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Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.

News Provided by the Free-Market News Network

Fri 10.31.2008

Monday's Radio show - ONE HOUR EARLIER
(8am PT; 9am MT; 10am CT; 11am ET)
"Fall Back" for Day Light Savings (except in Arizona) set clocks back on Saturday night, November 1

Call this a crisis? Just wait
Actually, don't wait, because we've got to stop a
bigger economic disaster in the making: 78 million
baby-boomers eligible for Social Security and Medicare.
By David M. Walker, former U.S. Comptroller General
Staring into the abyss always focuses the mind, which can help you avoid falling in. So let's take a look at the potential catastrophe that awaits us once we survive our current crisis. At the dawn of the 21st century the U.S. had $5.7 trillion in total debt. As we approach the end of George W. Bush's presidency only eight years later, that sum has nearly doubled, thanks to war costs, tax cuts, spending increases, expanded entitlement programs, and now a welter of government bailouts and rescues. This year was particularly bad. The federal budget deficit for fiscal 2008 hit $455 billion, up from $162 billion last year. That figure does not include the cost of the Emergency Economic Stabilization Act of 2008, which has an initial price tag in the hundreds of billions of dollars. In fairness, some of that money presumably will come back to the Treasury, since the new rescue-related sums will be used to acquire preferred stock, mortgages, and other assets that someday could be sold at a profit.

Staring into the deficit abyss (video)
David Walker, the former U.S. comptroller general, says the government has lost control of the national debt.

David Walker: Nobody is going to Bailout America

US Government Immorality Will Lead to Bankruptcy
(David Walker warned us - August 2007)

Fed interest rate cut may end up making matters worse
The Federal Open Market Committee’s half-point
cut in its Federal Funds target does not address
the leverage and credit issues in the banking system.
Indeed, by penalizing savers it worsens the economy’s supply/demand imbalance for funding. The cut doesn’t solve short-term problems and worsens long-term inflation worries. The banking crisis was not caused by over-high interest rates. Its two main causes were large and unknown housing-related and other credit losses and an urgent need for banks to reduce their leverage. Those problems are being addressed by huge Fed liquidity doses and plans to directly inject $250bn of new capital into banks via the Troubled Asset Relief Programme. Reducing already low interest rates will have no significant effect in alleviating the causes further.

House of Cards
You thought the housing crisis was bad? You ain’t seen nothing yet.
The Mess - Nationwide, two million homes sit vacant. Home sales are at a nine-year low. Former Treasury Secretary Larry Summers says that housing finance has not been this bad since the Depression. We still don't know the full extent of the colossal subprime rip-off, but a recent Bank of America study did some guesstimating on the scale of the consequences of the "credit crisis." The meltdown in the U.S. subprime real estate market, the bank said, had led to a global loss of $7.7 trillion dollars in stock market value since October.

Don't Look Now, There's a Huge Wave of Inflation Coming Toward Us
The time has come to review how back in 2005-2006 George W. Bush -- now increasingly perceived as another Herbert Hoover -- picked two top appointees who helped steer him towards his fateful 2008 rendezvous with a second Great Crash. One of them, a top level financier, insured that Washington's eventual rescue policies would concentrate on trying to bail-out Wall Street while ignoring the gnawing cancer of its warped ambitions and financial malpractices. The second, a professor, misapplied dogma about how to guard against severe downturns into a disastrous attempt to refight the onset of the 1930s depression -- his academic specialty. He did not understand the very different context of our own era of cyber-spatial financial recklessness and gathering global inflation.

Money for (Almost) Nothing $$
Though it often doesn't seem like it, the world is making progress against financial panic. Capital -- public and private -- is now flowing into the banking system, reducing the risk of runs or a crash. Though we're heading into a recession, how deep the downturn becomes will depend on the policy choices our leaders make. Many of those choices rest with the Federal Reserve, whose Open Market Committee cut its target federal funds rate by 50 basis points again yesterday to 1%. This was neither surprising nor all that meaningful, given that the actual fed funds rate has been trading well below the target rate for much of the last month. The Fed has been flooding the world with dollar liquidity, expanding its balance sheet in record fashion along the way. The nearby chart shows the magnitude of the Fed's monetary intervention.

Global Economic Crisis in Perspective -
USA - Inflation nation; Hyperinflation CAN happen here because we're printing money like it's going out of style!

Banks want credit card bailout next
Banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills. So they have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy. The proposal was pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America. The pilot program could involve as many as 50,000 people and would allow lenders to reduce by as much as 40 percent the amount of credit card debt those people owe.

Bank deals sought on unpaid credit-card debt
Big banks unite with consumer advocates
to seek OK to cut some consumers' liabilities
With defaults on credit-card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit-card bills. Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit-card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit-card debts in bankruptcy. The new pilot program, which the banks hope will become permanent, could involve as many as 50,000 people struggling with credit-card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.

UPCOMING GOLD DEFAULT
The gold & silver futures markets are each hurtling down a dangerous path toward possible default. The artificial paper price has created enormous physical demand, and hampered supply production, if not delivery. The gap between the corrupted paper price and the legitimate physical price in actual trading markets has grown sharply, enough to force a breakdown like in any distorted market. When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, we could easily see the COMEX fail in delivery. A default is highly likely. . .
. . . .The financial market crises, in numerous arenas, have come in large part because the banking authorities have intentionally provided rescues only for New York investment banks and other big financial firms. Up to a month ago, the USFed had sterilized most injections into the Wall Street centers of the banking system by denying the mainstream bank system via liquidity drains. Drain the national system where households work and live, and provide subsidies for the financial crime syndicate. This is a betrayal of government to the people. Elite gain came at mainstream expense. Attention has gained on the misuse, false promises, and other misdirection of USGovt funds even in the bailout packages. The big banks are ordered not to lend, but to acquire smaller banks.

Gold, Faith and Credit
Like many people, I have been looking at the price disparity between the market prices of gold and silver bullion (averaging about $1,000 an ounce for gold and $16.50 an ounce for silver) versus the prices of gold and silver futures (about $730 and $8.90 respectively), and I am thinking to myself that I would love to get a piece of that luscious arbitrage action where I buy the gold and/or silver futures at a low price while simultaneously selling the same gold and/or silver bullion at a higher price, telling the buyers that they must pay in advance and then wait up to a few months for me deliver their gold and silver, pocketing a hell of a lot of money on the buy-sell spread and the interest the money earns until the futures contract matures so that I can take delivery and settle up, and then spend the rest of my life on a wild, hedonistic spree of spending, spending, spending!

Reality Dawning... For Gold
Despite the fact that the governments of the G-7 nations have injected some $3.5 trillion into their financial systems to prevent a meltdown of the world's financial system, stock markets are still reeling. With some stocks down by over 60 percent, many investors already have been through a disastrous erosion of wealth. The declines have not occurred in just a few days as they did in 1929. Rather, Government interventions, regulatory changes and bailouts have drawn out the fall in prices over a long enough time period to make it feel like a slow water torture. Nonetheless, the reality is that there has been a dramatic fall in the price of stocks, precipitated by a massive sub-prime induced deleveraging and the opening salvos of a credit crunch that will likely be with us for some time. After years of misplaced optimism, market participants are now coming to grips with some rather unpleasant recessionary prospects. So, despite government rescue measures around the world, markets continue to sputter.

Mortgage Plan May Aid Many and Irk Others
As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence. An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people. If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.

Bush Administration Proposing Plan to Bail Out Delinquent Homeowners
The Bush Administration is considering a plan that could keep as many as 3 million homeowners who are behind on their mortgages from losing their houses, The New York Times reported today (Thursday). According to the newspaper report, this program would be the most sweeping and direct government initiative aimed at home-loan borrowers since the financial crisis started last year. As proposed, the federal government would incur half the loss on a home loan if the mortgage company that controls the loan agrees to lower the borrower’s monthly payment for at least five years. On any given loan, the mortgage company would reduce the payment borne by the homeowner by writing off part of the loan balance, reducing the loan’s interest rate or changing other loan terms, sources told The Times.

White House split internally on foreclosure aid
The White House on Thursday tried to tamp down a push from inside the administration for a program that would spend taxpayer money on helping homeowners avoid foreclosure. White House press secretary Dana Perino asserted that some within the government were trying to build support for the plan through leaks to the media. "I've seen this happen in Washington before where people float out ideas in the media," she said. "What I can tell you is that we're in the middle of analyzing several different proposals."

U.S. Commercial Paper Soars Most on Record as Fed Becomes Buyer
Corporate borrowing in the commercial paper market soared the most on record after the Federal Reserve began buying the debt directly from issuers. U.S. commercial paper outstanding rose by $100.5 billion, or 6.9 percent, to a seasonally adjusted $1.55 trillion for the week ended Oct. 29, the Fed said today in Washington. It was the first gain in seven weeks, reversing a 20 percent decline during the previous six weeks. Financial paper led this week's gain, rising $69.4 billion, or 12.4 percent, to $628.8 billion.

Goldman Sachs ready to hand out £7bn salary and bonus package... after its £6bn bail-out
U.S. investment bank Goldman Sachs HQ which has set aside £7bn for bonuses and salaries this year
Goldman Sachs is on course to pay its top City bankers multimillion-pound bonuses - despite asking the U.S. government for an emergency bail-out. The struggling Wall Street bank has set aside £7billion for salaries and 2008 year-end bonuses, it emerged yesterday. Each of the firm's 443 partners is on course to pocket an average Christmas bonus of more than £3million.
The size of the pay pool comfortably dwarfs the £6.1billion lifeline which the U.S. government is throwing to Goldman as part of its £430billion bail-out. As Washington pours money into the bank, the cash will immediately be channelled to Goldman's already well-heeled employees.

Marc Faber on Ben Bernanke and market interventions.
Predicts a 3-6 month rally with a bout of deflation, followed by global inflation.

Hey, Wall Street: Worst Yet to Come
With the Dow up another 190 points yesterday, investors are not exactly in capitulation mode. Far from it. So let us take a moment, amidst a veritable August ‘29 of complacency, to spell it out for Wall Street and the punditry: Get REAL, you blithering imbeciles! The bloody tide is about to be unleashed – so stop with the bullish hubris already, okay!? And what, you might ask, do we mean when we speak of “the bloody tide”? Just this: We are all going to wake up one day soon, the largest banks in the world will be history, and the stockmarket will be shutting down for a month. Think of it as Bear Stearns writ large, with taxpayers as the blitzed shareholder. Are you prepared?

Some Banks May Tell U.S. to Keep Bailout Cash
Talk about biting the hand that feeds you. The American Bankers Association complained on Thursday that bankers around the country were “extremely upset” about how the Treasury Department was trying to offer them billions of dollars in fresh capital. “These bankers believe they are being asked — in some cases pressured — to participate in a program they did not want and do not need,” wrote Edward L. Yingling, president of the American Bankers Association, in a blistering letter to the Treasury secretary, Henry M. Paulson Jr. Saying he had “deep concerns with the lack of clarity about the program,” Mr. Yingling said the confusion had grown sharply this week over what the government’s purpose was.

Fed's Yellen Says Recent Economic Data "Deeply Worrisome"
San Francisco Federal Reserve President Janet Yellen said that although inflation risks have diminished greatly, recent economic data is "deeply worrisome". Speaking at an event hosted by the University of California at Berkley and UCLA, Yellen said that loan rates would be substantially higher without the Federal Reserve's aggressive rate cuts.

U.S. Borrowing Needs to Reach $2 Trillion in 2009, Goldman Says
The U.S. government's borrowing needs will almost double to $2 trillion this fiscal year, prompting the Treasury to revive three-year notes and hold more frequent sales of 10- and 30-year debt, according to Goldman Sachs Group Inc. The Treasury should consider holding so-called reopenings of two-year note auctions on a monthly basis because demand for the maturity is strong enough to support sales of $50 billion to $60 billion a month, Goldman said in a note dated Oct. 29. The Treasury could, for example, hold an initial $40 billion sale and a $15 billion reopening two weeks later, it said. The Treasury sold $34 billion in two-year notes this month.

A New Bretton Woods
Economies of scale
To restore stability to the global financial system (and therefore to trade and the ecosystem) we need a "great transformation" to reverse the most pernicious elements of the failed "globalisation" experiment. Three pillars are vital to any new international architecture. . . . Since Nixon unilaterally dismantled Bretton Woods in 1971 and defaulted on the US government's commitment to meet its obligations in gold; and since the introduction of legislation to liberalise credit creation, financial markets have been liberated from social, political, and environmental constraints. As a result the world was turned upside down. The finance sector no longer acted as servant to the economy, but instead became its master. The tail wagged the dog.

Questions for nations left out of magic circle
Moves by the Federal Reserve and International Monetary Fund to make dollars available quickly and without conditions to a select group of emerging markets raise questions about the impact on those left out of the schemes. The initial response was very positive, with a broad-based rally across emerging market stocks and bonds, as investors took the view that more support for emerging markets in general was good for all of them. But there were some signs of differentiation in the currency market between those that now have access to Fed dollars – Brazil, Mexico, South Korea and Singapore – and those that do not.

Pivate Equity Is the Next Shoe to Drop
"I've been in a hurry all my life. I've been in a hurry to succeed, and in a hurry to prove myself." -- Henry Kravis
The casualty count in the world of finance is about to expand in scope. At the epicenter of the leveraged binge of the last decade were the private equity shops' "deals." These firms funded their "products" to individuals, endowments, hedge funds and to other institutions around the world with the promise of turning waste into gold.

Government and Banking, Who Rules?
The events of the last two weeks have presented enormous ‘moral’ hazards for governments and the banking industry. When we call them moral hazards we are not talking about biblical morality, but the principles behind government [Democracy] and banking [Profit and Prudence]. The effective takeover of the major banks, on both sides of the Atlantic, has brought the interests and politics of government into banking, a place ill suited to such governance. You may well say that the government shareholding does not represent such interference. If that is the case then there was no point to the purchase of such a shareholding, except the hope of an eventual profit.

Taming derivatives
Can the private sector clean up credit default swaps?
It's conventional wisdom that credit default swaps - the $55 trillion in derivatives contracts widely blamed for bringing down AIG - need oversight. But as Washington debates how to regulate what Senator Tom Harkin (D-Iowa) calls "casino capitalism," exchanges like the CME and NYSE are proposing their own free-market solution. Companies that run exchanges are proposing to set up clearinghouses for these contracts. Within a week of each other in October, both the CME Group, partnering with hedge-fund giant Citadel, and the Intercontinental Exchange announced systems for clearing and settling CDS. By the end of the month, three more exchanges laid out competing plans.

Get Ready For 'Stag-Deflation'
Back in January, I argued that four major forces would lead to a risk of deflation-- or "stag-deflation," where a recession would be associated with deflationary forces--rather than the inflation that mainstream analysts have worried about. They were: (1) a slack in goods markets, (2) a re-coupling of the rest of the world with the U.S. recession, (3) a slack in labor markets, and (4) a sharp fall in commodity prices following such U.S. and global contraction, which would reduce inflationary forces and lead to deflationary forces in the global economy. How has such argument fared over time? And will the U.S. and global economies soon face sharp deflationary pressures? The answer: Deflation and stag-deflation will, in six months, become the main concern of policy authorities.

Fed Making A Mistake? (video)
Discussing whether today's Fed decision continues a flawed strategy, with Bill Fleckenstein Capital and the Fast Money traders.

Gold Heads for Worst Monthly Slump in 25 Years on Dollar, Oil
Gold fell for the second day in Asia, extending a monthly drop that may become the worst in more than 25 years, as a stronger dollar and declines in crude oil reduced its appeal as an alternative asset. Gold tumbled by more than 15 percent this month, the largest plunge since February 1983, according to Bloomberg data. Oil has slumped 37 percent while the U.S. dollar index against six major currencies gained 7.3 percent this month.

Paulson's Swindle Revealed
The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson's transaction, the taxpayers were taken for a ride--a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public's money was a straight-out gift to Wall Street, for which taxpayers got nothing in return.

Fed Adds $21 Billion to Loans for A.I.G.
The American International Group said Thursday that it had been given access to the Federal Reserve’s new commercial paper program, allowing it to reduce its reliance on a costlier emergency loan from the Fed. The company said it would be able to borrow up to $20.9 billion under the new program, raising its maximum available credit from the Fed to $144 billion under three different programs. The credit includes an earlier emergency loan of $85 billion from the Fed that carries a much higher interest rate. A.I.G.’s big borrowings underscore the company’s bewilderingly rapid decline. When it suddenly faced a cash crisis in mid-September, the original estimate of the amount it needed was just $20 billion. A few days later, the Fed stepped forward with its $85 billion credit line. And now, the stunning size of that original bailout has grown by almost 70 percent.

Prudential's Books Hide $500 Million Loss
Prudential Financial shares were trading sharply down this afternoon after the insurer held its earnings call to explain the $166 million loss for the third quarter. Prudential's shares had opened at $35.25 in early trading on Thursday, and rose 7% in early trading. Shares then went as low as $26.11 before closing at $28.87, losing 18% for the day. It is not clear what drove the sudden drop, but clearly the market was unsettled by the lack of advice about future earnings, together with a reluctance of management to provide details about any excess capital reserves.

Ron Paul on Eddie Burke Show 10/30/2008

GMAC may become bank, eyes massive debt
GMAC LLC, the money-losing auto finance and mortgage provider, on Thursday confirmed it was seeking to become a bank holding company, and said it plans to overhaul and slash its debt load, barely four months after completing a $60 billion refinancing package. The Detroit-based lender said it was in talks with federal regulators about becoming a bank holding company, which would make it easier to participate in U.S. Treasury Secretary Henry Paulson's $250 billion bank recapitalization plan.

Bailout bill might pay billions in legal fees
Law firms could get $5.2 billion in legal fees from the U.S. government's bank-bailout bill, according to a survey by BTI Consulting Group. Lawyers would earn the fees over the next seven to 10 years by helping banks buy and sell assets under the Troubled Asset Relief Program, or TARP, as the $700 billion bailout bill is known.

A Real Election Choice On The United Nations
When Barack Obama said he'd like to "spread the wealth around," he was widely understood to be talking about redistributing income within the U.S. But there's another arena in which Obama fans are waiting impatiently for the promised wealth-spreading--the United Nations. Officially, under its 1945 charter, the U.N. is a neutral body that takes no sides in U.S. politics. But a recent story in the Washington Post, headlined "At the U.N., Many Hope for an Obama Win," reports the same drumbeat I've been hearing from the U.N.'s New York headquarters. There's little love lost there for John McCain, who replies to the U.N.'s chronic scandals and tyrant-friendly tilt by proposing some competition, via a League of Democracies. Obama, by contrast, promises to give the U.N. a bigger role in U.S. foreign policy and many more American tax dollars than the $5 billion or more per year that currently accounts for roughly one-quarter of the total U.N. budget--already the biggest share by far among the U.N.'s 192 member states.

Marching toward a dark river
Since the Obama phenomenon has no precedent in American politics, we must look to folk tales to understand it.
How could a man with no record, no experience, no known convictions and no known core beliefs so mesmerize the millions to turn themselves, their children and their country over to a man armed only with neatly pressed pants, a good shoeshine and a seductive voice? We don't even get the salesman's smile. he Pied Piper of Hyde Park is clearly the direct descendant of the Pied Piper of Hamelin. Both share the gift of what a fully credentialed psychology professor calls "a unique ability to identify with children." The early piper lured the children of Hamelin to their deaths in the river when the burghers refused to pay him for ridding their village of rats.

Yeah, sure . . . let the American taxpayers foot the bill for the whole world!
What about that old thing we defeated long ago - taxation without representation?. . .

America must lead a rescue of emerging economies
The global financial system as it is currently constituted is characterised by a pernicious asymmetry. The financial authorities of the developed countries are in charge and they will do whatever it takes to prevent the system from collapsing. They are, however, less concerned with the fate of countries at the periphery. As a result, the system provides less stability and protection for those countries than for the countries at the centre. This asymmetry – which is enshrined in the veto rights the US enjoys in the International Monetary Fund, explains why the US has been able to run up an ever-increasing current account deficit over the past quarter of a century. The so-called Washington consensus imposed strict market discipline on other countries but the US was exempt from it.

Venture capitalists not upbeat on economy
Silicon Valley is in for a long downturn, according to some of the area's top venture capitalists, and the depth of the tough times is still unknown. "There's been a real big change in the world, and I don't quite understand it," said John Doerr, a partner in Kleiner Perkins Caufield & Byers in Menlo Park, one of Silicon Valley's oldest and best-known venture capital firms. Doerr spoke in Palo Alto Wednesday on a panel sponsored by VentureBeat, a venture capital blog. "All the world's global financial assets ... have declined by 40 percent - that's absurd," he said. "There's something going on here other than subprime mortgages."

Intel chief sees growing potential for conflict
The risk of international conflict will increase in the next two decades as China, India and Russia become major powers and competition for resources grows, the top U.S. intelligence official said on Thursday. The next 20 years of transition to a new international system will be fraught with risks and challenges with the rise of emerging powers and a historic transfer of wealth and economic power from West to East, U.S. Director of National Intelligence Mike McConnell told an intelligence conference in Nashville, Tennessee. "Strategic rivalries are most likely to revolve around trade, demographics, access to natural resources, investments and technological innovation," McConnell said in a transcript of a speech provided by his office.

A $50 Billion Bailout in Russia Favors the Rich and Connected
Companies belonging to two of Russia’s richest men are among the first recipients of a $50 billion bailout program. The project, like so much else here, is opaque in its details but has resulted in some of the nation’s oil windfall being funneled to well-connected Kremlin insiders. Under the plan being put in motion this week, money is channeled through the state development bank Vneshekonombank, known as VEB, whose chairman is Russia’s prime minister, Vladimir V. Putin. The stated goal is to help Russian industrialists refinance loans to Western banks, with aid flowing quickest to those companies at risk of having assets seized as collateral by foreign owners.

Beaten down, American consumers burrow deeper
American consumers clobbered by housing, credit and financial fallout
Beaten down and watching their wealth shrink, Americans are burrowing ever deeper -- cutting back on spending and spelling more trouble for the sinking economy. One of the biggest problems saddling the country is damage from the housing market's collapse. Mounting foreclosures, falling home prices and soured mortgage investments are taking their toll on both individuals and businesses alike. Federal Reserve Chairman Ben Bernanke, who is scheduled to speak via satellite Friday at a Berkeley, Calif., conference on the mortgage meltdown, is likely to call on government officials and lawmakers to keep working on ways to provide more relief.

Economy Shrinks With Consumers Leading the Way
Less than a week before Americans go to the polls to select a president, the government reported on Thursday that the economy contracted from July through September. In a stark indication of widening national distress, consumer spending dipped for the first time in 17 years. Economists said the drop in economic activity — with the gross domestic product shrinking at a 0.3 percent annual rate — presages more bad news in the months ahead. The impacts of a now-global financial crisis are continuing to squeeze companies and impede investment, causing more layoffs and austerity, while prompting Congress to consider a fresh round of spending aimed at stimulating commerce.

Cash-strapped Americans raiding their 401(k)s
Despite potential tax and investment problems, more investors have been borrowing from their 401(k) plans or taking hardship withdrawals in recent months, some retirement plan providers say. Many in the field expect more borrowing in 2008, as consumers struggle with tighter credit and potentially higher mortgage payments. “I don’t think it’s a groundswell but it’s enough to be noticed,” said RickMeigs, president of 401khelpcenter.com, which provides information on 401(k)plans. Increased borrowing on 401(k)s could be because of the credit crunch and slumping housing prices. To be sure, the indications are preliminary; it’s too early to say why it’s happening, according to the Hartford Financial ServicesGroup. Borrowing against your retirement nest egg may seem tempting but it presents a host of problems. It could significantly reduce your savings at retirement and create an expensive tax bill if you can’t repay the loan when it’s due.

Suddenly, Exxon Is Challenged
Exxon Mobil’s chief, Rex Tillerson, might want to encase the company’s third-quarter earnings release in Lucite — because it’s unlikely to be repeated. While the oil giant raked in a $14.8 billion profit, a new record for a United States corporation, it must now consider buying a rival at home to protect itself from a worsening environment toward Big Oil abroad. The days of $145 a barrel are over, at least for the foreseeable future. With oil now trading at around $65 a barrel, it will become harder to obscure the industry’s biggest challenge: declining reserves and increasingly inhospitable host nations.

Oil falls below $65 on US contraction
Oil falls below $65 in Asia on US economic contraction, fears of demand slump
Oil prices slipped below $65 a barrel in Asia Friday, extending declines after data showed the U.S. economy contracted in the latest quarter, reinforcing expectations of a prolonged slump in demand. Light, sweet crude for December delivery was down $1.44 to $64.52 a barrel in electronic trading on the New York Mercantile Exchange by midmorning in Singapore. The contract overnight fell $1.54 to settle at $65.96. Oil prices have fallen about 55 percent since peaking above $147 a barrel in mid-July.

US motor industry: The great breakdown
Such is the severity of the downturn in the global car industry that US manufacturers are now pushing for their own state bailout. Why stop at the banks? Now governments around the world are pouring taxpayer money in to bail out loss-making financial institutions, it is getting harder to argue against subsidies, loans, guarantees and other forms of government assistance for other industries, too – particularly since the economic pain is now being felt far from Wall Street. Which is why Rick Wagoner, chief executive of General Motors, the largest US carmaker, packed his suitcase for Washington and headed to the capital again this week. He is leading a lobbying push aimed at tapping taxpayers and staving off the bankruptcy of the loss-making company. GM's coffers are being depleted at a rate of $1bn a month, and will run dry by the end of next summer. Little wonder its shares have touched levels not seen since it emerged from the Great Depression.

Arizona car sales: Bad to worse
Charting the rise and fall of car and truck sales is a simple way to gauge the health of the economy. When we feel good about our prospects, we buy. When fearful, we hold back. This year, a huge run-up in gas prices was followed by weeks of financial crises. Combined with uncertain job prospects and declining wealth, it created one of the toughest markets in decades. Vehicle sales have dropped so sharply that one analyst wonders how many people are just going to hold on to their vehicles until they fall apart. In September, taxable sales of new and used motor vehicles were down 29.8 percent from a year earlier, the Arizona Department of Revenue reported Thursday.

Auto aid pleas mount; Treasury says no GM talks
Six U.S. governors and a group of chief executives on Thursday urged the Bush administration in a letter to aid the embattled auto industry while the White House rebuffed a request for direct support of a merger between GM and Chrysler. An administration official said the focus instead would be on speeding of $25 billion of low-interest loans for factory retooling, a step the industry's allies say does not go far enough to reverse a deepening industry crisis. Meanwhile, auto parts makers worried that a merger would eliminate vehicles that they supply, and a prominent industry consultant said GM could up to 40,000 Chrysler jobs and 16 of its 26 models.

Hope and Fear in Motown
Fall in this city has always felt a bit like spring elsewhere. It is traditionally the season of fresh starts for the hometown industry, a time when the auto companies get a jump on the calendar and begin shipping next year’s models to dealers. There were some new bright spots this fall, too — or at least brighter ones. The once-grand Book Cadillac Hotel, long a dilapidated eyesore in the heart of downtown, reopened after a $200 million renovation.

Why Detroit is not Wall Street
There is a sense of déjà vu about Detroit. In the summer of 1979, Chrysler, having staked its business on gas-guzzling cars, was in deep trouble and angling for a government bail-out. Today, Chrysler finds itself in the same tough spot, but this time it has been joined by General Motors and Ford. Three decades ago, Chrysler received $1.5bn in loan guarantees. The conditions attached were harsh. Jobs were cut and creditors suffered. With hindsight, the bail-out may have been a mistake and bankruptcy a better option. Today, however, there should be no doubt that a second bail-out would be wrong. Politically, the issue now is even more sensitive because governments around the world have just bailed out the banks. Why should well-heeled bankers be saved when they caused the crisis while blue-collar workers are left to their fate?

Motorola to Cut Jobs and Delay Spinoff
Motorola said it would shed 3,000 jobs, or slightly less than 5 percent of its work force, and delay a planned spinoff of its mobile devices unit as it spends 2009 trying to develop smartphones that will excite the public. The slow economy and waning interest in its lineup of cellphones will make the job even harder. Sanjay K. Jha, who took over as chief executive of the mobile devices business in August, warned investors on Thursday that a turnaround was more than a year away.

Sun Microsystems Reports $1.7 Billion Loss and Falling Sales
With falling revenue, problematic acquisitions, product slips and a stock that has lost three-quarters of its value in the last year, Sun Microsystems is finding that Wall Street is losing patience. The company, which makes computer servers, reported dismal sales and a large write-off Thursday — but otherwise announced no changes in a strategy that has so far failed to restore the luster that Sun had during the dot-com era. "Sun is a problem child, and the problem child has to change," said Brent Bracelin, a hardware analyst for Pacific Crest Securities.

Who shrank the economy? Food prices dent U.S. growth
Inflation ate deeply into U.S. consumer spending in the third quarter, doing more harm to the economy than either slumping car sales or housing, but recent commodity price falls may support growth going forward. This does not mean that the U.S. economy is stronger than it looks. The gross domestic product shrank by 0.3 percent between July and September, according to annualized data released on Thursday, and many economists predict a recession lasting until mid-2009.

The Rothschilds control the gold market,
. . . and about everything else of monetary value in the world

Sarkozy pressures banks to increase credit
The mandate to increase credit to customers built into the French government's financial bailout plan could be problematic for banks, a noted economist said. Laurence Boone of Barclays Capital said the mandate to increase credit 3-4 percent a year "looks demanding" within the context of a declining economy, The Financial Times reported. "We expect the economy to fall in 2009 by 0.5 per cent. In that context, the 3-4 per cent lending target looks demanding as corporate and consumer demand is likely to fall sharply," he said.

U.S. economy contracts; Japan warns of "harsh storm"
The U.S. economy contracted in the third quarter as the financial crisis raged, while Japan and Germany said they would spend billions of dollars to provide a cushion against a deep global recession. The spending measures would complement a series of interest rates cuts, including those from China, Norway and the United States on Wednesday. Japan may cut rates on Friday and the European Central Bank, Britain and Australia are expected to follow next week, coming on the heels of data that showed a rapid deterioration in major economies.

The Great Obama Swindle of 2008
I have become 100% convinced, to a moral certainty, beyond a reasonable doubt, that Barack Obama is not only not a "natural born citizen" as required by the U.S. Constitution to be president, but that he was not even born in the USA, not born in Hawaii, probably in Kenya, never naturalized. If he is elected, he will be the UnConstitutional President from the moment he takes the oath of office, the first president who is not a citizen of the United States. Why I am so sure? . . .

Ruling to come on Obama birth case
A Warren County magistrate said he’ll decide tomorrow whether Ohio Secretary of State Jennifer Brunner has to get proof that Barack Obama was born in the United States. David M. Neal, a Turtlecreek Township resident who runs a political Web site, filed suit last week, saying state and federal government leaders have failed to verify that Obama was born in Hawaii, instead of Kenya. The U.S. Constitution requires presidents to be natural-born citizens who are at least 35 years old. Neal says he’s part of a nationwide grass-roots movement that has questioned Obama’s birthplace and qualification to run for president. Neal’s complaint asserts that Obama’s Internet site does not disclose the name of the hospital where Obama was born and that an original long version of the birth certificate should be made available before the election.

Supremes asked to halt Tuesday's vote
Constitutional crisis feared over Obama's 'qualifications'
The U.S. Supreme Court is being asked to help the nation avoid a constitutional crisis by halting Tuesday's election until Democratic presidential nominee Barack Obama documents his eligibility to run for the top office in the nation. Democratic attorney Philip Berg had filed a lawsuit alleging Obama is ineligible to be president because of possible birth in Kenya, but as WND reported, a federal judge dismissed the complaint claiming Berg lacks standing to bring the action. The 34-page memorandum that accompanied the court order from Judge R. Barclay Surrick concluded ordinary citizens can't sue to ensure that a presidential candidate actually meets the constitutional requirements of the office.

Yes, Barack Obama really is a Manchurian candidate
"If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide." – Abraham Lincoln
As Election Day rapidly approaches, many Americans are wondering why so many of their countrymen reject a genuine war hero with decades of experience, one whose pro-life, limited-government values pretty much reflect those of Middle America. Instead, these same countrymen are enthralled with a man who not only has no experience or qualifications for the job, but who is, in fact, the most radically left-wing major-party presidential candidate of our lifetime, having been mentored and supported for decades by terrorists (Ayers), communists (Davis), America-hating racists (Wright) and criminals (Rezko). Doesn't make much sense, does it?

OBAMA'S GAMBLE: POSSESSION NINE TENTHS OF THE LAW
While the disgraced mainstream media continues to ignore the constitutional crisis regarding Obama's birth certificate, we the people will not be deterred from getting the truth. . . . an individual applying for a hunting license in Virginia must provide a real birth certificate, but an applicant for president of these united States of America doesn't have to prove citizenship? Excellent point and it appears the states of the Union are willing to allow the DNC to defraud their citizens the right to vote for a legally eligible candidate because they fear riots by a certain race of voters. The idiom, possession is nine tenths of the law, is EXACTLY what Obama is gambling on right now. If he can stall until November 4th when vote fraud will "elect him" if he's the choice of the shadow government, Obama figures he's home free.

Jerome Corsi Interview about Obama Kenya Ties Part1

Jerome Corsi Interview about Obama Kenya Ties Part2

Jerome Corsi Interview about Obama Kenya Ties Part3

Obama Speaks Perfect Arabic??? WHO IS HE??

Video Unearthed Democrats in their own words Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis. At a 2004 hearing see Democrat after Democrat covering up and attacking the regulations to protect Fannie Mae and Freddie Mac (their Cash Cows) that are now destroying our economy because the Democrats let them cheat.

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Archived Page Link
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Thurs 10.30.2008

Fed cuts interest rates to 1%
The US Federal Reserve cut interest rates by half a percentage point to 1 per cent on Wednesday and announced that it would lend $30bn each to central banks in Brazil, Mexico, South Korea and Singapore to lend on to local banks. The dollar loans, structured as currency swaps, are intended to help meet intense demand for dollars in these major emerging markets. The Fed’s rate cut takes US rates down to a level only once equalled before, amid the deflation scare of 2003 to 2004. It aims to offset the sharp recent tightening in credit conditions that threatens to plunge a weakening US economy into a recession.

U.S. Inflationary Interest Rate Cut Bullish for Gold
Gold rose nearly 2% yesterday as the Federal Reserve decreased the fed funds rate by 50 basis points to 1.00%. Other central banks internationally are also slashing interest rates and there is increasing speculation that the Bank of England and the ECB may cut interest rates aggressively as early as this week and possibly even today in an effort to prevent international financial contagion causing a sharp global recession. Silver surged 12% yesterday from extremely oversold levels – its largest jump since December 31st 1979. The dollar fell sharply yesterday and increasing speculation that the Federal Reserve may decrease interest rates to 0% will likely put much pressure on the overbought dollar in the coming weeks. Negative real interest rates and further cheap money policies and unprecedented digital money creation will likely be very inflationary in the coming months and have significant implications for the US dollar and the international monetary system.

Chinese Yuan the Worlds New Reserve Currency?
Things are getting worse. On Friday morning, futures trading was halted for the first time ever after futures plunged more than 5 percent. The sell-off came after another 500-plus down day on the Dow followed by steep declines in equities markets across Europe and Asia. Japan's benchmark index, the Nikkei, slipped more than 9.5 percent after Toyota and Samsung reported disappointing earnings. The news was equally bad in Europe where shares were battered across the continent on fears of a global recession.

GDP report is expected to show shrinking economy
Report due Thursday is expected to show gross domestic product shrank at rate of 0.5 percent
A day after the Federal Reserve slashed a key interest rate to a level seen only once before in the last half-century, the government is releasing its first look at how much the economy shrank in the July-September quarter. The report is expected to show that the country's gross domestic product declined by 0.5 percent. Many analysts believe the GDP -- the measure of the value of all the goods and services produced in the United States -- is falling further in the current quarter and will also fall in the first three months of next year. Two consecutive quarters of declining GDP fulfill the classic definition of a recession.

Peter Schiff BLOOMBERG 28 Oct 2008 Part 1
Consumer confidence - not pessimistic enough; unprecedented financing need on horizon for 2009; we're BROKE and printing money.

Peter Schiff BLOOMBERG 28 Oct 2008 Part 2
We've borrowed and spent ourselves into bankruptcy. . . dollar will not hold value

Economy shrinks in third quarter, sign of recession
The economy jolted into reverse during the third quarter as consumers cut back on their spending by the biggest amount in 28 years, the strongest signal yet the country has hurtled into recession. The broadest barometer of the nation's economic health, gross domestic product, shrank at a 0.3 percent annual rate in the July-September quarter, the Commerce Department reported Thursday. It marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.

Fed's dilemma over zero rate looms closer
Yesterday's US interest rate cut, as well as the expectation of further reductions in December, puts the Federal Reserve within sight of the "zero bound" - a fed funds rate of zero. What happens then? If the Fed gets close to zero and believes it needs to ease monetary policy further, it will start to target the risk-free rate at periods of longer than one day - for instance, three-month or even two-year rates. But before doing so it will redouble its efforts to hammer down risk spreads in credit markets in conjunction with further fiscal stimulus. If these efforts are successful, the US central bank may not need to target longer term risk-free rates. The debate about next steps for policy is closely tied to the assessment of the risk of deflation - that falling asset prices and a deep recession could result in falling consumer prices.

T-bill demand rises, interbank lending rates slip
T-bill demand ticks higher as Fed lowers rates; interbank loan rates slip again
Investors again sought the security of Treasury bills Wednesday, uncertain that the Federal Reserve's interest rate cut will do much to boost the flagging economy anytime soon. The three-month T-bill, considered one of the safest assets around, saw its yield slip to 0.61 percent from 0.74 percent late Tuesday. A drop in yield indicates an uptick in demand. Longer-term Treasurys were mixed after the Fed said it was lowering the fed funds rate half a point to 1 percent, as expected.

Bailout Banks' Bonuses Questioned
CNBC's Dylan Ratigan, host of 'Fast Money' and 'Closing Bell,' gives Debra Borchardt the lowdown on banks that are receiving federal aid and how they'll handle bonuses this year.

Wall Street Won't Surrender Bonuses Amid Outcry, Veterans Say
Wall Street's chief executives will hunker down and pay bonuses this year in the face of the worst financial crisis since the Great Depression, a taxpayer bailout and mounting political outcry, industry veterans say. Odds that Wall Street will forgo the payouts are "slim to none," said John Gutfreund, 79, president of New York-based Gutfreund & Co. and the former chief executive officer of Salomon Brothers Inc. "They're going to have to be a little bit sensitive because politicians, whether they like it or not, are part of their lives now."

Bailed out firms are doling out dividends
A large share of the U.S. federal bailout funds allocated to banks will end up in the hands of the banks' shareholders, much to Sen. Charles Schumer's dismay. "The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program," said Schumer, D-N.Y. Schumer is requesting the government suspend dividend payments for banks that participate in the bailout plan, The Washington Post reported Thursday. In the next three years, 52 percent of the bank's bailout allocations could wind up in the hands of shareholders, the Post said.

Billions in Bank Rescue Funds are Fueling Buyout Deals, and not
the Increase in Loans That Would Help Ease the Financial Crisis
While the U.S. government’s plan to invest $250 billion into U.S. financial institutions has been billed as a strategy that will bolster the health of the banking system and also jump-start lending, the recapitalization plan is likely to have a secondary effect – one that whipsawed U.S. taxpayers likely won’t be very happy to learn about. Those billions are a virtual lock to set off a merger tsunami in which the biggest banks use taxpayer money to get bigger – admittedly removing the smaller, weaker banks from the market, but ultimately also reducing the competition that benefited consumers and kept the explosion in banking fees from being far worse than it already is.

Gold Insurance Against Continuing Financial Meltdown
Wow! Are you excited?
The entire world is going through a generational and even a once in a hundred year cyclical change right before our eyes and we are witness to these historical events. All of these gold and financial sites for over 10 years have been predicting that this financial meltdown was coming. And don't fool yourself here. The most important element for survival for those who survived the 1930s were those who were out of debt and had assets that were paid for free and clear. And what about those feet of clay?

Dollar: good as gold?
Until April 15, 1971, the United States dollar was as good as gold. While ordinary citizens couldn't own gold in 1971, foreign central banks could trade in their dollars and receive gold, at a fixed price of $35 an ounce. Then as the United States "printed" record amount of dollars to pay for the Vietnam War, those central banks redeemed $22 billion worth of gold in the first six months of 1971. President Nixon slammed the gold window shut. The world's currencies then went on a "floating exchange rate" -- with the dollar as the linchpin. And behind the dollar was the "full faith and credit" of the United States.

Gold Dips, Stocks Jump Despite US Recession Data;
Gold Mining Supply "in Crisis" as Government Debt Swells Worldwide
THE SPOT PRICE of physical gold slipped from a seven-session high for Dollar and Yen investors at the New York opening on Thursday, as world stock markets extended a four-day rally despite confirmation that the US economy has joined the UK in sliding towards recession. After the Federal Reserve slashed US interest rates to 1.0% as expected on Wednesday, Tokyo's Nikkei index today leapt another 10% as the Japanese currency retreated further from its strongest showing this decade.

Gold coins in short supply, command 50% premium
2Popular gold and silver coins such as the one-ounce gold and silver American Eagles produced by United states Mint is not available for sale in the market and those who sell do it at a premium of 50 percent or more on spot price, according to Michael Maroney, Vice President, Monex Deposit Company. "One-ounce and smaller gold and silver coins . . . ten-ounce and hundred-ounce silver bars . . . ten-ounce ingots and 32.15 ounce "kilobars" of gold have virtually disappeared from the marketplace," explains Maroney. "They're in private hands now, and people are holding onto them, unwilling to sell them back into the market."

Mints struggle to meet metals demand
Safe-haven investors are on a shopping spree for precious metals, snapping up gold and silver as an antidote to topsy-turvy markets -- if they can find any, that is. Demand for physical gold and silver is gobbling up product at nearly every mint around the globe and in Canada has the Royal Canadian Mint allocating its supply among its distributors, who in turn are limiting the number of coins they sell to dealers, who sell to consumers. "Virtually every mint in the world is sold out of product and as fast as we can produce it, all of us, there is more demand," said David Madge, director of bullion services at the Royal Canadian Mint.

A Bull in a Silver Shop
The most interesting news item recently was found on the cover of the Financial Times newspaper, where we learn that a guy named Lahde "made tens of millions of dollars from betting against the financial and property sectors during [the] past two years", and he now wanted to thank "the low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA" who made it all possible for him to find enough suckers. He noted that "These people who were often truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the aristocracy," he says, "only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America."

Question for A.I.G.: Where Did the Cash Go?
The American International Group is rapidly running through $123 billion in emergency lending provided by the Federal Reserve, raising questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say at least part of the shortfall must have been there all along, hidden by irregular accounting. "You don’t just suddenly lose $120 billion overnight," said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz. Mr. Vickrey says he believes A.I.G. must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse and received an $85 billion emergency line of credit by the Fed. That loan was later supplemented by a $38 billion lending facility.

Greenspan Slept as Off-Balance-Sheet Toxic Debt Evaded Scrutiny
As George Miller welcomed 60 bankers to the chandeliered Charlotte City Club one evening in September, the focus was on more than the recent bankruptcy of Lehman Brothers Holdings Inc. From their 31st-floor perch, members of the American Securitization Forum, which Miller leads, fretted about the future of their $10.7 trillion industry.

Asian shares surge, South Korea soars record 12%
Global stock indexes soared Thursday, buoyed by new efforts the world's central banks are taking to battle the slumping global economy. In Asia, major markets posted double-digit percentage gains. Japan's Nikkei index climbed 10% while Hong Kong's Hang Seng index surged 12.8%. In Seoul, the KOSPI shot up a record 12%. U.S. futures, which give an indication of how markets may open when trading begins in New York, were sharply higher. European shares posted more modest gains. In midday trading, Britain's FTSE 100 was up 1.6%. The CAC-40 in France was up about 1.3% and Germany's DAX was 4.3% higher.

U.S. pulls the plug on the world
The U.S. administration has prompted a huge surge
in the U.S. dollar, which may help refinance its financial
sector. The cost is a currency whirlwind that threatens the
collapse not just of banks and companies but entire countries.
In the past week the financial crisis, which began in banking and spread to stocks, has careered into the currency markets. The U.S. actively decided back in September 2008 to shut down the investment banks that lend to the biggest professional investors. This has caused those investors to sell anything and everything and to settle their trades. The result was a whirlwind of liquidation. Korean won, Turkish lira, Brazilian real, British pounds and commodities from oil and metals, all were sucked into the downdraft. Like a speeding truck heading home, dollar investors left a vacuum in their wake, a vortex of dust, where there had been steadily growing emerging market economies.

Gov't prepares $500 billion loan help plan for 3 million troubled borrowers
The government is considering a plan that would help around 3 million homeowners avoid foreclosure, sources briefed on the matter said. A final deal had not been reached as of Wednesday afternoon and negotiations could still fall apart, but government agencies were contemplating using around $50 billion from the recently passed bailout of the financial industry to guarantee about $500 billion in mortgages. The plan could include loan modifications that would lower interest rates for a five-year period, according to two people briefed on the plan, who asked not to be identified because details were still being worked out and the plan was not yet public.

Precious Metals Paradox
Demand is up, but prices are...down? Don't be fooled:
The market dip is the result of forced liquidations.
Gold has legs. So does silver.
he best place to find a one-ounce Canadian Maple Leaf, U.S. Golden Eagle, or a 100-ounce gold or silver bar is on eBay, but buyers had better be prepared to pay premiums of $3 to $9 per ounce over the Comex spot market price. Traditional brick-and-mortar dealers are all but sold out. How tight is this investor market? Silver Recycling recently converted part of its Philadelphia refinery from recycling industrial scrap silver to producing 100-ounce silver bars that it retails over the internet. The company is negotiating for lucrative high-volume contracts to supply several leading dealers with silver bars. With this kind of investor demand for gold and silver coins and bars, why have metal prices been falling?

Is Gold Overvalued?
In this article, I will make a case that gold’s value is significantly less than its current market price of $735. Not being omniscient, I will not consider every factor that now or in the future may impact upon gold’s price. But I will examine a few factors that, by themselves, suggest that gold is overvalued. If gold is overvalued now, it could become even more overvalued. It could rise in price. I am not providing investment advice about whether or not you should buy or sell. I am merely providing some straightforward analysis that may or may not be of value to those of you who are players or potential players in the gold market.

Gold Shortage
As the following links show, there now exists a shortage of physical gold in the real world market place. This shortage is in contradistinction to the falling price of price of paper gold in the Comex world of digital traders. Once some of these paper gold traders start demanding the delivery of their contracts, the fact of the physical gold shortage will become apparent and there will be a rush to acquire gold as a hard asset that can be held in investor's hands. Paper gold may turn out to be fool's gold.

Russia, China call for trade in more currencies
Russian and Chinese leaders called on Tuesday for world finance to use a wider range of currencies, and Russian Prime Minister Vladimir Putin suggested bilateral trade in roubles and yuan rather than dollars. "At the moment the world which is based on the dollar is suffering serious problems ... The situation on the global financial markets remains difficult," Putin said at a Russo-Chinese forum in Moscow.

Mad Max Keiser (podcast)
.... talks about a $300 Trillion global problem with negative equity and the banks; and massive short squeeze on the dollar; globalism is falling apart; predicts Obama win [caution" European view of American Politics and very strange (unbeliever) views on religion! Interesting to hear what the rest of the world thinks of what's going on here, and there.].

Globalisation and the new nationalism collide
We are saved. Amid the rubble of the world’s financial markets, we can catch sight of the foundations of a new international order. The big lesson of the crisis has been learnt: we cannot escape our mutual dependence. Global markets require multilateral rules. Why am I so upbeat? Well, only this week that great internationalist President George W. Bush announced he was summoning world leaders to Washington to “advance common understanding” of the causes of the crash. In the words of the White House, these leaders will frame “a common set of principles for the reform of the regulatory and institutional regimes for the world’s financial sectors”. That is a bit of a mouthful, I know. But, hey, multilateralism is a long word too.

Taxpayers will fund another run on the casino
Fannie Mae and Freddie Mac were probably the world’s most heavily supervised financial institutions, subject to a specialist agency, the Office of Federal Housing Enterprise Oversight. The office employed 236 people at the time of its last annual report. OFHEO did not fail because it was understaffed or not well informed about Fannie Mae’s activities, but because it lacked authority. The entire staff earned less in aggregate than Franklin Raines, the aggressive chief executive who masterminded Fannie’s expansion.

Private Banks Vie for Slice of Rescue Pie $$
Treasury Department officials and the banking industry are mulling ways to expand the government's financial rescue plan to include non-publicly-traded banks, potentially opening up the program to thousands of new institutions. Department officials met with representatives from the banking industry Tuesday to discuss expanding the Troubled Asset Relief Program to make mutually held, family-owned and other private banks eligible for federal funds.

Governors Call for Rescue Package for States
Governors David A. Paterson of New York and Jon S. Corzine of New Jersey added their voices Wednesday to the growing support for a second federal economic stimulus package, saying state governments would face devastating cutbacks if they did not receive assistance soon. Appearing before separate congressional committees, they said that their states, like many others, had already moved to address budget deficits. Their actions alone would not be enough, they said.

The matter of post-election representation
World leaders are to gather in Washington 11 days after the presidential election to try to build a new global financial structure. This raises an interesting question of US representation at the meeting. Should it be confined to an outgoing president with no stake in the outcome beyond his legacy, or should his successor also have a seat at the table – if not in person, then through designated surrogates? It is hard to imagine any of the non-Americans present objecting if Barack Obama dispatched the likes of Paul Volcker, Robert Rubin, Larry Summers or Gene Sperling, all with impeccable credentials, who could end up in his government. John McCain’s economics bench is thinner in quality but, as long as Phil Gramm were not included, it would be equally welcome.

Surplus capital is not for wimps after all
Can a bank have too much capital? To the person in the street, the answer is obvious. The function of a bank is to seek out profitable investment and lending opportunities. The more capital it has to hand, the more successful it will be. To a professor of finance, the answer is also obvious. The professor will refer to the Modigliani-Miller theorem, which states that the value of a business is independent of its capital structure. It follows that a bank cannot add value for shareholders by altering the proportions of debt and equity in its balance sheet.

Maid-Turned-Realtor Ran Vegas Mortgage Scam, Prosecutors Say
Eve Mazzarella was a Las Vegas success story. The high-school dropout and former housemaid moved to the Nevada city in 2000 from Seattle, got a certificate from the ABC Real Estate School and started selling houses in what would become the hottest market in the country. In 2006, Mazzarella recorded sales of $13.8 million and made the National Association of Realtors' "30 Under 30" list, which names the best young agents in the nation. Mazzarella started her own company, Distinctive Real Estate & Investments Inc., in December 2003. She whipped around town in a Mercedes-Benz sport utility vehicle. She planned to build a three-story office building in Vegas's shabby downtown north of the Strip and preserve a historic house on the site by lifting it onto the roof.

Women Buying Health Policies Pay a Penalty
Striking new evidence has emerged of a widespread gap in the cost of health insurance, as women pay much more than men of the same age for individual insurance policies providing identical coverage, according to new data from insurance companies and online brokers. Some insurance executives expressed surprise at the size and prevalence of the disparities, which can make a woman’s insurance cost hundreds of dollars a year more than a man’s. Women’s advocacy groups have raised concerns about the differences, and members of Congress have begun to question the justification for them.

Preventing a global slump must be the priority
Give credit where credit is due: Nouriel Roubini of New York University’s Stern School of Business was right. On February 20 2008, I wrote a column entitled "America’s economy risks the mother of all meltdowns", based on his analysis of the 12 steps to disaster. Alas, not only has the US taken those steps, but it has also – with help from others, including the UK – dragged the world behind it. In a more recent note, Professor Roubini predicts a combination of stagnation and deflation*. In doing so he points, with some glee, to the most recent analysis of the global outlook from JPMorgan Chase, once among the most bullish of analysts. Now, under?the rubric "A bad week in hell", JPMorgan states that: "Once again, we have taken an axe to near-term growth forecasts for the developed world and will likely follow up with additional downward revisions for emerging economies in the coming weeks. Already, our forecasts suggest that global gross domestic product will contract at a near 1 per cent annual rate” in the fourth quarter of 2008 and the first quarter of 2009.

Beware the unwinding of the yen carry trade
We are used to the concept that when a butterfly flaps its wings in Brazil all manner of unspeakable things happen in New Jersey and Tunbridge Wells. But many have struggled to understand the link between Mrs Watanabe’s mood swings and the price level of exotic currencies, distant equity markets and sundry commodities. What, in short, does a Japanese housewife have to do with the price of tea in China?

An ethics lesson from an unlikely quarter
It is easy to imagine corporate social responsibility being the first fad that companies abandon during the downturn. With businesses struggling, how many companies will fret about organic cotton T-shirts or how much workers earn in faraway factories? How many consumers, short of cash and worried about losing their jobs, will bother to ask? The disappearance of corporate responsibility seems a plausible prediction – except that one company last week pledged to continue taking it seriously. And because that company is Wal-Mart, the world’s most powerful retailer, thousands of other companies will be forced to take it seriously, too. Lee Scott, Wal-Mart’s chief executive, told a meeting of 1,000 Chinese suppliers in Beijing: “I firmly believe that a company that cheats on overtime and on the age of its labour, that dumps its scraps and its chemicals in our rivers, that does not pay its taxes or honour its contracts, will ultimately cheat on the quality of its products.”

U.S. Treasury Program Shuns Banks That Need Cash Most
The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say. "This has the unintended effect of making the strong stronger and the weak weaker," said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. "Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying."

Could Napoleon have coped in a credit crunch?
....Our desire to see history through the lives of great men blinds us to the real complexity of politics, business and finance, and leads us to find intentionality and design where there are only chance and improvisation. The philosopher, Alasdair MacIntyre, put it acerbically: “When imputed organisational skill and power are deployed and the desired effect follows, all that we have witnessed is the same kind of sequence as that to be observed when a clergyman is fortunate enough to pray for rain just before the unpredicted end of a drought!” He also said: “One key reason why the presidents of large corporations do not, as some radical critics believe, control the US is that they do not even succeed controlling their own corporations.” That was the experience of Chuck Prince, former Citigroup chief, and Stan O’Neal, former head of Merrill Lynch.
By describing Napoleon’s Russian campaign through the eyes of individual participants, Tolstoy rejected the notion of history as the lives of great men. Of the battle of Borodino, he wrote: "It was not Napoleon who directed the course of the battle, for none of his orders was carried out and during the battle he did not know what was going on."

The pendulum swings towards regulation
Events as well as ideas shape policy choices in democracies. Who would have predicted a year ago that a Republican ad?ministration would demand that Congress make the largest set of investments in public companies in US peacetime history? Would anyone have supposed that President George W. Bush would convene a global effort to renew Bretton Woods through strengthened international financial regulation? It reminds us that in the economic sphere, as in the national security sphere, dramatic events can make the inconceivable become inevitable.

Sarkozy’s attempted EU coup fails – for now
Largely unnoticed, there was an attempted coup d’état of sorts in Europe last week. Nicolas Sarkozy, the French president, let it be known that he wants to remain in his role of “president of Europe” for another year. No, he will not prevent the Czechs and the Swedes from assuming the European Union’s rotating six-month presidency during 2009. But since the two countries are not members of the eurozone, Mr Sarkozy wants to remain the de facto president of the eurozone until the end of 2009 when Spain, a eurozone country, takes over from Sweden.

The Twilight of Free-Market Ideology
When I heard Alan Greenspan's testimony before Congress last Thursday, I had one immediate thought: This is the beginning of the end for the free-market ideologues. According to press reports of the testimony, Greenspan told Congress that he "had put too much faith in the self-correcting power of free markets." That's no small statement. In fact, it struck me that if 1989 was the year when no reasonable person could still believe in communism (or any of its government-intensive relatives), then 2008 will go down in history as the year in which the free-market zealots saw their "wall" come crumbling down.

Sleepless in Tehran
I've always been dubious about Barack Obama's offer to negotiate with Iran — not because I didn’t believe that it was the right strategy, but because I didn’t believe we had enough leverage to succeed. And negotiating in the Middle East without leverage is like playing baseball without a bat. Well, if Obama does win the presidency, my gut tells me that he's going to get a chance to negotiate with the Iranians — with a bat in his hand. Have you seen the reports that Iran's president, Mahmoud Ahmadinejad, is suffering from exhaustion? It's probably because he is not sleeping at night. I know why. Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It's the kind of thing that gives an Iranian autocrat bad dreams.

Japan Offers Stimulus Package to Spur Its Economy
Japan announced a $51 billion fiscal stimulus package on Thursday to help households and businesses, the boldest of several measures that officials took to try to stanch the fallout from the global credit crisis, and prompting shares throughout the region to surge. Hong Kong and Taiwan cut interest rates, after a cut of half a percentage point by in rates by the Federal Reserve a day earlier. And South Korea established a $30 billion currency swap line with the Federal Reserve, a measure expected to ease pressure on local banks needing to refinance foreign debt. President Lee Myung-bak of South Korea also said his government would bring forward budget spending and consider beefing up construction spending.

Emerging economies a priority for Fed funds
The Federal Reserve’s decision to lend Mexico, Brazil, South Korea and Singapore $30bn each marks both the spread of the financial crisis to the emerging world and the increased global significance and maturity of these economies. The move is a response to the intense demand for dollars on the part of banks and companies outside the US, which extends beyond the industrialised world to many emerging nations. The Fed is seeking to address these needs and promote global economic stability in partnership with the International Monetary Fund.

US closes Syria embassy for a day
The US on Thursday closed its embassy in Syria for a day, amid increased tensions between Washington and Damascus after a US military attack killed a Syrian who was allegedly sending foreign fighters into Iraq. An anti-US demonstration is due to be held in Damascus to protest against Sunday’s US night raid on Bou Kamal, a Syrian village that is a main transit point into Iraq. The attack killed eight people including Abu Ghadiyah, who was alleged to have been supporting the insurgency in Iraq. Damascus has denied that the man was involved in terrorism.

Lights are on, but nobody is home
Outside the Democratic party headquarters in Hannibal, Missouri, one of the party workers is leaning against the window having a smoking break. He points to the Republican HQ opposite. “You could aim a howitzer straight at them,” he says. Yes, but there wouldn’t be much point: you would be very unlikely to hit anything. One small mid-western town (population, 17,000) on the Mississippi, chosen at random, provides a vivid illustration of what is happening all over the country. Conventional political wisdom attests to the importance of work on the ground in winning votes. If there is any truth at all in that, then the 2008 election was over weeks ago.

Obama prepares for speedy transition
Washington’s best-kept secret is that Barack Obama has the largest and most disciplined presidential transition team anyone can recall. Headed by John Podesta, former chief of staff in Bill Clinton’s White House, it started work well before the financial meltdown hit in September but has been swamped by its implications ever since. Transition insiders, who are under strict orders from the Obama campaign not to talk to the media to avoid giving the impression Mr Obama thinks he has won already, contrast it particularly with Mr Clinton’s transition in 1992, which was based in Little Rock, Arkansas, and turned into an extended symposium on every subject under the sun.

McCain, Palin criticize L.A. Times over Obama video
The Times will not post video of a 2003 event attended by Obama and a Palestinian scholar, saying it made a promise to a source. On the campaign trail, the GOP nominees blast the newspaper's stance.
John McCain and Sarah Palin, the Republican nominees for president and vice president, sharply criticized the Los Angeles Times today for withholding a video of a 2003 event in which Barack Obama, their Democratic rival, praised a Palestinian scholar. "It must be nice for a candidate to have major news organizations looking after his best interests like that," Palin said in Bowling Green, Ohio. "Maybe some politicians would love to have a pet newspaper of their very own. In this case, we have a newspaper willing to throw aside even the public's right to know in order to protect a candidate that its own editorial board has endorsed."

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Wed 10.29.2008

Another rate cut expected from Fed
Fed expected to cut rates again as the central
bank battles worst financial crisis in decades
The worst financial crisis in 70 years has forced the Federal Reserve to employ all the weapons in its arsenal -- including cutting interest rates to near historic lows -- to try to keep the country from plunging into a deep recession. Fed policymakers are expected to slash a key interest rate by a half-point, pushing the federal funds rate down to 1 percent, as they wrap up a two-day meeting Wednesday.

Wall Street jumps again, but no one is exhaling
Wall Street's best day in two weeks _ and one of its best ever _ brought little real reason to celebrate. Even the manic, final-hour of buying that sent the Dow Jones industrials soaring almost 900 points Tuesday was overshadowed by the reality that it could turn on investors in an instant. The extraordinary, lurching volatility that has gripped Wall Street since the financial meltdown began in mid-September meant there were no guarantees the rally would hold, not even for a few days.

Roubini Sees 'Significant Downside Risk' for Equities
Nouriel Roubini, the New York University professor who predicted the financial crisis in 2006, talks with Bloomberg's Tom Keene and Ken Prewitt about the risk of "stagdeflation," the global credit crisis and the outlook for stocks. (Source: Bloomberg) Prospects for the U.S. and Global Economy in 2008... Risk of "stagdeflation" for global economies...Outlook for "long and protracted" recession ... Need for "massive" fiscal stimulus in U.S. ... Libor; credit crunch; banking crisis ... "Significant downside risk" for equities 10:50 Fed interest rates; Roubini's predictions ... U.S. consumers; oil prices; earnings ... "Dangerous" conditions in credit markets ... Outlook for "continued" fall in home prices.

'Significant Downside Risk' for Equities P1

'Significant Downside Risk' for Equities P2

White House to banks: Start lending now
An impatient White House prodded banks and other financial companies Tuesday to quit hoarding billions of dollars flowing into their vaults from Washington and start making more loans. Wall Street soared nearly 900 points on bargain-hunting and hopes of a hefty interest rate cut by the Federal Reserve. The stock market's amazing climb, with its second-largest point gain ever, was a welcome burst of good news for a nation suffering big job losses and seemingly tumbling into a painful recession.

$7 Trillion and Counting
The Bank of England reckons that governments have
extended more than $7 trillion in aid to bail out the global
financial system. One-third of that comes from the U.S.
Governments worldwide have pledged more than $7 trillion in loans, guarantees, capital injections, and other assistance in their coordinated effort to prop up the global financial system, the Bank of England estimates. About one-third of the total has been offered by the U.S. government, according to the Bank's most recent Financial Stability Report, which it published today. As the Daily Telegraph in London notes, the global figure is equal to more than 12 percent of the world's total economic output this year.

Why Gold Price Rise Will Trigger U.S. Dollar Collapse
For the last few years, the dollar has been in a bear market due to the horrible fundamentals backing the currency (the huge debt mountain, unfunded liabilities in the tens of trillions, rampant money printing by the central bank, and the huge federal budget deficit). However, in the last three months the US dollar has diverged from its fundamentals and rallied due to investors fears about deflation. Because they see parallels between today's credit crisis and the Great Depression, investors are piling into the dollar and treasuries. Since the results of 1929's housing and credit collapse was an increase in the purchasing power of the dollar (deflation), investors have come to believe that purchasing power of the dollar is also going to rise today. Based on this belief, investors are selling assets in other currencies and buying dollars, which explains why foreign markets and currencies are crashing at the same time right now. These investors are then taking their dollars and plowing them into the "safest" investment, short term treasuries. Investors are willing to accept the near zero interest rates on these short term treasuries because they expect the dollar's purchasing power to rise. Unfortunately for these investors, the purchasing power of the dollar is not going to increase.

Dubai runs out of gold on Diwali rush
Dubai: A massive rush at jewellery shops has led to a shortage of gold at some outlets, prompting some shopkeepers to overcharge customers, Gulf News has learnt. Jewellers are seeing a huge rush of buyers as gold prices are currently at a two-year low. Shopkeepers said the rush, a combined result of the Hindu festival of Diwali and lower prices. has resulted in a shortage of gold bars. But they denied any hoarding by outlets. "There is enough gold available in the market and sales are at their peak over the last couple of days with the market falling drastically," jewellers said across the emirate. Gulf News received complaints from readers who encountered jewellers charging more than the market price.

David Walker - former Comptroller General, U.S. - "Washington is asleep!"
56 Trillion Dollar Debt America is Finished

The Four Horsemen of the Economic Apocalypse:
Lessons from the Great Depression:
Housing Distress, Stock Market Tanking, Commodities Collapsing, and Unemployment Surging.
The market on Monday opened sharply lower only to quickly rebound on the early morning new home sales numbers. This was short lived because after you dig through the journalistic rhetoric you will find that this was the lowest September since 1981. It was hard to spin the report. This includes what should be the end of the strong summer selling season yet the data was simply not there. This in light of major price declines which gave home sales a modest monthly boost. At the end of the day, the market was down yet again sending the S & P 500 to 848 or a whopping 45+% drop from its peak only 1 year ago. These are epic numbers. Wicked swings on the up and downside are not good. This is massive volatility spurred by economic uncertainty.

Don't miss this one! --- understand what's going on in this economic shell game
American Dollar down the tube America in Turmoils

IMF may need to "print money" as crisis spreads
The International Monetary Fund may soon lack the money to bail out an ever growing list of countries crumbling across Eastern Europe, Latin America, Africa, and parts of Asia, raising concerns that it will have to tap taxpayers in Western countries for a capital infusion or resort to the nuclear option of printing its own money. The Fund is already close to committing a quarter of its $200bn (£130bn) reserve chest, with a loans to Iceland ($2bn), Ukraine ($16.5bn), and talks underway with Pakistan ($14.5bn), Hungary ($10bn), as well as Belarus and Serbia. Neil Schering, emerging market strategist at Capital Economics, said the IMF's work in the great arc of countries from the Baltic states to Turkey is only just beginning.

British Leader Calls for Larger I.M.F. Bailout Fund
Prime Minister Gordon Brown of Britain called Tuesday for China and the Persian Gulf states to put up more money to help the International Monetary Fund deal with the fallout of the credit crisis. The appeal of Mr. Brown grabbed the spotlight ahead of a meeting on Tuesday with President Nicolas Sarkozy of France, who called the proposal interesting and vowed to work "hand in hand" with the British leader — just as they had on a coordinated rescue plan for European banks. Mr. Sarkozy said he also believed that the fund needed "additional means" to help ailing economies.

Struggling nations depleting IMF's bailout
Brown urges China, Gulf to pay more
With Iceland, Pakistan, Hungary and Ukraine already clamoring for mountains of cash, the $250 billion set aside by the International Monetary Fund to help struggling nations through the economic crisis is beginning to look puny. China and oil-rich Persian Gulf states should fund the bulk of a major boost in the IMF's bailout pot, Gordon Brown, the British prime minister who has burnished his reputation by taking the lead on the financial meltdown, said Tuesday.

Upping the Stimulus Dosage
Insanity is often defined as repeating the same action while expecting a different result. Recent Congressional activity to push through this year’s second economic "stimulus" package certainly indicates that many of our political leaders may have special needs. Responding to the $150 billion stimulus that was passed at the beginning of the year, I made the following observation in my February 15th commentary Upping the Inflation Dosage : "The failure of the stimulus plan to cure the economy will cause the Government, and the Wall Street brain trust, to conclude that it was simply too small. Their next solution will be to administer an even stronger dose."

U.S. Treasury Shuns Banks That Need Cash Most in Buying Spree
The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say. "This has the unintended effect of making the strong stronger and the weak weaker," said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. "Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying."

The Government's Actions Are Making the Financial Crisis Worse
The government's previous actions lead to the current financial crisis. Moreover, the government's current actions are actually making things worse.

How to Control a Currency Panic
The financial crisis has ratcheted up a dangerous notch. The currency markets have gone topsy-turvy. The authorities now have to make some pretty big and delicate moves — something like performing microsurgery in a plane in turbulent skies. The yen has risen by 40 percent against the euro since August, with most of that occurring in October. This month, the Australian dollar has also fallen by 25 percent and the pound by 16 percent against the American dollar. Swings of this scale are alarming when they happen in the stock market . But they are petrifying in currency markets, because they make it virtually impossible to price exports or imports.

What’s going on?

US Treasury Bonds = Junk The Dollar is Dead

Rattled by Housing Slide, Consumers See Worse to Come
Consumer confidence fell to its lowest level in at least 40 years, a survey said Tuesday, as falling home prices and steep declines in the stock market took a sharp toll on the faith of Americans in the economy. A widely watched survey by the private Conference Board, which dates back four decades, plunged to its lowest reading on record in October as Americans reported fewer jobs and smaller incomes and curtailed plans for major purchases like cars and appliances.

Congress Skimps on Highways, Caterpillar Sees Gap
The morning rush in Philadelphia ran 30 minutes longer than usual earlier this month when a joint in the Interstate 95 roadway came loose, shutting part of the artery and causing traffic to back up at least two miles. The U.S. House's transportation panel will hear from 19 witnesses tomorrow on boosting infrastructure spending after Speaker Nancy Pelosi asked committee chairs to suggest contents for a potential post-election economic stimulus package. While the California Democrat hasn't announced a spending target, a plan last month included $12.8 billion for roads. That wouldn't be enough to plug a $19 billion hole projected in the federal Highway Trust Fund next year.

Stocks Soar on Hopes for Rate Cut
A tug of war is in full swing on Wall Street and those pulling for stocks came out way ahead on Tuesday for the first time in a while. After four miserable weeks, a powerful afternoon rally left traders wondering if it was time to buy again. Shares, the bulls argued, have become too cheap to resist, despite signs of deepening trouble in the economy. Many other investors, however, remained unpersuaded. At about 2 p.m., the market exploded into one of its biggest rallies since World War II, with the Dow Jones industrial average closing up 889.35 points, or 10.9 percent, to 9,065.12. In the last 69 years, the Dow has gained that much on only one other day, and that was two weeks ago, on Oct. 13.

GMAC Wants to Become Bank After Getting Access to Fed Program
GMAC LLC, the money-losing auto finance and home-loan lender, is seeking to become a bank holding company after gaining access to the Federal Reserve's new program designed to unlock short-term commercial credit markets. The Fed began buying commercial paper from companies this week to reduce interest rates and lure investors back to the market for short-term debt, which seized up last month following the bankruptcy of Lehman Brothers Holdings Inc. Detroit-based GMAC said yesterday it was approved to participate in that program.

CEO Cashes Out as Bank Seeks U.S. Loan
The top executive at a midsize bank holding company is retiring with a more than $12 million payday, even as the company is applying for a government investment that could restrict such windfalls. The South Financial Group on Tuesday said Chairman, President and CEO Mack Whittle had left his post, effective Monday. Whittle had earlier said he would leave by the end of the year, and during a conference call to discuss the company financial results last week he made no indication the timing had changed. The unexpectedly sudden departure comes just days after the bank announced it plans to apply for a federal investment through the Troubled Asset Relief Program, or TARP, which contains provisions that void existing compensation agreements in order to prevent "golden parachutes." "The timing is precarious as hell," says Adam Barkstrom, analyst with Sterne Agee.

Still no end in sight
House prices in America fall yet again
THOSE looking for an end to America's housing bust will have to wait a little longer. Although sales of new homes rose slightly in September, prices are continuing to fall fast. On Tuesday October 28th the S&P/Case-Shiller index of house prices for ten cities showed a record decline of 17.7% in the year to September. The index has now fallen nearly three times as far as it did during the last big dip in 1991. The broader 20-city index has also touched a new low, sinking by 16.6%. Some observers think that house prices could continue to drop until the middle of next year.

Could the Dow reach 7,000? 700? Seven?
Financial forecasters are in a race to call the bottom to the bear market. And just as on the way up, when analysts competed for attention with their forecasts of bigger and bigger gains, the financial pundit class now seems compelled to out-gloom the next guy. "To make a crazy forecast today is not crazy," said Owen Lamont, a former professor at Yale who has studied economic forecasting. "It's not crazy to predict the Dow is going to 2,000. That's in the realm of possibility." Indeed, in an era of 1,000-point daily swings in the Dow and 30 percent losses in the stock market, and in stock markets around the globe, prescience is at a premium - and the dividends of a high- profile correct call can be immense.

A sobering look at the UCC:
How the world economies 'work' and the power of the world banks.

As Economy Slows, Lenders Begin to Curb Credit Cards
First came the mortgage crisis. Now comes the credit card crisis. After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers. The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of unprecedented losses after an era in which it reaped near record gains from the business of easy credit that it helped create

Consumers Feel the Next Crisis: Credit Cards
After years of flooding Americans with credit card offers and sky-high credit lines, lenders are sharply curtailing both, just as an eroding economy squeezes consumers. The pullback is affecting even creditworthy consumers and threatens an already beleaguered banking industry with another wave of heavy losses after an era in which it reaped near record gains from the business of easy credit that it helped create.

U.S. Growth Will Be Hurt More by Homes Than Stocks, Study Says
Plunging home prices will cut economic growth in the U.S. more than the drop in stock prices this year, economists at the University of Southern California and the University of California, Los Angeles, said. A 10 percent decline in housing wealth results in a $105 billion, or 1.2 percent, reduction in personal spending, according to the three-year study by economists at the USC Lusk Center for Real Estate and the UCLA Ziman Center for Real Estate. Consumer spending accounts for about 70 percent of GDP, so that drop would result in a reduction in real GDP growth of 1 percentage point, the study said.

The Audacity of Hypocrisy
REDISTRIBUTION BABY! BOTTOMS’ UP!

US consumers stop spending amid worries over jobs and homes
Two sets of appalling data signalled that the worst may be yet to come for the American economy, increasing expectations that the US central bank will slash interest rates today. Statistics published yesterday showed the worst level of consumer confidence since records began in 1967 and the sharpest annual fall in urban house prices on record. Traders banked on at least a half-percentage point interest rate cut today, which would reduce the cost of borrowing to 1 per cent.

Wal-Mart cuts growth plans
Wal-Mart Stores Inc. is navigating the global economic slowdown by scaling back its store growth and capital expenditures while focusing on remodeling existing locations and creating smaller outposts. The goal, Chief Financial Officer Tom Schoewe told analysts on its second day of the company's annual meeting with Wall Street analysts, is to continue to increase its cash flow to invest in its business, while delivering returns to shareholders through dividends and share buybacks.

World will struggle to meet oil demand
Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows. Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

A Detroit Bankruptcy Beats a Bailout
Not content with $25 billion in government loans to retool factories for fuel-efficient cars, the auto industry is already back at the trough, this time angling for a taxpayer investment in the firm that would result from a merger of General Motors and Chrysler. You can just imagine the pitch from the populists of the Michigan congressional delegation: If the government is willing to invest $250 billion to bail out pinstriped bankers, then the least it could do is throw an extra $10 billion to rescue the domestic auto industry and the millions of workers and retirees who depend on it.

Automakers seek govt aid beyond bailout and loans
Beleaguered U.S. automakers are seeking federal help beyond the money available for them as part of a financial industry bailout and a loan package to fund more fuel-efficient cars, the White House said Tuesday. White House spokeswoman Dana Perino said the auto industry has talked to the Bush administration about funding on a much broader scale than the two programs approved by Congress earlier this fall.

Big Car Retailers Write Off Domestic Brands $$
Two big auto dealership chains delivered more bad news for domestic car makers: Many Detroit auto franchises have become practically worthless. In third-quarter earnings reports Tuesday, Group 1 Automotive Inc. and Sonic Automotive Inc. announced charges of a combined $51 million reflecting declining "franchise value" for stores that sell brands from General Motors Corp., Ford Motor Co., and Chrysler LLC. Franchise value is a measure of the potential profit a company can make from holding the right to sell new vehicles and to provide warranty repairs for a certain make of automobiles.

More Car Dealers Shut Down $$
Auto Sellers Turn Off Lights as Sales Slump, Credit Tightens
With credit drying up and new-vehicle sales slumping to a 25-year low, car dealerships from New Jersey to California are going out of business at an accelerating pace, threatening greater economic pain for communities around the country. The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs. That is a heavy blow to a key piece of the U.S. economy. The country's 20,700 dealerships accounted for $693 billion in sales last year, or 18% of all retail sales, according to NADA. Dealership wages and salaries make up 13% of the nation's retail payroll.

Tight Credit for Farmers Leads to Smaller Crops, Higher Prices and More Hunger
Tighter credit for farmers could worsen a global food crisis as smaller crop sizes cause prices to soar. Many farmers have traditionally bought pre-season supplies such as seeds and fertilizer on credit and then paid off the debt with the proceeds from the year’s harvest. But with a growing number of farmers unable to obtain the credit they need, crop yields will suffer. Global wheat production will likely be 4.4% less next year, Dan Basse, president of AgResource Co. in Chicago, told Bloomberg News. Basse believes the world’s corn and soybean crops will also see decline

A Scramble to Shore Up Economies Worldwide
Policy makers around the world, unnerved by the relentless sell-off of shares, scrambled to support their economies on Monday. In South Korea, the central bank, at an emergency meeting, slashed its key rate by three-quarters of a percentage point, to 4.25 percent. The bank also announced that it would further shore up local banks by buying their domestic bonds.

Strong Banks Got Stronger in Rescue
The Treasury Department's investment in banks is looking more like a vote of confidence than a rescue operation.
On Monday, a host of regional banks unveiled some $34 billion in preferred equity investments made from the $700 billion bailout bill approved by Congress earlier this month. Most of the headlines Monday focused on the larger regional banks receiving the bulk of the investments, but a closer look at some of the smaller banks getting help highlights some very strong institutions that didn't need new capital to survive, reassure depositors or expand lending activity.

Banking misery engulfs Japan
Until recently Japanese banks had largely avoided agonies of the credit crunch. Now the misery has come to Tokyo
The Japanese banking sector, once considered a safe port in the global deleveraging typhoon, has begun to crumble in the face of stock market crashes and the destructive unwinding of the yen carry trade. The extent of the crisis emerged this week when the Nikkei 225 Index of Tokyo shares plunged to its lowest level since 1982, briefly breaking the 7,000-point level in a dip that analysts believe with have dire consequences.

In Japan, a Robust Yen Undermines the Markets
Tumbling stock markets and falling currencies are causing global concern, but the Japanese yen is generating high anxiety for rising too much. The yen surged as much as 10 percent against the dollar last week. In the last month, it has gained an astounding 34 percent against the euro. One reason the yen is rising is investors’ flight to quality. Another reason, many economists say, is the sudden end of one of the world’s biggest easy-money schemes, the so-called yen-carry trade.

Iceland Raises Key Rate by 6 Percentage Points
REYKJAVIK, Iceland — Iceland’s central bank raised its key interest rate by 6 percentage points, to 18 percent, on Tuesday, two weeks after it had eased policy to soften the impact of the country’s financial crisis. The move, which one economist called extreme, was the latest by authorities to prop up the country’s frozen currency and markets, offering investors a high return for putting money back into the North Atlantic island’s crippled financial system.

Netherlands Gives Aegon a $3.7 Billion Bailout
The insurance company Aegon said Tuesday that it had taken an investment of 3 billion euros or $3.7 billion from the Dutch government, acting to shore up its cash position in the face of the continuing financial crisis. The company also said it expected to post a loss of around 350 million euros ($436 million) in the third quarter and canceled dividends and executive bonuses for the rest of the year.

The strike that shattered US-Syria ties
Strained relations between Washington and Damascus shifted from bad to worse on Sunday when a United States commando raid on a Syrian border compound near the Iraq border reportedly left eight civilians dead - including one woman. Syrian television has called the attack an "American massacre", but details continue to emerge. The US broke its silence on the incident on Tuesday, claiming that top al-Qaeda operative Abu Ghadiyah was targeted and killed during what is being described in Western media as a pre-emptive strike. The Associated Press, quoting an unnamed US military official, reported that Ghadiyah was about to carry out an attack in Iraq. Ghadiyah, whose real name is Badran Turki Hishan Al Mazidih, is the leader a prolific network that moves foreign al-Qaeda fighters into underground resistance factions in war-torn Iraq.

Solana expresses concern at US air raid in Syria
EU’s foreign policy chief Javier Solana has voiced concern at the US air raid against al-Qaeda in Syria on Monday that caused the death of civilians. "I am concerned at the air raid that took place inside Syria which resulted with the death of civilians," he said in a statement. Solana recalled that he was in Syria last week where he discussed with the Syrian authorities "prospects for improved stability and security in the region." "I hope the situation can rapidly return to normality," he added. During his Damascus visit, Solana held talks with Syrian President Bashar al-Assad and Foreign Minister Walid Muallem about the regional situation and the development of closer ties between the European Union and Syria.

Tehran: "Syria raid cannot be repeated in Iran"
Iranian military officials have warned against a unilateral strike on Iran in the wake of a US raid against Syria. On Sunday, four US helicopters attacked a civilian building in the Syrian village of Sukkariyah, eight kilometers from the Iraqi border, killing nine civilians and seriously wounding 14 others. Deputy Army Commander Brigadier General Abdul-Rahim Mousavi told reporters on Tuesday that the time has come for the enemy to acknowledge Iran's defense capabilities.

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Did The "Chicago Way" Work for Obama in Hawaii?
As I speculated in a recent article, Obama had a dual purpose in leaving his campaign for Hawaii. And whaddaya know? His plane had barely touched down from his trip to Honolulu—ostensibly to visit his ailing granny—when the Republican governor of the Aloha State, Linda Lingle, placed his birth certificate under seal, directed the state’s Department of Health to bar access of the document to the press, and declared that the only people eligible to obtain it were the person born or someone acting on his behalf, a relative, or a legal guardian… So did Obama request the document, the better to resolve the question of his eligibility to be president? With less than a week to go before the election – and with attorney Philip J. Berg’s lawsuit questioning that eligibility on the way to the Supreme Court – we still haven’t seen Obama’s birth certificate!

Obama's birth certificate sealed by Hawaii governor
Says Democratic senator must make request to obtain original document
HONOLULU, Hawaii – Although the legitimacy of Sen. Barack Obama's birth certificate has become a focus of intense speculation – and even several lawsuits – WND has learned that Hawaii's Gov. Linda Lingle has placed the candidate's birth certificate under seal and instructed the state's Department of Health to make sure no one in the press obtains access to the original document under any circumstances. The governor's office officially declined a request made in writing by WND in Hawaii to obtain a copy of the hospital-generated original birth certificate of Barack Obama.

Obama Bombshell Redistribution of Wealth Audio Uncovered

Obama rips U.S. Constitution
Faults Supreme Court for not mandating 'redistribution of wealth'
Seven years before Barack Obama's "spread the wealth" comment to Joe the Plumber became a GOP campaign theme, the Democratic presidential candidate said in a radio interview the U.S. has suffered from a fundamentally flawed Constitution that does not mandate or allow for redistribution of wealth. In a newly unearthed tape, Obama is heard telling Chicago's public station WBEZ-FM in 2001 that "redistributive change" is needed, pointing to what he regarded as a failure of the U.S. Supreme Court under Chief Justice Earl Warren in its rulings on civil rights issues in the 1960s.

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Tues 10.28.2008

Spending the Economy into Oblivion by Ron Paul
With news this week that Congress is poised to consider a new stimulus package, I am forced to again ask a question that seems silly in Washington: How will we pay for this? While a few Members of Congress have raised the issue, it certainly was not the primary concern of the House Budget Committee when they interviewed Ben Bernanke on Monday. And, when they did direct this question to the Chairman of the Federal Reserve, his answer was the standard rhetoric about how Congress needed to make tough choices. Needless to say, not many specifics were discussed. One of the most liberal members of the House, Barney Frank, has at least volunteered something of a suggestion: "We can let Iraq take care of itself." This, of course, goes in the right direction, but hardly far enough.

Fed Begins Buying Short-Term Debt
Program Aims to Revive Market for Commercial Paper
The Federal Reserve yesterday began buying short-term debt from banks and companies as a way to make it easier for corporate America to borrow cash to cover day-to-day operations. General Electric, the biggest U.S. issuer of commercial paper, said it availed itself of the Federal Reserve's new short-term funding facility. American Express also has said it would register to borrow from the Fed.

Treasury clears way for bailout to begin
Treasury announces record bailout
starting with initial $125 billion headed to banks
The government has cleared the way to ship out $125 billion this week to the country's largest banks, beginning the biggest government bailout in history. "The money will go out the door for those institutions early this week," predicts Assistant Treasury Secretary David Nason, one of the chief architects of the rescue plan. Not only is the money ready to be sent to nine major financial institutions, including Bank of America, Citigroup Inc. and JPMorgan Chase, but the government is reaching preliminary agreements with a group of more than a dozen major regional banks, who will share a part of an additional $125 billion the government hopes to pump into the banking system.

Gold "Remains Safe Haven" Amid World Currency &
Stock-Market Crash; Price Dented by Forced Selling, Failing Hedge Funds
THE SPOT PRICE OF GOLD BULLION sank and then bounced hard vs. the Dollar early Monday, whipping violently against all major currencies as world stock markets added to this year's 40% losses to date. "While [the crucial Indian festival of] Diwali is just one day away in India," notes precious-metals dealer Mitsui in London today, "it is important to note that physical demand is strong globally, and this may help to support the Gold market at these levels.

How to Bankrupt a Nation
How would you bankrupt yourself? You’d want to get yourself into a position where you could not pay off your debts. You’d run up big credit card bills. You’d borrow heavily. You’d mortgage and re-mortgage your house. You’d splurge on your spending. The money would go – to clothes, restaurants, and hairdressers. While you were on your spending spree, you might run down your savings and assets. You might travel to Las Vegas and drop a few thousands at the tables. Or you might make bad investments. Buy a stock for $190 and hold it until it is worth a few pennies. Your income from your job is a big asset. It would help the cause if you lost your job.

If Obama Wins, Economy's Doomed
Peter Schiff, president of Euro Pacific Capital,?says a big-government Obama administration would lead to a collapse on par with the Great Depression.

G-7 countries worried about Japanese currency
The world's leading industrial countries are worried about the recent sharp rise in the value of the Japanese currency. The financial ministers and central bank presidents of the Group of Seven major industrial countries issued a joint statement late Sunday in which they expressed their concern about the recent volatility of the yen. The yen rose to a 13-year high against the dollar in trading Friday, raising concerns in Japan that it could harm its exports of cars and other products because they will now cost more in U.S. markets. The statement by the G-7 finance officials was released in Washington, Tokyo and other G-7 capitals.

Central Banks Slashing Rates As Investors Flee
Global Pullback Could Affect Currency Markets
Central banks around the world are moving to further slash interest rates as they seek to contain the damage from the bursting of the biggest credit bubble in history. The Federal Reserve is poised to cut its benchmark rate for the second time in two weeks at a pivotal meeting in Washington on Wednesday, and the European Central Bank yesterday suggested that it would do the same next week. South Korea announced a dramatic rate cut yesterday, by three-fourths of a percentage point.

Little relief in credit as market awaits rate cut
The still-cinched credit markets are anticipating a half-point interest rate cut from the Federal Reserve this week, but investors are worried it won't be enough to quickly revive the economy. The Fed has been slashing rates and taking unprecedented action to get market participants back in the lending mood, including launching a facility Monday to buy the short-term corporate debt known as commercial paper. The moves have helped ease lending rates at the margins.

Capitalism is superior to Socialism
Capitalism and free enterprise is an economic system that allows individuals to set their own goals for success and is the best system for producing wealth and promoting prosperity. It has often been described as the "primary engine of growth". Winston Churchill defined Socialism as "a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery." So it is evident that Norman Thomas, a U.S. Socialist Party presidential candidate in the 1940s, was correct when he said "The American people will never knowingly adopt socialism. But under the name of 'liberalism', they will adopt every fragment of the socialist program, until one day, America will be a socialist nation, without knowing how it happened." Socialists believe that your life must be guided from birth to death by the government.

Lessons From the 1929 Market Crash
Analysts say investors had better beware false rallies like the one that occurred after the market crash nearly 80 years ago.

Wall Street marks grim anniversary of 1929 crash
Anniversary of 1929 crash highlights
contrasts -- and parallels -- with current crisis
Wall Street's struggle to recover from this month's devastating drop is coinciding with the anniversary of another dark period for the stock market -- the crash of 1929. The dramatic selling of Oct. 28-29 of that year sparked widespread panic and helped trigger the Great Depression largely because the government, wary of meddling in the economy, failed to take many of the steps that the Treasury and Federal Reserve are now using to try to prop up the hammered financial system.

Wall Street drops to 5-yr lows on economic fear
Stocks closed at their lowest levels in 5-1/2 years on Monday, extending a global sell-off as worry about the severity of a global recession and the bleak outlook for profits gripped investors. Trading was volatile and volume was light, with stocks falling sharply in the last half hour of trading. With just four days left in October, the S&P 500 is on track for its worst month ever in the post-World War Two period. Hedge funds and mutual funds have been dumping stocks to raise cash to meet redemptions from their clients, traders noted, exacerbating the late-day selling.

China isn't interested in new global monetary system
Just as it was never realistic to think China could single-handedly save the world economy, it is probably wise to tone down any expectations that Beijing somehow holds the key to a new international financial order. Prime Minister Wen Jiabao promised after talks among 43 Asian and European Union countries that China would actively participate in a Nov. 15 summit meeting that the U.S. president, George W. Bush, is convening to rake over the global credit crisis.

Latin American finance officials call for reform of international system
Finance ministers and central bank chiefs from Latin America called for reforms to the international financial system on Monday in an extraordinary meeting in Brazil's capital about the financial global crisis. Foreign ministers, finance ministers, and central bank presidents from Argentina, Chile and Venezuela and others attended the meeting to discuss a crisis which is threatening to severely hurt regional and global economic growth.

Borrow and spend
Gordon Brown, the UK prime minister, has conceded that his long love affair with Prudence is over. The romance was embodied by fiscal rules whose spirit was never respected. Alistair Darling, the chancellor, seems set to scrap the rules entirely, while Mr Brown implied on Monday that ignoring them was an act of patriotism. Prudence, it seems, was a good-time girl. In grimmer days, Mr Brown finds her clingy embrace unendurable.

Silver Market Update
If we define a bearmarket as the price making a series of lower intermediate lows beneath falling long-term moving averages, then silver is in a bearmarket against the dollar and against the Euro and most other currencies. It is worth recalling, however, that by this definition both gold and silver lapsed into bearmarkets in the mid-1970's, which turned out to be severe corrections in the middle of a major bullmarket, as in the late 70's they picked up again and accelerated into spectacular parabolic blowoff tops.

Hang On: Hedge Funds Aren't Done Selling
The newspapers blame the weakening economy and somber earnings forecasts for the sharp selloffs we've been experiencing. Declining earnings and recession fears play into the declines, to be sure, but the real story -- which does not get the headlines it truly deserves -- is the mass liquidation that is occurring within the highly leveraged hedge fund community.

A Shock To The System?
In a moment, I’d like to describe a new development in silver that should prove quite bullish to the price, but first I’d like to review some continuing facts that are significant in their own right. It would appear that the confluence of many factors point to sharply higher silver prices dead ahead. Yes, I know the price has recently collapsed. Ironically, it is that very price smash that is the basis for the coming price launch higher.

Evil Wall Street Exports Boomed With 'Fools' Born to Buy Debt
Tom Bosh lowered the telephone receiver into its cradle, making a decision on the way down. "We're not buying any more," he told his traders at Bank of New York Co. "Nothing." It was May 2007, and Bosh, who managed $25 billion from the bank's 13th-floor trading room above Times Square, had just hung up on Ralph Cioffi at Bear Stearns Cos. a dozen blocks away. Bosh had invested $50 million in notes from an issuer Cioffi controlled, and he was ready to pull the plug.

US regional banks eye deals with Tarp cash
American regional banks accepted more than $30bn of fresh capital from the US Treasury on Monday in a move that is likely to spur a consolidation of the US banking sector. Fifteen regional banks and savings institutions, including SunTrust, Capital One and KeyCorp, have tapped the Treasury’s Troubled Asset Relief Programme (Tarp) so far. Further infusions are expected as banks obtain the necessary board and regulatory approvals. While the intent of the programme was to revive lending in locked credit markets, the capital is also providing a catalyst for consolidation.

Futures Lose Clarity, Put Fed in Dark on Reaction to Rate Move
Federal Reserve Chairman Ben S. Bernanke and his colleagues usually sit down for their interest- rate meetings with a clear idea of what investors think they'll do. Not this time. One key indicator, futures contracts, no longer provides an accurate signal of where the Fed will set its benchmark interest-rate target. The problem: Traders look at the rates banks charge each other for overnight loans when figuring out their bets on what the Fed will do, and for the last six weeks the Fed has failed to get those overnight rates to line up with its target.

80 Years History of Brutal Gold Stock Corrections
The severity and the speed of the crash which occurred in the precious metals stocks caught us and practically everyone by complete surprise. The meltdown surpassed everybody’s expectations and has no historical precedents. However, when looking at the past 80-year history, there are a number of bear markets that carry some similar characteristics to the crash of 2008. The following six bear markets saw very significant corrections in mining stock

Foreclosures Open Door To Disorder
Vermin, Crooks Exploit Housing Market Crisis
Among the many harsh lessons for mortgage lenders in the housing bust is this one about evictions: Selling a house is far easier than taking it back. Clever opportunists and struggling families have figured this out, too, and the result is a rapidly evolving free-for-all coursing through the Washington region's worst foreclosure-racked suburbs. Defaulting homeowners are taking advantage of banking chaos to live mortgage-free for six months or longer, dragging out the eviction process, according to lenders and real estate agents. Unscrupulous landlords are collecting rent but withholding mortgage payments, leaving a rude surprise for their tenants when repossession comes. And banks are so eager to avoid the hassle of eviction that they are paying occupants $5,000 or more simply to hand over the keys and move out without a fight.

Goldman faces hardship of life as just another bank
A few months ago the prospect of Goldman Sachs approaching Citigroup to discuss a merger would have been unthinkable — Goldman appeared to be the one Wall Street firm immune to a credit crunch that had saddled Citigroup with tens of billions of dollars of losses.

OUTRAGEOUS! . . . who do those people think they are?
Broken Securities Industry Still Has $20 Billion to Pay Bonuses
Five straight quarters of losses and a 70 percent slide in its stock this year haven't stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses. Goldman Sachs Group Inc. and Morgan Stanley, both still on track for profitable years, have set aside about $13 billion for bonuses after three quarters, down 28 percent from a year ago. Even some employees at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, will get the same bonus they received a year ago.

Scope of $700 billion bailout bill continues to widen
The Treasury may back risky mortgages and include other industries in its financial rescue effort.
The US government's $700 billion financial rescue effort is only a few weeks old – but it's already morphed into something far broader and more ambitious than its designers originally intended. The speed and severity of the nation's economic problems simply may have forced it to change. First, the Treasury added direct investment in banks to its plan to buy up troubled mortgage-based assets. Second, it now seems primed to partially guarantee some home mortgages in an effort to stem a rush of foreclosures sweeping through US neighborhoods.

Companies start competing for bailout money
The bailout is now the hottest lobbying game in town. Insurers, automakers and American subsidiaries of foreign banks all want the Treasury Department to cut them a piece of the largest government rescue in U.S. history. The betting is that many with their hands out will be successful, especially with financial markets in a stomach-churning dive and predictions the economy is about to tumble into a deep recession. These groups argue that the credit squeeze is so severe and the risks to the economy so dire that their industries need financial support as well. The Treasury is considering requests from a variety of industries, but has not decided whether to expand the program, officials said Saturday.

Recession pushes healthcare into shade
"I'm a healthcare voter!" says a campaign run by the Service Employees International Union, the labour body that has more than 1m doctors, nurses, nursing and home care workers among its members. With the housing market in severe trouble and a recession all but certain, the economy has of late pushed health policy down the list of voters’ concerns. At the end of last year, according to polling by the Kaiser Family Foundation, a non-partisan health policy institute, healthcare was the most important issue for 21 per cent of registered voters, almost neck-and-neck with the economy. Today the economy has taken a 62 per cent share, and healthcare is the main priority for only 12 per cent.

Gun Sales Thriving In Uncertain Times
Americans have cut back on buying cars, furniture and clothes in a tough economy, but there's one consumer item that's still enjoying healthy sales: guns. Purchases of firearms and ammunition have risen 8 to 10 percent this year, according to state and federal data. Several variables drive sales, but many dealers, buyers and experts attribute the increase in part to concerns about the economy and fears that if Sen. Barack Obama of Illinois wins the presidency, he will join with fellow Democrats in Congress to enact new gun controls. Obama has said that he believes in an individual right to bear arms but that he also supports "common-sense safety measures."

A case of balance as credit card rules change
Over the past 40 years, credit cards have become fixtures in the American wallet. But the worldwide financial crisis and increased regulatory pressure in Washington are starting to reshape the lending system in ways that are making plastic harder to get and more costly to use. The changes will affect American consumers differently, as they carry nearly a trillion dollars of credit card debt, according to Federal Reserve estimates.

Boeing, union agree on 4-year deal
Boeing Co. and the union representing its machinists Monday announced agreement in Seattle on a four-year contract that could end a 52-day strike. Negotiators for Boeing and the International Association of Machinists met through the weekend and came to terms on a deal for the union's 27,000 Boeing workers, The Seattle Times said Monday. The machinists are to vote on the contract this week. In a statement, the union said the deal "will provide job security" and limit how much work "outside vendors can perform in the workplace."

Oil slides toward $62 as recession worry dominates
Oil fell for a third day on Tuesday, dropping almost $1 to near a 17-month low as the unrelenting dive in Asian share markets underscored fears of a global recession that is already cutting into fuel demand. The U.S. dollar's rise to another 2- year high early on Tuesday also weighed on oil prices, while traders set aside OPEC's decision last week to slash output by about 5 percent until they saw how quickly those cuts might take effect.

Avis cuts 700 jobs and records $1 billion loss
Car rental company Avis Budget Group Inc cut 700 jobs in the third-quarter and recorded a loss, before taxes, of more than $1 billion after writing down the value of certain assets, it said on Monday. The company, which has been hit hard by slowing travel amid a weakening economy, also said 2008 revenue and profit would be "significantly lower" than previous estimates due to a drop in vehicle rentals.

GM speeds hat in hand to Treasury
Is General Motors too big to fail? Rick Wagoner would sure like us to think so. Wagoner, the chief executive of the ailing automotive giant, spent most of Friday down in Washington, pressing his case for a government rescue. Yes, GM wants our tax dollars too. Banks are getting billions. Insurance companies are getting billions. Why not GM? The answer to that question depends on a few crucial points that few people seem willing to talk about, at least publicly: jobs, wages and the United Auto Workers.

White House explores aid for merger between GM and Chrysler
The Bush administration is examining a range of options for providing emergency financial help to spur a merger between General Motors and Chrysler, according to government officials. People familiar with the discussions said the administration wanted to provide financial assistance to the deeply troubled Big Three Detroit automakers, possibly by using the Treasury Department's wide-ranging authority under the $700 billion bailout program that Congress approved this month.

European automakers schedule cutbacks
German and French carmakers have said they would shut down plants temporarily in reaction to the economic slowdown. BMW said it would halt production at a Leipzig, Germany, plant for four days, the EU Observer reported Monday. Daimler, makers of Mercedes brand, said it would cut production for as long as five weeks, the report said. In France, Renault and Peugeot-Citroen also announced production cuts.

Business leaders in Europe have a bleak view of 2009
European business leaders issued a bleak outlook Monday predicting economic growth in the European Union will slow to 0.4 percent in 2009 - and to only half that in its 15 euro-zone nations. BusinessEurope, which represents 20 million small, medium and large companies across Europe, urged the European Central Bank to be ready to make "further interest rate cuts" to ease the pain of an accelerating economic slowdown marked by hefty drops in investment spending and employment.

In Europe, crisis revives old memories
"I haven't forgotten history," says Gert Heinz, a tax adviser in Munich. "If you depend on paper money you can lose everything. We've learned that the hard way after two world wars." So when Chancellor Angela Merkel went on television recently to tell Germans that their bank accounts were safe, Heinz, who at 68 still remembers the rows of canned food that his mother hoarded in the attic, decided he would rather be safe than sorry. He converted another chunk of his savings into gold and stocked up on a six-month supply of rice, sugar, flour and a special brand of milk powder that lasts for half a century.

Chavez Ambitions in Venezuela May Fade With Oil Price
The same tumbling oil prices that led OPEC to slash output last week threaten to send Venezuela's economy into a tailspin, and put an end to President Hugo Chavez's ambitions to expand his socialist revolution at home and abroad. To cope with plummeting oil revenue, the source of half the government's spending, Chavez may have to cut domestic handouts and foreign aid. The first items likely to go will be arms purchases from Russia, oil subsidies for Cuba, and job-creating local projects such as bridges and subways, economists say.

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Mon 10.27.2008

Economic Basics and Today’s Gold Market
A viewer was good enough to write and ask me about my claim that there either has to be currency appreciation or depreciation (deflation or inflation in today’s lingo). Can’t we have something like an inflationary depression? That indeed was what several of the people he regards as authorities are predicting. That is a good question because it leads to some very definite conclusions about whether to buy or to sell here in late October 2008. But first, let us step back and establish some basic ground rules.

Gold Drops as Stock Plunge Prompts Investors to Switch to Cash
Gold fell in Asia as investors sold the precious metal for cash after equities extended a slump on concern the global economic slowdown is deepening and government measures won't be enough to stimulate growth. Asia's benchmark MSCI Asia Pacific Index fell for a fourth day, by as much as 6.2 percent, even after the Bank of Korea cut borrowing costs by an unprecedented 75 basis points and Japan said it will compile a package of measures to support the country's stock market.

Jim Rogers says gold is still in a bull market - he's BUYING and that people are turning this crisis into a depression because they won't let anyone fail.

Nouriel Roubini: I fear the worst is yet to come
When this man predicted a global financial crisis more than a year ago, people laughed. Not any more...
As stock markets headed off a cliff again last week, closely followed by currencies, and as meltdown threatened entire countries such as Hungary and Iceland, one voice was in demand above all others to steer us through the gloom: that of Dr Doom. For years Dr Doom toiled in relative obscurity as a New York University economics professor under his alias, Nouriel Roubini. But after making a series of uncannily accurate predictions about the global meltdown, Roubini has become the prophet of his age, jetting around the world dispensing his advice and latest prognostications to politicians and businessmen desperate to know what happens next – and for any answer to the crisis.

The Bet That Blew Up Wall Street
Steve Kroft On Credit Default Swaps And Their Central Role In The Unfolding Economic Crisis
The world's financial system teetered on the edge again last week, and anyone with more than a passing interest in their shrinking 401(k) knows it's because of a global credit crisis. It began with the collapse of the U.S. housing market and has been magnified worldwide by what Warren Buffet once called "financial weapons of mass destruction."

October Surprise: Preparing for Something Unexpected?
At a news conference on October 22, 2008, U.S. Democratic presidential candidate Barak Obama was asked about a comment by his Vice Presidential running mate Joe Biden that Obama could expect to be tested within six months of the new presidential term by a "generated" international crisis that will force him to make unpopular decisions. Obama said the Delaware senator has occasionally engaged in "rhetorical flourishes," but the essential point was that the new President could expect to be challenged no matter who wins.

IMF's Unwelcome Return $$
Until recently, the International Monetary Fund looked analogous to postwar Britain, having lost a loan book but not yet found a role. Loans outstanding were $19 billion on July 31, against $105 billion five years ago. Falling interest income prompted cost cuts this year. Now the likes of Pakistan and Iceland need loans. Like many others, the IMF's fortunes have reversed as easy credit and commodity prices collapse. Until recently, many developing economies could either export surging commodities or borrow cheaply from private sources that rarely demanded austerity programs.

A New Bretton Woods to Restructure the International Financial System?
The first thing to say about the calls for a “new Bretton Woods” is that they overreach, in the sense that it is very unlikely that any changes in the structure of the international monetary or financial system will or should, at this point in history, come out of multilateral discussions that are big enough to merit comparison with the first Bretton Woods. Certainly we are not talking about fixing exchange rates, as the 1944 meeting did.

Bretton Woods II Could Mark Shift Away From American Dominance
You know that upcoming meeting of the G-7, dubbed "Bretton Woods II"? Well, it turns out it will actually involve some 20 countries and regions, including those with emerging markets. As US News and World Report puts it: "President Bush will meet not just with the traditional Group of Seven (G-7) cluster of industrialized countries but rather with the Group of 20. That larger forum brings in the major emerging-market nations. They include such rising powers and emerging economies as Brazil, India, China, Russia, South Africa, Mexico, and Turkey, among others."

A Study in Collapse
The collapse of the capitalist world has begun, or so a Communist would explain. Karl Marx long ago anticipated a so-called "crisis of capitalism," when financial institutions would be convulsed and investors panicked. Such a situation would set the stage for a global Communist revolution. The working class would overthrow the bourgeoisie. The workers of the world would unite under Marxist leadership. The "dictatorship of the proletariat" would be born. Once Communism triumphed everywhere the state would wither away. Life would be better for nearly everyone (except the bourgeoisie). The means of production would be socially owned, instead of privately owned. The redistribution of wealth, the elimination of oppressive institutions and class distinctions would pave the way to a Golden Age. The ownership class would be exterminated or reeducated. Such is the revolution dreamt of by Marx and Engels, carried forward by Lenin and Stalin, and pushed today – amid the crash of 2008.

Uses for $700 billion bailout money are ever shifting
First, the $700 billion rescue for the economy was about buying devalued mortgage-backed securities from tottering banks to unclog frozen credit markets. Then it was about using $250 billion of it to buy stakes in banks. The idea was that banks would use the money to start making loans again. But reports surfaced that bankers might instead use the money to buy other banks, pay dividends, give employees a raise and executives a bonus, or just sit on it. Insurance companies now want a piece; maybe automakers, too, even though Congress has approved $25 billion in low-interest loans for them.

Greenspan admits free market has foundered
Whatever else you might say about the man, Alan Greenspan took his punishment like a grown-up. Appearing before the House Oversight Committee last week, the former Federal Reserve chairman acknowledged that the anti-regulatory, hyper-free-market ideology that had served him well for 40 years —- a philosophy that he literally learned at Ayn Rand’s knee —- had in some ways been wrong. And not just slightly wrong. The economic crisis has revealed a flaw, he said, "a flaw in the model that I perceived as the critical functioning structure that defines how the world works."

Socialism Takes Foothold after Train-wreck of Wall Street Capitalism
The demonized word "socialism" has taken a foothold as the political dialogue increasingly centered on what the government could do to save the economy. It has been vigorously injected into political discussion in the United States since the 700 billion dollar bailout to overcome the train-wreck of Wall Street capitalism initiated by the US Treasury. Now it had taken a political turn as Barack Obama promised massive tax cuts to 95 percent of the people who are facing financial burden with a constrained economy.

The "dirty little secret" of the US bank bailout
In an unusually frank article published in Saturday's New York Times, the newspaper's economic columnist, Joe Nocera, reveals what he calls "the dirty little secret of the banking industry"--namely, that "it has no intention of using the [government bailout] money to make new loans." As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers--the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.

U.S. Treasury to invest $395 million in Beverly Hills-based City National Bank.
Treasury will invest $395 million in City National. CEO may use 'fortress balance sheet' to buy rivals.
In a harbinger of what may be a flood of similar disclosures, City National Bank in Beverly Hills said Sunday that it would receive a $395-million capital infusion from the U.S. Treasury as part of the government's $250-billion bailout program. The bank said it had no "explicit or implicit understanding" with federal regulators about how it would use the money -- whether to increase lending in the community or acquire a specific bank.

Capitalism won’t die. It will only emerge stronger
"We are suffering just now from a bad attack of pessimism. It is common to hear people say that the epoch of enormous economic progress . . . is over; that the rapid improvement in the standard of life is now going to slow down; that a decline in prosperity is more likely than an improvement in the decade ahead. I believe that this is a wildly mistaken interpretation of what is happening to us." So wrote John Maynard Keynes in 1928.

Treasury urged to aid car and insurance sectors
The US Treasury is coming under increasing pressure to expand its financial rescue plan beyond banks to include direct assistance to the ailing car and insurance sectors. In recent days, lawmakers and interest groups have stepped up their efforts to persuade the administration of George W. Bush, US president, to divert part of the $700bn authorised by Congress to a range of companies that were not originally expected to be helped. The emergency legislation enacted this month gives the Treasury broad authority to buy any assets that are important for the stability of the US financial system.

How far should the U.S. 'bailouts' go?
FORGET CONSERVATISM — President Bush is likely to go down in history using unprecedented government intervention in the economy. The question Americans must ask: Is that bad? Isn't that socialism? Or, rather, given the now-believed worldwide recession, how far should the United States go in emulating European countries in saving its economy? After promising Congress he wouldn't, Treasury Secretary Henry Paulson has reversed himself and followed Europe's lead in giving capital directly to U.S. banks.

Bailout a move for-socialized banking
The financial institution ''bailout'' plan Congress approved earlier this month was controversial enough in the form presented to Americans. Lawmakers indicated that they would go along with a $700 billion program most people thought was intended to buy ''toxic mortgages'' from financial institutions. Another $150 billion in ''sweeteners,'' many of them involving outrageous pork barrel projects, was thrown into the package.

Look who pays for the bailout
Meet the Henrys (high earners, not rich yet).
They make $250,000-plus and get taxed to high
heaven. And they're about to get socked again.
Bill Kwon is the embodiment of the American dream. His father - who was arrested by North Korean Communists in the early 1950s for championing democracy - brought the family from Seoul to Illinois when he was a baby. Bill worked himself ragged pursuing every opportunity America's heartland offered, never leaving Peoria.

The man who predicted global markets meltdown
Here’s a thought provoking article about an M.I.T.trained economist, Krishnamurthy Narayanan, whose GI Global Opportunities Fund has returned 57% in the past year and 19 per cent (compounded) over the past five years. For those of you who remain convinced of the long term invincibility of the U.S. dollar, he sounds a note of caution if not down right alarm. He also has some positive things to say about the Canadian dollar, gold, oil and uranium - hardly mainstream views these days. But his views were hardly mainstream a year ago when he warned about the financial crisis that is currently spreading like wildfire around the globe.

EXPLODING DEBT DYNAMICS
Whither the dollar and gold? To answer that long-awaited inquiry – which will take some time to cover in full – let's start by getting a handle on "exploding debt dynamics." Cartoonish as it sounds, it’s a real term that IMF economists use. If, like me, the phrase gives you visions of Wile E. Coyote blowing himself up with a box of ACME brand dynamite, you aren't too far off. The technical meaning refers to the fallout from an ever-expanding debt-to-GDP ratio. Beyond a certain tipping point, a country’s debt burden becomes "explosive" as interest rates shoot higher, hope of payment recedes, and investors stampede for the exits.

Jim Willie - New world currency coming soon backed by gold!

Europe on the brink of currency crisis meltdown
The crisis in Hungary recalls the heady days of the UK’s expulsion from the ERM.
The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump. Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992. "This is the biggest currency crisis the world has ever seen," said Neil Mellor, a strategist at Bank of New York Mellon. Experts fear the mayhem may soon trigger a chain reaction within the eurozone itself. The risk is a surge in capital flight from Austria – the country, as it happens, that set off the global banking collapse of May 1931 when Credit-Anstalt went down – and from a string of Club Med countries that rely on foreign funding to cover huge current account deficits.

Germany takes hot seat as Europe falls into the abyss
We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars. Investors will learn today whether the Paulson bail-out - fattened to $850bn by Congress - can begin to halt the death spiral in the credit system. So far, the response looks terrible. Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.

In Beijing, World Leaders Pledge Broad Reform of Financial System
Leaders from Asia and Europe on Saturday called for new rules for and stronger regulation of the global monetary and financial system at the close of a two-day summit in Beijing as China assumed a leadership role in the crisis. Chinese Premier Wen Jiabao said the world's economic problems had become so massive that measures beyond the many multibillion-dollar bailout packages announced might be necessary to avert further damage.

Asia and Europe call for joint action on markets
Heads of state from across Asia and Europe called for a coordinated response to the global financial crisis in a two-day conference in Beijing, an event that underlined China's growing role as a diplomatic counterweight to the United States. But the leaders fell short of offering specific solutions to the current economic troubles, which have shown no signs of slowing.

'President Clinton’s actions are partly responsible for the crisis we face'
It is frightening to see large chunks of one's wealth disappear overnight. I have lost, regained and re-lost sums of money that are, to me, very substantial.
It is worrying, too, not to know just how bad it might get. I find myself looking at my house and thinking, "Gosh. I still have that. The house is still standing." Thank goodness the mortgage is covered by my holdings of cash and bonds. There are some people, of course, who face potential bankruptcy if they lose their jobs and thus their ability to pay their mortgages. All this has happened with amazing speed.

U.S. has plundered world wealth with dollar: China paper
The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday. The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies.

More weak data, hedge-fund selling seen this week
Have stocks bottomed? It's possible, but economy,
hedge-fund selling seen keeping things shaky
In a typical recession, stocks start recovering about six months before the economy does. The crisis we're in right now, however, is anything but typical: Lending is frozen, hedge-fund selling is happening on a massive scale, and economic troubles have spread all over the globe.

World’s biggest hedge fund restructures amid turmoil
The world’s biggest hedge fund is undertaking a radical
restructuring amid a shake-up of the multi-trillion dollar
industry which spells the end for thousands of its smaller rivals.
Highbridge Capital Management, which is majority owned by JP Morgan Chase and has $25bn under management, is axing 10 per cent of its New York-based staff and plans cuts in Europe and Asia. The volatility in global stock markets has savaged the performance of some of the world’s best-known hedge funds, raising fears of a collapse in the sector, which could cause a fresh crisis in the financial system. Big names including Deephaven, Marshall Wace, Citadel Investment Corp, Lansdowne Partners, Third Point and Harbinger, have in recent weeks sustained losses of as much as 20 per cent in some funds.

Hedge Funds Slam 'Gates' on Their Edgy Investors $$
Some high-profile hedge-fund managers have restricted how much and when investors can withdraw their funds, as the industry struggles to stem a wave of redemptions and poor performance. The restrictions cover hedge-fund assets worth an estimated $21 billion. Centaurus Capital LP, and Polygon Investment Management Ltd. have put "gates" in place, limiting what proportion of assets investors can withdraw on one redemption date. Gottex Fund Management Holdings AG, Wermuth Asset Management GmbH, Auriel Funds PLC and Atlantis Investment Management Ltd. have suspended withdrawals in October until further notice. Atlantis said it did this to ensure all investors were treated fairly.

U.S. Dollar Currency Collapse Within 30 Days
It appears that there is a common refrain going around the investment community. It goes something like this: "Gold should be doing better, and, since it isn’t, I am not going to buy it" Investors who believe this are making the mistake of thinking COMEX gold is the same as real physical gold. It is not. COMEX gold is a form of debt. It involves one party promising to produce gold (money) to another at a future date. Like all forms of debt, a COMEX futures contract is only as good as the counterparty behind the contract. Right now, because of low margin requirements, sellers of gold futures only have enough gold to cover 10% of outstanding contracts stored in COMEX warehouses.

Collapse of US Financial System: The Setting up of a “New Dollar”?
In this 28th edition of the GEAB, LEAP/E2020 has decided to launch a new global systemic crisis alert. Indeed our researchers anticipate that, before next summer 2009, the US government will default and be prevented to pay back its creditors (holders of US Treasury Bonds, of Fanny May and Freddy Mac shares, etc.). Of course such a bankruptcy will provoke some very negative outcome for all USD-denominated asset holders. According to our team, the period that will then begin should be conducive to the setting up of a « new Dollar » to remedy the problem of default and of induced massive capital drain from the US.

Lindsey Williams - Dollar Collapse, Amero & hyperinflation August 11, 2007

With wreckage piling up, Fed eyes another rate cut
With economic wreckage piling up, Fed weighs another hefty rate reduction
As the economic wreckage piles dangerously higher, the Federal Reserve is prepared to ratchet down interest rates -- perhaps to their lowest point in more than four years -- with the hope of relieving some of the pain felt by many Americans.

The Whole System is Contracting
Down for the Count
"The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain result of the concentration of too much economic power in the hands of too few men (who) felt no responsibility to the nation." From the 1945 UK Labour manifesto Let Us Face The Future
There are signs that the credit crunch is easing. Interbank lending in dollars has fallen for a ninth straight day. The various indicators of stress in the market–Libor, the TED spread, and the Libor-OIS spread–are all gradually returning to normal, but the damage to the broader economy has been substantial.

Senator Warns of Revolution
Senators don't normally use the word "Revolution". As a central part of the government, Senators do not normally wish to stir up any images of major challenges to power or of guillotines. . . . "If it turns out that they are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay."

So When Will Banks Give Loans?
"Chase recently received $25 billion in federal funding. What effect will that have on the business side and will it change our strategic lending policy?" It was Oct. 17, just four days after JPMorgan Chase’s chief executive, Jamie Dimon, agreed to take a $25 billion capital injection courtesy of the United States government, when a JPMorgan employee asked that question. It came toward the end of an employee-only conference call that had been largely devoted to meshing certain divisions of JPMorgan with its new acquisition, Washington Mutual.
page 2 ... So When Will Banks Give Loans?
.......Then, as Mr. Paulson divulged to The Times this week, it turns out that even before the bill passed the House, he told his staff to start drawing up a plan for capital injections. Fearing Congress’s reaction, he didn’t tell the Hill about his change of heart. Now, he’s shifted gears again, and is directing Treasury to use the money to force bank acquisitions. Sneaking in the tax break isn’t exactly confidence-inspiring, either. (And let’s not even get into the less-than-credible, after-the-fact rationalizations for letting Lehman default, which stands as the single worst mistake the government has made in the crisis.)

US public pension funds face big losses
Public pension funds in US states are facing their worst year of losses in history, exacerbating existing funding shortfalls and putting pressure on state governments to shore them up. In the nine months to the end of September, the average state pension fund lost 14.8 per cent, according to Northern Trust, a fund company. The loss has grown since, as financial markets slumped further in October. The previous highest loss for state funds was 7.9 per cent for the full year in 2002. California’s Calpers, the US’s biggest pension fund, last week reported a loss of 20 per cent of its assets, or more than $40bn, between July 1 and October 20 this year.

Forecasters Race to Call the Bottom to the Market
Financial forecasters are in a race to call the bottom to the bear market. And just as on the way up, when analysts competed for attention with their forecasts of bigger and bigger gains, the financial pundit class now seems compelled to out-gloom the next guy.

A growth industry: Tax collecting
Several states are putting more money and
personnel into cracking down on tax cheats -- large
and small -- to cut into their growing budget deficits.
The U.S. financial meltdown is creating brighter job prospects for at least one occupation: tax collector. Several states, including New York, Massachusetts, California and Illinois, are beefing up tax enforcement and collection efforts as they face widening budget deficits. "As their budgets quickly hit the skids and the pressure is on, they're going to be looking to see where those dollars are," said Verenda Smith of the Federation of Tax Administrators, an association of tax agencies from all 50 states.

Is Bankruptcy Your Personal Bailout?
Bankruptices on the rise but the choice can have serious consequences
With two million people losing their homes to foreclosure this year and unemployment at a five year high, personal bankruptcies are on the rise again as well, up more than 28% over last year. Expectations are that bankruptcies will top 1.1 million for the year. That's according to the American Bankruptcy Institute which reports American families are now going bankrupt at the rate of 22,000 a week, a figure that is trending upward as the nation falls deeper and deeper into a recession.

Bailout won't stop foreclosures - Fort Collins tenants be ready
The government's bank bailout is not going to stop foreclosures. Could you come home from class one day to the surprise of all your possessions sitting on the curb? A lot would have to go wrong for this to happen in Colorado. As long as you read your mail, you should not be blind-sided by a foreclosure. Foreclosure is put into motion by a lender when a borrower has stopped paying on a loan. Here, the lender starts the process by sending a "notice to foreclose" to the Larimer County Public Trustee's Office. The Public Trustee sets the sale of the property 110 to 125 days later and mails a notice of the foreclosure and sale date to the occupants of the property.

Banks seize homes over credit card debt
LONDON, Oct. 26 -- Banks and credit card companies in England are exploiting a legal loophole to seize homes of customers who cannot pay their credit card bills, experts say. People owing as little as $1,500 on such things as credit cards, car payments and personal loans have been served with charging orders, which enable a creditor to order the sale of a property, The Sunday Times of London reported. The newspaper said the controversial process emerged after Yvette Cooper, chief secretary to the Treasury, called on banks to do more to allow people to keep their homes.

Mortgage industry still mired in troubles
Complex rise makes a fix hard
Each day from July through September, more than 2,700 Americans lost their homes in foreclosure. That number, up from 1,200 a day a year ago, is a sign that the mortgage industry and government programs have done little to help troubled homeowners.

Spending Stalls and Businesses Slash U.S. Jobs
As the financial crisis crimps demand for American goods and services, the workers who produce them are losing their jobs by the tens of thousands. Layoffs have arrived in force, like a wrenching second act in the unfolding crisis. In just the last two weeks, the list of companies announcing their intention to cut workers has read like a Who’s Who of corporate America: Merck, Yahoo, General Electric, Xerox, Pratt & Whitney, Goldman Sachs, Whirlpool, Bank of America, Alcoa, Coca-Cola, the Detroit automakers and nearly all the airlines.

Job Losses Buffet U.S. Early, Compounding the Downturn $$
Jim Vogel has been unemployed since May 2007, when he was laid off from FreightCar America Inc., a builder of rail cars in Johnstown, Pa. The 55-year-old machine operator has sent résumés to manufacturing companies and defense contractors but has gotten little response. Earlier this month, his unemployment benefits ran out. "Everything is tightening up," Mr. Vogel says of his job search. "I'm not even getting any rejection letters."

Secrets of the Bailout
CNBC's Dylan Ratigan, host of 'Fast Money' and 'Closing Bell', tells TSC's Debra Borchardt why the lack of transparency in the bailout is a big problem.

Upside Down on Their Homes but on Top of Their Debts
Think of them as the walking wounded. They are the homeowners who are upside down on their mortgages -- owing much more than their home is now worth. But they're still on their feet and still sending their payments each month. In this credit crisis, all the attention has been directed toward the critically injured, namely those owners who cannot afford their mortgages and are slipping toward foreclosure. The walking wounded don't rate life-support measures such as interest-rate reductions or a write-off of part of their debt. And we don't hear much about them.

A Hopeless Plan for Homeowners
Debra Borchardt examines the latest plan from Fannie Mae designed to help struggling homeowners.

Bankruptcy Fears Rise as Chrysler, GM Seek Federal Aid $$
As talks between General Motors Corp. and long-time rival Chrysler LLC continued over the weekend, a harsh reality has emerged: Without a merger and possibly an assist from the federal government, two of Detroit's Big Three auto makers could run out of cash within a year.

General Motors, Driven to the Brink
IN late May, senior executives at General Motors confronted a decision that few thought they would ever face: whether to continue developing the next generation of one of the most successful products in G.M.’s 100-year history — the full-size sport utility vehicle — or to punt the program entirely. It’s rare for an automaker to pull the plug on high-profile initiatives, much less one involving a $2 billion, top-to-bottom overhaul of a high-volume vehicle that once helped it rake in cash.

Scuttled Chrysler parts plant an emblem of uncertainty
The construction crews have checked out of the Flamingo Motel, a $35-a-night motor lodge across the state road from a gleaming and still-unfinished auto parts plant that may never hire a single worker. "It's a big, sad story," said Kishor Patel, who owns the Flamingo and has watched guests slip away along with the town's dreams for a bonanza of 1,200 steady jobs making transmissions for Chrysler LLC.

Chrysler to Slash 25 Percent Of Its White-Collar Workers
Chrysler told employees yesterday that it would be cutting 25 percent of its white-collar workforce by the end of the year to trim costs and warned of restructuring in the near future. The automaker, the smallest of Detroit's Big Three, will eliminate up to 5,000 employees. Next month, Chrysler will begin offering early retirements and buyouts to about 17,332 salaried employees and an undisclosed number of people who work for other companies under contract with the automaker. Without mentioning specifics, the company said it plans layoffs by the end of December.

Chrysler axes 5,000 white-collar jobs
Detroit suffered a further blow yesterday with Chrysler announcing that it would slash one-quarter of its white-collar workforce, or almost 5,000 jobs, as merger talks with General Motors intensified. “These are truly unimaginable times for our industry”, Bob Nardelli, the carmaker’s chief executive, told employees in an e-mail. "Never before have auto industry sales contracted at such a fast rate."

Snipping, Clipping, Scrimping
On Paper and Online, Coupons Are Coming Back
Talia Holston used to spend about $150 a week to feed herself and her three children. Then she started using coupons, trolling the Internet for the best ones. Now, she spends about $200 a month on groceries. She once walked out of a CVS pharmacy having spent $50 for $200 worth of items. "Sometimes, it really feels like I'm robbing them," the Northwest D.C. resident said. "I sometimes feel bad." That is, until she looks at what stores are charging for food and toiletries these days. "The price of everything seems to be rising," she said. "When you walk out spending half what you would have, that feeling is mind-blowing."

Militarization of the American Homeland: Suppression of "Civil Disturbances"
ACLU Demands Information on U.S. Military Domestic Operations
On October 2, the American Civil Liberties Union (ACLU) filed a Freedom of Information Act (FOIA) request demanding information from the government on U.S. Northern Command’s (NORTHCOM) deployment of the 3rd Infantry Division’s 1st Combat Brigade Team (BCT) on U.S. soil for "civil unrest" and "crowd control" duties. Last month, Army Times published a piece detailing how the 1st BCT spent "35 of the last 60 months in Iraq." The 1st BCT–also known as the "Raiders"–carried out house-to-house raids and engaged in close-quarters combat in the city of Ramadi to suppress Iraqi resistance to U.S. occupation, according to a report on the World Socialist Website.

S.Korea announces record interest rate cut
South Korea's central bank on Monday delivered its biggest ever interest rate cut and promised other measures to calm the panic that has been driving down financial markets and rapidly eroding economic growth.

Syrians Blame U.S. in Deadly Blast on Iraq Border
An explosion on Sunday killed nine construction workers and wounded 19 others near the border of Iraq and Syria, the police in Anbar Province said. Local witnesses said they believed the blast was caused by American shelling, but Maj. Gen. Tariq al-Youssef, the provincial police chief in Ramadi, the capital of Anbar, which borders Syria, said that could not be confirmed. The police statement did not indicate on which side of the border the blast had taken place.

U.S. rearming Lebanon
BEIRUT: For years, the Lebanese military was ridiculed as the least effective armed group in a country that was full of them. After the army splintered during the 15-year civil war, its arsenal slowly rotted into a museum of obsolete tanks and grounded aircraft. That is starting to change. At the gates of the military base in Karantina, just north of Beirut, groups of soldiers drive in and out all day in new American Humvees and trucks, some of them toting gleaming new U.S. rifles and grenade launchers.

'What's wrong with socialism?'
Sometimes those of us who have been around awhile take too much for granted.
I tend to assume, for instance, that most Americans understand socialism is an evil, immoral system of economics and government. But, then, occasionally, I'll get a letter from a young American who has been taught throughout his or her life that only the government can spread wealth fairly or that market economics is inherently corrupt. I got one of those this week. And I quickly realized why Barack Obama is on the verge of winning the presidency of the United States. So, I guess it's time to get back to basics with an answer to the fundamental question: "What's wrong with socialism?"

Obama's grandma confirms Kenyan birth
'This has been a real sham he's pulled off for the last 20 months'
The Pennsylvania Democrat who has sued Sen. Barack Obama demanding he prove his American citizenship – and therefore qualification to run for president – has confirmed he has a recording of a telephone call from the senator's paternal grandmother confirming his birth in Kenya. The issue of Obama's birthplace, which he states is Honolulu in 1961, has been raised enough times that his campaign website has posted an image purporting to be of his "Certification of Live Birth" from Hawaii. But Philip J. Berg, a former deputy attorney general for Pennsylvania, told the Michael Savage talk radio program tonight that the document is forged and that he has a tape recording he will soon release.

Judge dismisses Obama birth certificate lawsuit
Rules voters don't have standing to 'police'
constitutional requirements for president
A lawsuit filed by Democratic attorney Philip Berg alleging that Sen. Barack Obama is ineligible to be president was dismissed by a federal judge yesterday on grounds that Berg lacks standing to bring the lawsuit. In a 34-page memorandum that accompanied the court order, the Hon. R. Barclay Surrick concludes that ordinary citizens can't sue to ensure that a presidential candidate actually meets the constitutional requirements of the office.

Paulson: Trust McCain with job
He has experience and will cut corporate taxes
If you still have doubts about Barack Obama's readiness to lead, here are reasons to make Sen. John McCain your choice for president: In one word: trust. His "Straight Talk Express" is more than a slogan. He promised to join Obama in taking public funds; only McCain kept his promise. When Sen. Joe Biden talks of our enemies testing a President Obama's strength, we know past enemies have already tested McCain as a POW. He passed with flying colors. You can trust McCain to do what he believes is right for the country — "I'd rather lose an election than lose a war!" He has the maturity, integrity and proven character that only experience can affirm.

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Fri 10.24.2008

Roubini Says 'Panic' May Force Market Shutdown
Hundreds of hedge funds will fail and policy makers may need to shut financial markets for a week or more as the crisis forces investors to dump assets, New York University Professor Nouriel Roubini said. "We've reached a situation of sheer panic," Roubini, who predicted the financial crisis in 2006, told a conference of hedge-fund managers in London today. "There will be massive dumping of assets" and "hundreds of hedge funds are going to go bust," he said.

Roubini: 'Panic' May Force Market Shutdown P1

Roubini: 'Panic' May Force Market Shutdown P2

Roubini: 'Panic' May Force Market Shutdown P3

Roubini: 'Panic' May Force Market Shutdown P4

Roubini: 'Panic' May Force Market Shutdown P5

US Dollar Death Dance
The USDollar rally in the last several weeks has been remarkable. At closer examination, it highly resembles a spurt prior to death. Imagine an old man who just had a heart attack, lost feeling in certain body parts, his mind not working right, plenty of nonsense gibberish coming from his mouth, and now he is dancing hard on some last gasps. The vast liquidation movement is akin to the old man going through an embalming process while dancing atop the tables at the funeral parlor, as bidding proceeds for his cadaver. Are Americans last to realize the financial structure destruction means the USEconomy does not enter a recession, but rather a bizarre unprecedented disintegration? It seems so. The liquidation of speculative positions, the massive de-leveraging, the payouts of defaulted bonds, these events are the opposite of developments toward revival or resuscitation, like business investment!! Liquidation is the exact opposite of investment, and precedes job cuts, not job creation.

Squeezed banks borrow record amount from Fed
Banks borrowed in record amounts from the Federal Reserve's emergency lending facility over the past week, while investment banks drew loans at a slightly lower - but still brisk - pace, a fresh sign of the credit stresses bedeviling the country. The Fed's report, released yesterday, showed commercial banks averaged a record $105.8 billion in daily borrowing over the past week. That surpassed the old record - a daily average of $99.7 billion - from the prior week. On Wednesday alone, $107.5 billion was drawn, an all-time high.

Credit crunch upsets 30-year rate swaps
The turmoil in financial markets has taken hold of the strategically important trade in long-term interest rate derivatives, pushing rates to levels once thought to be a "mathematical impossibility". Such interest rate "swaps" are the most widely traded over-the-counter derivative and are important for insurers, pension funds and other companies that need to fund liabilities decades in the future. Investors use swaps to lock in interest rates for 30 years or more, trading a floating rate, based on the London interbank offered rate (Libor), for a fixed rate. The latter is typically based on US Treasury yields, plus a premium, called the "swap spread", which reflects the risk of trading with a private counterparty, as opposed to the government.

U.S. vows more help for homeowners
With foreclosures mounting, Bush administration officials said Thursday that they were preparing to step up efforts to help struggling homeowners. A senior policy maker told a Senate committee that the administration was working on a plan under which the government would offer to shoulder some of the losses on loans that are modified. The insurance program could cost tens of billions of dollars, according to a person briefed on discussions about the plan, and would be run by the Treasury Department under the $700 billion financial rescue bill Congress passed earlier this month.

West is in talks on credit to aid poorer nations
With the financial crisis engulfing developing countries from Latin America to Central Europe, raising the specter of market panic and even social unrest, Western officials are weighing coordinated action to try to stabilize these economies. The International Monetary Fund, which is in negotiations with several countries to provide emergency loans, is also working to arrange a large credit line that would allow other countries desperate for foreign capital to borrow dollars, according to several officials.

Greenspan Concedes to 'Flaw' in His Market Ideology
Former Federal Reserve Chairman Alan Greenspan said a "once-in-a-century credit tsunami" has engulfed financial markets and conceded his free-market ideology shunning regulation was flawed. "Yes, I found a flaw," Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. "I was shocked because I'd been going for 40 years or more with very considerable evidence that it was working exceptionally well." Greenspan added he was "partially" wrong for opposing the regulation of derivatives.

Congress rips Greenspan for crisis
Ex-Fed chief concedes to 'flawed' faith in markets
Angry legislators Thursday officially threw former Federal Reserve Chairman Alan Greenspan off the pedestal that he once occupied as Congress' most respected economic adviser. In four hours of questioning before the House Committee on Oversight and Government Reform, the man once called "Maestro" for his mastery of nuance and ability to smoothly guide the economy through treacherous shoals acknowledged for the first time to making mistakes and misjudgments that contributed to what he called a "once-in-a-century credit tsunami."

Greenspan: 'credit tsunami' to have severe impact
Former Federal Reserve Chairman Alan Greenspan told the U.S. Congress in prepared testimony Thursday that the current global financial crisis is a 'once in a century credit tsunami' that policymakers did not anticipate. Greenspan was to be the leadoff witness at a House hearing lawmakers called to question past key financial players about what they felt caused the most grave financial crisis since the 1930s. The witnesses were also expected to be asked how they thought the government would deliver the nation from the economic turmoil.

Marc Faber: US will go bankrupt

Dr. Doom on the Bailout - U.S. should already be a junk bond

Treasury To Invest In More Banks
The Treasury Department will announce as soon as today that a group of large regional banks have agreed to accept investments from the government, industry sources said. The new banks would join nine of the largest American banks, including Bank of America and J.P. Morgan Chase, which were forced to accept $125 billion in funding last week.

Treasury Considers Backing Mortgages
FDIC Proposal Aims to Help Homeowners
The federal government may start guaranteeing home mortgages to persuade lenders to ease the monthly financial burden on struggling homeowners, Federal Deposit Insurance Corp. Chairman Sheila C. Bair said yesterday. The proposal, presented to the Senate Banking Committee, represents the most detailed idea yet on how the $700 billion federal rescue package might directly address the blight of foreclosures sweeping the nation.

Banks Face Another Wild Card $$
This financial crisis has shown that history is an unreliable guide for gauging future losses.
Banks relying on historical models were fooled when it came to potential mortgage hits. They similarly miscalculated with structured-debt products. Now, the same may hold true for credit cards. Banks and big card issuers have seen card losses climb and are projecting that things will worsen in 2009.

Some hedge funds argue against proposals to modify U.S. mortgages
Washington is pushing measures to help hard-pressed homeowners, but some Wall Street investors are pushing back. Hedge funds are fighting proposals to ease the terms of home mortgages, arguing that such a move would hurt their investments. Two funds recently warned mortgage companies that they might take action if the companies participated in government-backed plans to renegotiate delinquent loans in a way that undercut the funds' interests. The saber-rattling highlights the conflicting interests of various players in the mortgage arena and suggests that tensions are likely to intensify as government intervention in the market widens.

Banks' Unnerving Reserving $$
When a storm threatens, you batten down the hatches -- unless you are a bank, it seems.
Despite the darkening outlook for the U.S. economy, few banks have taken extra precautions to protect against sharply higher bad-loan losses. Make no mistake: Banks have been building up some defenses against credit deterioration. In their third-quarter earnings, released over the past two weeks, they added large sums to their loan-loss reserves, the protective buffer on the balance sheet that absorbs credit losses.

Highway To Hell
Premiums Soaring for Physical Bullion as Delayed Deliveries and Shortages Intensify Internationally
COMEX gold continues to surprise to the downside despite the incredibly strong fundamentals of gold bullion itself with increasing shortages, delayed deliveries and premiums soaring for physical bullion in Asia, Europe, the US and internationally. Premiums have soared on smaller bullion products (from 1 ozt to 5 kilo gold bars) and look set to soon rise on the larger 100 and 400 ozt London Good Delivery gold bars. Large investors and bullion dealers are now looking to take delivery of the December gold contract and there is likely to be a significant number of longs who stand for delivery leading to COMEX warehouses being depleted and the increasingly ridiculous COMEX price then surging in value.

Gold prices plunge on recession fears, dollar gain
Gold prices collapsed Wednesday, plunging to a 13-month low as a stronger dollar and growing fears of a global recession spurred investors to yank money out of commodities. A barrage of worrisome corporate earnings has deepened investors' pessimism about the direction of the economy, prompting them to shift funds into less risky assets like government bonds. At the same time, a sharply stronger dollar is feeding selling of commodities bought as a hedge against inflation and weakness in the U.S. currency.

Gold Rush Empties Supplies at Local Precious Metal Stores
The global gold and silver shortage has hit local sellers hard in the last few weeks, leaving many without coins or bars of precious metals for the hordes of frenzied buyers preparing for economic Armageddon. "We have one one-ounce Panda," says one Phoenix coin seller, referring to China’s official gold coin. Another store says it has a waiting list for gold products, but doesn’t know when they’ll be available.

WORSENING US$ FUNDAMENTALS
How many times have we seen the US stock market go down, non-government bond yields rise, the USDollar rise, and the USTBond yields fall? That has been the norm in the last few weeks. These are death signals, not investment signals. The USEconomy cannot afford liquidation and constricted credit, a well-known fact, seemingly forgotten today. These signals come amidst falling confidence, more bank distress measures, more job loss, more home foreclosures, and lately, trouble with letters of credit at port facilities.

U.S. senators press for action to stem foreclosures
Senators prodded government officials involved in the bank-rescue plan to do more to help struggling homeowners avoid foreclosure and expressed impatience on Thursday over the pace of the unfolding program. The lawmakers on the Senate Banking Committee urged the officials, in effect, to make the banks do something for the homeowners in return for the billions that the banks are getting from Washington in infusions of capital meant to thaw the credit spigots and get the economy moving again.

Foreclosures Rose 71% in 3rd Quarter as Prices Fell
U.S. foreclosure filings increased 71 percent in the third quarter from a year earlier to the highest on record as home prices fell and stricter mortgage standards made it harder for homeowners to sell or refinance, RealtyTrac said. A total of 765,558 U.S. properties got a default notice, were warned of a pending auction or were foreclosed on in the quarter, the most since records began in January 2005, the Irvine, California-based seller of default data said in a statement today. Filings rose 3 percent from the second quarter and fell 12 percent in September from August as state laws created to keep people in homes slowed the pace of defaults.

Foreclosures pull down values
For the first time, homeowners can see exactly how foreclosures are affecting their home values. New data tracks the prices of homes taken back by lenders through foreclosure and then resold. It then compares that median price of the foreclosure resales to the median price of regular resales in a ZIP code. With that, homeowners can look at the overall median price for home sales in their neighborhood and see how much foreclosures are pulling down overall values.

Citadel founder forecasts choppy seas ahead
Citadel Investment Group founder Ken Griffin forecast challenges ahead for hedge funds as the government attempts to resolve the financial crisis. "The key change in the next decade is that policymakers around the world have chosen the winners and losers," Griffin said at a Wednesday panel. "The winners are the banking system." By selecting commercial banks to become the centerpiece of the financial industry, the government closed the era of investment banks and hedge funds with highly leveraged balance sheets.

Ready for Downturn 2.0
Silicon Valley – which took the brunt of the dotcom bubble burst in 2000 – is putting the traumatic experiences of then to good effect now as hard times approach. With the benefit of hindsight, venture capitalists and entrepreneur survivors could write the book on what not to do in an unprecedented crisis, so the current meltdown of a different, macro?economic kind has seen them dusting off old memos and dealing out home truths to any start-up that will listen.

Forecast: 2 Years of Deflation, Followed by Raging Inflation
I'm calling 1 1/2 to 2 years of deflation, followed by raging inflation. Deflation Now Richard Berner of Morgan Stanley, said: "A global recession is now under way, and risks are still pointed to the downside for commodity prices and earnings." Nouriel Roubini writes: "There is a glut and excess capacity of goods while aggregate demand is falling soon enough we will start to worry about deflation, debt deflation, liquidity traps . . . ."And an oxford professor of economics and expert on U.S. inflation thinks deflation is probably on the way.

Gold May Do Well During the Later Stages of Deflation
Most people agree that gold does well during periods of inflation.
But what about during periods of deflation? Leading economist Dr. Marc Faber wrote in October 2007 that gold will do well even in a deflation: How would gold perform in a deflationary global recession? Initially gold could come under some pressure as well but once the realization sinks in how messy deflation would be for over-indebted countries and households, its price would likely soar. Therefore, under both scenarios - stagflation or deflationary recession - gold, gold equities and other precious metals should continue to perform better than financial assets.

The personal cost of a global meltdown
More than a million homes have been lost to foreclosure in the last two years in the United States. And according to data from Mortgage Bankers Association, banks are now in the process of foreclosing on 1.5 million more. The impact of the mortgage crisis has been obvious in both the worldwide credit crunch and the presidential campaign, where there has been a lot of talk about the plight of overextended homeowners. But the specific personal costs of home loss have been less evident, at least to those not paying them.

AT & T to raise monthly fee for basic service 23%
The increase, to $13.50 from $10.94, will start Jan. 1 and will affect about half of the carrier's 6.5 million residential land lines in California. Monthly bills for customers with about half of AT&T's 6.5 million residential land lines in California will be affected by the change, spokesman H. Gordon Diamond said. The rest are part of phone-payment plans unaffected by the increase.

Restaurant industry is starving for customers
As the economy worsens, Americans are eating out less, and
more at home, to save money. With less foot traffic, businesses are
seeing their sales and profits plummet -- and their expenses rise.
Joseph and Victoria Hurley are the kind of customers that keep restaurateurs up at night. The Hurleys, parents of two young boys, have restructured their lives. The couple -- she's a marketing consultant and he's a much-traveled computer troubleshooter -- dumped their Jeep Grand Cherokee for a Lexus hybrid SUV that gets twice the mileage. Dinners out at places such as the Cheesecake Factory and the Daily Grill are rare treats instead of a weekly habit. "We're worried about the economy, and we feel like it's more prudent to eat at home rather than go out and blow a lot of money on a meal," Victoria Hurley said. The steady drumbeat of bad economic news "feels like kind of a tidal wave, and the rest of us are trying to bail out with spoons." Tough economic times are giving restaurant owners indigestion.

U.S. job numbers show credit crisis is hurting employment
The number of Americans filing first-time claims for unemployment benefits rose last week, a sign the deepening credit crisis is hurting employment. Initial jobless claims increased by 15,000 to a larger-than-forecast 478,000 in the week ended Oct. 18, from a revised 463,000 the prior week, the Labor Department said Thursday in Washington. The number of people staying on benefit rolls was little changed, holding near the highest level in five years. The combination of tight credit and waning demand will cause more companies to retrench by trimming payrolls and investment.

Job losses accelerating, and the worst is ahead
Unemployment claims, already well into recession territory, are rising even faster than expected, leading economists to warn Thursday that the worst is yet to come. As the Labor Department released bleak new numbers on the job market, Goldman Sachs, Chrysler and Xerox all announced they were cutting workers by the thousands, adding to the woes of an economy beset by tighter credit and wobbly banks.

Wall Street layoffs could surge past 200,000
Traders and investment bankers might have more to worry about than dwindling bonus pools this year as mass firings on Wall Street are set to hit a record. The fallout from this year's global credit crisis has claimed jobs on all corners of Wall Street, from hedge fund managers to floor traders and beyond. More than 110,000 have lost their jobs so far this year, and some industry experts forecast it could come close to 200,000 before the year is over. Even the financial industry's biggest name isn't immune. Goldman Sachs Group Inc., the world's biggest investment bank, made plans on Thursday to cut 3,200 positions from its staff of 32,000. Barclays Capital is in the midst of purging 3,000 jobs as part of its takeover of Lehman Brothers, and Bank of America Corp.'s acquisition of Merrill Lynch & Co. is sure to add thousands more.

Goodrich Says Boeing's 787 May Be Delayed to 2010
Boeing Co. probably won't deliver its first 787 Dreamliner until 2010 even if the strike by the planemaker's machinists ends this month, supplier Goodrich Corp.'s chief executive officer said today. The Dreamliner had already been delayed three times and was at least 15 months behind schedule when Boeing's 27,000 machinists walked out Sept. 6. The company has said the strike is causing a day-for-day delay to the 787, whose new delivery target was for next year's third quarter. A new round of talks between Boeing and the union starts in Washington today.

Rough road for Chrysler, GM
Layoffs, cutbacks, plant closings jolt automakers
Chrysler LLC, now in merger talks with General Motors Corp., said it will cut 1,825 jobs as it shuts a Delaware factory a year early and reduces output at an Ohio plant. Meanwhile, GM, the largest U.S. automaker, plans to eliminate more than the 5,000 salaried jobs it has already targeted and said it will stop contributing to some retirement-savings plans.

GM to Halt Savings-Plan Payments Amid Wider Slowdown
General Motors Corp., the largest U.S. automaker, is suspending matching payments to employee 401(k) savings plans as it makes more cuts to conserve cash amid slumping sales in the U.S. and Europe. The match of as much as 4 percent of employee contributions will end Nov. 1, spokesman Tom Wilkinson said. The Detroit-based automaker will also end programs that assist with college tuition and child adoptions as of January, he said.

GM Halts Some Benefits, Plans to Trim More Jobs
General Motors is suspending a variety of benefit programs for its white-collar workers and slashing additional jobs to cut costs -- a move that comes as employers nationwide begin to re-evaluate the cost of retirement and health-care packages in an effort to ride out the economic downturn. Cash-strapped GM, the largest of the Big Three Detroit automakers, plans to stop matching its nonunion employees' contributions to their 401(k) retirement savings plans beginning Nov. 1, the company said in an e-mail sent to its U.S. executives Wednesday. The company usually matches contributions of up to 4 percent of an employee's salary. On Jan. 1 the company also plans to shelve its scholarship program, as well as financial assistance for tuition and adoption.

Peter Schiff from 2008.10.23 about the dollar and gold
(sound clip played on Thursday's show 10.23.2008)

Chinese banks brace for housing aftershock
A soft-spoken electronics engineer with an aversion to parties, Liu Shirong does not mind living in a complex where only 50 of 780 apartments are occupied and the swimming pool is eternally empty.
"I have peace and quiet at night," he said. Liu may like that tranquility, a rarity in this city of 12 million. But the vacant apartments are a nightmare for the mainly speculative investors who bought them when the complex opened a year ago - and they are part of an emerging problem for Chinese banks.

Worry About Big Asia Default Rises
Pointing to the 1997 financial crisis has become an instinctive defense mechanism in Asia. But, "this is not 1997" is starting to wear thin as the risk of corporate defaults in the region rises. Certainly, companies and governments in Asia are in far better shape to survive credit market turmoil than they were a decade ago. Then 17% of rated high-yield borrowers defaulted. This faith has helped keep Asia's domestic bond markets -- where debt is denominated in local currencies -- functioning relatively smoothly, even if the cost of borrowing has increased with the global credit squeeze. But weaknesses are starting to emerge, and a default by a big borrower could spook investors. Trouble has emerged in the junk-bond market. Hong Kong's 3D-Gold Jewellery Holdings, hit by employee fraud, last week failed to pay interest on a $170 million bond.

Derivatives Spook Hong Kong Market $$
Financial derivatives: Thy name is mud. Hong Kong's investors are in a panic over the damage that sophisticated investment products might cause to the companies using them to manage exposure to foreign currency. It's not entirely unwarranted -- pardon the pun -- but it does highlight just how little faith investors have in governance at companies that may have a perfectly reasonable need for these contracts. The panic comes after Hong Kong-listed conglomerate Citic Pacific disclosed a possible $2 billion loss from bad bets on the Australian dollar. The fact that the investments were unauthorized, but placed by senior executives nonetheless, was a surprising disclosure from a company once regarded as a model of good corporate governance.

Corsi probing Obama's Hawaiian birth
Unraveling evidence in questions over citizenship
WND senior investigative reporter Jerome Corsi, who recently returned from a trip to Kenya with revelations about Democratic presidential candidate Barack Obama's participation in a foreign nation's internal politics, now has been dispatched to Hawaii to uncover the truth of the senator's Hawaiian birth. The issue has been raised multiple times during the 2008 presidential campaign, with a number of court cases already being launched that demand documentation about Obama's birth place. One prominent Pennsylvania Democrat, Philip Berg, has alleged that Obama was born not in Hawaii at all but in Kenya. Corsi plans to be in Hawaii for several days to review the evidence and records in the dispute.

Newspaper shows Obama belonged to socialist party
Democrat's campaign denied allegations, but new evidence indicates membership
Evidence has emerged that Sen. Barack Obama belonged to a socialist political party that sought to elect members to public office with the aim of moving the Democratic Party far leftward to ultimately form a new political party with a socialist agenda. Several blogs, including Powerline, previously documented that while running for the Illinois state Senate in 1996 as a Democrat, Obama actively sought and received the endorsement of the socialist-oriented New Party, with some blogs claiming Obama was a member of the controversial party.

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Archived Page Link
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Thurs 10.23.2008

'Gold will go even to $2,000 in two years’
Expect short-term hesitancy in the upward movement of the gold price until liquidity returns to the markets, says Frank Holmes, CEO and chief investment officer at U. S. Global Investors and co-author of the new book “The Goldwatcher: Demystifying Gold Investing” (John Wiley & Sons). In this exclusive interview with The Gold Report, he predicts gold will go to $1,000, even $2,000, over the next two years. A growing money supply due to a change in government policies will help lift some juniors out of their misery, too. Holmes advises selective nibbling until conditions improve and names a few companies to consider.

Personal loans out, Gold is God now
At a time when most banks have closed or scaled down the personal loans and other non-collateral lending, gold has come to the rescue of a large number of Indians who depend on loans for their business and other needs. And who else other than World Gold Council will be heartened to make this happen. Gold is a traditional and emotional investment in India and WGC is now engaging banks to have gold as collateral for personal loans.

Pay Attention To Indian Silver Buying Spree
The massive correction in silver brings back Indian buyers. According to a Reuters story, Indians also shift to silver as the high silver/gold ratio of 80:1 makes the white metal appear cheaper to its competitor gold. Imports have jumped to 250 tons every month since August after a dull first half 2008 when record prices repelled buyers. Silver dramatically undershot my worst case scenario of a low at $14, trading briefly below $9 before it recovered to the current level around $10. The silver miners got knifed accordingly, playing out the bad side of beta with losses of up to 90% this year. But the Indian buying spree and losses in production because base metals mines are closing due to the price slump may be a solid base for the next upleg on fundamentals.

Presidential Change May Spur Attack, Chertoff Says
Terrorists may see the change to a new U.S. presidency during the next six months as a prime chance to attack, no matter who wins the White House, Homeland Security Secretary Michael Chertoff said. "Any period of transition creates a greater vulnerability, meaning there's more likelihood of distraction," Chertoff said in an interview yesterday. "You have to be concerned it will create an operational opportunity for terrorists." The risk is the same whether Democrat Barack Obama or Republican John McCain is elected president on Nov. 4, he said. That comment undercuts McCain's argument that the U.S. would be more in danger of an attack if Obama, 47, wins.

Top Iran officials recommend preemptive strike against Israel
Senior Tehran officials are recommending a preemptive strike against Israel to prevent an Israeli attack on Iran's nuclear reactors, a senior Islamic Republic official told foreign diplomats two weeks ago in London. The official, Dr. Seyed G. Safavi, said recent threats by Israeli authorities strengthened this position, but that as of yet, a preemptive strike has not been integrated into Iranian policy.

"Nuke strike would make 9/11 insignificant" and other weird warnings
Over the last 72 hours there has been a strange melange of cryptic messages leaked from world political leaders about what could be in store for America over the next few months. These predictions of impending doom come from England, France, Australia and the United States. In each case there has been a press releases or news expose’ predicting huge and building threats emerging from faceless enemies in shadowy places. Crisis will lead to unpopular decisions by Barack Obama.

Nuclear incident would make 9/11 'insignificant': nuke commission
The world is on the brink of an avalanche in the spread of devastating weaponry, a new global non-proliferation group warned Tuesday, saying that a nuclear incident would dwarf the September 11 attacks. The Middle East, particularly Iran, is a potential tipping point, according to Gareth Evans, co-chair of the newly formed International Commission on Nuclear Non-proliferation and Disarmament. Evans, a former Australia foreign minister, said the world had been "sleepwalking" on the issue of atomic weapons for a decade. "The devastation that could be wreaked by one major nuclear weapons incident alone puts 9/11 and almost everything else (in) to the category of the insignificant," he said, referring to the attacks inflicted on the United States in 2001.

Israel will hit Iran nuke sites, France's Kouchner warns
Visiting French Foreign Minister Bernard Kouchner warned that Israel would strike archfoe Iran before it was able to develop nuclear weapons, in comments published on Sunday. "I honestly don't believe (a nuclear weapon) will give any immunity to Iran," Kouchner said in an interview conducted in English with Israel's Haaretz newspaper during a two-day visit to the region. "First, because you will hit them before. And this is the danger. Israel has always said it will not wait for the bomb to be ready. I think that (the Iranians) know. Everyone knows."

Joe Biden warns Barack Obama supporters of war and depression - "Gird your loins"
Biden warns of International Crisis within six months of Obama Presidency
"Mark my words. It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We’re about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don’t remember anything else I said. Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy."
JFK faced down nuclear Armageddon. What type of international crisis is Biden talking about? Barack Obama has said he would send military aircraft into Pakistan and Iran in previous speeches. If he does this it could lead to a world war with Russia. Are they planning a world war?

Ballot debacle predicted for November 4
A "perfect storm" could be building for US election day on November 4 because of a combination of sky-high voter interest, new ballot machines and a shortage of poll staff, the independent Pew group warned yesterday. The Washington-based group set out a long series of problems still facing the US despite reforms aimed at avoiding a repeat of the 2000 and 2004 debacles.

"If you liked Act 1, just wait until Act 2!"
. . . . The Fed’s response to the financial crisis has been more of the hair of the dog that bit ya. Virtually everything the Fed is doing is increasing debt, not decreasing it. It seems that the Fed’s theory is to keep the drunk drinking to avoid the inevitable hangover. As we have said many times, the longer you put it off, the worse the hangover will be. And we are due for a whopper, thanks to the bartender, I mean the Fed’s irresponsible actions.

Fears of Mortgage Rate Re-Sets May Fuel LIBOR
Manipulation and Mask Deeper Banking System Problems
It’s panic time for U.S. legislators, regulators, banks and lenders. More than $24 billion worth of adjustable-rate mortgages (ARMs) are expected to “re-set” to higher interest rates in November – boosting the likelihood of further home foreclosures. And it gets worse. That increase in borrowing costs will spread to other parts of the global debt market, representing an across-the board threat to corporate, institutional and sovereign borrowers. If interest rates remain high and interbank lending remains tight, the credit crisis is not likely to recede.

Fiscal Cat 5 Hurricane Warning
You only think the Stock Market has been smashed.
Just wait until you see what will come next. If you're playing "Buffett", following his claim (note: there is no penalty for lying on national television about what you're doing in your personal account) that he's buying here, there is a little ugly fact you need to be aware of. That fact is treasury issuance. See, to fund all this crap that Congress, Paulson and Bernanke have in the pipe (you know, the TARP, the newly-minted SIV that Ben announced this morning to buy commercial paper, etc) the treasury issue requirements will be north of three trillion dollars in this fiscal year. Oh, and that's before Obama wins (and he will) and promises another $1 trillion worth of new spending without a nickel's worth of ability to fund it.

CNBC stooges quarrel with Jim Rogers over hyperinflation

Inflationary Holocaust - Jim Rogers - Dollar Collapse -
America Bailing Out Wallstreet (Incompetents And Crooks) At The Cost of The People

Bernanke May Seek New Ways to Ease Credit as Fed Rate Nears 1%
Federal Reserve officials are likely to bring interest rates down so aggressively over the next few months that they will have to search for fresh tactics to continue easing credit. The Fed's Open Market Committee will probably reduce the benchmark federal funds rate by half a point next week to 1 percent, the lowest since May 2004, according to futures trading. The official rate has never been lower since the Fed made it an explicit target in the late 1980s.

FDIC: New foreclosure prevention plan on tap
One of the country's top banking regulators said Thursday that the government is working on a plan to do more to help troubled homeowners. Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., told the Senate Banking Committee that her agency and the Treasury Department are working closely to find ways to prevent avoidable foreclosures. The plan would use the Treasury Secretary's new authority under the Emergency Economic Stabilization Act to provide guarantees to mortgage lenders. "Loan guarantees could be used as an incentive for servicers to modify loans," Bair said. "Specifically the government could establish standards for loan modifications and provide guarantees for loans meeting those standards."

Jobless claims increase as labor market weakens
Jobless claims increase more than
expected as layoffs rise, labor market deteriorates
New claims for jobless benefits increased by more than expected last week as companies cut jobs due to the slow economy, the Labor Department said Thursday. The Labor Department said new applications for unemployment benefits rose 15,000 to a seasonally adjusted 478,000, above analysts' estimates of 470,000. Former Federal Reserve Chairman Alan Greenspan said the job market will likely get worse. "Given the financial damage to date, I cannot see how we can avoid a significant rise in layoffs and unemployment," Greenspan told a House committee Thursday.

US working on plan to help homeowners refinance
Bank regulator says US working to help
besieged homeowners refinance; Greenspan grilled
The federal government is working on a loan-guarantee plan that could help many homeowners escape foreclosure, a banking regulator told Congress Thursday. At the same time former Federal Reserve Chairman Alan Greenspan said the financial crisis will get worse before it gets better. Accused of contributing to the meltdown, but denying that it was his fault, Greenspan told a House panel the crisis left him -- an unabashed free-market advocate -- in a "state of shocked disbelief." Federal regulators told Congress they were making steady headway in confronting the worst financial crisis since the 1930s as committees in both the House and the Senate held hearings on a contagious financial collapse that has infected global markets.

Markets Pricing in an 84% Chance of a 50bp Fed Rate Cut as Equities Sink
On a day that saw equity markets plummet, Fed funds futures are pricing in an 84% chance that the Federal Reserve will cut rates by 50bps at the next meeting set for Oct. 29.

Bush invites world leaders to summit
The G-8 (even Russia) plus 12 should make for a head-turning summit
President Bush today invited leaders of the world's industrial powers to an economic summit in Washington starting on Nov. 15. The president will officially be a lame duck at that point, yet the economic crisis underway will be foremost on the mind of his successor and the world's other leaders. The invitations for a summit on the global economic crisis have gone out to members of the other G-8 nations and 12 more players: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union.

US to host G20 world summit over crisis
Global stock markets plunged on Wednesday as the White House said it would invite world leaders to a global financial summit next month, 11 days after the US presidential election. The S&P 500 fell more than 6 per cent to close at its lowest level in five years, while London’s FTSE 100 lost 4.5 per cent and Japanese stocks dropped 6.8 per cent. The stock-market retreat came as prices for oil and gold fell sharply and European currencies slumped against the dollar and yen as traders bet on interest rates being slashed to offset a looming recession.

Bush's Financial Crisis Summit
President Bush plans to host a major economic conference with many of Europe's top leaders in order to address the worldwide financial meltdown. Kimberly Dozier reports from the White House.

Bush invites world leaders to Washington for economic summit
President George W. Bush has invited the leaders of 20 nations to come to Washington on Nov. 15 for an international summit meeting on the economy, the White House said Wednesday. The meeting could eventually lead to a far-reaching overhaul of the rules governing global financial markets. The meeting, intended to be the first of several global economic meetings, will come less than two weeks after the U.S. presidential election, and its timing underscores the urgency the Bush administration feels in addressing the financial crisis. The White House said that Bush would "welcome input" from the president-elect, although it is unclear if Bush's successor will attend.

Europe Seeks to Implement New Bretton Woods Fiat Currency System
Bretton Woods was effectively an exchange rate mechanism, were gold backed the new kid on the world block, namely the post war US dollar and all other currencies floated around the dollar in a fixed range. If a currency moved too far either way of the range then the respective Central Bank stepped in and delivered the appropriate medicine. However the US dollar was pegged to the price of gold which was fixed at an official rate of $35. All went well until one or two countries, well, mainly France decided that they wanted the gold that backed the dollar reserves they had accumulated by repatriating the dollars back to Uncle Sam.

Getting Ready for "The Turn" in the Dollar
Over the years, I have written a number of controversial articles, some which were correct, and some which were off base. Like a player that bats .300 in baseball, in the financial markets, if you can correctly see what’s coming next more then half the time, you are doing reasonably well. I start today’s article on this note because I know that right here, right now, this article and this call are bound to be among the most highly controversial and represent one of the more aggressive calls I have made in some time. Yet, looking at the state of the currency markets, it appears as though a truly major turn is dead ahead. Now, I am writing this article from the point of view of a market technician, and I want to state up front that I have no idea "why" the Dollar will weaken, and why the Euro will bounce back. For whatever reason, I would assert that at the moment, an "inflection point" of epic proportions is now directly ahead.

US Dollar Still the Safe-Haven of Choice – More Gains in Store?
Despite dismal fundamentals, the US dollar rally continues to dominate as it remains one of the strongest currencies, second only to the Japanese yen. The Federal Reserve is still struggling to stabilize the markets as banks remain worried about counterparty risk and are avoiding lending. As a result, the Fed said they would raise the interest rate paid on bank reserve balances in an attempt to keep liquidity in the financial system without impacting their monetary policy.

Max Keiser - Special Liquidity Schemes, Gold and the Dollar

Commodities Bull Run Ahead
Global crisis aside, commodities will roar again, and soon, says Jim Rogers, CEO of Rogers Holdings. "We have had eight or nine periods of forced liquidation over the past 100 to 150 years wherein everything was liquidated without regard to fundamentals. This is such a period," Rogers told the Web site Commodity Online. A slowdown in China and economic malaise in the United States and Europe have hit commodity prices short term, Roger says, but nothing about the basics of supply and demand have changed.

Dow Gold Ratio Hits 80 Year Extremes, Time to Buy?
YOU MIGHT LIKE to know, if you put store by such things, that the US stock market just sank to a 14-year low against gold. With the Dow Jones index dipping below 9,000 last week, the price of gold held near $850 an ounce – at least until last Thursday's AM Gold Fix in London. So the Dow/Gold Ratio – which simply divides the one by the other, thus pricing the Dow Jones Industrial Average in ounces of gold – fell to a little above ten, making the 30 stocks of the DJIA cheaper in Gold Bullion terms than at any time since January 1995. Y'know, like the Tech Stock Bubble and Reflation Rally were merely a dream Alan Greenspan had after eating wild mushrooms and blue cheese right before bedtime.

Gold can plunge to $600 soon
September 17, 2007. Ten days after the beginning of the Fed rate cuts (and financial market turmoil) that would eventually bring gold to $1033.90 on March 17 of 2008. That's how long ago it was that gold traded at $720 per ounce. We have now come full circle. The metal is currently showing a 20% loss over one month, and 3.5% on the one year timetable. Our long-stated (and much derided) $732 objective has been achieved, of that there is no doubt. The remaining question now emerging is: has gold seen its lows, or are we at the start of a phase in the mid-to-high $600's?

'Comex paper gold can not manipulate gold price'
When will Comex paper gold no longer be able to manipulate the price of gold as they did today and most every day for the last many years? Can the Comex paper gold exchange default? . . . . The Comex will no longer be able to manipulate price as Asia recognizes the dangers inherent in financial institutions and are therefore channelling their business into the cash bullion market. The Asian demand in the cash market then will not be of the kind that runs away from paper supply, but rather one that stands still and takes it. Should there be a shortfall of gold in the bullion market, delivery will be taken out of the COMEX warehouse to make cash bullion deliveries.

Bearish Outlook on the Markets
A look at why U.S. investors should brace themselves when foreigners come to their senses, with Peter Schiff, Euro Pacific Capital Inc. and CNBC's Rick Santelli

War between paper gold and bullion gold
It is axiomatic that the most leveraged gold market most often (95 percent of the time) sets the price of any cash market. First derivatives (listed futures) commands price. This remains true as long as the COMEX warehouse of gold is NOT meaningfully depleted by long gold contracts by taking delivery from the exchange warehouse. As long as an exchange maintains a warehouse that historically overwhelms historical demand for delivery the first derivative, The COMEX listed gold future, will be the primary cause of price.

Gold May Pay Only in Case of Maximum Despair
Gold is for rich guys -- buying physical gold, that is. The metal's highest and best investment use is as insurance policy against a currency collapse. For that purpose, you need a lot of it, stored around the world. Owning 20 or 30 coins is nice but won't protect your standard of living in a world where dollars are dust. Gold isn't even a reliable hedge against inflation. It reached $850 an ounce in January 1980, a price not seen again until January 2008. During those intervening 28 years, gold plunged and reared but lost more than half of its purchasing power. For a 1980 investor to break even after inflation, gold would have to reach $2,200.

The bail-out threat to free markets
As the global financial crisis deepens, European leaders are making a virtue of big government and state intervention. This is a dangerous path to take. Corporate bail-outs beyond the banking industry may now be an inevitable consequence of decisions to save the banks and, in the US, to lend billions of dollars to, say, the automotive industry. The siren calls should be resisted. Some European Union leaders affect to believe the crisis has ex?posed the failures of US-style free markets and justifies a return to the state’s historically strong role in setting European economic policy. Their response has struck a popular chord. Italy’s Silvio Berlusconi basks in media adoration for his state-sponsored rescue of Alitalia, the collapsing airline, and promises of help for carmakers. Nicolas Sarkozy, France’s president, advocates creating European sovereign wealth funds to save companies that are vulnerable to takeover by non-European predators.

The Myth that Laissez Faire Is Responsible for Our Financial Crisis
The news media are in the process of creating a great new historical myth. This is the myth that our present financial crisis is the result of economic freedom and laissez-faire capitalism. . . . . Beyond all this is the further fact that the actual responsibility for our financial crisis lies precisely with massive government intervention, above all the intervention of the Federal Reserve System in attempting to create capital out of thin air, in the belief that the mere creation of money and its being made available in the loan market is a substitute for capital created by producing and saving. This is a policy it has pursued since its founding, but with exceptional vigor since 2001, in its efforts to overcome the collapse of the stock market bubble whose creation it had previously inspired.

Greenspan Urges Tighter Regulation After 'Breakdown'
Former Federal Reserve Chairman Alan Greenspan called for tighter regulation of financial companies, distancing himself from the free-market culture that he helped to create. Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony to the House Committee on Oversight and Government Reform. Other rules should address fraud and settlement of trades, he said. Greenspan's office released the text ahead of the hearing scheduled for 10 a.m. in Washington.

Struggling to keep up as crisis raced on
"I feel like Butch Cassidy and the Sundance Kid. Who are these guys that just keep coming?" — Treasury Secretary Henry Paulson Jr.
It was the weekend of Sept. 13, and the moment Treasury Secretary Henry M. Paulson Jr. had feared for months was finally upon him: Lehman Brothers was hurtling toward bankruptcy — fast. Knowing that Lehman had billions of dollars in bad investments on its books, Mr. Paulson had long urged Lehman’s chief executive, Richard S. Fuld Jr., to find a solution for his firm’s problems. "He was asked to aggressively look for a buyer," Mr. Paulson recalled in an interview.

Horse is already out of the barn . . . .
Senators Seek to Ensure Bank Injections Boost Lending
A group of Democratic senators asked the U.S. Treasury Department on Wednesday to set guidelines saying that banks receiving government capital injections should use the funds to restore their lending activities to levels prior to the credit crunch. The senators said in a letter that Treasury officials should also issue guidelines or best practices that specify the type of lending allowed, encourage loan modifications, and provide more oversight of executive compensation. "Although we are supportive of your efforts to restore stability to the financial system through direct capital injections into financial institutions, we are concerned that if the program is not implemented correctly, its effectiveness will be limited," the letter said.

Recession Will Last At Least Two Years: Roubini
The US economy is entering a two-year recession that will be longer and deeper than previously feared, said Nouriel Roubini, a well-known economist and professor at New York University. "I believe we're going to have two years of negative economic growth," Roubini said on CNBC. "The last two recessions lasted only eight months each ... This time around this is going to be three times as long, three times as deep. This is going to be the worst recession the US has experienced since the 1980s."

Roubini on The Unfolding Financial Crisis P1

Roubini on The Unfolding Financial Crisis P2

Hedge Funds' Steep Fall Sends Investors Fleeing
The gilded age of hedge funds is losing its luster. The funds, pools of fast money that defined the era of Wall Street hyper-wealth, are in the throes of an unprecedented shakeout. Even some industry stars are falling back to earth. This unregulated, at times volatile corner of finance — which is supposed to make money in bull and bear markets — lost $180 billion during the last three months. Investors, particularly wealthy individuals, are heading for the exits.

How hedge funds manipulate markets!

Five Ways to Fix Our Financial Architecture
Some urgent reforms need to be made to the architecture of international financial regulation, but talk of a second Bretton Woods conference is misleading. Neither the International Monetary Fund nor the World Bank is a financial regulator in the sense of being a body that sets the rules for and supervises individual institutions. Those important tasks are carried out by less glamorous entities such as the Basel Committee and the International Organization of Securities Commissions. The real issues relate to the way in which these bodies carry out their jobs.

Credit Default Swaps, Part Two: ICE and Other Exchanges
My favorite investment in the CDS market to be is the Intercontinental Exchange (ICE). Founded in the year 2000 in Atlanta, the ICE pioneered the market for WTI Crude [West Texas Intermediate Crude]. Most of this commodity is from smaller wells in Texas and Oklahoma. Plus, the ICE recently has benefited from the surge in sugar and coffee prices [and hence traders were buying/selling these contracts to hedge their volatile positions]. Anyway, the ICE has benefited from providing liquidity in the commodity market - and their purchase of the NYBOT was accretive to earnings from an early stage [from the get-go in fact]. Some analysts have recently downgraded the ICE and reduced earnings estimates by a little.

Markets hold breath as $360bn Lehman swaps unwind
The $54trillion credit derivatives market faces a delicate
test as $360bn worth of contracts on now-defaulted derivatives
on Lehman Brothers are due to be settled on Tuesday.
Due to the opacity of the market, which is one of the most complex, least regulated and least understood in the global financial system, it is still not clear how many contracts have to be settled or which institutions will take the ultimate hits once the billions of dollars worth of contracts have been unravelled. The collapse of Lehman Brothers, is expected to trigger credit default swap (CDS) protection pay-outs of about $400bn but because the contracts were sold many times through different counterparties it is not yet known who will be liable.

Banks Face More CDO Writedowns
A Vicious CDO Circle - Subprime Losses Trigger Writedowns, Banks Fail as a Result, Triggering Losses on Bank Circuit; Synthetic CDOs Trading at Less Than 10 Cents Per Dollar; Lehman as Well as Icelandic Banks Failed; CDOs Paying Claims on Bond Losses

Job Losses Accelerate, Signaling Deeper Distress
Employers are moving to aggressively cut jobs and reduce costs in the face of the nation's economic crisis, preparing for what many fear will be a long and painful recession. The labor market has been weak all year, with a slow drip of workers losing their jobs each month. But the deterioration of the job market is now emerging as a driver of economic distress, according to a wide range of data and anecdotal reports from corporate America.

PBGC (Government Pensions) Lost $1.2 Billion in Investments
The government agency that insures private-sector pension plans for millions of Americans lost $1.2 billion in the past 11 months to Aug. 31, including a $3.1 billion loss in stock investments. The Pension Benefit Guaranty Corp. incurred the loss even before the stock market's historic tumble last month, according to preliminary unaudited figures released by the House Education and Labor Committee.

Willie Sutton Goes to Harvard
"Because that's where the money is." -- Willie Sutton, when asked in 1934 why he robbed banks
Washington is having a Willie Sutton Moment. Such moments occur when government, finding its revenue insufficient for its agenda, glimpses some money it does not control but would like to. Sen. Charles Grassley (R-Iowa) and Rep. Peter Welch (D-Vt.) recently convened a discussion of how colleges and universities should be spending their endowments.

The Trouble With a Homeowner Bailout
In the government’s ever-morphing efforts to save the financial system, the moment when the nation’s homeowners get rescued seems, finally, to be getting near. John McCain has called for the Treasury Department to spend $300 billion buying up mortgages, and Barack Obama now favors a version of an idea he opposed during the primaries: a 90-day moratorium on foreclosures. Sheila Bair, the head of the agency that guarantees bank deposits, said last week that it was time for the government to shift its focus away from banks and do more to prevent foreclosures.

U.S. spending forecast points to recession
In a season with plenty of chilling numbers, try this one: American households have lost something in the order of $7 trillion of wealth this year alone. That ballpark estimate of the damage done to households implies that personal spending will be cut back even more sharply than is already showing up in data. The debit side of personal balance sheets doesn't look so good either; credit is tougher to get and more expensive and banks are increasingly asking for their money back where they can.

For fallen bankers, sorry may be the hardest, and smartest, word
No one expects a fallen Master of the Universe to say sorry. But some academics say that an apology - even for all the litigation risk it might entail - can be the basis of revitalized confidence and trust. With global markets paralyzed by the inability to rely on a counterparty, and as trust and accountability form the heart of debates about effective regulation, a slice of humble pie now might help bankers earn trust in the future.

Regional Banks Post Large Loan Losses
This blog noted in May, thanks to comments from Chris Whalen of Institutional Risk Analytics, that the well publicized losses at large banks were soon to be followed by significant writedowns at mid and smaller sized banks. Whalen saw the wheels starting to come off in the June-July timeframe, meaning they would show up in third quarter earnings reports

Public-assistance numbers grow in Colorado
The foundering economy has homed in on people
unaccustomed to food stamps and unpaid bills.
The woman fidgeted just outside the office door, wondering aloud if they could fit her in that day, if she should come back later — or if she even should have come in the first place. She had found the Douglas/Elbert Task Force a little before the nonprofit opened on a Monday morning — only to find more than a dozen adults and a handful of small children already occupying the small waiting area. A few more stood outside in the hallway, waiting for help with rent, with utilities, or with clothing and groceries. "It's embarrassing," said the 48-year-old woman, a laid-off real estate office administrator so mortified by her unemployment that she didn't want her name used. "I have a lovely apartment, nice furniture, thousands of dollars in nice business clothes in my closet. "And here I am."

Wall Street facing heavy job losses
Wall Street could face tens of thousands more job losses as a result of the banking crisis and see average pay drop by more than a quarter, a report from the New York Federal Reserve suggested on Wednesday. In a comparison with previous financial sector downturns, the report said the current crisis shared characteristics with market problems in the late eighties and early years of this century. Employment in those periods fell 17 per cent and 12 per cent respectively, while in the early 2000s salaries fell 27 per cent.. There were 460,000 jobs in New York finance in September, according to Moody’s economy.com. A contraction of 12-17 per cent would be equivalent to 55,000 - 78,000 lost jobs.

Merck to cut 7,200 jobs
U.S. pharmaceutical giant Merck said Wednesday it would trim its workforce by 7,200 positions by the end of 2011. The 12 percent job reduction was part of a cost reduction plan aimed at saving $3.8 billion to $4.2 billion by the end of 2011, the company said.

Goldman Sachs said to cut 10 percent of work force
Goldman Sachs Group Inc. is cutting about 10 percent of its work force amid the ongoing downturn in the credit and lending markets, a person briefed on the plan said Thursday. Goldman Sachs will cut about 3,260 jobs. Goldman's work force, which was at record high levels at the end of the third quarter, will be pared back close to 2006 and 2007 levels. No additional cuts are planned, the person said. The job cuts are a direct result of the current economic environment and significantly lower levels of business activity, the person told the Associated Press.

Chrysler cutting 1,825 jobs with moves at 2 plants
Chrysler LLC will cut 1,825 jobs by eliminating one shift at a Toledo Jeep plant and accelerating the closure of its sport utility vehicle factory in Newark, Del., because of the slowing global economy and a shift toward smaller vehicles. About 825 workers at the Toledo North Assembly Plant will be laid off indefinitely as of Dec. 31. The Newark closure also will be effective at the end of the year and affect about 1,000 jobs, the company said Thursday in a news release. The cuts are about 6 percent of Chrysler's U.S. hourly work force of 33,000.

A.I.G. to Suspend Millions in Executive Payouts
The beleaguered insurer American International Group has agreed to suspend payments to executives from a $600 million bonus fund as well as $19 million in payments to its former chief executive, the New York attorney general announced on Wednesday. The moves are the latest steps in an effort by the attorney general, Andrew M. Cuomo, to prevent bonuses and other compensation to former executives at A.I.G., which in recent weeks has received tens of billions of dollars in loans from the Federal Reserve.

Latinos Account for Half of U.S. Population Growth Since 2000
Since the turn of the century, Hispanics have accounted for more than half (50.5%) of the overall population growth in the United States -- a significant new demographic milestone for the nation's largest minority group. From April 1, 2000, to July 1, 2007, the Hispanic population grew by 10.2 million to 45.5 million, an increase of 29%. During this same period, the much larger non-Hispanic population of the U.S. grew by 10 million, an increase of just 4%. As of mid-2007, Hispanics made up 15.1% of the total U.S. population but accounted for a majority of the nation's total population growth since 2000. During the 1990s, the Hispanic population also expanded rapidly, but over the course of that decade its growth accounted for less than 40% of the rise in the nation's total population.

Lobster prices tank as diners claw back spending
Lobster's price collapse boils down to supply
glut, as Maine catches tail end of credit crisis
The price of Maine lobster, which accounts for 80 percent of the U.S. catch, is tanking. The primary factor, a drop-off in demand by penny-pinching diners, has been in place since summer. But a secondary problem recently surfaced: the global banking crisis left Canadian processors short on credit, trapping Maine lobstermen and dealers with too much supply. While bargains abound for lobster lovers throughout the Northeast, there's growing angst in New England fishing communities. One small village held a lobster bake on the town pier to unload excess lobsters and help out the local fishing fleet.

MGM Mirage shares plunge on ratings cut
MGM Mirage shares plunge on Fitch downgrade
linked to financing worries for CityCenter resort
Shares of casino operator MGM Mirage Inc. plunged nearly 14 percent Wednesday after Fitch Ratings downgraded the company on worries about financing its $9.2 billion CityCenter megaresort. Shares slid $1.97, or 13.7 percent, to $12.44. Earlier in the session, shares hit a 52-week low of $11.76. The stock is down 85 percent so far this year. Fitch cut its rating on the company's issuer default probability, senior notes and senior credit facility to "BB-" from "BB" and trimmed its rating on senior subordinated notes to "B" from "B+". All ratings are considered non-investment or junk grade.

After the House Is Gone
MORE than a million homes have been lost to foreclosure in the last two years. And according to data from Mortgage Bankers Association, banks are now in the process of foreclosing on 1.5 million more. The impact of the mortgage crisis has been obvious in both the worldwide credit crunch and the presidential campaign, where there has been a lot of talk about the plight of overextended homeowners. But the specific personal costs of home loss have been less evident, at least to those not paying them.

So you think this is a free country - Free speech suppressed at Biden event
On October 21st Joe Biden was inside the Adams City High School in Commerce City, Colorado talking about "the change we need." Outside the event the only change being made is the attempted eradication of free speech. But not for everyone just for those who do not like the corporate control of Washington. You are still free to support corruption and worship chosen political candidates but don’t you dare challenge the status quo.

WeAreChange Colorado Members Harassed by Police Outside Biden Event

OPEC tests prospect of a cut in Russian oil production
As oil prices tumble amid fears of a worldwide recession, OPEC has been testing the prospects of Russia joining in production cuts to help support global prices, something the authorities in Moscow have not been willing to do in former downturns. So far, Russia has again been noncommittal in high-level meetings including an unusual visit by OPEC's secretary general, Abdullah al-Badri, to Moscow on Wednesday. Russia is the largest oil producer not in the Organization of Petroleum Exporting Countries.

OPEC Risks Split on Cuts as Economies Reel, Oil Drops
OPEC, founded five decades ago to unify oil producers, risks dividing members as the group plans to cut output and raise prices just as developed nations face their worst recession since 1983. Iran's energy minister, Gholamhossein Nozari, said yesterday OPEC may slash output quotas by 2.5 million barrels a day, or 8.7 percent, an amount about equal to what's pumped from Kuwait. The Algerian minister and OPEC president, Chakib Khelil, said two days earlier the reduction at the group's Oct. 24 meeting in Vienna may be only 1 million barrels.

Copper Plunges Below $4,000 for First Time Since November 2005
Copper tumbled below $4,000 a ton for the first time since November 2005 on deepening concern a global economic slump will damp demand for commodities. Australian, New Zealand and Japanese shares dropped on increasing signs the world's economy has slipped into a recession. BHP Billiton Ltd., the world's biggest mining company, lost 11 percent after metal prices plummeted.

Hyundai Motor Profit Tumbles 38% on Strike, Warranty Provisions
Hyundai Motor Co., South Korea's largest automaker, reported a 38 percent drop in third-quarter profit because of falling global demand, strikes and the impact of a weaker won on overseas warranty costs.

Owner said to weigh selling Chrysler in pieces
Person briefed on talks says Chrysler
could be sold in pieces to other companies
Chrysler LLC could be sold in pieces to other companies as its majority shareholder Cerberus Capital Management LP seeks to exit the auto business, according to a person briefed on the discussions. Cerberus, the New York-based private equity firm, has been shopping the beleaguered automaker to General Motors Corp., the combined Nissan Motor Co. and Renault SA and other companies.

Marble for Unknowns tomb just sits
The chunk of stone ready to be donated
by a Glenwood Springs man is stalled again.
Retired Glenwood Springs car dealer John Haines' hope of donating a giant chunk of snow -white marble to the federal government to replace the cracked Tomb of the Unknowns at Arlington National Cemetery is stalled again. Haines' hoped-for donation, which has sat outside the Yule Quarry near Marble since it was cut for the tomb in 2003, didn't even rate a mention in a 34-page Department of the Army report to Congress this week on replacement and repair options for the deteriorating tomb.

Rich-poor divide widens, says OECD
The gap between rich and poor has widened in most developed countries over the past two decades as economic growth has benefited the wealthy more than the poor, according to the Organisation for Economic Co-operation and Development. Mid-way through this decade, Mexico and Turkey had the highest inequality in incomes, followed by Portugal and the US. Denmark and Sweden were the most equal societies in terms of income disparity in the 30-nation study.

Citic Pacific Tied to Australian Dollar After Losses
Citic Pacific Ltd.'s attempt to manage currency risk means the Chinese steelmaker and property developer has four times more money riding on the Australian dollar than it earned last year.

Asian markets fall after opening
Wall Street blues spread to Asian-Pacific markets Thursday as Japan's Nikkei index led the sell-off in early trading. The 225-stock Nikkei, which took a big hit the previous day on the Tokyo Stock Exchange, dropped more than 7 percent before paring some of the losses after opening Thursday as investor sentiments were badly shaken by the Dow's 515-point loss on Wall Street. A strengthening yen added to their woes.

U.S. imposes sanctions on Iran's Export Development Bank
In yet another action to step up pressure on Iran to discourage it from pursuing a nuclear weapons program, the United States on Wednesday imposed sanctions on the Export Development Bank of Iran. The punitive action reflects Washington's opposition to the bank's involvement in the controversial nuclear activities of Tehran.

Mexico attacks ‘unethical’ derivatives selling
Mexico’s central bank chief has accused investment banks of behaving irresponsibly and unethically in marketing derivative products to companies – warning that the problem extended far beyond Mexico. In recent weeks, many of Mexico’s biggest corporate names have admitted billions of dollars of mark-to-market losses through exchange-rate derivatives, sold by banks as a form of insurance against currency movements. Companies in other emerging economies, such as South Korea and Brazil, have also suffered big losses.

Debt Default Looms for Argentina
Argentina to Seize $29 Billion of Funds; Argentina Last Defaulted in 2001; President Fernandez Says Argentine Plan Will Help Retirees and Workers

Brazil gives go-ahead to aid
Brazil’s government-controlled banks have been given the green light to help prop up financial institutions owed money from companies that have made bad bets on the country’s currency amid growing concerns about the level of exposure. Sadia, a food processor; Votorantim, an industrial conglomerate; and Aracruz, one of the world’s biggest paper and pulp manufacturers, have admitted to heavy losses on currency derivatives after Brazil’s currency, the real, devalued sharply against the US dollar in the past few months after appreciating steadily for almost four years.

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Wed 10.22.2008

US government throws oil on fire
Free-market fundamentalists have been operating in denial mode for more than a year, since the US financial sector imploded in a credit crisis from excessive debt in August 2007, claiming that the economic fundamentals were still basically sound, even within the debt-infested financial sector. As denial was rendered increasingly untenable by unfolding events, champions of market fundamentalism began clamoring for increasingly larger doses of government intervention in failed free markets around the world to restore sound market fundamentals. For the market fundamentalist faithful, this amounts to asking the devil to save god.

Fed Steps in with $600 Billion Plan to Bolster Money Market Funds
The U.S. Federal Reserve yesterday (Tuesday) announced a new program that will provide as much as $600 million in emergency funding to money-market funds should the ongoing global financial crisis once again cause the short-term credit markets to freeze out borrowers. The newly created Money Market Investor Funding Facility (MMIFF) will help money market funds meet redemption needs and keep from “breaking the buck” – dropping below the normal $1 in net asset value – as The Reserve Primary Fund did after the collapse of Wall Street investment-banking giant Lehman Brothers Holdings Inc.. Struggling money-market funds that have seen more than $500 billion in redemptions since Lehman’s demise.

'When Inflation Erupts, Gold Will Take Off'
. . . . Based solely on global economic indicators, commodities should be in a cyclical bear market with no bottom in sight. But there’s intense pressure on policymakers to fill the deflationary vacuum that’s been created by both Main Street and Wall Street. Main Street’s plummeting housing prices stretched the limits of the financial system, but lawmakers in an election year will find it easier to blame Wall Street than Main Street. . . . . We’re actually experiencing huge deflation—in housing and on Wall Street. It’s not inflationary yet. The Paulson package is a stopgap measure that could lead to inflation. This meltdown is just like 1974 or the Depression of the 1930s, not the 1987 quick crash. It continues to destroy confidence. Another thing that propelled this meltdown to more disastrous proportions was the rule that removed the uptick rule for short-selling. . . . . Over the next two years gold will be well over a $1,000, maybe running up to $2,000. The number-one Asian analyst, Chris Wood, is advocating a 30% gold exposure to institutions. . . . . Whether you have big deflation or big inflation driving the bear market, gold does well. If it’s just a normal cyclical inventory recession or whenever interest rates are above the CPI rate, gold doesn’t do well. Today, the Fed’s funds are below the CPI rate and the printing presses are busy.

Metal keeps drying up as Comex pretends otherwise
Today brought a couple more notable comments about the disparity between the price of real gold and silver in hand and the price of gold and silver futures on the New York Commodities Exchange. First from market analyst and mining company consultant Peter Grandich, now writing daily at Agoracom: "There's an old saying: 'Don't fight City Hall.' I have a new one: 'Don't fight the bandits on the Comex.' "There's no rational explanation for the incredible disconnection between gold's physical demand and the paper trading of it on the Comex.

Weak earnings rouse worries about global recession
Administration says it will take time for the
economy to recover as corporate earnings totter
A barrage of poor earnings Wednesday from major corporations revived worries of a global recession and showed the depth of the financial crisis the Bush administration is trying to tackle. Wachovia Corp., which is being bought by Wells Fargo for about $14 billion in stock, said it lost $23.89 billion in the third quarter. It earned $1.62 billion in the same quarter a year ago. Airplane maker Boeing reported its earnings slumped 38 percent as a strike halted production of commercial jets.

Dow futures fall 165 on more recession fears
Dow futures fall 165 on fears about corporate
earnings and chance of deep recession
Wall Street headed for a sharply lower open Wednesday as investors again shifted their focus away from improving credit markets and fixated on worrisome corporate earnings that are raising fears of a deep and painful recession. Ahead of the market's open, Dow Jones industrial average futures fell 165, or 1.82 percent, to 8,870, but came off its lows reached earlier in the morning.

CDO Cuts Show $1 Trillion Corporate-Debt Bets Toxic
Investors are taking losses of up to 90 percent in the $1.2 trillion market for collateralized debt obligations tied to corporate credit as the failures of Lehman Brothers Holdings Inc. and Icelandic banks send shockwaves through the global financial system. The losses among banks, insurers and money managers may spark the next round of writedowns on CDOs after $660 billion in subprime-related losses. They may force lenders to post more reserves against losses after governments worldwide announced $3 trillion in financial-industry rescue packages since last month, according to Barclays Capital.

Pay-up time for Lehman swaps
This Tuesday will be the first really interesting day in the financial markets since the day last week when US Treasury Secretary Paulson partially nationalized the nine largest US banks. October 21 sees the settlement of the credit default swaps (CDS) issued on Lehman Brothers debt. First the facts. A CDS, or credit default swap, is essentially an insurance against losses if an issuer of debt goes bankrupt and cannot honor its obligations. Those who have sold the protection will then compensate the loss to those who have bought the protection. Estimates say that Lehman debt amounts to some US$150 billion. Other estimates say that Tuesday will see settlement of about $360 billion worth of nominal CDS contracts.

Sounds fishy?

Life preserver for U.S. homeowners under water
In the U.S. government's ever-morphing efforts to save the financial system, the moment when the nation's homeowners get rescued seems, finally, to be getting near. John McCain has called for the Treasury Department to spend $300 billion buying up mortgages, and Barack Obama now favors a version of an idea he opposed during the primaries: a 90-day moratorium on foreclosures. Sheila Bair, the head of the agency that guarantees bank deposits, said last week that it was time for the government to shift its focus away from banks and do more to prevent foreclosures.

Gold has been and remains money
Inquiry into condition of the gold market - part 1

Inquiry into condition of the gold market - part 2

Inquiry into condition of the gold market - part 3

Global Stocks Decline on Economy Concern; Euro, Oil Retreat
Stocks fell around the world, the euro sank to a 20-month low against the dollar and oil retreated as the deepening economic slump sapped corporate profit.

Which? urges bailed-out banks to pass on rate cuts
The consumer group Which? today called on the UK's bailed-out banks to pass on interest rate cuts to consumers. Following the multi-billion pound rescue package for failing UK banks, Which? has written to chancellor Alistair Darling demanding that those banks that received cash injections from British taxpayers pass on base rate changes to their mortgage customers immediately.

U.S. Federal Reserve adds to efforts to aid credit markets
Adding to its efforts to unclog the credit markets, the U.S. Federal Reserve said Tuesday that it would provide financing to shore up money market mutual funds, the consumer investments that have traditionally been considered as safe as government-guaranteed bank accounts. Under the program, the Fed will help buy up to $600 billion in short-term debt, including certificates of deposit and commercial paper that expires in three months or less. This type of debt has historically been used by money market funds seeking safe, conservative returns for their clients. But the recent market turmoil caused a prominent fund to fall below $1 a share, an extremely rare occurrence.

Scandal hinders IMF's role in global lending
The International Monetary Fund, onetime firefighter for the global economy, is suddenly being called back into action, even as its chief stumbles on his way to the rescue. The fund is nearing agreements to make emergency loans to Iceland and Ukraine, and discussing aid packages with Pakistan and Hungary — moves that would thrust it into the thick of a global crisis after a frustrating period in which it was a bystander.

Pound falls to five-year low as Bank head admits recession is here
Sterling was hammered down to a five-year low against the dollar today and the FTSE 100 dropped by almost 200 points after Mervyn King admitted for the first time that the UK is entering a recession. The pound began tumbling last night as the Bank of England governor told business leaders in Leeds that the economy is shrinking and hinted at fresh interest rate cuts.

Idea of sovereign wealth funds divides Europeans
With some European corporate gems trading at beaten-down prices because of recent market turbulence, President Nicolas Sarkozy of France on Tuesday suggested that European leaders should set up their own sovereign wealth funds to buy stakes in crucial industries to shield them from potential foreign raiders. The widely differing reactions to the French proposal refocused attention on the fierce tug-of-war under way between those European countries eager to see government take a more active and expansive role in responding to the financial turmoil and its impact on the economy, and those intent on keeping state intervention to an absolute minimum.

A FINANCIAL NEW WORLD ORDER?
Bush says reforms must improve, not fetter, the free market; Europeans hint at more robust intervention.
When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system. The series of summits that Mr. Bush announced over the weekend at Camp David with European leaders at his side suggests a broad understanding among them: that the current crisis requires the kind of global regulatory reforms that have eluded major powers in the past.

Gliding toward nuclear war?
Soaring, cryptography and nuclear weapons
Let's face it, nuclear weapons are the elephant in the room that no one likes to talk about. So let's approach the issue from the less threatening perspective of the awesome picture of the glider. The glider looks like it's suspended above the runway, but in reality it's screaming toward the photographer at over 200 kilometers an hour in a maneuver known as a high-speed low pass. The pilot starts about 2,000 feet (609 meters) high and over a kilometer from the runway. He then dives to convert altitude into speed and skims the runway. Next, he does a steep climb to reconvert some of that speed into altitude so he can turn and land.

Shattered illusions of liquidity
The substantial reserves of central banks and their acolytes, sovereign wealth funds, are frequently cited in support of the case for a large pool of “unleveraged” liquidity, that is “real” money. These funds, it is reckoned by some, sit ready to support asset values across the globe. In reality, the available pool of money may be more modest than assumed. For example, China has close to $2,000bn in foreign exchange reserves. The reserves arise from dollars received from exports and foreign investment into China that are exchanged into renminbi. The central bank generates renminbi by printing money or borrowing through issuing bonds in the domestic market. The reserves are essentially “leveraged” using domestic “liabilities”.

U.S. banks mine data and pitch to troubled borrowers
Brenda Jerez hardly seems like the kind of person lenders would fight over.
Three years ago, the New Jersey resident became ill with cancer and ran up $50,000 on her credit cards after she was forced to leave her accounting job. She filed for bankruptcy protection last year.For months after she emerged from insolvency last fall, 6 to 10 new credit card and auto loan offers arrived every week that specifically mentioned her bankruptcy and, despite her poor credit history, dangled a range of seemingly too-good-to-be-true financing options.

Wipeout! Wachovia Posts $23.7 Billion Quarterly Loss
Wow. I am going from memory, but I am pretty certain that this is the mother of all quarterly financial services losses. And remember, Wachovia is merely a pretty big US bank, not a global capital markets behemoth like UBS, Deutschebank, or Citi. From the Wall Street Journal: Wachovia Corp. swung to a large third-quarter loss, as the bank posted $18.8 billion in goodwill write-downs and $8.71 billion in other charges and costs related to market disruption, investing and other crisis-related losses.

Hedge Funds Worldwide Post Record Losses in September
Hedge funds worldwide posted record monthly losses in September, according to Eurekahedge Pte., as short sale bans and client redemptions amid the credit crisis hurt funds including Citadel Investment Group Inc. The Eurekahedge Hedge Fund Index, which tracks 2,431 funds that invest globally, declined 4.7 percent, preliminary figures from the data provider show. The drop is the biggest one-month loss since it began collecting data in 2000 and the index, down 7.9 percent through September, is set for its worst year on record.

Spectre of recession haunts investors
Recession fears returned to haunt financial markets on Tuesday, undermining a recent improvement in investor risk appetite and overshadowing a further decline in interbank lending rates. News that the Chicago Fed’s national activity index had fallen to its lowest level since 1982, along with negative profit outlooks from companies such as Texas Instruments and DuPont, weighed on US and European equities and sent investors fleeing to the relative safety of government bonds. Commodity prices also staged a broad retreat on worries about falling demand, and were further hurt by fresh gains for the dollar as hedge funds continued to liquidate risky positions.

This Bear Market 2008 Could Last 20 Years
Yesterday, prices went up on Wall Street... The Dow rose 413 points. There was no follow-up this morning, as investors eyed a mixed bag of 3rd quarter corporate earnings. But, investors are in a pretty good mood, all things considered. After all, Warren Buffett is bullish on stock prices... Warren is putting his money and his mouth in the same place - equities. He says he's sure they will do better over the next 10 years than cash.

The world wakes from the wish-dream of decoupling
The US retains the capacity to disrupt the world economy which it has possessed since at least the 1920s. Accordingly, the struggle between the deleveraging of high-income countries and the growth momentum of emerging economies is ending, alas, in a decisive victory for the former. Yet the news is not all bad: inflationary pressures are abating fast. Even so, this hides more bad news. The broken financial system will weaken the transmission from monetary easing to the economy. This will make the coming slowdown last a long time. Even though decisive action has saved the financial system from its recent heart attack, the patient remains enfeebled.

No Simple Answers for Small Business
"Joe the Plumber" and other small-business owners want to know which presidential candidate would give them the best
deal on taxes. It's a simple question with no simple answers.
The definition of "small business" is broad, ranging from two-person enterprises such as the one Samuel J. Wurzelbacher – "Joe the Plumber" – of Holland, Ohio, told Sen. Barack Obama he wants to buy, to a factory with fewer than 500 workers, to a construction company with $33.5 million or less in sales, according to the Small Business Administration.

Euro, Pound Tumble on Bets European Central Banks to Cut Rates
The euro fell below $1.28 for the first time since November 2006 and the pound tumbled to a five- year low on speculation European central banks will cut interest rates as the global economy heads for recession. The single European currency also slid to the weakest in more than four years versus the yen as global stocks declined, reducing demand for higher-yielding assets funded by low-cost loans in Japan. The pound declined to a one-week low versus the euro after Bank of England Governor Mervyn King said the U.K. is probably in a recession.

Banking crisis timeline
How the credit crunch has led to dramatic, unprecedented events in the City, on Wall Street and around the world

U.S. faces a tricky balancing act
Before the current financial crisis, the United States carried enormous trade deficits, and investors from other countries gorged themselves on dollar-denominated assets. Those imbalances were already starting to readjust in the past year as the U.S. economy slowed. A relevant question now is whether the crisis will alter that trend. The answer will have far-reaching effects. If the United States is required to become more of a saver and less of a consumer, businesses around the world will have to find new markets for their products or sell less. But if U.S. consumers continue to spend rather than save, the U.S. economy will still need overseas investors to fill their portfolios with dollars, leaving the old status quo in place.

Regulating The Banks
Big Brother Banking on the horizon?

Bank on double standards
The world media and governments being consumed with an economic crisis of epic proportions - "The most tumultuous times on record in the global financial markets", according to the BBC - the 25th annual World Food Day on October 16 received little attention or governmental fanfare. There is hardly any disagreement that Wall Street's woes are man-made. Regardless of what terminology one wishes to apply - miscalculations, greed, or wholesale failure in the US capitalist system, rooted in the economic philosophies of Milton Friedman and his ultra laissez-faire approach - the fact is the US economic crisis is not a fleeting phenomenon and no quick fixes are to provide a magic remedy.

The Government Has Given Banks YOUR MONEY, and You Won't Get Anything For It
The government has given banks handfuls of YOUR MONEY and you won't get anything for it. . . .
So why has the government authorized trillions on our dime? Well, the original version of the bailout would have helped mainly Paulson's old company, Goldman Sachs. And according to one of the leading experts on monetary policy and economics, the government isn't "trying to save the banking system [but just] trying to save banks." Paulson trying to help out his buddies at Goldman Sachs and elsewhere?

Fed offers $540bn to prop up money funds
The US Federal Reserve on Tuesday said it would finance up to $540bn in purchases of short-term debt from money market mutual funds to shore up a key pillar of the US financial system. Money market funds have faced severe redemption pressures since the financial crisis deepened last month, forcing them to raise cash by scaling back their short-term lending to banks and selling their holdings of commercial paper. This retreat has contributed both to a freeze in the interbank market and a steep decline in activity in the commercial paper market, which has made it difficult for banks and companies to raise short-term funds.

H.D.S. Greenway: The grand illusion
The grand illusion The other day I went to hear my favorite soldier-scholar, Andrew Bacevich, give a talk at Boston University, where he teaches. A retired colonel and Vietnam veteran, Bacevich's new book is called "The Limits of Power: The end of American Exceptionalism." . . . . There is a mythical American narrative, according to Bacevich, that the United States is a nation "providentially set apart in the New World and wanting nothing more than to tend to its own affairs," only grudgingly responding to calls for global leadership "in order to preserve the possibility of freedom." In reality, the United States has sought expansion, first by pushing west until it reached the sea, then through a brief period of direct colonialism, and more recently through a ruthless if indirect imperial policy of control. It worked spectacularly. The United States became a great power replete with material abundance.

Have we paid for the Battle of Waterloo yet?
A masterclass in pithy interviews from a previous Bank of England governor
Cobbold: The National Debt represents the sums of money which the government have over the years borrowed from the public, mainly in this country and, to some extent, abroad. That is really the amount of expenditure which they have failed over the period to cover by revenue.
Day: Have we paid for World War II?
Cobbold: No.
Day: Have we paid for World War I?
Cobbold: No.
Day: Have we paid for the Battle of Waterloo?
Cobbold: I don't think you can exactly say that.

Financial Times to axe up to 60 jobs
The Financial Times is to make up to 60 staff redundant, with the majority of job cuts in commercial departments. FT management has begun consultation with employees about the redundancies, with staff in the editorial library and the managing editor's office at risk of losing their jobs. Other employees who face possible redundancy include staff from advertising sales, finance, IT, conferences and marketing. No journalists will be made redundant, but FT insiders fear the loss of librarians will affect editorial quality. Dan Bogler, the FT managing editor, told journalists that six library staff faced possible redundancy along with two staff from his office.

Workaholism to rule
The financial meltdown has called banking salaries
into question, but what about the long hours' culture?
Two things have always marked out the financial masters of the universe from the rest of us. First, their souped-up salaries, and then their souped-up working hours. We mortals understood that these were connected. The rewards were so high because the hours were so long. No question of flexible or part-time working for them. If they weren't in the office, they were entertaining clients or building team spirit, and were regularly expected to work into the small hours. Perhaps they could snatch a moment in the gym, but this was only to help them maintain their awesome stamina – the stamina to remain effective while working round the clock, and make crucial decisions after only a few hours' sleep.

Boeing Net Falls 38% as Strike Halts Jet Deliveries
Boeing Co., the second-largest commercial planemaker and defense contractor, said profit fell 38 percent after a strike by machinists halted aircraft deliveries and that it can't confirm its previous profit predictions. Third-quarter net income decreased to $695 million, or 96 cents a share, from $1.11 billion, or $1.44, a year earlier, trailing analysts' average estimate. Revenue fell 7.4 percent to $15.3 billion, hurt by the walkout that began Sept. 6, the Chicago-based company said in a statement today.

Boeing and Merck add to market gloom
Hungary has increased its interest rates by 300 basis
points to protect its currency, while the IMF is poised
to help Belarus, Ukraine and Pakistan
More signs of the recession biting came with news that pharmaceutical group Merck plans to cut more than 7,000 jobs by the end of 2011 to cut costs. Meanwhile Boeing has reported a 38% drop in third quarter net income, mainly due to reduced commercial aircraft deliveries after a strike by assembly workers. A host of other major US companies are due to report today, including McDonald's, Philip Morris and Amazon, and investors are growing increasingly nervous about what picture will be painted by their results.

Indian Brides Replace Traditional Gold Jewelry as Prices Rise
Ashima Lahiri will say her wedding vows in December wearing fake earrings, necklaces and bangles that cost a tenth of the price of gold, breaking a millennia-old Indian tradition that brides wear the precious metal.

Oil falls below $70 on US recession fears
Oil falls below $70 a barrel as bleak US company forecasts fuel recession concerns
Oil prices fell below $70 a barrel Wednesday as investors shrugged off a looming OPEC production cut after company forecasts suggested the U.S. may be headed for a severe economic slowdown that would crimp demand for crude. Light, sweet crude for December delivery dropped $2.63 to $69.55 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe.

OPEC faces tough test as oil price tumbles
At the beginning of the year, OPEC producers felt confident that strong economic growth and tight supplies would keep oil prices high. When oil crossed the $100-a-barrel threshold in February, the cartel's president blamed speculators and said there was not much OPEC could do. But now, panic is gripping producers as prices drop. Oil is down by half since July, and the speed of the decline has stunned oil-rich governments that have become dependent on high prices. As the global economy continues to weaken, the Organization of the Petroleum Exporting Countries faces its toughest test in years.

Oil cartel divided over level of cuts
Opec is expected on Friday to decide to slash production as the oil cartel faces its biggest test in more than a decade. But newly released data reveal that the cartel’s vastly divergent economic circumstances will make the divided group’s decision of how much to cut even more difficult. PFC Energy, the Washington-based industry consultants, calculated that Opec countries needed next year’s oil prices to be anywhere from $10 to $100 to keep their import expenditures and export revenues in balance. The tiny nation of Qatar needs oil to be only $10 a barrel, while Iran requires $100. Saudi Arabia, Opec’s most powerful member, needs oil to average $50 a barrel.

Investors suffer as US ethanol boom dries up
Investors, such as Microsoft’s Bill Gates, are sitting on billions of dollars in losses after buying into the corn-based ethanol industry that George W. Bush embraced as the ans wer to US energy woes. Six of the biggest publicly traded US ethanol producers have lost more than $8.7bn in market value since the peak of the boom in mid-2006 and the beginning of this month, according to an analysis by the Financial Times. The boom followed a 2005 law requiring refiners to mix billions of gallons of the biofuel with petrol.

GM in hunt for Buffett-style capital injection
General Motors is seeking a sizeable capital injection from outside investors as a possible alternative to a deal with Chrysler, the carmaker’s smaller Detroit-based rival. Such an investment would be along the lines of Warren Buffett’s recent purchases of minority stakes in General Electric and Goldman Sachs. private investors are searching for ways to deploy capital through minority investments, many such deals, including the capital infusion by TPG into Washington Mutual, have struggled or failed.

Kerkorian sells down his Ford stake
In a sharp change of strategy, Kirk Kerkorian, the US billionaire, is selling down his stake in Ford Motor because he sees more value in his core gambling holdings. The move represents a fresh blow for Ford, the most highly leveraged of Detroit’s three loss-making carmakers, which has replaced its chief financial officer and seen two of its most experienced board members resign this month.

Ford Asks Hiroshima To Buy Mazda Stake
Ford has asked Hiroshima Bank to buy some of the automaker's shares of Mazda, according to Japanese media reports. Hiroshima is expected to purchase a stake, although the size and price of the stake hasn't been determined, reports the Nikkei newspaper. Kyodo reports Ford will sell up to 5% of Mazda to Hiroshima Bank. It was reported last week that Ford is finalizing plans to sell shares in Mazda to about 20 Japanese firms, and will likely outline the deal by next month. Ford is considering selling some of its 33.4% stake in Mazda as it struggles with weakening sales and the global credit crunch.

European carmakers eligible for rescue funds
German and French carmakers, which have asked the European Commission for €40bn ($53bn) in cheap loans, are eligible to tap their governments’ banking rescue plans, according to government officials. Both the German and French finance ministries said on Monday that the financing arms of carmakers could use the state guarantees for new lending of up to €400bn and €320bn respectively. “Car banks can definitely participate in the scheme,” said the German ministry. A French official said: “If you are a bank specialised in providing credit for the purchase of cars you need access to the wholesale markets like any other bank.”

What happens when a Western economy dies
If you want to know what happens when a
21st century economy crashes, ask an Argentinean.
When their currency, the peso, which had been artificially pegged to the dollar, had to be devalued in 2002, savers lost 70 per cent of the money they had kept in their bank accounts. With the government forced to default on payment of its huge, unmanageable debt and unable to bail out the banks, Argentina went through four presidents in a fortnight. Before this disaster struck, in the prosperous 1990s, you couldn't walk anywhere in Miami without bumping into well-to-do Argentines, preppy pastel sweaters draped over their shoulders, spending their easily earned dollars in the city's swishest malls. But after the crash, proud, well-dressed people who had nostalgically considered themselves members of the first world - Argentina was once one of the world's ten wealthiest nations - were reduced to queuing for soup.

Which country will slither down the slippery slope next?
The threat of a worldwide recession leaves many other countries fearing for their future financial and economic strength. Simon Evans, Mark Leftly and Jesse Loncraine assess the health of 16 states on the 'at risk' list
No country in the world remains unaffected by the Western banking crisis that has ensued. Even the most conservative, safe and responsible states are suffering a backlash. Iceland, dubbed the biggest hedge fund in Europe as it rode the credit wave upon which we all surfed, is bankrupt. Its banks in crisis, the reverberations have been felt everywhere. Last week the contagion spread further. Financial institutions like the International Monetary Fund and the World Bank, along with domestic governments, have all forced to administer costly monetary sticking plasters to the world's financial institutions.

The spreading global storm
The fallout from the financial crisis is affecting economies around the world. By Sean O'Grady

New US leaders need a Japanese 'jolt'
As the world prepares for the election and inauguration of a new American administration, policymakers in Japan are thinking about ways their country can extend and reinforce the Japan-US strategic relationship. During the past decade, the government of Japan has undertaken a series of steps to progressively upgrade and stabilize the security relationship. These have included an expanded role for the Self-Defense Forces (SDF) in the fight against terrorism; the acquisition of sea and air assets making it possible for the SDF to conduct operations at a distance from the Japanese islands; increased SDF participation in multilateral security efforts (such as the Proliferation Security Initiative); and the introduction of the hardware and software necessary for integrated launch-phase and descent-phase ballistic missile defense.

Elusive consensus on Iran
Multilateral diplomacy on the Iran nuclear issue, led by the "Iran Six", is falling to pieces as a result of sharpening disagreements on how to respond to Tehran's defiance of demands from the United Nations Security Council that it suspend uranium-enrichment activities. More importantly, the division has been caused by the extent to which Iran has been prepared to accept nuclear transparency, and demonstrate the peacefulness of its nuclear program.

China acts to help struggling manufacturing firms
China today raised export tax rebates on toys, textiles and more than 3,000 other products as it attempts to mitigate the impact of the global slowdown. The boost for struggling manufacturers came as a toy industry expert warned that almost half of the businesses he works with could close down in the next two years. Textile firms, particularly in the Pearl River delta, have also been suffering for months.

Argentina nationalizes $30 billion in private pensions
Argentina's government said Tuesday that it would seek to nationalize nearly $30 billion in private pension funds to protect retirees from falling stock and bond prices as the global financial crisis continues. The measure, confirmed in a speech in Buenos Aires late Tuesday by Cristina Fernández de Kirchner, Argentina's president, was criticized by political opponents and analysts as a move to shore up government coffers to try to head off a fiscal crisis in 2009, when Argentina might be struggling to make billions of dollars in debt payments.

Russia set for sale of the century in reverse
The Russian state could wind up owning huge chunks of formerly private companies as a result of the bail-out measures it is implementing. A senior Russian policymaker said on Tuesday, however, that the government had no plans to “nationalise” these forfeited shares, but would seek to sell them as soon as market conditions improved. As a result of Russia’s financial turmoil, many of the country’s oligarchs are in dire financial straits, and $50bn of aid has been made available to finance their external debts – part of a $200bn-plus Kremlin plan for national economic bail-out measures.

'Stunned' white supremacists keep low profile in campaign
A tall, extra-hot mocha in his hand and a .380-caliber pistol on his hip, Bill White sat near the window of a Starbucks in Roanoke, Virginia, last month and discussed his political predicament as the leader of one of the nation's more established neo-Nazi groups. "Right now," said White, head of the American National Socialist Workers Party, "we're facing the potential of a half-black candidate financed by Jewish money going up against a white candidate financed by Jewish money, who are both advocating the same policy. So you've got two terrible choices."

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Tues 10.21.2008

Gold Market Update
The reason why commodities and stocks have been collapsing is liquidity problems and the consequent threat of deflation, and the collapse has been made far worse as a result of the extreme leveraging that had earlier been employed in the markets, which has resulted in a destructive vicious circle as each downleg triggered a fresh wave of selling as stops and margin calls kicked in. The selling of commodities by commodity index funds has been broad-based and indiscriminate, due to client redemption requests, and this has resulted in heavy collateral damage across the board, with the "baby being thrown out with the bath water" as usual. At the heart of the problem is the banks' extreme reluctance to lend to one another, indicated by the high Libor rate which if should continue would of course result in a credit freeze and a depression. The underlying reason for banks' reluctance to lend to one another is perfectly understandable - they don't know if the banks they are lending to are even going to exist in the future and the difficulty of calculating counterparty risk is exacerbated by the trembling derivatives mountain with its labyrinthine web of liabilities, which has been destabilized by the collapse of Lehman Brothers.

This toxic crisis needs more than one shot
What makes this credit crisis so toxic is that it involves numerous feedback loops with the real economy. This is why simple one-shot solutions such as last week’s rescue plans are not going to be as effective as many people think. Let us look at the present dynamic of this crisis in some detail.

First, the housing market. US house prices have fallen by about 20 per cent. To get back to the long-term real price trend, the market would have to fall by another 10 per cent to 15 per cent. This would also bring price-to-rent and price-to-income ratios closer to a long-term equilibrium. But there is no reason to assume that prices will stay on trend – not if there is a credit crunch, a dysfunctional money market and a deep recession with rising unemployment. The property market is more likely to overshoot, which is what it normally does even without those exceptionally bad circumstances. I do not want to produce a numeric estimate, but without a plan to stabilise house prices – which is not all that easy – we should expect substantial overshooting to take place. The same applies to the UK, Spain and Ireland, where prices have also fallen.

Japanese CEO Warns U.S. Headed Towards An Oligopoly, Greenspan Culprit Behind Crisis
This clip aired 10/16/08 on Bloomberg. Japanese CEO Ohmae discusses bailout passing will leave the U.S. with 3 banks in control. Oligopoly is the rule of law now. Also a guest mentions Greenspan being the culprit behind the global crisis we are facing now.

The Panic of 2008
"The two companies I saw a week ago not only have real business models, each is selling for less than the cash they have in the bank. At this point, they are worth more dead than alive. That's no risk at all." People who have been following this site know that I have been predicting a depression for years. It's here. Even the dolts in Washington are starting to figure it out. The credit system has ground to a halt. Commerce is on the verge of a complete breakdown. 18 hours after the bank holiday starts, the riots begin. Physical gold and silver are insurance policies against financial chaos. We have financial chaos.

America enters a new Depression
Forget the stock market’s woes, the real US economy is seriously ill
While economists continue to debate whether America is tipping into a technical recession, the message from across the country is clear: the US economy stinks and is only getting worse. We may not see families winding across the Dust Bowl, as they did in the Great Depression, but the situation for millions of ordinary workers is grimmer by the day. The stock market may be exhibiting epileptic symptoms, lurching from exuberance to despair and back, but the 'real economy' is desperately ill.

Against the Bailout Before He Really Started Hating It
Rep. Thaddeus McCotter (R-Mich.) was one of the most outspoken opponents of the bailout, when the bill was making its way through Congress -- and in the immediate aftermath of its passage. Neither time nor changes to the bailout's focus have changed Rep. McCotter's opposition to the plan, as revealed in the accompanying video exclusive. "It remains a collectivist solution," McCotter says of the bailout's new focus -- as of last week -- of injecting capital into banks vs. buying their bad debt. "Paulson is buying healthy shares of healthy banks that do not wish to have the government come in and purchase them," he says. Paulson's plan B is "causing further confusion in the market."

Markets hold breath as $360bn Lehman swaps unwind
The $54trillion credit derivatives market faces a
delicate test as $360bn worth of contracts on now-defaulted
derivatives on Lehman Brothers are due to be settled on Tuesday.
Lehman Brothers' complex network of derivatives will be settled on Tuesday October 22 Due to the opacity of the market, which is one of the most complex, least regulated and least understood in the global financial system, it is still not clear how many contracts have to be settled or which institutions will take the ultimate hits once the billions of dollars worth of contracts have been unravelled. The collapse of Lehman Brothers, is expected to trigger credit default swap (CDS) protection pay-outs of about $400bn but because the contracts were sold many times through different counterparties it is not yet known who will be liable.

Ron Paul - Inflation of the money supply will solve nothing

The Importance of Capital Theory
As I have read countless analysts, including professional economists, offer "solutions" to the financial crisis, I have become more convinced of the importance of capital theory. You see this with the dichotomy people keep drawing between the financial markets and the "real economy," a distinction that is useful for some purposes but which in this context often reinforces the idea that the stock market is really just a casino.

Banks braced for Lehman Brother's debt insurers' deadline
Financiers enjoying a respite from the panic of the past few weeks should brace themselves for further mayhem tomorrow, the deadline for insurers of Lehman Brothers' debt to pay up on billions of dollars of policies. Last week, these borrowings were deemed to be worth only 9.75 cents on the dollar. There are about $400 billion worth of insurance contracts — known as credit default swaps, or CDSs — written on Lehman’s debt, leaving the underwriters on the hook for about $360 billion. Fears are mounting that billions of dollars of insurance will go unpaid and that dozens of financial groups will go under because of Lehman’s demise.

Gobbled up by the derivatives monster
Clive Maund at clivemaund.com says, "Payback time for Wall St and Washington will be when foreign investors fail to turn up at the bond auctions to finance the bailout plan, whose US$800+ billion will have to be created out of thin air. So the bonds will have to be monetized, which will mean an immediate spike in inflation, which will cause the rate of corporate bankruptcies to soar as failing companies take down others in a chain reaction because the losses will be highly leveraged by credit default swaps etc. This is the underlying reason why banks won't lend to each other - they can't calculate the counterparty risk. All of this will set off a massive derivatives meltdown that will bring the whole system crashing down."

Paulson Says U.S. Has Sufficient Funds for Bank Plan
Treasury Secretary Henry Paulson said the government has set aside enough money to buy stakes in every financial company that qualifies for the crisis program aimed at halting the credit freeze. "Sufficient capital has been allocated so that all qualifying banks can participate," Paulson said in Washington, announcing details on how banks can sign up for the funds. "This program is designed to attract broad participation by healthy institutions and to do so in a way that attracts private capital to them as well."

Economic Essentials: Credit Crunch - The Economic Impact (part 1)

Economic Essentials: Credit Crunch - The Economic Impact (part 2)

A financial new world order?
Bush says reforms must improve, not fetter, the
free market; Europeans hint at more robust intervention.
When President Bush hosts a world financial summit in the coming weeks, one of the least multilateral American presidents in decades will set in motion what could result in a full reordering of the global financial system. The series of summits that Mr. Bush announced over the weekend at Camp David with European leaders at his side suggests a broad understanding among them: that the current crisis requires the kind of global regulatory reforms that have eluded major powers in the past.

Super-Sarko’s plans for the world
"Europe wants the summit before the end of the year. Europe wants it. Europe demands it. Europe will get it." So said Nicolas Sarkozy – president of France, and (until January) of the European Union – before jetting off to Washington over the weekend. There he persuaded President George W. Bush to agree to an international summit dedicated, says Mr Sarkozy, to nothing less than "re-founding the capitalist system".

Money market rates fall as big freeze eases
Money market rates fell again on Monday in a sign that the programmes of central bank liquidity are thawing the recent freeze in short-term lending. By a number of measures, conditions across the money markets improved. With the banking system now supported by governments and hefty amounts of short-term central bank funding, traders reported renewed lending in both the money and commercial paper markets.

Fannie, Freddie CEOs discuss foreclosures
Pair tell mortgage bankers their agencies must do more to stem crisis
The new chief executives of Fannie Mae and Freddie Mac are trying do more to stop the home foreclosures hammering the housing market, but said it still might take years for real estate to recover in some cities. "I don't think there is any magic bullet in regards to overbuilt markets" like Miami and parts of California, Nevada and Arizona, said Freddie Mac CEO David Moffett at the Mortgage Bankers Association's annual convention Monday.

After the bailout, regulatory cat fights
U.S. finance regulators are tentatively pushing forward with new rules for credit default swaps, a $55 trillion unregulated speculative market. Some say they believe the market should be left unregulated with the addition of transparency to the system. Others say more strident steps should be taken, The New York Times reported Tuesday. Credit default swaps are contracts that guarantee against debt securities going bad. American International Group, which accepted a $123 billion federal bailout last month, held $440 billion in swaps as it went under . . .

Fed to buy commercial paper from mutual funds
Fed says it will buy commercial paper from
mutual funds in another move to thaw frozen credit
The Federal Reserve announced Tuesday that it will start buying commercial paper -- a crucial short-term funding mechanism many companies rely on for day-to-day operations -- from money market mutual funds. It's the latest effort by the central bank to break through a credit clog that has hobbled lending and threatens to plunge the country into a deep and painful recession.

The Problem Was Never Liquidity, But Insolvency
... And We Should Let Insolvent Banks Fail
The problem was never really liquidity. Says who? Says Anna Schwartz, co-author of the leading book on the Great Depression, and someone who actually lived through it. The Wall Street Journal ran an interview with Schwartz last weekend: Most people now living have never seen a credit crunch like the one we are currently enduring. Ms. Schwartz, 92 years old [but still sharp as a tack], is one of the exceptions. She's not only old enough to remember the period from 1929 to 1933, she may know more about monetary history and banking than anyone alive. She co-authored, with Milton Friedman, "A Monetary History of the United States" (1963). It's the definitive account of how misguided monetary policy turned the stock-market crash of 1929 into the Great Depression.

Although Bank-to-Bank Loan Rates Fall for the
Sixth Straight Day, Only the Strong Will Survive
As a result of the U.S. credit crisis – and the near-shutdown of the commercial lending market – investors can expect Corporate American landscape to change in a big way over the next 12 months. Although bank-to-bank loan rates fell for the sixth-straight day yesterday (Monday) – decreasing fears that the corporate-lending market was going to seize up – a new reality has emerged: As the song says, "only the strong will survive."

How LIBOR Threatened to Destroy the Global Banking System
The largest financial crisis since the Great Depression has revolved around an interest rate that many U.S. investors are only now hearing about for the very first time: The London Interbank Offered Rate (LIBOR). But if you understand that rate, and study the forces that have been influencing it, chances are very good that you can figure out how we can escape the current banking-sector mess without wrecking the entire world economy.

Fed Adds to Its Efforts to Aid Credit Markets
Adding to its efforts to unclog the credit markets, the Federal Reserve said on Tuesday that it will provide financing to shore up money-market mutual funds, the consumer investment funds that have traditionally been considered as safe as bank accounts. Under the program, the Fed will provide an unspecified amount of financing to a new private-sector initiative that will buy several forms of short-term debt, including certificates of deposit and commercial paper that expires in three months or less. This type of debt has historically been used by money-market funds seeking safe, conservative returns for their clients, but the recent turmoil has roiled the market and caused at least one money-market fund to fall below $1 a share, an extremely rare occurrence.

U.S., N.Y. jointly probe crisis root
Credit-default swaps in focus
Federal prosecutors and New York's attorney general said Monday they had taken the unusual step of joining forces to probe the multitrillion-dollar credit-default swap market, an unregulated area of finance blamed for helping to fuel the credit crisis.

Is the Catharsis Yet to Come?
By at least one measure, investors late last week were more fearful than they had ever been before. On Thursday, a main gauge of market anxiety, commonly known as the VIX — its formal name is the Chicago Board Options Exchange Volatility Index — shot up to more than 80 for the first time. That reading, of 81.2, was more than 50 percent higher than its peak during two previous severe downturns on Wall Street: the Asian currency crisis of the late 1990s and the market drop after Sept. 11, 2001.

Economic Meltdown Forecast
Analysis by Marc Faber of The Gloom, Bloom & Doom Report, Marc Faber LTD

Economic Meltdown Forecast (part 2)

The 'arb' game is over
I'll admit to having warmed up a little to Federal Reserve chairman Ben Bernanke. He speaks clearly and candidly, in stark contrast to the years of his predecessor Alan Greenspan's spin and deception. I certainly have sympathy for the predicament Bernanke finds himself in today, and I'll give the chairman credit this week for comments suggesting that he is rethinking his flawed views with regard to bubbles. Yet this doesn't change the reality that his infamous 2002 "helicopter Ben" speeches played an integral role in fostering terminal credit and asset bubble "blow-off" excesses.

Bernanke Says He Supports New Aid for Economy
The chairman of the Federal Reserve, Ben S. Bernanke, said on Monday that he supported a second round of additional spending measures to help stimulate the economy. "With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture is appropriate," Mr. Bernanke told the House Budget Committee. His remarks were his first endorsement of another round of energizing stimulus, which Democrats on Capitol Hill have advocated and Republicans have resisted.

Bush Needs to Send in Reinforcements to the Fed
We are now battling a financial crisis that is the economic equivalent of war, and we aren't doing it with an army that anyone would choose. Individuals at Treasury and the Federal Reserve are doing their best in difficult circumstances. But both organizations are woefully undermanned. There is too much work to do and too little manpower to do it. The result is that government rescue plans are progressing too slowly, and market turmoil persists

Monetary despotism
The combined recent liquidity injection by Western central banks could exceed US$4 trillion, yet that vast amount has created nothing real, not even one grain of corn. To summarize, continental Europeans a week ago, on October 13, following the British plan for UK bank recapitalization, unveiled a plan requiring $2.55 trillion to recapitalize their banks, at the same time promising unlimited dollar funding in coordinated action with the US Federal Reserve.

U.S. Is Said to Favor New Mergers
In a step that could accelerate a shakeout of the nation’s banks, the Treasury Department hopes to spur a new round of mergers by steering some of the money in its $250 billion rescue package to banks that are willing to buy weaker rivals, according to government officials. As the Treasury embarks on its unprecedented recapitalization, it is becoming clear that the government wants not only to stabilize the industry, but also to reshape it. Two senior officials said the selection criteria would include banks that need more capital to finance acquisitions.

Pentagon spending growth outpaces auditors
Lack of oversight opens door to fraud, abuse
Government reports are not known for plain language, much less candor. But in a report issued in March, Pentagon Inspector General Claude M. Kicklighter summed up what had been growing increasingly evident for years: Defense spending has been growing so rapidly that auditors can no longer keep track.

Bank-to-bank loan rates fall for sixth day
As bank-to-bank lending rates slide lower, the credit climate is looking a bit brighter - at least for stronger companies. The fear of a complete shutdown in lending is fading, but there remains a sense that when it comes to getting loans, U.S. businesses are going to be divided into haves and have-nots. As a result, the corporate landscape could look very different a year from now.

How to manage an imperial decline
Do empires end with a bang, a whimper,
or the sibilant hiss of financial deflation?
We may be about to find out. Right now, in the midst of the financial whirlwind, it's been hard in the United States to see much past the moment. Yet the ongoing economic meltdown has raised a range of non-financial issues of great importance for our future. Uncertainty and anxiety about the prospects for global financial markets - given the present liquidity crunch - have left little space for serious consideration of issues of American global power and influence. So let's start with the economic meltdown at hand - but not end there - and try to offer a modest initial assessment of how the crumbling US economy might change America's global stance.

Financial crisis is shifting power to Asia, says HSBC boss Stephen Green
THE crisis consuming global markets is part of a fundamental shift of power from the US to emerging economies in China and the Middle East, according to Stephen Green, chairman of HSBC.
Speaking at a financial conference in Dubai, the banker also condemned the financial model that has led to the crisis as "bankrupt". The crisis, probably the worst since the 1929 Wall Street crash, will offer several lessons, Mr Green said, but added that the underlying trend of movement from West to East would "not be derailed". "The rebalancing of the global economy towards Asia, home to over half the world's population, and its implications for the Middle East, is the shift that will affect financial markets most profoundly," he said.

Circuit City shaky: Plans to unplug 150 stores
Troubled electronics retailer Circuit City Stores Inc. considered its options but withheld comment Monday after a published report that it would close stores to ward off bankruptcy sent its shares down 10 percent on the New York Stock Exchange. Circuit City spokesman Jim Babb said the Richmond-based chain wouldn't address "rumors" as it continues "a comprehensive review of all aspects of our business" in order to accelerate its turnaround plan and boost its financial and operating performance

Public anxiety on economy intensifies
Most fret about falling stocks besides mortgage payments, job security
With little relief in sight, people are getting more anxious about the slumping economy and how it affects them. The share of people who believe the country is moving in the right direction has plunged in just a few weeks, from 28 percent in September to 15 percent in October, according to an Associated Press-Yahoo News poll of likely voters that was released Monday.

Car dealerships facing tough times
U.S. automobile dealers report the credit crunch and consumers' switch to fuel-efficient vehicles are cutting sharply into business. "Most car dealers were down 30 percent last month, and that is a catastrophe," Ray Ciccolo, owner and chief executive officer of Village Automotive Group told USA Today. The National Automobile Dealers Association said out of 20,000 new car dealerships 61 either closed or downgraded to used car lots in September, the newspaper reported Tuesday. About 600 have folded this year . . .

Baby Boomers go bust as retirement savings tank
Latest market struggles jeopardize fiscal security
The Wall Street calamity that obliterated $2 trillion in retirement savings nationwide has left Bay State baby boomers with shattered careers, retirement plans and hopes. "It’s like a kick in the gut right now," said Deborah Banda, state director for AARP Massachusetts. "Many, many people are hurting." Boomers are especially hard-hit. There are 76 million Americans between the ages of 44 and 62.

Your Personal Bailout Check Isn't in the Mail
"I'm not going to open my latest brokerage statement," a woman told me this month when we started talking about the latest financial crisis. "My broker responded, 'good, don't open it.'" Did you adopt this "don't ask, don't tell" attitude as trillions were lost in the latest market rout? That's usually accompanied by the angry riposte: Now that U.S. banks are receiving $250 billion in cash infusions, where's my bailout?

In Hollywood, the Wall St. Plots Will Thicken
Just a few months ago, Lifetime Television started adapting the Candace Bushnell novel “Trading Up” into a movie, figuring an aspirational story about the entitled rich and their limousine culture nailed the cultural moment. The setting would be New York, of course — or, as it is described by Ms. Bushnell, a city where “the streets seemed to sparkle with the gold dust filtered down from a billion trades in a boomtown economy.” Time for a rewrite.

Bank robber hires decoys on Craigslist, fools cops
In an elaborate robbery scheme that's one part The Thomas Crowne Affair and one part Pineapple Express, a crook robbed an armored truck outside a Bank of America branch in Monroe, Wash., by hiring decoys through Craigslist to deter authorities.
It gets better: He then escaped in a creek headed for the Skykomish River in an inner tube, and the cops are still looking for him. "A great amount of money" was taken, Monroe police said, but did not provide a dollar value.

China's growth rates fall below 10pc for first time in five years
China's growth rates have fallen to single digits for the first time in five years in a further indication that the country is being hit by the global crisis of economic confidence.
Year-on-year growth for the third quarter was 9pc, down from 10.6pc in the first quarter and 10.1pc in the second, and a marked change from the stellar rates that had begun to be regarded as normal in recent years. These rates had also led to hopes that China's growth would keep the world economy moving, despite the credit crunch in the West. Exporting manufacturers, caught by the collapse in consumer confidence in the United States and Europe, and property developers, suffering from a bursting price bubble of their own, all show signs of economic stress.

Russia's next revolution has started - at the bank
The first sign of a Russian economic crisis is a line of desperate people, pushing and shoving outside a locked door, on which a scribbled sign has been posted indicating that the cash those outside thought they owned would be unavailable until further notice. In the classic Soviet tradition, a handful of enterprising individuals would go to the back door to see what could be arranged out of the glare of publicity and with a little bribery for those inside. There they were told the truth - their money had gone.

Japan Considers Bigger Role on Economic Stage
Just six months ago, five or six “bulge bracket” investment banks stood astride the globe virtually dictating the terms of engagement of international finance — managing deals, pronouncing companies (or countries) investment-worthy or not, and dispensing advice that companies (and countries) ignored at their peril. Now those brash American institutions have been swept away or tamed. And as the global financial order convulses, some Japanese leaders say they believe their country should take a more active role in economic leadership.

October Surprise . . . . This could be a game changer by Thomas Lifson
All the filings to date in the court action of Philip Berg are available here

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Mon 10.20.2008

Do our rulers know enough to avoid a 1930s replay?
Events are moving with lightning speed as the global credit freeze evolves into something awfully like a classic trade-depression. The commodity and emerging market booms are breaking in unison, leaving no more bubbles left to burst. Almost every corner of the world is now being drawn into the vortex of debt deflation. The freight rates for Capesize vessels used to ship grains, coal, and iron ore have fallen 95pc to $11,600 since May, hence the bankruptcy of Odessa’s Industrial Carriers last week with a fleet of 52 vessels. Cargo deliveries dropped 15.2pc at the US Port of Long Beach last month, From what I " “The crisis is now in full swing across the entire world," said Giulio Tremonti, Italy’s finance minister. "It is hitting the real economy, the productive forces of industry. I's global, it’s total, and it’s everywhere," he said.

Life after the bubble: How Japan lost a decade
Is the United States the new Japan? Or more precisely, Japan circa 1990, just as it was staggering into its Lost Decade. As recently as six months ago, the notion that the United States would face a decade or more of Japanese-style economic malaise seemed preposterous. But after the last few weeks of financial turmoil and political ineptitude, you could almost argue that America would be fortunate to end up with a downturn akin to Japan's. That's because in several key ways, Japan was much better equipped to withstand its financial lashing in the 1990s than Americans are today.

Amid Pressing Problems, Threat of Deflation Looms $$
Policy makers navigating the U.S. through the global credit crisis may have a new concern on the horizon for 2009: deflation. The risk of deflation -- generally falling prices across the economy, beyond volatile energy and food costs -- remains slim. But the financial shock and a faltering economy can set the stage for a deflationary environment. Federal Reserve officials view broad-based deflation as unlikely but possible. Federal Reserve Bank of San Francisco President Janet Yellen said in a speech this week that the plunge in oil prices along with slackening demand for labor and goods should "push inflation down to, and possibly even below, rates that I consider consistent with price stability."

Gold Jumps From One-Month Low as Dollar Weakens Before Speech
Gold climbed from its lowest level in about a month as a weakening dollar boosted the appeal of the precious metal as an alternative asset. The dollar declined toward the lowest in a week against the yen and slid for the first time in four days versus the euro on concern U.S. Federal Reserve Chairman Ben S. Bernanke will forecast a prolonged downturn for the world's largest economy when he speaks today.

Bernanke gives nod to more government stimulus
Bernanke gives nod to more stimulus, warning economic weakness could be last for a while
Federal Reserve Chairman Ben Bernanke told Congress Monday a fresh round of government stimulus is a good idea because there's a risk the country's economic weakness could last for some time. Bernanke's remarks before the House Budget Committee marked his first endorsement of another round of energizing stimulus, something that Democrats on Capitol Hill have been pushing. The Bush administration, however, has been cool to the notion.

Turmoil May Make Americans Savers, Worsening 'Nasty' Recession
The U.S. may be on its way to becoming a nation of savers, whether Americans like it or not. With home and stock prices declining and credit hard to come by, consumers who have fallen out of the savings habit are being forced to curb borrowing and rein in spending. That is bad news for companies catering to them, which will have to retrench as well. Detroit automakers may need to slash costs and merge as Americans hold onto their cars longer. Shopping malls might be forced to shut as retail traffic trails off. Hotels may have to shelve expansion plans as vacationers become stingier with their dollars.

It's time for a new Bretton Woods
In July of 1944 the 44 nations of the free world sat down at a hotel in Bretton Woods, New Hampshire to design a new post-war financial system. The basis of the agreement was simple. The US dollar was tied to gold at an exchange rate of $35 per ounce and all other currencies were tied to the dollar with relatively fixed rates. The system worked until the US tried to wage an expensive war without raising taxes to pay for it. (Why does that sound familiar?) The first sign of stress was when the US dropped silver out of our coinage in 1965 and went to slugs. We fought a long and expensive war in South East Asia without raising taxes to pay for it. Holding the world's reserve currency, the US was in the enviable position of writing checks without the intent or the ability to pay for them. The chickens have come home to roost.

Leaders move toward summit on economy
President George W. Bush and European leaders, who have been tussling over whether to revamp the global financial regulatory system, agreed Saturday to take steps toward a series of international meetings to address the economic crisis, the White House said. After a private dinner at the presidential retreat Camp David, Bush, President Nicolas Sarkozy of France and President José Manuel Barroso of the European Commission, issued a joint statement saying they agreed to "reach out to other world leaders" to propose an international summit meeting to be held soon after the U.S. presidential election, with the possibility of more gatherings after that.

Global Summits Planned to Tackle Economic Crisis
Bush Seeks Sweeping Oversight Changes
President Bush announced plans yesterday to host an emergency summit of leaders from the world's top economies to map out a response to the global financial crisis, urging a renewed effort to secure the basis of "democratic capitalism." The objectives set for the summit are every bit as far-reaching as those of the 1944 landmark meeting in Bretton Woods, N.H., attended by 44 Allied nations to remake the global financial system after the Great Depression. But while that earlier gathering was devoted to coordinating monetary policy and setting up an international currency exchange system, the summit announced yesterday at Camp David would aim to overhaul the regulatory framework for global finance.

Suddenly, Europe looks pretty smart to Americans
In recent years, as Wall Street boomed, Americans often dismissed Europe as a place for languorous meals and vacations, not economic innovation. London remained a financial hub, of course, but it was often treated dismissively — as a flashy aberration pumped up by petrodollars from Russia and the Gulf, an exception to the otherwise somnolent Continent.

European banks in no hurry for bailouts
Germany and France on Friday gave final approval to their costly bank rescue packages, but many beleaguered European banks were in no hurry to sign up for the government bailouts. Given that a number of major financial competitors already have the benefit of state backing, though, some of the big names of European banking, including ING of the Netherlands and Unicredit of Italy, may not be able to resist pressure from investors to accept government aid, strings and all.

U.S. deficit rises, and consensus is to let it grow
Like water rushing over a river's banks, the U.S. government's rapidly mounting expenses are overwhelming the federal budget and increasing an already swollen deficit. The bank bailout, in the latest big outlay, could cost $250 billion in just the next few weeks, and a newly proposed stimulus package would have $150 billion or more flowing from Washington before the next president takes office in January.

Rescue will send gold to surreal price level
The volatility in the gold and silver markers has been intensifying in recent months and such action is often a precursor to a large price move.

When investors sweat and tremble, eyes turn to the fear index
Fear is running high on Wall Street. Just look at the Fear Index. With all those stomach-churning free falls and sharp reversals in the stock market recently, traders are keeping a nervous eye on an obscure index known as the VIX. The VIX (officially the Chicago Board Options Exchange Volatility Index) measures volatility, the technical term for those wrenching market swings. A rising VIX is usually regarded as a sign that fear, rather than greed, is ruling the market. The higher the VIX goes, the more unhinged the market looks.

The Hedge Fund Apocalypse
Billionaire investor Warren Buffett wants his fellow Americans to buy stocks, but the Greenwich, Conn., set couldn't take his advice if they wanted to. As investors scream for their money back, hedge fund managers are as paralyzed as the rest of Wall Street. Hedge fund assets shrank by $210 billion in the third quarter, hit by volatility, higher borrowing costs and $31 billion in redemptions after a wave of investor panic.

Financial Rescues Can Set Off New Problems
If there was one thing policymakers could agree on during the recent economic turbulence, it was that interest rates on U.S. home mortgages ought to come down, and fast. But as the government stepped in recently to shore up the nation's banks, those rates went up. Chalk up another case of unintended consequences. Since the beginning of the crisis that has upended financial markets and stunned the world economy, the well-intentioned actions of governments and officials have often created new problems that require nearly equally urgent solutions.

Bernanke's Outlook Hits the Hill
No major economic data is coming out this week, but it is sure to be another busy one for economy-watchers anyway. Federal Reserve Chairman Ben S. Bernanke is scheduled to testify before the House Budget Committee on Monday morning, giving his latest views on the economic outlook. It is his last scheduled public appearance before the Fed's policymaking committee meets Oct. 28-29, so Bernanke could signal whether, or how much, the Fed intends to cut the short-term interest rate it targets, currently 1.5 percent. He will probably be asked his view on whether Congress should consider passing another stimulus bill. Bernanke endorsed the first stimulus bill in January but so far has taken no position on another.

A World Awash In Bonds
So far, governments around the world have committed more than $3.2 trillion to the cause of bailout out troubled banks, and while there has been some initially grumbling from taxpayers, heads of states have made reassuring noises about being able to raise most of that money initially by selling bonds rather than raising taxes.

3 factors behind the economic train wreck
How did the world's financial system get into such a mess? It's tempting to blame specific politicians, decisions and laws (or the lack thereof), and leave it at that. While it's certainly true that a great number of serious, identifiable mistakes have been made, we need to broaden our thinking in order to understand what has happened. The crisis is global in nature and its causes are more general and less country-specific than is commonly reflected in the political discourse of any single nation. Many countries — not just the United States — came to have fundamentally unsound banking systems. If Japan remains an exception, it is only because it already suffered through similar problems in the 1990s.

Mortgage firm arranged stealth campaign
Freddie Mac secretly paid a Republican consulting firm $2 million to kill legislation that would have regulated and trimmed the mortgage finance giant and its sister company, Fannie Mae, three years before the government took control to prevent their collapse. In the cross hairs of the campaign carried out by DCI of Washington were Republican senators and a regulatory overhaul bill sponsored by Sen. Chuck Hagel, R-Neb. DCI's chief executive is Doug Goodyear, whom John McCain's campaign later hired to manage the GOP convention in September.

US faces worst recession in 26 years
The US economy appears to be plunging into what many experts believe will be its worst recession since 1982. Senior officials at the Treasury and Federal Reserve are confident that the rescue plan for US banks will succeed in preventing a financial system meltdown and ensure there will not be a repeat of the Great Depression. But they know that a sharp economic downturn is already baked in the cake. They do not,however, know how deep or protracted it will be.

Bankrupt Calif. City May Be a Harbinger Economic Decline
Saps a Budget Already Stretched by Massive Payroll Costs VALLEJO, Calif. -- When this city of 120,000 declared bankruptcy in May, the extraordinary step appeared to arise from an extraordinary circumstance: Vallejo's payroll largess. Police captains in this blue-collar town north of San Francisco make more than $200,000. The city manager's $338,000 salary is more than that of the vice president or anyone on the Supreme Court.

Job cuts spreading to U.S. manufacturing sector Shock waves fro
Shock waves from the global financial crisis are now being felt by workers in almost every corner of the United States as companies lay off an increasing number of employees. While the ax has been falling for months in the financial, home-building and automaking industries, makers of everything from soft drinks to water filtration systems have begun hefty rounds of job cuts in recent weeks as they brace for what some predict could become a long and deep recession.

A Program to Keep the Roof Over Your Head --
but It Will Cost You in the Long Run
For homeowners trying to renegotiate their loans under the government's new HOPE for Homeowners program, please read the paperwork carefully -- because once again, you'll be stuck with a costly mortgage deal. HOPE for Homeowners, nicknamed H4H, became law this summer to help keep homeowners from defaulting on their mortgages and going into foreclosure. Lenders who voluntarily allow borrowers to refinance under H4H are required to reduce the size of the mortgage to a maximum of 90 percent of the home's current appraised value. Additionally, they are only allowed to put people in 30-year, fixed-rate loans.

GM Can't Secure Financing for Chrysler
General Motors' hopes of buying Chrysler LLC are floundering because the auto maker remains unable to secure the financing necessary for the deal, the Wall Street Journal reports. In recent days GM, its lenders, and Chrysler owner Cerberus Capital , have been pitching investors about the transaction. That pitch touts a combined GM-Chrysler as delivering cost savings of up to $10 billion, an immediate boost in revenue and an increase in cash available to the merged firm, according to the Journal.

Oil Rises a Second Day on Signs OPEC Is Poised to Reduce Output
Crude oil rose a second day in New York on signs OPEC is poised to cut production to stem an increase in stockpiles and a 51 percent decline in prices from July's record. Members of the Organization of Petroleum Exporting Countries favor a cut and may pare output in stages to maintain stable prices as global growth slows, group president Chakib Khelil said in a television interview. The Conference Board's index of leading U.S. indicators, due today, probably fell for a third time in September, according to a survey of economists.

OPEC Expected to Call for Production Cuts at Emergency Meeting Friday
The Organization for the Petroleum Exporting Countries (OPEC) is looking to stabilize global crude oil prices at $70 to $90 a barrel, which is why the cartel has called an emergency meeting in Vienna on Friday. The cartel had been scheduled to meet OPEC rarely makes such price projections. But in the last few weeks, the cartel has become more vocal about the price range for crude its members consider acceptable – especially after oil prices skidded below the $70-a-barrel level last week. Analysts don’t expect to see a return of the informal price band OPEC traditionally tries to promote, because they believe the cartel is more preoccupied with the steep price drop

Delinquencies Mount for American Express $$
Push Into Credit Cards Proves Costly; Mr. Bell Is Slapped With a Spending Limit
Long the darling of the credit-card industry, American Express Co. is looking awfully beaten-up lately. The New York company's stock price is down 55% so far this year, including a 34% slide in October. The percentage of loans deemed uncollectible in a pool on which American Express reports monthly performance data reached 6.7% in September, up from 3.6% a year earlier. Earnings due after the closing bell Monday are expected to show a decline of more than 30% from last year's third quarter, according to Thomson Reuters.

Thomas L. Friedman: The great Iceland meltdown
Who knew? Who knew that Iceland was just a hedge fund with glaciers? Who knew? If you're looking for a single example of how the globalization of finance helped get us into this mess and how it will help get us out, you need look no further than British newspapers last week and their front-page articles about the number of British citizens, municipalities and universities - including Cambridge - that are in a tizzy today because they had savings parked in Icelandic banks, through online banking services like Icesave.co.uk.

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Fri 10.17.2008

U.S. Economy Still on Life Support
On Monday October 13th, the Dow took the fifth biggest upward leap (in percentage terms) in its history and, most notably, since the 1930’s. It appeared that Paulson and his fellow G-7 finance ministers had solved the credit crisis. Despite the fact that G-7 taxpayers will be stuck with $3.5 trillion of liabilities to support their governments’ bailout plans, the stock markets nevertheless bustled with euphoria. The next day, reality dawned once again, and all markets closed down.
The truth is that these enormous bailouts enacted around the world, most notably in the United States, have done little or nothing to tackle the enormous deleveraging that is driving us into a serious recession and, if badly handled, a depression. Increasingly, politicians and commentators are talking about the need for a massive, new stimulus package, likely to cost trillions more dollars.

A Trillion Dollar Bait and Switch
The Bailout and the Smell Test
The explanation that has been given for the financial crisis does not match up with the solution that has been devised. Moreover, the windows into the crisis offered by the authorities are opaque rather than transparent. The only clarity we have is that the crisis is resulting in financial concentration and that the bailout constitutes a massive raid by financial crooks on both taxpayers and central bank reserves in the US and Europe.

The $58 Trillion Elephant in the Room
The roots of this year’s financial crisis go back to a small team of bankers at J.P. Morgan in New York. Now, their invention - credit derivatives - has helped bring down Wall Street and has left Morgan with its biggest exposure of all.
At a time when the reputation of bankers has been shredded, Bill Demchak is a throwback. The day I meet him, the financial world is once again poised on the brink of destruction. The Dow Jones Industrial Average lost 358 points the day before and is already down another 150 this morning. Yet the green-eyed Demchak, in pleated khakis hiked up unfashionably high on his waist, seems preternaturally calm—especially for a man who, unwittingly, has had a hand in bringing Wall Street to its knees.

Wall Street Monsters & Meat (You)
The tag team of JPMorgan as the monster and Goldman Sachs as its harlot represent a powerful pair that is more responsible for destroying the entire US financial system than 95% of the American public has any awareness. The colossus of JPMorgan is a monster, a predator, nurtured by pond scum. It has gobbled up Chase Manhattan, Manufacturers Hanover, Chemical Bank, Bank One, and more over the past two decades. Their profound presence in keeping the USTreasury Bond yields down can never be understated. They do so by managing 85% of the credit derivatives on the planet. They distorted usury prices, as in price of borrowed money, thus aggravating the LIBOR (London InterBank Offered Rate) market in a very visible manner. The oblong usury prices have contributed mightily to the destruction of the USEconomy itself, created bubbles, killed jobs, and wrecked savings.

Recession may be deepest since 1970s
The U.S. economy is showing disturbing similarities to patterns seen in the painful recessions of the mid-1970s and early 1980s and it may be a year or more before it resumes anything near normal growth. Factories are filling fewer orders, companies are cutting jobs and consumers are tightening budgets so dramatically that economists now think the economy will shrink for three straight quarters -- something that has not happened in 33 years.

Not Enough Money In The World To Fix Things
The Real Monster In The Meltdown Closet
The myth has quickly taken hold that the global financial crash was caused by bad mortgages. This has allowed rightwing hatemongers to blame the meltdown on the "liberal" programs that encouraged home ownership among a small percentage of lower-income people (a poisonous canard that parts of the mainstream media have actually done a fairly good job of knocking down), while "progressives" of various stripes have denounced banks and other financial institutions for pushing over-easy credit on people who couldn't really afford it.

The financial system established at Bretton Woods
Here are some details about the financial architecture established in 1944 by the Bretton Woods Conference, which European leaders now say needs updating. . . . With World War Two drawing to a close and Japan and Europe in ruins, the world's economic elite gathered to build a framework for economic cooperation that would avoid a repetition of the cycle of competitive devaluations that had contributed to the Great Depression of the 1930s.

FDR Ends Gold Standard in 1933
Hoover proclaimed steadfastness of the gold standard; made changes to keep dollar ringing true by raising Fed rate. FDR ended it.

1944 Bretton Woods International Monetary Conference
Stabilization of the world's currencies

Nixon Ends Bretton Woods International Monetary System
Nixon defends the dollar into gold and other assets; seeks new monetary system to protect the dollar (protectionism).

GOLD VS DOLLAR

EU leaders weigh overhaul of Western financial foundations
Shaken by the financial meltdown and plunging markets, leaders of the world's economic powers said Wednesday that they favored an ambitious campaign to revamp the structures that have governed global finance for more than 60 years. Officials from Britain, France and Germany, meeting before a summit meeting here of European Union leaders, said they approved of convening a conference in November or December aimed at revising the system put in place toward the end of the World War II.

Most of G7 in recession, more rate cuts ahead
The world's richest nations are in or close to recession and further interest rate cuts are needed to stem off more rot from the worst financial crisis in nearly 80 years, Reuters polls of economists showed on Thursday. Particularly worrying in a quarterly survey of about 250 analysts across the Group of Seven nations is the sharp deterioration in the outlook for the United States, which until very recently was seen only flirting with recession.

G-8 Nations Plan Summit On Global Financial Rules
The Group of Eight major industrialized nations announced Wednesday that they will convene a summit to plan changes in the regulation and structure of the world financial industry in hopes of heading off future economic turmoil. The statement, released at the White House, said the meeting would take place in the "near future." French President Nicolas Sarkozy said it should be "preferably in New York, where everything started."

Banks Admit Bailout Won't Work
So much for that story. A few days ago, when Hank Paulson called the heads of the nine families to Washington and shoved cash down their throats, he announced that the banks would use this new taxpayer cash to lend. They won't, of course. They'll hoard it like a starving family who has just been given a grocery cart full of food. And after a few days of silence, even the banks are finally admitting that. So it's back to the drawing board for Paulson & Co. Next steps? Find a way to force the banks to write their assets down to nuclear winter levels, so 1) private investors don't have to worry about getting sandbagged and therefore invest more in the banks, and 2) the banks know they won't be forced to take more multi-billion dollar losses. Only then will the banks begin to lend again.

Fed's Kohn Says We Need More Than Government's $250 Billion Stock Purchase
Federal Reserve Vice Chairman Donald Kohn said the U.S. government's recent decision to buy $250 billion in financial firm stocks is not enough to shore up the economy - but is a "key building block." He said he hopes private capital investment will follow the government purchase.

Fed Rethinks Stance on Popping Bubbles $$
The Federal Reserve and academics who give it advice are rethinking the proposition that the Fed cannot and should not try to prick financial bubbles. "[O]bviously, the last decade has shown that bursting bubbles can be an extraordinarily dangerous and costly phenomenon for the economy, and there is no doubt that as we emerge from the financial crisis, we will all be looking at that issue and what can be done about it," Fed Chairman Ben Bernanke said this week. The bursting of this decade's housing bubble, which was accompanied by a bubble of cheap credit, has wrought inestimable economic damage.

European Central Bank throws aside fears about inflation
The European Central Bank's main task is to keep inflation down. But over the past month, it has thrown caution to the wind in trying to prevent financial system and integrated economy of Europe from falling apart. The ECB has transformed itself into a crisis manager of the sort that its architects could hardly have imagined when the bank took up its work 10 years ago. The bank, charged with managing the euro, was given a single mandate - to keep prices under control.

EU vows to shield economy from financial fallout
European Union leaders vowed action on Thursday to underpin growth and jobs threatened by the global financial crisis, but ruled out spending their way out of recession with a Europe-wide stimulus package. Despite the downturn, the EU agreed to stick to a December deadline for adopting ambitious laws to fight climate change.

Trichet Address Global Economic Turmoil

Paulson regrets mistakes on economy
Paulson expresses regret for mistakes leading to biggest financial crisis in 7 decades
Treasury Secretary Henry Paulson on Thursday expressed regret for the many errors made that led to the biggest financial crisis in seven decades, but he insisted the administration is pursuing the correct course now to end the debacle. "We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here," Paulson said in an interview on Fox Business Network.

Slowing Inflation Opens the Door For Fed to Cut Interest Rates Further $$
With U.S. consumer price inflation receding, the Federal Reserve has additional leeway to reduce interest rates further in the weeks ahead, though Fed officials currently don't see more rate cuts as a clear choice.

Fed's Bernanke to Testify Before House on Idea of Second Stimulus Bill
Federal Reserve Chairman Ben Bernanke has been summoned to appear before the House of Representatives' Budget Committee on Oct. 20 to testify on a potential second economic stimulus package.

Fed to Meet With Credit-Default Industry on Clearinghouse Today
The Federal Reserve Bank of New York plans a third meeting today with the credit-default swap industry, as it presses for a central clearinghouse for the $55 trillion market, people with knowledge of the talks said. Fed officials summoned dealers and exchanges to the gathering after meeting twice last week, according to the people, who declined to be named because the discussions are confidential.

Banks Try to Drag Us Back Into the Drowning Pool
The trouble with throwing a lifeline to dying banks is they keep trying to pull the rest of us into the drink. Here we have the Treasury Department injecting $250 billion of fresh capital into U.S. banks in exchange for preferred stock, which should present the perfect opportunity for them to sell or write down all their toxic holdings. And how do the banks return the favor? By trying even harder to gut the rules that say they can't lie to investors about the values of their crummy assets.

How the Banks Will Spend Their Loot
Paulson wants them to start lending, but
some bank chiefs suggest they'll do no such thing.
Nine large U.S. banks are preparing to receive $125 billion from the Treasury Department as part of the government's plan to recapitalize the banking sector and reignite lending. Treasury Secretary Henry Paulson has urged the banks to use the capital to start lending again, but the government's equity stakes come with no power to influence how they actually spend it. For weeks, the Feds have tried one measure after another to spur lending, to no avail.

Banks may hoard bailout funds
Bailout money meant to provide movement in the U.S. financial system may end up sitting still for a while, various bankers said. "We will have the opportunity to redeploy that (bailout funds)," John Thain, chief executive officer of Merrill Lynch, told The New York Times. "But at least for the next quarter, it's just going to be a cushion," he said. Other bankers privately made similar remarks, the Times reported Friday.

Backlash against bankers
FALLOUT from the financial crisis grew in the real economy on Friday with job losses and a backlash against banking chiefs as shares ended a crazy week with a new roller-coaster ride.

Bank bailouts could spur risk-taking
Now that U.S. banks have access to $250 billion worth of taxpayer money, they'll lend it wisely, the markets will rejoice and all will be well again. If only. The first banks to participate, nine in total, have been given anywhere from $3 billion to $25 billion each. In exchange, the government gets preferred shares in the financial companies. What the banks haven't been given is many strings attached. . . . Doling out taxpayers' money in this way can result in moral hazard — maybe even on steroids. That means companies, individuals or investors could start taking big risks again because they think the government has their back.

'Armageddon' Prices Fail to Lure Buyers Amid Selling
Credit markets have fallen so far that they are providing a "once in a lifetime opportunity,'' and investors are still selling. Prices of loans rated below investment grade declined to a record low 66.1 cents on the dollar, virtually guaranteeing investors get their money back, based on historical recovery rates, according to data compiled by Standard & Poor's. Yields on corporate bonds show investors expect 5.6 percent of the market to go bust, the highest default rate since the Great Depression, according to Christopher Garman, chief executive officer of debt research firm Garman Research LLC in Orinda, California.

As Credit Tightens, Companies Curtail Spending, Expansion
Some Indebted Firms at Risk of Default
With bank lending windows slammed shut for the past month, countless companies -- from pizza delivery firms and auto retailers to big real estate firms and utilities -- are hunkering down to survive the freeze in credit markets and slowdown in the economy. Hard-pressed to sell bonds or arrange new loans, companies are dipping into credit lines, cutting back on spending, making deals with cash-rich partners or postponing projects.

A better way to revive credit markets
The chatter that the American taxpayers will pay $700bn to save the banks is nonsense. I have a straightforward plan that should revive the market in mortgage-related securities (MRS), greatly enhance bank capital and earn several tens of billions of dollars for the US Treasury. The distress in the US credit market reflects that MRS are no longer priced on a rational basis. Rather, a few companies with a desperate need for cash have sold these securities for 25 cents on the dollar; the accounting conventions require that this price is used to value similar securities owned by other banks.

Pentagon Wants $450 Billion Increase Over Next Five Years
"We cannot do everything, or function equally well across the spectrum of conflict. Ultimately we must make choices," Gates wrote. The new estimate, which has not been publicly released, would raise the fiscal 2010 budget number announced by the administration this year from $527 billion to $584 billion, not counting operations costs for the ongoing wars. Money to prosecute the ongoing wars is not included in the new estimate, meaning the military would still need significant supplemental appropriations in addition to the increased budget request. Supplemental appropriations have been used to fund procurement and personnel costs that are predictable and therefore should be placed into the regular budget, said Admiral Michael Mullen, the chairman of the Joint Chiefs of Staff.

Washington Continues to Ignore Root of Housing Problem
Some say the definition of insanity is trying the same thing over and over again, expecting a different result. By that measure, voters should load up on straitjackets this November and drag everyone in Washington off to the nuthouse. Despite overwhelming evidence that we're in the middle of a debt crisis, regulators insist they're wrestling a liquidity crunch. And all the while, a cancer continues to eat away at the guts of the economy: The housing market. Only when it stabilizes will the financial system and, by extension, the economy -- recover. And yet, despite this widely recognized fact, the recent $700 bailout package contains little support for struggling homeowners. Even the $250 billion being dumped into banks will have only a minor effect on property values.

Inflation Cools as Economic Downturn Deepens
Consumer prices held steady as the credit crisis took a toll on the sluggish U.S. economy and dampened inflation. The Labor Department announced yesterday (Thursday) that the Consumer Price Index (CPI) was unchanged in September after declining 0.1% in the prior month. Year-over-year, consumer prices increased 4.9% for the 12 months ended September 2008, down from a 5.4% increase in August. Oil prices made up the bulk of the decline in consumer prices as the cost of crude has dropped by over half from its record high of $147 per barrel in July.

Credit Default Vultures Turn Focus on Main Street
Wall Street firms have been getting clobbered for months by credit default swaps - bets that the companies will fail. Indeed, that is a large part of why Bear Stearns, AIG, Lehman and other giant companies failed. Now, the CDS vultures are turning their focus on Main Street. As Markit analyst Paul Davies wrote yesterday: "Credit derivative markets turned their attention away from financial armageddon towards plain old recession on Wednesday morning, pushing up the costs of protection on the main indices for the first time this week."

Hedge-Fund Assets Fell 11% in Quarter on Record Withdrawals
Assets managed by hedge funds fell 11 percent in the third quarter as investors pulled a record $31 billion from their accounts, according to data compiled by Hedge Fund Research Inc. The decline reduced industry assets to $1.72 trillion from $1.93 trillion as of June 30, the Chicago-based research firm said today in a statement. Fund returns fell an average of 8.85 percent in the quarter, compared with the 16 percent decline by the MSCI World stock index.

Treasury plan pushes up US mortgage rates
US mortgage rates have soared this week in an unexpected reaction to the latest Treasury financial rescue plan, which has prompted investors to buy bank debt and sell bonds backed by home loans. Interest rates on 30-year fixed-rate mortgages, as measured by Bankrate.com, rose to 6.38 per cent on Thursday from 5.87 per cent last week - before the Treasury said on Tuesday that it would take equity stakes in banks and guarantee new bank debt.

Banks borrow record $437.5 billion per day from Fed
Financial institutions ran to their lender of last resort for record amounts of cash in the latest week, under extreme pressure from the worst global financial crisis in a generation, Federal Reserve data showed on Thursday. Banks and dealers' overall direct borrowings from the Fed averaged a record $437.53 billion per day in the week ended October 15, topping the previous week's $420.16 billion per day.

Executives saw conditions worsening before crash
Top U.S. executives were bracing for a downturn even before the financial markets collapsed late last month, according to a survey conducted in September by the Business Council. Nearly three-quarters of the CEOs surveyed last month saw global conditions eroding over the next two quarters and 91.6 percent said U.S. conditions were worse in September than they had been six months earlier.

U.S. banks brace for slump as economy weakens
JPMorgan Chase, Wells Fargo, and State Street have weathered these bad times better than most banks. But things are about to get worse. Sobered by the prospect of a drawn-out erosion in the economy, investors drove down the shares of all three Wednesday even after they reported earnings that beat the low expectations of Wall Street analysts. "If you made it past the credit crisis, you are not making it past the economic carnage," said Meredith Whitney, a banking analyst at Oppenheimer & Company. "And there is more to come."

Banks Hoard Cash as Credit Card Defaults Rise
Consumers are increasingly unable to pay off their credit cards, forcing banks to hoard cash to protect against future losses and lend to fewer people, according to reports yesterday from several of the nation's largest banks. These financial disclosures showed a spike in credit card loans going bad, putting further pressure on already-stressed balance sheets.

Banks Are Likely to Hold Tight to Bailout Money
As two financial giants, Citigroup and Merrill Lynch, reported fresh multibillion-dollar losses on Thursday, the industry passed a grim milestone: All of the combined profits that major banks earned in recent years have vanished. Since mid-2007, when the credit crisis erupted, the country’s nine largest banks have written down the value of their troubled assets by a combined $323 billion. With a recession looming, the pain is unlikely to end there. The problems that began with home mortgages, analysts say, are migrating to auto, credit card and commercial real estate loans.

Commodities Outlook: Gold and Silver are the Ultimate Currencies

Currency Outlook: Dollar Will Remain Weaker Over Next Few Months

Credit card defaults rising
Credit card defaults are rising among U.S. consumers in an already tightening credit environment, various banks said. J.P. Morgan Chase said credit card account defaults rose 45 percent in the third quarter compared with the same period a year ago. The bank predicted 7 percent of their credit card loans would be in default in 2009, The Washington Post reported Thursday. Capital One, also expects credit card defaults to reach 7 percent next year. In September, 6.34 percent of their credit cards accounts went into default, up from 5.96 percent in August. The data points to a national spending habit that has U.S. credit card holders living beyond their means.

Social Security checks grow a bit as stocks shrink
Social Security checks are going up $63 a month for the typical retiree _ the largest increase in more than a quarter century but likely to seem puny to the millions who have been watching in horror as Wall Street lays waste to their retirement nest eggs. Every little bit helps, but the boost is coming after a year when people living on fixed incomes have been pounded by surging energy prices and higher food costs - and lately have been seen their lifetime savings shrivel along with the stock market.

U.S. Homebuilder Confidence Index Fell to Record Low in October
Confidence among U.S. homebuilders slid in October to the lowest level since record-keeping began in 1985, a sign the crisis in credit markets may deepen the worst housing recession in a generation. The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 14, less than forecast, from 17 in September, the Washington-based association said today. A reading less than 50 means most respondents view conditions as poor.

U.S. October Consumer Sentiment Falls Most on Record
Confidence among U.S. consumers fell by the most on record in October, raising the risk that spending will slump as job losses mount and financial markets crash. The Reuters/University of Michigan preliminary index of consumer sentiment fell to 57.5 from 70.3 in September, the biggest decline since records began in 1978. The measure, which averaged 85.6 in 2007, was lower than forecast.

Government may file subprime charges soon
"Dramatic results" coming in lender mortgage fraud investigation
The top federal prosecutor in Los Angeles indicated Thursday that charges are coming soon from a sweeping investigation of banks and subprime lenders for their role in the U.S. mortgage crisis. "I think we are going to see some fairly dramatic results in the near future," U.S. Attorney Thomas O'Brien told The Associated Press. "Mortgage fraud is an extremely important issue to me and to the people of this district."

Oil Prices Slip Below $70 a Barrel
Oil prices dropped below $70 a barrel for the first time in 14 months Thursday, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months. Oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel.

Oil is Headed for $150 a Barrel, Gold for $1,500 an Ounce, Merrill Analysts Predict
Gold could reach $1,500 an ounce, since the worldwide plans to bail out the global financial industry are certain to fuel inflation, analysts led by Francisco Blanch at Merrill Lynch & Co. Inc. wrote in a research report. The Merrill Lynch analysts also predicted that oil would reach $150 a barrel. In the research note released earlier this week, the analysts said "the unintended consequence of the ongoing financial bailout will be inflationary pressures to the commodity markets."

In-Depth Look: Global Growth & Commodities
Lower Oil Prices Cut Costs; Metal Prices Slump; Falling Commodities Signal Slowdown; U.K. Mining Sector Plunges; Further Analysis and Discussion with Michael Pento of Delta Global Advisors

OPEC calls emergency meeting as oil prices fall
Oil prices dropped below $70 a barrel for the first time in 14 months Thursday, prompting the OPEC cartel to call for an emergency meeting next week to establish some stability in prices that have plummeted recently after rising for months. Oil prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel.

GM, Chrysler Merger Talks Heat Up: Report
General Motors and Chrysler LLC are accelerating merger discussions amid strong support from potential lenders that are eager to see a deal done, the Wall Street Journal reports. GM is set to soon report dismal third-quarter earnings and is scrambling to find new sources of funding, the newspaper reports, citing people familiar with the matter. That's spurring the automaker to complete the deal as soon as the end of October.

FDIC Chief Raps Rescue for Helping Banks Over Homeowners $$
Federal Deposit Insurance Corp. Chairman Sheila Bair on Wednesday criticized the federal government for failing to take more aggressive steps to prevent Americans from losing their homes, highlighting a rift between her and other senior U.S. officials over terms of the $700 billion rescue package. The government plan will help stabilize financial markets but it doesn't do enough to address home foreclosures, the root of the crisis, she said . . .

Single-Family Home Starts in U.S. Fall to 26-Year Low
Housing starts in the U.S. fell more than forecast in September as construction of single-family homes plunged to the lowest level in 26 years, indicating the three-year real-estate slump is intensifying. Construction of single-family homes dropped 12 percent to a 544,000 annual rate, the Commerce Department said in Washington. Starts on all residential properties, including condominiums, slid to 817,000, below all 74 forecasts in a Bloomberg News survey.

Renters in foreclosed homes get help
Sheriffs, state governments move to help
renters who are innocent victims of foreclosure
Tita Mendoza and her husband moved into their Miami Beach condo in June and have been dutifully paying the $1,800 rent on time every month. And yet, they could be evicted any day now. Last month, the Mendozas were served with court papers notifying them that their landlord was being foreclosed on, meaning the couple could be turned out on the street.

As economy sputters, grad schools overflow
More people are applying for graduate school enrollment, now that Wall Street is melting down and the economy is souring.
With Wall Street all but disappearing, aspiring investment banker Nick Di Lorenzo has decided to explore other career options. Earlier this month, the New York University Stern School of Business senior took the LSAT, a first step toward a law degree. “The insecurity of not being able to have a job after college drove me to apply to grad school,” said Mr. Di Lorenzo, 21, who now wants to go into corporate securities law and is anxiously awaiting his test scores. Graduate programs typically see an enrollment boost during economic downturns, and New York area schools are no exception. As Wall Street firms shed tens of thousands of jobs, graduate programs at local schools like NYU and Columbia University have seen a flood of applications.

Caribbean nations to sign EU accord
Thirteen Caribbean countries will sign a trade agreement with the European Union on Wednesday despite doubts about whether it will help or harm the region. The countries – members of the Caribbean Community, a grouping of mainly English speaking nations, and the Dominican Republic – are signing the pact that has been questioned in the region and by other countries in Africa and the Pacific. It will not be signed by Haiti and Guyana’s president has said he is not comfortable with the terms. Caribbean officials say the trade agreement is compatible with World Trade Organisation regulations, while previous agreements were not. However, President Bharrat Jagdeo of Guyana maintains that the trade pact – the Economic Partnership Agreement – will hurt development and undermine future WTO negotiating positions. He also wants it to be revised every five years.

Dubai Reads from America's Economic Playbook
From Bloomberg.com we happily discover that Dubai is a lot more like America than one might think at first glance, as these arrogant blowhard morons also came up with "a surge in borrowing that paid for the world's tallest tower, palm tree-shaped man-made islands and stakes in banks worldwide" as they spent and spent and spent on credit, and now "may need help from Abu Dhabi and the United Arab Emirates government" to bail them out with some quick cash. Just like us! Hahahaha!

Outlook for Asian banks turns bleaker
The outlook for the Asian-Pacific banking industry is turning increasingly negative, as banks from South Korea to Australia battle growing financing fears and brace for more bad debts as economies slow. Asian-Pacific lenders have managed to mostly dodge the ravages of the subprime mortgage meltdown, but now they must survive depressed markets and a darkened economic picture.

Chinese Fund May Be Biggest Fool
As much as $5.4 billion of China's $200 billion sovereign wealth fund could be frozen due to a U.S. money market account that failed, the Financial Times reports. U.S. regulatory filings show that a China Investment Corporation subsidiary was the biggest institutional investor in Reserve Primary Fund, a $62 billion money market fund that was the oldest such fund in the United States, and which recently closed its doors. Until recently many investors considered money market funds to be as safe as bank accounts.

How China is Beating the United States in the Global Oil Game
Iraq recently signed its first oil deal in 35 years with a foreign company. And - quite surprisingly to many observers - the company wasn't one of ours. Not surprisingly, the U.S. news media barely acknowledged the deal - even though the agreement was major news throughout the rest of the world.

Concern grows over cracks in Chinese credit system
With signs of cracks appearing across the Chinese credit system, concerns are growing that domestic banks may be ill-equipped to handle a drop in the country's economy. Corporate collapses and loan defaults in China over the past few weeks, together with a tightening interbank lending market, show that Chinese banks are hardly in the clear when it comes to negotiating their way through the global financial turbulence.

----------- Excellent 3 part series on governments. ---------------

America at the crossroad. Do we want security over freedom and opportunity?

The Political Spectrum Explained! (1 of 3)

Capitalism, Fascism, Communism, Socialism, and the Difference? (2 of 3)
Explains why the 'difference' is in the ownership and control of the 'capital'

Americanism: Free Enterprise VS Central Planning (3 of 3)
State controlled capitalism

The Goldsmiths --Part XXIII
As one puts some effort into trying to understand the plutocrats and how they manipulate and control most of the world’s financial markets (certainly in the US, Europe, Africa [South of the Sahara] and parts of Asia), it seems inevitable that some conclusions can be developed on the probable direction of the markets in the future as long as they are subject to the influence and control of the plutocratic masters.

The $55 trillion question
Before this - thankfully - last United States presidential debate, Republican candidate Senator John McCain had promised "I'll whip [Barack] Obama's you-know-what". Well, he whipped nothing. He told Americans he was not President George W Bush. And then he presented himself as Joe the Plumber - a new working class heir to vice presidential candidate Sarah Palin's Joe Six-Pack. And then he got "hurting and angry". And then he lost the plot. Independent voters duly took note - and awarded one more debate to Obama. Three to none. Game virtually over. Obama - always cool and calculating, carefully hedging his bets - still refuses to stare America in the face and admit that the real economy will tank, and the resulting mass unemployment will be proportionally as devastating as during the 1930s.

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Archived Page Link
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Thurs 10.16.2008

Fire or Ice: Are We Headed Towards Hyperinflation or Deflation?
The most important debate among economists and high-level investment advisors is whether the U.S. economy will heat up or cool down - that is, whether it will go into runaway inflation or deflation. "Hyperinflation" is runaway inflation. This is what Germany experienced in the 1920s's, where people had to literally pay barrels full of German marks to buy a loaf of bread.
Deflation is what the U.S. experienced in the Great Depression, where most people had no one had money to spend, hire employees, or do much of anything else.

If we're going into hyperinflation, then investments like gold - which tend to hold their value in inflation - are best. In this case, the government should stop printing money like its Monopoly money.

If instead, we're going into deflation, then cash or treasury bills hold their value the best. Because prices go down in a depression, each dollar is worth much more, and is a good thing to hold onto for investing purposes. In this case, the government should spend more to get things going.

Dow plunges 733 on new disheartening economic data
The economy lurched deeper into the doldrums Wednesday and took the stock market down with it, sending the Dow Jones industrials to a staggering 733-point loss and erasing any hopes that the convulsions that have shaken Wall Street for a month were over. The daylong sell-off came as retailers reported the biggest drop in sales in three years and as a Federal Reserve snapshot showed Americans are spending less and manufacturing is slowing around the country.

Market Gets 'Real' With Huge Dive
Anyone who was worried that the stock market had taken leave of its senses should have felt greatly relieved after yesterday’s 733-point drop in the Dow Industrials. Added to the plunge from the previous day’s fleeting high at the opening, the Indoos have now given back 1264 points of their ill-gotten, 1900-point gain from Monday's low. Could it be that Wall Street isn’t so crazy after all? Some have attributed the latest bout of selling to scary numbers from the retail sector, others to the mounting specter of recession-or-worse, or even to the prospect of the left-most member of Congress becoming our next President. But we'd like to think investors are focused on the more immediate, and worrisome, matter of what will happen next week when insurance payments on several hundred billion dollars worth of Lehman default swaps come due.

Bank crisis ends as the economic crisis begins
The taxpayer rescue of the entire western financial system is more or less complete.
Tuesday's sweeping move by US Treasury Secretary Hank Paulson to guarantee financial debt and inject state capital into America's biggest banks brings the US into line with Britain and Europe, where almost $3,000bn has been vouched in the biggest bail-out of all time. If the history of financial crises is any guide, the violent credit shock of 2007-2008 has largely run its course. The sovereign states of the US, Britain, France, Germany, Italy, Spain, and Holland have broad enough shoulders to carry their load of fresh liabilities – even if Iceland does not.

Nouriel Roubini Peering into the Abyss of a severe recession; avoiding a more severe catastrophe.

EU Pushes for Overhaul of Post-World War II Financial System
European Union leaders pressed for an overhaul of the global financial system to prevent a repeat of the credit crunch that sparked the biggest stock-market selloff since the Great Depression. EU leaders called for a global summit as soon as next month to rewrite the 1944 Bretton Woods accord that paved the way for Europe's post-World War II reconstruction and set up the institutions that oversee the world economy today.

The British rescue, and memories of Bretton Woods
Why is Britain taking a leading role?
As the world's foremost banking centre, Britain has more than most at stake in repairing a system that has so rapidly disintegrated. "We regard ourselves as leaders in global finance and I think government has really sought to protect that, to protect the city as a global leader in finance," said Charles Davis, economist at the Centre for Economics and Business Research Ltd. Much of the motivation stems from the role of the country's financial services sector, which represents a higher-than-average chunk of the country's economic activity.

What is Bretton Woods?
The Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.

Setting up a system of rules, institutions, and procedures to regulate the international monetary system, the planners at Bretton Woods established the International Bank for Reconstruction and Development (IBRD) (now one of five institutions in the World Bank Group) and the International Monetary Fund (IMF). These organizations became operational in 1945 after a sufficient number of countries had ratified the agreement.

The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained the exchange rate of its currency within a fixed value - plus or minus one percent - in terms of gold and the ability of the IMF to bridge temporary imbalances of payments. In the face of increasing strain, the system collapsed in 1971, following the United States' suspension of convertibility from dollars to gold. This created the unique situation whereby the United States Dollar became the "reserve currency" for the Nations who signed.

European call for 'Bretton Woods II'
European leaders yesterday united behind calls for a "Bretton Woods II" summit to redesign the world's financial architecture, with Britain arguing the meeting could also be used to seal a long sought global trade deal. Gordon Brown, Britain's prime minister, said the world should turn the financial crisis into an opportunity and reform global institutions, such as the International Monetary Fund, conceived in 1944 when western leaders met in Bretton Woods, New Hampshire, and mapped out a postwar financial order. George Bush, the US president, is "open to the idea," of a summit, a US official said, although the administration was "focused on the immediate situation at the moment". Officials in Brussels indicated last night that the meeting could take place in New York as early as next month.

Leaders back call for 'Bretton Woods II' summit
European leaders yesterday united behind calls for a "Bretton Woods II" summit to redesign the world's financial architecture. Britain argued that the meeting could also be used to seal a long sought global trade deal. Gordon Brown, Britain's prime minister, said the world should turn the financial crisis into an opportunity and reform global institutions, such as the International Monetary Fund, conceived in 1944 when western leaders met in Bretton Woods, New Hampshire, and mapped out a postwar financial order. The idea yesterday gathered support at a European Union summit in Brussels. Nicolas Sarkozy, French president, and Angela Merkel, German chancellor, have already signalled their support for reforms to the international financial system.

Bernanke Foreshadows End to Fed's Hands-Off Approach to Bubbles
Federal Reserve Chairman Ben S. Bernanke signaled an end to the Fed's decades-old aversion to interfering with asset-price bubbles as the financial crisis reshapes some of the central bank's most firmly held views on regulation and monetary policy.

In U.S., more signs of deeper downturn
Even as governments around the world began to introduce their financial bailout plans Wednesday, more signs emerged that the economic downturn may be deepening, sending jittery markets down sharply in Europe and on Wall Street. The chairman of the U.S. Federal Reserve, Ben Bernanke, warned that the American economy was headed toward an extended period of difficulty, despite worldwide efforts to stabilize the financial markets.

At Moment of Truth, U.S. Forced Big Bankers to Blink $$
For an hour, the nine executives drank coffee and water and listened to the two men paint a dire portrait of the U.S. economy and the unfolding financial crisis. As the meeting neared a close, each banker was handed a term sheet detailing how the government would take stakes valued at a combined $125 billion in their banks, and impose new restrictions on executive pay and dividend policies. The participants, among the nation's best deal makers, were in a peculiar position. They weren't allowed to negotiate.

Paulson still eyeing a January exit
U.S. Treasury Secretary Henry Paulson said on Wednesday he would work to ensure a smooth transition to his successor after the November presidential election, throwing cold water on hopes that he might stay on crisis control duty. In an interview on CNBC, Paulson said he was available after the election between Sens. John McCain and Barack Obama to work with "whoever the new treasury secretary is."

'Distasteful' Capital $$
A dangerous if necessary moment for U.S. markets.
. . . . this is also a very dangerous moment. The government has taken ownership stakes in the largest banks in the land. This extraordinary intervention is perilous -- not least to the banks themselves -- unless it is limited in scope and time. Mr. Paulson called the capital injection "distasteful" but unavoidable, and we can't disagree. The trick is to ensure that neither he nor his successors develop a taste for politically directed credit.

U.S. Treasury Secretary Paulson Stresses $250 Billion Buy Was No Nationalization
U.S. Treasury Secretary said the government's recent $250 billion purchase in shares of U.S. banks was "anything but a nationalization." In an interview with CNBC Wednesday night, he described the government as a "passive" shareholder and emphasized the move was done to boost confidence, not bail out the firms. On Monday, Paulson announced the goverment would be spending billions on shares in the nine largest U.S. financial firms, including JPMorgan and Citigroup. "These are temporary investments to bring confidence to the system," he said.

Feds Give Hundreds of Billions to Banks,
But Get Only NON-VOTING Shares in Return
Paulson's original bailout plan was so ill-conceived, and the markets reacted so poorly, that he had to copy the European model of buying shares in banks in return for injections of capital. As Kenneth S. Rogoff, a professor of economics at Harvard, said, "The Europeans not only provided a blueprint, but forced our hand".

Bailouts at a glance
How do the American and British bank bailout programs compare on some key principles?

Ron Paul responds to Bush Plan to socialize banks.

G8 Leaders to Hold Special Meeting on Financial Crisis
The leaders of the G8 industrialized nations said they will meet "in the near future" to discuss the current financial crisis and that they support the actions adopted by the G7 Plan of Action last weekend. The G8 leaders, from Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States of America, as well as the European Commission President, said in a statement Wednesday they will meet with key countries "at an appropriate time in the near future to adopt an agenda for reforms."

US surrenders power to appoint World Bank president
The US is to lose its power to appoint the president of the World Bank after the UK's development secretary, Douglas Alexander, brokered a deal to throw open the post to candidates from any country. Backed by European governments and developing countries, Alexander overcame resistance from the US and Japan to secure a reform he described last night as "a significant step forward". Washington has had the right to hand-pick the president of the World Bank since the institution was founded after the second world war, with Europe choosing the managing director of the International Monetary Fund. Alexander said: "The agreement provides the opportunity for candidates to be nominated regardless of nationality. It will ensure that the best-qualified candidate is selected."

Gold in the hands of the public is an enemy of the state
"Gold in the hands of the public is an enemy of the state." … Adolf Hitler
. . . .We know from published reports in the media, and from the anecdotal input coming our way from everywhere, that it is becoming harder and harder to buy gold and silver in various forms. You can read the latest below. It appears that various governments and bullion banks are intentionally making it harder and harder for individuals to buy physical gold. The US mint is restricting gold coin sales. The German banks are saying they don’t have supply. Scotiabank says they are out. They are not banning people from owning gold, they are just making it very difficult to buy because they say they have nothing for sale. Therefore, prices of gold and silver in the unofficial markets are taking off all over the world. The price of gold in the real world is close to, or over, $1,000 per ounce and silver is $15 to $20 per ounce.

Peter Schiff On Glenn Beck: Depression In Disguise:

Markets Pricing in 42% Chance of 50 bps Fed Cut on Downbeat Data
Fed funds futures are back to pricing in a 50 bps rate cut for the Oct. 16 Federal Reserve meeting on a day that saw U.S. advance retail sales fall and producer price inflation rise above expectations. Markets remain fully priced in for a minimum 25bp rate cut, but are now factoring in a 42% chance that the Fed funds rate will be lowered to 1.00% from 1.25%.

World Markets Fall as Investors Weigh Relentless Trouble
Stock markets plunged anew on Wednesday, nearly wiping out the record gains of Monday and sending another wave of wealth destruction washing over American households. The government’s rescue of the banks has been widely embraced, but the frenzied selling, which pushed the Dow Jones industrial average down 733 points, underscored how the economy’s troubles are too broad to be fixed by the bailout of the financial system.

How central banks destabilized the world' s economies
The crisis that America finds itself in is not political in origin nor can it be laid at the feet of any individual or party. The whole world, including Europe, is experiencing a massive monetary disruption. Moreover, it is not the first time that the world has been shaken by a financial crisis. It happened in 1824 and it happened again after WW I. What is depressing is that though these crises have but one single cause today' s central bankers and legions of economists find themselves utterly clueless, readily taking as a causes those data which are in fact symptoms of a very deep monetary disorder.
Monetary disorders are always the product of inflationary policies.

The truth behind the Asian fairy tale
Are you sitting comfortably? Far, far away from the woeful mess engulfing the wicked countries of the west lies an upright land with fecund trade surpluses, near-bottomless pools of central bank reserves, well-capitalised banks and a healthy aversion to "money game" speculation. This land of Asia, dear children, shunned the easy profits promised by the peddlers of toxic derivative products and fancy collateralised debt obligations. Its banks eked out a respectable living through the sensible business of lending money, its manufacturers through the old-fashioned practice of making things. This is why Asia has avoided the financial near-collapse that rained down on the casinos of Wall Street and London. This is why, too, Asia will now become the sole motor of global growth.

Peter Schiff On Glenn Beck: Inflation Nation?

Forget the silver bullet
The initial reaction of US Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke to the financial crisis was to argue that their proposed US$700 billion Troubled Assets Relief Program (TARP) was better for American families than any other plan, although they did not allude what any other plan might entail.They wanted their proposal to be adopted in a "clean and quick" way before the sky fell. Unfortunately, soon after the passage of a modified plan, the TARP quickly and cleanly intoxicated capital markets in the US, Europe and Asia, wiping out trillion of dollars in share values and retirement savings within the span of five trading days. Had Paulson and Bernanke not forced their controversial TARP but had instead adopted a comprehensive plan the ensuing nightmare in stock and capital markets might have never occurred.

No Credit, No Leverage
"What we thought was a wall of liquidity, turned out to be a wall of leverage."
– Paul Davies in the FT, quoting "a number of senior bankers..."
WANNA KNOW WHY your stock market shares keep on tumbling, right back to what one Fox news anchor just called "the absolute lows" from the end of last week? It's credit – or rather, the lack of it. The US bail-out, European unity, Gordon Brown's sainthood, every new mortgage application...all these things now look incredible – quite literally unbelievable – against the stark backdrop of no credit, no leverage today. But nothing lacks credibility like trying to make fast money in finance right now.

Fed's Kohn Says We Need More Than Government's $250 Billion Stock Purchase
Federal Reserve Vice Chairman Donald Kohn said the U.S. government's recent decision to buy $250 billion in financial firm stocks is not enough to shore up the economy - but is a "key building block." He said he hopes private capital investment will follow the government purchase. Speaking to an audience at Georgetown University Wednesday night, Kohn said regulation of the financial system will soon be tightened, adding that the existing regulatory system "didn't pass the test."

JP Morgan and Wells Fargo announce big fall in profits
Huge losses on the credit markets sent profits plunging at two of America's leading banks, JP Morgan and Wells Fargo, a day after both were obliged to accept billions of dollars in capital from the US government.

Blatant Banker Manipulation Of Gold Prices
One ounce bullion still being sold $200-300 above spot value, proving official spot price is divorced from reality
Despite the dramatic fall in gold prices from Friday’s high of around $930 an ounce to today’s current low of $830, sales of actual physical gold continues to trade for anything up to $300 over spot price, proving again that official COMEX gold future numbers are completely divorced from reality and banker manipulation is rife.

Economy sinks deeper into rut
Country sank deeper into economic rut
during the fall as financial crisis takes its toll
The country has sunk deeper into an economic rut, the Federal Reserve reported Wednesday, reflecting mounting damage from the financial and credit crises. The Fed's new snapshot of business conditions around the nation showed economic activity weakened across all of the Fed's 12 regional districts. Consumer spending -- which accounts for more than two-thirds of economic activity -- slumped in most Fed regions. Manufacturing also slowed in most areas.

A Left at Nobel Drive
I was actually stunned to learn that the laughable Paul Krugman, another low-wattage PhD economist from Princeton University, won the Nobel Prize, and then I realized I was mostly just childishly jealous, especially about the part where he gets over a million smackeroos, and the news media uses a flattering picture of you, instead of the embarrassing one where I am on the ground getting gut-kicked by those damned nuns! Apparently Princeton University has a penchant for embarrassing itself, too, as Ben Bernanke - current chairman of the Federal Reserve - is another Princeton alumnus, who was actually the erstwhile head of the economics department there, and who demonstrates his intelligence by presiding over, and making worse, the biggest economic calamity to hit the United States and the world in a century (maybe more!), thanks to his own lack of competence and his inability to understand that his predecessor at the Fed since 1987, the execrable Alan Greenspan, was a complete moron, too.

Economic Expectations: "Nobody Knows" How Bad the Economy Will Be

Fed's Beige Book Says U.S. Economy Weak, Credit Tight, Prices Moderate
Economic conditions in the U.S have "weakened" across all 12 Federal Reserve Districts, and businesses are more concerned about the economic outlook, according to the Fed's Beige Book released Wednesday. The Beige Book is a summary of economic news over roughly the past six weeks in the 12 Federal Reserve Bank districts. The Federal Open Market Committee and analysts look to the compilation of comments by regional Fed banks to get a non-numerical picture of economic conditions across the country.

Home Prices Seem Far From Bottom
The American housing market, where the global economic crisis began, is far from hitting bottom. Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession. In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them.

A Look at LIBOR Shows Bigger Credit Problems on the Horizon
More than a year ago, even before the subprime-mortgage crisis had revved itself up into the full-fledged credit crisis that’s now threatening global growth, we pointed to the London Interbank Offered Rate (LIBOR) and other interbank rates that suggested that the worst was yet to come. LIBOR is the rate at which banks offer to lend funds to other banks, based on current interest rates. In many ways, it is similar to the U.S. Federal Funds rate.

Bernanke says U.S. economy faces big threat
Federal Reserve Chairman Ben Bernanke on Wednesday gave a dour assessment of the U.S. economy, emphasizing a "significant threat" from turmoil in credit markets in remarks that suggested more interest-rate cuts could be coming. Bernanke said it will take some time to restore normal credit flows and pledged the U.S. central bank would continue to act aggressively to fight the crisis.

Great Depression colors seniors’ view of crisis
Some consider taking all of their money out of the bank and hiding it
Marcelle Uptain grew up during the Great Depression, so her response to the recent bank turmoil, the stock market plunge and home foreclosures was simple — take her money out of the bank and hide the cash at home. Her son had to talk her out of it. "I have a little steel box with a key and I was thinking about taking my checking account out and putting it in there," said Uptain, 83, who grew up in Alabama and lives at a senior center here.

Risky business
The root of this financial crisis is the tension between wanting to spread risk and not understanding its consequences
The current financial crisis, the loss of asset values, the refusal to extend normally-given credit and the great increase in defaults on obligations ranging from individual mortgages to the debts of great investment banks presents, of course, a pressing challenge to the fiscal authorities and central banks to take measures to minimise the consequences. But they also present a challenge to standard economic theory, a challenge all the more important since the development of policies to prevent future financial crises will depend on a deeper understanding of the processes at work.

Economic Main Street Manifesto:
10 Reasons how this Bailout Fails the Middle Class American Worker.
The question that most Americans have on their mind about this historical government intervention is whether this program is ultimately going to work. In short, no. In this article I’m going to highlight 10 major reasons why this global intervention is nothing more than stitches on breaking economic flesh from preventing the world from going into the infected abyss. Just like I highlighted why the California housing market will not hit a bottom until May of 2011, I believe that this current intervention is simply window dressing on a dry and stale turkey.

The Financial Crisis: Where Do We Go From Here?

Thomas L. Friedman: Why how matters
I have a friend who regularly reminds me that if you jump off the top of an 80-story building, for 79 stories you can actually think you're flying. It's the sudden stop at the end that always gets you.

When I think of the financial-services boom, bubble and bust that America has just gone through, I often think about that image. We thought we were flying. Well, we just met the sudden stop at the end. The laws of gravity, it turns out, still apply. You cannot tell tens of thousands of people that they can have the American dream - a home, for no money down and nothing to pay for two years - without that eventually catching up to you. The Puritan ethic of hard work and saving still matters. I just hate the idea that such an ethic is more alive today in China than in America.

Blankfein's $70 Million Would Survive Paulson's Rules
Goldman Sachs Group Inc.'s Lloyd Blankfein, whose $70.3 million paycheck made him Wall Street's most highly compensated chief executive officer last year, could still earn tens of millions annually under the bank-rescue plan run by his former boss, Treasury Secretary Henry Paulson. Executive-pay packages will be restricted for the nine banks receiving a $125 billion infusion of U.S. funds to restart lending, said Paulson, who earned $37.8 million in 2005, his last full year as Goldman's CEO. The investment is part of a $700 billion bailout plan approved by Congress this month.

Switzerland to Inject Capital Into UBS $$
Credit Suisse Plans to Raise Capital
The Swiss government said Thursday it will inject six billion Swiss francs ($5.3 billion) of fresh capital into UBS AG in return for a 9% stake, as the Swiss central bank announced plans to shift $60 billion worth of toxic assets off the bank's balance sheet.
The Swiss National Bank, the country's central bank, said it will provide a long-term loan to purchase toxic assets worth up to $60 billion from UBS. The SNB will provide long-term financing of up to $54 billion for a special purpose vehicle to hold these assets.

Fears of global recession send markets crashing again
Fears of a global recession sent world stockmarkets crashing across Asia and Europe this morning, with the Footsie heading towards its lowest point in over five years. The panic selling that began on Wall Street yesterday evening spread around the globe as investors lost faith that Europe and America's bank rescue packages would stave off an economic downturn. In London the FTSE 100 ploughed downwards by almost 6%, or 240 points, in the first few minutes of trading to 3840.6. This is the lowest point it has hit during the recent crisis, and there was not a single riser on the index of Britain's biggest companies. This followed an 11% plunge on Japan's Nikkei, its worst performance since 1987. There was little sign of optimism in the City this morning, as analysts warned that shares may have much further to fall.

Citadel Hedge Fund Falls 30% on Bond, Stock Losses
Citadel Investment Group Inc.'s biggest hedge fund fell as much as 30 percent this year, because of losses on convertible bonds, stocks and corporate bonds, said two people familiar with the Chicago-based firm. Kenneth Griffin, who founded Citadel in 1990, said in a letter to investors this week that returns for the $10 billion Kensington Global Strategies Fund may swing wildly as markets are battered by the global credit crunch.

US hedge fund withdrawals hit $43bn in September
Investors pulled at least $43bn from US hedge funds in September as market turmoil led to unprecedented withdrawals, an analysis by a leading research house shows. The data from TrimTabs Investment Research – which was to be sent to clients late on Wednesday – come as hedge funds are working to prevent far bigger redemptions by the end of the year, when many funds give investors a chance to take out money.

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