Financial Crisis - 2008-2010

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From The Times
November 11, 2008
We can kick start the economy with cash, Brown urges world leaders



Philip Webster, Political Editor

Gordon Brown called on the world’s leading nations last night to fight the recession together by following China, Germany and Britain in giving financial boosts to their economies.

He told the Lord Mayor’s banquet that this was “no time for conventional old thinking or tired old orthodoxies” as he rejected “the old approach of short-term spending cuts in a downturn” that would hurt families and business.
Mr Brown, who earlier hinted at tax cuts and a spending boost in the forthcoming Pre-Budget Report, said that there was a growing international consensus that maintaining public investment was the right approach, “while allowing a temporary and affordable increase in borrowing to support economic growth”.

He praised China’s action in injecting $600 billion (£380 billion) to support its economy, the relaxation by the European Union of its spending restraints through the stability pact, Germany’s plans for a fiscal stimulus and Barack Obama’s signal that he would do the same. “Economic recovery will work better if we all work together,” he said.

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In a speech ranging across international affairs, Mr Brown appeared to be sending a message to Mr Obama when he called for a rejection of “beggar-thy-neighbour protectionism” that has been a feature in turning past crises into deep recessions.

He also urged Mr Obama to make a Middle East peace settlement an urgent priority. Mr Obama’s election was a source of “hope and inspiration”, he said, as he urged the United States to join with Europe in building a new global order.

The Prime Minister called on fellow world leaders to “seize the moment” and lay the foundations for the “first truly global society”.

Addressing the banquet at Guildhall, Mr Brown said that the election of Mr Obama as America’s next president offered the prospect of a new “dawn of hope”, both in the US and the wider world.

“Just days ago, our closest ally gave new meaning to its founding creed that all are created equal,” he said.

Mr Brown, who flies to Washington this week for a financial summit of world leaders hosted by President Bush, said it was vital that countries did not retreat into protectionism and isolationism in the face of the global downturn.

“We have a choice: to retreat or advance; to turn inwards or to look outwards; to be cowed by our fears or led by our hopes,” he said.

“I want this to become the moment when we rise to the new challenges by purposeful visionary and international leadership, leaving behind the orthodoxies of yesterday and embracing new ideas to create a better tomorrow, not as the victims of history but as shapers of an open, free trade, flexible globalisation that is also inclusive and sustainable.”

Insisting that there was still cause to be optimistic about the economic outlook, Mr Brown ended by quoting President Roosevelt’s maxim that the only thing to fear is fear itself.

“When fear overwhelms our perceptions or reality the effect is paralysing; it leaves people frozen into inaction, helpless at a time of great risk and even at a time of great opportunity too,” the Prime Minister said.

“But confidence in the future, that most precious asset of all, is the key to bringing back confidence today.”

http://www.timesonline.co.uk/tol/new...cle5126853.ece

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US May Lose Its 'AAA' Rating

CNBC.com | 10 Nov 2008 | 07:49 AM ET

The United States may be on course to lose its 'AAA' rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche.



The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.

"In the United States there is already a funding crisis, and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off," Hennecke told CNBC.

In order to solve or stem the economic slowdown, Hennecke suggested the US would have to radically reduce spending across all sectors and recall all its troops from around the world.

As for a stimulus package, there is not much of an industry left to stimulate back into life, Hennecke said.

© 2008 CNBC.com

http://www.cnbc.com/id/27641538

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Federal government to buy another $50 billion in residential mortgages

Wed Nov 12, 11:09 AM
The Canadian Press

By The Canadian Press

TORONTO - The federal government will buy another $50 billion in residential mortgages to ease the credit crunch facing Canadian banks, Finance Minister Jim Flaherty said Wednesday.

The move triples the amount of insured mortgages Ottawa can buy from banks by the end of the fiscal year, a plan Flaherty announced last month.

The move by the federal government is meant to take billions of dollars in mortgages off the books of Canada's big banks, which would then give them the financial capacity under current regulations to lend more money for consumer and student loans, lines of credit and corporate loans to help stimulate spending and economic growth in the flagging economy.

A credit crunch caused by the Wall Street financial meltdown and growing weakness in the global banking system has been blamed for freezing up lending, making it more difficult for people to borrow money to buy a car, or companies to get fresh lending to finance trade and purchase new equipment.

Flaherty stressed that the mortgages are already insured through the Canada Mortgage and Housing Corp., a federal Crown corporation.

"It is an efficient, cost-effective and safe way to support lending in Canada at a time of extraordinary strain in global credit markets," he said in a news conference from his Toronto office.

The move will also help average Canadians by making "consumer and mortgage loans more affordable and more available," Flaherty said.

Ottawa will also make it cheaper to use government insurance guaranteeing bank borrowing under its Canadian Lenders Assurance Facility.

The facility, announced last month by Flaherty, offers insurance on wholesale term borrowing that banks need to fund operations and make credit available to Canadian households and businesses.

The base commercial pricing of the facility will be reduced by a quarter percentage point, Flaherty said Wednesday. The government will also waive the quarter point across-the-board surcharge for insurance provided under the program "until further notice."

The government will take whatever steps are necessary to help Canada avoid economic risks caused by global events, he said.

"Our goal in all of this is to support the availability of credit to Canadian consumers and businesses and foster economic growth."

The finance minister added that despite the global economic crisis, Canada is still on track for a small surplus in the current fiscal year.

In another development Wednesday, the Bank of Canada says it will inject an additional $8 billion into the country's tight money markets under new liberal terms.

The bank says the new Canadian-dollar term loan facility will be conducted in four auctions of $2 billion each over the next few weeks.

Qualifying financial institutions will be able to offer non-mortgage loans as collateral, meaning they can offer most loans currently on their books.

http://ca.news.finance.yahoo.com/s/1...mortgages.html

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China seen topping up government reserves with cheap crude

Wed Nov 12, 2008 5:47am EST

By Chua Baizhen and Jim Bai - Analysis

BEIJING (Reuters) - Beijing appears to be taking advantage of falling crude oil prices to fill its strategic reserve tanks, potentially giving it a 100-million-barrel buffer by year's end that could help smooth out future demand growth.

A near 30 percent surge in China's crude oil imports to their third highest daily rate on record last month, coupled with widespread signs of anemic demand in the world's second-largest user, has stirred fresh speculation about Beijing's emergency reserves, the status of which remain a closely guarded secret.

Data due on Thursday is expected to show that the country's major refiners -- which have increased output by only 5.5 percent so far this year -- could not have processed all of that crude themselves, suggesting some of it has been put in storage.

Analysts say it is still too early to conclude that Beijing must have given the order to top up its national reserves, half of which were constructed over the past two years while the other half are due to be finished by the end of the year.

But from the economics point of view, oil's plunge from a record above $147 hit in July to below $60 definitely makes buying crude now an attractive and logical option, they say.

"There is no question about stockpiling," said Lin Boqiang, director of the Center for China Energy Economics Research (CCEER) at Xiamen University.

"Strategic storing needs to be done even without a plunge in oil prices, and China should go for three months (of buffer stocks) now," he said.

Building stocks now would also allow China to take advantage of the steep contango structure in oil markets, with prompt prices far cheaper than longer-dated futures, at a time when many oil companies and traders are struggling to profit from storage as the credit crisis drives up the cost of financing stockpiles.

September crude imports rose 28.2 percent from a year ago, their fastest pace in more than a year, to hit 3.81 million barrels per day (bpd), the third highest ever. Domestic production has also eked out modest growth, helping meet some of the growing demand.

China's first phase of its SPR plans, with tanks that can hold 100 million barrels of oil or just under a month's imports, are due to be commissioned by year-end with the completion of the last two out of four bases at Qingdao and Dalian.

The first two facilities at Zhenhai and Zhoushan were up and running more than a year ago.

Last year the government leased out its 33 million barrel capacity tanks at Zhenhai to top refiner Sinopec Corp (0386.HK: Quote, Profile, Research, Stock Buzz) for use as commercial storage, but it is not clear whether that arrangement continues or whether the tanks are full or not.

Beijing has maintained a near total silence on the status of these tanks and the location for a second batch of facilities to hold some 26.8 million cubic meters, plans for which have just been finalized, Beijing announced on Wednesday.

By comparison, the U.S. Strategic Petroleum Reserve (SPR) holds about 700 million barrels.

STRATEGIC OR COMMERCIAL?

The sensitive nature of the oil reserves program makes it hard for anyone to ascertain which crude shipments are ultimately bound for the SPR tanks and not commercial ones held by Sinopec and its top domestic rival PetroChina (0857.HK: Quote, Profile, Research, Stock Buzz).

Some of the crude is also likely to be burned at power plants or used by small-scale refiners, usage that doesn't appear in official data but may be growing as profit margins improve.

But looking at consumption patterns and oil product stockpile levels, analysts say there is little reason for the duopoly to step up crude purchases for their refineries.

China's apparent oil demand rose by just 2 percent in September, its slowest rate in 10 months, as the refiners dealt with the after-effects of an excessive build-up of fuel stocks ahead of the Olympics and as the global financial rout began to weigh on Chinese consumers and industries.

"One cannot say for certain that whether the high crude oil import reflects SPR accumulation or merely refiners stepping up runs," U.S.-based independent analyst Paul Ting said in a note.

"However, one can also question the wisdom of increasing refinery runs in the face of weak demand and high inventory."

A Reuters survey of China's biggest refineries showed last week that they were expected to cut their throughput in November by 5 percent as demand falters.

Beijing has pledged 4 trillion yuan ($586 billion) in extra spending to shore up the domestic economy, but the money is to be spent by the end of 2010, dimming hopes for any immediate boost to oil demand.

The pessimistic near-term outlook on demand will be amplified by brimming inventories of oil products after months of heavy stockpiling ahead of the Olympics.

Sinopec (600028.SS: Quote, Profile, Research, Stock Buzz) and PetroChina 601857.HK held record levels of gasoline and diesel inventories in September, at 31 million barrels and 47.6 million barrels for each of the transport fuel respectively, state media reported.

LITTLE GLOBAL IMPACT

Even if indeed China has accelerated the SPR top-up, analysts see only limited impact on international markets against the backdrop of a global slide in oil demand.

"China alone is not enough to change" the downtrend in prices, said Kang Wu of FACTS Global Energy in Hawaii, noting that the September rise amounted to around only 200,000 bpd, a small sum in the 85 million bpd world market.

"Of course we cannot talk about a trend in one month. But if refinery runs are not matching imports, you know they are buying for the future or for SPRs," he added.

(Editing by Jonathan Leff)

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Bank forecasts deep 18-month recession for UK

From Times Online
November 12, 2008

Grainne Gilmore

The Bank of England said today that the country is set for a steep 18-month long recession with annual output set to shrink by as much as 2 per cent next year.

In its quarterly inflation report, the central bank said that the country probably entered a recession in the third quarter of this year, and it predicts there will be no recovery until the end of next year.

The Bank also said that inflation is set to fall sharply, from its current rate of 5.2 per, cent to just under 1 per cent next year, opening the way for more swingeing rate cuts.

The Bank's Monetary Policy Committee last week cut rates by 1.5 per cent to 3 per cent.

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AmEx Said to Request $3.5 Billion in U.S. Aid

NOVEMBER 12, 2008
By ROBIN SIDEL

American Express Co. which is being hit by slowing consumer spending and rising defaults, is seeking roughly $3.5 billion in taxpayer-funded capital from the federal government, according to people familiar with the situation.

The card issuer is the latest company not directly hit by the housing crisis to request cash from the federal government. While retailers, car companies and others hit by the slowdown in consumer spending haven't gotten the government money, financial firms of all kinds are getting federal bailouts.

It isn't clear if the application under the Troubled Asset Relief Program came before or after the credit- and charge-card giant got Federal Reserve approval Monday to become a bank-holding company.

Since one of the New York company's bank units previously was regulated by the federal Office of Thrift Supervision, AmEx likely would have been eligible for some TARP money under its old structure. AmEx executives decided, however, the path to government aid would be quicker and clearer if it was supervised directly by the Fed, these people said.

AmEx hasn't announced the application, and it isn't known how it would use government money. While federal regulators don't disclose which institutions have been approved or denied for assistance, many companies have been announcing their own plans.

An infusion would give AmEx greater flexibility in funding its operations but likely won't help with the consumer-spending slump.

Even the most affluent AmEx customers are cutting back on discretionary purchases, the company has acknowledged. A spending slowdown is particularly problematic for AmEx because its business model revolves around consumers who pull out plastic for their purchases.

Delinquencies and defaults on credit cards also are rising. Meanwhile, the company is virtually locked out of credit markets because investors who buy consumer loans are sitting on the sidelines.

AmEx shares are down 57% so far this year. On Tuesday, the stock fell $1.58, or 6.6%, to $22.40 in New York Stock Exchange composite trading at 4 p.m.

So far, 52 financial institutions have received preliminary or final approval for about $172 billion of the $250 billion available under the capital-infusion program, according to Keefe, Bruyette & Woods, a New York firm that specializes in the financial-services industry. Another 23 companies have submitted applications for an additional $4.6 billion.

Credit-card issuer Capital One Financial Corp., based in McLean, Va., has received preliminary approval for $3.55 billion in TARP money. Companies face a Nov. 14 application deadline.

AmEx also operates a proprietary network that processes card transactions.

Rivals Visa Inc. and MasterCard Inc., which operate processing networks, aren't eligible for TARP because they technically aren't financial institutions.

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Uncle Sam's Credit Line Running Out?

By RANDALL W. FORSYTH | MORE ARTICLES BY AUTHOR

The yield curve and credit-default swaps tell the same story: The U.S. can't borrow trillions without paying a price.

WHAT ONCE WAS UNTHINKABLE has come to pass this year: massive bailouts by the Treasury and the Federal Reserve, with the extension of billions of the taxpayers' and the central bank's credit in so many new and untested schemes that you can't tell your acronyms or abbreviations without a scorecard.

Even more unbelievable is that some of the recipients of staggering sums are coming back for a second round. Or that the queue of petitioners grows by the day.

But what happens if the requests begin to strain the credit line of the world's most creditworthy borrower, the U.S. government itself? Unthinkable?

American International Group (ticker: AIG), which originally had to borrow what was a stunning $85 billion from the Fed to keep it from cratering in September, upped the total Sunday to $150 billion.

Monday, Fannie Mae (FNM) reported a $29 billion third-quarter loss, far in excess of forecasts, raising the specter that the mortgage giant may need more money after the Treasury pledged to inject $100 billion in preferred stock financing in September.

Meanwhile, American Express (AXP) received Fed approval to convert to a bank holding company, joining the likes of Morgan Stanley (MS) and Goldman Sachs (GS), that have a direct pipeline to borrow from the Fed or the Treasury's TARP, the $700 billion Troubled Asset Relief Program.

And, of course, Detroit is looking for a credit line from Washington. General Motors (GM) Friday warned it could run out of cash next year without a government loan. GM plunged another 23% Monday, to 3.36, as several analysts helpfully recommended selling shares of the beleaguered auto maker that already had lost more than 85% of their value.

Visiting the White House Monday, President-elect Obama pressed President Bush to support emergency aid for GM and other auto makers. The prospect for federal aid for GM ironically weighed on its shares as one bearish analyst said the price of the bailout could be a wipeout of common holders.

Be that as it may, it's all adding up. If the late Sen. Everett Dirksen were around today, he might comment that a trillion here, a trillion there and pretty soon you're talking about real money.

Trillions are no hyperbole. The Treasury is set to borrow $550 billion in the current quarter alone and $368 billion in the first quarter of 2009.

"Near-term pressures on Treasury finances are much more intense than we had thought," Goldman Sachs economists commented when the government announced its borrowing projections last week.

It may finally be catching up with Uncle Sam. That's what the yield curve may be whispering. But some economists are too deaf, or dumb, to get it.
The yield curve simply is the graph of Treasury yields of increasing maturities, starting from one-month bills to 30-year bonds. The slope of the line typically is ascending -- positive in math terms -- because investors would want more to tie up their money for longer periods, all else being equal. Which it never is.

If they expect yields to rise in the future, they'll want a bigger premium to commit to longer maturities. Otherwise, they'd rather stay short and wait for more generous yields later on. Conversely, if they think rates will fall, investors will want to lock in today's yields for a longer period.

The Treasury yield curve -- from two to 10 years, which is how the bond market tracks it -- has rarely been steeper. The spread is up to 250 basis points (2.5 percentage points, a level matched only in the past quarter century in 2002 and 1992, at the trough of economic cycles.

Based on a simplistic reading of that history and the Cliff Notes version of theory, one economist whose main area of expertise is to get quoted by reporters even less knowledgeable than he, asserts such a steep yield curve typically reflects investors' anticipation of economic recovery. Never mind that the yield curve has steepened as the economy has worsened and prospects for recovery have diminished. Like the Bourbons, the French royal family up to the Revolution, he learns nothing and forgets nothing.

As with so much other things, something else is happening this year.

The steepening of the Treasury yield curve has been accompanied by an increase in the cost of insuring against default by the U.S. Treasury. It may come as a shock, but there are credit-default swaps on the U.S. government and they have become more expensive -- in tandem with an increase in the spread between two- and 10-year notes.

This link has been brought to light by Tim Backshall, the chief analyst of Credit Derivatives Research. The attraction of investors to the short end of the Treasury market is "juxtaposed with the massive oversupply and inflationary expectations of the longer end," he writes.

Backshall is not alone in this dire assessment. Scott Minerd, the chief investment officer for fixed income at Guggenheim Partners, a Los Angeles money manager, estimates that total Treasury borrowing for fiscal 2009 will total $1.5 trillion-$2 trillion. That was based on $700 billion for TARP, a $500 billion-$750 billion "cyclical deficit," an additional $500 billion stimulus program and some uncertain amount for the Federal Deposit Insurance Corp.

Minerd doubts that private savings in the U.S. and foreign purchases of Treasury debt will be sufficient to meet those government cash requirements. That leaves the Fed to take up the slack; that is, monetization of the debt.

However it comes about, Backshall's charts of the yield curve and the spread on U.S. Treasury CDS paint a dramatic picture. Both the yield spread and the cost of insuring debt moved up sharply together starting in September.

Let's recall what happened that month: the Fannie Mae-Freddie Mac bailouts, the AIG bailout and the Lehman Brothers failure. The two lines continued their parallel ascent with the announcement and ultimate passage of the TARP last month. And evidence mounted of an accelerating slide in growth.

Cutting through the technical jargon, the yield curve and the credit-default swaps market both indicate the markets are exacting a greater cost to lend to Uncle Sam. And it's not because of anticipated recovery, which would reduce, not increase, the cost of insuring Treasury debt against default.
All of which suggests America's credit line has its limits.

At the beginning of the Clinton administration in the early 1990s, adviser James Carville was stunned at the power the bond market had over the government. If he came back, Carville said he would want to come back as the bond market so he could scare everybody.

President-elect Obama may come to think Clinton had it easy by comparison.

http://online.barrons.com/article/SB...980913759.html

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Asia eyes key stake in new global financial system

Asian leaders will find the first global summit on the current financial turmoil a perfect venue to demand a key stake for the region in any new international financial system.

As Europe and the United States clash over their leadership role in framing a new international financial architecture at the November 15 meeting in Washington, Asians feel they have as much of a stake in the stability of the global system as the industrialized countries.

“The big question is how you can restructure the international economic regime in a way that makes countries like India and China feel that they not only have a stake but also have real influence”, said Eswar Prasad, former head of the China Division at the International Monetary Fund.

The Washington-based IMF has often been criticized as increasingly unrepresentative of the global economy, with emerging economies, especially Asian ones, chronically underweighted in their voting shares.

“The problem with the Bretton Woods institutions in the way they are currently structured is that these major economies feel that those institutions are still the fiefdoms of the US in particular and advanced economies in general”, Prasad said.

The IMF and the World Bank are institutions established under the Bretton Woods agreement, which has guided international finance since World War II but which mainly European leaders want rewritten after a massive US home mortgage meltdown sparked the world’s worst financial crisis since the Depression of the 1930s.

US President George W. Bush has called for a series of summits, beginning with the November 15 talks, to discuss the causes of the problems in the global financial system and begin developing reform for financial regulatory bodies and institutions.

Leaders from China, Japan, India, Australia, South Korea and Indonesia are the Asian regional invitees to the summit, that also include the United States, the European Union, Britain, France, Germany, Argentina, Brazil, Canada, Italy, Mexico, Russia, Saudi Arabia, South Africa and Turkey.

“For the architecture of the international financial system, I certainly think they should be raising the whole question of the overrepresentation, particularly of Europe and to some extent the United States, and the extreme underrepresentation of emerging markets, many of which are in Asia”, said Nicholas Lardy of the Washington-based Peterson Institute for International Economics.

He said that without some really fundamental changes, for example, in the distribution of voting rights in the IMF, “it is hard to see how it is going to remain a relevant international organization”.

IMF member states approved reforms earlier this year for developed countries to give up a small fraction of their voting rights -- equivalent to 1.6 percentage points -- to the benefit of emerging and developing countries. It was criticized by experts as inadequate.

“They are really moving at a snail’s pace”, Lardy said despite IMF chief Dominique Strauss-Kahn’s pledge to restore what he called relevance and credibility to the heavily criticized multilateral institution.

While there is some agreement on the need for a powerful and effective multilateral institution that would bring everyone to the table and actually have some leverage over the key players, it is not clear whether the Washington summit would seek a new international financial framework, experts indicated.

“A big concern China and India have is that institutions, like the IMF, may not have leverage over the key advanced country players”, said Prasad, now with the Washington-based Brookings Institution.

“So, how you correct that imbalance or at least the perception of that imbalance is going to be very critical”, .

The current financial turmoil has inspired widespread speculation of a shifting balance of power away from the United States and other advanced economies of Europe toward the major emerging economies, Sabina Dewan of the Washington-based Center for American Progress explained.

www.mmorning.com

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How Bad Will Unemployment Become

Unemployment by industry: Brace for Impact


























Friday the Labor Department disgorged a mountain of ugly unemployment data. Another``surprising'' jump in joblessness made headlines.

iTulip has observed and analyzed changes in the US economy for over ten years. In the current economic cycle, since 2006, we have focused on median duration of unemployment to give us early warning of rising unemployment.

Here we extend that analysis to point us to where unemployment is headed overall and also delve into 14 major industry sectors, including one you work in, to fine tune our forecast.

There is no doubt in our minds that this is The Big One -- a depression is all but certain unless the US develops and executes a post WWII scale stimulus plan starting in 2009, but the structure of that stimulus is critical to avoid turning the US into a sclerotic economy dominated by large corporations and big government. In any case, we forecast 10 million jobs lost by the end of next year.

NOTE: Janszen Interview on CBC News: Sunday, Airs Nov. 9th, 2008 @9:40 AM (EST) debates the government bailout of Big Three automakers.

A mass layoff is the event of at least 50 persons let go by a single employer. Mass layoff events and initial claimants for unemployment insurance September 2007 was 1,307. For September 2008 it increased 57% to 2,269.

iTulip member PHS posted the following report on Friday from Pa. It gives us on-the-ground evidence of the impact.

Since 1990, I have served as a pastor in the UCC (Obama's former denomination) in central Pa. Never in the past 18 years have I had sooo many people call me for assistance. What was once rare now happens several times a week. These people aren't just passing through either. They live in the community. "My electric has been turned off." "We're out of food and the food bank told us to call the local churches." "I've never been layed-off before, I'm really ashamed to call you but we're behind on our bills." ...and so on. I believe that 10 million are now called "unemployed." This is what some of them look like. I suspect this figure will rise significantly over the next year or so. I suspect that I'll be hearing from some of them too.

All across the country the recession hammers the most vulnerable members of American society. Here are today's food pantry related headlines from Google News:

Mayor warns food pantry shelves near empty
Indianapolis Star, United States
Unemployment Up, Donations Down; Food Pantries Struggling
Hartford Courant, United States
Food pantries strained with rising demand
WZZM, MI
Need Rising For Area Pantries, Soup Kitchens
Jamestown Post Journal, NY
Salvation Army's food pantry may re-open
The Morning Journal, OH
Can-do attitude: Food pantry scrambles to keep up with needs
Maryville Daily Times, TN
Food bank will hold raffle for food
abc7news.com, CA
Santa needs help: Agencies worry about donations
Salt Lake Tribune, United States
Food bank low on supplies - November 7, 2008
6abc.com, PA
Oshkosh Salvation Army: More families are requesting help with the ...
Oshkosh Northwestern, WI
Food pantry levels running low
Lexington Clipper Herald, NE
Area food pantries low on supplies, support
Ledger Independent, KY
Salvation Army In Need of Food Donations
93.1 WIBC Indianapolis, IN
Tough times mean we must dig deeper
Beaufort Gazette, SC - 9 hours ago

Sorted by date, today's food pantry stories go on for ten pages covering every state in the nation.

Recession or depression?

A year ago October 4, 2007 we wrote Next Wall Street "surprise" is more bad employment news to show why median duration of unemployment matters:

We've been tracking the duration of unemployment numbers because they, combined with other data, are a decent leading indicator of future unemployment, especially at economic turning points.

Early in an economic slowdown, six months or more before the lay off employees, companies slow then stop new hiring. As thousands of employers cut new hiring, any worker who is laid off finds that finding a new job takes longer and longer.

At some point the process becomes self-reinforcing; the longer more people stay unemployed, the more spending and consumption is reduced, the more demand declines, the more pressure on firms to reduce head count rises, and so on.

Read more at: http://www.itulip.com/forums/showthr...9666#post59666

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The End

by Michael Lewis Nov 11 2008

The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong.



Photoillustration by: Ji Lee

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.

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I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.

When I sat down to write my account of the experience in 1989—Liar’s Poker, it was called—it was in the spirit of a young man who thought he was getting out while the getting was good. I was merely scribbling down a message on my way out and stuffing it into a bottle for those who would pass through these parts in the far distant future.

Unless some insider got all of this down on paper, I figured, no future human would believe that it happened.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

I had no great agenda, apart from telling what I took to be a remarkable tale, but if you got a few drinks in me and then asked what effect I thought my book would have on the world, I might have said something like, “I hope that college students trying to figure out what to do with their lives will read it and decide that it’s silly to phony it up and abandon their passions to become financiers.” I hoped that some bright kid at, say, Ohio State University who really wanted to be an oceanographer would read my book, spurn the offer from Morgan Stanley, and set out to sea.

Somehow that message failed to come across. Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

PREV 1 of 9 NEXT

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http://uk.finance.yahoo.com/m2

All down 3-7%, cept for...Shanghai- funny word

shang·hai (shng-h, shngh)

tr.v. shang·haied, shang·hai·ing, shang·hais 1. To kidnap (a man) for compulsory service aboard a ship, especially after drugging him.
2. To induce or compel (someone) to do something, especially by fraud or force: We were shanghaied into buying worthless securities.

---

[After Shanghai¹, from the former custom of kidnapping sailors to man ships going to China.]

Shanghai Composite (China)

1,927.61 7:00am

68.50 (+3.68%)

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60,000 new un-creditworthy individuals and how about their employer?

from ClusterStock, Nov. 14, 2008:

Citi CEO Vikram Pandit has ordered business unit heads to cut employee compensation costs by 25%, the WSJ says. This could lead to 60,000 firings by next year. The cuts will include the investment banking division. The firm has already fired 23,000 people over the past year, reducing its global workforce to 352,000.

The company vehemently denied the WSJ's report yesterday that Chairman Win Bisschof may soon be sent packing. The WSJ says it stands by its story.

Vik Pandit bought 750,000 of thee 1.2 million shares Citi brass scooped up yesterday. This sounds bold at first, but it's still chicken feed (under $10 million), and its value was likely calculated to be higher than that in getting everyone to talk about how Citi management is buying.

Lastly, Citi is jacking up the interest rates on its credit cards, punishing already overwhelmed consumers:

Citigroup is notifying some credit-card customers that their interest rates are being raised by an average of three percentage points.

Citigroup is one of the nation's largest issuers of credit cards, with 54 million active accounts. The unit had a loss of $902 million in the third quarter, compared with $1.4 billion in profit a year earlier, as a growing number of customers fell behind or defaulted on their payments.

A person familiar with the strategy estimated that the rate increases would apply to less than 20% of Citigroup's card portfolio.

"The industry has recently experienced an unprecedented market cycle with severe funding dislocation and significant consumer credit deterioration driven by the mortgage crisis and rising unemployment. In light of these unprecedented developments and others, Citi will be repricing a group of customers in our Citi-branded consumer credit-card business in the U.S. to appropriately manage these risks," said John Carey, chief administrative officer of the credit-card unit.

Citigroup's move follows a similar change by American Express Co., which is raising rates to some customers by two to three percentage points. Raising rates on customers is a delicate dance for credit-card companies. While the firms want to pull in more revenue from customers who carry a balance from month to month, they don't want to tip those customers into default because that hurts the card issuer's bottom line.

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J.C. Penney Third-Quarter Profit Falls After Sales Decline

By Lauren Coleman-Lochner

Nov. 14 (Bloomberg) -- J.C. Penney Co., the third-largest U.S. department-store company, said profit fell for the fifth consecutive quarter and forecast earnings that trailed analysts' estimates as shoppers cut spending on home goods and jewelry.

Fourth-quarter profit will be 90 cents to $1.05 a share, the company said. Analysts surveyed by Bloomberg estimated adjusted profit of $1.28.

Third-quarter net income dropped to $124 million, or 56 cents a share, from $261 million, or $1.17 a share, a year earlier, the Plano, Texas-based company said today in a statement distributed by Business Wire. Sales fell to $4.32 billion from $4.73 billion.

J.C. Penney rose 71 cents, or 3.8 percent, to $19.28 yesterday in New York Stock Exchange composite trading. The shares have fallen 56 percent this year, compared with a 33 percent decline for Kohl's Corp. and a 35 percent drop in the 27-company Standard & Poor's 500 Retailing Index.

J.C. Penney cut its third-quarter profit forecast twice since Aug. 15, and initially said it might earn as much as 75 cents a share.

To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net.

http://www.bloomberg.com/apps/news?p...Quw&refer=home

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Sun Microsystems, Inc. announced Friday it will cut up to 18%, or 6,000, Jobs

In cost-cutting move, the software and networking company said it would reduce its payroll by up to 18% and restructure its business operations.
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NEW YORK (CNNMoney.com) -- Software and computer networking company Sun Microsystems, Inc. announced Friday it will cut up to 18%, or 6,000, of its staff in a cost-cutting move.

Santa Clara, Calif.-based Sun said it's acting to "align its cost model with the global economic climate." The company said it plans to restructure its business operations, aligning the business into three divisions: application development, systems platforms, and infrastructure development.

"Today, we have taken decisive actions to align Sun's business with global economic realities and accelerate our delivery of key open source platform innovations," said Jonathan Schwartz, chief executive of Sun Microsystems, in a statement.

Sun Microsystems (JAVA, Fortune 500) is the maker of the Java computer programming software. Its shares fell 4% in premarket trading.

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China positioned to unleash global deflation

DAVID PARKINSON
November 13, 2008

It wasn't that long ago that pundits were counting on China to rescue the world from economic calamity. Now, China may be poised to become a key source of the problem.

After a recent visit to China, Nobuyuki Saji, chief economist and equity strategist for Japanese investment bank Mitsubishi UFJ Securities, issued a report warning that China could be on the verge of pushing the world into a deflationary spiral. The problem? Swelling industrial overcapacity, which threatens to undermine prices both for China's exported goods and its imports of raw materials.

He estimated that China's production is running as much as 50 per cent below capacity, as many industries that have been expanding rapidly are now being hit by slowing demand both domestically and abroad. Based on his estimates, China alone represents 7 per cent of the global supply/demand gap.

"We believe that once Chinese companies start to fully factor in a 2009 recession in the global economy in terms of significant shipment and selling-price cuts, widespread global deflation will be inevitable," he said

"With one country's overcapacity responsible for 7 per cent of the world's supply/demand gap, the anticipated deflation will likely turn out to be extremely severe," he predicted. "In the end, the only realistic way of closing this gap will be a correction brought about by prices collapsing."
The dire prediction is just another sign that China's economy, so recently the primary driver of booming global economic expansion, record commodity prices and surging stock markets, may be unwinding faster than most experts had envisaged.

That point was hammered home this week, when the Chinese government announced a massive economic stimulus package in hopes of averting a nasty downturn - despite forecasts of 8-per-cent-plus economic growth this year.

The country's massive manufacturing-export sector, which generates 40 per cent of the country's gross domestic product, is being hit hard by the global economic slowdown - and could hold back the Chinese and global economies as it struggles to adjust capacity.

"The inventory adjustment that is inherent to recessions will be felt disproportionately by China through [the first half of] 2009," said National Bank Financial assistant chief economist Stéfane Marion in a research note this week.
Here are just a few of the issues facing China.

1. TRADE IS FALTERING
National Bank Financial noted that China's export volume growth has fallen substantially this year, but its import volumes have slowed even more dramatically. In fact, import volumes may have even shrunk last month - an ominous sign for key exporters to China, including Canadian commodity producers.

"In our view, this development reflects the rapid slowdown in Chinese manufacturing and reduced demand for commodities," Mr. Marion said.

2. SWIMMING IN CARS, STEEL
Mr. Saji said China's auto production capacity is now more than double the expected 2009 production levels, which have been dropping amid slowing demand. Steel capacity is roughly 40 per cent above 2009 production forecasts, which are also on the decline, and reports are surfacing that major production lines are being shut. Domestic year-over-year auto sales have been shrinking since August. Prices for many car models are less than half what they were a year ago, while wholesale prices for steel products have fallen even further.

3. HOUSING BUBBLE BURSTS
New-home sales in 16 major regions of China were down almost 15 per cent year-over-year in August. Beijing sales were down 55 per cent, while sales in Shanghai were off 38 per cent. The slump in home sales is showing up in weaker sales of consumer durables, such as home appliances.

4. CHINA-STYLE SUBPRIME?
Mr. Saji noted that 65 per cent of China's bank lending is secured by real estate, and that long-term leaseholds represent up to 20 per cent of revenues for many regional governments - leaving both at risk in the slumping real estate market. On top of that, he said, many Chinese have borrowed money from banks "under the pretense of buying a home" but spent the money on cars and stocks instead. "This suggests that China actually has its own brand of subprime loan problem," he said.
The solution? Much like in the United States, the banks are tightening their lending conditions - another potential blow to consumer spending.

http://www.theglobeandmail.com/servl...Story/Business

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Best Buy: Toughest Retail Conditions Ever

Wednesday, November 12, 2008 9:00 AM

MINNEAPOLIS -- Electronics retailer Best Buy Co. says it is sharply cutting its fiscal 2009 earnings outlook below analyst estimates amid what the company called the toughest retail environment it has ever seen.

Richfield, Minn.-based Best Buy expects earnings per share between $2.30 and $2.90 for the fiscal year ending in February, down from a prior estimate between $3.25 and $3.40 per share.

The retailer forecast revenue between $43.7 billion and $45.4 billion, as well as 1 percent decline in same-store sales, or sales at stores open at least 14 months.

Analysts expect earnings of $3.02 per share and sales of $46.23 billion for fiscal 2009, according to a Thomson Reuters survey.

Best Buy's same-store sales dropped 7.6 percent in October. Same-store sales are a closely watched performance indicator because they measures sales at existing locations rather than newly opened ones.

Chief Executive Brad Anderson said "seismic" changes in consumer behavior have created "the most difficult climate" ever seen by the company.

Best Buy also says the stronger dollar will weaken revenue and profit from its international segment more than previously expected.

http://moneynews.newsmax.com/compani...12/150363.html

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Supply Chain: The moving target

Published: 13 November 2008 12:32
Author: Joanna Perry

Maximum potential: supply chain systems must be agile, responsive and functional if retailers are to optimise their flow of goods

Supply chain optimisation is one area where retailers can't afford to stop spending. Joanna Perry hears why quick and responsive systems are vital in the present climate.

Every second that stock is sat in your business costs you money. So, with the clock ticking, the aim of the game is to get products to the point where you can sell them as quickly and cost effectively as possible.

Even with tough trading conditions, supply chain technology is essential to ensure the smooth flow of goods; and even better if it can optimise this flow.

Marks & Spencer announced last week that it will open a distribution centre specifically for its Direct business. Other retailers have also been busy setting up staging posts for their international supply chains, as growth attention turns to franchises and other overseas sales activity.

Morrisons is also thought to be introducing an automatic ordering system for slow moving lines. The idea is to make its ordering process more efficient and improve availability, while allowing order decision making to be focused on faster moving lines.

Aldata UK managing director Mark Croxton believes that retailers are looking again at the efficiency of their inventory. In particular, Musgrave is introducing store replenishment applications and Midlands Co-op is implementing an inventory management system. Croxton explains: "Midlands Co-op implemented end-to-end retail systems to give it visibility of its point of sale. In the food sector spend is protected, though behaviour is different, and customers are being selective about what they buy." He says that this requires fast reaction times to what is happening at stores, especially around promotions.

The inventory management system is live in pilot stores and will roll out next year. He explains: "We are putting in a wide suite of applications that together give great visibility and allows Midlands Co-op to make sure stores are compliant with pricing and promotions, etc."

Not all projects will be on a grand scale. Low-risk initiatives to add functionality to existing systems can bring quick – and cheap – wins.
For instance, Croxton adds that retailers are doing more deals with suppliers – including not paying suppliers until they have sold the stock. If you can't manage these complex deals through your systems then you end up with lots of invoice queries, which brings added systems requirements.

Call and response

Lots of retailers have rolled out voice-directed order picking in their distribution centres in the past few years and have achieved big efficiency gains when the systems went live. Now they are looking again at how they can take further advantage of this technology.

WHSmith distribution centre general manager Jim McCafferty says the company deployed voice picking in its travel division three and a half years ago, but it is still making enhancements and getting additional benefits.

The retailer has also rolled out a new generation of wearable computers running the Vocollect Voice software working with VoiteQ. McCafferty says: "After having the system for a number of years the travel division has grown enormously – the store numbers have doubled – and we have had to enhance our current system from the Talkman T2 units to Talkman T5 units."

He explains that they are far quicker and allow management to provide prompts to staff, as well as producing more productivity information.
When the company first introduced voice technology productivity improved 15 to 20 per cent and these benefits have continued. "Since we have introduced the system we have grown hugely and have been able to keep the pence per unit cost exactly the same as it was six years ago, despite wage inflation. That's why we have enhanced the system," he says.

McCafferty adds: "It gives us real-time visibility of replenishment, which enables us to be far quicker. We are better able to respond to replenishment requests. Our service levels are so much better that we don't need to employ a quality control person."

The same system has been deployed in different areas of the warehouse, with subtle differences to match the type of stock in question. There are three main picking areas, each with their own unique processes, such as for confectionery and drinks, or books. WHSmith staff can use each of the terminals anywhere and just have to tell the unit which zone they are in to get the relevant interface.

McCafferty says the company isn't finished with its deployment plans either. "We are looking at introducing the system to our dispatch area to confirm deliveries into trucks." He says there could be huge benefits if the system is extended in this way to track and trace containers of products on to vehicles.

Meanwhile, at Ted Baker additional development on existing systems is also bringing new benefits without costing the earth.

Ted Baker IT manager Dustan Steer explains that the retailer has been piloting a portal for wholesale partners since August. A couple of the larger department stores it trades with, as well as some smaller independents, are trialling the system, which is designed to make repeat ordering easier.

Steer explains that Ted Baker is able to use the existing functionality in its Prologic software to run the portal, with only slight amendments to make it fit for purpose. Users receive a log-in to the portal, which connects directly to Ted Baker's database and acts as a front end for the main ordering system.

He adds that partners will always be invited in to view new collections and place initial orders, but this makes the reordering process more simple. The plan is to give all of Ted Baker's partners – including international ones – the option of using the system in the future, once feedback from the pilot has been taken in and any necessary changes made to the way the portal works.

Fuel for thought

Supermarkets, including Tesco and Asda, have also expanded their use of transport routing and optimisation systems in the past year. Though the price of fuel has been falling for the past few weeks at retailers' own petrol pumps, the same cannot be said for the fuel they use in their supply chains.

Croxton says: "The other thing worrying retailers is fuel – they have negotiated their contracts for fuel for next year and there is double-digit inflation on those costs. They are taking a judgment call on what will happen to fuel costs. They may not get it right, but at least they will know where they are with their costs."

This makes transport optimisation even more of a challenge for retailers, as they seek to ensure that trucks are full, taking optimal routes and where possible are also getting value from return journeys.

Another trend that has been seen in warehouse technology in the past few years is automation. It cuts down on the pairs of hands that must touch products within the warehouse and can improve speed and efficiency. But Croxton says that it will not be an investment priority for all at the moment.

He explains: "Automation is expensive to put in and it can create inflexibility within the supply chain unless the retailer is certain of what's going on and its volumes." He adds that downward pressure on wages could also mean that retailers are worrying a little less about these costs.

In the US, a few retailers are now taking the idea of automation to the extreme. Online shoe retailer Zappos.com rolled out a mobile fulfilment system earlier this year in just four months to support rapid order growth and an expansion into new categories such as sportswear.

It is using a fleet of Kiva Systems' mobile robots and inventory storage pods, meaning stock can be moved around within its distribution centre without needing staff or conveyors to transport it.

While UK retailers might not be ready for this level of technology, there is another reason that investment in supply chains and systems decisions might be reviewed.

The market has seen much consolidation and the plight of many retailers and their financial backers at present means that more mergers and acquisitions seem likely. Croxton believes retailers that buy others will have supply chains high on the list of areas where synergies can be identified and costs cut. So those involved in these deals will have to reconsider how they run and support their supply chains.

During trading conditions like those being experienced today, the last thing that retailers need is empty shelves, sellable stock sat in warehouses, or delayed home deliveries. Modern and agile supply chain systems are critical if retailers are to maximise their potential.

www.retail-week.com

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OECD wants more action on global recession

Jurjen van de Pol, Bloomberg News
Published: Thursday, November 13, 2008

The Organization for Economic Cooperation and Development cut its forecast for global growth in 2009 for the second time this year and urged governments to take more stimulus measures to fight a recession.

The economy of the OECD's 30 members will contract 0.3% in 2009 after expanding 1.4% this year, the Paris-based group said Thursday in its latest economic projections. The OECD in June forecast that economic growth among member nations would slow to 1.7% next year from 1.8% in 2008.

"The OECD as a whole is currently in recession" and will start recovering in the second half of 2009, Jorgen Elmeskov, the OECD's director of policy studies, said at a press conference Thursday in Paris. "Underlying the projections is an assumption that the extreme financial stress since mid-September is short-lived, but will be followed by an extended period of financial headwinds through late 2009," the OECD said.

The OECD follows the International Monetary Fund in forecasting economic contractions in the U.S., Japan and the euro area next year as the credit crisis ripples through the global economy, forcing central banks to cut interest rates. The Germany economy, Europe's largest, contracted in the third quarter, confirming it has entered the worst recession in at least 12 years as the financial crisis curbs exports.

'Spend the Money'

"The important thing in the current situation is to do something that is effective in stimulating demand," Elmeskov said in an interview. "One potential instrument is tax reduction targeted to households that are credit-constrained, so that one can be reasonably assured that they will go out and spend the money."

The U.S. is leading the slowdown as the largest economy in the world is forecast to shrink 0.9% next year after 1.4% growth this year, the OECD said. Japan will see a contraction of 0.1% next year after a projected 0.5% expansion in 2008, the OECD said.

"Obviously, Japan has a huge debt and the U.S. has relatively big deficits," said Elmeskov. As both countries have little room left to cut interest rates, "it's clear that in both these cases the need for fiscal stimulus is obviously there."

The 15-nation euro-zone economy is set to contract 0.5% next year after an expansion of 1.1% in 2008, only to recover in 2010, after consumers cut down on spending and companies postponed investments.

Public Spending

"In the euro area, taxes fall by a lot when there's a downturn and public spending increases due to higher unemployment benefit payments," said Elmeskov, adding that this helps to absorb the shock. "The ECB also has more monetary ammunition left than is the case in the U.S. and Japan."

European stocks fell for a third day as concern the financial turmoil is far from over outweighed speculation central banks will cut rates more to prop up economic growth. The Dow Jones Stoxx 600 Index lost 1.2% at 10:26 a.m. in London, pushing this year's retreat to 44%.

The OECD forecast inflation in its member states will accelerate to 3.3% this year, compared with an earlier projection of 3%. Price rises will ease in 2009 to 1.7% from an earlier projection of 2.1% as oil and commodity prices come down from record levels.

"We can see already in the incoming inflation indicators that inflation is coming down," Elmeskov said. "We would expect that process to have further to go."

Bloomberg News

http://www.financialpost.com/news/story.html?id=955322

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Investors shudder as US trade figures plunge and Germany enters recession

By Agence France Presse (AFP)
Friday, November 14, 2008
www.dailystar.com.lb

LONDON: US share prices wobbled Thursday after trade figures offered further evidence of a sharp slowdown in the American economy while European investors grappled with news that Germany was officially in recession. On Wall Street the Dow Jones Industrial Average was down 0.52 percent at 8,239.73 at mid-day. The tech-heavy Nasdaq had fallen 1.14 percent to 1,482.19.

The declines followed a report that while the US trade deficit narrowed in September, imports showed a record slide, with exports also down sharply.

In Europe the Frankfurt DAX index brushed aside a disclosure that Germany, the biggest eurozone economy, had officially fallen into recession.

The DAX finished the day with a gain of 0.62 percent at 4,649.52, powered by a solid showing in the automobile sector and as investors had already taken account of the recession announcement. The German economy shrank 0.5 percent in the third quarter, following a contraction of a 0.4 percent in the second quarter, the Destatis statistics service said, meeting the technical definition for a recession - two consecutive quarters of negative growth.

The contraction was worse than expected and mainly the result of a negative trade balance, with softer exports and considerably higher imports toppling a key German economic pillar. UBS economist Martin Lueck added that the German recession was "deeper than we thought."

It was also the first major economy to confirm that a long-feared recession had arrived, with France, Italy and the entire 15-nation eurozone expected to follow on Friday.

The United States, Japan and Britain are also on the brink, according to a report from the Organization for Economic Cooperation and Development, which predicted that the world's leading industrialized powers would sustain negative growth of 0.3 percent next year.

Elsewhere on European markets there were gains of 1.10 percent in Paris, 0.92 percent in Milan, 1.08 percent in Madrid and 0.65 percent on the Swiss Market Index, the advances generally coming after losses on Wednesday and in response to positive corporate news.

Bucking the trend was London's FTSE 100 index, which lost 0.31 percent to close at 4,169.21 points. Telecoms group BT nonetheless soared 8.89 percent after announcing plans to slash 10,000 jobs as a cost-cutting measure.

Dragging down the FTSE was the brokerage group Icap, which gave up 10.36 percent.


Thousands of British jobs have also been axed this week by British-based cable television firm Virgin Media, telephone directories group Yell, house-builder Taylor Wimpey and pharmaceutical giant GlaxoSmithKline.

"It is difficult to think of anything apart from doom and despair," said Capital Spreads managing director Simon Denham in London.

Investors in New York meanwhile digested a digested a forecast of weaker results from tech giant Intel and profits in line with expectations from retail sector leader Wal-Mart.

On the economic front, the US trade deficit fell 4.4 percent to $56.5 billion in September, which would normally be seen as positive but the data showed steep declines in both imports and exports.

"Trade can no longer prop up the US economy," said Peter Kretzmer, economist at Bank of America. "If we look out over the next 12 months, both export and import volumes will drop ... as the global recession reduces trade activity."

"The major headlines today aren't of the uplifting variety," said Patrick O'Hare at Briefing.com.

Russia's two main stock markets, the RTS and the MICEX, also briefly suspended trading on Thursday after plunging at the open, following trading suspensions the previous day. The exchanges later closed with respective losses of 2.37 percent and 7.62 percent.

Earlier in Asia, Tokyo tumbled 5.25 percent, Hong Kong dived 5.15 percent and Sydney shed 5.9 percent to finish at a four-year low.

China reported a sharp slowdown in industrial production growth - the latest sign that the Asian economic powerhouse is losing momentum.

Premier Wen Jiabao was quoted in the state media as saying the impact of the global financial woes on China's economy was "worse than expected."

Investors were turning their attention to a summit on the financial crisis that will bring together leaders of the Group of 20 industrialised and emerging nations from Friday in Washington.

Japan will offer at the meeting to lend up to about $100 billion to the International Monetary Fund to help boost loans to emerging countries hit hard by the financial crisis, local media reported. - AFP

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Brown: major countries must cut taxes now

• Leaders meet for crisis talks on crash
• Pound falls to six-year low of $1.48

Larry Elliott and Toby Helm in New York
guardian.co.uk,
Friday November 14 2008 00.01 GMT

Gordon Brown tonight called on the world's most powerful industrial nations to agree a programme of immediate and coordinated tax cuts to prevent the global economy sliding deeper into recession.

Arriving in New York for this weekend's unprecedented gathering of the leaders of the world's leading 20 economies, the prime minister said the need for a "fiscal stimulus" both for the UK economy and the world had increased after an autumn in which accelerating job losses had intensified fears of a deep and lasting slump.

Brown proposed a four-point plan which he hopes will win support at tomorrow's summit and help tackle the most severe financial crisis for 90 years.

"By acting now we can stimulate growth in all our economies," he said. "There is a need for urgency. The cost of inaction will be far greater than the cost of any action."

Brown believes an agreement by the G20 this weekend will provide his government with the political cover it needs to finance a multibillion-pound package of tax cuts in the upcoming pre-budget report.

"For Britain, a fiscal stimulus is the right course, as Mervyn King [governor of the Bank of England] made clear today, and we will be setting out our proposals in the pre-budget report," he said.

Brown will argue that countries cannot rely on interest rate cuts alone in the face of the wider economic crisis, and that the impact of tax cuts or higher public spending will be lessened if only a handful of countries take part. "It is now becoming increasingly accepted around the world that a temporary and affordable fiscal stimulus is needed. This will have most impact if it is coordinated internationally."

Last night George Bush admitted the global financial system needed reform, but insisted that the credit crunch was not a failure of the free market system. Speaking at Federal Hall on Wall Street, he said while financial markets needed some new regulation and more transparency, free trade should not be restricted. "The answer is not to try to reinvent that system. It is to fix the problems we face, make the reforms we need, and move forward with the free market principles that have delivered prosperity and hope to people all across the globe," he said.

"While reforms in the financial sector are essential, the long-term solution to today's problems is sustained economic growth. And the surest path to that growth is free markets and free people."

The scale of the problem facing Brown was underlined yesterday as the pound fell to a six-year low against the dollar, ending the day at $1.48. It also ended at an all-time low against the euro of almost 85 pence as traders priced in more interest rate cuts in the UK following Wednesday's bleak outlook from the Bank of England.

Figures confirmed that Germany, the world's third largest economy, had entered recession. The Organisation for Economic Cooperation and Development yesterday predicted the world's economies were heading into a "protracted recession".

The summit is seen by Downing Street as a crucial stage in tackling domestic and international problems.

"This is a global problem that requires a global solution. Only by acting with our international partners can we address the challenging economic circumstances affecting families and business in Britain." Progress was urgently needed in three other areas, Brown said.

• To identify and rectify the weaknesses of the international financial system exposed during the banking crisis.

• For rich countries to pump more money into the International Monetary Fund to support developing countries.

• Brown will push for world trade talks which opened in 2001 but finally broke down in the summer to be reopened and concluded by the end of this year.

Government officials are concerned that the meeting is being chaired by the outgoing President George Bush rather than president-elect, Barack Obama. They fear it means that Washington is less focused than other countries on making firm commitments. Brown will not be meeting Obama personally on his two day trip but his officials will be meeting Obama's transition team.

www.guardian.co.uk