Depression

[Fine Point]

Brace yourself...

[Fine Point]

MARCH 6, 2009

Bill Seeks to Let FDIC Borrow up to $500 Billion

By DAMIAN PALETTA

WASHINGTON -- Senate Banking Committee Chairman Christopher Dodd is moving to allow the Federal Deposit Insurance Corp. to temporarily borrow as much as $500 billion from the Treasury Department.

The Connecticut Democrat's effort -- which comes in response to urging from FDIC Chairman Sheila Bair, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner -- would give the FDIC access to more money to rebuild its fund that insures consumers' deposits, which have been hard hit by a string of bank failures.

Last week, the FDIC proposed raising fees on banks in order to build up its deposit insurance fund, which had just $19 billion at the end of 2008. That idea provoked protests from banks, which said such a burden would worsen their already shaken condition. The Dodd bill, if it becomes law, would represent an alternative source of funding.

more @ Bill Seeks to Let FDIC Borrow up to $500 Billion - WSJ.com

[Skylla]

Brace yourself...

Scary...real scary....lets just hope history doesn't repeat itself.

[Fine Point]

Record 31.8 million on food stamps
Government shows increase of 700,000 food stamp recipients in a single month.

March 5, 2009: 4:00 PM ET

WASHINGTON (Reuters) -- A record 31.8 million Americans received food stamps at the latest count, an increase of 700,000 people in one month with the United States in recession, government figures showed Thursday.

Food stamps, which help poor people buy groceries, are the major U.S. anti-hunger program, forecast to cost at least $51 billion in this fiscal year ending Sept. 30, up $10 billion from fiscal 2008.

"A weakened economy means that many more individuals are turning to SNAP/food stamps," said the Food Research and Action Center. Last summer food stamps were renamed the Supplemental Nutrition Assistance Program, or SNAP.
0:00 /04:12Living on food stamps

The average food stamp benefit is $115 a month for individuals and $255 a month per household.

more @ Record 31.8 million on food stamps - Mar. 5, 2009

[Skylla]

Damn, only $115 a month??      

I spend more than that in one week on groceries.

People must be going hungry, even with government help.

[Fine Point]

Are We Being Too Complacent About the Economy Crumbling Around Us?
By Tana Ganeva, AlterNet. Posted March 9, 2009.

A New York Times headline Friday horrifyingly screamed "651,000 Jobs Lost in February: Rate Rises to 8.1%, Highest in 25 Years."

And according to the Bureau of Labor statistics, almost all sectors of the economy are affected: retail dropped 40,000 jobs over the past month, and 608,000 since December 2007; jobs in leisure and hospitality fell by 33,000; the financial sector lost 44,000 jobs in February, and on and on.

Yet, according to an article recently published on AlterNet, one-third of Americans aren't worried about losing their jobs.

Do they know something we don't know? Is the stat a testament to that vaunted American optimism? Or have Americans been fattened into complacency by years of relative wealth (for some)?

Our readers had much to say about the shocking statistic:

davy writes that it's hardly surprising that people go into a deep state of denial in difficult times. "As a retired therapist, I can safely say, that in my experience, denial is what people are best at."

Many readers agreed, arguing that Americans are overly -- and unwisely -- complacent:

more @ Are We Being Too Complacent About the Economy Crumbling Around Us? |  | AlterNet

[Fine Point]

'Run on UK' sees foreign investors pull $1 trillion out of the City

Banking crisis undermines Britain's reputation as a safe place to hold funds

By Sean O'Grady, Economics correspondent

Saturday, 7 March 2009

A silent $1 trillion "Run on Britain" by foreign investors was revealed yesterday in the latest statistical releases from the Bank of England. The external liabilities of banks operating in the UK – that is monies held in the UK on behalf of foreign investors – fell by $1 trillion (£700bn) between the spring and the end of 2008, representing a huge loss of funds and of confidence in the City of London.

Some $597.5bn was lost to the banks in the last quarter of last year alone, after a modest positive inflow in the summer, but a massive $682.5bn haemorrhaged in the second quarter of 2008 – a record. About 15 per cent of the monies held by foreigners in the UK were withdrawn over the period, leaving about $6 trillion. This is by far the largest withdrawal of foreign funds from the UK in recent decades – about 10 times what might flow out during a "normal" quarter.

The revelation will fuel fears that the UK's reputation as a safe place to hold funds is being fatally comp-romised by the acute crisis in the banking system and a general trend to financial protectionism internat- ionally. This week, Lloyds became the latest bank to approach the Government for more assistance. A deal was agreed last night for the Government to insure about £260bn of assets in return for a stake of up to 75 per cent in the bank. The slide in sterling – it has shed a quarter of its value since mid-2007 – has been both cause and effect of the run on London, seemingly becoming a self-fulfilling phenomenon. The danger is that the heavy depreciation of the pound could become a rout if confidence completely evaporates.

Colin Ellis, an economist at Daiwa Securities, commented: "The outflow of overseas banks' UK holdings is not surprising – indeed foreign investors in general will still be smarting from the sharp fall in the exchange rate last year, as many UK liabilities are priced in sterling terms. That raises the question of what could possibly tempt overseas investors to return to the UK. Further heavy outflows of funds are probably a given."

The Bank of England said that there had been a large fall in deposits from the United States, Switzerland, offshore centres such as Jersey and the Cayman Islands, and from Russia.

more @
            'Run on UK' sees foreign investors pull $1 trillion out of the City  -
            Business News, Business - The Independent

[Fine Point]

World Bank warns East Asia to suffer biggest fall in trade

Christian Kerr | March 09, 2009

THE collapse in world trade will hit East Asia the hardest, the World Bank predicts in a grim report, hampering Australia's efforts to recover quickly from the global downturn.

The paper, published for this month’s G20 meeting in London, which Kevin Rudd will attend, warns that the global economy is likely to shrink this year for the first time since World War II.

The World Bank says global trade is on track to this year record its largest decline in 80 years.

The bank warns that the sharpest decline will be felt in East Asia and says that growth will be at least 5 percentage points below potential.

more @ World Bank warns East Asia to suffer biggest fall in trade | The Australian

[Fine Point]

AIG Told U.S. Failure Would Cripple World’s Banks, Money Funds

By Hugh Son and Scott Lanman

March 9 (Bloomberg) -- 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.

AIG needed immediate help from the Federal Reserve and Treasury to prevent a “catastrophic” collapse that would be worse for markets than the demise last year of Lehman Brothers Holdings Inc., according to a 21-page draft AIG presentation dated Feb. 26, labeled as “strictly confidential” and circulated among federal and state regulators.

“What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means,’’ said the presentation by New York- based AIG. “Insurance is the oxygen of the free enterprise system. Without the promise of protection against life’s adversities, the fundamentals of capitalism are undermined.’’

Regulators revised AIG’s bailout last week to ease loan terms and extend $30 billion in fresh capital after the firm posted a $61.7 billion fourth-quarter loss, the worst in U.S. corporate history. Lawmakers are reluctant to give more support beyond the package already in place, worth about $160 billion, because they say regulators haven’t given enough detail about how the funds are being used or when the bailouts will end.

The Fed is “asking for an open-ended check’’ and is “not going to get” it, Senator Robert Menendez, a New Jersey Democrat, said last week in Congressional hearings.

more @ bloomberg.com

[Fine Point]

Global Financial Assets Lost $50 Trillion Last Year, ADB Says

By Shamim Adam

March 9 (Bloomberg) -- The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.

Asia excluding Japan probably lost about $9.6 trillion, while the Latin American region saw the value of financial assets drop by about $2.1 trillion, said Claudio Loser, a former International Monetary Fund director and the author of the report that was commissioned by the ADB. The report didn’t give a breakdown of asset declines in other regions.

“The loss of financial wealth is enormous, and the consequences for the economies of the world will unfortunately commensurate,” said Loser, now the Latin American president of strategic advisory firm Centennial Group Inc.. “There are serious economic and political stumbling blocks that may well cause the recovery to be costly and slow to consolidate.”

Some of the world’s biggest financial companies including Lehman Brothers Holdings Inc. and Merrill Lynch & Co. have collapsed as banks and other financial institutions reported almost $1.2 trillion of losses and writedowns since the start of 2007. Global stock markets lost about $28.7 trillion in 2008, and another $6.6 trillion has been wiped from the value of world equities in 2009.

“Poor macroeconomic and regulatory policies allowed the global economy to exceed its capacity to grow and contributed to a buildup in imbalances across asset and commodity markets,” Loser said. “The previous sense of strength and invulnerability is now gone.”

more @ bloomberg.com

[Fine Point]

Global trade collapsing
Commentary: U.S. exports falling at 49% pace as customers fade away

By MarketWatch
Last update: 12:37 p.m. EDT March 13, 2009

WASHINGTON (MarketWatch) -- For a while, some analysts held out hope that the rest of the world would be spared the devastation of the collapse of the great American credit bubble. The global economy had de-coupled, they said. America's problems were her own.

No one is saying that any more.

In fact, the latest evidence shows that global trade flows are plunging at an alarming rate.

The Commerce Department reported that the volume of U.S. imports from abroad fell 4.6% in January while exports declined 8.6%, the most since the monthly trade figures were first collected in 1992. See full story.

Over the past five months since the credit crunch intensified, real exports have plunged at a 49% annual rate, while real imports have fallen at a 30% pace.

The pace of the decline is unprecedented in modern times, economists say. "We doubt even during the Great Depression that trade collapsed with such ferocity," said David Greenlaw, an economist for Morgan Stanley.

The Great Recession, as the IMF calls it, has severed a crucial link in the global economy. U.S. consumer spending has been the main engine of growth for the whole world, but that spending was based largely on phantom gains in asset prices that were inflated by that cheap money from abroad that has now been disrupted.

more @
   Global trade collapsing, forcing everyone to adapt - MarketWatch

[Fine Point]

Britain is showing signs of sliding towards a 1930s-style depression, the Bank of England says today for the first time.

By Edmund Conway, Economics Editor
Last Updated: 8:23AM GMT 16 Mar 2009

The country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month, according to a Bank report published today.

The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.

The Bank is using its Quarterly Bulletin to highlight the threat posed to the economy by deflation – where prices fall each year rather than rise.

Although inflation is currently in positive territory, it is expected to become negative in the coming months.

The Bank is worried that this may combine with high levels of indebtedness to squeeze families further.

It says that families with high debts could fall prey to the debt deflation trap. This means that the cost of their debts, which are fixed, would rise compared to average prices throughout the economy. While inflation erodes debts, deflation makes them relatively higher.

The Bank’s paper suggests that Britain is particularly at risk because there is a high proportion of families with significant levels of debt, and many of them are on fixed mortgage rate, which means they will not benefit from rate cuts.

Britain showing signs of heading towards 1930s-style depression, says Bank - Telegraph

[Skylla]

Guess this is why my brother told me yesterday, I had better be stock-piling food, ammino and water......its going to happen....people will kill to feed their families....lets just hope we don't get a depression like 1929.   

[Fine Point]

....lets just hope we don't get a depression like 1929.   

We won't, this one will be worse. 

[wizer]

Well, I guess I can look on the bright side for once.

I don't have a family to feed.

And with everyone running out of money no one is going to be paying their court ordered support so the courts will be back logged for years.