Sunday, November 13, 2011

oklahoma fracking quakes & other notes, week ended nov 12th

there werent any headline economic reports i normally cover this week, and the few reports that did come out showed little surprising, except for a new post recession high in exports...& there's not much certain out of the supercommittee which has been charged with conceiving a ten year budget plan, either, but we should watch what happens there closely this coming week, because there's only 11 days left for them to agree on a recommendation for cutting the deficit by $1.2 trillion, or else the automatic "sequestered" cuts kick in starting in fiscal 2013...and since the CBO (Congressional Budget Office) must score whatever plan they propose, ie, provide an official estimate of how much the plan would change the deficit, before it can be voted on, that length of time is even shorter, especially if new elements are introduced that the CBO hasnt previously figured on...it is this timeframe that makes the cuts to social security COLA by changing the inflation measure used, which we discussed previously, even more likely to be included, because that was scored by the CBO when it was first introduced...and there's another glitch in the schedule; the debt limit deal which created the supercommittee ruled that these committee members must have 48 hours to look at any proposal before voting on it...

at any rate, a small piece of legislation which was introduced as part of the obama jobs act did manage to pass this week; the tax break for companies that hire unemployed veterans; the legislation would give companies a $5,600 tax credit for each veteran they hired who had been unemployed for at least 6 months, with a smaller tax credit for hiring vets who had been jobless for less than six months; there were no votes against it in the senate, since no one wanted to be on record as against employing vets on veterans day, and unlike demands associated with other jobs packages, no one demanded offsetting spending cuts...there are still parts of the obama bill which have not received much attention; the payroll tax cut of 2% for 2011, which was initiated in the mcconnell-obama deal last december, will expire on december 31st; obama had proposed increasing it, but if no action is taken, that extra 2% will come out of everyones paycheck except for those who make more than $110,100, who will only be taxed up to that limit...the extension of unemployment rations will also expire at year end; without that, the time one will be able to be unemployed before being cut off will reduced to 26 weeks...when this was renewed last year, we discussed that because massive layoffs started at the end of 2008 and continued thru early 2009, a number of long term unemployed would run out of rations even with the 99 week extension, but that's been below my radar since; this week it was reported that it's worse than we expected; most of the unemployed no longer receive weekly checks at all; those still on rations now only number 48% of the 14 million who are unemployed; if the emergency rations expire, another 2 million would be cut off, the ratio of the unemployed receiving rations would be even lower, & poverty & homelessness would likely increase...

11-7-11pov2[2] after much criticism over the method used over the past 50 years to compute poverty in the US, the census bureau released new poverty figures which corrected the count to allow for such safety net payments as unemployment comp, food stamps and the like...what makes the new report especially interesting was an attempt last week by 3 NYTimes reporters to front run the report with a story about how poverty wasnt really as bleak as had been previously reported, & showing how new calculation methods would produce much lower poverty figures...but when the census bureau finally released its report (PDF), the new numbers left mud on the NYT reporters faces, as the total number of people living in poverty America is now higher than the previous simple computation had showed, because the new supplemental measure does not just take into account the positive effects of tax credits and the safety net programs, it also calculated the negative effects of childcare costs, out-of-pocket medical costs, geographic differences and the country's overall standard of living...so, according to the old method, the official poverty rate in 2010 was 15.2%, with the new statistical adjustments it's now up to 16.0%... the new supplement does show a lower percentage of children living in poverty, but that's offset by an even larger number of senior citizens who've fallen below the poverty line...the adjacent chart, from the Center on Budget and Policy Priorities, which should enlarge, uses a different definition of poverty, but gives you a picture of the impact of the safety net programs, many of which have been under attack in congress, on the overall level of poverty in the US…

in a similar vein, a Brookings report on the Pew Economic Mobility Project (EMP) put to test the theory that anyone can rise above their birth status if they just work hard enough at it; covered in a long article in the National Review, it showed that while 60% of the last generation who were born into the upper class remained there into adulthood, only 17% of those born into the bottom one fifth made it to the top two/fifths by the time they were 40...so if you want to do well in this country, you best pick the right parents...last sunday i posted a table resulting from a study by the german bertelsmann stiftung foundation comparing the OECD countries by their social justice scores; the title i used tells the story: we’re (not quite) at the bottom of the heap...

the new september CoreLogic home price index was out this week, and not being seasonally adjusted it showed a second straight month over month decline of 1.1%; this is a weighted index 3 month index used by the Fed where the most recent month counts heaviest...compared to the same month last year year, prices have fallen 4.1%, and they're expected to fall through the winter months as they normally do...according to a quarterly report released by Zillow this week, 28.6% of homeowners with mortgages now owe more on their loans than their homes are worth; according to a CNBC article on that report, half of US homeowners now have "effective" negative equity, meaning if they attempted to sell their house, the amount realized after real estate fees & the like would be less than the amount they still owe...TransUnion reported that the number of serious mortgage delinquencies is now higher than any time since 2009; 5.88% of homeowners have now missed two or more house payments...according to RealtyTrac, there was also an 7% increase in foreclosure activity in october over september's count; it's now at the highest level it's been in 7 months; however, in Nevada, where they passed a law effective October 1 that made it a felony to falsify a real estate title, foreclosures fell 88%...foreclosures also fell from triple digits per day to single digits after a similar law in new york was implemented, where attorneys are now required to verify the accuracy of documents they submit to the court...

we're still watching developments in the proposed multistate mortgage settlement which would release the banks from claims against them for all that fraud; according to the latest, the 16 banks that do mortgage servicing who've been guilty of submitting up to 10,000 false affidavits per month would pay fines of 5 billion, write down $20 billion of the approximately $700 billion of underwater mortgages, and promise to never do it again...in exchange, they would receive immunity from all servicing claims, all mortgage origination claims including discrimation, & a release of all MERS-related claims, leaving the shell corporation MERS, which has no assets, as sole defendant for MERS related lawsuits...

you may have heard on the news that there were a few large earthquakes in oklahoma over the past weekend...normally, i dont pay much attention to quakes, but this roused my curiosity because i knew that oklahoma was one of the areas where there were shale gas plays being worked by hydraulic fracturing, more commonly known as fracking...initial reports dismissed the connection, but since i knew that fracking had been previously identified as a cause of minor earthquakes in blackpool england, and swarms of small quakes in arkansas, i did some digging for more information...reports had the 5.6 quake, the largest in oklahoma history, at a depth of 3 miles, and searching the woodford shale, which is the shale formation where gas is being extracted in the area, i found "The Woodford Shale is considered to be one of the most important ...  and ranges in depth from 13000 to more than 40000 ft (estimated)." (pdf)... further checking the USGS record, i found there were 15 quakes over 3.0 magnitude about 5km deep in the same area in a 24 hour period...in fact, over a 4 day period, more than 1/4 of the worldwide earthquakes over 2.5 on the USGS record were in Oklahoma at the same depth, with large aftershocks continuing....obviously, all this activity didnt go unnoticed, & others started asking questions, & by the end of the week there were reports that both the USGS & the US Army had confirmed man made earthquakes associated with injecting water into deep rock formations; AP also reported Oklahoma had only experienced about 50 earthquakes a year before fracking, but last year there were 1,047 small quakes in the area...some of you are quite familiar with fracking, but for those who arent, fracking is the process of injecting millions of gallons of water, sand and chemicals into wells at extremely high pressure in order to break up deep rock formations that have gas or oil trapped in them...it's not a new process, but it's now become common in the US where most of our easy to get to domestic oil reservoirs are depleted...there are several environmental concerns associated with the practice; first, it takes copious amounts of water (about 5 million gallons per well, with thousands of wells per field), which becomes polluted by the hundreds of chemical additives, including some which are toxic, known carcinogens, or neurotoxins...inadequate water alone has inhibited fracking in some dry western states, and water must be trucked in from the Missouri river to work the bakken oil shale in north dakota (no link; request bakken water study from my files)...there have been dozens of reports of the pollutants reaching home water supplies, and small streams in pennsylvania, where some civil war era disposal rights are grandfathered in; even this week there was a SciAm article on one such incident in Pavillion, Wyo, where wells for 42 homes were poisoned...moreover, some home water supplies have been contaminated by the methane gas itself, such that water coming out of the tap is actually flammable...it is because of these problems that fracking has been banned in france, and moratoriums on it put in place in South Africa and New South Wales Australia...although fracking was originally exempted from US regulation in 2005, the EPA has recently agreed to reopen an investigation into its impacts on water quality...in addition, significant amounts of methane gas escape into the atmosphere during fracking operations, and as methane is 25 times as potent a heat-trapping gas as CO2, but 72 times more potent over 20 years, using gas from fracking could have twice as potent a near term affect on the climate as burning an BTU equivalent amount of coal...although it would seem that blasting large portions of the bedrock into tiny fragments might be the cause of the earthquake problems, it is not the fracking itself that is implicated in earthquakes, but rather the common practice of injecting the contaminated spent frack water into disposal wells far underground; this water is thought to seep through cracks in the bedrock and lubricate previously dormant faults where pressure had been building; then, once one fault breaks, adjacent rock formations have pressure applied  from the shifting, resulting in the quake swarm phenomena that has been observed...according to a new report by Common Cause, the petrochemical industry has pumped millions of dollars into Congress to avoid regulation of fracking, and this past week CNBC obtained audiotapes of an industry conference in houston where it was recommended to oil & gas execs that they hire former military “psy ops” specialists to plan tactics against citizen "insurgencies"...

it was also another busy week in europe, with prime ministers in both greece & italy stepping down & being replaced, and europe still unable to fund their trillion dollar bailout fund in order to make sure the bankers get paid; there’s a hundred or so links on the euromess included in this week's blogpost, most of which relate to european politics, so if you want the entire play by play you'll have to go to the last quarter of the post to find them...

the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me

 


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