped in limbo in Greece with nowhere to go: — A family of 50 Afghan refugees has set up camp along with hundreds of others in an abandoned train station here. They don’t plan on leaving anytime soon. “We came here for the future of our children,” said Amir Mohammad Walizada, 58, a former army commander who once fought the Russians. “We don't want to go back. We will stay here. We accept that we might die here.” It's been a month since neighboring Macedonia closed its border to Walizada’s family and more than 10,000 Syrian, Afghan and other migrants here, blocking their journey to western Europe in search of a better life. ​ These people — along with another 40,000 migrants in the rest of Greece — arrived before the recent deal between the European Union and Turkey to deport refugees arriving after March 20 back to Turkey. So they escaped immediate deportation. As a result, these migrants in Greece are in limbo — and the EU is not sure what to do. Some countries want them resettled elsewhere in Europe, some want them to stay. It's an impasse over a policy "that is not working," said European Commission Vice President Frans Timmermans.  The Walizada family says it can’t return to Afghanistan. The family left for Europe in September, the day after the Taliban took control of the city of Kunduz. Iran stopped some family members from crossing into that country. Others died along the way, killed by Iranian police or drowned during sea crossings, according to Razaq Mohammadi, 15, Islamuddin’s cousin.

Leaked Memo Reveals IMF (Still) Wants Out of Greece Bailout and Plots to Pressure Germany to Act - Yves Smith - While a leaked IMF memo does not represent a crisis, it’s awfully reminiscent of the bad old days of 2007 and 2008, where the really important stuff happened on weekends. Wikileaks obtained and published an official transcript of a conference call among Poul Thomsen, the program chief for Europe, Delia Velculescu, the head of the mission in Greece, and another official, Iva Petrova, that took place a mere two weeks ago. The conversation makes clear that the IMF team is frustrated by the fact that Brussels, meaning the European Commission, is sticking to fiscal surplus targets for Greece that the IMF regards as unrealistic, meaning there is no way Greece can achieve those goals. They discuss how the EC will instead want them to push Greece to make even deeper spending cuts, when Greece and the Trokia are still at loggerheads over issues like cutting Greek pensions (a third rail issue in Greece since the pension programs serve as a catchall social safety net).  Recall that the IMF had what appears to have been a staff revolt last year, via a leak of a debt sustainability memo for the upcoming, so called “third bailout” of Greece that made it crystal clear that Greece’s debt was not sustainable. “Sustainability” is supposed to be a bedrock requirement for IMF participation. Lagarde managed to tamp down the consternation over the leak and kept the IMF in the negotiations, while also insisting that Greece needs significant debt relief.  Yet here it is, nearly nine months later, and none of the fundamental elements of the impasse of last summer have changed. Greece is not willing to gut pensions and make other “structural” adjustments anywhere near as aggressive as the Troika wants, even the less unrealistic IMF. The IMF wants the other members of the Trokia to cut Greece’s debt levels. But Germany’s position is that debt cuts are off the table, since Greece has gotten enough debt relief for it to get by for a few years.

Greek Prime Minister Sends Angry Letter To Christine Lagarde Over IMF Leak -- Today's Wikileaks disclosure, in which two IMF officials hinted that the IMF may use a "credit event as a means to pressurize(sic) Greece" as it has been subsequently put by Greek officials, has elicited another round of widespread anger in Athens and could jeopardize the upcoming Greek debt negotiations. The anger has been made more acute because Greece previously accused Poul Thomsen, one of the IMF staffers caught on the leak, of effectively sabotaging talks in the past when the IMF refused to compromise on Greek pension cuts after the government proposed alternatives with an equivalent fiscal impact. As such, hoping to ride on the latest wave of populist anger, it was only a matter of time before the country's prime minister Alexis Tsipras officially responded to the IMF. His letter to the head of the IMF is below: Dear Christine I am writing to you to express my deep concern about publications on the position of IMF officials with key roles in the Greek program. The first issue is, of course, whether their position reflects the official IMF view.Using a credit event as a means to pressurize Greece and the other member states is clearly beyond the bounds of the negotiation process as we understand it. The second issue is whether Greece can trust, and continue negotiating in good faith with, IMF officials who express views such as those expressed in these publications. Particularly so as they seem to be threatening to delay the process in the belief that only a credit event will work to extract concessions. Successful negotiations are often difficult but they always require trust and credibility from all sides. I sincerely hope that the IMF position is to reach a quick, successful and sustainable conclusion of the review and I am sure you will take all necessary measures to ensure that the negotiation process will remain on track.

IMF's Lagarde Responds To Tsirpas: Calls Use Of Credit Event As Negotiating Tactic "Simply Nonsense" - After last night's oddly drafted letter by the Greek PM Tsipras (which contained a combination of typed text and scribbles) to IMF head Lagarde in the wake of the Wikileaks revelation which was interpreted by many, the Greek government included, that the IMF would seek a "credit event" to facilitate its debt-reduction negotiations with Angela Merkel, it was only a matter of time before the IMF officially responded to the Greek premier and population. She did so moments ago. The highlights:

  • ... any speculation that IMF staff would consider using a credit event as a negotiating tactic is simply nonsense
  • ... if it were necessary to lower the fiscal targets to have a realistic chance of them being fully met, there would be an attendant need for more debt relief.
  • ... this weekend’s incident has made me concerned as to whether we can indeed achieve progress in a climate of extreme sensitivity to statements of either side
  • ... I have decided to allow our team to return to Athens to continue the discussions.
  • ... it is critical that your authorities ensure an environment that respects the privacy of their internal discussions and take all necessary steps to guarantee their personal safety.
  • ... the IMF conducts its negotiations in good faith, not by way of threats, and we do not communicate through leaks

Full letter:

Germany To Greece: No Debt Relief For You -- Whether or not the IMF intended to use a Greek credit event to destabilize Europe as the Greek government first alleged, or whether this was "nonsense" as Lagarde responded to Tsipras letter, is irrelevant - ultimately the underlying premise was whether or not Greece gets debt relief, something the IMF has been insisting on since the third bailout package. And as is well-known, it was Germany - not Greece - that stood in the IMF's way. So after a terse weekend in which relations between Greece and the IMF devolved once again to frigidly sub-zero levels, moments ago Germany chimed in with its position, which can be summed up in another familiar word: "nein". As Bloomberg reports, citing finmin Martin Jaeger, "Greek debt relief isn’t on the agenda right now", adding that the "priority is to put Greek budget on sustainable footing." He also said that Greece already has historically low repayment costs on bailout loans, and that "we remain confident that we can achieve progress, though there’s still quite a bit of work to do."Finally, he said that we "don’t see why we can’t complete review before Orthodox Easter." Additionally, the German chief govt spokesman Steffen Seibert said in response to reporter’s question whether they discussed IMF-Greece relations Merkel, that Tsipras spoke by phone on Sunday to discuss “a variety of issues." He made it clear that Merkel government position on IMF participation in Greek aid program and debt relief hasn’t changed.

Destroy Greece: ΙΜF and Europe Disagree on the Method! - Julian Assange -- Today, 2nd April 2016, WikiLeaks publishes the records of a 19 March 2016 teleconference between the top two IMF officials in charge of managing the Greek debt crisis – Poul Thomsen, the head of the IMF’s European Department, and Delia Velkouleskou, the IMF Mission Chief for Greece.  The IMF anticipates a possible Greek default co-inciding with the United Kingdom’s referendum on whether it should leave the European Union (‘Brexit’).“This is going to be a disaster” remarks Velkouleskou in the meeting. According to the internal discussion, the IMF is planning to tell Germany that it will abandon the Troika (composed of the IMF, European Commission and the European Central Bank) if the IMF and the Commission fail to reach an agreement on Greek debt relief.Thomsen: “Look you, Mrs. Merkel, you face a question: you have to think about what is more costly, to go ahead without the IMF–would the Bundestag say ‘The IMF is not on board?’, or [to] pick the debt relief that we think that Greece needs in order to keep us on board?” Remaining in the Troika seems an increasingly hard sell internally for the IMF, because non-European IMF creditor countries view the IMF’s position on Greece as a violation of its policies elsewhere of not making loans to countries with unsustainable debts.

‘Creditors have many sinister ways to keep debt serf Greece paying forevermore’ - International creditors use their financial dominance to push Greece into paying its debts “forevermore” and want their debt peon to serve as an example to the UK in case it dares to pull out of the EU, professor of binary economics, Rodney Shakespeare, told RT.  On Saturday WikiLeaks published a document exposing a conversation between two International Monetary Fund (IMF) officials in charge of managing the ongoing Greek debt crisis. The report said that the IMF threatened to pull out from Greek bailout program if Germany refused to provide debt relief to the country. RT: It sounds like the IMF and Germany have different views on how to handle the Greek debt crisis. What do you think the IMF is hoping to achieve?  Rodney Shakespeare: The views aren’t very different. Both of them are in the business of forcing individuals into debt, organizations into debt , countries into debt – unrepayable debt. Greece debt to GDP is 180 percent. And the effect of that, of course, is that countries and individuals go on paying forevermore. They only quarrel over whether you push a country too far, so that it can’t do it. They want to keep a country in existence paying up forevermore. Now, they could do that, in this case, in several nasty ways. The threat on Greece, first of all, is to declare a default, and that will freeze the system. Secondly, they could declare a bail-in of all the money in the Greek banks, and Greek depositors would lose all their money. There are other sinister possibilities by which the IMF and the West, generally, can use threats against Greece to force it to bend to their will, which is so that it becomes a debt serf or a debt peon forevermore.

Yanis Varoufakis Issues A Major Warning To The Greek People -- Here are a few excerpts from his op-ed published at Der Spiegel. The feud between the International Monetary Fund (IMF) and the European side of Greece’s troika of creditors is old news. However, Wikileaks’ publication of a dialogue between key IMF players suggests that we are approaching something of a hazardous endgame.Ever since the first Greek ‘bailout’ program was signed, in May 2010, the IMF has been violating its own “primary directive”: the obligation not to fund insolvent governments. As a result, the IMF’s leadership has been facing a revolt from its staff members who demand an exit strategy arguing that, if the EU continues to obstruct the debt relief necessary to restore the solvency of the Greek government, the IMF should leave the Greek program. Regarding the primary budget surplus target (a crucial number that must be kept under 1.5 percent of GDP to give Greece any chance of recovery) Thomsen and Velculescu embrace precisely the number that I was proposing to the troika last year. Why then did the IMF not back me in 2015 but are adopting the same 1.5 percent surplus target now? Because they also wanted something that I would never grant: crushing new austerity which is inhuman and unnecessary but which, today, the Tsipras government (according to Velculescu) seems ready to accept, having already surrendered once in July 2015.  The IMF’s austerity package is inhuman because it will destroy hundreds of thousands of small businesses, defund society’s weakest, and turbocharge the humanitarian crisis. And it is unnecessary because meaningful growth is much more likely to return to Greece under our policy proposals to end austerity, target the oligarchy, and reform public administration (rather than attacking, again, the weak).

SYRIZA, The IMF And The EU: Gambling With The Future Of Greece - The latest flare up regarding Greece has followed publication by Wikileaks of illegally taped discussions among IMF officials. To analyse the significance of this event it is vital to bear one point in mind: Greece cannot meet the terms of the bailout agreement struck on July 2015 by Prime Minister, Alexis Tsipras. The agreement is effectively dead and all parties involved are aware of that, even if they are not openly admitting it.  To establish this point there is no need to engage either in Debt Sustainability Analysis, or in macroeconomic projections of output. Suffice to mention that the agreement requires Greece to ensure a primary surplus of 3.5% of GDP in 2018. The Greek economy actually returned to recession in the last quarter of 2015 and the available indicators since the end of 2015 have ranged from bad to appalling: industrial turnover in December was down 13.5%, retail turnover in January down 3.8%, unemployment in the last quarter of 2015 up to 24.4%, job vacancies for the whole of the economy in the last quarter of 2015 stood at a pitiful 3119, and the banking system currently has perhaps €115bn of non-performing exposure, roughly 50% of its loan book. Once the austerity measures of the bailout agreement kick in, substantially reducing aggregate demand for 2016-17 via tax increases and lower pensions, the recession will become deeper. There is no way that this ruined economy could generate a 3.5% primary surplus in 2018. The problems thereby created for all parties to this disastrous bailout are legion.

Why the eurozone is still headed for total disaster: For a few months in 2015, U.S. writers paid rapt attention to eurozone politics. It seemed like tiny Greece was going to force European elites to finally fix some of the crippling defects with the currency area. Left-wing Syriza, led by Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, leveled a challenge to the German-dominated eurozone grandees. With the economic situation in Greece worse than the Great Depression — very obviously the result of elite-imposed austerity — and much of the rest of the currency area doing only somewhat better, they demanded an end to austerity and a return to growth and shared prosperity. Alas, the hopes of internationalist leftists worldwide were crushed. Elites, mainly through the European Central Bank holding a gun to the head of the Greek banking system, forced Syriza to capitulate and give up their reform program even after they won a popular referendum. Varoufakis resigned, Tsipras seemed content serving as a local administrator for an economic empire run by eurozone technocrats, and politics settled down. However, the lull is only temporary. The political force of anti-austerity is still there, just waiting to be picked up by a sufficiently bold political movement. If the technocrats are lucky, it will be a better-prepared left-wing movement. If they aren't, it will be fascists.

Brussels finance chief admits ECB policies are making people poorer - German Economy Minister Sigmar Gabriel dropped the stunning gaffe whilst discussing the policies of the European Central Bank (ECB). He conceded that the EU's policies are depressing the earnings of low-paid workers and pensioners, who he patronisingly dubbed "the little people".The jaw-dropping admission will anger eurosceptics across the continent, and comes just days after the Dutch people gave Brussels a bloody nose in an EU referendum. It will also add further to the assertion of Brexit campaigners that the EU project is having a negative impact on Europe's economy. Although the bank's decisions do not directly affect British people, the Remain camp has made the importance of the EU economy to our own jobs and prosperity a key point in its argument for sticking with Brussels.

German Economy, Once Europe’s Leader, Now Looks Like Laggard - — China is cutting back on mining machinery as its economy slips. The United Arab Emirates and other Middle Eastern countries are no longer awash in oil money, putting luxury car brands at risk. Russia, still facing Western sanctions, cannot buy as much high-tech energy equipment. The downshift in the emerging markets is leaving Germany vulnerable — and, by extension, Europe. As many businesses in the region struggled just to tread water in recent years, German companies prospered by selling the goods and technology that emerging countries needed to become more modern economies. As they did, Germany’s strength served as a counterweight to the economic malaise, financial turmoil and Greek debt drama that dragged down many European countries. Now, Germany, which accounts for the largest share of the European economy, is looking like the laggard. Compared with the economies of other countries in the region, Germany’s has been more deeply tethered to emerging markets. And the political climate is only adding to the uncertainty, as Germany deals with a wave of migrants and a potential exit of Britain from the European Union. Against that backdrop, the country’s export engine is sputtering, while business confidence is eroding. During the good times, the German manufacturer Eickhoff Bergbautechnik sold 20 machines a year as China dug ever more coal mines to feed its energy-hungry factories. The machines, shearer loaders that use giant spinning claws to scrape coal or potash from underground seams, sell for up to 4 million euros, or about $4.6 million apiece. Last year, the company sold just eight. With profit dropping, Eickhoff laid off about 10 percent of its local work force of 300.

Reuters - Italy banks expect ECB to force pace of bad loan sales - sources: (Reuters) – Italian banks expect the European Central Bank to start setting deadlines for some lenders to sell off their bad loans as they come under increased pressure to improve asset quality, two senior banking sources said. Running at 360 billion euros ($410 billion) after a three-year recession, problem loans account for 18 percent of Italy’s bank loans against a euro zone average of 6 percent. Current market prices mean banks face a loss if they sell the loans now, although keeping them limits their ability to provide fresh credit to businesses that could fuel a fragile economic recovery. Since taking on supervision of euro zone banks 17 months ago, the ECB has been stepping up pressure on Italian banks to clean up their balance sheets. The sources said the ECB could start dictating the pace of problematic loan sales in specific cases, like it did before giving a preliminary go-ahead to the merger of Banco Popolare and Banca Popolare di Milano announced last month. The two banks target a 10-billion euro gross bad loan reduction by 2019, three years after the planned completion of their merger. The ECB rejected the banks’ original plan which staggered the sales over five years, sources have said. An Italian bank’s chief executive said he expected the ECB to take a similar approach towards other lenders, with bankers saying they have little option but to fall in line with the regulator’s increasing activism.

Unemployment rate down in euro area | euronews, economy: Figures just out show February’s unemployment rate in the euro area stood at 10.3 percent. That is down 0.1 percent on the previous month and is the lowest rate recorded in the bloc since August 2011. Across the European Union as a whole, the unemployment rate was 8.9 percent in February, stable compared to January and down on the same time last year.

Europe's major economies mark disappointing end to first quarter | Reuters: Europe's major economies ended the first quarter on a sour note, with lackluster growth in nearly all key business surveys, as jitters about a global slowdown and fears Britons may vote to leave the European Union weighed on demand. The latest Purchasing Managers Indexes will make glum reading for European Central Bank policymakers, coming just weeks after they unleashed a bold easing package in their latest attempt to spur growth and inflation in the currency bloc. So far there is scant evidence the stimulus has had much effect and they will be particularly concerned by survey evidence showing companies cut prices again last month. "It really dents hopes that the weakness we saw in January and February is just related to temporary concerns about the global economy. There is something more fundamental going on," said Jennifer McKeown at Capital Economics. "Without ECB stimulus I suspect that things would have been a lot worse but it certainly is evidence that we are still in a deflationary environment in the euro zone. There is a real risk going forward that households start to put off purchases." The ECB targets inflation just below 2 percent, but flash data showed last week it was -0.1 percent in March. Producer prices fell more than expected in February and the pace of their monthly decline increased, excluding volatile energy prices. There are few signs the latest round of stimulus has had much impact on growth either. Markit's final composite PMI for the bloc, seen as a good guide to growth, barely improved on February's 13-month low of 53.0, nudging up to 53.1.

ECB prepared to do more if necessary to achieve inflation target | Reuters: The European Central Bank is prepared to ease monetary policy further if necessary to prevent low inflation in the euro zone from becoming entrenched, its chief economist said on Monday. "The prolonged period of low inflation we are in today has increased the risks that inflation misses might become persistent, which would be deeply damaging for the economy," Peter Praet said at an event in Rome. "This is why we have reacted so forcefully to secure our objective – and will continue to do so in the future if necessary."

The ECB Explains Why Central Banks Can't Go Bankrupt in a Footnote -- This morning the European Central Bank published a research paper titled "Profit distribution and loss coverage rules for central banks. The paper dryly outlines how central banks account for profits and losses, and how those profits and losses are distributed to the shareholders of those central banks—usually the state in which they are based. The paper is useful though, for one very important point it makes. As the ECB engages on its expanded €80 billion per month asset purchase program, questions will arise over what would happen should the central bank make a loss on those purchases. In talking about profitability of a central bank the ECB says in its paper that it is not necessary for a central bank to make money, as this is not a useful measure of the efficacy of the bank. While noting that profitability may be useful for a central bank's credibility, the paper makes the critical point that losses made by a central bank do not lead to the bank needing to be recapitalized, or the bank becoming insolvent.  The ECB makes this point in a footnote on page 10: "Central banks are protected from insolvency due to their ability to create money and can therefore operate with negative equity." Central banks cannot run out of money because they are the ones that create the money. And you cannot run out of something you can create yourself.

JPM, ECB Hint At Arrival Of "Helicopter Money" In Europe Following Next "Significant Downturn" - Moments ago, ECB governing council member and Bank of Italy governor Ignazio Visco had some very troubling comments. He said that while helicopter money is not currently part of the discussion in the Governing Council that "no policy tool within our mandate can or should be dismissed a priori." The reason for this startling admission is "the importance of expectations of low inflation in determining wage outcomes, and thus giving rise to second- round effects, may be increasing.” He cited Italy’s recently signed collective contracts where "it was agreed that parts of future pay rises will be revised downwards in the event that the inflation rate falls short of current forecasts" adding that a "a generalized adoption of this type of contract would significantly decrease the rate of growth of wages and this would in turn be reflected in the dynamics of consumer prices." He went on to defend existing monetary policy which has so far only resulted in savings hoarding, ongoing deflation and a slammed banking sector, saying that "Regarding Italy, the effects are estimated to be somewhat stronger: absent the monetary impulse, the Italian recession would have ended only in 2017; inflation would have remained negative for the whole three-year period." But back to helicopter money: Visco also said that: "such an extreme measure would undoubtedly be subject to operational and legal constraints." Is the ECB really this cloase to helicopter money? It appears so, because as he notes "the redistributive implications and the close ties with fiscal policy would all make it very complex, all the more so in the euro area given its institutional framework." He concluded that a discussion on the measure "is noteworthy, not much per se, but because it underlines the concern that monetary policy is left to act in isolation."

Iceland PM Resigns Over "Panama Papers" Leaks -- We suspect more than a few 'prosecuted' bankers will be smiling wryly today as, following the exposure of his offshore financial dealings - revealed in the Panama Papers - Iceland's embattled Prime Minister Sigmundur David Gunlaugsson has resigned.  Despite earlier refusal to step down, the decision, which was reported by national broadcaster RUV, followed street protests that attracted thousands of Icelanders angered by the alleged tax evasion.

This Is Where Bad Bankers Go to Prison --  Kviabryggja Prison in western Iceland doesn’t need walls, razor wire, or guard towers to keep the convicts inside. Alone on a wind-swept cape, the old farmhouse is bound by the frigid North Atlantic on one side and fields of snow-covered lava rock on another. To the east looms Snaefellsjokull, a dormant volcano blanketed by a glacier. There’s only one road back to civilization. This is where the world’s only bank chiefs imprisoned in connection with the 2008 financial crisis are serving their sentences, Bloomberg Markets magazine reports in its forthcoming issue. Kviabryggja is home to Sigurdur Einarsson, Kaupthing Bank’s onetime chairman, and Hreidar Mar Sigurdsson, the bank’s former chief executive officer, who were convicted of market manipulation and fraud shortly before the collapse of what was then Iceland’s No. 1 lender. They spend their days doing laundry, working out in the jailhouse gym, and browsing the Internet. They and two associates incarcerated here—Magnus Gudmundsson, the ex-CEO of Kaupthing’s Luxembourg unit, and Olafur Olafsson, the No. 2 stockholder in the bank at the time of its demise—can even take walks outside, like Kviabryggja’s 19 other inmates, all of whom were convicted of nonviolent crimes.

Case Closed: Iceland's Criminal Bankers Released From Jail Years Early -- How very ironic. Over the weekend, just hours before the Panama Papers were released, we wrote a post that took "A Look Inside Iceland's Kviabryggja Prison: The One Place Where Criminal Bankers Face Consequences."And then, minutes later, the Panama Papers were disclosed by the ICIJ, which had a clear target: to "expose" the "circle of friends close to Putin", and of course, to reveal the dirty laundry of the Iceland Prime Minister, who resigned just two days after his shady offshore tax dealing were revealed to the world. There was some "conspiratorial" speculation whether the explicit hit on ex-PM Sigmundur David Gunnlaugsson was precisely due to Iceland's crackdown on the country's criminal bankers. As a reminder, Iceland is the only nation that sent bankers found guilty of crimes resulting from the financial crisis, to prison. It turns out there may have been something valid in said speculation, because moments ago,Iceland Monitor reported that three bankers from the defunct Iceland bank Kaupthing are to be released from jail today – after serving just one year of their 5-year sentences. Magnús Guðmundsson, Ólafur Ólafsson and Sigurður Einarsson were one of four men jailed in 2015 in the so-called ‘Al-Thani case’ on charges of breach of trust and market abuse. Sigurður Einarsson, former chairman at Kaupþing, received a sentence of four years, while Magnús Guðmundsson, former CEO of Kaupthing Luxembourg, and Ólafur Ólafsson, who was the bank’s second largest shareholder at the time, both received a sentence of four and a half years. They will be taken to a halfway house today, where they will be fitted with ankle tags and released under electronic supervision.

Britain could lose AAA rating if it leaves EU, S&P warns again -- Standard & Poor’s has repeated its earlier warning that Britain could lose its much-prized AAA rating if the country votes to leave the European Union. Writing an an opinion piece on the Politico website, S&P’s chief sovereign ratings officer Moritz Kraemer said: When Britain last held a referendum on its European Union membership in 1975, the stakes were not nearly as high. The U.K. had joined the European community only two years earlier. But today, given the U.K.’s deep political, financial and trading ties in Europe, an exit would be much more fraught — and the risks, when it comes to its credit worthiness, are therefore considerably higher. While Brexit supporters share a collective skepticism about the “European experiment,” they lack consensus on what Britain’s trading options and political alliances will look like outside of the EU. If the Brexit camp wins the vote on June 23, the U.K. would enter a protracted period of uncertainty while its people debate the alternative. Markets dislike uncertainty — especially protracted uncertainty — and this “working out” period will likely have adverse credit consequences for the U.K... Brexit would further polarize the U.K.’s political system, increase risks to effective, transparent and predictable policymaking, and diminish the U.K.’s long-term sovereign creditworthiness. Brexit also heightens potential risks to economic growth and the balance of payments, as well as domestic political threats to territorial integrity. Consequently, a vote for “Leave” would likely lead Standard & Poor’s to lower the U.K.’s AAA rating — a rating it has held, without interruption, since 1978. While the U.K.’s rating would likely remain high given its many institutional, financial and economic strengths, the U.K. would lose its place in the increasingly exclusive club of AAA-rated sovereigns.

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