The poor are getting poorer

The sun rises two days early in Greenland, sparking fears that climate change is accelerating – The sun over Greenland has risen two days early, baffling scientists and sparking fears that Arctic icecaps are melting faster than previously thought. Experts say the sun should have risen over the Arctic nation’s most westerly town, Ilulissat, yesterday, ending a month-and-a-half of winter darkness. But for the first time in history light began creeping over the horizon at around 1pm on Tuesday – 48 hours ahead of the usual date of 13 January.The mysterious sunrise has confused scientists, although it is believed the most likely explanation is that it is down to the lower height of melting icecaps allowing the sun’s light to penetrate through earlier.

 

Fed Foreclosure Proposal Headed to New Consumer Bureau – A controversial Federal Reserve staff proposal that would make it harder for borrowers to prevent foreclosures will likely be punted over to the new Consumer Financial Protection Bureau amid pressure from lawmakers, consumer advocates and civil rights groups. A senior Fed staffer this week announced at a lawyers’ conference that the proposal, which would limit borrowers’ “right of rescission,” won’t move forward at the Fed and will be taken up by the consumer watchdog agency, according to several people who were either at the conference or briefed on the matter. Transferring the rescission proposal from the Fed to the Consumer Financial Protection Bureau may ease some consumer advocates’ concerns. “Even if the rule is not being acted on now, this will still be an issue that will have to be addressed,” “But we’re heartened that we won’t have a change in rescission rules soon that will gut protections from homeowners. That would be a disaster.”
 

Fed’s Rosengren: Two Key Questions about the Economic Recovery – The first question is, what role will housing play in the recovery? … housing has traditionally been an important sector of the economy for generating recovery. … I expect housing will not provide as much support to this recovery as it has in previous ones. My sense is that residential investment, consumer durables, and services related to housing will be less robust than is usual in many recoveries, thus playing a role in what I think will be only a gradual improvement in the economy and employment.  A second key question involves the concerns about Fed actions stoking inflation. … Some observers and analysts have voiced great concern that the nascent economic recovery, combined with the actions of the Federal Reserve that have expanded its balance sheet, will lead to significant inflation. However, Figure 11 [see previous post for similar graph] provides a variety of different measures of core inflation; core CPI, core PCE, trimmed core CPI and trimmed core PCE. It is striking how much all four series have declined. In fact many of these series are at their historical lows.

 Biofuels Production and Magic Bullet Thinking – Using marginal lands not suitable for food crops, 50% of the world’s liquid fuels can be produced, according to U. of Illinois scientists.  Published in the ACS journal Environmental Science and Technology, the study led by civil and environmental engineering professor Ximing Cai identified land around the globe available to produce grass crops for biofuels, with minimal impact on agriculture or the environment. Under any of the projections, Africa has more than one third, and Africa and South America have more than half of the total land available for biofuel production. Thus, the locations of biofuel production potential and demand are not consistent, given that larger fuel demands exist in the US, Europe, China, and India. The transportation of this fuel between continents will cause additional energy consumption. Of special concern is whether the world could even produce enough biofuel to meet demand without compromising food production.
 
QE2 is Working – One goal of QE2 is to raise inflation expectations.  According to the latest Cleveland Fed data on expected inflation, QE2 is doing just that: (Click on figure to enlarge.) Though far from perfect, QE2 should be considered successful on this objective.  Raising inflation expectations is important for two complementary reasons. First, absent any negative productivity shock, higher expected inflation indicates the Fed is also raising expectations of future total dollar spending (that is how the prices will rise).  Higher nominal spending, in turn, means the real economy should be improving too, given sticky prices and excess economic capacity.  Such an improved economic outlook will cause households and firms to increase current spending. Second, higher expected inflation also increases the opportunity cost of holding low-yielding liquid assets like money and treasuries. This will encourage folks to adjust their portfolios away from money and treasuries to higher yielding assets. 
 
Higher Investment Best Way to Reduce Unemployment, Recent Experience Shows – Some economists argue that the efforts now underway to reduce government spending as a share of GDP will have adverse effects on unemployment. This is not what the data show. Consider this chart which shows the pattern of government purchases as a share of GDP and the unemployment rate over the past two decades. (The data are quarterly seasonally adjusted from 1990Q1 to 2010Q3.) There is no indication that lower government purchases increase unemployment; in fact we see the opposite, and a time-series regression analysis to detect timing shows that the correlation is not due to any reverse causation from high unemployment to more government purchases.
 

MSN: Global food chain stretched to the limit – Strained by rising demand and battered by bad weather, the global food supply chain is stretched to the limit, sending prices soaring and sparking concerns about a repeat of food riots last seen three years ago.  Signs of the strain can be found from Australia to Argentina, Canada to Russia. On Thursday, Tunisia’s president ordered prices on food staples slashed and indicated he won’t run for re-election after deadly riots hit the North African country.  The U.N.’s fear is that the latest run-up in food prices could spark a repeat of the deadly food riots that broke out in 2008 in Haiti, Kenya and Somalia. That price spike was relatively short-lived. But Abbassian said the latest surge in food stuffs may be more sustained.

Fed Watch: A Mixed Bag of Data–  Today’s data flow suggests ongoing expansion, but should also send a note of caution. Industrial activity continues to respond to firming demand, but capacity has yet to show solid gains. Firms are still not sufficiently confident, or lack sufficient demand, to justify widespread investment. Similarly, consumer spending continues along its upward trend, although the increase in energy costs are likely constraining the pace of that growth and keeping a lid on consumer confidence. Something of a mixed bag largely consistent with the general consensus view. Start with the better than expected industrial production report, via Bloomberg: Industrial production in the U.S. rose in December more than forecast, boosted by gains in business equipment and home electronics that indicate factories remain at the forefront of the recovery.. I have taken to looking at the capacity data for signs of a solid, self-sustaining recovery. Here we see the most tentative signs of improvement, or at least stabilization
 
 

Flood-Powered Currents, Drifting Fridges, Debris Shut Queensland Harbors – Brisbane, Australia’s third-busiest container port, is among export harbors for coal, cotton, explosives and oil products that remain shut by Queensland’s “raging floodwaters.”  Currents swelled by floods and carrying debris that include “everything from pontoons, to boats, to bins and fridges,” forced the closure of the Port of Brisbane on Jan. 11, Karen Weatherburn, a spokeswoman, said by telephone today. Ship movements at the harbor, 24 kilometers (15 miles) from the central business district of Australia’s third-largest city, won’t resume before Jan. 16.  Six weeks of heavy rain and flooding across the state has killed at least 26 people and left a disaster area bigger than Texas and California combined. The port of Gladstone, about 450 kilometers north of Brisbane, will resume coal loading on Jan. 15 after a rail line affected by the deluge was reopened, Chief Executive Officer Leo Zussino said today.

(Reuters) – Brent crude oil futures ended at the highest level 27 months on Friday as traders raised supply concerns after recent production disruptions in the North Sea and robust Asian demand.In London, ICE Brent crude for February delivery LCOG1 expired and settled up 62 cents, or 0.63 percent, at $98.68 a barrel, the highest close for a front-month Brent contract since Sept. 26, 2008, when prices ended at $103.54. Brent’s premium against the U.S. benchmark West Texas Intermediate CL-LCO1=R rose to $7.14 at the close, from $6.66 on Thursday. In the day’s session, the spread between the two grades widened to as much as $8.24, the widest since Feb. 12, 2009, when it hit $8.73.

Why coal is the fuel of the future – The idea behind ‘clean coal’ is that you find ways to minimise or capture the carbon dioxide – the key ‘greenhouse gas’ – given off when burning coal. Either you burn the coal in such a way that much of the carbon dioxide remains in the ground (‘gasification’), or you catch it then bury it (‘sequestration’) after burning the coal.  But if the problem is that coal is dirty, why can’t we just stop using it? Because, as Fallows points out, it’s impossible to picture an energy future that doesn’t involve coal.  Why not? Because for one thing, it’s a lot more geopolitically convenient than oil. The US has the most coal reserves in the world. Russia, China and India are next. Each of those nations is a leading economic and political power. Each has every reason to favour a secure, indigenous energy source over any other.  We’re also much further away from ‘peak’ coal than we are from ‘peak’ oil. And for another, coal simply provides far more energy than most other sources. Coal-burning plants provide almost half of the electricity consumed in the US. Natural gas is a distant second at around 23%, nuclear is

 
W.Va. Governor Urges State to Embrace Drilling – Acting Gov. Earl Ray Tomblin promised Wednesday night to continue to fight to protect the coal industry and urged state residents to embrace increased natural gas drilling as part of a broader energy production agenda.   Tomblin did not take advantage of his State of the State address to promote his own Department of Environmental Protection’s proposal for wholesale changes in the way drilling is regulated. And the acting governor vowed he would "aggressively pursue" a lawsuit to block Obama administration plans to limit mountaintop removal mining.  Tomblin’s speech drew strong support from lobbyists for the coal and gas industries, but left environmentalists concerned about the direction he’ll take West Virginia
 
 
Steel Output in India May Drop on Australian Floods — Tata Steel Ltd., Steel Authority of India Ltd. and local rivals may cut output and raise prices as floods in Australia disrupt coking coal supplies and boost costs, RBS Equities India Ltd. and Macquarie Group Ltd. said. Stoppages in coal shipments from Queensland state under force majeure clauses are likely to create a shortage in the April-to-June quarter, forcing steelmakers to lower production, RBS Equities analyst Rahul Jain said, without giving estimates. Steelmakers may also raise prices to cover cost increases, said Rakesh Arora, an analyst at Macquarie Group Ltd. in Mumbai. The worst floods in 50 years in Australia’s largest coal exporting region is creating a raw material shortage in India, where steel demand is forecast to grow 10 percent in the year to March 31. “There will be a global shortage of coking coal as no ships are moving from Queensland,”
 
Chicago gas prices soar to highest in country  Chicago ranked No. 1 for high gas prices in a recent survey. According to the Lundberg Survey , the highest gas price in the country, $3.35, was recorded in Chicago, while the national average was just $3.08. On Jan. 8, a leak found in the 800-mile Trans Alaska Pipeline forced owners BP PLC, ConocoPhilips, Exxon Mobil Corp. and Koch Industries Inc. to shut it down indefinitely. The pipeline carries about 15 percent of the crude oil produced in the U.S. Experts also cite increased oil demand from China, and diminished supply from both Alaska and Canada for the high prices.    And a recent equipment fire at Canadian Natural Resources Ltd. is particularly problematic for the Midwest, which gets much of its fuel from Canada, said Chicago energy analyst Phil Flynn.
 
A Step Toward Car Fuel From Wood Waste – A federal law requires companies that produce gasoline to blend in 250 million gallons of cellulosic ethanol this year, but the Environmental Protection Agency reduced that quota to a more realistic six million gallons.  On Thursday, however, one of the many companies working toward commercial production, the Mascoma Corporation of Lebanon, N.H., said it had reached an agreement with Valero, the nation’s largest independent oil refiner, under which Valero would take the entire output of a commercial plant that Mascoma is to break ground on this year in Kinross, Mich. It is the first such “offtake” agreement in the industry, Mascoma said. The plant is supposed to be running by 2013.
 
Sudan partition poses challenges for China – The looming partition of Sudan after this week’s independence vote in the south poses challenges for China, which faces dependence for nearly five percent of its oil imports on a new country long suspicious of its ties with Khartoum. A full 80 percent of the oilfields in Sudan, which the state-run China National Petroleum Corporation (CNPC) has pumped billions of dollars into developing, lie in the south.  Beijing’s arms deals with the Khartoum regime and its dogged defence of it in international forums have resulted in the former rebels who are set to lead the new state having much closer relations with Western countries that provided aid during the 1983-2005 civil war and spearheaded efforts to end the conflict
 
Peak oilers still blind to economic reality – But the problem is that, as Tom Bowers makes clear in his excellent book Oil, peak oil theory is being factored in to the price of oil by the traders who set the price. In the 1990s, these traders broke the OPEC cartel wide open and pushed oil down to $10 a barrel. Today, they are driving up the price of oil at least in part because they believe in peak oil. It;s no surprise that they should listen to the engineers rather than the economists – they are interested in where the oil is coming from and when, not the end use to which it is put. Yet that decision is having wide-ranging consequences for the rest of us.
 
The Anti-Regulators Are the "Job Killers" The new mantra of the Republican Party is the old mantra — regulation is a "job killer." It is certainly possible to have regulations kill jobs, and when I was a financial regulator I was a leader in cutting away many dumb requirements. But we have just experienced the epic ability of the anti-regulators to kill well over ten million jobs. Why then is there not a single word from the new House leadership about investigations to determine how the anti-regulators did their damage? Why is there no plan to investigate the fields in which inadequate regulation most endangers jobs? While we’re at it, why not investigate the areas in which inadequate regulation allows firms to maim and kill. This column addresses only financial regulation.
 

China sets goals to reduce emissions of pollutants – China said Friday it would cut emissions this year by rejecting construction projects that pollute too much and developing new technologies that curb greenhouse gases. The Ministry of Environmental Protection set a target to cut emissions of major pollutants such as sulfur dioxide, ammonia nitrogen and nitrogen oxide by 1.5 percent in 2011 compared to last year, a report on the ministry’s website said. China is the world’s largest polluter, with energy demands growing sharply every year. The consumption boom reflects the country’s transformation from a nation of subsistence farmers to one of workers increasingly trading bicycles for cars and buying energy-hungry home electronics.

Debt Limit a Worry at House GOP Retreat – Much of the talk today at the retreat for GOP House members in Baltimore is about raising the debt ceiling, a difficult vote that Republicans will face within a few months. “We’ll see what that vote looks like, but right now everybody’s sending a cautionary tone that we’re worried about making the vote, that’s not what the election was about last November,” Rep. Tom Rooney (R., Fla.) said during a break in the closed-door sessions. Republican leaders say they recognize the debt limit must be raised to reassure the markets and the public that the U.S. will honor its obligations. At the same time, many GOP freshmen are skittish about the politically sensitive vote. Republicans say the only way they’ll pass the increase is by packaging it with significant spending cuts. But there is no agreement yet on what those cuts should be.
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