NightBlogger

Ilargi
The Automatic Earth
…apart from Gustav making landfall in Louisiana, is the unabated decline of the British empire. Britain falls so hard and so fast that it’s getting scary to think of where it is headed. I have warned for quite a while that it would happen, but I have to admit that even I am surprised to see the speed at which events unfold. As the extent of the downfall and the reality of new-found desolate poverty seep through to the consciousness of the population, English society will reveal itself as an immensely volatile powder keg, with a very long array of very short fuses.

The de-facto resignation of Chancellor Alistair Darling -who publicly stated the UK economy is in far worse shape then the government lets on, knowing he will now have to go for saying so- reveals how desperate the situation is. Whether Darling comes or goes, the government can no longer keep up the pretense. The veneer of control has become so hard to maintain that Gordon Brown resorts to a level of nonsense that seems impossible to top:

“In the next 20 years, the world economy will double in its size and wealth and we have a great opportunity to win new business, new jobs and prosperity for Britain.”

On second thought, perhaps I underestimate the prime minister. It is entirely possible that that insane-looking statement serves the same purpose as Mr. Darling’s fatal interview this weekend. We may be looking at Mr. Brown’s own well-calculated de-facto resignation. More

Karl Denninger
The Market Ticker

America’s GDP, or the total of all goods and services produced in this nation in a given year, is about $14 trillion dollars.

America the nation currently has an outstanding debt of about $10 trillion dollars, and has more than doubled in the last ten years. But this number is not the real total, because it does not count all the “promises” (read: entitlements) that people have been told they will have. Those “promises” are Social Security, Medicare and Medicaid, in the main. They total, approximately $90 trillion dollars in current liability.

What’s worse, about 1/3rd of that was added with the “Medicare Part D” drug benefit, even though Congress was at the time fully aware that there was already $60 trillion or so sitting out there in unfunded liabilities. They did not care because the AARP, and you, screamed and demanded that Congress “do something.”

Oh they did something all right. They did the very same thing that you think you have a right to do - that is, spend more than you make.

That’s right. You have a right as an American to have a 4,000 square foot house on an acre, even if you only cut hair for a living. If you can’t get that loan honestly, you simply will make up an income and use some sort of “exotic” mortgage product to get it.

Your car broke down? Its beneath you to buy a used one, right? Just hit the home equity line and buy a new Suburban. $40,000. Cool. Oh, and charge the gas too.

Your kid comes home from school complaining that one of his friends has an iPOD. To shut him up, you go buy him one - even though you don’t have the $200 it costs. You just pull out the plastic and charge it. It will all be ok.

Your grandmother is taken deathly ill and whisked to the hospital. She’s 85, and has cancer. She has had a good life, but now it is drawing to a close. When you get there, the doctors ask what you, as her closest kin want, as she’s unconscious at the time. You tell them that they should preserve her life at all costs. Of course you don’t have any money to pay for the $500,000 in medical bills. Its ok; she was in a nursing home and didn’t have anything anyway, so there’s no estate for the bill to eat into; Medicare will pick it up. After all, she’s entitled to the best medical care money can buy as an American.

You love the $3/quart strawberries at the local WalMart. You won’t pay $3.50. As a consequence, the grower has fired all of his United States citizens as pickers and is employing illegal Mexicans. You don’t care, as you’ve got a good job - you answer the phones for Joe’s PCs and help people with their computer problems. Unfortunately Joe’s customers want to pay $50 less for that PC, so he fires you and outsources your job to India for $2/day. Oops.

Folks, what is going on in this country is exactly like what happened yesterday on the forum. Each and every day.

You drive around your neighborhood and see the “For Sale” and “Foreclosure” signs and the boarded-up businesses. You whine about $4 gasoline, $5 cheese and Ice Cream that is both more expensive and now is in a 1.5 quart instead of a 1/2 gallon container.

Your employer cuts medical benefits or expects you to pay more. You grumble or, if you’re unionized, you might actually strike. You end up capitulating anyway, then your job gets shipped to China.

We all feel the squeeze, but will we accept that we are part of the problem? That we have a spending deficit (that is, we spend more than we make), we have a savings deficit (we don’t save anything, on balance), we have a balance-of-trade deficit (we demand $30 DVD players from China, therefore, all the people who made them here are fired and they are manufactured there where workers are paid 25 cents/hour) and we have a common sense deficit (that is, we think we can continue to do this until the cows come home and there will be no consequence.)

Well, now we’ve got the beginning of the consequences, and what America is doing, for the most part, is sticking its fingers in its ears and going “LA LA LA LA LA LA LA LA” - because actually removing the fingers from your ears requires that you admit that you are likely part of the problem as you’re in debt up to your eyeballs and are unwilling to live within your earnings capacity!

Would you like to know the rest of the consequences that are coming for you, your children and grandchildren if you don’t remove the fingers and stop chanting? Do you even know what they are? Let me lay a few out for you:

Ambrose Evans-Pritchard
The twin missives more or less sum up the dramatic change in mood sweeping financial markets since it became evident that the entire bloc of rich OECD countries has succumbed to the delayed effects of the credit crisis. Japan contracted by 0.6pc in the second quarter, Germany by 0.5pc, France and Italy by 0.3pc. Spain recalled the cabinet last week for an emergency summit. New Zealand and Denmark are in recession. Iceland contracted at a catastrophic 3.7pc in the second quarter. “The whole decoupling thesis has started to come apart at the seams,” said David Bloom, currency chief at HSBC. “Canada is frozen over. We have Arctic conditions in Sweden, and the UK is falling off the white cliffs of Dover.” The US fiscal stimulus package that kept spending afloat in the second quarter is running out fast. There is nothing yet to replace it. The export boom cannot keep adding juice as the global crunch hits. My fear is that the US will tip into a second, deeper leg of the downturn, setting off a wave of savage job cuts. This will start to feel more like a real depression. More

James West
www.midasletter.com
Watching the complete collapse of share prices in the resource sector would be doubly disheartening if were not occurring around the globe irregardless of sector. From tech stocks to transports, from China to Brazil, markets are in a slow steady freefall. The question of “how do I profit from my investments?” is rapidly evolving into one of “how do I keep my house and investments and 401K from becoming worthless?” On Wednesday last week, the House passed a bill that essentially creates another $800 billion worth of U.S. dollar funny money out of thin air by raising the national debt ceiling to $10.6 trillion from $9.815 trillion. Treasury Secretary Hank Paulson now has carte blanche to inject as much effervescent capital in stroke-inflicted Fannie Mae and Freddie Mac as is required to keep the patients breathing, including buying up their stock if deemed necessary.

The bottom line here for the American tax-payer is that whereas we’re going to use this emergency bailout package to stay foreclosures (until 2009 at least), we’re going to reach into your other pocket at the same time and exchange those dollar bills for lumps of coal. (No…wait a sec…coal has value!). Worse, we’re going to put you down for another $3,200 as your contribution to the national bottomless pit we call the National Debt. The greatest threat to a relatively comfortable standard of living comes from the diminished purchasing power of the dollar should a global vote of no confidence take it down til its on par with the peso or yen. So far, the U.S. government has tackled the problem of too much currency by printing more currency. Now with global U.S. denominated foreign assets plummeting in value, most sovereign banks and funds are in the uncomfortable position of having to play along and support the dollar through the acquisition of U.S. Treasuries, or else watch the value of their portfolios collapse. An inadvertent (or so we’re to believe) case of self-inflicted blackmail.

Never mind recession…this is the road to full-scale depression. At some point, hyperinflation a la 1923 Germany is a very likely possibility. During this period at its worst, one U.S. dollar was equal to 80 billion Mark. Germans used bundles of the notes for firewood because they burned longer than an equivalent amount of firewood that could be purchased with them. In the spirit of disaster planning, as individuals its beyond time to hope for best and plan for the worst. That said, these are the measures as I see them that will best preserve what equity you may have:

1. If you own any U.S. dollar denominated assets, sell them and put them into gold and silver. As the dollar plummets, these metal prices, expressed in U.S. dollars, will rise, thereby preserving value.

2. If you own your house, sit tight. Don’t sell it and whatever you do, don’t mortgage it. One of the direst outcomes of hyperinflationary or stagflationary periods is high interest rates. Remember the 80’s when interest rates suddenly soared to 20% and beyond. In December of 1980, interest rates averaged 21.50 percent on mortgage loans.

3. If the bank owns your house, you might consider mailing them the keys, and walking away – especially if the mortgage you’re carrying is more than your house is valued at. If you think it’s a struggle now trying to make ends meet, just wait til food and energy prices continue their upward trajectory, and the U.S. dollar purchasing power continues its downward trajectory. Besides, having a bad credit rating rating for seven years might just be the discipline you need so that “no” becomes part of your vocabulary again. No matter that you’re being told no instead of saying no yourself. Consider it “rehabilitation”.

4. If you own anything that consumes lots of gasoline or diesel, sell it. I’m riding around on a scooter these days that costs me about $40 a month in fuel. Takes some getting used to, especially on rainy days, but it’s the best hedge against high gas prices yet.

One important thing to bear in mind. Right now, it may not look like things are so bad. Sure we’re in a spot of trouble, but it will be no more than dealing with a hangover after a particularly exuberant party that goes on for too long. That would be a normally optimistic approach. But his party has been going on for years. In fact, its more analogous to career in alcoholism. The many health conditions that evolve from such a profession have wide-reaching and long lasting systemic deteriorative effects. And whereas it may seem that nothing is going to happen overnight, the condition of the global economy is like going out for an afternoon in a sailboat. One minute, you’re cruising along in perfect conditions, and suddenly, everything turns to mayhem as a gale comes up out of the southeast and you’re suddenly healed over and clinging to the rails for dear life.

JOHN HEINZL
When CNBC or Fox needs a guest who can be counted on to deliver a thoroughly gloomy outlook for the U.S. economy, they call on “Dr. Doom.” To say Peter Schiff is bearish is like saying Tiger Woods is an okay golfer, or China has a small problem with air quality. The president of Connecticut-based Euro Pacific Capital Inc. is so pessimistic about the U.S. economy that he lives in a rented house and keeps the vast majority of his and his clients’ money outside the country, a healthy chunk of it in gold and energy stocks. “America is finished. We are going to destroy this country. Our economy is just going to unravel,” he told me yesterday. “The question is how much money is the world going to lose before it writes us off?” Apocalyptic forecasts are a dime a dozen these days, so why should anyone pay attention to Mr. Schiff? Because his past predictions have proved uncannily accurate.

When dot-com stocks with no earnings were shooting skyward in the late nineties, he was advising clients to stay away and instead putting money into the unloved energy sector, just in time for the great oil bull market. A few years later, when the housing bubble was inflating, he was warning about the dangers of reckless mortgage lending and the precarious state of Fannie Mae and Freddie Mac. “If it looks like a bubble, walks like a bubble and quacks like a bubble, it’s a bubble,” he wrote. That was in 2004, when speculators were still lining up to buy investment properties in Las Vegas. Ever the contrarian, Mr. Schiff made a bundle shorting the subprime mortgage sector. So, one year into the credit crunch and with more than $400-billion (U.S.) of mortgage losses piling up on company books, where does Dr. Doom see the U.S. economy heading now? Unfortunately, into an even deeper hole, one from which it could take years to emerge.

Far from rescuing the economy from the housing debacle, the government’s efforts to prop up Fannie and Freddie - which own or guarantee nearly half of the $12-trillion in outstanding U.S. mortgage debt - will only compound the problem by delaying the inevitable day of reckoning. The same goes for plans to help hundreds of thousands of homeowners refinance into more affordable mortgages. Apart from encouraging the very moral hazard that got the U.S. into this mess in the first place, the government bailout will come with an enormous price tag in the form of soaring inflation, Mr. Schiff argues. He believes government figures vastly understate the true rate of inflation, which he estimates is now running at 10 to 12 per cent. Before long, it could be north of 20 per cent.

“The government doesn’t have the balls to raise taxes. It’s going to print the money. It’s going to destroy the currency,” he says. During the Depression of the 1930s, at least people who held cash made out okay. Because prices were falling, their money actually bought more. But if Mr. Schiff is right and the U.S. is heading into a period of hyperinflation, then even the most prudent savers will see their wealth eviscerated. With the walls closing in on the U.S. economy, where is an investor to turn? Apart from gold and energy producers, which benefit from a plunging U.S. dollar, Mr. Schiff likes conservative, dividend-paying stocks such as pipelines and utilities. He’s especially fond of Europe, Asia, Australia and Canada, where his holdings include Barrick Gold Corp., Goldcorp Inc., Crescent Point Energy Trust, Baytex Energy Trust and Pembina Pipeline Income Fund. He has two words for Canadian investors thinking now is a good time to shop for bargain-priced U.S. stocks: “Stay away.”

Ron Paul talks about Fed chairman Ben Bernanke’s testimony in front of the House Financial Services Committee yesterday. Our economy faces enormous difficulties and one of the biggest culprits is the inflation tax for which the (privately owned) Federal Reserve is largely responsible.

Kevin Depew
Chaos and fear doesn’t sleep. This morning the first news story I read was a piece from the Los Angeles Daily News about police threatening to beat down and arrest any “disorderlies” trying to get their money out of a failed IndyMac bank branch in Pasadena, CA. Apparently, after being turned away Monday, customers began lining up at 1:30 a.m. the next morning to take out any cash they had in excess of the $100,000 maximum insured by the Federal Deposit Insurance Corporation. The scene was reportedly emotional and tense. At another IndyMac branch in Encino, the police were called in after line jumpers threatened to turn an ordinary bank run into a full-on riot.

Yes, it’s here. Welcome to the Depression. No, don’t drop whatever it is you’re doing. Don’t get up. It’s not going anywhere. It will wait. It’s just going to sit over here in the corner and read a magazine while you do whatever it is you need to do. A Depression doesn’t run hot and fierce like some crazed meth burner. A Depression is methodical, purposeful, patient. It will build a shelter out of tree branches and newspaper, light a small, well-contained campfire and wait you out, brother. While you feed on the empty calories of denial and popcorn, it will quietly gather shards of broken dreams and fashion them into a terrible weapon of blunt force reality.

It’s a hell of a thing to call this day and age the next Depression. It’s dangerous tinfoil hat territory inhabited mostly by screeching lunatics and volatile nutjobs. But by the time they get squeezed out by reputable folks the whole gig will be up, the circus will have left town. But how can this be? To understand the mechanics of this, the nature of it, let’s look back at the last Great Depression.

Despite the seeming enormity of it in retrospect, the stock market crash of 1929 barely even registered for most Americans. The day before the crash, Time Magazine’s Oct. 28, 1929 issue was business as usual, national stories, Washington stories, a review of the newest plays opening in Manhattan, a piece on a cat washing contest in Kingston, NC. A week later, in the wake of the stock plunge, the cover story was as far from a piece on crashing share prices as you could 2get - a profile of a man named Samuel Insull, the “financial father of the Chicago opera.” The crash did make the magazine, of course, second billing in the Business section in a piece titled, “Bankers v. Panic.” The next piece, however, was about a $2.5 million investment by a Wall Street investment bank in orchids. “Last week, however, to the orchid industry went 2,500,000 Wall Street dollars, not squandered, but carefully invested.”

Heh. Yes, the dream dies hard, doesn’t it? More

Glenn Beck
CNN
Professor Roubini recently laid out what he called the “12 steps to financial disaster.” Unfortunately, they were really complicated, and I have severe ADD, so I’ve boiled them down into five phases that even a rodeo clown like me can understand.

I think of these like our military’s “DEFCON” — or defense readiness condition — scale, except that this countdown could end in the meltdown of your bank account:

• DEFCONOMY FIVE

How you’ll know we’re here: The housing downturn turns into a free fall, making it the worst collapse in our country’s history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.

Odds we get here: Roubini told me that it’s “extremely likely, even unavoidable” that we hit this stage because “the excess supply of new homes in the market is like we’ve never seen before.” Prices, he believes, “need to fall another 10 to 20 percent before that clears.”

• DEFCONOMY FOUR

How you’ll know we’re here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.

Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.

• DEFCONOMY THREE

How you’ll know we’re here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.

Odds we get here: Very good. Roubini says that we’ll likely socialize the losses, “effectively nationalizing the mortgages or the banks.” It would be, he told me, “like Northern Rock (the large bank in England that was recently taken over by the British government) times three.” He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.

• DEFCONOMY TWO

How you’ll know we’re here: Most forms of credit (both to consumers and businesses) become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.

Odds we get here: Good. Roubini says that credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.

• DEFCONOMY ONE

How you’ll know we’re here: Welcome back to 1929. A full economic meltdown results in a complete failure of the underlying financial system. What will be known to future generations as “The Greater Depression” has arrived.

Odds we get here: Not likely. Roubini believes that this will be a “very painful and severe recession” that could last for 18 months or more, but it will be more like 1981 than 1929. Families may be eating soup again, but at least it’ll be in their own kitchens.

Now, do I think any of what you just read will happen?

I have no idea, and that’s exactly the problem. I’m not an economist or a stockbroker; I’m just a guy trying to make the best decisions I can, and picking the brains of real experts helps me do that.

But I do know one thing for sure: Depressions aren’t advertised in advance. Last time around we went from the Roaring ’20s to bread lines in a matter of just a few years.

Anyone who says that can’t happen again either doesn’t know history, doesn’t understand how interconnected the world’s economies have become, or is lying to you. While that doesn’t mean you should panic, it does mean you should prepare — something my grandfather would’ve done a long time ago. More

Source: Gather.com/by Donald H.
1. Ann Taylor closing 117 stores nationwide A company spokeswoman said the company hasn’t revealed which stores will be shuttered. It will let the stores that will close this fiscal year know over the next month.

2. Eddie Bauer to close more stores - Eddie Bauer has already closed 27 shops in the first quarter and plans to close up to two more outlet stores by the end of the year.

3. Cache closing stores - Women’s retailer Cache announced that it is closing 20 to 23 stores this year.

4. Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide The owner of retailers Lane Bryant , Fashion Bug , Catherines Plus Sizes will close about 150 underperforming stores this year. The company hasn’t provided a list of specific store closures and can’t say when it will offer that info, spokeswoman Brooke Perry said today.

5. Talbots, J. Jill closing stores - About a month ago, Talbots announced that it will be shuttering all 78 of its kids and men’s stores. Now the company says it will close another 22 underperforming stores.

The 22 stores will be a mix of Talbots women’s and J. Jill, another chain it owns. The closures will occur this fiscal year, according to a company press release.

6. Gap Inc. closing 85 stores - In addition to its namesake chain, Gap also owns Old Navy and Banana Republic. The company said the closures - all planned for fiscal 2008 - will be weighted toward the Gap brand.

7. Foot Locker to close 140 stores - In the company press release and during its conference call with analysts today, it did not specify where the future store closures - all planned in fiscal 2008 - will be. The company could not be immediately reached for comment

8. Wickes is going out o f business - Wickes Furniture is going out of business and closing all of its stores, Wickes, a 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

9. Goodbye Levitz - The furniture retailer, which is going out of business. Levitz first announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910 when Richard Levitz opened his first furniture store in Lebanon , PA. In the 1960s, the warehouse/showroom concept brought Levitz to the forefront of the furniture industry.

The local Levitz closures will follow the shutdown of Bombay.

10. Zales, Piercing Pagoda closing stores - The owner of Zales and Piercing Pagoda previously said it plans to close 82 stores by July 31. Today, it announc ed that it is closing another 23 underperforming stores. The company said it’s not providing a list of specific store closures. Of the 105 locations planned for closure, 50 are kiosks and 55 are stores.

11. Disney Store owner has the right to close 98 stores The Walt Disney Company announced it acquired about 220 Disney Stores from subsidiaries of The Children’s Place Retail Stores. The exact number of stores acquired will depend on negotiations with landlords.

Those subsidiaries of Children’s Place filed for bankruptcy protection in late March. Walt Disney in the news release said it has also obtained the right to close about 98 Disney Stores in the U.S. The press release didn’t list those stores.

12. Home Depot store closings - ATLANTA - Nearly 7+ months after its chief executive said there were no plans to cut the number of its core retail stores, The Home Depot I nc.ann ounced Thursday that it is shuttering 15 of them amid a slumping U.S. economy and housing market. The move will affect 1,300 employees.

It is the first time the world’s largest home improvement store chain has ever closed a flagship store for performance reasons. Its shares rose almost 5 percent. The Atlanta-based company said the underperforming U.S.stores being closed represent less than 1 percent of its existing stores. They will be shuttered within the next two months.

13. CompUSA clarifies details on store closings Any extended warranties purchased for products through CompUSA will be honored by a third-party provider, Assurant Solutions. Gift cards, rain checks, and rebates purchased prior to December 12 can be redeemed at any time during the final sale. For those w h o h ave a gadget currently in for service with CompUSA, the repair will be completed and the gadget will be returned to owners. http://www.news.com/8301-10784_3-9834177-7html < http://www.news.com/8301-10784_3-9834177-7.html >

14. Macy’s - 9 stores -

15. Movie Gallery - 160 stores as part of reorganization plan to exit bankruptcyThe video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall.

16. Pep Boys - 33 stores

17. Sprint Nextel - 125 retail locations New Sprint Nextel CEO Dan Hesse appears to have inherited a company bleeding subscribers by the thousands, and will now officially be dropping the ax on 4,000 employees and 125 retail locations. Amid the loss of 639,000 postpaid customers in the fourth quarter, Sprint will be cutting a total of 6.7% of its work force (following the 5,000 layoffs last year) and 8% of company-owned brick-and-mortar stores, while remaining mute on other rumors that it will consolidate its headquarters in Kansas. Sprint Nextel shares are down $2.89, or nearly 25%, at the time of this writing.

18. J. C. Penney, Lowe’s and Office Depot are scaling back

19. Ethan Allen Interiors: The company announced plans to close 12 of 300+ stores in an effort to cut costs.

20. Wilsons the Leather Experts - 158 stores

21. Pacific Sunwear will close its 154 Demo stores after a review of strategic alternatives for the urban-apparel brand. Seventy-four underperforming Demo stores closed last May.

22. Sharper Image: The company recently filed for bankruptcy protection and announced that 90 of its 184 stores are closing. The retailer will still operate 94 stores to pay off debts, but 90 of these stores have performed poorly and also may close.

23. Bombay Company: The company unveiled plans to close all 384 U.S.-based Bombay Company stores. The company’s online storefront has discontinued operations.

24. { I have been contacted by KB Toyus. They ahve informed me that this totally untrue information as it regards their company. My source for this article was one of some 20+ international newspapers from Europe. i do not remember which one it was. I apologize to KB Toys for the erroneous information. }

25. Dillard’s to Close More Stores Dillard’s Inc. said it will continue to focus on closing underperforming stores, reducing expenses and improving its merchandise in 2008. At the company’s annual shareholder meeting, CEO William Dillard II said the company will close another six underperforming stores this year.

Britain is now in the midst of the worst housing slide since the Great Depression, economists declared after house price inflation dropped to the lowest level since comparable records began. Figures from Halifax, the UK’s biggest mortgage lender, showed house prices have fallen by 8.7pc in the year to June, confirming that the property crunch is more severe than the last housing crash in the early 1990s. Hours before, the Bank of England voted to leave rates unchanged at 5pc. Prof Goodhart, now at the London School of Economics, said: “Output is going to fall, unemployment is going to rise, possibly quite sharply. It’s a horrible situation. More

NEW YORK (Fortune) — Here’s a scary, and relevant, question to ponder as the housing market continues to slide: What would it take for the government to step in and help Fannie Mae and Freddie Mac, and how would a rescue affect you, the taxpayer? It’s been a brutal week for Freddie and Fannie. A Lehman analyst report Monday kicked off a stock rout that had shares in both mortgage lenders hitting fresh multi-year lows Thursday. Freddie was down 19% in afternoon trading; Fannie was down more than 10%.

Fannie Mae and Freddie Mac are government-sponsored enterprises that help the mortgage market function by purchasing pools of loans and packaging them into securities. If one or both couldn’t function, the result would be chaos. “If Fannie or Freddie failed, it would be far worse than the fall of [investment bank] Bear Stearns,” says Sean Egan, head of credit ratings firm Egan Jones. “It could throw the economy into depression or something close to it.” More

James Howard Kunstler
This isn’t so funny anymore. Intimations of a July banking collapse rumbled though the Internet this weekend while mainstream news orgs like The New York Times and CNN pulled their puds over swift boats and Amy Winehouse’s performance technique. Something is happening, and you don’t know what it is, do you Mr. Jones…? to quote the master. What’s happening is that American society is sliding into a greater depression than the one Grandma lived through. On the technical side, there has been unending controversy as to whether we’re gripped by inflation or deflation. It’s certainly deceptive. Food and gasoline prices are rising faster than the rivers of Iowa. But the prices of assets, like houses, stocks, jet-skis, GMC Yukons and pre-owned Hummel figurines are cratering as America turns into Yard Sale Nation.

We’re a very different country than we were in 1932. In that earlier crisis of capital, few people had any money but our society still possessed fantastic resources. We had plenty of everything that our land could provide: a treasure trove of mineral ores and the equipment to refine it all, a wealth of oil and gas still in the ground, and all the rigs needed to get at it, manpower galore (and of a highly disciplined, regimented kind), with fine-tuned factories waiting for orders. We had a railroad system that was the envy of the world and millions of family farms (even despite the dust bowl) owned by people who retained age-old skills not yet degraded by agribusiness. We had fully-functional cities with operating waterfronts and ten thousand small towns with local economies, local newspapers, and local culture. More

business24-7
Save the dollar. If it falls further, we all will fall and that’s the truth many refuse to acknowledge. Dollar doomsayers are rampant and widespread across the globe and there are a host of reasons supporting their argument. Crystallizing those points, it can be said that never before has the United States economy been confronted by so many issues that are affecting their fiscal and economic report cards, businesses, individuals and government.

It is facing declining stock and real estate prices, increasing food, commodity and energy prices, trade and fiscal deficits, increasing unemployment and inflation, decreasing investment, stagnant productivity levels, low confidence levels, decreasing consumption, low savings level, increasing cost of debt in a credit dependent economy and failures major investment banks.

Okay, “dollar is doomed”; but is that in the greater interest of people? This is a tricky and complex question, with a lot of strings attached to it. Let us analyse a few. More

Photo Benno Hansen<
Leon Fisher
Regardless of whether the criminal cabal which has seized the Government of the United States proceeds with their intention to expand the war in the Mideast with an attack upon Iran, it is only a matter of time before the Country goes into a full blown depression.

While an expansion of the war into Iran would doubtless speed up the economic ruin of the United States, the die is already cast and there is no turning back. So weakened has the economy of the United States become since the implementation of so called Free Trade, as well as the lifting of regulations governing the excesses of Wall Street, no matter which political party dominates Congress and the White House and regardless of what measures they may implement, it will be
too little, too late.

If an attack on Iran does not materialize, then the price the American people will have to pay will be mostly economic. Rising unemployment, inflation, food shortages, and ever rising fuel prices will all contribute to lower the standard of living for most Americans. More

“Rogue Economics offers a fascinating view of how terribly wrong things have gone. Loretta Napoleoni’s book is an alarm, warning us to wake up immediately and head down a new path.” –John Perkins, author of Confessions of an Economic Hit Man

Two of the largest and longest studies so far show a “brain pacemaker” can effectively treat depression and obsessive-compulsive disorder (OCD), researchers said on Friday. Dr. Ali Rezai, head of neurosurgery at the Cleveland Clinic, who led the studies, said the technique known as deep brain stimulation helped the most severely depressed patients improve significantly. Read more

Photo Victoria
Darryl Robert Schoon
Depressions are monetary phenomena caused by central bank issuance of excessive credit. In 1913, the newly created US central bank, the Federal Reserve, began issuing credit-based money in the US. Within ten years, the central bank flow of credit ignited the 1920s US stock market bubble; and shortly thereafter, following the collapse of the bubble in 1929, the world entered its first Great Depression in 1933.

Investment banks are the undoing of central banking. While all banks, central, commercial and investment, view credit as the opportunity to exploit society’s growth and productivity, investment bank exploitation of growth and productivity exposes society to extreme risks - for investment banks use society’s savings to make their volatile and speculative bets.
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Scientists have unravelled how a horse tranquilizer and hallucinogenic night club drug known as “Special K” can ease depression. Ketamine, which can also cause feelings of detachment, could pave the way for new treatments for people suffering from depression. Previous research revealed ketamine improved symptoms in depressed people after just 24 hours — far faster than the month it can take for Prozac to kick in — but until now they did not know exactly how.
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This from Michael Fox in The Smirking Chip:
In an excellent column on the state of the dollar, Brother, Can you Spare $10,000, economist Peter Schiff writes that:

“…Bernanke blames the [Great] Depression on the Fed not printing enough money. Had the Fed done precisely what Bernanke now thinks they should have, the Great Depression would have been much worse. Had the Fed tried to re-inflate the stock market bubble or keep it from bursting in the first place, it’s the dollar that would have collapsed, and Depression-era America would have looked liked Weimar Republic Germany. As bad as the Great Depression was, hyperinflation would have made it even worse. The good news is that there is still time to alter course and steer clear of both hyper-inflation and depression. The bad news is that if we remain on our current course that is precisely where we will end up.”

So what can you do to hedge against this? Precious metals, especially platinum and gold. But remember, if anyone thinks saving coins qualifies, they don’t (unless they’re very old).
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“In this chilling BBC clip, a news team ventures to one of LA’s new shantytowns made up of people who’ve lost their homes in the subprime meltdown and now live in tents, improvised shacks or RVs.”