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

Saturday, March 26, 2016

week ending Mar 26

Don't try to normalize interest rates - Scott Sumner-- Marcus Nunes has a new post that discusses a recent Wall Street Journal article. Here's the WSJ: The Fed needs to keep raising short-term interest rates to diminish risks to the economy and markets of "excessive accommodation," Mr. Kaplan told the Journal on Monday. However, fragile and interconnected financial markets, slow global growth, and the perils of driving the economy back into recession all mean the Fed can't move aggressively, he said.  "We want to try to normalize [interest rates] as fast as we can," Mr. Kaplan said. "But we have to be patient and gradual." I was most struck by the term "normalize". I was not aware that there was any normal level of interest rates. I've observed rates ranging from 0% to roughly 20%, and in some countries rates have recently gone negative.  Is this a harmless concept? I don't think so. If the Fed is trying to normalize interest rates as fast as they can, then interest rates have become a goal of Fed policy, in addition to employment and inflation. And that means they are willing to trade off worse outcomes of employment and inflation in order to get better outcomes for interest rates. I also see an even great danger. In the past, the Fed's biggest errors occurred in the 1930s, in 1966-81, and in 2008.  In all three cases, interest rates were already "abnormal" and the appropriate policy was to make them even more abnormal. Now think about Kaplan's view that the Fed should want to normalize rates as fast as possible. People holding that view in the 1930s, the 1970s, or 2008 would have been likely to make the exact policy errors that led to our greatest monetary disasters.  Maybe the Fed should try to control the variables that actually lead to economic instability, and let the market determine what level of interest rates is "normal."

SF Fed's Williams Says Will Push For Rate Hike As Soon As April - After last week's ridiculous FOMC announcement which forced even such "party line" commentators as Steve Liesman to ask Yellen if the Fed has lost all credibility after its dots tumbled despite surging core inflation and a mandate low unemployment rate, one can be forgiven if all they laugh at the latest Fed "forecast." Still, it is a Fed forecast, even if one coming from a Fed permadove such as SF Fed's Williams who told Market News International in an exclusive interview that "he will be advocating for another interest rate hike as early as the April meeting of the Fed's rate-setting Federal Open Market Committee - or, failing that, at the June meeting - provided the economy continues to do as well as it has been." It is unclear just what he means by "as well as the economy has been doing" considering the Fed just slashed its rate hike expectations by 50% ostensibly on a weak U.S. economy, unless of course the Fed's mandate has nothing to do with the US economy and everything to do with the US Dow Jones Industrial Avereage. For those confused, that was sarcasm. More details from Market News, according to which Williams suggested there is no justification for long delaying further Fed rate hikes in the face of continued labor market improvement and "very encouraging" progress toward meeting the Fed's 2% inflation target. "All else equal, assuming everything else is basically the same and the data flow continues the way I hope and expect, then April or June would definitely be potential times to have an increase in interest rates," he said.

Fed's Lockhart says rate hike possible at April meeting | Reuters: The United States may be in line for an interest rate hike as soon as April, Atlanta Fed President Dennis Lockhart said on Monday, another sign that policymakers are comfortable allowing U.S. monetary policy to diverge from other major economies. Lockhart said the decision to hold rates steady at last week's Fed policy meeting was more about ensuring that recent global financial volatility had settled down, a "patient" approach which he said he supports. But given continued U.S. economic growth, "there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April," Lockhart said in a speech to the Savannah Rotary Club in Georgia. Lockhart's remarks and those recently made by other policymakers, including San Francisco Fed President John Williams, reflect an emerging consensus at the U.S. central bank that U.S. growth remains intact despite a weak global economy, and that rates can rise perhaps another half percentage point this year. Projections issued by Fed policymakers last week showed that 13 of 17 of them expected from one to three rate hikes by the end of the year - a relatively tight spread - with a majority of nine clustered at two hikes. Lockhart said that reflected a "pretty uniform" view on the rate-setting committee of how monetary policy is likely to evolve this year and how the economy is likely to perform.

Kaleidoscope Eyes -- Dennis Lockhart, Atlanta Fed president, made a speech today trumping up the possibility rate hikes as soon as April. In his speech, Lockhart cited “sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April.”  Let’s dive into his speech and also put a spotlight on his claim of “sufficient momentum“.  The title of this post comes from the title of Lockhart’s speech to the Rotary Club of Savannah Kaleidoscopic Context for Monetary Policy. Here are some snips, emphasis his, not mine.. Short of some big shock that turns consumer psychoIogy on its head, I see no reason why consumer spending growth should not continue. I think the conditions supporting this engine of economic momentum are likely to hold steady. I should add to the list the so-called “gasoline dividend.” Although slower than expected to show through in consumption patterns, lower oil prices and lower gasoline prices should bolster the economy through the consumer channel. The incoming economic data have been, admittedly, mixed since the momentous December meeting of the FOMC (the meeting at which the Committee raised its policy rate for the first time in almost a decade). We policymakers face some ambiguity. In my experience, this is almost always the case. But overall, I see the recent data as positive. I believe a forecast of sustained moderate growth momentum is realistic and remains the likely scenario. In my opinion, there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April.

Philly Fed’s Harker: Should ‘Get On With’ More Rate Hikes (MNI) - A Federal Reserve official said Tuesday the U.S. economy has proven itself so resilient the central bank's policymaking committee should consider its next 25 basis-point interest rate rise. "I think we need the committee to get on with it," said Patrick Harker, president of the Federal Reserve Bank of Philadelphia and a non-voting member of the Federal Open Market Committee this year. "We have to consider every (FOMC) meeting a live meeting," said Harker, answering questions following an evening speech to the New York University Money Marketeers, but added he "won't put a date on it." Harker said, "It's really a function of how the data plays out." If unemployment and job growth trends continue to cooperate, and core inflation and the personal consumption expenditure price index continue to move up to the Fed's 2% target, he said, then the FOMC should consider "another 25 basis-point rise." Monetary policy would remain "incredibly accommodative" nonetheless, he added. He also pointed to the U.S. dollar, which he said "seems to have stabilized for now," and the price of oil, which he said has "seemingly bottomed out" or is stabilizing. "The economy is really quite resilient to a lot of the headwinds," Harker said. If upcoming national manufacturing extends the upward trends seen in recent regional surveys, that will show "we've sort of weathered a lot of that volatility with the dollar," he said. Indeed, he said, despite "issues" in the manufacturing sector, "they feel pretty good." On inflation, Harker said he would prefer a target range, rather than the current target number. "If we overshoot that a little bit, that's okay, too," he said of the 2% inflation goal.

Fed Has Slack: Fed officials must be very pleased to see that the unemployment rate is under 5.0% and that the core PCED inflation rate is approaching 2.0%. However, the doves among them, especially Fed Chair Janet Yellen, might justify slowing the pace of monetary normalization so that they can be more certain that the economy has normalized for sure. They can argue that there is still slack in the labor market. The recent rapid increase in the labor force suggests that workers are coming back because they’ve heard that there are plenty of job openings and they are finding jobs. The influx of reentering as well as new workers seems to be keeping a lid on wage inflation, which is another sign of slack in the labor market. With regard to inflation, a few Fed officials recently have signaled that they prefer to target the headline rather than the core inflation rate since the plunge in oil prices seems to be having a depressing impact on inflationary expectations. Using the PCED measure, the former was 1.3% y/y while the latter was 1.7% during January. I wouldn’t be surprised if Fed officials started to suggest that they wouldn’t mind if the core rate overshot their 2.0% target for a while. Now let’s have a close look at all the recent data that members of the FOMC are likely to depend on when they meet on March 15-16--and most likely decide to do nothing and to signal nothing about another rate increase at the next meeting on April 26-27:

The number that tells us the economy might be doomed - Here is a math problem for the Federal Reserve: What is 3.25 minus 5? The answer, despite what you might think, isn't -1.75. It's that it doesn't matter what it is as long as it's much less than zero. Why is that? Because, as we'll get to in a minute, this tells us where interest rates are probably going to end up the next time there's a recession, except that this can't be too far into negative territory. Think about it like this: rates can't be much less than zero, since people would just turn their bank deposits that were "paying" them a negative amount—aka costing them money—into cash that wouldn't pay them anything, but at least wouldn't cost them anything either. And that's a lot worse than it sounds. It means the Fed won't always be able to give the economy the interest rates it "needs." Instead, the Fed will have to print money or promise not to raise rates for a long time. These things work, but not quite as well as good, old-fashioned interest rate cuts, which is why we'd like to avoid having to use them if at all possible. We might not avoid them, though, if the Fed keeps doing what it's doing. But let's back up a second. What are the 3.25 percent and 5 percent we're talking about? Well, the first one is how high the Fed estimates interest rates will tend to be in the long run, and the second is how many percentage points the Fed tends to cut interest rates in a slump. That's not only some bad math for the Fed, but also, as as the Financial Times' Matthew Klein points out, some even worse math than just a few years ago. In 2012, the Fed thought interest rates would eventually settle around 4.25 percent; in 2013, it revised that down to 4 percent; in 2014 it revised that down further to 3.75 percent; in 2015, it did so again to 3.5 percent; and in 2016, the pattern has continued to 3.25 percent.

'Helicopter Money' Won't Provide Much Extra Lift - Narayana Kocherlakota - Global central bankers quest for unconventional ways to stimulate weak economies has generated a lot of excitement about "helicopter money," a policy that entails creating money and giving it directly to people or the government to spend. The excitement seems unwarranted to me and misses the important point: The government has all the borrowing and spending power it needs to boost the economy and get inflation up to the desired level, if only it had the will. To understand helicopter money, consider two ways that the government can raise $100 billion to fund new spending (or a tax cut).

  • The Treasury can sell $100 billion in bonds to investors.
  • The Treasury can issue $100 billion in bonds to the Fed, which pays for them by creating new money.

The second form of financing looks like it should be cheaper and potentially more stimulative. After all, the government has raised $100 billion without increasing its debt burden, because payments on the bonds will simply go from one government pocket (the Treasury) to another (the Fed, which remits its profits to the Treasury). The term “helicopter money” reflects the idea that the government could drop the new $100 billion on people as if from a helicopter -- a windfall completely independent of whatever decisions those people make.  But the apparent attractiveness of the helicopter approach ignores something important: Money has a cost, too. When the Treasury spends the $100 billion, it will appear in bank accounts. Banks, in turn, will deposit the money at the Fed -- a liability on which the central bank pays interest.

The Time and Place for ‘Helicopter Money’ - With fiscal and monetary policy reaching their limits, the search for new solutions to the world’s low-growth, low inflation rut has turned to “helicopter money.” The policy gets its name from an essay by Milton Friedman in 1969 that imagined newly printed money dropped from helicopters.  Mr. Friedman used the helicopter as a metaphor to argue that the government could always create inflation by printing enough money. As people spent the money, nominal gross domestic product would rise—either through the production of more goods and services, higher prices or both. Haven’t central banks been doing that, through quantitative easing, known as QE? No. Helicopter money—which, in its more practical forms, is called monetary finance, or monetizing the debt—is used to purchase goods and services. With QE, the newly created money is used to buy government bonds. This pushes down bond yields, which should make consumers borrow and spend more—as interest rate cuts do in normal times.  Helicopter money is also different from traditional fiscal stimulus. Then, the government sells bonds to the public and uses the proceeds to directly stimulate demand, for example by building highways, hiring teachers or cutting taxes. But eventually more government borrowing will push up interest rates, hurting private investment and raising solvency worries. Households, expecting their taxes to rise, may spend less. Helicopter money merges QE and fiscal policy while, in theory, getting around limitations on both. The government issues bonds to the central bank, which pays for them with newly created money. The government uses that money to invest, hire, send people checks or cut taxes, virtually guaranteeing that total spending will go up. Because the Fed, not the public, is buying the bonds, private investment isn’t crowded out.

The Fed's Misunderstood Dots - Narayana Kocherlakota - Every three months, the U.S. Federal Reserve publishes a chart -- known as the "dot plot" -- showing where various officials think the central bank's interest-rate target should be over the next few years. And every three months, investors and the media consistently misinterpret it. A couple changes could make this widely followed monetary-policy tool a lot more useful. The dot plot has two big perception problems. The first is the belief that it reflects officials's interest-rate forecasts. It doesn;t. Rather, it shows what each participant thinks the Fed should do, based on his or her individual forecast of how the economy will evolve and what the optimal response would be. In other words, the dot plot offers a great representation of how much officials disagree. It says nothing about which of their views will prevail when the policy-making Federal Open Markets Committee forges a consensus. Will governor X’s perspectives prove persuasive during the remainder of 2016, and what about in 2017? This deliberative process is the essence of how the committee works, and the dot plot is completely silent about it. The second issue is that investors tend to see the dot plot as a commitment about the trajectory of rates. As my Bloomberg View colleague Mark Gilbert explains, markets tend to view even a relatively small change in the dot plot -- like the one that happened last week -- as eroding the Fed's credibility. What to do? For one, change the timing of the dot plot’s publication. Three weeks after every policy-making meeting, the Fed releases a set of minutes that offer valuable detail on the heterogeneity of perspectives expressed. As another way to communicate that difference of opinion, the dot plot would make a great supplement to the minutes.

Fed Watch: On Credibility -- Narayana Kocherlakota and David Andolfatto have been discussing the issue of Fed credibility. This is my effort to weigh in on the topic. I break the issue of credibility of monetary policy into two parts. The first I think of as “soft” credibility, or the perception that policy needs to follow a proscribed course due to some perceived promise. The second I think of as “hard” credibility, or the expectation that policymakers will pursue policies that maximize its odds of achieving its goals over the long run, price stability with maximum sustainable employment, regardless of perceived promises. We should encourage policymakers to pursue “hard” credibility and avoid communications or actions that lead to policy directed at achieving “soft” credibility.  Let’s step back to last summer. It was widely anticipated that the Fed would hike interest rates at the September 2015 FOMC meeting. Market turmoil in August, however, made the Fed think twice. It also encouraged no shortage of commentary urging the Fed to pursue what I consider “soft” credibility. Via Jon Hilsenrath at the Wall Street Journal: After months of forewarning by Federal Reserve officials that they are preparing to raise short-term interest rates, some international officials attending the Fed’s annual retreat here this week have a message: Get on with it already.“If you delay something that you were planning to do, then you leave the impression that your compass is different than what you led markets to believe,” Jacob Frenkel, chairman of J.P. Morgan Chase International and former head of the Bank of Israel, said in an interview Thursday. Market drama is increased by delay, he added. What I wrote: Hey, it's been a hard couple of weeks. Things changed. That certain rate hike became a lot less certain. Maybe that changes back by September 17. Maybe not. All of us Fed watchers probably won't come to agreement until September 16. Getting emotional and moralizing about change isn't going to stop it…Stocks dropped sharply. It is a clear sign, on top of other signs, that financial conditions are tightening ahead of the Fed, and arguably too much ahead of the Fed.

Inflation stirs as the Fed stands still (FT)   A debate has broken out within the US Federal Reserve on prospects for inflation, as several policymakers seek to put an interest rate increase up for negotiation as soon as next month. Patrick Harker, the president of the Philadelphia Fed, called on Tuesday for the institution to “get on with” rate increases given the resilience of the economy. His comments follow remarks by three other Fed policymakers that contrast with the dovish approach of Janet Yellen, the Fed chair, who last week acknowledged that scaled-down expectations of rate rises had helped calm financial markets after turbulence this year. The Fed kept interest rates on hold following a rise at December’s meeting and revealed a set of forecasts by officials that suggested that interest rates would increase only half as much this year as policymakers previously forecast. Ms Yellen downplayed the significance of recent movements in core inflation, which excludes energy and food and has risen to 1.7 per cent. The Fed forecasts predict overall price growth to end this year at 1.6 per cent, inch up to 1.8 per cent in 2017 and only reach its target of 2 per cent in 2018. Ms Yellen’s tone contrasts not only with research by some Wall Street analysts but also with figures such as John Williams, a close ally who heads the San Francisco Fed and signalled this month he was encouraged by the rise in underlying inflation, adding that the economy was set to “power ahead”. Mr Williams and Dennis Lockhart of the Atlanta Fed, who like Mr Harker are not voting on rates this year, have also said an April move should be considered, while Esther George of the Kansas City Fed voted for an increase in March. This month Stanley Fischer, the Fed’s vice-chair, said he saw the “first stirrings” of inflation.

Richmond Fed’s Lacker: Inflation Expectations Well Anchored - While inflation compensation measures give him some pause, Richmond Fed President Jeffrey Lacker said Monday he is still confident inflation will move back towards the Fed's 2% goal in the medium term as inflation expectations remain well anchored. "Inflation has been held down recently by two factors, the falling price of oil and the rising value of the dollar," Lacker said in remarks prepared for a panel discussion at a Global Interdependence Center event being held at the Banque de France in Paris. "But neither factor is likely to depress inflation indefinitely." Inflation issues have come to the forefront of U.S. monetary policymaking as one of its domestic objectives, maximum employment, has come very close to being achieved. Inflation - the measure of the Fed's other mandate of price stability - meanwhile has continues to run below its 2% objective during most of the economic recovery. Lacker, who is not a voter this year on the policymaking Federal Open Market Committee, expressed concern over some recent measures of inflation expectations, but said overall he is "reasonably confident that, barring subsequent shocks, inflation will move back to the FOMC's 2% objective over the medium term." Of course, he added, "the FOMC will continue to closely monitor both inflation and inflation expectations, and if necessary, it will respond appropriately." Part of low inflation around the world has been caused by declining commodity prices, including energy, which resulted in the price for a barrel of oil falling from more than $140 in the summer of 2014 to around $40 last week. "After the price of oil bottoms out," Lacker said, "I would expect to see headline inflation move significantly higher." The other phenomenon for the U.S. has been the strength of the dollar versus other currencies where economic growth has lagged. But Lacker again pointed out this is transitory. "And after the value of the dollar ultimately tops out, core inflation should move back toward 2%," he said.

Goldman: "Inflation Finally Begins to Firm" --A few excerpts from a research piece by Goldman Sachs economists David Mericle and Chris Mischaikow: Inflation Finally Begins to Firm  Fed officials have long argued that inflation has been soft primarily due to transitory factors and would eventually rise as these influences faded and the labor market tightened. Over the last half year, inflation has picked up substantially in a manner that closely fits the Fed’s narrative. Yet at the March FOMC meeting, both the Committee’s inflation projections and comments from Chair Yellen suggested a puzzlingly skeptical take on the encouraging recent data. We see three broad reasons for the skepticism of some FOMC participants. First, some see ... one-off factors that are unlikely to persist. Second, others likely see downside risks from recent declines in inflation expectations. Third, some participants likely expect further drag from past or future dollar appreciation. ... In our view, the FOMC had it right the first time. We expect disinflationary forces to fade further this year, while inflationary pressures should strengthen as the labor market continues to tighten ... As a result, we expect core PCE inflation to reach 1.8% by 2016Q4, 0.2pp above the FOMC’s projection, and headline PCE inflation to reach 1.5%, 0.3pp above the FOMC’s projection. ... As the year progresses, we expect that the FOMC will gradually revise up its inflation projections and ultimately conclude that an even stronger acceleration to 1.8% merits three hikes this year rather than two.

Fed rate hike expectations jolting currencies: The dollar is flexing its muscles again, now that Fed officials are suggesting a rate hike may come sooner rather than later. The dollar firmed as commodities sold off, sending the dollar index up 0.5 percent to just above 96. Platinum plunged more than 3.5 percent in its worse sell-off since January, while gold lost about 2 percent to $1,223 per troy ounce. Both the Mexican peso and Canadian dollar were down more than 1 percent against the greenback. Oil was also weaker. West Texas Intermediate futures lost 4 percent, closing below the key $40 level — at $39.79 per barrel. The dollar index has been moving higher since March 18, two days after the Fed met and sent a seemingly dovish message to markets. But more recent hawkish comments from Fed officials have helped give the dollar a lift in a fairly dramatic move against a basket of currencies as traders reassess interest rate expectations.St. Louis Fed President James Bullard was the latest to join a growing chorus of Fed officials who say it's time for the Fed to move. "We didn't do it, so now we can look at April and see what the data look like when we get to April," Bullard told Bloomberg News on Wednesday. His comments came shortly after Philadelphia Fed President Patrick Harker said the Fed should consider another hike as soon as next month.

Chicago Fed National Activity Index March 21, 2016: Highlights: A warm weather drop in utility output is a major factor behind a much lower-than-expected reading for the national activity index which came in at minus 0.29 vs Econoday expectations for plus 0.25 in February. The headline's production component fell to minus 0.21 from January's plus 0.29, pulled down by a 9.3 percent decline in utility output as well as a 9.9 percent decline in the struggling mining component, both masking a respectable 0.2 percent gain in the report's most important component, manufacturing output. But there is also weakness in the employment component which contributed only plus 0.03 to the February composite vs January's plus 0.19, here reflecting a lower contribution from employment expansion in the household survey (530,000 vs January's 615,000). A smaller negative comes from the personal consumption & housing component, at minus 0.09 vs minus 0.05, with a fractional drag coming from the sales/orders/inventories component, at minus 0.03 vs minus 0.02. The decline in utility output is a one-time event, pointing to a bounce for the February report.

Chicago Fed: "Index shows economic growth slowed in February" -- The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth slowed in February  Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.29 in February from +0.41 in January. All four broad categories of indicators that make up the index decreased from January, and three of the four categories made negative contributions to the index in February.  The index’s three-month moving average, CFNAI-MA3, edged up to –0.07 in February from –0.12 in January. February’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed: US Growth Stumbed In Feb But 3-mo Trend Improves - The US economy continued to expand through last month at a moderate pace, albeit at a rate that’s slightly below the historical trend, according to this morning’s update of the Chicago Fed National Activity Index. The business-cycle benchmark’s three-month average (CFNAI-MA3) ticked up to -0.07 in February, close to The Capital Spectator’s projection. The main takeaway: recession risk remained relatively low through last month, a message that echoes last week’s US macro profile.  The monthly reading of the Chicago Fed’s index dropped sharply last month, however, falling to -0.29—a substantial reversal after January’s upwardly revised +0.41. “All four broad categories of indicators that make up the index decreased from January, and three of the four categories made negative contributions to the index in February,” the Chicago Fed said in a statement.  The monthly data is noisy, of course, and so the three-month data offer a more-reliable measure of the macro trend. By that standard, the latest profile provides a fresh round of encouragement for arguing that NBER is unlikely to declare February as the start of a new recession. Indeed, CFNAI-MA3’s current print of -0.07 marks the highest reading in five months–a level that’s well above the -0.70 tipping point that signals economic contraction.

Q4 GDP Revised Up to 1.4% Annual Rate -- From the BEA: Gross Domestic Product: Fourth Quarter 2015 (Third Estimate) Real gross domestic product -- the value of the goods and services produced by the nation's economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 1.4 percent in the fourth quarter of 2015, according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.0 percent. The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 1.0 percent. With this third estimate for the fourth quarter, the general picture of economic growth remains largely the same; personal consumption expenditures (PCE) increased more than previously estimated ... Here is a Comparison of Third and Second Estimates. PCE growth was revised up from 2.0% to 2.4%. Residential investment was revised up from 8.0% to 10.1%.  This was above the consensus forecast.

U.S. Fourth-Quarter GDP Revised Up to 1.4% Growth but Corporate Profits Fall - WSJ: —The fourth quarter’s slowdown was less severe than previously estimated but corporate profits fell, showing the economy entered 2016 on uneven footing. Gross domestic product, the broadest measure of goods and services produced across the economy, advanced at a 1.4% seasonally adjusted annual rate in the fourth quarter, the Commerce Department said Friday. That was an upward revision from last month’s estimate of 1% growth. The output revision mainly reflects better consumer spending on services, and reinforces that the domestic economy is stable and growing. At the same time, declining profits and weak business investment show overseas uncertainty has stung manufacturers, energy firms and financial markets. “Consumer spending and housing are keeping the economy going, despite major drags from net exports, capital spending and an inventory cycle,” IHS economist Nariman Behravesh The balance sheets of U.S. companies weakened during the quarter. Corporate profits after tax, without inventory valuation and capital consumption adjustments, fell at an 8.1% pace last quarter from the third. That was the largest quarterly decline since the first quarter of 2011. Profits fell 3.3% in third quarter from the second. On a year-over-year basis, corporate profits declined 3.6% in the fourth quarter. Still, for all of 2015, profits were up 3.3% from 2014. The unadjusted measure of corporate profits tracks most closely with what companies report in earnings statements.

Third Estimate 4Q2015 GDP Revised Upward. Corporate Profits Down.: The third estimate of fourth quarter 2014 Real Gross Domestic Product (GDP) was revised upward to 1.4 %. This improvement was mainly due to upward revisions to personal consumption expenditures (PCE) and to exports.This third estimate released today is based on more complete source data than were available for the "second" estimate issued last month. (See caveats below.) Real GDP is inflation adjusted and annualized - the economy declined on a per capita basis.  The table below compares the 3Q2015 third estimate of GDP (Table 1.1.2) with 4Q2015 GDP which shows:

  • consumption for goods and services declined.
  • trade balance degraded
  • there was inventory change removing 0.22% from GDP
  • there was significantly slower fixed investment growth
  • there was reduction in government spending

The arrows in the table below highlight significant differences between 3Q2015 and 4Q2015 (green is good influence, and red is a negative influence). The arrows in the table below highlight significant differences between the second and third estimates (green is good influence, and red is a negative influence).

U.S. GDP Rose 1.4% In Final Estimate Of Q4 Growth As Corporate Profits Plunged - While the final revision to Q4 2015 GDP was so irrelevant it was released on a holiday when every US-based market is closed, even the futures, it is nonetheless notable that according to the BEA in the final quarter of 2015 US GDP grew 1.4%, up from the 1.0% previously reported, and higher than the 1.0% consensus estimate matching the highest Q4 GDP forecast. The final Q4 GDP print was still well below the 2.0% annualized GDP growth reported in Q3. The figure marks a slowdown from the 2.2% average pace in the first three quarters of 2015. For all of last year, the U.S. economy grew 2.4% matching the advance in 2014. The reason for the change was largely due to upwardly Personal Consumer Spending, which rose from a contribution of 1.38% to the annualized bottom line to 1.66%. In CAGR terms, personal consumption rose 2.4%, following the 3.0% increase in Q3, higher than the 2.0% previously estimated. Stripping out inventories and trade, the two most volatile components of GDP, so-called final sales to domestic purchasers increased at a 1.7 percent rate, compared with a previously estimated 1.4 percent pace.  The rest of the GDP components were largely unchanged, with Fixed Investment adding 0.06% to the bottom line, up from 0.02% in the previous estimate, Private Inventories contracting fractionally more than previously estimated (-0.22% vs -0.14%), net trade subtracting 0.1% less from growth (-0.14% vs -0.25%), and finally government spending largely unchanged and hugging the unchanged line at 0.02%. But while the "resilient consumer" once again carried the US economy in the fourth quarter, largely due to an estimated jump in spending on Transportation and Recreational services, which added an annualized $13 billion to the US economy vs the prior estimate, more disturbing was the drop in profits which we already knew courtesy of company reports and is known confirmed by the BEA whose GDP report also showed that corporate profits dropped in 2015 by the most in seven years. As Bloomberg writes, the earnings slump illustrates the limits of an economy struggling to gather steam at the start of this year. Some companies, encumbered by low commodities prices and sluggish foreign markets, are cutting back on investment while a firm labor market and low inflation encourage households to keep shopping.

CNBC analysis: Don't trust those GDP numbers: An in-depth analysis by CNBC of the government's reports on gross domestic product suggests large and persistent errors that should give investors, business executives and policymakers pause in relying on the data for key decisions. CNBC looked at each quarterly report going back to 1990 and found an average error rate of 1.3 percentage points. So an initial report of 2 percent growth on average later would be revised to 3.3 percent or 0.7 percent. The research does not show any systematic overstatement or understatement of growth, just persistently large revisions. CNBC also found:

  • The error rates in the second and third estimates of GDP are the same as the first. So despite more time and data, the error rates will be just as large three months after the end of the quarter as they are one month afterward.
  • About 30 percent of the time, the government gets the direction of growth wrong. That is, GDP initially shown to be higher than the previous quarter could in fact be lower, and vice versa.
  • The error rates haven't improved over the decades despite vast improvements in computing power and communications speeds. The size of the revisions from 2008 to 2013 is the same as those from 1990 to 1995.

The errors have potentially important policy implications. On April 30, 2008, with the Great Recession just gathering steam, the Federal Reserve cut interest rates by one-quarter point to 2 percent. That same day, the Bureau of Economic Analysis, the agency that produces the GDP report, announced that the economy was growing an anemic 0.6 percent but still growing.

Corporate 'recession' more than just oil -  While fears of a broad-based US recession have abated in the last few weeks, While fears of a broad-based US recession have abated in the last few weeks, the other recession at US corporations is showing no sign of ending anytime soon. While a US recession is loosely defined as two straight quarters of negative GDP growth, this corporate recession has come in the form of two straight quarters of profit declines for the S&P 500 companies. The good news, if there is any to be had, is that for the most part this dropoff has been sequestered to the energy sector,, as Jesse Edgerton, US economist at JP Morgan noted. "Aggregate operating earnings for the S&P 500, as reported by S&P, have fallen substantially since mid-2014," said Edgerton in a note to clients. "But the aggregate excluding the S&P Energy sector has held essentially flat." With oil prices increasing, and energy firms slowly restructuring operations, the hope would be that the drag from these companies would lessen and help return profits to growth. JP Morgan, Not so fast, said Edgerton. "So should we conclude that the aggregate decline in profits has no negative implications because it is 'just energy?' We think not for three reasons," wrote Edgerton. Here are those 3 reasons:

  • Non-energy companies should be getting a larger profit tailwind from oil price decreases.
  • Looking beyond the giant companies of the S&P 500, it looks even worse. Edgerton uses data from the National Income and Product Accounts' Quarterly Financial Report which includes smaller, private firms and is the source for US GDP. "Profits excluding the energy sectors still show a notable decline since 2014 after a steady upward trend throughout the recovery,"
  • Even if it is "just energy," that doesn't mean it can't bring down the rest of corporate profits with it. Edgerton points to profits ex-financials and ex-tech before the 2001 and 2008 recessions.

This Theory Explains Why the U.S. Economy Might Never Get Better: In the wake of the 2008 financial crisis, conventional wisdom among economists, business leaders, and policy makers was fairly straightforward: Once the banks were bailed out, the stimulus spent, and businesses had a few years to recover, the U.S. economy would return to its usual healthy growth. Time, in other words, would heal the wounds of the subprime collapse and subsequent turbulence. But if any recovery has turned conventional wisdom on its head, it’s this one.Over the last eight years, America’s economic prospects have lagged even the most pessimistic early predictions. In 2011, the Federal Reserve predicted that U.S. real GDP would, at worst, grow by 3.5% in 2013 and that the economy would expand between 2.5% and 2.8% annually in the long run. In every year since, the Fed has revised its predictions downward. (The most recent estimate predicts 2.2% annual growth in 2016, and 2% growth in the long run—a rate more than one-third lower than the post-war average.) Even employment, a source of uplifting headlines in recent weeks, is deceptively weak. The unemployment rate—which ignores those who gave up looking for a job—has hit new lows, but the percentage of Americans (between ages 25 and 54) who are actually working is over three points lower than its pre-crisis peak.These confounding circumstances have led many economists to rally behind the concept of so-called “secular stagnation.” As a diagnosis, secular stagnation is simple: It’s the idea that the economic problems the U.S. continues to face aren’t a product of the “business cycle,” the ebb and flow of boom times and recession (hence the “secular” part), but may well be permanent drags on the modern economy.

Forecasters See Modestly Stronger Growth For US Q1 GDP -- The US economy is widely expected to post modestly faster growth in this year’s first quarter vs. the weak 1.0% GDP rise in last year’s Q4 (based on seasonally adjusted annual rates). The projected improvement still looks unimpressive, but the good news is that analysts continue to forecast a slightly faster expansion for the “advance” Q1 GDP report that the Bureau of Economic Analysis will publish on Apr. 28. One of the more optimistic estimates (as of Mar. 18) comes from BMO Capital Markets, which predicts a 2.3% rise in Q1 GDP—more than double the rate in last year’s Q4. But that’s an outlier on the upside relative to the crowd’s view. The Wall Street Journal’s survey data for this month points to a 2.1% advance for first-quarter output, based on the average estimate for economists. The Atlanta Fed’s GDPNow model is currently projecting Q1 growth of only 1.9% (as of Mar. 16), which reflects a modest downgrade relative to estimates in recent weeks. Meanwhile, The Capital Spectator’s average econometric estimate for Q1 is 1.5%. That’s fractionally above last month’s 1.4% estimate, but a tepid projection nonetheless. Markit Economics yesterday advised that the weak survey numbers for US manufacturing in March, combined with a downturn in the services purchasing managers’ index (PMI) for February (the March update is due on Thursday), hints at weak growth generally. “The survey data are pointing to very modest GDP growth in the first quarter,” Markit’s chief economist, Chris Williamson, said. “Hopes are therefore pinned on a rise in Thursday’s services flash PMI for March to reassure that the economy is not completely stalling.” Meantime, here are the various forecasts that are used to calculate’s average estimate:

Atlanta Fed GDP Forecast Tumbles To 1.4% To Justify Fed's Downbeat Outlook On Economy Some time in the second week of February, when the market was tumbling on, among other things, fears of a U.S. recession, the Atlanta Fed was scrambling to give the all clear signal on the US economy when it surprised watchers by releasing a far stronger than consensus Q1 GDP nowcast of 2.7%. Since then things have once again not gone quite as planned, and following the latest flurry of poor economic data, the Atlanta Fed just confirmed that the current US economy is about as weak as it was when the Atlanta Fed first started estimating it at the start of February with a paltry 1.2% forecast. As of moments ago, this is where we are now: The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate)in the first quarter of 2016 is 1.4 percent on March 24, down from 1.9 percent on March 16. After this morning's durable goods manufacturing report from the U.S. Census Bureau, the forecast for first-quarter real equipment investment growth declined from 0.9 percent to -1.4 percent while the forecast for the change in inventory investment in 2009 dollars declined from -$9 billion to -$11 billion. The forecast for real residential investment growth fell from 14.6 percent to 7.8 percent after Monday's existing home sales release from the National Association of Realtors and yesterday's new home sales and construction cost releases from the Census Bureau.

Oil Mystery Solved? Interest-Rate Effect Upends Usual Growth Benefit - One of the economy’s big puzzles is why lower oil prices have done so little to help economic growth. The correlation between oil and stocks is now strongly positive. The opposite should be true since cheaper oil is a tax cut for oil-importing countries like the U.S. Three economists at the International Monetary Fund have advanced an intriguing theory: lower oil prices drive down actual and expected inflation, which would ordinarily also pull down interest rates. But in most big economies, interest rates are already at or near zero, and can’t go any lower. Thus, as expected inflation falls but nominal interest rates don’t, real interest rates (nominal rates minus inflation) rise, “very possibly stifling any increase in output and employment.”  For the same reason, if central banks are worried about deflation, they won’t respond to higher oil prices by raising rates. Thus, perversely, higher oil prices “can be expansionary by lowering the real interest rate.” Last year’s market action buttresses the theory. As oil prices sank, nominal bond yields remained stable but real bond yields rose. Thus, expected inflation—the difference—shrank. This year, as oil prices rebounded, real yields have edged lower. In theory, a one-off movement in the price of oil should not produce a lasting change in the rate of inflation. Yet both surveys of the public and trading in inflation-indexed bonds show a strong correlation between far-off expected inflation and movements in oil. This could reflect market dynamics. But it may also reflect a diminished faith in central banks’ ability to offset the disinflationary impact of lower commodity prices.

Why Is the CBO Concocting a Phony Debt Crisis?: “The CBO assumes that Social Security and Medicare Part A will draw on the general fund of the US Treasury……to cover benefit shortfalls following the depletion of their trust funds, which at the current rate will occur in 2034. That would obviously lead to an exploding debt, but it’s a scenario prohibited by law. In the case of both programs, benefits must be paid either from revenue collected via payroll taxes or from accumulated savings in the programs’ trust funds. When those funds run out, full benefits will simply not be paid. ‘Because there is no borrowing authority, there is really a hard stop,’ said Goss. Congress could pass a law saying that Social Security and Medicare Part A would begin drawing on the US Treasury general fund after 2034. Or, Congress could preemptively pass laws to avert the situation before the deadline; it could take the approach favored by progressives and increase revenue to the programs by lifting the payroll tax cap, or alternatively raise the retirement age and lower benefits. But the bottom line is the CBO projections disregard the actual law and assume a worst-case legislative scenario—and one that is politically unlikely, to boot…

Bill Black: Democrats Need to Give Up Being Deficit Hawks Even When it Feels Good Politically  - Representative Nancy Pelosi has just written the latest effort by a prominent Democrat to bash Republicans for the high crime of not being financially illiterate.  The Republicans are frequently financially illiterate on budget issues and they bash Democrats for the high crime of not being financially illiterate.  The leaders of both parties share the hypocrisy of bashing the rival party for supporting budgetary stimulus in circumstances in which stimulus is vital.  Particular forms of budgetary stimulus can be simultaneously desirable (relative to austerity) and inferior relative to alternative forms of budgetary stimulus.  The Republican‘s favored form of budgetary stimulus – large tax cuts for the wealthy – is a remarkably inefficient means of providing  stimulus that makes income inequality worse.  Those two points are the correct bases for criticizing their proposed tax cuts.  Far too many Democrats, however, cannot pass up the political opportunity to bash the Republicans for supporting stimulus when further stimulus is vital.  When Democrats like Pelosi launch these myth-based political attacks on Republican stimulus programs they help to enshrine economically illiterate austerity policies that make it even harder for Democrats to make the case for stimulus even when it is essential.

Obama’s Break with the Establishment - The biggest story in Jeffrey Goldberg’s 20,000-word report on “The Obama Doctrine” is President Barack Obama’s open break with the foreign policy establishment. The critique of orthodox national security policy thinking that Obama outlined in interviews with Goldberg goes farther than anything delivered on the record by a sitting president. It showed that Obama’s view on how to define and advance U.S. “national security” diverges sharply from those of the orthodox views of national security bureaucracy and Washington foreign policy think tanks on U.S. “credibility,” the real interests the United States in the Middle East and how the United States should respond to terrorism. It was the controversy surrounding his decision in the 2013 Syrian crisis not to authorize airstrikes against government forces that provoked Obama to go public with his position in that broader struggle. The foreign policy elite in Washington has issued a steady drumbeat of opinion pieces portraying Obama’s failure to launch a cruise missile attack against the Syrian air force and its air defense system in 2013 as a major blow to the U.S. role in the world because it forfeited U.S. “credibility.” Richard Haass, who is president of the Council on Foreign Relations and the closest thing to a spokesman for the foreign policy establishment, summed up the elite’s attitude toward Obama’s decision in Syria in a Feb. 23 tweet. Haass suggested that Obama’s decision not to bomb Assad regime targets was on par with the Bush administration’s U.S. invasion of Iraq. In his tweet, Haass linked to another attack on Obama’s decision by Laurent Fabius, the recently retired former French Foreign Minister. On Twitter, Haass wrote: “2003 #Iraq war error of commission; not enforcing #Syria red line error of omission. fair debate which more costly.

Donald Trump Could Be the Military-Industrial Complex’s Worst Nightmare - This week, while people everywhere were fretting over his violent talk, the candidate came to Washington and dropped a peace bomb on the neocon editorial writers at The Washington Post and the war lobby. Trump wants to get the United States out of fighting other people’s wars. He thinks maybe NATO has outlived its usefulness. He asks why Americans are still paying for South Korea’s national defense. Or Germany’s or Saudi Arabia’s. “I do think it’s a different world today and I don’t think we should be nation-building anymore,” Trump said. “I think it’s proven not to work. And we have a different country than we did then. You know we have $19 trillion in debt. We’re sitting probably on a bubble, and, you know, it’s a bubble that if it breaks is going to be very nasty. And I just think we have to rebuild our country.” “ Will anybody give him an amen? Yes, lots of folks. People who read The Nation (myself included) have been saying something similar for a long time. So have libertarian Republicans on the right. But this sort of thinking is mega-heresy among the political establishment of both parties. The foreign-policy operators consider themselves in charge of the “indispensable nation.”

The Democratic Road to Black Ruin - Black Agenda Report - Without overwhelming Black support, especially in the South, Hillary Clinton could not have achieved her insurmountable lead over the Democratic challenger from her left, Bernie Sanders. Although Blacks are the most left-leaning ethnic bloc in the United States – the most pro-peace constituency and the group that most closely resembles Sander’s beloved “Scandinavian Social Democrats” on economic issues – the bulk of Black voters have aligned themselves with the right wing of the Democratic Party, leading corporate pundits and pollsters to categorize Blacks as a “moderate” constituency within the Democratic sector of the duopoly electoral structure. Based on national voting behavior, the “left” side of the Democratic Party spectrum is now dominated by younger whites, who are locked in a struggle with their elders, Blacks and, to a lesser degree, Hispanics, for the “soul” of the Party. Of course, the Democratic Party has no soul; it is a rich man’s machinery controlled by Hillary Clinton’s patrons on Wall Street – a fact that most Black voters understand quite well. They are fully aware that Clinton is deeply connected to the “fat cats” with the resources to mount a billion-dollar-plus campaign against the Republican/White Man’s Party, in November. The likelihood that the GOP candidate will be the unapologetically racist Donald Trump lends urgency to their allegiance with Clinton, the cackling war criminal and former “Goldwater girl” who co-championed all of her husband’s mass Black incarceration and poor Black family-crushing initiatives the last time they were in the White House.

Clinton and CAFTA - Paul Krugman -Joel Benenson, Hillary Clinton’s number-cruncher/strategist, has an interesting note up about the implications of the Ohio primary.  I was struck by this: Ohioans took a hard look at Senator Sanders’ claims, and rejected them. Despite his attempt to portray Hillary as an ardent free-trader, Hillary voted against the Central America Free Trade Agreement (CAFTA), the only multi-national trade agreement that ever came before her in the U.S. Senate. I very much doubt that many Ohioans knew about Clinton’s anti-CAFTA vote, or even what CAFTA was. But I did. In fact, CAFTA was an important part of my education on modern “trade” agreements, helping to make me a lukewarm opponent of TPP.  A lot of this comes out of a seminar on trade policy I taught at the Wilson School, in which I asked students to look at a series of cases; DR-CAFTA (it also included the Dominican Republic) came as something of a revelation to me, because when you looked at it carefully, you realized that it wasn’t really a trade agreement at all. Instead, the most important issues were things like intellectual property, in particular pharma patent enforcement — and this made it a bad deal for Central America, despite sounding good.  And TPP is another modern trade-agreement-that-really-isn’t, with the most important provisions involving intellectual property and dispute settlement. People inside the administration argue with me that the trade provisions are important, especially for some poor countries, and that the IP and DS stuff isn’t as bad as portrayed; I grant that it’s not a slam-dunk case. As I said, I’m only a lukewarm opponent. But back to Clinton/CAFTA: Is this a misleading example? Actually, no — her record in the Senate was in general one of caution about and selective opposition to to trade deals. I’m sure we’ll be told that this was insincere and inauthentic — after all, Clinton Rules apply. But she wasn’t a knee-jerk free trader.

Robert Samuelson Pushes the TPP Again -- Dean Baker -  President Obama's allies in the media are working hard laying the groundwork for Congressional approval of the Trans-Pacific Partnership (TPP). Robert Samuelson did his part with a column warning that it would be "dangerous" if the next president repudiated the TPP. I suppose the piece is worth some brownie points with the administration, but it doesn't make much sense.He tells readers:"The United States has had continuous annual trade deficits since 1976, well before the North American Free Trade Agreement (1994) and China’s joining the World Trade Organization (2001). The explanation is that the dollar is widely used to settle trade transactions, to make cross-border investments and — for governments — to hold as international reserves."The resulting dollar demand on foreign exchange markets raises the dollar’s value in relation to other currencies. This makes U.S. exports more expensive and imports into the United States cheaper."There is a big difference between the relatively modest trade deficit (@ 1 percent of GDP) the United States ran in most of the years from 1976 to 1997 and the much larger trade deficits the United States ran in the years after the East Asian financial crisis in 1997. This was when developing countries began accumulating massive amounts of reserves. As a result the deficit expanded to a peak of almost 6 percent of GDP and is now somewhat over $500 billion (@ 3 percent of GDP).The difference of 2 percent of GDP, or $360 billion a year is the demand that the United States must make up from other sources. We could make up the demand with larger budget deficits, but Samuelson and his colleagues at the Washington Post and other Very Serious People would yell and scream about the deficits and how we are bankrupting our children. So we don't make up the deficit, we have higher unemployment.

Trade Backers Pin Pacific-Pact Hopes on Lame-Duck U.S. Congress - Election-year protectionism has trade supporters and some lawmakers eyeing the lame-duck session of Congress late this year as the last chance for the U.S. to approve the Trans-Pacific Partnership before a new administration waters down or scuttles a deal. Opposition to trade has emerged as a rare area of bipartisan agreement in the 2016 election campaign, with leading candidates opposing or criticizing a pact that would boost trade among nations making up 40 percent of the global economy. A tough battle for congressional seats in states where economic concerns loom large makes supporting deals such as TPP a political liability. In such a hostile environment, where anti-trade rhetoric resonates among voters in key manufacturing regions, congressional leaders point to the legislative session just after the Nov. 8 election as the earliest a deal could be considered. "I think we’ll probably get it through, but it’s shaky," Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, said in an interview. "It will probably have to be after the elections. I think we have a better chance to passing it after, but we’ll see” what Senate Majority Leader Mitch McConnell wants to do, he said. McConnell, a Republican from Kentucky, has indicated plans not to pursue it “certainly before the election," leaving the door open to a vote in the lame-duck session, according to trade analysts. A spokesman for McConnell said the senator has nothing to add to his previous comments on TPP, and has not announced a schedule for consideration yet. GOP leaders’ support is critical to the deal’s passage. President Barack Obama is counting on them to mobilize the same coalition of lawmakers that helped give the president fast-track authority in June to conclude the 12-nation deal. This time around, Republicans are less committal, having raised opposition to some of the provisions in the newly signed deal.

The Choice Is Not Between TPP or No Trade - Lori Wallach - The high-profile presidential primary revolt against decades of damaging American trade policy finally has forced the Trans-Pacific Partnership (TPP) into mainstream media coverage.The usual free-trade-agreement cheerleading squad of chronic-job-offshoring corporations, Wall Street, agribusiness and their coterie of think tanks and pundits are unnerved. After spending billions in campaign contributions, lobbying and PR since the 1990s to enact our current trade policies, they want us to believe there is no alternative. In recent weeks, they have ginned up a PR campaign with two main themes: Critics of free trade agreements in general and the TPP in specific are protectionists who want to stop trade and/or are ignorant and misled.The recent Washington Post piece by Vice President Biden's former chief economist Jared Bernstein does a great job explaining why the real choice is not between TPP and no trade. As he notes, we don't need more free trade agreements to expand trade. Indeed, U.S. export growth to countries that are not Free Trade Agreement (FTA) partners has exceeded U.S. export growth to FTA partners by 29 percent over the past decade. By the end of 2015, the aggregate U.S. trade deficit with FTA partners had increased by 418 percent since the FTAs were implemented while that with all non-FTA countries had decreased by 6 percent.How can that be? For the same reason polls repeatedly show that most Americans are for trade and against our trade agreements: America's trade policy and trade agreements have been hijacked by special interests. Indeed, the TPP's strongest opponents are not against trade and do know what is in such agreements. That is precisely why they oppose them.This Washington Post infographic shows how our secretive trade negotiating process gives a privileged role to hundreds of official U.S. trade advisors representing corporate interests. They have turned our "trade" agreements into delivery mechanisms for an array of retrograde policies, many unrelated to trade, that have hurt most Americans.

Magical Thinking: Sanders, Clinton, and the Federal Reserve Board - Dean Baker - Sanders does propose to have the bulk of the revenue for his agenda come from taxing the wealthy, but he is quite explicit on this point. The wealthy have been the big gainers from economic growth over the last 35 years, so it doesn't seem absurd on its face to envision that they should bear the bulk of the burden from any need for increased revenue. Since this conversation expressed a concern with unrealistic proposals from the presidential candidates it is surprising that no one mentioned the Federal Reserve Board. Several candidates have suggested that they would have substantially more rapid growth and job creation. The Fed has made it quite clear that it does not want to see more rapid job creation. They have expressed concern that if the unemployment rate fell substantially below current levels that it would lead to an inflationary spiral. In order to ensure that such a spiral does not develop most members of the Federal Reserve Board's Open Market Committee (FOMC) have indicated a willingness to raise interest rates to keep the unemployment rate from falling. Given the views of FOMC members, any candidate who indicates a desire to substantially lower the unemployment rate without addressing the Fed's plans is engaged in magical thinking. (Senator Sanders has criticized the Fed's plans to raise interest rates.) For some reason no one in the media has chosen to write about this obvious inconsistency in the plans of the presidential candidates.

Bill Black Speaks to TaxCast About the Political Coalition Against Financial Regulation -- Yves Smith - Bill Black is the special guest in this month’s TaxCast podcast. He gives an overview of his Whistleblowers United regulatory reform proposals, and gives a high level overview of the coalition against financial regulation. The earlier part of this TaxCast has an accessible and lively discussion of why tax amnesties are a terrible idea and what should be done instead. Enjoy!

Michael Hudson and Chris Hedges: The Real World Cost of Turning Classical Economics Upside Down -  (video & transcript) Yves Smith -  You are getting a big dose of Michael Hudson this week because he had interviews that were made weeks apart released in a tight timeframe. Several readers have already flagged this talk, and Hudson is in top form, and also covers a wide range of issues in a comparatively short time frame.  Today’s episode is from a teleSUR interview with Chris Hedges that focuses on one of Hudson’s favorite themes: the way that central messages of classical economics have been airbrushed out of the current economic orthodoxy, or worse, turned on their head. Classical economics was concerned with eradicating the vestiges of feudalism, which led to concerns about deadweight costs like rent extraction as well as distortions caused by monopolies and oligopolies. While it does not come up in this talk, another concern of classical economics was the productive use of lending. Classical economists favored usury ceilings because lenders otherwise would fund speculation (in those days, gambling by the rich) as opposed to funding commerce.

Something very significant is happening in repo -- Izabella Kaminska - The spike in US Treasury bond fails to deliver, which started earlier this year, is something we’ve been watching closely.  It’s fair to say we’re now at a significant milestone and the story is beginning to go mainstream. From the WSJ on Tuesday: Settlement failures in Treasury repurchase transactions in March hit their highest level since 2008, underscoring concerns on Wall Street that trading conditions are apt to deteriorate in even the most-liquid markets under the acute stress evident early this year. Almost 13% of Treasury repos through primary dealers in the week ended March 9 included a failure by one party to deliver securities as promised, according to the latest data available from the Federal Reserve Bank of New York. That is up from 2.7% last year and the highest ratio since 2008, said Joseph Abate, an analyst at Barclays PLC. ver at ADMISI Paul Mylchreest has dubbed it a $450bn plumbing problem: So what’s going on and how to fix the problem? Again, the standard response from industry is that this may be down to the unintended consequence of increasing the cost of renting out banks’ balance sheets. In that regard, here’s Darrell Duffie writing in Forbes earlier this month: In the case of repurchase agreements, known as repos, the “rental fee” for balance sheet space has been sharply increased by regulation. On a typical repo trade, a bank lends cash to a counterparty who secures the loan with bonds, say treasuries. The treasuries received by the bank are then usually financed by the bank itself on another repo, typically at a lower financing rate. The bank profits from the difference between the two repo rates. Absent capital requirements, this repo intermediation trade is almost self-financing because the bank passes the cash from one counterparty to the other, and the treasuries in the opposite direction. If a counterparty fails, the position can be liquidated with very low risk to the bank because it is almost fully secured or over-secured by cash or safe treasuries.

Trade failures of US bonds hit $456bn -- The US Treasury has played down concerns over the soaring number of trade failures for US government bonds, which hit an eight-year high of $456bn in the week to March 9. Trade failures, reported by big banks and brokers known as primary dealers, occur when a bank or investor agrees to lend or sell a Treasury security but then does not deliver it. Data released on Thursday by the Federal Reserve Bank of New York show overall failures to deliver reaching $452bn for the week ending on March 16. The figures are usually below $100bn, and compare to an average of $94bn per week earlier in the year. In the week ending on March 9 failures for the 10-year Treasury note climbed to their highest level since data collection began in April 2013, before falling back to more normal levels in Thursday’s release. Market participants point to the combination of many factors to explain the severity of the increase in failures. The US Treasury said the main cause was the build-up to fresh issuance of benchmark 10-year notes and 30-year bonds, which settled on March 15. Dealers may oversell securities knowing that fresh supply is not far away, which can result in an uptick in trade failures. Despite the drastic increase the Treasury said there was nothing yet to worry about. “It’s typical to see larger demand for Treasury collateral ahead of settlement dates and therefore to see fails rising into the settlement date,” said a Treasury spokesperson. “We don’t yet see reason to think there is anything too out of the ordinary here.” However, some analysts and investors say that a slow and steady uptick in failed trades over the past few years is a consequence of the pressures on bank balance sheets. Banks complain that increasing capital requirements makes them less willing to facilitate trading in US Treasuries, so it becomes harder for dealers and investors to find securities and trade failures increase.

Goldman Sachs probed in alleged rigging of US$13 trillion US Treasury market - A US probe into the alleged rigging of the US$13 trillion market for US government bonds, or Treasuries, by Wall Street banks has narrowed its focus to a few firms - including Goldman Sachs, The New York Post reported on Sunday (March 20). It said, quoting unnamed sources, that European authorities have opened up their own investigation into the possible Treasury bid-rigging. The Post said investigators in the fraud division of the Justice Department have obtained chats and e-mails from Goldman that appear to implicate the company in manipulating the price of Treasury bonds, one of the biggest traded asset classes in the world.The Post had first reported the Justice Department probe in June last year. In November, Goldman disclosed in a regulatory document that it was being probed for possible manipulation of US government bond prices, said the Post. The newspaper said Goldman is one of about 22 financial institutions that have been probed for any evidence that they may have manipulated Treasury auctions - a secretive process where banks and other financial services companies bid on the price of US government debt. US authorities are also looking into whether there was price-rigging in the secondary market for Treasuries, where the bonds are sold at a premium, the Post added. The newspaper noted that it was unclear if investigators had found any improprieties or illegal action.

“The US Has Lost the Will to Prosecute Corporate Executives” - In January, Sen. Elizabeth Warren released a scathing indictment of the American justice system. The 12-page report, titled “Rigged Justice: How Weak Enforcement Lets Corporate Offenders Off Easy,” highlighted 20 criminal and civil cases from 2015 in which the federal government “failed to require meaningful accountability from either large corporations or their executives involved in wrongdoing. The cases cover numerous industries—banks, car manufacturers, mining companies. Only one of them led to an indictment and conviction of an individual executive: following the Upper Big Branch mine disaster, in which 29 people were killed, former Massey Energy Company CEO Donald L. Blankenship was convicted of one misdemeanor. According to Warren’s report, there are currently two legal systems in the United States: one for wealthy corporate executives, where impunity is the norm and accountability is “shockingly weak,” and a separate system for everyone else. In the latter, enforcement is far less timid and punishments are severe. Over the past few years, ProPublica reporter Jesse Eisinger has interviewed dozens of Wall Street executives, defense lawyers, and former prosecutors and regulators in an effort to understand the roots of executive impunity, as well as to answer the question that has troubled millions of people around the world for the past eight years: how come, following the largest financial crisis since the Great Depression, not a single financial sector executive went to jail?   Eisinger shared the Pulitzer Prize in 2011 for a series of stories on the illicit practices of Wall Street executives prior to the financial crisis. He is currently writing a book about the failure of the Department of Justice to prosecute major corporate criminals. In an interview with ProMarket, Eisinger shared insights from his forthcoming book and traced the rise of executive impunity, from its nascent stages following the successful prosecutions that followed the accounting scandals of the late 1990s and early 2000s, to the current state, in which, he says, prosecutors are bewildered and captured and corporate executive are all but immune. “The book is an explanation why the United States has lost the will and ability to prosecute top corporate executives,” he says.

Is Bitcoin Really Frictionless?  - NY Fed  - Bitcoin is the most popular virtual currency yet developed. Proponents assert that bitcoin can remove frictions involved in payment and settlement systems by eliminating the need for the financial intermediaries that exist in traditional currencies. In this blog post, we show that while bitcoin transfers themselves are relatively frictionless for the user, there are significant frictions when bitcoins trade in exchange markets resulting in meaningful and persistent price differences across bitcoin exchanges. These exchange-related frictions reduce the incentive of market participants to use bitcoin as a payments alternative.

Corporate Profits in 2015 – The Numbers - WSJ:  The Commerce Department on Friday offered its first measure of corporate profits for 2015′s fourth quarter and the full year. The agency’s report generates 10 measures of business income and related components. Here’s a look at some key numbers, at seasonally adjusted at annual rates. Profits after tax without inventory valuation and capital consumption adjustments. This is the real-world number that most closely reflects corporate earnings statements. By this measure, fourth-quarter profits tumbled 3.6% from the same period a year earlier. For the full year, they rose 3.3%. Full-year growth was a paltry 0.1% in 2014 and 0.6% in 2013, after booming to nearly 18% in 2012. The last time full-year profits fell was 2011. $1.380 trillion Profits after tax with inventory valuation and capital consumption adjustments. This is the number that typically makes headlines in media reports. It’s also the most meaningful to Wall Street, reflecting something like the business equivalent of take-home pay. Profits sank 15% in the fourth quarter from the same period a year earlier, the sharpest decline in seven years. For the full year, they’re down 5.1%. $1.890 trillion Corporate profits before tax with inventory valuation and capital consumption adjustments. This is the Commerce Department’s featured number. The figure is comparable to changes in GDP, which measures all output in the economy. According to this measure, fourth-quarter profits dropped 11.5% from the same period a year earlier, the steepest fall since the fourth quarter of 2008. Full-year profits contracted 3.1%. -$124.3 billion Commerce also tracks corporate profits by industry. Last year, the sector for petroleum and coal products was the biggest drag, with fourth-quarter profits down $124.3 billion from the third quarter and full-year profits down $40.6 billion from 2014. The picture for other sectors was mixed, with a farily bleak fourth quarter across sectors alongside slightly brighter full-year numbers for domestic industries. Let’s not forget the headline number in the GDP report. The economy grew at a 1.4% pace in the fourth quarter of the year, a little better than the prior estimate of 1% growth. The reason? Primarily revisions to consumer spending, particularly on recreation and transportation services. Overall, fourth-quarter personal-consumption expenditures expanded at a 2.4% rate, still a tad softer than 3Q’s 3%. That leaves the overall growth picture largely unchanged: The economy is growing slowly, propelled largely by consumers.

86% of active equity funds underperform - Almost every actively managed equity fund in Europe investing in global, emerging and US markets has failed to beat its benchmark over the past decade, raising more questions about the value stockpicking managers add. The findings pile further pressure on active fund managers, who have come under repeated attack from academics and consumer groups for charging high fees for poor performance. An in-depth study by S&P Dow Jones Indices also found that 100 per cent of actively managed equity funds sold in the Netherlands have failed to beat their benchmark over the past five years. Ninety-five per cent of funds sold in Switzerland and 88 per cent of those on offer in Denmark also underperformed. Daniel Ung, director of research at S&P Dow Jones Indices, said: “The 100 per cent figure is very shocking. The other statistics are not much better. We are not saying active management is dead, but active managers need to justify what they are doing.” Overall in Europe, four out of five active equity funds failed to beat their benchmark over the past five years, rising to 86 per cent over the past decade, according to S&P’s analysis of the performance after fees of 25,000 active funds. Within that sample, 98.9 per cent of US equity funds underperformed over the past 10 years, 97 per cent of emerging market funds and 97.8 per cent of global equity funds. “There are some good managers out there but they are not easy to find. At a regional level, at a global level, in emerging markets, you name it, they are not performing well. On a one-year basis it is still possible to outperform, but it is very difficult on a consistent basis over the long run,” Mr Ung said. Asset management experts said the findings will exacerbate investor concerns about overpriced, underperforming active funds.

Bondholders suffer $150bn oil price hit - Investors have suffered losses of at least $150bn in the value of oil and gas company bonds, as the slump in crude prices since the summer of 2014 has fuelled fears of a wave of defaults in the US and emerging markets. The 300 largest global oil and gas companies have also seen $2.3tn sliced from their stock market value over the same period, a 39 per cent slide since oil began its decline, an analysis by the Financial Times has found. The losses show how intense the financial strain on oil producers from falling crude prices remains, in spite of the partial recovery in prices since January. Oil is still down about 65 per cent from its June 2014 peak. Banks have also been increasing their provisions for energy-related losses on their lending. With several banks having loans to the industry equivalent to more than 40 per cent of their equity, lenders have tightened loan agreements with oil producers, and capital markets remain closed to the lowest rated groups. More than $150bn has been shaved off the value of 1,278 actively traded bonds denominated in dollars, euros, sterling and yen since Brent crude hit almost $116 a barrel in June 2014. Borrowing by oil and gas companies has soared over the past decade. Their total debt, including loans, almost tripled from $1.1tn in 2006 to $3tn in 2014, according to the Bank for International Settlements. The borrowers with the steepest increase in debts relative to their assets included US independent production companies caught up in the country’s shale boom, and national oil companies from emerging economies including Pemex of Mexico, Petrobras of Brazil and CNPC of China. Cheaper oil can act as a stimulus to global growth, by redistributing real incomes from producing countries to consumers, who are often seen as more likely to spend the gains they make. However, Hyun Song Shin, chief economist of the BIS, said weak oil prices had also added to volatility in equity and bond markets.

"Nobody Is Making Money" - Hedge Fund "VIP Basket" Obliterated, Plunges To Record Low -- Exactly one month ago, when we learned that Goldman was looking to package its Hedge Fund VIP basket of stocks into an ETF we said, half jokingly, that we have discovered a "guaranteed way to make money: Short Goldman's "Hedge Fund VIP" ETF", adding that "with 5 of their Top 6 trades for 2016 already stopped out, and their recent heavy losses from swing-trading Gold,  one might question the demand for an ETF that tracks Goldman Sachs' hedge fund research tips, but, as Bloomberg reports,  David Kostin's "Hedge Fund Trend Monitor" report - tracking the 50 companies that matter most to hedge funds - is about to be launched." But more importantly we said that given the dismal performance, "one can only imagine that creating this ETF enables Goldman Sachs' clients to offload huge blocks of their positions into a muppet-friendly investment vehicle that every Tom, Dick, and Day-Trader will scoop up.  For now the ETF has not been assigned a ticker symbol - may we suggest 'LOSE' or 'MUPT' or 'FUKT'?" And then, just for good measure, we added that "this being Goldman - the company which brought you the Made for Shorting Abacus CDO - the guaranteed way to make money with this ETF would be to short it." It wasn't a joke. While already a month ago this Hedge Fund VIP basket was imploding as we showed at the time...

Every cycle is defined by a hubris trade - Today, the man facing questions of hubris is Bill Ackman, whose Pershing Square Capital has lost more than half its investors’ money in seven violent months with billions of dollars squandered on one company alone: Valeant. The travails of the pharmaceuticals group, predicted by rivals for years, threatens the standing of one of the most prominent and successful showmen in the industry. Yet if the names have changed, the tale is familiar — the fortunes of an investor, a fund or an institution transformed by a bad trade. When what worked before suddenly doesn’t. Perhaps the most famous example is Long Term Capital Management. The hedge fund was founded in 1994 by John Meriwether, the bond trading savant. Staffed with some of the finest minds in finance, including Nobel laureates Myron Scholes and Robert Merton, LTCM proved phenomenally profitable as the “young professors” notching up trading profits that were the envy of Wall Street. What the geniuses failed to realise was envy became imitation. The weight of money meant LTCM’s trades unravelled horribly in 1998 when the Asian financial crisis began to rumble and Russia defaulted on its debts.

Hedge Funds Dealt Setback as U.S. Sides With Argentina on Defaulted Bonds - The United States government has weighed in on the legal battle between Argentina and a group of New York hedge funds, lending its support to the struggling country and dealing a setback to the investors.In a friend-of-the-court, or amicus curiae, brief filed on Wednesday at the United States Court of Appeals for the Second Circuit in New York, the Justice Department said it supported an American federal judge’s decision to lift an injunction that had prevented Argentina from raising new money in the bond markets or paying its creditors. .“The United States has significant foreign policy interests in support of a swift resolution of this long-running litigation,” the Justice Department said in the brief.  It is a move that will increase the pressure on a group of holdout bondholders that refused to take part in two debt restructurings by Argentina after it defaulted on $100 billion of debt in 2001. The appeals court has often deferred to opinions of the American government.  On Feb. 28, Argentina agreed to pay $4.65 billion to four hedge funds in a deal that looked poised to end a 12-year battle that began when the hedge funds sued Argentina, seeking full repayment of their defaulted bonds. The funds, led by Paul E. Singer’s firm, NML Capital, were the last group of major investors to reach an agreement.But that was not the end. NML Capital objected to a Feb. 19 ruling by Judge Thomas P. Griesa of Federal District Court for the Southern District of New York that would lift the injunction, which had locked Argentina out of international markets. Judge Griesa set the condition that Argentina must repeal laws that prevented it from making payments to the holdout investors and make full payments to the bondholders that settled by Feb. 29.Argentina requested that the injunction be lifted after it made an offer to pay $6.5 billion to settle lawsuits from other holdout bondholders on Feb. 5. Complicating matters, there is another group of bondholders not included in the $4.65 billion deal between Argentina and the four hedge funds who have argued that they will get far worse terms if they agree to Argentina’s $6.5 billion proposal.

Is California Treasurer John Chiang Serious About His Private Equity Fee Transparency Bill? -  Yves Smith - What does it mean when the backers of a “must pass” bill present a case for it that is not only weak but also fails to mention the bad conduct it is designed to correct? The bill is California’s AB 2833: landmark private equity legislation. It provides for extensive disclosure of private equity fees and costs, most importantly, those charged directly by general partners to the portfolio companies they’ve acquired on behalf of investors (the “limited partners”).  This bill, proposed by California Treasurer John Ching and launched by Assemblyman Ken Cooley, came in the wake of the SEC’s 2014 revelation that private equity firms were engaged in widespread abuses, including waht normally be called embezzlement but the general partners dressed up as “unauthorized fees”. To add insult to injury, complacent and clueless limited partners seemed more upset by the fact that these bogus charges weren’t being largely kicked back to them. That reaction revealed another sad fact about private equity: the limited partners are no match for general partners. Not only, as the SEC pointed out, have the limited partners signed agreements that are disconcertingly vague on too many key issues, but the limited partners, as evidenced by their bleats about not sharing in the general partners’ pilfering as they had assumed, didn’t even understand the agreements they had signed.*  The SEC’s disclosures kicked off a series of articles in the New York Times and Wall Street Journal (as well as posts here) that described how many of the biggest firms in the industry were engaged in the sort of misconduct that the SEC had called out. We took this line of inquiry further by focusing on capture of limited partners by the private equity general partners, with the giant public pension fund CalPERS, and to a lesser degree, its Sacramento sister CalSTRS, as case studies.

Hillary Wants a Crusade to Defeat Trump’s “Bigotry” – and Leave Her Bankers Alone -- Black Agenda Report -- Clinton will allow Bernie Sanders’ delegates to craft much of the language of the party platform, in Philadelphia – a meaningless exercise designed to convince the Sandernistas that there is still hope to transform the Democratic Party “from below.” Clinton – who is permanently primed to lie on any subject, at any time, in the interests of the Lords of Capital – may give forked-tongue service to a Sanders-inspired platform, especially if Trump continues his hype on jobs losses to “China” because of “bad deals.” But, Wall Street will have little to worry about. Clinton’s central project will be to build an historic Democratic super-majority by appealing to all “decent” Americans to reject “bigotry” and embrace “fairness” and “tolerance” – by which she will mean nothing more than that they reject Trump. Such civil rights-sounding rhetoric will signify to Black voters that their faith in the party, and the Clintons, has been bounteously rewarded; that the campaign is really all about them. They will be reassured of the continuity of Barack Obama’s policies under Hillary – as if that were a good thing, and as if Obama and the Clintons were not political triplets all along, rooted in the same right-wing of the party.

Exclusive: SWIFT to advise banks on security as Bangladesh hack details emerge - The SWIFT messaging system plans to ask banks to make sure they are following recommended security practices following an unprecedented cyber attack on Bangladesh's central bank that yielded $81 million, a spokeswoman for the group told Reuters on Sunday. Brussels-based SWIFT, a cooperative owned by some 3,000 global financial institutions, will issue a written advisory on Monday asking banks to review internal security, the spokeswoman said. SWIFT staff will also begin calling banks to highlight the importance of reviewing security measures after the attack in Bangladesh, she added. "Our priority at this time is to encourage customers to review and, where necessary, to reinforce their local operating environments," the spokeswoman added. Unknown hackers breached the computer systems of Bangladesh Bank and in early February attempted to steal $951 million from its account at the Federal Reserve Bank of New York, which it uses for international settlements. Some attempted transfers were blocked, but $81 million was transferred to accounts in the Philippines in one of the largest cyber heists in history. SWIFT has so far said little about the attack, except that it was related to "an internal operational issue" at Bangladesh Bank and that there was no compromise in its core messaging system.

Mystery Of New York Fed Robbery Has Central Banks Asking Who's Next -- Bangladesh has learned a valuable lesson over the past two months: Do. Not. Trust. The. New. York. Fed.  On a quiet Friday morning in early February, a series of instructions using authenticated SWIFT codes was sent to 33 Liberty allegedly from the Bangladesh central bank requesting the transfer of nearly $1 billion from the country’s FX reserves. Now, the first thing that should jump out at you there is that Friday is a weekend in Bangladesh, a fact which probably should have set off alarm bells. But alas, it didn’t and by the time the hackers who sent the transfer instructions screwed the pooch by spelling “foundation” wrong in one of the requests, more than $80 million was sent to the Philippines where it landed in four accounts and eventually ended up transferred to at least two casinos and one unidentified man “of Chinese origin" who has since been named as a Weikang Xu. For those who might have missed the story, here are our three previous accounts of what is truly a Hollywood-esque plot line:

You’re reminded that the stolen funds ended up in the Jupiter Street, Makati City, branch of Rizal Commercial Banking Corp where the branch manager is one Maia Santos Deguito. Here she is: According to testimony from a Rizal executive heard at a Senate hearing in the Philippines late last week, some $427,000 in cash was withdrawn from one of four accounts that received the illicit funds. That money was promptly deposited - into the back of Deguito’s car. 

Banks Once Burned, Now Twice Shy About Taking on More Takeover-Deal-Related Junk Debt --  Yves Smith - Even though the junk bond market has made an impressive rally since it got severely whacked in the commodities downdraft and the post-Fed rate-increase generalized selloff in January, the banks that are typically the first port of call for originating this type of debt are still suffering more than a bit of a hangover. From the Wall Street Journal: Banks are increasingly turning down companies seeking financing to pay for debt-laden takeovers after the recent market rout left them saddled with debt from earlier deals. Credit Suisse Group AG, Jefferies Group LLC and Wells Fargo & Co. are among the firms turning down new requests for financing—typically from low-rated companies—as they retreat from the lucrative but risky business of backing debt-heavy buyouts, people familiar with the matter say.Banks guarantee the funding in these deals, hoping to then offload all or most of it to bond and loan investors. They promise to provide the money themselves if they can’t find others to buy the debt. But as markets swooned in the months since the summer, investors have lost their appetite for the riskiest securities, making them harder to sell.  Translation: these banks are still stuck with a lot of inventory that even now they can’t unload without taking losses. This not only means that tighter financing will result in less lofty multiples for transactions for typically highly-geared private equity transactions. Going-private deals also help support valuations for publicly-traded mid and small cap companies. Thus while the greater caution among lenders won’t have much if any S&P 500 multiples, since those companies are well above the size range of the amply-levered M&A deals, it could dampen stock prices in certain sectors of the market, particularly energy deals.

Bank Earnings Get Mauled by “Leveraged Loan” Time Bomb - Wolf Richter -- Banks have a few, let’s say, issues, among them: a source of big-fat investment banking fees is collapsing before their very eyes. S&P Capital IQ reported today that there was an improvement in the “distress ratio” of junk bonds, after nearly a year of brutal deterioration that had pushed it beyond where it had been right after Lehman’s bankruptcy. The recent surge in oil prices seems to have lifted all boats for a brief period. But not “leveraged loans.” Their distress ratio spiked to the highest levels since the Financial Crisis! Leveraged loans are the loan-equivalent to junk bonds. They’re issued by junk-rated companies to fund M&A, special dividends to the private equity firms that own the companies, or other “general corporate purposes.” They form an $800-billion market and trade like securities. But the SEC, which regulates securities, considers them “loans” and doesn’t regulate them. No one regulates them. This gives banks a lot of leeway. But they’re too risky for banks to keep on their balance sheet. Instead, they sell them to loan mutual funds or ETFs, or they slice and dice them and repackage them into Collateralized Loan Obligations (CLO) to sell them to institutional investors, such as mutual-fund companies. Regulators have been exhorting banks to back off. Banks can get stuck with them when markets get woozy just when the loans blow up, as they did during the Financial Crisis – or as they’re doing right now…. The S&P/LSTA Leveraged Loan Index Distress Ratio for February spiked to 12.96 from 11.13 in January, from 9.07 in December, from 7.77 in November… from 1.06 just last June!

March 2015: Unofficial Problem Bank list declines to 222 Institutions, Q1 2016 Transition Matrix -- Calculated Risk - This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for March 2016. . During the month, the list fell from 228 institutions to 222 after eight removals and two additions. Assets dropped by $1.4 billion to an aggregate $64.6 billion. A year ago, the list held 349 institutions with assets of $106.2 billion. This month, actions have been terminated against Bank of Washington, Washington, MO ($599 million); Community First Bank, Inc., Walhalla, SC ($355 million); Union National Bank and Trust Company of Elgin, Elgin, IL ($311 million); First State Bank, Mesquite, TX ($172 million Ticker: CFOK); American Bank of Baxter Springs, Baxter Springs, KS ($91 million); Freedom Bank, Columbia Falls, MT ($58 million); and Pacific West Bank, West Linn, OR ($54 million). North Milwaukee State Bank, Milwaukee, WI ($67 million) exited the list through failure on March 11, 2016. This is first failed bank since October 2, 2015. The additions this month were both from Kentucky -- Peoples Bank & Trust Company of Hazard, Hazard, KY ($278 million) and Blue Grass Federal Savings and Loan Association, Paris, KY ($38 million).  With it being the end of the first quarter, we bring an updated transition matrix to detail how banks are moving off the Unofficial Problem Bank List. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,705 institutions have appeared on a weekly or monthly list at some point. There have been 1,483 institutions that have transitioned through the list. Departure methods include 837 action terminations, 396 failures, 236 mergers, and 14 voluntary liquidations. The first quarter of 2015 started with 250 institutions on the list, so the 28 action terminations during the quarter reduced the list by 11.2 percent. Of the 389 institutions on the first published list, 26 or 6.7 percent still remain more than six years later. The 396 failures represent 23.2 percent of the 1,705 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

Does the White House Stand for Consumer Protection or for Predatory Lending? --Credit Slips -- Does the Obama White House truly stand for consumer financial protection, or will it support Wall Street when it thinks no one is looking?  That's the question that the Supreme Court served up today.  The Supreme Court is considering whether to hear an appeal in a critical consumer protection case called Midland Funding v. Madden. This is one of the most important consumer financial protection case the Supreme Court has considered in years. (See here for my previous post about it.) The Court will only take the appeal if at least four Justices are in favor of hearing it.  Today the Supreme Court requested the opinion of the Solicitor General about whether to take the case.  That's a good indication that there's currently no more than three Justices who want to hear the appeal and another one or more who are unsure.  If four Justices wanted to hear the case, there'd be no reason to ping the Solicitor General.  The request for the Solicitor General to weigh in on the case puts the White House in the position of having to decide whether it wants to stand up for consumer financial protection or to fight for Wall Street. This is because Midland Funding is about whether the 1864 National Bank Act preempts the application of state usury laws to loans originated by a national bank, but then sold to a debt collector.  The 2d Circuit said that state usury laws are not preempted as against the debt collector because National Bank Act preemption goes with a regulatory regime that applies only to national banks.  The really important implication is that state usury laws apply not only to debt collectors, but also to securitization trusts, which are not national banks, even if the trustees are.

This Could Be A Problem: Losses On "Deep" Subprime Auto Double Industry Average -- On Saturday, we highlighted a rather disturbing statistic. 60+ day delinquencies for subprime auto ABS have now risen above crisis levels to 5.16% - levels we haven't seen since 1996. That won’t surprise regular readers. The writing has been on the wall for quite a while. More auto loan originations are going to borrowers with shoddy credit and loan terms are looking more and more stretched by the quarter. Just ask the NY Fed. Or Experian, where even permabull Melinda Zabritski will tell you that underwriting standards are getting looser (although she likely won’t say that’s a bad thing).  While Citi and others are quick to point out that the originate to sell model isn’t prevalent in the auto loan industry, the inability for lenders to securitize subprime loans may well put the brakes on US auto sales. After all, the pool of creditworthy borrowers is finite. That means that at a certain point, incremental sales must be engineered by making ineligible borrowers eligible by resorting to looser underwriting. But that only works if you can offload that credit risk. No lender wants to be sitting on a book full of used car loans to deep subprime borrowers with sub-600 FICOs, and so, if demand for subprime auto ABS dries up, so too will credit to the subset of borrowers who are driving (no pun intended) incremental sales growth.  Here’s a look at the share of total auto loans that have been securitized:

Fannie Mae and Freddie Mac: If You Can’t Kill Them, Merge Them? - A group including some of the chief architects of the Obama administration’s housing policy released a paper Wednesday outlining a new proposal for how to deal with mortgage-finance giants Fannie Mae and Freddie Mac.The key takeaway: Instead of winding down Fannie and Freddie, the companies would be merged into a government-owned corporation that would take over the responsibilities of buying mortgages, wrapping them into securities and guaranteeing investors against default. That’s the core of the housing finance system that helps to make 30-year fixed-rate mortgages possible in the U.S. but not elsewhere.The paper is an important shift for some of the five authors, who include Jim Parrott, a former Obama White House housing adviser; Moody’s Analytics chief economist Mark Zandi; Barry Zigas, director of housing policy at the Consumer Federation of America; and Lewis Ranieri of Ranieri Strategies, who co-invented the mortgage-backed security. The fifth author is Gene Sperling, former director of the National Economic Council for presidents Barack Obama and Bill Clinton and a close adviser to Hillary Clinton, though the paper says “the ideas expressed are purely his own.” The new government corporation, which the authors call the National Mortgage Reinsurance Corporation, would be required to sell to investors most of the risk that a mortgage defaults, though the government would ultimately guarantee that mortgage bonds got paid on time. To be sure, legislative housing-finance reform isn’t on the horizon, and nothing is likely to happen until well after the election. But the new proposal does attempt to address some of the biggest criticisms of prior legislative efforts and attempts to set a path that future policy makers could get behind.

Introducing ‘Shadow Flipping’: Just the Latest Reason You’ll Never Be Able to Afford a House -- This is Vancouver. Isn’t it pretty? It is. Don’t you want to live there? Yeah, me too.  Here’s the rub: The average price for detached homes across the region hit a new record high of $1.83 million in January, a full 40 per cent higher than January 2015.  Housing costs have skyrocketed in Vancouver over the last decade or so (due in part to foreign investors), driving out many of the new-wave hippies who gave the city its laid-back character and creating a prohibitive climate for community-focused residents and young families. There’s nothing new here. However, the Globe and Mail recently published the results of their investigation into shadow flipping, the latest scourge on the Vancouver real estate market. What is shadow flipping? Here’s a helpful cartoon: Essentially, shadow flipping occurs when a broker or agent arranges a sale and then finds another, higher bid while the home is still under contract — and on and on ad nauseam, driving up the price of the home and collecting the fees. It’s legal — for now — but extremely controversial: In an already tight market, analysts said, all of this activity ties up inventory, contributing to unhinged prices, as brokers and investors hold property and trade empty houses. “It does propel the market upward,” said housing-market analyst Ben Rabidoux, who does market research for institutional investors. “They are feeding into the market and making it hotter, while padding their commissions. It’s just so toxic.”

Black Knight's First Look at February Mortgage Data: Delinquency rate lowest since April 2007 - From Black Knight: Black Knight Financial Services’ First Look at February Mortgage Data: Delinquencies Fully Recover from January Spike, Hit Lowest Level Since April 2007

• Delinquency rate down 13 percent month-over-month; down nearly 16 percent year-over-year
• Total non-current inventory falls below 3 million for the first time in over eight years

According to Black Knight's First Look report for February, the percent of loans delinquent decreased 12.6% in February compared to January, and declined 15.9% year-over-year.The percent of loans in the foreclosure process declined 0.6% in February and were down 24.6% over the last year.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.45% in February, down from 5.09% in January.  This is the lowest delinquency rate since April 2007. The percent of loans in the foreclosure process declined slightly in February to 1.30%.   The number of delinquent properties, but not in foreclosure, is down 419,000 properties year-over-year, and the number of properties in the foreclosure process is down 211,000 properties year-over-year.

The danger zone – when should we worry about how much households spend on their mortgages? -- As households spend more of their income making payments on loans they are more likely to get into arrears. This risk rises gradually at first, but above a certain point they enter a danger zone where the probability of arrears rises sharply.  Knowing where this danger zone lies is really important because, if it comes a little earlier or a little later, that can make a big difference to the number of people who fall into it, although as this post shows, it is hard to identify this danger zone precisely.  Nevertheless, understanding what leads households to get into financial difficulty is crucial for assessing how such difficulties might increase following rises in interest rates or unexpected falls in income. The proportion of income spent making payments on loans (the debt servicing ratio or DSR) is a good summary indicator of the sustainability of a household’s debt: it brings together information of the size of the payment and the amount of income available to make that payment.  DSRs help us to understand households’ current financial health, but perhaps more importantly, estimating how DSRs might evolve in the future is a way of assessing how financial distress could increase in response to economic events that lead to higher DSRs, such as rises in interest rates or scenarios that lead incomes to fall for some households.  This matters to policymakers at the Bank because they need to understand the implications of changing interest rates and how different scenarios might affect financial stability: widespread increases in financial distress have the potential to lower banks’ capital positons and threaten the resilience of banks.

Yale Law Journal: “In Defense of ‘Free Houses'” -  Yves Smith - The Yale Law School Journal has published a new article, “In Defense of ‘Free Houses'” (hat tip Deontos), which makes an argument that I wish had gotten an airing when the foreclosure crisis was national news. From the opening section:When addressing faulty foreclosures, courts are afraid to bar future attempts to foreclose—that is, afraid of giving borrowers “free houses.” While courts rarely explain the reasoning behind this aversion, it seems to arise from a reflexive belief that such an outcome would be unjust. Courts are therefore quick to sidestep well-established principles of res judicata in favor of ad hoc measures meant to protect banks against the specter of “free houses.”This Comment argues that this approach is misguided; courts should issue final judgments in favor of homeowners in cases where banks fail to prove the elements required for foreclosure. Furthermore, these judgments should have res judicata effect—thus giving homeowners “free houses.” This approach has several benefits: it is consistent with longstanding res judicata principles in other forms of civil litigation, it provides a necessary market-correcting incentive to promote greater responsibility among foreclosure litigators, and it alleviates the tremendous costs of successive foreclosure proceedings…So what should courts do when banks lose their foreclosure cases? As described above, one approach—that taken by the Florida and Maine Supreme Courts—is to bend the rules of res judicata to avoid a windfall for homeowners. This approach creates few benefits and significant economic problems…[We argue that further subsidizing banks’ poor litigation practices results in deadweight loss by contributing to negative public-health outcomes and by disincentivizing banks from improving their servicing and litigation techniques. We also explain how granting winning homeowners “free houses” will not negatively affect the mortgage market. Authors argue that state courts have been systematically violating a basic premise of the law, res judicata, in foreclosures, by bending the rules to favor banks. When the parties to a case have had a “full and fair” opportunity to present their arguments and evidence fully, the judge should issue a verdict “with prejudice,” meaning barring the losing party from trying to file suit again.

MBA: Mortgage Applications Decreased in Latest Weekly Survey, Purchase Applications up 25% YoY - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey - Mortgage applications decreased 3.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 18, 2016. ..The Refinance Index decreased 5 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 25 percent higher than the same week one year ago. ... The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.93 percent from 3.94 percent, with points decreasing to 0.35 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity picked up earlier this year as rate declined. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 25% higher than a year ago.

Mortgage News Daily: "Lenders quoting 30yr fixed rates of 3.75%" --Mortgage rates are still solidly below 4%.  From Matthew Graham at Mortgage News Daily: Mortgage Rates End Week at Lows While we're not quite back to the lower rates seen earlier in the month, the average conventional 30yr fixed quote is still well below 4.0 percent, with the average lender at 3.75% on top tier scenarios. Here is a table from Mortgage News Daily: Home Loan Rates - View More Refinance Rates

FHFA Home Price Index Rises 0.5% in January - 24/7 Wall St.: The Federal Housing Finance Agency (FHFA) reported Tuesday morning that U.S. home prices rose 0.5% month over month in January. Compared with January 2015, the house price index has gained 6%. The 0.4% index increase previously reported for December was revised upward to 0.5%. The FHFA monthly index is calculated using purchase prices of houses with mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. The consensus estimate for January called for an increase of 0.6%. Over the past 12 months, gains have been greatest in the South Atlantic states, up 8.9%, and the least in the Middle Atlantic states, which are up 1.7%. The year-over-year index rose in all nine Census Bureau divisions in January. Home prices posted month-over-month gains in eight of nine Census Bureau divisions. Only the Middle Atlantic (down 1%) showed a decline. The South Atlantic region posted the largest month-over-month price gain, up 1.7%. The West North Central region posted a gain of 1.2%; the Mountain and New England regions rose 0.8%; the East North Central region rose 0.4%; the West South Central region gained 0.3%; the East South Central region gained 0.1%; and the Pacific region was unchanged.

Existing Home Sales March 21, 2016: Housing demand continues to soften with existing home sales down a surprising 7.1 percent in February to a 5.080 million annualized rate. This is much lower than expected and well below Econoday's low estimate for 5.200 million and is the second lowest rate since February last year. The report is weak throughout with single-family sales down 7.2 percent, at 4.510 million, and condos down 6.6 percent at 570,000. All regions show declines in the month. Another month of price concession did not boost sales with the median down 1.4 percent at $210,800 for the lowest reading since, once again, February last year. Year-on-year, the median is up 4.4 percent which is above the year-on-year sales rate of plus 2.2 percent, an imbalance that hints at further price concessions ahead. One factor holding down sales, and which reflects the low price levels, has been a lack of available homes on the market which, however, moved 3.3 percent higher in the month to 1.880 million. But this is still down 1.1 percent year-on-year. Supply relative to sales, given the drop in sales and the rise in supply, rose to 4.4 months from 4.0 months. This, however, is still very low and compares with 4.6 months this time last year. The weakness in this report, described as "meaningful" by the usually upbeat National Association of Realtors, is substantial and, like last week's drop in housing permits, represents a downgrade for housing, a sector that was supposed to be a leader of the 2016 economy. New home sales will be posted on Wednesday.

Existing Home Sales decreased in February to 5.08 million SAAR -- From the NAR: Existing-Home Sales Fizzle in February Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month's large decline, sales are still 2.2 percent higher than a year ago. ... Total housing inventory at the end of February increased 3.3 percent to 1.88 million existing homes available for sale, but is still 1.1 percent lower than a year ago (1.90 million). Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.0 months in January.This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in February (5.08 million SAAR) were 7.1% lower than last month, and were 2.2% above the February 2015 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 1.88 million in February from 1.82 million in January. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing Home Sales Plunge -7.1% -- NAR's February existing home sales plunged 7.1% from January's six month record high.  Sales were 5.08 million, a far cry from January's 5.47 million annualized sales.  In February 2007 existing home sales were 5.79 million.  Sales are now 2.2% higher than a year ago.   Prices are through the roof and inventories are very tight.  Affordability and availability are cited as the main reasons for the drop in sales but NAR also hints at economic unease among potential buyers.  The national median existing home sales price, all types, is $210,800, a 4.4% increase from a year ago. This still beats the $230,400 July 2006 high, but not by much and we know what happened in 2006. The annual median price has also increased for 48 months in a row. The average existing sales price for homes in February was $253,900, a 2.5% increase from a year ago. Below is a graph of the median price. NAR Economist Yun finally nails the obvious, that no one can afford housing with flat wages: The overall demand for buying is still solid entering the busy spring season, but home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers.  Distressed home sales were 10% of all sales. Distressed sales were 11% of all sales a year ago. Foreclosures were 7% while short sales were 3% of all sales. The discount breakdown was 17% for foreclosures and short sales were a 16% price break. First time home buyers still are really having a rough time by the numbers. First time home buyers were 30% of the sales. First time home buyers were 29% of all sales a year ago. Investors were 18% of all sales and 64% of these investors paid cash. All cash buyers were 25% of all sales. A year ago all cash buyers were 26% of all existing home sales. Here is what NAR had to say about first time home buyers: Investor sales have trended surprisingly higher in recent months after falling to as low as 12 percent of sales in August 2015. Now that there are fewer distressed homes available, it appears there's been a shift towards investors purchasing lower-priced homes and turning them into rentals. Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers.

February 2016 Existing Home Sales Slump. Below Expectations.: The headlines for existing home sales say "the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential". Our analysis of the unadjusted data shows that home sales did decline, and the rolling averages improved. Sales price rate of growth moderated. Econintersect Analysis:

  • Unadjusted sales rate of growth decelerated 1.0 % month-over-month, up 6.4% year-over-year - sales growth rate trend improved using the 3 month moving average.
  • Unadjusted price rate of growth decelerated 2.3 % month-over-month, up 2.5 % year-over-year - price growth rate trend declined using the 3 month moving average.
  • The homes for sale inventory marginally grew this month, but remains historically low for Februarys, and is down 1.1 % from inventory levels one year ago).
  • Sales down 7.1 % month-over-month, up 2.2 % year-over-year.
  • Prices up 4.4 % year-over-year
  • The market expected annualized sales volumes of 5.200 to 5.550 million (consensus 5.305 million) vs the 5.08 million reported.

Existing Home Sales Crash Most In 6 Years: NAR Blames Slowing Economy, Bubbly Home Prices -- Existing home sales plnged 7.1% MoM in February, massively missing expectations of a 3.0% drop. Absent the regulation-driven drop in November, this is the largest MoM drop since July 2010 as realtors warn that "home prices and rents outpacing wages and anxiety about the health of the economy are holding back a segment of would-be buyers." As NAR reports, After increasing to the highest annual rate in six months, existing-home sales tumbled in February amidst unshakably low supply levels and steadfast price growth in several sections of the country, according to the National Association of Realtors®. Led by the Northeast and Midwest, all four major regions experienced sales declines in February. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month's large decline, sales are still 2.2 percent higher than a year ago.  And then Larry Yun tries to, stock drop... bubbly home prices and weakness in the economy  "Sales took a considerable step back in most of the country last month, and especially in the Northeast and Midwest," he said. "The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February's lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers."   

US Home Sales Slump in February; Supply Shortage Hits Market - ABC News: Americans retreated from home-buying in February, reversing months of prior gains as low inventories push up prices to levels that restrict sales. The National Association of Realtors said Monday that sales of existing homes fell 7.1 percent last month to a seasonally adjusted annual rate of 5.08 million. The decline follows robust yearly sales rates of 5.47 million in January and 5.45 million in December, a new regulation had delayed closings in November. The housing market enters the traditional spring buying season facing a quandary: There are relatively few properties listed for sale, even as steady job gains and low mortgage rates have bolstered demand from would-be buyers. The limited supplies have fueled rising prices that have, in turn, reduced affordability and limited sales levels. These cost pressures were further enhanced by a volatile stock market that hit down payment savings. "We assume the plunge in the stock market in the first six weeks of this year persuaded some potential homebuyers to reconsider, at least temporarily," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Shepherdson noted that sales momentum "stalled" in February, but sales volumes might pick-up in the spring. The median home sales price was $210,800 in February, a 4.4 percent annual increase from a year ago. Tight supplies have driven the increases in home prices, forcing buyers to bid more for hotly contested homes. Listings in February fell 1.1 percent from a year ago. Many homeowners are hesitant to sell, since they would need more equity to cover the down payment for stepping-up to a new property. Investors have also turned homes into rentals, further depriving the market of supplies.

A Few Comments on February Existing Home Sales - Bill Mcbride - As expected on this blog, existing home sales declined more in February than the consensus forecast.  Going forward, there are some economic reasons for some softness in existing home sales in certain areas. Low inventory is probably holding down sales in many areas, and there will be weakness in some oil producing areas (see: Houston has a problem).  It is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  So some slowing for existing home sales is not a big deal for the economy.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 1.1% year-over-year in February). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.  The following graph shows existing home sales Not Seasonally Adjusted (NSA).Sales NSA in February (red column) were the highest since February 2007 (NSA).  Note that January and February are usually the slowest months of the year.

Lawler on Existing Home Sales, Table of Distressed Sales for Selected Cities in February -- From housing economist Tom Lawler: NAR: Home Sales “Fizzled” in February: Northeast Estimate “Looks Low” In a report released this morning, the National Association of Realtors estimated that US existing home sales ran at a seasonally adjusted annual rate of 5.08 million in February, down 7.1% from January’s pace and up 2.2% from last February’s pace. The NAR’s estimate for unadjusted home sales last month was 6.4% higher than a year earlier. The NAR’s estimate for home sales was slightly lower my below-consensus projection based on regional tracking. In looking at the NAR’s regional estimates, the YOY increases in sales seem “reasonable” in all areas save for the Northeast, where local realtor/MLS reports suggest a significantly higher YOY gain than that shown by the NAR. I would expect the NAR to revise upward home sales for the Northeast in next month’s report, though the pace of national home sales would still be well below the “consensus” projection.  Note: Tom Lawler also sent me the table below of short sales, foreclosures and all cash sales for a several selected cities in February. On distressed: Total "distressed" share is down in all of these markets.  The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

The New "Middle Class" – Making $250,000 A Year In Palo Alto Qualifies For Housing Subsidies  -- Welcome to the new normal, where in bubble communities, $250,000 per year is now a middle class income. Nothing to see here. From CBS News: — Palo Alto is seeking housing solutions for residents who are not among the region’s super-rich, but who also earn more than the threshhold to qualify for affordable housing programs.The city council has unanimously passed a housing plan that would essentially subsidize new housing for what qualifies as middle-class nowadays, families making from $150,000 to $250,000 a year. Sky-rocketing housing prices in Palo Alto have left some in limbo; with teachers, firefighters and other government workers not earning enough to afford cost of living.Randy Bean says while she still loves her Palo Alto neighborhood, she can’t help but notice the changes that are making it unrecognizable.Some of the small two-bedroom, one-bath homes on her block are worth between $1.5 and $2 million – as teardowns. That’s just what the dirt is worth.“Prices have just gone through the roof, making it unaffordable for middle-class people, your firefighters, your teachers, and, frankly, some of your doctors,” Palo Alto Vice Mayor Greg Scharff said.

Hope springs from affordable housing shortage --Oil and gas prices ticked upward modestly in February. But months of cost-cutting measures among leading companies have led to waves of layoffs. And sadly, exorbitant rents and inflated home prices in oil-dependent communities have made it almost impossible for workers to wait out the next boom—leaving many scrambling to find more affordable housing. Yet the shortage in affordable housing is nothing new. It’s part of a disturbing trend that started years before the latest oil and gas slump and extends far beyond oil-producing areas. More and more low- and middle-class workers are chasing fewer viable housing options driving prices higher. In large cities, such as Seattle, only a third of potential homebuyers (outside of technology-related positions) feel confident they’ll be able to afford to live there in 10 years. The same thing will happen in dozens of other American cities where housing will become less affordable over the next decade, according to Redfin CEO Glenn Kelman on CNBC. The country’s lowest earners are increasingly at risk because the private sector cannot meet their needs for housing without government aid, said Chris Herbert, director for Harvard’s Joint Center for Housing Studies.

More Americans Are Again Moving to Suburbs Than Cities -Economists to real-estate agents have debated whether the housing boom and bust of the last decade has dramatically remade the way Americans live or merely created a temporary disruption. U.S. Census data released Thursday provides strong support for the the latter thesis—that shifts in where Americans move were merely temporary, according to analysis by Jed Kolko. For one thing, the rate at which Americans are moving to the suburbs is once again outpacing the rate at which they are moving to cities. That picks up on a decadeslong trend that only very temporarily reversed during the recession. Urban counties grew by 0.8% in 2015 to roughly 77 million people, compared with suburban counties, which grew by nearly 1% to 159 million people. Mr. Kolko defines counties as urban based on how dense they were as of the 2010 census.Overall, the U.S. population grew by 0.8% from 2014 to 2015, or a difference of about 2.5 million people. Suburbs have been outpacing cities in population growth for decades. In 2001, suburbs grew about 1.2% while cities grew by about 0.7%. The trend was exacerbated by the housing boom, when easy mortgages helped buyers afford homes being built at a rapid pace in far-out suburbs. In 2006, suburbs grew by 1.5% while cities instead actually lost nearly 0.4% of their population. Cities grew faster than suburbs for one year during the last decade, in 2011. While much has been written about the revival of cities, the overall population trends underscore that people flocking to cities remain a select class, mostly of the young, educated and affluent who can afford rising prices. In the meantime, America overall continues to suburbanize.

Homeownership increasingly difficult for average Americans: report (Reuters) - Home prices are rising faster than wages in most of the United States, making homeownership increasingly difficult for average Americans in some of the most populous areas of the country, according to a report released on Thursday. The report found that home price growth exceeded wage growth in nearly two thirds of the nation's housing markets so far this year, with urban centers like San Francisco and New York City among the least affordable. Home prices in 9 percent of the U.S. housing market are now less affordable than their historic norms, the report by RealtyTrac found. Home buyers need to spend more of their incomes on housing, leaving less money for other purchases. "While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S. housing markets," said Daren Blomquist, senior vice president at RealtyTrac, which monitors housing market trends. RealtyTrac parsed homes sales and income data in 456 U.S. counties with a combined population of 221 million. The report comes after data showing house flipping, buying and selling a house to make a quick profit in a hot housing market, had risen to record levels in some markets, generating concerns of a price bubble. While the latest report could fuel those concerns, prices are still far more affordable than during the peak of the housing bubble in 2006. In the first quarter of this year the average wage earner needed to spend a third of their income on monthly mortgage payments compared to more than half in 2006. In addition, RealtyTrac's affordability measure, which compares house prices to wages, was above historic norms in 99 percent of housing markets in 2006. After the housing bubble burst that fell to a low of 2 percent in 2012 before rising to its current 9 percent. Still, prices in highly sought after housing markets leave average wage earners far behind, RealtyTrac said.   For example, to buy a median priced home in various areas of New York City, Brooklyn and Manhattan especially, or in the San Francisco metro area, a buyer needs to spend between 120 percent and 95 percent of the average wage on mortgage payments.

Lawler: “Shortfall” in Single-Family Production Almost All in Moderately Sized Homes - From housing economist Tom Lawler: While single-family housing production has continued to recover, the overall level of production – in terms of units – has been well short of consensus forecasts from a few years ago. In looking at the production “shortfall,” the one thing that is striking is that production of moderately sized homes has barely recovered from the cyclical lows, while production of big homes (3000+ square feet) has been running at a higher pace that in all but one year of the 1990’s.  Before going into the distribution of single-family housing production by square feet of floor area, here is a chart of the median square feet of floor area by year for single-family housing completions from 1971 through 2015. While Census has not yet released its annual report on the characteristics of new single-family home completions for 2015, both the median and the average square footage for completions were similar to 2014, and as such it’s probably not unreasonable to assume that the distribution of single-family completions by square feet of floor area was also similar. It is a little tricky to look at the distribution of single-family housing completions over long periods of time, because (1) Census only provides annual data by broad ranges, and (2) Census has changed those ranges over time. However, looking at various relationships, and taking advantage of the fact that there is a five-year period where data are available for both the “old” and the “new” ranges, it is possible to construct reasonable estimates of production by constant ranges over time. Here is a chart based on such estimates. And here are these estimates by averages for five-year periods, as well as for each of the last five years.

New Home Sales increased to 512,000 Annual Rate in February  --The Census Bureau reports New Home Sales in February were at a seasonally adjusted annual rate (SAAR) of 512 thousand.  The previous three months were revised up by a total of 12 thousand (SAAR). "Sales of new single-family houses in February 2016 were at a seasonally adjusted annual rate of 512,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.0 percent above the revised January rate of 502,000, but is 6.1 percent below the February 2015 estimate of 545,000."  The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales since the bottom, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply was unchanged in February at 5.6 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). "The seasonally adjusted estimate of new houses for sale at the end of February was 240,000. This represents a supply of 5.6 months at the current sales rate."  Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973.

New Home Sales March 23, 2016: A burst of strength in the West supported a roughly as expected 2.0 percent rise in February new home sales to an annualized rate of 512,000. Sales in the West, which is a key region for the new home market, jumped 39 percent to reverse January's 33 percent flop. The swings in this region are a reminder that new home sales, because of small samples, are subject to extreme month-to-month volatility. February's gain for sales didn't come at the expense of discounting, based on the median price which jumped a monthly 6.2 percent to $301,400 but short of September's record of $307,600. And the median price compared to sales does look high, up a very modest but possibly unsustainable 2.6 percent year-on-year vs a sharp decline of 6.1 percent for sales. Lack of supply has been a problem for both existing home sales and also new home sales, with supply in the latter having been held down by a topping out in permits and also by supply constraints in the construction sector including for labor. Supply did edge 4,000 higher to a 7-year high of 240,000 units but supply relative to sales is unchanged at 5.6 months. Looking at year-on-year sales rates for regions, the West, after its big showing in February, is back in front at plus 10.2 percent. The Midwest is up only 1.9 percent and the Northeast and South are both down, at 3.8 percent and 14.3 percent respectively. These declines, especially for the South which is a very large region, are a reminder of how soft new home sales have been. Yet today's report, which includes the gain for prices, is a plus for housing, a sector that has opened the year on a soft note.

New Home Sales Down -6.1% From a Year Ago - (6 graphs) The February 2016 New Residential Single Family Home Sales increased by 2.0%.  Don't get too excited as the ±18.8% error margin is way larger than the actual monthly gain.  Monthly sales increased by 10,000 annualized units to 512,000 for the month.  Annual sales have contracted by -6.1%.  Sales were 545,000 a year ago.  The annual -6.1% sales change has a ±17.9% error margin.  In this Census survey, amounts are annualized and represent what the yearly volume would be if just that month's rate were applied to the entire year.  These figures are also seasonally adjusted.  Many in the press are saying this gain is great news.  We don't, and more suspect the economy is slowing, people are already tapped out and cannot afford the soaring home prices and the monthly gain will probably be revised away next month. The February 2016 average home sale price was $348,900.  This is a -4.0% monthly decrease.  That still is a very high amount of money as the average new home price.  From a year ago the average price has decreased 2.0%. The median home price is $301,400,  This is a whopping 6.2% increase from the previous month.  For the year, the median new home sales price has increased a 2.6%.   Median means half of new homes were sold below this price and both the average and median sales price for single family homes are not seasonally adjusted. New homes available for sale is now 240,000 units, a 1.7% increase from last month.  From a year ago inventories have increased 17.6% and this is outside the ±6.2% margin of error.  The monthly error margin is ±1.9%.The graph below shows how long it would take to sell the new homes on the market at each month's sales rate.  For February, the time stands at 5.6 months.  This is no change from last month and a 24.4% annual one.  The median time a house was completed and on the market to the time it sold was 3.8 months.  From a year ago that time period was 3.3 months.  The median time to move new properties is fairly stable but this is an uptick.

New Home Sales Plunge Most Since June 2014 - For the first time since April 2014, New Home Sales have fallen YoY for 2 consecutive months.The 6.1% drop YoY in February is the biggest annual drop since June 2014 and confirms recent housing data weakness. Average new home prices fell to $348,900 - the lowest since August.  The housing "recovery"... Only The West saw an increase in sales (151k from 109k) as Northeast (-24%), Midwest (-17.9%) and South (-4.1%) all tumbled.But annual growth is tumbling... Historic revisions (to 502k from 494k) made the 512k SAAR look like a beat (over 510k) but the MoM gain of 2.0% missed expectations of +3.2%. The decoupling between soaring debt-funded median purchases price and sales remains: And while median prices rose, average prices dropped to the lowest since August:

February 2016 New Home Sales Improve?: The headlines say new home sales improved from last month - and is in contraction year-over-year. The rolling averages smooth out much of the uneven data produced in this series - and this month there was a significant decline in the rolling averages. This data series is suffering from methodology issues. Econintersect analysis:

  • unadjusted sales growth decelerated 0.3 % month-over-month (after last month's deceleration of 13.7 %).
  • unadjusted year-over-year sales down 2.2 % (Last month was down 2.5 %). Growth this month was well below average for the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth decelerated 5.8 % month-over-month - is up 0.8 % year-over-year.

The headlines of the data release: Sales of new single-family houses in February 2016 were at a seasonally adjusted annual rate of 512,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.0 percent (±18.8%)* above the revised January rate of 502,000, but is 6.1 percent (±17.9%)* below the February 2015 estimate of 545,000.

New home sales: has housing peaked?: Last November I noted that within the housing sector, the progression tends to be:

1. New home sales peak (6 of the last 8 expansions, a weak but noteworthy relationship)
2. Permits for single family houses peak
3. Permits for all houses peak (very slightly after #2)
4. Permits for multi unit construction peak

New home sales frequently peak so early that they are more of a mid-cycle rather than long leading indicator! Since apartments and condos tend to be replacement goods when potential buyers cannot buy single family homes, they peak last, as the market comes under more stress late in the cycle. Since there are only 8 cycles, the correlation is weak, but still worth using. So with yesterday's report on new home sales, let's take a look where this progression stands: Because housing permits were distorted last May and June by the expiration of a NYC program, here is the same comparison excluding New York: The bad news about new home sales is that they have not made a new high for a full year. The good news is (although I can't show it using FRED) that as a 3 month rolling average, new home sales are only behind the December 2014 - February 2015 period. In other words, they have improved recently. Now let's compare them with single family permits (red) and multi unit permits (green): The first thing to point out is that multi unit permits were the epicenter of the NYC housing program that expired last June. Thus, the May-June spike last year should be somewhat discounted. Beyond that, as hopefully you can see, multi-unit permits have improved vis-a-vis single family permits in the last several years.

Comments on February New Home Sales: The new home sales report for February was slightly above expectations at 512,000 on a seasonally adjusted annual rate basis (SAAR), and combined sales for November, December and January were revised up. Sales were down 6.1% year-over-year (YoY) compared to February 2015. However, we have to remember February 2015 was the strongest month of 2015 at 545,000 SAAR. Sales for all of 2015 were 501,000 (up 14.5% from 2014) - and since January and February were especially strong months last year, the YoY comparisons have been difficult so far. This graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate). The comparisons for the first two months was difficult.  I also expect lower growth this year overall.   Houston (and other oil producing areas) will have a problem this year. Inventory of existing homes is increasing quickly and prices will probably decline in those areas. And that means new home construction will slow in those areas too. And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through February 2016. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

AIA: "Modest Expansion for Architecture Billings Index"  - Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Modest Expansion for Architecture Billings Index The Architecture Billings Index saw a dip into negative terrain for the first time in five months in January, but inched back up in February with a small increase in demand for design services. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the February ABI score was 50.3, up slightly from the mark of 49.6 in the previous month. This score reflects a minor increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.5, up from a reading of 55.3 the previous month. “March and April are traditionally the busiest months for architecture firms, so we should get a clearer reading of underlying momentum over the next couple of months,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “Hopefully the relatively mild weather conditions recently in most parts of the country will help design and construction activity move ahead at a somewhat faster pace.”... Regional averages: South (51.1), West (49.9), Northeast (49.5), Midwest (49.3)  Sector index breakdown: multi-family residential (53.0), commercial / industrial (52.3), institutional (48.1), mixed practice (47.7)

How Corporations Will Use Artificial Empathy to Sell Us More Shit - Known as artificial empathy, the idea here is to train machines to recognize social signals from humans, aka ‘visual data,’ and then produce an appropriate response. The emergence of social signal processing as a branch of computer science and robotics is a relatively new phenomenon, but it has already attracted a significant amount of attention from another field of research that is also profoundly interested in understanding the way humans communicate: marketing.On the one hand, harnessing artificial empathy is considered an essential step toward integrating robots and artificial intelligences into human society as it will allow for more fluid and affective human-robot interaction. On the other, it is seen as a marketing goldmine, as the work being done by Shasha Lu, a lecturer in marketing at the Cambridge Judge Business School, is wont to show. The research being done by Lu seeks to combine machine-based image and video analysis with current marketing techniques in order to streamline product sales. The idea is essentially to teach a machine to read a customer’s behavioral cues in reaction to a particular product and then make targeted product recommendations based on these social signals. In Lu’s case, she is specifically focusing on teaching a machine how to give clothing recommendations tailored (ha!) to the individual consumer. “The idea of getting a machine to come to useful conclusions from someone's expressions and behavior was … massively exciting to me,” Lu said in a statement. . “And we now have the technology and computing power to actually make this possible."

The "Restaurant Recovery" Is Over: Casual Dining Sales Tumble For Fourth Straight Month -- While the US manufacturing sector has been in a clear recession for the past year as a result of the collapsing commodity complex, so far the stable growth in low-paying service jobs - at least according to the BLS' statistical assumptions - such as those of waiters and bartenders have kept the broader service economy out of contraction (even though recent Service PMI data has been downright scary).   This is now changing: as we showed a month ago, according to the lagged effect of the collapse of the Restaurant Performance Index, that party is over:  ... just like it was in 2008;  But while such macro indices suffer from the same calendar and statistical aberrations which the BLS is all too famous for, a confirmation of the troubling restaurant downward trend was provided yesterday by company-level channel checks, courtesy of Sterne Agee, which show that same store sales trends at America's casual dining restaurants - those which cater to the vast majority of the US middle class - have suffered a fourth consecutive month of declines, something not observed since the first financial crisis, sliding a whopping 3% in March.

Assuming Away Unemployment and Trade Deficits from the TPP --  In an old joke, a shipwrecked economist is asked for his counsel on how the stranded group can be rescued. “Assume we have a boat,” he begins.  Robert Lawrence and Tyler Moran, writing for the Peterson Institute for International Economics, seem to have missed the joke in their recent repeat of the same flawed assumptions of their colleagues’ hugely optimistic assessment of the Trans-Pacific Partnership (TPP) Agreement which prompted our own paper, “Trading Down: Unemployment, Inequality, and Other Risks of the Trans-Pacific Partnership.”  Claiming to address contrarian findings that the TPP may well cause job losses and increase income inequality, Lawrence and Moran assume away the causes – downward pressure on wages and employment due to the consequent “race to the bottom” – which have made free trade agreements so controversial. Assume We Create Jobs.  To recap, in January, the Peterson Institute published new TPP estimates, updates by Peter Petri and Michael Plummer of an earlier 2012 paper. The update reiterated their claim of significant income gains from the agreement, 0.5% for the United States after fifteen years, with minimal job displacement, and with new jobs in growing industries absorbing displaced workers in declining activities. In “Trading Down”, we pointed out that the study was flawed because it assumed full employment and unchanged national trade and fiscal balances, among other things. We applied the United Nations macroeconomic Global Policy Model to their estimated trade impacts from the TPP dropping the full employment assumption.

LA Port Traffic Surges 46.6 Percent, Bloomberg Says “This Means Economy is Healthy”, Mish Says “Nonsense” - Los Angeles port traffic is up 46.6%. Traffic is up 44.7% in Long Beach, the biggest monthly gain since 2013.  Matthew Winkler, Bloomberg Editor-in-Chief Emeritus, says “This means that the economy is healthy and poised to get better, benefiting from trade that is expanding big and small businesses alike while creating more and higher-paying jobs.”  Mish says “What a bunch of nonsense.”  Before I provide the reason, let’s tune into As U.S. Ports Go, So Goes the U.S. Economy by Matthew Winkler. You’ve heard it from Donald Trump. You’ve heard it from Bernie Sanders. Hillary Clinton chimed in. Some famous economists, too. It’s the idea that trade liberalization has sapped U.S. economic strength, and that it’s time to make it stop. Flourishing U.S. ports tell a different story. Los Angeles and Long Beach, the continent’s two biggest gateways, reported the best February traffic in their histories going back more than a century. Total imports to the U.S. last month increased 27.4 percent from 2015, the most since 2010. Everything from furniture and electronics to apparel and machinery unloaded and distributed via Los Angeles surged 46.6 percent in February, the largest increase since February 2002. Long Beach traffic was up 44.7 percent in the same period, its biggest monthly gain since 2013.  This means that the economy is healthy and poised to get better, benefiting from trade that is expanding big and small businesses alike while creating more and higher-paying jobs. I am a huge free trade advocate. I side with Winkler on that side of his story. The rest of what Winkler says is total rubbish. All increases in port traffic stats from January and February are related to the port slowdown ending. Winkler should have investigated that unusual jump, but he was too anxious to attack Trump.

Rail Week Ending 19 March 2016: Rail's Slide Into The Abyss Worsens: 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).A summary of the data from the AAR: The Association of American Railroads (AAR) today reported U.S. rail traffic for the week ending Mar. 19, 2016. Total carloads for the week ending Mar. 19 were 235,390 carloads, down 17.2 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 248,073 containers and trailers, down 10.7 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 20.4 percent to 9,837 carloads; chemicals, up 4.9 percent to 31,343 carloads; and motor vehicles and parts, up 2.7 percent to 19,273 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 38.7 percent to 64,754 carloads; petroleum and petroleum products, down 26.8 percent to 10,644 carloads; and grain, down 10.6 percent to 21,494 carloads. For the first 11 weeks of 2016, U.S. railroads reported cumulative volume of 2,672,765 carloads, down 13.3 percent from the same point last year; and 2,847,908 intermodal units, up 3.9 percent from last year. Total combined U.S. traffic for the first 11 weeks of 2016 was 5,520,673 carloads and intermodal units, a decrease of 5.2 percent compared to last year.

DOT: Vehicle Miles Driven increased 2.0% year-over-year in January --The Department of Transportation (DOT) reported today: Travel on all roads and streets changed by 2.0% (4.8 billion vehicle miles) for January 2016 as compared with January 2015. Travel for the month is estimated to be 240.7 billion vehicle miles.The seasonally adjusted vehicle miles traveled for January 2016 is 264.3 billion miles, a 2.7% (7.0 billion vehicle miles) increase over January 2015. It also represents a -0.8% change (-2.1 billion vehicle miles) compared with December 2015. The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors.  The rolling 12 month total is moving up - mostly due to lower gasoline prices - after moving sideways for several years. In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.  Miles driven (rolling 12) had been below the previous peak for 85 months - an all time record - before reaching a new high for miles driven in January 2015.The second graph shows the year-over-year change from the same month in the previous year.  In January 2015, gasoline averaged $2.06 per gallon according to the EIA.  That was down from January 2015 when prices averaged $2.21 per gallon.Gasoline prices aren't the only factor - demographics are also important. However, with lower gasoline prices, miles driven on a rolling 12 month basis, is setting new highs each month.

Vehicle Sales Forecast: Sales to Reach All Time High for the Month of March -- The automakers will report March vehicle sales on Friday, April 1st. Note:  There were 27 selling days in March, up from 25 in March 2015. From WardsAuto: Forecast: March Sales Set to Hit Record-High A WardsAuto forecast calls for U.S. automakers to deliver 1.7 million light vehicles this month, a record high for March and the largest volume for any month since July 2005’s 1,804,240 units.  The forecasted daily sales rate of 61,727 over 27 days is a best-ever March result. This DSR represents a 0.2% improvement from like-2015 (25 days), while total volume for the month would be 8.2% greater than year-ago. If deliveries meet or exceed WardsAuto’s expectations, March will be the eight consecutive month to outpace prior-year on a DSR basis...The report puts the seasonally adjusted annual rate of sales for the month at 17.3 million units, below the 17.4 million SAAR from the first two months of 2016 combined, but well above the 17.1 million SAAR from same-month year-ago. Looks like another strong month for vehicle sales.

February Industrial Production Drops -0.5% -- The Federal Reserve Industrial Production & Capacity Utilization report declined -0.5% for February on mining and utilities.  More ominous is an annual -1.0% decline.  January was revised to a 0.8% monthly increase.  The G.17 industrial production statistical release is also known as output for factories and mines. Total industrial production has now decreased -1.0% from a year ago.  Currently industrial production is now 6.3 percentage points above the 2012 average.  Below is graph of overall industrial production's percent change from a year ago.  Notice the grey recession bars in the FRED graph and how closely industrial production follows those bars.  Here are the major industry groups industrial production percentage changes from a year ago.  The percentages for mining and utilities are now just horrific.

  • Manufacturing: +1.8%
  • Mining:              -9.9%
  • Utilities:            -9.3%

For the month manufacturing overall increased by 0.2%.  Manufacturing output is 6.4 percentage points above its 2012 Levels and is shown in the below graph. Within manufacturing, durable goods was the good news, with a 0.4% monthly increase.  Machinery, primary metals, and miscellaneous manufacturing all had almost 1.0% percentage point gains with wood products losing -1.2 percentage points.  Nondurable goods manufacturing declined by -0.1 percentage points for the month.  Mining decreased -1.4% and is now down -9.9% for the year.  Mining includes gas and electricity production and the Fed have a special aggregate index for oil and gas well drilling.  Oil and gas well drilling decreased -15.6% for the month and for the year is down -59.7%.  Below is oil and gas well drilling and one can see the boom and bust cycle with the amazing downturn now.   Utilities decreased by -4.0% for the month on warm weather and is down -9.3% for the year.  Utilities are volatile due to weather and why the below graph shows the wild swings. There are two reporting methodologies in the industrial production statistical release, market groups and industry groups.  Market groups is output bundled together by market categories, such as business equipment or consumer goods and shown below:

Is Industrial Production "less bad"?  -- One of my pet peeves is analysis that relies too much on Year-over-year comparisons, as in "X is still YoY positive/negative." If you do that, you are going to miss turning points, which happened sometime during that year - perhaps many months before the sign turned. But one good use of YoY comparisons is to see if they are getting "less good/bad." This will help you spot a change in trend. A few analyses in the last several weeks noted an improvement in the YoY comparison in Industrial Production, and I also made mention of it in my last Weekly Indicators column. But let's take a little closer look, first at the long term: YoY industrial production tends to bottom right at the end of recessions (this is true of most recessions over the last 100 years, the above graph is limited better to show the current situation). That little hook at the right is the recent improvement in YoY industrial production. Here is a close-up of the lastl year: There have only been two months of "less worse" readings, and they are well within the range of noise. I would like to see several more months of such improvement before I would be confident that the shallow industrial recession has bottomed -- although, with the recent decline in the US$, that is the more likely scenario.

Chemical Activity Barometer Expands in March --Here is an indicator that I'm following that appears to be a leading indicator for industrial production.  From the American Chemistry Council: Chemical Activity Barometer Expands in March The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), expanded 0.1 percent in March following a revised 0.2 percent decline in February and 0.1 percent downward revision in January. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 1.5 percent over this time last year, a marked deceleration of activity from one year ago when the barometer logged a 2.7 percent year-over-year gain from 2014. ..Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

February Durable Goods Drops By -2.8% -- The Durable Goods, advance report shows another decline in manufactured durable goods new orders for February.  New orders dropped by -2.8% and has been down three of the past for months.  February shipments also were negative with a -0.9% drop.  Core capital goods new orders by themselves declined by -1.8%.  Without transportation new orders, which includes aircraft, durable goods new orders would have decreased by -1.0%.  Defense spending just nose dived in new orders by -25.6% and without the contraction in defense, new orders would have still declined by -1.9%. Below is a graph of all transportation equipment new orders, which plunged by -6.2% for the month and led the overall new order decline.  Nondefense aircraft & parts new orders dropped by -27.1%.  Aircraft & parts from the defense sector decreased by -29.2%.   Aircraft orders are notoriously volatile.  Motor vehicles and parts increased by 1.2%. Core capital goods new orders decreased by -1.8%.  January's core capital goods new orders increased by 3.1%.  Core capital goods is an investment gauge for the bet the private sector is placing on America's future economic growth and excludes aircraft & parts and defense capital goods.  Capital goods are things like machinery for factories, measurement equipment, truck fleets, computers and so on.  Capital goods are the investment types of products one needs to run a business. and often big ticket items.  A decline in new orders indicates businesses are not reinvesting in themselves.  Machinery new orders dropped by -2.6%, computers & electronics new orders dropped by -0.9% as communications equipment dropped by -2.3%.   Primary metals new orders declined very slightly by -0.1% while fabricated metals products dropped by -1.2%. To put the monthly percentage change in perspective, below is the graph of core capital goods new orders, monthly percentage change going back to 2012.  Looks like noise, even during the great recession, which tells us the monthly percentage changes in this report really need to be taken with a grain of salt and one should think quarterly.  Yet this month is particularly smelly and thus might very well be a warning sign of bad economic events to come.

Durable goods, Claims, CNBC comment on GDP revisions - Unambiguously bad. And the downward spiral continues with sales falling faster than inventories: Durable Goods Orders Highlights The manufacturing component of the industrial production report pointed to February strength but the durable goods report certainty isn’t. Orders fell 2.8 percent with the ex-transportation reading, which excludes the up-and-down swings of aircraft orders, down a very sizable 1.0 percent. And capital goods readings, which offer indications on business investment, are once again in the minus column, down 1.8 percent for orders and, in a reading that will pull down first-quarter GDP estimates, were down 1.1 percent for shipments. Total shipments fell a very sharp 0.9 percent with unfilled orders also very weak, at minus 0.4 percent in a reading that is not promising for manufacturing employment. Inventories, at minus 0.3 percent, are coming down but not fast enough with the inventory-to-shipments ratio up one notch to 1.65. This report is always volatile and the weakness in February does follow even greater strength in January, but January now looks like an odd outlier for a sector that, up until last month at least, has been struggling with weak exports and weak demand for energy equipment. Continued claims for unemployment benefits were down again, and, population adjusted, to perhaps the lowest levels in a very long time. My suspicion is that this is entirely about the various governments making these claims a lot harder to get, rather than an indication of labor market conditions. If so, as previously discussed, this automatic fiscal stabilizer may have also been largely disabled:

Durable Goods New Orders Declined in February 2016?: The headlines say the durable goods new orders declined. The unadjusted three month rolling average improved this month and now is in expansion. Our view of this data is that there was an improvement this month. . Econintersect Analysis:

  • unadjusted new orders growth accelerated 4.4 % (after accelerating an downwardly revised +1.5 % the previous month) month-over-month , and is up 4.8 % year-over-year.
  • the three month rolling average for unadjusted new orders accelerated 0.8 % month-over-month, and up 1.3 % year-over-year.
  • Inflation adjusted but otherwise unadjusted new orders are up 2.3 % year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth accelerating 0.4 % month-over-month, up 1.6 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is decelerating, and has been decelerating for a year..

"Core" Durable Goods Tumbles For 13th Month - Longest Non-Recessionary Stretch In 70 Years -- Durable Goods New Orders (Ex-Transports) or so-called "Core" durable goods dropped 0.5% YoY, extending its losing streak to 13 months. This is the longest streak in the history of the series with no recession. All segments of the durable goods report saw negative MoM moves with headline down 2.8% (small beat) but preior data was revised dramatically lower, Capital goods orders were drastically revised lower but still fell more than expected (-1.8% MoM) and finally shipments ex-aircraft dropped 1.1% MoM (missing the expedcted rise of 0.3% notable) with significant downward revisions once again.

  • Durable goods new orders down -2.8%, exp. -3.0%; prior revised down to 4.2% for Jan. from 4.7%
  • New orders ex-trans. down 1%, Exp. -0.3%; prior revised to 1.2% from 1.7%
  • Capital goods orders ex-aircraft down 1.8%, Exp. -0.5%, prior revised to 3.1% from 3.4%
  • Capital goods shipments ex-aircraft down 1.1%, Exp. +0.3%, prior revised to -1.3% from -0.4%

And just like that, all the exuberant "bounce" hope has been eviscerated thanks to a broadly disappointing report, and steep downward revisions of last month's euphoric data. As we can't tired of showing, this has never happened outside of a recession...

PMI Manufacturing Index Flash March 22, 2016: Early indications on March's factory activity were positive in both the Empire State and Philly Fed reports, but not from the manufacturing PMI flash which, at 51.4 vs a final 51.3 in February and a February flash of 51.0, points to no significant pickup. Respondents in the sample continue to report declining demand for energy equipment, the result of low oil prices, and subdued demand for exports, the result of weak global demand tied with the strength of the dollar. A drop in pre-production inventories is a key negative in the report, hinting at a weakening outlook for future business. Destocking is also underway for finished goods which are also on the decline. Production in this sample is near its weakest pace of the last 2-1/2 years. Another negative is a drop in selling prices, only the second of the last 3-1/2 years. On the positive side, both new orders and employment, though soft by recent standards, continue to expand. Early indications on the March factory are mixed. Watch for the Richmond Fed report coming up at 10:00 a.m. ET this morning.

US Manufacturing PMI Misses By Most Since 2013, Presidential Election Blamed -- Given the extraordinary jumps in several regional Fed surveys, hope was rife that US Manufacturing PMI's flash print would jump... it didn't. Hovering near multi-year lows at 51.4, PMI missed expectations of 51.9 by the most since Aug 2013. With record highs in wholesale inventories, Markit claims that "pre-production inventories decline at the steepest pace in over 2 years." The blame for this plunge: dollar strength, weak global demand, and Trump. Not recovering... As Markit explains, Manufacturers signalled a further reduction in their inventory volumes in March.The latest fall in stocks of finished goods was the fastest since November 2015, while pre-production inventories declined at the steepest pace for over two years. “US factories continue to endure their worst spell for three and a half years.Headwinds include reduced spending by the struggling energy sector, the strength of the dollar, persistent weak global demand and growing uncertainty caused by the looming presidential election.

Richmond Fed: Manufacturing Sector Activity Expanded in March -- From the Richmond Fed: Manufacturing Sector Activity Expanded; New Orders and Shipments Increased   Fifth District manufacturing activity expanded in March, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders increased this month. Employment advanced at a slightly faster pace in March, while average wages grew moderately and the average workweek lengthened. Prices of raw materials and finished goods rose at a faster pace compared to last month. Overall, manufacturing activity increased markedly in March. The composite index for manufacturing climbed to a reading of 22, the highest since April 2010. The index for shipments added 38 points and the new orders index advanced 30 points, finishing at strong readings of 27 and 24, respectively. Manufacturing employment grew at a slightly faster pace this month; the employment indicator added two points to end at 11. Based on the regional surveys released so far for March, it seems likely the ISM manufacturing index will suggest expansion in March after five months of contraction.

Richmond Fed Manufacturing Survey Significantly Improves in March 2016.: Of the three regional Federal Reserve surveys released to date, all are in expansion. Market expectations from Bloomberg were between -3 to -2 (consensus 0). The actual survey value was +22 [note that values above zero represent expansion]. Fifth District manufacturing activity expanded in March, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders increased this month. Employment advanced at a slightly faster pace in March, while average wages grew moderately and the average workweek lengthened. Prices of raw materials and finished goods rose at a faster pace compared to last month. Manufacturers anticipated robust business conditions during the next six months. Firms expected faster growth in shipments and in new orders in the six months ahead. Additionally, survey participants looked for increased capacity utilization and expected order backlogs to grow. Producers looked for vendor lead times to lengthen modestly. Survey participants' outlook for the months ahead also included faster growth in average wages and the average workweek, with a pickup in hiring during the next six months. Over the next six months, manufacturers expected faster growth in prices paid and received.Overall, manufacturing activity increased markedly in March. The composite index for manufacturing climbed to a reading of 22, the highest since April 2010. The index for shipments added 38 points and the new orders index advanced 30 points, finishing at strong readings of 27 and 24, respectively. Manufacturing employment grew at a slightly faster pace this month; the employment indicator added two points to end at 11.

Massive Jump In Richmond Fed Manufacturing, Services Also Rise -- Yesterday, the Richmond Fed released its diffusion indices which measure activity in that district’s Manufacturing and Services sectors. Following strong readings from Empire Manufacturing (NY Fed District) and Philly Fed indices, the Richmond Fed’s Manufacturing index also exploded higher, with close to across-the-board improvement as shown in the table at left. This series is extremely volatile and can only be of limited use in terms of gauging growth or as a leading indicator for broad manufacturing activity on a national basis. It only covers the states of Maryland, West Virginia, Virginia, North Carolina, and South Carolina (as well as the District of Columbia). However, we were struck by how large and broad the improvement was in March, with explosions higher in a number of series that had previously been indicating clear contraction in Manufacturing activity. Below we chart some of those changes in the series that moved the most. Both the composite and shipment series had their largest MoM changes on record, while new orders and capacity utilization were 99th percentile moves. If these gains in activity hold, we will receive further confirmation that the manufacturing sector of the economy is emerging from the near-recessionary conditions that were the order of the day for the last year or so.

WTF Chart Of The Day: Richmond Fed Spikes By Most In History To 3rd Best Level Ever -- WTF is going on? Richmond Fed's manufacturing survey exploded from -4 to 22 in March, beating expectations of 0 by the most ever). This is the 3rd highest print ever (in 23 years) driven by the highest level of New Orders in 6 years. Inventories tumbled, prices paid and received jumped, and expectations for future orders surged (despite stagnation in expectations for jobs).The spikes in New Orders, Average Workweek, and headline data all mark extreme cyclical tops in history... so this "good" news seems like terrible cycle news... or did we just see the foirst triple-seasonal adjustment.

Kansas City Fed: Regional Manufacturing Activity "remained negative" in March - From the Kansas City Fed: Tenth District Manufacturing Activity Remained Negative The Federal Reserve Bank of Kansas City released the March Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity remained negative.  “Factories reported another decline in activity in March, although the drop was somewhat smaller than in the previous three months” said Wilkerson.... Tenth District manufacturing activity remained negative, while producers’ expectations for future activity weakened. Most price indexes edged higher in March, but remained at low levels.  The month-over-month composite index was -6 in March, up from -12 in February and -9 in January ... The new orders, order backlog, and employment indexes improved slightly but remained in negative territory. The Kansas City region continues to be hit hard by lower oil prices and the stronger dollar.

Manufacturing activity remains weak in KC Fed’s seven-state region | The Kansas City Star: Manufacturing activity in a seven-state region monitored by the Federal Reserve Bank of Kansas City remained weak in March, particularly for businesses in the oil and gas industry. The Fed said Thursday its monthly manufacturing index stood at -6 this month, an improvement from a -12 reading in February and a -9 reading in January. The index tracks production, new orders, employment, supplier delivery time and raw materials inventory. “Activity remained weak in most district states,” the report said. One survey respondent said that “business levels for all categories seem to be dropping, including energy, commercial items and automotive.” Another said that “overall activity is a mixed bag … however we are seeing a lot of activity for potential new business opportunities.” The Fed’s region covers Kansas, the northern part of Missouri, Nebraska, Colorado, Wyoming, Oklahoma and the northern half of New Mexico.

Kansas City Fed Manufacturing Contraction Lessens in March 2016 - Of the four regional manufacturing surveys released to date for March, three are in expansion and one is in contraction. There were no market expectations reported from Bloomberg - and the reported value was -6. Any value below zero is contraction.  According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity remained negative. "Factories reported another decline in activity in March, although the drop was somewhat smaller than in the previous three months" said Wilkerson.  Tenth District manufacturing activity remained negative, while producers' expectations for future activity weakened. Most price indexes edged higher in March, but remained at low levels. The month-over-month composite index was -6 in March, up from -12 in February and -9 in January (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The improvement in the index came from both durable and nondurable goods factories, particularly for chemicals, machinery, and nonmetallic mineral production. Activity remained weak in most District states. Most month-over-month indexes rose somewhat from the previous month. The new orders, order backlog, and employment indexes improved slightly but remained in negative territory. In contrast, the production index dropped from -8 to -14, and the shipments and new orders for exports indexes also fell. The raw materials inventory jumped from -16 to -2, and the finished goods inventory index also moved higher. Year-over-year factory indexes were mixed but generally remained weak. The composite year-over-year index inched higher from -20 to -18, and the new orders, order backlog, and employment indexes also showed slight improvements.

Weekly Initial Unemployment Claims increase to 265,000 --The DOL reported: Note: This week's release reflects the annual revision to the weekly unemployment claims seasonal adjustment factors. The seasonal adjustment factors used for the UI Weekly Claims data from 2011 forward, along with the resulting seasonally adjusted values for initial claims and continuing claims, have been revised. In the week ending March 19, the advance figure for seasonally adjusted initial claims was 265,000, an increase of 6,000 from the previous week's revised level. The previous week's level was revised down by 6,000 from 265,000 to 259,000. The 4-week moving average was 259,750, an increase of 250 from the previous week's revised average. The previous week's average was revised down by 8,500 from 268,000 to 259,500. There were no special factors impacting this week's initial claims. This marks 55 consecutive weeks of initial claims below 300,000, the longest streak since 1973. The previous week was revised down.
Note: The following graph shows the 4-week moving average of weekly claims since 1971.

Americans think they work harder than everyone else — and they don’t - Quartz: Ever feel like you’ve gone above and beyond what your job required? You’re not alone, especially if you’re an American. Nearly 11% of US workers overestimate how productive they are relative to their compatriots, according to a survey of more than 6,000 respondents in 14 countries by Qualtrics, a market research platform. People who think they’re doing better than they are suffer from “the Lake Wobegon effect,” named after a fictional town from a long-running American radio show. Lake Wobegon was conceived as a place where “all the women are strong, all the men are good looking, and all the children are above average,” which speaks to the human tendency to overestimate ourselves. The same tendency is also called “self-serving bias” or “illusory superiority.” Compared to Americans, Italians and New Zealanders only slightly over-stated their productivity at work compared to their fellow citizens. The measure was derived by first asking respondents what proportion of their individual work days were productive, and then asking them to estimate the same proportion of productivity for their countrymen. The gap between the two is shown in the chart below.

Building the Virtuous Neighborhood | The American Conservative: In my work as a primary care physician in a Baltimore homeless clinic and hospital, most of my office visits ended by asking my patients if I could do anything else for them. Sometimes I forget to address a concern a patient brought up at the beginning, or they save a difficult question about erectile dysfunction or depression for the very end of the visit. The response I tended to hear most often, though, was this: “Not unless you can get me a job.” Much to my regret, I was unable to prescribe “One job—at least five days a week at a wage that pays the bills” for my patients. While the residents of the post-industrial region were not exactly rural, they were the sort of people who have been discussed, quoted, pandered to, or sneered at during this election cycle—poor, underskilled, often with a history of hard labor in an industry that was gutted in the last several decades. If we are to find a solution to the problem that Donald Trump has exposed—the cultural and economic evisceration of the working class, particularly the white working class—we cannot simply ask how to magically prescribe jobs. We have to ask how public goods and virtuous behavior come to be. And that must always bring us back to community, and to whether our cities and towns are organized in ways that make us good neighbors.

The Enduring Employment Impact of Your Great Recession Location - Abstract: This paper asks whether Americans were jobless in 2014 because of where they were living in 2007. In the cross section, employment rates diverged across U.S. local areas 2007-2009 and---in contrast to history---have barely converged. This "great divergence" could reflect spatial differences in human capital, rather than causal location effects. I therefore use administrative data to compare two million workers with very similar pre-2007 human capital: those who in 2006 earned the same amount from the same retail firm, at establishments located in different local areas. I find that conditional on 2006 firm-x-wages fixed effects, living in 2007 in a below-median 2007-2009-fluctuation area caused those workers to have a 1.3%-lower 2014 employment rate. Hence, U.S. local labor markets are limitedly integrated: location has affected long-term employment and exacerbated within-skill income inequality. The enduring employment impact is not explained by more layoffs, more disability insurance enrollment, or reduced migration. Instead, the employment outcomes of cross-area movers are consistent with severe-fluctuation areas continuing to depress their residents' employment. Impacts are correlated with housing busts but not manufacturing busts, possibly reconciling current experience with history. If recent trends continue, employment rates are estimated to converge in the 2020s---adding up to a relative lost decade for half the country.

The Unemployment Rate for Veterans Is the Lowest in Seven Years - The unemployment rate for American veterans fell to the lowest level in seven years in 2015, a reflection of an improving jobs market alongside programs to put servicemen and women to work. The unemployment rate for all veterans was 4.6% last year, the Labor Department said Tuesday, matching the rate in 2008. By comparison, the figure was 5.2% for nonveterans ages 20 and over.The latest numbers echo broader trends in the U.S. labor market. . The unemployment rate for people 16 and over was 5% at the end of 2015 and 4.9% the first two months of 2016, the lowest since February 2008. To be sure, by many measures the labor market hasn’t fully healed from the latest recession, which ended in mid-2009. The share of Americans stuck in part-time jobs or too discouraged to look for work was 9.7% in February, the lowest level since May 2008 but still well above prerecession levels. But overall job creation appears to be pulling more Americans into jobs. The latest report offers a notable turnaround for younger veterans, who experienced particularly high unemployment following the downturn.

Wages grew more for low-wage workers in states that raised their minimum wage in 2015 -- In 2015, wages for low-wage workers rose faster in states that increased their minimum wage than in states that saw no minimum wage increase. Working people in states that increased the minimum wage through legislation—which led to larger increases than indexed increases—saw the biggest boost to their wages, regardless of gender. Women, however, benefited slightly more from boosts to the minimum wage. Overall, the 23 states with a minimum wage increase, plus the District of Columbia, account for about 40 percent of the U.S. workforce. In 2015, 11 states and the District of Columbia (shaded green on the map) increased their minimum wage through legislation and 11 states (shaded blue) increased their minimum wage through indexing to inflation. The remaining 27 states did not increase their minimum wage in any way. Comparing 10th percentile wage growth between states grouped by whether they had a minimum-wage increase and by the type of increase yields highly suggestive results. When looking at 10th percentile wages by gender, wages grew more slowly in states without minimum-wage increases than in states with any kind of minimum-wage increase. Among states with any minimum-wage increase, the growth in the 10th percentile wage was faster in states with legislated increases (which are, on average, higher than indexed increases). This holds true for both men and women at the 10th percentile. For example, the 10th percentile women’s wage grew 5.2 percent in states with legislated minimum-wage increases, compared with only 3.1 percent growth in states without any minimum-wage increase. This is a clear indication that strong labor standards like the minimum wage can benefit workers even when workers generally have severely reduced bargaining power.

BLS: Unemployment Rate decreased in 22 States in February -- From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in February. Twenty-two states had unemployment rate decreases from January, 8 states had increases, and 20 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.... New Hampshire and South Dakota had the lowest jobless rates in February, 2.7 percent each, followed by North Dakota, 2.9 percent. Alaska had the highest rate, 6.6 percent, closely followed by Mississippi and West Virginia, 6.5 percent each.  This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska, at 6.6%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only seven states are at or above 6% (dark blue).

State economies continue steady improvement, but stimulus would still boost growth --Today, the Bureau of Labor Statistics released state employment and unemployment data for the month of February. The report points to a mostly steady improvement in the economy across the United States. Over the last year, states saw moderate gains in employment and declines in the unemployment rate which, coupled with a growing labor force, indicate genuine labor market improvements—improvements that must continue in order to achieve full employment. From November 2015 to February 2016, 42 states and the District of Columbia gained jobs. The states with the largest percentage gains were Hawaii (+1.3 percent), Idaho (+1.1 percent), and Washington (+1.0 percent). Seven states experienced declines over the same time frame with North Dakota (-1.5 percent), Wyoming (-0.9 percent), and West Virginia (-0.4 percent) still coping with the impact of lower energy prices on their energy sectors. Meanwhile, one state, Nebraska, saw no change in employment. From November 2015 to February 2016, unemployment rates fell for 29 states and the District of Columbia, and remained unchanged for nine states. The largest improvements in unemployment rates occurred in Oregon (-0.8 percentage points), Tennessee (-0.7 percentage points), and Arkansas and New Jersey (both -0.6 percentage points). These states also experienced gains in their labor force, so the positive trends in the unemployment rate are unambiguously good news—the result of more people are finding jobs, and not dropping out of the labor force, as has been a concern for a good part of this recovery. In the states where unemployment rose slightly (0.1 to 0.2 percentage points), most also saw their labor forces increase, generally indicating that these changes were not especially troublesome. The exception was Wyoming, where unemployment rose by 0.7 percentage points and the labor force shrank by 0.8 percent.

Income Growth Averaged 4.4% Last Year. How Did Your State Do? - Personal-income growth across the U.S. last year reflected broader economic trends, with construction and the service-sector propelling earnings, especially in the Southeast and along the West Coast. Crashing commodity prices, meanwhile, were a drag in states with big farming or energy sectors. State personal income, a broad measure that includes earnings, property income and government benefits, grew on average 4.4% from 2014 to 2015, the same as the prior year, the Commerce Department said on Thursday. Professional and business services, health care and construction contributed the most to overall income growth in 2015. Highlights from the report:

  • Construction earnings increased for the fifth consecutive year and are now higher than their previous peak before the Great Recession. Nevada and Utah saw the fastest growth in the sector.
  • Earnings in mining declined 5.2% nationally, and subtracted more than any other industry from the growth in personal income in North Dakota, Wyoming, West Virginia and Oklahoma.
  • Earnings in farming declined 21.9% nationally, and subtracted more than any other industry from the growth in personal income in South Dakota, Iowa and Nebraska.
  • Earnings grew in 21 of the 24 industries tracked by Commerce, with professional and business services, health care and construction contributing the most to overall income growth in 2015.
  • California remained the wealthiest state, with overall income topping $2 trillion. The next closest state was Texas at almost $1.3 trillion.
  • The Western part of the U.S. also saw the fastest income growth, led by California, Oregon, Utah and Nevada.
  • The Northeast was the wealthiest region per capita, led by Connecticut, Massachusetts, New Jersey and New York.

When Older People Do Better Than Those of Working Age - WSJ: In deciphering the many forces behind income inequality, economists are flagging a widening shift in the economic fortunes of the old and everyone else. The gap between the incomes of those 65 and older and the rest of the population has narrowed significantly in Europe and the U.S. since the recession. The divergence is exacerbating generational imbalances in government pension systems while highlighting the wage struggles of younger workers. Seniors in the U.S. have recently enjoyed healthier income gains—from government and private pensions, investments and, for those still working, salaries—than their younger counterparts, census data shows. In some countries, France and Spain among them, people 65 and older now earn more on average than younger people do. The average person 65 and older in the U.S. earns 77% of the income of the average citizen, up from 69% in 2008, at the start of the recession. In the U.K. the figure is 89%, up from 78%. In Spain and France, seniors now earn about 103% and 102% of the average worker’s income, respectively, according to an analysis of data from the European Union’s official statistics agency. That’s up from 86% in Spain and 96% in France in 2008. This divergence between generations is in part a reflection of demographic shifts that have been brewing for years, as populations grow older and the wealthy postwar baby boomers in particular reach their golden years. But it is also widening as a consequence of forces bearing down on the earnings of the young, creating a growing imbalance that threatens to undermine the promise that market economies will deliver rising living standards for successive generations.

A new study says elderly Americans aren’t working nearly enough - In a political season more focused on borders and trade deals, entitlement reform hasn’t been high on anybody’s agenda this year. But that doesn’t mean there aren’t policy wonks out there trying to come up with ways to reduce the cost of Social Security, Medicare and the other elements of the social safety net that consume such a large portion of the federal budget. One of the most frequently heard suggestions for reforming Social Security has been raising the retirement age. The argument is that with increasing life expectancy and a healthier population of older Americans, there is no good reason to stick to the somewhat arbitrary rule that 65 is the age at which someone should be allowed to retire. The libertarian Cato Institute recently flagged a paper published as part of the International Social Security Project by the National Bureau of Economic Research which tried to quantify just how much unused “work capacity” there is among retired Americans. Researchers determined that about 28 percent of Americans between the ages of 55 and 69 are healthy enough to be working but are not. The real slackers, though, are people aged 70 to 74. The study found that 39 percent are still healthy enough to work but do not. To be fair to the American worker, though, the report found that compared to most industrialized countries, people in the US tend to remain in the workforce longer – sometimes much longer. Among men between 60 and 64, for example, the study found that in Germany fully 50 percent are capable of working but choose not to. In France the number is 63 percent. By comparison, only 17 percent of American men in that age cohort do not work even though they are capable of doing so.

Still Working Hard: An Update on the Share of Older Workers in Physically Demanding Jobs - A recurring theme in debates over Social Security policy is that workers should be encouraged to work later into their lives by raising the age at which they can get full benefits. Implicit in this argument is that most workers are in a situation where they would be able to work to an older age; however, many older workers stop working because they can no longer meet the physical demands of their job. In 2010, CEPR did an analysis that examined the percentage of older workers (ages 58 and over) who either worked in physically demanding jobs or in difficult work conditions. This paper is an update of that earlier study and is based on data from 2014. Using data from the Current Population Survey (CPS) and Occupational Information Network (O*NET) it finds that in 2014, 8.0 million workers ages 58 and older (34.5 percent) had physically demanding jobs, while 5.1 million workers ages 58 and older (22.1 percent) had jobs with difficult working conditions. About 10.2 million workers ages 58 and older (43.8 percent) were employed either in physically demanding jobs or jobs with difficult working conditions. The workers who were most likely to be in these jobs were Latinos, the least educated (less than a high school diploma), immigrants, and the lowest wage earners. Physically demanding jobs include general physical activities, handling and moving objects, spending significant time standing, walking or running, making repetitive motions, or having any highly physically demanding work. Highly physically demanding jobs require dynamic, explosive, static, or trunk strength, bending or twisting of the body, stamina, maintaining balance, or kneeling or crouching. Difficult working conditions include working in a cramped workspace, labor outdoors, or exposure to abnormal temperatures, contaminants, hazardous equipment, whole body vibration, or distracting or uncomfortable noise.  PDF

Men in the U.S. Illegally Are More Likely to Work Than Men Born Here, For Less - Men in the U.S. illegally are more likely to work than their native-born counterparts, and they’re willing to take jobs pretty much regardless of how much or little they get paid, new research from Harvard University finds. The study fleshes out the behavior of undocumented workers—a group that by its nature can be difficult to analyze. The challenge of studying the roughly 11.3 million illegal immigrants in the U.S. leaves policy makers guessing on the implications for a wide range of proposals—from offering such workers a path to citizenship to kicking them out of the country. To help fill in some gaps in policy assumptions, Harvard University professor George Borjas used newly developed statistical methods to sift through native-born, legal and illegal workers showing up in the Census Bureau’s Current Population Survey (the same survey that informs the Labor Department’s monthly employment report). Mr. Borjas arrives at three initial conclusions: Undocumented immigrant men are far more likely to work than other groups, while undocumented immigrant women are far less likely to work. The employment gap that distinguishes undocumented men from the other groups widened dramatically over the past twenty years. By 2014, the probability that an undocumented man was employed…was around 12 percentage points larger than that of native men. The probability that undocumented women are employed also grew at a relatively faster rate, but the increase was far less dramatic. The labor supply of undocumented workers is not as responsive to wage changes as the labor supply of the other groups in the population. In fact, the data clearly suggest that the labor supply of undocumented men is almost perfectly inelastic.

The new class warfare in America -  In January the National Review, a flagship of thinking conservatives, pulled together 22 intellectuals to condemn Mr Trump’s candidacy as an existential threat to conservatism. Their efforts had no impact on Mr Trump’s fan base. Now the magazine has switched to damning his supporters. By declaring open season on blue-collar whites, Kevin Williamson’s widely read essay on “white working class dysfunction” marks a turning point. Yet he is only putting into writing what many conservatives say.    “The truth about these dysfunctional, downscale communities is that they deserve to die,” Mr Williamson writes. “Economically, they are negative assets. Morally, they are indefensible . . . the white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles. Donald Trump’s speeches make them feel good. So does OxyContin.” Margaret Thatcher’s acolyte, Norman Tebbit, once sparked fury by implying the jobless should get on their bikes to find work. Mr Williamson says America’s benighted working classes should hire a U-Haul and move on. As an exercise in condescension, Mr Williamson’s words rival the most inbred hereditary peer. As an economic prescription, it is wide off the mark. Millions of Americans are anchored to blighted neighbourhoods by negative equity, or other ties that bind. Their life expectancy is falling. Their participation in the labour market is dropping. The numbers signing up to disability benefits is rising. Opioid prescription drugs are rife. Those that are white tend to vote for Mr Trump. On Super Tuesday this month, the counties with the highest rates of white mortality — whether to overdoses, suicide or other symptoms of community breakdown — came out heavily for Mr Trump. The correlation was almost exact, according to a Wonkblog study.

Mocked and forgotten: who will speak for the American white working class? - The National Review, a conservative magazine for the Republican elite, recently unleashed an attack on the “white working class”, who they see as the core of Trump’s support. The first essay, Father Führer, was written by the National Review’s Kevin Williamson, who used his past reporting from places such as Appalachia and the Rust Belt to dissect what he calls “downscale communities”. He describes them as filled with welfare dependency, drug and alcohol addiction, and family anarchy – and then proclaims: “Nothing happened to them. There wasn’t some awful disaster, There wasn’t a war or a famine or a plague or a foreign occupation. ... The truth about these dysfunctional, downscale communities is that they deserve to die. Economically, they are negative assets. Morally, they are indefensible. The white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles.” A few days later, another columnist, David French, added: “Simply put, [white working class] Americans are killing themselves and destroying their families at an alarming rate. No one is making them do it. The economy isn’t putting a bottle in their hand. Immigrants aren’t making them cheat on their wives or snort OxyContin.” Both suggested the answer to their problems is they need to move. “They need real opportunity, which means that they need real change, which means that they need U-Haul.” Downscale communities are everywhere in America, not just limited to Appalachia and the Rust Belt – it’s where I have spent much of the past five years documenting poverty and addiction.

How Locking Up Judges Could End Debtors’ Prisons - HuffPo-- Justice Department officials warned U.S. judges and court administrators this week that practices like incarcerating poor people without determining whether they could afford outstanding fines are illegal and unconstitutional.  But civil rights advocates with clients who've had their lives torn apart after being accused of petty crimes, receiving traffic tickets or charged with municipal code violations say the feds have a much more effective method of fixing the widespread problem: locking up judges.  In a nine-page letter sent to all state chief justices and state court administrators on Monday, the DOJ's Vanita Gupta, who heads the Civil Rights Division, and Lisa Foster, the director of the Office of Access to Justice, urged local officials to "review court rules and procedures within your jurisdiction to ensure that they comply with due process, equal protection, and sound public policy." Judges who incarcerate poor people because they missed a payment are breaking the law, the letter said. What many courts consider a "routine administrative matter" of forcing defendants to pre-pay a "bond" or "bail" before they're allowed to schedule a court date is actually unconstitutional, Gupta and Foster wrote. Locking people in cages for long periods of time solely because they can't afford to buy their freedom is a violation of the country's supreme law, the U.S. Constitution. Civil rights advocates praised the Justice Department for sending the letter. However, they say there's a much more powerful tool available if the feds really want to deter judicial crime: Federal prosecutors can hold judges accountable for their unlawful conduct by charging them with a federal crime. Section 242 of Title 18 of the U.S. code -- the so-called "color of law" statute -- is the same federal civil rights legislation that Justice Department prosecutors use against police officers and prison guards who use excessive force and make false arrests. The law applies to prosecutors and judges, too. But the feds don't use it against them often.

How Chicago racked up a $662 million police misconduct bill  In this city's troubled history of police misconduct, Eric Caine's case may be unrivaled: It took more than 25 years and $10 million to resolve. For decades, he maintained he didn't brutally kill an elderly couple. The police, he said, beat him into a false confession. Locked up at age 20, he was freed at 46, bewildered by a world he no longer recognized. Caine ultimately was declared innocent, sued the city and settled for $10 million. But victory brought little peace to his troubled mind. "They wouldn't give anybody that large amount of money if they didn't believe that person was wronged," he says. "But I also look at it as a way for them to just want me to go away. ... Nobody cares if I live or die. I'm a shell of a human being." Caine is one of the more dramatic examples of huge police settlements that have tarnished the city in recent years. Among them: A one-time death row inmate brutally beaten by police: $6.1 million. An unarmed man fatally shot by an officer as he lay on the ground: $4.1 million. And last year, the family of Laquan McDonald, the black teenager shot 16 times by a white officer, received $5 million. His death, captured in a shocking video, led to a murder charge against the officer, the police chief's firing and thunderous street protests with calls for Mayor Rahm Emanuel's resignation.  In all, Chicago has paid a staggering sum - about $662 million - on police misconduct since 2004, including judgments, settlements and outside legal fees, according to city records. The payouts, for everything from petty harassment to police torture, have brought more financial misery to a city already drowning in billions of dollars of pension debt.

NY millionaires write to governor asking for higher taxes (AP) — A group of more than 40 millionaires in New York state has written to Democratic Gov. Andrew Cuomo and top lawmakers calling on them to consider raising taxes on the state’s wealthiest residents to help address poverty and rebuild failing infrastructure. The letter, a copy of which was given to The Associated Press, proposes new, higher tax rates for the top 1 percent of earners. The letter goes on to say additional revenue is needed to address child poverty, homelessness and aging bridges, tunnels, waterlines and roads. “As New Yorkers who have contributed to and benefited from the economic vibrancy of our state, we have both the ability and the responsibility to pay our fair share,” the letter states. “We can well afford to pay our current taxes, and we can afford to pay even more.” Those signing the letter include Abigail Disney, Leo Hindery and Steven C. Rockefeller. The tax plan, known as the “one-percent tax plan,” was worked out in conjunction with the Fiscal Policy Institute, a left-leaning economic think tank. “As a businessman and philanthropist and as a citizen of New York State, I believe we need to invest in our people and our infrastructure,” Hindery, the managing partner of InterMedia Partners, a media industry private equity fund, said in a statement accompanying the letter. “The one-percent tax plan makes it possible to make these investments, and simply asks people like me to continue to pay a higher tax rate, as we should.” Their proposal faces significant political obstacles in the state Legislature. While the Democratic majority in the Assembly has its own plan to increase taxes on millionaires, the Republican-led Senate opposes the idea.

Measure to hike California's minimum wage to $15 qualifies for ballot | Reuters: A proposal to raise California's minimum wage to $15 an hour by the year 2021 has qualified to be listed on the upcoming November ballot in the state, officials said on Tuesday. The development comes as a wave of minimum wage increases at the state level sweeps the United States as the federal minimum wage has gone more than six years without an increase from $7.25 an hour. The California Secretary of State's office said supporters of the measure, pushed by Labor group coalition Lift Up California, had gathered more than the 400,000 signatures needed to have the Fair Wage Act of 2016 placed on the ballot. "California has led the country on environmental, health and civil rights protections and it’s only appropriate that we would become the first state to enact a minimum wage that allows millions of families to live in dignity," Los Angeles County Supervisor Sheila Kuehl said in a statement. She added that the measure would build on the efforts of Los Angeles lawmakers, who last year passed a law hiking the city's minimum wage to $15 by 2020. The measure would boost the state's minimum wage to $11 an hour in 2017, and increase it by a dollar an hour every year until reaching $15 an hour in 2021. After 2021, the minimum wage would be adjusted annually based on the rate of inflation.

US supreme court signals support for bill to relieve Puerto Rico of $70bn debt - The US supreme court on Tuesday began weighing whether Puerto Rico can escape billions of dollars owed in crippling debts that the island’s governor has warned are bringing the island territory to the brink of ruin. The four liberal justices on the supreme court signalled support for the move and House speaker Paul Ryan told reporters Tuesday that Congress will take up a Puerto Rico relief bill in April. But it remains unclear how the court will rule on whether the Caribbean island’s 2014 law, known as the Recovery Act, can be changed to allow the territory to escape some of its $70bn plus debts. The economic crisis has left Puerto Rico facing a mass exodus of residents – 84,000 people left Puerto Rico for the US mainland in 2014, a 38% increase from 2010. Some 45% of people live in poverty and the unemployment rate is the highest in the US. Only seven justices heard the arguments in the case. Justice Antonin Scalia died in February and has not yet been replaced. Justice Samuel Alito recused himself. In 1984, Congress said Puerto Rico, as a US territory, could not use bankruptcy laws that govern US states. But federal bankruptcy law also dictates that no state can pass local debt-restructuring laws, and in one provision Puerto Rico is defined as a state. “Why would Congress put Puerto Rico in this never-never land?” liberal justice Ruth Bader Ginsburg asked. Some creditors have argued that Puerto Rico has massively overspent on services such as education and should close schools and lay off teachers. They blame mismanagement for the territory’s woes and say the law protects their investment. Fellow liberal Elena Kagan said that before the oral argument she favored the creditors’ position, but after hearing from Puerto Rico’s lawyer she found the territory’s arguments to be equally compelling.

Let the Can Collectors Collect Cans, For Chrissake: The New York City municipal government would like for the city’s hordes of can collectors to stop collecting cans from curbside garbage. Hey: just let them collect the damn cans. It makes very superficial sense that a city government would want to discourage poor people from pulling valuables out of recycling bins and garbage bags before the city picks them up, because it makes sense to imagine that the city just wants the money that those things are worth for itself. In that case, it is possible to argue that the city is being not just greedy, but inefficient—it will collect the recyclables and go to all the trouble of sorting them and recycling them and presumably get some money in return and that money will go into the city budget and then somewhere down the line some of that money will be appropriated to city services designed to help the very sort of poor people who are out collecting cans on the street in the first place. Hey, save us all some time: just them collect the cans. They can turn em in for money and pay for food and whatnot. Take it easy.But if you closely read today’s New York Times story on the city’s ongoing efforts to dissuade “scavengers” from picking up bottles and cans, you’ll notice that it’s so much the pure profit motive that the city complains is being disrupted; rather, they complain that scavengers are fucking up the city’s ability to measure how much recycling it’s doing. “[Sanitation] officials say that if the city is going to reach its goals, then it must be the one doing the recycling,” the Times writes; “Recycling theft does impact the city’s ability to track our curbside diversion rate,” a spokesperson for the mayor says; “The city’s got goals, and the only way we know how to meet those goals is if we have control over the commodity,” a Sanitation Department spokesman adds.

Mayor: Atlantic City government will shut down for 3 weeks: The mayor of Atlantic City, New Jersey, says the resort town's dismal finances will force a weekslong shutdown of nonessential government services next month if the city doesn't get state aid. The city is "making every effort to find solutions prior to the April 8th deadline", Guardian said in a statement. "Unfortunately, due to financial circumstances beyond our control, we will be forced to close City Hall starting on Friday, April 8th, 2016 at 4:30 p.m. We anticipate this closure to remain in effect until at least Monday, May 2nd, 2016". Four of Atlantic City's 12 casinos shut in 2014 and remain closed, putting thousands of people out of work. Moody's Investors Service warned that the city could default on debt as early as next month without state action, and local officials have floated the possibility of filing for bankruptcy. Last week, Republican Gov. Chris Christie said he wouldn't sign legislation to send money to Atlantic City unless the Legislature approved a takeover of city government.

Atlantic City to pay workers with IOUs as money crisis looms - Atlantic City hurtled on Thursday toward a financial crisis that means IOUs for police officers, firefighters and sanitation workers while city and state officials trade blame for the seaside gambling resort's increasingly dire predicament. Mayor Don Guardian held a news conference to detail plans for a shutdown of nonessential city services from April 8 to May 2, due, he said, to the state's continuing inability to pass a financial rescue package that Gov. Chris Christie has vetoed twice already. "On April 8, we will run out of money; that's a fact," Guardian said. He said the situation needs to be resolved by an agreement with state officials on long-term help for Atlantic City, which has seen its largest taxpayer, the casino industry, crumble in recent years. "How long can we last?" he asked. "Not long." But Christie said the city's problems are largely of its own making through years of overspending. The governor said he will sign two bills seen as crucial to the city's future — a state takeover of Atlantic City's finances, and a bill to allow casinos to make payments in lieu of property taxes — only if they are not amended first. Assembly Speaker Vincent Prieto is refusing to approve the bills in his chamber without guarantees that public employee contracts will be honored after a state takeover — something to which Christie will not agree. "If this is not passed and put on my desk in the exact form that it was passed on the Senate, then no action will be taken and Atlantic City will be out of money on April 8," Christie said.

Growing Up in a Bad Neighborhood Does More Harm Than We Thought - The neighborhood in which you grow up is a major determinant of your economic success as an adult. That’s been known for a while, but new research suggests that the effects may be much larger than social scientists previously understood. The new insight is that much of our best evidence about the effects of growing up in a bad neighborhood comes from examining children whose parents work particularly hard to protect them from the dangers around them. The negative effects of a bad neighborhood may be much larger for low-income families with less motivated parents. A recent research paper by Eric Chyn, an economist completing his dissertation at the University of Michigan, explores this idea. Mr. Chyn’s findings have received close attention from economists around the country. It has long been clear that children from troubled neighborhoods have worse outcomes as adults. But it has been much harder to disentangle whether these neighborhoods cause the later disadvantage, or whether the hardships that lead families to bad neighborhoods are the problem. The federal government’s Moving to Opportunity experiment has provided the clearest evidence yet on the effects of leaving a bad neighborhood. Lottery winners and losers were both tracked over the ensuing years, and an important study last year by the Stanford economist Raj Chetty, with Nathaniel Hendren and Lawrence F. Katz of Harvard — a study I’ve previously written about — found that children who moved when they were young went on to enjoy substantially higher earnings than people of similar ages whose parents lost the lottery. The random assignment of slots in this program means that we can be confident that these differences result from moving. But Mr. Chyn argues that this experiment substantially understates the importance of neighborhoods. The problem, he says, isn’t in comparing those who win the lottery with those who lose.

How a Democrat-Led, Education-Focused PAC Channels Out-of-State Dark Money: At first glance, "Democrats for Education Reform" (DFER) may sound like a generic advocacy group, but a closer review of its financial filings and activities shows how it uses local branding to help throw the voice of huge Wall Street players and other corporate interests from out-of-state. DFER is a PAC, a Political Action Committee, which means it can (and does) play a direct role in state and local elections. Public school advocates like Diane Ravitch have been spotlighting concerns about DFER since its beginning.  Because DFER is not a charity, money given to it does not result in a tax write-off but -- if successful in changing laws -- that money could get the hedge funders who back it a return on investment through politicians and policies that redirect tax dollars from truly public schools to "education reforms." Ed reform is fueling non-profit corporations paying lucrative for-profit style salaries to their executives and for-profit firms, such as the controversial K-12 Inc., which has made hundreds of millions while traditional public schools have faced budget cuts. The Center for Media and Democracy has calculated that the federal government alone has spent more than $3.7 billion in U.S. tax dollars propping up the charter school industry, in addition to enormous amounts spent by states. DFER has supported a number of Democrats in elections but its name could have been "Hedge Funders for Education Reform" (HFFER) -- in much the same way that David Koch's Americans for Prosperity could have been called "Billionaires for Prosperity," or Americans for Greed, names with less popular appeal.  That's because DFER is backed by billionaires and millionaires representing well over $20 billion at least in investor money.

As a Teacher, How Can I Help My Students Develop Their Brains? - Scientific American: In the past decade or so researchers have experimented with various exercises meant to increase one such skill, namely the capacity of working memory. Working memory is the mental space you use to keep several things in mind at once—say, numbers such as 38 and 16—and to manipulate them, perhaps by multiplying them together. As you might guess, people who can keep more things in working memory and who are more efficient at manipulating them tend to be better at reasoning. But the effectiveness of working memory training is controversial. Everyone agrees that people get better at the specific tasks they practice, but it is less clear whether that skill transfers to other, unpracticed tasks. Learning how to calculate least common multiples, for example, does not make you better at math in general. This specificity is especially pronounced early in training. When someone spends years working at certain types of problems, they do develop thinking skills that can be more flexibly deployed. For example, a professional historian who specializes in the Italian Renaissance can do a creditable job analyzing documents from the American Civil War. But even so, experience matters. Our historian's training has made the person good at thinking like a historian, not good at thinking generally. Or to put it another way, Stephen Hawking may be a very smart guy, but I would not suggest he coach the Chicago White Sox. Rather than thinking about developing our students' brains, I suggest focusing on specific thinking skills. What is a good writer able to do? What are our expectations for mathematical thinking? We must define the abilities that go into our definition of competence in each domain and give students ample practice in honing them.

Campus Anti-Semitism Prompts New York Lawmakers To Slash Funds - - The New York State Senate has voted to slash $485 million in funding to senior colleges in the City University of New York system to “send a message” that not done enough to fight campus anti-Semitism. On March 14, a state budget resolution championed by Republicans passed after a sprawling 2-hour debate on the Senate floor, Capital New York reports. “These are the things that have been happening at CUNY,” said GOP State Sen. Ken LaValle of Long Island. LaValle, who chairs the chamber’s committee on higher education, described what he said is a pattern of anti-Semitic incidents, “and these are the things that the Senate Republican conference says are intolerable and must stop.” The resolution was met with vocal opponents who called into question both the allegations of anti-Semitism and the usefulness of cutting funding to the school. Democratic Sen. Liz Krueger called the language of the resolution “shocking.” “I’d never heard from my senate colleagues or my constituents that anyone thought CUNY was an anti-Semitic institution,” said Krueger, who represents Manhattan’s Upper East Side. “And even if CUNY has a problem, how is cutting a third of their budget going to solve the problem?” The allegations of anti-Semitism stem from a long February letter penned by the Zionist Organization of America to CUNY, accusing the group Students for Justice in Palestine of anti-Semitic actions on campuses.

Parents borrowing to send kids to college skyrocketed over the last two decades -   Borrowers with Parent PLUS loans, a product the government offers parents to help pay for their kids’ education, made up 19.9% of the federal student loan borrowers in the 2011-2012 academic year, according to an analysis of Department of Education data released Tuesday by personal finance site, NerdWallet. That’s a 385% jump from the 1989-1990 academic year, when the share of borrowers with PLUS loans was just 4.1%, NerdWallet found.  Skyrocketing college costs and the increase in the number of students from a variety of income backgrounds attending college have likely fueled the growth in parent borrowing as families scramble to find ways to pay for school. The average balance of a Parent PLUS loan, including interest, grew from $15,323 to $40,154 during the same period NerdWallet found. “You find this middle zone where you’re not quite eligible for a lot of free aid, but you don’t have the resources to cover the cost of college,” said Nonso Maduka, NerdWallet’s student aid expert. “They’re turning to programs like these that are an accessible form of debt, but might not always be the best solution down the line.” Despite the impulse of many parents to shield their students from debt, experts say it often makes sense for students to maximize their own federal aid eligibility first. That’s because students should theoretically reap the return on the investment in their schooling and have decades of work ahead of them to earn the money to pay off their debts. Parents, on the other hand, may be nearing retirement by the time their children are going to college.  A loan could force them to work longer or put their retirement income at risk.  In fiscal year 2013, 17% of PLUS loans held by borrowers between the ages of 65 and 74 were in default, according to data from the Government Accountability Office These borrowers could be losing out on the benefits they need to live comfortably in retirement — the government has the power to garnish a portion of a borrower’s Social Security check over an unpaid student loan.

Democrats' College Plans Omit Key Reforms - To say taxpayers subsidize higher education is the definition of an understatement. During the 2014-15 school year, Uncle Sam disbursed nearly $100 billion in student loans and spent another $50 billion on Pell Grants and other student aid programs. Not to be outdone, Democratic presidential candidates Hillary Clinton and Bernie Sanders have each proposed additional higher education spending to the tune of $35 billion a year on average in Clinton's case and $75 billion in Sanders'. With the candidates asking so much more of taxpayers, it is worth examining what their plans intend to accomplish.  Sanders has famously proposed abolishing tuition at public colleges and universities for rich and poor students alike. Clinton has taken a less dramatic approach. Her plan aims to make public institutions "debt-free." It includes federal subsidies to lower tuition, but also requires contributions from students and their families.The Clinton and Sanders proposals center around the problem of high tuition, but both fail to recognize that the trouble is exacerbated by government involvement as much as it is tempered. For example, in addition to their efforts to reduce or eliminate tuition at public institutions, both candidates call for cutting the interest rate on student loans. But such a policy might just make things worse — as it becomes easier to borrow, it also becomes easier for colleges to hike tuition. Affordability matters, but accountability matters too. The American higher education system, while sometimes called the envy of the world, is still rife with problems. Among them are low graduation rates and the inability of many graduates to find relevant jobs. Currently, if colleges fail their students, there are few ways to hold the institutions accountable.  Overall, the Democrats' proposals mostly miss the problems. Federal student aid is a mess. The government offers several different aid programs, some of them technically unlimited, which cause headaches for students and expose taxpayers to tremendous risk. Simplification of the system, combined with hard caps on how much may be disbursed, would be welcome.

Student Loan Defaults Are Up, New Data Show -  The U.S. Department of Education's new data on the status of outstanding student loans show that outright defaults are up.  However, their press release--and much of the accompanying media coverage--instead played up a decline in loan delinquencies. The increase in defaults is worrisome and needs to be addressed by Congress. The total amount of outstanding direct student loans stood at $855 billion at the beginning of the first quarter of 2016, distributed among over 30 million recipients. (This total does not include loans still outstanding under the now-discontinued FFEL program, which guaranteed private-sector student loans.) The total direct loan amount outstanding is up roughly 15 percent over a year ago, doubtlessly the result of relentless tuition increases. Excluding student loans owed by borrowers currently in school or in their six-month grace period, 46 percent of student loans are not currently being repaid. Ten percent of student loans are delinquent, meaning the borrower has missed payments for thirty days or more. Another 13 percent are in deferment, which means payments have been postponed for various reasons. Another 14 percent are in forbearance, meaning the borrower has encountered economic hardship and had their payments suspended or reduced. The remaining 8 percent are in default.  Fifty-four percent of loans are currently in repayment, up slightly from 51 percent at the same point in 2015.

Student Loan Defaults Hit $121 Billion; 40% 0f All Borrowers Not Making Payments - – Federal student loan defaults have hit an astounding $121 billion, with about 40 percent of all borrowers not currently making any payments, according to a government report. “This is a slow-moving disaster,” Jason Delisle, director of the Federal Education Budget Project at New America, told the Detroit Free Press. “Why no hearings on Capitol Hill? Why isn’t the administration talking about it more?” The U.S. Department of Education highlighted the report in a self-congratulatory news release about an increase in the number of students who are enrolling in income-based repayment programs. In December 2015, there were 4.6 million borrowers using income-based repayment plans, which represents a 48 percent increase from the year prior, and a 140 percent increase from two years ago, according to the news site. “Today’s analysis suggests that the administration’s efforts to help struggling borrowers are having a positive impact,” U.S. Education Secretary John King Jr. said. “While we see promising signs of progress, we know we have to work to do to ensure that every borrower in distress has a clear path to avoid default. And I will continue to fight to ensure that students have access to an affordable education that helps them get ahead, rather than drowning in debt.” “Twenty percent of all federal load borrowers have defaulted on their loans, according to new data released by the federal government last week,” the Free Press reports. “That translates into $121 billion of loans in default. That same data show 40 percent of all borrowers are not making any payments, and are in some sort of forbearance, delinquency or default.”

Americans just had $176 million in wages garnished by the government due to unpaid student loans - Despite more programs available to federal student loan borrowers to manage their loans, borrowers are still struggling. In fact, between October 1 and December 31, 2015, private debt collection companies hired by the Department of Education garnished more than $176 million in wages from defaulted student loan borrowers in order to pay back their debts, according to data released last week.  Though the government provides a variety of options to help student loan borrowers manage their payments, it also has extraordinary powers — including wage garnishment — to collect on the debt if a borrower defaults. There’s not much historical data on how much student loan debt collectors have secured through wage garnishment, so it’s hard to say whether there are fewer borrowers being subjected to wage garnishment than in previous years. The government did release similar data last year, which showed that the companies collected $170 million over the three months leading up to October of 2015. To be sure, these companies do collect more by other means — more than three quarters of the money the companies recovered for the Department came through rehabilitations, a process that allows defaulted borrowers to become current on their student loans after a series of on time payments.   “You have to wonder what conditions people are living in when they’re seeing that much of their wages garnished.” What’s more, the share of total borrowers who should be making payments on their loans, but are defaulting instead, hit its highest level in three years last quarter, according to an analysis of the data released last week by Jason Delisle, the director of the Federal Education Budget Project at New America, a Washington-based think tank.

Citing pension woes, S&P just cut N.J's credit outlook to negative | Standard and Poor's Ratings Services lowered its outlook for New Jersey from stable to negative Tuesday over concerns with the state's declining pension funding levels and growing retirement liabilities. Last week, Fitch Ratings assigned New Jersey a stable outlook, though it also warned of New Jersey's mounting retirement liabilities and relatively high debt load. But Standard and Poor's took a dimmer view of the state's financial picture. Those retirement benefits costs are putting "significant" pressures on the state, the agency said, and they're made worse by contributing less than recommended by actuaries to keep the system solvent and by unremarkable investment returns. The pension fund returned 4.16 percent last fiscal year, and its market value fell below $71 billion at the end of December. A spokesman for the Treasury Department, Christopher Santarelli, said the department is "gratified that all the rating agencies maintained New Jersey's credit rating in recent days and that only S&P changes its outlook." "S&P noted improvements in the State's surplus, revenue forecasting, and economic profile, but stated the obvious, that New Jersey's postemployment liabilities continue to be our Achilles heel," he said.

Illinois Supreme Court strikes down Chicago pensions plan - (AP) — The Illinois Supreme Court on Thursday struck down a state law designed to narrow multibillion-dollar deficits in two of Chicago’s chronically underfunded pension funds. The law was aimed at rescuing accounts that are short by roughly $8 billion and cover about 61,000 current and retired municipal civil servant workers. The law forced Chicago to significantly step up its contributions, but also reduced pension benefits — which affected workers argued was unconstitutional. The city has warned that the funds would be insolvent within 15 years without the change. One account covers workers such as librarians, health care aides and non-teaching public school employees, while the other covers city laborers.The Legislature and former Democratic Gov. Pat Quinn approved the plan in 2014, and the law took effect in 2015. But in a lawsuit filed by pension-program participants, a Cook County judge ruled last summer that the law violated the Illinois Constitution’s protections against reducing promised pension benefits. The decision mimicked a ruling two months earlier by the state’s Supreme Court on a separate pension bailout: the $111 billion deficit in state-employee retirement accounts. In the Chicago plan, lawyers argued that the city wasn’t skirting the “pension protection clause” because the huge increase in tax-dollar contributions required by the law was a benefit that ensured there would be pensions to pay out to 61,000 workers and retirees in the coming decades.   

Report of 10,000 severe workplace injuries might be only half the problem WaPo - Shortly after a federal rule requiring employers to report severe work related injuries was implemented, Labor Department staffers in the Occupational Safety and Health Administration’s (OSHA) Atlanta office noticed a disturbing and surprising trend – “numerous reports of fingertip amputations among workers using food slicers.” That’s one finding in an OSHA document released Thursday about the 10,388 severe work-related injuries reported in 2015, the first full year of a federal reporting requirement. Injuries resulting in eye loss, amputation or hospitalization must be reported within 24 hours.  Included were 2,644 amputations and 7,636 hospitalizations. Employers were already required to report fatalities within eight hours. Until the severe injury reporting requirement, OSHA officials didn’t have a full grasp of the situation. “Too often, we would investigate a fatal injury only to find a history of serious injuries at the same workplace,” the report says. “Each of those injuries was a wake-up call for safety that went unheeded.” Even with the new requirement, officials still don’t have a complete accounting of severe injuries. OSHA knows the reported number is an under-count.“We think the actual number might be twice as high,” Assistant Secretary of Labor David Michaels said by telephone.

How McKinsey Helped Turn Big Pharma into a Rent Extraction Business -- Yves Smith - The pharmaceutical industry has long enjoyed very generous government support, yet over the last two decades has taken to putting profits (meaning CEO and C-level bonuses) over combatting disease. Drug companies in the US benefit from decades of large-scale research and development by the National Institutes and Health and other Federal agencies. They also get R&D tax credits that to a large degree represent an acceleration of tax break for the expected future profits. Yet when those profits actually show up, they shift them offshore to avoid paying taxes in the US.* And let us remind you that it not the responsibility of corporate executives; the “maximize shareholder value” theory of governance was made up by economists and does not have a legal foundation (see here for a longer discussion). And even if that were the case, actually trying to achieve that goal is counterproductive. As John Kay of the Financial Times explained in a 2004 article, and expanded in his book Obliquity, in complex systems, attempting to chart a straightforward path to a goal typically fails. Why? We don’t understand the system well enough to define an efficient way through it. For instance, a study that paired companies in a series of industries, one that chose complex and aspirational goal versus ones that set out to “maximize shareholder value,” found that in every case, the company with richer and loftier objectives performed better than its counterpart.** One of the poster children for anti-social conduct by Big Pharma is Valeant, which is basically an up-market version of Martin Shkreli, a patent troll whose main method of “adding value” has been to buy drug businesses and jack up prices. A post yesterday at Business Insider recaps some of the high points of the well-warranted consternation over Valeant’s practices:

The Hidden Health Costs of the Global Financial Crisis - One of the many impacts of the Global Crisis was on stress levels, and these can be a risk factor for adverse birth outcomes. This column shows that exposure to the Crisis resulted in a significant reduction in the birth weight of babies in Iceland, comparable in size to the effect of smoking during pregnancy. The full costs of poor health at birth as a result of the Crisis will not materialise until the children exposed in utero become adults. The economic costs of financial crises are large. Much effort has been put into quantifying the direct economic costs due to unemployment, production contraction, and wealth destruction associated with the 2008 Global Crisis. The estimates show that the Crisis and its aftermath have been distinctive; in the US, where it was responsible for the destruction of around 44% of the median household wealth (Wolff 2014), it was the worst downturn since the 1930s, and the suggested cumulative loss in world output associated with the Crisis lies in the range of $5 to $15 trillion dollars (Adelson 2013). The Crisis might, however, have had other more subtle but still direct costs. Because financial difficulties may raise stress levels among the people they affect, and stress is a risk factor for adverse birth outcomes, children who were in utero during the downturn might be at risk of being born with poorer health endowments. Despite the pervasiveness of financial stress in advanced economies, we have very limited understanding of the effect on health at birth. My research attempts to fill this void.

Threat to medicine pipeline in TPP - The cost and availability of expensive new medicines like Keytruda are still at risk from the TPP despite government assurances. That is the implication of documents released under the Official Information Act showing advice from the Ministry of Health to the Government.One of the last and most controversial issues to be settled in the TPP negotiations was the length of monopoly protection given to these new medicines. It landed on a choice between eight years (what the US wanted) and five years plus "other measures" such as medical safety approvals to achieve a "comparable" delay before lower-cost equivalent medicines could be provided to patients.The documents show that these medicines could be approved in NZ within a year after the monopoly ends - a total of six years. This is two years short of US expectations. If the US forces the issue as is expected, that would mean two more years of high prices and patients going without medicines they need.  . Keytruda is a "biologic" medicine, manufactured using biological rather than conventional chemical processes. A treatment course for a single patient can cost hundreds of thousands of dollars. Although more expensive to manufacture than conventional medicines, the main reason they cost so much is lack of competition from equally effective versions known as "biosimilars".  One way producers of biologic medicines prolong their monopoly is a law preventing market approval of biosimilars for five years after approval of the original biologic. The USA wanted to extend it to eight or 12 years. A standoff was resolved only during the final hours of negotiations using ambiguous legal wording. This ambiguity allowed governments like NZ and Australia to claim that requirements can be met under current practice, while also allowing US trade officials to claim the agreement guaranteed at least eight years.

The Global War on Drugs Has Unleashed an International Health Crisis, Says Top Health Panel -- A premiere public health commission warned Thursday that the global war on drugs and zero tolerance policies are unleashing an international health crisis by fueling “lethal violence, communicable-disease transmission, discrimination, forced displacement, unnecessary physical pain, and the undermining of people’s right to health.” A joint initiative of Johns Hopkins Bloomberg School of Public Health and The Lancet, the commission released a report calling for a global transformation of drug policy—towards decriminalization and harm reduction. “The global ‘war on drugs’ has harmed public health, human rights and development,” Dr. Beyrer continued. “It’s time for us to rethink our approach to global drug policies, and put scientific evidence and public health at the heart of drug policy discussions.” The researchers based their findings on a review of existing evidence and an “original analyses and modeling on violence, incarceration and infectious diseases associated with drug policies,” according to a press statement. They concluded that punitive measures that fail to reduce harm are meaurably killing people. “The persistence of unsafe injection-linked transmission of HIV and HCV that could be stopped with proven, cost-effective measures remains one of the great failures of the global responses to these diseases,” the authors wrote. Notably, the report concludes that the criminalization of drugs unleashes political and social violence, including the “mass incarceration of African Americans and Hispanics for non-violent drug crimes has led to deterioration of families and communities.” The researchers also point out that the war on drugs has unleashed horrific violence across Central America and Mexico, leading to a spike in homicides that has measurably reduced life expectancy in Mexico and sparking a mass displacement.

Planned Parenthood defund bill cites dentists as reproductive care alternative -- A bill passed in the Florida legislature this week would effectively defund Planned Parenthood and other reproductive rights clinics by preventing state agencies from working with any organization that provides abortion care other than that for victims of rape, incest, or if the life of the woman is at risk. As the bill heads to governor Rick Scott for his signature, several state lawmakers who have insisted that plentiful alternatives exist for reproductive and sexual healthcare have cited a list of health centers that includes dentists, optometrists, and elementary schools. “I don’t understand how they put this list together,” said Kheyanna Suarez, a student at Florida Atlantic University who first started visiting Planned Parenthood when she was 16. “Were they blind and mashed everything from Google on to one list? A dental office, a Salvation Army, an elementary school – I can’t go and get care at those places. If I have to leave my healthcare up to the places on that list, I am scared. I don’t think an elementary school can prescribe me birth control.”

From daredevil to chicken: Scientists find off-switch for risky behavior -- Whether you prefer to play it safe or wade into risky business for larger payoffs, your decision process may largely depend on a tiny bundle of cells deep in your noggin. By tagging and tweaking those cells in the brains of high-rolling rats, researchers were able to turn them from ballsy to cautious decision-makers. More specifically, the rodents switched their preference away from pulling a lever that released a jackpot of sugary treats 25 percent of the time to another lever that served up smaller-sized treats 100 percent of the time. The finding, published in Nature, backs up previous studies in humans showing that drugs that interfere with those same brain cells can lead to gambling problems. The study also offers a neurological explanation for differences in risk-taking behavior as well as a target for new treatments for gambling addictions. “These findings indicate interesting directions for further study,” the authors conclude, which “will benefit from deeper knowledge of how precisely defined cell populations, brain regions, and connections support risky choice.”

Are You Eating Toxic Chocolate? Lead Found in Trader Joe’s, Hershey’s and Other Chocolates - Consumer health watchdog As You Sow released results Wednesday showing that 35 of 50 chocolate products tested, including chocolate bunnies and eggs, expose consumers to lead and cadmium above levels set by California’s Safe Drinking Water and Toxic Enforcement Act. “Lead exposure is associated with neurological impairment, such as learning disabilities and decreased IQ, even at very low levels. In fact, there is no safe level of lead for children,” said Eleanne van Vliet, MPH, As You Sow’s environmental health consultant. As You Sow has filed legal notices against chocolate manufacturers, including Trader Joe’s, Hershey’s, Green and Black’s, Lindt, Whole Foods, Kroger, Godiva, See’s Candies, Mars, Theo Chocolate, Equal Exchange, Ghirardelli, Earth Circle Organics and more, for failure to warn of lead and/or cadmium in their chocolate products. “As underscored by the Flint disaster, humans have contaminated our environment with lead, and now we must do everything in our power to protect ourselves and children, who are the most vulnerable of us, from every possible exposure,” said Sean Palfrey, MD, a pediatrician and professor of pediatrics and public health at Boston University School of Medicine. “Young children and pregnant women especially should avoid exposure to lead.” Scientists have linked chronic cadmium exposure to kidney, liver and bone damage in humans. Children are more susceptible to especially susceptible to even from low doses over time. Animal studies associate cadmium exposure with decreased birth weight, neurobehavioral problems and male reproductive harm.

'BPA-free' plastic accelerates embryonic development, disrupts reproductive system - UCLA research suggests common substitute for BPA is not safer. Companies advertise "BPA-free" as a safer version of plastic products ranging from water bottles to sippy cups to toys. Many manufacturers stopped used Bisphenol A to strengthen plastic after animal studies linked it to early puberty and a rise in breast and prostate cancers. Yet new UCLA research demonstrates that BPS (Bisphenol S), a common replacement for BPA, speeds up embryonic development and disrupts the reproductive system. Reported in the Feb. 1 edition of the journal Endocrinology, the animal study is the first to examine the effects of BPA and BPS on key brain cells and genes that control the growth and function of organs involved in reproduction. "Our study shows that making plastic products with BPA alternatives does not necessarily leave them safer," explained senior author Nancy Wayne, a reproductive endocrinologist and a professor of physiology at the David Geffen School of Medicine at UCLA.  After uncovering her first finding about BPA in 2008, Wayne immediately discarded all of the plastic food containers in her home and replaced them with glass. She and her family purchase food and drinks packaged in glass whenever possible. "Most people think of BPA as mimicking the effects of estrogen. But our work shows that it also mimics the actions of thyroid hormone," said Wayne. "Because of thyroid hormone's important influence on brain development during gestation, our work holds important implications for general embryonic and fetal development, including in humans." Researchers have proposed that endocrine-disrupting chemicals may be contributing to the U.S.' rise in premature human births and early onset of puberty over the past couple of decades.

The long-awaited silica rule is a step forward for workers - EPI - The Department of Labor has taken another significant action to protect American workers from harm by issuing a final rule to control employee exposure to silica dust, which destroys lung tissue and causes cancer, disabling thousands of workers every year and killing hundreds more. Secretary of Labor Tom Perez and OSHA Administrator David Michaels have persevered against a political hailstorm to finish this rule, which was first conceived more than 35 years ago.  Some employers will complain that it’s too expensive to protect their employees from lung disease, but it’s not.  Thousands of businesses, in construction, mining, brick-making, and other industries already meet the standard. A dent in the profits of the businesses that haven’t cared enough in the past to do what was needed is no reason to back away now from safer workplaces and better lives for millions of Americans. Ultimately, the decision to issue this rule rests with President Obama, who deserves credit for putting people first.

Will Anyone Accept Responsibility for Flint? - Lawmakers on the House Oversight Committee agree that multiple layers of government failed the people of Flint, Michigan, whose children were tragically poisoned by lead and who, to this day, can’t trust the water coursing through their community. On Thursday, at the third Flint hearing they’ve held this year, legislators excoriated Michigan Governor Rick Snyder and Environmental Protection Administrator Gina McCarthy on the roles they played in the crisis. But beyond that consensus, lawmakers’ opinions of who bears primary responsibility largely broke down along partisan lines. They’re lines that fundamentally divide Republicans, who emphasize state and local government control, from Democrats, who tend to place their faith in federal oversight. But instead of blaming the government breakdown on the entities whose primacy they generally emphasize, both sides instead targeted the institutions they think should have even less authority or control. “Republicans are desperately trying to blame everything on the EPA,” thundered Elijah Cummings, the committee’s ranking member from Maryland. “So let me say this: I agree that the EPA should have done more. They should’ve rushed in sooner to rescue the people of Michigan from Governor Snyder’s vindictive administration and his utter incompetence at every level.” Cummings’s rhetoric was characteristic of lawmakers’ tone at Thursday’s hearing. Snyder and McCarthy were both asked, strongly and repeatedly, to resign. The two officials, for their part, blamed each other: The governor faulted the EPA for its slow and “ineffective” response, while McCarthy took aim at state officials for obfuscating the poor water quality. Both also suggested they weren’t fully aware of the problem’s scope until far too late.

Inquiry: State of Michigan "fundamentally accountable" for Flint crisis -  The state of Michigan is "fundamentally accountable" for Flint's lead-contaminated water crisis because of decisions made by its environmental regulators and state-appointed emergency managers who controlled the city, an investigatory task force concluded Wednesday in a withering report. The panel, appointed by Gov. Rick Snyder to review the disaster, said what happened in Flint is "a story of government failure, intransigence, unpreparedness, delay, inaction and environmental injustice." It also cited "intransigence and belligerence that has no place in government." "Flint water customers were needlessly and tragically exposed to toxic levels of lead and other hazards through the mismanagement of their drinking water supply," investigators said. Moreover, the 116-page report described as "inappropriate" a frequent claim of Snyder and his representatives that the Flint water crisis represents a failure of the local, state and federal governments. That suggests "that blame is attributable equally to all three levels of government," the report said. "The state is fundamentally accountable for what happened in Flint," it said. Flint's 2014 switch in drinking water sources led the supply to become contaminated when lead leached from old pipes and fixtures into some homes, businesses and schools. The Republican governor has repeatedly apologized for the state's role as some have called for his resignation.

Flint burglary where water files stored 'an inside job,' police chief says |  -- Mystery still surrounds an unsolved December break-in at an executive office inside City Hall where Flint water files were kept. As of Friday, March 18, there were still no suspects in the case, and officials say it may never be known what -- other than a TV -- was taken. But the city's new police chief Tim Johnson says it's too suspicious that there was a break-in where important documents were kept, just as investigations began heating up and decision makers were beginning to be held accountable. "It was definitely an inside job. The power cord (to the TV) wasn't even taken. The average drug user knows that you'd need the power cord to be able to pawn it," Johnson said. The office was not assigned to any city employees at the time of the break-in, city officials have said. "It was somebody that had knowledge of those documents that really wanted to keep them out of the right hands, out of the hands of someone who was going to tell the real story of what's going on with Flint water," he said. Flint Mayor Karen Weaver said documents were strewn about the room, and it is impossible to know if any of them were taken.

Following Breadcrumbs: TPP Text Provides Clues to U.S. Positions in TTIP - Institute for Agriculture and Trade Policy: The U.S. government has made no secret of its interest in limiting the EU’s reliance on the Precautionary Principle in setting food, environmental and chemical safety standards. Under that Principle, which is part of the EU’s foundational Treaty of Lisbon, when there is a possibility that a policy or action could harm human or environmental health but the science is uncertain, that action is avoided until there is more definitive scientific information.5 The U.S. position is clearly laid out in the negotiating object-tives set out in Trade Promotion Authority.6 It is also strongly backed by industry. At the start of the TTIP negotiations, a coalition of 47 agribusiness firms sent a letter to USTR insisting that, Such precautionary measures are often based on mere hazard identification—or worse, on public perception and political considerations—rather than proper, science-based risk assessments, as required by the WTO. And, even in cases where risk assessments are ultimately carried out, the EU has demonstrated an inability to lift unjustifiable measures because of domestic political pressures. “Precaution” in the EU has become a pretext for import protectionism under the pretense of consumer safety. As a result, U.S. exports have repeatedly paid the price.7

Regulations of Toxic Chemicals under TTIP  -  In July 2015, the European Parliament demanded the European Commission not to affect the implementation of the EU chemicals legislation REACH through the Trans-Atlantic Trade and Investment Partnership (TTIP) and not to negotiate with the US on issues “such as REACH and its implementation” in order to protect Europes stronger regulations of toxic chemicals relative to the US. The Center for International Environmental Law (CIEL) sees in the most recent proposals a continued threatment of the implementation of REACH, the EU flagship chemical regulation, and other European laws for chemicals, including the implementation of long overdue criteria to regulate endocrine disrupting chemicals, under TTIP. “The latest TTIP proposals would allow ‘regulatory cooperation’ to affect the implementation of EU chemical laws,” says Baskut Tuncak, Senior Attorney, CIEL. “This is a serious threat to EU chemical laws and policies as the US continues to lobby against more protective EU standards.” “Regulatory cooperation in TTIP mimics the European Commission’s controversial agenda for lean EU regulations, which it calls Better Regulation,” adds Laurens Ankersmit, EU Trade & Environment Lawyer with ClientEarth. “TTIP would therefore cast its controversial elements in stone, putting yet another break on regulators’ ability to manage hazardous chemicals.”

Caribbean nations make styrofoam illegal - Business Insider: Sick and tired of seeing their white sand beaches tainted by garbage, Caribbean nations are at the vanguard of international efforts to eliminate plastic waste. On April 1, a ban on Styrofoam products will come into force in Guyana. The small island nation of Dominica is working on banning Styrofoam this year, too. And Antigua and Barbuda is hoping to phase out plastic bags by July. "It is a progressive program that we are on," Antigua and Barbuda Health Minister Molwyn Joseph told teleSUR. "We want to clean up this environment. We want to encourage people to use biodegradable materials for storage and as containers for food and drinks." The efforts are small in relative terms — the total population of the three island countries is around 900,000 — but they might help curb the 8 million tons of plastic that are estimated to leak into the ocean annually, according to a recent Ellen MacArthur Foundation report. Plastic doesn't decompose quickly (Styrofoam can take more than 500 years to breakdown), which means around 150 million tons of plastic are floating in the oceans, the report said. "Like a stranglehold, Styrofoam latches itself around the neck of the environment, shortening its breath and its cries going fainter with each passing day," said a Guyanese Environmental Protection statement issued in January. Experts lauded the island nations' efforts, but also warned that they don't rush headlong into banning plastics without considering the host of issues that often accompany the move. "Every time we reduce an uninvited guest to the environment, it's a good thing," said Christopher Reddy, a marine chemist at the Woods Hole Oceanographic Institution. "But you have to balance that with the alternatives — whether they are better or not — and the reality of whether or not we are going to make difference."

The New Way Microplastics Are Devastating Marine Life: MSN video - By now, we're all aware that there is an unbelievable amount of trash in our oceans. New research shows how this is changing marine life

Japan Kills 333 Minke Whales Including 200 Pregnant Females -- As part of its intention to kill nearly 4,000 whales in the Antarctic over the next 12 years as “scientific research,” Japan’s whaling fleet returned to port Thursday with 333 dead minke whales, including pregnant females. According to Reuters, 103 of the slaughtered whales were male and 230 were female, with 90 percent of the mature females pregnant. A press release from the Institute of Cetacean Research (ICR), the organization behind the Japanese government’s whaling program, includes a map showing the hunt occurred within the Southern Ocean Whale Sanctuary, the Australian Whale Sanctuary and the Ross Sea. Japan’s Fisheries Agency resumed its whaling program in the Antarctic Ocean despite a landmark 2014 ruling from the International Court of Justice (ICJ), the the primary judicial branch of the United Nations. Japan’s actions have received widespread condemnation from conservation groups. “Just a year and a half after the ICJ ruled Japan’s whaling program to be illegal, and just months after the Australian Federal Court ordered the whalers to pay a $1 million fine for illegally slaughtering whales inside the Australian Whale Sanctuary, the Japanese government has sanctioned yet another mass slaughter of protected Minke whales in the Southern Ocean,” Captain Alex Cornelissen, the CEO of Sea Shepherd Global, said in a statement earlier today. “This rogue act is in blatant disregard of international law and diplomacy, and sets a dangerous precedent for all nations that respect the rule of law.”

Kraft Heinz sued over wood pulp content in cheese | TribLIVE: The Kraft Heinz Co. is violating the District of Columbia's consumer protection law by selling grated parmesan cheese containing about 3.8 percent cellulose as “100% Grated Parmesan Cheese,” a D.C. resident says in a lawsuit filed Friday in federal court in Pittsburgh that seeks class-action status. The lawsuit is one of several filed nationwide since a Bloomberg news report in February reported that several companies' cheese included wood pulp as filler. Bloomberg had the cheeses tested and reported the cellulose amounts in the story. A company spokesman couldn't be reached for comment. The lawsuit is seeking damages plus an injunction that would prevent Kraft Heinz from selling the parmesan cheese in the District of Columbia.

Iowa’s 60 Million Laying Hens Aren’t Being Monitored by Food-Safety Inspectors - In 2010, 550 million eggs were recalled after thousands of people were sickened with salmonella in an outbreak tied to farms in Iowa, the leading state for laying-hen production. Despite Iowa producing 15 billion eggs annually, amounting to $2 billion in sales, both state and federal food-safety inspections were halted there last year, the Des Moines Register reported on Sunday. The concern was that letting inspectors into laying-hen facilities could help spread the virulent strain of bird flu that has been killing off birds in the tens of millions. While the disease has been devastating for animals and the people who rely on the industry for their livelihoods, there was a problem with the logic behind the plan: When the FDA stopped inspections in May 2015, there were no documented instances of bird flu being spread by inspectors. “This is jaw-dropping. I just don’t know what else to say,” Marion Nestle, a professor of food studies at New York University and an expert on food safety, told the Register. “The inspectors are turning up potential hazards. Why anybody would tell you with a straight face that suspending these inspections is no big deal is beyond my comprehension.”

Tiny Vermont Brings Food Industry to Its Knees on GMO Labels - ABC News: General Mills' announcement on Friday that it will start labeling products that contain genetically modified ingredients to comply with a Vermont law shows food companies might be throwing in the towel, even as they hold out hope Congress will find a national solution. Tiny Vermont is the first state to require such labeling, effective July 1. Its fellow New England states of Maine and Connecticut have passed laws that require such labeling if other nearby states put one into effect. The U.S. Senate voted 48-49 Wednesday against a bill that would have blocked such state laws. The food industry is holding out hope that Congress will prevent states from requiring such labeling. Some companies say they plan to follow Vermont's law, while others are considering pulling their products from the small state. The Grocery Manufacturers Association has called for a national solution instead of what it says is a patchwork of confusing and costly state labeling laws. It has also challenged Vermont's law in federal court, asking that the law be blocked until the case is resolved. That request was denied and is on appeal. General Mills' "announcement is the latest example of how Vermont's looming labeling mandate is a serious problem for businesses," the association said in a statement. "Food companies are being forced to make decisions on how to comply and having to spend millions of dollars. One small state's law is setting labeling standards for consumers across the country." Nestle supports the mandatory informed disclosure of the presence of GMO ingredients in food and beverages and believes it's best done by a uniform national approach, but will abide by state laws if they come into effect, according to spokeswoman Edie Burge.

Is Bill Gates Right About GMOs? -- The world’s wealthiest man really wants Africa to embrace genetically engineered foods or GMOs. In an interview with the Wall Street Journal’s Rebecca Blumenstein, Bill Gates explained his views about the controversial food technology:  “What are called GMOs are done by changing the genes of the plant, and it’s done in a way where there’s a very thorough safety procedure, and it’s pretty incredible because it reduces the amount of pesticide you need, raises productivity (and) can help with malnutrition by getting vitamin fortificationAnd so I think, for Africa, this is going to make a huge difference, particularly as they face climate change … The U.S., China, Brazil, are using these things and if you want farmers in Africa to improve nutrition and be competitive on the world market, you know, as long as the right safety things are done, that’s really beneficial. It’s kind of a second round of the green revolution. And so the Africans I think will choose to let their people have enough to eat.”  If Gates is right, that’s great news. That means the key to solving the hunger problem is lowering barriers for biotechnology companies to get their climate-resilient, nutrition-improved genetically engineered crops to market.  Another video released the same week as the Gates Wall Street Journal interview provides a very different perspective.  The short film by the Center for Food Safety describes how the state of Hawaii, which hosts more open-air fields of experimental genetically engineered crops than any other state, has become contaminated with high volumes of toxic pesticides.The film and report explain that five multinational agrichemical companies run 97 percent of genetically engineered (GE) field tests on Hawaii, and the large majority of the crops are engineered to survive herbicides.

Study Indicates That Organic And Sustainable Agriculture Can Feed The Planet - The never ending debate as to whether organic food production could actually feed the globe is back at the debate table. And the data culled for this latest report suggests that turning to increased organic food production to feed the globe isn’t really a far-fetched idea. Washington State University researchers have concluded that feeding a growing global population with sustainability goals in mind is possible. Their review of hundreds of published studies provides evidence that organic farming can produce sufficient yields, be profitable for farmers, protect and improve the environment and be safer for farm workers. Critics have long argued that organic agriculture is inefficient, requiring more land to yield the same amount of food. The review paper describes cases where organic yields can be higher than conventional farming methods. The report, Organic Agriculture for the 21st Century, authored by Washington State University Regents Professor of Soil Science and Agroecology John Reganold and doctoral student Jonathan Wachter, looks at the efficacy of organic and non-organic farming according to the four pillars of sustainability: economics, environment, productivity and community well-being. Organic production currently accounts for only one percent of global agricultural land, despite rapid growth in the last two decades.

Seed Banks Are Supposed To Ensure Food Security, But They’re Missing Crucial Pieces --Seed banks are supposed to be a safeguard against terrible food shocks, a sort of last line of defense if something terrible — a megadrought, a virulent disease, a war — wipes out a staple crop. But a new study found that the banks themselves are missing crucial pieces: crop wild relatives, which contain key genetic diversity that could help domesticated crops adapt to a changing climate. In a study published Monday in Nature Plants, a coalition of international scientists embarked on a first-of-its-kind effort to map the representation of crop wild relatives — crops that are genetically related but have evolved apart from domestication — in seed banks worldwide. They found that for the majority of the 81 crops they looked at, wild relatives were insufficiently represented in seed banks (also called gene banks), signaling a crucial disconnect between seed banks and the potential genetic diversity available to farmers and breeders. “There is a lot of diversity that has been left behind when crops were domesticated,” “That diversity includes important stuff like resistance to pests and diseases, or better nutritional composition. To ensure access to that diversity, you have to make sure that you still have access to the precursors and cousins which are still wild.” The researchers looked at 1,076 wild relatives related to 81 species of crops, from wheat to bananas. They found that over 70 percent of the wild relatives are not sufficiently preserved in global gene banks. Moreover, 29 percent of wild relatives are missing from gene banks entirely.

Study: Farms, hydropower at risk in West's changing climate: (AP) — Climate change could upset the complex interplay of rain, snow and temperature in the West, hurting food production, the environment and electrical generation at dams, the federal government warned Tuesday. Some areas could get more rain and less snow, reducing the snowmelt flowing into reservoirs in the summer when farmers need it to irrigate, the U.S. Bureau of Reclamation report said. Higher temperatures would mean more evaporation from reservoirs, particularly in California’s Sacramento and San Joaquin river basins. The delta of the Sacramento and San Joaquin provides water for two-thirds of Californians and irrigation for nearly a million acres of farmland. Hotter summers would also mean more demand for hydroelectric power in the summer, but reservoirs may have less water to run their generators then because of changes in precipitation patterns, the bureau said. The report, “Reclamation Climate Change and Water 2016,” looked at eight rivers from Washington state to Texas, including the Columbia, the Missouri, the Colorado and the Rio Grande as well as the Sacramento and San Joaquin. The Bureau of Reclamation is the largest wholesaler of water in the U.S. and the largest hydropower provider in the West.

 White House Responds To Western Governors’ Call For Action On Drought As the first-ever White House Water Summit got under way on World Water Day, the Obama administration announced a new cross-agency initiative to help vulnerable Western states build resiliency to drought.  Responding to requests for help made last year by the Western Governors’ Association, the White House’s new initiative aims to better coordinate the efforts of federal agencies to protect vulnerable communities from the impacts of drought.  Much of the western United States is in its 16th consecutive year of drought and, because reservoir levels have shrunk to 50 percent of capacity, water users in the Colorado River Basin may experience cuts in water deliveries in the coming months.  President Obama’s memo to executive branch departments and agencies lays out the administration’s plan to bolster state and local efforts to prepare for and adapt to drought.  The goals align with key themes that Governor Brian Sandoval (R-NV) highlighted as important to stakeholders at last year’s drought forum. These goals include: improving the collection and sharing of scientific data, better communicating drought risk, advancing market-based approaches for infrastructure and efficiency, and supporting innovative water use, efficiency, and technology.

White House: 17 Western States Face New Threats to Water Supplies From Impacts of Climate Change --Higher temperatures and changes in precipitation will exacerbate water supply woes in 17 Western states, the Interior Department announced Tuesday with the release of its SECURE Water Act Report. The report, which responds to requirements under the SECURE Water Act of 2009, shows several increased risks to western U.S. water resources during the 21st century.  According to the report, specific projections include:

  • a temperature increase of 5-7 degrees Fahrenheit by the end of the century;
  • A precipitation increase over the northwestern and north-central portions of the western U.S. and a decrease over the southwestern and south-central areas;
  • A decrease for almost all of the April 1st snowpack, a standard benchmark measurement used to project river basin runoff; and
  • a 7 to 27 percent decrease in April to July stream flow in several river basins, including the Colorado, the Rio Grande, and the San Joaquin.

The Interior Department released the report on the same day as the first ever White House Summit on Water, held in observance of World Water Day. For more: AP, The Hill, Think Progress,, San Francisco Chronicle, Denver Post, YubaNet

If You Catch And Use Rainwater In Colorado, You Are A Criminal - In a state where recreational marijuana was legalized two years ago and extreme weather has caused serious concerns, one mundane drought-fighting tool remains illegal: using rain barrels to catch rainwater from roofs for use in gardens.  Despite the fact that the American West is facing serious water shortages — Lake Mead, for example, is at its lowest recorded levels since the 1930s — recent proposals to legalize rain barrels in Colorado have been stalled or defeated. But this could soon change. A bill to legalize rain barrels is making its way through the Colorado state legislature, which would allow homeowners to possess two 55-gallon rain barrels to be used to collect and store rainwater for use in gardens and yards. The bill overwhelmingly passed the Colorado state House two weeks ago on a 61-3 vote, but faces an uncertain future in the Republican-controlled Senate later this week. . As Pete Maysmith, Executive Director of Conservation Colorado, which is leading the fight to legalize rain barrels put it, “It makes water policy approachable, not something just for lawyers and insiders.”  But, their efforts could face challenges, as anti-water conservation lawmakers could potentially kill the bill. Sen. Jerry Sonnenberg (R-Sterling, CO), who was responsible for the demise of the rain barrel bill last year, could fight the bill once again. The reason that Sonnenberg and other legislators have defended this antiquated policy lies in the complicated world of water law in the American West. Colorado is one of many states that operate under a prior appropriation system whereby people with “senior” water rights get access before those with “junior” water rights. In a water-constrained world, they argue, there won’t be enough to go around. And senior water right holders are worried that urban farmers and lawn-lovers will impinge on their allocations by collecting rain off their roofs.

Eastern Monarch Butterflies at Risk of Extinction Unless Numbers Increase -- Long-term declines in the overwintering Eastern population of North American monarch butterflies are significantly increasing their likelihood of becoming extinct over the next two decades, according to Scripps Institution of Oceanography at UC San Diego and U.S. Geological Survey (USGS) research published today.  The new study, available in the journal Scientific Reports, found that the Eastern migratory monarch population declined by 84 percent from the winter of 1996-1997 to the winter of 2014-2015. Using this information, the study demonstrated that there is a substantial chance—11 to 57 percent—of quasi-extinction over the next 20 years. A quasi-extinct population is one with so few remaining individuals left that recovery is impossible. While the remaining individuals may survive for a short time, the population as a whole will inevitably go extinct.   “Because monarch numbers vary dramatically from year to year depending on weather and other factors, increasing the average population size is the single-most important way to provide these iconic butterflies with a much-needed buffer against extinction,” 

How much are trees feeling the heat of climate change? - Rising temperatures might not stress trees as much as previously thought. And that means they may continue to be efficient at scrubbing carbon from the atmosphere, even as the planet warms. As a result, some equations in our climate models will likely have to be tweaked. Forests are known for being massive carbon warehouses, drawing carbon dioxide out of the atmosphere through photosynthesis. Most of that carbon remains locked in trees' roots, trunks, branches, and leaves but a bit of it is emitted back into the atmosphere through a process called respiration. Previous models had suggested that respiration in trees would increase exponentially as the planet heats up, thus feeding even more carbon dioxide into the atmosphere and increasing global warming further. But new research suggests that feedback loop won't be as dramatically affected by rising temperatures.  The researchers estimated that, without acclimation, exposure to temperatures 3.4 degrees Celsius (6.12 degrees Fahrenheit) above ambient temperatures would prompt the plants to emit 23 percent more carbon dioxide over a period of three to five years. But when using heat lamps on trees in a forest and measuring the emissions, they found that leaf respiration increased by just 5 percent, according to new research published Wednesday in the journal Nature.

Warmer Winter Brings Forest-Threatening Beetles North - This winter has been the warmest on record in much of New England. And while many people enjoyed the T-shirt weather, it made Claire E. Rutledge, a researcher with Connecticut’s Agricultural Experiment Station, more concerned about what next season may hold.  Beginning in April, she will head to Wharton Brook and other state lands, setting traps for the southern pine beetle and checking them weekly through midsummer. The beetles, which can kill thousands of trees in epidemic attacks, had never been found beyond the pitch pine forests of the American South, because the winters were too cold. But they have migrated to New Jersey, where they have destroyed more than 30,000 acres of forest since 2002. And the warmer winters have now beckoned them to New England.  Alarmed scientists first discovered the beetles last year along a front stretching more than 200 miles, from central Long Island to Cape Cod and Martha’s Vineyard, a region long thought to be far too frigid for these tiny beetles, barely different in size and color from a chocolate sprinkle. “When I heard they caught a live beetle in Massachusetts,” Dr. Rutledge said, “that really freaked me out.”Now that the beetles are in New England, they are probably there to stay, state and environmental officials said. And if there is a severe outbreak, the region could lose much of its pitch pine forests. Many of the forests are already unhealthy, a result of overcrowding, making them especially susceptible to the pine beetle’s attacks — boring through bark, laying eggs and spreading a crippling fungus — and many state forestry divisions do not have the resources to combat them.

Is China Exporting Its Environmental Problems? - For years, logging ran rampant as the country transformed itself into the world’s biggest buyer of timber and wood products, including everything from furniture to paper. Denuded hillsides contributed to massive floods in 1998 that forced millions to evacuate their homes. This year, China plans to cut its commercial logging quota another 6.8 percent and will expand a ban on logging natural forests nationwide. Here's the problem, though: As China has quieted its chainsaws, the country has become the world’s largest importer of timber; the government predicts that by 2020 it will rely on imports for 40 percent of its needs. And as buyers, Chinese companies aren' terribly discerning. According to the London-based think tank Chatham House, China’s purchases of illegally harvested timber nearly doubled between 2000 and 2013, growing to more than 1.1 billion cubic feet. The damage extends across the developing world. China buys up 90 percent of Mozambique's timber exports, around half of which were harvested at rates too fast to sustain the forest over the long-term. In 2013, the World Wildlife Fund declared that illegal logging in the Russian Far East had reached “crisis proportions” after finding that oak was being logged for export to China at more than twice the authorized volumes. That same year, Myanmar tripled the volume of endangered rosewood exported to China (where it's particularly valued for its use in furniture). At those rates, some of Myanmar’s rosewood species could be extinct by 2017. Despite a total ban enacted in 2014, rosewood exports to China surged last year to levels reportedly not seen in a decade. China has no law against importing timber that was harvested illegally; buyers and overseas Chinese loggers (they can range from small independents to large corporations) are meant to self-regulate. (By contrast, the U.S. has had a formal ban on illegal plant imports since 2008.) Indeed, when Myanmar sentenced 153 Chinese loggers for illegal logging within its borders last year, China protested vociferously. The loggers were eventually freed.

Why is nobody talking about Africa's drought? - Millions in parts of eastern and southern Africa are facing the worst drought in three decades. Only 15 percent of the $155 million needed for relief aid has been funded to date. Since late 2015, Southern and Eastern Africa have been hit hard, and scientists warn that human-aided climate change is likely to make such events more frequent. The good news: While Africa needs help, it’s now more able to help itself. The drought has hit many African countries like a line of falling dominoes. The first to be toppled were farmers, both subsistence and commercial, who experienced massive crop failures in the last two harvests. In South Africa, the continent’s breadbasket, agronomists estimate that 30 to 40 percent of all corn crops will fail this year, and food prices have spiked for consumers across the region. As many as 36 million people in Southern and Eastern Africa now face hunger, according to the United Nations.But the drought has also reshaped lives in less obvious ways, says Victor Chinyama, chief of communication at UNICEF Zimbabwe. School enrollments are down, for instance, as families are forced to put their children into the workplace to make ends meet. Girls are particularly at risk, he says, as families are forced to contemplate early marriage to reduce their financial burden. “Of course there are immediate matters of survival,” he says, “but it’s also important that we don’t lose track of the long-term impact this drought could have on a generation’s development.”

The global water crisis in pictures - BBC News: Since 2011, American photographer Mustafah Abdulaziz has travelled to eight countries around the world highlighting the global water crisis in his documentary project, Water Stories. Seventy large-scale photographs from the series are on display in London in his first UK solo exhibition.  Abdulaziz's project aims to highlight the effects of urbanisation, poor sanitation, pollution and water scarcity. "Our most critical resource for life on this planet hangs in a delicate balance - between growing populations and energy demands, between rising seas and melting ice and between those who have access to clean water and those who do not," says the photographer.

El Niño Upsets Seasons and Upends Lives Worldwide -  In rural villages in Africa and Asia, and in urban neighborhoods in South America, millions of lives have been disrupted by weather linked to the strongest El Niño in a generation.In some parts of the world, the problem has been not enough rain; in others, too much. Downpours were so bad in Paraguay’s capital, Asunción, that shantytowns sprouted along city streets, filled with families displaced by floods. But farmers in India had the opposite problem: Reduced monsoon rains forced them off the land and into day-labor jobs.In South Africa, a drought hit farmers so hard that the country, which a few years ago was exporting corn to Asian markets, now will have to buy millions of tons of it from Brazil and other South American countries.“They will actually have to import it, which is rare,” said Rogerio Bonifacio, a climate analyst with the World Food Program, a United Nations agency. “This is a major drought.”The World Health Organization has estimated that worldwide, El Niño-related weather is putting 60 million people at increased risk of malnutrition, water- and mosquito-borne diseases, and other illnesses.Scientists began reporting early signs of El Niño conditions early last year, based on changes in surface-water temperatures and atmospheric pressure in the equatorial Pacific. By midyear, the World Meteorological Organization declared that El Niño was in full swing and that it was on track to be the strongest such event since 1997-98.

How a Monster El Niño Transforms the World’s Weather - Through the interactive graphic below, Climate Central takes a look at how this major climate pattern typically influences the world’s weather, what it can mean for societies in the areas it affects, and what has actually been happening with this particular event, which ranks amongst the strongest on record. After all, no two El Niños are the same. For instance, while Southern California was drenched during the 1997-1998 El Niño, it has remained disconcertingly dry this time around.  First, the big picture: El Niño is most known for shifting a large pool of warm ocean waters from the western to the central and eastern tropical Pacific. That shift changes where heat is pumped into the tropical atmosphere, disrupting its typical circulation patterns. Those local disruptions cause a domino effect through the global atmosphere that can alter weather thousands of miles away.  There are two main circulation patterns that are affected. All around the tropics is a pattern of rising and sinking air — like a vertical loop — called the Walker Circulation. The rising air corresponds to areas of unsettled, rainy weather, while the sinking air creates a stable, dry clime. Normally in the tropical Pacific, a major area of rising air is found over the western portions, where the warmest waters are found. With the eastward shift from El Niño, that rising air (and its sinking counterpart) move eastward as well. This displacement shifts the other branches of the Walker Circulation around the tropics, pushing wetter weather over areas that might normally be dry and vice versa. These areas typically see some of the strongest impacts from El Niño because they are in a region more directly linked to it.

Beyond record hot, February was 'astronomical' and 'strange': Earth got so hot last month that federal scientists struggled to find words, describing temperatures as "astronomical," ''staggering" and "strange." They warned that the climate may have moved into a new and hotter neighborhood. This was not just another of the drumbeat of 10 straight broken monthly global heat records, triggered by a super El Nino and man-made global warming. February 2016 obliterated old marks by such a margin that it was the most above-normal month since meteorologists started keeping track in 1880, according to the National Oceanic and Atmospheric Administration. NOAA said Earth averaged 56.08 degrees Fahrenheit (13.38 degrees Celsius) in February, 2.18 degrees (1.21 degrees Celsius) above average, beating the old record for February set in 2015 by nearly six-tenths of a degree (one-third of a degree Celsius). The old record was set just last December and the last three months have been the most above-normal months on record, said NOAA climate scientist Jessica Blunden. And it's not just NOAA. NASA, which uses different statistical techniques, as well as a University of Alabama Huntsville team and the private Remote Sensing System team, which measure using satellites, also said February 2016 had the biggest departure from normal on record.These were figures that had federal scientists grasping for superlatives. "The departures are what we would consider astronomical," Blunden said. "It's on land. It's in the oceans. It's in the upper atmosphere. It's in the lower atmosphere. The Arctic had record low sea ice." "Everything everywhere is a record this month, except Antarctica," Blunden said. "It's insane."

Current record-shattering temperatures are shocking even to climate scientists - “Stunning,” “wow,” “shocker,” “bombshell,” “astronomical,” “insane,”“unprecedented”– these are some of the words climate scientists have used to describe the record-shattering global surface temperatures in February 2016. It’s difficult to see any ‘pause’ or slowdown in the global warming over the past 50 years. To put the current temperatures into context, prior to last October, monthly global surface temperatures had not been more than 0.96°C hotter than the 1951–1980 average, according to Nasa. The past 5 months have been 1.06°C, 1.03°C, 1.10°C, 1.14°C, and 1.35°C hotter than that average, absolutely destroying previous records. Estimates from Noaa are in broad agreement with those from Nasa. Right now, the Earth’s average surface temperature is hotter than it’s been in thousands of years; potentially even longer.We’re currently at the peak of a very strong El Niño event, which has brought warm water up to the ocean surface. That’s certainly played a major role in the current record-breaking temperatures. The hottest years are almost invariably years with El Niño events, although 2014 was the first year in decades to set a temperature record without an El Niño.For comparison, the current El Niño event is very similar to a previous one in 1997–1998. That event made 1998 by far the hottest year on record at the time, and it’s why contrarians often cherry pick temperatures over the past 18 years – the abnormally hot 1998 was 18 years ago.However, the past 6 months have been 0.43°C hotter than the corresponding months in 1997–1998. So clearly, while El Niño is a big contributor to the current record-shattering temperatures, human-caused global warming is playing a major role as well. Climate scientist Michael Mann attributed the record to approximately 50% human influences, and 50% a combination of El Niño and natural weather fluctuations.

As temperatures soar, new doubts arise about holding warming to 2 degrees C -- According to NASA data, February 2016 was the most anomalously hot month the Earth has seen since record keeping began — fully 1.35 degrees Celsius (2.43 degrees Fahrenheit) warmer than the average from 1951-1980.  In the context of international climate policy, February is ominous as well. If you go back further in time to consider pre-industrial temperatures, then some analysts have suggested February was well over 1.5 degrees C warmer — and thus, breached a key temperature threshold cited in the recent Paris climate agreement. Up until relatively recently, 2 degrees C above pre-industrial temperatures – also cited in the Paris accord — was widely regarded as an upper limit for a “safe” level of global warming, but of late that has come into major question.  At the same time, meanwhile, two pieces of new research have questioned whether, from an energy standpoint, keeping long term warming below 2 degrees C is even likely to be possible. Take, for instance, a study, just released as a working paper where Richard Newell of Duke University and two colleagues use a “harmonization” methodology to reconcile and compare future energy outlooks issued by the International Energy Agency, the U.S. Energy Information Administration, ExxonMobil, BP, and others. Synthesizing all of these outlooks, they find an expectation of major growth in demand for energy out to 2040. And while the forecasts suggest a rapid expansion of renewable energy is also afoot, it’s simply starting from too small of a percentage of total energy to catch up very quickly. Therefore, this paper finds that “Global carbon dioxide emissions continue to rise under most projections and, unless additional climate policies are adopted, are more consistent with an expected rise in average global temperature of close to 3 C or more, than international policy goals of 2 C or less.”

Crunch Time for the Climate - HuffPo - President Obama's Clean Power Plan rule, announced to much fanfare last summer, was cheered by supporters as a turning point and jeered by critics as overreach. The rule will cut carbon emissions from power plants by 32% against 2005 levels over the next fifteen years. This will lock in a trend that's already happening thanks to rising investments in wind, solar and energy efficiency and to the switch from coal to natural gas. The attorneys general of 27 states, led by West Virginia and Texas, are suing to overturn the rule on behalf of their pals in the fossil fuel industry - excuse me, in the name of their constituents.  The post-Scalia Supreme Court is likely to repel this shot-block attempt. That doesn't mean the rule is a game changer. Power plants account for only one-third of the nation's carbon emissions. The rest come mostly from transportation and industry. And while a 32% cut sounds impressive, it's a soft target for 2030. To reach the final rounds in the climate tournament we will need bigger reductions, and we will need them across the board, not just in electricity. The smartest policy option in the playbook may be the Healthy Climate and Family Security Act of 2014, introduced by Congressman Chris Van Hollen (D-MD). The Van Hollen bill mandates a 40% economy-wide cut in carbon emissions by 2030. It would achieve this by capping the amount of fossil carbon allowed to enter our economy, and by auctioning permits up to this ceiling to energy firms (not giving them free permits, as in the failed cap-and-trade proposals of the past). It would return all the revenue from the permit auctions directly to the people in equal dividends for every woman, man and child with a valid Social Security number.  Something similar would happen under the Managed Carbon Price Act, sponsored by Congressman Jim McDermott (D-WA). His bill would institute a carbon tax - in effect, carbon permits with a fixed price - and again return the revenue equally to all Americans.

The scientist who first warned of climate change says it’s much worse than we thought | Grist: The rewards of being right about climate change are bittersweet. James Hansen should know this better than most — he warned of this whole thing before Congress in 1988, when he was director of NASA’s Institute for Space Studies. At the time, the world was experiencing its warmest five-month run since we started recording temperatures 130 years earlier. Hansen said, “It is time to stop waffling so much and say that the evidence is pretty strong that the greenhouse effect is here.” Fast forward 28 years and, while we’re hardly out of the Waffle House yet, we know much more about climate change science. Hansen is still worried that the rest of us aren’t worried enough. Last summer, prior to countries’ United Nations negotiations in Paris, Hansen and 16 collaborators authored a draft paper that suggested we could see at least 10 feet of sea-level rise in as few as 50 years. If that sounds alarming to you, it is — 10 feet of sea-level rise is more than enough to effectively kick us out of even the most well-endowed coastal cities. Stitching together archaeological evidence of past climate change, current observations, and future-telling climate models, the authors suggested that even a small amount of global warming can rack up enormous consequences — and quickly. However the paper, publicized before it had been through peer review, elicited a mix of shock and skepticism, with some journalists calling the news a “bombshell” but a number of scientists urging deeper consideration. Now, the final version of the paper has been published in the journal Atmospheric Chemistry and Physics. It’s been reviewed and lightly edited, but its conclusions are still shocking — and still contentious. Here we help you understand their new paper:

Global Warming Could Yield Catastrophic Effects Sooner Than We Think - A group of leading climate scientists have warned that the effects of global warming could come quicker and at a far bigger impact than originally thought. Those consequences could include rising sea levels that would submerge coastal cities, storms that would be stronger than anything in history, and the large-scale melting of polar ice sheets, according to a paper in theAtmospheric Chemistry and Physics science journal released on Tuesday. The paper has 19 authors, and one of the most prominent is Dr. James Hansen, a climatologist and adjunct professor at the Columbia University Earth Institute. Hansen is considered the first person to have raised awareness on climate change in a 1988 congressional testimony, and in an accompanying piece in the Huffington Post, looks at “how soon we will pass points of no return.” In December, 195 countries agreed to a climate change dealmeant to curb greenhouse gas emissions. The paper, however, details that if there are no significant cuts in greenhouse gas emissions across the world soon, the global sea level would likely rise “several meters over a timescale of 50 to 150 years.” That could lead to the over-flooding of coastal cities around the world, which ties into another recent study that said New York, London, Rio de Janeiro, and Shanghai were at risk of submersion by 2100. Circulation in the Atlantic and Southern Ocean would also be affected, leading to storms that could be of a magnitude unlike the past. It’s a timeline that clashes with those from other climatologists. “They conflict with the mainstream understanding of climate change to the point where the standard of proof is quite high,” Michael E. Mann, a climate scientist at Pennsylvania State University, told the New York Times. Hansen is also a flashpoint, as he has arguably been taking on the role of activist in protests to supplement his work inside laboratories, according to the Times. However, his standing makes this paper noteworthy. “I think we ignore James Hansen at our peril,” said Mann.

James Hansen: Dangerous Sea Level Rise Will Occur in Decades, Not Centuries -- Dr. James Hansen, the former NASA scientist who is widely credited with being one of the first to raise concerns about human-caused global warming, is a co-author of a new report predicting that the world will undergo devastating sea level rise within mere decades—not centuries, as previously thought. The report, published Tuesday in the open-access journal Atmospheric Chemistry and Physics, paints an even bleaker picture of the planet’s future, positing that continued high fossil fuel emissions will “increase powerful storms” and drive sea-level rise of “several meters over a timescale of 50 to 150 years.” Hansen, who now serves as the director of the Climate Science Awareness and Solutions program at Columbia University Earth Institute, published the findings along with an international team of 18 researchers and academics. As the abstract states, the predictions “differ fundamentally from existing climate change assessments.” For example, the United Nation’s Intergovernmental Panel on Climate Change (IPCC) in 2013 predicted three feet of sea level rise by 2100 if greenhouse gas emissions continue unabated. A draft version of Hansen’s paper released last year provoked wide debate among climate scientists. The peer-edited report examines growing ice melt from Antarctica and Greenland and studies how that melting has historically amplified “feedbacks that increase subsurface ocean warming and ice shelf melting.” Taking into consideration “rapid, large, human-made climate forcing,” the study predicts a much more accelerated rate of sea level rise of several meters, beyond that which humanity is capable of adapting to. Or, as Hansen put it, “We’re in danger of handing young people a situation that’s out of their control.”

World-Renowned Climate Scientist Makes Dire Warning About Sea Level Rise, Storms -- If global temperatures on our planet continue to go up, ferocious super-storms could become more frequent and sea levels could rise several meters over the next century, drowning coastal cities along the way.  That's the ominous warning put forth in a new, peer-reviewed paper penned by former top NASA scientist Dr. James Hansen and 18 co-authors, which was published in the journal Atmospheric Chemistry & Physics on Tuesday. The paper builds from controversial research released last year before the study was peer reviewed, a process that gives other scientists an opportunity to critique the work. The research raised eyebrows not only because it was released in draft form, but also because it suggests that current climate models -- including forecasts made by the United Nation’s Intergovernmental Panel on Climate Change -- underestimate the effects of ice melt runoff from the Greenland and Antarctic ice sheets. For instance, the IPCC previously warned of only 3 feet (about one meter) of sea level rise by 2100. "Greenland and Antarctica are beginning to melt because of global warming," Hansen, an adjunct professor in Columbia University's Department of Earth and Environmental Sciences, says in a new video (above) about the paper. "So far it is just a tiny, tiny fraction of the ice sheets that has melted. However, this fresh meltwater spilling out onto the North Atlantic and into the Southern Ocean already is having important effects."

Leading Climate Scientists: ‘We Have A Global Emergency,’ Must Slash CO2 ASAP -- James Hansen and 18 leading climate experts have published a peer-reviewed version of their 2015 discussion paper on the dangers posed by unrestricted carbon pollution. The study adds to the growing body of evidence that the current global target or defense line embraced by the world — 2°C (3.6°F) total global warming — “could be dangerous” to humanity.  That 2°C warming should be avoided at all costs is not news to people who pay attention to climate science, though it may be news to people who only follow the popular media. The warning is, after all, very similar to the one found in an embarrassingly underreported report last year from 70 leading climate experts, who had been asked by the world’s leading nations to review the adequacy of the 2°C target.  Specifically, the new Hansen et al study — titled “Ice melt, sea level rise and superstorms: evidence from paleoclimate data, climate modeling, and modern observations that 2 C global warming could be dangerous” — warns that even stabilizing at 2°C warming might well lead to devastating glacial melt, multimeter sea level rise and other related catastrophic impacts. The study is significant not just because it is peer-reviewed, but because the collective knowledge about climate science in general and glaciology in particular among the co-authors is quite impressive.  Besides sea level rise, rapid glacial ice melt has many potentially disastrous consequences, including a slowdown and eventual shutdown of the key North Atlantic Ocean circulation and, relatedly, an increase in super-extreme weather. Indeed, that slowdown appears to have begun, and, equally worrisome, it appears to be supercharging both precipitation, storm surge, and superstorms along the U.S. East Coast (like Sandy and Jonas), as explained here.

Climate Change As Tragedy -  Dave Cohen - I took an interest in anthropogenic climate change in the late 1990's, about a decade after James Hansen first testified before the U.S. senate about the dangers of global warming. It is now 20 years later, and Hansen's role in publicizing the issue has been much reduced. In 2016, Hansen can only make a video on youtube about the dangers of 2°C of warming and hope people will watch it. To date, about 30,500 people have watched it, including me. I've embedded the video below. You can find a transcript here. The video explains the implications of a recent paper written by Hansen and 18 co-authors called Ice melt, sea level rise and superstorms: evidence from paleoclimate data, climate modeling, and modern observations that 2 ◦C global warming is highly dangerous (pdf). The paper compares what happened during the Eemian interglacial (~120 kya) to what is happening today, and finds many things to worry about (see the paper). Near the end of the video, we get this from Hansen: I think the conclusion is clear. We are in a position of potentially causing irreparable harm to our children, grandchildren and future generations.This is a tragic situation — because it is unnecessary. We could already be phasing out fossil fuel emissions if only we stopped allowing the fossil fuel industry to use the atmosphere as a free dumping ground for their waste. And thus we see Hansen has misunderstood tragedy. The coming (and present) sorrow and suffering caused by global warming is tragic because it is necessary in the sense above. In the great drama of life on Earth, the main character (humanity) is brought to ruin as a "consequence of a tragic flaw, moral weakness or inability to cope with unfavorable circumstances."  Hansen himself is therefore a tragic figure because he can not comprehend or acknowledge that humanity can not act in ways other than what we've already seen heretofore. According to the rules of human nature, Jim Hansen is fated to blame the fossil fuel industry for a crisis which has much deeper roots. He is fated to make videos on youtube which only a relative handful of people will watch. He is fated to explain the climate science to people who, for one reason or another, are unable to listen to his reasoned arguments.

Lies, Damn Lies and Sea Level Data -- A Drudge headline this morning points to this story that claims sea levels have been falling for the past 6 years.  And the story is correct.   Here's the graphic proof based on data from the National Oceanic and Atmospheric Administration: Nothing to look at here.  Everyone's safe.  No worries.  But, perhaps unsurprisingly, given the source, the picture fails to tell the whole story.  Here is the same graph extended back to 1910.  According to the data--yes, the same data used in the top graph--sea levels fell from about 1920-1930, and again from 1945-1950, and again from 1970 to 1980, and again from 2000-2005 and from 2008 to 2009 and from 2010-2016.  Yet somehow sea levels rose from 1910-2016.  By almost .4 meters. Upshot:  Part of the story doesn't tell the whole story.  As I tell my students in my econometrics classes:  If you tell me the conclusion you want people to draw, I can find data to support your conclusion.  But the trick to good statistics is to draw conclusions from the data and not draw data for the conclusions.   

Cuts in Europe's air pollution have boosted Arctic warming by 0.5C - Carbon Brief: Tackling air pollution in Europe since its peak in the 1970s could have magnified Arctic warming by half a degree celsius, a new study suggests. Lower levels of air pollution have seen a decrease in the cooling effect from tiny particles emitted when fossil fuels are burned, the study says. But it’s not a reason to hold off from cutting pollution further, the researchers tell Carbon Brief, as accumulating greenhouse gases in the atmosphere will continue to be the dominant force behind Arctic warming. Temperatures in the Arctic are increasing more than twice as fast as the global average – a phenomenon known as Arctic amplification. One of the main causes is the loss of sea ice in the region. As Arctic sea ice melts, energy from the sun that would have been reflected away is instead absorbed by the ocean. Now a new study, published in Nature Geoscience, suggests that a reduction in air pollution over Europe has also been contributing to rapid Arctic warming in recent decades. The study looks specifically at sulphur dioxide, which is emitted from power stations, vehicle exhausts and industrial processes, such as extracting metals from ore. Sulphur dioxide reacts in the atmosphere to form tiny particles called sulphate aerosols. These have a cooling effect by scattering sunlight and stimulating clouds to form, preventing sunlight reaching the Earth’s surface. Sulphur emissions in Europe peaked in the 1970s and have declined to around a quarter of that level as governments have tackled air pollution. This decline has meant a reduction of the aerosol cooling effect, the researchers say, magnifying Arctic warming by 0.5C since 1980.

How cleaner air could actually make global warming worse - A significant amount of the climate change caused by greenhouse gas emissions in the past century has been hidden from us, scientists say — by another type of pollution that actually cools the climate and temporarily cancels out some of the warming. Two new studies, both released today in the journal Nature Geoscience, address the powerful influence of aerosols — fine particles or drops of liquid often released by industrial activity — on the climate, and suggest that as nations around the world work to reduce this type of air pollution, we will begin to see more rapid warming than expected. And that could hurt our ability to meet the climate goals set in last year’s Paris Agreement. Scientists have long been aware that certain types of aerosol emissions — most notably, sulfate — can block solar radiation from getting through to the surface of the Earth, either by scattering sunlight directly or by helping to increase the extent and reflectivity of cloud cover over the planet. This results in a kind of cooling effect, especially in the areas where the pollution is heaviest, which can temporarily mask the ongoing warming effect caused by greenhouse gases in the atmosphere. The important thing to remember about aerosols, though, is that they tend to have a rather short lifespan in the atmosphere — eventually, the rain brings them back out of the sky. If humans are continuously pouring pollution into the air, then the cooling effect will probably appear pretty constant. But as certain parts of the world start cutting down on their aerosol emissions, scientists have actually noticed a phenomenon known as “regional brightening,” in which the dimming effect on solar radiation begins to lift away.

Climate: Carbon emissions highest in 66 million years - AJE News: Scientists wrote that the pace of emissions even eclipses the onset of the biggest-known natural surge in fossil records, 56 million years ago, which was perhaps driven by a release of frozen stores of greenhouse gases beneath the seabed.That ancient release, which drove temperatures up by an estimated 5 degrees Celsius (9 Fahrenheit) and damaged marine life by making the oceans acidic, is often seen as a parallel to the risks from the current build-up of carbon in the atmosphere from burning fossil fuels."Given currently available records, the present anthropogenic carbon release rate is unprecedented during the past 66 million years," the scientists wrote in the journal Nature Geoscience. The dinosaurs went extinct about 66 million years ago, perhaps after a giant asteroid struck the Earth. Lead author Richard Zeebe of the University of Hawaii said geological records were vague and "it's not well known if/how much carbon was released" in that cataclysm. Current carbon emissions, mainly from burning fossil fuels, are about 10 billion tonnes a year, against 1.1 billion a year spread over 4,000 years at the onset of the fast warming 56 million years ago, the study found. The scientists examined the chemical make-up of fossils of tiny marine organisms in the seabed off New Jersey in the United States to gauge that ancient warming, known as the Paleoeocene-Eocene Thermal Maximum (PETM). UN studies project that temperatures could rise by up to 4.8C this century, causing floods, droughts and more powerful storms, if emissions rise unchecked. Carbon dioxide forms a weak acid in seawater, threatening the ability of creatures such as lobsters or oysters to build protective shells.

The Warmer, Wetter Arctic Is Becoming a New Source of Carbon -Could the impacts of climate change include environmental feedbacks that intensify its effects? New research from Dartmouth College in New Hampshire adds to a growing body of evidence that in the Arctic, at least, such feedback loops are a real consequence of the world’s continued reliance on fossil fuels. Ecologist Julia Bradley-Cook and her team took samples of western Greenland tundra soil that grows grass and shrubs back to the lab and tested how increases in both temperature and moisture would affect the release of carbon dioxide. They found that both types of soils released significantly more CO2 as they got warmer and wetter. Grass soils released up to twice as much carbon than the shrub soils as heat and moisture increased.  "I think about it as if you’re pouring Red Bull on the soils,” said Bradley-Cook, who led the study as part of completing her Ph.D. at Dartmouth. “As you ramp up temperatures, you’re giving the microorganisms in the soils all this energy, in an accelerated way. The grass soils are more sensitive to that Red Bull than the shrub soils.”

Study shows North Atlantic Ocean CO2 storage doubled over last decade --A University of Miami (UM) Rosenstiel School of Marine and Atmospheric Science-led study shows that the North Atlantic absorbed 100 percent more man-made carbon dioxide over the last decade, compared to the previous decade. The findings show the impact that the burning of fossil fuels have had on the world's oceans in just 10 years."This study shows the large impact all of us are having on the environment and that our use of fossil fuels isn't only causing the climate to change, but also affects the oceans by decreasing the pH," said Ryan Woosley, a researcher in the UM Rosenstiel School, Department of Ocean Sciences. The oceans help to slow the growth of human produced CO2 in the atmosphere by absorbing and storing about a quarter of the total carbon dioxide emissions. The North Atlantic is an area of high uptake and storage due to large-scale ocean circulations. The uptake of CO2 has many impacts on ocean-dwelling organisms by decreasing the pH. The findings have important implications for marine organisms, such as corals and mollusks, which require a certain pH level in the surrounding water to build their calcium carbonate-based shells and exoskeletons.

How Can Global CO2 Levels Soar When Emissions Are Flat? - Last year saw the biggest jump in global CO2 levels ever measured, as NOAA reported on March 9. Yet in 2015 the world economy grew while energy-related CO2 emissions were flat — for the second year in a row — according to the International Energy Agency, as ClimateProgress reported last week. This puzzled more than one reader. One emailed me the following: “the IEA is saying that emissions have gone flat, while, at the same time, NOAA is announcing that we just had the largest-ever jump in CO2 [levels]. Logic would seem to dictate that someone has their figures wrong. Flat emissions should not translate into record CO2 jumps.”  What’s going on? Two things:

  • Annual CO2 emissions are very different from global CO2 levels.
  • CO2 levels tend to have big jumps in El Niño years.

  NOAA reported two weeks ago that the CO2 concentrations “measured at NOAA’s Mauna Loa Observatory in Hawaii jumped by 3.05 parts per million during 2015, the largest year-to-year increase in 56 years of research.” That is a big jump compared to the average annual rise at Mauna Loa from 2005 to 2014 of 2.11 ppm per year. But the second-highest single-year growth rate for CO2 levels was back in 1998, which saw a jump of 2.93 ppm (whereas the average annual rise from 1995 to 2004 was 1.87 ppm per year).You may notice a pattern here — big jumps during big El Niño years. “El Niño years tend to be bad years for plant growth, due to things like widespread drought or other extreme weather,” Stefan Rahmstorf, co-chair of Earth System Analysis at the Potsdam Institute for Climate Impact Research, explained in an email. “So the biosphere loses some carbon. You see that happening in 1998 as well. Below is a diagram from the AR5, you see from the squiggly line how variable the land sink is, it dominates interannual variability in the carbon budget.”

The vast, shrinking northern glaciers that we never even talk about - We all know that Greenland is losing a lot of ice. If you take NASA’s word for it, it’s currently losing ice mass to the tune of 287 billion tons per year, enough to raise sea levels the better part of a millimeter annually. Overall, it contains enough ice to potentially raise sea levels by as much as 20 feet.  But as new research suggests, it’s far from the only major ice loser in the region. We pay far too little attention to two others: the northern and southern glaciers of the Canadian Arctic archipelago. The northern region, centered on Ellesmere Island, contains more glacier mass than any other region in the world (outside of Greenland and Antarctica, that is), and the southern region, centered on the vast Baffin Island, also holds a very large amount of ice. And they’re both fast losing ice. “If you do an entire inventory of all the glaciers, they actually are changing more than Greenland and Antarctica at the moment, or have been,” says Princeton geoscientist Christopher Harig, who conducted the new study in Geophysical Research Letters. Baffin Island is one of the five biggest islands in the entire world, according to the U.S. Geological Survey. Its two largest ice caps, named Barnes and Penny, are “thought to be the last remnants of the Laurentide Ice Sheet” that once extended across much of North America, the survey says. Ellesmere Island is arguably even more spectacular — like Antarctica (but on a considerably smaller scale), it is actually the home to significant ice shelves, or sheets of ice that extend over the ocean and hold back glaciers behind them as they flow into the sea. These are all located on the northern side of Ellesmere Island, facing the North Pole. According to Environment and Climate Change Canada, these ice shelves have already been severely damaged as warming advances. In August 2005, the “entire Ayles Ice Shelf broke away,” says the agency, leaving just five remaining. When Ayles broke up, fully 7.5 percent of all of Ellesmere Island’s ice shelf area was lost in the space of an hour, a 2007 study found. And many of the remaining shelves have also lost major portions since then.

Warming ocean water undercuts Antarctic ice shelves - “Upside-down rivers” of warm ocean water threaten the stability of floating ice shelves in Antarctica, according to a new study led by researchers at the National Snow and Ice Data Center published today in Nature Geoscience. The study highlights how parts of Antarctica’s ice sheet may be weakening due to contact with warm ocean water.  “We found that warm ocean water is carving these ‘upside-down rivers,’ or basal channels, into the undersides of ice shelves all around the Antarctic continent. In at least some cases these channels weaken the ice shelves, making them more vulnerable to disintegration,” Ice shelves are thick floating plates of ice that have flowed off the Antarctic continent and spread out onto the ocean. As ice shelves flow out to sea, they push against islands, peninsulas, and bedrock bumps known as “pinning points.” Contact with these features slows the flow of grounded ice off the continent. While ice shelves take thousands of years to grow, previous work has shown that they can disintegrate in a matter of weeks. If more ice shelves disintegrate in the future, loss of contact with pinning points will allow ice to flow more rapidly into the ocean, increasing the rate of sea level rise. “Ice shelves are really vulnerable parts of the ice sheet, because climate change hits them from above and below,” . “They are really important in braking the ice flow to the ocean.”The features form as buoyant plumes of warm and fresh water rise and flow along the underside of an ice shelf, carving channels much like upside-down rivers. The channels can be tens of miles long, and up to 800 feet “deep.” When a channel is carved into the base of an ice shelf, the top of the ice shelf sags, leaving a visible depression in the relatively smooth ice surface.

Tipping point: how we predict when Antarctica’s melting ice sheets will flood the seas -- Antarctica is already feeling the heat of climate change, with rapid melting and retreat of glaciers over recent decades.  Ice mass loss from Antarctica and Greenland contributes about 20% to the current rate of global sea level rise. This ice loss is projected to increase over the coming century. A recent article on The Conversation raised the concept of “climate tipping points”: thresholds in the climate system that, once breached, lead to substantial and irreversible change. Such a climate tipping point may occur as a result of the increasingly rapid decline of the Antarctic ice sheets, leading to a rapid rise in sea levels. But what is this threshold? And when will we reach it?  The Antarctic ice sheet is a large mass of ice, up to 4 km thick in some places, and is grounded on bedrock. Ice generally flows from the interior of the continent towards the margins, speeding up as it goes.Where the ice sheet meets the ocean, large sections of connected ice – ice shelves – begin to float. These eventually melt from the base or calve off as icebergs. The whole sheet is replenished by accumulating snowfall. Floating ice shelves act like a cork in a wine bottle, slowing down the ice sheet as it flows towards the oceans. If ice shelves are removed from the system, the ice sheet will rapidly accelerate towards the ocean, bringing about further ice mass loss. A tipping point occurs if too much of the ice shelf is lost. In some glaciers, this may spark irreversible retreat.  One way to identify a tipping point involves figuring out how much shelf ice Antarctica can lose, and from where, without changing the overall ice flow substantially. A recent study found that 13.4% of Antarctic shelf ice – distributed regionally across the continent – does not play an active role in ice flow. But if this “safety band” were removed, it would result in significant acceleration of the ice sheet.

Why more than 200 planned new dams will be a disaster for the Amazon rainforest - Continued dam-building across Amazonia could threaten dozens of species with extinction, says a new paper published this month in the journal Biodiversity and Conservation. With 191 dams already dotting the Amazon basin and nearly 250 more planned, scientists say the region’s unique freshwater ecosystems are at serious risk. Major changes will be required from the Amazonian nations — most of all, increasingly unstable Brazil — to prevent further damage in the most biologically diverse area of the planet. Hydropower is the favored energy source in the Amazon, where it is largely considered among the most reliable and price-competitive options. In Brazil, hydroelectric plants already account for about 80 percent of the electricity generated in the country, and the country is in the process of completing the 11,233-megawatt Belo Monte dam on the Xingu river, which will end up being the largest dam in the region. One reason is the mining industry: Dams provide a convenient way to power remote mining operations, and the construction of dams and subsequent redirecting of water supplies can also help facilitate the exposure of new mining sites. But conservationists are increasingly concerned about the dams’ effects on both the natural environment and the indigenous communities who call it home. It’s an issue that, according to some, is only starting to garner mainstream attention, as most conservation efforts and media coverage until this point have focused on deforestation and the Amazon’s terrestrial resources — not its freshwater systems, which are equally important to the health of the rainforest.  “There are lots of people going out and doing consulting work or work with individual dams, but there was no overarching review on the effects.”

McConnell: Obama climate plan hinges on next president— A Supreme Court ruling that delays a key element of President Barack Obama’s strategy to fight climate change will likely push a final decision on the issue to the next president, the Senate’s Republican leader said Monday as he urged the nation’s 50 governors to continue a “wait-and-see” approach on Obama’s plan. Senate Majority Leader Mitch McConnell advised the governors to defy Obama’s effort to limit carbon pollution from coal-fired power plants by refusing to submit compliance plans to the Environmental Protection Agency. In a follow-up letter to the governors Monday, McConnell said the Supreme Court’s Feb. 9 ruling reinforces his view that states should refuse to act on the power plant proposal until all court challenges are decided. McConnell’s call for defiance echoed a strategy he has adopted for the Senate Republicans to refuse a hearing or votes on Obama’s nominee to the Supreme Court. The high court’s action in a case brought by West Virginia and other states means a current delay “will likely extend well beyond this administration, providing a welcome reprieve to states while simultaneously underlining the serious legal and policy concerns I wrote you about last year,” McConnell told the governors. “This is precisely why I suggested a ‘wait-and-see’ approach” last year, McConnell said.

Does Trump Have an Energy Policy? - Scientific American - Donald Trump doesn’t seem to have a coherent policy on energy and climate. Trump to this point has offered campaign pitches rather than policy positions on issues related to greenhouse gases, fossil fuel development and renewable electricity. It appears that the Republican front-runner hasn’t hired a top energy adviser, according to multiple GOP analysts who work on the issue. “I haven’t seen any evidence that he’s got somebody working with him directly on energy policy,” said George “David” Banks, a former climate aide in the George W. Bush administration. “At some point, look, he’s going to have to do that.”  Several advisers interviewed for this story expressed skepticism about working for Trump based on his controversial remarks and his inattention to federal policy.  One person who has advised Republican presidential candidates described Trump’s understanding of environmental regulations as “pathetic” after hearing him say that aerosols from hair spray can’t escape his luxurious apartment in New York City. Ozone-depleting compounds in hair spray were outlawed in 2010.  To some, Trump’s omissions represent an untapped policy well. Who knows, maybe he’s less obstructed by ideology and political history than other candidates, said Phil Kerpen, a conservative policy analyst who’s offered to provide his insights to the Trump campaign.  “With a campaign like Trump’s, where a lot of people seem to be committed to sort of raging against him to the bitter end even if he ends up the nominee, I think it would be much more productive to say, ’Here are some things you can move in a conservative direction on,’” Kerpen said, noting the limited number of positions taken by Trump. “So it’s almost a green field to have sort of these policy debates and sort of convince him the free market view is the best one,” he added.

Coal Miners Are Losing Jobs In States With Coming Primaries - The only states to lose significant numbers of jobs in the past year were the energy-reliant states of North Dakota, West Virginia and Wyoming—all of which hold their primaries in the next three months. The steep job losses in each state highlight the economic challenges facing many white working-class voters, who have become a driving force in the topsy-turvy presidential election. These voters have been hit hard by the downturn in energy prices that has swept away jobs in coal mining, fracking and related industries, fueling an antiestablishment wave that has benefited outsiders Donald Trump and Bernie Sanders at the expense of more establishment candidates. The latest figures on state unemployment show North Dakota losing 22,700 jobs in February 2016 from a year ago, West Virginia shedding 11,700 and Wyoming dropping 8,800 over the same period, the Labor Department said Friday. While the fracking economy had boomed until mid-2014, when oil prices began their fall, the coal industry has been steadily losing jobs in the past five years as power plants turned to cleaner alternatives like natural gas. The slump in energy prices only intensified that job loss. By contrast, of the 38 states showing statistically significant changes in employment, 35 were positive. Democratic frontrunner Hillary Clinton touched a nerve this month when she told a CNN town hall that “we’re going to put a lot of coal miners and coal companies out of business,” in the context of a broader answer about a clean-power economy. Democratic Sen. Joe Manchin of West Virginia called her statement “horrific,” and Mrs. Clinton followed up with a written apology in which she called her comment “mistaken.” In Wyoming, which produces roughly 40% of the nation’s coal, the U.S. Environmental Protection Agency’s proposed Clean Power Plan rules could further dent jobs

Mysterious, Powerful Lobbying Group Won’t Even Say Who It’s Lobbying For -- Dave Dayen - The Commercial Energy Working Group (CEWG) is one of the many lobbying organizations in Washington. They make recommendations to federal agencies and try to sway lawmakers on policies. They engage in the basic political work of making the government friendlier to business. There’s only one problem: who the Commercial Energy Working Group actually represents is a secret. This violates federal lobbying and ethics laws, according to Public Citizen’s Tyson Slocum, who has urged the House and Senate to investigate the matter. “The Commercial Energy Working Group is one of the most active – and secret – organizations seeking to undermine energy market regulations,” Slocum told The Intercept. “The purpose of my complaint is to force the group to start identifying its membership.” Under the Honest Leadership and Open Government Act of 2007, all lobbying organizations registered with the federal government must list the names of any business that has contributed more than $5,000 to them in any one quarter. But the CEWG “does not disclose the individual companies or entities that constitute its active membership,” according to Slocum’s letter. The group has no web site, does not file annual reports with the IRS, and hasn’t sought incorporation in any state. It operates out of a D.C. law firm – Sutherland, Asbill & Brennan – and used the Sutherland offices as their formal business address in their initial 2013 lobbyist disclosure form. CEWG’s official lobbyists, Alexander Holtan and Blair Scott, are employees of Sutherland.

From Flint to fracking, EPA can learn from its mistakes | TheHill: As most of us have heard by now, an emergency manager in Flint, Michigan switched water sources from Lake Huron to the Flint River in April 2014 to cut costs without adding required corrosion controls. The EPA was aware of dangerously high levels of lead in the water supply the following year, but chose to remain silent for months. The result? Hundreds of Flint children are thought to now have elevated blood-lead levels, which can lead to serious, irreversible damage to the nervous system.To its credit, EPA has finally admitted its mistakes and begun to take responsibility. But Flint is not an isolated example. All too often, the EPA seems to let polluters off the hook. A striking example is EPA’s report on the drinking water impacts of fracking for oil and natural gas. In June 2015, EPA released a draft report summarizing the scientific evidence about the frequency and severity of fracking’s impacts on drinking water. The EPA reviewed evidence of fracking incidents including spills of toxic fracking fluid and chemicals, groundwater contamination, discharges of fracking waste into rivers and streams, and underground migration of fracking chemicals, including methane, into drinking water wells. The report confirms over 450 specific cases of spills of chemicals and water contamination caused by drilling and fracking-related actions. The report also identifies the multiple mechanisms by which contamination took place. Despite these clear findings, the report used language that was misleading and has since been misinterpreted by the media, industry and the public to suggest that fracking is safe and that there is not evidence of harm to our water resources. They summarize the draft report saying that the “assessment shows hydraulic fracturing has not led to widespread, systemic impacts to drinking water resources.”

National companies seek to stop solar deal struck in Maine (AP) — Maine’s rooftop solar installers and the state’s major utilities have set aside long-standing differences to strike a deal they say could increase solar power in the state tenfold in five years. But national solar companies are trying to stop it. The Alliance for Solar Choice, a national industry group focused on defending rooftop solar, and California-based firms Sunrun and SolarCity want to kill a key part of the plan as it moves through the Maine Legislature. Although the companies don’t work in Maine, they’ve dispatched lobbyists to Augusta, funded an opinion poll and are running a social media advertising blitz warning that the deal would allow utility monopolies to “tighten their hold on their captive consumer base.” The solar industry is watching Maine closely because the state is considering a novel solution for a regulatory problem that more than a dozen states are also wrestling with, said Autumn Proudlove, senior policy analyst at the North Carolina Clean Energy Technology Center. “What Maine is doing, even though there is not a lot of solar there, has national implications,” she said. Utility companies in other states are also watching Maine and working behind the scenes to push back against the national solar firms, said Tony Buxton, a lobbyist for the state’s large industrial energy users, such as paper companies. “It’s almost a proxy war,” he said.

Exelon closes deal to buy Pepco, creating largest US utility  (AP) — Exelon has completed its nearly $7 billion deal to buy Pepco, creating America’s largest electric utility company. The deal closed late Wednesday after the company received approval from its final regulator, almost two years after the company first made its offer for Pepco. The combined company becomes the largest electric utility company in the U.S., based on number of customers, according to the U.S. Energy Information Administration. Chicago-based Exelon Corp. owns Baltimore Gas and Electric Co., ComEd in Illinois and PECO in Pennsylvania. Pepco Holdings Inc.’s namesake utility powers homes in Maryland and Washington, D.C., where it is headquartered. Pepco also owns Atlantic City Electric in New Jersey and Delmarva Power, which provides electricity in parts of Delaware, Maryland and Virginia.  Exelon now has about 10 million customers, the company said.

Natural gas poised to pass coal for producing electricity in US - - This year is expected to be the first in U.S. history that more electricity will be generated from natural gas than coal, a new analysis has found, marking another milestone in the decline of America’s largest single source of greenhouse gas emissions. Coal used to generate electricity represents about 30 percent of U.S. emissions driving climate change. Natural gas emits roughly half the carbon as burning coal, not accounting for methane leakage from natural gas wells and pipelines. Natural gas overtook coal as the leading U.S. source of electricity — on a monthly basis — last April, but 2016 is likely to be the first full year in which it will have replaced coal as the chief source of electric power nationwide, according to the analysis published this week by the U.S. Department of Energy. “Right now, what’s been driving the switchover to natural gas from coal is mainly the sustained low natural gas prices,” U.S. Energy Information Administration analyst Tyler Hodge said. Utilities have been routinely retiring coal-fired power plants in recent years as they’ve had to comply with new mercury emissions standards. They are also grappling with the possibility of having to reduce greenhouse gas emissions from their coal-fired power plants to comply with the Clean Power Plan, Hodge said. The plan, which has been temporarily blocked by the Supreme Court, aims to cut carbon emissions from coal-fired power plants 32 percent below 2005 levels by 2030.

Oregon says yes to coal-free electricity - The Oregon legislature has adopted a first-in-the-nation plan to phase out electricity from coal, a major source of climate-changing greenhouse gases. The state's environmental community had been gearing up for a ballot initiative this year that would have forced the state's utilities to abandon coal as a fuel for electricity. But negotiations between the two groups resulted in a legislative compromise--dubbed the Clean Electricity and Coal Transition Plan--that will wean the state off coal-fired electricity no later than 2030 except for one out-of-state power plant that is partly owned by an Oregon-based utility. That plant will be retired no later than 2035.The plan also calls for an increase in the percentage of energy that electric utilities must get from renewable sources such as wind and solar from 25 percent by 2025 to 50 percent by 2040. Coal currently provides almost 34 percent of the state's electricity. Hydroelectric generation provides almost 43 percent. Natural gas and wind account for 13.5 percent and 5.6 percent, respectively. Regarding Oregon's renewable energy targets, for context California and New York have mandated the same percentage as Oregon but by 2030. Vermont has targeted 75 percent by 2032, and Hawaii has mandated 100 percent renewable energy for electricity by 2045. The Clean Electricity and Coal Transition Plan targets the state's two large investor-owned utilities, Pacific Power and Portland General Electric, which together provided 65 percent of all electricity to the state as of 2014 according to the Oregon Department of Energy.

After 115 Years, Scotland Is Coal-Free -- For nearly 50 years the Longannet power station in Scotland burned coal for energy. The plant, the last of its kind in Scotland, closed Thursday.  After some 115 years, Scotland has burned its last lump of coal for electricity.   The Longannet power station, the last and largest coal-fired power plant in Scotland, ceased operations Thursday. What once was the largest coal plant in Europe shut down after 46 years before the eyes of workers and journalists, who gathered in the main control room.  “Ok, here we go,” said one worker moments before pressing a bright red button that stopped the coal-fired turbines that generated electricity for a quarter of Scottish homes.  Here's the moment #Longannet power station was shut down today marking the end of coal-fired generation in Scotland  Longannet’s closure comes as Scotland, a country of some 5 million people, aims to have enough renewable energy to power 100 percent of its electricity demand by 2020. And while Europe has lowered its investment in renewables recently, Scotland seems well on its way to meeting its green energy goals. Renewable electricity output has more than doubled since 2007 and is equivalent to half of the electricity consumed. This surge in renewables follows a massive investment in onshore and offshore wind, which has established Scotland as a renewable energy leader in the region. In fact, Scotland’s largest wind farm is also the largest in the United Kingdom. Whitelee Windfarm near Glasgow has a 539-megawatt capacity and generates enough electricity to power just under 300,000 homes.

Australian prime minister announces greener policies: (AP) — Australia's prime minister on Wednesday distanced himself from the man he replaced by announcing a new fund to promote clean energy innovation as the country heads toward a likely early election in July. The announcement by Prime Minister Malcolm Turnbull of the 1 billion Australian dollar ($760 million) Clean Energy Innovation Fund comes after his predecessor Tony Abbott accused him this week of seeking re-election on the Abbott government's record. Among Abbott's biggest achievements of his two years in power was repealing a carbon tax that had been paid by the worst industrial polluters in a bid to reduce the nation's greenhouse gas emissions. Turnbull, who has long advocated that polluters should pay for their carbon emissions, also announced the center-right government's support for two agencies that finance and promote clean energy in Australia. Abbott had gone in an election in 2013 promising to abolish both government agencies — the Clean Energy Finance Corp. and the Australian Renewable Energy Agency — which had been established by the former Labor Party government. "This is a very good day for innovation, it is a very good day for technology and for taking on the big challenge of global warming," Turnbull told reporters. "This reflects a very big change in the way the government ... is now approaching this type of investment," he said.

Developing world overtakes West in renewables investments (AP) — A U.N.-backed report says global investments in solar, wind and other sources of renewable energy reached a record $286 billion last year. For the first time the developing world accounted for the majority. The United Nations Environment Program on Thursday said renewable investments in developing countries jumped 19 percent to $156 billion in 2015, with $103 billion in China alone. U.S. investments rose 19 percent to $44 billion but, overall, investments in developed countries fell 8 percent to $130 billion.   Despite higher investments, renewables accounted for only one-tenth of global power generation, most of which comes from coal and natural gas. The renewable figures were based on data from Bloomberg New Energy Finance and excluded large-scale hydropower projects, which are often criticized by environmentalists for disrupting wildlife and river flows.

World’s Largest Coal Company Expected to File for Bankruptcy as Stock Price Tanks -- Peabody Energy, the top miner of coal in the world, may soon file for Chapter 11 bankruptcy.  The news comes as Peabody’s stock closed Wednesday at a six-month low of $2.19 per share—a 46-percent fall. Peabody noted its potential bankruptcy in the company’s March 16 U.S. Securities and Exchange Commission Form 10-K.  “If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing to improve our operating performance and financial position, obtain alternative sources of capital or otherwise meet our liquidity needs, we may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code,” stated Peabody.  Peabody’s announcement coincides with a recent string of tough blows faced by the coal industry, including both Arch Coal’s and Alpha Natural Resources‘ filing for Chapter 11 bankruptcy, as well as fellow coal mining giant Foresight Energy’s announcement in its recently-filed Form 10-K that it may await the same fate.  In a press release, Peabody alluded to current atrocious coal market conditions, with the price per ton stagnating at $40 per ton—down from a price of $200 per ton in 2008—as the rationale for its bankruptcy restructuring. The bankruptcy news does not signal, though, that humanity has reached a climate Utopia. Indeed, as the U.S. Energy Information Administration (EIA) reported, natural gas power generation via hydraulic fracturing (fracking) will likely surpass coal power generation for the first time ever on the U.S. power grid.

Is Hillary Clinton the canary in the coal mine? - The message was brutally simple. “We’re going to put a lot of coal miners and coal companies out of business,” Hillary Clinton, front runner for the Democratic presidential nomination, recently told a CNN town hall meeting in Ohio. For Clinton, it was yet another effort to placate far-left environmental activists, who clearly favor her opponent in the Democratic primary, Bernie Sanders. He has thrilled the activists by enthusiastically embracing their five-word energy and environmental plan: Keep it in the ground. Clinton’s energy plan includes a $30 billion promise “to bring economic opportunity, using clean renewable energy as the key, into coal country.” But even so, catering to the environmental fringe still perplexes some Clinton supporters. “That was a dumb way to put it,” former Massachusetts Congressman Barney Frank (D) said in response to Clinton’s remarks on the coal industry. More to the point, the public does not have the “confidence in government” to believe in Clinton’s $30 billion plan, and “the likelihood that 58-year-old coal miners are going to become the solar engineers of the future is nil,” Frank said on HBO’s Real Time with Bill Maher.

Obama intervened over crumbling Iraqi dam as U.S. concern grew - On Jan. 21, U.S. Secretary of State John Kerry met with Iraq's prime minister in Davos, Switzerland, and handed him a personal note from President Barack Obama pleading for urgent action. Obama's confidential message to Haider al-Abadi, which was confirmed to Reuters by two U.S. officials and has not been previously reported, was not about Islamic State or Iraq's sectarian divide. It was about a potential catastrophe posed by the dire state of the country's largest dam, whose collapse could unleash a flood killing tens of thousands of people and trigger an environmental disaster. The president's personal intervention indicates how the fragile Mosul Dam has moved to the forefront of U.S. concerns over Iraq, reflecting fears its failure would also undermine U.S. efforts to stabilize Abadi's government and complicate the war against Islamic State. It also reflected growing frustration. The U.S. government felt Baghdad was failing to take the threat seriously enough, according to interviews with officials at the State Department, Pentagon, U.S. Agency for International Development (USAID) and other agencies. "They dragged their feet on this," said a U.S. official, who like the other sources declined to be identified.

Environmental Groups Sue Energy Company Over Alleged Coal Ash Pollution -- A coalition of environmental groups have filed a lawsuit against PacifiCorp, one of the western United States’ leading energy providers, alleging that the company has been improperly disposing of toxic coal ash waste for decades. The lawsuit alleges a slew of pollution violations related to the Clean Water Act, including accusing the company of using a research farm next to a power plant to dispose of waste-tainted water via irrigation. The lawsuit comes months after environmental groups raised initial red flags about the Huntington Power Plant, about 110 miles south east of Salt Lake City, Utah.  In the lawsuit, filed Monday in the United States District Court for the District of Utah, the plaintiffs allege that the Huntington Power Plant has been contaminating the local environment for decades due to improper disposal of its coal ash and other pollutants created when coal is burned for power. Since 1973, the plant has used onsite, unlined landfills to dispose of coal ash and other pollutants. According to Webster, the Huntington plant began intercepting water from two streams that drain the coal ash landfills in 2007. That water was then diverted to a holding pond used to irrigate the nearby research farm. By diverting the contaminated water from the landfill into a holding pond, Webster said that the power plant is able to side-step the need for permits and pollution treatment required by the Clean Water Act, since Huntington Creek — into which the streams used to flow — is listed as an impaired waterway.

As Coal’s Future Grows Murkier, Banks Pull Financing -- JPMorgan Chase announced two weeks ago that it would no longer finance new coal-fired power plants in the United States or other wealthy nations. The retreat follows similar announcements by Bank of America, Citigroup and Morgan Stanley that they are, in one way or another, backing away from coal. While coal has been declining over the last several years, Wall Street’s broad retreat is an ominous sign for the industry. “There are always going to be periods of boom and bust,” “But what is happening in coal is a downward shift that is permanent.” On Wednesday the world’s largest private-sector coal company, Peabody Energy, said that it might have to file for bankruptcy protection, following a path already taken by three of the nation’s other large coal companies.  Peabody has been trying to sell three of its mines in Colorado and New Mexico to raise cash. But the sale to Bowie Resource Partners appears to have stalled amid the difficult financing environment. Bowie did not comment. A Peabody spokesman said the company “stands ready to complete the sale of assets to Bowie.”  Coal, like railroads, steel and other engines of the nation’s industrial expansion in the 19th and early 20th centuries, helped drive Wall Street’s profits for generations. More than a century later, the coal industry is in a free fall and the banks are pulling away.  Some banks say they are trying to do their part to curtail climate change by moving away from coal projects and financing ventures that produce less carbon. But bankers also say there is a more basic reason for the shift: Lending to coal companies is too risky and could ultimately prove unprofitable. Coal companies are being squeezed by competition from less expensive energy sources like natural gas and by stiffer regulations — pressures that show no signs of letting up.

On Burning Ground: The Human Cost Of India’s Push to Produce More Coal -- We are standing on the edge of a 650-foot unfenced drop into an open-pit coal mine that is shrouded in dust. As we gingerly approach his home, a two-room brick hut just 30 feet from the precipice, we have to clamber over the rubble of collapsed houses and avoid deep fissures and spots of hot earth from which smoke is erupting. What remains of the once-rural village of Lantenganj — now deep inside India’s largest coalfield in the mining state of Jharkhand — is being consumed by underground fires that burn the coal beneath. The government-owned company Bharat Coking Coal, whose mines are responsible for the fires, wants the villagers to leave — for their own safety, the company says, and so the mine can be expanded. But Raju’s family and the 50 others that cling on here say they will not go without proper compensation and new homes near to their jobs in these mines. “We’ve got nothing from the government,” Raju tells me, as we inspect a crack that has opened up in his living room floor. “We want a better deal or we will not move.” Until, presumably, their houses fall into the abyss below. These are economic boom times in India. The government of Prime Minister Narendra Modi is presiding over 7-percent annual growth, fueled by the coal that generates most of the country’s electricity and powers heavy industries like steel and motor manufacturing that dominate Jharkhand, one of India’s industrial heartlands. To keep the growth going, Modi last year called for the state-owned company Coal India, whose subsidiaries include Bharat Coking Coal, to double its production by 2020.

Another Fully Loaded Coal Vessel Sinks of Coast of Bangladesh -- The Sea Horse, a large bulk cargo vessel carrying 1,245 metric tons of coal, sank in the Shela River Saturday inside the Sundarbans in southern Bangladesh. In addition to the large amount of coal, hundreds of gallons of fuel oil, batteries and other toxic contaminants may now be polluting the Shela River. Waterkeepers Bangladesh in Mongla, Bangladesh Poribesh Andolon (BAPA) and Pashur River Waterkeeper have been on site working with communities to demand immediate measures to protect the Pashur and Shela Rivers and the Sundarbans. The sinking coal barge marks the fourth incident over the course of two years where there have been devastating impacts to the waters of Bangladesh. Last October, a fully loaded coal barge sank in Passur near the Sundarbans and in May 2015, a vessel filled with 500 tons of toxic fertilizer sank in the Bhola River. And in December 2014, an oil tanker carrying 350,000 liters of furnace oil collided with a cargo vessel and sank in the Shela River, spilling oil into the Dhangmari and Chandpai dolphin sanctuaries created to protect the rare Irawaddy and Ganges dolphins. The oil spread more than 37 miles throughout a network of canals in the Sundarbans, blackening the shoreline and threatening trees and vast populations of fish and dolphins. In each of these instances, government did not adequately protect these precious waterways or regulate shipping business in the waters of the Sundarbans. The governments of India and Bangladesh are aggressively moving forward with the construction of the proposed Rampal coal-fired power plant which will dramatically increase the shipping of coal, coal ash and gypsum through the Sundarbans. Bangladesh is also moving forward to approve a second coal plant—Orion Khulna—that will be even closer to the Sundarbans than Rampal. “These recent developments show that the leaders of India and Bangladesh are not taking steps to protect the Sundarbans, rather they are taking multiple joint actions that will result in greater damage and destruction,”

Anti-protest laws ‘draconian’ and ‘oppressive’ -- Emotions have been running high following the passing of laws in NSW which will see political protesters fighting against the coal seam gas industry, even on their own properties, face large fines and up to seven years in jail. Hundreds of people demonstrated outside NSW Parliament last week against the harshness of the new laws, which were specifically designed to quell protests against the actions of mining and coal seam gas companies. Critics say the laws achieve little more than restricting free speech.  Greens MP Jeremy Buckingham described the laws as a “jack-boot police crackdown on democratic rights”. Protestors affected by the legislation go way beyond eco-warriors. Civil libertarians, farmers and unionists are all up in arms. President of the NSW Law Society Gary Ulman told The New Daily the laws were draconian and interfered with people’s ability to engage in demonstrations vital for a democratic state.

US official criticizes E Asia plans for nuclear reprocessing  — A senior U.S. official has come out strongly against major powers in East Asia pursuing nuclear reprocessing that nonproliferation experts warn could lead to spiraling quantities of weapons-usable material in a tense region. Assistant Secretary of State Thomas Countryman told a Senate Foreign Relations Committee hearing Thursday that the reprocessing of spent nuclear fuel “has little if any economic justification” and raises concerns about nuclear security and nonproliferation. The committee’s chairman, Republican Sen. Bob Corker, accused the Obama administration of encouraging the production of plutonium, after it eased restrictions on civilian nuclear cooperation with China to allow the reprocessing of fuel from U.S.-designed reactors for nonmilitary purposes. The U.S. has a similar arrangement with its close ally Japan. It has deferred a decision on giving similar consent to South Korea.

Nuclear Plant Leak Threatens Drinking Water Wells in Florida - When Florida’s largest power company added two nuclear reactors to an existing plant that sat between two national parks — Biscayne Bay and the Everglades — the decision raised the concerns of environmentalists and some government officials about the possible effects on water quality and marine life.Now more than four decades later, Florida Power & Light’s reactors at Turkey Point, built to satisfy the power needs of a booming Miami, are facing their greatest crisis. A recent study commissioned by the county concluded that Turkey Point’s old cooling canal system was leaking polluted water into Biscayne Bay.This has raised alarm among county officials and environmentalists that the plant, which sits on the coastline, is polluting the bay’s surface waters and its fragile ecosystem. In the past two years, bay waters near the plant have had a large saltwater plume that is slowly moving toward wells several miles away that supply drinking water to millions of residents in Miami and the Florida Keys.Samples of the water at various depths and sites around the power plant showed elevated levels of salt, ammonia, phosphorous and tritium, a radioactive isotope that is found in nature but also frequently associated with nuclear power plants. The tritium, which was found in doses far too low to harm people, serves as a marker for scientists, enabling them to track the flow of canal water out from under the plant and into the bay. The tritium levels in December and January were much higher than they should be in ocean water.Environmentalists, who have waged a longtime battle over water quality with the power company, among the largest in the country, said Tuesday that they planned to sue Florida Power & Light in 60 days for violating the federal Clean Water Act unless it addressed the problem.AdvertisementContinue reading the main story The company has faced criticism and scrutiny from a judge and Miami-Dade County officials who said it was slow to react to the changes in water quality after the company overhauled Turkey Point in 2013 to increase its energy output. The plant, whose canals are filled with extremely hot water, was built on Florida limestone, which is highly porous.

Belgium Evacuates Nuclear Power Plant As Panic Spreads After Attacks - Energy utility Electrabel is evacuating Belgium's two nuclear power plants in the wake of Tuesday's terrorist attacks in Brussels.  Doel, made up of four reactors, and Tihange, with three are closed and all vehicles coming and going are subject to checks. "Employees who are not needed to run the two power plants are now leaving the sites," Politico EU reports, adding that the "military arrived at the Tihange plant on Friday." "Surveillance is stepped up with added security measures at nuclear plants," the Belga says. "Vehicles are being checked with police and army on site." As AFP reminds us, "in February, investigators probing the Paris attacks found video footage of a senior Belgian nuclear official at the property of a key suspect." That footage was discovered “as part of seizures made following the Paris attacks”, Belgian prosecutors said last month, while declining to divulge the individual’s identity “for obvious security reasons”.

Brussels Suicide Bombers Planted Hidden Camera At Home Of Top Belgium Nuclear Official -- As the chaos surrounding the coordinated suicide attacks on Belgium unfolded on Tuesday morning, we reported that energy utility Electrabel was evacuating two nuclear power plants, Doel, made up of four reactors, and Tihange, comprised of three. Electrabel would later dispute that account, drawing a distinction between a full evacuation and the utility’s generous offer to non-essential employees: “...people who are not strictly necessary on site can leave.” #Tihange nuclear powerplant - people who are not strictly necessary on site can leave #security measures  Yay, a day off. It’s kind of like when you’re a kid and you get sent home from school early because it’s snowing. Only with terrorists. And three dozen casualties.But the presence of military personnel belied Electrabel’s attempts to play down the incident. The stepped up police and army presence certainly seemed to suggest that the threat to Belgium’s crumbling nuclear infrastructure was very real indeed.  Although nearly two thirds of Belgium’s electricity comes from the sites’ seven reactors, activists want at least two reactors shuttered on safety concerns. Those concerns - stemming from the discovery of “thousands” of micro-cracks - were amplified last month when Belgium’s federal prosecutor confirmed that on November 30, police seized footage that appeared to show a high-ranking Belgian nuclear official in an anti-terror raid. The surveillance video was discovered in a bust that resulted in the arrest of Mohamed Bakkali, who was charged with terrorist activity and murder in connection with the Paris attacks. His home in Auvelais may have been used as a hideout. On Thursday, we get still more chilling evidence to suggest that this is all the work of the very same Belgium-based terror cell. According to Dernier Heure, it was the Bakraoui brothers that planted a hidden camera in the bushes and captured the 10-minute surveillance video of the senior Belgian nuclear official coming and going from his home. Here’s DH (Google translated):

Ohio Regulators Near Decisions On FirstEnergy, AEP Rate Deals | WOSU Radio: Ohio utility regulators are nearing decisions on two proposed energy deals that have sparked fierce debate among consumer, business and environmental advocates. The power purchase agreements proposed separately by Akron-based FirstEnergy and Columbus-based AEP have been the subject of television ad wars, email-writing campaigns, apps and web sites and mountains of written testimony. They ask regulators to permit rate increases over eight years to subsidize certain aging coal-fired and nuclear plants and guarantee profits. Critics call the rate plans bailouts that flout Ohio's decision to deregulate its electricity market and force power companies to compete on an open market. The companies and their allies argue the proposals protect jobs and aid the expensive transition to cleaner energy. Decisions by the Public Utilities Commission of Ohio could come later this month.

SEC investigating large Ohio oil and gas supplier for foreign corruption - Columbus Business First -  A large oil and gas supplier based in Ohio is under investigation by federal regulators looking into whether it may have run afoul of securities laws governing international operations. Federal regulators are investigating Fairmount Santrol, based near Cleveland, under the Foreign Corrupt Practices Act. Enacted in 1977, the act prohibits publicly traded American companies from paying bribes to foreign officials for help getting or keeping business. Sanctions for violating the act "can be significant," the Securities and Exchange Commission says. The $828.7 million company is one of the world's biggest providers of sand-based proppant used in hydraulic fracturing, or fracking, operations. It operates across the world, including in Argentina, Canada, China, Denmark and the United Arab Emirates. A Fairmount Santrol spokeswoman said the company is cooperating with the investigation and strictly forbids "any such conduct." The company's training helps provide safeguards "against the risk we face in those countries that are customary for large companies like Fairmount with international operations," spokeswoman Kristin Lewis said in a statement. The Chesterland-based company disclosed the information in a regulatory filing. The SEC told the company of its investigation in December. In the filing, Fairmount Santrol said it had earlier brought in outside lawyers to investigate the undisclosed focus of the investigation and deemed no further action was necessary. "We cannot predict what, if any, further action the SEC may take regarding its investigation, and cannot provide an estimate of the potential costs of the SEC’s investigation or any possible fines, penalties or other remedial actions that might result, if any, at this time," the filing said.

Pro-fracking writer ignored essential dangers of drilling: Tish O'Dell, Mothers Against Drilling in Our Neighborhoods - -Guest columnist Tish O'Dell, co-founder of Mothers Against Drillin in Our Neighborhoods, argues the dangers of drilling. This is in response to guest columnist Jackie Stewart, from Energy In Depth, "Ohio anti-fracking activists miss the mark on climate change, methane regulations," published last month. Industry lobbyists representing one of the wealthiest industries on the planet use every form of media available to propagandize: millions of dollars spent on TV and radio advertising, the purchase of elected officials through campaign contributions who speak on their behalf, full color glossy mailers and print advertisements – and, of course, print media. All to convince us – we, the people – that shale gas drilling and fracking is environmentally safe and an economic benefit for all. Ms. Stewart quotes research and cites statistics on how good for the environment shale gas really is. She ignores the research that reveals otherwise (e.g. Robert W. Howarth, of Cornell University, in 2011 published research showing "...the footprint of shale gas is at least 20 percent greater and perhaps more than twice as great [as coal] on the 20-year horizon").How convenient. When an oil and gas industry lobbyist cites research extolling the safety and benefits of shale gas, it may generate some questions from discerning readers. For example, why is it that the only people working so hard to convince us fracking is safe are those who financially or politically benefit from fracking? And why does the oil and gas industry ensure that before over taking communities with fracking and its waste, they find it necessary that state legislatures first pass laws stripping local communities of their authority to prohibit or regulate it, and keeping secret the "safe" chemicals used in the process? It happened here in Ohio in 2004 with HB 278. It's happening today in Florida with SB 318. Similar bills, stripping communities of any say over what the industry does in their cities and neighborhoods (while smiling propagandists promise the creation of jobs), were passed in Colorado, Pennsylvania, New Mexico, West Virginia, California, Texas and more. They are even exporting this preemption law to other countries, like England, because it has worked so well to protect the industry here.

Ky. Senators want radioactive waste study - Kentucky state senators on Tuesday rallied around a bill that seeks to make sure the state is protected from radioactive waste produced during oil and gas drilling.The Senate's Natural Resources and Energy Committee unanimously approved its version of House Bill 563, sending it to the floor for a vote. "There is a distrust of government out there by some citizens," said Rep. Cluster Howard, a Democrat whose district includes an Estill County landfill where state officials say dangerous radioactive waste was dumped last year. "This will ensure that we know we are on top of this." The Kentucky House of Representatives previously voted 97-0 to approve the bill, which calls for the energy and health cabinets to take a fresh look at state regulations to see whether any changes should be made to modernize the handling of this type of waste from the oil and gas industry. Kentucky Division of Waste Management officials on Feb. 25 confirmed that radioactive waste from rock, brine and mud from drilling in fracking zones in Ohio, Pennsylvania or West Virginia was brought into Kentucky against state law. Officials said some also went to the Green Valley landfill in Greenup County, and that they are looking to see if any other landfills might have been sent the waste. That intensity level is nearly 400 times as high as the U.S. Environmental Protection Agency generally sees as safe. State officials say they believe the Green Valley landfill accepted less risky but still illegal waste.

$4.2 Million Fracking Verdict Sparks More Suits --Toxics Law Reporter— A recent jury verdict and $4.2 million award in favor of two Pennsylvania families who alleged fracking operations contaminated their well water is likely to trigger the filing of more suits, sources tell Bloomberg BNA.  A jury March 10 found Cabot Oil & Gas acted negligently in drilling fracking wells in Dimock, Pa., which created a private nuisance and significantly harmed the plaintiffs in their use and enjoyment of the property. A number of other families involved in the litigation settled before trial for a total amount less than what was awarded here.  It is one of the first fracking nuisance verdicts finding for plaintiffs but is not unprecedented. A Texas jury awarded $2.9 million in 2014 to a family who alleged contamination from fracking operations caused them a variety of personal injuries, in Parr v. Aruba Petroleum Inc., Tex. County Ct., No. CC-11-01650-E, 4/22/14. In this case, however, no personal injury allegations were put before the jury. Counsel for the plaintiffs, Leslie Lewis, a solo practitioner in New York, declined to speculate whether the case will have an impact on further litigation. “I have no idea what the future will bring regarding other cases and future verdicts; this case was a particular fact pattern, with shoddy operations occurring early in the so-called ‘gas boom’ years,” Lewis told Bloomberg  “This case was about gas drilling operations, not necessarily hydraulic fracturing,” Lewis said. “This is maybe the second nuisance verdict in the U.S.; the only other I am aware of is the Parr case, which is under appeal. Presently, I do not know how many other cases are out there and where.”“Seeing plaintiffs prevail here, even on limited claims and with debatable evidence, suggests that lawyers for plaintiffs will be emboldened to pursue many more cases. Whether those cases translate to more verdicts will depend on the specific facts of each situation,”

Opponents question climate benefits, morality of natural gas - - An interfaith group of religious organizations held a rally at the state Capitol Monday, calling on Governor Tom Wolf to halt natural gas development. About 50 people attended the event and asked the governor for what they called a “moral-torium” on unconventional gas development and related infrastructure, such as pipelines.“We are calling on our legislators to listen to science and protect public health,” says Rev. Dr. Leah Schade of the United in Christ Lutheran Church in Lewisburg. “This is one area where science and religion are actually in agreement.” She pointed to climate-damaging methane emissions and water contamination from the drilling boom.At the same time, the House Democratic Policy Committee was meeting in another part of the Capitol to discuss whether the state should be incentivizing the use of natural gas.“There’s a difference between whether natural gas production is good and whether it should be incentivized by the state,” says Rep. Greg Vitali (D- Delaware), who hosted the hearing. The hearing’s panelists included members of the Wolf administration in the Department of Environmental Protection (DEP) and Department of Community and Economic Development (DCED), as well as climate scientists and representatives from environmental groups. Vitali invited UGI and the gas trade group, the Marcellus Shale Coalition to testify, but he says both declined.

Think Globally Arrested Locally  — They came here to get arrested.  Nearly 60 protesters blocked the driveway of a storage plant for natural gas on March 7. Its owners want to expand the facility, which the opponents say would endanger nearby Seneca Lake. But their concerns were global, as well. “There’s a climate emergency happening,” one of the protesters, Coby Schultz, said. “It’s a life-or-death struggle.” The demonstration here was part of a wave of actions across the nation that combines traditional not-in-my-backyard protests against fossil-fuel projects with an overarching concern about climate change. Activists have been energized by successes on several fronts, including the decision last week by President Obama to block offshore drilling along the Atlantic Seaboard; his decision in November to reject the Keystone XL pipeline; and the Paris climate agreement. Bound together through social media, networks of far-flung activists are opposing virtually all new oil, gas and coal infrastructure projects — a process that has been called “Keystone-ization.”  As the climate evangelist Bill McKibben put it in a Twitter post after Paris negotiators agreed on a goal of limiting global temperature increases: “We’re damn well going to hold them to it. Every pipeline, every mine.” Regulators almost always approve such projects, though often with modifications, said Donald F. Santa Jr., chief executive of the Interstate Natural Gas Association of America. Still, the protests are having some impact. The engineering consultants Black and Veatch recently published a report that said the most significant barrier to building new pipeline capacity was “delay from opposition groups.”

Global Shale Gas Market Poised to Surge from USD 63.0 Billion in 2014 to USD 105.0 Billion by 2020 – MarketResearchStore.Com - -- -- Zion Research has released a new report titled “Shale Gas Market by Technology (Horizontal Drilling, Hydraulic Fracturing, and Water Usage Issue) for Power Generation, Residential, Industrial, Commercial, Transportation and Other Applications: Global Industry Perspective, Comprehensive Analysis, and Forecast, 2014-2020.” According to the report, the global demand for shale gas was valued at USD 63 billion in 2014 is expected to reach USD 105 billion in 2020, growing at a CAGR of around 9% between 2015 and 2020. In terms of volume, the global shale gas market stood at around 10.0 trillion cubic feet in 2014. Shale gas is a carbon-friendly and low-cost alternative to conventional fuels. Considerable deposits of shale gas are being found throughout the world. Shale gas is poised to provide a rising proportion of the global energy needs. Shale gas is also referred as natural gas and is extracted from shale. The main driving factor for shale gas industry is rapidly growing demand worldwide. U.S. government is highly focused on shale gas production in order to lower down reliance on crude oil as source of energy. However, high cost involved in the production in comparison with traditional sources would limit growth of this industry. However, ongoing research & development and technological advancements in the field of shale gas are estimated to bring down cost of production.

Anti-Drilling Protesters Shout, Disrupt Oil, Gas Lease Sale - ABC News: Protesters opposed to drilling in the Gulf of Mexico disrupted an oil and gas lease sale Wednesday, chanting and waving signs as government officials read bids from companies for the right to explore and develop fossil fuels offshore. Government officials said afterward that the sale — for tracts in the central and eastern regions of the Gulf — raised a total of $156 million in the central region but no bids were made for the eastern region. The $156 million was the fourth lowest total for sales in the central region — traditionally the Gulf's most active territory — since sales started back in 1983, officials said. Oil and gas companies have been struggling with low prices. Government officials called the sale results respectable but said the price of oil and gas is influencing companies, which are slowing down on capital investments. "I think industry is proceeding cautiously," said Janice Schneider, assistant secretary at the Department of Interior. Schneider said the protesters did not hold up the sale, she had no concerns about the demonstrations and that everyone has the right to express themselves. About 150 protesters, holding signs that said "No new leases" or "No Drill, No Spill," marched into the room where the sale was held Wednesday, staying until it was over. As a government official read aloud the bids from a microphone, the protesters chanted "What's the solution to pollution? Keep it in the ground!" The audience of mostly oil and gas company employees and executives in suits looked on, sometimes pulling out their phones to take videos or photos of the protesters. The Bureau of Ocean Energy Management offered about 45 million acres for exploration and development. Companies submitted bids in advance to the agency, which announced the results at the sale held at the Superdome.

Transportation Fuel/Heating Oil Pipelines To The East Coast. -  The East Coast consumes more than 200 million gallons of gasoline, diesel, heating oil and jet fuel a day, but produces only one-fifth of that total, most of it at New Jersey and Pennsylvania refineries. To keep the region’s cars, trucks, trains and airplanes moving (and many of its homes and businesses heated) huge volumes of fuels need to be delivered from elsewhere, mostly via two pipelines from the Gulf Coast and the rest by ship—some from Gulf and other U.S. ports and some from overseas. Today, we continue our examination of the infrastructure that moves gasoline, diesel, heating oil and jet fuel to the nation’s largest fuel-consuming region with a look at four major pipelines. The aim of this series is to describe the logistics involved in moving refined petroleum products like gasoline, diesel, heating and jet fuel (which we have dubbed GDHJ) to the East Coast from their primary production region—the Gulf Coast, also known as Petroleum Administration for Defense District (PADD) 3.  As we said in Episode 1 of our series, PADD 3 produces about 7.5 MMb/d of GDHJ (the equivalent of 315 million gallons), but consumes only one-third of that (about 2.5 MMb/d). In sharp contrast, PADD 1 produces about 1 MMb/d of these fuels, but consumes five times that amount (about 5 MMb/d). According to the U.S. Energy Information Administration (EIA) about 2.8 MMb/d of GDHJ is moved, on average, from PADD 3 to PADD 1, accounting for nearly three-fifths (58%) of the East Coast’s total consumption of transportation fuels. Of that 2.8 MMb/d PADD 3-to-PADD 1 transfers, 82% (2.3 MMb/d) is moved by the two primary refined products pipelines between and through the two regions: Colonial Pipeline and Plantation Pipe Line. Given their significance, let’s zero in on these two pipelines first.

Slow Train Coming – Crude By Rail To Northwest Refineries Still Resilient -- Most of the crude by rail  (CBR) shipments to 4 refineries in Washington State are ex-North Dakota from where rail freight costs are over $10/Bbl. Bakken crude from North Dakota competes at Washington refineries with Alaska North Slope (ANS) shipped down from Valdez, AK. Back in 2012 ANS prices were more than $20/Bbl higher than Bakken crude – easily covering the rail cost. In 2016 so far the ANS premium to Bakken has averaged well below the $10/Bbl freight cost making CBR shipments uneconomic. But as we discuss today - Northwest refiners are still shipping significant volumes of crude from North Dakota. This is Part 6 in our series updating the sorry state of the CBR business in North America in 2016 compared to its heyday a few years back. In Part 1 of this series we noted CBR declines in response to narrower spreads between U.S. domestic crude benchmark WTI and international equivalent Brent. The lower spreads reduce the incentive to move crude from inland basins to coastal refineries by rail because the latter is a more expensive transport option compared to pipelines. As we discussed in Part 2 – looking at the epicenter of the CBR boom in North Dakota – the slower than expected decline in rail shipments is mostly because committed shippers and refiners continue to use rail infrastructure that they invested in (and made take-or-pay commitments to) and because some routes do not have pipeline access (East Coast and West Coast). In Part 3 we looked at CBR traffic out of the Niobrara shale region in the Rockies. Midstream companies continue the build out and expansion of rail terminals as well as new pipelines in this region even though production has leveled off. In Part 4 we looked at the fate of CBR load terminals in Western Canada that are “overbuilt and underutilized”. In Part 5 we turned to CBR market destinations – beginning with the East Coast. This time we begin a two-part look at CBR unloading on the West Coast.

Nebraska measure aimed at controlling fracking waste - Advocacy group Bold Nebraska, which helped take on the Keystone XL pipeline, declared victory after state leaders passed a measure to control oil and gas waste. The Nebraska Legislature passed bill LB-1082 on a vote of 48-0-1 to enact stronger provisions governing the waste associated with hydraulic fracturing, a drilling practice more commonly known as fracking. Bold Nebraska Director Jane Kleeb said the passage came as a result of pressure from citizens concerned about waste disposal in the state. "Wastewater injection wells are the result other states' reckless fracking practices and should be banned," she said in a statement. In January, Oklahoma Gov. Mary Fallin approved $1.38 million in one-time costs to support earthquake research. The U.S. Geological Survey found evidence to suggest seismic activity in the state may be tied to the disposal of wastewater from the oil and gas industry in underground wells. Two minor tremors were recorded by the USGS in Oklahoma in the last 24 hours. Nebraska lawmakers in floor debates in early March said, meanwhile, that up to 10,000 barrels of wastewater from Colorado were among those slated for deposit in the state's Sioux County, along the border with Wyoming. State leaders said it was a water quality concern given the proximity to the Sandhills area, home to the primary source of water in Nebraska.

Erin Brockovich on Oklahoma Earthquakes: ‘It’s Fracking, Let’s Just Be Honest’ -- Erin Brockovich is speaking out on Oklahoma’s alarming earthquake activity and she’s not afraid to tie the state’s seismicity to a certain industry. In an interview with Oklahoma’s News9, the prominent environmental activist and consumer advocate explained she’s aware that the injection of mass quantities of fracking wastewater in disposal wells is triggering the tremors, as geologists have confirmed. But Brockovich added, “It’s fracking, let’s just be honest.”  Oklahoma experiences more earthquakes than anywhere in the world. Before 2009, Oklahoma had two earthquakes of magnitude 3.0 or greater each year, but now there are two a day. A 5.1 magnitude earthquake that shook northwest Oklahoma two weeks ago was the third-strongest ever recorded in the state, the U.S. Geological Survey (USGS) said. And, within the past 24 hours, seven earthquakes rattled the city of Edmond in central Oklahoma. Brockovich told News9 that many citizens have been concerned about structural damage to their homes and have called on her to help protect their health, property and legal rights.“These people you know, they have rights and their homes are being damaged and structural damage and its cause by a man-made condition,” Brockovich said. Blaming a lack of regulation, Brockovich said that Oklahomans should review policies, legislation, rules, and regulations. “There’s a lack of enforcement. There’s a whole lot of information that can go out there that can help this community speak up and stand up for themselves,” she said.

The big bust in the oil fields - — He’d borrowed from banks and investors and retirement funds, all in a frenzied mission to drill for oil and gas, and by the time Terry Swift realized he’d gone too far, this was his debt: $1.349 billion.  His company, founded by his father almost 40 years earlier, had plunged into bankruptcy and laid off 25 percent of its staff. Its shares had been pulled from the New York Stock Exchange. . “Maybe we were wrong to believe there wouldn’t be a bust this bad,” Swift, 60, said, as the Tahoe rumbled south of San Antonio. “It didn’t even feel risky.”  Swift’s miscalculation has made his company, Swift Energy, a casualty of the greatest wave of financial defaults since America’s subprime mortgage crisis ravaged the U.S. economy.  This new wave of bad loans isn’t the same magnitude of the housing bust, but it reflects similar behaviors. Borrowers feasted on what Bloomberg estimates was $237 billion of easy money without scrutinizing whether the loans could endure a drastic downturn. The consequences are far-reaching: The U.S. oil industry, having grown into a giant on par with Saudi Arabia’s, is shrinking, with the biggest collapse in investment in energy in 25 years. More than 140,000 have lost energy jobs. Banks are bracing for tens of billions of dollars of defaults, and economists and lawyers predict the financial wreckage will accelerate this year.  South Texas, along with North Dakota, had been the testing grounds for the industry’s ambitions, a place where shale oil and gas companies had taken on billions in loans to support more drilling and fracking. The strategy was to gather up drilling sites at turbo-speed and later slow down and reap the benefits. But then, oil prices plunged and stayed down. They’ve fallen 60 percent from two years ago.

Groups want freeze on oil waste dumping into water reserves - (AP) — Environmental groups sought a freeze Wednesday on permits to dump oil field waste into the country's underground water reserves, alleging that lax federal oversight was threatening potential drinking water supplies. Groups including the Natural Resources Defense Council and Clean Water Action formally petitioned the U.S. Environmental Protection Agency for the moratorium. The agency would review the petition, said an EPA spokeswoman, Margot Perez-Sullivan.  The request follows news reports and federal and state investigations that detailed California's failures in enforcing laws meant to protect natural reserves of water that might one day be needed for drinking and irrigation. Oil regulators in California, the country's third-biggest oil-producing state, acknowledged last year that they had allowed oil field waste to contaminate some federally protected drinking water supplies.   The environmental groups said they had found 4,679 instances nationwide in which the EPA has authorized oil field wastewater and other material to be injected into naturally occurring underground water supplies, which are otherwise off-limits to dumping. Regulators are supposed to allow oil companies to inject only into water reserves, or aquifers, whose water is naturally too briny or otherwise unlikely to be used for drinking. The environmental groups say regulators have been too loose in granting such permits. For example, two-thirds of permits approved by the federal agency lacked documentation on the original water quality of an underground source, the groups claimed.

Feds, groups reach tentative deal over oil lease emissions (AP) — Environmental groups and the U.S. government reached a tentative agreement to end a dispute over greenhouse gas emissions from federal oil and gas leases in Montana. Attorneys for the Department of Justice and the environmentalists filed notice in federal court Friday that they have a settlement in principle over a lawsuit that pushes the government to examine the effects on climate change when leasing public lands for energy drilling. They hope to finalize the deal within the month. The groups say the government should require companies to use technology that would reduce climate-changing methane emissions as a condition of their leases. Better oversight and technology use could cut 40 percent of the methane now lost due to leaking pipes, venting excess gas and exhaust from drilling, processing and transporting the oil and gas, according to the Montana Environmental Information Center, WildEarth Guardians and Earthworks’ Oil and Gas Accountability Project. Justice Department attorneys argued that the lawsuit should be dismissed because the groups had not shown evidence that greenhouse gas emissions from federal lease sales caused them harm. The environmental groups entered into settlement negotiations with government attorneys after the 9th U.S. Circuit Court of Appeals last year reversed a ruling that dismissed the case. U.S. District Judge Sam Haddon had ruled that future drilling emissions would be too small to make a significant contribution to global greenhouse gas levels.

Cramer – BLM Comment Period Extension on Proposed Methane Rule Falls Short -- Congressman Kevin Cramer announced today the United States Bureau of Land Management (BLM) has extended the public comment period until April 22 for the recently proposed Waste Prevention rule, which changes the regulation of methane emissions from oil and natural gas production on federal and tribal lands across the country.  The proposed rule was released on Jan. 22 and provided the public 60 days to comment from the date it appeared in the Federal Register on Feb. 8. “This extension, which falls far short of what’s needed, allows stakeholders some additional time to analyze the impact the proposed regulation will have and provide informed comments,” said Cramer.  “These regulations have nothing to do with protecting the environment and everything to do with shutting down the oil and gas industry.  This BLM rule in particular is duplicative of EPA and State regulations.  Plus, let’s not forget the oil and gas industry already has a natural incentive to capture methane – essentially natural gas – and sell it in the marketplace.  Federal agency data even shows methane emissions have been reduced at the same time natural gas production has increased.  The BLM and other federal agencies can do more by approving rights-of-way for additional pipelines in a timely manner.” On March 17, 2016, Cramer led a letter with 13 of his House colleagues urging the BLM to extend the comment period for a minimum of 60 additional days.  View the letter here.

Bill McKibben:  Global Warming’s Terrifying New Chemistry --  Our leaders thought fracking would save our climate. They were wrong. Very wrong. -- In February, Harvard researchers published an explosive paper in Geophysical Research Letters. Using satellite data and ground observations, they concluded that the nation as a whole is leaking methane in massive quantities. Between 2002 and 2014, the data showed that US methane emissions increased by more than 30%, accounting for 30-60% of an enormous spike in methane in the entire planet’s atmosphere. To the extent our leaders have cared about climate change, they’ve fixed on CO2. Partly as a result, coal-fired power plants have begun to close across the country. They’ve been replaced mostly with ones that burn natural gas, which is primarily composed of methane. Because burning natural gas releases significantly less carbon dioxide than burning coal, CO2 emissions have begun to trend slowly downward, allowing politicians to take a bow. But this new Harvard data, which comes on the heels of other aerial surveys showing big methane leakage, suggests that our new natural-gas infrastructure has been bleeding methane into the atmosphere in record quantities. And molecule for molecule, this unburned methane is much, much more efficient at trapping heat than carbon dioxide. The EPA insisted this wasn’t happening, that methane was on the decline just like CO2. But it turns out, as some scientists have been insisting for years, the EPA was wrong. Really wrong. This error is the rough equivalent of the New York Stock Exchange announcing tomorrow that the Dow Jones isn’t really at 17,000: Its computer program has been making a mistake, and your index fund actually stands at 11,000. These leaks are big enough to wipe out a large share of the gains from the Obama administration’s work on climate change—all those closed coal mines and fuel-efficient cars. In fact, it’s even possible that America’s contribution to global warming increased during the Obama years. The methane story is utterly at odds with what we’ve been telling ourselves, not to mention what we’ve been telling the rest of the planet. It undercuts the promises we made at the climate talks in Paris. It’s a disaster—and one that seems set to spread.

Official: North Dakota communities lacking natural gas at disadvantage (AP) — An economic development official says the lack of natural gas service is hampering scores of communities in the state. Economic Development Association of North Dakota President Connie Ova Communities says communities that lack natural gas are at an economic disadvantage. Public Service Commission Chairwoman Julie Fedorchak says there are 368 North Dakota communities without natural gas service, compared with 89 communities that have it.  Fedorchak says extending natural gas pipelines can cost about $1 million a mile. North Dakota lawmakers last year defeated a bill that would have allowed tax incentives to extend natural gas infrastructure. Lawmakers decided to study the issue instead. Propane companies argued that the state should not provide the incentives and that the extension of natural gas infrastructure should be driven by the market.

The Forgotten Shale Boom Towns -- US economic growth may not be at the same level it was in the halcyon days of the 80’s and 90’s, but compared to the rest of the world, the US is a model of economic performance. Without the economic outperformance of shale oil and gas from the Bakken to the Marcellus, the US would be in much worse shape than it is today. Unfortunately, shale oil has been largely betrayed by an ungrateful Washington DC, which has hammered the idea of increased fossil fuel production, and done precious little to help shale oil producers make the necessary changes to their business model to adapt to lower oil prices. North Dakota, and Williston in particular, reflect this reality. Williston boomed as shale oil production became mainstream, going from a town of 12,000 to a town of more than 40,000 at its peak. Today the situation In Williston is very different and much less rosy. Williston’s place at the heart of a new American gold rush, with virtually no unemployment and household incomes above $80K a year, set the stage for renewed optimism after the 2008 Recession. The change in North Dakota’s economy was so remarkable that, for what might be the first time ever, last year Hollywood actually made a scripted (and underrated) TV series about oil. Reflecting enormous irony, that series was cancelled at the end of its first season.  Today the picture in Williston is much different. The town’s population is back down to 31,000, while layoffs are common across the oil patch which is leading to severe distress for many related service businesses like hotels and restaurants. The bust is also putting enormous pressure on North Dakota’s budget. Some experts suggest that North Dakota is the quintessential boom-bust story. With little in the way of economic infrastructure in much of the Bakken region before the boom, there is little to support the region now after the bust. In that regard, many of the businesses that have opened in the area may have little prospect of ever recouping the capital they put into opening up shop if they haven’t done so already.

Boom or Bust, Courts Remain Busy in North Dakota Oil Patch - The Bakken oil boom was in full throttle when a North Dakota couple leased rights to water on their property so it could be used in hydraulic fracturing, the process of extracting sweet crude from the ground. Then, energy prices began to plummet.  The result, Jeffery and Shelley Schmidt say, is they were stiffed on about $90,000 in royalty payments and left on the hook to subcontractors for about $180,000. The Schmidts have filed a lawsuit in state court in an effort to recoup their losses.It’s a scenario that has become common in western North Dakota in the last year. While the number of oil rigs operating in North Dakota has plummeted to its lowest figure in nine years, the legal action is booming — with most of it shifting from lease and title complaints to larger contract disputes involving major investors and small claims by individuals.“People say that everything has slowed down,” said Carolyn Probst, clerk of courts for northwestern North Dakota, which includes the oil patch. “Well, the oil may have, but our caseload has not.”Last year brought a record-setting 9,305 civil cases to the district, including a 32 percent increase in small claims actions from the previous year. The number of civil cases in many of those counties are already on pace to equal last year’s stack.  About 90 percent of attorney Josh Swanson’s cases are based in energy counties — despite the fact he’s in Fargo, about six hours from the heart of oil country.  Companies that were once willing to let some time go on collecting accounts receivable for services are now filing well liens on a daily basis and trying to collect their money before the debtor goes insolvent,” Swanson said. “It’s all about everyone trying to get paid and working out deals to stay in operation.”

Wells drilled since start of 2014 provided nearly half of Lower 48 oil production in 2015 - (EIA) U.S. crude oil production from the Lower 48 states from new wells (drilled since the start of 2014) made up 48% of total U.S. crude oil production in 2015, up from 22% in 2007. Production from new wells has grown as advances in horizontal drilling and completion techniques led to growth in oil production from low-permeability tight reservoirs. In 2015, production from tight formations—which include, but are not limited to, shale plays—accounted for more than 4 million barrels per day (b/d), or 50% of total U.S. oil production.  U.S. oil production from tight formations increased from 0.5 million b/d in 2009 to 4.6 million b/d in May 2015, at which point decreasing oil prices contributed to declines in oil production. As of December 2015, oil production from tight formations was 8% lower than the level in May. More than 80% of oil production from tight formations originates from the Eagle Ford, Bakken, and Permian regions.  Horizontal wells drilled into tight formations tend to have very high initial production rates, but they also have steep initial decline rates. With steep decline rates, constant drilling and development of new wells is necessary to maintain or increase production levels. Rig counts and the productivity of newly drilled wells, which are tracked in EIA's Drilling Productivity Report, are two key indicators of future oil production. Future production can also be affected by the current inventory of drilled but not yet completed wells and the potential for recompleting and refracturing existing wells that may increase production from already-producing wells without drilling new wells. The U.S. oil-directed rig count totaled nearly 1,600 rigs in the fall of 2014. However, the decline in oil prices over the past 18 months has reduced drilling activity, with just 413 rigs operating as of February 19, 2016.

Fracking now fuels half of U.S. oil output - Mar. 24, 2016: The rise of fracking has reshaped the global energy landscape. It recently hit a new milestone in the U.S. Fracking now accounts for more than half of all U.S. oil output, according to the Energy Information Administration. It's a stunning feat considering fracking made up less than 2% of American oil production in 2000. Hydraulic fracturing technology, more commonly known as "fracking," paved the way for drilling into America's enormous shale deposits. It has fueled a dramatic boom in U.S. oil production. Back in 2000, there were just 23,000 fracking wells pumping about 102,000 barrels of oil a day. Now there are 300,000 fracking wells, churning out 4.3 million barrels per day. Fracking "has allowed the United States to increase its oil production faster than at any time in its history," the EIA said in recent report. U.S. output has nearly doubled over the past decade and America only trails Saudi Arabia and Russia globally. That surge in American crude is one of the main reasons why there is a global glut in oil that keeps getting worse. The excess supply caused oil prices to peak in mid-2014 and crash as much as 75% since then. "Prices are where they are because shale has been so phenomenally successful. It's changed the whole pricing paradigm,"

Half of continental U.S. oil production comes from new wells: About half of the oil produced in the continental United States last year came from wells drilled after January 2014, according to the U.S. Energy Information Administration. The data provides insight into the importance of short-cycle shale production and advances in oil industry technologies.  Many companies are targeting short-cycle investments, lower-cost projects that take months, rather than years, to come online.  Chevron plans to focus on short-cycle shale fields in the Permian basin, rather than costly deepwater projects. Though shale wells can be costly themselves, there are fewer risks involved, and companies can reap benefits more quickly. With a large number of short-cycle wells, the EIA expects average U.S. production to fall 7.4 percent in 2016 – about 700,000 barrels a day. Despite an increase in shale oil production during the past few years, individual wells have steep decline rates, losing nearly 70 percent of initial production in the first year. “Constant drilling and development of new wells is necessary to maintain or increase production levels,” the EIA said. “Oil production from new wells has so far been able to keep U.S. crude production from falling significantly below its level in late 2014.” With the U.S. rig count down 76 percent since late 2014, oil production will have a tough time keeping up recent levels. The EIA expects U.S. oil production to decline through 2017.

U.S. petroleum product exports continue to increase - (EIA) Total U.S. petroleum product exports continued to increase in 2015, up 467,000 barrels per day (b/d) from 2014 to 4.3 million b/d, driven by increased exports of distillate fuel, motor gasoline, and propane. Mexico and countries in Central and South America continue to be major recipients of U.S. petroleum product exports.  Exports of distillate fuel oil represent the largest component of U.S. petroleum product exports, and averaged 1.19 million b/d in 2015, an increase of 85,000 b/d from 2014. The United States exported distillate fuel to 88 different countries in 2015. The top destination for U.S. distillate exports was Mexico, averaging 143,000 b/d in 2015, an increase of 15,000 b/d from the previous year. Distillate exports to Central and South America averaged 595,000 b/d in 2015, up 10,000 b/d from the previous year. Chile was the region's largest single importer of U.S. distillate in 2015, averaging 101,000 b/d.  As continued high U.S. refinery runs and a warmer-than-normal heating season combined to push U.S. distillate inventories above the five-year average and combined to push prices lower, exports of distillate to Western Europe also increased. In the third and fourth quarters of 2015, distillate exports to Western Europe increased year-over-year by 80,000 b/d and 136,000 b/d, respectively. Increased U.S. exports contributed to high distillate inventories in the major refining and petroleum hubs of Amsterdam and Rotterdam in the Netherlands, and Antwerp in Belgium, collectively known as the ARA.

Coming to the Oil Patch: Bad Loans to Outnumber the Good - WSJ: Bad loans are likely to outnumber good ones soon in the U.S. oil patch, an indication of the pressure on energy companies and their lenders from the crash in prices. The number of energy loans labeled as “classified,” or in danger of default, is on course to extend above 50% this year at several major banks, including Wells Fargo and Comerica Inc., CMA 0.54 % according to bankers and others in the industry. In response, several major banks are reducing their exposure to the energy sector by attempting to sell off souring loans, declining to renew them or clamping down on the ability of oil and gas companies to tap credit lines for cash, according to more than a dozen bankers, lawyers and others familiar with the plans. The pullback is curtailing the flow of money to companies struggling to survive a prolonged stretch of low prices, likely quickening the path to bankruptcy for some firms. Fifty-one North American oil-and-gas producers have already filed for bankruptcy since the start of 2015, cases totaling $17.4 billion in cumulative debt, according to law firm Haynes and Boone LLP. That trails the number from September 2008 to December 2009 during the global financial crisis, when there were 62 filings, but is expected to grow: About 175 companies are at high risk of not being able to meet loan covenants, according to Deloitte LLP. “This has the makings of a gigantic funding crisis” for energy companies, said William Snyder, head of Deloitte’s U.S. restructuring unit. If oil prices, which closed at $39.79 a barrel Wednesday, remain at around $40 a barrel this year, “that’s fairly catastrophic.”

Alaska budget deficit just jumped $300M because of low oil prices, Walker administration says -- Alaska’s already massive budget deficit has jumped another $300 million thanks to low oil prices, Gov. Bill Walker’s administration said Monday. The state’s unrestricted revenue forecast for the current fiscal year, which ends June 30, dropped to $1.3 billion from an earlier projection of $1.6 billion, according to a new preliminary forecast by the revenue department released Monday morning. The exact drop is about 17 percent, the department said, and it’s based on sustained low oil prices. The revised forecast means the expected deficit for the state’s $5.4 billion budget is now $4.1 billion, up from a previously projected $3.8 billion. That means current revenue can cover only about 25 percent of the existing state budget. The picture for the following year is even worse, with the forecast revised downward to $1.2 billion from a previous $1.8 billion projection. Walker, in a news conference at the Capitol on Monday, said the diminished flow of oil revenue underscores the need for lawmakers to pass his financial plan.  Under the plan, the state would pay for government largely based on an annual $3.3 billion stream of revenue from a restructured Alaska Permanent Fund, instead of from oil revenue. Alaska’s oil revenues have crashed as prices dropped to $39 a barrel last week from more than $100 two years ago. “We have reached a point in our state’s history that we need to be looking beyond oil a bit,” Walker said. “We have that opportunity now. And you’re not going to do it by sitting back with a Ouija board hoping the price of oil’s going to go to $110, $147. It just isn’t going to work.”

The Atlantic Won’t See Drilling Anytime Soon, But It Could Still See Harmful, Noisy Blasting - Put away your party hats, Atlantic whale-watchers. Despite the recent announcement that the waters off southeastern United States are closed to drilling, applications to send massive sonic booms throughout the region are still being considered. The practice is called seismic airgun testing, and it is used to determine oil and gas resources below the sea floor using loud noises that can travel up to 2,500 miles underwater — potentially disrupting whales, fish, turtles, and invertebrates such as scallops and crabs. “There’s a potential for these species to be impacted for months on end,” Ingrid Biedron, a marine scientist with Oceana, told ThinkProgress. Right now, there are eight applications to conduct seismic testing making their way through the federal permitting process. The National Marine Fisheries Service, part of NOAA, is currently considering issuing Incidental Harassment Authorizations. There will be a 30-day public comment period on the IHAs before they go back to the Bureau of Ocean Energy Management, which will decide whether to approve the permits. There’s a potential for these species to be impacted for months on end The IHA specifically looks at impacts to marine mammals, Biedron said. BOEM is required to consult with the NMFS and other agencies — such as the Department of Defense and NASA — on other impacts to fish habitats and other federal programs. But each permit application is considered separately. “Cumulative impacts aren’t being considered,” Biedron said.

Dreaded 'stealth' supply becomes reality as U.S. drillers turn on 'ducks' | Reuters: A dreaded scenario for U.S. oil bulls might just be becoming a reality. Some U.S. shale oil producers, including Oasis Petroleum and Pioneer Natural Resources Co are activating drilled but uncompleted wells (DUCs) in a reversal in strategy that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices. When oil prices started their long slide in mid-2014, many producers kept drilling wells, but halted expensive fracking work that brings them online, waiting for prices to bounce back. But now, with crude futures hovering near multi-year lows and many doubting recent modest gains that brought oil prices near $40 a barrel can hold, the backlog of DUCs is already shrinking in some areas. In key shale areas such as Eagle Ford or Wolfcamp and Bone Spring in Texas such backlog has fallen by as much as a third over the past six months, according to data compiled by Alex Beeker, a researcher at Wood Mackenzie. "If the number of DUCs brought online is surprising to the upside, that means U.S. production won't decline as quickly as people expect," said Michael Wittner, global head of oil research at Societe Generale. "More output is bearish.” In the Wolfcamp, Bone Spring and Eagle Ford, the combined backlog of excessive wells remains around 600, Beeker estimates. About 660 wells could be the equivalent of between 100,000 and 300,000 barrels per day of potential new supply, according to Ed Longanecker, president of Texas Independent Producers and Royalty Owners Association (TIPRO).

"A Dreaded Scenario For Oil Bulls Is Becoming A Reality" Reuters Warns: U.S. Production Is Coming Back On Line -- One month ago, as we pounded the table on the biggest threat to the fundamental case for oil, namely that even a modest rebound in oil prices could unleash another round of production by the "marginal", US shale oil producers, we warned that a rebound in the price of oil as modest as $40 per barrel, could be sufficient to get drillers to resume production. As noted in late February, among the companies prepared to flip the on switch at a moment's notice are Continental Resources led by billionaire wildcatter Harold Hamm, which said it is prepared to increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost 2017 production by more than 10 percent, chief financial official John Hart said last week. Then there is rival Whiting Petroleum which may have stopped fracking new wells, added it but would "consider completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts. Less than a year ago, when the company was still in spending mode, Volker said it might deploy more rigs if U.S. crude hit $70." Then there was EOG Chairman Bill Thomas who did not say what price would spur EOG to boost output this year, but said it had a "premium inventory" of 3,200 well locations that can yield returns of 30 percent or more with oil at $40, and so on, and so on. The reason for the plunging breakeven price? The same one we suggested on February 3: surging, rapid efficiency improvement which "have turned U.S. shale, initially seen by rivals as a marginal, high cost sector, into a major player - and a thorn in the side of big OPEC producers."

Drillers Can't Replace Lost Output as $100 Oil Inheritance Spent -- For oil companies, the legacy of $100 crude is starting to run dry. A wave of projects approved at the start of the decade, when oil traded near $100 a barrel, has bolstered output for many producers, keeping cash flowing even as prices plummeted. Now, that production boon is fading. In 2016, for the first time in years, drillers will add less oil from new fields than they lose to natural decline in old ones. About 3 million barrels a day will come from new projects this year, compared with 3.3 million lost from established fields, according to Oslo-based Rystad Energy AS. By 2017, the decline will outstrip new output by 1.2 million barrels as investment cuts made during the oil rout start to take effect. That trend is expected to worsen. “There will be some effect in 2018 and a very strong effect in 2020,” said Per Magnus Nysveen, Rystad’s head of analysis, adding that the market will re-balance this year. “Global demand and supply will balance very quickly because we’re seeing extended decline from producing fields.” A lot of the new production is from deepwater fields that oil majors chose not to abandon after making initial investments, Nysveen said in a phone interview. Royal Dutch Shell Plc is scheduled to start the Stones project in the Gulf of Mexico’s deepest oil field this year after approving it in May 2013. Benchmark Brent crude averaged $103 a barrel that month compared with about $41 on Monday. Stones will add about 50,000 barrels a day to Gulf of Mexico output at a peak rate, according to Shell. Two other deepwater projects, run by Noble Energy Inc. and Freeport-McMoran Inc., are due to commence this year, the U.S. Energy Information Administration said in a Feb. 18 report.

Emerald Oil Files For Chapter 11 -- March 23, 2016; Buy High; Sell Low? -- Bizjournal is reportingEmerald Oil Inc. said it's filed voluntary Chapter 11 petitions in the U.S. Bankruptcy Court for the District of Delaware. Its oil and gas operations are located in the Williston Basin of North Dakota and Montana.   Prior to the bankruptcy filing, Emerald said it reached a deal with Latium Enterprises Inc. of England to sell "substantially all of Emerald's assets" and to serve as a "stalking horse" in the bankruptcy process. "The plan we are announcing today will provide for continuity in Emerald's current and future business operations. This process is the only path going forward and should enable the business to execute a turnaround in the current low oil price environment.  Importantly, Emerald's plan and the Latium transaction would allow the business to continue to operate and would provide a sound path for potential recovery for company stakeholders," said McAndrew Rudisill, president and CEO of Emerald, in a statement.  More here:  Emerald has obtained $20 million in post-petition debtor in possession financing to maintain operations during the restructuring. Prior to the Chapter 11 filing, Emerald executed a non-binding term sheet with privately-held Latium Enterprises under which Latium has proposed to purchase substantially all of Emerald’s assets and will serve as a “stalking horse” in a sale process under section 363 of the Bankruptcy Code. Shares of EOX are at $1.37 within a 52-week range of $0.39 – $19.00.    As of December 31, 2014, the company controlled the rights to mineral leases covering approximately 122,000 net acres.

U.S. Mining Losses Last Year Wipe Out Profits From Past Eight Years - The U.S. mining industry—a sector that includes oil drillers—lost more money last year than it made in the previous eight. Mining corporations with assets of $50 million or more recorded a collective $227 billion after-tax loss last year, according to Commerce Department data released Monday. That loss essentially wipes out all the profits the industry had made since 2007.  A crash in oil prices last year caused significant losses for what had been an upstart domestic energy industry propelled by petroleum reserves accessed via hydraulic fracturing, or fracking. Crude oil prices fell from above $100 a barrel in the middle of 2014 to less than $40 by the end of last year.  That meant many of those new wells were suddenly operating at a loss. What’s more, other types of mining operations were stung by falling commodity prices tied to weak demand from China and other parts of the globe.  Mining revenues also fell sharply, down 38% in the fourth quarter from a year earlier.  A faltering global economy also stung the manufacturing sector, though the industry remained profitable. The sector recorded a $510 billion annual profit, down from $609 billion in 2014. But manufacturing revenue declined 7.8% in the fourth quarter from a year earlier. Falling revenues suggest weaker global demand for U.S.-made goods. That’s likely a symptom of a stronger dollar making American products relatively more expensive overseas.

In One Year The US Mining Industry Lost More Money Than It Made In The Prior Eight - For anyone still looking for context to the biggest ever collapse in commodity prices in history, one far sharper and now longer than that in the deflationary aftermath of the Lehman failure, look no further than the chart below: as the WSJ notes, the U.S. mining industry, a sector which includes oil drillers, lost more money last year than it made in the previous eight. Mining corporations with assets of $50 million or more recorded a collective $227 billion after-tax loss last year, according to Commerce Department data released Monday. That one year loss wipes out all the profits the industry had made since 2007, or almost a full decade worth of profits, gone in 12 months. It wasn't just shale drillers: other types of mining operations were stung by falling commodity prices tied to weak demand from China and other parts of the globe. Mining revenues also fell sharply, down 38% in the fourth quarter from a year earlier. The faltering global economy also stung the manufacturing sector: as the WSJ notes, manufacturing revenue declined 7.8% in the fourth quarter from a year earlier, meaning dropping global demand for U.S.-made goods, which is nowhere more obvious than in Caterpillar's impploding retail sales.

OilPrice Intelligence Report: Despite High Debt Levels Energy Investors Remain Undaunted -- The number of energy loans that are in danger of default could jump above 50 percent this year, according to The Wall Street Journal, presenting some problems for several major banks. Lenders are starting to back away from new loans, declining to renew credit, and selling off bad debt. That could slash the available credit lines for some struggling oil and gas producers this year, potentially raising some liquidity pressure on E&P companies. An estimated 51 oil and gas companies have fallen into bankruptcy since early 2015. The periodic credit redetermination period is coming up, which could result in credit lines offered to energy companies being reduced by 20 to 30 percent. The total debt in the entire oil and gas sector hit $3 trillion in 2014, or about three times higher than 2006 levels.  Despite posting record losses in potentially seeing credit lines cut, several oil companies have returned to the equity markets, where they are still being welcomed with open arms. Reuters reports that at least 15 oil companies have announced new offerings in 2016 in 2016, with minimal damage to their share prices. The companies surveyed have outperformed an oil and producers index by 3 percent on average. But another way of looking at that statistic is that only well-positioned companies have issued new stock. Companies like Pioneer Natural Resources, Callon Petroleum Co, and Oasis Petroleum have performed better than some of their peers since announcing new stock offerings. Shareholders seem willing to provide companies with new cash infusions. “People would rather they have money in their pocket and survive,” Irene Haas, analyst at Wunderlich Securities, told Reuters. “They’ll worry about dilution later.” U.S. oil and gas exploration companies have issued a combined $10 billion in new equity this year.

U.S. on track for record summer gasoline demand: Kemp | Reuters: The United States will probably consume a record amount of gasoline in 2016, passing the previous peak set in 2007, and the prospect is helping lift crude oil prices. Recent data indicates the country is on track for its biggest-ever driving season this summer, which will keep refineries running flat-out turning crude into the motor fuel. A rapid expansion in U.S. gasoline consumption has coupled with strong demand growth in India and China, falling crude output in the United States, and hedge funds turning bullish, to send crude and fuel prices surging. U.S. motorists consumed 9.16 million barrels per day (bpd) of gasoline in 2015, just 125,000 bpd short of the record 9.29 million bpd set in 2007. The U.S. Energy Information Administration (EIA) is still forecasting consumption in 2016 will remain slightly below the 2007 peak. On Feb. 23, the EIA published a commentary titled “Motor gasoline expected to remain below 2007 peak despite increase in travel”. But the agency has been revising its estimates higher in response to the extraordinary strength in demand exhibited in recent high-frequency data. In December 2015, the EIA predicted gasoline consumption would rise by just 10,000 bpd in 2016. By January, it had upped its forecast increase to 70,000 bpd and in March, the agency raised the number to 90,000 bpd (“Short-Term Energy Outlook”, EIA, December 2015 to March 2016 editions).  The upward revisions come amid statistics showing gasoline demand already running at record levels.

As NASA releases climate “bombshell”, more questions raised over fracking’s climatic impact -  According to data released by NASA, the temperature record for February has been broken by an “unprecedented” amount. The scientists have found that February was 1.35C warmer than average. “We are in a kind of climate emergency now,” Stefan Rahmstorf, from Germany’s Potsdam Institute of Climate Impact Research, told the media. “It’s completely unprecedented.” There are those within the oil industry that argue that due to climate change we should transition away from dirty coal and oil to gas as soon as possible. They argue that gas – much of it from fracking – is the cleanest fossil fuel, which can act as a so-called “bridge” between the dirtier fossil fuels and cleaner renewables. I and many others have long argued that this is a flawed argument for a multitude of reasons, not least that fracking has large emissions of methane, one of the most potent greenhouse gases. I have also pointed out that fracking continues our reliance on fossil fuels generally, just at a time when we should be de-investing from fossils.  For example, just last month I blogged that: “Fracking has long been linked with the emissions of methane too.” I reported on new academic  research published by Harvard University in the journal Geophysical Research Letters which concluded “that US methane emissions have increased by more than 30% over the 2002–2014 period.” This methane spike has coincided with the fracking boom across the US. Well now respected environmental journalist Geffrey Lean, writing in the Independent, reports on another down-side of the fracking boom: The rise of carbon-intensive infrastructure and industries which all have a climatic impact. He reports “fracking is set to lead to a sharp rise in emissions of climate changing greenhouse gases, newly undermining industry and government claims that shale gas is a relatively clean fuel that can help combat global warming, an authoritative new study reveals.”

How the refineries came to own our air pollution regulators - "Regulatory capture" is the term for what happens when an agency overseeing an industry begins to see things the industry's way. Consider the most recent illustration: the South Coast Air Quality Management District board and the refinery industry. The refineries are among the worst-polluting facilities in the Southland, which has the dirtiest air in the United States. But that didn't stop the board from rejecting a clean-air plan worked out by its staff over 37 months and substituting a plan made public that very morning, developed by the Western States Petroleum Assn., a refinery lobbying group. Given a chance to reconsider its action at a meeting earlier this month, the board voted to stand pat. At the same meeting it fired its executive officer, Barry Wallerstein, who had supported the staff proposal. . California Air Resources Board's executive officer, Richard Corey, says the clean-air program would be so lax it might well violate state and federal regulations. State Senate President Pro Tem Kevin de León (D-Los Angeles) has launched an effort to remake the board so its pollution-tolerant majority can be outvoted. On Wednesday, the Sierra Club and three other environmental organizations sued in state court to force the board to reverse its vote. In response, the board majority and its industry overlords have offered some of the most fatuous defenses heard from a public body in years. Board member Mike Antonovich, a Los Angeles County supervisor, informed me in an emailed statement that the AQMD board "is not simply a rubber stamp for District staff." That's true, but it doesn't explain why it should be a rubber stamp for the refinery industry.

USA Today Reports On Saudi Aramco - Shell Split; Saudi Aramco Now Owns Largest Refinery In US -- USA Today reports that Saudi Arabia now owns the largest refinery in the US. I track this story here. The report sheds more light on the background to this "breakup": Reuters reported that the relationship started to fray after Motiva announced a $10 billion expansion of the Port Arthur refinery, doubling its capacity to 603,000 barrels per day, making it America’s largest refinery. It produced gasoline, diesel and jet fuel. A leak shortly after the expansion was completed in 2012 led to ballooning costs, exacerbating tension between Shell and Aramco. A 2015 workers strike also sparked anger between the two companies.  The two companies signed a nonbinding letter of intent, a plan that would divide up Motiva’s refineries between them. The refineries have a combined capacity of 1.1 million barrels per day and are all located close to each other. The breakup will allow Saudi Aramco to take over the Port Arthur refinery and 26 distribution terminals, and Aramco will also hold onto the Motiva brand name. Shell will take over the other two refineries, Convent and Norco, both located in Louisiana. Shell said that it would operate the two refineries as one plant with a combined throughput of 500,000 barrels per day. This is obviously a different spin or emphasis than the one I suggested earlier: Saudi Aramco is in early stages of monetizing its assets. So we will see how this plays out. And there it is, at the end of the USA Today article: The split will hand the largest U.S. refinery to the state-owned Saudi oil company. The Wall Street Journal speculates that it could also pave the way for some sort of listing of Aramco’s assets in a public offering, something that Saudi officials have alluded to for several months. Few expect Aramco to list its upstream production assets in Saudi Arabia; downstream assets are much more likely to be offered up. This article fails to note what else Saudi Aramco got in the deal, which in some ways may be just as important, if not more important. Saudi Aramco also got:

  • the Motiva name
  • retain 26 distribution terminals
  • maintain an exclusive, long-term license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi Valley, the US southeast, and the US mid-Atlantic markets
In the short-term, Americans won't notice any difference, but it would not surprise me to see Motiva-branded service stations in the US.

US fracking revolution hits UK as first tanker loaded with American shale gas arrives in Europe | This is Money: The first tanker loaded with US shale gas has arrived in Europe, in a move predicted to transform British manufacturing.The Intrepid, a 180-metre vessel owned by chemicals giant Ineos, docked in Norway with 27,500 cubic metres of gas.Ineos will turn the ethane into plastics for cars, flooring and household products at its petrochemical refineries at Grangemouth in Scotland – which had been at risk of closure – and Rafnes. Jim Ratcliffe, the 52-year-old British billionaire who owns 60 per cent of Ineos, said: ‘Cheap shale gas should transform manufacturing in Britain because it brings down energy costs and provides cheap raw materials like ethane.’ Shale is cheaper and more abundant than North Sea gas. However, it is produced by a controversial process known as fracking where water and sand are pumped at high pressure underground to fracture rock. This releases previously unreachable pockets of gas. Ineos has invested £1.4billion in the project. At peak, both its Grangemouth and Rafnes refineries will receive one ship-load of ethane a week. 

US Gulf Coast distillate flows to Europe jump as arbitrage swings open -  A total of 1,320,000 mt of distillates have been loaded in the US Gulf Coast for discharge in Europe during March, Platts has estimated, based on data from cFlow, Platts trade flow software. The figure was about twice the level of the previous estimate, pointing to increased volumes of product loaded in recent weeks. "The US arb is open", a trader said, driven by "cheaper freight and raised ULSD diff in Europe". According to the estimate, 11 of the cargoes due to land in March are headed to the Northwest European market, while 18 have set sail towards the Mediterranean.In the physical diesel market, CIF NWE diesel cargoes were assessed at a $2.75/mt premium to front-month ICE low sulfur gasoil futures Friday, up $2.50/mt on the week and $2.50/mt higher month on month. In recent weeks, refinery maintenance, run cuts, and then-closed arbitrages from the US Gulf Coast and Asia have all contributed to more balanced fundamentals in the Northwest European diesel market, sources said. In the Mediterranean, CIF diesel cargoes were pegged at a $4.25/mt premium Friday, 50 cents/mt higher on the week and $2.25/mt up on the month. The Mediterranean market has seen healthy demand, particularly from Turkey, where a fire at the 220,000 b/d Izmit refinery brought Tupras, the owner, to the market as a buyer.

In Canada, a battle brews over pipelines, power lines -- With the current assumption that a crude export pipeline from Alberta to the US Gulf Coast is unlikely to ever be built, never has there been a better opportunity for Canada’s provinces to join hands and hasten efforts to open up oil export outlets along the country’s Pacific and Atlantic coasts.  A new issue is, however, brewing between Alberta and British Columbia that, instead of pulling the provinces together to optimize the value of the nation’s crude oil resources, is putting them at loggerheads. In early March, Alberta’s energy minister Margaret McCuaig-Boyd said that the province would not buy additional electricity from neighbor British Columbia unless the latter lends its support for an oil export pipeline through that province. “We’re not necessarily going to have that much demand for electricity if we can’t find someone to sell our products to.”  Neighbors wanting to talk about new power lines crossing provincial borders need to understand that the issue is tied to inter-jurisdictional product distribution infrastructure, like pipelines to carry bitumen to tidewater. These were not separate issues, Notley said. British Columbia has opposed Enbridge’s 525,000 b/d Northern Gateway and the Kinder Morgan-backed 890,000 b/d Trans Mountain pipeline expansions, primarily for environmental reasons. Now British Columbia has a project at risk: the fate of its recent final investment decision to build the 1,100 MW Site-C hydroelectric power project near Fort St John on the Peace River at a whopping cost of C$8.8 billion ($6.7 billion) and the laying of a new transmission line to supply power to northeast Alberta, which is home to oil sands producers.

By rejecting $1bn for a pipeline, a First Nation has put Trudeau's climate plan on trial -- Everything has a price. Everyone can be bought. We assume this principle is endemic to modern life — and that accepting it is most obvious to the impoverished. Except all over the world, people are defying it for a greater cause. That courage may be even more contagious. It has been in full supply in north-west Canada, where an oil giant is aiming to construct one of the country’s biggest fossil fuel developments: a pipeline to ship liquified natural gas (LNG) out of British Colombia. To export it overseas via tankers, Malaysian-owned Petronas must first win approval for a multi-billion dollar terminal on the coast. That happens to be at the mouth of Canada’s second-largest salmon river, on the traditional territory of the Lax Kw’alaams First Nation. One of the world’s longest un-dammed rivers, the Skeena abounds in the fish relied on by surrounding wildlife — and by First Nations and an entire regional economy. Last year, following our modern principle, Petronas offered the First Nation an offer they imagined couldn’t be refused: in exchange for their support, a whopping $1.15 billion in cash. But put to a vote, the Lax Kw’alaams resoundingly said “no” — every single community member. When Petronas made the offer, Lax Kw’alaams hereditary chief Yahaan says he believed the community — poor and with few employment prospects — might vote yes. “Opportunities like that don’t come to your door every day,” he says. “But I give my people credit for taking that bold step. They showed their love and their passion for the land and water. No amount of money can compare to the richness of the river and what it gives us.”

Steam Injection Fractures Caprock in Big Alberta Spill, Regulator Confirms -- Three years after an eruption of 10,000 barrels of melted bitumen contaminated the boreal forest and groundwater near Cold Lake, Alberta, the provincial energy regulator has now officially blamed hydraulic fracturing, or the pressurized injection of steam into the ground for fracturing nearby rock. The bitumen blowout occurred sometime between May and June 2013 at Canadian Natural Resources Ltd.'s Cold Lake project, an operation that uses steam injection to melt bitumen and bring it to the surface. In this case, the pressure from the steam cracked rock between different formations, allowing melted bitumen to find natural fractures and flow to the surface at five different locations, including under a lake. In some places, the bitumen erupted through fissures in the ground as long as 159 metres deep. The event, not the first of its kind as an earlier Tyee investigation revealed, killed wildlife and seeped nearly 20 barrels of bitumen a day into muskeg over a five-month period. In a lengthy report, the Alberta Energy Regulator concluded what experts had suggested all along -- that all five bitumen seeping events "were caused by excessive steam volumes, along with an open conduit (wellbore or natural fracture or fault) or hydraulically induced vertical fractures." According to the regulator, an independent third party expert panel that also reviewed the bitumen disaster found that the company, a major bitumen producer, had failed to properly account for geological faults and fractures in the region it was steaming.

A Glimpse Of Things To Come: Canadian Oil Company Liquidates Hours After Bank Demands Repayment --Until recently, the bulk of the attention on the insolvent North American oil and gas sector fell squarely on the US. That is starting to change for two reasons: first, Canada's regulator just ended the cute game (first profiled here) Canadian banks had been playing for years by reserving zero of their potential loan losses to the collapsing energy sector; second, slowly but surely Canadian oil and gas failures are starting to become a daily reality; failures such as that of Canadian junior oil and gas producer Terra Energy Corp which yesterday said it shut down production, ceased operations and announced the resignation of directors and officers on Monday, after its lender, Canadian Western Bank, demanded full repayment of its debt.  And that's all it takes: one simple debt acceleration, which has led to the shuttering of Terra, and which would send thousands of insolvent energy companies into bankruptcy overnight. For now, most such insolvent companies continue to exist as zombies, many of which can't even afford an interest payment, but which after the direct intervention of the Dallas Fed and the OCC (which as we exclusively reported bought the insolvent sector a brief reprieve when it demanded that banks not force debtors to repay) continue to exist as the Fed is terrified of the default tsunami that would be unleashed once the bankruptcies finally arrive, as they will. As for the now defunct Canadian junior, according to Reuters, Terra, which was producing around 3,600 barrels of oil equivalent per day from its operations in western Alberta and north-eastern British Columbia, said that at current low oil prices the cost of operating was more than its revenue. Oops.

‘Historic’ spending cuts putting future oil supply at risk, threatening spike in prices - An oil shock may be lurking around the corner as the price bust has hammered investment in future supply, according to the International Energy Agency. “Historic” investment cuts taking place now increase the possibility of oil-security surprises in the “not-too-distant” future, Neil Atkinson, head of the IEA’s Oil Industry and Markets Division, said in Singapore on Wednesday. About US$300 billion is needed to sustain the current level of production, and nations including the U.S., Canada, Brazil, and Mexico are facing difficulty in keeping up investments, he said. “We need a lot of investments just to stand still,” Atkinson said at the launch event of SIEW 2016. “There’s danger as we are reaching a point where we are barely investing upstream. If investment doesn’t resume in 2017 and 2018, we can see a spike in oil prices as oil supply can’t meet demand.” Companies from ConocoPhillips to Chevron Corp. and BP Plc have cancelled more than US$100 billion in investments, laid off tens of thousands of workers, slashed dividends and sold assets as oil sank below US$30 a barrel to a 12-year low. With crude rebounding since mid-February to near US$41, Atkinson said the worst may be over for prices as they have a floor “for the time being.” The Organization of Petroleum Exporting Countries and other producers including Russia plan to meet in Doha next month to discuss limiting output to reduce a global oversupply.

Major Production Projects Start Up Around The World  |  Rigzone -- Production start-ups have occurred all over the globe within the first few months of this year, with considerable increases in Europe, the Middle East and Africa. Several additional projects across the latter two regions are expected in the near future, and a variety of recent developments in East Asia are expected to ramp-up their outputs by year-end. In Europe, Total’s UK-operated Laggan-Tormore development in the West of Shetland area, will produce 90,000 barrels of oil equivalent per day (boepd). Despite its status as a “key component” of Total’s future production growth, the Laggan-Tormore project has been delayed numerous times, with output commencement initially expected at the end of 2014. Situated in 1,968 feet of water, the Laggan-Tormore gas and condensate fields feature an 86-mile tie-back of four subsea wells to an onshore Shetland gas plant, which has a capacity of 500 million cubic feet of gas per day (MMcf/d). Another European production start-up got underway in February at the Horse Hill-1 discovery in the UK’s Weald Basin. Oil flowed from the well at an initial rate in excess of 700 barrels of oil per day (bopd), in an approximate mix of 50:50 oil to water, before stabilizing to more than 463 bopd, in an approximate mix of over 99 percent oil and less than 1 percent water. Light, 40-degree API, sweet oil continued to flow naturally to surface at the Horse Hill-1 at a steady rate in excess of 456 bopd, and the first two tankers full with 348 barrels of oil from the site have already been sent to be refined. Brendan D’Souza, an oil and gas analyst at WH Ireland, said the results have been highly impressive and far exceed expectations. The Horse Hill discovery could lead to one of the most significant oil supplies found onshore UK, according to Schlumberger’s research. In August, the oilfield services firm calculated that 10.993 billion barrels of mean oil in place was imbedded within the 55 square miles of the PEDL137 and PEDL246 Horse Hill licenses.

West Lothian could home over 1000 fracking wells - Daily Record: West Lothian will be overrun by fracking companies unless the Scottish Government ban the practice. That was the message from Friends of the Earth Scotland during a meeting in Linlithgow Burgh Halls last week. The meeting came after it was revealed last year that up to nine shale gas companies have applied for fracking licences in West Lothian. There is currently a moratorium on granting licences in Scotland but companies including iGas, GDF Suez and Ineos want to exploit 19 blocks of shale-rich land under the likes of Bathgate and Linlithgow. And Dr Richard Dixon, Director of Friends of the Earth Scotland said: “Tourism, farming and fishing are going to suffer from the damage caused by fracking. “Ineos’ plans for the central belt of Scotland mean 1300 wells. You may have seen pictures from the States which show the landscape covered in a really ugly chess board thing. “That’s what Ineos want to bring to Scotland.” SNP MSP for Linlithgow, Fiona Hyslop, refused to rule out supporting fracking in the future but admitted she would need to be convinced. She said: “One of the things, in terms of where I stand, is that I am not convinced at all about fracking. “I’ve got serious concerns but I think it’s right that there’s a moratorium and I think it’s right that there’s evidence being put together. “Scotland doesn’t need this because our alternative energy resources are extensive. We should be champions of renewables rather than looking at carbon releases of other descriptions.”

Green Party of England and Wales : Greens urge government to rethink “reckless and unnecessary” fracking plans -- In a letter published today, local Greens are urging government ministers to halt their plans to remove decision-making powers from local authorities on new fracking sites. The proposals, leaked by the government in January, would see approval for fracking schemes made by the Government's Planning Inspectorate rather than local authorities. The move would prevent local communities from having any say as to whether fracking schemes go ahead in their local area. The proposals are part of a government move to create a shale gas industry within a decade, despite widespread public opposition and protest to fracking schemes. The government is expected to release its fracking strategy in the summer. . The plans being considered by ministers would allow government inspectors to overrule local decisions and impose fracking on local communities. Convenor of the Green Group of councillors Phelim Mac Cafferty, said: 'These proposals from the government are a blatant attack on democracy that removes the rights of councils to protect their local environment by opposing fracking. This is yet another naked power-grab by central government. 'In this week's budget we heard more of the Government's endless rhetoric about devolving power to local communities to make local decisions. Yet time and again their actions run counter to the rhetoric, as local authorities are stripped of powers and resources to effectively decide what happens in their areas. 'Just last week a report from NASA showed that global temperatures in February smashed previous records by an unprecedented amount [1]. This is a climate emergency, which needs an urgent response to bring about a more sustainable future. These proposals on fracking will take us down the wrong path, forcing us towards more exploitation of fossil fuels when we desperately need to be investing in renewable energies'.

Hydraulic fracturing, foreign investment, free trade, Indigenous employment headline NT Cattlemen's Association conference - ABC  - Hundreds of cattle producers and industry delegates from across Australia have met in Alice Springs for the annual Northern Territory Cattlemen's Association conference. Those attending were able to hear from a wide range of guest speakers, covering topics of importance to the sector in 2016.   In a well-received presentation, energy law expert Dr Tina Hunter from the University of Aberdeen in Scotland told the conference that Australia was the only jurisdiction in the world without mandated gas well inspections. But Dr Hunter went on to say the moratorium on fracking, as proposed by the NT Labor Party should they win government, was not the answer. She said fracking exploration provided useful data which helped to develop a regulatory regime. "My concern with a moratorium, and I am against a moratorium, is because how do you get knowledge and build your scientific profile and get the necessary data if you can't undertake the activity that will give you the data," she said.

WA Government fails on fracking regulations: farmers and conservationists: CONSERVATIONISTS and landholders say the WA Government will go only part of the way towards properly regulating the controversial gas extraction method known as fracking. A Legislative Standing Committee on Environment report into hydraulic fracturing made 12 recommendations to the WA government on Thursday, including banning the use of dangerous chemicals and increasing fines for companies that commit offences. But the Government’s response to the 12 recommendations — 10 of which it accepted at least in part — has drawn criticism from WA Farmers, the Conservation Council WA and anti-fracking campaigners Lock the Gate Alliance. “As the Government is attempting to legislate on this very important issue, all recommendations of the Parliamentary Committee report must be included to safeguard farmers and freehold landowners when negotiating with the resources sector,” WA Farmers chief executive Stephen Brown said on Friday.

Record Loss For Petrobras As Political And Economic Crisis Worsen -- Petrobras reported a record loss for the fourth quarter, a horrendous performance that raises questions about the company’s ability to handle its mountain of debt. The state-owned Brazilian oil company announced that it lost more than 36 billion reais in the fourth quarter, or more than USD$10 billion, a 40 percent increase compared to the fourth quarter of 2014. The losses were all the more staggering because the previous year’s figures were inflated due to the massive corruption scandal, which continues to bedevil the company. The problem for Petrobras is that it has the world’s largest pile of debt, bigger than any other oil company. And that debt, much of which is priced in U.S. dollars, is becoming more expensive to service, particularly since the Brazilian real has depreciated significantly over the past year. As The Wall Street Journal notes, Petrobras’ debt has jumped to just about 800 billion reais, or about 10 percent higher than at the end of 2015, despite spending cuts.

Italy's Eni in broad restructuring to weather low oil price — Italian oil and gas company Eni has announced a broad restructuring plan to weather low oil prices. Eni announced Friday that it aims to sell 7 billion euros (nearly $8 billion) worth of assets by 2019, mostly by diluting stakes in recent discoveries, and make 3.5 billion euros in cost reductions through renegotiating contracts. CEO Claudio Descalzi said in a statement that the industry “is facing a very complex challenge, reducing costs to fulfill short-term constraints while enhancing long-term value.” Eni said it plans to reduce investments by a fifth, while it expects oil and gas production will grow by more than 3 percent annually over the next four years. The company will continue to make exploration one of its main focuses.

Iraq exports first natural gas shipment in its history - (AP) — Iraq on Sunday exported the first shipment of natural gas in its history, a key development for the OPEC member struggling to feed a cash-strapped economy amid an expensive fight against the Islamic State group. The move revives a long-sought ambition by Iraq to be a gas exporter, thanks to a joint venture with Anglo-Dutch Royal Dutch Shell PLC and Japan’s Mitsubishi Corp. Iraq first planned to begin exporting gas in the late 1970s, but that timeline was delayed by the Iraq-Iran war when Iraqi export ports were bombed. A Panama-flagged gas carrier sailed Sunday afternoon from Iraq’s southern port of Umm Qasr on the Persian Gulf with a cargo of about 10,000 standard cubic feet of gas in the form of condensates, Oil Ministry spokesman Assem Jihad said. Jihad wouldn’t reveal how much the cargo was worth or the buyer, but he added that the next cargo will be shipped by the end of this month. In November 2011, Iraq signed a $17 billion deal to form a joint venture to gather, process and market gas from three oil fields in the oil-rich province of Basra. The fields are the 17.8 billion-barrel Rumaila, the 4.1 billion barrel Zubair field and the 8.6 billion barrel West Qurna Stage 1. In the 25-year joint venture, called the Basra Gas Company, Iraq holds a 51-percent stake and Royal Dutch Shell has 44 percent, with the remaining 5 percent for Mitsubishi. According the International Energy Agency, Iraq has estimated natural gas reserves of 112 trillion cubic meters, making it the 11th largest in the world.

Is This The Most Intricate Oil Theft Operation Yet? - While Georgia has been caught up recently in a major pipeline competition, with Russia, Azerbaijan and Iran all making a play for the action in this small, strategically located energy-transit hub, some men in the central Georgian village of Ruisi have been busy with a pipeline project of their own. They lay a kilometer-long, underground pipeline to leach into the British Petroleum-operated, more than 800-kilometer-long Western Route Export Pipeline, which carries 100,000 barrels of oil daily from Azerbaijan’s Caspian Sea coast to Georgia’s Black Sea coast. Known as the Baku-Supsa pipeline for the terminals at both ends, the conduit was the first link in the country’s energy-export network. The suspects built their own terminal in Ruisi, about a 20-minute drive west of Joseph Stalin’s birthplace, Gori, and created a parallel world of shipping, processing and retailing the Caspian Sea oil. A police video showed rows of large tanks used to collect the stolen oil. A makeshift tap was installed on the body of the Baku-Supsa pipeline to turn off and on the flow into its new, mini- branch. From Ruisi, the oil was loaded onto trucks and camouflaged as vegetables – cabbage, to be exact, police said – and driven about 90 minutes east to the capital, Tbilisi. A makeshift refinery there then turned the cabbage-concealed crude into petroleum products.

Recent moves in oil prices -- Jim Hamilton - Today I discuss the factors that brought oil prices so far down and more recently back up.  World oil production was essentially stagnant for seven years beginning in 2005. Field production of crude oil averaged 73.9 million barrels a day in 2005 and averaged 74.7 mb/d in 2011. That plateau was followed by a dramatic surge in world production of 3.1 mb/d between January 2012 and January 2015. More than all of that increase can be accounted for arithmetically by the 3.2 mb/d increase in U.S. production, spurred by horizontal fracturing of shale formations. Net production outside the U.S. actually decreased 100,000 b/d during these 3 years, though far from uniformly across producing countries, with 800,000 b/d increases each from Iraq and Canada helping to offset production declines in places like Libya, Iran, and Mexico. U.S. production continued to rise in the first few months of last year, but fell almost 400,000 b/d between March and November to end the year about where it began. The EIA’s Drilling Productivity Report model predicts that field production from the major U.S. shale plays will have fallen another 400,000 b/d from November values by April. But despite the situation in the U.S., world production of crude oil increased another 1.1 mb/d in the first 11 months of 2015. Here the big story has been Iraq, whose production was up almost 1 mb/d even though ISIS continues to control large non-oil-producing sections of Iraq.  Saudi production was 400,000 b/d higher in November than in January, though that just leaves its current monthly production within the range we’ve been typically seeing over the last three years. .Another key factor keeping oil prices low has been Iran. The country claims to have increased production by 400,000 b/d since sanctions were lifted in January, and has plans for further increases. However, so far Iran has been encountering some logistical problems in selling the oil. It’s important to emphasize that it’s not just developments on the supply side that have been driving recent oil price movements. The graph below compares the prices of a number of commodities over the last 16 months, which share not only the same dramatic downward trend, but also all experienced price rallies in the spring of last year and again over the last 2 months. This is true not just for the dollar price of copper, silver, lumber, and cattle, but for the dollar price of a euro as well.The recent comovement between the dollar price of oil and the dollar price of the Chinese yuan is even more striking, as plots of the cumulative percent change (measured in 100 log points) in those two series since Sept 2014 demonstrate.

Oil Prices and the Global Economy: It’s Complicated: Oil prices have been persistently low for well over a year and a half now, but as the April 2016 World Economic Outlook will document, the widely anticipated “shot in the arm” for the global economy has yet to materialize. We argue that, paradoxically, global benefits from low prices will likely appear only after prices have recovered somewhat, and advanced economies have made more progress surmounting the current low interest rate environment. ... This outcome has puzzled many observers including us at the Fund, who had believed that oil-price declines would be a net plus for the world economy, obviously hurting exporters but delivering more-than-offsetting gains to importers. The key assumption behind that belief is a specific difference in saving behavior between oil importers and oil exporters: consumers in oil importing regions such as Europe have a higher marginal propensity to consume out of income than those in exporters such as Saudi Arabia. ... To address this question, the forthcoming April 2016 World Economic Outlook compares 2015 domestic demand growth in oil importers and oil exporters to what we expected in April 2015—after the first substantial decline in oil prices. The lion’s share of the downward revision for global demand comes from oil exporters—despite their relatively small share of global GDP (about 12 percent). But domestic demand in oil importers was also no better than we had forecast, despite a fall in oil prices that was bigger than anticipated. ...[...]Persistently low oil prices complicate the conduct of monetary policy, risking further inroads by unanchored inflation expectations. What is more, the current episode of historically low oil prices could ignite a variety of dislocations including corporate and sovereign defaults, dislocations that can feed back into already jittery financial markets. The possibility of such negative feedback loops makes demand support by the global community—along with a range of country-specific structural and financial-sector reforms—all the more urgent.

How Oil Price Volatility Explains These Uncertain Times -- The numbers say that these should be the best of times for America. The economy has been growing for five years. Unemployment is low. Inflation is almost nonexistent and gas is cheap. Yet, many Americans feel deeply uneasy about their future prospects. Uncertainty is the catchword of the moment. This uncertainty is contributing to growing pessimism and anger – discontent that is no doubt a factor in the unsettled state of the 2016 Presidential race. If times are good, why do so many Americans believe that it is the worst of times? Have we become a nation of neurotics or is something real going on?  !n 2013, prior to the beginning of the 2014 collapse in oil price, I proposed that turbulence in the oil markets was on the way. In a subsequent essay in early 2015, I suggested that this instability in the oil markets would lead to a period of turmoil in the stock market in the coming year or so.There was no magic behind correctly foreseeing what unfolded in the oil and stock markets over the last two years. Indeed, the path to connecting the dots started with an observation that many readers have probably already made themselves – namely, that oil prices seemed to have been notably changeable or volatile over the last decade or so.In the following essay, I describe how I used math tools to dig into oil price volatility – discovering a repeating pattern of instability in global oil markets that has ticked like clockwork for at least the last 15 years. The identification of this rhythm within the volatile price of oil has taken some of the guesswork out of forecasting what may be ahead. It is my contention that the world has not seen a phenomenon of this type previously and that its emergence marks the rise of a new dynamic with potential to shape our economic and political fate. The uncertainty that many of us feel thus may be far from nebulous, but a shared hunch that history’s engines are shifting gears.

How The Brent/WTI Crude Futures Relationship Got Trickier  -- In January 2016 the ICE futures Exchange changed the expiration calendar for its flagship Brent crude contract. The March 2016 contract expired on January 29, 2016 under new calendar rules that stipulate expiration one month and one day prior to delivery. This was done belatedly to reflect a change in the assessment of the physical Brent market that was implemented back in January 2012. On paper the change is just an overdue action by ICE to properly align the timing calendar for their popular futures contract with the underlying physical market. But in practice - as we suggest in today’s blog, the change has significant impacts on the calculation and analysis of the commonly utilized spread between ICE Brent (the international benchmark crude) and the U.S. equivalent West Texas Intermediate (WTI) crude futures contract traded on the CME/NYMEX.   Note that this blog is primarily educational – describing the mechanism and impact of the new ICE Brent contract expiration rules on the analysis of the Brent/WTI spread.

The Current Oil Price Rally Is Reaching Its Limits -- Oil prices have climbed by about 50 percent from their February lows, topping $40 per barrel. But the rally could be reaching its limits, at least temporarily, as persistent oversupply and the prospect of new shale production caps any potential price increase.  U.S. oil production has steadily lost ground over the past two quarters, with production falling more than a half million barrels per day since hitting a peak at nearly 9.7 million barrels per day (mb/d) in April 2015. American oil companies have gutted their budgets and have put off drilling plans, with many projecting absolute declines in 2016.  That has sparked a renewed sense of optimism among oil traders. Moreover, supply outages in places like Iraq and Nigeria have also knocked at least a quarter of a million barrels per day offline, an unexpected disruption that put upward pressure on prices in March. Geopolitical unrest still has the ability to influence prices, even while the world is awash in oil. More oil bulls are piling on in anticipation of the April OPEC meeting, on an unfounded belief that the production freeze may actually have any material impact on global oil supplies.  But while oil traders have found some reasons to believe that oil prices are rising, there are just as many, if not more, data points to backup bearish sentiment. Storage levels in the U.S. continue to set records, hitting 523 million barrels for the week ending on March 11. Until inventories start to deplete in a significant way, oil prices will face a lot of resistance trying to break above $40 per barrel. Iran also continues to add production, albeit at a slower-than-expected rate. In fact, the rally to $40 was largely driven by speculation. As short bets peaked and started to unwind, traders closed out positions at a rapid clip, helping to push prices up by $12 to $13 per barrel in less than two months. The trend continued last week as hedge funds and other major money managers increased their net-long positions on crude by another 17 percent. Short positions are now at their lowest levels since last June. 

OilPrice Intelligence Report: Oil Prices Struggle To Move Beyond $40: Oil prices have held gains in recent days after rising to $40 per barrel, but the rally has struggled to move beyond that threshold. Terrorist attacks in Brussels on March 22, which early reports say killed more than 30 people, have spooked the markets as investors moved assets to safe havens. Oil prices were flat in early trading on Tuesday. Not all OPEC members will attend Doha meeting. With much of the energy world holding its breath for the production freeze meeting in Doha in April, OPEC’s Secretary-General said that not all members will attend the summit. “I hear that about 15 countries are going to attend. Maybe some of our members will not attend. Some of non-OPEC members will not attend but 15 or 16 countries are major producers and are not a bad number,” Secretary-General Abdallah Salem el-Badri said on March 21 in Vienna. The meeting is expected to cover the details of the production freeze, which Iran has already said it will not adhere to. . Venezuela’s state-owned oil company PDVSA is slated to receive a shipment of U.S. crude oil, which will be delivered by PetroChina in early April, according to Reuters.. Separately, PDVSA is expected to purchase 8 million barrels of U.S. and Nigerian crude oil. The Venezuelan company has begun importing light oil to dilute its extra heavy oil, a necessary step to help process it. PDVSA could end up importing around 120,000 barrels per day in the second quarter.

The Oil and Gas Fire Sale: How Bad Will Losses to Banks and Investors Be? - Yves Smith - You can tell things are going a bit pear-shaped when single stories in the business press are so meaty as to warrant posts all on their own. Today’s example is a Financial Times story, Oil and gas: Debt fears flare up, which gives a grim update on the wreckage in the wake of the energy price collapse, and how the damage to lenders has only started to play out.   We’ve been warning for some time, first of the froth in the junk bond market, and its particularly high exposure to energy concerns, and then the correction last year. We were also one of the few to argue that the “cheap gas will prop up the economy” would be offset, and likely more than offset, by the losses of high-paying oil and shale gas jobs and the impact of direct (energy company) and indirect (real estate loans in oil boom areas) lending losses on banks and investors. We further stressed that the energy price rebound was not going to happen in a mere six months, as was the almost universal consensus in early 2015, because shale gas players had strong incentives to keep pumping until their money sources cut them off. Indeed, while we recognized that issue (identified by the Financial Times’ John Dizard) as a key driver that was widely ignored, if anything, we underestimated that an analogous set of imperatives – the need to fund national budgets – would also lead energy producing nations to maintain production levels even at what they would have recently regarded as depressed prices. But what is new, and important, about the Financial Times article, is its effort to put parameters on the severity of the slump and how bad the collateral damage might be, particularly to financial players. Even though Mr. Market is feeling his spring oats, let us not forget that back in January, one of the causes for concern was European banks. It was widely recognized that on top of existing bad loans, the Eurobanks collectively were sitting on an estimated additional $100 billion in energy-related losses. Indeed, the pink paper addresses that concern by mentioning how Crédit Agricole, with the second largest energy debt exposure on the Continent, had to reassure investors, telling them 84% of its book was investment grade. It’s also worth remembering that the recent oil rally is unlikely to be a harbinger of more price appreciation soon. Stockpiles and oversupply remain large. Even the generally upbeat OilPrice warned yesterday that the market was driven lately by sentiment more than fundamentals.  I strongly urge you to read the Financial Times account in full. Key points:

Crude Drops On Yuuge Inventory Build -- Overall crude inventories rose for the 6th week in a row according to API. Despite draws in Gasoline, Distillates, and Cushing; Crude inventories surged 8.8mm barrels - the 2nd biggest weekly build in a year.API, according to RTRS:

  • Crude +8.796mm
  • Cushing -1.37mm (confirming Genscape's data)
  • Gasoline -4.3mm
  • Distillates -391k

This was a big draw in Cushing but appears to be dominated by the surge in overall inventories...

Wednesday, March 23, 2016 - Weekly petroleum statistics from EIA:

    • U.S. crude oil refinery inputs averaged over 15.8 million barrels per day during the week ending March 18, 2016, 176,000 barrels per day less than the previous week’s average.
    • Refineries operated at 88.4% of their operable capacity last week.
    • Gasoline production decreased last week, averaging 9.7 million barrels per day. Distillate fuel production decreased last week, averaging over 4.7 million barrels per day.
    • U.S. crude oil imports averaged 8.4 milli on barrels per day last week, up by 691,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged 8.1 million barrels per day, 11.6% ab ove the same four-week period last year.
    • Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 415,000 barrels per day. Distillate fuel imports averaged 93,000 barrels per day last week.

Crude Oil Inventories Surge - Crude oil inventories surged by more than 9 million barrels this week, and that was more than triple what traders were expecting. While it is normal for crude oil stockpiles to rise at this time of year, the current pace of increase has been much more than normal. Total stockpiles are up at another multi-decade high and are currently more than 195 million barrels above the average for this time of year dating back to 1983. That’s 54% above average! To put the recent build in stockpiles into context, the chart below shows the rolling ten-week change in crude oil inventories since 1983. With this week’s build, total inventories have risen by 50 million barrels in the last ten weeks. For the current week of the year, the only year where stockpiles increased at a faster rate was last year, and the average ten-week rolling inventory change for this time of year is 14.6 million barrels.

Oil Pumps'n'Dumps As DOE Reports 2nd Biggest Inventory Build In A Year, Production Drops -- Following last night's API-reported yuuge build in crude of 8.8mm barrels (and draw in gasoline and Cushing - confirming Genscape's earlier report), DOE reports today an even bigger 9.36m barrel build - the 2nd biggest build in a year. Crude prices were confused as this massive build was offset by a drop in crude production to Nov 2014 lows and a big draw at Cushing... but for now Oil is extending losses. Finally we note that gasoline prices are now flat from January last year - DOE


U.S. Oil Takes Biggest Losses in a Month as Stockpiles Keep Growing - WSJ: Oil prices took some of their biggest losses of the last month on Wednesday as data showed U.S. stockpiles keep rising and production is holding strong, which thwarted recent bets that those trends may be winding down. Light, sweet crude for May delivery settled down $1.66, or 4%, at $39.79 a barrel on the New York Mercantile Exchange, the worst percentage loss since Feb. 23. Brent, the global benchmark, lost $1.32, or 3.2%, to $40.47 a barrel on ICE Futures Europe. Total commercial stocks of oil and refined fuels rose by 9.9 million barrels to 1.354 billion barrels as of Friday, the U.S. Energy Information Administration said. It is a record high, buoyed almost solely by crude, which added 9.4 million barrels for the week. That addition was more than three times the size of analysts’ expectations, and also outpaced industry estimates and a strong draw from gasoline stockpiles.The size of total combined stockpiles has taken on growing importance in recent weeks as traders around the world await the moment when high stockpiles start to decline. Both crude and refined fuel stockpiles have hit historic highs and they need to start falling before prices can rise substantially, according to several analysts. Total oil storage levels have now grown 10 out of the last 13 weeks, and the latest record dates back to 1990. Crude stocks alone hit 532 million barrels, a record of its own. In monthly data, which don’t line up exactly with the weekly data, inventories last exceeded 500 million barrels in 1930.  “Nothing’s really changed. The supply issue is going to continue to get worse.” Oil futures have spent more than a month going steadily upward, with total gains of more than 50%, their biggest rally in years. Much of that came from tightening markets in Europe, and talk of a coordinated output freeze from Russia, Saudi Arabia and some of the world’s other large exporters. But many traders have also been anticipating output cuts from U.S. producers, which have been slow to come despite prices being down about 35% from last year’s highs.

Scramble for oil storage extends, suggesting excess has room to run | Reuters: Trading houses are betting on oil markets remaining oversupplied for at least two more years even as crude prices stage a recovery driven by early signs of falling production. Traders such as Vitol, Gunvor and Glencore are looking to extend or lock in new leases on storage tanks for crude oil and refined products in key hubs as far out as the end of 2018, sources at storage firms and trading houses say. Storing oil in a heavily oversupplied market has been a cash cow for traders and oil companies in recent years as markets bet that future oil prices will be significantly higher than current ones, in what is known as contango. Ian Taylor, chief executive of top oil trader Vitol, said on Tuesday that "stocks of crude and products continue to build and these will weigh upon the market". Like other traders, Vitol has invested in recent years in storage, and last August acquired the other half of its VTTI storage subsidiary for $830 million. Oil prices have risen 30 percent since mid-February to around $40 per barrel, as global production shows signs of slowing, which has led to a significant narrowing of the crude contango despite a stock overhang of 300 million barrels. Crude oil has found more of a balance in recent weeks through supply disruptions in Iraq, Libya and Nigeria.  But refined oil products have not followed suit. Gasoline and blending components have been quietly building, squeezing the amount of storage left in Europe. U.S. gasoline stocks, when adjusted for current consumption, are just at the top of their 10-year range.

Oil Hits Critical Choke Point: Why "The Market Faces A Round Of Rapid Stockbuilds" -- One month ago, just as Cushing storage was rapidly approaching its operational capacity, we warned that Cushing (and increasingly all parts of PADD 2) is denying storage requests. We also said that overall PADD 2 inventories had risen to a new record high 155 million barrels...... hinting that it was just a matter of time before excess production would be shifted to other regions, most notably the Gulf Coast, or PADD 3. In the intervening month, this is precisely the dynamic we have observed, which culminated with today's weekly DOE announcement which saw not only a massive inventory build, one which surpassed the estimate threefold (surpassing yesterday's gargantuan API build in the process), but also has confirmed that oil storage is now shifting away from Cushing and PADD 2 to PADD 3 just as we expected, to wit:

  • PADD 1: East Coast +1.8
  • PADD 2: Midwest -0.1
  • PADD 3: Gulf Coast +9.0
  • PADD 4: Rocky Mount +0.1
  • PADD 5: West Coast -1.4 

This confirms that the shift away from Midwestern storage to the Gulf Coast has begun in earnest, which was to be expected for a region that is already at operational capacity, even when netting out the excess oil that is being "exported" out of the US to Europe, Asia or Latin America. In fact, as shown in the chart below, with over 533 million barrels in storage, it is only a matter of time before oil overflows into swimming pools and household buckets.

Oil oversupply is getting worse despite recent price spike: The world is continuing to drown in an excess amount of oil and it’s getting worse. US oil stockpiles skyrocketed by 9.4 million barrels last week to 532.5 million barrels, according to figures released on Wednesday by the U.S. Energy Information Administration. Those levels are three times higher than analysts had expected. Last week crude climbed over $40 a barrel for the first time since early December. Prices have climbed under the assumption that major oil producers will freeze their output while US producers will cut back on drilling as low prices make their operations unsustainable. However, the latest EIA report shows that inventories continue to pile up in the short-term. “We are oversupplied. This price rally feels a little bit premature,” said Anthony Starkey, energy analysis manager at analytics firm Bentek Energy. Oil prices fell by 3% on Wednesday to $40.20 a barrel. The EIA said the US imported 8.4 million barrels of oil per day last week, up by nearly 700,000 barrels from the prior week.As US oil production has fallen, buyers continue to important an increasing amount of oil from over seas. Adding to the glut is Iran, which has promised to push up production by one million barrels per day in an attempt to earn back some of the market share it lost during several years of US economic sanctions.

Oil Drops To $40 Handle After IEA Warns Production Freeze Is "Meaningless" -- It appears The IEA has come to the same reasoning as we have been pointing out for weeks -"freezing" production at what is already the highest output levels ever is "meaningless." As Reuters reports, Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday. This reality check appears to have stalled crude's exuberant run as WTI pushed below overnight API "build" lows. As Reuters reports, a deal among some OPEC producers and Russia to freeze production is perhaps "meaningless" as Saudi Arabia is the only country with the ability to increase output, a senior executive from the International Energy Agency (IEA) said on Wednesday. Brent crude futures are up more than 50 percent from a 12-year low near $27 a barrel hit early this year, bouncing back after Russia and OPEC's Saudi Arabia, Venezuela and Qatar struck an agreement last month to keep output at January levels. Qatar has invited all 13 members of the Organization of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers to Doha on April 17 for another round of talks to widen the production freeze deal. "Amongst the group of countries (participating in the meeting) that we're aware of, only Saudi Arabia has any ability to increase its production," said Neil Atkinson, head of the IEA's oil industry and markets division, at an industry event. "So a freeze on production is perhaps rather meaningless. It's more some kind of gesture which perhaps is aimed ... to build confidence that there will be stability in oil prices."

Why Oil Prices Are About To Plunge Again: 31 Million Barrels In Floating Storage Are Coming On Shore - One week ago, we wrote that as a result of the collapsing crude contango, oil tankers (such as the fully loaded Distya Akula which has been on anchor in the Suez Canal for one month unable to find a buyer for its cargo so it continues to wait) "will soon have to unload their cargo", in the process flooding the already oversupplied market with millions of barrels of crude oil, thus pushing the price of oil far lower. But how many millions of barrels, and how much lower will the price of oil go? For the answer we go to Deutsche Bank's Michael Huseh, who has done the calculations to get the answer. What he finds is that since the start of 2014, global floating storage inventory has ranged between 80 and 180 million barrels (Figure 1). According to estimates of the global VLCC fleet at the end of 2014, the potential storage capacity is implied to be 1169 million barrels. Adding Suezmax vessels would add 528 million barrels of capacity. After touching 186 million barrels in early March, inventories have begun to decline once more. Since the start of 2015, one can identify both periods when builds in floating storage have been associated with rising Brent prices, and also periods when draws in floating storage have been associated with falling Brent prices (Figure 2). Since the Arabian Gulf has represented much of the variability in floating storage inventory, one can also measure the incentives to add or withdraw from storage using Arabian Gulf tanker rates. South East Asia would be another valid candidate to measure economics, as floating storage inventories in that region have moved in a very similar fashion (Figure 3).

US rig count drops 12 this week to all-time low of 464  (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped 12 this week to 464, a record low amid continuing price woes in the energy industry. A year ago, 1,048 rigs were active. Houston-based oilfield services company Baker Hughes Inc. said Thursday 372 rigs sought oil and 92 explored for natural gas. Among major oil- and gas-producing states, Texas lost eight rigs, Oklahoma three, Alaska two and Kansas and Pennsylvania each dropped by one.   Louisiana gained two rigs and New Mexico one. Arkansas, California, Colorado, North Dakota, Ohio, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981. It previously bottomed out at 488 in 1999.

US Oil Rigs Resuming Slide, Drop By 15 In Past Week To New Record Low - After posting the smallest possible rebound in the past week, moments ago Baker Hughes reported that in the holiday shortened week (in which there was some extrapolation) the decline in US oil rigs has resumed, and as of this moment there were only 372 oil rigs operating in the US, down 15 in the past week, the lowest number in recent history. Offsetting the drop in oil rigs was a modest increase in nat gas rigs which rose by 3 in the past week; the result was that the drop in total US rigs was -12 to 464, a new record low in this 41 year-old series. Some further breakdown:


Oil has staged a modest rebound on this latest negative (for US GDP) news, pushing it to intraday high, over $1 higher than recent lows.

US oil closes at $39.46, ends week 5 pct lower: Oil prices pared losses on Thursday, but still posted their first weekly loss in over a month, pressured by record high U.S. stockpiles, weakening equity markets, and a strong dollar. The number of oil rigs operating in the United States fell by 15 in the previous week, oilfield services firm Baker Hughes reported Thursday. The rig count rose last week after 12 weeks of cuts. With crude futures losing as much as 6 percent since Tuesday's settlement — their biggest slide in two days since mid-February — analysts said the oil rally of the past five weeks that brought prices up from mid-$20 levels may be unraveling. U.S. government data on Wednesday showed crude stockpiles jumped 9.4 million barrels last week, three times more than forecast by analysts in a Reuters poll. A senior executive from the International Energy Agency, meanwhile, said a deal among a few OPEC producers and Russia to freeze production was likely to be "meaningless" as Saudi Arabia was the only one with the ability to raise output. U.S. crude futures settled down 33 cents, or 0.8 percent, at $39.46 a barrel. For the week, it lost about 5 percent, its first weekly loss since mid-February.

What Oil Production Freeze: Russia Just Revealed The Laughable Loophole In The OPEC "Agreement" -- The main catalyst that pushed the price of oil from a 13 year low in early February, when crude briefly traded in the mid-$20 to well over 50% higher less than one month later in one of the world's most furious short squeezes, was the recurring infatuation with the fabricated narrative that OPEC would if not cut production then, then at least freeze it.mWe mocked this, as recently as one month ago, when we wrote "About That "Oil Freeze": Russian Crude Production Sets New Post-Soviet Record In February" an article which was self-explanatory: ... according to calculations by Bloomberg's Julian Lee, Russian crude and condensate production just set new post-Soviet daily record of 10.92m bbl yesterday. He notes that the monthly estimate is based on daily data from Energy Ministry’s CDU-TEK for 1st 25 days, and applies the average rate over last week for final 4 days. And since this compares with a revised 10.91m b/d for January, it means that Russia took the production "freeze" seriously: by freezing at a new record high level of production. What was even more entertaining, is that the so-called "production freeze" came at a time when both Saudi Arabia and Russia, the two most important oil exporters in the world, were already producing crude at the highest recorded level - they couldn't produce more even if they wanted to. Then this so-called "freeze" took on a truly bizarre twist one week ago when we first heard what we thought at the time was a cruel rumor, namely that while OPEC production may indeed be frozen, there is absolutely no limitation on exports. In fact, the lower the domestic demand for oil, the greater (and in the case of Saudi Arabia and Russia, even more record) the exports would be:

Russia Can Technically Cut its Oil Output by 5%  - Rigzone -- Russian Deputy Energy Minister Kirill Molodtsov said on Thursday that it was "technically possible" to reduce the country's oil output by 5 percent.

Oil price war threatens US sense of energy security: Kemp - (Reuters) - The political economy of oil prices in the United States is complicated. The United States is the world's largest oil consumer and one of its biggest importers. But it is also a substantial producer with large oil and gas resources. And its oil is medium-cost, more expensive to produce than the large fields in the Middle East but cheaper than frontier areas like the Arctic. U.S. politicians tend to be happiest with mid-priced oil: not too expensive to upset motorists but not too cheap to threaten the survival of domestic production and increase dependence on imports. In the last century, the country has swung between confidence in its self-sufficiency and energy independence to extreme insecurity about its dependence on imported oil ("Oil scarcity ideology in U.S. national security policy", Stern, 2012). In recent years, the debate has been characterised by optimism, even complacency, about rising U.S. domestic production and falling reliance on imports, but that could easily change, as it has in the past. The shale revolution transformed America's sense of its energy security but it occurred thanks to high oil prices and a wave of technical innovation and entrepreneurship. The shale revolution had almost nothing to do with the political class, though politicians have been quick to claim the credit for an American success story. But just as rising prices and production banished concerns about import dependence, so falling prices and output could reawaken them if pushed too far ("Market madness: a century of oil panics, crises and crashes", Clayton, 2015). OIL IMPORTS RISING U.S. crude oil imports are rising for the first time for more than five years, a sign that Saudi Arabia is winning its war for market share against shale producers. In the week ending March 18, the United States imported nearly 8.4 million barrels per day of crude oil, according to the U.S. Energy Information Administration ( Weekly crude oil imports were the highest since July 2013 ("Weekly Petroleum Status Report", EIA, Mar 23).

Oil’s Decline Takes Toll on Saudi Conglomerate -- Saudi Binladin Group struggles with massive debt as government cuts funding for megaprojects. A construction conglomerate at the center of Saudi Arabia’s petrodollar-fueled economic boom is teetering under billions of dollars of debt, bankers and financial advisers familiar with the matter said, showing the strain of cheap oil on the kingdom and its companies.  The Saudi Binladin Group was once among the biggest beneficiaries of Saudi Arabia’s massive spending at home, paid for by the kingdom’s growing oil wealth. But in the past half year, it has hit hard times.  An executive at one of SBG’s subsidiaries said the parent company hadn’t provided any funding to the unit for more than six months, triggering a funding crunch that has stalled longer-term plans. Several subcontractors and suppliers involved in Binladin projects also haven’t been paid for months, according to the bankers and advisers who know about the company’s finances.

Thanks To Fracking, OPEC’s Chickens Are Coming Home To Roost | Heartlander - Fracking has fundamentally altered the way oil and natural gas are produced. Rather than investing billions of dollars and five to 10 years in large offshore oil projects or drilling in the Arctic, oil companies are beginning to flock to shale oil fields, which can typically be drilled within 20 days and cost a few million dollars per well. Fracking costs substantially less time and money compared to the larger drilling projects oil companies have been investing in for decades, and as a result, the wheels on many of these larger projects have already started to fall off. Foreign producers are now failing to complete 80 percent of their megaprojects on time and without going over budget, which bodes poorly for nations that are highly dependent upon oil revenues. In an effort to drive many U.S. oil producers out of business, OPEC has chosen not to decrease its production, thereby allowing the market price of oil to continue to decline. OPEC hopes it can destroy its competition and then reinstitute its low-production policies to drive prices back up, but according to Daniel Yergin, a leading scholar on energy and geopolitics, this strategy will ultimately be unsuccessful. According to Yergin, “It is impossible for OPEC to knock out the U.S. shale industry though a war of attrition even if it wants to, and even if large numbers of frackers fall by the wayside over coming months. Mr. Yergin said groups with deep pockets such as Blackstone and Carlyle will take over the infrastructure when the distressed assets are cheap enough, and bide their time until the oil cycle turns. The management may change and the companies may change but the resources will still be there.” As oil prices begin to modestly recover and technological advancements continue to make shale oil less expensive to produce, oil prices will likely be tempered by shale drillers, who can bring new supplies to the market faster and cheaper than conventional oil producers. This is bad news for the many oil-exporting counties who would likely face the prospect of economic, financial, or social unrest if low oil prices persist, such as Algeria, Brazil, Ecuador, Nigeria, Russia, and Venezuela. The problem with OPEC’s brand of socialism is that oil money inevitably runs out; eventually, innovation always defeats despotism.

An Output Freeze Is Still The Big Red-Herring For Oil -  The way things are shaping up on the oil price panic barometer, 17 April is now a D-Day of sorts for the industry. It’s the day both OPEC and non-OPEC countries will (reportedly) sit down together in Doha, Qatar, to work towards an output freeze deal. OPEC President Qatar will host the meeting as a follow-up to a late February meeting that was attended by Qatar, Saudi Arabia, Russia and Venezuela—when the initial idea of an output freeze to January levels was bandied about, and that the idea is being “increasingly supported” by Saudi Arabia and Russia. “It is worth noting that the earlier Doha meeting of February 16 has changed the sentiment of the oil market and put a floor under the oil price. This has triggered a broad and intensive dialogue between all oil producers out of the conviction that current oil prices are not sustainable,” according to a Qatari Energy Ministry statement.But now that prices have somewhat rebounded to the $40 level—up 30 percent or so since last month when the output freeze was first brought up—what is everyone expecting from Doha? While the meeting scored a bit of a coup by winning a Saudi commitment to attend, there has been some undermining of things by Russian Energy Minister Alexandar Novak, who said yesterday that the meeting would only “probably” be held in April. The official line is that the supporters of the freeze are looking for commitments from more producers, both within OPEC and outside of OPEC. But those who have committed so far are doing so contingent on others committing as well. Venezuela—the hardest hit—is fully committed. Qatar has been lobbying for the freeze from the onset. Kuwait is committed. But Iraq, which represents the strongest supply growth among OPEC countries—is not keen on the idea, and Iran, fresh off sanctions, has said it would commit only after it reached a production level of 4 million barrels per day. That’s not going to be April.

OPEC's Badri Hopes For Positive Producer Meeting In April  Iran may join other oil producers planning to freeze production to support prices at a later date, OPEC's secretary general said on Monday, since the country is seeking to raise its exports. Producers from the Organization of the Petroleum Exporting Countries and non-members are due to meet on April 17 in Qatar discuss the output freeze. But Iran is seeking to increase exports, following the lifting of Western sanctions in January. "I hope the result of the meeting will be positive," Abdullah al-Badri said at a news conference in Vienna. "They are not objecting to the meeting but they have some conditions for the production and maybe in the future they will join the group," he said of Iran. The comments are a further sign that Iran's position will not derail a wider agreement on the output freeze. Gulf oil exporters including Saudi Arabia had previously maintained that all major producers should participate.

Saudi Arabia will freeze oil output without Iran, says Opec delegate -- Saudi Arabia is prepared to join an oil output freeze next month without Iran taking part, a senior Opec delegate said, making a deal among big producers more likely. Some of the world’s largest oil nations will meet in Doha on April 17 to discuss restraining output. The move follows a provisional agreement reached in February by Saudi Arabia, Russia, Qatar and Venezuela to keep production at January levels. “There is agreement from many countries to go along with a freeze,” said the delegate. “Why make it contingent on Iran?” Last month Gulf officials suggested any deal was conditional on Iran, Saudi Arabia’s Opec rival, taking part alongside other big producer countries. Iran has sought to increase production and exports after the lifting of sanctions against its oil industry in January. Iranian officials have shown no willingness to back any deal that would result in restricting its output. Questions have been raised among Gulf delegates about Iran’s ability to increase output, suggesting this could be one reason to proceed without it. “Despite all the bragging, we have yet to see what Iran can do,” said the delegate. Abdalla El-Badri, Opec secretary-general, said on Monday at a news conference in Vienna: “Maybe in the future [Iran] will join the group. They have some conditions about their production.” About 15 Opec and non-Opec countries — accounting for two-thirds of global oil output — supported an oil freeze, Mohammed Bin Saleh Al-Sada, Qatar’s energy minister, said last week. Some market analysts have said an oil freeze at January levels would have a limited impact on supply and demand balances because many producer countries are producing near record levels. But a provisional deal has helped to support prices and reverse negative market sentiment towards oil. Brent crude was at $41.72 in afternoon trading on Tuesday, up 54 per cent since a 2016 intraday low of $27.10 a barrel in January.

“Families Were Blown Up” — Scenes From a Saudi-Led Bombing in Yemen - WE SAW DEADLY airstrikes on a market last Ramadan, not far from here, but this attack was the deadliest. There was an earlier attempt to bomb this market over two months ago — you can still see the crater over there, where a dud missile is still buried. But this time, two explosions destroyed the marketplace at noon, when people usually buy their food and khat [a leaf that is a mild stimulant when chewed]. This was the only marketplace in the entire district and had recently become larger, especially after many storekeepers and retailers had to escape from neighboring areas, such as Haradh. People bought a wide range of food in this market; they used to buy and sell livestock, and even bought clothes. There was a big hangar where khat was sold. Around 12 p.m., the first airstrike hit that hangar. The second hit another hangar soon afterward, where a lot of food was sold. I was in my spot, selling sacks of flour. The market was bustling at the time, with a large number of people. There was a lot of noise coming from the electricity generators and motorcycles, so I heard no warplane. Usually they fly over Mastaba almost every day — you can hear now, this warplane circling overhead. At noon, when the first explosion took place, I nearly passed out, falling on the ground. The other explosion followed right after the first one. Then, all of a sudden, I found myself jumping to my feet and running ahead. I stopped when I got to the opposite side of the market, only to see bodies scattered all over the place. There were two big craters where the bombs hit — nearly full of ripped and charred bodies, and blood was everywhere. Survivors were in a frenzy; rescuers began to pile up the bodies, while the wounded were rushed to hospitals.

Brussels attacks: How Saudi Arabia's influence and a deal to get oil contracts sowed seeds of radicalism in Belgium --  There are many reasons why Belgium has become a hotbed of radical Islamism. Some of the answers may lie in the implanting of Saudi Salafist preachers in the country from the 1960s. Keen to secure oil contracts, Belgium’s King Baudouin made an offer to Saudi King Faisal, who had visited Brussels in 1967: Belgium would set up a mosque in the capital, and hire Gulf-trained clerics. At the time, Belgium was encouraging Moroccan and Turkish workers to come into the country as cheap labour. The deal between the two Kings would make the mosque their main place of worship.Brussels already had the perfect place. An oriental pavilion designed by Belgian architect Ernest Van Humbeek had been built in the capital’s Cinquantenaire park in 1879, but was falling into disuse. The 1967 deal gave the Saudis a 99-year, rent-free lease. The pavilion was refashioned by the Saudis, opening in 1978 as the Great Mosque of Brussels, as well as the seat of the Islamic and Cultural Centre of Belgium (ICC). Although the mosque was treated as the official voice of Muslims in Belgium, its radical Salafist teachings came from a very different tradition to the Islam of the new immigrants. Today, there are around 600,000 people of Moroccan and Turkish origin in Belgium, a country of 11 million. “The Moroccan community comes from mountainous regions and rift valleys, not the desert. They come from the Maliki school of Islam, and are a lot more tolerant and open than the Muslims from other regions like Saudi Arabia,” says George Dallemagne, a Belgian member of parliament for the centre-right CDH, an opposition party. “However, many of them were re-Islamified by the Salafist clerics and teachers from the Great Mosque. Some Moroccans were even given scholarships to study in Medina, in Saudi Arabia.”

Explosive Accusation: Belgium Had "Advance And Precise" Warning About Terrorist Attacks, Did Nothing -- In what, if true, is the most incendiary allegation of the day, Israel's Haaretz newspaper reports that Belgian security services and other Western intelligence agencies had "advance and precise intelligence warnings" regarding Tuesday’s bombings. According to the paper, "the security services knew, with a high degree of certainty, that attacks were planned in the very near future for the airport and, apparently, for the underground railway as well." Here is the full Haaretz report: The Belgian security services, as well as other Western intelligence agencies, had advance and precise intelligence warnings regarding the terrorist attacks in Belgium on Tuesday, Haaretz has learned. The security services knew, with a high degree of certainty, that attacks were planned in the very near future for the airport and, apparently, for the subway as well. Despite the advance warning, the intelligence and security preparedness in Brussels, where most of the European Union agencies are located, was limited in its scope and insufficient for the severity and immediacy of the alert. As far as is known, the attacks were planned by the headquarters of the Islamic State (ISIS) in Raqqa, Syria, which it has pronounced as the capital of its Islamic caliphate

REPORT: ISIS has trained 400 fighters to attack Europe - The Islamic State group has trained at least 400 fighters to target Europe in deadly waves of attacks, deploying interlocking terror cells like the ones that struck Brussels and Paris with orders to choose the time, place and method for maximum carnage, The Associated Press has learned. The network of agile and semiautonomous cells shows the reach of the extremist group in Europe even as it loses ground in Syria and Iraq. The officials, including European and Iraqi intelligence officials and a French lawmaker who follows the jihadi networks, described camps in Syria, Iraq and possibly the former Soviet bloc where attackers are trained to attack the West. Before being killed in a police raid, the ringleader of the Nov. 13 Paris attacks claimed to have entered Europe in a multinational group of 90 fighters, who scattered "more or less everywhere." But the biggest break yet in the Paris attacks investigation — the arrest on Friday of fugitive Salah Abdeslam— did not thwart the multipronged attack just four days later on the Belgian capital's airport and metro that left 31 people dead and an estimated 270 wounded. Three suicide bombers also died. Just as in Paris, Belgian authorities were searching for at least one fugitive in Tuesday's attacks — this time for a man seen on security footage in the airport with the two suicide attackers. The fear is that the man, whose identity Belgian officials say is not known, will find Abdeslam's path instructive. After fleeing Paris immediately after the November attacks, Abdeslam forged a new network back in his childhood neighborhood of Molenbeek, long known as a haven for jihadis, and renewed plotting

ISIS, oil & Turkey: What RT found in Syrian town liberated from jihadists by Kurds (EXCLUSIVE) - An RT Documentary crew filming in northern Syria has seen Islamic State (IS, ISIS/ISIL) documents abandoned by retreating terrorists and found by the Kurds that, along with captured IS recruits, provide a stunning insight into IS oil trade. Trends Islamic State, Syria unrest, Syria-TurkeyShortly after the outbreak of the Syrian war, IS became a game-changer in Iraq and, in particular, Syria. Beheadings on camera, mass killings, and enslavement, as well as apparent connections to the Paris and Brussels attacks had become synonymous with the terror group, giving it wide publicity. Running a viable militant organization with such remarkable capabilities would be impossible without some logistical and financial support from the outside. Turkey, which has been actively engaged in the Syrian war since the outset, has repeatedly denied claims that it is aiding IS. However, while Ankara insists that it is the jihadist group’s sworn enemy, facts on the ground often tell a different story.RT has spoken to several witnesses who were involved in Islamic State’s trade activities and accessed the terror group’s documents, which provide insight into how and where foreign militants enter Syria to join the terrorist “state.”The RT Documentary team did most of its filming in the town of Shaddadi, located in the Syrian province Hasakah, which has been partly overrun by IS jihadists. Following the liberation of Shaddadi, which is home to some 10,000 people, RT filmed Kurdish soldiers walking around what used to be the homes of IS fighters and examining piles documents that had been left behind. Some of the files seized at the scene turned out to be detailed invoices used by IS to calculate daily revenues from their oil fields and refineries, as well as the amount of oil extracted there. All the documents had Islamic State’s symbol at the top.

US Marines Enter Ground Combat in Iraq to Defend Oil Fields - Even as Pentagon officials have sought to emphasize their claims of ISIS being “on the run,” ever more US ground troops are being deployed into Iraq to try to cope with ISIS offensives, with the battle of Makhmur leading to the introduction of US Marines in front-line combat roles. Officials are trying to downplay the operation as “force protection” for Iraqi ground troops, who have been massing in the area in an effort to ultimately launch an attack on the ISIS-held city of Mosul, not far away. The explanation is unsatisfying for several reasons, but primarily because this “tactical assembly area” already includes thousands of Iraqi troops and Kurdish Peshmerga, and these are the same troops who are supposed to attack Mosul. Yet these troops are apparently unable to even hold Makhmur, let alone advance toward Mosul.The Makhmur District is also a key to holding oil fields around Kirkuk, and the ISIS offensive is seen by many analysts as part of an effort to ultimately regain control over those lucrative oil fields, and have been “outgunning” the thousands of Iraqi troops in the area. Whether they’re trying to save Iraqi ground troops who still can’t stand up to ISIS, or save oil fields, however, the latest escalation puts US troops even further in harm’s way, and has put the war even further afield from the “no boots on the ground” affair initially promised by the Obama Administration.

U.S. Indicts 7 Iranian Hackers For Cyber Attacks On Banks, New York Dam: (Reuters) - The Obama administration on Thursday announced the indictment of seven Iranian hackers for a coordinated campaign of cyber attacks on dozens of U.S. banks and a New York dam from 2011 to 2013, signaling an effort by officials to more publicly confront cyber crime waged on behalf of foreign nations. The indictment, filed in a federal court in New York City, described the suspects, who live in Iran, as "experienced computer hackers" believed to have been working on behalf of the Iranian government. The move marks the first time the U.S. government has charged individuals tied to a nation-state with attempting to disrupt critical infrastructure, a vulnerability that security researchers have grown increasingly concerned about in recent months. Separately, the U.S. Treasury Department blacklisted two Iranian companies on Thursday for supporting Iran's ballistic missile program and also sanctioned two British businessmen it said were helping an airline used by Iran's Revolutionary Guards. The charged hackers were identified as Ahmad Fathi, Hamid Firoozi, Amin Shokohi, Sadegh Ahmadzadegan, Omid Ghaffarinia, Sina Keissar and Nader Seidi, all citizens and residents of Iran. They are accused of conspiracy to commit computer hacking while employed by two Iran-based computer companies, ITSecTeam and Mersad Company. Firoozi is additionally charged with obtaining and abetting unauthorized access to a protected computer.

Biden says Israel settlements raise questions about commitment to peace | Reuters: U.S. Vice President Joe Biden called on Israel's government on Sunday to demonstrate its commitment to a two-state solution to end the conflict with the Palestinians and said settlement expansion is weakening prospects for peace. "Israel's government's steady and systematic process of expanding settlements, legalizing outposts, seizing land, is eroding in my view the prospect of a two-state solution," Biden said in a speech to the American Israel Public Affairs Committee (AIPAC), a leading pro-Israel lobbying group. Biden said he did not agree with Israel Prime Minister Benjamin Netanyahu's government that expanded settlements would not interfere with any effort to settle the conflict. "Bibi (Netanyahu) thinks it can be accommodated, and I believe he believes it. I don't," Biden said. Biden said the region instead seems to be moving toward a one-state solution, which he termed dangerous.

Commodity rebound outruns fundamentals (FT) - Commodities have always been cyclical, but already this year we have seen two distinct mini-cycles — down in January, recovering in February and March. Of course, fundamentals do not change that quickly, but sentiment certainly can. In particular, Chinese sentiment has turned around sharply — from the lowest point in the history of Macquarie’s China steel and copper surveys in January into positive territory. So how should we view what has happened recently? Have fundamentals improved? Yes, from an extremely low base in December and January there has undoubtedly been a demand recovery. We would term what has happened as a “sub-trend to trend” move. For example global steel demand looks to have improved from around minus 6 per cent year on year to perhaps minus 2 per cent. At the same a time, a degree of confidence has returned helped by further loosening of the monetary policy from central banks. With it commodity order books have improved, helped also by a seasonal pick-up in demand. However, outlook for 2016 is not great and we would be cautious on hopes of further upside in prices as demand is not aggressive enough. Across the main metals and bulk commodities we cover, the majority will see negative year-on-year supply growth this year. Given global mining capital expenditure peaked in 2012 and adding the typical lag in the delivery of big projects, we always felt 2016 would be the year where a lack of new mines would be acutely felt. While this is helpful in bringing markets back towards balance with demand expected to be sub-trend, inventories high and many markets starting from an oversupplied situation, large stockpiles remain for most commodities. As of yet, there are few raw material constraints that have the potential to become inflationary in the near future with zinc the notable exception..

What Tracks Commodity Prices? - NY Fed - Various news reports have asserted that the slowdown in China was a key factor driving down commodity prices in 2015. It is true that China’s growth eased last year and, owing to its manufacturing-intensive economy, that slackening could reasonably have had repercussions for commodity prices. Still, growth in Japan and Europe accelerated in 2015, with the net result that global growth was fairly steady last year, casting doubt on the China slowdown explanation. An alternative story relies on the strong correlation between the dollar and commodity prices over time. A simple regression shows that both global growth and the dollar track commodity prices, and in this framework, it is the rise of the dollar that captures last year’s drop in commodity prices. Thus a forecast of stable global growth and a relatively unchanged dollar suggests little change in commodity prices in 2016.

Mounting debts could derail China plans to cut steel, coal glut | Reuters: China's campaign to slim down its bloated industries could be derailed by more than $1.5 trillion of debt in its steel, coal, cement and non-ferrous metal sectors, which threatens to overwhelm local banks. Tackling industrial overcapacity has become a priority for Beijing to make its slowing economy more efficient and address a supply glut that has hammered coal and steel prices. China is providing more than 100 billion yuan ($15 billion) in the next two years to handle layoffs from coal and steel, but that will only be made available once debts have been settled. Critics say there is no clear mechanism for tackling the debt burden, which will put huge strain on the weakest sections of the banking sector. The debt figures, revealed in papers submitted to China’s parliament this month, highlight the dilemma facing state firms grappling with surplus capacity and how difficult it will be to pull off this central plank of Beijing's economic reform plans.Costs for the estimated 1.3 million coal-sector layoffs alone are as much as 195 billion yuan, and coal industry delegates attending parliament urged government to provide more support to deal with the mounting debts of hundreds of stricken "zombie" firms. The four sectors targeted in the battle against overcapacity owe around 10.2 trillion yuan ($1.56 trillion), according to documents submitted to parliament by Wang Mingsheng, head of Anhui-based coal firm Huaibei Mining. China's statistics bureau puts coal and steel debts alone at 8 trillion yuan, of which about a third is bank debt.

China Car Sales Suffer Biggest Crash On Record To Start 2016 - The dream of transition to a 'consuming' economy just crashed into the wall of excess debt and leverage. 2016 has started with a 44% collapse in China passenger car sales. This is the biggest sequential crash and is 50% larger than any other plunge in history.While there is a seasonal effect here obviously, the sheer scale of this 2-month drop - which removes the new year holiday affect - indicates something is terribly wrong in China. Coming at a time when vehicle inventories are near record highs relative to sales with a mal-investment-driven excess inventory-to-sales at levels only seen once before in 24 years... And worse still, used car prices starting to fade rapidly (biggest Feb drop since 2008)... Falling used car prices means pressure on new car prices as well, which would be a shock to America's booming auto market. Obviously, the scariest part about all of the above is that consumers still have the pedal to the metal (pun fully intended) when it comes to leases, which means there's no end in sight to the off-leases and thus no way to determine, at this juncture, how big the residual writedown wave and deflationary auto industry calamity will ultimately end up being. Simply put, the world's automakers - all toeing the narrative line that growth will be from China - now face a harsh reality of massive mal-investment deja vu. And furthermore, any pricing power is lost (no matter how long the credit terms are extended) as they are forced to halt production and dump inventories in a vicious deflationary cycle...

"Don't Take The Public For Fools!": China Hides Millions Of Layoffs, Jails Miners Protesting Unpaid Wages -- When you look out across markets and across the increasingly fraught geopolitical landscape, there are plenty of black swans waiting in the wings (no pun intended). And quite a few of them are Chinese. China has, among other problems: a massive debt overhang that, all told, amounts to more than 250% of GDP; a decelerating economy that Beijing swears will be able to pull off a miracle and move away from the smokestack and away from export-led growth without slipping into recession; a currency crisis; a new property bubble in Tier-1 cities; and a burgeoning NPL problem in the banking sector. All of those issues are of course inextricably bound up with one another. They are set like dominoes and once the first one tips, the rest will too as sure as night follows day. And while twin crises (financial and economic) in China would wreak havoc on markets in both EM and DM - between which China exists in a sort of limbo - the real question is this: what would the consequences be for societal stability in China? That is, if it all falls down, will social upheaval ensue leading to a revolt against the Politburo? That’s not some attempt to use hyperbole on the way to positing some anarchic future for the world’s engine of global growth and trade. In fact, the possibility for widespread unrest is so real that Chinese officials have begun to address it frequently in discussions of how they plan to deal with the mass layoffs that are bound to result from Beijing’s efforts to restructure the country’s collection of elephantine SOEs and stamp out excess capacity.

China considers Tobin tax to counter capital outflows - FX regulator | Reuters: China is studying a Tobin tax as a new policy tool to curb capital outflows, an official at the country's foreign exchange regulator said on Tuesday. Wang Yungui, head of the policy and regulation department at the State Administration of Foreign Exchange (SAFE), did not mention a timeframe or other details for rolling out the tax. The comment followed a similar remark from central bank's vice governor Yi Gang, who said on March 19 that China looks to introduce a tax on transactions to combat currency speculation

Does a Tobin Tax on Foreign Currency Trades Make Sense for China? - WSJ: The problem with introducing a tax on currency transactions in China: It’s probably too late. Taxing foreign exchange transactions – sometimes known as a Tobin tax – aims to limit short term currency transactions by making them more costly. That may appeal to China, where a financial regulator said this week a tax is an option as the central bank fights to reduce opportunities to sell yuan. Versions of a Tobin tax, named after U.S. economist and Nobel laureate James Tobin, have been tried in Chile, Spain, India and South Korea. But in those cases, they were mostly used to limit currency transactions at a time when skittish foreign investors are trying to get their money into a country to make short term gains. “It’s macro-prudential, counter-cyclical — you are leaning against the wind,” said Chilean-born economist and former central banker Stephany Griffith-Jones. In financial circles, Chile is widely credited with running the most successful Tobin tax in the 1990s. Yi Gang, a deputy governor of the People’s Bank of China, said last year that China should consider introducing a Tobin tax on spot-currency trades to curb short-term speculative capital flows. He wrote in the central bank publication China Finance that the country should set up contingency plans to counteract abnormal capital flows by considering policy tools such as imposing a Tobin tax, reserve requirements with zero interests and fees on foreign-exchange transactions.

A plea for help: How China asked the Fed for its stock crash play book: In a message to a senior Fed staffer, the PBOC's New York-based chief representative for the Americas, Song Xiangyan, pointed to the day's 8.5 percent drop in Chinese stocks and said "my Governor would like to draw from your good experience." It is not known whether the PBOC had contacted the Fed to deal with previous incidents of market turmoil. The Chinese central bank and the Fed had no comment when reached by Reuters. In a Reuters analysis last year, Fed insiders, former Fed employees and economists said that there was no official hotline between the PBOC and the Fed and that the Chinese were often reluctant to engage at international meetings. The Chinese market crash triggered steep declines across global financial markets and within a few hours the Fed sent China's central bank a trove of publicly-available documents detailing the U.S. central bank's actions in 1987. Fed policymakers started a two-day policy meeting the next day and took note of China's stock sell-off, according the meeting's minutes. Several said a Chinese economic slowdown could weigh on America. Financial market contagion from China was one of the reasons cited by the Fed in September when it put off a rate hike that many analysts had expected, a sign of how important China has become both as an industrial powerhouse and as a financial market. The messages, which Reuters obtained through an Freedom of Information Act request, show how alarmed Beijing has become over the deepening financial turmoil and offer a rare insight into one of the least understood major central banks. The exchanges also show that while the two central banks have a collegial relationship, they might not share secrets even during a crisis.

China’s new macro strategy - - In the past few years, China’s macro-economic strategy has largely failed to command the confidence of investors in developed markets, despite the fact that the reported performance of the economy has remained fairly impressive. Part of the problem has been that there does not seem to have been a coherent, joined-up strategy for maintaining growth while rebalancing the economy towards consumption, and reducing overall debt levels. The policy transparency now taken for granted in the developed economies has not come naturally to the Chinese political system, as Ben Bernanke has pointed out. China has been trying to improve on this record, in consultation with senior western advisers in some cases. In the past two weeks, there has been evidence of “glasnost with Chinese characteristics” in the economic announcements emerging from the annual meetings of the National People’s Congress. The overall thrust of Chinese macro strategy now seems to be broadly what is needed, but the intended switch away from “zombie” manufacturing companies towards the new economy will happen only at a moderate pace, consistent with the 6.5-7.0 per cent GDP target, and with no overall rise in unemployment. With the new strategy in place, the Chinese “landing” does not have to be a hard one, but it is still likely to be a long story, with many twists and turns before it is fully resolved.The latest policy changes are confronting a deteriorating economic situation since the start of the year. The graph below, taken from Fulcrum’s nowcast models, encapsulates the key features of Chinese growth in the current decade:

Study Reveals 95% Of Filipino, Indonesian Helpers In Hong Kong Exploited Or Forced Labor - Forbes: Only 5.4% of migrant domestic workers in Hong Kong do not show any signs of exploitation or forced labor, revealed a study by local non-profit human rights organization Justice Centre Hong Kong on Tuesday. Hong Kong has one of the highest ratios of domestic workers in the world, with more than 336,000 among the 7.2 million in the city, comprising 10% of the total working population. The study surveyed over 1,000 domestic workers, almost all either from the Philippines (51%) or Indonesia (46%).“Migrant domestic workers are uniquely vulnerable to forced labor because the nature of their occupation can blur work-life boundaries and isolate them behind closed doors,” the study states. “They are often overworked and undervalued.” According to government statistics, the city’s average working hours is 40 to 50 hours a week. Meanwhile, the study shows that domestic workers work on average 71.4 hours a week (11.9 hours a day, six days a week), mostly due to the live-in rule, which requires migrant domestic workers to live with their employers, blurring work and rest boundaries. Over a third of domestic workers still work before or after they leave for their one rest day, not getting the full 24 hours of rest mandated under Hong Kong employment law.

Taiwan''s Central Bank Cuts Rates Again - Taiwan's central bank lowered interest rates for the third time in six months Thursday, in its latest move to help prop up the stuttering economy and boost inflation. The central bank cut its benchmark discount rate to 1.50% from 1.625%. The move was widely expected by economists. The bank also shaved the same amount off its other key rates for secured and unsecured loans. The move is the third straight rate cut by the bank, after reductions at its previous policy meetings in December and September. The decision follows more data showing weakness in the economy despite a recent jump in inflation. Exports fell 12% in February from a year earlier, the 13th straight monthly slide in the value of shipments abroad, as limp global demand and China's slowdown continue to weigh on the island's export-dependent economy.

Economist Krugman joins call for Japanese fiscal stimulus- Nikkei Asian Review: -- Every one of the economists that Prime Minister Shinzo Abe has invited here for a series of meetings with policymakers has recommended that Japan let loose government spending to counter slowing growth. Japan ought to spend without concern for budget deficits for two or three years, Nobel laureate Paul Krugman told officials here Tuesday, prompted by Abe. The prime minister said he has been told his debt-laden country ought to take advantage of negative interest rates to do just that. Krugman said he supports Japan's policies but that more could be done as weakness pervades the global economy. When Abe asked why consumer spending has remained feeble since the 2014 consumption tax increase, the U.S. academic suggested the answer lies in expectations that fiscal stimulus will end. Krugman also cited Japan's shrinking labor force. Krugman told reporters later that now is not the time to raise the consumption tax again, echoing fellow Nobel Prize winner Joseph Stiglitz, who spoke at the first meeting in the series. A tax increase to 10% from 8% is set for April 2017, but Stiglitz urged a postponement. Two leading members of Abe's economic brain trust, Koichi Hamada and Etsuro Honda, have offered the same advice. Harvard University economist Dale Jorgenson and Kazumasa Iwata, president of the Japan Center for Economic Research, also supported accommodative fiscal policy in their recent meetings with Abe. Jorgenson argued that Japan needs to raise its consumption tax, but he did not say when. Iwata did not mention that issue.

Japan Inc. May Soon Get Paid to Borrow in Commercial Paper Sales -- Japan’s companies may soon get paid to borrow in the commercial paper market as brokers adjust to the Bank of Japan’s negative interest-rate policy. The Japan Securities Depository Center will start an interim system Tuesday that will help settle commercial paper with minus rates. The Tanshi Kyokai, an association of brokers, announced over the weekend that it plans to have the capacity to handle transactions with sub-zero yields from today. The upgrades come more than a month after the BOJ started charging some lenders 0.1 percent on their excess reserves. Japan’s central bank has stepped up its buying of commercial paper this year, increasing the planned size of monthly operations to 500 billion yen ($4.5 billion) as part of its effort to achieve a 2 percent inflation target. While CP rates may drop below zero sporadically, such levels are unlikely to take root because it will be hard for investors to time purchases before BOJ operations. “There are no investors who would buy credit products with negative rates,”. “Risk is also high for dealers to take CP just to sell them back to the BOJ.” Japan’s government was paid to borrow money for 10 years for the first time ever this month as yields on benchmark debt fell toward the record-low of minus 0.135 percent reached March 18. The unsecured overnight call rate dropped past zero for the first time in more than a decade on Feb. 17.

Japan lease company become first issuer of commercial paper with negative yield | Reuters: Japan hit a new milestone in its experiment with negative interest rates after a leasing company issued commercial paper with a negative yield. Sumitomo Mitsui Finance and Lease Co Ltd issued 5 billion yen ($44.27 million) of six-month commercial paper (CP) at a yield of -0.001 percent. The company, an leasing arm of Sumitomo Mitsui Financial Group, will receive interest of 25,000 yen for the borrowing, a phenomenon that is made possible only after the Bank of Japan introduced negative interest rates in late January. Banks are buying assets with negative yields, expecting they can sell them at a deeper negative rate to the Bank of Japan, which is gobbling up assets from government debt to corporate debt and stocks as part of its quantitative easing strategy. In the BOJ's last CP buying operation last week, the BOJ bought commercial paper at as low as minus 0.385 percent. The BOJ has committed itself to holding 2.2 trillion yen of commercial paper - short term borrowing instruments that are popular with companies - on its balance sheet as a part of its stimulus.

Bank Of Japan Unleashes Yield Curve Chaos: JGBs Inverted At Short- And Long-End -- You know you have 'tinkered' too much in the machincations of what dealers now call a "dead market" when the world's largest sovereign bond market is inverted at the short-end and the long-end. The utter folly of Peter Pan policy has sent 10Y JGB yields below the BoJ's overnight call rate for the first time ever...  Japan’s 10-year bond yield dropped to a record -12.5bps Friday, falling below the the negative deposit rate introduced by the Bank of Japan last month, after the central bank’s operation to buy long-term debt met the lowest investor participation on record. Yields on government debt have tumbled since the BOJ announced Jan. 29 that it would start charging 10bps interest on some deposits held at the bank starting Feb. 16.  40Y Yields are down a stunning 90bps since the BoJ went full retard... to record lows.  AND yields are so low that demand for 40Y JGBs has driven its yield below the 30Y yield by the most ever... As Bloomberg notes, Japan’s long-term bond yields extended their push to record lows, driven by a shortage as the central bank buys record amounts of securities. Investors are hoarding the debt because it still pays interest, while shorter maturities have negative yields.  “We’re in a situation where traders have no stock of the bonds,”

Japan Goes Full Krugman: Plans Un-Depositable, Non-Cash "Gift-Certificate" Money Drop To Young People -- The Swiss, the Finns, and the Ontarians may get their 'Universal Basic Income' but the Japanese are about to turn the Spinal Tap amplifier of extreme monetary experimentation to 11. Sankei reports, with no sourcing, that the Japanese government plans to unleash "vouchers" or "gift certificates" to low-income young people to stimulate the "conspicuous decline" in consumption among young people. The handouts may not be deposited, thus combining helicopter money (inflationary) and fully electronic currency (implicit capital controls and tracking of spending). Since Ben Bernanke reminded the world of the existence of government printing-presses, echoed Milton Friedman's "helicopter drop" solution to fighting deflation, and decried Japan for not being as insane as it could be... it has only been a matter of time before some global central bank decided that the dropping of cash onto the populace was the key to economic recovery. Having blown their wad on QQE (and been left with a quintuple-dip recession) and unleashed NIRP, it appears Japan has reached that limit.  As Bloomberg reports, The Japanese government plans to include gift certificates for low-income young people in its fiscal 2016 supplementary budget, Sankei reports, without saying who provided the information.Recipients would be able to use them for daily necessities. The government sees gift certificates as more effective in stimulating consumption than cash handouts, which may be deposited.

Central Banks Creep Toward Uncomfortable Role: Central Planners - WSJ: The question may sound daft when policy makers are pumping gushers of cash into several of the world’s major economies. But as the central banks become more desperate to boost inflation and growth, they are starting to break one of the modern tenets of the profession by funneling that cash directly to what they regard as “good” uses. The past two weeks brought interventions by the Bank of Japan 8301 -0.51 % and European Central Bank, which would have been unthinkable just a few years ago. The Bank of Japan’s conditions for companies to qualify for exchange-traded funds it would like to buy sound like they come from a well-meaning government minister, not a monetary authority concerned about overall growth and inflation. Companies could qualify by offering an “improving working environment, providing child-care support, or expanding employee-training programs.” The central bank wants financiers to create a new breed of ETFs it would like to buy. The ETFs would hold only shares of companies that are increasing capital spending, expanding spending on research and development or boosting what the Bank of Japan calls “human capital.” The latter means pay raises for staff, taking on more people or improving human resources.All these are eminently reasonable things to demand of companies, especially Japanese firms. All would probably be good for the economy, too. However, they have nothing to do with monetary policy. The basic aim of central banks is to adjust the overall economy while leaving the market and government to decide the best use of capital, decisions that are inherently political. The problem, as Neal Soss, vice chairman of research at Credit Suisse Group AG CSGN 0.91 % , puts it, is “these are very, very challenging times for the economic orthodoxy,” and if governments won’t step up with an expansionary fiscal policy, central banks have little choice but to fill the gap.

Deterring China: US Army to Stockpile Equipment in Cambodia and Vietnam - The U.S. Army plans to set up equipment depots–so-called equipment activity sets–in a number of Asian countries, including Cambodia and Vietnam, the top officer of the U.S. Army’s Materiel Command said at a conference, Defense News reports.  General Dennis Via, speaking at this year’s Association of the United States Global Force Symposium and Exposition, said that the Army plans to set up eight equipment activity sets around the globe.  However, Asia-Pacific equipment activity sets will differ from other equipment caches that the Army maintains in, for example, Europe, the general notes. “Army prepositioned stocks are go-to-war equipment,” Via explained when discussing European activity sets. According to Breaking Defense, the European equipment depots hold 200 M1 Abrams heavy tanks 87 tanks, 138 M2 Bradley infantry fighting vehicles, and 18 M109 Paladin self-propelled howitzers. The Army Materiel Command also recently sent 5,000 tons of ammunition to Europe, the largest delivery of its kind since the end of World War II. General Via explained that it is the responsibility of his command to “provide our Army and the joint force with strategic reach, allowing units to quickly deploy and fall into equipment that is highly modernized.”The equipment activity sets in Cambodia and Vietnam will contain lighter equipment primarily for humanitarian and disaster relief operations, according to Via. “Throughout the Pacific Rim, these will be humanitarian assistance/disaster relief-type equipment and material, so that when you have typhoons and other types of natural disaster U.S. Army Pacific Command can respond more quickly,” Via said, according to Breaking Defense. “We are looking, for example, at in Cambodia placing a combat support hospital.”

Why Vietnam Loves the Trans-Pacific Partnership | The Diplomat: When trade ministers from 12 countries convened in Auckland, New Zealand for the formal signing of the Trans-Pacific Partnership (TPP) trade agreement on World Cancer Day on February 4, Public Citizen, a Washington-based advocacy group, organized a protest before the D.C. headquarters of the Pharmaceutical Research and Manufacturers of America, an influential drug industry-lobbying group. Protestors decried TPP, a mammoth free trade agreement whose 12 members comprise nearly 40 percent of global GDP, as “the worst deal ever” and a “death sentence” for cancer and HIV patients, among others. But on the other side of the Pacific, those fighting for the rights of Vietnamese patients likely to be impacted negatively by the trade deal were resigned to its passage and have argued against public protests. “We had indeed hoped for the death of the TPP,” Nguyen Anh Phong, a coordinator of the Vietnam Network of People living with HIV, said in an interview. “But we now know Vietnam desperately needs the TPP. Its benefits for the future of the entire country should outweigh the damages sick people stand to suffer.” Phong’s stance is emblematic of the strong support the Vietnamese masses have thrown behind the U.S.-led controversial trade agreement. According to a Pew survey last year, just two percent of Vietnamese think that the deal will be a bad thing for their country, while 89 percent believe it will be good. The Vietnamese government has thus got a rare edge over other TPP countries when it comes down to joining the deal: overwhelming public endorsement. On that day, front-page headlines across the nation highlighted the prospect of Vietnam opening the floodgates to increased foreign investment, particularly to American companies, after the TPP takes effect. On the other end, media reports crooned that the deal would also enable tariff-free access to the United States for Vietnamese companies, particularly apparel, footwear and textile exporters. It would also pave the way for Vietnam’s overhaul of its much-cosseted yet inefficient public sector. Overall, the TPP has been hailed as an omen of a much-anticipated return of the United States to a country now awash with Americano-philia.

New Rules for the Monetary Game - by Raghuram Rajan – Our world is facing an increasingly dangerous situation. Both advanced and emerging economies need to grow in order to ease domestic political tensions. And yet few are. If governments respond by enacting policies that divert growth from other countries, this “beggar my neighbor” tactic will simply foster instability elsewhere. What we need, therefore, are new rules of the game. Why is it proving to be so hard to restore pre-Great Recession growth rates? The immediate answer is that the boom preceding the global financial crisis of 2008 left advanced economies with an overhang of growth-inhibiting debt. While the remedy may be to write down debt to revive demand, it is uncertain whether write-downs are politically feasible or the resulting demand sustainable. Moreover, structural factors like population aging and low productivity growth – which were previously masked by debt-fueled demand – may be hampering the recovery. Politicians know that structural reforms – to increase competition, foster innovation, and drive institutional change – are the way to tackle structural impediments to growth. But they know that, while the pain from reform is immediate, gains are typically delayed and their beneficiaries uncertain. As Jean-Claude Juncker, then Luxembourg’s prime minister, said at the height of the euro crisis, “We all know what to do; we just don't know how to get re-elected after we’ve done it!”  Central bankers face a different problem: inflation that is flirting with the lower bound of their mandate. With interest rates already very low, advanced economies’ central bankers know that they must go beyond ordinary monetary policy – or lose credibility on inflation. They feel that they cannot claim to be out of tools. If all else fails, there is always the “helicopter drop,” whereby the central bank prints money and sprays it on the streets to create inflation (more prosaically, it sends a check to every citizen, perhaps more to the poor, who are likelier to spend it). But they can also employ a range of other unconventional tools more aggressively, from asset purchases (so-called quantitative easing) to negative interest rates.

ANZ warns of bigger credit hit from resources exposure | Reuters: Australia and New Zealand Banking Group on Thursday said bad debt charges for the first half of 2016 could almost double due to a downturn in the resources sector, a problem analysts warn could snowball across the banking sector. A plunge in the prices of two of Australia's biggest exports - iron ore and coal - has raised the spectre of mounting defaults by mining companies and a follow-on impact on bank earnings after years of record profits. Shares in No.4 lender ANZ dived the most in over seven months after it said bad debt charges would likely blow out to A$900 million ($676 million) for the first half of the current financial year, up from its A$800 million forecast only a month ago. It cited a "small number" of resources-related exposures. Rival Westpac Banking Corp also said on Thursday it was seeing signs of stress in consumer loans in Western Australia and Queensland - Australia's biggest mining states. "You're probably past the bottom of the credit cycle so it's hard to see how things can get better from here," said Andrew Martin, a fund manager at Alphinity Investment Management, which owns shares in the major banks. "There is a reasonable chance that incrementally things get worse so it tends to be reasonably hard for the banks to out-perform."

Get ready for a recession by 2017 - For the last 25 years, Australian politicians of both Liberal and Labor hue have been able to brag that, under their stewardship, Australia has avoided a recession. Those bragging rights are about to come to an end. During the life of the next Parliament — and probably by 2017 — Australia will fall into a prolonged recession. Whichever party is in opposition at the time will blame the incumbent, but in reality this recession has been set up by the sidestep both parties have used to avoid downturns for the past quarter century: whenever a crisis has loomed, they’ve avoided recession by encouraging the private sector to borrow and spend. The end product of that is starkly evident in a new database on private and government debt published by the Bank of International Settlements. Australia’s most famous recession sidestep was during the GFC, when it was one of only two countries in the OECD to avoid experiencing two consecutive quarters of negative GDP growth (the other country was South Korea). Since then, the private sectors of the advanced countries have collectively de-levered, reducing their debt levels from about 170 to 160 per cent of GDP. Australia, in stark contrast, has levered up. Our private debt to GDP ratio is now more than 20 per cent higher than when the GFC began, and more than 50 per cent higher than in the USA (see Figure 1).  Unfortunately for Australia’s next Prime Minister, there are two catches to this trick. The obvious catch is that getting that much extra demand out of credit necessarily increases debt much faster than it increases income — hence the runaway ratio of debt to GDP shown in Figure 1 — and this can’t go on forever. The less obvious one is that when debt is at stratospheric levels that apply in Australia today, total demand falls even if the debt ratio merely stabilises.

HSBC Cuts Global Growth Forecast, Sees “Helicopter Money” From Central Banks - HSBC lowered its global growth forecast once more, now seeing the world to grow by only 2.3% this year, down from 2.5% previously. In 2015, the world churned out 2.4% growth. The unique feature of this forecast, compared with the trend over the last year or more, is that the bigger downgrade comes from the developed world. HSBC now sees the developed world – U.S., Europe and Japan – to grow by only 1.6% this year, down from 2015′s 1.8% and its previous forecast of 1.9%. Meanwhile, HSBC kept its emerging markets growth forecast relatively unchanged, down to 3.8% from 3.9% previously. This growth number is in line with last year’s 3.8%. Specifically, HSBC sees U.S. to grow 2% this year, versus 2.4% in 2015; Eurozone to grow 1.4% this year, versus 1.5% in 2015; and Japan to grow 0.8% this year, versus 0.5% last year. HSBC kept its China and India forecasts unchanged at 6.7% and 7.4%. In the U.S., “For the most part this reflects weaker-than-expected growth in Q4 – in the US thanks to weaker investment and exports – but we have also shaved our investment outlook for 2016,” wrote HSBC. Monetary policies may be losing their effectiveness, but central banks will continue spinning their wheels and taking riskier and riskier kits out of their toolboxes, simply because they “can’t risk a de-anchoring inflation expectations.” Yes, I am looking at you – ECB and BoJ! HSBC warned that central banks may go further than negative interest rate policies: Even full-blown helicopter money − as opposed to the “light” version currently underway in the eurozone whereby ECB asset purchases simply allows governments to overshoot their budget targets − could be considered. Helicopter money could be the ultimate solution to raise nominal GDP since it increases the total stock of assets held by the public (at least initially) and encourages them to spend. Delivering the optimal split between growth and inflation would be no mean feat though: historical experience suggests the impact on inflation is far from linear. Even if the scale of monetary financing is “managed” carefully enough to prevent hyperinflation, there would still be significant re-distributional effects.

Fearing crash, bond fund Pimco warns off 'helicopter money' | Reuters: One of the world's biggest bond fund managers has urged central banks not to dole out free cash to citizens saying it could lead to hyperinflation, a debt market sell-off and even a banking crash. Such schemes, in which central banks effectively finance government budgets, have been likened to helicopter drops of money. The idea has been around for a while but has re-entered policy-speak as many central banks struggle to stoke growth and inflation via other means. But PIMCO says its research shows that since the late 18th century there have been 56 examples of similar schemes, from France in 1795 to Zimbabwe in 2007, and all have had severe consequences. "This is a place you don't want to go to," said Andrew Bosomworth, head of portfolio management in Germany at PIMCO, which manages $1.43 trillion of assets. "If we look back in the past, it shows that when central banks tried just a little bit of this, it created huge amounts of inflation."

Bring on helicopter drops of money for Europe and Japan, says Capital Economics: Helicopter money - also known as printing money - could be the next monetary tool that European and Japanese central banks turn to as the threat of deflation looms, according to a note from Capital Economics. "Although helicopter money is not yet high on the agenda of any central bank, it is well worth considering," said the note, written by Capital's senior global economist Andrew Kenningham. Mario Draghi, the European Central Bank president, commented last week that "it was a very interesting concept".  The argument is also gathering steam with a number of other commentators, including US hedge fund titan Ray Dalio, Allianz chief economic adviser Mohamed El-Erian, Martin Wolf in the UK Financial Times, and the Wall Street Journal. The term "helicopter money" stems from a scenario envisaged by the late, Nobel-prize-winning American economist Milton Friedman in the 1960s. If banknotes were dumped out of a helicopter, he reasoned, people finding the money would generally spend it and thereby boost consumption. Quantitative easing has also been referred to as "printing money", but the London-based think tank's paper pointed out that the increase in the monetary base is generally temporary under QE. True "printing money", by contrast, involves permanent growth in the monetary base with a more aggressive impact on inflation.

Global Economy Has Taken Some Hits Already This Year ... And It Shows  -This is quite a series of events from Fed President Lockhart. We know that in January and early February, the world's financial markets, including our own, went through an episode of significant volatility. From the first trading day of January, investors appeared to go "risk off" and headed for safety. A number of concerns seemed to gang up on investors: the weak fourth quarter here in the United States, economic weakness globally in advanced economies and emerging markets, the apparent economic slowdown in China, Chinese currency depreciation, and the falling oil price and what that could mean for global demand. We know that an important index that measures financial volatility—the VIX—rose to a level above 28 (a very high reading) on February 11 and has since settled back to a much calmer reading around 15. We know that financial markets here have substantially recovered lost value, but we do not know if the volatility investors experienced and the public observed in January and early February will have any extended impact on the broad economy. We know that on March 5, the government of China stated its GDP growth target for the next measurement period at a range of 6.5 to 7.0 percent. The introduction of a range was interpreted as allowing for lower growth than recorded in the past, reinforcing the sense that China's economy is slowing. We know that the Bank of Japan—Japan's central bank—unveiled a negative rate policy on January 29. Japan joined the eurozone in using negative official rates to spur inflation and growth.We know that on March 10, the European Central Bank deployed Mario Draghi's "bazooka." The ECB pushed its policy rate more into negative territory and took other strong measures in an attempt to pull the eurozone out of its persistent weak state evidenced by very low inflation. Combine that with this chart of global growth from the Dallas Fed

Global dry bulk fleet set to contract significantly this year: Khalid Hashim - Splash 247 - video -  For the first time in living memory the global dry bulk fleet is set to contract significantly this year, Khalid Hashim, the veteran managing director of Precious Shipping, tells Splash TV. Extrapolating annual figures based on statistics through to mid-March, anywhere between 55m to 60m dwt of bulkers could be scrapped this year, while, assuming there is a slippage of 50% in the dry bulk orderbook, Hashim estimates 45m dwt of dry bulk deliveries in 2016. More top names in maritime are set to feature on Splash TV shortly.

Before Her Assassination, Berta Cáceres Singled Out Hillary Clinton for Backing Honduran Coup | Democracy Now! interview and transcript - Former Secretary of State Hillary Clinton is facing a new round of questions about her handling of the 2009 coup in Honduras that ousted democratically elected President Manuel Zelaya. Since the coup, Honduras has become one of the most violent places in the world. Last week, indigenous environmental activist Berta Cáceres was assassinated in her home. In an interview two years ago, Cáceres singled out Clinton for her role supporting the coup. "We’re coming out of a coup that we can’t put behind us. We can’t reverse it," Cáceres said. "It just kept going. And after, there was the issue of the elections. The same Hillary Clinton, in her book, 'Hard Choices,' practically said what was going to happen in Honduras. This demonstrates the meddling of North Americans in our country. The return of the president, Mel Zelaya, became a secondary issue. There were going to be elections in Honduras. And here she [Clinton] recognized that they didn’t permit Mel Zelaya’s return to the presidency." We play this rarely seen clip of Cáceres and speak to historian Greg Grandin.

Brazil Is Engulfed by Ruling Class Corruption — and a Dangerous Subversion of Democracy - Glenn Greenwald - THE MULTIPLE, REMARKABLE crises consuming Brazil are now garnering substantial Western media attention. That’s understandable given that Brazil is the world’s fifth most populous country and eighth-largest economy; its second-largest city, Rio de Janeiro, is the host of this year’s Summer Olympics. But much of this Western media coverage mimics the propaganda coming from Brazil’s homogenized, oligarch-owned, anti-democracy media outlets and, as such, is misleading, inaccurate, and incomplete, particularly when coming from those with little familiarity with the country (there are numerous Brazil-based Western reporters doing outstanding work). It is difficult to overstate the severity of Brazil’s multi-level distress. This short paragraph yesterday from the New York Times’s Brazil bureau chief, Simon Romero, conveys how dire it is: Brazil is suffering its worst economic crisis in decades. An enormous graft scheme has hobbled the national oil company. The Zika epidemic is causing despair across the northeast. And just before the world heads to Brazil for the Summer Olympics, the government is fighting for survival, with almost every corner of the political system under the cloud of scandal. Brazil’s extraordinary political upheaval shares some similarities with the Trump-led political chaos in the U.S.  But one significant difference with the U.S. is that Brazil’s turmoil is not confined to one politician. The opposite is true, as Romero notes: “almost every corner of the political system [is] under the cloud of scandal.” That includes not only Rousseff’s moderately left-wing Workers Party, or PT — which is rife with serious corruption — but also the vast majority of the centrist and right-wing political and economic factions working to destroy PT, which are drowning in at least an equal amount of criminality. In other words, PT is indeed deeply corrupt and awash in criminal scandal, but so is virtually every political faction working to undermine it and vying to seize that party’s democratically obtained power.

Brazil to rescue states, cities as debt costs soar, Barbosa says - Reuters: The Brazilian government, facing the threat of impeachment amid escalating political turmoil, launched on Monday a plan to help stave off a debt crisis among states and municipalities hit by the worst recession in decades and climbing borrowing costs. Finance Minister Nelson Barbosa said at a news conference in Brasilia the plan could cost taxpayers about 37 billion reais ($10.2 billion) within three years, because it would stretch out debt maturities for some liabilities by as much as 20 years and concede grace period on some of them. Regional governments that adhere to the rescue plan will have to streamline expenses, keep spending growth in line or below annual inflation and set aside more of their recurring revenues to fund pensions, Barbosa said. He also called on states and municipalities to endorse the creation of a fiscal responsibility law for them - which would help make their finances sustainable over time.

BRICS Under Attack: The Empire Strikes Back In Brazil -- Despite all the fancy anti-corruption rhetoric, the assault on President Rousseff’s leftist government is the result of a coordinated campaign by business interests tied to Washington and Wall Street. The last decade has seen a remarkable coalescing of non-Western nations in both economic and political partnerships. These multilateral institutions have been championed as alternatives to Western organs of political and economic power such as NATO, the International Monetary Fund, and the World Bank. From the growth of the Shanghai Cooperation Organization to the establishment of the Eurasian Economic Union, China’s “One Belt, One Road” strategy to link much of the Eurasian landmass via trade and investment, and most recently the establishment of the Asian Infrastructure Investment Bank, many have viewed these developments as essential for the decentralization of global power away from the imperial centers of Washington, Wall Street, London and Brussels. But perhaps none of the emerging Global South international groupings has been more promising in terms of both public relations and real economic partnership than that of the BRICS countries (Brazil, Russia, India, China and South Africa).  BRICS countries account for 46 percent of the world’s population – over 3 billion people, as of 2015 – making it the single largest bloc in terms of human capacity among global alliances. The scope of BRICS, combined with its increasing assertiveness as an economic power unto itself, has undoubtedly ruffled a few feathers in Washington and elsewhere in the West.

Switzerland to hand Venezuela oil firm bank records to U.S. - In a widening corruption probe into Venezuela's state oil company by U.S. authorities, Swiss regulators have agreed to provide U.S. prosecutors with records from at least 18 banks relating to the oil firm. The requests for information from two separate U.S. authorities were part of their investigations into alleged money laundering and corruption in connection with the conclusion of energy contracts with Petroleos de Venezuela SA (PDVSA), Switzerland's Federal Office of Justice (FOJ) said on Friday. U.S. authorities say they have traced over $1 billion to a conspiracy involving a Venezuelan magnate who allegedly paid bribes to obtain contracts from PDVSA. They are separately investing representatives of Venezuelan energy company Derwick Associates, which has done business with PDVSA, based on the FOJ's statements. "Within the context of the investigation against representatives of the energy company Derwick, the Attorney for the Southern District of New York has requested on June 4, 2015 the FOJ to gather bank records," FOJ spokesman Folco Galli said, confirming a report by Bloomberg on Thursday. "18 banks are concerned by the measures of mutual assistance."

Chinese Take Over Canada's Real Estate Market, Buy One-Third Of All Vancouver Homes Sold In 2015 | Zero Hedge: Kevin Oke, co-founder of LlamaZoo Interactive, left Vancouver for Victoria two years ago because he couldn’t afford to buy a home in his native city even while earning a generous salary as a lead designer at a video-game company whose clients included Atari and Ubisoft Entertainment SA. Kevin isn't the only one leaving. Vancouver added only 884 net new people age 18-24 last year according to Statistics Canada, and many observers worry the soaring cost of housing will eventually strip the city of its burgeoning tech economy. According to the Greater Vancouver Real Estate Board, residential property sales in Greater Vancouver rose 31.7% in January, 46% above the 10-year sales average for the first month of the year and the second highest January ever. The benchmark price for a detached home in Vancouver: $1,293,700. The benchmark price for an apartment: $456,600. The latest data from the Canadian Real Estate Association shows the average price of a home in Canada rose an astonishing 16% Y/Y last month to more than $500,000.  So what's behind the inexorable rise? How is it possible that "fixer uppers" like the residence shown above go for $2,500,000? It's very simple. Chinese worried about continued market turmoil and a weaker RMB, are moving money out of the country. As CAD slid against USD, Chinese "investors" found Canadian real estate to be comparably priced vis-a-vis US real estate in USD terms. Wealthy Chinese funneled their dollars into the Canadian market, driving up prices. In short: capital flight from China has created a massive housing bubble in cities like Toronto and Vancouver. Throw in the fact that some of these locales - like Waterloo, Ontario - are becoming tech hubs, and you have the recipe for overheating markets.

Trudeau Will Push Canada Into the Red With `Unsexy' Debut Budget-- Prime Minister Justin Trudeau will put the Canadian government back in business when he introduces a debut budget Tuesday that reverses a decade of restraint. Trudeau, whose popularity has swelled since his majority victory in October’s election, will push the country deeper into deficit as it grapples with sluggish economic growth. The shortfall will finance new benefits for families and what the Liberal prime minister bills as “unsexy” infrastructure spending, among other programs. The deficit is expected to be in the range of C$30 billion ($22.9 billion), up from C$2.3 billion in the fiscal year that ends March 31. That amount of red ink will test three decades of fiscal restraint in Canada and underscore the contrast between Trudeau and his predecessors. Stephen Harper, the Conservative who governed from 2006 to 2015, aggressively pursued a balanced budget in recent years while cutting taxes and shrinking the role of government. “We will continue to put more money in the pockets of hard-working families,” Trudeau said in a brief pre-budget statement Monday. “Because we know that when middle-class Canadians have more money to save, invest and grow the economy, all of Canada benefits.”  Trudeau’s move comes amid calls to do more with fiscal policy and take pressure off the Bank of Canada. Governor Stephen Poloz has said policy makers are waiting to assess the impact of budget measures before making a decision on interest rates, which have been on hold at 0.5 percent after two cuts last year to counter the oil-price shock. The prime minister said this month governments need to do more as monetary policy loses its bite and economists are encouraging him to be bold.

It's Official: Canadian Bank Depositors Are Now At Risk Of Bail-Ins -  Earlier today, Canada's new Liberal government unveiled a stimulus budget meant to revive slumping growth with a surge in infrastructure spending and said it would run a deficit nearly three times larger than promised during last year's election. The government projected a C$29.4 billion ($22.5 billion) deficit for fiscal 2016-17 and gave no target date for returning to a balanced budget. This budget broke virtually all pledges the Liberals made before the election, including running just three years of deficits of up to C$10 billion before balancing the books by fiscal 2019-20. "We are seizing the opportunity to invest in people and the economy, and to prepare Canada for a brighter future," Finance Minister Bill Morneau said. What he is really seizing is the Bank of Canada money printer, because in order to monetize this surging deficit, the BOC will soon have to unleash its own QE in the coming months. As Reuters adds, because the Liberals command a majority in the Canadian Parliament's House of Commons, the budget is guaranteed to pass. Which is bad news not so much for the Canadian Dollar, which will certainly devalue in the coming months as the market prices in what a massive surge in deficit spending means although so will all other currencies as the global debasement race accelerates once more in a few short months, but for bank depositors, because deep inside the budget announcement, in the section discussing "tax fairness and a strong financial sector", we have official confirmation that Canada has just become the latest country to treat depositors as the bank creditors they are, and as such, they too will be impaired, or "bailed-in" the next time a Canadian bank needs to be rescued.

It's the global debt, stupid - In today's global economy, following the debt should dispel any complacency about the world economic outlook. According to a recent McKinsey & Company study, seven years after the bursting of a global credit bubble resulted in the worst global financial crisis since the Great Depression, global debt has continued to grow at a troubling rate. In fact, rather than reducing indebtedness, today practically all the world's major economies have higher levels of overall borrowing relative to gross domestic product (GDP) than they did in 2007. Of particular concern has to be the over-indebtedness in key regions of the global economy. Among the more vulnerable of these regions has to be the formerly rapidly growing emerging-market economies, which now account for around 40 percent of world GDP. Since 2008, corporate indebtedness of the emerging market economies has more than doubled to around $23 trillion, which makes that debt market approximately the same size as the U.S. high-yield debt market. More troubling yet, as the Bank for International Settlements keeps reminding us, is the fact that over the past seven years, these emerging-market corporations have increased their indebtedness in U.S. dollar terms by over $3.25 trillion. This makes the emerging market economies particularly vulnerable to crises at a time that their currencies have plummeted and at a time that they are being hit by a major bust in international commodity prices.

Central banks are already doing the unthinkable - you just don't know it: The lords of finance are losing their touch. Institutions which dragged the world from its worst depression since the early 20th century are finally seeing their magic desert them, if conventional wisdom is to be believed. Eight years on the from the Great Recession, voices as authoritative as the International Monetary Fund and the Bank of International Settlements - dubbed the 'central bank of central banks' - have called time on the era of extraordinary monetary policy. Having hoovered up $12.3 trillion (£8.5 trillion) in financial assets and carried out 637 interest rate cuts since 2008, central banks have been stunned back into action in the last six weeks. The Bank of Japan kicked off a new round of global easing with its decision to cross the rubicon into negative interest rate territory on January 29. Eurozone policymakers followed suit earlier this month with a triple whammy of interest rate cuts, €20bn in additional asset purchases a month, and an unprecedented move to allow commercial banks to borrow money at negative rates.The Federal Reserve has also taken its foot off the pedal by slashing its expected interest rate hikes from four a year to just two.  But the new wave of policy accommodation has ushered in fresh panic that monetary policy is suddenly subject to dwindling returns. Instead, talk has turned to governments finally pulling their weight to support the shaky global recovery.

Swiss National Bank Admits It Spent $470 Billion On Currency Manipulation Since 2010 - By now it is common knowledge that when it comes to massive, taxpayer-backed hedge funds, few are quite as big as the Swiss National Bank, whose roughly $100 billion in equity holdings have been extensively profiled on these pages, including its woefully investments in Valeant and the spike in its buying of AAPL stock at its all time high. But while the SNB's stock holdings are updated every quarter courtesy of its informative SEC-filed 13F (we wish the Fed would also disclose the equities it holds courtesy of its Citadel proxy), getting a gllimpse of the flow is more problematic, and involves waiting for the hedge fund's, pardon central bank's annual report. Earlier today patience was rewarded when the SNB filed its 108th annual report, in which it disclosed that it spent CHF 86.1 billion or $88 billion, on current interventions last year, a measure of its efforts to shield the economy from deflation. As Bloomberg reports, SNB President Thomas Jordan and his colleagues have repeatedly pledged to step in to prevent the franc from strengthening. They’ve done so even since they gave up a minimum exchange rate of 1.20 per euro in January 2015 on the grounds the interventions required to sustain it were out of proportion to the economic benefit.

Negative rates earned Swiss central bank 1.2 bln Sfr in 2015 | Reuters: The Swiss National Bank (SNB) earned 1.2 billion Swiss francs($1.23 billion) last year in charges on cash parked with it by commercial banks, it said in its annual report published on Thursday. Since January 2015 the central bank has levied an interest rate of -0.75 percent on deposits above a certain limit, part of the SNB's efforts to discourage banks from holding Swiss francs and thus weaken a currency it describes as significantly overvalued. Deposits with the SNB amounted to 468 billion francs at the end of 2015, 171 billion of which were subject to negative interest rates and thus generated earnings, it said. Currency market interventions are the other main tool the SNB uses to protect Switzerland's export-oriented economy from too great an appreciation of the franc. In its annual report, the SNB also said it purchased 86.1 billion francs in foreign currency last year to influence exchange rates. The SNB last week left interest rates on hold. Any move further into negative territory would have fuelled criticism from banks, insurers and pension funds which have had to pay the deposit charge.

ECB Doing Whatever It Takes Can't Make Euro-Area Banks Lend - The European Central Bank began charging banks interest on deposits in June 2014 to encourage them to lend more to companies and consumers. It hasn’t worked. Deposits at the ECB by euro-area banks in excess of required reserves have jumped sixfold since the introduction of negative interest rates, while lending within the currency bloc has barely budged. Of the 646 billion euros ($730 billion) that banks added in assets during the period, about 85 percent has ended up as deposits at the central bank. One reason banks are paying to keep money idle is a lack of demand for loans in an economy still recovering from a double-dip recession and a sovereign-debt crisis. Another is that banks saddled with bad loans or low capital levels and those in the midst of restructuring are reluctant to increase lending. Even the ECB’s latest offer to pay banks interest on money they borrow from the central bank may not do the trick. “They’re not profitable enough to substantially increase lending, so even the negative rate for lending by the ECB to the banks probably won’t help much,” "It’s not lack of liquidity or its price that’s the problem.” A spokesman for the ECB declined to comment on the impact of policies on bank behavior.Lending to nonfinancial companies and consumers, excluding mortgages, has been stuck at about 6.8 trillion euros since June 2014, ECB data show, despite the central bank’s liquidity programs to encourage more of those loans. Policy makers have looked at those figures when determining how much cheap money to provide lenders. Banks that increase such loans qualify for more funds.

Munich Re Gives The ECB The Middle Finger, Owns Almost 300,000 Ounces Of Gold - Munich Re, one of the largest reinsurance companies in the world, has said it will increase its cash hoard as it doesn’t want to pay a fee to the European Central Bank to store the cash there overnight. This is a first step of a problem we already warned for about two weeks ago. We said that any further reduction in the negative interest rate would have to go hand in hand with banning cash from ‘the streets’. That made a lot of sense, considering people would just start to hoard cash under their mattresses to avoid paying an annual fee to store cash on the bank, and even if people would withdraw just 10 or 15% of their savings from the banks, the entire financial system might implode.  The simple fact Munich Re is planning to store tens of millions of euros in bank notes in its vaults might be the start signal for a very slow bank run. What’s stopping the other insurance companies, or even the bank themselves to just increase the cash position rather than keeping the deposits overnight at the European Central Bank?  We also wanted to find out if the media rumors about Munich Re buying gold were true, but that doesn’t seem to be the case. The total amount of gold on the balance sheet seemed to be rather flattish compared to the previous financial year. According to our calculations, the insurer has approximately 285,000 ounces of physical gold on its balance sheet, and that’s definitely nothing to sneeze at! It’s probably one of the very few financial institutions that is somewhat transparent with regards to its gold position, but we still had to scroll all the way down to page 234 of its annual report to find the disclosed amount of gold.

Banks Say No to Funds From Flagship ECB Policy - As the European Central Bank prepares to deploy new rounds of cheap lending to eurozone banks, the tepid take-up from what’s currently on offer suggests the scheme will provide little relief to the sector. The seventh round of the ECB’s Targeted Longer-Term Refinancing Operation program was launched Thursday, and saw the program’s lowest take-up since it was began in 2014. The TLTRO offers cheap liquidity to banks in exchange for them lending to households and companies. In March the ECB said that starting June, it will offer a new brand of TLTROs at a rate that can go as low as the central bank’s deposit facility—currently at a minus 0.4%. Essentially, the ECB will be paying banks to borrow money. That announcement helped push up the share prices of banks on that day, even as shares across Europe were falling hard. On Thursday, banks were still being offered funds at a zero percent interest rate but they bid for only 7.3 billion euros ($8.21 billion) worth of funds. That’s the lowest take-up since the program’s inception in September 2014. The TLTRO program has disappointed expectations from the start.

Negative Yields Seep Into Shell, Siemens Debt on ECB Distortions -- Royal Dutch Shell Plc and Siemens AG bond yields have dropped below zero, highlighting how European Central Bank stimulus is contorting the region’s credit markets. Traders are quoting yields of minus 0.026 percent on the oil company’s 2.5 billion euros ($2.8 billion) of notes maturing in May 2018, according to data compiled by Bloomberg. Yields on some notes of French drugmaker Sanofi also dropped below zero this week. About 16 billion euros of highly rated corporate bonds are trading with yields below zero as negative deposit rates spur money managers to look for alternative safe places to park cash. Bond prices have also been bolstered by the ECB’s plan to start buying non-bank corporate notes, as policy makers seek to drive investors into riskier or longer-dated debt. “It’s part of the ECB’s very clear message,” . “Take risks -- whether that’s credit quality or maturity -- and help us finance businesses for the longer term.” Siemens’ 1.6 billion euros of bonds maturing in June 2018 yield minus 0.024 percent, according to data compiled by Bloomberg. Sanofi’s 1.5 billion euros of bonds due May dipped below zero for the first time Wednesday and were at 0.02 percent Thursday. The ECB is expanding its bond-buying program to 80 billion euros a month and moving beyond government and covered bonds after crushing yields in these markets. About 2 trillion euros of sovereign bonds yield less than zero, according to data compiled by Bloomberg. In the covered-bond market, Berlin Hyp AG earlier this month sold debt with a negative yield, making it the first non-government issuer to get paid to borrow in the single currency.

Hungary’s central bank cuts key interest rate to fresh low - Hungary’s central bank cut its main policy rate to a record low Tuesday in a surprise move after keeping it steady for seven straight months, in a bid to boost growth and nudge prices higher. The National Bank of Hungary cut its benchmark interest rate to 1.20% from 1.35%. All 12 economists in a poll by The Wall Street Journal expected the central bank to keep rates steady. The benchmark rate was 1.95% at the start of last year and 7.0% in August 2012, before the rate cuts began. Investors and economists will scrutinize the central bank’s statement at 1400 GMT to understand the reasons behind the decision. Central bank Vice Governor Marton Nagy said earlier this month that cuts to the benchmark rate “are very likely this year” and “adjusting” the central bank’s overnight rates would come “soon.” Overnight lending and deposit rates are a major tool for the central bank to manage bank-sector liquidity. As a result of Tuesday’s rate cut, the central bank’s overnight deposit rate has fallen to -0.05% from 0.1% on the money retail banks place with it overnight. Its overnight lending rate, or the amount it charges for lending funds to retail banks has fallen to 1.45% from 2.1%. The midpoint of the asymmetric corridor is the benchmark rate—which is at a 1.20% record low. Putting rate cuts back on the table represents a major policy reversal from the bank’s previous preference for monetary easing through unconventional measures. Most economists had expected Hungary to start cutting its benchmark rate from May onward.

Helicopter Money Takes Flight as Latest Drastic Monetary Idea - After more than 600 interest-rate cuts and $12 trillion of asset purchases failed to move the inflation needle enough, central banks may need to head even deeper into uncharted territory. The way to get the world out of its disinflationary rut could lie in them directly financing government stimulus -- a strategy known as deploying “helicopter money” after a 1969 proposal from Nobel laureate Milton Friedman. Economists at Citigroup Inc., HSBC Holdings Plc and Commerzbank AG all published reports to investors on the topic in the past two weeks, while hedge fund titan Ray Dalio sees potential in the idea. European Central Bank officials are already squabbling about what President Mario Draghi calls a “very interesting concept.” “We don’t know for certain that ‘helicopter money’ will be the next attempted silver bullet, however the topic is receiving considerably more attention,” said Gabriel Stein, an economist at Oxford Economics Ltd. in London. “The likelihood is reasonably high of some form being implemented somewhere.” The theory -- never attempted by a modern major economy -- is to fuse monetary and fiscal policies now both running out of room. Cash-strapped governments sell short-term debt straight to their central bank for newly printed money that is then injected straight into the economy via tax cuts or spending programs. The usual intermediaries, like banks, are bypassed. The idea is to spur spending and investment directly rather than influence bond yields or sentiment. Central banks can be saved from permanently underwriting governments by establishing growth or inflation limits.

Germany's private sector growth holds steady in March on strong services - Growth in Germany's private sector was steady in March, a survey showed on Tuesday, helped by a solid upturn in the services industry that made up for a slowdown among manufacturers suffering from weak foreign demand. Markit's flash composite Purchasing Managers' Index (PMI) , which tracks the manufacturing and services activity that accounts for more than two-thirds of the German economy, remained at 54.1, unchanged from February. That reading was comfortably above the 50 line that separates growth from contraction, as it has been for 35 months. But while growth in services accelerated, manufacturers saw their lowest rise in output since November 2014, with the headline figure of the sub-index dipping to 50.4 from 50.5 the previous month. That slip was largely due to a drop in exports caused by weak demand overseas, Markit chief economist Chris Williamson said. "Maybe we'll see the foreign demand trend reverse itself and, as more stimulus comes through, we'll see the industrial sector pick up again," Williamson added, referring to the European Central Bank's ultra-loose policy stance. He dampened expectations of a quick upturn, saying many of the underlying indicators were telling "a broader story of weakness."

CESifo Group Munich - Ifo Business Climate Index Rises: After weakening for three consecutive months, sentiment among German businesses brightened slightly in March. The Ifo Business Climate Index for German industry and trade rose to 106.7 points in March from 105.7 points in February. Assessments of the current business situation improved, reaching their highest level in six months. After last month’s sharp decline, expectations also recovered somewhat. German businesses are less sceptical than in February.In manufacturing the business climate improved slightly, after last month’s sharp decline. Manufacturers were once again more satisfied with their current business situation. After February’s downturn, business expectations recovered slightly. The improvement in manufacturing was mainly due to consumer goods producers. In wholesaling the business climate index rose. Assessments of the current business situation – already good in February – improved markedly this month. On the other hand, wholesalers’ business expectations remained optimistic, but to a slightly lesser degree than last month. The business climate in retailing showed a clear improvement. Retailers were far more satisfied with their current business situation than in February. Their business expectations also brightened. Construction was the only sector in which the business climate index declined somewhat. Assessments of the current business situation edged downwards from February’s record high. Contractors, however, were slightly more optimistic about the months ahead.

Eurozone Consumer Confidence Down for Third Straight Month - WSJ -- Eurozone consumer confidence weakened for the third straight month in March, amid worries about weaker growth prospects for the global economy which have prompted the European Central Bank to announce a fresh package of stimulus measures. If sustained, the draining of optimism from households threatens to stunt the currency area’s already modest recovery, for which consumer spending has been a main support since the return to growth in mid-2013.  The European Commission Monday said its monthly measure of consumer sentiment across the 19 countries that use the euro fell to minus 9.7 from 8.8 in February, bringing it to its lowest level since December 2014. Economists surveyed by The Wall Street Journal last week had expected a pickup in confidence.  The measure remained above its long-term average of minus 12.8, indicating that consumers don’t yet feel pessimistic about their prospects. The decline of confidence is in line with surveys of business activity, which have pointed to a weakening of growth in the early months of 2016. But official measures of industrial production and construction pointed to a surge in activity during January, while retail sales were also up, leaving it far from clear that the eurozone recovery has started to falter.  The ECB has already concluded that it has indeed begun to stall, and on March 10 its economists cut their growth forecast for this year to 1.4% from 1.7% in December, which would mark a slowdown from the 1.6% expansion recorded last year. ECB President Mario Draghi said that largely reflected “a significant weakening of the global growth prospects.”

Will regulatory cooperation in TTIP become a straight-jacket for EU law making? -- Regulatory cooperation might sound like a relatively benign and straightforward part of trade agreements. It is actually at the very core of TTIP, a trade deal being negotiated between the US and the EU which would be the world’s largest. By aligning regulations, standards, or merely exchanging data, the EU and US are hoping to cut costs for businesses on either side of the Atlantic. If regulatory cooperation were to eliminate redundancies or to lead to more informed decisions, no one would oppose it. But in a previous blog we laid out our worries, shared by many, including national governments and parliaments.  By codifying ‘better regulation’ procedures into a trade deal, the desire to cut costs risks becoming the global norm. The chapter on ‘good regulatory practices’ mirrors the Commissions’ ‘Better Regulation’ agenda. This strategy to cut red tape is – luckily – not set in stone however. It could find itself watered down, or ditched altogether, in the future by the next Commission. But by codifying ‘better regulation’ procedures into a trade deal, the desire to cut costs risks becoming the global norm. That would be bad for EU law-making, as it would subordinate future EU legislation to the principles of TTIP. The US bluntly refuses to share its proposals on regulatory cooperation with the public. Another very problematic provision in the EU’s text is the possibility for “natural and legal persons” to propose “improvements to existing regulatory frameworks”. Only the big corporations will have the ‘evidence’ that measures are too burdensome and should be simplified. A lawyer’s paradise The chapter is also littered with vague, undefined concepts which – within a trade deal – could be misinterpreted in many ways. We counted more than 20 concepts in the latest EU text which were not self-explaining, such as “timely information”, “unnecessarily burdensome” and “pre-normative research”. It will be a lawyer’s paradise.

The EU-Turkey Migrants Deal – At A Glance - WSJ: The European Union and Turkey agreed a controversial migration deal aimed at discouraging refugees from coming illegally into the bloc and thwarting people smugglers. It was hailed by Donald Tusk, the European Commission’s lead negotiator, as a “breakthrough” and the Turkish Prime Minister called it a “success story.” However, several leaders warned​ that the logistical and legal challenges involved could limit its success. Here’s a quick guide to what you need to know. What is the deal about? The European Union is trying to stop the flow of people coming to the continent via Turkey, after more than one million migrants arrived in Germany last year. Ankara has agreed to take back all migrants, including Syrian refugees, who pay smugglers to help them travel to the Greek islands, on their journey to Germany and other affluent European countries. In return, EU countries will take some Syrian refugees−not more than 72,000 this year−directly from Turkey and pay €6 billion ($6.79 billion) for food vouchers, schools and other projects aimed at improving the lives of 2.7 million Syrian refugees currently in Turkey. From Sunday, March 20, migrants who arrive on Greek islands will be returned to Turkey. The first transfers are likely to take place in early April, because each migrant has to be registered, given a chance to file for asylum, have his case heard and possibly file an appeal before being sent back to Turkey. Europe prides itself in being a continent where people fleeing from war can find shelter. But human rights groups say that at the core of the deal is Europe’s desire to keep the refugee problem at its periphery, using two defensive rings: The first, aims to keep everyone in Turkey, and the second, tries to confine those who have reached Greece by closing borders in countries north of Greece to cut off the main migrant trail to Germany which has left tens of thousands of migrants blocked in squalid camps.

EU-Turkey deal: An “army” of EU staff to move to Greece (details) Staff, staff and more staff is needed for the operational implementation of the EU-Turkey deal with regards to sending back refugees and migrants to Turkey. The Commission estimates that Greece will need:  Around 4,000 staff from Greece, Member States, the European Asylum Support Office (EASO) and FRONTEX

  • For the asylum process: 200 Greek asylum service case workers, 400 asylum experts from other Member States deployed by EASO and 400 interpreters
  • For the appeals process: 10 Appeals Committees made up of 30 members from Greece as well as 30 judges with expertise in asylum law from other Member States and 30 interpreters
  • For the return process: 25 Greek readmission officers, 250 Greek police officers as well as 50 return experts deployed by Frontex. 1,500 police officers seconded on the basis of bilateral police cooperation arrangements (costs covered by FRONTEX)
  • Security: 1,000 security staff/army
  • Transport: return from the islands: 8 FRONTEX vessels with a capacity of 300-400 passengers per vessel) and 28 buses
  • Accommodation: 20,000 short-term capacity on the Greek islands (of which 6,000 already exist)
  • Administration: 190 containers, including 130 for EASO case workers

source & more on financial assistance here

Migrant Deal Demands Huge Logistical Undertaking From Greece - WSJ: A controversial and ambitious deal between the European Union and Turkey under which Syrian refugees arriving in Greece will be returned to Turkey comes into effect Sunday. But pulling it off requires Greece to do a huge amount of legal and logistical work within days. Under the pact, migrants and refugees arriving in Greece from Sunday are subject to being sent back once they have been registered and their individual asylum claim processed. The returns to Turkey are set to begin on April 4. In return, the EU would take in up to 72,000 refugees directly from Turkey and reward it with some €6 billion ($6.76 billion) aimed at improving the lives of 2.7 million Syrian refugees currently living in the country. Within the next two weeks, cash-strapped Greece must construct nearly from scratch a functional asylum system, deploy thousands of staff—judges, translators, border guards—on the islands, build shelter and detention facilities for the migrants and organize return operations. An extra 4,000 staff—just over half of which will be provided by the EU—will be based on the Greek islands to manage the process, an effort that has been described as “herculean” by the head of the EU’s executive arm, Jean-Claude Juncker.

Thousands Of "Elated, Wet" Migrants Land On Lesbos, As Refugee "Deal" Fails To Stem Flow -- On Friday, the EU and Turkey came to an agreement on a set of proposals to stem the flow of Mid-East asylum seekers into Western Europe. The focus of the discussions in Brussels was cutting off the sea route to Greece. On the front lines is the Greek island Lesbos where at least half of the 144,000 refugees who have entered Greece in 2016 have landed. More than a million people crossed the Aegean to Greece last year. The new deal between the EU and Turkey calls for Ankara to take back all refugees arriving in Greece by sea after their asylum claims are processed. For every refugee that is sent back, Europe will take refugees directly from Turkey in a kind of one-for-one swap. The point is to discourage people smugglers by effectively making the sea trip pointless. “If returns begin migrants won't want to pay $1,000-2,000 to a smuggler,” Antonis Sofiadelis, head of the coastguard operations on Lesbos explains. As part of the deal, Turkey will also get as much as €6 billion in aid and will have its EU membership application fast-tracked.  In the meantime, the flow continues. “They waved, cheered and smiled, elated to have made it to Europe at dawn on Sunday in a packed blue rubber motor boat,” Reuters writes, recounting the scene on Lesbos as dawn broke on Sunday. Here’s more: The 50 or so refugees and migrants were among the first to arrive on the Greek island of Lesbos on day one of an EU deal with Turkey designed to close the route by which a million people crossed the Aegean Sea to Greece in 2015. Exhausted but relieved, the new arrivals wrapped their wet feet in thermal blankets as volunteers handed out dry clothes and supplies. Reuters witnesses saw three boats arrive within an hour in darkness in the early hours of Sunday. Two men were pulled out unconscious from one of the boats amid the screams of fellow passengers and were later pronounced dead. Twelve boats had arrived on the shoreline near the airport by 6 a.m, a police official said. A government account put the number of arrivals across Greece in the past 24 hours at 875 people.

One million and counting: EU migrant deal has little effect on Greece  -- Greece is bearing the brunt of the migrant crisis. Following the EU-Turkey deal, migrants and refugees attempting to cross the Aegean Sea to Greece now face a multitude of barriers, including patrols by Frontex, NATO and the Greek and Turkish Coast Guards,  The International Organization for Migration (IOM) reports that 144,899 of the 158,361 migrants and refugees reaching Europe since the start of the year have landed in Greece. That represents around 90 percent of the total arrivals since January. The one millionth migrant entered Greece by sea on Saturday (March 19), according to the IOM.  IOM reports the one millionth migrant entered Greece by sea last Saturday. Stamatis Giannisis, the head of euronews’ Greek bureau, sent us the latest figures from the country on Monday, March 21.

  • 50,000 migrants and refugees are currently residing in Greece
  • 13,000 people seeking shelter in the Idomeni camp on Greece’s northern border
  • 5,500 refugees and migrants are on the eastern Aegean islands
  • 14,000 said to be in the greater Athens area
  • 18,000 scattered around mainland Greece from the capital up to the border with the Former Yugoslav Republic of Macedonia
Last week’s EU-Turkey deal, Stamatis says, appears to have done little to halt the flow of new arrivals.

Greek Border Desperation: 2 Refugees Self-Immolate Over 'Concentration Camp' Conditions -- Just days after Greek Interior Minister Panagiotis Kouroumplis compared the nation's refugee camps to WW2 concentration camps, saying "I wouldn’t hesitate to say that this is a modern Dachau," KeepTalkingGreece reports two men poured gasoline on their clothes and set them on fire on Tuesday morning to protest the appalling conditions at Idomeni camp and the closure of the borders. Other refugees who were standing by managed to extinguished the fire and save their lives. But both men suffered injuries and were transferred to hospitals in Kilkis and Thessaloniki, reports the Athens news Agency. With their action, the two refugees reportedly wanted to protest the appalling conditions at Idomeni camp and the closure of the borders. The action triggered tension among the other refugees who stated to chant “Open borders”. Last night another man set poured fuel on his clothes, other refugees were quick to stop him from set himself on fire. Another group of some 50 refugees and migrants demonstrate with a sit-in on the rail tracks. More than 13,000 people of several nationalities and refugee or migrant status insist on staying at Idomeni camp, despite repeated Greek government calls that they should move to “accommodation centers” set by the Greek Army across the country. They hope that the borders to FYROM will open and that they can reach Germany and other countries.

Latest Poll Shows 71% of People Do Not Trust Tspiras; Greeks Want Change in Government - According to a poll by Alco for the “Proto Thema” newspaper, the New Democracy (ND) party is several points ahead of SYRIZA. More specifically, regarding the voting intentions of Greek citizens, ND collects 21.1% against SYRIZA’s 17.3%. The parties that follow are Golden Dawn with 6.1%, ΚΚΕ with 5%, Democratic Allience with 3.6%, Union of Centrists with 2.6%, Independent Greeks with 2.2% and To Potami with 1.8%.  38% of the people who participated in the poll, are interested in the formation of a different government from this Parliament, 21% want new elections, whereas 22% approve of the SYRIZA – Independent Greeks cohabitation. What may be most surprising, is the fact that 81% of the participants think that the government has lost its “moral advantage”. This is proven from the fact that 71% of the participants say that they do not trust PM Alexis Tsipras any more, whereas 84% criticize the government’s performance. In addition, 67% of the people think that the government is making false moves regarding the management of the refugee and migrant crisis, whereas 85% think that there is no more space for additional taxes and pension cuts. Lastly, 72% of the people who were asked, appear pessimistic regarding the country’s situation in the next six months.


Tensions Rise in David Cameron’s Government Over E.U. Vote - The New York Times  With a referendum on Britain’s membership in the European Union fewer than 100 days away, Prime Minister David Cameron faced deepening fissures within his government on Sunday, underscoring the risk that his Conservative Party could be torn apart over the country’s relationship with the Continent. The heightened tensions were exposed late Friday by the resignation of a government minister, Iain Duncan Smith, a former Conservative Party leader who oversaw work and pensions policy in Mr. Cameron’s cabinet. Mr. Duncan Smith, who backs a British exit from the European Union, ostensibly resigned over proposed cuts to welfare payments for people with disabilities. But the government had already signaled that it was reconsidering the cuts because of opposition to them, and Mr. Duncan Smith’s decision to step down was widely seen as a more fundamental break with Mr. Cameron and his No. 2, George Osborne, the chancellor of the Exchequer, who are leading the campaign for Britain to stay in the European Union. Mr. Duncan Smith had been one of six senior cabinet ministers supporting a British exit from the bloc. “This really seems to be about the European referendum campaign,” the pensions minister, Ros Altmann, said in a statement late Saturday. “He seems to want to do maximum damage to the party leadership in order to further his campaign to try to get Britain to leave the E.U.”

Brexit could cause £100bn short-term shock to the economy, warns the CBI The uncertain fate of Britain’s trade relationships in the event of Brexit could knock up to 5pc from the country's GDP and leave us close to recession for several years, according to research commissioned by the CBI business group. Even if the UK can secure a free trade agreement with Europe after a vote to leave later this year, economic growth would be 3pc lower than the country’s expected output within the EU by 2020, the research estimates. The CBI, which has voiced strong support for EU membership, has used the data from PwC to repeat its warning that businesses will be left vulnerable to trade obstacles and a shaky economy outside of the bloc. “The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment. Even in the best case this would cause a serious shock to the UK economy,” said Carolyn Fairbairn, director general of the CBI. If the UK could sign a trade agreement with the EU and other trading partners within five years of the referendum on June 23, PwC estimates that the economy would be 3pc smaller than it would have been within the EU by 2020, amounting to £55bn wiped from the country’s output. This decline would come from lower international trade, a fall in net migration and uncertainty, leaving businesses reluctant to spend. However, the effects would fade over time and by 2030 the country's GDP per head would be 0.8pc behind the pace of growth expected within the EU. Without a trade agreement, the UK could be hit with tariffs under a standard World Trade Organisation deal and output growth could grind to a halt in 2017 and 2018, leaving GDP 5pc lower by the end of the decade, PwC estimates. This amounts to a £100bn short-term shortfall compared to staying within the Union.

Brussels attacks could shift public opinion in favour of Brexit - The Globe and Mail: The bombs that ripped through the Brussels airport and a downtown subway station caused many casualties on Tuesday. One may eventually prove to be Britain’s place in the European Union. The explosions, which struck the city that hosts most of the EU’s institutions of government, came almost three months to the day before voters in the United Kingdom will be asked to decide whether their country should remain inside or leave the EU. London bookmakers raised the odds of a so-called Brexit to 36 per cent, from 33 per cent, on the assumption that the triple bombing in Brussels would make staying in Europe look less appetizing to voters. The pound fell the most among the world’s major currencies on Tuesday, sliding more than 1 per cent against the U.S. dollar, to $1.42, on the same speculation. “Terrorism could break the EU and lead to Brexit,” read a headline on the website of the right-of-centre Daily Telegraph newspaper. A British vote to leave would be a major blow to the 28-member organization. Britain was the second-largest contributor to the EU budget last year. Before Tuesday’s attacks, most of the ferocious debate about Britain’s future revolved around the disputed economics of staying or leaving. But within hours of the first blasts at Zaventem airport, Leave campaigners were seizing on the attacks as evidence that Britons would be safer outside the EU. Prime Minister David Cameron, who wants the United Kingdom to remain in Europe, has argued that Britain is safer as a member of the EU and its joint security institutions such as Europol. That contention is harder to make after the security failures in the EU capital.

Britain's 'Out' campaign leads by 2 percent points ahead of EU referendum: ICM poll - (Reuters) - Support for Britain to leave the European Union stood at 43 percent, 2 percentage points ahead of support for staying in the 28-member bloc, an ICM opinion poll suggested on Tuesday. Three months ahead of the June 23 referendum, the poll of 2,000 people carried out March 18-20 showed the "in" campaign on 41 percent.

Two-thirds of banks fear Brexit, according to UK industry poll  - The majority of banks operating in Britain said they think they would be worse off if the UK leaves the European Union, according to a survey by the leading industry lobby group. The British Bankers Association said that almost 60% of banks that responded to its survey on EU membership had warned that the UK leaving the 28-member state bloc would have a negative impact on their business. Some 26% of the 74 banks which responded also said the impact would be significant. However 31% said they did not have a position on the impact of the UK referendum on EU membership, being held on 23 June. Some 64% of respondents also said their own organisation did not hold a position on whether the UK should remain in the EU. Anthony Browne, chief executive of the BBA, said that the question was a matter for the British people. “Our survey shows there is almost no appetite from banks for the UK to leave the EU. The majority of our members who responded to the survey also think that if the UK were to leave the EU, their business would be harmed. “The single market is of crucial importance to the UK banking industry, which employs over half a million people, contributes over £31bn in tax a year, and is the country’s biggest export industry.

Iain Duncan Smith resignation leaves David Cameron and George Osborne with biggest challenge to their authority yet -- Britain's former Secretary for Work and Pensions, Iain Duncan Smith Reuters David Cameron and George Osborne face the biggest challenge to their authority in six years of power as the Conservative Party descended into civil war over the resignation of Iain Duncan Smith. The former Work and Pensions Secretary launched an attack on the Government’s record on Sunday, claiming the Prime Minister and the Chancellor risked “dividing society” with their approach to public spending cuts. In his first interview since resigning, he accused opponents of a deliberate attempt to “besmirch” him as his former colleague, the pensions minister Baroness Altmann, claimed his decision to resign had been “all about Europe” and that he was condemning policies he had “pushed through” when in office.As a growing number of Conservative MPs lined up to support the former Tory leader, Downing Street dug in, dismissing his claim that, by seeking to cut welfare payments for the disabled while giving higher earners a tax break, the party was at risk of losing its claim to be a One Nation government. The Climate Change Secretary, Amber Rudd, meanwhile, branded her former cabinet colleague “completely wrong” and attacked his “high moral tone”. Mr Cameron was set to give a statement to MPs in the Commons on Monday, in which he was expected to defend the Government's "One Nation" record before answering questions on the row which has thrown his party into crisis.