Washington has so thoroughly botched its supervision of the banking industry that 200 banks are likely to fail this year - easily surpassing last year’s 140 bank failures - inevitably involving the greatest bank losses in history - and already costing the FDIC ten times more than the great S&L and banking crisis of the 1980s did. I am not basing these conclusions on conjecture. They come straight from official sources.

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Indeed, the current "!solutions" being proposed to the global financial crisis benefit those that caused the crisis over those that are poised to suffer the most as a result of the crisis: the disappearing middle classes, the world's dispossessed, poor, indebted people. The proposed solutions to this crisis represent the manifestations and actualization of the ultimate generational goals of the global elite; and thus, represent the least favourable conditions for the vast majority of the world's people.

It is imperative that the world's people throw their weight against these "solutions" and usher in a new era of world order, one of the People's World Order; with the solution lying in local governance and local economies, so that the people have greater roles in determining the future and structure of their own political-economy, and thus, their own society. With this alternative of localized political economies, in conjunction with an unprecedented global population and international democratization of communication through the internet, we have the means and possibility before us to forge the most diverse manifestation of cultures and societies that humanity has ever known.

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Governments the world over have spent the past year bailing out, backstopping, insuring, and stimulating their financial sectors and economies. Trillions of dollars, euros, yen, and pounds have been thrown around like Halloween candy. Officials have assured us there's little risk to that strategy. But we have warned consistently that the opposite is true. Our stance: If you borrow and spend too much, all you're going to do is transform a Wall Street debt crisis into a Washington debt crisis.

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A new BBC World Service global poll, surveying 29,033 adult citizens (living in major urban areas) across 27 countries (Australia, Brazil, Canada, Chile, China, Costa Rica, Czech Republic, Egypt, France, Germany, India, Indonesia, Italy, Japan, Kenya, Mexico, Nigeria, Pakistan, Panama, the Philippines, Poland, Russia, Spain, Turkey, Ukraine, the United Kingdom, and the United States of America), conducted between 19 June and 13 October 2009 by the international polling firm GlobeScan, together with the Program on International Policy Attitudes (PIPA) at the University of Maryland finds that dissatisfaction with free market capitalism is widespread, with an average of only 11% saying that it works well and that greater regulation is not a good idea. That is, eight in nine people believe that free market capitalism is bad; it has failed and is not working for them any more. So overwhelming is the verdict against capitalism that no statistical magic or jugglery can put a dent to the conclusion drawn from the study.

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Three score and six years ago, the greatest president of the 20th century gave one of his greatest speeches. On Jan. 11, 1944, in a State of the Union address that deserves to be ranked with Lincoln's "Gettysburg Address" and King's "I Have a Dream" speech, President Franklin D. Roosevelt called for recognition of a "Second Bill of Rights."

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In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

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Can the Fed be fixed? Don't bother, writes U.S. Congressman Ron Paul in "End the Fed", a blistering libertarian broadside from a firm believer in Austrian economics. Paul, a Republican from Texas, wants to abolish the Fed, freeze the money stock, and reintroduce a gold standard. His book lays out his arguments in blunt rhetoric pitched to the surly mood of an understandably disillusioned electorate. He attributes his title to a catchphrase he heard University of Michigan students chanting in October 2007.

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Suresh Tendulkar, an economic adviser to Indian Prime Minister Manmohan Singh, said he is urging the government to diversify its $264.6 billion foreign-exchange reserves and hold fewer dollars.

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The world is a step closer to a global currency, backed by a global central bank, running monetary policy for all humanity.

Full Analysis..

World Bank President Robert Zoellick warned policy makers that fiscal-stimulus plans are insufficient to turn around the "real economy" and rising joblessness threatens to set off political unrest across the globe. "While the stimulus has given an impulse, it's like a sugar high unless you eventually get the credit system working," Zoellick said in an interview yesterday with Bloomberg Television's "Political Capital with Al Hunt." "When unemployment increases, that's probably the most political combustible issue."

Full Report...

With his proposed Financial Regulatory Reform Plan, Obama hopes to prevent the next great financial catastrophe. To read the full report of the five-point regulatory plan:

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Following the 2009 G20 summit, plans were announced for implementing the creation of a new global currency to replace the US dollar's role as the world reserve currency. Point 19 of the communique released by the G20 at the end of the Summit stated, "We have agreed to support a general SDR allocation which will inject $250bn (170bn pounds) into the world economy and increase global liquidity." SDRs, or Special Drawing Rights, are "a synthetic paper currency issued by the International Monetary Fund." As the Telegraph reported, "the G20 leaders have activated the IMF's power to create money and begin global "quantitative easing". In doing so, they are putting a de facto world currency into play. It is outside the control of any sovereign body. Conspiracy theorists will love it."

Full Article..

All is not well in Obamafanland. It's not clear exactly what accounts for the change of mood. Maybe it was the rancid smell emanating from the US treasury's latest bank bailout. Or the news that the president's chief economic adviser, Larry Summers, earned millions from the very Wall Street banks and hedge funds he is protecting from re-regulation now. Or perhaps it began earlier, with Obama's silence during Israel's Gaza attack.

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The Obama administration's bank- rescue efforts will probably fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

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The Obama administration's plans to stabilise the financial system lack "essential details" and have left the markets uncertain about how it intends to recapitalise the teetering US banking sector, says the International Monetary Fund.

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"My forecast was that we needed to double our resources," IMF Managing Director Dominique Strauss-Kahn told reporters after a G-20 meeting near London today. "A commitment to do so has been made. It may even go further."

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Car giant General Motors (GM) has filed for bankruptcy protection, marking the biggest failure of an industrial company in US history.

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Watch this TV show here to see an honest journalist in action:

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As in the Great Depression, world trade is collapsing, wealth is evaporating and the banking system is broken. Deflation is a growing threat as companies slash production, pay and prices. And leaders worldwide are having difficulty making headway in halting the self-perpetuating decline.

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American International Group Inc. appealed for its fourth U.S. rescue by telling regulators the company's collapse could cripple money-market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers’ stake in the firm.

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The Bank of England yesterday announced unprecedented steps to prevent the deepest slump since the 1930s when it unveiled plans to inject up to £75bn into the economy over the next three months.

Alarmed by signs Britain's malfunctioning banking system is starving consumers and businesses of credit, chancellor Alistair Darling yesterday gave Threadneedle Street clearance to begin creating money - the last-gasp measure used by Japan to end a decade of recession and deflation.

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Brown [also] challenged Congress by asking: "Should we succumb to a race to the bottom, and a protectionism that history tells us that in the end protects no one? No. We should have the confidence that we can seize the opportunities ahead and make the future work for us."

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Premier Wen Jiabao said China's 8 percent growth target for this year is within reach, indicating the government doesn't see the need to increase a 4 trillion yuan ($585 billion) economic stimulus. It's "possible for us to meet this target," Wen told delegates in his annual speech to China's parliament in Beijing today. The nation needs to "reverse the economic slide as soon as possible."

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The crisis-stricken insurance company AIG has crashed to the biggest corporate loss in US history, with a deficit of $61.7bn, after suffering devastating liabilities on policies to protect banks against bad loans. In a renewed effort to prevent AIG from collapsing, the US government today provided it with $30bn in emergency aid. This money comes on top of $150bn of taxpayers' funds advanced to AIG last year. The scale of AIG's losses sent US markets plunging in early trading, with the Dow Jones Industrial average falling below 7,000 for the first time since 1997. The Dow is currently down nearly 200 points at 6,863.62, with the Standard & Poor's 500 also falling sharply.

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The rest of the world cannot yet decouple from the United States' economy.
Excessive deleveraging of U.S. dollar-based credit is the sure sign that investors have come to understand this fact. They've pulled in extreme amounts of capital in search of a safe place to stash their cash.

In past Money and Markets columns, I've tried to make it clear that the U.S. dollar has been the huge beneficiary of these unwinding investments. I expect this trend to continue.

I wrote in my Money and Markets column last week about how the dollar should continue to rally and the European Monetary System is in jeopardy. But now, it's not just me saying this …

I'm not the only one saying that the European Monetary System is in jeopardy.

Here are excerpts from two different stories appearing on Bloomberg News yesterday morning [my emphasis]:

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At the height of the real estate bubble, I was desperate to buy a home. I had no idea what kind of trouble I was borrowing.

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"The government's measures to tackle the financial crisis have shown preliminary results," Wen said during an online chat with the public on the government's Web site today. Wen cited rising loans, retail sales in January and growing power output and consumption since the middle of February as signs of relief.

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The degree to which discussion of government policy has centered, not on the social needs of the masses of people, but rather on financial issues related to the interests of the very wealthy who make their fortunes on Wall Street - a miniscule segment of the population - is itself extraordinary. It testifies to the reality of class relations in America and the domination of a financial aristocracy over every aspect of social and political life..........

The crisis requires not a temporary government takeover to bail out the bankers, but a socialist and revolutionary policy directed against the entrenched power and economic stranglehold of the financial aristocracy. What is required is the nationalization of the banks without compensation to the big shareholders and bondholders, the transformation of the banks and financial institutions into public utilities under the democratic control of the working class, and the redirection of financial policy to meet the needs of the people for good-paying jobs, housing, education, health care and a secure retirement, rather than the drive for profit and the accumulation of personal wealth by a privileged few.

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Billionaire investor George Soros said the current economic crisis has its roots in the financial deregulation of the 1980s and marks the end of a free-market model that has since dominated capitalist countries. Liberalization of the financial industry begun by the Reagan administration has led to a series of breakdowns forcing government intervention, Soros told economists and bankers last night at a private dinner at Columbia University in New York. The global recession, triggered by the collapse of the U.S. housing market, has "damaged the financial system itself," he said.

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U.S. Senate and House Democrats who steer financial-industry legislation clashed over having the government take over some banks as a way to help lenders that have been hammered by the worst economic slump in 75 years....A possible government takeover has gained support. Former Federal Reserve Chairman Alan Greenspan told the Financial Times this week that the U.S. may have to temporarily nationalize some banks until the industry is restructured. Republican Senator Lindsey Graham, a member of the Budget Committee, said on ABC's "This Week" Feb. 15 he wouldn't reject the idea of nationalizing the banks.

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Here are five reasons why Japanese leaders might be excused for drinking in excess these days:

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Lloyds Banking Group Plc led a decline in the value of subordinated bank bonds to a record low on concern governments will be forced to nationalize lenders to save them from collapse.

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Japan's economy shrank at an annual 12.7 percent pace last quarter, the most since the 1974 oil shock, as recessions in the U.S. and Europe triggered a record drop in exports.

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Asian stocks fell, led by finance and consumer companies, as Japan's economy shrank the most since 1974 and Group of Seven finance chiefs said the economic slowdown will persist through most of 2009.

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In order to save the global economy, the President has to stop trying to satisfy everybody. He should follow the example of Roosevelt and leave Lincoln behind....We are living through nothing less than the disintegration of the global financial system, shattering the western banking systems' capacity to lend. The risk is growing of a worldwide debt deflation. The west's governments have no choice but to put their balance sheets behind their broken banks and to make good the consumer demand that is no longer there via fiscal policy. They may even collectively have to print money, much more effectively done together than separately. Yet conservatives deny these truths. The acute problem is that, although the old order and ideas do not work, there is no consensus on what the new order and ideas will be. The lack of coherence is plaguing these early weeks of Obama's drive for economic recovery.

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Fractional reserve banking - the basis of the current financial system - is about usury, fraud and insurmountable debt. Since the Federal Reserve Act was passed into law in the dead of night in 1913, bankers have fraudulently created money out of thin air and the process of lending money has created staggering inflation. Obama's "stimulus" bill will make sure future generations are enslaved by this astronomical debt. It is a scientifically engineered event designed to consolidate power and wealth in the hands of the global elite.

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Staggering falls in exports across Asia have shocked economic analysts and ended all claims that the global slump may be nearing its bottom. The IMF's growth forecast for Asia this year is just 2.7 percent - less than a third of the 9 percent growth rate of 2007. The prediction is a full percentage point less than during the 1997-98 Asian financial crisis.

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The government's job is not to rebuild a ruined financial world in its old form. The intellectual alternative to the free market that Mr Brown promised 17 years ago is more necessary than ever.

Full Editorial..

[LankaEye Editor's comment: Obama says the private sector - weakened by the recession - does not have the resources to jolt the economy. The truth is: not just the resources, the profit-based capitalism cannot produce the necessary vision to rationally mobilise the resources on a national & global scale. Obama does not seem to have grasped this truth yet.

Click here to read the Bloomberg report...

Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said. "The worst cannot be ruled out," Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. "There's a lot of downside risk."

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Stimulating growth before the current slowdown deepens into a prolonged slump is the top priority. Referring to a raft of initiatives that the government has already announced, including a Rmb4,000bn (585bn US dollars, 460bn Euros, 400bn pounds) fiscal spending package aimed mainly at infrastructure spending, Mr Wen says that further efforts may be required.

The government intends to fight on several fronts. Most important is the infrastructure spending and this, he says, is already well under way. But also key is a long list of measures aimed at providing the softer context to a comprehensive stimulus effort - including initiatives to boost consumer spending and welfare.

Full Interview...

His core idea is "reflexivity", which he defines as a "two-way feedback loop, between the participants' views and the actual state of affairs. People base their decisions not on the actual situation that confronts them, but on their perception or interpretation of the situation. Their decisions make an impact on the situation and changes in the situation are liable to change their perceptions."

It is, at its root, a case for frequent re-examination of one's assumptions about the world and for a readiness to spot and exploit moments of cataclysmic change - those times when our perceptions of events and events themselves are likely to interact most fiercely.....

...."I think it has to do with the human condition,” he (Soros) said. “The fact that we are mortal and we would like to be immortal. The closest thing you can come to that is by creating something that lives beyond you. Wealth could be one of those things, but evidence shows that it doesn't survive too many generations. However, if you can have an artistic or philosophical or scientific creation that withstands the test of time, then you have come as close to it as possible.

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Predictions of more gloom and doom this year have forced the Bank of England to slash another half a point off UK interest rates to a fresh record low.

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Nobel laureate Joseph Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt. Obama's administration is moving closer to buying the illiquid assets currently clogging bank's balance sheets and preventing them from boosting lending, people familiar with the matter said this week. That amounts to swapping taxpayers' "cash for trash," Stiglitz said in a panel discussion at the World Economic Forum in Davos, Switzerland today. "You shouldn't chase good money after bad. We're talking about a national debt that's very hard to manage."

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The U.S. economy shrank the most in the fourth quarter since 1982 as consumer spending recorded the worst slide in the postwar era, a trajectory that’s likely to continue in coming months.

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As the global economic crisis continues to deepen, the unmistakable stench of economic nationalism is on the rise around the world. Confronted with collapsing industries and growing anger over job losses, governments are reaching for protectionist measures despite the disastrous consequences of such beggar-thy-neighbour policies in the 1930s.

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A further acceleration of the US economy would in turn drag down the world economy. The International Monetary Fund's revised growth figures it issued on Wednesday - forecasting just 0.5 percent global growth - is already under challenge. New York University Professor Nouriel Roubini has predicted the world economy will experience negative growth of at least -0.5 percent, the first such international contraction since the 1930s great depression.

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Jan. 29 (Bloomberg) - Federal Reserve officials warned of a prolonged global economic slowdown that may push the U.S. to the brink of deflation. For the first time during the credit crisis, the Federal Open Market Committee's statement yesterday indicated concern about the worldwide economy weakening "significantly," with "some risk" that inflation would remain below ideal rates. The Fed signaled it's moving closer to buying long-term Treasuries and expanding its $600 billion program to buy home-finance debt.

Full Analysis...

[Editor's comment: Here's another example of "free-market philosophy in crisis"] Jean-Claude Trichet gave a stark warning to financial markets on Thursday to stop putting pressure on banks to hold more capital, insisting that such views were exacerbating the global recession.

The president of the European Central Bank criticised the prevailing view among investors that banks should hoard funds, insisting that the view was contrary to those of the European authorities. Such ideas did nothing to contain the deepening recession, he said, and also provided non-financial companies with incentives to postpone investment.

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The International Monetary Fund added to Gordon Brown's woes last night when it warned Britain will be at the bottom of the league table of major developed countries this year, in the weakest year for the global economy since the second world war.

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The leaders of China and Russia on Wednesday turned the tables on their western counterparts who have dictated the world's economic agenda, lecturing them for policy failures they said had led to the global financial crisis....."What is discouraging is [Barack] Obama's statement that he is going to run a $1 trillion deficit for years to come. For us, that means that all the free liquidity in the world will run into American Treasury bills," said Igor Yurgens, who heads a think tank advising Mr Medvedev. Mr Yurgens likened the policy to the "beggar thy neighbour" protectionist policies of the 1930s. "Of course, [Mr Obama] expects the Chinese or Russians to buy US Treasury bills. That is pretty selfish and philosophically it is protectionism."

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The recession is killing jobs at an alarming pace, with tens of thousands of new layoffs announced Monday by some of the biggest names in American business - Pfizer, Caterpillar and Home Depot.

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Fresh evidence of a deepening downturn emerged Monday as a wave of leading corporations announced more than 70,000 job cuts in one of the gloomiest days in the global economic crisis so far.

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In recent years, Goldman Sachs has been renowned for hosting one of the hottest parties during the World Economic Forum's glittering annual meeting in Davos. No longer.

This year, in a nod to the new mood of sobriety and self-recrimination, the US broker has quietly cancelled its party and sharply reduced its delegation to the event, which starts on Wednesday.

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The first 100 days of President Barack Obama's administration officially begin today (Wednesday). But the reality is that President Obama already has a solid head start, as he and his advisor have been working for months to establish the groundwork for one of the most ambitious - and most important - economic-stimulus plans in U.S. history.

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Powerful steps have been taken to revive the economy. Now Gordon Brown must ensure the City loses its power to harm us....

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The battered pound faces a third straight day of turmoil after falling to its lowest level for nearly 24 years against the dollar.

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Sterling hammered on currency markets as traders take fright at state of UK banking sector and cost of government rescue....

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VR's Comment: Above all this article reflects the fast growing desperation among people amid the collapsing capitalist economy. You'll find readers' comments below the article some of which are more interesting than the main article.

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US stocks were on course on Tuesday for their worst inauguration day performance since the assassination of John F Kennedy, led by more heavy losses among banks.

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For once, Gordon Brown is guilty of understatement. The other day the prime minister remarked on the rising public anger at the behaviour of Britain's banks. Unbridled rage would have been a more accurate description of the national mood.

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A plunge in the share price of the Royal Bank of Scotland prompted City and Westminster speculation tonight of imminent full-scale nationalisation for the bank as the financial markets issued a vote of no confidence in the government's latest bail-out.

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Less than four months after Congress passed the Bush administration’s Troubled Asset Relief Program (TARP), authorizing the Treasury Department to spend $700 billion in taxpayer money to bail out the banks, the same banks that received the government handouts are reporting massive losses and the incoming Obama administration is preparing to funnel hundreds of billions in additional funds to Wall Street.

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In a critical bid to revive lending, Labour is to underwrite toxic assets and use Northern Rock to boost the mortgage market. Gaby Hinsliff, Ruth Sunderland and Jill Treanor report:

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You cannot use previous recessions or depressions as a yardstick. This failure is nothing like we have seen in the past few hundred years. The average post-war recession lasted about 10 months. By our calculations we are into the 23rd month and there is no end in sight. In fact, we are really just getting underway.

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The ugly data that poured forth from official sources last week demonstrate, beyond a shadow of a doubt, that the jobs situation in the United States is an unmitigated disaster. Unemployment is far worse than the pundits dreamed possible just a few months ago — the highest official unemployment rate since 1993, the lowest weekly hours worked since 1964, the most jobs lost in a year since 1945!

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How much is $1.186 trillion - or $1,186,000,000,000, written out the long way? It's more than the inflation-adjusted cost of the Vietnam ($698 billion) and Korean Wars ($454 billion). It's more than the Louisiana Purchase ($217 billion) and the Savings and Loan bailouts ($256 billion). It's greater than the 2007 Gross Domestic Product of all but 13 other countries in the world. It's equal to $3,881 for every man, woman, and child in the U.S. It could buy 189,760,000,000 bushels of wheat at recent prices. 26,893,424,036 barrels of oil. Or 1,581,333,333,333 cans of Diet Coke at my trusty vending machine in the break room.

Why do I bring this up? Because that $1.186 trillion figure is the projected 2009 deficit, according to the latest report from the Congressional Budget Office (CBO). And it is downright scary.

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The financial guru's Ponzi scheme cost me 30 years of retirement savings. How could he do this to me - and why did I let him?

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Less than one week into 2009, new economic data indicate the US will not quickly rebound from the crash of 2008. Economists now openly discuss the possibility of another Great Depression, portending the permanent impoverishment of broad sections of the population.

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The situation could hardly have been bleaker in March 1933 when FDR assumed the presidency. At least a quarter, but probably a third, of US workers were unemployed. A thousand families a day were losing their homes. Farmers were desperate. The stock market had failed to recover from the 1929 crash. In 1932 alone 1,500 banks went bust. But, in an early taste of the audacity of hope, the patrician, polio-stricken but politically mesmeric Roosevelt told America it had "nothing to fear but fear itself". He pledged himself "to a new deal for the American people. This is more than a political campaign. It is a call to arms".

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Developing countries face the threat of a financial drought in the next 12 months, as rich governments embark on a round of "capital market protectionism", corralling the funds of their battered banks for borrowers back home.

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It has been a bad year for economic forecasters. So bad that royalty wants to know what went wrong. "Why did no one see it coming?" Britain's Queen Elizabeth asked during a visit to the London School of Economics this month. Her Majesty's question has sparked a series of ludicrous claims about the prescience of individual forecasters.

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Manufacturing in the US is collapsing, with a key index falling to its lowest level in 20 years on Friday. Other figures released yesterday show a downturn in production throughout the world.

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It was the worst of times for ordinary Americans. And even worse times for deregulators and supply-siders. The bright side? Their party is over.

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Stocks in Japan and South Korea ended the last trading day of the year on Tuesday by notching up annual falls of more than 40 per cent, their worst yearly result since records began.

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IMF economist warns of "Great Depression"

The Wall Street Journal quoted Mary Delk, a director in the retail practice at consulting Firm Deloitte LLP, as saying, "This will go down as one of the worst holiday sales seasons on record. Retailers went from 'Ho-ho' to 'Uh-oh' to 'Oh-no.' " Retailers introduced sharp discounts on many items in the weeks leading up to Christmas, with some sellers in panic mode, in an attempt to unload excess inventory. Sales are continuing into the post-Christmas period, but they will do little to improve figures for the month and the year as a whole.

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"We didn't think it was going to be anything like as severe as it's turned out to be," says Gieve, who is in charge of financial stability at the Bank. "Why didn't we see that it was so serious? I think that's because we, perhaps, we hadn't kept pace with the extent of globalisation. So the upswing here didn't involve the big increases in earnings and consumption and activity which we saw in previous booms. We saw the credit, we saw the house prices, but we did see a fairly stable pattern of earnings, prices and output."

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To return to the ABCs of Marxism: the material productive forces have once again come into conflict with the social relations of production, giving rise to a new period of social revolution, in which the fate of the working class, and humanity as a whole, will be decided. It is for precisely such a period that we must now prepare.

Full Lecture...

Toyota's announcement on Monday of a projected operating loss for the current financial year - its first in more than half a century - has sent shockwaves through the auto industry, not only in Japan but internationally. The Japanese carmaker has long been regarded as the international benchmark for manufacturing efficiency, so its losses are a clear demonstration that no one is immune from the worsening global recession.

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Investors delivered a vote of no confidence in Opec last week when oil prices fell by their most in almost two decades even though the cartel decided to curb production.

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Barack Obama has expanded the goals of his proposed economic stimulus, with a plan to create or save an additional 500,000 jobs. The president-elect raised his jobs target over the next two years to 3m - up from the 2.5m goal set last month - after US unemployment hit its highest level for 15 years in November.

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Tackling unemployment among university graduates will be China's priority next year as the economy falters, Wen Jiabao, the prime minister, said at the weekend. The attention given by state media to Mr Wen’s visit to a Beijing university was the latest sign of the government's increasing fear of widespread unrest as growth declines much faster than expected.

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[Part 1 of this lecture is available in WSWS]

... In a recent speech Kevin Warsh, a governor of the US Federal Reserve System, noted that the issues in the current financial crisis went far beyond subprime mortgages and pointed to the wider processes now unfolding.

"If the challenges to the economy were predominantly about the value of housing stock, my focus today," he told his audience, "would be narrower than the establishment of a new financial architecture. So, what diagnosis, beyond housing weakness, is consistent with the unprecedented levels of volatility and dramatic financial market and economic distress? I would advance the following: We are witnessing a fundamental reassessment of the value of virtually every asset everywhere in the world" [Kevin Warsh, The Promise and Perils of the New Financial Architecture].

This "reassessment", however, does not occur through some kind of accounting procedure. It takes place, as Marx drew out, through "violent and acute crises, sudden forcible devaluations, an actual stagnation and disruption in the reproduction process, and hence to an actual decline in reproduction" [Marx, Capital Volume III, p. 363]. In short, it takes place through a violent economic contraction, whose severity depends on the extent of the initial over-accumulation of capital. In today's conditions, we are speaking of processes that have already led to the implosion of one economy, Iceland, with even bigger ones, Ireland and even the UK, to follow....

Full Article...

The Bank of Japan reduced interest rates for the second time in two months on Friday, bringing its rates within the US Federal Reserve's range after its historic move close to zero earlier in the week. The Bank of Japan reduced its overnight call rate to 0.1 per cent from 0.3 per cent, amid a rapidly deteriorating economy. Economic woes were emphasized by the BoJ's Tankan survey of business confidence on Monday, which had its sharpest decline in more than three decades. The board members voted 7-1 in favour of the cut.

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The SEP advocates the transformation of the auto companies and other major corporations into publicly-owned utilities. Genuine nationalization does not mean the intervention of the state on behalf of the financial oligarchy, but the establishment of democratic control of industry. The state itself, as an instrument of the corporations, must be replaced by a workers government that can oversee the rational organization of the world economy to benefit social need, not private profit.

The necessity for these policies arises organically out of the objective crisis itself. Capitalism - the so-called "free enterprise" system - has failed. In response to this crisis, the American working class must come face-to-face with the basic question of socialism.

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In the two days since the Federal Reserve Board cut its benchmark interest rate to a record low range of 0 to 0.25 percent and announced that it will supply an unlimited amount of liquidity to near-frozen credit markets, the US dollar has fallen sharply on world currency markets. The panic sell-off of dollars is an expression of falling confidence in the solvency of US financial institutions and the credit-worthiness of the American currency, and mounting fears that the recession that began with the collapse of the US housing and credit markets could develop into a full-blown depression.

Full Article...

In the latest shock to the global economy, China's industrial production is declining sharply, indicating that the entire national output is contracting. The official statistics for November are a staggering measure of how quickly the world slump is worsening, cutting off demand for Chinese exports.

Full Analysis...

The pound dropped to within 5p of parity with the euro on Thursday as it fell to a fresh record low against the single currency for the ninth successive day. Sterling sank to 95.5p against the euro for the first time amid rising speculation that the Bank of England will follow the US Federal Reserve and cut rates to virtually zero.

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As the economic crisis deepens, its human toll is becoming more evident. A new survey of food charities in the United States has revealed a dramatic increase in hunger. Feeding America, the largest hunger-relief organization in the US, says that a growing number of families face difficulties in securing adequate nutrition. Meanwhile food banks have proven ill-equipped to meet the increased demand caused by layoffs and increased food costs, and many have collapsed or have restricted the allotments of food they make.

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As of Wednesday, the Bush administration had yet to present a bailout proposal for US automakers General Motors and Chrysler, which have indicated that they may be unable to make payments to their creditors and suppliers by year's end. The Bush administration has indicated that it will provide some additional funds to the auto industry, perhaps as part of an organized bankruptcy proceeding. Meanwhile, the global auto industry has largely ground to a halt.

Full Article...

The government is likely to be forced to pump billions more pounds into UK banks, the Bank of England has indicated.

Even though it is only two months since the government ordered a groundbreaking £37bn bank recapitalisation package, Charlie Bean, the central bank's deputy governor, told the Financial Times that as the economy kept slowing and banks found it harder to lend, "it may well turn out that further capital injections are required".

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As Bernard Madoff returned home to his Manhattan apartment, it was impossible to overlook the disorder he has brought on with his alleged $50 billion investment fraud.

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The Opec oil cartel on Wednesday announced a further – and record – 2.2m barrels a day cut on top of the 2m b/d it had pledged since September in an attempt to shore up falling oil prices.

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Stocks tumbled around the world and the dollar slumped after the Senate rejected a bailout for American automakers, threatening to deepen the global recession. Treasuries rallied and yields fell to record lows.

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The repercussions from the collapse of Bernard L. Madoff Investment Securities LLC, whose founder and owner was arrested last Thursday after admitting that his $17 billion investment advisory business was "a giant Ponzi scheme," continue to widen. According to a criminal complaint filed by the FBI and a civil action brought by the Securities and Exchange Commission (SEC), the elderly Madoff estimated that the losses from his fraud exceeded $50 billion. The tally of losses already reported by banks, hedge funds and wealthy investors climbed over the weekend to nearly $20 billion.

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The row between the UK and Germany over Gordon Brown's economic stimulus plan hit the front pages of both broadsheets and tabloids today. According to the Independent, the prime minister is "furious" at Peer Steinbruck, Germany's finance minister, who accused him of making a spectacular U-turn since his years as a prudent chancellor by adopting a "crass" and "breathtaking" policy of "tossing around billions".

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Equity markets across Asia tumbled on Friday as the proposed bailout for US automakers collapsed in the US Senate, wiping out the tentative signs of improved sentiment in the region and sending the dollar to a fresh 13-year low against the yen.

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Today's meeting of European government heads in Brussels takes place under conditions of a deepening crisis of the European Union. At the centre of the growing tensions between Berlin, Paris and London is the question of how to react to the international financial crisis and global recession. While the French and British governments, together with European Union Commission president, Jose Manuel Barroso, are urging a large-scale economic stimulus programme, the German government has made it clear that it opposes making large sums of money available for such a programme.

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The pound has hit a new all-time low against the euro following further warnings that the UK economy is in worse shape than expected. Sterling fell to €1.1391 this morning and also hit a record low against a basket of other currencies.

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A falling pound poses a serious danger for millions of ordinary British people since almost every daily essential, from food to fuel and manufactures, is imported. The dominance of finance capital has left the UK with a manufacturing sector that accounts for no more than 16 percent of GDP, while the service sector, much of it related to finance, accounts for 73 percent. Joining the euro does not offer a lifeline, since it would not offer a solution to the economic and fiscal problems that underlie the falling pound. With government borrowing now set to rise to 57 percent of GDP, it might not even be possible.

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China's exports fell for the first time in seven years, more evidence that recessions in the U.S., Europe and Japan are driving the world's fourth-largest economy into a slump.

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Big rise in monetary base, trillions in loans all over the world that will never be repaid, many nations very exposed in monetization crisis, all currencies to fall against gold, writers running naked, larger corporate failures to come, American condition to worsen, resentment already smoldering around the world, taxpayer money still being squandered on bankrupt Wall Street…

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The Chinese government is clearly in crisis over how to deal with the rapid slowdown of the country's economy under the impact of a deepening global recession. Like its counterparts around the world, Beijing has little understanding of, let alone control over, economic events that are already leading to widespread plant closures, rising unemployment and social unrest.

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Editor's comment: Here you'll see the mindset of a truly American patriot who clearly sees what's happening to the American economy. But, his optimism is unshaken. He thinks America will somehow rise from the ashes like a phoenix with renewed youth to live through another cycle - to repeat history. He fails to see the new global society that is striving to emerge.

Click here to read Martin D. Weiss' analysis...

The U.S. economy, now officially in recession, may be in the midst of the longest slump in the post- World War II era as job losses mount and credit dries up.

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Evidence of a global slide to a deep recession mounted on Monday with severe strain reported by manufacturing companies around the world, large falls in car sales across Europe and bad construction figures in the US.

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Sterling was battered, UK shares slumped and gilt yields touched historic lows on Monday as weak manufacturing and mortgage data added to concerns that Britain was facing a deep recession.

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The UK is "closer" to joining the euro than ever before, according to European Commission president Jose Manuel Barroso.

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Is anyone less thankful this year than last year? It's probably safe to bet on YES. I don't have to run through it all - we've been bludgeoned by all that's bad in the global economy and financial system all year long. And I’m sure there are plenty of individuals out there who aren't quite in the mood to be thankful - turkey on the table or not. Last week I discussed the effect of tight coupling on financial markets. I said when the mechanics of some market or some asset of immense complexity becomes loose, it’s liable to create a downward spiral for all the moving parts tightly coupled with it. That’s exactly what’s happening. And it means … Assets Collapse, Markets Crumble and Capital Flow Shifts as We Enter an Ice Age. Governments are taking all kinds of efforts to bailout key institutions and contagious markets. They understand the severity of the cleansing cycle that’s begun; and are very afraid of what they see.

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Specialist financial services company London Scottish Bank has announced that it has gone into administration.

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Senior executives ask business secretary for access to banking bail-out money and for tax changes to be scrapped.

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Debt-stricken retail group Woolworths is to go into administration, putting thousands of jobs at risk. The company employs about 30,000 people at its 815 stores and its Entertainment UK distribution business, the two parts of the group affected by tonight's decision.

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The current financial crisis will probably lead to an unnecessarily deep recession. This column suggests that European central banks, misguided by outdated econometric models, should have cut rates faster and deeper in a coordinated fashion. They should now scrap these models and agree on a large, coordinated cut of 2 percentage points.

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The world economy is suffering from a Keynesian shortage of demand. Worse, it is trapped in a dangerous downward spiral of falling asset prices, rising bankruptcies, foreclosures and unemployment feeding into more of the same, along with falling commodity and now goods prices. Since no country is exempt, international co-ordination is needed and made easier because of the obvious common interest. The rapidity of the current contraction also means that fiscal solutions, though helpful, are not timely enough and create obvious free rider problems.

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The Federal Reserve s new $800 billion effort to combat the financial crisis is designed to make credit more accessible to shaken consumers who aren't sure they want more debt.

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Australia's economy will avoid a recession next year, helped by lower interest rates, government spending and exports, the Organization for Economic Cooperation and Development said. Gross domestic product growth will slow to 1.7 percent in 2009 from 2.5 percent this year, before accelerating to 2.7 percent in 2010, the Paris-based group said. Inflation will fall back within the central bank’s target range of 2 percent to 3 percent in 2010.

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The danger is of a debt trap - a vicious circle in which the debt/GDP ratio explodes as rising debt interest causes ever widening budget deficits. A debt trap develops if two conditions are fulfilled - the primary budget balance, which excludes debt interest, is in deficit, and the debt interest rate is greater than money GDP growth. The Treasury's forecasts show an average primary deficit of 3.3 per cent of GDP over the next five fiscal years. Even a modest rise in gilt yields would cause the debt/GDP ratio to explode.

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The government bailout of Citigroup marks a new stage in the utilization of the public treasury to rescue Wall Street banks and finance houses. The deal reached shortly before midnight Sunday places an estimated $249 billion in taxpayer money at the disposal of Citigroup and the bank’s major shareholders, lenders and executives.

It marks the single biggest government bailout to date, outstripping the $200 billion allocated in the takeover of mortgage finance giants Fannie Mae and Freddie Mac and the more than $150 billion given to insurance conglomerate American International Group.

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With an estimated $4 trillion in housing wealth and $9 trillion in stock-market wealth destroyed so far in the United States, there is little doubt that we are witnessing a classic debt-deflation bust at work, characterized by falling prices, frozen credit markets and plummeting asset values.

Chad Crowe

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The economic plan announced Saturday by President-Elect Barack Obama, with the goal of "saving or creating" 2.5 million jobs in 2009 and 2010, is a measure that has already been outstripped by events. The deepening crisis of American and world capitalism could destroy that many US jobs in the next six to nine months alone.

The collapse of the auto industry itself would wipe out 2.5 million to 3 million jobs according to most estimates, canceling out the entirety of Obama’s plan, even if it were to be enacted quickly and in full by the incoming Democratic-controlled Congress. The broader recession, well under way, is expected to increase the ranks of the unemployed by a million or more by next spring.

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George Monbiot misses the central point about the build up of surpluses and deficits that Keynes's plan would have prevented: they are a consequence of a refusal to share wealth in both the surplus and deficit states (Keynes is innocent, November 18). For example, the growing wealth in China and oil-rich Arab states was not redistributed to their own citizens, but was used to buy assets in places such as the US and the UK, that were intensely relaxed about people getting filthy rich. Many people in the US and the UK were not really better off, but sustained the illusion by borrowing all that money that was flowing in. Their debt got parcelled up and parcelled on - until the music stopped.

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American workers will rebuild the nation's roads and bridges, modernize its schools and create more sources of alternative energy, Obama said in the weekly Democratic address, posted on his Web site. "The plan will mean 2.5 million more jobs" by 2011, Obama said. His Web site clarified that the plan would "save or create" that many jobs.

[Lankaeye editor's comment: Nation-state based plans will not work in a global meltdown of the existing system. What is needed is a global plan. A paradigm-shift in economic vision is necessary for that. A Bretton Woods type international conference should be the starting point for a qualitative change of global scale. (Read my article "Are we seeing the death agony of capitalism?" in Editor's Essays column.)]

Back in the summer, before deflation, recapitalisation and slump peppered the political vocabulary, Alistair Darling said the economic conditions facing Britain were "arguably the worst they have been in 60 years"....Recession is imminent, unemployment is climbing, house prices are falling, the banks are not lending, tax receipts are plummeting and government debt is mounting.

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The Chancellor, Alistair Darling, is spending the weekend putting the final touches to a package of tax cuts and big increases in public spending.

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Not surprisingly, my Money and Markets column last week about a new monetary system based on an upward revaluation of the price of gold set off quite a buzz all over the world. It was picked up by CBS MarketWatch, The Financial Times, dozens of blogs, and more.

Some Think I'm Crazy, That I've Lost My Mind. No Problem. They can think and say whatever they want. I have thick skin. Moreover, I have history on my side - Franklin Roosevelt's 1933 confiscation and revaluation of gold and subsequent devaluation of the dollar.

Read the full analysis...

Further multibillion-dollar losses hit share markets worldwide over the past two days, driven by fears that a deflationary spiral could lead to global depression. While government and media commentators are still attempting to assure the public that there could be no repeat of the 1930s, the money markets are telling a different story.

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Citigroup’s crisis deepened on Thursday as its shares continued to slump in spite of a planned investment of about $250m by Prince Alwaleed Bin Talal, its largest individual investor.

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Oil sank below $50 a barrel, reaching its lowest point since May 2005 amid fears over the outlook for demand in the face of a global recession. The drop in oil prices led a broader retreat in raw materials, with the Reuters-Jefferies CRB commodity index, a global benchmark, falling to a five-year low.

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Fears of a severe recession gripped financial markets on Thursday as dire unemployment figures from the US drove long-term interest rates down to record lows. Economic news across the world was almost uniformly bad as slumping Japanese exports threatened to push the economy further into recession and the Swiss central bank unexpectedly slashed interest rates by a full percentage point in response to the slowdown.

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Asia-Pacific stocks fell steeply on Thursday as anxieties about the US economy and the global outlook heightened amid worsening data and prospects for US carmakers.

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Our oil-rich friends in the Middle East are scared. How do I know? Because they are buying gold like crazy!

First, we got the news that Saudi investors spent $3.47 BILLION on gold in a recent two-week period. On a ratio-to-GDP basis, that's like investors in the U.S. spending $131 BILLION.

Why are they doing this? The only explanation I've heard is that the Saudis are turning to gold as a safe haven in the midst of the global financial crisis. And since the financial crisis kicked into high gear in August … something must be scaring them quite a bit more right now.

Full Analysis...

The credit storm swept through Wall Street and Main Street with renewed virulence on Monday as AIG and Fannie Mae reported huge losses, a leading US retailer filed for bankruptcy and multinationals such as DHL cut thousands of jobs.

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In 1944, our country had recently emerged from the Great Depression and was in the middle of World War II when 730 delegates from 44 Allied nations met in Bretton Woods, New Hampshire.

Those global leaders had come together to develop a monetary system to govern the financial relationships between the world's largest economies. They set up a system of rules, institutions, and procedures. And they created the World Bank, the International Monetary Fund (IMF), and the forerunner of the World Trade Organization. It was a rare time when much of the world's financial interests were aligned, and cooperation was a matter of global survival.

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Detroit's Big Three automakers pleaded with a reluctant Congress Tuesday for a $25 billion lifeline to save the once-proud titans of U.S. industry, pointedly warning of a national economic catastrophe should they collapse.

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Barry Eichengreen is George C. Pardee and Helen N. Pardee Professor of Economics and Political Science at the University of California, Berkeley. He is the author of "Golden Fetters: The Gold Standard and the Great Depression, 1919-39" and "Financial Crises and What to Do About Them."

Click here for the article..

It is now clear that the central issue in the debate over whether to extend a bailout to the US auto industry is the destruction of the conditions of auto workers. Whether it takes the form of a government loan or the bankruptcy of one or more of Detroit's Big Three carmakers, the aim is to create conditions which will rip up existing labor agreements and drive auto workers back to conditions of poverty and ruthless exploitation which existed prior to the industrial battles that built the United Auto Workers union in the 1930s.

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The Japanese economy entered its first recession in seven years, as growth declined for the second quarter running by a wider margin than expected, raising fears the situation could deteriorate amid the global downturn.

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Fresh round of cuts takes total job losses to 73,000
Bank has lost more than $20bn this year
Sources say up to 20% of UK workers could lose jobs

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The leaders of 20 of the world's biggest economies were never, in a single afternoon, going to solve a crisis that has been a generation in the making. But there is some reassurance in the fact that they are ready to talk about coordinated action. It is worth recalling that the last equivalent economic crisis drove America to isolationism, much of Europe to fascism and the world to war.

Full Editorial...

The G-20 summit being held in Washington today takes place amid the worst economic and financial breakdown since the Great Depression of the 1930s. But notwithstanding the rhetoric about the need for a new Bretton Woods Agreement and calls for the remaking of the international financial system, the summit will provide no solutions to the rapidly deepening crisis. On the contrary, in the absence of any coherent program, it may well see the divisions among the major capitalist powers widen.

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When the euro launched nearly 10 years ago, an unnamed euro-sceptic currency trader - now almost certainly redundant - famously called it a toilet currency. Last week it climbed to an all-time high against the pound.

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*Western leaders seek to help emerging economies
*Global crisis brings biggest meeting in decades

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Canary Wharf is facing the threat of rapidly emptying office blocks as big corporate tenants review their property needs after the wave of bank mergers triggered by the financial crisis.

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Gordon Brown on Friday heralded an anti-recession strategy founded on tax cuts for low earners and further cuts in interest rates, in the hope that Britain will spend its way out of the downturn.

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If you think this weekend's G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks....think again...

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An emergency package of tax cuts and public spending is being considered by ministers and Treasury officials, it emerged on Friday, as the government looks at ways to jolt the flagging economy back to life. The measures, which have yet to be finalised, would be included in the pre-Budget report this month and need to be worth about £15bn to have much effect, say experts.

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The dollar gained against the euro on speculation Barack Obama's victory in the U.S. presidential election and Democrat gains in Congress will accelerate policies aimed at overcoming a recession.

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The International Monetary Fund (IMF), backed by central banks in the US and Europe, has taken drastic steps over the past week to prop up so-called emerging economies around the world from Asia to Eastern Europe and Latin America.

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European economic confidence saw its biggest fall to date this month and the global bank crisis has generated the bleakest outlook since the early 1990s, a closely-watched survey showed on Thursday.

The latest European Commission economic sentiment survey has revealed the devastating impact of financial market turmoil on the real economy. Pessimism has risen dramatically on all fronts – from manufacturers' expectations about exports to consumers' fears about unemployment.

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First, some important news no one else is telling you: The Dow is now trading at the equivalent of the 2,500 level, down a whopping 77% from its high. Yes, you read that right. In terms of "honest" money - gold - the Dow Jones Industrials has already lost 77% of its value! Now, how could that be, you ask. Simple: It's because the world no longer uses "honest" money and instead economies - and asset prices - float on variable currency exchange rates with nothing but "a promise to pay" backing them. So to really understand what's happening to values - the nominal prices that you see in the markets whether they be for stocks, bonds or commodities - you must look at them in terms of the one asset that always holds its purchasing power: Gold.

For instance... Click Here for More..

While all eyes were focused today on the Fed's rate cut, the big news was the Fed's latest cockamamie effort to save world. Indeed, just when you thought the insanity couldn't get crazier, the Fed announced it's now going to funnel a massive 120 billion dollars of U.S. funds into Brazil, South Korea, Singapore, and Mexico. And that's on top of the IMF bailouts already committed to the Ukraine ($16.5 billion), Iceland ($2.1 billion), and Hungary ($25.5 billion)! In response, some folks are cheering with glee, blindly believing that Mr. Bernanke can play Santa Claus, the Pied Piper and the Fairy Godmother all in one act.

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Alan Greenspan and Ben Bernanke will go down in history as two of the most incompetent Federal Reserve chairmen our country has ever had. Like Mr. Magoo, they blindly drove the stock market and then the real estate market into some of the biggest bubbles our world has ever seen. Now, however, they are dead right about just how bad the situation has gotten. So you should believe every word of warning that is coming out of their mouths. And let me tell you, these are some of the most dire warnings you will ever hear from a central banker.

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How much is that?

The Bank of England may have put the paper cost of the global crisis at a staggering $2.8 trillion, but how does one come to grips with such a sum? Think of it like this: it could pay for 46 bail-outs of the kind the Treasury handed to the banks RBS, HBOS group and Lloyds TSB; or pay off the last quarter's public debt 45 times. It is more than three times the sum of UK annual public spending, and also equivalent to the wealth of 100 Oleg Deripaskas - before the credit crunch anyway. It's equal to 138m bottles of 1947 Petrus Pomerol, the bankers' favourite vintage; or, if it's your turn in the coffee round, 773bn lattes - nearly 13,000 each for every UK citizen.

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European markets have opened sharply lower following hefty falls in Asia that saw Japan's Nikkei index falling 6.4% to its lowest close since 1982.

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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.

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[C]ompared to what is happening now, the 1997 crisis looks like a day at the beach. Right now in far-flung corners of the world as diverse as Iceland, Hungary, Argentina, India, and elsewhere currencies aren't just declining. They're crashing. Stock markets aren't just falling. They're collapsing. Foreign investors aren't just walking for the exits. They're running and trampling anyone in their paths.

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While the world's attention has been focused on the global economic crisis, the United States has continued to prosecute its neo-colonial war in Iraq and has expanded its military violence in Afghanistan and the adjoining border regions of Pakistan.

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*FTSE 100 closes down 5%
*Wall Street down almost 500 points in opening minutes
*Heavy losses in rest of Europe and Asia

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Share markets in the US and internationally fell sharply again yesterday. The renewed round of sell-offs was a reaction to growing signs that a severe recession is taking hold in the United States and engulfing Europe, Asia and the rest of the world.

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With American and European governments having pledged huge bailouts for their respective banking systems, the obvious question has arisen: where will they get the money? The US in particular is so indebted that an estimated $1.3 trillion in new bonds may have to be issued next year just to cover its initial $700 billion Wall Street bailout package. Faced with dwindling currency reserves, some eyes are turning to China and other Asian countries, which hold $4.35 trillion in foreign reserves, as a possible source of cash.

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The economies of central and eastern Europe are being rocked by the crisis of world capitalism, compounded by the corrupt and pro-big business policies of their local elites.

Defying many economists and commentators, who had forecast that the region would be well placed to deal with the credit crisis due to the lower relative weight of finance capital within their national economies, much of Eastern Europe stands on the verge of insolvency and deep and protracted recession.

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Gordon Brown wants a rerun of the Bretton Woods summit. But what would we need the new financial institutions to do?

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Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (40bn pounds), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

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Industrial and manufacturing firms in the US and Europe are sharply curtailing production and laying off workers as world economic growth stalls. Layoffs and plant closings, combined with a series of economic reports released in recent days, indicate that the US and European economies are in a significantly worse state than economists had previously believed.

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Gordon Brown has warned that the financial crisis had exposed the "weaknesses" of unfettered capitalism, insisting the markets had to be underpinned by society's values.

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Plans to fast-track billions of pounds of public spending on building projects such as new schools and hospitals are being drawn up by Alistair Darling to give an emergency boost to the British economy as it heads into an expected recession in 2009. Although he is hemmed in by tight public finances, the chancellor is planning to raid future budgets in an attempt to give a Keynesian stimulus to the economy in the months ahead.

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...Now, standing in the midst of the ruins of their own firms and the onset of an economic catastrophe for millions of working people in the US and around the world, these very same bankers are declaring that they have no intention any time soon of using the billions in taxpayer money handed them by the government to resume lending and unfreeze the credit markets - the ostensible purpose of the bailout measures whose estimated cost to the American people has risen to $2.25 trillion.

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THE global banking system has leapt from the fire into the frying-pan. After yet another burst of dramatic interventions, governments are now furiously tackling the twin problems afflicting banks-solvency and liquidity. Their actions briefly pepped up stockmarkets, and, more importantly, stabilised credit markets. But on October 15th and 16th stockmarkets tumbled headlong once again amid concerns that the banks had been rescued too late to stop a slump in the world economy.

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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.

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Stock markets in the US and Europe fell sharply yesterday amid mounting evidence that the US economy is entering into a severe recession.

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A slump in monthly US industrial production figures on Thursday sparked renewed fears that the global economy could be heading for a prolonged recession and led to sharp falls for equity and commodity markets around the world.

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The credit collapse is not entirely over. Nor is its impact on Main Street. And as we saw yesterday, there will be more sell-offs, sharp ones that scare the dickens out of nearly everyone. That's why I suggest sticking mainly with natural resource-based companies that operate businesses which deal in assets that have intrinsic value - and that will be the main recipients of the next wave of what I call the "Great Re-inflation." At the top of that list is my all-time favorite: Gold. You know I'm a gold bug. And given everything that's happening in the world today, I'm more of a gold bug than ever before. How can you NOT be in gold? There are dozens of reasons I believe everyone must own some gold. But lately, there's another one that's rising to the surface...

China Is Soon Going to Make
Some Big Buys In the Gold Market.

Click Here...

Opec on Thursday brought forward to next week an emergency meeting to consider a cut in production after oil prices dropped to less than $70 a barrel for the first time in more than a year on worries about a global recession.

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Growing evidence that the worldwide bank rescue plans have come too late to avert a deep global recession drove down stock markets in Europe and the US on Wednesday. Investor fears came as bad economic data were released across the world and emerging economies appeared more vulnerable than thought to the world slowdown.

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Yesterday's worldwide surge in stock market share values marked a partial reversal of the previous week's declines, which had wiped out trillions of dollars in wealth. The rally marked the first reaction of the financial elite to the hundreds of billions of dollars promised to the world's biggest bankers by central banks and governments in Europe and the US.

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Half-measures like recapitalisation will put taxpayers' money at grave risk. The only option is full nationalisation of failing banks:

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The process of rationalising our banks has begun. Royal Bank of Scotland and HBOS will be in effective state ownership very soon: I have little doubt that within a short period Lloyds TSB and Barclays will follow.

This nationalisation is essential: our economic system will collapse without it. But I stress: this has to be nationalisation, not support, for all the reasons Ken Livingstone and John McDonnell have argued. There is more than ideology in this though: outright nationalisation is needed if the government is to take control of this situation at a time when no one else can.

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European central banks have opened the floodgates with promises of unlimited dollar funding in a coordinated action with the US Federal Reserve. The European Central Bank, Bank of England and Swiss National Bank said they were ready to inject as much as needed into the markets for dollars funding covering periods of seven days, a month and 84 days.

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Germany, France and other European countries have unveiled bail-out plans to recapitalise their banks and reopen credit markets, following the British announcement of measures to nationalise parts of the UK banking system. The world's stock markets soared as details emerged of the co-ordinated European campaign to spend more than £1,350bn (€1,680bn) on bailing out the continent's troubled banks.

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The global financial crisis and looming recession have quickly exposed the weakness of the Indian economy and shattered illusions in the country's so-called economic miracle. In the course of last week, the Sensex index on Bombay Stock Exchange (BSE) plunged by almost 16 percent and the rupee devalued further against the US dollar amid fears of a marked economic slowdown.

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China's export sector is struggling, according to the Australian Financial Review on September 28. C.K. Yeung, vice-president of the Toys Manufacturers Association of Hong Kong, which mainly operates in Guangdong's Pearl River Delta, said this was the toughest year since investment in China began in the early 1980s. He estimated that 10 percent of the 4,000 large toy factories in the region had shut down. Andrew Yeh, the head of the Dongguan Taiwanese Business Association, told the newspaper that in the first half of the year, 1,500 Taiwanese firms closed in Dongguan, a major manufacturing city in Guangdong.

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Mike Larson wrote: "October is the month that brought us the Crash of '29 and the Crash of '87 - single-day declines in the Dow that would be the equivalent to 1,400 and 2,500 points in today's market. And next Wednesday, a new killer Black October begins."

Now, just twelve days into the month of October we've seen the single worst week in the history of the Dow. We have seen two of the three greatest one-day crashes in stock market history. More than $8 trillion of stock market wealth has evaporated (since January). And there's no end in sight.

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Let's take a step back and consider how we can reform the world's dysfunctional markets:

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Gordon Brown was today holding key talks with European officials desperate to prevent a continent-wide meltdown in the banking sector when the markets reopen tomorrow. The prime minister, who has travelled to Paris for the negotiations, wants the rest of the EU to adopt a plan along the lines of his £500bn banking system bail-out, announced last week. But he now believes the government could end up having to take seats on the boards of rescued banks to keep control of bosses' pay and bonuses.

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The events of Friday, culminating two weeks of mounting financial crisis and a flurry of measures by governments to prop up their banking systems at public expense, confront the working people of the world with the prospect of rapidly rising unemployment, poverty and social misery. They raise urgently the need for a coordinated international socialist strategy to defend the interests of the world's people against the financial elites who are responsible for the unfolding catastrophe and are seeking to impose the burden of the crisis on the working class.

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US stock prices suffered their worst weekly loss in history on Friday, prompting a pledge from global policymakers to implement an aggressive but broad-brush plan to combat the financial crisis. Finance ministers and central bankers meeting in Washington said they would use "all available tools" to prevent the failure of any systemically important banks after a day of virtually indiscriminate selling in Asia and Europe and unprecedented volatility in the US.

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Stock market traders are increasingly looking like government intervention junkies – whatever central banks throw at them they want more.

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Emerging market stocks have been tumbling since their peak in October, when investors were still betting that rising stars such as the BRICs (Brazil, Russia, India, China) were now strong enough to shake off a US crisis. That illusion has been shattered. The International Monetary Fund said it is mobilising a "rapid-fire" fund worth several hundred billion dollars to stop a domino collapse across the developing world.

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After the Icelandic banking collapse, British savers are starting to value safety above getting the best rates of interest.

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World leaders have pledged to part-nationalise swathes of the global banking system as part of a drastic international plan to halt the panic gripping financial markets and prevent the crisis from descending into a global depression.

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Other than cash, gold, and a few select natural resource stocks, the only other investments I’d make in these wild and crazy times are in Chinese companies, buying them hand over fist for the long haul. Yes, that’s right. Even bearing in mind the recent milk/melamine scandal, which is outrageous.

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Global finance chiefs gathered in Washington for crisis talks Friday in search of a solution to a growing financial firestorm as panic spread in global markets.

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Global stocks dove head first to five-year lows on Friday at the end of a brutal week as even the traditional safe-havens of gold and government bonds suffered as fear-stricken investors sought refuge in cash.

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Stock markets worldwide were gripped by fear as London's FTSE 100 Index endured its worst week since the Black Monday crash of 1987.

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Stockmarkets around the world slumped today as fears of a global recession deepened. After Wall Street fell to a five-year low last night, the rout started in Asia, where Singapore slid into recession, and quickly spread to Europe. In London, the FTSE 100 plunged more than 10% in early trading, and the Dow Jones dived nearly 700 points to 7882 shortly after Wall Street opened, a fall of 8%. Both markets later came off their lows, and the FTSE 100 closed almost 9% down and the Dow was seen off almost 2%.

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Why is the failure of banks and associated financial institutions a greater threat than would be the failure of other large businesses such as Ford or General Motors? There are two main reasons.

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Japanese shares fell by 11.4 per cent on Friday - the worst drop for 20 years - leading a rout of Asia-Pacific shares as fears deepened that the world's economy was heading for recession. Markets followed the example of Wall Street, where the S&P 500 dropped by nearly 8 per cent.

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Yamato Life Insurance on Friday became the first direct financial sector casualty in Japan of the US subprime mortgage crisis, filing for bankruptcy with Y269.5bn ($2.7bn) in liabilities.

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Fearful selling clenched Asian markets on Friday after U.S. stocks plunged, heaping pressure on economic powers to halt a global spiral of financial distress and slowing growth.

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The US stock market suffered its largest loss since the crash of 1987 on Thursday amid panic over General Motors, Morgan Stanley and several big insurance companies. The market collapse heightened speculation that the US would unveil a bank recapitalisation plan in the coming days.

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Asian stocks plunged on Friday, with Japan's Nikkei down more than 10 percent, while the yen and U.S. Treasury debt prices rose, as panic set in after global efforts so far failed to unlock credit markets.

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Iceland's stock exchange on Thursday suspended trading in all shares citing unusual market conditions after the country's largest lender, Kaupthing Bank, followed domestic peers into state ownership.

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Britain's largest banks were preparing on Wednesday to boost their capital reserves after the government launched a dramatic £400bn rescue plan to restore confidence among financial institutions and avert a severe economic slowdown.

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"This plan is a gamble; and, our stake may rise"

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Britain's largest banks are to be part-nationalised after the government took the momentous decision to pump tens of billions of pounds of public money into the sector to avert a banking collapse.

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Already the financial crisis, the result of speculation in pursuit of high profits, is having a cruel impact on working people. The government reported Tuesday that more than $2 trillion in retirement savings has been wiped out over the past 13 months.

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Britain's largest banks will be part-nationalised on Wednesday morning after Gordon Brown took the momentous decision to pump tens of billions of pounds of public money into the sector to avert a banking collapse.

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For the last decade, Europe’s leaders have slashed welfare and public spending on essential services, claiming that the money was not available and the private sector was more efficient. Now, without any democratic consultation, let alone a vote, they have agreed to direct vast tranches of public funds into unstable financial institutions to pay for rampant speculation by the super rich.

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Rogue trader Nick Leeson has said he doesn't think morality will ever return to the City. Mr Leeson made his comments ahead of an anti-fraud conference in Yorkshire. His illegal trading led to the collapse of Barings Bank in 1995.

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Asian shares have fallen heavily this week, along with American and European stock markets, despite last week’s approval of the Bush administration’s $US700 billion bailout plan for Wall Street. While the Asian markets are reacting to the global financial crisis, there are also fears throughout the region that export markets in the US and Europe will be badly affected by an international economic slowdown.

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Stocks tumbled around the world on Monday as a wave of selling spread from Asia through Europe and the US as banks continued to reel from funding shortages and governments scrambled to stop a behind-the-scenes run on the world’s banking system.

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Markets around the world are now plunging into an abyss - Asia stock markets down more than 5%, Europe plunging over 4%, Brazil hit by close to 10%, the equivalent of 1,000 points on the Dow. Before long, the U.S. stock market could suffer a similar fate.

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The $700 billion bailout approved by the U.S. Congress on Friday failed to provide shelter as investors appeared convinced a recession was inevitable and fled to safe havens. The banking upheaval that began on Wall Street has effectively shut down interbank and other loan markets, pushing industrialized countries closer to recession. Conditions remained poor for interbank lending.

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Wall Street joined in the global share sell-off today despite another intervention from the Federal Reserve, as fears over the stability of the banking sector sent markets sliding worldwide.

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We will look back on the banking crisis of September 2008 as a defining moment for economic globalisation. It may have started in the US mortgage market and on Wall Street, but through an integrated global economy it has become an international problem. Whatever our response, we should be guided by two principles. First, we should not jettison our commitment to globalisation. Second, a global economy needs global governance.....

.....There is no institution with a mandate or real capacity to assess systemic risk in financial markets. There is no institution empowered to speak from the perspective of global economic interdependence and to counsel states on the global picture. Coordination mechanisms among central bankers and regulators exist, but they are weak.

They are also skewed towards an economic order that is increasingly outdated. The large emerging economies - especially China - are growing sources of capital and economic demand. They are tightly knit into the global economy. Bodies like the G8 simply do not reflect this changing economic architecture. Effective multilateral governance of the global economy will require institutions that do. It is 64 years since the Bretton Woods conference put in place the basic machinery of modern global economic coordination. It is time for a Bretton Woods for this century.

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Stocks suffered sharp falls on Monday as worries about the extent of the crisis in the financial sector deepened after finance ministers failed to reach a consensus on how to react.

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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.

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Germany said on Sunday it would guarantee all private German bank accounts - currently worth €568bn - in a dramatic move to prevent panic withdrawals as fears over the worldwide financial crisis spread to Europe's largest economy.

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The failure of the Paris summit to achieve any concrete results is an expression of growing national tensions between the main European states and, in the final analysis, the inability of the European ruling elites to resolve the current crisis.

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KEVIN Rudd has urged international leaders to end an era of "extreme capitalism" and reject the notion that "greed is good" by embracing a new world order of global financial regulation. The Prime Minister has refused to step back from his argument that the big banks might not be able to pass on in full any cut in official interest rates this week, with new Treasury advice underlining the rising cost of credit in the face of the global financial crisis.

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Germany to guarantee all private savings one day after criticising Irish for doing same.

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Governments across Europe scrambled to save failing banks on Sunday, working largely on their own a day after leaders of the continent's four biggest economies called for tighter regulation and coordinated response to the global meltdown.

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A shocking series of events that forever changed the financial markets:

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Experts differ on whether the $700 billion bailout plan will prompt banks to lend and help the economy. But even if it does, it will take time.

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The US Congress on Friday passed the Bush administration's $700bn financial rescue package after a tense week on Capitol Hill, but stocks fell sharply afterwards amid continuing turmoil in the credit markets.

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The UK may already be in recession. Some economists believe the slowdown will last all through next year - which would add up to the worst recession since the war. Julia Finch and Ashley Seager examine the likely scenarios for Britain over the coming months.

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Everyone has been acutely focused on Washington - specifically, if and how the financial industry will get bailed out. The Senate voted to approve a revised $700-billion bailout package, one that's packed with all kinds of fresh pork and new tax cuts. And it looks like the House may finally get on board, too. But the real fireworks aren't in D.C. - they're in the REAL economy. It's looking like a total disaster in the making. Just consider what we learned this week:

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European and Asian shares fell Thursday despite the U.S. Senate's approval of a modified $700 billion bank rescue plan intended to bolster the ailing financial system.

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The US Senate on Wednesday night approved by a large margin the Bush administration’s $700bn plan to rescue the financial system, while European policymakers clashed on Wednesday over how to protect their own banks.

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The spreading financial crisis has us in the clutches of a tough bear market in stocks. The nightmare on Wall Street is spilling over to Main Street, and is becoming an even bigger threat to your wealth.

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Global markets are whipsawing right now as the Federal Government tries to put out a fire in the credit markets with a flood of liquidity. But the rescue plan is failing. As a result, credit markets are spiraling into a deep freeze, threatening to destabilize the U.S. dollar.

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Despite their control of both houses of Congress, the Democrats never advanced their own plan to deal with the financial crisis. With Wall Street and the entire ideology of American "free market" capitalism discredited in the eyes of the American people, and popular opposition to the bailout mounting, the Democrats were in a position, as the nominal opposition party, to demand significant reforms of the banking system.

They could have called for tougher regulation of the banks and punitive measures against the multi-millionaire architects of the financial meltdown. They did nothing of the kind.

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Sales at the nation's top automakers fell sharply in September, as tighter credit for buyers and dealers combined with high fuel prices resulted in industrywide U.S. sales falling below the 1 million mark for the first time in more than 15 years.

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FTSE 100 continues bounce-back with 1.4% gain - Asian stocks also gain on deal optimism:

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Shocks throughout the world financial system, centered in the financial meltdown in the US, led by mid-September to a sharp fall on the Russian stock markets. The country is facing its greatest banking crisis since the default of August 1998, demonstrating the enormous vulnerability of the Russian economy to fluctuations on the world markets.

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Wall Street rebounded on Tuesday in spite of a worsening crisis of confidence in the global banking system, as leaders of the US Congress moved to try to salvage the Bush administration's $700bn (£385bn) bail-out plan.

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It is not so much the proverbial Irish solution to an Irish problem as an Irish solution to what is a global problem. Yet Tuesday's guarantee offered by the Irish government to its six national banks to safeguard €400bn ($563bn) of deposits and bank debt is causing ructions in Brussels, where there is concern the Irish move shatters any hope of pan-European regulatory response to the turmoil.

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Gordon Brown, the UK prime minister, was facing growing pressure to extend the guarantees on British savers' bank deposits after Ireland promised to underwrite the debts and savings accounts of its six largest lenders in a desperate bid to restore investor confidence in the ailing sector.

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Asian equity markets tumbled in reaction to the US House of Representatives rejection of a Bush administration's $700bn bail-out plan for the financial industry while earlier US stocks suffered their biggest fall since the Black Monday crash of 1987.

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Asian stocks dropped, extending the worst global sell-off in 21 years, after the rejection of a $700 billion plan to rescue the financial system by U.S. lawmakers exacerbated concern more banks will fail.

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US stocks suffered their worst one-day fall since the 1987 crash on Monday, after the House of Representatives shocked investors by voting to reject the Bush administration's $700bn bail-out plan.

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The fate of the Bush administration's $700 billion financial bailout plan was abruptly thrown in doubt Monday as a House vote turned against the controversial measure.

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Lyndon LaRouche responded, instantly, to Treasury Secretary Henry Paulson's 10 A.M. (EDT) press conference, today, unveiling what promises to be a multi-trillion-dollar bailout of the speculative bubble. "This latest action by Paulson, Bernanke, et al. is pure thievery. This is a swindle, it is corruption beyond belief," LaRouche declared.

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Lyndon LaRouche today reiterated that the trillion dollar taxpayers bailout scheme, being peddled by Hank Paulson, Barney Frank, Chris Dodd, et al. is doomed to fail. "If the bailout is passed, this will not solve anything. It will trigger Weimar hyperinflation immediately, will bring down the whole banking system, and, contrary to Gordon Brown's fantasies, will not save the hopelessly bankrupt British banking system."

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European governments, including Belgium, Netherlands, Luxembourg and Britain, intervene to prop up weakened banks as crisis deepens.

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Stockmarkets slumped around the world today amid a flurry of major bank bail-outs and growing fears over the effectiveness of the $700bn (£380bn) US rescue package for the financial industry, which goes to Congress later today.

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Regional banks in upper Midwest, Florida and California vulnerable to possible failure, expert says.

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The Federal Reserve and other countries' central banks announced new steps Monday that makes billions of dollars available to squeezed banks here and abroad to battle a worsening credit crisis that threatens to unhinge the U.S. economy.

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Central banks on Monday announced more co-ordinated action to combat the credit crisis and boost dollar liquidity. The Fed will more than double swap lines with the European Central Bank and other central banks from $290bn to $620bn. It will also expand its Term Auction Facilities programme.

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Although America's housing collapse is often cited as having caused the crisis, the system was vulnerable because of intricate financial contracts known as credit derivatives, which insure debt holders against default. They are fashioned privately and beyond the ken of regulators - sometimes even beyond the understanding of executives peddling them.

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In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.

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Congressional leaders and the Bush administration reached a tentative deal early Sunday on a landmark bailout of imperiled financial markets whose collapse could plunge the nation into a deep recession.

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Shadow chancellor says Bank of England should take charge of running the business down without taxpayers taking a hit.

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Our nation is suffering through a financial emergency, and I wanted to make sure you get this urgent message now, before it's too late. Right at this moment, in an attempt to prevent a Wall Street meltdown from beginning as soon as Monday, Congress is locked in a last-ditch effort to produce a bailout package before Sunday evening when Asian markets open. Whether they succeed in their weekend endeavor or not, three things are crystal clear:

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You can't possibly have hidden yourself from the news of the $700-billion planned bailout that's working through Congress this week. And I won't mince words - I consider it a big slap in the face for the free market system.

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Fate of bank may be decided this weekend, but Liberal Democrats say taxpayer bail-out must be last resort.

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Washington Mutual shareholders and some bondholders will be wiped out by the transaction. WaMu laid off 4,200 employees earlier in the year, and its failure and takeover by JPMorgan will likely result in more job cuts. As of June 30, the bank employed 43,000 people. Already this year close to 150,000 employees at US banks have lost their jobs as a result of the collapse of the speculative housing and credit bubbles. Ousted WaMu CEO Killinger received $14.4 million in compensation in 2007. His successor, Fishman, stands to receive a severance package of $18 million for three weeks on the job.

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The escalating crisis in the global financial system has claimed its biggest victim yet with the collapse last night of the US savings and loan group, Washington Mutual.

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Shares in London and Asia fall as talks descend into chaos and American mortgage lender Washington Mutual collapses.

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After all, if you're going to socialize financial risk, it isn't a big intellectual leap to conclude that the same ought to be done for health care. It's also morally the right thing to do, especially after George W. Bush's administration decided to have the American taxpayer pick up the tab for the misdeeds of what is probably the wealthiest segment of the population.

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This bailout bill won't prevent the "real" economy from sliding into recession. Factories are closing. Layoffs are rising. Spending is slowing. And the downturn that began in the U.S. is spreading to other economies overseas. Heck, just yesterday we learned that durable goods orders plunged 4.5% in August — more than double the decline economists were expecting. Meanwhile, initial jobless claims soared to 493,000, the highest since the period right after the 9/11 terrorist attacks. Some of that gain stemmed from Hurricanes Ike and Gustav. But the trend higher is clear, and a sign of real economic weakness.

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The Bank of England moved on Friday to inject longer term cash into money markets as part of a co-ordinated effort with the US Federal Reserve, the European Central Bank and the Swiss National Bank.

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You're not going to like what I have to say in this issue. But I'm just going to tell it like it is. No spin. Just common sense analysis. The Wall Street "experts" and other "pundits" who don't understand the macro picture ... who continually miss the big trends ... and steer you the wrong way — are as ignorant a lot as I've ever seen. They ought to be ashamed of themselves. They missed the tech wreck of 2000 - 2001. They missed the top in the Dow in 2000. They missed Enron and WorldCom. They missed the bear market in the dollar, the breakout of inflation. They missed the bull market in commodities. In gold. In oil. In food and agriculture. They missed the bursting of the real estate bubble. The mortgage and derivatives disasters. The bankruptcies of Fannie Mae, Freddie Mac, Bear Stearns, Lehman Brothers, AIG, and more. Could they be more wrong? What are they smoking? And now, they continue to miss the big picture, completely.

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The dollar took a hit on Thursday after further delays to the US government’s proposed $700bn rescue package for the financial system.

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President Bush said Wednesday that lawmakers risk a cascade of wiped-out retirement savings, rising home foreclosures, lost jobs and closed businesses if they fail to act on a massive financial rescue plan. "Our entire economy is in danger," he said.

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Money markets seized up once more on Wednesday amid deepening uncertainty about whether Congress would approve the Bush administration's $700bn financial rescue plan and whether revised proposals would succeed in restoring confidence.

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Treasury Secretary Paulson and Congress are hammering out details of the government's rescue plan for financial institutions, and we don't know what final impact it will have on the debt crisis. But I can tell you one thing - it's going to drive gold prices higher.

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Stocks and bonds fell in Moscow, Mumbai and Shanghai, ending a record emerging-markets rally, on investor concern that the U.S. Treasury's $700 billion rescue plan won't be enough to prevent a worldwide recession.

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Did you breathe a sigh of relief when the Dow Jones jumped by 779 points last Thursday and Friday? Did that 7.3% two-day jump impress you? I Wasn't. Let Me Give You Three Reasons Why.

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The announcement of a virtually open-ended government bailout of Wall Street has set off a frenzied competition among the biggest banks and financial firms to grab the lion's share of the super profits to be reaped from the program.

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You'd think the last thing Goldman Sachs and Morgan Stanley would choose to be called is a bank. Such is the fury towards financials these days they should have re-classified themselves as cuddly toy makers. But this simple change is tactically smart. Confidence in broker-dealers is shot; by becoming regulated banks Goldman and Morgan Stanley have at least made sure they will not suffer the same fate as their Wall Street rivals. They now have long term access to the Federal Reserve primary credit facility, and, further down the road, alternative sources of funding such as retail deposits.

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The plan to rescue the US financial industry arrogates virtually unlimited money and power over the financial affairs of the state to the office of Treasury Secretary Henry Paulson. Paulson is a figure with a long history of intimate connections to the political and financial elite.

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We believe Congress may be on the verge of making what could become one of the greatest policy mistakes of modern times, passing bailout legislation that could aggravate, rather than alleviate, the nation's massive debt crisis.

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The proposal before Congress for a $700 billion mega-bailout is far too little to repair the damaged debt and derivatives markets ... and, at the same time, far too much for investors and taxpayers who must put up the money. How big is the problem, really?

In the past, Congress has repeatedly asked us for data and analysis on these issues, and we have provided it in Congressional testimony and white papers. In that same tradition, below is a partial first draft of a white paper we will be submitting on this matter:

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As the Bush administration and Congress continued negotiations Monday on a trillion-dollar bailout package for Wall Street, Democratic presidential candidate Senator Barack Obama delivered a speech in Green Bay, Wisconsin in which he promised to carry out sweeping cuts in government spending and impose strict fiscal discipline on the US government.

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America's $47-trillion bubble of debt has burst. America's $180-trillion balloon of derivatives has popped. And all the president's men cannot put them back together again:

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On top of a string of unprecedented events stemming from the credit crunch, the US Treasury's $700bn rescue plan for distressed mortgage assets seems likely to give us another: the trillion-dollar deficit.

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Senior Democrats signalled hard bargaining ahead on the Bush administration's proposed $700bn bailout for the country's financial institutions as officials met members of Congress over the weekend to seek bipartisan agreement on the package.

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The plan, which is being rushed through Congress for passage this week, is the response of the government and the entire political establishment to what is acknowledged to be the greatest economic crisis since the Wall Street crash of 1929. It calls for an unprecedented transfer of public funds to the major banks and the American financial elite at the expense of the broad mass of the people.

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The Bush administration on Friday announced plans for a massive and unprecedented federal bailout of the US banking system. In separate appearances Friday morning, Treasury Secretary Henry Paulson and President Bush announced a series of measures to shore up collapsing financial markets and called on Congress to pass legislation next week to use, in Paulson's words, "hundreds of billions" of taxpayer dollars to buy virtually worthless mortgage-backed assets that cannot be sold on the market from banks and other financial institutions.

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Russia's President Medvedev has uttered a proposal for immediate, emergency consultation among the U.S.A. and Russia and others, on a general international meeting for emergency measures to deal with the presently onrushing general monetary-financial breakdown-crisis. Since none among the proposals uttered so far, from the Executive Branch or the Speaker of the House of Representatives, have any competence for dealing with this onrushing breakdown-crisis of the present international monetary-financial system, it is of the greatest urgency that there be initiating joint action, co-sponsored by Russia, as a member of the Russia-China-India, Eurasian party and the U.S.A. as the representative of the international Dollar system on which the present world system depends.

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Five days after the collapse of the investment bank Lehman Brothers the extent and consequences of the international financial crisis still remain incalculable. Not a single country or continent is exempt from the crisis.

Full Analysis...

Hedge funds were forced to scramble to unwind trading positions on Friday after a massive assault by global regulators on short selling aimed at calming the turmoil in global markets.

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The week started with shocking news of a Wall Street giant collapsing - and ended with euphoria and a record market surge. So have the bankers avoided financial catastrophe?

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Stock markets around the world roared their approval on Friday, staging huge rallies as the US authorities moved towards agreement on a programme of government intervention that would put hundreds of billions of dollars of taxpayers’ money at risk in an effort to quell the credit crisis.

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In the last few hours, in a desperate attempt to ward off a catastrophic Wall Street meltdown, the government has announced three unprecedented actions:

First, President Bush, Fed Chairman Bernanke and Treasury Secretary Paulson have called on leaders of both parties in Congress to work through the weekend to develop a plan to let the government buy up bad debts from banks.

Such a plan may buy some large banks some time. But like the bailouts of Freddie Mac, Fannie Mae and AIG, it does very little to change the reality on the ground.

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U.S. stocks surged in the biggest two-day global rally in history as the government announced plans to purge banks of bad assets and crack down on speculators who drove down shares of financial companies.

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Oil rose as much as 7.5 percent and stock markets surged after U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke said they're making plans to halt the credit-market seizure. Output disruptions from hurricanes in the U.S. and attacks in Nigeria have constrained supplies.

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Central banks are called lenders of last resort, for good reason. They have now duly become the last resort in a generalised panic in the core of the world's financial system on a scale not seen at least since the 1930s. Nobody trusts any credit, other than that of governments themselves.

Editorial Comment...

What is revealed in this crisis is not merely the recklessness, incompetence and greed of America's financial elite, but the failure of capitalism - an economic and political system that subordinates the needs of society to profit and personal enrichment.

Who is going to pay for this crisis? Here the US corporate and political establishment agrees: working people must accept a drastic reduction in their living standards to bail out the Wall Street investors and banking executives who are responsible for this debacle.

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As banks hoard cash and lending dries up, Fed plus 5 to pump $180 billion into system.

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The U.S. economy is experiencing its worst financial crisis since the Great Depression. Fannie Mae and Freddie Mac have failed — the largest financial failures ever seen in this country. And the U.S. Treasury has guaranteed their $5.2 trillion of debt. Lehman Brothers has failed. Merrill Lynch has had to be sold off to help stop its bleeding. The airline industry is broke. The big three auto manufacturers are all but officially bankrupt. And more woes are certainly coming.

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U.S. statesman Lyndon LaRouche spoke bluntly today about the significance of the weekend's financial developments, including the bankruptcy of the long-dead Lehman Brothers, the buyout of drowning Merrill Lynch by the equally desperate Bank of America, and the growing list of financial corpses - such as AIG, Washington Mutual, and others - lining up at the morgue.

"The key thing here," LaRouche said, "is, who is to blame? It was inevitable. Why was nothing done about it? It was inevitable. We warned about it. Why was nothing done? We warned that the whole thing was happening, back in our international webcast of July 2007. And we defined the precautions that should be taken all the way through. Why was nothing done about it?

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The panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war. Barometers of financial stress hit record peaks across the world. Yields on short-term US Treasuries hit their lowest level since the London Blitz, while gold had its biggest one-day gain ever in dollar terms. Lending between banks, in effect, stopped.

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Europe's ruling elite has reacted with shock and disbelief to what they fear will be the most serious crisis for world capitalism since the Wall Street Crash of 1929.

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The American financial crisis has sent shockwaves throughout Asia over the past few days as governments, banks and corporations scramble to cope with plunging share prices, international financial turmoil and the prospects of a serious downturn in the US and other major economies.

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Government response reaches dramatic new level: U.S. will take 80% stake in nation's largest insurer to prevent global financial chaos.

Full Report...

Confirmation that Lloyds TSB was in advanced talks with HBOS about a takeover failed to support the shares in the UK’s largest mortgage lender. The high-level talks are detailed and at an advanced stage, HBOS said in a statement on Wednesday.

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Reaction from around the world....

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Inflation shot up to a 16-year high in August, making it harder for the Bank of England to cut interest rates to ease the economic pain of what many are describing as the worst financial market crisis in a generation.

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The end of Lehman Brothers and Merrill Lynch, two of the largest Wall Street investment banks, one week after the government takeover of the mortgage finance giants Fannie Mae and Freddie Mac, marks a new stage in the convulsive crisis of American capitalism.

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Central banks intervened heavily on Tuesday in international money markets, as banks scrambled for cash following the collapse of Lehman Brothers causing much higher than usual volatility.

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US stocks suffered their biggest one-day decline on Monday since the market reopened after the terrorist attacks of September 11, 2001, as investors sought the safety of cash and government debt following the historic collapse of Lehman Brothers and the emergency sale of Merrill Lynch to Bank of America.

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US authorities were on Monday fighting a fresh fire in the crisis on Wall Street, throwing a $20bn lifeline to AIG, one of the world’s largest insurers, just hours after the collapse of Lehman Brothers and Bank of America’s $50bn rescue takeover of Merrill Lynch.

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In the wake of Lehman's demise, Fed Chairman Bernanke and Treasury Secretary Paulson will try to put out the word that it's no great trauma.

But it's a lie and they know it. If they openly admitted that the Lehman collapse will paralyze Wall Street, torpedo the stock market and sink the economy, they'd have to pony up $100 billion or more to support it. Instead, their agenda was to push big banks to put up the money. And they failed to do so.

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Asian stocks, U.S. futures and the dollar tumbled after Lehman Brothers Holdings Inc. prepared to file for bankruptcy, deepening a financial crisis that threatens
to tip the global economy into a recession.

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Wall Street was in turmoil on Monday as Merrill Lynch found shelter in a $44bn takeover by Bank of America and Lehman Brothers said it would file for bankruptcy protection.

BofA's bold bid for Merrill came as the world's top banks abandoned efforts to save Lehman and set out to build a firewall against further financial chaos with a $50bn liquidity pool to support other vulnerable institutions.

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As one company after another lays off its workers, Tim Webb, Heather Stewart and Nick Mathiason report on the crisis faced by struggling British households.

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Asia-Pacific shares were pushed lower on Monday after Lehman Brothers said it plans to file for bankruptcy protection as the 158-year old company succumbed to the global credit crunch.

Full Report..

Since the Bush administration announced on Sunday the US government takeover of mortgage finance giants Fannie Mae and Freddie Mac, in the largest corporate bailout in American history, developments have underscored the profound and systemic nature of the crisis that precipitated the action.

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When a national currency is used only as a national currency, a government knows that it can jeopardize its existence by printing too much money, as this has inflationary and instability costs within the economy. But when a national currency is also the international currency, as is the case with the U.S. dollar, the government knows that the costs of excessive printing of money - and excessive fiscal deficits and current account deficits - will spill over onto others, such as countries that hold its currency in their reserves.

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XL Leisure Group, the third largest tour operator in the UK, collapsed into administration on Friday leaving tens of thousands of holidaymakers stranded abroad.

Full Report...

The FT House Price Index recorded a drop of 1.3 per cent in August, the single largest monthly fall since October 1992, according to the latest figures released on Friday.

Full Report...

The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae and Freddie Mac, launching what could be its biggest bailout ever to support the U.S. housing market and ward off more global financial market turbulence

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In the biggest government intervention in the American economy since the Great Depression of the 1930s, the US Treasury Department announced Sunday that it is effectively nationalizing the two mortgage giants Fannie Mae and Freddie Mac.

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With yesterday's announcement of the most massive federal bailout of all time, it's now official: Fannie Mae and Freddie Mac, the two largest mortgage lenders on Earth, are bankrupt.

Some Washington bigwigs and bureaucrats will inevitably try to spin it. They'll avoid the "b" word with vengeance. They'll push the "c" word (conservatorship) with passion. And in the newspeak of 21st century bailouts, they'll tell you "it all depends on what the definition of solvency is."

Full Analysis...

For most of the decade, banks largely avoided borrowing from the Fed. There was plenty of cheap money available elsewhere. They had little reason to submit to the extra scrutiny that it required. And there was little stress in the banking system.

Now, all that has changed.

Now, borrowing at the Fed's discount window has surged - from a weekly average of a meager $1 million per day at its low point last year to a weekly average of $18,469 million per day last week.

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We are busy preparing for Hurricane Ike. Everyone in Florida knows what to do. And hopefully, it will pass us by. But the financial pandemic that's spreading to the entire economy is another matter entirely. It's the contagion now spreading beyond banks to many of America's largest and most widely held companies - retail firms, tech companies, industrial giants and more. Do you own their shares? I hope not.

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Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

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The pound hit a record low against the euro and a two-year low against the dollar this morning after a stark warning from Alistair Darling, the chancellor, that the economic downturn would be worse and longer than expected. With speculation growing of a rift at the top of government, some in the City believe that the pound is likely to continue falling through the next few months.

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The UK is facing its worst economic crisis in 60 years, Chancellor Alistair Darling has admitted. He told the Guardian newspaper that the economic downturn would be more "profound and long-lasting" than most people had feared. Using strong language, Mr Darling acknowledged voters were angry with Labour's handling of the economy. Shadow Chancellor George Osborne said Mr Darling had "let the cat out of the bag" about the state of the economy.

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But one thing is sure: it's a myth that being dependent on imported oil is bad. As a way to stump politicians who perpetuate this nonsense, perhaps we should ask them this question: If oil is so critical and will become even more valuable when world supplies allegedly dwindle in the future, shouldn't we use other countries' oil now and have the U.S. government require that our limited production be saved to use or sell as the shortages worsen and future prices go even higher? Diametrically opposed to the present time, with the prevalent fears of dependency on foreign oil, this "conservation theory" was all the rage in the late 1930s and 1940s when a slowdown in finding new oil deposits seemed to threaten chronic future shortages (similar to the dire predictions after World War I and in the early 1920s before big oil discoveries were made late in the 1920s). Of course, this is not the right policy prescription either. We should instead treat oil as any other product and let the market provide ample supplies at the lowest cost to the consumer.

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According to a long-term study just released by the U.S. Naval Services Department, a series of tipping points could dramatically alter the global prospects for economic growth and humanity - for the worse.

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Yesterday, the dollar rallied hard against the euro. And today I want to tell you what I think is happening. Let's start with a question ... What happened to decoupling, the idea that other economies were immune to weakness in the U.S.? Well, it seems as though the subprime fiasco has created bigger problems for the U.S. financial system than most people anticipated. And now we're seeing this economic virus spread across other areas of the globe.

Listen to the M&M analysis...

With America's economy sinking rapidly into recession, with much of America's financial system teetering on the brink, and with a presidential election just three months from today, our leaders in Washington are under siege.

What are they saying behind closed doors? What worst-case scenarios are they contemplating? What contingency measures are they debating?

I have no pretense of being privy to the answers. Nor can anyone forecast what they will do in the press of events. But we do have abundant research and data to serve as a basis for guessing. Add a healthy dose of imagination, and I can begin to draft a script, below.

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LankaEye Editor's comment: Alan Greenspan is correct to point out that the panicky nationalist reactions from governments to the credit crunch may harm globalisation. As can be expected though, his analysis amounts to a plea to protect the status-quo - the traditional form of globalisation.

Instead, the international community should look for fresh models to replace the anarchic system that is being forced to wipe out all that wealth built on artificial booms.

In fact, the efforts to overcome the deeper causes of the global economic imbalances - of which, the credit crisis is a symptom - I believe, can become a catalyst for new knowledge that points at far more effcient forms of globalisation than the one based on the 'nation-state' mindset. Naturally, such possibilities do not come into Greenspan's calculations that assume competitive markets to be the ultimate form of progress.

Click here...

The US economy grew at a less-than-expected rate of 1.9 percent in the second quarter of this year, according to figures released Thursday by the Commerce Department. The department also announced revisions to its previous growth estimates, concluding that the US economy contracted for the first time since 1990 in the fourth quarter of 2007.

"We're in a recession," Allen Sinai, chief economist at Decision Economics Inc., told Bloomberg News. "It's going to widen, it's going to deepen." The second-quarter growth figures were lower than the 2.3 percent predicted by a Bloomberg survey of economists.

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It is impossible not to agree with this. Since easy credit and low interest rates in the United States were the cause of this crisis, it is hard to see how they should also be the cure. They have led to very low levels of savings, particularly in the US. Proponents of fiscal expansion are simply saying that, now that the private sector finds it difficult to borrow the public sector should do it for them. Much discussion of the crisis is confused because it does not pay attention to the macro-economic background. It focuses on the problems of the financial sector rather than the macro-economic imbalances which fuelled this.

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I was all fired up to save for the future. Then I found out I was a day late and about, um, $90,000 short.

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The "Doha round" of global trade talks lapsed back into limbo on Tuesday as a ministerial meeting to rescue the round collapsed after nine days of tense negotiations.

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Global financial markets are "fragile" and indicators of systemic risk remain "elevated" almost a year into the credit crisis, the International Monetary Fund said on Monday.

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On July 23 the New York Times published a brief account of President George W. Bush's comments on the struggling US economy to an invitation-only fund-raiser in Houston. The July 18 event was held at a private home to benefit Pete Olson, the Texas Republican who is challenging Democratic Representative Nick Lampson. The comments were recorded by a local ABC television station and broadcast, despite Bush's verbal request that journalists in attendance turn off their cameras.

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The Bank of England's monetary policy committee was split three ways in its vote to leave interest rates on hold this month, but most members felt raising rates to fight inflation was not yet necessary given the weaker outlook for economic growth.

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Producer prices: Roaring! Wholesale prices just posted the largest jump since 1981 — to a mind-blowing 9.2% — signaling far MORE inflation ahead ...

The dollar: CRACKING! International investors dumping dollars in droves!

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Our nation may be on the cusp of economic catastrophe - call it a panic, a meltdown, an implosion; I don't care what you call it. But it's bad. And it's coming straight at you like a runaway bus.

In times of crisis, people naturally gravitate toward gold, because it's the one investment that can hold its value when the fertilizer hits the fan. As for silver, well, any trader will tell you that silver is gold on steroids. When gold jumps, silver can leap twice as far, percentage-wise.

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Bernanke and Paulson's smoke, mirrors and hot air are temporarily buoying markets, luring gullible investors back into stocks! Meanwhile, Merrill Lynch just disclosed it was creamed by $40 billion in investment write-downs in the second quarter - $69 billion so far this year. Citigroup has revealed a $2.5 billion loss - and a decline in total assets of a staggering $99 billion so far this year. Plus, The U.S. Dollar Index is now within one penny of a new all-time low and a new plunge.

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Underwriters to the HBOS rights issue were on Wednesday night preparing to pick up the tab for the UK mortgage bank's four billon pounds cash call after a fresh slump in the stock made it highly likely that shareholders would shun the fundraising.

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With market turmoil intensifying on fears of a banking crisis, Federal Reserve chairman Ben Bernanke faced a new grilling Wednesday after warning of a bumpy road to economic recovery.

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"The UK economy probably is slipping into recession or about to. Even so, it seems very unlikely the Monetary Policy Committee will cut rates near-term given the extent to which inflation is surging," said Michael Saunders of Citigroup.

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Companies across the region, such as Toyota Motor Corp, the world's biggest car maker, and Huaneng Power International, China's top electricity provider, have been lowering their sales and earnings outlook in the face of slower demand and higher costs.

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Ben Bernanke highlighted the “numerous difficulties” facing the US economy in a sobering testimony on Tuesday that sent markets on a rollercoaster ride as he signalled serious risks on both the growth and inflation fronts. The Federal Reserve chairman told Congress that strains in financial markets, declining house prices, a weaker labour market and higher oil prices were all putting pressure on the outlook.

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The dollar declined to a record low against the euro on speculation Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson will say credit- market losses are hurting U.S. economic growth.

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Fannie Mae and Freddie Mac fell as stockholders lost confidence in the Treasury's plan to support the biggest U.S. mortgage-finance companies.

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If you're worried about the IndyMac Bank failure on Friday - America's third largest in history - brace yourself.

This crisis is about to get uglier. And in this double-length issue, I'm not going to pull any punches.

General Motors is now nearer to bankruptcy than at any time since it nearly failed in 1920.

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The UK on Friday became the last of the world’s leading stock markets to enter bear market territory amid fresh concerns that the credit crisis was entering a new phase and a record high for oil prices.

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U.S. stock futures tumbled, indicating the Standard & Poor's 500 Index will extend its longest stretch of weekly losses since 2004, as oil jumped to a record and concern grew that a government takeover of Fannie Mae and Freddie Mac may wipe out shareholders.

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Among more than 2,325 investors voluntarily responding to the recent poll, 43 percent ranked the dollar decline as their single most serious concern. The fear of a recession or depression was a distant second, cited as a primary concern by only 20.8 percent of the respondents. Ranked third and fourth were terrorist threats, wars or future geopolitical crises (10.4 percent) and inflation (10.0 percent).

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Shares in Freddie Mac and Fannie Mae plunged in frantic trading on Thursday in spite of attempts by US regulators to provide reassurance that the two government-sponsored mortgage financiers remained on a solid footing.

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What is the bottom line? It is, quite simply, that a big fall in house prices is likely, partly because prices became extraordinarily high and partly because credit to the market has dried up. Yet whether that will itself drive the economy into a deep recession is not clear. In any case, as long as inflationary pressures remain strong, the Bank of England can do nothing about it. Those of you who hope for a soft economic landing need also to wait for a halt in the rise in commodity prices and a quick recovery in the health of global credit markets. I would not suggest holding your breath while you do so.

Full Article...

The ground is shaking. The buildings are swaying. Now, you have to wonder how many of them will come tumbling down.

I'm talking about the major financial institutions in this country.

The tremors in the mortgage market that first started rumbling a year ago have escalated. And now they're ripping through the industry with the force of a 9.0 earthquake ...

It's no longer just mortgages that are shaking the biggest banks, brokers, and insurance firms. Auto loans, credit cards, commercial real estate, credit derivatives, and construction and development loans are setting off their own temblors.

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Crude oil rose, rebounding from its biggest decline in three months, after Iran test-fired a long- range missile capable of reaching Israel and the dollar fell.

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Far from stymying the environmental cause, the downturn in the world's economies highlights just how pressing it is....global society is seriously questioning whether today's problems can be solved through short-term measures, as has been the case with routine ups and downs in the economy during past cycles. Could this lead to a widespread realisation that today's problems are the result of fundamental flaws in past growth and development patterns? There are, in my view, two reasons to suggest that the answer could be yes.

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Oil-dependent countries are focused on growth at all costs, and the pale green political consensus looks unlikely to hold.

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Fears of fresh losses in the financial sector spooked stockmarkets worldwide today, sending shares falling in London and across Asia.

The FTSE 100 plunged 150.2 points, more than 2.6%, to a low of 5362.5 points by 9.30am, its lowest level since November 2005. Every company on the index dropped, with banks among the big losers. Royal Bank of Scotland lost 5%, while Lloyds TSB fell 3.7%.

The FTSE has now fallen more than 20% since its peak of 6732.4 last June, meaning it is now officially a bear market. One City commentator warned today that the index may fall below 5000 before it hits the bottom.

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The spectre of inflation returned to haunt the global economy on Tuesday as companies ranging from Dow Chemical of the US to South Korea's Posco unveiled sharp price rises to combat the soaring cost of energy and raw materials.

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The US Federal Reserve Board's decision on Wednesday to maintain its benchmark interest rate at 2 percent was not so much a policy decision as the expression of the growing paralysis in government and central banking circles in the face of the powerful forces now at work in the US and global economy.

On the one hand, the deepening slump in the US pointed to the need for a further interest rate cut to try to provide an economic boost. On the other hand, rising US and global inflation, as well as a weakening US dollar - itself a factor in inflationary pressures - pointed to an interest rate increase. In the event, the Fed decided to do nothing.

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Fears that Britain is heading into recession were heightened today on news of a worsening credit crunch and the worst performance by the service sector since the 9/11 terrorist attacks.

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 Rising consumer prices will leave more U.S. consumers unable to pay their debts and may lead to a "financial tsunami", according to Bennet Sedacca, president of money manager Atlantic Advisors LLC in Winter Park, Florida.

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The central banks are thus faced with a dilemma: If they stop the bailouts, the whole house of cards will come tumbling down; but if they keep the bailout going, the hyperinflation will blow out the financial system, the dollar, governments, households, and what's left of the economy.

They are damned if they do, and damned if they don't.

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Job losses in the US are mounting as inflation, the credit crunch, plunging home values and tighter family budgets are combining to produce a perfect storm of economic malaise, which is threatening the livelihoods of tens of millions of working people.

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Global equities were on Friday heading for their worst first-half performance in 26 years after a week in which oil surged to a record and there were renewed worries about the health of the financial system and ­global growth.

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Oil prices extended their record breaking run on Friday after pushing above the $140 a barrel level for the first time in the previous session, driven higher by a cocktail of supply concerns, dollar weakness, inflation fears and turmoil in equity markets.

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Investors' fears of prolonged financial turmoil deepened on Thursday as blue-chip downgrades sent European and US shares into a tailspin and oil prices jumped above $140 a barrel for the first time.

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The eurozone on Monday slid closer to stagflation - low growth combined with rising inflation - as private sector output contracted this month for the first time in five years.

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Oil prices have risen after emergency talks among the world's top oil powers and leading consuming nations over the weekend ended with no real resolution.

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Western countries have upgraded the food and fuel crisis into a national security concern as they fear record high energy and agriculture commodity costs are destabilising key developing regions of the world. (FT)

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The US economy is likely to “stagnate” in the second half of this year, the International Monetary Fund warned on Friday, as stock markets in the US and Europe fell to their lowest levels since March and US bank shares hit a five-year low.

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City expects price pressures to trigger rise in interest rates instead of cuts.

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The dollar fell the most against the euro in more than a week as New York state manufacturing shrank in June and Group of Eight finance ministers stopped short over the weekend of calling for a strong U.S. currency.

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If you offer prognoses on the markets, as I do on occasion, you are bound to make the odd mistake. In this column four months ago I made a cracker.

The issue was that some sectors – I singled out banks and housebuilders – had fallen sharply in the early stage of the credit crisis. So I posed the question: was that a once-in-a-decade opportunity, or Armageddon?

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Taking their cue from tough comments from central bankers on inflation over the past two weeks, the G8 communique said: "Elevated commodity prices, especially of oil and food, pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and may increase global inflationary pressure."

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Crude oil prices jumped to a fresh high of nearly $140 a barrel on Monday in spite of indications from Saudi Arabia that it would boost production to its highest for more than 25 years.

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There are no quick fixes to soaring oil and food prices, Group of Eight finance ministers concluded on Saturday, although disagreements emerged about the role that speculators were playing in exacerbating price rises. (FT)

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Fears that central banks around the world are planning a crackdown on rising inflation saw bond and futures markets move sharply on Tuesday, with a series of interest rate rises now priced into markets in the US, the eurozone and the UK.

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The central problem underlying the current food crisis is not a physical lack of food, but rather its unaffordability for masses of people due to rapidly increasing prices. Among the immediate factors driving the rapid worsening of the food crisis, a major role is played by the explosion of speculative investment in basic commodities such as oil and grain, itself bound up with the difficulties facing US and world financial markets and the decline in the US dollar. Rampant speculation by hedge funds and other big market players has increased costs, encouraging private firms to further bid up prices in a competitive drive to amass as much profit as possible.

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Russian president Dmitry Medvedev on Saturday blamed the US and its banks in large part for provoking today’s financial crisis - and pushed for a role for Russia in finding a way out of the turmoil.

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· Biggest rise for 22 years in unemployment
· Shares and hopes of dodging recession tumble

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This is the first part of a three-part series of articles on the world food crisis. Part two will be posted June 9.

As the June 3-5 Conference on World Food Security of the United Nations' Food and Agriculture Organization (FAO) began in Rome, FAO Director Jacques Diouf said of the explosion of food prices: "It is touching every country in the world. We have not only seen riots and people dying, but also a government toppled [in Haiti], and we know that many countries...could tilt to one way or the other depending on the discontent or satisfaction of their population".

Click here to read part one...

Horrified motorists who have watched the price of fuel soar will need no reminding that record oil prices have another sting in the tail: when the price of crude oil rises, so too does the cost of the natural gas we use to heat our homes and generate electricity.

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Dire mortgage lending statistics and a profit warning from one of the UK's biggest mortgage lenders has underlined the crisis facing the housing market as the credit crunch continues.

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The attempt of Bradford & Bingley (B&B), the UK’s largest buy-to-let (BTL) mortgage lender, to raise more capital has stoked fears about the health of Britain’s largest banks. It presages job losses and rent and mortgage repayment hikes for millions of families, as the banks seek to recoup their losses.

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Ten years after it was launched, the single currency has proved the sceptics utterly wrong.

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In recent years, it has become increasingly clear to those who follow US economic statistics that there is something dubious about the numbers released by official government agencies and used to guide many aspects of social and public policy.

The details and chronology of the corruption of economic data are presented in a new book by Kevin Phillips, the political commentator and former Republican Party adviser who has become something of a muckraking critic of the "excesses" that he helped set in motion. The book is entitled, Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism Phillips summarizes some of his main conclusions in an article in the current issue of Harper's Magazine.

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Falling house prices and consumer spending combine to deepen gloom.

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The unprecedented accumulation of wealth by a narrow financial elite under conditions of declining real incomes for the vast majority of the world's population is creating mounting discontent and anger. This is the significance of a poll conducted across Europe, Asia and the United States by the Financial Times of London and the Harris polling firm.

Click here to read the full analysis...

Is the spread of prosperity in the interests of citizens of today's high-income countries? Is globalisation of their economies in their interest? [This analysis is written by Martin Wolf of Financial Times.]

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Businessmen or manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism.

Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout.

Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers, then, tend to be tied in with government policy, and try to influence and control government actions in domestic and foreign affairs.

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Public opinion across Europe, Asia and the US is strikingly consistent in considering that the gap between rich and poor is too wide and that the wealthy should pay more taxes.

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Let us start with the good news. Never has so great a proportion of the world's people been free of extreme poverty. In 1981, two-fifths of the world's population lived under the extreme "dollar-a-day" poverty line; in 2001 the figure was one fifth. The world economy has rarely grown faster over a sustained period, and very large, very poor countries are major sources of that growth. This growth presents political and especially environmental challenges, but it is a dramatic development success story.

FT Editorial Comment...

The ranks of the world's rich swelled to 8m during 2007 as the wealthy proved immune to the strains across global economies in the latter half of the year. Below we publish the data.

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Global inflation has re-emerged as a major threat to the world economy, the International Monetary Fund said on Thursday in a stark warning that marked an abrupt change of tone from its emphasis on the risks to growth. John Lipsky, IMF deputy managing director, said "inflation concerns have resurfaced after years of quiescence" due to soaring energy and food prices. Mr Lipsky said global growth was slowing but headline inflation was "accelerating".

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The Federal Reserve Board, with the full backing of the Bush administration, Congress and both political parties, has carried out a massive and unprecedented intervention to avert an imminent collapse of the US banking system and bolster the major Wall Street finance houses.

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May 9 (Bloomberg) -- Crude oil rose above $126 a barrel in New York to a record as the dollar weakened against the euro and yen, prompting investors to buy commodities as a hedge against the currency's decline.

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The stakes couldn't be higher for Ben Bernanke. If the Fed chief decides to lower rates at the end of April, he could be condemning millions of people to a death by starvation. The situation is that serious. Food riots have broken out across the globe destabilizing large parts of the developing world. China is experiencing double-digit inflation. Indonesia, Vietnam and India have imposed controls over rice exports. Wheat, corn and soya are at record highs and threatening to go higher still. Commodities are up across the board. The World Food Program is warning of widespread famine if the West doesn't provide emergency humanitarian relief. Venezuelan President Hugo Chavez said it best: "It is a massacre of the world's poor. The problem is not the production of food. It is the economic, social and political model of the world. The capitalist model is in crisis."

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April 28 (Bloomberg) -- Add another ailment to the U.S. misery index of soaring gasoline and wheat costs and falling home values: a federal deficit that is burgeoning as foreign investors led by the Japanese recoil from the slumping dollar.

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The euro broke through $1.60 against the dollar for the first time on Tuesday, hitting a fresh record high as hawkish comments from the European Central Bank boosted the single currency.

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A series of reports in the international media have drawn attention to the role of professional speculators and hedge funds in driving up the price of basic commodities—in particular, foodstuffs. The sharp increase in food prices in recent months has led to protests and riots in a number of countries across the globe.

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Since trading as low as $50.53 early in 2007, oil prices have exploded higher, stunning the world. Just yesterday, crude jumped to a new all-time high above $119 a barrel!

Consumers would probably be happy just to see oil fall back to $100 a barrel. How sad is that? My 2008 price target on oil remains $127 ... but where do we go after that? I'd expect a big pullback sooner or later - but then prices should head higher again. In fact, I think we need to come to grips with the unthinkable - oil prices running much higher, say to $200 a barrel. How will that affect your driving ... your family ... your work ... your life?

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Reports issued by the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) warn that the United States is entering into a recession and reject all claims that Europe will be able to avoid severe economic dislocations as a result of America's worsening situation.

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WASHINGTON (AFP) - The Group of Seven has warned the global economy is sputtering and vigorously backed measures to prevent a recurrence of what is being called the worst financial crisis in seven decades.

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WASHINGTON (Reuters) - Finance chiefs from rich nations offered a gloomier assessment of the global economy on Friday and vowed to act swiftly on wide-ranging reforms aimed at moving beyond a credit crisis that threatens world growth.

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The market's in a slump and America's heyday is long gone. But I've found comfort in being a coupon clipper.

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April 26 (Bloomberg) -- The dollar rose the most against the euro in a month as traders increased bets that the Federal Reserve may stop cutting interest rates at its meeting next week and the European economy showed signs of a slowdown.

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The last few weeks have been the roller coaster ride from hell for commodities, an up-and-down whirlwind that has left many traders feeling turned inside-out. But I think there are strong signs that a commodity correction may be coming to a close.

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The financial sector faces potential losses of almost $1,000bn as a result of the credit crisis, the International Monetary Fund said on Tuesday, warning of further losses and writedowns on prime mortgages, commercial real estate, leveraged loans and consumer finance.

Government intervention at a global level is required to tackle the credit crisis, according to the head of the International Monetary Fund, who has warned that market turmoil will take a serious toll on world growth. Dominique Strauss-Kahn, IMF managing director, told the FT: "I really think that the need for public intervention is becoming more evident."

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At a hearing of the Senate Banking Committee on Thursday, top financial regulators said the unprecedented actions by the Federal Reserve Board last month to prevent the failure of investment bank Bear Stearns were taken to avert a collapse of the entire US financial system.

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UBS, the embattled Swiss bank that has been Europe's main casualty of the credit crunch, is facing a fresh assault after a former chief executive launched an activist campaign to break it up and overhaul its board.

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Last week I told you that the mortgage crisis is not over. This week, the message I want you to come away with is that the mortgage and credit crisis do not present a doomsday scenario. Don't misunderstand - I am not cavalier about the financial crisis the U.S. is going through. It is scary stuff. Probably the worst crisis this country has seen since the Great Depression. However, it is not the end of the U.S. nor is it the end of the world. And I do not believe that it is going to lead to another depression. Quite the contrary, it's going to lead - as you well know from reading my column - to much higher inflation.

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Is it coming to a soup kitchen near you? Here's how we'll know if the current recession is turning into something much worse.

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If you think you know what water is worth ... what wheat is worth ... and what oil is worth ... check out the latest news from Saudi Arabia ...The Kingdom is going to start importing wheat early next year - 250,000 tons by next spring. The reason is simple: They need to save water. Underground water levels in Saudi Arabia are dropping by at least 16 feet a year in areas of "heavy" cultivation, according to a U.S. government report. Eventually, the Saudis will probably import all their wheat - about three million tons a year.

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In the first days after the Fed's history-breaking Bear Stearns bailout, a parade of Wall Street pundits preached the theory that ..."The worst of the crisis is behind us" ..."The dollar has hit rock bottom," and ..."The great investor flight to hard commodities is over." Markets that had been surging fell. Markets that had been falling surged. Investors cheered. And everyone who wanted to believe believed.

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Big international banks and other financial institutions should be subject to beefed-up cross-border regulation, Alistair Darling, the UK chancellor, will propose at next month’s meeting of Group of Seven finance ministers and central bank chiefs in Washington.

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The Bank of England has signalled it is ready to cut interest rates further and give ground to British banks’ demands to do more to resolve their liquidity problems. Appearing before the Treasury select committee on Wednesday, governor Mervyn King said the Bank’s existing lending against mortgage-backed securities was “a useful bridge”, but could only be “a temporary measure”.

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Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died. For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over. It showed in deeds its agreement with the remark by Joseph Ackermann, chief executive of Deutsche Bank, that “I no longer believe in the market’s self-healing power”. Deregulation has reached its limits.

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A German-language book on the international Schiller Institute conference on "The World Land-Bridge" in Kiedrich, Germany last September, is out, in a run of 3,000 copies. It provides excellent ammunition to organize people around Lyndon LaRouche's international development perspective, against the new dark age plans of the oligarchy. The book, which has a very optimistic, beautiful cover design with a collage of the world land-bridge and the Bering Strait Tunnel illustrated by Hal Cooper, contains the full proceedings of the Sept. 15-16, 2007 conference and other documentary material; it has 304 pages and a 16-page full-color section. It can be purchased for 10 euros by sending an e-mail to bestell@solidaritaet.com.

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The dramatic reaction of stock markets across Asia on March 17 to the collapse to the Wall Street investment bank Bear Sterns demonstrated once again that no part of the global economy is immune from the financial turmoil that is wracking the US. Nervousness about the fallout from the escalating credit and liquidity crisis is being compounded by concerns about the impact of the US sliding into recession, particularly on China.

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LONDON (Reuters) - Investors and the general public believe a recession is the biggest threat to their financial well-being and are consequently saving more and spending less, a survey said on Friday:

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However the events on Wall Street play out during the next few weeks, there is no question but that a crisis of historic magnitude is now unfolding. After a generation of relentless media propaganda, which touted the infallibility of the capitalist market and the genius of Wall Street's financial wizards, the United States economy now stands on the very brink of an economic breakdown on a scale not seen since the Great Depression.

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March 18 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be readying the deepest interest-rate cut in a generation as the central bank struggles to prevent a meltdown in financial markets and a recession.

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LONDON (AFP) - European and Asian shares plunged on Monday as investors dumped both stocks and the dollar on fears more US banks could be vulnerable to the credit crisis that sank Bear Stearns.

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NEW YORK (Reuters) - NEW YORK (Reuters)- A fire sale of Bear Stearns stunned Wall Street and pummelled global financial stocks on Monday on fears that few banks are safe from deepening market turmoil.

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March 17 (Bloomberg) -- ``Pain'' in U.S. and European credit markets is spreading to Asia, with borrowing costs in the region increasingly set by a company's access to funding and the value of its assets, Morgan Stanley said. "This is more important for financials than any other sector,'' Morgan Stanley said in a report today.

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The collapse of a private equity fund sparked renewed concerns about liquidity levels in the financial system on Thursday, further damaging sentiment as the dollar continued to weaken.

Equity markets around the world tumbled as the dollar breached the Y100 level against the yen for the first time in 12 years, while the euro hit a new record high and the Swiss franc neared parity with the greenback.

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Feb. 15 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said the U.S. economy is on the verge of its first recession in six years as falling home values hurt consumer spending.

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NEW YORK (CNNMoney.com) -- Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson both acknowledged problems in the U.S. economy Thursday, but both said they believe the nation will avoid falling into recession.

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Feb. 26 (Bloomberg) -- Joseph Stiglitz, a Nobel-prize winning economist, said successive Federal Reserve chairmen have left the U.S. economy facing a ``very significant'' slowdown.

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March 10 (Bloomberg) -- Bond investors have never been so sure that the Federal Reserve will lose control of inflation. They're so convinced that they're giving up yields just to buy debt securities that protect against rising consumer prices.

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March 10 (Bloomberg) -- The dollar fell toward an eight- year low against the yen as traders bet the Federal Reserve will lower interest rates by at least 75 basis points as a growing number of economists predicted a recession.

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March 8 (Bloomberg) -- The dollar fell to a record against the euro and to an eight-year low compared with the yen as the U.S. lost jobs for the second straight month in February, adding to concern that the economy is in a recession.

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The global economy is facing twin shocks. Natural resource markets are delivering a supply shock of 1970s dimensions, while the financial system is delivering a shock comparable to the bank and thrift crises of the 1988-1993 period. The magnitude of each shock is very different. The financial markets require a recapitalisation of the banking system, with estimates ranging from $300bn to $1,000bn.

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With crude oil at $100 a barrel, there is going to be a massive transfer of global financial wealth from oil consuming countries to oil exporters. Some of these windfalls will be absorbed by the economies of the oil producers, but a far larger amount will be invested outside them. Indeed, a petrodollar tsunami is coming, with significant consequences for global financial markets.

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Mark Schurman, who works for Herman Miller, an office furniture maker based in south-western Michigan, dreads to think what would have happened to the company had it not restructured since the last US recession:

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The dollar’s decline widened on Monday, falling to a three-year low against the yen and to a new trough versus the Swiss franc. The US currency also remained close to Friday’s record low against the euro, while the dollar index, which measures the unit’s value against a basket of currencies, fell to a low at 73.445:

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US equity markets were lower on Monday, adding to pressure on European indices as fears about a potential recession in the world’s biggest economy intensified. The dollar fell to fresh lows against the euro after Warren Buffett, the billionaire investor, warned that the US economy was in a recession and data showed manufacturing activity contracted last month.

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March 1 (Bloomberg) -- The dollar fell to the weakest ever against the euro and to a three-year low versus the yen after Federal Reserve officials signaled they will keep cutting interest rates to support the economy.

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Why the debt crisis is now the greatest threat to the American Republic:

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The slowdown in Europe's expansion may intensify this year as the U.S. economy, the world's biggest, hovers near a recession. While the European Central Bank has held off cutting interest rates as inflation accelerated to a 14-year high, it said the risks to economic growth are ``unusually high.''

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Feb. 13 (Bloomberg) -- Confidence in the global economy fell for a third month in February as the slowdown in the U.S. spread to Europe and Japan, a survey of Bloomberg users on five continents showed. The Bloomberg Professional Global Confidence Index fell to 14.3 from 21.0 in January. Users in Asia were the most pessimistic about the global economy, with the index falling to 12.6 from 15.0. A reading below 50 indicates negative sentiment.

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The economy is facing a rough year as a result of the credit crunch and slowing world economy but a recession remains unlikely, a cluster of business surveys forecast today.

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Finance chiefs from the G7 group of rich countries have warned that the global economy faces a period of slower growth as a result of the US mortgage crisis and projected the levels of the size of the sub-prime losses could be as high as $400bn (£200bn). They stopped short of agreeing on concerted action to stimulate demand.

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Panic can be a dangerous thing, especially when it is the response by a central bank to global economic disintegration, and panic is just what the Federal Reserve did with its two interest-rate cuts in January. The combined 1.25 percentage-point cut was precisely the wrong move, amounting to more of the poison which has already killed the patient. The Fed is trying to save a system which cannot be saved, and in doing so, is leading the nation and the world into a Weimar Germany-style hyperinflationary blowout. We are headed, in the analysis of Lyndon LaRouche, into a "global breakdown crisis," a self-feeding downward spiral in which the financial system, the physical economy, and the political structures all collapse, leading to a chaos not seen since the Dark Age of 14th-Century Europe.

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Jan. 23 (Bloomberg) -- Billionaire investor George Soros said the post-World War II era of easy credit backed by the U.S. dollar will end as the nation's economy slips into an ``almost inevitable'' recession.

Lyndon LaRouche delivered the following hour-long keynote, and then fielded questions for two more hours at an international webcast from Washington, D.C., sponsored by the La Rouche Political Action Committee on Jan. 17, 2008. The webcast was moderated by LaRouche's national spokeswoman Debra Freeman.

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Sovereign wealth funds are suddenly the capital provider of first and last resort for ailing US financial institutions, investing at least $30bn (£15.3bn, €20.5bn) in some of the biggest banks and brokerages on Wall Street, including Citigroup, Merrill Lynch and Morgan Stanley.

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He lost his bank £3.7bn. So was it his fault the markets crashed?

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