NightBlogger

(Reuters) - Investors will be seeing this week whether policymakers found a way to pull markets away from a deeper collapse as global capital markets faced complete freeze-up. The global financial system was on the brink of meltdown, the International Monetary Fund warned on Saturday, a day after finance chiefs from the Group of Seven rich nations failed to agree on concrete, joint measures to end the crisis. In a brief statement after their Washington talks, the G7 stopped short of backing a British plan to guarantee lending between banks, something many on Wall Street saw as vital to end growing market panic.

European leaders then raced on Sunday to produce their own deal at a summit in Paris, the focus fixed firmly on how much state money governments could mobilize to buy into banks if needed, and if they would also underwrite lending between banks, paralyzed for now by fear and distrust. Analysts say policymakers must avert a wholesale breakdown in cross-border capital and investment flows after the tumult of last week saw investors dumping everything from stocks, bonds, oil and commodities in a panic dash for cash.

Capital markets were already grinding to a halt in many parts of the world with equity trading only briefly or completely suspended in Russia, Iceland, Romania, Italy, Austria, Ukraine, Peru and Indonesia last week. “The crisis is moving with an astonishing speed and international flows of funds are freezing rapidly,” said Lena Komileva, head of G7 market economics at Tullett Prebon. She said the lack of specific steps from the weekend G7 meeting was likely to disappoint investors, threatening to cause more damage across risk asset classes this week. More

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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

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Stephen Lendman
From July 21 - 31, Joint Task Force (mostly US, but also UK, Brazil and Italy) “Operation Brimstone” large scale war games were conducted off the US East coast in the North Atlantic. Its purpose may have been to prepare for a naval blockade of Iran. Initial reports after its completion were that participating ships were deployed to Persian Gulf and Arabian and Red Sea locations to join up with the present American strike force in the region. The major media cover none of this, and US Navy sources deny it. So precise information is unclear. From what’s known, however, redeployment may be planned, and a blockade may ensue. The situation remains tense and worrisome.

Under international and US law, blockades are acts of war and variously defined as:

– surrounding a nation or objective with hostile forces;

– measures to isolate an enemy;

– encirclement and besieging;

– preventing the passage in or out of supplies, military forces or aid in time of or as an act of war; and

– an act of naval warfare to block access to an enemy’s coastline and deny entry to all vessels and aircraft.

In 2009, it’s believed that the International Criminal Court in the Hague will include blockades against coasts and ports as acts of war.

International law expert Professor Francis Boyle is very outspoken on this topic as well as on others of equal importance. He defines blockades under international and US law as: More

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Street clashes in Italy and Belgium bring rioters and police together. In Italy, the fight was over where to put garbage. In Belgium, street groups tangled after a soccer match.

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