The Panic Behind The Propaganda: Why The Fed Wants You To Sell Your Bonds

As Barclays’ Joe Abate warns, delivery fails in the Treasury market have surged recently. While not at the scale of the 2008 crisis yet, we suspect the spike is what is panicking the Fed to say “the market is wrong”, talk up short-end rates, and implore the public to sell-sell-sell their bonds. The Fed’s market domination has meant massive collateral shortages (as we have detailed previously) and now more even that during last year’s taper-tantrum, the repo market is trouble.

The fails are greater than during last year’s taper tantrum.

But well below the 2008 crisis levels (for now)

Which is why The Fed is in panic mode to get everyone selling bonds.

As Abate write in his note,

Delivery fails in the Treasury market have surged recently. On Monday, the DTCC reported that incomplete deliveries reached a 52-week high at $120bn (Figure 1). And a week earlier, Treasury fails – as measured by the Federal Reserve – exceeded 6% of daily dealer Treasury transactions volumes. By contrast, usage of the Fed’s securities lending program has been relatively constant at around $15bn/day. Recall that each day the Fed auctions securities from its securities portfolio (at a 5bp fee) for dealers to borrow overnight to cover their shorts. In effect, the securities lending program is a backstop source of specific issue supply that dealers can access temporarily to prevent market disruptions caused by fails or incomplete deliveries.

But what if the Fed does not own any of the issues that dealers need? Indeed, this appears to be driving the surge in recent fails, which have been concentrated in the OTR 5s and 10s. Operation Twist and the sale of all the Fed’s <3y paper has meant that the Fed does not own any securities that mature until early 2016. Without maturing paper, the Fed is unable to buy OTR issues at Treasury auctions. The fact that the OTR issues are trading special in the repo market also means that the Fed avoids buying these securities in its (diminishing) QE purchases.

In the absence of Fed supply, dealers face a choice: fail and pay a 300bp fee for not completing the promised delivery or offer a sufficiently low financing rate to coax supply of the issue back into the market. In effect, the 300bp fails charge becomes the threshold determining how rich an issue will trade in the repo market or whether it will fail.4 Regularly scheduled re-openings and supply lured in from customer holdings in lendable accounts will eventually cheapen these issues. But in the meantime, the issues are likely to trade deeply special.

A quick reminder of what the repo market is… (via IMF)

Think of the bilateral repo market via the analogy for old clothing trade: Typically, merchants in developed countries shrink wrap old clothes in shipping container sized bundles (under pressure) and send the plastic wrapped block to poor countries. There, a clothing broker buys it, and resells it by weight to jobbers. So if the block weighs 500 pounds and they sell it in 10 pound lots, all 50 people gather around. But some people pay slightly more to be at the front of the crowd, and some pay slightly less to be at back. Then the jobber pops the bundle open with a big knife and the shrink wraps literally explodes; everyone gathered around jumps for the best pieces. Collateral desks are a bit like those jobbers. Big lots come in from hedge funds and security lenders, and the large bank’s collateral desk paws through it, searching for gems. Those gems go out bilateral to customers who’ll pay a premium. The remainders go to the guys in the back of the line (for example, triparty repo)

But why do I care about some archaic money-market malarkey? Simple, Without collateral to fund repo, there is no repo; without repo, there is no leveraged positioning in financial markets; without leverage and the constant hypothecation there is nothing to maintain the stock market’s exuberance (as we are already seeing in JPY and bonds).

Crucially, it should be inherently obvious to everyone that the moves we see in the stock market is not about mom and pop choosing to invest in the stock market (or not) as the ‘cash on the slidelines’ fallacy is “completely idiotic’ but about the marginal leveraged machine (or human) quickly jumping oin momentum.

The spike in “fails to deliver” highlights a major growing problem in the repo markets that provide that leverage… and thus the glue that holds stock markets together.

Wondering why JPY and bond yields have diverged so notably from stocks in recent days… repo effects (it’s just a matter of time before it hits stocks)…

So that explains why the Fed is so desperate to talk you into selling your bonds – most notably the short-end by demanding you listen to what Yellen said about raising rates.. as that reduces the shortfall of collateral that repo needs and restocks the banks with repo-able funds.

*  *  *

Is that why a noted dove Jim Bullard was so visibly hawkish yesterday?

The irony of course of the Fed explaining how rates will rise faster is that it spooks stock investors who have grown used to exuberant liquidity supply and roitates them to bonds… which merely exacerbates the problem the Fed has

via Zero Hedge Tyler Durden

“To My Fellow Filthy Rich Americans: Wake Up, People. The Pitchforks Are Coming”

Excerpted from Nick Hanauer’s OpEd in Politico (read more here),

Memo: From Nick Hanauer

To: My Fellow Zillionaires

You probably don’t know me, but like you I am one of those .01%ers, a proud and unapologetic capitalist. I have founded, co-founded and funded more than 30 companies across a range of industries—from itsy-bitsy ones like the night club I started in my 20s to giant ones like, for which I was the first nonfamily investor.

I tell you all this to demonstrate that in many ways I’m no different from you. Like you, I have a broad perspective on business and capitalism. And also like you, I have been rewarded obscenely for my success, with a life that the other 99.99 percent of Americans can’t even imagine.

But let’s speak frankly to each other. I’m not the smartest guy you’ve ever met, or the hardest-working. I was a mediocre student. I’m not technical at all—I can’t write a word of code. What sets me apart, I think, is a tolerance for risk and an intuition about what will happen in the future. Seeing where things are headed is the essence of entrepreneurship. And what do I see in our future now?

I see pitchforks.

At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country—the 99.99 percent—is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent.

But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.

And so I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

Many of us think we’re special because “this is America.” We think we’re immune to the same forces that started the Arab Spring—or the French and Russian revolutions, for that matter. I know you fellow .01%ers tend to dismiss this kind of argument; I’ve had many of you tell me to my face I’m completely bonkers. And yes, I know there are many of you who are convinced that because you saw a poor kid with an iPhone that one time, inequality is a fiction.

Here’s what I say to you: You’re living in a dream world. What everyone wants to believe is that when things reach a tipping point and go from being merely crappy for the masses to dangerous and socially destabilizing, that we’re somehow going to know about that shift ahead of time. Any student of history knows that’s not the way it happens. Revolutions, like bankruptcies, come gradually, and then suddenly. One day, somebody sets himself on fire, then thousands of people are in the streets, and before you know it, the country is burning. And then there’s no time for us to get to the airport and jump on our Gulfstream Vs and fly to New Zealand. That’s the way it always happens. If inequality keeps rising as it has been, eventually it will happen. We will not be able to predict when, and it will be terrible—for everybody. But especially for us.


(read more here)

via Zero Hedge Tyler Durden

Pentagon Admits Armed Drones Flying Over Baghdad; Top Shiite Cleric Joins US Calling For Maliki Ouster

With Iraq closing a last minute deal with Russia to reinforce its depleted airforce by purchasing second-hand Su fighter jets, suddenly the US found itself scrambling: the last thing it wants is to hand over control of Iraq’s skies to foreign-made warplanes. Which is perhaps why as CBS just reported, a Pentagon official has officially confirmed that the US is now flying armed drones over Baghdad. “The flights, which are not round the clock, are for the protection of the embassy and are not the precursor to air strikes” according to the same source.

So despite its reticence to engage in yet another Iraqi war, the US has now sent not only “military experts” but is once again doing what it does best: killing people by remote control. Not only that, but the people it (supposedly) intends to kill (for protection purposes of course) are the same Jihadist militants which Obama just requested another $500 million to equip and train. Because if you can’t find enough support for a limited regional war, the next best thing is to wage a proxy war… against yourself. And since the US military industrial complex is arming both sides, it is a win-win once again for any neo-con interests.

In other Iraqi news, the days of the current PM Maliki, who has now burned all bridges with the US, appear numbered after Iraq’s top Shiite cleric – Iranian-born Grand Ayatollah Ali al-Sistani – on Friday called on political blocs to agree on the next prime minister before the newly elected parliament sits next week, stepping up pressure on political leaders to set aside their differences and form an inclusive government in the face of Sunni militants who have seized large swaths of territory. However, from a geopolitical perspective this opens up a new can of worms: since the new PM will certainly be even more pro-US in a country in which Russia has invested generously to build out its oil infrastructure, this means that Putin will likely have to intercede once again to make sure the new PM is just as agreeable to Russian interests as the current one. Which also means that a whole lot of money is being spent behind the scenes.

The reclusive al-Sistani, the most revered figure among Iraqi Shiites, rarely appears or speaks in public, instead delivering messages through other clerics or, less frequently, issuing edicts.


Prominent Shiite leaders are pushing for the removal of al-Maliki, whose bloc won the most seats in April’s elections – 92 out of the legislature’s 328 – but who has been widely accused of monopolizing power and alienating Sunnis with a heavy-handed response to years of militant violence.


Even al-Maliki’s most important ally, neighboring Iran, is said to be looking at alternatives.

According to Reuters, a western diplomat, speaking on condition of anonymity, predicted that Maliki was now done.

“It looks like the debate is whether it is going to be Tareq Najem from inside State of law or someone from outside Maliki’s alliance,” the diplomat said, referring to Maliki’s one-time chief of staff and a senior member of his Dawa party.


“It is generally understood it will not be Maliki,” the diplomat said. “Security was his big thing, and he failed.”


Allies of Maliki said Sistani’s call for a quick decision was not aimed at sidelining the premier, but at putting pressure on all political parties not to draw out the process with infighting as the country risks disintegration.

Meanwhile, on the military front, a senior Iraqi army official told The Associated Press that Iraqi commandos aboard four helicopters landed at a soccer pitch inside a university campus in the insurgent-held city of Tikrit late Thursday and clashed with militants of the Islamic State of Iraq and the Levant for several hours.

One of the helicopters developed mechanical problems after takeoff from Tikrit, 80 miles north of Baghdad, but landed safely in the provincial military headquarters. The official had no word on casualties and declined to specify the mission’s objectives. He spoke on condition of anonymity because he was not authorized to brief the media.

The official also said 200 troops have arrived at a key refinery north of Baghdad under attack by militants for more than a week. The reinforcing troops join a 100-strong contingent that has been defending the Beiji refinery, Iraq’s largest and the source of about a quarter of the country’s oil product needs, including fuel for power stations.

Finally, for the visual learners, here is the latest Iraqi situation report from the Institute for the Study of War

via Zero Hedge Tyler Durden

Tonight on The Independents: Friends, Enemies, and Chaos in the Middle East

|||Do you know how certain people
on the Internet are fond of formulations like “Everything you need
to know about ____________”? It is of course an asinine statement,
since it is impossible for any single human to judge any other
human’s precise need for knowledge, let alone presume to have
amassed the precise quality and mix of the stuff. Nitpicky
throat-clearing aside, if you have an interest in and worry about
the tumult in the Middle East and North Africa, and you don’t
consider yourself an expert, then chances are very good that you
will find something useful in tonight’s theme episode of The
(Fox Business Network, 9 p.m. ET, 6 p.m. PT,
with re-airs three and five hours later).

“Friends, Enemies and Chaos” begins with a series of
backgrounders from Wall Street Journal multimedia
explainer Jason
, Fox
Middle Eastern specialist Lisa Daftari, and Michael
of The Interpreter. Who are the teams? From
where did those ISIS scaries emerge and what do they want? What is
the nature and import of the Sunni/Shia schism? You’ll likely know
more going out than you did going in.

As for what, if anything, the United States should do about the
chaos, both short term and long term, we tease out some scenarios
with The Blaze national security chief (and former CIA
employee) Buck Sexton,
KABC radio host (and multiple-theater combat veteran) Bryan Suits, former
Reagan-administration deputy defense secretary K.T.
, and Heritage
Director of National Security Policy Steven Bucci. And because this is
The Independents, there will be a mid-show game you can
compete along with at home, plus a dash of at least some
long-term optimism, in a discussion about whatever the hell
happened to the Arab Spring.

Tweet along your reviews, sartorial and otherwise, @ independentsFBN. Facebook
page is at,
and you can click on this page
for video of past segments.

from Hit & Run

Lawmaker Slams Ex-NSA Chief: ‘Nothing to Offer’ but State Secrets

Keith Alexander, since stepping
down from his position as National Security Administration (NSA)
and U.S. Cyber Command chief following last year’s mass
surveillance revelations, has gotten himself in the business of
cybersecurity consulting.

And not everyone’s comfortable with that. Rep. Alan Grayson
(D-Fl.) yesterday published letters he sent to the “Securities
Industry and Financial Markets Association, the Consumer Bankers
Association, the Financial Services Roundtable and the Clearing
House—all of which Alexander reportedly has approached about his
to Wired. The congressman, who sits on both
the Committee on Foreign Affairs and the Committee on Science,
Space, and Technology, gave a
roundabout warning
to former spy chief:

Disclosing or misusing classified information for profit is, as
Mr. Alexander well knows, a felony. I question how Mr. Alexander
can provide any of the services he is offering unless he discloses
or misuses classified information, including extremely sensitive
sources and methods. Without the classified information he acquired
in his former position, he literally would have nothing to offer to

He concluded by turning up the heat and asks the organizations
to be transparent:

Please send me all information related to your negotiations with
Mr. Alexander, so that Congress can verify whether or not he is
selling military and cybersecurity secrets to the financial
industry for personal gain.

Grayson isn’t the only skeptic. In his letter, he cites top
computer security expert Bruce Schneier, who has similar concerns.
Regarding Alexander’s eye-popping rates, $600,000 to $1 million a
month, earlier this week Schneier
his readers to “think of how much actual security they
could buy with that $600K a month. Unless he’s giving them
classified information.”

There’s a pinch of irony that Alexander, who does a lot of

over Edward Snowden for exposing government
secrets, is now on the receiving end suspicion for similar

from Hit & Run

Russia Announces It Will Send “Humanitarian Aid” To East Ukraine

While Poroshenko extends today’s ceasefire (under threat of militaryt action if nothing is solved by then); the phrase “hearts and minds” comes to mind as Russia unleashes its latest softly-softly headline in providing ‘humanitarian aid’ to the eatern regions of Ukraine. While ‘asking’ Ukraine to help determine the route for the aid, the press release explains this is ‘aid’ for the eastern regions of Donetsk and Luhansk following “numerous appeals” by the people. It appears that the “aid” does not include US-Iraq-style “special advisors.”


As Russia explains…

Humanitarian assistance to the eastern regions of Ukraine


June 27 the Russian Foreign Ministry sent a note to the Foreign Ministry of Ukraine regarding the provision of humanitarian aid the eastern regions of Ukraine.


The note says that in connection with numerous appeals by the people of Donetsk and Luhansk requesting urgent humanitarian assistance, Russia has prepared to send a motorcade to deliver humanitarian cargo weighing 60 tons, consisting of food and personal hygiene products. Ttrucks will head out on June 28 toward Donetsk and Lugansk, and possibly also in other regions of Ukraine, where there are refugees.


The note expressed hope that such humanitarian assistance will assist the residents of the regions and refugees, and will help reduce the number of the latter in the future.


Russian Foreign Ministry appealed to the Ministry of Foreign Affairs of Ukraine with a request to assist in the implementation of humanitarian action, including in terms of determining the route of motorcade through Ukraine.

*  *  *

So no ‘boots on the ground’ from Russia – but winning hearts-and-minds as Ukraine loses control of its gas and water supply.

via Zero Hedge Tyler Durden

Abortion Clinic Buffer Zone Ruling Makes Liberals Like Cenk Uygur Embrace the Second Amendment

The U.S. Supreme Court’s

decision Thursday in

McCullen v. Coakley
quickly provoked a fair amount of
outrage. The case concerned a Massachusetts law creating a 35-foot
buffer zone around abortion clinics, in which protestors could not
tread. Anti-abortion activist Eleanor McCullen argued—and
Supreme Court justices unanimously agreed
—that the buffer zones
were an unconstitutional infringement on free speech. But the
court’s decision was narrow in scope, rejecting not the idea of
buffer zones per se but the way this particular
Massachusetts law was written. 

“For a problem shown to arise only once a week in one city at
one clinic, creating 35-foot buffer zones at every clinic across
the Commonwealth is hardly a narrowly tailored solution,” wrote
Chief Justice John Roberts, in an opinion cosigned by the court’s
four liberal justices (the other justices offered concurring
opinions). Roberts suggested that a small buffer zone or a less
broad law might pass muster. 

The decision seems like one that should appease folks on both
side of the issue, if not necessarily thrill them. The court was
careful to balance the safety interests of abortion clinic patients
and staff with First Amendment rights. 

Here’s how Cenk Uygur, host of the progressive political
commentary program The Young

“You’re gonna yell at those women making the toughest decision
of their lives — a choice that’s between them, their doctor, and
having nothing to do with you or big government or your so-called
god, which might not be their god? Well, you tell me every day that
I’ve got Second Amendment rights. I guess in Massachusetts,
Colorado, [and] Montana, those women have to show up with their
guns and be like, ‘Okay, you’ve got rights. You’ve got a right to
get in my face; I’ve got a right to stand my ground, right?’ I
mean, that’s what I’m told by conservatives day in and day

Oof, so much mess to unpack there. First, Uygur seems to suggest
that being against a woman’s legal right to make her own medical
decisions is somehow anti “big government.” Because this makes so
obviously little sense, I’m going to suggest that Uygur is just
throwing in “big government” there as a dog whistle for the kind of
people who think wanting to limit government power is some sort of
nutty, extremist idea. 

Moving on to the meat of Uygur’s comments here: Why, yes, women
seeking abortions do also have second amendment rights. If they
feel physically unsafe heading to an abortion clinic, they could
very well bring along a gun. And if they needed it for self
defense, they could use that gun. If they chose to wave said gun in
the face of people peacefully protesting, they would be subject to
the same punishments as anyone who recklessly brandishes and
threatens people with a gun.

I am not sure what is controversial about this. And I would
assume that most conservatives, even extremely anti-abortion
conservatives, believe that even women seeking abortions have
Second Amendment rights. That is the thing about constitutional
rights in this country: They apply even to people you don’t like.
Liberals may not like protesters like McCullen, but that doesn’t
mean she doesn’t have First Amendment rights. And for the First
Amendment to mean anything, it has to be interpreted broadly.

I think people like McCullen are scum, but I’m sure she’d think
the same about me. If I was the type inclined to theatrics, I may
choose to go protest her protests, to stand by her side advocating
for reproductive rights–and I can’t imaging many liberals
having trouble with this. But if we create a free speech paradigm
where McCullen’s words and actions are illegal, than so would mine
be. And a government big enough to arbitrarily suppress speech
that’s distasteful is also a government big enough to strip away
any sorts of rights, including the reproductive rights liberals are
so vociferously defending here. 

When I wrote about this issue for another publication in
January, I admit that I had a different viewpoint. But I wasn’t
fully grasping the free speech implications then, and the more I’ve
read about the case, the more I’ve come around. For people
dedicated to the health and safety of those entering abortion
clinics, I understand why the buffer zones may seem like an
appealing idea. But only if you consider them solely within this
context. If people want the right to protest outside Monsanto or
the Westboro Baptist Church or wherever else, than McCullen and her
ilk has to be allowed to protest outside abortion

Feminist Majority Foundation President Eleanor Smeal
, “why must harassment, initimidation, and terror have to
be endured before women’s constitutional rights are protected? But
and intimidation are already against the law
, quite correctly,”
as a surprisingly cogent New York Daily News editorial

In New York State, it is specifically illegal to use or threaten
force to injure, intimidate or interfere with access to abortion
clinics. In New York City, an especially powerful law makes it a
crime “to follow and harass another person within 15 feet of the
premises of a reproductive health care facility.”

Massachusetts went far beyond that.

Thuggery is a crime. Speech, even loud and impassioned speech,
is the sometimes uncomfortable consequence of living in a free

Anyway, here’s the whole Uygur segment, if you’re feeling like a
dose of outraged, disingenuous smarm:

h/t Chanelle Johnson 

from Hit & Run

Friday A/V Club: Equal Time for Surrealist Subversion

After the police
at the 1968 Democratic convention in Chicago, the city
government made an
hour-long documentary
to try to salvage its reputation.
Stations that broadcast the film were then required, in what may be
the single most hilarious application of the
Fairness Doctrine
in TV history, to give the organizations he
attacked equal time to respond. Forty-five minutes of their hour
were allotted to the American Civil Liberties Union and the
National Mobilization Committee to End the War in Vietnam, who made
what was reportedly—I haven’t seen it—a levelheaded description of
how the Chicago cops overstepped their bounds. The other 15 minutes
were allotted to the Yippies, who made this:

Harlan Ellison reacts to the show
. He also, for some reason, complains about Stevie Wonder’s
mannerisms. Did anyone edit Harlan Ellison’s TV column? Just

For more on the Yippies, go here.
For past installments of the A/V Club, go here. And for one more
response to the city of Chicago’s film, reported in the October 15,
1968, issue of Tempo, read on:

from Hit & Run

Expulsion Now Mandatory for Dartmouth Students Convicted By Campus Rape Tribunal Under Low Evidence Standard

DartmouthDartmouth College is now
expelling all students found guilty of sexual assault through the
campus judiciary process. Inside Higher Ed notes that
automatic expulsion is precisely what many activists want, although
some colleges have settled on a dubious compromise: make
convictions clear and easy but punishments light.

It’s a compromise that pleases no one—and shouldn’t.
Universities are essentially letting the convicted off lightly as
compensation for the fact that the campus judicial process—which
often does not following normal rules of evidence or due process—is
fundamentally unjust. As Inside Higher Ed

The compromise may be doing little to appease either side, with
lawsuits still being filed by the accused and protests being staged
by survivors and other students. Dartmouth’s decision received
praise from some student groups and safety advocates, but other
colleges and universities may be slow to adopt similar policies,
even as many advocates for sexual violence survivors are pushing
for expulsion to be the default punishment.

… In recent months, a handful of institutions,
including Amherst
, Duke University and Vassar
, have put more emphasis on expulsion as a penalty, but
stop short of making it mandatory. Duke’s is perhaps the closest to
Dartmouth’s, with a policy that refers to expulsion in cases
of sexual
 as the “preferred sanction.” For the most part,
however, colleges and universities still decide upon expulsion on a
case-by-case basis, as they would for many other types of
misconduct on campus.

… Last year, the University of Michigan expelled a former
football player for an alleged sexual assault in 2009, and earlier
this year — for the first time in at least a decade — the
University of Iowa also expelled a student accused of sexual

No criminal charges have been brought against any of the
and neither of the universities has a default
expulsion policy for cases of sexual assault. Instead, they follow
the Campus SaVE Act’s broader requirement for addressing assaults,
which only mandates that university policies include “possible
sanctions or protective measures” that institutions can impose in
cases of rape, sexual assault, and other kinds of domestic and
dating violence. [Emphasis added.]

Is it wrong to expect that when a student becomes the
victim of a sexual crime, that person should notify the police and
seek justice under typical criminal procedures? Does student status
confer some special right to have criminal complaints adjudicated
under a much lower standard of evidence, with fewer rights retained
by the accused?

Automatically expelling all students found guilty of rape
is a perfectly defensible policy, but only if guilt is adjudicated
in an actual criminal trial.

from Hit & Run

What’s Behind The Rise In U.S. Industrial Production?

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The domestic energy boom is behind the expansion of Industrial Production.

In contrast to other measures of economic activity that are stagnant or declining, U.S. industrial production has been rising: Industrial Production and Capacity Utilization (Federal Reserve data)

Is this evidence that manufacturing is on-shoring, i.e. returning from overseas? While there is anecdotal evidence for on-shoring, it appears that energy production (classified as part of mining in government statistics) is the big driver of rising industrial production.

Longtime correspondent B.C. submitted these two charts breaking down industrial production into mining, manufacturing and total production. While manufacturing has recently returned to pre-recession levels of late 2007, energy production (included in mining) has soared as the energy industry has put fracking and new wells into production. B.C. Commented: "The remarkable untold story: Ex mining and oil and gas extraction, US Industrial Production has been in contraction for most of the period since Peak Oil in 2005-08."

The red line is the ratio of total production to mining/energy. Its decline reflects the dominance of mining/energy in the rise of industrial production as a whole.

The second chart is percent change from a year ago. This shows the rate of manufacturing expansion has been declining since 2010 while mining/energy has been on a tear, spiking as high as 10% gains per year.

Here is a chart of the U.S. oil/gas rig count:

For context, here is a longer term look at the U.S. rig count. Note that the number of active rigs in the early 1980s was considerably higher than the present count.

For context, here is total U.S. energy consumption. The takeaway here is the reliance on oil, gas and coal, i.e. the fossil fuels:

One last bit of context: U.S. oil imports. While the increase of 3+ million barrels a day in domestic production is welcome on many fronts (more jobs, more money kept at home, reduced dependence on foreign suppliers, etc.), the U.S. still needs to import crude oil.

U.S. Imports by Country of Origin (U.S. Energy Information Administration)

*  *  *

Do these charts look sustainable?

via Zero Hedge Tyler Durden