Iraq's Northern Pipeline which has a capacity of 400,000 - 500,000 B/D and ships to the Turkish port of Ceyhan was bombed by unknown parties on Saturday. The story was only sparcely mentioned in the mainstream media but did get covered by the Iraqi news service which put out the following release:
Iraq to resume pumping oil from Kirkuk towards Ceyhan today
Tuesday, December 22, 2009 08:51 GMT
Iraq's deputy oil minister Abdul Karim Al Luaibi said that Iraq expects to resume oil exports from Kirkuk to Turkey today. The pipeline was shut Saturday by sabotage, he added. Earlier on Saturday, Kirkuk oil flow towards Ceyhan Turkish port was halted. It is to be noted that November flow rate was of 404000 barrels per day.
إقرأ هذا المقال باللغة بالعربية
Apparently the pipeline is already repaired and ready to resume shipments. This shows just how easily pipelines are repaired and why the Nigerian attack last Saturday (the same day) was not a big deal.
Zerohedge has a piece on the pipeline story which I've included below. It is covered in their usual conspiratorial fashion. I think their suggestion that the PKK might be behind the bombing is misplaced. The pipeline benefits the Iraqi Kurds and it appears unlikely that the PKK would do anything to hurt their Iraqi compatriots. "Dead Enders" (i.e. former Bathists from Saddam Hussein's regime), Sunni militants or Iranian agents are more likely culprits. The outage was so short that it is unlikely to have any impact on the crude market although this is the first time that the Northern pipeline has been bombed in quite a while so this could be important if it is a sign of things to come.
Here is the ZeroHedge story:
The Real Iraqi Crude Story (Hint: It Ain't Iran)
Submitted by Marla Singer on 12/22/2009 09:55 -0500
Crude European Union Exports hedge Iran Iraq Media Oil Turkey United States Wrong Zero Hedge
Sadly, media misfeasance (or malfeasance) has become such a common experience that it begins to look like a go-to story on Zero Hedge during slow news cycles. All we can say is that despite its increasingly droll repetition, we think media degradation in all its forms an important issue. So when, just for instance, the mainstream media jumps all over the Iranian "invasion" of Iraq to seize oil wells, despite the fact that the seizure of the well itself is only one of a rather unremarkable series of similar incidents in exactly the same disputed area going back years, and at the same time totally ignores the much more serious news of terrorist attacks on Iraqi pipelines that actually halt about 400,000 barrels per day of crude flow, well, we are just not that surprised anymore. One has to go to Alsumaria, Iraq's satellite channel, to find this story today:
Iraq's deputy oil minister Abdul Karim Al Luaibi said that Iraq expects to resume oil exports from Kirkuk to Turkey today. The pipeline was shut Saturday by sabotage, he added. Earlier on Saturday, Kirkuk oil flow towards Ceyhan Turkish port was halted. It is to be noted that November flow rate was of 404000 barrels per day.
This particular bit of oversight cannot simply be explained away by the lack of a compelling narrative either. The area in question is known for its friendly refuge for the activities of the Kurdistan Workers' Party (hereinafter the "PKK"). Yes, the same separatist (and if you adopt the definition used by the United States, Canada, the European Union, Iraq, Iran, Syria and, of course, Turkey also "terrorist") PKK that gives Turkey fits. One would think that the PKK's potential involvement in the (apparently effective) sabotage of oil assets in the region, or at least the sabatoge in a region known for PKK activity, on a Turkish conected pipeline would be worth noting, particularly where a pipeline cut disrupted serious pipeline flows for days. One would think wrong.
Tuesday, December 22, 2009
Monday, December 21, 2009
Extremely cold weather in Europe and the US
We've had extremely cold weather in both Northern Europe and the Northeast of the US over the past week. Both of these regions are heavy users of heating oil so continued cold could drive a spike in distillate/heating oil demand. Even though product stocks are currently very high the US, a cold winter could draw them down very quickly and lead to a midwinter spike in crude prices. We should all keep an eye on the weather forecasts as they may create a bullish spark for oil.
Here is an AFP article on the cold weather in Europe. Natural gas supplies appear to be adequate but this must be bullish for fuel oil demand.
Big freeze kills at least 80 across Europe
AFP – A postman rides his bike in the snow covered Amsterdam, The Netherlands. The death toll from winter storms … Mon Dec 21, 4:28 pm ET
PARIS (AFP) – The death toll from winter storms across Europe rose to at least 80 on Monday as transport chaos spread amid mounting anger over the three-day failure of Eurostar high-speed trains.
With tens of thousands stranded by the cancellation of London-to-Paris trains and hundreds of flights across the continent, new accidents and mass power cuts added to the big freeze tumult.
A car veered off an icy road and knocked concrete onto rails, derailing a Paris commuter train and injuring 36 people, police said. Three hundred people had to be evacuated from the train.
Another train in the Croatian capital Zagreb hit a buffer injuring 52 people.
Croatian investigators blamed the minus 17 degrees Celsius (1.4 Fahrenheit) temperatures for a brake failure, national television reported. European temperatures as low as minus 33.6 degrees Celsius (minus 28.5 Fahrenheit) have been recorded in Bavaria.
In Poland, authorities said 42 people, many of them homeless, had died of cold over three days after temperatures plunged to minus 20 degrees Celsius (minus four Fahrenheit).
Ukraine reported 27 deaths while six people were killed in accidents in Germany and three in Austria.
France has reported at least two deaths of homeless people, and the national power company briefly cut electricity to two million people on Monday saying it was necessary to avoid an even bigger blackout amid surging demand.
More flights were cancelled in France, Germany, the Netherlands, Portugal and Spain and main highways were blocked across Europe where some regions had more than 50 centimetres (20 inches) of snow.
The breakdown of the Eurostar service under the Channel, linking London with Paris and Brussels, has symbolised Europe's suffering.
After the nightmare of more than 2,000 people stuck in the tunnel when five trains broke down Friday, tens of thousands more people have missed trains cancelled since then, with Eurostar announcing a "restricted" service for Tuesday.
Eurostar to restart some services
But those trains will only run for passengers originally due to travel Saturday or Sunday, with the remainder of the backlog to be cleared over the next few days. Normal service is not expected to resume before Christmas Day.
The French transport ministry has ordered an investigation into the breakdown, which Eurostar said has been caused by trains unable to handle the change from freezing temperatures outside to warm temperatures in the tunnel.
Eurostar said it had launched its own independent review.
The winter storms caused other disruption across Europe.
Air traffic was again badly hit as temperatures remained glacial: minus 20 degrees Celsius in Sibiu in Romania, where more than 50 centimetres of snow fell, and minus seven Celsius in Venice, Italy.
Seven hundred people spent the night on camp beds at Amsterdam-Schipol airport and more flights were cancelled after dozens were grounded Sunday.
The Dutch rail network was also badly hit with the railway company advising commuters to stay at home.
Heavy snowfall led to more delays and cancellations at Frankfurt and Duesseldorf airports in Germany, where more than 500 flights were cancelled or redirected on Sunday.
Twenty percent of flights out of Paris-Charles de Gaulle were cancelled Monday. The main RER commuter train line running east to west across the Paris region has been out of action for 12 days because of a strike.
Spanish civil aviation authorities said 174 flights from Madrid-Barajas airport were called off. Flights from Lisbon to Madrid were among those hit while main roads in northern Portugal were cut by snow.
Brussels airport also reported cancellations and delays.
After more snow falls on Moscow, authorities sent out 13,000 dump trucks to clear the streets as chronic traffic jams built up.
In Britain, more airport delays hit passengers while snow forced the postponement of Wigan's English Premier League football match against Bolton Wanderers.
Here is an AFP article on the cold weather in Europe. Natural gas supplies appear to be adequate but this must be bullish for fuel oil demand.
Big freeze kills at least 80 across Europe
AFP – A postman rides his bike in the snow covered Amsterdam, The Netherlands. The death toll from winter storms … Mon Dec 21, 4:28 pm ET
PARIS (AFP) – The death toll from winter storms across Europe rose to at least 80 on Monday as transport chaos spread amid mounting anger over the three-day failure of Eurostar high-speed trains.
With tens of thousands stranded by the cancellation of London-to-Paris trains and hundreds of flights across the continent, new accidents and mass power cuts added to the big freeze tumult.
A car veered off an icy road and knocked concrete onto rails, derailing a Paris commuter train and injuring 36 people, police said. Three hundred people had to be evacuated from the train.
Another train in the Croatian capital Zagreb hit a buffer injuring 52 people.
Croatian investigators blamed the minus 17 degrees Celsius (1.4 Fahrenheit) temperatures for a brake failure, national television reported. European temperatures as low as minus 33.6 degrees Celsius (minus 28.5 Fahrenheit) have been recorded in Bavaria.
In Poland, authorities said 42 people, many of them homeless, had died of cold over three days after temperatures plunged to minus 20 degrees Celsius (minus four Fahrenheit).
Ukraine reported 27 deaths while six people were killed in accidents in Germany and three in Austria.
France has reported at least two deaths of homeless people, and the national power company briefly cut electricity to two million people on Monday saying it was necessary to avoid an even bigger blackout amid surging demand.
More flights were cancelled in France, Germany, the Netherlands, Portugal and Spain and main highways were blocked across Europe where some regions had more than 50 centimetres (20 inches) of snow.
The breakdown of the Eurostar service under the Channel, linking London with Paris and Brussels, has symbolised Europe's suffering.
After the nightmare of more than 2,000 people stuck in the tunnel when five trains broke down Friday, tens of thousands more people have missed trains cancelled since then, with Eurostar announcing a "restricted" service for Tuesday.
Eurostar to restart some services
But those trains will only run for passengers originally due to travel Saturday or Sunday, with the remainder of the backlog to be cleared over the next few days. Normal service is not expected to resume before Christmas Day.
The French transport ministry has ordered an investigation into the breakdown, which Eurostar said has been caused by trains unable to handle the change from freezing temperatures outside to warm temperatures in the tunnel.
Eurostar said it had launched its own independent review.
The winter storms caused other disruption across Europe.
Air traffic was again badly hit as temperatures remained glacial: minus 20 degrees Celsius in Sibiu in Romania, where more than 50 centimetres of snow fell, and minus seven Celsius in Venice, Italy.
Seven hundred people spent the night on camp beds at Amsterdam-Schipol airport and more flights were cancelled after dozens were grounded Sunday.
The Dutch rail network was also badly hit with the railway company advising commuters to stay at home.
Heavy snowfall led to more delays and cancellations at Frankfurt and Duesseldorf airports in Germany, where more than 500 flights were cancelled or redirected on Sunday.
Twenty percent of flights out of Paris-Charles de Gaulle were cancelled Monday. The main RER commuter train line running east to west across the Paris region has been out of action for 12 days because of a strike.
Spanish civil aviation authorities said 174 flights from Madrid-Barajas airport were called off. Flights from Lisbon to Madrid were among those hit while main roads in northern Portugal were cut by snow.
Brussels airport also reported cancellations and delays.
After more snow falls on Moscow, authorities sent out 13,000 dump trucks to clear the streets as chronic traffic jams built up.
In Britain, more airport delays hit passengers while snow forced the postponement of Wigan's English Premier League football match against Bolton Wanderers.
Sunday, December 20, 2009
MEND sends a warning to the Nigerian Government
MEND attacked what it claimed was a "major" pipeline this weekend as a "warning" to the government about delays in negotiations. This attack was the first since MEND declared a ceasefire back in late September. MEND claims this attack is a "warning" due to delays in peace negotiations due to the ill health of Nigeria's president and that it will review its current ceasefire in 30 days if negotations don't move ahead.
While in the past this would have been very bullish for oil, the attack showed the current weakness of MEND (Movement for the Emancipation of the Niger Delta) which has been stung by multiple defections after the Nigerian government offered concessions and some revenue sharing for the Niger delta region. Instead of a bold attack against a major production facility, offshore platform or army barracks MEND chose to bomb an oil pipeline. While this is an easy target as pipelines are almost impossible to defend, it also does little damage as pipelines are easily repaired. The fact that MEND (Movement for the Emancipation of the Niger Delta) kicked off its new campaign with a pipeline attack by a small group of militants is a sign of weakness and is a far cry from the MEND attacks which crippled Nigerian oil production in 2006 and 2007.
Below is a press article with background and a press release by MEND.
The Movement for the Emancipation of the Niger Delta blamed the resumption of the attacks on the suspended peace talks due to President Umaru Yar'Adua's absence.
Gilbert Da Costa | Abuja 19 December 2009
The rebel group responsible for most of the attacks in Nigeria's oil producing region says it destroyed a major crude pipeline in "a warning" strike early Saturday. The Movement for the Emancipation of the Niger Delta (MEND) says 35 of its fighters, armed with assault rifles and heavy machine guns raided an oil facility jointly operated by Royal Dutch Shell and Chevron in Rivers state.
The group met with President Umaru Yar'Adua last month at the start of peace talks. But the process has been stalled by Mr. Yar'Adua's absence from Nigeria in the past few weeks. The Nigerian leader is receiving medical treatment in Saudi Arabia for a heart condition.
A statement by MEND said "a situation where the future of the Niger Delta is tied to the health and well-being of one man is unacceptable." The group says it may review an indefinite cease-fire it declared after 30 days.
The Catholic bishop of the Niger Delta town of Bomadi, Hyacinth Egbegbo, is urging the militants to stay calm saying only a negotiated peace can bring lasting stability to the troubled oil-rich region.
"Let us go for peace, not for any more struggles," said the bishop. "Armed struggle is not going to be in favor of any Nigerian. So let us sit down at the table and see that we resolve these problems amicably. I appeal to the boys to take their guns away from the dialogue that is being initiated by the government. Because dialogue with guns is not dialogue. So let us put the guns aside and speak words of wisdom to each other so that we can come to a more amicable solution to the problem."
The militant group, which says it is fighting for a fairer share of the region's oil wealth, crippled daily oil production with series of attacks on oil facilities and personnel since early 2006.
But MEND has been severely weakened since dozens of its field commanders and thousands of gunmen accepted President Yar'Adua's amnesty offer and disarmed.
The Niger Delta remains a stronghold for gangs and militant groups with strong opposition toward foreign oil companies and the government.
Security analysts say the oil industry remains vulnerable to opportunistic attacks, crude oil thefts and kidnappings. Nigeria plans to offer inhabitants of the Niger Delta an extra 10 percent in oil and gas revenues in a bid to end the rebellion.
While in the past this would have been very bullish for oil, the attack showed the current weakness of MEND (Movement for the Emancipation of the Niger Delta) which has been stung by multiple defections after the Nigerian government offered concessions and some revenue sharing for the Niger delta region. Instead of a bold attack against a major production facility, offshore platform or army barracks MEND chose to bomb an oil pipeline. While this is an easy target as pipelines are almost impossible to defend, it also does little damage as pipelines are easily repaired. The fact that MEND (Movement for the Emancipation of the Niger Delta) kicked off its new campaign with a pipeline attack by a small group of militants is a sign of weakness and is a far cry from the MEND attacks which crippled Nigerian oil production in 2006 and 2007.
Below is a press article with background and a press release by MEND.
The Movement for the Emancipation of the Niger Delta blamed the resumption of the attacks on the suspended peace talks due to President Umaru Yar'Adua's absence.
Gilbert Da Costa | Abuja 19 December 2009
The rebel group responsible for most of the attacks in Nigeria's oil producing region says it destroyed a major crude pipeline in "a warning" strike early Saturday. The Movement for the Emancipation of the Niger Delta (MEND) says 35 of its fighters, armed with assault rifles and heavy machine guns raided an oil facility jointly operated by Royal Dutch Shell and Chevron in Rivers state.
The group met with President Umaru Yar'Adua last month at the start of peace talks. But the process has been stalled by Mr. Yar'Adua's absence from Nigeria in the past few weeks. The Nigerian leader is receiving medical treatment in Saudi Arabia for a heart condition.
A statement by MEND said "a situation where the future of the Niger Delta is tied to the health and well-being of one man is unacceptable." The group says it may review an indefinite cease-fire it declared after 30 days.
The Catholic bishop of the Niger Delta town of Bomadi, Hyacinth Egbegbo, is urging the militants to stay calm saying only a negotiated peace can bring lasting stability to the troubled oil-rich region.
"Let us go for peace, not for any more struggles," said the bishop. "Armed struggle is not going to be in favor of any Nigerian. So let us sit down at the table and see that we resolve these problems amicably. I appeal to the boys to take their guns away from the dialogue that is being initiated by the government. Because dialogue with guns is not dialogue. So let us put the guns aside and speak words of wisdom to each other so that we can come to a more amicable solution to the problem."
The militant group, which says it is fighting for a fairer share of the region's oil wealth, crippled daily oil production with series of attacks on oil facilities and personnel since early 2006.
But MEND has been severely weakened since dozens of its field commanders and thousands of gunmen accepted President Yar'Adua's amnesty offer and disarmed.
The Niger Delta remains a stronghold for gangs and militant groups with strong opposition toward foreign oil companies and the government.
Security analysts say the oil industry remains vulnerable to opportunistic attacks, crude oil thefts and kidnappings. Nigeria plans to offer inhabitants of the Niger Delta an extra 10 percent in oil and gas revenues in a bid to end the rebellion.
Friday, December 11, 2009
Saudi Production now up to 8.5M B/D
Saudi Arabia has raised production to 8.5 M B/D. This explains the widening of the contango in recent days as the Saudis are raising production to keep markets oversupplied as they want to keep oil prices at the lower end of the $70-80 range that they have targeted. The US establishment is afraid that oil prices above $80 will derail the fragile recovery and the Saudis have responded to these fears and are doing their best to keep prices below $80 until the recovery looks self-sustaining.
Saudi Oil Output Rises to 8.5m Barrels Per Day
Saudi Oil Output Rises to 8.5m Barrels Per Day
(Bloomberg)
10 December 2009
RIYADH — Saudi Arabia, the world’s biggest oil supplier, raised crude production to as much as 8.5 million barrels a day as signs of a global economic recovery boost demand in Asia.
Saudi Arabia is pumping 8 million to 8.5 million barrels a day, Khaled Al Buraik, executive director of state oil company Saudi Aramco, said today. Output was about 8.19 million a day last month, after falling as low as 7.86 million a day in February, according to data compiled by Bloomberg.
“Most demand for oil is coming from the Far East,” Al Buraik told reporters in Kuwait, adding that “demand is increasing much slower than anticipated.”
The Organisation of Petroleum Exporting Countries, of which Saudi Arabia is the largest producer, agreed on record output cuts last year as the global recession curbed demand, dragging down prices. Oil futures have since risen 64 per cent in New York, recovering from a low of $32.40 a barrel last December.
“Our production in 2010 will definitely be increasing but we will still have millions of barrels in spare capacity,” Al Buraik said. “We have 4 million in spare idle capacity” now.
Saudi Aramco has delayed its Manifa heavy-oil field development because of lower demand, al-Buraik said. “If the market needed it, we can always advance” the project, he said.
Manifa Delay
The Dhahran-based company expects to start production at Manifa in 2013 and complete the project in 2015, Chief Executive Officer Khalid Al Falih said on December 7. Saudi Arabia originally planned to complete the development by mid-2011.
Manifa, which involves building a causeway to 27 shallow- water drilling islands, will eventually produce 900,000 barrels a day of heavy crude, 900 million cubic feet a day of associated gas and 65,000 barrels a day of condensate, a light oil.
In May, Oil Minister Ali Al Naimi said Manifa would only start production if the market needed more oil. The project is one of several Saudi ventures to boost output capacity, which reached 12.5 million barrels a day in June, Al Naimi said last month. —
Saudi Oil Output Rises to 8.5m Barrels Per Day
Saudi Oil Output Rises to 8.5m Barrels Per Day
(Bloomberg)
10 December 2009
RIYADH — Saudi Arabia, the world’s biggest oil supplier, raised crude production to as much as 8.5 million barrels a day as signs of a global economic recovery boost demand in Asia.
Saudi Arabia is pumping 8 million to 8.5 million barrels a day, Khaled Al Buraik, executive director of state oil company Saudi Aramco, said today. Output was about 8.19 million a day last month, after falling as low as 7.86 million a day in February, according to data compiled by Bloomberg.
“Most demand for oil is coming from the Far East,” Al Buraik told reporters in Kuwait, adding that “demand is increasing much slower than anticipated.”
The Organisation of Petroleum Exporting Countries, of which Saudi Arabia is the largest producer, agreed on record output cuts last year as the global recession curbed demand, dragging down prices. Oil futures have since risen 64 per cent in New York, recovering from a low of $32.40 a barrel last December.
“Our production in 2010 will definitely be increasing but we will still have millions of barrels in spare capacity,” Al Buraik said. “We have 4 million in spare idle capacity” now.
Saudi Aramco has delayed its Manifa heavy-oil field development because of lower demand, al-Buraik said. “If the market needed it, we can always advance” the project, he said.
Manifa Delay
The Dhahran-based company expects to start production at Manifa in 2013 and complete the project in 2015, Chief Executive Officer Khalid Al Falih said on December 7. Saudi Arabia originally planned to complete the development by mid-2011.
Manifa, which involves building a causeway to 27 shallow- water drilling islands, will eventually produce 900,000 barrels a day of heavy crude, 900 million cubic feet a day of associated gas and 65,000 barrels a day of condensate, a light oil.
In May, Oil Minister Ali Al Naimi said Manifa would only start production if the market needed more oil. The project is one of several Saudi ventures to boost output capacity, which reached 12.5 million barrels a day in June, Al Naimi said last month. —
Thursday, December 10, 2009
Oil looks like it hit bottom today
Oil looks like it may have hit bottom today with a convincing test of the 200 day moving average ($70.60). There was even a false breakout down to support at $70.00 to lure in bears before oil rallied back to close on the 200 day. I think today may have marked a near term bottom because there just isn't any catalyst or fundamental reason for oil to break down here.
While the physical market is very weak (as indicated by the nearly $2 1st-2nd month contango), inventories are very high and US demand has been anemic (down 3% yoy) the reality is that overall demand is rising and OPEC has supply firmly under control. Yes output have been growing as the Saudis have ramped up production over the last few months but the Saudis could just as easily cut this production back. Furthermore, excess capacity is declining and overall demand is growing driven by China and the Middle East. Unless the market is acting on significant macro news (Greece about to Default, much more bad news out of Dubai etc.) that is not being reflected in any other market (S&P 500 still at 1100, bond yields rising, Euro holding $1.47) then oil should bottom here and turn higher.
Chinese news can easily provide the "catalyst" for a new bull run back to $75 or $80 over the next few weeks. Chinese auto sales were extremely strong again in November with sales of over 1 M autos and commercial vehicles (up 90% yoy). More importantly, the Chinese government has now committed to supporting very strong auto sales in 2010 as well. This is likely to drive an incremental 1M B/D of Chinese demand next year. That is enough to offset some truly awful numbers here in the US.
Tonight's industial production figures provide another catalyst for this theme with industrial production up 19%. Industrial production doesn't rise 19% yoy without rising oil demand!
I've attached tonight's Bloomberg News Release Below:
China’s Industrial Output Rises 19.2%, More Than Forecast
China’s Industrial Output Rises 19.2%, More Than Forecast Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Bloomberg News
Dec. 11 (Bloomberg) -- China’s industrial production grew 19.2 percent in November from a year earlier, the statistics bureau said in Beijing today.
That compared with a 16.1 percent increase in October and the median 18.2 percent estimate in a Bloomberg News survey of 25 economists. Consumer prices rose 0.6 percent, the first increase in 10 months.
A $586 billion stimulus package, record bank lending and incentives for purchases of cars and home appliances are supporting industrial output, which will get another boost as exports recover. China’s government this week fine-tuned its growth policies by extending subsidies for rural consumers and increasing payments for automobile trade-ins, while scrapping a tax break on property sales.
“Beijing’s fine-tuning of stimulus measures shows that it’s getting more comfortable with the economy’s recovery,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government may start to exit stimulus via curbing investment and loans from April.”
China’s growth accelerated to 8.9 percent in the third quarter, helping Asia to lead the recovery from the global economic slump.
November’s gain in industrial output was boosted by the comparatively low level a year earlier, when exports and growth slumped after the collapse of Lehman Brothers Holdings Inc.
Retail Sales
Retail sales climbed 15.8 percent in November from a year earlier, compared with 16.2 percent in October, according to the statistics bureau. Urban fixed-asset investment rose 32.1 percent in the January-to-November period from a year earlier after climbing 33.1 percent through October, today’s data showed.
Producer prices fell 2.1 percent last month from a year earlier, after dropping 5.8 percent in October.
While President Hu Jintao pledged this week to maintain a “moderately loose” monetary policy and a “proactive” fiscal stance, China’s banking regulator plans to slow new lending in 2010, a person familiar with the matter said this week.
Banks extended 8.9 trillion yuan of new local-currency loans in the 10 months through October. The regulator plans a limit of between 7 trillion yuan and 8 trillion yuan for all of next year, the person said. The credit boom has raised the risk of asset bubbles and bad loans.
Forecasts for China to maintain the fastest growth of any major economy are encouraging companies to boost production and spurring overseas investors to expand.
Expanding Production
China Petroleum & Chemical Corp., the country’s biggest refiner, said this month that it plans to expand the capacity of its second-biggest oil-processing plant by a third. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, said last month that it will build a new factory worth 5 billion yuan to tap an auto market set to overtake the U.S. as the world’s largest this year.
China’s cabinet and the nation’s top economic planner said this week that they will increase policy flexibility, manage inflation expectations and curb speculative property purchases. Property prices in 70 cities rose at the fastest pace in 16 months in November and the benchmark Shanghai Composite Index has jumped almost 80 percent this year.
Food and energy price increases helped to bring deflation to an end, said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong. The government last month approved increases of as much as 8 percent to gasoline, diesel and jet fuel prices and raised retail power charges for the first time in 16 months.
--Li Yanping, Kevin Hamlin. Editors: Paul Panckhurst, Stephanie Phang.
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg
While the physical market is very weak (as indicated by the nearly $2 1st-2nd month contango), inventories are very high and US demand has been anemic (down 3% yoy) the reality is that overall demand is rising and OPEC has supply firmly under control. Yes output have been growing as the Saudis have ramped up production over the last few months but the Saudis could just as easily cut this production back. Furthermore, excess capacity is declining and overall demand is growing driven by China and the Middle East. Unless the market is acting on significant macro news (Greece about to Default, much more bad news out of Dubai etc.) that is not being reflected in any other market (S&P 500 still at 1100, bond yields rising, Euro holding $1.47) then oil should bottom here and turn higher.
Chinese news can easily provide the "catalyst" for a new bull run back to $75 or $80 over the next few weeks. Chinese auto sales were extremely strong again in November with sales of over 1 M autos and commercial vehicles (up 90% yoy). More importantly, the Chinese government has now committed to supporting very strong auto sales in 2010 as well. This is likely to drive an incremental 1M B/D of Chinese demand next year. That is enough to offset some truly awful numbers here in the US.
Tonight's industial production figures provide another catalyst for this theme with industrial production up 19%. Industrial production doesn't rise 19% yoy without rising oil demand!
I've attached tonight's Bloomberg News Release Below:
China’s Industrial Output Rises 19.2%, More Than Forecast
China’s Industrial Output Rises 19.2%, More Than Forecast Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Bloomberg News
Dec. 11 (Bloomberg) -- China’s industrial production grew 19.2 percent in November from a year earlier, the statistics bureau said in Beijing today.
That compared with a 16.1 percent increase in October and the median 18.2 percent estimate in a Bloomberg News survey of 25 economists. Consumer prices rose 0.6 percent, the first increase in 10 months.
A $586 billion stimulus package, record bank lending and incentives for purchases of cars and home appliances are supporting industrial output, which will get another boost as exports recover. China’s government this week fine-tuned its growth policies by extending subsidies for rural consumers and increasing payments for automobile trade-ins, while scrapping a tax break on property sales.
“Beijing’s fine-tuning of stimulus measures shows that it’s getting more comfortable with the economy’s recovery,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “The government may start to exit stimulus via curbing investment and loans from April.”
China’s growth accelerated to 8.9 percent in the third quarter, helping Asia to lead the recovery from the global economic slump.
November’s gain in industrial output was boosted by the comparatively low level a year earlier, when exports and growth slumped after the collapse of Lehman Brothers Holdings Inc.
Retail Sales
Retail sales climbed 15.8 percent in November from a year earlier, compared with 16.2 percent in October, according to the statistics bureau. Urban fixed-asset investment rose 32.1 percent in the January-to-November period from a year earlier after climbing 33.1 percent through October, today’s data showed.
Producer prices fell 2.1 percent last month from a year earlier, after dropping 5.8 percent in October.
While President Hu Jintao pledged this week to maintain a “moderately loose” monetary policy and a “proactive” fiscal stance, China’s banking regulator plans to slow new lending in 2010, a person familiar with the matter said this week.
Banks extended 8.9 trillion yuan of new local-currency loans in the 10 months through October. The regulator plans a limit of between 7 trillion yuan and 8 trillion yuan for all of next year, the person said. The credit boom has raised the risk of asset bubbles and bad loans.
Forecasts for China to maintain the fastest growth of any major economy are encouraging companies to boost production and spurring overseas investors to expand.
Expanding Production
China Petroleum & Chemical Corp., the country’s biggest refiner, said this month that it plans to expand the capacity of its second-biggest oil-processing plant by a third. Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, said last month that it will build a new factory worth 5 billion yuan to tap an auto market set to overtake the U.S. as the world’s largest this year.
China’s cabinet and the nation’s top economic planner said this week that they will increase policy flexibility, manage inflation expectations and curb speculative property purchases. Property prices in 70 cities rose at the fastest pace in 16 months in November and the benchmark Shanghai Composite Index has jumped almost 80 percent this year.
Food and energy price increases helped to bring deflation to an end, said Sun Mingchun, chief China economist at Nomura Holdings Inc. in Hong Kong. The government last month approved increases of as much as 8 percent to gasoline, diesel and jet fuel prices and raised retail power charges for the first time in 16 months.
--Li Yanping, Kevin Hamlin. Editors: Paul Panckhurst, Stephanie Phang.
To contact Bloomberg News staff for this story: Li Yanping in Beijing at +86-10-6649-7568 or yli16@bloomberg
Monday, December 7, 2009
The physical oil market is very weak
Front month crude continued to weaken today for the fourth straight day. Weakness was most pronounced in the front months as the 1st - 2nd month contango widened out to a massive $2 monthly spread implying a 33% annual yield for holding a front month short position. Clearly, the market is burdened by high inventories and is concerned about market conditions over the next few months.
This makes sense as onshore inventories are high (US onshore inventories well above 5year averages with Cushing at 32M bbls) and offshore inventories are even higher (140 M bbls in VLCC's floating offshore). What makes this worse is that OECD demand continues to deteriorate. Last week's EIA numbers showed demand down 3.2% yoy. While this is an ugly number, it is much worse when you consider that it is being compared to the last November when we were at the height of the financial crisis. The implication is that demand is DOWN 3.2% compared to the incredibly weak numbers of late 2008 when financial markets were crashing, consumers were paralyzed and credit markets were totally frozen. These are depressionary numbers and they portend weakness in the crude market for some time.
Unemployment is skyrocketing in the US, Spain, the U.K. and Eastern Europe. Unemployed people don't drive much and people who are fearful about their jobs don't go on long vacations or otherwise travel nearly as much as in a healthy economy. While governments are playing statistical games to make it look like unemployment is stabilizing, the real numbers are dismal with a huge and widening gap between reality and government numbers. The crude market is starting to adjust to this reality and this explains the weakness of the last few days.
The following piece from Anecdotal Economics details some of the games being played with US employment numbers. Unemployment is reaching depressionary levels with a realistic U-3 (official unemployment) of 15% and U-6 (unemployment including involuntary part-time work) of over 20%.
Six Degrees of Deception
“Lies, damned lies and statistics,” a quip of English statesman Benjamin Disraeli, was popularized by Mark Twain a century ago, and, well, for the early 20th century those categories more than sufficed.
In a vastly more complicated 21st century however, we find more shades of gray, more nuance necessary, and so we comment today on the Six Degrees of Deception, an upgrade from the mere three with which we made do for so many decades. The original trio remains intact, of course, but we embellish those with several more categories, namely “White Lies” to precede the three and “Government Statistics” to follow.
The Sixth Degree of Deception we will save until last, as our real focus today is lying’s fifth circle of hell, Government Statistics, namely the award-worthy work of fiction published Friday by the Bureau of Made-Up Labor Statistics known as the Employment Situation for November 2009. It depicts, fairy-tale-like, a U.S. U-3 Unemployment Rate of 10.2 percent and a broader U-6 rate of 17.0 percent, when, in fact as we illustrate below, the true unemployment rates are more like 15.5 percent (U-3) and, when including involutary part-time workers, 21.2 percent (U-6), which certainly are more Depression-like numbers.
Friday, December 4th, we reliably were informed, the U.S. economy, in the midst of the worst recession since The Big One in the 1930s, shed a mere 11,000 jobs, well below the 130,000 expected by forecasters and, by nearly an order of ten, the 169,000 private-sector jobs lost according to the ADP National Employment Report issued two days earlier, and a 23 rd consecutive month of declining employment.
According to the BLS, the Government sector created 7,000 jobs in November. Adjusting accordingly, it implies 18,000 private sector jobs were lost last month, an absurd, happy-face estimate which bears no resemblance to ADP’s more realistic assessment of reality. BLS also managed to refine its estimates of job losses in September and October, utilizing its own formulas of revisionist history, in which it now pretends far fewer jobs were lost than originally reported.
September’s Employment Situation guessed 263,000 jobs disappeared into the recession’s depths when first reported in early October, was revised upward to -219,000 a month later, and, to make the deception complete, revised upward again in the November report to -139,000, almost half as many job losses than first thought.
October’s Employment Situation originally pondered the loss of 190,000 positions, only to be pleasingly reworked this month to show 110,000 fewer jobs. At this pace, when December’s Employment Situation is released early next year, October may be upwardly revised to fewer than 50,000 job losses and, to maintain the illusion, November almost certainly will be upwardly adjusted to a positive, jobs-created, number.
The manipulation is breathtaking, particularly the fiction of jobs being created by new business creation (the Birth/Death Model adjustment), a convenient “plug” number designed to estimate the number of businesses being formed or closing – and the resulting jobs created or destroyed in the process. The Birth-Death Model employed by the Bureau of Labor Statistics fabricators statisticians clearly is nothing but a mechanism by which desired employment situation outcomes can be constructed. As evident in the chart below, from Jesse’s Café Américain, monthly Birth-Death adjustments are positive every month save January, and vary little month-to-month over the last six years, despite nearly two years of brutal recession and record-setting unemployment data.
In November, the Birth-Death Model added 30,000 jobs, and in April-May-June this year, it helped fertilize all the green shoots with a combined 630,000 new jobs created by intrepid Americans fed up working for The Man (or not working, as likely was the case) who, supported mentally and financially by loving spouses or family members, threw their hats into the deep end of capitalism’s pool by starting a new business, hiring themselves, and others, presumably, in the process.
Not.
This is data of convenience, designed to achieve political ends. When interested parties wanted to pass a near-trillion-dollar stimulus program in February, the employment situation suitably was grim. Once-passed, the data rapidly began improving. Now that 2010 mid-term elections are months away, the employment situation magically is darn-near robust, and no doubt will be upwardly adjusted to further robustness in months to come. Tell that to the record number of people – 5.9 million at last count if that data point can be believed – who now have been unemployed more than 26 weeks, half a year, and who are helping to rapidly deplete state unemployment insurance coffers.
Our favorite manipulation, however, centers around the manner in which the U.S. population is categorized in BLS-world, as in who is working, who isn’t working, who has stopped looking for work and who want to work, and bears witness to the astonishing manner in which data can be rearranged to suit to the objectives of those with a vested interest in the outcomes.
The deception lies in who BLS conveniently counts as employed and unemployed and how they are counted. Two areas for mischief jump out: “Persons Who Currently Want a Job (PWCWJs),” a 6.0 million subset of those Not In Labor Force (the NILFs*…see definition below) and those “Marginally Attached” to the workforce, a subset of PWCWJs. Persons Who Currently Want a Job are those able and willing to work, but who temporarily have left the Labor Force for any number of reasons. Sounds like “unemployed” to us.
In November, according to the BLS monthly cookbook, 2.3 million people were “Marginally Attached,” and of those, a record 861,000 officially were “Discouraged,” meaning in BLS terms they no longer are counted as Unemployed (part of the Labor Force), even though of course they were unemployed, but, being so discouraged, they had not looked for work in the last four weeks because “they believe no jobs are available for them.”
We reviewed BLS data from November 2004 to May 2007 (30 months) and from May 2007 to November 2009 (30 months) to establish some trends in both periods, as depicted in this table. From November 2004 to May 2007, the Labor Force – new entrants by age or immigration – grew on average by 149,100 each of the 30 months, Employment advanced by 189,400 a month, Unemployment fell and NILFs increased by about 86,000 a month over the time period.
From May 2007 to November 2009, however, the Labor Force increased only by 37,200 a month according to BLS, the number of Employed declined nearly 250,000 per month, Unemployment, of course, increased dramatically, an average of 285,000 each month over the 30-month span, and the NILFs grew by 138,000 a month.
When we adjust the November 2009 data (hey, we can make up numbers as well as the government) to account for a more realistic growth of the Labor Force over the last 30 months, which almost everyone including Ben Bernanke acknowledges is growing by at least 100,000 to 125,000 entrants per month (not the measly 37,200 per month fantasized by BLS), add the “Discouraged” subset to Labor Force and Unemployed and reduce the Persons Who Currently Want a Job fudge category to November 2004 – May 2007 levels (about five million), we find a much different “employment situation.” (Chart Column: More Realistic Nov-09)
U-3 “headline” unemployment increases to 12.9 percent and U-6 unemployment, which includes involuntary part time workers and the rest of “marginally attached” cohort, jumps to 19.4 percent.
But wait…There’s More. Let’s roll the Marginally Attached into the Labor Force and Unemployed because, after all, they really do want to find jobs and they’re able and willing to work. Now the U-3 unemployment increases to 13.6 percent and U-6 unemployment, which includes involuntary part time workers remains at 19.4 percent. (Chart Column: Even More Realistic Nov-09)
And More. When we include the rest of the Persons Who Currently Want a Job (3.688 million) in the Labor Force and Unemployed because, after all, they really do want jobs and they’re able and willing to work, we get the most realistic view of unemployment in America, numbers starting to approach Great Depression levels and a more reliable indicator of how badly the employment situation has deteriorated.
U-3 unemployment leaps to 15.5 percent and U-6, including the involuntary part-timers advances to 21.2 percent, scary numbers indeed if in reality one in five Americans willing and able to work cannot find full-time employment. (Chart Column: True Employment Nov-09)
For a much more hilarious discussion of how BLS classifies Labor Force Participants, NILFs, the Employed and Unemployed, see Mint.com's YouTube explanation "Are You Unemployed" below (courtesy of Mish's Global Economic Trend Analysis).
And, as we continually have observed, those unemployed and underemployed tend to make lousy consumers and borrowers, and will for years to come as we progress through our own self-made, Japanese-style lost decade or two of sluggish economic activity, growing disparity between wealthy and other-than-wealthy, massive tax increases applied to a resentful populace able to pay taxes (primarily the wealthy, but wage-earners as well), steadily increasing federal government debt well beyond the best-case hopes of the Hoper-in-Chief, and continued eroding equity market values as money, including what’s left of the retirement funds of the Baby Boomers, is recycled into the perceived “safety” of government bonds, all spinning vicious-circle-like downward to some miserable equilibrium manifested in a much lower standard of living for just about everyone except Bill Gates and Warren Buffett and 398 other people on the Forbes list.
Bottom line, by manipulating the number of people allocated to the Labor Force (Employed and Unemployed) and the NILFs, BLS conveniently can make the monthly Employment Situation politically more palatable, which is why Government Statistics is the lying’s fifth circle of hell which fewer than one in a hundred in this country understand. Government Statistics certainly deserve a prominent place in the Six Degrees of Deception, to a degree which never could have been envisioned a century ago by a cynical and caustic Mark Twain, and the BLS Employment Situation is but one of the many ruses upon which markets gyrate and politics is practiced, so don’t even get us started on the topic of fictional GDP estimates.
This makes sense as onshore inventories are high (US onshore inventories well above 5year averages with Cushing at 32M bbls) and offshore inventories are even higher (140 M bbls in VLCC's floating offshore). What makes this worse is that OECD demand continues to deteriorate. Last week's EIA numbers showed demand down 3.2% yoy. While this is an ugly number, it is much worse when you consider that it is being compared to the last November when we were at the height of the financial crisis. The implication is that demand is DOWN 3.2% compared to the incredibly weak numbers of late 2008 when financial markets were crashing, consumers were paralyzed and credit markets were totally frozen. These are depressionary numbers and they portend weakness in the crude market for some time.
Unemployment is skyrocketing in the US, Spain, the U.K. and Eastern Europe. Unemployed people don't drive much and people who are fearful about their jobs don't go on long vacations or otherwise travel nearly as much as in a healthy economy. While governments are playing statistical games to make it look like unemployment is stabilizing, the real numbers are dismal with a huge and widening gap between reality and government numbers. The crude market is starting to adjust to this reality and this explains the weakness of the last few days.
The following piece from Anecdotal Economics details some of the games being played with US employment numbers. Unemployment is reaching depressionary levels with a realistic U-3 (official unemployment) of 15% and U-6 (unemployment including involuntary part-time work) of over 20%.
Six Degrees of Deception
“Lies, damned lies and statistics,” a quip of English statesman Benjamin Disraeli, was popularized by Mark Twain a century ago, and, well, for the early 20th century those categories more than sufficed.
In a vastly more complicated 21st century however, we find more shades of gray, more nuance necessary, and so we comment today on the Six Degrees of Deception, an upgrade from the mere three with which we made do for so many decades. The original trio remains intact, of course, but we embellish those with several more categories, namely “White Lies” to precede the three and “Government Statistics” to follow.
The Sixth Degree of Deception we will save until last, as our real focus today is lying’s fifth circle of hell, Government Statistics, namely the award-worthy work of fiction published Friday by the Bureau of Made-Up Labor Statistics known as the Employment Situation for November 2009. It depicts, fairy-tale-like, a U.S. U-3 Unemployment Rate of 10.2 percent and a broader U-6 rate of 17.0 percent, when, in fact as we illustrate below, the true unemployment rates are more like 15.5 percent (U-3) and, when including involutary part-time workers, 21.2 percent (U-6), which certainly are more Depression-like numbers.
Friday, December 4th, we reliably were informed, the U.S. economy, in the midst of the worst recession since The Big One in the 1930s, shed a mere 11,000 jobs, well below the 130,000 expected by forecasters and, by nearly an order of ten, the 169,000 private-sector jobs lost according to the ADP National Employment Report issued two days earlier, and a 23 rd consecutive month of declining employment.
According to the BLS, the Government sector created 7,000 jobs in November. Adjusting accordingly, it implies 18,000 private sector jobs were lost last month, an absurd, happy-face estimate which bears no resemblance to ADP’s more realistic assessment of reality. BLS also managed to refine its estimates of job losses in September and October, utilizing its own formulas of revisionist history, in which it now pretends far fewer jobs were lost than originally reported.
September’s Employment Situation guessed 263,000 jobs disappeared into the recession’s depths when first reported in early October, was revised upward to -219,000 a month later, and, to make the deception complete, revised upward again in the November report to -139,000, almost half as many job losses than first thought.
October’s Employment Situation originally pondered the loss of 190,000 positions, only to be pleasingly reworked this month to show 110,000 fewer jobs. At this pace, when December’s Employment Situation is released early next year, October may be upwardly revised to fewer than 50,000 job losses and, to maintain the illusion, November almost certainly will be upwardly adjusted to a positive, jobs-created, number.
The manipulation is breathtaking, particularly the fiction of jobs being created by new business creation (the Birth/Death Model adjustment), a convenient “plug” number designed to estimate the number of businesses being formed or closing – and the resulting jobs created or destroyed in the process. The Birth-Death Model employed by the Bureau of Labor Statistics fabricators statisticians clearly is nothing but a mechanism by which desired employment situation outcomes can be constructed. As evident in the chart below, from Jesse’s Café Américain, monthly Birth-Death adjustments are positive every month save January, and vary little month-to-month over the last six years, despite nearly two years of brutal recession and record-setting unemployment data.
In November, the Birth-Death Model added 30,000 jobs, and in April-May-June this year, it helped fertilize all the green shoots with a combined 630,000 new jobs created by intrepid Americans fed up working for The Man (or not working, as likely was the case) who, supported mentally and financially by loving spouses or family members, threw their hats into the deep end of capitalism’s pool by starting a new business, hiring themselves, and others, presumably, in the process.
Not.
This is data of convenience, designed to achieve political ends. When interested parties wanted to pass a near-trillion-dollar stimulus program in February, the employment situation suitably was grim. Once-passed, the data rapidly began improving. Now that 2010 mid-term elections are months away, the employment situation magically is darn-near robust, and no doubt will be upwardly adjusted to further robustness in months to come. Tell that to the record number of people – 5.9 million at last count if that data point can be believed – who now have been unemployed more than 26 weeks, half a year, and who are helping to rapidly deplete state unemployment insurance coffers.
Our favorite manipulation, however, centers around the manner in which the U.S. population is categorized in BLS-world, as in who is working, who isn’t working, who has stopped looking for work and who want to work, and bears witness to the astonishing manner in which data can be rearranged to suit to the objectives of those with a vested interest in the outcomes.
The deception lies in who BLS conveniently counts as employed and unemployed and how they are counted. Two areas for mischief jump out: “Persons Who Currently Want a Job (PWCWJs),” a 6.0 million subset of those Not In Labor Force (the NILFs*…see definition below) and those “Marginally Attached” to the workforce, a subset of PWCWJs. Persons Who Currently Want a Job are those able and willing to work, but who temporarily have left the Labor Force for any number of reasons. Sounds like “unemployed” to us.
In November, according to the BLS monthly cookbook, 2.3 million people were “Marginally Attached,” and of those, a record 861,000 officially were “Discouraged,” meaning in BLS terms they no longer are counted as Unemployed (part of the Labor Force), even though of course they were unemployed, but, being so discouraged, they had not looked for work in the last four weeks because “they believe no jobs are available for them.”
We reviewed BLS data from November 2004 to May 2007 (30 months) and from May 2007 to November 2009 (30 months) to establish some trends in both periods, as depicted in this table. From November 2004 to May 2007, the Labor Force – new entrants by age or immigration – grew on average by 149,100 each of the 30 months, Employment advanced by 189,400 a month, Unemployment fell and NILFs increased by about 86,000 a month over the time period.
From May 2007 to November 2009, however, the Labor Force increased only by 37,200 a month according to BLS, the number of Employed declined nearly 250,000 per month, Unemployment, of course, increased dramatically, an average of 285,000 each month over the 30-month span, and the NILFs grew by 138,000 a month.
When we adjust the November 2009 data (hey, we can make up numbers as well as the government) to account for a more realistic growth of the Labor Force over the last 30 months, which almost everyone including Ben Bernanke acknowledges is growing by at least 100,000 to 125,000 entrants per month (not the measly 37,200 per month fantasized by BLS), add the “Discouraged” subset to Labor Force and Unemployed and reduce the Persons Who Currently Want a Job fudge category to November 2004 – May 2007 levels (about five million), we find a much different “employment situation.” (Chart Column: More Realistic Nov-09)
U-3 “headline” unemployment increases to 12.9 percent and U-6 unemployment, which includes involuntary part time workers and the rest of “marginally attached” cohort, jumps to 19.4 percent.
But wait…There’s More. Let’s roll the Marginally Attached into the Labor Force and Unemployed because, after all, they really do want to find jobs and they’re able and willing to work. Now the U-3 unemployment increases to 13.6 percent and U-6 unemployment, which includes involuntary part time workers remains at 19.4 percent. (Chart Column: Even More Realistic Nov-09)
And More. When we include the rest of the Persons Who Currently Want a Job (3.688 million) in the Labor Force and Unemployed because, after all, they really do want jobs and they’re able and willing to work, we get the most realistic view of unemployment in America, numbers starting to approach Great Depression levels and a more reliable indicator of how badly the employment situation has deteriorated.
U-3 unemployment leaps to 15.5 percent and U-6, including the involuntary part-timers advances to 21.2 percent, scary numbers indeed if in reality one in five Americans willing and able to work cannot find full-time employment. (Chart Column: True Employment Nov-09)
For a much more hilarious discussion of how BLS classifies Labor Force Participants, NILFs, the Employed and Unemployed, see Mint.com's YouTube explanation "Are You Unemployed" below (courtesy of Mish's Global Economic Trend Analysis).
And, as we continually have observed, those unemployed and underemployed tend to make lousy consumers and borrowers, and will for years to come as we progress through our own self-made, Japanese-style lost decade or two of sluggish economic activity, growing disparity between wealthy and other-than-wealthy, massive tax increases applied to a resentful populace able to pay taxes (primarily the wealthy, but wage-earners as well), steadily increasing federal government debt well beyond the best-case hopes of the Hoper-in-Chief, and continued eroding equity market values as money, including what’s left of the retirement funds of the Baby Boomers, is recycled into the perceived “safety” of government bonds, all spinning vicious-circle-like downward to some miserable equilibrium manifested in a much lower standard of living for just about everyone except Bill Gates and Warren Buffett and 398 other people on the Forbes list.
Bottom line, by manipulating the number of people allocated to the Labor Force (Employed and Unemployed) and the NILFs, BLS conveniently can make the monthly Employment Situation politically more palatable, which is why Government Statistics is the lying’s fifth circle of hell which fewer than one in a hundred in this country understand. Government Statistics certainly deserve a prominent place in the Six Degrees of Deception, to a degree which never could have been envisioned a century ago by a cynical and caustic Mark Twain, and the BLS Employment Situation is but one of the many ruses upon which markets gyrate and politics is practiced, so don’t even get us started on the topic of fictional GDP estimates.
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